It’s very hard to argue with most of this—directionally, companies/CEOs are sub-optimized towards good products or profit. Personally, I’m interested in what you think going forward from this. Specifically, questioning the idea that investors will or even want to suss out bad long term business and, relatedly, given zirp or post-zirp. More broadly, there are many reasons to think of the line being much blurrier between C-suite and investors than we’re giving credit for. The CEO is much more on team investor than team company (with their employees), incentive-wise and even socially. Perhaps you view public companies vs startups as meaningfully different for the point you’re making, could be. But there are many many companies making and selling things very unprofitably explicitly to get an exit before ever having to solve or deal with getting in the black. This is Plan A or a very desirable Plan B . Even public companies have any number of champions for an argument of short term stock price mattering to investors more than long term sustainability (Tesla, GameStop, etc). Maybe those examples feel too trifling, but I’m not sure why we should default expect investors to be long term oriented. Even if the companies eventually make good a decade or two from now, the investors would almost certainly have done better to just jump between the short term wins. You could argue they don’t have the intel to do this well—though this is easier when the execs and investors are “aligned”—but that wouldn’t explain choices of buying into stocks with distorted PE ratios.
You’re right on about questioning who or why leaders become leaders I think. But I’m not sure I agree that their “weaknesses” aren’t actually helping them. They seem to do quite well. Often even when their companies “fail.”
Yes, so there's a power law distribution at work here, where a small handful of really large and profitable companies account for the majority of corporate profits. Like Apple I think is 5% of the S&P, the top 5 are maybe 20% of the total, the top 100 are like half or three quarters. Non-S&P 500 public companies are like < 25% of public company value I think. (I'm not going to look it up right now, but I think that's all in the range.) Basically there have always been investor fads and speculation but all of the stuff that happens to Gamestop-type companies generally has very little economic meaning.
The other question here goes back to Keynes's beauty contest, and the answer is that the combined efforts of speculators playing the greater fool game has to be zero at best, and more likely less than zero to the extent they inevitably get exploited by longer-term investors who can buy the undervalued unloved stocks and sell the fad stocks (and generally avoid frictional cost).
Not to imply long-term investing is easy but that is the larger trend. I wouldn't say investors are default long term oriented by any means but investor returns are driven by the ~$2 trillion a year of profits that companies return to investors or reinvest and so it doesn't end up mattering as much what or how investors think, they will get what they get regardless.
There’s a distinction between investors as a whole, effectively “the market”, and the categories of investors within. Conventionally, we might slice the latter as say institutional vs retail. but more descriptively, it could be people who do this as a job (trained, spending and paid for 40 hours a week researching and discussing, often with a team supporting them, connected with other investors) and individuals moonlighting (whether gambling on Robinhood during their lunch break or a more methodical, researched hobby a couple hours every night after work).
I hesitated when mentioning GameStop earlier. It’s easy to ignore because of its funny circumstances and just how high it went. While I think your word, “fad”, is appropriate, I wouldn’t for example call it an “outlier” exactly. An outlier describes something that is so extreme or one off as to be detached. GameStop and other memestocks are more like very visible tips of icebergs. They went to particularly extreme prices because virality makes the visible parts even more visible and the distribution curve goes more extreme at the top. But the rest of the iceberg, including stuff just below it like Tesla, which has/had many of the GME qualities, but (in theory at least) more claim because of the technology it does build. Many of the top tech companies, including FAANG ilk, have huge real profitable businesses, but also saw their PE ratios swing. At the least, prices do not reflect fundamentals in quite the same way they used to.
That the stock market broadly goes up in the long-term is true and rationalizes that investing and holding is broadly good. It at best makes a case for index investing (which likely has some unclear reckoning of its own to come). I don’t think this essay is about that exactly. But regarding CEOs manipulating professional investors (not so much the moonlighters), these are individual investments in individual companies—choosing among individual companies not choosing to invest in a company vs the market.
