Learnings from Larry Ellison
JC’s Newsletter #209
Dear friends,
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I recently read “Softwar: An Intimate Portrait of Larry Ellison and Oracle” by Matthew Symonds.
It's a book from 2003, so 20 years ago, but I find it retains lessons that are more than valid today in the technology world, and I wanted to share some with you.
You can order the book here or, of course, in any good bookstore and I strongly suggest you do.
Below are some highlights because I think they are interesting and exciting, and help in building better companies. You'll learn about the integrated model, the importance of having a highly differentiated product, and how to sell and market.
Happy reading!
Softwar: An Intimate Portrait of Larry Ellison and Oracle (Matthew Symonds)
Strategy & vision
Growth thanks to product
“We were small, and we had to grow fast or die. But the most effective way to grow sales is to make the product better. That’s why I spend most of my time with our engineering teams.”
Notes: I truly believe that we will only win and accelerate because our product gets better faster than competition
Endurance
I have a lot of endurance: intellectual, emotional, physical. The clock in the software game is measured in years, not minutes. It took twelve years to make our bloody database-clustering technology work. But we knew if we could make it work we’d win.
We’re pretty good at coming up with winning strategies; the problem is, our strategies are technically very, very hard to implement. But difficult strategies, well executed, can lead to great victories.
Notes: Come up with a hard, difficult strategy, execute very well and have more endurance than anyone
The integrated model
Notes: This vision of an “integrated model” is very close to what we are doing with the bundle and the learnings they share are important for our mental models about how to scale it.
Standardization
“It may not have one hundred percent of what you want, but it has a hundred percent of what you need. The advantages of out-of-the-box integration more than makeup for a few missing nice but not necessary to have features.”
The overwhelming reason, Ellison believed, for the failure of information technology to deliver on its overblown promises was the fragmentation of information that resulted from the computing industry’s addiction to complexity.
Notes: Talk about us as the out-of-the-box product that has a hundred percent of what they need
You are better off, I submit to you, with an eighty percent solution installed and working in six months than fantasizing about a hundred percent solution that you might finish in two years after you write lots of custom code.
Notes: For enterprise customers that have several tools!
The power of the bundle
“The applications software industry sold components, not complete business systems. The customer bought the components and assembled them into systems as best they could—no instructions included. No other technology industry in the world works this way.
I mean, every Boeing 747 has the same basic components: fuselage, wings, and tail. You don’t buy a 747 and decide to speed it up by sweeping the wings back a little more. That would be expensive and dangerous.
Who in their right mind travels in a heavily customized, one-of-a-kind 747? Why do people use heavily customized, one-of-a-kind business systems? Because they had no other choice. We wanted to give customers a choice of a complete and integrated suite of business applications.”
Notes: Use similar arguments for the bundle pitch
The case of Microsoft
They’re going after Real, using the same exact bundling techniques they used against Netscape. They’re bundling instant messaging to go after AOL. That’s how they compete: bundle, bundle, bundle.
Now in everything that Oracle did it would emphasize the same tight integration that Microsoft understood so well, the same determination to throw in a bewildering array of features that smaller rivals had to charge for, the same aggressive pricing and ruthless pursuit of volume.
Ellison told the analysts, “Our strategy in enterprise software is integrated suites with a low total cost of ownership. The only software company we worry about, watch, and try to learn from is Microsoft. We think their basic model—integrated suites, low price, high volume—is the winner. Nothing else works, and that’s where we’re going.
Notes: Integrated bundled suite, aggressive in terms of pricing, high volume.
Product
Make big leaps forward in technology
We have to make big leaps forward in technology or sink slowly into obsolescence. The pain is worth the gain. It’s very much like childbirth. It’s a lot of pain followed by great joy. The joy helps you forget the pain.
Notes: You need some pain to massively innovate but that is the only way
Don’t mistake the present for the future
If Ellison had his way, 11.0 would be engineered for the Internet only. Ellison was certain that Oracle could not succeed if it had both an offensive and a defensive strategy.
Ellison remembers, “I got a call from Ray at about midday. He wanted me to come and listen to what the field had to say about giving up on client/server. And they wanted to tell me what customers were saying. When I got there I was treated to what seemed to me to be a carefully choreographed show. The message was clear: our customers wouldn’t tolerate being forced away from client/server and pushed to the Internet.
‘Can you guys just tell Larry that what he’s doing is crazy and he’s putting the entire company in danger.’ I had heard it all before.
Relational database will never be commercially viable. The customers want client/server. Blah blah blah.
They were mistaking the present for the future. It’s the worst mistake a tech company can make. Client/server was dead, and the people in the room would figure that out at the funeral. By then it would be too late for Oracle to change course. We had to change to Internet applications now—before SAP and the rest figured it out.
Notes:
The worst mistake a tech company can make is mistaking the present for the future, even when the customers are still asking you for the past/present
How to take very bold risks, don’t be defensive and offensive at the same time.
Marketing & sales
Category creation
Much of Ellison’s time was spent talking up the relational model.
Don Lucas says, “People just didn’t believe that the relational model would work.” We had to fight that for maybe ten years. He was like a spiritual leader, an evangelist for the relational database model.
While that kind of “high-level sell,” which included doing a lot of public speaking at conferences
Notes: The time it takes to create a category, and how much you need to be spending time pitching the vision. We might want to talk more about it.
Convincing customers to follow your vision
Ellison frequently tells prospective customers that unless they are prepared to review all their business processes in the light of the Internet and unless their top management is willing to make available the best people in the company to work out what should be done, they shouldn’t buy Oracle’s software because they will only be disappointed by the return on their investment. His constant message is: Don’t change the software to fit the way you have always done business; use it to figure out how you want to do business for the next twenty years.
