Great by Choice: A Syrios Book Review

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:

• - The enterprise sustained truly spectacular results for an era of 15+ years relative to the general stock market and relative to its industry.
• - The enterprise achieved these results in a particularly turbulent environment, full of events that were uncontrollable, fast-moving, uncertain, and potentially harmful.
• - The enterprise began its rise to greatness from a position of vulnerability, being young and/or small at the start of its 10X journey. (pg. 5-6)

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.

• “Amundsen adhered to a regime of consistent progress, never going too far in good weather, careful to stay far away from the red line of exhaustion that could leave his team exposed, yet pressing ahead in nasty weather to stay on pace. Amundsen throttled back his well-tuned team to travel between 15 and 20 miles per day… When a member of Amundsen’s team suggested they could go faster, up to 25 miles a day, Amundsen said no.” (p. 61)

They then relate this to business.

• “The 20 Mile March is more than a philosophy. It’s about having concrete, clear, intelligent and rigorously pursued performance mechanisms that keep you on track. The 20 Mile March creates two types of self-imposed discomfort: (1) the discomfort of unwavering commitment to high performance in difficult conditions, and (2) the discomfort of holding back in good conditions.” (pg. 45)
  

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,

• 10 X Companies: 49 Good Luck Events
• - Comparison Companies: 56 Good Luck Events

• 10 X Companies: 65 Bad Luck Events
• Comparison Companies: 60 Bad Luck Events

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.

Previous Book Reviews
Mindset by Carol Dweck (Video)