Bootstrapping, sustainability, work/life and profitability. In this wide ranging special edition of the Tough Things First podcast, guest host Erik Huberman, the Founder & CEO of Hawke Media, grills Ray Zinn on the entrepreneurs life, and how their unique vision drives all things possible.
Erik Huberman: Hi. You’re listening to the Tough Things First podcast. I’m Erik Huberman, your guest host today, Founder and CEO of Hawk Media. I’m joined by Ray Zinn. How are you Ray?
Ray Zinn: I’m doing great. Thanks for hosting this podcast for us today, Erik.
Erik Huberman: No, yeah. It’s truly an honor to talk to you. I’m going to start with a pretty straight forward question. You obviously talk a lot about tough things first, and I would love to first off talk a little bit about your background. Would love you to get people up to speed on the impressive man that you are, and really go into the tough things you had to deal with, and what you focused on first, and what brought you to this philosophy.
Ray Zinn: Okay. Well, first off, I’m 80 years old. 80 years young, as Erik says. I’m 50 years older than Erik. Erik is just 30. I started Micrel 37 years ago, actually 40 years ago now. Erik, of course, just started his company just a few years ago. So, we’re in totally different time points in starting our companies. I started Micrel in 1978 with my own money, because I wanted to own the company. I didn’t want to have anyone tell me how to run the company. Probably one of the toughest things I had to do was be able to run the company profitably because we were bank funded, and you can’t run a company with bank funding unless you’re profitable. So, that was the big challenge was having a start-up that didn’t lose money.
That’s a challenge for anybody who thinks about, start a company from scratch and not lose money, because in the first year of operation, I could only have one quarter, three months, that I had a loss. That one quarter it could not be such a significant loss that it cost me to go negative for the whole year. In other words, I had to maybe lose money in one quarter, but be positive for the entire year.
How do you grow your business when you’re a start-up, no customers basically? Then on top of that you can’t lose money, because you have to pay people. Every two weeks they want to get paid. So, I had to change the strategy of my business that I originally had not had to do or not proceeded to do, and that is to run it as a profitable business. So, I operated as a service, much like you did, Erik. Your startup is very similar to mine. I offered a service. That was a [inaudible 00:03:00] service as opposed to marketing service like you’re doing, but still it was a service a business so I could have that cash flow. It wasn’t until 1985 that I had sufficient revenues coming in that I could literally start building my own products. So, we did. In ’85, we began looking at developing our own products as opposed just offering services, similar to what you’re thinking about doing, I think.
Erik Huberman: Yep.
Ray Zinn: Even though it was 40 years ago, business is business. You still want to run your company profitably, and that’s the challenge. So, doing the tough things means that some of the things that you would like to have like fancy offices, or lots of perks, and stuff like that, we had … and a big salary for two years, I didn’t even draw a salary. So, it was tough. Learning to do the tough things was really what propagated Micrel into being the company that it was when I sold it. So, that’s kind of in a nutshell a little bit about me and how I started mine, Erik. I think it’s similar to what you did, or what you’re doing, and kind of what you’re going to be facing. ’78 to ’85, so let’s say seven years or six and a half years, I operated as a service company.
Erik Huberman: Mm-hmm (affirmative). Makes sense. My question to you is, because it actually is … bizarre as it may seem to people like you and I, it’s unusual to run a business bootstrapped or for profitability these days. You would think that that would be the point, but these days it’s much what’s hyped in the news, what’s talked about is fundraising, venture capital, raising as much money as you can, grabbing market share, beating other people out.
You see companies like Uber who have never had unit economics, but their whole goal here is to make it so no one else can operate in the industry. Even Amazon, which is now been publicly traded for a long time, has only shown a profit one quarter and it was an accident, because they really want to squeeze everyone out. So, why do you think … Do you think it’s better to run a profitable business versus a company going that route? Why?
Ray Zinn: Well, again, if you want to be a unicorn, then you’re going to operate like Uber, or Amazon, or Facebook and Google. They have a different strategy. I’m not knocking them, but that’s not what I wanted. Again, I was building a company for people. I wanted an enduring company that provided people a way to make a living. So, I wasn’t looking at a in and out scenario. My strategy for the company was to build an enduring business that could last on into the centuries. It didn’t, but that was my goal when I started the company was to provide an opportunity for people to actualize an income for their family.
