Who Really Runs Alpha, Warrior and Transocean?
The Autopsy
“You can’t make a good deal with a bad person.” — Warren Buffett
Three men sat in a room at Salomon Brothers in 1991.
The CEO. The president. The general counsel.
They had just learned their trader was faking bids to the US Treasury. One phone call would have ended it. Nobody made the call.
Two weeks later the trader did it again. And a hundred year old firm nearly died. Not from the crime. From the silence. Buffett had to testify before Congress just to keep it breathing.
Salomon’s numbers looked perfect the whole time. Record profits. Rising stock. Clean ratios. The numbers always look perfect right before the fire.
The rot was never in the numbers. It was in the men.
Anyone can screen a stock. Nobody screens the CEO. Your terminal shows ROIC in four seconds. It cannot show you whether the man spending your money is a builder or a thief. That’s the last edge left in this market. It can’t be automated. You have to read. Most people won’t.
Buffett spent sixty years judging managers and boiled it down to two questions.
“How well does he run the business.”
“How well does he treat the owners.”
And he noticed something dark. The answers almost always match. The manager who runs the business badly is the same one picking your pocket. Bad operator, bad partner. Same guy, every time.
Two questions. Five filters. All five you can run from your desk, with nothing but public documents.
One. Follow the dollar. Give a CEO one dollar of free cash and watch what he does. Buys back cheap stock, keep him. Prints shares and overpays for empire, run. A CEO controls more capital in a decade than most fund managers touch in a career, and almost none were hired for that skill.
Two. Read the proxy. Not the investor deck. The deck is makeup. The proxy is the confession. What did he pay himself. What did the owners get. Bad managers always leave fingerprints in the pay table.
Three. Integrity first. Intelligence, energy, integrity. Miss the third and the first two turn against you. A brilliant crook is the most expensive man you will ever own. If your CEO must be dishonest, pray he’s also lazy and stupid.
Four. The money or the game. Some men keep working after the payday because they love the game. Those men outwork everyone on earth. Others love the money, and they’re already gone. They just haven’t told you.
Five. The confession test. Pull up the shareholder letter from the company’s worst year. Does he write “I made a mistake” or does he blame weather, macro, China. A man who lies to you about the past will lie to you about the future.
Five filters. Public documents. One afternoon of reading.
Now the part where it stops being theory.
The four men I’m about to grade control most of my net worth. This isn’t a research exercise. If one of them fails these filters, I have to sell. So I graded them the way you’d grade a surgeon before he opens you up.
Andy Eidson. Walt Scheller. Jeremy Thigpen. Keelan Adamson.
Let’s see who bleeds.
