“It takes 20 years to build a reputation, and five minutes to ruin it,” Warren Buffett once warned.
Perhaps that’s why social media has been flooded with news headlines, coverage, and memes since Wednesday night.
That’s when the CEO of a tech startup called Astronomer was caught on the jumbotron camera at a Coldplay concert, enjoying what looked like an intimate moment with what appeared to be the company’s HR manager.
Not present? Their respective spouses.
Astronomer is one of many unicorn companies today. It’s privately held and valued at over $1 billion.
That means there are dozens of investors, from angel investors to hedge funds, who put their capital – and their reputation – on the line to invest.
The latest filing notes that Astronomer has about 370 employees.
Today, that’s all in jeopardy. The damage done to the company by the actions of two of its key employees is all that it took.
Imagine finding out that your spouse is either cheating on you… or, worse – they’re a Coldplay fan.
It’s most likely that the event, which became a social media storm on top of all the other drama this week, will blow over. The CEO and HR manager will likely be allowed to step down.
The company will likely move on. But even as this viral moment fades into memory, the impact may endure for years – with future investors being more hesitant to invest.
Management: A Make-or-Break Factor In Investment Success
Management is just one facet of any investment decision.
But it’s a challenging one because it doesn’t appear on the balance sheet. It requires a deeper dive beyond the numbers.
Chances are, if you’re a momentum trader, you just watch the price and buy as long as it’s been going up.
Value investors look to determine the total sum of a company’s assets and discounted future earnings, and look to buy at a discount to that figure.
Most likely, you’re somewhere in between. You own some value plays. You trade some momentum stocks. Life is good.
But every once in a while, you’ll run into the Enrons of the world – the companies whose behavior leads to a material risk to your investment.
Sure, it helps to be diversified.
But at the end of the day what really matters is management.
Ultimately, a company CEO has obligations beyond making decisions in boardrooms. They need to behave in a way that reflects well for the company that they run 24/7. They need to do the right thing, even when nobody is looking.
We used to have a word for that. It’s called integrity.
Build Your Community With Integrity
Integrity is in short supply today.
Corporate CEOs have to chase quarterly results, and the temptation to cut corners is great. We’ll see that play out with earnings season over the next few weeks – look for companies with a suspicious number of “one-time” events – chances are they aren’t one-time.
Members of Congress use the information they get from committee meetings during their part-time hours to substantially outperform the stock market. Until that’s fixed with clearer legislation and term limits, at least investors can follow along, albeit belatedly.
Families are working harder and harder to make ends meet, having their purchasing power eroded by inflation, and by the machinations of a central bank concerned with propping up asset prices, not wages.
It’s tough. I get it. But that’s also why it’s worthwhile. The road less taken is a more challenging one, but a more satisfying one.
This is why it’s crucial as an investor to look at who you’re investing with. Someone with a good idea and integrity will help you grow your wealth far more than someone with a great idea but who has no integrity.
And why it’s important to keep some of your wealth in honest forms of money like gold and, yes, bitcoin.
And there’s another theme here as well: The truth. It always comes out. Not always on the jumbotron, or on the front page of a national newspaper. But if you always live your life under the assumption that anything you do will be headline news – or the darling of social media – you’ll focus on the positive ways that can turn out.
~ Andrew
P.S. Integrity, trust, truth – themes we’ve touched on this week as we look at the unfolding news – are qualities always worth watching.
Issues of corporate governance – and wild stories about CEOs and management teams running amok – aren’t unusual.
In fact, real-world examples of corporate malfeasance have become inspirational for the series of novels that I’ve written. But what happened at that Coldplay concert this week sounds stranger than fiction.
Your thoughts? Please send them here: addison@greyswanfraternity.com
