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Triple every five years for twenty
The compounding path
The path is compounding. Getting a little bit better every year adds up, and if the businesses triple in value every five years and keep doing it for twenty years, the result is a trillion-dollar company.
Avoiding mistakes
Holding that pace over decades means avoiding mistakes, retaining the best technology talent in the world, and delivering the best customer service across every service line. Long-term thinking and never being a seller are what make the compounding possible.
Going public
Going public is part of the ambitious path. Public markets are the deepest pools of capital, and holding company builders like Henry Singleton and John Malone showed that executing over a long period earns a currency that trades at a lower cost of capital. That currency makes even more ambitious deals possible.
Why do insurers anchor holding companies?
Insurers collect premiums before they pay claims, and the money in between is called float. A holding company can invest that float in other businesses while it waits for claims. Berkshire Hathaway began as a New England textile maker, and Warren Buffett took control of it in 1965. He bought the insurer National Indemnity in 1967 and built Berkshire around that float.
How did stock become an acquisition tool?
A company with a highly valued stock can pay for acquisitions with new shares instead of cash. John Malone ran Tele-Communications Inc. from 1973 and used deals to build it into the largest cable operator in the United States. AT&T bought the company in 1999 in a deal reported at about $48 billion.
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