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| A Whitney lock, 1822 |
Scene 1: It’s 1798 and Eli Whitney is in big
trouble. His cotton gin business has ground to a halt as he fails
repeatedly in court to stop copycat gins from spreading across the
South. His New Haven factory has been idled, his experienced workers
threatening to leave. He is deep in debt.
But Whitney sees a chance.
The federal government, frantic that Napoleon might declare
war on the US, is taking bids from private contractors to build
muskets. Skilled craftsmen up and down the Eastern seaboard are
offering to produce 50, 100, and as many as 200 muskets for the government.
Whitney has never built a firearm, but no matter: he offers
to deliver 10,000 muskets, one of the most difficult manufacturing processes in
the world—stock and barrel being hard, but the lock being especially
complex. Not only that, but he says he’ll take a giant, disruptive
leap forward, foregoing individually crafted firearms and relying instead on
machined, interchangeable parts.
After that, nothing goes right for the entrepreneur. New Haven is hit with 12 snowstorms. Construction of Whitney’s factory and tooling falls behind. Yellow fever in Philadelphia delays critical raw materials. By the time the 4,000 muskets are due, Whitney has delivered 500 and is broke again.
In crisis, Whitney heads to Washington to save his business. The setting is the War Department, located in the White House. President-elect Thomas Jefferson and President John Adams attend, among others.
Whitney lays parts for a number of locks on the table before his distinguished audience. Then he tells them to mix and match the lock parts in any combination to assemble complete, functioning locks. The gathering is astounded. Jefferson later writes that Whitney “has invented moulds and machines for making all the pieces of his locks so exactly equal, that take 100 locks to piece and mingle their parts and the hundred locks may be put together as well by taking the first pieces which come to hand. . . .”[2]
Whitney departs Washington with another advance, this time for $10,000, and an extension of five years on his delivery dates. Not only will he one day be known as the Father of the Cotton Gin, but he has now become the Father of Interchangeable Parts. He is triumphant.
Until December 1959.
That’s when MIT historian Robert S. Woodbury concludes in a research paper that Whitney is a fraud. His demonstration of interchangeable parts before Jefferson and Adams was a sham. “A test of a number of known Whitney arms in at least one collection proved that they were not interchangeable in all their parts,” Woodbury writes. “Some were not even approximately interchangeable.”
Whitney eventually fulfilled his musket deliveries to the federal government. He went on to build high-quality muskets for state militias, becoming wealthy in the process. It's unlikely, though, that he ever delivered true interchangeability.
So, did Whitney lie to Adams, Jefferson, and his country? And, if so, was it ok?
+++++++++++++++++++++++++++
Scene 2: Steve Jobs insisted that product demos
be done live, a risky practice but one that was sure to excite audiences. His single most famous product demo was done
at the Macworld trade show in San Francisco on January 9, 2007, when he presented
the Apple iPhone, a product so revolutionary it was dubbed “the Jesus phone” and described by some analysts as the “most anticipated consumer product in the
history of time.”
Jobs
opened by saying, “Every once in a while a revolutionary product comes along
that changes everything.” What followed,
according to one observer, was “a mind-bendingly awesome display of cutting
edge technology” that “probably made your eyes melt.”
The truth that day in 2007 was different,
however. Jobs' iPhone demo was held
together with bubble gum and baling wire, almost literally. The prototype rarely worked. “In truth,” reporter Fred Vogelstein wrote,
“the list of things that still needed to be done was enormous. A production line had yet to be set up. Only about a hundred iPhones even existed,
all of them of varying quality . . . And the software that ran the phone was full
of bugs.”
In
fact, the iPhone team had jerry-rigged something called “the golden path,” a
set of tasks which, only if performed in a specific order, made the iPhone
appear to actually work. The device was
unable to play an entire song without crashing, quickly ran out of memory, and
was preprogrammed by engineers to always show “five bars” of phone reception no
matter how poor the actual signal.
Six months later when the iPhone launched, it
worked as advertised. You know the rest
of that story.
So, did Steve Jobs lie at that January
demo? What if the iPhone had later underperformed, or never
performed as advertised?
++++++++++++++++++++++++
"Lying Isn't a Sin; It's a Business Plan"
In the same way that Eskimos have 50 words for snow, it’s possible that entrepreneurs have 50 words (or more) for lying, or fibbing, or
forecasting, or anticipating—well, you get what I mean.
