“Too big to fail?” became a refrain from the last GFC (Global Financial Crisis) when companies like Bear Sterns began to sink and the gargantuan Lehman’s triggered the GFC. 2008 was a salutary lesson in size being no defence against the dual forces of sudden change and a strategy that ends up as wrong. Paraphrasing Covey: you can put a ladder against a wall and run up it quickly. But if it’s against the wrong wall you are on the wrong roof.
The GFC headlines the issue of big failures. Of “failures” which relate to today’s world we might pick on Kodak. The company enjoyed S&P status and dominated the photographic industry in the 20thCentury.
They even invented the digital camera in 1975- but- leadership apparently took the view “that’s cute- but don’t tell anybody about it”. They were on the right roof but outside forces moved the ladder. Also failing from a high roof-top was Nokia- they were first to invent a digital network- and whilst I miss my “brick” phone- subsequent generations went for the Smart Phones which killed off Nokia’s hegemony.
BIG AND FAST?
Being big of course is not necessarily a mistake. In 2018 Apple became the first trillion-dollar company. When it launched on the market it became the biggest launch since Ford in 1956. According to Russell’s they are now bigger than the Indian and Brazilian markets. In fact, our stunning Chart Of The Week (Valuation Disparities) shows Apple and Microsoft bigger than the entire UK Equity Market. That’s a wow graph. What makes them valuable is covered in many articles, but we can sum it up in one word “transformative”- Ipad, Iphones, Ipod- they keep evolving.
FAST AND COVID?
The GFC headlines the issue of big failures. Of “failures” which relate to today’s world, we might pick on Kodak. The company enjoyed S&P status and dominated the photographic industry in the 20thCentury. They even invented the digital camera in 1975- but- leadership apparently took the view “that’s cute- but don’t tell anybody about it”. They were on the right roof but outside forces moved the ladder.
Also failing from a high roof-top was Nokia- they were first to invent a digital network- and whilst I miss my “brick” phone- subsequent generations went for the Smart Phones which killed off Nokia’s hegemony. the pandemic forces them to move things even quicker than planned.
FOR INVESTORS?
For stock-pickers: picking the vaccine winner would be nice. Picking the innovators and adapters slightly easier. For the rest of us who trust the market to recover- we rely on the “Law Of Survivorship”. The S&P and other indices will flush out its Kodaks and replace it with newer Apples as the fast eat up the slow.
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