Andy Grove: The Life and Times of an American | Richard Tedlow | Talks at Google

Welcome to another event in the series Authors at Google. I'm Kelly Campbell. I'm one of the managers in the online sales and operations team, working with the AdWords team. And I have the pleasure of introducing Richard Tedlow today. Richard Tedlo is The Class of 1949 professor of Business Administration at the Harvard Business School, where he's a specialist in the history of business. Professor Tedlo received his undergrad from Yale and did his graduate work at Columbia, where he got his Master's and his PhD. He joined the Harvard Business School faculty in 1979. He's led courses in both marketing and business history. Although I did not have the pleasure of sitting in one of his courses, I can speak on behalf of other HBS students, as well as Cheryl and Kim Malone, Sheryl Sandberg and Kim Malone, who both know Professor Tedlo. Excuse me. Quite well. And the students of HBS always consider Professor Tedlow as one of the greatest educators and one of the most inspiring educators of our time. So with that, we're very lucky to have him here today to share with us his insight on Andy Grove, one of the greatest technologists and managers of our time. Professor Tedlo brings with him the secrets of Andy Grove's. Excuse me, sorry. The secrets of Andy Grove's success to light in a way that will make them easy, as easy for all of us as managers to emulate. So with that, I'm going to go ahead and kick this off with a quick video.

Sa. I only have to press one button. How many Harvard Business School professionals. No. Can you hear me now? It may have been better before. So anyway, I wanted to show you that little clip. That was from a 1997 Triple E, you know, Frammer Jammer conference that engineer type people have. And Andy, it's very hard to capture the fun of him. His humor is very situation specific. And if you have to explain a joke, you know, you're lost. But he's a born ham. And you saw him out there dancing, you know, and then the helmet came off and the bunny suit. And the people there were surprised. They didn't think it was him. And anyway, so I've known him since 1993. That was when I first came to Intel. I was brought there by a man named Dennis Carter, who invented Intel Inside. I had given a speech in Tucson called why Bad Things Happen to Good Companies. He said, you need to come to my company to give this speech. And I was and am an Easterner. I was doing work on retail at the time. I didn't know I Didn't know enough about intel to be as frightened as I should have been. It was a typical intel event. It was at the Marriott down the street from 2200 Mission College Boulevard. It must have been at least dinner, must have been at least $2.49 per person. The food could not possibly have been worse. But, you know, with the exception of me, the IQs were high. Andy was there, Gordon Moore was there, Sean Maloney, Paul Otellini, you name it. And it turned out they were pretty smart. And it was a good lively session. I wound up speaking now and again at intel after that. Anyway, so I finally wound up. I'm an historian. My PhD is in history, although I've taught at the Harvard business school since 1979 and I've taught marketing and course called Business, Government and the International Economy and all that stuff. Basically, I'm just an historian. And I suggested to Andy at one point in 2003, actually, I said, look, you're about to step down. As I sent this to his technical assistant, Julie Kopernal. She'd asked me a question. I said, look, you're about to step down as chairman of the board of this company. People are going to try to make money off your name. Why not hire a real historian? It's not me. I do not want to write this book. However, I know everybody who does this kind of work and I'd be happy for no charge. This isn't a consulting thing, it's for the advancement of knowledge. Because I thought then that he was sort of an important person in this valley. And I said, let me screen these people and let me send them three or four out to Santa Clara. You choose the one you want and then you'll be in business. So his ta, Julie Copernolle, sent that email onto him without comment. He sent an email back to her saying, that's the stupidest idea I ever heard. Which is actually not what the direct quote, if you'll pardon me, from the email. You have to. I mean, if you're going to quote the guy directly, you know, I mean, if I'm violating anybody's virgin ears, just, you know. He said, actually, that's the stupidest fucking idea I ever heard in my life. Thirty minutes later she got another email from him saying, why doesn't he want to write the book? Have him call me. So she sent that one to me, not the one about the stupidest fucking idea. And I couldn't call him, actually. My wife was quite ill. She was in the process of dying of ovarian cancer. And Kim and Cheryl knew her. Anyway, I couldn't call him because things were going on in the house. So I'm minding my own business. The phone rings. I pick it up. It's Andy. And he said, when did I offend you? He said, I don't remember offending you. He said, I know I've offended almost everybody else on earth, but when did I offend you? I said, andy, you didn't offend me. He said, why didn't you return my call? And I said, you know, this actually isn't about you, Andy. And so he had met Joyce before because one of the members of the board is a member of my. One of the members of the board is a member of our faculty at the Harvard Business School. Hbs. We like to say there's no BS like hbs. And another member of the board is Reed Hunt, who's one of my oldest friends and is. So, you know, there was a lot of connections. He knew Joyce, my late wife. We had had dinner together. He said, well, how well is she? Ovarian cancer is an odd disease. You sort of have your ups and downs before you pass away. And we had an up. And she said, let's go for it. We flew out to Santa Clara. Well, we met him at his home in the Valley and spent a weekend with him and decided that I would write this book. It would be a business biography, and he would not look at it until it came out just like this. In other words, it's not authorized. He didn't look at it until it was published, and he isn't financially interested in it. I mean, I sold it to a publisher. This is confidential. He doesn't need the money. But it was a very, very easy book to sell to a publisher. I didn't want to write it because I'm not an engineer. And this is a very technical. I mean, microprocessors, what have you. But it's really. It turns out to be a story about people. And that's even the tech people at intel, by the way. And the really good ones could explain the engineering stuff that I needed well enough. This is not a history of technology. It's a history of people on the technological frontier. So anyway, so that's how this book happened. And so let's talk about Andy a little bit. And by the way, I'll take questions anytime during, before, during or after. I'll sign any books that you want signed. If anyone wants to buy a book for everyone living in China, I'll sign and that's 1.3 billion. That would make me happy, make my publisher happy. I'll sign them all. So anyway, I'm going to press