- Excessive brilliance
- Insufficient brilliance
- Natural law
I have had the privilege of watching all three of these, sometimes alone, sometimes in pairs, and once in a glorious mind-boggling death-spiral trio, create new found misery to the acquirer and the acquiree.
As a wise man once told me, no one gets up in the morning intending to do a bad job, but the simple fact is, sometimes you get up in the morning with zest and vigor, go to the office, and by the end of the day wish that you’d stayed home watching leave-it-to-Beaver reruns on the classic t.v. channel.
When it comes to technology acquisitions, I’ve found that one key to a failed acquisition hinges on some kind of delusional madness that afflicts most executives during their career. The symptoms are usually clear and there is always a hindsight that permits the board of directors to pillory someone for the crime of “should have known.” Excessive Brilliance
The first delusion comes from selecting the wrong person to do the technical due diligence.
A typical example of the wrong person is a PhD who has extensive experience with the subject matter. When the PhD thinks things are good, that means, the warning flags should be tossed all over the playing field. Thomas Kuhn wrote about this in his classic, “The Structure of Scientific Revolutions.” One of his basic themes was that true advancement in science requires two things:
- A brilliant unconventional newcomer to the field
- The death or retirement of established experts who know better
Kuhn noted that significant advances seemed to occur during the course of a generation, essentially, the time it took existing experts to die off. The message here is, if your PhD thinks it’s good, then it could be old hat or even worse, something you already have in a different color, which means you’d better look twice before investing.
My favorite example was an expert in the field of credit/debit card transaction processing. This particular genius had truly broad experience in the field and was doubly fascinated by the amazing amount of money you could make from the interchange fees that skim off of each use of the card. He wanted to invest in and create mobile payment technologies. No one else had it, he said.
One day after listening to his pitch, and everyone in the room was enraptured, I brought up on the wide screen projector the web page of a small mobile payment company named OboPay with a recent $70 million investment from Nokia. I noted that they were already in the market, and they had a CitiBank logo on their web site. I was told I was ignorant and anyone could misuse the CitiBank logo, and their product couldn’t work. So, I trounced over to the CitiBank web site and pulled up their press release announcing their alliance with OboPay.
The room was very very quiet after that.
This second delusion comes from having a senior executive who is absolutely fascinated by the technology, so much so that they forget to see if it’s unique, or even useful.
One example I lived through was a CEO who was absolutely fascinated by a prototype credit card that only activated when the owner swiped the card with his fingerprint. Like a 5 year old child with a $100 bill in a candy store, he kept trying to tell everyone that this was the best acquisition candidate he’d seen in 20 years.
We tried to point out to him that a half dozen companies had come to market with exactly the same thing over the last 10 years, and each had failed. There wasn’t anything wrong with the technology. It worked. The problem was, there wasn’t a problem that was actually solved by marrying a fingerprint with a credit card. There are two reasons for this, a typical credit card costs aroud 20 cents to produce, and banks limit your liability for fraudulent use to $50. This particular card had a cost of goods projected to be around $50. No net benefit to the consumer, and, this kind of technology has a wallet life expectancy of a few months before something breaks.
This became somewhat of a wrestling match, CEO with vision versus his technical due diligence team that knows better. Fortunately, this particular CEO got distracted by something else after a few weeks and we were spared the glory of implementing a product failure.
The third and final delusion was best described by Kurt Vonnegut as the “universal will to believe.” In other words, don’t bother me with the facts, I don’t care
My favorite experience came from assessing an anti-radiation shield for cell phones. As we all know, too much use of cell phones will turn the inside of your skull into a popcorn cooker. There is convincing data that 100% of the people who use cell phones will die. This is a fact.
As a result, a number of technical innovations have come to market which “reduce” the radiation of cell phones by placing an adhesive backed gizmo somewhere on the phone. In this particular case we were doing a technical evaluation for a Las Vegas based singer who wanted to do something good for the world with her excess cash.
Sadly, physics has a few things to say about such innovations. First, if you block the radiation emitted by a cell phone, then you no longer have a cell phone. You have an ergonomically designed brick. Without radiation, the cell phone won’t work.
Second, if you can directionally reduce the radiation, such that it goes everywhere but into your skull, then that would be cool, except electromagnetic radiation has this horrible tendency to be absorbed and re-emitted from anything that is capable of blocking it, unless of course the blocking device is grounded to the earth with a cable and a spike driven 30 feet into the earth. But then, your cell phone is no longer a mobile device, it’s now a part of your building structure.
In this particular case, there was an added special element to the technology. This particular gizmo had to be shipped to the Ukraine where a Dr. of Applied and Revealed Religion would “activate” each gizmo before packaging for sale.
In this case, our due diligence was deemed a failure and this famous singer invested in the technology. Sometimes, it’s best to lose. I now have a bumper stickers that reads “Physics isn’t a religion. If it were, we’d have a much easier time raising money.”
This article was written by Glenn Fishbine
Glenn provides deep technology, mentoring, and technical partnerships.. He has four decades of experience in a wide variety of technologies and has held senior & board positions on several technology companies.He focuses on the technology footprint and strategic planning for new ventures and provides leadership and coaching to product and engineering teams.He can be reached at; firstname.lastname@example.org 387 7536