Entrepreneur's publishing vision is a Lulu

To most people, Bob Young is the man in the Red Hat who made his fortune off the fascinating technology company of the same name.

But Young, a promotional whiz whose net worth briefly swelled to the billion-dollar range in 2000 as Red Hat's stock rocketed on high-tech mania, takes just as much pride in his many other entrepreneurial hats, even that of a one-time typewriter salesman who was ambushed by the onslaught of the computer age.

On the day of this interview, Young is wearing his Lulu, Inc., hat as CEO of the online publishing company based in Morrisville, N.C., but it's apparent the 51-year-old's heart is in his native Hamilton. In Steeltown, he is worshipped by football fans as the man who saved the Canadian Football League's Tiger-Cats. He also remains on the board of directors of Red Hat.

Yet, Young isn't one to spike the ball in the endzone in celebration of his run to daylight in the entrepreneurial arena. In spirit, the typewriter salesman lives on.

John Sokolowski photo
Hamilton native Bob Young, a typewriter salesman-turned technology entrepreneur, is worshipped in Steeltown as the man who rescued the Ticats.

1. What's your fondest memory of a boyhood in Hamilton?

"It's the chocolate cupcakes that my grandmother's housekeeper would cook and offer us after school. We lived next door to my grandmother's. I played sports, but I didn't play any sports very well. I come from a family of three boys and most of my cousins were boys, so you couldn't grow up in that era without playing a lot of pickup baseball or touch football. We were all big Ticat fans. Depending on the year, in touch football we were either Bernie Faloney or Hal Patterson, or we were Joe Zuger or Tony Gabriel. We went to the Ticat games with my Uncle Bill (Young), who had a bunch of season tickets."

2. To what career did you aspire as a history major at the University of Toronto?

"It was somewhat inevitable that I would become an entrepreneur because, as a history major, you graduate from college without any life skills with the possible exception of becoming a history teacher. I don't think I had the patience for teaching. My parents and my mother (Nancy), in particular, were very worried for very good reasons about what I would do for a living with a history degree. No one wanted to hire a history major, but I knew that if you started your own business, you were assured of getting a job - perhaps not a very good-paying job, but a job nevertheless. If you started a business, I thought you could require the business to hire you, and then you could assure your mother that you were gainfully employed."

3. What was your first business venture?

"I got into the typewriter rental business in Toronto. To this very day, I describe myself as a typewriter salesman in terms of my training. It became very obvious in the office equipment rental business in the late 1970s that there wasn't much of a future in IBM correcting golf-ball typewriters. We'd call on our clients who stopped renting typewriters to find out why, and what competitor they were renting them from. When we went to the office buildings in downtown Toronto, we'd find that they'd replaced all of their typewriters with word processors or computer terminals. So, I went into computer rentals. I was pretty successful for a little while with a company called Vernon Computer Rentals, which did pretty well until the 1989 recession. With that recession, I managed to drive my net worth down to something less than what it was when I graduated from university. We ran into financial difficulties with Vernon and were forced to sell the company on a very unattractive basis because of mistakes I'd made but, had I not made those mistakes, I wouldn't have been unemployed working in my wife's sewing closet in 1993 and been in a position of helping with the formation of Red Hat."

4. How did you get involved as a co-founder of Red Hat (the leading provider of the Linux computer operating system)?

"As an entrepreneur, you're always looking for what we refer to as the hole in the market. In other words, you're looking for some product or service that customers can't find. We realized that we had a benefit that we could offer corporate computer users that no other for-profit technology in America, or for that matter in the world, was willing to offer. We could give our customers control over Internet technology by giving them source code and a licence to modify the source code. What we realized is that we weren't selling a better, faster or cheaper operating system, but we were providing control. There were all these people who worked for major corporations who were desperate to get their hands on the source code of the technology that they were building their companies around.

So the rest of it is history."

5. How do you reflect on the way Red Hat has been able to affect the Internet market?

"The bizarre thing is that, even in the early days of Red Hat, our mistakes turned out better than our good decisions. The potential for the value of this business was so obvious to us and so surprisingly opaque to our competitors. I would not in hindsight change a single thing."

6. What was it like for you as CEO of Red Hat, watching the company's shares crash from $140 US to $5 in 2000?

"We didn't pay much attention to it. We had one opportunity to price our stock, and that was when we went public at $7 (the stock surged to $54 in its first day of trading). So the company communicated to the market that we thought the stock was worth something in the $7 range. Today, it's trading at $11. That's what we take comfort in. What we sold to the market was the real value of the company, and we have been able to build on that."

7. While you were CEO of Red Hat, did you lose sleep over what Microsoft founder Bill Gates was up to?

"Well, yeah, you worried like crazy over all this stuff, and I'm a good worrier of things. But Andy Grove, the guy that largely built Intel Corporation, wrote the great book on the technology industry. The beauty of Andy's book is that you don't have to go past the cover, because the whole point of the story is in the title, which reads Only The Paranoid Survive. Do I lose sleep over what Bill Gates was going to do to us? Yes. Do I lose sleep over what Larry Ellison (at Oracle) was going to do to us? Of course. Do I lose sleep over what Lou Gerstner at IBM was going to do to us? Yeah. Our industry changes with such rapidity that you cannot sit back and relax for five minutes."

