In Defense of John Z. DeLorean

I worked with John Z. I knew John Z. John Z was a friend of mine. *

Even though John Z DeLorean has been part of my business background since I can remember (I used to work at General Motors), lately two books have kindled old memories:

1. The DeLorean Story by Nick Sutton

2. Ego is the Enemy by Ryan Holiday

The first one is an insider account of what went right and wrong at DMC. It is obvious that the author knows what he is talking about.

In contrast with Mr. Sutton, Ryan Holiday has only very superficial knowledge of DMC and just tries to "prove" the central premise of his book by making gross oversimplifications. Since his book is titled "Ego is the Enemy" he just concludes DMC and John Z himself failed because of only one reason: his gigantic ego.

Not so fast.

Yes, John Z had a gigantic ego, however, without it he probably would have stayed at GM all his life and thus would never have started his namesake company.

Real life is complicated and there is not one simple, clear-cut reason DMC failed, however as a long time automotive industry insider I forward the most probable cause: John Z tried to tackle the impossible.

The last successful American automotive company launched was Chrysler in 1925. However, Walter P. Chrysler did not actually start it from scratch (as did John Z). Mr. Chrysler bought Maxwell Motor Company and named it after himself.

The automotive industry is very capital intensive. John Z just didn't have the capital to launch a full blown car company. Thus the car had to be designed by Lotus, it used a Renault engine, and, worst of all, he had to accept building his factory in what was then one of the most dangerous places on Earth: Northern Ireland.

Almost everything was against him, so the fact that DMC was able to produce more than 8,500 cars before going under was a minor major miracle. What is more, 25 years after the company died close to 75% of all DMC-12s were still in existence!

For DMC to have continued as a going concern, a series of consecutive miracles were needed and this was an unreasonable expectation for a mere mortal to pull through and thus DMC went under.

Today, we have Tesla Motors and even though the odds are not as badly piled up against it as DMC had them then, here is our prediction:

Unless it is bought by one of the giant industry players, Tesla will go under. And it will not be due to Musk's gigantic ego. (Although a future edition of Mr. Holiday book might explain it that way). It would be because, again, a man tried to achieve the impossible.

Still, it is probably a good idea to buy a Tesla now as 25 years from now (long after the original batteries are in a landfill) the cars themselves might still be extant and valuable.

* I never actually met John Z. I was just paraphrasing Senator Lloyd Bentsen during his debate with Senator Dan Quayle. 

Feel free to add to the conversation in Twitter.

@luisbaram

In Defense of Ken Olsen

When Digital Equipment Corporation (DEC) "refused" to change with the times, business pundits all over the place chose to blame Ken Olsen for his "lack of leadership".  

What most of those business pundits didn't seem to understand is that there is a difference between a gradual evolution of a market and a sudden disruption of it.

What DEC experienced in the last years of Olsen at its helm was not only the perfect storm, but a simultaneous tectonic movement that essentially obliterated Digital's market.

Many "experts" stated that DEC should have moved faster to sell PCs in spite of the fact that IBM never made money on them and that other nimbler players such as Compaq were taking over that very low margin industry.  MOST of the profits in the PC sector were being captured by Microsoft and Intel (as is still the case today).

No, DEC didn't have a chance on Earth diving into the PC industry (which eventually they did and the results were disappointing  to say the least).  The alternative was fighting simultaneously both Intel and Microsoft at the same time that the profits from its core business were rapidly vanishing.   

So, save a "Steve Jobs" that comes to the business world every 100 years or so, nobody could have rescued DEC, and yes, DEC died.

Let's put it in sport terms to better understand the predicament DEC was at in the 1990's:

DEC was the best basketball team on Earth, with the best manager.  They were ready to compete in the Olympics.  But then, three weeks before the start of the games, they were informed that soccer was going to be the discipline in which they were actually competing.  

Even the best basketball team, with the best manager is going to be shredded to pieces if the game changes completely.  And it is not for lack of leadership or competence.  THIS is what happened to DEC.

Eventually, all companies will probably go bankrupt or merge with another one, so the caliber of an entrepreneur is not the final destiny of his creation, but how high he propelled it.

In 1986 Fortune magazine stated that Ken Olsen was "arguably the most successful entrepreneur in the history of American business."

THIS statement still stands true today.