“Samsung Rising” goes deep on corruption, chaebols, and corporate chaos

I had the unfortunate experience of having a run-in with Samsung America over a decade ago. They were a components supplier for a business I founded and ran many years ago. They lobbied us to switch from LG to Samsung. They made promises and helped us select sole-source components with, as they promised, long EOL (end of life) timelines.

We devoted a multidisciplinary ten month engineering effort to design an entire line of products around the components Samsung recommended. I won't even talk about the money we spent. It wasn't trivial, particularly for a small company. The way I can put it is, we bet the farm on Samsung.

I will never forget the day I emailed our distributor to plan orders for production. I got a three sentence reply:

"These parts have been discontinued. There are no planned replacements. You will have to redesign your products."

I have no idea why I didn't end up in the hospital with a massive heart attack. I mean, this was a company-ending email. I must have stared at that text for an hour before someone walked into my office and snapped me out of the mental loop I was in.

What's worse is what they did after I raised hell. They lied and filed a TRO (temporary restraining order) against us to prevent us from attending an industry trade show where they, and, more importantly, their competitors, were exhibiting. The TRO had a radius of a few hundred feet from the Samsung booth at the show. We couldn't even park at the convention center.

Because of the TRO we couldn't go to the convention and talk to alternative sources to try and find a solution. With sole-source components there are no substitutes. Every company makes a unique version and you are absolutely screwed if they EOL the part number you are buying. It's not like buying resistors, where there are million alternatives. This is why a trade show was almost the only way we could deal with this situation. It would take months and much travelling, potentially outside the US, to be able to meet with other manufacturers and evaluate options. The financial damage Samsung created with their surprise EOL (after promising a seven year lifetime of the components they selected for us) was such that we couldn't even buy a cheeseburger without risking going out of business.

After the conference we could not attend I found myself in court in San Jose, CA, for the TRO hearing. I didn't know anything about TRO's until then. If you don't go to the hearing they can turn into a permanent restraining orders and they go on your record. So, you have to take TRO's seriously or suffer additional consequences. Once again, we couldn't hire an attorney due to the financial damage Samsung caused...so I went on my own.

The judge was very surprised by two things. One, that I showed up on my own. The CEO of a company doesn't normally go to court without counsel. Second, he could not believe this TRO was issued. He understood why I was there on my own and advised me to let him run this and say very little unless he asked questions. Samsung's attorney was there with one of their Vice Presidents, the guy who lied in the TRO declaration in order to secure it. The judge proceeded to read these people the riot act. I wish I had it on video. He tore them a new asshole, both of them. He told the attorney that if I had the money to pursue it he could be disbarred but that they had caused so much damage that the best outcome would be to cancel the TRO and advise me to lick my wounds and move on.

He ripped them a new one more time and asked me how we were doing. I told him "not well". He said, "I am sorry this fraudulent TRO was issues in the first place. Clearly this caused much damage. I can't address it at this level. If you recover financially you might consider consulting with an attorney for further action".

That was the end of that story. It was like Samsung detonated a nuclear bomb inside my company. We were in life support after that. We managed to stay alive. We had designed a line of six new products that we could not manufacture. We had no funds or financial path to redo them. Our competitors were taking business away from us every day. Our entire product line evaporated overnight.

We managed to redesign one of the products but it wasn't ideal or very competitive. And then the 2008 economic downturn hit us. We somehow survived until 2010, when I finally shut down the business. I ended-up in the hospital twice in two years due to the inordinate amount of stress this caused.

I wrote a very dark email to one of my friends at the end of 2009. I told him I now understood, in no uncertain terms, why people took their own lives during financial catastrophes. He was at my office in the blink of an eye concerned about what I might do. I realized reading it later that the email sounded terrible. What I meant to say was that the pain and suffering all of the above caused me led me to understand how someone --not me-- could make that choice and see it as perfectly logical or necessary. That wasn't my case at all. Well, I'll say that it was my kids and family who kept me together, without them I could absolutely see someone with the right (or, more appropriately, wrong) brain chemistry having a tragic ending under such circumstances.

Entrepreneurship is hard, even without some of the tragic shit that can happen for no reason at all. This is partly why I sometimes react very harshly to people who, without any real experience building a non-trivial business, use words like "greed" and beyond. Hence my favorite quote by Mark Twain: "A man holding a cat by the tail learns something he can learn in no other way".

I am not going to extend my experience to the entire Samsung organization, yet I am sure my words, over a decade after the incident, still communicate the tension I feel every time I think about what they did to us, the jobs they cost, the future they destroyed and the life-ending stress they were responsible for. A shameful example of how financial asymmetry can stomp the little guy. This also made me view the concept of Asian honor as a complete fable. Maybe I was naive in believing such horseshit in the first place.

It took decades for GE to slowly fall apart after Jack Welch retired. Not saying he lacks responsibility, it’s just hard to tease out how much.

It's really important I think to also understand the genesis of the modern conglomerates in Korea in order to understand their history and arrive at modern day practice.

IIR, "A History of Korea: From Antiquity to the Present" by Michael J. Seth is an excellent book that has some great sections on the topic.

I haven't come across any real "management theory" texts out of Korea, in the same way that Kaizen came out of Japan and was all the rage in the 80s and 90s in U.S. management circles. There's probably a few reasons for it, but I think the most compelling one is that in the things that are no real international competitors in the leading industries of the day to the U.S. (software, internet stuff, etc.), so there's no real driver to look abroad and see what the other guy is doing. In the 80s and 90s, Japanese car companies started taking the stuffing out of the American auto industry, then a dominant market, and it forced people to seek out how this was happening. Today "Agile" is all the rage, and nobody is really doing it better.

However, the reverse is happening, as South Korea continues to transition to more of a service oriented economy, and American-style management practices are slowly being integrated into Korean workplaces. There's a pretty direct line from Drucker bringing Kaizen over to modern Agile practices, and I suspect that we'll see a similar Korean evolution of Agile practices that befit the culture.

I would suggest reading: https://www.researchgate.net/publication/317639433_Formal_an...

as well as this short talk https://youtu.be/OHilmaWZVUw

No, I think the original EOL specification was truthful. What likely happened is that a major customer canceled an order that was the basis for extrapolating such a product lifetime. Unlike other companies, organizations like Samsung and LG live for large contracts in order to be able to justify spinning up assembly lines and build inventory. In other words, there are organizations that exist to supply the industrial markets who will commit to having a stable supply for years because that's the nature of the markets they serve.

Once the key customer cancelled the order they had no way to manufacture these products for the many small companies who were feeding off the edges. During that time I met the CEO of another company who had a multi-million-dollar government contract that was impacted by the same parts we were promised. He was about to be sued by the US government for violating his contract due to Samsung's premature EOL. It is likely that Samsung destroyed dozens of companies when this happened.

BTW, I was dealing the Samsung America's Vice President at the time. In other words, the top guy in the US. The promise came from him and various division top management people. So, yea, it was one of those "you can take it to the bank" promises.

In many ways this was a case of ethics and honor. Having made promises to multiple small to medium companies they should have delivered product at a loss and provided a reasonable runway for everyone to migrate designs. Hardware isn't like software, you can't turn on a dime, even if you want to. Realistically speaking, you need a two year run before new designs. Among other things, your customers don't like it very much if they buy an expensive product and you obsolete it six months later. And then there's the case of having to provide a reasonable EOL for your own products as well as parts, service and support. It can get complicated and messy very quickly.