MBA2183 Must Read: How the Mighty Fall by Jim Collins

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Welcome to the Hundred Dollar MBA Show. No fluff, just the good stuff every single day with our daily 10 minute business lessons for the real world. I'm your host, your coach, your teacher Omar Zenholm. I'm also the co founder of Webinar Ninja, an independent software company I started with my co founder back in 2014 and today's episode is a must Read episode. On our Must Read Episodes I share with you a book that I've read that's influenced me Entrepreneur. I share with you its takeaways, its insights, and why you should read it too. Today's must Read is How the Mighty Fall by Jim Collins. How the Mighty Fall is about how so many companies can go from a massive success to a crushing failure. In the book, Jim Collins argues it has nothing to do with the economy, bad luck, or even the success itself, but instead it has everything to do with the leaders that steered the company in the wrong direction. I thought this book and this must read episode would be appropriate with the recent news of ftx, a massive cryptocurrency platform that just tanked this week, or at least the week I'm recording this, how does a company like that go from being a $16 billion company to zero? Now, even though this book, how the Mighty Fall, is not specifically about ftx, it tells a story of why it happened. Because as we know, history repeats itself. But the main reason why I wanted to share this book in this Must read episode is because the lessons in this book are applicable to all businesses. We're all susceptible to falling into the same traps that these companies that we kind of laugh at books like this. Help us to know what to look out for so that we can check ourselves before we wreck ourselves. Let's get into it let's get down to business.

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Edu Today's Must Read how the Mighty Fall is such an interesting book. And let me start with the first and biggest takeaway that I received from this book. And here it is. Every company, every founder is vulnerable to to a decline, no matter how great you are. Listen, if the Roman Empire, if the Ottoman Empire, with endless resources and manpower declined and is nowhere to be found today, then you are kidding yourself if you think that you are not vulnerable to being crushed as well. This chapter also reminded me of something that Jeff Bezos, the founder of Amazon, mentioned one time in an interview. He said that he believes that it's inevitable that Amazon will go out of business. And he says that their job as the leadership of Amazon is to try to delay that as long as possible. And he's saying this not because he thinks he's like incredibly proud and that he's going to tear the company down with how hubris he is. He says that because he believes that, hey, all things come to an end, they get reinvented, innovation happens, things change. So he's just hoping that, hey, that he stays humble and he stays hungry long enough to extend their run as long as possible. Now, what this chapter shows you is example after example of companies that were dominant in the market. I mean, they were just crushing it. And now they're almost a joke. One of the examples that I remember from the book is Nokia. Remember Nokia phones? When mobile phones were becoming popular in the late 90s, in the early 2000s, everybody had a Nokia. They were the market leader, head and shoulders. And then BlackBerry's came out and then the iPhone came out. And now it's very, very hard to see somebody holding a Nokia phone when everybody was holding one just 15 years ago. They went from being the market leader to only having 3% of the market share. Why? Well, in the book he explains that other companies like Samsung and Apple, they were innovating, they were researching. Nokia got complacent, they got cocky, they didn't stay hungry and they didn't stay cutting edge. They thought they arrived. Let's look at the inverse. Let's look At a company like Apple, for example, that has stood the test of time. One of the things that you'll notice about Apple is they actually cannibalize their own products, meaning they are their own competition. Before the competition, when they came out with the iPhone and the iPhone had a way for you to play music and buy music off the itunes store, they knew that this would hurt the sales of ipods, that they sell their own product. But they believe that, hey, it's better for us to cannibalize our own product with our own product with a new, improved product, something that's better than a competitor that comes and eats our lunch. Another great point in this book is about how successful companies, when they skyrocket, they get to a point where they become hubris. They become overconfident, cocky. After experiencing so much success, they become arrogant. They think that they're unbeatable. And because of that arrogance, they don't innovate. A great example of this is Blockbuster Video. Internet speeds are getting faster, so streaming video is becoming a possibility. They had a chance to buy Netflix but refused. And then when Netflix started to grow and expand and become mainstream and they tried to build their own streaming service, but it was too late, their arrogance caused their downfall. The next point of the book is really relevant, especially in today's big startup economy where a lot of funding is being thrown at these companies to grow as fast as possible. And Jim Collins says that companies lose their focus when they try to chase unattainable levels of growth. The problem is, is that it's a cycle. These tech companies are funded by VC firms that are throwing money at these companies so they can invest in crazy, crazy growth. Why? Because if they keep spending money on growth and attaining new customers, it makes the numbers look good. It looks like, hey, on paper, this company's growing rapidly. This makes the investors happy, which then makes the company be valued at a higher rate. And therefore they raise another round of funds and it goes on and on and on. The problem is, is that fabricated growth is not sustainable. Why? Because when you're trying to go a million miles per hour growing your company 10xing your company month over month, this means you need to grow your team, you need to grow your infrastructure. And when you're trying to grow that fast, mistakes happen. You make the wrong hires, you make the wrong decisions. Maybe these mistakes don't rear their heads immediately, but they do eventually. There's nothing wrong with growing your company. But just like if you're on the treadmill and you keep increasing the speed very rapidly, you might just fall on your face because you are not ready to run that fast. When you build a business and grow a business, there are a lot of lessons along the way. You have to learn to be sustainable, to be a business that's there for the long run. You can't skip steps, you can't skip lessons, and forced growth causes that to happen. And then these mistakes, these problems accumulate. Now Jim also talks about what are some of the signs that the decline is on its way. And one of the signs is blaming others. You'll find management blaming the investors, investors blaming management, the employees blaming their supervisors, the customers. The customers are left with the short end of the stick. They're the ones that suffer because you can't compete in the marketplace if you're not a harmonious team. Business is as hard as it is. You need everything going in your advantage, your way. When the blaming starts, that's when the fall begins. Another sign is when they're faced with big challenges, they take big risks, or they just hang them up altogether. We saw this with ftx because as you know, the bigger they are, the harder they fall. When you have a big, big company that there's a lot riding on it, a big mistake can make a big difference, can make a catastrophe out of the situation. That's why growing slowly is actually a very smart idea. Because if you have a misstep, if you have a mistake, it's not like a house of cards that just drops and crumbles. Everything you can course correct in time, before the problem compounds.

