Company: Auction Systems
2013 Inc. 5000 Rank: 4333
Headquarters: Phoenix, AZ
Year Founded: 1995
2012 Revenue: $141.9 million
3-Year Growth: 56%
2002 Inc. 5000 Rank: 320
Headquarters: Houston, TX
Year Founded: 1997
2001 Revenue: $5.1 million
3-Year Growth: 716%
2007 Inc. 5000 Rank: 3590
Headquarters: Bethesda, MD
Year Founded: 1995
2006 Revenue: $8.3 million
3-Year Growth: 81%
Company: Linac Systems
2002 Inc. 5000 Rank: 259
Headquarters: Lakewood, NJ
Year Founded: 1997
2001 Revenue: $3.5 million
3-Year Growth: 884%
Two years ago Stephen Satterwhite was a very confident guy, and today he's a very confident guy, and there the similarity ends. Satterwhite, the CEO of Entelligence, an IT staffing and services provider, tells the story while driving back to his home in Houston. He has just finished a meeting at Dell Computer in Austin, where he impressed the attendees with his pragmatic promises and subdued conviction. Satterwhite says that doing the right thing is now number one on his dashboard, and it's not until he's said it two or three times that it becomes clear that he's talking about a kind of spiritual/ethical barometer and not the control panel on his BMW 528i. After five years in which almost everything went right and six months in which nothing did, he's figured out there's more than one kind of confidence.
"Our early confidence was euphoric, egotistical," says the CEO. "We thought there was nothing we could touch we wouldn't make a success of." But then, in 2001, Entelligence took three disabling hits: a sputtering technology market, September 11, and Enron's implosion, which rattled all of Houston. Satterwhite, who realized too late that back in the glory days his company was just one boat on a rising tide, watched as the water swirled down the drain, threatening to take him with it. Things got so bad that he started bringing home backup tapes from the company's PCs in case his landlord locked them out. "One of my partners said, 'Maybe you're not the right guy to run the company," says Satterwhite. "And I thought, 'Maybe he's right."
Satterwhite regained both confidence and financial stability through a series of humbling but fruitful negotiations with his landlord, his bank, the phone company, and other creditors, in which he laid everything on the table. "I got naked," he says. "I'd always been about looking good, but not anymore." The CEO was able to get out of his lease and into cheaper space, negotiate interest-free extensions on his debt, and significantly reduce operating costs. Now the company's financial position is healthier than it's ever been, and so, says Satterwhite, is his personal outlook. "I learned this last year about a confidence that's different from 'I feel good about a sale' or 'I feel invincible," he says. "I just feel in my gut every day that I'm going to do the right thing. I have to keep focused on my values and being straightforward and truthful. That's where I derive my confidence now. It's not something I have to pump myself up for."
Satterwhite represents the new face of confidence among entrepreneurs who, having survived tough times, feel a less heady, more rational faith in their own skills. Another is Gary Berman of Greyhawk North America, a construction-management consulting firm on Long Island. Berman has scaled back his growth objectives after losing contracts when New York City canceled projects post-9/11. But he remains positive. "I know we're going to grow, and I know we're going to get there," he says. At ProSys Information Systems, in Norcross, Ga., founder Michelle Clery has drawn confidence from an unexpected source: her employees' loyalty. "During the dot-com boom, I was afraid every day that people were going to leave me for another $5,000 in salary," says Clery. "Now I'm sticking by them in tough times, and that's increasing their loyalty, which is so important to our future."
The tempered optimism expressed by Satterwhite, Berman, and Clery showed up again and again in more than 50 interviews conducted for this story. Our objective was to gauge the current attitudes of business owners and to explore the deeper sources of confidence among them. The discovery that entrepreneurs' confidence is becoming more grounded in reality is to be expected. Failure, like imminent death, has a way of concentrating the mind. What surprised us was how often their confidence runs higher than their circumstances would appear to warrant.
The evolving field of behavioral economics suggests a possible explanation. Terrance Odean, an assistant professor at the Haas School of Business at the University of California, Berkeley, has studied the cause and effect of overconfidence in investors and executives. He points to something called "attribution bias," the tendency of people to credit themselves unduly for successes that are heavily influenced by external factors (such as a boom market or a technology revolution) and to blame external factors disproportionately when they fail. He also suggests that it's a good thing for decision makers to be mildly overconfident because they are likely to assume a degree of risk that is healthy for their companies.
