Skip to main content


As a student of corporate history, I gain an interesting perspective on the longevity of firms.  Very few firms in existence today were in existence 100 years ago.  One exception is IBM.  Warren Buffett has recently taken a large stake in IBM, which is testament to the fact that this firm is still very successful. 

Why has IBM been so successful?  There are at least three reasons.

1. It has innovated and responded to the needs of its customers – small, medium and large business enterprises.  It started out with punch card readers and counting machines, moved on to mainframes and PCs, and today it provides firms with business solutions, consulting and software. IBM was once the market leader and main innovator in the PC and laptop market, setting industry standards along the way. But it quickly realised that this was not going to be a profitable business in the long-run and that its customers (businesses) were going to need integrated software and consulting solutions to compete in an increasingly complex environment.  Today, it is known more for its business services and software solutions rather its computer hardware.

2. IBM has always placed great stress on having well-educated and highly-trained managers.  Good managers are essential if any business is to succeed.

3. I am a great believer in Armen Alchian’s argument that success is partially (or wholly) down to serendipity.  IBM tried something, and it worked because they just happened to have the right service or product at the right time for the right customer – the product or service was a success due to chance not managerial foresight.

Popular posts from this blog

Bitcoin Bubble?

According to Robert Shiller , speaking at Davos, Bitcoin is a perfect example of a bubble - story here . Shiller sees Bitcoin as a backwards step in the evolution of money.   George Selgin , a free banker, takes an opposing view - click here .  Although he doesn't believe that Bitcoin is money, he sees its development as a fascinating turn in the evolution of money. In particular, he lauds the fact that Bitcoin production is constrained and cannot be infinite. There is a short video below where Bitcoin explain how it works.

How Valuable Are Connections?

Daron Acemoglu, Simon Johnson, Amir Kermani, James Kwak and Todd Mitton have written a paper on whether firms connected to Timothy Geithner benefited from these connections. They do so by looking at how stocks of these firms reacted to the announcement that he was a nominee for Treasury Secretary in November 2008. They find that there were large abnormal returns for connected firms. Below is the paper's abstract and the full paper is available here . The announcement of Timothy Geithner as nominee for Treasury Secretary in November 2008 produced a cumulative abnormal return for financial firms with which he had a connection. This return was about 6% after the first full day of trading and about 12% after ten trading days. There were subsequently abnormal negative returns for connected firms when news broke that Geithner's confirmation might be derailed by tax issues. Excess returns for connected firms may reflect the perceived impact of relying on the advice of a small ne

Boom and Bust: A Global History of Financial Bubbles

Boom and Bust: A Global History of Financial Bubbles, co-authored with my colleague Will Quinn , is forthcoming in August. It is published by Cambridge University Press and is available for pre-order at Amazon , Barnes and Noble , Waterstones and Cambridge University Press .