Tom Shen — Entrepreneurship Is in the Heart
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Tom Shen came to the U.S. at 14, dropped out of college, learned to hack code, and started a company “really by accident” at 25. That company, Software Dynamics (SDI), had 1,200 banks worldwide on its software by the time it sold, and Tom has had three exits as an operator and six more as a board member and early-stage investor. Joining Mash is Bob Ashley — Mash’s father, and Tom’s friend and former tennis partner — who spent 23 years at SDI. Together they get into what Tom calls the heart of an entrepreneur: humility, a culture richer than the founder, EQ in the age of AI, and why delighted customers beat happy ones.
This conversation has been edited and condensed.
“When you’re the dumbest guy in the room, you win”
Introduce yourselves. Tom, who are you?
Tom: Immigrant — came to this country when I was 14. College dropout. Bob’s Big Boy cook, then manager. Learned how to hack code. Worked for a couple of companies that happened to be in financial services, and started my own company really by accident at 25. I didn’t know what a business thesis was. But I was able to surround myself with brilliant people who carried me across the finish line. I’m blessed to have three exits as an operator and six others as a board member or early-stage investor. I sold my last company in 2018. Today I sit on three fintech boards, do some early-stage investing, work with some private equity companies, and play a lot of bad golf.
And Pop — what role do you play in this tiny little adventure?
Bob: I play a tiny role. My name’s Bob Ashley. I’m here with two important people in my life: my son, and my boss, friend, pal and former tennis partner of about 20 years. I’m a tech guy who does software, and fortunately I fell in with the right group and got to work with three significant fintech companies. What a blessing it’s been.
Tom, a lot of the university students I work with think, “My buddy in engineering can do it, my friend in marketing can do it, let’s build a startup.” What does surrounding yourself with great people really mean?
Tom: Much of what I’m going to share is retrospective. If you’d interviewed me 20 years ago, I might have said something different. But it is my personal opinion that one trait is most important to being an entrepreneur. It’s a word that’s not often used in our community today, and probably thought poorly of, actually. That word is humility.
I believe the heart of an entrepreneur starts with humbleness, for something very simple and quite selfish: when you’re the dumbest guy in the room, you win, because you learn the most. Some of us are born with it; some of us have to work at it. Humility helps you listen, and if you listen, you have a chance to learn something. The way I practice that: don’t always be the first to speak. Take notes. Walk away from every meeting having learned one thing. I had an old boss who said everybody’s got an answer — some people have two or three. But questions are the key. Learn to ask the right question, and then you learn.
When you have a heart of humility, you have a chance to attract top talent, because top talent wants to work with people who are willing to listen and take action. Attracting talent requires vision casting: having a vision and being able to articulate it. Retaining talent requires building a great culture. People want to stay.
A lot of founders tell me they feel like, to lead, they have to show they’re super smart. That’s almost the opposite.
Tom: It’s the idea that the first shall be last. You win by losing. We fail into success. Successful entrepreneurs often start their story with a big failure. It’s whether you learn from it, and whether you learn the right thing.
A culture richer than the founder
Growing up, Pop used to say, “How can you be humble when you’re as great as I am?” That’s his sense of humor. But at some point you hired him. Why did you put a bet on him?
Tom: Very simple. Bob came with a very strong background in the product set we were building. He’d spent several years building a proprietary system that was very similar to ours from a function and feature perspective; we were building an open system. The first thing that impressed me was his can-do spirit. This can be done. I won’t be defeated. We will reach the finish line.
The second piece was culture. People often think a company has a culture and you bring in people to fit it. That’s not true. You build a culture modeled after the founder, but every person you bring in should add to it and make it richer. The culture needs to be better and richer than the founder. Because if it isn’t, what happens when the founder makes a mistake? The whole company goes down. You need people alongside who can say, “Hey, look, brother, I know you really believe that, but let me show you why that’s wrong.”
Bob is the kind of person who will speak his mind plainly but kindly, in a way that’s easy to accept. I realized he would not only fit the culture but enrich it. And I hate to say this, but I was right. Bob stayed 23 years. I founded the company and was there a hair less than 20. We sold it in 2001, and Bob stayed on and led part of the development team on a product that lived on for another 10 to 15 years.
