John Hennessy’s Leadership Tips From Stanford and Alphabet

Steve Pomeranz: John Hennessy is professor of electrical engineering and computer science, and he has also served as President of Stanford University from the year 2000 to 2016. Among his other accomplishments, in 1984 he co-founded the semiconductor company, Mips Computer Systems which went public in 1989 and was eventually sold to Silicon Graphics for a little over $400 million.

He is the core author with David Patterson of two internationally used textbooks in computer architecture. And he has a new book, Leading Matters: Lessons from My Journey. And by the way, he was recently appointed executive chairman at Alphabet, which is Google’s parent company. Professor Hennessy, President Hennessy, [LAUGH] I don’t know what to call you.

Welcome to the show.

John Hennessy: Thanks, Steve, just John will be fine.

Steve Pomeranz: [LAUGH] Okay, now, I’ve served on a number of nonprofit boards, have been president of boards. And I did all this while running a business and doing a radio show. But your list of accomplishments are so incredibly wide and diverse.

How do you find the time to do all these and then to excel in them?

John Hennessy: Well, I’d probably say, first and foremost, my career has been my hobby. I’ve been passionate about computing and computer science for a long time, and so it came quite naturally for me.

I used to tell students, people who are good in computer science will stay up late at night to program, not just to go to parties. And I found that passion early, and it was easy. Later on, as I took on more administrative roles, I had to think more constructively about taming my schedule and ensuring that I had adequate time to think about long-term strategic issues.

Steve Pomeranz: Well, as president of Stanford, I’m sure that was a big administrative job as well as a leadership job, am I correct in that?

John Hennessy: You’re correct, and it’s one that you can only tackle by building a team and become comfortable delegating to your team responsibility for important things.

Steve Pomeranz: Well, Stanford as an institution is one of the world’s leading non-profit educational institutions, and Alphabet is one of the world’s most profitable companies. So what are the main differences in leading these two types of disparate large institutions?

John Hennessy: Well, there are certainly differences. Clearly, the objective function for the two kinds of institutions is different.

Who your constituents are that you serve as a leader differ. And in the academic setting, you have everything from families and faculty and students, alumni. While in the for-profit sector, you have shareholders and customers and your employees. But I think there are also some surprising commonalities between them.

I think getting leaders who will focus on long-term strategic outcomes for their institutions, whether nonprofit or profit, I think it’s a crucial thing right now.

Steve Pomeranz: Well, the rate of change is different within these two types of institutions. I mean, I think universities have the ability to look out 10 and 20 years.

Whereas companies are forced to look at the next quarter and to look for guidance, otherwise they’re going to be punished on Wall Street. I mean, the rate of change is so different, how do you manage between those two?

John Hennessy: Yeah, you’re absolutely right. The range of change is very different.

Universities change slowly and pay a lot of attention to the past, but they do need to change in both cases. Both for companies and for universities, innovation becomes a core value, something you have to be committed to in order to get it to change. Now the pace is different, you’re absolutely right about that.

I think in companies, the challenge for so much of the leadership is not just to look at the next quarter, but to look at the next five years. And to remember that you don’t want to make short-term tradeoffs that will benefit the quarter, at the cost of making the wrong decision five years from now.

Steve Pomeranz: Well, in your book you write about the role of the university. And I project this also to the government to support and propel private industry. Your development of computer technology when you were at Stanford was perhaps something that could only have been done in a university setting or maybe a government setting.

And actually, the Internet started from government research and all. What do you think the role of the university in government is to support and propel private industry?

John Hennessy: Well, I think government and its investment in the research infrastructure in our country, that’s the primary way in which we’ve generated new economic growth.

When I came to Silicon Valley 40 years ago, it was still mostly farms, and there were a few early semiconductor companies. There were essentially no computer companies at the time. And things have changed dramatically, much of that financed by government research—Google, Yahoo, lots of companies that had their roots in originally government research.

