After the Premier League arrived on American television and I was able to watch Manchester United regularly, my curiosity about the skill it takes to become a successful leader eventually led me to Sir Alex. I was intrigued to know how he had accumulated more trophies than any other manager in the world’s most competitive and popular sport. Thanks to the good offices of Charlie Stillitano, one of the founding members of the US Soccer Foundation, I was introduced to the man himself. In a London hotel room, on the eve of a United game against Arsenal seven years ago, we polished off a bottle of wine and–interrupted a couple of times by players who needed some private words with Sir Alex–began the first of many conversations that eventually helped form this book.
The list of leadership topics that Sir Alex and I started to chew over soon stretched the length of a football field. How had he been able to inculcate the benefits of teamwork above the role of an individual–particularly among young, highly paid, intensely competitive characters? How had he managed to instil hope of a better tomorrow and the desire to win in a club that, prior to his arrival in 1986, had failed to win an English League championship for almost 20 years? How did he find and develop talent? How did he retain them? How did he set targets? How did he make people aspire to achieve the impossible? When did he give up on young players? How did he balance different levels of compensation? How did he cope with distractions, mete out punishment and instil discipline? How did he bounce back from setbacks or deal with press criticism or maintain balance in his life? How did he think about competitors and deal with changes? How did he set aside his personal feelings for particular individuals? How did he prevent complacency from setting in? How did he prepare, plan and communicate? How did he maintain his enthusiasm and hunger?
Many of the habits and approaches that hold true for the best football teams are also germane for any organisation that seeks to excel–even an investment partnership housing multiple businesses and active on several continents. There are plenty of parallels between life in the English Premier League, the most fiercely contested sporting competition in the world, and the stretch of land that lies between San Francisco and San Jose–which is little farther than the distance between Old Trafford and Anfield. Yet it is also easy to make too many trite analogies between Manchester United, an organisation that, 50 to 60 times a year, confronts a worldwide television audience, most of whom consider themselves qualified experts, and the world of large companies and government agencies, or of local hospitals, boy-scout troops and community centres.
For Sequoia Capital, lessons drawn from leaders in other fields or organisations can be applied in two ways. The first is to our own, internal investment partnership, where we deal with many of the organisational challenges that bedevil any company or institution seeking to perform at the highest possible level. Like any other organization, we contend with issues around recruitment, team-building, setting of standards, questions of inspiration and motivation, avoiding complacency, the arrival of new competitors and the continual need to refresh ourselves and purge under-performers. The second is towards the companies in which we invest, and where we are often the first, serious business partner for talented entrepreneurs, frequently still in their early or mid-twenties, setting out on a path that, sometimes, turns an entire industry upside down. In the first case, after internal wrangling and jawboning, we can usually apply what seems relevant. In the second, where we are minority shareholders in companies started and run by people of great wit, imagination, drive and, often, emotional fragility and temperamental dispositions, we need to rely on powers of persuasion, motivation, sensible counsel and, more often than not, good humour, to help someone do something, or make a decision, the wisdom of which might not be immediately apparent.
There is no other place in the world where companies wreak so much havoc on existing industries as Silicon Valley, the world I have inhabited since the early 1980s. Here new technology companies are formed almost every day. Most of them either fail or are quickly subsumed by others. Only a handful, far fewer than all the Silicon Valley spin-masters would have you believe, are great in the way in which Manchester United, Bayern Munich, Real Madrid or Barcelona are great and have dominated football since the Second World War. In the past 40 years, the list of technology giants is surprisingly short; the only qualifiers, at least in my book, are Apple, Cisco, Oracle, Google, Facebook, Intel, Microsoft, Amazon, Qualcomm, Alibaba and Tencent (though the last five are based in Seattle, San Diego and China rather than Silicon Valley proper).
