Blog author: jballor
Monday, June 6, 2005

In this month’s issue of Esquire, Ken Kurson extols the virtues of Sanofi-Aventis, the world’s third largest pharmaceutical company. “A Drugmaker reborn” (subscription required) essentially describes why Kurson thinks Sanofi is a great investment, but between his praises of the company sits this tidbit:

And yet controlling costs is one of the things I like best about Sanofi. It’s why I believe in its strategy of growth through acquisition. And it’s why I think the merger with Aventis will be so effective.

There’s a small but chronically overperforming mutual-fund company called Mairs and Power. Based in Minnesota, it invests a disproportionate amount of its money in companies headquartered in its home state, like 3M. I once asked its founder how he maintained his excellent returns, especially when he was so overweighted in companies whose profits were dragged down by Minnesota’s high taxes. He explained that their high taxes were the exact reason he liked those companies: They had learned how to be lean enough to compete with their lower-taxed competitors, and that discipline carried over into every area of their business.

Sanofi has shown the same character, one of the unexpected benefits of socialism. By staring down France’s cuckoo labor situation and America’s tendency to sue everyone and spend itself silly on marketing, Sanofi has learned how to run a tight ship.

Kurson is essentially saying that companies that learn to thrive in situations adverse to economic success run more efficiently and compete better than companies that don’t face such difficulties. If necessity is the mother of invention, maybe efficiency is the key to economic survival.