November 12, 2020 –
In this episode, Cisco Chairman Emeritus and Founder & CEO of JC2 Ventures John Chambers shares his perspective on building business for better, creating and keeping trust in institutions, the relationship between government and tech, the future of Silicon Valley and more.
Listen to the Podcast:
Business Beyond Returns with John Chambers
Welcome to Conscious VC, where we have real conversations that explore how to build businesses that shape the future, while making a giant difference at the same time. Hosted by Navin Chaddha, Managing Director of Mayfield, and me, podcaster and author, Christopher Lochhead. On this episode, an extraordinary guest, John Chambers, is with us. And I don’t think it’s hyperbole to say that John is one of the most important CEOs in the history of the technology industry. He was at Cisco Systems for over 25 years, and for the bulk of that time, served as chairman and CEO. He helped to grow Cisco from $70 million to over $47 billion. Today, Cisco Systems is a $165 billion market company.
And not only did he build a legendary company and do an extraordinary set of things as a CEO, during this boom of the internet in the 90s and into the early 2000s, John Chambers was one of a handful of CEOs who literally led the build-out of the internet. And today, the internet has become, I would argue, an essential service, not just for business, but frankly, for humanity. On this episode, we get John’s take on conscious capital, leadership, his view of the future. And Navin and I could not have been more excited to have this extraordinary conversation. John today is super active as the Founder of JC2 Ventures, where he invests and advises on leadership around the world. So grab yourself a pen, you’re probably going to want to take a lot of notes. You’re going to love this one. Enjoy.
Chaddha: John, thanks a lot for taking the time. It’s a real pleasure to be back with you.
Chambers: Navin, it’s my honor. We always do great things together.
Chaddha: Yeah. And having our host, Christopher, here is an amazing thing for all of us. I want to start by asking a question to you. You have always had balance as a business leader, where you have looked at social impact and what technology can do for the world. Do you have a perspective on what conscious venture capital is?
Chambers: I have a very strong perspective on it. It doesn’t mean that people always agree, but I’ve always believed that those that are most successful in life owe an obligation to give back. And as you think about the role that venture capital and start-ups can play, as they’re successful in this digital world, I think they have to have equal commitment to their shareholders in traditional capitalism, but also the benefit to society. And this isn’t about doing good, this is about good business and also doing good. And so, whether it’s diversity of your leadership teams, or whether it’s about giving back to help people in need, whether it’s in concepts like Second Harvest food bank or in healthcare or making a really difference. Cisco is an example and sometimes your listeners might say, “Well, that’s nice, but corporate social responsibility, that isn’t really the job of capitalism.” It absolutely is. And if we don’t do it, the government will impose regulations.
Cisco, we were far from perfect, far from a perfect leader, but we won every corporate social responsibility award from the Democrats, from the Republicans, from the Middle East, from China, from Russia, to India on it. And everywhere we were number one in corporate social responsibility, we were also number one in market share. We won the top corporate social responsibility award from Bush and Condi Rice, and we won it from Secretary Clinton and President Obama. And as you all know, we’re one of the most profitable companies in history, and created 10,000 millionaires among our employees. Great return for our venture capitalists. We didn’t negotiate hard enough, but I’m learning on that, so it was a win. And I think the two go hand in hand, and I think it’s more important now than ever, especially during the tough times that we balance that as venture capitalists and as startups.
Now, John today, things like diversity and inclusion, and hopefully now conscious capital and Conscious VC are becoming accepted mindsets or ideas or strategies. When you were doing this at Cisco, particularly in the early go-go days of the 90s and the build out of the internet, these topics were not as mainstream as they are today. What gravitated you towards diversity, towards conscious capital back then?
Chambers: Well, I think part of it was the influence of my parents who were both doctors, and from the beginning, they taught me, deal with the world the way it is, not the way you wish it was. But secondly, if you’re successful, give back. My dad delivered about 6,000 babies, 25% of them for free. Mom was in internal medicine and psychiatry, so when we broke, they could fix us, but she would give back as well. And I saw the impact they can have, because I think at times we as VCs or startups, don’t realize that our business knowledge and our ability to take complex problems, the next unit on them, it isn’t about giving back money, it’s about giving back in ways we help to solve problems. So I don’t think it’s a dream that France could become the best place in Europe to do business.
