Have we inadvertently become trend-setters?

Our previous post summarised the story of Apple in three acts. Act One: visionary but young founder of successful high-tech company feels obliged to bring in experienced CEO to manage growing business. Act Two: successful high-tech business loses its vision in new corporatist culture. Act Three: visionary but now not-quite-so-young founder returns and takes over as CEO.

It was no sooner posted than exactly the same thing happened at Google.

In 2001, Google co-founder Larry Page, then aged 27, head hunted the experienced Eric Schmidt from outside the company to serve as CEO. Schmidt was brought in to provide – in his own words – “day-to-day adult supervision”.

This he did – but at a price. Although Google increased its market share under Schmidt, so that the verb “to google” has practically replaced the verb “to search” when applied to the internet, this success is built on sand. Customer dissatisfaction leaves room for a strong competitor and the company faces the danger of anti-trust litigation of the sort that brought an end to Microsoft’s drive for world domination. At the same time, poor decision-making over the controversial Street View and censorship in China has undermined public goodwill.

So it is no surprise that Schmidt has now been eased out as CEO – although he remains Chairman of the Board. What is interesting is that his replacement as CEO is none other than that same Larry Page who hired him.

Like Apple’s Steve Jobs, Page has developed wider business experience during the intervening period – most notably, in Page’s case, through his work on alternative energy. Unlike Jobs, Page has remained closely involved with his original company.

Perhaps we are seeing the beginning of a new law of business succession. The classic paradigm is that a visionary entrepreneur founds a company and then hands it on to more experienced professional managers who take it to the next level.

The new model may be that the experienced professional managers are not the heirs to the visionary entrepreneur but the trustees or guardians of his estate. In a manner somewhat similar to the way a child is treated if he inherits something under a will, the young entrepreneur is not in full control of the successful business he established until he has built up the experience to manage it himself. Then the “day-to-day adult supervision” becomes unnecessary.

For the famously work-focussed CEO of Apple, Steve Jobs, to take leave on health grounds, especially in the context of his previous medical problems, suggests a serious situation.

However, we should not write him off yet. The man has already survived two near-death experiences – one metaphorical, one far more literal. The latter is the more recent: his recovery after a diagnosis of pancreatic cancer, and subsequent liver transplant, astonished many and gave hope to other sufferers. At one point, he had actually read his own obituary, which had been published by mistake but which was readily believed.

Almost as remarkable was his business comeback in 1997 – although in some ways his story is a familiar one.

A college drop-out, he became one of the first of the new generation of young computer millionaires in the 1970s, co-founding Apple. Still in his 20s, he felt too young and inexperienced to manage his rapidly expanding empire, so he head-hunted a senior executive from Pepsi to serve as CEO. The new management turned Apple into a Pepsi-style corporation – in which there was no room for a loose cannon innovator like Mr Jobs himself. The fact that the company owed everything to him meant nothing in the board room battle that followed. Lacking his CEO’s familiarity with the dark arts of corporate warfare, Jobs was forced out of his own company.

He was soon missed. The vision and enterprise that had made Apple such a success left with the founder. Old-fashioned corporate executives are singularly ill-equipped to cope with the ever-changing IT sector, which puts a premium on constant innovation and long-term vision. Microsoft was left as the computer giant in the strongest position to exploit the Internet Revolution (something MS rather bungled) just as it was really getting started. Apple was sustained only by extraordinary brand loyalty built up under Jobs.

However, Jobs himself was not idle. A successful stint as CEO of Pixar, where his willingness to let original thinkers do things their own way generated a string of artistic and commercial triumphs, led to a seat on the main board of Disney. Meanwhile, he also founded another computer company, which eventually sold out to Apple – bringing him back to the main board of his old company.

By this time, Jobs had himself become an experienced executive and master of the dark arts – which he perfected dealing with Michael Eisner at Disney. The year after his return to Apple, the existing CEO was removed in another board room coup, but this time Jobs himself took the post, which he has held ever since. Almost immediately, Apple returned to profitability. The last decade – which has seen Microsoft under constant pressure – has seen a series of successful Apple product launches, most notably the iMac, the iPod, the iPhone, and the iPad.

The moral of the story is that, no matter how big a successful new business becomes, even when it needs more professional management, there is no substitute for the enterprise and vision of its founder. Get well soon, Steve.

No matter how powerful a supervillain, his function is to be beaten by the superhero. When that happens too often, the writer needs to increase the threat level if he is to maintain any tension. The best solution is to bring together an alliance of supervillains. So Ian Fleming set up SPECTRE and DC Comics founded the Injustice Gang.

The same logic may be behind Goldman Sachs’ teaming up with Facebook. The only thing they have in common is that they are ideal casting for supervillains. Goldman Sachs is the Darth Vader of international banking, unpopular even by the standards of post-2008 banks, and Facebook’s founder was recently the subject of an amazingly unsympathetic portrayal in a hit film.

It is hard to think of another explanation for Goldman Sachs’ $450 million investment in Facebook – itself based on the bank’s optimistic valuation of the social networking company, which it says is worth over $50 billion.

True, most sector analysts agree that there is still a lot of scope for market growth, and Facebook is now placed to all but monopolise its expanding market. However, if recent history has taught us anything, it is that there are no guarantees in the dot.com business. Facebook was itself built on the graves of Friends Reunited and My Space.

The essential weakness of dot.com companies is that their valuation is often based on no more than wishful thinking. In some cases that optimism proves justified. In most it does not. Customer goodwill is an intangible asset, one that often proves fleeting, even where it really exists.

Some dot.com firms, like Google, have backed up their online presence with more tangible assets, most notably in the form of intellectual property rights. However, Facebook has nothing tangible that justifies anything like that $50 billion price its new best friends have put on it.

So it is hard to fathom out why the usually conservative Goldman Sachs is being so generous. One explanation is that the bankers are betting that Facebook will be allowed to take over other major online players, possibly including Twitter, and are prepared to bankroll the construction of a huge online conglomerate. The other explanation is that there is underground lair somewhere where Lloyd Blankfein of Goldman Sachs and Mark Zuckerberg of Facebook are sitting around a large table with the CEOs of Halliburton, Starbucks, Microsoft, BP, and Disney, plotting to take over the world in the name of evil.

These two explanations are by no means mutually exclusive.