At TDM, Helmer’s “7 Powers” is one of our core lenses and forms part of our ‘Four Pillars’ investment framework for when we are assessing current and prospective portfolio companies. It has materially improved how we analyse businesses, debate strategy, and allocate capital. And yet, after years of applying the framework in the real world, we found it incomplete without addressing an obvious gap.
There is a source of advantage that consistently separates the companies that compound value over decades from those that merely perform well for a period. One that business leaders talk about, that investors increasingly reference, and that proves difficult to replicate.
That source is People & Culture.
Because People & Culture was not explicitly articulated as a power within Helmer’s framework, we chose to address this pragmatically by elevating it to a standalone pillar in our own investing approach. But as we have applied both frameworks in parallel, it has become increasingly clear that People & Culture is not separate from the idea of power. It is a power.
This article argues that People & Culture (“P&C”) deserves recognition as an Eighth Power: a distinct, durable source of competitive advantage that meets the same rigorous standards Helmer applies to the original seven.
Firstly, What Is People & Culture?
Before making the case for People & Culture as a distinct power, it is worth being precise about what we mean by the term. One resource that has narrowed our focus on a definition is TDM’s ‘Scaling Up’ podcast; across more than 50 episodes of conversations with founders, CEOs, and operators who between them have built over $200 billion in market capitalisation, culture is the topic that surfaces most consistently, and with the most conviction. It is also the most frequently misunderstood. Too often it is treated as atmosphere, or mood, or the sum of a company’s perks. What we have come to believe, through hundreds of hours of these conversations and over 20 years of investing, is something more precise and more demanding than that.
Culture is the collective work of making thousands of daily decisions in a way that achieves the mission while remaining true to a set of values. It is not a document, a set of principles, or a poster on a wall. It is the living system that sits at the intersection of these three dimensions of purpose, values, and the micro-decisions made at every level of an organisation, every single day – from where capital is allocated to which features ship in the free tier of a product. It exists and – ultimately – grows whether or not leaders tend to it. As a seasoned Chief People Officer, Anna Binder, put it in a way that has stayed with us: it is never in tension with business performance, it is, in fact, precisely what drives business outcomes. The trade-off, as she said plainly, is a false one.
What Makes Something A “Power”?
Helmer’s framework is deliberately demanding. A competitive advantage only qualifies as a power if it enables persistent differential returns, not just outperformance for a cycle, but sustained superiority over time.
A true power is one that satisfies three criteria:
- Durability: it creates a lasting advantage, not a temporary one.
- Barriers to Replication: it is difficult for competitors to imitate.
- Market Impact: it materially affects a company’s competitive position or ability to sustain profitability.
These criteria explain why some advantages endure while others fade. The question, then, is straightforward: Does People & Culture meet this bar?
A note on how we use Helmer’s framework:
Helmer’s powers each carry precise formulations: defined benefits, and defined barriers, with the rigour of someone who trained as a mathematician. At TDM, we apply the framework more as a shared language than a scoring system: a way of structuring investment debates and stress-testing the durability of competitive positions. We are aware of that distinction, and we do not think it diminishes the framework’s utility. What it does mean is that when we argue for a new power, the burden of proof cannot rest on intuition alone. It is partly why we invested years developing a proprietary methodology – the Culture First Growth Index – to test whether People & Culture produced measurable, repeatable outperformance at scale. It did. That quantitative grounding is what gives us the confidence to make a qualitative argument.
People & Culture As A Structural Competitive Advantage
At TDM, People & Culture sits prominently as one of our four investment pillars, alongside Growth Opportunity, Structural Competitive Advantage, and Valuation.
Our conviction here is not theoretical. Across decades of investing, our most successful investments (and our most painful failures) have repeatedly featured P&C as a decisive factor.
This mirrors what we hear from successful Boards, CEOs, and executive teams. Over time, many arrive at the same conclusion: regardless of starting point, People & Culture ultimately determines how well a business compounds.
Culture, in other words, is not a soft overlay on strategy. It is the system that determines whether strategy can be executed, and how an organisation adapts as conditions change.
Durability: Culture Compounds Over Time
Theseus’s Paradox is a common thought experiment about whether an object is the same object after having all of its original components replaced with others over time. Founders and employees leave and are replaced, customers come and go, brands change, products get spun up and decommissioned.
What exactly makes a company the same company over time? Most of the time, we think it’s the values, the culture and the shared mission that endure and creates identity.
Culture is inherently durable. It is formed through thousands of decisions, behaviours, and shared experiences over long periods. Once established, it tends to persist. Jeff Bezos has been explicit on this point:
“For better or for worse, corporate cultures are enduring, stable, hard to change.”
Amazon’s culture of customer obsession, ownership, and long-term thinking has endured for more than two decades of massive scaling, new business adjacencies, and leadership transitions. Mechanisms like two-pizza teams, narrative memos, and the “Day One” mindset are not tokenistic; they are cultural infrastructure that inform micro decisions, for any employee, on any given day and therefore compound over time.
