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January 26, 2016


John Charles Thomas

You might also take a look at The Living Company by Aries de Gues. He was commissioned by Royal Dutch Petroleum to see whether any companies had survived 100 years. As I recall there were four characteristics of long lived companies: 1) a high degree of internal mutual trust 2) strong boundaries around the company -- hard to get in, but once you were in, you tended to stay 3) financial conservatism 4) tolerance for explorations at the boundaries of the current business. It's interesting to compare these to yours and also to how IBM at least used to be.

I am all for quantitative analysis, but I do think it needs to be tempered with humility. I think one major reasons companies fail in small ways and large is that they believe their models too deeply. So long as conditions do not change, the models work. If the conditions change, they do NOT have sufficient redundancy to survive. Trivial example: Someone determines a company can save a million dollars a year by making a wrapper with only a quarter inch of extra plastic. This is enough for 95% of the population to eventually open the container. However, at some point, the raw ingredients of the plastic are differently sourced or the containers are outsourced to a cheaper company whose quality control is not as good, or the demographics of the user changes, or 100 other things so that now there is only 1/8 inch of extra plastic which is only enough for 5% of the population to open the container. Larger example is reducing salesforce to the bare minimum. At first, people work overtime, become more efficient and all looks well. But meanwhile, the best people are applying for other jobs etc. A slight boom in the economy and suddenly half the best sales people are gone and it is very very hard to find and train new ones in time to meet the uptick in demand.

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