Leadership + People: Episode 51 - James Clarke - Part 1 of 2
In this episode James Clarke discusses the benefits of digging ditches and how a clear focus and hard work ethic trump confidence.
- Overcoming ‘people problems’ [03:45]
- Staying true to your personality despite the norm [05:22]
- How hard work, learned digging ditches translating to a focused CEO willing to pivot [08:54]
- From a basement with a childbirth deadline to 1,000 employees; Clearlink [12:15]
- Walking arm in arm; investors with operators [14:20]
- Advice and how to take it from even the most successful of individuals [17:27]
- Benefits of a growth mindset [19:23]
This episode of Leadership and People was originally released on: September 19th, 2018
Welcome to Leadership and People. This is a series that pulls back the curtain on leadership by interviewing CEOs, Senior Executives and Entrepreneurs who had large exits. We ask these experts about how they built trusted networks to rapidly grow their companies. And what advice they wish they knew if they could do it all again.
JL: Today on the show we’ve got James Clarke.
JAMES CLARKE “Again you understand that, you know, I’m probably at that midlife stage. I won’t say it’s a crisis, right. As I think and look back at our time at Clearlink, that I was just a kid. Sort of Just trying to will it. I didn’t have any other choices. I didn’t have any other options. We had to succeed.”
00:45 JL: James, thanks for making time.
JAMES CLARKE: How you doing Jess?
00:47 JL: So for people that don’t know you, can you tell folks a couple of things that you’ve accomplished.
JAMES CLARKE: Well first, appreciate you having me on today. It’s really kind of you, and thoughtful. I’m, you know, I’m an entrepreneur turned investor. Started a company right out of school. Right out of my undergrad. And had three partners that had the exact same skill set that I did. That doesn’t always go so well. And timing didn’t go so well for me either. I started a business in 2001. Just 6 weeks after 9/11, in the internet space. So the dot.com bubble had burst. The world was falling apart. And it was not an ideal time to raise capital. But it was a good time for me to start a business. I started a company called Clearlink. About ten years later we exited that business. But 2 years prior to selling the business of course, so we sold and closed on selling the business in 2011. Two years later we hit run a process trying to sell that business. Also I brought in one of our operators to run the business as CEO. But again the world fell apart in 2008, as you well know. And so he was left running the company. All of our investors sort or… Or the buyers, the pool of buyers dried up. And we ended up not selling the business of course. I found myself without a job. And ultimately, you know, had to figure out what I was going to do until that business sold. So I set up an office in New York. And started figuring out what I would do with the next chapter of my life. Which was of course fell in love with investing. And learned a lot while I was out on Wall Street for those couple of years. Flew back and forth every other week. And then as soon as the business closed and we did sell Clearlink, set up shop running Clarke Capital. And ever since we’ve been investing in sort of growth equity as our thesis. And our primary focus is businesses that have sort of nailed it and then we come in with some growth capital and help them scale. And I think we’ve done ok over the last several years. I think we’ve been around almost 8 years now. We, last year had 2 IPOs that we participated in and helped to lead. And then we’ve excited a couple of our other businesses. And we’ve got a good little track record. I think we ready for the next chapter of our business to get really serious about what we’re doing. So it’s been a great run. We’ve been very very fortunate. But we’re really happy with the spot where we find ourselves now. And look forward to the future.
03:35 JL: That’s exciting. So the show here; Leadership and People, obviously been involved in leadership growing these different business and leading a different way now where it’s portfolio companies…
JAMES CLARKE: Yeah.
03:43 JL: Maybe more than your own staff.
JAMES CLARKE: Right
03:45 JL: Can you talk a little bit about maybe a leadership lesson that served you well?
JAMES CLARKE: That’s a great question. There’s so many. And I think, you know as I think about leadership lessons. My problem is I think I learned them, and then I forget them. And then I have to relearn them. It’s a painful process, right. So you’ve known this first hand. We look at our businesses and there are always problems. There’s always great and wonderful things that take place. But when we look at the problems that we’re trying to solve. And entrepreneurship is not easy. If it were, everybody would be doing it. But as we look at the problems they’re not generally the business problems that we get caught up in. They’re the people problems. So we become, and I talk about this a lot in our organizations, that yes we can learn this process or we can be the best in class on a certain thing. But if we forget about our people, we’ve forgotten everything. And so it’s being able to really truly, it probably sounds trite. Probably sounds very simple. But you know, just remembering the people and the personality types in this. And we can’t solve all the problems. But it’s always the people problems that are the most challenging. And if we can overcome those, then we usually find ourselves in a pretty good spot.
05:00 JL: Yeah. Can you give us an example of sticky one that you’ve been through?
JAMES CLARKE: [laugh] How much time is your show?
05:09 JL: It’s only eight hours. Only eight hours. [laugh]
JAMES CLARKE: Eight hours? Yeah. You know I don’t know that there’s really one that comes to mind right now relative to the challenges that we see. I mean…
05:22 JL: Or back in Clearlink. Or just something of; we need to make a change. And I realized I waited too long, and then…
The Kinder More Gentle Investor
JAMES CLARKE: Oh all the time. I think one of things… Okay. So of the things if you get specific about that making changes. I think my nature is probably a kinder, gentler nature than a lot of CEOs or entrepreneurs or even investors. And so my tendancies is to, okay let’s hold off to pass judgement on a certain personality or operator or senior executive in a business. And if I had just followed my instincts, which were generally probably we needed to cut ties or pivot or make a change, we probably would have been much better off doing that. And I keep thinking, okay the kinder, gentler version of this, or the more generous version is going to serve us well. And I think netnet we’re a head. But I think it’s easy to say things like ‘fire fast’ or you know ‘cut down dead weight’. But it’s really hard for me personally as a manager because I happen to care about people a lot. And again not to be the trite ‘I’m a people person’ or anything like that. But I get the personalities. Thinking about people’s families. And being able to sleep well at night is really important to me. So we find ourselves probably on the warmer and fuzzier side of growth equity as an investor or even as an operator. So not that cold calculated killer some might describe a typical, either venture capitalist or private equity investor. Those kinds of… Erring to the kinder side is maybe the downside of who I am as a personality. And maybe you know that’s how people have benefited in some ways but also ways that we’ve suffered as an organization being a little softer than we ought. ….
07:16 JL: So knowing that about yourself, how do you… What kind of self talk do you have? How do you overcome that about yourself knowing that you’ve got it? How do you do better in the future recognizing that tendency?
JAMES CLARKE: I first of all realize that I’m probably not going to change. I’ve been in, using that term that we hear quite a lot in business, ‘a crucial conversation’, where a senior manager within one of our organizations came to me and said… And it was one of those conversations of ‘Hey we need more from you. We need you to do better.’ And the person responded and said I need you to yell at me. [laugh] And I thought about that and went silent for a moment. And responded and said; ‘you know I appreciate that but I’m not going to change who I am just to satisfy your needs’. And I look at that and think about that conversation. And probably would have been the right thing, probably would have helped performance relative for that person. They were asking for it. At the end of all this, I’m not likely to change sort of the trajectory of who I am to help be the kind of manager that might be a bulldog or a stickler for this or that. I think I’m more of a guide, a principle guide in what we do. And a strategist. I think that we’ve got really good ideas that we help execute on. And I’m a cheerleader. So it’s hard for me to be a screaming and yelling coach, if you will. So maybe I wear the skirt of a cheerleader and I’m proud to do that.
08:54 JL: Too funny. Well talking about this people thing, you know coming up with the good ideas, finding the right people to do business with. When you think about relationships and networking and spending time with the kind of people that might be the kind of indifuvlaa that you might want to do stuff with in the future. What is your approach? What do you like to do?
Ditch Digging CEO
JAMES CLARKE: You know we’re betting on horses more than betting on races. For sure. So ee first look at this operators and how can we build a meaningful relationship with this individual and back them, essentially. Right so I’ll give you the example of probably our most notable and I wouldn’t call it an exit because we are still holders in this one. But they had a phenomenal IPO and the business continues to grow. But it’s this great operator out of Idaho. And you know, he talks about ditch digging. And when he said those words from one Idaho boy to another Idaho boy. It just landed. It resonates with me that, you know, he gets how to work. And so I wouldn’t call this operator the most polished. And certainly he is far more polished than he was seven or eight years ago. And I think… But I have watched him dig ditch day in and day out. Pivot pivot pivot again to a strategy that is I believe a world class strategy. And guess what? The polish has come. He is in my humble opinion the best CEO in the make that I’ve ever seen. Because he first knows how to dig ditch and work really hard. I don’t know that I’m answering the question specifically relative to what we do and picking people and our strategy. But boy I watch for those kind of subtle cues that they get how to work. And nobody works harder than this guy. And the polish came. And we backed him. And it has continued to be a roaring success because of his efforts and a relationship that he’s built.
11:00 JL: Is there an example of that? It is necessarily because he is putting in more hours? Is he putting hours in the right thing? For people who want to get a little more context to that. He is digging ditch. He’s going the extra mile. What does that look like?
JAMES CLARKE: Well he is in the office at 5:30 every morning. He is an insane road warrior. I mean he is everywhere. He doesn’t need council from me, but he asks for it. Not a text. Not an email. Never long emails. But he will pick up the phone and he’ll ask for my opinion. And then he’s going to do whatever he’s going to do. Because he has got good instincts. And that makes for an exceptional operator. And he’s focused. He is focused. And I think that is the single most important thing for a operator to remember. Just focus on what’s most important. And the rest sort of follows that way. It’s been marvelous to watch, to see him. Because it has not been easy. His past has not been an easy past. He’s had some real challenges in business and with other partners and things like that. It was a big bet for us. But I remember hearing this term dig ditch. And he does. Every single day. Extreme focus. It’s pretty great.
