Steve Ballmer to startups: ‘take a long-term view’

As Microsoft charts a new course under Satya Nadella, the company’s former head and now Microsoft board member, Steve Ballmer, has been candid about his experiences at the Redmond software giant. The ex-CEO’s latest public words came via a fireside chat hosted by Professor Peter Tufano, a long-time friend of Ballmer’s and Dean of the Saïd Business School, part of England’s Oxford University.

We’ve extracted some entrepreneurial gems from the talk, but if have an hour to kill, the school has made the entire session available online — it’s worth the watch.

Ballmer dropped out of Stanford School of Business after about a year in the programme to join a little known company, at the time, called Microsoft. Ballmer explained that he was compelled to stray from the well trodden path because he understood the value of connecting with smart people.

“I dropped out of school to join Microsoft, mostly because I knew Bill Gates from college — he was the smartest guy I knew. I didn’t really know what the company did super well,” he said. “I knew Bill, and his buddy [Microsoft co-founder] Paul Allen, and they were kind of a world-leader in something that I didn’t quite understand, but that sounded good. And these guys were really smart, and that sounded even better.”

Ballmer said that whether you’re starting a company or joining one, slotting into a place that is world leading at something or employs smart people, are good things to look for. In addition to that, “it’s important to be excited about the work,” said Ballmer. “Find something where you’re going to be excited about going to work, every day. Pick the things that are really going to switch you on, not the things that you think are going to make you attractive in the next five years.”

Recruitment

“Learn how to recruit,” advised Ballmer.

“I didn’t really know much about much, but I’d interviewed for a lot of jobs. It turned out that the most valuable thing I added to Microsoft was that I actually got the hiring machine going, and mostly because I’d interviewed for a lot of jobs while at college and business school,” said Ballmer.

Hiring smart people in the beginning is important because smart people will attract other smart people.

“If you’re going to be a small company in particular, everybody’s a recruiter. Everybody’s out there, ‘Who’s the best?’, ‘Who’s the brightest?’, ‘How do we get them?’. It’s the life-blood. Even up until the last minute at Microsoft, the last thing I did was a recruiting call. It’s what you’re always doing,” remembered Ballmer.

Ballmer also said that the toughest decisions he ever had to make was about hiring and firing people.

Ideas

Ballmer gave some thoughts on the importance of ideas, something which, in the age of serial cloning businesses, have often taken a backseat. “In a world where startups have gone crazy, ideas matter. Do you have a good idea?”

Good ideas, says Ballmer, are often what attracts smart people to your fledgling venture, and they can be illusive. Take your time. “Don’t pursue a lousy idea, just because you’re desperate to do a startup now,” he said. “Get an idea that is powerful enough to make it work pursuing. People can get carried away with everything else. They can get carried away with capital, charisma, people leadership — it doesn’t make a business.” “Start with something that is interesting enough — either a new idea, an area that you want to explore, or an existing idea from a new perspective.”

In addition to a good idea, Ballmer was candid about luck. “People understate the value of luck. I know how luck we [Microsoft] have been. ”

Accounting

Repeating it three times, Ballmer warned: “pay attention to accounting.”

“I don’t just mean in a financial accounting sense. Management accounting is even more important than financial accounting — really thinking about what you’re measuring, how you account for revenue, how you think about costs. It’s fundamental.”

Ballmer says one of the things he wish he understood when he was younger is pricing. “Understand price. Think about price. Don’t ignore price.”

“You know, you take all these fancy classes in lots of things, people will want to teach you about marketing, and they’ll want to teach you about finance, and now there’s a whole craze about product development and SCRUM and rapid innovation, but this thing called price/business model is really, really important,” said Ballmer.

“I still think a lot of people under-think it through. You get a lot of companies that start that have no business model. The only difference between the companies that succeed and fail is that one figured out how to make money, because they were deep in thinking through the revenue, price, and business model. I think that’s under-attended to generally.”

The best and worst advice Ballmer ever received

“My dad said if you’re going to do a job, do a job, and if you’re not going to do a job, don’t do a job. And that, is the key to everything,” said Ballmer.

“If you’re really going to do something, get in, heart, body and soul, and do it, and really care. Have a kind of brain where you’re always thinking about it and worrying about it, and caring about it, and nurturing it, and tending to it and growing it. You either be ‘all-in’, or be ‘all-out’.

Ballmer admits that there are advantages to this type of obsessive personality. “It’s not all a bed of roses,” he quips, but underlines that it takes unrelenting perseverance to grow a fledgling business into a success.

“If you’re going to be one of those people who do their own startup, I guarantee you that unless you’re all-in — not ‘all-in for six months and see how it goes’ — no startups do that well that quickly,” continues Ballmer. “You’ve got to be in, and you’ve got to stay in and take a long-term view, you’ve got to be as hardcore as anything, if you’re going to be successful. I would say that’s the best piece of advice I ever got,” he said.

Later in the talk, Ballmer underlined the importance of tenacity, patience, adaptability in people who are moving to do startups.

“The rhetoric is, ‘everything goes splendidly.’ We all know 98% of startups go away all together, another one or two percent wind up having nice exits and only a small, small percentage are colossal successes.”

Ballmer says the worst advice he ever got was when people told him not to drop out to join Microsoft. “That would cosmically be the worst piece of advice I ever got,” he said.