Conversation with Brad Silverberg – Part III

Episode #205
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Chris Williams: I was vice president of human resources at Microsoft at the turn of the millennium. Microsoft was at the peak of its dominance, at least in mindshare. The company was fresh off a drawn out battle with the Justice Department over allegedly having a monopoly in the personal computer world. It seemed a great juggernaut in the tech world, the company everyone feared to compete against.

Ah, the good old days.

The stock price too seemed inexorably on the rise. This minted a horde of senior people with what was called in good company “walking away money”. They had worked incredibly hard for years building the company. There was a joke at the time: “We have flex time at Microsoft, you can get your 80 hours in any way you like.” It was said mostly with a wince as it hit a bit too close to home.

At the same time, the outside world was awash in the .com bubble. Fledgling internet companies like were being valued like Fortune 500 companies. That alternative universe caused tremors inside Microsoft. Was the Windows-first strategy, the right choice? Should the company more aggressively embrace the internet? And of course, could the stock price continue to rise?

This confluence of events caused a serious brain drain in the top ranks of the company. When money is not a factor, you work because you want to, because you believe in the vision. If that’s not there, many choose to not be either.

Brad Silverberg was first among those who weren’t sure the company vision was right. And he told pretty much everyone who would listen about it, including me. And that’s what this is all about.

This is Leading Smart, the show about managing in the brainpower age. It’s a field guide to the joys and challenges of leading and working in the modern workplace.

I’m Chris Williams, your guide to the stories and ideas that I hope will inspire you to be a better leader in the world of knowledge work.

This is the third and last of three episodes with Brad Silverberg. In this episode, we talk leadership as a VC and in a post COVID world. This is Episode 205, part three of my conversation with Brad Silverberg.

Chris Williams: In the previous episode, I told of the last meeting that Brad Silverberg and I had at Microsoft. He was returning from sabbatical and made the fateful choice to leave the company. It was hard for Brad, and hard for me to hear.

Brad Silverberg: So what happened was, I took a sabbatical in summer of 1997.

So till then I led Windows 95 effort up to that, end of 95 move, move the Windows group, consolidated the OS groups into one and then I was leading the internet effort. Division, initially called the Internet Platform and Tools divisions, I had much of the internet stuff included the browser and some of the server components and dev tools. Then that lasted for about a year, year and a half. And then it felt a little threatening to the Windows group. So the talk about internet platform while no Windows as our platform so …

Then I was in charge of Office and dev tools for about a year. And my heart just wasn’t in at the same way. So I took a sabbatical summer 97. I was going to come back beginning of 98, worked out an agreement with Bill to run the Internet Explorer group and … and then came back and that agreement was reneged.

That they said I came back my first day and they said, You know what? Those three months worth of negotiation to come to agreement about what you do? We changed our minds.

That didn’t work for me.

Because, you know, like I said, trust, trust is so important. And trust is a two way street and you want to be able to work for people that come to work, feeling like, hey, they trust me. I don’t need to worry about coming. You know what’s going to happen, what decisions are going to happen about my future that happened behind my back that I’m not involved in. You’re not going to get people’s best work. People are coming into work every day wondering, you know, how they might get… how stuff might be happening to them that though wasn’t agreed upon. So…

Trust is a really big thing with me. I felt I developed that relationship trust of folks I’ve worked with and I want to have that same trust in people I worked for. And once that trust was broken, I didn’t think I was gonna get it back. It was it was pretty deep wound for me.

And so I ended up working for Bill and Steve as a consultant for the next couple years helping them understand, here are the changes coming to this world. Here are some of the things inside the company organizationally, we need to address culturally. And I found that rewarding for a while. But I saw the internet just really, really taking off during that period. And Microsoft was really not part of that.

CW: At this point, having left Microsoft, Brad dipped his toe in the venture capital world. And what he found was that the vision he saw for the internet wasn’t his alone. He shared this passion with some old rivals, the guys from Netscape who had been at the core of the lawsuit against Microsoft and Internet Explorer.

BS: So I did make a couple angel investments during that period. And to see how I might like this VC thing, let me make some investments so I made an investment a company called TellMe, which Microsoft ended up buying a number of years later, but it was started by a bunch of ex Netscape guys. Mike McCue, Angus Davis. Was funded by the CEO, ex CEO Netscape, Jim Barksdale, he was a lead investor. And so it was pretty weird. This is in 97, 98 to now get involved with a bunch of ex Netscape guys and then Hadi Partovi and his brother Ali were also involved and that’s how I got introduced the company.

