In 2007 I wrote:
Between the years 2001 and 2006, if you bought 100 shares each of the following large prestige leading companies : Coca-Cola, Citigroup, Dell, Exxon-Mobil, GM, GE, IBM, Disney, 3M, Johnson & Johnson, Microsoft, Wal-Mart, Pfizer and Proctor & Gamble, you would have invested about $50,000 and gained about $500.”
In contrast, if you invested equally a total of $50,000 in Cognizant, Ralph Lauren, Cheesecake Factory, Google, Hanes, Coach, VMware, Costco, Apple, and Amazon in 2002 or whenever they went public it would be worth about $ 200,000 or about a 30% annual return. The numbers today say you would have lost $12,000 in the large stocks and even in the market decline made $41,000 in the growth stocks.
Our financial experts, corporate leaders and government experts discuss the financial aspects of these results every day, but vastly underestimate other key impacts. In particular, they are ignoring the structural and competitive assumptions that are dooming these large companies. The reality is the president of General Motors and a bunch of others deserve to get fired. As we are learning with the auto companies, forget the bailout money, bonus controversies, and regulation debates, etc. These companies need completely new structures and managements.
Why is this phenomenon so apparent when these large companies have so many resources to effectively compete? The obvious answer is that the economy and society are changing so quickly those major corporations lack the flexibility to respond and that:
Bigger is not Better.