The combination of these two insights -- that there is a still-healthy remnant of self-confidence among company leaders and that mildly overconfident leaders make the best decisions -- suggests an intriguing possibility: companies today may be better positioned than they have been in years to make smart calculations about growth and strategy. Just as there is an optimal level of available capital (too little and companies starve, too much and you get the excesses of the dot-com era), suppose that in the economy at large there is also an optimal level of confidence, one at which entrepreneurs en masse take on just the right amount of risk to flourish and no more. And suppose -- thanks to the effect of attribution bias on the post-bubble population -- we are in a period of optimal confidence right now. If investment in houses and cars and heavy machinery so far hasn't galvanized the economy, perhaps business leaders' belief in themselves will do it.
While virtually all the entrepreneurs who were interviewed for this story identified confidence as one of their key assets, they disagreed sharply on the specifics: what confidence feels like, where it comes from, how one gets it, and how one gets it back. A few of the company founders described confidence as a kind of epiphany that visits them in isolated moments. Others called it a constant source of strength but only in discrete areas. Still others said it was a pervasive presence that infused everything they did. They differed over whether confidence is something you can build quickly, using the mind as a power tool, or whether it must develop gradually, over a lifetime of successes and failures.
Deborah Weidenhamer, founder and president of Auction Systems Auctioneers & Appraisers Inc., in Phoenix, routinely lectures M.B.A. students on entrepreneurship, and she says they are hungry for information about confidence. "They've been inundated with case studies of successful companies," says Weidenhamer. "And successful companies have these stories of incredible perseverance, taking risks that make no business sense. But no one's taught the students how to do that. They can read financials. But they don't know how to work off of sheer guts and willpower."
Weidenhamer is right about the paucity of such material. A check of the indexes of management books at Barnes & Noble, for instance, turned up no listings for confidence. Our interviews with business leaders, however, did uncover a few universal truths on the subject, as well as some practical advice on the care and feeding of the entrepreneurial ego.
What exactly is confidence?
Confidence is like one of those perfumes that react differently with each individual's body chemistry to produce something unique. The only point on which everyone agrees is that without confidence, nothing happens.
Kenny Kramm, founder of FlavorX Inc., in Bethesda, Md., describes confidence as "perseverance; the knowledge that I will never give up." Jim Sharkey, founder of Linac Systems, in Lakewood, N.J., refers to "the assurance that I am being absolutely honest with myself." To Jane Sydlowski, founder and president of American Megacom, in Livonia, Mich., "confidence is synonymous with preparation." Jim Wanner, CEO of KeyMark, in Greenville, S.C., is among those who single out external influences, specifically "good people and good information." And Patrick Martucci, chairman and CEO of United Asset Coverage, in Naperville, Ill., insists that confidence is about one thing: clarity. "You don't have to be correct," explains Martucci. "You have to be clear. You have to choose clarity over certainty."
The most-cited descriptions of confidence involve courage (tolerance for risk, the ability to manage fear, the possession and strategic leverage of balls). Next come references to goals: focus, vision, and -- most often -- clarity. (The clarity proponents are especially persuasive.) Mentioned often -- but less often than the others -- are perseverance, persistence, and determination. A few people describe themselves as stubborn or even insane, but we're probably expected not to take that seriously.
Rich Harshaw, cofounder and CEO of Y2Marketing, in Desoto, Tex., says that confidence is simply "knowing you can make crap happen." OK, maybe that's not Emerson, but Harshaw knows a lot more about entrepreneurship than Ralph Waldo did. Harshaw once shuttered a successful consulting business -- eliminating all his clients in the process -- and plowed every cent of his and his partner's money into a riskier national venture. Both his company and the marketing program he sells run on a commando-style philosophy of guts and glory that he calls BBO, or "big brass ones." Harshaw gives this example: "In 1996 we met up with a seminar promoter who said that for $7,000 he could make us prominent in the seminar circuit. Back then my partner and I were making $3,000 a month apiece. But I went down to the bank with a check for $7,000 -- one of those fake-looking checks that credit-card companies send you to get you to run up your credit-card bill. I didn't tell my wife about it until three years later. The seminar thing didn't work out. But I did make one contact that turned into $85,000 the next year."
Doesn't that smack of bravado? Not to Harshaw. "It isn't bravado when it works," he says.
Where does confidence come from?
The science on confidence, unfortunately, is thin. Generally, it falls under the purview of the self-help movement rather than psychology. But research in related areas -- such as narcissism and self-doubt -- suggest that confidence has many obvious nurture and a few still-hazy nature components.
Temperament, for example, which is determined by chemicals produced by the brain, makes a "small contribution" to confidence, according to Jerome Kagan, a professor of psychology at Harvard. "There are a proportion of people -- maybe 10% or 15% -- who inherit a biology that makes it easy for them to feel tense, uncertain, unsure," explains Kagan. "Another 20% have the opposite temperament. These are the General Pattons of the world, the astronauts."
