Get in touch with technology with tech Stuff from how stuff works dot com. Hey there, and welcome to tech Stuff. I'm your host, Jonathan Strickland. I'm an executive producer at how Stuff Works and I love all things tech. And today we're gonna talk about the Oracle story. Oracles a big, big company, and this is inspired by my recent trip to Sweet World eighteen. I flew out to Las Vegas, Nevada and was part of that conference. I am back in the Atlanta studio as I record this, So if you're listening to this and you're thinking us sounds like the normal type of episode, that's why. Also I want to let you guys know we're going to step up the production schedule for Tech Stuff, so you're gonna start getting new episodes pretty much on a daily basis, at least four new episodes a week and a rerun on Saturday's, maybe more than that, depending up on how our scheduling goes. But we're experimenting with a new format to see how well it works, and I'm curious to hear what you guys think about it. But I'm really excited about this because it means I get to do the thing I love to do more often, which is awesome. All right, let's talk about Oracle. It's a huge name in the tech space. It's a software company that frequently ranks right behind Microsoft in the largest of such companies in the world. So in the world of software, Microsoft's number one and Oracles right behind it number two. And while most of Oracles products aren't the kind the average person accesses on a regular basis. You know, you think of Microsoft and you think of things like Windows, and you think of their suite of productivity software, things like Word and Excel. Oracles business isn't really about the average customer, like the average person is being a customer. Instead, it tends to be a business that sells products to other businesses. Um. It's history and its founders have very interesting stories. So to begin with, let's start with the most famous of oracles co founders, a man who has an incredible reputation for being uh flamboyant, and he speaks his mind and he can be incendiary in some cases. We're talking about Larry Ellison. Now, Ellison's story is the stuff of legend or maybe a fairy tale in some ways, because he rose from poverty to become one of the richest people in the world, and he has a reputation for being headstrong, unconventional, and at times in his life living like a rock star. Biography about his life has the title The Difference between God and Larry Ellison, which is a setup to the punchline God doesn't think he's Larry Ellison. I could do a full episode just on him and his anti but I'm gonna try and limit that a little bit and focus mostly on his behavior directly tied to Oracle, though expect some of Ellison's actions to creep in now and again because they had an impact on the company that he co founded. He was born in nineteen forty four to nineteen year old Florence Spellman. Spellman was unwed and Ellison never met his biological father. His mother handed Ellison over to her sister, Lillian and her sister's husband, Louis Louis Ellison. Larry's aunt and uncle adopted him, and according to Ellison, the family took their last name from Ellis Island after the father or the his uncle really Louis or Louis after his family immigrated to America from Eastern Europe. Now, according to Ellison himself, his childhood was pretty rough. His adopted father undermined Ellison's self worth and confidence. Apparently, he would say frequently that Larry Ellison was good for nothing. Ellison had trouble in school. He was described as intelligent, but he didn't do well with authority figures. He wasn't really crazy about being told what to do and win. But he was very smart, and when he graduated high school, he first enrolled in the University of Illinois, but after a while he dropped out, and then he enrolled in the University of Chicago, but after a while he dropped out of that as well, and at least the first one. He dropped out for good reason and that his adopted mother had passed away and he wanted to leave school to be back with his his family and to pay his respects. He made the decision in the mid nineteen sixties to head to California and try to make a living out there, and at first he did odd jobs. He also bought a book on programming and began to teach himself how to do it. According to an account he gave to the Smithsonian, he never once took a class in computer programming. He was completely self taught and in nineteen seventy three got hired on at the Ampex Corporation. Ampex is an electronics company. It started out making electric motors and generators in the nineteen forties. By the nineteen seventies, when Ellison had joined, the company had diversified and started making various types of recorders like magnetic tape recorders such as eight track or sixteen or twenty four track recorders. Larry Ellison's supervisor at Ampex was a guy named Robert Bob Nimrod Minor. Bob Minor was a first generation American born in nineteen forty one. His parents came from Iran to live in the US in the nineteen twenties. Minor had attended the University of Illinois at Urbana Champaign and graduated with a degree in mathematics. Bob Minor had a deep understanding of computers and would end up being the lead engineer for Oracle during those early days. The third co founder of Oracle was another Ampex employee named Ed Oates. He was born in nineteen forty six and graduated with a BA in mathematics from San Jose University in nineteen sixty eight. Together with Minor and Ellison, he would found what would become Oracle. Now, alright, I should say that at the very beginning here that there are a lot of conflicting reports about the actual order of events that I'm going to describe next. But based upon my research, this is how I think things unfolded. Now. I say think, because again, if you research this stuff, you're gonna find a lot of different versions of this story. Some suggest that Ellison joined the fledgling company a few months after Oates and Minor founded it. Others say that Ellison was the central role of founder in this company. I think the truth is probably somewhere in the middle. First, Ellison left Ampex in nineteen seventy six and joined another company called Precision Instruments to take the position of vice president of research and development over at Ampex. Bob Minor and Ed Oates decided they wanted to form their own business, so they left Ampex and they create They contacted Ellison. They asked him if maybe he wanted to join their venture, and Ellison agreed. So while he had joined Precision Instruments, he was not there for very long. He left to go and found this company and the brand new company was not called Oracle, at least not yet. Instead, this brand new company was called Software Development Laboratories or s d L, and their business model was to become software engineers for hire, so companies would contract with them to build out software packages that those companies needed on a per job basis. They would be contract workers. You need a platform of programs developed, call us, we'll do it. They rented out a an office out of Santa Clara, California, with nine square feet of office space and all they needed at that point, we're customers. So while they started looking for business, ed Oates was looking around and he came across a paper that was written back in n seventy by a computer scientist in the UK named Edgar F. Cod. Cod proposed using a model for information that would allow a database to organize data by its relationship with other data. And you would do this by organizing all the information into tables with columns and rows, and each row would have a unique identifier attached to it, and the rows will be called records or sometimes called tuples. Columns would represent attributes, so you would have a column that describes some sort of feature that could apply to the various records the various rows in this table, and each column would be a different feature. So let's say that you're talking about a physical product. One column might indicate the location where that physical product is. Another column might be the price of that product, or another one might be the color of that product or whatever that might be. And using this kind of approach, you could build a really useful database that could allow you to look at data in many different ways by structuring queries. So let me give you a simple example so that I can, you