The Kodak Conundrum

Kodak's story begins with innovation. Founded in 1888, the company revolutionized photography, making it accessible to the masses. For decades, Kodak dominated the market, becoming synonymous with capturing memories. Its yellow-and-red logo was as recognizable as Coca-Cola's.

But success bred complacency. Kodak developed habits - ways of thinking and operating - that served it well in the age of film. These habits were comfortable, profitable, and seemed unbreakable. Like a daily routine that becomes second nature, Kodak's business practices became ingrained, invisible, and unquestioned.

The irony is that Kodak invented the digital camera in 1975. However, instead of embracing this new technology, the company's ingrained habits led it to shelve the invention. Why? Because it threatened their existing business model. Kodak was so used to selling film, chemicals, and paper that it couldn't imagine a world without them.

This is where Buffett's quote becomes painfully relevant. Kodak's habits - its focus on film, its resistance to change, its belief in its own invincibility - were too light to be felt. They didn't seem like constraints; they felt like the natural order of things. But as the digital revolution gained momentum, these habits became heavy chains, dragging the company down.

Think of it like a frog in slowly heating water. At first, the warmth is comfortable, even pleasant. By the time the frog realizes the danger, it's too late to jump out. Kodak was that frog, and its habits were the slowly heating water.

By the time Kodak realized the severity of the digital threat, it was too late. The company tried to pivot, but its decades-old habits were too ingrained. It was like trying to teach an old dog new tricks - possible, but incredibly difficult and time-consuming. In a rapidly changing market, time was a luxury Kodak didn't have.

The result? Kodak filed for bankruptcy in 2012, a shadow of its former self. A company that once employed over 145,000 people and was worth $31 billion saw its workforce shrink to 8,000 and its value plummet.

This case study isn't just about technological disruption; it's about the danger of unexamined habits in business and investing. It's easy to develop habits based on past successes, but in a changing world, yesterday's winning formula can become today's losing strategy.

For investors, the lesson is clear. Don't become so attached to your investment theses or strategies that they become unbreakable habits. The market is always changing, and what worked yesterday might not work tomorrow. Stay flexible, question your assumptions, and be willing to adapt.

Habits in investing - whether it's always buying blue-chip stocks, avoiding certain sectors, or sticking to a particular valuation method - can be comforting. They simplify decision-making and provide a sense of control. But they can also blind you to new opportunities or emerging risks.

In the end, Kodak's story reminds us that success can be the enemy of innovation. It's a call to constantly examine our habits, in business and investing alike. Because by the time those chains of habit become heavy enough to notice, they might already be too heavy to break.