Amazon regularly buys that number one spot, because it has the
money to do so. And Amazon can afford this at a scale that no one else
can match, as it has cheaper capital. The company is playing by a
different set of rules, and with a whole different deck of cards. As
J.Crew chairman Mickey Drexler points out, “It’s impossible to
compete with a big company that doesn’t want to make money.”
The strength of visionary capital begets competitive strength.
Why? Because you can more patiently nurture assets (invest) and
place more bets on more pockets of innovation (try crazy shit that just
might change the game). Of course, you ultimately have to show
shareholders tangible progress against your big vision. However, if
you’re able to make the jump to light speed, and the market crowns
you the innovator, the reward is an inflated valuation... and the self-
fulfilling prophecy (“we’re #1”) that comes from cheap capital. The
ultimate gift, in our digital age, is a CEO who has the storytelling talent
to capture the imagination of the markets while surrounding
themselves with people who can show incremental progress against
that vision each day.
3. Global Reach
The third factor in the T Algorithm is the ability to go global. To be a
truly large, meaningful company, you need a product that leaps
geographic boundaries and appeals to people on a global scale. It is
not just the bigger marketplace, but the diversity—not least the
prospect of countercyclical markets that can ride out a downturn
elsewhere in the world—that investors want, again rewarding you with
cheaper capital. If you have a product that appears to have global
reach, you’re accessing 7 billion consumers vs. 1.4 billion in China, or
300 million in the United States or the EU.
Again, it doesn’t require world domination, but rather proof that
your product or service is so “digital-ish” that the normal rules of
cultural friction do not apply. Uber’s revenue growth in countries
outside the United States has a chaser effect on the firm’s valuation
(its multiple of revenues), and the first dollar earned outside the
United States increased the value of the firm by billions. If you want to