know, explain what this means. Let's say that you are a huge roller skate tycoon, which means you you sell roller skates and you're incredibly successful, not that you sell really big roller skates or that you are in fact a giant who wears roller skates. Now, in your business, you decide you want to see which lines of roller skates are selling best in your stores in San Francisco. So you run a query and you've got this big table of data and you're saying, well, I want to see the skates that are being sold in our San Francisco stores. I want them ranked by most popular to least popular, and then I can get a quick look at my business and see which ones are doing well. Maybe I need to order more of those, Maybe I need to order fewer of the models that are not doing really well. And so you look at this information and you see that the skates that have really good breaks on them are the ones they're doing really well, which makes sense in San Francisco, because otherwise you're just gonna take off down that hill, hurtling to your destiny until you just end up in the middle of the Pacific Ocean, so you would never be seen again. It makes sense that the roller skates would break, so the ones that are doing really well. Now this is not revolutionary these days, right. We are used to being able to create ables in this way where we can create different categories of features and then we can sort by that, or we can filter by that, so that we're only looking at the data that actually interests us, and everything else gets hidden away so that it's not distracting. That's not revolutionary today, But back then it was. This relational database idea was a huge, huge notion, and at that point, while cod was suggesting this particular model of handling information, no one had yet found a way to implement it. In an elegant way. All the different attempts were still very much in the early phases. But Oates, having read this paper, thought this sounds really really interesting to me. I think that we can make a business out of this because other businesses are going to want to be able to sort their data in various ways. So if we can figure out a way to build a software platform where we can create eate database software for these companies, that might be our entry point into the market. Maybe that's how we actually start making our money. So the databases in commercial use became known as relational database management systems, also known as r D B M s S S so are for relational dB for database, M for management, and S for systems. And that would really transform data analysis. But that's only part of the picture. So another part was thanks to the computer scientists over at IBM. There was a guy named Donald D. Chamberlain and another one named Raymond F. Boyce. They had also read Cod's paper, and they decided to create a type of programming language that could manifest those ideas make them actually work. They wanted to create a programming language that would end up allowing you to create these kind of relational databases. So they set to work and doing it, and there first such a town was originally called Square, but Square proved to be pretty clunky and inelegant. It had a lot of limitations to it, so they decided to go back to the drawing board and try again. Their second effort they called sequel s q L, or sometimes they actually would spell it out s e q L, and s q L stands for structured Query Language. S e q L was supposed to be structured English query language, and uh, it was kind of a cheeky reference to also being the second attempt to create such a language to make these r D B M s is. So the sequel language would in fact lend itself well to building this kind of database. Now what came next, Well, I'll tell you, but first let's take a quick break to thank our sponsor. All Right, So we have this concept of relational databases that cod had proposed. We've got the sequel language that was developed by the scientists over at IBM, and the three co founders decided they didn't want to challenge IBM directly by creating database systems for mainframe computers. IBMS clients tended to be really big companies, like really big ones, and they were mostly using these large mainframe computer systems that trace their origins back to the nineteen fifties. So instead, the co founder said, what we should do is build out a database system that can work on many computers. Many computers are still pretty big, right they're not. They're bigger than what a personal computer would have been. Like, especially the many computers back in the nineteen seventies. They were still large. Uh, they were less expensive than mainframes, but they were also less powerful and they were more frequently used by mid sized companies. It just made more sense to go with many computers than may frames. Now, the personal computers, those we would call micro computers, they're even a size smaller. So the co founder said, well, IBM is probably not going to go for that market. They tend to concentrate on large companies, not mid sized companies. So if we tailor a business for mid size companies, there's probably a lot of opportunity there, and we don't have to worry about IBM wanting to compete directly against us or acquire us. We can do business our way. And so ed Oates convinced his partners that building out databases using the sequel language was the way to go, and so the team got to work building their very first software product, which was called Oracle. But there's a bit more to it than that, because it was called Oracle for specific reasons. So the software gots name from a project that was being run by the first customer SDL ever had. Remember STL stood for Software Element Laboratories. Well, that customer was the little US agency called the c i A, that is, the Central Intelligence Agency. That was the first s d L customer, and the CIA had a special project they were looking to complete called Oracle. So what was the project about? Why did they need a relational database? Well, who's to say it's classified? It's probably cloak and dagger stuff. I do not have the proper clearance to find out what exactly was going on. It was all redacted. But STL took the project and they had two years to complete the work and create a relational database for the c i A. Bob Minor did most of the work and creating the architecture for the database, and they were able to turn in their project a year ahead of schedule. They spent the following year adapting this database approach so that they could create a commercial product that they could sell to other companies. So essentially, they said, well, we did this for the CIA, let's just adapt it so that we can sell it to anyone, really, any organization or a company that's out there. So they decided to stick with the name the project name the CIA project, which was called Oracle, and use that to name their product, their software, their database software thus became known as Oracle. By the way, there is an allegation out there that Oracle actually started out as a Russian software product that the c i A lifted as in stall, and then handed over to SDL. I've seen no confirmation of that allegation anywhere, and I'm inclined to consider it outright false, as it really serves as a huge injustice to the people like Bob Minor who actually worked really hard to build out this database software. But I just wanted to acknowledge the fact that there is a rumor out there. I just don't think it has any real credence. Also, the version that Ellison, Bob Minor and Oates made commercially available wasn't just Oracle. It was actually called Oracle Version two. So why was the first version ever offered in the consumer market, known as Version two. Well, it's because Larry Ellison thought no company or organization would want to buy Version one of any kind of software platform. They would worry about it being unproven, and so he said, well, why don't we just call this version two? Will bypass the problem. It was still the first version of the Oracle software, it just had the name Version two, which is sort of like forming a brand new musical band and then calling your first album your greatest Hits album, which is funny. There's a lot of hutzpa there. In fact, hutzba is one of those words that often gets used to describe Ellison. But that's why the first version of Oracle was called Version two, even though it was technically the first one. The company's