Are Oregon Business Execs too nice?

John Calhoun

The question is: Why is it that we haven’t had more bad-ass execs that create billion dollar companies from the ground up or by acquisition? In the survival of the fittest, why are Oregon companies the acquired rather than the acquiring?

I finally got around to watching “Social Network”, the story about the founding of Facebook. As those who have seen the movie know, it portrays the principle founder of Facebook, Mark Zuckerberg, as a predatory egomaniac willing to sell out his friends in order to make himself and his company the dominant player in his industry. He is totally driven by his goal to be number one and nothing will stand in his way. He cares not a whit for relationships that do not help him meet his goal. He is quite willing to lie, cheat and betray to be successful.

While the details in the movie are open to debate, and Hollywood always seems to play fast and loose with the facts, my experience says that there is probably a lot of truth in the message that Zuckerberg was not a nice guy. When I met Bill Gates back in the 80’s he came across just like Zuckerberg. In fact, when I was watching the movie, I had flashbacks to my meetings with Gates. Larry Ellison of Oracle has a similar reputation. At Intel, the nice guy founders, Robert Noyce and Gordon Moore, made the single-focused, driven Andy Grove the CEO.

The old saying is “nice guys finish last” and while it is not always the case, there is some truth to the saying when you are talking about the creation of major corporations. Beyond the examples above, think about the Robber Barons of the last century. Rockefeller, Vanderbilt, and Carnegie would have been right at home with Gates, Zuckerberg and Ellison. (As an aside, we now remember Carnegie more for his libraries than his ruthless, anti-labor stands and thanks to Melinda, Bill Gates may be remembered more for his fight against deadly diseases than destroying his competitors.)

So what does this have to do with Oregon? Well the only one here that fits this model of super aggressive, dominating personality is Phil Knight at Nike and Nike has done quite well thank you. After that it is hard to find a company created in the past 50 years in Oregon that has come close. Meanwhile, in addition to Microsoft, Seattle has Starbucks and Amazon.com. At the same time, Oregon has lost and continues to lose many company headquarters to outside acquisitions; big timber companies like Louisiana Pacific and Weyerhaeuser, banks like U.S. Bank, and dozens of smaller tech companies. Even today, one of our remaining bigger companies, Mentor Graphics, is under attack from Wall Street bad boy Carl Icahn who wants it sold off to a more aggressive owner.

The question is: Why is it that we haven’t had more bad-ass execs that create billion dollar companies from the ground up or by acquisition? In the survival of the fittest, why are Oregon companies the acquired rather than the acquiring? Why did U.S. Bank get acquired by a bank in Minnesota rather than acquiring banks across the country and making Portland a banking capital? Charlotte, North Carolina was not a national financial center 50 years ago. It is today.

While this may seem to be just so much corporate drama for the movies, the result is that we have only a handful of large corporate headquarters in Oregon. The lack of these offices is one reason why we are a poorer state reflected by our lower than average per capita income. Those corporations increase the tax base and provide charitable donations and foundation grants for the community.

Now the Oregon business lobby wants Salem to make a lot of policy changes that they say will help the business community grow and provide more jobs. Maybe, just maybe, Oregon’s lack of large corporate HQ’s has nothing to do with government policy, but everything to do with the fact that people in Oregon, including our business leaders are just too damn nice.

And frankly, I wouldn’t have it any other way.

Comments

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    John, as you know, this topic - why do Oregon companies get acquired instead of doing the acquiring - is one that has fascinated me for years.

    The question was first posed to me by Patricia McCaig over a decade ago.

    Time and again - Fred Meyer and Willamette Industries are two more examples - Oregon companies get acquired, rather than being the ones that swallow up firms elsewhere.

    "Too nice" is one possible explanation, though I suspect that's more a symptom than a cause.

    The explanation that I've finally landed on is this - admittedly without any empirical proof:

    Oregon is a nice place to live. People who move to (or stay in) Oregon do so for exactly that reason. As a result, our culture is such that people here don't do the rat-race 80-hour work-week thing (as much) as people who live elsewhere.

    In short, Oregonians have lives. We value weekends at the beach, up the mountain, on the trail. We value evenings at the local pub, or afternoons at Powell's or the library.

    And that means that when it comes to corporate raiding, we're much happier having our ship boarded by pirates - and sailing off on a golden lifeboat. The life of corporate piracy doesn't appeal to many Oregonians.

    Those Oregonians who do want such a life tend to relocate to Seattle, Silicon Valley, New York, and elsewhere.

    Portlandia says that Portland is a place where "young people go to retire". I think it's more accurate to say that Portland is where "50-something corporate executives would rather retire than become international corporate titans."

    Phil Knight, as you note, is our most prominent exception. But I think he's the exception that proves the rule.

