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December 20 2011

The price of greatness: Three takeaways from the biography of Steve Jobs

Steve JobsAs the first Christmas approaches without Apple founder Steve Jobs, it's worth pausing for a moment to appreciate what he has left behind.

In addition to an astoundingly healthy business with $80 billion in the bank, recent analysis by Andy Zaky of Bullish Cross suggests that in the current holiday quarter, Apple will record its largest earnings blowout ever.

This is on top of unparalleled customer loyalty and brand recognition, not to mention a potent halo effect generated by Apple's iPhone, iPad and Mac products.

Yet, according to analyst Zaky, Apple remains the most undervalued large cap stock in America. It's almost as if Apple is saving "one more thing" for the holidays; this one, a stocking-stuffer for investors.

I bring this last point up because the notion of Apple still being undervalued (and under-appreciated), despite the accomplishments, accolades and attention, suggests something about the human condition; namely, that when faced with an exceedingly bright and brilliant light, our minds naturally filter it down a bit.

But true greatness, the kind realized by Jobs in his life, and by Edison, Disney and Ford before him, is best appreciated without filters, for it is something that is experienced perhaps only once in a generation.

With that in mind, I want to share three takeaways from Walter Isaacson's biography of Jobs that spotlight both the greatness of the man and the price that greatness demands.

"The flu game"

In the annals of professional sports, there is perhaps no individual performance more emblematic of greatness in action, than "the flu game" in the 1997 NBA Finals, where a flu-ridden Michael Jordan overcame a stomach virus that had rendered him weak and dehydrated to score 38 points and lead his Chicago Bulls to a 90-88 victory over the Utah Jazz in Game 5. They won the series in six games.

That one man could overcome, no ignore, failing health to will his team to victory is both a defining example of the greatness of Michael Jordan as a basketball player, and no different than how Jordan approached every game that he played.

I thought about this a lot in reading Jobs' bio, inasmuch as one of the key takeaways (for me) from the book was how Apple's rise from the ashes was largely accomplished with its leader fighting not a flu, but cancer, and not for one game, but for eight years.

We all know about Jobs' battles with cancer, his forced leaves of absence, and the fact that he was never quite physically restored to the cherub-like state that he embodied when he first returned to Apple in 1997.

But the book lays clear, painfully so, something that all of us grokked and groped from the shadows but could never truly "know" because it wasn't public: from the moment he got sick in 2003 to when he died in October of this year, Jobs was never fully healthy again

.

Quite the opposite, in fact. He was literally fighting a continuous battle with his body, and a metastasizing cancer, yet still led his team to a series of triumphs that have no equal in the annals of business.

What Steve Jobs accomplished after cancer

  1. iTunes Store ramp
  2. iPhone
  3. iOS + App Store
  4. iPad

During this period, Apple stock surged more than 3,000%, and for Jobs personally, it was only his second greatest financial achievement; he would realize far greater personal wealth leading Pixar's evolution from a failing tech provider for the film business into Disney 2.0.

Apple's stock performance

Just as Jordan's flu game is simultaneously emblematic and par for the course of his greatness, so too was Jobs' leadership of Apple during his period of sickness.

The man known for reality distortion and an unwavering, uncompromising pursuit of the insanely great, ignored his own personal suffering, paying the ultimate price to achieve greatness. More so than any nugget from the Steve Jobs bio is this coarsely ground truth, something that should serve as a reminder the next time we wonder why there are so few great leaders, and even fewer great companies.

Yeah, but he was a jerk

Those who seek to dismiss or marginalize the accomplishments of Jobs tend to focus on one of three things.

Either they diminish his accomplishments as a modern-day Edison since Jobs wasn't an engineer, or they give props to Jobs' marketing savvy as a backhanded-way of diminishing the realness of what he built.

Or, they point out that he was a narcissistic jerk who took credit for the accomplishments of others, was controlling, belligerent, and probably not the prototypical role model of the family man (home for dinner, mowing the lawn on the weekends).

I'd like to focus on this last point, as it is simply irrelevant to the field of play that Jobs made his mark within.

