Hey, they're aud Loots listeners. It's Tracy Alloway.
And Joe Wisenthal.
We are very excited to announce that Audlots is going to Washington That's right.
For the first time, we are going to do a live public odd Lots recording in our nation's capital. That's going to be March twelfth in Washington, DC at the Miracle Theater and guests will be announced in the coming days, but in the meantime you can find a ticket link at Bloomberg dot com slash odd.
Lots, Bloomberg Audio Studios, Podcasts, Radio News.
Hello and welcome to another episode of the Aught Thoughts podcast. I'm Tracy Alloway.
And I'm Joe Wisenthal.
Joe, you told me you read a fiction book last year, right, just one.
I read it, so I read too much nonfiction Like a lot of dudes. I think it's nonfiction is very bro coded. My goal for twenty twenty five was to read at least one novel, and I did it. I already satisfied my goal. It's not even the end of January yet, so back to reading random history and philosophy and all that stuff.
Very very ambitious. You're one fiction book can I make a suggestion for another.
Fiction book you should read, please.
So there's a book by Margaret Atwood called Orx and Craik, and it's sort of a sci fi thing, but I think about it quite a lot nowadays because she has this vision of society in the future, and in that society, companies are the most important part of it. It's not about countries anymore. It's all about what company you work for, and the companies are kind of the ones providing all the social services like healthcare and housing. Basically you're a
citizen of a company instead of a country. And I kind of think about it a lot because I feel like we're sort of moving in that direction where companies are becoming more powerful, they're becoming more interesting in many ways and more important to society than ever.
I'm looking it up right now, I hadn't heard of it. It came out in two thousand and three. Maybe at that time it was sort of seen as futuristic, but in twenty twenty five it does not even sound futuristic or controversial at all. And we could go on about what that means, but I just like basically accept the premise that that's true now twenty five.
Okay, great, so you have your second fiction book to read. But the reason I bring it up is because I think we should do more on these stories of companies in general. And so I am very pleased to say that we do, in fact have the perfect guests to discuss this. I'm very excited about this. I'm a fan of their podcast. Lots of people are fans of their podcast. We're going to be speaking with Ben Gilbert and David Rosenthal,
the co hosts of the Acquired podcast. So Ben and David, thank you so much for coming on all thoughts.
Thank you great to be here, Thanks for having us all right, may it was so good career.
Thank you.
Tracy and I were talking about like who should start this one, and I was like, Tracy, you do it, and it was much better than what.
I Well, thank you everyone. That's very nice. Ben and David maybe give us the uh, the elevator pitch for the podcast just before we begin.
Well.
Acquired is a ten year old podcast that started, like many company journeys in obscurity, with nobody listening, and slowly doubled year over year over year. Now I bet, I bet, uh Yeah, we're now fortunate to be one of the top few off of the number one tech podcast on
Apple and Spotify. Which is a little funny because we study these companies that are very often not tech companies now, but we look at companies like TSMC and Bars, the company behind M and M's ikea, Meta ermez Costco, and we really try to through conversation David and I tell the entire history of the company from founding to today, analyze it and really try to answer the question why did the company that we are studying work and work at such extreme scale?
And Tracy it's the reason we do it is literally just like you said, you know, the institutions that these companies, the biggest companies you know around the world have become are you know, they're quasi governmental at this point. You know, you can make an argument they're more important than government.
Somebody said to Ben a few months ago when when talking about acquired you know, in two hundred years, I don't know if people are going to know the name Joe Biden, but they're sure as hell going to know the name Mark Zuckerberg. We're like, WHOA, that's that's a crazy idea but might be true.
Yeah, I mean I can't. They're a bunch of random presidents from one hundred years ago that I certainly I couldn't name, or if I could name them, wouldn't know anything about them. Going back to Tracy's fantastic intro, you know, there's sort of two things I guess about companies, which is one is I guess the business model, the product that they sell. You know, you build something and then you try to sell it for more money that you
built it for. And then there is this sort of like the internal empire, and there's the culture, and there's just the way they work. And these are fundamentally sort of like different questions. Do you how do you think about like what a company is? Because I get they're really portrays it's intro. There are multiple ways to describe it, like what is a company that is?
