Dave Sather’s Money Matters

August 14, 2012 

Having The Capacity To Suffer

This week my Texas Lutheran students took a well deserved break from summer jobs and classes to tour the production facility of Blue Bell Creameries in Brenham. Not only did the tour include all the inner workings of their production plant--but also their freezer, which at sixty degrees below zero, was a distinct contrast to the sweltering heat outside.

The tour concluded with a question and answer session in the board room with Blue Bell CEO, Paul Kruse and CFO, Bill Rankin. As we sat in the board room eating every variety of Blue Bell, students peppered Kruse and Rankin with questions. In return the two gave sincere, if not blunt, feedback that surpassed the lessons one could learn from reading a thousand text books.

However, one question in particular got my attention. “Can you share with us one of your most difficult decisions?”

Kruse gave it some thought and replied “Having the capacity to suffer.” Rankin then added that “Despite our success over the years, it is never a straight line. Sometimes you must be willing to step back in the short run to do the right thing for the long run.” 

Kruse also offered that you must know when to say "no", even if it is unpopular or difficult--and then have the discipline to follow through. However, doing so may cause sales or earnings to be depressed while these decisions work themselves out. 

Kruse elaborated that over the years there have been many times when the company faced a variety of challenges whether it be distribution, vendors, raw materials or expansion. Often, these issues require a well run company to take a step back, make changes or spend some money--to make significant long term progress. 

In considering these growing pains, Kruse added that you must be cognizant of the impact your decisions have on your employees, shareholders, customers and reputation. 

Rankin added that one of the best things allowing them to have the capacity to suffer is that they are privately owned. Sure, there are many shareholders—but the stock does not trade on any formal exchange and they don’t work with Wall Street or investment bankers. As such, there are no analysts waiting to give some sort of worthless trading recommendation or quarterly projection. 

Given this, Blue Bell has the capacity to suffer if they believe it will strengthen the company over truly long time periods (decades). This mindset allows the company to focus on treating their employees and shareholders very well while delivering a consistent and high quality product to their customers. 

For the average investor or business person, there are valuable lessons to be gleaned. First, just because you can trade short term does not mean you should. If you bought one hundred percent of the Coca-Cola Company for eighty dollars per share, would you sell it just because someone offered you eighty-one a share? Hopefully not. 

Maybe lots of trading makes your broker happy, but short term activity is just gambling. Plus, it generally drives up your tax bill. 

No matter what type of business venture or investment you are in, behave as if it is privately held. In doing so, you will be far less apt to sell a great business just because the price jumped a bit or its earnings slipped over a three month period. 

Secondly, Warren Buffett has often said that he looks for companies with strong consumer brand names that are consistent and predictable over extremely long time frames—many decades. He has also said that investors should choose investments they would be happy with if they were stranded on a desert island and couldn’t trade. 

It sounds like the folks at Blue Bell and Warren Buffett have some similar thoughts on how to successfully allocate money. If it has worked for Buffett for more than seventy years and Blue Bell for more than one hundred years, maybe they are on to something. 

Dave Sather is a Victoria Certified Financial Planner and owner of Sather Financial Group. His column, Money Matters, publishes every other Wednesday.