And it was really, really fun. I mean, I loved getting to know Mike and Angus and the team from Netscape and exchanging war stories from the browser wars. Of how you guys did this to us, and we did that to you. Well, what I found was I shared a vision for the future that was more consistent with the vision they had at Netscape, than Microsoft did at that time for Microsoft. And so we, we kind of bonded, we did bond, we stayed up till two, three in the morning, many nights just talking about the internet, the future, what it was like inside our companies and what we did and what they did. And so it was like that mutual respect between two warriors of who may have been on opposite sides at the time, but really kind of shared, shared a lot. And so I really enjoyed that. And I was on the board of directors for TellMe and… And I had a great time I saw Yeah, I could see myself doing this.

CW: Having dipped his toe into the VC world, Brad and some friends started a venture capital firm called Ignition. Based in Seattle, they were initially focused on investments that followed his passion. The internet.

BS: started ignition in 2000 primarily with a bunch of ex Microsoft folks and then one ex McCaw. person, Steve Hooper. It was John Ludwig, Cam Myhrvold, John Roberts, Rich Tong, Chris Peters, folks that I had worked with throughout my career, and who shared a common vision that the next technology wave was going to the internet. And we wanted to align our VC firm along around the internet. In fact, what we believed in 2000 was we felt it was already clear that the internet had won and what was the next thing after the internet? We thought it was mobile internet.

CW: I need to stop right here and repeat what Brad just said. He said it was clear in 2000, some 20 years ago, that the internet had won, and he and Ignition were already moving on to the mobile internet. Something most of the rest of the world only truly appreciated 15 years later. The iPhone was still at least five years away. And yet Brad and the ignition team saw that future.

BS: And so we that was our fundamental investment thesis when we started Ignition was to invest around the mobile internet. We were right strategically but timing wise for a little, little early. And in VC, you learn pretty quickly being early is the same as being wrong. That you make investments, they may be great ideas, but it just takes too long for the market to develop and the company runs out of money before then. So we couple years later, we did revise our investment thesis to a more broader technology investment platform and then invested in a company like DocuSign, we were the initial investors in DocuSign, Splunk, and a number of other companies have done very well.

CW: So one of the things people say about VC’s investments all the time is that ideas are a dime a dozen, and that money is not particularly that hard to find. But what really you’re betting on is the people is the ability to build a team to execute to … is that still something that rings true to you?

BS: Absolutely. especially early stage, which is when we were doing we were early stage investors series A or seed investors. And there are a lots of really great ideas out there. There’s some extraordinary ideas out there. There are a lot of great ideas and there are and ideas. What really matters is how you execute how you turn that idea into a into a product
and into a company into a business. And so we do look for not just the idea, but the team around it that can translate that idea into a successful product and business.

And the character. Because building a startup is hard, it’s really hard. It’s discouraging at times, exciting at times. You don’t have the staff to, to hire people and have somebody else do it, you’ve got to do it all yourself. And typically, we’ll take a big pay cut to be able to do so based on expectation that hopefully the equity will be worth something someday but it’s a short term sacrifice. It’s a big sacrifice you might have to make in terms of your cash flow at a time when you have kids and family and… So we do look for character. We look …

And we did … to be candid, Chris, especially in the early 2000s that decade, there were a lot of people in Microsoft who saw startups going crazy startups, starting all the time in Seattle and in the Bay Area and very exciting time. Great new ideas companies getting started and Microsoft was a big company at that time.

I would say strategically they were not going in the right direction. That was my opinion. That’s why I left the company, I lost faith in in the strategic direction the company and be honest, I sold all my stock in the end of 99, which turned out to be until recently, global high … until the growth of the stock under Satya last year or two turned out to be good timing, he’s covered up a lot of mistakes. People in the company had lost faith in the strategy or the culture, culture was undergoing some real challenges too. And people were leaving.

But we were we were reluctant at Ignition unless we really knew the people well enough to hire people directly from Microsoft into our startups. We wanted them to go through another startup first, because it was a real shock to the system to leave a very coddled, well paid Microsoft environment and go to a startup where it was bare bones and salary was a lot less than people were expecting. And you didn’t have the headcount. And so we want people to go through that, that experience first to find out whether startup life was really for them.

