The company Rackspace planted their flag in the heart of Texas in 1998, and just over two decades later, the scrappy little underdog was a billion-dollar business with more than 6,000 employees worldwide. The rocketship growth was exhilarating but exposed Rackspace’s early flaws, including avoiding customers at all costs. When the mission shifted to becoming one of the world’s greatest service companies, everything changed. Suddenly, Rackspace had a rallying cry and a culture that few companies could match.
In his new book, The Rack We Built, Lorenzo Gomez shares his recollections from those days, told as only he can tell it, through stories packed with style, heart, and humor. With the principles in the book, you can create the type of culture that makes people want to volunteer their best for you.
Drew Applebaum: Hey listeners, my name is Drew Applebaum and I’m excited to be here today with Lorenzo Gomez, author of The Rack We Built. Lorenzo, I’m really excited you’re here, welcome to the Author Hour podcast.
Lorenzo Gomez: Drew, thank you so much for having me, I’m so excited to be here.
Drew Applebaum: Let’s kick this off, can you tell us a little bit about your professional background?
Lorenzo Gomez: Yeah. I’m from San Antonio, I’m an inner-city Hispanic guy who, I feel like, got my big break when I was 20 years old. Before then, I had done sort of the normal retail jobs, I worked at a grocery store, I was a receptionist at a computer store, and something really special happened back in 1999 or actually ’98.
A tech company was started in San Antonio, which was just very odd. In 2001, I was hired. I was referred by a good friend of mine named James Brim, and I really got a shot to work at this tech company that was just really magical, it really changed my life, and that’s not hyperbole. It gave me skills and training and a network and all these opportunities.
I spent a decade at Rackspace, I was an account manager, and then later I got into leadership, and I got to work in their UK office for a couple of years. It changed the way I viewed the world. I’m just so grateful for it. Then after that, I stayed in the tech startup world. I was there for about nine and a half years, then I left to go to a little startup that completely bombed.
I have my proud, “I was at a startup that failed,” badge.
Drew Applebaum: Yeah, don’t we all?
Lorenzo Gomez: Yeah. Then, I was hired by the former owner of Rackspace, a guy named Gram Westin, to help found his private foundation called the 80/20 Foundation. Then later, I went on to run a coworking space he had founded with another entrepreneur named Nick Longo called Geekdom, and it’s one of the largest coworking spaces in the state of Texas.
I ran that for several years, and now I’m sort of on to a new venture called Geekdom Media, where we’re trying to get into the media world, specifically in San Antonio. Along that time, this is my third book, so I wrote one, The Cilantro Diaries, for young professionals just trying to get in and start their careers.
I wrote another book called Tafolla Toro which is a mental health book about my middle school years.
Drew Applebaum: Now, what is the inspiration behind the book, and what motivated you to write this book now?
Lorenzo Gomez: Well, I’ve always wanted to write this book because while I was at Rackspace, I was 20 years old, I was such a wide-eyed young man and I always remembered thinking, “This is so cool. This is not normal to be a part of this fast-growing rocket ship, this tech startup.” It was downtown, which was very Sex and The City for me.
You know, I’m a 20-year-old guy with no college degree and I’m like, “I’m living the dream right now!” What was really peculiar to me was that Rackspace really cared about people and the culture, and was very deliberate about it, and talked about values and things that I had really never heard before. I completely bought in as a young man, and it really did shape my view of the world. Specifically, what we all want from work.
Many years later, there was a phrase that Graham came up with that I think perfectly captured those early years, and every job I’ve had since, I filtered through this phrase, which is, “Everybody wants to be a valued member of a winning team on an inspiring mission.”
When I look back to those early days, it’s absolutely how I felt. I always tell people, you know, Rackspace was not a very sexy category of tech. It managed hosting, it’s really the plumbing of the internet, but they were able to reframe it and have a true, authentic, inspiring mission, which is to be one of the world’s greatest service companies.
I realized, upon reflection, that any company can do what we did, and any company that wants to care about people and their culture can do it. When I look back on my nine and a half years, I realized that there were some very deliberate things that we did that worked, and some things that we did that didn’t work. I wanted to write a book to help any entrepreneur, any leader, and organization say, “Hey if you want an amazing culture, do these things and don’t do these things over here that took us off track.”
Drew Applebaum: Now, a lot of this book is based on your time at Rackspace. Can you tell us a little bit more about Rackspace and your experiences there?
