ROBERT F. SALVINO
His tale is thus both instructive and cautionary, filled with lessons about innovation, character, leadership, and values.
—WALTER ISAACSON, Steve Jobs, p. xxi
Entrepreneurs are risk-takers, profit-seekers. We can never identify who will be the next great entrepreneur, or what will be the next great product. You might have a strong feeling about one particular person you know or may have encountered or one particular thing you have envisioned or even held in your hands, but collectively we can’t know. Innovators, profitable enterprises, and their valued products are random occurrences emerging from the spontaneous order of the market process.
Steve Jobs was an entrepreneur of a very exclusive class. He was a billionaire. According to research by Sanandaji and Leeson, there were 234 billionaires in the United States in 2009, comprising just 0.00008 percent of the population. Almost no one actually knows a billionaire; fewer still can claim to know one well. Today many do claim to know a great deal about Steve Jobs, his reputation as a jerk, his quirky habits. His products are almost everywhere, and because of his products we have access to more information about Steve Jobs than we have ever had about entrepreneurs in the past.
Many would describe Steve Jobs as an egoist, and that’s probably right. He was an entrepreneur, a capitalist, an individualist. Very few people seem to routinely follow their own self-interest as a matter of course, even fewer as ruthlessly as Steve Jobs reportedly did. But as a class, entrepreneurs in general may be more likely than most to pursue their interests unwaveringly. Successful people in general are focused on their goals, and this focus requires an independent, seemingly self-absorbed approach to life. We’re familiar with the stories of dedicated practice of great athletes like Tiger Woods and Kobe Bryant, and we’re also familiar with the hardships in their personal and professional relationships. The same can be said of musicians. Iconic musical groups that have lasted for decades are extremely rare. More often we hear the stories of the break-ups, the personal, irreconcilable differences.
That we have such reverence for the achievements of people like this, yet so many express a sense of relief or sometimes even snicker at their failures, is a great irony. These fanatically driven achievers make other people uncomfortable. To paraphrase Jobs’s hand-picked biographer, Walter Isaacson, their personalities, passions, and achievements are all inter-related. He said this of Steve Jobs, but he could have been describing any successful entrepreneur or innovative artist. Their dedication could be viewed as “over-the-top” and most people can only handle so much of them. Many might like them to turn it down a notch, take a break, live a little, and join the rest of us for a while, but if they did we would likely never know of their achievements and neither would they.
Adam Smith didn’t promote self-interest per se, but he maintained that it is an entrepreneur’s pursuit of his own self-interest, rather than anyone’s good intentions, that best ensures the satisfaction of people’s wants. Ralph Waldo Emerson heralded self-reliance and integrity to our own thoughts so that we may fulfill our truest desires uncorrupted by the will of others. Ayn Rand crowned selfishness as a virtue and proclaimed its sole measure is man’s unrelenting pursuit of his own ideal. The validity of these notions is evidenced in our regard for the entrepreneur, the independent soul who undertakes risk to will his thoughts into actions, thus standing for himself of his own accord.
These independent, ambitious traits are the wellsprings of progress. The entrepreneur’s drive to build a better mousetrap, in pursuit of profit, ultimately allows the rest of us to enjoy greater variety in our lives, to get more and better goods and services out of our earned dollars, to work less yet still produce more.
The Entrepreneur as Destroyer
‘Creative destruction’ is Joseph Schumpeter’s artful term describing how the marketplace responds to an innovation that brings into being a better product, service, or method. On economic grounds it is better because it is more efficient, consuming fewer resources for a greater result. In so doing, however, it makes the existing technology inferior.
Take the automobile. It gets us from point A to point B with greater ease and comfort, and with far less pollution than the thing it replaced—the horse and carriage. Think of the problem of disposing of horse manure in a large city congested with horse and carriage traffic. Imagine the rain washing over the dung heaps—a common method of storing the build-up of waste from the horses—and then the sun drying the heaps and the wind blowing the dung dust throughout the city and the rain bringing the dust to the ground again, layering everything with a coating of dung. (This historical story was vividly illustrated in a guest lecture by Professor Brad Hobbs, delivered to my classes at Coastal Carolina University in 2013.)
