YouSaid · the spoken record

Georges Doriot

lines on the record: 27
first: 2021-09-08
most recent: 2021-09-08
sittings or episodes: 1
sources: podcast

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“Another maxim that spreads throughout the book. One of Detroit's one of Georgia's maxims was you should always raise money when you don't need it, having learned through hard experience that when you do not need money, or excuse me, when you do need money, chances are you are unlikely to get it. This is very similar to the few lessons from Warren Buffett. We just went over, he says, the most attractive opportunities may present themselves at a time when credit is extremely expensive or even unavailable. At such a time, we want to have plenty of financial firepower, which means plenty of cash. So this is a quote I want to bring to your attention about somebody that works at ARD for George. So it says George was head of it and he was more than anything else a teacher, he said. He was in the business to test a thesis, making money wasn't really a very high objective. He wasn't opposed to it, but the salaries were modest. There was no ownership in the company for anybody. This was a missionary zeal about it. That's how George got away with underpaying us all.”
2021-09-08 · Founders · #203 Georges Doriot (Birth of Venture Capital) · IDENTIFIED FROM THE TRANSCRIPT · source
“It was funny to me at this point. He's helping staff DEC2. One of his former students comes to him, Johnson to Samuel Johnson. Johnson had two other offers, both for more money, but he visited George to see what he thought about the job. You're a scandalian, aren't you? asked George. Yes, replied Johnson. Scandinavians work very hard, replied George. I could use another hardworking Scandinavian, because that's what Olsen is. You do that. You work for DEC, and you make them work hard as hell. And so again, we see the importance that George puts on work ethic. This is very interesting to me.”
2021-09-08 · Founders · #203 Georges Doriot (Birth of Venture Capital) · IDENTIFIED FROM THE TRANSCRIPT · source
“the importance of being cocky. Perhaps everyone has creative potential, but only the arrogant or self confident enough to press their creative ideas on others. Why is he bringing that up? Because he was a mentor for Steve Jobs. He hired Steve Jobs at 19. Steve Jobs starts Apple at 20, if I'm not mistaken. Let's go back to the full quote. Perhaps everyone has creative potential, but only the arrogant or self-confident enough to press their creative ideas on others. Steve believed he was always right and was willing to push harder and longer than other people who, and this is the important part, who might have had equally good ideas, but who caved under pressure. Steve is not one to cave under pressure. Ken is not one to cave under pressure. Talks about Ken. The North myself here is like, this makes sense why George would want to back him, because they think similarly, excuse me. So it says Olsen despised the organization man with his perfection.”
2021-09-08 · Founders · #203 Georges Doriot (Birth of Venture Capital) · IDENTIFIED FROM THE TRANSCRIPT · source
“So it's like, you're on my team, we're good. Oh, you go against me? You're weak and uninteresting, and you have no belief. And so now we're going to go, this is a summary that we're 10 years in, 10 years into his company, ready? A decade after its founding, George had led ARD to a fairly successful record thanks to 10 years of trial and error. ARD had begun to codify the principles of venture investing. It had nurtured several innovative and successful businesses, and it had found a way to deliver operating profit and a modest capital gain. But ARD had yet to fulfill its grander ambition of creating a venture capital community, nor had it produced a blockbuster company of stature and importance. But that was all about the change. And so this is where Ken Olsen comes in at the beginning of digital equipment corporation. I want to pull out a quote from Ken because I thought this was interesting. So this is a great foundation for a company, right? So he says, he's talking about his own motivation for what he's trying to do. We felt a”
2021-09-08 · Founders · #203 Georges Doriot (Birth of Venture Capital) · IDENTIFIED FROM THE TRANSCRIPT · source
“Guess that is a good idea for you and I. The idea that the future value is most likely be realized when it's misunderstood by other people. And so at this point, they're like, okay, this project isn't working out. We should just sell. This is going to get, I'm going to read the census to you because this gives you good insight into his personality, his own treasure suggested that giving up, they should give up and they should sell ARD. And this is George's response to this guy. His name was Ford. It says George wrote that Ford was a weak and uninteresting man who never believed in ARD.”
