Microsoft, it turns out, had been thinking along similar lines, though its view was largely focused on the computer as an alternative to the television set—a view Steve thought was silly. As WebTV began evangelizing Enhanced Television, with its ability to combine Internet content and television programming, Microsoft, realizing it could have the best of both worlds, approached Steve about buying his company. Steve was reluctant to give up control but finally, after a great deal of agonizing, he decided to sell. In the end he knew making Enhanced TV successful was going to cost a fortune, if it worked at all. Microsoft's deep pockets would give him a shot at it. We weren't sure we could ever pay the tab otherwise.
If Steve had ceded his visionary leadership to an operating manager early on, Microsoft probably would never have bought WebTV. Limiting ourselves to the Internet television business would have shortchanged Steve's larger vision, and WebTV would have had to struggle with building a much smaller and just as risky business on its own.
For me, the moral of the story of Steve Perlman and WebTV is the need to emphasize visionary leadership over management acumen in the formative stage of a startup. If you turn a visionary startup into an operating company too early, you throw out its birthright. It will never be as big, as grand, or as influential as it might otherwise be. It will be much harder, perhaps impossible, to expand the vision later, when performance is being measured quarter to quarter against operating plans, because then there's too much at stake. Steve was the right leader, the only leader, to take WebTV through its formative years.
LENNY, of course, was leaning entirely in the opposite direction. He'd taken a big idea and shrunk it to make operational sense of it before he even started. In the process, he'd gutted his big idea and reduced his potential. He had yet to demonstrate his ability to develop a compelling vision worth following. Could he lead?
In my last check of the night, I found an e-mail from him. I was betting he had heard from Frank, though I suspected Frank's message was less direct than his “we're going to pass” message to me. Lenny probably had gotten the hedge-your-bets “no.”
* * *
TO: [email protected]
FROM: [email protected]
SUBJECT: Dead Wrong
Randy,
Got home tonight and found a note from Frank. I'm confused. He says I should feel free to “explore other possibilities.” When do we get the money?
Thanks,
Lenny
* * *
I hit “Reply” and tapped out a response.
* * *
TO: [email protected]
FROM: [email protected]
SUBJECT: Re: Dead Wrong
I cannot speak for Frank. But my assessment is that nothing is going to happen there for you, Lenny. Frank's telling you nicely to go somewhere else. My sense is that, in your two attempts, you've failed to excite anyone with Funerals.com.
Sorry for the bluntness, and I may be wrong, but I doubt it.
My advice: Go back to why you and Allison started on this path in the first place, to the things she was talking about at the Konditorei, and try to recapture some of that. Valuable content and a vibrant community can establish a strong following that you can monetize with commerce and advertising. Where there's a critical mass, there's money.
Stop playing it safe. Don't waste your time or Frank's.
Ask yourself the question: What would make you willing to do Funerals.com for the rest of your life? Start from there.
best
r
* * *
Chapter Nine
THE
GAMBLE
WHEN MY MIND finally turned to business the next morning, my first thoughts were of Lenny. I knew he was at a crossroads. I had no affinity for Funerals.com, at least as Lenny had cast it, but Allison had struck a chord with me. Her enthusiasm for a community-based service was real; so was her disappointment in the evisceration of their original dream. If Lenny truly shared Allison's vision, I wanted very much for them to get a shot at it. On the other hand, if Lenny couldn't get past his limited view, better to part ways now and put Funerals.com to rest. Lenny was going to have to answer those fundamental questions he had so neatly avoided thus far. Why was he doing this? What was important to him, and what did he care about? Who was he, and how could he express that in his business? I was now curious about the answers.
But when I checked my inbox, there was nothing from Lenny. To my surprise, though, there was a message from Allison. I opened it immediately.
* * *
TO: [email protected]
FROM: [email protected]
SUBJECT: One Last Question
Randy,
Thanks for meeting with us the other day. I hope you understand my position. In his frenzy to get Funerals.com funded and operating, Lenny won't consider anything not directly on point. To be honest, I find it demoralizing. Lenny forwarded your e-mail regarding the outcome of the VC meeting. I'm sorry for Lenny, but I wasn't surprised. Unfortunately, Lenny now seems paralyzed with indecision. He finally hit a wall he can't break through, and it's shaken him up. As much as I know he'll deny it, I think he needs someone else to call this one.
What do you think I should do? I'd like to take your advice and give the community concept a run. There's nothing else for me in this anyway, and if we can get support for the business that first brought us together, I'm sure Lenny would embrace it.
Thanks a million.