You know, we typically spend four to six hours on an episode trying to answer that question.
You know.
It's what we've tended to find is the only pattern that tends to really exist across these greatest, biggest companies in the world is that they are each totally idiosyncratic in some really one or multiple really really really important to mentions. And so I think I would say, you know, for those incredibly successful, you know institutions of our time, what they are is they are something unique that no other institution, you know, company, corporate, governmental, otherwise can well.
TSMC that we just covered, we just interviewed the founder of Morris Chang in Taiwan, which is an incredible experience. You know, they make all the leading edge chips in the world, so you know, to the extent that computing and compute is important in our world, like all of it flows through TSMC. There is nobody else in the world that has the capability to make the incredibly powerful chips at the leading edge that they do.
I think our episodes tend to hinge on this question, in what way is this company singular? Because nothing gets to five hundred billion dollar trillion dollar scale without being the only one that can do X. And in TSMC's case, they're the only company that doesn't ever compete with their customers.
They're purely a foundry. They are not also a chip designer, and they're the only ones capable of doing what is the current technology generation two nanometer process the most sophisticated leading edge chips, and almost every big company you look at that has been successful over in a long period of time or reached outlier status is singular in some way like that.
And TSMC, it's like it's wild because of that, that is the only thing that matters there. They are in this you know, island nation of you know, depending on who you ask, disputed sovereignty. It's insane. There's something like six or seven percent of the country's GDP and like I think, like fifteen percent of the stock market you know, of the equity value of companies in the country. Yet it exists, and yet the world order, you know, at least thus far, has reorganized itself around it.
So the way I kind of think of your podcast, the analogy that I use is you're the business equivalent of Dan Carlin's hardcore history. Like these are long episodes where you are digging very deep into the profile of a particular company. But as you mentioned, you also do interviews or you weave interviews into your company profiles, and you just did that one with Morris Chang, the TSMC founder.
One of the things that really surprised me in that interview was he said he never fired people and never did performance reviews. What did you guys, think of.
That, it's really interesting. So David and I got to read an unauthorized translation of his Chinese only memoir to prepare, and he went into great length in the memoir explaining the philosophy, and the idea is that performance reviews are entirely separate from the idea of who should get laid off if there's a layoff. Performance reviews are specifically about coaching you on how to be a better employee for the company next year, so both the employee and the
company benefit if there is a layoff. There should be an entirely different way of determining where we need to trim to cut budget versus looking at people's performance reviews. And Morris goes so far as to believe that in his industry, with his business model, you should actually never
lay people off. And I think that comes from the fact that, a if you believe the economy or your industry is going to turn around within twelve or eighteen months, you know it's not actually worth it to lay people off, pay a whole bunch of severance, need to hire people back, need to retrain them. But the other big part is Moore's law marches on and so.
If you believe in Moore's law, you will always need more.
Yes, and you'll need more people, you'll need more machinery, you'll need more capacity. And the semiconductor industry is so cyclical that part of the way that he believes you can kind of avoid these huge gluts and then you know bubbles. Basically this boom and bust of the semiconductor industry is to sort of behave less in this whiplash like fashion where oh no, there's a little bit of an asset bubble and you know, stocks are in a draw down, so we need to lay off people.
Oh my god.
And I think he sort of blames layoff as a piece of the massive cyclicality of the industry.
And he had a really scarring experience around this back when he was at TI Texas Instruments. So, I mean, the crazy thing about Morris he didn't start TSMC un till he was fifty six years old. He's not Taiwanese's. He was born in China but then became an American citizen. He had a whole incredible career in the semiconductor industry in America. Long before starting TSMC, he ran TI's semiconductor group and before Intel and.
Really what you might chuckle about, like TI they make those calculators for high school students, right.
