No divisions, less is better

I’ve been reading Walter Isaacson’s biography of Steve Jobs. I’m just at the part where Apple is developing the iPod and iTunes to create a new music ecosystem. Why were Jobs and Apple able to pull this off and other companies, who had the requisite technology, unable to do so?

Jobs suggested that much of the problem with places like Sony, which arguably had all the tools in place (remember Walkman?), was that it was broken into divisions, each with its own profit-and-loss responsibilities. Thus, each division inevitably competed with the others, frustrating the collective effort necessary to put it all together. Apple, on the other hand, had only a single “division” and just one P&L.

But Apple also had Jobs. Key to his success, I think, was not only his exquisite and exhausting attention to detail. He understood that less is better. It was his ability to just say no that enabled Apple to concentrate on doing a few things extremely well.

Microsoft, as we know, charted a different course under the guise of freedom and choice. Bill Gates decided at the very beginning to make his money licensing the software to dozens of different hardware vendors.

When Apple was in the doldrums and at risk of having to shutter its doors, Gates and others strongly urged Apple to license its software to outside hardware manufacturers, just as Microsoft had done. And when Jobs was in the wilderness running both NeXT and Pixar, Apple’s then-CEO permitted a couple of companies to build Mac OS-compatible devices. Upon his return to Apple in 1997, Jobs quickly terminated the agreements.

Jobs believed strongly in closely integrating the software and hardware, unlike the Windows PC side. He reckoned that there was too much fragmentation under the Redmond regime. There were, and continue to be, so many problems with compatibility, as hardware vendors would incorporate different tweaks—and then all those third-party applications and utilities. It’s a wonder that PCs worked at all.

Nor was Jobs’s focus just on limiting the number of devices Apple would produce. The devices themselves were always on diets. Jobs’s creations had fewer features than PC counterparts. Just compare an HP laptop with a MacBook Air. The former is stodgy, ugly, assembled with screws, thick, heavy—but, my, it has a lot of ports and slots. Indeed, PC manufacturers seemed to suffer from “ports gap.” Jobs killed off the floppy drive and, more recently, the optical drive—neither of which will you find in the Airs. (Image from Apple)

As much as Jobs loved Apple and its products he did not hesitate to pull the plug on devices. Nor did he worry about cannibalizing his own products. For example, as iPhone sales skyrocket, iPod sales are down. No problem, since the iPhone includes the iPod functionality—by design. More people are buying iMacs than Mac Pros. Kill the latter.

Though Jobs would behave as a martinet more often than not, he also realized that good products require close collaboration amongst those with different, but complementary, skill sets. So Jobs insisted that the places he superintended be designed to facilitate accidental encounters.

Isaacson writes about Pixar’s being in need of new headquarters, having outgrown its old. Jobs purchased the abandoned Del Monte cannery in Emeryville, at which I happened to work during one college summer (a really crummy job, by the way). Always paying attention to design and function, Jobs ensured that employees would have to run into each other, even on trips to the bathrooms, of which there were only two, at opposite ends of the studio.

Jobs’s org chart differed remarkably from the conventional. Instead of an inverted tree, Jobs had fashioned a wheel. He was at the center surrounded closely by a small hub of direct reports. In most organizations, the branches become insular silos. Jobs would have none of that. (The following graphic from Fortune.

You may have seen the designs for Apple’s new headquarters in Cupertino, on property acquired, ironically enough, from HP. It reminded me of the space station hovering above the moon in 2001: A Space Odyssey. Again, employees, no matter what product they’re working on, will necessarily encounter one another, which yields ad hoc conversations that Jobs believed would stimulate innovative thinking via cross-pollination. (I could imagine Jobs sitting in the center of his new space station, sans shoes, eating apples and drinking Odwalla juice, pondering really cool products.)

Jobs also detested slide presentations inside the workplace; he reserved them for product rollouts, and he was a master at giving them. Jobs expected his leadership team to come to meetings fully prepared and ready to brainstorm. Jobs himself liked to think aloud using a whiteboard and markers. It was important for him to see things. He couldn’t be bothered with spreadsheets. If an employee had an idea for a product, he or she had better have a physical mockup available for Jobs to touch and feel.

