“The best executive is the one who has sense enough to pick good men to do what he wants done, and self-restraint to keep from meddling with them while they do it.”
Get your Free
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“The real success for the firm, the real success.. in my view, and the key differentiator, was our culture. And for me and for all those who participated, it was all about the team. My people were in it together and our clients knew it. There was no turf. There was no, “It’s my account.” There was no, “I’m the star so pay me.”
Which corporate paragon of virtue is being described here ? Is it JP Morgan, perhaps ? Or Apple Inc. ?
No. It’s Lehman Brothers, as described by its former CEO, Dick Fuld, at a dinner at the Grand Hyatt hotel in New York City on 28 May 2015.
So who was to blame for probably the most notorious bankruptcy in American financial history ?
“It starts with the government..”
“They wanted everybody to be able to fulfil their view of the American dream. We had low rates, easy access to credit. That led to increased home values, household debt, people borrowed a record amount of money, and as rates went down further, people refinanced, they used their homes and the increased value in their homes as ATM accounts.”
So clearly it is also the people’s fault.
Between 2002 and 2007, there were also “huge” increases in the prices of “hard assets” and “financial assets”. So it was also the economy’s fault. And the fault of Wall Street. And the Fed.
But not Dick Fuld.
According to OIiver Budde, a former Lehman Brothers lawyer who turned whistle-blower, between 2000 and 2007 Fuld managed to salt away some $550 million in overall compensation, and his attempts earlier during the year he made his Hyatt conference speech to clear his name were frankly delusional:
“Fuld’s comments were the plaintive cries of a man begging to be understood. Or the ravings of a madman.. Same lying, deluded asshole he’s always been.”
The human factor
When scouring the markets for potential investments, the City tends to focus on the bottom line. Bloomberg terminals, Excel spreadsheets and bond calculators are all brought into service to assess value. Analysts spend hours calculating and refining price / earnings ratios, revenue projections, and balance sheet strength. But there’s something just as important as the raw data. It can be summed up in three words: the human factor.
It may be difficult to give a textbook definition of the human factor, but you’ll know it when you see it.
Tom Murphy, of Capital Cities Broadcasting, had it. Capital Cities would go on to give its shareholders an astonishing cumulative compound annual return of more than 22% over a period of 19 years.
And Murphy valued shareholders’ capital as profoundly as if it were his own.
The company had its headquarters in a dilapidated former convent building. When he joined the firm, his Board complained at the unprofessional image the headquarters was projecting to potential advertisers.
Murphy responded by painting the two sides of the building facing the road. The other two sides of the building he left untouched. No point in wasting money.
You can read more about Tom Murphy, and American executives like him, in William Thorndike’s great study of outstanding business managers, ‘The Outsiders’.
Over 80 years ago, a highly successful bean-counter made a similar observation about the primacy of human character in business and investing.
Sir Mark Webster Jenkinson was a well-regarded accountant who made a speech to a group of his peers in London on 5 March 1928. His subject was on the balance sheet as it relates to the evaluation of a business. Sir Mark understood both the substance of things, and the necessity for having independent judgment on such issues.
“The real value of fixed assets depends on the earning capacity of the business. To gauge the earning power of the business, it is essential to ascertain how the profits have been earned, where the profits have been earned, why the profits have been earned. No balance sheet will and no balance sheet can, afford any reliable guide on these matters.”
If the financial statements are not sufficient to allow us to gauge the inherent value of a business, then what is ?
“You may teach rationalization of industry or you may preach nationalization of industry as a solution of our economic problems; you may introduce artificial aids of a temporary nature, such as State-aided finance, tariffs and subsidies; you may appoint Royal Commissions, Committees, and Trade Federations, but, in the end, the value of a business depends on the men who run it.”
The three stages of investment
This correspondent, over the past 35 years in the City, has been on something of a personal journey.
When you begin working in the capital markets, the system moulds you into having a view on everything. Everything, be it a stock, a bond, a currency or a commodity, has a price. And all those prices are on view and on call, almost 24 hours a day, via a Bloomberg or Reuters terminal or via a web page.
