Business Adventures tells stories about important moments in different companies and how those moments defined their future. This microbook is a wonderful collection of American business adventures that will teach you with the mistakes and the correctness of others. You will learn about how greed can lead people and businesses to commit fraudulent attitudes in pursuit of more profit. But you will also understand that there are still good people working in search of a better world. This microbook is based on Bill Gates' favorite business book. Want to know more about the American business world? You'll learn in 12 minutes!
Unfortunately, greed is one of the primary forces in the business world. It's a great motivator and has become more frequent in the corporate world. Many companies are destroyed by greed and even the American income tax system has fallen victim to this evil.
At the outset of the introduction of US federal income tax in 1913, the system was fair and had good intentions. Everyone followed the rules and were taxed according to what they could afford. But over time, the richest and greedy have found holes in the law to avoid paying according to the rules. The rates went up, and with them, the number of tax evasion measures practiced by the rich.
At the outset, tax rates varied from 1% to 7%, without the evasion holes, and without decreasing payments. As early as 1944, they ranged from 23 to 94 percent. From 1920 onwards, evasion began, allowing those with higher incomes to avoid paying the full amount they owed.
With the help of financial advisors specializing in tax laws, corporations could take advantage of loopholes as well as the wealthy. That meant they could end up paying the same percentage as middle-class payers.
For average people, the rules are so many and so confusing that it is almost impossible to take advantage of the existing loopholes and, as most cannot afford a financial advisor, income tax has become unfair and expensive. This system resisted reform for years, and most attempts to fix the problem only created more holes.
There is no clear solution to this problem, but American taxpayers are among the most obedient in the world in relation to income tax. They pay their taxes even when they are broke, simply because it is their obligation and without money or not, financial funds are vital to the country. Unfortunately, greed is a powerful force that corrupts people and causes them to abuse the system to enrich themselves.
With greed taking over many businesses, it is no surprise that some will disobey the law for financial gain. This was the case of 13 members of the Texas Gulf Sulfur (TGS), who engaged in insider trading, a direct violation of the Securities Act, approved by Congress in 1934. Before the TGS incident, the government didn't care about violations of this law, since it was a bit obscure, but this case in 1960 changed everything.
Insider trading is the act of using internal information, which is not available to the public, to make money from your own company's stock. In that case, TGS employees had confidential information about finding a valuable mine and knew that when it became public, the company's stock value would go up. These members bought shares of the company before the information on the mine was made public, knowing that they would make substantial financial gains.
Before the Securities Law, this behavior was fully legalized, and even after its approval, insider trading was still common because the law was never enforced. But the Securities and Exchange Commission (SEC) ruled that these TGS employees had given the perfect opportunity to end this illegal behavior.
TGS members not only bought shares using internal information, but the company had also made press releases to mislead the public about the value of the mine until they were ready to reveal the real value. That was also a violation of the law and offenders were forced to give back the funds they gained from inside information. SEC brought the case to trial and, despite having managed to convict only 2 of the defendants, one appeal overturned that decision and declared all 13 involved guilty.
The result of this is that everyone on Wall Street knows that such behavior will be punished by law. Of course, this doesn't prevent people from using insider information when they believe they won't be caught, as for some the gains outweigh the risks of getting caught. But the SEC is ready to prosecute anyone caught in violation of the Act.
A recurring rule in business is to know and obey your market. There are countless stories of people who haven't done so and are suffering the consequences. One of the most notable stories about this is that of the Ford automaker and its failed Edsel car. This project started with the intention of following the rules, but in the end, economic and market factors were ignored, and the car had negative results.
In the 1940s, Ford mainly produced low-priced cars, but in 1948 it decided it was time to get into the mid-car market. Ford executives realized that when consumer incomes rose, they stopped buying Ford cars to buy more expensive brands. Ford was losing consumers to its competitors, and it was time to change.
In 1955, they began surveying their teams of design and marketing specialists and invested money in the development of a new project, the Ford Edsel. When the car was a failure two years later, the team claimed that it had designed a vehicle to satisfy its customers and that it didn't understand what had gone wrong. But the problem was that Ford wasn't paying attention to public opinion and market trends.
They designed the Edsel based on the opinions of their team members, without regard to public opinion. They named the car against the public and the Ford family's taste and failed to notice that the market was headed toward the smaller, cheaper cars. When the new model came on the market, it wasn't just out of fashion, but also out of the price range preferred by consumers. Also, the car was poorly built and had mechanical problems.
As a result, the Edsel model failed to meet its sales targets, and Ford lost about $ 350 million. Fortunately, they were rich and successful enough to deal with this loss, and from that experience, they learned a valuable lesson. But not all companies can overcome an error of this magnitude.
While there are greedy people with bad intentions in the business world, some are in the market to help each other. Although they are in the market to make a profit, they can commit to do so, while intentionally avoiding unethical attitudes. That is the case of David Lilienthal, and his company, which has become a means to make the world a better place.
Lilienthal was a public administrator who worked for the Tennessee Valley Authority and later became the chairman of the United States Atomic Energy Commission. This happened during Franklin's New Deal program. D. Roosevelt, who sought to reduce unemployment, assist the poor, and repair the damage caused by the Great Depression. Lilienthal was an advocate of New Deal ideals and was often at odds with Wall Street. When he retired, he didn't interrupt his career. Eventually, he became a corporate consultant and successfully negotiated deals, but he wanted to do more than that.