forward, right? That's the theory here. This is a presentation to you in case you're having like identity problems now. And you got to tell me when I go out of range, am I in range? Now I'm in range, there's a range. So one of the things about Andy that is quite interesting is this combination. It's oxymoronic. You know what the word oxymoron and oxymoron are two things together that don't make any sense. The classic example is military music. You know, two words that they don't match. Andy is both very focused and very flexible. So a focused, flexible person. These are two things that don't work. He's laser like in his focus. But he's also changed a lot. And he's changed because he's had to change. He wanted to be a journalist, but that didn't work out because he was in Hungary and the commies were in Hungary and that they didn't like his uncle. So his journalism wasn't published. Then he came here, he thought he'd go into engineering, became a chemical engineer, morphed if you will, from a chemical engineer to a semiconductor device physicist. By 1967, when he was at the then High Flyer, the Google of the 1960s was a company called Fairchild Cameron Semiconductor. And that's where Robert Noyce was, Gordon Moore was, Andy Grove was, and he published a book called Physics and Technology of Semiconductor Devices. So he moved from chemical engineering to semiconductor device physics. He moved from there to a not inconsiderable knowledge of software and he moved from there to management. So the story of the book really to some important extent is becoming a manager. How does this engineer transform himself? How does he morph into a manager? So I asked, I talked to the people at intel about this and I wanted to come up with a graphic that sort of illustrated it. So now this is either going to work or it isn't going to work. It's digital. Okay, so what you're going to see first, what you're going to see first, okay, this is Andy. Andy is born in Hungary on September 2, 1936. He's 70 years old now and he's born of Jewish origin. He's a non practicing Jew. But think about it, you're in Budapest, Hungary, it's September 2, 1936 and Hitler didn't make those distinctions about whether you were a believing Jew or not. So you're born in the shadow of the Holocaust. This is not an exaggeration. He has scarlet fever. When he's four and before antibiotics. Scarlet fever is potentially life threatening. He had to have five operations to save his hearing. His hearing is still better in one ear than it is in the other. This man has been battling his body his whole life. He had prostate cancer in 1995, and he was diagnosed with Parkinson's disease in 2000. This book is the first published fact, published acknowledgement of that. So look closely. If this works, you will see Andy morph from a young kid in Hungary to a total geek engineer. Big thick glasses, and then he moves on to management. The glasses. But it's management in the 1970s. So there's a big mustache, but the glasses leave for contacts. Then the mustache gets a little trimmer, and then by the end of this 15 second morph, he's a captain of industry. If this works. If it doesn't, this is all you're going to see. So here we go. Your theory is I tap it twice, just once. Well, I tapped it once, nothing happened. Now let's try twice. There he goes. Wait a minute. Go back, Andy, back. Okay, now forward. Go. Still in Hungary. Geek manager. Now it's moving. Mustache is gone. Captain of industry. You want to see it again? Okay, here we go. Okay, Andy, do your thing. Come on, do it again. Okay, here he goes. I love those glasses. And then the content you gotta love. And the mustache. Look at that. And then it goes. Because he's like a captain of industry by, you know, by the end of this. Okay, So I mean, the guy was changed. This is. We're talking about a man who had to change his name three times. In other words, a man who had four different names in the first two decades of his life to survive. So change is sort of built in. So this is a picture of George Grof G R O F and Maria, Andy's folks. And Andy's an only child. And what does this picture say to you? Just looking at this picture, does it say anything to you in particular? Centered on him. Centered on him. And it's a close marriage. George and Maria had a very close marriage. Centered on him. Does it say anything else to you? Anything else come to mind when you look at it? I'm sorry. Concern. You're right. Look at. See, they're centered on him and they're looking at him and they're worried, whereas he's looking forward. This is before. Only the paranoid survived. You know, he didn't get it yet. This is the last picture taken of the family before the Holocaust hit them. Within a year of the taking of this picture, Andy's mother was raped and his father was tortured. He lost members of his extended family in Auschwitz, as did his wife, who was a Viennese Jew. So, I mean, these people knew. I mean, I was born in the US 1947, and I've been here. You know, I'm a citizen and stuff like that. It's unimaginable. It's unimaginable to people who have a background like mine. What these people really went through, okay, early in life, his physical survival is at stake. You know, I mean, he was dealing with Hitler and Stalin, so, you know, he can have dinner with Bill Gates. He can manage that. Not to compare Bill Gates to Hitler and Stalin. Now, anyway. Although around here it's probably okay. Anyway, you're right. You're focused on him, and it's a picture of concern. I'm out of range. I'm in range. The important thing is that these folks be in range. Now, I want you to see this next picture. There are a lot of pictures like this coming out of the Holocaust, and usually it's people who died. Andy survived, and this is him getting his PhD in chemical engineering at Berkeley with his folks. He got his parents out of Hungary, and They lived in 3011 Ross Road, Palo Alto. And that's where they died. His father died in 1987, four days after he became CEO of Intel. His mother lived till 2002. She lived from 1907 to 2002. But, you know, so this is remarkable fact, mere survival. Andy attended City College of New York. He escaped from Hungary in 1956, 50 years ago, almost to the day. The Hungarians were at the time under the thumb of the Soviets, who were run by Khrushchev. He was the CEO there. And they revolted. For a brief time, the border between Austria and Hungary was open. And Andy had to make a decision. Do I run for it or not? And his Aunt Mansi came to his apartment on Kirai street on the Pest side of Budapest. Those of you who've been to Budapest know it's divided by Daniel. There's Buda and Pest and O Buddha. And she said to him, andres, which was his diminutive, you have to leave. And you have to leave now because you're going to die. Otherwise. They're rounding up students from the university, from Budapest U. From the University of Budapest. And he makes the decision to leave and he parts with his Parents from his parents on a street corner in Budapest. And you can't even have a demonstration of affection because, aha, that kid's making for the border. Look at this. And then you get disappeared. You know, we're talking about physical survival here. And you. So he decides to make for the border and he