Business Adventures

Business Adventures Plot Summary

Introduction

Have you ever watched a high-stakes poker game and marveled at how the best players know exactly when to hold, fold, or go all in? Financial markets operate with similar dynamics, but with far greater complexity and consequences. Every day, individuals and institutions make decisions that balance potential rewards against calculated risks, often with millions—sometimes billions—of dollars hanging in the balance. The world of strategic financial decision-making isn't reserved for Wall Street titans or central bankers. The principles that govern successful risk management apply whether you're considering a career change, launching a business, or managing your investment portfolio. By understanding how the masters of calculated risk think and operate, you gain invaluable insights that can transform your approach to wealth building. This collection of remarkable true stories reveals how different players navigated moments of extraordinary financial pressure, the psychological factors that influenced their choices, and the systematic approaches that separate successful risk-takers from reckless gamblers. You'll discover why timing matters more than perfect information, how to recognize when conventional wisdom becomes dangerous groupthink, and why protecting your downside is often more important than maximizing potential gains.

Chapter 1: The Fluctuation: Understanding Market Psychology

The stock market—that daytime adventure serial of the well-to-do—would not be the stock market if it did not have its ups and downs. In May 1962, Wall Street experienced one of its most dramatic fluctuations in history. On Monday, May 28th, the Dow-Jones industrial average dropped 34.95 points, the second-largest one-day decline ever recorded at that time. The volume of trading reached 9,350,000 shares—the seventh-largest one-day turnover in Stock Exchange history. The following day brought even more drama. After an alarming morning when stocks sank far below Monday's closing prices, the market suddenly reversed direction and charged upward with astonishing vigor. Tuesday's trading volume reached 14,750,000 shares, the greatest one-day total ever except for October 29, 1929. By Thursday, May 31st, after a Wednesday holiday, the Dow-Jones average had gained enough to leave it slightly above the level where it had been before the excitement began. The crisis had run its course in just three trading days. Signs of public hysteria began appearing during lunch hour. Normally a quiet time for trading, volume instead continued to rise between twelve and two. At the Times Square office of Merrill Lynch, the manager noted an unusually large crowd of "walk-ins"—people who were securities customers only in a minimal way but found the atmosphere of a brokerage office entertaining during market crises. From experience, he recognized a correlation between public concern and the number of these casual visitors. By early afternoon, an unrestrained liquidation of stocks was underway. Orders from customers were running five or six times above average, and nearly all were orders to sell. In one midtown Merrill Lynch office, a cable arrived from a client in Rio de Janeiro that said simply, "Please sell out everything in my account." Radio and television stations were interrupting their regular programs with spot broadcasts on the situation, likely contributing to the uneasiness among investors. The lesson from this episode is clear: market psychology can create its own momentum, independent of economic fundamentals. As one veteran trader observed, "In a rising market, there's an entirely different sound. After you get used to the difference, you can tell just about what the market is doing with your eyes shut." The market's movements reflect not just economic realities but human emotions—fear, greed, and the tendency to follow the crowd. Understanding these psychological factors is essential for anyone hoping to navigate the unpredictable waters of stock trading.

Chapter 2: The Edsel Disaster: When Research Fails

In 1955, the Ford Motor Company made a fateful decision to produce a new automobile in the medium-price range. Two years later, in September 1957, Ford introduced the Edsel to the market with unprecedented fanfare. The total amount spent before the first car went on sale was a quarter of a billion dollars—the most costly consumer product launch in history at that time. Ford expected to sell at least 200,000 Edsels in the first year. The reality proved devastatingly different. Two years, two months, and fifteen days later, Ford had sold only 109,466 Edsels. Many of these were purchased by Ford executives, dealers, and others with a personal interest in seeing the car succeed. On November 19, 1959, having lost an estimated $350 million on the venture, Ford permanently discontinued Edsel production. The origins of this spectacular failure dated back to 1948, when Henry Ford II proposed studies on introducing a wholly different medium-priced car. Market research had shown that owners of low-priced Fords typically "traded up" to medium-priced cars from competitors rather than to Ford's own Mercury. As one Ford vice president lamented, "We have been growing customers for General Motors." After years of planning and research, Ford established the Special Products Division in 1955 to develop the new car, known internally as the "E-Car" until it was officially named. The Edsel's most striking feature was its vertical, horse-collar-shaped radiator grille, set in the center of a conventionally low, wide front end. The rear featured horizontal wings rather than the huge tail fins popular at the time. Inside, the car boasted numerous gadgets, including a push-button transmission control in the center of the steering wheel. Ford believed these distinctive features would make the Edsel immediately recognizable and appealing to consumers. What went wrong? The timing couldn't have been worse. By the time the Edsel reached the market in 1957, the economy was entering a recession. Medium-priced car sales were declining, and consumer preferences were shifting. The first Edsels also suffered from quality problems—oil leaks, sticking hoods, trunks that wouldn't open, and push buttons that couldn't be budged. One distraught owner reported that his dashboard had burst into flame. The Edsel story teaches us that market research alone cannot guarantee success. Despite extensive polling and consumer studies, Ford failed to anticipate changing economic conditions and consumer tastes. The company became so invested in its expensive project that it couldn't adapt when circumstances changed. As Richard Krafve, the head of the Edsel Division, later reflected: "It was a question of my relationship to my dealers. I had assured them that the company was fully behind the Edsel for keeps, and I didn't feel that I was the fellow to tell them now that it wasn't."

