15 April 2021
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Don't write off the Big Mac Bank

Peter Switzer
30 July 2009
Any investor who underestimates the potential of the millionaires' factory called Macquarie Group could live to regret it. Sure, all of the experts say the Macquarie model of taking fees off funds it originally set up, that in turn were taken to the market, is broken nowadays. However, my business commentary life has taught me it’s not a good idea to underestimate the grey matter power of this company.
Smartest guys and gals in the room
Under Allan Moss they assembled, to use a term that was once employed to describe the disgraced team at Enron, the smartest guys in the room. But unlike Enron, Macquarie has had some really smart men and women that took them to be the biggest infrastructure company in the world.

That’s not to say they have always got it right. Like many bigger-than-life companies, as their share price rocketed towards $100, hubris inter-mixed with their usual good understanding of how to manage risk. This explained why its share price eventually went below $20 at the depths of the post-Crash plummet of global stock markets.

Confidence building

But it’s now making a comeback as confidence rebuilds worldwide. In fact, Nicholas Moore, the current CEO, once explained at a UNSW conference that Macquarie’s share price closely tracks the Morgan Stanley Capital International (MSCI) World index. This tracks the health of the global stock prices and as it has headed north again, so has Macquarie’s share price.

On why Macquarie has done so well, Moss explained to me a number of years ago that it has employed a small business-like model where small teams think entrepreneurially as opposed to what prevails in most big business banks. But unlike most small businesses they are given two things that all businesses need — capital and expertise support.

Initial doubts

I know I doubted Mac Bank, as it was called then, when some years ago it bought Rome airport and on visiting the airport I saw a policeman smoking under a sign which read 'No Smoking'.

I thought at the time: “If these guys make money working with Italians then the sky is the limit.” Of course the share price headed that way until the Crash.

In my years of watching great business builders and great companies, I have learnt not to underestimate those who Malcolm Gladwell, the author of The Tipping Point fame calls “outliers”. In fact, his new book carries that name where he analyses and explains a myriad of success stories. In my opinion, Macquarie has gone long on outliers and their results, in the future, won’t surprise me.

Outside the square

One last point before I sign off. I have now interviewed Edward DeBono, the man who is famous for coining the terms — ‘lateral thinking’ and ‘thinking outside the square’. He says the very competitive in business and all walks of life are lateral thinkers. They assess their opposition and challenges, and they outthink their rivals and their obstacles. Macquarie’s old model might be dead, and that’s still debateable, but I will bet you these smartest guys and girls in the room will come up with a new model in the future.

Wise words

As Rachel Hunter, the famous model and ex-wife of Rod Stewart once observed about the hair repair qualities of a certain shampoo: “It won’t happen overnight, but it will happen!”

For advice you can trust, contact Switzer Financial Services.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

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