'The Rare Find': An Excerpt From George Anders' New Book
This is an adaptation from "The Rare Find: Spotting Exceptional Talent Before Everyone Else", a new book by Pulitzer Prize winning journalist George Anders. In it, he examines how experts succeed and fail at identifying breakout talent in industries ranging from professional sports to the military and what can cloud the judgement of even the savviest decision-markers. In the following excerpt, Anders examines what early backers saw in a "little known striver" named Jeff Bezos.
The first time we met, Seattle go-getter Nick Hanauer had let me know of his role in helping Bezos locate his earliest backers. Hanauer didn't want to say more at the time, but the chance to learn more about Amazon's first stirrings had always seemed intriguing. So on a drizzly winter morning in 2009, we sat down over coffee in Hanauer's downtown Seattle office to reconstruct one of the great venture-investing opportunities of all time.
As Hanauer recalled, Bezos in 1994 had just quit a senior-level hedge fund job in New York and moved west. Bezos knew hardly anyone in Seattle. Hanauer and Bezos had met earlier through a mutual friend, and Hanauer was enchanted. "I had $50,000 that I could commit to Jeff," Hanauer recalled. "That wasn't nearly enough. But I offered to introduce Jeff to everyone I knew who might be able to help."
Hanauer's list was huge. There were buddies from Alaskan fly-fishing trips, favorite customers from Hanauer's short-lived career as a restaurateur, and acquaintances who knew Hanauer's socially prominent relatives. (The Hanauers had become America's down- pillow kings, thanks to their ownership of Pacific Coast Feather Company.)
"I called them up and invited them to a series of dinners at my house, where they could meet Jeff," Hanauer recalled. There would be a quick run-through of Amazon's business plan. But there would also be plenty of time to size up Bezos on a more personal basis. If people were curious, he was ready to tell them about his childhood desire to be an astronaut, about his days as a Princeton undergraduate, or about his favorite books. They could take stock of him in any way they wanted.
What happened next startled everyone. The friends that Hanauer had pegged as natural investors— high-tech executives at Microsoft and other companies who knew the most about software and the Internet— didn't want anything to do with Amazon. Perhaps Bezos's operation was too small and too speculative, in their eyes, to have much chance of succeeding. For executives at big technology companies, Hanauer recalled, Amazon's target market seemed uninteresting; it was "just retail."
Besides, giants such as Microsoft were routinely crushing 100-person or even 500-person software companies that lacked the clout to survive. In such a fierce world, what chance did a one-man outfit have? As Hanauer told me, "They were blinded by their love for their own technology."
By contrast, Hanauer recalled, his friends who ran old-style family businesses— shipyards or timber companies— loved Bezos. They didn't know much about the Internet. They couldn't tell if Bezos's business idea would work. But they pegged him as a winner. They liked the fact that he had quit his job in New York and traveled west so he could start Amazon in a new location. One way or another, they figured, Bezos would thrive. Some were so enthusiastic that they didn’t just write checks themselves; they encouraged their parents or siblings to join in, too.
A few days after chatting with Hanauer, I tracked down one of Bezos's early investors, shipyard operator Nick Eitel. He was a second-generation maritime man; his father had started Everett Shipyard in 1959. As a teenager, Eitel had spent summers scraping barnacles off the sides of boats in dry dock. As a young man, he had sat up nights working through bid sheets, trying to manage the boom-and bust nature of shipyard work. Not every year at Everett was a good one, but overall, the business prospered.
Nick Eitel remembered that first dinner with Bezos as a warm bonding moment. "Jeff was a lot of fun," Eitel told me. "He talked a lot about what the opportunity was. He wasn't confused in the least about how to get there." The two men didn’t review Amazon's business plan until a second meeting a few days later, but to Eitel, that was a formality. "I had pretty much decided before even seeing the numbers that I would put money into this," Eitel recalled. "He struck me right away as a winner."
For Eitel, that early investment paid off enormously. Soon after he bought into Amazon, the company was valued at perhaps $6 million. Today, the company's total stock market value is 17,000 times that amount. Not only did Eitel and the other early investors get rich; they also won the renown that comes with being known for great prescience. When Everett Shipyard eventually was sold, Nick Eitel was financially secure enough to begin a second career as a private investor. Some of his picks worked out quite well; others didn't. Overall, he thrived.
Another of Amazon's earliest investors was Thomas Alberg, a former top partner in Perkins Coie, a leading law firm in the Pacific Northwest. Alberg wasn't the only attorney to hear Bezos's pitch. In fact at least one other corporate lawyer turned down the chance to be an early investor in Amazon because it didn’t seem appealing. But Alberg was more than just a cautious adviser to the likes of Boeing and Alaska Airlines. He had been redefining his career from the mid-1980s onward, so it was much easier for him to think like Bezos, too.
Instead of focusing on Washington State's biggest companies, Alberg became a leading adviser to fast-paced young growth companies. He liked their dynamism. He liked the opportunities to help them achieve their dreams, instead of advising giant companies on how to ward off trouble.
In the early 1990s, Alberg decided he wanted to step further into the entrepreneurs' world. He served as president of LIN Broadcasting and executive vice president of McCaw Cellular. These cable and mobile-phone companies lived closer to the edge, with sizable debts and growth plans that kept requiring more cash. No matter. They thrived. When Bezos entered the picture, Alberg had little trouble seeing this new entrepreneur's potential, without being scared off by the risks.
Those sorts of personal insights constantly pay off in other talent-spotting arenas as well. One of Silicon Valley's most profitable enterprises, Linear Technology, is known for hiring chip designers with a fondness for outrageous bits of tinkering as far back as their teenage years, or even earlier.
Linear's engineers are people who configured kitchen-table capacitors to shock their little sisters, or who tore apart 1980s Apple computers in doomed attempts to jam in a speech-synthesizer chip where none belonged. They’re a bit better socialized as adults, but not totally. Now they are the sorts who doodle out circuit designs at lunch and at movie theaters. They are consumed by a restless desire to create; they don’t go home until a tricky new circuit finally works.
How did this tinkerer's paradise get started? The man to focus on is Bob Dobkin, the company’s long-time chief technical officer. At age 10, he created a contraption that electrified the family's outdoor garbage bins, so that neighborhood dogs couldn't prowl for scraps. At age 14, he made another gizmo that commandeered a local diner's intercom system, so that he could boom out insults to the cooks and waitresses. Decades later, Dobkin couldn't help giggling about his long-ago mischief. But he had a serious point to make, too. "You can always learn more equations as an adult," he said. "We can teach that. But you can't learn to be an inventor if it isn’t in your blood."
If everyone felt comfortable drawing insights from their own lives, this wouldn't be a controversial chapter. Unfortunately, hiring norms in recent decades keep leaving less room for individual perspectives. Formulaic conformity feels safer. Hiring becomes a labored exercise in not making mistakes. What gets lost in such straitjacketed systems is the ability to spot transformative geniuses who can breathe new life into a place.
Excerpted from "The Rare Find: Spotting Exceptional Talent Before Everyone Else." Published by Portfolio/Penguin. Copyright George Anders, 2011.