Business Adventures Book Summary And Review

The New Yorker writings by Brooks about the reasons why various businesses prospered or failed are collected in the book Business Adventures. The lessons learnt are still relevant today even though they were published many years ago, in 1969. Bill Gates’ all-time favorite business book is titled Business Adventures.

Table of Contents

The Fluctuation: The Little Crash in ’62

One illustration of how investor behaviour is significantly influenced by mood is the Flash Crash of 1962. Investors in the stock market were in disarray for the three days of this crisis. But, people who had merely kept onto their investments for those three days would have most likely had a portfolio with a comparable value. In order to demonstrate that variations are frequently caused by arbitrary causes, Brooks outlines the sequence of events that occurred during the 1962 flash collapse.

The stock market had been in decline for six months as of May 28, 1962. The central office’s delayed updating of stock prices led to an increase in this market panic. Thus, stock price predictions have to be made 45 minutes in advance by investors. They thought the price had dropped more because of how they were feeling right now. This sparked a share sell-off in panic, which set off a downward cycle and reduced stock values by $20 billion. The market quickly returned to its initial value as a result of another market panic. The Dow Jones Index’s ability to remain over 500 points is well known. Investors therefore began to panic buy as soon as the price approached that mark. Within just three days, the market had fully recovered.

Many were looking for logical reasons for this quick crash after it happened. The truth is that market volatility and irrationality were to blame for the crisis. Hence, Brooks emphasizes that the market’s one constant is that it will vary.

The Edsel’s Demise: A Warning Story

According to Brooks, executives are rarely held accountable when errors are made. Leaders frequently want to avoid taking responsibility, which hurts their organisation. Brooks offered the example of Ford in the 1950s when they were failing owing to questionable judgements by leaders. They made an effort to deflect responsibility rather than take it. The business was having trouble because of its unpopular Edsel model, which had failed due to subpar marketing and research. The automobile is currently regarded as one of the greatest product failures of all time. They spent the greatest money ever on one project—$250 million—but nothing revolutionary was accomplished. The vehicle had a number of technical issues as well, such as ineffective brakes and a jerky acceleration.

The management put the blame on a man by the name of Roy Brown rather than admitting that these failures were the primary cause of the car’s failure. He was the person behind the Edsel’s design. Brown was demoted as a result, even though the design was not at fault. As a result, Roy Brown experienced depression and the leadership team continued to commit the same errors.

The Federal Income Tax: Its Background and Unique Characteristics

According to Brooks, the federal income tax has evolved significantly since 1913, resulting in a system where the wealthiest might pay less in taxes than the middle class. The US implemented a federal income tax in 1913 as a result of the government’s declining revenue stream and rising expenditures. This system initially functioned, with the wealthiest citizens making up the majority of the contributors. When this tax was made applicable to the majority of the population, wealthy people have been able to take advantage of various unintended loopholes.

The current tax system’s design encourages inefficiency. For instance, freelancers frequently cease accepting new jobs in the middle of the year. Due to federal income tax, they would really be better off earning less at this point. Tax reform is not conceivable due to the rising complexity and the powerful political influence of the wealthy. Brooks advises that we go back to the 1913 tax structure instead.

A Reasonable Amount of Time: Texas Gulf Sulphur insiders

The evolution of insider trading is then covered by Brooks. The act of trading on inside information that is not generally known is known as insider trading. The Securities and Exchange Commission initially only seldom enforced this offence. Nevertheless, everything changed when insider trading was involved in the Texas Gulf Sulphur case in 1959. A number of individuals connected to Texas Gulf Sulphur or employed there chose to invest extensively in the business in 1959 as they had just discovered copper and silver worth millions of dollars. Importantly, the corporation kept this discovery quiet so they could keep purchasing equities before they increased in value. Then, there were rumours that the corporation had discovered something.

Since nothing had been discovered, management continued to hold press conferences to reassure the public. They kept buying more and more stock throughout. They finally disclosed their discovery after purchasing all the shares they could afford. The insiders pocketed millions of dollars as the stock price suddenly surged.

In the past, individuals would have gotten away with this criminal activity. The Securities and Exchange Commission, however, believed that this had crossed a line. They thus accused the corporation of lying and insider trading. Once all insider traders were found guilty, Wall Street regulation was altered. Insider traders are much more likely to face charges in the modern era.

The Impacted Philosophers: Non-Communication at GE

In the workplace, routes of communication between managers and their staff members can be confusing and troublesome. Brooks uses General Electric (GE) as an example to illustrate the significant effects of poor communication. GE started engaging in extensive price-fixing in the latter half of the 1950s. Together, a number of electronics manufacturers were able to raise prices by 25%. As the primary perpetrator of this price-fixing, GE was identified and prosecuted. The surprising consequence was that no executives were charged despite the fact that certain managers were found guilty. The executives were able to attribute all of the problems on poor communication.

