212 - Innovative Paths to Success: Lessons from Silicon Valley Tech Pioneers with Rob and Terry Ryan

Welcome to Listening with Leaders. I'm Doug Noll, lawyer turned peacemaker. I teach executive leaders how to listen to emotions rather than words so that they can become the leaders everyone wants to follow. And I teach those same leaders how to be authentically present, available, and connected to their families despite being insanely busy. I have learned that we are 98% emotional and and only 2% rational. Learning how to listen to emotions is, in my experience, the foundational skill of life. Stick around to the end of the show and I'll reveal how you can be on our next guest in 15 to 20 minutes. So let's get started.

Rob and Terry Ryan, welcome to Listening with Leaders. I have been interested in this conversation because You guys have lived a pretty amazing life. For those people in the audience that don't know, Rob is a math and physics guy out of Cornell. You guys were a couple of years ahead of me when I was at Dartmouth. But you, your career was in the— basically, you were the guy that saved Silicon Valley. You saved the internet. And the story is really amazing about the technology that you developed using T1 and T3 lines. To try to get the old kludgy modem system that people were using, ISPs were using, into something high, much more efficient. And it was that product that allowed the internet to explode into what it is today. And without it, somebody would've come up with something, but you were the guy in the right place at the right time and profited enormously off it. Would you sell your company for $22 billion to Lucent or something like that?

Actually more.

That was a big payday.

I hope for you.

I hope it was a big payday for you. Anyways, that's just a very brief summary of a brilliant career. Welcome to the show. And maybe you guys could just talk about your backgrounds a little bit. Terry, you were like me, a lawyer, and Rob, you were in engineering. And just tell us a little bit about the beginning days back in the, back when everything was new.

So I was a lawyer. Rob put me through law school. We'd been married 7 years when I started. He actually did all. I want you to know he did all the housework and the cooking for the 3 years I was in law school. That was the deal. I went with a large law firm and I just quickly discovered that I really didn't like litigation, but I was really good at negotiating win settlements for clients. The partners at the law firm I was at didn't really like that because it didn't engender a lot of these trial fees. And so I went with Rob's encouragement. I went with the Silicon Valley firm in-house, which I just loved that job because I could keep my clients out of trouble to start with. And if they got in trouble, I could devise a, and negotiate a win solution that everyone was happy with.

And so you were in-house counsel back in the days when all us lawyers thought that people that went in-house were crazy, right?

That's right.

I remember, and now being in-house is a thing. Who wants to be in a big firm where you can work in-house?

So I went to Cornell in math and physics, as you mentioned, then my career concentrated on everything with respect to networking computers. So early on, one job had me building V32 modem way back when modems were the only way you would interact with the internet.

I think we got to tell people what modems were. They were modulate-demodulate. It took an analog signal and sent it over telephone lines, and that's how data was conveyed over telephone lines. And we were lucky to get 2K bits. That was a high speed.

Exactly. And so that was my first incursion into the internet. Another The first job I ended up was at Intel Corporation. And I was the representative, my team was the representative of a trifecta of Intel, DEC, and Xerox. And we were designing and specifying what became the international standard for Ethernet. Inside of Intel, we built the Ethernet chips, the first chips to represent Ethernet. And for those that don't know what Ethernet was, let's say it's a high-speed local area network that at that time was 10 megabits. It's much higher right now. And it's used really as the backbone for all the server farms that run the internet.

Like Google's server farms.

Or Amazon's or any of them. And if you have a computer.

There may be people that have not just wireless networks, but you may have cables that you plug in with Cat5 cables, and that's Ethernet. Plug into your computer and then you plug in a router and—

Yep.

That's how it works.

So that was the kind of the next incursion. I kept staying in computer networking. I also had an incursion with Digital Equipment Corporation in Boston where I was part of a an architecture design team to design the protocols that would run DECnet. DECnet was at that time a competitor to IBM's S/4. And S/4 was a centralized architecture with a central computer talking to all of the minions, whereas DEC was distributed. And we were designing distributed routing algorithms. I was congestion and packet aging. So it was really very interesting. Not only did we design them, we also implemented them, made sure they all interworked across all of the boundaries of the different computers that DEC had.

That was a packet switching network.

