Chapter One
Your Goal Is Victory

“I’M GOING TO DESTROY ANDROID, BECAUSE IT’S A STOLEN PRODUCT.” So said Steve Jobs to his biographer Walter Isaacson shortly before his death. Imagine that. Jobs knew he had not long to live and yet there he was, still trying to win. That’s a ninja for you.

It’s no surprise to say that Jobs possessed many qualities of the ninja innovator. Jobs was smart, passionate, and relentless. A ninja must be all these things, but he must be something more: He must be driven by an unyielding desire to win. A ninja’s job is not complete until he finishes the mission. Just infiltrating the castle is meaningless unless he can get back out. For Jobs and other ninja innovators, just inventing a good product is not enough. What is required is different for every person, but one thing is the same: To complete the mission, your goal must be victory.

What also made Jobs a ninja is that he never retired while he could still produce. And so there he was, in the twilight of his life, vowing to “destroy” the competition. It’s an appropriate word choice for a famously demanding person. His example inspired countless people to pursue victory in their own lives, if not necessarily in the same way. Not only that, but Jobs’s products, and their successors, will be with humanity for centuries—much as another ninja innovator’s products are with us today.

Useful, Not Nifty

ON NOVEMBER 14, 2007, CON EDISON ENDED 125 YEARS OF DIRECT-CURRENT electricity service that had begun when Thomas Edison opened his Pearl Street power station in Manhattan on September 4, 1882. While the station itself clearly had changed over the years, that’s as if in 2003 Ford Motor Company had finally stopped running the assembly line Henry Ford had first fired up in 1903. It’s a remarkable testament to the brilliance of Edison.

Today, Edison is known as the innovator of the phonograph and incandescent light. But those weren’t his greatest contributions. It was his development of a central power station that has resulted in his most enduring impact on the future of consumer electronics.

The first thing you do when you buy a stereo, TV, or any electronic device is plug it into a wall socket. This simple act is possible because Edison spent almost his entire fortune and risked his substantial reputation to build the Pearl Street power station in lower Manhattan. When Edison gave the order to flip the switch on September 4, 1882, stores all along Fulton and Nassau Streets, the editorial offices of the New York Times, and the brokerage house of Drexel Morgan were lit up with Edison’s incandescent lightbulbs. Imagine that moment, when Edison knew he had achieved victory. He had forever changed Manhattan—and the world.

The reason the Pearl Street station was so important—and why Edison would have failed had he not created it—is that the electric lightbulb couldn’t replace the gas lamp as the primary source of lighting until an entire electrical system was created to sustain it. Otherwise, Edison would have been just a guy who had created a cool, but useless, gadget. In other words, inventing the lightbulb was not the end for Edison; it was only the beginning. The end would come when homes were lit by the lightbulb—and the effort to make that happen proved even more demanding and expensive than the invention of the lightbulb ever was.

The story of Edison and his Pearl Street power station defines for me what I mean by “Your goal is victory.” No one questioned that Edison had brilliance, but there are thousands of others out there inventing nifty things that we will never ever see. And Edison wasn’t interested in just inventing nifty things. He was driven to win—and for him that meant creating something of value to everyday people, something that, yes, would revolutionize the world, but also something that would require no more from the user than simply flipping a switch. But to go from the lightbulb to turning on the switch required an expenditure of time and resources that would have surpassed the ability of most other inventors.

The same could be said of Jobs. He wasn’t interested in creating a cool-looking device that was only used by the wealthy or technology geeks. He wanted to create devices that were useful to everyone. What this requires is a resolve and discipline that so often separate victory from defeat. Having brilliance just isn’t enough. History is strewn with the leftovers of otherwise brilliant people who, for whatever reason, just couldn’t succeed. Maybe they were just unlucky. But what is certain is that to win, you must have a clear idea of what it fully takes to win and where that requires you to go. For Jobs and Edison, their vision matched their determination to win.

