eFactor: A Lesson in Leadership

Michael Shur

The mid-1990s were the Gold Rush days of Web technology. Thousands of people—many of
them young and inexperienced—were transformed overnight into millionaires, as the promising
new technology of the Worldwide Web was repositioned from an academic tool-for use by
scientists and researchers—to a commercial medium, full of hope and unrealized potential.

For many, acquiring the baseline skills to jump on the bandwagon and stake out a fortune was a
temptation difficult to resist. The Web seemed to offer everything that traditional business didn’t,
especially to those of us who had for so may years resisted the constraints that traditional
business demanded. Suddenly available was the promise of freedom and riches, plus a rarefied
knowledge, jealously guarded amongst a small class of self-professed elite. With a good idea and
a minimal amount of technical expertise, dreams could come true.

My wife Syd and I began designing and building Web communications for businesses in San
Francisco in 1996. Occasionally we would enlist the services of some of our friends, and by 1998
we had enough modest successes under our belts that we felt ready to branch out.

Though the work was interesting, our ultimate goal was not to revel in the joy the work may
have offered, but rather to get rich and cash out. We were proud of our burgeoning expertise and
our product, but they were a means to an end. Looking around, this mindset was not at all
unusual, but rather, endemic to this new media industry. The Holy Grail was the revered IPO, or
initial public offering; the phase where a startup company attracts enough prominence to capture
venture capital investment, go public, sell stock, and ultimately, trade ownership for a golden
parachute.

Syd and I flew to Amsterdam in the summer of 1999, specifically for a single meeting with a
mysterious businessman named Terry Bayer. This meeting had been arranged by a mutual
contact whose specialty was relocating businesses to the Netherlands. We had been informed by
her that Terry was planning to start up a dotcom, and she assured us that we definitely had
something to offer one another.

For Syd and me, the possibility of founding a startup and raising our daughter in Amsterdam was
the gateway to a larger, unformed dream; namely, living in Europe as free and unfettered
expatriates. We had wanted to expatriate for many years, and though Holland wasn’t our first
choice, it would suffice as a step in the right direction. Looking back, I wonder if it even
mattered to either of us what Terry Bayer might have proposed; if the plan seemed even remotely
promising, we were interested.

The fledgling Web industry was full of hipsters and hype, so meeting Terry Bayer was a pleasant
surprise. He was certainly not hip at all, and we liked one other immediately. He was relaxed,
and possessed a quiet confidence. As we sat at an outdoor café, overlooking the Amstel River, he
nursed a cup of black coffee and spoke matter-of-factly about high-level business contacts and
investments in the millions and even billions of dollars.

Bayer didn’t know exactly what we did, and we didn’t know exactly what he did; yet no one
cared. He had a vision, and an angel investor, and he needed warm bodies to populate his startup.
To us he was our own angel that might perhaps deliver us our dreams. There on an Amsterdam
terrace, in the slanted rays of early summer, Bayer mused that it might make sense for Syd and I
to take on the role of eFactor’s corporate communications department. We squeezed hands under
the table, trying not to look overly excited, and felt briefly that dreams actually do come true.

The next day we met at an empty building that overlooked a canal, in a part of town that would
later become home to eFactor, as well as many other multimedia startups. The building was
charming, dusty, and nearly empty, except for a half-broken grand piano. The three of
us—Terry, Syd, and I— sat on the broad windowsill in the front bay window, each lost in our
own dreams, as our toddler daughter Phoebe ran gleefully back and forth across the large
echoing rooms. Within an hour, the deal was set, and the only thing left for us to do was to go
back to San Francisco, close out our life of eighteen years, and wait for Terry’s instructions.

When we arrived back in Holland a few months later, it still seemed like a dream; the
opportunity, the money, and the international team, all converged in time and space on the port
bank of Amsterdam’s Prince’s Canal. Like reality show contestants, wave after wave of new
employees arrived from around the world, prepared to reap the grand prize, and concealing in
their hearts that they had absolutely no clue what they were there to actually do.