doesn't know what's going to happen. There's no Internet saying border crossing conditions good today, you know. And he sneaks across the border, literally on his belly, gets to Vienna, manages to see three operas. He's quite a connoisseur, actually. How about now? Okay. I'm someone who does what he's told. Anyway. Then he, through something called the International Rescue Committee, which was founded by Albert Einstein, manages to come to the United States and goes to ccny, Flunks his first test there because he doesn't know what isosceles triangle is in English. His English is shaky. He still has a thick Hungarian accent, although his English is superb. I wish I had his vocabulary. And by 1960, graduates first in his class. And that's the first time he's mentioned in the New York Times. Immigrant graduates first in engineering class from ccny. And he's quoted in the. I'm sorry, that's not news anymore. No, no, he's smart. He's a smart guy. And immigrants, of course, now. Yes, precisely. That's right. You're precisely correct. But in those days, that was the headline, literally. And Andy is quoted as saying, when I came here, it turned out that all you needed was talent. Americans don't know how lucky they are. And that's why I call the book the Life and Times of an American. That's America at its best when it's a true meritocracy. Is it always that way? Only a fool would think that. But is that a great goal to have? Yeah. Could Andy Grove have been Andy Grove if he'd stayed in Budapest? Not a chance. He would have. Andy is unedited. I mean, believe me. And he would have wound up losing his life there because you can't speak your mind, you know, around Commies and Nazis and people like that. So here he is with the two founders of intel, an icon of the valley named Robert Noyce, co inventor of the integrated circuit with a silicon substrate. The other guy, Jack Kilby, invented the integrated circuit with a germanium substrate. That germanium is harder to work with than silicon for a million reasons. But if that had become the dominant design, this would be called Germanium Valley rather than Silicon Valley. Noyce would have won the Nobel Prize in Physics. Had he lived to 2000, because Kilby did, and they both invented this thing. But Noyce died in 1990, suddenly of a heart attack. He was quite physical and quite an athletic. I mean, Steve Jobs talks a lot about him, but he was a smoker and died suddenly. Went for a swim in a pool, got out, lay down on the couch, didn't get up. Massive coronary. Gordon Moore is still alive. Multi billionaire. The only billionaire that I've ever heard of who does not own a tailored shirt. I mean, it. I mean, he's just your basic sort of, you know, down to earth, you know. Gee, just another billionaire now. I know around here. Well, around here, you know, for me, look, I'm just a schoolteacher, you know? I mean, you people. I mean, two fetuses just sold this company. Well, how old. Well, how old are the YouTube? They're grad students. They're still. How old are these two grad students? They're 28 years old. That's how old they are. So you put them together. What's 28 times two? 56. Okay, 56. And they're worth $1.65 billion. I'm 59. I've been saving for three years longer. And this is confidential. I don't want. I'm going to move out of range for this remark. This is confidential. But that's more money than I have. Okay, so I don't understand this 1.65. I mean, is this a bubble? You know, bubble 2.0? No. No, it isn't. Can't be. Because when you're in the middle of a bubble, it never looks like one. I mean, is it possible that there will be a grand total of two people who are going to make money from YouTube? I don't know. I hope they buy a 767. They deserve it anyway. More. Moore is an incredible yes, no, or maybe type guy. I mean, when you interview him, you better have a lot of questions because he will not tell you one thing more than you ask him. But, you know, some people are smart and some people aren't. And so Gordon is smart. Andy, who is a technologist, a true technologist, says Gordon is one of the leading technologists of the United states in the 20th century. You all know what Moore's Law is, I assume. Well, that's the Moore of Moore's Law. There's no Ted Lo's Law. It's a good thing. I mean, that's. You get billions and billions of dollars if you, or, you know, what have you so here he is looking at these things that they make there. And here's Andy looking back at that picture from many years ago. This picture was just taken last year. This is a Pentium ii. Does it look complicated to you? I could actually program one of these, but my time is short. We only have the room till 5. It would take me at least till 5:01, so I'm not gonna. I mean, do you. Okay, anybody know who the picture. Who the people flanking Andy, who are they? It's Jobs and Gates. So Steve Jobs, you know, this remarkable creature we're talking about, a man who was fired as CEO of Apple when he was 30. Anybody can be hired. We're all working. But to have on your Resume fired as CEO of Apple when you're 30 and then to have them beg to have you come back. And then meanwhile, here's a brain dead dumb idea. Let's compete with Disney in animation, does that with Pixar and sells that off for a mere $3.44 billion. Saves Apple. And I don't know what your experience is, but when I go into an Apple retail store, I just think it's fantastic. I think the job they, I think they're great retailers. Nobody 10 years ago would have thought that Apple was a retailer. Andy and Steve are actually good friends. When Steve was diagnosed with cancer, with pancreatic cancer, he saw Andy. Andy had already had prostate cancer. I would not say that Andy and Gates are good friends, but I will say this. There's a lot of mutual respect there. This book goes up to 2006 and the email that Andy sent Gates when Gates said I'm going to become a full time philanthropist, is in here. The email that Gates sent Andy back is remarkably gracious and it was surprising and it was a very nice exchange these two had, which is very different from a dinner, famous dinner that they had at Andy's house. There were four of them, Gates and some guy from whose name now slips my mind from Microsoft, who was ex intel, and a guy named Bill Latin from Intel and Andy. There were four of them. And Gates said something that Andy didn't like. Andy got up and said, are you threatening me with a lawsuit in my own home? They started shrieking at each other. And the caterer came in thinking that something, a candle, something caught on fire or something like that. And it's just, it was just capitalism, you know, I was all just capitalism, you know. So these three people are important in the history of America and in the history of the world because these are the Three people who put a computer on everybody's desk and who put a computer within reach of everybody, really. You know, in my opinion, Jobs was the visionary of a computer. Andy did the hardware, Gates did the software, and Wintel took the play away from IBM When I was growing up, certainly when I was in college. I started college in 65. In 64, the IBM 360 came out. Why 360? Because we surround your data needs. 