Business Insights#19|Hành trình 36 năm của Kingston| John Tu,CEO và Co-founder Kingston Technology

John, I'm sorry, I lost all your money. It's such a big shock. Of course then we immediately worry about what do we do tomorrow because we had no money to buy food, even to pay the rent at that time. Nobody took too seriously the PC, and that's the beginning of Kingston.

People are the most important value. The assets without them is nothing.

First of all, I'm really appreciated that I have a chance to meet one of the best interviewers. It's my honor. And I also really appreciate having a chance to really get to know more about today's Vietnam.

The truth is that I did not move directly from Taiwan to America. I had a problem — there was a problem to get a visa at that time. I was a very bad student. I was kicked out of school twice, so that means I didn't have the opportunity to be in a good high school or university because my score was really poor. So I had to leave in order to build a better future or chance for myself. Then the US rejected my visa, and I said, but I still want to go somewhere else. And for no reason, I just decided on Germany. So I got a visa, and then I just went there to begin my younger life in Germany.

Kingston was born because there was a tragic event. We had a little savings, not much, so we decided to give the savings to a stockbroker. And he promised us — he said, I will grow your money. So David and I both gave all our savings to the stockbroker. That year in October, the whole US stock market crashed. Really crashed. At the end of that day we were told — David, my partner, John, I'm sorry, I lost all your money. All of it, just gone, just like that. It's such a big shock. Of course then we immediately worry about what do we do tomorrow, because we have no money to buy food, even to pay the rent. And that's the beginning of Kingston, because we had to do something quick in order to survive.

My partner David designs products, so he knows more about PCs. At that time, the PC was not important — nobody took it too seriously. And he said he thinks the PC will become one of the main major tools for companies to grow using technology. So I said, okay, let's look at the PC, what can we do? Luckily, he had designed memory products before, so he said PC memory is very simple to design and to produce. But at the time we didn't know — is there a need? Is there a market? Then we found out that was the time that PCs — Apple and the other PC companies — they began taking off. And we heard that memory chips were one of the products very difficult to find, because everybody wanted to use the PC. And that's when we made a decision. I said, why don't we make this to compete with the original? And that was a risk, because we didn't know if the originals like IBM would sue us. So we took a gamble. We made the product, but we didn't have resources — money.

Money — zero. No money. And luckily we had a friend who runs a manufacturing facility. So we went to him. I said, we don't have money to pay you, but since we're friends, maybe you can do us a favor. He said, yeah. We said, how many? We said five. We could not afford to have more, so we said five. And he said, okay. As soon as we had these five, we began to call some people we knew who were handling PC products. We said, yeah, we have only five. Then people said it doesn't work, because at that time they didn't trust it. Then I always said, come here, pick them up, take them back and try, test it. If it doesn't work, no problem. If it works, then you keep it, then you pay us. Our request was, we don't have enough money to give you credit.

Yes, we had zero cash. And so he said, no problem, I will pay you cash. And that was the beginning. He came, picked up the product, and paid cash right there. So it was very quick — from product to money, to cash. That was the beginning. So then we immediately found out that if this guy really needs this product, there must be more people who need this product. The truth is that everybody had a lot of PCs in their warehouse they could not ship, because memory was missing. We were unknown to a lot of people, but it was really a good opportunity. And so that was the beginning of Kingston.

Yeah, just five, I remember that. And zero cash. We wanted to look professional, so we have five, right? It's not very good if you just hand someone five pieces. So we tried to package them — we bought some material and did our own packaging, and that looked more professional. And that was fun.

Not yet. We had no idea about the legal process. We didn't know that if you want to name your company, you need to check with a lawyer whether the name is already taken by somebody else. We were told that, so we tried many, many names — most of them were already taken. And then I remembered when I was 17, there was a group of singers from California. They were called the Kingston Trio — three young men — and I loved their music, it was so beautiful. So I remembered that, and I decided, how about Kingston Technology? They did the research and said, no problem, you can have that. That's the reason — because of the music.

That was long after we officially started the business. The graphic designer — because we said we needed to have some material to put in advertisements — asked me, how do you want to be seen? You need something to represent your company. So I thought about it. I said I want to look strong, bold, and shocking. I wanted to have a shocking effect so people would remember us. And so he came back with the design — a hat chopped in half, with memory chips jumping out of the head. It was really very effective. People saw it and said, that is really cool. You have this idea.

