Back from Spring Break

Last week was Spring Break at MIT. I'm back now, trying to get back into the swing of things. There are several speakers lined up this week to present to the students in my program. I'll post my notes as usual.

Sallie Krawcheck – Chief Financial Officer and Head of Strategy for Citigroup (2005.03.16)

It was quite a treat to attend a talk given by Sallie Krawcheck, CFO of Citigroup. She was energetic, witty, and had much advice. To top it off, she attended UNC on a Morehead Scholarship. She mentioned that she attended the recent Carolina/Duke basketball game and enjoyed watching Carolina kick Duke's butt! After Carolina, she received an MBA from Columbia University.

Sallie was warmly received by the students (the classroom was overflowing) and I took copious notes. She's obviously done something right to be named Citigroup's CFO at age 39.

Bio:
Ms. Sallie Krawcheck is Chief Financial Officer and Head of Strategy for Citigroup. Ms. Krawcheck is clearly one of the most influential women on Wall Street and in the business community at large. For three straight years, from 2002 to 2004, Fortune Magazine has recognized Ms. Krawcheck as one of the "Most Powerful Women" in business. She was also named the "Most Influential Person Under the Age of 40" by Fortune Magazine in 2003. In 2002, Ms. Krawcheck was recognized as one of Time Magazine's "Global Business Influentials."

As CFO, Ms. Krawcheck is responsible for Financial Reporting, Treasury, Tax, Investor Relations, Mergers and Acquisitions and Strategic Planning. She joined Citigroup in October 2002 as Chairman and Chief Executive Officer of Smith Barney, where she oversaw the global management of both its Global Private Client and Global Equity Research businesses. She was named CFO and Head of Strategy of Citigroup, Inc. at age 39 in November, 2004.

Notes:

Thinks she's had a great background to become a leader

She believe everyone has 1 false start after business school

After her false start, she became a sell-side analyst, which was great training

Finds it useful to start every new job with an analyst mindset

As an analyst, she learned:
- To handle criticism
- To fail gracefully
- To make judgments based on imperfect information
- To constantly re-evaluate her decisions (but not be wishy washy)
- The art of persuasion

The one negative related to leadership about being an analyst is you have to be completely self-absorbed

Moved on to become Director of Research at Bernstein

There she learned how to manage small groups of people

She said it was the hardest job she ever had

Word of warning: Nothing good happens when an employee wants to "talk" after 3pm on Friday

She said it is much harder to manage 15 people than 25,000 people. With 15 people you have to learn everyone's personality, what motivates them, what ticks them off, etc.

"Catch more flies with honey than vinegar" – don't yell at the office

She learned how to read, manage and motivate people

She learned about herself – e.g. she thinks she has good people instinct (whereas her husband doesn't)

You need to figure out what skills you have – important to recognize what you are good at and bad at

She struggles with the work life balance (what balance?)

One day she got a call from Sandy Weill, Chairman of Citigroup, to work for him at Smith Barney

At SB she had to lead big (instead of lead small as with previous job)

It is nice to have a good idea, but you must execute on the idea or it isn't that good

Worst mistake when joining a new high pressure situation is to Ready, Fire, Aim

Her rule is to give herself 3 months to listen and learn, then she has to do something (or people will think you are indecisive)

In stressful situations, try to simplify

Thought she could accomplish two or three things at SB

Communicating simple ideas is much easier than communicating complicated ideas

Overcommunicate during times of stress

Being a leader is sometimes like being a parent – everyone wants to know how mom is doing

Never let them see you sweat!

Important to know your weaknesses and overcome them (she can get blotches on her neck when she gets nervous, so she invested in some turtleneck sweaters)

In times of stress, people look for a leader so you can't waiver

You need some someone you can be weak with (for her, it is her husband)

You can't be upset all the time; you can't let everything get to you or you'll never have any sanity

You have do something you love

Most people mess this up coming of business school

She was turned down by virtually every Wall St firm

It is ok to make career mistakes

Keep knocking on the door if you have to – be tenacious

You have to be proud of the company you work for

She got pregnant and quite her job. It took her 9 months to find a new job. No one wanted a pregnant analyst.

