Think back to the titans of late 19th- and early 20th-century industry, and you are likely to think of empire builders: John D. Rockefeller, Andrew Carnegie, and John Pierpont (J. P.) Morgan. High on the list of America’s greatest tycoons during those years and afterward was Henrietta (Hetty) Howland Robinson Green.
Green built an immense fortune, billions of today’s dollars, by shrewd investing. She zeroed in on cash flow. She also kept her nerve, stayed ahead of rivals, and profited immensely during downturns and crises, such as the Great Panic of 1907. Yet she didn’t make her money by chasing bigness—at least not for bigness’s sake. “There is a price on everything I have,” she said. “When that price is offered, I sell.”
Core principles of disciplined value creation—knowing an asset’s intrinsic value, understanding a company’s competitive advantage, and not fearing to take bold steps—continue to hold true. Companies that allocate and continually reallocate capital to areas in which they hold a competitive advantage demonstrably outperform companies that stand still. Businesses that aren’t afraid to grow but understand that growth makes sense only when it doesn’t destroy value stand a better chance of creating more value for the long term. Their leaders are alert to broader business trends and strive to anticipate them. But the leaders don’t fall for flavors of the month, set about to build empires, or forget that companies that grow and earn returns above their cost of capital in a sustainable way create the most value.
That’s been proven across eras, from Green’s time to now. But then, fundamentals of strategy and finance have always been about the long term.
