Fortune Story About David Sokol

The past is the past. Time now for the rubber to hit the road. Sokol and his team will be graded on what they really and truly do in the future. If Sokol can succeed making NetJets the dominant player, all try to emulate again, he would deserve a huge well done along with everyone’s full support. If not there will be many people ready to point out the truth. Time will tell and until then as you say the facts are the facts. Now it is time for balanced results.

I will admit to feeling some degree of shame and regret for being a member of the "Anonymous" writers in this forum. However, as a current flight crew member of NetJets, I feel that I have no other choice but to keep my identity private.

To the extent that I am current employee of the company, it might be correct to say that I have the perspective of an "insider". With that said, I have no direct, personal knowledge of what took actually place behind the scenes - this time last year - when Sokol came on board. Nor do I have any actual knowledge of the specific accounting practices being employed, the discussions taking place among the senior executives of the Company, or the style and manner in which Sokol relates with his staff.

I have found it interesting - and also, admittedly, disheartening - to read so many negative, non-factual-based comments about the current state of the NetJets, it's future, and the individuals responsible for running this organization. While reading many of these comments, I have found myself wondering what the true, underlying motivation is for the outpouring of negative comments and the prognostications of doom-and-gloom. It's probably safe to assume that the majority (although, not all) of the individuals making such comments fall into one of two categories: (1) former employees who feel a personal measure of hurt and/or anger in response to losing their job, or (2) current employees who have been demoted or reassigned to a new position, or have had to give up some measure of control or power in their position. In any event, from my point-of-view many of the negative statements and proclaimations come across as blatantly biased and armed with the intent of harming the reputation of the company. On the other hand, as an existing employee of the company, it is certainly possible that I am missing the mark due to my lack of true objectivity.

During the latter stages of the Santulli era (say, the final two years), I sensed that the Company was not being well-managed. Of course, from my position as a pilot I had no way of actually knowing whether this was in fact the case. But it was clear - even from the rather restricted confines of the cockpit - that things were ever-so-slightly amiss. This is what I observed: the financial resources of the company were being drained on projects that had little-to-no operational relevance or importance; individuals with virtually no prior professional management experience or educational background were elevated to senior management roles simply because they had been with the company for a requisite number of years or because they were connected with Santulli; mini-fiefdoms were developing thoughout the organization (with virtually no oversight or restraint); band-aids were being placed over serious, systemic problems which needed a greater degree of attention; and, overall, the organization was not running efficiently. Of course, all of these things were being masked by quarterly profits.

Richard Santulli is a great guy and, without question, extremely loyal to his friends and employees. He was - and is - a true visionary. But Santulli was not a very good Chief Executive, which is now evident.

The problems I described earlier began to more fully emerge and present themselves more clearly when the economy began it's dramtic collapse, with a significant number of NetJets Owners exiting their contracts early. Money starting flowing out of the company at an accelerating rate. Urgent and drastic action was needed to reflect the reality and seriousness of the situation, but nothing happened. Right or wrong, the perception is that Santulli froze at the first sight of blood.

Enter Sokol.

As mentioned before, I do not have first-hand knowledge of what Sokol is like to work for -- although it's clear that he is demanding and direct. He should be. After all, he accepted the responsibility of caring for a patient that was essentially bleeding-out right before everyone's eyes; it was only a matter of time before the "patient" expired. Without a doubt, Sokol has made some mis-steps throughout his first 12 months at NetJets - which is not unusual or to be unexpected - but he has brought a level of seriousness and maturity to the organization which was desperately needed for quite some time. Santulli was, unfortunately, unable to foster these qualities throughout the organization. This is just a hunch on my part, but I am inclined to believe that Sokol has been intentionally firm and direct in his manner in an effort to restore order and bring a greater degree of business-minded principles to the organization. His overall managerial style probably comes across as harsh and cold to many - especially to those who lost their job last September and beyond - but he has had to make some very tough decisions which neccesitated this type of approach.

From my perspective as a crew member: despite the rumors of our demise, I believe that the company has begun to regain its footing over the past 6 months and is, more importantly, at least heading in the right direction. The impact that Sokol has had to the company has been profound, but certainly not always in a pleasant way. I might even go far as to say that the actions that Sokol has taken is akin to something along the lines of chemotherapy. None of us at the company has enjoyed the experience we've been through. But it was necessary.

