By Chris Kornelis
When Steve Ballmer ran Microsoft Corp., he was happy to choose between executive A and B. But judging engineer X against engineer Y? Above his pay grade.
Now, as owner of basketball's Los Angeles Clippers, he takes a similar approach. He can choose company brass -- a coach and leaders in the front office. But he won't try picking between two journeymen players himself. In fact, he's learned a lot about selecting talent from his organization's vetting process.
Before the Clippers bet on a player, they do things like talk to coaches, parents, former teammates, opponents, people who pass out towels in the locker room. They scan the player's social-media presence, trying to get a picture of the kind of player and competitor they are looking at.
"As a basketball team, we do far more detailed reference checks on any player we're going to draft or trade for than we ever did on anybody we ever hired at Microsoft," Mr. Ballmer says. "It's a new lesson I've learned in terms of how you think about and recruit not only players but executives."
With sports, there's maximum transparency. "We're making a bet every day on players, on coaches," he says. "And there is a way to measure: How many games do you win, did you win a championship, did you get the key player you wanted in free agency?Those are bets, man, and you get evaluated on them, and every fan knows them. Everybody has visibility to how you did."
Here, Microsoft's ex-CEO talks about some of the best and worst bets he made before entering the world of sports.
BEST BET: Leaving Stanford for Microsoft
Investment: Leaving school
Gains: A billion-dollar career
When Mr. Ballmer entered Harvard in 1973, he thought about being a physicist or a mathematician. But after stints at the student newspaper and managing the football team, his mind was fixed on business.
He then got into Stanford Graduate School of Business, but deferred admission to get some work experience. Once he was there, in his first year he got offers from the summer programs of three consulting firms, an investment bank, Progressive Insurance and Ford.
Then a Harvard friend, Bill Gates, called and said, "We kind of need a business guy."
Mr. Ballmer went to Seattle to interview for the job -- a visit that coincided with the start of a vacation for Mr. Gates. Mr. Ballmer drove his friend to the airport in Mr. Gates's own car. Afterward, while Mr. Gates was on a boat with friends, they negotiated on a ship-to-shore radio.
"He was on an open speaker, and his friend was like, 'Hey, Bill, just give him what he wants. You need this vacation,' " Mr. Ballmer says. "We managed to work things out."
Working it out included Mr. Ballmer finishing what would be his only year of graduate school, then joining Microsoft with an 8.75% ownership stake in the company.
The takeaway: "If you find something that you're really excited about," he says, "go do it."
Mr. Ballmer says Mr. Gates was "the smartest guy I had ever met" and the company, though small, was a leader in an emerging field that excited him. So, he went for it.
"You've got to find something that's consistent with how you want to live, but also [that] you can get excited about what you're doing every day," he says. "When I was in school, that wasn't my attitude. It was about building my résumé. And it was a key lesson learned for me."
WORST BET: Selling Microsoft stock to get into furniture
Investment: Tens of millions
Losses: Hundreds of millions in future valuation
In the late '80s, when Microsoft's stock was slacking, Mr. Ballmer bought about $50 million of shares to show he was still committed. His wealth was all tied up in Microsoft stock, so he had to borrow money to make the purchase.
A few years later, a friend mentioned an opportunity to get into the furniture business. Mr. Ballmer had two thoughts: He liked the idea, and he wanted to pay off the debt he'd taken on to buy the extra stock. He sold tens of millions of dollars of Microsoft stock to do both.
Mr. Ballmer and his friend bought Marker Brothers, a furniture retailer in Los Angeles, and Breuners, a chain in San Francisco. The companies later went bankrupt, and Mr. Ballmer's investments went more or less to zero, save for some money made on the companies' real estate.
The bigger loss, though, is what would have happened to the money if he'd left it in Microsoft stock. "If you look at those two things," Mr. Ballmer says, "I can't tell you how many hundreds of millions of dollars that probably would cost me."
The takeaway: Stick with what you know. Mr. Ballmer says the root of the problem was that he didn't know the furniture business.
"I know Microsoft, and then I blew some of that off," he says. "I didn't know the furniture business, but I went into that. Stick with what you know. Or really dedicate yourself to learning something new."
Though he has made a few other investments that have paid off modestly through the years, such as Twitter, Mr. Ballmer says he keeps his money in Microsoft stock and in S&P index funds.
"Unless it has something to do with my passion around philanthropy or sports," he says, "I just stick to my knitting."
Mr. Kornelis is a writer in Seattle. He can be reached at firstname.lastname@example.org.