"My job as a board member is to ask questions and tell stories”
Veteran CFO and serial board member Jeff Epstein talks to Michael Matias about the importance of boiling matters down to a single key question and other insights from his 40-year career
The word retirement is often associated with a decrease in work for the retiree, but for Jeff Epstein, former CFO at Oracle and current board member at multiple prominent companies, retirement means doing more of what he loves. In his 25 years at Oracle, Epstein learned how to lead a team and delegate tasks effectively. Epstein notes that his obligations as a CFO are very different from his current responsibilities as a board member and specifically states that he now has the opportunity to ask more questions and guide executives on major decisions. In addition to being a board member, the “retired” Epstein is a professor at Stanford University, where he teaches a unique course in which students develop a startup idea and potentially begin to earn revenue. Epstein sat down for an interview with Michael Matias, the creator of 20MinuteLeaders, and told him about the wealth of knowledge he gained throughout his career and his hopes that he can continue to learn and assist the individuals he works with.
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Who are you, Jeff?
I spent 25 years working full time as a chief financial officer where every day you have people who report to you and you have a boss, a board, and quarterly earnings. That was a lot of responsibility. Now, I am retired from full-time work. So, the difference between being a board member is usually you go to the board meetings and you ask a lot of questions. You say, “Boy, hey, you have got a lot of problems. I will see you at the next board meeting.” And management are the people who have to fix the problem; we just talk about them. So, there is a lot of governance responsibility, and if occasionally you have to change to CEO or things like that, there’s a lot of work. There are certain companies like Wells Fargo and PG&E going through bankruptcy; they have a very intense experience. But if the company is doing well, then it’s a lot easier to be a board member than to oversee the day-to-day responsibility of being an executive. It’s very rewarding as well because my job is to ask questions. I love learning; I love asking questions. After 40 years, you have asked a lot of questions; you get to learn a lot.
It sounds like the questions you are asking now are not just questions, they are questions with dozens of years and a wealth of experience that you bring with you.
In my mind, there are sort of three parts to a board meeting. There’s the compliance part, the audit report, and the compensation committee. In the remainder of the time, the management is telling the board what they have been doing; I call it the “show and tell” part of it. Then there’s another part of the meeting, the third part, which is to hear about the decisions we’re thinking about but haven’t made yet. I personally find the decisions we have not yet made to be a much more valuable board meeting as opposed to the show and tell ones. In my view, it can be done in writing. Create this big presentation, send it out to the board a week in advance. We will read it all and we will ask questions if we don’t understand it, but to spend most of the board’s time just telling us what’s in the written material is, to me, not taking full advantage of the board. That’s the example of the things that I have learned over the years, which 20 years ago, I probably did not understand. I try to nudge my CEOs in that direction.
How would you describe your relationship with your CEOs? Is this a friendly relationship? Or is this more of a boss-employee relationship? What’s the intimacy like over there?
Well, it depends. If I work for the venture capital partners or private equity partners, essentially, they are appointed by their firms or the private equity firms, and maybe they hire the CEO. Companies that I have been involved in personally, because I am always an independent, the CEO meets me and personally wants to recruit me to the board. So, the CEO essentially hired me to be a board member. And essentially, the CEO can fire me if they decide they don’t like me on the board. It’s never happened, but they could. My role is to make the CEO as effective as he or she could be. It’s by asking questions, by telling stories and anecdotes.
Mark Twain said that history doesn’t repeat itself, but it does rhyme. So, if I have been involved in a company before and they had a similar problem, I might tell a story: here’s what the situation was, here’s what they did, here is what happened, but that doesn’t mean you should do the same thing because every situation is different. But if you never had any similar experience, you are flying blind, whereas if you have the benefit of mine or other people’s experience, you can triangulate and piece together the pieces of the puzzle and say, “Well, I think this is relevant,” and then you make up your own mind. So, I basically work as a board member, not by telling people what to do, but by asking questions and by telling stories.
You are teaching one of the most popular courses at Stanford, and you are also an operating partner at Bessemer, one of the world’s leading venture capital firms. What do you do there? What does being an operational partner mean?
