Wednesday, January 5, 2005 – Making a Fortune

Wednesday, January 5, 2005 – Making a Fortune

I’ve spent the better part of my life writing about other people; engineers, scientists, corporate executives, etc; and what they did. Reading now what I wrote I realize how repetitive the stories were, a new device that was 10-times faster, smaller, lighter, less expensive than what existed. Nowhere in any of those stories was there any mention of the person, what motivated them—money for sure, but there had to be more.

I ghost wrote a story for the CEO of a high tech company based on a recorded session at his elegant home in Carmel, California. It had an ocean view to die for. His was a true rags-to-riches story. By the time I met him—I’ll call him C—in 1986, he had taken his company public adding to an already considerable personal fortune in the process. Yet, C had begun as a humble draftsman at another high tech company in the valley ten or so years earlier.

He had a gift as a sales person. When several of the engineers, led by one I’ll called A, decided to start their own company—call it Acme Inc.—C went along. I never found out what he did at the start-up early on, but he eventually ended up in sales where his true talent emerged and he made a name for himself as one of the top salesmen. By contrast A’s fortune plummeted and the investors fired him and brought in a replacement that turned the company into a success.

When the company went public, C profited reasonably from his stock options. A went off to lick his wounds and consider what he had done wrong. After the company went public, C parted ways. There was a messy legal battle upon his departure and C is pictured in a trade paper in a late 1970s, early 1980s suit, walking into the courtroom with his attorney, smiling his best salesman smile. The man had charm.

The legal battle drew to a close and C went on to a new start-up making a smaller version of the product his former employer supplied. The start-up was hopeless from the beginning since it lacked the marketing muscle to make the smaller version as acceptable as the existing product, for a variety of reason, all of which I covered in excruciating detail back then. But, C saw the future and it entailed a product that was even smaller than the one his new start-up was making. He proposed his idea to the CEO who was having none of it. It was hard enough trying to make what he had a success and he had no heart for starting over with a yet smaller version.

When C parted ways with the founder of the start-up, he asked for and received the legal rights to the product he had proposed and left. The next time I interview C, he has partnered with A and the two have started a company, call it XYZ, to build the smaller product C had taken with him. A is the technical wizard. C is the sales force. Within a couple of years, the company is profitable and has a very successful public offering, which made A and C two wealthy men. The company is still a very successful public company today and a leader in its field.

However, as the company grew, the struggle for control of the its direction created a rift between A and C and the latter left to start yet another company, making—you guessed it—a smaller version of the product that XYZ was making. To everyone’s amazement, C’s new company—call it ABC—was profitable within the first year and had a successful public offering in under two years, making C even wealthier than before.

This is when I interviewed him just as he was conspicuously consuming the wealth he had amassed. I was flown in to Carmel on one of his two private planes—one for short hops—the other a jet used for longer flights. He is pictured in a Business Week profile, sitting in his larger plane, explaining how he had taken ABC public in record time back then. He wore an impeccably tailored suit in this picture. My story was a think piece under his byline for a popular trade paper.

When I arrived at his spacious home, a professional golfer on the PGA tour (with his family) was visiting C at the time and he was pointed out to me during the walk to C’s study, a huge portrait over the fireplace of C’s son staring at me as I enter. In the course of our conversation, C attired in casual sport slacks and dress shirt, recalled Acme Inc. and the legal battles—not for publication. He gave grudging admiration for the CEO who had replace A and turned Acme around.

He steered away from all mention of A but did recall the early days of XYZ and one financial backer who contributed to their early success. A friend of both A and C, who had given them parts on credit and never submitted a bill until well after XYZ’s final product was in production and being shipped. The backer had a large block of shares and C said he was the most deserving of their backers. XYZ was one of the few investments the investor made that paid off.

C’s run of success with ABC eventually came to an end several years later after a good stretch. But with maturity, the company’s growth slowed and C resorted to a series of acquisitions to bolster the product line, but to no avail. In an ironic twist, XYZ eventually acquired ABC and C was again an unemployed wealthy man with private jets and nowhere to go. The other ironic twist to the story is that several years later, A’s luck ran out as well and his tenure as head of XYZ came to an end with the board ousting him from his position, a faint refrain of his dismissal from Acme Inc.

At some point we all outlive our usefulness.