Much later I recalled Terry momentarily perplexing me during that first meeting by questioning
what our exit strategy was. In my naiveté, I thought he was asking about our plans to exit San
Francisco. Yet in retrospect I realized Terry was already planning for the failure of the business
he was about to start. At the time, I didn’t know that, positioned properly, even spectacular
failure can be lucrative. Clarity of this depth often arrives too late.

But failure hadn’t happened yet, and it wasn’t even a remote possibility. In the beginning it was
hard to believe the magnitude of the overall venture. There were highly designed billboards
advertising our project in every neighborhood of Amsterdam. Old cobblestone streets all over
town were being torn up so that fiber optic cable could be laid all the way from Austria to
Denmark, as the infrastructure for our product.

The salaries and perks were impressive by American standards, but actually obscene by the
modest standard of the Dutch. These sums of money and feeling of omnipotence they
encouraged were the first cracks in the foundation, and laid the groundwork for the first
leadership failure, for the organization known as eFactor existed solely for the money, the
prestige, and the power of high-tech. This bred what John Bradshaw would call a state of
mystification, or a belief that our value was derived from others’ opinions, not from who we
were as people (as cited in Richards, 1995, p.40). The entire organization reflected this state of
mystification, and approached the work with an attitude that the work itself was—at best—an
annoying necessity that must eventually lead to self-actualization. The rewards we sought were
purely extrinsic (Richards, 1995).

Employees represented a sort of currency whose value was defined, not by the work performed,
but by the compensation package negotiated. Aside from the rifts this caused between the foreign
expatriates, this inequity poisoned the well, as it positioned eFactor’s Dutch employees as
second-class citizens, as they had negotiated typically modest Dutch wages. The effect of that
divide further eroded the unity that might have grown between hosts and guests, and fueled an
animosity that grew over time. The great leader Mahatma Gandhi could have easily predicted
this outcome, for he structured his life around the understanding that attachments to power and
wealth serve only to reduce the standard of leadership (Nair, 38).

A handful of eFactor employees were well known in the industry and those that weren’t inflated
their résumés. Director titles were handed out irrespective of merit. Adding to this injustice was
the fact that most of the directors no leadership skills, so they fought with one another about
what the company’s goals and vision should be.

There were emergent models of management during this era that presumed to flatten hierarchies.
The reasoning was that command and control should not come from the top of an organization,
but rather all individuals within should lead. Richards, O’Toole, and Nair would certainly agree
with this notion in principle, but all three authors stress that a shared vision must exist for such a
structure to be effective. According to Nair, it is the responsibility of the leader to tap into the
transcendent values of the group (Nair, 1994). Disseminating and nurturing a shared vision—and
indeed making it the followers’ own—is the prime responsibility of a leader, and represented the
second leadership failure at eFactor.

Bayer came and went quietly. When he was in Amsterdam, tensions would subside, but the
moment he left, tempers would flare again. If Bayer’ vision was understood, it was certainly not
evident, for competing realities took on lives of their own. n one floor a group of people worked
on a project, while on the next floor a separate group busied themselves with an entirely different
approach to the same project. There was no collaboration, no coordination, or even conscious
awareness between the two; in fact there was open hostility. Inefficiencies like this might be
expected at a large company, but eFactor never comprised more than about 40 employees. The
distance between groups of people who were not on speaking terms with each other was at most
a few feet, so why was there such animosity, and why were there such differing visions?

We built walls, mental and physical, and those walls served to isolate ourselves from one
another. Worse though, we separated ourselves from ourselves, and this bred disunity. Richards
would find this partitioning of the self to be a sad step in the opposite direction he recommends,
for he contends that only by bringing our entire humanity into our work can we rise to true
artistry and become the people we were meant to be (Richards, 1995).

At eFactor, opportunities to learn and grow were in direct contradiction to a bunker mentality
that evolved for no good reason. The net result of this dynamic was that vast potentials of
mental, spiritual, and emotional energies were squandered. Gandhi taught that the path to
successful change is through unity (Nair, 1994). I shudder to think how he would have viewed
our organization.

