My Reflections on Steve Jobs, by Walter Isaacson

As soon as I heard there was an authorized biography of Steve Jobs in the works, I knew I would be reading it ASAP.  As a semi-”fanboy” of Apple products, I had a special affinity for Jobs’ ability to create beautiful, yet simple products that so clearly surpassed the competition.

Steve Jobs is inspirational to me as an innovator and businessman, and I always looked forward to his next Apple event.  Not many people could successfully earn the respect bestowed upon him by both the hippiest of the hippies and capitalist of the capitalists out there today like Jobs has.  The first iPod I got (a gift from my Mom for my college graduation) was a semi-spiritual event and shortly thereafter Apple was my first really good Tech investment in the dot.com bubble’s wake.

I say a semi-fanboy, because while I prefer Apple products, and recognize their superiority, the closed ecosystem and lack of hardware scalability consistently pisses me off.  No product exemplifies my feelings more than the iPad.  I knew the concept was in the pipeline for a while, and I “knew” that I would be buying one rather quickly.  I even bought a large external hard-drive/hub and built my own internal home network in anticipation of the iPad as my computer replacement.  My vision was clear–with my newly created home network and hard-drive, a tablet (I was expecting the name iSlate, not iPad), and a tablet dock, I could theoretically build my own cloud-computer at home.  The tablet would be my CPU and monitor (the brains and eyes), while my network would be the memory (the central nervous system), enabling the liberation of my computing experience into my personal cloud.

Unfortunately, it wasn’t meant to be.  The iPad, required adding an additional device to one’s computing infrastructure, rather than liberating the user to do something new altogether.  Sure the iPad was new, and incorporated some amazing and groundbreaking features, but there was a major disconnect between my expectations and the level of enthusiasm that ultimately greeted the device.  Here’s what I said at the time.

Needless to say, I felt let down.

After spending much of this past Thanksgiving weekend messing around on some family and friends iPads, I still want one despite my disappointment, and despite the fact that Apple never fully came around to the features I want.  Perhaps that’s just my impatience about the fact that neither the iPad 2 nor any of its clones have come close to offering what I am looking for.  But really, I think it comes down to how amazingly awesome the iPad is to use, and in the context of what I was looking for in a tablet, if I settle, I better settle for the best (the Ipad).

I start my “review” of Steve Jobs, by Walter Isaacson with this little anecdote, because it is in some ways the perfect metaphor for my feelings towards the book, as well as my feelings towards Steve Jobs.  Reviews of the book are a dime-a-dozen, and therefore, I would like to focus my review not on the book itself, but on elaborating on my personal feelings towards the subject–Steve Jobs.

Immediately upon the book’s release, all the juicy tidbits about Jobs personality and personal life were plastered all over the Internet. Before the book came to light, I was generally aware that Jobs had a prickly personality, and before reading much of the book, I learned a good chunk of the most shocking details from his childhood post-adoption to his intimate relationships to his business rivalries.  Much of the “drama” was conveniently extracted by a media blitz as one website after another attempted to beat their rivals at revealing the most shocking plot lines first.  And let me be clear from the start, the “juicy” stuff is interesting because it is what we already did not know; however, as I kept reading the book I became more annoyed (albeit not surprised) with how much of the focus in the press was on Jobs’ personality and his private life rather than his ethos and achievements.  With that in mind, I purposely will forego reciting and commenting on many of these facts better left for the tabloids.

The media blitz forge an initial bias on my part: there was more to Steve Jobs than meets the eye, and he is not exactly the saint he was idolized as in the public eye.  My bias was further confirmed as I began reading the book.  The early parts moving from Jobs’ childhood in Silicon Valley, through his college days and the founding of Apple don’t really paint too attractive a picture of the man.  Jobs’ genius clearly stands out from early on, but all of the striking parts in the beginning pertain primarily to demystifying Jobs role in the creation of Apple (Isaacson confirms the oft-stated critique that Wozniak was the brains behind Apple’s technology) and highlighting the nature and depth of Jobs thorny personality.

As I kept reading, I said to myself, “sure he’s done some great things and all, but what an asshole!”   Then something happened along the way.  It started even before the revelation of Jobs’ cancer, at which time he became more of a sympathetic figure.  Where I really felt my inner transition in emotion towards Jobs was the sequence in which Isaacson takes us through the early days of Pixar and its rise.  I can’t put my finger on what exactly it was, but in this context I really started understanding Jobs as a guiding visionary, who can almost will innovation to happen, rather than just someone who got lucky being around the most brilliant computer geek of his time.

