Winter 2007

Thank you.

I am honored to be here and I congratulate you for obtaining a degree from one of the top engineering schools in the world.

Yes, the world.

Not everyone out there knows that yet, but it’s true and it needs to be said. When you go into the work force, people will recognize it.

I hope you’ll continue to remain connected to the University of Maryland throughout your ensuing career.

There's a Romanian poet, Nina Cassian, who says, according to James Waller in Poets and Writers magazine, that she "loves a good joke, especially the kind of joke that expresses a pessimistic delight in the vanity of human enterprise."
She tells this joke.

“A foreign tourist visiting Bucharest approaches two policemen on the street. Addressing himself to one of the officers, the tourist asks, in English, ‘Pardon me, sir, but do you know the way to the Art Museum?’ The officer - obviously uncomprehending - shrugs his shoulders.

“The tourist asks again, this time in French: ‘Pardonnez-moi, mais ou est le Musee des Arts?’ Again, the officer indicates that he hasn't understood.

“Undaunted, the tourist tries a third time – ‘Entschuldigen Sie, bitte, wo ist die Kunsthalle?’ - again, the policeman makes his gesture of incomprehension. Frustrated, the tourist walks away.

“Once he's out of earshot, the second policeman says to the first, ‘That guy sure knew a lot of languages!’
“And the first responds, ‘Yeah - fat lot of good it did him.’”

Armed with your Engineering Degree, in effect, you now know “a lot of languages,” and “what good will those do you?”
Today, based on my own experience, I want to talk about how you can leverage “those languages.”

By my definition, an engineering career is an opportunity to combine an extensive body of theoretical and practical knowledge with a passion for creativity to solve difficult problems to make people’s lives better, while at the same time contributing to your own sense of self-worth and satisfaction.

I want to talk about getting a mentor, learning about finance, and thinking big.

Getting a Mentor

Many papers have been written in IEEE journals, the Harvard Business Review and the like on the importance of mentors. A mentor is a career coach, so to speak.

According to one article, “mentoring relationships have been shown to enhance organizational success, individual career development and individual career satisfaction.”

I’ve told my two sons, William and Tommy, that, in life, many things you cannot choose, but you CAN choose your friends and your mentors.

I have been blessed in my career with a wide variety of mentors. In my view, mentors can not only help you more effectively apply your skills, but also solidify important human values, including working hard for what you believe in, being accountable to results and ultimately being generous with regard to sharing your prosperity and knowledge as a mentor yourself.

After many years on the job, when I now meet an engineer I’m convinced I can tell the difference between those who have had a mentor and those who have not.

Early in my career, I accepted a position as one of the first software engineers at a predominantly hardware engineering company - basically, I was a 60’s hippie with long hair and sandals who was about to go to work every day with a bunch of stuffy slide-rule types.

While I was currently earning $18,000 per year, at the end of my first interview the president of my new employer offered me $23,000 on the spot –   a 28% increase.

After telling my boss (who incidentally was a year younger than I) what happened with the president, I asked how my salary compared to his. “I’m making $20,000,” he said with no hesitation.

“Then I’m making $3,000 more than you?” I exclaimed.

“That’s no problem,” he said, “since you work for me, eventually I’ll get a raise!”

I learned that hiring the best people, even if they make more than you do, can amplify your career in the long run.
When I was 27 in 1975, I was sent to Italy by this same company to convince a customer that a large telephone central office switch could be built all digitally, instead of in the analog fashion at the time.

My role was to be a newly-minted “microprocessor  –  or, as the Italians pronounced it, mee-croprocessor expert.” In 1975 an Intel 8080 8-bit microprocessor cost about $350.00.

Every day for a month, I sat in a conference room with my boss surrounded by 30 very bright Italian engineers who asked us technical question after question for 8 hours a day.

Without knowing anything about telephone switching at the time – I didn’t even know what an Erlang was  –  I went back to my hotel room each night and read CCITT/ITU manuals to study different types of telephone signaling systems.

