Thu, 23 May 2019
251: How a Humble Typewriter Salesman Started a Software Company Now Worth Billions, With Red Hat Co-Founder Bob Young
The Open Source CEO
Bob Young’s journey from renting typewriters to co-founding an open-source software company to founding a self-publishing platform.
Entrepreneurship carries a lot of prestige these days. But back in the 1970s, when one freshly minted, Canadian college grad decided to start his own business, the only real perk was a business card that read, “Bob Young: President” that he could show to his mom.
This, Young explains, was the single greatest benefit of starting a business back then. It wasn’t about the money, the eager investors, or the thousands of devoted fans (he didn’t have any of those). He just hoped he could reassure his mom that she didn’t have to worry about him anymore.
“We now have the smartest kids in our high schools going to college to study entrepreneurship,” he says. “Whereas, back in my day, all the smart kids went and got ‘real jobs’ as lawyers or accountants or whatever and became CEOs of big corporations, and it was us dumb kids who started businesses because no one would employ us.”
For Young, that meant printing up a fancy business card and, with a little money from friends and family, buying a small, failing typewriter rental business for cheap.
From there, though, things got interesting. Young quickly pivoted from typewriters to computers, until a mid-career stumble led him to the world of open source software, a field in which he thrived. Young has since gone on to found Red Hat, a multinational company that offers non-proprietary software solutions to businesses. In 2018, IBM announced it would acquire Red Hat for around $34 billion.
Today, Young is at the helm of a few businesses, including self-publishing platform Lulu.com, continuing his passion for democratic, open distribution models that favor the little guy. But despite his 40 years in entrepreneurship, he still lists just a single skill under “Specialties” in his LinkedIn bio: typewriter sales.
“I’m a typewriter salesman, and that is the value I bring to the companies that I’m involved with,” Young says. “I’m a sales and marketing guy, and I have to hire smart accountants and smart engineers and smart product managers, because those are skills that I don’t have. My one contribution is in the sales and marketing side of the projects I’m involved in.”
When Success Turns Sour
Young realized almost immediately that his first business had to evolve, and fast. Shortly after he bought the typewriter rental business, he dug through old customer records to find those listed as inactive, and began calling them to try and entice them back into the fold.
One of the businesses that had often rented typewriters from the previous owner was a phone company called Bell Canada. After speaking with the office manager, a sweet woman who invited him to come visit even though, “when you come by all I’m going to do is show you why I don’t need your services anymore,” Young headed off to downtown Toronto to meet with her.
As she walked him through the open-plan office building, he saw several hundred employees, who only four years previously had used rented typewriters, at work in their cubicles. They were all staring into computer screens.
“We then, immediately of course, got into the computer equipment rental business,” Young says, laughing.
He managed Hamilton Rentals from 1979 until he sold it in 1984. He then founded Vernon Computer Source, another equipment rental business, that same year.
In 1992, Young was on cloud nine. He had just sold his second computer rental business to technology services company Greyvest Capital, Inc., mostly for shares in the company, and took a stable, comfortable job there.
Then came NAFTA (the North American Free Trade Agreement), which eliminated tariffs between the United States, Mexico, and Canada. That led to financial troubles for Greyvest, and suddenly Young’s life ceased to be as stable as he’d expected.
“In ’93, I found myself in Westport, CT, unemployed with a net worth of something less than it had been when I graduated college 15 years earlier, only now I had three children, a wife and a big mortgage.”
Just as Young had made his next big step forward in his career, it had all come crashing down around him. But looking back on this time in his life, Young is grateful for this heartbreaking failure, because he links it directly to the birth of Red Hat, Inc.
Trying on a New Hat
Shortly before its demise, Greyvest sent Young to New York to pursue the Unix workstation (a special computer designed specifically for scientific or technical endeavors) market, asking him to get to know the users in the big financial services companies and engineering companies in and around the city. Greyvest was in pursuit of new rental and leasing customers, and this was precisely what Young did best.
To accomplish this, he had been attending evening user group meetings and offering a helping hand. He had even started a modestly sized newsletter.
But when the bankruptcy of Greyvest forced him to walk away from the computer rental business for good, his goals shifted. What if, he wondered, he could transform his newsletter into something more?