I wasn’t worried about me or my investors. I was focused on building a company as opposed to just building products. I wasn’t trying to run anybody out of business. I wasn’t trying to monopolize the market in my particular area of expertise. I just want to run a nice company and want to run it profitably. So, that’s what I focused on. I didn’t focus on running people out of business.
Erik Huberman: Yeah. Well, that’s interesting. It’s funny to me, and I’ve seen it now with a few companies, your outcome, even though you never intended on selling the company, your outcome personally was actually much greater than most people’s outcomes that end up selling unicorns because you personally own so much of the business that even though the business itself didn’t sell for the same amount maybe one of these unicorns will, your personal ownership in it was so great, you still had a better outcome that also seemed to be less risky, to be honest. You always ran it profitably, so there was no burn rate, there was no begging people for money, it was like you ran a good business.
So, it wasn’t this risk of just completely falling apart all the time, which you have with the other strategy. It’s just always interesting to me that this almost more conservative strategy of building a good business actually can have a greater outcome than a lot of these high flying unicorns. I’ve been studying it a lot recently, and it’s just interesting to see that it stays consistent. You talk about the age difference, we have actually a 49 year age difference. I turned 31 a week ago. Even in that difference in terms of … It doesn’t change. Business doesn’t change.
Ray Zinn: No.
Erik Huberman: If you run a profitable business, you’re going to sustain. Things like economic shifts don’t affect you as much. They still affect you and you might have to slim down a little bit, but you don’t worry about not being able to raise capital, which is a big problem in these economic downshifts.
Ray Zinn: Exactly. Again, I want to reinforce or restate that I didn’t start the company to make a lot of money. I wasn’t saying, “Hey, I want to become this filthy rich guy.” That wasn’t why I did it. I wanted to have a company that was a real company that hired real people that did real work. I wasn’t worried about, as I said, running people out of business. I wasn’t planning on taking over the world. That wasn’t the goal. If that’s what other companies want to do, fine, but that’s not what my intent was. I want to start a company, have it profitable, not having to go out looking for funding every six months.
So, I ran it profitably. I had positive cash flow and was successful in selling the company for a great deal of money, but that wasn’t the goal. That wasn’t why I did it. I did it because I wanted to build a company for people. I know that sounds a little bit corny, but that was what I did. When I started Micrel in ’78, the average age of the employees was 28. When I sold the company in 2015, the average age was 55 not because I hired older people. It’s because they were loyal, stayed with the company, and we didn’t have layoffs. So, just naturally the population after 37 years is going to age. These are very capable, very good people. We were very successful. Profitable every year except for one year. We only had one year that I lost money. I lost $50,000 in 2003, and that’s because I consolidated two dabs onto one. As a consequence, I had to write $29 million off, but I only lost $50,000 when you look at it on a gap basis.
I’m very proud of that over 37 years of only losing $50,000. I never had to go back out raising money. From the day I launched the company, never had to do it. One of the goals that I … In fact, I mentioned this in my blog and in my podcast that if you’re going to start a company, raise enough money to take you to profitability. Don’t start the company unless you can get to profitability with what you’ve raised.
Erik Huberman: Yep. I totally agree. Again, unless you want to go down that other strategy which has worked for a few people, but rarely it works. You just touched on something we were talking about earlier, which is the idea of age in the workplace. It’s actually very similar to us. Again, there’s a lot of parallels here. Our average employee age started at probably 26, 27, and maybe now is 28. It hasn’t really aged up that much. There is a propensity with start-ups in Silicon Valley and just the start-up culture to really hire young people, which it sounds like the same thing you did when you first started your business.
It can create a little bit of ages on where you’re looking at young people for the sake of being young as opposed to who is the most skilled at the job. What are your thoughts on what’s going on in Silicon Valley with kind of the older demo that is still totally capable, if not more capable, has more knowledge, and is finding hard time getting work?
Ray Zinn: Well, that’s a very good point, Erik. We didn’t intentionally hire young people. It’s just that the population that was available to me to hire, they were young. Our industry was young. It founded itself in 1957, so you’re talking only 20 years when I started Micrel. So, I didn’t have an aging population to pull from. I wasn’t intentionally hiring younger people, it’s just that it turned out that the average age of my employees was 28. By the time 37 years rolls around, our average age was 55 because the people stayed with the company and just got older.
