Today in Tedium: There’s this common plot line that often comes up with tech startups. A person has an idea, and it’s got enough potential that they decide it’s worth following through. The problem is, sometimes that idea needs money, and that money has influence attached. Try as they might to look for money from other sources, they ultimately have to go with professional investors who do this for a living, often known as venture capitalists. They seem friendly enough, but ultimately their money shapes your trajectory. It gives you a runway, perhaps of a couple of years, but it only goes so far, and if things don’t work out, they might put the squeeze on you, and suddenly, your vision might become compromised. Wash, rinse, repeat. It’s a common story, and one that dates to Silicon Valley’s earliest years. With that in mind, today’s Tedium talks about a startup that gave us something important—but also, thanks to that knotty VC influence, compromised its founder’s vision. (That founder quickly went on to bigger and better things.) — Ernie @ Tedium
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The number of punch cards that the first floppy drive, an 8-inch read-only machine called the “Minnow” which was developed by IBM in the early 1970s, could replace. To put this in perspective, the drive could only hold 80 kilobytes. Later generations of the 8-inch drive could hold as many as 1.2 megabytes. The man who assigned the project, Alan Shugart, would prove one of the most pivotal figures in disk technology in the 20th century.
The guy at the center of the disk-drive revolution was collecting unemployment while his company was soaring
A while back, I noted that Memorex the first startup that Silicon Valley ever created, and the thing about startups is that they often inspire other startups as those companies grow mature.
One of Memorex’s early executives, a man named Alan Shugart, made this kind of leap. Shugart, who spent time at IBM in the 1950s and 1960s, had worked on some of the most fundamental disk drives that the computing industry had. Shugart was directly involved with the IBM 305 RAMAC, one of the first projects to develop a hard drive, and over time, he worked his way up the ranks at Big Blue, greenlighting the the floppy drive in the process.
But Big Blue was proving a bit stifling; they wanted him to move to New York, but he wanted to stay on the West Coast, leading to a situation where he was flying cross-country every single week just to avoid moving to New York. Eventually, he decided that he wanted a new experience, so he went to Memorex, where he began developing new floppy-disk technologies.
As I wrote in my piece on Memorex, the firm went through some serious financial troubles, including facing a lawsuit with IBM (most assuredly not helped by the fact that Shugart brought some of his team members with him to Memorex). This created a brain-drain effect not dissimilar to what happened when alumni of Fairchild Semiconductor started iconic companies like Intel.
Shugart tried doing something similar after departing Memorex, coming to lead startup that had his name on the tin. Shugart Associates, as it came to be known, initially had dreams competing head-to-head with IBM in the mainframe market.
Speaking to author Thomas Mahon in the tech-industry profile book Charged Bodies, Shugart described his role at the company as being less attractive than the name of the company made it sound.
“I had the big name and all, so I was the boss,” he recalled. “But the equity split between the nine of us was nearly equal.”
The equity challenges and the ambitious mission meant that the firm had set itself up for a long buildup process. But that takes time, and what they had to show for a couple of years of work was some improvements in floppy disk technology, which were invented by IBM and sold by Memorex early on.
That was about the point where Shugart found the exit ramp. He wanted to stick to the original plan—to build printers next, then work its way up to building full mainframe systems for companies. The VCs disagreed. They argued, and Shugart found himself out of the company bearing his name.
The venture capitalists decided to stop grabbing for the brass ring and instead embracing the power of the 5 1/4-inch floppy disk that the company had developed. Shugart was a floppy manufacturer first—and last.
To highlight this point, an article in the local Palo Alto newspaper, The Peninsula Times Tribune, was published with this retrospectively problematic headline: “Diversity a dirty word? Maybe, for Shugart firm.”
(The diversity they’re talking about is business model diversity!)
Donald Massaro, the man who replaced Shugart as the company’s leader, explained how the company quickly veered off of its original mission, and ended up finding big success by setting its sights low.
“As soon as we completed the floppy disk,” Massaro told the Trbune, “we planned to go and do a printer with 300 lines per minute, then small systems, then absorb IBM and so forth. It was a grandiose scheme. The real world wasn’t like that. Our business plan was unrealistic.”
This embrace of a realistic business plan sounds great if your firm is run by venture capitalists looking for an exit, and lo and behold, Xerox came knocking around 1977; they kept using Shugart’s name despite the fact his company had fired him.
So what happened to the guy? Shugart didn’t have a golden parachute when he left—he says he was forced out, they say he resigned. Ultimately, he was just a sad sap like the rest of us, stuck without a job. He tried making the best of it, per his comments to Mahon:
It can’t be easy to leave a company that carries your name. but apparently that didn’t bother Shugart. He planned to get out of the business anyway.
“I started salmon fishing. I had a commercial license and my own boat. Never made any money at it, but I did it anyway. Paid for beer.”
And how, one wonders, does he compare being president of a high-technology company with salmon fishing? “You get a suntan when you’re fishing.”
Alan Shugart eventually got out of the boat, started collecting unemployment, and then moved into independent consulting while he was waiting out the clock on his noncompete clause. At one point, per a 2007 obit, he owned a bar.
But then, he got back in the game. And honestly, he made the quick exit his prior company made look kind of silly.
“I was looking for a name that would replace Shugart, with seven letters and starting with an S and ending with a T and with a G in the middle. Seagate was the closest thing I came to.”
