Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 147

Investing in the best long-term founders

Amazon, Berkshire Hathaway, Google, Starbucks and until recently Apple have been some of the best-performing shares in the market. They were also all led by their founders. We believe their long-term view is an advantage in a market that usually thinks short term. Most founders have a view that spans decades. This allows them to take advantage of opportunities that cost in the short term but pay off big in the long term.

It’s the opposite approach and mindset of professional managers that sign on for caretaker roles for a few years. Founders tend to be more willing to disrupt their businesses. A major example has been Apple and Steve Jobs. He returned and released the iPod, a product that soon dominated the music market. At the time, investors questioned what Apple could do next. We all know what happened then as they disrupted themselves. Steve Jobs introduced the iPhone and then the iPad, two products no analysts predicted. It’s a difficult decision to cannibalise your best-selling product but it’s an easier decision if you’re thinking out decades. Unfortunately, Apple has changed since his passing but there are other founder-led firms with a long-term view.

Jeff Bezos and Amazon

Amazon started out as on online bookstore. Now it’s the most feared retailer in the world. Many retailers are getting ‘amazoned’, which means to watch helplessly as Amazon vacuums up the customers and profits of your traditional ‘bricks and mortar’ business. Amazon does not care about short-term quarterly profitability. They also created AWS, the leading cloud computing service. It’s hard to imagine that an online bookstore would become the leading retailer in e-commerce and cloud computing, two of the largest growth opportunities in the world.

A major reason for Amazon’s success is Jeff Bezos’s long-term customer focus. For $99 a year, customers access 20 million items with free two-day shipping. This Amazon Prime service increased its membership by 51% last year. I’m still waiting for it to be available in Australia. Investors initially thought he was crazy to offer free shipping but now it’s a key competitive advantage. Bezos knows that technology changes quickly so he focuses on what won’t change in the longer term, knowing no matter what happens customers will always prefer cheaper prices, more choices and free shipping. While both Prime and shipping are short-term costs, it creates longer-term customer loyalty with these customers spending 140% more than non-members of Prime.

Amazon’s cloud computing business was started 10 years ago and is now a $10 billion revenue business at a 28% operating margin (they disclosed sales and profitability last year for the first time.) It would have been hard to establish this business without the backing of an entrepreneurial founder.

Amazon is also taking the long-term view by moving into homes. Their dash buttons have been a big success (see picture below). Prime members can purchase brand-specific buttons such as for Tide detergent, attach them to their washing machine and press the Tide button every time they run low on detergent. If that’s not easy enough they have introduced voice ordering with Amazon Echo. If you run out of toothpaste while brushing your teeth, you can tell Echo to reorder without bothering to open your smartphone. What’s better than a store that sells everything, open 24/7? A voice-activated store that buys you everything you need without you having to remember it.

Larry Page and Google (now Alphabet)

Google is another famous founder-led company. Not many companies I follow have a category for investing in moon shots. Google takes the long-term view investing in driverless cars instead of just incremental search improvements. Google’s founder Larry Page is an inventor but also a great businessman. Some of their investments have worked out extremely well. They paid around $50 million for Android and the $US1.65 billion acquisition of YouTube in 2006 has been one of the best acquisitions of all time. When investing they don’t look at the profitability but at the long-term usefulness of the product. Products must pass his toothbrush test. They invest only in products that are as useful and meaningful as a toothbrush that you use twice a day. This approach means Google now has seven products with over a billion users.

Google spent $3.6 billion in moon shots last year, an increase of 84% on the prior year. A non-founder is unlikely to make these longer term investments. Now that it is called Alphabet (Google is its largest division) it will be interesting to see what comes next. It might seem strange for Google, an internet company, to invest in health care (longevity is a focus) but it makes more sense for a conglomerate like Alphabet. What potential employee wouldn’t be inspired to join a company that is willing to take on long-term problems?

Howard Schultz and Starbucks

Technology founders get the lion’s share of people’s attention but I am constantly amazed by what Howard Schultz, the founder of Starbucks, has built. Coffee is an extremely competitive market with low barriers to entry but there is still only one global coffee chain. Starbucks serves 85 million customers around the world every week at an average sale of $5. Most people buy from Starbucks not because of the coffee but because of the brand and how they treat their employees and customers. Howard not only helped create the business but came back and turned it around when Starbucks overextended its growth in 2008. He shut stores to retrain baristas, stopped reporting monthly sales and introduced technology to make ordering easier.