If CEOs and investors are much more on the same team (the premise I was raising), if their incentives are aligned for finding greater fools, then CEOs selected more for “their storytelling ability and self-confidence than for their expertise or correct knowledge” is what both want. The investors may not be hoodwinked by the CMO turned CEO so much as the investors are selecting the CMO to hoodwink others.
So for things like, “None of this will work at all because the whole theory is based on a false analogy: reporting to investors is nothing like marketing to your boss or to consumers”, they may be they’re more similar than we think.
Or: “The stock market may not be perfectly efficient, but it is incredibly naive to imagine that it will be fooled by any of these simple gimmicks. You can sandbag your earnings targets, but investors will still benchmark you against your peers. You can inflate reported earnings through addbacks, but it’s easy for investors to identify them and just subtract them back out.” This is less true if the category of investors at this stage are out before the manipulations matter. There are yet greater fools.
Part of this is that the CEOs that “get trapped in that backwards paradigm” seem to do fine. The investors benefit from CEOs who “pull out every legal trick in the books to meet quarterly earnings targets” whether they do that when the company is doing fine or only as the CEO is panicking and things are bad.
The primary thesis, “Perhaps this is just a hazard of selecting our CEOs and journalists and political leaders more for their storytelling ability and self-confidence than for their expertise or correct knowledge of how things actually work” feels pretty spot on. While that’s to be bemoaned, I’m poking at whether the structural elements around it and enabling it will really mean there’s a comeuppance in the longterm.
So the first part is a redux of the Fama / Thaler debate 25 years ago. The story goes that Thaler was presenting his 3Com/Palm carveout paper (basically showing that the pricing for 3Com and Palm couldn't be reconciled) and claimed it was the "tip of the iceberg", and Fama retorted that "it was the whole iceberg". (Which I'm guessing might be what you were referring to with the iceberg, but this is for the benefit of anyone else reading this later on.)
I'm more on Team Fama here because it's really hard to manufacture a cult stock. Matt Levine writes about this but lots of people have the idea to mimic Microstrategy but no one has really pulled it off. I think there is just a finite supply of crazy cult retail capital that is not that big relative to the overall market, and it comes and goes based on retail interest. I know that people are saying it's bigger now than it used to be, and that's probably true, but I'm old enough to have seen it come and go and it's always been there to some degree. My feeling is it is 1% - 5% of the total market. The problem with everyone trying to play the greater fool game is that it's hard to get greater fools to play in the first place.
Separately, I think the relative pricing of broad asset classes has always swung in ways that can't be considered rational and that has always been true -- basically a version of the ERP puzzle. Blue-chip stocks traded at a crazy PE relative to long bonds in the late 90s (think Coke or GE at 2% earnings yield vs 8% or so for investment grade debt) and then it flipped in the early 2010s. As an exec you can adjust your cap structure in response (as Apple did) and as an investor you can rebalance but it's hard to arbitrage because of the long timelines.
I think the challenging thing about the stock market is that it's so counterintuitive, and that applies to both investors and CEOs. There is that Phil Fisher analogy to restaurants where if you serve French food, you will select for diners that like French food. So CEOs that play games will tend to attract investors that play games, and then will proclaim that they know from experience that all investors play games and they are forced into it, which would be like the owner of a French restaurant saying that they have learned that all diners like French food. And then when a CEO plays games and can't find like-minded investors (because the supply is limited), they complain that the market is undervaluing his stock and they just don't get it, which is where Welch was for the first part of his tenure.
I wouldn't say that the market is rational but most money is managed by institutions these days (if it isn't indexed), and professionals that encounter Welch-like CEOs generally peg them as liabilities, which might be ok if the business is awesome and/or they are really good operationally, but they rationally apply a discount because they are liable to do something big and destructive, and they have to know that any CEO that sucks at external reporting probably also has some broken things going on with internal incentives and reporting, as Welch did.
