The Reeducation of an Internet CEO

A year after MicroStrategy Inc. made our Agenda issue for its visionary use of the Web, the company's outspoken CEO shares the keys to surviving a nearly catastrophic crash.

After more than 10 years as a CEO, Michael Saylor thought he knew a lot about business. After all, he had cofounded Vienna, Virginia-based MicroStrategy Inc. as a 24-year-old MIT honors grad and had overseen its growth from a two-man partnership to a company with more than 2,000 employees around the world. He guided its development from a strategic consulting outfit to a multifaceted organization on the cutting edge of decision-support software. He was an increasingly high-profile player on the digital stage, trumpeting a grandiose vision that went beyond mining company databases for trends and inefficiencies. Saylor envisioned a "personal intelligence network" that would one day provide customized wireless alerts on traffic, crime -- you name it -- to consumers anytime, anywhere via tiny earpieces. But the turmoil of the past year or so, which involved an SEC investigation, significant layoffs, and a plummeting stock price, has taught Saylor more about business -- and about his role at MicroStrategy -- than any other period in his career. It's been an unbelievably expensive education. In March 1999, his shares in the company were worth about $14 billion. Today, they are worth roughly $210 million. In an interview with Fast Company, Saylor shared some of those $13.8 billion lessons. Don't let your stock price go to your head. When you have 5000% stock growth, you have everybody in the world -- presidents, senators -- thinking that you're the greatest thing, the symbol of the new economy. But when your stock goes in the other direction, you realize that you're like every other business person. Doing business -- especially if you're creating new technology -- is an inherently risky, painful, difficult proposition fraught with dozens of twists, turns, and challenges at every bend. Sometimes the path gives way. I learned how powerfully various constituencies -- the media, Wall Street, customers, employees, the community -- can interact and amplify an idea. We hit that resonant frequency where every single thing just clicked. It's like an 80,000-ton flywheel that starts to roll and then accelerates, accelerates, and accelerates. But the most unexpected thing can reverse the flywheel, causing it to spin in the other direction just as powerfully. I understood that lesson at an intellectual level, but now I understand it at a visceral level. These catalyzing events have certainly made me much more careful, much more humble. Hardship is relative. People ask me, "How do you deal with what's happened to MicroStrategy?" And I tell them about Saylor's Law: Things can always get worse. It's actually a very optimistic and motivational rule, because it means that you shouldn't sit around and feel sorry for yourself. MicroStrategy experienced a revenue restatement. A lot of people lost their jobs. Our stock crashed -- but that's not the worst that can happen. As we've seen with other companies, the worst is when the stock is delisted, the company goes bankrupt, and the court disallows bankruptcy. I don't mean to suggest that this whole experience has not been very, very painful, because it's been the most painful thing that's happened to me in my entire business career. That's for sure. But I do try to remind people that things could be much worse. Trust the market -- even if you don't like the message. It's uncanny the way in which the invisible hand of the market has orchestrated the restructuring of MicroStrategy and has helped create a company that is a safer investment for investors, employees, and customers. I think the market wants us to be successful, and it wants Mike Saylor to be a good CEO, to invent cool stuff, to commercialize that stuff, and to create good jobs. It just wants him to do those things very, very responsibly. What's frustrating is that investors can be like a parent who says, "Go for it, invest, take chances" -- which was the situation in 1999. And then the parent changes his mind and decides that you should get efficient really fast and not stretch too far. Investors can make that switch with blinding speed. No leader is smart enough to do it alone. We've had to move from being an entrepreneurial, early-stage business to a mature, midstage business that has decentralized leadership and operations. That evolution means that I'm surrendering a bit of power and not gripping the company's reins too tightly -- which says to our shareholders that we're going to run an enterprise based upon a group of adults discussing and reaching consensus. I don't think anybody expects a CEO to be able to do everything. But you have to be able to recognize your blind spots and delegate someone else to manage those blind spots. I'm more willing to let the enterprise breathe now and be a corporation that is greater than any one person. You ( and your people ) have got to believe. True faith is not when you believe in a vision and pursue it as long as the organization executes flawlessly. True faith is when you believe in a vision and are willing to follow an imperfect person and to tolerate imperfect execution and imperfect results. That's real faith. True believers believe that you're going to learn from your mistakes. What we found was that not everybody in our company had true faith. I don't blame them. I don't hold it against them. On the other hand, we found that most people did have true faith. Layoffs are the ties that bind. In a way, the emotional bond you have with someone you lay off is even stronger than the bond you have with the people you keep. You and your employees are in a reciprocal relationship: They're getting something from you, and you're getting something from them. But the people you laid off have made a sacrifice that saved the company. You'll always be indebted to them for that. Find your focus. When the market was funding grander and more expansive business plans, it experienced the equivalent of 1,000 companies wanting to create automobiles. And, logically, it can't afford to have 1,000 automotive factories. What it really wants is 1,000 companies building car components and a handful of companies putting the entire car together. When the market began to fall, the message was, "You guys have to cooperate now," and the question became, "Who can manufacture one component efficiently?" That forced us at MicroStrategy to look at our business and ask ourselves, Where are we no better than anybody else? And where do we have 1,000 man-years of expertise, hundreds of millions of dollars invested, and a rational reason why we should win the business? Before that, MicroStrategy was about to go to the market to raise $1 billion, so we could hire 2,000 more people and launch 10 different businesses. But we've retrenched and refocused. Now if someone wants to build an intelligent traffic system, we say, "Fine, use our software as one component." We're going to provide the one piece that we know how to do best, instead of taking on the greater risk of building the entire system ourselves. An economist or classic business theorist would say that we've clarified our value proposition, because we've focused on the business most likely to generate positive cash flow. It's not that we don't have a grandiose vision anymore. We still do. But it's a vision over the next 10 years, not the next 12 months. There's no substitute for experience. When Sanju Bansal and I started the company, we were 24, and we were like people who had taken up yachting for the joy of the sport. Then we got successively better and better, and finally we took a ship onto the open ocean on a major voyage. And the first voyage worked well, the second worked better, the third one worked great, and then -- with the entire world looking on -- we were caught in a "perfect storm." We came out the other end with our lives, but we lost part of our crew. And now I'm sailing again in 2001, but I don't look at the ship the same way anymore. I'm never going to look at the ship as a joy ride. I can't. But then again, maybe that's what qualifies me to run a company. Maybe that's what qualifies a captain to captain a ship. Chuck Salter ( ) is a Fast Company senior writer. Learn more about MicroStrategy Inc. on the Web, or contact Michael Saylor by email ( ).

Read more about MicroStrategy: Updating the Agenda

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