023: Exor, Suddenly

Exor, Suddenly

Color Commentary

Table of Contents

1. Surprise Trip
2. Startup Attitude
3. It’s Not About the Past
4. Mistakes and ESG
5. Community
6. Let’s Get Practical

1. Surprise Trip

What a way to come back.

On very short notice, I was invited to go in person to the Investor Day in Turin, Italy on Thursday, for a European company called Exor.

I’ve come across Exor a few times in my discussions with value investors who debate its potential, and when I spent a little time reviewing Fiat Chrysler. It is, like Warren Buffett’s Berkshire Hathaway, a holding company with multiple businesses that it owns fully or partially.

Exor is the holding company of the Agnelli family. Giovanni Agnelli founded Fiat in Italy in 1899 and, under Giovanni’s grandson, Gianni Agnelli, the company became an Italian industrial powerhouse in the mid-1900s and, through mergers and acquisitions, has continued its success despite the ups and downs of various brands (including, of course, Fiat itself, which was saved by merging with Chrysler). If you’re interested in more details, here is the history as stated on the Exor website and here is a not-sure-how-accurate Wiki on the family history.

In the modern era, so to speak – our era – John Elkann, grandson of Gianni Agnelli, has been at the helm of the Agnelli family companies. He was appointed to the board in 1997 at the very early age of 21 and officially took over when Gianni Agnelli passed away in 2003. So, basically, he’s a wunderkind young leader who has been growing into his role as head of the family, head of these massive companies, and steward of his family’s legacy for 16 years. Through various mergers and acquisitions, ten years ago the Agnelli family companies became called Exor. The Agnelli family owns 53% of it. AND – relevant to our purposes – Exor is publicly traded.

I know no real details about Exor except what I have recounted above, and I am not a shareholder. I’ve never researched the company. However, I jumped at the chance to go in person to the meeting anyway because the talk around Mr. Elkann is that he leads Exor in the same style as Mr. Buffett: by holding multiple companies and equities, with a rabid focus on long-term value creation over short-term, and with a winning combination of intelligence and humility.

How many times have I wished I could go back to the 70s and invest with Mr. Buffett at that time!? How cool would it be to find a similar type of person now? Not at ALL saying that that’s the situation at Exor, merely that that’s the buzz.

I was curious to hear Mr. Elkann in person and see how the company presented itself to investors. I expected I’d either: come away with either a general lack of interest in the company after being slowly lulled to sleep by a boring presentation by yet more corporate doublespeak, OR I’d be intrigued by a company that might accomplish big things over the, let’s say, next 40 years that I might expect Elkann to be its leader.

For me, dear reader, it was the latter.

2. Startup Attitude

In marked contrast to the enormous Berkshire Hathaway meeting which is literally held in a basketball arena, this one was maybe 150 people and you had to be pre-registered and pre-approved to attend. However, Exor did livestream the meeting online and you can still watch the video here – which means they’re obviously not expecting secrecy or privacy in a small select group. Had it been private, I wouldn’t write about what was said; however, as it was publicly streamed online, as I did after the Berkshire meeting I’m going to talk a bit about my impression from the comments and questions I found most revealing about the company.

Before the meeting began, tours of the building of Fondazione Agnelli were offered. It’s a very nice building with nice art, but that’s not what stuck out to me. What stuck out to me is that in the headquarters of Fondazione Agnelli, where the event was held, they have quite a large area dedicated to startup coworking space. Indeed, the whole foundation is devoted to education. Now, it’s not exactly the same thing as Exor, but it was telling that the Agnelli family allocate their resources to support education and up-and-coming Italian startups. I asked if the space was allocated for companies in which they have made a seed investment, and no, it’s not. They rent the space to any comers.

As I took the elevator from the tour down to the meeting room, I mulled it over. Seems rather annoying to me, to have random people coming in and out out of the building, and having to deal with the logistics of renting the space and maintaining it. And then I remembered why I have been spending time going to startup pitches lately. Learning what’s coming up in the world of ideas is invaluable to an investor of any kind. Knowing what’s cutting-edge, what’s working, what is failing and why – these are data points that you can only get from being around the people actually living it.

Fondazione Agnelli, and by extension John Elkann and Exor, brilliantly decided to go straight to the source by hosting a coworking space right in its own headquarters. Now, ok, foin – maybe they have a coworking space because it’s a great thing to do, it’s a foundation focused on education, and that’s all. However, I kind of hope that it’s more than that. In the investor presentation, they made a point of discussing their seed investing as a critical part of their strategy. Other companies do the same, but they tend to be tech companies with a clear path for intriguing startups to work directly with them. For a holding company like Exor? It’s unusual, and I’m here for it.

