An anecdote appears early in Walter Isaacson’s biography of Steve Jobs that has stuck with me.
When Jobs was young, his adoptive father loved building things: cars, fences, cabinets, etc. He included Jobs in these activities, and Jobs remembered the activities fondly:
"I thought my dad’s sense of design was pretty good," he said, "because he knew how to build anything. If we needed a cabinet, he would build it. When we built our fence, he gave me a hammer so I could work with him.
Fifty years later the fence still surrounds the back and side yards of the house in Mountain View. As Jobs showed it off to me, he carressed the stockade panels and recalled a lesson that his father implanted deeply in him. It was important, his father said, to craft the backs of cabinets and fences properly, even though they were hidden. “He loved doing things right. He even cared about the look of the parts you couldn’t see.”
This has stayed with me for two reasons. One, it reminded me how important it is for me as a father of two young kids to include my kids in things I do since you never know what will stick with them. Two, the idea of craftsmanship resonated with me, the love of “doing things right.”
Much has already been written about the design and craftsmanship of Apple products themselves, but it’s important to remember that at the time Apple was creating beautiful, well-designed products, computer hardware and consumer electronics were considered difficult businesses. It certainly wasn’t where a straightforward investor would have placed his bet for a company to create the sort of value that Apple ended up creating, becoming the most valuable company in the world.
In other words, there are many companies in “attractive” markets and industries that perform poorly, and there are many companies in “ugly” markets and industries that create dramatic value.
Beyond Apple, there’s Starbucks. There’s also Spanx, a bootstrapped company founded in 2000 to create shaping undergarments for women that will have revenue north of $300 million. Other startup examples include Warby Parker that is re-creating the market for eyewear.
So more and more I’m starting to move away from the market-centric view of the world of investing in “hot” markets. Markets change, and in fact, the “hot” market more often than not just means lots of noise and hype. Now this doesn’t mean you ignore markets completely. Market size does matter. Insights into market structure (buyers, sellers, fixed costs, etc.) are helpful. But now I subordinate those to understanding the entrepreneur (his or her world view, experiences, capabilities, network, and vision) and the product.
The idea of craftsmanship sticks with me even beyond the idea of “doing things right” with regard to the product itself. I think you can expand the idea to the company itself. The best entrepreneurs think of the company itself as a product, and bring that same craftsman mindset to creating a company.
More on that later.