With age comes wisdom. The fact that some of the unicorns have an unofficial policy of not hiring anybody over 45, I think, poses a problem for them, because in another 25 years, they’re going to have a population over 55 unless they have a forced retirement at 50. If they do, then of course they can keep the age down. We didn’t have that. We didn’t force people to leave, so the average age has matriculated up over time. That’s why we ended up at 55, average age of 55, when I sold the company. I think it’s a shame that these unicorns, which they tend to thrive on the yuppie type of age class to run their companies, because they feel that older people can run out of gas, long in the tooth, which is not true.
Erik Huberman: No, I agree. I actually got some great advice recently, which I’ve seen come to fruition with some of our hires. There’s definitely a time and place to have young people in the way you’re hiring. Again, I’ve talked about our average age here. There’s something to be said about someone that’s already been there. If you want to create a Super Bowl team, hire someone that’s already been to the Super Bowl and won. If you want to create an all-star company, bring on talent that’s already been there at times. That doesn’t mean everyone, but it should be a balance. I don’t think I would agree that everyone should be over 45 either. It should be a balance, but the idea is, if you can pull in some senior talent that has already been in the end zone, so to speak, has already done what you want to do and can help you avoid pitfalls.
It’s the same reason people, frankly, hire my company or probably hired Micrel back in the day with … You can do one of two things, try to do this yourself and fall into every pitfall everyone else has, or hire a consultancy or a service business that can help you avoid those pitfalls and can navigate it for you. It’s the same thing with hiring senior people. They’ve already done it.
Ray Zinn: Yeah. It’s interesting, in professional sports, they call it a young man’s game. I understand. I mean, football players tend to retire before they’re 40, because it’s a very strenuous sport and that’s the kind of age that these guys tend to retire. That’s kind of the name of the game in that sport. In our business, that’s not true. It’s not a young man’s game, even though some of the unicorns would tell you it’s a young man’s game because it seems like they believe whatever, that the older people just don’t have the energy, the enthusiasm, the drive to work 24/7, as they say, and run these kind of businesses. It’s an atmosphere that they want to develop where they have all these younger people around, and the older people, because they say, the age difference, it just becomes a problem for them. So, they tend not to hire people who are over 45.
Erik Huberman: If there’s one thing I’ve learned is, that mentality of having to work day and night all the time is not the most productive thing. Don’t get me wrong, sometimes it takes hard work. My business partner, who I would not trade for anything, is generally in here 9:00 to 6:00. He comes to work 9:00 to 6:00 every day, and he is unbelievably productive. He gets everything done, and then he gets to go home and spend time with him family. That’s his priority. You need both.
Ray Zinn: That’s a good point, Erik. In my mind, if you have to work 24/7, or let’s say classic … They even brag about, “Oh, I had to work 80 hours a week.” That’s ridiculous. I mean, if you have to work 80 hours a week to run your company successfully, you’re just not a successful leader. In my mind, 50 hours is kind of the max. If you can’t get your work done in 50 hours for whatever reason, you have to look at your problem. You have an issue that you need to resolve. I didn’t require my people to work over 50 hours a week.
I had a partner very similar to yours. My partner came in at 10:00 and went home at 10:00 at night. That’s what he wanted. So, he worked 12 hours a day, but that was his … I didn’t ask him to. That was his lifestyle. He came in at 10:00 in the morning and went home at 10:00 at night. I didn’t encourage it. In fact, I said, “Warren, you’re setting a bad example, because people think you have to work late because you’re there late.” He says, “Well, that’s the way I want to work.” That’s okay. That’s free agency, and we allowed him to do it.
Erik Huberman: Yeah. I think that’s part of it, I think the good thing here. I work longer hours than most, but that’s because there’s all these other things I can be doing that I’m having fun doing. I totally agree. If I find myself having to work 60, 70, 80 hours and not being able to get away from it, I’m doing something wrong. There’s things that are … I love what I do. I’m young. I don’t have a family to go home to yet. I have a fiancé, but she’s also very accepting right now of the choice to work hard. That being said, I don’t expect it of our people. I expect them to show up when they need to. There are going to be times where they have to work a couple longer hours, but generally that expectation, I think, is ridiculous.
