Steve Jobs: Nobel Laureate


The remarkable achievements of one of the world’s greatest entrepreneurs offer profound insights into the fundamental nature of economy and essential missing links in prevailing economic theory. The career of Steve Jobs dramatically illustrates the central importance of human capital in modern economy and the almost incalculable contribution that a single individual can make to technological advancement, social innovation and wealth creation, while enhancing the lifestyle of hundreds of millions of people. Jobs demonstrated that the real basis of economic value is providing valuable products and services that fulfill human needs and aspirations, not unregulated markets and financial speculation. His apparent failures point to the dual nature of uncertainty that presides over all human activity – both the ever present threat of error and the untold opportunities hidden behind the veil. Widely regarded as a genius for inventing better products, his greatest commercial achievement has been in recognizing the central importance of services in modern society and fashioning integrated social service systems within which products act as an enabling technology.

Eager to recognize Winston Churchill’s outstanding service to humanity, the Nobel Committee could not bring itself to award the Peace Prize to a leader whose greatest achievement had been fighting and winning the Second World War. Instead they decided to award him the Nobel Prize in Literature for his “mastery of historical and biographical description as well as for brilliant oratory in defending exalted human values”. A similar difficulty arises in conferring recognition on Steve Jobs for his remarkable contribution to our knowledge of Economics. Having dropped out of a liberal arts college six months into his freshman year and audited a course on calligraphy before setting off on a six-month trek to India in search of spiritual enlightenment, the idea of conferring on him the Nobel Prize in Economics sounds outlandish.

Indeed, it is very unlikely that Jobs ever read a textbook on economics, let alone intentionally contributed to the formulation of economic theory. Yet we can learn more from this barefoot entrepreneur – he literally went barefoot and bathed infrequently for years until his status as a corporate leader compelled him to don a more respectable garb – about the fundamentals of wealth creation, economic development, technological innovation, employment generation, entrepreneurship, creativity, management and accomplishment than from a whole pile of social science textbooks. A review of earlier economic prize awards, including many for work on minor esoteric issues and two for contributions to the development of computer algorithms responsible for financial speculation, should be sufficient evidence of the need to refocus economics on issues directly related to wealth creation and human welfare.

Steve Jobs’ contributions to economy are unquestionable and unprecedented. Starting out in his garage with his partner Steve Wozniak and an initial investment of $5000 in 1976, within a decade Jobs grew Apple Computers into a $2 billion company with 4000 employees. Relieved of all management authority by a board of experienced corporate leaders after the launch of the Macintosh computer in 1984, Jobs left Apple. When he returned to Apple 12 years later, the company’s market share had fallen from a high of 16% to just 4% and was still declining. Apple’s prospects were so precarious that billionaire entrepreneur Michael Dell publically advised Jobs to close the company. Over the next fifteen years, Jobs transformed Apple into the fastest growing, most profitable consumer electronics company in history. By the time of his death in 2011, Apple was a $156 billion corporation with 72,000 employees and ranked as the most valuable company in the world with market capitalization in excess of $500 billion – 100 million times greater than his initial startup capital – an unparalleled example of economic growth and wealth creation.

His astonishing accomplishments defy explanation by traditional economic theory. Had he been a theorist, he most certainly would have rejected the Newtonian concept of the economy as a machine tending always toward equilibrium between supply and demand. Jobs did not strive to discover or conform to universal laws of economics. He understood that economics is not a natural science of scarcity founded on unconscious mechanisms but rather a conscious human science of unlimited creative potential based on human choice. He did not commodify products to meet available demand or attempt to set prices at the equilibrium point. He invented new products to create new types of demand that never existed before and frequently sold them for prices far higher than experts predicted the market would bear. First to market a keyboard, microprocessor, display and operating system as an integrated personal computer ready to use out of the box, Apple’s early models became the best-selling computers in America until behemoth IBM entered the fray with their MS-Dos based PC. Refusing to be brushed aside by his giant nemesis, Jobs then launched the user-friendly Macintosh as the first commercially successful PC with a graphic user interface, mouse, scalable fonts and networking – which became and continues to be the global industry standard.

