(Reposted from timberry.bplans.com) As a four-year mutually beneficial relationship ended, turning our cooperation into competition, Emmett Ramey offered this as a final thought: So …
(This is reposted from my blog at timberry.bplans.com) I was furious. This guy had stolen from us, blatantly, by ordering a software product, returning …
It was August of 1981, early morning, in the office of John Lutz, managing partner of McKinsey Management Consulting in Mexico City. I was three months out of Stanford with an MBA degree, working for McKinsey Management Consulting in Mexico City.
The McKinsey offices sat in a very stylish high-profile office building overlooking a critical freeway junction over Chapultepec Park, linking the fancy Las Lomas residential area with Polanco and the Paseo de Reforma main business district. The streets were wet from rain overnight, and the freeway was, as almost always, jammed. The sky was dense, a mixture of rain clouds and smog.
Mortified, but I had to quit
I was mortified to tell Lutz that I needed to quit. I’d only been there a few weeks. I didn’t like to see myself as the archetypical fancy MBA blowing off the first job. I was 33 years old, married, and my wife was expecting our fourth child. I was way too mature for this stuff.
I certainly didn’t belong there. I’d been entrepreneurial for 10 straight years, making my own way with freelance journalism and, later, my own consulting, and I wasn’t up to faking awe for the partners. And as a family, we didn’t belong in Mexico City. I had loved that place for nine years in the 70s, it had been good to me, but I was done. And Vange was just as done, even though it was her city. It had become too big, too hard to deal with. We had left in 1979 and shouldn’t have gone back in 1981.
The above was our young family in 1979 on the driving trip from Mexico City to Stanford campus.
Furthermore, as I’d come out of the business school, I chose McKinsey for the wrong reasons. It was the job that made me look best in the eyes of my peers. It wasn’t just the money and prestige, it was also the competition. With McKinsey, I’d won.
Wrong job, wrong choice
But the job I’d chose was meant for a 26-year-old single person blinded by ambition and unencumbered by relationships. Like most professional firms, success involved putting up with a corporate culture that spent 12 to 14 hours a day in the office, whether or not there was work to be done. The firm actively discouraged families by encouraging long-term business travel but without families, and by running 5-day strategy meetings at beach resorts and forbidding families coming along, even at the family’s own expense. I was not supposed to disagree with partners. Lutz’s previous one-on-one with me was to complain about my second-guessing a partner, in a cocktail setting, in front of a client. But the issue on that one was about an imminent peso devaluation, and I was right and the partner wrong. Staying quiet about peso devaluations never occured to me. After all, I’d been the Business Week correspondent in Mexico for years, and I’d learned to read the signs. I’d bet right on devaluation and earned enough from it to pay for a year in school. Also, aside from that one, an associate I was supposed to put up with one of the partners who parked his six extra cars in the reserved spaces of associates, one of which was mine — in Mexico City, where parking spaces were so scarce you could take hours looking. Oh, and at the end of the day, as an associate, I was warned not to leave before all of the six partners had left. It would have meant hanging around, with nothing to do, from six to nine, while Vange and our three kids waited at home. I ignored that advice, of course. I mention it here because it illustrates the awkwardness of that job, for me.
So, back in the office with John Lutz, did I tell him why I was leaving? That I didn’t like the job, had made a bad decision, didn’t like Mexico City either? No. I didn’t. I told him I needed a lot more money.
The lesson: tell the damned truth
This is one of the best arguments ever for telling the damn truth, even when it’s embarrassing. I’m still embarrassed, but I’m older now, and, well, I think this is a good lesson to share.
The next day they doubled my peso salary. But I still left, and I left looking and feeling really stupid. Why didn’t I just tell the truth in the first place? If the first conversation was hard, the second, when I told him I was still leaving, was ten times harder.
