The BlackBerry Problem | The Mistakes Series

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0:36Pushkin.

0:40It dawns on all of us, at some point before adolescence, that there is something called smart. And it is really rare. Only a small number of people are smart. And then, a few years later, you have an even more important realization, which is that smart comes in many different varieties. I feel I spent my adolescence cataloging all the varieties of smart. There was my high school friend who had a mind that was a giant sponge that could soak up what seemed like an infinite amount of knowledge. Then I got to college. I met a guy whose thinking seemed effortless. He could be distracted or procrastinating or dancing at a party.

1:21It didn't matter. Somewhere in a back room in his brain was a giant computer that just quietly hummed along, solving one problem after another. Oh, then I had a friend who didn't mind the cheat attached to a giant V8 with like 800 horsepower. I'd never seen smart attached to energy like that before. I spent a lot of time in college working on my taxonomy of smart. And along the way, I had a third realization. That every kind of exceptional intelligence has a downside. a price that person had to pay for being one of the chosen few. And every time I think of that third rule, I think of my old college friend, Jim Balsley.

2:04My mistake and naivety was to think that people were with me. So you're flying around the world, you're trying to get people on side, and you think they're on side, but they're not. And you get blindsided.

2:24My name is Malcolm Gladwell. You're listening to Revisionist History, my podcast about things overlooked and misunderstood. This episode is the fourth in our series on mistakes, inspired by Michael Linton and Josh Steiner's book, From Mistakes to Meaning. And this story is about the big mistake that changed the life of my old college friend, Jim, who I will say without reservation is possessed of one of the most remarkable minds I have ever met, and paid a price for it.

2:57What was it like for you growing up? You went to, you grew up in Peterborough? Yes, I did. And you went to public high school in Peterborough? Yes. Peterborough, for those unfamiliar with Southern Ontario, is just over an hour east and north of Toronto. It is to Toronto roughly what, I don't know, Poughkeepsie is to New York City. My dad was a tradesman, my mom was a homemaker. Your high school, I suspect, was a lot like my high school. We're not talking about Exeter. No. Although, I actually, I don't mean to diss it, because I got an amazing education from fabulous teachers. So what was it like to be, you were the smart kid in high school.

3:45Yes. What was that like? uh it um i i don't think they know what to do with you um so i think you're just i think there's a premium on compliance i think we've learned now that high energy kids need to run around and when they're young until they're tired but kind of making them sitting at a desk all day is when they're young is really really difficult um are you talking about yourself Yes, very much so. And it was just incredibly boring. And you just look at the clock and count minutes. And yeah, it was. Did you get in trouble in high school? Yeah, yeah, a few times. One time when I was in grade seven, a teacher did a long formula across three or four boards.

4:34And he said, where did I go wrong? And from the back of the class, I said, when you were born.

4:42and Malcolm and he took me out of the class and he held me up by the scruff of the neck and my feet were off the ground against a locker and he had me taken out of the math class and I was just it seemed funny at the time and then a couple months later there was a provincial math contest for the 10 million people in Ontario and as a grade 7 I came first in grades seven and eights in Ontario. He was the best math student in the entire province, but he wasn't allowed in his own math class. What did your parents make of you? When I was four years old, they took me to some child psychologist, which was, they didn't know what to do.

5:31What were you doing at four that led your parents to take you to a child psychologist? I don't know. I don't know. No, we're kind of Presbyterian, Southern Ontario, so you don't really talk a lot. You don't sort of, you just sort of carry on. And so you don't, it's not like this rich unpacking of psychologist kids or something like that. Everybody's just, you know, it's kind of go play outside and, you know, try to make it home for dinner kind of thing. Right. It was a very different era. Very different era. In my taxonomy of smart, Jim has a whole category to himself. I don't mean this in a derogatory way, but Jim has cunning.

6:12My brain, I was beginning to understand at that time, likes to take the long way home. Jim only took shortcuts. If life was a maze, most of us stumble along, retracing our steps from one dead end to another dead end until we finally get to the other side. Jim would see the right path instantly. Or, more accurately, he would recognize that there's actually a gap in the hedge right at the start, which no one had ever noticed before, with a straight shot to the finish. And he'd just cut through there. And by the time the rest of us stumbled to the end, he'd won the trophy, gone home, changed, and was having a beer.

6:48This is Canada, remember. Not long after college, Jim met an engineer named Mike Lazaridis, who had a little company called Research in Motion, RIM as it was known. Jim becomes co-CEO, and to the surprise of absolutely no one who knew him, builds RIM into a multi-billion dollar juggernaut. Remember 15 years ago when everyone had a BlackBerry? First real smartphone with those clickety-clackety buttons? That was Jim. So why don't you use a BlackBerry anymore? In the business school case studies about the fall of BlackBerry, there are pages and pages on the rapidly shifting smartphone landscape of the early aughts.