It is a small world. Act professionally at all times. Never act emotionally. Walk away and calm down

One time it took her a full week after her budget got cut to face her boss

Take care of your skills, ethics and reputation as you would your kids

Have to be comfortable being uncomfortable

Watch out for creeping incrementalism ("frog in boiling water" analogy)

If you have a boss that doesn't support you or takes credit for your work, GET OUT

Don't fight if you don't think you can be successful in your position, get out

First thing you should do in any new job is evaluate your team

Pick your team before you pick your strategy

Doesn't remember many of her business school classes, but she learned how to communicate

It is so important to be able to communicate effectively to small and large groups of people. Practice every chance you get.

Joe Berardino - Former CEO, Arthur Andersen (2005.03.02)

Joe is the former CEO of Arthur Anderson (AA), the now dissolved accounting firm that once employed 85,000 people. You may remember, but AA was the accounting firm in charge of Enron's books. AA came under heavy pressure during the Enron scandal; Joe was forced to step down after being in the CEO position for only 8 months; and later AA disbanded. Anderson Consulting became Accenture. Joe spoke candidly, but couldn't answer every question due to litigation he is currently facing. He seemed like a nice guy that got the CEO job at the wrong time.

Notes:

Joined AA in 1972

1982 he became a partner (he was 32)

How do you get to the top:
1. Must have competence
2. Must develop trust both internally and externally
3. Must have likeability

He liked what he was doing and was good at it

He stepped down in an effort to save the company, but it didn't help

Discussed trends in business over last 20 years:
1. Democratization of the stock market
2. Change in executive compensation
3. Business news (CNBC)
4. Focus on short term numbers

As a CEO, he "slept like a baby…..and woke up crying every two hours"

Left AA in March '02; took some time off; (he was 52)

Stressed importance of communication with spouse

"The cover up is always much worse than the crime"

Spoke real candidly about the trials of the AA break up

George Mueller – CEO, Color Kinetics (2005.03.08)

George is a young entrepreneur (34 years old) that visited my New Enterprises class to speak with us on what it is like to build companies. It was an entertaining tale indeed. George's current company builds LED-based lights. You have undoubtedly seen LEDs before in clocks or watches, but George's company is taking them to a whole new level. Color Kinetics makes LED lights that can serve as light bulb replacements. A few attractive characteristics of LED lights over traditional bulbs is that they don't give off heat, they can be easily programmed to change colors, they are more energy efficient, longer lasting, etc. He brought in a demo and the lights looked really good. George views LED-based lights as a disruptive technology to traditional lights. They recently outfitted the external lights at a hotel in Vegas with LED-based lights. George made the seemingly boring topic of "lighting" interesting.

Notes:

Build the company around people

Would invest in B-rated business plan with A-rated people over A-rated plan and B-rated people

Manufacture in China, it is the only way to be competitive

Sales should lead the company. Focus on profits

Contract recruiters suck

Don't get hung up on failure

As an entrepreneur you run scared and are always worried about the big company coming in and taking your market share

Starting a company is a big hand waving exercise

George invested all of his money and run up $50K in credit card debt

Follow your heart

Now is the best time to start

To be an entrepreneur, you have to be comfortable with the unknown and comfortable with change

OOC (out of cash) should be your laser focus

Have a business plan? It is accepted. Visa is willing to invest. Get as many credit cards as you need

Believes strongly in using angel investing and credit cards to start a company

Had to talk to 150 people to get first 12 investors

Always ask for an order and always ask for a referral

Work multiple deals with VCs and don't tell them about each other

Always move from a position of strength

Raise more money than you need – takes 3 times as long and 3 times as much money as you think

Building a team should be a top priority (and it takes a lot of time)

Need to have a performance based culture

VCs fund 6 out of 6000 business plans each year

60% of funded high tech startups go bankrupts

Fewer than 1 out of 47000 business plans submitted to VCs go public

Under promise and over deliver

Must be persistent

Cline Frasier – Former Manager, Apollo G&N Project Office (2005.03.08)

In my Engineering Apollo class, we were fortunate to have Cline Frasier (bio) come in to speak with us. Cline played an important role in the development of the Apollo Guidance and Control systems (the software and hardware that provided navigation for all stages of the spacecraft)

Notes:

He has a MS in Mechanical Engineering

Wasn't responsible for the software, just the hardware

Software took 1400 labor years to build

Hardware took 1500 labor years to build

Takes a great amount of management to control interface specs between contractors (Grumman and North American were subcontractors for the G&C system)

Experts are not always right

Backup plans are expensive, but not having them when you need them is even more expensive

Only way to know what is really going on is to listen to the troops

Details are important

Doesn't believe Software projects are doomed to always be late – it requires an extraordinary amount of management

Frank Biondi – Former CEO, HBO, Viacom, and Universal Studios (2005.03.09)

I recently read Sumner Redstone's autobiography for the second time. He has a short passage about how Frank Biondi took over Viacom as CEO, but was later fired. I was very interested to hear Frank's perspective.

History:

Went to Princeton to play baseball during undergrad

Went to HBS during Vietnam (chose HBS over Harvard Law because MBA took 2 years and Law took 3)

Started in Investment Banking

Ran HBO, Viacom, and Universal Studios for a time

Held several other significant executive jobs in the media industry

Notes:

Internet will become big avenue of personal entertainment

Globalization has changed the media biz (95% of the world population is outside North American)

Consumers have been gradually willing to pay for more options (HBO->Showtime->VHS->Blockbuster->Digital->PVR)

In Media, you don't want to be the first mover (and you don't have to be to succeed)

The Music industry is in desperate straights fighting online access

TV may be in trouble due to PVR (if you can fast forward past commercials, there goes TV big revenue stream)

He talked about why many studios don't adopt tech faster – mostly because existing management doesn't understand technology and people don't want to make the wrong decision because they'll lose their job

He thinks Sony is going to have a tough time

He has been fired 4 times

The first time was because fraud was found at his company (he says he had nothing to do with it)

Fired at HBO because he got a new boss and his boss wanted his own people in high positions

Third firing was at Viacom because of Sumner Redstone wanting to run the company

He said Redstone sucks the life out of people because he is so involved and passionate

He said all Redstone was interested in was making deals.

Redstone stayed hands off for 6 years, but learned more about the biz and decided he wanted to try running the show

Owners are tough to deal with

In his fourth firing, the owner of the company started selling parts of the company (the wrong parts)

If you aren't fired at some point, you probably aren't pushing hard enough

Getting fired isn't the end of the world

Much better to be lucky than smart (said it twice during his talk)

You have to take chances on people; they won't bat 1000 though

Hire people smarter than you. That doesn't mean they won't go after your job so you can't be dumb about it.

Told a story about how Barry Diller would throw away memos he received from people. He wanted to see who would followup on the memos to find who was really passionate about their ideas.

He thinks Viacom is too big. It really needs to be pared down to pre-Paramount acquisition size and centered around MTV ($50 billion today) which still has a lot of room to grow internationally

AOL is an ISP in search of a biz

He thinks Yahoo will be selling more advertising than Disney in a few years

He thinks MSN will own 50% of search by the time everything is said and done

Cable could be sewing the seeds of their own free competition since a lot of broadband is being run over cable

If he was graduating today, he would go to a small entrepreneurial company

If he started at HBO at a different time (like two or three years earlier or later), he would not be as successful as he is today

Do you know what cold looks like?

This is it walking to class in single degree temps and 30 mph wind gust:

John Osher, Inventor of Crest SpinBrush

John's talk was titled: "How I Made $475 Million from a Battery-Powered Toothbrush", which caught my eye. He was an extremely nice guy and even gave out Crest Spinbrushes to the audience. I had never used one (and had only vaguely heard of them), so it was a nice treat. He is a serial inventor and entrepreneur and has an interesting story, so I took a lot of notes:

Notes:

Must set price right

Spent 6 years after undergrad as a carpenter. He said he learned a lot about how things work.

Invented the Baby Gym and eventually sold it to Gerber and became VP of Nothing

Left Gerber to start a toy company.

At one point he got stuck with too much inventory and investors wanted out. He went through hell and ended up getting a divorce. After 6 months of being on his knees, things turned around. The company wasn't a huge success, but he wouldn't say it was a failure either.

With most of his companies, he had critical times that required hard decisions.

Created interactive candy.

Eventually sold the toy company to Hasbro and became VP of Nothing.

Left Hasbro and retired for a year.