Exactly. And making sure that, making sure the data was sent, transmitted, and received, you were getting exactly what was sent. Checking all the time back and forth. Were you doing, was this hardware design or were you doing software design or both?

I was doing software design because this was a protocol design and I was with a small group and there was mathematicians. I had my boss was a mathematician from Harvard. I was a mathematician. The other guys were either math guys or physics guys. And we were designing algorithms that in fact we could prove correctness on. Meaning that the algorithms terminated, they terminated in finite time, and they terminated in the correct results. Something up to that point had not been done. We published papers, they were published in journals, and I think some of my routing algorithms, overlaid routing algorithms, are still used at DEC and other and other places. Then in 1990, Terry, I, and 3 co-founders founded SEN Communications. And initially we ended up doing communications equipment for video, but video wasn't this video, was not Zoom.

It was room video.

That was all you had. And we migrated from that or added to that. We had an ultimatum from the board of directors that we had about a $17 million business, profitable but barely, that if we didn't get a bigger business and real quick, they were just going to sell the company for about $30, $35 million to whoever. And they had bidders, so they could actually do that. The interesting thing of that whole episode is the way they had structured their venture capital to us is They put in about $16 mil total, and they get 2x back before anyone dipped in the pool, which just corresponded exactly to the number that the sale of the company—

I could read it through the work.

It was a coincidence.

Yeah, absolutely.

I wasn't real fond of that. Neither was the co-founders and the rest of the company. So we, let me just say, we convinced them to give us an opportunity. And when we got that opportunity, it had the following constraints. You have 6 months, you have to invent a whole new class of products, build it, and have customers. And if it shows market promise, then we'll support you and move forward.

Otherwise, we're selling the company.

Wow.

Was the deal. I went off with my lead engineers. And I began to think about how do you collaborate with a group of people that are very bright, high-strung, and you have limited amount of time to do that. And I invented on the fly the Sunflower Code. And the code is very simple. It has 3 stages to it. Stage 1 is the collaborative effort by which you're mining the core competencies of the company. All of us were digging in and trying to figure out what the heck are we really good at?

Unique.

It's valuable to the accounts. It's leverageable. Those are three criteria that we use. We came back and said, we're really good at digital or analog dialing any place, any switch, any protocol. There was a lot of Emmys. Okay, so we wrote that inside the center of a circle. Okay, and then I told the team, okay, let's have some fun now, and you can ideate, innovate, create any opportunity, product, service, as long as it uses about two-thirds of our competencies. You can't just go off and Neverland and float a balloon up in, in the air. So the team came up with a whole bunch of market areas that we might be able to utilize our competencies. For example, the internet, remote access, telecommuting, the old space, the video space.

It was a whole bunch of them.

So we put them up on a whiteboard and then I said, how are we going to distinguish between them? How are we going to collaborate together to come up with a choice? Because we can't afford to mess this up. We got to make a choice and then we're going to have to do more work. But if we mess it up, we're gone. So I, as a logician mathematician, said, why don't we build a criteria set? And they said, what the heck is a criteria set, Ron? And I said, some of the criteria we already talked about. Uniqueness, the size of the market or the rate of growth of the market or the competitiveness within a market. We started putting down criteria and the criteria then became the y-axis. The x-axis was all the opportunities and we had ourselves a decision matrix. And then inside that decision matrix, I let each person vote from 0 to 10, 10 being a perfect score and 0 means it's really the klutz, or anything in between. And when we did that, the real interest is when we had major disagreements. For example, if 4 people said an 8 or a 9 and Doug comes back and says it's a 2, I was really excited because that means Doug knows something the rest of us idiots don't know, or Doug's a moron, one or the other. Okay. So we needed to now dig in and find out which it is. And half the time, the person knew stuff the rest of us didn't, and half the time they were just completely off track. This whole process took days, but finally we came up with a ranked order of the markets based on our criteria set. And it was the internet infrastructure in first place, and in fifth place, our current $16 million business was sitting. And so I asked the team, how do you like what we've been doing? And I remember Jeanette, the co-founder of running engineering, said, I really love this process, Robert, but somehow we have our current business in 5th place and I'm really a little nervous on that. And I said, Jeanette, we can go over this again and you may have hidden some criteria from me. And we'll just go back through the whole team and we'll do it over again. And of course, the thought of the whole team doing this again was way too much for them. And so the question then said, what do you want next, Rob? And next is the second stage, which is the feedback stage, which is the walkabout. We set up 3 or 4 questions we were going to ask and we targeted 200 Internet providers in the United States.

