Great Companies Stay True to the Spirit of Their Founders

[giofranchi]

A good article:

 

Great Companies Stay True to the Spirit of Their Founders

 

Companies still run by their founders have a certain magic. That’s not just a hunch — among public companies since 1990, returns to shareholders were three times greater at firms where the founder is still part of the management team.

 

https://hbr.org/2016/03/great-companies-stay-true-to-the-spirit-of-their-founders

 

Cheers,

 

Gio

[Guest Grey512]

Interesting article - will take a read.

 

We've seen all sorts of founder-led businesses. For every good story (NVDA) there's a bad one (GPRO, ZNGA) and some where the jury is still out (TWTR). And measuring shareholder returns is a not a perfect proxy. It would be much more interesting to know how much capital it took those founders to get their business to IPO. Even bad stories for shareholders (e.g. ZNGA or GPRO) may look like businesses that were worth starting and worth staying on to lead given the returns to the founder and the pre-IPO investors.. Sorry for the rant.

[Jurgis]

Sorry for the rant.

 

Not a rant. Good observations.

[Travis Wiedower]

Not surprised founders do better than non-founders, but 3x is huge! One of the big factors in my opinion (which the article alludes to) is that founders often invested their own money to start the company. There's a big difference between that and hired CEOs who almost always are given options and never invest any personal money.

 

Many founders also love their business as if it's their child. A hired CEO will almost never care as much as a founder.

[scorpioncapital]

The keyword in that headline is , "the Spirit".

Great companies may stay true to the spirit of their founder - if that spirit was great.

By the same token, Poor companies also stay true to the spirit of their founders/leaders - if that spirit was not so good.

 

To me, the moral is: people don't change so invest in good people. I know it's pessimistic but actually Buffett believes this too. I would say a major part of his success is that he goes with the good stuff and just ignores the bad stuff. Doesn't try to change it just stays away.

 

[Jurgis]

I would say a major part of his success is that he goes with the good stuff and just ignores the bad stuff. Doesn't try to change it just stays away.

 

Part what you said is correct. Buffett tries to get the good stuff.

 

However, it is incorrect that he "just ignores the bad stuff". He did quite a few reorgs in his captive businesses. Buffalo news, National Indemnity (and/or other his early insurance companies), GenRe, NetJets, and a whole slew of recent Tracy Britt Cool helicopter restructurings. He even forced KO CEO out through boardroom politics. So don't get fooled with "he does nothing" image.

[ccplz]

Great companies like Valeant right?  ::)