Adapt, Adjust, Dominate

THE DRIVE FOR VICTORY ISN’T JUST EMBODIED IN THOSE RARE INDIVIDUALS who possess a seemingly superhuman intellect, vision, and determination to succeed. It’s also something that must propel an enterprise, whether it’s an organization like the Consumer Electronics Association (CEA), an athletic team like the New England Patriots, or a company like IBM.

Let’s look more closely at IBM. Around the same time Jobs and Steve Wozniak were starting Apple, Paul Allen and Bill Gates set up shop in Albuquerque, New Mexico, to write computer programs, including a new computer operating system, PC-DOS, for the IBM Personal Computer. Gates and Allen and their new company, Microsoft, then adapted PC-DOS into MS-DOS for use in a PC that IBM was trying to build in order to capture some of the non-mainframe computer market opened by Apple.

By 1981, several companies, such as Atari, Tandy, Sinclair, Commodore, and others, had introduced small PCs that were of interest only to relatively niche market segments. This changed when several entrepreneurs introduced more functional computers that ran software such as MicroPro’s WordStar (1978) and the SuperCalc spreadsheet program (1980). Adam Osborne’s Osborne 1, a twenty-four-pound device with a five-inch screen, was the first “portable” PC when it hit stores in June 1981. Only 8,000 were sold that year, but sales jumped to 110,000 the following year. At one point, Osborne reported an order backlog of 25 months, but the company declared bankruptcy in September 1983. The Osborne 1 was followed by the Kaypro II transportable in late 1982, a similar bulky machine that experienced similar sales success.

But the real coming of age for the PC came between the introductions of the Osborne 1 and the Kaypro II: the unveiling of the IBM PC model 5150 in August 1981.

The IBM PC used Intel’s new 8088 chip, a wealth of off-the-shelf computing technology, and, most importantly, the MS-DOS operating system provided by Microsoft. IBM, the world’s largest computer maker, quickly proved that there was a substantial market—at least among mainstream businesses—for the PC. Unlike Apple, IBM aimed its PC at the market segment it was more familiar with, and indeed already dominated: the business office. It would prove to be a wise decision.

A host of companies such as DEC, NEC, Xerox, Epson, AT&T, and HP—none of which previously believed that a mainstream, non-geek-oriented computer market existed—quickly jumped on the PC bandwagon. These machines came to be known as “IBM clones” since they essentially copied the technology included in the IBM PC, most of them running MS-DOS. In late 1983, IBM itself tried to expand beyond the market it had created by releasing its IBM PCjr, designed for the home market. But a lack of features and capabilities for average homeowners (and its much-derided “Chiclet” keyboard) doomed the product. Yet IBM’s failure was short-lived because it became better at understanding the needs of new and broader market segments.

IBM followed up the PCjr in 1984 with the Kaypro-like IBM “transportable.” A start-up company called Compaq made the first DOS-compatible transportable in 1986. The laptop age had begun, and today it not only survives, but it also arguably birthed myriad other portable personal computing devices. But it wasn’t a straight line of technology or market development, much as the wars that ninjas fought often ebbed and flowed over decades.

Monochrome computer screens slowly gave way to color screens in the mid-1980s, thanks in part to the introduction of the 256-color VGA monitor included with the IBM PS/2 line in 1987. When videodiscs emerged in the early 1990s, with several formats available, there was serious threat of a format war. To avoid an industry-killing battle, the two competing companies, Sony and Toshiba, enlisted IBM to lead a multicompany committee called the Computer Industry Technical Working Group (TWG) to mediate a solution. Along with IBM, Apple, Microsoft, and HP, other members included Compaq, Sun, Kodak, and Intel. IBM executive Alan Bell chaired the group.

In 1996, IBM designed a chess-playing system known as Deep Blue. Smarter than any previous computer player—the computer player on your PC is a nitwit comparatively—Deep Blue (and IBM) challenged the world champion Garry Kasparov to a match. Kasparov went on to win. But a year later Deep Blue was back and IBM challenged Kasparov again. IBM wanted to win, which it did in a six-game match with two wins to one and three draws.

