THE WIZARD OF ‘WOZ’

WOZNIAK IS THE OFT-FORGOTTEN CHAPTER IN THE CHRONICLE THAT DOCUMENTS THE FIRST FEW EXPERIENCES THAT MADE THE LATE STEVE JOBS THE GREATEST CEO AND MARKETER OF THE PAST CENTURY. HE IS THE OTHER ‘STEVE’ – THE ENTREPRENEUR WHOSE STINT AT APPLE IN ITS FIRST DECADE HAS MANY A LESSON FOR MODERN DAY ENTREPRENEURS TO LEARN FROM

“A true entrepreneur doesn’t start with all the money in the world. When we started Apple, we had golden ideas but no money. That is true entrepreneurship...” Steve Wozniak

Besides being referred to as one of the co-founders of Apple, much is not talked about Steve Wozniak. In the present times, all that most know about him, if at all, is that he stays as of now in Los Gatos.

There are entrepreneurs who walk with a vision that stretches out into generations. Then there is the most unbelievable cult of visionary innovators who walk with an idea to create temporary monopolies and break march the second they feel they are done with their current experiment and that the lot of leaders whom they trained can handle the war well. Woz incredibly belongs to the latter group, ready to live an entrepreneurial dream purely for the sake of his passion than for anything else; and ready to hit the road in search of the newest entrepreneurial high every moment.

When Janet (Woz’s wife) first wrote back to my office last month, Steve was putting up at the MGM Grand in Vegas, and had just completed a nine hour-long drive from Gilroy (California) to Vegas. “Right now, his schedule is so full with travel and speeches,” she said. He was there on a quick break before his packed season was to kick-off. His diary for the next five days included two days of driving and three days of judging high-school robotics in Nevada. In the past half-a-month, I had tracked this multimillionaire through more than a dozen destinations across three countries, where he had been delivering speeches at educational institutions, sharing his vision with young entrepreneurs, egging on the innovation spark in budding minds – in short, the man was firmly and passionately embedded into sharing all that he knew with all the people around him that could benefit. I cannot imagine a more altruistic form of entrepreneurship – where a professional, without any qualms, gives up all the cards that he holds to help the other guy, whoever, win. A true teacher!

Over the time that I researched him, Woz’s answers to my queries made me realize that behind the geek who was technically ‘the’ creator of Apple’s computers during the 1970s and 1980s, lies a legendary entrepreneur who doesn’t like hogging the limelight. He never did. And from Woz, what I believe is the primary CEO-nurturing lesson that true entrepreneurs of the modern age should internalize is – encourage and spearhead the ideation processes and initial stages of product-making, and once you’ve found your optimally utopian CEO (or one who comes closest to that), give complete independence to your CEO to finally shape, market and sell the produce. Even if you’re gone tomorrow, your CEO and his successors should be trained well to adopt the company as his and take it forward responsibly – with shareholders to serve. Shy but determined, Woz was a creator of many-a-marvel, and the independence that he gave Jobs in executing the selling and marketing strategies is what I believe gave the primary cementing foundation to Jobs’ character and in Jobs becoming the greatest marketer and CEO in the world. And this effect had started much before Apple was even born (to be precise, five years before, with the invention of the ‘Blue Box’ – an instrument to make free calls – which these two tech wizards made; I’ve given more details later).

In Jobs’ biography (‘Steve Jobs’ by Walter Isacsson), recalling his first interaction with Woz, while sitting on the sidewalk in front of Bill Fernandez’s home (Woz’s Homestead High School friend), Jobs had concluded: “Woz was the first person I’d met who knew more electronics than I did. Woz was very very bright.” He was. He is still. Very.

Woz’s father (Francis) was a rocket scientist at Lockheed Martin, and a proud passout of the California Institute of Technology. Since he was a child, Woz would spend hours gazing at circuit diagrams and enjoy hearing about the power of transistors and diodes from his father. While in the fourth grade, Woz made an intercom system, connecting his friends’ bedrooms in six households in the neigh-bourhood. He started making calculators when he was in the eighth-grade. And by the time he moved to the penultimate year of high school, he had started played pranks with his creations. Such was his madness when it came to experimenting with new electronic equipment that he was even sent to a juvenile detention centre for scaring his school principal with a fake electronic bomb. His excitement didn’t bend before law. In the one night he spent there, he taught fellow prisoners how to conduct electrical current on to the prison bars!

He was born a hardware guy, and though his pranks were not marketable, they were definitely signs of a genius entrepreneur-inventor in the making.