Allison
* * *
This was a promising turn of events. Allison's job offer was in the bag, and yet she was still willing to gamble on their original business vision. I wondered if Lenny was equally willing to take the risk. In the Deferred Life Plan, by definition, you postpone risking what matters most to you; that happens later, if it happens at all. What if Lenny pursued a business built around what truly mattered to him, and it failed? What if the world told him, despite his absolute best efforts, that what most inspired his passion wasn't very interesting? With Funerals.com, Lenny had been minimizing his exposure and avoiding the real test. He was aiming far too low.
My morning was unscheduled, so I decided to escape from e-mail for a while. I suited up and grabbed my racing bike for a brisk ride in the hills. I do some of my best thinking while pedaling.
The first leg of my route was up Page Mill Road, a winding climb to over two thousand feet, through oak forests, with an occasional glimpse of the Bay shimmering in the morning sun. Cycling has long been my favorite way to travel, and I had logged thousands of miles zigzagging throughout New England, Eastern Canada, and even China during the seventies and early eighties. I put my love of travel on hold, though, while I pursued my Valley career. A few years ago, I reshuffled the cards when I became a Virtual CEO and recalibrated my priorities and passions. Since then I have biked France, Spain, Vietnam, Laos, and Myanmar. Soon, Bhutan, and who knows where else?
As my legs spun, my mind churned on the idea of risk. Everything in this Valley turns on risk. Lenny had been hedging, unwilling to expose the big idea, because he suspected it had a substantial chance of failing as a business. Cheaper caskets seemed straightforward as a moneymaker, and he wouldn't have to stretch hard to try it. Proposing a business with higher aspirations seemed too risky because it wasn't clear how that business, the one he and Allison first discussed, the one that had excited them, could work. So Lenny focused on the bottom line in an attempt to appeal to what he presumed to be Frank's greed. He underestimated Frank and the importance of vision, passion, and the big idea. The question he seemed to have answered was not, How can I make a difference? but, What's the least risky path to financial success? Ironically, he had assumed the biggest risk of all in Silicon Valley, the risk of mediocrity. He had dug his own grave.
Lenny didn't understand how the Valley thinks about business risk and failure. Instead of managing business risk to minimize or avoid failure, the focus here is on maximizing success. The Valley recognizes that failure is an unavoidable par
t of the search for success.
Silicon Valley does not punish business failure. It punishes stupidity, laziness, and dishonesty. Failure is inevitable if you are trying to invent the future. The Valley forgives business failures that arise from natural causes and acts of God: changes, for example, in the market, competition, or technology. The key question here is why a business failed. When you have a big idea as GO had, and you turn out to be years ahead of the market, failure doesn't end careers. Ironically, businesses that fail for acceptable reasons can actually provide a wealth of experience and increased opportunities, as was the case for all the key players at GO.
Ted Williams once said baseball was the only human endeavor at which one could fail 70 percent of the time and still be a success. To baseball I would add the venture capital business, in which only two or three in ten of all funded business ideas eventually hit big, the Internet phenomenon notwithstanding. For the investor, the explanation of this paradox is simple: the lonely winners return 10 to 100 times or more what the losers lose. With those odds you can see how the VC business and the Valley work. And if you understand that, you can understand how VCs evaluate business ideas. They want something that will make a difference, and not a small difference. Hedging is not the way to get their attention. Reducing your downside risk will not warm the cockles of their hearts. Business failures are unfortunate but necessary steps in the search for those few huge successes.
I reached the top of Page Mill Road and turned north on Skyline, along the ridge of hills that mark the volatile San Andreas Fault. These hills, the result of the millennia-long collision of tectonic plates, literally define Silicon Valley to the east and shield it from the Pacific Ocean on the west. This ridge is part of a plate drifting inexorably toward Alaska.
For some of us, Silicon Valley's forgiving attitude toward failure rests on a more profound realization: Change is certain, and in a world of constant change we actually control very little. When there are important factors outside your control, the risk of failure always looms, no matter how smart or industrious you are. We delude ourselves if we believe that much of life and its key events fall under our control.
Most people will respond to that statement by saying, “Of course. Obviously.” Yet many still believe that those who enjoy exceptional achievements and accomplishments rode to the top entirely by themselves. The media always look for a single person, a CEO or an entrepreneur, to personify the accomplishments of an entire company or industry. It makes good reading, but it's simplistic. Someone in the Valley suddenly finds himself worth $100 million dollars and begins to believe he earned, and therefore deserves, that money because of his skill and ability. The rest of the world, egged on by the media, tends to be seduced by the myth, despite the hard work of many others and the role of simple dumb luck. How many of these people accept equal responsibility for the failures in their lives? When you experience the vagaries of success and failure firsthand, it is as hard to accept credit for success as it is to accept blame for failure.
