This is what happened to hardware stores in small towns all over America when

This is what happened to hardware stores in small

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price well below your cost. This is what happened to hardware stores in small towns all over America when Wal-Mart moved in. Because of their volume buying, Wal-Mart could sell the hammer for less than Mr. Smith’s Hardware, and before long, Mr. Smith’s Hardware was gone. Do not own a business without a big Moat—public or private. 3. No CEO . Yes, there will be a body in the CEO chair with the title, but that does not mean the business has a real leader. Leadership is about vision and values. All public businesses have management. Fewer have leadership . As I’m writing this, Steve Jobs is overcoming health challenges. I’ve worked with Steve and I can tell you from personal
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experience that he can be a total son of a gun about what he thinks is right. He’s like Simon on American Idol . He has absolutely no concern for your personal feelings. What you are doing is either “cool” or “@#%s%!” But it’s that laser-like focus on what he sees as “cool” that allows his company to connect technology with consumers better than any company in the world. Thank God Steve recovered quickly. America needs every hard-core, iconoclastic, SOB like Steve Jobs it can get. But what happens, God forbid, if Steve doesn’t stay healthy? It’s an open question whether anyone else can keep Apple’s products at the cutting edge of brilliant innovation. Last time Steve stepped down, the company was turned over to a sugar-water salesman and Apple nearly went down the tubes. When Steve brought it back, he saved the company. We’ll see if a real leader can step up to keep it saved now. (To that end, you also need to be careful about buying into a company that’s so reliant on the brains of a single person. If that asset goes away, the entire business as an asset can go away, too.) Also be certain to not invest in businesses that have political climbers at the helm. They are not leaders. They are the polar opposite. They look to where the band wants to go and then get in front of it and wave their baton. The world has enough self-promoting grandstanders in politics. Be careful of investing with one. 4. Big Debt . No debt is best, particularly in this credit crunch. Debt implies the business needed to borrow money to finance either working capital or growth or both. When money gets tight, they might find their source of cash drying up. Then they have to either sell equity and dilute the existing shareholders or slow down growth or even sell off parts of the business to get capital for the rest of it. Make sure you know that the debt load isn’t too high for the business to handle even in a bad credit market like this one. As explained in Chapter 3 , make sure a company can pay off its debt within three years by dividing total long-term debt by current earnings. 5. Trade Unions . I like the idea of an intracompany union because I’m all about the little guy, but I’m not a fan of trade unions. An intracompany union is a union of both management and employees within the same company, which gives employees a way to come to consensus and let the CEO know what they want, along with a forum for
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management to explain what it wants. It’s a means of building consensus
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  • Spring '20
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