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ss is in decline, but it may be incentivized, by money or fame, to make big bets (acquisitions, for example), with low odds, hoping for a hit. While the owners of these businesses lose much of the time, the managers who get hits become superstars (and get…

strengths: A company that is in decline may have fewer moats than it used to, but it can still hold on to its remaining strengths that draw on them to fight decline. Thus, Intel, in spite of its troubles in recent years, has technological strengths (people, patents) that may be under utilized right now, and if redirected, could add value. Starbucks remains among the most recognized restaurant brands in the world, but Walgreens in spite of its ubiquity in the United States, has almost no differentiating advantages.

3.
Governance: The decisions on what a declining firm should do, in the face of decline, are not made by its owners, but by its managers. If managers have enough skin in the game, i.e., equity stakes in the company, their decisions will be often very different than if they do not. In fact, in many companies with dispersed shareholding, management incentives (on compensation and recognition) encourage decision makers to go for long-shot bets, since they benefit significantly (personally) if these bets pay off and the downside is funded by other people's money.

4.
Investors: With publicly traded companies, it is the investors who ultimately become the wild card, determining time horizon and feasible options for the company. To the extent that the investors in a declining company want quick payoffs, there will be pressure for companies to accept aging, and shrink or liquidate; that is what private equity investors with enough clout bring to the table. In contrast, if the investors in a declining company have much longer time horizons and see benefits from a turnaround, you are more likely to see revamps and renewals. All three of the companies in our mix are institutionally held, and even at Starbucks, Howard Schultz owns less than 2% of the shares. and his influence comes more from his standing as founder and visionary than from his shareholding.

5.
External factors: Companies do not operate in vacuums, and capital markets and governments can become determinants of what they do, when faced with decline. In general, companies that operate in liquid capital markets, where there are multiple paths to raise capital, have more options than companies than operate in markets where capital is scare or difficult to raise. Governments too can play a role, as we saw in the aftermath of the 2008 crisis, when help (and funding) flowed to companies that were too large to fail, and that we see continually in businesses like the airlines, where even the most damaged airline companies are allowed to limp along.

6.
Luck: Much as we would like to believe that our fates are in our own hands, the truth is that even the best-thought through response to decline needs a hefty dose of luck to succeed.
In the figure below, I summarize the discussion from this section, looking at both the choices that companies can make, and the determinants:

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With this framework in place, I am going to try to make my best judgments (which you may disagree with) on what the three companies highlighted in this post should do, and how they will play out for me, as an investor:

1.
Intel: It is my view that Intel's problems stem largely from too much me-too-ism and aspiring for growth levels that they cannot reach. On both Ai and the chip manufacturing business, Intel is going up against competition (Nvidia on AI and TSMC on manufacturing) that has a clear lead and significant competitive advantages. However, the market is large enough and has sufficient growth for Intel to find a place in both, but n[...]

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