first hired to help them build out this software was a programmer named Bruce Scott, and he started so early with the others that he's frequently referred to as the fourth co founder, but technically speaking, he was the company's first hire. Scott worked on the first several versions of the Oracle database software. Now, it took a couple of years to get Oracle ready for commercial deployment from the founding of the company. So again STL was founded in nineteen seventy seven, but by nineteen seventy nine, Oracle was ready to go, and the company formerly known as Software Development Laboratories, had undergone a name change, but it still wasn't called Oracle yet. Instead it became known as Relational Software, Incorporated. And one wonders if they ever got contacted by people who were compute dating enthusiasts, because Relational Software suggests to me that maybe you can hook me up with miswrite. I don't need that. By the way, I'm happily married. The company's Oracle product soon became the go to for lots of big companies and organizations, including other U. S. Government and military clients. So in addition to the c i A, there was the Air Force and the Navy. In fact, depending upon whose account you read, the first customer for the company wasn't the CIA, but instead was the Air Force. Either way, the military and intelligence communities were hot for relational databases, and it makes sense considering how much information those organizations have to handle, So one of their earliest non government contracts would be with Bell Labs, another company that has a huge amount of information to deal with, so it made sense that they wanted a database software program where they could structure that data in a way that was more useful. By the model for business computing had shifted toward mini computers and the Unix operating system for things like database management, So people were moving away from having that enormous centralized computer that mainframe inside their business. They were now starting to rely on these relatively smaller mini computer workstations and the Unix operating system so that they could actually do their work instead of having this proprietary massive computer in their building. That played right into this young company's strengths and admit, their decision to focus on many computers was a big success, and sales steadily began to climb. Now it wasn't a runaway success right out of the gate, but they were making regular sales. In one the company lured away former IBM employee Umang Gupta to join as the seventeenth employee of Relational Software. I'll be talking about some of the other early employees in part two of this episode, because, as it turns out, some people that were hired early on stuck around with Oracle for quite some time. But over that time they began to form some very strong opinions about Larry Ellison and his managerial style. Anyway, back to Gupta, his main priority was developing a business plan for the company. Because you had these three guys who had founded the company and they knew how to make and market a product. Everyone said that Ellison was kind of the marketing guy. He was the one who would go out and sell the product, and Bob Minor was the architect and at Oates was a developer. But they weren't business guys in the sense that they weren't the ones ready to run an enormous company um and so doing things like developing a business plan was not exactly in their strong suit. That wasn't one of their uh there uh features. So Gupta came in and he created a business plan for the company, and he was also the vice president of the company's microcomputer products division. Now, remember this was a time when personal computers, also known as micro computers, were really starting to become a big success. In the early nineteen eighties. The proliferation of computer systems and businesses and homes created the opportunity for software companies to go after new markets, and after a relatively short stint at the company, Gupta would end up leaving along with the first employee hire of Oracle's history, Bruce Scott, and they would found Gupta Technologies, which later became cinur A Software. Also in nineteen eighty one, the company began to work on features that would expand Oracles, such as the Interactive Application Facility. This was a tool that could handle transaction processing forms, which doesn't sound exciting, but it was an important development in the company changed names again, except this time they finally became the Oracle we know today. At that time, the company was enjoying two and a half million dollars in annual revenue. To grow further, the company leaders decided to invest a quarter of their revenues back into research and development. So how did that pan out? Well, I'll tell you, but first let's take another quick break to thank our sponsor. As it turns out, this two and a half million and annual revenue and then the reinvestment into research and development paid off in a big way. So the next big jump Oracle took was in three when the company offered up a version of relational database management software that could work on any sort of computer platform, which included mainframes, workstations, and personal computers. This expansion doubled company revenues for that year, which is pretty good validation for your decision. This was Oracle version three, which really means it was version two, because again they started with two, not one. So you know what, when I tell you version names, just mentally subtract one from the number, because that's what it really was. Now. Version three was such a big success that the company decided to push version four out the following year, in nineteen eighty four. This version included the ability to generate a report based on queries, which again seems like a no brainer these days, but it was a real innovation at the time by Oracle was selling more than twenty million dollars a year in software deals, and the company was getting into a very young field, which was the Internet. In the Internet was extremely young, not a lot of people knew about it, but in fact, of course, that was a decade before the Web would really become a thing, So this was a pretty bold move. Um. Version five of our software supported the ability for a machine running Oracle to log into a database server, so you didn't have to rely on computer systems that were co located anymore. With a connection to the Internet, you could have computers in offices around the world log into the same database. The version also included an auditing feature that tracked all the times someone accessed the database, which was a security and quality control feature. So it didn't necessarily immediately tell you who had accessed the database, but I would tell you the location of that person or the person's computer and the time, like what time did they access the database. So if you go into the database and you think, well, that's weird, three whole columns are missing. Someone accidentally deleted them. I wonder who did that. You could actually go through the audit list and find out who had last accessed that particular database, and then you could go and pay them a little visit and maybe ask them why they don't like their kneecaps anymore. I'm assuming you're using the database in the mafia. But the point being that this was a new feature that allowed for greater tighter control not just of the information but access to it. And they hit fifty five million dollars in revenue. That's not profit, that's in revenue, but still fifty five million is a huge amount of money, and it was incredible growth for the software company. That was also the year Oracle held its initial public offering or i p O. That's when a private company turns into a publicly traded one. The initial price for a share of Oracle stock was fifteen dollars. An Oracle created two point one million shares and made them available. So you multiply those two numbers together and you get the market value of the company, which was thirty one and a half million dollars. So again you just look at how much is it per share, how many shares are out there. Multiply those two numbers together, and that tells you the market value for a company. By the way, if you want to know how much a share of Oracle stock you bought back in the days when it went public, how much would that be worth today? You actually have to do a little bit of