Thursday, October 30, 2008

Common beliefs in CEOs

Two nights ago I sat on a panel at Stanford Business School called "Getting to the Top" - the view of CEOs. This panel is part of a series designed for middle management wanting to figure out how to grow their careers and what skills they need to acquire to achieve their ambitions. It was, as these things often are, great fun. The other CEOs were all very different - a large company CEO, an engineering CEO and a flamboyant marketing CEO of a startup - and me - and we were presented with a set of questions to answer and then rif from before taking questions from the audience.

The questions were pretty generic, for example: What are the skills a CEO most needs? What skills have been most useful to you? What advice would you give in working with a board? etc.

The thing I found most interesting was how two factors were consistently in common between the four of us: leadership and the quality of our people.

We talked about leadership in terms of having the courage to act, having passion and a vision, listening to your conscience over advice you receive - on top of the usual management skills - but the number of times the word "passion" was used was wonderful.

But more importantly the theme of the quality of your team was resonant: don't compromise in the quality of your people, if you've made a mistake let the person go quickly, have integrity with your team, keep looking until you find a world class person for the position you are filling. This is a particular passion of mine and I am rigorous (and ruthless) about hiring practises - as I have posted on in my Startup to IPO series before - and about performance.

As an aside: one of the five FirstRain Values is "Demand Uncompromising Quality" - and when I first worked on the values I had added "in your people" because I believe so strongly that the quality of a company is solely rooted in the quality of the people. In that case my HR guys backed me down to the simpler form, but I still add the "in your people" phrase in my head.

Finally, when I am on a panel in the evening I always try to weave humor into my answers because it's late, people are giving up personal time to be there and so it should be fun as well as educational. So on the question "Are there any disciplines you wish you had more experience with now that you are a CEO?" I answered "Yes, self discipline" - and took the opportunity to tell a few self-depreciating, humorous stories. Life is too short to take everything seriously.

Thursday, October 23, 2008

Questioning the MBA?

Do you think an educational approach can lead to the kind of economic meltdown we are experiencing? It's ironic that the celebration of the 100 year anniversary of Harvard Business School and the worst financial crisis in our lifetimes were happening at the same time last week - as excellently reported by the FT.

HBS offers a serious, rigorous business training. The key element is the case-study, a potted history of a given strategic management dilemma faced by businesses and organisations at different moments in the past.....
But does this high-pressure learning method imbue overconfidence as well? There is no doubt that most HBS graduates leave the institution with a very clear sense of their own worth and capabilities. They are not set up to fail. And yet, equally clearly, HBS alumni were involved at the heart of the investment banking and strategy consulting worlds that now stand accused of destabilising the world's financial system to the point of destruction.

One of the things I really enjoy about FirstRain and in particular in our free report Eye On The Storm is the juxtaposition of opposing views that we see in the research. So at the same time as the FT is subtly questioning whether the Harvard MBA has contributed to the crisis - EMII reports on the hilarious, in your face, letter that Andrew Lahde wrote to his hedge fund clients as he closed down the fund.

Andrew Lahde, founder of Santa Monica, Calif.-based Lahde Capital Management, bid adieu to hedge fund clients in a letter thanking stupid people for making him rich. Lahde, who managed about $80 million, made an 870% gain last year.
One of his hedge funds strategies was just shorting the ABX. ``The low-hanging fruit, i.e. idiots whose parents paid for prep school, Yale and then the Harvard MBA, was there for the taking. These people who were (often) truly not worthy of the education they received (or supposedly received) rose to the top of companies such as AIG,
Bear Stearns and Lehman Brothers and all levels of our government,” Lahde wrote.
“All of this behavior supporting the Aristocracy, only ended up making it easier for me to find people stupid enough to take the other sides of my trades. God Bless America.'' The letter also ended with a plea to legalize marijuana.


Bloggers outperform Wall Street analysts

Fascinating analysis comparing bloggers forecasts for Apple results vs. the professional analysts: Apple Q4 earnings: Analyzing the analysts in Fortune yesterday.

