WEBVTT 00:00:00.000 --> 00:00:03.319 Welcome back to the Deep Dive. You know, usually 00:00:03.319 --> 00:00:05.179 when we talk about business strategy, we use 00:00:05.179 --> 00:00:07.679 these very, I don't know, these very sanitized 00:00:07.679 --> 00:00:09.779 intellectual metaphors. Right. It's always a 00:00:09.779 --> 00:00:11.779 game of chess. It's a game of chess. It's navigating 00:00:11.779 --> 00:00:14.859 a ship. It's architecting a vision. It all sounds 00:00:14.859 --> 00:00:17.739 very controlled, very clean. It really does. 00:00:17.940 --> 00:00:20.260 It implies that if you just have the right five 00:00:20.260 --> 00:00:22.480 -point plan, if you just think hard enough, you 00:00:22.480 --> 00:00:24.940 win. It's almost mathematical. Exactly. Yeah. 00:00:25.000 --> 00:00:27.899 But today, today we are opening a file that suggests 00:00:27.899 --> 00:00:30.719 something. Completely different. We're looking 00:00:30.719 --> 00:00:33.579 at a philosophy that says business isn't a game 00:00:33.579 --> 00:00:35.899 of chess. Not even close. It's trench warfare. 00:00:36.439 --> 00:00:39.060 It's a biological struggle for existence where 00:00:39.060 --> 00:00:41.799 the default state isn't profit. The default state 00:00:41.799 --> 00:00:44.079 is death. It is a bit intense, isn't it? But 00:00:44.079 --> 00:00:45.859 that is the reality. I mean, that is the core 00:00:45.859 --> 00:00:48.219 of the figure we are discussing today. We are 00:00:48.219 --> 00:00:51.960 unpacking the mind of Andrew Grove. The man who 00:00:51.960 --> 00:00:55.740 built Intel. The man who, you could argue. built 00:00:55.740 --> 00:00:58.399 the engine of the modern world, and the author 00:00:58.399 --> 00:01:01.299 of perhaps the most terrifyingly titled business 00:01:01.299 --> 00:01:04.840 book in history, Only the Paranoid Survive. It's 00:01:04.840 --> 00:01:07.299 a striking phrase, for sure. And what we are 00:01:07.299 --> 00:01:10.260 going to see today, as we go through his biography, 00:01:10.560 --> 00:01:12.739 his management books, like high output management 00:01:12.739 --> 00:01:17.060 and his economic essays, is that paranoia wasn't 00:01:17.060 --> 00:01:19.500 just a catchy marketing slogan for him. It wasn't 00:01:19.500 --> 00:01:22.810 just a metaphor. No. It was a survival mechanism, 00:01:23.109 --> 00:01:26.849 a deeply ingrained worldview that was forged 00:01:26.849 --> 00:01:29.750 in literal fire. And that really is the mission 00:01:29.750 --> 00:01:32.530 for this deep dive. We aren't just going to list 00:01:32.530 --> 00:01:34.049 his accomplishments, though. I mean, they are 00:01:34.049 --> 00:01:36.650 massive. We want to understand the why. The source 00:01:36.650 --> 00:01:40.370 code, so to speak. Yes, exactly. How does a refugee 00:01:40.370 --> 00:01:44.500 fleeing a totalitarian nightmare? How does he 00:01:44.500 --> 00:01:46.739 turn that very specific, very personal trauma 00:01:46.739 --> 00:01:49.719 into a management system? Things like OKRs, strategic 00:01:49.719 --> 00:01:52.299 inflection points that basically rule Silicon 00:01:52.299 --> 00:01:54.420 Valley today. And we really need to dig into 00:01:54.420 --> 00:01:56.480 the technical side of this, too, because you 00:01:56.480 --> 00:01:59.060 cannot understand Groves' paranoia unless you 00:01:59.060 --> 00:02:02.120 understand the specific, brutal economics of 00:02:02.120 --> 00:02:04.099 the semiconductor industry. That's a great point. 00:02:04.219 --> 00:02:06.439 It is a business where you can be king on Monday 00:02:06.439 --> 00:02:08.419 and completely bankrupt on Friday if you miss 00:02:08.419 --> 00:02:10.699 one technology cycle. The stakes are existential. 00:02:11.199 --> 00:02:13.319 Always. So let's start at the source. Let's go 00:02:13.319 --> 00:02:15.319 to the very beginning, because before he was 00:02:15.319 --> 00:02:17.259 the Time magazine man of the year, before he 00:02:17.259 --> 00:02:20.319 was the CEO of Intel, he wasn't even Andy Grove. 00:02:20.580 --> 00:02:24.280 No, he was born Grove Andras Istvan. This is 00:02:24.280 --> 00:02:27.860 1936 in Budapest, Hungary. He's born into a middle 00:02:27.860 --> 00:02:30.300 class Jewish family. And if you look at the timeline 00:02:30.300 --> 00:02:32.520 of European history, I mean, he is essentially 00:02:32.520 --> 00:02:34.800 born into a collapsing building. That's a perfect 00:02:34.800 --> 00:02:37.379 way to put it. He's born at the exact moment 00:02:37.379 --> 00:02:39.830 the world is about to tear itself apart. The 00:02:39.830 --> 00:02:42.289 sources paint this picture of a childhood that 00:02:42.289 --> 00:02:44.969 is just one existential threat after another. 00:02:45.069 --> 00:02:48.289 It's almost relentless. But there is one specific 00:02:48.289 --> 00:02:51.069 detail from when he was just four years old that 00:02:51.069 --> 00:02:53.669 really stood out to me. The scarlet fever. The 00:02:53.669 --> 00:02:57.169 scarlet fever. It is a crucial detail. In 1940, 00:02:57.469 --> 00:03:00.229 scarlet fever was a coin toss for a child. There 00:03:00.229 --> 00:03:02.389 weren't the widespread antibiotics we have today. 00:03:02.449 --> 00:03:05.139 It was often fatal. And he survives it. But not 00:03:05.139 --> 00:03:07.259 without a cost. Not at all. The high fevers, 00:03:07.259 --> 00:03:10.620 they rupture his eardrums. He is left with significant 00:03:10.620 --> 00:03:14.039 permanent hearing loss. Just stop and think about 00:03:14.039 --> 00:03:16.460 the psychology of that for a second. You are 00:03:16.460 --> 00:03:19.659 four years old. The political environment around 00:03:19.659 --> 00:03:22.719 you is getting more and more dangerous. Antisemitism 00:03:22.719 --> 00:03:25.520 is on the rise. The war is starting. The world 00:03:25.520 --> 00:03:28.319 is getting louder in a terrifying way. And your 00:03:28.319 --> 00:03:32.020 primary sense for monitoring that danger, your 00:03:32.020 --> 00:03:36.090 hearing. is compromised. It's muffled. It forced 00:03:36.090 --> 00:03:38.310 him to develop a totally different relationship 00:03:38.310 --> 00:03:41.569 with the world. He couldn't rely on passive listening. 00:03:41.729 --> 00:03:44.189 He couldn't just hang out and absorb things from 00:03:44.189 --> 00:03:46.069 the background. He had to lean in. He had to 00:03:46.069 --> 00:03:48.330 lean in. He had to lip read. He had to focus 00:03:48.330 --> 00:03:50.750 with this incredible intensity just to understand 00:03:50.750 --> 00:03:53.349 what was being said in normal conversation. That 00:03:53.349 --> 00:03:55.830 focus became legendary later, didn't it? Oh, 00:03:55.849 --> 00:03:58.819 absolutely. decades later at intel employees 00:03:58.819 --> 00:04:00.860 would talk about the grove stare he would just 00:04:00.860 --> 00:04:03.479 lock onto you and it terrified people i've read 00:04:03.479 --> 00:04:06.479 about that but it originated from this childhood 00:04:06.479 --> 00:04:10.180 necessity of decoding a muckled world he learned 00:04:10.180 --> 00:04:13.139 a lesson very very early if you stop paying attention 00:04:13.139 --> 00:04:16.180 for one second you miss the signal and in his 00:04:16.180 --> 00:04:18.639 childhood missing the signal could be fatal and 00:04:18.639 --> 00:04:21.399 that is not an exaggeration that is literal because 00:04:21.399 --> 00:04:24.720 by the time he is eight years old The Nazis occupy 00:04:24.720 --> 00:04:28.899 Hungary. March 1944. And the efficiency of the 00:04:28.899 --> 00:04:31.220 horror is what is so staggering when you read 00:04:31.220 --> 00:04:35.139 about it. In a matter of months, nearly 500 ,000 00:04:35.139 --> 00:04:37.680 Hungarian Jews were deported to the death camps. 