Public company boards often hire CEOs using fuzzy adjectives like 'leader.' A better method is to first define 3-5 key strategic goals, creating a 'scorecard of success,' and then find a candidate whose track record specifically matches those objectives.

During due diligence, it's crucial to look beyond returns. Top allocators analyze a manager's decision-making process, not just the outcome. They penalize managers who were “right for the wrong reasons” (luck) and give credit to those who were “wrong for the right reasons” (good process, bad luck).

Effective due diligence isn't a checklist, but the collection of many small data points—revenue, team retention, customer love, CVC interest. A strong investment is a "beam" where all points align positively. Any misalignment creates doubt and likely signals a "no," adhering to the "if it's not a hell yes, it's a no" rule.

A board member's role includes flagging strategic risks, including geopolitical exposure that could drastically limit future acquirers or prevent an IPO. Advising a CEO to relocate teams from a high-risk country is not operational meddling, but a core governance duty.

Experience taught Herb Wagner that great leaders consistently surprise on the upside. He now weights leadership quality far more heavily, assessing CEOs not by interviews or charisma, but by their verifiable track record and through trusted backchannel references who have worked with them directly.

A common activist trap is 'ambulance chasing'—looking for problems to fix. ValueAct argues the correct sequence is to first identify a great company with a differentiated investment thesis. The need for influence is secondary, preventing adverse selection.

A company’s true values aren't in its mission statement, but in its operational systems. Good intentions are meaningless without supporting structures. What an organization truly values is revealed by its compensation systems, promotion decisions, and which behaviors are publicly celebrated and honored.

While many investors screen for companies with high Return on Invested Capital (ROIC), a more powerful indicator is the trajectory of ROIC. A company improving from a 4% to 8% ROIC is often a better investment than one stagnant at 12%, as there is a direct correlation between rising ROIC and stock performance.

An all-green OKR or status board is a red flag, often indicating a lack of transparency or fear of failure. A "colorful" board with red and yellow statuses is a positive signal. It shows the team is honest about challenges, fostering a culture where problems are surfaced and solved openly.