360 degrees. We're all you need. IBM was the company of companies in the industry of industries. It broke up because of Wintel. And Andy and Gates, you know, did that. And Jobs was the guy with the vision that he knew from the start that the PC was, well, the Apple, the Mac, what have you, was the future. So this I'm not going to do because I'm already running late. And I'm not going to do this and not going to do that either. Although that's good for laugh. I'm not going to do this. But what I'll do is I'll summarize all this stuff. There are some people who believe that there is no such thing as strategy, that, that the story of business is basically the story of luck. It's stochastic. And what do they point to as proof of that? Look, for example, at the number of wagon makers who successfully crossed the chasm, to use a phrase often used now to automobile manufacture. Nobody did, with the exception of Studebaker, which went out of business in 1967. You know, same thing with disk drives. There's a guy named Clay Christiansen, some of you may have heard of him, and he thinks his thesis is very important on disruptive innovation. He looks at disk drives and every time there's a new generation, all the old companies are wiped out. So it's Darwinian, it's variation, selection, retention. Other people think that strategy really does matter. Personally, that's my view. And I think people matter. I don't think we're all just sheep wandering around so that I just got through a whole bunch of slides in a big hurry. Let's take a look at Intel. Intel was founded in 1968, Moore and Noyce and then Grove. When Moore says, I'm founding a company, Grove said, I'm coming too. He didn't wait for a job interview. You people have interviews. That's not how it worked back then. Intel goes public as a disruptive innovator with a memory chip called the 1103. They go public in 1971, they lose money in 68, 69, but that's startup phase, okay? They go public in 71. And look at the first 10 years. Just look at the. Look at 71 and look at 80. I mean, this company is. You know, they are getting the laundry out, okay? And they're making a fortune doing it. Then they have a little trouble. I mean, this is a good record, even by Googleian standards or Googlerite standards. I mean, these are. They're putting up some pretty fancy numbers here, okay? But then 1981, they overbuild. They overdo it. And as you can see, the sales and profits drop. But then they win this famous design win. They become the CPU in the IBM PC with a device which. I was just with Andy in Santa Fe. We did a program together which was a hoot. And he said the 8088, which beat out the Motorola 68K. Motorola is not in the microprocessor business anymore. They spun it off to a company called Freescale, which just got bought by Steve Schwartzman of Blackstone. They're in the private equity world. Motorola, which was the company, it was beaten by intel with a product that was not. That was better than Intel's. The microprocessor division head of intel, the year that the design win took place, said the 8088 is the Edsel of microprocessors. He was later. That was thrown in his face. Edsel. I hope you know that the Edsel was. The Edsel was the worst product ever. And Ford has sort of kept on that track, which is why they. They lost, Well, I think $5.7 billion last quarter or some large amount of money, laughable amount of money. And I'll tell you something interesting. I was in that. I spent a lot of time in that company from 94 to 96. And if you were there, you'd see why the company was. I've never been in a company. I've been at HBS since 1979. I've never been in a company so full of frightened people. I mean, nobody. It was a shoot the messenger kind of company. And you could feel it, you know, And I'm not shocked. I met Billy, you know, William Clay Ford Jr. He's a very charming, extremely nice guy. Went to Princeton. You know, the saying is that you get over a yale education in 10 years, a Harvard education in 20, but a Princeton education you just never get over. Kim Malone's a Princeton graduate, by the way, but Cheryl went to Harvard, I went to Yale. So it's not, you know, so that's the Way it worked out anyway. They have all the money and I'm doing these talks. But where's your little. I actually haven't. I've won that more. She's throwing that monkey at me more than anybody else. Anyway, I'll tell you. Kim Malone. I remember calling cold, calling on her to start a class. She was fantastic. And so was Cheryl. Sheryl Sandberg. We take grading very seriously at the Harvard Business School. It's not like Harvard College. Well, Harvard College, look. In the year 2001, 91% of Harvard College students graduated with honors. 91. Which makes you wonder about the other 9%, you know, brain dead dumb. I mean, Sheryl Sandberg, who's class of 95 from the Harvard Business School, in the first year, all the students take the same courses and we grade on a forced curve. Do you know what that means? 10%. I am forced to fail 10% no matter how good on an objective sense their work is. It's judged relatively. That prevents great inflation. I mean, you know, that solves the problem rather than what you have at not only Harvard College, but at a lot of universities, which is this tacit conspiracy. I'll be a rotten teacher, but I'll give you a high grade and you'll get a high grade so you won't complain. So a lot of our greatest universities are the ones with the biggest names anyway basically are selling their admissions departments and their placement offices, classes. We don't do that. In other words, we grade carefully. And Cheryl's year seven students had perfect grades, which is extremely difficult. Six were men and one was Cheryl. She was the only woman. And it's tougher to be a woman at that because of the environment in that school. I wish that weren't true, but I'm just telling the truth. So Cheryl and Kim are just fantastic to have in class. I mean, you're just great. Anyway, as you can see, they drop out in 1981. They overbuild. But gee, look at what's happening here. This is really good. They're in the IBM PC. But then look at what's happening in 85 and 86. They're falling out of bed. So let's take a look at those numbers again. 85 and 86. Okay, if 85. If 87 had borne the same relationship to 86 as 86 bore to 85, intel would have lost about a million dollars a day and the company's survival would have been in doubt. It was heading for bankruptcy. They have sabbaticals at Intel. Do you have Them here. By the way, do you have sabbaticals here? They have them there. They're seven weeks long. Gordon Moore called Andy back from his sabbatical, which you don't do. And he said, look, you see this? I'm going to get out of range. You see that minus? It's supposed to be a plus. That's one of the things they teach you at the Harvard Business School. And so he said, look, Andy, fix it. So Andy in 87 became CEO of Intel. And these are the actual numbers. A projected loss of about a million dollars a day turns into a profit of basically a million dollars Every working day.250 working days in a year. And then if you look at Andy's performance as CEO of Intel, here it is now once again, even by Google standards, this is not chopped liver. When you have a compound annual growth rate of 42% in market capitalization over an 11 