Executives at the time gave managers two different kinds of policy: formal and implied. The official policies would be explained with a straight face. With a wink, the implied rules would be revealed. The inferred policies might actually exist, or the executives might have anticipated the exact opposite. The price-fixing policy was one of the implied ones. Because of this, several managers misinterpreted GE’s policy prohibiting discussing prices with competitors. This is only one illustration of how executives frequently claim poor communication as a justification to absolve themselves of legal liability.

The Last Great Corner: A Company Called Piggly Wiggly

Piggly Wiggly obtained a patent for the idea of a self-service grocery store in 1917. They were the first supermarket to include check-outs, price tags on every item, and carts for customers. Piggly Wiggly is still a relatively obscure store despite having had a significant impact on contemporary supermarkets. This is because of its owner, Clarence Saunders, according to Brooks. When a failing franchise caused investors to mistakenly short his stock and assume the business was in peril, Saunders responded aggressively. Saunders attempted to repurchase the majority of the shares in an effort to punish these investors. He publicly declared his intention to purchase all outstanding shares of Piggly Wiggly, and after taking on significant debt, he was able to acquire 98 percent of the company’s stock.

Saunders finally failed as the stock exchange gave the short sellers more time to settle their debts. After taking on too much debt, Saunders was unable to hold on for this period of time, the stock price fell, and Saunders went bankrupt.

A Second Sort of Life: David E. Lilienthal, Businessman

One individual who was both business-savvy and morally upright is David Lilienthal. Lilienthal worked for President Roosevelt as a federal servant in the 1930s. He continued to work as a federal servant until the 1950s. In 1950, Lilienthal was honest and said he needed more money to support for his family. The people Lilienthal had worked for had a great deal of regard for him. He received the same esteem for his commercial acumen.

Lilienthal opted to take over the struggling Minerals and Chemical Corporation of America since he had experience in the mineral industry. He was successful in making the business a success, and he gained a little fortune as a result. Following this achievement, Lilienthal published a book in which he made the case that large business is essential to the security and economy of the US. Many of his former coworkers referred to him as a sellout because this was contentious. Lilienthal argued against this and stated that he was dedicated to both the public and private spheres. He established the Development and Resources Company in 1955 to demonstrate this. This corporation assisted developing countries perform big public works undertakings.

Stockholder Season: Corporate Power and Annual Meetings

According to Brooks, although significant firms’ boards of directors make decisions, shareholders elect these directors. In America, shareholders therefore wield real authority. Shareholders have an annual meeting once a year to choose the board and approve policy. The shareholders need to be making the decisions at these meetings, but the directors disagree. They do all in their power to keep the shareholders at a distance because they do not respect the shareholders as their superiors.

According to Brooks, shareholders underuse their potential. There are several instances of shareholders who regularly challenge the board of directors, such as Wilma Soss who stated in the 1965 shareholders’ meeting that AT&T needed more women on the board. But, nothing is more passive and submissive than a little investor who receives dividend payments on a regular basis. It follows that enthusiastic people are powerless to hold the board of directors accountable. Shareholders could prevent management from acting arbitrarily if they used their influence more frequently.

Business Adventures Book Review

Business Adventures by John Brooks is a timeless classic that explores the intricacies of the business world through a series of fascinating stories. Originally published in 1969, the book is a collection of twelve articles that were originally published in The New Yorker. Each article covers a different aspect of the business world, from the rise and fall of the stock market to the struggles of individual companies.

One of the strengths of Business Adventures is its ability to humanize the often-abstract world of business. Brooks brings the stories to life with vivid descriptions of the people involved, their motivations, and their struggles. For example, in one chapter, Brooks explores the history of Xerox and its struggle to bring the photocopier to market. Through interviews with key players in the company, he shows the reader the human side of business decision-making.

Another strength of the book is its historical context. Business Adventures was written during a time of great change in the business world, as the post-World War II economic boom was beginning to slow down. Brooks explores this context in detail, providing insights into the economic and social forces at play during this time. This historical perspective makes the book valuable not only as a collection of interesting stories, but also as a document of a particular era in business history.

One potential weakness of the book is its age. Some of the stories in Business Adventures are now over 50 years old, and the business world has changed a great deal since then. However, many of the lessons and insights that Brooks offers are still relevant today. For example, his chapter on the “Edsel” debacle provides insights into the importance of understanding consumer behavior and the dangers of overreliance on market research.

Overall, Business Adventures is a must-read for anyone interested in the world of business. Brooks’ writing is engaging, insightful, and full of fascinating stories. While some of the specifics may be outdated, the book’s overarching lessons are still valuable today. If you want to understand the human side of business decision-making and the historical context of the business world, this book is a great place to start.

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