For my second Syrios Book Review, I dive into Jim Collins' and Morten Hansen's Great by Choice, a follow up to their classic Good to Great. And in fact, I actually think this is a slightly better book.
Great by Choice looks for what it takes to thrive in a volatile market (kind of like the one we have now). Collins and Hansen look for companies that meet the following characteristics:
Overall, they come up with seven companies (Amgen, Biomet, Intel, Microsoft, Progressive Insurance and Southwest Airlines). They then look at seven comparison companies that were in the same industry and in similar situations but didn't make the leap.
Collins and Hansen then look at any differences they can find between the 10X companies and comparison companies and connecting threads between each 10X company to see what allowed these companies to do so well.
Of the many things they found, such as maintaining high cash reserves (something I have stressed for real estate investors), my favorite is the concept of 20-mile marching, which they got from Roald Amundsen, the first man to ever lead a team to the South Pole in 1911.
They then relate this to business.
Our natural inclination is to jump ahead too fast in the good times and hunker down to "wait out the storm" in the bad. The evidence shows this is the wrong approach. Consistent and steady is the right approach.
Collins and Hansen also show that luck is overrated (although not useless, of course). They look at good luck events and bad luck events for the 10X and comparison companies. For example, a bad luck event is as follows:
1989: The New England Journal of Medicine published an article that challenged the effectiveness of t-PA relative to more conservative strategies and alternative treatments. (pg. 158)
That was for Genetech, a comparison company to Amgen.
Overall, this is what Collins and Hansen found,
So it turns out the 10X companies actually had slightly less good luck and slightly more bad luck than the comparisons who fared poorly in a volatile economy.
Overall, I think Great by Choice is a fantastic book for business leaders and entrepreneurs, particularly in a volatile market. I give it four and a half stars.
"Every day is a new life to the wise man."
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