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      I attended the Sam Adams/PDC meeting for the software industry cluster. One of the most striking things was the result of a survey they conducted of software people in Portland. Several of the questions addressed values, and while I don't remember the exact items or order, financial gain came in dead last.

      They related it all back to the "Fort Hall decision." People who wanted to get rich quickly went to California to the gold fields. People who wanted to build something lasting, but not necessarily get rich quickly, came to Oregon.

      Somehow, they posited, that is embedded in our Oregon DNA. They advocated that we turn that into a positive instead of wistfully looking to California and wondering why we didn't have the boom and bust cycles like the Goldrush that still happen in Silicon Valley.

      I'm not sure exactly what to think of all that, but it sure rang true for me. I tried Silicon Valley and left mostly because I couldn't stand the money attitude. Oregon is, after all, the land of the pretentiously unpretentious. That didn't play very well in California.

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    I couldn't tell if this was a gnashing of teeth, smug self-congratulations, or sour grapes?

    Dog-eat-dog business doesn't come to Oregon because there are better states for that.

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    aren't 90% of all jobs and all economic wealth thru small/medium businesses? why do we sweat the big companies? our efforts should be directed at fostering the businesses that are an organic part of Oregon, and we should be working with concepts like Jefferson Smith's "Economic Gardening".

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      "the government often defines small as firms with fewer than 500 employees. Using this definition,one-half of the private sector is populated by small businesses and the other half by large businesses. http://archive.sba.gov/advo/research/rs359tot.pdf

      Just as important, large businesses, think Intel or Nike, create many jobs in their small business suppliers, law firms, accounting firms, PR firms,etc.

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    John makes an excellent point, and he's right about the tax base and job creation.

    There are many reasons why a corporation locates in a specific area. They often cluster in cities where other large corporate entities exist because they can pull from the workforce, have a significant presence of large manufacturing companies nearby (within a certain radius), and exist where ease of travel is found. And, you'll often find corporations existing in states and/or cities with a large university presence. Tax rates (capital gains and others), along with tax incentives can also be factors.

    Kari also makes a good point that the typical corporate culture doesn't exist in Oregon like it does elsewhere.

    T.A.'s point is valid as the SBA reports that small businesses collectively create the most jobs overall (80% of all new job creation), but corporations employ the most people. So having a few large corporations would, as John said, not only provide more jobs in Oregon, but increase the tax base - which would bode will in Salem and at the local level.

    Economic Gardening is worthwhile, but it's only one aspect of economic development. Gardening typically focuses on growing and expanding local businesses, but leaves out recruitment. Recruitment plays a vital role, too, as it helps diversify the economy, and bring in new money, jobs, and investment. Both local expansion and recruitment are equally important.

    Corporations are also known to be large contributors to non-profit and other service organizations, etc. (And they're known to give to sports organizations...does PGE Park ring a bell?) According to the "Chronicle of Philanthropy" 68 American corporations (not identified), gave $3.9 billion in 2010. That's just 68 companies, so the overall giving of corporations is much larger than that.

    The link below is a good read, as it provides a case study on Boeing's move to Chicago in 2001. Tax incentives are often used to lure corporations, and I'd argue that Oregon (and Portland) aren't very competitive in this arena. (Which could very well play to the lifestyle issue discussed above.)

    "Of the many reasons, Boeing chose Chicago because of its overall geographic location, efficiency as a transportation hub and highly educated workforce."

    http://www.tradeandindustrydev.com/industry/manufacturing/corporate-headquarters-site-selection-441

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    "thanks to Melinda, Bill Gates may be remembered more for his fight against deadly diseases than destroying his competitors."

    Exactly. Robber barons almost always use charities to cover their tracks as well as to shape the future of society. What users of Microsoft remember about Bill, though, is that while he was the most ruthless at destroying his competitors, he didn't have, alas, the best software.

    Do we really want more a-hole corporate bosses in Oregon?

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      Bill Gates was on Jon Stewart a couple of weeks ago, and I don't think you could conclude that he was a jerk, in any respect. Those who do best at making lots of money are probably those who care a lot about making money. Shocking.

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    John

    I didn't care much about this when I lived here in the late 70s, but moving back here for the past decade, and this alternately puzzles and alarms me. The latter because I think we are or are in danger of losing pace with more entrepreneurial regions, and because I have watched more ambitious students, friends, and colleagues move out of state because the opportunities are limited here.

    Kari's account might be part of it. I don't believe all of what Jenny writes; the "build things that are more lasting" does sound self-serving. If true, it should have resulted in some successful businesses.