2021-09-08 · Founders · #203 Georges Doriot (Birth of Venture Capital) · IDENTIFIED FROM THE TRANSCRIPT · source
“His own thoughts, we do not know where to find interesting projects. And so we see the sad state of affairs. It also doesn't hope because he's already tangling with the SEC at this point. And so this is the sad state of affairs. This is seven or eight years into his company and after the founding of ARD. ARD, their share price is just destroyed. ARD shares were so beaten down that ARD was no longer seen as a growth investment. It was a value play. So the only people thought, it's like the cigar butt version of the Buffett people that use the cigar butt method. These are the people buying a stock now. It's like, no, no, it's not that you have growth, large growth in company earnings in the future. It's like, no, this is a value play. I thought that was funny. I mean, it's not funny at the time he's going to, is it for sure? He's very depressing for him. But again, they're misunderstood. They don't know. They're about to hit really hard. This is where they're going to, I want to say four or five years from now where they hit their first home run.”
2021-09-08 · Founders · #203 Georges Doriot (Birth of Venture Capital) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, main part of this is George not only having to maintain and manage the mindset of the people he's working with, he's got to do it for himself. He feels like he's making progress. No one's understanding. It's taking years for him to explain this to people, so he's a little gloomy. George set down his thoughts on the state of the industry in his 1953 letter, his conclusion, venture capital is not fashionable. The search for, and then this is where he talks about. He's like, people are too afraid of risks. They're not understanding this. So search for security instead of hard work and daring up. They are searching for security instead of hard work and daring opportunities. And so there's a cyclical nature at this point. People stop, like they stop getting new pitches, says the deal flow, its deal flow was slowing to a trickle. We do not know of any interesting new projects, George confessed in a May note he left to himself. He often wrote notes or memos like this to clarify.”
2021-09-08 · Founders · #203 Georges Doriot (Birth of Venture Capital) · IDENTIFIED FROM THE TRANSCRIPT · source
“Results take more time and the expenses of its operation must be higher, but the potential for ultimate profits is much greater. So this is about, and this is mentioned many times, like the counterintuitive nature of their work, right? It is misunderstood by outsiders. I know I said that a lot. It comes up over and over again in the very beginning. And this is like the same thing, beginning of an industry, beginning of an asset class, beginning of a company, which is what you and I have mostly studied. Beginning companies are always going to be misunderstood, right? So it says, don't worry about the company names here, their funding. That's not important. The growing success of ionics and high voltage convinced ARD directors that early stage investments in technology companies represented its best opportunities. This is the counterintuitive.”
2021-09-08 · Founders · #203 Georges Doriot (Birth of Venture Capital) · IDENTIFIED FROM THE TRANSCRIPT · source
“In 1950. Keep on financing concrete that doesn't move, that doesn't call you at 2 o'clock in the morning to tell you about a new human accident. And this is an update. We're about five years into the business. So it's very much like one step forward, two steps back, two steps forward, one step back kind of thing. By the end of 1951, combined sales of ARD's portfolio companies doubled to 40 million in total employment rose to 3,000 workers. They've made 26 investments at this point, 21 reported profitable operations.”
2021-09-08 · Founders · #203 Georges Doriot (Birth of Venture Capital) · IDENTIFIED FROM THE TRANSCRIPT · source
“As Bill ended up working for ARD for the next 18 years. And I think he winds up being, I want to say he's George's like second or third in command. This is one of the very talented people that George loses because his inability to compensate talent. He's going through all these fights with SEC at the time. There's a crazy amount of detail in the book about that. But this was funny. The struggle, I really need to make sure I'm emphasizing for you how difficult what he was misunderstood by everybody. He had a hard time raising money. He had to fight with regulators. He had pressure because of the structure of the business to produce immediate profits, which doesn't go along with new business creation normally, right? And so it says, but he, and then this is also going to illustrate his personality. He's really funny. Through all the ups and downs, George maintained his sense of dark humor. Never go into venture capital if you want a peaceful life. He warned a group of businessmen.”
2021-09-08 · Founders · #203 Georges Doriot (Birth of Venture Capital) · IDENTIFIED FROM THE TRANSCRIPT · source
“George's outlook, and this is the founder still talking, George's outlook inspires and transforms my own, lifting me above the worried plane that he was on, grappling with these myriad challenges led George to believe that managing talent was the most important ingredient in the startup equation. And this is what he says about this and the note of myself, I already told you. This is about Ed Catmole. It's very similar to what Ed Catmull said about people being way more important than ideas. So just as George writing in his annual report, an average idea in the hands of an able man is worth much more than an outstanding idea in the possession of a person with only average ability.”