Robert Arkin, a professor of psychology at Ohio State University, who has spent 20 years studying under- and overachievers, explains matters differently. "For a confident person there's probably more going on internally," says Arkin. "Their brain is fired up but in a way that's focused on the environment, not on themselves. The Zen philosophy suggests that you empty your mind of thoughts about self. That's what people with confidence do."
Whatever nature gives you, of course, is modified by experience. Not surprisingly, conversations with confident people turn up no shortage of supportive parents and schools bursting with inspirational teachers, coaches, and debate-team instructors. Entrepreneurs who spent significant time watching their successful parents work were especially grateful. Greyhawk's Berman recalls tagging along with his father, "the world's greatest salesman," on calls for a clothing manufacturer in Kentucky. "I would sit there and watch him cut deals, and I thought, 'My God, so this is how it's done," says Berman. FlavorX's Kramm can still recite Calvin Coolidge's celebration of perseverance, which his mother framed and hung in the living room of his childhood home. "My parents don't give up on anything, which is why I don't give up either," says Kramm. "They own a pharmacy, and at times it was really tough, but they stuck it out when all the other pharmacies were selling to chains. When I was growing up, we worked together as a family. I saw their persistence every single day."
More than a third of the business leaders interviewed, however, described young lives plagued with family and financial instability. Members of that group tend to trace their confidence to overcoming obstacles. "My father was married six times," says Kevin Price, founder and president of AccuCode Inc., in Denver. "I spent as much time out of the house as I could, and I became very focused on school and extracurricular activities. A lot of my overachievement and confidence comes from that." At age 17, Abid Abedi, an insecure kid who "didn't play sports and had no friends," found himself broke and alone in Columbia, Mo., after emigrating from India. "That experience taught me there was no one I could count on but myself," says Abedi, founder and CEO of Adea Solutions, in Dallas. "I realized all I had was between my two ears. That was when I started building confidence."
What's the difference between false confidence and the real thing?
Harshaw, the evangelist for big brass ones, recalls the first time he encountered what he considers confidence in its purest form. It was 1994, and he was trying to put together a marketing seminar in Dallas. His partner, Edward Earle, was living in Utah at the time, and Harshaw asked him to fly down and make a presentation. "He put on the most unbelievable seminar I'd ever seen," says Harshaw. "Full of confidence, full of passion. Two years later I found out that his wife and two kids had stayed behind in an apartment for three days with no heat because he couldn't afford to pay his bills. But he never gave a tip of the hat to having financial struggles. He gave a seminar on being prosperous in business and pulled it off with absolute conviction because that was what he felt: absolute conviction."
Harshaw's notion of "real" confidence may accommodate a larger tolerance for risk than many people find acceptable. Other entrepreneurs had different perspectives on real and false confidence -- almost as many as on confidence itself. Many drew a distinction between false confidence (which they defined as a serious misreading of one's own abilities) and misplaced confidence (a misreading of a market, say, or of a trusted partner). Some described false confidence as the ultimate fair-weather friend, buoying you when times are good and deserting you when they're bad. The test of real confidence, they said, is if after you lose it, it comes back.
By that last standard Scott Earnest has real confidence. Earnest was the kind of kid who had an American Express card at age 17. Three years out of college, he was employed by a software company that put him in charge of a $20-million IBM account and more than 600 employees in five states. "Aren't you afraid you'll fail?" his mother once asked him. "I'm not going to fail," Earnest says he replied. "I am Confidence Man."
He brought the same type of conviction with him when he bought his first company: a pool-cleaning outfit. But his confidence made him sloppy. Pool cleaning requires administering a chemical test to determine how much chlorine goes in the water. The results appear as colored bands, and Earnest was color-blind. "I had put everything on the line," he says, "and I was standing there looking at this test result, and I said, 'Shoot, I have no idea what this means." With the company collapsing, Earnest's wife staged a "confidence intervention," inviting 15 relatives to confront her demoralized husband and one by one remind him of his strengths. He lost the business but came back soon after with CEO Inc., a successful IT-staffing firm in Boca Raton, Fla.
Should confidence be faked?
False confidence is a flaw; faked confidence is a tactic. Still, it's a tactic that entrepreneurs disagree about. Certainly, former New York City mayor Rudy Giuliani became a national hero because he radiated strength yet never tried to mask his human vulnerability during an extremely tough time. But such honesty doesn't always play well in the confidence business. Brent Habig, founder and CEO of Tigris Consulting, in New York City, says that as a consultant he must appear confident at all times. "Otherwise why are they paying me?" he asks. Yet Habig believes that "acting confident when you don't feel that way is a complicated risk that's best avoided. If your confidence isn't based in the knowledge that you can deliver, you risk letting people down."
