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    Home IT Management
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    Who Wants to Be an Ex-Billionaire?

    By
    Steven J. Vaughan-Nichols
    -
    May 21, 2001
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      Who wants to be an ex-billionaire? Well, no one. But that didnt stop PSINets former CEO William Schrader from taking the plunge.

      Youre probably not a billionaire—Im certainly not—but I think Schraders fall has lessons for all of us in the high-tech business. Its a common story of daring, pride and willful blindness.

      It started, as it does for many of us, with an idea. Ideas are cheap, a dime a dozen. Execution is all.

      Schraders 1989 idea was to provide commercial and personal Internet services. The Commercial Internet eXchange and the opening of the Net to business traffic is still two years away. No one has even heard of a dot-com, but he makes it work.

      He does it by driving his idea with all the passion and energy in his heart. While the general public doesnt know him, everyone whos anyone in Internet business does.

      But that same drive betrays him, as he moves to acquire companies outside of PSIs area of expertise. I first wonder whether hes losing his focus when PSI buys InterCon, a successful but quirky Mac Internet in 1995. Thats the first of many acquisitions that are not good fits. InterCons real value disappears when much of its staff leaves because they dislike PSIs corporate style.

      Although PSIs glory days are ahead of it, storm clouds are forming: PSI isnt staying with its core competency, and it acquires companies instead of expertise.

      As the rah-rah Internet 90s begin, PSI rides the money tidal wave with everything its worth—and every dollar it can scrounge. Under Schraders 1996 direction, PSI sees the razor-thin margins of consumer ISP services coming, and it refocuses on being a business ISP and backbone provider. Thats smart. But, fueled by junk bonds, PSIs debt load rockets from $116 million to $4 billion.

      With an arrogance that has always been there, Schrader throws money away on everything from the naming rights to the Baltimore Ravens football stadium—a cool $90 million—to various off-center acquisitions.

      When the bottom fell out of the market, the bottom fell out of PSI. The company could only survive as long as the dot-com boom grew explosively.

      Like far too many managers, Schrader seemed to have believed that simply because he was good, indeed great, at one thing, he would be great at everything. He was wrong.

      And like a compulsive gambler, Schrader believes that he could keep placing bigger and bigger bets and keep winning. He lost; anyone would.

      As PSI heads to what may be the biggest technology bankruptcy ever, the lessons for us are to stick to what you do best, and push it for all youre worth. But dont throw your resources away, and dont think that just because you won once or twice by putting it all on the table that always betting big is a business plan. Its not. Its just a way to join Schrader in his fall.

      Avatar
      Steven J. Vaughan-Nichols
      I'm editor-at-large for Ziff Davis Enterprise. That's a fancy title that means I write about whatever topic strikes my fancy or needs written about across the Ziff Davis Enterprise family of publications. You'll find most of my stories in Linux-Watch, DesktopLinux and eWEEK. Prior to becoming a technology journalist, I worked at NASA and the Department of Defense on numerous major technological projects.

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