8. Why did you leave Red Hat in 2000?

"Keep in mind that I'm an entrepreneur, both by instinct and by training. So, once Red Hat had 500 staff members across three continents, I was more than happy to hand over responsibility to a smart guy like Matt Szulik (current CEO). What I enjoy about business is that, in our free-market democracy, the consumer and the citizen are the same person. So if you can build a healthy business that serves the need of some segment of our population, you're actually making the world a better place.

"So I looked at the publishing industry. If you look at how the publishing industry works, the artist - whether he's an author, musician or filmmaker - in order to get his work distributed, has to sign over all his rights to that work to a publisher who turns around and gives the author maybe 10 per cent of the sales. We looked at that and said: 'That's backwards in this day and age.' So we started Lulu (in 2002) to reinvent the publishing industry, and allow the author to retain control over his work and reap a much bigger share of the value that the customer receives from listening to his song, or buying his book or video."

9. How is Lulu faring?

"By definition, I say all startups do really, really badly because a startup is a company that has no product and no customers. But someone asked me this question the other day, and I said Lulu is going really badly. And I realized that I had dropped a 'really' out of my description. In other words, there was a quantifiable improvement in the prospects for the company. So, the short answer is that Lulu is doing badly. We are nowhere near as profitable as we'd like to be, but we're making very good progress in recent months."

10. Can Lulu become another Red Hat in terms of its potential?

"If I was being facetious, I would absolutely assure you that I wouldn't be doing it if it couldn't become a great deal bigger than Red Hat. But, in order to keep my sanity, I try not to set my ambitions and business plans very far ahead of where I already am."

11. Do you plan to take Lulu public?

"With the SEC (U.S. Securities and Exchange Commission) and Sarbanes-Oxley (regulations), it's now a great deal more expensive to take a company public. So, for entrepreneurs, the option of taking a company public is not as attractive an option as it was in the 1990s (before Sarbanes-Oxley). We haven't even begun to think about it (going public). We're trying to work hard at making our customers, and our authors, successful. We'll worry about the long-term exit strategy once we are successful."

12. Obviously, you've got your plate full with Lulu. Why did you buy the Hamilton Tiger-Cats in 2003 when the franchise looked like a lost cause?

"One of the main reasons is that I am from Hamilton ... and if you're from Hamilton, one of the few claims to fame that you can point at and take pride in as a kid is the Hamilton Tiger-Cats. One of the problems I had being a longtime Tiger-Cats' fan is that from the late '70s to late 2003 (when Young bought the team), the Tiger-Cats were probably one of the worst-run professional sports franchises anywhere in the world that I was doomed to cheering for. I've been unable to find another professional sports team that has been run worse. From a business point of view, the attitude that emanated from the Tiger-Cats' organization was: 'We will put on a football game and you, because you're a football fan and live in Hamilton, are required to come and watch our football team.' That was the message that I'd received for 30 years and, as a typewriter salesman, it drove me nuts. When 2003 rolled around, my older brother Michael had just died, and Michael was one of the world's great Tiger-Cat fans. So there were a combination of influences and then, when it looked like the team might go bust, a friend in Hamilton sends me an e-mail saying: 'Hey, Bob, maybe it's time for you to step up and do your civic duty.' And I thought: 'You know, maybe it is time, and I'm tired of cheering for this team that neglects its customers.' " 13. So what made you think you could turn around the organization?

"I got some confidence and conviction about the organization while doing some due diligence on the organization. I saw that David Braley (the Hamilton-based owner of the B.C. Lions) did a very clever thing. He was trying to keep the fans hopeful that there was a future to football in Hamilton, so he leaked a story that the CFL was talking to a 'Mr. X' about the Hamilton Tiger-Cats. And the amount of interest in the 'Mr. X' story across southern Ontario was astounding. What it told me is that the reason people weren't going to the game was because it was a badly run business, not because they didn't care. The fans would complain about the dirty washrooms and the team would say: 'Well, the city owns the stadium, that's not our fault.' The moment they said that they had, in effect, allowed themselves to fail."

14. What have you done to win back the fans?

"Well, we just went into it with a typewriter sales guy's attitude where there is no such thing as a problem, they're all features. The attitude was that we didn't have a crummy, rundown 50-year-old stadium, but we had a classic of a football stadium that was second only to Fenway Park (Boston's historic baseball stadium) as a fan-friendly stadium. We looked at Ivor Wynne Stadium as an asset. And we didn't say we were in a residential area without parking. We said that we were in a neighbourhood area where you could come to the game and have valet parking across the street from the stadium. Of course, all the neighbours would rent out their driveways for parking. We just had to convince the fans that they were going to have more fun coming to Ivor Wynne than anything else they could do with their entertainment dollars."

