Thankfully, I am happily married and never out after ten pm at this stage of my life. But there was a time in my life when I couldn’t have a night out with girlfriends without our conversations getting interrupted by the douchiest of douchebags. There were decent guys who would strike up a conversation from time to time as well and we had to acquire a spidey sense to figure out how to separate the good guys from the d-bags. I was much better at it when it was my friend and not me who was the target of the gentleman’s affections. Those who are practiced at the art of dishonesty can often fool you. However, after a while you start to think, “Is he playing her or is he being honest?” You want your friend to be treated well so the things that might blind you if you were the recipient of his affections don’t come into play. Once you’re a bit older and it is your nieces, daughters, younger women in your life, it is even easier to spot. Jason Momoa’s clone could be there and if there is a tiny bit of dishonest, douchebaggery you will spot it. His attributes cannot beat his intentions – and you can tell the difference between the good and the bad most of the time while in mama bear mode.
How can this ability help your investing practice?
Well, Charlie Munger – one of the greatest investors of all time – has four criteria for picking a good company for investment.
1. It must be a business that you are capable of understanding.
2. It must be a business with a durable competitive advantage.
3. Ideally, the business’ management has integrity and talent.
4. The price must make sense (i.e. buy it on sale, not full price).
Charlie Munger video:
Now, the spidey sense you acquired fending off douchebags can really only help with Charlie’s third principle – Management with integrity and talent. You’ve spent your post puberty years weeding out those who lack integrity – or sometimes marrying and then divorcing them, but still.
Wide sweeping generalization warning: This is definitely as spidey sense that women have more than men (sorry guys, I’m sure you’ve got some other advantage. If I find out what it is, I’ll let you know.)
This does NOT mean you can skip the other three principles. This is a skill to use AFTER you have already looked into principles 1, 2, and 4. (See Phil Town and Danielle Town’s books for details about finding and assessing the companies for you. Links below.)
For detecting douchbaggery I watch as many video interviews with the CEO in question as I can. Does he say a lot of words that sound like jargon-y gibberish? (That is a, “Full of shit” warning!) Plain English can’t hide dishonesty as easily as bombastic, condescending pomposity. Is it clear? Is it straightforward? Does he know the answer to the question? If he doesn’t know, does he admit it?
Is he into the company? There have been CEOs who just use their company to line their pockets and move on. (I see a dating metaphor in this part, too.) The companies are sometimes left a financial mess that may not be easy to clean up. You don’t want your money lost because of a user d-bag. I was researching two companies at the same time a few months ago and the difference between their CEOs was extremely noticeable. One clearly loved his company, what they did, the positive impact they had on their community and the world, the other was a stuffed shirt who was in way over his head. The first CEO gave clear, plain English answers. He was knowledgeable about and a cheerleader for his employees, his customers, the plans for growth etc. The second spoke in undiagramable sentences. He didn’t understand his customers, didn’t mention his employees and didn’t seem too enthusiastic about his company. He was either a d-bag or over his head. Basically, he either lacked integrity or talent, and possibly both. Either way, don’t give your money to him.
Now, the concrete, measurable info is the most important to look into. Annual reports, growth reports, you know, numbery shit – that’s the first thing on your agenda. But use that spidey sense to your advantage. Let all the sexist bullshit you’ve put up with throughout your life work in your favor for once. You want your CEOs to be more like Mr. Darcy than Mr. Wickham. (BTW, Pride and Prejudice references will be frequent in my blog posts.)
It may just be that all the crap we put up with can help make us rich. Revenge bodies are great. Revenge bank accounts are better.
*Links to Phil Town and Danielle Town Books:
I highly recommend these books to help you understand how to value a company. I will get a tiny commission if you purchase through the links below.