Methods of Prosperity

Last week on Methods of Prosperity:

Charles Koch is a politically active libertarian who is against corporate welfare. He opposes special privileges to businesses. He believes in free markets for fair competition. Koch has developed Market-Based Management (MBM). It’s his philosophy. He believes in running businesses like markets. His philanthropy promotes free markets and limited government. He believes in empowering others to be contribution-motivated and creating value for others. Koch advocates for self-actualization to benefit the individual and the organization.

The following is Methods of Prosperity newsletter number 22. It was originally deployed November 16, 2023. As of July 25, 2024, original subscribers have received up to issue number 58: Howard Schultz (continued).

TL;DR

Larry Ellison is the co-founder of Oracle. Oracle Corporation is a major computer technology company. Founded in 1977, it’s a prominent global leader in cloud computing for businesses. It specializes in selling database software, cloud engineered systems, and enterprise software products.

In college he discovered computer programming, but he also discovered a greater revelation. That is, it’s more profitable to get paid by the program than by the hour. Another discovery informed his success. Experts and authority figures can be good examples of how to be wrong.

Key lessons:

• Nothing is more important than people.

• Make work and play the same thing.

• Don’t conform to be accepted.

• Think from first principles.

• Always question authority.

• Explore your interests.

• Learn to code.

We’re improving quality of life at scale for hard working families.

Inveresta Holdings LLC is seeking capital partners, brokers, and motivated sellers. You’re invited to secure your place on our waitlist now. You’ll receive details about our investment strategy. This is not an offer, solicitation of an offer, for anything at this time. All investments have risk. Past performance is not indicative of future results. Always do your own research.

Lawrence Joseph Ellison was born on August 17, 1944, in the Bronx, New York to a single Jewish mother. When he was 9 months old, she put him up for adoption. At 12 years old he learned of his adoption. His adoptive father was an accountant named Louis Ellison. His adoptive mother’s name is Lillian (Spellman) Ellison. She’s the aunt of his birth mother, Florence Spellman. Ellison’s biological father was an Italian-American United States Army Air Corps pilot.

Larry Ellison worked for Precision Instruments as vice president of software in 1976. His friend, Bob Miner worked at Ampex in those days. Precision Instruments (PI) was a small company. They needed to outsource this new relational database management system software. Larry used to work at Ampex, where Bob was his boss.

One day, Larry decided it would be great to start a company with Bob, and this was the perfect opportunity. Bob had a great job at Ampex and was hesitant to leave for a new venture. That’s why it took a while for Larry to convince Bob to start a software company together. Three nights a week, Larry visited Bob in San Francisco around dinner time, to sell him on this idea.

After a while, Bob caved in. Precision Instruments sent out offers for a bid on this new database. If Bob didn’t win the bid, he could keep working at Ampex and there would be no problem. So Larry wrote the spec on the project.

As luck would have it, they won the bid. It was either luck or the low price Larry offered PI. So, Bob started Software Development Laboratories (SDL) to develop the program. This was after winning the bid for $300,000 to deliver the software to Precision Instruments. Bob’s company later changed its name to Omex. The next lowest bid was $2,000,000.

As Larry Ellison tells the story, he wasn’t hired to SDL right away. Bob founded SDL with top employees Ed Oats and Bruce Scott in 1977. Bob hired Stuart Fagan and then Larry Ellison in 1978.

Before the completion of the program , Larry went out and started selling it. Out in Washington DC, he pitched it to people he knew in the CIA which his previous employer built systems for. The original system for the CIA was code-named Oracle. It failed. That was perfect. It allowed SDL to use the name Oracle again for the new project, since it was no longer in use. The CIA bought the new program for $48,000.

For a small team in Silicon Valley, they became the provider of this software to the US government. Now they had to deliver. So they stopped all other consulting projects and started on this big important one. They moved their small office to a bigger, more prestigious address in Silicon Valley. An upgrade from their modest beginnings, it was not so close to the freeway.

The year was 1979. Having a big government contract worth $48,000 in the late seventies was impressive. That presented a bigger problem. The government doesn’t always pay on time. Especially when the procurement process takes forever. That’s a catch 22 with government projects. They pay well, but the bureaucracy is torture. It took nine months for the CIA to pay. Oracle finally shipped its first commercial SQL relational database management system. They called it Oracle Version 2. There was no Oracle Version 1. Who would want that?

Startup life is tough. When you have a cushy job, your employer takes on all the risk and you still get to eat. An entrepreneur doesn’t have that luxury. Larry had no savings or a job to fall back on. He had to live on credit cards that whole time, and his house was in foreclosure. The work they were doing caught the attention of Don Lucas. He’s a significant figure in venture capital. He gave Larry a loan and took over his mortgage from the bank. Oracle is one of Don’s most notable investments. He’s famous for another investment which didn’t turn out so well. A startup named Theranos, but that’s a different story.

Oracle grew fast and hired the brightest young people in Silicon Valley. Many didn’t have a college degree, but several were top students at Harvard. It didn’t matter what their credentials were. Their chief architect dropped out before his last week of school. The company never lost money.

Then, in the early 1990’s, the recession hit. For the first time, the company was in financial trouble. In 1991, Oracle almost went out of business. Forced to restructure the company, he had to let many of his top people go.

The new team recovered Oracle. They shipped Version 7, growing the business to over $10 billion and over 100,000 customers. Things were going well for the rest of the decade until the end, when the bubble burst.

In the 1990’s, Oracle provided the infrastructure for most big tech companies of the era. That included Amazon. Business was booming. The recession was cyclical and on a macro scale. This time was different. This was an internet bubble, where there was more hype than actual paying consumers. Oracle wasn’t able to recover so fast. Once again, he installed a new management team. This resulted in a solid infrastructure. Oracle maintained a steady stream of corporate data. Oracle was able to survive.

By 2004, Oracle was able to outspend their competition on acquisitions. Oracle acquired a significant number of companies after the dot com crash. In 2005, they acquired human resources SaaS company Peoplesoft for $10.3 billion. Their acquisition strategy has been a key element of its growth and expansion. Oracle’s biggest acquisition was NetSuite for $9.3 billion in 2016. In 2021, Oracle acquired healthcare SaaS company Cerner for $28.3 billion.

In conclusion, the estimation of Larry Ellison’s net worth is be between $115 – $138 billion. This comes from his stake in Oracle and other investments including Tesla.

I like you,

– Sean Allen Fenn

Methods of Prosperity newsletter is intended to share ideas and build relationships. To become a billionaire, one must first be conditioned to think like a billionaire. To that agenda, this newsletter studies remarkable people in history who demonstrated what to do (and what not to do). Your feedback is welcome. For more information about the author, please visit seanallenfenn.com/faq.