Actionable insights on equities, fixed-income, macros and personal finance Start 14-Days Free Trial
Actionable investing insights Get Free Trial

Business Wars: 6 Lessons from the most iconic Business duels in history


Business Wars” is an excellent podcast series by Wondery, chronicling some of the most intense and entertaining business rivalries in history. Coke vs Pepsi, Nike vs Adidas, Netflix vs Blockbuster, Hershey’s vs Mars. These are just some of the rivalries it covers.

This post is about some of the recurring themes I noticed as different business rivalries played out many decades apart. Any misinterpretations are, of course, mine

Business Wars: 6 Lessons from the most iconic Business duels in history

Theme 6: One fervent believer making bold decisions

Enduring successful businesses seem to all have founders who are fervent believers. Successful founders tend to be hard-charging eccentric a**holes who are blind to the possibility that their product or idea might be worthless. They believe completely in their mission and are more open to making ambitious, risky decisions. Phil Knight published a memo to his employees with Nike’s principles: “One: Our business is change. Two: We’re on offence, all the time.” This was after Nike sales had grown from $29M in 1973 to $850M in 1983.

Also, Founder-CEOs > Professional-CEOs. Most organisations that lost their edge and became mediocre did so after their founder-CEOs had left and had been replaced by their children or outside CEOs. Most didn’t make bold enough decisions and presided over gradually declining franchises.

A notable exception to the founder-CEO over the outside CEO is probably Howard Schultz, an early employee at Starbucks. When the founders refused to expand into speciality espresso bars, he quit and started his own coffee bar before being offered the opportunity to buy the Starbucks business outright. But given he pestered the founders for a job multiple times before they relented and appointed him as Manager of Retail Operations, Schultz was clearly more of a fervent believer in Starbucks than the founders.

Theme 5: Success is sometimes as simple as ‘Right Place, Right Time.’

Paypal was initially built as a mobile payment system to allow Palm Pilots to send and receive money. When Nokia Ventures agreed to fund $3M as an early investor, Max Levchin, the founder, stayed up for five days and nights straight to enable the functionality at the public press-covered event held at a diner. The investor beamed the funding cheque from his palm pilot to Peter Thiel’s device.

Mobile payments were where Paypal was to make waves. The web interface was almost an afterthought which then took off with the rise of online commerce with eBay. People exchanging goods online needed a convenient way to pay each other, and Paypal fit the bill perfectly. As eBay rose in popularity, Paypal adoption and usage exploded, but not the way the founders had imagined. Paypal let go of the mobile Palm Pilot payments idea not long after and doubled down on web payments.

In the early 1940s, Coke was the beverage market leader, but Pepsi was starting to make headway. But when World War II started and sugar was in short supply, Coke positioned itself as the drink of the armed forces. It offered to supply all overseas personnel with a bottle of Coke for 5 cents anywhere in the world. Senior military brass preferred having Coke available for their troops over alcohol. Coke was thus exempt from sugar rations as it was manufacturing for the military. Its continued availability through the years, where everything else was in short supply, firmly established Coke as the all-American drink in America and worldwide.

Hence the phrase “It’s better to be lucky than good.”

Theme 4: Stronger Brand mostly beats Better Product

Harley Davidson has one of the most loyal customer bases. What other customers tattoo their product names on their bodies? And yet, Harleys are notoriously clunky and unreliable. Their designs and build quality are objectively considered inferior to the Japanese competitors. They have different points and had large-scale quality issues on their bikes. And yet, a set of customers, albeit now a shrinking group, would never consider buying anything other than Harley.

Ask customers what words come to mind when they hear Volvo, and almost everyone says “Safety”. Yet, Volvo cars haven’t featured on top safe car lists for years.

When Coke announced “New Coke”, it received complaint letters, and its switchboard was clogged with people calling to express their anguish. This is even though “New Coke” had fared better than Coke on blind taste tests. The change itself was triggered by a popular Pepsi “Taste test challenge.” which showed four out of five people preferring Pepsi over Coke. New Coke was taken off the market months later, and “Old” Coke was reintroduced, getting so much fanfare that some industry observers suspect to this day that the failed launch of New Coke was a planned marketing masterstroke.

Theme 3: Can’t merge your way to greatness

Elon Musk’s merger with Paypal had a disastrous beginning with the organisation barely able to function as the two teams couldn’t stand each other. Musk was considered too autocratic and abrasive and was ousted as CEO by a Peter Thiel-led board while Musk was on vacation. It took a lot for Paypal to get back on track.