And when we said that five years ago, it would become the startup nation for Europe, even my very close friends said, “I don’t think so, John. France is a great place to visit, great people, but the last place you want to do startups.” Today, it’s the top innovation center in Europe. Their startups are up 5X over the last five years. Venture capital came in, both because of the good return, but also Macron was given an opportunity to do good for society. So I think they go hand in hand, and then when you see it occur, then you see the results. People often don’t do it, first, because nobody they respect asked them to do it. Secondly, they don’t think they can make a difference, and third, they don’t get the results. If we can tie all these back in a closed loop, then I think we can move at tremendous speed. It’s basic to my DNA, it’s like a company, Cisco or my startups, we’re a family.
We talked about this earlier and before the recording, I know every onus of every employee, their spouse, their children, we’re with them like no one else. We created 10,000 millionaires among our employees at Cisco. Best of my knowledge has not been done before or since. That was back when a million could get you a house in Silicon Valley, own it, and they go together and that’s what people don’t grasp. Diverse teams will out-execute teams that look alike all day long, to a gender, to color of skin, religion, sexual orientation, geographic location, et cetera. So I think we in the VC world, perhaps more than any other place in the universe, can influence how this evolves, because the startups grasp inclusion. Large companies, Navin, you’ve watched this occur.
Chaddha: Mm-hmm (affirmative).
Chambers: In the Valley, people have gone after it and gone after it, they make 2% or 3% each point difference. I can have a startup that suddenly believes in gender diversity, or/and people of color diversity, of geographic diversity. We can change it in a year. I mean, big numbers. And by the way, all four of those companies, if I were to use examples, have dramatically outperformed the market as a whole, a uniform, Navin, which you are familiar with. And by surprise, it is up 20 fold in three and a half years on it. It is just getting started, but they’re teams, they learned how to make it diverse. So geographic-wise, large operations in India, the U.S., around the world, gender-wise, et cetera, and they’re a powerhouse. Gustavo, what he’s doing with ASAP out of New York, amazing in terms of the execution and the speed they’re moving. Again, a very diverse change geographically, and in other aspects as well.
Chaddha: And John, from my perspective, right, you’ve been a role model for me on how you’ve always led with empathy and radical candor. You’ve always believed in creating opportunities for diversity, equity and inclusion. And what I love about what you just said, and you always say is, “Think beyond what just the tech does, think about its impact to the world.” And I’ve always felt you are a leader who has always invested in relationships and not transactions. So it’s just amazing to be hearing your thoughts always on some of these topics.
Chambers: But Navin, you’re setting me up, and you and I have done Q&As with your startups and other groups, and we can face each other since this, Chris. And we think a lot alike, and it’s a lot of fun, but I’ve made a number of mistakes and you’re more a product of your mistakes than you are your successes. And I’m able to share what has worked or not worked in those type of environments. And then I’m a huge believer in connecting the dots for people and showing cause and effect in terms of the direction. But in today’s world, your currency as a leader, as a VC, as a startup CEO is very simple, what’s your track record? It’s your relationships and trust.
And where you have those three, you can do almost anything. Could I call the leader of Russia, the leader of China, the leader of India, the leader of France, and get an immediate phone call back? Absolutely. Is there any enterprise customer in the world that I’ve met with over my 40 years, that I can’t call the person and say, “Hey, I’ve got an idea that’s actually good for you. Will you spend time with me?” The answer would be yes. Same thing with recruiting people. I think your vision and strategy is important, but it’s the team that you build around it, recruiting people is key. And where we’re leading each other too is your currency, and that track record, relationships and trust.
And people underestimate how important trust-transference is. Relationships are everything. They won’t do something because of the relationship, but it allows a trusting point to them make a decision off of. It is true regardless of form of government, the political party in the U.S. contrary to some people’s views, I think we in the end have a similar view of what we want to see all America prosper for, and we need to get back to that, but it’s especially true of the venture world and challenging. Navin, you’re my partners around the world on this. We owe an obligation to change this for society and for business. And by the way, we’ll make a lot more money by doing that than we would have been not doing it.
Now, we’ve heard a lot about an erosion of trust, particularly in the United States, in major institutions and government agencies. There’s some people who are very negative right now about “big tech.” And so what do you think the business leaders, and particularly technology business leaders, John, need to do to make sure there is a high level of trust in them as individuals and of course their companies?
