Let's get something straight right up front. Steve Jobs had a big influence on all of us - generally positive. A digital guru. An iMaster. A taskmaster. A perfectionist par extraordinaire, et cetera, et cetera.
His career is worth examining to try and determine what investors can learn from him. There are lessons here to be followed, and others to be avoided at all costs. The fascinating thing is that for every soaring positive there is an almost equal negative.
Call it the yin and yang of Steve Jobs. Maybe in order to achieve great things on one hand, there has to be a lot of the bad stuff on the other too. If so, Jobs is the poster child.
The business of Apple, both its long-time arc and its near-term digital global rocketship, is so extraordinary as to invite endless speculation, most of it well-meaning, much of it dead wrong.
There is greatness in this business story, a truly unique personality, lots of money made, and some really ugly behaviour. The lessons here can guide investment decisions in a post-Jobs world if the right lessons can be sorted from the wrong and those insights applied rationally to investing opportunities.
Or can you? Is there any way to make rational investment decisions in an irrational company?
Lesson 1: There are no lessons . the sympathy effect
To put it bluntly, there are precious few parallels between our lives and Jobs'. He was world famous at 22, worth $250 million at 25. There are no object lessons here for most people directly. We would be fired for doing what he did when he browbeat and denigrated the efforts of many of his best people, cracked down on any communication from inside Apple (or Pixar) by deploying mobile-signal blocking apparatus, or carried his personal grudges with him for years. Jobs was a unique figure at a unique time in a unique place with a unique story. That does not mean these characters do not exist in other businesses, just that it's a high bar to search for Jobs-alikes. All power to you if you can find them.
If that isn't enough, he's dead too. If you don't think he planned all this, you don't know Jobs. The sympathy wave goes to him, hands down. Five years of planning for his exit. Call it the ultimate Reality Distortion Zone - how can anyone speak ill, or critically, of a dead man?
So discount any company that says "just like Apple" because no-one else can do that. Jobs helped the company carve out a niche and it owns it. The only question is whether Apple can get big enough on its own to fill all the demand it has created. The products will continue, and they will continue to be better than the competition, and Apple will continue to be the BMW of the tech sector.
Lesson 2: Insanely great
Passion is a big part of Jobs' legacy. Make sure there is someone at the top of a business who cares, passionately, deeply, insanely about great products. It doesn't have to be the CEO, but it sure helps. We've all been told about Jobs as the rejecter, the perfectionist, the destroyer of egos, but the other side of that was the incredible enthusiasm he had when seized - and there is no other word for it - by a technology or an idea or a possibility. "Insanely great!" he would say about this or that. Every business needs top execs who feel the passion. Make sure you can help investors identify them and give them a chance to experience them.
The other side of the coin is that passionate enthusiasm can be dead wrong.
Beware of passions and reorganisations and restructurings that blow hot and cold. Jobs would be hot on something for about 15 minutes, then you'd never hear about it again. Watch out for enthusiasm masking insecurity.
Back then, Jobs was incredibly insecure about most of his decisions and would always run things by his chosen few. As he aged, he lost the indecision and replaced it with wisdom, which goes a long way towards explaining the string of hits (which started, by the way, at Pixar in the '90s with Toy Story) he was associated with in his last 15 years.
But he was also always early to adopt new technologies - laser printers, optical hard drives, wireless networking - some of which worked out, others didn't. Traditional smokestack industry development cycles don't work in high tech, but choosing features based on 'thinking different' makes for bad bets and cul-de-sacs. Jobs could avoid criticism - no-one else can.
Lesson 3: Perfectionism is sacred . and a curse
Jobs' attention to detail was legendary. His intensity astonishing, some kind of combination of Zen and LSD and an antenna for design that created another world he operated from. "Take the time to do it right," was his mantra back in the Macintosh days, when he had crushed somebody's latest project. He always cared, deeply, about every bit of the product, from the inside of the case on out. That scrutiny, that unrelenting over-attention to detail drove people crazy who worked with him.
His refusal to be satisfied until it reached some satori in his own mind was tiresome and then counterproductive and finally, once he grew up, accepted and even - as his run of successes accelerated - emulated. More's the pity too because it isn't necessary to belittle to be a perfectionist. Just a stickler.
Satori: a moment of clear, clairvoyant insight when the door of perception opens and layer upon layer of meaning is revealed. The 'acid' insight, the world as a kaleidoscope or, to the 'Mac Kids', pixels and pixels, into the Fat Bits, looking for meaning deep inside the screen. A satori in Zen parlance is that moment when you clap your forehead in recognition and say why hadn't I thought of that? Insight. Deep clarity.
Somebody at the top has to care passionately about the quality of the products, but the bigger the company the further away from the line is the CEO. Jobs' curse was having to personally approve everything that came out of Apple.
This kind of micro-management worked when he knew the part numbers for every component on the Apple II motherboard and could go toe-to-toe with suppliers, his favorite phrase: "You'll have to sharpen your pencils to get Apple's business." That absolute focus on every tiny detail made him maddening, and maddeningly effective in a negotiation. So, look for top technologists who can tear their products apart and wax poetic about every part. But beware of those who tear their people apart as well.