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Such a great book, how the Mighty Fall by Jim Collins. One of the pieces of advice he gives is that if you feel like you're falling down, if you feel like you're in decline in your business, don't panic, don't do something rash, stay calm, stay disciplined, and don't take massive risks. Consult with people, consult with advisors or mentors and make small changes and improvements that can accumulate over time and move you in the right direction. Basically, if you need to change things around in your business, don't just pull the E brake, right? Don't pull the handbrake in your car and cause an accident on the freeway. Metaphorically, of course, right? You want to slow down, you want to take the next Exit. You want to get your bearings. You want to move in the right direction, start changing your direction. This is especially important if your company has grown to a certain size because your decisions are going to affect a lot of people. Your customers, your team, yourself and your family. This book was incredibly insightful. I highly recommend you pick up how the Mighty Fall by Jim Collins. It's incredibly applicable even if you're a small business owner. Because what I have noticed in my own businesses is that I'll have seasons of rapid growth and things are just moving fast. Things are going well and you almost feel invincible. Those are the times you need to worry, okay, you need to get re centered. You need to be mindful of how you spend your money. Be mindful of how you make your decisions. Understand that this is a season and that this is great momentum, but use it to your advantage so that it will work for you. When things are not so great, make decisions that will allow you to weather storms in the future. Meaning invest in your business so that it's a long term business and not chasing the moment or chasing the the fast sale or the rapid growth. Don't get me wrong, you need growth. You need to make sure that you're making more money than you did last month. That's really something to admire and something to look after and something to really shoot for. But growth at all costs is a recipe for disaster. It can be a real painful one for you and can cost you your business. Thanks so much for listening to the 100 MBA show. If you love what you hear, hit subscribe, hit follow. On your favorite podcast app or on every single podcast, Apple Podcast, Stitcher Radio, Google Podcasts, Spotify, you name it. Hit subscribe, hit follow so you don't miss an episode. Before I go, I want to leave you with this. When you read a book like this, it might seem a little bit doom and gloom. You know, how the mighty fall. And you might think to yourself, oh, that's not me, that's other companies, other founders. That's when the learning stops. You need to consider that this could be you now or in the future. That's when the antennas go up and that's when you start paying attention and that's when you start remembering the lessons. We are human. We are susceptible to mistakes. I always say to myself when I see these companies totally get crushed and go down to zero, I say, you know, these founders, these leaders of these businesses, they're not idiots, right? They created an incredible company at some point, but they made a mistake or they've made mistakes along the way, mistakes that anybody can make. So stay humble, because not being humble is the reason why a lot of these companies fail. Thanks so much for listening and I'll check you in tomorrow's episode. I'll see you then. Take care.

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