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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.