I think we have an obligation as a country, and looking at both sides of the aisle, whether you look at industry or you look at academia, we have an obligation to try to take advantage of those investments that the government has made and turn them into economic growth, as well as other good outcomes for society.

Steve Pomeranz: We talk about cultures of different industries, and this is a book about leadership. The new book, by the way, is Leading Matters: Lessons from my Journey, my guest is John Hennessy. The stereotype of Silicon Valley’s culture is that they’re rebellious upstarts. And is that a culture that makes good leaders?

John Hennessy: I think it’s a culture that is changing and must change, Steve. When I started in the valley, our start-up companies and the companies we were building built products that primarily touched the lives of other engineers and techies, and maybe people in the business sector. Now you look at the products coming out of everything from Uber, to Facebook, to Google, they touch every person’s lives every single day.

So that requires that the leadership think very differently about its responsibility to its customer base than it did at an earlier time. And I think that’s evolving, quite frankly. I think this has happened relatively quickly and the industry and its leaders are catching up with the implications of those changes.

Steve Pomeranz: In your book, you discuss core elements for the basis of leadership. Humility, authenticity, leadership as service, empathy, and there’s more, courage, collaboration, innovation, curiosity, storytelling, and legacy. When I think of the stories of Steve Jobs, which spoke about how brutally honest he was because he didn’t really care what people thought of him.

And that seems like a big stretch for most corporate leaders today, and that’s under the authenticity banner. It’s one thing to be authentic, but it’s another to kind of crossover behavioral lines. Can you discuss that?

John Hennessy: Yeah, I think you’ve raised a very good point. I think Steve is generous, I mean he is perhaps unique in the entire high tech industry.

He not only founded Apple, he got fired from it, he went back, and he saved the company. He really saved the company and turned it around and made it a great company. There are very few people that have that sort of history and that sort of charisma and ability to do that.

So I think we have to accept that we’re not Steve Jobs. We perhaps have less command and control capability than Steve had. And we have to find ways to leverage the rest of our support team in order to be successful.

Steve Pomeranz: I’m discussing the new book, Leading Matters: Lessons from My Journey, with John Hennessy, former president of Stanford University and on and on.

So in your book or throughout your book, you discussed the idea of taking necessary risks. How does risk play in this role and in one’s leadership journey? Because with taking a risk and, as I tell clients my investment advisory business, taking risk doesn’t mean you’re going to get a reward.

It just means that [LAUGH] it increases the probability or the possibility of a reward, but it doesn’t guarantee it. So I especially in thinking about these large companies that have seen success doing things a certain way for so many years. Industry changes, but they don’t see that industry change and they don’t take the necessary risk.

John Hennessy: You’re absolutely right, I mean, a successful company that’s built a very successful product. One of the biggest dangers to them is that they continue to invest incrementally in that product without doing the new thing. I still remember the board discussion where Google decided to buy YouTube. And here you’re buying this company that’s putting up free videos and letting people have access to them.

And getting the vision that video was for the younger generation, what email and text was for my generation, really helped everybody understand that this could be a transformative, admittedly high-risk purchase, but could really be transformative. I think people who want to change their institutions and want to see them get better and thrive, have to be comfortable with some sort of risk.

It can be an educated thoughtful risk, but they have to be comfortable with it.

Steve Pomeranz: I’m speaking with John Hennessy, former President of Stanford and now executive chairman at Alphabet, Google’s parent company. And we will be right back to continue this discussion.

Steve Pomeranz: I’m back with John Hennessy, we’re talking about his new book Leading Matters: Lessons From My Journey. For those of you just joining us, John Hennessy is the former President of Stanford and also Chairman at Alphabet, Google’s parent company.

John, we were talking about leadership and the difficulty of large companies to take that kind of risk. So, and you were talking about Google’s purchase of YouTube and as an investment person, I was thinking, I mean, there’s no earnings there. There’s little revenue, there’s only possibility, and yet I forget what they paid, but it seems like these numbers are always in the billions.