Any student of business, management or economics knows there are very few groups capable of excelling for a long time. Just think of all the restaurants, hotels, bars, bakeries and toy shops on the High Street that once commanded a devoted following, only to founder as their standards fell or tastes changed. The same is true in the corporate world, and in the United States a quick look at the Dow Jones 30 index shows the vicissitudes of time. Only seven companies that were in the index in 1976 are still present. Some, like steel mills and shipbuilders, were slaughtered by offshore competition; retailers, like Sears, clung too much to their heritage; while once powerful companies in a wide range of industries–newspapers, cinema, radio and television broadcasting, advertising, real-estate brokerage, printing–have been upset, transformed or gutted by advances in technology. Many, of course, were felled by managers who made the wrong choices, thought themselves invulnerable and were undone by a combination of ineptitude and vanity.
For firms like Sequoia Capital, this cycle of growth and decay is of keen interest because our business depends on it. The technology world is far less forgiving of leadership failures than other industries, because a sudden, underlying change can quickly catapult a young company into a position of prominence and spell trouble for an industry leader. The floor of the technology world is littered with the butchered carcasses of high flyers that once could do no wrong: Digital Equipment, Compaq, Data General, Cray Computer Corporation, Silicon Graphics, Lotus Development, PeopleSoft, Novell, Sun Microsystems, Wang Laboratories, Siebel Systems, BlackBerry, Nokia–the list is endless. So we’ve always been eager to learn about what leadership characteristics differentiate the so-called ‘academy’ companies from the true giants, particularly since I have always felt that a vast gulf separates a great leader from a very good manager. Accomplished and skilful managers can be hired by the truckload. Leaders are the rarest of commodities. So, here is what I learned about the character of one leader–the man who used to wear a jacket bearing the initials ‘AF’.
When the teenager, later identified as ‘AF’, started as a professional footballer, he and his fellow players were treated little better than oddly gifted manual workers, employed by local business people who, in addition to a football club, also owned steel mills, shipyards, a chain of shops or, in the case of Louis Edwards, Manchester United’s chairman and principal shareholder between 1965 and 1980, a meat distribution business. The class barriers, reinforced by archaic structures laid down by the Football Association’s rule-makers in their London headquarters, reinforced this divide.
Sir Alex played his first League game in 1957–when, despite the date, the game was still lodged in its interwar mode. Players selected for international teams would often only discover they had been picked after seeing their name on a team-sheet in the newspapers. Floodlights were just starting to appear; the handful of fixtures that received television coverage were broadcast in black and white; commercial hoardings were absent from most British stadiums; fans stood on terraces (with the seats reserved for VIPs and season-ticket holders); the footballs were made of leather and became painfully heavy when wet; boots covered the ankles; players’ shirts and shorts were made of cotton and the pitches quickly turned to mud. It was still an intensely local game. In the United Kingdom international fixtures were often interpreted to mean games between England, Scotland, Wales and Ireland. European football–the European championship and the European Cup Winners’ Cup–had yet to be launched an
d the European Cup was only two years old; the majority of players were born within a couple of bus rides of their club ground, and a salary cap that existed until 1961 meant that football workers were paid like factory hands. It was also a game played by white men; it was not until 1978 that a black footballer first appeared in the English national side.
Sir Alex himself attributes much of his success to his working-class roots on the banks of the River Clyde. The memory of the grit and perseverance his father displayed as a shipyard worker–working 60-hour weeks in cold, dangerous conditions–looms large. Beyond this ingrained disposition for hard work, and a touching inclination to appear early for appointments, Sir Alex has always seen himself as something of an outsider, a rebel without being a firebrand, irritated by pompous people in positions of authority and happiest when surrounded by family and the friends he has known since childhood. While he is intensely competitive and doesn’t easily forget past slights, he is not a man who harbours malice. He has a natural sympathy for those who are struggling and an affinity with his fellow managers, partly because all of them had a common challenge: the unpredictable behaviour of club owners who could dismiss them at a moment’s notice. It was entirely characteristic of him, in remarks to a packed Old Trafford following his final game as a manager, to mention the United midfielder, Darren Fletcher, who for the previous five years had been battling ulcerative colitis, and the retirement of the midfielder, Paul Scholes, after more than 700 appearances for the club, whose dislike of the spotlight was inversely related to the influence he wielded on the pitch.