As Young explains, the true value of an online newsletter doesn’t lie in the subscriptions. It’s all about the mailing list. Products of value to those particular customers can be marketed and sold using the list. And so, ACC Corp. was born, and through it, Young transformed his mailing list into a catalog filled with programs and software that catered to his audience: the ACC PC Unix and Linux Catalog.
Linux and Unix were two similar but competing operating systems initially released in the early 1970s. The major difference? Linux was free and open sourced. Unix was not.
Through the catalog, he had the greatest success in the sale of Linux-based products, so when he asked his customers to share what else he could add to his catalog, and they directed him to a tiny project filled with potential called Red Hat Linux, he was intrigued. Red Hat Linux promised to be a new and improved version of the Linux Young’s customers already knew and loved, so Young knew he needed to check it out.
Young called the creator, Mark Ewing, who was working out of his spare bedroom and his own bank account, and asked him to send over 300 copies of Red Hat Linux for him to sell through the catalog.
Young questioned Ewing’s hesitation to do business with him. Ewing explained that he had only planned to manufacture 300 copies of Red Hat Linux in total.
Young meshed his big dreaming style with Ewing’s engineering prowess, and the two co-founded the version of Red Hat, Inc. that still thrives today.
He had taken a circuitous route to the software industry, but he was grateful that he finally arrived when he did.
“Whether it was Steve Jobs or Bill Gates, they’re both contemporaries of mine and it’s been fun sort of growing up in the industry watching those guys be successful,” he says. “I was late to the party of success, but I was pleased with Red Hat’s success.”
Young served as the company’s CEO from its founding in 1993 until shortly after the company went public in 1999.
“Once we became a public company, and we had 400 employees, I realized I’d never worked for a company of 400 employees, much less managed one,” he says.
As he faced down the wild host of new rules, regulations, and responsibilities that came with being CEO of a public company, Young recognized that the best thing he could do to ensure the company’s success was to embrace his own weaknesses and step away.
“One of the tricks to being successful is to be self-aware,” Young says. “None of us—no human being—is anywhere close to being perfect. In fact, I’d argue that most of us are barely adequate, even among the most successful of us. But if you know what you’re good at, and you know what you’re not good at, then you can build organizations that protect themselves from your failings.”
Young also recognized an entrepreneurial wanderlust stirring in his heart.
“I’m an early stage startup guy,” he says. “I really, really like the big idea, and I really like selling the big idea, but once I convince people that the big idea is worth pursuing, I lose interest in it and I’m looking for the next big idea.”
He explains that this is an excellent quality when you’re just starting a business and hunting for your great, big idea, but that, once a company is off and running, it can become a serious problem.
“Repetition and precision are things I do not do,” he says with a chuckle. “I never have done. This is why I was such a terrible student as a kid. My mind just doesn’t work that way. My mind works always on the next idea.”
So, he decided to call Matthew Szulik, who would become the next leader of Red Hat, into his office for a chat.
“Probably the biggest single contribution I made to Red Hat’s success was getting out of Matthew’s way and letting him turn our fledgling Red Hat business into the billion-dollar enterprise it is today.”
Although the time had come to bid Red Hat farewell, Young is still incredibly proud of their ongoing success.
“It was this wonderful adventure that worked out astoundingly well,” he says. “We weren’t sure if we could build a business there, but we knew if we could it was going to be a huge business, because open source—sharing your software, sharing binaries with your customers—was simply a better way of building software than the previous proprietary model that all the other software companies were pursuing at the time.
“To have that vision come true has been a bit of an out of body experience, and it gives me great pleasure,” he says.
And just like that, the co-founder of Red Hat was off on a journey to find his next big idea and turn it into a reality.
Open Source Publishing
Today, at just shy of 60 years old, Young owns the Canadian football team the Hamilton Tiger-Cats and serves as CEO of craft marketplace Needlepoint.com and chairman of drone company PrecisionHawk. But the endeavor he says he is currently most passionate about was one he founded in 2002—Lulu.com.
Through this print-on-demand self-publishing and distribution platform, Young wanted to revolutionize the publishing industry. He wanted to serve authors who write on niche subjects and catered to niche audiences. In other words, the ones that would be turned away by the traditional publishing industry, no matter the value the book offered to the market it intended to serve.
