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The Ruthless Determination of Larry Ellison
The First 20 Years Building Oracle
Justin Gordon
January 21, 2024
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Larry Ellison
As of this writing, Larry Ellison is the fourth-richest person in the world and the company he founded, Oracle, is valued at more than $300 billion.
By 1996, nearly 20 years after starting the company, he was already worth $6 billion and was the richest man in California.
Today, we’re diving into his story, before and during those first 20 years of building Oracle.
To write today’s deep dive, I read the insightful book The Difference Between God and Larry Ellison: *God Doesn't Think He's Larry Ellison by Mike Wilson. For the full story, I highly suggest you check it out.
Let’s get to it.
Early Days
Larry Ellison was born on August 17, 1944 in Manhattan.
After nearly dying from pneumonia at just nine months old, his unmarried, nineteen-year-old mother, Florence, sent him to live with relatives in a middle-class suburb of Chicago.
Not until he was twelve years old did Larry know he was adopted and this was a powerful motivator for him, thinking he had something to prove.
But Larry’s desire to succeed wouldn’t yield tangible results for many years to come.
Along the way, he’d find other motivators, his unsupportive, adoptive father being one of them:
Oh, it was a powerful motivation. I think my dad had a wonderful effect on me. If fire doesn't destroy you, you're tempered by it. Thanks, Dad. I'm not sure I would recommend that everyone raise their children like this. There's got to be a better way. But it certainly worked.
While in high school, Larry mostly flew under the radar, described by one classmate as, “very quiet, very withdrawn, not at all in the mainstream.”
He also started to display the rebelliousness he’d use later in life, refusing to read many of the books he was supposed to read, instead choosing to read what interested him most:
I never accepted conventional wisdom. This got me in a lot of trouble. It served me well later in life, but it got me in terrible trouble in a school system that tries to get you to conform.
Nonconformist.
Classic entrepreneur, right?
After graduating high school in 1962 he attended the University of Illinois in Champaign-Urbana where his rebelliousness continued:
As in high school, Ellison did well in the areas he enjoyed and did a lot of reading on his own. But he was unwilling to study a subject just because the university required it or complete an assignment just because a teacher said he had to. The irony of this was that Ellison was hoping to become a doctor. He may have been an iconoclast, but he definitely wasn't a realist.
Larry didn’t stay in college long.
After his sophomore year, when his adoptive mother, Lillian, died of cancer, he left the University of Illinois.
Before leaving school, and after giving up his aspirations to become a doctor, Larry learned to program a computer and utilized that skill to get a job as a programmer at the university.
Not long after, in 1966, he left Illinois for California, a decision that proved incredibly fruitful.
California Dreamin’
Larry enrolled at Berkeley in the summer of 1966, though he wouldn’t attend long.
After getting married to Adda Quinn in January 1967, Larry worked as a systems programmer for IBM mainframes for a few years at several companies.
It was “monotonous and unchallenging” and, even though he wasn’t making much money, he was spending exorbitantly.
Adda said he had “champagne tastes on a beer budget.”
LOL.
His spending, among other reasons, caused his wife to leave him in 1974.
It was a turning point in his life:
“He said to me, 'If you stay with me, I will become a millionaire and you can have anything you want.'"
She did not know where that idea came from. He had never said anything like it before.
"There was never any clue. Believe me. Not a clue."
In Quinn's view, Ellison "made a commitment to himself that he was not going to be a failure. That was the turning point of his life."
She wasn’t the only one concerned about his prospects though.
Larry later said:
I actually do remember saying something like that. I remember at that point saying [to myself), “God, everyone seems to be very concerned that I'm not going to know how to make money.” ...There was that very consistent point of view throughout most of my life that success wasn't going to come my way. So I think it was probably in that context that I said something.
Adda later said of Larry:
He is extremely intense. I was married to him for seven years, and by the time I left, I was worn out and I'm a fairly multiphasic, high-energy person with a lot of diverse interests and a Type A personality. Goal-oriented. And I was worn out. He's beyond anything I've ever experienced. And I'm sure that's what accounts for his enormous success now. He has incredible intelligence, and he applies it with incredible intensity. And that intensity does not let up.
