Metacircus by Howard Yeh

Words Are But Shattered Mirror of Thoughts

Hundred Year Companies

Fred Wilson wrote a blog post on the sustainability of a business. He says that when a company finds a win-win scenario, so that its customers would benefit while it makes profit, then the company is sustainable.

Thinking about sustainability encourages long term thinking. Too few companies do that. How might a business remain sustainable for a hundred years?

What Hundred Years Companies?

Trading companies like the British East India Company. Financial houses like the Rothschilds. Conglomerates like Mitsubishi. Resource companies like Exxon Mobil. Some family wineries.

There seems to be a two separate components to sustainability. One is sustainability of a business as a profit earning entity (keeping everyone paid), and the other is sustainability as legacy. There really aren’t that many hundred years businesses.

It seems that once a company had innovated, their sustainability is an attribute of how well it maintains power. To last that long, a hundred years company almost always have to be political too.

It’s just really, really, really hard to remain profitable under the constant onslaught of Schumpeterian creative destruction. Capitalism’s drive for efficiency exerts a relentless downward pressure on profit.

Once a company found a way to create profit by innovating, other companies would scramble to do the same and undercut that profit. For a company to remain profitable in the long run, it would either have to keep innovating, or (as was so often done) to seek to protect its profit through political means (e.g. SOPA).

Legacy And Death

Given that it’s so hard to remain innovative, wouldn’t it be better to let a company die after it had been innovative, rather than sticking around to interfere with new innovators (e.g. Microsoft)?

I like what Mark Zuckerberg said (at Startupshool) that a company is the best social organization to make something happen. 10 years is enough to change the world. Do you really want a company that exists for 100 years?

Apple had change the world. Or rather, Steve Jobs had. If Apple had lost its ability to innovate, would it seek to protect its interests by exerting its power? Do you want Apple to be a hundred years company, now that Steve Jobs is gone? What if 100 years from now the App Store is still the only way to sell Apps?

It is said that the only way for Physics to advance, old physicists would have to die. So it is that old companies have to die to make way for innovation.

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