INVESTOR'S BUSINESS DAILY

WEDNESDAY, APRIL 22, 2009

A3

LEADERS & SUCCESS
IBD’S 10 SECRETS TO SUCCESS
Investor’s Business Daily has spent years analyzing leaders and successful people in all walks of life. Most have 10 traits that, when combined, can turn dreams into reality. Each day, we highlight one.

A Gem Among Venture Capitalists
Get Out Front: Arthur Rock saw early that Intel and Apple were winners
BY REINHARDT KRAUSE
INVESTOR'S BUSINESS DAILY

3

TAKE ACTION: Goals are nothing without action. Don’t be afraid to get started. Just do it.

Energize The Employed
Many news stories feature layoffs and dismal unemployment numbers. But more than 90% of Americans are still employed. These folks are dealing with the loss of their colleagues and the burden of extra responsibilities for no additional pay. Right now, a manager’s toughest job is energizing his staff, keeping workers as productive as possible, says Steve Zaffron, CEO of global consulting firm Vanto Group. In “The Three Laws of Performance,” which he recently co-authored, he shows how to achieve that goal. Zaffron has advised 300 firms in 20 countries on this topic. San Francisco-based Vanto’s clients include Apple, GlaxoSmithKline and Heinz Northern Europe. He and Clotaire Rapaille, a medical anthropologist and psychologist, share tips. 00 Clear it up. “Share information with people with whom you don’t normally share,” Zaffron said. Speak to employees directly and make sure you address what’s on their minds. Otherwise, they’ll believe the rumors they hear. 00 Consider perceptions. When we do something, it usually makes complete sense to us. But when others make choices that puzzle us, we might ask, “Why are they doing that? It doesn’t make any sense.” Understand that situations appear differently to each of us. Put yourself in employees’ shoes. Then their responses or actions will make more sense. Zaffron suggests asking yourself: “What processes, dialogues and meetings can I arrange so that people can feel like co-authors of a new future, not merely recipients of others’ decisions?” 00 Pay attention. Listen for oppor-

Rock’s Keys
What: Helped land the money to start chipmakers Fairchild Semiconductor and Intel. How: “Art understood what semiconductors could mean back in the late ’50s,” said Pitch Johnson, venture capitalist.
compete and win. “Art could provide capital and provide advice and guidance. But he also had a third role, by showing commitment — devoting yourself for success, disciplining yourself for success, to make the right decisions to be successful. That helped him build great companies.” Silicon Valley, where Rock landed in the early 1960s, was 3,000 miles from Rochester, N.Y., where he grew up. Born in 1926, he was an only child. His father, Hyman, a Russian immigrant, operated a candy store, where the boy worked as a sales clerk and stocked shelves. He also peddled magazines in town. After graduating from high school, Rock served in the Army for a year as World War II wound down. He attended Syracuse University on the GI Bill, graduating with a bachelor’s degree in business administration before earning his MBA. In 1957, Rock still worked for Hayden when he tried to raise money to start Fairchild Semiconductor. Eight scientists left Shockley Semiconductor to start the new outfit. Rock persuaded Sherman Fairchild, founder of Fairchild Camera & Instrument, to bankroll the startup. The scientists were called the Traitorous Eight after leaving Shockley, and helping unhappy campers start anew was brazen, says Spencer Ante, author of “Creative Capital: Georges Doriot and the Birth of Venture Capital.” “In the late 1950s, there was a com-

3

tunities from stakeholders at all levels and functions, inside and outside the firm, Zaffron says. He once worked with Reebok when it faced falling market share. He advised the CEO to sit down with departments to listen to their ideas. Those ideas led to expansion outside of shoes, into new fitness areas. 00 All for one. Teach employees that by doing their jobs well, they’re helping lift the firm. “Remember, leadership isn’t a function of position,” Zaffron said. “Leadership can be provided by anyone.” At the Ritz-Carlton hotel chain, former President Horst Schulze treated each employee’s job as key to achieving the goal — pleasing the customer, Rapaille told IBD. When the Ritz opened a new hotel, Schulze would work as doorman for part of the day, then wash dishes and clean rooms alongside employees. He’d talk to them about how their job performance directly improved customer satisfaction and the entire hotel chain’s success. He taught them that each was a leader. 00 Commit to integrity. Do what you say. It sounds easy, but many companies don’t, says Rapaille, who wrote “The Culture Code.” Years ago, Rapaille consulted with AT&T, where the motto was “right on time.” But its managers frequently started meetings 20 minutes late. “Do you really care about ‘right on time’ or not?” he asked. “The airlines are a bad example of this,” Rapaille said. “They say they’re concerned with security, but then someone tests their system by easily walking on board with a gun. So customers know they’re not really concerned about security.”
Gloria Lau

Arthur Rock had his own way to take the measure of a man. When money-seeking startups knocked on his door, Rock looked for “intellectual honesty” in wannabe entrepreneurs, not just promising business plans. Rock’s money smarts and guiding hand turned feisty Silicon Valley startups into some of the nation’s biggest technology companies. The venture capitalist played a key role in launching Fairchild Semiconductor, one of the first chipmakers; tech conglomerate Teledyne;and industry giants Intel and Apple. An investment banker before turning venture capitalist, Rock didn’t have an engineering resume that might’ve sparked his tech startups. He graduated from Harvard Business School in 1951, then joined the corporate finance department of banking firm Hayden, Stone & Co. in New York City.

