Advice for CEOs. July 4, 2025

24:49So I don't mind the generally, the general directional kind of aspirational kind of goals. I don't mind too much. But yeah, hyper-specific guidance is terrible. I think a really good one is to, usually when you've seen things go really bad, it's because companies become too obsessed with growth. And by that, I mean, it's sort of, because when, because everyone wants growth and I want growth too, right? But the best and easiest, not the best, the easiest way to get growth is to buy something, is to buy the growth, just buy the revenue, right? All these synergies that we can strip out and do this and we get extra scale advantage.

25:33It just writes itself. It's such a well-hacked playbook. But we know statistically they don't, like two-thirds of the time, roughly, they don't work out. And by that, I mean sort of one-third of the time it's sort of a wash. One-third definitely doesn't work out. One-third of the time it kind of does. So these big sort of acquisitions. Now, strategic acquisitions, like the little bolt-on, it's like, well, we could build this in-house or we could just do this and automatically have a presence in Germany. for example, or whatever. There are certain little things, but it helps us further our broad strategic direction.

26:05But the trouble with acquisitions is they tend to cost a lot of money. They tend to always be skeletons in the closet. You've got to try and mesh two, speaking of cultures, you've got to push two cultures together, which might not gel. Generally speaking, there's redundancies that happen when this happens. So that kind of makes the morale, It's just super, super, super, super, super hard. And, you know, it's again, it's not that I don't want you to go for growth, but I really, if you're only, if you're bereft of ideas other than we will just buy this, because it's notionally in the same space and we've got a cash burning hole in our pocket, I just think is usually counterproductive.

26:44and layered onto that is probably a, maybe this is a separate point, but it's, I would very much encourage CEOs to think in per share terms, right? Because it's very, you see it in all the slide decks and like revenues and EBITDAs and then growing up and like, wow, that's fantastic. How come the share price hasn't moved? Like, well, three times as many shares on issue as there were when they started doing all of this kind of stuff, right? So, you know, if, if, if, if, if you, the best kind of growth is the organic growth is the growth that you can engineer yourself just by doing what you're doing better than anyone else can do is it's just a thing of beauty because it tends to be a much much better ROI because again if there was another company out there that was just gushing cash it wouldn't be cheap and you'd pay up for it and then you'd have all the other challenges to deal with it yourself so yeah yeah back to you um I like that a lot I'm going to go with incentives and I mean your incentives, I mean the incentives of people that work for you, but I mostly mean the incentives of people who will knock on your door.

27:45And I'm talking specifically about our favourite, some of our favourite people, investment bankers. And you mentioned those acquisitions, right? So how do investment bankers get paid? Well, they get paid by charging fees. How do they get those fees? Well, they convince you to do a thing. And it can be making an acquisition. It can be raising more capital, issuing more shares, buying back shares, all those things. Now, none of those things are bad in and of themselves if you said about acquisitions, mate. There are reasons to do all of those things. But there are no good reasons or just because the investment banker says you should.

28:18And that's the problem. If you're a new CEO, I have massive amounts of empathy for these CEOs, right? Because someone walks in a fancy suit from a big investment banker and says, mate, you're just new here. You used to do sales. You used to do marketing. You used to be in operations. Maybe you were even the CFO. but I've been working in capital markets for years and let me tell you I can help you out here and here's how I'm going to help you and you really should because by the way there's other companies did and it's a really good opportunity to do it now you might miss the you might ruin the opportunity to not have done this later what if what if what if by the way I know your incentives I can help you with those incentives as well let's go and do the thing and so that's now I am absolutely you know imputing entire industry reputations here and that's not justified at least not in total but the reality is is that's the sort of thing that I think as a CEO, you've really got to be careful of because there's no shortage of people who give you advice and they'll give you the advice they want you to take because that's how it works.

29:16And the incentives of those people are really, really different. I will say the same about incentives for staff. Again, we've talked a little bit about the per share stuff you talked about, mate. The way you're incentivized, the way, and this is by the way for directors as well, the way a CEO is incentivized, the way your management team are incentivized, what gets measured gets done. What gets incentivized gets done twice as quickly. And so you think about what will someone do? They'll do whatever they have to do to make you happy, to get their incentive, to get their bonus, to get the promotion.

29:43So you've got to be really careful how you decide to act with your team that you're setting incentives for. But mostly, frankly, it is those others outside your organization who will say, here's a great idea. You should do this. Everyone else is doing it. It's a smart thing to do. It'll make it important. The market will pay attention to you, all that kind of garbage. Why? Because I get a fee. And again, they're not all bad people. And there are times when it's a really great idea and there's lots of value created by people doing this really, really well. But just remember, why are they calling you?

