I don’t think it was all Catherine’s fault. Half of it was the Polymodal Product Management culture. The one Hank brought. The one that loved to say, “he/she threw me under the bus.” The 120 slide NanoDeck required by Don Layzer flew against the idea of the essential priority.
Essential.
The deck looked great for marketing. ‘Look at all the things we are thinking of.’ ‘Look at all the plans we have.’ ‘Look at how smart we are.’
When it comes to building something good, it’s debilitating.
The Layzer Team, the product managers he brought from NanoSoft Health, all lived near Hank, outside Kerry, Eastern Carolinia. They had all relocated to be near the nerve center, even though the cores of our engineering and operational teams were in Atalantis, Edenborg, and of course, Pittstown.
The Layzer Team was uber-talented. Ivy league degrees coming out of their ears, but as Polymodal was sold and then entered and emerged from bankruptcy, they were all gone. None had created a single successful product. None had gone deep enough to know enough about their customers and the business, like Rich or Noah, to be made a general manager of one of the business units. At first I wanted to write, “they were gone because they accomplished nothing,” but that’s wrong. There’s another story, underneath.
The Layzer Team had done their job and done it well. They were presented as an extraordinary product team with tremendous vision. The Layzer Team could have been an amazing product team. The ones I spoke to were insightful, but they would have been better served to live in Pittstown, Atalantis, and Edenborg, near engineering and operations.
Hank wasn’t a builder. He was a seller. He sold the story of a product team, which was actually a marketing and sales team. Their job had been complete the moment JD Morgenstern wired the money.
Walter Cramblin was our Chief Medical Information Officer. Everyone knew him as Suspenders, because he wore a pair of bright red suspenders, the color chosen because of our bright red logo. Suspenders came to me one day, “Phil Anderson told me you said your system can’t be put outside the firewall on the Internet.”
I responded, “That’s correct. We’ve been designing the system assuming a VPN.”
“Well, we’re trying to sell a deal in Nashtowne and they need it on the web.”
“I’m all for a managed service, cloud hosting. Then, we can secure one set of endpoints, but that’s not what we sell right now. The customers are responsible for hosting and we simply can’t manage or test all the different ways they might set it up.”
“I don’t care, you have to do it,” he insisted.
“What would we give up to take the time to make it work?” I asked.
“That’s not my problem.”
“Why don’t you take it up with Catherine? Get it properly prioritized?”
“You take it up with her. You need to do this.”
I wondered,
Do I?
Catherine had never made it a priority. If she had I would have worked out what needed to be done.
I thought about it some more.
It was an acceptable strategy to have 100 small fortresses instead of one big one—if you can lose a few: a war of attrition. —But this was not war. Can you imagine treating customers that way? If one of our customers was hacked, I imagined,
A courtroomI went to Erik and explained the situation. His response, “You need to figure out how to do it.”
It was one of the only times I didn’t feel supported.
I couldn’t see it, but the company was trying to increase revenues to push up the stock price. Suspenders had been brought into a sales deal, a medical information expert, demanding changes to IT security. His goal was to push revenue, deal by deal, to push a story.
Polymodal went public in 2012 and a year later, the company was sold to Alpha Equity backed by the legendary investment bank JD Morgenstern.
Going public had put Polymodal on the map, but it had been part of making people do stupid things.
Suspenders never came back to confirm I had followed orders. I hadn’t. I had gotten distracted by the 20 other higher priorities. I mentioned it to Catherine, “can you prioritize it?” but it never got prioritized. I would find out three years later, in 2016, that operations had given customers clearance to put their servers on the Internet without a virtual private network (VPN). I don’t know if Suspenders had been in on it, but I had explicitly said, “no.” Someone above me must have told them it was “ok.” Of course, Suspenders was long gone by then and Catherine too. It’s easy to justify bad decisions when you aren’t committed to being responsible for the consequences.
I’m going to repeat that.
It’s easy to justify bad decisions when you aren’t committed to being responsible for the consequences.
Erik broke the news of the sale in our monthly Development leads meeting. We had gone public the year before and JD Morgenstern was taking us private. Erik said it was a good thing. “We will have owners who are committed to investing in us, but we need to show hockey stick growth by expanding our product sales.” We thought we had the tools and talent.
I walked by the main conference room a few days later. Something was going on. Among the Polymodal nerds, Greek gods had come down from Mount Olympus, four or five of them. the shortest was 6’4,” the tallest 6’6”, perfect heights as any taller would just be awkward. Broad shoulders. Chiseled. Stone, cold competence… or something.
At my next 1:1 meeting with Erik, I asked him, “What’s going on with those guys in the conference room?”
“Those are the Alpha Equity guys.”
“Do they all look like that?”
He smirked, “They told us they all met at rowing competitions in college. They are all ivy league rowers. One of them said you have to be, to understand the mentality needed to compete and thrive.” Erik was confident and brilliant. I read his smirk as skeptical. He continued, “There is one exception, but he was a division 1 basketball player, so…” he shrugged.
