A Billionaire’s Story

John Tu

Net Worth: $5.8 Billion

Wealth Origin: Kingston Technology

Place of Birth: Chungking, China

Education: Bachelor of Arts/Science, Technische Universität Darmstadt

Introduction

Stumble into the right Orange County restaurant, on the right night, and you may not know it but you could be watching self-made billionaire, John Tu jamming out on stage with his band JT and California Dreamin’.

Get hired by his tech company, Kingston Technology, and you may wake up one day to a Los Angeles Times headline screaming: Holiday Bonus For Workers: $100 million!

Great, another tech genius who the average person can’t relate to. Except, there’s just one problem with that notion because John Tu didn’t know anything about technology when he started Kingston. Also, he was a notoriously horrible student growing up.

His life spent in the glimmering suburbs of Southern California’s Orange County is a far cry from where his story began. He was born in China amidst the chaos of a raging Civil War. As a result of his father being on the losing end of such a bitter conflict, John Tu fled to Taiwan with his family.

He wore the status “Refugee” before that of “Billionaire.”

Early Life

Childhood

John Tu describes his childhood in an interview with Fortune:

“I was born in Chongqing, China, and our family moved to Shanghai in 1945, where my father worked for the Nationalist Chiang Kai-shek government. After two years the civil war in China was getting close to Shanghai, so we moved to Taiwan.”

Chinese Civil War

John’s father worked as a Minister of Cultural Affairs. For further context, China’s Civil War was raging before the Japanese invaded upon the onset of World War II. Both sides were forced to work together to some degree to fend off the Japanese, however, there is documentation of fighting continuing despite the momentary truce.

Chiang Kai-Shek’s government preached democracy, freedoms, and capitalism while Mao Zedong’s Communist Party of China promised poor farmers their own land and more help from the government. Because the Nationalist government was internationally recognized as the official heads of state, they were obligated to use the vast majority of their men to defend the cities from the Japanese invasion.

Meanwhile, Mao Zedong’s troops clung to the countrysides initiating gorilla-war type tactics upon the enemy (at times both the Nationalist Government and Japanese). By the time the allies won the war, the Nationalists Government had suffered severe casualties in their ranks as they did most of the fighting.

The communist’s power actually grew in comparison as they were able to avoid the larger battles, being in the rural areas, and foster relationships with everybody they encountered. They made promises of essentially fixing every part of the poor man’s life but especially assured giving people their own land to grow crops on. Not to mention, they had the support of Stalin’s Soviet Union.

How it Ended

As soon as the Japanese were defeated, the Civil War proceeded. President of The United States of America, Harry Truman, even went so far as to help the Nationalist Government by stalling the retreat of Japan from China. He kept the Japanese troops in place while also flying in Nationalist soldiers in order to avoid the communists taking over the land in the event it was left unprotected.

The war raged on until October 1st, 1949 when Mao Zedong proclaimed the founding of the People’s Republic of China. Chiang Kai-Shek, along with all those affiliated with the Nationalist Party (including John Tu’s father) were forced to flee to Taiwan.

Mao Zedong would go on to earn credit for conducting the “Greatest Mass Murder in the History of the World.” The Washington Post estimates the death toll to be somewhere around the 30 million people mark, possibly more. In addition, the People’s Republic of China today routinely conducts human rights abuses, doesn’t allow “freedom of speech,” heavily censors what its citizens can and cannot learn, and unfortunately, this list could go on forever…

In the aftermath, Chiang Kai-Shek writes in his diary, “After the fall of Kaifeng our conditions worsened and became more serious. I now realized that the main reason our nation has collapsed, time after time throughout our history, was not because of superior power used by our external enemies, but because of disintegration and rot from within.”

Obviously, this is an extremely condensed summary of the Chinese Civil War, a conflict from which one could write volumes of literature concerning the events that took place. I encourage everybody to look further into the matter as it demonstrates an important lesson that history seems to continually remind us:

It is the individual who is responsible for producing their own happiness, as soon as one relinquishes such responsibility to another person or entity they do so by also forfeiting their own personal freedoms.

Refugee in Taiwan

Fleeing the fate of such despair, John Tu found himself a refugee sailing to Taiwan with the rest of his family. Life in Taiwan would prove to be somewhat tumultuous.

