Page 163 - Executive Warfare

The People You Have to Motivate

I knew relatively little about investing, but I did know this much: When
I was a kid, my father had bet compulsively on horse races, so I under-
stood the difference between a long shot and the favorite—and the rea-
son a winning bet on a long shot paid
better. Long shots don’t all pay off. So
ASK THE KINDS OF
that’s what I asked about.
QUESTIONS THAT
For example, we were considering a
CAN BE POSED IN
big investment in a poultry farm that
LAYMAN’S TERMS:
offered an unusually good rate of
IS THIS GOING TO
return.
WORK? WHY ARE
I asked, “What can go wrong?”
YOU SO
“Nothing,” somebody answered.“It’s
CONFIDENT? WHAT
a fairly predictable investment because
HAPPENS IF IT
between cat food, fertilizer, human con-
DOESN’T?
sumption, and consumption at the zoo,
there’s a great market for chicken.”
I begged to differ.“This loan is not really collateralized because all you
have is chicken coops, a few thousand acres of farmland in the middle of
nowhere, and a pile of bird droppings to sell as fertilizer. So what happens
if you have to stop killing chickens?”
They looked at me as if I were a madman.
Then a senior person asked, carefully, “Why would we stop killing
chickens?”
I said, “Well, chickens get the flu. What if they all die and therefore we
don’t have any chickens to kill for 180 days? How much money do we lose?”
It was inconceivable to these people that this could happen, but the
answer was some huge number—particularly when you figure in the fact
that if you are killing chickens, there are no new eggs making new chick-
ens. So then I asked the next question:“How much of our portfolio do we
have in chickens versus our competitors?”
It turned out we had a lot more in chickens than they did because we
were willing to take on more uncollateralized risks.

143