This is the type of person that builds a multi-billion dollar company.
But it’d still be a few years before Larry started the company that made him a billionaire.
After losing his job at a company called Amdahl, Larry joined Ampex, an important company for our story.
At Ampex, Larry worked under Bob Miner, in what would later become a collaboration for the ages.
It was through Larry’s dissatisfaction with a manager at Ampex that he even started working with Bob in the first place:
I thought that my manager, the manager they assigned me to, was not technically competent. So I refused to work for him. So I said, I'll work for Bob. He's the best guy. I'll work for him.
Shows you the value of speaking up and surrounding yourself with great people, doesn’t it?
Larry and Bob would create an iconic, generational company together.
They’d also find their third future co-founder, Edward A. Oates, while at Ampex.
Working together at Ampex for a brief time, the three of them often discussed their disdain for the corporate world.
Soon, they’d start a company of their own.
Oracle Origins
After quitting Ampex to join a company called Precision Instrument, Larry jumped on an opportunity to work with his former colleagues, Bob and Ed.
Precision Instrument needed software for its hardware and didn’t have programmers who could write the code.
When bids came in from other companies to take on the work, they were overpriced, giving Larry an opening.
Ellison called Bob Miner and Ed Oates, his former colleagues at Ampex, and suggested that the three of them form a company and put in a bid.
If they got the contract, Miner and Oates would write the software while Ellison supervised the project from within Precision Instrument.
Eventually he would give up his beloved vice-presidency and join them in the new company. After the three men finished the Precision Instrument job, they would continue on in business.
Beyond that, Ellison's plan wasn't completely baked. Maybe the new company would become a contracting house, and maybe it would develop a product. Ellison wasn't sure. But somehow they all would become rich.
Wait, but why pursue this in the first place?
Larry had a good job as a VP, why shake things up?
Larry explained:
I think I was driven to do this because I knew I could never really survive inside a conventional corporation. I was not suited to being able to work my way up the corporate ladder.
Larry, Bob, and Ed organized a bid of $400,000 for the Precision Instrument contract and won it.
They formed a company, Software Development Laboratories, Inc. (SDL) to fulfill it:
In June 1977 the three programmers officially founded their new company, with Miner as president and Oates as vice-president.
Ellison, the mastermind, remained an employee of Precision Instrument, with responsibility for overseeing the contract. But he made it clear to his employers that he would soon resign to join the new venture.
Years later Ellison enjoyed noting that he was not even the first employee of the company he founded.
In their new venture, Ellison paid $1,200 for 60% of the company’s shares, with Bob and Ed each buying 20%.
Ed explained why Larry got the majority of the stock:
Larry was the prime mover behind this thing. There was no question about the fact that Larry was pushing this idea a lot harder than either Bob or I would have pushed it.
He had more chutzpah than the two of us combined, one and a half times as much. So he got the chutzpah bonus. Bob and I both recognized that we were going to build the software, but this organization was going to be a success because of Larry's chutzpah.
That chutzpah was on display for SDL’s first programmer, Bruce Scott:
On one of his first days at SDL, Scott was trying to connect SDL's computer terminals to the Precision Instrument computer.
There was a problem: A Sheetrock wall stood between the SDL offices and the computer room.
Scott said, "Larry, we need to hook up these terminals. How are we going to hook them up?"
"I'll show you how," Ellison replied. He grabbed a hammer and smashed a hole through the wall.
Bruce Scott came to believe that Ellison’s entire business philosophy could be summed up in that single act. "Find a way or make one. Just do it," Scott said.
With a team being built, Larry and his co-founders had to decide what kind of company they were creating.
Would they take on more contract work or build their own products?
Bob explained the simple rationale behind the decision to build their own products:
We just figured that a product-oriented business would be more profitable and more satisfying.
It’s also important to understand at this point in our story just how important it was that Larry and Bob had each other to build Oracle:
Ellison was sizzle, and Miner was steak. In the coming years Ellison peddled the product and Miner built it— always in that order.
