Ariel Investments Case Study Part 1: Watch Your Feet

Mellody Hobson

Lesson time 18:26 min

Mellody discusses the circumstances that led to a key decision she made at Ariel Investments in 2008 when she was the company’s president. She explains the business and why it became necessary to make a critical decision about the firm’s survival. Then she prompts you to consider what you would do in her shoes.

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Topics include: Ariel Investments • "Peak Performance and Growth 2001–2004" • "A Stumble 2004–2008" • "The Year Everything Changed 2008" • The Decision Point


- I believe people can see success and mistake it for always representing good times. And my belief, it's the critical moments of failure or difficulty that actually become the biggest stepping stones to success. And they're actually necessary components of success. And so I thought the best way to teach was to teach a real problem. In recent years, just, if we use this millennium so far, we've had the dotcom bubble bursting in the stock market, with the great financial crisis that affected so many people. We had the unprecedented COVID crisis. And then of course, we've had the hangover that has come from the amount of stimulus that had to go in economies around the world, and now the inflation that we've seen that hasn't existed for the last 50 years. But nothing impacted our business at Ariel like the 2008 financial crisis. And because of that, it is the focus of this case study. My trajectory at Ariel has been just unbelievable. I started out as a summer intern when I was 19 years old. Then I was a marketing associate. I remember my first paycheck was $35,000 a year, which seemed like a million dollars. And I just did whatever was needed. I volunteered for all the tasks that no one wanted. Slowly, I rose up through the organization. I became a vice president, then a senior vice president, very early. And then by the time I was 31, I was named president of the company in May of 2000. Ariel is an investment firm. And what we do is we manage stock portfolios for individuals, large institutions. You can think of it as a person's IRA, or 401(k) plan, or the savings that they might have for their kids' college education. And we manage them in very specific ways. We call ourselves value investors. We're looking for stocks that are widely misunderstood, ignored, undervalued. For some reason, people don't like them. But we see a lot of value. So we're investors. But we like to buy when things are cheap. We say, we really want to, on the US side, pay $0.60 for a company that's worth $1. And we want to own them for a very long period of time. We have a tortoise as a logo, the idea of slow and steady, winning the race. That we were gonna make money over time, that we were gonna be patient, long-term investors. It's our mascot. It's a symbol of this long-term approach, not only in how we pick stocks, but how we do everything that we do at Ariel. I am a co-CEO with John Rogers, who founded the company. But what we have done is we've carved out our roles in a very specific way. Our worlds don't really meet. On a day-to-day basis, I run the firm. And then all of the investment function reports up to John Rogers. So the way that I describe it is he's in the factory making the product, and I'm running the factory. And so the decisions that we have to make individually are very different. His might be about a stock that he's going to buy or sell. And mine might be about some kind of legal or compliance issue that we're ...

About the Instructor

Mellody Hobson knows how to make tough calls in trying times. As one of the most influential leaders in business today, she’s led companies through junctions of financial crisis, acquisitions, and restructuring. Become a more dynamic, confident business leader by diving into real-life case studies from Mellody’s career. Get an inside understanding of the pivotal decisions she’s made from the top, and build a strategic decision-making framework for your next step as a business leader.

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Mellody Hobson

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