Lorenzo Gomez: Yeah, I was hired in 2001, August 6th, 2001. I remember when I went in for the interview, I googled what managed hosting was and I read it 10 times, I still couldn’t figure it out. The true test was, I couldn’t really explain it to my mom. I realized we leased servers to people and small businesses, it was a B2B company, we had data centers full of servers that we were renting out to people. In hindsight, it was very much like real estate. We managed everything and I was an account manager.
I had, when I first started, I had some ungodly number, like close to a thousand customers assigned to me, and then, later on, they hired more account managers and they broke us off into these teams. What we really did is we were sort of the outsourced IT department for a lot of companies. If you had a business that especially made money on the internet, back in those days, hosting was critical, you couldn’t be an expert on the newest version of Linux Apache that came out, and most people didn’t want to do that, so they would rent that from us.
What was special about Rackspace though was we were in an industry that was famous for ignoring and mistreating its customers. I think everyone listening probably has an experience of trying to call a tech company and getting lost in the deliberate phone maze or having some bureaucrat just not want to help you. I remember a day when I was at our company all-hands meeting, and this is in the book, our CEO said, “Raise your hand if you’ve tried to call the cable company recently, and keep your hand up if you actually talked to a human being.” We all just started laughing.
He said to us, “We’re going to be the company that answers the phone every single time, and we’re here to help our customers,” and as a young 20-year-old, it was so punk rock to me, and I thought, “Yes!” Because we all hate that experience. Then what they did, this is what was really brilliant, is we had a core value called fanatical support, and it was a way to bring that sentiment to life. They said, “We deliver not just good customer service but fanatical support to our customers.”
It was sort of the rallying cry and every other company that was in managed hosting said they did 24 hours support and said they did customer service, but fanatical support was what we used to really achieve extreme differentiation in our space.
Drew Applebaum: Now, a company’s core values are their immune system, and those are your words. What are some core values that a company should look to adapt and what are the questions they should ask themselves to find out which of those values work best for them?
Lorenzo Gomez: I have given this a lot of thought. Core values can, for a lot of people, fall into that really boring category of business-y stuff that’s on the wall in your conference room. When I look back at Rackspace, I realized that we did a good job. Most of the core values that I wrote about in the book were real and they weren’t manufactured, they were born out of real situations and people that brought them to life. Fanatical support being the main one. What I realized when I started studying them and studying other companies is that a good core value lets you do three things.
It lets you hire people, so it helps you evaluate the people that you’re going to bring into your family. It helps you fire people when people are not matching the values of the company. But the biggest thing for me is, it allows the individual contributors to make decisions when the leader is not there. I remember being a young 21-year-old and I had to make a decision, am I going to give this customer $5,000 back because their server went down?
I remember so many times, there was no one around, the customers on the phone screaming and I looked at our core values and I went, “Well, I think that we failed in our fanatical support promise, and so I’m going to do this, and I’m going to give them back their money.” What I realized was I was never going to get in trouble for doing something based on our core values, that was for the customers.
That core value was real because it helped me make a decision. Then I think what people need to look out for is, are there real stories that bring your core values to life? We had so many stories for each core value, and I wrote about as many as I can remember in the book, to say that these are actually real things. The problem is that most people struggle, they think they have to have five, and they all go to the best practices core value, I’ll say. It’s integrity about everything, or it’s a passion for excellence, and these things are really meaningless to your employees, and they’re very hard to bring t0 life. I would say, for anybody listening, start with one real core value.
What is one thing that you want to train people on when they get in the door that will help them make decisions when you’re not there? I think a lot of companies that are already in existence if you go ask the frontlines or the customers, they will feed you back the stories, and hint around what those values are.
Drew Applebaum: I think most companies want to adopt these values and some of them might try too hard to put keywords, as you’ve said, on the wall. What happens when a company’s values change, but leadership isn’t 100% aligned with them?
Lorenzo Gomez: What a great question. I think that one of the true tests of a core value is your leadership. I write in the book because I was at Rackspace when we were small and then after we went public, that I noticed a huge shift. I remember, before we went public if I took a transcript of all of our company meetings and I dumped them in a big database and I did a search for the most commonly said terms or words, customer service, fanatical support, there’s no doubt in my mind, it would have been in the top five.
We talked about fanatical support so much that everyone knew what it looked like and what it didn’t look like. Then, when you go IPO, what happens to all companies that do, is you start seeing a new term, which is “shareholder value.”
