From Scaling Cisco to Seeding AI: John T. Chambers on Speed, Strategy, and Reinvention

26:50It will also shock you that a third of the CEOs are dyslexic. And you're going to say, no, John, I don't buy that. Well, only a few people talk about it, Charles Schwab, Richard Branson, myself, some others, but I watch their pattern thinking, and I can see it when how they think. Dyslexics can't go A, B, C, D, E, F, G straight through the outcome. They get a couple of data points, they jump to the outcome, they see how it plays out backwards and forwards. And so they move with a speed that is very unique to CEOs. And so when I watch the pattern, I'll never ask them in public, but I'll say, you're dyslexic, aren't you?

27:25And all of a sudden they get shocked. They say, how do you know? And I said, I can read your thought pattern. And I said, it will help if you share your weaknesses with others and with the group. And almost inevitably they say, no, John, I'm not going to. How long did it take you to share that? I blundered into it. I'd take our child to work one day. To answer your question, 20 years, 15 years. 20 years. So you were already at that point the CEO of Cisco? Oh, way into it. I was doing a take our child to work day. Kids would come with that. Were you ashamed? I'm not ashamed at all, but I felt it was a weakness.

28:02And I didn't think people wanted CEOs to have weaknesses. So not ashamed at all. I'm not ashamed of hardly anything I've ever done in life. It's basically something I can't change. So deal with the world the way it is. That's the doctor's training. But it made me uncomfortable. And that's why you never saw me read speeches at Cisco. People never asked why I didn't read them. The answer is I'd struggle reading it. Even with training where Mrs. Anderson helped me in the second and third grade. Without her, even though my parents were doctors, they were teaching me to read in a way that was not effective for dyslexics.

28:34So a girl came up and asked a question on stage. And they were lined up with their parents there and probably 500 people, as I said, in the Woodians. And she tried to read it and she lost her spot and she started crying and she walked back off and I followed her off stage. And I said, let's try this again. And she said, I'm dyslexic. And I said, I am too. And I said, here's how you do it. Her mother was by that time beside her and she was sitting in the chair. I said, I want you to come back up. Don't try to read it because we dyslexics have trouble reading. I want you to think about the question you want to ask me and look at me just like you'd look at your mom, look me in the eye and ask me the question.

29:18She came up, she nailed it, but the room was real quiet. And I realized they heard me because I had a lavalier mic on say I was dyslexic. And as you can tell, my hands sweat now, even talking about it. It was hard, but it's a gift on the one hand. It's a challenge on the other. I'm talking into a school that specializes dyslexia, the Armstrong School, Tamar. And I go periodically to talk to young people and say that you don't want to use your limitations in life as an excuse for why you can't achieve things. What you've got to realize is what are the strengths of your limitations and what are the weaknesses and how do you play around it?

30:01And then how do you get people around you that really connect effectively with you? Wow. So at Wang, nobody knew. and you spent seven years there. And at what point did you feel like, and you started as in, what did you start as? What was your role? I was well into management there. I was first or second line manager at Wang? Third line manager. But in the marketing originally, they wanted my IBM expertise because their competition was IBM. And I understood how to sell technology to solve business problems as opposed to technology to solve tech problems. And I knew how to compete against great companies like IBM pretty effectively.

30:43And how, when you joined, like, give me a sense of Wang as a company. Where was it? Like, how big was it? How many people? 30 ,000 people. 30 ,000 people? It was one of the top three mini computer players in the world. Almost all office automation was done through Wang Equipment. We had the State Department's mini computers around the world. And because we didn't change, 30 ,000 people eventually lost their jobs. So by the time you left, the company was? It was starting to dramatically slow down. Dr. Wang died, unfortunately, and he was our spiritual as well as our mental leader. we had trouble with leadership and the next generation of leaders was taking the company away I didn't agree with.

31:29And I shared with them that it was time for me to move on and do something else. And you decided Cisco at that point? No. At this time, we were starting to do the layoffs and I ran the U.S. operations for Wang at that time. And every holiday, we were planning our next layoff. It was brutal. And finally, I lost confidence in the direction the new CEO was taking us. And it wasn't part of the Wang family. It was an outside hire and a mistake on it. And I didn't feel that I could go look for a job while I was leading people through restructuring and layoffs and asking my team to follow me, which all of them did.

32:13People that I didn't lay off, they stayed with me completely. I've always been able to develop tremendous trust and loyalty with my teams. At Cisco, our attrition rate was 5 % for 25 years in a value that averages 15. Our acquisition is Yain turnover rate, which averages 20, as you probably know. We averaged four on it. So I held people. So I left Yain literally weighing without a job. I'd never recommend that, by the way, because I learned the hard way. I thought I'd just take my resume. I had a really good resume. I never missed goal. Chief and top salesperson at IBM, on our way to become potentially one of the top leaders on it.

32:57Same thing at Wang. Everything I touched turned into the number one operation because I built great teams and leaders who empowered me on it. I thought I'd send my resume out to a number of companies. I waited for the offers to come in. None came back. None. and that was very humbling. Probably the second most humbling thing after being dyslexic. Then I suddenly realized my family, we were without a job. We were in Boston. The mini computer industry was rapidly coming apart and so I started working real hard on interviews around the country and different companies and the first two months were very humbling and challenging would be an understatement.

33:44By the end of the fourth month, I had 22 offers in process. And out of the 22, all but one came through networking and people opening doors for me. The one at Cisco, I was never going to get presented because I had five offers already in the valley for it and was thinking about which one was I probably going to take on it or not. And I didn't realize how small the Valley was at that time, uh, that, uh, uh, when somebody called me up and said, would you interview at Cisco, John, the head, the head heading firm's never going to present you here because you've already accepted two jobs, not accepted, but you had two job offers from companies they already presented you at.