math. The day I'm doing this research, So the day I actually researched this information, Oracle stock came in at forty six dollars per share or so, which means it's about three times more than the initial offering at fifteen dollars, which means you would triple your money. Right, not so fast, because it gets way better than that. If you just thought, oh, the stock prices three times what it used to be, I make three times as much money. Here's the thing. Oracle has split its stock a few times. So splitting stock increases the number of shares a company has out on the market, and it also has the effect of lowering the price per share. But you end up with twice as many shares if you're doing a two for one split, and the overall market valuation of the company will remain the same of the moment. So, in other words, the market valuation has to remain constant. You don't magically make the company more valuable. Right, So if you already have your company valued at thirty million dollars and you've got two million UH shares out there, and you go to four million shares, your company is still going to be worth thirty million dollars. It's just that each share is going to be worth half as much as it was before. So I have I do it too. For one split, I double the number of shares in my company. I also have the value of the individual shares, because again, the value of my company does not magically change. So I'm gonna give you a full example here, Let's say that my company is worth fifty million dollars and I've got two million shares out there, which means each shares worth twenty five bucks before I split. Then I split the stock two for one. Now there are four million shares of my company out on the market, which makes the price of each share go down to twelve dollars and fifty cents. So when you split a stock, if someone already owns stock, they get the benefit of that split. Right. So if it's a two for one split and I own ten shares of the company, now I own twenty shares of the company. Each share is half as expensive as it used to be, but I've got twice as many. So why would I Why would I bother splitting if the value of the company remains the same. What's the point? Well, there's some psychological effects when you split stock. If you were to take humans out of the equation entirely, if you took human emotion out, then it wouldn't really matter if you split the stock or not. It wouldn't really have a big effect on the company's performance. But we are human, we're the ones investing, so it does matter. By splitting the stocks and reducing the cost on a per share basis, you can improve the liquidity of shares. People are more likely to trade because they don't feel they don't feel frozen either by holding onto stocks that are incredibly expensive, and therefore they have the the the reputation of being valuable. And you don't avoid investing because the entry price is too high. Right, You've lowered the entry fee to buy stock by making the stocks half as expensive. So you might have small investors out there who would jump on shares of Oracle, but if it's too expensive, they're like, I just I can't buy a forty dollar stock that drops down to twenty Oh, I can buy that. Then you get more investors, So that's one of the reasons you might do it. You might do it to try and encourage more trading, to encourage more small investors, and you're also doing it in an attempt to continue growing. So while you initially reduce the price of those shares by half, they can still climb up as the company does well. So uh, that means the stock price can increase over time. So over the course of Oracle's history, it is actually split its stock ten times. Six of those were two for one stocks, which meant if you held stocks an Oracle, the number of shares would double each time it has a two for one split, but four of the splits we're three for two stock splits, meaning that for every two shares you held, you would get a third one, or if you prefer, for each share you got one and a half shares. Right, So if you bought one share of Oracle in nine six for fifteen dollars, after all the stock splits, you would actually end up with three hundred twenty four shares of Oracle, right, because of each of the times they split, your number of shares would increase. So if you add up all the different ten splits, that one share turns into three four shares. And it's not three four shares at fifteen dollars, which is what you bought it at. It's three four shares of Oracle at forty six dollars, which means your fifteen dollar investment would turn into fourteen thousand, nine hundred four dollars. Not bad, not bad to go from fifteen to fourteen thousand bucks now almost fifteen thousand bucks now. Oracle clients were pretty huge, which makes sense. Not a lot of smaller organizations had real need for the robust databases Oracle had to offer. Instead, Oracles products were appealing to bigger organizations and companies industries like pharmaceutical companies, aerospace companies, tech firms, automotive corporations. Those were among oracles top clients. In Oracle launched a new division in the company. It was called the Applications Division, and it initially had just seven employees working in it. Their job was to put together application software to integrate various functions with the database software to make it easier to run routine tasks for large organizations. Essentially, the thought was that the database software gave organizations a lot of power to analyze their data, but they still had to develop their own tools to put that data to use. So Oracle was getting into the business of developing applications that would do that for these companies. Oracle didn't just rely on in house teams to do this. The company also acquired a company called t c I that built project management applications. The in house team got to work building on an accounting module that could integrate with Oracle databases, and this was the beginning of Oracle creating a suite of software applications that could work closely together. Branching out from being a purely database focused company, Oracle also launched a consulting service to offer support to clients, helping them best understand how to leverage Oracle software. So now not only could the company sell its products to customers, it could keep earning money from those same kind customers by explaining to them how to use their own products, which is pretty much genius. In fact, this was a top revenue generator for Oracle, was not just selling the product, but selling ongoing support for the product. In the company was outgrowing its home base, and so it relocated to Redwood Shores, California. It launched a subsidiary company called Oracle Data Publishing that was all about getting hold of data and then distributing it electronically, and the company sought out new industries and branches of computing to expand into, including supercomputers. The following year would end up being a tumultuous one for Oracle, which had to make for a pretty ugly admission for a company all about crunching numbers, because the company turns out it had misrepresented revenues, whether on purpose or by accident. It was not a pretty picture. And that's how we're gonna start our next episode of the Oracle Story talking about this massive controversy that the company and countered early in its history and what it had to do in order to climb back out again. In fact, it was so bad that there was a real danger of Oracle going away and not surviving. Now, as it turns out, Oracle still around today, so you kind of know things work out, but back then people weren't so sure. Now, if you have suggestions for future episodes of tech Stuff, I welcome you to write me and let me know what they are. The email address for this show is tech Stuff at how stuff works dot com, or you can drop me a line on Twitter or Facebook. The handle for both of those is tech Stuff hs W. Remember we have an Instagram account. You can go and follow us there and see all the behind the scenes stuff and some other interesting things. Also, remember I broadcast my recording sessions live on twitch dot tv slash tech Stuff. Just go there. You'll see when I tend to stream. It's on Wednesdays and Fridays, but there's a schedule up there, so go there. You can jump into the chat room and be part of the shenanigans. What goes on when I record? 