Netflix provides a similar example. Its culture has evolved, but its core principles of talent density, context over control, and radical candour, have endured across multiple reinventions, from DVDs, to streaming, to content production. Reed Hastings is explicit that culture has been central to Netflix’s ability to adapt.
Durability is not accidental. In these companies, culture is treated as something to be actively curated and reinforced, in a way that allows for reinvention and vitality.
Barriers To Replication: Why Culture Is So Hard To Copy
While competitors can copy strategies, features, or pricing models, replicating a high-performance culture is extraordinarily difficult.
There are three primary barriers:
- Time: culture emerges over years, not quarters.
- Path dependence: it is shaped by unique leaders, crises, and histories.
- Human complexity: it relies on trust, judgment, and norms that cannot be installed like software.
Netflix’s Culture Code famously went viral. Yet very few companies that adopted its language (or practices) achieved similar outcomes. The reason is simple: the deck was not the culture. The real work sat in the systems behind it. The Keeper Test, real-time feedback, and the discipline to tolerate short-term discomfort in service of long-term performance.
HubSpot illustrates the same dynamic. Brian Halligan’s insight that “culture is how people make decisions when you’re not in the room” led to deeply embedded structures: values-based hiring, radical transparency, and trust-based decision-making. These systems took years to build and require constant reinforcement.
Microsoft’s transformation under Satya Nadella perhaps best illustrates this barrier at scale. Competitors could copy Microsoft’s cloud strategy. The deliberate internal shift from siloed, defensive behaviours to collaboration, learning, and empathy across 200,000 people is irreplicable.
In each case, the barrier is not secrecy. It is the difficulty that comes with human complexity. This requires years of consistent sustained leadership, particularly when doing so is uncomfortable, costly, unorthodox or unpopular in the short term.
Market Impact: Culture As A Source Of Persistent Advantage
“You got to be careful about talking about culture with investors because the only culture they love is in their yogurt.” Satya Nadella, CEO of Microsoft (February 2018)
A keyword search of public company transcripts and documents corroborates the idea that P&C has gone mainstream over the last 10 to 20 years. Our analysis shows that the frequency of public companies mentioning P&C-related terms in public documents – such as “company culture”, “employee engagement”, and “employee experience” – has increased by 5 to 10 times over the last 20 years.
But for all of this increased focus on P&C, does it make a difference to business and shareholder outcomes?
The data behind the conviction that it fundamentally does, has been building for years, and it points consistently in one direction. The FTSE Russell “100 Best Companies to Work For” index – tracking publicly listed companies from Fortune’s annual workplace ranking – returned 11.66% annually from 1998 through 2016, nearly five percentage points ahead of the Russell 3000 over the same period, and had produced a cumulative return of 1,709% by 2020 compared to 526% for the broader market. A parallel study of Glassdoor’s “Best Places to Work” rankings, covering 260 stock selections across thirteen years, found that the top twenty companies returned 2.1 times the S&P 500, with 93% delivering positive returns and the risk of a money-losing investment falling from four in ten, to less than one in ten.
These indexes inspired us to work towards a proprietary methodology to help us identify better investment opportunities as well as a global benchmark to objectively identify high performing culture-first businesses. Our own work produced consistent findings. Scanning global public companies above $500 million in market capitalisation and identifying the fifty most deliberate about People & Culture through public disclosures, the selected cohort generated approximately 16% compound annual returns over the period from September 2017 to September 2022, compared to 10% for the Nasdaq Composite and 7% for the S&P 500. In short, over the seven years, the culture-focused cohort generated approximately 3.2 times invested capital, compared to 2.3 times for the S&P 500 and 1.9 times for the MSCI World, representing roughly 40% outperformance against the S&P 500 and a doubling of returns relative to global equities over the same period.
Taken together, these studies do not prove causation. But the correlation is now robust enough, and replicated across enough independent methodologies, that dismissing it requires more evidence than accepting it: the companies that compound most effectively tend to be materially more deliberate about People & Culture.
The case studies reinforce this pattern:
- Microsoft’s cultural reset preceded one of the largest periods of value creation in corporate history.
- Amazon’s culture-driven mechanisms continue to support reinvestment and long-term profitability across multiple categories.
- Netflix, whose market capitalisation has increased by more than 100 times since publishing its Culture Code, consistently cites culture as central to its adaptability.
- HubSpot’s evolution from a ~$700m IPO to a ~$25bn platform business coincided with the deliberate codification of its culture.
In each case, culture did not merely support execution, it expanded the organisation’s capacity to adapt and sustain superior returns over time.
That is precisely what Helmer means by market impact.
Why People & Culture Is A Distinct Power
Our conviction that People & Culture can function as a true power is not derived solely from observing great companies from the outside. It has been shaped (and sharpened) through first-hand experience sitting on boards and working closely with management teams over many years.