Bob: I’m still doing consulting on that product.
Tom: To this day — 25 years later. An unbelievable legacy, all because of character that led to a foundationally good product.
Bob: Part of the culture was that everybody who was going to work for the company, from the bottom to the top, got interviewed by Tom. There were technical people who couldn’t grasp that he wasn’t asking, “Can you code this?” Instead he’d say, “Let’s say we hire you, and you go along for a few years. What do you really want to do?” For a few people it was, “He’s not asking me a technical question. I don’t know what to say.” But there was always something about going to your heart.
Pop, when did you know you were the right fit?
Bob: I had been laid off, and I’d never been laid off before. Three days in, nobody had called me to interview. Then an employee at SDI I knew from a previous company called me, and I went in and talked to Tom right away. A normal interview is maybe 20 minutes, half an hour. I was in Tom’s office for about four hours. But the thing that sealed it: I looked up, and there was a psalm hung on the wall. And I said, “Lord, that’s it. I know I’m supposed to be here.”
The right people in the right seats
Not everyone who joins a startup needs to be the founder, the visionary. There are huge strengths in understanding the role you play. Tom, did you purposefully put those pieces of the jigsaw puzzle together?
Tom: In the beginning, I did not, because I didn’t understand what I was doing. But looking back, that piece of it was somehow in my DNA. Even as a little boy playing G.I. Joe with the neighborhood kids, I’d ask: Can Tom Shen be a good number two as well? If I thought another boy was the most talented of the four, I’d be his number two, and we’d win. It’s okay.
SDI was a basketball company. We played four days out of five, 12 to 1, in a community gym at Chatsworth Park, and my executive assistant’s job was to get us an even number. Years later she told me, “Man, that was hard. I had to call somebody at their desk and say, ‘I know you’ve got a big project, but Tom’s short one and you’ve got to play today.’”
Our head of sales, Nick, was in many ways a great mentor for me — so many things I do and say, I learned from him. I gave him a percentage of the company, and the exit set him up for life. He was a big boy, a linebacker from Harvard. One day on the ride back to the office, a disgruntled player said, “Damn, that Tom sets up the team every day so he always wins.” Nick turned around, stared at the fella and said, “You know how hard it is to set up the team to always win 11 to 9?” Everybody in the car roared.
All kidding aside, that’s team building. Get the right people on the bus — but more importantly, get them in the right seats. So many times we’ve had teammates who were really good at one thing but wanted to be another. If you can’t convince them this is their greatest contribution to the team, they should move on, and you should help them move on. We sit them down, talk them through it, take care of them financially and set them up. To this day I’m dear friends with many of them, because they went to the next place and were hugely successful.
EQ, IQ and the heart check
Can you explain what EQ and IQ mean, and how you look at them?
Tom: IQ, for me, is intellectual firepower: the ability to comprehend something very quickly, understand it fully, and abstract additional thoughts from it. With artificial intelligence moving at light speed, that lessens the importance of IQ — maybe listeners will disagree — because you can find out almost anything you don’t know very, very quickly.
EQ is first of all the ability to manage your own emotions. People think of it as reading the room. But as a wise man once said, before you can walk a mile in someone else’s shoes, you’ve got to take off your own. Your own emotions color the entire room. Filter that out, and you can get closer to the truth of the emotions of the people around the table. In entrepreneurship, where your most valuable assets are most often your people, your ability to communicate, to motivate, to create a culture and some loyalty to the cause of the company requires EQ.
People are going to say AI will create peopleless companies. Does EQ still matter?
Tom: If solopreneurs can create value by themselves without a lot of teammates, EQ would become less important. But I suspect that even then, a solopreneur would be involved in sales activities that require interaction with another human being. So I would tend to think strong EQ would be even more important.
Is there anything somebody with lots of IQ but not a lot of EQ can do to develop it?
