Profitable companies are often “boring”
Profitable companies are often “boring”
In the history of business, there is perhaps no greater tale of fortune and glory won and lost than that of Seagram Company. When third-generation CEO Edgar Bronfman Jr. took over the international distilling conglomerate, he steered it toward show business, buying film and music properties with high price tags. Dreaming of creating a digital entertainment giant, he sold the whole thing to Vivendi, a French media company. But it was 2000, and when the tech bubble burst, Vivendi ditched Seagram’s assets. A storied Canadian company was gone. Worse still, its disastrous acquisition spree was funded by the sale of a 24% stake in DuPont. The materials firm was safe and well-performing. It was just, well, kind of boring. According to Good Spirits, a memoir by Bronfman’s father (and his predecessor as CEO), Bronfman Jr. used exactly that word —“boring”— to describe DuPont in the years before the sale. Today, the Seagram name is a cautionary tale, meanwhile 24% of DuPont is worth $13.9 billion.
Boring, it turns out, is good business—sometimes even great business. Entrepreneurs, investors and executives sometimes forget this. Entrepreneurs chase fads and trends. Investors, eager to be seen as cutting edge, fund questionable ventures that have a sheen of excitement to them. The media play a role here, too. We valorize startups that have yet to turn a profit, insisting they are doing something that will change the world. Meanwhile, low-profile, unglamorous companies rake in real money in obscurity.
So it is time for boring businesses to get their due. They have found larger meaning in their work. Crucially, these companies are passionate about what they are doing. Such firms are free of egos and not easily distracted by trends. In his popular book Good to Great, Jim Collins describes them as “hedgehog” companies, citing U.S. bank Wells Fargo as one example. Competitors used the era of deregulation to bulk up, creating international financial behemoths with varying degrees of success. But Wells Fargo took the bland approach and zeroed in on plain vanilla retail banking. The disciplined commitment to the most basic of financial services paid off. As of last year, Wells Fargo was the largest bank in the world by market cap.
Warren Buffett has a similar approach to investing. For most of his career, Buffett has shunned flashy technology stocks simply because it’s not a world he understands. “We will not go into businesses where technology which is way over my head is crucial to the investment decision,” he once wrote. Instead, Buffett favors simple things, such as Coca-Cola, furniture and razors. He’s also the proponent of the most boring investment strategy around: buy and hold.
In countless studies of what makes successful leaders, it is hard not to see dullness as an underlying theme. Research by Steven Kaplan at the Chicago Booth School of Business found successful CEOs are fixated on details, rarely cut corners and are content to work long hours. Another study, published in the Journal of Applied Psychology, found that conscientiousness was one of the biggest predictors of CEO success. Researchers from the National University of Singapore and Arizona State University looked specifically at humility in leaders and found that humble CEOs foster more effective, profitable teams.
Charisma can play a role in leadership, but not in the way you might assume. Good operational performance makes a CEO seem charismatic, found a study in the Academy of Management Journal. In other words, first attaining success boosts perceptions of charisma, not the other way around. Taken together, these studies suggest effective leaders are the exact opposite of the fun, visionary CEO that dominates popular culture.
Indeed, dullness in business abounds. And, in some ways, that’s how it should be. Everyone, from employees to investors to customers, benefits when companies are stable, consistent and predictable. So remember: Being boring is not an insult.
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