The oracle of Larry Ellison: stuff legends are made of

The oracle of Larry Ellison: stuff legends are made of

Wednesday September 24, 2014,

9 min Read

‘The Difference between God and Larry Ellison’, this was what Mike Wilson, the official biographer of Larry Ellison, titled his biography. And he was not wrong.

Larry Ellison is a larger-than-life figure, making outrageous claims, cashing in on opportunities, and making big deals. He has dog fights with his son in planes mid air. He doesn't go to movies, he brings movies to himself when he wants to watch them. He owns the best yachts in the world, gifts expensive cars to people he likes, and buys houses on a whim. CEOs of the biggest companies in Silicon Valley turn to him for advice.

He is probably everything you want to be.

The entire world admires Steve Jobs. But it is Larry Ellison who Steve Jobs admired. What Steve Jobs did with Xerox, Larry did with IBM. Both Xerox and IBM failed to see the potential of the technology they held in their backyard.

On September 18, 2014, Larry announced that he would be stepping down as CEO of Oracle, and announced Mark Hurd and Safra Catz as co-CEOs. Ellison will become the Executive Chairman and CTO.


Troubled childhood

Larry was born on August 17, 1944, in Bronx, New York. Nineteen-year-old Florence Spellman was unwed at the time she gave birth to Larry. Nine months later, Larry suffered from pneumonia. Florence handed Larry over to her aunt and uncle, Lillian and Louis Ellison, who then adopted Larry. As a child, one of the most motivating forces for Larry was his uncle who always used to say that he would never amount to anything. Larry took it as a challenge to prove him wrong.

One of the things he never liked as a child was structure. Larry dropped out of college, not once but twice. First he dropped out of the University of Illinois, Champaign-Urbana in May 1964 while in his second year there. It was not clear why he dropped out. After dropping out from University of Illinois, he attended the University of Chicago for a term but dropped out from there too. As Larry moved on, he started working on contractual basis and building software for different people after short stints at various companies.

Most great companies have been built by chance and spotting opportunities in the most unlikely places. In case of Microsoft, Bill Gates cashed on the famed IBM meeting and decided to provide an operating system on a contractual basis. Steve Jobs found his moment when he saw the user interface at Xerox's Palo Alto Research Center in 1979. Larry found his opportunity, when IBM refused to partner with him on System R, the database software by IBM.

Larry Ellison
Larry Ellison


Steve Jobs and Larry Ellison

Mark Wilson, in his book about Larry Ellison, draws a comparison between the legends of the Valley.

"But then, it is not unusual for the inventors of new technologies to miss out on some of the resulting riches. About the time that IBM was doing unintentional favors for Larry Ellison, the Xerox Corporation did a similar kindness for an equally brash—and equally motivated—young entrepreneur. In 1979, Xerox's Palo Alto Research Center invited Apple Computer's Steve Jobs to have a peek at some technology it had developed. This technology completely transformed the face of the computer: What once had been an inscrutable machine now looked like a desktop, with little pictures, or icons, representing programs and documents. To read a document, a person merely touched a device called a mouse. Xerox—which was run by ‘copier heads’, according to Jobs, did nothing with the graphical user interface. Jobs incorporated it into the Apple Macintosh, the first (and some would say the last) great personal computer. By adopting Xerox's idea, Steve Jobs changed an industry, much as Larry Ellison did by adopting IBM's. It really wasn't much of a coincidence that Jobs and Ellison later became friends."

It was not much different for Larry Ellison when he read a paper titled, ‘A Relational Model of Data for Large Shared Data Banks’ by Edger F Codd on Relational Databases, while working on a project by CIA. Larry had heard about IBM's software for databases, ‘System R’ and wanted it to be compatible with what he was doing. Larry was 32 when he founded ‘Software Development Labs’ which released the first version of Oracle. It was named Oracle 2. According to a legend, Oracle 2 was meant to signify an improved version of the Database software.

At that time software came bundled with PCs and there was no concept of selling software separately from hardware. No one had ever thought that one could make money from selling software alone. Though it is nowhere proven, but it is often said that Larry was among the first people to set the ball rolling for an autonomous software industry in the 1970s.