As an adolescent, Chinese American Heroes (CAH) reports that “John was characterized to be rebellious and seen as a problematic student in the eyes of his teachers, and as his teachers turned their backs on him, he too did the same to his studies. By high school, John would regularly cut class and eventually ended up not going to school altogether.”

His parents caught wind of his behavior after receiving a report card filled with failing grades. When they confronted John with their concerns, John angrily expressed his absolute disdain for the educational system as a whole. Shockingly, his parents accepted his perspective.

Tu adds, “we speak Mandarin, and had to get used to the Taiwan dialect. I felt totally lost at school.” He wasn’t sure of much at the time, however, there was one thing he had unequivocal faith in – AMERICA.

In testimony, in front of the United States Senate Committee on Immigration, he told them, “My experience brought me to the conclusion that in the U.S. one can be anything he wants.” Later on in life, he’d visit his sister in Boston and come to the conclusion, “right then that I would find a way to make my home in America.”

Just after high school, as a frustrated youth back in Taiwan, he applied for a Visa to the United States and got denied.

Struggling in Germany

In making his next move, he says, “I had an uncle in Germany who owned a Chinese restaurant, so after graduating from high school in 1960, I went there. I knew how to speak a few sentences in English, but no German. After several weeks I went out on the street to find someone who spoke English. A biker led me to an old priest who had lived in China, and he sent me to a language school in Munich.”

Similar to Benjamin Franklin leaving Boston for Philadelphia or Elon Musk going from South Africa to Canada – and eventually to the United States. At times, one may find it necessary to leave behind everything they ever knew for the sure promise of opportunity. While only bearing a determined heart, Tu first stepped forth into the world willing to discard all that his life was for the slightest chance at all that his life could be.

He started off working as a cook at his uncle’s Chinese restaurant. His ultimate goal though was to become an engineer. This would require attending engineering school in Germany, which in and of itself required an apprenticeship of two years in the field before even being able to apply.

A Small Loft Without A Shower

He saught help from a local church, CAH notes that “the church helped John land an apprenticeship at a shipyard, but John was mocked by his German co-workers with racist comments for the next two years. His living circumstances during this time weren’t much better. The weather was harsh and he lived in a small loft that had no
bathroom and shower.”

While at the ship-building factory, Tu says, “The foreman looked at me as cheap labor, and I had to tough it out.”

Tu continues, “those two years were crucial in my life. German society is very homogeneous. There were few foreigners, and they were called Ausländers, implying second-class citizens. When I wanted to rent a room, no one wanted a foreigner. The apartment I found had no hot water. Every day the landlady would put a bucket of water in front of my door. Overnight it would freeze, and I’d have to break the ice to wash my face. Later, when I had challenges with Kingston, I would think, ‘Compared to that time in my life, this is nothing.‘”

College

Upon completing his apprenticeship, John enrolled in engineering courses at the University of Darmstadt. This time around, he was sure to complete his education!

The summer before graduating, he visited his sister in America. She earned her citizenship in the process of marrying a U.S. citizen she had met in Taiwan and was living in Boston at the time. While there, John took up part-time work as a cook at a restaurant.

It didn’t take long for him to notice the night and day difference between how he was treated in Germany versus in America. The trip confirmed every notion he had come to love about the country. This is when he decided that come hell or high water, he would do whatever it’d take to live in America.

That fateful summer ended, and John returned to Germany to finish up his schooling.

Becoming an American

According to Tu, “After getting my degree in electrical engineering, I went to work for Motorola in Wiesbaden, Germany. In 1970 my sister agreed to petition for me to become a U.S. citizen. She moved to Arizona, where I was hoping to get a job with Motorola.”

Rather, when he arrived in Arizona he found no job, no financial stability, and his first marriage ended. With nothing more to lose, he decided to take a shot at opening his own business.

An American Dream

Gift Shop

Tu explains, “the economy was bad, and I couldn’t get an interview, so I decided to be entrepreneurial. I opened a gift shop in Scottsdale, and it worked. I sold things imported from China, but after two years I had no savings. The biggest expense was the rent, so I decided to be a landlord.”

The gift shop business was barely breaking even. While he surely learned a lot from the venture, he realized it was time to try something new. What sounded good to him was collecting rent, rather than paying it!

Albert Einstein: The definition of insanity is doing the same thing over and over and expecting different results.