2021-09-08 · Founders · #203 Georges Doriot (Birth of Venture Capital) · IDENTIFIED FROM THE TRANSCRIPT · source
“His whole issue the whole time he's like, I'm trying to build a great organization. I don't have enough money. I can't raise them. Investment banks wouldn't underwrite. So it says despite the successful offering and positive coverage, Newsweek, Barons, other outlets, revealing that half of ARD's ventures were showing a profit. ARD could still not convince an investment bank to underwrite its second offering. And so this is where he expresses a frustration, the lack of money he's able to raise. He's like, I have way more opportunity to pursue than money. He expressed frustration over the growing gap between the rhetoric and the reality of the venture capital business, if it could be even called a business at this point. I am afraid that as usual, people believe in venture capital as long as somebody else's money does it, he said. People will make long speeches explaining that they don't want the government to finance small businesses or new businesses, but they still do not want their own money to be used for it either. Now, another great thing about”
2021-09-08 · Founders · #203 Georges Doriot (Birth of Venture Capital) · IDENTIFIED FROM THE TRANSCRIPT · source
“Than existing machines. Another company that sold radioactive isotopes and made radiation detection machines. This is right at the very beginning of nuclear age. And then we see a quote here from George talking about a good synopsis of his idea. George best explained the formula in his 1949 annual report. A team made up of the younger generation with courage and inventiveness matched together with older men of wisdom and experience should bring success.”
2021-09-08 · Founders · #203 Georges Doriot (Birth of Venture Capital) · IDENTIFIED FROM THE TRANSCRIPT · source
“This is a little bit about what kind of projects they're looking to fund. The firm set clear guidelines for making investment. Projects should have passed a test tube stage. They should be protected through patents or specialized knowledge and techniques and can afford an attractive opportunity for eventual profits. And so what they do is they say, hey, we've raised a little bit of money. All you people doing experiments, all you people with long-haired, crazy ideas come to us. And so they get, I don't know, hundreds of pitches, and then they only select obviously a few. This is just a few about them. I'm not going to, they go into so much more detail, but there was like, for example, these are some of the first few ones. The company developing a handgun that melted car engine grease by vaporizing a solvent and ejecting it into automobile transmissions. They funded two MIT scientists who were developing a 2 million volt generator that was eight times more powerful.”
2021-09-08 · Founders · #203 Georges Doriot (Birth of Venture Capital) · IDENTIFIED FROM THE TRANSCRIPT · source
“new methods of applying development capital. We cannot depend safely for an indefinite time on the expansion of our old big industries alone. We need to create new ones, right? That's where all the opportunity is. We need new strength, energy, and ability from below. We need to marry some small part of our enormous financial resources to the new ideas which are seeking support. And this is a big headache they wind up having. The idea of venture capital was so new that ARD's founders were forced to re-engineer aspects of various financial regulatory structures in order to make their idea viable. I'm going to admit a lot of this because they go into way more detail than I want to on the podcast, but there's just, the reading of this is like, there's just all these arbitrary rules. And what's so interesting to me is like they didn't just accept, oh, this is how it rules. Like, no, they thought, okay, the way you have this set up precludes me from pursuing this opportunity. So guess what? I'm going to get these laws changed.”
2021-09-08 · Founders · #203 Georges Doriot (Birth of Venture Capital) · IDENTIFIED FROM THE TRANSCRIPT · source
“Okay, so let's go back into the main point of this, right? He's starting a new asset class, fast forwarding. This is 1946. They start the American Research and Development Corporation, also known as ARD. ARD was formed. This is George writing in the company's first annual report to aid in the development of new or existing businesses into companies of stature and importance. ARD was the first professional venture firm that sought to raise money from non-family sources, primarily institutional investors such as insurance companies, educational organizations. This was a critical development since it greatly expanded the potential amount of money that could be devoted to venture capital. And so now they're writing, this is one of his partners, they're writing about like, you got to stop being afraid to take risks. Like, that is where all the opportunity is. We have the greatest number of possibilities for new investments. We have various means for selecting the most attractive possibilities and for spreading the risk on those selected. Does this not furnish a sound business basis for trying”
2021-09-08 · Founders · #203 Georges Doriot (Birth of Venture Capital) · IDENTIFIED FROM THE TRANSCRIPT · source
“they'd get stifled. He wanted us to violate all kinds of rules and regulations and just write us a letter and put a stamp on it. It was a rare opportunity to express myself to someone who would read it with intense interest and start to do something about it. It would not be laid in a desk and forgotten about. It would not be stifled because of bureaucracy. It would be moved and action would be taken on it. Just give you an idea of the size of the organization he's running. There's 542 people when he joined. There's more than 2,000 at the peak that we're working directly under him. And he had a budget of a couple billion dollars. He's also, again, working 12-hour days, seven days a week.”
