Sep 30, 2021
Ross Perot built two powerhouse companies and changed the way politicians communicate with their constituents. Perot was an Eagle Scout who went on to join the US Naval Academy in 1949, and served in the Navy until the late 1950s. He then joined the IBM sales organization and one year ended up meeting his quota in the second week of the year. He had all kinds of ideas for new things to do and sell, but no one was interested.
So he left and formed a new company called Electronic Data Systems, or EDS, in 1962. You see, these IBM mainframes weren’t being used for time sharing so most of the time they were just sitting idle. So he could sell the unused time from one company to another. Perot learned from the best. As with IBM he maintained a strict dress code. Suits, no facial hair, and a high and tight crew cut as you’d find him still sporting years after his Navy days.
And over time they figured out many of these companies didn’t have anyone capable of running these machines in the first place, so they could also step in and become a technology outsourcer, doing maintenance and servicing machines. Not only that, but they were perfectly situated to help process all the data from the new Medicare and Medicaid programs that were just starting up. States had a lot of new paperwork to process and that meant computers.
He hired Morton Meyerson out at Bell Helicopter in 1966, who would become the president and effectively created the outsourcing concept in computing. Meyerson would become the president of EDS before leaving to take a series of executive roles at other organizations, including the CTO at General Motors in the 1980s before retiring.
EDS went public in 1968. He’d taken $1,000 in seed money from his wife Margot to start the company, and his stake was now worth $350 million, which would rise sharply in the ensuing years as the company grew. By the 1970s they were practically printing cash. They were the biggest insurance data provider and added credit unions then financial markets and were perfectly positioned to help build the data networks that ATMs and point of sale systems would use. By the start of 1980 they were sitting on a quarter billion dollars in revenues and 8,000 employees. They continued to expand into new industries with more transactional needs, adding airlines and travel.
He sold in 1984 to General Motors for $2.5 billion and Perot got $700 million personally. Meyerson stayed on to run the company and by 1990 their revenues topped $5 billion and neared 50,000 employees.
Perot just couldn’t be done in business. He was good at it. So in 1988 he started another firm, Perot Systems. The company grew quickly. Perot knew how to sell, how to build sales teams, and how to listen to customers and build services products they wanted. Perot again looked for an effective leader and tapped Meyerson yet again, who became the CEO of Perot Systems from 1992 to 1998. Perot’s son Ross Jr took over the company.
In 2008, EDS and their 170,000 employees was sold to Hewlett-Packard for $13.9 billion and in 2009 Perot Systems was sold to Dell for $3.9 billion. Keep in mind that Morton Meyerson was a mentor to Michael Dell. When they were sold, Perot Systems had 23,000 employees and $2.8 billion in revenues. That’s roughly a 1.4x multiple of revenues, which isn’t as good as the roughly 2x multiple Perot got off EDS - but none too shabby given that by then multiples were down for outsourcers.
Based on his work and that of others, they’d built two companies worth nearly $20 billion - before 2010, employing nearly 200,000 people.
Along the way, Perot had some interesting impacts other than just building so many jobs for so many humans. He passed on an opportunity to invest in this little company called Microsoft. So when Steve Jobs left Apple and looked for investors he jumped on board, pumping $20 million into NeXT Computer, and getting a nice exit when the company went to Apple for nearly half a billion.
Perot was philanthropic. He helped a lot of people coming home from various armed services in his lifetime. He was good to those he loved. He gave $10 million to have his friend Morton Meyerson’s name put on the Dallas Symphony Orchestra’s Symphony Center. And he was interested in no BS politics. Yet politics had been increasingly polarized since Nixon.
So Perot also ran for president of the US in 1992, against George Bush and Bill Clinton. He didn’t win but he flooded the airwaves with common sense arguments about government inefficiency and a declining market for doing business. He showed computer graphics with all the charts and graphs you can imagine. And while he didn’t get even one vote in the electoral college did manage to get 19 percent of the vote. His message was one of populism. Take the country back, stop deficit spending just like he ran his companies, and that persists with various wings of especially the Republican Party to this day. Especially in Perot’s home state of Texas. He didn’t win, but he effectively helped define the Contract with America that that Newt Gingrich and the 90s era of oversized suit jacket Republicans used to as a strategy.
He argued for things to help the common people - not politicians. Ironically, those that took much of his content actually did just the opposite, slowed down the political machine by polarizing the public. And allowed deficit spending to increase on their watch. He ran again in 1996 but this time got far less votes and didn’t end up running for office again.
He had a similar impact on IBM. Around 30 years after leaving the company, his success in services was one of the many inspirations for IBM pivoting into services as well. By then the services industry was big enough for plenty of companies to thrive and while sales could be competitive they all did well as personal computing put devices on desks across the world and those devices needed support.
Perot died in 2019, one of the couple hundred richest people in the US. Navy Lieutenant. Founder. Philanthropist. Texan. Father. Husband. His impact on the technology industry was primarily around seeing waste. Wasted computing time. Wasted staffing where more efficient outsourcing paradigms were possible. He inspired massive shifts in the industry that persist to this day.