Possible Lessons from Steve Jobs’ Entrepreneurial Journey

(p. 4) GOOD IDEAS TAKE TIME After he was ousted from Apple, Mr. Jobs founded NeXT in 1985. It produced a powerful desktop computer, a stylish black cube, and its initial market was going to be in education. The idea was that the machine would be more than hardware and software; it would also offer content, “a universe of wisdom,” recalls Michael Hawley, a computer scientist who worked closely with Mr. Jobs at NeXT and lived part time in Mr. Jobs’s house, as Mr. Hawley shuttled between California and his post at the M.I.T. Media Lab.
NeXT computers, in Mr. Jobs’s vision, would marry technology and the liberal arts by including digital books, music and art. Mr. Jobs began pursuing the rights to works that could be converted to digital form. He persuaded a few publishers that because they would save the expense of paper, printing and distribution, NeXT should pay a royalty that was a fraction of the cost of a printed book. Mr. Jobs, Mr. Hawley recalled, struck a deal with the Oxford University Press for the complete works of Shakespeare for a royalty of $1 a digital copy.
NeXT’s foray into education fizzled; its machines were too expensive for that market. But Mr. Jobs’s concept and business model for digital media were “the instinct that was translated to Apple with the iTunes store, 99-cents-a-song pricing and all the media offerings that have followed,” Mr. Hawley says.
“When Steve believed in an idea, he was both passionate and patient, scratching away over the years until he got it right,” says Mr. Hawley, a scientist, concert pianist and host of the EG Conference, an annual gathering for technologists, educators and people in media and entertainment.
DON’T DWELL ON MISTAKES Steve Capps, a computer scientist, describes creating the Macintosh, which shipped in 1984, as a constant process of making decisions — part experiment and part product development, with steps ahead mixed with many setbacks. “Steve kind of knew what he wanted, but he didn’t precisely,” says Mr. Capps, who designed software for Macintosh.
Mr. Jobs, Mr. Capps remembers, was the arbiter on countless hardware, software and design choices. “His combination of incisiveness and decisiveness, I think, really explained his success,” Mr. Capps says.
Mr. Jobs was also decisive in recognizing mistakes, even when they were his own. For example, he favored one model of a disk drive — for reading computer programs stored on small, removable so-called floppy disks — while other members of the team championed another design. They kept their disk project going surreptitiously. When they showed him the result, he embraced it. “He turned on a dime,” Mr. Capps says. “Don’t dwell on your mistakes. It’s a great lesson.”
PASSION COUNTS FOR A LOT The relentless intensity and total commitment that Mr. Jobs brought to his work, former colleagues and friends agree, had a simple explanation: he genuinely enjoyed what he did and found it worthwhile.
Andy Hertzfeld, a member of original Macintosh team who is now an engineer at Google, says: “The most important thing that I learned from Steve is to always follow your heart. He believed that the only way to do truly great work is to adore what you are doing.”
Mr. Jobs made a lot of money over the years, for himself and for Apple shareholders. But money never seemed to be his principal motivation. One day in the late 1990s, Mr. Jobs and I were walking near his home in Palo Alto. Internet stocks were getting bubbly at the time, and Mr. Jobs spoke of the proliferation of start-ups, with so many young entrepreneurs focused on an “exit strategy,” selling their companies for a quick and hefty profit.
“It’s such a small ambition and sad really,” Mr. Jobs said. “They should want to build something, something that lasts.”

For the full commentary, see:
STEVE LOHR. “The Power of Taking the Big Chance.” The New York Times, SundayBusiness Section (Sun., October 9, 2011): 4.
(Note: bold in original.)
(Note: online version of the commentary is dated October 8, 2011.)
(Note: the same title, on the same page, was used as heading for two different articles on Steve Jobs–Lohr’s on the left side, and Stross’ on the right side.)

Edison Was Great Inventor; “Jobs Was the Far Shrewder Businessman”

EdisonThomasAlva2012-06-22.jpg “Thomas Alva Edison.” Source of caption and photo: online version of the NYT article quoted and cited below.