I’ve made a lot of mistakes. You can’t build a business from scratch without making mistakes. It’s an entire category on my blog, more than 150 posts. This dumb MBA mistake wasn’t my worst, but it’s one of the easiest to explain afterwards, and I hope one that might help others avoid making it too. There is a moral to this story.
As it turned out, the mistakes were choosing the job in the first place, and then not telling the truth about why I was leaving. But leaving, the main decision, was not a mistake. I had arranged a job waiting for me with Creative Strategies International in San Jose. For me and my family, returning back to the San Francisco peninsula, Silicon Valley, seemed like returning from exile back to paradise.
There are two morals to the story. First, never make decisions to impress others. Second, never slant away from the truth to make a hard moment easier. Give it a spin instead, and you risk looking twice as bad later.
Late summer, 1983. I asked Philippe how his software project was going.
“They are writing a new compiler,” he answered. “They’ve decided there is no good PASCAL compiler for MS-DOS. So they are writing a new compiler first.” The “they” was a team of Danish programmers.
Oh no! Seemed like bad news
In that instant, I imagined myself as waving goodbye to money that had sprouted wings and was flying away. So you understand, the idea of “they are writing a compiler first” sounded something like having to climb Mount Everest first. They were supposed to take some software that ran in one operating system and convert it to a second operating system. Instead, they were recreating an entire programming language.
I was sure this was disaster. I had skin in the game. I’d foregone my consulting fees with Philippe and had taken one percent ownership in the company — Borland International — instead. And yet, in fact, it was the key to success. It turned out to be a spectacularly good move. The compiler they wrote became Turbo Pascal. Look it up. In fact, three links for you: 1.) https://en.wikipedia.org/wiki/Philippe_Kahn … 2.) https://en.wikipedia.org/wiki/Borland … 3.) https://en.wikipedia.org/wiki/Turbo_Pascal
The project in question was converting some menu interface software that ran on one existing personal computer operating system (CP/M if you’re interested in history) to a newer more marketable operating system (MS-DOS). You have source code written in PASCAL, a programming language. The PASCAL compiler reads the code and converts it to machine language, so that any computer using that operating system can run it as an application, a finished software product. To move that software application to another operating system, you start with the source code as a text document, load it into a PASCAL compiler built for the other operating system, and run it there (compile it) to create machine code that works in the new operating system. It’s called “porting” software.
In 1983, porting software was all the rage.
Personal computing was still in its infancy. There were a million or so early Apple I and Apple II computers around, and the Apple Lisa (look it up) just started. There were a single- million personal computers in businesses. One source says there were fewer than a million home computers, another says single-digit million microcomputers being used in business. Business computing on the new microcomputers (aka personal computers) was a huge growth market.
Philippe was Philippe Kahn, a software pioneer, a tall, portly Frenchman in his with an overabundance of gestures, enthusiasm, optimism, and drive. He had founded Borland the previous May. You can look him up too. He became a celebrity entrepreneur and was later credited with inventing the camera phone. He was about my age then, early thirties. I had done his business plan, and redone it, and I’d kept on revising almost weekly. He was not the easiest person to deal with, a bit more certain than I was used to, but I liked him and liked working with him. He was originally supposed to pay me a couple of thousand dollars for my consulting, but as time went on and my fees accumulated, he asked me to take equity and a seat on the board of directors instead of fees. I’m not sure I really had a choice, but I did take him up on the offer, so I became what we called then “a co-founder” of Borland International.
That moment with Philippe became on of those key moments, engraved in memory, for which you even remember where you were at the time. We were in the parking lot of the office building at Keily Blvd and Saratoga Ave. in San Jose, where I had my offices with Creative Strategies International, and Philippe had a rented single desk in some other software business. We had met for lunch and we were walking and talking on our way.
