“If you don’t change, you are a dead duck.” Those are the words of Arthur Blank, co-founder with Bernie Marcus of The Home Depot. When Marcus and Blank started Home Depot in 1978, they did so amid great skepticism about their ability to succeed. Despite this, the founders were confident.
A major source of their confidence was the tendency of thriving businesses to rest on their admittedly very successful laurels. Why change what works, and which has proven dominant? Blank has the answer: “No matter what your business, you cannot stay still for any length of time, or your competitors will scratch and claw all over you.” Marcus and Blank would reinvent home improvement for the masses, and that’s exactly what they did.
The brilliant rise of The Home Depot is a useful jumping off point for yet another discussion of FTC Chair Lina Khan. Khan plainly disdains dominance in the commercial space, and she’s dangerously allowed her feelings to shape the FTC’s policies. In particular, Khan treats nearly every corporate acquisition in a hostile way.
The obvious source of Khan’s hostility is her belief that acquisitions enhance the long-term prowess of the presently dominant. To use but one example, it’s no reach to suggest that if Google were to offer to purchase DuckDuckGo, or if Meta were to express interest in Raya, Khan would block each acquisition. Her alleged reasoning would be that Google is already too powerful in search, and Meta too powerful in social networking. The reasoning would be flawed.
Commercial history is littered with once great companies that didn’t evolve. In other words, the stationary state in business is the path to obsolescence.
Applied to Khan’s reflexive hostility to mergers, it’s unlikely that investors would finance the hypotheticals involving Google and Meta, and they wouldn’t for the same reasons that Google and Meta would be highly unlikely to pursue DuckDuckGo and Raya. And they wouldn’t simply because in the real world of commerce, if you’re focused on the present you’re surely stuck in the past. Put another way, to the powers-that-be at Google and Meta, search and social networking are so very yesterday.
This is what must be kept in mind in light of Khan’s stance on M&A. Rare is the near-term successful business that stays that way by resting on its laurels, or by pursuing acquisitions that enhance what makes them presently great. Instead, mergers and acquisitions are intrepid (and frequently incorrect) speculations about what will meet and lead the needs of consumers and users in the future.
All of which speaks to how dangerous Khan’s M&A policy stance is. The simple truth is that the successful businesses of today are well aware of Marcus’s crucial observation that the “history of retailing is filled with once-great companies that disappeared off of the face of the earth.” Aware of this, they actively acquire other businesses big and small not because they’re dominant, but precisely because they’re not. Fully aware that the present is once again the past in commerce, the near-term excellent are feverishly searching for what’s ahead so that they can avoid the dismal fate of all too many once-great companies.
All of which explains why I’m a signer of a letter with numerous other policy types that’s asking Khan to revise her policies against mergers and acquisitions. She thinks she’s enhancing competition in the commercial space, but in making it impossible for businesses to discover the future through acquisition, Khan is making it more likely that they soon enough won’t be able to compete at all.