    My own additional diagnoses, based in large part on what I've seen in more dynamic areas (Bay Area, Seattle, Denver, Salt Lake City, Austin, RDU) are:

    1) Higher education. It continues to seriously harm our economic development. Every single one of the areas listed above has one or more major research institutions. We have none and our flagship state institutions are, to be blunt, mediocre at best.

    2) Business in Politics and Politics in Business.
    Who are our business leaders who get involved in civic life, beyond Phil Knight building sports facilities at U of O? Why aren't the Boyles more involved? Who are the other major business leaders in this town? At the same time, why doesn't the political establishment celebrate business success?

    3) Complacency. Ok so this is the controversial one. It's been referred to above as a desire to be raided and not raid. Or don't get rich quickly. I sometimes feel that we so precious, so inward looking, that we are unable or unwilling to look to other cities or states for examples or realize that we are in a competition for the best and brightest. After all, we are so great that people just flock to Portland, right?

    BTW Jenny, I don't know what you mean by the boom and bust cycle in Silicon Valley. They have been booming for the past quarter century, while we are in the fourth serious bust cycle of the past decade. If Silicon Valley is boom and bust, I'll take it!

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      I was, apparently rather inadequately, trying to paraphrase what I heard from the folks who did the study. The money slide in the presentation I linked to is the one about values that people here allegedly hold. Those surveyed were involved in the software industry, so may not be representative.

      The slide details the responses to the question "What are the values that you think best define tech professionals in our region?"

      80% responded Quality of Life. Other top values were community, independence, citizenship, knowledge, and innovation. At the bottom were Financial Success (20%) and Entrepreneurship (35%).

      The crowd was rather aghast at the results and spent quite a bit of time discussing things like "firms don't want to locate here because people don't want to work 80-hour weeks" and "no wonder we get so little venture capital."

      The study authors (Fuse?) contended that this is part of the region's cultural DNA and made the reference to the Fort Hall decision.

      As I recall, the study authors talked about Silicon Valley companies' propensity to hire/layoff/hire/layoff constantly. A company skyrockets, then falls, then everyone runs off to the next big thing (a la Goldrush). So, the boom and bust refers more to a cultural (get rich quick) style. Rather than our style, which is more...complacent. I hope that clarifies things.

      While the Valley may have boomed for awhile, I saw several periods of up and down while I lived there in the 80s, and certainly people got laid off frequently as firms arose and disappeared, although there were more jobs to go to. If you worked longer than two years at the same place, it was considered bad on your resume.

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        As a long time tech employee both in Silicon Valley and in Oregon I want to confirm that Silicon Valley has a very high boom-bust cycle. Paul is wrong to say there is a one way trip up in Palo Alto. Remember the dot.com bust? Huge negative impact in Santa Clara county, made the drop here seem mild. Comes with the territory of cyclical manufacturing. Always has, always will.

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      I absolutely agree 100% with Paul's #1.

      Portland is unique - at least with respect to major cities that most of us would consider competitive or comparable - in that we do not have a major national research university serving undergrads and grad students in the Metro area.

      Denver, Seattle, Minneapolis, San Francisco, San Jose, Los Angeles, Salt Lake City, Boston... Portland is the outlier on that list with respect to higher ed.

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    There was an article I read last week,(can't find it right now) that polled hyper successful business owners on their motivations. Guess what. It isn't money. It is winning. Their driving force was to be the best whatever they could be.

    Not sure that mindset is valued here.

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    Thank you for the interesting article. I know many people in the Portland Metro area who are willing to work themselves to the bone in order to try to hit a home run in their business. It does not matter what type of business, and certainly food and beverage and retail folks work every bit as hard as corporate types to try and be successful. And although I don't know too much about programmers or IT people, I assume they are out there right now working 24/7 to create value for themselves and their employers. In my own profession I think of the first and second year associates at big law firms working 70 or 80 hours a week.

    But all things considered, at least from my standpoint Portland does not project a "vibe" of young people willing to sacrifice themselves on the alter of commerce to gain treasure for themselves and their dependents. I tend to agree with those who value family and freedom over personal profits, but I wonder if that has a negative influence on Fortune 400 companies considering a move here.

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    I’ve pondered, and come to no conclusions, on related questions. If much of the future global economic growth is going to take place abroad in emerging markets (in places like China, India, and Brazil), why is there no public interest in Oregon in tapping into those markets and increasing our export of goods and services? For example, President Obama has an effort underway to double our national exports in four years. Yet no political or business leader in Oregon has uttered such an Oregon related goal. The economic opportunities are out there. Some of our businesses go after them (Nike, Intel) but there is little public focus, support or even discussion of possible ideas on how to increase exports.

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    John

    I do remember the dot com bust. Seems like Silicon Valley has recovered pretty well, yet "Silicon Forest" is a dim memory.