Chambers: So let me give you a little bit of background on what’s changed. First Chris, to be very candid, part of that is deserved. And if you use the 90s and the first decade of 2000, Navin, you know what tech was viewed as in the U.S. John Doerr, Jim Barksdale, myself form TechNet. We look to how we work with Washington, not as an adversary or with one political party or another. John Doerr and I flipped a coin to see who got the Democrats and who got the Republicans. So I won’t tell who won or loss, but we went in with, “It isn’t the role of business to tell society how to live their lives or to be tied to one political party or another. It’s how do you produce the end results that you want?” And we did the same in developing trust with the European regulators and the leaders there, same with China and Russia.
I mean, even after the Snowden event, they trusted Cisco in Russia and in China to have their key core networks. And it is so important to develop effective working relationships with society, with governments. And it doesn’t mean you can do what they ask. In fact, often we didn’t, but that open communication for legitimate issues saying how do we address them? And then earning that track record of being able to do that effectively, and the trust that goes with it, allows you to move with speed. And it is about relationships as well in terms of how you break it down. So in the 90s and early 2000, 90% of America felt tech was good for them and felt that it was good for our country. That number is now below 50%. And I think in fairness, being very candid, I think some of the companies, not all, but some of the companies focused on the benefit to them as a company, their market share, their economic return over a balanced with the good for society.
The Democrats or Republicans started signaling to us about three years ago, Navin, as you know this, that if we didn’t change, regulation and antitrust was coming, and surprise, it’s coming. And so this is where if we don’t listen to our critics, even if we think maybe they might be missing things, or if we focus purely on the economic return and our own market share and do behaviors that our citizens or our country may not think is fair, a day of regulation will come. And it isn’t that the regulators and the government leaders think that they will be perfect in this. They actually will also on the record tell you, if we regulate, we’re going to make mistakes. We know that, and we want you to correct it before we have to regulate. But when you don’t, they will move, and unfortunately, I think there’s going to be some changes coming.
I don’t worry about the big companies. I apologize to my big company peers from where I was before. They can survive. They can pay a billion dollar penalty, it’s not going to affect the bottom line long-term. It’s those regulations that are implied, the big companies have tremendous disaster facts on the regulation of small companies, just for privacy. As an example, in California, the privacy regulations, $55 billion cost to businesses. Big companies can absorb it, small companies go out of business or move out of state. And so we’ve got to find a way to get back to key themes, including this being the startup nation. And it needs to be inclusive on that in terms of how we do it, and a benefit to society and a benefit or economic return to our shareholders. And going back to the theme most important, I would argue for the VCs, you will make a much better return by having that social focus on society as part of your agenda than you would if you just focused on the capitalistic side alone, traditional capitalism.
Thank you for that, John. Now I’m curious to get into this with both of you. There’s an interesting thing that seems to have been accelerated by C-19. And I’ll just say this as an idea and then maybe get your reaction, that Silicon Valley more and more is less of a place, and more of an idea. And if that’s true, are we in front of an opportunity to dream about startups more broadly in more than just one place in this country, and if so, how?
Chambers: Navin, why don’t you go first.
Chaddha: Absolutely. So I think I tend to agree with you, Chris. I think the world is global, but one still has to think local. And with technology like what companies like Cisco, Microsoft, Apple enabled, now you can essentially have a company which is boundaryless. You don’t need to just be in one location. It started with your engineering being in different locations, but now you’re seeing it in other functions, business functions, sales, marketing. And one of the things when that happens, especially when your development goes outside Silicon Valley, you end up creating technical centers of excellence, and the people who work for these startups and big companies start thinking about becoming entrepreneurs themselves. And that’s what we saw with globalization, and I think the same is going to happen in the United States.
Let’s look at cloud companies, right? The cloud capitalist, Seattle, right? You look at AWS, Azure, and some of the work which is being done, even Google has hired there. And if you look at Facebook, same with Oracle. It is really the cloud infrastructure capital. And I would love to hear John’s views who has done so much work in rest of the places in the U.S. on what he’s seen with it. But to me, innovation will continue to happen in Silicon Valley, but that’s not going to be the only place where we are going to see innovation. It’s going to be widespread. And today, Silicon Valley probably attracts 40% of all venture capital, and I think it’s going to go down over time.
