We invest in exceptional people to create exceptional companies. Since 2001, Alpine has believed that inspiring growth in people is the most sound way to build growth and revenue. We start within our own offices, and share our learnings with our portfolio companies. Here are some of our favorite stories about heroes being unleashed.
This article was originally published on Graham Weaver’s blog.
By Graham Weaver, Founder and CEO, Alpine Investors
“If I have seen further than others, it is because I have stood on the shoulders of Giants.” – Sir Isaac Newton
Reading voraciously is one of the greatest life hacks I’ve ever adopted– and I’ve adopted a lot of life hacks. Reading offers you the ability to absorb years — often decades — of knowledge from those who are the very best in the world at what they do, all in just a few hours.
For example, in his international bestseller, Good to Great, Jim Collins and his research team sifted through tens of thousands of documents to determine, with specificity, how companies successfully transitioned from mediocre to outstanding performance. Luckily for us, we can invest little more than 10 hours and $13.65 to learn the same lessons they spent five years uncovering. I’d call that a wildly asymmetric return on time and dollars.
Over our 22 years of operating Alpine, we have collectively consumed thousands of hours of content related to business building, leadership, and investing. Below are insights from the five books that made the most significant impact on us.
- Good to Great by Jim Collins – Chapter 3: First Who, Then What
- Who by Geoff Smart
- Switch by Dan and Chip Heath – Chapter 2: Find the Bright Spots
- Berkshire Hathaway Annual Letters from Warren Buffett
- Competition Demystified by Bruce Greenwald
1. Good to Great by Jim Collins – Chapter 3: First Who, Then What
After experiencing learning curves in Alpine’s first fund, I read this book looking for answers — solutions that would help our firm transition from “good” (a generous term for our performance at the time) to “great.”
Like most people, I expected that great companies won with innovative strategies or new technology. But Collins and his research team discovered that “great” leaders’ first move is to “get the right people on the bus, the wrong people off the bus, and the right people in the right seats.” Only then can they figure out where the bus is going. I didn’t realize it then, but the simple concept of getting the people right would become a silver bullet for me as a leader — and the secret to building Alpine and our portfolio companies.
Our primary focus became attracting and retaining the world’s best people. We even coined the term “PeopleFirst,” which expresses both the chronology of hiring the right people first and the priority of focusing on those people above all other priorities.
Our approach works because, with the right people on the bus, we have the collective horsepower to create a winning vision. And because our team helped create the vision, they are much more enrolled in executing it. I believe hiring and retaining the best people is a leader’s primary job and the key to consistent winning.
Great leaders’ first move is to get the right people on the bus, the wrong people off the bus, and the right people in the right seats.
2. Who by Geoff Smart
Once we agreed that getting the right people on the bus was our priority, Geoff Smart taught us precisely how to do it. Building off his father Brad Smart’s book, Topgrading, Smart outlines a clear process for making hiring more scientific in his bestselling book, Who. The method includes the following steps:
- Build a scorecard to define the outcomes and attributes of the candidate you’re seeking;
- Source candidates rigorously;
- Use screening interviews, deep dive interviews, and focused interviews to assess candidates;
- Conduct reference checks to validate information; and finally,
- Sell candidates to join your firm.
We hired the consulting firm Green Peak to train Alpine in the Topgrading framework, which was one of the best investments we’ve ever made! Today, we offer Topgrading training sessions to all Alpine portfolio company managers twice yearly. The book and process have transformed the way we hire.
3. Switch by Dan and Chip Heath – Chapter 2: Find the Bright Spots
There are hundreds of business strategy books, but by far, the best strategic statement I’ve ever encountered comes from Dan and Chip Heath in their bestselling book Switch. These eight words flipped a mental switch for me: “Find what’s working and do more of that.”
These eight words flipped a mental switch for me: ‘Find what’s working and do more of that.’
