The Tao of Steve Jobs

“If you keep your eye on the profit, you’re going to skimp on the product. But if you focus on making really great products, then the profits will follow.”   -Steve Jobs   “Be desireless, be excellent and be gone.”   -The Tao of Steve   I just finished listening to the most recent episode of Exponent, and it dredged up the memory of an obscure early-2000’s romantic comedy about a chubby dude and an ancient Chinese philosophy. Also, the protagonists in each story are named Steve, so it seemed worth writing about. The topic of discussion in the podcast was Apple under Steve Jobs vs Apple under other CEOs. Jobs, by his own description, focused on creating the best products, with faith that profits would follow. Apple under other leadership, particularly that of John Sculley in the 80’s and early 90’s, focused on profits, and while it achieved them in the short term, even paying out the company’s first dividend in 1987, this approach set the company on a path for later struggles. We all know the rest of the story: Jobs returned to the helm, restored the company’s product focus, invented a bunch of i-Things, and now the company is worth all the money. “The Tao of Steve” is an intellectual rom-com from the year 2000 about a dude who uses his own interpretation of Taoism to pick up chicks. This philosophy comprises 3 rules: “Be desireless, be excellent and be gone.” The idea was that to get a woman interested in you, you had to a) not let her know you were interested, b) show her that you were really good at something, and b) get out of sight before you lost your cool. I saw this movie only once, something like 15 years ago, but for some reason it really stuck with me. Possibly because of the sneaky clever Kevin-Smith-meets-the-Coen-Brothers dialogue. Possibly because it was first time I’d encountered the idea that the best way to achieve certain goals was not to pursue them directly, but rather to ignore your actual goal and aim for some adjacent or intermediate target. More likely because I was a teenager at the time and any idea which offered the promise of attracting women was automatically deemed memory vault-worthy, but whatever, I remembered it. The parallels with Steve Job’s philosophy at Apple are pretty clear. Pursue the affections of ladies profits directly, you will fail to attain them. Pursue the things that are one step removed from the affections of ladies profits, and you will attain your ultimate goal. I find this philosophy (or possibly, twisted interpretation of a philosophy) so fascinating because there are situations where it really seems to apply, and others where it doesn’t. For example, I took Latin as a foreign language in high school. My primary motivation was that I liked the teacher, and had some friends who were planning to take the same class, but one popular justification for taking Latin was that it’s the root of all romance languages, and would make it subsequently easier to learn other languages. This is true, but I certainly wouldn’t say that learning Latin is the easiest way to learn Spanish. If my main goal was to learn Spanish, I would have been much better off just taking Spanish, and then I would know Spanish! Sometimes the direct approach really is best. In business, there are plenty of examples where the Jobs-Tao principle looks to hold true, and plenty where it doesn’t. Nordstrom is famous for their over-the-top customer service, and while they’ve been posting somewhat lackluster results recently along with the rest of the retail industry, I would say they’ve done pretty well for themselves over the last 119 years. On the other hand, I don’t think there’s any evidence that a “focus on the customer, ignore profits” approach works in the cable industry. Everyone hates their cable provider and yet they keep paying, because cable providers don’t often compete on quality, or price, or anything really; there’s usually just one available for your neighborhood. In the airline industry, Southwest has been phenomenally successful over the last four decades with a combination of low fares and much-better-than-average customer service; however, Spirit Airlines borrowed the “low fares” part of Southwest’s playbook, ripped out all the pages about customer service, and has also grown at a decent pace, suggesting maybe Southwest’s customer focus wasn’t that much of the story after all. Is there a general rule of thumb to know when “The Tao of Steve Jobs” applies in business? It seems to have worked for Apple because Apple was not attempting to compete on price. As long as they had the best product in the view of some reasonable fraction of tech consumers, they would be able to sell some number of these products at almost any price; there are always some high-earning-enough technophiles willing to pay up for the best, even at prices the majority of us would balk at. Going after the high end of the market, of course, limited Apple’s scale (and still does), but it did give them the freedom to really focus on quality, knowing they would always have a market of some size. This was important because even if Steve Jobs wasn’t concerned about reporting accounting profits or returning cash to shareholders, he still had to keep the lights on, so all those iPod nanos Apple sold in 2005 really did matter. Another tech giant, Google, could be said to have taken a similar approach when they were growing their search business. They focused on having the best search product, and trusted that if they did, it would win. If you are old enough to remember using “Ask Jeeves” or other competing search engines, you know that Google was indeed a superior product. And obviously, it did win. Google was also free from having to compete on price, even more so than Apple: search engines were totally free to their users, so it was impossible to compete on price. Really the only option Google had beyond competing on quality was on brand recognition; to the extent they employed a ToSJ-ist approach, it was primarily in eschewing marketing, and trusting that quality would win out regardless. It did. OK, so another tech company which didn’t have to compete on price, won by having the highest quality product or service. Not exactly a revelation. What about Amazon, though? Bezos has also been pretty militant about focusing on customer experience and not worrying about near-term profitability, has also been pretty successful, and yet Amazon definitely competes on price. How is Amazon able to maintain this quality focus despite operating in a cutthroat, low-margin industry? Well, one argument would be that they haven’t actually succeeded by a strict definition of the principle. If the ultimate goal is still profitability, well then Amazon’s retail operations haven’t really reached that goal, at least not anywhere close to the degree that the previous examples, Apple and Google, have. However, Amazon has other businesses which are quite profitable, namely AWS and Amazon Advertising, which couldn’t have been built if Amazon’s retail business didn’t exist. (OK, AWS could have, but likely wouldn’t have succeeded without the built-in scale that came from serving Amazon’s retail business). This is not in fact too different from Google’s case: they are leveraging one business which generates little or no profits (Amazon: retail, Google: search) to succeed in a different business, with a different set of customers, which is highly profitable (Amazon: AWS + Advertising, Google: search ads). If you look at things this way, Amazon has in fact achieved profits through superior quality of service in their retail operations, they've just mostly not been retail profits. So, as per usual with Amazon, it doesn’t quite follow the rules, but sorta does if you squint. OK, back to the question at hand: is there some rule which defines when the T of S J applies and when it doesn’t? Actually, I think it always applies, if we expand the definition a bit. Instead of specifically referencing product or service quality, let’s say: Don’t focus on profits, but instead focus on the thing that allows you to make profits. In the case of Apple, product quality is that thing; if they stop having the best products, they are in trouble. In the case of Spirit Airlines, low cost is that thing; if they aren’t the cheapest option, they are in trouble (they sure as hell aren’t gonna win on experience). For Comcast, geography is that thing...I guess Comcast doesn’t have to worry too much.