Chambers: So Navin and I sure are very much in sync. It used to be when I came to Silicon Valley in the early 90s, Navin and myself, it was 92% of venture capital. Now it’s 40, always control the trend on that, it’s going to get less. Part of it is an idea, and part of it is that if you believe as I do that large companies will not add any headcount over the next decade. 50% of them would disappear. All job creation, 25 million over the next decade, plus the 10 to 15 million, the digitization. What is choice of 40 million jobs will come from small companies and startups getting bigger.
If you don’t do that across your entire country, you’re going to have economic challenges. You’re going to have voting pattern challenges. You’re going to have a digital divide. They’ll make today’s issues look small. And so I think we have to find a way to address that. But I think there’s a more pressing issue that people are dealing with as directly. I was a product of Boston 128. Chris, this was the high-tech capital of the world. I mean, DEC and Data General, and I was part of Wang, and literally hundreds of thousands of jobs.
There was a point in time when Wang was the most important technology company in the world, was it not?
Chambers: It absolutely was. It was the whole implementation of the state department architecture around the world, the automation of back office and front office of many companies, et cetera. Dr. Wang was most brilliant man that I ever met in my life. Going back to diversity and inclusion and how important it is to have, they’re all gone. MIT lost their leadership, the tech companies kept doing the right things too long. The many computer companies, they missed the move to client server, then to the internet. The venture capitalists missed badly. Navin, we got to talk about that another time, but MIT and the venture capital world really, I think misexecuted there as well.
The point that I’m about to make, I was there at the time and we were on top of the world. And we saw Silicon Valley and we said, “These California people are a little bit unusual. They won’t be a threat to us.” They completely displaced us. Same thing could very well happen in Silicon Valley. So I don’t think it’s actually a positive now saying, does Silicon Valley have the answers? I actually think we have more questions than answers. You can’t get a moving truck out of California scheduled for months, you can’t even get a U-Haul.
John, it seems half my friends are moving too, a lot of them seem to be picking Austin, but a lot of them are going to Montana or Idaho. There’s a lot of people, seriously powerful people, CEOs of public companies leaving Silicon Valley.
Chambers: There is, but Chris, that’s what perhaps some of the politicians worry about because they say, “Well, this is my current cash flow and who I can tax.” It’s the jobs that they take. Even the companies that stay, most of my startups are now challenged. Tell me again why you have your engineers here in Silicon Valley, you could do much better in Texas, Montana, whatever. My top company out of New York will probably move to Montana or Texas. And what happened is we became a very difficult state to do business in, government took the groups for granted. And it’s not a tax issue, it’s a total lack of coordination between the business community and government leaders to make the changes.
So when you can’t even get a U-Haul to move from L.A. to Montana, like one of my recent CFOs found out, it sends a message that government ought to understand. If this state doesn’t change, if they take the venture capital world, the startups for granted, and I’m not saying it’s the tax issue. It is the difficulty to do business here, and government not saying how do we make it easier? And then you add on top of it, the tax issues, the privacy issues, the regulations, Silicon Valley may become the next Boston 128 if we’re not careful. Some of those are for benefits, because we have to get jobs everywhere, but it’d be a shame to see this jewel that California has, destroyed because people took it for granted and thought that we were just entitled to stay on top.
Chaddha: Yeah, I agree with you, but one of the things I think you and I would agree on how difficult it is for our startups to recruit tech talent in Silicon Valley, because some of the companies, I won’t name them, which are the hyperscalers are the big consumer internet companies. The amount of money they’re willing to pay engineers is just mind-boggling. So what is your view and what are you seeing in the market? Because we are seeing talent move out and there are pockets of technical excellence, but what do you think needs to be done? Because some companies which bring money, right, are just going to pay up, and it’s becomes really hard for your, and my startups.
Chambers: Well, it’s a combination. If you have a really hot startup and people like the startup environment, and you’re in good growth, you can compete because the upside on the stock options exist there, but for the average startup, it’s a problem. And for the established Silicon Valley company who isn’t bringing cash, et cetera, when your competitors will pay a million dollars per engineer and 2 million for a PhD in artificial intelligence, it’s very hard to compete.