The Adaptable Entrepreneur

Especially concerning one’s first entrepreneurial venture. It’s easy to get caught up, trapped almost, in the idea that we have to stick to that one thing. It’s actually a scary place to be; having told everybody in your life about how much you love doing “x,” only to tell them you’re now in love with “y.”

It doesn’t seem consistent. Why should they believe you now if in a year or so it’ll just be something else?

In reality, it is consistent to switch things up. It’s being consistent with yourself. There’s only one thing we ought to be aiming to appease in this life and that is our own personal happiness – not the opinions of others.

Ron Shaich owned a cookie shop before going all-in on Panera. Richard Branson has launched over 400 companies using the “Virgin” brand name. Ray Kroc fell short on one business idea after another before coming across McDonald’s and growing it into the monster it is today. Elon Musk started Paypal, Tesla, Solar City, and Space X; His first business was selling video games he coded as a kid in South Africa.

While there are others like Henry Samueli, Donald Bren, Bill Gates, and more who pretty much stuck to one thing. It’s important to remember that there are as many paths to success as there are people on this Earth; one for each of us.

Real Estate

How did Tu start being a landlord?

He says, “My parents loaned me about $5,000, I got a mortgage and a construction loan, and I built my first building. In 1972, I became a U.S. citizen. I bought another lot, and another. I told my mom, ‘I’m famous now. I’m a developer.'”

At the time, real estate was experiencing a boom in Arizona, turning John Tu into a millionaire. He says something wasn’t quite right though. His American dream didn’t feel complete.

On a trip to visit his sister in Los Angeles, he remembers thinking to himself, “This is the place for me. You can buy Chinese groceries, and Hollywood is here.”

Simple enough. He says, “So I bought a small place in Redondo Beach and tried to figure out what was next. A friend introduced me to [Kingston’s co-founder] David Sun, who liked to play basketball, as I do.”

Camintonn

John Tu describes to Fortune magazine the first venture he and David Sun embarked on:

He worked for Alpha Micro, which designed add-on products for Digital Equipment Corp. [DEC]. I found out there was an enormous profit in making memory modules that were compatible with DEC’s machines. If we could do that and charge less, we’d still make tons of money. So we made a prototype, and it worked.

I had no experience with computers, so David gave me the product to sell. We put a phone line in my garage and ran an ad in a trade magazine. The phone started ringing, and I had no idea what to say, so David wrote me a bunch of buzzwords.

In 1986, DEC called and said it would like to schedule an appointment to visit us. I was so nervous. I was sure DEC would sue us and close us down. David and I rushed out and got an office. We asked all our friends to call while the DEC representatives were there, so it looked as if we were very busy.

The DEC people stayed two days and finally told us they knew we weren’t a real company. What they wanted was to license our design because it would take them too long to get a compatible memory product to market. When they offered us $250,000, it seemed incredible, and we signed immediately. Once we were licensed, the business took off.

In 1986 we sold the company for $6 million to AST Research. It was the American dream come true. That $6 million became $4 million because of Uncle Sam, but life was very good.

Taking a Chance

By the time John Tu got to America, he was already a professional chance taker. He had risked it all leaving Taiwan for Germany, he risked it all by leaving Germany for America after investing years in higher education, and here he is risking it all again. Why? For something more out of life.

Many who are born in the United States take for granted the opportunities that exist; actually, nowadays one can’t help but feel like there are plenty of complainers to go around.

Look what happens when a guy like John Tu –

a refugee expelled from his homeland of China after a brutal Civil War, an academic reject, he was the spring-board for racist jokes for years at the ship-building factory he worked at in Germany, when he got to America his marriage fell apart, his first business was a failure, etc.

– gets, by the slimmest of odds, a single shot at making his dreams come true. Life gave him so many reasons to give up or give in. He persisted. He drew strength from his darkest moments.

Losing Everything

John and David wised up after making their fortune. In maybe the theoretically safest money move John ever made, he says, “David and I each gave our $2 million to a money manager. Then Black Monday happened on Oct. 19, 1987. In one day we lost all the money we had. It felt like the end of the world.”

Wealth and Poverty are a Mindset

Wealth gets confused with the accumulation of materialistic objects in the same way poverty becomes synonymous with the lack of personal belongings. In reality, neither are related whatsoever to any kind of ownership.

Wealth and poverty are both a state of mind. If a person with an impoverished brain loses a million dollars they were given (They likely couldn’t make it on their own, although, in some cases they do.) then they could kiss that money goodbye forever.