34:28And I went in and interviewed, uh, and did very well with John Mortgage and the team. And I interviewed at that time with one of your peers, Don Valentine at Sequoia. And brilliant guy, tough, but brilliant. And he said, tell me about your other offers. I went, how did he know? He knew all my other offers. The value was so small, he knew where they were, et cetera. And he convinced me that if you want to really be successful in the industry, and if you're as good as we hope you are, you want to go with a company that's setting the pace for the next generation of technology. and then he outlined to me why Cisco was the right one.

35:05Wow. How old were you? I was about 40 at that time. You were 40. And when you joined Cisco, what was the role that you joined as? I joined as, I'd have to think about it. I had a fair amount of the sales, some of the marketing, some of the customer services. They hired me to be John Mortgage's replacement. John Mortgage is the CEO. CEO. And John was the one that was helping select me. So John knew - And you knew that going into the interview process, meaning that was a selling point for you to join. The reason they recruited me was to be the next CEO at Cisco. Wow. And they said, unless you messed it up.

35:40And so I knew going in, that was the way it was headed. It took four years, not two, as they said, to become CEO. But John taught me a lot and we built a really strong organization. And by then we were restricted to get on a roll. Our average growth was 65 % a year. For how long? Decades. That's insane. How big was the business when you joined Cisco? 70 million. 70 million. And it was a public company at that point, yes? Just going public. Just going public. Wasn't it trading at like 10 cents a share or something? It was a fairly low amount. To answer your direct question, if you invested a dollar at the time we went public, it was worth$15 ,000 when I left.

36:17Wow. So very good appreciation. Most valuable company in the world at the point in time. That's right. That's right. And how many people were at the company at that point? 400. 400. and then you slowly started ramping up more responsibility over those few years before you got the CEO job? They had me running everything by the time I got to be CEO. John did a good job of turning things over to me. Just I wish he'd moved a little bit faster on it. I think he enjoyed the job. Why do you wish he moved faster on it? Because I was ready. How do you know you were ready? I thought I was ready. This is one of the things that's fascinating.

36:50Most of us in Silicon Valley, myself included, probably have more confidence than we deserve in terms of being ready for jobs before we are. And sometimes it's that lack of fear or lack of knowledge that allows you to do things that others cannot. If I knew how hard M &A was and to make part of my living on M &A, I might not have had the courage to go. 80-90 % of M &A fails. 80-90%. But yet, we built our strategy in part on innovation with great engineers internally, but great engineers through M &A and then strategic partnering. So I felt I was ready. I had no fear versus the competition. I understood my strengths and limitations.

37:31What's the worst thing that can happen? I get fired. Yeah. I wasn't a failure. I hate losing, but not afraid of failure. You're never going to be able to achieve key goals in life unless you are willing to take the risk and you're likely to get yourself in trouble if you don't realize that if you mis-execute, this could fail. If you think it's just a given the way you're going, you don't have to change course because most of the big bets you make, you change course multiple times through them in terms of the direction, in my opinion. Would you agree with that? I would generally agree with that.

38:05I'm also quite confident. Maybe some would ascribe it as maybe irrational confidence, but I certainly also carry a fear of failure. In many ways, I actually think my confidence is grounded in a fear of failure in a sense that I think that I'm so afraid of falling over that I'll just never let it happen. And that gives me some maybe reservoir of confidence. I think it gives you tremendous motivation not to fail. Right. If you really want, back to a question you hit earlier, it's kind of fun. The reason that most of Silicon Valley is run by engineers, and it will continue to be, by the way, out of my 25 startups, most of them are run by engineers.

38:46Only a couple of key business leaders, including Zach Bookman that I had dinner with last night at OpenGov, which we sold to Cox Communication for about$1.9 billion a couple of years ago. But engineering leads are very analytical on it, and they often have trouble filling certain positions effectively, but also understanding how important they are. So the classic engineering lead in Silicon Valley, when they recruit a sales leader, they recruit somebody who talks like an engineer that can identify with the engineers, where I recruit somebody that can build a great sales organization that is 100 % customer driven, develops trust and relationships.

39:28and instead of getting a CRO who's a business development person in disguise, I build sales leaders that have the skill sets to rebuild great sales organizations. And out of Cisco, we probably generated at least a hundred people that went on to be CROs in other companies. We built, I think, the best sales team in the industry for almost two decades. And that's how we were ranked, by the way, too. And 97-ish was when you took on the CEO role? 95. 95. Yeah. And it went from 70 to where was it when revenue-wise when you took the CEO job? I should know the number off the top. A couple hundred? I don't.

40:10No, I think it was probably over a billion. And then you took the CEO job. And then how long, you had probably a four to five year window of amazing appreciation before the dot-com crash, right? Yeah, we were the most valuable company in the world. What was the, do you remember the market cap of the company at that time? Well, we were 500 billion. We talked about being the first trillion dollar company. And about the time they talk about you being the first in something. You're already dead. Well, it means you might be near an inflection point and you ought to think about what's your growth numbers.

40:45Our business continued to grow, but our multiple changed down dramatically on it. Why? Because the profits and the growth didn't support the multiple. It's classic. We see that in the industry all the time. To your indirect question, where is AI in that? I think AI is very early stage, but it's moving, in my opinion, in internet terms at five times the speed and three times the results, which many companies don't succeed and fail at a rate you haven't seen. I would actually make an argument rather than LOMs being the key factor in AI today in the differentiator. I think they're becoming very much commodity-like.

