Xerox had an attractive financial model focused on leasing and servicing machines and selling toner, rather than big-ticket equipment sales. For Xerox and its salespeople, this meant steadier, more recurring income. With a large baseline of recurring revenues, budgets were more likely to be met, which allowed management to give accurate guidance to stock analysts. For customers, the cost of leasing a copier is accounted for as an operating expense, which doesn’t usually entail upper management approval as a capital purchase might. As a near-monopoly manufacturer of copiers, Xerox could reduce costs by building more of a few standard models. As owner of a fleet of potentially obsolete leased equipment, Xerox might prefer not to improve models too quickly. As Steve Jobs saw it, product people were driven out of Xerox, along with any sense of craftsmanship. Nonetheless, in 1969, Xerox launched one of the most remarkable research efforts ever, the Palo Alto Research Center (PARC), without which Apple, the PC, and the Internet would not exist. The modern PC was invented at PARC, as was Ethernet networking, the graphical user interface and the mouse to control it, email, user-friendly word processing, desktop publishing, video conferencing, and much more. The invention that most clearly fit into Xerox’s vision of the “office of the future” was the laser printer, which Hewlett-Packard exploited more successfully than Xerox. (I’m watching to see how the modern parallel, Alphabet’s moonshot ventures, works out.) Xerox notoriously failed to turn these world-changing inventions into market dominance, or any market share at all—allowing Apple, Microsoft, Hewlett-Packard, and others to build behemoth enterprises around them. At a meeting where Steve Jobs accused Bill Gates of ripping off Apple’s ideas, Gates replied, “Well Steve, I think there’s more than one way of looking at it. I think it’s like we both had this rich neighbor named Xerox and I broke in to steal his TV set and found out that you had already stolen it.
Joel Tillinghast (Big Money Thinks Small: Biases, Blind Spots, and Smarter Investing)