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...fact, assets grew so quickly that the firm decided to close both its Stock and its Balanced portfolios to new investors--a decision that benefits current shareholders but not necessarily the firm since it collects a percentage of assets. "We are capitalists," says Gunn, "but long-term capitalists. And if you're a long-term capitalist, you need long-term satisfied customers." After months of informal conversation about skyrocketing inflows, the decision to close the two funds and potentially cut their income was made by more than a dozen people sitting around a conference table...
That ability to make complex strategic decisions collectively requires an almost Benedictine devotion to corporate togetherness, starting with physical space. The firm's 39th- and 40th-floor offices offer sweeping views of San Francisco Bay and the Golden Gate Bridge as well as of the interior hallways--the walls are glass. Two staircases connect the floors, and walking about is heavily encouraged. Branch offices and telecommuting are verboten...
Dodge & Cox also exhibits a level of commitment to employee development unheard of in layoff-crazy corporate America. When freshly minted M.B.A.s are hired to become analysts, the expectation is that they'll remain for their entire careers and eventually become shareholders in the firm. Seven out of nine people on the domestic-stocks team started as analysts straight from B school. Dodge & Cox rarely hires people who have worked elsewhere in finance: disagreements are fine (and considered a strength), but operating with a different investment philosophy isn't. "When we visit, it's almost eerie how on the same...
Part of preserving that culture is keeping the right ratio of experience to fresh talent. Dodge & Cox hires only one or two analysts a year. Starting in the 1980s, that became a problem as the firm began covering foreign companies. Dodge & Cox could have hired a big batch of analysts but decided not to, fearing it would wreck the apprenticeship model. "If you hire five people at the same time, they all start going to lunch together," says president Ken Olivier, a member of the U.S.-stocks committee. And as years passed, there might not have been enough promotions...
Advocacy, though, doesn't mean an analyst gets all the credit when a stock rises or the blame when it falls. Analysts circulate research reports to the entire firm. Anyone can weigh in. And when the analyst thinks it's time to change the firm's exposure to a stock, the first stop is a sector committee, made up of people who know an industry well and can drill down to test the idea in depth. "The nature of this business is that you're going to be wrong a lot of the time," says Diana Strandberg, who sits...