#403 How Jensen Works

This episode covers the insanely valuable company-building principles of Jensen Huang—and nothing else. I spent over 40 hours reading (and rereading) this book on Jensen and Nvidia written by Tae Kim I then spent several days editing down 30 pages of notes from the book. I deleted everything that was not How Jensen Works. List of ideas: 1. Professor Jensen 2. The Whiteboard 3. Complacency Kills 4. Insist on a Flat Organization 5. Public Criticism 6. Tortured Into Greatness 7. Speed of Light 8. Extreme In All Things 9. Top 5 Emails 10. Direct Communication 11. LUA 12. The Mission is the Boss and Pilot-in-Command 13. Strategy is Action 14. Ship The Whole Cow 15. Go To School On Everybody 16. Create The Market 17. Choke You With Gold 18. Highest Priority First 19. Swarm Your Greatest Opportunity Episode sponsors: ⁠Ramp⁠⁠⁠⁠⁠⁠⁠ gives you everything you need to control spend, watch your costs, and optimize your financial operations —all on a single platform. Make history's greatest entrepreneurs proud ⁠⁠⁠by going to Ramp and learning how they can help your business control your costs and save time and money.⁠⁠⁠ ⁠⁠⁠⁠https://ramp.com⁠⁠⁠⁠ Automate compliance, security, and trust with Vanta.⁠ ⁠⁠⁠Vanta helps you win trust, close deals, and stay secure—faster and with less effort⁠⁠⁠⁠. ⁠⁠⁠Find out how increased security leads to more customers by going to Vanta⁠⁠⁠. Tell them David from Founders sent you and you'll get $1000 off. ⁠⁠⁠https://www.vanta.com/founders⁠⁠ ⁠⁠⁠ Collateral⁠⁠ transforms your complex ideas into compelling narratives. Collateral crafts institutional grade marketing collateral for private equity, private credit, real estate, venture capital, family offices, hedge funds, oil & gas companies, and all kinds of corporations. Storytelling is one of the highest forms of leverage and you should invest heavily in it. You can do that by going to ⁠⁠https://collateral.com

• 0:00Speaker 00

  About a year ago, I read this book called "The Nvidia Way" by Tae Kim. The book is a company history and a partial biography of Jensen. The episode that I made on the book, the first time I read it, covered a lot of Jensen's life and then how he built Nvidia. That was episode 376. For this episode, I reread the book, and then I wanted to strip away everything that wasn't ideas for how Jensen runs his company. So, how Jensen works and nothing else. And so what I did is I made a list of about 20 of Jensen's ideas that I want to run through with you. So, starting with idea number one, which I call "Professor Jensen." So, a common trait of history's greatest founders, they spend a lot of their time teaching their organization.

• 0:45Speaker 00

  The best description of this I ever heard actually comes from Jim Senegal, the founder of Costco. He says, "If you're not spending 90% of your time teaching, you're not doing your job." The very first sentence of this book is, "In another life, Jensen might have been a teacher." Colleagues call him "Professor Jensen" for his ability to explain complicated concepts on the whiteboard in a way that just about anyone can understand. There's another line in this book that comes later on, where the author Tae Kim says, "I would become his student, much like his employees do." Jensen's teaching is both persuasive and pervasive. They say that you can talk to two unrelated Nvidia employees who don't know each other, and they still will say the same thing.

• 1:30Speaker 00

  Jensen has this Vulcan mind meld with everybody inside of his company. He spends a great deal of his time communicating with his employees and ensures that everyone at the company knows the overall strategy and vision, which leads us, ties into idea number two, which I've already mentioned, and that is whiteboard. Jensen wants the whiteboard to be used as the primary form of communication in meetings. Why? Because it forces employees to demonstrate their thought process in real time in front of an audience, and there's no hiding. Jensen wants drawing and talking at a whiteboard to be the center of every meeting. Whiteboarding forces people to be both rigorous and transparent. It requires them to start from scratch every time they step up to the board, and therefore to lay out their thinking

• 2:15Speaker 00

  as thoroughly and clearly as possible. It becomes immediately apparent when someone hasn't thought something through. At the whiteboard, there is no place to hide. And I would say there's this beautiful underlying tie-in to his overall company-building philosophy. And it's the fact that he just believes in constant reinvention. So it says, "The whiteboard represents both possibility and ephemerality." "The belief that a successful idea, no matter how brilliant, must eventually be erased, and a new one must take its place." So this deep belief in constant reinvention, as mandatory as not optional, is something I think that Jensen has in common with Michael Dell. One of my favorite things that Michael Dell ever said was this. He said, "I stood up and told the company that five years from now,

• 3:00Speaker 00

  we will have a new competitor. And that new competitor is going to be in every business that we are in, except they're going to be faster, more efficient, and more capable, and they're going to put us out of business. And the only way that we're going to prevent that is if we become that company." It is gut-wrenching stuff to reinvent and reimagine your business. But if you don't do it, you'll go out of business. Which leads to idea number three, which is complacency kills. Jensen repeats this belief over and over again throughout the book. Complacency kills. I would say that Jensen has this combination of extreme self-confidence and charisma, matched with this inner voice that says that he sucks.

• 3:44Speaker 00

  An inner voice that says, "Nothing he ever does is good enough." And I truly believe, for a lot of history's greatest founders, that inner voice is impossible to satisfy. And there's a great line in the book on how this manifests. It says, "At Jensen's company, innovation is a necessity, not an option." I don't know what Jensen's answer would be if you ask him, like, what is his biggest fear? I would highly suspect that complacency taking root inside of his company is going to be towards the top of that list. And so throughout the entire book, he's just constantly hounding on this. Here's one example. Jensen resists overly positive accounts of Nvidia's startup period and his own missteps. "When we were younger, we sucked at a lot of things.