30:11Same as a stock broker. A stock broker calls you because he wants you to make a trade. Why? Because he gets paid when you make a trade. That's how it works. So just keep that in mind. Incentives, incentives, incentives, as Charlie Munger would say, never think about anything else when you should be thinking about incentives. So just keep that in mind. Whenever someone knocks on your advice, just be really clear about what they're trying to do. Yep. I would say the number one job is capital allocation. So where the money goes is really the strategy. I mean, that's right. It's kind of, unless you're dealing with relatively small businesses, there is no choice but for you to delegate, right?

30:48So you can set culture at the top. That's super important. And you make the big decisions in terms of that capital allocation. We've got this much money from shareholders. We'll have this much from retained profits, that's this much available to us from debt, where are we going to invest it? Everything. What you buy, what you spend that money on determines everything. Let's say that you own a big retail outfit and you want to go into horse racing. No names mentioned. Probably not a great idea, right?

31:22Gosh, there's so many examples here, actually. You could go on and on, but it's just sort of like, So as you know, I love the phrase opportunity cost, right? So it's sort of like there's only whatever the size, it is a finite amount of capital that you've got to deploy. You deploy it somewhere, you can't deploy it somewhere else, right? And where you deploy it sets the rate of, you know, will determine the rate of return. The rate of return will determine the company's profit growth and that will determine ultimately the share price. So it is everything. thing. And here you need to think big, right?

31:58Like you don't want to be a micromanager. You don't want to be too hands on the details. This is why you need really good lieutenants underneath you to get on with the job of, right, doing this. But you allocate. The board sets the strategy. We want you to do this. Right. Okay. Here's the money. Okay, cool. Go and spend it. Now that money could easily be spent just by, well, let's just send a dividend check to everyone. But it's like, well, that's not, we gave it to you. We don't want it back. Give us that back and then some, right? To do that, you've got to like buy some really interesting things, right?

32:33And some things that are going to, here's the important thing. What you want to do is lean into your areas of competitive strength, right? There's no point in, as I say, buying a business completely unrelated to you, no matter how good it is. What can I buy that will augment the existing assets that I have got to really make them sing, to improve our overall efficiency, to give us a leg up on the competition, meaning that we can do something faster, better, stronger, cheaper than our competitors. If the money you're spending is not to that end, it is a waste of money and should be sent back to shareholders, right?

33:11Or at the very least, for goodness sakes, put it in a high interest savings account or something, right? Like, I can't stress that enough. So, in front of culture is capital allocation, then culture, and they're really the two big things for a CEO for me. Yeah, I like that. I like that. Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

33:41One of the biggest challenges for a CEO is to understand their... I'm going to give you a point about capital allocation. I'm going to say understand the balance sheet. And I don't mean that, and this goes back again to how you run the business, incentives, it's all interlinked. Someone's got to say, our favorite three words or some of them are, is lazy balance sheet. And someone's going to always have an idea, how you can maximize your profit. Again, it's all about, it's capital, it's long-term, it's all stuff we've just talked about. But thinking about how you are positioned as a company and what your job is when it comes back to, and again, the first thing I said was long-term value.

34:19And so you can absolutely juice the returns. You've taken lots of debt. You can sell businesses off. You can give out lots of dividends. You can do all this sort of stuff and really make this thing look lean and mean and wonderful. What you add, though, is massive amounts of fragility. And so I've got to say, I think for most CEOs, my advice would be have more cash, have less debt. Don't try, you know, there's lots of funniness done with underwritten buybacks, which we probably won't get, or dividends, we won't get into necessarily. But that idea of, you know, everything's going to be paid out.

34:51Now, we talked on Friday, last Friday, about returns on equity. And the best way to do that, well, obviously make more profit, but also have less equity. You can juice these numbers, right? Because if you make the top number bigger and the bottom number of the fraction smaller, you get a bigger number and you look smart, you look great. But as we said on Friday, you can juice your return on equity by taking lots of debt. And the number goes, the ROE goes up, looks brilliant. But you've taken on massive amounts of risk. I know we've said before, everyone knows I own a company called Corporate Travel Management.

