Friday, October 28, 2011

The Lady Running IBM

This week IBM named a new CEO to succeed Samuel Palmisano, who transformed the old “business machines” maker into the world’s preeminent supplier of business solutions. The new chief executive is Virginia Rometty, who sounds like exactly the right person for the job.

You’ll remember that about 10 years ago IBM sold its PC business to Lenovo, a Chinese firm. You may also remember that when Sam Palmisano decided to build a services company, he used an acquisition – PriceWaterhouseCoopers Consultants – as his platform. At the time the acquisition was roundly criticized, but he made it work, thanks to the executive he charged with bringing the consultants on board. That person was Ms Rometty. “She did the deal, and she made it work,” Palmisano said.

Compare this smooth-as-silk transition to the recent fiasco at Hewlett-Packard. At IBM, the new CEO is a 30-year Company veteran who has proved herself and won the respect of the workforce, the Board of Directors, and her predecessor. H-P reached outside the Company for its last three CEOs. Of the tens of thousands of employees, none was deemed CEO material - not once, but three times. What does that say about succession planning at this iconic technology Company?

(Today, it was reported that H-P has decided to scrap its planned divestiture of its computer business. Its recently fired CEO had planned to follow the IBM paradigm, exiting the computer business and concentrating on services and software. What H-P lacked, apparently, was a Virginia Rometty.)

Virginia Rometty’s well deserved promotion raises another point: A good woman as CEO is a wonderful corporate asset. I was reminded of that this morning, when listening to Ellen Kullman, the CEO of DuPont, as she was interviewed on TV. Ms Kullman displayed a comprehensive knowledge of DuPont’s strategy, a razor-sharp ability to discuss the Company’s various businesses, and – most tellingly – the personality to stream all the DuPontiana enthusiastically and without once sounding brittle.

My late wife would have made a great CEO. Instead, she was a great stay-at-home Mom. I have two very bright daughters, either of whom would be a terrific company president. Some women, like some men, should never run companies. But I have a hunch that corporate America is discovering the formidable potential that is there for the taking in its female workforce.

Sunday, October 23, 2011


Along with the trash that Hollywood shovels at us these days, there is the rare gem, the movie written and directed for thinking adults. Such a film is Moneyball, starring Brad Pitt, written by Steven Zaillian and Andrew Sorkin, and directed by Bennett Miller. They deserve all the awards they can pick up. So does the supporting cast, especially including Jonah Miller and Philip Seymour Hoffman.

Moneyball tells the story of the 2002 Oakland Athletics, a small-market baseball team that must find a way to be competitive against the American League goliaths, New York and Boston. General Manager Billy Beane (Brad Pitt) decides that the key lies in statistics, as massaged by a young Yale economics graduate (Jonah Hill). And the new system that Beane crafts works. The Athletics have a fine season, along the way breaking the baseball record for consecutive wins. Of course, there is always resistance to change, especially in a tradition-bound game like baseball, and the tension between the old guard and the young rebels gives the film its edge. But the film is notable, not only for what it includes, but for what it does not. There is not a single sex scene. Robin Wright, as Beane’s ex-wife, shows up for a few milliseconds and appears on the posters, but anyone who is drawn to the movie by her presence is going to be disappointed, for her character could as easily have been played by the check-out girl at your Wal-Mart. And there is no violence, save for a few of Billy Beane’s temper tantrums, which don’t count.

What gives Moneyball its flavor is the honest portrayal of the characters in the front office, the back office, and all the offices in between. And “characters” is the word. It gives us a picture of the machinery of baseball that is lacking in any other baseball movie, including my ex-favorite, Bull Durham. Sorry, Crash Davis, but as of now you’re second best.

Moneyball is a feel-good movie. Well, maybe feel-better, since the Oakland team didn’t win the World Series or even the pennant in 2002. But that, in an odd way, is one of film’s strengths. If Billy Beane’s bunch of misfits had won it all, that would have been too Hollywood. Life is imperfect.

