Entrepreneur & Investor.
Entrepreneur & Investor.

Issue #77: Nortel’s Meteoric Rise

NOTE: this was a past issue of my weekly newsletter, Timeless Gems. Join my free mailing list so you don’t miss out on future issues.

Today’s gem is this video on Nortel, the infamous Canadian telecom business that was once the largest company in Canada.

It’s a long video, but well worth the entire watch. The YouTuber has done some seriously top-notch research for this video (and the visuals are incredible).

At its peak, Nortel sported a $400bn market cap ($720bn in 2023 dollars) and made up 38% (!!) of the entire Toronto Stock Exchange. During its heyday, Nortel employed nearly 100,000 people, and about 1 in 3 PhD/masters grads in Canada went to work for Nortel. These stats are so insane, they sound made up – but I can assure you they are all 100% accurate.

Nortel is a great example of why studying history is beneficial for anyone in business/finance. Everything is cyclical, we learn lessons in one cycle and forget them in the next. Greed/fear causes amnesia and we repeat mistakes. In 1991 Buffett delivered a talk where he discussed AT&T in the 70s. He mentioned how, despite AT&T having a plethora of patents, MBAs, lucrative stock compensation, etc. they still managed to destroy capital. The resemblance of this situation to Nortel’s is uncanny.

The older (and more experienced) I get, the more I believe that there is little correlation between cutting-edge innovation and shareholder returns. Plenty of examples of companies developing life-changing technologies but permanently destroying shareholder capital in the process.