In this report we will be showing how much does management own for ticker:
MSFT company
- The core idea is to understand management's vested interest in the company
- If managements fortunes depends on the long term prospects of the company, management will never take shortcuts nor it will be engaged in any wrongdoings
- Studies show companies with substantial management ownership have outperformed SPY, e.g.: https://www.jstor.org/stable/43611178
- Jeff Bezos - Amazon, Warren Buffet - Berkshire are classic examples of owner and companies...
- King Hammurabi of Babylon already used the principle when he established one of history’s first laws. To ensure high construction quality inside the empire, one set of laws was for the builders.
Law 229 stated that if a builder builds a house for a client and does not construct it properly, and the house which he built collapses and causes the death of the owner, that the builder shall be put to death.
As a result, builders who were not able to construct properly or tried to cheat left the trade —one way or another. Soon, those who were planning to build a house had less to worry about.
The law’s harsh consequences and its simplicity made sure that the incentive of the builder who gains to profit and the man who risks the cost of construction, living inside the house, are aligned.
“Show me the incentive, and I'll show you the outcome.”
― Charlie Munger
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