On 20 Jan 2012, the last day of the Entrepreneurship Winterim, Thunderbird alum, serial entrepreneur, and mega-donor Scott Walker spoke to us at his Napa vineyard, Anderson’s Conn Valley Vineyards. He told his life story, especially focusing on the ups and downs of his journey as an entrepreneur. Now, years later, after turning around multiple companies (this is his specialty) and starting, and selling, many of his own businesses at a tidy profit, he is the man of the hour. We hung on his every word. By the end of his talk, he had convinced us to work for him for the starting salary of $0, accompanied by the fringe benefits of learning everything from him and possibly getting rewarded big-time down the road. No risk no reward—a fundamental principle we have all, of course, learned in finance class at business school.
According to Scott, he was a late bloomer with no idea what he would do in life. He had a degree in political science and history, with the notion of becoming a lawyer one day, but without any solid plan. We’ve all been there. His course changed the day a professor at his university recommended Thunderbird to him for graduate studies (Tbird didn’t require the work experience back then for the master’s degree). He loved the school—it just felt different to him, and he knew he didn’t want to be with the crowd, even back then when he was confused about what he did want to do. Says Scott, “if you think differently, you don’t accept the ways things are done, and that’s the key.” That pretty much sums up the general operating principles of Thunderbird, and why we occupy such a niche in the global business community and have such a tight bond amongst the students and alumni—a common mentality of creative problem solving and questioning the status quo.
For Scott, the Thunderbird curriculum was tough, especially coming from a political science and history background. One day, when he was almost on the verge of quitting, he woke up one morning and had an epiphany. All of a sudden, he just “got it”—the finance, the accounting, the strategy, all started making sense. The pieces all came together. The lesson is that even when you think your life couldn’t me more divergent, stay the course, and you will see that paths will converge again. For example, wine, one of Scott’s principle joys in life, was discovered at Thunderbird, and he cofounded the Thunderbird International Wine Society. He never thought it would ever become a business pursuit, but yet it did later in life—two principle fundamentals in his life converging, after having been divergent for so long (wine and business), came together in the winery that he resides over as Chairman of the Board and was brought in to bring his operating and financial acumen to bear. The spirit of wine, the way it is enjoyed, the way it is allowed to mature and breathe, given space to be unleashed and run free after the laborious process of creation, is very much the spirit of an entrepreneur, and the spirit of Scott himself. As he reminded us, make sure to do what you love: “life’s too short…don’t drink cheap wine.”
In any case, Scott Walker did of course graduate from Thunderbird, in finance at that, but still had little idea of what he ultimately wanted to do, so he ended up joining First City Bank. Within his first months on the job, he underwent a training program with other MBAs. The other MBAs just didn’t get it, he said. They didn’t get what was really going on in business, and in the world, what was really making the industry tick, and they thought too much like typical finance guys. Scott, having majored in history in undergrad, had a principle advantage of having studied where (and how) mankind made mistakes in history, and, coupled with a finance focused masters from Thunderbird, had a unique perspective—while he was a finance guy, he didn’t think like a finance guy. This is the Tbird difference—applying different perspectives to a problem that lead to better solutions, as well as having a holistic view of the world.
The picture wasn’t rosy in the beginning. Things at First City started going downhill fast following the early 80’s energy industry slump in Houston. A large majority of the people Scott respected were leaving the bank, and what stays behind when all the star performers leave? Mediocrity. So, Scott left too. He left to go a French bank that specialized in oil and gas financing, but that didn’t last for long either. He finally made his way to Lloyd’s Bank, then to GE Capital. With good industry and successful deal experience in hand, he thought things were going pretty well. Then, everything changed.
Right at the beginning of the early 90’s, during the S&L debacle M&A virtually died, he got laid off and wasn’t successful in finding another job. He went on unemployment. Fast food restaurants wouldn’t even hire him because he was over-qualified. And it didn’t stop there. His wife left him, taking their young son with her. His family wouldn’t talk to him anymore either. He lived on $500/month. He was depressed. Some of his “friends” were dragging him down further through words of discouragement. After two years, at the bottom point in his life, he only had $300 dollars in his bank account, nobody would talk to him, and nobody would hire him. Of the three biggest life changing things than can happen to an individual (a death in the family, a layoff, and a divorce) he had two simultaneously.
It was there, at his lowest point, that he had another epiphany and fundamentally decided to change his life. Scott made three decisions:
- He wouldn’t compromise his principles or integrity ever again.
- He would never give up.
- Lastly, if he ever made it out, it would be due to somebody helping him along the way (think Malcolm Gladwell), meaning that Scott, in turn, also had an obligation to help others and give back if he made it.
Well, as we all guessed, someone did give him a hand, and Scott did make it out of his quicksand trap—with another banking job starting at $60K. But, even as he started to pay off his lawyers and debt, he knew that he had to get out of banking. Earlier in his life Scott had met a man who he really admired—Bill Conley—and so Scott asked him to teach him. Like a true American entrepreneur, Scott worked two jobs for three years–one job during the day, so he could pay the bills, and the other job at night, the “dream job,” with his friend and mentor Bill. Finally when a true opportunity presented itself, Bill stated he couldn’t pay Scott, and didn’t know when he could. But Scott knew this was it, and said “let’s go.” Full throttle ahead. Five months later Scott had his starting salary set at $40K.
