Break The Rules Like Billionaire Investor Carl Icahn

Should you break the rules if it means achieving greater success? Here's a look at what every entrepreneur can learn from billionaire financier Carl Icahn.

Jeff Bittner, Founder and President of Exit Technologies | Source: Courtesy
Jeff Bittner, Founder and President of Exit Technologies | Source: Courtesy

Should you break the rules if it means achieving greater success?

Some people feel comfortable following rules verbatim. It optimizes their learning technique and transposes fluently from business and study, into every aspect of life. However, we are not all wired this way. Some of us feel boxed in by rule-based problem solving, to the extent that following standard procedure negatively impacts the end result.

If applying independent creative thinking to problem solving produces the same, or better results–is this approach wrong? It certainly wasn’t in Carl Icahn’s case.

When Icahn started investing, the status quo was to passively buy and hold stocks hoping company management treated investor money like their own money–and growing it!

Unfortunately, management is all too often comfortable drawing hefty salaries and this breeds complacency. This status quo created a trend of safe investment, and no one was getting optimum value out of the company assets for the shareholders.

 

Carl Icahn, founder of Icahn Enterprises | Source: Courtesy Photo
Carl Icahn, founder of Icahn Enterprises | Source: Courtesy Photo

Icahn was not wired to follow the status quo. His innovative approach to investing broke the mold, or as he puts it; “Some people get rich studying artificial intelligence. Me, I make money studying natural stupidity.” He sought out complacency and under achievement and made it work in his favor.

 

Hidden asset value

His first step was to identify a company with the most opportunity to employ his theory. So he enlisted the skills of Wharton economics graduate Alfred Kingsley. Kingsley had gone on to achieve his masters in Taxation from New York University and was an expert at finding companies with hidden value in their balance sheets. He was a fortuitous hire for Icahn’s then modest discount brokerage firm specializing in arbitrage. Where assets were mispriced, misused, or misvalued, Kingsley could diagnose the concealed worth.

With Kingsley on the balance analysis, Icahn’s focus was to effect change, which required the type of proactive approach that CEO’s dread. Once Icahn had chosen his target company, simply buying shares and waiting was too passive an approach. He needed enough ownership of the company to make key changes in management, personnel, and board members.

Icahn’s skill in business strategy was 12 chess moves ahead of his opponent. While he used lawyers and advisors, Icahn also thoroughly investigated everything himself, using all of these findings to reach his conclusions. The results spoke for themselves.

 

Think like Icahn

Companies often decommission existing equipment to accommodate for new installations. IT asset decommissioning (ITAD) companies are a good example, as they often take an easy route when it comes to handling customer assets. They tend to flip or broker the product for a quick cash out, but what if you could get a 30% higher return over liquidation pricing?

By liquidating products quickly, without extensive research, it would be easy to settle for a lower offer. Secondly, quickly liquidizing assets damages the supply and demand ratio. Liquidating millions of dollars of equipment at once depresses value up to 50%, by flooding the market with more supply than demand requires.

 

Photo: © opolja, YFS Magazine

Other ITAD companies manage their clients’ excess IT assets in a similar way to the complacent investment strategy that Icahn revolutionized–a comfortable status quo with a comfortable return that is blind to hidden value that could benefit their clients. Businesses need to rethink this strategy. Extensive research is needed across all assets, to identify hidden value.

Some IT products are worth spending time thoroughly inventorying, packing, shipping, testing, and processing. While others simply require being responsibly recycled. ITAD companies need to ask: how do we maximize on this value? Does it sell better whole, or in parts, in volume, or smaller transactions?

By applying fastidious thinking and not accepting the status quo, ITAD companies (all businesses for that matter) can go further to improve clients’ return, squeezing every last inch of value out of assets, whatever they may be.

 

Jeff Bittner is the Founder and President of Exit technologies, an R2 certified, global IT asset disposition company (ITAD). Jeff is a serial entrepreneur and founded the company in 1989, to help enterprises cost-effectively liquidate their IT hardware. Connect with @exittech on Twitter.

In this article