But before Intel and for the first like ten years of Intel's existence, they were the pipsqueak and TI was the semiconductor giant, and Morris ran the semiconductor division at TI. And at some point part of how they really lost the crown to Intel was the corporate you know, the CEO decided we need to have La off for whatever reason, you know, gyrations were going on in the stock market or whatever. They ended up as a result of that.
I don't know if they're directly laid off, but as a result, the Moss team mos metal oxide semi conductor some of the uh yeah, which was sort of the next generation of silicon. That team within TI left the
company started a new company called Moss Tech. And then anybody who knows anything about semi conductors knows, you know, Moss was like the key technology that Intel leveraged and like you know, really helped expand More's law and t I just totally missed out on that because they you know, parted ways with this really important group and like, who knows what's going to be really important in the future.
So this actually gets to something that is a very recurrent, odd lotch theme. And of course when I described what companies are sort of in the theoretical sense, you know, one thing I didn't mention is their preservation of collective knowledge and memory.
Right.
So TSMC may be the best in the world at producing chips, but there is no individual at TSMC that knows how to build chips, right, It's a collective process and there's no one person that stores it all in his head and just can walk across. And you see this in the failings of certain American manufacturers. They do have these layoffs and then they're like out of practice and they get rusty. And we talk about it a lot in the nuclear industry and the plan industry, et cetera.
Talk to us maybe TSMC, but also other examples of the company as this sort of knowledge preserver.
Totally. Well, TSMC is so vivid in our minds right now because we just were there and we toured the science park Kinschy Science Park in Taiwan, where not only TSMC, but the whole semiconductor ecosystem is located. Like media texts there, arms there, you know, Apple's there, like, you know, it's like a it's all all right there, right together. You are so incredibly correct that there is no one person.
There's not even a group of one thousand people who know how to make chips or know what TSMC is. You can't just like airlift, you could take all the buildings, you could take a bunch of people out of there, and like, you cannot recreate this. It is a whole ecosystem contained in one physical location.
I think it's fair to say it's the most complex process that humankind has created and the most complex product, like the science and technology in R and D that goes into etching a two nanimeter wafer for use in whether it's AI chips from Nvidia or you know, the chips in our MacBooks or iPhones from Apple. That is, you know, there's a joke in the semiconductor industry that this is a technology given to us by aliens. That's how sort of insane it is.
It is the closest thing to magic in the modern world.
Yes, I think that's exactly right, and so yeah, I think lots of indust have examples of what you're talking about, This idea that the culture of the company contains this sort of fabric of knowledge that not one person can have, but is blown out to its extreme in semiconductors.
So if we agree that companies are sort of collections of institutional knowledge, more broadly, I guess I'm wondering how much of a role does management play? Then, Like, are there instances that you've studied where management has made a real, real difference?
Yes, of laughing, Meta Facebook is like such an extreme example of this, Like, yes, Meta, And I'm sure Mark would be the first to say, is just like TSMC, a collection of all the people and knowledge and processes. And if Mark were to go start another company, he
couldn't recreate you know, Meta and Facebook. But there have been so many moments in the history of that company where a decision or a set of decisions made solely by Mark have completely changed its course and enabled it to become what is it, you know, before this most recent draw down one and a half trillion dollar market cap company.
I would say I draw a distinction between management and leadership. I think management tends to play a role in stabilizing companies and creating companies that are maybe one two standard deviations away from the mean. On the positive side. You know, how to create good companies, and leadership is how to
create great companies. These founder led companies Jensen and Mark Zuckerberg and Forrest Mahers and in the case of the Eminem's you know, Snickers Candy Corporation, and Bill Gates in the case of Microsoft, Dehak in the case of Visa. These are people that are visionary, that have an idea
of the way the world should work. John Collinson has this great quote that when you look around the world as a museum of passion projects, and I think it's the leadership of these like true visionaries that you know, when they first started, you didn't know for sure they
were going to be right or not. But in hindsight it was it was their leadership, their stubbornness, their stick toitiveness, and their insistence that their way of arranging the world around them was correct that ended up actually shaping the world and creating the biggest companies on Earth.
