Once upon a time, in a valley known for innovation, there was an entrepreneur who believed that he knew everything there was to know about growing a business.
Growth, he said, was the result of innovation, and innovation is created by people with vision and passion. One day, his bookkeeper approached him and told him that he had created a piece of technology that could make the business grow a hundredfold.
“Bookkeeper, I’m afraid that innovation is driven by people who look forward. I pay you to look back and report on the past.”
And so the innovative entrepreneur listened.
Many years passed, and the entrepreneur’s business became a large corporation that attracted and retained the best and brightest executives from across the valley. Where the bookkeeper once sat, there was now a fully functioning finance department with rows of executives armed with spreadsheets and an assortment of forward-looking tools.
Nevertheless, as the business grew and people were hired and motivated, the bookkeeper’s unparalleled contribution to the firm’s innovation seemed all but forgotten, and, as with the entrepreneur before them, finance was not top of mind with the firm’s leaders when it came to driving innovation.
Then, one day, news spread that the company widely recognized as the valley’s most innovative was near collapse. The troubled company’s board turned to the innovative entrepreneur — who had left the firm a number of years earlier to start up yet another business.
However, before the entrepreneur would agree to return, he required that one condition be met. As his biographer later quoted him:
“Guys, if you don’t want to do this, I’m not coming back. Because I have thousands of key decisions to make that are far more difficult to make than this, and if you can’t throw your support behind this decision, I will fail. So if you can’t do this, I’m out of here, and you can blame me, you can say, ‘He wasn’t up to the job.’”1
And so the board listened, and agreed to the innovator’s condition, which had little to do with big new ideas or audacious research. Instead, the innovation — which the entrepreneur would immediately draw upon and leverage generously to repair his fallen firm, was the bookkeeper’s innovation — a concept hatched by a financial mind that made possible the issuing of tradable shares of stock.
Now, the innovator was demanding that the board reprice the company’s employee stock options. At the time, the company’s stock price had dropped so low that its options were worthless, and the innovator viewed the repricing of the options as the only means to stop the flow of talent out of the valley’s most innovative company.
In the end, the board acquiesced, the options were reset, and the innovator went on to grow the largest and most innovative company the valley had ever known.
1. Steve Jobs by Walter Isaacson (Simon & Schuster, 2011), p. 318.