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Peter Kaufman: Six ways to break the investment code

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  • Feb 24, 2017
Peter Kaufman: Six ways to break the investment code

Peter Kaufman

If you want to stand out from the crowd as an investor or a business leader, you need to do things differently from everyone else.

Peter Kaufman, Chairman and CEO of Glenair Inc., a manufacturer and supplier of military and commercial connectors, illustrated that point by making a different kind of presentation to students in Professor George Athanassakos’ value investing class. Speaking via videoconference, Kaufman showed different props, such as a hummingbird and a stuffed dog, to set up each key message. He then explained how the props tie into his advice on breaking codes, developing your own style, and considering different viewpoints.

“When you do as everyone else does, don’t be surprised when you get what everyone else gets. There is an advantage from doing it differently,” said Kaufman.

Here are some key takeaways:

Break the code – The hummingbird may seem an unlikely role model for investors, but this tiny bird has set a big act to follow. Kaufman explained how the hummingbird rotates its wings, rather than flapping them straight up and down, to get more lift. It can then access nectar from flowers that other birds can’t reach. The lesson for investors: don’t invest where everyone else is.

“The hummingbird broke the code of how to turn a crowded backyard space into a beautiful, uncrowded niche. The No. 1 problem in money management is crowded spaces,” he said. “If you want to do better than all the other birds, metaphorically speaking, you’re going to have to figure out how to flap your wings differently.”

Aim for bronze – Although tin and copper are soft metals individually, when blended together, they create bronze, which is harder and more durable. Kaufman said it’s an example of a startling nonlinearity in inorganic chemistry. He encouraged the students to assess the characteristics typical to people in their specialty and to work on developing non-typical attributes for a competitive edge.

“This is how the world works sometimes. There are blends that give you quantum results,” he said. “If you really want to succeed, you should develop proficiency in a certain area while simultaneously blending in other characteristics not generally found in such specialists.”

Let your own unique style emerge – Kaufman said he once met R&B singer Lionel Ritchie, who told him he embarked on a singing career by imitating rock ’n’ roll pioneer Chuck Berry. Ritchie said he soon learned there wasn’t demand for a Chuck Berry imitator and his career only took off when he developed his own style. The lesson for investors: don’t try to follow in the footsteps of legendary money managers, such a Warren Buffett and Ben Graham. Kaufman said you need to develop your own investing style.

“Don’t try to be a clone or an imitator of someone else. It’s not going to work,” he said.

Master the game – Kaufman said it’s easy to win a poker game if you know the hands of the other players. The same goes for the game of business. If you take the time to understand the needs of the other players – such as customers, employees, and regulators – you will have a winning advantage, said Kaufman.

“The real work in business is not learning spreadsheets or terms. The real work in business is seeing through the eyes of your counterparty groups,” he said. 

Get people to be all in – Kaufman likened this process to how you’d orient a new puppy. If you create a safe, calm, reassuring environment; meet its needs by providing food and water; and are consistent, the puppy will eventually trust you and be forever loyal. People are no different, he said. If you consistently prove you can be trusted, show concern for people’s needs, and treat people with respect, they’ll go all out to help you.

“Some of you will be running your own business one day. It might be money management. It might be something else. Your job is to get everybody to be all in,” he said. “There is no other job because, when people are all in, everything else will be taken care of. They’ll treat the customers right. They’ll treat the suppliers right. They’ll treat one another right.”

Be a good leader – Kaufman shared the story of Captain Michael Abrashoff, a former U.S. Navy Commander who took command of the worst-performing navy ship and crew in the Pacific Fleet and made it the best in the fleet. Abrashoff’s strategy included dining with the crew instead of separately with the officers, and eating last in case the group ran out of food. Kaufman said Abrashoff simply treated his crew the way he wanted to be treated and that motivated the crew to do its best work.

“All you have to do to be the greatest leader anyone has ever seen is to exhibit the very same set of characteristics you are looking for,” he said.