41:22And so it's really how to use AI across the technology architecture, what is commodity-like, what is currently sustainable differentiation, and what is long-term differentiation. And then how close are your architectures in implementing. So that's how I'm coming after that market. I think I was just reading a stat that every year it's getting 50 times cheaper, the LLMs, 50 times cheaper. I haven't read that, but it would not surprise me. But 50s are pretty fast-paced. But it's like we've never seen an asset that depreciates like this. Perhaps. We've also never seen an asset gets absorbed this type of volume.

42:06The internet got absorbed with tremendous volume, even though we dramatically improved how much information can move over a given capability in the network. Voice used to be an entire network by itself, extremely profitable for the Nordels, the AcaTells, the Lucent, et cetera. They made a mistake of staying with voice too long and did their data networks separately. We basically developed data voice video over a single network. the internet. And then we said to the service provider industry, it was probably one of those comments I should have worded better, but the service providers, the AT &T and the Verizon's except for the world, we said, your primary revenue is voice.

42:50And it will not only commoditize, it will account for maybe two to 3 % of the load on the network. And that all happened. And the companies who didn't make that transition got caught hard. Our toughest competitors should have been the voice networking players, but they didn't change. They stayed with their old technology too long and we had them. And you're saying at the height of your powers, when you're thinking about we are the most valuable company in the world and we're going for a trillion, that's maybe a signal that it's time to reinvent the business. It means you need to reinvent your business with a regular rhythm.

43:26And if I were to draw parallels for today's world, I needed to reinvent myself at least every five years at Cisco. And I didn't necessarily have that as a goal, but that's kind of, if you watch my career, that's what I did. One of my toughest competitors, he was Dutch by background, you'll probably figure out who he was. He came out of AT &T, then Lucent, then he ran BT, and then he ran Alcatel-Lucent combined. And so he was bothered by the fact that I didn't acquire Lucent. He thought I should. They were a different culture too big for us to acquire. And he was a critic. And he pulled me aside one time.

44:08He said, John, I just want to compliment you on how you reinvented Cisco again and again and again. And I was shocked. At first, I was waiting for the and, and he didn't. And I said to him, that's why I believe leaders need to be in the position 10 years, not just three to five like the average CEO is. And then he laughed. He said, now we're disagreeing again. And he said, I move every four years. He said, I go in. I use my experience, my bag of tricks. And then after years four or five, it's time for me to move. And I think that's true of most leaders. He could see I wasn't buying them. He knew I copied Jack Welch on my top 300 leaders at Cisco.

44:47I ranked them. I knew where they were. I've constantly worked on their improvement of movement within the group, lost very few of them ever, very hard to recruit from us. And even though most of you would pay more, it's about, are you having fun in the job? Are you making a difference? And he said, out of your top 300 leaders that you track, how many of you ever left in the job five years or more and been happy with their performance?

45:13He had me. Only one, Joe Pinto. Everyone else, I either had moved to different responsibilities, I had to take them out of the job. Most leaders do not reinvent themselves. Now, the challenge for today's time is as a leader in AI, you have to reinvent yourself, in my opinion, every year. And I used to look at the young CEOs of my startups and say, it's not internet speed, but if you are changing your strategy every two to three years, you're not getting the leverage out of it and you're chasing the new shiny object. beginning about two and a half, three years ago, I began to push my CEOs really hard about reinventing themselves every 12 months.

45:53And most of them do. And they transition that quickly in today's environment. You have to. Can you define reinvention? Reinvention means what is your target market? What is your target products? What is your differentiation? What are you trying to achieve? How do you drive it through? How do you go to market? So for a startup that used to be software as a service, let's take a company like Safe Securities, Saquette Mody, brilliant young guy, really proud of him. And I've been investing in his company for eight years. The last three years, and he would be one who would come with a new idea every 12 months, and I say, slow down.

46:33The last three years, he's grown at 100 % per year in cybersecurity and risk management implementation. And this year, he's going to grow 100 % again. How much do you think he's increased his headcount in the three years? 100 % growth per year. Well, if measured by the traditional yardstick, probably it would be like doubling every year. He's decreased his headcount by 10%. He uses AI to change everything. He builds his products. He used to build them in a month. He builds them now in a couple of days. You watch what he's going to do going forward. He'll bring out genetic AI implementations in the risk management phase once a week.

47:20Wow. Rather than once every six months. He uses it not just for his core product development. He uses it in sales, the analytics, the forecasting, the customer service. and he runs us like a machine and he's moving with tremendous speed. And John, just revisiting the top 300 executives and the low attrition rate that you had, I have heard, tell me if this is true or false, that you would kind of have a handshake agreement with the leaders on your team and just basically say, hey, look, I want you here for three or four years. Can we agree to that? No contract, no nothing. But you would look at them in the eye and do a handshake agreement of, I want you here for this long.

48:00Can you commit that to me? Is that true? That is true. It often wasn't even three to four years. When I did an acquisition, I said, I need a handshake. I'd rather have your word than a legal document for a minimum of two years. So you wouldn't do a golden parachute or anything? I did golden parachutes for two years on it. That's just logical to get through. Then if they didn't want to be a part of the company, I was okay with them leaving, but we didn't lose many. In fact, out of my eight CEOs that I acquired in cybersecurity, all eight were there when I left. And if you hold the CEO in the heart of a company, when you acquire them, you report in the right area, you challenge them, you keep the people.

48:40So it's basic blocking and tackling in terms of the direction. A parallel that might surprise you, many people, when they start to lose people, they try to talk them out of it, and maybe they talk to them in one other person. You know, I have a process for everything I do. I have a process for how you do M &A. I have a process for how you do crisis management. I have a playbook for how do you save people, and you start to lose them. And probably 75 % of my leaders out of that 300 at one time that they worked for me either came close to leaving or actually told me they were going to leave. And I lost almost none of them.

