The mid-1990s. Apple was in a mess – a big mess. It is impossible to overstate just how rotten a state of affairs Apple found itself in its 20th year of existence, wrote Fortune magazine, especially given the glorious narrative of its beginning. Apple’s success story stood on par with that of the much older and well-established IBM. In 1984, riding on the popular novel by George Orwell, Apple strategically positioned itself on the same level as ‘Big Brother’ by portraying itself as the slayer of the all-powerful IBM, then the dominant force in computing.
For good reasons, though. Apple’s Mackintosh was as radical as IBM’s PC. It was the first computer to use a graphical user interface, colour, and a pointing device, which was later called the ‘mouse’. By 1985, when Steve Jobs was kicked out of his own company by John Sculley, the CEO Jobs had personally recruited, Apple had been wildly profitable, a market share leader, and an icon of American entrepreneurialism.
It was the first computer to use a graphical user interface, colour, and a pointing device, which was later called the ‘mouse’. By 1985, when Steve Jobs was kicked out of his own company by John Sculley, the CEO Jobs had personally recruited, Apple had been wildly profitable, a market share leader, and an icon of American entrepreneurialism.
Probably almost all MBA students now learn how Apple made a legendary comeback by bringing their founder back. In his second coming, Steve Jobs behaves more like a professional magician. He creates a synergy by fetching a much-needed operating system from NeXT, a firm he formed after leaving Apple. He extracts the best from Jonathan Ive, a young industrial designer and Apple’s Chief of Design. He convinces Microsoft to make a $150 million investment in Apple and releases Microsoft Office for the Macintosh. He kills 70% of the company’s planned products, including Newton and an early digital camera, QuickTake 150.
In 1998, Apple introduced a new all-inone computer reminiscent of the original Macintosh: the iMac. That was a huge success for Apple, selling 800,000 units in its first five months, followed by a succession of incredible products like the iBook, iTunes, iPod, and iPhone. The rest, as they say, is history. Today, Apple is the world’s largest business with a market cap of over $2.5 trillion, the first-ever firm to cross the trillion-dollar mark, and no one ever talks about its once-upon-a-time troubles.
Why cannot countries bounce back with the same vigour and speed that business firms recover from their financial troubles? Why cannot countries emulate business firms and quickly pivot and transform strategies to gain what is lost rather than experimenting with the same traditional macroeconomic adjustments? What lessons can Sri Lanka, Pakistan, and other developing nations learn from the great comebacks of international companies like Apple? Basically, why do we discuss serious macroeconomic theories? Can we find answers from a few simple microeconomic truths? Why do we make situations so complex when there are more straightforward approaches? Interesting questions one could ask with an open mind.
Still, is this comparison rationale? Are we comparing apples and oranges? The first difference is size. Sri Lanka is a $70 billion economy, and Apple in 1996 was a $3 billion firm. This gap holds good only for a few cases like this. Some firms that have made remarkable recoveries are far larger than many developing nations. Starbucks, when it quickly recovered from a financial fall in 2010, at $64 billion, was only slightly smaller than Sri Lanka. The operations of international firms are also far too complex. They have tens of thousands of employees and product portfolios of thousands of items bound by a corporate network spread across multiple markets worldwide.
The running of a national economy of less than $100 billion is far easier if we consider only this aspect: they do not engage in the kind of complexity inherent in a multinational company. The decision-making processes of international firms occupy a layer far above those of small national economies. So, the size factor does not come into play in comparing small national economies with international business firms.
What makes states different from business firms is how they treat those at the bottom of the pyramid – citizens in the case of states and employees in the case of firms, both categories constituting an integral part of the respective establishments. Employees are relatively fewer in number compared to the citizenry. They come and go, but for the period they stay with the firm, the firm takes care of their welfare assiduously.
Citizens, on the other hand, maintain lifelong relationships with the state; there is no question of ‘firing’ them even in bad times – the state has to look after them, even if that care is not to the level of how a firm treats employee. Another key difference is that employees do not select their management; they have to work with whatever hierarchy is decided by the establishments. Citizens, however, elect their administrators, which, prima facie, appears to be a privilege but could work against them. Citizens are neither educated nor trained to select the best administrators. They do that emotionally, motivated by short-term gains, so the ultimate choice may not be the best given the circumstances. If states too selected their administrations the same way firms do, the outcomes would have been more gainful for everyone.
Against this backdrop, a pertinent question will be: Staying well within its constraints of the state, is there any way Sri Lanka can recover by behaving more like a firm? Maybe like Apple did, for example.