Interesting, I wasn’t familiar with Fama/Thaler. I meant the iceberg metaphor in its generic form, but the iceberg for me is not rise of cult stock behavior. It’s not that goofy tweets and investment-fund leaders-turned-funny-guru-personas are actually there up and down the stock market. The iceberg is along the lines of deprioritizing future profit or fundamentals, it’s still being figured out though.
The stock market mechanically-speaking is an MLM. Pragmatically, it’s mostly culture or mood that keeps it in check, but it can sway nearer and further from full Ponzi. I am actually thinking of Levine here. I’m not sure I got the one I was thinking of, but “Meme-stock vacation is over” seems close enough. He gives an admittedly over simplified history of market investing:
- Stock market is invented to finance a company and share in profits. You get dividends—and so you’re investing in future profit.
- Market devolves a bit into gambling. There’s not much available financial information. You buy stocks because you think others will. It’s about reading mood and reading it before others.
- Discounted cash flow analysis is invented and market moves back towards betting on future profits. This is fundamentals and comes in part because of the Crash. There is less manipulation because there is more financial information.
- In 2020s, he suggests things swayed back again. The market as always still has MLM dynamics, guessing what others will buy works if you can do it and lots of people think they can
I probably did some editorializing in that, but I’ll add that some of the “guessers” wear suits and work in finance. The weirdos might be the visible part of the iceberg. Notably, there is also math and data for “what others will buy”, which might be more direct than company fundamentals math and data.
I like the French food analogy. I still think we’re missing what it means for investors and CEOs to be so similar—in their backgrounds, in the circles they move in, and very directly in their incentives. CEOs maybe aren’t playing games against investors, maybe they’re playing games with them against future investors. Maybe the analogy works the other way—CEOs didn’t find that investors like French food and therefore serve it, investors like French food and found CEOs who serve it.
Less to say here, but I think it’s meaningful that the institutions largely manage the index investors—not of course in the “actively managed portfolio” sense of managed, but in the price finding sense (and maybe in the AUM sense a bit too). This is the maybe sorta unclear reckoning I referenced, but there’s fewer people doing the price seeking work as more stuff is passively indexed, those few people are weighted towards the institutional folk.
One thing I recall about Security Analysis is that Graham suggested that the stock market was probably more rational in the early Guilded Age, when it was more just rich businesspeople trading with each other, and there weren't many listed companies period, some railroads and a few early industrials. I think around 1890-1900 you started to see big modern industrial companies put together like US Steel (GE was 1896) and you got more volume and speculation. Definitely at the time Graham was writing in the 1930s (post Crash but pre modern SEC) there's a lot, he calls out airplanes (new) and alcohol companies (which were hot post prohibition).
The landmark work here is really Keynes's chapter 12 of the General Theory, which I think is 1934, where he cites the newspaper beauty contest (guessing what other readers will find most beautiful) and talks about speculation.
My theory is that what is really going on is that you are bringing in different people with different mental models of the world. Once you have more volume and price action you get non-businesspeople participating, and they naturally assume price action is a really important signal, and they think narratives are important, and so you get all of this crazy speculative behavior. And Graham's point is that ultimately you are buying a share of a business that spits out cash and you should let the speculators play their game and just buy stuff that is cheap relative to the cash it will be spitting out.
Now with regard to investors and CEOs, I don't think it's that important that they both probably went to Wharton together and theoretically similar incentives. People who climb the corporate ladder just necessarily think about business much differently than people who come up as professional investors and it's hard for them to change or update their mindset when they become CEO. Like to me, setting a 15% annual earnings growth goal is a very middle manager thing to do -- it's this nice round number that sounds good as theater in a meeting but makes no mathematical sense at all. Same thing with smoothing earnings, and same things with running a diversified conglomerate. This stuff makes obvious theoretical sense to them and when they see evidence to the contrary they actually interpret in a way that reinforces their view. That was the point with stocks that crash when you miss earnings by a penny: the CEO thinks that proves investors are irrational but in reality it only happens because the CEO set up a game where missing earnings by a penny is a huge signal that something is catastrophically wrong fundamentally.
