In the Company of Giants

by Rama Dev Jager

  I am, however, trying to lead a more balanced life. Since I have two kids, I certainly work much fewer hours and I’ve reduced my travel. If you don’t find the balance, you won’t have a family or you will miss it. Keeping things balanced is always a challenge.

  Speaking of Pixar, how do you think the two industries—software and motion pictures—are similar? And how do they differ?

  Well, the product life cycle is different.

  Other than Pixar, almost everything else I’ve worked on in my life—an Apple II, for example—you can hardly find anymore. You won’t be able to boot up a Macintosh in ten more years. Everything I’ve worked on in technology becomes the sediment layer for other things to build on top of. The Macintosh, for example, just advanced the culture at that time. Now, Windows has grabbed the baton and is running its leg of the relay. Later something else will.

  In contrast, Pixar is putting something into culture that will renew itself with each generation of children. Snow White was re-released on video two years ago and sold over 20 million copies. It’s sixty years old. I think people will be watching Toy Story in sixty years just the way they’re watching Snow White now. The fact that the

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  exact same movie will be watched 60 or 100 years from now is intriguing.

  Speaking of the Mac, I wanted to talk a little bit about John Sculley.

  You’ve expressed, both privately and publicly, your dissatisfaction with him, and have even gone so far as to state that he destroyed Apple.

  He did, yes.

  If so, then what would have Steve Jobs done differently? What would Steve Jobs have done differently from John Sculley? Are we talking about not licensing its operating system, or allowing others to make compatibles?

  No. It was much more profound than that.

  For many years, Apple was about bringing a computer to everybody. It was about the personal computer revolution. It was about the products and the user’s experience with those products. I was taught by some wise people that if you manage the top line of your company—your customers, your products, your strategy—then the bottom line will follow. But if you manage the bottom line of the company and forget about the rest, you’ll eventually hit the wall because you’ll take your eyes off the prize.

  At Apple, the top management basically got very corrupt—starting with John—in several ways. They got corrupt about their purpose and became very financially driven instead of product- and customer-driven. They became financially corrupt and started self-dealing: there were a lot of company Mercedes, company planes, and company houses. Who am I to say, but my guess is that if somebody plowed through that stuff it would border on criminal. Previous to that, Apple had been a very democratic, egalitarian place. No one had palatial offices. There weren’t fat cats at the top.

  The most important part of this corruption was that the values of the company changed. They changed from the conviction of making the best computers in the world to the conviction of making money—

  a very subtle thing, really. This, and the fact that most of the people who made the breakthrough products soon left the company, was what destroyed Apple.

  Many new people joined Apple. But, it was as if they boarded a rocket ship as it was leaving the launch pad and they thought they made the rocket ship rather than having just been passengers, which is all they really were. All these passengers were convinced that they

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  STEVE JOBS

  made the rocket ship. That was fine until the company needed a new rocket ship. Yet, Apple has, up to this point, not been able to make one. They tried with Newton. That was a fiasco and they’re still on the same rocket ship. They needed a new one years ago, but the culture doesn’t exist to know how to build rocket ships.

  I’ll try to muster it in one sentence. Apple had a wonderful set of values that was based on, in many ways, what Hewlett-Packard did.

  We copied a lot and tried to build upon it. Our values were about building the best computers in the world and when those values changed to the value of “the reason we make computers is to make a lot of money,” many things started to change, subtly and not so subtly. The kind of people that flourished in the old value system didn’t flourish in the new one. A different set of people flourished.

  The biggest manifestation of these changed values was that before we wanted as many people as possible to use our products. We didn’t call it market share in those days, but it was.

  Apple’s greatest mistake, in my opinion, is not that it did or didn’t license their technology in the late ’80s. Apple’s biggest mistake was that it got immensely greedy. Apple priced the product so high that it didn’t go for market share and left a giant umbrella for the PC industry. We originally weren’t on that trajectory. The reason we built the Mac factory was to get the Mac down to $1,000 someday, but instead they sold it for much, much more. I think Apple could now have a 35

  percent market share had management cared about people using Apple computers instead of making $400 million a year in profits.

  It’s what you care about. An organization with talented people will definitely adjust itself to the value structure expressed at the top.

  People who were better for one value structure, when it changes, will leave. And other people will come in. You can change an organization in a big way in five years. That’s part of what happened at Apple.

  They hired a stream of mediocre people, just one after another after another.

  Speaking of great products, what do you think the next great products of this industry are going to be? What’s its future?

  To be honest, I have no idea.

  All you can see are the plate tectonic trends. The trend is that computers will move from primarily being a computational device to primarily a communications device. We’ve known that was coming.

  The internet is certainly doing it on a larger scale than some people

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  had imagined. But what this all means yet I don’t know. The internet was around for a long time before the World Wide Web made it more approachable, and yet the World Wide Web is still a very simplistic thing. I think there’s room for a lot more breakthroughs. I think when they happen they might spread very quickly, much like the World Wide Web did, meaning that in a period of five years things could be very different. But it’s hard to say exactly what they’re going to be. It’s very hard.

