Editor's Page

Dec. 21, 2004
Betting your future on the past?

A friend of mine told me about an interesting conversation after a recent corporate board meeting. Amid the ruins of a good steak dinner and too much wine, the CEO posed the following question to his directors: If you:

  • had $100 million today, and
  • had to invest the money for the next 10 years, with no chance of retrieving it until August 2009, and
  • could invest only in a single equity,
what would it be? This particular group -- stewards of a manufacturing firm -- opted not for their own industry but for high tech. Most, in fact, said that they would invest their imaginary millions in Microsoft, reasoning that if Bill Gates could make $90 billion or so over the last decade, then he'd probably do even better in the next. After much discussion, the others voted their cash for Lucent Technologies, betting that the company's expertise in research and development would generate huge returns in the next century. I find these answers fascinating -- not as stock picks, but instead for what they say about what stock pickers believe is important for long-term growth. This group avoided Internet stocks altogether, finding them too risky. Yet I can't help wondering how many of these directors would have chosen Microsoft back in 1989 -- before its incredible decade of success. And while past performance comforts our risk-averse psyches, it's no guarantee of continued returns -- especially at the level of Microsoft's last decade. How many investments can maintain that kind of pace for 20-plus years? As for Lucent, the company didn't even exist a decade ago. And bright as its future may seem, the best performing investment of the next decade is likely a company that hasn't even been born yet. Where would you invest your $100 million?
* * *
This issue marks the fourth appearance of our honor roll of the world's 100 Best-Managed Companies. Along with the usual kudos -- to our 113 expert panelists; to the editors who served as judges; to Editorial Research Director David Drickhamer; and to Project Leader and Associate Editor Glenn Hasek -- let me add three notes of special thanks: First, our work was made immeasurably easier thanks to financial data provided by Waltham, Mass.-based Primark and its staff, including Renny Ponvert, vice president and managing director; Matt Menheneott, customer service manager-North America; Laddie J. Hunter, director, research center services; Scott Schwartz, manager, data acquisition; and Corey Downes, production manager. Second, independent data consultant Erik Fine made sure our interpretation of the data was consistent. Third, we could not have completed the exhaustive research necessary for this project without the tireless efforts of IW interns Douglas J. Edwards, Justin S. Rosenberg, and former intern Halley Stith. Let them (and me) know what you think. Send e-mail messages to John Brandt at [email protected]

Sponsored Recommendations

Voice your opinion!

To join the conversation, and become an exclusive member of IndustryWeek, create an account today!