It may sound Pollyannaish, but Jobs really did want to marry the arts with technology, and he believed that intuition was more important than intelligence. There are numerous examples of this preference in Isaacson’s book. One stands out so far. Jobs said that most computer vendors let the engineers determine how a machine is designed. The guts would come first, leaving those responsible for the containers to house the engineering contents. The result, thought Jobs, was a whole lot of ugly.

For Jobs, the look and feel and function by the eventual user were most important, qualities that he would intuit. The engineers would be tasked to devise the appropriate components to make them fit together seamlessly and attractively. That’s why Jobs made Jony Ive the second most powerful person at Apple; he is the award-winning industrial designer par excellence. In Ive’s studio was a machine that would convert computer drawings to foam models that could then be painted and even given heft with lead shots, if needed. And that’s where Jobs liked to spend a lot of his time, touching, feeling, holding the prototypes. The artist at work.

Apple, you will learn should you read the biography, is a much different place than any other organizations you may have worked, visited, or read about. As electronics companies try to ape Jobs’s devices, I’m sure that some of them will try to copy his management style and even his workplaces.

They will likely fail at this and produce, in Jobsian lingo, “nothing but shit.”

Skipping civilization

For most of my adult life I have tended to socialize with like-minded people. Not surprising, since that socializing was the byproduct of working on peace and justice issues, which attract few, if any, conservatives.

More recently, however, I have been in the company of individuals espousing viewpoints that I simply don’t share. Among these are support for capital punishment, which I strenuously oppose, and lower taxes on the wealthy. Yes, you read that correctly.

On the latter point the argument I heard can be summed up neatly: taxes should be imposed on the basis of need. Since the rich, almost by definition, need fewer public services, they should be taxed at a lower rate than the poor, who rely more heavily on government programs.

Neat, but nevertheless bizarre.

I admit to being taken aback by such thinking, probably because I’m just not used to it. How should the argument be countered? Wherein lie the defects?

Having spent a bit of time on this, I’ve come up with an analogy, influenced by Prof. Krugman: the U.S. government is one large insurance company. Each of us in this arrangement, whether rich or poor, is subject to risks outside our control. To hedge against individual catastrophe, we pool our risks. We do so by paying taxes, with the implicit understanding that the revenues gained will be used to mitigate the suffering incurred by others.

The arrangement presupposes commonality. At the simplest level, we are of one species, homo sapiens, who inhabit a particular chunk of real estate. Yet there is something more, I suspect: we are in a fundamental sense co-equals.

The equality has little to do with outcomes, which are extreme in the U.S. Rather, we share the myth of equal opportunity. With a bit of luck and a whole lot of pluck we can become the next Bill Gates or Warren Buffet.

In reading the Walter Isaacson biography I’m struck by how many fortuitous events conspired to yield the person of Steve Jobs: his being adopted into a home in which the father manifested an unusual concern for detail and aesthetics in his work; trekking up to Reed College, only to drop out so that he could audit classes he liked, one of which was on calligraphy and type; his accidental pairing with Steve Wozniak, whose talents complemented Jobs’s; his ouster from Apple, the company he established with Woz, which led to his developing the NeXT computer operating system that later served as the kernel for Mac OS X and buying Pixar from George Lucas; that the Apple board would agree to purchase NeXT and bring Jobs back to Apple; and so on.

As it happened, the innate character of Jobs enabled him to exploit these serendipitous events for personal and corporate gain. He died a very wealthy man, though not the richest in the cemetery. But we also know, as Steve Jobs knew, that things could have turned out very differently for him, including his becoming a starving artist. There might not have been an iPod, an iPhone, iTunes, the Mac, or the iPad.

All of us have read accounts of individuals whose lives did not turn out well at all. The Great Recession has produced millions of sad stories.

A few weeks ago I happened to overhear a middle-aged man in the grocery store tell a young clerk that he had lost his job, his pension, his wife, and his house. He said that he had a good, steady position that paid well. When the economy tanked, so did his life.

The man was now at the mercy of government programs, including Social Security and perhaps Welfare. The funding of the programs he desperately needed comes from all of us via taxes.