In the question and answer session, there was a question about Exor’s foray into investing in startups, and the management team commented that they use the deep well of knowledge Exor has and the company’s huge network to bring value to startup companies. The way they’re thinking about their relationship to startups is extremely smart. Again, it’s not new – a lot of big companies try to bring value effectively to startups, but they struggle through their bureaucracy to be effective. Exor, simply because it is so small at the holding company level and because of its steady family investor base that’s willing to ride out some rough years, may have fewer hurdles when it comes to high risk venture capital.

3. It’s Not About the Past

Mr. Elkann started with a general presentation about the company, its numbers, etc. And then he said something so on point, I wrote “Yesss!!!” in my notes. (Please note: I won’t put quotes around anything he said because I did not take verbatim notes, but you can listen to it on the video if you like.) He said: But we are not here to celebrate the past. It’s about what’s ahead.

Yesss!! How many times do you hear that it’s not about the past from public companies? Usually they’re obsessed with their past performance and make pretty strong inferences that it indicates future results.

Mr. Elkann, by contrast, said that the main thread of the company since the beginning is its strong culture of entrepreneurial spirit and financial discipline, which has enabled it to reinvent itself over and over. There’s that startup attitude again. New ventures are a possibility, but he said we have companies that are more than hundred years old, and they can change and adapt. There’s a lot to be said for how important that is.

He also said that the purpose of Exor is to build great companies, so they, at headquarters level, have done considerable work on the elements of what makes a company great: how it is run, what it believes in, and how it is governed – but also what the company aspires to become. It’s about perfecting to the highest standards and making sure you’re distinctive, acting in a way in which you’re responsible, and always looking at how you renew and change.

I really like this sort of messaging to move ahead, to continue to grow, with an entrepreneurial spirit and adjust nimbly as a company that’s been around for more than a hundred years and has iterated and pivoted – startup buzzwords – many times.

The management team then gave a presentation on how Exor, at the headquarters level, has thoughtfully developed a plan to assist its portfolio companies to develop their culture to meet the standards of Exor, but still be individual and distinctive. The presentation wasn’t terribly detailed, but I appreciated that they have clearly dedicated real resources to this question and have thought generously about how a holding company can make its portfolio companies better.

There’s a phase in management consulting that, when the lower-level consultants finish doing all the actual work, the high-level partners “swoop and poop.” They don’t pay much attention to things until the last minute, then swoop in and poop all over everything good that was done by criticizing and changing it, and then the lower-level consultants have to go in and clean it all up.

My impression was that Exor is trying to do the opposite of the swoop and poop for its portfolio companies. I hope they succeed.

To that end, a question was asked later in the meeting on how to handle difficult leaders at their portfolio companies – particularly founders, who tend to have strong opinions and weak operating experience. Mr. Elkann answered that, for him, it goes back to the F. Scott Fitzgerald line he quoted in his shareholder letter, in reference to his late mentor and head of Fiat Chrysler, Sergio Marchionne: “the test of a first-rate intelligence is the ability to hold two opposed ideas in mind at the same tiem and still retain the ability to function.” Anyone who can, he intimated, would do very well in the culture of Exor, and Exor would, in turn, appreciate that person’s skills.

He commented that the difficult thing is to avoid being too mechanical about culture and values, which is so RIGHT. How many of us have been in an organization that talks a lot about values but lives almost none of them? It’s the strength of people with whom we associate ourselves that makes the difference, and keeping the organization small. Their management presentation noted that Exor has focused extensively on revamping its Boards of Directors to put functional expertise on the boards and be conscious of diversity. Not only the kind of diversity we typically hear about and that is easy to identify, though – not only race and gender – but diversity of educational backgrounds, sector backgrounds, and experience. They want people to bring very different perspectives who are willing to challenge the status quo and have had many conversations amongst the management team around that kind of diversity.

Frankly, boards of directors are so often check-the-box type groups that do whatever management wants, that if Exor can actually accomplish a reality of having strong boards that challenge the company, I actually think it’s such a large differentiator from their competitors that it would become a competitive advantage of theirs.

Another question, which asked what the positive qualities of a good holding company would be, brought out a similar answer about how Exor views itself. In their holding company, they want good control of the balance sheet, to stay very conservative, and not to have a huge bureaucracy.

