Here's What It Takes to Make a Great Company
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Hey there, OddLots listeners. It's Tracy Allaway and Jill Wiesenthal. We are very excited to announce that OddLots is going to Washington. That's right. For the first time, we are going to do a live public OddLots recording in our nation's capital. That's going to be March 12th in Washington, D.C. 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.com slash OddLots.

Bloomberg Audio Studios. Podcasts. Radio. News. Hello and welcome to another episode of the Odd Thoughts Podcast. I'm Traci Allaway. And I'm Joe Weisenthal. Joe, you told me you read a fiction book last year, right? Just one. I

I read it. So my, I read too much nonfiction, like a lot of dudes, I think it's nonfiction is very bro coded. My goal for 2025 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 ambitious, your one fiction book. Can I make a suggestion for another fiction book you should read? So there's a book by Margaret Atwood called Oryx and Crake. And it's sort of a sci-fi thing. But I think about it quite...

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 health care 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

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 2003. Maybe at that time it was sort of seen as futuristic.

But in 2025, 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 in 2025. OK, 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.

Tracy, I love that intro. What a career she has had. Oh, 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 would have done. Well, thank you, everyone. That's very nice. Ben and David, maybe give us the elevator pitch for the podcast just before we begin.

Well, Acquired is a 10-year-old podcast that started, like many company journeys, in obscurity with nobody listening and slowly doubled year over year over year. We can't rely on it. Exactly. I bet. I bet. Yeah.

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 Mars, the company behind M&M's, Ikea, Meta, Hermes, 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, 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 talking about acquired, you know, in 200 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. And we're like, whoa, that's that's a crazy idea, but might be true. Yeah.

Yeah, I mean, I can't. There are a bunch of random presidents from 100 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 are 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. How do you think about like what a company is? Because I get there really portrays its 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 growing.

idiosyncratic in some really one or multiple really, really, really important dimensions. 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 do.

Well, TSMC that we just covered. We just interviewed the founder, Morris Chang, in Taiwan, which was 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 chips.

I think our episodes tend to hinge on this question, in what way is this company singular? Because nothing gets to $500 billion, 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 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 15% 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. Yeah.

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 sort of 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 12 or 18 months, 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. Yeah. 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 stocks are in a drawdown. 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. Yeah. 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 until he was 56 years old. He's not Taiwanese. He's, he was born in China, but then became a American citizen. He had a whole incredible career in the semiconductor industry in America. Um,

long before starting TSMC, he ran TI's semiconductor group. And before Intel, and really for the first... Which you might chuckle about, like TI. TI, right, right. They make those calculators for high school students, right? But before Intel, and for the first like 10 years of Intel's existence, they were the pipsqueak and TI was the semiconductor giant and Morris ran the semiconductor division at TI. And...

And at some point, part of how they really lost the crown to Intel was that corporate, you know, the CEO decided we need to have a layoff 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,

Sulfate? I'll look it up while you talk.

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 Lots 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 plane industry etc talk to us maybe tsmc but also other examples of

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, Hinshu Science Park in Taiwan, where not only TSMC, but the whole semiconductor ecosystem is located. Like Mediatek's there, Arm's there, Apple's there. It's like all of- Cadence, Opsys, Qualcomm. It's all-

right there right together you are so incredibly correct that there is no one person there's not even a group of a thousand people who know how to make chips or know how to 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's a uh it is a whole ecosystem contained in one physical location and

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 and R&D that goes into etching a two nanometer 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 I think lots of industries 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.

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So if we agree that companies are sort of collections of institutional knowledge, more broadly, I guess I'm wondering, like, 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, I'm 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, you

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 drawdown, one and a half trillion dollar market cap company. I would say I draw a distinction between management and leadership. I think management is.

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 Mars in the case of the M&M's Snickers candy corporation, Bill Gates in the case of Microsoft, DeHawk in the case of Visa. These are people that are visionary, that have vision,

an idea of the way the world should work. John Collison has this great quote that when you look around, the world is 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-to-itiveness and their insistence that they're,

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 sometime, which is that let's say you have like a Mark Zuckerberg starting Facebook in his dorm room or Larry and Sergey and

Google in their garage and they have this cool technology and they're growing. And then 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. Yeah.