Again and again, we have seen People & Culture act as the decisive variable in outcomes. Baby Bunting is a case in point. We invested when the business had only five stores in 2007 and believed it had significant potential, but it was not until retail veteran Barry Saunders took the helm, and deliberately built a high-performance retail culture through an exceptionally difficult period, that the business became the category leader it is today. Around the same time, our investment in RiskMetrics was underpinned by a similar observation. Founder and CEO Ethan Berman exemplified consistent, values-led leadership, placing culture, trust, and long-term stewardship ahead of personal economics. This was most visibly demonstrated when a leaked letter published by The New York Times revealed Ethan asking the board to pay him less. His objective was simple: to make RiskMetrics the world’s best employer, on the belief that sustained success would follow.
The most recent illustration of this for us has been Guzman y Gomez. From the outset, GYG was a differentiated food concept. Fast food that was good for you. But what allowed GYG to conceive global scale, in one of the most operationally complex, people-intensive categories in retail, was its People & Culture.
Consistent execution across thousands of frontline employees, geographies, and years required a deeply embedded culture, one that emphasised the food and the guest through People & Culture systems and practices that cultivated and rewarded discipline (daily calls focused on food, guest experience, and growth ambition), ownership (long-term incentives extending down to restaurant leadership), and ambition (clear career pathways that can take an individual from a crew member to a multi-million-dollar franchise owner).
What has stood out over time is the constancy with which leadership has pursued that culture, even as the business scaled and the operational challenges intensified. In our experience, this cultural foundation has functioned as a structural advantage: enabling faster replication of quality, resilience through periods of stress, and a level of execution consistency through hyper growth periods, that is exceptionally difficult for competitors to imitate. In a category where many concepts falter as they grow, GYG’s People & Culture has not been a supporting element of the strategy, it has been central to its ability to scale.
These experiences fundamentally changed how we assess businesses. Today, we do not view P&C as something to be admired after success has been achieved, but as a core determinant of whether long-term success is possible.
Is People & Culture simply another expression of Hamilton’s existing powers? Is it distinct? You could argue that P&C is so broad and nebulous that it trickles into all seven powers and therefore can’t be extracted to stand on its own.
As we’ve suggested above, we think it sits squarely alongsisde the other seven. People & Culture is not simply a subset of Process Power, nor is it a Cornered Resource. Processes can be documented, resources can be acquired. Culture must be lived – through daily, weekly, monthly, and yearly habits and routines.
To test this belief, consider the following thought exercise: are there companies that continue to succeed on the basis of network effects or switching costs in spite of fractured, bureaucratic and indistinct cultures? And, in reverse, can you think of companies that had no right to win – no cornered resource, no brand, no counter-position – but prevailed through the power of the people and culture alone?
In other words, some companies have it and others don’t. All companies have people and a culture, but not all people and cultures are purposefully shaped into a lasting, inimitable advantage.
When intentionally developed, P&C becomes a durable, hard-to-replicate system that shapes how decisions are made, how fast organisations move, how talent compounds, and how companies respond to change.
By any reasonable application of durability, barriers to replication, and market impact, People & Culture clears the bar.
The AI Era: Culture Becomes More Decisive, Not Less
There is a tempting assumption that AI will erode the importance of People & Culture. If execution can be automated, and strategy can be assisted by machines, perhaps the human dimension matters less.
We believe the opposite is true.
When every company can access the same large language models, the same automation tools, the same agentic workflows, competitive outcomes will be determined not by access to technology but by how that technology is adopted, configured, and integrated.
The data bears this out. A recent Deloitte study found that 60% of executives use AI in decision-making, yet only 5% say they manage it well. The gap sits in trust, governance, change management, and leadership — the precise domains that define People & Culture. Companies with strong cultures adopt AI faster, they have the psychological safety to experiment, the adaptability to absorb change, and the clarity of values to deploy new capabilities.
This dynamic also strengthens the barriers-to-replication argument. Culture is already hard to copy because of time, path dependence, and human complexity. In the AI era, a fourth barrier emerges: organisations that embed their cultural norms, decision-making patterns, and institutional knowledge into their AI systems create a compounding advantage that is increasingly difficult to disentangle from the culture itself. The AI learns from the culture, reinforces the culture, and in doing so, makes it harder still to replicate from the outside.
The innovator’s dilemma is real. Incumbents face genuine tension between optimising existing models and embracing technologies that may disrupt them. What determines how companies navigate that tension is not strategy documents or technology budgets. It is whether their culture permits — and rewards — the willingness to change.
In this sense, AI does not diminish People & Culture as a source of power. It amplifies it.
The Eighth Power?
In an interview, Helmer once said:
“I would love to find another power. So far, I haven’t.”
Whether People & Culture ultimately earns that designation is for Helmer to decide. But the evidence from the world’s most successful companies is increasingly difficult to ignore.
Culture is a structural advantage. One that compounds quietly, resists imitation, and increasingly determines who wins over the long term. If the purpose of strategy is to explain why some companies generate persistent differential returns, then People & Culture deserves a place in that explanation.
Perhaps it is time to call it what it is:
The Eighth Power.