I think it's harder for managers to become disconnected from fundamentals because you have a lot more money in activist investing and in private equity. You can take a company private and run it for cash or you can pressure or replace the CEO and get him or her to run it in a more fundamentally sound way, at least if the stock is trading cheaply. That always existed to some degree back in the day -- Buffett did control/activist investing in the early partnership days -- but it's so much larger and more professional now. You can do crazy stuff if you have voting control or you have cult members bidding your stock to the moon you will have vultures all over you the second your stock gets cheap.
One thing to think about here is you always had technical analysis and sector rotation and all of this stuff and you would get famous displacements like The Washington Post trading at 20% of private market value that Buffett capitalized on. I just don't think you could anything like that today in a non-controlled company (granted WPO was controlled at the time but they weren't controlled by an irrational CEO or anything).
Nice! The Boyle book was interesting insofar as a lot of the specific predictions were wrong -- e.g. he framed the aircraft engine business as slipping toward failure, falling behind P&W and R-R but in fact it was on its way to being the global leader by far. Also he missed the problems with the finance business, iirc.
Gelles has said he was inspired by Boyle, and he definitely repeats a lot of Boyle's mistakes (blaming Welch for deindustrialzation is a big one) despite having the advantage of hindsight, which I think is what makes it so jarring -- it makes it feel like he didn't do much research at all.
I think journalists don't appreciate how easy it is to fall for debunked incoherent folk theories and they end up writing these books which they think are original and insightful but really aren't that interesting. But then, the same was true for Welch!
Welch's failures can partially be blamed on his incentives but if you're going to dedicate months or years of your life to a story you should be more rigorous-journalists should do better!
It’s very hard to argue with most of this—directionally, companies/CEOs are sub-optimized towards good products or profit. Personally, I’m interested in what you think going forward from this. Specifically, questioning the idea that investors will or even want to suss out bad long term business and, relatedly, given zirp or post-zirp. More broadly, there are many reasons to think of the line being much blurrier between C-suite and investors than we’re giving credit for. The CEO is much more on team investor than team company (with their employees), incentive-wise and even socially. Perhaps you view public companies vs startups as meaningfully different for the point you’re making, could be. But there are many many companies making and selling things very unprofitably explicitly to get an exit before ever having to solve or deal with getting in the black. This is Plan A or a very desirable Plan B . Even public companies have any number of champions for an argument of short term stock price mattering to investors more than long term sustainability (Tesla, GameStop, etc). Maybe those examples feel too trifling, but I’m not sure why we should default expect investors to be long term oriented. Even if the companies eventually make good a decade or two from now, the investors would almost certainly have done better to just jump between the short term wins. You could argue they don’t have the intel to do this well—though this is easier when the execs and investors are “aligned”—but that wouldn’t explain choices of buying into stocks with distorted PE ratios.
You’re right on about questioning who or why leaders become leaders I think. But I’m not sure I agree that their “weaknesses” aren’t actually helping them. They seem to do quite well. Often even when their companies “fail.”
Yes, so there's a power law distribution at work here, where a small handful of really large and profitable companies account for the majority of corporate profits. Like Apple I think is 5% of the S&P, the top 5 are maybe 20% of the total, the top 100 are like half or three quarters. Non-S&P 500 public companies are like < 25% of public company value I think. (I'm not going to look it up right now, but I think that's all in the range.) Basically there have always been investor fads and speculation but all of the stuff that happens to Gamestop-type companies generally has very little economic meaning.
The other question here goes back to Keynes's beauty contest, and the answer is that the combined efforts of speculators playing the greater fool game has to be zero at best, and more likely less than zero to the extent they inevitably get exploited by longer-term investors who can buy the undervalued unloved stocks and sell the fad stocks (and generally avoid frictional cost).
