Or Seeing Clearly

The idealized glow of a halo makes it hard to see clearly – and to think straight.  We are reminded about this now as Steve Jobs has stepped down as Apple’s CEO, and the press is full of dire warnings about the company’s future.

An account of Job’s career in Newsweek is suffused with idealizations.  At the same time, offering a retrospective of his career, it reminds us that his life, like most of ours, has been checquered and filled with its share of mistakes.

Most of us probably have not forgotten that he was booted out of Apple for being a poor manager before he was brought back.  “In his second tour of duty at Apple he mastered all the less glamorous but highly important aspects of business that had eluded him at first—things like inventory management,” writes Newsweek.  Returning, he found a second in command who was good at just those things he wasn’t.  And he also learned a lot about listening to others. Nonetheless, “The company lost $247 million in the last quarter of 2000. CBS Marketwatch named Jobs one of the year’s biggest losers.”  (See “Exit the King.”)

I do not in any way want to take away from Jobs’ brilliant achievements at Apple.  The point is about us, and our susceptibility to hero worship.  It’s about how hard it is for investors to think straight and keep in touch with reality.

Two years ago, Phil Rosensweig published a thoughtful book, The Halo Effect, about how we tend to be blinded by the oversimplifications we want to believe.  He begins his story with Cisco System’s phenomenal rise in the late 90’s, until its bubble burst, and he goes on to chronicle the stories of IBM, Nokia, and ABB.  He notes the typical delusions of business managers and journalists who believe they have found the magic key to success.  He also offers critiques of such classic business books as In Search of ExcellenceBuilt to Last, and From Good to Great.  His point is that the path to success is winding and complex, not capable of being summed up in a recipe or illustrated by a single example.

We all remember Enron, for course, several times Fortune’s top Company of the Year.  And, no doubt, we all have our own examples of companies we idealized and over-valued.  We may even at time believe we have found the secret to success, or even the two or three secrets.

As CEO at Apple, Jobs did eventually deliver.  After early failures, Newsweek notes:  “when stock splits are factored in, the shares increased 110-fold during his tenure.”  But it is one thing to be successful, and it is another to be endowed with superhuman qualities, to walk on water.  The halo looks like it’s out there, glowing in the dark, but it’s largely a mirage.