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But sometimes companies go through this process and they were basically never a thing, they were able to expand and borrow and increase share price but they were never going to do their thing, either because it’s not a real thing or because they were never that good at it.
And here’s where I get windy: some of those companies will achieve an outsize value because the market wants to make money and so long as you’re not holding the shares when the entity reaches its takeoff speed and notably doesn’t fly, that’s still profit. You ride the curve.
And there seems to be a perverse incentive, sometimes, to take a good company that does one thing well and expand it into new areas in which it has no particular strength, because expansion is investable and profit, oddly, is not.
I’m *acutely* conscious of my own knowledge shortfall here, so please do intervene if you’re well-versed. I’m working the way I used to with philosophy: sometimes when you don’t understand a position, it’s because the position is broken.
In my day it was called line extension, and considered a dangerous but beguiling Heffalump trap. It speaks to the most self-deceiving part of a business - the idea that its customers love the brand, and will want more from it. Customers are not loyal, and they do not love brands.
Indeed.
As businesses grow they lose sight of what they actually do, what their market is. (Ratner)
New senior management takeover and want to make their mark. (Tim Cook)
The focus shifts from delivery to stock price. (GE)
And mediocrity, madness and aromatherapy follow.
Hard to say that Tim Cook’s been a failure at Apple - but your point is right that businesses often become more focused on themselves than on their customers when they grow past a certain size.
May 15, 2025 11:28I’m finding the company’s direction of travel unhelpful, to the point of asking myself if I want to move to another ecosystem.
Beware of letting go of nurse… but yes, I agree the focus on short term shareholder value has moved Apple away from making life nicer for customers (tiny online storage, can’t buy Kindle books through app, etc). Yet still no one I know who moved from Windows wants to go back.
He's been very successful with supply chain management and product margins.
New products however?
And the App Store debacle is grimly stupid
Agreed. I’d argue that “new products” are a close cousin to line extension. If Apple just focused on iterating its existing product ecosystem better than anyone else it would still be a success. App Store (and lousy free online storage) not putting customers first - problem with having shareholders.