You have to describe very briefly what an ISP looked like back then. It wasn't what it is today.

An internet provider then might be called MeritNet or SurfNet, BarNet, and they serviced a small area. And then they may have serviced, let's say, a portion of San Francisco or a portion of a town. And they had these things called POPs, Points of Presence, and inside there were buildings. And inside they had all the modems and the wires by which when you dial in, it was received there and put on the internet.

Their back rooms were really ugly because they had the modems, were the personal modems, and they were shaped like this dome. So they couldn't be piled up. They were just— on these tables in their back room. One per call you had to have.

Wow.

So what we had concluded is, and our hypothesis was that we could build something for these guys, but then we walked around and talked to them. And after talking to about 150 of them, we got in to see, we realized that we had reasoned ourselves through a collaborative process process sunflower into a gold mine. Not only was nobody in there, they actually— all the competitors had been in there and rejected it, and none of them had any technology to actually serve the market. On the walkabout, I selected 2 or 3 of the accounts that were really gung-ho, and we started a collaborative process with them to design the product. To design the product. So I also went one step beyond and I asked them for an order. So why would I ask them for an order? I remember I had to go back.

Hold on. I just want to make it clear. You're designing a product to replace all of the cabling and all the individual—

Yeah, yeah.

All of the stuff in the back room.

The plants, all that.

Yeah. So I asked them for an order. They thought that was cheeky, very cheeky. And they said, how are you going to price it? And I said, you already told me how much it costs for you to put 100 users on. It was about $1,000, $1,200 per user.

Wow.

$20,000 for 100 users. I said, oh, $50,000. I'll construct the box that services all your 100 users and it'll also talk all the protocols. It'll do two jobs. And they said, oh, that's a really That's a good bargain. And then he said, "Well, how do you know you can make it and make money?" I said, "Trust me. I know I can make it and I know I can make money." So off we go with checks. I get checks. They give me checks for 2 units. And I go back to the board with 3 checks or so, waving checks around, and with the telephone numbers of the people from the— So the board then calls all of these people to make sure that this wasn't some really grand scheme by Rob, and they find out this is real. This is like real.

Oh, wow.

So then they, all of a sudden, they're throwing money at us. Now they want to give us more money. So they forced another $11 million on us or something, money that I didn't want. Anyhow, we get the money. Now we're running on it. We're building the unit and we're literally testing it in these accounts. And they're— of course, the feedback is immediate. I literally had Jeanette and engineers down to get the first prototypes. We just took the old video product, which had T1 and T3 lines and everything, and we cannibalized it and we added the internet software onto it. And lo and behold, we got something working so that it could be tested very quickly, so it could be tested down at the internet providers. And meanwhile, we were doing a new unit. And they loved it. And when they started to tell all their friends, who are their friends? Their professional friends, all the internet providers in the world. And we started getting orders. Please send us 4 units for testing, for deployment. And so Ascend's revenue went from $16 to $40 to $180 to $600 million. To $1.3 billion. It just went Nike curve, straight up. Obviously, the board at this point was all in. They were all in. I appreciate that, by the way. And we had our IPO in 1994, 5 years exactly after I had started the company with Terry and the founders. And then I left the company 2 years after that, 2 years plus after that. And we sold the company for $24 billion to AT&T Lucent, which you have to remember, that's billions in 1990 money.

It was the largest sale of a venture-backed company in the history of the United States.

And it remained that way until recently.

Yeah.

For more than 20 years, held the record for a venture-backed company in Silicon Valley.

And you had shares in the company, right?

Oh, of course.

So you did well.

Yeah. So Terry and I moved on to Montana, a ranch on Montana.

It sounds like some sort of dream, right?

And a beautiful estate up here in the Big Island of Hawaii. And those two places we still have, they're home.

But everyone at the company did well. Rob made sure that everyone in the company had stock, even the 18-year-old who answered the telephone had enough shares of stock that if she sold at the right time, she would have made a million.

Yeah, that's—

Carrie's correct.

Everybody had equity in the company from the receptionist to the whatever.

