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Weekly Column

The Innovators' Ball: Why Business Isn't as Fun as it Used to be

Status: [CLOSED]
By Robert X. Cringely

I was talking recently with the very unhappy founder of a successful high tech company. His complaint was that his company was no longer his company: it had been more or less stolen from him. Though he owned more than 80 percent of the company shares (ALL the common stock) the preferred shareholders took over the company, selling it off piecemeal in such a way that there was no money left to pay the holders of common stock, which is to say the founder. No wonder he was unhappy. And this all happened through an undisclosed conflict of interest on the part of the company's Chief Counsel. This lawyer had long worked for the preferred shareholders and in his role as company secretary had been able to tip the balance of power by not allowing the founder to replace a board member who had resigned. That's all it took.

This all looks on the surface to be against a zillion rules and breaking a law or three, but when my friend was looking for a lawyer to take his case, he couldn't find one. What had happened to him, he was told, was fairly normal. What the Chief Counsel had done was just conducting "sharp business."

Sharp business: it sounds so clean and good. To look sharp is to look neat and and nicely dressed. To be sharp is to be alert and in full command of the situation. But sharp business is something different, it is playing the game of business so close to the boundary of good faith and legality that it is hard to tell where that boundary is or if there even is such a boundary.

Sharp business is cheating and not getting caught.

Alas, there is a lot of sharp business being conducted recently. Enron, Tyco, Adelphia, Worldcom, bad brokers, bad bankers, and now bad lawyers are everywhere among us. Every week some big company is paying a $100 million fine for knowingly and blatantly doing something against the law. And though they pay the money, they never admit guilt. They never come truly clean. And the result is that we all become cynics. We trust less and less and some of us consider behaving sharply ourselves because we know that for every $100 million fine payer there are probably 10 other companies just as guilty who weren't caught.

We've gone from following the rules to playing the odds.

And if we do follow the rules and don't play the odds, then we are figured to be suckers.

Last week I mentioned John Walker's essay "The Final Days of Autodesk." I actually wrote "The Last Days of Autodesk," which was a mistake and more than 30 readers contacted me claming they couldn't find the essay and asking for a link. It seems to me there is an opportunity here for some search engine to pick up the algorithmic slack.

Walker, when he was head of Autodesk, wrote long memos to the company about the current state of their business and where they were heading. These memos were later compiled into a book, The Autodesk File, which provides a fascinating glimpse into the workings of a company that was made by nerds for nerds. But when Walker wrote The Finals Days he was no longer Autodesk's CEO so I don't think that 43-page essay was included in the book. In fact Walker had moved from Sausalito all the way to Switzerland, where he continues to live today.

The short version of The Final Days says that even a company that invented its market and dominates it almost completely, as Autodesk did, can quickly lose that dominance. Remember Digital Research and Lotus Development were each once substantially larger than Microsoft, so it CAN happen. The way to stay ahead, Walker decided, was to spend more on R&D than the other guys, not just to make better products but also to make them spend more on R&D, too, when they could less afford it. This raises the price of entry. That's what Intel has tried to do against AMD and what Microsoft does against the entire software industry. You have to want to continually improve your products, of course, and to do that you also have to be willing sometimes to follow, not just lead. That means meeting the competition where it is, which Autodesk did with low-end products like Autosketch.

But at the end of the day, following these practices leads to something I don't believe Walker envisioned quite so clearly -- the corruption of a company's soul. That's why founders nearly always end up leaving. "The company changed." "It wasn't fun anymore." This is the malaise of the market leader because leaders can only survive or they can fall but they rarely triumph. Triumph is reserved for the little guys at the expense of the leaders.

At some point in every market leader the creative energy runs out and what's left is just corporate power, which is to say smart business. It is all technique from then on. That's when companies are beaten not just in the marketplace but any way they can be beaten. "Winning isn't the important thing," said Vince Lombardi, "it is the only thing."

And so we have stories like last week's about Microsoft and, where it looks likely to me that Microsoft rolled over, crushing the baby. They did it (if they did it -- a jury will decide) because they could, because it was their habit to do so, because they got away with it more often than not, because by this point in Microsoft's evolution they knew nothing else. That's sharp business.

It is also a lawyer's game, a game of damage control. It is, quite frankly, mean-spirited. When did we fall so low?

My readers, who are the best and the brightest, are many of them still debating in their minds whether software can even be patented. Whether it can be patented or not, in the U.S., it IS patented, and expecting that some contrary decision will be shortly made and the planets rearranged in space is just folly. This is the difference between cynicism and realism.

But there is another issue here, one that is hardly ever mentioned and that's the coining of the term "innovation." This word, which was hardly used at all until two or three years ago, feels to me like a propaganda campaign and a successful one at that, dominating discussion in the computer industry. I think Microsoft did this intentionally, for they are the ones who seem to continually use the word. But what does it mean? And how is it different from what we might have said before? I think the word they are replacing is "invention." Bill Shockley invented the transistor, Gordon Moore and Bob Noyce invented the integrated circuit, Ted Hof invented the microprocessor. Of course others claimed to have done those same three things, but the goal was always invention. Only now we innovate, which is deliberately vague but seems to stop somewhere short of invention. Innovators have wiggle room. They can steal ideas, for example, and pawn them off as their own. That's the intersection of innovation and sharp business.

Yes, Microsoft is an innovator and I don't think that is good.

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