Ellison the Performer recruited good people into the company, and Miner the Regular Guy got them to stay: The two men complemented each other well. Even more than that, they needed each other.
Bob Miner never could have created Oracle Corporation by himself. He couldn't have sold software the way Ellison did; he was too inward, too modest, too honest. Nor was he willing to make the sacrifices Ellison made. For Ellison, Oracle was a holy mission; for Miner, it was always just a job.
Ellison needed Miner too. Few people liked, respected, and enjoyed Larry Ellison more than Miner did. And nobody would have put up with him for as long.
So we have the right co-founders working together.
They decide they want to be a product-oriented business.
Now… what product?
Well, thanks to IBM researchers, they’d have their answer.
It all started in 1970 with an article by IBM researcher Edgar H. “Ted” Codd.
The title was, “A Relational Model of Data for Large Shared Data Banks” and it was published in June 1970.
At the time, people didn’t make much of it, doubting the potential of relational databases.
As it turns out, years later, relational databases were exactly the product many companies needed.
Without going into too many of the technological details, of which I know very little anyway, here’s what’s important to know:
IBM researchers publicly published several papers about System R, their database research project that used SQL, a programming language built to be a better way to store and process information in a relational database.
But IBM didn’t release a product till years later.
That was Larry Ellison’s opening.
And boy oh boy did he make the most of it.
As Mike Wilson wrote in his book:
Indeed Ellison could not have dreamed of a more amiable and helpful competitor than IBM. Think of the marketing of relational technology as a race, with Ellison and IBM as two of the main entrants. IBM taught Ellison to walk, bought him a pair of track shoes, trained him as a sprinter, and then gave him a big head start. How could he lose?
It’s a good example of how corporate bureaucracy slows down, and sometimes, kills companies.
IBM didn’t want to sell a product that would cannibalize the products they already had. That resistance by people at IBM slowed down the development of their relational database product.
In the meantime, Larry Ellison and his company took full advantage.
Relational Software Inc. (RSI)
The first customer for Larry’s company?
The Central Intelligence Agency.
Once again, this came, in part, thanks to IBM.
With IBM not yet ready to sell relational database software, the CIA had to look elsewhere.
Relational Software Inc. (RSI), the new name for what would become Oracle, is where they ended up.
After landing the CIA deal, Larry also sold Oracle to the Navy.
Only one problem.
Between the two customers, there were three different operating systems they needed Oracle software to work on.
It forced Oracle to build portable software:
We had the first portable piece of software of any real size. And it was forced upon us, really. It was just a matter of necessity.
This turned out to be a critical part of the Oracle story.
Larry Ellison promoted the hell out of it too:
In years to come he promoted Oracle as a one-size-fits-all computer program.
It doesn't matter what kind of computer you have, he told customers; Oracle will work on it.
For a long time he liked to say that Oracle software was "promiscuous" because it would work "with anybody." This was a powerful selling point. Big corporations and government agencies often used more than one kind of computer, as the CIA did.
The idea that they could run one kind of database software on many different machines was exciting; no longer would they have to waste time and money writing new programs for each machine.
One of the computers Oracle software had to work on was the Virtual Address eXtension (VAX) which was developed and sold by the Digital Equipment Corporation (DEC).
But in 1979 Larry didn’t have money to buy a VAX machine.
What’d he do?
He made a deal with the University of California, Berkeley to use theirs.
Another time, Larry negotiated a deal with a different company to keep their VAX machine at Oracle and allow them to use it too.
Eventually, Larry borrowed money so that Oracle could buy its own VAX machine.
It was a worthy investment.
In the ensuing decade and beyond, Oracle made hundreds of millions of dollars from VAX users.
The person who helped Larry with the loan was Donald Lucas, who worked in the same office building as Larry and his team:
Lucas could not help noticing Ellison, Miner, and the other young men who worked in the offices on the floor below his.
They were working when he arrived each morning and working when he left each night. He did not know what they were doing, but he figured it had something to do with computers; he could see their computer terminals glowing through the office windows.