I have not read Stross’ books on Jobs and Edison. According to some of the Amazon reviews of the Jobs book, back in 1993 Stross was much more critical of Jobs than he is in the piece below:

(p. 4) I wrote a book about Mr. Jobs in 1993.
. . .
Years later, I wrote a biography of Edison, a person whom Mr. Jobs admired. When you compare the two personalities and their careers, a few similarities emerge immediately. Both had less formal schooling than most of their respective peers. Both possessed the ability to visualize projects on a grand scale. Both followed an inner voice when making decisions. And both had terrific tempers that could make their employees quake.
. . .
Mr. Jobs was the far shrewder businessman, even if he never talked about wealth as a matter of personal interest. When Edison died, he left behind an estate valued at about $12 million, or about $180 million in today’s dollars. His friend Henry Ford had once joked that Edison was “the world’s greatest inventor and the world’s worst businessman.” Mr. Jobs was worth a commanding $6.5 billion.
Mr. Jobs was perhaps the most beloved billionaire the world has ever known. Richard Branson’s tribute captures the way people felt they could identify with Mr. Jobs’s life narrative: “So many people drew courage from Steve and related to his life story: adoptees, college dropouts, struggling entrepreneurs, ousted business leaders figuring out how to make a difference in the world, and people fighting debilitating illness. We have all been there in some way and can see a bit of ourselves in his personal and professional successes and struggles.”

For the full commentary, see:
RANDALL STROSS. “The Power of Taking the Big Chance.” The New York Times, SundayBusiness Section (Sun., October 9, 2011): 4.
(Note: online version of the commentary is dated October 8, 2011, and has the title “The Wizard and the Mortal: Two Sides of Genius.”)
(Note: in the print version, the same title, on the same page, was used as heading for two different articles on Steve Jobs–Lohr’s on the left side, and Stross’ on the right side.)

Stross’ books on Jobs and Edison are:
Stross, Randall E. Steve Jobs & the Next Big Thing. New York: Scribner Publishers, 1993.
Stross, Randall E. The Wizard of Menlo Park: How Thomas Alva Edison Invented the Modern World. New York: Crown Publishers, 2007.

Experts “Produce Poorer Predictions than Dart-Throwing Monkeys”

(p. 219) Tetlock interviewed 284 people who made their living “commenting or offering advice on political and economic trends.” He asked them to assess the probabilities that certain events would occur in the not too distant future, both in areas of the world in which they specialized and in regions about which they had less knowledge. Would Gorbachev be ousted in a coup? Would the United States go to war in the Persian Gulf? Which country would become the next big emerging market? In all, Tetlock gathered more than 80,000 predictions. He also asked the experts how they reached their conclusions, how they reacted when proved wrong, and how they evaluated evidence that did not support their positions. Respondents were asked to rate the probabilities of three alternative outcomes in every case: the persistence of the status quo, more of something such as political freedom or economic growth, or less of that thing.
The results were devastating. The experts performed worse than they would have if they had simply assigned equal probabilities to each of the three potential outcomes. In other words, people who spend their time, and earn their living, studying a particular topic produce poorer predictions than dart-throwing monkeys who would have distributed their choices evenly over the options. Even in the region they knew best, experts were not significantly better than nonspecialists.

Source:
Kahneman, Daniel. Thinking, Fast and Slow. New York: Farrar, Straus and Giroux, 2011.

Tetlock’s book is:
Tetlock, Philip E. Expert Political Judgment: How Good Is It? How Can We Know? Princeton, NJ: Princeton University Press, 2005.

Joe Biden’s Dad Told Him to “Get Up” in Face of Job Loss

Innovative entrepreneurs, through the process of creative destruction, provide us with wonderful new products and services. But sometimes the process also results in job loss. One response to the job loss is to shut down innovation. Another is to preach resilience. Joe Biden’s Dad said “get up.” (The clip is from a talk that Joe Biden gave to the National Press Club on August 1, 2007. The full talk is posted to the C-SPAN web site.)

A mainly similar presentation of the “get up” message is on p. xxii of Biden’s autobiography:
Biden, Joe. Promises to Keep: On Life and Politics. New York: Random House, 2007.

People “Enmeshed in Modern Commerce” Are More Generous

(p. C4) A few years ago, Joe Henrich of the University of British Columbia and his colleagues did a series of experiments in small-scale societies in the Amazon, New Guinea and Africa. They asked people to play the “ultimatum game,” in which a player must decide how much of a windfall he needs to share with another player to prevent the other player from exercising his right to veto the whole deal. The more the small-scale society is enmeshed in modern commerce, the more generous the offers people make. This may shock those who believe in Rousseau’s idea of the “noble savage,” but not those who believe in the virtues of what Montesquieu called “sweet commerce.”
. . .
. . . , though human beings do kind things unrewarded for their neighbors, for reward they also do kind things for strangers: They hand more cash to merchants than they do to beggars.