In 2005, IBM sold its PC division to Lenovo. Three years later, the company’s Blue Gene supercomputing program was awarded the National Medal of Technology and Innovation by President Barack Obama. Then, in 2011, an introduction known to millions of people around the globe would forever be associated with IBM: “This is Jeopardy!”

In February 2011, during a three-episode tournament, the two most successful champions in Jeopardy! history, Brad Rutter and Ken Jennings, competed against a player named Watson. After the first round of the two-game tourney, Jennings had $4,800, Rutter had $10,400, and Watson had won $35,734. After the second game, where the players’ scores carried over, Rutter came in third, with $21,600; Jennings came in second, with $24,000; and Watson won the tournament with $77,147.

Of course, as everyone knows, Watson was not a human player but an artificial-intelligence computer system able to answer questions posed in natural—as opposed to computer—language. And compared to Deep Blue’s slight victory over Kasparov, Watson’s was crushing. The AI did have some unfair advantages over its human competition, such as response time, but its ability to answer questions stunned the world.

Jennings, using the humor that only a human (for now) can, summarized everyone’s reaction: “I for one welcome our new computer overlords.” IBM had triumphed once again.

Not bad for a company founded in 1911 under its original ninja name, the Computing-Tabulating-Recording Company, or C-T-R. In its 102 years—and I only summarized the last 35—IBM has successfully reinvented itself over and over to the point where it is the second-largest U.S. firm behind Wal-Mart in terms of number of employees.1 In 2012, Fortune magazine ranked IBM the fourth-largest company in terms of market capitalization, the ninth-most profitable, and the nineteenth-largest firm in terms of revenue.2 That success is largely due to the ninja strategy that IBM has implemented through savvy product positioning and innovation. IBM has created software and programs to run cities and businesses by absorbing data and information and leveraging it to increase profitability, inventory management, planning, and efficiency.

IBM could have appeared in almost any chapter in this book, but I included it here because IBM is a company whose strategic goal has always been victory. To achieve victory, despite a Titanic-like size that might make it difficult to alter course nimbly, IBM has successfully transformed itself from a mainframe company to a PC company to a consulting company to a company that beats chess and Jeopardy! champions just because it can. It takes a ninjalike discipline, long-term vision, and technical and marketing skills to be a consistent winner. But more than that, it takes a desire to win.

IBM has rarely been defeated by its competition, but when it does lose—as with its PC division—it has the discipline to cut its losses and move to a new battlefield. Although the world celebrates both Microsoft and Apple in the early PC age, in many ways it was IBM that made it all come together, as the above history makes abundantly clear. The reason I recounted the early years of the personal computer is to highlight that while sometimes market victory is explosively quick, it can also be achieved with more modest, tightly calibrated successes. Successful ninjas, going to battle with limited resources, had to have a cold-eyed realism about what it would take to ultimately succeed, and short-term defeats were lessons from which to learn.

For instance, while Apple initially trounced the competition with the Apple II and then the Macintosh, it was IBM that stole the lead in the late 1980s and throughout the 1990s—of course with a little help from Microsoft. Part of the reason for Apple’s early success—and it’s certainly not the only one—is that it chose to target families with a user-friendly product the entire family could enjoy. Apple made its Macs easier to use than any IBM-based PC, and it began to dominate the youth market by capturing customers first in their schools.

But then IBM, with an improving Windows operating system, altered its strategy. If a ninja knows that the wall blocking him from completing his mission is impassable, with a wide, deep moat; sheer sides; and hundreds of sharp-eyed archers on the barricades, he has two choices: either try to scale the wall and hope for the best, or find a way around it. Given a competitor’s product that was arguably superior in the home market segment, IBM faced a similar choice: attempt to compete in the home market segment with an inferior product, or instead avoid direct engagement by attacking a different, but related, segment. Critically, what defined victory would remain unchanged: controlling the PC market. It would be the tactics that made the difference.

IBM’s PCs were very successful in the huge business market and therefore were intimately known to one of, if not the, key decision makers for choosing a PC for the home: the full-time breadwinner, whether father or mother. IBM knew this market; this market trusted IBM. Like any good ninja, IBM simply went around the “wall.”