Although I was, for the most part, scared to death each day I confronted those Italians, my mentors, including my boss who carried the brunt of the “Italian assault,” expressed unflinching confidence in me.

From this experience I learned, as an engineer, almost any difficult learning curve could be overcome by working hard, preparing well, asking dumb questions and never giving up.

Let me mention one further example of mentoring. When that same President sold the company, he and his fellow executives made a lot of money. Although they were the only owners, they donated a pool of dollars and gave some of that to me. To this day, I don’t have the slightest idea how much money it was; all I remember was the generosity they showed me as a workaday engineer because I was part of their team.

That model of generosity held me in good stead when I started my first company. When we sold Telogy Networks, almost half our employees were millionaires, some many times over, because I wanted my success to be their success too.

Take control of your career by choosing good mentors!

Learning about Finance

When I attended Purdue University, briefly as an Honors Engineering Student and then as a Philosophy major, I’m sorry to say I looked down on my fellow students who were pursuing Business, Accounting or Finance degrees. I thought they weren’t smart enough to do engineering or philosophy.

Later, as a Vice President at M/A-Com, thanks to the encouragement of our CEO who was an MIT Ph.D. graduate, I was fortunate enough to be forced to enroll in MIT’s Sloan School Executive Management Program.

About 30 days before the first course, I received a box of books to read before class. With the prejudice I had from Purdue, I left the box unopened until just before my flight to Boston. After opening the box, I scanned the agenda of classes and threw a couple books into my briefcase. It wasn’t until I checked into the hotel, had a long dinner and a few leisurely drinks that I retired to my hotel room and finally cracked one of those books.

Within the first twenty pages, I realized I was in DEEP TROUBLE.

With page after page of financial definitions and mathematical formulae, I began to slowly understand I was encountering a body of knowledge I knew absolutely nothing about. My engineering experience to date had not prepared me for what I read in those books – other than I knew I’d better start immediately taking notes.
When I arrived at class the next day, I sat as far back in the room as I could.

Our professor wasted no time intimidating us. “I know most of you have an engineering background,” he said. “And some of you may have responsibility for running a P&L. But we’ll see shortly how smart you really are.”

Fortunately, this professor was a true teacher and he was bluffing. He said, “Some of you don’t have the slightest idea what business finance is all about and some of you are already successful running profitable divisions of M/A-Com. So today I’m going to instruct you on a single message about business finance that is everything you need to know as a starting point: ‘There is no such thing as THE cost of anything. There is only such a thing as A cost of something.’ If you don’t read any of the books we sent you and you learn nothing else during your time here at MIT, this is what I have to impart to you.”

I cannot tell you how much this simple advice has helped me in my career as an engineer – in fact, I could never have been an effective CEO otherwise.

Ironically, there seems to be almost a creed that engineers should be bad at finance, and it’s a cruel joke among CFO’s that engineers are the last people who should have any say about cost allocations, product pricing and business models.

To wit, I have frequently been involved in startup company conversations where founders have said, “Why should we hire an expensive CFO when we could hire 2 or 3 more engineers for the same amount of money?”

Let me give one more example.

After several years as CEO of my first company, Telogy Networks, in our 3rd year my board told me that our gross margins were too low. I accepted the board’s gauntlet. We needed to either raise our prices or lower our costs.
As I began to think about it, I wondered how many of our employees understood what gross margin was. That is when I established what I called our annual employee quiz and my now infamous “gross margin question.” I realized we could never achieve high gross margins if our employees didn’t know what gross margin was.

I created the following test question: “If I make a product which has a COGS (cost of goods sold) of $1.00 and I want to sell it for 75% gross margin, what is the sell price?”

The answer, of course, is $4.00, that is, a sell price which is FOUR TIMES the cost. Unfortunately, after giving this test over many years I found that most engineers failed  –  the most common answer being $1.75. Upon discovering the correct answer, one engineer, who happened to be a phase-locked loop circuit genius, told me, “Tom, to sell our products at four times cost seems like a sin.”

