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Steve Forbes' Advice on Innovation and Corporate Mindset

This is the first part of my two-part blog about my conversation with Steve Forbes, chairman and CEO of Forbes Media, speaking about free markets, bold innovations and how he embraces change.

Steve Forbes is a friend who helped me launch my book, Abundance, holding my first-ever launch party at the Forbes headquarters in New York. He's a man whose mindset and brand shouts abundance.

One of my objectives in this BOLD blog is to interview some of today's most successful CEOs and billionaires, and to share with you how they think and how they make critical decisions. This is one of those interviews with the man who knows more successful CEOs and billionaires than almost anyone else, and he shared with me some of what he learned in his encounters with them. The "Forbes List of Billionaires" is most definitely the who's-who of today's most successful entrepreneurs.

During our conversation, I asked Steve to share his thoughts on entrepreneurship, the future of large corporations and his own experience with transforming Forbes.

1. Steve on the "explosion of an entrepreneurial class around the world": "I think characteristics among entrepreneurs around the world are pretty much the same. You have the vision, you have the drive and the desire and obliviousness to the clock, you work till you get it done. That doesn't change. What has changed is that, thanks to the fall of the Berlin Wall, thanks to the success of the U.S. coming out of the malaise in the 1980s, suddenly, what you might call the entrepreneurial class has exploded around the world -- India, China, central and eastern Europe, the Baltic States."

"I mean, who ever thought Skype would be developed in Estonia? So, it's not so much the characteristics of entrepreneurship as much as the opportunity to practice entrepreneurship that has grown exponentially," Steve added.

2. Steve on the "bloated large-size corporations": "It is human nature that organizations inevitably become inward-looking," Steve said. "You lose sight of the reason the organization was created, and you become all about the organization. British historian C. Northcote Parkinson did a history of the British navy, and wrote about this phenomenon. After World War I, when Britain won the war, it didn't need a big navy anymore, so it sharply downsized the number of ships, sailors, dockworkers and the like during the 1920s. Even though the Navy was drastically shrinking in the 20s, the bureaucracy called the Admiralty, which ran the Navy, actually was getting bigger. Parkinson observed that the amount of work or size of an organization has nothing to do with the work really at hand."

"Every organization eventually becomes inward looking, bloated and loses sight and becomes pretty much useless," Steve explained. "The virtue of free markets is if you do that, you get tossed aside. One of the dangers in free markets is if you focus on trying to do what you're doing better, sometimes that may be obsolete. IBM got into personal computers but still had the mainframe mindset, so even though it started to make drastic changes in the 80s, by the early 90s it nearly went down for the count. You saw it in the steel industry, too. The idea of making steel out of scrap was something that traditional steel mills said no to. So they all fell by the wayside or drastically shrank, while new companies like Nucor came in and for a while did very well," he said.

"This gets us to our business today: media. We have the mindset of 150 years ago," Steve said. "You create content, you hope to attract an audience with that content, and then you deliver that audience to an advertiser. That's the mindset you see today – one based mostly on advertising revenue."

"We have to find new sources of revenue," he explained. "The web is knocking out what we call middlemen. What this means for journalists is that you don't make your living as a pure journalist anymore. You have to have a portfolio of jobs as a consultant doing a variety of things. But trying to get traditional media people to wrap their minds around this change is very, very tough."

"So, when you focus on being the best at what you have traditionally done, you might lose sight of the fact that what you still doing may not be in demand in the marketplace anymore," he said. "That's what is so humbling. You're trying to do your best and the market may just pass you by. What you're doing just isn't needed anymore."

3. Steve on "transforming": "You may do something right but it doesn't mean it's always going to be the right thing to do," Steve said, speaking about his business. "In the mid-'90s, like everyone else we went into the electronic world. We started Most publishers made the mistake of thinking that if you took the printed page and threw it on the screen, voila! You're in a brand-new world, sort of the equivalent of when Edison and others invented movies over 120 years ago. Initially," he explained, "it was thought that feature films would be like filming a stage play. But no: It's an entirely different medium, film."

"So, we did that," said Steve. "We went through the horrors of the early part of the last decade when everyone was telling us we're pouring tens of millions of dollars in information on the website, we're idiots. The bubble burst all of that kind of thing, and then it all came together. And from 2002 to about 2006 or 2007, by golly, our website was booming."

