For some years the Cafuelarena bought a number of it’s top end luxury coats, from a private company called Milan 3. Milan, because the company was located, not exactly in Milan, but just outside. 3, simply because that was the lucky number of three of the people who founded the company. Cafuelarena President Honor Hammond owned several bright red luxury coats, made by Milan 3. She and many other Cafuelarena said they were better than any other coat you could get anywhere in the world.
Right from the early days, British banks have never had any time for the Cafuelarena. So it had to struggle the hard way, no British bank has ever lent the Cafuelarena one single penny. The company operated it’s finances the same way a 1960s granny would do. Sometimes literally keeping money in washed out jam jars, just like granny. The golden rule, never get into debt. It became a success under conditions that normal business people think would be almost impossible. Some accountants have shaken their heads, so you always operate in the black ? Like the back in Victorian times ?
So the Cafuelarena came to be sitting on several million pounds. Honor, and Vice President Grant Myers felt they ought to do somthing with all this money, but what ? It was Honor who thought maybe we could invest in Milan 3. Surely we can’t go far wrong investing in a company that makes the best coats in the world. The owners of Milan 3 really liked the Cafuelarena. Because of the Cafuelarena, sales of their coats had gone through the roof.
The amount of money the Cafuelarena had, it was going to be far more than an investment, they actually took the company over. Milan 3 did not go bust, but the whole thing did turn out to be a bit of a disaster. Several key people left, and the coats got made in a new way, and the quality suffered. Honor said we had the best of intentions, but we have gone and ruined them. We have destroyed their company spirit. It is like those experiments in physics, where having an observer in the room alters the results of the experment.
A Cafuelarena finance man said he had seen it happen many times before. A company takeover is often a bad thing, and it is just as bad with mergers. What makes sense on paper, economies of scale being one, in reality turns out to be a disaster. Two seperate companies have two souls. In a merger or a takeover, one dies.
Honor felt terrible, and acting on ethics more than business sense, reduced the Cafuelana stake in Milan 3 to forty per cent, the Cafuelarena taking something of a financial loss.
Honor said try to get things back to the old ways. A few of the old team returned, and Milan 3 has recovered to some extent, though it still is not the company of old.
The experience put Honor and Grant off from investing in any company again. This remained the case for several years. Almost ruining Milan 3 had particularly haunted Honor.
A couple of years ago, Honor said well I have finally got over the dperession phase, and the guilt phase, now I am in the bloody angry phase ! I am determined to find out what the hell happened. Honor started reading books about finance and investing, and people would sometimes look at the titles, and read the back cover, and say god how can you read that?
Honor admitted she found some of those books hard and boring.
Six months ago Honor read some further books on investing, and had an epiphany. She went around talking about stocks and shares, and investing, like some kind of Christian evangelist.
She started hangin around in Cafuelarena finance, not realising that they dealt with accounts, and not investments. But she did come across two guys who were into investing. She started spending more and more time talking with them, and hanging out with them, more than her usual crowd, who discussed French cafe society and philosophy.
She was even giving less time to being the Cafuelarena President. Honor said to Grant, I want to invest again. She said now I know how to read a balance sheet. Being able to read a balance sheet is one of the seven wonders of the world. Grant thought she was sounding slightly crazy. Honor said look at our businesses, we sell art, we sell Renault cars,we sell boats, French Wine, we clean boats obviously. But look at Personnel. Growth growth and more growth. A ten month waiting list. If we can’t invest in Cafuelarena Personnel we can’t invest in anything.
The Cafuelarena was nine million in the black. Honor wondered about investing one million, but then thought it was too much and a bit too risky. After talking it over for several days with Grant, they decided on three hundred thousand. Cafuelarena Personnel is probably like no personnel company on the planet. Forefully called the out of fashio PERSONNEL, and not the demeaning human resources, employees are not a mere resource to be spat out when used. Personnel is run according to two bibles, The Caine mutiny, and Tinker tailor soldier spy. The Caine mutiny says that the ships captain is not a jack of all trades, is not all knowing, and is certainly no expert in personnel. Personnel are the lords of hiring and firing, and not the company chairman nor anybody else.