I’d fallen in love with personal computer software
As this happened, I’d fallen in love with personal computer software and programming, and made a career of it. I discovered programming with the BASIC programming language on the Tops 20 minicomputer in the basement of the Stanford business school. The admittance packet included a book titled “Teach Yourself BASIC” and I did. I became a paid monitor in the computer facility, helping other students with programming. I got my part-time employer, Creative Strategies, to let me program a forecasting system on their computer as a summer job. Later, while I went full time with Creative Strategies after the MBA, I wrote an entire bookkeeping system in CBASIC, for a consulting client. Then I started a group within Creative Strategies to do market analysis and market forecasts of that business. I became the VP in charge of micro (personal) computer software market analysis. Which is where Philippe found me, with the recommendation of my older brother, who was his lawyer.
The amazing board meeting
Two months later, early October of 1983, Philippe called a board meeting on a Saturday morning in his new offices in Scott’s Valley. Turbo Pascal was ready to go. It was sensational software, way better than the $440 Microsoft Pascal then available for MS-DOS. To give you the idea, if you were working with the existing PASCAL language, when you had a program ready to go you would tell it to compile and wait 20, 30, or more minutes. Programmers would set the compile and go to lunch. And, most of the time, the compile command would just stop with an error message, but not tell the programmers what error and in what line of code.
What we saw that October morning in 1983 was sensational. You’d manage the lines of code like normal. But when you told it to compile, it would start going and almost immediately, seemingly instantly, kick out an error message with the first error encounter, plus the line of code it was in, and what was the error message. It made programming in PASCAL 100 times easier.
Philippe’s business genius
Philippe seized the moment. I said he should price Turbo Pascal at $500 because it was way better than Microsoft’s $440 PASCAL; and price is the best marketing message. Philippe said no, we would price it at $49.95 and blow up the market. They would cost us only $5 to build (there was no Internet and no downloading so selling software was selling a disc and a manual. Philippe was right. We created a sensation. Philippe bet the business on a few full-page ads in the main personal computer magazines of the day. That worked. Turbo Pascal took off. Suddenly, almost overnight, Borland was a big deal. Everybody wanted Turbo Pascal. Sales poured in. Philippe hired people and Borland was up and running. And I am proud I was a part of it, although I don’t claim much credit. Philippe made the call against my advice. At least I had the sense to recognize sensational software when I saw it.
How? Slowly, carefully, bolstered by good product and reviews that validated, doing a lot of coding and documentation myself, and not spending money we didn’t have.
Spreadsheet templates
It started as spreadsheet templates. The first of those was published in 1984 to accompany a book “How to Develop Your Business Plan,” published by Oasis Press. In 1988 I separated from that book, and redid the templates to accompany my own book when I published “Business Plan Toolkit,” released in MacWorld January 1988. All of these early products were 100% my work, my spreadsheet macros and my documentation. It helped to have a diverse background, including 10 years as a professional journalist, foreign correspondent in Mexico City, plus a Stanford MBA. I could write about business so (people told me) others could understand.
I released ‘Business Plan Toolkit’ in January of 1988 at the San Francisco MacWorld exhibit. Laura and Sabrina shared the booth duty with me.
Funded mostly by consulting
Throughout the early years I kept up a healthy consulting practice doing business plans for some startups, and that plus market research and strategy consulting for some larger high tech companies, plus workshops on business planning for dealers of high tech companies. Apple was by far my best client, with repeat business in consulting on business planning from the beginning until 1994 (Hector Saldaña was a steady client for years, and a supporter of the business idea, and informal advisor). The consulting supported marketing expenses. There was no Internet to speak of until 1995, so the early marketing was a combination of small ads in the back of magazines and product reviews in major computer magazines. I did about $1.4 million worth of consulting for Apple Computer between 1982 and 1994.
During the consulting years I never lost site of the main goal of building my own business. I was sacrificing consulting revenues to prop up products. My mantra was “I want to sell boxes, not hours.”
When we moved it from Palo Alto to Eugene OR in 1992, I had three early equity shareholders (1% each) who agreed to surrender their shares because there was no value in them. One of them was my brother, Chip.