• 4:26Speaker 00

  Nvidia wasn't a great company on day one. We made it great over 31 years." And so, in addition to rereading this book for the second time, I also watched Jensen's commencement speech that he gave at Caltech. And as with any commencement speech, they're going to give you a nice introduction, they're going to give you like a short biography, and after the nice introduction, he begins his speech by saying, "Thanks for the kind introduction. It really makes me cringe listening to all of that. I hate hearing about myself." In the book, he summarizes his first 15 years as CEO. This is what it says. "He slipped into the third person. If Jensen wasn't even involved in the first 15 years of our company,

• 5:07Speaker 00

  I would really like that. He wasn't proud of how the company was managed then, or his own naivete and lack of strategic thinking." Jensen runs the company the way he does because he believes that Nvidia's worst enemy is not the competition, but itself. The worst enemy is the complacency that grips any successful company. That is yet another thing that Jensen has in common with a lot of history's greatest founders. They all believe that complacency kills. In fact, Andy Grove, he had a mantra. His mantra was, "Success breeds complacency. Complacency breeds failure. Only the paranoid survive." This idea of complacency killing your company just reappears over and over again. Here's another example. Herb Kelleher, founder of Southwest Airlines, he has a great way to

• 5:50Speaker 00

  describe this. "A company is never more vulnerable to complacency than when it's at the height of its success. We must not let success breed complacency. Cockiness, greediness, laziness, indifference, preoccupation with bureaucracy, hierarchy, or obliviousness to threats posed by the outside world." I read this great profile on the founder of LVMH, Bernard Knoll. It says, "He abhors complacency so much." Warren Buffett would repeat this over and over again. In his shareholder letters, he says, "You need the ability to fight off the ABCs of business decay: arrogance, bureaucracy, and complacency." When these corporate cancers metastasize,

• 6:33Speaker 00

  even the strongest of companies falter. And so there's so many examples in the book of Jensen fighting back against complacency. One example, early in their history, says that at each monthly company meeting, Jensen would say, "We're 30 days from going out of business." All the way back in 97, he talks about making sure that we're acting with a sense of urgency because one of the biggest companies in the world is trying to kill us. He says, "We need to kill Intel." Make no mistake, remember he's saying this in 97. "Make no mistake, Intel is out to get us and put us out of business. They have told their employees, and they have internalized this. They are going to put us out of business. Our job is to go kill them before they put us out of business. We need to kill Intel."

• 7:17Speaker 00

  I also wanted to include this in here because obviously, he's an extremely unusual person. And he's at the top right now, but he was like this for decades. At the time he just said this, he's telling his company, "We're gonna go kill Intel." At that time, Intel was 860 times larger than Nvidia in terms of revenue. Jensen abhors complacency. Only the paranoid survive. Again, that's a quote from Andy Grove. What's interesting about that is Andy Grove mentored Steve Jobs. And Steve Jobs had a very clear philosophy about what to do after achieving something great. And it's a way to, again, avoid complacency taking root in your company. This is what Steve said. "I think if you do something and it turns out pretty

• 8:00Speaker 00

  good, then you should just go do something else wonderful and not dwell on it for too long. Just figure out what's next." That is a mentality that history's greatest founders have. This is the way I summarize it. "No rearview mirror, no resting on laurels or sleeping on wins. Make something great, then do it again." And one of the things I admire most about Jensen is this relentless dedication to improving his craft. In fact, "craft" is the word that he uses in that commencement address that he gave at Caltech. And Jensen's dedication to constantly improving his company reminds me of my friend Kareem, who's the co-founder and CTO of Ramp. Ramp is the presenting sponsor of this podcast, and Kareem is one of the Greatest technical minds working in finance.

• 8:43Speaker 00

  I spend a lot of time talking to Kareem and every single conversation centers around his obsession with crafting a high-quality product and using the latest technology to constantly create better experiences for his customers, just like Jensen does. Kareem is running one of the most talented technical teams in finance and they use rapid relentless iteration to make their product better every day. So far this year, Ramp has shipped over 300 new features. Ramp is completely committed to using AI to make a better experience for their customers and automate as much of your business's finances as possible. In fact, Kareem just wrote this, "AI is all I think about these days. It is our duty to be first movers and push limits so we can make the greatest possible product experience for our customers."

• 9:27Speaker 00

  Many of the fastest-growing and most innovative companies in the world are running their business on Ramp. Make sure you go to ramp.com to learn how they can help your business save time and money today. Let AI chase your receipts and close your books so you can use your time and energy building great things for your customers. Get started today by going to ramp.com. Number four, Jensen insists on a flat organization. Jensen has 60 direct reports and he doesn't do one-on-one meetings. And so he talks about why he designed a flat organization. "When we were a small company, we were plenty bureaucratic and plenty political." Jensen thought about how he could create an ideal organization from scratch. He realized he would choose a much flatter structure

• 10:11Speaker 00

  so that employees could act with more independence. He also saw a flat structure would weed out lower performers who were unaccustomed to thinking for themselves and to acting without being told what to do. This is what he said, "I wanted to create a company that naturally attracts amazing people. A flat structure fights against the danger of slow decision-making." It is very interesting that Jensen picked up on how dangerous slow decision-making is. Jeff Bezos, in one of his biographies, said this, "You can drive great people away by making the speed of decision-making really slow. Why would great people stay in an organization where they can't get things done?" Jensen will describe his flat organization structure in the book and also a bunch of interviews. Here's an interview, and one of the interviews, he actually compared how he runs his company to what happens and what will happen

• 10:57Speaker 00

  when humanity is surrounded by all these AI agents that are smarter than they are. And he was talking about the fact that he gets that question, like, what's gonna happen if you're surrounded by all these AIs that are doing things so incredibly well and they're so much better than you? And he says, "When I reflect on that, that's already my life." I have 60 direct reports. The reason why they're on my e-staff is because they're world-class at what they do, and they do it better than I do, much better than I do. And I have no trouble interacting with them. I have no trouble prompt engineering them. I have no trouble programming them. And what is fascinating is he refuses to change his management philosophy. He constantly insists on maintaining this flat structure. Says he did not want to spend time on career coaching because the majority of them had already reached the pinnacle of their careers.

• 11:40Speaker 00

  Instead, he focused on providing them collectively with information from across the organization, as well as with his own strategic guidance. Jensen had steadfastly refused to change his management philosophy, even when new board members joined, and recommended that he hired a chief operating officer to reduce his administrative burden. This part made me laugh. "No, thanks," Jensen replied. "This is a great way to make sure everybody knows what's going on," referring to his direct communication with the rest of the company. And so when I'm reading to you, like, I'm pulling all these... These quotes and ideas are not in one section of the book. They are repeated over and over again throughout different sections of different time periods. That's how you know it's important to him. And one of the ways I would summarize what he's about to say here is like, oh my God.