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  T. J. RODGERS

  Cypress Semiconductor

  THE IMPORTANCE OF

  VISION, ACCORDING

  TO THE GENERAL

  T. J. Rodgers is founder, president, and CEO of Cypress Semiconductor. Based in San Jose, CA, Cypress is an international supplier of integrated circuits (i.e., chips) for a range of markets including high-performance computers, telecommunications, instrumentation, and military systems.

  Thurman J. Rodgers, or T. J. as he is known, went to Dartmouth College where he graduated as Salutatorian with a double major in physics and chemistry. Rodgers attended Stanford on a Hertz fellowship, where he earned a Ph.D. in 1975 in electrical engineering. While at Stanford, Rodgers invented and patented VMOS (Vertical Metal-Oxide Semiconductor) technology, which he later sold to American Microsystems (AMI). He managed the MOS memory design group at AMI from 1975 to 1980 and then moved to Advanced 27

  Copyright 1997 Rama D. Jagar and Rafael Ortiz. Click Here for Terms of Use.

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  T. J. RODGERS

  Micro Devices (AMD), where he led their static RAM product group.

  In 1983, after dissatisfaction with AMD’s management, T. J. left to found Cypress. Four years later, the company went public. It now has annual revenues of over $600 million and employs over 1,500 people.

  Part of Cypress’ financial success can be ascribed to its culture. Cypress is a company based on fi
ve core values—

  which Rodgers proceeded to explain to us in detail. Rodgers takes pride in fostering these values at Cypress, and has also written Harvard Business Review articles and a book, No Excuses Management, about them.

  Rodgers’ reputation as one of Silicon Valley’s most outspo-ken CEOs is well deserved. Whether the issue is U.S. immigration policy, workplace diversity, or Cypress’ competition, Rodgers delivers his opinions with a brash, no-nonsense style that some find abhorrent and others refreshingly honest.

  In one recent episode, Rodgers received a letter from a Catholic nun requesting that he make Cypress’ board of directors more diverse. His response, a blistering six-page letter reprinted in the Wall Street Journal, bluntly informed Sister Doris that her advice wasn’t needed.

  We met with T. J. at Cypress’ headquarters. Sparse and modestly appointed, his office’s only lavish accouterment is the Frederic Remington sculpture on a nearby bookcase—a frontier-era cowboy bravely riding atop a defiant, bucking bronco.

  “Large companies must be screwing a lot of stuff

  up to lose when they’re that big.”

  Why did you leave AMD to start your own company?

  Actually, my mother asked me that. Her basic question was—rephras-ing it negatively from my perspective—“Now that you’re in the rat race and can scramble up the political ladder at Advanced Micro Devices, why give up the sure opportunities and start your own company?”

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  I wanted to start a company since I graduated from college. It was one of my life goals, stated at age 21, that I would start a company by age 35. Why do people actually start their own companies?

  The standard entrepreneurial answer is frustration. You see a company running poorly; you see that it could be a whole lot better.

  Like the freshman Congressman who’s been around for six months, you realize that the other guys really aren’t that good. All of a sudden you understand that you could go build something bigger and more important than where you are. That’s a big deal.

  Does the idea have to be original?

  No. I think that premise is total bullshit. If you look at Hewlett-Packard, their first two products were automatic urinal flushers and bowling pin setters—those are hardly unique ideas. In our case, we both did and did not have a unique idea.

  Our business plan was to attack the big companies by building a technically superior product: memory—RAM. I’m a technologist. I have a Ph.D. in electrical engineering from Stanford and my spec-ialty is transistor physics. While at AMD, I saw CMOS [complementary metal-oxide semiconductor process technology used to make integrated circuits, or chips].

  CMOS had existed for a decade when I was at Stanford in 1974.

  I knew by having roomed with one of the people who did early work on CMOS that it was clearly the technology of the future. I realized in 1974 it was going to happen. In 1979 I knew exactly how to do it, and at AMD I was prevented from doing it by internal politics, by superiors who had not a clue about technology.

  I looked at the semiconductor business, saw wonderful opportunities, calculated that I could attack with a RAM product that was twice as fast. Twice as fast, half the power, half the chip size. If you make a part for two dollars that you sell for four dollars, and I can make it for a dollar and sell it for eight, then I win.

  I saw exactly how to do that and I concluded the same thing the Japanese did about the same time in 1979: the American semiconductor industry was really weak; the powerhouses, Intel and Advanced Micro Devices, were arrogant. They were riding a wave they no longer had earned, and they could be taken apart by superior technology.

  The balloon was ready to burst. I saw it and the Japanese saw it.

  I jumped in and attacked existing products. Ours was really a

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  Japanese-style attack of superior technology. We also had pretty good manufacturing and always have had. So there was no whiz-bang idea.

  Why didn’t AMD want to do CMOS if it was a better technology?

