Picture two billionaires meeting for the first time and you probably don't imagine them discussing their favorite books.
"It's Business Adventures, by John Brooks," Buffett replied. "I'll send you my copy."
According to Gates:
I was intrigued: I had never heard of Business Adventures or John Brooks.
Today, more than two decades after Warren lent it to me -- and more than four decades after it was first published -- Business Adventures remains the best business book I've ever read. John Brooks is still my favorite business writer. (And Warren, if you're reading this, I still have your copy.)
Business Adventures: Twelve Classic Tales From the World of Wall Street is a collection of New Yorker stories first published in the 1960s.
But that doesn't make it any less useful today. According to Gates:
It's certainly true that many of the particulars of business have changed. But the fundamentals have not. Brooks's deeper insights about business are just as relevant today as they were back then. In terms of its longevity, Business Adventures stands alongside Benjamin Graham's The Intelligent Investor, the 1949 book that Warren says is the best book on investing that he has ever read.
One of the stories involves a case of price fixing at GE that shows the impact of miscommunication -- especially intentional miscommunication. Another explores the failure of the Edsel, Ford's failed flagship car whose design was theoretically based on extensive customer polling.
And, of course, there's a story about Xerox, which, starting in the early '70s, funded considerable research that led to Ethernet networks and the first graphical user interface. But those and other innovations were brought to market by other companies -- including Microsoft.
As Gates says:
I know I'm not alone in seeing this decision as a mistake on Xerox's part. 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. Many other journalists have written about Xerox, but Brooks's article tells an important part of the company's early story. He shows how it was built on original, outside-the-box thinking, which makes it all the more surprising that as Xerox matured, it would miss out on unconventional ideas developed by its own researchers.
Most of all, Business Adventures serves as a great reminder that even if you master the technical fundamentals of business -- for example, designing a great product, creating a great marketing plan, or satisfying the needs of customers -- mastering the "human factor" matters even more.
As Gates says:
Which people are you going to back? Do their roles fit their abilities? Do they have both the IQ and EQ to succeed? Warren is famous for this approach at Berkshire Hathaway, where he buys great businesses run by wonderful managers ... and then gets out of the way.
Business Adventures is as much about the strengths and weaknesses of leaders in challenging circumstances as it is about the particulars of one business or another. In that sense, it is still relevant not despite its age but because of it.
John Brooks's work is really about human nature, which is why it has stood the test of time.
Reason enough to add it to your reading list.