Business is like the game of Poker
There is a way to lose at the Big Table that is worse than being dealt bad cards, and worse even than playing good cards badly. It is being dealt the future and not recognizing it — holding cards so far ahead of the game that you cannot read them, and letting the man across the table read them for you. That is the story of Xerox, and it is the most expensive failure of recognition in modern business.
In the 1970s, Xerox maintained a research center in Palo Alto, California, staffed with some of the finest minds in computing. What those researchers built, inside a company that made its money selling and leasing photocopiers, reads today like a description of the modern world: a graphical interface of windows and icons instead of typed commands, a mouse to point with, Ethernet to connect machines together, the laser printer. Xerox did not merely have good cards. It had, years before anyone else, the cards the entire next game would be played with.
In 1979 a young Steve Jobs toured the research center and saw the graphical interface demonstrated. Jobs was not a researcher and had invented none of it. He simply understood, immediately and completely, what it meant — that ordinary people would use computers this way — and he went home and built it, first into Apple’s Lisa and then into the Macintosh. Other companies built fortunes on Xerox’s remaining inventions as well. Xerox commercialized the laser printer and little else of consequence from that laboratory. The rest of the future it gave away, mostly without meaning to, one visitor and one departing researcher at a time.
It is tempting to call the Xerox executives fools, and history largely has. I would call them something more common and more instructive: men playing a different game. Their scoreboard was copiers — machines sold, leases signed, cost per copy. Measured by that scoreboard, the laboratory was an expense indulged by a rich company, staffed by brilliant people building toys. An asset that does not fit the game you are currently playing does not look like an asset at all. It looks like overhead. That is why the future so often gets invented inside the company least able to see it: the incumbent’s whole organization, its incentives and its habits of measurement, is tuned to the present hand.
I have seen modest versions of this in my own working life, in law offices and land deals. The firm that sat for years on a specialty its clients begged for and never built a practice around it. The developer holding a parcel everyone called worthless, who could not see it was worthless only under the rules of the last game, not the next one. In my development years I learned that half of valuation is imagination: the same dirt, the same building, the same client list is worth one figure to the man who sees only its present use, and a very different figure to the man who sees the use that is coming. Xerox’s failure was not a failure of intelligence or of resources. It was a failure of imagination at exactly the point where imagination was the whole game.
Notice, too, what Jobs actually contributed, because it completes the lesson. He contributed recognition, and recognition turned out to be worth more than invention. At the Big Table, the player who first understands what a new card is worth — his own or someone else’s — collects the pot that the card’s creator dealt away. This should make every established business slightly paranoid, in the healthy sense: somewhere in your company there may be a laboratory, a sideline, a customer request, a piece of property, a skill your people have that the market has not yet priced. Its value will not announce itself on your current scoreboard.
Here is the takeaway. Once a year, walk through your own business the way Jobs walked through that laboratory — as an outsider with no loyalty to the current game. Inventory what you own that you have never seriously tried to sell: the byproduct, the sideline, the expertise, the asset carried at its old use. For each one, ask the only question that mattered in Palo Alto: what would a hungry competitor build with this, if it were his? Xerox’s researchers dealt their company the future, face up, on its own table. The tragedy is not that Xerox folded the hand. It is that no one in the room ever looked at the cards.