00:04:37.879 --> 00:04:41.129 It was industrial -scale murder. Grove. Young 00:04:41.129 --> 00:04:43.689 Andros and his mother are right in the middle 00:04:43.689 --> 00:04:45.449 of this. They had to vanish. They had to become 00:04:45.449 --> 00:04:48.509 ghosts. They took on false identities. They were 00:04:48.509 --> 00:04:50.930 moving from apartment to apartment, being sheltered 00:04:50.930 --> 00:04:53.170 by friends who were risking their own lives to 00:04:53.170 --> 00:04:55.350 do it. It is the definition of hiding in plain 00:04:55.350 --> 00:04:57.850 sight. It is. I mean, can you imagine? Every 00:04:57.850 --> 00:04:59.730 knock on the door, every look from a stranger 00:04:59.730 --> 00:05:01.569 on the street, it could mean the end. Every day 00:05:01.569 --> 00:05:03.649 is a gamble. And his father wasn't there to help 00:05:03.649 --> 00:05:05.910 them navigate this. No. His father was arrested 00:05:05.910 --> 00:05:08.889 early on. He was taken to an Eastern labor camp. 00:05:09.319 --> 00:05:12.240 The biography details that he was tortured, forced 00:05:12.240 --> 00:05:15.259 into slave labor. Unbelievable. He did survive, 00:05:15.459 --> 00:05:18.199 miraculously, and was reunited with the family 00:05:18.199 --> 00:05:21.079 after the war. But young Andy spent his most 00:05:21.079 --> 00:05:23.899 formative years with a missing father and a mother 00:05:23.899 --> 00:05:26.839 constantly on the run, just trying to survive 00:05:26.839 --> 00:05:30.399 until the next sunrise. So the war ends. The 00:05:30.399 --> 00:05:33.360 Nazis are defeated. And you would think, OK, 00:05:33.459 --> 00:05:35.600 we made it. Spivalides returned. But that is 00:05:35.600 --> 00:05:38.360 the tragedy of Eastern Europe in that era. One 00:05:38.360 --> 00:05:41.040 totalitarian regime was just swapped for another. 00:05:41.279 --> 00:05:44.060 The Soviets roll in. The siege of Budapest. Which 00:05:44.060 --> 00:05:46.800 was brutal. And then a Stalinist puppet government 00:05:46.800 --> 00:05:49.600 is installed. So the fear doesn't go away. It 00:05:49.600 --> 00:05:52.100 just changes its uniform. Grove wrote about this 00:05:52.100 --> 00:05:54.279 in his memoir, Swimming Across. He said that 00:05:54.279 --> 00:05:56.379 by the time he was 20, he had lived through a 00:05:56.379 --> 00:05:59.180 fascist dictatorship, German military occupation, 00:05:59.540 --> 00:06:02.759 the final solution. the Soviet siege, and then 00:06:02.759 --> 00:06:04.680 the daily repression of the Iron Curtain. He 00:06:04.680 --> 00:06:06.800 didn't just read about instability in a history 00:06:06.800 --> 00:06:09.040 book. He was molded by it. He was forged in it. 00:06:09.100 --> 00:06:10.959 He learned a very specific lesson, which is that 00:06:10.959 --> 00:06:14.199 society is fragile. Systems collapse. Order is 00:06:14.199 --> 00:06:17.279 not the default state. Chaos is. And when things 00:06:17.279 --> 00:06:19.399 collapse, nobody is coming to save you. You save 00:06:19.399 --> 00:06:22.699 yourself or you perish. Which brings us to 1956. 00:06:23.600 --> 00:06:26.319 He's 20 years old. The Hungarian Revolution. 00:06:26.800 --> 00:06:29.300 This is a pivotal moment in Cold War history. 00:06:29.519 --> 00:06:32.310 The Hungarian people, led largely by students 00:06:32.310 --> 00:06:35.389 and workers, they rise up against Soviet control. 00:06:35.550 --> 00:06:37.370 And for a few days, it looks like it might actually 00:06:37.370 --> 00:06:39.949 work. It does. There's this incredible brief 00:06:39.949 --> 00:06:42.790 flash of freedom. They tear down the Stalin statues. 00:06:43.069 --> 00:06:45.870 There's what Grove called chaotic democracy in 00:06:45.870 --> 00:06:48.050 the streets. But then the tanks came back. The 00:06:48.050 --> 00:06:50.189 Soviets crushed it ruthlessly. People were being 00:06:50.189 --> 00:06:53.029 rounded up. Execution started. And Andy Grove, 00:06:53.230 --> 00:06:56.430 at age 20, realizes the window is closing. He 00:06:56.430 --> 00:06:58.189 has to make a binary choice. A life or death 00:06:58.189 --> 00:07:01.449 choice. Stay and likely face arrest or a life 00:07:01.449 --> 00:07:03.970 of quiet repression. Or leave everything he has 00:07:03.970 --> 00:07:06.529 ever known. His family, his home, his language. 00:07:06.870 --> 00:07:09.509 He chooses to run. And the details of the escape 00:07:09.509 --> 00:07:12.209 are. They're harrowing. He leaves his parents 00:07:12.209 --> 00:07:14.170 behind, not knowing if he'll ever see them again. 00:07:14.350 --> 00:07:16.170 He heads for the Austrian border with a friend. 00:07:16.290 --> 00:07:18.449 They're moving at night. They're dodging patrols 00:07:18.449 --> 00:07:21.370 with flares and dogs. He eventually crawls through 00:07:21.370 --> 00:07:23.550 the cold mud of a ditch to cross into Austria. 00:07:23.870 --> 00:07:26.370 And I want to just pause on the image of him 00:07:26.370 --> 00:07:29.410 arriving in Austria. Yeah. He is 20 years old. 00:07:29.529 --> 00:07:32.370 He has the clothes on his back. He has no money. 00:07:32.829 --> 00:07:35.389 And he barely speaks a word of English. It really 00:07:35.389 --> 00:07:38.589 reframes the concept of risk for the rest of 00:07:38.589 --> 00:07:40.529 his life, doesn't it? Completely. I mean, think 00:07:40.529 --> 00:07:43.310 about it. Later in his career, business journalists 00:07:43.310 --> 00:07:46.550 would ask him about the risk of investing a billion 00:07:46.550 --> 00:07:49.449 dollars in a new factory or launching a new chip. 00:07:49.649 --> 00:07:51.689 And he would just look at them. You can imagine 00:07:51.689 --> 00:07:53.689 him thinking, you don't know what risk is. To 00:07:53.689 --> 00:07:58.050 him, a drop in the stock price isn't risk. Risk 00:07:58.050 --> 00:08:00.589 is a guy with a rifle at the border. Risk is 00:08:00.589 --> 00:08:02.670 extinction. Business problems are just that. 00:08:02.769 --> 00:08:04.430 They're problems. They're not life or death threats. 00:08:04.490 --> 00:08:06.990 He'd already faced the real thing. So he makes 00:08:06.990 --> 00:08:10.310 his way to the United States in 1957. And this 00:08:10.310 --> 00:08:12.730 is where the story shifts from sheer survival 00:08:12.730 --> 00:08:16.790 to, well, to conquest. The speed at which he 00:08:16.790 --> 00:08:19.470 adapts to America is, frankly, almost unbelievable. 00:08:19.870 --> 00:08:22.779 It is the ultimate immigrant hustle. He learns 00:08:22.779 --> 00:08:24.759 in New York, and he knows he needs money, so 00:08:24.759 --> 00:08:26.819 he starts working as a busboy at a resort in 00:08:26.819 --> 00:08:28.519 the Catskills. Which is actually a sweet side 00:08:28.519 --> 00:08:31.079 note. That is where he met his wife, Eva. That's 00:08:31.079 --> 00:08:33.460 right. She was a waitress, also a refugee from 00:08:33.460 --> 00:08:35.899 Austria. They connected over that shared experience. 00:08:36.659 --> 00:08:39.240 They were married in 1958 and stayed married 00:08:39.240 --> 00:08:42.419 for 58 years until his death. A rare constant 00:08:42.419 --> 00:08:45.000 in what was otherwise such a chaotic life. It 00:08:45.000 --> 00:08:48.039 really was. But while he is bussing tables, he 00:08:48.039 --> 00:08:51.159 enrolls at the City College of New York, CCNY. 00:08:51.960 --> 00:08:55.120 Now, remember, he barely speaks English. I can't 00:08:55.120 --> 00:08:57.159 even imagine. He has to translate the engineering 00:08:57.159 --> 00:09:00.019 textbooks word by word initially from English 00:09:00.019 --> 00:09:02.519 to Hungarian just to understand the concepts. 