Yggdrasil, the Back Story Part 3 – The Theta Digital Years
So a year or so later, the marketeer I had originally approached, Neil, had once again become available from the Tube CD Player Company and gave me a call – I was thrilled! He was the kind of a guy that could get away (in the days before internet and email) a phone campaign to put our product in every dealer in the country that mattered.
You see, back in those days, it was a different world. There was no acceptable infrastructure to launch a direct sales audio company. The systems were more fiddly (think turntable), larger (think big listening room - not surrounding a computer), and far more expensive in 1980's dollars. Also, a dealer served up necessary functions in an era when there were no bloggers. The only data available on audio were in the magazines. There was no convenient way for the ordinary user to contribute opinion except by hanging out at dealers, a few clubs/users groups, and inviting each other over for the equivalent of what has now become mini-meets. Also, since the users were then as odd as they are today (look around you at any meet), the dealer provided not just the heavy lifting in terms of turntable setup and system install, but also functioned as the therapist/counselor, albeit with biases according to which lines he carried. Even though the very presence of dealers nearly doubled the prices, they were a very necessary component of sales at the time.
My duties then were are they are today: produce and design a line of digital products with proper familial integration. If I were to design the aesthetics, the products would have been as ugly as the original Theta Electronics products so then Neil (and today Jason) made them suitably aesthetic.
But before we built anything, we had to name the company, so Neil suggested that we call it Theta Digital to link my earlier company to the new one. That was simple. Then was the agony of the first product. Neil lobbied we go from the top down in terms of products. The tricky part was to figure out how to configure the first product, difficult since there were no other D/A converter product models. Do we integrate it into a preamp with digital inputs as well as analog ones? Or do we configure it as a digital in, analog out box required to be hooked up to another preamp. Not being sure, I built both, the Theta DSPre and the Theta DSPro. The DSPro outsold the DSPre significantly, but we were committed – we had to keep both in the line. Further, the norm at the time was everybody building electronics offered both black and silver (clear anodize) finishes. So we started out with four SKUs which was needles to say, increased our cost and decreased our inventory velocity significantly. Of course, this made our products more expensive, but still far less than that of our eventual fellow DAC makers, Wadia within a year, Krell a year or so later, eventually the high end ROW (rest of the world). And so we continued, Neil relaxed, seldom leaving his house, running his phone campaign to put us together a first class dealer network at just the right pace to keep me permanently backordered – it was my job not just to design the line, but to produce the products; to run the factory/operations of the whole deal.
Along the way, I learned quite a few things. The best way to learn them is to ****** up. The first run of Theta DSPros had a 30% failure rate. I learned all about eutectic solder, rigid static procedures, and selecting good assembly houses, which Schiit still uses today. I learned about component crib deaths, the benefits burning-in my products. I learned about the tragedy of even one failure of any Theta Product and how much that really costs us. I improved our reliability to the point where we offered free FedEx two day both way shipping for repairs. (FedEx was a very big deal back then – exclusive and expensive) I learned that service needs to be instant; that it also needs to be friendly; and this was the best way to build good will. By this time we were shipping hundreds of units per month. I learned that the biggest mistake I could possibly make was to hire a manger to deal with my assemblers, tech, front office people, and inventory/shipping people. It just insulates me from the people I need the most and causes resentment all around. I put in a bonus system tied to production, reliability, and on-time shipping equal to the manager's salary and learned some more. I learned if you treat a crew like imbeciles, you get the same. If you treat them as self-supporting adults, guess what you get! They even correct problems they see and in one case, even push out those who will not pull their own weight. I learned what employees really care about – its not platitudes or company rah-rah cheerleading or screw**g turkeys or cards or Sh**ty bonuses at Christmas. It's money... What a shock. When we gave employees a multi-thousand $ Christmas bonus (a big deal 25 years ago), they will follow you anywhere, be self-policing, and require little of your remedial time. Moreover, they cared about what we were doing and were proud to be a part of it. I also learned that there was a very small percentage of customers who were abusive; they were the 2% of our users who were 98% of our trouble. They would call and have our secretaries in tears. I learned that it was far better to refund them and tell them it was on the condition they never buy anything from us again. We have to be at work a significant percentage of our lives and it should be as pleasant as possible, even with a goal of being fun. The better we do, the better the morale; all I had to do most of the time once the self-policing work force was set up was stay out of the way. Speaking of staying out of the way, Neil, who we seldom saw was marketing us into continued prosperity and never ending back orders. He was amazing!