7:29Strategic miscalculations, the cloud of Apple, All the things that business school case studies like to dwell on. But I think there's a simpler explanation. I think you need to understand something about my old friend, Jim. Set the stage for me. Sure. It's interesting because when you talk about mistakes, and I do think the biggest mistake in my career when I look back With RIM, we had a fork in the road, and I mismanaged the board relationship at a time where I wanted to go left and they decided to go right. And that not only changed the trajectory of the company, it changed the trajectory of the global technology industry.

8:39so tell me what what do you mean by you wanted to go left and they wanted to go right and we're we're talking about what first of all let's let's date this what what era are we talking about we're talking 2011 and um a couple things were going on um one our hardware business had grown a lot, but it was under pressure, huge pressure. And there were new operating systems, one from Apple and one from Google. They were putting tremendous pressure on our hardware sales. But our services business was where we made all our money, our messaging services. So at that year, 2011, we had more profit from our services businesses than Facebook had total revenue at that time.

9:26We're going to talk about BlackBerry, the beleaguered smartphone maker. BlackBerry's CEO himself has admitted one of the reasons they're struggling is because they didn't innovate fast enough. Let me give you my 2012 prediction. Where? The company that brings us to BlackBerry. I'm predicting that they are going to be on the verge of bankruptcy. There were two sides to BlackBerry in those years. There was the phone, that rectangular plastic block with the physical keyboard. And there was also a messaging function, BlackBerry Messenger. BBM. That was what Jim is calling the service business. Hardware and services were separate, and Jim thought that BlackBerry should get out of the physical phone business, which wasn't making any money anymore, and just be in the BlackBerry messenger business.

10:10And so I'd spent a year and a half buying companies to avail a service to make it an open service. And I'd spent time with the carriers and they were going to launch it with SMS, call it SMS 2.0. And it had storage and rich media functions. What he was imagining was turning BlackBerry Messenger into the backbone of the entire smartphone ecosystem. So it's effectively what we know of as social media right now. And there was a small emerging player called WhatsApp that worked cross-platform, but we had multiple abusers, as they did. And so, yeah, I'd beavered away on it, and I thought the board was on side.

11:01I thought everyone was on side. Apple had just come out with the first iPhones. Jim was thinking that there was no way Little BlackBerry, as fast as it was growing, could compete with Apple. or giants like Samsung. But BlackBerry Messenger was a different matter. BlackBerry was dominant in that space. And in the version of the world Jim imagined, your texting and social media would come bundled with your wireless contract. So the minute you hooked up your new iPhone or Samsung phone to a wireless provider, you'd be using BBM. Stop there and let's go back and I want to make sure everyone understands what we're talking about here.

11:40So in 2011, many of us still have a BlackBerry. And there's two components here. There is the physical phone, and there's also, you're talking about, a service that could live, a messaging service that could either live on a BlackBerry or live anywhere. Correct. Yeah. That would be the equivalent of what WhatsApp became? Is that the mess model? What Facebook and WhatsApp became, that's correct. What at the time was BBM effectively was social media. And the difference would be is it would be in your subscription plan as part of your texting rather than an ad-supported social media service. Yeah.

12:29So the goal here or the play was to make the BlackBerry services business the backbone of basically new media, of new social media. That's correct. And it would be embedded in your cellular plan. And I worked with the carriers, the major CEOs throughout Europe and already had two of the big three committed in the U.S. So all you need is enough to keep it going. And it eventually tips. So, yeah, people would have said, I'm migrating to an Android. I'm migrating to an iOS. I'll just take my BBM with me. I'll maintain all my contacts, all of my. And you remember you had digital voice over IP happening on those things at that time.

13:17You had pictures. You could store them. You've established groups. You've had status of delivery. All the things that were social media that was emerging at that time, we had that in the BBM. Well, how many users, BBM users, did you have at the beginning of 2012, say, or the beginning of 2011? 80 million. 80 million. So what would you put the probability of BBM becoming the dominant, becoming this kind of dominant player in the telecommunications world if you had gone that route? Do you think you could have, how big do you think you could have grown it? Well, the probability that it would have stayed a major force is 100%.

14:02That's the vision he pitches to the board. We're trapped in the maze, along with everyone else. Here's the shortcut. Was he right? Of course he was. Jim's always right. So, yeah, in the immortal words of Yogi Berra, when you reach a fork in the road, you got to take it. So you go, tell me about the board meeting. You go to the board and what happens? Well, the board had brought in consultants. And I was explaining this and presenting this and talking about the strategy, thinking they were with me. And really, I was just speaking into just a vacuum of receptivity and interest to it. Why weren't they with you?