One day he poked his head into their offices and introduced himself. Ellison did not know it at the time, but Lucas was just what he needed.
Donald L. Lucas was a Stanford-educated businessman who had gotten rich by investing in new companies. His career as a venture capitalist stretched back to 1959, when he helped start National Semiconductor.
Don came into play when Ed Oates, Oracle’s third co-founder, decided to leave the company after his work was suffering and his marriage was dissolving.
They needed to know the fair market value of Ed’s stock and Don helped them do just that.
He’d eventually become the first Chairman of the Oracle Board.
To take Oracle beyond those first couple of customers, Larry did what many software companies at the time were doing - exaggerating both the number of customers they had and what their software could do.
Larry was trying to give Oracle more credibility in the early days.
He knew how important it was to win as much market share as possible as quickly as possible, as he later mentioned:
How much does it cost Pepsi to get one half of one percent of the market from Coke once the market has been established? It's very expensive. This market is being established. If we don't run as hard as we can as fast as we can, and then do it again twice as fast, it'll be cost-prohibitive for us to increase market share.
And although Oracle’s software didn’t always work as advertised in the early days, companies still bought it.
Part of the reason was Oracle’s phenomenal ability to sell it.
Another was that they were building a product on the bleeding edge of technology, a product the CIA, the Navy, and others desperately hoped would work, and so, early on, they got a lot of leeway.
As one member of the Navy said of Oracle software:
We were buying a Wright Flyer with the expectation that we would probably have an airline in a few years.
With Oracle selling a new sort of software product, Larry’s job was not just to sell Oracle itself, but relational database technology more broadly.
He did it to perfection.
Taking Off
In 1982, Oracle did $2.4 million in sales.
The next year, that number was $5 million.
By 1984, it was $12.7 million and Larry was leading a company of 150 employees.
The same year, Jenny Overstreet became Larry’s assistant, and a driving force for Oracle behind the scenes for years to come:
She was everything he wasn't: punctual, detail-oriented, thorough, discreet in her communications. Ellison never had an organized day in his life (in that way he was a typical entrepreneur), but Overstreet managed to make him seem organized. Well, almost.
In time people in high technology came to identify Oracle almost as closely with Overstreet as they did with Ellison. In 1993 a former Oracle executive named George Koch published a technical manual called Oracle: The Complete Reference. In the acknowledgments he wrote that Overstreet "quietly runs Oracle and most of the western world. She solves problems before anybody else has even realized there are problems."
Koch wasn't exaggerating by much about Overstreet's influence. At Oracle Overstreet was a power unto herself (but as one person pointed out, "It never went to her head").
Of course, Ellison had his own view on time management, offering a lesson on the value of focus:
Jenny and I approach things very differently. Jenny feels that she has to be exactly on time all the time. Jenny feels if there are a hundred things you have to know, you have to know all hundred of them. If there are a thousand things you're doing, you have to do all thousand of them. My view is different.
My view is that there are only a handful of things that are really important, and you devote all your time to those and forget everything else. If you try to do all thousand things, answer all thousand phone calls, you will dilute your efforts in those areas that are really essential.
It’s hard to argue with the results of that approach.
Here’s a ridiculous growth streak for you.
Oracle’s sales doubled in 11 of its first 12 years.
Larry’s sales strategy for Oracle’s software focused on three things:
Portability
Connectability
Compatibility
And he had a peculiar hiring strategy to build the team that would execute:
Ellison insisted that his recruiters hire only the finest, and cockiest, new college graduates.
"When they were recruiting from universities, they'd ask people, 'Are you the smartest person you know?' And then if they said yes, they'd hire them. If they said no, they'd say, 'Who is?' And they'd go hire that guy instead," Oracle engineer Roger Bamford said.
"I don't know if you got the smartest people that way, but you definitely got the most arrogant."
Ellison's swaggering, combative style became a part of the company's identity. This arrogant culture had a lot to do with Oracle's success.
But it also explained why Oracle's competitors—and quite a few of Oracle's customers—despised the company and distrusted its founder.