Few of us know or care if Michael Jordan is a nice guy, whether Walt Disney remembered the names of his workers' kids or if Thomas Edison pet his dog. Case in point, Henry Ford held anti-Semitic views, but that doesn't mute the impact that Ford had on the field of play that is the automotive industry.

In Jobs' case, we have already established how fully the man led by example; how unparalleled the financial results his company generates are; and the deep, emotional bond that Apple products engender with users. But, also know that Jobs built a corporate culture defined by longevity, loyalty, depth, purpose and intellectual honesty — but above all, peak performance.

In other words, in the field of play that is creating enduring companies that build products that "make a dent in the universe" (a Jobs axiom), whether the leader is warm, fuzzy and personally likable is mostly orthogonal to the outcomes that he manifests.

Sweating the details

So, we've established that Jobs led by example, making the ultimate sacrifice so that his vision, his purpose in life, could be realized.

And we've noted that whatever personal peculiarities adorned the man, they didn't tarnish his accomplishments one iota.

In closing, I'd note how Jobs' manifestation of these attributes translated into the type of leader who plugged himself into an entire category of granular decisions that on the one hand, most CEOs would delegate "on principal," but on the other, it's darn near impossible to imagine an un-Jobsian leader being able to yield the wealth of transformational products that Apple has created.

One such example explored in the book are the specific materials and production processes that Apple uses in building its products. Such is the story of Gorilla Glass, the exceptionally lightweight, damage-resistant glass that came to anchor the screen of the iPhone.

How Gorilla Glass came to be is classic Jobs.

Internally, the iPhone team was driven by a realization that the centerpiece of a touch-driven phone was the display, not a composite of screen, casing and keyboard.

Armed with this clarity, Jobs drove the Apple team to re-think the form of the device around its display centricity. But, of course, this begged the question of the integrity and durability of the display material being used.

While conventional wisdom initially drove the company toward plastic screens, as the iPod had used, Jobs focused on the elegance and substantive nature of glass.

Having gotten wind from an old friend that Corning Glass was doing some amazing things with chemically-fortified glass, in typical Jobs fashion, he tracked down Corning's CEO, who told him about a chemical process that had actually originated in the 1960s but had never found an appropriate commercial application.

Convinced that he had found the right answer, Jobs challenged Corning's CEO to commit to both the capacity and timeline needed to achieve the scale Apple required to meet the iPhone launch deadline.

It was a game-changing solution for an unproven new device from an approach that had never been produced commercially prior to that point. And it worked!

There are similar stories in the book about the advent of multitouch, Apple's embrace of intricate metal fabrication processes, mass-purchasing of pinpoint lasers and the internal prototyping culture that instructed what became the Apple Stores.

Beyond showcasing the many incredible qualities of Jobs, all of this serves to underscore that having a simple product line — in terms of having very few products — is very different than having a simple product strategy. With scarcity comes focus, and with focus comes precision.

A final thought

There are many of us who consider ourselves to be entrepreneurs, inventors, and startup guys and gals, but I think this quote from Jobs captures the essence that there are no shortcuts to greatness. Greatness is dedication. It's a demand, and it's a detail. Or, as Jobs said:

I hate it when people call themselves entrepreneurs when what they're really trying to do is launch a startup and then sell or go public so they can cash in and move on. They're unwilling to do the work it takes to build a real company, which is the hardest work in business.

Amen. Somewhere in the universe, there is a hole where the light of Steve Jobs still shines through.

Photo of Steve Jobs from Apple Press Info.

Related:

December 18 2011

Asian art turns from plaything of Hong Kong's young rich into moneyspinner

Demand for high-end Chinese art booms as the growing number of millionaires seek alternative investments

In a luxury apartment perched on the leafy hills of Hong Kong, Kai-Yin Lo browses through a trove of Chinese art acquired over several decades, reflecting how her niche, scholarly pursuit has hit the mainstream.

Despite giddy Chinese art prices showing some strain from global economic uncertainty, collectors like Lo think values will continue to rise due to limited supply and continued strong demand as Asian collectors become more affluent.

