He started with $1000 and grew to $912 Million over 43 years. That's compounding annually at 38% percent. I was surprised that after 43 years it is still under a billion. Just goes to show how big a billion dollars is :-).
He must also really really love his space and company, nowadays when companies are flipped in 43 weeks, he is going on for 43 years. Wow, that's some dedication and calls for a very difficult temperament and set of skills.
> Just goes to show how big a billion dollars is...
As a boy, my grandfather once wanted to impress upon me the astronomical nature (or so it seemed at such a young age) of large numbers (especially in reference to government budgets).
At first, I couldn't believe it when he told me that if I spent $1/second, I'd blow through $1M in just under 12 days (11.5 to be more precise, with rounding).
But it was when he told me that spending through $1B at the same rate would take me nearly 32 years that I realized that was a ridiculously large sum of money.
I've never forgotten that lesson. I also walked away deviously thinking the best goal I could shoot for in life was to figure out how to earn $1/second.
In my opinion, this is Apples to Oranges. Capital and Revenue are not the same thing. Also, you should take into account his knowledge, experience, and partner help.
I remember Riverside (pretty close to Redlands) in the 1990s and it was dirt cheap, even during the era of the $1 gallon of gasoline. $100k in pay + benefits stretches far there, especially once you factor in the higher revenue per employee in other nations (43 years + 350k orgs using their software sounds like a multinational).
Ive met Jack and had conversations with him a few times. He is in the DC area often since an office is out there as well as the government.
He is a humble go getter just like you would imagine Steve Wozniak. He doesn't seem to talk about his money nor does he really care. What I have taken away from our few talks is that he actually does care about the customer and thats why I believe he keeps winning.
The software at version 1 was poorly written and sadly still poorly maintained. But since 2005 or so, its been improving ever since.
Ps. They are hiring folks of all types in the DC area.
Sure... but again, consider their bread and butter client. While the Valley has a large share of government clients (case in point, Palantir), they still have to compete for sophisticated customers (basically, those that can code).
Esri caters to university, state & federal agencies (and military).
I've done a lot with both ESRI and the open source alternatives. I created zigGIS. With that said, the side you dont read about is that Mr. Dangermond - outside the ESRI compound - is generally considered a very cutthroat personality. Often his success is more attributed to this than most anything else.
I was watching an architecture show yesterday where a rich artist couple were re-purposing a barn as a house. It was a strange building for living in. Unconventional and contrary. The show follows people through the build and visits them after they've moved in.
At various point they seemed to be obsessed with concepts like rooms and how important they are for dividing up a house or walls and how useful they are for putting furniture against, directional lighting in the kitchen, etc. All these obvious things that come standard with a standard house and most people don't think about were discoveries to them. They started by rejecting everything until they begrudgingly let some of the things in or found workarounds. The result was pretty cool.
We end up with big lists of rules about things, whether we are aware of them or not. You can call them rules of thumbs or call them cargo cults. Either way, there is value to be had from rejecting standards and then rediscovering for yourself the ones that demand to be discovered. It's like a cleanup process.
When I worked for a billion dollar hedge fund, we used open source code and hired great open source developers.
When I left and returned to academia, all I deal with is ArcGIS, Microsoft, and Matlab. These are the tools you use when money is tight. Open source is a luxury.
That actually is very insightful. We developers love open sources because of the deep customization and the breeding edge they offer. Ordinary people can't use them since they don't have the know-how. ArcGIS, Microsoft, and folks make a killing catering to these people's needs.
I would say no in the case of geography. Qgis is a UI disaster as much as Arcgis. Where you are right, is that they sell people to install it for you, teach you, and very often, actually use the software for you (I have seen more than once).
I do most GIS viz through the browser (client-side scripting + PostGIS + ad hoc servers). Took a while to get up to speed, but it feels so good being able to scale projects quickly and not rely on Esri.
As for math, I generally keep it on the command-line.
I assume it varies by institution and field, but with the decline of centralized IT in universities, I'm seeing more open-source in academia, because the infrastructure and budget to buy and administer site licenses for commercial tools no longer exists. Even a mere 10 years ago, everything would've been done on either the department Unix server, or a centrally managed Windows desktop install, and both of those came with the whole range of Maple, Matlab, Sicstus, etc. licenses. But nowadays I have a Debian server in the server room I administer myself, and a laptop I also administer myself. I could buy a Matlab license for my server, but it's basically up to me, so I probably won't.
The other shift is that open-source tools seem to have been slowly been chipping away at the incumbents in statistical software. People used to use SAS and SPSS and that kind of thing, or commercial AI software from the likes of Salford and Symbolics, but now everyone I know uses R, stuff from MLOSS [1], and Weka.
This could be local to CS/AI, though; I do get the impression that engineering departments love Matlab.
This article does not mention much about how they hit $912 million in sales. However, the title made me furiously click on the article. So they've done their job.
expensive, licences sold to the armies around the world.
It's like Oracle for geography: overbloated, expensive, you need loads of DVDs to install it, when at last the guy you hired to install it is done, you can't do anything with the GUI (assuming to clicked a .exe at random), because you need weeks of training for a "hello world" equivalent.
I don't follow it. He seems folksy, but if "Not taking outside money, and serving customers based out of a low cost area" were the path to $912 million in Sales, wouldn't a lot more people be doing that?
