INVESTOR'S BUSINESS DAILY WEDNESDAY, APRIL 22, 2009 A3

LEADERS & SUCCESS

IBD’S 10 SECRETS TO SUCCESS
Investor’s Business Daily has spent years analyzing leaders and suc-
cessful people in all walks of life. Most have 10 traits that, when com-
A Gem Among Venture Capitalists
bined, can turn dreams into reality. Each day, we highlight one. Get Out Front: Arthur Rock saw early that Intel and Apple were winners
3 TAKE ACTION: Goals are nothing without action. Don’t be afraid to
get started. Just do it.
BY REINHARDT KRAUSE
pletely different business culture,”
INVESTOR'S BUSINESS DAILY
Rock’s Keys Ante said. “Back then if you left a

Energize The Employed Arthur Rock had his own way to

take the measure of a man.
What: Helped land the money
to start chipmakers Fairchild
Semiconductor and Intel.
company (to form a startup) it was a
sin. Arthur Rock was the first finan-
cier to appreciate the importance of

3
Many news stories feature
layoffs and dismal unemploy-
ment numbers. But more
than 90% of Americans are
still employed. These folks
are dealing with the loss of their col-
leagues and the burden of extra re-
sponsibilities for no additional pay.
Right now, a manager’s toughest
job is energizing his staff, keeping
workers as productive as possible,
says Steve Zaffron, CEO of global
consulting firm Vanto Group. In
“The Three Laws of Performance,”
which he recently co-authored, he
shows how to achieve that goal.
Zaffron has advised 300 firms in
20 countries on this topic. San Fran-
cisco-based Vanto’s clients include
Apple, GlaxoSmithKline and Heinz
Northern Europe. He and Clotaire
Rapaille, a medical anthropologist
and psychologist, share tips.
00 Clear it up. “Share information
with people with whom you don’t
normally share,” Zaffron said.
Speak to employees directly and
make sure you address what’s on
their minds. Otherwise, they’ll be-
lieve the rumors they hear.
00 Consider perceptions. When
we do something, it usually makes
complete sense to us. But when oth-
ers make choices that puzzle us, we
might ask, “Why are they doing
that? It doesn’t make any sense.”
Understand that situations appear
differently to each of us. Put your-
self in employees’ shoes. Then their
responses or actions will make
more sense. Zaffron suggests asking
yourself: “What processes, dia-
logues and meetings can I arrange
so that people can feel like co-au-
thors of a new future, not merely re-
cipients of others’ decisions?”
00 Pay attention. Listen for oppor-
tunities from stakeholders at all lev-
els and functions, inside and out-
side the firm, Zaffron says. He once
worked with Reebok when it faced
falling market share. He advised the
CEO to sit down with departments
to listen to their ideas. Those ideas
led to expansion outside of shoes,
into new fitness areas.
00 All for one. Teach employees
that by doing their jobs well, they’re
helping lift the firm. “Remember,
leadership isn’t a function of posi-
tion,” Zaffron said. “Leadership can
be provided by anyone.”
At the Ritz-Carlton hotel chain,
former President Horst Schulze
treated each employee’s job as key
to achieving the goal — pleasing the
customer, Rapaille told IBD. When
the Ritz opened a new hotel,
Schulze would work as doorman
for part of the day, then wash dishes
and clean rooms alongside employ-
ees. He’d talk to them about how
their job performance directly im-
proved customer satisfaction and
the entire hotel chain’s success. He
taught them that each was a leader.
00 Commit to integrity. Do what
you say. It sounds easy, but many
companies don’t, says Rapaille, who
wrote “The Culture Code.”
Years ago, Rapaille consulted with
AT&T, where the motto was “right
on time.” But its managers frequent-
ly started meetings 20 minutes late.
“Do you really care about ‘right on
time’ or not?” he asked.
“The airlines are a bad example of
this,” Rapaille said. “They say
they’re concerned with security,
but then someone tests their system
by easily walking on board with a
gun. So customers know they’re not
really concerned about security.”
Gloria Lau
When money-seeking startups
knocked on his door, Rock looked
for “intellectual honesty” in wanna-
be entrepreneurs, not just promis-
ing business plans.
Rock’s money smarts and guiding
hand turned feisty Silicon Valley
startups into some of the nation’s
biggest technology companies.
The venture capitalist played a key
role in launching Fairchild Semicon-
ductor, one of the first chipmakers;
tech conglomerate Teledyne;and in-
dustry giants Intel and Apple.
An investment banker before turn-
ing venture capitalist, Rock didn’t
have an engineering resume that
might’ve sparked his tech startups.
He graduated from Harvard Busi-
ness School in 1951, then joined the
corporate finance department of
banking firm Hayden, Stone & Co.
in New York City.
Chipping Away
Rock, now 82, had a knack for find-
ing gems in the business rough.