"As east and west get into more of a confluence in taste and in the market place, it will still go up," said Lo, a Cambridge-educated writer and jewellery designer known for wearing mismatched designer shoes.

Lo is one of Hong Kong's leading art collectors, her home stacked with rare Chinese furniture, stone carvings and paintings, including an inkbrush panorama of the Grand Canyon by 20th-century Chinese master Wu Guanzhong.

Hong Kong's auction market turnover trebled between 2009 and 2010. The Mei Moses Global Art Index – a broader measure – showed an 11.8% rise in the first 11 months of 2011, statistics belying the global fiscal crisis.

Despite the art market's vulnerability to shocks, including the collapse of Lehman Brothers in 2008, when unrealistic estimates left scores of unsold lots amid tepid bidding even in the red-hot Chinese ceramics market, Asia's rapid wealth accumulation is likely to result in more cash flowing into art and other alternative investments.

Asia's wealth management and private banking industry remains a growth area for banks, with an estimated 3.3 million high net worth individuals worth more than $1m, according to Capgemini and Merrill Lynch's latest annual World Wealth report.

With a combined wealth of $10.7tn (£6.88tn), Asia's wealthy have eclipsed the $10.2tn held by Europe's generational millionaires. "The exponential growth in the number of emerging market [millionaires] ... is expanding the global market for investments of passion," the report said.

"It may not be a good time for sellers but it's an excellent time for buyers. During late 2008 and 2009, I highly advised clients to buy," said Bobby Mohseni of art consultancy MFA Asia. "With Chinese contemporary art, some prices have gone exceptionally high and that's just over a decade ... so it's best to look at upcoming or mid-tier artists."

While stocks on the S&P 500 in New York have outperformed western art over the past 25 years, according to Mei Moses data, Chinese and Asian art is still comparatively cheap compared with the Impressionists or American contemporary art. A Mei Moses index for traditional Chinese art showed a 24% jump in the first threequarters of this year.

"Confidence in the Chinese contemporary art market remains high despite art market confidence dropping sharply in the US and European contemporary market," said Anders Petterson, head of art research consultancy ArtTactic.

Even for those with less purchasing muscle, experts say bargains can still be had, including modern Filipino and Indonesian painters, as well as photography and Chinese snuff bottles, to name a few categories.

"Collect what other people aren't collecting," said Tony Miller, a former top Hong Kong government official who collects Chinese art. "If you can't afford Qi Baishi paintings, and they're going at HK$2m a throw, well, go for prints."

Qi is one of the masters of inkbrush paintings and his pieces routinely sell for millions of dollars.

Owners of Hong Kong's art galleries, many of them crammed along the winding Hollywood Road in the Central district, say timing is key.

"If you get good works of art, then without any question it is a safe haven, but it doesn't have the liquidity. That's the difficulty," said Sundaram Tagore, whose galleries in Hong Kong and the US feature a stable of culture-bridging artists.

"If you're trying to sell at the wrong time it becomes part of the distressed market, but if you're selling at the right time then you could make 100 times more, maybe more than property or any bonds can provide you."

The search by Asian investors for alternative assets has extended beyond art into wine, gems, watches, postage stamps and other memorabilia – the rarer and more exclusive, the better.

With about two-thirds of the world's stamp collectors in Asia, the stamps and collectibles market has surged, says Geoff Anandappa of stamp and memorabilia retailer Stanley Gibbons.

Hong Kong-based InterAsia Auctions – which specialises in Asian stamps – broke world records for Chinese stamps in September, taking $12.6m over four days. A 1941 Dr Sun Yat-Sen inverted centre stamp fetched $221,000, up 66% from a similar sale a year ago.

Chinese and Asian buyers have cornered the fine wine market, with a Hong Kong Acker Merrall & Condit wine auction in December bringing in $9m, including a single super-lot of 55 Romanee Conti vintages that fetched a record $813,000.

Similarly, Asian buying is behind the boom for diamonds and gems. China is on course to become the world's top diamond buyer and retailers in Hong Kong report a rise in the number of men coming to buy loose diamonds for investments.

