The Long-Term Secret to Predictable Business Growth

Happy Saturday,

The inspiration for today’s quick insight comes from a memo written by investor Howard Marks about how investors ultimately succeed as long as they 'avoid the losers, the winners will take care of themselves'.

This got me thinking about how this investing principle applies to businesses, namely people.

First, let's start with an example:

The General Mills pension fund had a fourth percentile return but never ranked above the 27th percentile or below the 47th percentile over a 14-year period.

They simply strived to do a little better than average each year.

The most generational businesses take 20 or 30 years to build. They compound over time.

Warren Buffett really started cooking after his 50th birthday.

His partner, Charlie Munger, has said the vast majority of his own wealth came from four winners.

Now, let's tie this back to business.

When we think about talent, we should compare it to investing. Nothing great can be built without people.

And yet, most companies let their hiring processes decay over time. Their standards drop, and the bozo explosion ensues.

When people invest in a business, they want the business to be growing consistently.

They also have a checklist of other attributes that they're looking for:

- 3+ years of consistent growth
- Profitable
- Strong exec team
- Growing market, etc.

Here's what a '10-bagger' might look like for talent:

• Has been promoted 2 or more times at a job
• Has managed people
• Has recruited a team from scratch (not by using HR)
• Has built something from scratch (new initiative, content creation, special project, etc.)

Here's what a dud might look like:
• Changes jobs every year
• Hasn’t been promoted
• Hasn’t managed people
• Hasn’t built a team
• Hasn’t built anything on their own

Sure, you might have some losers every now and then, but keeping your standards high will reduce the odds of finding a loser.

The key thing is continuing to refine those standards and making sure that the entire company upholds them.

To your growth,
Eric Siu

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