Last week I told you that the DNA of the best brands could not be copied. On its own, it's a half-truth, and the other half is what can turn into an expensive lesson. One that I had to learn the hard way.
You might recall my mention of Apple, and how its story and iconic leader (Steve Jobs) gave it an unclonable fingerprint. The thing is, Nokia couldn't be 'copied' either. Neither could BlackBerry. Both owned a history no rival could claim (the very thing I praised in Apple), and yet it didn't save either of them.
Brand is a moat, but not a promise of corporate immortality.
There's a subtler trap too, and this one I walked straight into. In 2020, I bought Chegg (CHGG). To me it was a brand near enough synonymous among students (tutoring, worked examples... the whole kit and caboodle). Because of its prevalence I held on far longer than I probably should have.
What I'd actually found was a cheap solution masquerading as a brand. Students likely didn't love Chegg. They presumably loved the cheapest way to get an answer, and being the cheapest is the most fragile position there is, because someone could always undercut you.
Eventually someone did. ChatGPT arrived in 2022 as the cheapest, most abundant tutor the world had ever seen.
What really stings is that the story I'd built (strong brand, temporary wobble, etc.) was what blinded me to a category being rewritten in real time. I'd mistaken a structural decline for a cyclical dip, because the 'brand' story I wanted was more comfortable than what was actually panning out.
So this week is about the harder half of the job. Telling a real brand from the story you'd like to be true, and a hiccup from a permanent change. It's a lesson I paid for. Hopefully this one's on the house for you.
Sincerely,
Mitchell Lawler, Senior Investment Editor
