value
Quality Persists
The rule
Truly great businesses tend to stay great far longer than the textbook "everything drops back to average" story predicts.
Where it flips
The danger is treating past greatness as a promise, and clinging to a business whose edge is actually crumbling. Technology shifts and fading brands do decay. The fix is to keep checking whether the special advantage still holds, not to assume it lasts forever.
Many people believe any company earning unusually high profit must soon be pulled back to the pack by rivals. Sometimes that is true. But a rare few keep earning high returns for a decade or more, because something real protects them: a loved brand, a network, or a cost edge rivals cannot copy. If you reflexively assume every star will fade, you will sell your best holdings far too early. The harder, more rewarding question is whether the thing making this business special is likely to last.
A worked example
Rohan holds a branded-consumer company that has earned high returns for eight years running. A friend keeps warning him it "must revert soon," but the brand's pricing power holds, and the stock quietly grows for another decade. [illustrative]
How to spot it
- ·high returns sustained across many years, not one
- ·a clear reason rivals cannot copy it
- ·resist the reflex that every winner must fade
Pulak Prasad · What I Learned About Investing from Darwin