But, it’s a big deal. I’ve tried to convince every company CEO I know not to settle anymore of these and encourage them to take it to the mat. We’ve done that, and as a result, it’s not quite so easy pick-ings any more for them.
Eighty percent of investors are pension funds and institutional investors. They don’t like these things either; they know better.
They’re not going to get a return on their investment by these lawsuits, and generally, our long-term investors make a lot of money on our stock and have done so historically. So, I just don’t have much tolerance for this.
Do you think these lawsuits affect your business relationships with customers?
No, it doesn’t affect the business, but it certainly has affected our relationship with Lerach. In fact, he just sued us again recently, even after the legislation. And so, we’ve given them a target, certainly, and we knew that would happen, and the fact is that that has happened.
One of the things you’ve stated is that you really don’t do much long-term planning at SGI. Compared to many other companies, this could be considered in sharp contrast.
I think some people around here would do more long-term thinking than a lot of people do. I mean, you think about the market in the year 2000 or 2005; we try to understand the new paradigms. We try to project all these ideas; try to understand how things are going to be.
You just don’t lock it in. So, we try to limit the things we need to make a long-term, hard decision on. We tend to focus our long-term thinking on core competencies and the general direction of technology in the marketplace, whereas we focus our tactical thinking on as short a term as we possibly can, and try to keep every decision open to the last possible minute. And then when we make the decision, we implement quickly.
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In terms of long-term thinking, SGI has been very active in promoting interactive television, and there appears to be almost a dividing line now between PCs and set-top boxes. Where do you think SGI’s future is headed? Do you think we’re going to have PCs? Or set-top boxes?
Well, I think we’re going to have both.
My personal belief is that, if I look at the data for the home PC
market, as I understand it, about a third of the homes have a PC, and that hasn’t increased a lot in the last year. I think the PC market has run into a brick wall in terms of the home marketplace. Getting PC
usage to 50 percent of the population is almost impossible. So a third of the homes are going to have multiple PCs, or Macs or whatever.
But I think that the rest of the population, the two-thirds of the population, is not going to use PCs unless it becomes an appliance: an appliance where the PC-ness is masked, and that becomes television or whatever else. And so, by far the bigger market is the non-PC
home market, which is currently being fulfilled only by video games and video game machines. But it will be eventually fulfilled by interactive television and Web—you’ll turn your television into a Web terminal. That’s a much bigger market.
So my belief, with the technology getting faster and faster, is that any market is going to change by a factor of a thousand, in terms of price/performance between now and the year 2010. It’s not going to get locked-in in terms of the exact paradigm. In other words, the PC
monopoly is going to gradually get broken in the next ten or twenty years. If you ask me how it’s going to get broken, I don’t know. But it’s going to get broken, because you just can’t carry that kind of paradigm in the future for that period of time. Things are too chaotic.
Consumer electronics will be one of the things that breaks it.
So you think it’s going to be PCs or interactive television? I mean, are people going to be able to do their word processing on a TV?
Who would want to use their TV to do word processing? So—what I’m saying is that two-thirds of the population doesn’t do word processing.
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Even in the future?
Yeah, for the next 10 or 20 years. It’s hard for us to imagine that, but yes, two-thirds of the population doesn’t do word processing. They want to sit down with a beer and watch television. More power to them. It’s great. Or they just want to sit around and play video games.
Super.
That’s why I’ve been leading this U.S. Advisory Council in NII
[the National Information Infrastructure]. The Clinton administration has been very supportive of using new technologies in K-12 education. I think that could change all of this. We can educate a whole group of K through 12 students, who will move in this society, will have a different set of characteristics, who will kickstart the country into the information age.
Can we talk a little about Net Day? With such a chaotic marketplace and all of your potential competitors, it’s amazing that you’ve been so involved in it. Why are you so involved?
Well, I think part of it is to change this two-thirds of the population.
I think it’s the only way to have a country without the haves and have nots. It isn’t so much an economic question; it’s who’s exposed to this—
—Knowledge and education.
Right. I think that Stanford has talked about “TAF-letes,” children of technically advantaged families, and the advantage they have in the 21st century. Well, the only way to get everybody in our country an equal start, which is what we believe in—we don’t believe in equality in our country; we believe in an equal start—and the only way to give people an equal start is to introduce aggressively this kind of technology in our schools, so that everybody has a chance to really explore what the network means and what the computer means. I hope this becomes a standard part of the education process.
But, it’s expensive. The U.S. Advisory Council talked about it taking three percent of the educational budget in order to introduce this kind of technology in the next five years. Three percent is a lot of money. The cost is broken into the four compartments: the networking expense, the computer expense, the teacher training expense, and the content expense.