For the full commentary, see:
MATT RIDLEY. “MIND & MATTER; Which Makes Us Nicer, Team Spirit or Trade?” The Wall Street Journal (Sat., August 27, 2011): C4.
(Note: ellipses added.)

Page 76 of the Henrich et al article has the key result that Ridley summarizes:
Henrich, Joseph, Robert Boyd, Samuel Bowles, Colin F. Camerer, Ernst Fehr, Herbert Gintis, and Richard McElreath. “In Search of Homo Economicus: Behavioral Experiments in 15 Small-Scale Societies.” American Economic Review 91, no. 2 (May 2001): 73-78.

Alexander Field Claims 1930s Were “Technologically Progressive”

GreatLeapForwardBK2012-06-22.jpg

Source of book image: http://yalepress.yale.edu/images/full13/9780300151091.jpg

(p. 1) UNDERNEATH the misery of the Great Depression, the United States economy was quietly making enormous strides during the 1930s. Television and nylon stockings were invented. Refrigerators and washing machines turned into mass-market products. Railroads became faster and roads smoother and wider. As the economic historian Alexander J. Field has said, the 1930s constituted “the most technologically progressive decade of the century.”
. . .
(p. 6) The closest thing to a unified explanation for these problems is a mirror image of what made the 1930s so important. Then, the United States was vastly increasing its productive capacity, as Mr. Field argued in his recent book, “A Great Leap Forward.” Partly because the Depression was eliminating inefficiencies but mostly because of the emergence of new technologies, the economy was adding muscle and shedding fat. Those changes, combined with the vast industrialization for World War II, made possible the postwar boom.
In recent years, on the other hand, the economy has not done an especially good job of building its productive capacity. Yes, innovations like the iPad and Twitter have altered daily life. And, yes, companies have figured out how to produce just as many goods and services with fewer workers. But the country has not developed any major new industries that employ large and growing numbers of workers.

For the full commentary, see:
DAVID LEONHARDT. “The Depression: If Only Things Were That Good.” The New York Times, SundayReview Section (Sun., October 9, 2011): 1 & 6.
(Note: ellipsis added.)
(Note: online version of the commentary is dated October 8, 2011.)

Book discussed:
Field, Alexander J. A Great Leap Forward: 1930s Depression and U.S. Economic Growth, Yale Series in Economic and Financial History. New Haven, CT: Yale University Press, 2011.

The Illusion that Investment Advisers Have Skill

(p. 215) Some years ago I had an unusual opportunity to examine the illusion of financial skill up close. I had been invited to speak to a group of investment advisers in a firm that provided financial advice and other services to very wealthy clients. I asked for some data to prepare my presentation and was granted a small treasure: a spreadsheet summarizing the investment outcomes of some twenty-five anonymous wealth advisers, for each of eight consecutive years. Each adviser’s score for each year was his (most of them were men) main determinant of his year-end bonus. It was a simple matter to rank the advisers by their performance in each year and to determine whether there were persistent differences in skill among them and whether the same advisers consistently achieved better returns for their clients year after year.
To answer the question, I computed correlation coefficients between the rankings in each pair of years: year 1 with year 2, year 1 with year 3, and so on up through year 7 with year 8. That yielded 28 correlation coefficients, one for each pair of years. I knew the theory and was prepared to find weak evidence of persistence of skill. Still, I was surprised to find that the average of the 28 correlations was .01. In other words, zero. The consistent correlations that would indicate differences in skill were not to be found. The results resembled what you would expect from a dice-rolling contest, not a game of skill.

Source:
Kahneman, Daniel. Thinking, Fast and Slow. New York: Farrar, Straus and Giroux, 2011.

Technology Allows Start-Ups to Launch with Fewer Employees

HarelAndShilonOfBiteHunter2012-06-22.jpg “Start-up BiteHunter launched with three employees. Above, co-founders Gil Harel, left, and Ido Shilon.” Source of caption and photo: online version of the WSJ article quoted and cited below.

