The Inevitables

 Back in the 1990's, investor Warren Buffet talked about 4 stocks in his investment portfolio that he called "the inevitables." He described their businesses as almost bullet proof and indicated that he would never sell any of them. Fast forward 30 years, and how things have changed! The four publicly traded inevitables were Capital Cities/ABC, Coca-Cola, Gillette and the Washington Post. Today, only Coca-Cola remains in Berkshire Hathway's portfolio and the other three are hardly at the top of their game. What happened?

Three of the companies were purchased and taken out of the public markets. Capital Cities/ABC was purchased by Disney. Gillette was purchased by Procter & Gamble. The Washington Post was purchased by Amazon CEO Jeff Bezos. What is surprising about this is that these Inevitables are struggling today. Capital Cities/ABC owned the ABC television network and ESPN. Both of these networks are struggling today, the victim of increased competition and changing consumer preferences. Gillette has seen increased competition in razor blades, deodorants, and facial care in general. Finally, today the Washington Post announced that it is laying off 1/3 of its staff. 

What happened to these companies? In short, the world changed. Mr. Buffet always liked the local newspaper business. It was basically a legal monopoly, as most cities had just one major newspaper, meaning there was very little competition for advertising dollars. Then, along came the Internet. The local newspaper business died out as people got their news from the Internet, which cratered subscriptions, which in turn cratered advertising revenue. These factors put the Washington Post on life support, and given the public's increasing distrust of the media, and today's announcement was not surprising. Just as an example, I use X as my newspaper, following a variety of journalists from all over the country. X is my sports page, it is my front page. And it is free. We take it for granted today, but 30 years ago, this was barely a dream.

Gillette pioneered the "razor blade model" of business, giving it a dominant market share in that business. The company hit on the idea that they could basically give away their razors and make money on the interchangeable blades, which consumers would have to buy over and over again. In addition, manufacturing razor blades was highly specialized, which also discouraged competition. But, in recent years, lower priced competitors have entered this space and Gillette has lost market share.

If I think about this too long, I am in a state of disbelief. Thirty years ago, the greatest stock market investor of all-time basically declared that these four companies were the very best investments in the world. Today, his beloved Washington Post is on life support. Capital Cities/ABC (now a part of Disney) is nothing to write home about. Gillette and Coca-Cola are just fair to middlin' companies. What happened? The world changed and these companies did not change with it. You can never rest on your laurels in this big, bad world. Finally, do not weep for Mr. Buffet. He made many millions on the sale of these companies, and he still owns his full stake in Coca-Cola.