And Net Day takes care of a large percentage of one of those: the
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networking expense. It really does wire our schools. We still have the other three-and-a-half components. Those are still expensive. So, Net Day has a lot of criticism from those who say, “That’s not the answer.
They’re just wiring our schools.”
And, of course, it isn’t the answer, but if it can save a half a percent on the educational budget as a result of doing it, what a wonderful thing. And if it can bring communities together, work together to improve their schools, also what a wonderful thing.
So, I think it’s great. And our company is involved primarily with disadvantaged schools in Silicon Valley, where we’re doing the wiring.
We’ve really offered to do that, rather than being in the situation where we would just wire schools—that were going to get wired anyway—a little more quickly. So we’re trying to wire schools that wouldn’t have gotten wired for the next five or ten years.
What about the content part of it? Having schools wired to the internet provides kids with access to some wonderful things, but it also exposes them to things that perhaps they shouldn’t be exposed to. Do you think there should be censorship of certain materials on the internet?
I don’t know the answer to that. I think the heavy-handed things that are being talked about aren’t very appropriate and are probably not constitutional. On the other hand, I think that the part of the internet community that feels that there should be no regulation of any kind on the internet has got their head in the sand, too, because society has a responsibility of some kind for the internet—the same kind of responsibility we have with newspapers and radio and other types of public communication.
The problem is that we have a new paradigm, a new way of communicating, and a whole set of legislators who have never used the inter
net. And their job is to cut new legislation that relates to this new community. So, I think those of us in the internet community are worried about this, because we’ve got a group of people who don’t have a clue, but are passing the legislation that regulates those of us that are on the internet.
On the other hand, I think if we had a team of educated legislators, I think it would still pass some legislation that related to certain types of rules about—rules of the road. There are also filters of various kinds that allow the internet to be used in schools, without as much risk of pornography and the kinds of things that people are worried about. So, my belief is that censorship of the internet is not
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something we have to do in order to use this technology in our schools.
If you were a young person looking to start a company, what area would—
Content. I think it’s going to be big for the next twenty or thirty years. That’s where a lot of the venture capital money is going, whether it be content for the Web, or content for anything. It’s a wonderful opportunity. My venture capital friends are telling me that many of the ideas they’re seeing for new businesses are coming from people under 26 years old, and they all relate to some kind of content, rather than some kind of Web tool. But I think content in general is really hot—there’s going to be a dearth of content compared to the appetite out there.
You’ve talked about the need for balancing your family life with your work. How do you manage to do that, and what kind of advice would you recommend for both of us trying to start companies?
You know, I don’t have the answer to that. I think the important thing is to really be happy, and if you’re really happy, I think that your family life’s going to be better than if you’re unhappy. And your work life’s going to be better than if you’re unhappy.
So, it is a tricky thing. There aren’t obvious answers. I’m not sure I have the answers. But you have to work at it. In the end, the people doing these kinds of jobs don’t separate family and work very much; I’m doing this job because I love this stuff.
And if I really separate it totally from my family, then I have to live two different lives, and I have to balance them. If there’s some-way I can integrate it and have it be one life, then it works better.
And some of that you can do, some of it you can’t do. Integrate it into your travel schedule, integrate it into your life. But I don’t have all the answers, I’m still learning about balance.
But what I’ve also learned is that I’m not happy if I choose not to be absolutely involved in the current technology revolution. Because I get a lot of excitement out of being an active participant in today’s computer environment. And as a result, I can bring more to my family situation.
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So, you feel that your being involved in technology helps your family life?
It makes me much happier. I could give it all up, but I would be a less happy person. I might be able to spend more time with my family, but it wouldn’t have as much quality.
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14
KEN OLSEN
Digital Equipment
Corporation
REFLECTIONS ON THE
REVOLUTION
Fortune magazine hailed him as America’s most successful entrepreneur. His unauthorized biographers call him “The Ultimate Entrepreneur.” His company experienced 25–40 percent growth for seventeen straight years. At its peak, Digital Equipment Corporation—known as DEC by outsiders—employed 120,000 and claimed annual revenues in excess of $14
billion. For 35 years Ken Olsen, founder, president, and pater familias piloted his company from a modest start in a small Massachusetts town in 1957 to a formidable, if bloated, leviathan at the time of his departure in 1992.
For all the attention that CEOs of companies one-fourth Digital’s size manage to attract, Olsen should be as familiar to America as any of the great industrialists this nation has seen.
However, a certain modesty and aversion of publicity make it difficult for all but his closest colleagues to know him.
Olsen received his M.S. in electrical engineering from 209
Copyright 1997 Rama D. Jagar and Rafael Ortiz. Click Here for Terms of Use.
