While speaking with Randy Eisenman and Sunny Vanderbeck, the founders of Satori Capital, I found a new sense of respect for the idea of “time horizons.”
You see, over time, companies gravitate toward the expectations of its shareholders. If the financial shareholders of a company are looking to see a return on their investment within a couple of years, then there will be a lot of short-term pressure for that company to produce financial results.
But what often happens is the company’s management will begin making decisions based on finding short-term payoffs. And this is at the loss of long-term opportunities.
While the management may be in it for the long term, Randy and Sunny believe that shareholders will usually get their way and will exert pressure to match their goals – not management’s. Sunny warns, “Choose your investors carefully.”
Satori Capital looks at a company’s investor base to assess the business’ time horizon. And they only work with companies where they can achieve harmony between investor and management expectations.
A brilliant example of the power of this principle is New York Life. The “Company You Keep” has sustained for over 160 years. Several New York Life executives attended our recent Kai Method Innovation Seminar in New York City, and I got a chance to hear some of the reasons why New York Life has outlasted its peers and maintains a strong position today.
Their core advantage, I believe, has little to do with marketing strategy or investment principles. Though such factors are important, they are also factors that the competition can easily copy.
What makes New York Life stand out is its investor base. The company is not public. It is not even owned by investors. It is owned by its shareholders. These shareholders fund the company by purchasing life insurance, which they hope to never cash out.
This affords New York Life an uncommonly expansive time horizon. In times of trouble, when, for example, real estate prices are at a steep decline, New York Life can purchase land and buildings because they are comfortable holding them for 30 years.
Meanwhile, New York Life’s competitors are often worried about what their stock price will be the next day and whether investors will start abandoning them. A three-decade investment horizon is unthinkable.
I think this offers us a powerful lesson. Often, young companies are so strapped for cash that they quickly accept support from a variety of investors. But by choosing those investors carefully, a business can develop the long-term success that we all hope to achieve. Ask yourself the questions below to ensure that your success will depend on your business plan and not on unreasonable expectations.
1. Do we have the right investors?
2. Are our investors’ time horizons in harmony with our vision?