You know, I have a question since you started off by talking about performance reviews, and here's something that I think about some time, which is that let's say you have like a Mark Zuckerberg starting Facebook in his dorm room, or Larry and SERGEI and Google in their garage and they have this cool technology and they're growing, and that it's eventually they hit a point where someone comes to them and says, you know what, we really need to like write an HR manual, we really need to like
come up with all this stuff. And I think about myself, that would be the point where, like, you know what, I'm selling the company I hate. I hate dealing with.
Like Joe, I hate paperwork.
I don't want to like write a manual. I don't want to start having performance reviews. I don't want to like come up with all these like HR policies. This sounds like a headache. I'm curious, though, like, because you talk about these visionaries, how do they sort of accept the fact that as they get bigger, certain aspects of bureaucracy, which they probably find kind of annoying to are sort of must haves.
With scale hm, I would push back that it's must have. I think it is most common to have it. But I am of the opinion that you can accomplish the same set of tasks through process and through culture.
They all have, right, they all have rules, they all have like man, I mean, eventually, like they all have a HR department, and they have a specialization all that stuff.
One hundred x more than others like you. Look at Nvidia, and I honestly believe this is true from speaking with Jensen, from interviewing him, from speaking with a number of directs, from spending time at headquarters. It is a pretty unstructured environment with comparatively few people. I think, what's in Nvidia's head count, David something and.
I don't know, compared to the other tech giants.
Five to ten x less less than the other big tech companies, way less process.
Small, Yeah, according to twenty nine thousand people, twenty nine thousand, six hundred, All right, keep going, keep going, And.
What's Apple somewhere in one hundred thousand, Microsoft's like one hundred and sixty seventy thousand. I mean, it's a comparatively small headcount company. And I really do think you can accomplish tasks through incredibly strong culture or process, and usually it's the sum of both. But it's always interesting to see which companies are able to lean much more heavily on You would just never violate some tenet of our culture, and therefore we don't need rigid process around it.
And it's funny, you know, it's not you can kind of go one way or the other or somewhere in the spectrum. So with Jensen, and in Nvidia's case, clearly that's how he loves to operate. Forest Mars at the Bars company was the total opposite end of the spectrum.
You know.
Forrest was one of the most idiosyncratic entrepreneurs in American history. And because the company is so private and the family is so private, it's not as well known. We did an episode audit.
By the way, I said, Candy and Pet company worth probably over one hundred billion dollars, totally privately held.
Totally owned by the family one hundred percent. Forrest was so extreme on process, so he just instituted this set of rules that were completely crazy to the outside world at the time, but like we're how he wanted to organize things, and then everybody in the company just fell in line with the rules. So stuff like they're no office, there's no conference rooms. Well there are a few conference rooms, they don't have doors on them, they're made of glass.
Everybody open floor plan. This is in the nineteen thirties. Imagine this, like no executive offices, no perks.
A large bonus is determined if you are on time to meetings or not.
And everybody punched a time card, including him, the CEO.
By the way, Tracy, I can think of another privately owned company with open floor plans and all glass windowed offices.
Yeah, do you guys punch a time card? We don't.
We kind of do, yeah, kind of, kind of.
Some of this sounds from it. We don't get a bonus for showing up at a meeting time. Some of this sounds familiar anyway, keep going.
Sorry, And the way that he did this is you know, again these were radical, radical concepts for like you know, pre war and post war America and Europe at the time. Uh. He just said, like, we are all about performance here. We're all about the company's bottom line, and if the company performs well, you will make an sane amount of money.
And so his goal was, like, assuming we outperform our targets, everybody you know, on their salarly base should make three times what an average salary for their job would be elsewhere in the industry. And so like, you just set up those incentives and you set up those hard rules, and you're going to get people to follow them.