I think that what happens is that every employee is looking to the very top of the company at the leaders and whatever words come out of the leader’s mouth the most, tells you what they really care about. If the leader isn’t bought in 100% on those values and talks about them or the mission, then everyone else will look and go, “Well, it’s actually not real, and why should I pay it any importance if that person doesn’t?”
I write in the book that it starts at the top, if you have a leader who doesn’t believe in them and doesn’t talk about them, then there’s no reason for the rest of the employees to believe them.
Drew Applebaum: Now, you brought up the IPO and so I’d love to know more about what happened with the Rackspace IPO? The successes and its failures and why this was the beginning of the end for you? Mostly because a lot of people work at startups and wait for that IPO. It makes their equity in the company actually have a real value and it’s usually seen as, “We’ve made it.” Yet the opposite actually happened for you.
Lorenzo Gomez: I’ll just remind the reader, this is my own personal experience, but I think that there are so many lessons to be learned. I’ll just say this, I remember exactly where I was the moment we went public, and it was a really magical feeling to be a part of it. I’ll probably never experience it again, but I was so honored to see what it was like and, in a way, it sort of felt like a finish line. The market finally gets to see our big debut, and then quickly, the stock price fell and we were found wanting.
There were so many great lessons in there. I think what happens is, I talk about this concept in the book a lot, is every company has or every employee has a sort of a market agreement whether it’s written down or not. I’m going to pay you X amount of dollars, salary, or whatever it is, in exchange for you doing these things. But everyone also operates on a social agreement. Dan Ariely wrote about this well in his book, Predictably Irrational. I try to expand upon that idea, which was, in a social agreement, you’re willing to volunteer more just based on the mission. If I ask you to help me move and I try to pay, you’re going to say no, we’re friends.
Well, with companies like Rackspace, so many companies out there have these unwritten social agreements and what happens is, when you go public, there is a new social contract that is introduced that no one talks about. The social contract goes like this–we love the culture, we love all the perks, we love everything, the meditation room, however, there is a new component that supersedes all others and that is shareholder value.
If you don’t achieve shareholder value at X growth rate at X percent, or whatever, then we will sacrifice, without hesitation, these other things in service to shareholder value. Because I was very naïve and I didn’t expect that change, you feel very betrayed when people’s behavior changes to serve this new master.
I think that, to your earlier point, there is so much good that comes from an IPO, which I also write about. I had shares, and those shares gave me such a financial break and allowed me to write the books that I write. There was so much wealth created in San Antonio that ended up becoming new companies and new ventures, and there was so much good, but what I realized was there was a social agreement that was fractured for so many people that didn’t have shares to retire on or to start that new company.
I think that the reason I wrote about it was I wanted other companies to be more intentional about communicating the shift when it happens so that their employees don’t feel betrayed. It’s not that everyone felt betrayed, this was just my experience as we were shifting the tone and the words we use. It just didn’t feel right to me.
Culture and Values
Drew Applebaum: Now, you talk about culture in the book and you talk about values. Are they one and the same or are they different, respectively?
Lorenzo Gomez: I think that they are very different. I think that the culture is sort of this macro high-level idea of what everybody wants. They want a good culture–actually, there are different types of cultures, and I wrote about this in the book. I used to think that the military had what I would call a culture that I didn’t want to work for, or I would say a terrible culture. It’s like command and control, do what I say, yes sir, no sir, charge that hill, no questions asked.
I realized that that was a very unfair assessment on my part. What I realized was that was not a culture for me, and that I know many people in my family that have joined the military and they love that culture. They love serving because they love the mission. The inspiring mission is that I get to serve my country, and this is the greatest way I can do it. So, it has a culture. It just wasn’t a culture for me. The values are what every soldier does when they’re in that culture.
I think that that’s the separation between culture and values, is the values are how you bring the culture to life. I think that most companies struggle to give their employees at least one real value so that they can bring it to life and show the world how their company is different.
Drew Applebaum: Are there people right now or companies that are leading the way in terms of creating positive culture?
Lorenzo Gomez: I will say that even Rackspace, they went public, got bought by a private equity, Apollo, and then they just went public again. I’ll tell you, there are so many people there that I worked with, that are still there doing amazing things. I will always have a soft spot for Rackspace and the culture that they created in San Antonio, because they could have chosen to move, and everybody was telling them to move since day one.
I love Rackspace as a beacon for the culture experiment and the things that they still do because they still have a lot of the traditions and rituals alive there. I am very proud of what Rackspace has led in the cultural world. When I was there, we would also study other companies. Zappos was one that we studied a lot. I got to meet Tony Hsieh and his team, and it was just so amazing. He wrote a book called Delivering Happiness, where he spends a lot of time talking about their core values.