You would think that my partner and I would say, oh, here we are, we were successful, very happy. But I don't believe that, even today. When I get into the car and drive to the office, I still feel like we were in the garage. My partner feels the same way. The success we have achieved has very little influence on what we think about ourselves. We're happy to go to work, to conduct the business, to look after the people. And we realize that people are the most important value — the assets without them is nothing. So our belief is that you have to treat the people working in your company like your family. And if you're willing to do this for your sister, you should be willing to do it with your employees. And that was the beginning — we decided that's how the culture should be.

Absolutely.

When SoftBank announced the deal for 80% of Kingston, they said, John, I want you to come to Tokyo to make an announcement for the press, because they are a public company and they need to have an announcement. I went there and we did a press conference. Then I received a phone call from the LA Times — a reporter I know. He saw the news and called me. He said, John, I just saw this from the news, is that true? I said, yeah, yeah, it's happening. And then he said, John, I remember your philosophy is always taking care of your employees. So what are you going to do now that you have this much money? I was caught by surprise. I was not ready to give an answer, but I felt like if I didn't answer, maybe it would look like I'm not sincere. So I just grabbed a number. I said, of course, we will always share and take care of our people. And he said, how much? So I said, $100 million. And that news — they printed it. They were the first newspaper to print this news. Then all of a sudden, all the other agencies and news outlets picked it up. It was unheard of — some company giving a $100 million bonus. So all the newspapers throughout the country and TV stations, they all reported this, and we became instantly recognizable. As a matter of fact, not too long ago when I traveled to Europe — I think it was Norway — I was dining with our people in a small restaurant. We started to order food, and I think we paid with the company's credit card. The owner saw it and said, wait, wait a minute — you are the one I saw on TV giving $100 million! Oh my gosh, even today people still remember that. I felt so good about what happened.

Yeah, I knew that one. That is the day we hit $1 billion in sales.

Surprise, number one. Number two — they saw the numbers, so they were very excited to see the number. And then they were also surprised that, oh, so that means you two only keep 20%, so the boss is just SoftBank. So there were mixed feelings. The offer was very good, but our goal from the beginning was to keep the family together. And now we were thinking — does that mean we are going away from our principles? Then we looked at the reality. Our promise to our people from the beginning was that we will always be like family, taking care of every one of you. Let's say for some unlucky reason Kingston had to close the doors — at that time, what we could do was gather all the valuables and cash, divide it among... at that time I think we only had 60 or 70, 80 employees, so it's not too difficult. But when we were selling, we were reaching 300 people already. And we said — if someday something happened to Kingston, and we not only had 60 people but 350 people, could we do that? Because we promised. Our answer to ourselves was, maybe not, because it's a different situation. And that was the major reason we said maybe we should do the deal — because once we do it, we will distribute right away. Everybody has it in their pocket already. So whatever happens in the future, it's safe now. Even if we had to close down the company, we already did the part we promised.

That's because of the requirement from SoftBank. There was a reason why they wanted to acquire 80%. It was all about the accounting issue. They had some problem with their own business, so they were worried about their stock. By buying 80% of Kingston, Kingston has a very nice-looking book. Every year profitable.

Yeah, I knew that one. That is the day we hit $1 billion in sales. How did it happen? It was the people who made us become that. So we decided we want to say thank you to all the people. And we said, how do we do it best? It's in the Wall Street Journal. So we had a full page in the Wall Street Journal saying thank you for a billion. It was a very eye-catching article. And we listed our employees — every one of them. How many people at that time? I think close to a thousand. A thousand names in the newspaper. So then we had T-shirts with a thousand names on it. This was one way we showed our gratitude.

Very, very. First of all, the title was 'Thanks for a Billion.' People say, what does that mean? And then we had the explanation — we are reaching a billion because of you. Was it a strategy that you planned? Like, when we reach this moment we are going to run an ad? No, it just happened. And when it happened we were so excited. I said, well, this is a big thing. And our guys got together — I think it was a marketing person. He said, why don't we use this opportunity to announce the success and really reward our customers, give them the credit? Because without you, it would not be Kingston. That was our marketing guy.

You don't want to do things to anybody that you don't wish people would do to you. Based on that principle, basically it's honesty, compassion. We were one of the very few companies that had compassion for our competitors. Even at that time, there were a few smaller companies doing something similar to Kingston. Because they were smaller, sometimes they ran out of cash to pay the supplier, so they came to us. Sometimes it was parts, because we were much bigger and could obtain parts easier and cheaper. When there was a shortage and they had a problem getting support, they would come and say, we really think if you can help us this month by giving us some of your parts, it would save our company. And we did that all the time, no problem, even though they were our competitors. So we helped them. Compassion — that's the word. And fairness. The last one, very important, is: if we do all these things and have success in terms of money, but we don't have a happy life, what does that mean? So we added one more core value: having fun. You have to have fun, no matter what happens. That's one of the core values.