00:09:02.679 --> 00:09:06.320 The sheer willpower involved is staggering. The 00:09:06.320 --> 00:09:08.139 New York Times had a great line about this period. 00:09:08.179 --> 00:09:11.120 They wrote, a refugee became a senior in engineering. 00:09:11.500 --> 00:09:14.179 It's so simple, but it captures the whole journey. 00:09:14.340 --> 00:09:17.059 And he graduated in 1960, not just graduated, 00:09:17.080 --> 00:09:19.690 but at the top of his class. That is just three 00:09:19.690 --> 00:09:21.610 years after crawling through the mud in Austria. 00:09:21.850 --> 00:09:23.750 And he didn't stop to catch his breath. He went 00:09:23.750 --> 00:09:25.889 straight from New York to California. Straight 00:09:25.889 --> 00:09:28.789 to UC Berkeley. He gets his Ph .D. in chemical 00:09:28.789 --> 00:09:31.789 engineering by 1963. So let's just recap that. 00:09:32.129 --> 00:09:35.570 In six years, he goes from a penniless, stateless 00:09:35.570 --> 00:09:38.450 refugee who doesn't speak the language to Dr. 00:09:38.590 --> 00:09:42.070 Andrew Grove Ph .D. from one of the best universities 00:09:42.070 --> 00:09:45.230 in the world. That academic tenacity gets him 00:09:45.230 --> 00:09:47.789 hired at a place called Fairchild Semiconductor. 00:09:48.909 --> 00:09:50.929 Now, for those who aren't deep into Silicon Valley 00:09:50.929 --> 00:09:53.990 lore, we should probably explain Fairchild. Oh, 00:09:54.009 --> 00:09:56.889 yeah. Fairchild is the Genesis block. It is the 00:09:56.889 --> 00:09:59.149 company that spawned almost every other major 00:09:59.149 --> 00:10:01.370 chip company. If you look at a family tree of 00:10:01.370 --> 00:10:04.269 Silicon Valley, the roots are at Fairchild. It's 00:10:04.269 --> 00:10:06.289 where the integrated circuit was really commercialized. 00:10:06.350 --> 00:10:08.409 Exactly. It was the center of the universe for 00:10:08.409 --> 00:10:10.610 this new technology. And it is where Grove meets 00:10:10.610 --> 00:10:13.750 the other two titans of this story, Robert Noyce 00:10:13.750 --> 00:10:16.779 and Gordon Moore. The Triumvirate. You cannot 00:10:16.779 --> 00:10:18.720 tell the story of Intel without these three. 00:10:18.840 --> 00:10:21.159 No. And the dynamic was fascinating because they 00:10:21.159 --> 00:10:23.200 were so different. They were three legs of a 00:10:23.200 --> 00:10:25.980 stool and each one was essential. Right. So you 00:10:25.980 --> 00:10:29.059 have Robert Noyce. He's the face, the co -inventor 00:10:29.059 --> 00:10:31.639 of the integrated circuit. He's handsome. He's 00:10:31.639 --> 00:10:34.519 charismatic. The visionary who could charm investors 00:10:34.519 --> 00:10:36.960 and rally the troops. Then you have Gordon Moore. 00:10:37.320 --> 00:10:40.639 He's the brain. Quiet, thoughtful, the brilliant 00:10:40.639 --> 00:10:43.259 scientist who came up with Moore's law, the idea 00:10:43.259 --> 00:10:45.759 that computing power doubles roughly every two 00:10:45.759 --> 00:10:48.720 years. He was the pure technologist. And then 00:10:48.720 --> 00:10:52.179 there's Grove. Grove was the fist or maybe the 00:10:52.179 --> 00:10:55.820 engine. Noyce and Moore were the dreamers. Grove 00:10:55.820 --> 00:10:58.259 was the guy who actually made sure the damn things 00:10:58.259 --> 00:11:01.460 got built. He was the operations guy. The discipline. 00:11:01.580 --> 00:11:03.360 He was the one who imposed discipline on the 00:11:03.360 --> 00:11:06.159 chaos of manufacturing something that was at 00:11:06.159 --> 00:11:09.679 the time basically magic. So in 1968, Noyce and 00:11:09.679 --> 00:11:13.059 Moore decide to leave Fairchild to start a new 00:11:13.059 --> 00:11:15.799 company. They call it Intel, short for Integrated 00:11:15.799 --> 00:11:18.019 Electronics. And on the day of incorporation, 00:11:18.139 --> 00:11:20.799 Grove joins them. He walks away from a secure 00:11:20.799 --> 00:11:23.039 job at Fairchild to bet on this new venture. 00:11:23.279 --> 00:11:25.179 He wasn't technically a founder on the paperwork. 00:11:25.360 --> 00:11:28.220 He was employee number three or four, depending 00:11:28.220 --> 00:11:30.740 on how you count the receptions. But spiritually, 00:11:30.879 --> 00:11:33.399 he was the third founder. There is no Intel without 00:11:33.399 --> 00:11:36.250 him. Absolutely not. He was initially the director 00:11:36.250 --> 00:11:39.149 of engineering. His job was to take the brilliant 00:11:39.149 --> 00:11:41.769 ideas from Moore and Noyce and figure out how 00:11:41.769 --> 00:11:44.450 to manufacture these microscopic devices at scale 00:11:44.450 --> 00:11:47.590 reliably and profitably. Which was a massive 00:11:47.590 --> 00:11:49.590 challenge. A huge challenge. He wrote a textbook 00:11:49.590 --> 00:11:51.789 on it, actually, while at Fairchild, Physics 00:11:51.789 --> 00:11:54.850 and Technology of Semiconductor Devices. He literally 00:11:54.850 --> 00:11:57.149 wrote the book on how to build this stuff. And 00:11:57.149 --> 00:12:00.470 they succeed. Intel takes off. The revenue numbers 00:12:00.470 --> 00:12:04.250 are just staggering. It goes from $2 ,672 in 00:12:04.250 --> 00:12:07.450 the first year to over $20 billion by the time 00:12:07.450 --> 00:12:10.429 he steps down as CEO. And in the 1970s, Intel 00:12:10.429 --> 00:12:13.129 is the absolute king of the memory chip market. 00:12:13.350 --> 00:12:15.269 And this is a really important distinction for 00:12:15.269 --> 00:12:18.190 what comes later. Intel was a memory company. 00:12:18.389 --> 00:12:20.389 Right. They weren't making the brains of computers 00:12:20.389 --> 00:12:23.269 yet. Correct. They invented the durian dynamic 00:12:23.269 --> 00:12:26.370 random access memory. For the first 15 years 00:12:26.370 --> 00:12:28.710 of its life, Intel's identity, their revenue. 00:12:28.940 --> 00:12:31.039 Their soul was tied to memory chips. They were 00:12:31.039 --> 00:12:33.659 printing money. They also dabbled in other things, 00:12:33.740 --> 00:12:35.299 right? Yeah. I read they made some of the first 00:12:35.299 --> 00:12:38.399 digital watches and calculators. They did. They 00:12:38.399 --> 00:12:40.480 were exploring the applications of their technology. 00:12:40.700 --> 00:12:43.779 But the cash cow, the core business, was memory 00:12:43.779 --> 00:12:47.299 for mainframe computers. But then comes the mid-'80s. 00:12:47.320 --> 00:12:49.639 And this leads us to what is probably the most 00:12:49.639 --> 00:12:52.960 famous business case study in history, the Great 00:12:52.960 --> 00:12:55.519 Pivot. This is the textbook definition of what 00:12:55.519 --> 00:12:57.820 Grove would later call a strategic inflection 00:12:57.820 --> 00:13:01.000 point. So set the scene for us. It's 1984, 1985. 00:13:01.559 --> 00:13:05.519 Intel is, on paper, dominant in its field. But 00:13:05.519 --> 00:13:07.799 something is happening in the market. The Japanese 00:13:07.799 --> 00:13:10.379 competition arrived. And they arrived in force. 00:13:10.639 --> 00:13:14.139 Companies like Toshiba, NEC, Hitachi. They had 00:13:14.139 --> 00:13:16.620 studied American methods, improved on them, and 00:13:16.620 --> 00:13:18.419 they had figured out how to manufacture memory 00:13:18.419 --> 00:13:21.019 chips with incredibly high quality. And at a 00:13:21.019 --> 00:13:23.600 massive scale. A massive scale. And they were 00:13:23.600 --> 00:13:26.039 ruthless on price. This is the dumping accusation. 