So: Exor wants to be a company with people who challenge their own ideas, reinvent the business, are diverse in thought and experience, and stay conservative financially. As Mr. Elkann said several times: entrepreneurial spirit and financial discipline. Everything said in this meeting supported my impression that they take that line seriously.

4. Mistakes and ESG

Mr. Elkann presented the successes of each of Exor’s four biggest companies in his opening talk. I would have liked to have heard, in his main presentation, anything negative about Exor’s four biggest companies. What mistakes have they made lately? What did they try to accomplish but fail? I look for leaders who point out the failures and the mistakes without shame, and that was one omission I noticed in his main presentation that I would have liked to have heard.

One attendee asked what his Exor’s worst investment had been, and to his credit, Mr. Elkann did not dodge the question in the slightest. Considering that he hadn’t talked about any mistakes for pretty much the entire time thus far, I expected him to say something vague and useless like “we’ve made a few mistakes but we prefer to focus on our successes,” and instead he directly answered. His biggest mistake was an asset management company called Vision. He then went on say, and I thought it was fair to do so, that one of the people at Exor went to turn this company around for 18 months and was able to sell it, I presume at a loss since this was in the context of Exor’s worst investment, but he did not explicitly say that. Then, that person who turned it around took what he learned to another Exor portfolio company. Furthermore, it taught them a lot about aligning themselves with owner-operators and needing to be clear that that owner-operator is running the show. In sum, basically, he was saying that we lost money but learned a lot, so it wasn’t all bad. It was a real answer, and as an investor, I understand how much learning from a mistake can make me feel like it was really more an expensive lesson than a mistake.

On ESG (Environmental, Social, and Governance factors), Mr. Elkann made some careful comments that addressed its importance, and its potential to limit if done by rote. You guys know I was already on his side as soon as he framed it that way. I can’t stand greenwashing. He said working with ESG factors in mind issomething they always have done, and that one must be careful of what it implies and means. He wants to be careful in expressing what they do without putting themselves in any boxes or viewing it as a compliance exercise. He didn’t say this exactly, but I think he was referring to the forms companies are asked to fill out to qualify for “good” or “green” status. He said they just want to be clear about what they are doing so people know, rather than making “ESG” just an additional compliance burden that could be perceived as such.

Great attitude. The hurdle they face is that some people won’t really research what Exor actually does, and they will think Exor is not a “green” or “ESG” company, but I suspect no one at Exor cares to have those people as investors or what they think. I haven’t looked into Exor’s actual practices, so for all I know they’re clubbing baby seals on the head and pouring vats of nuclear waste on the shores of Lake Como, but I like the talk.

5. Community

As at every single Berkshire meeting, every fund’s annual meeting that I’ve been to, the Daily Journal meeting, Invested Practice meetup, etc. – I’ve been struck by how lovely the people are who are attracted to this sort of long-term, value-oriented, stable company and investing style. We are the company we keep. The company I keep either elevates me and makes me realize I need to step up my game, or it lets me rest on my laurels feeling pretty good about myself. I am always happier when I’m around people who make me realize I need to step up my game. It’s invigorating to be around extraordinary people, and I find them at value investing events. Thank you to the investing gods (you know who you are) who invited me to the meeting and to our lovely group there – I look forward to next year.

As you know, from the last two issues on Cal Newport’s concept of Deep Work, I’m in deep thought about deep work. How do I structure my time to maximize deep work, maximize my output, and make sure days like Thursday – which was not at all deep work – happen periodically – without getting distracted by all the shallow work in between? This conundrum and paradox is the essence of the practice of investing, and I’m invigorated yet again to keep at the never-ending process of failing to perfect it. It feels good to be feeling good again.


I sent you an IP Extra letting you know about the meeting on Thursday morning and linking to the company website. I was amused that, in the meeting, Mr. Elkann announced a redesign of the website that was launched that day. He framed it as a present to the company to have a website that actually looks good, which I thought was pretty cute. Check out the new website at exor.com and note that some of the old links don’t work anymore. Remember when I spent a ton of time looking up the purpose of companies, and had a hard time finding it for many of them? This one is front and center.

John Elkann’s 2019 Letter to Shareholders is very worth reading (or here in PDF)

Watch replay of the livestreamed meeting here (free registration required). Unfortunately the software won’t let you move the video forward or backward or see timestamps, but you can jump to the section of the meeting you want.

Read about John Elkann and Sergio Marchionne’s relationship (WSJ)

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