    I bet if we look at wealth creation, unemployment and income numbers, San Jose has outpaced us by a huge amount in the last 40 years.

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      You are right that in the race for wealth, Oregon vs. Silicon Valley, is no contest.

      You are wrong to say that Silicon Forest is a dim memory. Intel's new factory, TriQuint out of capacity due to product demand, Tripwire ready to go public are all signs that it is not a distant memory. We did lose out on the dot.com boom (no Amazon, no Google), but we have added more solar cell companies than any other place in the country. What you haven't seen yet is a huge impact on employment, but employment in the industry is growing and should accelerate.

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      I was in San Jose this last fall when it was announced that, for the first time in as long as anyone's been tracking it, Manhattan NY was no longer the county with the most millionaires in America. Santa Clara CA now tops the list.

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    Good, bad, or indifferent - Oregon has a reputation. (Portlandia is a good indicator. Portland, Salem & Eugene embrace it while the rest of the state is probably chagrined.) On the plus side, many young (and a lot of older) people want to move to Oregon. Conversely, "The American Dreamers" think Oregon is a fine place to visit...

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    The answer to this question is obvious to anyone from another state the first time they pull up to a 4 way stop in Oregon. Nowhere else in the country will you see traffic congestion because 4 drives are all stuck waiting for the other to go first.

    In all seriousness, huge successes like Intel, Google, Facebook and Microsoft are the rare exception. It is important to note that Oregon does well by these companies, even without having their HQ. Oregon is the largest Intel site in the world - not their Santa Clara HQ. Google and Facebook have made major investments for Data Centers.

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      Even if we aren't getting HQs, we can still get operations and the jobs that go with them. Like Intel. Also, from a new NPR story about Portland demographics:

      Recently, Sun Microsystems was trying to decide whether to close a plant in Portland or in California's Silicon Valley. The company asked employees from both places if they would relocate.

      "And the responses were night and day," Kaylor says. "The skilled California workers they wanted to keep were enthusiastic about relocating their families to the Portland area. The Portland employees who were skilled indicated that they would quit rather than relocate in the Bay Area."

      Final score: One more high-tech plant for Portland, one less for Silicon Valley.

      On the balance, I'm not sure the lack of Fortune 500 company headquarters is necessarily a bad thing. Yes, our universities, museums and symphonies could be better endowed -- but we're still a highly livable community (as noted in the article, people are voting with their feet) and I'm not sure what we're missing that a major metropolitan area SHOULD have. A better research university? A major league baseball team? A public aquarium? Whatever we are arguably "missing" from the Portland metro area, it seems to me to be a very short list.

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        This is more supposition then verifiable fact, but I think big companies tend to offer better opportunities at the entry level. They have more slack capacity that can be directed at training and documentation. Put it this way- to the small business owners, how often do you bring in someone with zero experience?

        You ask what Portland is missing, I'd say it's missing entry level jobs and in a big way.

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      Nowhere else in the country will you see traffic congestion because 4 drives are all stuck waiting for the other to go first.

      Well, if movie scenes are hat tips to culture, I'd check out the opening sequence to L.A. Story (starring Steve Martin). Apparently, they do that in Los Angeles, too.

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    This article really started me to thinking. I have been in the Salem business community since 1993 an am very familiar with hundreds of business owners here. I cannot recall one instance where I have ever heard of a business owner planning any type of growth that wasn't organic. Never heard any talk of M&A activity on any level.

    Makes me think that many small businesses are nothing more than jobs for the owners. If they can grow to the point of having 5-10 employees, great. But I don't get the feeling that hyper-growth is what they want. Sure, some small businesses grow to be rather large, employing 100+ people, but that seems to be the exception rather than the rule here.

    I must confess that I am doing the same thing. I have set my business up to be essentially a one man operation. Give me a computer and an internet connection and I can run this business from anywhere in the world. I only consider growth from product line expansion and market share growth.

    Thanks John for making me think about this. You might have nudged me in a slightly different direction.

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      There is a lot to say for running a personal boss. Once you start adding staff you add people problems. If you add investors, you no longer control your destiny. There are a lot of trade offs, but if you want to make a bigger impact you have to face them.

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      Sure, some small businesses grow to be rather large, employing 100+ people

      And still, the federal government defines "small business" as under 500 employees.

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        No one ever claimed the Federal Government was perfect. I would guess that most business owners would consider 100-500 as a "large" business.

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    John,

    As noted in Luring, Growing, and Retaining Corporate Headquarters and Management Offices: A Research Report Prepared for the Associated Oregon Industries Foundation by two Willamette University professors, there is little that the state can do to keep headquarters in an age of mergers and aquisitions, and they question whether HQs should really be the goal.

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