00:13:26.120 --> 00:13:28.379 Exactly. They were selling chips in the U .S. 00:13:28.399 --> 00:13:30.679 market, often below their own cost of production, 00:13:30.919 --> 00:13:33.460 just to capture market share and drive American 00:13:33.460 --> 00:13:35.159 companies out of business. And it was working. 00:13:35.580 --> 00:13:38.259 It was devastating. Intel's prices were being 00:13:38.259 --> 00:13:41.240 undercut by 10 percent, 20 percent, 30 percent. 00:13:41.399 --> 00:13:43.980 Intel started bleeding red ink. They were losing 00:13:43.980 --> 00:13:46.659 millions of dollars a month. The company was 00:13:46.659 --> 00:13:49.860 in a death spiral. Now, here is where the paranoia 00:13:49.860 --> 00:13:53.159 concept gets real. Most CEOs in that position 00:13:53.159 --> 00:13:55.720 would double down. They would say, we just need 00:13:55.720 --> 00:13:58.159 to work harder. We need to cut costs. We need 00:13:58.159 --> 00:14:00.500 to market better. We need to ask the government 00:14:00.500 --> 00:14:03.200 for protection. And that is exactly what the 00:14:03.200 --> 00:14:05.679 internal culture at Intel wanted to do. They 00:14:05.679 --> 00:14:08.279 were in denial. The sales team, the engineers, 00:14:08.419 --> 00:14:11.220 they all said, we are a memory company. We can't 00:14:11.220 --> 00:14:13.240 stop making memory. Just an emotional attachment. 00:14:13.620 --> 00:14:15.080 It was their identity. It was what they did. 00:14:15.200 --> 00:14:17.080 It was like telling Ford to stop making cars. 00:14:17.340 --> 00:14:19.820 But Grove saw it differently. And there's this 00:14:19.820 --> 00:14:21.779 famous conversation he had with Gordon Moore 00:14:21.779 --> 00:14:24.919 that captures his genius for clear, ruthless 00:14:24.919 --> 00:14:28.100 thinking. perfectly it's one of my favorite anecdotes 00:14:28.100 --> 00:14:30.679 in all of business history grobe is in his office 00:14:30.679 --> 00:14:32.960 with moore they're looking out the window at 00:14:32.960 --> 00:14:34.840 this ferris wheel revolving in the distance at 00:14:34.840 --> 00:14:38.259 an amusement park and the mood is just Grim. 00:14:38.259 --> 00:14:40.940 They're at a dead end. Completely. And Grove 00:14:40.940 --> 00:14:44.559 turns to Moore and asks this brilliant hypothetical 00:14:44.559 --> 00:14:47.279 question. He says, Gordon, if we got kicked out 00:14:47.279 --> 00:14:50.200 and the board brought in a new CEO, what do you 00:14:50.200 --> 00:14:52.259 think he would do? And Moore doesn't even hesitate. 00:14:52.580 --> 00:14:55.600 No. Moore says instantly he would get us out 00:14:55.600 --> 00:14:57.980 of memories. And Grove just looks at him and 00:14:57.980 --> 00:15:00.600 says the killer line. Why shouldn't you and I 00:15:00.600 --> 00:15:03.019 walk out that door, come back in and do it ourselves? 00:15:03.379 --> 00:15:06.179 That is the moment. It sounds so simple, but 00:15:06.179 --> 00:15:08.700 think about the psychological difficulty, the 00:15:08.700 --> 00:15:11.179 courage it takes. They had to kill their own 00:15:11.179 --> 00:15:13.460 baby. They had to admit that the product that 00:15:13.460 --> 00:15:15.840 built the entire company was now a liability. 00:15:16.120 --> 00:15:18.100 A boat anchor. And they did it. They decided 00:15:18.100 --> 00:15:20.879 to exit the memory business entirely. They shut 00:15:20.879 --> 00:15:23.159 down factories, laid off thousands of people. 00:15:23.240 --> 00:15:26.200 It was brutal. To focus on what, though? At the 00:15:26.200 --> 00:15:28.379 time, what was the alternative? It was this other, 00:15:28.379 --> 00:15:31.059 much smaller, almost noosh line of business they 00:15:31.059 --> 00:15:35.190 had. The microprocessor. The CPU. The thing that 00:15:35.190 --> 00:15:37.950 eventually becomes the Intel inside. Exactly. 00:15:38.049 --> 00:15:40.009 They had developed some of the world's first 00:15:40.009 --> 00:15:43.710 microprocessors like the 4004 and the 8080. They 00:15:43.710 --> 00:15:45.750 were the core of the first hobbyist computers 00:15:45.750 --> 00:15:48.610 like the Altair. But it was still a small business 00:15:48.610 --> 00:15:50.450 compared to memory. No, we need to get a little 00:15:50.450 --> 00:15:53.070 technical here because this isn't just swapping 00:15:53.070 --> 00:15:55.690 one product for another. The economics of memory 00:15:55.690 --> 00:15:58.269 chips versus microprocessors are totally different. 00:15:58.350 --> 00:16:00.490 Night and day. And this explains why the Pivot 00:16:00.490 --> 00:16:03.429 was so brilliant and so hard. Explain that. Memory 00:16:03.429 --> 00:16:06.049 chips are a commodity. Think of them like wheat 00:16:06.049 --> 00:16:09.250 or steel or a blank notebook. If I sell you a 00:16:09.250 --> 00:16:11.470 memory chip and a Japanese company sells you 00:16:11.470 --> 00:16:14.029 a memory chip, they both just store data. It 00:16:14.029 --> 00:16:15.990 doesn't really matter who made it. So the only 00:16:15.990 --> 00:16:18.690 way to compete is on price. It is a race to the 00:16:18.690 --> 00:16:20.649 bottom. It's about who has the cheapest labor 00:16:20.649 --> 00:16:22.970 and the biggest factory. A terrible business 00:16:22.970 --> 00:16:25.350 to be in if you're a high -cost American company. 00:16:25.529 --> 00:16:28.190 Okay, so that's memory. What about a microprocessor? 00:16:28.429 --> 00:16:32.230 A microprocessor is a platform. It is the brain 00:16:32.230 --> 00:16:36.029 of the computer. Once you... write software for 00:16:36.029 --> 00:16:38.750 a specific microprocessor architecture like the 00:16:38.750 --> 00:16:41.549 Intel x86 architecture, that software doesn't 00:16:41.549 --> 00:16:43.269 run on a different chip without a lot of work. 00:16:43.649 --> 00:16:46.149 It's sticky. It creates lock -in. It's a monopoly. 00:16:46.889 --> 00:16:48.850 If you can make your chip the standard, you own 00:16:48.850 --> 00:16:51.409 the entire ecosystem. You aren't competing on 00:16:51.409 --> 00:16:53.429 price anymore. You are competing on performance. 00:16:53.870 --> 00:16:56.149 And everyone has to buy your chip to run their 00:16:56.149 --> 00:16:57.950 software. It's a much better business to be in. 00:16:58.070 --> 00:17:01.009 Infinitely better. But to make that work, they 00:17:01.009 --> 00:17:03.750 needed a killer deal. They needed to become the 00:17:03.750 --> 00:17:07.420 standard. And that is the IBM deal. This is where 00:17:07.420 --> 00:17:09.900 Grove's toughness as a negotiator and a strategist 00:17:09.900 --> 00:17:12.799 came in. IBM was launching the personal computer, 00:17:12.940 --> 00:17:16.680 the PC. It was a huge deal. Grove and his team, 00:17:16.759 --> 00:17:19.240 led by a guy named Earl Whetstone, they negotiated 00:17:19.240 --> 00:17:22.160 ferociously. And they convinced IBM to use the 00:17:22.160 --> 00:17:25.539 Intel 8088 chip as the brain of the IBM PC. Yes, 00:17:25.539 --> 00:17:27.839 and that was the coup. But the even bigger win 00:17:27.839 --> 00:17:30.819 was a mistake IBM made. IBM decided to make the 00:17:30.819 --> 00:17:33.019 PC an open standard, meaning other companies 00:17:33.019 --> 00:17:36.140 could make clones of it. Like Compaq, Dell, HP. 00:17:36.339 --> 00:17:38.920 All of them. And because the IBM PC became the 00:17:38.920 --> 00:17:41.339 standard for business, every one of those clone 00:17:41.339 --> 00:17:43.420 makers had to use the Intel chip too if they 00:17:43.420 --> 00:17:45.240 wanted to be compatible and run all the business 00:17:45.240 --> 00:17:48.079 software like Lotus 1 -2 -3 and WordPerfect. 