The automobile solved this and many other problems. It also called for more and better roads as thousands of places suddenly came within a day’s drive by car—opening the world and all of its possibilities to millions of people previously shut out from the pathways of progress. This new development disrupted everything and everyone associated with the horse and carriage industry. The innovation of the automobile eventually brought about the destruction of the horse and carriage industry. Schumpeter identified “creative destruction” as the fundamental driving force of capitalist progress.
The creative and destructive forces are resisted by some, either for immediate financial motives, from fear, or from lack of understanding, lack of foresight, or just an unwillingness to adapt to change. The Hewlett Packard executives didn’t feel the new desktop created by Steve Wozniak, an employee of HP at the time, fit into the core vision of HP. Fortunately for Wozniak he was already associating with a group of young innovators willing to take risks. A collectivist ethic would have hindered Wozniak from developing and marketing his computer because this would, if successful, have disrupted the current state of affairs, but the economic freedom inherent in pure capitalism enabled Wozniak to take his ideas elsewhere, to form his own company, and undertake risk for his own gain or loss. His friend Steve Jobs saw the commercial appeal and the two began producing crude desktop computers in Jobs’s garage in the 1970s, reminiscent of the way Hewlett and Packard had begun their technology company in the 1930s.
Pursuing His Own Vision
Steve Jobs showed an affinity for technology early in life. His adopted father made side money purchasing used vehicles and refurbishing them to sell on the used market. He taught Steve some of the basics of mechanics and electronics and also the way of turning a dollar into two with a little resourcefulness. According to many accounts Steve was building a frequency counter in eighth grade for a school project and needed parts. He looked up the phone number for Bill Hewlett, co-founder of Hewlett Packard, and made a direct call, an action that most people would never have had the courage or will to take. He spoke directly with Bill Hewlett and several days later walked into the offices of HP and received a bag full of parts personally assembled by Bill Hewlett. This was Palo Alto in the late 1960s. That summer Steve was given a job at Hewlett Packard, something child labor laws would prevent today.
Apple combined the engineering and marketing genius of Wozniak and Jobs. We often hear that the company they launched would go on to revolutionize six, maybe seven, entire industries—personal desktop computers, laptops, tablets, smartphones, music distribution, portable music players, and possibly even retail stores. This is a broad characterization and ignores such obvious technologies as photography and videography. It also ignores the use of apps to bring thousands upon thousands of features to our fingertips with a simple, quick download. Everything from compasses to guitar tuners to GPS navigation can be downloaded to a smartphone with an app. New product and service apps are entering the marketplace every day.
iProfit—uBenefit
Steve Jobs had a vision to create “insanely great” products and ultimately to build a company that would stand tall even in his absence. By most measures he achieved the former, but the latter remains to be seen. His first absence from the company, arguably forced by the board of directors, saw Apple decline, almost into bankruptcy, only to be revived by the return of Jobs twelve years later and the return of his crude approach to management and stellar gains in the company’s valuation.
Jobs placed quality on a pedestal—above character, above reputation, above profit maximization. The quality he demanded and protected was truly a quality of his own design and purpose. He demanded total control and sometimes the features resulting would come to be viewed as less favorable to consumers, but Jobs was unyielding. He demanded quality the way he envisioned it.
Steve Jobs’s approach would have pleased William Edwards Deming, the father of quality management. Deming’s philosophy of quality management, developed in the 1920s through the 1940s, was adopted by Japanese firms in the 1950s. Up to that point, Japanese manufacturers had been chiefly noted for their cheap, inferior copies of Western designs. Deming’s system of thinking about management led to the paradoxical conclusion: If you focus on quality, then quality will rise and costs will fall, but if you focus on costs, costs will rise and quality will fall. Many corporations appear to have this backwards, but at least for a time with Jobs at the helm, Apple had it right.