If a film could be made, the two Steves would have unique titles. While Woz would be the Entrepreneur-Creator-Ideator, Jobs would be the CEO-Innovator- Marketer. For many years, the duo worked together, but at every stage until Woz left Apple in February 1987 (he ceased to be a full time employee at Apple a year after Jobs was forced out of the company), Woz played the role of the visionary creator, while Jobs acted his part of being the visionary marketer to the hilt. That Jobs was under no undue pressure from Woz and acted on his independent will as the master marketer and head of the Macintosh division for Apple is apparent from not just the manner in which product creation and selling were masterminded independently by Woz and Jobs respectively during the first 12 years of Apple (when the two worked together) but also by the manner in which the advent of John Sculley as Apple’s new Chief in 1983 disturbed Jobs’ independent psyche, so much so that Jobs organised a boardroom coup to oust him [The coup backfired].

The Blue Box: The first revenue-generating product that the duo created was the Blue Box (September 1971), which replicated tones that routed frequencies on the AT&T network thereby enabling callers to make toll-free calls across the world. Woz masterminded the product. He got the idea from a magazine article, and turned it into a potent mix of mischief, oscillators, and wizardry. From calling the Ritz in London to speaking to a bishop at the Vatican at half- past-five in the morning, both the entrepreneur and the master marketer got their product tested. Then it was time to mint some money. Jobs, true to the marketing stamp, decided the pricing of the Blue Box. Woz allowed Jobs to experiment his pricing skills and bloom as a marketer during those early years. [Remember: Woz was 21 years old and Jobs was only 16 then.] The cost of making one unit was $40, therefore Jobs decided that they should sell it at $150 to make good profits. They sold about 100 pieces and made net profits to the tune of $11,000 – big moneys for a start. Lesson #1: As an entrepreneur, if you find your CEO competent, even if his age is lower than the industry standard, trust him. Of course, there will always be stock taking sessions – but these should neither be oppressive or daily.












Success #1@Apple: In early 1975, after Jobs returned to US from his soul-searching trip to India, Woz and he got back. During one of the meetings at the Homebrew Computer Club which Woz attended on the evening of March 5 that year, he saw a demonstration of the Altair 8800 (a microcomputer design based on the Intel 8080 CPU design). The circuit layout of the microprocessor gave Woz an idea to create a personal computer. He recalls, “This whole vision of a personal computer just popped into my head. That night, I started to sketch out on paper what would later become known as the Apple I.” The enterprising Woz, on his own, had masterminded the creation of the world’s first personal computer. Says he, “Usually, entrepreneurship involves creation and engineering. Bright engineers get ideas and become entrepreneurs to bring them to fruit.”

On June 29, 1975, the first prototype of the Apple I PC was done. What next? It was the free-spirited Jobs’ turn to take responsibility of raw materials procurement and sales thereafter. He sourced some Intel chips (for free!) and gave presentations to clients on behalf of the shyto- talk Woz. Interestingly, had Woz gone ahead with the selling act, he would have sold-off all units of the Apple I for free! He wanted to. Says the true to nature altruistic Woz, “The theme of the [Homebrew Computer] club was ‘Give to help others’. I designed the ‘Apple I’ because I wanted to give it away for free to other people.” Jobs certainly wasn’t one to endorse the entrepreneur’s idea of philanthropy. He was a CEO and marketer with an overwhelming understanding of his business’ potential.

Steve Jobs sold the Apple I at $666 a piece – a margin of over $300 per piece. Their first order was 50 units from the Byte Shop in California.

Success #2@Apple: The Apple II went on sale on June 5, 1977. Like the previous version, this one had Woz’s touch of brilliance. He had designed it keeping in mind the evolving needs of Apple PC users. The Apple II had better colour and sound, storage capabilities, a faster microprocessor and became a best-seller.

Its sales rose from 2,500 units in 1997 to 210,000 by 1981, the year which practically was Woz’s last active year as an entrepreneur at the company. But the Apple II wouldn’t have earned fame had it not been for Jobs’ own touch of brilliance as a sales guy. This is what Isaacson writes in his book, “To make the Apple II successful required more than just Wozniak’s awesome circuit design. It would need to be packed into a fully integrated consumer product and that was Jobs’ role.”

