#95: From Startup to Grown-Up: Bob Young, co-founder of Red Hat - The origin of Open Source; the key to life and startup success, and how failure can fuel you.

What I know how to do in terms of making the world a better place is to build businesses that solve customer problems. And that's what keeps me and the companies I work with so focused on our customers is why else do we get out of bed in the morning? We're not doing it to make money, we're doing it to make our customers lives better. If we can do that, our customers will pay us and we will be able to make money. Making money as a result of creating value. You don't go into business to make money. You go into business to create value. If you can do that, you will find opportunities to make money.

Welcome back. This is from startup to grownup. My name is Alyssa Cohn and today I'm thrilled to welcome Bob Young to the podcast. Bob co founded the iconic open source company red hat in 1993 with Mark Ewing. Part of our chat today is a fascinating history from this incredible time that paved the way for so many other founders to use Open Source as a basis for their companies. Bob is truly a pioneer. Bob describes how they came up with the business model for Open Source. Bob and I talk about how they took the free Linux operating system, hardened it, and turned it into a platform that companies could rely on. The code stayed open source, but Red Hat sold a subscription. Predictable and turnkey updates, support and the ability to make it work for enterprise companies and not just some hackers. That services model around Open Source gave the movement its first commercial footing and ultimately led IBM to buy the Raleigh based company for $34 billion. Now we start the conversation with Bob's personal struggle against distraction and information overload. Something I'm sure you can all relate to. I know I can. And then dive into how betting on customer control instead of license fees built a company that reshaped the software industry. Bob also shared we learned about culture, why he stepped aside once redhead got big, and how he's still chasing the next problem worth solving. No retirement for Bob Young. We also got personal and talked about what it was like for Bob to grow up as the dumbest guy in the room, as he called it, and how he turned that into a strength. Bob also shares the secret to a successful marriage. You're definitely going to want to hear all about that. This is a fascinating, super fun discussion. So please enjoy my great conversation with Bob Young, co founder of of Red Hat. Do you find Bob, that you yourself are like fragmented by the Internet because you know you grew up in a time that was not fragmented by the Internet?

Yeah, I was actually just talking to colleagues downstairs in the business about a marketing tool that we want to add to our website to allow us to better serve our customers by showing them products that they might be more interested in than whatever the default product would be. And the kids I work with have grown up with the Internet, so when they look at this thing, it's just blindingly obvious to them and they're jumping way ahead and I'm having to slow them down and go, no, no, you have to explain the ABC to me before you can talk about the xyz. And they look at me like, because I have had some success on the intern that they're. It's not that they think I'm stupid, they just don't understand why I don't understand what they're saying.

Yeah.

And it is very much a, an age related thing. And so many of my friends have retired, like formally retired. And they are so happy being retired because they don't have to put up with these overbooked schedules that, you know, Google calendar and the ability to invite yourself onto your colleagues calendars without them even being aware of it means our calendars get incredibly busy and we go, oh, I should be able to do that. It all kind of fits. But in reality, humans are not computers. We can't go from one meeting on one subject to. To the next meeting on the next subject instantly without having a cup of coffee or something or processing. Yeah. To prepare for the next topic. And I find I go into these meetings and I talk about the weather or the sports game or their favorite needlepoint project for five minutes, just not to build rapport, but to allow me to change the subject in my brain from whatever I was talking about previously to whatever the topic of the next conversation is. And you're a perfect example here. You want to talk about startups to whatever. And I'm thinking marketing tools@needlepoint.com.

Well, good. Well, I'm glad we've had a chance to switch the subject back to, from startup to grownup, which is what we're gonna talk about. But before we leave this topic and I introduce you properly, I am curious. Do you also get caught up in kind of like, are you on social media? Do you get caught up in alerts and you're like, oh, look at that thing on Instagram. Oh, wait, what about this thing? Oh, I was gonna go look for that thing. Oh, what happened? Do you get caught in the ping pong of that?

Oh, and the, the guilt is much too strong a word. But, but the sense of never being Properly informed about the topics you should be keeping up with is just constant. I feel I'm constantly behind on what I should be following and keeping up with. And I keep reassuring myself of, oh no, the world will in fact keep turning over even if I don't know what the US Administration's policy on tariffs are today kind of thing.

Right, right, totally. Well, I look forward to getting into this and all of it in this discussion. And I just hit record because you were saying something so interesting. But I'm just going to go back in time a little bit and sort of say that to listeners here that I'm here with Bob Young and Bob was the founder and CEO of Red Hat, which took the free open source Linux operating system and made it secure, stable and supportable for major corporations and governments. Basically, Red Hat kind of invented Open source and I want to get all into that. And Red Hat was the first billion dollar open source company. In 2019, it was acquired by IBM for $34 billion. Not a bad day's work. And I would say that Red Hat really inspired and paved the way for iconic companies like Coinbase, like Automattic, like GitHub. And so Bob, when I met you just a few weeks ago at that MIT AI conference, you sat down, you told me the whole story and I want everyone to hear the story. So what was the founding story of Red Hat?

Okay, so it was a fun story because as a businessman my interest is so going all the way back to first principles. In a free market democracy, the citizen and the consumer are the same person. So you as a young person, when you come out of university with your idealistic views of wanting to make the world a better place, you can go and work for the Peace Corps or the Red Cross and give away your time and effort, or you can build a for profit company that serves your customers. And if you do a better job serving those customers, you are making the world a better place in a measurable way for those customers. And the beauty of it is the world will pay you for making the world a better place. Is this a great system or what?

I love it. So good capitalism.

