One of the delights of the modern age is to buy the latest high-tech gadget that promises to make life just a touch easier.
That is until you face the annoyance of dealing with overly cumbersome packaging, in which a three-inch item is buried under 15 pieces of wrapping.
There’s no sense of proportion. In my opinion, the best product packaging comes from Apple (AAPL). It’s simple and the instructions are easy to follow.
In my view, that kind of clarity is also crucial when it comes to evaluating businesses. Some of the questions I think you should ask yourself are laid out below.
Is the strategy easy to follow?
When you size up a profit-seeking enterprise, there are usually moving parts to consider.
What is the growth rate range and what might it depend on? How might margins improve and over what time frame?
How will capital be deployed and what kind of return should be expected?
I believe these variables have different potential outcomes, and slight changes over time can lead to dramatically different results.
Given the uncertainty and the reality that capital is scarce, I prefer business strategies that are easy to understand and straightforward.
Peter Lynch, the famous white-haired Fidelity fund manager, used to say you should be able to describe the business in ten words or less.
As more of my hair starts to turn grey, possibly from opening too many poorly designed packages, clarity and simplicity become increasingly attractive.