• 12:23Speaker 00

  Jensen made like an F1 organization. Ultimately, my e-staff is something that I have to know how to work with. The company's organization is like a race car. It has to be a machine that the CEO knows how to drive. Jensen created a company he could manage directly. That sentence is very important. Jensen created a company that he could manage directly. He created a company-building philosophy that fit him. It doesn't matter what other people are doing. The root principle is to do things your way. And so he would repeat over and over again all the benefits of keeping his company flat. It turns out, by having a lot of direct reports, not having one-on-ones, we made the company flat and information travels quickly. And therefore, employees are empowered.

• 13:06Speaker 00

  That algorithm was well conceived. You want a company that's as large as necessary to do the job, but to be as small as possible and not bogged down by over-management and process. Now, idea number five works very well with idea number four. Public criticism works well with a flat organization. Jensen does not believe— You hear this like a common trope that's repeated. And maybe it makes sense if your idea is to get along with people, which I think Jensen is like—the quality of the work obviously goes like top priority more than, you know, other people's feelings. Jensen doesn't believe in praise publicly criticized privately. He criticizes publicly so the entire organization can learn from a single person's mistake. Again, this is another reoccurring theme throughout the book. This is what he said.

• 13:49Speaker 00

  "Over the years, I realized what was happening and how people protect their turf and they protect their ideas. I created a much flatter organization." Jensen's anecdote to the backstabbing, the gaming of metrics, and to political infighting is public accountability and, if needed, public embarrassments. "I just say it out loud," he said. "I've got no trouble calling people out." And so here's an example of Jensen's public criticism so the entire company can learn from the mistake. And I think it also ties together with that constant fight against complacency. "Jensen was furious at the poor planning and execution of the chip. He called out its engineers at an all-company meeting. 'Is this the piece of shit that you intended to build?' he said. 'The architects did a shitty job putting the product together.

• 14:33Speaker 00

  How could you not see the issue before it happened? Someone should have raised their hand and said, hey, we have a design issue here.'" Jensen's criticism didn't end after a single meeting. He invited an executive from Best Buy to speak to his employees. The executive spent much of the session talking about the NV30's poor performance and customer complaints. Jensen agreed. "He's right. This is crap." Jensen reflected on the NV30's failure. Ultimately, it was his responsibility to ensure that Nvidia's teams collaborated effectively, no matter how large the company got. Again, What I think is remarkable about reading these books about, you know, you obviously know this, like I'm obsessed with people that do things for a long time.

• 15:18Speaker 00

  Jensen is the longest running founder CEO of a tech company in the world. And the result of hopefully this podcast and obviously the book is we get to benefit from Jensen's pain and experience. All of these ideas that you and I are talking about today come from over three decades of him building his company into one of the best companies in the world. Now, the way he thinks about this is very similar because I do think this is one of the most unique ideas that you will hear. And it reminded me of this conversation. I was watching this interview with Johnny Ive one time and this is after Steve Jobs passed away. He talked about one of the most important lessons that Steve told him and it sounds exactly, Jensen's not trying to hurt people's feelings just to hurt their feelings. He's trying to refine the character of his company. Listen to Johnny Ive talk about this. I remember asking Steve about this.

• 16:03Speaker 00

  I said, "It could be perceived that his critique of a piece of work and that in his critique of a piece of work, he was a little harsh and we had been putting our heart and soul into this." And so I asked him, "Could we not moderate the things we said a little bit?" And he asked, "Why?" And I said, "Because I care about the team." And then Steve said this brutally brilliant insightful thing. He said, "No, Johnny, you're just really vain. You just want people to like you. I'm surprised at you. I thought you held the work up as the most important, not how you believe you were perceived by other people." And Johnny replied, "And I was terribly cross because I knew he was right." Going back to why Jensen does this, he offers employees direct criticism in large meetings

• 16:47Speaker 00

  so more people can learn from a single mistake. I give feedback in front of everybody. Feedback is learning. For what reason are you the only person who should learn from this? We should all learn from that opportunity. I don't take people aside. We are not optimizing for not embarrassing somebody. We're optimizing for the company learning from our mistakes. Idea number six, tortured into greatness, a habit of self-criticism. Jensen is not just publicly criticizing others. He does this to himself. He actually has a great line about this. He calls it tortured into greatness. And so I mentioned earlier that Jensen has this combination of extreme self-confidence and charisma, matched with this inner voice that says, you know, he sucks, and an inner

• 17:30Speaker 00

  voice that says, nothing ever, that, nothing he ever does is going to be good enough. And what you learn by reading this book is that he admittedly tortures his team into greatness. In fact, he has a line about this. He says, "I don't like giving up on people. I'd rather torture them into greatness." And it's clear from that that he sees this as a guard against complacency. He feels praise is a distraction, and the deadliest sin is looking back on past accomplishments. But after you read this book, you realize that he has tortured himself into greatness as well, that it started with him. And so there's this great story in the book about this habit of self-criticism that he has, and it's told by an executive at the company. He says, "I'll never forget this. We've done a fantastic job. We just blew the doors off the quarter.

• 18:12Speaker 00

  And Jensen stood up in front of us and said, 'I look in the mirror every morning and say, 'You suck.'" The executive was struck by how someone so manifestly successful could still think in such terms. You and I have seen that idea over and over and over again. And I think it's tied, again, he talks about, one of my favorite, maybe my all-time favorite maxim from the history of entrepreneurship is excellence is the capacity to take pain. I've never heard Jensen speak in that exact terms, but it's the same idea. I'm going to give you two examples. I'm going to pull two quotes that he said. One is from a speech at Caltech, which I referenced earlier, and another is a speech at Stanford. This is what he said at Caltech. This is my favorite thing he said in the entire commencement address. "I hope you will see setbacks as new opportunities.