35:16During the COVID crash, Flight Center and WebJet had almost double their respective share counts because they didn't have enough money on the balance sheet. They couldn't run the business. They were so lean, which felt smart in the good times. And then as soon as you know, think about the hibernating bear, right? You're sleek in summer, not fat in your winter, you're in trouble. the corporate travel didn't have to raise any capital. Why? Because they didn't run themselves so lean that they were effectively vulnerable to the slightest. Now, this wasn't a slight issue, I suppose, but to this sort of impact and this sort of effect.

35:45And it's one of those situations where, you know, no one's going to thank you for the good times. Anything times zero is zero, right? You're at 49 times in a row. You're only the last time and you've let the whole thing run. You end up with nothing at the end of the day. So, you know, thinking about, and by the way, we're saying letters for CEOs. we're also saying our lessons we're also saying critically here as investors this is what to look out for right if you have companies that experience and demonstrate this it's a really good thing but see you should almost universally have more cash buffett's got about 500 billion dollars australian dollars worth of cash you don't do that much necessarily um but but just you know in terms of what you're doing with your business what you're doing with your balance sheet just again ignore the the smart alecks who say oh you could you could you know you're a lazy balance you could juice this you get better returns if you just took on more debt if you just got rid of this cash, you just did this, just did that.

36:34Money is cash is king, right? At the end of the day, you got the money, you can last. I mean, cash is all cash equivalents. And I really hope that no companies have a safe with actual cash in it. That'd be pretty funny. That'd be funny, but concerning. Didn't Kerry Packer have some gold in a safe in his office? Oh, it wouldn't surprise me. It wouldn't surprise me. Yeah, so cash is resilience, but cash is also optionality. You know, Buffett, as you say, a third of a trillion USD, a half a trillion in AUD. It's a very lazy balance sheet. Yeah. But if and when, well, not if, when something, you know, the proverbial hits the fan, he's got so much dry powder, right?

37:22And you just, when everyone, when things get really scary, you actually have presidents picking up the phone to this guy. Yeah, yeah. And saying, can we, on their hands and knees. Use a hand, please. Please, can you help us out? That's right. Now, what's that worth? Yeah. You know, not just, not that, okay, it's going to suck for our earnings for a little while, but the business is bulletproof, right? But not only that, it's just like, I guess I will be naming the price that I will pay for all of these covetous assets that I want to get. But it is, yeah, I can't stress it enough. I mean, look, there is a natural point where you might think, come on, Warren, pay out a dividend or something.

37:58You've got optionality and then some, you know. So it's not something that at a point it probably does become a little bit silly. But because the focus across the board is to the other end of the spectrum, I think we can make these comments. The one I was going to say next is own your mistakes early. Oh, I was going to go with that going. Yeah, I'm going to go for it. I think markets forgive errors, at least the sensible share, the kind of shareholders you want will forgive them. Yes. But they will absolutely punish denial. Right. It's not just a river in Egypt.

38:36It is different, too. There's different characters of mistake. There is, I thought this was a good idea. We tentatively sort of legged, dipped our toe into the water. Didn't work out. my bad, we're not doing that again. I actually, the market usually punishes that short term. To me, I just think, well, that is brilliant because you could have gone all in, you know, from the get go, because it just sounded like a good idea or to your earlier point, the investment bank convinced you it was a good idea and you've now bet the farm on it. And now it's just, oh, just give me a bit more time. Oh, it's not my fault.

39:11Oh, this happened. You know, it's just sort of like, and again, it comes back to that other point of just consistent, clear, you know, brutal transparency with your shareholders, with your staff, with yourself, with your board, all of that kind of stuff. Hey team, we think this is a really good idea. And this is why we think it's a really good idea. And we want you to go on this journey with us. Now, as all things in life, we're not, there's no guarantees. So we're going to, we're going to, the classic example here is with this, with Australian companies going overseas. It's like, Like, wow, we've just absolutely crushed the Australian market, got a pretty good product.

39:44I think people in Europe or the US, usually the US, would like this as well, not recognising how insanely competitive and brutally tough it is over there. But rather than like do a massive capital raise, take on a bunch of debt and just bet the farm on it, I mean, it's worse than just not working in the new geography. Your eyes off the prize on the goose that laid the golden egg back here at home and that suffers as well. And so, but again, if you, if you can just sort of say, um, we're going to, we're going to try it. It looks promising and just be brutally honest the whole way through. And if it doesn't, and it will often not work out and it's not a sign of failure.