CW: And one of the things that I kept seeing and I saw it numerous times was people would say, senior leaders at Microsoft would say, “I led a billion dollar business”. But when you looked at it in any kind of reality, you realize what they did was they led development for a particular business, but they had finance all done for them, sales all done for them, facilities, all the support. They didn’t have to manage the most of what is challenging about managing a startup.

BS: Absolutely. It’s like you’re on a big ship. That’s, you know, back in the 1600s. People rowing and you’re standing at the bow saying, “Hey, I’m in charge”. You don’t realize how much infrastructure was there, doing all that work for you that you were really sure you built a great product and that you needed to have a great product but all that infrastructure, sales, marketing, finance, operations…

Recruiting, having this constant inflow of people who want to work at your company. When you’re, when you’re at, you know,, people at MIT, Stanford don’t know who you are, they’re not gonna go there, you’ve got to now be able to convince gotta be well enough, you got to be able to create these new networks and flow of candidates, you’ve got to be able to convince people to come work for you. All of that was all done for you and Microsoft and other people couldn’t make that jump.

Plus, the way Microsoft was structured. It was pretty functional. And so even if you were a general manager, you really didn’t have you didn’t manage sales, you didn’t manage a lot of parts that are important to be able to run a business. And so for that period of time, people would come out of Microsoft, really not that well trained to be able to assume a CEO role. They could be a good VP of engineering, they could be good CMOs, but in terms of the leadership and exposure to the broad aspect of the business. That’s not you didn’t get that in Microsoft.

That sales machine and Microsoft was a machine. And even they, late 90s, early 2000s, a lot of that was, they were order takers more than they were out, going out, creating leads, generating business, having a fight tooth and nail in the market. It was a different experience.

And in a startup, you gotta you got to have scrappy people who are gonna operate on a small budget, and do very creative things. And there are time horizons you got there’s a time clock, you’re a startup, you’re on money. You’re out of business, Microsoft, essentially infinite. There’s no time clock, you guys takes three tries to get it right. Sure. No problem is no, no chance you’re going to run out of money but in startup, as there was a time clock and you’re out of money you’re on business.

CW: So you’ve been incredibly generous with your time I just want to wrap up a little bit by by we are at an obviously an unprecedented time right now everything has changed. You know, the virus has changed an awful lot. Do you think the kinds of change to remote — I mean, you’re the visionary here, you’re the guy who thinks who sees these things, I don’t — do you see this virus and work from home change in the remote work? Do you think that’s gonna stick? Do you think that’s gonna make a big sea change in the way we work?

BS: I do. I do. I think the virus is a huge accelerant to trends that we’ve been seeing the last couple of years anyways whether it’s the switch from retail to online and switched from shop at the grocery store to delivery services, I think work from home is is gonna stick.

I think some of these new tools like we’re using right now with zoom, Microsoft Teams, whatever, I think there could be a lead to a whole new generation of tools that make it easier to collaborate. I think there’s some challenges. I mean, Microsoft has long been a believer in headquarters philosophy, and not work from home.

CW: They’re in the middle of building a $4 billion campus right at this very moment.

BS: There’s and as Satay has said the thing he misses the most is the is the chatter, the conversations that happen before meeting and after meeting where you just kind of talk with people around the table. And there’s a lot that gets gets missed. I think companies are going to have to be a lot more deliberate, more considerate about communication. Stuff has to get written out, you can’t just walk down the hallway and talk to people.

I think they’re gonna have to be more deliberate about what type of culture and invest more energy into making, putting instead of let it just evolve organically and take it for granted. You’re gonna have to really put effort into creating the culture that you want. I think there gonna be some things that are missed.

At the same time I think people, people like not having to fight traffic. I think business travel is going to be hugely cutback. I people are finding you can get a lot, maybe not 100%, done over videoconferencing. But you probably get 80% of it done maybe 70% of it done, and you don’t have to spend all this time on airplanes and airports and business hotels, spending days for a couple hour meeting.

CW: This might not be the time to be investing in Class A real estate as well. Right Class A office space?

BS: I yeah, I think that’s the commercial real estate’s gonna struggle. I think it’s going to change our housing industry, I think people who are living in some dinky apartment in San Francisco, thousand square feet paying $5,000 a month. Now that you have to work from home from that space too? You might want a little more space.