Terry Bayer had a vision, and he was brilliantly articulate, yet I never understood his vision, and
I wonder if anyone at eFactor truly did. Not understanding him felt to me like a personal
deficit—a sort of secret shame. I assumed that everyone else understood, and that perhaps they
were smarter or savvier. Our industry was built upon vapors of arcane knowledge, and this
implies secrecy, which Gandhi would have excoriated as anathema to building a unified force for
positive change. Applying his principles, specifically his insistence on transparency (Nair, 1994),
one can only conclude that Bayer, as leader, was remiss in his duty of ensuring that his followers
shared his vision.

The dysfunction at eFactor seems almost epic in narrative, however somehow the company rose
again and again like a shark, dominating and devouring the competition. Its reputation grew in
inverse relation to its actual productivity. As a culmination, eFactor began to close in on the
cherished goal of receiving venture capital blessing. Not surprisingly this too led to infighting
over who would get what. This bitter attachment to the distribution of stock summons once again
the clear teachings of Gandhi, and his lifelong renouncement of material wealth. In this case it is
rendered almost laughable due to its illusory nature, for the stock was never to materialize:
eFactor’s IPO was about to collide head-on with a much greater disaster. In Fall of 2000, the tech
bubble burst.

Reading about the factors that led to the massive devaluation of tech stocks in those first months
of the 21st century, one is struck by the idea that many of the very same failures of leadership
that plagued our small company were rampant on a macro scale across the entire sector. Both
within our company and in our rapidly changing world, the leadership principles that brought
about a loss of livelihood for millions of people represent the very opposite of the values-based
leadership and artistry in work outlined by Dick Richards, James O’Toole, Keshavan Nair, and
others.

So far, this narrative has focused on the culture at eFactor, and Terry Bayer’ inability or
unwillingness to lead. However there is another perspective that must be examined, and that is
the morals and values of the individual staff. It is entirely plausible that Bayer was unable to lead
simply because he reflected the morals and values of his followers, and those morals and values
were rotten at the core. This raises the question, what should a leader do when faced with such
moral ruin? Since neither giving up nor failing are acceptable qualities of leadership, we must
examine the leadership traits of great leaders in the hope that we might learn how to withstand
such pressure.

Again we cite Gandhi and his ability to withstand an entirely corrupt British Empire. He began
with the commitment to the ideal that he could not live a dual standard, so he teaches that we
must be the same in all aspect of our lives (Nair, 1994). This integration of the self is what
Richards calls centering, or bringing one’s entire being to every situation (Richards, 1995), and it
unleashes great stores of power; notably the ability to withstand immoral forces. Contrasting this,
we see Bayer’ organization actually striving toward an inauthenticity that discouraged expression
of the whole self, and encouraged pursuit of a value bestowed by wealth and power.

Bayer built an invisible wall around himself, and although he did not appear aggressive, he
somehow made it clear that there were non-negotiable constraints to the interaction that he would
allow. Contrast this again with Gandhi who not only lived among the people he led, but freely
encouraged them to come to him at all hours (Nair, 1994).

Gandhi would have seen this type of exclusion for what it really was: a way to foster secrecy. He
required absolute transparency as one of his criteria for advancement (Nair, 1994), and the
important functional difference is the willingness to freely offer the self in service rather than
hold it apart from one’s followers. In the final analysis, this is the key that defines great
leadership. It is simple, difficult, and rare.

In our own American history, we see Abraham Lincoln similarly striving to eradicate secrecy
and exclusion. He possessed a sense of self, strong enough that he didn’t fear surrounding
himself with a cabinet of officials who violently disagreed with him on crucial issues (Kearns
Goodwin, 2005). He encouraged dissent, not only among his peers, but also welcomed an almost
constant stream of everyday citizens into the White House to air their grievances and offer
opinions (O’Toole, 1995).