Chapter 3: The Federal Income Tax: Evolution of Complexity

April 15th—a date that strikes dread in the hearts of Americans—reveals much about our national character through our complex relationship with taxes. The federal income tax, now the government's primary revenue source, has evolved from humble beginnings into a labyrinthine system that influences virtually every aspect of American life. The income tax as we know it began in 1913, when the Sixteenth Amendment was ratified. The original tax was remarkably simple—rates ranged from just 1% to 7%, and most Americans paid nothing at all. During World War I, rates rose dramatically, reaching 77% on the highest incomes by 1918. After the war, rates fell again, and the 1920s became a golden age for taxpayers, with top rates of only 25%. The Great Depression and World War II transformed the tax system forever. By 1944-45, rates reached their historic peak—23% at the low end and 94% at the high end. More significantly, the tax base expanded dramatically. Before the war, the income tax affected only the wealthy; during the war, it became a mass tax touching most American workers. By 1960, about half of all revenue from individual returns came from adjusted gross incomes of $9,000 or less. The most striking feature of the modern tax code is the gap between its progressive rate structure and its actual impact. While the official rate table appears to tax the rich at much higher rates than the middle class, the reality is quite different. The code contains numerous "loopholes" that allow wealthy taxpayers to significantly reduce their effective tax rates. For example, in 1960, individuals with incomes between $200,000 and $500,000 paid an average tax of about 44%—far below the top rate of 91%. Even more striking, eleven millionaires paid no income tax at all that year. These disparities arise from special provisions in the tax code—the tax-exempt status of municipal bonds, favorable treatment of capital gains, percentage depletion allowances for oil companies, and many others. The complexity of these provisions means that expensive professional advice is required to navigate the system, giving the wealthy another advantage over ordinary taxpayers. The evolution of our tax system reflects a fundamental tension in American society—between our egalitarian ideals and our reverence for wealth and success. As Louis Eisenstein noted in his book "The Ideologies of Taxation," "Taxes are a changing product of the earnest effort to have others pay them." The income tax, despite its flaws, remains our most significant attempt to balance the competing demands of revenue collection, economic growth, and social equity.

Chapter 4: The Texas Gulf Sulphur Case: Ethics and Information

On April 16, 1964, the Texas Gulf Sulphur Company announced a major discovery—one of the richest mineral deposits ever found in North America. Located near Timmins, Ontario, the strike contained vast quantities of copper, zinc, and silver worth hundreds of millions of dollars. When news of the discovery reached the public, Texas Gulf stock soared from about 30 to over 58 within days. But there was a problem. For months before the announcement, company insiders had been quietly buying Texas Gulf stock and options. The story began in November 1963, when the company's first drill hole at the site revealed extraordinarily rich mineral content. Though only a single hole had been drilled, geologists at the scene were excited by what they saw. Within days, several company officers began purchasing shares. As drilling continued through the winter and spring, more insiders joined in, some even tipping off friends and relatives. The Securities and Exchange Commission took notice. In 1966, it filed a landmark lawsuit against Texas Gulf and thirteen of its officers and employees, charging them with violating Rule 10B-5 of the Securities Exchange Act, which prohibits trading on material non-public information. The case raised a fundamental question: When does information about corporate developments become public enough that insiders can legally trade on it? The trial revealed fascinating details about the discovery and the subsequent trading. Kenneth Darke, the geologist who supervised the initial drilling, had been so impressed by the core samples that he immediately called his superiors. Word quickly moved up the corporate ladder. Charles Fogarty, an executive vice president, purchased 300 shares of Texas Gulf stock on November 12, the very day he learned of the discovery. Other officers followed suit in the coming days and weeks. When rumors of the strike began circulating in Canadian newspapers in April, Texas Gulf issued a press release on April 12 describing the findings as inconclusive. Four days later, after more drilling confirmed the enormity of the discovery, the company held a press conference announcing "a major strike." Between these two announcements, several more insiders purchased stock. This case teaches us that corporate information belongs to all shareholders equally. Executives entrusted with confidential information have a fiduciary duty not to use it for personal gain before public disclosure. As the court noted, the integrity of securities markets depends on all investors having equal access to information that affects stock prices. When you're privy to valuable non-public information, remember that using it for personal advantage isn't just legally risky—it undermines the trust that makes markets function efficiently for everyone.

