Doug Carlston - Software People. An Insider’s Look at the Personal Computer Software Industry

One of Leff’s programmers at Informatics prior to 1980 had been a high-energy kid who was even younger than Leff and who was always moonlighting three or four jobs in addition to his regular one. The kid’s name was Ken Williams, and he and his wife, Roberta, had fallen in love with adventure games. As a result, Roberta even started to write one on her own, while Ken tracked down Scott Adams at the 1980 West Coast Computer Faire to strike a deal for exclusive distribution of Scott Adams adventure games in southern California.

But Ken and Roberta soon decided that they liked writing and selling their own adventure games better than selling someone else’s, and when they decided to move to the Sierra foothills to run their newly founded software publishing company (then called On-Line Systems) in the kind of setting they liked best, they sold some of their assets to raise money for the move. Ken offered Bob Leff all of the assets of his little regional distributorship for about $1300. At the time, Bob felt that none of the distributors who were then selling to computer stores was effective at distributing software, and so he eagerly accepted Ken’s small franchise.

Ken and Roberta went off to Coarsegold, California, and turned On-Line Systems into one of the most exciting home computer software publishers, and Bob Leff started to sell their products. Ken also directed other new software companies in Leff’s direction. Soon Bob found himself swamped—he was now moonlighting at Robwin and working days for Informatics. And so in the summer of 1980 he began looking for a partner. When he started working for Transaction Technology, a CitiBank subsidiary, he met Dave Wagman. A TTI manager like Bob, Dave was, if anything, even more enthusiastic than Leff about the possibilities of software distribution. The two seemed to complement each other.

Dave is a softer, gentler soul than Bob. Lighter in complexion and beardless, he has far less appetite than Bob for the rough and tumble of business. He prefers to deal with more abstract systems. Nevertheless, he is an effective public speaker with an informal, candid style and a vision of the software industry’s potential that was every bit as clear and far-sighted as Bob’s. Still, Bob is a little more hot-headed. Although he is considerate in speech under normal circumstances, many people in the industry have been subjected to one of his wrathful episodes. He is the first person who ever hung up a telephone on me in the middle of a conversation. His saving grace is an ability to see himself and those around him in proper perspective—a trait that is very disarming and that has always led me to wonder whether his occasional outbursts are simply negotiating ploys, consciously inflicted for a calculated effect.

When Leff first valued Robwin at $20,000 and offered Dave a 50 percent interest in it for $10,000, Wagman didn't even flinch. This was serious money for a young man of about twenty-eight who was just starting his career, but he nevertheless agreed to the deal. Both men had high hopes for the industry and supreme confidence in their own abilities. They seemed undaunted by the fact that in July 1980, Robwin was more or less broke, and the $10,000 contributed by Wagman constituted the entirety of the company’s working capital.

The two were able to stretch that money by mixing Robwin business with TTI business. TTI flies its managers around the country fairly regularly, and so whenever either Bob or Dave went off on a business trip for TTI, they added a third city to the trip and stopped in on all the computer stores they could reach. They had only just begun this practice at the time I drove across the country, and it was simply a coincidence that I hit upon two of the stores that Bob or Dave had called upon during one of their “triangular” trips during the summer. I got the impression that they were all over the country. They weren’t nationwide yet, but it wasn’t long until they were.

By the end of the year, both of them were working full time at Robwin. In January 1981 they hired their first fulltime employee, and changed the company name to Softsel. They then embarked on a course of absolutely prodigious growth. Within nine months they had thirty employees and twice had to find new, larger facilities. By their first anniversary, they were the microcomputer software distributor in the country.

They did it, I’m convinced, by working harder and smarter than anyone else. Gary and I showed up at their Los Angeles office twice in 1981, once at 1:00 A.M. on a Friday and once at 11:30 P.M. on a Sunday. Both times we arrived unannounced, and both times Bob and Dave were there, working with a few of their staff.

Hard work is a big part of their story, but it isn’t all there is to tell. They also figured out what services were critical to their dealers and tried to provide them. Same-day shipment was one of their early selling points. At that time, stores were desperate to get products quickly so that they could sell them quickly and keep their own inventories as low as possible. Later, as the market matured, returns of products became a major issue, and Softsel, with its huge inventory of suppliers, was able to replace a dealer’s slow-moving products with the latest hit products. In addition, Dave Wagman wrote a computer program in 1981 that gave each dealer a quarterly inventory analysis and profit report on all products. It not only proved to be a valuable tool to the dealers, but it also helped them order more intelligently and lowered the risks to Softsel of having to take back unsold products.

Although Softsel later dabbled in distribution to mass-merchandisers, it focused most of its energy on providing services to the retail computer stores. And so, as the stores changed, Softsel changed as well. Its original line of largely hobbyist-oriented, mostly entertainment products became more and more heavily skewed toward business products as the business market mushroomed. In 1982, 70 percent of Softsel’s sales consisted of entertainment products (games). By early 1984 only 12 percent of Softsel’s sales were of entertainment products. These weren’t the only changes. The company developed a management infrastructure and took in venture financing. A small partnership had become a large corporation. They toyed with the idea of going public and then retreated when the market for computer-related stocks took a nosedive.

Softsel has become a big business. Typically, entrepreneurs don’t do too well in big businesses, even in ones they have founded. It seems to take one kind of person to build an enterprise from the ground up, and an entirely different kind of person to manage a business with annual revenues over $100 million. I wondered from time to time how Bob and Dave were handling the astonishing growth of their company, in view of the changing marketplace.

I got a chance to talk with Leff about this question in May of 1984, the year of the big shakeout. We had been to Sierra On-Line’s fourth-anniversary party the night before. A lot of the “old people,” as Bob called them, had come to the party, and we compared notes about them. Many of those people’s companies had been hit by the shakeout and had not survived, and Bob was clearly uncomfortable at the way some people blamed an unjust world for their failures. “The big guys moved in and took over,” someone had said. Bob’s reaction was a little puritanical. “This is silly,” he said to me the following day. He pointed out that people have different levels of business ability and this shakeout was only to be expected. People with lots of ability were going to prosper, but a lot of the rest wouldn’t. The old “survival of the fittest” rule was now applying to the software industry.

I wasn’t surprised to see Leff’s show of self-confidence about Softsel’s own ability not only to survive but also to prosper in the stakeout. What did surprise me was realizing that, underneath the bravado, he still obviously thinks of himself as an amateur who has to work smarter and harder than anybody else just to compete. Deep down, he is just as unsure about his ability to run a really big company as I am about mine. But it’s a part of him that hardly ever shows.