Inside baseball: Paul DePodesta, the young nerd played (under a different name) by Jonah Hill, is now VP for Player Development with the Mets. He also looks more like a movie star than a nerd, but the producer must have thought that one handsome guy was quite enough. (The producer was Brad Pitt,) Anyway, Jonah Hill is perfect in the role, providing a nice roly-poly contrast with the trim Pitt. Columbia, which had first dibs on the film, bowed out in protest over script revisions. (The script is one of the film’s major strengths.)

I don’t know how many Oscars Moneyball will win. Maybe none. Maybe, like the 2002 Athletics, it will have to be satisfied with having a good run. That counts in my book.

Monday, October 10, 2011

Stock Talk

In the years since I began writing this blog, I have refrained from commenting on the stock market. Some friends wonder at this, since I spent a quarter century as an intermediary between a fair-sized company and Wall Street, watching market behavior on a minute-by-minute basis. I have been silent on the subject for one reason: The more you know about the market, the less you know.

Still, certain principles must be respected, and they are these:

1. Day trading is idiocy. If you make money doing it, you have been lucky, not smart. The chances are you’ll eventually lose your shirt.

2. The same applies to short sales. I didn’t always feel that way, and I used to “pair trade” – balancing a long position with a short in the same industry. But now I realize that rule 2 is a corollary of rule 1.

3. If you believe that the dollar is overvalued because of investor nervousness (as I do), owning stock in a good company is wiser than owning dollars. Take Apple as a proxy for “good company,” an unarguable proposition. There are about a billion shares in Apple. So if you buy one share, at about $380, you own one billionth of the Company. No matter what happens to the dollar or to the stock market, your share will always be one billionth of the Company. (Dilution is a non-factor, since Apple has tons of cash.) Which would you rather own, a slice of Apple (or any other profitable, growing company) or dollars, euros, or bars of gold, given almost any political or economic scenario? (Full disclosure: I own Apple.)

4. Dividends matter. Why would any sane person accept 0.25 percent on a T bill or 0.75 percent on a bank CD when one can get 4 or 5 percent from a solid utility stock? Bonus: Dividend-paying stocks tend to behave better than growth stocks at times when the market craters.

5. Irrespective of the above, it makes sense to limit one’s exposure to equities. The older you are, the lower this limit will be. One expert suggests subtracting your age from 90, and setting that as your maximum exposure to the stock market, but I think the right number is whatever lets you sleep at night.

6. Never, ever buy stocks on margin.

7. Never buy a stock on a takeover rumor. Whoever is spreading the rumor owns the stock and is “talking his book.” The same warning applies to anything you hear from a CNBC talking head. I watch the channel, but often with the audio muted.

8. Buy what you know. This is the old Peter Lynch rule, and it makes sense. If you food-shop, be aware of what’s moving off the shelves. If you buy clothes, know what’s hot and what’s not. If you are a techie, buy technology. And don’t buy stocks in a business you know nothing about.

9. “Occupy Wall Street” makes a nice sign or headline, but it shouldn’t affect your investment decisions. Not because it doesn’t matter, but because it’s impossible to rationalize.

There. I put my oar in the water, and now I will pull it out again and return to matters I know more about, like books, movies, music, and plays.

Thursday, October 06, 2011

The Magic of Steve Jobs

Poll question: Which of the following luminaries has made the biggest positive change in the quality of your life?

George W. Bush
Barack Obama
Warren Buffett
Steve Zuckerberg
Nancy Pelosi
Bill Gates
Steve Jobs
Timothy Geithner

Most people would name Steve Jobs. That’s not the real surprise, though. The shocker is that no one else comes close. Do we have only one game-changer? I guess we do.