49:18Why? First playbook was, why are you leaving? And they'll say, more money, more opportunity. That's almost never the reason. It's often their manager or they don't think they have a career opportunity here or they're getting bored in their job and they aren't giving you new challenges. And you've got to figure out what the challenges are. we had run the same plays with my top executives there was usually somewhere between five and eight of us that work on everybody we were about to lose i would say all right basically rick justice you've got the second call to him here's what i want you to emphasize here's what i found out then we go to pankaj patel pankaj you got the third call to him then we go to the people he had developed in the company and said you can't leave we love you we need you then i'd get back to what's the real reason you're leaving and how do we fix it?

50:05And so I didn't lose hardly any. Wow. That's incredible. Then did you literally stack rank 300 people? No. Yeah. Like you had a whiteboard or something. How did you stack rank them? I stack ranked them with input from my team, but then I did it myself. I stack ranked it on two basic areas. I don't make things too complex. How much are they contributing to the company and how much future are they going to be able to contribute? Simple as that. Wow. And did you weigh one more than the other current contribution versus potential 50 50 50 but i i'm a pattern recognition person i'm very weak dyslexic in english as you can probably already tell pretty good on math and so basically uh i measured everything uh and so if you look at it uh when we did customer briefings and by the way if we brought a customer into our corporate briefing center our win rate on that competitive piece of information was over 90 If we got them there, we were that good at getting them more comfortable with us and going with us longer term.

51:02Every speaker, including myself, who presented to the customers, would get ranked by the customers. Do you ask the customers to rank? Oh, of course. When you come all this way, I want to use your time constructively. Give me feedback on what we're doing well and what you liked and what you didn't. And they were very transparent. And we'd rank every one of the speakers. We'd add them up to the end of the quarter and rank every one of us top to bottom. Now, what was I doing? Focus on customer number one. What I do this fanatical, it's all about customer success. Well, what you're really doing is making sure that people are coming with their A game because they know that they're going to be measured.

51:37Yeah. And they're going to be ranked versus their peers. And I'm going to be ranked as well. Wow. And I probably got a little bit of advantage because I was the CEO and they probably got me a little bit, but we measure people on communications and even the engineers. which often struggle with some of the communications effectiveness. We put them all through training classes, presentation, et cetera. Even today, every presentation I give, including the discussion on our podcast today, Shannon, my chief of staff, and she's been in that role for almost 19 years, she'll give me feedback afterwards.

52:10Here's what you did well. You missed this one on the third question end. You lost a little bit of energy here. You didn't answer this question as crisp as you needed to. You need to answer and then pivot, et cetera. So always focusing not on perfection, because that makes you too slow, but focusing on getting better every single time. And I believe in building winners. So you have your board of 300 leaders that you're constantly ranking. You're ranking them based on two vectors. Vector one is results in the job at hand. Potential for the future. Potential for the future. But the precursor to that is figuring out, is this person going to be those two things?

52:48Well, the precursor is there's obviously levels of data below it. So to your direct part of your question, how do I measure people when I do a review of their performance? I start off with numbers don't lie. What were your results if you're a salesperson? And almost no salespeople who didn't make gold were with me two years later. So it's a given if you're going to be in sales in my companies, I expect you to overachieve. And over 70 % of the group did every year. and it was tremendous competition for the top salespeople and recognition on a stage and the process that goes with it. The second thing I measure the leaders on is how good a team do they build.

53:29And I know their teams. I knew their attrition rates in their teams. I knew how competitive their teams were. I knew who within the company was trying to steal their people, which usually means they've got good people on it. I knew how they interfaced with other players on it. I knew were they sensitive to customers and that they put customers first or they just say that because I said it was important to do. I knew how they did in their briefings and how the balance was there. So literally broke it down into about seven or eight key elements, but it also trust. If the person didn't have the culture that we were building, they were gone and we'd take them out.

54:07And how did you think about, what was your playbook for interviewing those people? What was your playbook for figuring out who's going to be in the seat? This is where a salesperson has an advantage over an engineering people. Engineering people are much better judging other engineering people than I ever will be. I have to watch the results, talk to other engineers who knew them, said, how good were they on products? Could they recruit the people? Now, if you put a customer service person in front of me, a finance person in front of me, a lawyer in front of me, a salesperson in front of me, a business development person, And I knew in five minutes if this was likely to be a win.

54:41And at the end of a 45-minute interview, I'd work through what was important to make my judgments on the questions. A lot of the times when I ask questions, about one out of three of your questions already know the answer to. So I want to see, do they know what they're talking about? And are they going to be transparent with me? I then will ask some of the same questions in a different way to see if they cross foot in terms of direction. But that's because in a sales call, I have to be able to, in a half an hour sales call, be able to read the CEO or the CIO or the key business lead. I have to understand what their objectives are.

55:16I've got to understand how they get measured. I've got to understand how do they view my competitors without asking the question that obvious. I've got to understand what are their expectations for me. Do I think that they're going to be able to trust me? Do I be able to trust them? And so I wouldn't call it interviewing on sales goals, but yeah, I was interviewing all my career. And was there any characteristics that you really wanted to scratch at to measure if they were going to be a good leader on your team? Yes. For sales leaders, I asked, how many years did you make goal? And two of sales reps as well.

55:52And then I would say, what were the best years and what were the worst years? Most really good salespeople won't remember the best years unless they won Chairman's Club. they'll remember the years that were the tough ones. And they go right to it with tremendous transparency. And then you ask them, what would you do differently on it? So it's how candid were they with me? And then when they made mistakes, which I want people to make, if you don't make mistakes, you're not growing in the job. What did they learn from them and how do they move forward? How precipitously did the bottom drop when the dot-com bust happened?

56:27Oh, that was with a speed that you could not imagine. 25 % of my customers didn't stop ordering. They went bankrupt. Billion-dollar orders per year from customers, completely gone forever.

