how does an "investor mindset" differ from a "CEO mindset"
If an "investor mindset" is one in which you constantly think of levers you can pull to drive growth in a company, generally used in the context from a buyside HF PE seat, is that really all that different from being the CEO driving growth within a company, whose principal objective is to grow the company itself?
Or, is the main distinction being that the HF PE view investing more from a financial perspective, versus a commercial perspective like a CEO would be "more" focused on?
Some would argue that there shouldn’t be a difference, and that the best CEOs think like capital allocators. You should read The Outsiders
Stay gold, Ponyboy.
This gave me a good chuckle.
Thanks for the laugh
Comparing an investor to a CEO is like comparing me sitting on my couch playing FIFA to Messi playing on the field. Big picture it's all about kicking a ball into the net right? =)
Having been on both sides of this...in my own experience, the general differences have far more to do what the roles & responsibilities of each role entails (i.e., experience), and what is required to move up in each of the respective career paths (i.e., the achievements and accolades over time), more so than potential or general competence (notwithstanding individual propensities to be better at one vs. the other).
Good PE investors are "generally" great strategists, but not great at execution (lack of ops experience) and most of the time terrible people managers (high finance does not "lead" people nor do they really need to be great leaders, they tell people what to do in exchange for high compensation). CEOs are great executioners, but not as great strategists. To be clear, I'm not insinuating CEOs are bad at strategy, they have to be good at strategy if they want to scale a business. CEOs just simply don't see as many business models and/or have the time to think high level strategy relative to PE people who spend all day evaluating what are "differentiated business models" and how to maximize exit value (and exit value isn't always the same thing as long-term value). Whereas CEOs spend some time setting the strategy, but once a strategy is set, CEOs spend an inordinate amount of time managing the people and business processes to achieve the desired strategy; and occasionally review/revise strategy. PE people have very little knowledge of what is actually required or happens in the day-to-day to build a great business, they simply do not see this side of business ownership (even the most hands-on PE firms; and usually "hands-on" means there are operating partners that are hands on, not the investors). Instead PE people will talk about what do great businesses look like and what levers to pull (at a very high level), but don't know how to get there, how feasible it is to get there, how to prioritize initiatives given the limitations on resources/time of the business, etc.
To one of the other posters point, in theory there shouldn't be a difference. Having Ops experience can be incredibly beneficial to being an investor, and vice versa. But the roles and responsibilities of each career path dictate what each person is spending most of their time and attention on; and at least as it stands today, there just aren't a lot of opportunities, or it doesn't make financial and/or career sense, to jump around between the two. Because of carry, very few senior investors leave to go be CEOs (although we'll see if this remains true in the future given the financial incentives of PE are declining for future generation of investors). And PE firms typically do not hire CEOs to be investors, they are hired to be operating partners (rightfully so given a CEOs experience).
Above is a great comment. I own/operate a small business (I don't pretend that I have the competencies to execute / scale at a large organization), so I have experience running / growing a company AND being an investor. A big decision I generally had to deal with when I was in rapid growth mode was where are my resources better served, "invested" in my business or as a passive investment in either the market or RE. I've done both. A great executor/scaler (CEO) will take that internal investment and use it wisely (staff, tech, partnerships, JVs, marketing, etc.) I did both simultaneously. Sometimes the business fed my external investments. Sometimes the investments fed my business growth.
In a pure sense, as an investor, I don't care about what it takes to scale or grow. I care about net return (how much and when)! If it's easier to make $X outside my company than why would I invest it internally?
Essentially companies exist to generate profits and ultimately to be sold. The cash flow along the way is like a dividend.
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