The flight operation - while not neccesarily in an optimum state right now, given the cuts in resources - is running quite well and the Owners seem genuinely happy and satisfied. Early on, many predicted that NetJets would not be able to cover the flight demand with the reductions in staffing and fleet size, but these naysayers have been proven wrong. Without a doubt, there is room for improvement. I think Sokol is fully aware of this and will continue to make improvements going forward. Yes, we need growth - but that will only happen when the global economy rebounds.

Some will say that these comments are overly-optimistic or driven by nothing other than hope on my part. But from an "insider's" point-of-view, this is how I see it. I felt it important to share this perspective, given the fact that it conflicts with much of what others have described in this forum.

I look forward to your insight and analysis, Alice!

Reading the comments on this blog, you would be forgiven for thinking that business experts abound in the ranks of NetJets employees. Or, they once did. While the company was losing truly vast sums of money.

A lot of the posters here need to stop complaining and start asking some pretty basis questions about themselves. Like, for example, "what have I achieved in my life that I am fit to have an opinion about how to run a company?"

Seriously, who are you people? Who are you, and what have you done? To be throwing around these huge and sweeping criticisms, I guess y'all must be accomplished and experienced in the running of firms.

In which case I am mystified. Why were you then working for NetJets as an employee?

As someone who now works for NetJets as a new hire, I am totally unsurprised by the whinging tone and miserable emotional content of the posts on this blog lecturing Sokol and others about how to run the company. NetJets strikes me as the sort of place where prima donas and hysterical yes men once thrived and multiplied. You can still pick up the stench, in places. You still find people with grand ideas about the very special place NetJets once was.

I wasn't there, but I work for a living and people who carry on with hysteria about loving their employers business vehicle strike me as unstable and a bit odd. All this talk about NetJets being special is ridiculous. It is a service business. I was making huge losses. There is not much special about that. So the customers were super wealthy. So what? Coke has hugely wealthy customers. So does every toilet paper manufacturer.

Having super rich customers does not make a firm special. Making large profits in good times and surviving the bad times makes a firm stable, and doing it for decades makes a firm special. Having super rich customers means nothing, unless you are a class obsessed sycophant who thinks standing next to rich folks makes you better than your less wealthy peers.

And boy, do we have a bunch of those folks still at NetJets! It is revolting to experience. Europe is bad enough, when it comes to class obsessed weirdos and snobbery. But NetJets takes that semi feudal arrogance to a whole new level. Especially the pilots. In fact everyone is keeping a lid on that snob attitude, but it is still there.

To give you an idea how utterly ridiculous the NetJets whiners are, check out the published exchange between NetJets Europe management and the newly hatched pilots union movement. For anyone who has ever worked a seriously hard and shitty job, these folks a laugh a minute. The pilots complain bitterly that sometimes they catch the bus home from work. They threaten militancy because their meals have been curt back in extravagance. They still get fed. I mean, these people are massively well paid. They earn a fortune in wages, by any sane standard. But because someone had to catch a bus for once, and because the fine dining is no longer given to them as an entitlement, they are outraged and marching for better treatment.

I catch a train to work, and I am better qualified than any of these prima dona pilots. I'm happy to have a job in these times, and I don't make huge comments about how to run large corporations because I have never done it so I just don't know.

But I do know about work, and working people, and I now about the NetJets culture. All the suffering pilots and disgruntled staff are ridiculous, and they are an embarrassment to themselves. They are the industrial hardmen who are crying like bairns because they broke a nail.

NetJets will be a much better company if Sokol can get a work ethic going, and get rid of this culture of noble entitlement that exists.

It’s interesting you use the words financial disaster to describe NetJets. From a cash generating perspective, after you reverse the non cash write downs and then factor in the tremendous tax deprecation benefit, that Berkshire took for the NetJet fleet over the years, NetJets was a cash generating machine. I refer you or anyone else to Warren's very own powerful words of praise for NetJets, year after year in his annual reports from 1998 forward to 2009.

In three years alone leading up to 2009 NetJets made over 800 million in operating earnings. In 2008 the profit was over 280 million in spite of the post Lehman Brothers collapse. Everyone loved NetJets then. Do yourself a big favor and read those Berkshire reports carefully. Warren Buffett and Richard collaborated closely in running NetJets and even more so during the severe economic cries. They both did an outstanding job steering NetJets through the "economic pearl harbor" Warren said we were facing.