For a long time, I certainly took full credit for my success. I became a lawyer, an expert in the rules that govern the game, worked at Apple in its heyday, and then helped build a highly successful startup at Claris. All that convinced me that I could determine my own fate. It was at GO that I finally realized there were forces at work far larger than anything I, or anyone else, could control. Riding the highs and lows long enough, never being able to see beyond the next peak or the next valley, makes one realize there is only one element in life under our control—our own excellence.
Here's what I tell the founders in the companies I work with about business risk and success, and what Lenny needs to understand: If you're brilliant, 15 to 20 percent of the risk is removed. If you work twenty-four hours a day, another 15 to 20 percent of the risk is removed. The remaining 60 to 70 percent of business risk will be completely out of your control.
My father's a gambler, I tell them, a blackjack player. The game is always in the house's favor. If you play blackjack consistently, you can only lose. Unless you are, like my father, a card counter. He plays the ebbs and flows of the opportunity based on some probability he continuously calculates in his head as he watches the cards dealt. By playing each hand to the best of his ability, he is ready to take advantage of the odds the instant they swing in his favor, wagering more when luck smiles on him, and building his winnings in those moments. Of course, the casinos have made it harder by increasing the number of decks in the shoe and reducing the number of hands played before reshuffling. Nevertheless, my father plugs away, his love of the game unvanquished, waiting impatiently for his chance to win.
If you're excellent at what you do and the stars are in alignment, you will win. Of course, you may run out of time first, but, if you're excellent every day, you will have furthered your chances of beating the house as much as they ever can be. That should be your primary measure of success — excellence — not simply the spoils that come with good fortune. You don't want to entrust your satisfaction and sense of fulfillment to circumstances outside your control. Instead, base them on the quality of what you do and who you are, not the success of your business per se. Unless you understand what is truly outside your control, you are likely to make serious mistakes, misallocate resources, and waste time.
I ENCOURAGE PEOPLE to think about all the risks involved —personal risks as well as business risks. When I talk to candidates as part of recruiting outside management talent to the Valley, the issue of risk often comes up. Prospective managers usually fear that the venture won't be a blockbuster or, worse, that it will be forced to close its doors. Some recruits fixate on that business risk to the point of indecision. They strain to research all the facts, but at some point no additional information or assurances will offer them any further clues into the business's ultimate success or failure. Uncertain, they freeze and stay with the status quo, no matter how unsatisfying it is. After all, it's what they know.
But when I drill down, I inevitably find personal risks that need to be considered along with the business risks. Personal risks include the risk of working with people you don't respect; the risk of working for a company whose values are inconsistent with your own; the risk of compromising what's important; the risk of doing something you don't care about; and the risk of doing something that fails to express—or even contradicts — who you are. And then there is the most dangerous risk of all — the risk of spending your life not doing what you want on the bet you can buy yourself the freedom to do it later.
Several years ago when I pondered the offer to join Apple, and I looked down that long corridor at my law firm, the answer was clear. I was not concerned with whether Apple's business would succeed or fail or whether my options would be valuable or not. What I had to weigh was whether I should remain on the well-defined path to professional and financial success as a lawyer or venture into a creative life in business, with no specific destination in mind. I was not hesitating because of business risk; I was wrestling with personal risk, a different game of chance in which we have far more control.
When I considered the risk of staying at my law firm, I had to face the possibility of an unfulfilled life, of working endlessly on things that did not matter and that at times violated my core values. I had to face subordinating my creativity in order to become a specialist, channeling myself too narrowly. To me these were graver risks than whether Apple succeeded or failed. Ultimately I chose to pursue what seemed most important to my life at the time.
In theory, the risk of business failure can be reduced to a number, the probability of failure multiplied by the cost of failure. Sure, this turns out to be a subjective analysis, but in the process your own attitudes toward financial risk and reward are revealed.
By contrast, personal risk usually defies quantification. It's a matter of values and priorities, an expression of who you are. “Playing it safe” may simply mean you do not weigh heavily the compromises inherent in the status quo. The financial re
wards of the moment may fully compensate you for the loss of time and fulfillment. Or maybe you just don't think about it. On the other hand, if time and satisfaction are precious, truly priceless, you will find that the cost of business failure, so long as it does not put in peril the well-being of you or your family, pales in comparison with the personal risks of not trying to live the life you want today.
Considering personal risk forces us to define personal success. We may well discover that the business failure we avoid and the business success we strive for do not lead us to personal success at all. Most of us have inherited notions of “success” from someone else or have arrived at these notions by facing a seemingly endless line of hurdles extending from grade school through college and into our careers. We constantly judge ourselves against criteria that others have set and rank ourselves against others in their game. Personal goals, on the other hand, leave us on our own, without this habit of useless measurement and comparison.
The Monk and the Riddle: The Art of Creating a Life While Making a Living Page 14
