Everlasting Companies: Their Secret

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I would define an everlasting company as one which writes itself into the history books without the need of a pen. There are only a few collection of everlasting companies; an analogy I like to make is the number of habitable planets in our universe. Only a few, but a rather fantastic few.

What really makes a company stand out? There are a bundle of characteristics floating in the minds of heads and the society that we live in on what makes a successful and everlasting company. I wish to examine those which are highly prevalent for the "crème de la crème".

Sustainable long term growth and vision

If your company cannot survive your enemy of "time", one should rethink and rebuild plans for the long-term sustainability of the company. We have seen companies come and go, grow and diminish just because their foundations were not built on long-term vision.

In simple economics terms, if one plots a graph of a company with the x-axis being growth and the y-axis being durability, it provides a visual representation of what a company should seek out to be. We call these PPFs (Production Possibility Frontiers) but in this case, it's almost like a Company Possibility Frontier.

By this, I plan to paint an image that companies should emulate the magical point in the middle where growth and durability are even; one may even argue that the point should be more towards the durability axis; in the end, it is the durability of a company which makes it successful.

There are many key examples of companies which did not have strong enough long-term vision or plans. Although it is wise to evaluate companies which failed to ever pursue durability, in order to question why they did fail and learn from them, this article will be focused on those which defied odds with persistence to strive for longevity.

Amazon fits this description. Jeff Bezos believed that the long-term always outwitted short-term growth, with his focus, heavily concerning the future cash flows of Amazon. Bezos maximised cash flow per share rather than relying on current revenue and growth. His decisions were based upon the fact of building a long-term monopoly.

And where is Bezos and Amazon now? Amazon is eating the retail world; engulfing competitors like never before. Bezos has perfectly shown that with long-term thinking and careful planning, amidst strong foundations and belief, one can create an everlasting company.

Network Effects result in Monopolies

Word of mouth is undoubtedly the most powerful method to not only build a company, but a brand. Network effects simply refer to the process in which a company naturally grows as more people join and connect. Social media platforms are notoriously known for their large network effects. Facebook. Instagram. Snapchat.

The greater the network effect, the higher the sharing outcome as more and more get to know your company. The everlasting companies are those which maximise network effects and as a result, reach a monopoly by attracting such a large proportion of the market/industry they are part of. As a result, it is common that companies at the very top have monopoly figures which dwarf others.

The first iPhone revolutionised not only the phone market but the whole of the technology industry. A phone which could be used easily with a slide over the screen or a tap or two, introduced technology 10 times better than before. Many were stunned, shocked and surprised by this new invention; news spread crazily and quickly...an example of a powerful and highly effective network effect.

Never stay comfortable

The fact is, successful companies keep building, keep innovating and keep creating. If a company does not keep evolving or fail to adapt to external stimuli, then their future path has already been constricted from the get go. A major reason for failure is that certain companies "get stuck with comfort" and never move on to something greater; something worth the fight for the future.

The reasons why companies may not actually continue to innovate may be down to the fundamental truth that they fail to address or even notice their lack of urgency to build new ideas. Perhaps, some don't even know where to start or what to build. Everlasting companies always create new and useful services which can be rendered effectively for their customers.

A dominant message

The odds of building an everlasting company are very low but as Elon Musk puts it "The first step is to establish that something is possible; then probability will occur." Companies which plan to excel in rendering useful services to all, are those which will succeed; and a very few from these collections will eventually rise above others and begin to start their trek on being an "everlasting company".