Let’s see if David Sokol can make 800 plus million dollars in the next three years, sell thousands of net new customers, create thousands of jobs, attract hire and train great new talent and future leaders the previous regime did for many years. Then he must find a way to buy the best new airplanes under the same or better terms and conditions NetJets enjoyed on the contracts he canceled, building upon what was what the most productive relationship that ever existed with the aerospace world.

Sokol is going to get out of town soon and turn things over to someone in Columbus Ohio who has never made a payroll or run a business. This is not a very encouraging sign for the future. Such a decision shows the value Berkshire has placed on Netjets future. Not that any high caliber experienced super stars in the business world would ever come to NetJets now but the employees would have appreciated at least an attempt. If there was good news for NetJets and personal glory for Sokol coming down the pike in 2011 would he be high tailing out of town? What he knows and the rest of us don’t?

If Sokol runs 5 miles and lifts weights 5 days a week there is no way he can be pleased or satisfied with the performance and result.

But if he does 5 by 5 in 7 his results look about the same as his NetJets results; over hyped and dishonest at best.

Or, it might be too many sugar carbs from a 10 Red Bulls a day diet.

It has been proudly announced that David Sokol runs three separate companies at the same time for Berkshire Hathaway. Sokol says the secret to running all these companies at the same time is the efficient use of two and half assistants.

Is he serious? Can you imagine any other single CEO running three substantial and challenging businesses merely because he has two and half assistance helping him? If this theory has any basis in reality then corporate America could eliminate two thirds of the CEOS in this county by hiring a few more excecutive assistants. Nice thought but somehow I really don’t think so.

Next time Sokol shouldn’t be so quick to hand out his self published book. He counted his chickens before they hatched. How many people do you know would hand out their own book “on the first day they arrive.” If reading his book was so informative and rewarding intelligent and experience executives would have already done so. In many people’s mind they are neither “pleased” and definitely “not satisfied.” Has anyone calculated the size of this mans ego?

A few easy points on the Fortune article:

1) Carol Loomis is editor at large for Fortune. She is extremely close to Warren and has helped him with the Berkshire Hathaway annual letters since the late 1960’s (as Alice has pointed out in The Snowball). She plays Bridge with Warren frequently and clearly wanted to help Warren PR spin his mistakes with NetJets.
2) The Fortune article effectively called Sokol a workout man, a fix it plumber, who has added no real value to NetJets. NetJets was a $4 billion plus total revenue company that Sokol is overseeing reduced to total revenue of less than $3 billion for 2010. NetJets is still shrinking…
3) Sokol never provides a leadership vision for NetJets, simply because other than watching it shrink and squeezing it for what “profit” they can get out of it is all Sokol knows how to do.
4) Sokol never provided any good examples for his “collaborative” management style or any substance to show that NetJets has been “fixed.” That said there are endless examples (many here) of the troubles he has created for NetJets.
5) Notice how Santulli said he has no comment because he signed a non-disparagement agreement. That means Santulli only has negative and disparaging things to say. My educated guess is that Santulli would have never signed anything if he understood what Warren and Sokol intended to do and have done to NetJets. It looks like its follow the path of the original Berkshire Hathaway textile mill – run it out and eventually shut it down, or sell it. But like the original Berkshire Hathaway, NetJets has become worthless and worse a major liability.
6) Warren and Sokol to their credit are doing a masterful job hiding their wind it down or sell it plan in order to prevent a run on the bank with customers leaving the program at a more rapid pace.
7) No vision = no growth = no real business plan = no “fix it” substance to put in the Fortune article.
8) Now Sokol wants out and to hand it off to one of six very inexperienced and incapable managers who can live with themselves while Sokol throws water battles at them. The competition is chomping at the bit over what is happening and NetJets.

Now all the customers and employees know they will continue to get nickel and dimed for Sokol and Warren's $200 mill to $500 mill year after year dream. Customers paying more for less is unsustainable.

It’s sad the Fortune article is the best press Sokol could get from Carol Loomis who for all intents wrote this piece for Warren.

I am certain a true investigative report will surface the reality.