— Shugart, explaining to Mahon how he came up with the name of his follow-up company, a little firm you’ve probably heard of called Seagate. (Shugart had considered naming his company after himself once again, in an attempt to goad Xerox into suing him, but thought the better of it.) Shugart’s company ended up becoming one of Silicon Valley’s largest companies and a major supplier of disk technology to the computing industry. Not bad for a revenge company.
How Seagate upstaged Alan Shugart’s former company, and then some
Before the mid-1980s or so, hard drives had a weird name. They were called Winchester disks. This name, dating to the mid-1970s, was named for the Winchester Model 1894 rifle, whose most iconic model used a pair of .30 cartridges. The IBM 3340, a drive built for the IBM System/370, was originally supposed to have two 30-megabyte modules. The modules turned out to be far larger than that, but the name stuck.
I’m explaining this to you because Shugart’s company Seagate specialized in hard drives that, like the floppy drives his predecessor built, could fit into relatively compact 5 1/4 bays. This was novel enough at the time that when Popular Science did a profile on the company, they called the drives “compact Winchester drives,” despite the reason for the nickname not really making any sense.
These 5-and-a-quarter drives came about at just the right time for the personal computer, however, which were beginning to come up against the storage and speed limitations of the floppy disk. As Popular Science explained:
The advantages of the Winchester are formidable. Instead of plastic, it is made of polished aluminum with a thin coating of oxide. Aluminum does not change with temperature nearly as much as Mylar. Thus, tracks can be jammed much more closely together—up to about 250 per inch. Further-more, the head does not ride directly on the oxide coating. Instead, it “flies” about 20 millionths of an inch above the coating on a cushion of air created by the disc’s rotation. Thus the disc can spin at 3,600 rpm—more than 10 times faster than the floppy.
The payoff is that many current Winchesters can hold 5M [megabytes]—some 2,500 typewritten pages, or 10 times as much as a floppy—with that number rising rapidly. Moreover, they can handle information at far greater speeds. And because the enclosure is sealed, reliability is far greater.
This was the business Seagate chose to specialize in, just as the IBM PC hit the market. And Shugart saw the potential before just about anyone else. Speaking to the magazine, he noted the importance of embracing the dimensions of the existing 5-and-a-quarter floppy drive.
“The plan was to design a disc memory device that had exactly the same physical dimensions as the 5 1/4 mini-floppy-disc drive,” Shugart told the outlet. “Every desktop computer in the world that was being shipped with more than one mini-floppy was a candidate for our drive. In general, we were offering 15 times the capacity at only three times the price.”
He also realized, before much of the rest of the PC industry, that standardization would be important. The piece noted that Shugart worked with every competitor to ensure that every 5 1/4-inch drive had matching technical standards for speed and data transmission, ensuring that users wouldn’t get a bad experience no matter who they bought the drives from.
This proved to be Shugart’s great stroke of genius, even moreso than the 5 1/4 floppy drive. As the PC clone market aged into maturity, Seagate’s standard became the one that the computing industry relied on, with the device making an appearance in the IBM Personal Computer XT and in many of its later competitors. That meant that Seagate was destined to become a far larger and more formidable company than Shugart Associates could ever hope to be.
Betting the farm on floppy drives proved to be a long-term mistake. By the mid-1980s, Xerox was liquidating the company that bore Shugart’s name but had long been bereft of his influence; while it had later started to move towards hard drives and even optical drives, it had struggled within Xerox’s corporate structure and that led it to fall into irrelevance, disappearing entirely in the early ’90s. Seagate, meanwhile, was selling hundreds of millions of dollars worth of hard drives to both manufacturers and end users.
While Shugart was pushed out of Seagate during a downturn in the late 1990s, the firm remains one of the largest technology companies in the world, with $11.6 billion in revenue in its 2022 fiscal year and $1.6 billion in profits.
Hard drive technology is seen as old hat these days—I think the term is “spinning rust”?—but without it, the tech industry would never have fallen into place in quite the same way. And Alan Shugart deserves a huge chunk of that credit.
If you ever feel bad about a professional setback, his story proves that it’s possible to jump back in the game and outdo all of your prior success stories in one fell swoop.
The story of Seagate is perfect for business history books. It basically makes the case that VC meddling can be toxic if poorly handled.
Shugart Associates got a quick exit that likely made its investors happy, and because of that, it never really saw the potential huge upside that could have come from developing a technology that nearly all computer users in the 1980s were deeply familiar with.
Seagate, on the other hand? It became one of the best-known names in data storage. And while it doesn’t have Shugart’s name on the box, perhaps that’s not necessarily a bad thing—after all, the last time that happened, he basically found himself competing with his namesake.
In case you want to hear it from the horse’s mouth, Shugart did a presentation for the Computer History Museum before his 2007 passing.
Alan Shugart, who managed to build a billion-dollar company in a decade, was able to retire with a bunch of mess-around money in his bank account, and he decided to use his fortune to do some silly things. He thought both parties stunk, so he decided to put his dog, Ernest, up for a political run in 1996, a period of prime third-party activity. Ernest, of course, was disqualified, but he still ran an unofficial campaign, because he’s a good boy.
(Shugart was behind a similar stunt a few years later, when he pushed a “none of the above” option on the California ballot.)
We don’t talk about him much today compared to other pioneers in the computing field, but Alan Shugart is arguably as important as some the people whose names you know. He helped develop the hard drive and the primary disk-storage medium of the ’80s. And on top of that, he figured out a way to make hard drives a mainstream, commercially viable technology.
To me, though, the real lesson is how he spent his forced mid-career retirement. He gave himself a chance to take a break. Then, when he saw his opportunity, he jumped back in.
Allow yourself that.
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