14:59I think it was too radical what I was trying to do. I'd not spent near enough time with them explaining it and debating it, which is a lesson I learned. And you've really driven the company's strategies for 20 years to a$20 billion company. And you think they'll just follow you. They say, what are you talking about? We're a company that makes phones. And SMS 2.0, Jim's vision for the next stage of BlackBerry, is killed just a few weeks before it was supposed to launch. I wasn't consulted. I didn't know it was happening. It was just on the agenda, presented and decided. And I called the lead director after that.

15:54And I said, what's going on here? This will kill the company. And they say the decision's made. And so I resigned from the board and sold my shares, the remaining shares at that time. And they were extremely confident for a year and a half. marketing campaigns super bowl ads lots of declarations of its future and its success and it's going to be great and there was just one board member who was from the tech industry and from the telecom industry who called me and said there's nothing i can do to stop it this is madness and um yeah and and and it was just jaw on the floor i i i just never experienced anything like that and I didn't see it coming.

16:41And how could somebody be so blind to something like that when it's such a consequential decision? We'll be right back.

17:04Jim and I both went to Trinity College at the University of Toronto, which was, and still is, the smallest and the snobbiest of the colleges that make up the University of Toronto. I met Jim in the first few weeks of freshman year. I had just turned 17. I just had eye surgery, So I had a huge scar running down the side of my face. A massive afro. Lots of acne. Maybe 110 pounds. And all the wrong clothes. I was from a small town way off in the countryside. Here I was at Swanky Trinity. And I had no idea how the fancy kids dressed and no money to do anything about it. I had a moment of truth. I need to figure out how to fit in.

17:44Jim lived across the hall from me. He taught me how to play backgammon. I played endless games of touch football with him. I had a beloved jade tree that I called William F. Buckley, and he used to steal Buckley from my room and put him in some perilous place. And I think the reason that I felt a certain affinity with Jim is that I sense he shared my urgency about fitting in. Only, it was going to be much harder for him than me. First of all, he was from Peterborough. Nobody was from Peterborough. He had further to climb. And second, he was really, really ambitious. I mean, I was ambitious, but not like Jim.

18:23Jim wanted it more. Do you remember, what was it like when you came to college, to university? What's your account of your kind of first year at Trinity? Well, it was very intimidating. I found these people from tremendous privilege and just very, very intimidating and meeting people with stellar backgrounds. I'd never been on an airplane. I've never been outside of Ontario. Very modest background. Yeah, just tremendously intimidating. I mean, I was smart, but then you'd see Robertson Davies at High Table and sometimes his friend Northrop Fry there. And it's like, Dorothy, this is not Kansas anymore.

19:07Just so you know, Robertson Davies and Northrop Fry were two of the biggest Canadian intellectual celebrities of that era. and we'd see them out our window, walking through the college quadrangle. God, out for a stroll. For those of us from the sticks, this seemed unbelievable. So we, just to remember, you and I, you were across the hall in our second year, and I remember there were, how many people were on our floor? 13 people on our floor or something like that? I remember telling my dad, I can't. Max, max, max. Maybe 12. It was like private school kids and kids who went to Upper Canada College, you know, and kids who went to, it was, did you feel like you had to work harder to prove yourself in that world?

19:58What was your kind of cycle? Yeah, yeah. Well, I worked all the time. As a kid, I had five or six paper routes, four or five paper routes almost all the time. And then I got summer and winter jobs from grade seven on. I bought my own clothes. I still to this day have my own pants and darn socks. Yeah, I can darn socks with the best of them. I sew my own buttons on because you learn how to do it. And I'll sit there, watch the news and sew up my clothes all the time. It's very, very funny. I just enjoy sewing. But I always sewed. I had my own clothes. I stitched in my shirts. I darn socks. Yeah, it's a funny thing, right?

20:38And when something rips, my wife says, why don't you buy a new pair of sweatpants? I said, well, I can fix those. And it's very funny. So I'll sit there with a big thing and do a catch stitch on it. And yeah, and so you work all the time. And then you go to school and I would do the math club and I'd go to basketball. And then I'd go out to a party and then I'd work all weekend. So yeah, I work every day. Jim went off to Harvard Business School right after graduation. He could have gotten a job anywhere, but he chose RIM, right near where I grew up in Waterloo, Ontario. And RIM's rise was swift.