year period, that's headline news. Okay? It was under Andy that Intel became Intel. He stepped down as CEO. It had a market cap of almost $200 billion. And look at these numbers. How did this happen? Okay, Andy becomes a manager. That's sort of the saga here. I've talked a little about the beginning. Intel goes public. He does this operation Crush because the 8086 is losing to the 68k and they win with a worse product. How do they do it? Better marketing, better field applications engineering and better. You know, we're going to show you how to do this. We're going to be all over you like a cheap suit. I mean, we're going to make this goddamn thing work. And they did. Andy found out on a Friday by two telexes in 1979. No email in those days. One was from Denver and one was from Bethpage, Long island, that they were losing, losing, losing to Motorola. The following Tuesday he had a meeting. And there's a man named William Davidow. Does that name ring a bell for anybody? Moore Davidow. Do you know that firm? Davidow is ex Intel. And he said it was a very unpleasant meeting. I mean, when Andy becomes volcanic, it's just like nothing you've ever experienced. And as Davidow says, trying to quote him now, subtlety is not one of Andy's virtues, you know, and he said, you know, you just can't. This is impossible. So anyway, the 286 is introduced. Andy in 83. Andy's suspicious of the word leadership. He publishes books called Management. High Output Management, by the way, is still worth reading. In 85, intel is forced out of the memory market, even though the memory chip was the one that had made those great numbers for the 1970s. And then in 85, they introduced the 386. And this is the turning point in the computer information age. Why? Because up until then, intel was a mere component supplier to the behemoth IBM, the market cap of which was 50 times Intel's at the time. As I say, company of companies, industry of industries. And you have to multiple source your. If you're a component supplier, you have to multiple source your products. In other words, you do all the R and D. But once you come up with it, IBM says, well, we know you people, you're going to lose the recipe, Give the formula to amd and to Fujitsu, or so what? And the theory is, otherwise we'll lose our supply. But the truth is, it's because we want price competition among our suppliers. And Andy said, this is a great device, and I'm not going to allow this to happen. This is the moment of truth for intel, because what happens if IBM doesn't buy it? You know, IBM is IBM. And by the way, IBM owned 20% of Intel @ the time and was big enough to do their own microelectronics. They didn't need, you know, I mean, they're facing catastrophe. And in fact, Andy was also worried about his own people. In other words, what if they buckle? What if a salesperson's already made a sale on the basis of multiple sourcing? Because that's the way the industry had always worked. That was normal science. You know, what's going to happen. He was, you know, nail biting time. And in fact, IBM didn't buy the 386. Compaq bought it first, and they put it in the desk pro. And that was when this industry changed. That was when the center of power moved from IBM to Wintel to Microsoft and Intel. And one thing that's sort of interesting to me is that the financial markets didn't recognize this for years. You know, IBM still was far higher, more highly valued until the early 90s, when they just started losing so much money that you couldn't deny it, that the company, that the whole model had changed. One of the great things about being an historian is you're never wrong. So I'm telling you that if you owned IBM, 1986 was the year to sell. Coca Cola shouldn't have changed the formula in 1985. I mean, I know all this kind of stuff. But keep in mind, Compaq announces the desk Pro in 1980. 6 DeskPro 386. And then in 1990, intel launches the intel inside advertising campaign. These are a bunch of engineers. They are reaching over. They're over the heads of their customers to the end consumer and creating pull rather than push marketing. And the reason that the Pentium was the reason the Pentium brand came about, does anyone happen to know? Because they had the 8086, the 186, 286. Why did they come up with the Pentium brand? Why not the 586? You can't. She said what somebody. This young lady said what somebody over here just said. You can't trademark a number. In other words, I can't say I have 586. So you have to go from 585 to 587 for from now on, for the rest of your life. It's not the way it works. And intel was afraid that they were going to lose this to Compaq, that people were going to think that the 386 was actually Compaq's product. So it's a war over that. Intel goes to Pentium, they advertise it. And this was a very un engineering type thing to do. Andy is diagnosed with prostate cancer. I'll talk a little bit more about that in 1995. And he's time magazine's man of the Year. Doesn't become person of the year until 1999. He's their man of the year in 1997. Okay, this is the Hungarian freedom fighter. Remember I told you that in 1956 there was a revolt against the commies in Hungary and he was the man of the Year. If you look to the left of his head, you'll see a hole in the flag. That's where the commies put the hammer and sickle. And during the revolt, the patriots. Cut that out. You can still see. I went back to. I got into his apartment, the apartment he escaped from. He's never been back to Hungary and never will, but I got into it, and you can still see those flags there while I was in his apartment. I have a trio. I used to have a trio. Oh, this is really depressing. I've lost a trio. I'm going to go out of range just to see if it's here. It's here. I'm so happy. I have a trio. This runs T Mobile, which is Deutsche Telekom and works in Hungary. And I sent him from the apartment that he escaped in 1950 an email saying, I'm here now. Stop by anytime. Anyway, so this is the Hungarian freedom fighter as times man of the year. And then four decades later, it's Andy. How did this happen? How do you get there? What is the Odyssey from technologist to technologist manager to technologist manager leader? Well, first of all, as an historian, how do you find out? Andy and I had this deal. He didn't read the book, as I said, until it was published, but he was also very available to me and he opened his Rolodex, which is why I got to interview Eric Schmidt. I had a terrific interview with Eric Schmidt. Why I got to interview Steve Jobs. People who. Otherwise, you know, they're always being asked for their time and, you know. But a little note from Andy saying, I'm not going to read this beforehand, but talk to him, it's okay. You know, he's not Al Qaeda. And people had some very thoughtful, interesting things to say. So anyway, this is one of the things. One of the other things I discovered was that Andy started keeping notes about intel from the time of its foundation. So here is. This is out of his notebooks. He never thought anyone was going to read them. I got to. It's an historian's dream. Okay, and you can't read this. I know, but what it says is the Peter Principle. He's worried about that from the beginning. Does anyone know what the Peter Principle