Bill secured a deal in telecom infrastructure and Scott became the second employee as CFO. At that time, big telecom providers were not allowed to build and own their own internet backbone and the business flourished. Within a year, the law changed, and Scott found himself out of a job again. But this time, he merely smiled; he knew he would be OK. He was in control of his destiny. That same day, a friend asked him to join a poker game (to lose money he didn’t have). Low and behold, someone at the table needed a CFO, and Scott was hired two days later at $80K.
Scott was brought in to this company to clean it up and take it public. Scott did just that, and ultimately represented the company in front of SEC in March 1998. But shortly after the President and CEO announced that they were going back to their old ways. This was before Sarbanes–Oxley took effect. He refused to sign the upcoming 10K, and promptly was out of work again. But, he knew his priorities—what was important were his principles, his family (he was married again now), and trust in friends. So he went back to Bill, this time on a venture in education. Scott took three months to wrap up this project, and at the end was getting bored. In mid-1998, TelePay brought him in to help close an exit acquisition deal. TelePay was doing less than $1MM in revenue, and Western Union, a powerful competitor, wanted to crush the company in the negotiation. Scott told the CEO that the deal would never close in the shape that the company was currently in, and decided to buy the company (for $3MM) and do the M&A himself. He eventually gave up 50% of the company for the money to buy it, but he quickly turned the company around and it began to grow at more than 100% a year. Scott changed the name to Bill-Matrix, and did business with all the major telecom, utilities, insurance and loan payment companies, such as car and student loans. Just over six and half year later, Scott ended up selling Bill-Matrix for $350MM, and a $1MM check promptly landed on Angel Cabrera’s (the then-President of Thunderbird) desk.
This was when Scott started to pay back. He believes in Thunderbird, and later committed $10MM to underwrite the entrepreneurial center, with the plan of making the Walker Center for Global Entrepreneurship one of the best entrepreneurship centers in the world. I think Scott will do just that. On the personal side, Scott decided to not touch the money for a year, but then finally caved in and bought a car—a Jeep Wrangler. It took him half an hour to convince the salesman that he was legitimately writing a check to pay it in full. Scott also paid off all his debt, including his house. Following a commitment of working for two years to the acquiror, he took six months off to spend with family.
The next chapter in Scott’s life began when Bill called him up in Oct 2008 to help close another deal. Bill wanted to buy an aviation fuel distributor in the North American market. The economy was deteriorating quickly. Scott went to Bill on 1 Dec 2008 and told him that they couldn’t close any purchase deal because the financial climate was a mess (their bank would only let the deal happen with the clause that they could change the terms at any time). So, in the typical Walker way, he told the bank where to stick it. Scott bought 25% of Epic Aviation, and he eventually found a new bank (Bank of America) a year later. Along with Bill, they acquired another 25% of the company on the exercise of a put option, at a very good price. Time and time again in his life, Scott has done what others thought he couldn’t. That’s why he advises us not to worry too much about what others say. Instead, he says, “just do it.”
Then what happened? The BP oil spill (he says chaos always creates opportunity). “There are always opportunities sitting right in front of you but you have to recognize them and capitalize,” said Scott. At this time, BP was really getting slaughtered by the press. Bill conferred with Scott, and a call to BP was made. 3 Aug 2010, Scott cuts the deal. BP wanted to close in 3 months. The actual close was 11 Feb 2011. Scott entered Epic Aviation in Sep 2010. It was a family run business with lots of operational issues. They had maxed out on their bank lines and were nearing financial collapse. But with Scott at the helm, within ten months all bank debt was repaid, and now the company is generating more cash than what the company was bought for.
So what is Scott’s secret sauce? It can be boiled down to discipline, and playing by the rules. These rules are the “Walker cool aid.” The industry is irrelevant. It’s the rules, the discipline. Financial, infrastructure, operating, and technology discipline.
Rule 1: pay off your debt early and don’t borrow excessively (work with partners for financing whenever possible).
Rule 2: sacrifice—if you don’t sacrifice you can’t make it. Don’t expect full compensation (as in a salary) to make it. You don’t create wealth through your salary, but if you make sacrifices you will win big in the end.
Rule 3: you can’t do it alone, share the wealth, so take the hit upfront and then give back later.
Rule 4: there are no short cuts and there is no way to “get there faster.” Keep plodding along and hard-work will speak for itself.
Rule 5: the person who has experience knows more, so take the time to learn from them. Your mentor (Bill in the case of Scott Walker) can make all the difference.
Rule 6: make mistakes, experiment, and learn what goes wrong from history. Failure is OK. But don’t repeat mistakes.
Rule 7: if you want to be an entrepreneur, go work for one.
Rule 8: everyone has an agenda. You’ve got to look at who is saying it and why they are saying it. This applies to everything in life, from work to politics to personal life. If you are waiting for someone else to tell you what you should do, or to make a decision, it’s already too late.
Rule 9: Scott has been partners with Bill for 17 years on a handshake. This is what matters—principles and integrity. This is old-school business and is still the golden rule.
Now Scott and Bill are creating a global aviation company from a fuel and operations side, and have a relationship with CNAF in China. They have negotiated a contract to build out the general aviation industry in China. They are planning to revolutionize the aviation business worldwide. But, Scott can’t do it alone. He needs people (especially Tbirds) in China (and other parts of the world, such as Australia and Europe) who have dual language skills and cultural understanding. But remember, he can’t pay you a salary yet and doesn’t know when he can. Would you join?