A Hong Kong jewellery retailer recently raised $2bn in one of the city's biggest initial public offerings this year to fund expansion in the region.

"It's not the old days of 'safe as houses', put your money in the bank and that will sort you out," said Jon Reade of the Art Futures Group, a Hong Kong-based art investment firm. "Those are the days probably of my parents' generation … people are getting more creative with their money."


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December 14 2011

Four short links: 14 December 2011

  1. The HipHop Virtual Machine (Facebook) -- inside the new virtual machine for PHP from Facebook.
  2. PHP Fog's Free Thinkup Hosting (Expert Labs) -- ThinkUp archives your tweets and other social media activity for you to search, visualize, and analyze. PHPFog hosts PHP apps scalably, and I'm delighted to be an advisor. Andy's made a video showing how to get up and running with ThinkUp in 3m. (This is impressive given how long I squinted at ThinkUp and swore trying to get it going on my colo box just a year ago)
  3. The Secret Lives of Links (Luke Wroblewski) -- notes on a talk by Jared Spool. On the Walgreen’s site, 21% of people go to photos, 16% go to search, 11% go to prescriptions, 6% go to pharmacy link, 5% go to find stores. Total traffic is 59% for these five links. The total amount of page used for these 5 links is ~4% of page space. The most important stuff on the page occupies less than 1/20th of the page. This violates Fitts's Law. Makes me think of the motor and sensory homunculi.
  4. VC Memes -- the success kid is my favourite, I think.

September 09 2011

Crowdfunding gets traction in D.C.

In May, I wrote here about efforts I've been involved with advocating a "crowdfunding exemption." As part of the American Jobs Act introduced by President Obama last night, the White House announced that it will work with the SEC on implementing something along these lines. Here's how the White House Office of Science and Technology explains it on their website:

As part of the President’s Startup America initiative, the Administration will work to unlock this capital through smart regulatory changes that are consistent with investor protection. This means reducing the disproportionately high costs that smaller companies face when going public, as well as raising the cap on “mini” public offerings (Regulation A) from $5 million to $50 million. It also means responsibly allowing startups to raise money through “crowdfunding” - gathering many small-dollar investments that add up to as much as $1 million. Right now, entrepreneurs like these bakers and these gadget-makers are already using crowdfunding platforms to raise hundreds of thousands of dollars in pure donations - imagine the possibilities if these small-dollar donors became investors with a stake in the venture.

Hear, hear! In a conference call with the press immediately after Obama's address, U.S. Chief Technology Officer Aneesh Chopra and Office of Science and Technology Policy Deputy Director Tom Kalil explained that they advocate an exemption, or at least a streamlined and less-expensive registration process, for public securities offerings of $1 million or less, with individual investment capped at $10K. They also said that they believe the SEC has the authority to make this regulatory change, no legislation required.

Elsewhere in DC, the House Committee on Oversight and Government Reform has just scheduled a hearing entitled "Crowdfunding: Connecting Investors and Job Creators" for next Thursday, Sept. 15. It isn't on their public calendar yet, but letters were sent on Wednesday to the people testifying. Among them (and my source on this) is Sherwood "Woodie" Neiss, whose Startup Exemption campaign has led the way on this issue.

Careful readers might note that Obama is a Democrat, while the chair of Oversight, Darrell Issa, is a Republican who is known to have no love for Obama. But hey, uniting diverse interests to a common cause is what crowdfunding is all about!

Of course, I'm thrilled about all of this. I would now bet that crowdfunded investing will become legal here in some form, hopefully fairly soon — and that when it does, we'll see a surge of grassroots entrepreneurship, innovation, local investing, and economic vitality.

For more, read my blog at crowdfundinglaw.com.

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July 25 2011

Gold, fine wine, art or under the bed: what's the safest place for your cash?

In uncertain economic times, alarmed investors want to minimise their risks. We take a look at the options

For City traders digesting the news via their terminals today, the language had a constant ring.