• 18:55Speaker 00

  Your pain and suffering will strengthen your character, your resilience and agility, and they are the ultimate superpowers." This is my, really my favorite part of my favorite part. "Of all the things that I value most about my abilities, intelligence is not top of that list. My ability to endure pain and suffering, my ability to work on something for a very, very long period of time, my ability to handle setbacks and see the opportunity just around the corner, I consider to be my superpowers, and I hope they're yours." Says something very similar to that when he gave a talk at Stanford. "I think one of the great advantages is I have very low expectations." Most of the Stanford graduates have very high expectations. People with high expectations have very low resilience.

• 19:40Speaker 00

  And resilience matters in success. I don't know how to teach it to you, except that I hope suffering happens to you. I was fortunate that I had plenty of opportunities for setbacks and suffering. To this day, I use the phrase, "pain and suffering inside of our company with great glee." And I mean that in a happy way. Because you want to refine the character of your company. Now, let me pause there. I think that's exactly what a lot of Jensen's ideas do. They refine the character of your company. So let's go back to that. I mean that in a happy way, because you want to refine the character of your company. You want greatness out of them. Greatness is not intelligence. Greatness comes from character. And character is not formed out of smart people.

• 20:25Speaker 00

  Character is formed out of people who've suffered. I wish upon you ample doses of pain and suffering. Idea number seven, speed of light. Not only has he derived really great ideas from three, you know, over three decades of experience, but he's good at naming them and branding his ideas. So Jensen's speed of light idea is basically, hey, the only benchmark that we're going to judge how fast we move will be the absolute maximum speed possible. What does that mean? Jensen insists that all employees work at the speed of light. He wants their work to be contained only by the laws of physics. Sounds like Elon. Each project must be broken down into component tasks. And each task must have a target time to completion that assumes no delays, no queues, and no downtime.

• 21:10Speaker 00

  This sets the theoretical maximum, the speed of light, that it is physically impossible to exceed. We will then judge ourselves against the speed of light, not what we used to do, or what other companies are doing. As he saw it, he needed to prevent the kind of internal rot that he observed at other companies. Again, what's that reference to? That's a reference to idea number three, complacency kills. Jensen would not let his employees think about what was likely to work or what they could reasonably achieve. He only cared about what would be possible with the maximum amount of effort and minimum amount of wasted time. Minimum amount of wasted time. Before we get into idea number eight, there is another tool and technology that I need to tell you about that does exactly that.

• 21:55Speaker 00

  And Ramp actually uses this tool. It is Vanta. I just told you earlier how Ramp has the best technical talent in their industry. And knowing that the team at Ramp trusts Vanta was a huge positive signal for me. And then when I talked to Vanta's founder Christina, it became obvious why Ramp uses Vanta. Because Vanta's value prop is very clear. Vanta helps your company prove that you're secure so more customers will use your product or service. Many companies won't sign contracts unless you're certified, and this is causing you to lose out on sales. That is why the average Vanta customer reports a 526% return on investment after becoming a Vanta customer. Vanta helps your company automate compliance, security, and trust. Vanta helps your company pass audits without tons of manual work. So not only do you make more money with Vanta, but you save more time.

• 22:40Speaker 00

  Manual compliance is slow and painful. The best companies and the best founders will not tolerate wasting valuable company time doing something with labor when technology can help you move faster, maybe even move at the speed of light even. And Vanta helps you do just that. Vanta will help you win trust, close deals, and stay secure faster and with less effort. Go to vanta.com/founders to learn more and you'll get $1,000 off. That is vanta.com/founders. Idea number eight. This is a combination of reoccurring themes that you see throughout the book. Jensen is unapologetically extreme. He is extreme in all things. He works all the hours and he insists that no one will outwork him. Jensen is so relentless that he will grill you at the urinal. It's one of the funniest stories in the book.

• 23:25Speaker 00

  No place in company headquarters was safe from a drive-by grilling from Jensen. Kenneth Hurley was at a urinal when Jensen walked up to the one next to him. I'm not the kind of guy who likes to talk in the bathroom, Hurley said. Jensen had other ideas. Hey, what's up? He asked. Hurley replied with not much, which earned him a sidelong glance from Jensen. Hurley panicked, thinking, I'm gonna get fired because he thinks I'm not doing anything. He proceeded to list 20 things he was working on. Okay, Jensen replied, satisfied with the answer. So Jensen is described as extremely hardworking by everybody that runs into him. And he also describes himself that way. He says, there may be people that are smarter than me, but no one is ever going to work harder than me. This is very interesting.

• 24:07Speaker 00

  I was reading the way that Jensen thinks about his own work ethic. And he has a bunch of great lines that now me and my friends have also used from the first time, the first episode, the first time we read the book. But for some reason, when I got to this part, the second time I was reading it, there's this idea that I thought was fascinating, where Larry Ellison likes having an enemy. He says that he would pick an enemy and then he would use that to push himself and his company. And one enemy that he picked was Bill Gates. And the whole thing that Larry's point was like, you want a foe worthy of your steel. You want a formidable enemy. And so in the middle of this war that's going on, this battle between Ellison and Gates, Ellison gives this interview and he talks about, he understands Bill Gates very well. And this is how he described Bill Gates. He says, there are a lot of people in the world smarter than Bill Gates.

• 24:52Speaker 00

  There are very few people in the world that have his focus and endurance. He is utterly relentless. He is indefatigable. He is absolutely focused and he wants it all. Barry Diller said that Bill is young and he's mean and he's not tired. That is a high compliment coming from Barry Diller. That's like Jensen. Very few people that I've ever come across have Jensen's focus and endurance. And he doesn't hide this. He is unapologetically extreme. Jensen said that he works all the hours and any hour that he is not working, he is thinking about work. And he has a very low tolerance for anybody complaining about work. So there's a bunch of employees that are griping about long work hours. And Jensen's response was typically direct.

• 25:35Speaker 00

  People who train for the Olympics grumble about training early in the morning, too. Jensen was sending a message, long hours were a necessary prerequisite for excellence. To this day, he has not deviated from that view. He also is unapologetically extreme in his desire and his need, his deep need to be number one. The first time he came in second place, Jensen sternly told me, second place is the first loser. I realized I'm working for a boss who believes that we have to win at everything. Jensen's guidance was direct, just go win. The idea was whoever could run faster would get all of the land. And Jensen is extreme in all things, including recruiting. He was trying to recruit the chief engineer from Silicon Graphics.

