Alumni Explain Some of Their More Unusual Investments
Some ventures benefited from perfect timing; others encountered the perfect storm, according to alumni of the Stanford Graduate School of Business.
by Janet Zich
Did you buy Berkshire Hathaway in the 1970s? When Stanford Business asked alumni what were their most "unusual investments," we learned that a prescient few did buy Berkshire back when they were MBA students. Other alums found value in less traditional investments.
For example, Jeffrey Malone, MBA '74, invested in a pre-Columbian artifact dig in Mexico. Jessie Christina Huang, SEP '97, bought silver in the form of 18th-century French sterling and antique Native American jewelry. And Robert Litfin, MBA '59, invested in forex currencies, although he warned others, "Beware, the tools are hot enough to burn the hand that feeds them!"
After a 46-year career as a venture capitalist specializing in high-tech startups, Sutter Hill Ventures founder Paul M. Wythes, MBA '59, reported that he made an investment that was most unusual for him: He bought into the San Francisco Giants baseball team. "I've learned quickly that I don't know much about what happens inside the white lines, but I find the management issues still critical to a company's, or a partnership's, success." Wythes' reported paper value increased roughly twofold in his first three years as a principal partner. That was before the Giants brought their first-ever World Series win to San Francisco in October.
Another sports investor, former food equipment executive Joe Deering, MBA '64, and his wife, Gail, began breeding Friesian horses in North Carolina in 2004, entering them in competitions, and offering them for sale. Star of their gentle giants is the gelding Samson, who excels at barrel racing and "loves to dress up and compete in regular events, including jumping, dressage, and pulling carts," the Deerings wrote.
Garrett Redmond, SEP '74, who raises thoroughbred horses at his Ballycapple Farm in Bourbon County, Kentucky, wrote that he has designed two unusual instruments for people who want to invest in thoroughbreds. One is what Redmond calls a "speculative investment" in the offspring of a specific stallion over a given time, and the other, "a type of futures or options market in young, prospective racehorses." And you thought you had to go to the track for a deal like this.
Real estate executive Bukk Carleton, MBA '64, recalled one investment with special pride. Carleton had a hand in the development of the 3,000-acre heavy industrial park, Pureland, in Southern New Jersey back in the early 1970s. "We were the first to get large oil companies to submit to private environmental controls other than state and federal, which were much more stringent at the time than government controls," Carleton wrote.
Christopher Mothersill, MBA '86, remembered learning a lesson when he led a private equity team that invested in an integrated tuna fishing, processing, and canning business in Indonesia. The company was located on the island of Biak, where the tuna were plentiful and the labor costs competitive. However, Biak is a Christian enclave in the world's largest Muslim nation and home to frequent religious clashes. "The project did not fully meet expectations due to periodic, but massive, labor disruptions, with workers fleeing the plant for safety elsewhere," Mothersill said. "Nevertheless," he concluded, "a fascinating and valuable experience."
And then there was Don Dobler, MBA '58, PHD '60, whose succinct reply to our unusual-investment question is quoted here in its entirety: "Five kegs of Scotch Whiskey in Scotland. Not a good decision."
No discussion of investments is possible without mentioning the awful financial events of 2008 and 2009. "Reality and bad luck — ‘the perfect storm' — hit all our real estate investments, particularly hard in Hawaii, where I was born and expected to return," wrote Bob Coleman, MBA '74, who says he has since returned to the real world of work. "We had no retirement from any of the companies we worked to build. Hence we put our dollars in real estate, borrowing from our residence's equity. Oops!"
Not long after Coleman's real estate investments tanked, Stephane Albernhe, SEP '08, found himself on the other side of the housing meltdown. "Because of the economic crisis I decided to invest in real estate," he wrote. "This was a good decision. I had the opportunity to buy a quite rare apartment in the French Alps with a steep discount compared to its value one year before."
Hans Mueller, SEP '92, looked at the bright side of the recession. In October 2008, as the global financial crisis dominated the headlines, he wrote: "Six years ago, I was taken completely unprepared at an art auction by a good painting. I bought it on the spur of the moment and paid a rather high price for it. For quite some time I thought I was a fool. This summer, a painting by the same artist — same subject, same size, painted during his same vacation, and of the same quality — was auctioned in the same city for almost three times the price I paid for mine. The stock account I used to pay for the painting has not really suffered when you include this investment in art. And as a bonus, we enjoy this wonderful painting every day."
Perhaps the biggest financial success story we heard came courtesy of Andrew Cowherd, MBA '77, who recalled the investment seminar back in 1977 when finance Professor Jack McDonald, MBA '62, PHD '67, introduced Warren Buffett to the class. "At our 30th reunion, several classmates disclosed that they had bought Berkshire Hathaway stock at that time — and that they still held it!"
Not all the respondents counted their ROI in dollars or euros. Jack Boyd, Sloan '66, is investing in his nine grandchildren, one camp or cooking lesson at a time. Genoa University economics professor Sergio Grea, SEP '85, is investing in his health. Still cycling 5,000 kilometers a year, Grea bought a racing bicycle to conquer the mountainous portions of the Giro d'Italia and the Tour de France, "as Lance Armstrong does, but a bit, just a bit, slower." And Bruce Baker, MBA '81, invested in his future. He spent two years at the University of St. Andrews in Scotland, studying for a PhD in theological ethics. Baker was awarded the degree in June 2010 and is now an assistant professor of business ethics at Seattle Pacific University.
Finally, there was the chance of a lifetime — literally. Mark Rosenbloom, MBA '78, is the founder of Pepid, a publisher of medical and drug information in a variety of formats, which got an offer that was hard to refuse. "The strangest investment I almost made, and was seriously considering, was to become the first human being cloned!" Rosenbloom wrote. "A competent scientist came to us and offered us worldwide publication rights for the cloning story and a choice of who would be cloned, in exchange for $1 million. While it would have been a reasonable business investment, we eventually declined due to ethical concerns."