You know he has one core value–that’s be humble, and I remember we were in a meeting and he said, “You know, we interviewed this Harvard MBA guy and there was nothing humble about him, but we knew he could add to the bottom line right now, and we chose not to hire him because there was nothing humble about him.” I thought wow, there’s a real example of bringing it to life in the hiring process.
There are a couple of other ones that I really love to study, Patagonia is one.
The founder, who’s name I always struggle to pronounce, he wrote a great book called, Let my People Go Surfing, and I think that he is a great example–you know his company is now B Corp, which is really his way of saying, we care and want to be deliberate about investing profits in the environment, and doing the right thing for our planet. That is not just something I think Wall Street would ever allow a company to do if haven’t have steered it in that direction.
I love this, I think they’re a punk rock because they are trying to be really radically different than the way most of the companies do. I also think about Pixar. I watched an interview where Elon Musk was talking about his innovation strategy, and he said, “If you want innovation, if you are going to go to Mars, it is a whole different way of thinking,” and he said, “In our world, you get the most reward for trying and succeeding. There is no penalty for trying and failing, but to not try at all is the greatest penalty, you’re fired.”
So, our incentive structure is designed to drive the thing we want, and I went, “Wow, there is a social contract if I ever saw one.”
Drew Applebaum: Now when you adopt a culture and values here in the United States, does it always translate abroad? And I will tell you from experience, I worked for Yelp for a long time and they changed none of the culture values when operating abroad and it ended up being a huge failure.
Lorenzo Gomez: Wow that’s really interesting. So, I am sure it is definitely hard, and I will tell you that there is always going to be the sentiment of the mothership. What is the mothership up to? And those guys don’t get it. I would say that even when Rackspace opened an office in Austin, we still saw that because the headquarters are where the decisions are made. It is where the real careers have upward mobility. So, there was always this tension, but I write about this in the book as well.
When I moved to the UK office for Rackspace, I was blown away by how they actually adopted the core values, they lived them out, and they actually improved upon them. This was what was so cool to me, was that the UK office–it was so awesome to see how they took it. I think it was because they were real and I want to give credit, especially in the leadership. The leadership of Rackspace back then was so deliberate about making sure these things were front and center and they would go to the UK office all the time. They would visit, and they would have their leadership come over to the US to see how we did things.
There was so much time invested that when I moved there, it was literally like picking up where I left off. There is a story in the book about how we celebrated–one of our values was, “Treat Rackers like friends and family,” and I will tell the story. When I left the US office, my best friend is this guy named Dex Moreno, and as a parting gift, he bought a flag of Texas, had everyone sign it, and gave it to me.
When I got to London, I got to my desk. There was an effort to make the office kind of more celebratory. They wanted to celebrate diversity and they were taking ideas and I said, “Hey, I have noticed in two weeks that everyone here is from another country, and it’s so cool because, in my neighborhood, I only met people that looked like me.” The person I was talking to said, “Well, what are some ideas?” And I said, “Why don’t we have people put something from their country on their desk?”
He was like, “That is a great idea.” So, the next day, I brought in my Texas flag and I hung it over my desk and the guy next to me was an amazing Racker named Michael Petri and he was from South Africa. So, he had heard me and brought in his South African flag. So, boom, he hung it up. Then we were in these pods of teams and three women across from us were all from Britain and they were like, “Oh, no you didn’t,” and they overnighted three St. George flags and then after that, it went bonkers.
Every person overnighted their country’s flag. You walked into our office and you were just overwhelmed visually by how many different countries were represented and it became this amazing conversation starter, a real conversation starter. I walk up to this guy from Austria and I said, “Hey man, tell me about this Eagle on your flag,” and he was like, “Oh that’s the Steinadler, Lorenzo. The Steinadler, he’s smaller than the North American bald eagle, but he’s faster and he soars in the Alps.”
He got up and he started soaring around the office and I just thought, this is the coolest thing ever. What happened is the flag had such an impact that it went back to the US. So, they took something that was started in the UK and it became a tradition in the US. So, everyone in the US was hanging either the place they went to college, the state they were from, and then they adopted a new flag tradition where you reach 5 years or 10 years and they would give you a flag.