• 26:17Speaker 00

  So he invites the guy out to lunch and he goes for, again, his direct approach, which I think is probably the only approach. I think direct is the only way he approaches anything. And he tells him, he goes, John, you should really think about coming to our company because ultimately I'm going to put SGI out of business. He is absolutely relentless about work. This is what he says, "You have to allow yourself to be obsessed with your work. I work every day. There's not a day that goes by that I don't work. If I'm not working, I'm thinking about working. Working is relaxing for me." That line, me and my friends repeat to each other, "Working is relaxing for me." And then just one more line about him being unapologetically extreme. As Jensen put it, "When looking directly into my eyes, the secret to his company's

• 27:00Speaker 00

  success is nothing more than sheer will." Idea number nine, Jensen's top five email idea. It's a genius way to get unfiltered information from the entire company. As companies grow, as they become more successful, bad leaders wind up surrounding themselves with sycophants or executives who are not incentivized to tell you the truth. In fact, I just started doing this new show where I actually sit down and talk to extreme winners in business. It's called David Senra. And the very first episode was with my friend Daniel Eck, who is the founder of Spotify. And you gotta listen to it if you haven't listened to it yet. Because he tells a hilarious story about this. And this story happened years ago, but one of Daniel's employees, who now, he was the head of product at Spotify, his name's Gustav, but now he's one of the co-CEOs. After a product meeting, he pulled Daniel aside and he's like, "Hey, you really suck at this."

• 27:45Speaker 00

  And Daniel had a very human, he tells a story, he had a very human reaction where he goes home, he's like, "Oh my God, I have to fire this guy." And then he thought about it more and more. And when his emotions calmed down, he's like, oh, my God, Gustav is right. And so Daniel's point is that you want people to tell you the truth. Well, Jensen has tens of thousands of employees. How is he going to make sure he gets unfiltered, true information from the entire company? He does this with a top five, his top five email idea. So since Jensen asked employees at every level of the organization to send an email that detailed the top five things they were working on and what they had recently observed in their markets, including customer pain points, competitor activities, technology developments, and the potential for project delays.

• 28:25Speaker 00

  The ideal top five email is five bullet points where the first word is an action word. It has to be something like finalize, build, or secure. To make it easier for himself to filter these emails, Jensen had each department tag them by topic in the subject line. That way, if he wanted to get all his recent emails on, say, hyperscaler accounts, he could easily find them through a keyword search. The top five emails became a crucial feedback channel for Jensen. He would tell his employees when asked why he liked the top five process. It's easy to pick up on the strong signals, but I want to intercept them when they are weak. Every day, he would read about 100 top five emails to get a snapshot of what was happening within the company.

• 29:10Speaker 00

  There's another article written by the Wall Street Journal that I read about this. It says, "Employees have been sending notes known as T5Ts, or top five things, for decades, and Jensen has been reading them. The top five emails have become his preferred method of flattening hierarchy." "Strategy isn't what I say, it's what they do," Jensen said. "So it's really important that I understand what everybody else is doing." And one way he does that is by reading these top five emails. He doesn't want information that has already made its way through layers of management. What he wants is information from the edge." That is a direct quote from him. "He wants information from the edge. He's looking for the next zero billion dollar market, a frontier that hasn't been explored because it barely exists, but could one day be a thing." One of the weak signals that he intercepted years ago was a wonky but exciting development in machine learning that kept popping up in the emails.

• 29:56Speaker 00

  Jensen decided that Nvidia needed to invest more in tools for accelerating workloads on its GPUs. These days, those GPUs are the brains for artificial intelligence. Reading these emails is the thing that he did for fun. He says, "I drink a scotch and I do emails." Idea number 10: Jensen's communication style. It is blunt, concise, and direct. Jensen believes in direct blunt communication. Jensen's emails are short and sweet, like a haiku. Napoleon was the exact same way. There's a great quote from this biography of Napoleon I read. "Long orders, which require much time to prepare, to read, and to understand, are the enemies of speed. Napoleon could issue orders of a few sentences which clearly expressed his intentions and

• 30:39Speaker 00

  required little time to issue and to understand." This is yet another thing that Jensen had in common with Steve Jobs. There's this great book called Creative Selection, which was written by a person that demoed directly to Steve. I covered the book all the way back on episode 281. Here's the quote. "Steve was always easy to understand. He would either approve a demo, or he would request to see something different next time. Whenever Steve reviewed a demo, he would say, often with highly detailed specificity, what he wanted to happen next. He was always trying to ensure the products were as intuitive and straightforward as possible, and he was willing to invest his own time, effort, and influence to see that they were. I chuckled to myself over how much time I've spent thinking about this iPad demo and

• 31:24Speaker 00

  how much Steve taught me in one meeting where he spoke just four sentences." Think about that. Get your point across and make it memorable in four sentences. That is world-class communication. Idea number 11: Lua. When an employee starts rambling, Jensen will say, "Lua." Lua is a warning sign that Jensen's patience is growing thin. When he says it, Jensen wants the employee to stop and do three things. Number one, listen to the question. Number two, understand the question. Number three, answer the question. Everyone who works for Jensen has heard Lua.

• 32:05Speaker 00

  And so, just like Steve Jobs, Jensen is easy to understand. And when a person and their ideas are easy to understand, their ideas are easy to spread. The best storytellers know this, and you'll find a lot of the best founders are also great storytellers. The best story wins, and that is exactly what my partner, Collateral, helps you do. Don Valentine, who's the founder of Sequoia, said one of my favorite things ever. He says, "The art of storytelling is critically important." Most of the entrepreneurs who come to talk to us can't tell a story. Learning to tell a story is incredibly important because that's how the money works. The money flows as a function of the stories. And that is exactly what Collateral does. Collateral can transform your complex ideas into compelling narratives.

