SPENCE Asset Management

Biographies of Greats November 2011

Studying people who accomplished great things in their lives can offer valuable insights into what being “great” is all about. A gifted biographer such as Ron Chernow (John D. Rockefeller, J.P. Morgan, Alexander Hamilton) or Walter Issackson (Albert Einstein, Ben Franklin) can literally bring the most notable activities of accomplished human beings back to life for their readers.

The passing of another great, Steve Jobs in October, sent shock waves through the nation. When I was stuck at the L.A. International Airport a couple of weeks ago, Jay Elliot’s new book, The Steve Jobs Way, practically jumped off of the shelf and into my hands. Jobs managed to succeed in two arenas while the financial graveyards are jammed to capacity with failures. Jobs mastered both consumer technology and retailing- venues where operators have to be brilliant every day. Rarely has a corporate CEO been more universally admired than Steve Jobs.

Having missed the Apple investment phenomenon thanks to an over-awareness of the perils technology companies and retailers face, the hope in studying Steve Jobs was to try to figure out what made him tick and learn from his success.

To be sure, many challenges facing investment managers are unrelated to those facing consumer electronics companies and retailers. In our business, it is the huckster who “promises” great results. And while we do take great pride in our investment decision-making processes, we also go out of our way to under-promise what we can deliver. The idea is to refrain from building false expectations in an ever-unpredictable world. Consumer electronics and retailing companies are not under the same constraints. Rather, in those businesses, salesmanship is very necessary. Still, plenty can be learned from understanding the remarkable success of Steve Jobs, regardless of what field one works in.

Here is a snippet of what we learned: Steve Jobs demanded uninterrupted passion from every participant on every company project at Apple. He saw clunky decision-making processes that created clunky products as opportunities for Apple to create great products. Jobs was always open to accessing new talent and new ideas that could help him improve his products. He was above all else, the ultimate consumer. Jobs knew what the customer would like before the customer did. And Steve Jobs never paid much attention to people who said something could not be done. Instead, he set the bar high and then constantly kept raising it.

There will probably never be another Steve Jobs. In his own way he takes his place alongside great historical figures like Albert Einstein, John Rockefeller, Andrew Carnegie, Benjamin Franklin, and ironically, the man associated with the apple, Sir Issac Newton.

One of the most significant aspects of the Apple culture is how much the people working there, from top to bottom, looked forward to the new products coming off of the assembly lines. Former Apple executive and author Jay Elliot tells the story of how nearly everyone at Apple could not wait to have their own personal Ipods, IPhones, and Ipads. Having watched the development process from start to finish, they knew better than anyone that the products were so functional and so user friendly that having one of their own to use every day during the course of their own lives was going to be simply wonderful.

It took a few days of contemplation after finishing The Steve Jobs Way to identify common ground with the culture Jobs created at Apple. Then it finally dawned on me. While we certainly do not involve ourselves in the remarkable technological intricacies and innovations associated with creating Iphones and Ipads, we are very much aware of the intricate financial details of our investment analysis processes. In fact, so much so are we involved in those intricacies, that we too become pretty anxious once we believe we have identified positions worthy of investment. Why? Because once we cross that “need-to-own” bridge, we also want to commit our own capital to the decision. Put another way, we look forward to eating our own investment cooking around here. Conversely, we also know that if we are not willing to commit our own money to a particular position, it certainly cannot be considered worthy of including in portfolios we manage for our clients.

There is no doubt that the study of the life and times of Steve Jobs will continue. Greatness is rare. And there is no doubt that we will continue to implement at least one aspect of what made Apple win here at Spence Asset Management; the products we “create” for you, we are also creating for ourselves.

Jim Spence, Eric Walton

The information contained herein is for informational purposes only without regard to any particular user’s investment objectives, risk tolerances or financial situation and does not constitute investment advice, nor should it be considered a solicitation or offering to investors. To determine if investment in a Separately Managed Account with Spence Asset Management is an appropriate investment for you please call 1.800.230.1840.

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