Oh, and lest I forget, all during this time of Theta's growth there was another audio company in a neighboring building run in a much more corporate manner. In their employ was a young engineer (late twenties). He was intelligent, street smart, and nearly as irreverent as I am. He hadn't yet learned to take a look around at his audio peers and stop taking himself so seriously, but he's improving at that today. He was still trying to figure out what he wanted to do when he grew up, but then again, so am I as of now. He was a great engineer, but kept babbling about marketing. We began to hang out a lot and he was just like a blotter, sucking up every Theta experience I had. He had a sardonic sense of humor – but, before I get there, there is a back story. At Theta we worked with a recovered cocaine addict named Fred Caccione (name changed). So one day, I walked into the Theta production men's room and looked up on the wall to see a new poster: “ The Fred Caccione Cocaine Weight Loss Program “ then something about white powder, no fussy diets, appetite reduction, and send $50,000 for your first ninety days supply. I laughed my ass off, and Fred thought it was just as funny as I did. By the way, if you haven't figured it out, that engineer was none other than Jason Stoddard. This was the first of a series of posters from my current Schiit co-founder. He was starting to loosen up!
There were some good times there. We were like a big family, with enough dysfunction to make it terribly interesting. I had a secretary named Ann (again not the real name). She was one I had rescued from an abusive customer by firing and refunding him. She was in her early twenties, amazingly cute, and had an aura of innocence. I always followed the never schiit where you eat rule and as a result was always well trusted by my female staff.
One day she walked into my office, closed the door, and said to me very seriously, “I have to show this to somebody". She then began to unfasten her pants. My eyes were enlarging as she turned around and revealed a bare rear end so perfect that DaVinci himself could not have done it justice. There was a still healing tattoo of a rose on her upper right ass-cheek. Turning around, she asked me what I thought. I told her that the tattoo was beautiful. Relieved, she pulled her pants back up and thanked me. I could tell she really meant it.
So one day Jason comes over to my house for a batch of Mike's famous margaritas - he mentions that Theta, (which now was a multi-million company with three lines of DACs, and a couple lines of transports, as well as accessories) needed a cheaper series of DACs. He already has a name (Cobalt), an industrial design, and a price. Even though we were probably drunk (we only got drunk once – it just lasted about ten or twenty years), we worked the electronic design out quick even with jitter reduction to fit the projected $600 price. ( $360 direct equivalent) The outcome was that Theta sold not thousands but tens of thousands of those. Lots of money. He was really right.
Even in my mid 40's, I still had the idealistic high-end attitude, kick all of the other high end pretentious ******* companies selling Jewel-encrusted over-machined arbitrary-industro neoart angular looking waaaaaay overpriced crap. I was all about making high performing products with money sunk into performance, not sculpture. Further, in the early 1990's the DAC chip technology had peaked with the PCM63, IMHO the best fu***n audio branded DAC ever made. The new marketing direction was delta sigma DACs, which I have flamed many times before, as being bit non-perfect, full of bad math and noise glare, etc. These were proliferating, with cookbook spec sheets and reference designs published so that even non-engineers could design them. This meant that anyone could build a DAC, and with the fall in prices on the new “audio branded, sh**ty sounding parts, that everybody and his brother were coming out with me-too DACs with no value other than cheapest. Even big audio corporations that never had built digital products were hiring dish washers and landfill workers to design DACs. What was worse was all of the good DACs were disappearing. Even the new multibit PCM1704 DAC sounded like ass compared to the PCM63. It was time to get out of the DAC business. So I sold my portion of Theta to Neil. I decided once again what to do when I grew up – only to set myself down the most excruciating path I had traveled since Viet Nam ---