is? Some people do, some people don't. What is it? You rise to your level of incompetence and then stay there. You rise to your level of incompetence and then stay there. What is the mechanism? Why is that? Why does that happen? You see, if I could stay in range, I would walk back to that guy, you know, you, sir, I see a hand. It's true. It's not up, but I see a hand. Why do you suppose. Why do you think that people rise to their level of incompetence and stay there? Why do you think that would happen? Getting kicked upstairs? Hold on, take a guess. That's by the way, a very good reason. That's certainly what keeps them there. And you were saying, getting kicked upstairs into a position such that you won't do harm where you had been. That's a common. That happens all the time. What Dr. Lawrence, Peter, if you actually read the book says, is that if you do job A, well, you get promoted to job B. If you do job B, well, you get promoted to job C. But if you stink the joint out at job C, you won't get promoted. So therefore everybody is in the job that they shouldn't have. So think about that the next time you're on an airplane. Just think about the pilot. I mean, that's the person who used to be serving Diet Coke, you know, and got promoted and now he doesn't. Shouldn't be a pilot, but, you know. Anyway, so Andy as a manager has been worried about the Peter Principle his whole life. These are Andy's principles of management, and I want to talk about them a little bit. How much time do I have? I mean, is it the hook? I mean, Kelly, where do we stand? Okay, we. Okay, if everybody leaves, I'll know the talk is over. I'm sorry. She's too young for the vaudeville reference. I see. Oh, yeah, she is. She doesn't understand the hook. Well, she graduated from Harvard business school in 2005, right? Really? Who'd you have in first year marketing? Okay, well, I'm not going to put you on the spot and ask. Anyway, these are. What are the principles? Knowledge, power versus position power. It doesn't matter where you are in the firm. What matters is what you know. This is the opposite of commie Hungary, where. Where you stood, literally. You're too young to know this, but I remember it. Kremlin ologists, in other words, people who studied the Kremlin during the age of Soviet communism would see at the May Day parade who was standing next to whom. So literally, where your position was at Intel. He wanted to create a company where no matter where your position was, what you said was what mattered. Knowledge, power always trumped position power. Titles don't matter. That company was built by people who graduated from universities. A lot of you have never heard of Andy. Felt he was a better judge of talent than Harvard's admissions department. So what does this mean in concrete terms? Let me tell you a story about his prostate cancer. He's diagnosed with prostate cancer in 1995. He decides he wants to write an article about this for Fortune magazine in 1996. I'm out of range. I'm back in range. He decides he wants to write this article, becomes very famous. He approaches John Huey, who's the editor of Fortune. Huey's wife had just died of cancer. Ten years ago, men didn't talk about prostate cancer. Why not? Because it had narcissistic implications. In other words, you might become incontinent, you might become impotent from the treatment, and you might become dead. So three things, none of them good. Fifty years ago, people didn't talk about cancer. It was like a shame. If you look at New York Times obituaries, they'd say so and so died after a long illness. But for a man like Andy, at the peak of his career, to write about prostate cancer in a magazine like Fortune was not to be expected. Huey said, go for it. He writes an 8,000 word article and it's about how his own approach to his treatment. I know a lot more about cancer than I wish I did. And I can tell you that you. My wife was a physician. She died of cancer. She was a physician. You tend to go to the best doctor, you find out who that person is and I'm telling you that doctor can tell you the moon is made of green cheese and you're going to believe it. Andy didn't do that. He did his own research. I'm a researcher, I'll just do oncology. I did semiconductor device physics and then quiz the doctors. So he does all this research, then goes around to urologists and, and one of them, he walks and he looks at his computer and he says, you know, what chip do you have in there? The guy said, It's a 286. And he said, we stopped making those three years ago. This is 1985. They were on the 386 by then. This is not your average patient that the doctor has position, power. But Andy has knowledge, power. At one point he gets into a shouting match, which is a tough thing to do when your life is on the line. Finally, he selects the treatment of less approved by doctors. It's the radiation treatment and certainly in 1996. But he said the data says that that's the treatment. For me, this is a life and death decision. But he had made them before. He goes to the Swedish hospital in Seattle. That's where it's done. Just before the treatment takes place, he says to his urologist, tell me if I were in your. If you were in my shoes. And the question oncologists get a lot. If you were in my shoes, what would you do? He said, I'd have surgery. And he said, look at my data. And he said, I was taught that surgery was the gold standard. That's how I was brought up. Legacy. Legacy. Stephen Dedalus in Ulysses says history is a nightmare from which I'm trying to escape. Think about that. The local auto companies, the domestic auto companies didn't escape the legacy costs. So anyway, Andy writes this article, a tell all article about his prostate. And there's a fact checker at Fortune who says she finds a mistake. Now she's 24, he's 58. We're talking about the author of Semiconductor Physics and Technology of Semiconductor Devices. It's his first book, a book of which I can read one page, one, the page that says copyright. After that it hits Greek letters and who's some little snot nosed? I'm going to say girl, because I'm 59, she's 24, she's overindulged. She went to Williams. Andy went to City College of New York, you know, the proletarian, you know, college. And he gets into arguments with her and she doesn't give in. So I send her an email and I said, tell me the story. And this is what she said. Sorry for the tardy response. This issue has come up before it embarrasses me. The issue, by the way, was which chart did he get wrong and did you get right? How does this work? He published 40 refereed journal articles. I interviewed his dissertation sponsor, Andreas Akrabos, who said this was a brilliant dissertation. And I spoke to the most critical person in the world about his dissertation and he said it was a great thesis. And he said that. He said, pardon me, but the thesis was brilliant and he really is a critical guy. So anyway, so she says, you know, I'm still a bit too young to be losing my mind, but there you have it. Anyway, my main recollection of dealing with Andy is that he is the extremely rare person who is brilliant, very successful and very strong willed, yet also immediately able to admit when he's wrong. When the story was going to print, he called