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Get in touch with technology with tech Stuff from how stuff works dot com. Hey there, and welcome to tech Stuff. I'm your host, Jonathan Strickland. I'm an executive producer at how Stuff Works and I love all things tech. And today we're gonna talk about the Oracle story. Oracles a big, big company, and this is inspired by my recent trip to Sweet World eighteen. I flew out to Las Vegas, Nevada and was part of that conference. I am back in the Atlanta studio as I record this, So if you're listening to this and you're thinking us sounds like the normal type of episode, that's why. Also I want to let you guys know we're going to step up the production schedule for Tech Stuff, so you're gonna start getting new episodes pretty much on a daily basis, at least four new episodes a week and a rerun on Saturday's, maybe more than that, depending up on how our scheduling goes. But we're experimenting with a new format to see how well it works, and I'm curious to hear what you guys think about it. But I'm really excited about this because it means I get to do the thing I love to do more often, which is awesome. All right, let's talk about Oracle. It's a huge name in the tech space. It's a software company that frequently ranks right behind Microsoft in the largest of such companies in the world. So in the world of software, Microsoft's number one and Oracles right behind it number two. And while most of Oracles products aren't the kind the average person accesses on a regular basis. You know, you think of Microsoft and you think of things like Windows, and you think of their suite of productivity software, things like Word and Excel. Oracles business isn't really about the average customer, like the average person is being a customer. Instead, it tends to be a business that sells products to other businesses. Um. It's history and its founders have very interesting stories. So to begin with, let's start with the most famous of oracles co founders, a man who has an incredible reputation for being uh flamboyant, and he speaks his mind and he can be incendiary in some cases. We're talking about Larry Ellison. Now, Ellison's story is the stuff of legend or maybe a fairy tale in some ways, because he rose from poverty to become one of the richest people in the world, and he has a reputation for being headstrong, unconventional, and at times in his life living like a rock star. Biography about his life has the title The Difference between God and Larry Ellison, which is a setup to the punchline God doesn't think he's Larry Ellison. I could do a full episode just on him and his anti but I'm gonna try and limit that a little bit and focus mostly on his behavior directly tied to Oracle, though expect some of Ellison's actions to creep in now and again because they had an impact on the company that he co founded. He was born in nineteen forty four to nineteen year old Florence Spellman. Spellman was unwed and Ellison never met his biological father. His mother handed Ellison over to her sister, Lillian and her sister's husband, Louis Louis Ellison. Larry's aunt and uncle adopted him, and according to Ellison, the family took their last name from Ellis Island after the father or the his uncle really Louis or Louis after his family immigrated to America from Eastern Europe. Now, according to Ellison himself, his childhood was pretty rough. His adopted father undermined Ellison's self worth and confidence. Apparently, he would say frequently that Larry Ellison was good for nothing. Ellison had trouble in school. He was described as intelligent, but he didn't do well with authority figures. He wasn't really crazy about being told what to do and win. But he was very smart, and when he graduated high school, he first enrolled in the University of Illinois, but after a while he dropped out, and then he enrolled in the University of Chicago, but after a while he dropped out of that as well, and at least the first one. He dropped out for good reason and that his adopted mother had passed away and he wanted to leave school to be back with his his family and to pay his respects. He made the decision in the mid nineteen sixties to head to California and try to make a living out there, and at first he did odd jobs. He also bought a book on programming and began to teach himself how to do it. According to an account he gave to the Smithsonian, he never once took a class in computer programming. He was completely self taught and in nineteen seventy three got hired on at the Ampex Corporation. Ampex is an electronics company. It started out making electric motors and generators in the nineteen forties. By the nineteen seventies, when Ellison had joined, the company had diversified and started making various types of recorders like magnetic tape recorders such as eight track or sixteen or twenty four track recorders. Larry Ellison's supervisor at Ampex was a guy named Robert Bob Nimrod Minor. Bob Minor was a first generation American born in nineteen forty one. His parents came from Iran to live in the US in the nineteen twenties. Minor had attended the University of Illinois at Urbana Champaign and graduated with a degree in mathematics. Bob Minor had a deep understanding of computers and would end up being the lead engineer for Oracle during those early days. The third co founder of Oracle was another Ampex employee named Ed Oates. He was born in nineteen forty six and graduated with a BA in mathematics from San Jose University in nineteen sixty eight. Together with Minor and Ellison, he would found what would become Oracle. Now, alright, I should say that at the very beginning here that there are a lot of conflicting reports about the actual order of events that I'm going to describe next. But based upon my research, this is how I think things unfolded. Now. I say think, because again, if you research this stuff, you're gonna find a lot of different versions of this story. Some suggest that Ellison joined the fledgling company a few months after Oates and Minor founded it. Others say that Ellison was the central role of founder in this company. I think the truth is probably somewhere in the middle. First, Ellison left Ampex in nineteen seventy six and joined another company called Precision Instruments to take the position of vice president of research and development over at Ampex. Bob Minor and Ed Oates decided they wanted to form their own business, so they left Ampex and they create They contacted Ellison. They asked him if maybe he wanted to join their venture, and Ellison agreed. So while he had joined Precision Instruments, he was not there for very long. He left to go and found this company and the brand new company was not called Oracle, at least not yet. Instead, this brand new company was called Software Development Laboratories or s d L, and their business model was to become software engineers for hire, so companies would contract with them to build out software packages that those companies needed on a per job basis. They would be contract workers. You need a platform of programs developed, call us, we'll do it. They rented out a an office out of Santa Clara, California, with nine square feet of office space and all they needed at that point, we're customers. So while they started looking for business, ed Oates was looking around and he came across a paper that was written back in n seventy by a computer scientist in the UK named Edgar F. Cod. Cod proposed using a model for information that would allow a database to organize data by its relationship with other data. And you would do this by organizing all the information into tables with columns and rows, and each row would have a unique identifier attached to it, and the rows will be called records or sometimes called tuples. Columns would represent attributes, so you would have a column that describes some sort of feature that could apply to the various records the various rows in this table, and each column would be a different feature. So let's say that you're talking about a physical product. One column might indicate the location where that physical product is. Another column might be the price of that product, or another one might be the color of that product or whatever that might be. And using this kind of approach, you could build a really useful database that could allow you to look at data in many different ways by structuring queries. So let me give you a simple example so that I can, you