40:30It is a sign of failure. If you never, if you're never making any mistakes, I've always said this, this is true for us as investors as well. If you've got a portfolio, you've never made a mistake, you're not taking on nearly enough risk. And I bet you there are people out there that are like that, but I bet you their returns are terrible. Like not they've lost money necessarily, but they're not shooting the lights out, right? They're probably at best of what you might get in the term deposit or something like that. And it's the same for CEOs. The real mistake is just not recognizing the mistake, blaming everyone else for it and putting your head in the sand and barreling ahead when everything is telling you to stop and you just won't because of your ego.

41:10So yeah, own your mistakes early. The market will forgive you. I'm going to stay with what I was going to say because it's a version of that, so I won't spend too long on it. But I will say, just be candid in general, not just on mistakes, but just on the way the business is operating. The number of times you see a CEO try and spin hard to change metrics, focus on this one year and that the other year or change the description or the conversation they're having, just kind of bring it right back. And again, it shouldn't be surprising. Buffett's view is, when he writes his shell letters, is, you know, I will tell you what I would like to know if our positions were reversed.

41:49And that's the job. That's the goal, right? So yes, as Andrew said, absolutely. If you make mistakes, fess up to them. Cop it sweet. But also tell us things we need to know. Tell us how things are going. Tell us what matters to you and the company. Now, there's a line between confidentiality and disclosure, and so you've got to manage that because your shareholders would rather, I presume, most of the time, you not tell the general public things that are actually in their interest if it's not told. But more broadly, think about what you are trying to achieve in the context of what you would like to know if the positions were reversed.

42:21And so that is absolutely first up to your mistakes, absolutely first up to current market conditions. Be as transparent as you reasonably commercially can. Share the information, share the detail because it means that your shelves, you mentioned, Ram, this is a coverall. You get the shelves you deserve. Now, in the short term, you don't. You're going to have a lot of shelves if you took over as a new CEO who under the old CEO were happy to have guidance and share price jumps and all that kind of rubbish. But over time, and it might hurt in the short term, by the way, but as a new CEO, you probably get a chance for a big bath.

42:53So do it early. Come out and say, look, here's what I'm going to do. And I tell it to you straight. It's not going to be fun all the time. I'm going to tell you exactly what's going on. I've given the example before of Salt Pat's, another company I own. they give normalized profit and sometimes it's big and sometimes it's small and sometimes you know bigger than the reported number sometimes it's small than the reported number why because i'm like this is the number you need to this is what matters um seek to their credit years ago i haven't looked at financials recently used to do what they call look through earnings they own so many bits of subsidiaries they'd kind of go right we'll actually give you a whole lot more information than just what we're required to give you so you can see each business how it's going what's going on our share of the profits the rest of the business so you can literally have a look and see what was going on.

43:30It takes a little bit more work sometimes. But again, if you're working on behalf of and literally as an employee of the shareholders, because you are as a CEO, then that should be your job to really understand and manage the shareholders, not even expectations, but the information they receive so that they get all the information they need to make those decisions. Do they buy? Do they sell? How do they think about valuation? How's the company performing? It shouldn't be that complicated. It shouldn't be that unusual, but unfortunately it is. Yeah, nice one. My next one is avoid complexity. Oh, I'll tell you.

44:04Keep it simple. I'm really a big fan of flat organizational structures. If there's 400 layers between the person at the front line and the CEO, it's almost impossible for that business to run effectively because the people who can see the problems and the challenges and the opportunities are so – you have to fight your way through umpteen levels of middle management to get to anyone who's actually in a position to make a decision to do anything about it. It's just sort of like, as I said before, most businesses, listed businesses, they're too big for the founder or for the CEO rather to be everywhere.

44:44And they shouldn't be everywhere, right? We don't need you to micromanage. But if you can't get a good read on what's happening on the front lines, I mean, like, what are you there for? Then you're only, then you're beholden to your lieutenants who are beholden to their lieutenants. And it's just sort of like, it's very easy for things to, I mean, complexity hides rot is really the best way to sort of put it. And the other thing is the simplicity, is simplicity scales really well. God, I'm trying to think, got to come up with better examples, but I'm going to go with it. Berkshire again, right?

45:18It runs out of like a single building in Omaha, Nebraska. I think it might even be a single floor, isn't it? Like the corporate office of Berkshire Hathaway. I think it's expanded dramatically from 13 to 19 people. Let me just say that again. Berkshire Hathaway, whatever its market cap is. I think it's like the fifth most valuable company on the US stock market. It's a monster. And there's 20 people at corporate. it. Now, if that is not the perfect example of what I am talking about, there are companies I've visited whose market cap's 50 million, who will have 400 people there. And it's just sort of like, what?

