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Is Jack Dorsey the Next Steve Jobs?

By Jamal Carnette, CFA – Oct 5, 2015 at 11:46AM

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America loves a great comeback story.

Image source: Twitter

Stop me if you've heard this one before: A founder is pushed out of his company, leads another successful company, and then comes back to the original company to save the day. Of course, the most famous example of the aforementioned scenario is Apple's Steve Jobs, but many Twitter (TWTR) investors are hoping Jack Dorsey -- who, it was announced today, has been reappointed Twitter's CEO -- will follow the Jobs playbook.

The comparison is analogous and apt in many respects, but not necessarily the same. Dorsey was Twitter's CEO, whereas Jobs entrusted John Sculley to that position; Jobs left on his own accord after being stripped of responsibility, where it was reported that Dorsey was actually removed by the board of directors; and Dorsey was given a board spot whereas Jobs left Apple entirely.

Both were faulted during their initial tenure as being tough to work for, and with. Steve Jobs' reputation as being a ruthless, results-focused manager has been well-chronicled by news articles, books, and the cornucopia of movies about him that seem to be released every six months. (Seriously, Hollywood, please stop).

New York Times writer Nick Bilton chronicled Dorsey's faults in his 2013 book, Hatching Twitter. Among them were frequent arguments with fellow co-founder and subsequent CEO Ev Williams, supposedly taking credit as the "sole visionary" behind Twitter, and lack of communication with investors.

Twitter could use a Jobs-like reinvention right now
Both Jobs and Dorsey returned because they were considered "product guys" -- and that's what Twitter needs right now. Much like post-Jobs Apple, which was faulted for trying to monetize its brand without its former product-focused mentality (see: Apple Newton), Twitter may have gotten ahead of itself with a focus on monetization at the expense of user growth through an experience and product focus.

Source: Dorsey's other company, Square

Since his return as interim CEO, however, Dorsey has gotten rave reviews for product development from large investor and Lowercase Capital proprietor Chris Sacca. On CNBC last week, Sacca addressed Dorsey's return: "This isn't a hypothetical situation, he's been back in charge of Twitter now for over a quarter and over that time we've seen the product road map accelerate dramatically." And, apparently, Sacca got his wish with the board officially naming Dorsey its CEO this week. Dorsey will remain a member of Twitter's board, though not as chairman, and still be CEO of Square, the payments and financial services company he co-founded in 2009.

One area where Dorsey may have to emulate Jobs
In the intermediate time frame, the best way Dorsey could emulate Jobs is to cut costs while focusing on the aforementioned product experience. When Jobs returned to Apple, he essentially cut superfluous projects, and doubled down on refining the iMac. Twitter would benefit from following this same playbook for the time being.

Although it's not necessarily a cash expense, Twitter could improve its reported financials by lowering the cost of stock-based compensation. Through the six-month period ended June 30, Twitter's stock-based compensation costs are nearly 40% of revenue -- a massive amount that rivals is total research and development costs (although, admittedly, there's overlap in these two figures).

In the short term, it may be hard to grow monthly active users or engagement, but shareholders should respond to more shareholder-friendly overtures like this while the product is being refined.

One area where he should take Chris Sacca's advice
Finally, I think it's time for Twitter's investors to seriously look at changing its board of directors. Twitter is a prime example of how many board members appear to be lacking in their primary objective as legally obligated fiduciaries who are to bring product and business knowledge to the table to enrich the company's shareholders. More often, it seems boards are becoming social-welfare programs for the already rich.

Sacca addressed Twitter's board by calling it "a disaster from the very beginning," and he has a legitimate point. Dorsey could initially put his stamp on the company by asking for resignations, or taking the issue to shareholders if members refuse. He should have a receptive audience.

More broadly, though, it seems that Dorsey's career path is looking very similar to the career path of Steve Jobs. And while it's perhaps mostly narrative, and the hard work begins now, one thing's for sure: America loves a good comeback story.

Jamal Carnette owns shares of Apple. The Motley Fool owns shares of and recommends Apple and Twitter. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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