We cannot legislate sympathy. But upon some moment of reflection we should arrive at an appreciation for those whose fortunes have soured. It could happen to any of us.

My contrary friends presume that the incomes of the rich are justly deserved. Thus, taxation amounts to theft. The government has no legitimate claim to the money earned by its citizens. By extension, the poor have no claims against the rich.

In a recent essay Gar Alperovitz writes:

A half-century ago, in 1957, economist Robert Solow showed that nearly 90 percent of productivity growth in the first half of the 20th century alone, from 1909 to 1949, could only be attributed to technical change in the broadest sense. The supply of labor and capital – what workers and employers contribute – appeared almost incidental to this massive technological “residual.” (Solow received the Nobel Prize for this and related work in 1987.) Another leading economist, William Baumol, calculated that “nearly 90 percent … of current GDP [gross domestic product] was contributed by innovation carried out since 1870.”

The truly central and demanding question is obviously this: If most of what we have today is attributable to knowledge advances that we all inherit in common, why, specifically, should this gift of our collective history not more generously benefit all members of society? The top 1 percent of US households now receives far more income than the bottom 150 million Americans combined. The richest 1 percent of households owns nearly half of all investment assets (stocks and mutual funds, financial securities, business equity, trusts, nonhome real estate). A mere 400 individuals at the top have a combined net worth greater than the bottom 60 percent of the nation taken together. If America’s vast wealth is mainly a gift of our common past, how, specifically, can such disparities be justified?

All of us, not just Steve Jobs, are products of an endless string of fortuitous events beyond our control. Some will wind up doing well; others not so much. In no case do individuals deserve their fates.

A civilized society would have the winners compensating the losers via tax-funded government programs. Perhaps the problem here is that we’re not all that civilized. Oscar Wilde reckoned so:

America is the only country that went from barbarism to decadence without civilization in between.

Education for what or whom?

We are told that those who graduate college earn more than those who don’t. Okay. But amidst the statistical averages lie sobering details. Thousands of college graduates, strapped with tens of thousands in student loans, can’t find work. Moreover, they’re moving back home, not because they want to but because they must.

I, too, had incurred debt while attending Berkeley. Yet, my amount was very small potatoes—in the low hundreds—compared with today’s students’. After all, Berkeley was still tuition-free when I attended, which gives you some sense of how old I am and how long ago it was that I was studying history and later philosophy.

My own children graduated from the University of Washington. We parents were able to scrape together most of their expenses. Our daughter, however, went on to obtain two Master’s degrees and a law degree from the same institution. Fortunately for her, while our resources were insufficient to pay for graduate school, she has been able to find respectable employment that pays her well and allows her to comfortably retire her debt. She’s also married to an enterprising attorney, who, we’re certain, will soon become a partner in his firm.

Our family’s experience is an exceptions. Far too many children have gone to college and will continue to do so with the expectation that their expensive sojourn in higher education will reap substantial reward. Sorry about that, kids. While a few of you will indeed become successful, both professionally and financially, most will not.

The Northwest’s own Timothy Egan now writes for the New York Times. In his column today he tells us of a parent’s lament.

Her sons jumped from commencement to the real world full of springy confidence. But now, two years after graduation, after hundreds of rejections, after their resumes bounced back like boomerangs to the head, they were living at home, and every day brought another dent to their self-confidence.

Egan regrets the tethering of self-worth to academic performance. He suggests adopting some of Steve Jobs’s wisdom.

What was missing in the life message of child-raising was some of the counter-cultural swagger in that 2005 commencement speech by Steve Jobs, the one that made the viral video rounds after his death. If you listen to the whole speech, it is what he says at the end that seems so apt for these years of diminished expectations. “Stay hungry,” Jobs said, borrowing an admonition from the creators of The Whole Earth Catalogue, an early bible for him, and equally important, “Stay foolish.”

Egan adds that the “hungry” part is easy. Being “foolish,” it seems, requires a different mindset than the prevailing Darwinian philosophy. (I would add that there is and will be only one Steve Jobs, who, ironically, eschewed the culture of consumerism to produce the most lusted after products on the planet. Walter Isaacson’s biography reveals much, and I will have more to say about it in one or more future posts.)