"Swiss franc leaps as investors seek havens," screamed one story. "Investors poured into perceived safe-haven assets, driving gold to a record high," stated another, before adding: "US government bonds failed to benefit from their usual safe-haven status after the weekend breakdown in talks fuelled investor anxiety over treasury holdings."

It is a small sample but the message seems clear. Spooked investors, unsure of where to put their cash, are looking for places where they can be confident it will not suddenly vanish. So what are the safest investments – and can they really be risk-free?

Swiss franc

Sometimes you can look desirable just because the weaknesses of those around you are so stark. That was true of successors to Robert Green in the England goal, and it is now proving to be the case with the Swiss franc, which has appreciated by about 15% against the dollar this year. While some argue that the Swiss National Bank (SNB) will have to step in, others believe it is powerless to dampen demand.

In a research note, Simon Smith, chief economist at the foreign exchange specialists FXPro, wrote: "Switzerland is not the only country in decent fiscal shape but, apart from the Aussie dollar, it is the most liquid alternative to the US dollar, euro, yen and sterling, all of which have sovereign fiscal issues to varying degrees. Furthermore, the SNB could once again find itself pretty helpless in terms of trying to fight this strength, should this aversion to countries with sustained deficits really take hold.

"Intervention is an option but, despite the increased reserve levels and balance sheet position (around 55% in euros, from over 70% last year), it could well be a futile one."

Gold

Gold is always considered the ultimate safe haven, and it has so far served investors brilliantly during this downturn – rising 16% during 2011. Silver has performed even better, up 30%, despite a crazy period in the spring when margin calls (when an investor has to deposit more cash or securities to cover possible losses) were increased four times in six weeks as regulators feared that speculators were driving the price too high.

The consensus among analysts is that both metals will continue to rise, although there are some famous names who strongly disagree. George Soros, the financier who "broke the Bank of England", is a gold bear. "The ultimate bubble is gold," he said in May. "Gold has shown tendencies to go parabolic, and usually bubbles tend to end in that parabolic rise before the collapse."

Premium bonds

Another perennial safe bet, but are they worth it? According to the Premium Bond calculator on the financial website Moneysavingexpert.com, an investor enjoying average luck and punting £30,000 would expect to win £400 over one year – or a return of 1.3%. That comes tax free, so is equivalent to a 2.2% return at the 40% rate. In normal financial times, that would not appear stellar. But, with interest rates at 0.5%, it suddenly does not look too shabby.

Fine wine and art

Your typical City wine investor delights in boring acquaintances about how he drinks for free by buying two cases of young wine and leaving them to mature, before quaffing one and selling the other to finance his purchase. The brag is almost always nonsense but there are those around who reckon that wine can deliver decent investment returns. The Wine Investment Fund, which asks investors for a minimum £10,000 commitment, says it has paid out annualised returns of upwards of 13% on its portfolios between 2003 and 2006, while 2009 punters are enjoying a vintage year with many showing profits of more than 20%. Even 2010 investors currently have profits upwards of 8%.

However, there are those who believe that this cannot last. "Historically wine has had a good run, but there is a feeling it is getting near the end of the bubble," said one City trader. "Every man and his dog seems to be cropping up as a wine broker. And unlike gold and stocks, if the price starts to fall you might struggle to get out as it's not the most liquid asset, if you forgive the pun."

Yes, very droll. Equally, art is not an easily sold asset but it is also touted as another area for nervous investors. "The idea of contemporary art as a safe haven is a joke," said the entrepreneur Luke Johnson. "It is particularly illiquid, transaction costs are enormous, there is clearly no income and capital growth prospects are at best uncertain."

A number of art funds fell over during the downturn, but the Fine Art Fund Group, which has a base level $250,000 (£153,000) investment, is still around and boasts annualised returns in excess of 25% in its two main funds.

Still, in a world where everybody talks up their own book, it may be worth noting a quote frequently (but dubiously) attributed to Pablo Picasso: "I'm a joker who has understood his epoch and has extracted all he possibly could from the stupidity, greed and vanity of his contemporaries." Maybe not a screaming buy, then.

