Companies that have a ‘Soul’

In this blog post, we want to talk about the idea of investing in companies that have devoted their work to a stated purpose, founders with a mission, and projects that have a soul. One of the key elements when investing in a stock is to assess the management team. Typically, we would define a good management team as having a good background in their industry, a mission to accomplish something or to serve an economic need, and the ability to improve the financial performance of their company. There are a few companies that have performed extremely well over time, and we would attribute much of their successes to one thing – these companies had a purpose, they had a soul.

We would like to preface this article by mentioning that not all companies that have visionary leaders or have an ambitious purpose will perform well in the stock market, and it is not a hard and fast rule to the success of a company, but we believe it to be one of the cornerstones of a highly successful company.

Vitalik Buterin, co-founder of Ethereum, stated that ‘even a billion dollars of capital cannot compete with a project having a soul’. 

The Idea of Value Creation

Value creation can be roughly defined as the idea of adding significant value to the economy in a way that ignores short-term profit-oriented thinking and strives towards achieving success through a long-term vision and increasing the number of benefits to the greater population. In this sense, it is really the opposite of value extraction. We think that both investors and companies that look to achieve a value-creation philosophy can both refine their own beliefs and add value for themselves and others. This gets us to the ‘trickle-down' effect part of value creation, whereby if a company prioritizes adding value to the greater population rather than maximizing short-term profits, then the long-term benefits of this value creation can trickle-down to its investors and others. The impacts of this trickle-down effect can be much greater than the short-term benefits of a value extraction model.

Business Leaders and Their Visions

There are many inspiring business leaders over history that have had great success in their careers and have inspired the works of others, but we would like to focus on the works of Elon Musk, CEO of Tesla, Linda Hasenfratz, CEO of Linamar, Jeff Bezos, former CEO of Amazon, and Steve Jobs, former CEO of Apple.

Jeff Bezos

In its early days, Amazon was not profitable, and Jeff Bezos, the CEO at the time, did not focus on optimizing quarterly results and did not seek out profits immediately. Jeff Bezos was often asked if Amazon was a book company, a toy company, or a music company, and he would respond that Amazon was a customer-centric company. Jeff Bezos sought out to place the customer at the center of the universe, and every action that Amazon took began with the customer in mind and worked backward. We would suggest that a large part of Amazon’s success was due to its lack of focus on short-term profitability, and a substantial focus on the customer's wants and the long-term vision of consumer behaviour.

Linda Hasenfratz

Linda Hasenfratz, CEO of Linamar, is particularly inspiring because of her 100-year plan for the automotive manufacturing company. Linda Hasenfratz does not focus on quarter-over-quarter results, or results in five years from now, but rather has a sharp focus on important themes over the next 50 to 100 years and has begun to identify these as areas of opportunities for the future of Linamar. Linamar is traditionally an automotive manufacturing company, but Linda Hasenfratz has identified areas such as food and agriculture as important growing themes in the future, and as areas that Linamar can expand into. These are signs of a great leader and of a great visionary – someone who is not just seeking to expand the current operations of the company, but willing to look outside the box and into new areas that the company can carve out a niche. Linda Hasenfratz once said, “Pivoting for the sake of pivoting does not work. Don’t change your product, maybe change your strategy instead. Identify your advantages, listen to your data…understand what makes you, you”. 

Elon Musk

Elon Musk, CEO of Tesla and SpaceX, once stated that ‘when something is important enough, you do it, even if the odds are not in your favour’. Elon Musk is not motivated by money, and this is evident through his creation of a space company, which is arguably one, if not the most, capital-intensive business that exist today. Elon Musk is inspired by the vision of how he can shape and mold the future, and we would argue that his relentless ambitions to shift humanity towards renewable energy and an interplanetary species is what has made Tesla and SpaceX so successful today.

Steve Jobs

Steve Jobs, the former CEO of Apple, was a pioneer in the computer hardware and internet era, and he often sought out to derive meaning out of design and to add value to peoples’ lives. There was a very large following of Steve Jobs in Apple's early days, and it was largely due to his long-term vision and attention to user experience and design. Steve Jobs’ mission statement for Apple in 1980 was ‘to make a contribution to the world by making tools for the mind that advance humankind'.

Integration with Investing

The vision and works of these founders and CEOs have taught us that identifying and learning about companies that have a purpose and that seek to create value can often be the cornerstone of the long-term success of a company. While we don’t believe that investors should strictly seek out companies that have a good vision, we do believe that it is a significant contributing factor to the long-term success of a company. In times of extreme market volatility and high levels of economic uncertainty, we think it is important to look past short-term profit orientation and to remind ourselves of the long-term vision and value creation of the stock markets’ underlying companies. 

Research for today, invest for tomorrow.

Disclosure: Analysts of 5i Research responsible for this report have a financial or other interest in AAPL, AMZN, and TSLA.The i2i Fund does not have a financial or other interest in any of the securities mentioned.