Inventor CEOs

One in five U.S. high-technology firms are led by CEOs with hands-on innovation experience as inventors. Firms led by “Inventor CEOs” are associated with higher quality innovation, especially when the CEO is a high-impact inventor. During an Inventor CEO’s tenure, firms file a greater number of patents and more valuable patents in technology classes where the CEO’s hands-on experience lies. Utilizing plausibly exogenous CEO turnovers to address the matching of CEOs to firms suggests these effects are causal. The results can be explained by an Inventor CEO’s superior ability to evaluate, select, and execute innovative investment projects related to their own hands-on experience.

That is from Emdad Islam & Jason Zein, forthcoming in the Journal of Financial Economics, via the excellent Kevin Lewis.

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I sure hope that none of those hands on inventors will be hearing chants about being sent home during the upcoming election cycle. Boy, would that be embarrassing for pro-business liberty lovers in the Republican Party.

If they're anti-American, hope they don't let the door hit them on the way out.

Define "anti-american"?

Supported Obama? Got a big boost under Obama?

Defies Trump? Grows businesses Trump opposes?

The best ones are anti-everyone, they just want to release technology floods and break all sorts of stuff.

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'If they're anti-American'

I'm not even sure who would be able to judge that, especially as, thankfully, the Constitution is extremely explicit in who can be defined as anti-American - 'Treason against the United States, shall consist only in levying war against them, or in adhering to their enemies, giving them aid and comfort. No person shall be convicted of treason unless on the testimony of two witnesses to the same overt act, or on confession in open court.

The Congress shall have power to declare the punishment of treason, but no attainder of treason shall work corruption of blood, or forfeiture except during the life of the person attainted.' Article III Section 3.

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this study confirms our bias about
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Does "Inventor CEO" mean the same thing as "Discoverer CEO"?

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A summary of Islam and Zein's findings: https://www.businessthink.unsw.edu.au/articles/Tech-firms-outperform-with-an-inventor-at-the-helm

Heartwarming study for me, but I wonder how much of this is due to the Google founders being inventors? Google/Alphabet would be an outlier that would skew the averages.

Far more than just Google. The definition used of inventor was CEO with at least one patent.

Amazon — Jeff bezos has a large number
Microsoft — Bill Gates has numerous (and very technical)
Apple — Steve Jobs numerous
Facebook — Zuckerberg has a good number

Of the top 5 companies in the world all of them had CEOs with patents.

The CEO with patents become a little more sparse after the top 5, but Alibaba, Cisco, Taiwan semiconductor and maybe Visa are interesting additions.

Jobs wasn't exactly an inventor, he was more like the world's greatest patron of inventors, kind of like how Lorenzo the Magnificent and Pope Julius II weren't artists, they were great patrons of artists.

I agree that Jobs wasn't an inventor but he was more than a patron. He took an active hand in product development and wasn't afraid to tell Wozniak or Ive that they were full of shit. More like a film or record producer but for tech.

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Jobs filed over 450 patents. That is an immense number.

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But, yeah, having a CEO who knows what he's doing is a very good thing.

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Then again, perhaps CEOs who actually have a deep understanding of the technology in the company's products might perform better than those whose expertise is in finance or marketing.

Especially for companies competing in a market where "making the same old thing but doing so incrementally better," while valuable, isn't going to be enough to remain competitive.

Also, conversely, if the inventor bails immediately after receiving a pile of cash, maybe it's a sign that he doesn't have complete confidence in the product.

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Perhaps this is why companies that used to make things go into finance.

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Inventor CEOs are less likely to fall for the bullshit excuses of subordinate developers than the MBA numbskulls.

Some accuse “MBA asshats” of being capricious rather than gullible. Which is it? In my opinion, top MBAs aren’t just signaling opportunities for assholes. They take really smart students and teach them how to maximize value in a firm environment using the latest research in operations, finance, pricing, marketing, strategy, etc... Also note that a large percentage of elite MBA students have a STEM background.

"Also note that a large percentage of elite MBA students have a STEM background."

Indeed. And those are the one's I would trust, along with the one's who clearly have a passion for the business. However, the guys that are clearly there churning out Widget statements are probably at the lower end of expertise.

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The problem is that these MBA asshats, as you call them, tend to do blatantly obvious things that don't require an Ivy League degree. It doesn't take a genius to move the supply chain to China or outsource to India or fire thousands of American workers. But ludicrous sums have been paid for such thoughtless and often destructive work. Being a spreadsheet wizard is not the same as coming up with a new way of doing things or inventing products. The fact that the degree is titled "business adminstration" is a clue that we aren't talking about innovators but bureaucrats.

I didn’t know that everything other than literal R&D-type innovation was so trivial. Businesses should just recruit local Dungeons and Dragons players into their management rotation programs. They’re probably above average IQ and marginally more creative than the average MBA. They would totally make all the right managerial decisions. It’s common sense, after all.

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What is the comparative financial performance?

They produce more, but do they generate profits and efficient production?

Define "profit"?

Business profit?

Or economic profit, ie, monopoly profits/rent extraction?

Two CEOs I follow, one US born, the other an illegal immigrant like Melania Trump, seek zero economic profit, but maximize paying workers to build capital. They meet the Keynes ideal:

"I feel sure that the demand for capital is strictly limited in the sense that it would not be difficult to increase the stock of capital up to a point where its marginal efficiency had fallen to a very low figure. This would not mean that the use of capital instruments would cost almost nothing, but only that the return from them would have to cover little more than their exhaustion by wastage and obsolescence together with some margin to cover risk and the exercise of skill and judgment. In short, the aggregate return from durable goods in the course of their life would, as in the case of short-lived goods, just cover their labour costs of production plus an allowance for risk and the costs of skill and supervision."

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CEOs used to be mostly engineers. Now it seems mostly marketing types or MBA asshats.

+1

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An empty suit like Carly Fiorina can ruin an industry with devastating consequences. The US no longer has a major 5G manufacturer since her mismanagement at Lucent. This has geopolitical implications as Huawei allows China a backdoor into everybody's infrastructure. But at least Carly got her hundreds of millions!

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This is so obvious I am astounded there is a paper being published in the Journal of Financial Economics on it.

Harvard business school would beg to differ. There must be some flaw in the methodologies.

admission criteria for their MBA program has widened considerably to admit all kinds of airheads

most of the harvard MBA's know how to do advanced math and econ but can't construct a sentence, articulate or spell to save their lives. my daughter went to MIT-Sloane, which is steeped in the tech tradition with more focus on skills, both analytical and otherwise, specifically for technical writing.

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Mike Scherer, former Chief Economist of the FTC, while at Harvard, did a similar study with similar results around 20 years ago.

One interesting finding, as between CFOs or General Counsel (or persons with a legal background) who became president, lawyers did better.

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There are great patents, then meandering patents. The inventor CEO has one great patent that keeps the company alive for a long time. Qualcom and code multiplexing is one. Itis a great patent because the inventor beats the mathematicians. Mathematicians make it open source.

Yeah but Qualcomm is losing all of its cases for abusing the patent system. If anything, it makes the opposite case for patents. We might need less of them if we want more innovation. Every country that industrialized all ignored IP during their high growth years with China being the latest.

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