"What we didn't notice was that even though we caught the first wave right, the Web was relentlessly commoditizing marketing. So the market no longer took for granted that because you had a great audience and a great brand name you should be paid a premium for reaching that audience. Ultimately we ended up having to do a mad scramble and make drastic changes," he said.

"I think we did it well," said Steve. "Today we get over 30 million unique visitors a month to our website and it's been doubling over the last year or so. That doesn't mean we're going to be doing that tomorrow. Again, the Web is drastically changing things, and even if you get one part of it right, our traditional competition is no longer the same, it's a whole new world. So, while we got the first wave of change right, we didn't see the other wave as quickly. No one did, but we should have and didn't."

In my next blog, Steve Forbes will share his top 10 recommendations for success. Great stuff.

NOTE: As always, I would love your help in co-creating BOLD, and will happily acknowledge you as a "contributing author" for your input. Please share with me (and the community) in the comments below what you specifically found most interesting, what you disagree with and any similar stories or examples that reinforce this blog that I might use as examples in writing BOLD. Thank you!
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I believe on of the success factors for most will be a very narrow focus. Time is running out for organisations that want to do too much by themselves. So much is becoming commodity, and you need to spot where to get that so you can come quickly and focused with your unique value proposition.

Looking very much forward to the Forbes recommendations.
I just finished reading The Lean Startup by Eric Ries. An interesting point he made regarding large corporations and their corporate mindset and what they lack is innovation within the company, big or small, is instrumental in maintaining growth. Basically the people within the company don't have the opportunity to create and experiment with new products in areas of high uncertainty which limits the companies overall vision. Corporations need "intrapraneurs" that can do this and an open mind to change and innovation. This makes any large company sustainable and growth positive. 
Just read Innovator's Dilemma by Clayton Christensen.  Large companies are limited in their ability to innovate because they need 40% margins. Only a startup or new division can get by on 20% or less while the tech ramps up to cross the threshold where it become interesting to a large enough customer base.  It's a dilemma we all must deal with as exponential growth makes tech move faster thru these curves.
We received this comment from Luise Healey via email:

My concern is with the sudden energy independence and fracking.  While I'd like to think the Israel fracking triggered the recent earthquake in Iran, USGS reports a strong connection between fracking and earthquakes.  I live in California and earthquakes are an everyday occurrence (somewhere in the state), until a judge recently halted the granting of new licenses for fracking.  A Federal judge did the same thing.  Time for your crowd sourcing to stop this insanity before all that's left of California is beach front property in Nevada.  California isn't the only state at risk.  In the Midwest where earthquakes are not as commonplace as tornadoes and drought, they are experiencing earthquakes.  Same thing is true in the Dakotas and on the East Coast.

I am one of those who read the pre-publication of Abundance so I'm convinced some trade off is possible between energy independence (fracking, in this case) and environmental disaster.  What do you think?  Am I a tree hugging alarmist or is this really as scary as it seems (to me)?
I would be more concerned with the environmental effects from the fracturing fluids that release VOCs causing water and air contamination, among many other effects. 
you can also apply Gabe Newell thought "...corporations essentialy look like pre Internet way of organizing production and alocating capital."
Fine insights, Peter, thanks. I'm one of those journalists that made the leap to the Web, and relieved I did.
Innovation is a great asset.  It is easy to keep DOING the 'same old, same old' but we can never BE the 'same old'. In order to stay the same, we must continue improving what we are doing.  Let's keep moving ahead.  
I have no issue with the comments made in the interview by Steve Forbes. I take issue with the expressed or portrayed ideology of Steve Forbes.  Any dearly held ideology ignores the nuance and complexity of human interactions.  It is often a simplistic model of what is occurring and is very often misused.  A couple of examples which illustrate this point:  This is not to say the effective rules need to be complex rather the history behind them needs to be examined and thoroughly understood.  I consider Forbes' ilk in a fashion best captured by the name of his Father's plane - Capitalist Tool. 

I have absolutely no issue with Adam Smith or his Wealth of Nations.  What I take issue with is a self-serving use of these insights to manipulate and stack the deck.  Though Steve Forbes may be an individual closely tied with many entrepreneurs his livelihood still is based on the being a member of what Smith termed an "unproductive labour" class.  Smith was very clear when he wrote:

"A man grows rich by employing a multitude of manufacturers; he grows poor by maintaining a multitude of menial servants."
Smith, Adam - Wealth of Nations - Kindle Edition.