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 dealing. I hate dealing with like- Joe hates paperwork. 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 our sort of must haves with scale? 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. But they all have it, right? They all have rules. They all have, like, manuals. I mean, eventually, like, they all have an HR department and they have specialization, all that stuff. 100x 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...

pretty unstructured environment with comparatively few people I think what's Nvidia's headcount David something I don't know compared to the other tech giants five to ten X less than the other big tech companies way less process small yeah according to 29,000 people 29,600 all right keep going keep going and

And what's Apple? Somewhere in 100,000. Microsoft's like 160,000, 70,000. 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, uh,

You can kind of go one way or the other or somewhere in the spectrum. So with Jensen and NVIDIA's case, clearly that's how he loves to operate. Forrest Mars and the Mars company was the total opposite end of the spectrum. 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 a

episode. By the way, it's a candy and pet company worth probably over $100 billion. Totally privately held. Totally owned by the family. 100%. 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 were how he wanted to organize things. And then

Everybody in the company just fell in line with the rules. So stuff like there are no offices, 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 1930s. Imagine this, like no executive offices, no perks.

A large bonus is determined if you are on time to meetings or not. 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, me too. Do you guys punch a time card? We don't. Oh, no.

Oh, we kind of do. Yeah, kind of. Kind of. Some of this sounds familiar. We don't get a bonus for showing up at a meeting on time. But some of this sounds familiar. Anyway, keep going. Sorry. And the way that he did this is, again, these were radical, radical concepts for like, you know,

pre-war and post-war America and Europe at the time. 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 insane amount of money. And so his goal was like,

Assuming we outperform our targets, everybody on their salary base should make three times what an average salary for their job would be elsewhere in the industry. And so 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, M&Ms are delicious and all of that. But when you're researching a privately held company like that, 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 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 manager out of Setauket, New York. I think that's right, David. Yeah, on Long Island. 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. Yeah, for Mars, there's a book written by Joel Glenn Brenner. She was a reporter at the Washington Post in the 80s and 90s. It's called Emperors of Chocolate. It's so good. She got access to Mars by 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 80s, early 90s. So we used that and then we talked to her. So we talked to her for Mars. We talked to Greg for Rent Tech. We talked to these people and we say like, okay, tell us about this. What was the process of getting access? What are you sure about? What are you not sure about? What do we really need to highlight? What's happened since? And David's favorite technique is...

Even if a company, for example, when we did NVIDIA in early 2022, 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 things

something like in a presentation, they get 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 Oregon State University on the steps of OSU. And it was recorded, I don't know, probably sometime in the 90s, early 2000s. And it's a totally different Jensen. It's a totally different company. And he's completely candid, straightforward, talking about his journey. And when we found it, it had like, I don't know, a couple hundred views on YouTube. This stuff is out there. ♪

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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 obviously, a lot of companies are just too old to still be founder-led, or companies thrive 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 bias? 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. I'm glad you're saying this because that is the major caveat here. Yeah, yeah, I was going to follow up. 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 $10 billion 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. It's like holding that lottery ticket up in the air and professing to everyone like the great web comment XKCD. There's this amazing comic where he's holding the lottery ticket on a stage saying, I'm

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, you will not create Facebook. I mean, 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 this CEO. He gets up at 4 a.m. and takes a cold shower and then meditates for half an hour and then eats raw oats and then takes his kids to school, etc. It's like, man, 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. XKCD. 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 30, 40, 50 most important, largest, most successful, durable companies on the planet? Founder-led companies have a much higher probability of being that. And it

as you point out, time has a lot to do with that. You look at Hermes, this is a, you know, what is it? 150 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, uh,

They control their own destiny. They don't have to answer to the whims of shareholders. IKEA is 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 Hermes. David, your comment 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

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 them 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 are

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, to keep your specials. There's this amazing story from, uh, Hermes's history of, uh, uh, Jean-Louis Dumas, who was, um, I think the third, either the third or fourth generation, uh, uh, family member to, to run the company. Um, in the eighties, uh, late, late seventies, early eighties, Hermes had 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. It was the Tom Ford days at Gucci and they were everywhere. And they brought in some consultants. I don't know which firm, you know, and recommended like, oh, OK, Hermes should basically...

throw in the towel and follow the Gucci playbook of like machine production, high volume, lots of SKUs, be everywhere. License your brand. License your brand. Yeah. Things you could never imagine Hermes doing today. And Jean-Louis just said like,

basically no and F you and we will never work with consultants ever again. And we're going to double down on handcrafted, uh, 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, 8,000 artisans that hand make the majority of their items in France and

Like what other company is, you know, a hundred plus billion dollar company where everything is handmade by artisans? This was a dead craft. They spent 30 years reviving the number of craft people in the world trained to do this. They started schools, 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 Birkin bag. But I guess it wouldn't be as special. All right. It would not be as special. 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 Marks 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&P 500, like back in the 60s, they aren't there anymore. So names like Kodak or Avon, remember the Avon lady? Oh, yeah. Simplicity Pattern was in the S&P 500. 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 industry,

You're discussing successful companies, but how do you view, I guess, a company's longevity? 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 5% per year growth company.