So let's go backwards to your opening comment on Red Hat and be very clear. Red Hat did not invent Open Source. We very much are a member of the open source free software community of engineers who contributed to contributed their time and resources to build all of these tools. What Red Hat does deserve some credit for is we did invent the first successful business model that was compatible with delivering the benefits of open source software to our customers. And that's what was somewhat unique because no one believed. And let me back up. Prior to this open source movement, all software only came in binaries, the ones and zeros that your computer could understand. You didn't get the source code, the if then statements, and go to statements that programmers actually write in. And you also got the software under a license that prohibited you making changes to the software. So it put the vendor of the software in control of the vendor customer relationship, which made software very profitable. But the problem was with the invention of the Internet in the early 90s, there was no 1800 Internet to call. It was a collaborative communication network that was being built. And without a 1-800 Internet to call, the engineering teams at the cable companies and at the application and search engine companies, all of those engineers had to work collaboratively to keep this network running. And you can't work collaboratively without source code and without a license that allows you to fix the source code when something bad happens to it. So the Internet itself is the world's biggest open source project. And the Linux operating system is arguably the second biggest open source project. But the Internet itself was the biggest. And the open source Linux operating system powers most of the Internet today.

Was that true in 95? Oh, sorry. In the 90s, Linux was powerful.

We don't really know because there was so little good data back then on who was using which operating system to run which web server on the Internet. Today we understand this much better. Google's analytics, a lot of other smart people are tracking this data in very sophisticated ways. Back then there was a guy, Mike Pettyjohn out of Bath, the town of Bath in England. And he was an English engineer who was curious about this. And so he wrote some scripts and built some bots that searched the Internet. And he used to, on a very small scale, have some really interesting data. Yeah, it was very poorly understood. But there was no question that even the most proprietary of the Internet technologies back then all relied on a lot of open source or free software technology. Tcpip, Web services. Yeah, the list goes on and on. Because it was a collaborative model. And Red Hat's business, interesting enough, was inspired by IBM. And then whatever. Twenty years later, IBM realized they had to own Red Hat because we were out ibming IBM.

I love it.

Okay. And it's actually a really interesting business story. So here's the story. I'll try and keep it short. IBM was in real trouble in the 1980s because there was so much money going into technology. They were Having a hard time keeping up with the cpu, the computer processor technology, with the storage technology, the tape drive technology. There was just so much technology. And they were one company. They were admittedly a very big one, but there was so much innovation happening outside of IBM. They were losing ground to not one person, but this industry of players. They were in real trouble. And Lou Gerstner, who had been a consumer products guy with, I can't remember, someone like Procter and Gamble, big career, very successful, was recruited to IBM to try and turn it around. And what he did is he went, talked to all of IBM's biggest, most enthusiastic customers and asked them, look, if we're falling behind on technology, why are you so loyal to us? Like, what is it that we're doing for you that you can't get anywhere else? And what they told him wasn't that he had great computers or great tape drives or great networking software. What they told him is that IBM was the only company who had a support office in every city around the world that they did business in. And he listened to that story and he goes, holy.

Holy guacamole.

Holy guacamole. Yeah, thank you. Not the word I was going to use, but much better. We're not in the technology business. We're in the services and support business. So why are we competing with EMC in storage devices or with Dell in desktop computers? We should partner with all those guys because we're in the support business. What our customers need from us is to support the technology platform that they, the customer, have selected for their business. So that's what he did. And he turned IBM around as a result of doing it. And, and we're now in 1994. Mark Ewing and I are working out of our spare bedrooms, doing this little red hat thing. And I talk to, I go to industry conferences, I explain.

Wait, wait, wait, wait. Bob, before yet, that was a big summation. Okay, you and Mark, you just give us like two minutes on what you were doing and what the insight was, because actually you were like a typewriter salesman, right? And then, like, things happened and suddenly you were working on this little red hat thing. So just tell us a little bit about how that came together.

Okay, well, the short version, the reason I'm a typewriter salesman is it was my first job out of college. I then get into equipment leasing, which takes me into computer equipment leasing. That business goes quite well. I sell it, I think very successfully, only to find out a year later that the company I sold it to goes out of business and takes my net worth and my job with them. And I go home and explain to my wife, who is living in a nice house with three children, that I not only had no savings or capital had been flushed down the drain, but I didn't even have a job. And she says, so where are you going to get a job? And I go, this is one of those, you know, your wife loves you. When I look her straight in the eye, this is a mother of three young children. And I say, nancy, I've never met the company that would employ me. And the fact that she did not pack up the girls and move back with her mother.

A testament.

Anyway, as a result of that disaster, it led me directly into the open source play. And so I'd started this little company that ended up merging with Mark Ewing. So it was basically just the two of us, myself and Mark Ewing. I was the sales guy, Mark was the engineer. And we decide to build a better Linux operating system on the back of a little project that Mark had initiated called Red Hat. So I started the company that became Red Hat, Mark started the project that became Red Hat. And so who actually was the founder of Red Hat? And we could never resolve that. So we agreed we would call each other co founders, despite the fact that we didn't collaborate on the founding of the thing. I started the company, he started the project regardless.

Yeah, okay. And just to clarify what he was doing, he was building this sort of, let's say, better version of Linux. But he was also, he, he was like, you guys were creating it to sell. And I mean, I think you had experience in publishing, which is why you probably have this sense of like, we'll put it on a CD and sell it. Right?

Yeah. So I did have a quick detour after the leasing company crashed and burned into newsletter publishing. Computer newsletter publishing. And I learned a. It's a really hard way to get to make a living. But the other thing I learned is that the value in publishing is not in what you are publishing, it is in the mailing list of your subscribers. And so once I understood that, and when I partnered up with Mark because he needed help marketing the product he was developing, and he had initially been trying to write a software project, a developer tool, and he had spent six months on it. The end of six months, he stopped to do the analysis of why wasn't he making any progress on this. And he realized he was spending more time configuring his Linux servers that he was using to program on. He was spending more time messing with his Linux operating system than he was writing his tool. And he concluded that, no, the world doesn't need another programming tool. The world needs a better version of the Linux operating system. So that's what Mark stopped doing. And that was at pretty much the same time that he and I got to know each other. It's a long shaggy dog story how that happened, because when I was in the computer leasing business, one of the companies I called on, of course, was IBM in White Plains. And one of the people I was introduced to was a Mr. Ewing, who five years later turns out to be Mark Ewing's father. And I had met Mark completely independently over the Internet as a result of publishing this computer newsletter. Anyway, so it's a world, it's a small world.

