Apple no longer innovates. Look no further than its cash cow iPhone. Prior to the iPhone’s initial launch in January 2007, Motorola, Blackberry and Nokia ruled the mobile phone universe.
Today, rather than driving innovation, rather than striving to leapfrog the competition, Apple is content to play a feature/functionality cat and mouse game with Samsung, Google and upstarts such as OnePlus.
Heck, serial entrepreneur Jim Jannard, founder of Oakley (eyewear) and RED Cinema (mobile, cinematic high-definition cameras) will be first to market with a holographic phone this August/September when RED launches the RED Hydrogen One. Jannard has deep pockets, but his personal balance sheet of $2-3 Billion doesn’t begin to rival Apple’s $244 Billion cash war chest (including short and long-term marketable securities).
So what gives? Certainly Apple doesn’t have to put itself into financial dire straights in order to truly innovate. Apple’s corporate personality – and its lack of innovation – is related to the risk-averse personality of its non-founder CEO Tim Cook. This is consistent with our thesis that technology founder CEOs are better equipped to drive innovation than are hired CEOs. Technology founder CEOs embrace smart risk, push for perfection and don’t shy away from conflict in the pursuit of excellence. They are motivated to build, not to maintain, to extend market leadership positions, not run with the pack.
We created the CEORater Technology Founder CEO Index in 2017 to illustrate our strong belief that founder CEOs are better qualified to lead Technology companies than are “hired” CEOs/ professional managers. The CEORater Index remains undefeated through July 13th 2018.
The CEORater Technology Founder CEO Index returned 24.7% and 22.8% on a Weighted and Unweighted Return basis respectively (click here for detail) during the January 2nd 2018 – July 13th 2018 period.
We created the CEORater Technology Founder CEO Index in 2017 in large part to illustrate our strong belief that founder CEOs are better qualified to lead Technology companies than are “hired” CEOs/ professional managers. The CEORater Technology Founder CEO Index returned 13.0% and 10.5% on a Weighted and Unweighted Return basis respectively (click here for detail) during the January 2nd 2018…
Our Hypothesis: Founder CEOs Will Outperform Over the Long-Term
We believe that founder CEOs will generally outperform non-founder peer group CEOs as well as broader benchmarks over the long-term. We believe this to be true both in terms of stock market returns as well as operating performance as measured by traditional financial measures such as Cash ROIC, ROE, ROA and Economic Value Added.
We recently created the CEORater Technology Founder CEO Index in part to help test our hypothesis. Over time we plan to operationalize the index to where investors may use it as an investment vehicle (stay tuned).
Founder CEOs tend to take a long-term view of the companies they created (their children). Where hired CEOs focus on the current quarter and year, many founder CEOs want their respective companies to thrive in perpetuity.
Legacy Matters to Founder CEOs
It’s about legacy for founder CEOs:
It’s why Jeff Bezos (AMZN) thinks about 50 year increments as opposed to quarterly increments;
It’s why Reed Hastings (NFLX) pushed OTT, original content and international investment when many investors wanted a U.S.-focused DVD distribution company;
It’s why Bill Stone (SSNC) has built one of largest FinTech companies during a period when much of the Capital Markets industry has become commoditized.
We reviewed Total Stock Returns over the January 3rd 2017 – February 8th 2018 period:
We wanted to see how the CEORater Technology Founder CEO Index would fare if we were to market cap weight the components (review component details here). Therefore we compared our CEORater Index to the S&P 500 Information Technology Index (Ticker: S5INFT). We compared total stock returns for each for the period January 3rd 2017 – January 22nd 2018:
The market cap weighted total stock return for the CEORater Technology Founder CEO Index over the measured period was 63.72%.
These two most recent TEK2day posts are just the beginning of our analysis in an effort to test our hypothesis that Technology companies led by founder CEOs will in the aggregate outperform peer group companies led by non-founders.
We examined the stock performance of Technology companies led by founder CEOs vs. a broader Technology index where the CEOs of the component companies are not necessarily company founders. The CEORater Technology Founder CEO Index is an extract from our CEORater database. You may view the component companies here.
We reviewed the period from January 3rd 2017 through January 22nd 2018:
The unweighted total stock return for the CEORater Technology Founder CEO Index over the measured period was 46.71%.