2021-09-08 · Founders · #203 Georges Doriot (Birth of Venture Capital) · IDENTIFIED FROM THE TRANSCRIPT · source
“Because he didn't want the information he was getting to be filtered from other people. So what I'm about to read to you is this is something he had in common with, like the founder of UPS, who would insist on talking to drivers. Like every time he'd pass a driver on the street, he'd pull over and just talk to them, right? Jeff Bezos did this with anybody could email Jeff at amazon.com. He wanted like unfiltered information from his customers. The founder of Kinko's, we saw him do this, Paul or Falla, right? They all wanted, the main theme here is they all want unfiltered information from the front line. They understood that was the most important part, and they knew that layers of managers distort the message. It's very similar to like if you played the game telephone when you were a kid. Same thing's happening when you're adults, except because you've added all these layers of management. So it says one of the wonderful peculiarities of George was that he didn't want word coming back from channels. And so the description of that, he knew it would take forever. And they'd run into people that didn't agree.”
2021-09-08 · Founders · #203 Georges Doriot (Birth of Venture Capital) · IDENTIFIED FROM THE TRANSCRIPT · source
“Never fail to deliver for their indefatigable chief. One word is omitted from George's otherwise complete vocabulary. That word is impossible if a thing must be done, it can be done. Two good ideas for you here. So he's got a great team, but in the service of this goal, so he's got they're in charge in many cases of making sure all the people, the actual people fighting the war, have the right equipment, right? And he just winds up, the main idea here, I guess one of the good ideas here is in the service of this goal of building the best team, he also paid attention to details others missed. And so at the time he's requisitioned supplies for tankers. And so he's asking the questions like, well, how much space is in there? Like, we need to know. It's like, no one knows. So it says before the war, no one thought to measure the foot space in the tank to see how much the soldier's shoes would fit in such a cramped quarter or to see how soldier shoes would fit in such cramped quarters. But George did. In fact, he had a tank delivered to his parking lot in Washington, D.C. So again, just paying attention to details that other people miss that are important to your job. And then the second good idea is he would break the chain of command.”
2021-09-08 · Founders · #203 Georges Doriot (Birth of Venture Capital) · IDENTIFIED FROM THE TRANSCRIPT · source
“Then and probably now is good people, right? Leadership skills and brains. And so there was all this like deficiency of staff constantly. And they're like, how the hell is George finding all these qualified people? Well, he had at this point, he'd been a teacher for 15 years. So he's got like this Rolodex, so to speak, of just driven intelligent people. And that's something he did that was really smart. He just maintained and nurtured these relationships for decades, in some cases for his entire life, right? In the case of Ken Olson, he's almost about to die. They're on a board together. They've known each other for, what, 30, 40 years, something like that. So this is a quote from a newspaper around this time that gives you a little indication of what that means. I don't do the work. I just pick the right bright men to do it for me. While teaching at Harvard Business School for the last 15 years, George always had a sharp eye out for able young men. Today, a lot of them were working for him.”
2021-09-08 · Founders · #203 Georges Doriot (Birth of Venture Capital) · IDENTIFIED FROM THE TRANSCRIPT · source
“To identify the unmet needs of soldiers and oversee the development of new products to fulfill those needs. One thing he learned, he had a bunch of different offers because he had done consulting and stuff for the military before through his position at Harvard Business School. And so he's got a couple different opportunities to choose who's he going to work with. And really the key lesson I learned from this section is you should always, if you have a few options, work with the smartest people you know. And so one of his former students is running the quartermaster course at the quartermaster core at this time. And so he says, I had several other offers from different parts of the army and air force, but he explained a decision later in his life. And the only reason I went to the quartermasters is that I considered General Gregory the most intelligent officer I knew. And so one of the advantages that George had during this time is the fact that the limiting factor”
2021-09-08 · Founders · #203 Georges Doriot (Birth of Venture Capital) · IDENTIFIED FROM THE TRANSCRIPT · source
“Company. A company should have its own capital, they concluded. That way it would be insulated from events outside of its control. And so it says for the time being though, the war snuffed out the formation of the nation's venture capital industry just as it was getting off the ground. Six years later, though, George, Compton, and a bunch of these other members of the Brain Trust would revive their plans to create a regional venture movement. But first, they had a war to fight. So I'm going to skip over a lot of his war work, but I do want to talk to you about how his work in the military during World War II actually helped inform his later career in investing in new companies. So as George learned how to become a venture capitalist during the war, for it was through World War II that he underwent the most significant metamorphosis of his life, transforming himself from a professor of business into a world-class builder of innovative new enterprises. When George became head of the military planning division, he began running, in a sense, his first venture capital operation, the purpose of his division was”
