Max Pacella
Investment Analyst
Macro & Markets
11 Dec, 2020

“Be a symbol of perfection,
Be an object, be a cult
Take their praise, take the collection
As the multitudes exalt

Elton John, “It’s Tough To Be A God”

Despite what we may read in the news of late, the world has become a more global financial ecosystem over the last few decades, particularly when it comes to investment.

International investing has become so commonplace that it is strange for a portfolio to only have domestic exposure – it seems that investing is one of the only areas of our modern economy that seems immune to a new wave of isolationism.

And this puts us at odds with that peculiar human desire to have a figurehead, a leader behind which we can put efforts and faith in.

Most commonly associated with political figures, leaders who can garner this kind of desire and faith govern what’s called a “cult of personality”.

Throughout history, having this cult-like appeal has either led to prosperity or utter ruin, since the faith and trust in a particular country or economy is based entirely on one figure; think of the reverence the Romans showed their emperors, Russians showed Joseph Stalin, South Africans showed Nelson Mandela, or Americans showed JFK or Donald Trump.

Now, instead of turning to their political leader, many investors turn towards larger-than-life captains of industry – those which this note will call, “CEOs of personality”.

Let’s examine a few modern examples and what risks or benefits having this kind of figurehead can have to a business.

Elon Musk – CEO, Tesla (TSLA:NASDAQ)

It’s hard to pick a more obvious example of a cult following than that of Elon Musk, an undeniable visionary and a crafty social engineer.

As the face of one of the largest and most talked about listed companies in the world, Elon has played heavily into popular culture and social media to win over millions of fans who may never be able to afford, let alone buy one of his cars.

One needs to only look at the number of Robinhood users owning TSLA to see the impact of this following on the company’s share price – see the graph below on the direct correlation between the number of retail traders owning the stock and the increase in price.


Musk’s commanding presence amongst popular culture has garnered support particularly from the retail market, who vehemently defend the company (and Elon) out of their own passion and volition. This was also covered in Jesse’s note on affinity stocks.

For example, did you know that Musk did not start PayPal or Tesla?

A quick Google search will prove that statement, but restraining orders have been put out on fans who harassed financial journalists for pointing it out.

But having a relatively unsophisticated investor market be your fanatical base does not always serve you, as we saw then Tesla stock plummeted 9% over one trading session after Musk was taped smoking marijuana on the Joe Rogan podcast – something that did not affect the company operations at all. Such is the risk of the faith of the company being placed in one person – if that person falls out of favour, the public reaction for the overall organisation could be disastrous.

Warren Buffett – Chairman and CEO, Berkshire Hathaway (BRK.A:NYSE)

An investing legend and personal idol of this author, Warren Buffett needs no introduction.

A man who can move markets through a nod of approval to one sector, Buffett became a CEO of personality for almost the opposite reasons of Elon Musk; he keeps a quiet profile, is known for his austerity and humility, and lets numbers speak louder than words.

Berkshire Hathaway, although made up of multiple successful businesses and run alongside other capable investors, is synonymous with Warren Buffet and always will be (sorry, Charlie).

The ‘Buffett Premium’ is a notion established amongst followers of the Oracle of Omaha, essentially positing that Warren’s reputation and business acumen add value to Berkshire and any of its investments by way of association.

This can only be possible because his cult following is of a more sophisticated level of investor, ones who seek confirmation on economic or sector plays rather than hunt one particular stock – and we’ve seen it happen recently.

In August, Buffett disclosed that Berkshire had amassed 5% stakes in five Japanese trading firms, noting that he had warmed to Japan as a market and saw opportunity in investment. Markets rallied on the news up to 9% higher, in fact continuing on well into October the levels of foreign investment into Japan were at highest levels in over 18 months – egged on by the Buffet seal of approval.

Source: Bloomberg, Itochu Corporation, one of the five Berkshire investments

On the negative side of Buffet’s reputation is the actual value in Berkshire Hathaway; Buffett himself has said Berkshire could continue on perfectly well if he died tomorrow, but the market still holds immense concerns around who will succeed the 90-year-old tycoon – the value of his reputation for brilliant timing and acquisitions overshadows even the titanic portfolio of Berkshire itself.

Adam Neumann – Former CEO, WeWork

Now if you want to see the risk of a cult of personality backfiring, look no further than former WeWork CEO Adam Neumann: a rockstar executive who managed a company from a valuation of $47bn USD to within spitting distance of bankruptcy in a matter of months.

Yet before this fiasco, Neumann was the face and differentiator of the company, his creativity and outlandishness putting them ahead of the competition in the eyes of many industry spectators.

His charismatic energy and public persona as face of a disruptive working model brought in investment and praise – until any kind of scrutiny was held up to his actual business practices.

After filing for IPO, the findings that Neumann was financial irresponsible at best and negligent as a CEO at worst, shattered his public image; the market had seen a god bleed, so they lost faith.

Even after Softbank swooped in to inject funds into WeWork and eject Neumann from any kind of strong leadership position, the name is so intrinsically tied with its cult leader, that for the near-term any kind of IPO may be crippled by a slumped public image.

Dear Leader

As the public profile of CEOs grow in conjunction with that of their company, human branding becomes increasingly important to many figureheads.

As we’ve touched on in a previous note, investors like to see what they’re putting their money into – last week it was on how a company can be profitable, but in this case, many are investing into the CEO of personality themselves.

Elon Musk believes that Tesla will be worth more in the next five years, his followers believe in Elon Musk – so their investment will drive the stock price. validating his statement and fulfil their belief in him.

The financials may not change one dollar in the interim, but charisma is sometimes a commodity with a market value all of its own.

The views expressed in this article are the views of the stated author as at the date published and are subject to change based on markets and other conditions. Past performance is not a reliable indicator of future performance. Mason Stevens is only providing general advice in providing this information. You should consider this information, along with all your other investments and strategies when assessing the appropriateness of the information to your individual circumstances. Mason Stevens and its associates and their respective directors and other staff each declare that they may hold interests in securities and/or earn fees or other benefits from transactions arising as a result of information contained in this article.