00:17:48.319 --> 00:17:50.940 So Grove didn't just win the IBM deal. He won 00:17:50.940 --> 00:17:54.380 the entire industry. He locked Intel into the 00:17:54.380 --> 00:17:56.740 DNA of the personal computer revolution. The 00:17:56.740 --> 00:17:59.450 result. absolute crushing dominance for decades. 00:17:59.710 --> 00:18:04.089 During Grove's tenure as CEO from 87 to 98, Intel's 00:18:04.089 --> 00:18:08.390 market cap went from $4 billion to $197 billion. 00:18:08.769 --> 00:18:11.990 4 ,500 % increase. It's just, it's an insane 00:18:11.990 --> 00:18:14.250 number. Intel became the seventh largest company 00:18:14.250 --> 00:18:15.930 in the world. They went from a struggling memory 00:18:15.930 --> 00:18:18.750 manufacturer on the brink of bankruptcy to the 00:18:18.750 --> 00:18:21.269 Intel inside powerhouse that we all know. And 00:18:21.269 --> 00:18:24.089 that pivot was only possible because Grove was 00:18:24.089 --> 00:18:26.130 paranoid enough to see if the memory business 00:18:26.130 --> 00:18:28.250 was dead. before it actually killed them. Exactly. 00:18:28.490 --> 00:18:30.609 And that leads us to the core of his philosophy. 00:18:30.930 --> 00:18:33.210 He took that traumatic near -death experience 00:18:33.210 --> 00:18:35.950 and he codified it. He turned it into a system. 00:18:36.130 --> 00:18:38.569 Right. Only the paranoid survive. Let's unpack 00:18:38.569 --> 00:18:40.690 the actual methodology here because it's not 00:18:40.690 --> 00:18:42.809 just about being scared all the time. No, it's 00:18:42.809 --> 00:18:45.150 not about unfocused anxiety. It's about a very 00:18:45.150 --> 00:18:48.450 specific kind of vigilance. It's about what he 00:18:48.450 --> 00:18:51.789 called strategic dissonance. Strategic dissonance. 00:18:52.130 --> 00:18:54.829 Sounds a bit academic. What does it actually 00:18:54.829 --> 00:18:57.519 mean? It's the gap. It's the mismatch between 00:18:57.519 --> 00:18:59.599 what your senior management is saying and what's 00:18:59.599 --> 00:19:02.099 actually happening on the ground. It's the difference 00:19:02.099 --> 00:19:04.799 between your official strategy and the new reality 00:19:04.799 --> 00:19:07.180 of the market. So when Intel's leadership was 00:19:07.180 --> 00:19:10.049 saying, we are a memory company. But the sales 00:19:10.049 --> 00:19:12.269 team was getting crushed by Japanese competitors. 00:19:12.670 --> 00:19:16.029 That gap is the dissonance. That is the strategic 00:19:16.029 --> 00:19:18.710 dissonance. And Grove believed that every company, 00:19:18.829 --> 00:19:21.210 no matter how successful, eventually hits a point 00:19:21.210 --> 00:19:23.230 where the fundamentals of the business change. 00:19:23.549 --> 00:19:25.829 He called that the strategic inflection point. 00:19:25.950 --> 00:19:27.769 A point where the old rules just stop working. 00:19:27.970 --> 00:19:30.130 Right. It could be a new technology, a new competitor, 00:19:30.349 --> 00:19:32.490 a change in regulation, something fundamental 00:19:32.490 --> 00:19:35.329 shifts. And his theory was that the CEO and the 00:19:35.329 --> 00:19:37.869 senior VPs are usually the last people to know 00:19:37.869 --> 00:19:39.650 that the inflection point. has happened. Why? 00:19:40.569 --> 00:19:42.390 Is it just because they're sitting in the ivory 00:19:42.390 --> 00:19:46.089 tower? It's that. Yes. They're insulated. They're 00:19:46.089 --> 00:19:49.369 surrounded by yes men who filter out bad news. 00:19:49.609 --> 00:19:52.549 They're looking at lagging indicators like last 00:19:52.549 --> 00:19:55.309 quarter's profits, which look fine right up until 00:19:55.309 --> 00:19:57.630 they fall off a cliff. So who does know? The 00:19:57.630 --> 00:19:59.569 people on the front lines, the people on the 00:19:59.569 --> 00:20:01.769 periphery. Yeah. The people who Grove called 00:20:01.769 --> 00:20:05.089 the Cassandras. We mentioned Cassandra earlier. 00:20:05.930 --> 00:20:08.390 the figure from Greek mythology who could predict 00:20:08.390 --> 00:20:10.950 the future but was cursed so that no one would 00:20:10.950 --> 00:20:13.490 ever believe her. In a company, the Cassandras 00:20:13.490 --> 00:20:16.150 are the sales reps who keep losing deals to a 00:20:16.150 --> 00:20:19.049 new, cheaper competitor. They're the junior engineers 00:20:19.049 --> 00:20:21.029 who see a new technology at a conference and 00:20:21.029 --> 00:20:23.109 think, hey, this is way better than what we're 00:20:23.109 --> 00:20:25.250 making. They see the snow melting at the edges, 00:20:25.390 --> 00:20:27.529 as Grove put it. That's his phrase. They see 00:20:27.529 --> 00:20:29.829 the early warning signs. But in most corporate 00:20:29.829 --> 00:20:31.849 cultures, what happens to those people? They're 00:20:31.849 --> 00:20:34.410 ignored. Or worse, they're punished for being 00:20:34.410 --> 00:20:38.579 negative or Not a team player. Exactly. And Grove's 00:20:38.579 --> 00:20:41.759 genius was to flip that entirely, he said. You 00:20:41.759 --> 00:20:43.880 must cherish the Cassandras. You must create 00:20:43.880 --> 00:20:46.440 a culture where bad news travels fast. You have 00:20:46.440 --> 00:20:49.240 to amplify those weak signals. This brings us 00:20:49.240 --> 00:20:52.920 to constructive confrontation. Because I've read 00:20:52.920 --> 00:20:54.599 stories about intel meetings and they sound, 00:20:54.680 --> 00:20:58.039 well, they sound loud. Laughs. They were incredibly 00:20:58.039 --> 00:21:00.960 intense. Yelling was common. Swearing was common. 00:21:01.099 --> 00:21:04.180 People would pound the table. But it wasn't chaotic 00:21:04.180 --> 00:21:06.359 aggression. It was structured. There was a core 00:21:06.359 --> 00:21:09.240 rule. Which was? We argue about issues, not people. 00:21:09.400 --> 00:21:11.339 You attack the data, you attack the logic, you 00:21:11.339 --> 00:21:13.480 attack the proposal. You never attack the person 00:21:13.480 --> 00:21:15.839 who brought the proposal. But did that actually 00:21:15.839 --> 00:21:19.299 work in practice? Or was it just an excuse for 00:21:19.299 --> 00:21:21.519 bullying? By all accounts, it worked because 00:21:21.519 --> 00:21:24.519 of the second, even more important rule, the 00:21:24.519 --> 00:21:28.220 egalitarian ethos. Grove had a saying, knowledge 00:21:28.220 --> 00:21:30.900 power trumps positional power. Meaning what? 00:21:31.039 --> 00:21:34.119 Meaning if you are a junior engineer fresh out 00:21:34.119 --> 00:21:36.140 of college and you have the data that proves 00:21:36.140 --> 00:21:39.799 Andy Grove, the CEO, is wrong, you are not only 00:21:39.799 --> 00:21:42.420 allowed to say it, you are expected to win the 00:21:42.420 --> 00:21:44.200 argument. And Grove would actually back down. 00:21:44.440 --> 00:21:47.720 The stories say yes. Craig Barrett, who succeeded 00:21:47.720 --> 00:21:49.960 him as CEO, said it's give and take. He's not 00:21:49.960 --> 00:21:52.720 above it. Grove wanted the truth more than he 00:21:52.720 --> 00:21:55.799 wanted to be right. He viewed politeness or deference 00:21:55.799 --> 00:21:59.579 to authority as a form of lying. How so? If you 00:21:59.579 --> 00:22:01.200 are being polite, instead of telling your boss 00:22:01.200 --> 00:22:03.480 that the product has a fundamental flaw, you 00:22:03.480 --> 00:22:05.839 are hurting the company to protect your boss's 00:22:05.839 --> 00:22:08.539 feelings. And Grove had no time for that. He 00:22:08.539 --> 00:22:11.519 wanted the unvarnished, brutal truth as quickly 00:22:11.519 --> 00:22:14.140 as possible. And he stripped away all the physical 00:22:14.140 --> 00:22:16.599 trappings of power to reinforce this. The famous 00:22:16.599 --> 00:22:18.500 cubicles. This is maybe the most well -known 00:22:18.500 --> 00:22:21.200 part of his style. Andy Grove, running one of 00:22:21.200 --> 00:22:23.140 the biggest, most important companies on Earth. 