In technology investing, it’s easy to get caught up in the amazing products, disruptive business models, and massive market opportunities. We analyze growth rates and profit margins. But one of the most critical factors for long-term success, and one that is often overlooked, is the quality and vision of a company’s management team. A great technology can fail under poor leadership, while a visionary leader can steer a good company to greatness.
The Visionary Founder
Many of the most successful technology companies in history were led by visionary founders who had a deep passion for their product and a relentless drive to change the world. Think of Steve Jobs at Apple, Bill Gates at Microsoft, or Jensen Huang at NVIDIA. These founder-CEOs often have a long-term perspective that is not swayed by short-term market noise. A company led by a talented and committed founder can be a very powerful investment.
Capital Allocation is Key
One of the most important jobs of a CEO is capital allocation. This involves deciding how to allocate the company’s funds. Should they reinvest heavily in research and development? Should they make a major acquisition? Or should they return cash to shareholders through dividends and buybacks? A management team skilled in capital allocation can create significant value for shareholders over time. A team that makes wasteful acquisitions or bad investments can destroy it.
The Ability to Navigate Change
The technology industry is defined by constant and rapid change. A company that is dominant today can be irrelevant tomorrow. The best management teams are not just good at running the current business; they are paranoid about the future and are constantly looking for the next wave of disruption. They are willing to cannibalize their own successful products to stay ahead of the curve, as Apple did when the iPhone cannibalized the iPod.
Listening to Earnings Calls
One of the best ways for an individual investor to gain insight into a company’s management is to listen to its quarterly earnings calls. Don’t just read the press release. Listen to how the CEO and CFO answer questions from analysts. Do they sound confident and in command of the details? Are they transparent about challenges, or do they try to spin everything? This can give you invaluable insight into the quality and credibility of the leadership team.
Trust, but Verify
While a great story from a charismatic CEO can be compelling, it’s essential to always verify their claims by examining the numbers. Does the company’s financial performance back up what management is saying? Are they consistently meeting or exceeding their own guidance? A management team with a long track record of delivering on its promises has earned the trust of investors.
Conclusion
Technology and products are important, but people run businesses. Ultimately, an investment in a company is an investment in its leadership team. Taking the time to evaluate the quality, vision, and execution of a company’s management is one of the most crucial steps in making a successful long-term tech investment.