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MIT in 1952. After working in MIT’s Lincoln Laboratory on a joint development project with IBM, Olsen saw that an opportunity existed to create a computer radically different from the closed architecture Big Blue locked its customers into. In 1957 he and colleague Harlan Anderson approached Georges Doriot, the godfather of the venture capital industry, for $70,000 to start a company.
Digital’s first computer was the PDP-1. Though it fueled the company enough to achieve critical mass, subsequent computers like the PDP 4 and 6 failed. It was a backbreaking effort to deliver the PDP 8, but Digital successfully ushered in the state-of-the-art in interactive computing—the notion that users needed to access a computer using their own terminal and keyboard in order to perform their work, rather than sub-mitting requests to lab-coated managers in imposing data processing centers packed with IBM equipment.
By the mid-seventies, over 70 competitors crowded the minicomputer market that DEC had spawned. The firm’s technology lead had steadily withered and IBM had awakened to the minicomputer market opportunity and developed a system of its own. Even Data General, the company founded by the departed Digital lieutenant, Ed De Castro, had racked up some successes. Once again though, Digital reestablished dominance with a next generation computer, VAX. VAX carried the company for another decade and fulfilled prophesies of computer ubiquity—for companies, at least.
For most entrepreneurs, the calls to step aside and let professional management guide the startup venture come relatively early. Olsen survived these challenges even during the company crises of the mid-70s and 80s and propelled his company to greater heights. By 1992, however, DEC’s financial outlook was bleak; the company had made several aborted attempts to enter the PC market. Olsen’s disdain for this emergent industry was well documented by the press. More than once, when asked about the next wave in computers, Olsen responded with “There is no reason for any individuals to have a computer in their home.” This assessment of the new market for years was held up as emblematic of corporate arrogance and ineptitude.
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Nonetheless, Olsen’s legacy of achievement marks him as a truly successful, if somewhat contrarian, entrepreneur of the modern computer industry—a giant to be reckoned with.
A company of firsts, DEC implemented various unortho-dox business practices, including paying its sales people on the basis of a strict salary instead of leveraged incentive plans popularized by IBM. At the height of the company’s success, DEC’s unique approach to business was hailed as revolution-arily effective. As the company plunged, pundits and employees complained about overlapping tasks, committee-managed inefficiency, and chaos.
From a cultural perspective, DEC mirrored Olsen’s tem-perament—unique and unpredictable. Digital was the coun-tercultural antidote to IBM—a title Apple would inherit in the 80s—yet it was decidedly un-flashy and almost entirely avoided TV and radio advertising. In short, most important aspects of the DEC gestalt inevitably trace back to Olsen himself.
We met with this publicity-shy bear of a man at the offices of his newest venture, Advanced Modular Solutions, in bucol-ic Boxborough, Massachusetts.
“The best assumption to have is that any commonly
held belief is wrong.”
You are one of the most successful entrepreneurs of your era. What are some of your keys to success?
I was asked to give several speeches on entrepreneurship to various groups this Fall. One point I made is that business schools’ goal today is to teach people to become entrepreneurs. I think this is a serious mistake because once someone becomes accustomed to being h
is own boss, it’s very hard, maybe impossible, for him to later work as a team member. People who want to be boss right from b-school are skipping the beneficial activities of working for somebody else—not very likely the best thing to do.
My recommendation is to first work for somebody else and learn how to be a team member, which sounds kind of obvious, but in this modern world being a team member is very odd. Then go and learn to be a leader. If you never learn to be a leader don’t try to run a busi-
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ness. Television business schools don’t train people to lead. They teach that the boss must be decisive, even if he knows nothing.
Someone who teaches at West Point and Harvard compared the two educational systems in an article. He wrote that one is always questioning issues and never cooperates—Harvard. The other is disciplined and military. He didn’t come to the obvious conclusion that Harvard’s way is better. You really need both. Whether it’s Harvard, or MIT, or Stanford. You’re kind of useless in business with just an academic background. You’re also useless if you spend too much time in the military. You really ought to have backgrounds in both. There is a lot to learn in the military about leadership that the academic world completely misses. The image of the military may be of top-down management, but that’s not how it works.
I was a sailor. A ship is a good model for a business. A captain determines the direction of the ship, but the ship is made up of many divisions and groups. Each one is quite independent and knows what its particular task is. And the attitude is beautiful, shared, and universal. The attitude is that the ship may not accomplish its mission, and the group may get killed, but one thing is for sure: it isn’t going to be our group’s fault. People don’t sit there worrying about the captain and the direction of the ship.
So it’s a deep sense of accountability that maintains high performance?
It’s more than accountability. The group members simply know how to do their task well even if nobody else on the ship knows what that particular task is. Business needs such a model, too. The manager who says, “I make all the decisions”—is a fool. He’s a fool.
In the Company of Giants Page 24
