Steve Jobs has a stellar reputation.   Maybe he has a Messiah Complex, and maybe he’s too secretive about his health, but as a product visionary and marketing impressario he stands alone.    Add to this his well-chronicled comback – we all love a redemption story – and you have one of the most compelling personal narratives in the history of business.   

But the reputation of Jobs the person is much better than the reputation of Apple the company, just as the reputation of the revered investor Warren Buffett is much better than the reputations of most of the companies that make up Berkshire Hathaway.    I’ll go into the evidence for these claims in the next post, but I want to demonstrate here why confusing personal and company reputation can be very dangerous, particularly for investors.

And I can do that with just one word – Madoff.    Those investors who used the reputation of Bernie Madoff  as a proxy for the reputation of Madoff Securities International Limited were so taken by Madoff the person that they didn’t bother to independently determine if the company he ran was in fact reputable.

Now, this is partly because we’re suckers for celebrity, and Madoff certainly was one within his network (as Jobs and Buffett are in theirs).  But there is another factor involved – it’s not always easy to directly measure the reputation of companies.  To do that, you have to somehow make a bottoms-up assessment of the opinions of all sorts of stakeholders -  not only investors, but customers, employees, people in the communities where the companies operate, and concerned citizens - on how they think the company treats them.

It certainly appears that Madoff consciously exploited the tendency on the part of his investors to use personal reputation as a proxy for company reputation to perpetrate his massive fraud.   Jobs and Buffett, of course, are running completely legitimate businesses that are as transparent as any publicly traded company.   But they both seem happy to accept the benefits that their personal reputations have had on the valuations of their companies.   Investors who made their bets based on that “trickle down” effect, however, are finding severe disappointment in the declining value of AAPL and BRK shares as the light turns from  Jobs and Buffett to the companies themselves.