The Saturday (07.15) pre-dinner party shopping list for me had a few scribbles-at-60mph added to it as I wended my way the 22 miles between me and the closest grocery store. Hence it read:
Minute Maid frozen lemon juice
Citronella for torches
Brandenburg Gate [spy novel for TP]
I'll take the Tonic. High fructose corn syrup notwithstanding, I'll get my money's worth. (And it gets better and better with the temperature climbing into the 90s, even in VT.) The TVP—Tonic Value Proposition—is more than you can get from the corporate section of the list, assuming Stock Price Appreciation is your measure of the Big Co. taste test.
I often rip Big Cos. And, of course, I think it's deserved. To be sure, market price isn't a surefire barometer—but it's about the best we free market junkies, starting with A. Smith, can do. Take the case of Home Depot and its CEO, "What Annual Meeting Bob" Nardelli. He has beyond a shadow of doubt masterminded (bulled through, in Nardellian fact) a turnaround, but his stock hasn't budged—while that of his principal competitor, Lowe's, has marched ever upward. CEOs want to be rewarded for stock price appreciation—at least they do in a bull market. Nardelli has made a king's ransom, which he says he deserves for the turnaround; I might agree as long as he in turn agrees: If the stock does head North he'll be content with flat or even depressed compensation since he will have previously been rewarded for building the framework for the appreciation. (Hey, his whole argument for his couple hundred mil is, de facto, that stock price is irrelevant.).
But the Nardelli riff is mostly an aside. The Big Point of the Post is that perhaps the time of dominance of the above listed companies has passed. And, say I, so be it. (Or, "Whatever.") These Masters of the Universe may indeed have been built to last, and contribute they have, but as usual—as always?—it's not panning out.
I'm afraid I think Built to Last is downright silly. Take GM. Dominant forever and ever, you say. Hold on! When the car market took off in the mid-teens of Century 20, Ford was the clear leader (Henry I's Model T). Upon the arrival of Alfred Sloan and implementation of his divisionalization-brand ideas (Technicolor beats "Black only"), GM became Big Dog. But almost simultaneously, GM et al. got whacked by the Great Depression. WWII bailed them out, and GM rebounded courtesy Tojo, Hitler, and tank sales. GM's true, earth-rattling Commercial Dominance emerged in the late 40s. It continued unimpeded until the First Oil Shock. Enter, Stage Pacific, the crafty Japanese. ("Built to run on not-much-gas" supplanted "Tail Fins R Us.") Thence it has been all downhill, despite micro-comebacks courtesy minivans and SUVs. Now the Big Woes are upon the Big Two. Thence a serious revisionist evaluation suggests that GM in fact was dominant for about ("just") 25 years all told—say, 1950 to 1975. Ain't a bad run on Broadway and what was good for GM was indeed good for America ... but a long way from Built for Eternal Greatness/Built to Laaaasssst. (Unless "last" includes the "hanging on by your fingernails" years—Goliaths are hard to kill off regardless of their irrelevance.)
So last week recently Invincible ("the Ultimate Business Model") Dell and Invincible ("Innovation Machine") Intel announced re-structurings (with more to come in both cases). Despite GE's new dude's increasingly high profile, the stock is becalmed for Mr Immelt and his shareholders. Despite Wal*Mart's blizzard of "We have soul" moves—the stock is becalmed. Ditto Microsoft. And, of course, Big Pharma, which was supposed to become the King of the Hill in a post-GM world, is tanking (Marianas Trench-style), despite a couple of Merck court victories.
In all cases the chief cause is Creeping Clumsiness that INEVITABLY (Big Word, that) accompanies SuperSize, even in the "virtual, outsource-every-damn-thing" age.
Size can surely help you muscle your way into many a market; but INEVITABLY it will choke you to death, or at least deliver growing IRRELEVANCE.
Before blogging became all the rage, Tom was posting book reviews and Observations (essentially early blog posts) to this site. You can find the archives below.
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