Mark Burnett goes further, arguing that confidence can't be faked. "If you're not confident, you can't be a leader, and that's all there is to it," says Burnett, creator and executive producer of Eco-Challenge and Survivor, television programs that do for confidence what Iron Chef has done for nori and spiny lobster. "I've heard 100 times that you can fake confidence, but you can't. It takes too much of a toll. You waste too much energy."
But Habig and Burnett are in the minority. "You can't show doubt," insists Kevin Price of AccuCode. "You've got to portray yourself as absolutely certain that you can do what you say you'll do. Even if you doubt that yourself, you've got to make it seem like you don't." Most entrepreneurs interviewed agreed with that argument, and many acknowledged faking confidence at one time or another -- particularly in their early sales careers. They described the practice as harmless, like using training wheels just long enough to gain psychic balance.
That was certainly the case for Price, who started AccuCode because he needed a job. "I wasn't confident," he says, "and in many ways I wasn't qualified." Price admits that for the first three years he often faked confidence in front of customers, "and then one day I realized I was no longer faking it," he says. "I was sitting in a room of people that had more years of industry experience than I did, that were supposed to be more technically qualified than I was, but I knew more than they did. Those years gave me a chance to grow into my expertise so that now I no longer have to fake anything."
How do you build confidence?
"Both champion athletes and CEOs are good at mentally drawing upon their past successes to step into uncharted territory," says Chris Carmichael, founder and chairman of Carmichael Training Systems, in Colorado Springs, Colo., and the longtime coach of three-time Tour de France winner Lance Armstrong. "When I'm working with an athlete, I'll have them do a mental recall of what they've accomplished. If you do it right, the athlete starts to swell with confidence."
Success, of course, derives from a combination of things: experience, mastery, native talent, propitious external factors, and luck. Most entrepreneurs we interviewed said they develop confidence through mastery and experience, principally in domains that are important to their jobs. They read business books. They attend conferences and seminars. They take classes in negotiating and salesmanship and public speaking (although many CEOs appear to view fear of public speaking as a charming flaw, like not being able to carry a tune).
They also consult with peer groups, mentors, and coaches of various stripes. Jeff Sinelli began modeling his leadership style on Genghis Khan after launching the Genghis Grill restaurant chain in Dallas. He supplements the wisdom of the Mongolian marauder with advice from his pastor ("he's very business savvy"), a business coach ("he found out what makes me dynamic and what my gifts are"), a psychologist ("we talk on the phone once a month about business, family, girlfriends, everything"), and a growing gallery of mentors that includes restaurant magnate Norman Brinker.
Some people seek to develop expertise in numerous disciplines, intent on becoming a human Swiss Army knife that can handle any task the business world throws at them. The confidence that helped Brent Habig launch Tigris Consulting "was in my ability to do a variety of things," he says. Proficient at programming, project management, recruiting, and accounting, he knew that whenever a problem arose, he could "jump in and solve it myself," he says.
Psychologist Ros Taylor, founder of London-based consultancy Ros Taylor Ltd., has created a whole grab bag of exercises for developing confidence. Many of those techniques received widespread exposure in England when she served as the key presenter and adviser on Confidence Lab, a popular BBC program in which 12 shrinking violets set out to reinvent themselves in seven days using tools such as art therapy and salsa lessons. Taylor believes that a wide-ranging confidence can be built virtually from scratch -- and that it can be built quickly. "People learn to drive within a week," says Taylor. "They learn French in a week if they're rushing off. They live and breathe these skills. I think it's exactly the same with confidence."
The skills that Taylor promotes are in such areas as making good first impressions, improving posture, and thinking positive thoughts. She asks clients to concoct 30-second commercials about themselves, to compile lists of self-descriptive adjectives, and to practice asking open-ended questions for conversation starters. It may sound a little too easy, but Taylor points to the Confidence Lab graduates who, within just nine months of the show's airing, had asked for and received promotions, landed prestigious new jobs, and -- in two cases -- launched companies.
"Psychologically, action precedes change," insists Taylor. "If you start doing things in a more confident fashion, it feeds back to your nervous system that you might actually be confident. All these people went through profound cognitive shifts about what they could do internally."
Is there such a thing as general confidence?
No, there is not. For Kagan, that point is the postulate for everything else he has to say about the subject. "Individuals have confidence in specific domains," he says flatly. "I am very confident about my knowledge of child development. I have no confidence in my knowledge of how computers work. You don't have general confidence."