56:46I had to write down$2 billion in inventory because I was trying to keep up with demand for almost six years. I couldn't build it as fast as my customers wanted. And finally, about the time I caught up, the 2001 hit. Now, lessons learned a little bit on it. As you look at 2001, my numbers in December of 2000, even though the stock market had been dropping for about six months, if I remember right, my growth the first week in December was 70 % year over year. 70%. And we were forecasting only 35 % growth for next quarter. I was well within the range. And my numbers never failed me. We didn't have AI tools, but we had all our data.

57:36I knew what every sales rep in the world was booking within three minutes. I knew where were they versus forecast versus their geography. I knew how that results on a Friday compared to a Thursday, compared to Wednesday. That prior week, the week before that, the year before it, I knew how the quarters lined up and we could forecast our quarters, even though 80 % of our business knew every quarter, plus or minus 2%, which is almost unheard of. Wow. But we just knew our business cold. We had a great sales force, as I alluded to earlier. We had tremendous trust and credibility and a very, very vibrant review of your pipelines and closing.

58:16and we expected people to hit goal and we helped them get there when they needed it. But I was doing the right thing for too long. 40 quarters in a row, never missed. They called my CFO plus or minus one to two cent Larry because he was always one to two cents, occasionally three above. And people said, that's just amazing. And I'm going, well, we probably knew what we're going to do in the quarter ahead of time. And I was kind of surprised people just didn't anticipate would be two to three cents over. Although it always gives them reasons why the next quarter is going to be challenging for it.

58:50So this is really understanding your business, running it like a machine and having fun. We had fun. Something that your viewers may be interested in or listeners, we were number one in not just customer satisfaction in terms of the industry. We were number one in corporate social responsibility in almost every major country in the world. And wherever we were number one in giving back, guess what? we were number one in market share. Wow. Not just in countries you think about, but in China, Russia, everywhere. And John, when you went from that year, the most valuable company in the world, call it 500 billion, to within a year, do you remember where the market cap was?

59:31I was down$70 a share. I'm choking even now. I got a sip of Diet Coke on it from$70 a share to below 20. And we had gone from - In a year. Oh, faster than that.

59:47I would win every corporate award imaginable. And I mean imaginable. And I've been, the CEO always gets more credit than they deserve. But every CEO award from CEO of the year to the best in the industry to other awards, we'd won them all. I read analyst reports that were gushing about you, gushing about Cisco at that point. For a bunch of quarters in a row. And when we missed, this was a lesson in leadership. Once I miss, then people really turned very quickly. That was a lesson learned. The public markets. The industry analysts, shareholders, CNBC, Kramer hammering me every day saying I shouldn't have my job every day on it.

1:00:32And part of the criticism was fair. And that was the first time you've missed a number maybe ever in your career. I think it was. And you probably thought you were unflappable at that point. Oh, no, I knew I was vulnerable. But I thought my systems would tell me far enough ahead of time I could adjust. They didn't. And because there had not been a change like that occur before, the data that I was analyzing, which was right 40 quarters in a row, actually was my limitation. I did the right thing too long. And that's what a lot of startups make the mistake of doing. Now, just so your listeners understand, every principle you and I have talked about up to this point in time in your podcast is what I help to teach my young CEOs and their team how to do.

1:01:22And I'm more of a strategic partner with them, a coach, a mentor. Some of my leaders have asked me to marry them. I don't mean marry them that way, but be the official in their weddings. We are a tight team, just like Cisco was, and we build tremendous confidence and trust. and I try to share with them the mistakes I've made as well as the successes. And unfortunately, because I've seen every movie two times and I've made every mistake there is, usually when we get in trouble, I can say, here's what we probably need to do better and how do we work through it overall. And my number one job is just to help the company be successful.

1:01:57I just also happen to be a VC. By the way, we usually get very high advisory options, which is almost unheard of for a VC to get in addition to your investment. So we get great financial terms And it's common for us to get one to 3 % of the company just for being their advisor. That's amazing. And John, did you have to adapt your leadership style when you weren't winning anymore? Anytime you're not successful, you have to evolve. First, you've got to say, what are you doing wrong? So rather than saying, let's use the 2001 crash on it. Very painful. Next to dyslexia, my hands still sweat. I laid off 7 ,854 people that year.

1:02:377 ,854 people. And the first thing you do in crisis management, and this goes back to the playbook that I run, is you want to be realistic. How much was self-inflicted and how much was market? I firmly felt that this was a market phenomenon. I called it the 100-year flood before anybody else did. But we also had made mistakes. And I was transparent. Once I realized that I'd missed orders in the January first couple of weeks, I went around the world, talked to customers, et cetera. And I realized this was a real flood coming at us. I came back and called a meeting in the evening. The next day, we made a decision to reorganize, announced it to the market that day.

1:03:24And we very quickly pivoted. We had all of our changes done in 51 days. in days 52, we started gaining market share again. Now the numbers were coming down, but we were taking from our peers and most of them, by the time we were already gaining market share again, they hadn't even made their fundamental changes on it. Now the market was much smaller and we had nearly billions of dollars that just disappeared that were never going to come back on it. But I learned from my mistakes. To be candid, did I have moments of self-doubt? Exactly. If you don't, you have to say, am I the right person to fix this?

1:04:05Why couldn't I see it coming? This is my family. I'd hired every one of the people I laid off, almost every one of them. And I knew every illness in the company that was life-threatening of them, their spouse, or their kids. What do you mean? We tracked it. And when they had an illness, we were there for them. I'd go to the hospital to see them. We got the best doctors on it. If we were having a pregnancy that with a major heart situation for the unborn baby, we'd have the surgeons ready to go. The minute the baby was born, we did a heart operation on them. There isn't a week goes by that I don't have somebody that comes up and said, John, you helped me through this scenario.