With that team, Larry had the highest of expectations:
"There was a lot of intimidation, a lot of uncomfortable intimidation. I didn't like that," Wells said. But she didn't believe that Ellison meant to hurt anyone. He only wanted "to create an atmosphere of the very highest expectations," a place "where the limits of what you can do are your own.”
He was also unforgiving:
Because I personalize a lot of Oracle and personalize a lot of the things we do, I was not terribly forgiving of mediocrity. I was completely intolerant of a lack of effort. And I was fairly brutal in the way I expressed myself.
The culture was ultra-competitive, with “frequent pickup basketball games among Oracle executives” in the 1980s.
I find that amusing and I’m not sure why. Seeing a young Larry Ellison take it to his executives in a pickup game just seems like it’d be fun to witness.
The culture included a high level of commitment as well, especially from salespeople, who were all expected to hit their numbers, and who used some questionable tactics to do so, which put Oracle in a bind later on.
Ups and Downs
With a salesforce humming along selling Oracle software, Larry ramped up advertising with the help of Rick Bennett.
In Rick’s first year at Oracle, after rarely spending on advertising, they spent $330,000 on ads. The next year, $1.33 million. And by 1987 that number was $4.8 million.
Unsurprisingly, Larry took an aggressive advertising approach as well:
With their ads, Ellison and Bennett established an aggressive and extremely arrogant public image for the company.
Instead of promoting Oracle on its merits, they created the high-tech equivalent of political attack ads: They tried to raise Oracle's stature by smearing the competition.
They did this cleverly, obnoxiously, and to great effect. "Larry played a zero-sum game: You have to destroy your competition. It's quite Darwinian," Bennett said.
Larry also found another creative way to get an advantage over his competitors:
The PC version of Oracle allowed the average corporate employee to become familiar with the SQL language and with relational database technology.
People tinkered with it at work, and some even loaded it onto their PCs at home. They learned how to put information in and how to get it out.
After a while these people began to consider themselves Oracle experts. That made them feel good about themselves—and about Oracle.
Marketing a product this way was "enormously visionary," said consultant Richard Finkelstein. The PC version couldn't do much, Finkelstein said, "but that was not the point. The point was that Ellison put the product in front of everybody at almost no cost."
As a result, the folks around the water cooler knew all about Oracle, but a lot of them had never heard of Oracle's competitors.
When the founder of Ingres, Mike Stonebraker, one of Oracle’s main early competitors, was asked about the competition between the two, it was clear why Oracle won out:
When I asked Mike Stonebraker about competing with Oracle, he said that basically it wasn't fair.
To hear him tell it, Ingres was always the loveliest and most talented contestant in the beauty contest, but Oracle won anyway.
"Throughout the eighties Ingres constantly had a superior technical product. If you ask anybody, any watcher of the scene, they will all say exactly the same thing. It was not only better, it was way better," Stonebraker said.
"Larry Ellison was always able to make up for his deficiencies with superb marketing.”
Superb marketing certainly goes a long way.
For Oracle, it led them to an IPO in March 1986.
By 1989, Oracle was cruising, doing $583 million in sales.
The company had more than 4,000 employees at this point.
But a big problem, one that had been building for years, was about to show up in a major way.
The numbers told the story:
Oracle finished fiscal 1989 with $583 million in revenue and $262 million in receivables. The company ended 1990 with $970 million in revenue and $468 million in uncollected bills. (By contrast, in 1994, after Oracle got its act together, it did $2 billion in business and finished the year with only $455 million in receivables.)
At one point in 1990 Oracle was taking an average of two hundred days to collect from customers in the United States. The industry average was about sixty days.
No bueno.
To grow at a rapid rate, Oracle got sloppy. Very sloppy.
They had negative cash flow, booked very questionable deals for years that included everything from extended payment terms to side letters, and the company took a massive hit.
After announcing their financial results for Q3 of the 1990 fiscal year on March 27, 1990, one where profits increased only 1% compared to the previous year, Oracle’s stock dropped from $25.38 to $17.50, losing 31% in a day.