The system wants you to trade.
But we believe very strongly that one’s investment approach should be guided by one’s psychology.
So our first career progression was to stop thinking like a trader, and start thinking like an investor instead.
Unlike a trader, an investor doesn’t need to have a view on everything. Suddenly you can shrink the investible universe down to what really interests you. You can specialise. If something is outside what Warren Buffett calls your “zone of confidence”, just ignore it. It’s irrelevant.
The “zone of confidence” concept is very similar to what the late Jim Slater referred to as his “Zulu principle”. Slater noticed that after reading a short article on the Zulu people in the Reader’s Digest, his wife was better informed on the subject than he was. He went on to suggest that if one read all the books on the topic available in the library, and followed up with a visit to South Africa to engage with them personally, pretty soon one could become a leading authority on the subject.
And whereas trading is an “always-on” pursuit, an investor can take time to differentiate between what’s important and what’s not. And whereas a trader’s time horizon might be anything from weeks down to seconds, an investor can afford to take the long view, and discriminate between the irrelevant and the vital.
Our next journey was to move a little further on again, and progress beyond thinking like an investor and to start thinking like an owner. Traders, and many investors, only ever rent shares. But to get the best possible alignment between a business’ prospects and your own, you have to start thinking like a business owner instead. Once again, your field of vision will shrink again, and you’ll start to focus only on those areas where you want to own businesses – you’ll start to ignore everything that falls outside that circle of competence and interest.
Our friend Tony Deden makes a similar observation:
“The trick in life, generally speaking, is knowing what not to do, knowing what not to read, knowing what advice not to take. Because if you can do that, you have eliminated a very large subset of what you ought to be looking at, et cetera. So that’s how I started. I started by exclusion, and I still believe that very strongly.”
It’s no surprise that the most successful investors have made this mental journey. Warren Buffett may have started out buying “cigar butt” stocks, effectively renting the shares of businesses whose values were temporarily on sale so he could make a quick turn out of them, but he made the vast bulk of his fortune at Berkshire Hathaway amassing ownership stakes in high quality businesses – and therefore indirectly in their managers – for the long run.
Tony Deden, again:
“An owner in a business is far more interested in his survival, in the first instance, than its necessary monetary value. No owner of a business wakes up every morning asking himself what he is worth.
“He is concerned with his products, he is concerned with his employees, he is concerned with his suppliers, he is concerned with his customers. To do that you have to have a time preference that is different from other people.”
Sir Mark Webster Jenkinson concluded his 1928 speech with the following verse:
“Though your balance-sheet’s a model
of what balance-sheets should be,
Typed and ruled with great precision
in a type that all can see;
Though the grouping of the assets
is commendable and clear,
And the details which are given
more than usually appear;
Though investments have been valued
at the sale-price of the day,
And the auditors’ certificate
shows everything O.K.,
One asset is omitted—
and its worth I want to know,
That asset is the value
of the men who run the show.”
………….
As you may know, we also manage bespoke investment portfolios for private clients internationally. We would be delighted to help you too. Because of the current heightened market volatility we are offering a completely free financial review, with no strings attached, to see if our value-oriented approach might benefit your portfolio – with no obligation at all:
Get your Free
financial review
…………
Tim Price is co-manager of the VT Price Value Portfolio and author of ‘Investing through the Looking Glass: a rational guide to irrational financial markets’. You can access a full archive of these weekly investment commentaries here. You can listen to our regular ‘State of the Markets’ podcasts, with Paul Rodriguez of ThinkTrading.com, here. Email us: info@pricevaluepartners.com.
Price Value Partners manage investment portfolios for private clients. We also manage the VT Price Value Portfolio, an unconstrained global fund investing in Benjamin Graham-style value stocks and real assets, and also in systematic trend-following funds. The fund was “Highly commended” in Investment Week’s 2026 Fund Manager of the Year Awards.
