Notes on Being a Board Member

Fred Wilson posts about the importance of knowing the difference between being a good advisor to a CEO and being in the CEO's way. These are truly words of wisdom.
It's a lot about how you say things, not what you say. The most important thing is to advise not direct. Ordering entrepreneurs around won't work. If they wanted to take orders, they'd be working at some big company taking orders from someone else. It's also critical to soft pedal the advice. Coming from an investor, it's going to have an impact anyway, so I find it best to say something like, "have you thought about", as opposed to "that's not the way to do it".
I couldn't agree more that it's of critical importance that a Board Member know how to coach & guide while keeping a CEO upbeat about what he/she has already accomplished. Obviously, this is Management 101, but I've found several VC's and Board Members who tend to forget the basics of management & motivation. No matter how good the CEO, people are people and they need to be treated with respect & recognition. Just like anyone, CEO's appreciate words of motivation & validation.

If you have something to say, think carefully about how to phrase it...

Intellectual Happy Hour

Dan Primack points me to an interesting article by James Surowiecki of The New Yorker discussing the inherent conflict of interest in buyouts of public firms. Surowiecki claims that LBOs present a conflict of interest between management and shareholders. The thought is that management is not incentivised to sell the company at a low price since they’re participating as shareholders in the new acquisition vehicle. This is a thought-provoking piece.

Rumour has it that Ford Motor Company may be taken private. With a market cap of about $15 billion, current long-term debt at $150 billion, and a credit rating in the dumps, it would be a really brilliant idea to take this company off the market and help it refocus it's business. The divestiture of several key assets could raise a substantial amount of cash to fund the company to viability. Let's see who steps up. Nasser, possibly?

Bret Swanson hits the Wall Street Journal with a testy commentary on the reasons behind the skyrocketing price of oil in the US. He states: "Today, commodity prices across the board, from coffee to carbon fiber, remain near 25-year highs. High oil prices are not a unique phenomenon, but just another commodity whose price is determined primarily by the value of the dollar. Expensive oil isn't exclusively a monetary event, of course: Risk and demand matter, too. But in comparing oil to other commodities, especially gold, we find that elevated risk and demand explains only $10-$15 of the higher oil price; $30 of the price is explained by a weak, inflationary dollar. The entity most responsible for expensive oil is thus the Fed." Read this article.

Pluto was demoted to dwarf status. That's just flat out sad.

Ford Sales Drop 34%

...this is not a bad thing. As I've mentioned before, these car companies have focused way too much on being number one or number two and not focused enough on being solidly profitable. Toyota has become the number two automaker in the US.

This is the best news I've heard come from Ford management in quite some time:
Ford officials painted an optimistic picture of July's results, citing an improvement in sales excluding those to rental companies, government agencies and other mass purchasers. The auto maker said its July retail sales climbed 7% compared to June, representing the second best retail month for the auto maker this year. The auto maker is looking to lessen its reliance on unprofitable sales to so-called fleet customers.
Fleet sales are probably one of the worst kind of sales an automaker can get in to. Usually fleets simply diminish the residual value of vehicles tremendously; as they flood the market with an abundance of used vehicles 2-3 years after the purchase.

That basically means that the re-sale value of that Taurus you bought is crushed when you try to re-sell it because Hertz and Avis are dumping theirs as well. So, the supply of used Taurus' in the market is greater than the original supply of new Taurus' a few years earlier (because the vehicles sold to Hertz and Avis originally were never actually part of the open supply). But, generally, demand for those same vehicles (but used) hasn't drastically increased either.