Making a Fizzy Splash – It Happened Today, January 15, 2017

You know all those internet-era stories about if only I’d put a few hundred bucks into that garage venture by those two awkward jokers I used to know, I’d be a billionaire today? The problem being to figure out which jokers are actually Steve Jobs, Bill Gates or Mark Zuckerberg. Well, would you have gambled on the Pemberton Medical Company back in 1889?

If not, maybe stick to broad-based mutual funds. If so, you’re arguably just plain lucky. Because, you see, the PMC incorporated in Atlanta on January 15 of 1889 went on to become the Coca-Cola company. And obviously if a morphine-addicted Civil War veteran reacts to local Prohibition by removing the alcohol from his mixture of cola nut and cocaine extract into a gooey sweet brown health tonic and accidentally mixing it with soda water, you’ll make a fortune, right? Like a music player with no off switch or a Quick and Dirty Operating System. Can’t miss. (I should mention that Coca-Cola may not have contained much cocaine to begin with and certainly had only minute traces after 1891, and none after 1929.)

Like many giant purveyors of non-health food, the company has been battling economic headwinds recently. But it remains true that if you’d bought a single share in 1919 for $40 and reinvested the dividends, you’d have had $9.8 million by 2012, more than 10% a year real returns (that is, adjusted for inflation). Plus the company more or less gave us the modern image of Santa Claus, and his less famous helper Sprite Boy. No, really.

The point is, capitalism is wonderful at creation and its disquieting cousin creative destruction. The marketplace allows things to succeed that sound absurd or revolting at first blush, things that would never get a grant or the central planners’ stamp of approval. But that’s precisely why entrepreneurial success is inherently unpredictable, at times even inexplicable in retrospect (think pet rocks). So don’t kick yourself if you didn’t foresee that a web site where you could post every inane thing that drifted into your head for the benefit of hundreds of friends you don’t know and nothing was sold could make some guy so rich you couldn’t count all his money in a lifetime.

Or that business with the fizzy syrup.