Key Messages
Unlock The Secrets Of Us Business History With Bill Gates’ Favorite Book: Business Adventures
Business Adventures provides readers with an in-depth look into some of the most influential economic, financial and business moments of the past century.
It gives readers a unique perspective on events such as the launch of the world’s ugliest car, a wink from a General Electric executive, and the fall of the Piggly Wiggly supermarket chain.
Not only that, but it also sheds light on some significant developments in US business history – including insider trading and an employee’s right to choose their employer – which still influence us today.
Through Bill Gates‘ favorite book of all time, you can revist twelve captivating stories detailing how Wall Street almost killed off Piggly Wiggly, why shareholder meetings are usually a farce, and how one misinterpreted wink led to court proceedings at GE.
Get ready to dive in – its an exciting journey!
The 1962 Flash Crash: How Fear And Irrational Thinking Wreaked Havoc On Wall Street
The 1962 Flash Crash was a stark reminder of the irrational behavior of stock market investors, and that in the end, the stock market is unpredictable.
On May 28th, 1962, financial markets were experiencing a period of decline and when investors realized they couldn’t find out the true price of stocks until 45 minutes later due to having to manually update information this sparked a mass panic sell-off.
As more people kept selling, prices kept decreasing creating an overall market crash that wiped out $20 billion dollars in value.
But with the same emotions that caused all this chaos also came a buying panic when it seemed like prices couldn’t go any lower than 500 points on the Dow Jones Index.
Just three days later, everything had fully recovered showing just how powerful emotions can be in guiding investors despite facts.
All Wall Street officials could agree on was that government needed to pay more attention to the “business climate” or essentially what kind of mood everyone was in during these times.
This showed us just how much unpredictability is inherent in the markets.
To quote J.P.
Morgan: “It will fluctuate”
The Ford Edsel: An Epic Product Failure Caused By Miscalculating The Market, Unrealistic Expectations, And Poor Build Quality
The story of the Ford Edsel is the epitome of a product launch gone wrong.
In 1955, eager to tap into the booming American automobile market, Ford decided to invest $250 million in a project that would become their flagship product.
By the time it was launched in 1958, however, their plans had gone egregantly sideways: an economic downturn and a shift in consumer taste meant that people had become more interested in smaller, cheaper cars – not what they expected from a product with such big expectations.
Not only this but consumers had also been promised something revolutionary and when they got the Edsel there were several faults ranging from unreliable brakes to jumpy acceleration due to poorly tuned technical elements.
It’s hard to imagine such failure was possible with one of America’s most successful car companies behind it!
Life gave us lemons – and so from failure came an important lesson – if you ever plan on launching a new product or service: make sure you pay attention to market demand, don’t over-promote your product without delivering quality and ensure you know what kind of customer experience you are offering them.
The Us Federal Income Tax System: How It Became Unfair And What Needs To Be Done To Fix It
The current federal income tax system is badly in need of an overhaul.
It encourages inefficiency, costing us both time and money, and it disproportionally impacts the middle-class population.
Since 1913, when income tax was first introduced, this system has been almost constantly tangled with loopholes for the wealthy and higher taxes for the average person.
It’s time to revert back to the original structure of our taxation system from 1913 – one low rate that just targets the wealthiest citizens.
Reforming our tax code along these lines could free up resources currently wasted on navigating complicated laws and regulations, as well as make taxation more fair across all sectors of our society.
Unfortunately, because powerful people are benefitting from our broken taxation system, reform is extremely political unfeasible right now.
But if we can push back against those with vested interests in maintaining their advantages we can move towards something better – an income tax system that actually serves everyone equally.
The Texas Gulf Sulphur Case Established Rules To Prevent Insider Trading
The Texas Gulf case of 1959, in which a mineral company discovered hundreds of millions of dollars worth of minerals in Ontario, Canada and subsequently engaged in insider trading and deceptive press releases, was to be the turning point for insider trading regulations.
People who worked for or were connected to the company ended up getting incredibly wealthy as a result, which spurred the action of the Securities and Exchange Commission as they finally began to crack down on insider trading.
At the trial, it was decided that insiders had been given “a reasonable opportunity to react” before they began investing while other investors were left with little knowledge.
This type of behavior has not been accepted since, and with this case it became clear that Wall Street needed to become a little cleaner so that all investors could enjoy fair returns equally.