Wait, so I don't know that much about the Mars company other than you know, Eminem's are delicious and all of that. But when you're researching a privately held company, like that's what's the actual research process for you? Like how do you dig up information on a company where you know there aren't as many like public publicly available documents and financial statements.
We rely heavily on the or at least historically. We're now getting more primary source access, but historically on the writing of great journalists and so usually there is a canonical book of someone who got close, like in the case of Renaissance Technology, the ultra Secretive Asset Man out of uh Stocket, New York.
I think that's right, David.
There's a great book by Greg Zuckerman called The Man Who Solved the Market. Like pretty investigative journalism work, David, there's one here in the Yeah.
For Mars, there's a book written by Joel Glenn Brenner. She was a reporter at the Washington Post in the eighties and nineties. It's called Emperors of Chocolate. It's so good. She got access to Mars by calling them, calling headquarters every single day for a year and then finally they relented and gave her access. It's the only book ever written. It came out in like the late eighties early nineties, so we used that and then and then we talked to her. So we talked to her from Mars, We
talked to Greg for Rentech. We talked to these people, and we say like, okay, like you know, tell us about this, like what was the process of getting access? You know, what are you sure about? What are you not sure about? What do we really need to highlight what's happened since? And also is.
Even if a company, for example, when we did Envidia in early twenty twenty to which gosh, what a ride it's been since we covered the company. Back then there wasn't a book yet There's about to be two books, and so that requires sort of piecing together the story over a lot of different ways. David's favorite is finding industry talks that have been posted to YouTube, and so there's usually some mid level manager that is talking about
something like in a presentation. They all excited because they get to go and present to their peers. There's always gold in there, and I don't think it's like investment Alpha necessarily, and I'm not sure it's competitive information where the company's like, oh, we wish this wasn't presented, but it really does. If you're trying to understand the story of how the company became successful, really helps you find that.
And it's often the founders themselves too. I mean, gosh, in that Nvidia case, there was a talk that Jensen gave at against the State University on the setting of OSU and it was recorded I don't know, probably sometime in the nineties, early two thousands, and he's, you know, it's a totally different Gensen, it's a totally different company, and he's completely candid, straightforward talking about his journey. And you know, when we found it, it had like I
don't know, a couple hundreds views on YouTube. This stuff is out there.
There's an obsession among a lot of investors with the idea of founder led companies, and that's really exciting someone who's still there, who still has that original vision. But you know, obviously a lot of companies are just too old to still be founder led, or companies thrived through multiple CEOs. Regardless, what patterns have you realized is there a real difference with founder led companies or is this
sort of just a survivorship virus. Some founder led companies have done really well, and we remember all of those, some flame out and no one talks about them, et cetera. I'm curious what patterns or anti patterns you observe.
Okay, well, first of all, it's all survivorship bias. Everything we've talked about so far. Actually, I'm glad, yeah, I was gonna follow anyway.
Past performance is not an indicator of future success here.
We have not brought up a single company on here that A has failed or B is a middling success. No, ten billion dollar companies have sort of crossed our lips this conversation. We have decided on acquired. We love understanding what made the extreme outliers work so well. The great irony is that is not a playbook that you can repeat.
You know.
It's like holding that lottery ticket up in the air and professing to everyone. Like the great webcomic x XKCD. There's this amazing comic where he's holding the lottery ticket on a stage saying I just kept playing and if you keep playing too, you too can win the lottery. And I think it is you know, we should wave our arms around and say, if you run Mark Zuckerberg's exact decision process will not create case BRI. I mean that it's just you weren't there at that exact time and that exact place.
I always think about those Twitter threads where it's like, this is the daily routine of the CEO. He gets up at flour am, it takes a cold shower, and then meditates for half an hour, and then eats raw oats and then takes his kids to school, et cetera. You're not going to start a billion dollar company by following what you saw on a Twitter.
Humans are really really bad at distinguishing correlation from causation.
Yes, that's another now xCD comic, isn't it.