• 32:48Speaker 00

  I need you to remember their website, which is easy to remember because it's collateral.com. Collateral crafts institutional-grade marketing collateral, and they do this for private equity, private credit, real estate, venture capital, family offices, hedge funds, oil and gas companies, all kinds of corporations. There are big companies now using Collateral because they discovered it from this podcast. I have friends that have used Collateral for their marketing collateral that have raised billions of dollars of capital and have made hundreds of millions of dollars. I will leave a link down below, but make sure you go to collateral.com and improve the way that your company tells its own story. Storytelling is one of the highest forms of leverage, and you should invest heavily in it. And you can do that by going to collateral.com. Number 12, "The mission is the boss and pilot in command."

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  Jensen tells his employees that the ultimate boss is the mission itself. This is what he said. "The concept of the mission is the boss makes a lot of sense because ultimately, we're here to realize a particular mission, not in service of some organization." Under the "mission is the boss" philosophy, Jensen would start every new project by designating a leader, which he calls a pilot in command. That pilot in command will report directly to Jensen. We always have a pilot in command for every project. Whenever Jensen talks about any project, he always wants the name. Nobody can hide behind "such-and-such team is working on that." Everything has to have a person's name attached. The pilot in command is accountable. I just did this episode, episode 399, on how Elon works.

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  In that episode, it talks about Elon's algorithm that has five commandments that he uses and applies relentlessly, and he repeats it over and over again. In the first commandment, it says this, "Question every requirement. Each should come with the name of the person who made it." You should never accept that a requirement came from a department such as the legal department or the safety department. You need to know the name of the real person who made that requirement. In other words, find out who is accountable. Jensen organized his employees into groups centralized by function, so like sales, engineering, operations, and so on. They were treated as a general pool of talent and not divided by business units or divisions. We take the people that we have and we're able to redirect them into a new mission. That is, mission is the boss and pilot in command.

• 35:03Speaker 00

  Number 13, strategy is not words, strategy is action. This is what Jensen said. "Strategy is not words, strategy is actions." We don't do a periodic planning system. The reason for that is because the world is a living, breathing thing. We just plan continuously. There's no five-year plan. So, "Strategy is not words, strategy is action." That's one of my favorite lines in the book. It reminds me very much of Henry Singleton. So, Henry Singleton had this very distinct philosophy about planning. I discovered Henry Singleton because Charlie Munger said that Henry Singleton was the smartest person he ever met, and Warren Buffett said that it's a crime that business schools don't study Singleton. And Singleton famously said, "I know a lot of people have very definitive plans, but

• 35:46Speaker 00

  we're subject to a great number of outside influences on our businesses, and most of them can't be predicted. So, my plan is to stay flexible. My only plan is to keep coming to work every day. I like to steer the boat each day rather than plan way into the future." And so Jensen has that in common with Singleton. He also has something in common with Michael Bloomberg, that line where Jensen says, "There's no five-year plan. We just plan continuously. There's no five-year plan." That is exactly the same line of thinking that Michael Bloomberg used to build his company. In Bloomberg's autobiography, he wrote this. "Life, I've found, works the following way. Daily, you're presented with many small and surprising opportunities.

• 36:26Speaker 00

  To succeed, you must string together many small incremental advances rather than counting on hitting the lottery jackpot once. As a practical matter, constantly enhance your skills, put in as many hours as possible, and make tactical plans for the next few steps. Then, based on what actually occurs, look one more move ahead and adjust the plan." Don't devise a five-year plan or a great leap forward. Central planning didn't work for Stalin or Mao, and it won't work for an entrepreneur either. Number 14, ship the whole cow. The Innovator's Dilemma is one of Jensen's favorite books. One of the things that he learned from the book is that the threat often comes from the low end of the market. So this is what he said. "We build Ferraris. All of our chips were designed for the high end, the best performance.

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  I don't want to let someone come in and be the price leader. Lock me out of the bottom and then climb their way to the top." And so Jensen saw that they could stop throwing away parts that failed quality tests. These parts were not suitable for the company's Ferrari-grade chips, but they were otherwise functional at lower speeds. Nvidia could repackage them into a less capable and cheaper version of the company's mainline products. This looked like a clear opportunity to make something out of nothing. Rejected parts were generating no revenue. Nvidia could create a whole new derivative product line that could turn a profit without the expensive and time-consuming process of research and development. That line would serve as defense against competitors

• 37:55Speaker 00

  for whom the low-cost chip was the main product. Nvidia could easily afford to price its chips down so much that its competitors would be forced to sell at a loss. This strategy was dubbed "ship the whole cow", a reference to how butchers find ways to use almost every part of the carcass, not just the prime cuts. Number 15, go to school on everybody. There's a line in a biography of Jeff Bezos that says, "Jeff went to school on everybody. Jensen goes to school on everybody." There's a story in the book where he shows up at this conference. It's an academic conference where machine learning and neuroscience experts are presenting their latest findings. He runs into one of his employees, who knew that Jensen wasn't scheduled to speak, and then asked him, "What are you doing at the conference?"

• 38:40Speaker 00

  Jensen replied, "I'm here to learn." Jensen had not assigned someone else to attend and take notes on his behalf. He had shown up himself so he could absorb the recent developments in artificial intelligence. He wanted to be deeply involved. This is a great story. So Mitch Rales is the co-founder of Danaher. Danaher is this like $150 billion company. And a friend of mine was at this like small intimate conference with Mitch recently, and he was blown away by how focused Mitch was. He says that the entire time that Mitch Rales was there, he was listening to the speakers and he was taking pages of notes. And my friend had this thought, which he relayed to me, where he's like, Mitch, you're more successful than anybody else here. Why are you taking notes? And when my friend told me that story, I go, no, no, no. Wrong answer.

• 39:23Speaker 00

  There's a great line in Bill Walsh's book, The Score Takes Care of Itself, that I think is very important and related to this. And Bill Walsh wrote, "Champions behave like champions before they're champions." I guarantee you that Mitch didn't build a $150 billion company and then start taking notes. I guarantee you that Mitch was doing this way before he was quote unquote, "the most successful person in the room." There's a million examples of Jensen just being an absolute learning machine in the book and consuming enormous amounts of information that will help his company. You can distill down to that maxim, that the good ones know more. And what I loved about reading this book is you'll realize that Jensen is in the details. He's paying attention to things that surprise everyone else around him. Let me give you an example from the book.