46:01So keep it as simple as you possibly can, because when things go well, you want to be able to replicate that elsewhere. You want to be able to scale that up. It works really well. Simple things are easy to scale and expand, complex things are very, very, very hard to do it. So keep it simple. You and I are speaking with one mouth at the moment, which is funny. So I'm going to go, again, similar, but different. I've written out Decentralize, which is funnily enough, not miles away from what you were saying in terms of keeping it simple. 3M is a great case study. Does some interesting things with chemicals at different times.

46:39So I'm not going to say they're or necessarily a wonderful business. But what they did do is when a business unit gets to a certain size, they split it. Why? Because they want to have the accountability as low in the organization as physically possible. So you want the managers to be accountable for the result, but people make the decisions and the accountability for those decisions as low as possible. I haven't read, I think it was good to great, I read it in, it's about 300 people. When some business gets to more than 300 people, they just split it up. And there's no head office bureaucracy, there's no core systems, there's no, you mentioned head office, Matt, again, we're speaking with the same mouth here.

47:13They literally just go, just break it up, do all the functions. Why? Because there's economies of scale to a point. After that, the bureaucracy becomes its own thing. It becomes its own mouth to feed and the rules and regulations or whatever it comes out. Now, you need good rules and regulations. Again, I'm not saying that, but the bureaucracy becomes its own end rather than genuinely serving the operation of the business and the shareholders at the same time. It's a really complex thing to do. So yes, you can get learnings. Yes, you can get scale, all those kind of good things. But in 3M's experience, and I suspect strongly, having worked in lots of different companies, I suspect strongly that this is true, that whatever economies of scale you get, you lose more in the make work and the paperwork and the bureaucracy and the rules and the everything else rather than saying to a great business manager, you go and run the business.

48:03It's X hundred people big. Go and maximize your returns. You've got colleagues and other business units you can call if you need some advice or information or whatever but otherwise go and do it yourself go and make it work and that's kind of again that's why i'm coming to the book's your example um you know they've got very small numbers of people head office why because they let their managers do their thing they don't always get it right and buffets replaced managers before where they're just simply not up to the task but that's that's the job that's the effort that's the expertise of go and let them do their thing and then you mentioned culture mate the other thing of a CEO is culture and capital management the third in my in my mind is just it's hiring and firing it's literally have i got the right people in the right jobs are they are they you know are the right drivers on the right buses if i have great if i haven't i'll make some changes but then let them do their thing knowing by the way that in doing so you'll have less control and that feels scary for a ceo because how do i tell the analysts or the the shareholders or the directors like this business did badly so well again think about what you're trying to achieve here if you have got a a larger business that has different departments i'm saying well i'm going to try and make all these work but i'm going to do it by delegating i'm going to do it by giving them responsibility and accountability.

49:05And if they screw up, they're going to get fired. But otherwise, I'm going to let them go and make the best of things. Because it's kind of a bit like shares. We've said lots of times, mate, that there's no limit to the upside for a share price, but the downside maximum is 100%. And it's kind of like that with these small business units. You say, well, that business unit could go broke. Yes, that would be terrible. However, these other businesses over here that all have massive amounts of upside and can do these great things, they are worth taking the occasional L on some of the stuff doesn't work because freeing up these other people to go and do their best work is hugely, hugely beneficial.

49:39Well, yeah, it relates to what I was going to say, which is probably a bit controversial, which is don't promote based on performance. I completely agree. It's right. So let me unpack it a little bit. It's actually based on this. I love it. It's called the Peter Principle. And what it basically says is that people get promoted to their level of ineptitude or something like that. In other words, you start within an organization, maybe you're on the sales team, you just crush it. This person is fantastic. We're going to make you head of sales. Makes sense, right? But the thing is, they were good at sales doesn't mean that they were good at managing people.

50:20And that's why they say you get promoted to the point of incompetence or ineptitude because that's where you stay. It's like, oh, he's great at that too, or she's great at that too. Boom, we'll promote her. Boom, we'll promote them. And then when you stop getting promoted is because you're no longer good at it. And then you just sort of stay there. And it's just, you've got to understand that there are very different skill sets. I'm not saying don't reward people, but promotion's not the only reward. If someone's good at sales, give them a bigger commission. Give them more agency within their role.

