The Best Oracle
When thinking about what makes a great CEO, I couldn’t help but think about the importance of looking ahead and predicting customer needs, often before the customer is even aware they have the need. Some companies have extraordinary track records for huge product successes over and over again, while others continually miss industry trends. Everyone looks at Apple for their home runs yet even Apple didn’t always get it right and people quickly forget failed products such as the Mac Portable, the eMate, HiFi, Ping, and many others. For Apple to become something great, it had to take risks. Someone had to have vision and someone had to get it right at least most of the time.
In the inverse, I think about all the products that Microsoft missed because they didn’t believe what common sense otherwise indicated. They made fun of the iPod, only to flop with their own Zune. My favorite, CollegeHumor.com selling, “Zunes by the pound![1]” and all the other pronouncements both Steve Ballmer and Bill Gates made over the years. Scientific America[2] wrote an article highlighting a few from tech opinion leaders that were colossal thuds. Here are some.
· “I predict the Internet will soon go spectacularly supernova and in 1996 catastrophically collapse.”—Robert Metcalfe, founder of 3Com and inventor of Ethernet, writing in a 1995 InfoWorld column
· “Television won't be able to hold on to any market it captures after the first six months. People will soon get tired of staring at a plywood box every night.”—Darryl Zanuck, 20th Century Fox, 1946
· “Everyone's always asking me when Apple will come out with a cell phone. My answer is, 'Probably never.'”—David Pogue, The New York Times, 2006
· World Economic Forum, 2004: “Two years from now, spam will be solved.” Bill Gates.
Some quotes from Steve Ballmer[3]
· “$500, fully subsidized with a plan?! That is the most expensive phone in the world, and it doesn't appeal to business customers because it doesn't have a keyboard.”
· “There's no chance that the iPhone is going to get any significant market share. No chance. It's a $500 subsidized item.”
· “Google’s not a real company. It’s a house of cards.”[4]
While even the most successful CEOs sometimes get it wrong, these quotes were so wrong that you have to wonder if they were at all grounded in reality in their roles as CEO. I keep wondering why.
In the book, “Memoirs of the Twentieth Century, Prevision. Should the Future Help the Past?”[5], first printed in 1733, on page 8, it says, “A quote from a lost Greek tragedy by Euripides commonly translated as “The best prophet is common sense, our native wit” or another translation, “The best prophet is the good guesser.” This concept grabbed me because it made me think about those CEOs who I knew who were more successful than average and how they were first grounded by common sense, even if others thought they were crazy. They have this ability to separate fact from fiction to understand what’s really in front of them. They don’t simply believe what they want to believe.
There is a famous quote by Richard Feynman, when talking about the very meaning of science, "The first principle is that you must not fool yourself, and you are the easiest person to fool.” CEOs looking forward are no different. I’m thinking about those CEOs who understand true cause and effect and can separate the difference between matters of internal performance and external market forces. The outstanding CEO, with a heavy dose of pragmatism, can see what’s ahead and know the difference between fact and fiction and take action accordingly. While others see what they want to believe. They fall for the very point Feynman was trying to make.
When the press was telling the world that Bluetooth was a dead technology, I couldn’t find any evidence to support the notion. None! It was purely manufactured in the press simply because adoption was slow. The weekly silicon sales reports never once showed a decline in shipments. In fact, I couldn’t find a single company that was going to take Bluetooth off their future roadmap. This is why the acquisition of OI made so much sense to me.
I look at some CEOs who are clearly about to face-plant with no clue that their own market is changing and I can't help but think about what Ernest Hemingway once wrote, “How did you go bankrupt? Two ways. Gradually, then suddenly.[6]” I’ve loved this quote for years. It stuck me most when I was working as a trustee as I'd see it again and again. Everyone one of those companies was once a huge success before turning into a colossal failure. I always wanted to know if they lost their common sense along the way. In most cases they did. They wanted to believe one thing when the market said something completely different.
Great companies know that at some point, no matter how successful they are, they will need to pivot into a whole new segment. Great CEOs understand that from the beginning and are constantly looking for what's next.
When I started my first intellectual property management company, I named it QED, Inc., which is usually written Q.E.D. It’s the Latin phrase, quod erat demonstrandum, meaning, “which is what had to be proven.” It’s commonly used in math equations. I loved the name because at the time, we were creating ideas in a company with a lot of theories and no clue where we were ultimately headed. We were a solution looking for a problem, which is typically not the best way to build a business. What made us successful was that we threw caution to the wind and talked to everyone we could find to help us shape our technology to meet the needs of the market. We eventually got there by letting the market set our priorities, not the other way around. In our case, it was an early buyout to leverage our technology into new markets we hadn't even contemplated.
That company more than any other taught me how to look far ahead to plan back to where you are today. It was an important lesson that seems to get lost with a lot of entrepreneurs, that basic pragmatism that leads to good predictions about where you’re going, and accepting what pragmatism tells you, even when it’s difficult to accept. I tell people over and over, accept when an idea is a bad one and never double down on the investment in that bad idea. Too many leaders believe that somehow admitting a mistake means that you’ve invalidated your life. It hasn’t. Even OI had some failed directions, but luckily we were willing to let go in time.
I know of one company right now where the CEO refuses to accept the reality of his changing business model. He’s been advised by numerous people that he needs to make a major pivot, yet he prefers to discredit the messenger rather than accept that he is wrong. He will soon reach the point where it’s too late. Like Hemmingway wrote, failure is happening gradually then it will occur suddenly.
So much of our success running companies depends on our willingness to have a serious look at where were going, to remain viable, pragmatic, with a healthy dose of common sense.
[1] http://www.collegehumor.com/video/3943684/nicks-commercials-zune-warehouse
[2] http://www.scientificamerican.com/article/pogue-all-time-worst-tech-predictions/
[3] http://www.zdnet.com/pictures/what-steve-ballmer-got-right-and-wrong-in-quotes/
[4] http://www.thinkcomputers.org/10-incredibly-stupid-quotes-by-steve-ballmer/
[5] “Memoirs of the Twentieth Century” Samuel Madden, Prevision. Should the Future Help the Past? Liam Gillick” Excerpt From: Samuel Madden & Liam Gillick. “Memoirs of the Twentieth Century & Prevision. Should the Future Help the Past?.” iBooks. https://itun.es/us/3KNXz.l
[6] Ernest Hemmingway- The Sun Also Rises