Lesson 1: Choose Your Grandparents Carefully
“There are three ways to make money. You can inherit it. You can marry it. You can steal it.”
– conventional wisdom in Italy
Lesson 2: Choose Your Parents Carefully ** {My personal fav.} **
"A young man asked an old rich man how he made his money. The old guy fingered his worsted wool vest and said, “Well, son, it was 1932. The depth of the Great Depression. I was down to my last nickel. I invested that nickel in an apple. I spent the entire day polishing the apple and, at the end of the day, I sold the apple for ten cents. The next morning, I invested those ten cents in two apples. I spent the entire day polishing them and sold them at 5 pm for 20 cents. I continued this system for a month, by the end of which I’d accumulated a fortune of $1.37. Then my wife’s father died and left us two million dollars.”
Lesson 3: Acquire Research
Results by Hiring and Buying Conventional (loser) economic wisdom holds that monopolies should spend heavily on research because they are in a position to capture the fruits of the research. But if you want to become as rich as Bill Gates, you have to remember that it is cheaper to wait for a small company to come up with something good and then buy them. In the old days, antitrust laws kept monopolies from buying potential competitors. But not anymore. When Microsoft products were threatened by network computers and Web-based applications, they simply bought WebTV and Hotmail.
Lesson 4: Let Other People Do the Programming
If you’re a great engineer, it can be frustrating to rely on other people to translate your ideas into reality. However, keep in mind that the entire Indian subcontinent is learning Java. And that if Microsoft, Oracle, SAP, and Sun products simply worked and worked simply, half of the world’s current IT workers would be out of a job. You’re not going to get rich being “just a coder.” Especially working in painful low-level imperative languages such as C or Java. It might be worth writing your own SQL queries and HTML pages since these tend to be compact and easier than precisely specifying the work for another person to do. But basically you need to get good at thinking about whether a piece of software is doing something useful for the adopting organization and end-user. Bill Gates does code reviews, not coding.
Lesson 5: Train your new CEO
If you’re an intelligent curious person it can be painful to run a company of more than 50 people. You spend more time than you’d like repeating yourself, sitting in boring meetings, skimming over long legal documents in which you know there are errors but aren’t sure how serious, etc. The temptation is to hand over the reins to the first “professional manager” who comes along. And that’s what the standard venture capitalist formula dictates. But Bill Gates didn’t do that. He hired Steve Ballmer in 1980 and gave him the CEO job 20 years later. Making money in the software products business requires domain expertise and a commitment to solving problems within that domain. Great tech companies are seldom built by non-technical management or professional managers who aren’t committed to anything more than their paycheck. Adobe is another good example. The two founders were PhD computer science researchers from Xerox PARC who were passionate about solving problems in the publishing and graphics world. They are still guiding operations at Adobe.
Lesson 6: Focus on Profit
“At Hewlett-Packard, people, materials, facilities, money, and time are the resources available to us for conducting our business. By applying our skills, we turn these resources into useful products and services. If we do a good job, customers pay us more for our products than the sum of our costs in producing and distributing them. This difference, our profit, represents the value we add to the resources we utilize.”
– David Packard in The HP Way
Lesson 7: Let the Venture Capitalists Schmooze Wall Street …
… but don’t let them run your company. A profitable Microsoft Corporation brought in venture capitalists (VCs) at the last minute. They didn’t need or spend the money but used the VCs to boost their valuation at the initial public offering, thus getting more money for the shares that they sold. Venture capitalists are dangerous because even the most successful might not know anything about business. Remember that there are tens of thousands of venture capitalists in this world. Assuming that they make random choices of companies in which to invest there will be a Gaussian curve of performance. Some firms will do consistently better than average even if everyone is guessing. Imagine that thousands of monkeys are flipping coins; some of the monkeys will get 10 heads in a row. These are the monkeys that will be celebrated for their insight. These are the monkeys whose track records will lead to uncritical cheerleading by underwriters and public investors. In bull markets such as we had in the 1990s nearly all the monkeys will be fairly consistent winners. But remember your next-door neighbor who made money in the stock market in 1985. He convinced himself that he had special insight and ability when actually he was only holding high-beta stocks in a rising market. So his foray into the commodities futures market wiped him out in the crash of '87.
Lesson 8: Self-Esteem is Not Job 1
Gentility, politesse, decorum, and high self-esteem are wonderful. You can achieve all of these things within your organization. And then watch it be destroyed by competitors where frank and, if necessary, harsh criticism is encouraged. Technical people, even (and especially) those fresh out of school are always convinced that whatever they’ve developed, no matter how hare-brained, is perfect. It takes a technical person with good judgement to notice the flaws and it may require repeated and increasingly harsh delivery for the, uh, pinhead to realize his or her mistake.