Wasn't it also when you were visiting with that IBM group, like, what was the moment that you thought, well, you told me this, right? This sort of sense of why are you guys wasting your time at Open Source? I was like, yeah, why are they wasting their time at Open Source? So how did you sort of sort that out?

So now Mark and I are working together on this and we're going to little industry conferences and we're talking to. I corner all of the software executives I could find and explain to. Because I didn't have a background selling software, I needed the help. I was now in the software business and I'm a computer leasing guy. So I would go to them and I would explain what we were doing and why. The value of Open Source was it gave customers control over their software. And we're building an operating system to compete with Microsoft Windows nt. And Microsoft is the world's biggest, most profitable software company. And it's Mark Ewing and a couple of buddies in the tobacco fields in North Carolina. And we think we're going to compete with Microsoft. Okay, so setting the stage. So now I'm talking to software executives going, how am I going to do this? Like, how do I. Because I don't know, software marketing, give me the figurative arm around my shoulder and go, you know, Bob, we're really pulling for you. What we think you're doing is really interesting, but I hate to break it to you, you can't make any money in software if you give your software away for free. It seems kind of logical in the face of it, but I'm going, but my customers, the reason they're choosing Linux is not that Linux, the Linux operating system is better or faster or cheaper. They're choosing the Linux operating system because they get control over the software that they're building their systems on. And it's that control is the benefit, is the benefit that my customers need from me. And only by collaborating in this open source world and being a member of that open source community am I in a position to deliver them control, so I can't charge for the software. So that was the conundrum that I was betting my kids college education on. And I didn't even believe in what I was doing. So then I went around, I made a real effort actually to interview all the smart people in the open source community to understand where this stuff was coming from, who was paying to have it engineered and what is the business model. So what we discovered, or what very quickly was most of the software was written by professional engineers who were being paid to write software. But these were not software engineers working for software companies. These were software engineers working for insurance companies and working for telephone companies and working for banks. And as software engineers, they were every bit as good as the software engineers that Microsoft or, or Sun Microsystems or IBM could employ. They were just employed to make the software work, not to sell software to other people. And they all had an interest in contributing to this free software because they wrote software, but they weren't trying to make money on the software they wrote. So if they could publish software and have other people help them improve the software, it was of no cost to them and it was of significant benefit to them because they got back better software than they gave away. That's what powered. Once we understood that, we go, okay, so now we understand where the software is coming from. How do we make money doing this? And this goes back to the IBM story. And now Lou Gerstner has just written the book Making Elephants Dance. And I read Lou Gerstner's book, and Lou Gerstner says, well, we're not in the technology business, we're in the support business. I had looked at Microsoft's financials and I realized that while they were selling $44 billion worth of software, 1994, 95, they were also earning $4 billion worth of support on their operating systems. And I go, okay, so let's see if we give our software away for free. We're walking away from the $44 billion market, but there's a $4 billion market in doing support. And we were doing all of a million dollars a year worth of sales. I go, I think $4 billion is a big enough market to keep us going, right? So that was our conclusion. And when we concluded that, you know, we go back to the conversations we had with all the software executives that we couldn't make money in the software business. The question of, okay, well, if we do give our software away for free, we're clearly not in the software business. The way that business had been defined and it begged the question of what business are we in? And that was the right question.

Totally. I mean, if I may say so, eureka, right? Eureka. Here we are. But what I love about that is it's like you sort of step, it's like Linux is a thing. This guy Mark is kind of working on Linux and creating Linux. And then you, bob, are like the businessman, if you will, trying to figure out how the heck you're going to make any money on this thing, which is by definition kind of voluntary work. Everyone's contributing, but the insights around, well, the community has value. The community of people participating in the community to contribute software themselves in order to get much more out of it. By being able to take software that they need and take advice that they need is a significant understanding of why people would even waste their time contributing. And then the second piece around, like, it's all very well and good to have free software, but since no one can figure out how to set it up, or if they can, it's just time consuming to set it up. You have the ability to kind of help them set it up.

Yeah. It also went further than that that the Linux operating system is based architecturally on the Unix Unix operating system. And Unix came out of AT&T, the phone company, in the early 70s. And AT&T had the problem of they are buying computers from everyone and they're having problems getting the computers to talk to each other. So they had a couple of their engineers, Kernahan and Richie, stop what they were doing and write an operating system that they could run on all these different computers. And that way they eliminated the lack of interoperability between all the operating systems. So the genius of Unix was they built a very modular operating system, a very small central kernel that controlled the operating system. And everything else were components around that kernel. And that's what Linus Torvalds and the Linux community adopted as their model. The downside to that model, however, is when we would package up. If you were end engineer and you were trying to download Linux, there were literally 800 different packages that you needed to download to make your Linux operating system work. And our job at Red Hat and the other Linux distribution companies was to take those 800 packages and put them together and make them easy to install as a single product. But like all software that gets updated. And if you, these 800 different projects were being updated, say on average once a year, that was three updates a day that you as a user had to deal with. And you as a, as a programmer who was running your own Linux server, you might be willing to do that, stop what you were doing every once a month and update the various, you know, 30 or 40 packages that needed updating. But if you were a corporation and now you discovered you had a hundred or a thousand servers connected to your networks, all running Linux, all that needed to be updated, one of their packages needed to be updated literally every day, why would you use Linux? Why wouldn't you just use Microsoft nt? But you needed the control that this open source Linux software gave you. So what actually happened is all these smart engineers working for these big companies would install Linux servers. A few years later their MIS director would suddenly add up all the Linux servers connected to the Internet. They'd realize they had a thousand and they didn't have the budget to replace a thousand servers. So now they're a little desperate of now what do we do? We have all these servers that are out of control because some kid in our Milwaukee office set up this server and that they would call us and they'd say help. And Red Hat's growth in the first 20 years was mostly handling inbound calls for help from these MIS directors who discovered they were running an awful lot of open source Linux servers on their networks.

