No Shortcuts to Long-Term Business Success

Sean IddingsPresentation5 Comments

Investing and business success takes time. Cutting corners might provide great results in the short term but it eventually backfires.

In this episode we explore a few companies who took shortcuts to build their business. Harold Geneen of ITT and Michael Pearson of Valeant rhymed a similar tune and met a similar demise.

Intelligent fanatic Henry Singleton’s acquisition spree was slightly different. He had the capacity to pivot when the acquisition strategy was no longer good and to repurchase his cheap shares. Yet in the long-term, Teledyne did not thrive after Singleton’s departure.

True intelligent fanatic led organizations such as Berkshire Hathaway and all 3G partner led companies (Garantia, AB InBev, Lojas Americanas, 3G Capital, etc.) did not utilize shortcuts. They have taken their time to build their organizations slowly. The result has been a strong organization that has a much higher probability of succeeding once the intelligent fanatic leaders have left.

About the Author

Sean Iddings

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Sean is the founder of Unconventional Capital Wisdom, a registered investment advisor in New York State seeking to invest in high quality microcap companies led by intelligent fanatics. He is a member of MicroCapClub and writes about investments, entrepreneurship, and leadership on a number of blogs and publications. Sean is also a long distance runner having completed five marathons across the globe and a jazz/rock guitarist. He lives outside Ithaca, NY with his wife and daughter.

5 Comments on “No Shortcuts to Long-Term Business Success”

  1. Absolutely true that there are no shortcuts to success in both business and investing. In both, a learning curve may be involved. Particularly in business, even if an experienced CEO is brought on board, he would still need some time to figure the organization structure, systems, suppliers and customers out. All great organizations have been built up over decades, even centuries, only through the sweat and toil of managers.

    In Investing, one can learn the ropes, read all the great books, but one has to have actual investing experience. That can only be gained once one has invested over an entire economic cycle lasting 7-8 years. In other words, one ought to experience at least one bull market and one bear market, and analyze several industries and companies, in order to become a savvy investor.

    Personally, I am not particularly bullish on acquisitions. Historical evidence suggests that a majority of acquisitions have either failed, or have not generated any significant benefits to the acquirer company. Acquiring companies may not be difficult, but integrating their operations into the acquirer company usually is. There are cultural differences, different practices and a talent pool which may not be able to deliver under the acquiring entity.

    1. Nitiin,

      Thanks for reading/listening. Good point on the time necessary in getting experienced CEOs and other talent up to speed on a new company. As you say, company acquisitions often fail, and, what most people don’t realize, experienced talent acquisition often fails too for smaller, growing companies. It’s better to develop young talent within an organization. It takes much longer, but the tangible and intangible ROI is much greater.

      We’ll expand on this topic soon.

  2. I suspect issue with Teledyne was poor succession planning and lack of greater organizational purpose. Once the Great Leader left there was no one and nothing left to follow through. Because Teledyne was really an investing project (or astute asset allocation?) unlike truly great business making projects like P&G, Google, Nestle etc where the people working for the organization know why their organization exists in the first place. I doubt in projects like Teledyne people really know why their organization exists for. Although Singleton made huge money for investors in 30 odd years and hence relentlessly worshiped by guys like Munger and Buffett I think he did not build his organization for longevity and he did not care either. They sold for the highest bidder when time came.

    1. Giri, I agree. Singleton is like Leonardo Da Vinci working tirelessly on one masterpiece. Contrast this with Buffett and other intelligent fanatics who are like Andrea del Verrochio who’s masterpiece is to perpetually build up other Leonardo Da Vincis.

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