Simply put - unproductive labour can only exist based upon the surplus material wealth created by productive labour.  This is the most profound and unexplored insight of Smith's work. There are many others but this the foundation.  I see the period of the Forbes ascendency during the Age of Reagan not as a glorification of capitalism but rather as a cynical period in American History when the great ideals of the Enlightment were twisted on their heads and employed to justify an extracttion of vast rivers of stored wealth from existing reserves.  Thus began a period of significant disinvestment in the material wealth generating activities of our civilization in favor of maximal wealth extraction and minimal investment in the future. Forbes was one of the cheerleaders of this period.  It is one thing to stand against cartles, monopolies and the undue influence of special interests while at the same time working for the very same outcomes for ones self-interest. 

From a media - connections point of view I am confident that Steve Forbes is a valuable asset.  That said, I remain unconvinced as to his worth as a visionary for an emerging Third Wave Civilization.  We'll see though.
It is a great time to be a capitalist: predictably energy costs will be going dramatically lower due to a new energy technology (LENR), so a main bottle-neck to our economy is eased.  Let me add that has been a main-stream media leader in educating people about the coming LENR explosion:

"This reactor does not use fission, the process of splitting atoms into smaller elements employed by every commercial power reactor currently operating on earth. And it does not use hot fusion, the union of hydrogen atoms into larger elements that powers the sun and stars.
Instead, a low-energy nuclear reactor (LENR) uses common, stable elements like nickel, carbon, and hydrogen to produce stable products like copper or nitrogen, along with heat and electricity.
“It has the demonstrated ability to produce excess amounts of energy, cleanly, without hazardous ionizing radiation, without producing nasty waste,” said Joseph Zawodny, a senior research scientist with NASA’s Langley Research Center." ( )

"A volume about the size of a #2 pencil eraser of water provides as much energy as two 48-gallon drums of gasoline. That is 355,000 times the amount of energy per volume – five orders of magnitude." ( ).

This phenomenon (LENR) has been confirmed in hundreds of published scientific papers:

"Over 2 decades with over 100 experiments worldwide indicate LENR is real, much greater than chemical..." --Dennis M. Bushnell, Chief Scientist, NASA Langley Research Center

"Total replacement of fossil fuels for everything but synthetic organic chemistry." --Dr. Joseph M. Zawodny, NASA

By the way, here is a survey of some of the companies that are bringing LENR to commercialization:

For those who still aren't convinced, here is a paper I wrote that contains some pretty convincing evidence:

P.S.  Sorry, but I abhor Steve Forbes' politics.  Perhaps I portray a lack of perspective by labeling his political viewpoint (what he has made public) evil.
There is no such thing as surplus wealth created by labor.  Almost all physical wealth today is created by machines, with a little help from some employees.  The rest of us do not engage in the creation of any physical wealth.  Marx ignored the technological revolution of his day when he said those things about surplus wealth.  It is much worse from the standpoint of Marxists today.
"So, when you focus on being the best at what you have traditionally done, you might lose sight of the fact that what you still doing may not be in demand in the marketplace anymore," he said. "That's what is so humbling. You're trying to do your best and the market may just pass you by. What you're doing just isn't needed anymore."

This is so true.  And getting more true for more people every day.  What you do may not be needed anymore because machines do it and do it better.  Or it may have been replaced by some completely new process.  Or no one is interested in paying you anymore for doing what you do.  What you do has become obsolete.

As technology accelerates this situation will spread to the entire working population.  Our only solution is the nanotech replicator.  As some tech makes it impossible to find work, this tech will make it not only possible but likely that we will never have to work for a living again.  How?  By each of us becoming the owners of our own automated means of production--of everything.
There is no such thing as "surplus wealth" created by labor, huh Ms Morem?  First, I looked you up on Google+, and you are a total pro-lifer, if that gives the reader any indication of where you get your information.

"Almost all physical wealth today is created by machines."  What, do you think all production is completely automated??  Sorry, but what you are spouting is destructive nonsense and I am offended by it.
+Cyrus Jou Great comment, Cyrus. Eric Ries is right about that. The word 'intrapreneur' is clever and a great description for employees who have to take considerable risk within their companies.