All his experience led him to believe in the positive force business could have to provide jobs and improve the world both socially and environmentally. With this, he decided to build his own business, called the Resource and Development Corporation. Through this business, he built dams, facilitated water conservation and clean cities in the United States and around the world. His business was not driven by greed, but by a sincere desire to improve the world.
This example gives hope that there are good people in the business world and that greed doesn't have to be everything. While the Resources and Development Corporation still makes a profit and allows investors to earn financially, it is also a public works group that strives to improve the world.
As there are numerous people acting with selfishness and greed, it can be difficult to trust someone in the business world. When businesses want to protect their secrets, it can be even harder to trust someone. Sometimes this mistrust may go too far, and the rights of employees may be infringed.
Chemical engineer Donald W. Wohlgemuth needed to fight to get hired by a rival company of American aerospace manufacturer B.F. Goodrich Company.
Wohlgemuth's motivation to leave Goodrich and take up employment at the International Latex Corporation had nothing to do with the desire to undermine or weaken his former company. His new job at Latex was closer to his wife's family, he had been promoted, and his salary would rise. So it's no wonder he took the opportunity.
Meanwhile, the company Goodrich refused to let him leave because they were afraid that Wohlgemuth would divulge the secrets of the development of the space suit to Latex. Besides, it was possible that Latex had hired Wohlgemuth to seize the opportunity to obtain Goodrich's secrets.
Goodrich brought his employee to court in an attempt to legally prevent him from accepting employment with Latex or any competitor.
That would end Wohlgemuth's career and make him the exclusive property of Goodrich. However, Latex argued that they didn't want Goodrich's secrets, but rather the experience and quality of the employee. In the end, Goodrich couldn't legally prevent Wohlgemuth from working on latex suits. They only got an injunction to legally prevent him from sharing the secrets with his new company.
The Wohlgemuth case raises many questions from many scientists and developers, who question whether they are trapped in their current employers for knowing business secrets. In fact, as long as these people act honestly, they won't break any law when they change businesses. If you are a professional, avoid sharing anything that is not your intellectual property, as this can harm your old company.
One of the most frightening examples of greed in the business world came in the 1960s when a series of fraudulent bids and price-fixing scandals took over the electronics industry. The companies involved conspired together to force the consumer to pay absurd amounts for their products. They all agreed to set prices at the same rate, which eliminated competition and left consumers no choice but to pay the higher prices.
General Electric (GE) was one of the companies involved in this corruption scheme. Responsible executives held a dialogue about pricing rules and other questionable policies.
While they were explaining to their officials the federal regulations on pricing policy, they blinked at each other. This was the way executives found to communicate non-verbal to their employees that they should disregard these rules and continue to practice pricing methods.
This gave people a chance to use the misunderstanding between bosses and employees as an excuse, which would blame the company and put it on the employees themselves. Dishonest practices like this put many workers in trouble, even if they were following orders from their superiors. Leaders were able to blame their greedy practices on their subordinates and even punish them with wage cuts and other penalties.
GE operated like this for many years, facilitating illegal behavior such as fixed-pricing, while pretending to be an example in the business world. They made a point not only of maintaining the pricing culture but also of getting away with it. Even though they were discovered, they escaped with a warning and nothing more. The sad truth is that many companies will try to escape unethical practices if rewards are greater, because greed is still an essential force in business.
People are the heart of the business, and that is why they are always changing. The stock market is an excellent example of the steady stream of human emotions, opinions, and motivations. When there is confidence, the market remains stable. But when things are uncertain for some reason, there is a lot of confusion. This was what happened in 1962 when there was a stock market crash.
It is not yet known exactly why the market sank on May 28, but it was probably a combination of factors. Also, thanks to the high number of transactions going on, there was a delay in reporting the problem, which kept things in a state of continuous confusion.
Whatever the reason, on that particular day, the market opened up and began to fall. As it fell, people began to panic and sold their stock at any price to avoid further losses. Everyone was struggling to take care of their interests. The reports were late, and the numbers seemed imprecise, and at that moment no one was sure of the value of anything. The delay made the audience hysterical.
The market only stabilized a few days later because of the careful management of AT & T shares and the support of mutual funds that did not sell their shares and managed to hold onto the market by spending a lot of money on cheap stocks that were undervalued by the downturn in the market. The market only recovered because of the people who managed to remain calm during the panic. When people are the center of something, emotions play an important role in their functioning. If all the stockholders had been able to think rationally, the market would probably stabilize in a few hours, but uncertainty and panic made people lose their minds.
Greed is an unfortunate motivator in the business world and makes many people and corporations dishonest and disloyal. But not everyone is greedy or bad. Some have ethical principles and seek to use their companies to make the world better in some way. The stories in Business Adventures are examples of what's good and bad in the American corporate world.
People are the heart of the business, and that's why things can go wrong. Whether they break the rules intentionally or because they make a mistake, individual emotions and motivations make all the difference. It can be distorting a system like federal income tax or making a judgmental mistake based on your pride, leading your business to failure.
But individuals may also want to make a difference and change the world for the better. Each story has valuable lessons with teachings that apply to the business world of both the present and the future.
If you liked this microbook you might also like our microbook based on From Zero to One. Check it out!
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