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International Business Machines Corporation lore says that, in the early
1960s, CEO Tom Watson Jr. summoned to headquarters an executive
who was responsible for a venture that lost $10 million. Watson, whose
fierce temper was legendary, asked the man if he knew why he’d been
called in. The man said he assumed he was being fired. Watson responded:
“Fired? Hell, I spent $10 million educating you. I just want to be sure you
learned the right lessons.”

There have been enough failures associated with financial engineering
that it’s worth distinguishing, in Warren Buffett’s words, acceptably
aggressive accounting from attempts at alchemy. In the end, as
Buffett once wrote his shareholders, alchemy fails. Financial alchemists
may become rich, but gullible investors rather than business achievements
will usually be the source of their wealth. We’re interested in spotting
the alchemists and helping both executives and investors head off
inherently flawed financial engineering strategies before they wreak
havoc.

“More often than not, failure in innovation is rooted in not having asked
an important question, rather than having arrived at an incorrect answer,”
Clay Christensen has observed. Unfortunately, the internal process safeguards
that we proposed in chapter 10 are no guarantee that the important
questions will be asked about unfounded assumptions, unattainable
forecasts, untreated deal fever, or any one of the many other individual
and organizational tendencies that can lead to ill-conceived strategies. In
the heat of the moment, even the most experienced executives and the
strongest safeguards can fail.

We love the printed word. But, in this age of iPod’s, there are times when an audiobook is called for–especially when read by a brilliant narrator. Thanks to the folks at Brilliance Audio, here’s a broad sampling of “BillionDollar Lessons,” as read by Jim Bond. Click on “Read More” to listen to key ideas and selected stories from the audiobook version of Billion-Dollar Lessons.

Our research looks at the data that others have ignored. Most business research studies successful companies and tries to generalize from their traits, tactics or strategies. But a serious question always lingers: What about companies that tried to do the same thing as the winners and failed? And, if they failed dramatically, they might not […]

We take the approach that nobody is as smart as everybody, and, fortunately, we have a lot of smart friends and colleagues. We imposed shamelessly on them all in the service of this book, and they responded like champs. This book wouldn’t be nearly as good without their ideas and support. We thank and acknowledge […]

Robert A. Lovett, President Harry S. Truman’s defense secretary during much of the Korean War, observed, “Good judgment is usually the result of experience. And experience is frequently the result of bad judgment.” Throughout Billion-Dollar Lessons, we strive to help shorten the normal managerial learning cycle by reporting on the bad judgment of otherwise talented […]