When Tom Watson, Jr., of IBM retired, he was asked what he was most proud of during his career. Mr. Watson was the CEO of IBM when they dominated the computer landscape with IBM’s System 360 computer, the computer I grew up on.

“My high prices,” he said.

When you can BOTH deliver cool technology AND charge a premium for its value that is engineering nirvana!
Engineers who understand finance, financial models and Wall Street can be, from a practical standpoint, more powerful than engineers who don’t.

Give it a try, it’s not easy!

Thinking Big

Besides recognizing you can choose your mentors, you also have the choice of thinking small or thinking big.
In my last year at Purdue, I took a graduate Modern Analytic Philosophy course studying Wittgenstein, Frege and Russell.

My professor had a photographic memory. It was rumored that he could tell you who the “camera grip” was for any movie by simply watching the credits as they rolled by.

In fact, he wrote out his lectures in long hand but delivered them by reading his notes from memory in the upper right-hand corner of the lecture room. This meant the only way to ask a question was to raise one’s arm in that direction to get one’s hand in his field of view.

There were 6 students in this class to begin with and that shrank down to 3 as the semester progressed. As the only undergraduate student in the class, I wanted very much to impress this professor. My paper had to do with an arcane point in Gottlieb Frege’s writings.

I felt absolutely certain of my conclusions, and at midterm I met this professor in his office to expound my thesis. He listened intently. When I finished making my case, he said, “That’s interesting. But it’s not a very important point, is it, Tom?”

I was devastated, …but I came to realize I was making a compelling argument about a nit.

Subsequently, I threw out the research on Frege and started over on Wittgenstein. While I felt my discourse was less persuasive, I put myself on the line to tackle a much more complicated problem. When I received my grades in the mail, I was amazed I earned an “A.”

Even more amazing, I later learned I was the only student who had completed the class!

My advice here is to condition yourself to think big.

At Telogy, we set out to change an industry by providing a turn-key solution for enabling Voice-over-IP products: VOIP phones, VOIP gateways, and VOIP switches.

Here are some of the comments we received regarding our strategy:

• VOIP doesn’t seem that complicated, anybody can do it
• Implementation is too expensive
• Cisco considers this a core competency and they’ll never buy from you
• It will never work. You’ll get killed with jitter, latency and echo cancelation
• The Telcos (that is, major telephone companies) will kill you
• It’s an interesting niche market
• And here’s my favorite:
  It will work, but not for 10 years

Today, SKYPE is a household piece of software. Probably only a few people who use SKYPE today even realize it’s based on VOIP technology.

Here’s the good news: oftentimes, as a practical matter, working on a small opportunity is no less difficult than working on a big opportunity – but small opportunities provide fewer degrees of freedom for making mistakes than big opportunities.

I will never forget my last day as Senior Vice President of Engineering at Hughes before starting Telogy. With about 500 engineers in my organization at the time, I merrily deleted hundreds of emails, cleaned out my office and boxed up my records. On my way out the door, one of my engineers ran up to me.

“That’s it?” he said.

“Yes,” I said, “this is my last box.”

“I hear you are going to start a company to compete with us,” he said.

“I only have 4 full-time people right now,” I said. “Hughes is a $9 Billion company. How could I compete with you?”

“Then tell me what product you are going to build,” he replied.

“I don’t know yet,” I said. “We haven’t figured it out.”

“You can tell me,” he said. “I won’t tell anybody.”

“But I can’t tell you,” I said, “because we don’t know.”

“YOU CAN’T BE THAT DUMB!” he exclaimed, and he walked away believing I hadn’t told him the truth.

As I was getting into my car, leaving a great job, many friends and valued mentors, I couldn’t help saying to myself, “My God, I AM that dumb!”

My final advice: when you begin to think big, don’t worry about being as smart as everyone thought you were.

Congratulations and Good Luck in your career!

Return to Commencement Archives