Harlan Anderson was an American engineer and entrepreneur who, alongside Ken Olsen, co-founded the trailblazing Digital Equipment Corporation (DEC) in 1957. While not a traditional “investor” in the mold of Warren Buffett, Anderson is a pivotal figure in the history of modern finance, particularly in the world of Venture Capital (VC). His journey with DEC, backed by Georges Doriot's pioneering firm, American Research and Development Corporation (ARDC), became the textbook case for how early-stage investment in innovative technology could generate astronomical returns. The success of DEC effectively lit the fuse for the venture capital industry, creating a model for funding the technological revolutions of the late 20th century. For the value investor, Anderson's story is a masterclass in the power of backing brilliant management, identifying disruptive business models before the crowd, and having the patience to let a great enterprise compound its value over the long term.
In the 1950s, the computer world was dominated by one name: IBM. Computers were colossal, room-sized machines that cost millions and were sold only to the largest corporations and governments. Working at MIT's Lincoln Laboratory, two bright engineers, Harlan Anderson and Ken Olsen, saw a different future. They believed they could build smaller, more interactive, and vastly cheaper computers for scientists and engineers. Armed with a business plan and technical expertise, they sought funding. Traditional banks were baffled by their proposal, but they found a receptive ear in Georges Doriot, the head of ARDC and a man often called the “father of venture capital.” In 1957, ARDC made a legendary investment: $70,000 in exchange for a 70% equity stake in the newly formed Digital Equipment Corporation. This seed money allowed Anderson and Olsen to launch their “minicomputer” revolution. DEC's machines, like the PDP-8, were a smash hit, democratizing computing and turning the company into a technology behemoth. ARDC's initial $70,000 investment would eventually be worth over $350 million—a staggering 5,000x return.
The DEC saga, with Anderson at its core, is more than just a great business story; it’s a blueprint for a new way of investing and holds timeless lessons for anyone looking to build wealth.
The investment from ARDC wasn't simply passive capital. Doriot and his team provided crucial mentorship, management guidance, and strategic oversight. They took board seats and helped the young founders navigate the treacherous waters of building a business. This combination of capital and expertise became the defining characteristic of the venture capital industry that DEC's success helped spawn. It was a partnership, not just a transaction, focused on nurturing long-term value from the ground up.
While venture capital often focuses on high-growth tech, the principles underlying the DEC success story resonate deeply with the philosophy of value investing.