Sacrilege to the traditional sell side but this time the bloggers were better at predicting Apple's results. The reason seems to be that they got much better estimates of the on-the-ground data on iPhone sales. "What jumps out of the chart for me is how badly the pros blew the iPhone numbers: the Street consensus was off by a shocking 72%. It was here that the bloggers shone. All three came within 8% of the actual number and Turley Muller of Financial Alchemist hit it on the head with an estimate of 6.8 million.
“I was just lucky the data was good,” says Muller. “All the data — my checks with Best Buy managers, counts at Apple stores, IMEI numbers, assumed production rates — pointed to the same general number.”"

However, the analysts are better at building the financial models - not surprisingly since that is a core part of their job. And the Piper Jaffray analyst did have the courage to forecast deferred revenue but was far off on the EPS estimates.

"Bottom line: Nobody got everything right, but considering how badly the pros misjudged iPhone sales and how close the unpaid analysts were on the other numbers, I have to give this round to the bloggers."

Wednesday, October 22, 2008

Software is different from Hardware

To someone who spent 20 years in semiconductor and EDA, the recent meltdown of Cadence and removal of the executive team is a sad story. It's the end of a long story of great products, explosive growth, customers as partners, smart acquisitions and market leadership that was slowly eroded as the business model got ahead of the fundamental growth of the business.

Gabe Moretti, a veteran journalist who covers the EDA industry wrote a thoughtful opinion piece on what happened in the last 4 years in EETimes Asia, and he raises interesting points about the strategy mistakes which he believes were made. But there is one he missed (which I have posted on before here about revenue recognition and here about the impact on investors again) and that is the issue of business model - or revenue and cash model. Not only is Cadence not Intel - which is Gabe's premise - but EDA is software and not hardware. Software business models and revenue treatments are complex areas and you can get very different top line results based on the nuances of how contracts are written.

So the short term question for the key stakeholders: employees, customers and investors is whether the underlying business, if you stripped away the continuous changes in business model, is still healthy or whether the Cadence products and technologies have fallen behind the competition? That will make all the difference in the long term to the role the company plays in the world of chip and system design.

Monday, October 20, 2008

How the credit crisis is impacting UK law firms

As I read our free twice-daily report on the financial crisis (Eye On The Storm) this morning I was interested in a UK publications view that the crisis is impacting law firms in a way I would not have expected.

My local observation of the silicon valley law firms is that they are busier than ever. We use WSGR and the partners who are my friends are slammed, travelling all the time, all over the world, and consumed with M&A, litigation etc - the usual work of a big law firm.

But according to, the big UK banks are playing marriage broker to about 500 UK law firms.

"Around 500 firms have been referred to the so-called intensive care units (ICU) of their banks because they are facing financial difficulties. It is understood that 21 of the UK’s top 150 firms are being treated in Barclays’ ICU, which is known as ‘business banking support’, although the bank refused to confirm this number."

The problem is stemming, yet again, from the credit crisis. When firms break their covenants because of lack of working capital they are assessed by their banks and determine whether to outsource, reduce costs or find a partner to merge with.

The challenge is that, as the same site opines on the same day, despite 20 years of prediction that UK law firms were going to consolidate, there is little evidence of any strong trend.

"One reason is that lawyers are simply too ­conservative to put themselves through disruption for the sake of an abstract principle. But at bottom it’s because consolidation can only come from ­irresistible external forces."

But maybe this time it's different? Maybe the size of the credit crisis is an irresistible external force that will cause partnerships to finally merge. And as Catrin Griffiths says, somewhat tongue in cheek I suspect, "The law is too often seen as an employment ­programme for the middle classes – a nice earner with not much risk. Maybe not for long."

Our firm, Wilson Sonsini Goodrich and Rosati is the lead law firm for tech in the valley. It weathered the dot com bust with little impact - it just shed associates as the startup business fell off but the partners didn't get much respite. It'll be interesting to see if the crisis impacts the firm's larger tech clients to a level where finally business slows down and as a result, the partners can get time with their families, or their friends (like me) again.