Not to imply long-term investing is easy but that is the larger trend. I wouldn't say investors are default long term oriented by any means but investor returns are driven by the ~$2 trillion a year of profits that companies return to investors or reinvest and so it doesn't end up mattering as much what or how investors think, they will get what they get regardless.
Thanks!
There’s a distinction between investors as a whole, effectively “the market”, and the categories of investors within. Conventionally, we might slice the latter as say institutional vs retail. but more descriptively, it could be people who do this as a job (trained, spending and paid for 40 hours a week researching and discussing, often with a team supporting them, connected with other investors) and individuals moonlighting (whether gambling on Robinhood during their lunch break or a more methodical, researched hobby a couple hours every night after work).
I hesitated when mentioning GameStop earlier. It’s easy to ignore because of its funny circumstances and just how high it went. While I think your word, “fad”, is appropriate, I wouldn’t for example call it an “outlier” exactly. An outlier describes something that is so extreme or one off as to be detached. GameStop and other memestocks are more like very visible tips of icebergs. They went to particularly extreme prices because virality makes the visible parts even more visible and the distribution curve goes more extreme at the top. But the rest of the iceberg, including stuff just below it like Tesla, which has/had many of the GME qualities, but (in theory at least) more claim because of the technology it does build. Many of the top tech companies, including FAANG ilk, have huge real profitable businesses, but also saw their PE ratios swing. At the least, prices do not reflect fundamentals in quite the same way they used to.
That the stock market broadly goes up in the long-term is true and rationalizes that investing and holding is broadly good. It at best makes a case for index investing (which likely has some unclear reckoning of its own to come). I don’t think this essay is about that exactly. But regarding CEOs manipulating professional investors (not so much the moonlighters), these are individual investments in individual companies—choosing among individual companies not choosing to invest in a company vs the market.
If CEOs and investors are much more on the same team (the premise I was raising), if their incentives are aligned for finding greater fools, then CEOs selected more for “their storytelling ability and self-confidence than for their expertise or correct knowledge” is what both want. The investors may not be hoodwinked by the CMO turned CEO so much as the investors are selecting the CMO to hoodwink others.
So for things like, “None of this will work at all because the whole theory is based on a false analogy: reporting to investors is nothing like marketing to your boss or to consumers”, they may be they’re more similar than we think.
Or: “The stock market may not be perfectly efficient, but it is incredibly naive to imagine that it will be fooled by any of these simple gimmicks. You can sandbag your earnings targets, but investors will still benchmark you against your peers. You can inflate reported earnings through addbacks, but it’s easy for investors to identify them and just subtract them back out.” This is less true if the category of investors at this stage are out before the manipulations matter. There are yet greater fools.
Part of this is that the CEOs that “get trapped in that backwards paradigm” seem to do fine. The investors benefit from CEOs who “pull out every legal trick in the books to meet quarterly earnings targets” whether they do that when the company is doing fine or only as the CEO is panicking and things are bad.
The primary thesis, “Perhaps this is just a hazard of selecting our CEOs and journalists and political leaders more for their storytelling ability and self-confidence than for their expertise or correct knowledge of how things actually work” feels pretty spot on. While that’s to be bemoaned, I’m poking at whether the structural elements around it and enabling it will really mean there’s a comeuppance in the longterm.
So the first part is a redux of the Fama / Thaler debate 25 years ago. The story goes that Thaler was presenting his 3Com/Palm carveout paper (basically showing that the pricing for 3Com and Palm couldn't be reconciled) and claimed it was the "tip of the iceberg", and Fama retorted that "it was the whole iceberg". (Which I'm guessing might be what you were referring to with the iceberg, but this is for the benefit of anyone else reading this later on.)