There is another chapter here on the darkness before dawn in 1994, when all seemed lost; and how I created Business Plan Pro to snatch victory from the jaws of defeat. in 1995 PAS gained critical mass with Business Plan Pro so I was able to stop consulting and dedicate myself to the business. We grew quickly to more than $5 million annual revenues by 2000.
I was speaking to a group of students in 2007 when one of them asked me to comment on what makes an entrepreneur. The student who asked the question wrapped it in the mythology of the entrepreneur driven by the idea, stubbornly, tirelessly proving its value to the world. She wanted me to tell about me wanting to build something big.
Escaping Boredom
But I had to admit that my case was different.
I was running away from boredom, not building castles.
Me
When I left a good job at Creative Strategies and started on my own, in truth it was not because of something I wanted to build, not because of a creative vision, but rather because I thought I could make enough money to keep my family whole and do what I wanted. I wanted interesting work, and I wanted to choose my work. I wanted to actually do the writing and research, not supervise others. It was important to me that what I spend hours doing was something fun — I always found writing and planning and working numbers fun — even though I didn’t have the idea that would create the empire.
I wanted to actually do the writing and research, not supervise others.
Me
For the record, I thought at the time that I could make a living writing computer books. I was good at writing and liked it, and I was one of the early adopters of personal computers. I’d built my own and done some serious programming. Computer books were getting good money, or so it seemed after Stewart Brand had supposedly landed a $100,000 advance for a computer compilation related to his Whole Earth Catalog.
And I was wrong about that. I had to pivot to consulting, which happened almost immediately. I have more details in 1983: First Day of a New Business.
Or maybe you like this shorter version:
I was married, had kids, so we needed the money; and nobody else would pay me what I needed to make.
me
And the idea of a software product, that creative vision? Yes, that happened, but that came slowly, over years.
As a four-year mutually beneficial relationship ended, turning our cooperation into competition, Emmett Ramey offered this as a final thought:
So now we’re competitors, but we can still be friends. The way I see it, it’s like two people fishing on a pier. I’m not worried about the fish nibbling on your line, because there’s plenty of fish nibbling on my line at the same time.
Emmett Ramey and I did business together for four years, money was spent and earned, and the business relationship ended amicably with an agreement to compete against each other, all based on a handshake, without either of us signing a contract.
Yes, it’s a true story. No, I’m not suggesting that this is the right way to do business; it’s an anachronism, definitely out of date. Still, it happened.
Emmett and his wife Ardella were owner-operators of Oasis Press in Milpitas CA when this happened in 1984. I was a one-man company called Infoplan, doing planning and market research, writing books and magazine columns, and working out of a home office.
We got together because I’d developed a business plan template, for use with Lotus 1-2-3 and Microsoft Excel, for the financial portion of a business plan; and Oasis Press had published Develop Your Business Plan, by Leza and Placencia. My financial templates worked very well with that book. We agreed that Oasis Press would buy the templates from Infoplan and add them into the book, as an option.
That deal lasted for about four years. I sweetened the pot for both of us by taking payment for a monthly column in Business Software magazine as a free black and white ad for Oasis Press, rather than money. The ad advertised the templates and the book. Oasis Press took the sales, and paid me for the add-on.
It worked really well until Emmett called one day, sounding embarrassed, saying that his authors wanted royalty payments from me for my software. That didn’t make sense to me. I’d already written books published by McGraw-Hill, Dow Jones-Irwin and other publishers, and business planning was my favorite topic, and the authors hadn’t contributed anything to my software. So we agreed, again without having to negotiate with lawyers or sign anything, to split it apart.
So I stopped selling the template for Develop Your Business Plan, and developed Business Plan Toolkit, which was released in January of 1988. Oasis Press continued to sell the book, but without software. It moved to Oregon in 1991 and was purchased by Entrepreneur Press in 2003.
And, with apology for repeating, I’m not recommending you do it this way now. I guess this was the exception, not the rule. And in this case, business by handshake worked perfectly well.