1:04:46And your team did. I want to thank you. Most of the time I remember, but not always on it. And so these were people that I cared greatly about. Now, why did people stay at Cisco? We were successful, pretty strong culture. We watched out for each other, especially when they needed a smoth on it. We had high expectations. We expected the other team members to carry their load and to work hard on it overall. But going back to the issue on crisis management, determine how much was self-inflicted and how much of it was external. It's usually a pretty good combination. You then say, here are the five to seven programs we're going to run to get us back on track.

1:05:26Here's how I'm going to measure each of those programs numerically to make it accomplished. Then you've got to paint, here are the steps that are going to occur. And you've got to be remarkably transparent, try to get all your bad news out immediately, which is what we did when we said layoffs coming, here's what it's going to be. You then paint your picture of your North Star, what you're going to look like when you come out of it. You regularly report back to your employees, to your shareholders in the market. What's your progress versus those approach? You don't hide. You've got to be very visible, which is really hard once you misstep.

1:05:59You know, somebody who did that remarkably well, George at CrowdStrike. Yeah, I agree. I mean, he handled that unbelievable on it. You see the results in the stock. So this is how you do crisis management. And then you paint the progress along the way. and you have to keep your emotion in check. And the team wants to understand that you clearly understand how to get them out of this, but you also understand you're learning a little bit on the way. And so that was the toughest year of my life.

1:06:32The dissonance between your team counting on you to put on a brave face. Not a brave face. They wanted to know, did I know how to get us out? and you not being sure that you knew? At first, when I was trying to make the decision, was I going to stay or not? You thought about leaving? No, should somebody else be running the company? Yeah, you thought about replacing. Well, should I am the right person to run it? Yeah. And I went through that pretty quickly. I was a little bit biased, I must say, in terms of the end result, but I got very comfortable. Did the board have your back? Yeah, pretty well.

1:07:10It actually did. we moved very fast i called up the board and don't know i was doing a complete layoff in a day they let me do it wow uh and i hadn't given them any heads up that we were in trouble too fast you think or no i think i was too slow i should have seen it coming should have seen it coming stop market had dropped for a long period of time sound familiar yeah uh so when you see the market dropping you've got to say is there something to play is this a temporary correction or is it a longer-term issue? Now, something to be interesting for your listeners, Jack Welch, who I learned a lot from, and he was a tough guy at GE, but the best by far of the leaders, a generation in front of me.

1:07:54I taught at his Grotonville system where we see folks in his top 300 leaders. That's where I got my number 300 from him on it. And he was very good about knowing he didn't understand technology, but was using me to help get GE to change culturally and to embrace technology overall. He told me in the late 1990s, he said, John, you have a good company. And he was clearly giving me a nudge. And I knew he was, I just wasn't sure where he was going. And I said, all right, Jack, I'll buy you. What does it take to have a great company. He said, overcoming a tremendous crisis. I said, how I did that in 93, 97 financial crisis.

1:08:35I've done that. I've seen it before. He said, I mean, a near death experience. And he said, when you overcome that, you are a much better leader and you have, you're a great leader and your company is a much stronger company, which by the way is true. He called me up at the end of 2001 and he said, John, you have a great company. and I said, Jack, I don't think I do. And I don't think I'm a great leader. I mean, I let down my shareholders. I let down my employees. I'm getting hammered still on CNBC about what's going on. And that maybe I'm not, maybe I'm not the right person to lead it. He said, no, you've got this.

1:09:13He said, I've seen this movie before you got it. And this is your best leadership year ever. I said, Jack, you're going to be the only person that ever says that. And by the way, he was. Wow. However, sure enough, we came back. And Kramer was on TV every day calling for your head. Almost every day. How did you feel? How did that make you feel? I was first, I wanted, you always listen to criticism. Because in every, even emotional criticism, there are elements of truth you want to learn from. But I was upset because he said I was one of the best CEOs ever. And then here he was, just because the market goes a different way, hammering me the other way.

1:09:49No reason I'm mentioning these. The only critic that I mentioned, there were a number of critics who said positive things, then negative. And almost all of them came back positive. I didn't go on CMBC for two years. I did. I just wouldn't go. They asked me. There's the competitiveness. Oh yeah. I went to all their competitors. I mean, at Davos, it was fun. I'd walk past their booth to the next booth, et cetera. So I have a little bit of too much competitiveness in me. I wasn't arrogant. And by the way, I should have been smarter. I should have figured it out. And so it's how do you teach that from others?

1:10:19And how do you know when the right time to reinvent yourself is every three to five years? When is it two to three? And when is it one? How do you get pattern recognition that allows you to run your business more effective than others? One of the challenges for your listeners, regardless if they're an individual contributor or others, have a playbook that is a set of guidelines that you run to make you more effective than you'd be without that. it allows you to move speed that others cannot and so it's fascinating to me that the average mna in today right now uh takes nine months from the time they start on it till it's announced and then it takes a good little time after that my average mna was probably one to two months and we could do it in two days and that isn't necessarily good because when you have that much time and evaluation etc there's room for a lot of things to go wrong including expectations to get out of line, renegotiating the price again and again, which builds, causes trouble with trust on it.

1:11:19So I'm a believer in M &A movement pretty quickly. John, did you have any playbooks for your personal life? Did you, you are known to lead with almost limitless enthusiasm and vigor. And I wonder, you know, did you have any playbooks to cultivate that enthusiasm? Is it just, Is it just God-given or did you organize your calendar in a way that you do anything from a personal perspective? And personal, I wasn't quite as structured, but I ran equally as fast. My wife, Elaine, who I love tremendously, was my high school sweetheart. We dated for seven years. She dumped me twice in the process. I convinced her to marry me and she knew exactly what she was getting into.

