Remembering Ken Olsen, a Computer Industry Pioneer

Bloomberg contributor Paul Kedrosky recalls the co-founder of Digital Equipment Corp. and the lessons Olsen's career holds for today's tech giants and entrepreneurs

Ken Olsen in April 1987, at Digital Equipment Corp.'s then headquarters in Maynard, MA. CORBIS

By Paul Kedrosky

One of my first jobs was with Digital Equipment Corp. It was there I met its founder Ken Olsen, who died on Feb. 6. He was 84.

Olsen reminded me of a cross between Ed Sullivan and Inspector Morse from the television series based on the detective novels by British author Colin Dexter. He had the former's long face and hunched posture, and the latter's authority and presence. That authority came, in large part, from Olsen's success as an entrepreneur.

An engineer's engineer, Olsen was called the "ultimate entrepreneur" in one late-1980s book about the history of Digital. Sadly, that belated recognition coincided with the long, slow decline of the company he had started 30 years earlier. But Olsen's legacy is the key role he—and Digital (known as DEC to many in the business)—played in the formation of the modern computing industry, venture capital, and democratized entrepreneurship. He was one of the first rank-and-file technologists to build a hugely successful company, forging a path that we now take for granted, as if it has always existed.

Many of the Twitterati generation won't know Olsen or have heard of Digital, which was acquired by Compaq Computer Corp. in 1998 for $9.6 billion. (Compaq is another sad saga in the annals of once important tech companies.) Four years later, Compaq and the remnants of Digital were snatched up by Hewlett-Packard (HPQ) for $22 billion (yet an even sadder saga). Those blunders were post-Olsen, who left Digital in 1992. Despite the ignominious demise of Digital, there are lessons to learn from Olsen and his company that apply to today's industry-dominating companies like Google (GOOG) and to wannabe Mark Zuckerbergs.

Minicomputer Niche

In a computing marketplace populated by larger, older mainframe companies, like IBM (IBM), Sperry Univac, Honeywell, and Burroughs, Olsen's Digital created a market niche, minicomputers, and implausibly and unpredictably rode that niche's emergence to private and public market success.

At the time, it was far from obvious that minicomputers were the next big thing in computing. IBM dominated the market, one of room-filling, power-hungry machines that could cause an entire suburb's lights to blink out when turned on. Olsen recognized the economic and technological power of a shift from vacuum tubes to transistors, and was the first to build products that took advantage of those changes. The result was the PDP series of computers, then the famous VAX computers, which in their heyday were to generations of engineers what the Mac is to legions of designers.

Ken Olsen's influence was deeper than that, however. The rise of Digital marked the beginning of the end of computers as scarce resources, something to be hoarded and parceled out in small pieces to the lucky few. Digital's minicomputers began showing up everywhere, from labs to offices, turning computers from blinking lights in an overchilled room to that thing over there in the corner. That liberation inspired other entrepreneurs and possibilities—workstations, personal computers, laptops, and now tablet computers.

Success for Venture Capital

The founding and early success of Digital also marked the emergence of venture capital. Digital was one of the most successful investments of the earliest venture capital firm, American Research & Development Corp. (better-known as ARDC). Its founder Georges Doriot turned a $70,000 investment in Digital in 1957 into $355 million by 1968, a rate of return that snapped investors to attention with respect to venture capital, transforming the economy along the way.