Hank left as part of the buyout. The rumor was he collected a $10 million bonus. The Layzer Team began to show up in Pittstown. Without Hank anchoring them in Eastern Carolinia they suddenly had to find where the real decisions were being made, the real work being done. A small round of layoffs came. Erik protected engineering, so we didn’t see them. Then, a change in the health plan, raised the deductible, reduced service, caused deep unrest. Travel was frozen. Alpha Equity was…
We were called to an all hands meeting for the Pittstown staff about 6 months after the take over.
I had never had a corporate boss before Erik. He defied the stereotypes I had seen in movies. He was forthright. His attitude seemed to be, ‘the truth is going to come out in the end anyway, so you might as well speak it.’
Erik stood up, “We have some news, but we want you all to hear it and make sure you understand how important you all are to the future of Polymodal.” He swallowed and continued, “As you know we were purchased by Alpha Equity six months ago. Now, it has become clear, the financing done by Alpha Equity took on too much debt.”
Erik would go on to say the word “debt,” 30 times.
He concluded, “Again, Polymodal is fundamentally sound. The only thing that is a problem is the debt financing.”
“Will there be layoffs?” came from the audience.
“We don’t know, but you are all important to the future of Polymodal.”
“Will there be further cuts in healthcare?”
“We don’t know, but you are all important to the future of Polymodal.”
“What about the owners?”
“They lost everything.”
People were afraid.
I sat with Erik shortly after the announcement of the bankruptcy and asked, “What happened?”
He pursed his lips, looking away for a moment in consideration, “They paid twice as much as the company was worth. They needed revenue to be a hockey stick to pay the interest on the debt. Only our best projections made it all work.”
“You mention we have too much debt. What do you mean by ‘we?’ They bought the company.”
“Yes, but the way the Private Equity structures it, Polymodal owns the debt they took out to buy it.”
“Oh. Shit.”
It’s absolute magic.
The way it works for me and you, if you don’t pay the loan on your house, the bank will take it. If you don’t have homeowners insurance and the house burns down, you still have to pay off the loan. I just don’t get it: if your whole strategy involves walking away from businesses that don’t work, why would anyone loan you the money?
So, the thing about stone, cold competence—it wasn’t in the operation and growth of a high tech healthcare firm. The competence was in hedging against your own incompetence in the operation and growth of a high tech healthcare firm.
Don’t feel sorry for the rowers. It wasn’t their money.
“How come they didn’t see it?” I asked.
“They should have. It’s obvious that Desktop Dialect and Radiology could never sell the amount they needed to cover the debt. Neither could Catalogic. We needed to double revenue from 100 million to 200. I think that happens in 3 to 5 years, but not 1.”
It put the rumor of Hank’s $10 Million payout in a different perspective.
All the executives, including Erik, Alex, and Roger made money off the sale. I wondered how obvious it actually was. If it had been obvious, then people had ignored it.
In bankruptcy, the banks who had loaned Alpha Equity the money became our new owners. I never met them, but I heard they were unhappy losing half their investment.
The Layzer Team, Hank’s ace product team who had built nothing of note in 3 years, made themselves scarce. As a transition team took over, the Layzer Team could see they were not part of the group Erik had talked about when he said, “you are important to the future of Polymodal.” They left, one by one.
The rest of us, we suffered; responsibility for the consequences.
Catherine was on the front lines of the bankruptcy. She had to call customers, something she was very good at, and explain what the bankruptcy meant. She had to try to convince the customers to stick with us. A shitty job.
I give her hypothetical credit here, but realize now, I need to take it away. There are those people who bring positive or at least “can-do” attitudes to shitty jobs: Phil, Daniel, Finn, Cal; not Catherine Jay. The bankruptcy is where she and Dr. Patel and whoever else hatched and executed her exit.
She was indeed playing chess, when the rest of us were committing to getting things right over the next 3 years.
What I can see looking back now, the air was toxic.
Daniel, Catherine, and I were all owed about 1/4 of the total Poetic Systems money before the bankruptcy. The bankruptcy took all of it and wiped it out.
Many employees had incentive money on the table, all of it lost.
Again, it put Hank’s payout in a new light.
And it made things even more toxic.
Catherine, Daniel, and I retained a bankruptcy attorney from New York City to help negotiate with the Polymodal bankruptcy attorney. We would have gotten nothing, except for Alex and Erik.
Alex and Erik, knowing that the future of the company depended on the employees staying around and being happy and productive fought for us. They made the case, ‘if you don’t make everyone whole, you risk the half billion dollars you still have.’ The case was there. The company could double in value. It was just going to take a few years.
The Polymodal bankruptcy attorney came back with an offer to make us whole, to get all the money that was left to be paid out, a half million, each. The biggest change was that instead of getting our final payment in December, we would be paid out quarterly over the next three years. It sucked, but I don’t see how to be negative about it. Everyone was suffering. Most of the others didn’t have such a big reason to stick around.