Watch what happens in the case that somebody who earned their own millions, loses everything. Other than their knowledge, they have no greater advantage than the same “poverty” inclined person who has nothing. See how John Tu responds to starting over again from nothing.

The Origins of Kingston Technology

John Tu describes how they came to found Kingston Technology:

David said he could get a job at his old company. I said, “You make something, and I’ll sell it, just like last time.” He said okay, but what product could we make?

We knew the PC would replace the DEC machines. We knew how to do memory storage and upgrades. So we went back to Superior Manufacturing, which had made our original DEC prototype, and the company made some samples for us.

It worked, and friends started buying from us. We didn’t know there was a shortage of memory devices. We had no idea what we were doing — again. It was the right time, the right place, the right product.

When we needed a name, we started with Kensington because it sounded regal. But another company already had that name. I had loved the Kingston Trio, so we became Kingston Technology.

We were incredibly lucky. We accumulated cash every day and had no time to process the money. So we stuffed it all in a shopping bag, and David’s wife would deposit it in the bank the next morning.

We worried about what would happen when the memory shortage ended. When we found out how horrible service was for add-ons, we found another niche. We created a flexible service policy; no complicated return policies.

Kingston Technology History

• 1989 – Kingston differentiates itself from its competitors with 100-percent testing, resulting in quality assurance and a leadership position in the market.
• 1990 – Kingston branches out into its first non-memory product line, processor upgrades.
• 1992 – Kingston is ranked #1 by Inc. magazine as the fastest-growing privately held company in America.
• 1993 – Kingston expands into networking and storage product lines.
• 1994 – Kingston introduces DataTraveler® and DataPak™ portable products.
• Kingston achieves the rare feat of becoming ISO 9000 certified on its first assessment attempt.
• Forbes magazine lists Kingston as number 367 on its list of “The 500 Largest Private Companies in the U.S.”
• Kingston is listed with revenue of $489 million.
• 1995 – Kingston joins the Billion-Dollar Club as the company’s 1995 sales exceed $1.3 billion. Ads run in the Wall Street Journal, Orange County Register and LA Times with the headline “Thanks a Billion!” and a listing of all Kingston employees.

Tu and Sun Sell Kingston

John Tu on when he and David Sun sold Kingston, then bought it back:

In 1996, Kingston was valued at $1.8 billion. I went to talk to Masayoshi Son, founder of SoftBank, because I thought his company could carry our product in Japan. But Masayoshi made an offer to buy 80% of Kingston.

We felt responsible for the lives of our employees. If we took SoftBank’s offer, we’d have close to $1 billion to share with them. So we sold Kingston and gave $100 million in bonuses to the 450 people or so who worked for us.

Two years later Masayoshi saw it was the digital era, which conflicted with [his acquisition of Kingston].

Tu and Sun Buy Kingston Back

John Tu on when he and David Sun bought Kingston back two years later:

He told us he’d like us to buy Kingston back. At the same time, there was a huge shift in the market, with an oversupply of our products. Prices dropped. So we bought our 80% back for $450 million.

A Lesson on Being a Good Person

John Tu Continues:

The papers called us geniuses, but this is what really happened: Back in 1996 when we signed the deal, SoftBank asked if it could give us cash and stock and $300 million in an IOU that it would pay over two years.

The contract said that if it defaulted, we could take the company back. Instead, we forgave the $300 million IOU because we felt Kingston wasn’t worth $1.8 billion at the time. SoftBank was shocked.

When Masayoshi wanted to sell, he sold to us because it was a way to pay back the favor for our honesty and generosity to him. The market started to go up after we took it back, and we’ve expanded every year since. Emerging markets like Brazil, India, China, and Russia saved us during the 2007-08 recession.

**For a complete history of Kingston Technology filled with their most exciting up-to-date activities, see their website here.

Inspiration From John Tu

Overcome your ego and be honest about your strengths and weaknesses. To make the company strong, you have to figure out the best way to run the team. You should never shoot a basket if you’re better at defense or rebounding.

Show customers that you stand behind your products. We offer a lifetime warranty as long as you own our product. As a result, our return percentage is very low.

Survive first, then focus on success. Most startup companies fail because they cannot survive long enough to make a go of it. The longer you hang on, the more time you have to adjust the idea and make it better.