An operating partner means I’m not an investing partner. I don’t make any decisions to invest customers’ money. I can invest my own money side by side with Bessemer. Since I was a career CFO, I have created a CFO advisory board among Bessemer’s portfolio company CFOs. We have 100 portfolio company CFOs. Any company where there might be 100, 200, or 300 employees, that CFO probably has no one else in the company to talk to about a financial issue, but across the portfolio, there are 100 people to talk to. Before Covid-19, we met in person once a quarter. Now we are meeting online.
About the class at the Graduate School of Engineering, it’s teams of four or five students with the startup ideas. In ten weeks, they are required to interview 100 potential customers, build multiple prototypes, and run many experiments, and with any luck, they generate their first revenue by the tenth week. I guess this will be my eighth year teaching. We had 100 teams or so graduate from the class. We have had maybe 15 teams actually from companies and get funding. Some of them are doing quite well.
Jeff, you were the CFO at Oracle, everybody knows Oracle. Since I do not get to speak to many CFOs in my daily life, please tell me, what does a CFO do?
A CFO at any size company is responsible for the same functions: accounting, treasury, risk, capital raising, financial planning, and forecasting. The difference is that when I was the CFO of DoubleClick years ago, I started out and we had 180 people and I probably did 25% of the work myself. I would run the Excel model myself, do investor presentations myself, and then delegate 75% of the time. But at Oracle, I did virtually 0% personally and delegated 100%.
You have grown as a CFO from early-stage startups, in the terms of annual revenues, all the way up to the billions. It cannot be the same mind-set and the same day-to-day responsibilities and thinking. You have to be transitioning yourself. What is that like, transitioning from millions to billions?
Well, I did it for over 25 years; it wasn’t overnight. Between DoubleClick and Oracle, I was the CFO of a big group at Nielsen, the TV and Internet rating company with thousands of employees. So, I had that exposure to large companies. One difference is that Larry Ellison, the founder and chairman of Oracle, started Oracle with a country structure and grew very fast in the early days. They had Oracle US, Oracle UK, and Oracle Japan. One day, around 20 years ago, he said, “We are a big company now, but we are operating like 75 small companies. What we should do is centralize and take advantage of this kind of scale.” Over the course of about two years, they went from 75 different country structures to one global structure. Each country had its own CEO and its own CFO, and then, when it was all over, there were no other CEOs, no other CFOs. I was the only person in Oracle with the title of CFO. There was a single global controller, one head of marketing, things like that. Oracle was an example of an extreme case of a very effective and efficient case of centralization.
Give me one or two earned secrets, truly earned secrets, that you would give to young entrepreneurs trying to make an impact and dent on the world in a positive way.
For entrepreneurs, if you are starting a company from scratch, the first step is to product-market fit. So, my advice for most companies, software companies, is try to create the smallest possible product with the smallest ever customers who love you a lot. Paul Graham put it this way, he said, “You’d rather have ten customers who love you than a million customers who like you.” The logic is if you have created a product that ten customers love, I’m pretty confident you could find an 11th, then find a 12th. But if you have a lot of customers who just like you, tomorrow they are going to like someone else. Facebook started just at Harvard, and within two weeks, he had 90% of all Harvard students loving Facebook. Airbnb started with literally renting airbeds in someone’s apartment. They started with a very small product and a very small number of customers, but they built huge companies. I think you can’t build a jet engine company that way, but for many businesses, you can.
I would love to hear three words that you would use to describe yourself.
It’s curious, analytical, and helpful.
Michael Matias, Forbes 30 Under 30, is the author of Age is Only an Int: Lessons I Learned as a Young Entrepreneur. He studies Artificial Intelligence at Stanford University, while working as a software engineer at Hippo Insurance and as a Senior Associate at J-Ventures. Matias previously served as an officer in the 8200 unit. 20MinuteLeaders is a tech entrepreneurship interview series featuring one-on-one interviews with fascinating founders, innovators and thought leaders sharing their journeys and experiences.
Contributing editors: Michael Matias, Amanda Katz