I was furious. This guy had stolen from us, blatantly, by ordering a software product, returning it, getting his money back from us, and then getting his money back from the credit card company.
This was back in the “old days,” the beginnings of Palo Alto Software, when I was the only full-time employee. I knew the guy’s history. He had done the same thing with the previous version, and then he did it again with this version.
So I was furious when I called the credit card merchant services line to get my money back. This guy was stealing from us and the credit card people were empowering him.
I got about five minutes into the call when I finally had to take a breath, which gave the very smart and presumably very well trained woman on the other end of the call a moment edgewise.
“Mr. Berry, can I interrupt you, break your train of thought for just a moment?”
“Okay,” I said, but begrudgingly.
“If your company is going to do business with customers who have credit cards, this is going to happen to you from time to time,” she said, calmly, with a reassuring tone.
“What’s happening is that our biggest problem is credit card fraud, merchants who take customers’ money and skip out. We live and die on our customers trusting us that credit card purchases are safe.”
I was listening. She continued.
“So you have to just think of it as a cost of doing business. We are always going to side with the customer, at the drop of a hat. It comes with the territory.”
And by then, I was getting it. Like the old saying, “if you can’t stand the heat, stay out of the kitchen.”
“So basically,” I asked, “anybody who is prepared to lie to you can take my goods and get them free?”
She hesitated only a few seconds, just the right amount.
“Well, please don’t quote me on that,” she said, “but think about it. Is it worth it to you to take credit cards?”
I thanked her, gave up the issue, and went on to do something else more useful.
Years ago we were coaching a soccer team of six-year-old girls. That was me and two of my teenage kids. Another of my kids was on the team. After a game with a team clearly way more organized and much better coached than ours, I asked the other coach how he did it.
“Oh it’s not what we do,” he said. “It’s what we don’t do, and even what we don’t say.”
He explained that they kept things very simple.
“We don’t tell them about passing or dribbling or very much of anything. We just tell them we want the ball in the goal.
“We don’t call them halfbacks or fullbacks or strikers or sweepers. They’re kickers and honeybees and goalguarders. Kickers go where the ball is, honeybees go where the ball is going to be, and goalguarders kick it away if it gets close.”
And perhaps the most interesting thing of all:
“We never tell them what they did wrong, or what they’re doing wrong,” he said. “Instead of that, we wait until they do something right, and when they do, we make a really big deal of it. We make sure all the others know what they did right.”
This made so much sense that we started copying it immediately. By the following year, the girls had way more fun, the parents had more fun, and the coaches had more fun, and oh, by the way, not that it mattered, but that team also won every game.
In 1983: The First Day of a New Business I told the story of leaving Creative Strategies and going out on my own to write books and, as it turned out, build my business planning and market consulting business. I was recently reminded of an offshoot of that story, valuable to me as a lesson in running a business right.
The lesson came from Larry Wells, who was the founder of Creative Strategies, president of Creative Strategies when this took place, and was later a venture capitalist in his own firm and then Citibank Venture Capital. I don’t know where he is these days. It’s been a long time, and I moved from Palo Alto to Eugene, but if you’re out there Larry, send me an email. I just Googled you and it didn’t work, there are many Larry Wellses out there, none seem to be the one who started Creative Strategies.
Larry and I remained friends during and after my exit from Creative Strategies. He kept me on retainer for more than a year, passed some business over to me, and made sure I got all of my accumulated vacation pay. I stayed on an extra nine months longer than I wanted, because my original exit date was awkward. Larry was trying to buy back the company from Business International and wanted me to remain until after the deal was done.
There was, however, one thing he wouldn’t do: help me build a business to compete against him. That’s exactly what he said when I asked him to cosponsor a newsletter that became Infotext: the Strategy Letter (and died many years ago).
“Sorry Tim, that would be helping you to build a name to compete against us. I never do that. That’s always bad business.” Larry looked me straight in the eye and answered as simply and clearly as possible. I got it.
