The Right Answer by John K. Delaney

Author:John K. Delaney
Language: eng
Format: epub
Publisher: Henry Holt and Co.

CHAPTER 7

See Both Sides

Courage is what it takes to stand up and speak.

Courage is also what it takes to sit down and listen.

WINSTON CHURCHILL

One morning a couple of years ago, I was sitting in a meeting at the Cannon House Office Building with about two dozen of my fellow Democrats. The conference chair had invited all of us to a roundtable discussion on how to structure an upcoming caucus retreat in Philadelphia.

These kinds of retreats, which we have every year, involve going offsite for a few days to discuss strategy and the party’s direction. I had some ideas for how we might organize the retreat differently, so when the chair asked for comments, I spoke up. “Here’s what I would do,” I told the group. “Let’s have one whole day where we bring in Republican strategists and policy people. Wouldn’t it be interesting to hear how they think about the world and what they’re advising Republicans to do?” People looked at me like I was from Mars.

I tried to explain. “Look, these retreats basically turn into a bunch of sessions where we all sit in a room together and listen to people we already agree with,” I said. “Why not find out what the other side is thinking?” More blank faces. I obviously wasn’t making any headway, so I told them about how we had addressed a problem that cropped up while I was CEO of CapitalSource.

In 2005, about two years after our IPO, short sellers began sniffing around the stock, apparently believing it was overpriced. (For those who don’t follow the markets: Most people buy a stock and expect that its price will go up, but a short seller borrows a stock and sells it with the expectation that its price will go down. If the stock does indeed go down, the short seller buys it at the lower price, returns the stock to the lender, and pockets the difference.) Short sellers target companies they believe are overvalued, and often they’ll put out information, whether grounded in fact or speculation, that they hope will drive down the share price. For obvious reasons, short sellers aren’t very popular among people who run companies.

At the time, our stock was doing really well, and Jason and I were feeling good about the direction of our company. So I was surprised to learn that the shorts were targeting us; nothing like that had ever happened in my business career. I called a meeting with our senior management team. There was a lot of muttering and groaning around the table, with people saying the shorts were just trying to damage our business to make money. That could well have been true: short sellers often don’t care about a company’s fundamentals or long-term prospects, as long as they see a short-term opportunity to make money.

The more I thought about it, though, the less sure I was that in our case the short sellers were merely behaving like predators. “Maybe they see something we’re missing,” I told the team.

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