Oh, and they had to get their arms around it. Oh my God. I have to tell you, Bob, thank you so much. I never really understood what UNIX was. I never really understood what the power and the importance of Linux was. And I certainly did not until we spoke understand how the heck you can make any money from open source. It's open source, right? So let me just say thank you. It's a very satisfying moment to understand all those dynamics. Is there any more? Because I want to talk also about your company, kind of how you grew Red Hat, but was there any more to say about kind of this background you've got?

The gist of was a fun period of time though, particularly before we went public because our customers wanted us to succeed so badly. They were fans of ours as much as they were customers of ours. And you could materially. I'm a business guy, but I'm really trying to make the world a better place and I'm trying to find businesses that, where I can do that, where the world will pay to make the world a better place. And that was the Fun thing about Linux compared to my previous career in computer leasing was in computer leasing. Yeah, we provided a great service and we provided better customer service than our competitors did. And we convinced ourselves we were making the world a better place. But only 10% better than our competitors were doing. It was a marginal improvement at Red Hat. By empowering people to use to get the benefits of this open source ability to control the systems that you are building your organization around, whether your organization is a hospital system or a bank or a network company, you needed that benefit of freedom from your vendor. We weren't making the world a better place. 10% better than what Microsoft or Sun Microsystems or IBM were doing at the time. They were making the world a better plate, 100% better, maybe 200% better than that proprietary model allowed. Here's a different story because you tempted fate by asking me an open ended question. Here's the story of software. Is software from the invention of the computer? Pretty much. 19, late 1940s, Turing and and the US government's military work. And then of course early versions of IBM's involvement. But by 64. So all software, sorry, in that first 15 year period, all software was free because no one saw any value in it and the computers needed more software. So everyone gave their software away. And everyone assumed that there was no value in the software. The value was in the hardware. In 1964 IBM had come out with their 360 series. Easily the best computer of its day. Significantly the best. And IBM was also the best sales and marketing company. So they distanced themselves from all the other computer vendors and they ended up with a dominant position in the market. And Thomas Watson Jr. Had a Eureka moment. This has never been written down anywhere, so I don't know the whole story. But he is credited with inventing the proprietary software by asking the question, why are we giving the software away for free? Because we're writing all this software that all our customers need to run our computers. If we stop giving them source code, if we give them just the binaries and if we make them sign a license that because they're already dependent on us for all this software. So we make them sign a license that says they will not mess with the software and they will trust us to give them the next version. By doing that, he invented the proprietary software business. And he invented it quite specifically in 1964 to improve the profitability at IBM. You know, in his mind he genuinely believed he was making the world a better place because with more money IBM could build better software. Products for their customers. The only problem was he invented an evolutionary dead end. So if you think of this, the whole technology world as an ecosystem that evolves, and if you think of the dinosaurs as a evolutionary dead end, although the poor dinosaurs, turns out it was a meteor and not evolution that did them in anyway, in his case, he invented an evolutionary dead end because it ran counter to how free market democracies work. Free market democracies for all. We talk about competition and beating up on our competitors, that's not actually how it works. It works because we're all trying to serve the needs of our customers. And so, no, I don't care about my competitors, I care about my customers. And if I do a better job serving my customers than my competitors do serving theirs, I will put them out of business. But that's not my goal. I'm not trying to put them out of business. I'm trying to serve my customers better. And the story of proprietary software was it was a feudal system. And free market democracies evolved away from the feudal systems because feudal systems are not very economically efficient. And so what we were doing with this open source free software, Linux operating system is we are moving from a feudal system into a modern collaborative democracy where the consumer is in control of the customer vendor relationship. The feudal system, the lord had control of the peasants on his land and they had to do whatever he told them to do. They couldn't read or write, and he made sure they couldn't read or write because by not being able to read or write, they couldn't read the laws he was writing and he got to police people. Okay, well, a proprietary software model is not unlike that. You buy proprietary software on your computer and something goes wrong, you have to call up the vendor and ask nicely for them to fix it. That's a lot like owning a car with the hood locked shut. And so you get a rattle under the hood and you take it to the dealer who has the only key to your hood. And the dealer looks under the hood and says, oh, no, that's not a problem, that's a feature of this car. All high quality cars have a knock under the hood.

Yeah, yeah, okay.

If you don't have a key to the hood of the car, you have to live with that. But the moment you have a key to the hood of your car, you can take it to any other dealer, or you can take it to your buddy down the street who knows something about cars and you can find someone who will actually fix that problem for you. Or if you Want a musical horn and you can't open the hood of your car, you are stuck with the annoying horn that the vendor. But the moment you can open the hood, you can put in a musical horn. These are funny examples, but software isn't funny. It powers our economy. So now if you're a Internet service provider, a cable company, and you're trying to network to another cable company, whatever, in another country, and your systems aren't talking to each other very well, if you had a proprietary vendor in the middle of that, who decided he didn't want you talking to that other vendor, you have no way of fixing the software. The moment you're using open source software, you get to call the other cable company and you say you work on the problem together and you get your systems to work together because you, the consumer, have control over the software you are using. You can build better, more reliable systems if you have control. So Linux was never about better or cheaper or faster. It was and still is about control over the technology you are using.

This is amazing, Bob. It's so helpful because just to say that like I have always understood that Open Source is not just a software, it's kind of a philosophy and it's like a state of mind in some senses. And you really articulated that. And I just want to go back to what you said about Thomas Watson. I didn't realize it was Thomas Watson Jr. I've always quoted him. He's my favorite quote of Thomas Watson. He said if don't worry about people stealing your ideas. If your ideas are any good, you have to shove them down people's throats.