Visionary probably isn’t even the right word, but I said it there intentionally.  It wasn’t as if Jobs set out to create something new altogether with Pixar.  Actually, he was navigating down a different path altogether when the CGI movie idea came to him, but it was he who recognized the promise and allowed the ship to steer itself towards its manifestation.  Where most other CEOs would never let the project get legs in the first place, Jobs encouraged the creatively inclined workers among him to embrace and indulge in their creativity, nurtured the project, and saw to it that at each step of the way success would be maximized.  Opening doors was not enough.  Nothing short of perfection was.

Maybe it’s just that Pixar itself sounds more fun, but as that episode of Jobs’ life played out, my personal Steve Jobs impression reflated rather quickly.  This accelerated as the story evolved into Jobs’ return to Apple and eventually his battle with cancer.  The return to Apple contains much of the folklore we already know, but also in the context of Isaacson’s narration, it turns Jobs from someone whose bubble had popped and builds him back up into the man we know today.  There are some clearly delineated self-improvement stories in there, but also we finally get the clear articulation of Jobs’ brilliance–his ability to take something amazingly complex and make it beautiful and simple.  This holds true on the macro and micro levels, as Jobs built the company and each of its products around this principle.  Don’t get me wrong, these elements were there from the beginning in Apple, but they are much more well-rounded and central to the plot at this point, probably because they are clearer in Jobs’ own personal vision by then.

As for the battle with cancer, many have taken this as a real critique of a brilliant man.  The question “why would someone so smart do something so dumb” was asked throughout the blogosphere, and I very much see why people want to ask this question.  Yet, I think that view can only come when that fact is encountered in isolation from the rest of the book. While many have derided Jobs for failing to adequately treat his own cancer, and to a large extent, I agree, he wouldn’t be Steve Jobs were it not for his ability to ignore hindrances while focusing steadfastly on his personal priorities–EVEN TO A FAULT!

Although the outcome sucks, it’s hard to blame the man for it.  In fact, it makes him into more of the tragic hero I think he has become, in that the source of his strength, his so-called essence itself, was also the source of his downfall.  Therein lies the real source of my once-again reflated opinion.  Steve Jobs is your prototypical tragic hero in the Aristotelian sense, and this is exactly what humanizes his brilliance in the end.

The real climax of the book, and what pulls it all together are Steve Jobs’ own words on what he thinks his legacy should be.  Whether one can truly ascribe each word to his life or not, the message in and of itself is one that all should take to heart.  To maximize one self, people need to be well rounded and have an understanding and connection to the humanities, but also knowledge of the technical.  People need to be hyper-honest, even to the point of being critical, while also being able to push aside their ego in order to accept criticism and use it constructively.  Lastly, people need to build things out of passion, aiming for the highest of quality, rather than for profits alone.

Be sure to read the book for yourself, it’s well worth it.   What is interesting in the book goes well beyond what’s juicy and leaves many lessons to learn for just about anyone.

Book Review: The Myth of the Rational Market

I just finished reading The Myth of the Rational Market: A History of Risk, Reward and Delusion on Wall Street ,by Justin Fox, and wanted to share some of my thoughts.  The book begins with the story of Irving Fisher and his attempt to apply mathematics in developing a theory for investment in the stock market and journeys through the history of the development of the rational market theory (a.k.a. rational choice theory, efficient market theory, etc).  Fisher’s mathematical approach is placed in contrast with Charles Dow‘s technical analysis and Roger Babson’s trend-lines, both of which incorporate the emotive element of market participants as key elements in predicting future prices.

Running throughout the book is the underlying tension between those who take a mathematical approach to finance, investment and economics and those who add the behaviorist element to the discipline.  Although the title suggests otherwise, Fox does not proceed to debunk the rational choice theory in a step-by-step manner.  Rather, he tracks the history and development of the theory from its originals as an investment thesis through its transition into a macroeconomic philosophy.  Much of the book is spent defining the theoretical underpinnings of the “efficient market theory,” a term first coined by Eugene Fama and the “random walk” theory of equity pricing.

In his historical account, Fox incorporates the theoretical contributions of those who sought out flaws in the rational market theory–people like Daniel Kahneman, Robert Schiller and Joseph Stiglitz–and emphasizes the fact that even these opponents of the rational market theory begin their analysis with the efficacy of the theory to an extent, in refuting the broader-based application of its specific precepts.  The narrative is tied up with a reflective take on the rational market theory from Fama and an analysis of the broader theory in the wake of the financial crisis.

For my readers, I am sure you know that I am particularly fond of Hyman Minsky and his theories with regard to the financialization of the economy and the influence of the cyclicality in leverage on business cycles.  I was pleased to see that Fox found Minsky to be a poignant and relevant figure in light of current events and an influential in his reapplication of Keynes’ “animal spirits” to modern financial theory.  Interestingly, Fox cited John Mills (not to be confused with John Stuart Mills), who wrote “Credit Cycles and the Origin of Commercial Panics” in Manchester, England in the 1860s as the first to identify leverage cycles as a force behind the business cycle.