This quality of leadership is simply unheard of today, and in its place is a much more imperious
style that marginalizes opposing views and discourages free expression. O’Toole rightly
concludes that this autocratic approach serves to weaken the leader rather than make him
stronger, and cites as but one example a NASA study that showed that even in an emergency
situations, when time is of the essence and there hardly seems time to consult differing
viewpoints, that doing so inevitably leads to better decision-making (O’Toole, 1995).

Nair takes this even further, and speaks about moral decision making, acknowledging that the
temptation to make command and control decisions is always present, due to the high-pressure
environment within which we must operate. He makes no claim that it is easy, but rather that it is
an outcome of what he calls a “quality of spirit”, or one might say an intestinal fortitude that
does not permit the leader to succumb to the pressures of the moment (Nair, 1994).

It is here that Nair tells us that Mahatma is not a name like Bob, or Bill, or Joe, but rather a
Sanskrit word, meaning “Great Spirit.” (Nair, 1994). Of all the pressures one must learn to
withstand, it is the pressure of immorality, which others may foist upon us. To be able to
withstand this pressure is characteristic of great spirit, and even if we were never to lead anyone
but ourselves, it is a standard well worth aspiring to.

Great leadership is rare, and yet such a statement is both simplistic, and misleading. It certainly
has a ring of truth to it, and as evidence, one would only have to cite the abundance of
organizations run aground by leaders oppositional to the principles of values-based leadership.
Working in of one of these organizations, one imbibes the toxic effects. Characterizing great
leadership as rare, however, risks implying that certain concrete qualities are ethereal. Like a
precious gem, they can only be found by chance, and there is a finite store in the world. This
fatalism undermines our potential, and must be remedied through the study of transcendent
leaders such as Gandhi, Lincoln, and others.

In closing our study of eFactor and its failure of leadership, it is important to note that the
criticisms leveled here are not meant to heap blame on Terry Bayer, or any individual at eFactor.
Every one of us at the company was equally guilty of poor leadership, and we fomented a
process that could only lead to our demise.

That we reflected the values of an entire industry may help explain the eventual bursting of the
entire technology bubble, and to the extent that this sector existed within a global business
environment that daily grows further from the ideals of values-based leadership, begins to
explain the deteriorating economic picture for our society. Studies such as this are not meant to
place blame, but rather to try to understand and elevate the leadership of our entire world. Each
one of us has great ability to affect a positive outcome. Gandhi shows this again and again, as
does Lincoln; modest, moral and powerful leaders who changed the course of history for the
better, without sacrificing their souls.

As a postscript, a story: I recently traveled to Michigan on family business, and found myself in
a small town motel, run by a middle-aged Indian man. I was waiting in the front office for my
taxi at about 5:00 AM, and there was no one there but the two of us, so I struck up a
conversation. He told me he was from India, so I dug around in my satchel and pulled out A
Higher Standard of Leadership by Nair. I showed him the cover, which shows only Gandhi’s
eyes, and said, “Recognize those eyes?”

He became very emotional and cried out, “Mahatma Gandhi!” Then he excitedly began to tell me
about his life; that he had attended school at a school founded by Gandhi, that his father had been
a freedom fighter in India, and that Gandhi had once passed through his village. He told of
Gandhi taking a pinch of salt from his bag and dropping it on the earth in a ritual of symbolism
that would unite an entire nation.

Perhaps it was the hour, the lack of sleep, or the travel, but as he told the story, I felt myself
deeply moved by the personal relationship this man clearly felt with someone whom he had
never met. I understood in a flash that Gandhi’s great leadership came from a personal bond he
had managed to forge with millions and millions of followers. It was an essence, a quality, or a
spirit that can truly only be summed up in the word “Mahatma”.

This was a powerful moment for me. It was a validation that great leaders can exist, that change
is indeed possible, and that the positive effects of true values-based leadership ripple onward
thorough time and space, long after the leaders themselves are gone. I am certain that Terry
Bayer’ leadership at eFactor will not live on to inspire future generations of seekers, but at that
moment I understood that if our spirits and our principles are strong, some of us may go on to
lead great, abiding, and necessary change in a world which desperately needs it.