I'm more on Team Fama here because it's really hard to manufacture a cult stock. Matt Levine writes about this but lots of people have the idea to mimic Microstrategy but no one has really pulled it off. I think there is just a finite supply of crazy cult retail capital that is not that big relative to the overall market, and it comes and goes based on retail interest. I know that people are saying it's bigger now than it used to be, and that's probably true, but I'm old enough to have seen it come and go and it's always been there to some degree. My feeling is it is 1% - 5% of the total market. The problem with everyone trying to play the greater fool game is that it's hard to get greater fools to play in the first place.
Separately, I think the relative pricing of broad asset classes has always swung in ways that can't be considered rational and that has always been true -- basically a version of the ERP puzzle. Blue-chip stocks traded at a crazy PE relative to long bonds in the late 90s (think Coke or GE at 2% earnings yield vs 8% or so for investment grade debt) and then it flipped in the early 2010s. As an exec you can adjust your cap structure in response (as Apple did) and as an investor you can rebalance but it's hard to arbitrage because of the long timelines.
I think the challenging thing about the stock market is that it's so counterintuitive, and that applies to both investors and CEOs. There is that Phil Fisher analogy to restaurants where if you serve French food, you will select for diners that like French food. So CEOs that play games will tend to attract investors that play games, and then will proclaim that they know from experience that all investors play games and they are forced into it, which would be like the owner of a French restaurant saying that they have learned that all diners like French food. And then when a CEO plays games and can't find like-minded investors (because the supply is limited), they complain that the market is undervaluing his stock and they just don't get it, which is where Welch was for the first part of his tenure.
I wouldn't say that the market is rational but most money is managed by institutions these days (if it isn't indexed), and professionals that encounter Welch-like CEOs generally peg them as liabilities, which might be ok if the business is awesome and/or they are really good operationally, but they rationally apply a discount because they are liable to do something big and destructive, and they have to know that any CEO that sucks at external reporting probably also has some broken things going on with internal incentives and reporting, as Welch did.
Interesting, I wasn’t familiar with Fama/Thaler. I meant the iceberg metaphor in its generic form, but the iceberg for me is not rise of cult stock behavior. It’s not that goofy tweets and investment-fund leaders-turned-funny-guru-personas are actually there up and down the stock market. The iceberg is along the lines of deprioritizing future profit or fundamentals, it’s still being figured out though.
The stock market mechanically-speaking is an MLM. Pragmatically, it’s mostly culture or mood that keeps it in check, but it can sway nearer and further from full Ponzi. I am actually thinking of Levine here. I’m not sure I got the one I was thinking of, but “Meme-stock vacation is over” seems close enough. He gives an admittedly over simplified history of market investing:
- Stock market is invented to finance a company and share in profits. You get dividends—and so you’re investing in future profit.
- Market devolves a bit into gambling. There’s not much available financial information. You buy stocks because you think others will. It’s about reading mood and reading it before others.
- Discounted cash flow analysis is invented and market moves back towards betting on future profits. This is fundamentals and comes in part because of the Crash. There is less manipulation because there is more financial information.
- In 2020s, he suggests things swayed back again. The market as always still has MLM dynamics, guessing what others will buy works if you can do it and lots of people think they can
I probably did some editorializing in that, but I’ll add that some of the “guessers” wear suits and work in finance. The weirdos might be the visible part of the iceberg. Notably, there is also math and data for “what others will buy”, which might be more direct than company fundamentals math and data.
I like the French food analogy. I still think we’re missing what it means for investors and CEOs to be so similar—in their backgrounds, in the circles they move in, and very directly in their incentives. CEOs maybe aren’t playing games against investors, maybe they’re playing games with them against future investors. Maybe the analogy works the other way—CEOs didn’t find that investors like French food and therefore serve it, investors like French food and found CEOs who serve it.
Less to say here, but I think it’s meaningful that the institutions largely manage the index investors—not of course in the “actively managed portfolio” sense of managed, but in the price finding sense (and maybe in the AUM sense a bit too). This is the maybe sorta unclear reckoning I referenced, but there’s fewer people doing the price seeking work as more stuff is passively indexed, those few people are weighted towards the institutional folk.
