Most equity analysts short shrift the people side of investing. As a group, they are quantitative by nature. They like building spreadsheets and running numbers. Assessing leadership? Not so much.
What leaders of organizations do with the capital entrusted to them is largely determined by how those leaders are wired psychologically. Since psychology is not a quantitative science, equity analysts as a rule largely ignore one of the most important determinants of long-term value.
Walmart compounded earnings 38% annually in the 1980s compared with K-Mart’s 8%. Walmart was destined to become the dominant U.S. retailer. K-mart eventually went bankrupt.
Both companies served similar customers with similar products. The key difference between the two was Walmart had Sam Walton. K-Mart didn’t.
Walton was an all-in super-overachiever. Finding an all-in super-overachiever early in his or her career is a game changer for an investor.
We have studied in some detail the psychological traits of the all-in super-overachievers of the past so we can better identify the all-in super-overachievers of the present and future.
In Obsessed with Success we describe the tendency of all-in super-overachievers to exhibit a cluster of personality traits psychologists refer to as obsessive-compulsive personality disorder (OCPD): a preoccupation with order, perfectionism, and attention to detail.
The difference between our all-in super-overachievers and mere mortals with OCPD is our guys have somehow found a way to channel OCPD tendencies into something highly productive. They use OCPD personality traits to create something special.
In A little Closer to Perfect we described a second but very much related personality trait of our all-in super-overachievers: they iterate, and iterate, and iterate making whatever it is they are working on a little better with each iteration. They know that many small incremental improvements done ad infinitum turn the ordinary into the extraordinary.
Here, we describe a third feature we find in all-in super-overachievers: they need no external validation for what they are doing. They are fiercely independent.
When Business Week published a cover story in 1982 critical of Henry Singleton, Leon Cooperman was furious. As a shareholder of Singleton’s company, Teledyne, Cooperman had witnessed and benefited from Singleton’s capital allocation prowess. Cooperman fired off a nine-page letter to Business Week complete with tables, graphs, and data pointing out how very wrong Business Week had been in critizing Singleton. According to Cooperman, Singleton, while grateful for the support, couldn’t understand why his friend and shareholder would actually spend time writing the rebuttal. Singleton didn’t need Business Week’s endorsement. The article supposedly just rolled off his back.
All-in super-overachievers have rigid self-imposed internal standards. They work every day to meet those standards. They expect others around them to strive for those standards. But, whereas most of us have a need for external validation for what we are doing and how we do it, the all-in super-overachievers have no such need.
This we believe is a defining feature of great capital allocators. They have no need for validation from the market, from consultants, from the press, or from equity analysts. They are extremely self-confident. They know what they are doing. They are defiant in their views, persistent in their actions.
All-in super-overachievers exist in all walks of life. If an all-in super-overachiever is focused on coaching, you get a John Wooden. If an all-in super-overachiever is focused on invention, you get a Wilbur Wright. On sport? You get a Ben Hogan or a Michael Jordan. On Music? You get a John Lennon. And, if an all-in super-overachiever is focused on business and capital allocation, you get a Henry Singleton, Warren Buffett, Steve Jobs, or Sam Walton.
These, then, are the traits we look for in identifying the preeminent capital allocators we call the all-in super-overachievers: that cluster of personality traits psychologists call obsessive compulsive personality disorder, a penchant for iteration, and no need for external validation.