Oracle’s glorious days and the fall

Oracle was started in 1977 with a modest sum of $2000, out of which $1,200 belonged to Larry. In the coming years his idea was proven. For the next 11 years, Oracle doubled its sales every year. To give a snapshot of the kind of growth the company was seeing, if someone had bought $10,000 worth of Oracle shares when it went for IPO and held it for the next decade, the value of his shares would have increased to $790,000.

For Larry, power mattered as much as success and he felt powerful by making others powerful. During the early days of Oracle, he used to keep a list of employees who had become millionaires and made sure that the list grew with time. The company grew at an exponential pace in the early days but to assume that the same pace could be sustained for its lifetime would be naive. As its first decade got over, new clones had started coming up in the market.

It was almost ironical when one of the fastest growing companies in the 80s was on the verge of bankruptcy. The crisis which Oracle faced was an excellent example of over-promising and under-delivering. The sales team would ask people to buy the software which would be released in the future and then book those profits under current quarter. This way they could increase their commissions. All hell broke loose when in the quarter ending March 1990, Oracle’s revenues jumped by 54% but their net earnings rose by only 1%. On the day of the announcement, the company’s stock went down by $7.88 to $17.50 in a record one-day volume where close to 21 million of the company’s 129 million shares were traded.

Immediately after this, some shareholders filed a class action lawsuit against Oracle, saying that the company had made misleading earning forecasts. Oracle announced that it would conduct an internal audit and then it had to restate its earnings and a lot of management restructuring was done. It was one of the biggest mistakes by Oracle which would haunt it for years to come. The brand had taken a huge hit.

Post this debacle other database companies had come into the picture. Sybase was the front runner and competing directly with Oracle. Soon there was Informix, another company that sold relational databases, which came to prominence and became the biggest competitor of Oracle. The rivalry between Larry Ellison and Philip E White, CEO of Informix, was highlighted very prominently and has since become a case study in leadership and business with books being written on it. In 1997, Informix committed similar mistakes as Oracle did in 1994 and Philip White was sent to jail.


The legend walks free

It was during this time that Steve Jobs returned to Apple and Larry joined the Board of Directors at Apple Computers. The similarities between the early life of Steve Jobs and Larry Ellison did not end with both of them being born out of wedlock and dropping out of college. Steve met his biological father much later in life. Similarly, Larry met his biological mother much later in life and realized she was related to his adoptive parents. Steve and Larry became close friends, especially during the period when Jobs was ousted from Apple and was working on NeXT. They often went for long walks and discussed ideas about revolutionizing the world. Perhaps it was due to the similarities in their upbringing that Jobs often considered Larry as his mentor

Larry resigned from the board of directors at Apple in September 2002 citing his busy schedule. “I will continue to offer my advice to Steve and the executive management team at Apple, but my schedule does not currently allow me to attend enough of the formal board meetings to warrant a role as a director,” he said in an official press release.

In 2010, HP CEO Mark Hurd resigned from the company following allegations of wrong conduct in an investigation following a sexual harassment case. The board at HP voted 6-4 to expel Mark. Larry was angry over this decision and denounced HP board for ousting Hurd and compared the event to the ouster of Steve Jobs from Apple.

Larry recently stepped down from the position of CEO of Oracle and appointed Mark Hurd and Safra Catz as CEOs of the company. Larry was one of the last Founder-CEOs of the early companies of Silicon Valley after Bill Gates, Steve Jobs, Bill Hewlett and David Packard. Though Larry has moved to the position of Chairman and CTO, how his new stance will impact the company is yet to be seen.

Living a lavish life had always been something Larry cherished; he was the highest paid CEO in the last decade. Be it owning yachts or cars or planes, Larry had it all. He even tried to buy a decommissioned Russian MiG Fighter jet but wasn't allowed by the US government. He had a cameo in the movie ‘Iron Man 2’. When his son wanted to watch the movie ‘Independence Day’, he asked the movie studio to send for a copy and held a private screening for his son and their friends.

For Larry Ellison, nothing is impossible, which is probably why the biography is subtitled as, ‘God doesn't think he is Larry Ellison’.