50:50Give them like, you know what I mean? Like there's all kinds of things that you can do to reward them. You know, maybe they want a fancier business card or something with a fancier title. if you're that easily swayed, then great for the business because it doesn't cost anything, right? You'd be surprised how often that works, by the way. It's like, give someone a fancier title and a slightly nicer office and they'll feel fantastic and it doesn't actually cost you that much more. But my point being really here is that it's more about potential than performance. And you can really find that you get this bloated, incompetent middle management layer, which is full of people who had great performance in the roles they were at below that level, but just terrible now.

51:37And it's also, if you're considering on who to promote, don't ask their managers. So let's say I need someone to go up a level. Don't ask the people who manage them, who's the best in your team, who should we do? Because some people are very good at managing up and they're terrible at managing down. Ask the people that they work with and work below them what they think as well, as well, right? Because that can be far more revealing. And again, I can bet that there's a whole bunch of people listening right now that can point to a bunch of people in their workplace who everyone knows is as useless as anything.

52:15But for some reason, the boss thinks the sun shines out of their backside. How can they not see it? And they can't see it because in the boss's eyes or their boss's eyes, you know, they are brilliant. They're always really polite and punctual and this and that. And it's just like, yeah, but you don't see what goes on underneath. They're the kind of person who takes credit for others' work, who puts the blame onto other people. And they just look good in the eyes of the people who are above them. So, yeah, it's a counterintuitive one. One of the things you can do too is you can make it so that a demotion isn't a loss of face here.

52:51You can do things where you can do like trial runs, you know, or you can sort of say, we're going to give you a trial of this, but if it's not up for you, there's no harm, there's no fail, there's some other options here. You don't want to rub someone's face in it. Hey, you're really good at this. We're going to step you up to this other role. And like no one wants to, everyone wants to do a good job deep down, right? You want to be well regarded. And if it's not working out for you, then make demotion a safe space. Or not even call it demotion. It's just sort of like, listen, we tried this. We're putting you back here.

53:21This is where your strengths clearly lie. What else could I say on this front? Yeah, I think that's probably all to say. It's particularly pernicious in very large organisations and it's just something to watch out for. I don't want to get too deep into giving management advice, right, because we're doing this from an investing lens. But I will just give one suggestion, which is largely cultural. Again, as you said, culture is culture is culture. Encouraged dissent is the word. Oh my gosh, yes. Now, I'm a big fan. I've been very lucky with great managers where I can be completely frank with them and then once a decision is made, my personal view is you make the decision and then you go and do what's, you're a line of one once the decision is made, right?

54:10So I've been able to have those conversations and I think what you mentioned, kind of the sun shining and the men and women, and all that kind of stuff. Go a step further because when you know it's safe to do these things, you've got to get better outcomes. When people are scared of being disliked or fired or whatever, that's going to cause them to do those things, right? Why would you not? And this is, by the way, I find it fascinating when CEOs, particularly, have taken top job at businesses they've been at for a while and they make all these swinging changes early on. And I'm always kind of impressed that they've been able to kind of suck up the rubbish on the way through and then kind of get the job and go, right, thank God, I've had to do all that stuff.

54:49Now I can fix things. It's impressive in one level. It's also very, very, I don't know how you do it. But either way, knowing that you can have those people who can say, I think this is wrong because, or we shouldn't do this because, or I think that's bad because, or I disagree with your boss, here's why. And not take it as a personal insult and not make it a case of a popularity contest or he's always, she's always disagreeing with me so I don't like them or I'm going to give Mark down a performance review. If you're the best out of your team, you need different ideas. You need dissenting voices.

55:21You need to hear a range of stuff. Otherwise, everyone says, oh, yeah, okay, well, we'll go along with that. And the boss makes the decisions. You don't hear the stuff you need to hear. And I think that's kind of, again, I don't want to get too deep in management advice because I'm a management guru. But for my, it's, and why I say that, mate, is because we've done that at, I've done it with my teams with the Motley Fool. It's like, just give it to me straight. I own this company or I made this recommendation, but tell me why you don't like it. Tell me why I'm wrong. Let's have that conversation.

55:49I know it's the base of straw man, which I don't mean to bring it back to that particular point, but the idea of openly inviting and being comfortable with the centre disagreement, respectfully and nicely, and there's no room for so-and-sos and there's no room for rudeness or arrogance or any of that kind of rubbish. So the personality traits are really important as part of this, but you want to, you need to hear that stuff. And the best way to do it is to, well, frankly, and make an example of not just the dissent itself, but when the disagreement has changed your mind. I was going through this and then John or Jane stood up and said, actually, boss, I think you're wrong.