00:22:23.470 --> 00:22:26.009 Sat in a standard eight by nine foot cubicle. 00:22:26.130 --> 00:22:28.769 Same as everyone else. Exactly the same. No mahogany 00:22:28.769 --> 00:22:32.150 paneled corner office. No private jet. No executive 00:22:32.150 --> 00:22:35.329 dining room. No special parking spots. No executive 00:22:35.329 --> 00:22:38.769 washrooms. Nothing. It sends a pretty powerful 00:22:38.769 --> 00:22:41.950 message, doesn't it? I am in the trenches with 00:22:41.950 --> 00:22:44.809 you. It says we are all soldiers in this war, 00:22:44.950 --> 00:22:47.410 but it's also practical. It kept the information 00:22:47.410 --> 00:22:50.970 flow open. If the CEO is behind three assistants 00:22:50.970 --> 00:22:53.579 and a locked door. You're never going to tell 00:22:53.579 --> 00:22:55.680 him the bad news. You're too intimidated. Right. 00:22:55.779 --> 00:22:58.140 But if he's in the cubicle next to you, you might 00:22:58.140 --> 00:23:00.420 just lean over and say, Andy, this chip has a 00:23:00.420 --> 00:23:03.180 bug and we need to talk about it. It flattens 00:23:03.180 --> 00:23:05.380 the organization and speeds everything up. He 00:23:05.380 --> 00:23:07.759 also had this insane attention to detail. Oh, 00:23:07.839 --> 00:23:10.680 obsessive. The devil is in the details was one 00:23:10.680 --> 00:23:12.900 of his mottos. He would correct his own spelling 00:23:12.900 --> 00:23:14.960 errors and memos, even though English was his 00:23:14.960 --> 00:23:17.180 second language. He feared that brilliance and 00:23:17.180 --> 00:23:19.259 great strategy would come to nothing without 00:23:19.259 --> 00:23:22.019 disciplined execution. Now, managing this kind 00:23:22.019 --> 00:23:24.099 of high confrontation, high information chaos 00:23:24.099 --> 00:23:27.500 requires a system. You can't just have everyone 00:23:27.500 --> 00:23:29.519 yelling at each other all day. No, you need a 00:23:29.519 --> 00:23:31.559 framework. And this is where Grove's engineering 00:23:31.559 --> 00:23:33.920 mind really shines. He gave us the management 00:23:33.920 --> 00:23:36.779 tool that basically runs every modern tech company, 00:23:36.980 --> 00:23:40.660 OKRs. Objectives and key results. If you work 00:23:40.660 --> 00:23:44.299 at Google, LinkedIn, Amazon, Netflix, or really 00:23:44.299 --> 00:23:47.279 any venture -backed startup today, you use some 00:23:47.279 --> 00:23:49.779 version of these. But... They started with Grove 00:23:49.779 --> 00:23:53.460 at Intel. Yes. He developed the system from earlier 00:23:53.460 --> 00:23:55.660 management by objective theories and taught it 00:23:55.660 --> 00:23:58.299 in an internal course at Intel in the 1970s. 00:23:58.359 --> 00:24:00.660 And in one of those classes was a young sales 00:24:00.660 --> 00:24:03.400 guy named John Doerr. Who later becomes a legendary 00:24:03.400 --> 00:24:05.900 venture capitalist at Kleiner Perkins. The legendary 00:24:05.900 --> 00:24:09.559 VC. And in 1999, Doerr, having invested in a 00:24:09.559 --> 00:24:12.039 small search engine startup, taught the system 00:24:12.039 --> 00:24:15.680 to its two young founders. Larry Page and Sergey 00:24:15.680 --> 00:24:18.680 Brin at Google. And the rest is history. So what 00:24:18.680 --> 00:24:21.319 is the Grove flavor of OKR? How does it differ 00:24:21.319 --> 00:24:24.000 from just, you know, setting goals? It's about 00:24:24.000 --> 00:24:26.559 extreme clarity and separating the what from 00:24:26.559 --> 00:24:29.400 the how. OK. The objective is the what. It's 00:24:29.400 --> 00:24:31.500 the destination. It should be qualitative, inspirational, 00:24:31.980 --> 00:24:35.559 dominate the PC microprocessor market or launch 00:24:35.559 --> 00:24:38.380 the best personal computer. And the key results 00:24:38.380 --> 00:24:41.140 are the how. Well, more like the how do we know 00:24:41.140 --> 00:24:43.559 we got there? They are the measurable milestones. 00:24:44.140 --> 00:24:48.140 When 50 new PC design wins by Q3, achieve 99 00:24:48.140 --> 00:24:51.319 % yield in the new factory, ship 10 ,000 units 00:24:51.319 --> 00:24:53.900 by December 1st. And the magic is in the measurement. 00:24:54.140 --> 00:24:57.599 It has to be quantifiable. It has to be brutally, 00:24:57.759 --> 00:25:00.920 unambiguously quantifiable. This was the Grove 00:25:00.920 --> 00:25:03.660 litmus test. He said a key result has to be binary. 00:25:04.099 --> 00:25:06.660 At the end of the quarter, you ask, did I do 00:25:06.660 --> 00:25:09.500 it? Yes or no? Simple. Did I ship 10 ,000 units? 00:25:09.579 --> 00:25:12.410 Yes or no? There are no arguments. No, I tried 00:25:12.410 --> 00:25:14.349 really hard. No. Well, the market was tough, 00:25:14.490 --> 00:25:17.130 but we made good progress. It's just yes or no. 00:25:17.269 --> 00:25:20.369 It's ruthless. It is. But it's clarifying. Growth 00:25:20.369 --> 00:25:22.750 believed that if you can't measure it, you can't 00:25:22.750 --> 00:25:24.710 manage it. And if you can't manage it, you can't 00:25:24.710 --> 00:25:27.470 improve it. It forces discipline and accountability 00:25:27.470 --> 00:25:30.650 into the whole organization. And Larry Page from 00:25:30.650 --> 00:25:33.009 Google credits OKRs with allowing the company 00:25:33.009 --> 00:25:36.009 to achieve 10x growth many times over. Because 00:25:36.009 --> 00:25:38.460 it kept everyone aligned. When you have thousands 00:25:38.460 --> 00:25:40.640 of brilliant engineers, they can all run off 00:25:40.640 --> 00:25:43.180 in different directions. OKR has turned that 00:25:43.180 --> 00:25:46.079 disorganized mob into a focused vector with everyone 00:25:46.079 --> 00:25:48.019 pushing in the same direction. It's applying 00:25:48.019 --> 00:25:49.960 engineering physics to managing human beings. 00:25:50.160 --> 00:25:52.480 Precisely. It's a system for converting human 00:25:52.480 --> 00:25:55.519 effort into predictable output. Very Grove. I 00:25:55.519 --> 00:25:58.059 want to shift gears now because so far we have 00:25:58.059 --> 00:26:01.000 painted a picture of Grove as the ultimate Silicon 00:26:01.000 --> 00:26:04.460 Valley capitalist. Ruthless, competitive, a free 00:26:04.460 --> 00:26:06.779 market conqueror. The ultimate survivor. Right. 00:26:06.839 --> 00:26:09.359 But when you dig into his economic writings, 00:26:09.559 --> 00:26:11.859 especially later in his life, you find something 00:26:11.859 --> 00:26:14.119 that surprised me, something much more complex. 