On the Long View
Some Friday thoughts...
As many of the tech unicorns (Slack, Lyft, Uber, Airbnb) of the past few years hit the public market circuit, the conversation about the merits of going public for founders is alive and well. In recent years, tech founders have leaned towards holding off on taking their company public, whether through IPO or direct listing (and that’s a whole other conversation). Some investors and pundits believe that these founders are wary of the tighter scrutiny of the institutional eyes dominating the public arena. However, others may argue that it’s about a perceived misalignment of time horizons. Management teams feel susceptible to quarterly shareholder expectations focused on earnings with constant fluctuations in stock price. Only a small handful of founders have spurned the shortsightedness of many Wall Street investors to orient themselves to the long view -- Bezos is the prime example of this. If they continue to stay private, they can supposedly build with less stopgaps.
There are corollaries during the early stages of company building to the flurries of information that guide stock volatility and momentum swings in the public markets. In our arena of business, people find it easy to glorify long term thinking, but still fall victim to short term thinking. Startups report to many different whims. Think about the TechCrunch articles, miscellaneous coffees, chatter on Blind, etc. -- the list could drag on. While they don’t directly impact valuation, these factors can be psychologically akin to the fluctuations of the stock market and fodder on CNBC.
Great companies don’t suddenly focus on long term time horizons the minute they go public. That DNA is embedded in them from inception. An extended view requires a continuous, rather than discrete, focus on a company’s relationship with its customers. Furthermore, folks generally assume that a long view is good, but we’re rarely reminded of why it’s beneficial besides an understanding that the great compounders have it. Most founders and management teams end up competing on short time horizons. Call it 1 to 2 years. As you extend the timeline on which you compete, the number of competitors you go toe to toe against reduces in size. It can be a moat of sorts.
Long term thinking is easy to talk about, but incredibly difficult to internalize. I’m consistently guilty of this myself! Regardless, we felt as if the message was worth repeating because cultural principles embedded in a company in the early days have a high switching cost -- they’re hard to rip out.
Artwork from Jason Wright: https://www.artsy.net/artwork/jason-wright-spirits-in-the-material-world