Another detail, we would also get paid out if we were laid off, but not if we quit or were fired for cause.
I followed Erik’s lead. I could see there was still value for the employees. I made a case. I was positive.
For years, I had become well practiced at it. I had been Catherine’s foil.
When she complained, “The customer is an idiot.”
I would soften it by saying, “That part of the interface is confusing, even for me.”
Or, when she said, “That guy is a fucking asshole.”
I would fill in some context, “He’s direct because he’s just got a lot on his plate right now.”
I did it for her too. Charles was right. At some point it had become enablement.
In the bankruptcy, she said things like, “This is a shitshow.”
It was. When Eli asked me what I thought I responded, “The problem isn’t that there’s not a bright future. We have great people, tech, and vision. The problem is debt, which the bankruptcy will fix. The company knows how important we are to its future. Hank and JD Morgenstern really made things tough on us, but the new owners have taken care of everyone and seem to have the right idea in mind.”
I can see how it might be annoying, but we were there, still collecting paychecks. We still had customers who were relying on us. Exposure to Catherine’s venom made me quiet. I was afraid of the effect on the rest of the team. I didn’t want the rest of the team to fear her or to fear I wouldn’t stand up for them if it came to that.
The mood outside the radiology engineering team’s area was melancholy and defeated.
The attitude wasn’t what you’d expect from being thrown under a bus. We had been thrown under a train. —But all metaphors break down. We were alive. Mostly unscathed, except for the shame of being labeled “bankrupt.”
Our competitors used it against us and that further soured the mood. When we lost a competitive sale because of the bankruptcy, the news rippled back. From sales to product. From product to operations and engineering.
Our sales lead Mick held on, hoping he could wait out the bankruptcy.
Noah couldn’t sell anything.
Barbara had to talk customers out of leaving us.
Engineering and Operations began losing people. Catherine had called it, “rats leaving a sinking ship.”
The year was a lost year.
A little aside:
I wondered where did the rest of the money go, the other half billion, minus Hank’s 2%?
As it was explained to me…
Before the Polymodal that I was a part of, Polymodal had been many separate companies. I’ve looked back to understand what these were.
I searched: “Questar 2004,” and asked NanoLLM, “Tell me about Questar ownership from 2004-2020. Please provide references.”
I found articles about Questar being delisted from the stock exchange for not filing proper financial paperwork. Customers began a class action lawsuit for fraudulent billing. —The company we were part of had been part of a giant fraud ten years before. I knew some of the people who had been at Questar during those times. They were good people. They were the ones who hadn’t left in the aftermath, the ones who had been shocked at the fraud. Questar’s major investor sold their stake in the company a few years later to Flushing Capital.
Questar appears to have stayed afloat by constant acquisition of smaller companies, funded by their new parent Flushing Capital. By buying other companies, you could show constant revenue growth, which would allow you to keep borrowing more money to buy more companies. There would come a time when there was no one to buy. That was the writing on the wall in 2011. They needed to change strategy.
Polymodal itself had been a great, growing company in 2011. When I talked to people about pre-merger Polymodal, most were positive. But, when we met with Alex and Erik and Roger, the story was always, “if we don’t grow, we will not survive.”
So, the company that had run out of companies to buy merged with a company that was afraid it needed to grow. It just so happened that one company had the technology and vision to make all of the purchased companies more efficient.
It was in this narrative that Poetic Systems was purchased.
Behind the scenes, Flushing Capital was running the show. They took the company public, marketed a story, and sold it to 6’4” Adonis, Apollo, and David, the marbled and gilded gods, the brilliant JD Morgenstern bankers. Ivy League rowers who could understand the pressure that mortals couldn’t. They were betting, not managing, leading, or building. They lost their bet and it was the company that suffered. It was a game to them. A race. They’ll have another next week. They might win, they might lose, but it’s difficult for me to say they haven’t rigged it so they never lose.
When you lose money, make sure someone else shares or pays it all. When you win money, take it all, and tip the dealer if it makes you look good.
I don’t subscribe to this for a minute. There are a thousand stories like Polymodal’s and each one hurts the reputation of capitalism. “It’s just capitalism.” —But it isn’t.
Flushing Capital was indicted by the Justice Department the year after they sold us, on insider trading charges. They settled and paid a $2 Billion dollar fine and agreed to close shop. Their lead partner took $15 Billion into retirement.
That same lead partner was responsible for hiring Hank. That same lead partner could have encouraged building as much as storytelling. The two go hand in hand. Instead, Hank and Don Layzer and the Layzer Team, firmly established a culture where the people running the products needed to watch behind them when standing at a corner. Better to be the one shoving than be the one shoved.
When I see someone standing on a curb, unaware, my urge has always been to watch and observe to make sure they were aware of any buses; to intervene if there is danger always an urge to pull them back—otherwise to let life unfold.
I always thought a better world could be built and the bankruptcy didn’t change that. I wasn’t the only one.