1. Human Capitalist

The sheer magnitude of these achievements is sufficient to earn Jobs a place among the great entrepreneurs of the modern era, but hardly enough to substantiate his qualifications as a noteworthy economic theorist. It is rather the foundations of these accomplishments that reveal his profound contribution to our understanding of economy. His achievements contradict conventional wisdom in countless ways. His actions belied the traditional view that productivity is a function of natural resources, human labor, technology and capital. Unlikegreat financial capitalists of the early 20th century such as J.P.Morgan and Rockefeller, Jobs was pre-eminently a human capitalist. Although he accumulated more than $10 billion in personal wealth during his lifetime, he never valued or sought money for its own sake or based his decisions on profit-maximization. He understood that human resourcefulness is the source of all innovation and discovery. It is the human mind alone that converts ordinary materials into productive resources. Technology itself is simply and solely a product of human invention. The resources he valued most and relied on throughout his life were creativity, intuition, adherence to high values and great personal dynamism.

Jobs’ single most striking personal endowment was intense, focused, overflowing human energy. Like other great entrepreneurs and high achievers in other fields, he exuded intense energy. He recruited bright, talented high energy people. He built a high energy company where people were motivated by a missionary zeal. Creative human energy rather than money or technology was the real fuel for his accomplishments. In whatever Jobs did, he focused and directed that energy with laser-like precision into a force to reckon with. Organization is the means for channeling human energy into productive work. But too often, the corporations of his time had become top heavy, bureaucratic and unresponsive to opportunity. Jobs helped fashion the prototype of a new kind of organization which gave unprecedented freedom for individual initiative and creativity. Apple was among the first to institute informal dress codes, flexible working hours and a flat organization where the best and brightest could rise quickly. The intensity of Apple and its young leader attracted top talent. It also attracted a younger generation of customers inspired by the individualistic values of the 1960s. To own an Apple product became a symbol of human supremacy over the machine.

Jobs’ view of the marketplace was as unconventional as his view of capital. As he believed in the unlimited capacity for enhancing the productivity of resources, he also believed in the unlimited capacity for market expansion. He perceived the market as an ascending hierarchy of human aspirations and expectations which are perpetually rising. He understood that basic material needs may be limited, but human needs also encompass social and psychological dimensions which are inherently unlimited. He recognized the importance of a product’s physical and technical specifications, but gave equal or greater value to its social and psychological attributes. He was a visionary and revolutionary at heart inspired to change the world for the better rather than merely satisfy its minimum needs. His mission was to convert impersonal machines that threatened to subordinate or replace human labor and dehumanize people into user friendly personal tools to empower the individual and liberate people from the specter of mechanization. His strategy was not to fill market needs but energize markets so that they continuously expand. He emphasized the subtle aura surrounding his products and took great efforts to “impute” value by the way products were packaged, presented and marketed. Apple’s Superbowl ad of 1984 announcing the launch of the Macintosh was heralded as the greatest commercial of all time.

2. The Notion of Value and Values

Jobs rejected the traditional view that economic value is measured by efficiency and cost of production. For him, real economic value was a function of the perceived value of the product to customers, most especially its use value and utilization value over time. Throughout his career he defined value strictly in human terms as value to the user. He made ease of use a differentiating characteristic of every product, from the desktop metaphor that first appeared on the Mac to the elegant interface of touch screen iPods, iPhones and iPads. He learned the value of simplicity from a study of Zen Buddhism and constantly strove to reduce the complexity of Apple products. He stripped away 90% of the features on the prototype iTunes music software and eliminated even the on-off switch on the iPod. More of an artist than a technologist, he gave equal importance to form and function and was never satisfied with a new product until its physical elegance was as striking as its technical capabilities.

Returning to Apple in the late 1990s, he introduced a PC with an entirely new look called the iMac, which became the fastest selling model ever launched by Apple. He deferred the launch of the first iPhone because he realized he did not love the product, then altered the design to eliminate all corners so the phone would rest softly in the palm of his hand. Indeed, ‘love’ was the ultimate goal of every product he designed, knowing full well that where love was born, profits would follow. He combined all these values together in an endless quest for perfection that transcended and sometimes appeared to contradict good business sense. He insisted that even the insides of the computers and the layout of circuit boards which customers never saw should be beautifully designed as a statement of craftsmanship and pride.