Yeah?
Oh yeah, x XKCD.
Oh sorry XKCD. Dyslexia strikes again.
It's not the easiest name to remember or pronounce. But I will say, though, I think if your goal is how do I start a trillion dollar company? How do I start one of the thirty forty to fifty most important, largest, most successful, durable companies on the planet. Founder lead companies have a much higher probability of being that, And as you point out, time has a lot to do with that. You look at Arimez. This is a you know what
is one hundred and fifty year old company. The original founder is not going to be the person running that, but close control is a key to the success of that business and so many others where they control their own destiny, they don't have to answer to the whims of shareholders ike as another great example. Mars is a great example. It might be a hired CEO in the case of Mars, or it might be a close family member in the case of Aermez. That David, you're common
on the sixth generation family member. But there is a flexibility to adhere to the ethos of what makes the company special. That either founder control, family control, or just sort of tight original shareholder control lets you do in a way that if you're publicly traded, eventually the specialness
gets beat out of you. You start believing that the consultants are right when you hire that and they say you should be like everyone else, or that the public equity investors that are trying to compare you against your comps and use the same numbers to compare you, but not really understand actually the way my business works you should analyze it in a completely different way, because that is what makes it special. You just you lose the ability to keep your search.
This amazing story from Ermez's history of Jean Louis Dumat who was I think the third either the third or fourth generation family member to run the company in the eighties, late seventies, early eighties, and Mez it kind of I don't want to say fallen on hard times, but they were much much smaller relative to their peers in the luxury industry, and Gucci was on the rise. You know, it was the tom four Days at Gucci and they
were everywhere, and they brought in some consultants. I don't know which firm, you know it recommended like, oh okay, I mes should basically throw in the talent, follow the Gucci Plight book of like machine production, high volume, lots of skews, be everywhere, license your brand, license your brand. Yeah,
things you could never imagine them as doing today. And Jean Leus just said like basically, no, an f you and we will never work with consultants ever again, and we're going to double down on hand crafted, you know, unique history, scarcity, and that's what they did and so they built up, you know, over the ensuing decades they have seven eight thousand artisans that hand make the majority
of their items in France. Like what other company is is, you know, a one hundred plus billion dollar company where everything is handmade by artisans.
This was a dead craft. They spent thirty years reviving the number of craft people, and.
They started schools, to trade schools to teach people to do this because it wasn't getting passed on, you know, through generations anymore, because all the other luxury companies had moved to machine production.
I think, when it comes down to it, the lesson is the most successful companies are created by leaning into the thing that makes them special, not by trying to be like everyone else.
I like the idea that in some alternate reality they listen to the consultants and I in fact have a burken bag, but I guess, I guess it wouldn't be as special, all right. So the other thing that people are obsessed with, in addition to founder led companies is the idea of disruption, right and disruption is certainly in the news right now, given the Deep Seek sell off
and stuff like that. And Joe and I recorded an interview with Howard Marx a little while ago, and one of the things he talks about is how there's no guarantee that the big or best companies of today are going to be around forever. So if you go back and look at some businesses that were big in the s and p. Five hundred, like back in the sixties, they aren't there anymore. So names like Kodak or Avon, remember the Avon lady and Simplicity pattern was in the
s and p. Five hundred. That's a company that made patterns so people could make their own clothes. Like it's kind of hard. Yeah, it's hard to imagine that now. But in the podcast you're discussing successful companies, But how do you view, I guess a company's longevity, Like what factors determine whether a business is sustainable for decades versus being just a flash in the pan.
It's funny.
Not only is this a great question, it's actually the most important question because if let's say something compounds at a fixed rate, and let's even say that rate is low, it's a five percent per year growth company, what actually matters is your growth in years twenty eight, twenty nine
and thirty on a thirty dollar horizon. And it's if whether or not you're able to grow ten percent this year in year two or three or four and wildly exceed your targets, that's completely irrelevant, versus can you survive till you're twenty eight and do five percent two percent, you know, like a modest growth at scale in case.