21:19It's important to understand that Apple launched the iPhone in January 2007. And in response, there was a very aggressive selling and marketing and device function. Apple supercharged the smartphone category, the same way Starbucks supercharged cappuccinos. And in the beginning, RIM was able to ride that wave. So when they launched in 2007, we were 3 billion sales. The next year, we grew to 6. The next year, we grew to 11 billion. The next year, we grew to 15. The next year, we grew to$20 billion. Fortune had us in the middle of that time, the fastest-growing company in the world. Smarter and sleeker.

22:06Now with real-time, turn-by-turn GPS navigation. It has the intelligence you require with the beauty you desire. The all-new BlackBerry Curve. I would drive through Waterloo in those years and see building after building after building with the big RIM logo on it. Even today, my mom lives across the street from a giant recreational center donated to the city by RIM back in that era, RIM Park. It is impossible not to have a certain amount of pride and affection for the guy who used to steal your jade tree and ended up a billionaire. And then, at the very height of Blackberry's success, Jim wanted to go left, and the board of directors wanted to go right.

22:49But Jim, B, this is a good moment for a reflection here. how are they not with you? You built this thing. You've been the strategic force behind this extraordinary company. You're, you know, the device is in the hands of the president of the United States. I mean, like, how is it that they could look at, that they would see what you had done for the company and come to this crucial fork in the road and not even, they don't even seem interested in your option? yeah well mike and the new ceo thorsten didn't they were hardware people and mike did say right in the end in a meeting before the board meeting if we do this uh it'll kill hardware and and i said hardware is already dead and um and it's like i told him his dog just got hit by a car.

23:47When you look at what you did, where do you think the mistake lay? I think it's many things that you're touching on. One is, for sure, you're busy because you're flying around the world trying to enact this shift. I underestimated how a strategic shift is hard for people. You'd much rather have a continuum. Yeah, and more time, for sure, more preparation, more persuasion. I did not spend the time I needed to. I'd always driven the decisions and they'd always been, yes, of course, we'll do what I'm pushing. But ultimately, the board held the power. So underestimated their power, underestimated how they were sold in their way of thinking.

24:41If we cut to the bottom line here, is you have a notion of where the company's future lies, which turns out, in retrospect, to be accurate, right? Yours was the only path. There was no path. The right word fork in the road was only going to lead to disaster. There was no path that BlackBerry was going to emerge a winner by focusing on hardware. Yeah, there's no debate on that now. There was at least a decent probability it could have come out on top or at least very healthy in the other path. You came up with this idea. You had an enormous amount of intellectual confidence in the accuracy of your decision.

25:24But what you overestimated was that you thought that having a great idea, well supported by evidence, would be sufficient to win over a group of intelligent people. And what you discovered was, actually, no. A room full of allegedly intelligent people need more than an intellectual argument to win them over. That's correct. You need to have, you need to go out to dinner with them seven times and at a lovely restaurant and hold their hand and kind of, you know, make them feel like they're wanted and needed and that you're someone who they can trust, et cetera, et cetera, et cetera. That was the, it was all that soft stuff that you underestimated the importance of.

26:11You thought it was big. What you needed was, what you needed to be, you thought what was most important was to be right. Yeah. Yeah. Yeah. And yeah, no, I do a lot kind of in, I do a lot in public policy and my wife makes a joke. She says, Jim's motto is why convince when you can confuse. By the way, what's Jim doing as all this is going on? Trying to buy a National Hockey League franchise. The Pittsburgh Penguins in 2006, the Nashville Predators in 2007, the Phoenix Coyotes in 2009. In each case, the franchises were struggling financially. And Jim proposed to move them to a big city in Southern Ontario called Hamilton.

26:57Was Jim right to want to do this? Of course he was. Southern Ontario is home to 14 million people, and at present has just one hockey team, the Toronto Maple Leafs, which is absolutely bananas. There could easily be three or even four more franchises in the Toronto region, and each would be more successful than almost any franchise in the entire league. But could Jim convince the other owners to let him do it? No, he couldn't. I'm wondering, isn't the Penguin story a version of this? that that was another case where you were right. The Penguins should not be in Pittsburgh. The Penguins should be in Hamilton, right?

27:39You are 100 % correct. The future of the league, this is a terribly run league by a bunch of idiots who have not understood that Canada is the natural home for, has way too few hockey teams, and Hamilton would be 100 times better as a home for the Penguins than Pittsburgh. Right? So in both instances, the story of Black Brace Fork on the Road and the story of the Penguins, you are correct. And in both instances, you cannot convince the board, in one case, the rest of the owners, in the other case, the board of the company. You cannot convince them of the 100 % accuracy of your position. Had you done this?