January 5, 2009 — I’m reading a fascinating biography of Warren Buffett right now(Snowball).
So Warren Buffett, Bill Gates, and a few other gazillionaires are sitting around at a resort in British Columbia drinking some cokes and shooting the shit. It is 1990, George Bush is president and the Internet revolution is still a few years away.
The trillionaires are having a discussion about what companies will have a banner decade in the 90’s. Someone mentions Kodak. Bill says Kodak is dead. His nutshell description of why Kodak is dead has to do with photography shifting from film to digital storage. Bill is simplyfying to say that all Kodak does is make film. Even though they are the best at it, that doesn’t matter because more and more pictures are being stored on digital media, not film. Bill tells his friends: “you get rid of film so knowing how to make film becomes absolutely irrelevant.”
Maybe I’m overplaying this, but I thought it was a very sharp insight, concisely said. You can apply the pattern to a number of different industries:
Cars: “you get rid of horses so knowing how to make horseshoes becomes absolutely irrelevant.”
Cell phones: “you get rid of landlines so knowing how to make landlines becomes absolutely irrelevant.”
Music: “you get rid of CDs so knowing how to make cds becomes absolutely irrelevant.”
Yet to happen(and may or may not happen, just trying to illustrate the thought process):
“you get rid of Facebook/Twitter/Myspace so knowing how to make Facebook/Twitter/Myspace apps becomes absolutely irrelevant.”
You could probably even apply it to Microsoft itself:
“you get rid of desktop apps so knowing how to make desktop apps becomes absolutely irrelevant.”
This is a simplification certainly. Things take time to disappear and if you’re the market leader there is still good money to be made. But if you want to stick around you certainly have to adopt to big swings like this. Microsoft is obviously trying hard to replace get better at “internet apps” while still cashing in on its dominance of “desktop apps”. Time will tell how well they do(I’d personally likely bet on them succeeding).
I think it would be a good excercise for startup founders to try and apply this pattern to their own business. Are you making something that will become absolutely irrelevant? When you’re just starting out, you don’t have a whole lot of room for error.
Comment from Jeremy: i just finished reading through the book, and thoroughly enjoyed it as well. My second favorite tidbit was when Buffett and Gates were with Gates parents and a group of other biz people, and Gates father asked everyone what was the single biggest factor to each person's success. Bill Gates and Buffett's responses were the same: "Focus"
Note: I imported this post from my original Wordpress blog.