Considered Opinions

The Red Flag

In the early 1970s, Intel bought a small company at about the same time I was doing consulting work for that same company. Soon after the acquisition, I became VP of Engineering, and a young engineer – let’s say his name was “Clark” – had been put in place earlier as the Director of Quality, reporting to me. He was a very likable fellow and seemed to do a good job^[i]Of course I knew next-to-nothing about Quality Control or Quality Assurance in those days. so I quickly became his supporter. Two or three years later Intel decided to abandon the consumer electronics business so I helped them sell the Division to Timex, whereupon I became part of the deal as an indentured servant to Timex, never to return to Intel. Clark stayed behind at Intel and eventually filled various marketing and sales roles.

Some years later I found myself heavily involved in integrating electronic circuitry with LEDs and photodetectors, running what was then a $25 million subsidiary of a very large, foreign-owned company. Clark in the meantime had left Intel and joined a small semiconductor company, where he had progressed through the sales/marketing ranks to become CEO. One day my phone rang and it was Clark, who I had not seen for a couple of years, saying that he was about to get fired and he needed advice on his legal options. I quickly arranged a meeting including Cesar, who was my go-to guy for such matters. We managed to get him into a better financial and negotiating position but there was no way to prevent the Board from firing him, which they did. That didn’t make sense to me at the time – he had done a good job for me in the past and I knew him to be very kind, thoughtful, gentle, caring, and an all-around nice guy.

Fast forward a few years and I find myself needing to replace my Marketing/Sales Vice President. Clark, of course, popped into my mind and he happens to be “between jobs” again. How could he be out of a job when he is one of the most personable guys around? He serves on the Boards of non-profits, volunteers in his community, and is the fundraising guru for his church. Everyone likes him because he seems so empathetic. He is also able to sell stuff to people who may or may not need the stuff. In this case, putting him back in the salesman role served him well. He did a great job of selling, at least the products that were in the catalog – the engineers had to sell the custom-made ones.

I left Clark behind to start a new company, built around an invention that had been in the back of my mind for several years prior. After another couple of years had passed, I hired him back a third time, to write and expedite proposals to raise Federal grant money – he failed miserably .

After having sold that company and having been retired for a few years, my phone rang again – it was Clark. He knew that I had been investing in technology start-ups and he asked me to invest in his idea to resurrect one of the segments of the optoelectronics business that we had both worked on together in the past. He and I and the third partner in the new venture all agreed that Clark should be the CEO because, (a) I didn’t want to take on the responsibility, and (b) the third partner lived in Asia.

We started the business in my “high-tech barn” on one of my properties in the Santa Cruz Mountains and after developing and establishing a customer base for a handful of cutting-edge products, we launched an effort to raise equity financing. Bruce joined us at that point, bringing with him considerable experience in financing tech start-ups. After a couple of unsuccessful investor meetings, it became clear that Clark was not able to focus on the goal. He would get lost in the middle of a technology discussion and wander off with some “shaggy dog” story, which didn’t sit well with potential investors. Bruce and I quickly jumped in to prop him up and we managed to raise several million dollars in equity financing but it was too late – the die had been cast and the Company was destined to fail with the wrong guy at the helm.

A palace coup ensued and the company went down the drain. But not before Clark swindled the equity investors out of the liquidation proceeds. He hastily packed up all the hard assets and shipped them off to Malaysia, where it was impractical for the investors to recover them.

I am embarrassed to admit that I overlooked all the yellow flags along the way. I should have been able to see what was happening as each incident built on the failure of the last. It was not until the big red flag hit me that I could see what had been there all along.

• In the Quality Control situation, all the rules were well-defined. They were taken straight from the Military Standards of-the-day and I could have trained a chimpanzee to follow them.
• When he was about to get fired as a CEO I should have understood that seven seasoned technology professionals rarely agree on anything but would certainly not agree unanimously to fire someone without some really good reasons. That flag clearly signaled that Clark was not CEO material.
• The next time, I never asked why he was “between jobs” . That flag would have told me that “talking was his game”, which was a great asset for selling parts from a catalog but nothing more.
• When he failed miserably to write a grant proposal, I should have recognized his lack of creativity. He was not able to visualize the goal, let alone devise a way to get there.
• When I realized that he was unable to formulate a strategy or even focus on one that had been presented to him, it finally hit me that something was really wrong.
• But it was not until he swindled the equity investors , who had put their faith in him, that his dishonesty opened my eyes to what should have been obvious to me for all those years – the “nice guy” persona was only skin deep.

 

Clark was – and probably still is – one of the nicest guys you could ever meet. As a salesman, he could sell anything as long as it was well-defined and no creativity or careful thought was required. It was hard for me to see through his “nice guy” façade. He was seemingly full of caring, empathy, and goodwill. In the inventory of characters I have known over the years, he remains the smoothest talker by far.

One of the guys who was part of the Board that fired him from the semiconductor company put it best when he said, “Clark is a really polished guy until you scratch the surface and realize there is nothing underneath”.

By: Jim
Written: 2021
Published: January 2021
Revised: