[lmm]

> the claim that something by itself is enough has to explain why most companies are able to be destroyed, even though they have really good leadership

I think most of us are happy to believe that most companies simply have bad leadership, that leadership quality really is the axis on which Costco differs from others. If you want us to believe that other (destroyed) companies' leadership is just as good as Costco's, you need to make that case.

> Costco is protected by a very distinctive thing I call a "governance fortress." This fortress (and not merely their leadership) is the reason why they have been able to endure for forty years.

Can you sketch out your actual argument here (I think doing so would help rather than hinder your book sales, though of course that's a biased judgement)? What is this "governance fortress", and why should we believe that that, rather than the personal qualities of this one guy, is the reason they kept the hot dog?

[eries]

Sure, happy to. This is a very common source of confusion, so definitely worth clarifying. We agree that Costco's difference is due to its superior leadership. The question is why has the company been able to maintain this leadership advantage over multiple generations of managers, when other companies have not.

In the book, I give dozens of examples of companies that were well-lead and then suddenly destroyed, often by outside actors who found a way to profit from their destruction. This often happened at the governance layer, while leadership watched helplessly from the sidelines.

So why hasn't this happened to Costco? I don't think it's a coincidence that Costco has a variety of "bad governance" provisions, such as a super-majority (of all shares, not just votes) provision threshold for shareholder votes, as just one example. When activists, analysts and other Wall Street actors have tried over the years to force Costco to change, its leadership has been insulated from this pressure. I think that is a structural factor that is important.

Again, structure does not _cause_ ethos. It protects it. My argument in the book is you need both.

[PandaRider]

> ... Costco has a variety of "bad governance" provisions, such as a super-majority (of all shares, not just votes) provision threshold for shareholder votes

Do you believe there's a fundamental tradeoff between structural constraints (i.e. the 'democratic' model, where dispersed shareholders and markets have a voice) vs. insulated leadership (i.e. the 'benevolent dictator' model, where competent leaders are shielded from short-term shareholder pressure)?

Also, thank you for your quick replies.

Somewhat related: https://en.wikipedia.org/wiki/Benevolent_dictatorship

[fsloth]

"I think most of us are happy to believe that most companies simply have bad leadership"

I don't believe this for a second.

I don't know if this makes me the minority or not though!

It trivializes forces influencing large public companies.

Yes - there can be good and bad leadership - and bad leadership is just bad.

But good leadership can be totally helpless in a public company.

Not recognizing this is a huge gap.

The other forces that incluence a company:

- Board

- Shareholders (via board)

- Banks. Lots of companies have loans. The banks generally have the companies by the balls and can dictate many things when things go south - either due to leaderhip or just prevailing market winds

As an example of shareholder/board direct and rapid influence: an activist purchases shares. Installs board member. Causes rapid change in one or more aspects of business structure or strategy to support _their_ portfolio strategy (of course aligned with interests of other shareholders).

etc.

[mattcwilson]

I think you’re right, however, I think the person you’re replying to may also.

And is shorthanding “everyone without direct experience of the influential power of market forces” into “most of us.”

I think it’s fair to say that the fact that more or most people _don’t_ understand that and _do_ think it’s “all just leadership” explains much of the sentiment about capitalism generally.