Mike Wilson’s book goes into way more detail about what led to this, but all that is to say that it was a terrible situation.
Then, on September 6, Oracle announced its first quarterly loss in company history.
Larry had to lay off 10% of Oracle’s workforce, about 400 people in total.
A few weeks later, the stock fell to around $6. It had been above $28 only six months before.
The stock continued to dive, dipping below $5 in November.
Several people thought Larry would be on his way out of Oracle at this time.
Stephen Imbler, the VP of Finance, was not one of them and he made a good point about Larry:
Yeah, we had lost hundreds of millions of dollars of shareholder value, but who was the primary person responsible for creating that shareholder value in the first place? There are very few people who can lose hundreds of millions of dollars because very few ever create that much.
After the dip, Oracle made changes.
Their new CFO, Jeff Henley, was one of the people leading the charge.
Most of the changes Henley made were commonsense ones; they only seemed revolutionary because Oracle had been so lacking in common sense.
No longer would the company sell a maintenance contract and recognize all the revenue up front; instead it would book the revenue a month at a time, as the payments came in.
No longer would Oracle have a tiny bad-debt reserve; from now on it would always keep enough cash to cover any deals that fell through.
And no longer would customers be given a year to pay for their software. "I said, 'I don't care if [the accounting rules say you can recognize the revenue or not; we're not going to do that,’ Henley said. "So let's start doing thirty-day terms, and if people aren't willing to buy, it means they really don't need the products anyway."
All these changes slowed revenue growth, of course, and that was why Larry Ellison had not made them years earlier.
In 1989, revenue grew 102%.
In 1991, growth was only 12% and in 1992 it was 15%.
This was painful given what they were used to, but was completely necessary.
The crazy part?
In hindsight, the bad quarter didn’t matter much at all:
In the end none of it mattered. Within a few years people were referring to what happened at Oracle in 1990 as a "hiccup" or a "stumble" or a "dip," just something that happens to a fast-growing company.
The rule bending, the cheating, the arrogance, the shabby treatment of customers—none of it made any difference because Oracle was making money again, and that was what counted. Oracle did a billion dollars in business in 1991 and was up to two billion in 1994.
20 Years of Oracle
In 1996, nearly 20 years after Larry Ellison started Oracle, the company had 23,113 employees and did $4.2 billion in revenue with $603 million in profit.
The key to the success of Oracle in those first 20 years could be summed up with a quote by Gary Kennedy: We did what we had to do.
Larry built a company filled with people who played to win.
Yes, it caught up to them in 1990, but it also made Oracle remarkably successful.
Could a more passive founder have accomplished what Larry did in those first 20 years?
I doubt it.
There’s a reason why companies like Oracle and Microsoft came out on top at that time - they were both led by aggressive founders who played to win… and won.
Larry was ruthlessly competitive in all areas of life during that time and it made Oracle fabulously successful, but also came at a high personal cost, including multiple failed marriages.
Nonetheless, Larry built Oracle his way:
A lot of people summed up Larry Ellison's success by saying he was in the right place at the right time.
One early employee of Oracle said of Ellison and his partners, "They didn't have a great idea; they found a great idea." That was true. But so what?
Lots of people in the computer industry read the System R papers, but only Ellison seized on the opportunity to build an actual database product. Only Ellison took an idea and used it as the foundation for a huge corporation.
Yes, he was in the right place at the right time. But as he told me, "I don't know of any place or any time where there aren't great possibilities."
Yes, IBM gave him the idea. But it did not give him six billion dollars. He made himself rich through ceaseless work, brilliant strategy, unrelenting optimism, and ruthless determination.
Larry Ellison achieved the first success of his life by doing what no one else could or probably would do. He did it by being himself.
Thanks for reading! If you’d like to read the book by Mike Wilson, which includes way more details than I could include in this piece, check it out here.
Best,
Justin
P.S. Interested in sponsoring Just Go Grind and reaching 23,000+ founders, investors, and operators?
P.P.S. Want to work with me 1 on 1?
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