Centuries ago, if you couldn’t pay your debts, you were thrown into debtor’s prison where you wrote letters imploring family and friends to bail you out. In ancient Rome, if you pledged yourself as loan collateral and couldn’t pay the loan, you became your creditor’s slave. Colonial Virginia was settled by thousands of indentured (i.e. indebted) servants working off their debts via labor.
In the US we abolished debtor’s prisons by the mid-1800s. Some notable people had been imprisoned, including Light-Horse Harry Lee, a Revolutionary War hero and Governor of Virginia. Congress later replaced debtor’s prison with bankruptcy, a way to start over.
19th century debtor’s prison in England. Source: Wikimedia
This came to mind as I reflected on serial entrepreneurs like Elon Musk or Steve Jobs. In many ways, Steve Jobs was the most successful failure in modern history. The list of his failures is lengthy. He helped invent the Apple I and the Apple II — early computers that sold by the … hundreds. The product didn’t work very well until Apple’s engineers added a floppy disk. Then came the Lisa, another flop. Jobs we so distracted he missed deadlines and got himself fired. That didn’t help Apple much. At one point in the late ‘90s, the stock had fallen by over 80%.
Apple shares in the 1990s. Source: Bloomberg
Jobs took a half dozen Apple employees with him and founded NeXT, which produced a computer which sold, um, a few thousand. It had some amazing software, though, prompting Apple to buy the company in 1997, bringing Jobs back. He brought his lessons with him.
When Jobs introduced the iPod, iTunes, iPhone, and iPad he had an inexpensive alternative approach to a large-scale consumer need with a seamless software ecosystem. His early failures prompted his later successes, which has carried on for Apple. In these days of ginormous banks, Big Tech, and ever-bigger health-care systems, it’s important to remember: we can either learn from our failures, like Steve Jobs, or send them off to prison. The choice is clear.
Douglas R. Tengdin, CFA
Charter Trust Company
“The Best Trust Company in New England”