While most executives run around putting out fires and fixing what’s broken, Dan and Chip Heath argue this is the exact opposite of the behavior leaders should practice. Instead, they should be scaling their bright spots — doing more of what is working. The absolute simplicity of this statement belies its power. Consider a few straightforward applications of scaling bright spots:
- Which customers use the most features of your product/service, spend the most with you, or grow the fastest? How can you find more of them?
- Which employees are the most productive? How can you give them more resources, responsibility, and attention? How can you find more like them?
- What customer acquisition channels yield the highest and most consistent returns? How can you scale those channels?
We used this strategy to scale our CEO-in-Training (CIT) program, our investment in software and services, our focus on add-on acquisitions, our undergraduate recruiting program, our win-the-deal process, and many more core strategic initiatives at Alpine. It works. Do more of it.
4. Berkshire Hathaway Annual Letters from Warren Buffett
Countless investing experts dole out advice daily, but is there any question about who is the greatest investor of all time? Warren Buffett’s track record is staggering. Ten thousand dollars invested in Berkshire Hathaway in 1965, when Warren Buffett started buying the stock, would be worth $252 million today. This is an astounding 20% annual return over 58 years! Buffett has never written an investment book per se, but he has penned an annual letter to Berkshire Hathaway shareholders since 1959. In the letters, Buffett spells out his investment strategy and philosophy. Here are a few that have resonated with our team:
- To value a company, don’t try to predict what others will think it’s worth. Instead, calculate the discounted value of the cash it will create in the future.
- The market will be a voting machine in the short term and a weighing machine in the long term.
- Pay fair prices for predictable businesses with durable competitive advantages (see #5).
- Be in business only with people you like, trust, and admire.
- Be greedy when others are fearful and fearful when others are greedy.
- Investors would do better if they only made 20 investments in their lifetime. Concentrate your capital in your best ideas – don’t over-diversify.
If you hear investors saying, “This time is different” (the four most dangerous words in investing — see internet stocks, cryptocurrencies, SaaS company valuations) — that is a great time to re-read Buffett’s letters. As unsexy as they might seem, Buffett’s timeless principles can serve as a North Star in any investment period. Adhering to them doesn’t require enormous intelligence, but it does require patience, discipline, and an even temperament.
5. Competition Demystified by Bruce Greenwald
Arguably the least well-known book on this list, Competition Demystified was written as a sequel to the famous Michael Porter book, Competitive Advantage. In Competition Demystified, Greenwald argues that while Porter discusses five forces that impact the competitive advantage of a business, only one of these forces really matters: barriers to entry. I wrote a longer blog on barriers to entry here. Greenwald argues that there are only a few sources of true barriers to entry over the long run.
- Scarcity of Supply: Companies that operate in spaces with limited alternatives like ports, bridges, oil supplies, and mines.
- Switching Costs: Companies that provide products or services where consumers will have difficulty changing from one provider to another, like enterprise software and frequent flier programs.
- Brand: Companies that provide products or services where a consumer associates a specific identity with the product or service, like Coca-Cola, Nike, and Disney.
- Economies of Scale: Large companies can provide scale advantages, just look at Walmart and Amazon.
- Intellectual Property: A company has patents or know-how unique to it, like WD-40, Google, and Apple.
- Network Effects: The value of a network on which the company operates increases as more users use the network, like Facebook, TikTok, and Uber.
Early in Alpine’s history, we invested in many fast-growing companies that lacked barriers to entry, only to watch competition enter the markets and compete away the companies’ margins. The simple structure of Greenwald’s arguments formed the backbone for our assessment of companies over the subsequent decades. This advice, combined with “Find what’s working and do more of that,” led to our focus on software and services and then allowed us to be even clearer about which companies within those categories merited our investment.
Read to Win the Day
One of my mentors used to say, “If you read for 30 minutes in the morning, you have already won the day.” I’ve consumed thousands of hours of content from books, podcasts, videos, and speeches, and I’ve learned more valuable lessons from this habit than any other activity. If you’re not already in this habit, I hope the books and insights above spark a new interest — or reignite an old one — in investing your time in reading. I’d love to hear your book recommendations.