Notes: How to convince customers to follow our processes (I don’t think we do it enough)
Ellison said, “Don’t tell us how you’ve been running your business for the last twenty years. Instead, let’s try to figure out how you want to run your business for the next twenty years.
Notes: I love this wording.
Leadership
Ambition
We were right to be ambitious. There’s nothing else like it. First, we have to persuade ourselves; only then can we convince the rest of the world.
Notes: The importance of being ambitious
Energy
It’s the end of my first week on the road with Ellison. When you are around him, you cannot escape being evangelized. He can’t help it.
A few months before Oracle’s IPO in early 1986, Ellison had declared that the company would double its revenues every year. Indefinitely.
In 1985, with sales running at $24 million, Ellison had declared that from that point on Oracle would double its revenues each year. Amazingly, for the next five years, Oracle did precisely that, hitting sales of $916 million in 1990.
Notes: Energize people around you
How to take risk
I thought that relational was clearly the way to go. It was very cool technology. And I liked the fact it was risky.
The bigger the apparent risk, the fewer people will try to go there.
We would surely lose if we had to face serious competition. But if we were all alone in pursuit of our goal of building the first commercial relational database system, we had a chance to win.
But we had to be first to market with the new technology.
This was the first in a pattern of apparently high-risk decisions I made throughout my life at Oracle.
But I only ever picked the high-risk approach when I thought that it would increase our chance of winning and our share of reward.”
Notes: On the importance to take massive risks and go in uncharted territories
Addiction to technology
Nobody I’d met was as addicted to technology as Larry was. In my interview he described a feature that was just being developed in the database that’s still important today called ‘read consistency’—he described that to me and asked what I thought about it. I was just amazed that I was having that kind of conversation with the CEO the first time I’d met him.
Notes: Remain addicted to technology
The importance of persuading
Ellison says, “You can’t tell engineers, ‘Just do it.’ You have to persuade them that the Internet is a better architecture than client/server.
You have to persuade them the Internet is going to win in the marketplace—even though Microsoft is backing client/ server all the way.
They have to believe in what they are doing. If you simply bark out orders, you get malicious obedience—they’ll build exactly what you want and make sure it doesn’t work.
I had to proselytize in every meeting. It took years before we killed off our last client/server product. It wasn’t fun.
I’d say, ‘You know that thing you’ve been working on for the last year and a half? Throw it all away. We don’t want it.’ It pissed people off.
They’d say, ‘I’ve been working hard for a year and a half, and now you want me to throw it all away?’ ‘Yeah, I do.’ ‘Are you crazy? I quit.’
It was very difficult to get all the developers inside Oracle to change direction.
Everything they were reading said that Microsoft and client/server would go on forever.
I got the same looks that Galileo got when he told people the earth revolved around the sun. ‘Sure. Whatever you say, boss.’”
Notes: The time needed to persuade on innovation or big changes is very high
Managing cynicism
She might as well have said that analysts and technology journalists are professional cynics and that someone like Larry Ellison, who is relentlessly optimistic, calculatedly contrarian, and shamelessly devoted to hyperbole, brings out the absolute worst in them.
Notes: The importance of fighting cynicism and understanding where it comes from
Some good articles I have read this week
👉 Stock-Based Compensation in Public Growth Technology Companies: A Fresh Look at the Data (TDM Growth Partners)
Very interesting deep dive in stock market compensation
Having a level of net dilution around 2% p.a. max seems great for performance
Companies with the lowest Net Dilution (<2% pa) recorded median stock price performance of +16.9% p.a.
Growth technology companies that dilute greater than 3% p.a. from SBC on a net basis, are EXTREMELY UNLIKELY to outperform the market.
No clear relationship between company size and net dilution and company revenue growth rate and net dilution
👉 A Conversation with Charlie Munger & John Collision (Join Colossus)
“You make your living selling things to other people that are good for them, that is safer and more profitable”
Even things that you think will never change, do change.
The US are not going to prosper for ever
“I have one standard set of advice for all difficulties, suck it in and cope”
Be multidisciplinary
“If you don’t look, you won’t find.”
Be concentrated on the big bets
👉 Larry Page on learning new things (Startup Archive on X)
One of the richest ways to learn something is reading things written by people who deeply understand their subject matter.
Alaners should be voracious readers (books, blogposts, …) about topics they want to learn about
You should also talk to people with expertise.
You don’t need to have a diploma to become an expert on a topic. “Most schools are really just thin wrappers on books.”
👉 Martin Mignot on LinkedIn about Revolut (LinkedIn)
I find there are many similarities between the way Revolut grew and what we are building:
Being multi-product very early on, which is what we did with insurance, health services, and prevention.
Being multi-country very early is what we did, and I think we need to do it even faster. We will need to think about the future. If we were to launch ten countries at once from 2026, what would that look like and how would we do it? What are the easy countries where we can win quickly?
And of course, this bias towards building instead of buying is really important.
I also agree with Martin that these decisions may make the path a bit more difficult at the beginning, but allow us to grow faster and faster in the end, and that's what we are building.
I am eager for us to maintain growth above 80% per year soon, because our model will continue to compound.
👉 Stuart Blitz on X (X)
Talked to a health insurance exec at a brunch this AM. Asked him for some off the record thoughts on working with startups and what he really thought of pilots.
He said “It’s so cute that they think we’re serious. We just do them so our staff doesn’t get bored.”
➡️ Why we became the insurance company, so we can do the things that matter and don’t depend from the governance of others
Let’s talk about this together on LinkedIn or on Twitter. Have a good week!