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11/08/2011

Book Review: Great by Choice


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Great-by-choiceJim Collins is considered one of the very top management experts, and has written several books that have gained a wide audience. His new book Great by Choice: Uncertainty, Chaos, and Luck—Why Some Thrive Despite Them AllGreat by Choice follows in this path. It is carefully researched, clearly presented, and studies a timely topic—why some companies are able to move ahead in times of turmoil and trouble, while others fail to do so.

The timeliness of this book is uncanny, considering the fact that the country in the midst of extraordinary financial crisis. In Great by Choice, the authors select 7 “10X” companies out of 20,400— Amgen, Biomet, Intel, Microsoft, Progressive Insurance, Southwest Airlines, and Stryker—that have thrived through chaotic times. Their definition of a “10X” company is one that beat their industry 10-fold. These subject companies were then compared to similar companies, termed, “comparison companies.” Simply put, one company wins and the other loses. Pairing the companies allowed for the positive qualities of the companies listed above to shine. Case in point, Southwest Airlines “won” against Pacific Airlines. Southwest, when faced with the same turmoil as Pacific (fuel prices, bankruptcy, etc.), demonstrated growth. The superior stock price performance of the successful companies are shown, one sign this is a practical book, not simply an academic project.

The book concludes that some myths on superior performance did not turn out to be true. These myths include the theory that successful companies are bold risk takers, that they are distinguished by innovation, move with great speed and undergo radical internal change. The book determines that the successful in troubled times have fanatic discipline, productive paranoia, and empyreal creativity.

Great By Choice will seem old fashioned by many in today's financial world, going back to an era when analysts and portfolio managers focused on quality of management. Today we study financial bubbles, and feel vulnerable to oncoming macro disasters. However, we may be in a time where quality of investments may be the important focus.

This book will be helpful to professionals not only in their analyses and investing, but also in the self-awareness part of career management. Specifically, professionals will be able to appraise current and prospective employers so they do not end up at “comparison company.”

–Bill Hayes

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