Founders

I read fairly little biographies, perhaps they make up for 15% of my readings. And, curiously, most of them were Roman counsels and emperors, political and historical figures, and some generally unknown characters, like Roger Casement, an Irish historian in the early 1900s that actively reported the abuses that took place in British colonies.

Most of my physical reads are outside of finance, business, and the stock market. However, three weeks ago, I read Phil Knight’s autobiography. Shoe Dog stunned me, I couldn’t stop smiling at the book. I found it strange to have enjoyed it that much. Last week, I read Steve Jobs biography, written by Walter Isaacson. I might have just found a new vertical to exploit, founders’ biographies.

Unusual people

In Zero to One, Peter Thiel dedicates a whole chapter to founders. He writes about how strange successful entrepreneurs. These peculiar individuals are often characterized by being bipolar on some personality levels. Successful founders often possess generally mutually exclusive traits. They feel like outsiders and insiders, as eccentrics yet at the same time introverted.

Great companies are built around secrets. In chapter 8, Peter expands on this fascinating theory. He believes there are three types of ideas, with differences being around difficulty and accesibility:

• Conventions are concepts and ideas massively available. It’s what everyone knows. It’s those things that, if we do a minimum effort, we get to.

• Secrets are ideas that are not obvious. Nobody knows they are out there, but, if somebody spots them and works hard, they can solve them.

• Mysteries are perhaps known things, like death, but which appear impossible to solve, even if you dedicated your whole life to trying.

Capitalism is about solving problems. A good business is nothing more than a group of people that were able to solve a problem other humans are willing to pay for. Therefore, they have to be built around secrets. Because conventions are easily attainable, the market for them is huge, competition eats your profit away. If, otherwise, the business looks to solve a mystery, it will only mean it’s wasting resources.

What’s funny here is that only those that believe there are secrets out there and are actively looking for them, are the ones that will find them. There is always a person, in most cases the founder, that believes in secrets, looks for them and was able to find them.

It is not a formula

Steve Jobs thought there was a secret in the PC for consumer segment. He pursued it, found it, and solved it. In the early 2000s, Jobs was able to solve many more huge problems, in the technology for consumers segment, in the cellphone market, in the music and almost all industries. Apple is, as of today, the largest company in the world because it was able to uncover the largest secrets out there, or at least the ones with the vastest addressable market.  

However, it was Steve who knew there were secrets out there and was willing to pursue them. When Jobs was kicked out of Apple in the mid 80s, the company entered the most depressive decade of its history. No new products, loss of market share and resources scattered all around the place. More importantly, it was clear that management did not believe in secrets. No novelty, no vision.

Thiel ultimately dictates that unless companies seek to create new things, they will end up failing. We have to get back to the innovator’s dilemma, a book so profound that I only read 50 pages and I still cannot properly digest them. The conclusion I’m arriving at is that companies need to disrupt themselves or somebody else will. Nevertheless, when you are on top of your market, like Apple was when Jobs left. At that stage, everything incentivizes you to go the opposite route.

In early 2000s, Sony was worried of internal competition, that new products could compete with old ones. Jobs didn’t care, he realized what companies needed to do to remain leading:

“If you don’t eat yourself, somebody else will” S.Jobs

But people will not be willing to eat themselves if they don’t believe in secrets. The only thing separating a business from bankruptcy is a secret that remains unsolved. If another person solves it, you are done. Nonetheless, you can actively look for it to remain in track and hope you find it. Again, curiously, only these strange people that believe in secrets are able to find them. Those are the founders that make companies truly resist the test of time and continuously create more value.

The iPhone was created in the mid 2000s, way after the iPod. Steve knew they would compete with each other. He knew the iPhone put in risk his star product. But he still did it. Turns out the iPhone solved a bigger problem and now accounts for 200bn in annual sales, 20x that of the iPod’s peak in 2008.

Personal commentary

I had much more to share, didn’t even get to Phil. Perhaps I’ll revisit this topic, it’s incredibly exciting. If you have any favorite biography, you can share it in the comments and will do my best to go through it as soon as possible. Hope you enjoyed the article!