IBM’s strategy helped it remain the dominant competitor in the PC market, but it didn’t “destroy” Apple. After the second coming of Steve Jobs, Apple is bouncing back, but its share hasn’t risen above 10 percent or so for nearly twenty years. IBM’s later decision to spin off its personal computer division to Lenovo proved prescient: Both Hewlett-Packard and Dell faced layoffs in 2012 because of declining PC sales.3 The computing market is moving toward mobile technology.

IBM’s experience with the PC offers several lessons regarding ninja strategies and tactics. The first is that your goal (victory!) almost never depends only on you, but instead often requires the aid of allies. These allies include early-adopter customers, technology partners, distribution partners, and so on. Your relationship with them survives only at the point of interaction for your shared interests. The reality of this “what’s in it for me?” relationship means that an alliance is rarely permanent. Therefore you should plan in advance for the best way to dissolve it as well as to possibly reconstitute it at some future point.

Another major lesson from IBM’s experience is that ninja strategies and tactics are appropriate for capturing markets but not necessarily for permanently occupying them. IBM recognized when it was time to move on to new tech territories.

How does it do it? It adapts, adjusts, and dominates.

ADAPT

Few other companies have survived and prospered as long as IBM. It’s no wonder that IBM is usually seen as the “dark suit” company, without humor or a dynamic corporate structure. No Ping-Pong tables or beanbag chairs for IBM employees! But make no mistake, IBM is one of the most dynamic companies in human history. It has thrived as such by always being ahead of the next wave of technology. It helps that IBM has created a few of these waves by itself, as it did with one of its first products, the employee punch card. But even when it hasn’t, it has possessed that ninja ability to adapt to changing circumstances. For instance, IBM has not necessarily been known as an “Internet company,” per se, but as the Internet Age ramped up, big corporations weren’t convinced their future was online. After all, it was a place for Silicon Valley geeks and too-good-to-be-true business ideas. IBM, however, showed that Big Business had a big stake in the Internet and used its strengths in mainframes and transactions to create a strategy called e-business. It was a phenomenal success.

ADJUST

When confronted with an insurmountable wall, find a way around the wall. As mentioned above, IBM came out with a home computer known as the PCjr. It was a flop. IBM adjusted and went back to its old marketing strategy. IBM also tried to get into the office-support game with its introduction of IBM OfficeVision—a kind of precursor to Microsoft Office. But the platform wasn’t made to be PC-compatible, and OfficeVision never caught on.4 Instead, IBM took the ninja route and adjusted by acquiring Lotus Software in 1995 and obtaining their more popular office suite Lotus Notes.

DOMINATE

In mainstream computer lore, Microsoft and Apple get all the glory. It’s well deserved. But behind it all—working the levers, plodding along, innovating like a company possessed—there’s been IBM. Rarely in its history has IBM entered a market where it’s failed completely. The more common outcome is that IBM dominates, or at the very least runs even with, the rest. That’s because IBM’s strategy is the strategy of the ninja: driving for victory.

IBM proves that a company with a strong personality can innovate, change, and prosper. “Big Blue” has done this all while retaining its identity, conviction, and presence. IBM is certainly the long-term ninja company.

To Be the Best, Be Number One

THE INSPIRATION FOR MY PREVIOUS BOOK, The Comeback, STRUCK me while I attended a dinner. As I sat next to a particularly arrogant Chinese government official, we got to talking. He put his thumb in the air and raised it upward as he said, “China going up.” I nodded. He then pointed his thumb downward, pushing it toward the floor, and said, “U.S. going down.” I was so mad I wrote a book about it—not so much about the “China going up” part, but more so the “U.S. going down” part.

And so The Comeback was born. The book succeeded beyond my hopes and most of its major suggestions have been or are likely to be adopted by the U.S. Congress. And while this book is not meant to be another treatise on policy, I will examine certain governments—federal, state, and foreign—throughout these pages to explore whether their innovation and growth strategies rise to the level of the ninja.