Again, it’s counterproductive. People need a balance to be a productive employee, or you’re asking for just … It’s ridiculous. You don’t get well balanced people, which I think is what we’re seeing in a lot of software companies in the Valley. They’re not creating things anymore for the common person that doesn’t want to be super-efficient at their desk all the time, which seems to be what everything is after these days.
Ray Zinn: You’re going to get married here in the next year, and I promise you that if you don’t set aside time for you and your wife and your family, you’re going to lose them. You’re going to lose them in ten years. You’ll be one of the statistics. So, if you want a long-lasting marriage, and that’s the most important thing in my life is my marriage … I’ve been married 56 years. I have 22 grandchildren. Four children, 22 grandchildren, and six great-grandchildren. I’m proud of the fact that I did not have to work Saturdays and Sundays. Maybe I worked ten hours a day, but I didn’t have to work weekends.
I was made sure that I was home in time to at least work with my children on their homework and help them with their various activities at school. I was involved and engaged. I made sure that they didn’t suffer because of my work. If your work becomes your life, then you’re going to lose your family.
Erik Huberman: Yeah. I totally agree. That’s actually one of the reasons I put in the time now is so as the family starts to grow, that’s not going to be a sacrifice I have to make and also something I’m totally respectful with my business partner. I think that’s important, which again, goes back to the idea of the older generation not wanting to put in the hours that the younger generation is. First off, I don’t think you should be driving the younger generation to do that.
Ray Zinn: Exactly.
Erik Huberman: The younger you are, the more full of life you are, the more you want to take advantage of that age. I’m lucky enough to even … For the past few years, I’ve had a good balance. I’ve been able to do some really cool, fun things in my twenties that I’m glad I did that weren’t just focused around work. You want to set yourself up, but it’s always about a balance because you don’t want to be that person that hits mid-life crisis and goes, “I missed all this because I was working too hard.” You know?
Ray Zinn: Your family too, you don’t want to miss their growing up years either. Do you have any other thoughts or questions you’d like to cover during this podcast?
Erik Huberman: I’m going to close out with the same question I opened with, actually. When you’re talking to entrepreneurs when you say, “Tough things first,” what is the tough thing you most commonly see them avoiding when you feel that that is a necessary … I know that all your investments that you make, you have them read your book. What are you trying to drive that you actually think that … What’s a behavior you’ve seen that you think you’re solving there?
Ray Zinn: Yeah, that’s loving the things you hate. Most people procrastinate. They put off doing things that they should do in a timely way, and that’s called procrastination because they don’t want to do it. They hate it. Learning to love the things you hate, it’s a real art. It’s a goal. It’s something that you should strive for is to … Any of the listeners that think there’s something that they don’t want to do, they got to go out and do it now. Do it right now. What you’re going to find is, like Emerson says, “That which we persist in doing becomes easier,” not that the nature of the task becomes easier, but our ability to perform it becomes better.
Erik Huberman: Yeah.
Ray Zinn: Stick with a task until it sticks with you. That’s what I’ve seen is that people tend to ignore, leaders and entrepreneurs, tend to ignore doing the tough things. They tend to put them off or delegate them to someone else. Any leader, entrepreneur, that can learn to do the things they don’t like doing and doing well, that’s the ones that are going to succeed.
Erik Huberman: Couldn’t agree more. Well, Ray, thank you so much for allowing me to guest host your podcast. I definitely hope to do this again soon.
Ray Zinn: Well, again, I thank you, Erik, for joining me today. I admire you for starting your very successful company. You’ve done well. I think you’re up to 100 plus people now, and that’s really remarkable given you only started you … about three or four years your company is. You’ve done well, and I applaud you for what you’ve accomplished. Again, if you’re interested in seeing what Erik is doing, look him up on hawkemedia.com. It’s a h-a-w-k-e media.com.
Erik Huberman: Thank you.
Ray Zinn: Again, I want to refer the listeners back to Tough Things First, our website, toughthingsfirst.com or pick up my book from Amazon under the same name. Try to read it, and put it in practice, and you’ll become successful. Again, thanks again, Erik, for joining us today. Look forward to talking to you again.
Erik Huberman: Absolutely. Thank you as well.