00:26:14.440 --> 00:26:17.160 You find a man who was deeply, deeply worried 00:26:17.160 --> 00:26:19.640 about the future of the American economy. He 00:26:19.640 --> 00:26:22.319 wrote a famous, almost infamous article for Bloomberg 00:26:22.319 --> 00:26:26.309 in 2010. And in it. He basically attacks the 00:26:26.309 --> 00:26:28.609 modern Silicon Valley playbook. When he helped 00:26:28.609 --> 00:26:31.269 create. Exactly. He draws this sharp distinction 00:26:31.269 --> 00:26:34.240 between startups. and scale ups. This is a critical 00:26:34.240 --> 00:26:36.400 insight, and it's more relevant today than it 00:26:36.400 --> 00:26:38.799 was when he wrote it. Grove argued that as a 00:26:38.799 --> 00:26:41.279 society, we've become obsessed with startups, 00:26:41.480 --> 00:26:44.299 two guys in a garage inventing a new app. It's 00:26:44.299 --> 00:26:46.519 romantic. It's the American dream. It's romantic 00:26:46.519 --> 00:26:49.119 and it gets all the headlines. But he said startups 00:26:49.119 --> 00:26:52.160 don't solve the national economic problem. Startups, 00:26:52.160 --> 00:26:54.519 he argued, create wealth for a few people, the 00:26:54.519 --> 00:26:58.160 founders, the VCs. But jobs, mass employment, 00:26:58.420 --> 00:27:00.680 a stable middle class that comes from scaling. 00:27:00.799 --> 00:27:04.200 It comes from manufacturing. And his big problem 00:27:04.200 --> 00:27:06.500 was that American companies had stopped scaling 00:27:06.500 --> 00:27:09.839 in America. Right. The playbook had become invent 00:27:09.839 --> 00:27:12.160 the product in California, get the venture funding 00:27:12.160 --> 00:27:14.680 in California, but then build the factory in 00:27:14.680 --> 00:27:18.819 China or Taiwan or Vietnam. Grove called this 00:27:18.819 --> 00:27:21.500 the exit strategy for American manufacturing. 00:27:21.759 --> 00:27:24.279 Now, the standard economist argument, the free 00:27:24.279 --> 00:27:27.920 trade argument is. That's fine. That's efficient. 00:27:28.299 --> 00:27:30.740 We do the high value design and marketing work 00:27:30.740 --> 00:27:33.400 here, and we outsource the low value assembly 00:27:33.400 --> 00:27:36.339 work over there. Grove hated that argument. He 00:27:36.339 --> 00:27:38.259 thought it was dangerously short -sighted. He 00:27:38.259 --> 00:27:41.039 called it the innovation machine paradox. Break 00:27:41.039 --> 00:27:42.839 that down for us. Why did he think that was so 00:27:42.839 --> 00:27:45.299 dangerous? He believed that innovation isn't 00:27:45.299 --> 00:27:47.240 just a brilliant idea you have in the shower. 00:27:47.789 --> 00:27:50.170 True, sustainable innovation comes from the struggle 00:27:50.170 --> 00:27:52.589 of making things. He called it tacit knowledge, 00:27:52.789 --> 00:27:54.710 the knowledge you can't write down in a textbook. 00:27:55.049 --> 00:27:57.190 Give us an example of that. Okay, take batteries 00:27:57.190 --> 00:28:00.200 for electric cars. If you want to design a better, 00:28:00.240 --> 00:28:02.880 cheaper, more powerful battery, you need to understand 00:28:02.880 --> 00:28:05.400 the chemistry, sure. But you also need to understand 00:28:05.400 --> 00:28:08.960 the manufacturing tolerances, the supply chain 00:28:08.960 --> 00:28:11.480 for lithium, the way the machines that assemble 00:28:11.480 --> 00:28:13.700 the cells actually work. The hands -on stuff. 00:28:13.940 --> 00:28:16.960 The hands -on stuff. If the factory is 6 ,000 00:28:16.960 --> 00:28:20.319 miles away, your brilliant PhD designers in Palo 00:28:20.319 --> 00:28:22.960 Alto lose touch with the physical reality of 00:28:22.960 --> 00:28:25.519 the product. They get separated from the manufacturing 00:28:25.519 --> 00:28:28.559 learning curve. So he argued that... If you lose 00:28:28.559 --> 00:28:31.619 the ability to scale the technology. Eventually, 00:28:31.619 --> 00:28:33.819 you lose the ability to invent the next generation 00:28:33.819 --> 00:28:35.680 of it. You forget how to make the thing. And 00:28:35.680 --> 00:28:38.099 once you forget, the innovation itself moves 00:28:38.099 --> 00:28:39.940 to where the factories are, which is exactly 00:28:39.940 --> 00:28:41.819 what we have seen with batteries, with solar 00:28:41.819 --> 00:28:44.880 panels, with advanced displays. The U .S. invented 00:28:44.880 --> 00:28:48.859 them, but Asia perfected them and now leads in 00:28:48.859 --> 00:28:51.279 the next generation. It is incredibly prescient, 00:28:51.319 --> 00:28:53.259 given the conversations we are having right now 00:28:53.259 --> 00:28:55.740 in the 2020s about supply chains and national 00:28:55.740 --> 00:28:58.140 security and bringing. chip manufacturing back 00:28:58.140 --> 00:29:01.819 to the US with the CHPS Act. He was the Cassandra 00:29:01.819 --> 00:29:04.720 again. He was waving a giant red flag about this 00:29:04.720 --> 00:29:07.579 in 2010. He wrote, and this is a direct quote, 00:29:07.799 --> 00:29:10.880 the US has become wildly inefficient at creating 00:29:10.880 --> 00:29:13.680 American tech jobs. And his proposed solutions 00:29:13.680 --> 00:29:17.559 were. controversial to say the least. Very. He 00:29:17.559 --> 00:29:19.519 sounded like a protectionist, which was shocking 00:29:19.519 --> 00:29:22.720 coming from a Silicon Valley CEO. He said job 00:29:22.720 --> 00:29:25.500 creation should be the number one national priority, 00:29:25.660 --> 00:29:28.599 even above things like maximizing shareholder 00:29:28.599 --> 00:29:31.440 value. And he suggested a mechanism for it. He 00:29:31.440 --> 00:29:34.539 did. He suggested taxing imported products from 00:29:34.539 --> 00:29:37.099 countries that were subsidizing their own industries 00:29:37.099 --> 00:29:39.859 and then using that tax revenue to subsidize 00:29:39.859 --> 00:29:42.400 domestic manufacturing here to help American 00:29:42.400 --> 00:29:44.519 companies scale up at home. He knew that would 00:29:44.519 --> 00:29:47.099 be called protectionism. Oh, yeah. He ended the 00:29:47.099 --> 00:29:48.980 article by saying, if what I'm suggesting sounds 00:29:48.980 --> 00:29:52.000 protectionist, so be it. He used the phrase fight 00:29:52.000 --> 00:29:55.180 to win. He viewed nations as competitors, just 00:29:55.180 --> 00:29:57.559 like companies. He thought the U .S. was resting 00:29:57.559 --> 00:30:00.000 on its laurels, acting like its post -war dominance 00:30:00.000 --> 00:30:02.240 was guaranteed. And coming from where he came 00:30:02.240 --> 00:30:05.079 from, he knew nothing is ever guaranteed. Absolutely 00:30:05.079 --> 00:30:07.519 nothing. It all circles back to that core trauma. 00:30:08.119 --> 00:30:11.140 He looks at the U .S. economy and he sees a system 00:30:11.140 --> 00:30:15.420 that is making itself fat, complacent and vulnerable. 00:30:15.900 --> 00:30:18.880 He sees a strategic inflection point that the 00:30:18.880 --> 00:30:21.500 politicians and economists are ignoring. He believed 00:30:21.500 --> 00:30:24.200 that a society that cannot make its own essential 00:30:24.200 --> 00:30:28.069 goods is fragile. And Andrew Grove hated fragility 00:30:28.069 --> 00:30:30.670 more than anything else. He also had some other 00:30:30.670 --> 00:30:32.490 interesting thoughts on the Internet and privacy 00:30:32.490 --> 00:30:35.769 that were. Again, way ahead of their time. He 00:30:35.769 --> 00:30:39.089 did. This was in the early 2000s. He argued against 00:30:39.089 --> 00:30:41.289 the idea that e -commerce should be tax -free. 00:30:41.410 --> 00:30:43.309 He said it was a subsidy that physical stores 00:30:43.309 --> 00:30:45.529 didn't get and it wasn't necessary. He was in 00:30:45.529 --> 00:30:47.190 the minority, but he turned out to be right. 00:30:47.289 --> 00:30:50.089 And on privacy. He viewed personal data as property, 00:30:50.369 --> 00:30:52.809 your property. He believed the government's role 00:30:52.809 --> 00:30:55.109 was to regulate property rights and that it should 00:30:55.109 --> 00:30:57.609 create a uniform federal standard for data privacy. 00:30:57.890 --> 00:31:00.089 He didn't trust companies to self -regulate. 