Finding Hidden Gems

The idea to start Turning Gears came to me after reading two separate, but somewhat related books. Both are undeniably among the most incredible pieces in management literature. The first is Good to Great by Jim Collins and the second one is Outsiders by William Thorndike. Each author focused on the success stories of the public companies that outperformed the market by 3x or more over at least 15-year period. Both try to discern the actions these companies and their CEOs took to achieve these incredible results. While both provided answers to some of my questions, neither addressed the one that nags me to this day.

How does one identify a successful CEO before the market realizes it?

The authors of a recent series Secret Life of CEO’s developed by Freakonomics sifted through available research trying to answer this question, but the only factor that had some predictive ability was that a CEO has already achieved success in his or her previous endeavor. For someone who is naturally curious, I wasn’t satisfied with the answer. So the idea of a podcast was born.

The application of this question is relevant both in public and private markets. Highly successful investors such as Thomas Russo, Richard Lawrence and Warren Buffet, whose firms consistently outperformed over long periods of time, cited strong management as one of the key factors for making investments in the first place. Buffet’s talent to size up the managers within 5 minutes has probably been more useful to his career than his ability to deploy capital itself. Likewise, founder of Carlyle Group (one of the largest PE firms in the world) noted that the right leadership was the first among deciding factors in the acquisition.

By deciphering key principles, decision-making processes and habits of successful leaders, I hope to be able to improve my own investment decisions. And the more learnings I can share in the process, the better.