I think big companies will see great success if they launch several subsidiaries at the microbusiness scale. Maybe Forbes Media will start a subsidiary similar to the app 'Taptu.' Forbes can easily afford to launch several microbusiness subsidiaries for a very low amount of money with very low marketing costs. They have so many visitors now; they will be able to advertise their new releases right on their site! Whether it's referred to as microbusiness subsidiaries or subsidiaries run by intrapreneurs, this is definitely a winning tactic.
Brad Arnold: Not all production, not yet.  But most of it is now done by machines.  People in Mexico and Asia are now losing their jobs to automation.

What does pro choice/pro life debate have to do with this debate?

People are too easily offended by anything today.
Ms Morem: I am equating the fundamentalist notion of the pro-lifers with the anti-communistic notion that surplus labor doesn't exist.  Frankly, I am also pointing at the absurd notion that labor (and therefore surplus labor) is irrelevant because "most of it is now done by machines."  This is reminiscent of all sorts of absurd notions floating around the pro-life community, which tie into the conservative movement.

I am not offended by over 99.99% of the stuff on the web, but dismissing labor using the ridiculous reason that "most of it is now done by machines" is fundamentally obnoxious to me, although the profound implications of such an absurd notion probably escapes most people.  Maybe everyone in society ought to stop helping you with their labor, and you will see how quickly machines step in to keep you fed, housed, clothed, and entertained.

BTW, Steve Forbes had an interesting article in ( ) deriding Bitcoin as money ( "The basic reason: it has no fixed value. It trades like a stock or commodity." ).  Mr Forbes and Ms Morem can agree on many issues.  I told him to listen to the "Francisco money speech" in Atlas Shrugged where it is said that money is a medium of exchange and trade.

Money is no more "fixed" than surplus labor is irrelevant.  Both are examples of the capitalists trying to fix their advantage in the existing system and rationalizing their efforts with spurious concepts (like "trickle down" - or Voodoo - economics).
What are you going to do with your outdated ideology when there is no more work and no need to do work?  The Abundance society is coming soon to a nanotech replicator near you (sometime in the 2020s).  The trend is clear.  Ever since the first flintknapper chipped his first handaxe, tools, and now machines, have been doing more and more of the actual work that we deem needs doing.

Some more examples:  Stevedores used to tote those bails.  Now one guy with a forklift does it.  The forklift does most of the actual work.

Carpenters used to use hammers and handsaws to build houses.  They now use power saws and nail guns, which do most of the actual work.

Your ideology's symbol of the hammer and sickle is already technologically obsolete.  It should be a Black & Decker nail gun and a Weedwacker.  But of course Communism itself has long since been obsolete, so maybe the original is more fitting.
Interesting thoughts. I think we still have that mindset from over 150 years ago as well. One of the problems is that there is so much out there on the web, so much information that it's hard to decipher it at times and see what has value. That's where great copywriters, authors, visual consultants, REAL EXPERTS who come into play and can at least guide you to reach the people on your platform.

Ron Greenfield
"What are you going to do with your outdated ideology when there is no more work and no need to do work?"

I think there is a fundamental misunderstanding about the SIngularity.  I guess some people think paradise is right around the corner, and they need only bide their time until they being served hand and foot by robots.  I too am a Singularitarian, but to dismiss the concept of surplus labor because IN THE FUTURE it won't be relevant is out of touch.  Frankly, it sounds like Ms Morem doesn't live in the real word, where paradise is far removed from reality, and they are struggling day by day to met their demanding work schedules and come home aching from their labor (no not from the day at the gym, or a busy day supervising the robots, but real hard sweaty exhausting work).

It is people like you that want to raise the retirement age for Social Security because you imagine everyone has a desk job they can do until the robots take over. 
I think it is important to understand the idea that a journalist does not make his leaving as a pure journalist any more. And that he has to have a portfolio of jobs as a consultant doing a variety of thinks.
I expect this phenomenon to get more intense in the next years. The crowd will be involved in all aspects of the content creation. The collaborative journalism will get wide spreader. Content will be available everywhere.  Local news will be faster available in the face book than in any paper. Even today I read all my local news in the social media.
The content collection will be done using analytics or any AI methods. A paper can be produced with few people only. So yes a journalist will probably work as a consultant, a strategist or a futurist.
He may need to work as a teacher explaining the content or as a mediator between counterparts. He may also need to be more creative using presentation methods for his content different than these the bots and the analytics software will use. He may use Lego for visualizing content, gaming technology for teaching, theatre for mediating and others. Imagination will be more important than knowledge.
+Nikolaj Berntsen you are quite right on the notion of focus. Focus on what you are really strong (compared to others), and take this comparative advantage to the action table. 

