Entrepreneurship from Software to Sports

Steve Ballmer served over 20 years at Microsoft.  During his tenure, the company pioneered personal computing and democratized enterprise computing, growing from a small start-up to a company that today employs more than 110,000 people, with a market capitalisation approaching $100 billion.  After retiring from this role in 2014, he purchased the Los Angeles Clippers NBA Basketball team, I caught up with Ballmer to discuss his transition from software to sports.

A Question of Wealth

Ballmer’s career has seen him becoming one of the world’s wealthiest individuals, and like many others in his position- this was never his primary purpose.  “Never was wealth the driver for me.  – it was always hey, there’s a cool idea here, let’s make something of it.  It was nice to be well rewarded, but the interesting part was working the problem, thinking about new things and how to bring them forward from being ideas to being products or new ways of doing things.”

The Ballmer Group’s philanthropic arm focuses on organizations dedicated to bettering outcomes for children in need and helping reduce the cycle of intergenerational poverty in the United States. They advance these efforts through grant making, investing in system reform, and collaborating with public and private sector partners.  “Many forms of entrepreneurship don’t lead to wealth, and but they are no less entrepreneurial.” He told me, “Place-based social service interventions like the Harlem Children’s Zone, is a great example:  Jeffrey Canada figured out a new way of doing something that makes a huge difference for disadvantaged kids, other places are now pioneering it – I call that entrepreneurial.”

I asked Steve what philanthropy means to him. “It is really good to be able to support existing institutions that are doing very good work for what their chosen purpose is, and to support those organizations and their missions.  But really being involved with convening something new or helping social entrepreneurs who have really interesting ideas get something off the ground or up to scale with what I’d call ‘mezzanine financing’… that can be really cool too.  Take for example toughening up the background check process for buying guns here in our state of Washington.  The organizers had a good idea and needed extra support to make it happen. A lot pf philanthropy is making bets, seeing if they work, staying with them…it is more like being an investor in other people’s good entrepreneurial ideas.”

From Software to Sports

In 2014, Ballmer purchased LA Clippers for $2 billion.  I asked him why he did the deal…. “I bought the Clippers because I expected owning them to be fun and it sure has been…” said Steve, “I feel I paid a number that made it a good investment. I paid probably 10% over the second bidder, which is generally what it takes to get the deal done.  As an investment, these sports franchises tend to appreciate faster than the S&P index. The people who are going to buy a team are generally people who own stock, and own a stock or stocks that are doing very well, so the value of teams tend to rise with wealth creation. They are better investments than most of the things on the stock market these days. They can make a bit of profit, make a bit of money, you don’t get financial dividends but do get asset appreciation.  So it makes sense as an investment, but that’s not why I bought it.  I bought it because I love basketball and thought: wouldn’t it be cool to own the LA Clippers? And it is a great team, and a great experience. I don’t plan to ever sell my team.

Many of the world’s most powerful brands are in sports, and LA Clippers are no exception and sports brands are more complex than the club themselves.  “You have to consider  the city, the team and the individual players.” Notes Steve, “certainly basketball is a game in which star players are really important, not only because they win championships, but because their brands can be as powerful as many of the teams. Think Kobe. Think LeBron. Those brands are very powerful. Team brands can also be powerful.  The Clippers are powerful, the Lakers, the CelticsSan Antonio is becoming more powerful.  Cities do help form part of the brand.  LA, NY, Miami. The brands of those cities are certainly important to the brand of the teams.”

In his role at Microsoft as CEO, Steve led a publicly traded organisation with revenues of over $80 billion, a very different challenge to sports.  On adapting to this challenge he said, “to the best of my ability I have relied on knowing when to delegate and when to get involved. I have found a cadence of leadership that makes sense on both the business side and the basketball side of the team.  On the business side, I am involved, and talk about principals of where we are going, I stay connected on things that are new.  On the basketball side, l I love basketball but I am no couch, and no assessor of talent…that’s not my role.  When it comes to talking about how we invest in ways that are consistent with collective bargaining, with supporting our team, or with a big trade or recruit, I am part of those discussions. I pay attention to salary cap because I participate well in numbers discussion, and allocation of scarce resources is an interesting math problem.

Learnings on Leadership

Alongside his many business interests, Ballmer has taught at Stanford University and I asked him to reflect on his learnings on leadership.

On what makes a great leader he notes, “The most important thing a leader has to have is an idea on where they want to go and the ability to bring people with them. Most discussion about leadership is about styles and characteristics, but the most important thing is having a clear sense — and a right sense — of where you want to go. Dangerous leaders can be charismatic and effective at mobilizing people, but take them down a wrong path.   So the questions for strong leaders who are trying to do the right thing are:   Do you know where you want to go? Are you right? Number two, you need to have the tools that allow you to build followership.  You need to clearly communicate the why, to explain and to show people how they participate, what their role is in making whatever it is you’re trying to do happen.”

Noting that Microsoft was just a start-up when Ballmer first joined, I asked how his leadership style adapted as the company grew.  “In a smaller company you are working hard just to get to critical mass – getting there is hard.” Steve told me, “You don’t have a feedback loop that’s already telling you what’s going well and what’s not.  Over the time I was at Microsoft, it went from basically a start-up, getting an idea and a plan coherent enough to get lift off, and then once you have lift off revving the engine and revving up the hamster wheel.  In a bigger company you get good at spinning the wheel, but when you decide to do something new, that takes one of two forms.  The first is a linear extension of what you’ve done before, the other looks more like something new for which you need to be build new capabilities you don’t yet have.  In that second case, you need to do what I call getting in the weight room, build new muscles so you may be ready to pounce, see opportunities that are not yet in front of you, build skills in new areas.  Small companies will get an idea and try to scale up.  Big companies have to decide when to extend, when to extend and scale, and when to do something new.  They need to build capabilities in terms of insight and execution to do the new thing.”

His Advice for Us?

On the secret of his success he notes, “One you have to get a unique insight. It starts there. Two, you need to be prepared to devote a lot of energy and commitment.

Thought Economics

About the Author

Vikas Shah MBE DL is an entrepreneur, investor & philanthropist. He is CEO of Swiscot Group alongside being a venture-investor in a number of businesses internationally. He is a Non-Executive Board Member of the UK Government’s Department for Business, Energy & Industrial Strategy and a Non-Executive Director of the Solicitors Regulation Authority. Vikas was awarded an MBE for Services to Business and the Economy in Her Majesty the Queen’s 2018 New Year’s Honours List and in 2021 became a Deputy Lieutenant of the Greater Manchester Lieutenancy. He is an Honorary Professor of Business at The Alliance Business School, University of Manchester and Visiting Professors at the MIT Sloan Lisbon MBA.