Carrie, what were you doing during all this time? You were in law? Were you progressing working in-house?

No, I started with Rob when we started Ascend.

Oh.

What happened was this. They were in my kitchen. That's where the startup was. No, not in the garage. It was in my kitchen. They got the $3 million check from the venture capitalists when the venture capitalists decided to back them. At that point in time, you got a lump sum. It was up to you to do something with it, right? They don't do that anymore. They have measurables and milestones and you don't get the next lump.

Until you meet those criteria, right?

But Rob was like, I'm really nervous about this. Having this check, do you think we should drop by our bank and deposit it into our account? I'm like, no.

Bad idea. Bad idea.

So I went out the next day and found them an account. And then I had to go find them a facility in order to get them out of my kitchen. And then somebody had to answer the phone at the company and somebody had to set up all those personnel files, which I knew how to do because I had been the attorney that handled the personnel department at the company I worked for. I'd also been the attorney that handled the finance department. So I knew how to set all that up.

So that—

It's like you became the chief operating officer.

Yeah, pretty much did every single job I didn't want to do. And I didn't want to do any of the administrative jobs, nor did the co-founders.

I even learned how to do purchasing, those little— I would call up the providers and the suppliers and go, can you sample me those 7-point chips? And I almost always could get quite a number for our product to be using our prototypes for free.

So there you go.

That was pretty amazing.

Rob, did you—

I heard on another interview, I heard you say that the total cost of one of these devices was like $500.

Oh yeah, I forgot to tell you that the total cost was in a bill of materials, etc., was $500. So the $50,000 did cover it. Totally covered it. And you're very happy with the margin.

Labor costs were another $500 to assemble the thing?

Yeah. No, that was total cost. Packaging, everything.

$500.

Yeah.

When they went public and they had to reveal what their profit margins were and they were 64%. So one of the internet service providers who had helped Rob design this product called up and said, Hey, I had no idea that your profit margins were that great. We're going to have to renegotiate this. And Rob said to him, that's why they call them gross profits.

Gross margins, I said. I thought the word gross meant gross. And it was Bernie Schneider at Sprint. He was the head of Sprint's data at that point.

Didn't you put him on the board later?

Later, he was on the board many years later. But yeah.

So Terry, you stayed with the company all the way through to the—

No, I didn't. No. Yeah. One of the dramatic points in the movie is when my husband fires me.

Really?

Yeah.

You're going to have to watch the movie. We're not saying any more.

No spoiler alerts, huh?

Yeah, no spoiler alerts. Not going to do that.

The person at his first company—

Spoiler.

No, come on. The person at his first company who managed all that at the first company he founded had been laid off the day of the earthquake. That was 1989, the day of the earthquake, big earthquake, 7-point earthquake in San Francisco.

I remember.

And she called Rob up the next day and said, and told him that he, she'd been laid off. And I was having some issues with the head of engineering. And so Rob was just internally torn apart by that. So he told me to go home, do the legal work from home. And the person that everybody knew and loved, because all these engineers had worked for Rob's first company. And so she came in. It was a very smooth transition. Actually, nobody at the company realized that Rob had fired me, but I realized it and I was really ticked off.

I always love when we get to this point in the conversation.

Right.

Not that he was paying me because he never paid me a nickel for working.

You've now opened up a Pandora's box, Doug. Thank you.

So Terry, what do you do?

What do you—

so now your husband fires you from the job, but now what do you do with yourself?

We had sold our first company, and so the money that we got from that needed to be managed.

Okay.

It was— what had happened was For a while, the interest rates were so high in the '80s that you could get 13% for a 20-year Treasury bond.

That's right.

So that was a no-brainer. But when those interest rates were taken down, you needed to figure out how to invest the money. And it turned out that I'm fairly good at that too. So that was my next iteration.

There you go. So what— I'm just curious, if you look back on this amazing career that you guys have had, What if you're thinking about lessons that you would talk to younger people and say in their 40s or maybe even in their early 50s, what kind of lessons do you have for people that are coming behind you? And just in terms of leadership and creativity and running businesses and stuff like that.

So several lessons, I think.

And it's a good question, Doug. I don't think leaders exhibit much courage any longer. They blow with the social winds. And I think you all, everybody has seen that, whether it's in politic or non-politic, right?