  I came to AMD to run their NMOS technology. NMOS is half of CMOS. I figured out that there was no fundamental reason for CMOS being slow; it could be very fast. All of a sudden, I was looking at the prospect of attacking the fastest technology with the lowest-power technology that was also cheaper. I explained the idea and AMD hired a group to do CMOS research and development. Those guys were political cretins, their boss was a moron, and they proceeded to screw up their implementation big time.

  I explained why they screwed it up. I wrote the four-page memo explaining technically why they had missed the mark. Basically, they were Intel copycats. Intel had tried the same thing and screwed it up. AMD had assumed that, because Intel couldn’t do it, they couldn’t do it. So, the argument was about authority and turf as opposed to transistors, electrons, and pico-seconds and pico-farads. It infuri-ated me.

  I had been very successful in the NMOS group. I developed a $25

  million RAM business for AMD that was very, very capable. We were taking market share when I ran the group. And yet they refused to let me have CMOS. It was only after I had decided to leave that continued failure by the CMOS guys caused the group to report to me.

  At that point in time I wanted to take apart the little political clique that I didn’t like. Then I was disallowed to manage the group the way I wanted. So I argued with subordinates on technology issues, and they would threaten to run to daddy [AMD CEO Jerry Sanders] if I didn’t do what they wanted. If you think about it, any billion-dollar company that has so much money to spend on R&D should be unas-sailable. It should crunch little companies like bugs. But the large companies routinely cannot crunch little companies, so something’s got to be wrong. Large companies must be screwing a lot of stuff up to lose when they’re that big. That’s how it was inside AMD.

  Do you think that that’s why Cypress was able to handle competition as a small firm—because Intel and AMD were not as technically proficient?

  It’s not that they weren’t as proficient. Rather it was because they were really screwed up. AMD suffered through the early 1980s and

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  never, ever got CMOS. Jerry Sanders was years late getting into CMOS, precisely because of what I just said. He’d have been in CMOS and a lot richer years earlier had he let me run it based on merit, which he didn’t because he’s not a technologist and doesn’t understand. He delegated the decision down the chain of command and the next guy didn’t understand either. My life was too short for that kind of crap. They weren’t not proficient; they were pathetic.

  That’s why the Japanese kicked their asses.

  They’re now competent, and that’s why they shoved the Japanese back. That’s the entire thing; it’s got nothing to do with MITI, government subsidies, or any of that bullshit. Basically, incompetent companies got beat. To their credit, AMD decided not to lose. They changed, started doing quality improvement and statistical process control. I won’t say as good as the Japanese, but they’re so close in manufacturing the difference is irrelevant relative to the huge advantage they have in invention, which the Japanese don’t have.

  How are you different in terms of product innovation? How does Cypress listen to an employee with a good product idea any better than AMD did to you?

  That’s a good question. People have come to me with ideas that I thought were bad ideas. Some people have left the company to pursue ideas that I thought were bad ideas. The difference is that I’m involved. I’m involved in personally evaluating new technology initiatives. I’m a technology junkie. I understand that technology is what moves our industry. I view technology not as a threat—the story I just told—but as an opportunity. Therefore I personally get involved in it.

  It’s kind of reversed here at Cypress. My VP of R&D is, in effect, a manufacturing person in research and development. His check partly depends upon putting the technologies
into production.

  Meanwhile I sit in the room saying, “That’s a great idea. Why don’t we do this and do that?” The VP of R&D sits there with white knuckles thinking, “God, he’s going to have me make something really risky.” I’m the force trying to pull more technology into the company and the bureaucracy has to make those things happen.

  I evaluate the technology; I am very open to new ideas. I evaluate every new product in this corporation. I spend three hours a week in an open forum where I bring in our manufacturing people, marketing people, applications engineers, product-line managers, and technical design persons. In that forum we listen to any product proposal that

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  comes from anywhere. If you get it approved you’re on your way. The criteria for approval aren’t as simple as: “Gee, it’s a funky idea, so let’s go spend a million dollars.” Nonetheless, if you’ve got a good idea and you’re willing to come to the meeting and withstand some tough scrutiny, you can get an idea launched.

  In 1992 sales were down and you had to move away from your 100 percent American content pledge. You moved manufacturing to Thailand.

  Was the answer entirely evident that moving manufacturing offshore was the right thing?

  The answer was entirely evident, and the debate in the company was everybody against me. I was the bad guy in that case. So what went wrong in 1992?

  First of all, we had an all-American strategy. And all-American meant we manufactured here. We also had a niche product strategy, which meant we had 5,000 product/package combinations. We also had a bunch of military business. So I fought the decision. Keeping manufacturing in the U.S. was $17 million a year in added cost.

  From the time we started the company, when the theory was semi-valid, we were probably always a 30 percent profitability company.

  We said, “We’re doing great and would have been better had we not had the burden of U.S. manufacturing all along.” What went wrong was that the competition automated. So they had one-dollar-per-hour people running robots, when I had two twelve-dollar-an-hour people running robots. Point one.