Those are the usual things — Christmas party, picnic, and making trips, for example to Disneyland. But mostly what I think about is the everyday point of view. If you only have fun when you have a Christmas party, well, so what, right? It has to translate into everyday life. One of the decisions is that we don't have offices. Today I still sit in a cubicle with everybody, just next to me. That is part of the culture — people who want to talk to anybody, including me, they don't have to knock on a door or make an appointment. They just come by, 'Hey John, I need to talk to you.' The other fun I'm talking about is really fun — doing some crazy things when you're in a company. Don't be like other companies that say, no, no, you cannot do that. I always encourage everybody: if you have some crazy idea and it's fun, do it. One of the craziest things — because we have different departments: Latin America, Eastern Europe, US — once in a while I will all of a sudden say, hey Latin, we haven't been together for a long time, so why don't we, right after five, let's not go home, let's stay here. What do we do? We drink. Drinking in the office is normally taboo, but we said let's have fun, life has to be fun. So we make a South American Latin-style drink — it's called caipirinha, a Brazilian drink, and you have to mix things, lemon, everything. We make that, and the department gets together, we drink, laugh, and talk. That's just one of the things — very spontaneous, no point to it, just do it.

A tricky thing. It's more like a marriage. I haven't seen any other company where the partners share the company for 40 years. I don't know of any other company. One thing the press always writes about is that it's amazing — two together for 40 years, still working nicely together, making the company grow. Having said that, I don't mean we don't have different opinions. Once in a while we have some — not fights, but arguments about something. At the end of the argument, at least this is what I feel — I made my point, I think this is not right, it should be different. But maybe he has the opposite view. Then I realize that maybe that's a better idea. We always compromise at the end. There is no injury in the company. We do have arguments about who's right.

By showing compassion. But here it is — if I argue to a point, then you tell me you've pushed to the boundary. If you push more, it will hurt more than help. He does that too, but he has a stronger personality. Sometimes he tells me, John — and when that happens, I just say, okay, I don't want to talk about this anymore until maybe tomorrow. It's another day. Tomorrow, usually my opinion changes. So I don't want to go through that kind of conflict. The conclusion is: yes, we have different opinions, different ideas on what to do, but we always end up with no big fight.

Yeah, because you have a lot of children to take care of — thousands of people to take care of.

Not to borrow money from the bank. That impacts your decision a lot. From the beginning, we tried to buy everything with whatever cash we had. We don't owe the bank anything. Even until now, the banks come knocking on the door saying, I'll give you credit for $800 million, you can have it now but you don't have to take it. Another bank will do the same — I can give you $1.2 billion in cash reserve. We rarely take that kind of offer. There are times when we see a temporary cash shortage because we keep growing, and it's good to have something reserved. But it's only when we really need it that we draw some money. That is the secret to success. Let me tell you about crises — the crisis that happens to most companies is cash flow. They overspend or don't look at their books, then they say, okay, I can borrow. So they get into debt, and there's borrowing pressure. And then if you run into trouble — why do they do that? It's all for the name of expansion. 'We need to expand our market, therefore we need cash.' So they take a $200 million cash reserve from the bank. Then all of a sudden you're running into a crisis. The market takes a downturn, your business starts going down, your income doesn't balance your overhead because products aren't selling. So now you owe money to the bank and need more. I would say many, many times companies get into big trouble and even go out of business because they do not know how to manage money. So we are always very conscious about it. Don't borrow the money. Use whatever you have to expand. That's the key. When the crisis happens, other companies have to lay off people to save overhead, or temporarily close down. But we have never even come close to that. We make our family — meaning our employees — feel very safe and secure. For 40 years they see that we'll never do that to them. We just spend a little less. For example, if we buy product, for the next three months we'll buy less, but we don't owe money to anybody. That is longevity — you continue to operate without fear. While other companies have such big pressure because of money issues. That's longevity.

I think it has to come from the very beginning. We said, if we don't have the money, let's just not purchase it. That practice actually, more and more, gave us the ability to have our own reserve. The profit that we generate — we don't give it out as distributions to owners. We don't like that. The profit stays there. Every time I have to say it's the medicine of feeling safe and not panicking. I'll tell you another reason: because of the cash we have, when we do business with our vendors — semiconductor suppliers — when you run into a market that is questionable, where business in the next three or six months looks like it's going downwards, the vendor has to make a decision. This company is asking for credit to take these parts, and then they see another company, Kingston, that has no risk because they pay cash. So we have an advantage when crises happen in the market. The vendors will pick us first because they know it's safe for them.