McDonnell Douglas’s merger with Boeing caused a massive change in culture at Boeing from being an engineering to a Sales organisation. That shift is considered responsible for quality issues on Boeing aircraft over the last decade, including the disastrous 737-Max. In this case, a significantly different plane in physical design and software was called a minor upgrade to an older model to save on pilot training costs and close sales faster.

The best businesses rarely are a product of multiple mergers and acquisitions. Instead, they tend to be done by panicking managements hoping to reverse declining fortunes. Success seems rare for organisations cobbled together by bolting on one acquisition after another.

Theme 2: The deepest moats get breached

Blackberry was the ubiquitous business tool of choice for its reliable email coverage and sturdy plastic keypad. When mobile networks across America were disrupted on 9/11, Blackberries continued delivering messages and emails flawlessly. The technological advantage RIM built, enabling them to route emails securely and without delay, was meant to be insurmountable, especially given how deeply embedded they were in their corporate clients’ IT infrastructure. A moat, if ever there was one.

Yet, the plastic keyboard went from “a thing of beauty” to an “eyesore”, and Blackberry went from market leader to irrelevant in just a few years after Apple launched the iPhone. Apple decimated not only the business segment but also the consumer segment where Nokia, with its sturdy phones at all price points, was ubiquitous.

Hard to imagine today that Hewlett Packard was at one time the superstar of the technology companies pack, consistently growing faster than the competition, that too with high margins. The list of companies that have looked unbeatable to later become obsolete, either spectacularly quickly like Blackberry or gradually, is surprisingly long.

Today, the iOS ecosystem looks impenetrable. The thing that breaks through might look very different from apps on a touch screen.

Theme 1: Surviving is half the battle

Google was a success long before it was even a business. It was spewing cash as a freshly minted company. That’s the exception. Overall, it seems persistence matters. Most businesses that count as out and out successes today have long and meandering histories filled with mediocrity, missteps and near-death experiences. They have had periods where they plodded along. Periods where they barely survived.

Nike took a long time to become a serious competitor to Adidas and Reebok. Pepsi was an afterthought to Coke for most of its history. Netflix has gone through multiple reinventions of its business models and will likely see a few more in the future. Anheuser-Busch, the maker of the leading beer brands, has undergone numerous transformations to become AB-Inbev, but it has survived.

Airbus was a clumsy coalition of government-backed European companies that withheld information about costs and struggled to adopt common standards, hardly a match for Boeing for the longest time. But Airbus eventually got its act together and started designing world-class aeroplanes that have since successfully countered Boeing’s domination.

The point is not that if you survive, you make it big, but that to make it big, you need to survive, sometimes barely, and that’s ok.

But…Invert, always invert

The problem with most “success recipes” is they are past lottery winners’ numbers.

What happened to work in a unique set of circumstances that will never be fully replicated, and even if they are, might play out differently based on the new players involved.

Looking back at the six themes above, we can come up with examples of “non-successes” that also did those things. For instance, no startup that went under after burning billions in cash lacked a founder with extraordinary belief. There are companies toiling away in obscurity that will never be the subject of a WSJ article no matter how long they survive.

To me, the critical insight was noticing how companies that seemed invincible at one time are merely a footnote today. Conversely, the companies that look dominant today have, at times, seemed distinctly ordinary, as they made mistakes and course corrected.

That is probably why there are successful growth investors as well as successful value investors.

Also why this quote sits as a reminder in my office of an enduring theme in business, investing and life.

Business Wars: 6 Lessons from the most iconic Business duels in history


Sample of some of the Business Wars series:

Netflix vs Blockbuster

How Blockbuster laughed the Netflix team out of the room when they came proposing being acquired for a paltry amount

eBay vs Paypal

How Pierre Omidyar hacked together an auction website after being disappointed on seeing a new IPO he wanted to invest in shoot up 50% within moments of listing. And how a Russian hacker openly challenged Max Levchin to stop fraud on Paypal.

Browser Wars

How Marc Andreesen takes on his alma mater who owns the Mosaic browser he coded, has the biggest IPO in history, and then takes on Microsoft


Like our content? Join Capitalmind Premium.

  • Equity, fixed income, macro and personal finance research
  • Model equity and fixed-income portfolios
  • Exclusive apps, tutorials, and member community
Subscribe Now Or start with a free-trial