Choose partners who are intelligent, hard-working and of high integrity.
Warren Buffett once said, “You’re looking for three things, generally, in a person. Intelligence, energy, and integrity. And if they don’t have the last one, don’t even bother with the first two”. When you are looking to invest in a small company, often a private company, there is very little to base your assessment on. Track records are often short and financials can be skewed. So, one of the key factors we turn our attention to is the quality of the management team. For small businesses, it really all comes down to the human factor – people, striving towards a common goal. And, as Buffett puts it, there are three attributes that count.
Intelligence – we talk to a whole host of people from past and current employees, to professors and mentors. We analyse past decisions and try to identify the mental models they use to operate. Energy – how did someone get to where they are today? Did they inherit or build from the ground up, how many trials and tribulations did they overcome on the way? A history of hard work can be a predictor of the future. Integrity – what do people value above all else? What they say and how they react during a rough patch can be two different things. Watching how someone navigates choppy waters and, in particular, how they prioritise to overcome obstacles can be a strong indicator of integrity. If we are signing on to a ten-year relationship, then we had better be sure that we have backed a team that can deliver.
The focus on people and culture stems from our origins in venture captial and has long been a primary factor for investment consideration. “Given the limited track record of a product and, in many cases, the market for that product, it is important to look beyond the quantitative factors and focus on qualitative aspects like people…
Meet the team who work hard everyday to achieve our goals: to protect and grow wealth for our investors over time and to provide the highest level of customer service.
We’re marking the holidays with the 12 Days of Investing the Pender Way. Short posts in which we share some of the key tenets of our investment process.