For what does it profit a man or woman to earn the Ivy League credential, itself a product of much discipline, money, and self-denial, only to have to move back with the parents? Unfortunately, in today’s depressing economy there appear to be only two paths: somehow become very wealthy; or struggle to put food on the table. The in-between option seems closed. That first path, by the way, begins very early in life; and it helps immeasurably to be born of rich parentage. Should you not jump on that upward vector, or dare fall off, you may have to find contentment flipping the proverbial hamburger.

Lamentation is thick and widespread. The starving artist is always a possibility.

UPDATE (Oct. 28, 2011):

For more on this click here.

Saving capitalism from the capitalists

John Maynard Keynes thought that it a worthy objective to save capitalism from itself. Unchecked by regulation “animal spirits” would produce excesses, both up and down.

The Times‘s Nicholas Kristof writes in his column this morning:

Capitalism is so successful an economic system partly because of an internal discipline that allows for loss and even bankruptcy. It’s the possibility of failure that creates the opportunity for triumph. Yet many of America’s major banks are too big to fail, so they can privatize profits while socializing risk.

The upshot is that financial institutions boost leverage in search of supersize profits and bonuses. Banks pretend that risk is eliminated because it’s securitized. Rating agencies accept money to issue an imprimatur that turns out to be meaningless. The system teeters, and then the taxpayer rushes in to bail bankers out. Where’s the accountability?

I submit that the absence of accountability has everything to do with a corrupt political system that allows for, if not also encourages, massive financial contributions to those ostensibly tasked with the responsibility to restrain the excesses—that is, legislators. Complicit in the corruption, of course, are the ideological conservatives dominating the present Supreme Court, which has issued a string of rulings that virtually ensures plutocracy. The Rest of Us have little skin in the game because we lack bribing ability comparable to the One Percent’s.

Alas, I see nothing on the horizon to correct the gross imbalance, save for one small possibility: that both sides of the political aisle concert to gradually eliminate subsidies and financial guarantees. Yes, we all have our favorite subsidy. But if the opportunity for quid pro quo ceases, then the plutocrats may find it worthwhile to invest their dollars outside the halls of Congress.

Meanwhile, the “animal spirits,” though impossible to eliminate since it’s inbred, can be contained by those who choose to play the casinos, Keynes’s metaphor for Wall Street. A simple, nominal tax on financial transactions could—and, I would argue, should—be established, the revenues from which to be deposited in a private insurance fund. Those who play would pay in the event matters sour.

So much for progress

We had a string of good years, ladies and gentlemen of the work force. But lately matters have gotten worse. Indeed, it’s as if we’re back where we started.

The unemployment rate remains stubbornly high, at around nine percent, give or take. Meanwhile, the ratio of employed people to population has dropped precipitously. Just take a look. (Data from St. Louis FED.)

Despite a lower ratio during the 50s and 60s, the unemployment rate was much lower than today. My guess is that women began entering the workforce in ever-increasing numbers, beginning in the late 70s. (Data from Bureau of Labor Statistics.)

The Bureau of Labor Statistics provides a sobering table of information regarding the unemployed. To wit, how long have people been out of work before they find new employment?

Wander over to the rightmost column. The data here represent those who have been out of work for a year or more. We can see that 2009 and 2010 recorded the highest percentage since 1994., the first year tracked. Keep in mind that the table numbers reflect only those people who eventually found new employment; it does not address those who have either given up or simply cannot find work of any kind.

Just stand and say nothing

Against the current crop of GOP candidates the Democratic contender need only to stand erect while keeping his mouth resolutely shut. He would be rightly deemed sufficiently serious to continue in office. Whom am I kidding?

Why is America such a stage for political idiocy? Television’s reality shows prove no match for the clown-filled circus starring the Republican presidential wannabes.

It’s not as if nothing’s wrong in this country, for god’s sake. Real people are suffering, and they’ve been at it for several years if not decades now. But suffering people are not the proper constituency of the GOP. Hell, if you’re poor, it’s your own damn fault. Praise be to Wall Street.

I admit to not watching a single second of the Republican debates. I read the fallout, which is filled with endless strings of quoted inanities.

One would like to think that we deserve better. Then again, perhaps not. These idiots may be precisely what we deserve.