What did Apple do? Apple’s strategy, as Walter Isaacson elaborates in his legendary book on Steve Jobs, was not to fire employees en masse. Instead, Apple killed projects and people working on those were reassigned to new ones. So it was more of a transformation of the product portfolio. Why work with products already identified to be failures? Why not work with new ones?
Interestingly, this was the same strategy Sri Lanka, then Ceylon, followed when it encountered the coffee crisis about 150 years ago following an unfamiliar fungal disease Hemeleia Vastatrix (later known as ‘Devastating Emily’) that destroyed all coffee plantations. Of the 1,700 British coffee planters, all except 400 returned to England empty-handed. The recovery remains one of the best lessons for any country about recovering from a severe economic crisis. IMF didn’t exist then. We can guess that the Victorian government was not in favour of bailing out one of its tiny colonies. So the country immediately started experimenting with other crops. Cinchona, cocoa, and tea were a few examples.
Still, governments can create a policy environment that improves production. That is where Sri Lanka must have business-oriented thinking. What incentives make private firms produce more internationally competitive products? Before that, we must ask: What categories of goods and services will be more internationally competitive?
A botanical garden at Heneratgoda was opened for experimenting with new low-country crops, rubber in particular, and Ceylon progressively transformed from a coffee-based economy to a teabased one within just a decade. The plantation industry boomed, funded railway expansion and elevated the economy to never before seen heights.
Should the approach to reviving the economy be different this time? The global market environment has posed serious threats to some of our export industries. The Sri Lankan apparel industry, which built a global reputation, is gradually moving to Bangladesh due to its more conducive business environment and cheaper labour. Tourism, as we saw during Covid-19 and subsequent turbulent periods, has its limits. It’s making a grand comeback, no doubt, but better not to have too many eggs in that basket – unless, of course, we diversify into new avenues like health tourism or entertainment tourism. Tea is doing okay, but it has its limitations too. We no more have a Thomas Lipton to popularize Ceylon Tea off-shore. We know that the US dollar earnings from our tea product portfolio are hardly adequate to meet our import requirements and debt payment obligations (even after restructuring). Sri Lanka needs more new products in the international market that would guarantee a steady cash flow. Much like Apple did with the introduction of the iPod, iPad and iPhone.
Of course, countries, like firms, cannot directly get into production. States have failed, over and over again, whenever they attempted it. In 1971, Prime Minister Indira Gandhi’s government thought it should create a People’s Car: an efficient indigenous car that middle-class Indians could afford. In June 1971, a company known as Maruti Motors Limited was incorporated under the Companies Act with Indira Gandhi’s son Sanjay Gandhi as its Managing Director. You would be mistaken to think this is the firm that produces Maruti cars today. It didn’t make a single car. What we now know as Maruti came later as a private sector initiation that succeeded in its venture. Production and governments, like oil and water, do not mix.
Still, governments can create a policy environment that improves production. That is where Sri Lanka must have business-oriented thinking. What incentives make private firms produce more internationally competitive products? Before that, we must ask: What categories of goods and services will be more internationally competitive? What policy initiatives will make labour costs low? How can infrastructure facilities be improved to overcome supply chain issues? From where do we bring technology know-how? Does foreign policy flavour matter to yield the technology transfers we require? These are challenges too complex for outmoded bureaucrats. They should be faced and addressed by young, innovative, and forward-thinking leaders with enough hands-on business experience: these are missing critical attributes of the current Sri Lankan government setup. Bureaucrats with no private sector experience continue to fail the country. One can only hope that the political leadership is sensitive in bringing more-business oriented high-level professionals to fill this gap.
Finally, we need discipline, another critical attribute a government could adopt from any successful international business firm. The form and scale of the economic blunders caused by the government are unheard of – even among the most corrupt business firms. For example, Sri Lanka has been running a negative budget deficit for decades!
What international firm will run at a loss for such a long period? If they cannot sustain profits, they will automatically file for bankruptcy. Business firms also make rational business decisions, not always politically correct ones. To fire Steve Jobs and later invite him back into the fold were each rational decisions at the time. The Jobs who came back to Apple was not the same Jobs who left. It was a more mature individual. Were Sri Lankan leaders to undergo a similar learning curve as Jobs with the same discipline and focus, we could certainly expect a brighter outcome from the hard times confronting us now. We do not necessarily need macroeconomists to revive Sri Lanka Inc. A group of experienced business leaders may be perhaps in a better position to do so. It’s high time we resorted to using pure common sense instead of putting stock in complicated macroeconomic theories – an approach pundits may not readily approve of. Nevertheless, it is worth a try, particularly because all the textbook theories have failed us.
Were Sri Lankan leaders to undergo a similar learning curve as Jobs with the same discipline and focus, we could certainly expect a brighter outcome from the hard times confronting us now