'The Most Important Thing' is Value Realization

Journal of Private Equity, pp. 89-93, Fall 2012

Posted: 1 Sep 2012

See all articles by Joseph Calandro, Jr.

Joseph Calandro, Jr.

Fordham University - Gabelli Center for Global Security Analysis

Date Written: August 31, 2012

Abstract

This paper analyzes select lessons from the recently published book by Howard Marks, "The Most Important Thing" (NY: Columbia University Press, 2011), from a private equity perspective. Mr. Marks specializes in credit value investments, and as a result private equity investors may overlook the applicability of his book to their activities. As we discuss, the scope of evaluating credit can be very wide thereby providing valuable insights into more private equity-related topics. Using Mr. Marks's book as a primary source, we argue that value realization requires a differentiated approach to strategy, focusing not only on value proposition differentiation -- which is the primary focus of the strategy literature -- but also on search and capital allocation differentiation. We then argue that the management approach chosen to execute a strategy should be considered carefully and may not necessarily involve the use of "stretch targets," which can be commonly used today. Irrespective of the management approach used, however, a primary activity is to manage the risk of value destruction. As we show, Mr. Marks offers a very practical, theoretically-consistent approach for accomplishing this much written about, yet for many seemingly elusive, goal.

Keywords: value realization, strategy, risk management

JEL Classification: D81, L20, M21

Suggested Citation

Calandro, Jr., Joseph, 'The Most Important Thing' is Value Realization (August 31, 2012). Journal of Private Equity, pp. 89-93, Fall 2012 . Available at SSRN: https://ssrn.com/abstract=2139239

Joseph Calandro, Jr. (Contact Author)

Fordham University - Gabelli Center for Global Security Analysis ( email )

531 Hughes Hall
441 E. Fordham Rd
Bronx, NY 10458
United States

HOME PAGE: http://www.linkedin.com/in/josephcalandro/

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