C&B Notes

Silicon Valley Pioneer

Andy Grove — the long-time executive at Intel who was present at the company’s founding, stewarded the business through a series of competitive disruptions, and created its “Wintel” era of incredible success — passed away this week.  Grove was a brilliant engineer and taught himself to be a brilliant manager.  He wrote one of our favorite business books, “Only the Paranoid Survive,” which explores the lessons he learned as he went about reinventing Intel on several different occasions. 

When Steve Jobs and Larry Ellison told Andy Grove he was the only person in Silicon Valley who they would willingly work for, he told them he wouldn’t have hired either because they were “a couple of flakes.”  He was at least half serious and didn’t crack a smile…

Before he achieved success and fame in his adopted country, the man born Andras Grof in Budapest on Sept. 2, 1936 had to endure some of the worst of Europe in the middle of the last century. He grew up in a middle-class Jewish family in Budapest. In his autobiography “Swimming Across,” he described a fairly idyllic early life that was soon thrown into turmoil. During World War II, his father was conscripted into a Hungarian army labor battalion and taken off to the Russian front, where he was reported lost. After the Nazis invaded in 1944, he hid with Christian families under a false name and narrowly escaped a sweep of the countryside that eradicated Hungary’s Jewish population outside of its capital — about half a million people.

He survived the fight for Budapest between the invading Russians and Germans by hiding in cellars.  The torment did not end with the defeat of Germany; his family had to endure more brutality at the hands of the occupying Russians.  The rest of Grove’s childhood was spent amid the tightening grip of the single-party communist government of Hungary, which took its orders from Moscow.  His father, who had returned skeletal from a labor camp, was forced into menial work after being publicly accused of bourgeois tendencies.  Grove was only able to get into university, despite his strong grades, by begging favors to get around his family’s “class enemy” status.

By 1956, Hungary was caught up in a wave of anti-Soviet protests that swept across Eastern Europe following the death of Stalin and early freedoms of the Khrushchev period.  In the ensuing crackdown, Grove and his family again found themselves sheltering in the coal cellar as artillery shells hit their neighborhood.  Heeding the word of an aunt who had survived Auschwitz, Grove joined the flood of people taking advantage of the chaos and walked across the border into Austria and a life in the West.

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Arriving in the U.S. with less than $20 in his pocket, he was taken in by relatives in New York, where he studied chemical engineering at City College and graduated at the top of his class, teaching himself English along the way.  But he hated the weather in New York and moved to the West Coast to attend the University of California at Berkeley, where he earned a Ph.D. in chemical engineering.

He joined Fairchild Semiconductor in 1963, the seminal chip company and home to a group of men who would give Silicon Valley its name, many of them the founders and leaders of the U.S.’s biggest semiconductor companies.  Five years later, he followed Gordon Moore and Robert Noyce out the door to help found Intel.  “When I came to Intel, I was scared to death,” Grove said on the company’s 25th anniversary.  “I left a very secure job where I knew what I was doing and started running R&D for a brand new venture in untried territory.  It was terrifying.  I literally had nightmares.”

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Grove’s ability to make tough decisions, mapped out in his 1996 book, “Only the Paranoid Survive,” helped Intel overcome a crisis in the 1980s, when it lost ground to Japanese chipmakers whose costs and prices were lower.  His response was to get out of the market for computer-memory chips, a product Intel invented and built its fortune on.  Instead, Grove poured the company’s resources into microprocessors, betting on the market for PCs.  It was a huge gamble.  At the time, Intel processors were far from the industry standard.

Under Grove’s leadership, the company launched Operation CRUSH to sell what was thought by many to be an inferior chip.  But it did something companies didn’t do back then: It touted the chip’s end-user benefits, rather than its technical specifications.  In the short term, it exceeded its goal of 2,000 customers for the 8086 processor and, more importantly, won a spot in the new PC that IBM was dabbling with…

One of Grove’s technical assistants, Dennis Carter, noticed Intel’s newer processors weren’t initially outselling older ones and proposed a marketing campaign directed at consumers.  By 1991, the company was pouring cash into its ‘Intel Inside’ campaign, making its chips as well known as the computer brands they powered.  Grove, the scientist and management disciplinarian, embraced the marketing, even donning a colored factory clean-room bunny suit and dancing on stage.  The showmanship paid off: Intel became one of the world’s most recognizable brands.  Consumers no longer bought computers based on the brand of box — Hewlett-Packard or Dell — but rather which version of the Pentium to buy.

During his 11 years as Intel’s CEO beginning in 1986, Intel pushed aside competitors and grabbed the more than 80 percent market share in PC processors it still has.  In that period, Intel’s sales surged 20-fold to $26.3 billion from $1.27 billion in 1986.

“If you were to pick one person who built Silicon Valley, it was Andy,” Marc Andreessen, the entrepreneur and venture capitalist, said in a 2015 Churchill Club award presentation.  “Andy kind of set the model for what a high quality Silicon Valley company could be.”