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North Stars: Priorities and Profits

Max Child has a preally great article on priorities and profit in the context of the Apple enigma. I think the crux this: the idea that you can actually make more money by focusing first on other priorities is anathema to many.

James and I have an argument. It goes like this.

I say that Apple’s number one priority is making good products, and they assume that if they succeed, they will make money.

James says that Apple is a corporation, and the goal of corporations is to make money. James believes that Apple has found a novel way to achieve the ultimate goal of making money—by focusing on making good products.

But here’s a paradox: choosing “shareholder value” or profit as your North Star will eventually lead to the demise of your business. Disruption, short-term greediness, whatever you want to call it—you will die. To paraphrase Clayton Christensen, you fail by getting too good at pleasing your best customers, while companies that were once beneath contempt eat you from below.

I was reminded of the dilemma reading this piece. It seems that companies that survive multiple business cycles aren’t aiming to extract the most value from them. Why?

Perhaps the company that is culturally built to extract profit can really only do so from a small set of product-market combinations. Perhaps the company that is built on loftier, more abstract goals, like “making great products,” or “pleasing customers,” is a different kind of organization entirely.