Lesson 4: Cult of personality
In the global outpouring of praise and honour for the co-founder of Apple after his death, his photo and personality towered over the world like the Colossus. The cover of his authorised biography was carefully orchestrated by him before his death: quintessential Steve Jobs. His death revealed another intriguing fact: every patent that Apple had made while he was there had his name on it. And the patent portfolio was fascinating for its breadth and for the fact he had clearly not patented a method for building a staircase, or a design for a mobile media device or a touch screen, but he was named on every one. He was everything and more to Apple - and he worked hard at inventing his role as the inventor king of Apple, the Thomas Edison of his age. The world has swallowed this line: Jobs as the inventor of all Apple's products. No-one else is ever mentioned. The guru of Cupertino could get away with this. No other CEO could make this canard work.
Jobs was always obsessed with manufacturing efficiency, and today Apple runs a tight ship, has high margins even at reasonable prices, and can sell everything it makes. His successor is a total operations guy with knowledge of the Asian market - watch Apple's ability to extend its brand into China and India for a weather vane to its future. His legacy, about to go off, is Apple TV or iTV (or whatever they call it), which is Apple's final hurrah, its attempt to remake the television business, and its tribute to Jobs. Should be cool. But it also will extend the cult of Jobs, and make Apple have to work triply hard to gain traction in the future. Creating a giant cult of personality like this makes it very hard to convince the market there's the same secret sauce at work in his absence. Worse, in a recent interview, Apple's design director, Jonathon Ive, talked about five years of a product roadmap that Jobs had outlined. The problem comes when the marketplace shifts and the old roadmap no longer works. Will Apple be able to adapt or will it have to follow Jobs' path slavishly no matter what?
Lesson 5: Legacy backlash
The trouble with a big, outspoken public personality such as Jobs, who had some great insights and products, is that it is too easy to believe everything he thought or did was genius - especially in retrospect. There was one giant blind spot that he never could shake, and while he could use his Reality Distortion Field to convince the world that he was right, his adherents won't be so gifted. The gospel according to Saint Steve was always his determination to hold onto everything, to control the software and the hardware and never let anyone else in. It was the control freak's ultimate play. Did Jobs license out the iPod operating system? No. The same for the iPhone and iPad and Mac and Apple II. You could only buy those products from Apple.
Jobs has painted Apple into a corner that is going to be tough to escape. You can have it any way you want so long as it is the way Apple tells you. For shareholders this is a poor choice, the same myopia that he demonstrated back in the 1980s when he stood up to Bill Gates when Microsoft came wanting to license the Mac OS. Think of it: the Mac OS at the heart of every Windows machine in the world. Jobs turned him down cold. Apple would go it alone. He did the same thing when the geeks at Google approached him about a Google phone with Apple OS. And a tablet. It was predictable, but that doesn't make it any better.
Wouldn't Apple be much bigger if it licensed its operating system to other cell phone makers, let them build hardware versions, and competed with them as well? The company might have an 80 per cent market share rather than Apple's bare (and falling) 20 per cent of the gigantic global cell phone market. Heresy, I hear you say. Jobs had to control everything to build a seamless customer experience. And Apple does deliver a great experience. But not that much better than Android.
The result means purposefully limiting how big Apple can get. Jobs was fine with being BMW. Shareholders might not like that smaller playing field.
Lesson 6: No-one is perfect
Then he died. There is no more Jobs. But his legacy lives on in some terrific products and a well-run company. His passions and petty anger live on too. Jobs wanted to kill the Androideans at Google, calling it stolen and pirated, and vowed to spend every last cent of Apple's cash horde on putting it out of business. This widely-quoted attitude was expressed in his new authorised biography and will hamstring Apple as it tries to move forward. Apple tried suing Microsoft over the pirated Macintosh look and feel years ago and wasted plenty of time and money in a losing effort. (It was ultimately decided that Apple had appropriated much of what it created from Xerox - the same will hold true of the iPod, iPhone and iPad: innovative recombinations and enhancements to ideas created elsewhere first.)
They'll also follow his mistaken philosophy with Apple TV/iTV. You'll only be able to get it with an Apple logo, and there will be few options, and it will work really well. But it won't take long for the consumer electronics industry to copy the essentials and fill in all the niches. All the niches that Apple could own, but then it would have to fend off anti-trust and monopoly investigations like Microsoft did and go against Jobs' explicit wishes. In exchange for that kind of scale, most shareholders would accept the trade-off. The keepers of the flame at Apple won't. Fighting a marketplace war in the courts is a poor choice. Keeping hold of the ghosts of the past is just as destructive.
Irrational? Does anyone have the guts to say Jobs was wrong?
Lesson 7: Nothing is forever
Short term, look for a chance to take your profits in Apple. Mid term, play the ups and down of the chart as the stock rallies and falls back. In five years, be out of the stock completely. But, in all this, the wild card is irrationality. «
* Jeffrey S Young is the author of two acclaimed biographies of Steve Jobs: the worldwide bestseller iCon: Steve Jobs, The Greatest Second Act in Business History (2005), and the just republished 1988 classic Steve Jobs: The Journey is the Reward. Young was one of the founders of MacWorld and spent 1983-85 as an embedded journalist at Apple. He has written a number of other books, including Cisco UnAuthorized, was a spin-doctor in the Schwarzenegger administration, has been the editor of several magazines, and was a longtime contributor to Forbes. He lives in northern California and can be reached at www.jsyoung.com.
