David Packard

David Packard (1912-1996) was the brilliant engineer and businessman who, along with his partner William Hewlett, co-founded Hewlett-Packard (HP) in a one-car garage with just $538. While not an investor in the traditional sense like Warren Buffett, Packard's story is a masterclass for any value investor. His legendary management philosophy, known as the “HP Way,” provides a powerful blueprint for identifying truly great businesses. This philosophy wasn't about fancy financial metrics or chasing quarterly profits; it was about building an enduring institution based on innovation, integrity, and a profound respect for people. For investors, studying Packard is like getting a backstage pass to see how a sustainable economic moat is built from the ground up. He demonstrated that a strong corporate culture isn't just a “nice-to-have” but a critical driver of long-term value creation, turning that small garage startup into a global technology giant.

Born in Pueblo, Colorado, Packard's journey to becoming a business icon began at Stanford University, where he met his lifelong friend and future business partner, Bill Hewlett. After graduating, and with the encouragement of their professor Frederick Terman, they decided to start their own company. In 1939, in what is now a legendary Palo Alto garage, they founded Hewlett-Packard. Their first product was an audio oscillator, an electronic testing device that was famously sold to Walt Disney Studios for use on the film Fantasia. Packard was the business mastermind, complementing Hewlett's engineering genius. He also served his country as the U.S. Deputy Secretary of Defense from 1969 to 1971, bringing his pragmatic management style to the Pentagon.

The “HP Way” was the soul of the company and offers timeless lessons for investors trying to separate great companies from merely good ones. It was built on a few core, common-sense principles that are surprisingly rare in the corporate world.

This wasn't just a catchy acronym; it was a core practice. Packard believed that managers should get out of their offices and engage directly with employees on the factory floor or in the engineering labs.

• Why it matters: This approach fosters open communication, builds trust, and allows managers to understand the business's real-world challenges and opportunities. For an investor, a company with an MBWA culture is less likely to be blindsided by operational problems and more likely to have an engaged, proactive workforce. It’s a sign of a healthy, transparent organization.

Packard and Hewlett despised the short-term thinking that dominates Wall Street. They reinvested profits back into the company, funded research and development, and made decisions based on what was best for HP in the next decade, not the next quarter.

• Why it matters: This aligns perfectly with the value investing philosophy. As an investor, you want to own businesses run by managers who think like owners, not stock promoters. A company that prioritizes long-term innovation and market leadership over hitting arbitrary quarterly earnings per share (EPS) targets is building a durable competitive advantage.

The HP Way was built on the belief that men and women want to do a good job and will if they are provided with the proper environment. HP offered its employees job security, excellent benefits, and a culture of trust and respect.

• Why it matters: A company's greatest asset is its people. A strong, positive culture attracts and retains top talent, which in turn drives innovation and customer satisfaction. This “soft” factor is an incredibly powerful, though often overlooked, part of a company's economic moat. It’s a competitive edge that is nearly impossible for a rival to replicate.

David Packard left behind more than just a multi-billion dollar company; he provided a roadmap for building and identifying quality businesses. His legacy offers several key takeaways for the modern investor:

• Leadership Matters: Look beyond the balance sheet. Investigate the character and philosophy of a company's management. Are they long-term builders like Packard or short-term opportunists?
• Culture is a Moat: A strong corporate culture is not just corporate fluff. It is a powerful competitive advantage that drives performance and resilience.
• Patience Pays: The greatest returns come from owning exceptional businesses run by exceptional people over a very long time. Packard's story is the ultimate proof that building a great business is the surest way to create lasting shareholder wealth.