To investors, Fox’s narrative offers some important lessons: mainly the idea that price history is far more analogous to Brownian Motion (i.e. chaos) than it is to something rational.  The two “technical” strategies proven to work best over time have been momentum and relative strength.  For those who believe in backtesting, this is an important observation.  Momentum and relative strength are the only two to have statistical merit.  Perhaps most importantly, the fact that pricing is so emotional and chaotic provides an advantage to those who can identify a value and invest only in those times in which prices become dislocated from reality, thus offering value investors an opportunity profit.

For those interested in economics and investment, the book is an intellectual thriller which weaves a subtle conclusion through an intriguing historical narrative.  As with many thrillers, Fox includes a Cast of Characters in the end which gives a brief account of each person’s contributions to the central plot–the creation or refuting of the rational market theory–and offers readers an easy reference through which to refresh on who is who along the way.  The conclusion succinctly ties up the key themes that play out over time and also leaves the reader with some intriguing questions to contemplate about our financial markets moving forward.  All in all this is a great book for who like thinking about how and why to invest and what factors influence broader economic cycles and a must read for anyone interested in investment and/or economics.

Book Review: Freefall by Joseph Stiglitz

Joseph Stiglitz is one of the most important, yet somehow under-the-radar economist today. In Freefall: America, Free Markets, and the Sinking of the World Economy, Stiglitz provides readers with a narrative of the events leading up to and during the financial crisis and Great Recession. He does a masterful job of diagnosing the problems, critiquing policy decisions and creating a comprehensive forward-looking vision of what an economy SHOULD look like. This last aspect is where Stiglitz truly excels. While others have offered excellent narratives of events, exposed some of the many villains and immortalized its heroes, Freefall provides readers with a depiction of what an ideal big picture landscape looks like.

The book begins with an equal opportunity rebuttal of the policy choices made by both the Bush and Obama administrations to date. Then, Stiglitz makes quick work of those who argue that this crisis was “unforeseen” and “could not have been anticipated” while dissecting the sources of this failure in foresight. Too many in the financial sector and the field of economics placed blind faith in an ideology which preached that in the event of a problem, all wrongs would be isolated and fixed by the market’s self-correcting tendency to find an equilibrium. It is this ideology—the efficient market theory—that Stiglitz seeks to destroy in Freefall with gems like:

“If the efficient market hypothesis had been right and market participants were fully rational, they all would know that they could not beat the market. They all would then just “buy the market”–that is, someone with .01 percent of the country’s wealth would buy .01 percent of each of the assets….The very fact that market participants spend billions…trying to beat the market itself refutes the twin hypothesis that markets are efficient and that most market participants are rational.”

Stiglitz won the Nobel Prize in Economics and attained international acclaim for his work demonstrating the asymmetry of information in markets and rebutting the notion that markets are inherently efficient. The zero-sum nature, in which one person’s loss is another’s gain, combined with the presence of externalities in and of themselves are evidence of inefficiencies. A common theme throughout Freefall is the belief that it is government’s obligation to minimize the impact of negative externalities through a thorough, but not overreaching regulatory system, while maximizing the prevalence of positive externalities with a more forward-looking economic stimulus that generates increased investment and jobs growth. Additionally, he argues that the very idea of too-big-to-fail is in and of itself a market inefficiency that leads to a widespread misallocation of capital. With the talk of the Volcker Rule seemingly swaying markets on a daily basis, this timely explanation by Stiglitz highlights the rationale behind its necessity–controlling moral hazard risks and finding a solution to our unbalanced financial system.

Stiglitz’ incorporation of the global elements of this crisis further distance Freefall from other “crisis” books. One of the more intriguing ideas put forward is that of a global reserve currency. As the former chief economist at the World Bank Stiglitz witnessed first hand the asymmetries of the movement towards globalization and free trade and the negative consequences of growing global imbalances. He illustrates how global imbalances lead to the suppression of aggregate demand and heightened economic instability on a global level. The idea of a global reserve currency originated with Keynes nearly a century ago, and it is fitting that Stiglitz is its torch-bearer today.

The analysis and prose are excellent throughout and difficult economic concepts are explained in a very readable manner. Where Stiglitz truly shines is in the last two chapters: “Reforming Economics” and “Towards a New Society.” He takes the lessons learned from the issues leading into the financial crisis and their troubling outgrowths and offers his view of a coherent, forward-looking economic landscape. Right now decision makers react with ad hoc policies and no clear vision or plan. What Stiglitz would like to see is an actual underlying set of principles that we strive towards and consciously contemplate in reaching important policy decisions. This is exactly what our country needs in one of these most uncertain of times.