Exactly.

Everything we already talked about — I think it's very different from the traditional corporation and how they view managing the company. When you have pressure, you lay off people because your profit is down. There are times when you make a decision to lay off people based on not very important reasons. We always give people a second chance or even a third chance to correct themselves. That is a big difference. So when people in the market talk about Kingston, one of the topics is always: Kingston really treats their employees very fairly. You don't have to worry if you work there. That gives us a competitive edge.

That's always the question when hiring new employees. I think it's always a gamble. You see the resume, you see some recommendations, you like that. But the reality is, you really do not know how talented this person is, because they can say, I did this, I did that, now I'm this. But when it comes to real practice, that's a different story. There are times we definitely hire the wrong person, and it doesn't work out for the job. In that sense, because this person is not a long-term employee, not really family yet, we have no problem. We say, I'm very sorry, it does not work out, and we let them go. Sometimes it also happens with a long-term employee, because people change over time. Let's say this person has been with the company for 25 years and all of a sudden you feel like he's not serious, he's falling behind, his attitude changes. Of course, then you have to seriously have a talk and a warning. Say, why do you behave like this? Give us a reason. If they give you a reason and you understand he's going through a really difficult time in his life, or some kind of crisis — we always have compassion, it's one of our core values. Remember compassion. This guy worked 20 years for your company, very hard work. Now he's going through a crisis. Don't just make a judgment. Give him the second chance, maybe a third chance. That's how we move forward. Most of the time it works out very well.

We had some wrong decisions in terms of direction — usually it's the product, what we should promote, what we should add to our product line. That is for sure. With time, you will have wrong decisions, but you overcome them very quickly. It's not a big deal. The big decisions — later on we found out it was a terrible decision. It hurt the company in many ways. But actually, I don't remember there being any disastrous cases. It's all not-very-good decisions, but never really a disaster. We just say, okay, let's work with that, and slowly we phase it out and replace with something else. We never had a huge crisis where we said we made a really wrong decision that killed the company. When you make a mistake, usually the result is you lose money — because of a wrong product or wrong decision on how to sell it. But because our financial position is so good, we never worry about that. The money is there. We replace it and move on.

At that time, when I met David, my partner, he was working for an engineering company as an employee. And I was struggling, finding my own direction. He said, I could sit at home in my spare time to design a product — it's very easy to do. But then, how do we sell it? You're not working, you don't have a job right now, so you can stay home and just sell this product. Nothing to lose, because we had no overhead. That was the beginning of this idea. I had no idea what I was selling. I was very illiterate in terms of computer technology. I had a problem — how do I sell? I don't even know what I'm going to talk about. And it's very funny — he said, okay, there are many people who don't know what they're talking about. They just pretend they know what they're talking about. So that's easy. He said, I will teach you a few technical terms. You don't understand them at all, but when you're in trouble, when you're trying to sell your product and people are grilling you and you're hanging at the end and you don't know how to answer — what you do is, he wrote a list of what we call buzzwords. Buzzwords meaning you say them and nobody understands. And he said, just look at that. Very funny. When you reach a point where you don't know how to answer, you just use one of those words. Most of the time, they shut up, because they think, oh, I don't know what he's talking about, maybe I don't want to show that I don't know anything about it. That is very funny. But that's the beginning of our partnership — how we wiggled into the computer business.

One thing I'm always eager to talk about is sitting on the wing of an airplane — outside, on the tip — and the plane takes off like that. That was a crazy idea. You sat there outside the plane? That was me, yeah. I was looking for that kind of feeling — how it really is. No place was willing to do that for me, because I'm not a professional, I'm not a stuntman. I found a friend's friend who lives in Hungary. He's a very good pilot, he has his own airplane. I asked him, could you do me a favor? This is my dream, I want to do that. He said, yeah, just come over to Hungary first and look at this airplane. I was sweating because it looked like it was 100 years old — almost falling apart. I said, is this the best airplane you have? He said, yeah, this is the best I can do. I don't have any other plane. And that was one of the things I wanted to do very much. So I did it, and I was happy.

Yes, we have many employees from Vietnam. Some of them are maybe second or third generation — their grandparents came from South Vietnam after the war or during the war. Some of them have been working for almost 30 years with one company. I have to say, the employees from Vietnam — number one, they're very smart when they work. Number two, they're very responsible. When you go to see what they do, most of the time I'm very impressed, because they take very seriously what they're doing, and they're very loyal to the company. It's all because of these few important reasons — they feel the culture is right for them.