I’ll be blunt: China is a ninja, and it deserves a mention in this chapter on victory. Indeed, China has many flaws, some of them potentially fatal. Its biggest flaw is also its greatest asset. As a one-party authoritarian state, China’s leaders can set a directive and expect it to be enacted. Many U.S. commentators, most notably New York Times columnist and bestselling author Thomas Friedman, have expressed admiration for this great competitive advantage.

In a famous column on September 8, 2009, Friedman wrote in the Times:

One-party autocracy certainly has its drawbacks. But when it is led by a reasonably enlightened group of people, as China is today, it can also have great advantages. That one party can just impose the politically difficult but critically important policies needed to move a society forward in the 21st century. It is not an accident that China is committed to overtaking us in electric cars, solar power, energy efficiency, batteries, nuclear power and wind power. China’s leaders understand that in a world of exploding populations and rising emerging-market middle classes, demand for clean power and energy efficiency is going to soar. Beijing wants to make sure that it owns that industry and is ordering the policies to do that, including boosting gasoline prices, from the top down.5

Friedman was both praised for his candor and pilloried for his admiration of an autocratic state. I think there’s a middle way. We can pat ourselves on the back all we want for our democratic, free-market system as the best humanity has ever devised. It is. And we can further criticize China for being an oppressive regime that stifles information, exploits its workers, manipulates its currency, and steals patents like candy from a baby. It does all that too. In his bestselling book, The World Is Flat, Friedman even wrote a chapter called “China for a Day (But Not for Two).” Let me go on the record and say, “Not even for a second.” Freedom and democracy are too precious to hand over for even that brief period.

But that does nothing to change the fact that China is in the process of overtaking us, and it is doing so in no small measure because it doesn’t have anything resembling our democratic processes. More, it’s even harder to refute the notion that our constitutional republic, as currently arranged, has not been generating the necessary policies to help America maintain its economic superiority. In other words, if we’re going to do anything about it, then let’s stop kidding ourselves. China is getting it done, and we’re not. That’s not a judgment on either political system; it’s simply a statement of fact.

A 2012 survey of global executives from KPMG found that 45 percent of respondents, a plurality, named China the next technology innovation center in the world.6 Indeed, in 2006, China’s government announced a mandate to shift its economy from the world’s manufacturer to the world’s innovator. Known as the “Indigenous Innovation” plan, it calls for China to become a global innovation leader by 2020. A 2009 analysis from the U.S. Chamber of Commerce summarizes the plan:

The result is an indigenous innovation political and economic campaign that amounts to an all-hands-on-deck call to action for the Chinese nation to roll up its sleeves and complete the mission of catching up and even surpassing the West in science and technology that began 200 years ago when foreigners with modern weaponry and transportation technology came calling as the Chinese dynastic system was dissipating.7

China has made strides already, and every time I visit China I am overwhelmed by its investment in new buildings and infrastructure. They have new bridges, airports, convention facilities, and roads. They use fiat, willpower, and a captive press to push through these projects from launch to completion.

However, while China’s successes in manufacturing and building are notable, they are a far cry from leading the world in creation and innovation. Innovation requires the ability to challenge the status quo. But unlike Americans, the Chinese have not been taught or encouraged to do this and they are just now catching on.

Innovation has been America’s strength for many reasons: our “can-do” attitude; a free-market system that rewards savvy risk-takers; an educational system that encourages questions rather than rote learning; our First Amendment, which promotes different views without government censorship; our heterogeneous society; and our willingness to treat failure as a learning experience rather than a badge of dishonor.

By contrast, the Chinese have a decades-long tradition of copying others, do not respect intellectual property or have a culture that even recognizes it, have a bias toward conformism, and have a government that quells dissent. Given these vast cultural differences, it may be a stretch for the Chinese to shift from manufacturing to innovation.

But they are certainly trying and their strategy is respectable.

One little-noticed strategy is a formal ten-year plan (2010–2020) backed by the Chinese government to seduce the best and brightest Chinese who have moved abroad to return.8 Headed by Dr. Wang Huiyao, vice chairman of the China International Economic Cooperation Society, part of the China Ministry of Commerce, this program directly contacts accomplished U.S.-trained Ph.D.s, many U.S. citizens, and seeks to entice them to return to China with promises of huge compensation (one person told me millions of dollars per person) and great power, including top leadership positions in Chinese universities and companies.