He wasn’t merely trying to please the customer. Steve Jobs believed no one knew what was best for the consumer as well as he, Steve Jobs, did. He was like Seinfeld’s “Soup Nazi,” and there are still lines out the door of Apple stores whenever a new product hits the shelves. If the customers don’t like it, there’s plenty of competition (I am writing this on a Dell laptop and my phone of choice is a Google Android device, but my music comes from iTunes, and I play it on an iPod).
All of this is not to suggest that theories of self-interest or egoism simply advocate doing things your way—not if your way just isn’t very good. Jobs believed that his way was beyond the best the customer could conceive, and he and his team at Apple delivered. No amount of market research could persuade Steve Jobs that his intuition was not right. He believed in the power of his own mind over the power of objective analysis of existing conditions.
Some people say, “Give the customers what they want.” But that’s not my approach. Our job is to figure out what they’re going to want before they do. I think Henry Ford once said, “If I’d asked customers what they wanted, they would have told me, ‘A faster horse!’” People don’t know what they want until you show it to them. That’s why I never rely on market research. Our task is to read things that are not yet on the page. (Walter Isaacson, Steve Jobs, p. 567)
Jobs has been compared to the heroes of Ayn Rand’s novels. Luskin and Greta’s book, I Am John Galt, devotes a chapter to Steve Jobs, portraying him as the real life Howard Roark—Ayn Rand’s individualist architect from The Fountainhead. But my conversations with philosophy professors acquainted with Rand’s thinking suggest that the intuitive approach of Jobs was extremely un-Randian. Jobs was less likely to rely on reason, the cornerstone of Rand’s philosophy, than on his own intuitive grasp. However, Jobs comes as close to a Rand character as any known businessman ever has when considering two other virtues of her philosophy—the virtues of independence and integrity. Rand described independence as accepting the responsibility to form your own judgments and to live by the work of your own mind and integrity as the responsibility to never sacrifice your own convictions to the opinions, will, or wishes of others. It seems Jobs deserved an A+ for those qualities.
Marketing consultants warn against everyone adopting Jobs’s approach. After all, most people simply don’t know as much about their craft as Jobs knew about his or have access to the best talent in the world to help try to put their crazy thoughts into action. When Jobs made the comments quoted above he already had almost twenty years of direct experience in his field and had already been at the helm of one of history’s most innovative companies for nearly a decade. So it may not be entirely accurate to suppose that Jobs didn’t rely on rational thought. He may just have been genius enough to know that his reason was objective and that his famous “reality distortion field” was in fact based on his own rational calculations—regardless of whether others thought they were realistic.
Ethical Lapses
If an entrepreneur and his business get big enough and last long enough, even for the great ones, criticism and controversy will find its way into their stories. Steve Jobs and Apple have come under fire for three main reasons: allegedly unjust exploitation of labor in poor countries, Jobs’s harsh verbal treatment of his subordinates, and his seemingly niggardly approach to charitable giving.
The biggest source of controversy associated with Steve Jobs and Apple has been the succession of news stories and protests about the bad working conditions at Foxconn factories in China. Foxconn is the biggest private employer in China, with a million employees. It is a contract manufacturer for all the major western makers of electronic appliances, including Apple.
Foxconn’s factories have been described as ‘labor camps’ and the conditions compared with slavery. Wages are low and a twelve-hour day is common. Allegations were made that suicides occurred because of the poor conditions, though it was later found that suicides among Foxconn employees are lower than in China as a whole (which has a high suicide rate), and even lower than the suicide rate in the United States.
There’s a huge difference between general conditions and institutions in China and the US, though the difference in conditions gets slightly less each year. Although Chinese productivity and incomes are rising rapidly—partly because of the employment generated by companies like Apple through contractors like Foxconn—China is still far behind the US in productivity and therefore in income and customary workplace standards.
