While competitors retrench during recessions, Amphenol leverages its strong balance sheet to accelerate M&A. This counter-cyclical strategy allows it to acquire strategic assets at attractive valuations, ensuring it emerges from downturns with increased market share and strength.

Amphenol runs as a federation of autonomous business units. This structure is key to its M&A success, as acquired companies retain their brand, culture, and customer intimacy. Sellers prefer Amphenol because they know their business won't be suffocated by a monolithic corporate hierarchy.

Amphenol's components are a tiny fraction of a customer's total cost but are critical to system performance. The real value proposition is not the part itself but the confidence that the larger system won't fail. This dynamic creates high switching costs and pricing power.

Earning a high return on invested capital is only half the battle. True compounding requires the ability to redeploy large amounts of capital at similarly high rates. Amphenol achieves this through its disciplined M&A playbook in a fragmented market, answering the crucial question of reinvestment.

High-margin software businesses operate on 'easy mode,' which can mask inefficiencies. To build a truly durable company, founders should study discount retailers like Costco or Aldi. These businesses thrive on razor-thin margins by mastering cost reduction, operational simplicity, and value delivery—lessons directly applicable to building efficient software companies.

Amphenol functions as a continuous innovation partner, not just a component supplier. A quarter of its annual sales come from products launched within the prior four years. This highlights its ability to co-develop custom solutions for emerging technological needs and avoid commoditization.

Founders often start scrappy out of necessity and dream of lavish resources. However, once successful, many realize that small, lean, and scrappy teams are more effective. This creates a paradox where the most successful entrepreneurs intentionally revert to the resource-constrained mindset they once tried to escape.