Yes, that's actually yeah, I've always believed in that as well. I'm a stupidly transparent human being. My colleagues are constantly reprimanding me for telling all of our company secrets in public to anyone who will ask. It's probably why I I'm no longer at Red Hat and haven't been for, golly, almost 20 years now. I'm not a big company person because I'm so transparent, but I absolutely buy that right? In part because I'm a sales guy and I understand people don't. The sales function is to communicate the value of the product you are selling. It's not the old plaid suited stereotype of making people buy something they didn't want. It's about helping them buy something they didn't understand before you explained it to them. And IBM was nothing in its heyday between Thomas Watson Sr. And Thomas Watson Jr. They were nothing if not a world Class sales organization.

Yeah, yeah. And I would just say, you know, it's interesting, you could say that he invented a, what you said, like a dead end. Yeah, a dead end.

Evolutionary dead end.

An evolutionary. Maybe that's true. But also I would just say that a whole bunch of companies invested in a whole bunch of software and operating systems because they could make money and that advanced the field of knowledge, maybe ultimately was a dead end. But I think it also probably contributed to a whole bunch of like actually innovation, including I think the biggest closed source example we have is Apple.

Yes, that's true. Albeit Apple uses a ton of open source software.

Right. But they don't let their customers under the hood.

No, that's right. Because they understand that most humans don't want to think about technology at all.

Right. They just want to work out of the box and that's their magic.

Yeah. So what I'm talking about is, I'm talking about that subset of humans who keep technology working for the rest of us, right? And those are the people who have to have control over the use of the technology. And those people, the long haired system administrators that work in your office and my office, who wouldn't know a clean T shirt when they met, but who are orders of magnitude smarter than you and I are, those are the people who are, I enjoyed working with because going back to when I was a kid, I was one of the worst students that you've ever had on your show. And my father kept some of my transcripts so I can prove that if you challenge me on it. And my shtick is because I'm a sales guy. Thanks to my Irish mother's gift of the gab, I made friends with the much smarter technology guys who understood the innovation behind the technology but didn't have the skills to explain it to the world in a way that the world would understand. And being the dumbest guy in the room, I don't understand the technology until I dumb it down to a point where I can explain it in an elevator pitch. And once I can do that, then I can help them sell it. And shockingly enough, my customers who are almost as dumb as I am, can understand what I'm selling them. Whereas my engineers, who are much smarter than I am, are incapable of dumbing down the story to the point that the average human being understands the value.

Yeah, incredible. Bob, this is fascinating. I do want to go back to Red Hat because on the one hand, and I, I get it, like you were starting to sell it and distribute it and everyone was like, Give it to us, we need it. But I read that you also racked up 50k in credit card debt as you were trying to make this work. Rather than take in funding or debt. You know something, you had to fund this in some way. So first of all, tell us what that was like and tell us what Nancy said about that.

It's a cute story. So I'm an early stage startup person. Like that's my personality, it's also my training. So after Red Hat, I did not either stay at Red Hat and help run a billion dollar software company or what became a, by the time IBM bought it, a $14 billion software company. I got back into startups. So I did Lulu.com, this self publishing. So now authors who were being rejected by all the publishers could publish the books themselves. I'm helping my wife with her needlepoint business. @ needlepoint.com we are trying to explain to the world that we're not selling needlepoint canvases and threads, we're selling happiness to our audience of needlepoint stitchers. And it just makes me happy to come to work every day to sell needlepoint, which I know is making my customers lives happier every day. And that's who I am. That's why it gets me out of bed in the morning. And that's why I'm not, I'm not Michael Dell or Bill Gates who invented great companies and then stayed with them and turned them into even greater companies. And good for them. That's just not who I am. Okay, so coming all the way back, the story of being an early stage entrepreneur is, is you sort of relax around the risks associated with open with, with early stage entrepreneurship. So when you do it the very first time, like anything else, jumping off a cliff the first time is incredibly scary. As long as you don't kill yourself, it's much less scary the second time you jump off the cliff. Okay, so Red Hat was, golly, I guess my third startup by the time I did Red Hat. And so I was doing whatever was necessary. So I didn't think of these at the time as particularly risk adventurous or. But the story was no one would invest in us. We are gaining reasonable sort of traction in the technology world. We had venture capitalists call us up and say, hey, we're in the business. You guys are doing well, you have a following. I've talked to sysadmins who tell me I really should talk to you guys and that Linux is the next big thing and you guys are the leaders in that space. And so I would explain to them them our business model. And they say, well, can you explain your IP model? I go, oh, that's the beauty of what we're doing. Every night. We are engineers. Mark uploads all his source code to a public server, and you can download it for free. We don't even need locks on our door.

We.

We frequently forget to lock the front door, much less worry about burglar alarms and key codes. Anyway, the VCs would, as you might expect, end the phone call with, wow, that's fascinating, Bob. But don't call us, we'll call you. Okay? And as a result of no one thinking this thing was investable, we had to scramble for money between releases of Red Hat because our sales would spike whenever we had a big new release, and then they'd trail off, and then we'd have big new release and they'd spike together. And we were in one of these income gaps and didn't know where I was going to find the money to pay the bills until I realized that, unlike myself, I married a very smart woman who was incredibly well organized, and she would balance her checkbook every month, and I didn't know where my checkbook was. You know, the comparison, opposites attract, I guess. And so this was in the mid-90s, when the banks were flooding everyone with credit card offers, and Nancy kept getting new credit card offers with a guaranteed minimum of $5,000. So I would sign up the credit card, I would use that $5,000 to pay off the balance of the other three credit cards, and I got up to about $50,000 worth of credit card debt that before Red Hat had another big release, we had a spike of revenue, and I was able to pay off.

To pay it off. Did Nancy know you were doing this with her credit?

Yes. And I don't know how she does it, but Nancy has an ability to tune out things she doesn't want to know about.

So she knew, but didn't really know.