3. Evolutionary Theory

Jobs was an evolutionary economist, not a mechanist. He soundly rejected the static conception of business and economy. He understood that society is continuously evolving and that evolution generates an endless fount of new needs and aspirations spurring an endless process of invention and innovation and undergoing a continuous process of development. From the launch of the first Apple computer to the phenomenal success of the iPhone, Jobs demonstrated the ability to intuitively sense successive waves of opportunity before they became apparent to others and to position his company to ride the rising tide, or to create the new wave of opportunity and then ride it as he did with the Macintosh, iPod and iPad.

At the peak of the company’s early success, he realized that Apple could not sustain competitive advantage producing commodity computers, so he shifted all his attention from computing technology to the user experience. Returning to Apple in the late 1990s, he saw that the PC had become a commodity product and even the user friendly interface had become commonplace. So he looked beyond the computer to identify human needs that computers could satisfy. As a lover of music, he realized there was not a single portable music player on the market that delivered the quality of music, storage capacity and ease of use he longed for as a consumer. Soon after the successful launch of the iPod, Apple became the largest online music retailer in the world. Within a few years 45% of Apple’s revenues were coming from music sales. In similar fashion, he foresaw that the growth of the smartphone market would eventually undermine sales of the iPod, so he pushed Apple into the cell phone business and within five years, Apple’s profits on iPhone sales accounted for nearly three-quarters of the total net earnings by cell phone makers globally. Since its launch in 2007, Apple has sold more than 150 million iPhones.

4. Transition to the Service Economy

The success of the iPod was made possible by a radical shift in the mission of Apple from a computer maker to a service provider. Jobs saw the opportunities generated by the transition that was taking place from the industrial economy of manufactured products to the emergence of the modern service economy. Long overlooked by traditional economists, this transition represented a change in perspective akin to the shift from a geocentric to a heliocentric universe. Apple’s entry into the music business marked a more fundamental change in focus. Although it continued to base its operation on the sale of electronic products, the emphasis shifted from selling computers and iPods to providing an integrated delivery system to meet human needs. Apple bridged the gap between products and services. Products became the means to deliver enhanced services. The service economy consists mainly of complex integrated delivery systems such as those providing for education, medical care, communication, transportation, entertainment and financial services. In services the quality, capacity and throughput of the delivery system are more important than the technical specifications and capabilities of the product.

Jobs conceived and developed a seamlessly integrated delivery system for digital music consisting of the iMac computing platform, the iPod portable player and the iTunes online store. In order to make the player as small and simple as possible, he shifted most functions to the computer, which served as the link to the iTunes store. At a time when Apple was an insignificant player in the American computer industry, Jobs succeeded in persuading major music publishers to allow Apple to sell individual songs for 99 cents each, giving it a virtual monopoly over legal online music sales. Apple literally stole the market from Sony, which had the huge competitive advantage of being both a much larger consumer electronics company and a major music publisher. Bill Gates later expressed his utter astonishment at Jobs’ accomplishment, acknowledged Microsoft’s error, and was determined to recoup lost ground by launching his own system. Neither Sony nor Microsoft could successfully compete with the simple, elegant Apple interface and finally gave up trying. Their failure appears quite astonishing in view of their much larger technological and financial resources. Apple’s success is explained by the fact that unlike its competitors, its strategy reflected a perfect balance between technological sophistication, engineering excellence, ease of use, quality of consumer experience and access to market. In 2012 Apple sold its 25 billionth song.

Garry Jacobs: Chairman of the Board of Trustees, World Academy of Art and Science; Vice President, The Mother’s Service Society.
* Based on a presentation at the World Academy’s session on ‘Individuality and Human Capital’ at the 14th International Conference on Sustainable
Development & Eco-innovation, Krakow, Poland on Sept. 6, 2012.

Pages: 1 2