Collection: Mohnish Pabrai - #84 'Management Matter, But Don't Hang Out With Them'



[Transcript]

AUDIENCE MEMBER 00:00

So what are the things that you talked about the other investors is –


What's your take on the impact with management of a company? So what do you look into? Do you talk with management extensively or does it matter from case to case when you go out to stocks?


MOHNISH PABRAI 00:16

Yeah, actually I think that's another great question.


So there's no point talking to management because – So first of all, management matter a lot. I mean, of course just like brands and cannibals, I have learned the hard way to appreciate high quality management, ultra high quality management.


So I put a lot of weight on it now much more than I did in 1999, for example. But I think that you're not going to get too many insights about management by hanging out with them.


You know, so the average public company CEO is likely a great salesman. If they weren't great salesman, they won't have gotten the job. And so if you go meet a great salesman and he's talking about a subject that he knows everything about, and you know nothing about. You cannot be anything but impressed.


So there's not much that's going to come out of that meeting, that's going to be helpful to your long-term investments success.


So, you know the average public company CEO is a very honorable guy, a person you would be happy to have your daughter married but not a person you should be hanging out with to understand whether you should buy the stock or not.


So I never try to meet management, I've never tried to reach out to them, in some cases they have reached out to me. And I've actually told them not to waste their time because you know, there's not much to come out of that, better off focusing running the business.


And so knowing the nature of management is very important and you can know that by looking at the long history, ideally what they've been up to and what they said and what they've delivered versus what they are saying, they will deliver in the future.


So you're better off looking at the past and extrapolating on your own independently what you think they'll do in the future versus trying to go by what they are saying, they will do in the future while they ignore their past.


So as I look at my portfolio today, I find that it is very rich in high quality management versus even 5 years ago or 10 years ago. That's one change I noticed and I'm very happy about.


So I think that if we can find you know, going back to the WL Ross – Wilbur Ross's company – you know, Wilbur Ross is an exceptional value investor. So you're getting a very high quality person at no premium, upside without downside. So very nice confluence of factors.


You know, so I think that – Yes, I think that if you put in your checklist that you want to have high quality management in addition to everything else, that criteria will not hurt you.


(Source: https://youtu.be/7F2IGzES7Uc)

 

[YAPSS Takeaway]

Judge the management by:

1. What they said in the past with what they've done.

2. What they are saying now with what they're doing.


Remember Top Management are usually great salesmen.