00:31:00.309 --> 00:31:03.319 Which, again, coming from the CEO of Intel. is 00:31:03.319 --> 00:31:06.039 a very strong statement. It shows his pragmatism. 00:31:06.099 --> 00:31:08.599 He wasn't a blind ideologue. He believed in whatever 00:31:08.599 --> 00:31:11.059 worked to create a strong, resilient system. 00:31:11.339 --> 00:31:13.279 Let's look at the final chapter of his life. 00:31:13.599 --> 00:31:15.940 Because even as he stepped down from the CEO 00:31:15.940 --> 00:31:19.839 role in 1998, moving to chairman, he faced his 00:31:19.839 --> 00:31:22.480 biggest personal battle. The medical challenges, 00:31:22.579 --> 00:31:25.400 yes. He was diagnosed with prostate cancer in 00:31:25.400 --> 00:31:28.700 the mid -90s. And then in 2000, he was diagnosed 00:31:28.700 --> 00:31:32.289 with Parkinson's disease. And true to form. He 00:31:32.289 --> 00:31:35.269 didn't just passively have the disease. He managed 00:31:35.269 --> 00:31:38.210 it. He attacked it. He absolutely attacked it. 00:31:38.289 --> 00:31:40.890 He treated his own body like a struggling division 00:31:40.890 --> 00:31:43.809 of Intel. He became an expert on his own conditions. 00:31:43.950 --> 00:31:47.049 He collected his own data. He plotted his PSA 00:31:47.049 --> 00:31:49.089 levels on charts. He read all the scientific 00:31:49.089 --> 00:31:51.650 papers. He challenged his doctors. Oh, constantly. 00:31:51.990 --> 00:31:54.609 There is a famous story where he basically designed 00:31:54.609 --> 00:31:57.250 his own radiation treatment plan for his cancer 00:31:57.250 --> 00:31:59.769 because he analyzed the data and wasn't satisfied 00:31:59.769 --> 00:32:02.049 with the standard of care. doctors were proposing. 00:32:02.410 --> 00:32:04.970 And his plan worked. It's the engineer's mindset 00:32:04.970 --> 00:32:07.589 applied to his own biology. It's only the paranoid 00:32:07.589 --> 00:32:09.710 survive on a cellular level. He wasn't going 00:32:09.710 --> 00:32:11.490 to be a passive victim. He was going to be the 00:32:11.490 --> 00:32:13.529 CEO of his own health. He also put his money 00:32:13.529 --> 00:32:16.609 where his mouth was. Yeah. Millions and millions 00:32:16.609 --> 00:32:19.150 of dollars into medical research. He was instrumental 00:32:19.150 --> 00:32:21.970 in building the UCSF Mission Bay campus in San 00:32:21.970 --> 00:32:24.670 Francisco, specifically the cancer research centers. 00:32:24.809 --> 00:32:27.009 He wanted to speed up the cycle time of medical 00:32:27.009 --> 00:32:29.470 research. He thought science moved too slowly. 00:32:30.039 --> 00:32:33.380 He wanted to apply Intel's pace to finding cures. 00:32:33.480 --> 00:32:36.759 And he never forgot his roots. He never forgot 00:32:36.759 --> 00:32:40.480 where he came from. No, never. In 2005, he gave 00:32:40.480 --> 00:32:44.720 a $26 million grant to CCNY, the City College 00:32:44.720 --> 00:32:47.519 of New York. His alma mater. It was the largest 00:32:47.519 --> 00:32:50.619 single gift in the school's entire history. He 00:32:50.619 --> 00:32:52.740 established the Grove School of Engineering there. 00:32:53.319 --> 00:32:55.640 He said, and I'm paraphrasing, CCNY didn't just 00:32:55.640 --> 00:32:58.880 educate me, it saved me. It was the institution 00:32:58.880 --> 00:33:01.740 that gave a penniless refugee a chance. He was 00:33:01.740 --> 00:33:03.980 also very vocal about immigration throughout 00:33:03.980 --> 00:33:06.099 his life. He was a passionate supporter of the 00:33:06.099 --> 00:33:08.200 International Rescue Committee, the IRC, which 00:33:08.200 --> 00:33:11.119 helps refugees. He advocated for pathways to 00:33:11.119 --> 00:33:13.119 citizenship. He gave an interview to Esquire 00:33:13.119 --> 00:33:15.480 magazine where he said, immigrants are what made 00:33:15.480 --> 00:33:17.720 America what it is. He saw it as a competitive 00:33:17.720 --> 00:33:20.019 advantage. The ultimate competitive advantage? 00:33:20.460 --> 00:33:22.859 He believed that the hunger of the immigrant, 00:33:23.099 --> 00:33:26.180 that desperation to prove yourself, that paranoia, 00:33:26.240 --> 00:33:29.440 was the secret sauce of America's success. He 00:33:29.440 --> 00:33:31.339 didn't want the country to lose that edge. He 00:33:31.339 --> 00:33:33.119 didn't want us to get comfortable. He never wanted 00:33:33.119 --> 00:33:35.160 anyone to get comfortable. Comfort was the enemy. 00:33:35.380 --> 00:33:38.119 So Andy Grove died in 2016 at the age of 79. 00:33:38.599 --> 00:33:40.859 But when we look around today, his fingerprints 00:33:40.859 --> 00:33:44.369 are just... Everywhere. They're indelible. Every 00:33:44.369 --> 00:33:47.289 laptop with that Intel inside sticker, every 00:33:47.289 --> 00:33:49.789 tech company using OKRs to manage its goals, 00:33:49.950 --> 00:33:53.690 every CEO talking about need to pivot their business 00:33:53.690 --> 00:33:56.150 model. It's all growth. But I think you're right. 00:33:56.170 --> 00:33:58.490 The most enduring legacy is the mindset. The 00:33:58.490 --> 00:34:00.990 mindset. The good fear, as you called it. Yeah. 00:34:01.349 --> 00:34:04.210 There was another famous management guru, a contemporary 00:34:04.210 --> 00:34:07.410 of his named W. Edwards Deming, who had a famous 00:34:07.410 --> 00:34:10.690 mantra, drive out fear. He believed fear was 00:34:10.690 --> 00:34:12.710 always counterproductive. And Grove completely 00:34:12.710 --> 00:34:14.849 disagreed. He wrote about it. He said fear of 00:34:14.849 --> 00:34:17.050 competition, fear of bankruptcy, fear of being 00:34:17.050 --> 00:34:19.969 wrong, fear of losing. These can all be powerful, 00:34:20.070 --> 00:34:22.570 powerful motivators. It's the fuel that keeps 00:34:22.570 --> 00:34:24.769 the engine running hot. It keeps the organism 00:34:24.769 --> 00:34:28.809 alive. Grove often compared a company to a living 00:34:28.809 --> 00:34:32.150 thing. He said it must constantly shed its skin 00:34:32.150 --> 00:34:35.190 to survive. If you try to hold on to the past 00:34:35.190 --> 00:34:37.429 like Intel tried to hold on to memory chips, 00:34:37.610 --> 00:34:40.960 you die. The world moves on and you become a 00:34:40.960 --> 00:34:43.500 fossil. You have to be willing to kill your old 00:34:43.500 --> 00:34:46.800 self to give birth to your new self. A painful 00:34:46.800 --> 00:34:49.860 but necessary process. So here's the final thought 00:34:49.860 --> 00:34:52.599 for you listening today. We all have our own 00:34:52.599 --> 00:34:55.179 businesses that we run. Maybe it's your actual 00:34:55.179 --> 00:34:57.880 company. Maybe it's just your career. Maybe it's 00:34:57.880 --> 00:35:00.239 your skill set. The question Andy Grove would 00:35:00.239 --> 00:35:03.239 ask you, would ask all of us, is this. Are you 00:35:03.239 --> 00:35:05.699 resting on your laurels? Are you comfortable? 00:35:06.039 --> 00:35:08.320 Are you assuming that what made you successful 00:35:08.320 --> 00:35:10.179 yesterday will make you successful tomorrow? 00:35:10.460 --> 00:35:12.920 Because if you are comfortable, you are probably 00:35:12.920 --> 00:35:15.139 in trouble. The strategic inflection point is 00:35:15.139 --> 00:35:17.400 coming. It's always coming. For every business, 00:35:17.480 --> 00:35:20.460 every industry, every career, the snow is melting 00:35:20.460 --> 00:35:22.880 at the edges whether you see it or not. The only 00:35:22.880 --> 00:35:25.619 question is, are you paranoid enough to survive 00:35:25.619 --> 00:35:27.960 it? Thanks for diving in with us. Stay paranoid. 00:35:28.079 --> 00:35:29.000 We'll see you next time.