With the Apple II, Jobs put his father’s advice (of making even the unseen parts in a product look perfect in terms of craftsmanship) into practice. Then there was the marketing expenditure, which Woz allowed Jobs to go ahead with. It was the first West Coast Computer Fair in April 1977, and Jobs wanted to grab the booth right opposite the hall to make an impact. That cost Woz and Jobs a huge $5,000. Woz didn’t stop him. Woz thoroughly know that having a great product wasn’t even half the job done. One had to convince people to buy it. It worked. Exemplifying this thought process was what ensured that Apple II sold almost 6 million units for the next 16 years.

Lesson #2: As an entrepreneur, never fall into the trap of believing that the best product can win purely on quality. That almost never happens. Believe in the power of advertising and marketing, fanatically.

Of course, all this doesn’t mean that one can’t disagree at the top. Even when it came to execution and people management, Jobs was particularly stubborn, as Woz says, “Steve was too tough on people. I wanted our company to feel like a family where we all had fun and shared whatever we made.”

After surviving a private plane crash in 1981, it was only in 1983 that Woz returned to Apple. This time however, he sensed the change in Jobs’ orientation towards work. Woz tells us, “Steve was one of the greatest. He didn’t do the engineering but he understood it better than pure business types. I was his ‘key’ in the early days. In later times, it was clear that he had understood the importance of all the departments of a large company. From then on, Steve became a great CEO but it wasn’t the same. That’s why it’s confusing as to whether the word ‘entrepreneur’ applies to this latter phase [of Jobs].”

Woz stayed with Apple till 1987. In the between, he earned his undergraduate degree in 1986 from UC Berkeley under the pseudonym “Rocky Clark” (Rocky being his dog’s name and Clark his former wife’s maiden surname). Post that, he tried his hands at encouraging technological start-ups, and still continues to do so. He has been quite successful with ventures like Acquicor Technology and Fusion-io. Woz’s close association of a decade with Jobs was critical in making Steve Jobs the great visionary CEO and Marketer. Woz was the cushion with brains and a creative acumen, Jobs was the hedge-hammer with a love for profits, and making ordinary objects beautiful and sellable.

Chances are, had Woz continued playing the seasoning role on Jobs, Jobs wouldn’t have had the bitter Sculley days in his biography. But that clearly wasn’t to be, because Woz was an entrepreneur who loved to break march as soon as his initial idea had won trust. He wasn’t the one in it purely for the love of money – and when he had had his share of the happiness quotient, he moved on! Whatever said and done, Woz’s association with Jobs was meant to be just that long.

If you ever chance upon him walking through Blossom Hill Park with his two pet dogs (which he does quite regularly whenever he is home in Los Gatos), or getting his hair made at his favourite ‘Curl Up and Dye’ salon at Gilroy, you’ll never suspect that he’s the co-founder of the world’s most valuable company – that’s how down-to-earth he is.

Respect is what we must give him, for choosing passion over money, choosing life over fame. This is why he walked away from Apple. In a decade since Woz and Jobs started Apple, the company’s sales had risen to $346 million by 1987, and Woz would have known that sticking around would not only keep him on the headlines of media outlets but also get him more money than one could have imagined. But he did walk away.

Lesson #3: Always choose passion over money; success will be longer lasting and more satisfying.

I might not have been able to do that myself. Perhaps the only commonality between Woz and me is our choice of music – he loves listening to Dylan and Counting Crows; so do I. For trivia’s sake, he still is an owner of Apple apart from getting around $125,000 a year as an employee – which is peanuts given what he’s worth as a person; for me, his character is worth more than all the trillions that one could churn up in market capitalization!

He’s the cult entrepreneur all CEOs should listen to, to get their bearings sparklingly right. Well, there are some things that money just can’t ever buy – Woz is at the top of that list.

THE WIZARD OF ‘WOZ’

ALLOW THE VALUES IN, AND WEALTH FOLLOWS

PLAN ‘A’ FOR NARAYANA MURTHY WAS ABOUT MIDDLE CLASS VALUES & GROWTH PROJECTIONS BEFORE HE REALISED THAT ENTREPRENEURSHIP IS THE KEY TO POVERTY ERADICATION IN INDIA. THE VALUES STAYED, BUT A LOT ELSE CHANGED THEREON

This happened a few years ago when I was talking to Ted Turner at a function where a few new members were being inducted into the United Nations Foundation’s board of directors. Our conversation was pretty soporific, as can be expected of such functions where one is loathe to utter politically incorrect statements. Ted suddenly stopped an individual who was passing by, and introduced him to me, mentioning, “Meet the newest board member of the UN Foundation, Narayana Murthy.”

