"Always remember that someone, somewhere is making a product that will make your product obsolete." – Georges Doriot
How can the Philippines leapfrog from being an exporter of labor, garments and bananas into a technology powerhouse that can outshine India as exporter of innovative new products and software? When will Philippine economic news shift from the usual foreign loans, new taxes, and high budget deficit to technological breakthroughs and the export world-class products?
A former poor boy from Cagayan province and now a Filipino technology tycoon in Silicon Valley recently granted us an exclusive interview in his Tallwood Venture Capital office building beside Wells Fargo Bank and near Stanford University. In 1997, Philippine-born Diosdado "Dado" Banatao was honored with the prestigious "Master Entrepreneur of the Year" award sponsored by the Ernst & Young global accounting giant, Inc. magazine and Merrill Lynch. Every year, Banatao funds Filipino-American scholars studying engineering or science courses in top schools all over the US. He also funds a special program that takes University of the Philippines professors to work with University of California in Berkeley professors for one year, hoping these UP professors can bring to the country newest ideas and technologies.
UP president Dr. Francisco "Dodong" Nemenzo said, "Dado Banatao is richer than Ayala." Though Banatao admitted that he owns two private jets and drives a Porsche sports car, and that he once earned and lost $350 million dollars in a single day at the US stock market, he requested that our interview focus more on economic issues rather than on his personal wealth.
A businessman who respects Dado Banatao is Ayala conglomerate CEO Jaime Augusto Zobel de Ayala who said, "Dado has a tremendous mind." He invited Banatao to be a director of Ayala-controlled Integrated Microelectronics Inc. (IMI). In 2000, Ayala Group invited Banatao to be a partner in its information technology and Internet businesses.
The soft-spoken Banatao is founder and managing director of Tallwood Venture Capital, which focuses on semiconductors and semiconductor-related technologies. As an engineer, he has developed several key semiconductor technologies and is today regarded as a Silicon Valley visionary. As an investor, he has a keen business sense of trends and opportunities involving technology solutions for computing and communications. He has a BS Electrical Engineering degree (cum laude) from the Mapua Institute of Technology in Manila and an MS in Electrical Engineering and Computer Science from Stanford University. Last May, the University of California in Berkeley invited him to speak on what it takes to succeed in Silicon Valley.
When the world’s most powerful mainframe computer was the IBM 360, Banatao’s innovative new chip-set design produced 10 times more power at a thousandth of the cost. His other technological innovations include: developing the first single-chip; the 16-bit microprocessor-based calculator while working for Commodore International in ‘76; the first single-chip MicroVAX while working for Digital Equipment; the first 10-Mbit Ethernet CMOS with silicon coupler data-link control and trans-receiver chip; getting 3Com into the Ethernet PC add-in card business while at Seeq Technology in early ‘80s; the first system logic chip set for the PC-XT and the PC-AT while at Mostron in ‘84 and Chips & Technologies in ‘85); the first enhanced graphics adapter chip set while at Chips & Technologies in ‘85); pioneering local bus concept for PC while at S3 in 1989, and the first Windows accelerator chip while at S3 in ‘90.
Here are excerpts from our three-hour conversation with the Silicon Valley visionary:
PHILIPPINE STAR: Are the reports in the US media true that you earned and lost $350 million in a single day at the US stock market?
DADO BANATAO: (laughs) That’s what happens when one plays big. That’s all part of risk-taking in business. You just have to make sure that you’re still ahead. Since my companies Chips & Technologies and S-3 went public, I have continuously looked for new challenges, investing in multiple companies.
About 3,000 Filipinos leave the Philippines everyday. What is your opinion about what people describe as a brain drain?
I disagree when they say there’s a brain drain when top engineers, scientists or doctors leave the Philippines. It becomes a brain drain only if the economy or society you’re leaving is supporting and utilizing the brains that are leaving. The professionals leave because they are underutilized and not given full support to develop and flourish, so where’s the so-called brain drain? This is just a symptom of a greater problem. I recommend that our leaders treat the real disease, not the symptom.
Do you think the Philippine economy has the capital to finance new technology ventures, since we do not have your Silicon Valley or your huge US stock market?
I think the Philippines – the government and private sector – has the money, but not enough entrepreneurs are willing to fund risky new ventures in technology. More than the availability of money, the reason Silicon Valley here in northern California is the world leader in technology is because we’re willing to risk money here everyday on new ventures, new ideas. Also, please do not forget that Silicon Valley is not all about big money and glamour. I hope you remember the hard work we put in. When I started out, I was literally not sleeping every night due to working and thinking. It takes years to build a company; it’s not an overnight success; there are no shortcuts. In fact, it’s hard work that I usually emphasize hard work more than brains. Real success comes due to hard work.
But you are an engineering graduate of Mapua and you studied in Stanford, you had distinct advantages.