I actually — over all these years, maybe 20-some years, not 25 — I wanted to play music. But if I'm all by myself, it's very boring, isn't it? And I chose to play drums. The reason is very simple — my fingers are not really good for playing the piano, guitar, or any of that. I'm kind of clumsy with that. So I said, okay, if I play drums, it's only two sticks in your hand — very simple. You're just beating on something. That's what I thought. So I chose drums. I bought a drum set, practiced a little bit until I had a little idea of what drumming is about. I contacted a few musicians and said, do you mind? I want to form a band. Would you be willing to play with me? I'm nobody here. And I think I was lucky — the musicians I approached were professional, very good. For some reason, maybe they liked me, so no problem — they said, I'll come and practice with you. The band started with four people, then five, six, seven — it started to expand like crazy. That was the beginning of the band. Today we still play for charity reasons — usually for hospitals, theaters, universities. Many organizations need to raise money every year. The way they raise money is to throw a big party — they call it a benefit party. They have a good time, and during that time they do the fundraising. They just talk, and hopefully everybody raises their hand. Our contribution is to get people off their chairs, because when you have a party like that, everybody sits there. But with music — no, no action, no life. So we want to play kind of music where when you listen to it, you want to get up, you feel it, you want to move. That is the most effective way. People get up, get onto the dance floor, dance. I think that's part of the secret — people open their walls because they're having fun, so it's easier for them to make the decision to give.

Yeah, there's a lot in common. Especially when you play music — if it's only three, four, or five people in a band, it's very easy, because you can adjust. If you make a mistake, you adjust very quickly, and people don't even notice. But with a band of 40 or 50 people, the problem is that everybody plays a part in this whole thing. If your part goes off, it affects every other musical instrument, because they lose their rhythm. They're professional, they read the notes, so when somebody makes a mistake — that's the most horrible mistake, especially for the drummer. Drum is the soul of the band. Before, I didn't believe it — I thought just beating on a drum. But slowly I realized that the drummer is the soul of the band. You're in charge of the tempo. You're in charge of the intensity — higher volume or lower. When you start to do this, you lead the band. The musicians are all professional, they feel it — this is the moment we need to pick up the intensity, or we need to play soft. That's what I later learned. In a band, what's important is to be organized, in sync, in harmony. A company is exactly the same. You have different departments, different functions, all happening at the same time. You can say, I want you to pay attention to this, this, this. But if these people do what you said but are not connected with the rest of the departments, the whole thing collapses. How come we didn't know that? How come we have no idea what they're doing? It's exactly the same — you need to be in sync. You do the same thing and everybody knows what you do. That's why the music notes are there — you read. This part you have trumpet, this part you have piano, you read the chart and you come together. To me, it's the same.

The culture. Always the culture. They feel good about where they are, and they will perform. I always attribute it to the culture.

I always believe — first, you need to set up a goal. What is your goal? What are you trying to achieve? If you just say, I wanted to have a company, well, sure, everybody thinks that way. But you need to set up a goal — not just any goal, a realistic one that you can achieve. Then you try to reach that goal. That could be choosing the product — which product you want to spend your time and finance on. You need to have enough — not tons of money, but you have to calculate how the money you have available, how long will it last. If you don't make any profit or income, how long can your money sustain this? I always believe that companies fail and close their doors — 90% of the time it happens because they run out of money. They have no choice, they just have to shut down. So my advice is always: you need to have a financial plan. It's not like you have to go to the bank and borrow millions of dollars. You have to be realistic. You say, this is how much I have, this is what I want to achieve, how much will it cost? Then you really have to see — okay, this is possible, then you do it. If it looks like you're just dreaming too much — I am a dreamer, okay? I always tell anybody: dream, and dream big. You have to dream big to reach it. But there are times you also need to be realistic, otherwise you just sink into it and don't know how to get out. My advice is always: have an idea, and then go for it. Just go for it. Make sure you have some financial backing, and then do it, do it, do it. Don't look back.

There are so many. You need to be smart — whether the company wants you or you have your own company, you need to think smart. More than one? Being smart, more than one — think smart, logical. Sometimes you have an idea that's just not logical, so that's part of smartness. And then the rest is: don't give up. There's a good example from my personal experience. We were somewhere where we had lost everything. We didn't have anything to buy food for even the next month. And we said, what do we do — kill ourselves? And finally I had a child. And that's the time you have to say, tomorrow is another day. You don't know what tomorrow will bring. Have consistency, just continue to do it, and you will see the light.

Well, thank you so much. You're so kind.