And so I think a large part of those jobs, those companies are going to locate somewhere else. I don’t think the state understands the long-term implication of it, because that means the next generation of the Facebook or the Cisco or the Oracle, or the Intel may not be here in the Valley with all the job creation that goes around it. And you’ll see engineering groups not outsourcing to foreign countries for an arbitrage on calm, but you’ll see them do it across the U.S., where literally by being in a different state, somebody can have a much higher quality of life for 25% less their salary and a better economic future as well.
So I think these changes are occurring rapidly. I watch what happened to my home state in West Virginia where we didn’t change. And you talk about conscious capitalism, it’s a story, Chris, we may want to go into, but it took us 30 years to change. Now we’re starting to change, we’re starting to win again, but it is very painful once you lose leadership to get it back. And I think it’s a warning signal for Silicon Valley. On the positive side, I think you’re absolutely right, it’s going to go across the U.S. You’re seeing states understand that the university has changed their curriculum, people doing things they would not have done before.
And maybe let’s steer into that a little bit, John. Can you tell Navin and I some of the things that you’re doing to try to stimulate entrepreneurship and make the dream alive.
Chambers: Well, in France, I am French president Macron’s high-tech ambassador. Can you imagine the U.S. having a French or a German high-tech ambassador. And it shows you how people are thinking differently. And they are saying, “What can government do?”
I hate to interrupt you, John, but how good is your French?
Chambers: Poor. We’re very lucky that the universal business language, at least for now is English, whether or not we maintain that, we’ll see. But to your point, moving past the language or the culture differences, it’s a common vision of how you change the country. How do you do that inclusively across all 13 regions in France, not just in Paris? How do you get your society to buy into that and your government leaders and to move with speed that has not been done before in Europe? I mean, France, you would normally say, never put a job in France, much less bet on France, and now it’s the best place in Europe to do business. Most innovation center in New York, not to say they don’t have challenges like all of Europe does, but if I’d bet anyone comes to Europe, France. India, same thing. What Modi is doing there, he’s becoming a startup nation.
He’s changing things rapidly, huge challenges for 1.3 billion people, but they are a democracy. They do protect intellectual property. It’s a great coordination through the U.S., and maybe the most strategic partnership in the world between countries and a space to value too. My startups, their second major headquarters is India. My India startups, the second major headquarters is the U.S. It’s a natural in terms of the coordination and the direction. But back to the example you say, well, that really is at different scale. West Virginia, my home state, we decided three and a half years ago to make West Virginia startup site. We began to change the curriculum at West Virginia University. Gordon Gee, the president, Ohio State President, Brown, Vanderbilt President said, “Let’s do this together. Let’s talk about what can be done.” We attracted several of the top high-tech people that came out of there, Ray Lane, who most of your people will be familiar with, Brad Smith from Intuit.
And then we got the support of the governor, the speaker of the house, the president of the Senate. We pitched to the business community, we’re changing the curriculum. We had the courage to say, “How does this benefit all 1.8 million people in the state?” We learned how to dream again. And the other day, as an example, we not only copied, but stationed [FDED] in Paris, where you have a small station up in Morgantown, West Virginia, tied tight in university for startups. We went after the Virgin Hyperloop deal that probably could represent as many as 13,000 jobs.
We competed against 17 other states, and we wouldn’t have even tracked three years ago. And we started in last place two and a half years ago, and we finished first by a long way. And I announced that with Richard Branson together, just a couple of weeks ago. It shows you dreaming is very possible. It’s the role of VCs can play in helping those dream come true, including corporate social responsibility, maybe in helping kickstart some of these key incubation centers that are going on, and putting a little bit more money there for startups so it is an inclusive type approach. Key takeaway, West Virginia has beat 17 other states, all about innovation. No entitlement in this world.
Who would have thunk it?
Chambers: I would have. But you had to have the courage to dream, and you had to bring people together through relationships and trust. And the track records that that show an ability to do this.
Chaddha: And I attended one of the sessions at your house with some of the local leaders and the business people you just mentioned. And I think credit to what you did and your leadership, what I saw was the courage to change. And I have a strong belief that dinosaurs never survive, and this has been a living example of how, if you adapt continuously, you can just do wonders. And I saw it happening at your house in the same room. You’re sitting right now with some of the political leaders and the businesses and how this open conversation was happening, and how people were just open-minded to change and trying. And if you try and shoot for the moon, at least you’ll reach the roof. Because if you just shoot for the roof, you will get nowhere.