Rock,atCalifornia’sComputerHistory Museum in 2007, spotted Apple’s wizardry at a computer show in 1977 and knew “we had something.”

Chipping Away
Rock, now 82, had a knack for finding gems in the business rough. “I invest in people, not in technology,” Rock said in “Done Deals,” a book from the Harvard Business School Press. “I was always interested in investing in people. So I spent a lot oftime with would-be entrepreneurs to see whether they were motivated and whether they were intellectually honest.” Among the scientists and engineers Rock believed had fire in their belly: Fairchild co-founders Gordon Moore and Robert Noyce, both of whom launched Intel in 1968; and Apple co-founders Steve Jobs and Steve Wozniak. In a 2007 interview at the Computer History Museum, Rock shared his startup evaluation: “I’m not enough of a technologist to be able

tounderstand whatmost of these entrepreneurs are about technically. The way I went about it was to spend a lot of time with these wouldbe entrepreneurs. The main thing is are they honest? By honest I don’t mean taking money out of your pocket, but intellectually honest. Do they see things the way they are and not the way they want them to be?” Rock’s role didn’t end with providing capital, advising on strategy and recruiting management. As an early-stage board member at a few firms, he showed startups how to build a business and aim for industry leadership. With Intel, he served as its first board chairman and was a director for 30 years, all the while attending staff meetings. “Art consistently tried to build great companies and did,” Pitch Johnson, co-founder of venture firm Draper & Johnson Investment and founder of Asset Management, told IBD. “Great venture capitalists, and Art is among those, know how to share a commitment to success. It’s a sports coaching type of skill, motivating and building a desire to

pletely different business culture,” Ante said. “Back then if you left a company (to form a startup) it was a sin. Arthur Rock was the first financier to appreciate the importance of technology, and now leaving companies to innovate is viewed as a positive thing.” In 1961, Rock left Hayden and moved to California to form a new outfit, a venture capital partnership with Tommy Davis, a vice president at Kern County Land Co. in charge of its investment diversification program. Over the next seven years, Davis & Rock invested $5 million and returned $100 million to their 15 or so investors. Venture capitalists make money when startups go public or are acquired. Davis & Rock invested in about 15 firms, including Scientific Data Systems, acquired by Xerox in 1969. Rock built trust with key Silicon Valley people. When Moore and Noyce grew tired of Fairchild, Rock wrote up a business plan for Intel. “I raised the money (for Intel) just on the telephone in something like two days,” he said.

Apple In His Eye
He founded San Francisco-based Arthur Rock & Co. in 1969, and in a few years faced competition from tech-savvy venture capitalists. Rock had one big deal left in him. Mike Markkula, a former marketing VP at Intel, asked Rock to hook up with Apple’s Jobs and Wozniak. At first, Rock was put off by the two computer geeks. But a 1977 visit to the Homebrew Computer Show in San Jose convinced Rock that Jobs and Wozniak were for real. “In this big auditorium, all these companies were there showing off their gear,” Rock said. “Everybody at the show was around the Apple booth. I could not even get close to see them. At that point, I knew, well, maybe we had something.”

UNLEASH UNLIMITED.
Accomplish unlimited tasks with Excel Manager in Power E*TRADE Pro.1

STREAM real-time market data. EXECUTE stock and options orders. CUSTOMIZE conditional orders. ANALYZE historical market data.
2

1000 new accounts a day
GETPOWERETRADE.COM 1-800-ETRADE-1
New Accounts claim based on internal E*TRADE FINANCIAL Corp. metrics for average daily gross new E*TRADE Bank and E*TRADE Securities accounts between 2/1/08–1/31/09. Net new accounts were in excess of 150,000 over the same period. 1. The Power E*TRADE Pro trading platform is available at no additional charge to Power E*TRADE active trader customers who execute at least 30 stock or options trades during a calendar quarter. To continue receiving access to this platform, you must make at least 30 stock or options trades by the end of the following calendar quarter. 2. Commission-free trade offer applies to new Power E*TRADE accounts opened with $1,000 minimum deposit. The new account holder will receive a maximum of 100 free trade commissions for each stock or options trade executed within 30 days of the opening of the new qualified account and deposited funds have cleared. You will pay the Power E*TRADE commission rate at the time of the trades ($9.99 for stock and options trades—plus an additional 75¢ per options contract). Your account will be credited $9.99 per stock or options trade within eight weeks of qualifying (excluding options contract fees). Other commission rates apply to customers who trade less than 30 times a quarter or maintain less than $50,000 in linked E*TRADE Securities or E*TRADE Bank accounts. Account must be opened by December 31, 2009. Securities products and services offered by E*TRADE Securities LLC, Member FINRA/SIPC. Excel (TM) is a product of Microsoft Corporation. System response and account access times may vary due to a variety of factors, including trading volumes, market conditions, system performance and other factors. ©2009 E*TRADE FINANCIAL Corp. All rights reserved.

Copyright 2009 Investor’s Business Daily Inc.