She knew, but she didn't want to know.

It's like, I'm gonna look away from that train wreck.

And at the end the day, the key feature of our marriage, Nancy and I, is our infinite trust in each other. And again, you know your wife loves you when she lets you run up credit cards in her name to keep your little software company running. But I was very transparent with her, with what we were doing, why we were doing it, why I needed another $5,000. So I. I didn't do it behind her back. Whack. I absolutely ruined her Credit in front of her.

And so. Well, I want to. I want to go back to that point about your. The secret of your marriage. So, like, absolute trust in each other. And obviously you weren't going, as you said you weren't going behind her back. You sort of did it up front and she trusted you that this business would turn into something or trusted that you'd figure it out because you had a history of that or what was. I mean, no offense, but why'd she trust you?

You would have to ask Nancy those questions. I'm not gonna put words in her mouth other than. Yeah, all I can put it down to is blind faith. She had seen me operate by then. This was early 90s, so we had been married for a decade by then. We had three kids together. So we're pretty committed to each other and to our family. Both of us are just instinctively family oriented people. So, yeah, the trust we have in each other is what deep and unwavering and has been from day one. I'll tell one story out of school that Nancy won't forgive me for, so I hope she doesn't watch this, but we used to. And we will still fight. So the fact that we trust each other with our lives doesn't stop us from fighting. Like the old Honeymooners show, Becky Gleason threatening his wife at every second episode. But then we're having one of these fights very early on in our marriage, and Nancy was very unhappy with me for whatever I had done. I don't remember the cause of the fight. All I remember is saying to her, well, if you're that unhappy, why are you staying with me? And she just calmed down. She. She went into this incredibly relaxed serious mode. And she says, bob, that is never a question you are ever going to ask again.

And I go, oh, good.

Oh, good. That gave us freedom to fight because, yeah, we could fight. We'll work out whatever our disagreements are. We can be emotional. But as long as we're committed to each other, as long as the question of whether we're on the same team or not is off the table, then we're on the same team and we're allowed to fight with each other as teammates because we want our team to succeed. And it was a lovely and remarkably liberating thing for her to say. And I remember this one every time we have a fight and we have lots of them. So I think back to that moment on a regular basis.

Yeah, yeah, yeah, that's beautiful. And by the way, you know, just to say, when I listen To Founders podcast with David Senra. He constantly points out that successful entrepreneurs, if they have a spouse, you know, partner, it's really important who they pick as partner.

A hundred percent. I talk to kids on a regular basis and you see these bright kids coming out of university and they're all, you know, sort of worried about their futures. And I go, come on guys, relax, you've gotten a great education. Even if you screw up your career, you'll do just fine. So now go out and spend your time finding something you want to do and find someone you want to do it with and commit to that person. You don't have to commit to the project. Whatever your project is can crash and burn. And you're smart enough, you'll recover, you'll learn all sorts of things from every failure you have. But the one thing you don't mess with is your personal relationships. When you find your spouse, you commit to your spouse and you put that in a box. And now you're building your future together. It's not your future versus her future or his future, it's your future together. And you get to have these adventures together and you get to go bankrupt together. You get to lose your house together because you will be smarter with every setback. Everyone makes the mistake of they have a failure and what they think they've learned is they shouldn't do that again. And I go, no, no, you're now smarter than 90% of the world on that thing because you know what not to do. So absolutely you should do it again if it's worth doing.

Yeah, like why waste your expensive education of that failure, Right?

That's right. No, failure is simply a learning experience.

Yeah. You know, Bob, you're so self aware and you're so kind of clear eyed about yourself. Certainly now in the middle of the Red Hat situation where Red Hat was growing f and then Red Hat was turning into a large company and then Red Hat got acquired by IBM and I think you had already left by the time it got acquired by IBM. What was it that inside of you that you, you, you'd already had some successes and some failures as an entrepreneur. What was the moment that you thought, I'm not meant to be the CEO of this large company. That's just not who I am.

So I'm very self aware, which is that I know I'm the dumbest guy in the room thanks to 16 years worth of education, then being in the bottom of my class all the way through. That was the one consistent message that teacher after teacher after Teacher sort of hammered into my head. Turns out I wasn't the dumbest guy in the room. I just was a slow learner. It taken me many years to understand that, that I was able to understand anything anyone else could. It just took me twice as long to understand. Okay, don't ask me the science behind that. I'm sure if they had had Ritalin when I was a kid, I too could have gone to a good school and made something of myself.

Unfortunately, you just founded Red Hat, but okay, keep going. Yeah. Poor Bob.

But what I did, the thing I did best of all my accomplishments was I chose my parents really well. Well. And I had lovely parents who were supportive of their idiot children no matter how badly we did. And that made a huge difference for us.

Was that painful as you were growing up to have all your teachers like, you know, this was in the days before we had diagnoses and before we had Ritalin.

Yeah, yeah.

And I guess I am curious, was it painful? And what was your parents reaction to sort of your just poor school performance?