The incident remains in my mind purely because of the fact that that was my first meeting with the legendary cult entrepreneur Narayana Murthy. Years later, talking to Murthy on critical issues of entrepreneurship, I realized that here was one individual who would be considered one day soon - if not already - the father of India Inc. The commitment, sincerity and dedication that Murthy has shown to not just Infosys but to the nation, in terms of bringing India on the world map and ensuring that the fruits of India’s development flowed down to the lower sections, is without argument in the league of the likes of JRD Tata.

For an entrepreneur, whose company has scaled unprecedented heights to become one of India’s most profitable companies in a remarkably short span of time, the values that have driven N. R. Narayana Murthy, now Chairman-Emeritus, Infosys in his entrepreneurial journey are quite counter intuitive – they are, in fact, values that the Indian middle class would relate more to, rather than the corporate honchos who have defined Global Inc. throughout history. These values were indeed a part of his upbringing in a middle class Kannada Madhava Brahman family. He grew up to learn that an uncompromising focus on education and respect comes before everything else.

And if you had some acquaintance with Murthy in the initial years of his career, his life seemed like an immaculately planned middle class growth path even then – with the expected ingredients of academic excellence, linear growth and the much cherished job security; in short, nothing extraordinary. He completed his B. E. in Electrical Engineering from University of Mysore and his M. Tech from Indian Institute of Technology. Moreover, Murthy was a socialist at heart, and seemed hardly the kind of person who could set up a multi-billion dollar global IT company.

But a few unexpected experiences changed Murthy’s mindset tremendously, and unleashed the technical brilliance and entrepreneurial dynamism that have been part of his personality since. The first was a meeting with a famous American computer scientist when he was a graduate student in Control Theory at IIT on the future of computer science. The meeting was so insightful that Murthy got committed to computer science for life. Secondly, a trip to Europe convinced him that rather than his cherished Leftist ideologies, capitalism & entrepreneurship were the most practical solutions to India’s poverty problems.

His first venture Softronics was a failure and he terminated it fairly quickly. But the learnings from that venture helped him immensely when he exited en masse with his team of engineers from Patni Computers and a loan of Rs.10000 from his wife Sudha Murthy, to form Infosys in 1981. They were – a) you are a successful entrepreneur only if the market is ready for your idea and b) it is important to have a team that has a common and an enduring value system. The consequence of the first was that Infosys was keenly focused on exports from the beginning since Murthy had realised that the Indian market wasn’t ready. And the consequence of the second was that he carefully chose his A team, the team that we all now know as the seven co-founders of Infosys. These co-founders made up their mind since the beginning that they would seek respect first from all stakeholders by adopting the highest standards of business excellence, and that money would then flow in automatically. Murthy himself additionally drove home the firm belief in equity, and gave all his colleagues 15% equity in the company, even though they were just engineers with 1-1.5 years of experience; a decision that would arguably not find any precedent in business globally.

Even if the idea was right, anyone in his right mind at that time would have been quite convinced that the time and place was horribly wrong. They were planning to export software, but they were still operating from India, where the environment for business was far from ideal in those days. They had to import their first computer and MNC banks were not ready to lend them money for the same since they were start ups. Taking a telephone connection and even importing a computer took 2-3 years. There was no data communication and they used to fax source code (imagine what a client would have felt!) to the US. Six of Murthy’s colleagues went to the US to bypass the constraints in India and interface with clients. RBI approvals for overseas travel took 8-10 days, and if you got any foreign exchange earning, 50% went to RBI. Murthy, in fact, convinced clients to send him money on the 28th or 29th of every month. It was then that he could send his overseas colleagues their maintenance allowance after giving 50% to the RBI.

Through all these difficulties, Murthy held steadfastly to the belief that his idea was right, and the value that his company was providing to customers was world class. And he was confident that the difficulties would ultimately give way. However, amidst a difficult initial decade (Infosys grew from an annual turnover of $14000 to $2 million between 1981 and 1991) members of his team lost hope, and found themselves drawn towards a $1 million offer that was made for the company in 1989. Murthy placated them and assured them that the future was going to be much better. He even offered to buy out their stake.

However, even Murthy would not have comprehended the not-so-small mercy that India Inc. had in store in the form of liberalisation in 1991. Infosys truly found its bearings in the new and far more enabling environment. A view at some numbers will help put this in perspective. When Murthy stepped down as CEO, revenues of Infosys stood at Rs.26.03 billion compared to Rs.290 million in 1994 (Infosys got listed in 1993). That means a CAGR of a mind boggling 75.44%! Profits were even better at Rs.9.58 billion in FY 2001-02, a CAGR of 77.79% during the same period.