On a panel I shared with Dr. Huiyao in 2011, he said China had sent one hundred million students to study abroad over the past thirty years. He described his country’s national talent development plan to propel China as a world leader. But Dr. Huiyao also lamented that the Chinese are not world-class innovators, a result of an education system that focuses heavily on training students to take tests rather than to be innovators. To compensate for this, he described a plan for ten thousand Chinese students to train at U.S. universities to learn the basics of innovative thinking (and open Chinese universities to a like number of Americans).

While the Chinese have developed and are executing a plan to regain their most highly educated citizens, Americans are assisting their efforts by denying legal status to the thousands of Chinese who earn Ph.D.s from U.S. universities. Once we award the degrees, we have no plan for keeping the recipients here. Instead, we send them—and thousands of other foreign-born Ph.D. graduates—to the back of the visa line. This is a terrible strategy. We are essentially training our competition. The U.S. embassy in China reports that in 2012, some 160,000 Chinese students were studying in the United States. China and other rising nations know they can’t compete with America in terms of education excellence. So they smartly “offshore” that responsibility to us, then devise creative ways to lure their citizens back home.

China also is forming partnerships with foreign innovation centers as a way of getting access to cutting-edge technology. An example of this strategy in action is the January 2012 announcement that Hisense, a huge electronics company based in China, is working with MIT’s Media Lab—the first alliance between the MIT Media Lab and a Chinese company—on talent training and project cooperation regarding smart technology, artificial intelligence, and human-computer dialogue.9

Finally, as the U.S. Chamber of Commerce study examines in detail, China is building its innovation engine through a mixture of government mandates to encourage more domestic innovation. The downside to this is that the country is increasingly protectionist and hostile to foreign investment and business. The Chamber of Commerce study notes, “Indigenous innovation seems to be a policy borne [sic] as much of China’s fear of foreign domination as China’s pride in its great accomplishments and desire to be a leader in the rules-based international system.”

But China clearly has a ninja strategy for victory, and that strategy is working. In 2010, China surpassed Japan as the world’s second-largest economy. And with growth rates averaging 10 percent a year, China is the fastest-growing economy in the world, and could overtake the United States by 2020 according to some estimates.10 China is the largest exporter and the second-largest importer in the world, as well. With so many good things happening for China, what could possibly go wrong?

Well, there was that flaw I mentioned. . . . As a one-party state, China has a fatal weakness, one that pops its head up from time to time. We saw it at Tiananmen Square in 1989. We’ve seen it occasionally in the years since, though China’s leaders would likely never do something as dramatic as rolling tanks through a crowd again. Well, unless that was the only option left. And that’s what I’m getting at: As much as China is pursuing a ninja strategy of economic domination, it is secondary to the regime’s survival. The Chinese Communist Party will never allow economic superiority to get in the way of its staying in power. That’s just the way authoritarian regimes operate. China’s leaders believe they have unlocked a system that’s better than free-market economics, and that’s authoritarian economics. I’m not so sure the Chinese people agree. All the wealth in the world cannot overcome a human being’s innate desire to be free. The more wealth that flows in, the hotter that desire will burn.

Nevertheless, I am not judging China’s political system, only whether their national economic strategy is driving toward victory. As with the previous examples in this chapter, a drive for victory—completion of your mission—is a defining characteristic of these individuals and enterprises. They do not settle for second best and if they fail, they learn from that failure to succeed elsewhere. With China, the lesson for the United States is simple: Our strategy should be victory as well. We should set as our foremost goal the continued superiority of the U.S. economy. That we have other goals at the present moment is obvious by our inability to rise above recent troubles.

And if we do make victory our highest goal, then there is no way China can match or exceed us. In the end, as history has shown, an authoritarian economy cannot compete with one premised on the unique power of free markets, free minds, and free enterprise. It’s time to unleash that power once more. It’s time for America to become a ninja.