market folly

Jeff Gramm runs hedge fund Bandera Partners and is an adjunct professor at Columbia Business School.  He has written an intriguing book entitled Dear Chairman: Boardroom Battles and the Rise of Shareholder Activism.



Dear Chairman Book Review

When asked why he wrote it, Gramm told us he had an idea to collect original activist letters into a book, but what really got the ball rolling is when he asked Warren Buffett for his 1964 letter to American Express (AXP).  When that arrived in the mail one day, he began chronicling what has now become the archive of activism.

(And speaking of Buffett, value investors might have already noticed that at this year's Berkshire Hathaway annual meeting, Carol Loomis asked Buffett about Dear Chairman.)

Basically, the book is a series of case studies on activist investor situations over the years.  Chapters feature the likes of Benjamin Graham, Robert Young, Warren Buffett, Carl Icahn, Ross Perot, Karla Scherer, Dan Loeb, and BKF Capital.

Many of these managers have been featured countless times on Market Folly, but this account gives a behind the scenes look at many specific situations and underscores the struggle between shareholders and management.

While the first few chapters of the book are admittedly slower and perhaps not as intriguing, it definitely pays off to keep reading as the back half of Dear Chairman is full of interesting anecdotes.  Additionally, the appendix of some never-before-published activist letters offers a rare look into the minds of some of history's great activist investors.

Our favorite was probably Chapter 7 on Dan Loeb of Third Point because he's the most modern incarnation of an activist profiled.  Not to mention, his exploits make for a great story, as the book examines his journey from 'Mr. Pink' on an online message board to the scathing letters he's penned to companies.

Another Chapter later in the book also features Carlo Cannell of Cannell Capital.  He has become more known in recent years as well for his, shall we say, 'choice' words for public company executives (he famously blasted Jim Cramer and TheStreet.com recently).

The book is around 250 pages (including all the activist letters), so not a terribly huge ask in terms of time commitment, and it's easy to stop and pick back up after each Chapter given they all detail independent situations. 

So who should read this book?  Well, aspiring activist investors certainly would benefit.  But so too would any investor looking for more insight on the 'behind the scenes' of board rooms.  If you don't like historical situations or aren't terribly interested in activism in general, then this isn't really the book for you.  But realistically, what aspiring investor doesn't like to learn from others?

The book excels at framing the activist situations with specific details and background color.  Rather than merely reading as a boring timeline of historical events, it transports you from the black and white pages into recreations of the sagas themselves.  The stories are actually quite entertaining, but lessons are embedded as well.

Jeff Gramm's Dear Chairman offers a unique entry into a previously underrepresented niche in the library of finance.

To read the book, click here to pick up a copy (physical or digital).