This week’s read is a business classic: Business Adventures: Twelve Classic Tales from the World of Wall Street by John Brooks.
This is a collection of 12 business stories written in the 1960s, and although some things have certainly changed, the lessons are timeless. Collectively, the twelve stories provide a wealth of insights into the worlds of business and finance, and leadership in general. The stories include the failure of the Edsel, insider trading, challenges of corporate communication, trade secrets, and others. But to me what is important is not the details of the specific cases he discusses, but the leadership and human qualities on display.
The stories are not simple prescriptions like the lists of “10 things you must do” that clutter my inbox each day. Instead, each is a detailed and engagingly written narrative that leaves the conclusions to the reader. Indeed, I enjoyed reading some of the reviews of this book and seeing how different reviewers drew different conclusions from the stories.
I think my favorite is the story of Xerox, which is told through a series of interviews with the leaders of the company. The copy machine story began with Chester Carlson working in a kitchen in his spare time away from his day job in the patent department of a manufacturing firm.
Brooks quotes Xerox’ Dr. Clark:
“Xerography had practically no foundation in previous scientific work. Chet put together a rather odd lot of phenomena, each of which was obscure in itself and none of which had previously been related in anyone’s thinking.”
Carlson, the inventor, had come up with a process that combined existing technologies in a completely new way. Brooks writes,
so new, in fact, that the kings and captains of commerce were markedly slow to recognize the potentialities of the process.
Eventually, Carlson persuaded Battelle Memorial Institute to continue development on the work in progress, and it, in turn, sold rights to Haloid (which later became Xerox).
The cost was staggering. Between 1947 and 1960, Haloid spent about seventy-five million dollars on research in xerography, or about twice what it earned from its regular operations during that period; the balance was raised through borrowing and through the wholesale issuance of common stock to anyone who was kind, reckless, or prescient enough to take it.
Many of the company executives put up their savings and mortgages on their houses to support the effort.
Brooks quotes Xerox’ Dr. Dessauer on what it was like:
“Well, it was exciting. It was wonderful. It was also terrible. Sometimes I was going out of my mind, more or less literally. Money was the main problem. The company was fortunate in being modestly in the black, but not far enough. The members of our team were all gambling on the project. I even mortgaged my house—all I had left was my life insurance. My neck was way out. My feeling was that if it didn’t work Wilson and I would be business failures but as far as I was concerned I’d also be a technical failure. Nobody would ever give me a job again. I’d have to give up science and sell insurance or something.” Dr. Dessauer threw a retrospectively distracted glance at the ceiling and went on, “Hardly anybody was very optimistic in the early years. Various members of our own group would come in and tell me that the damn thing would never work. The biggest risk was that electrostatics would prove to be not feasible in high humidity. Almost all the experts assumed that—they’d say, ‘You’ll never make copies in New Orleans.’ And even if it did work, the marketing people thought we were dealing with a potential market of no more than a few thousand machines. Some advisers told us that we were absolutely crazy to go ahead with the project.”
And the problems continued once it got to production:
But once the machine was on its way out of the shop and on to showrooms and customers, Becker [Xerox executive] related, his troubles had only begun, because he was now held responsible for malfunctions and design deficiencies, and when it came to having a spectacular collapse just at the moment when the public spotlight was full on it, the 914 turned out to be a veritable Edsel. Intricate relays declined to work, springs broke, power supplies failed, inexperienced users dropped staples and paper clips into it and fouled the works (necessitating the installation in every machine of a staple-catcher), and the expected difficulties in humid climates developed, along with unanticipated ones at high altitudes. “All in all,” Becker said, “at that time the machines had a bad habit, when you pressed the button, of doing nothing.” Or if the machines did do something, it was something wrong.
The Xerox chapter is also interesting for the discussion of the role of the corporation in public policy. Brooks writes,
…Xerox has taken risks for reasons that have nothing to do with profit. In a 1964 speech, Wilson said, “The corporation cannot refuse to take a stand on public issues of major concern”