Lower costs to entry means more start-ups and that means more innovation, ceteris paribus. All good. For the labor market, there will be fewer initial jobs per start-up. But there will be more start-ups, and more opportunity for erstwhile laborers to themselves become entrepreneurs. So maybe still all good.

(p. B5) New businesses are getting off the ground with nearly half as many workers as they did a decade ago, as the spread of online tools and other resources enables start-ups to do more with less.

The change, which began before the recession, may be permanent, according to some analysts.
. . .
Rather than purchasing the tools and manpower needed to run their companies, more small firms are renting, sharing or outsourcing resources, typically through online services, according to Steve King, a partner at Emergent Research, a research and consulting firm for small businesses.
. . .
Last year, Gil Harel launched BiteHunter, a search engine for restaurant discounts, with just three employees. Based in New York, the site used shared screens and other communications tools to work with developers in Russia, Uruguay and Israel.
“Just to build the infrastructure to get a business off the ground used to take a lot of money and people. But things that you couldn’t do in the past, you can now do on your own,” Mr. Harel says.

For the full story, see:
ANGUS LOTEN. “With New Technology, Start-Ups Go Lean; Web-Based Services Mean Fewer Workers Needed.” The Wall Street Journal (Thurs., September 15, 2011): B5.
(Note: ellipses added.)

Innovation Depends Less on R&D Spending and More on “Talent, Process, Execution and Strategy”

(p. B1) In the world of R&D spending, more doesn’t necessarily mean better. And R&D may not describe all the innovation that matters.
“I think the numbers are pretty useless,” says Michael Schrage, a research fellow at MIT’s Sloan School who has studied the subject. “What matters more is the kind of innovator you are. If it were really true that the people who spent the most on R&D were the most successful, we wouldn’t be subsidizing General Motors .”
“There’s no statistically significant relationship between how much a company spends on R&D and how they perform over time,” adds Barry Jaruzelski of Booz & Co. “There’s a set of people who just consistently seem to skin the cat better.”
. . .
(p. B2) Booz & Co. in 2007 listed the biggest global corporate spenders of R&D. The top 10 were Toyota, Pfizer, Ford, Johnson & Johnson, DaimlerChrysler, General Motors, Microsoft, GlaxoSmithKline, Siemens and IBM.
Then it drew up a second list, a group of companies it called “high-leverage innovators” that returned the best financial performance for every dollar spent on R&D. Booz screened for companies that, over the five previous years, outperformed industry peers across seven measures–including profit, sales growth, and shareholder return–while also spending less on R&D as a percentage of sales than the median in their industries.
No company from the first list made the second list. (Winners included Adidas, Apple, Exxon, Google, Kobe Steel, Samsung and Tenneco.)
That disconnect essentially hasn’t changed, says Mr. Jaruzelski. Winning at innovation “is all about talent, process, execution and strategy,” he says. “That’s given the U.S. a pretty strong advantage over time.”
“Technology,” he adds, “is not equal to innovation.”

For the full commentary, see:
JOHN BUSSEY. “THE BUSINESS; Myths of the Big R&D Budget.” The Wall Street Journal (Fri., June 15, 2012): B1-B2.
(Note: ellipsis added.)

Larry Page on Tesla, Commerce, and Changing the World

Funding is a key constraint for the innovative project entrepreneur. By “project entrepreneur” I mean the innovator who views money as a means to achieving the project, and not as an end in itself. In this brief clip from Page’s 2007 AAAS talk, he discusses how as a 12 year-old reading Tesla’s autobiography he almost cried at how Tesla’s failure to commercialize his ideas limited his ability to change the world.

The Tesla autobiography is:
Tesla, Nikola. My Inventions: The Autobiography of Nikola Tesla. SoHo Books, 2012.

Neglecting Valid Stereotypes Has Costs

(p. 169) The social norm against stereotyping, including the opposition to profiling, has been highly beneficial in creating a more civilized and more equal society. It is useful to remember, however, that neglecting valid stereotypes inevitably results in suboptimal judgments. Resistance to stereotyping is a laudable moral position, but the simplistic idea that the resistance is costless is wrong. The costs are worth paying to achieve a better society, but denying that the costs exist, while satisfying to the soul and politically correct, is not scientifically defensible.

Source:
Kahneman, Daniel. Thinking, Fast and Slow. New York: Farrar, Straus and Giroux, 2011.