No. So the more I listened to people whine about how terrible their life was or how terrible their friend's life. All of our lives are terrible. You can either focus on the negatives, all the problems your parents had, all the bad advice they gave you, all the lectures, all the rules they came up with that were pointless, or you can celebrate them for all the things they did do for you and all the good advice they gave you. And I'm one of these people. I was born under an optimistic star somewhere. And yeah, I find it easy to see the good in both people, but in my own situation. But yeah. Was my childhood painful? Yes. And everyone else's childhood is painful. Was my childhood more painful than other people's? And the answer is no. I had a lovely childhood in part because I had lovely parents and in part because I was born with this genetic. I think of it as my superpower. We all have a superpower. It takes us a while to learn it. Mine is I can sleep. So Nancy and I can be as worried as can be about some mutual problem. We'll both go to bed worried about it. In the morning we'll wake up, Nancy will turn to me and go, what are you going to do about that terrible thing? And I go, what terrible thing? Because I can sleep. The old Annie song, the musical song on it always comes to mind. If you can sleep, if you can go to bed and get your seven, eight hours of sleep reliably, even if you're worried the sun does come out tomorrow, and if you can't sleep, you wake up with the worries you went to bed with. And I think if there's one thing that keeps Nancy and I together, from Nancy's perspective, it's being married to someone who doesn't obsess about the problems that we're dealing with is the only pleasure she gets. Because mostly I'm a burden in her well organized life. But she does enjoy the fact that I cannot stay mad at her. I cannot stay depressed about a problem because I can sleep. So at Red Hat, no, it was blindingly obvious to me. Red Hat was the. This just wonderful experience where even the mistakes we made worked out in our favor. It was like following stars in the sky. It was really a pretty magical period for a guy who loves doing startups. And I've done others since then, and none of them have been as magical as the Red Hat one was. And so shortly after we went public, we bought a related company in our industry and suddenly we had gone public. We were now 400 people doing $40 million a year worth of business. And I had never worked for a company of 400 people, much less managed one. And I was at the board meeting, and in our board meeting, we had a governance guy come in and tell us how to run the board properly. And he did the analysis of our board composition, who should be on our board. And he acknowledged that under Sarbanes Oxley World, our board was non conforming. And when we dug into why we were non conforming, it's because our CEO was unqualified as a director of a public company. And I go, really? Sarbanes Oxley, the guy who starts the business in his sewing closet and is the CEO through the public offering, is not qualified to serve on the board of directors of the public company. And that's literally. Sarbanes had forgotten to actually look at real companies when they came up with their rules.

Incredible.

Okay. And apparently it wasn't that painful. All I had to do was to go to Atlanta and take a four week, whatever, governance course.

Yeah.

And I go, I would rather have pins in my eyes than to go.

Oh, no, back to school, Bob. No. You're like, no, not going back to school. Cool.

Yeah. So thanks to that conversation and many others, I go, no. I don't want to spend my time in some corporate office at a distance from my customers and from my team members. I would rather get back to doing what I love to do, which is to, you know, rent a thousand square feet in some Empty office building, hire a couple of smart people and figure out how to solve a customer problem. And that's what I've been doing at Lulu and Needlepoint and the Hamilton Tiger Cats and the Forge FC up in Canada. A whole bunch of fun projects.

Yeah, I know you've been very active since leaving Red Hat, but I have to ask you, first of all, you just said that things at Red Hat were magical, that really, like, the stars led you one thing after another, and that's lovely. And also, you clearly, as you said, were born under a star yourself. You've got a very sunny disposition. But were there any downs in your process of building Red Hat? Or, you know, every journey, every entrepreneur has ups and downs. Were there any moments of like, oh, my gosh, holy guacamole, we're not going to get out of this?

Nope. At least. Okay. At least that I can remember. Okay. But again, being an upbeat person who can sleep, there probably were days like that. I just don't remember them. You know, all I remember are that we had some social media issues that we had to deal with where we make mistakes. And so the whole community started beating on us for being stupid. And so we just reacted like people, and we go, hold on. Really? Like, did we actually screw up that badly? And people would explain how we screwed up and we go, okay, that's a really good point. Okay, so we won't do that. We'll do this instead. We're sorry for screwing up. And here's what we've learned from the story. Screw up. And it turns out Red Hat was quite good at doing that as a team. This wasn't my doing. Mark Ewing, Eric Trohan, Donnie Barnes, Lisa Sullivan was just a team of people who took responsibility, both individually, for their own lives and would apologize when they made a mistake and would fix their mistakes. And we built that into the culture of the company. And to this very day, I've heard a story from an IBMer I met just a month or so ago at a conference who was very complimentary of the Red Hat culture. And he says, she was saying, at IBM, when we would. After we bought Red Hat and when we would interact with them, we'd go, hold on, I want to go and work for that division of IBM. They have a much better culture than we do. And that was one of the finest compliments that I think Red Hat has earned.

Beautiful.

And in as much as I might have contributed a little bit to that culture, it gave me great pleasure to see that Red Hat still had that Enthusiasm for taking responsibility and accountability and for addressing mistakes and staying focused on customer success. Yes.

Yeah, that's a great legacy. Now, Bob, in that growth period where you were at Red Hat, do you have any sense of how you personally grew? Because the company was growing. You had to grow as a leader, as a business person. Any thoughts about how you grew personally?

Yes. The one thing I put it down to in my own case is just your own education and I don't have good examples. But the one thing that again, working with the young team here@needlepoint.com for example, is they get very worried about things. And I find that I spend a fair amount of my time just assuring them that 20 years from now the same thing will not bother them to the extent that it does. As 30 year olds, hell, as 10 year olds, the whole world is intimidating to us. As 20 year olds, it's our social environment is intimidating and makes us nervous. And it's the one benefit, as you get older, you go whatever and you work the problem instead of worrying about the problem. The worry doesn't really help. The work is what helps. And just having good values. And again, this is where I chose my parents well. And they in turn chose their parents well. And the only thing I take some credit for is I did listen to their better lectures and I've forgotten some of their less insightful lectures. Yeah, so. But did I learn? You can't. As you go through life, you're going to learn a lot. But the nice thing about your successes is at least I found this, is it allows you to relax around your failures more easily because you know you're not that big an idiot. Whereas when you start off, you haven't had any success. So when you fail, your failure is in relationship to just failure. Like there is no success to fall back on. Hulu.com, which is the self publishing platform that's doing extremely well today, we did very well in the early days and then Amazon jumped into our business with a self publishing service. And our business, along with all the other competitors of ours, went backwards for a number of years. And it took Lulu a while to reinvent itself into a model that not that Amazon wasn't doing, but that we had confidence Amazon didn't want to do so. And it's not actually, it's a funny story, not unlike Red Hat. So when you talk about things, I learned this story at Lulu actually applies, which was we were building this platform where any author could publish their own book to their own audience. Amazon jumps into the business. We're arrogant enough to think that we could compete with Amazon. We'd be the herz to am the avis to Amazon's hurts. We would try harder. So to this be turns out that for a lot of authors, the very act of seeing their book on Amazon being Amazon's the world's biggest bookstore was the definition of being published. What did they need Lulu for? Since then we've recognized that Amazon's building, not unlike Microsoft, a lobster trap. You can go into Amazon and you can publish your book there, but your customers for your book are not your customers. They are Amazon's customers. And when we realize that one, we've reinvented Lulu to partner with great platforms like Shopify and Woocommerce, where when you publish your book on on Lulu and your customer comes to buy your book on Lulu, you own the customer. Lulu does not own the customer. Shopify doesn't own the customer. You own the customer customer. And so that ability to have a direct relationship with your readers is why authors and publishers are coming to Lulu today as opposed to going to Amazon. Because you publish your book, pick a book, pick a topic, Yoga for Beginners and literally before you can and then you send your customers to Amazon to buy your Yoga for Beginners book. And literally before the customer can check out Amazon, saying, well, if you're interested in that yoga book, here's 13 other yoga books you might want. And that's where it's Amazon's customer, not your customer. When you're on Amazon, totally. When you're on Lulu, we'll help you sell your book. And when the customer is checking out with your book, we'll make it easy for them to check out with your book. We're not going to try and sell them your competitors book.

