Firms of Endearment vs. Good to Great Companies
We were interested in one more comparison. Jim Collins’ bestselling book Good to Great identified 11 companies that it described as going from “good” to “great” by virtue of their having delivered superior returns to investors over an extended period of time (the companies had each delivered cumulative returns at least three times greater than the market over a 15-year period). We compared our set of publicly traded FoEs with the 11 Good to Great companies. This is what we discovered:
- Over a ten-year horizon, the 13 FoEs outperformed the Good to Great companies 1,026 percent to 331 percent (a 3-to-1 ratio).
- Over five years, the 17 FoEs outperformed the Good to Great companies 128 percent to 77 percent (a 1.7-to-1 ratio).
- Over three years, the 18 FoEs performed on par with the Good to Great companies: 73 percent to 75 percent.
Note that none of the Good to Great companies made our cut, though one (Gillette, which was acquired by Procter & Gamble) did come close. We also have a semantic disagreement with that book when it comes to defining “great.” To us, a great company is one that spreads joy and fulfillment and makes the world a better place because it exists, not simply a company that outperforms the market by a certain percentage over a certain period of time. By our criteria, then, a company such as Altria (formerly Philip Morris and one of the companies in Good to Great) cannot be considered “great” even though it may have performed handsomely for investors. With a broader, society-level accounting, Altria’s value is considerably diminished, perhaps even rendered negative.
Great companies sustain their superior performance over time for investors, but equally important in our view, for their employees, customers, suppliers, and society in general. We are confident that the companies you will read about in this book will stand the test of time. If you are looking for a meaningful and deeply satisfying career, take a look at the opportunities these companies offer. If you are a potential customer, compare their offerings to others. If you run a business, consider partnering with them. If you represent a community, try to attract them to your neighborhood. If you are a business professor, get this affirming message out to your students. We don’t think you will be disappointed.