There are a plethora of books, magazines, podcasts, videos and web pages published, all claiming to know the precise formula for ‘How to Build Billion Dollar Companies’. Most of them however, have at least one element in common; none of the authors have done it themselves. It would seem that George Bernard Shaw’s famous quote “Those that can, do. Those that can’t, teach” applies equally to writers.
Perhaps the finest way to learn how to do something is to listen to the advice of someone who’s already done it; to watch what they did and how they did it.
William Erbey is a serial entrepreneur, having founded six, multi-billion dollar public companies in the United States. In 2014, Fortune Magazine listed two of them as the 8th and 26th fastest-growing companies of the year.
A modest man who does not court publicity, Erbey is an old-fashioned, hard-working, straight-talking businessman who doesn’t give many interviews. But it’s possible to deduce from his few responses to direct media questions, the secrets of his success.
One of William Erbey’s top qualities is that of being an optimist. Someone who stays positive even when there are obstacles. As Winston Churchill put it; “A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.”
Erbey was asked if he expected to repeat the success he had seen (with his five companies in the financial services sector), with his latest company in the technology sector.
“Absolutely!” he said. “I believe that one has to be an optimist and believe in what one is doing, to be a successful entrepreneur. There are too many set-backs in building a company and too many reasons to give up. When I grew up in Pittsburgh, Pennsylvania, there was a saying “It does not matter how many times you get knocked down. What matters is how many times you get back up.” That was a great lesson for a career in business as well!”
Building a company into a multi-billion dollar concern also requires a definite goal; one that can be applied to all aspects of the business. “My goal was to devise products that provide greater value to the customer, that can be produced at a lower cost so that I can compete on price if need be. In my case, this almost always involved a technology solution, grounded in mathematics/statistics.
“As for modest spending; why spend money unless it creates value? However, if I can spend two cents to generate a hundred cents in margin, I will try and spend as much money in this area as possible!”
“Half of my new tech companies use mathematics to solve problems which heretofore were perceived to require hardware solutions,” Erbey said.
Human resources is a vital part of any company; the bigger the company, the greater opportunity to maximize your staffing resource.
Bill Erbey puts it like this: “Hire the best people possible. Agree upon high-level goals/objectives and get out of their way. Make certain that you have more than sufficient capital and liquidity to grow the business. Establish a culture of hard work and attention to detail, while simultaneously encouraging inductive thinking. It is critically important that your senior people are capable of abstracting to see the bigger picture. “Unfortunately, hiring decisions have a low probability of success. Studies show that less than 1 in 3 hires are successful. In my companies, we have implemented psychological and cognitive testing to improve the odds. It helps, but there is no panacea in the hiring process.”
Erbey never expected more from his workforce that he did from himself. He used to work between 80-100 hours a week. “I do not work 75 hour weeks any longer. I am 70 years old and have cut back to 60 hours. Going to work is my hobby. I enjoy the mental challenge of solving problems. I really enjoy what I do. I’ve also learned over the years that it’s good to take time to recharge the batteries. I exercise more now than ever, and the dividends are amazing in terms of energy, focus and stamina!”
Although William Erbey graduated from Harvard Business School with Distinction, he says that for young entrepreneurs, who would one day like to found unicorns, there is no substitute for working for successful organizations and gaining hands-on experience.
He tells the story of when he worked for General Electric Credit Corporation for a senior executive who had an identical philosophy to HBS. His training was not unlike the United States Marine Corps “Break the person down and build them up again.On my first day of work, he informed me that I knew very little and that I had a lot to learn. He was relentless in his criticism of my work. And I was too stubborn to give in and vowed to show him. In the background he was my biggest supporter. I owe him a lot. He was trying to make me better”.
Erbey states; “Failure is a part of learning. …beyond schooling, young adults have a lot to learn, and one of the best places to learn how to become successful in business is at a highly successful, established company.”
Finally, Erbey has a warning for all entrepreneurs-whether those who seek to build multi-million or billion companies; always add time and money to your original plans. “First, everything takes longer and costs more than you anticipate. Most of my companies took five years before they became a commercial success. Often your initial idea requires a pivot. Make certain that you have a significant capital buffer, so that you do not go out of business before you achieve your goal”. You read it here, straight from the winning horse’s mouth.