An Introduction to Investment Banking, M&A, Financial Modeling, Valuation + Business Best Practices by Chris Haroun

Author:Chris Haroun [Haroun, Chris]
Language: eng
Format: epub
Publisher: www.BusinessCareerConsulting.com
Published: 2016-01-16T07:00:00+00:00

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An Introduction to Investment Banking, M&A, Financial Modeling, Valuation + Business Best Practices

SUCCESS = APPLE'S SIMPLICITY + INTEL'S PARANOIA

Some of the best investments in history have had a combination of Apple’s simplicity and Intel’s paranoia.

In fact, both Apple and Intel had a healthy dose of paranoia and simplicity under CEOs Steve Jobs and Andy

Grove respectively, which is a winning combination. Other companies that have showed similar

characteristics include Microsoft, Nintendo and Netflix.

In 1997 Andy Grove wrote his masterpiece, 'Only the Paranoid Survive' which stipulated that a company

contains the seeds of its own destruction and that success, in fact, breeds complacency. Complacency then

tends to breed failure. As a result, companies must be paranoid in order to survive by either disrupting

their own markets or being overly paranoid of the competition. Steve Jobs was paranoid of employees

leaking products ahead of product launch dates and even had many secret code words for the same

product so that he would know who leaked a product name should the press write about it. Grove was

incredibly paranoid about the viability of his company’s business when it came to competing with the

Japanese, who were much more aggressive with pricing. Grove reacted accordingly and reinvented the

company in the processor market.

Steve Jobs’ genius was the simplicity of his products’ designs and marketing efforts. He was the

quintessential communicator and he was famous for his simple catch phrases. He believed that 'less is

more' and he was adamant about having only one physical method for entering information in hand held

devices, unlike the post Jobs products which are a bit more complex (including the Apple Watch which is

slightly confusing to use at first and the stylus on the new larger iPad). In fact, Jobs believed in product

portfolio simplicity by having relatively few products to sell. The number of Apple products that the

company sells increased from 12 four years ago prior to the passing of Mr. Jobs to 24 today. Under Andy

Grove, Intel created the brilliant yet simplistic ‘Intel Inside’ advertising campaign with the Intel jingle,

creating consumer brand loyalty for a chip that consumers never see! Simply brilliant.

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An Introduction to Investment Banking, M&A, Financial Modeling, Valuation + Business Best Practices

Microsoft also had a healthy dose of Apple’s simplicity and Intel’s paranoia under Bill Gates as he believed

that Microsoft was always one and a half years away from bankruptcy. Under Gates, Microsoft simplified

the process of using computers with the release of Windows. In the post Bill Gates Microsoft era, the

number of products has also grown materially leading a slightly more complex product portfolio.

Nintendo, similarly, has prided itself on very simple video game designs while being incredibly paranoid

since its founding in 1889. For many years Nintendo has had a multi-billion dollar cash balance that many

investors feel is unnecessary. In fact, Nintendo is so paranoid when it comes to its cash balance that the

company could actually operate at a $250mn annual deficit for more than 35 years if needed! I met the

CFO of Nintendo in Tokyo about 8 years ago and I asked him why they have such an enormous cash balance

while the Nintendo Wii was a huge success.

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