Nothing is Invincible…


You know how I said you were often guilty of “undergraduate hyperbole.”

One example was imagining Apple, Inc, or any company, is pre-destined to being powerful or successful.  When you all talk in glowing terms about Apple, Inc, and write things like “an indestructible company,” I try not to chuckle too much. You are young. You don’t recall Apple’s own brush with corporate death in the 1990s (when Microsoft infused them with cash). You don’t know that the Fortune 500 has very high turnover (i.e. today’s 500 most profitable firms are unlikely stay on the list).

Uncertainty is inherent in business, and while this may be good for economic growth (and hopefully society broadly), it can cause heartburn to managers.  More so if this comes as surprise to them.

So, uncertainty rules in American business. At the same time, it is a damn good gig. What do I know? I am just some college professor.

You know who agrees with me?  Warren Buffet.  Yep, that one.
Well, Warren Buffet said the same thing in his recent letter to shareholders. (http://www.berkshirehathaway.com/letters/2012ltr.pdf)

“A thought for my fellow CEOs: Of course, the immediate future is uncertain; America has faced the unknown since 1776. It’s just that sometimes people focus on the myriad of uncertainties that always exist
while at other times they ignore them (usually because the recent past has been uneventful).
American business will do fine over time. And stocks will do well just as certainly, since their fate is tied to business performance. Periodic setbacks will occur, yes, but investors and managers are in a game that is heavily stacked in their favor. (The Dow Jones Industrials advanced from 66 to 11,497 in the 20th
Century, a staggering 17,320% increase that materialized despite four costly wars, a Great Depression and
many recessions.
And don’t forget that shareholders received substantial dividends throughout the centuryas well.)
Since the basic game is so favorable, Charlie and I believe it’s a terrible mistake to try to dance in and out of it based upon the turn of tarot cards, the predictions of “experts,” or the ebb and flow of business
activity. The risks of being out of the game are huge compared to the risks of being in it.

…The country’s success since that perilous time boggles the mind: On an inflation-adjusted basis, GDP per capita more than quadrupled between 1941 and 2012. Throughout that period, every tomorrow has been
uncertain. America’s destiny, however, has always been clear: ever-increasing abundance.

If you are a CEO who has some large, profitable project you are shelving because of short-term worries, call Berkshire. Let us unburden you.”

LOL. Love the last line…

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