The Texas Gulf case of 1959 marked a turning point in the regulation of insider trading that still holds true today: no one should have unfair access or advantage when it comes to investments due to personal connections or privileged knowledge.
Xerox’S Rollercoaster Ride: From Overnight Success To Near Defeat And Back Again
The cautionary tale of Xerox Corporation emphasizes just how imperative it is to stay vigilant even after a period of substantial success.
The late 1950s marked the beginning of an unexpected bump in Xerox’s profits due to the success of their plain-paper photocopier that challenged preconceived notions about copying documents.
Within just six years, their revenues soared to over $500 million and donations were being made to universities like University of Rochester, who participated in the product development process.
Additionally, they used their platform to voice support for the UN during periods when it was under public attack.
However, shortly after reaching this peak, Xerox quickly fell victim to market forces and technological advances from competitors who released cheaper copycat products with diminished technological leads.
New investments into research and development also failed to improve their situation and soon left them stranded.
This tragic story serves as a valuable reminder that while achieving success may be exciting, it comes with risks if appropriate measures are not taken to ensure its sustainability.
The Nyse’S Unprecedented Act Of Bravery To Save Ira Haupt & Co
In 1963, the New York Stock Exchange (NYSE) stepped in to save a brokerage company, Ira Haupt & Co., from economic ruin.
The reason why the brokerage found itself on the brink of bankruptcy was because it had made an ill-advised purchase of cottonseed and soybean oil and used fraudulent warehouse receipts as collateral to borrow money from a bank.
The situation was made worse by the fact that President Kennedy had just been assassinated and the nation was in panic.
This caused people to lose faith in their investments and could have led to a market crash.
To prevent this from happening, the NYSE worked together with member firms and creditors of Ira Haupt & Co.
to come up with a repayment plan for its debts, which amounted to $22.5 million.
The NYSE itself pledged $7.5 million of its own reserves – nearly a third of its total – in order to keep the brokerage afloat.
It is unlikely that such a drastic move will ever be repeated, but at that moment in time, it showed how the NYSE put preventing financial crisis ahead of everything else – even before their own financial interests.
Executives Use ‘Communication Problems’ As An Excuse For Illegalities
In the business world, it’s not unheard of for executives to blame immoral or criminal actions on what they dub as a “communication error”.
Such was the case with General Electric (GE) in the late 1950s.
After faulty products were sold at an inflated price of over $1 billion, GE claimed that it was due to a middle manager interpreting instructions incorrectly.
This is because they had two types of strategy; official and implied.
If executives issued orders casually, then the recipient should do the opposite.
The implication being that managers often times failed to read between the lines, and land themselves into hot water when their actions contradicted actual policy.
And although some lower-level personnel faced fines and even prison sentences, no higher-up employees ever got charged for their role in the scandal.
This shows how companies can try and exploit communication issues to disassociate themselves from morally questionable actions.
But in reality, such schemes only end up hurting loyal members who are already struggling under complex policies – all while protecting those at ground zero from accountability.
The Risks Of Taking A Stand: The Story Of Clarence Saunders And Piggly Wiggly
Clarence Saunders, the eccentric owner of Piggly Wiggly-the world’s first self-service supermarket – almost killed the store in a stock market battle.
The supermarket was rapidly expanding throughout the United States but suffered a hit when two franchises in New York failed in 1923.
This set off proceedings for a bear raid – where investors hoped to make money by driving down the company’s stock value with false claims about the business’ failure – and Saunders wanted to take action against this financial speculation he saw as unjust.
He announced a plan to buy back all existing stock in Piggly Wiggly, and managed to purchase 98 percent of the shares.
But this was expensive and led tomassive debts, meaning Saunders was unable to hold against additional extensions granted by the stock exchange, which eventually lead him to declare bankruptcy and put an end to his vision for Piggly Wiggly-a shocking result from such an incredible accomplishment.
David Lilienthal: From Good Public Servant To Ideal Businessman
The story of David Lilienthal proves that a clean conscience and business savvy can co-exist.
Throughout his career, he held important positions in the government and was highly regarded as an honest civil servant.
However, when it came time to provide for his family and plan for retirement, Lilienthal made the move to the private sector – an honest and responsible decision.
Once he became a businessman, Lilienthal again proved himself to be an upstanding leader, though some of his old government colleagues called him a sell-out.
To prove them wrong, he pulled off the difficult task of breathing life into Minerals and Chemical Corporation of America (MCCA) with impressive success.