He might blanch at the label, but Sir Alex, a lifelong supporter of the British Labour Party, is, at heart, a conservative–with a small ‘c’. He is self-made, keenly appreciates loyalty (which is returned in spades), doesn’t tolerate slackers, poseurs and braggarts, and cannot hide his disdain for high-profile freeloaders who show up with an entourage for an important game and demand a clutch of free tickets for the best seats in the ground. Even though he’s worked hard all his life, Sir Alex feels he’s had it easy compared to miners, farmers, fishermen, oil-field workers, steelworkers and shipbuilders–manual labourers who have often faced difficult and dangerous conditions at work. He is, by nature, an optimist, and though he has the jovial characteristics of the pub owner he once was, he is not inclined to embrace complete strangers with bear hugs as his brother, Martin, is prone to do.
Though he is fond of the good things in life and is wealthy by most people’s standards, Sir Alex isn’t avaricious, and has never felt the need to own the largest house (or collection of homes) or a stable of exotic cars. Compared to today’s footballing stars, he and his wife Cathy live quietly and modestly. Though she never attended games at Old Trafford, Cathy–whose instinct is to protect her husband from the overtures of strangers–has always been keenly aware of whatever duel is being fought on the field.
Sir Alex has a chess master’s memory for numbers, deals and people, which lends additional authority to his observations. Ask him the score of football games played decades ago, and he’ll remember not just the final score and most names on the starting team-sheets but also the critical substitutions and the build-up to many of the goals. He will reel off the entire Premier League fixture list for the weekend that lies ahead with the same quiet confidence with which other people complete The Times crossword in ten minutes. He will remember with precision what price he paid and gained for a player (wincing when recalling occasions on which the latter was less than the former); the amount he contributed for his share of a horse–like Harry the Viking or Chapter and Verse–and how much he paid for a 1986 Pétrus or 1993 Sassicaia, though his face will suddenly harden and his lips will purse when recounting an investment over which he feels he was duped. It is easy to see how, if destiny and circumstances had been different, he probably would have succeeded at whatever he had turned towards: leading a trade union, operating a chain of retailers, commanding an aircraft carrier, or–if for some reason Silicon Valley had developed between Glasgow and Edinburgh in the 1940s and 1950s–founding a company.
Unnervingly he can recite the names of the hotels that he and Cathy have visited and, without guile and almost reflexively, will name each of the children of their friends. He is reticent about asking others for special treatment and will cringe when recounting an experience or pleasure that came his way due to the kindness of others. Long-time football fans might remember his emotional outbursts on the sidelines, and journalists who covered him throughout his career might recall being subjected to the occasional stream of profanities and abuse, but most people aren’t aware of his patience and innumerable acts of kindness: the good-natured way he will pose for photographs or sign autographs, politely say a few words to someone who interrupts his dinner at a restaurant or who stops him in the street. Little wonder that, for years, he has welcomed the relative anonymity of New York, where he has an apartment.
He likes winning whatever card game (such as Kaluki) or snooker challenge he plays. He prefers red wine and has never drunk whisky, the pride of his homeland. For the past 15 years, his summers have been spent in the same hotel in the south of France, where he knows all the staff by name, and thoroughly admires the way the owner is up at dawn meticulously inspecting his property.
Sir Alex is a card-carrying member of several tribes–his own family, the memory of the tenements of Govan, Glasgow, Scotland and Manchester United. Most of all he still feels he belongs to the working-class tribe, and remembers, with a shiver, the cold Scottish mornings when, as an apprentice tool-maker, he had to tie rags around the end of the lathes to keep his hands warm.
Sir Alex Ferguson was United’s manager from 1986 to 2013, but never held the title that, in the business world, applies to the most senior person in the organisation: chief executive officer. From 1980 to 2000 that role belonged to Martin Edwards, at the time the club’s principal shareholder, from 2000 to 2003 to Peter Kenyon and from 2003 to 2013 to David Gill, whom Sir Alex came to view as a blood brother.
