Swiber Holdings

[specuvestor]

TSMC is a company without strong major shareholders but with a strong board and management team led by Morris Chang. In fact that's how the corporatization should work with the institution of Board and Management team. Similar to many US companies or MNCs.

End of day the 3 SSH of Swiber has vested interest in the company and there is incentive for them to keep the company going. But of course if the company needed funding and they can't or not willing to fork out more cash then the outcome is clear. On the other hand if their stake is small vs their net worth or NAV, then they may figure it is not worth their effort either.

The corollary for companies with strong shareholders is that the Board is not independent and the company will move to the beat of the SSH. That's where cronyism or deep value will occur cause the SSH control the Structure. Basically one has to assess whether you want to dance with the SSH. But if the SSH is a visionary or hardworking, things can move very fast.

So there's pros and cons in both scenarios and the unsatisfying answer is "it depends"

The "rule" seems based on human motivation system. We probably all know the story of "一个和尚挑水喝，两个和尚抬水喝，三个和尚没水喝". Sorry for not translating it, you can cut-and-paste to google for translation. To be sure, the orphan company means more SSHs with almost equal stakes. Least-effort solution, is often the team solution, even it is fatal over longer term.

No absolute rule in investing, IMO. To break the rule, you need to master it. If similar structure exists in core team of Alibaba, I have no reason to worry, with a highly passion, and aligned team. But most of the time, the rule applies if unsure, IMO

I should spend some time on TSMC, it seems is an interesting company. It is probably fall into similar situation of Alibaba 

(not vested)

Totally agree it is actually based on incentive system. People not only analyse risk/ reward but also effort / reward and sometimes even hubris. Buffett and Munger is totally right that it depends on the individual's incentive system but in aggregate the material incentive is paramount. So it's not about "orphan" or not, it's about understanding the incentive of the SSH.

If the stake of ⅔ of the SSH is small vs their net worth but it accounts for almost the entire net worth of the 3rd SSH, it is not difficult to imagine who is going to be the hardworking one. That's why it's not that ridiculous to understand why certain small companies have little SSH support

IMHO TSMC is a class of it's own like Apple. That doesn't mean they are invincible but will take a long time to erode their moat