Podcast Summary
Improve communication skills with Think Fast, Talk Smart podcast: Listen to Think Fast, Talk Smart for practical tips on communication, managing anxiety, and being persuasive. Also, gain insights into CEO succession.
Effective communication skills are essential in business and life, and the Think Fast, Talk Smart podcast, with its expert guests and practical tips, can help you hone those skills. Dylan Lewis, co-host of Motley Fool Money, recommends the podcast as a valuable resource for improving communication abilities, from managing anxiety to being persuasive. He also highlights the importance of understanding CEO succession, as seen in the HBO series Succession, but acknowledges the complexity and uncertainty surrounding this topic. Ultimately, both strong communication skills and awareness of CEO succession can contribute to personal and professional growth.
Impact of CEO succession on stock performance and company culture: CEO succession can cause initial uncertainty and impact stock price, but capable leadership ensures long-term success. Experience and aptitude are crucial in running a company.
The succession of a CEO, particularly a highly successful one, can have significant impacts on a company's stock performance and overall culture. The passing of Steve Jobs in 2011 and the subsequent appointment of Tim Cook as CEO at Apple is a prime example of this. While Cook had already been running the company, Jobs' death sparked initial concerns and uncertainty, leading to a temporary dip in Apple's stock price. However, Cook's tenure has proven to be successful for investor returns. In contrast, the planned succession at Berkshire Hathaway, with Howard Buffett set to become chairman, raises questions about the importance of experience and aptitude in running a company. The discussion also touched upon the potential challenges of 2nd generation CEOs and the importance of merit over familial ties. Overall, the conversation underscores the importance of thoughtful and capable leadership in driving a company's success.
Real-life CEO succession often goes to the least qualified: Succession in family businesses often goes to unqualified family members, adding a layer of realism to the TV show 'Succession'.
Learning from the discussion about the TV show "Succession" is that the profoundly damaged and unqualified children of the patriarch, despite their entitlement and constant jockeying for position, are currently co-CEOs of the family business. The show explores the idea that in real-life CEO succession, the person who gets the job may not be the most qualified or skilled, but rather the one who is in the right place at the right time. Two examples of real-life family businesses that come to mind are Dressbarn and its parent company, which was once a successful family-run business where the husband had passed on, the wife was still on the board, the son was the CEO, and the daughter was also on the board. The fact that the children in "Succession" are damaged and not qualified for the job adds a layer of realism to the show, as this dynamic is not uncommon in real-life CEO succession stories.
Family control and hubris can lead to generational wealth destruction: Expanding businesses and maintaining family control can lead to risky financial decisions, ultimately causing bankruptcy and wiping out wealth.
The mix of family control and hubris can lead to the destruction of generational wealth. The discussion highlighted two instances where families, driven by a desire to expand their businesses and maintain control, made risky financial decisions that ultimately led to bankruptcy. In the first case, a retail company's acquisition spree and expansion plans resulted in leveraging themselves into bankruptcy, wiping out a family's 9-figure stock holdings. In the second instance, a bank's CEO, who was more focused on philanthropy than managing the business, ignored deteriorating lending standards, leading to the bank's demise and the loss of 4th generational wealth. These stories serve as cautionary tales about the dangers of putting family ties above sound business judgment.
Roy family's dealings with Matson reveal weaknesses and defeat: Ruthless acquisitions can leave businesses feeling vulnerable and defeated, but admitting defeat and maintaining control can lead to better deals
The Roy family's business negotiations with tech billionaire Lucas Matson in "Succession" revealed their weaknesses and left them feeling defeated, despite ultimately securing a better deal. Roman's raw, truthful outburst to Matson marked a turning point, where his sarcasm and humor broke down, leaving him vulnerable and admitting defeat. Matson's character, with his cold demeanor and desire to acquire and strip companies for parts, added to the vampire-like atmosphere of the business deal. This theme of ruthless acquisitions and the potential loss of control is common in the business world, as exemplified by Warren Buffett's approach to acquisitions, which emphasizes continuity and allowing the selling company to maintain control.
Job losses due to corporate acquisitions: During acquisitions, some companies create 'kill lists' leading to job losses, particularly for lower-level employees, and uncertainty surrounding succession can prolong this process.
That during a company acquisition, the acquiring firm often creates a "kill list" of employees who will be let go to reduce redundancies. This can lead to job losses for employees, particularly those lower down the organizational hierarchy who may not have the financial security to easily find new employment. Bernard Arnault's story, as mentioned in the conversation, serves as an example of this phenomenon. He is the richest person in the world and has promised to pass the CEO role down to one of his children, but he has also raised the retirement age to keep himself in power longer. This highlights the uncertainty surrounding succession and the potential for job losses in the face of mergers and acquisitions. The first season of "Succession" on HBO explores this theme as well, with Kendall Roy, the heir apparent, ultimately proving unsuited for the role and causing his father to delay his retirement.
Succession's Lessons for Investors: Meritocracy and CEO Succession: Choose the best person for leadership roles, regardless of family ties or past roles. Meritocracy is key for successful succession. Be wary of CEOs who insert themselves too much into the company, potentially causing instability and interference in new leadership.
Key takeaway from the discussion about "Succession" and its implications for investors is the importance of meritocracy in leadership succession and the potential risks of a CEO making himself too prominent in the company. Siobhan's character in the show illustrates the respect a father holds for his daughter who has built her career independently, but loses his respect when she works for him. The discussion also warns against basing succession on DNA alone and being wary of CEOs who insert themselves too much into the company. The example of Disney's "dueling Bobs," Bob Iger and Bob Chapek, highlights the risks of a former CEO's continued involvement and interference in the new CEO's tenure. Ultimately, the best person for the job should be chosen regardless of family ties or past roles, and CEOs should avoid making themselves the center of attention to ensure a smooth transition.
Deliberate sabotage by outgoing CEOs: Outgoing CEOs sabotaging their successors can lead to mediocre returns, missed opportunities, and significant value loss for shareholders. Companies must carefully consider potential successors' cultural fit and leadership skills to prevent such outcomes.
There have been instances of deliberate sabotage by outgoing CEOs towards their successors, which can negatively impact the company's performance. Bob Iger's handling of his succession at Disney and Jack Welch's experience at GE are cited as examples. This behavior, known as "sandbagging," can lead to mediocre returns for the company and missed opportunities for growth. The failure of a CEO to effectively transition to a new leader can result in significant value loss for shareholders. It's important for companies to carefully consider the cultural fit and leadership skills of potential successors to avoid such outcomes.