You've seen that.

I think I would suggest to people, if you're going to be in leadership roles in a startup, that get a backbone.

And the other part is, It helps to have a moral compass.

It helps to have values. You can't be sliding your values around depending on the person that you talk to in the company. I had, for example, a Post-it rule. You remember the old Post-it slips? I still love them. And if you came in and you were interviewing, let's say, for VP of something or other, and I'd ask you at some point and say, hey, we're interested in giving you an offer, but what is your current salary? And you'd say, oh, I need to get $250,000. $100,000 or whatever. And I thought, that's interesting. Um, if I did that, I would literally have to post it on the Post-it and stick it on the front door. And the minute I did that, it would be a violation of the trust that is built up in all of the company, because the highest salary in the company at that point was $90,000, that being me. And most of the salaries were at the $70,000 and $80,000 K range, and I'm not going to break that trust. And so if you can't burp all the way down, which is a big ask, and then we can't go any further.

And I would show them the W-2.

I would show them the W-2. And most of the people that still wanted to hang in there, and that was most of the people, would go back and want to talk with their wives. And I'd say, I'm going to do that one step better. I'm going over and inviting myself to dinner so your wife can actually ask all of the questions directly to me. But she's got to cook a dinner to do that.

And I had a lot of dinners and a lot of really good questions.

And basically it summarized to, yeah, he's going to get paid a whole lot less. He's going to work about 50%, 60% more than he ever has. Probably is not home on weekends except Sunday, and he's going to be late on weekdays. So all around. And oh, by the way, I can't guarantee you that the stock certificates are going to be worth anything, maybe toilet paper, but may not even be worth shit. So that was the conversation I would have with all of the engineers and whoever I was hiring.

And Lo and behold, people like directness. So there's the other character trait. They love directness and they love that you didn't vacillate.

You were constant.

Um, the other thing I think that people need to think about is workplaces can get tense.

I created collaborations and I have a good sense of humor.

And so laughter was constant.

And laughter can diffuse.

It diffuses. And if you laugh at yourself, that's even better because everyone loves that. And so I think humor is very much part of my equation because otherwise things can get heated.

And then finally, and extremely important, is listening skills.

Yep.

Most people talk too much and listen too little. You need to reverse that.

And that's what I teach. I teach people how to listen.

I know you do.

And it's a good skill to have.

It's essential. And I teach people not how to listen to words. I teach people how to listen to emotions. Because when you listen to emotions, you're really finding out what the deep meaning is of what somebody's trying to convey. And it's an extraordinary skill to have. Teri, I'm wondering, you and I are both lawyers. We were, we came into the law around the same time. If you were talking to a young person today thinking about being a lawyer, what would you say to them?

I would, of course, advocate for the kind of job that I had. First, I was in-house with this Silicon Valley company that, by the way, was focused on packet switching networks. And the reason they hired me, Doug, was because when they interviewed me and threw all this jargon at me, I was able to respond. It was just dinner talk for me.

You were probably surprised at that, huh?

And I just loved, as I said before, keeping my clients out of trouble. That was very rewarding. But as law is a very good background for business. And so I didn't have any problem migrating to the business aspect of things later. And I also, when I was at Cornell, I majored in sociology because it was considered pre-law, but I minored in economics. And that has stood me very well now because he doesn't like to be— he doesn't like to do the investment thing. And I have— I'm pretty good in economics. I'm also partially because of that currently on the board of directors of the Hoover Institution, which is very much into the economics.

Right. At Stanford.

Policy.

Yeah, Stanford. Condoleezza Rice.

Yeah.

And it's a good organization.

It turns out that Dr. Rice is a member of the same golf club as my mother-in-law and they play golf.

Oh, she loves golf.

She also is a 49er fan.

I just thought I'd add that.

And I'm a 49er fanatic.

Rabid 49er fan.

Rock Birdie, go.

Right. Number 13, our lucky number. Our company went public on Friday the 13th.

Oh, there you go.

At $13 a share.

Wow. Yeah, I think that I tell young people that legal education is really powerful, but you don't have to be a lawyer to, to, you can use a legal education in a whole bunch of different ways that are, because you learn how to think and you develop some really powerful analytical skills. And so it's really useful for that. There are very few people I would recommend, say, go practice law today. It's a miserable way to make a living, I think, from what I can tell, looking at the outside now. But that's just my opinion. One more thing. One more question for each.