What it needs however, and is not yet despite the well connected world we now live in, is to mindfully let this focus actions come together in one/several system changing actions (even though they might start really tiny). Not starting doing at all, waiting for the "silver bullet" to be delivered (as +Angela Incampo and myself heard at a conference yesterday from managers) won't save anything other than a tiny fraction of the stakeholders in the "big game" what is called EARTH.
Larger technology Corporations with sufficient scope of technology portfolio and market diversification usually represent a more compelling environment for innovation and intrapreneurship than “external” entrepreneurship. The major obstacles are the low priority incentives in monetizing these initiatives for the benefit of the shareholders, and the increased likelihood and ease of killing these efforts within the Corporation itself.      
Large companies are dinosaurs, mostly for the reasons Forbes states above; but they didn't have to be. The reasons for their demise, however, traces all the way back to 1792, when a couple of dozen brokers got together at the foot of Wall Street and formed the NYSE. 

Until then, investors were people who understood the financials, could assess the business risks involved in making an investment, and had the spare cash to invest.

Once those brokers discovered that they could make more money from INVESTORS than from INVESTMENTS, and opened the door to inviting Joe Grog (they didn't have six-packs then) in. The proverbial fan got hit. 

The newly born casinos, (nee the brokerages), spent billions to persuade the common man that he was investing,. when he was simply gambling. And it is this herd that couldn't read a financial and doesn't have a clue what a business does, determines what happens on Wall Street, all the while "the house"  is making its money on both ends of all transactions.

And that industry has had a shameful history. Congress finally tried to clean it up in the aftermath of the '29 Depression and failed. Spitzer, before his unfortunate fall, rapped the top 10 investment banks for a 10.4 BILLION dollar fine, for misrepresenting their roles in the financial markets. And, within the past two decades, our financially illiterate congress has mostly undone what they had tried to do in the '30s, letting the securities crooks invade the last bastion of consumer financial safety, the banking industry. And all this time, they've paid gazillions to buy the respect that they don't deserve and convince the gullible public that a stock brokerage whose brokers are nothing but salesmen should be treated as if they were the venerated banking institutions the public was always able to rely on for the safety of their hard-earned dollars.

The by-product of the birth of that scurrilous industry (and the relevance of these comments as background) was the shareholders' loss of interest in the respective companies. Nowadays, the directors of most large companies permit obscene pay, perks, and parachutes, and can get away with it because it's their cronies in other companies that are approving their rape of the shareholders. 

No one can tell me that the CEO of any corporation EARNS more pay than the president of the US or a Nobel Laureate. But the shareholders let them get away with it. 

The Occupy Wall Street movement was right! Just lacked the focus and leadership. 

I'm all for Elliot Spitzer (who, compared with the captains of the securities industry is a saint) coming out of his retirement and earning his pay again, leading a movement to start at the top and work down the list of companies that most egregiously overpay their executives. And filing derivative action suits on behalf of the shareholders to permit those companies to make enough money to provide the jobs and crank up our economy again. 

But Diamandis and his colleagues are right. The future of this nation lies in the DIY Makers. There are plenty of opportunities out there, and with crowdfunding and crowdsourcing, our young entrepreneurs can save the day (if our wonderful government doesn't discover the opportunity to levy more taxes to stifle them as well).

Hey, talk about taxation without representation; we already have the latter without the former.  Shades of 1776!

Don't mean to rant; but you've hit this octogenarian's hot button! :o)
Oh, and one more comment about another topic addressed here:

Our economic landscape would look a great deal prettier had the large companies had the vision to expand their horizons. Trains were really in the transportation business (and might have founded their own airline competition); steel was in the construction materials business; newspapers are really in the information business; etc. 

Imagine what our airlines would look like, when you consider that they, too, are in the transportation and communication business. Suppose they were to expand their horizons—and their R&D—to other possible modes of travel. C.R.Smith, American's former CEO, once commented that people were going to get in a "phone booth" at one place, emerge from another at another place moments later; and they're gonna want a cocktail and a meal along the way! 

I once knew a very successful engineer/inventor who claimed to have made a breakthrough in anti-gravitational transportation. He has long since passed away; but, at that time (in the '60s), I remember his buying some electronic equipment for his garage workbench that cost him $15K out of pocket—big bucks in those days.
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