The following is part of our week-long Rule Breaker series, where we Foolishly examine several companies and ask, "Is it a Rule Breaker?" Hey, even better, we'll answer the question for you.
I'm accustomed to breaking the rules. For example, when others were striking it rich in Silicon Valley in 1998, my wife and I up and left for the Rockies without first finding jobs. Sound crazy? Well, it was. But it also paid off huge, as Rule Breaking bets can. We own a house, we're financially independent, and we're building the family we want without making undue personal sacrifices. Rebellion is just part of our family DNA. And I mean that literally.
Last week, my wife gave birth to our third child, a boy. Others thought we were nuts to go this route. I understand why. Our oldest has serious food allergies and a chronic disease that prevents him from digesting protein. But he's an otherwise healthy kid -- a living, breathing Rule Breaker if ever there was one.
Look hard enough and you'll find plenty of companies that also sport defiant streaks. All this week we've been pondering the credentials of some of the market's more obvious rebels. And we've come to learn that there's more to Rule Breaking than mere rebellion. Being first is key. So is being innovative. And that makes me wonder whether the common wisdom here at Fool.com -- that search king Google (Nasdaq: GOOG ) is the reigning lord of Breakerdom -- isn't just wishful thinking.
A rebel with a cause
Certainly Google feels like a Breaker when you read the material available at its website. Consider the corporate mission, which is to "organize the world's information and make it universally accessible and useful." That's a lofty goal, to be sure. And it just oozes rebellion. Google will digitize, organize, and monetize as many avenues to information as it can. It has made billions doing so thus far.
Then there is the thumb Google founders Larry Page and Sergey Brin poked in the eye of Wall Street's big institutions by opting to bring its stock straight to the public via Dutch auction. Were there bumps in the process? Absolutely. An untimely interview with Playboy helped raise eyebrows at the SEC, for example. And a fair amount of negative publicity helped keep the opening price for Google's shares at $85, well below initial expectations for north of $100 per stub.
Yet Page and Brin continue to stubbornly defy Wall Street's conventions. Google refuses to give quarterly guidance on its financial results. And its prospectus from last summer's IPO includes a letter from the founders modeled as an "owner's manual" for shareholders. In it, Page writes specifically that Google's time horizon is three to five years for yielding profits from projects aimed at fueling growth. That approach, Page wrote, will demand a long-term outlook from owners. If you're thinking that sounds both Foolish and Breakerish, you're right.
But is Google really a Rule Breaker?
In a word: no. Go ahead, roll your eyes. I know you're demanding an explanation and I've got one. Ready? Here goes: Google has almost never been a first mover. Instead, it's proved to be one heck of a copycat. Think about it. What has Google done that's really original? Was it first with a search engine? Nope. How about paid search? Uh, no. Online email? Sorry, try again. Ironically, the best analogy for Google might be Microsoft (Nasdaq: MSFT ) , for it has embraced and extended innovations that others introduced.
Sure, Yahoo! (Nasdaq: YHOO ) commercialized Web searching. But it was Google's algorithms that made searching the Web simple. Enough so that Yahoo! gave it the ultimate endorsement: It adopted the technology. (And then promptly dropped it, once determining that Google would be a tough competitor.)
Overture, the pioneer of paid search that is now a part of Yahoo!, and Hotmail, the pioneer in free online email, haven't ceded to Google. But the Big G has moved in on each of them and, in so doing, expanded its Trump-sized digital real estate empire. Profits, too, have risen like a Manhattan skyscraper.
I'd like to buy a verb
But Google is far more than just a copycat. It has reformed an entire industry not by breaking the rules, but by establishing new benchmarks for practically everything it does. In that sense, Google is king. And that, Fools, makes it a Rule Maker. What's a Rule Maker? In an excerpt from his 1999 book Rule Breakers, Rule Makers, which he co-authored with his brother David, Motley Fool co-founder Tom Gardner says it best: "These are the heavyweights with broad smiles, wooden forearms, and their competitors' lunch money; they're the companies that you know darn well will be around in 10 years, probably inking masterpiece earnings reports while boxing the ears of any who would impede their growth."
Sound familiar? It should. But let's not stop there. Of all the various and sundry characteristics of a Rule Maker, Tom placed branding first. The thesis was that the most popular firm in an industry is most likely to sit atop the throne. There are, of course, dozens of ways to measure popularity. Some companies just ooze "cool," such as Abercrombie & Fitch. Others create a loyal following that identifies with the products loudly and proudly, such as the millions of Apple (Nasdaq: AAPL ) fanatics. And then there's the ultimate: when a name transforms into a verb. Let's have a show of hands: How many of you "Googled" something today? Of course you did. That's because "Googling" entered the vernacular as a synonym for Web searching well before the company came public last year. Think FindWhat.com (Nasdaq: FWHT ) will ever have that kind of cachet? How about former dot-com star AOL? Yeah, me neither.
In truth, Google is exactly the kind of firm we Rule Breakers are looking for, only we might have invested when it was a little less seasoned. I say seasoned because I'm uncomfortable saying younger. Google is, after all, only seven years old. But during that time it has set a land speed record for going from Breaker to Maker. That's why I'm confident that investing in Google now -- like Microsoft, Intel (Nasdaq: INTC ) , and Dell (Nasdaq: DELL ) in the mid-1990s -- will prove richly rewarding over the ensuing decade.
But what if you had taken the added risk of buying at the IPO, as an unconventional Rule Breaker investor might have? Today, less than a year later, you'd be sitting on more than double your initial investment. Would you have seen some ups and downs along the way? Undoubtedly. That's why we warn that Rule Breaker investing isn't for the faint of heart. Nor is it for the couch potato. But if you're willing to get engaged and take some risk (and maybe even make some big mistakes), you could find the next Microsoft. Or, even better, the next Google. Join the search today by taking a 30-day free trial to Motley Fool Rule Breakers.
For more rebellious Foolishness about our hunt for Rule Breakers, see:
- Find out how we search for Rule Breakers.
- Apple is leading the way again, a generation later. Can it last?
- Is that a pirate flag flying over DreamWorks' HQ?
- eBay may be the world's biggest flea market. Is it also a Rule Breaker?
- We wonder whether Dendreon is more than a one-trick pony.
- Think stem cells are the new new thing? We do too. Maybe even too new.
- Netflix knows what it means it be in-between.
- Is IBMbreaking the rules of nanotechnology?
Motley Fool contributorTim Beyersis betting Bradley Patrick Beyers will one day grow up to be a Rule Breaker. But he hopes he'll be breaking someone else's rules. Tim didn't own stock in any of the companies mentioned in this story at the time of publication. To see what stocks are in Tim's portfolio check out his Foolprofile. The Motley Fool has adisclosure policy.