One hundred and nine, year one hundred and ninety, you know.
Yes, yes, and we've experienced this.
It acquired.
It's the craziest thing that you know, last year we grew from five hundred thousand listeners to a million listeners. Okay, it's one hundred percent growth. That is high growth were we a public company. It's kind of like middling pathetic growth if you are an early stage startup. And yet the fact that it happened in our tenth year is actually the thing that matters. I wouldn't have cared. I would take that over growing at eight, you know, eight
hundred percent in year two any day. And so i' you're getting at the core ethosis of like, what really matters when you're creating something very valuable in the world is the out years of the compounding. Now to actually answer the question. David, you look like you've been thinking about it.
I love what you did there, and then you're like, oh so the really hard thing that like if you actually knew, you would probably be the greatest.
I'm going to remember that for this podcast. Like Joe, Joe, you look like you have something to say.
Oh boy, oh boy. I think it's you know, every company without fail. I mean, look at this deep seat crisis right now is going to face crises on some you know, irregular pattern. You know, you don't know when they're going to come over X many years, but like, if you're in business long enough, you will face crises.
I mean, we have faced crises with our little two person company here, and then it's just you know, can you navigate that crisis and emerge on the same or better, you know, compounding trajectory that you were before.
And to your point earlier, David, that this okay, I'll try to really answer the question. Every company is special in some way, singular in some way, and the thing that gives any individual company its durability is different and
related to its specialness. So for Aermez, it's the uncompromising commitment to craftsmanship and the durability of their products and protecting their brand and making the hard choice over and over and never never making the easy choice, such that it is instilled in the psyche of generations of customers, like customers who pass things down and word of mouth that they have this this extreme premium luxury associated with their brand, that you know, if they made little trade
offs like, oh, let's juice the price. Let's raise burkeinbag prices fifty percent this year, or let's have a whole bunch of these get made in this machine. They kind of look saddlestitch, but isn't saddlestitch? These would trade off against their sort of durability over time. But that's not the way every company does it, Like Microsoft, for example,
does it through product bundling. The fact that they now have so many pretty good pieces of software that they can bundle together and sell in one enterprise agreement to a company and have a full solution versus needing to have the best individual widget to do the task for an given thing. This turned out, over time to be an incredibly durable business model that you know, really didn't exist before Steve Baumer sort of invented it in the late nineties.
I just have one last question. You know, obviously, if you're talking about the great and this is something that we talk a lot about on the show, But if you're talking about the great companies today, there are great companies in luxury, they are great companies in pet food and candy, but the vast majority of them are going to be big tech giant. Those are the biggest, most
successful companies in the world. And then to your recent point, what's really extraordinary to me and I think to investors is how big they still compound in the out years. So we're talking about companies that in many cases are more than forty years old and yet still growing at
just extraordinary clips given their size. Is this truly sort of a historical like if we looked at like, you know, if we looked at the really big companies thirty years ago or something, you know, you have like oil companies or General Electric, et cetera, And they were big and they were doing really well, but they had slowed down quite a bit by the time they had like gotten
to the whatever the equivalent is. And it seems like we're really in sort of uncharted territory by the speed with which these tech giants specifically could still grow at their level of maturity.
Yes, uh, this is the consequence of Moore's law. Moore's law and what we like to refer to as the Meritz corollary to Moore's law, which is Michael Meritz, who was a longtime partner at Sequoia, invested in Google, YEAHO and Striper among others, and a journalist before joining Suoya for us, All, yeah, the folks probably know, you know Moore's law, but in this case, you know, the relevant and interpretation of it is that the both demand and
supply for computing power you know writ large forgetting a specific definition of it, but like the ability to compute things will double every eighteen to twenty four months, and that spiritually has held true since gosh what nineteen sixty eight maybe, and so we're many many years down the compounding curve of that, and it is still relatively true. The Merits corollary to it is that as long as Moore's law holds, the world will find uses for that
increased compute power and demand for it. And so if you believe that the market size for computing technology writ large is going to grow, if you look at like the entire technology market. It's going to roughly grow at the same pace as Moore's law, which is exponential. That's the reason it's exponential. And it's sixty plus years into compounding at this point, and the world has never seen anything like it.
