CEOs and Causation
Causation - the action that drives an outcome - is a well known concept in Physics. Causation needs to be applied in the investment due diligence process as it relates to CEOs and the companies they lead. Theme investing is nonsense. Only a fool would chase every chip company considering them equal. There is a reason why NVIDIA (NVDA) dominates the chip market - it is led by a passionate, hands-on founder CEO who cares about winning and being the best - not second or third best. Sure, XYZ chip company may be cheaper from a valuation, but will they ever outgrow the market so long as NVIDIA keeps innovating and driving superior operating results? My experience is that cheap companies are always cheap and they are typically cheap because they are led by mediocre CEOs.
There is a reason why CoStar Group (CSGP), leads the Commercial Real Estate (CRE) Info Services market with everyone else competing for second place (CoStar is led by a passionate, hands-on, product-centric founder CEO).
There is a reason why Apple (AAPL) has not been the same innovative company company since its founder CEO Steve Jobs passed away in 2011.
There is a reason why Tesla (TSLA) mops the floor with all of the other Auto OEMs.
I could go on and on. Founder CEOs typically drive superior outcomes when compared to Non-Founder CEOs. Investing in a company is first investing in a management team - particularly the CEO - who is the “causation” in the causation - outcome relationship.
In case you missed it, we published an article earlier this week that highlights the Top performing CEOs in the S&P 500. 70% of the Top 10 CEOs are Founder CEOs. The list is free - HERE.