That's so powerful. Just, you're right. Just like Red Hat. Just like open source. Just like democracy. Right. Just like empowering the customer. I love it. That's so powerful. Now, Bob, a lot of your contemporaries, as you also pointed out at the very beginning of this conversation, have retired. Retired. But not you. You're like doing lulu. You're doing needlepoint.com. yep. You've become a needlepoint entrepreneur. I guess I am curious, like how come you don't play golf like a normal person? Like what, what keeps you, I guess I want to kind of hear like what keeps you so engaged? What are the upsides and what are the downsides? And what advice do you have for other successful founders as they kind of go off into their second and third and fourth acts.

Well, it's the same advice I have for anyone who will listen. And it's the only good advice I have. And it only applies to a certain subset of humanity who share my personality quirk, which is. No, let me start from first principles. I don't like getting out of bed. I like my bed. It's comfortable. I'm inherently a very lazy person. You know, the idea of spending my whole day in bed and just pulling the COVID that is what I really what to do. So then I ask myself, why do I get out of bed? And after Red Hat, you know, I've been blessed with the resources where I don't actually have to get out of bed anymore. So why do I get out of bed? And the answer to that one is, I want to make the world a better place. And it doesn't matter how you define that. You may want to define that for your family. You're getting out of bed to cook them breakfast because you want to make your family's world a better workplace. Maybe it's your town. You want to get out of bed to go to the open house, that city hall, to expound on garbage collection. Maybe you want to go into politics and make the world a better place. And in my case, the only thing I know how to do in a free market democracy where the citizen and the consumer are the same person. What I know how to do in terms of making the world a better place is to build businesses that solve customer problems. And that's what keeps me and the companies I work with so focused on our customers, is why else do we get out of bed in the morning? We're not doing it to make money. We're doing it to make our customers lives better. If we can do that, our customers will pay us us, and we will be able to make money making money as a result of creating value. You don't go into business to make money. You go into business to create value. If you can do that, you will find opportunities to make money.

Amazing. I love it. Bob, just a few more questions. What do you wish you had known earlier on your journey?

Oh, this one haunts me to this day. And I sent you the note this morning because I got. Yeah, I was supposed to send a lease headshot and I haven't sent you the headshot and I have to send you a bio and I haven't. I wished I had listened to the people who attempted to teach me the importance of discipline and organization. My lack of discipline and my lack of organization has been the bane of my existence. And I keep dropping the ball on people that I promise things for. And had I been better organized, things would have moved faster. And so I beat myself up on that topic regularly. My coping mechanism, however, because I've been aware of this my whole life, is to surround myself with people who are highly organized and they in turn like having me around. At least I think so. Because I free them from the drudgery of keeping things organized all the time and I get them to look out up and to recognize why they are organizing as well as they are. And so inadvertently, when I work with accountants and these sort of, I go, look, I love you guys because my life doesn't work without you. And in turn, they enjoy hanging out with me because their lives are so much more exciting than if they worked for someone who was also head down at keeping keeping the numbers organized instead of looking up and saying why are we doing what we are trying to do? Who are our customer and how does our customer benefit from all this work we're doing?

I love it. Last question. What advice do you have for other founders as they embark on their own journeys to grow into leaders?

Stay close to your customer and by that you're not doing what your customer asks you to do. You're not paying paying attention to your customers wants. You have to do the hard work of understanding your customers needs. If you serve your customers wants what they ask you for and you do not serve their needs, your customer will not be loyal. If you ignore everything they ask you for, but you actually solve their need, they will be incredibly loyal. And I don't have a good example because I don't know who you, your, your audience is and what they're listening to. But think of your children and your children will come up to you and go, daddy, daddy, I need an ice cream cone. And you go, no dear, you want an ice cream cone. You need spinach. And shockingly enough, 20 years later, your daughters come to you and they thank you for making them eat their spinach and teaching them the value of good nutrition. And they're thanking you because you address their needs, not their wants.

Well Bob, on behalf of all of my listeners and your daughters, thank you for the wisdom. It was so great talking to you and I just know people are really going to enjoy this and this history lesson you've given us and also this really practical wisdom. So thanks for being here today.

It's such a great pleasure and I will get you the headshot of the bio shortly.

Oh, don't worry. We're going to follow up.

Thank you Bob.

Thanks. Thanks for listening to From Startup to Grown Up. If you like what you heard, give it a review on Apple Podcast so other people can find it. And if you know of a founder or someone else who is meant to be on this podcast, drop me a line through my website, alyssacon.com.