Bloomberg contributor Paul Kedrosky recalls the co-founder of Digital Equipment Corp. and the lessons Olsen's career holds for today's tech giants and entrepreneurs
One of my first jobs was with Digital Equipment Corp. It was there I met its founder Ken Olsen, who died on Feb. 6. He was 84. Olsen reminded me of a cross between Ed Sullivan and Inspector Morse from the television series based on the detective novels by British author Colin Dexter. He had the former's long face and hunched posture, and the latter's authority and presence. That authority came, in large part, from Olsen's success as an entrepreneur. An engineer's engineer, Olsen was called the "ultimate entrepreneur" in one late-1980s book about the history of Digital. Sadly, that belated recognition coincided with the long, slow decline of the company he had started 30 years earlier. But Olsen's legacy is the key role he—and Digital (known as DEC to many in the business)—played in the formation of the modern computing industry, venture capital, and democratized entrepreneurship. He was one of the first rank-and-file technologists to build a hugely successful company, forging a path that we now take for granted, as if it has always existed. Many of the Twitterati generation won't know Olsen or have heard of Digital, which was acquired by Compaq Computer Corp. in 1998 for $9.6 billion. (Compaq is another sad saga in the annals of once important tech companies.) Four years later, Compaq and the remnants of Digital were snatched up by Hewlett-Packard (HPQ) for $22 billion (yet an even sadder saga). Those blunders were post-Olsen, who left Digital in 1992. Despite the ignominious demise of Digital, there are lessons to learn from Olsen and his company that apply to today's industry-dominating companies like Google (GOOG) and to wannabe Mark Zuckerbergs. Minicomputer Niche
In a computing marketplace populated by larger, older mainframe companies, like IBM (IBM), Sperry Univac, Honeywell, and Burroughs, Olsen's Digital created a market niche, minicomputers, and implausibly and unpredictably rode that niche's emergence to private and public market success. At the time, it was far from obvious that minicomputers were the next big thing in computing. IBM dominated the market, one of room-filling, power-hungry machines that could cause an entire suburb's lights to blink out when turned on. Olsen recognized the economic and technological power of a shift from vacuum tubes to transistors, and was the first to build products that took advantage of those changes. The result was the PDP series of computers, then the famous VAX computers, which in their heyday were to generations of engineers what the Mac is to legions of designers. Ken Olsen's influence was deeper than that, however. The rise of Digital marked the beginning of the end of computers as scarce resources, something to be hoarded and parceled out in small pieces to the lucky few. Digital's minicomputers began showing up everywhere, from labs to offices, turning computers from blinking lights in an overchilled room to that thing over there in the corner. That liberation inspired other entrepreneurs and possibilities—workstations, personal computers, laptops, and now tablet computers. Success for Venture Capital
The founding and early success of Digital also marked the emergence of venture capital. Digital was one of the most successful investments of the earliest venture capital firm, American Research & Development Corp. (better-known as ARDC). Its founder Georges Doriot turned a $70,000 investment in Digital in 1957 into $355 million by 1968, a rate of return that snapped investors to attention with respect to venture capital, transforming the economy along the way.
Olsen's influence spread to his organization's form. He famously created a principle-driven organization—The Digital Way—structured in a matrix, with people having dotted-line connections to different parts of the company. I was in sales, but I had responsibilities in both product management and sales. While that structure had many pitfalls, some of which Google is newly rediscovering, its merits were that it recognized that Taylorism, or scientific management, had outlived its usefulness in modern, white-collar organizations, and something had to replace it, especially in fast-changing markets like technology. Today, Olsen is too often remembered for two quotes. The first was when he called the Unix operating system "snake oil." At the time, upstarts like Sun Microsystems (ORCL) and others were bludgeoning Digital about its dependence on its own proprietary VMS software, instead of the allegedly more open Unix. Olsen was right: Unix is and was snake oil. There is no one Unix, certainly not in the sense of the Jurassic Park scene where the young girl Lex sees a computer and says, "This is a Unix system; I know this." No, she didn't. Unix, as Olsen was really saying, had long been split into myriad variants, and it offended Olsen's inner engineer—he was an MIT graduate—to see Unix's "standard" benefits so misrepresented by marketers who had never written a line of software code in their lives. Rise of Personal Computers
Olsen also famously said, "There is no reason for any individual to have a computer in his home," for which he has been mocked ever since. In later years, Olsen said that he meant mainframes, not personal computers, but it hasn't mattered. He was wrong, but his quote is being proved out, at least a little, with computing disappearing into the cloud, and computers turning back into display terminals to access software and data that are both elsewhere. Olsen did have some major misses. I remember the controversies inside the company about its various forays into personal computers, which by the late 1980s were doing to Digital's minicomputers what they had done to mainframes before them. The company, like so many large organizations, was reluctant to cannibalize its own sales, so its products often seemed tentative and ill-promoted. For a while, Digital even tried to convince people that it was in software not hardware. I was given a "Digital is a Software Company" coffee mug that mostly listed printer drivers in an effort to look more like this young "Microsoft" (MSFT) company that was getting so much attention. Despite Olsen's failings, he was a great entrepreneur. His company was open, democratic, and surprisingly tolerant of the experiments of its employees. Yes, his company failed, in the end, but his success and examples have inspired many entrepreneurs after him. Startups, even successful ones like Digital then or Google and Apple (AAPL) now, have no permanence in the economic landscape, even if its founders, like Ken Olsen, sometimes do.