Chapter 5: Xerox: Innovation Through Persistence

In a modest kitchen above a bar in Astoria, Queens, an obscure inventor named Chester F. Carlson created a process that would revolutionize office work worldwide. On October 22, 1938, after months of experiments, Carlson and his assistant Otto Kornei successfully transferred the message "10-22-38 Astoria" from one piece of paper to another using a process Carlson called electrophotography. This humble beginning would eventually transform into xerography—"dry writing"—and create one of the most spectacular business success stories of the 20th century. For years, Carlson tried unsuccessfully to sell his invention to major office-equipment companies. Finally, in 1944, he convinced Battelle Memorial Institute, a non-profit research organization, to develop the technology in exchange for a share of future royalties. In 1946, a small Rochester photographic paper company called Haloid became interested in the process. Haloid's president, Joseph C. Wilson, and a young lawyer named Sol Linowitz visited Battelle to see a demonstration. "We went to Columbus to see a piece of metal rubbed with cat's fur," Linowitz later recalled. That visit led to an agreement giving Haloid rights to Carlson's process. Developing xerography into a commercial product proved enormously challenging. Between 1947 and 1960, Haloid spent about $75 million on research—twice what it earned from regular operations during that period. The company's executives took most of their pay in stock, and some even mortgaged their homes to keep the project going. In 1958, the company changed its name to Haloid Xerox, even though no major xerographic product was yet on the market. The breakthrough came in 1959 with the introduction of the Xerox 914, the first automatic xerographic office copier. The machine could make copies of virtually any document on ordinary paper at the rate of one copy every six seconds. The 914 was an immediate success, and Xerox's fortunes soared. From sales of $33 million in 1959, the company grew to $500 million by 1966. Anyone who bought Haloid stock in 1955 and held it until 1967 saw their investment grow 180 times in value. What made Xerox remarkable wasn't just its technological innovation but its corporate philosophy. Under Wilson's leadership, Xerox demonstrated an unusual commitment to social responsibility. "To set high goals, to have almost unattainable aspirations, to imbue people with the belief that they can be achieved—these are as important as the balance sheet, perhaps more so," Wilson once said. The company donated a significantly higher percentage of its pre-tax income to charitable causes than most large corporations and took public stands on controversial issues like supporting the United Nations. The Xerox story demonstrates that business success and social responsibility can go hand in hand. By focusing on long-term value creation rather than short-term profits, and by recognizing obligations beyond shareholders to include the broader community, Xerox created both economic and social value. As you build your own career or business, remember that the most enduring enterprises are those that serve a purpose beyond mere profit-making. True innovation requires not just technical brilliance but the persistence to overcome setbacks and the vision to see how your work can positively impact society.

Chapter 6: The GE Price-Fixing Scandal: Communication Breakdown

In the early 1960s, General Electric found itself embroiled in one of the most damaging price-fixing scandals in American corporate history. Between 1956 and 1959, GE executives had participated in secret meetings with competitors to fix prices on electrical equipment worth over $1.75 billion annually. When the conspiracy was uncovered, seven executives from GE and other companies were sentenced to jail terms, and the companies paid millions in fines and damages. What made the case particularly fascinating was that GE had a clear, well-publicized policy forbidding exactly the kind of behavior its executives engaged in. The company's "Directive Policy 20.5" explicitly prohibited price-fixing and other anti-competitive practices. Yet despite this policy, dozens of managers systematically violated both company rules and federal antitrust laws. During the subsequent investigations and trials, a disturbing pattern emerged. When questioned about their actions, many GE managers claimed they believed the company actually expected them to fix prices while maintaining the appearance of following the official policy. One executive testified that his superior had told him, "I don't want to know what you're doing, but I expect you to meet the competition." Another reported being told to "be careful" and "don't get caught." The breakdown occurred at multiple levels. Top executives issued the policy but failed to ensure it was implemented. Middle managers received mixed signals—formal directives prohibiting price-fixing alongside implicit pressure to maintain market share and profits by any means necessary. Lower-level employees saw their superiors engaging in illegal activities and assumed this was acceptable behavior despite official statements to the contrary. Perhaps most revealing was the testimony of one manager who explained that he had interpreted Directive Policy 20.5 as meaning "don't fix prices, but don't lose business either." When these contradictory demands proved impossible to reconcile legitimately, he and others chose to violate the letter of the policy while believing they were honoring its spirit by protecting GE's market position. This case illustrates the critical importance of aligning formal policies with actual organizational expectations. As management scholar Chris Argyris later observed, organizations often operate with two distinct sets of rules: their "espoused theory" (what they say they do) and their "theory-in-use" (what they actually do). When these diverge significantly, employees face impossible ethical dilemmas, and organizations risk catastrophic failures of integrity. When you lead teams or organizations, remember that your actions speak louder than your written policies. If you pressure employees for results without providing ethical means to achieve them, you create the conditions for misconduct. The GE case teaches us that integrity requires consistency between what we say and what we do, between the values we proclaim and the behaviors we reward. Without this alignment, even the most carefully crafted ethical guidelines become meaningless.