1:12:03And part of it is that extremely high energy level. And I try to do more in a day than you should. And I love it. I love going 120 miles in air, two wheels off the road. Two wheels off the road. Can you sit on a couch and just watch TV? Yeah, I know how to veg out doing certain things. I fly fish, very calming. I hunt. I'm out of West Virginia and anything I shoot, I eat on it. I love watching sports on it. I get very close to football teams and basketball teams in terms of the direction. with family. They're my number one priority always. And I need to at times make sure they always know that.

1:12:39And sometimes I get so busy, I've got to remind them and remind myself of that in terms of the direction. But no, the energy has always been there to a fault. I will sometimes get so focused and doing so many things. I'll go 36 hours in a row without eating any food. Come on. Are you serious? Oh, yeah. And one time I was out in the golf course with my wife after 36 hours and I'd got the morning business done and we were going to play golf in the afternoon. And on hole 12, I just collapsed. And I was done. And at first they were concerned of something else. And then I said, I haven't eaten. And they got me sugar and a diet Coke and carted me back in.

1:13:27And within an hour and a half, I was ready to go. So units are strength and a weakness. So you, and then on your calendar, can I ask about your calendar during these crazy days? What time did you start? Obviously, Cisco was an international business. What time did you end? Did you carve out blocks of time to make sure that your family felt prioritized? How did you? Not as well as I should on the family well prioritized. We took vacations together. I spent time with my children. I coached their sports teams. But if, you know, I think I could have done more there. Family vacation is very much a part of it.

1:14:03My dad was my best friend. We hunted and fished during the year together on it. But I was on probably a 60 to 100 hour week regularly. Now on time, when I was at headquarters, the days probably would go from 7 in the morning to 6 at night. I'd often do a dinner or something else on it. When I was on the road, we would do, this was crazy. We could do five countries in five days. And I took two communications people with me to keep me organized. When I go on a trip, here's just your briefing. And because I'm dyslexic, I like to be able to see it, touch it, write on it. And I would have, on today, like today, I think I've done 12 meetings today already.

1:14:51I've gone around the world, started in Spain and worked around the India, then worked across the U.S. overall. I'll have a dinner tonight with one of my CEOs, Amesh, out of Unifor, who's really good. Wait, it's 3.15. You've had 12 meetings today? Yeah. I do them half an hour, it seems, and then sometimes as quick as 15 minutes. You have a briefing on me. Oh, briefing on you, your background. This is how you do. Do you have this for every meeting? Oh, yeah. I'm the best prepared juicy in any meeting that I go into. And yet I do more meetings. I used to think that was bureaucracy and slows you down, allows me to move a tremendous speed.

1:15:34But how do you, like, where are those briefings? Like, let's say you're at 12 meetings today. Shannon prepares them for me. Every day. Every day. Wow. Now, when we'd travel, this will probably challenge you a little bit. We would travel. We'd spend 12, 14 hours in a city. We'd fly through the night to the next country. My team would take turns. I had usually multiple Shannons travel with me, at least two. One would have me one day. One would have me the next. And so on the days while one's executing with me, these calls, physical calls, Usually the dinners, the write-up, the speeches, getting me prepared, making sure the lavalier mic's there, audience, right spot, right time.

1:16:17Then we'd fly through the night, and usually I would work for about three or four hours through the middle of the night. Then I'd try to get a couple hours of sleep. My team would prepare during those couple hours. Then when we'd land, if we could, we'd get some sleep. Usually a lot of times we didn't. They'd give me the next book for the next day. Here's where you go. And so we ran really hard. Being in a private plane really helped, though. That made it very productive. But my support team would take every other day, not off, but a day to recover and get ready for the next meeting. And we'd do that sometimes seven, eight days in a row.

1:16:52And you could run like that for 20 years? At some point, did you not hit a wall? Or would you not hit a wall? Like, maybe I'll give you a personal example. I don't run like that. But I consider myself also quite high energy. and it seemingly doesn't run out. Now I have to do things to get me there, meaning I have to work out, I have to eat a specific way, I have to sleep a specific way. And if I do those things, like I can go until the sun goes down. But I find that, I don't know, at least for me, John, maybe every one to two months, there'll be a day where I'm almost crippled. Like my brain barely works, my body's barely working.

1:17:34and that's about the like the cadence that I feel like I run into and then I'm like oh I have to like the afternoon's off I have to veg out I have to watch tv yeah whatever it is but that's about like the cadence that I feel like I run into a little bit I couldn't do that for a different reason especially at the time at Cisco I would publicly speak two and three times a day broadcasts in front of customer groups, et cetera. So I had to be on. In terms of the trade-offs with it, prioritizing my schedule was very key. When I would take vacations, I'd take them, still work some on the vacation, but they'd be five, seven days.

1:18:15I don't think I ever took 10 days off on it. I don't recommend that. I actually encourage my team members, currently my startups, but also even at Cisco. And I saw somebody working too long. I would say, I'd need for you to take time off at least four day weekends. And if they wouldn't do it, I'd go in and mark it on their schedule and say, you've got to take it off because I understood the limitation. I did understand that I could really mess up if I got too tired and exhausted. So I had techniques like running, like you did. If I could get two to three hours sleep, I could function. If I could get four hours sleep, I could go for a week.

1:18:53before I sleep each night on it. And I had such confidence in my team. I knew when I went to bed, they'd continue preparing the briefing. I knew it'd be outside my door the next morning or beside me at the airplane seat. I'd open it up, turn to the page and jump right into it. And do you feel like you exhaust those around you by, because not anybody's going to be able to keep up with this pace. It sets a pace. They work equally as hard. In fact, I would argue harder in terms of their sprinting while I'm running a marathon, but I have to be careful not to burn them out and have to re-pay attention.

