Steve Jobs’s decision to transition from a tech to a luxury brand is
one of the most consequential—and value-creating—insights in
business history. Technology firms can scale, but they are rarely
timeless. On the other hand, Chanel will outlive Cisco, and Gucci will
witness the meteor that sets Google on a path to extinction. Of the
Four Horsemen, Apple has by far the best genetics and, I believe, the
greatest chance of seeing the twenty-second century. Keep in mind,
Apple is the only firm among the Four Horsemen, at least for now, that
has thrived post the original founder and management team.
Tech’s Good-Looking Corpse
The research of NYU Stern’s Professor of Finance Aswath Damodaran
highlights that technology firms experience the traditional company
life cycle at an increased speed. They age in dog years, if you will.^40
The good news is that these tech companies can launch a product,
scale the firm, and acquire customers faster than other industries,
which face annoyances like real estate, capital requirements or
distribution channels that might require years, and a huge labor force,
to create. The bad news: the same rocket fuel that sends a tech firm to
the Moon also is available to a bevy of younger, smarter,faster
competitors coming up fast behind them.
Male lions have a life expectancy of 10–14 years in the wild.
However, they live twenty years or more in captivity.^41 Why? Because,
in captivity, they aren’t constantly challenged by other males. Males in
the wild usually die of injuries from fights protecting or challenging
the throne. Very few die of old age.
Tech companies are like alpha male lions in the wild. It’s good to
be king—a higher multiple on earnings, rapid wealth (when it works),
and the love and admiration of a society that sees its innovators as
rock stars. However, everyone wants to be king. All it takes is strength,
speed, violent aggression, and being too stupid to know you will fail, to
dethrone the king.
Apple not only transitioned from one of the greatest visionaries to
one of the greatest operators—it has been able to extend its life by
transitioning to a luxury brand. How? Apple recognized that the CEO