Base Rates and Not Over-Reading
When Equinix announced its leadership succession on March 12, 2024, its release noted that Charles Meyers had joined the company in 2010 and had become chief executive officer, or CEO, in 2018. Read on its own, a chief executive handing over after six years could look like news in need of explanation. Read against the ordinary pattern of corporate life, it looks like what it was presented as: a planned succession with the outgoing chief executive moving to the chair. The difference between those two readings is the subject of this lesson, and it has a name: the base rate.
A base rate is simply how often something happens in general, before you consider the particulars of any one case. Chief executives are replaced. Chief financial officers move on. Boards refresh their membership. Senior people change jobs as a matter of course, and every one of those moves, at a listed company, generates a filing. If you treat each filing as a signal, you will be busy, alarmed and mostly wrong. The first discipline is to ask, of any move, whether it is unusual relative to what normally happens at companies like this one, in roles like this one.
Faraday's read is that the most informative people moves are those that break a pattern rather than those that are merely large. A chief executive succession at a mature company, announced months in advance with the predecessor staying on as chair, is common. A company creating a senior role it has never had before, or recruiting from an industry it has never drawn on, is less common. A cluster of hires in the same function across several competitors within a short period is less common still. The rarer the pattern, the more attention it deserves; the more ordinary, the more modest your conclusion should be.
The second discipline is corroboration. A single people move, however striking, should rarely change your view on its own. Look for independent evidence pointing the same way: a filing that mentions a new business line, a planning application in a new region, a financing whose use of proceeds matches the new executive's remit, a conference appearance that confirms the title. Independent is the operative word. A press release and a trade story that repeats it are one source, not two. Two filings from the same company about the same event are one source with two dates.
The third discipline is to write the prediction down before the evidence arrives. When Digital Realty announced on December 13, 2022, that its new chief executive would also remain chief financial officer until a successor was named, a reader could have recorded a specific expectation: a chief financial officer appointment would follow, and here is what an internal versus an external choice might indicate. Writing that down, with the date, turns a vague impression into something that can be checked. Checking it, and recording whether you were right, is how a practitioner learns how much weight their own readings deserve.
The fourth discipline is to resist the narrative. A people move is an unusually human piece of evidence, and humans are drawn to stories about other humans. It is tempting to build an account of why someone left, what they must have disagreed with, or what the new arrival will surely do. Almost none of that is knowable from the public record, and most of it is not your business. The record tells you who, what role, and when. Why is usually a guess, and a guess about a named person's motives is not intelligence.
Over-reading has a counterpart. Under-reading happens when a genuinely unusual move is dismissed because it arrives without drama. A quiet hire into a newly created role, announced in a paragraph at the bottom of a release, can matter more than a noisy chief executive change. The protection against both errors is the same: a consistent record of moves, their dates and your predictions, reviewed against what actually happened.
None of this makes executive movement less useful. It makes it honest. A practice built on base rates, corroboration and written predictions will produce fewer confident calls and more accurate ones. The Equinix succession, read that way, was a well-signposted handover rather than a mystery, and the most useful thing a careful reader could write about it on the day of the announcement was a short list of what to watch in the quarters that followed.