Chapter 7: Financial Decision-Making: The Psychology Behind It

On a crisp autumn day in 1929, Jesse Livermore sat in his luxurious office overlooking the Manhattan skyline. As the stock market began its historic crash, Livermore wasn't panicking—he was profiting. Having anticipated the collapse, he had placed massive short positions and was now watching his fortune grow by millions as others lost everything. Livermore, perhaps the greatest speculator of his era, understood something fundamental about markets: they are driven not by rational calculations but by human psychology. Livermore's story illustrates one of the most persistent paradoxes in finance. Despite sophisticated mathematical models and powerful computers, financial markets remain stubbornly unpredictable because they reflect the collective decisions of human beings subject to fear, greed, and cognitive biases. The 1929 crash didn't occur because economic fundamentals suddenly changed but because investor psychology shifted from irrational exuberance to panic. This psychological dimension of finance manifests in numerous ways. Consider the phenomenon of "herd behavior." In 1954, when the Ford Motor Company decided to issue new common stock, investors rushed to buy it simply because others were doing so. The stock market, led by automobile shares, "gyrated upward so frantically that Congress investigated it." No significant change in Ford's business prospects justified this enthusiasm—it was purely a social contagion. Another psychological factor is overconfidence. A study of investment managers found that 74% believed they could consistently outperform the market average, despite overwhelming evidence that this is mathematically impossible for most of them. This overconfidence leads to excessive trading, which typically reduces returns. As one Wall Street veteran observed, "After more than a decade of more or less constant profits to yourself and your customers, you get to think you're pretty good. This break exposed a weakness." Perhaps most insidious is the tendency toward confirmation bias—seeking information that supports our existing beliefs while ignoring contradictory evidence. When the Texas Gulf Sulphur Company discovered a major ore deposit in 1963, insiders who bought stock before the public announcement weren't just acting unethically; they were demonstrating a common psychological pattern. They believed they deserved special rewards for their insight and rationalized their actions accordingly. Understanding these psychological factors doesn't just help explain market behavior—it can improve your own financial decision-making. By recognizing your tendency toward emotional reactions, you can implement safeguards like predetermined investment rules. By acknowledging your cognitive limitations, you can seek diverse perspectives before making major financial commitments. And by studying historical patterns, you can develop the emotional resilience needed to weather market fluctuations. As Joseph de la Vega wrote in his 1688 book on the Amsterdam stock exchange, "It is foolish to think that you can withdraw from the Exchange after you have tasted the sweetness of the honey." The psychology of financial markets hasn't fundamentally changed in over three centuries—only by understanding it can you hope to navigate it successfully.

Summary

The true value of business lies not in formulas or theories but in the stories of triumph and failure that reveal timeless principles about human nature and organizational behavior. From the stock market panic of 1962 to the Edsel disaster, from Xerox's remarkable rise to GE's ethical collapse, these narratives demonstrate that business success depends as much on understanding psychology and ethics as on mastering finance and technology. Take time to study both successes and failures in your field, looking beyond superficial explanations to understand the underlying patterns. Develop a healthy skepticism toward market euphoria and popular business theories that promise easy answers. Remember that organizational culture—what people do when no one is watching—matters more than formal policies or public statements. Most importantly, recognize that in business as in life, character and integrity create lasting value, while shortcuts and ethical compromises inevitably lead to downfall, no matter how clever or profitable they may initially appear.

About Author

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John Brooks

John Brooks (1920–1993) was an award-winning writer best known for his contributions to the New Yorker as a financial journalist. He was also the author of ten nonfiction books on business and finance, a number of which were critically acclaimed works examining Wall Street and the corporate world. His books Once inGolconda, The Go-Go Years, and Business Adventures have endured as classics. Although he is remembered primarily for his writings on financial topics, Brooks published three novels and wrote book reviews for Harper’s Magazine and the New York Times Book Review.

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