Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 629

The DNA of long-term compounding machines

Investors are often trained to look for size as a proxy for safety. Blue chips, household names, and index leaders dominate portfolios not only because they feel familiar, but also because of herding bias – the psychological pull to follow the crowd rather than stand apart. But history shows that tomorrow’s champions are often built quietly, well before they attract mainstream attention.

Canva’s rise offers a case in point. Barely more than a decade old, the private design platform is now worth around $65 billion. It is more valuable than Telstra, Brambles, and Rio Tinto – companies that have taken over a century to build. While Canva is exceptional in scale, it highlights a broader trend: founder-led firms with aligned incentives and disciplined cultures will continue to reshape Australia’s corporate landscape.

Why incentives matter

The way leaders are rewarded has a direct impact on the way businesses grow. According to the Australian Council of Superannuation Investors, 91% of Australia’s top listed CEOs received a performance bonus last year, typically vesting over three years. This structure often drives short-term priorities.

Founders, in contrast, are rewarded only if their businesses thrive over decades. Their ownership stakes and reputations are tied to long-term outcomes. Their long-term motivation is reflected in bolder decision making, leaner organisational structures, and faster responses to change. For investors, understanding these differences is critical in assessing why some companies compound value more effectively than others.

Telltale signs of founder behaviour

Founder-led firms are not immune from challenges. Some stall, others remain niche, and a few will fail outright. But collectively they demonstrate a pattern of behaviours investors can analyse:

  • Capital discipline: prioritising sustainable margins and reinvestment over empire building.
  • Alignment: boards, executives, and shareholders cohesively building long-term value rather than chase personal gain.
  • Strategic patience: committing to opportunities that compound over decades, even when short-term sentiment resists.
  • Scalable structures: setting up organisation structures that ward off corporate bureaucracy and continue to proliferate the founder’s philosophy

These traits do not guarantee success, but they are observable markers that investors can use when evaluating businesses and management team’s decision-making.

Emerging examples

This mindset is visible across a range of Australian companies. Objective Corporation [ASX:OCL] in government software, Hansen Technologies [ASX:HSN] in specialised software products, and Macquarie Technology Group [ASX:MAQ] in cloud and data services have all grown under founder influence. Private firms such as Expert360 and Lakeba are building new models in talent platforms and applied technology. Even mature names like Technology One [ASX:TNE] retain founder DNA in their culture of customer focus and capital efficiency.


Source: Morningstar.com.au

These are not stock recommendations, but case studies of how founder structures can shape performance. For investors, the lesson is not just which names to watch, but what patterns to recognise when allocating capital.

The takeaway for investors

The next generation of wealth creation is unlikely to come from the obvious megacaps. It is more likely to emerge from founder influenced firms that combine scalable models with long-term alignment. By the time these companies appear in index products or attract heavy broker coverage, much of the edge is already gone.

Investors who want exposure to this trend need to build frameworks for identifying founder alignment early, before the crowd does. That means going beyond market capitalisation, looking at ownership structures, and assessing the decision-making culture that sits behind the numbers.

 

Lawrence Lam is the author of The Founder Effect (Wiley) and Managing Director of Lumenary Investment Management. He writes on leadership, markets, and the traits that define exceptional management. More at lawrencelam.org and lumenaryinvest.com. The material in this article is general information only and does not consider any individual’s investment objectives. Companies mentioned have been used for illustrative purposes only and do not represent any buy or sell recommendations.

 

  •   17 September 2025
  • 3
  •      
  •   

RELATED ARTICLES

Nvidia's CEO is selling. Here's why Aussie investors should care

Compare the pair: Expensive versus cheap

Lessons from the rise and fall of founder-led companies

banner

Most viewed in recent weeks

Want your loved ones to inherit your super? You can’t afford to skip this one step

One in five Australians die before retirement and most have not set up their super properly so their loved ones can benefit from all their hard work and savings. 

Indexation implications – key changes to 2026/27 super thresholds

Stay on top of the latest changes to superannuation rates and thresholds for 2026, including increases to transfer balance cap, concessional contributions cap, and non-concessional contributions cap.

Super is catching up, but ageing is a triple-threat

An ageing Australia is shifting the superannuation system’s focus from accumulation to the lifecycle of retirement. While these pressures have been anticipated for decades, they are now converging at scale and driving widespread industry change.

Has Australia wasted the last 30 years?

The 20 years after Peter Costello left Treasury have been deemed wasted...by Peter Costello. The missed opportunities for Australia began long before.  

The refinery problem: A different kind of energy crisis in 2026

The Strait of Hormuz closure due to US-Iran conflict severely disrupted global energy supply chains. While various emergency measures mitigated the crude impact, the refined product market faces unprecedented stress.

3 ways to defuse intergenerational anger

With the upcoming budget increasingly likely to include bold proposals to alter the tax code I’ve outlined three incremental steps with fewer unintended consequences.

Latest Updates

Investment strategies

War can’t be good, can it?

War brings immense human suffering and geopolitical chaos, but historically, equity markets have shown a certain detachment and resilience amid conflict, leading to increased profitability despite initial panic.

Property

Origins of the mislabeled capital gains tax ‘discount’

Debate over the CGT discount is intensifying amid concerns about intergenerational equity and housing affordability. This analysis shows that the 'discount' does not necessarily favor property investors.

Superannuation

Div 296 may mean your estate pays tax on assets your beneficiaries never receive

The new super tax, applying from 1 July, introduces more than just a higher rate on large balances. It brings into focus a misalignment between where wealth sits and where the tax on that wealth ultimately falls.

Investment strategies

There’s more to software than just code

AI-driven fears of collapsing software moats has triggered indiscriminate sell-offs. This has created mispricing opportunities as markets overreact to uncertainty and rising discount rates.

Economics

Europe: A new growth trajectory powered by reform and investment

Europe is undergoing a major transformation driven by security threats, US pressure, and a shift from austerity to growth. EU member states are taking proactive measures to enhance competitiveness and resilience.

Investment strategies

Orbital AI data centers prepare for launch

The new space race is driven by AI as data centers in space offer continuous solar power and reduced environmental impact. Orbital AI aims to speed data processing and ease Earth's resource strains.

Retirement

Little‑known government scheme can help retirees tap into $3 trillion of housing wealth

The Home Equity Access Scheme in Australia allows older homeowners to tap into their home equity for retirement income, yet remains underused due to lack of awareness and its perceived complexity.

Sponsors

Alliances

© 2026 Morningstar, Inc. All rights reserved.

Disclaimer
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. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. 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.