know, explain what this means. Let's say that you are a huge roller skate tycoon, which means you you sell roller skates and you're incredibly successful, not that you sell really big roller skates or that you are in fact a giant who wears roller skates. Now, in your business, you decide you want to see which lines of roller skates are selling best in your stores in San Francisco. So you run a query and you've got this big table of data and you're saying, well, I want to see the skates that are being sold in our San Francisco stores. I want them ranked by most popular to least popular, and then I can get a quick look at my business and see which ones are doing well. Maybe I need to order more of those, Maybe I need to order fewer of the models that are not doing really well. And so you look at this information and you see that the skates that have really good breaks on them are the ones they're doing really well, which makes sense in San Francisco, because otherwise you're just gonna take off down that hill, hurtling to your destiny until you just end up in the middle of the Pacific Ocean, so you would never be seen again. It makes sense that the roller skates would break, so the ones that are doing really well. Now this is not revolutionary these days, right. We are used to being able to create ables in this way where we can create different categories of features and then we can sort by that, or we can filter by that, so that we're only looking at the data that actually interests us, and everything else gets hidden away so that it's not distracting. That's not revolutionary today, But back then it was. This relational database idea was a huge, huge notion, and at that point, while cod was suggesting this particular model of handling information, no one had yet found a way to implement it. In an elegant way. All the different attempts were still very much in the early phases. But Oates, having read this paper, thought this sounds really really interesting to me. I think that we can make a business out of this because other businesses are going to want to be able to sort their data in various ways. So if we can figure out a way to build a software platform where we can create eate database software for these companies, that might be our entry point into the market. Maybe that's how we actually start making our money. So the databases in commercial use became known as relational database management systems, also known as r D B M s S S so are for relational dB for database, M for management, and S for systems. And that would really transform data analysis. But that's only part of the picture. So another part was thanks to the computer scientists over at IBM. There was a guy named Donald D. Chamberlain and another one named Raymond F. Boyce. They had also read Cod's paper, and they decided to create a type of programming language that could manifest those ideas make them actually work. They wanted to create a programming language that would end up allowing you to create these kind of relational databases. So they set to work and doing it, and there first such a town was originally called Square, but Square proved to be pretty clunky and inelegant. It had a lot of limitations to it, so they decided to go back to the drawing board and try again. Their second effort they called sequel s q L, or sometimes they actually would spell it out s e q L, and s q L stands for structured Query Language. S e q L was supposed to be structured English query language, and uh, it was kind of a cheeky reference to also being the second attempt to create such a language to make these r D B M s is. So the sequel language would in fact lend itself well to building this kind of database. Now what came next, Well, I'll tell you, but first let's take a quick break to thank our sponsor. All Right, So we have this concept of relational databases that cod had proposed. We've got the sequel language that was developed by the scientists over at IBM, and the three co founders decided they didn't want to challenge IBM directly by creating database systems for mainframe computers. IBMS clients tended to be really big companies, like really big ones, and they were mostly using these large mainframe computer systems that trace their origins back to the nineteen fifties. So instead, the co founder said, what we should do is build out a database system that can work on many computers. Many computers are still pretty big, right they're not. They're bigger than what a personal computer would have been. Like, especially the many computers back in the nineteen seventies. They were still large. Uh, they were less expensive than mainframes, but they were also less powerful and they were more frequently used by mid sized companies. It just made more sense to go with many computers than may frames. Now, the personal computers, those we would call micro computers, they're even a size smaller. So the co founder said, well, IBM is probably not going to go for that market. They tend to concentrate on large companies, not mid sized companies. So if we tailor a business for mid size companies, there's probably a lot of opportunity there, and we don't have to worry about IBM wanting to compete directly against us or acquire us. We can do business our way. And so ed Oates convinced his partners that building out databases using the sequel language was the way to go, and so the team got to work building their very first software product, which was called Oracle. But there's a bit more to it than that, because it was called Oracle for specific reasons. So the software gots name from a project that was being run by the first customer SDL ever had. Remember STL stood for Software Element Laboratories. Well, that customer was the little US agency called the c i A, that is, the Central Intelligence Agency. That was the first s d L customer, and the CIA had a special project they were looking to complete called Oracle. So what was the project about? Why did they need a relational database? Well, who's to say it's classified? It's probably cloak and dagger stuff. I do not have the proper clearance to find out what exactly was going on. It was all redacted. But STL took the project and they had two years to complete the work and create a relational database for the c i A. Bob Minor did most of the work and creating the architecture for the database, and they were able to turn in their project a year ahead of schedule. They spent the following year adapting this database approach so that they could create a commercial product that they could sell to other companies. So essentially, they said, well, we did this for the CIA, let's just adapt it so that we can sell it to anyone, really, any organization or a company that's out there. So they decided to stick with the name the project name the CIA project, which was called Oracle, and use that to name their product, their software, their database software thus became known as Oracle. By the way, there is an allegation out there that Oracle actually started out as a Russian software product that the c i A lifted as in stall, and then handed over to SDL. I've seen no confirmation of that allegation anywhere, and I'm inclined to consider it outright false, as it really serves as a huge injustice to the people like Bob Minor who actually worked really hard to build out this database software. But I just wanted to acknowledge the fact that there is a rumor out there. I just don't think it has any real credence. Also, the version that Ellison, Bob Minor and Oates made commercially available wasn't just Oracle. It was actually called Oracle Version two. So why was the first version ever offered in the consumer market, known as Version two. Well, it's because Larry Ellison thought no company or organization would want to buy Version one of any kind of software platform. They would worry about it being unproven, and so he said, well, why don't we just call this version two? Will bypass the problem. It was still the first version of the Oracle software, it just had the name Version two, which is sort of like forming a brand new musical band and then calling your first album your greatest Hits album, which is funny. There's a lot of hutzpa there. In fact, hutzba is one of those words that often gets used to describe Ellison. But that's why the first version of Oracle was called Version two, even though it was technically the first one. The company's