Blood & delusion: Outrageous company visits

As the manager of a hedge fund, I've traveled around the country and met with thousands of CEOs, CFOs and other top executives in their corporate offices. Name any business complex or office park west of the Mississippi and there's a good chance I've been there at some point over the last 30 years. Often, if I'm invested in a company or I'm particularly intrigued by its business, I'll stop through to speak with its managers multiple times.

Businessman shocked outraged
Andersen Ross | Getty Images

Most of these interviews are cordial but brief and to the point. Some, however, have been a little wacky. Here are my top five most outrageous corporate meetings and the lessons I took from each of them:

1. Blood in the boardroom

I don't usually expect to bleed during business meetings, but that is exactly what happened when the chief executive officer of a medical-device company called Chemtrak invited me to try out its new take-home cholesterol kit. As he showed me how to prick my finger and deposit a drop of blood on a test strip, he confidently predicted that the product would soon outsell take-home pregnancy tests.

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My takeaway: Even the smartest executives can get caught up in very dumb ideas. Chemtrak's CEO was an accomplished businessperson with an impressive academic background, yet there was simply no way American consumers were going to shed their own blood just so they could feel guilty about eating too many cheeseburgers. Chemtrak filed for bankruptcy shortly thereafter.

2. Cracked up

The managers of the promising biotech firm Cygnus Therapeutics allowed me to test a prototype of their main product, as well — a watch that could detect glucose levels in a person's sweat. The watch didn't produce a reading at first, so I had the brilliant idea of shaking my hand around to make my wrist perspire. Bad move. I accidentally smashed the prototype against the edge of the conference table and cracked its face!

My takeaway: Besides the fact that I am not to be trusted with valuable corporate property, biotech is an extremely risky business. Fortunately, Cygnus had more prototypes of the watch. Unfortunately, the problems I experienced getting it to work were harbingers of things to come. After the watch finally gained FDA approval, it didn't live up to expectations and sold poorly. Many, many biotech products suffer a similar fate.

3. Ship of fools

During the first dot-com bubble, the CEO of Quokka Sports made me seasick as he rapidly clicked through dozens of camera angles to demonstrate how his company planned to stream the upcoming America's Cup yacht race online. For the better part of an hour, I fought down nausea and he gushed about the drama of the event while promising that millions of people would log onto Quokka's website to watch it.

My takeaway: Manias warp peoples' brains. The notion that a substantial number of Americans would suddenly become passionate about sailboat racing just because it was being shown on the Internet is a great example of the magical thinking that takes hold during stock market bubbles. Quokka went broke soon after I met with its CEO.

4. Spic-and-span

By far, the most cheerful, wholesome corporate headquarters I have ever visited were those of the cafeteria-style, all-you-can-eat restaurant chain Fresh Choice. Everyone I passed stopped to smile at me and wish me a good day. It felt like I had stumbled onto the set of the movie Pleasantville. The company's CEO welcomed me into his office with a grin and proceeded to go into exhaustive detail about Fresh Choice's family-friendly atmosphere and how thoroughly its employees cleaned every surface of their establishments, right down to the special brand of scraping tool they used on countertops.

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My takeaway: Executives will often confuse their own habits and tastes with those of their target customers. People who frequent all-you-can-eat restaurants generally don't do so for the service or because one place is cleaner than another. After an initial period of expansion, Fresh Choice's sales began to decline and the chain eventually filed for bankruptcy.

5. Turning the page

In the late 1990s, an executive at PageNet, one of the few remaining pager manufacturers at the time, proudly displayed its latest model for me. This was long after the widespread adoption of cellular phones, and yet he doggedly argued that consumers still preferred pagers because they had better "penetration" inside of buildings and because they allowed users to return calls at their convenience.

My takeaway: When industries sunset, leaders look for all sorts of reasons not to adapt. I've seen this refusal to face facts time and time again at once-thriving businesses like video-store companies and Yellow Pages producers.

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Commentary by Scott Fearon, the founder and president of Crown Capital Management. He is also the author of "Dead Companies Walking: How a Hedge Fund Manager Finds Opportunity in Unexpected Places," which chronicles his 30 years of experience in the investment management industry.