But let us just think about the transfer of culture to the UK office. Not only did they live the core values, but they could have shut me down. They could have said, “Hey, it is a fire hazard to have your flag up,” but they really embraced it. I think to your question when a company struggles you have to go to the leadership. The leadership sets the tone always and forever, and if they are not brought on board, then very quickly people will notice.
The Diversity of Diversity
Drew Applebaum: Now you write about interesting experiences with diversity in the book. Can you tell us about your experience and the diversity of diversity as you call it?
Lorenzo Gomez: I think that diversity is such a complicated topic that is discussed today. There are two stories in the book that I think have really shaped how I view diversity, and the first one is the flag story. I just remember thinking, “I am living in London.” It is this amazing metropolis, it’s a melting pot, and so we didn’t even have to try. Every job offer we put out there, there were tons of candidates and I feel like all of them were from different countries.
I was just blown away by how automatically diverse we were, but what happened is we didn’t put out job offers saying, “We are hoping to have,” because the UK was called the EMEA office, which stands for Europe, Middle East, and Africa. So, we didn’t say, “Hey, we need someone to represent Africa.” We had such an amazing pool of talent that we just hired the best person for the role, and it was automatically filled by a diverse pool of candidates.
So, I remember, and I tell the story in the book, I grew up in a very, very 100% Hispanic neighborhood and when I moved to London, I met the first person that was Muslim in my life. He was a Windows engineer named Shoab, and this dude was amazing. I remember, when I first met him, I didn’t know anybody, he invited me to dinner, and I tell the story in the book. We just had this awesome conversation about Islam, Christianity, and Tupac.
He loved Tupac. I remember sitting there and thinking that I was so lucky to work in a place where they did not advertise–they didn’t say, “We need religious diversity in the office.” They said, “We need a Windows engineer who’s super awesome,” and Shoab is the best candidate for that, and I got to consume from that diversity. Now most companies don’t have the luxury of being in London.
The other story I tell is about one of the big innovations we did at Rackspace, which was cross-functional teams. Like a lot of places, we were very silent at first, then one day, through calling our customers, we realized that we needed to form these little mini-companies within the company. They would put an account manager next to a sales guy, next to three engineers, next to a backup specialist, next to a security specialist, and we were a little team. We got assigned a bunch of customers and we were just there to take care of those customers. So, when a customer would call in, I could solve all of their problems in one phone call.
“Oh, your server is down? Let me get an engineer right on the phone for you,” boom. We sat in these very low cubes. What happened is that we were also super diverse even though we were in San Antonio, which is a predominantly Hispanic city, our roles were so diverse that it brought in a very diverse pool. I think that, to me, the category of diversity is only ever looked at I feel in terms of race and gender but there are all these other categories that people don’t look at.
When we look at the cross-functionality with the role of the team, the nationality of things like what I saw in London, I realized we are only pigeonholing ourselves and I think that you can achieve true diversity if you go about it the right way, the way that we did in those two examples.
Drew Applebaum: Lorenzo, writing a book is no joke especially your third book. So, let me first tell you congratulations.
Lorenzo Gomez: Thank you.
Drew Applebaum: And the last question, if readers could take away just one thing from your book, what would it be?
Lorenzo Gomez: I will say this when I left Rackspace, I was a little bit cynical about can you scale great cultures to the highest level? And now, I can proudly say the answer is yes, but it is just hard. So, the disclaimer is, it is very hard to do, but I am inspired by companies that I meet every day. The whole book hangs on the ark of that one sentence that I heard from Graham, which is everyone wants to be a valued member of a winning team on an inspiring mission.
I think that that one sentence is what the whole book is about. It is 200 pages around that one sentence. I think that that is what I want people to take away, is that if you are unhappy, one or more of those three variables are off. If the company is off track, it’s because one or more of those three variables are off. The beautiful thing is, it’s 3 variables. It is not 10, they can all be put back on track with some deliberate focus, and I think that the great companies always go back to that, whether they know they’re doing it or not.
Drew Applebaum: Lorenzo, this has been such a pleasure. I am really excited for people to check out the book. It is a great read. Everyone, the book is called, The Rack We Built, and you can find it on Amazon. Besides checking out the book, where can people find you?
Lorenzo Gomez: You can reach me at lorenzogomez.com, or I am on all the platforms, @lgomez123 is my handle on most of them and yeah, you can find me on Facebook, LinkedIn, Instagram, all of it.
Drew Applebaum: Awesome Lorenzo, thank you so much for coming on the podcast today.
Lorenzo Gomez: Thank you, Drew, I appreciate it.