first hired to help them build out this software was a programmer named Bruce Scott, and he started so early with the others that he's frequently referred to as the fourth co founder, but technically speaking, he was the company's first hire. Scott worked on the first several versions of the Oracle database software. Now, it took a couple of years to get Oracle ready for commercial deployment from the founding of the company. So again STL was founded in nineteen seventy seven, but by nineteen seventy nine, Oracle was ready to go, and the company formerly known as Software Development Laboratories, had undergone a name change, but it still wasn't called Oracle yet. Instead it became known as Relational Software, Incorporated. And one wonders if they ever got contacted by people who were compute dating enthusiasts, because Relational Software suggests to me that maybe you can hook me up with miswrite. I don't need that. By the way, I'm happily married. The company's Oracle product soon became the go to for lots of big companies and organizations, including other U. S. Government and military clients. So in addition to the c i A, there was the Air Force and the Navy. In fact, depending upon whose account you read, the first customer for the company wasn't the CIA, but instead was the Air Force. Either way, the military and intelligence communities were hot for relational databases, and it makes sense considering how much information those organizations have to handle, So one of their earliest non government contracts would be with Bell Labs, another company that has a huge amount of information to deal with, so it made sense that they wanted a database software program where they could structure that data in a way that was more useful. By the model for business computing had shifted toward mini computers and the Unix operating system for things like database management, So people were moving away from having that enormous centralized computer that mainframe inside their business. They were now starting to rely on these relatively smaller mini computer workstations and the Unix operating system so that they could actually do their work instead of having this proprietary massive computer in their building. That played right into this young company's strengths and admit, their decision to focus on many computers was a big success, and sales steadily began to climb. Now it wasn't a runaway success right out of the gate, but they were making regular sales. In one the company lured away former IBM employee Umang Gupta to join as the seventeenth employee of Relational Software. I'll be talking about some of the other early employees in part two of this episode, because, as it turns out, some people that were hired early on stuck around with Oracle for quite some time. But over that time they began to form some very strong opinions about Larry Ellison and his managerial style. Anyway, back to Gupta, his main priority was developing a business plan for the company. Because you had these three guys who had founded the company and they knew how to make and market a product. Everyone said that Ellison was kind of the marketing guy. He was the one who would go out and sell the product, and Bob Minor was the architect and at Oates was a developer. But they weren't business guys in the sense that they weren't the ones ready to run an enormous company um and so doing things like developing a business plan was not exactly in their strong suit. That wasn't one of their uh there uh features. So Gupta came in and he created a business plan for the company, and he was also the vice president of the company's microcomputer products division. Now, remember this was a time when personal computers, also known as micro computers, were really starting to become a big success. In the early nineteen eighties. The proliferation of computer systems and businesses and homes created the opportunity for software companies to go after new markets, and after a relatively short stint at the company, Gupta would end up leaving along with the first employee hire of Oracle's history, Bruce Scott, and they would found Gupta Technologies, which later became cinur A Software. Also in nineteen eighty one, the company began to work on features that would expand Oracles, such as the Interactive Application Facility. This was a tool that could handle transaction processing forms, which doesn't sound exciting, but it was an important development in the company changed names again, except this time they finally became the Oracle we know today. At that time, the company was enjoying two and a half million dollars in annual revenue. To grow further, the company leaders decided to invest a quarter of their revenues back into research and development. So how did that pan out? Well, I'll tell you, but first let's take another quick break to thank our sponsor. As it turns out, this two and a half million and annual revenue and then the reinvestment into research and development paid off in a big way. So the next big jump Oracle took was in three when the company offered up a version of relational database management software that could work on any sort of computer platform, which included mainframes, workstations, and personal computers. This expansion doubled company revenues for that year, which is pretty good validation for your decision. This was Oracle version three, which really means it was version two, because again they started with two, not one. So you know what, when I tell you version names, just mentally subtract one from the number, because that's what it really was. Now. Version three was such a big success that the company decided to push version four out the following year, in nineteen eighty four. This version included the ability to generate a report based on queries, which again seems like a no brainer these days, but it was a real innovation at the time by Oracle was selling more than twenty million dollars a year in software deals, and the company was getting into a very young field, which was the Internet. In the Internet was extremely young, not a lot of people knew about it, but in fact, of course, that was a decade before the Web would really become a thing, So this was a pretty bold move. Um. Version five of our software supported the ability for a machine running Oracle to log into a database server, so you didn't have to rely on computer systems that were co located anymore. With a connection to the Internet, you could have computers in offices around the world log into the same database. The version also included an auditing feature that tracked all the times someone accessed the database, which was a security and quality control feature. So it didn't necessarily immediately tell you who had accessed the database, but I would tell you the location of that person or the person's computer and the time, like what time did they access the database. So if you go into the database and you think, well, that's weird, three whole columns are missing. Someone accidentally deleted them. I wonder who did that. You could actually go through the audit list and find out who had last accessed that particular database, and then you could go and pay them a little visit and maybe ask them why they don't like their kneecaps anymore. I'm assuming you're using the database in the mafia. But the point being that this was a new feature that allowed for greater tighter control not just of the information but access to it. And they hit fifty five million dollars in revenue. That's not profit, that's in revenue, but still fifty five million is a huge amount of money, and it was incredible growth for the software company. That was also the year Oracle held its initial public offering or i p O. That's when a private company turns into a publicly traded one. The initial price for a share of Oracle stock was fifteen dollars. An Oracle created two point one million shares and made them available. So you multiply those two numbers together and you get the market value of the company, which was thirty one and a half million dollars. So again you just look at how much is it per share, how many shares are out there. Multiply those two numbers together, and that tells you the market value for a company. By the way, if you want to know how much a share of Oracle stock you bought back in the days when it went public, how much would that be worth today? You actually have to do a little bit of