I am typing this on a MacBook Pro. My office computer is a Mac Mini. My music is stored in an iPod. It is only a matter of time before I buy an iPad and an iPhone. I, like hundreds of millions of others, live in a universe that was created by Steve Jobs. They are calling him a visionary, but that grossly understates his achievement. Any dreamer with a good imagination can have a vision; the hard part is translating a vision to reality, and Steve Jobs did that better than anyone in at least a century.

The talking heads are dissecting the magic of Steve Jobs. Some say it was his quest for perfection, some say it was his ability to sense the public’s taste, some say it was his passionate attention to detail. I have a different read. I never met Jobs, but Apple’s success speaks volumes about its CEO. It says that he had an uncanny ability to identify, attract, and inspire talent. You can’t build a Company like Apple without recruiting and motivating good people, people like Tim Cook and Jonathan Ive and dozens of others behind the headlines. Steve Jobs had a nose for talent, and he could tell the real McCoy from the many pretenders that inhabit Silicon Valley. And that’s how Apple became the most exciting technology company of the digital era.

There is a message here for our politicians. No politician, not even the President, has the knowledge or the skill to improve our lives except at the margin. The best thing a politician can do is make sure the entrepreneurs, the future Steve Jobses, have the freedom to follow their instincts.

A little encouragement wouldn’t hurt, either.

Saturday, October 01, 2011

Reflections on the Baseball Playoffs

I’ve been a baseball fan ever since the days when Boston had two major league teams, the Braves and the Red Sox. As a matter of fact, I hustled peanuts and Cokes and ushered at both Fenway Park and Braves Field, and I still have an autograph book with the signatures of Boo Ferris and Tex Hughson and Whitey Wietelman. You never heard of them? Ah, well.

I was watching TV the Night of the Great Comebacks. By now everybody knows that the Tampa Bay Rays were down to the Yankees 7-0 with only six outs separating them from extinction, and, the Red Sox had the champagne ready, with closer Papelbon sitting on a 3-2 lead over Baltimore with two outs in the ninth inning.

You know what happened next, but you may not know that someone has calculated the odds of the Rays and the Orioles pulling both games out at 1 in 278 million. In the only game where “it ain’t over till it’s over,” the only game without a clock to end the contest, a miracle happened – twice, less than an hour apart.

The broadcasters and the sportswriters had a field day. But no one, not even the best of them, could capture the drama of last Wednesday night. It was one of those moments that you can appreciate only from a distance. They’ll still be talking about that night 20, 30 years from now.

So now it’s on with the playoffs, which seem destined to end just before the Super Bowl. There are eight teams still alive, which seems six too many to me. Finishing atop the league standings after 162 games ought to qualify a team for the World Series. But of course baseball is not the only offender here. All sports extend their playoffs, some to the point where it is possible for a team with a losing record to qualify for the post-season.

But we watch the games, so we can’t complain too much. And there is, occasionally, a brilliant double play or an exciting suicide squeeze or a sensational catch in the outfield. Baseball played by the best professionals is a beautiful sport to behold.

The extras are another matter. Heading the list of my pet peeves are the renditions of the national anthem. “Oh say, can you see,” the singer begins, splitting the word “see” into three notes. “See” is not a three-syllable word. God Bless America is more of the same, with the “love” in “land that I love” embellished beyond recognition. Three syllables seems to be standard, but I have heard four.

At one recent sporting event, management decided to replace the live singer with the Kate Smith recording of God Bless America. I wanted to stand up and cheer.

Let us not leave the subject of baseball without a moment’s silence in honor of the just-deposed Red Sox manager, Terry Francona. Life is unfair. Francona wasn’t the one who decided to pay hundreds of millions of dollars for the non-performers, but he will take the blame, because that’s the way the system works.

Now Red Sox Nation is all abuzz with speculation about the new manager. The possibilties include all unemployed managers, but I have my own candidate. He has never been a Big League manager, but I think he has the perfect temperament for the job, and he has obvious public relations skills. My choice for Manager of the Red Sox: Brad Pitt.