Last Sunday was a very sad day for me – one of my all-time favorite CEOs, Neal Patterson, passed away. I never wrote an article regarding the death of any business leaders but Neal Patterson is someone special to me personally, even though I have never met the guy.
Most people probably don’t know who Patterson was and most people probably don’t know too much about Cerner (CERN, Financial), the business that he co-founded with two others in 1979.
I truly admire Patteron and Cerner. To me, reading his annual letter to shareholders has become a habit in life, just like I read Warren Buffett (Trades, Portfolio)’s letter to the Berkshire (BRK.A)(BRK.B) shareholders every year. I love learning about Cerner from reading his annual letters going back to the 1990s when Cerner was a very small business. To quote directly from Cerner’s Web site, "Today Cerner is the world's largest independent health information technology company with $4.8 billion in revenues in 2016 and more than 24,000 associates worldwide. Cerner has been recognized multiple times by Forbes as one of the 'World’s Most Innovative Companies' and by Fortune as one of the 'World’s Most Admired Companies.'"
My favorite letter to shareholders is one he wrote in 2005, in which he quoted Buffett and explained Cerner’s moat:
"Warren Buffett says the key to investing is ‘determining the competitive advantage of any given company and, above all, the durability of that advantage. The products or services that have wide, sustainable moats around them are the ones that deliver rewards to investors.’
"What is Cerner’s moat? It is clearly in our Intellectual Property – Cerner Millennium architecture, application software, medical content, algorithms, empirical data, and methodologies – and in the Intellectual Capital of our associates and their experiences. Only time will tell how wide, deep and enduring our moat is. We have tried to give you some ideas in this letter of where we are investing to improve Cerner’s moat. We believe that the busy intersection of healthcare and information technology has a sizeable, important and increasing role to play in our society.”
Below are a few other Patterson classics:
"My personal philosophy (and advice to any Cerner associate reading) is to focus less on reading the press and more on being worthy of what has been said about us."
"Frankly, one of the best things about a pattern of success is that it reinforces our resolve to pursue long-term objectives, knowing today’s long term is tomorrow’s present. When you lead through vision, confidence that the future will be greatly different from the present is essential."
"My father, a farmer, taught me my earliest lesson of business, 'Success follows hard work.' At the time, 'hard work' carried strenuous physical connotations. Relatively early in my Cerner career, however, I began to appreciate the difference between 'hard work' and ‘work that is hard.' At Cerner, we do both. We work very hard at work that is very hard."
And in each of Cerner’s annual letter to shareholders, Neal always explain Cerner’s business model and strategy in an easily understandable way even for people who don’t work in the Healthcare IT field.
I’ve read shareholder letters from many public companies and I have to say, Patterson’s were a rare breed. I've learned so much not only about Cerner but also about business and life in general.
With his vision, a relentless focus on culture and the willingness to invest heavily for the future, Neal has built an admirable organization. According to Cerner’s Web site, “during his multidecade tenure as CEO, Patterson has led Cerner to invest more than $5.6 billion in R&D of health IT, and the solutions Cerner has designed are deployed at more than 25,000 health care facilities in more than 35 countries. In 2015, Cerner technology was selected by the U.S. Department of Defense to digitize health records for 9.5 million beneficiaries at about 1,000 military sites worldwide.”
How has Cerner’s stock done? This chart from the 2016 AR says it all.
As a Cerner shareholder, I am deeply indebted to Neal. Thank you, Neal. Rest in peace, and may God bless you.
Disclosure: Long Cerner.