High-yielding stocks

Can high-yielding equities suddenly be a safe haven? UK shareholders have received their largest dividend payouts since the collapse of Lehman Brothers in 2008, with companies returning £19.1bn to shareholders in the three months to July – a 27% increase on the same period last year, according to Capita Registrars.

However, investing for the income might still put your capital at risk. David Jones, chief market strategist at IG  Index, said: "The stock market has been going up for two and a half years and might be fully valued. You may get the dividend, but possibly not the capital appreciation."

The mattress

If you invested in the stock market 11 years ago, you are still waiting for a return. And with interest rates at 0.5% for more than two years, leaving your cash in the bank has not proved to be a massively profitable option. Sticking your funds under the bed might be one approach and it is similar to one adopted by many companies, which are now reluctant to lend their spare funds in the wholesale money markets.

Louise Cooper, market analyst at BGC Partners, said: "For some risk-averse companies, it may be better just to keep the cash inside the company and earn nothing on it, rather than lend it out for a minimal return, with degrees of risk currently being replaced with fear of the ultimate risk."

So should private investors follow suit and simply stuff their wads under the mattress? "It's an option," admitted one frustrated City analyst. A word of caution, though: if the house goes up in smoke, the insurance will only pay out on £500 or so of burnt notes.


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June 23 2010

Battersea power station fires up for London stock market listing

• Irish owners refinance and want to list the project on Aim
See our gallery of previous redevelopment plans

The troubled owners of Battersea power station have unveiled plans to float the building on the stock exchange in the latest in a string of attempts to redevelop the derelict London landmark.

Despite numerous plans for the 40-acre site, it has stood empty for more than a quarter of a century while the rest of the Thames waterfront around it has undergone huge change.

Now Irish property group Real Estate Opportunities (REO), which bought the Battersea site in 2006 for £400m, wants to spin it off and possibly float it on London's Alternative Investment Market (Aim). It is also looking for a partner to take a 50% stake in the project and provide the financial firepower.

REO has been hit hard by the Irish property slump. It reported an underlying loss before tax of nearly £1bn for the 14 months to 28 February, reflecting an £811m drop in the valuation of its property portfolio.

The firm has drawn up a shortlist of possible investors after being approached by a number of international real estate groups, private equity firms and sovereign wealth funds from around the world, including the Middle East.

REO hopes to get permission to redevelop the site in September after submitting the largest ever planning application made in central London, in terms of financial value, last autumn. If it gets the go-ahead, the site's value is expected to soar from the current valuation of £388m.

"It's an opportunity to turn the power station into a cultural icon for London," said Robert Tincknell, who runs REO's parent firm, Treasury Holdings. "A year ago, people were saying 'it's not going to happen'. That's changed enormously over the last 12 months, with the planning permission having gone in and the support we have [from the London mayor, Boris Johnson, English Heritage and Wandsworth Council]." The Conservatives launched their election manifesto at the power station in April.

Treasury Holdings was forced to tear up its plans for the imposing building, one of London's most recognisable landmarks, and start again after Johnson decided that a proposed tower would ruin the view from Waterloo Bridge to the Palace of Westminster. The original plan, drawn up by the New York-based architect Rafael Viñoly, included a futuristic 300m glass funnel and atrium, rising from an enormous transparent dome.

Viñoly and Treasury Holdings came up with a new blueprint a year ago that is capped at a height of 60m, as stipulated by the mayor. It includes 3,700 homes, office space, shops, restaurants and leisure facilities, at a cost of £4.5bn. Treasury Holdings also hopes to co-fund an extension of London Underground's Northern Line to the site.

The high cost means the company needs a partner – "someone who can bring big financial strength to it to make sure it happens," said Tincknell. Building work could start at the end of 2011.

When the power station was decommissioned in 1983, its then owners, the Central Electricity Generating Board, wanted to tear down the building and replace it with housing, but it had been given a Grade II listing in 1980. For developers, the real prize is the land around it; most have little interest in its heritage status.

REO said today it had negotiated new lending terms for Battersea with Lloyds Banking Group and Nama – Ireland's "bad bank" – which means its existing bank facility will be extended and all outstanding breaches waived.


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