It seems like an easy option to read a business autobiography rather than a self-improving book on the workings of companies or markets.
The attraction is that it may be a more palatable way to pick up business tips, and has lengthy theories presented in potted form.
Both are true of Joel Stern's memoir, Against the Grain: How to succeed in business by peddling heresy. The emphasis here is on peddling, and he is proud of it. "I dash about to sell ideas," he writes in a section on "serious" jet-setting. Not long before his 61st birthday he visited 12 cities, "some more than once", on four continents in 27 days.
Of course, the book also sells Stern Stewart & Co, the financial consulting firm he founded in 1982, which has developed and popularized the concept of EVA - economic value added - "the profit that results after deducting the cost of all capital invested in the firm".
Such peddling of his firm is sometimes irksome, but Stern Stewart's theories on how to measure profit and wealth created for shareholders remain a healthy antidote to earnings per share. Simila rly, Stern's skepticism about share options as a form of remuneration rings true - as well as providing the backdrop for his sales pitch on EVA-related incentives.
But the main interest of Stern himself lies in his unusual combination of academic, entrepreneur and salesman. Teaching has always been an important part of his career and, even if you disagree with him, he makes you think.
The academic side blossomed at the University of Chicago graduate business school. He was drawn there by Milton Friedman's book Capitalism and Freedom, which prompted a Damascene conversion to free markets. There he lived through a revolution in financial theory led by the likes of Merton Miller, Nobel Prize winning economist.
Aware of his lack of economics training, he kept piping up with questions. Finally Miller snapped and suggested he visit the dean's office: "There will be a derringer in the file for you. Please keep pulling the trigger until something exciting happens."
Stern stuck at the financial theory. And he did so on limited means, which prompted his first entrepreneurial burst. As an orthodox Jew, he could not eat in the student mess. His self-catering demanded a fridge, which he bought for Dollars 38 and then rented out to fellow students at Dollars 12 per half shelf per quarter, grossing Dollars 432 a year. "With that towering return on investment, I was convinced that the free enterprise system worked just fine."
He started work at Chase Manhattan Bank and joined the corporate financial research team, where he developed his disdain for conventional accounting and worked on free cash flow analysis. He railed against such gimmicks as "smoothing out" earnings, arguing that it was not so easy to fool the market.
When set loose on clients, he insisted a fee was charged for the analytical service. Giving it away would devalue it - a view that equity researchers in the 1990s would have done better to abide by.
Stern broke away, with some colleagues and backing from a client. Ron Palamara, of Anacomp, asked what the new business was worth. "Dollars 10m," Stern replied - it sounded like a "nice round number". Palamara bought a 50 per cent stake.
Bennett Stewart, another graduate of the University of Chicago, is the firm's other leading light. Stern had recruited him to the Chase team via an interview that involved debating financial theory in a car wash.
Stern's autobiography is short, with the story of the man and the firm taking up a mere 142 pages. The personal side includes his religious devotion and love affairs with South Africa, libertarian politics and a woman he bumped into on a flight to Phoenix. These leaven the mix, although the reader will occasionally ask himself how much he cares.
The final two sections of the book include a question and answer session on such topics as corporate greed and business ethics, and a selection of articles comprising useful short lectures on corporate finance and efficient market theory.
Stern describes himself as a missionary. The term is apt because he realizes that good ideas are worth nothing if they are not published and pushed. Like this zealous role model, he can be irritating - but he is, above all, stimulating. (
Financial Times, November 13, 2003)
“…he is above all, stimulating…”(Financial Times, 13 November 2003)
Success does not come easily in the world of business, especially if you choose to challenge some of the most widely held beliefs in modern finance. Nobody knows this better than Joel Stern–a man who swam against the strong current of conventional financial dogma and ended up revolutionizing the way CEOs and money managers value and measure performance. By maintaining a steadfast belief in his concept of Economic Value Added (EVA) and convincing individuals, institutions, and companies of its validity, Stern has become a catalyst for change in the world of finance. He has also become the man who made EVA the most insightful measure of today’s corporate performance.
In Against the Grain: How to Succeed in Business by Peddling Heresy, Stern shares for the first time, not only the story of how EVA swept the corporate world, but the story behind the story–the intellectual underpinnings of EVA, how he and his colleagues at Stern Stewart & Co. promoted the concept, won its initial acceptance by major corporations, and later turned the concept into a revolution that has continued to grip the worlds of business and finance.
But Against the Grain is about more than Joel Stern’s achievements in shaping economic thought and financial practices. This absorbing business memoir is about the life challenges of an incredibly driven individual. Through fascinating anecdotes and vignettes, you’ll get an up-close look at Joel Stern the person and the professional–from growing up in a middle-class Jewish family in New York City to attending graduate classes with Myron Scholes and learning from teachers such as Merton Miller and Milton Friedman. You’ll also see how dogged determination and an unwavering belief in his ideas led to the creation of Stern Stewart & Co.–a world-class consulting firm with offices on five continents.
It takes confidence and skill to buck the trend, and Joel Stern has a lot of both. In this unique story of a business heretic and his concept of EVA, you’ll find out what motivated Stern to proclaim "earnings per share don’t count" and how he went about proving it to the world.