“I invest in people, not in technolo-
gy,” Rock said in “Done Deals,” a
book from the Harvard Business
School Press. “I was always interest-
ed in investing in people. So I spent
a lot oftime with would-be entrepre-
neurs to see whether they were mo-
tivated and whether they were intel-
lectually honest.”
Among the scientists and engi-
neers Rock believed had fire in their
belly: Fairchild co-founders Gor-
don Moore and Robert Noyce, both
of whom launched Intel in 1968; and
Apple co-founders Steve Jobs and
Steve Wozniak.
In a 2007 interview at the Comput-
er History Museum, Rock shared
his startup evaluation: “I’m not
enough of a technologist to be able
Rock,atCalifornia’sComputerHisto-
ry Museum in 2007, spotted Apple’s
wizardry at a computer show in 1977
and knew “we had something.”
tounderstand whatmost of these en-
trepreneurs are about technically.
The way I went about it was to
spend a lot of time with these would-
be entrepreneurs. The main thing is
are they honest? By honest I don’t
mean taking money out of your
pocket, but intellectually honest. Do
they see things the way they are and
not the way they want them to be?”
Rock’s role didn’t end with provid-
ing capital, advising on strategy and
recruiting management.
As an early-stage board member at
a few firms, he showed startups
how to build a business and aim for
industry leadership. With Intel, he
served as its first board chairman
and was a director for 30 years, all
the while attending staff meetings.
“Art consistently tried to build
great companies and did,” Pitch
Johnson, co-founder of venture
firm Draper & Johnson Investment
and founder of Asset Management,
told IBD. “Great venture capitalists,
and Art is among those, know how
to share a commitment to success.
It’s a sports coaching type of skill,
motivating and building a desire to
How: “Art understood what
semiconductors could mean
back in the late ’50s,” said Pitch
Johnson, venture capitalist.
compete and win.
“Art could provide capital and pro-
vide advice and guidance. But he
also had a third role, by showing
commitment — devoting yourself
for success, disciplining yourself for
success, to make the right decisions
to be successful. That helped him
build great companies.”
Silicon Valley, where Rock landed
in the early 1960s, was 3,000 miles
from Rochester, N.Y., where he
grew up. Born in 1926, he was an
only child. His father, Hyman, a Rus-
sian immigrant, operated a candy
store, where the boy worked as a
sales clerk and stocked shelves. He
also peddled magazines in town.
After graduating from high school,
Rock served in the Army for a year
as World War II wound down. He
attended Syracuse University on
the GI Bill, graduating with a bache-
lor’s degree in business administra-
tion before earning his MBA.
In 1957, Rock still worked for Hay-
den when he tried to raise money to
start Fairchild Semiconductor.
Eight scientists left Shockley Semi-
conductor to start the new outfit.
Rock persuaded Sherman Fair-
child, founder of Fairchild Camera
& Instrument, to bankroll the start-
up. The scientists were called the
Traitorous Eight after leaving
Shockley, and helping unhappy
campers start anew was brazen,
says Spencer Ante, author of “Cre-
ative Capital: Georges Doriot and
the Birth of Venture Capital.”
“In the late 1950s, there was a com-
technology, and now leaving compa-
nies to innovate is viewed as a posi-
tive thing.”
In 1961, Rock left Hayden and
moved to California to form a new
outfit, a venture capital partnership
with Tommy Davis, a vice president
at Kern County Land Co. in charge
of its investment diversification pro-
gram. Over the next seven years,
Davis & Rock invested $5 million
and returned $100 million to their
15 or so investors. Venture capital-
ists make money when startups go
public or are acquired.
Davis & Rock invested in about 15
firms, including Scientific Data Sys-
tems, acquired by Xerox in 1969.
Rock built trust with key Silicon
Valley people. When Moore and
Noyce grew tired of Fairchild, Rock
wrote up a business plan for Intel.
“I raised the money (for Intel) just
on the telephone in something like
two days,” he said.
Apple In His Eye
He founded San Francisco-based
Arthur Rock & Co. in 1969, and in a
few years faced competition from
tech-savvy venture capitalists.
Rock had one big deal left in him.
Mike Markkula, a former marketing
VP at Intel, asked Rock to hook up
with Apple’s Jobs and Wozniak.
At first, Rock was put off by the
two computer geeks. But a 1977 visit
to the Homebrew Computer Show
in San Jose convinced Rock that
Jobs and Wozniak were for real.
“In this big auditorium, all these
companies were there showing off
their gear,” Rock said. “Everybody
at the show was around the Apple
booth. I could not even get close to
see them. At that point, I knew, well,
maybe we had something.”

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