Some of the best businesses in the world, or on the ASX like TPG Telecom Ltd (ASX: TPM), are driven by one individual or a small group of people.
Think of some of the world's biggest businesses – most of them got there thanks to one person's vision. Jeff Bezos is integral for Amazon. Mark Zuckerberg has been extremely important for Facebook. Bill Gates, and a couple of others, created software giant Microsoft. Steve Jobs is credited as being the one to change Apple's fortunes.
However, you could argue that Apple and Microsoft have been less innovative without their talismans leading the respective companies.
The more a business relies on a person for their performance, the more 'key person risk' there is.
I can't imagine that Berkshire Hathaway will be as successful without Warren Buffett when he eventually stops making decisions for the business.
Will TPG Telecom be as much of a driving force with David Teoh no longer the CEO?
How much will WAM Capital Limited (ASX: WAM) and WAM Microcap Limited (ASX: WMI) miss CIO Chris Stott after his announced retirement? Geoff Wilson steps into the role for now and there are many team members at WAM.
Does Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) rely too much on Robert Millner?
The point I'm trying to make is that the main investment case for a business shouldn't be reliant on one individual, as they won't always be around.
Sometimes a change is necessary to continue a business' progress. Just think of the decision by Xero Limited (ASX: XRO) founder Rod Drury to step aside from the CEO role to give Steve Vamos the role – someone who has experience in running a large technology business.
Foolish takeaway
I suppose not relying on one individual is one of the reasons why diversified index funds like Vanguard MSCI Index International Shares ETF (ASX: VGS) are good – there is no key person risk there.