As he took the company on its new trajectory, Narayana Murthy’s leadership skills were put to test time and again, and so were his value systems. In 1994, for instance, one of their largest customers GE wanted to renegotiate rates. Murthy refused and the contract was terminated, which led to a severe cash problem as GE contributed a huge 25% of Infosys’ revenues at that time (in fact, that’s when Infosys decided that it would always keep enough cash for one year’s salaries in its reserves, a diktat it follows till date). Besides, Murthy has stood by the belief that benchmarking oneself with the global best is a necessary end, as that enables you to compete in global markets and also provide world class products to your domestic market. In that spirit, he inculcated a culture of innovation across the board at Infosys. Everyone had to innovate, be it a business head in the cabins or a sweeper on the floor, and his benchmark for the same was – think of ways in which you can perform your roles faster, cheaper and better than you do them today. Another aspect that reveals Murthy’s obsession with ensuring sustainability was his approach towards derisking. For instance, he and his successor Nandan Nilekani never travelled together on the same plane! Even the listing on NASDAQ signified two very prominent aspects of Infosys DNA – great ambitions and also the willingness to embrace the highest global standards, especially in terms of corporate governance. Under him, the Infosys Leadership Institute was set up, which ensures a steady pool of next generation leaders in the company, who can be promoted to senior positions when necessary.

Infosys innovated time and again to ensure the respect of its clients. From 1992 itself, the company decided that rather than looking for short term gains, it has to build an institution for the long run. They invested in building state of the art physical infrastructure, attracting the right talent, embracing the latest trends in transparency and accountability (finance) and continuously enhancing productivity and quality standards. The sales team also innovated on ways to improve client satisfaction and deliver value. One of the most important innovations that Infosys brought in at that time was the global delivery model, and it was conceptualised and implemented by Murthy himself. The model is now immensely valued by clients as it enables Infosys to deliver its solutions from multiple locations across the globe and also enable round the clock implementation. Even today, Infosys earns around 98% of revenues from repeat customers.

In rough times and smooth, Murthy mostly remained his calm and humble self. He has believed in taking advice from all team members before taking any decision. But he also believes that when it comes to taking the final call, the leader has to trust himself. Today, it seems hard to believe, but when Infosys launched its IPO in 1993, the issue, which was launched at an offer price of Rs.95/share (it opened trading at Rs.145/share), was actually undersubscribed (how we wish we had a functional time machine!). The saving grace was Morgan Stanley, which acquired 13% stake in Infosys at that price. For posterity sake, the Infosys share closed at Rs.3557.85 on March 31, 2002, the month when Murthy exited operational responsibilities as CEO but continued as Chairman, hence growing by 37.45 times its IPO price. The Infosys share was trading at Rs.2225.40 on August 19 last year (Murthy stepped down as Chairman on August 20), with multiple splits en route. If you invested Rs.9500 for 100 Infosys shares in 1993, your investment would have been worth Rs.28.48 million (adjusting for the splits), a capital appreciation of 299743.37%! And add the regular dividends to that too.

One is reminded of the famous quote from Mahatma Gandhi, “My life is my message.” The success of a cult entrepreneur is driven by his passion and zeal for a vision, a passion that transcends short term blips, analyst forecasts, quarterly shocks, economic malaise, et al. For Murthy, his personal ‘larger than life’ vision (apart from the Infosys’ vision) was linked to eradication of poverty. Unlike the anti-capitalist mindset that prevailed in the 1980s, Murthy was convinced that entrepreneurship and capitalism are the ways to take India ahead. He calls Infosys his experiment in entrepreneurship. Even when he moved on from Infosys, he decided to devote his energies to fostering entrepreneurship in India, which led to the formation of his VC firm Catamaran Ventures.

Murthy not only set new standards in wealth creation, but also in terms of wealth distribution. The company distributed 27% of its equity among employees after its IPO, which was valued at Rs.5 trillion. Narayana Murthy has slowly and steadily given a huge portion of his wealth to charity through the Infosys Foundation led by his wife, and has believed in giving up equity as well over time. As on December 31, 2011, the entire shareholding of the Murthy family in Infosys was just around 4.37%. Perhaps the greatest learning that Narayana Murthy would like all entrepreneurs to take up is that the power of wealth creation is secondary only to the power of giving it away. And yes, his life has been a true epitome of this message.

ALLOW THE VALUES IN, AND WEALTH FOLLOWS