56:21Here's why. And I realised I was right and so I did this. And that's management advice. But from a company perspective, you're just going to get better information, you get a better view to a wider range of views and you're going to probably make better decisions. Yep, 100%. My next one is don't chase the crowd. you don't have to have just because everyone's doing something you don't have to do it like maybe everyone's doing something because it's a great idea and you need to do it you need to not to give you an advantage but just to make sure you're not at a disadvantage right like you just have you probably want a website these days probably a good idea I mean obviously the classic example right now is AI right this is like and I'm thinking this is a super powerful tool I think every company should be genuinely looking at how they can incorporate it.

57:14But for the love of God, don't incorporate just because people think that you should. And you'll see where people are incorporating it for no other reason that they can put it on a presentation deck for investors to say, look, we're doing AI. Look how cutting edge we are. We're at the forefront of this and we're doing it. And it's like, yeah, but are you doing it because you need to do it to remain competitive or you feel as though it gives you a genuine edge or you're doing it just so you say that you are doing it? And it sounds stupid, but you would be surprised at how often people do those kinds of things just because that's what, you know, is the new hotness.

57:51And you can waste a lot. Not only can you waste money in talking about capital allocation, you can invest and buy things that really just don't move the needle there. But again, there's the opportunity cost out of that and also the distraction from the core part of your business. There are some businesses out there that, frankly, you know, they might use AI and it would be important in the same way that email is important. It's like, yeah, it's part of our processes, but it's really no secret sauce and it really doesn't deserve to be called out. And it doesn't, you know, and there's a lot of examples like that kind of stuff.

58:24and you'll get to your earlier point too of, you know, don't listen to a lot of the investment bankers and all the rest of it. So they'll be telling you, what are you doing? This is new. Everyone's doing this. Why aren't you doing this? Like bugger off. We're not doing it because unless you can show me how this is actually going to enhance our profitability or lay the foundations for future growth, it's purely a distraction, you know. So yeah, point made. Yeah, I like that. I think that's really important. Mate, I have the teller I've got. Do you have anything else you want to throw in your list?

58:55I was wondering, we mentioned it on a podcast, I was going to say recently, but I don't know where we are in the timeline with this particular pod. Yeah, it's parallel universe. But I was having a rant about that show, Undercover Boss, and like, oh, aren't they great? Look at them, they're mixing with the hoi polloi and the front line, and they're getting a sense of how things are. Well, what a brilliant manager. I was like, no, no, you're not a brilliant manager. You're only doing it because of the TV show. It's like, you're only doing it now? Like this is a 60 year old company that's gone through three generations.

59:27And it's only now that you've bothered to like turn up at the factory floor and have a look at what's going on. I just, to me, it strikes you. I don't care how big the company is, right? It strikes me as negligent that you do not experience your business or business's offerings from the customer perspective from time to time. You know, you don't rub shoulders with the forklift driver or whatever it happens to be, you know, because you are going to get so much more insight there than you ever are from any report that's gone through 12 different departments and layers of bureaucracy to get to where, to get to you, to give you this beautiful, lovely, you know, glossy report full of charts and images that tell you nothing.

1:00:13where you spend a day on the road with one of your sales people and you just, it cannot be overstressed how much that is. So just, you know, be the person who is involved. Again, I said before you can't micromanage and you can't be everywhere at once. I'm not saying you should spend your nine to five, five days a week, Monday to Friday doing all this. You've got bigger things that you need to be worrying about. But surely over the course of a year, you can really diarize some time. You know what? Next time that the idiots from Brokerage, X, Y, and Z want to catch up for a coffee, you know, so that you can leak all this information, spend your time instead and go and speak to, you know, someone in a random department somewhere and find out, hey, what's not working for you?

1:01:02What would you, if you were me, what would you change? Not that you have to listen. I mean, some people are going to give you all kinds of stupid advice. I think we should get free donuts all every day. I was like, well, okay. But I don't know, I'm thinking of a bad example here. But my point is, is just like, make yourself available. And it really should be that anyone has the capacity to pick up the phone or talk to you or send you an email because you're not better than anyone else. You're really not. And it is one team, one dream. And I just think that that is just a sign of a real leader, you know.