1:19:29That's why I had two people travel with me, not one that alternate days on it. But I get people that have high energy around me too. And you expressed that you feel like maybe you left some out on the field of not balancing things well with your family. I think I could, yeah, I would like - Give me an example. Oh, I would have loved coaching not six or seven years of the kids sports. I'd rather coach 10 or 12. But, you know, I did each of the kids a couple of times was all I was I did. I would love to go on hunting with my dad and fishing with my dad, not twice a year, but maybe more on it and take my son with us on that.

1:20:08With my daughter, she was like me in business, has the same energy. We did business together, which I really like. Very proud of both of my adult kids and very proud of them growing up. But the balance is something that I think we all need to get. And my wife knew exactly what she was getting, good news and bad news. And it was a person that runs very hard, very intense and focused on it. Your wife was your high school sweetheart? Yeah. Can I share an observation with you that I've shared in the past on this show? I always thought growing up that the cost of achievement and people that did really important things in their career was sacrificing their home life.

1:20:47and I have found almost without exception for the opposite to be true. Sure, there are a few exceptions, but out of 240 episodes of some of the most prominent CEOs, almost all of them have an incredibly strong partner at home, almost all of them. And before I started this journey, I thought it was gonna be the opposite. I was convinced it was the opposite. That was what I saw growing up. And so you fit that mold. Well, I take that extreme compliment and thank you. It varies by company and varies by industry. And I'm a huge believer in this is my parents who were doctors, psychiatrists, and OBGYN.

1:21:26If you're in a relationship that isn't working, you've got to get out of it. But we've had no divorces in our family for generations. Wow. Not because you were expected to make it work. We were just lucky who we picked as a partner and we do work at it. I need to be even better. I still hope Elaine doesn't trade me in on it. And I've got, and she's talking about a two-year contract again in a positive way. I love it. No bit of humor you'll get used to. I love it. What did you not ask me that you want to know? Um, that is a great question. I, um,

1:22:07what do you think the book about you is behind closed doors negatively? What do you think that leaders that worked for you when you closed the door and said things that weren't positive about you. What do you think that was? Well, usually they said them to my face and I expected it. And you know, what's amazing is many people don't know. They think that leaders just want to hear good things. And some leaders only want to hear good things and want to be in denial on negatives. And if you got a negative, tell HR or tell somebody else. The best way to earn my trust was number one, get results yourself.

1:22:46And number two, to be candid with me, what you think I need to do better and why. It doesn't mean I'd always agree, but that was one of the quickest ways for me to develop trust and directness. So, or Larry Carter, or Randy Pond, or Rebecca Jacoby, Mel Seltzer, I could go through a hundred of my top leaders, almost without exception, that worded carefully where they told me what they would think. And I didn't ask them unless I wanted to know, because I knew that's what I would get. And I surround myself with people like that. So the book is periodically I spread myself too thin, and by definition, spread them too thin.

1:23:21I try to do too much on it. Occasionally, once I decide I'm going to move, I just go. I told them I'm going to go on it. And sometimes I make mistakes that way on it. But I don't believe even revisiting decisions very often unless something changes. Maybe too high expectations of people. Or asking the team to run too fast. I don't think the team goes any faster than the lead dog. That's why I run hard. And I don't ask the team to do anything I wouldn't do myself on it. I don't think any team runs faster than the lead dog. You can't by math on it. You know, I asked one night, I thought I was, I don't think I'm a tough person.

1:24:09I've never raised my voice ever in business, ever. And I thought that I could be tough if I had to, but most people didn't know I had that tough side to me. And we were going to a movie with my head of sales and his wife and my wife, and I said, I have a suggestion. And the car got real quiet. And all three of them said, John, together, when you have a suggestion, you've already made up your mind. Just tell us what it is. And I said, I'm not that tough. and my head of sales, who was very direct with me, he said, John, everybody knows you have a tough side. Don't think for a second they don't. And they respect it.

1:24:46But if somebody crosses you, hurts our team, does something wrong, that customer treats an employee wrong, you can be very firm. Everybody knows. And I think at times you have to have that to be an effective leader. But I don't think that means you have to be mean to treat people in a way you don't want to be treated yourself. It doesn't mean you're always right. Does that make sense? It does make sense. I appreciate that. I appreciate that answer. And I appreciate you doing this. This is fun. You made me think. I like that. And I hope you found it worthwhile. I did. I absolutely did. I close all of these the same way, which is, what does the word grit mean to you?

1:25:26When you think about grit, what do you think of? John Wayne, up on the hill, true grit. I think grit means that you have the courage when things get tough to get through it and to not lose your values in new direction along the way. It doesn't mean you're going to be perfect because I don't know any perfect people. Grit also means when you make a mistake, own up to it and be candid with it and transparent. And for me, it also means that when I give you my commitment, if it's humanly possible, I will deliver. My customers know that. When I say to a customer, I think you should buy this company, they know I really mean that I'll be behind that company if they buy them.

1:26:14When I say to a customer, I think you ought to implement this for AI and you ought to use XYZ of my startups with it. They know if I say this is what Bavoro can do with only a secure phone in the world, which is very interesting given the security events that have happened the last week, I'll stand behind it in direction. So that's kind of what I think grit means. I like the question. I'm probably going to steal it. I'll give you credit for it the first time I use it after that. I'll say, here's the one I got from John Wayne. It's yours. It's yours. Thank you. I appreciate you. This is a real thrill.

1:26:47That's it for now. If you liked the episode, please leave us a review or go back into the archives where we've done more than 200 episodes with some fantastic folks. This podcast is a Kleiner Perkins production, and I'm Juven. Thanks for listening.