The company as a cult…

One could argue that the first significant example of the company as a cult phenomenon was in the early 18th Century, when the South Sea Company (while fraudulent) managed to transfix a population; destabilize government; and set back the progress of legal reform of corporate structures for many decades.

Since then, the phenomenon has appeared periodically, often at times of financial and economic change and disruption, almost as if investors and others are seeking for some form of confirmation of belief that “X” company is going to change the world.

While corporations are legally “persons” in most jurisdictions, that “personality” is abstract and dispersed, meaning that it often comes to be represented by one or more human beings- often a charismatic individual who created and built the business- or creates a culture that is designed to foster what one might call a cult mentality. So-called Multi-level Marketing companies (MLMs) such as Herbalife and Amway are examples of the latter form.

Of course, bankers, analysts and institutional investors tend to pride themselves on being cynical and clear-eyed. However, they are also (so far) human. This means that they can be lured into behaving as if members of a cult of “true-believers”, either by suspending judgement or by being manipulated into ignoring harsh realities.

Often this is not intentional, but the result of “herd behaviour”, in which it becomes awkward to take a contrary view.

Nevertheless, not all “corporate cults” are malign or fraudulent. While the early Ford Motor Corporation under Henry Ford; The House of Morgan under JP Morgan; or General Motors under Arthur Sloan were demonstrably inseparable from the characters of their founders, none could properly be regarded as deliberately “cult like”, although the way in which Sloan built GM arguably led to the modern cult of “management” as an end in itself. Even Standard Oil under John D. Rockefeller, ruthless as he was, essentially enabled much of the United States’ economic power.

More recently, the growth of the “technological age” has been led by a number of businesses which clearly achieved cult status at their peak- for example, Microsoft as lead by Bill Gates (who has managed to transition to the philanthropist role without too much opprobrium), or Apple under the late and legendary Steve Jobs. Both companies, while still powerful, no longer attract the same status.

At present, we would suggest that, in the US at least, two companies, Amazon and Tesla, have the makings of a “cult” (and compare Alibaba in the PRC under Jack Ma), while Google and Facebook, although powerful, simply do not attract the same perception.

There is little doubt that Jeff Bezos is a brilliant business man, nor that the company he created is inextricably identified with and gets the benefit of the doubt when its strategy or performance are opaque. Similarly, Tesla is inseparable from Elon Musk, who has demonstrably achieved cult status, because any other company which persistently underperformed both expectations and promises made would have been already consigned the remaindered section of history. This does not mean that Tesla will not ultimately succeed; simply that its CEO is able to persuade most investors and potential sources of funding that there will, most certainly, be “jam tomorrow”.

And if one wishes to observe perhaps that most enduring corporate cult, one only has to think of Berkshire Hathaway and the “Sage of Omaha”. The epithet says it all!

At Awbury, while we believe that a strong corporate culture is generally a good thing, and that a charismatic leader may also help, being of a naturally skeptical nature, and having been around for a sufficiently long time to have seen the consequences of the suspension of critical faculties in many areas, we take the view that a corporation’s actual performance, competitive position, financial capacity and liquidity are what really matter. We are very wary of unsubstantiated charisma.

The Awbury Team

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