Monday, May 4, 2015

Review of The Difference Between God and Larry Ellison by Mike Wilson

If the title of your biography is "The Difference Between God and [You]" (Larry Ellison in this case), then obviously you are a jerk.

Larry Ellison says that Steve Jobs was his best friend (they may have been each other's only real friends), which is perfect because they were both jerks.

That's the thing about these winner take all business competitions. They select for jerks who don't spend time with their families, who sell vaporware which hurts honest competitors, who trick investors with bad accounting to get a lower cost of capital.

IBM came up with the first relational database system, called System R. Ellison and his partners read IBM's papers on it and created Oracle. Why didn't IBM do what Oracle did? Apparently, a bit of innovator's dilemma:

"A lot of people-executives, programmers, salespeople, technical support people-had built their careers on IMS. Indeed the engineers at [IBM] were still making improvements in IMS when their colleagues in San Jose published the first of the System R papers. According to longtime industry consultant Jeffrey Tash, the IMS loyalists 'fought like crazy' to keep the relational product from going to market. They did not want IBM to sell anything that might replace the product they had built.

At first IBM tried to resolve the conflict between IMS and System R by creating a database that was somehow both relational and hierarchical."
It's not clear that RDMS started out inferior to the IMS system, as true disruptive innovation theory requires, but the point about internal politics preventing a new opportunity is there. As I said in my review of Innovator's Dilemma:
"managers bury their heads in the sand because it's the shareholders' money anyway. They are focused on maximizing the present value of their salaries, which means making sure Bob's division doesn't try to get you fired."
How was Ellison able to start Oracle? He and the two other Oracle co-founders worked for a company called Precision Instrument. The company was outsourcing some software development work, and these three decided that they would form a company to bid on the job:
"Ellison, the mastermind, remained an employee of Precision Instrument, with responsibility for overseeing the contract. But he made it clear to is employers that he would soon resign to join the new venture."
Not many people would be aggressive enough to use their executive position at company A to launch their own company B with a built-in customer.


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