Tom: One thing the tech industry has done a good job with is real-time mentorship — pairing an entrepreneur with a more seasoned leader. I’ve seen that work. Often a framework helps, too. When I’m challenged with something, I try to develop a way of thinking, put it in a grid, and sift things through it. Because the greatest deception in life is self-deception.
So I tell entrepreneurs: on something important, spend the time to think it through and write it down on a piece of paper. Every morning before you go to work, read it and understand what’s most important to you. It can change — environments change, people change — but it’s a conscious effort to scratch that thing out and write something else below it. When I work with leaders on a transaction, we write down what’s most important — maximizing wealth, the good of the people, the good of the customers — because halfway through, you’ll find you’ve wandered very far from the original piece of paper.
“When you’re the dumbest guy in the room, you win because you learn the most.”
— Tom Shen · Inspiring Founders Podcast, Ep. 07
I tell people in incubators and accelerators to work with several mentors, because one person can give you bad advice that hurts you for years. And the founder needs humility to take what the mentor is trying to give. How do you deal with a founder who’s confident, passionate, has the IQ — and you want to help them, but you just can’t?
Tom: At this stage in my life, my tagline is “build into the lives of others,” like the apostle Paul building into the life of Timothy. And the single most important thing I spend the most time vetting before I invest in an individual is that heart check. The heart check is humility. If they don’t have it, I can’t help them. That doesn’t mean they won’t become wildly successful, or that somebody else can’t help them. It just means I can’t.
Bob, we had a hierarchical relationship at work — I hope it never felt that way, but on the org chart there was one. On the basketball court and the tennis court, I wasn’t the boss. I was another player, and often the less talented one. What was that like for you?
Bob: We didn’t start off being friends. We started off as people who kind of liked each other, and I respected Tom’s talents. I really wonder where the friendship blossomed — a lot of it on the basketball court, I would say. There’s character that’s shown on the basketball court. We had one player who constantly had to make a little statement — you traveled, you committed some kind of foul. One day Nick looked at him and said, “I do not want to play lawyer ball anymore,” threw the ball down, and that was that.
Bottling the magic
Was what you created at SDI an anomaly? Or is magic reproducible?
Tom: That’s a wonderful question, and we never actually talked about it. At SDI the first product didn’t work out. The second one took off, and when we sold the company 19 and a half years later, 1,200 banks worldwide used our software. My leadership style grew over those years, but never formally, because I wasn’t formally educated.
After the sale I stayed two years with the acquirer. Then I chased another dream and, not unusual in my life, I failed. In the midst of that, a very good friend asked me to help at Digital Insight, in Calabasas, which built internet banking software and was scaling very quickly. I came over as a consultant for six months, then he and the CEO asked me to join, and suddenly I had 650 people working for me.
On day two I sat in my office and thought, I don’t have a framework for how to lead these 650 people. It was horrifying. We had built SDI from zero to 250 employees, and the culture got richer and richer. So I went home and said, “I just can’t wing it. What worked?” I locked myself in a room for two days and created a framework I called GOT WOW — Great Operating Team, Way of Working. I codified the five things that were most successful in our SDI days. I tried to bottle that magic.
I introduced it to the leadership team I’d inherited at an off-site in Westlake Village, and these fellas looked at each other like, Who is this idiot? The old way’s working pretty good. They were texting each other under the table. Then I had my assistant bring in a hat with names in it. Each of them drew a name — not their own — and had to stand up and tell the rest of us what that person’s job was and how they bring value to the company. They were horrified: “That’s not our job.” Well, no, it actually is your job. By the end of the day, people came up and said, “Okay, I get it. We operate as silos. We don’t know what happens before or after, and to grow and scale, we need to.”
At dinner one leader said, quite loudly, “Tom, there are eight of us and 650 people. It’s going to take forever for these five principles to work.” I’d just happened to read Malcolm Gladwell’s The Tipping Point. I said, “Oh no. There are eight of you, and I’m asking you to become believers. If each of you gets eight others on your team to become true believers, we’ll cascade it through the company. It will become a tipping point.” And we did it. We had an incredible exit — Intuit bought it. I was Johnny-come-lately, but I played a part.