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  Peter Young was first introduced to Jensen at a party for new hires. Jensen already knew who he was. "You're Peter Young," Jensen said. "You've been here for about a year, before you were at Sony PlayStation, and 3D FX prior to that." He had a similar recall of biographical details for all 50 attendees of the party. There is a great quote from Walt Disney himself that says, "If we lose the details, we lose it all." Jensen is in the details. Jensen manages his company directly, involving himself deeply in product decisions, sales negotiations, investor relations, and more. Number 16, we need to create the market, not fight over share of an existing market.

• 40:49Speaker 00

  Jensen believed that Nvidia was nothing like any other company that ever existed. Jensen doesn't believe in building commodity products because commodities are subject to downward pricing pressure as competition increases. Jensen has always said that we should be doing things that other people cannot. Jensen believes we need to bring unique values to the marketplace, and he feels that by doing work that is cutting edge and revolutionary, it allows the company to attract the best people. We do not have a culture of just going after market share. We would rather create the market. And there's many examples of him doing this in the book. In that commencement address at Caltech, he mentioned their move into robotics, and he explained the decision-making behind it. He says, "We decided to build something where we are sure there are no customers."

• 41:34Speaker 00

  And everybody laughed. And he was serious. He's like, this is why it's important. Where there are no customers, there are also no competitors. That is a $0 billion market. Something that barely exists, maybe doesn't exist at all, but one day will be giant. And I think Edwin Land is a good comparison here. You know, I'm obsessed with Edwin Land. He's one of my personal heroes. He was Steve Jobs' personal hero. And if you think about it, this is exactly the strategy that Edwin Land had. When Edwin Land targeted the instant photography market, there were no customers and therefore no competitors because he invented the market. And by inventing the market, that allowed Edwin Land to build a monopoly.

• 42:15Speaker 00

  And one advantage of Edwin Land's approach and of Jensen's approach is pricing power. Here's an example from the book. Jensen understood that gamers who buy Nvidia's cards are willing to pay for performance. As long as they look at the screen and see something radically different, they're going to buy it. He made the same case to Nvidia's investors. He said that Nvidia would be a unique semiconductor company where products' average selling prices rise. "We are going to be the only guy where ASPs go up over time. When everyone else's ASPs will go down," he said. Number 17, "I will choke you with gold." I found a story in one of the books I read on David Ogilvie, where he talks about that the Medici family was trying to persuade this sculptor

• 42:59Speaker 00

  to move to Florence and to enter into their service. And one member of the Medici family is writing this sculptor a letter, laying out why he should come to Florence. And he concludes this letter with this following line, "Come, I will choke you with gold." Jensen wants to work with the best people, and to do so, Jensen is willing to choke you with gold. Jensen looks at his stock like his blood. He pours over the stock allocation reports. Managers can refer an employee for special consideration to senior executives. Jensen will then review this list of top contributors and give out special one-off grants that also vest over a four-year period. When the grant is approved, the employee will receive an email.

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  The subject line says, "Special Grant: Authorizing the RSU Grant in Recognition of Your Extraordinary Contributions", with a clear description of the rationale behind the award. Jensen can also reach down into the organization at any time and award stock directly, without waiting for an annual compensation review. This allows him to ensure that people who are doing great work feel appreciated in the moment. It is yet another sign of his interest in every aspect and level of his company. Number 18, work on your highest priority first. This is what Jensen says. "I have a very clear priority list and I start from the highest priority work first. Before I even get to work, my day is already a success.

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  I've already completed my most important work and can dedicate my day to helping others." Ruthlessly prioritize your time is what he's saying there. Focus on the most important activity at all times. Larry Ellison shares this belief that you should only focus relentlessly on your most important goal. Here's a quote from a biography of Larry Ellison that I read. "Ellison made no apologies for his quirks. If anything, he seemed amused at Jenny's concern about his time management." Jenny was his longtime assistant. "Jenny and I approach things very differently," Ellison said. "Jenny feels if there are a thousand things you're doing, you have to do all thousand of them. My view is different. My view is that there are only a handful of things that are really important and you should devote all your time to those and forget everything else.

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  If you try to do all thousand things, answer all thousand phone calls, you will dilute your efforts in those areas that are really essential." Jensen would tell others to focus on the most important activity at all times and not be beholden to a schedule. And then related to 18 is finally number 19, swarm your greatest opportunity. Obviously, a huge part of this book is about the fact that Jensen recognized the AI trend early, invested heavily, and maneuvered his company into the position to take advantage of it better than anyone else in the world. And there's probably 80 pages on this swarming of his greatest opportunity, this march toward this unlimited AI opportunity. And so I just pulled out a few examples and a few decisions he made that put him in a

• 45:54Speaker 00

  position so he could swarm the greatest opportunity of his life. And I think one of the most important lessons is this plays out over two decades and he's doing this when people tell him not to. He does this at a great expense and he does this over a long period of time. So the idea that turns Nvidia into a multi-trillion dollar company actually came from their customers coming up with unique ways to use their product. The first reference to using GPUs for non-graphical purposes was in a 2002 research paper on using computers to simulate the movement of clouds. And he picks up on this really early. An increasing number of computer science researchers were using GPUs for non-graphics applications. They reported significant speed improvements

• 46:36Speaker 00

  over computers that relied on CPU power only. In other words, the researchers had hacked their GPUs. Jensen sees this as a way to expand the market for his products, and he works on making it easier for this to happen. So number one, he hires the guy who discovered this. And then number two, he makes it a priority to make it easier for people like him to find more non-graphical applications for GPUs. That is a principle and idea that you and I have seen over and over again in these books, that anytime you make something easier for people to do, the market expands. Anytime you make something easier for people to do, the market expands. The guy he hires, his last name is Harris, also coined the phrase "GPGPU", general purpose computing on GPUs,