Taking the long-term view, Starbucks invests in its employees. It recently offered full college tuition coverage with a goal to graduating 25,000 employees by 2025. The technology investments were also a major hit to the bottom line but Starbucks now processes the most mobile payment transactions in America (21% of transactions) and it has introduced mobile ordering. No more waiting in line. Starbucks is also trialling delivery e-commerce based on a coffee app.

We believe that some of the best growth investments are found in founder-led firms. They have the advantage of longer term views and the ability to take advantage of opportunities that most companies couldn’t or wouldn’t invest in. In a quarterly focused world, it’s a major advantage.


Jason Sedawie is a Portfolio Manager at Decisive Asset Management, a global growth-focused fund. Disclosure: Decisive holds Amazon, Google and Starbucks. This article is for general purposes only and does not consider the specific needs of any individual.



How Barry Lambert beat the banks at their own game

Two companies well-positioned amid supply chain disruption

Is there an Uber or Amazon of wealth management?


Most viewed in recent weeks

How to enjoy your retirement

Amid thousands of comments, tips include developing interests to keep occupied, planning in advance to have enough money, staying connected with friends and communities ... should you defer retirement or just do it?

Results from our retirement experiences survey

Retirement is a good experience if you plan for it and manage your time, but freedom from money worries is key. Many retirees enjoy managing their money but SMSFs are not for everyone. Each retirement is different.

A tonic for turbulent times: my nine tips for investing

Investing is often portrayed as unapproachably complex. Can it be distilled into nine tips? An economist with 35 years of experience through numerous market cycles and events has given it a shot.

Rival standard for savings and incomes in retirement

A new standard argues the majority of Australians will never achieve the ASFA 'comfortable' level of retirement savings and it amounts to 'fearmongering' by vested interests. If comfortable is aspirational, so be it.

Dalio v Marks is common sense v uncommon sense

Billionaire fund manager standoff: Ray Dalio thinks investing is common sense and markets are simple, while Howard Marks says complex and convoluted 'second-level' thinking is needed for superior returns.

Fear is good if you are not part of the herd

If you feel fear when the market loses its head, you become part of the herd. Develop habits to embrace the fear. Identify the cause, decide if you need to take action and own the result without looking back. 

Latest Updates


The paradox of investment cycles

Now we're captivated by inflation and higher rates but only a year ago, investors were certain of the supremacy of US companies, the benign nature of inflation and the remoteness of tighter monetary policy.


Reporting Season will show cost control and pricing power

Companies have been slow to update guidance and we have yet to see the impact of inflation expectations in earnings and outlooks. Companies need to insulate costs from inflation while enjoying an uptick in revenue.


The early signals for August company earnings

Weaker share prices may have already discounted some bad news, but cost inflation is creating wide divergences inside and across sectors. Early results show some companies are strong enough to resist sector falls.


The compelling 20-year flight of SYD into private hands

In 2002, the share price of the company that became Sydney Airport (SYD) hit 80 cents from the $2 IPO price. After 20 years of astute investment driving revenue increases, it sold to private hands for $8.75 in 2022.

Investment strategies

Ethical investing responding to some short-term challenges

There are significant differences in the sector weightings of an ethical fund versus an index, and while this has caused some short-term headwinds recently, the tailwinds are expected to blow over the long term.

Investment strategies

If you are new to investing, avoid these 10 common mistakes

Many new investors make common mistakes while learning about markets. Losses are inevitable. Newbies should read more and develop a long-term focus while avoiding big mistakes and not aiming to be brilliant.

Investment strategies

RMBS today: rising rate-linked income with capital preservation

Lenders use Residential Mortgage-Backed Securities to finance mortgages and RMBS are available to retail investors through fund structures. They come with many layers of protection beyond movements in house prices. 



© 2022 Morningstar, Inc. All rights reserved.

The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. Any general advice or ‘regulated financial advice’ under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.