All In The Family
Boy the way Glenn Miller played
Songs that made the hit parade.
Guys like us we had it made,
Those were the days.
And you knew who you were then,
Girls were girls and men were men,
Mister we could use a man
Like Herbert Hoover again.
Didn't need no welfare state,
Everybody pulled his weight.
Gee our old LaSalle ran great.
-Theme song from "All in the Family" 1971-1979 (CBS)
Ah yes, the 1970's. Vietnam, Watergate, Arab Oil Embargo, Jimmy Carter, Inflation, Recession. A tumultuous time. But somehow I survived. To escape we watched All in the Family on TV. The star was Archie Bunker, head of a slightly dysfunctional family. When Archie wasn't picking on wife Edith, he was ridiculing "meathead", as he often called Mike, his college-educated son-in-law. Archie's political incorrectness created a national dialogue about previously taboo TV areas including race, gender, religion, sex, and politics. You name it, All in the Family discussed it. And, the number one TV show for six straight years from 1971 to 1976.
While All in the Family was a groundbreaking television program, and highly entertaining, the Bunker household was a poor example of family behavior as applied to investment analysis. Make no mistake, we love companies where families are involved, often due to significant stock ownership. But poor ol' Archie wasn't exactly a rational thinker. No, Archie's biases and stereotypes controlled his behavior, and often lead him to behave in illogical ways. As we often preach, rational behavior is the best way to deal with an occasionally irrational stock market.
We spend quite a bit of time analyzing businesses and the people who run them. We want to understand the people and the culture. We like heavy insider ownership. Why? Owners tend to take care of their belongings. The old adage "no one washes a rental car" comes to mind. We especially like family-controlled companies as the culture tends to be strongly biased. But unlike Archie, the bias is often rational and focused on long-term decision making and taking care of shareholders.
Examples? Warren Buffett and Berkshire Hathaway are one well-known example. But many others exist. The Tisch family and Loews Corp. Prem Watsa and Fairfax Financial. William Berkley and W.R. Berkley Corp. The Rales Brothers and Danaher Corp. Sergey Brin and Larry Page of Google. Fred Smith and FedEx Corp. Fred started FedEx in 1971 (same year as All in the Family), but unlike Archie Bunker, Fred is still running the show. We know many others, but I'm guessing you have other things to do today.
What these companies have in common is significant insider ownership, often family-based, managed by independently wealthy people who continue to work because it's their passion, not a job. In short, these companies think like private business owners, without catering to the short-term pressures of Wall Street. That's what we love to see.
What I learned from Archie, like many children of the 70's, is how not to behave. That was his great lesson. And learning what not to do illuminates the right way forward.
Those were the days, indeed.
-John Heldman, CFA