Editor’s Note: Before we get into today’s Journal about Walt Disney’s use of animation, we want to share an article Porter wrote that has nothing to do with investing but everything to do with your quality of life and how the world perceives you. Check it out here.

Yesterday I told you about how Ralph Lauren is in the midst of an incredible, multi-decade transition into the world’s leading luxury house.

Today, I want to show you how these same lessons – to focus on the “dream” that lies behind your brand – could save The Walt Disney Company (DIS).

What is Disney actually selling? Not superheroes. Not sports. Not a general-entertainment streaming bundle.

Disney sells the fantasy world of animation: Mickey Mouse. Cinderella. The Lion King. Toy Story. Frozen. Moana. Every enduring, generation-spanning, park-anchoring, toy-selling franchise in the vault started as a drawing, not an action hero or a sci-fi opera.

In 1937 Walt Disney bet everything he had on Snow White And The Seven Dwarfs – the first feature-length animated film. Derided in the press as “Disney’s Folly,” it became the highest-grossing sound film to that point and built the studio, the theme parks, and the empire that followed.

The dream was animation from the very first day.

Everything Disney has ever sold – the parks, the merchandise, the cruises, the streaming catalog – descends from a hand-drawn fairy tale. And the desire for these kinds of deeply felt, human stories in this genre will never disappear. This is Disney’s permanent advantage. It’s Mickey’s “cowboy,” if you’ll recall what drove Philip Morris (Marlboro) and Ralph Lauren.

Bob Iger’s first major act as Disney CEO was to buy Pixar Animation Studios in 2006 for $7.4 billion – not for its film library, which Disney already distributed, but to import its creative culture and put John Lasseter in charge of a Disney Animation studio that had gone creatively dead. Steve Jobs, Pixar’s largest shareholder, reportedly wanted to shut down Walt Disney Animation entirely. Iger refused, and instead used Pixar’s leadership to revive it.

An incredible renaissance followed. Tangled in 2010. Frozen in 2013 at $1.28 billion in box-office revenue, the highest-grossing animated film of its time. Frozen II in 2019 at $1.45 billion.

During Iger’s first tenure as CEO from 2005 to 2020, Disney stock rose 400%, far outpacing the market. A March 2015 headline said it plainly: “Frozen, Star Wars, And Cinderella: Disney At All-Time Highs.”

But… did Star Wars really fit?