Entrepreneur Tom Kulzer believes that few
entrepreneurs start with a plan; when forced to justify their activities, they
“tell themselves and everyone around them they know exactly what they’re
doing. ‘We are right on track,’
‘Everything is going as planned,’ and ‘We couldn’t be better,’ are common
phrases heard in the startup world. But
it’s a lie.”
In his article, “Should Entrepreneurs Lie?”, Daniel Isenberg lays out a series of examples where entrepreneurs must
embellish or obscure the truth in order to advance their business
interests. One of Isenberg’s business
associates, an experienced venture capital fund manager, told him that “if a
person does not know how to seriously twist the truth from time to time, he
(she) cannot be an entrepreneur.”
In one case, an entrepreneur seeking his first
round of funding saw a critical strategic relationship blow up the day before
closing; he decided not to tell his investors until after the funding was
secure. The venture went on to be
successful. Another company printed
brochures indicating products were installed and field tested when they were
still under development; customers in America understood but those in Japan
were horrified. One entrepreneur in
Isenberg’s article admitted, “We had no idea: this was an entirely new market,
so we just put down numbers that the investors wanted to see.”
Venture capitalist and economist William H.Janeway wrote, “Sooner or later, nonetheless, the venture capitalist learns the
law of life: entrepreneurs lie.” When
the world is reluctant to accept the innovation being proposed, when the pace
of delivery is stalled, when all of the technical bugs have yet to be
addressed, “the accuracy of reported results is likely to suffer.”
In his “Top Ten Lies of Entrepreneurs,” pundit
Guy Kawasaki lists as #1 “Our projections are
conservative.” One modern investor has a solution for this
kind of general deception: At the close
of each pitch, he asks the entrepreneurs to go back through the slide deck “and
point out every lie they have just told.
There are always plenty.”
Google CEO Larry Page once told a roomful of marketing executives that “their profession was built on an ability
to lie.” A 2012 article discussing Presidential-candidate Mitt Romney’s willingness to
embellish the truth concluded that his years in private equity convinced him
that “Lying isn’t a sin. It’s a business
plan.”
There even developed in the late 1960s a kind
of accepted (though never entirely acceptable) commercial deceit that came to
be known as “vaporware,” when technology products were announced far in advance
of their release. In 1969, for example,
IBM detailed upgrades to its System 360 three years in advance of their market
release, reducing sales of Control Data Corporation’s latest computer. Twenty-five years later Apple announced
improvements to its operating system some two years from market release to
blunt Microsoft’s latest system upgrades.
FUD is still a common marketing ploy to delay the sale of competitive offerings.
In the infamous “browser war” of the mid-1990s
that pitted Netscape’s Navigator against Microsoft’s Internet Explorer,
Netscape’s founder Jim Clark was a key player.
Few technology entrepreneurs have been more successful than Clark, credited with three billion-dollar startups (back when a billion
dollars was still real money). When
called to testify under oath in the Justice Department hearings, Clark’s
colleague and the President and CEO of Netscape, Jim Barksdale, was asked this
question about his boss by a Microsoft lawyer: “Do you regard Jim Clark as a truthful man?”
Barksdale’s answer, quoted in Michael Lewis’s The New New Thing, was as clever as it
was evasive: “I regard him as a salesman.”
Sorry, salespeople; no harm intended. He really meant “entrepreneur,” but it was in
the age before that term became ubiquitous.
Whether Eli Whitney was a fast-talking
salesman or an epic hero, one historian surmised, is a test that “functions to
distinguish historians of technology from ordinary people.”
But there’s a third option, more in line
with Steve Jobs’ iPhone experience and that of thousands of modern
entrepreneurs: Had Whitney delivered
interchangeability six months or even six years after his dazzling Washington
product demo—as he very well may have anticipated—his reputation would be
largely intact. In other words, selling
the future is only lying if the goods are never delivered.
One sensible conclusion is to regard Eli
Whitney not as a hero or a swindler, but as one of America’s first practicing
entrepreneurs.
[1] Jeannette Mirsky and Allan Nevins, The World of Eli Whitney, New York:
Macmillan, 1952, 146.
[2] Joseph Gies and Frances, Those Ingenious Yankees: The Men, Ideas, and
Machines That Transformed a Nation, 1776–1876, New York: Thomas Y. Crowell
Company, 1976, 78.