12:15 JL: Interesting. Well maybe going a different direction on this same theme. You think about the different staff that you’ve had. Back in the Clearlink days. Or whether it’s people involved in the office here, or the businesses. When you think about identity opportunities for staff to maybe grow in their leadership and knowing that finger pointing and telling them to is typically not effective. What’s your approach in helping your people become leaders?
Success as the Only Option
JAMES CLARKE: Oh that’s a great question. Again you understand that, you know, I’m probably at that midlife stage. I won’t say it’s a crisis, right. As I think and look back at our time at Clearlink, that I was just a kid. Sort of Just trying to will it. I didn’t have any other choices. I didn’t have any other options. We had to succeed. Just giving you a little bit of a context as to how that started. I started in the basement of my fiance. Convinced her that I was going to make it a success. She had a well paying job. I convinced her, and I don’t know how I did it, to invest in us so we wouldn’t have to go and get other outside investors. And she did. Even before we were married. The name even of the company was her Maiden name Earl and my last name Clarke. Clearlink. So that’s where it came from. We just willed it because we had to make it work. And I didn’t know what I was doing. But I didn’t have any other options. We were expecting our first child. And I told her that by the time we had our first baby we would be cash flow positive. And again…
13:55 JL: There was a deadline. Right?
JAMES CLARKE: There was an absolute deadline. And so again back to that point of pivoting and pivoting again. We didn’t have the model dialed in. And not being a terribly creative personal, simply saying ‘ok, there is something out there and there is a business that someone is making work’. I came from door knocking and selling satellite dishes door to door. Had a company with these partners that I described where we all had the same skill set. Left that. Started Clearlink.
14:20 JL: And was that sale number disclosed? What you sold Clearlink for?
Entrepreneurs as Investors
JAMES CLARKE: No. We didn’t share that. It’s been sold again to a publicly traded company. I think they disclosed that number. But I think there are couple thousand full time employees there today. And great tea. And so many of the initial operators and the talent that we brought in are still there. So it’s been wonderful to watch. We were just kids. I was the senior statement as sort of the early 30s something. And the rest were still doing their undergrads. And it’s fun to see the talent that’s come out of that. But back to this point of having to make it work. I didn’t have a choice with Clearlink. We have a choice every day as it relates to what we’re doing. I mean I could have… And we laugh about this. We could have bought some silly little island or go buy a house on the beach and sip alcohol free margaritas, for a kid like me, and do that. I think that would have been a pitiful outcome for me. And wouldn’t have been satisfying at all. So we got really thoughtful about how we were going to build this organization here at Clarke Capital. And how would try to help influence these organizations that we were going to be a part of. Some we founded. Others we’ve simply invested in. Others we’ve rescued from bankruptcy. But how would we operate. So there are little bits and pieces that we’ve put together. And I think going back to this. We know how to work. I grew up working on farms in Southeast Idaho. And like my colleague and their CEO of this portfolio company that he’d taken public. We know how to dig ditch. We are extremely focused. We are a very lite organization. There are only about a dozen of us here in the office. And we fight above our weight class. You know the kind of deals that we’ve done and look forward do doing in the future. But as I think about sort of the core of the core of who we are, and what we are trying to instill with those who are coming to work here at Clarke Capital and our organization is that we are operators first and investors second. Jess, I know you’ve spent your time out on Wall Street. And you know that all these investors who close their eyes and write a check and feel like they need to beat you up in a boardroom. But I think Part of what we do at Clarke Capital with our portfolio companies is lock arms and then walk forward, and even run with these, you know, these great entrepreneur. We are kindred spirits. Because we’ve built companies ourselves. We continue to build companies. I probably have one or two more to go start or found, or whatever that might look like. But we really enjoy that part of the business. And helping as sort of co-entrepreneurs. But also writing good sized checks to help these entrepreneurs move forward in these business. I know that’s a long winded answer to your question but that’s a little bit about us and what sort of the thesis looks like for us and in the future at Clarke Capital.
17:27 JL: That’s great. I know we’re sorting of winding down here a bit here. Maybe as a final question; what’s a piece of advice you’d want to go back and give an earlier version of yourself?
Bad Advice and Bozos
JAMES CLARKE: [laugh] I’m terrible at giving advice. As one who has received awful advice from very very smart people. To be fair I’ve gotten really great advice as well. But some really smart and very successful people have given me advice that was absolutely incorrect. And had I followed that, I would have followed… I would have gone a very different trajectory that what I’m on right now. So I’m very cautious. So perhaps my advice is don’t listen to every word that smart or wealthy people give to you.