my editor to ask where my reporter's credit was. Hope that's helpful. Do you understand what. In other words, he wanted her name on as reporter's credit because she had gotten it right and stuck to her guns. This woman's name is Bethany McLean. Does that name ring a bell for anybody? It should. Enron. You're absolutely right. She's the woman who broke the Enron story. She wrote an article for Fortune magazine called Is Enron Overpriced? Andy Fastow. Do you know who he is? Came up from Houston to New York with two of his people and tried to browbeat her, but she had already been through Andy Grove. So Andy Fasto, he goes to her boss, you know, drop dead is the answer. And then when he leaves her, he says, you know, don't say anything bad about me. And then she knew she had him. She covered the trial and apparently is dating the prosecutor. Andy Grove told me that. How you ask, does he know? It's because he knows things. Okay? So I sent an email To Andy, saying, tell me about this thing that happened with this prostate article. Andy's a man of few words. He has voice recognition software, IBM voice recognition software. One point, when it went wrong, he called the IBM help desk. They put him through immediately to Sam Palmisano. Really, there's a lesson there. If you have a problem with any IBM product, just say you're Andy Grove. They'll put you through the CEO. So this is what happened. Andy's a man of few words. Okay, okay, this is what happened. Bethany was a researcher. Those days they called them reporters. Assigned to my story, she was methodically going through factoids. All went well until she claimed she found an error in one of my graphs that I constructed from published data. After some back and forth, I conceded the point and nursed my wounded pride. The back and forth was heated at times. You have no idea what that means. I mean, he'll rip your lungs right out, you know, I mean, he's, he's tough. So then he says, after I recovered, I wrote her one of my handwritten notes. You see, he's tough. But if you stick with it and you're right, good things happen to you. Thanking her for her thoroughness. Thank you. During my next visit to Fortune, a number of months, this actually made her reputation at Fortune magazine. A number of months later, I found out that the note and Bethany were much talked about. I asked to see her and was introduced to her. In the process, I found out she was a boxer. Had I known that, I would have backed down earlier. I was not at all surprised when it turned out that she was the one who broke the Enron story. You know, that's who she is. And you can't push her around. And she does her homework. So Andy had position, power. He was Andy Grove, but she had knowledge, power. And even in this instance, it's outside of business, but it's in life. That's the way it works with him. So a corporation is its middle management. What does that mean? If you're top management? Once again, variation, selection, retention. You're top management because you're good at something five, 10, 15 years ago. So it's the middle management that's out there. If you lose a sale, a salesperson feels it in their wallet or pocketbook right away. Snow melts at its periphery. You've got to somehow be out there and be tactile and know that. And you've got to listen to those people. So if that's true, what's the role of top management? The role of top Management is to know the difference. By the way, there was an article, I think I can't remember where it was. It was either Fortune or the Wall Street Journal. Was it Fortune, where Sheryl Sandberg says, I made a stupid mistake and I went to Larry. I'm terribly sorry, Fortune magazine. Thank you. I made a mistake and I went to Larry. And it was apparently a multimillion dollar mistake. And do you remember what his response was? Basically his response was, go out and make more mistakes like that. Because that's the kind of. You can't be in business without making mistakes. And if your mistake is a noble failure, go for it. You're not going to. No one bats 1000. I mean, think of it. The greatest hitters in baseball are batting.330. You know, no one's hit, you know, 400. Since Ted Williams did it back in the 1940s. Business is just as tough. But there's a. So it's a role of top management to know the business well enough and to know the people well enough to be able to tell the difference between a noble failure and a stupid mistake. From your point of view, the people who make stupid mistakes, you want to encourage them to go to Redmond. There's a very nice company up there. They can work there. The people who make noble failures, you want to keep. But you've got. If you're top management, you've got to tell what the difference is. Because everybody in tech is in a constant war for talent, mercenaries and Marines. I talked to Cheryl a lot about this, actually, when I was writing the book. She's acknowledged at the end. The Valley is a very strange place for an American. I think that we need visas, in my view, because there's a very, very intense sort of dual track. On the one hand, people want to make money, but on the other hand, they want to make a dent in the world. They want to change the world. And you've got to manage that if you're going to manage out here. And the importance of message. Here's a list. I'm a historian. Intel inside. What does that do? It reassures. It gets rid of search costs. A microprocessor is as complicated as any other device ever mass produced. And yet intel inside, you know, you can go for it some more. Principles, fear, good and bad. W. Edwards Deming, this famous business writer, said it's the role of management to banish fear from an organization. And he said, it is like hell, I want people scared. As a matter of fact, if you look at this book at the very beginning, the epigraph. This is an Andyism. You are in danger. You are always in danger. You are in danger of competitors, you are in danger of new ways of doing things. But most importantly, you have a danger that the way you have conducted your business is going to lose relevance. He wants his people scared every day. He thinks fear is a powerful motivator. He doesn't want people walking to work happy. What he doesn't want people to be afraid of is to speak truth to power. And he doesn't want a company where the messenger gets shot because the message isn't good. You know, he wants to find out the truth. Why is that? Because when he grew up, if he didn't know the truth, he wouldn't have survived physically. It was worth his life to know the truth. His life and death. And that's the kind of passion with which he pursues it down to this present day. You learn by teaching. He taught chemical engineering at Berkeley for eight years and he's still teaching management at Stanford Business School. He believes. This is interesting. You let chaos reign, in other words. If you look at his prostate treatment, he put off the treatment itself for a long time. He did a lot of research. Then he took a long bike ride to clear his mind and he made a totally data driven gut decision. So once again, it's oxymoronic. A data driven gut. He'd do both. This is to me very interesting. Avoid the trap of the first version. It's one of his principles along with put common