One more thing.

One more question, and then we'll call it, we'll close it out. I want you to each tell me one thing about yourself that we would know nothing about unless you revealed it to us. Terri, you get to go first.

I get to go first.

Ladies first.

I'm old school.

This necklace that I have on? Yeah. I made it. I like to— I like— and the earrings to match. I like to design jewelry. Sometimes I have— if it's gold or silver, I have to have someone else fabricate it. But I've designed a lot of jewelry for myself and I make a lot of jewelry for myself and for friends.

How cool is that? And that's your creative, one of your creative outlets.

That's my creative thing. The other thing is that I took up playing viola when I was in my 70th year.

Then you'll like to know that I'm a jazz violinist. Aha!

I do like to know that.

How about that?

Huh?

What about you, Rob? One thing you thought we wouldn't know about you.

One thing might be I'm an avid, avid, avid reader.

There's books all over the place, literally thrown. All over the place.

And I enjoy—

and I took a third major at Cornell in philosophy.

So I had math and physics and philosophy, and I continue the philosophy.

I'm reading a book, for example, on Pericles and Athenian democracy, which is fascinating to me, by Donald Kagan, who's dead now, but he was a classicist at Yale and an amazing teacher, or would have been if I could have had him as a teacher. But the book is outstanding.

Just to learn how— that's 450 BC—

just to learn how the first democracy actually operated, which has nothing to do, I might add, with how we're currently operating. You wouldn't even recognize it.

But philosophy is a very opening of the mind. And I pride myself on digging in and being curious.

I'll just say that you're what, 76 years old? 74?

Yes.

76. And you're still growing your mind. That is amazing. And I think that's the lesson to be learned for all of us. The moment you stop growing is when you start dying.

100%. Yeah.

They know one of our friends is a neuroscientist, won the Kavil Prize, which is the Nobel Prize. For neuroscience and Michael Merzenich, and he wanted for brain plasticity, how the brain can adjust and adapt. And it starts that, of course, when you're a baby, but it continues to learn and adapt and adjust as long as you allow it.

It needs excitement. It needs newness. It needs, wow, this is different.

It—

and so if you're You can do that through books. You can do that as Terry does through the viola.

Dr. Merzenich was the one that challenged me to take up an instrument that I had never played before. He said, it's the best thing you can do for your brain.

And that's why I don't perform, but I play every single day.

I do too.

Yeah. So does Terry. And I'm with my books. I've got books right behind this stack here.

Books everywhere.

Calculus and chaos theory. I found the book that Feynman talked about, that he learned calculus. And I thought, how interesting. The book is still in print. And I got the book and it's incredibly well written. So I'm relearning calculus and it's by a wonderful instructor and a wonderful book. And then I thought I'd branch off, but with Professor Strogatz into chaos there in dynamical systems, which by the way has branched me off into a dead end, so I've got to go back a bit. But the continuous attempting to push your brain.

Absolutely.

And I see I got a cat there behind me up on the bookcase.

Oh, she's a cutie.

Back there. See right there? Yeah, yeah, yeah.

Oh, there she is.

This has been a great conversation. I really appreciate both of you taking the time out of your day to chat with me and chat with my audience. You guys are amazing, and I'm honored to know you and to be able to have this conversation. Thank you so much.

You're welcome.

Doug Noll here. Thank you so much for listening to Listening with Leaders. If you are a successful executive leader who would like to be on this program, please visit podcast.dougnull.com/podcast. If you got something out of this interview, would you please share this episode on social media? Just do a quick screenshot with your phone and text it to a friend or post it on the socials. If you know someone that would be a great guest, tag them on the social media to let them know about the show and include the hashtag #ListeningWithDougNoll. Leaders. I love seeing your posts and guest suggestions. We are regularly putting out new episodes and content. To make sure you don't miss any episodes, go ahead and subscribe. Your thumbs up, ratings, and reviews go a long way to help promote the show and mean a lot to me and my team. Want to know more? Go to my website, DougNoll.com, or follow me on LinkedIn, Facebook, and Instagram.

That's @DougNoll.

Doug Noll. Thanks for listening, and we'll see you on the next show.