18:10 JL: Let’s talk about that for a minute. You know Guy Kawasaki, the kind of head of analysts for Steve Jobs when the Mac came out.
JAMES CLARKE: Sure.
18:18 JL: He talks about the bozos. He says when you’re starting a business, or your running…
JAMES CLARKE: [laugh] Are you talking about me? I might be one of those guys.
18:25 JL: Hear what he says. He says there are two kind of bozos. There’s the your brother in law bozo which you spot right off the bat. He says the other kind are dangerous, because they wear Breitling watches, because he’s into Breitling. They wear breitling watches and they drove a fancy car to get here.
JAMES CLARKE: Oh yeah.
18:35 JL: His example was he said, he got a call and his answer to the request was “Well, I don’t want to drive an hour. And besides I don’t see how that can be a business anyways”.
JAMES CLARKE: [laugh]
18:50 JL: It was when he was being offered the job of being the CEO of Yahoo.
JAMES CLARKE: Oh come on. Is that right?
18:53 JL: So he says he figured that cost him two billion. [laugh]
JAMES CLARKE: [laugh] What’s cool two billion dollars?
19:00 JL: The first billion for my family. That’s fine. It’s the second billion, that kills me. But he brought up this point of… And I would be interested in any guidance you have for folks. Obviously we want to learn from other people’s mistakes and wisdom. And at the same time, just because people have accomplished things, doesn’t mean that their advice is ideal for us.
JAMES CLARKE: Yeah.
19:23 JL: And I’d just be interested in any kind of… What your gut check is or how you make the decision of whether that advice is something you’re going to follow or not.
JAMES CLARKE: I love that example that you brought up of Guy Kawasaki. Because you could sincerely sit in your pajamas for the rest of your life, in your basement, staring at a television set, thinking about the two billion dollars that you missed out on. And I know a lot of guys that happen to do that. It might not be a two billion dollar number, but they missed out on a certain deal or their company didn’t go the way they planned or they didn’t get the promotion. And my council is pretty simple. And I think it is universally applicable. Is that you just want to keep moving forward. And don’t dwell on the missed opportunities. Focus on the things ahead. I’ve had my own, not two billion dollar misses, but my several hundred million dollar misses. A choice that I made. And it was the right choice. But it happened to be not as financially beneficial had I gone the other direction. And I’ve done that over and over. But I don’t beat myself up. I just try to make up for it in the next decision, instead of dwelling on the past. And again I’m saying things you already know. And hopefully your listeners don’t feel trite. Focus. A forward focus. A growth mindset. We hear a lot about that today. We love talking about that with our children, with our entrepreneurs. But that growth mindset of moving forward is really exciting to us. Dwelling on the past is so counterintuitive and not helpful in any way.
20:53 JL: It’s interesting how we humans need to keep learning that though. You know driving around today I was listening to a book going through a bunch of the stoics from 2500 years ago. And you’ve got Marcus Aurelius talking about… dwell on the present and be consumed with the present. Be present.
JAMES CLARKE: Yes.
21:11 JL: Worry about the next thing you are doing right now. And he’s got his anecdote about not worrying about the past or the future, but the next step kind of thing.
JAMES CLARKE: Yeah.
21:21 JL: It’s interesting how 2500 years later we still need to master that about ourselves.
JAMES CLARKE: Isn’t that the truth. And listen. I’m so glad you are bring that up. And I have a fellow board member in this publicly traded company that we have. And he asked me on a drive to the airport. And he said… And both of his kids are at Ivy League schools today. And he just said, “What’s the single most important characteristic you want to teach your children James?’ And I said; ‘Let me turn the question on you Mark. Clearly you’re asking me this question for a reason’. And he said; ‘Well I want them to have confidence.’ Well that’s interesting. I know a lot very very confident people that happen to be wrong a lot. Often wrong, never in doubt. That’s great. That sounds like a very interesting thing. And again he came back to me and asked me the question. And I just said; ‘I want them to be driven’. I want my children to be driven. I also want those with whom I work to also be driven in what they’re doing. I certainly am not the smartest guy in the room. I will never say that I am. But I’m a pretty driven individual. I’ve probably had to kick down the back door or every either ivy league or overseas institution that I’ve been to, because I’m driven. Or will a company like Clearlink to happen. Or will an IPO to take place because we happen to be quite driven And w simply want more and be forward focused in what we do. Hope that that’s something that’s meaningful… It’s certainly something that’s meaningful to us. And I hope it’s something that’s meaningful to those that are listening in the context of our conversation
22:53 JL: That’s great. Well thanks for spending time with us here today.
JAMES CLARKE: Thank you. Thank you. The pleasure’s mine.