What Do Keith Richards and Costco's CEO Have In Common?
You might not guess it, but Keith Richards and the CEO of Costco have one very important thing in common. It's something that enabled each man to rise to the top of his very different lifelong pursuit.
Both Richards and Costco's Jim Sinegal have what I call the A-factor – the Authenticity Factor – a deep and abiding emotional attachment to the purpose of their enterprise, whether it's rock and roll or running a chain of warehouse retail stores.
Once you know how to spot it – and I'll give examples of a few companies who leaders have it – the A-factor can help you identify companies with a leg up on the competition.
What Is "Authentic"?
I began considering the importance of authenticity when Chris Farley, the founder/operator of a local specialty retail company, came to speak to our office about Pacers, his successful chain of running stores in the Washington D.C. area.
Pacers is thriving in a highly competitive environment. When asked why he was successful, Chris simply said, "I'm authentic."
Chris genuinely loves running, and he's built something that is much more than just a running store. Pacers coordinates more than 20 fun runs each week, where customerss gather and express their mutual passion. The people who Chris hires to work for him share his passion. They provide outstanding customer service because they, too, eat, sleep, and breathe running.
Like Facebook, LinkedIn (LNKD), and Groupon, building communities that connect like-minded people can be a very profitable endeavor. And superior service leads to superior success in retail.
Keith Richards Keeping It Real
At the same time Chris came to speak to our company, I was reading Keith Richards's autobiography, where once again, the theme of authenticity came to light.
Rock and roll was never an occupation for the Stones. It's a way of life, which is why they keep performing long after they stopped needing to financially. In Keith's own words from Life, his autobiography:
People say, "Why don't you give it up? I can't retire until I croak. I don't think they quite understand what I get out of this. I'm not doing it just for the money or for you. I'm doing it for me.
Rocking the Retail World
Who does this in the commercial world? For me, Jim Sinegal embodies authenticity. The founder of Costco (COST) is an authentic crusader for retail goodness. It takes less than five minutes of talking to him for his passion for retail to come across.
Sinegal doesn't spend much time in his office at Costco headquarters. He's too busy visiting stores, talking to employees and customers about the products. (I've heard him speak eloquently about the benefits of Kirkland brand diapers.) He is heralded in his industry as a master merchandiser, and he has the ability to assess how well a retail store is run within one minute of walking through the door.
Identify the Authentic and Ignore the Actors
Unfortunately, identifying a company's authenticity isn't as straightforward measuring a business's margins. It's not something you'll find by examining financial statements or dissecting conference call transcripts.
Instead, drop by a company's Facebook page to see whether they've ever engaged their audience. Look at how the company is building its fan base. Are they buying "likes" by running sweepstakes, or earning them through genuinely good service? That's the difference between marketing and authenticity.
Thanks to the Internet and social media, it's easier than ever to detect the fakers. It's just too hard to snow people any longer.
The next time you invest in a company, consider why the CEO has accepted the position. Ask yourself: Do they love the money? Do they love the prestige that goes along with title? Or are they pursuing a bigger purpose? Would they be doing this job even if they were the wealthiest person in the world? If the answer is yes, you can probably assume they have the A-factor. Their company may have the makings of a very good investment.
Who do you think has the A-factor?
Buck Hartzell, Motley Fool Director of Analyst Learning, shops at Costco but doesn't currently own shares of it. The Motley Fool owns shares of Costco. Motley Fool newsletter services have recommended buying shares of Costco.