Wednesday, October 15, 2008

Bankers blink

Talk about history in the making. I would love to have been a fly on the wall for Paulson's meeting with the heads of the banks - fantastic description from the WSJ At Moment of Truth, U.S. Forced Big Bankers to Blink

Tuesday, October 14, 2008

Redeyes and Steinbeck

I am reading Travels with Charley for the 4th or 5th time on this trip and as I started into it at the beginning of my journey I was struck by John Steinbeck's wonderful attitude to his life. He's an older man when he's writing it, having had some health issues the prior year and he's about to head on a long journey, in a truck and with his dog Charley, to rediscover America, despite the advice of his friends and doctors.

He says:
"A kind of second childhood falls on so many men. They trade their violence for the promise of a small increase in lifespan.... I did not want to surrender fierceness for a small gain in yardage. My wife married a man; I saw no reason why she should inherit a baby.... And in my own life I am not willing to trade quality for quantity. If this projected journey should prove too much then it was time to go anyway. I see too many men delay their exits with a sickly, slow reluctance to leave the stage. It is bad theatre as well as bad living."

I love that last sentence. Until I am headed into my third redeye in 8 days as I journey from California, to New York, to London, to New Delhi, to New York. Then I think I read too much literature.

Love Letter to my Sister

I went to my sister's 50th birthday party in London last weekend and she asked me to give a short speech about her. This was prompted by her best friend (my sister is too humble for this to be her idea) who was sharing the party and had asked her husband to speak on her behalf.

Unknown to me several very accomplished and famous BBC reporters were in the room - the best friend is a BBC producer - and had I known I would have been much more intimidated. But I didn't and so I gave a good speech - funny, just the right mix of humor and seriousness, and Sue loved it.

I love and admire her so much I decided to share it here:

When Sue asked me to say a few words for her tonight I was a bit at a loss. It took me a while to come up with anything because the problem is, you see, in my memory growing up Susan was always perfect.

She was neat and clean. She was always good. She was smart. She read books. She played nicely. She didn't get into trouble and the parents never had to spank her, unlike me...

You can see from these early photos of her that butter wouldn't melt in her mouth - and in the picture of the two of us going off to church, when I was about 3, I am looking up at her adoringly. It was the admiration a little sister (who was always in trouble) had for her perfect big sister.

But I am relieved to say that when we were teenagers the perfection showed a few cracks. When looking at pictures I did find one of her with a perfectly horrible 1970s haircut - I took pity on her and didn't ask Daddy to print that one out for you. She wasn't good at sports, and I remember camping with her and her getting cross with me that I didn't wake her when a bear came to our tent in the middle of the night and I was too scared to move - so she did get irritated with me sometimes.

But these were minor imperfections and as she exited her teens she was doing well at the whole perfect thing again. Perfect grades, a scholarship to Cambridge, erudite brilliant friends.

And then thankfully she began to rebel and I began to have hope. At 21 Sue went to Turkey to work on a commune much to the parents horror. Luckily they weren't there when she came home to London. I opened the door for her and she threw herself into my arms she was so glad to be home. And she was no longer neat and clean - she stank and was filthy. It was a marvellous thing to see.

But Sue flirted with perfection again in her 20s She lived in London so she was close to home (unlike me who went to California), she had great jobs, spoke several languages, travelled all over the world and the parents were very proud of her when she got the Coopers job. I call this phase the "Our daughter the management consultant" phase.

But I am pleased to say that in her 30s she fell off the wagon bigtime and followed her heart. She fell in love with a man from a distant country, different culture and different faith. Excellent move! I of course rallied to her side. Here was a chance to celebrate with her in her imperfection - and for her to need me!

And I can tell you at her wedding to Paran, Sue never looked more beautiful. As you can see from this picture she was deliriously happy. Everything was marvelous and she was in love - and a few of you here tonight were there with us for her wedding in Malaysia.