Following this success, Lilienthal wrote a controversial book about why big business is important for society.
In addition to this, in 1955 he created Development & Resources Corporation – an endeavour that benefited developing countries while also creating a reasonable profit.
It is clear that David Lilienthal’s actions are proof that one can pursue successful businesses without ever having to compromise moral values or strong ethical standards.
The example of David Lilienthal shows that a clean conscience and business savvy can go hand-in-hand!
The Power Of Shareholders: How Major Corporations Could Be Held Accountable By Passive And Compliant Investors
When it comes to who the most powerful people in the United States are, one would assume it should be the stockholders, as they have large stakes in the companies that dominate American society.
Unfortunately, stockholders rarely wield the true power that they have at their disposal.
Every year, these shareholders come together for an annual meeting and elect a board of directors as well as vote on policies and question executives.
But instead of being a serious and dignified event, it is usually just a farce with management actively trying to keep investors and shareholders from getting involved.
This is largely due to how passive most stockholders are when presented dividends each pay period; they don’t feel like challenging or fighting corporation practices or policies.
This was comically demonstrated by Wilma Soss in 1965 at AT&T’s shareholders’ meeting, where she berated chairman Frederick Kappel and challenged him to put more women on board.
From this incident we can see how powerful individual investors can be if they choose to use their influence, but that is sadly something happening very rarely.
If only shareholders were more motivated to fight for changes then big business wouldn’t be able to do whatever they please without any interference from them.
Donald Wohlgemuth: The Crucial Court Case That Secured Employee Rights And Set A Precedent For Pursuing Tempting Job Opportunities
Thanks to Donald Wohlgemuth, you now have the right to change your employer even when you have access to trade secrets.
In 1962, he was working at B.F.
Goodrich Company in their space suit engineering department, not knowing that the company had just lost a contract for an important moon project to its main competitor International Latex.
But when Wohlgemuth received an offer to work on the prestigious Apollo project with more responsibility and a larger salary, he accepted without delay.
However, when he told his supervisors at B.F.
Goodrich that he was going to leave, they feared that he might reveal trade secrets of the company and hence sued him for breaking his confidentiality agreement with them.
The matter went all the way up to court and two key questions arose – Can preventive action be taken against someone who hasn’t broken any agreement yet? And should people be barred from taking up positions where they may use confidential information for personal gain?
In a landmark decision, the court ruled in favour of Wohlgemuth and declared that as long as a person hasn’t committed or showed intention of committing any crime, nothing can be held against them before it actually happens.
This opened the door for people being able to shift jobs even if they possess important information regarding their current workplace.
Therefore we can all be grateful to Donald Wohlgemuth for this great victory in terms of employee rights!
The Battle Over The Pound Sterling Shows The Inherent Weaknesses Of The Bretton Woods System
In 1964, the pound sterling was one of the world’s most important and respected currencies.
So when speculators started attacking it, central bankers across the world were determined to defend it.
This attack stemmed from economic circumstances which had arisen since the Bretton Woods Conference of 1944, when governments agreed on a fixed exchange rate between different currencies.
To maintain this system, governments often had to intervene in markets by buying or selling currencies to regulate their value.
At the time, Britain was running a large trade deficit and currency speculators believed that Britain was unable to maintain its fixed currency exchange rates and would eventually have to devalue their pound.
As a result, speculators began betting against the pound in a bid for its value to decrease.
Considering both the threat posed to Britain’s most prominent currency and also to the international monetary system itself, an alliance of policy makers led by the US Federal Reserve waged war against these bets by buying pounds in an attempt to stop their decrease in worth.
Despite their initial success at defeating these waves of attacks, they could not keep up financially and eventually were forced into retreat in 1967 with the pound sterling having devalued by over 14%.
Ultimately what became clear with hindsight is that this battle between speculators and central bankers over the value of the British Pound was an indication of serious issues surrounding economic power-plays following Bretton Woods agreements – four years later these agreements would come crashing down just as expected.
Wrap Up
Business Adventures by John Brooks is a great book that looks at current financial markets and business ethics, drawing on key incidents from history to illustrate his points.
The final summary of this book is that these lessons from the past can be influential in influencing the way we view business today.
One particularly powerful story was about an employee who fought for their rights and changed the face of employment forever.
From understanding customer satisfaction to making wise investments, Business Adventures provides insight into how we should approach modern business.
Ultimately, it helps us to make more informed decisions and understand the importance of industry principles.