Yet some factors that contribute to confidence have nothing to do with particular talents or fields of expertise. A belief in God is one. Environment is another: many entrepreneurs stress the salutary effects of familiar, controllable surroundings. That's one reason that Stephen Rosa, founder and CEO of Advertising Ventures, in Providence, purposely built his business just across a bridge from the street where he was raised. "It keeps me grounded," says Rosa. "It's comforting to see the rooftop of the house I grew up in."
Can't confidence gained in one area carry over into another?
Some people believe it is possible to accumulate a kind of capital of confidence by stretching physical limits and conquering their fears. That capital, they believe, can then be drawn upon to meet the challenges of their business and personal lives. A full 10% of the entrepreneurs interviewed for this story have jumped from planes; another 10% either have climbed or are preparing to climb mountains. Don Preston, founder and CEO of Loss Mitigation Services, in Paris, Tex., jumped out of a plane six weeks after leaving a secure job to launch his first company, a carpet retail business. "We went out in a little Cessna, and I had to actually climb out on a wing before I jumped," says Preston, who has since sought confidence by walking on hot coals. "I'm afraid of heights, but I figured if I could sky dive, I wouldn't be scared of anything."
If you lose your confidence, how do you get it back?
Auction company CEO Deborah Weidenhamer expects to suffer occasional emotional ebbs and has something approaching a system for weathering them. She hoards successes, refusing to savor them when they happen so that in downtimes they can be pulled from her mental drawers and experienced afresh. She beefs up her mentoring and coaching of employees to remind herself of what she has to offer. And when things get really bad -- as they did five years ago -- she seeks help from friends and business associates. Hundreds of them.
On February 24, 1997, Weidenhamer mailed -- by regular post, no less -- a letter to 350 friends, relatives, customers, vendors, and other associates. "This is a hard letter for me to write, because I don't like asking for help," the message began. She went on to describe working 15 to 17 hours a day, seven days a week, at a company that was teetering on the brink of failure. "I am not able to work any more hours in the day," Weidenhamer continued. "I can't afford to hire an administrative person right now, and I can't afford to pay a salesperson anything other than commission.... I can't borrow money for the interim on my contracts, because I have put everything into the company.... I need your prayers and support. If you have any ideas, please call me or write.... "
Admitting that she needed help was "a life-changing experience," says Weidenhamer, who received more than 100 responses, including ideas that improved her operations and support that improved her morale. "I think when people see you as self-confident, they don't even bother to say anything. They think you've got it under control. They assume you don't need even a word of encouragement."
Three months later the company was back on track, and Weidenhamer knew it would be viable. "What really helped most was my customers who called and said, 'You're the best we've ever worked with," she says. "That's when I said, 'I can keep doing this. I can keep pursuing the goal."
Why is confidence like sex?
Because for both, the most important organ is the brain.
Confidence is by definition about action, but many entrepreneurs boost theirs using popular mental exercises or idiosyncratic sleights of mind. The technique most commonly mentioned was visualization. Carmichael says that detail is key to effective visualization. "You can't say, 'Oh, you'll go to the race, and it'll feel great, and you can feel yourself crossing the line and winning," he explains. "You've got to say, 'OK, there are four hills in that race. The first is only three kilometers long. It's not that hard. The average grade is about 6%. But the second hill. You know that hill. That climb is long, it's 12%, and you know after the third switchback it pitches up to 14%.' You have to get that detailed."
Other techniques are less structured and more a matter of managing perspective. Take for example, Arkady Maydanchik, founder of Arkidata Corp., an information-integration company in Downers Grove, Ill. The supremely confident Maydanchik has challenged a friend to a game of golf at Pebble Beach next August. The friend has been playing for 30 years and has a 12 handicap. Maydanchik has been playing for five months and has yet to make it off the practice range.
Maydanchik believes in his triumph on the links for the same reason he believes in Arkidata's continued success and in the success of pretty much every other endeavor he's embarked upon. That is, he is able to mentally defang the odds. "When you talk about something being a 1 to 10,000 chance, at the end of the day either it happens or it doesn't," says Maydanchik, a former researcher in probability and statistics. "And it might happen. Most people who started to play golf could not beat an experienced player in one year, so you might assign a 1 in 10,000 chance to that outcome. But every endeavor is unique. If I have the talent of Tiger Woods -- seemingly long odds, but nobody knows in advance whether or not I do -- I would argue that it is a sure bet that with significant practice and a good teacher I will beat my friend next year."
And who has the confidence to argue with that?
Leigh Buchanan is a senior editor at Inc.
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