When Bill Gates says a book changed his life, it's worth checking out.
Three years ago, Gates had his favorite business book, 1969's "Business Adventures" by John Brooks, pulled out of obscurity and put back into print. With the force of Gates' passionate recommendation behind it, it became a bestseller.
He continues to publicly vouch for it, most recently on Monday in a Reddit AMA, in response to the question, "Was there any book that helped you through your career?"
On his personal blog, Gates said that he fell in love with the book, a collection of Brooks' New Yorker articles detailing some of the most important events in corporate America in the mid-20th century, back in 1991, when he was still CEO of Microsoft. He had asked Berkshire Hathaway CEO Warren Buffett what his favorite business book was, and Buffett responded by sending Gates his personal copy of "Business Adventures."
"Brooks's work is a great reminder that the rules for running a strong business and creating value haven't changed," Gates wrote in his post.
We've gone through "Business Adventures" and highlighted some of its key lessons that are still applicable today:
Innovators need to keep innovating
Gates wrote that one of the most instructive stories in the book, especially when taken in a historical context, is the article with his favorite title, "Xerox Xerox Xerox Xerox." Brooks chronicled how Xerox recruited researchers to develop the product that would replace the mimeograph machine and change how offices worked around the world. Five years after the Xerox 914 hit the mass market in 1960, "xeroxing" was part of pop culture and the company brought in $500 million in revenue.
But beyond Brooks' account, Xerox's leadership had grown comfortable with its early success. This attitude would eventually lead to huge losses in the late 1970s as competitors started releasing their own photocopiers.
Gates believed this could have been avoided by Xerox executives embracing, rather than ignoring, the advances Xerox made with graphical user interfaces. They did not turn it into a marketable technology because they believed it didn't fit into their legacy, but companies like Apple and Microsoft built on this tech to great success.
"I know I'm not alone in seeing this decision as a mistake on Xerox's part," Gates wrote. "I was certainly determined to avoid it at Microsoft. I pushed hard to make sure that we kept thinking big about the opportunities created by our research in areas like computer vision and speech recognition."
Place extra resources into what matters for long-term success
Xerox's founding is important to look at, as well.
Joseph C. Wilson, the company's founder, inherited The Haloid Photographic Company in the late 1940s. After learning of the physicist Chester Carlson's invention of an electronic printing machine, he made an agreement with Carlson and decided that his company's future was in finding a way to turn the experiment into an easy-to-use office tool.
Wilson took the new name of this copying process, xerography, and renamed his company Haloid Xerox in 1958, while the xerography machine was still in development.
Wilson's board grew anxious as he insisted on the years of R&D the machine required, and Brooks explains that even the researchers weren't convinced they could create a marketable product. Wilson could have given customers a cumbersome product, but it likely would have bombed and then later improved upon by a competitor. But $75 million later, the Xerox 914 made Wilson and his executive team rich and Xerox a household name.
Business can be done with social purposes
Brooks expressed fascination with Wilson's do-gooder rhetoric, concluding that it was genuine.
Today, many companies hype their compassionate corporate cultures, but it was less common in the 1960s. Wilson believed that it was his duty to donate millions of dollars to charities and universities and to have progressive hiring policies during the civil rights movement.
Wilson's unorthodox ideas initially faced pushback, and then, along with similar initiatives, were torn apart in the 1970s by the Nobel Prize-winning-economist Milton Friedman, who advocated for placing utmost primacy on shareholders, not society.
In the post-Great Recession world, however, Wilson's ideals of investing resources into employees and society are now fundamentally seen as beneficial for business performance, and thus good for shareholders, too.
Letting egos lead the way can be disastrous
Another one of Gates' favorite case studies in "Business Adventures" is the story of the Ford Edsel, which remains one of the most disastrous product launches in corporate history.
Ford's executives decided that they would use research to develop the perfect car for middle-class Americans. Its designers and marketers spent two years gathering suggestions from the public and testing ideas on focus groups. But after all that research, Ford's executives did what they wanted.
They also tried to please everyone instead of focusing the brand. Ford debuted the Edsel in 1957 in 18 variations, none of which seemed to target a particular audience.
As for the name, the chairman of the board decided at the last minute that the car would be named after Henry Ford's son Edsel, dismissing the list of names that took endless hours to compile.
You must never place yourself in a situation you can't get out of
Before the car was finished or even named, Ford began promoting teasers for the "E-Car," which promised to revolutionize the automobile industry. Brooks said that the executives never even considered failure an option, creating an entire Edsel division and signing distribution contracts with dealerships before the vehicle was completed.
The stock market took a nose dive in the summer of 1957, and people stopped buying mid-priced cars. The Edsel was set to launch in 1957. Had Ford's leadership acted more cautiously and avoided betting so much on the Edsel, they likely would have been able to avoid losing $350 million.
If you fail, accept it, learn from it, and move on
Despite the countless mistakes that Ford's leadership made with the Edsel, Brooks found that no one would take responsibility for the failure and instead felt they had done everything right.
Edsel marketing manager J.C. Doyle even told Brooks: "People weren't in the mood for the Edsel ... What they'd been buying for several years encouraged the industry to build exactly this kind of car. We gave it to them, and they wouldn't take it. Well, they shouldn't have acted like that."
Managers must communicate clearly with their employees
Brooks also told the story of the 1961 price-fixing scandal among 29 electric companies. He looked particularly at the biggest party involved, General Electric, where employees worked on their own to profit from their illegal actions.
Brooks wrote that even after researching the case thoroughly, he couldn't tell if the higher-ups were responsible or at least aware of the price fixing because GE had a culture in which nobody seemed to communicate with one another. Multiple employees even testified that their bosses would often say things with a wink, making it difficult to ascertain if what they just said was what they actually meant.
Brooks wrote that, "the clear waters of moral responsibility at G.E. became hopelessly muddied by a struggle to communicate — a struggle so confused that in some cases, it would appear, if one of the big bosses at G.E. had ordered a subordinate to break the law, the message would somehow have been garbled in its reception, and if the subordinate had informed the boss that he was holding conspiratorial meetings with competitors, the boss might well have been under the impression that the subordinate was gossiping idly about lawn parties or pinhole sessions."
After an extensive SEC investigation and trial, GE was fined $437,500 and three employees were sent to jail for 30 days.
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