“We serve the interests of the author,” he explains. “The publishing industry is set up to serve the interest of the readers, and the author is just a cog in their machine.”
Young has a special passion for creators would otherwise get chewed up by “the machine,” no matter their industry. This is partly why he recommends founders consider platforms like Shopify to sell their products rather than relying on the “FANGs” (Facebook, Amazon, Netflix and Google).
“The consolidation we are seeing on the internet is making early internet pioneers nervous,” Young says, “because the whole point of the Internet was to bring more democracy—to put more control in the hands of the consumer, of the user of the internet—and we are seeing it move away from there.”
When a business owner sets up an Amazon store or a Facebook page to sell from, those customers no longer belong to the business owner. They belong to Amazon or Facebook.
“You want your customers to have loyalty,” he says. “The problem with setting up your shop on Amazon is Amazon is competing with you for the brand and the attention of the customers you’re sending to Amazon, and that’s not in your interest of building a strong brand for your product and your service.”
Young explains that when an author sends their customers to Amazon to buy their book, Amazon immediately begins recommending other titles in that subject to the customer before they have even been able to purchase the title they originally intended to buy.
“Amazon has just absconded with your customer,” he says. “Amazon is happy to have you as a merchant, because they want you to bring all your customers to Amazon so they can sell them other things. Shopify is the exact opposite of that.”
Rather than sending new customers to Facebook.com/YourBusiness, he urges business owners to start sending customers to YourBusiness.com. He also encourages founders to “pay attention to the principles behind the internet, not just the buttons that Facebook and Google give you.”
“The internet itself is this great, open vista, and if you build your market using the foundational elements of the internet, no one can ever take that away from you.”
He’s hopeful that the rising generation of founders and business owners will be savvy enough to navigate these stormy seas.
“As this next generation of entrepreneurs get going, they’re going to understand…you’ve got to be really careful about surrendering your customer to your supplier,” he says. “You want to find suppliers who are going to partner with you to build your business, not using you to build their business.”
Whether in the computer rental space, the arena of open source coding or his current realm of self-publishing, Young has always lived by the principal of democratizing access to the tools that build success.
Through collaboration and inviting more voices to the table, advancements come more swiftly, and this is a principal that even Young, a self-proclaimed “dumb kid” who started out selling typewriters, can embrace.
Bob Young’s Tips on Cultivating Self-Awareness
Bob Young says that he owes much of his success to self-awareness. By leaning into what he is good at and hiring others to cover areas where he struggles, this self-proclaimed typewriter salesman has found remarkable success. Young insists that even those who struggle with self-awareness can develop it, and these are three of his tips for harnessing that growth:
1. Put the Pride Aside
“So many of us are prideful,” Young says. “We worry about being criticized.”
But as founders, and as humans, there is always room for growth. Rejecting that evolution in favor of belief in our own mythology only prevents us from reaching our greatest potential. Young says that, in order to achieve any increased level of self-awareness, pride first has to be eliminated from the equation.
2. Listen to Critiques More Than Compliments
Once pride is silenced, it’s time to let the criticisms reach our eyes and ears, even though it may sting a little.
“We worry that people think we’ve made a mistake or that we’ve done something dumb,” Young says. “If you can flip that around and look at your mistakes as your biggest single learning opportunity that day or that week or that year, now when people criticize you, they’re more valuable to you than the people who compliment you.”
Choosing to embrace our own failings today, no matter who brings them to our attention, is the only way to make sure those same failures don’t repeat tomorrow.
3. Be Honest With Yourself
Young is comfortable with sharing the skills he lacks, especially in the area of customer support. He explains that, although he loves his customers, he cannot find the patience to help a new customer struggle through a problem he’s solved for 600 customers who came before.
He says that it took many years, and many, many customers pointing out this flaw, for him to internalize the criticism, but once he did, and once he genuinely considered the critique, he recognized that he and his customers would be better served if left that work to someone else. He says his brain simply isn’t wired for customer service, so he relies on those around him who are.
To maximize self-awareness, Young says we should accept what we are great at, grow where we are able, and rely on the talents of others to support us where we perpetually fall short.