Legendary investor Carl Icahn He once walked through a company he had just taken over and tried to understand what entire departments actually did, but he couldn’t figure it out. Then he dismissed them all at once.
The founder and majority shareholder of Icahn Enterprises (NASDAQ:IEP) used the story to explain how deeply inefficient some companies can be and why activist investors like him are stepping in to make drastic changes.
After buying the business, Icahn said he tried to understand how it worked. He spent days going floor by floor, talking to employees and taking notes. But something didn’t add up.
“I come home, I look at my yellow notebook, I can’t figure out what the hell they’re doing,” he said at the New York Times DealBook conference in 2015.
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The confusion only grew. Executives told him the job was too “arcane” to understand. Consultants were hired and paid a considerable sum to explain it. Your conclusion? They couldn’t explain it either.
“You’ve been straight with us, Mr. Icahn. You seem like a good guy, so I’m going to tell you something,” Icahn recalled what the consultants told him. “We don’t know what they do either.”
That was enough.
He reached out to an operations leader in St. Louis to get a clearer picture. The answer was simple.
“Get rid of them all tomorrow,” the executive told him.
Icahn did exactly that. He closed 12 staff floors in one move. What surprised him most was not the reaction; It was the lack of it.
“It was like something out of a science fiction movie. It was like they never existed,” he said, adding that he received no complaints, calls or interruptions in business.
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For Icahn, the story reflects a broader problem he sees across corporate America.
He argued that many companies are burdened by inefficiency, weak leadership and boards of directors that do not challenge management. In his opinion, activism is nothing more than chasing quick profits; It is about intervening where responsibility is lacking.
“There are a lot of companies in the country that are very well managed, but many are terribly managed,” he said at the DealBook conference. “There are people who run companies who are not bad people, but they shouldn’t be running them, they are in way over their heads or they have different agendas.”