2021-09-08 · Founders · #203 Georges Doriot (Birth of Venture Capital) · IDENTIFIED FROM THE TRANSCRIPT · source
“something new, the class that he's teaching at Harvard. He winds up serving on a bunch of boards, like 20 different companies. His experience in the military, his experience that he saw with his father all leads, and then his distaste for a lot of what was happening on Wall Street all is going to culminate into this idea. It's like, hey, we really need to create a way to start to get talented young people to start more companies. Okay, so at this point in his life, he's married. They never have children, but it says George was a workaholic with no family responsibilities to divert his energies. And so because he was a workaholic and because he didn't have personal distractions, so now he's setting up, he's doing part-time consulting with the military. He's running his class. He's serving on 15 to 20 different boards. He's starting, he's going back in the summers and going back to Paris to start this international business school. And so this is when he is approached to do”
2021-09-08 · Founders · #203 Georges Doriot (Birth of Venture Capital) · IDENTIFIED FROM THE TRANSCRIPT · source
“Ponder the purpose of life and the purpose of business, it was a highly unusual technique, but the students realized George was giving them knowledge of much deeper value. He peppered his lectures with a number of pithiaphorisms which pupils would take notes on. Here's a couple examples of that. One should not only be able to criticize but should also have a suggestion to make. Another one, don't challenge others' statements. Have them repeat them over again. Ask about prospects who didn't buy your product. Always challenge the statement that nothing can be done about a certain condition. He used his course as a forum to explore new subjects and business that were assuming greater value in his view, such as entrepreneurship and leadership. George devoted one class to the process of financing and building a new company. It's really interesting how all the experiences that he's exposed in his life are going to combine together to create”
2021-09-08 · Founders · #203 Georges Doriot (Birth of Venture Capital) · IDENTIFIED FROM THE TRANSCRIPT · source
“And so right away he becomes really good at teaching. He gets a note from his class that says, you've given us something of far greater value than case books or assignments. You gave us yourself. As you pace back and forth on the deck before us, you looked upon our group not as a class, but as individuals needing guidance. You gave us needed advice, encouragement, criticism. You gave us into original and constructive thinking upon difficult problems and develop powers of analysis and understanding of infinite value in days to come. And so this is the effect it had on receiving this note had on him. It was remarkably poignant moment for George, a major milestone in his young teaching career, the heartfelt note from his students proved that George, despite all of his doubts, was hitting his stride as a teacher. This is more in his philosophy, what his class was like. George began to mix some philosophy into his pragmatic teaching methods. He would stand in front of the class pacing back and forth, and he would encourage his students to”
2021-09-08 · Founders · #203 Georges Doriot (Birth of Venture Capital) · IDENTIFIED FROM THE TRANSCRIPT · source
“as George described with a palatable sense of glee the importance of imparting a I do believe that the men leave my class, they have a definitive notion of what an honest day's work means. The third tenet of his philosophy was an emphasis on pragmatic management, on the nitty-gritty realities of day-to-day decision-making, not high floutin theories. A lot of this book is personal letters he wrote. There's another book I almost read, and I'm glad I did this one first because I wanted an actual biography. It's called The First Venture Capitalists is a term. And I think almost all of it's like his writing are somebody edited the book together. It's a lot of his notes, his letters. He also would write in public as well. And then reminisces from his students. But this is an example. So we have a lot of quotes in this book from his own writing. This example of that crazy work ethic. I haven't had a day's rest for four months.”
2021-09-08 · Founders · #203 Georges Doriot (Birth of Venture Capital) · IDENTIFIED FROM THE TRANSCRIPT · source
“And so, this is a little bit about that fear of failure I was just mentioning. He was haunted by visions of failure. So George worked overtime to ensure that his teaching debut would be a success. And he's like, I took this job, but I don't know if I can do it. I don't know if I can teach or not. And so he figured the way to increase his chance of success is just spending more time at it. At least it was a subject that I felt close to. And I had studied it very hard. So I spent hours and hours and hours at night studying. And I took further courses. And then I just have a note, a few paragraphs, a few pages later rather, good guy George. Over the next four decades, George would go on to mentor thousands of other students, giving them advice, finding them jobs, guiding them in their careers, and taking an extraordinary personal interest in each and every one of their futures. In fact, throughout his 40-year teaching career, George kept detailed files on many of his students which he updated on a regular basis as a great anecdote later in the book where one of his students asked for advice. Should I take this job? Like, you know, I can double my salary.”
2021-09-08 · Founders · #203 Georges Doriot (Birth of Venture Capital) · IDENTIFIED FROM THE TRANSCRIPT · source