It’s a good lesson. Don’t build the competition. Even if you’re friends, or allies, you have to be able to look into the future and see where that leads.
This is a true story. Back in my market research days, 20-some years ago now, I watched one of my friends and colleagues (call him Fred) present a market forecast to a committee of IBM executives. They objected to his numbers, which seemed way off of what they expected, which was also what they’d received from competing market research companies.
The pause that followed seemed to me to take forever. I watched with excruciating pain as the IBM executives in the room exchanged glances. I was sure they thought we were idiots; and expensive idiots too.
It was probably only a second, maybe two. Fred, thank goodness, was a seasoned veteran of this kind of moment, an alumnus of Stanford Research Institute with a lot of degrees and a lot of experience. He responded immediately. “Oh, that’s because we define the market differently,” he said, quickly and confidently. Then he started asking questions. “How do you define PCs? Does the processor make a difference?” Our clients seemed bewildered first, then apologetic. Fred resumed his presentation. We were home free.
What I knew, but kept to myself, was that Fred had changed definitions as quickly as a carnival con man changes peas underneath walnut shells. There’s sleight of the hand and sleight of the definitions. Definitions are a market research consultant’s best friend.
Which brings me to the subject of metrics. By that I mean numbers, measurement, a scorecard. People want to see how they’re doing and we’re used to scores in numbers. I’ve posted on this blog before about the importance of metrics, which drive accountability into planning and management. Metrics are to management what mortar is to a brick wall. How can you have accountability if you can’t measure performance?
My story here is about another side of metrics, the pliability of metrics. There’s an old quote, attributed to Mark Twain, Alfred Marshall, or Benjamin Disraeli:
“There are three types of lies: lies, damn lies, and statistics.”
Mark Twain
Sometimes we manufacture truth to fit our purposes. It’s not necessarily bad. When our Palo Alto Software soccer team went 8-1 in the city league last year we called a local trophy shop and ordered our own trophy, which most of the players assumed was given by the league for finishing in first place (and if this is you reading this, sorry, we thought you deserved it). This gets particularly interesting when we do this with the metrics that are built into our management.
That comes to mind today for the juxtaposition of a story in the New York Times and a post by Seth Godin. In How Many Site Hits? Depends Who’s Counting, Louise Story reports on widely varying ranges of traffic statistics on different websites, depending on the source.
…big media companies — including Time Warner, The Financial Times and The New York Times — are equally frustrated that their counts of Web visitors keep coming in vastly higher than those of the tracking companies. There are many reasons for the differences (such as how people who use the Web at home and at the office are counted), but the upshot is the same: the growth of online advertising is being stunted, industry executives say, because nobody can get the basic visitor counts straight.
I do remember that in the old days of the dot-com boom we could manipulate definitions to change Web traffic numbers. For example, there were visits, visitors, unique visitors, unique visits, page views, hits, lots of different but related numbers. Of course the true measure was sales, but even with sales, did we count returns? Did the month end at midnight of the last day of the month, when orders were made, or when the orders were tallied and posted? There’s always some wiggle room.
In his post “The New York Times Bestseller List”, Seth Godin points out that the New York Times is manipulating the list to serve various purposes. But, he adds,
The best part… it doesn’t matter. Cumulative advantage is so powerful that even though the accurate reports of book sales often completely contradict the Times list, authors and others still obsess over it. We’re always looking for clues, especially in crowded markets.
The easy answer to this puzzle is consistency. Measure performance by one consistently applied measure, without making it matter much which measure you use, but stick to the same measure so you can see change over time. In the real world, however, even those consistent measures over time are subject to change.
Fred, the market researcher in my opening story, was in his early fifties when I was working at Creative Strategies, myself in my early thirties, and he taught me a thing or two. One of them was his use of the term SWAG as a data source. SWAG stands for “scientific wild-ass guess.”
