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to invest in the start-up of Intel, Buffett had never trusted technology companies as investments. Technology companies came and went, their products often made obsolete. Now, his interest piqued, he bought a hundred shares of Microsoft, which, to him, was like eating a single Cheerio. He couldn’t bring himself to buy any Intel, even though he sometimes bought a hundred shares just to keep track of a company. Grinnell College had made a lot of money from its Intel stock but had already sold it.10 Buffett himself would never buy stock like Intel that depended so much on future growth and that he didn’t fully understand. But he did invite Gates to the next Buffett Group meeting. Soon thereafter he had gotten the phone call from Don Feuerstein and Tom Strauss and for the next two months had thought of nothing but the miseries of Salomon.

In October, released from the conference rooms of 7 World Trade Center and the browbeatings of Congressmen and regulators for a few days, he went to Vancouver, British Columbia, for the latest meeting of the Buffett Group. FMC Chairman Bob Malott and his wife, Ibby, who were the planners, appreciated Native American culture and had arranged a “potlatch dinner” and Native American dance one evening. The person who introduced the dancers explained that the ceremony had been condensed from its usual length of three days. For the next several hours, the Buffett Group twitched and yawned on hard wooden benches with no refreshments and no escape. Roxanne Brandt leaned over to Buffett at one point: “Which is worse, this or Salomon?” she whispered. “This is worse,” Buffett replied.11

Bill Gates avoided the evening of the dancers; he was coming to the meeting for only the one particular session that interested him. The Buffett Group was going to review the ten most valuable companies in 1950, 1960, 1970, 1980, 1990—and how the list had changed. What gave a business a durable competitive advantage? What gave companies an edge, and why didn’t they keep it?—because most didn’t.

Arriving late because his new seaplane had been delayed by fog, Bill and his girlfriend, Melinda French, slipped into the room unobtrusively from the rear. Melinda had thought that they were going to leave fairly early. However, after about the fourth slide, she realized that maybe they were going to stay.12 Tom Murphy and Dan Burke, who both served on IBM’s board, started talking about why IBM, the leader in hardware, hadn’t gone on to become the leader in software. Buffett said, “I think we’ve got somebody here who can add a little something to this discussion.” Everybody turned around and saw Bill Gates.13 The conversation continued. If you were Sears in 1960, why couldn’t you keep getting the smartest employees and selling at the best prices? What was it you couldn’t see that prevented you from remaining the leader? Most of the proposed answers, regardless of the company, revolved around arrogance, complacency, and what Buffett called the “Institutional Imperative”—the tendency for companies to engage in activity for its own sake and to copy their peers instead of trying to stay ahead of them. Some companies didn’t bring in young people with fresh ideas. Sometimes managements weren’t attuned to tectonic shifts in their industry. Nobody suggested these problems were easy to cure. After a while Buffett asked everyone to pick their favorite stock.

What about Kodak? asked Bill Ruane. He looked back at Gates to see what he would say.

“Kodak is toast,” said Gates.14

Nobody else in the Buffett Group knew that the Internet and digital technology would make film cameras toast. In 1991, even Kodak didn’t know that it was toast.15

“Bill probably thinks all the television networks are going to get killed,” said Larry Tisch, whose company, Loews Corp., owned a stake in the CBS network.

“No, it’s not that simple,” said Gates. “The way networks create and expose shows is different than camera film, and nothing is going to come in and fundamentally change that. You’ll see some falloff as people move toward variety, but the networks