Years later I started another company, and when we were about 12 people, we hired a young lady named Amy Davis in customer support. Six months in she came to my office: “Tom, I love this company. We do everything great except one thing. Onboarding sucks.” She volunteered, on her own time, to build an onboarding program. I gave her my original GOT WOW, and she and a committee of five came back and said, “That terminology is not going to work for this generation of people we’re hiring.” So they translated the five principles into 10, in language the people we were hiring could understand. We took the original magic and morphed it again.
Is there a Tom Shen framework people can learn from?
Tom: I’ll give you a simple one. I don’t think there’s a company in the world without a line somewhere about being ethical. The problem is, there are things you need to do to be ethical. So the first principle is “ethical but disciplined,” because if you’re not disciplined, even if you want to be ethical, you can’t be. Another is presumption of good intent. Another is passion for customers — good enough is not good enough in today’s marketplace.
And for leaders, this is why EQ is so important: modeling. We show teammates what good looks like, what ethical looks like. Something very simple about being a servant leader: when I took a walk around the office, I would always ask my executive assistant if I could bring a cup of coffee back for her. She’s always getting me coffees and lunches. I can serve her as well.
And you genuinely care about her — you’re not ticking a box. For some people there’s a chasm there.
Tom: But it’s trainable.
Bob: I experienced that. I’m just a tech guy, but at times I had a group of maybe eight to 12 under me, and I would walk from office to office. Sometimes I’d bring a spray bottle to clean the guys’ screens while I checked in — how are things going, how’s the software. I think I absorbed it from what I saw. It wasn’t like I said, “Oh, Tom did this, I’m going to do this.” It was just, Well, I guess that’s how you run a team. And I have to say, I love those guys. And gals.
“Fun is sustainable”
Leave us with a couple of concrete things. Pop?
Bob: I remember one thing. At the company I worked for before SDI, in virtually the same field, the attitude was that when you go into a room to design something, there are going to be fights. You duke it out to see whose idea wins. When I interviewed with Tom, I said, “Tom, I’ve seen it done wrong, and I want to do it right.”
And I was blessed to be on a team starting from a blank piece of paper. We went into a conference room every day for probably three good solid weeks and came out with an overview of exactly the product we wanted to build. And we never had a fight in that room. I’d say, “We need to figure out how to handle this subject. Let’s talk about it.” Somebody says this, somebody says that. Then I’d say, “The way I see it, we’ve got A, B and C. I see some good advantages to each. We’re going to go with C.” And we had a tech writer in the room who wrote down the alternatives, what we chose and why. The people who championed A or B were on board, because they’d been heard. But somebody had to make a decision. Most of the time I was just learning. There were some brilliant minds in there. I love the employees. I love the product. It’s my baby.
You always cast yourself as the supporting actor, but you are so entrepreneurial — you’ve inspired me to be an entrepreneur in many ways. All right, Tom, land the plane.
Tom: We didn’t prepare; this is not scripted. But if I were to say two things, number one is fun. When I look back on my career — I’m an old fella, and I worked a lot of years — I might have really worked six months. The rest of the time I had fun. And fun is sustainable. If it’s fun, you keep doing it and keep trying to get better at it, and you can create an environment that’s fun for others. If you’re not having fun, go do something else — for your sake, for others’ sake, for your own family’s sake.
Number two strikes at the heart of everything we do, and I use this word deliberately: delight. We have a responsibility to create delighted customers, not happy customers. A happy customer is not good enough. Give them a 50% discount coupon and they’ll go to the store down the street. A delighted customer would drive 30 minutes out of the way to come see you.
We all know what delight is, because we’re all consumers ourselves. And there are three powerful things about it. If you’re delighted with a solution, you will use it. You will grab your friends, your family, people by the lapel and say, “You must use this.” And a delighted customer will pay full price. You have economic power because you’ve delighted your customer. They’re not going to come asking for a discount.
So: fun, and delight. Build a solution and an environment that’s fun and that delights customers, and you will get the right outcome. Whatever your true north is — whatever you first wrote down that you want to accomplish — you will get there.
More conversations with founders on the Inspiring Founders Podcast.