Got together with a bunch of inventor friends and thought up things that people use every day. They came up with a list of 100 things.

As an entrepreneur, you have to keep things simple. What is your breakeven? How much do you have to sell to make a 15% profit? ALL entrepreneurs should know the basic financials inside out.

He has several more ideas in the pot and a few consumer products coming out soon (disposable electric razor?)

Patrick Kuhse - From Prominence To Prison, My Fall From Grace As A Successful Stockbroker

Unfortunately I didn't take any notes for this one, but it has been one of my favorite talks so far. Patrick Kuhse told his life story, which included a midwestern upbringing on a farm, an eye-opening experience at college (Arizona State), rise to prominence as a stock broker, and his subsequent unethical behavior and eventual incarceration. Patrick spoke with a folksy midwestern accent and kept the conversation lively with his many jokes. After feeling the heat from the FBI, he picked his family up and moved them to Costa Rica and lived on the run. It eventually caught up with him and he faced the music and several years in jail. He now goes around giving talks about his story and how to avoid the common unethical trappings that so many people fall prey to.

Interesting trivia: Patrick said at one point he lived in Broken Arrow, OK at the same time Frank Abagnale (of Catch Me if You Can fame) did. He said there must be something in the water :-) There is also an effort in the works to make a movie out of Patrick's story. He has a forthcoming book that should be well worth the cover price.

Matt Kressy - Industrial Designer

Matt Kressy is a product designer, industrial designer, Principal of Designturn, and Adjunct Faculty - Industrial Design at Rhode Island School of Design (RISD). Matt came in and spoke to my Product Design and Dev class about industrial design. He covered the fascinating process of industrial design, which I knew very little about. It was interesting because it is so different from software. It is all about creating physical forms that provide functionality and that can be sold as a product.

Recommends "The Measure of Man and Woman" for understanding the shapes, sizes, forms, etc that work best for humans.

If you have to use a manual, he considers the product a failure

Iterate a lot

Sir Martin Sorrell - CEO, WPP

Mr. Sorrell is the CEO of advertising firm WPP. He was an entertaining fellow and had some interesting insights. This was from a talk on Feb 9th.

Notes:

Graduated from HBS

"Luck is very important"

Sees huge growth in the Asian countries. Also talked about a Goldman Sachs report that discussed growth opportunities in Russia and Brazil

When competitors are under pressure, invest in people

"We will have more ear time than eye time" -Quoted from someone at the MIT Media Lab

"People like small groups" and "Diseconomies of scale"

VC is the most expensive form of capital. Mortgage your house if you can to avoid it. "VCs are lenders of last resort"

"Focus on what you enjoy"

Recommends Moneyball.

Passion and commitment should be your focus when hiring new people

If he graduated today, he would learn Chinese and move to Shanghai!

10 year prediction for his company:
* More Asian biz
* More Indian biz
* More Latam biz
* More Middle East biz
* More Russia biz
* Internet will grow from 15% to 30% of biz
* Big thing will be the growth in Asia

Scott Anthony - Partner at Innosight

Scott is a partner at Clayton Christensen’s consulting firm, Innosight, which is focused on topics of innovation. I saw Clay give a talk on disruptive technologies back in October and Scott covered much of the same material. If you haven't read Innovator's Dilemma, I highly recommend it. Scott is a former student of Clay's and looks pretty young (mid to late 20's), but spoke very well and obviously had the material down.

Here are a few items I found noteworthy:

Sometimes the leaders of an industry are the worst to predict what the future holds. Two good examples include Western Union (and the telephone) and DEC (and the PC).

Existing firms almost always win out with sustaining innovation (but often lose out with disruptive innovation)

The competitors most companies worry about are the biggest and best funded, when they really should worry about the one's you don't know about yet.

Catch up time

I haven't been very good so far in keeping my blog up-to-date. I've been busy to say the least. One thing I'm going to focus on for this blog is posting my notes from the various speakers I see on campus. I've seen 8 different (and interesting) people present over the last 3 weeks. That is one of the strong points about MIT: there are numerous people giving talks any given week. I must say that I've learned far more from those presentations than I have from my professors or class work.

I'm also starting to see common themes emerge from CEOs, Inventers, and Entrepreneurs. Over time I plan on compiling these for posterity.