One thing I recall about Security Analysis is that Graham suggested that the stock market was probably more rational in the early Guilded Age, when it was more just rich businesspeople trading with each other, and there weren't many listed companies period, some railroads and a few early industrials. I think around 1890-1900 you started to see big modern industrial companies put together like US Steel (GE was 1896) and you got more volume and speculation. Definitely at the time Graham was writing in the 1930s (post Crash but pre modern SEC) there's a lot, he calls out airplanes (new) and alcohol companies (which were hot post prohibition).
The landmark work here is really Keynes's chapter 12 of the General Theory, which I think is 1934, where he cites the newspaper beauty contest (guessing what other readers will find most beautiful) and talks about speculation.
My theory is that what is really going on is that you are bringing in different people with different mental models of the world. Once you have more volume and price action you get non-businesspeople participating, and they naturally assume price action is a really important signal, and they think narratives are important, and so you get all of this crazy speculative behavior. And Graham's point is that ultimately you are buying a share of a business that spits out cash and you should let the speculators play their game and just buy stuff that is cheap relative to the cash it will be spitting out.
Now with regard to investors and CEOs, I don't think it's that important that they both probably went to Wharton together and theoretically similar incentives. People who climb the corporate ladder just necessarily think about business much differently than people who come up as professional investors and it's hard for them to change or update their mindset when they become CEO. Like to me, setting a 15% annual earnings growth goal is a very middle manager thing to do -- it's this nice round number that sounds good as theater in a meeting but makes no mathematical sense at all. Same thing with smoothing earnings, and same things with running a diversified conglomerate. This stuff makes obvious theoretical sense to them and when they see evidence to the contrary they actually interpret in a way that reinforces their view. That was the point with stocks that crash when you miss earnings by a penny: the CEO thinks that proves investors are irrational but in reality it only happens because the CEO set up a game where missing earnings by a penny is a huge signal that something is catastrophically wrong fundamentally.
I think it's harder for managers to become disconnected from fundamentals because you have a lot more money in activist investing and in private equity. You can take a company private and run it for cash or you can pressure or replace the CEO and get him or her to run it in a more fundamentally sound way, at least if the stock is trading cheaply. That always existed to some degree back in the day -- Buffett did control/activist investing in the early partnership days -- but it's so much larger and more professional now. You can do crazy stuff if you have voting control or you have cult members bidding your stock to the moon you will have vultures all over you the second your stock gets cheap.
One thing to think about here is you always had technical analysis and sector rotation and all of this stuff and you would get famous displacements like The Washington Post trading at 20% of private market value that Buffett capitalized on. I just don't think you could anything like that today in a non-controlled company (granted WPO was controlled at the time but they weren't controlled by an irrational CEO or anything).
I wrote a review of Thomas Boyle's book: https://enterprisevalue.substack.com/p/foreseeing-ges-fall
Nice! The Boyle book was interesting insofar as a lot of the specific predictions were wrong -- e.g. he framed the aircraft engine business as slipping toward failure, falling behind P&W and R-R but in fact it was on its way to being the global leader by far. Also he missed the problems with the finance business, iirc.
Gelles has said he was inspired by Boyle, and he definitely repeats a lot of Boyle's mistakes (blaming Welch for deindustrialzation is a big one) despite having the advantage of hindsight, which I think is what makes it so jarring -- it makes it feel like he didn't do much research at all.
I think journalists don't appreciate how easy it is to fall for debunked incoherent folk theories and they end up writing these books which they think are original and insightful but really aren't that interesting. But then, the same was true for Welch!
Welch's failures can partially be blamed on his incentives but if you're going to dedicate months or years of your life to a story you should be more rigorous-journalists should do better!
Enjoyed the write up. Thanks for sharing.