15. Are you surprised with the way the city and fans have responded since you assumed the reins of the Tiger-Cats?

"It has been astounding. I guess the only credit I will take is that I recognized that the obvious answers were not going to work in Hamilton. It's not that I was smarter than all the previous owners going back to Harold Ballard, but I recognized that because all the things they did weren't working, we needed to find a new set of ideas. I'm not a smart enough guy to come up with a new set of ideas, but what I will take credit for is that, unlike the previous administrations of the Tiger-Cats, we went way outside the organization to find smart, well-trained sports marketing executives in the U.S. to come and help us figure this thing out (including ex-Tampa Devil Rays executives Christopher Dean, general manager of business operations, and Rob Katz, senior adviser of business operations)."

16. Can you say how much money the Tiger-Cats lost last year?

"No. Our goal was to turn this into a profitable business within five years, and we think we're a good two years ahead of that business plan. We don't think we're going to make money this year but, assuming the weather holds and we have a good year, we think we can make money next year."

17. How's the team shaping up on field?

"I actually have no idea. I don't know who they're signing. I don't know if any of the guys they're signing are any good. But I do know Greg Marshall (head coach) is a calibre of coach who, if he was able to go 9-8-1 (won-lost-tie record) in his first year (2004), he should be able to do a lot better than that this year. The real piece of good fortune was finding Greg Marshall living 20 minutes down the road from the stadium at McMaster University (where he was head coach). You just don't get really, really smart guys coaching Canadian university football living within 20 minutes of your football stadium, but it happened to us. Greg's a first-class human being."

18. What motivates you to continue working when you could have retired after your success with Red Hat?

"It's just that you continue to do your basic psychology 101 course. All human beings have pretty similar needs or desires, and one of the primary ones is that we all want to believe that what we are doing is making the world a better place. As much as I'd rather be golfing or fishing for bonefish in the Bahamas, when I do those things I realize that the only person getting any satisfaction out of those activities is me. And, just like every other human being, I find that gets tiring after a while. A lot of people work at dead-end jobs, but then they contribute in a material way through their church or through the United Way. In my case, my contribution to society are these businesses that I build. It's the chase that keeps me going. Sure, it's rewarding when they go well. But the fact is that I've had businesses that have crashed and burned."

19. How has money changed you as a person?

"Awwwww. Awwwww. I don't know. You'd have to ask someone else that one. I have no idea. I presume it has changed me, but I just can't speak to it."

20. What do you see yourself doing 10 years from today?

"I've always wanted to be 60 years old for as long as I could remember (he is 51). When I was 14, I did the analysis because I'd had a bad day. My father yelled at me or something. I said: 'Well, I can't wait until I go off to college.' Then I realized: 'No, when I go to college I'll still be dependent on my dad to support me financially and my professors are still going to yell at me.' Then I thought: 'I can't wait till I leave college.' Then I realized: 'When I leave college I'll have a subsistence wage and my boss will yell at me, and that won't be any fun.' So, then after working it through, I thought: 'I bet by the time I am 60, I'll have lost enough hair that when I walk into a room people won't think of me as a kid and underestimate me, they'll treat me like an adult.' By the time I'm 60, even if I'm only modestly successful, I'll have some resources at my disposal. And by the time I'm 60, I won't have to put up with all this crap that you put up with at high school because, hopefully, all my other buddies in high school will also be 60 by then, and then we'll all be decent to each other.' What happens when I'm 61? I can't tell you that. Maybe I'm in for a massive midlife crisis when I pass 60."

(Gyle Konotopetz can be reached at gyle@businessedge.ca)

Bob Young

* Title: CEO/owner, Lulu, Inc.; owner, Hamilton Tiger-Cats, Canadian Football League.

* Born/Raised/Age: Hamilton, Ont./51.

* Lives: Raleigh, N.C.

* Education: University of Toronto graduate (history major).

* Career: Young warmed up for his starring role as CEO of Red Hat by working in the typewriter and computer rentals business in Ontario. He was president of Hamilton Computer Rentals from 1978 to 1984 and founding CEO of Vernon Computer Rentals from 1985 to 1993. He was CEO of Red Hat from 1993 to 2000 and remains a director of that company. He founded Lulu, Inc., in 2002 and runs that firm when he isn't rooting for the Ticats. He is also chairman of the Centre for Public Domain, a non-profit foundation.

* Claim to fame: Young graced Business Week magazine's list of top entrepreneurs in 1999.

* Passions: Fly fishing, golfing, red socks.

* About Lulu: Based in North Carolina, Lulu is a publishing website that helps artists, mainly writers, publish and sell their works.

* About the Ticats: The Ticats drew 250,000 fans to Ivor Wynne Stadium in 2004 for the first time in the franchise's 135-year history, and made the playoffs for the first time in three years with a 9-8-1 won-lost-tie record.

* Websites: www.lulu.com, www.ticats.ca, www.redhat.com