sense on a pedestal. Avoid the trap of the first version. What does that mean? I'll give you an example from my own past. When the IBM PC came out, I was a faculty member at Harvard and they gave us IBM, gave us all PCs. This device was. I could make my IBM PC do two things. I could make it sing the IBM fight song. Ever on Word, everon word IBM. Okay, that was great. I could also make it say error loading driver. I could make it do those two things. It was so badly engineered that it was. I'm going to go out of range again. They gave you literally a block of wood so you could prop it up because otherwise you had to get down on your knees to look at the screen. I mean, nobody thought that people are not, ok, fine. So I thought, this is worthless. There's no computer on everybody's desk. When we got this big deck mainframe at the Harvard Business School, this is never going to fly. I fell victim to the trap of the first version. I didn't ask Myself. What if this thing were 10 times better than it is? What if this thing really could deliver some of its promise? What if it could print graphs without saying error loading driver? What then? People in the Valley are always hawking gadgets and, you know, Andy gives it that test, what if this thing were ten times as good? What would we have then? Challenge your own assumptions. Nobody does that as much as he does. I'm going backwards. This is an interesting moment, and I want to pause on it. They had to get out of memory and in the microprocessor. And he's talking to Gordon Moore and he creates a virtual Andy and a virtual Gordon by saying, if we got kicked out and the board brought in a new CEO, what do you think he would do? Gordon answers without hesitation. He would get us out of memories. I stared at him numb and then said, why shouldn't you and I walk out of the door and come back and do it ourselves? Now this is as hard a decision for them as it would be for Google to get out of search. You know, they were the memory company. The memory company. Why does this quote matter? Because Andy is getting above the fray. He's looking at it clinically. He's getting rid of the legacy. Any new manager would come in and say, you know, I've got news for you, you're already out of the memory business. They had 3% market share. They were still investing a fortune in it. As Andy said, we were selling $100 bills for $90 and we were doing very well. It was obvious to an outsider. But this is what didn't happen in the US auto industry. Nobody got outside. You know, this was 40 years coming. Everybody saw that the Toyota production system made better cars. But, you know, denial is not just a river. In Egypt, you know, I mean, they, you know, they denied it and that was the story. But it's his ability. This is what made him a great manager. To be clinical, it's what made him able to manage his health. And when he gets too emotionally involved. I'm not going to go into this. When he gets too emotionally involved, such as the floating point flaw, which I'll go into if you want to, but won't if you don't want me to. He's just mortal like everybody else. He makes mistakes like everybody else. But when he's able to get above it and to create this device, what if the board kicked us out and brought in new management? All of a sudden, the legacy costs, you press delete on the legacy costs. And when he's Able to do that. He's as skillful a manager as this valley or this country has ever seen. So that's the presentation. Let me ask, are there any question? Seeing none. Yes, we went over here. Yes, sir. Last time you came and spoke to us, you started out with a clip from Deadwood. Yes, absolutely. He still says it. He still says it. I mean, the clip from Deadwood was some guy who slapped some guy in the face and he said, did that hurt? Yeah, it hurt. Then the guy says, did it kill you? No, it didn't kill you. And it's like Nietzsche. And also Sprach Zarathustra says, anything that doesn't kill me makes me stronger. I mean, that's the Andy approach to life. Business is a contact sport and that's how he looks at the world. Any other questions? So I know some people who work at intel and I'd heard that a few years ago, maybe seven or eight years ago, if you showed up at work after 8 o' clock in the morning or maybe nine, you had to stand outside for an hour. It was 8:05. Can you put that in perspective? Andy did that. Andy put that in place. It was the late list. Everybody, including Bob Noyce, had a sign on if they came late. And that's because you can do a lot of things in life, but you can't keep him waiting. And he was tired of getting there on time and seeing somebody sort of walking across the parking lot. You have to remember that this was a very different valley 40 years ago than it is now. The problem with the semiconductor industry, you know, it's called Silicon Valley, but if it were named today, it's called Silicon Valley because a journalist named it Silicon Valley in 1971. If it were named today, it would be called something else. The Valley of the Virtual Community or something. I really mean it. I don't think it'd be called Silicon Valley. But it was a cowboy industry. People swapped stories. In other words, they traded secrets of the company, they drank, they stayed up late, they were sloppy and you can't produce a microprocessor. John Doar, who's on the board of this company, is quoted in this book as saying they had to be that way because they had to be killingly precise or they'd lose yield. And what Andy did was he said, I don't want anybody going to the Wagon Wheel anymore. I don't want to hear stories about swapping trade secrets and I want you here on time. He was a disciplinarian and the people took it and eventually got rid of the late list because you just don't want to get to the work after he did. That was bad. Any other questions? Yes, over here. Yes. So I saw your interview on Charlie Grove. Oh, really? Yes. The impression that I got from there was that that Andy Grove is not very introspective in that he railed against applying pop psychology to how his past formulated how he did business. But is that actually true or was that. First of all, I was on Charlie. I've been on two television shows with Andy, which is a trip. Charlie Rose is this interviewer, and Andy's been on that show four or five times. We were at Bloomberg. I don't know if any of you have ever seen Bloomberg, but it is. It's Google East. Food's free. And so we, as Andy and I, there's no preparation. I don't know what's going to happen. As Andy and I are walking into the studio, Andy says he knows me, Charlie knows me. So he's going to talk to me. I'm going to throw you the ball when I do catch it. That was it. Then. We were on the air. I didn't know what the hell he was talking about. You know, Andy is more introspective than he lets on, but he's not as introspective. When my wife. When my late wife read Swimming across, which is this book he wrote about his first 20 years under Nazism and Communism, she said, there's a lot more in this book than he knows. She was a psychiatrist, as I mentioned. And when we met with Andy and Eva, she started telling him about himself, and he couldn't get enough of that. Once that happened, the deal was made and the book took place.