In the Philippines, success in business, technology or other fields depend more on hard work rather than on brains alone. In terms of absolute brilliance, I’m way below the curve. In fact here at Silicon Valley, I envy all the smart people. I really believe it is the effort and hard work that matter more than pure brilliance.
What is your answer to people who attribute much of success to luck – your moving from Mapua, becoming a Philippine Airlines pilot trainee in Boeing USA, which led you to Stanford and Silicon Valley success?
You make your own luck. I remember a guy once telling me about his pilot training at Philippine Airlines, that it was fun, so I applied there. Then Boeing in 1967 offered me a job in the Washington State in the US. Then I ended up in Stanford. Believe me, you have to make your own luck.
How do you assess the technology industry of the Philippines?
The Philippines has most of its capabilities in manufacturing. There are some design and software work. IMI and Ionics are doing some work on the system side. Unfortunately, I don’t know if there’s semiconductor chip design there in the Philippines. There’s big space in software. If there are any, they are small and not so innovative. China is much cheaper and very innovative in semiconductors, while India is leading all of Asia in software development. I hope the Philippines can become like India in the future. But if the current thinking process there is still the same – not a lot of risk-taking or investments in technology – then the Philippines will never get there. If there is no change in thinking, then it will absolutely never happen.
What are the numerous companies you are involved in right now here in Silicon Valley?
Before forming Tallwood Venture Capital, I was a venture partner at the Mayfield Fund. I co-founded three technology startups – S3 (SBLU), Chips & Technologies (INTC), and Mostron. I also held positions at National Semiconductor, Seeq Technologies, Intersil and Commodore International. Today, I am chairman of SiRF Technology (SIRF) and other Tallwood portfolio companies. I also served as chairman and led investments in Marvell Technology Group (MRVL), Acclaim Communications acquired by Level One (INTC), Newport Communications acquired by Broadcom (BRCM), Cyras Systems acquired by Ciena (CIEN), and Stream Machine acquired by Cirrus Logic (CRUS).
Is it true you grew up in a rural farming barrio in northern Luzon, where you used to walk treadbare along dirt roads to school?
Yes, I grew up in Malabbac barrio of Iguig municipality in Cagayan province. It is about an eight-hour drive from Manila, a sleepy little barrio. My late father was a small rice farmer. I came from a humble family. The whole town was a farming community and so simple.
Do you speak Ilocano or Ibanag?
My native dialect is Itawes, one of the two top dialects of Cagayan province. Yes, I also learned to speak Ibanag and Ilocano. You know, our provincial capital of Tuguegarao is actually half Itawes-speaking and half Ilocano-speaking in population.
Have you returned to your hometown and to your old school?
Yes, I’ve visited Iguig four times. I studied in Malabbac Elementary School, a small public school. In the 1990s, we built a computer center there. Today, it’s probably the only public elementary school in the Philippines that has 20 of the most modern computers on networks.
What do you recommend government should do to help students become world-class in technological skills?
It is important for the Philippine economy to be strong in technology. I hope government will emphasize better education in math and sciences, because now the Philippines is not very competitive in those fields.
What is your reaction to Philippine society looking up mostly to lawyers, politicians and showbiz stars, not to entrepreneurs and engineers?
It is tragic that in the Philippines, there’s so much glorification of other professions like law or politics – if you can call it a profession (laughs) – which I think is a huge mistake. Look at the China economic miracle. Look at India. They’re educating their kids to be good in math, the sciences and English. There’s a cultural difference. It is sad that the Philippines glorifies other things, but not engineering. In the Philippines in the last 20 years, a lot of kids of the elite were encouraged to study business management courses and MBAs here in the US, but when they went back, there was nothing for them to manage. They might not agree with my views, but I have my own on how the Philippines can improve. Look at the world’s most advanced economies. They’ve gone beyond agriculture. Their economies use a lot of the best technologies. A lot of their national incomes are derived from technologies. For the Philippines to advance economically, the country should be capable of creating a lot of technologies and globally competitive products. The Philippines has to go back to basics, make sure kids are being educated well in sciences and engineering. We cannot keep on blaming others. We Filipinos should change our educational emphasis, our cultural outlook.
How does it feel to be the only Filipino major player in Silicon Valley?
Actually, I have mixed feelings. Of course, I am proud that someone from the Philippines has made it here, but I really wish there were more Filipinos here in this level.
Were you named after the Pampanga politician Diosdado Macapagal?
No, (laughs) it’s just a coincidence that my first name is Diosdado.
Have you met President Gloria M. Arroyo? What did you talk about?
Yes, I met her during her visit here two or three years ago. She asked me if I could help and I said yes.
What is your advice to her on how to solve the many economic problems of the Philippines and how to turn around the whole situation?
Obviously, I’m the wrong person to ask advice from. I’m not a politician. My advice is to put the Philippines in a position where the country can really create globally competitive products.