When someone takes their existing business and tries to transform it into something else - they fail. In technology that is often the case. Look at Kodak: it was the dominant imaging company in the world. They did fabulously during the great depression, but then wiped out the shareholders because of technological change.

The quote “When someone takes their existing business and tries to transform it into something else – they fail. In technology that is often the case. Look at Kodak: it was the dominant imaging company in the world. They did fabulously during the great depression, but then wiped out the shareholders because of technological change” by Charlie Munger offers a critical observation about the challenges of business transformation, especially in technology-driven industries. Munger, the longtime partner of Warren Buffett and vice chairman of Berkshire Hathaway, highlights that companies deeply rooted in a specific business model often struggle to successfully pivot or reinvent themselves when disruptive technologies emerge.

Munger uses Kodak as a prime example. Once a giant in the photographic film industry, Kodak thrived for decades but failed to adapt effectively to the rise of digital photography. Despite early involvement in digital technology, Kodak’s entrenched focus on its traditional film business made it difficult for the company to pivot decisively. As a result, Kodak’s shareholders suffered heavy losses when the company’s core market was disrupted, illustrating the risks companies face when they resist change or try to transform without a clear strategy.

The origin of this quote comes from Munger’s speeches and writings on investing and business strategy, where he frequently emphasizes the importance of adaptability and understanding industry shifts. Known for his sharp wit and practical wisdom, Munger often points out the pitfalls of complacency and the dangers of clinging to outdated business models in rapidly evolving markets. His insights draw from decades of experience analyzing companies and industries.

Ultimately, Munger’s quote serves as a cautionary tale for business leaders and investors. It stresses the importance of recognizing technological change, being willing to innovate authentically, and understanding that superficial transformations rarely succeed. For companies to survive disruptive eras, they must embrace true evolution rather than attempting to simply retrofit old models to new realities.