I followed the herd and read Business Adventures (by the late John Brooks, originally published in 1969) over the summer like many others did after learning the book was Bill Gates’ favorite all-time business book (even better, it came recommended to him from none other than Warren Buffett). I previously posted some of my favorite quotes and notes from the excellent first chapter that covers the May 1962 crash, a flash crash of sorts of the time. Reading that post before or after my summary thoughts about Business Adventures that follow below is worth your time.
What interested me in the book?
What hooked me was considering when Bill Gates received the book from Warren Buffett with his imprimatur, in 1991, and the setting of the subject matter, largely 1950s-60s corporate America and Wall Street. That nearly 25 years later Gates can say this is also his favorite business book is impressive, and certainly piqued my interest, no doubt in the same way Gates must have read it with great interest having come with the highest of recommendation from Buffett at that time.
Did I enjoy reading it?
Yes, very much so. The stories might be old and the names unfamiliar, but Brooks’ retelling is superb (a near perfect balance of breadth and depth to the stories) and I recognized Buffett-like humor and sarcasm throughout.
Chapter 7, “The Impacted Philosophers: Non-communication at GE,” is actually pretty funny at times — the clusterfuck at GE in the early 1960s surrounding its price-fixing and bid-rigging of electrical components is an unlikely subject of humor.
And yet fast forward to more recent history and unsurprisingly GE’s top brass found itself unable to communicate properly again (e.g. book cooking; operating copycat one-trick pony hedge funds masquerading as its Capital division; and the ultimate capitulation of the 68% dividend cut in February 2009 when earlier in the month CEO/chairman Jeff Immelt said the dividend was safe). For those interested, see my own collection of essays covering my GE shareholder activism.
Interestingly, considering its best-seller ranking, one might assume Business Adventures is receiving mostly 5-star ratings, but there are a fair number of 1-3 star ratings at Amazon.com. As one can see from my notes about the first chapter of Business Adventures (“Market Fluctuations: The little crash in ’62”) and the still highly relevant 17th century stock market quotes Brooks invoked, it seems not only these quotes but the various messages of importance from that chapter are missed by a subset of readers.
Whether 1680, 1870, 1960 or 2014, there is a consistency of extreme human emotions surrounding the stock market that will surely persist as does the sun rise and set. Brooks’ coverage of other topics have a shared timelessness.
Why would people be interested in stories written for The New Yorker in the 1950/60s?
I think there are a few forces at work. First, the respect that Buffett and Gates command given their vast wealth and philanthropy. In tandem with that respect is the desire for many people to want to gain an edge and increase the value of their brokerage account or nest egg, or come up with the next big thing to Kickstart.
Another problem is that many people don’t actually read the book and even when they do, many don’t know how to read — that is, they aren’t really distilling and retaining the information.
Even among investors, it’s a running joke of sorts that few have actually read Benjamin Graham’s (and David Dodd’s) classic, Security Analysis (Ben Graham is the pioneer of value investing and taught Buffett at Columbia Business School and he eventually hired Buffett at his investment firm). Business Adventures is not explicitly a self-help book and is definitely not a how-to.
What did I learn from it? Are there lessons in the book that will make one a smarter investor?
I took a lot of notes. There are some great, lasting lessons sprinkled throughout Brooks’ stories. From an investor and business owner’s standpoint, it is clear why Buffett offered Business Adventures as his favorite business book. Buffett lived through those times and most likely read some, possibly many, of these articles by Brooks when they were originally published.
At the time and in re-reading them, the importance of honest and highly capable management was probably not lost on Buffett, who was then in the early years of his investment partnership and laying the foundation for what was to become the holding company we all know today, Berkshire Hathaway. The recurring folly of the market and some of its players continues to provide Buffett lucrative investment opportunities.
Buffett’s name is not mentioned in Chapter 6, “Making the Customers Whole,” but the “salad oil scandal” is one that has similar features to the antics undertaken in the subprime boom years (and a similar subsequent interconnected fallout), an unprecedented making-whole of individual investors by the head of the New York Stock Exchange, and it represents the other side of the story of the one well-known to value investors about how Buffett would go on to earn a fortune investing in beaten down shares of American Express (which was associated with millions of dollars of missing salad oil).
More specifically, and notably for investors, the first chapter (about a “flash” crash in 1962 that had the biggest one-day drop since 1929) is rich with the quotes I mentioned above (e.g. “The expectation of an event creates a much deeper impression … than the event itself.”), and if one reads closely it is easy to see why Buffett/Berkshire Hathaway maintains a large cash hoard and waits for the fat pitch while not getting caught up in the day-to-day noise. That mutual funds of all things were the heroes of that crash is impressive (they avoided permanent losses thanks to having ample cash positions from which they managed investors’ withdrawals; they went on to lock in gains when the public started buying again en masse). And it would have been more impressive, following Buffett’s style, had mutual funds been buying on that sharp drop — but that’s asking a bit much. Nevertheless, it was the individual investor that panicked most, according to Brooks.
In 2008-09, everyone seemed to panic, save Buffett, his sidekick Charlie Munger, and a select few others. Buffett’s rational, disciplined, patient, and ultimately bold (invest a lot when one has strong conviction) framework is that untold part of the 6th chapter where Buffett is all over American Express while the forged salad oil inventory receipts were confounding lenders and the stock exchange members.
Other connections one can see with Buffett include his dislike of capital intensive companies where markets are cyclical (e.g. automobiles – Chapter 2) or otherwise fraught with uncertainty (e.g. new technology – Chapter 5), while in that same chapter about Xerox (Chapt. 5), there is some important discussion of corporate responsibility and philanthropy that is highly relevant today.
Chapter 10 (about shareholder meetings) is a fun one and may have had some influence on Buffett (Berkshire Hathaway’s annual meeting is the Super Bowl of such meetings among listed companies).
In closing, the current reprinting of Business Adventures is yet another, timely, reminder that “History does not repeat itself, but it often rhymes.” — Mark Twain.