To make an accurate comparison of real incomes across different countries, economists at the International Monetary Fund use a special measure called Geary-Khamis dollars. By this measure in 2013, the United States ranked number six of all countries in the world at $53,101 per head, while China ranked number ninety-three at $9,844 per head. On average US citizens have over five times the annual income (per person) of Chinese citizens. The US Census shows that the richest state in the US in 2012, Connecticut, had an income per head of $59,687, while the poorest state, Mississippi, had an income of $33,657 per head. So the average resident of poor Mississippi was almost four times richer than the average resident of China.
This is not to say that Apple doesn’t have a moral obligation to confront the issue, and to its credit it has. Apple has insisted on audits of pay and working conditions, leading to substantial pay increases and workplace improvements, though pay and conditions are currently, of course, still way behind those in the West. Furthermore, political conditions limit what outside investors can do. In the short run Apple can only go so far in persuading firms in China to improve the working environment. Business freedom has increased in China in recent decades, yet the Communist Party maintains strong controls over speech, labor, and industry. In the words of the Global Economy Rankings on Economic Freedom, “The Communist Party’s ultimate authority throughout the economic system undermines the rule of law, and institutionalized cronyism remains pervasive” (Heritage.org 2014).
The second complaint concerns the harsh treatment or verbal lashings Jobs unleashed on those whose ideas he didn’t accept or whose work he didn’t deem up to his standards. This is a difficult one to analyze because we’re forced to look at the complaints of some without knowing all the relevant circumstances. One noteworthy account comes from his ex-wife in her own book on Steve Jobs. That probably isn’t the least biased source. There are those who didn’t receive the treatment so criticized by others, at least those who didn’t consider it significant enough to place it above all other aspects of his character. He was a CEO, and even before that he was a leader on a path destined to high achievement. This also doesn’t excuse his treatment of others, but it does suggest the intensity of his relationships was far beyond the typical relationships even in business. Even among business leaders, most don’t regard their work with the intensity of someone like Steve Jobs. Another possible explanation for the numerous stories of harsh treatment may be that his management style seemed to keep him in the operations side of the business more than most CEOs. He was approachable, exposed to more personalities. All in all, it appears that Jobs displayed more anger than he ought to have done.
Steve Jobs held an unpopular view of philanthropy. His actions were also unpopular. He didn’t join Bill Gates and Warren Buffett in their pledge to give away most of their fortunes. He wasn’t actively involved with his wife’s foundations. He didn’t get behind their missions in public speaking opportunities or site visits. He actually did set up a foundation of his own in the 1980s and became very frustrated with the whole thing. According to Caroline Preston, writing for the online Chronicle of Philanthropy, Jobs found “professional philanthropy—the jargon, showiness, and all the rich people who thought they could shake it up—distasteful.” Some of his views come from his initial experience with this foundation.
Perhaps the best defense of his position on philanthropy comes from a conversation he had with Walter Isaacson while working on his biography. According to Isaacson as reported by Ullekh, Jobs said he “would be able to do more to reform education, for example, by creating an iPad that had interactive textbooks than by being a philanthropist giving his money away.” This is consistent with the view put forth by philosopher Stephen Hicks. Entrepreneurs can do the most for society by focusing their efforts on creating the greatest products for the most people. (For more on Jobs and charity, see Chapter 9 in this volume.)
Entrepreneurship allows us to have more with the use of less resources; it reduces the prices of goods and services, thus enabling more people to benefit. An iPad may seem expensive relative to a book, but the iPad enables access to an infinite trove of information and exploration, so in real terms the iPad has reduced the cost of acquiring information, and hopefully knowledge—but that is up to the user. A philosophy of business ethics that would make a Steve Jobs divert his resources and talents away from his chosen entrepreneurial pursuit would be inefficient on economic grounds.
On philosophical grounds, it would infringe upon his pursuit of his own virtue. It would corrupt him. It’s better to leave the choice open and let others more so inclined pursue that path, their path, not the path of Steve Jobs.