What actually matters is your growth in years 28, 29, and 30 on a 30-year horizon. How long are you going to compound for? And whether or not you're able to grow 10% 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 28 and do 5%, 2%, you know, like modest growth at scale. Or in this case, a hundred and nine, you're 190, you know? Yes. Yes. And we've experienced this at Acquired. It's the craziest thing that, you know, last year we grew from 500,000 listeners to a million listeners. Okay. It's a 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, and

Yet, the fact that it happened in our 10th year is actually the thing that matters. I wouldn't have cared. I would take that over growing at 800% in year two,

any day. And so you're getting at the core ethos 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, man. You did the setup and then you're like, oh, so the really hard thing that like, if you actually knew, you would probably be the greatest investor. I'm going to remember that for this podcast. You're like, Joe, Joe, you look like you have something to say.

Oh, boy. Oh, boy. I think it's every company without fail. I mean, look at this deep sea crisis right now is going to face crises on some irregular pattern. You don't know when they're going to come ever X many years. But 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, can you navigate that crisis?

crisis and emerge on the same or better compounding trajectory that you were before. And to your point earlier, David, 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 Hermes, 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, uh,

this extreme premium luxury associated with their brand that, you know, if they made little trade-offs like, ooh, let's juice the price, let's raise Birkenbag prices 50% this year, or, oh, let's have a whole bunch of these get made in this machine that kind of looks saddle-stitched but isn't saddle-stitched. These would trade off against their brand

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 any given thing. This turned out over time

to be an incredibly durable business model that really didn't exist before Steve Ballmer sort of invented it in the late 90s. I

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, there are great companies in pet food, in candy, but the vast majority of them are going to be big tech giants.

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 40 years old.

and yet still growing at just extraordinary clips given their size. Is this truly sort of ahistorical? Like if we looked at like, you know, if we looked at the really big companies 30 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 can 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 Moritz corollary to Moore's law, which is Michael Moritz, who was a longtime partner at Sequoia, invested in Google, Yahoo, and Stripe, among others, and a journalist before joining Sequoia. Hope for us all. Yeah, hope for us all. The folks probably know, you know, Moore's law, but in this case, you know, the relevant interpretation of it is that the brain

Both demand and supply for computing power, you know, writ large, forget any specific definition of it, but like the ability to compute things will double every 18 to 24 months. And that spiritually has held true since, gosh, what, 1968, maybe? And so we're many, many years down the compounding curve of that. And it is still relatively true.

The Moritz 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 60 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 Moore's law curve. However, I think it's a little bit disingenuous because I, uh,

every 10 years or so, we have a new entrant to big tech who is surfing the wave of the most recent new market created by exactly, exactly. And so whether it was mainframes or mini computers or the PC or the internet or mobile or AI, like each one of these brought one or two or three brand new entrants. And we sort of liked that. We called him Fang and then we called a mama. Now we call him the magnificent seven, but like, these are actually different companies that,

And NVIDIA 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?

David hinted to our listeners. What was your specific hint? A different type of TikTok. Not that kind of TikTok. Yeah, 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 big plans. A watch comes in the mail. It's Rolex. Yeah, Rolex. That's my guess. Yeah. Awesome.

All right. Well, Ben and David, that was so much fun. Thank you so much for coming on Oddlots. And yeah, everyone go listen to Acquired and Oddlots. Listen to both of us. Oh, we should say way back four years ago when we first did our TSMC episode, there was a great Oddlots that we both listened to.

Yeah, with Tim Philbin. Yes, with Tim to talk about TSMC. And in particular, I think it was the relationship with SMIC, the Chinese competitor. Oh, thank you. 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 good that was really fun i like the point the sort of acknowledgement that like none of it's fun to listen to these stories of amazing outliers but none of their playbooks are gonna work for you probably right well here's where i i almost think that looking at

Yeah.

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 the 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. Yeah.

And I guess that, you know, obviously TSMC is a publicly traded company, but it does seem like this idea of,

of sort of being able to ignore outside investors and the importance of close heldness 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 10 times more votes than the other public. And

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 are never going to vote us off the board or whatever. We're not going to change how we do things. In many cases, that seems to be an advantage. Never go public, never do performance reviews, never write an employee manual.

They all have employee manuals. I'm certain they do. That's true. All right. Shall we leave it there? Let's leave it there. This has been another episode of the All Thoughts Podcast. I'm Traci Allaway. You can follow me at Traci Allaway. And I'm Joe Weisenthal. 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, Kermen Rodriguez at Kermen Arman. Dashiell Bennett at Dashbot and Cale Brooks at Cale Brooks.

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