But, darn it, she was always the smart one. She planned a strategy to rope the parents back in by having both her children at home in England so the parents were hooked. And then a couple of years ago she sealed the deal by moving her family back to the UK so she can raise perfect, proper English schoolchildren. And they are quite perfect. Unlike my two Americans.

So I give up. Here she is, 50 years old, half way through her life, accomplished, happy and from the point of view of this little sister, still perfect. And I couldn't be more proud of her. Happy Birthday Sue.

Interestingly, several people came up to me afterwards who loved the speech because they were themselves second children and could completely relate to the experience of growing up with an elder sibling who was perfect!

Thursday, October 9, 2008

Valley alarms

Sitting in a London hotel lobby, waiting for my room to be ready, half asleep but reading through my email.... I picked up the Gigaom article Sequoia Rings the Alarm Bell: Silicon Valley Is in Trouble. I had posted a few weeks ago that the valley was not immune, but it seems that people had to see the market crash to get the message.

Clearly Sequoia has see this type of downturn before. The burst of the dot com bubble was much worse for silicon valley than for the rest of the country. Startups went under at an incredible pace. The glory days were over then and there was speculation that the valley was finished, never to recover. (And the side benefit was less traffic and easy restaurant reservations.)

But the doomsayers were wrong. As has happened repeatedly now, a few short years later the valley was booming again with a new generation of heroes like Google and Facebook and the highest number of billionaries outside of Manhattan.

I think the same cycle will repeat. No question this downturn, like the last just 8 years ago, is going to be brutal and we all have to tighten our belts and hunker down to survive it. But the companies that survive will come out the other side much stronger. They'll have better products, more resilient management teams and the respect of the market for surviving.

It's my job to make sure FirstRain is one of them.

Thursday, October 2, 2008

Leadership and Risk

I visited the Grace Hopper conference today in Keystone Colorado to give a talk on Risky Business – Building Teams and Taking Risk as the Leader.

As I always find when I talk on leadership I had a great time. About 300 women in the room (GHC is 1400 technical women this year), 50% of whom were students. My objective was to share my principles on how to build a company from a startup (an inherently risky proposition), illustrate my principles with stories and have fun at the same time.

I started with three key principles to leadership of a startup
1. Have a clear vision of what you are building
2. Refuse to compromise on the quality of your team
3. Embrace risk (note embrace not take risk)

The talk was very interactive. When I talked through how important it is to have a clear strategy that everyone understands I illustrated it with how we have all hands meetings and any question is OK, how I take every opportunity I can to make sure every employee can use the strategy as context for their decisions. That opened the floor up to questions - since I'd said any question is OK!

I talked about being uncompromising about the quality of people on the team - from interviewing practises to letting people go who are in the wrong job. A senior manager from Cisco asked me where I thought B players belonged then, and I said (not entirely facetiously) in a large company. There is enough risk in startups already - you have to have A players. And diversity helps because you get a better mix of ideas and opinions into the room.

I feel strongly that you cannot tolerate politics in a small company - it is just too inefficient. This is something I learned the hard way at Simplex and so at FirstRain I simply won't allow it. Trust is incredibly efficient. It lets you move quickly, it lets you make decisions without getting everyone involved if you have to because the team trusts each other to always act in the best interests of the company.

Then I took two examples of risk where I felt very exposed and talked them through with the group - taking Simplex public in 2001 when the window was supposedly closed, and taking my new baby into an executive staff meeting at Synopsys because I had to go into work (but was the only female VP in the industry at the time). I fessed up that my style of leadership - very open and transparent - does make me vulnerable personally and I have learned to embrace it (most of the time).

Of course, any time I present to a roomful of professional women I get the question on balance - how do I do it? do I think I am superwoman? do I judge women who slow down their careers for their families?

I think balance is a myth and I ended my talk with one of my favorite stories that always gets a laugh - how I dealt with it when my son broke his arm (the link takes you to my personal blog with just a few stories from my life).

It was great to see so many technical women together at the conference - it's inspiring because we still see disproportionately few women in CS/EE degrees and we need more, as a profession and as a country. And it was a privilege to share my beliefs and life stores with them.

There was an error in this gadget