At Sea in Iowa
TYPO: The Last American Typesetter or How I Made and Lost 4 Million Dollars
TYPO: The Last American Typesetter or
How I Made and Lost 4 Million Dollars
By David Silverman
Soft Skull Press; $16.95 (paper)
When 32-year-old David Silverman arrived in Clarinda, Iowa, in 1999 to inspect the typesetting company he and a partner had just acquired, he checked into a down-at-the-heels motel. The clerk was thrilled at the prospect of a long-term guest: "You must love Iowa," she said, smiling. Silverman writes: "Her teeth were crooked in as many ways as she had teeth, which were not as many as there should have been."
There, in a typically glib, elitist, and prophetic nutshell, is the essence of Typo: The Last American Typesetter or How I Made and Lost 4 Million Dollars, Silverman's memoir of his doomed attempt at making a fortune while salvaging an industry. You get the picture: City slicker meets country rubes. Silverman and his partner Dan Coyne, a father-figure with industry experience, pool their and others' savings, borrow a lot of money, and ride into town to save the languishing, 50-year-old Clarinda Co. They plan to turn it around, "roll up" the few remaining independent domestic typesetters, and take the company public. They want to end up as heroes—rich ones—but also want to run the company benevolently. In the end they fail, largely because typesetting software had evolved sufficiently to enable the work to be done remotely, in far cheaper labor markets. But it is refreshing for an entrepreneur to give an inside peek at a business flop, rather than one more nostrum on how to get rich quick. And if you can overlook his snarkiness, Silverman is a graceful and amusing writer.
To finance the acquisition, Silverman and Coyne borrow $1.2 million in a term loan, take out a $1.5 million revolving credit line, get loans from the state, the city, and an Iowa business coalition—all personally guaranteed—and borrow $200,000 from Silverman's alcoholic, widowed father. By contracting with a typesetter in the Philippines and offering high-quality service, they hope to beat the offshore competition, primarily in India, at its own game.
But Clarinda's employees, most of whom had worked at the company for decades, have no intention of changing, as Silverman recounts it. His attempts to be an enlightened boss by including managers in decisions such as whom to lay off mystify them. The changes the partners introduce, whether new software or stricter financial controls, land with a thud. When Coyne suggests that employees leave their office doors open and their desks unlocked "because that's the kind of company we are," the company's bookkeeper replies: "I can't do that. I've got everyone's payroll information. We have laws we have to follow."
WHO WILL BUY?
After some initial success at increasing revenues and cutting costs, Silverman alienates most of the company's customers, including such major players as Pearson (PSO ) and McGraw-Hill (MHP ) (publisher of BusinessWeek SmallBiz). Some of that seems due to his contentious personality, but Silverman implies that the economics of the publishing industry and outsourcing would have buried him no matter what. Although Clarinda sent some work to its Manila facility, the annual wages it paid employees there—$6,000—were still more than triple the average salary in India. Moreover, his Indian competitors ran three daily shifts—enough to make mistakes, correct them, and still outrace their U.S. competitors. "Our third shift," Silverman laments, "was one grandmother."
As the enterprise crumbles, Clarinda laid off workers. Customers complained orders were late and error-ridden, and many terminated their contracts. Then what started out as a vaguely amusing lark becomes a tragedy. Coyne turns out to be an alcoholic and a liar. Silverman lets him go and the company continues to founder. He tries to sell it, but with customers deserting in droves, no one is buying.
Silverman heads to Prague after Clarinda disintegrates, but before he's able to appease the creditors. Coyne dies. Silverman's father dies. Ultimately Silverman returns to New York and takes a job "writing corporate policy" at Citigroup (C ). If Silverman made one unforgivably egregious mistake, it was not reading the writing on the wall. "Capitalism is about making money," he admits, sadder but wiser. There must have been an easier way to learn that.
By Marilyn Harris