• 47:21Speaker 00

  to describe this phenomenon that he was witnessing. Jensen was quick to grasp that GPGPU had the potential to open up the market for GPUs far beyond mere computer graphics. And so in order to generate more demand, Jensen decides they have to make it so their cards are easier to program. This is when they create the new programming model called CUDA, which stands for Compute Unified Device Architecture. CUDA made it possible and easier for scientists and engineers to leverage the GPU's computing power. Why did Jensen want to do this? Jensen believed that it would expand Nvidia's reach into every corner of the tech industry. Remember what Jensen said earlier. "All the things that I value most about my abilities,

• 48:06Speaker 00

  intelligence is not at the top of the list." One of the things that he values most is the ability to work on something for a very, very long period of time. That is evident in this book, 2002, the first reference to using GPUs for non-graphical purposes. What I'm about to read to you is happening in 2007 and 2008. This is again about the importance of doing something for a long time. So much of entrepreneurial culture now is start, scale, sell. And if you want to be great, you build, retain, and own. You find your last company, the company you can work on for decades, just like Jensen did. Jensen's decision here to go all in on this will create trillions of value for the company in the coming decades. Imagine if he quit or sold here.

• 48:51Speaker 00

  So they call this the era of the GPU. The era of the GPU would create so many opportunities that Jensen saw it as his mission to prepare Nvidia to take advantage of it. Even if no one could know exactly what those opportunities would be, everything else was secondary. He is swarming his greatest opportunity. And it is Jensen's way. He wants to push it everywhere. He wants to make it a foundational technology. And if Jensen has conviction, he will invest heavily over the long term. Jensen understood the importance of saturating the market with it. The more people who had CUDA in their hands, the faster technology would establish itself as a standard. We should push this everywhere and make it a foundational technology. This move was extremely expensive. Remember, this happened in 2007, 2008.

• 49:35Speaker 00

  The company invested so much in converting its GPUs for CUDA compatibility that its gross margin fell from 45% to 35%. At the same time it's increasing its spending on CUDA, the global financial crisis destroyed consumer demand, and Nvidia's stock fell by more than 80%. Jensen believes so strongly in the market potential that he remained committed to the course he had chosen, even as his investors demanded a strategic course correction. Swarm your greatest opportunity. I believe in CUDA, Jensen said. We are convinced that accelerated computing would solve problems that normal computers couldn't. We had to make that sacrifice. I had a deep belief in its potential. So what does he do? There's another idea embedded in this idea. Educate the market. This is also not a new idea.

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  If developers didn't yet know what to do with CUDA, Nvidia would teach them. Nvidia's chief scientist began offering schools CUDA-capable machines if they committed to teaching a class on the subject. He gave more than 100 talks over the course of a year. He taught a class himself at the University of Illinois. There was no textbook, so he wrote one. The textbook sold tens of thousands of copies, which translated into several languages, and was used by hundreds of schools. It was a major inflection point in attracting attention and talent to CUDA. What they understood is that we need to educate the market, not a new idea. Intel did the exact same thing when they invented the microprocessor. Intel discovered that the marketplace—this is from a company history of Intel that I read for the first time nine years ago. Intel discovered that the marketplace wasn't just confused by the concept of the microprocessor,

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  the market had to be educated. At one point, Intel was conducting more seminars and workshops on how to use the microprocessor than the local junior college total catalog of courses. Bob Noyce, Gordon Moore, and Andy Grove became part of a traveling educational roadshow. Everyone who could walk and talk became educators. It worked. Jensen was focused on how much of an opportunity GPU-powered deep learning would be for Nvidia. There was considerable debate within his executive team on the topic. Several of Jensen's key lieutenants were against investing more in deep learning, in the belief that it was a passing fad. Jensen overruled them. "Deep learning is going to be really big.

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  We should go all in on it. Swarm your greatest opportunity." Everything that you and I have been talking about today and highlighting and studying has led up to this point right now. Jensen had built a company in the image of his own focused, yet far-ranging mind. Now he would pull every lever at his disposal to navigate Nvidia to the very center of the tech industry, as the company whose hardware could bring about the AI-powered future. It was definitely not a single day when the entire company changed forever. It was a period where Jensen was increasingly interested and started asking increasingly deep questions, and then started encouraging the company to swarm to machine learning.

• 52:34Speaker 00

  Jensen announced the change in strategic focus in a company all-hands meeting. "We need to consider this work our highest priority. AI was going to be more important than anything else they could possibly be doing." Within a decade, Jensen was sure that AI would create, quote, "the largest total adjustable market expansion of software and hardware that we've seen in decades." It is hard to describe Jensen's actions as anything other than the construction of a competitive moat. Interesting to know that Jensen doesn't like the term "moat." He prefers "strong, self-reinforcing network." My guess is because believing you have a moat can lead to complacency, and complacency kills. Nvidia made a general-purpose GPU that represented the first major leap forward in computational

• 53:18Speaker 00

  acceleration since the invention of the CPU. The GPU's programmable layer, CUDA, was easy to use and opened up a wide range of functions across scientific, technical, and industrial sectors. As more people learned CUDA, the demand for GPUs increased. Jensen's strategic brilliance ensured that competitors would have difficulty breaking into a market that Nvidia had created. Swarm your greatest opportunity.

• 53:48Speaker 00

  And I started this episode with the first sentence in the book, that in another life, Jensen might have been a teacher. Here is the last paragraph in the book. "There are no shortcuts. The best way to be successful is to take the more difficult route. And the best teacher of all is adversity. It is why Jensen still keeps going at a pace that would see most other people burn out. It is why Jensen still says, to this day, and without any trace of hesitation, or irony, or self-doubt, 'I love Nvidia.'" And hopefully, some of these ideas help you build something you love, too. I have made something new that I love and I'm already obsessed with. I started a new podcast called David Center, where I have conversations with extreme winners in business.

• 54:32Speaker 00

  The first two episodes are already out. My conversation with Daniel Ek, the founder of Spotify, and my conversation with Michael Dell. Both Daniel and Michael are big fans of founders. And so, when I reached out to both of them, they immediately agreed when I asked them for help to launch the new show. And so, I'm asking you for help. I need a favor from you. Make sure you go follow the new show. It is on a separate feed. So, whatever app you're listening to this right now, Spotify, YouTube, whatever it is, search for David Center and follow the show there, please. Thank you very much, and I'll talk to you again soon.