This may sound odd, but Sir Alex, unlike so many other people who experience success at the head of an organisation, was not confused about his position. He knew he was a hired hand. He did not delude himself into thinking that he was the man who built Manchester United; he was well aware of the fact that he had come to a club with a rich heritage that had enjoyed much success due to the work, sacrifices and performance of those who had preceded him. Sir Alex never imagined when he joined United that his image would one day be cast in bronze and be placed, for all to see, outside the stadium. I would be surprised if he ever thought, even in his most private moments, that he was bigger than the club. He has the sort of moral compass that is not found among leaders who award themselves a disproportionate share of the spoils; talk about themselves and their accomplishments in the third person; don’t have the humility and inner decency to recognise that they are standing on the shoulders of those who came before; or understand that they are merely custodians, charged with leaving the organisation in better condition than it was when they arrived.
Ferguson ruled everything that occurred on the pitch, was responsible for the lion’s share of the club’s spending and was in charge of the majority of the club’s payroll. Generation of revenue (negotiation of television rights, sales of sponsorships, setting of ticket prices, international tours) and management of advertising, promotions, stewardship of financial systems and human relations were the preserve of the club’s ‘commercial side’, which fell under the purview of the CEO. But of course the ‘commercial side’ hinged on a first-rate performance on the field, and the growth in the value of the club–from £20 million in 1989, when Martin Edwards first thought about selling his stake, to £1.93 billion today–is irrevocably associated with Sir Alex. While he had plenty of frustrations during his managerial life, his control over what is colloquially called the ‘dressing room’–the players, coaches, groundsmen and the medical and sports science staff–was as complete as that of any absolute monarch
. The way that former players, now in their fifties or sixties, still address him as ‘Boss’ is freighted with meaning. In the words of Reggie Jackson, one of the kings of American baseball during the 1970s and 1980s, Sir Alex was the straw that stirred the drink.
Other business organisations split executive responsibilities in a similar way to Manchester United. Think of an advertising agency or fashion house, whose inspiration and following comes from the inventiveness and imagination of a creative director, but where the commercial affairs are run by a CEO. Consider the newspapers and magazines of yesteryear, where the editorial coverage was the preserve of the editor and the sale of subscriptions and advertising of the publisher or the CEO. Look at movie companies where directors are always at war with the men (and now women) who used to be called ‘suits’. In the arts there are orchestra conductors, museum and theatre directors responsible for artistic repertoires, shadowed by a CEO, whose name is usually unknown to the public but who is responsible for maintaining a going concern. If Manchester United were a Silicon Valley company, Sir Alex’s title would probably have been chief product architect or chief designer, and David Gill’s would have been chief commercial officer.
Some–particularly from the business world, large public agencies or the military–will look at Manchester United and conclude that this footballing enterprise would be straightforward to run. If so, they are underestimating the challenge of constantly buffing a global entertainment brand that relies on the unpredictable physical condition and mental state of a changing collection of absurdly talented live performers. While United’s reputation is vast (and, thanks to the explosion of satellite television and mobile computing, it now has fans in faraway places such as Bhutan, Djibouti or Belize), its business and payroll, measured alongside some of Silicon Valley’s companies or some of the world’s larger companies, is surprisingly small and pedestrian. The club’s revenues in its last fiscal year were £433 million, which is what Apple and Google do in 30 hours and four days respectively. It only operates one line of business and it does this in one time zone rather than in separate locations scattered across different continents. The club’s expansion opportunities are circumscribed. The Old Trafford stadium has 75,731 seats and is already the largest club ground in Britain. It is hard to squeeze more games into a year when, in a busy season, the most heavily worked players already take the field 38 times for Premier League games as well as FA Cup, League Cup and European competition fixtures, not to mention the pre-season exhibitions, friendlies, international matches, testimonial and charitable games that find their way into the calendar. United’s share of television revenue, which was nonexistent before the formation of the English Premier League, fluctuates with the team’s performance, as do its other sources of revenue: ticket sales, rental of luxury boxes, and sponsorship and merchandising opportunities. Like most sports franchises, Manchester United would not meet any of Warren Buffett’s investment criteria–its performance is unpredictable, it requires large capital outlays and there is no lid on costs.
Leading: Learning from Life and My Years at Manchester United Page 29