And so I think if you take big tech writ large, it probably is true that big tech will continue to get bigger than ever because the market cap of technology companies in some will continue to follow the Moors Law curve. However, I think it's a little bit disingenuous because every ten years or so we have a new entrant to big tech who is surfing the wave of the most recent.
New market created by more exactly.
Exactly, and so whether it was mainframes or mini computers, or the PC or the Internet or emotion or AI, like, each one of these brought one or two or three brand new entrants and we sort of liked that. We called them fang and then we called them Mamma, and now we call them the Magnificent Seven. But like, these are actually different companies and n Video was not a part of the conversation even three years ago.
Can you give us a scoop and maybe tell us what you're working on next.
Dave, related to our listener, is what was your specific hint? A different type of TikTok, not that.
Kind of TikTok. Yeah, we uh, we do little hints on our emails when we release episodes. We do a little riddle of what the next episode is going to be. Yes, a different type of TikTok is our next episode. But we've got some watch yeah guess yeah.
All right, Well, Ben and David, that was so much fun. Thank you so much for coming on Odd Lots and yeah, everyone go listen to Acquired and Odd Lots. Listen to both of us.
Oh, we should say, uh, way back four years ago when we first did our TSMC episode, there was a great Odd Lots that we both listened to that was yes with Tim to talk about t SMC and UH in particular, I think it was the relationship with Smith the Chinese competitor. Oh, thank you lots, Thank you so much for having us on and thanks for being a part of our research process.
That was so much fun. Thank you.
Joe.
That was really fun.
Well, I love talking to other podcasters.
I know it's very easy because you can kind of just let them talk.
I know, they're really getting. That was really fun. I like the point, the sort of acknowledgment that like none of them. It's fun to listen to these stories of amazing outliers, but none of their playbooks are going to work for you.
Probably right.
Well, here's where I almost think that looking at corporate failures like bad businesses is kind of more useful in some senses, because if you're trying to identify, you know, things like survivorship bias and other heuristics that we might all have in our heads, you kind of need to look at where people failed as well as where they succeeded. But anyway, I did actually learn a lot from that.
So the point about TSMC and idea of well, when you're in an extremely cyclical industry, maybe yeah, don't do layoffs. Maybe you don't want to lose a bunch of institutional skill and knowledge every like three or four years and then have to rebuild it.
This seems like something that has really plagued a lot of big American manufacturers, and I guess that you know, obviously TSMC is a publicly traded company, but it does seem like this idea of sort of being able to ignore outside investors and the importance of close held inness
within a company. And so obviously there's private companies like a Mars, But then there's companies like a lot of the American tech giants, where the founders have a different class of share structure that gives them like ten times more votes than the other public And it does seem like to some extent, for better or worse, probably for corporate performance. Often the better that the ability of the founders.
They know, we are really not going to do anything, and you're never going to vote us off the board or whatever. We are not going to change how we do things. In many cases that seems to be an advantage, an advantage.
Never go public, Never do performance reviews, Never write a employee manual I have. Yeah, I'm certainly that's true. All right, shall we leave it there.
Let's leave it there.
This has been another episode of the Oudlots podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway and.
I'm Jill Wisenthal. You can follow me at the Stalwart. Follow our guests Ben Gilbert He's at Gilbert and David Rosenthal He's at DJ Rosent. Follow our producers Kerman Rodriguez at Kerman armand dash O Bennett at Dashbot and kill Brooks at Cale Brooks. From our odd Loots content, go to Bloomberg dot com slash odd Lots. We have transcripts, a blog, and a newsletter, and you can chat about all of these topics twenty four to seven in our discord discord dot gg slash hoblines.
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