Though his ongoing illness made last week’s resignation less than surprising, the departure of Apple’s (NASDAQ:AAPL) Steve Jobs from the innovator’s executive suite was and will remain big news. With good reason.
Jobs’ success speaks to the wonders of capitalism, a system built on incentives. Under capitalism, those who do the most to remove unease from the lives of others are rewarded handsomely, and Jobs’ billions attest to all that his success meant for others.
After that, a grand thanks is owed to Jobs by chief executives, professional athletes, and U.S. citizens more broadly. If this is doubted, read on.
Considering chief executives, Jobs’ brilliance as the head of Apple (NASDAQ:AAPL) has redefined the upside possibilities for those in possession of the incredibly unique skills required to oversee companies. Thanks to the stupendous rise of Apple shares on Jobs’ watch since he returned in 1997, skilled CEOs will be able to command even greater salaries as a result.
Indeed, what’s perhaps not been stressed enough in the myriad testimonials to Jobs since his announcement is how very little he’s been paid by the corporation he’s so identified with. But for those who don’t know, Jobs returned to a near bankrupt Apple in 1997, yet upon his resignation the technology innovator was worth $350 billion.
Paid $1/year in salary, the vast majority of Jobs’ compensation came in the shares of the technology giant itself. Jobs’ Apple shares are worth $2.1 billion, but when we consider how very much his return meant to a company formerly on its back, Apple’s board short-changed him by a mile.
Commentators and politicians who perhaps should know better regularly decry CEO pay, but Jobs’ staggering success with Apple shows how very meaningful a skilled chief is to any corporation. They’re sometimes the difference between bankruptcy and immense wealth creation, though in Jobs’ case it’s doubtful that the CEO-pay ankle biters will be heard uttering the simple truth that in terms of his Apple pay, Jobs was exploited. Others will say not everyone is Steve Jobs, and that CEO pay should reflect just that, but then when he returned to Apple in 1997, Steve Jobs wasn’t Steve Jobs as Forbescontributor Nick Schulz has so articulately pointed out last week. Author of quite a few stupendous failures, Jobs arrived at Apple with questionable bona fides such that his pay package was doubtless deemed too generous by some.
Looking ahead, all economic acts are a speculation, and this applies to CEO compensation plans. Jobs has once again raised the bar of possibility when it comes to the impact corporate chiefs can have on company valuations, and the vital few with the rare skill set necessary to build and operate companies will be compensated handsomely as a result.
Some will earn their pay, some will of course underperform, and then some, like Jobs, will be vastly undercompensated. Needless to say, Jobs’ brilliant success is a reminder of how very important the man or woman running the show is to business prosperity.
Looking at professional athletes, in an indirect way what Jobs accomplished will accrue to them too. Much as a top quality CEO can profoundly change the fortunes of a founding company, thus making their arrival hard to put a price on, so can athletes, and for that matter, coaches.
There are so many examples, but Larry Bird joined a Boston Celtics team that was 29-53 upon his arrival, but a year later the Celtics finished 60-21. Magic Johnson entered the NBA the same year as Bird, and joined a team that had underperformed for years. The Johnson-led Lakers hoisted the championship trophy his rookie season.
Considering college football, Pete Carroll took over at $1 million per year a USC team that had become inconsequential in the two decades before he arrived. USC surely underpaid a coach whose team would claim 3 Heisman Trophies and 2 national championships within his first five years, and while Carroll ultimately became the highest paid coach in college football, it’s fair to bet that USC boosters would have doubled or even tripled the salary of an individual who understood the power of the USC brand, and returned it to heights that it may never reach again.
The point here is that talent matters, and whether it resides within CEOs, athletes or coaches, the value of unique individuals can’t be stressed enough, and can’t be compensated enough. Jobs was a certifiable game-changer in the way that Bird, Johnson and Carroll certainly were, and his achievements will inform the hiring and pay decisions of professional team GMs and college athletic directors as they consider compensation for persons hired.
As for U.S. citizens more broadly, back in the late ‘80s I remember shopping for my mother on Christmas Eve with my father and sister. Though car phones with cords and antennas were increasingly common then, wireless phones were otherworldly. Upon seeing an individual in a Beverly Hills parking lot talking away on the kind of wireless later used to great effect by Michael Douglas in the movie Wall Street, all three of us were taken aback.
Fast forward roughly ten years, when Jobs arrived at Apple wireless cellphones were still mostly obscure, and even e-mail hadn’t much penetrated the technology landscape. Fast forward roughly ten years after Jobs’ return to Apple, and Americans could buy wireless iPhones on which they could make calls, send e-mails, and most surprisingly, watch tv.
Schumpeter long ago observed that capitalism “progressively raises the standard of life for the masses” for turning obscure and highly expensive luxury items into mass-produced goods that all classes can purchase. Apple’s iPhone, a product whose development Jobs doubtless helped quarterback, is a prime example of how the profit motive regularly reduces the lifestyle gap between the rich and poor for the baubles of the rich neatly predicting the goods we’ll all enjoy if governments get out of the way of progress.
Jobs is sadly moving on to deal with his illness, and we can only hope he triumphs with his health much as he’s succeeded elsewhere in life. Whatever the end result, we all owe him a big thanks for the many ways in which he’s changed the world, not to mention what his success means for the best and brightest of the present and future whose compensation will surely reflect how very much they’re standing on the shoulders of a giant innovator.