“The best executive is the one who has sense enough to pick good men to do what he wants done, and self-restraint to keep from meddling with them while they do it.”
Get your Free
financial review
“The real success for the firm, the real success.. in my view, and the key differentiator, was our culture. And for me and for all those who participated, it was all about the team. My people were in it together and our clients knew it. There was no turf. There was no, “It’s my account.” There was no, “I’m the star so pay me.”
Which corporate paragon of virtue is being described here ? Is it JP Morgan, perhaps ? Or Apple Inc. ?
No. It’s Lehman Brothers, as described by its former CEO, Dick Fuld, at a dinner at the Grand Hyatt hotel in New York City on 28 May 2015.
So who was to blame for probably the most notorious bankruptcy in American financial history ?
“It starts with the government..”
“They wanted everybody to be able to fulfil their view of the American dream. We had low rates, easy access to credit. That led to increased home values, household debt, people borrowed a record amount of money, and as rates went down further, people refinanced, they used their homes and the increased value in their homes as ATM accounts.”
So clearly it is also the people’s fault.
Between 2002 and 2007, there were also “huge” increases in the prices of “hard assets” and “financial assets”. So it was also the economy’s fault. And the fault of Wall Street. And the Fed.
But not Dick Fuld.
According to OIiver Budde, a former Lehman Brothers lawyer who turned whistle-blower, between 2000 and 2007 Fuld managed to salt away some $550 million in overall compensation, and his attempts earlier during the year he made his Hyatt conference speech to clear his name were frankly delusional:
“Fuld’s comments were the plaintive cries of a man begging to be understood. Or the ravings of a madman.. Same lying, deluded asshole he’s always been.”
The human factor
When scouring the markets for potential investments, the City tends to focus on the bottom line. Bloomberg terminals, Excel spreadsheets and bond calculators are all brought into service to assess value. Analysts spend hours calculating and refining price / earnings ratios, revenue projections, and balance sheet strength. But there’s something just as important as the raw data. It can be summed up in three words: the human factor.
It may be difficult to give a textbook definition of the human factor, but you’ll know it when you see it.
Tom Murphy, of Capital Cities Broadcasting, had it. Capital Cities would go on to give its shareholders an astonishing cumulative compound annual return of more than 22% over a period of 19 years.
And Murphy valued shareholders’ capital as profoundly as if it were his own.
The company had its headquarters in a dilapidated former convent building. When he joined the firm, his Board complained at the unprofessional image the headquarters was projecting to potential advertisers.
Murphy responded by painting the two sides of the building facing the road. The other two sides of the building he left untouched. No point in wasting money.
You can read more about Tom Murphy, and American executives like him, in William Thorndike’s great study of outstanding business managers, ‘The Outsiders’.
Over 80 years ago, a highly successful bean-counter made a similar observation about the primacy of human character in business and investing.
Sir Mark Webster Jenkinson was a well-regarded accountant who made a speech to a group of his peers in London on 5 March 1928. His subject was on the balance sheet as it relates to the evaluation of a business. Sir Mark understood both the substance of things, and the necessity for having independent judgment on such issues.
“The real value of fixed assets depends on the earning capacity of the business. To gauge the earning power of the business, it is essential to ascertain how the profits have been earned, where the profits have been earned, why the profits have been earned. No balance sheet will and no balance sheet can, afford any reliable guide on these matters.”
If the financial statements are not sufficient to allow us to gauge the inherent value of a business, then what is ?
“You may teach rationalization of industry or you may preach nationalization of industry as a solution of our economic problems; you may introduce artificial aids of a temporary nature, such as State-aided finance, tariffs and subsidies; you may appoint Royal Commissions, Committees, and Trade Federations, but, in the end, the value of a business depends on the men who run it.”
The three stages of investment
This correspondent, over the past 35 years in the City, has been on something of a personal journey.
When you begin working in the capital markets, the system moulds you into having a view on everything. Everything, be it a stock, a bond, a currency or a commodity, has a price. And all those prices are on view and on call, almost 24 hours a day, via a Bloomberg or Reuters terminal or via a web page.