While I follow your logic, there are a lot of companies out there like this. They're called "hidden champions" and modern industry has plenty of hidden stories like these. http://en.m.wikipedia.org/wiki/Hidden_champions
The main point here is that companies like this might not be as sexy as the short term vc-funded explosive growth companies that are always in the news, but like small stars, they burn for a much longer time and are much more stable than the massive stars that quickly run out of fuel and turn into dwarfs and black holes later on.
Source: our company was bought by Esri last year, and before then I didn't really know the company existed. I was looking for a way to grow our technology in the long term, not evaporate like so many other companies had before.
I'm not negative on the company, and am not taking a general stand for or against VC. (It's useful in some situations, but not all) It's just that what he presents as their secret sauce is also the formula for a lot of companies that never grow.
I'm intrigued by Esri, I just wish he'd give more detail on how they were truly different from those left behind.
Companies that want money talk a lot. Companies that don't... don't. This means you have probably heard more of companies raising money.
I know one giant company that does not have a website, or even an official logo. They don't need them, or the attention. They are an industry leader in one of the biggest economies.
Or perhaps more precisely, "Companies that want money from VCs talk a lot to the press. Companies that want money from customers talk a lot to their customers."
Very wrong comparison. Even if you get easily VC money, there still some liability with it. I don't expect anyone to ask me or advice where and how to spend the $100 bill.
Yes, but I'm not sure what the connection to this is. My point is that what he attributes his success to is also true of most companies that never grow.
You suggested (paraphrasing) that if it was such a good model, surely others would be doing the same thing and making a killing doing it. What you effectively said there, is that you believe that the market for company management is an efficient market.
There is a joke that says an efficient market economist is walking down the street, sees a $100 bill on the sidewalk and doesn't stoop to pick it up. If it were real, he says to himself, someone would have picked it up already.
I don't believe that there is necessarily an efficient market in management. Nor do I believe that VCs, press coverage, parties, etc have no effect on many company's strategies. The VC business model relies entirely on their ability to purchase a certain distribution of company outcomes, what some might call a "go big or go home" type of management. That's fine, I have no problem with it.
But that doesn't mean it's the only way to run a company successfully. And the author is trying to point that out.
I was taking a statistics approach actually, rather than the efficient market hypothesis.
For example:
20 people have a choice between X & Y.
- 10 people choose X, 1 succeed.
- 10 people choose Y, 1 succeed.
The first person who succeeds says, "It's because I chose X" Based on the data, you can't say that this choice is what mattered, because many others made the same choice and it didn't help them.
Perhaps I'm being pedantic about the title, but this is where I'm coming from.
And when I heard the joke it was $20, but perhaps it's the monetary phenomenon called inflation. :-)
I wonder what the numbers are between "tried not to take money" and "tried to take money" are. On the one hand trying to take money gives you a lot of focus and a short-term goal; getting enough traction to get investment. VC money probably makes a lot of companies succeed short-term that might not otherwise. Then on the other side of investment, VC money encourages a "go big" approach where you need to grow gangbusters which most people interpret as hire, spend, etc. Seems like that might actually kill some companies that might otherwise be viable as they get over-extended and don't pare back fast enough, then go broke.
My intuition is that money is better when:
- There is some competitive advantage to being first.
- That the advantage is enduring.
- There are lots of competitors.
- It is important to fail faster.
For example, if you're trying to scale Google or a SaaS, and there is some kind of "Winner take all" then you need funding.
Funding makes less sense when:
- You're selling a service directly linked to people's time. (Consulting firms)
- You have other sources of money to carry you through.
- The market is less competitive.
- People will take significantly less money to get equity.
I kind of view funding like, "Do you need it bad enough to justify letting someone expect 30+% returns?" If it's the only way to get great growth for that individual company, great. If it's not needed, that's ok too.
In terms of measurement, there are two measures. "What % succeeded with and without?" and "What was the median and mean with and without?" The funders are more likely to be stacked in the huge winners and huge losers, because funding (to use financial terms) increases the volatility.
Microsoft hit a billion in sales in roughly 12 years (inflation adjusted). They took no outside money, and ran Microsoft out of low cost areas for the first four years.
Gateway 2000 was founded on a farm in Iowa. They hit a billion in sales in 7 years (in 1992 dollars). Their outside money consisted of a $10,000 loan from Ted Waitt's grandma.
I believe Microsoft took one round of venture financing, and that VC (Dave Marquardt) is both still quite an active investor (as founder of August Capital) and is also still on Microsoft's Board. See http://en.wikipedia.org/wiki/David_Marquardt for details.
I'm all for bootstrapping and avoiding VC, but I get annoyed with these proclamations that make all businesses sound the same. (I suspect it is the writing at fault here as Mr. Dangermond probably doesn't think about business so simply. Maybe he just means software businesses when he refers to "young entrepreneurs".)
There are plenty of business models that aren't viable without lots of capital early on. Tesla and SpaceX are good examples of companies that could not be bootstrapped as they need lots of capital to actually build things and to build the factories that build those things.
for a while, I remember when ESRI was constantly hiring new people. The problem is, it's in redlands, and redlands in way the heck out side of L.A.C. or O.C.
While Esri HQ is in Redlands, there are an increasing number of R&D Centers around the world. Portland, OR, DC, Scotland, Zurich and China all hire front end and back end devs, UX and visual designers. While it was uncommon to work outside of Redlands only a few years ago, there are more possibilities for that now. This is a pretty recent development, though.
He must also really really love his space and company, nowadays when companies are flipped in 43 weeks, he is going on for 43 years. Wow, that's some dedication and calls for a very difficult temperament and set of skills.