math. The day I'm doing this research, So the day I actually researched this information, Oracle stock came in at forty six dollars per share or so, which means it's about three times more than the initial offering at fifteen dollars, which means you would triple your money. Right, not so fast, because it gets way better than that. If you just thought, oh, the stock prices three times what it used to be, I make three times as much money. Here's the thing. Oracle has split its stock a few times. So splitting stock increases the number of shares a company has out on the market, and it also has the effect of lowering the price per share. But you end up with twice as many shares if you're doing a two for one split, and the overall market valuation of the company will remain the same of the moment. So, in other words, the market valuation has to remain constant. You don't magically make the company more valuable. Right, So if you already have your company valued at thirty million dollars and you've got two million UH shares out there, and you go to four million shares, your company is still going to be worth thirty million dollars. It's just that each share is going to be worth half as much as it was before. So I have I do it too. For one split, I double the number of shares in my company. I also have the value of the individual shares, because again, the value of my company does not magically change. So I'm gonna give you a full example here, Let's say that my company is worth fifty million dollars and I've got two million shares out there, which means each shares worth twenty five bucks before I split. Then I split the stock two for one. Now there are four million shares of my company out on the market, which makes the price of each share go down to twelve dollars and fifty cents. So when you split a stock, if someone already owns stock, they get the benefit of that split. Right. So if it's a two for one split and I own ten shares of the company, now I own twenty shares of the company. Each share is half as expensive as it used to be, but I've got twice as many. So why would I Why would I bother splitting if the value of the company remains the same. What's the point? Well, there's some psychological effects when you split stock. If you were to take humans out of the equation entirely, if you took human emotion out, then it wouldn't really matter if you split the stock or not. It wouldn't really have a big effect on the company's performance. But we are human, we're the ones investing, so it does matter. By splitting the stocks and reducing the cost on a per share basis, you can improve the liquidity of shares. People are more likely to trade because they don't feel they don't feel frozen either by holding onto stocks that are incredibly expensive, and therefore they have the the the reputation of being valuable. And you don't avoid investing because the entry price is too high. Right, You've lowered the entry fee to buy stock by making the stocks half as expensive. So you might have small investors out there who would jump on shares of Oracle, but if it's too expensive, they're like, I just I can't buy a forty dollar stock that drops down to twenty Oh, I can buy that. Then you get more investors, So that's one of the reasons you might do it. You might do it to try and encourage more trading, to encourage more small investors, and you're also doing it in an attempt to continue growing. So while you initially reduce the price of those shares by half, they can still climb up as the company does well. So uh, that means the stock price can increase over time. So over the course of Oracle's history, it is actually split its stock ten times. Six of those were two for one stocks, which meant if you held stocks an Oracle, the number of shares would double each time it has a two for one split, but four of the splits we're three for two stock splits, meaning that for every two shares you held, you would get a third one, or if you prefer, for each share you got one and a half shares. Right, So if you bought one share of Oracle in nine six for fifteen dollars, after all the stock splits, you would actually end up with three hundred twenty four shares of Oracle, right, because of each of the times they split, your number of shares would increase. So if you add up all the different ten splits, that one share turns into three four shares. And it's not three four shares at fifteen dollars, which is what you bought it at. It's three four shares of Oracle at forty six dollars, which means your fifteen dollar investment would turn into fourteen thousand, nine hundred four dollars. Not bad, not bad to go from fifteen to fourteen thousand bucks now almost fifteen thousand bucks now. Oracle clients were pretty huge, which makes sense. Not a lot of smaller organizations had real need for the robust databases Oracle had to offer. Instead, Oracles products were appealing to bigger organizations and companies industries like pharmaceutical companies, aerospace companies, tech firms, automotive corporations. Those were among oracles top clients. In Oracle launched a new division in the company. It was called the Applications Division, and it initially had just seven employees working in it. Their job was to put together application software to integrate various functions with the database software to make it easier to run routine tasks for large organizations. Essentially, the thought was that the database software gave organizations a lot of power to analyze their data, but they still had to develop their own tools to put that data to use. So Oracle was getting into the business of developing applications that would do that for these companies. Oracle didn't just rely on in house teams to do this. The company also acquired a company called t c I that built project management applications. The in house team got to work building on an accounting module that could integrate with Oracle databases, and this was the beginning of Oracle creating a suite of software applications that could work closely together. Branching out from being a purely database focused company, Oracle also launched a consulting service to offer support to clients, helping them best understand how to leverage Oracle software. So now not only could the company sell its products to customers, it could keep earning money from those same kind customers by explaining to them how to use their own products, which is pretty much genius. In fact, this was a top revenue generator for Oracle, was not just selling the product, but selling ongoing support for the product. In the company was outgrowing its home base, and so it relocated to Redwood Shores, California. It launched a subsidiary company called Oracle Data Publishing that was all about getting hold of data and then distributing it electronically, and the company sought out new industries and branches of computing to expand into, including supercomputers. The following year would end up being a tumultuous one for Oracle, which had to make for a pretty ugly admission for a company all about crunching numbers, because the company turns out it had misrepresented revenues, whether on purpose or by accident. It was not a pretty picture. And that's how we're gonna start our next episode of the Oracle Story talking about this massive controversy that the company and countered early in its history and what it had to do in order to climb back out again. In fact, it was so bad that there was a real danger of Oracle going away and not surviving. Now, as it turns out, Oracle still around today, so you kind of know things work out, but back then people weren't so sure. Now, if you have suggestions for future episodes of tech Stuff, I welcome you to write me and let me know what they are. The email address for this show is tech Stuff at how stuff works dot com, or you can drop me a line on Twitter or Facebook. The handle for both of those is tech Stuff hs W. Remember we have an Instagram account. You can go and follow us there and see all the behind the scenes stuff and some other interesting things. Also, remember I broadcast my recording sessions live on twitch dot tv slash tech Stuff. Just go there. You'll see when I tend to stream. It's on Wednesdays and Fridays, but there's a schedule up there, so go there. You can jump into the chat room and be part of the shenanigans. What goes on when I record? 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