The system wants you to trade.
But we believe very strongly that one’s investment approach should be guided by one’s psychology.
So our first career progression was to stop thinking like a trader, and start thinking like an investor instead.
Unlike a trader, an investor doesn’t need to have a view on everything. Suddenly you can shrink the investible universe down to what really interests you. You can specialise. If something is outside what Warren Buffett calls your “zone of confidence”, just ignore it. It’s irrelevant.
The “zone of confidence” concept is very similar to what the late Jim Slater referred to as his “Zulu principle”. Slater noticed that after reading a short article on the Zulu people in the Reader’s Digest, his wife was better informed on the subject than he was. He went on to suggest that if one read all the books on the topic available in the library, and followed up with a visit to South Africa to engage with them personally, pretty soon one could become a leading authority on the subject.
And whereas trading is an “always-on” pursuit, an investor can take time to differentiate between what’s important and what’s not. And whereas a trader’s time horizon might be anything from weeks down to seconds, an investor can afford to take the long view, and discriminate between the irrelevant and the vital.
Our next journey was to move a little further on again, and progress beyond thinking like an investor and to start thinking like an owner. Traders, and many investors, only ever rent shares. But to get the best possible alignment between a business’ prospects and your own, you have to start thinking like a business owner instead. Once again, your field of vision will shrink again, and you’ll start to focus only on those areas where you want to own businesses – you’ll start to ignore everything that falls outside that circle of competence and interest.
Our friend Tony Deden makes a similar observation:
“The trick in life, generally speaking, is knowing what not to do, knowing what not to read, knowing what advice not to take. Because if you can do that, you have eliminated a very large subset of what you ought to be looking at, et cetera. So that’s how I started. I started by exclusion, and I still believe that very strongly.”
It’s no surprise that the most successful investors have made this mental journey. Warren Buffett may have started out buying “cigar butt” stocks, effectively renting the shares of businesses whose values were temporarily on sale so he could make a quick turn out of them, but he made the vast bulk of his fortune at Berkshire Hathaway amassing ownership stakes in high quality businesses – and therefore indirectly in their managers – for the long run.
Tony Deden, again:
“An owner in a business is far more interested in his survival, in the first instance, than its necessary monetary value. No owner of a business wakes up every morning asking himself what he is worth.
“He is concerned with his products, he is concerned with his employees, he is concerned with his suppliers, he is concerned with his customers. To do that you have to have a time preference that is different from other people.”
Sir Mark Webster Jenkinson concluded his 1928 speech with the following verse:
“Though your balance-sheet’s a model
of what balance-sheets should be,
Typed and ruled with great precision
in a type that all can see;
Though the grouping of the assets
is commendable and clear,
And the details which are given
more than usually appear;
Though investments have been valued
at the sale-price of the day,
And the auditors’ certificate
shows everything O.K.,
One asset is omitted—
and its worth I want to know,
That asset is the value
of the men who run the show.”
………….
As you may know, we also manage bespoke investment portfolios for private clients internationally. We would be delighted to help you too. Because of the current heightened market volatility we are offering a completely free financial review, with no strings attached, to see if our value-oriented approach might benefit your portfolio – with no obligation at all:
Get your Free
financial review
…………
Tim Price is co-manager of the VT Price Value Portfolio and author of ‘Investing through the Looking Glass: a rational guide to irrational financial markets’. You can access a full archive of these weekly investment commentaries here. You can listen to our regular ‘State of the Markets’ podcasts, with Paul Rodriguez of ThinkTrading.com, here. Email us: info@pricevaluepartners.com.
Price Value Partners manage investment portfolios for private clients. We also manage the VT Price Value Portfolio, an unconstrained global fund investing in Benjamin Graham-style value stocks and real assets, and also in systematic trend-following funds. The fund was “Highly commended” in Investment Week’s 2026 Fund Manager of the Year Awards.
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