From “It’s Always About The People” (December 2023): “Over time, I’ve come around to a different conclusion. Put simply, I think the quality of the business tends to bend towards the quality of the management team. As a CEO’s tenure lengthens, the combination of their long-term strategic vision and capital allocation decisions has a growing influence on the quality of what remains… Through that lens, the starting assumption for a long-term investor should be that most businesses are likely to be greatly impacted by the decision-making of a CEO who remains at the helm for an extended period.”
That post went into detail about the decisions made at Microsoft, primarily in the early 2010’s, that positioned the company to become a leader in the cloud computing business. As shown below, the payoff from successful execution against that strategic vision continues to take the business to astounding new heights: run rate revenues for Microsoft Cloud reached ~$135 billion in Q2 FY24 (+24% YoY), nearly 5x larger than at the end of FY18 (~$28 billion).
Read the remainder of the post at the TSOH Investment Research service