1:01:37the Roman emperor who was at the front lines with his legionnaires, that was a leader that they would follow into the jaws of hell, right? Someone who's sitting back in Rome on high ordering stuff, you know, no, just go ahead. And that is someone who you're going to get dissenters and deserters. And it's the same in the corporate world. It really is. I like it. I like it. I think that's probably it. I do I think if I was if I was going to sum it up I think

1:02:10the problem with being novice is you don't know what you don't know yeah and I really really probably give too much credit to CEOs who you know maybe not making the right decisions on the basis that well possibly maybe they're you know should know better shouldn't know better I'm not entirely sure I guess my last thought mate is just that everything we just said about CEOs applies to directors and possibly even more so And I think that's where, you know, why? Because the directors are CEO's bosses. And so a CEO who says, I heard on a podcast, no one's actually going to do this, but I heard on a podcast I should do this, so I'm going to do that.

1:02:42If the directors aren't on board because they're not doing the right thing either, then you've got the same sorts of problems. And this is really, it's a really, really difficult one. It's cultural. It's cultural across the industry. It's cultural across business in general, the ASX listed companies overall. all um it's also why again kind of coming back to the investing takeaways it's why founder ceos generally are so good at this because they've built their own thing they've done it their own way they can be a bit arrogant sometimes frankly for that reason but it also means they've kind of gone well what do you imagine this that's a stupid idea why would i do that you know it's a different perspective and it's uh in a very very different kind of way it's why woolly's best ceos have always come up from the shop floor.

1:03:22Because they're not being parachuted in to go and be people who run the, oh, change this and change that. It's like they've literally served the customers, swept the floor, picked up the fruit and veg. They've driven the trucks. They've done whatever else they've done. And they've come in and gone, well, I kind of know the business backwards. I know what works. I know what makes it tick. And I know what's going to be successful. And again, to your point about culture, why is Woolie such a great business? Because the culture there is so incredibly strong and has been for such a long time that everyone's doing the thing that needs to be done.

1:03:46Now, they're not self-sustaining. You've got to work on them. You've got to build those cultures. But yeah, as much as we're talking about CEOs here, directors are as responsible, if not more, particularly if your CEO is coming into an existing public company and taking over from someone else. The directors were probably there before. They probably liked the way it was done. So it's harder for a CEO to make those changes from scratch if the directors aren't on board. So while, yes, CEOs should do those things and they are the head executive, the representative of the shareholders should also be on the same train and say, we will do these things and we'll do them properly.

1:04:19Absolutely. Can I just sneak one more in? Oh, yeah, of course. I love this. Again, it's another Buffett thing, but, you know, not that he invented these things, but he just articulated them so well. Yeah. He always said, praise by name, criticised by category, which is great. So what he's saying is, like, you know, give recognition to the team, the person who just did the wonderful thing. Again, it's the good and noble thing to do, but it's also free. My mum used to say good manners cost nothing, right? And it's Cho-Jaroo. And it's like, we are all human, right? And we love praise. We love to be called out for our successes.

1:04:55It just gives you a warm and fuzzy. You've got a spring in your step. You just, ah, the last, you know, company-wide meeting, I got called out for a great job. Zero cost. Zero cost in the business for that. And I feel great. And when I feel great, I'm more, I'm not, maybe I'm less likely to call in sick and all of these other kinds of things. But you criticize by category here. Again, when you point the finger of blame at a particular person, even when it's fair to do like it was clearly this person's fault, you know, you want to be more judicious in your criticism there as well. Because it's not about trying to throw people under the bus and make them feel terrible.

1:05:35It's very much about trying to point out what went wrong and trying to address it. So, yeah, another thing I just wanted to sneak in. Nice. Love it, mate. Love it. I hope you've enjoyed that little bit of a self-appointed walk down CEO advisory lane. We've tried to be reasonable, tried to think about the things we hope our CEOs would do and will do, something that hopefully they're going to start paying attention to. I say hopeful. The reality is the reality. But also, as I said, hopefully it's an investing guide for you. If you're seeing CEOs, companies with these traits, hopefully that's useful as well.

1:06:09Just separate some of the wheat from the chaff, I think. Yeah, so true. Yeah, nothing to add. Will you come back on a pre-recorded Sunday and have a... I may have already. Who knows? Yeah, that's entirely possible. Who knows where we are in the... It's four-dimensional space time. Anything's possible. In that case, we'll see you Sunday or next Tuesday or maybe Wednesday, three years ago. Who knows? But until then, full on. Cheers. The Motley Fool and people appearing in this program may have positions in the companies mentioned. general advice only. Please speak to your financial professional to understand how it may pertain to your situation.

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