John Anderson has been among the giants of the Los Angeles business community for decades. During his career he has owned a bank, founded a law firm, chaired two public companies, given countless seminars, taught accounting classes and purchased dozens of businesses. Even today, Anderson owns more than 30 businesses in such fields as banking, insurance, real estate and beverage distribution.
One of the nation’s top-ranked business schools bears his name, the John E. Anderson Graduate School of Management at UCLA, in honor of his $15 million gift in the mid-1980s.
Last week, Anderson spoke with Business Journal staff reporter Daniel Taub about what it takes to make a public company profitable, and keep it that way over the long run.
Question: What does it take for a public company in Los Angeles to remain profitable for five years or longer?
Answer: I don’t think there’s anything different in L.A. than in any other part of the nation. I think the same basic principles that apply to business in general apply in L.A.
We’re in an upswing in the economy. Things are looking up. We’re the gateway to the Pacific. We’ve got all the advantages that a business can ask for as far as I’m concerned.
Q: So what are the key ingredients to sustained profitability?
A: We’re just talking about basics. I own some 34 companies, and what I’ve learned is, take good care of your customers, take good care of your employees, and take good care of the community in which you reside. You have to keep your products up to date, you have to keep your employees geared up with proper incentives, and you have to do the right thing.
And I think you ought to take the long view. A lot of public companies take a short-term view, and I think that’s a mistake. I think in the business community, you have to take the long view and do your planning accordingly. You have to take care of the company, and if you take care of the company, you will benefit.
I was chairman of two public companies, and there is a lot of pressure, because of Wall Street, to make earnings quarter after quarter after quarter. But as chairman, as custodian, I think you have to take the long view.
There are a number of ingredients that go to make up a successful business. I believe that luck is part of it. I have a cup in my office that says, “The harder I work, the luckier I get.” I think that’s a basic element of success.
Q: Many of L.A.’s most profitable public companies seem to focus not just on one industry, but on a particular niche within that industry. Is that niche approach crucial?
A: No matter what you’re in, you have to look for the proper niche. I don’t know whether niche is the right term, but I think having all the answers for all the people is not going to make it. You have to zero in on your customers.
I was the owner of First Business Bank after I bought out all public shareholders. American Business Banker did an article about us and the title of the article was “The Best Business Bank.” We knew who our customers were, and we focused in on them. Call it niche if you like, but we went after the middle-market businessman, and we didn’t let ourselves get dragged into real estate loans, and on and on and on.
Take SunAmerica. They’ve developed an answer for a lot of customers in their annuity program. You can talk about IHOP with their breakfasts. You can’t be everything to everybody. Determining who your customers are and going after them, I think, is the right answer.
Q: Is there a danger, though, in not being diversified?
A: I think there is. If you’re strictly in the real estate business, and you’ve gone through the cycle we’ve gone through here in California, there’s a risk. That’s what life is all about risk and return. You have to stay ahead of the curve if you can, but I don’t think any of us saw the real estate downturn we had in California. But I think it’s now coming back, and I don’t think we’ll make the same mistakes on this up-cycle of the real estate market.
Q: L.A. has the reputation of being an expensive place to do business. What does that mean for a public company based here?
It’s expensive to live here, but I don’t think it is all that much more expensive to do business. It has the reputation, but I question that. I think our present city administration is doing everything it can do to make it an attractive place to do business. But I don’t think we’re at any great disadvantage. I must own more than 20 businesses that do business here in the Southern California area, and I don’t feel that I’m at any disadvantage.
Q: How important is it for a public company’s business to be global?
A: I think you have to think global. One area I am involved in is beverage distribution. I have a Budweiser franchise in metropolitan Los Angeles. It is very obvious that they, along with other beverage companies, like Coca-Cola, are thinking globally. I think we are realizing that the world is much smaller than it was in the past.
Q: But is it possible for a public company to be successful without being global?
A: It all depends on what your area is. I think it would be a mistake for a small bank to reach beyond the California limit. If you have a product that is global in nature, like Coca-Cola, you have to think global. Where would the cigarette companies be if they didn’t think globally today? They’re looking to China and Europe. But the service industry is different. It would be very difficult to go global with a service, but certainly not with a product.
Q: It seems that many L.A.-based public companies, especially the larger ones, have their operational facilities elsewhere. How significant is that to profitability?
A: A lot of companies have decided to produce their products where their labor rates are cheaper. A lot of the shoe industry has left America because of the cost of doing business in America. If you’re looking at a business, one of the things you’re doing is looking at anything to reduce cost. If you can do it in Mexico or Asia, that’s one of the parts of doing business in a global economy.
Q: How important is it to have successful public companies in L.A.?
A: I wish we had more. We almost lost Northrop, and we lost McDonnell Douglas. I think for some reason or another we’ve lost a lot of nationally based companies, and I think that’s truly a shame. I don’t know if whether statewide we need to look at our taxing structure or not. We are a large state, and we do not have the largest number of national companies based in California. It hurts our charitable contributions. Companies tend to contribute to the states and cities where they’re headquartered.
