It was refreshing to hear Michael Moritz talk about building “incredibly enduring companies” at the IVA meeting on Monday afternoon.
Drawing on the Dow Jones 30 companies that make up the Dow Jones Industrial Average, Moritz pointed out that only four of the 30 companies on the index today – DuPont, GE, General Motors, and Proctor & Gamble – were a part of the index in 1960.
With no sense of irony – given Sequoia’s track record of spectacular exit through M&A, Moritz bemoaned the “ incredible shortage of the great enduring companies.”
How do you build one? These are his guidelines:
- Pursue billion dollar opportunities
- The founder’s spirit should rule
- Expand with Care – Walmart and Ames Department stores started from similar humble beginnings and at about the same time. Ames quickly expanded across the U.S., putting up stores ahead of the company’s ability to manage the growth.
- Examine your company as an outsider – Great companies, and here Moritz pointed to Rupert Murdock, must keep reinventing themselves to stay fresh.
- Skeptics are also wrong – Fed Ex was dinged as a business school plan because it would never work.
- Never bow to setbacks
- Lack of money breeds ingenuity – Amazon in the early years was capital constrained. Without much money, the company developed ideas and technologies to help save money.
- Invest during downturns
- Spirit of the founders must be captured by next CEO –The successors to founders Gordon Moore and Robert Noyce, Andy Grove and now Paul Otellini, “make the spirit of the founders live,” Moritz believes. “They instinctively know how to react.” Apple Computer’s board fired Steve Jobs fired in 1985 “because they believed in ‘adult supervision,’” Moritz asserts. “Youthful chaos is preferable to adult supervision.”
- Market growth often hides tremendous weakness.
- Don’t build useless products
- When lightening strikes – strike!
- Design what you want to use