Chambers: John Hennessy from Stanford came over and talked to us. Their top venture capital people came over. You were here with two of your peers, actually two of you your peers talked about it. We brought the top IITs from India over, and to your point, the West Virginia political educational and business community realized they had to change, and they did. Interestingly enough, they reminded me of a speech I gave in the mid-90s to the West Virginia business community. And that time our state was still pretty strong economically. And one of the peers who was in that session said, “John, we didn’t understand half of what you said, but we missed the most important part. You told us we have to change or we’re going to get left behind. This time, we had been left behind, and we know if we don’t change, we have nobody to blame but ourselves.”
So back to the original point, I actually think the terrible events of this year, and they have been terrible on all fronts, economic, political, life with a terrible pandemic disease and the impact it’s had on society and our friends and loved one has caused innovation to move faster. Innovation, virtual and physical innovation about how quickly we address the pharmaceutical issues, et cetera. And Navin, I think you’re seeing that with your portfolio and I’m seeing with mine.
I saw a willingness to move with a higher speed, and the same thing in the large companies. Suddenly they’re willing to partner with startups that I would have never thought or recommended as a VC. They start spending a lot of time with big companies because they can drain you dry in terms of time and resources, or give you too much love or too little. Now it’s actually a strategic change taking place. So I’m optimistic about our future, but only if we have the courage to change.
Well, speaking of that John, as you think about the future, I mean, you have lived through and clearly been part of shaping and creating massive new categories of innovation that have literally changed the world. As you think about the future, what’s the one thing you hope that entrepreneurs and business leaders do differently?
Chambers: I think, and Navin, I’d love your thoughts as well. I think we are a product of our mistakes or perhaps risk that we took we didn’t learn from as we are the successes. So I think we’ve got to learn what we’ve done right over the last decade, and the changes we have to make. I am optimistic that we will make these. My real worry, Chris, however, is that you’ve seen as much as 50% of America have hit periods of depression this year. All of us understand Zoom fatigue. By the time I do the 15th session in a day, and Navin you know I never run down. By the 15th one, I’m dragging a little bit, not as crisp. And without realizing, I think we’re losing our ability to drain and then execute with the confidence to make dreams come true. So I’m going to challenge us all on this podcast.
I think we need to ramp up our ability to dream again, Shimon Peres out of Israel taught me that. At 94 years of age, he was more of a dreamer than many of us were at 28. And then how do we make these dreams come true? By bringing communities together in ecosystems to make it happen, including government and business and VC and startups. So if we do this, then I think the future is bright. And I would challenge everybody listening today, you can make a difference. People often say they didn’t try because they didn’t think they could make a difference. Nobody they respected ask them to do it, and they couldn’t see the results. I’d argue we could do all of the above by an ever evolving form of venture capital, that’s not only great for economic returns and can continue to be even better, but also for benefits to society.
And Navin, what are your thoughts on one thing that we could do differently in the future as we head to the future?
Chaddha: So my feeling is the topic we are discussing here of conscious capital and Conscious VC, we need to all focus on building business for better than business for usual. And we need to do well financially, but at the same time by doing good. So if we keep that lens to the work we do, as John mentioned earlier, not only will we do good for the world, but we are going to make great financial returns. So that’s what I think if we can bring in those two things together and have an ethical lens to leadership, I think we can do wonders as a community.
John, anything else from you before we wrap?
Chambers: No, I’ve just enjoyed it. Chris, you make it easy, Navin, I love being in your wingman on it. And it’s amazing what an ecosystem can happen together and make dreams come true.
Chaddha: Absolutely. It’s always a pleasure talking with you. And I think as I always mention, I learn every time something new, and even today, that’s the case.
Chambers: Yeah, we learn from each other. It’s been an honor, Chris. Thank you for doing this.
It is an absolute thrill to have had this time with you. Your contributions to the business world, to technology are uncountable. And so thank you so much. It’s been a real pleasure.
Thanks for joining us on Conscious VC with Navin Chaddha, Managing Director of Mayfield, and me, podcaster and author, Christopher Lochhead. You can find me on the internet at Lochhead.com. Conscious VC is presented by Mayfield. Visit Mayfield.com, where you can learn more about the five pillars of conscious capital and much more. Thanks again for pressing play.