You might want to be in a or it’s going to give people opportunity to say, you know, always wanting to live in the mountains, but I couldn’t because my job is there. I think you’ll find people moving to double A what I call double A or triple A cities. Like Boise is going crazy right now, people from California and Washington are buying homes site on scene. They’re looking at the videos on Zillow and saying, I want to move there. I wanna I want more space for my family. I want more outdoor activities, I want you know, good schools. I think you’ll see an accelerated trend away from some major, very expensive places, to places with lower costs of housing.

Maybe, you know, if you’re committed to some of the cultural activities like Symphony or arts, that only in New York or a San Francisco or Chicago can provide and, you know, there’ll be people who, who will stay but I think there will be increased migration to … out of those center cities and into either suburban areas or to next tier cities.

Now, am I going to move back to Cleveland? No, I’m not gonna move back to Cleveland, although the cost of housing there is really great.

I think you’ll see shared spaces with in because people still want some human interaction, human connection. They’re going to want to get away from the house, to have some meetings or phone calls, without the distraction of the gardener in the background or the kids running around. People are gonna want to get away from the house to go too far in that direction. But…

CW: yeah, that’s more the office hotelling kind of thing.

BS: Somebody’s gonna nail that with, you know, as long as it can be a healthy environment, in terms of safety and, you know, cleanliness, I think. I think those will thrive. People will want some central meeting, some amenities of an office. Those big office buildings… you look at the Tower. Do you want to be on an elevator right now going to the 80th floor? I don’t.

CW: Yeah. One final question, which is not to peek too much under the kimono, but do you see investment opportunities in in this change? Are you and your investment company looking at doing some of those things?

BS: I’m absolutely sure.

CW: Okay.

BS: Sure. I mean, you look at some of the best companies have always been formed after during a recession. After the 2000-2001 recession some of the best companies got formed. After the 2008 recession. People retrench and look for opportunities of where the world is going. And this is going to make some fundamental changes in the way we live our lives, the way we work, the way we play, the way we recreate, the way we educate our families, the way we get food, and I think those are all going to present new opportunities for new businesses.

You just look at like telemedicine right now. Even a year ago, was not very well accepted. Now you try to make appointment they want to do a video conference. So… I guess I guess that can work after all. So I think there will be lots of new opportunities and whoever nails that right.

People are gonna look for new forms of social media. They want to create community. Let’s look at what Zoom has done in the last year, people want to create community even if they can’t be physically together.

And something you and I both participate in: look at Zwift.

CW: Yep.

BS: indoor cycling or Peloton, it’s huge. People can’t go to the gym right now or they want to go outside where the trails may be busier, there’s some, you know, health risk. People are moving inside and finding community and being able, to use these new methods of getting exercise or fitness that are, and there’ll be more of those, that take full advantage of this change world.

CW: Thank you very much. I can’t tell you how much I appreciate. I know you don’t do this much. And I can’t tell you how much I appreciate you spending the time with me.

BS: Well, thanks, Chris. I appreciate the opportunity. I really enjoy your podcast. I’ve been following it since the start. I’ve learned a lot from it. I know you have a lot of experience, especially from Microsoft. You have a lot of earned experience and lessons, and I’m really happy to see you’re telling it to the world. I look forward to listening to further episodes and if a book comes out. I think that’ll be great too. I think you have a lot to teach the world.

And I think we here in the latter halves of our careers, I think we have a chance to look back and what can we help the next generation, learn from what we’ve learned and pass some of those tips and tricks on to help them make new mistakes, but learn from some of the mistakes that we’ve made, and things that we’ve seen happen that we think can be done better.

Chris Williams: I want to thank Brad again for spending the better part of two hours with me. He had repeatedly told me that he didn’t want to do it, but I’m so glad he did. He is undoubtedly a unique talent with a gift of vision as he put it, that placed him at the center of the development of much of the technology we all use every day. I found this conversation to be one of the most thoughtful and enlightening I’ve had in years. I hope you do as well.

The next episode returns to the studio and I tackle a tough subject that’s come to the forefront lately. Diversity and Inclusion. Some companies make a lot of noise on the subject but very little progress. I think I know why. And we’ll discuss that next time. I hope you’ll listen.

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That’s it for this episode. Next episode we’ll return to the studio for a look at the challenges of diversity and inclusion. It’s called “Not Just a Job”. Until then, please remember that each of the several dozen decisions you make today are part of Leading Smart.