How is that kind of price or those kinds of prices so justified?

John Hennessy: Well, I think you have to then build a financial model that indicates how you will be able to monetize that purchase eventually. And for Google, the advantage was it had an advertising network that could take advantage of YouTube’s reach and figure out how to make that a significant and substantial business. So I’m in favor of doing bold things, but not bold things that aren’t underpinned with a strong analysis and a strong rationale.

Steve Pomeranz: You must have made numerous mistakes in your long career, and I think, for many, there’s a fear of making mistakes. I always say, there’s no sin in making a mistake, the only sin is not learning from it.

What were some of your most challenging failures, especially with regards to self-examination, which you really had to realize something that you were doing was wrong? Does that bring to mind any event in your life?

John Hennessy: Surely, I have had several setbacks, I mean, early on when I was starting a company.

When I started a company, Steve, I knew a lot about technology. I didn’t know the first thing about organizing and running a business. So as part of the executive team, and you might argue that it wasn’t my responsibility. But we let the company expand too fast, and we had to do layoffs and we almost ran out of money.

We had a near-death experience with the company. And that was a lesson for me that I had to learn more about the general management side of the business if I was going to participate as a leader in that company. I had several setbacks in the academic side.

We tried to do a few things, probably one of the biggest was a new campus in New York City, that we had an invitation from Mayor Bloomberg to compete for. And in the end for a variety of reasons, we couldn’t pull it off. We couldn’t get to yes in a way that would satisfy both the needs of Stanford as well as the needs of the city.

That was a big investment, a lot of time. It was an interesting lesson in understanding the dynamics of working with a public-sector entity. And so I think we learned things from it, but it didn’t work out. That’s fine, we can step back and say that didn’t work.

It was a big risk, it was a big try, we go a different direction.

Steve Pomeranz: You spoke about having to lay people off in this new company that you were starting where you grew too fast. In your chapter on courage, you describe the decisions you had to make as President of Stanford after the financial crisis of 2008.

You had to figure out a way of still serving your constituency while serving, the ability of the institution to remain solvent. How did you deal with that?

John Hennessy: That’s a great question because it was a real challenge and most universities were worried about doing the right thing. So first of all, we made a decision we were not going to cut financial aid for students.

Look, we’re going into an economic crisis, a recession. Families were going to be more stressed, not less stressed. So we decided to stand by that. That implied if we were going to realign our budget with the new reality of what our endowment was worth, we lost billions and billions of dollars out of the endowment.

Steve Pomeranz: Well, 25% I wrote in the book.

John Hennessy: Yeah, 27% roughly of the endowment vaporized in a relatively short period of time. So that meant we needed to cut elsewhere, and we decided we need to do a layoff. That we couldn’t just hold our breath for an extended period of time, which would’ve turned out to be six or seven years in reality, and wait for the market to get better.

So we decided to do a layoff, and the first thing we decided is the provost and I both cut our own salaries. So we could send a message to everybody that this was a serious situation and the university had to realign its finances if it was going to continue to thrive.

Steve Pomeranz: Was there consternation from the faculty that you were cutting the students a break. You’re continuing to keep your financial aid package intact, and yet they were being laid off and their salaries were being frozen.

John Hennessy: There were, nobody would’ve spoken against the students and student financial aid because it’s such a core value for the university.

But they did say other institutions are not taking these kinds of dramatic reactions. The fascinating thing is a year later they changed their minds because we had one year of pain and then we’re back on course. Many other institutions who decided to cut very small amounts every year, some of them are still budget cutting today, ten years later in order to get alignment.

Steve Pomeranz: What is that death by a thousand-

John Hennessy: Yeah, death by a thousand cuts.

Steve Pomeranz: Cuts, yeah [LAUGH]

John Hennessy: That’s what I did learn in the startup environment. I learned if you’re going to do a layoff do it quick, get it over, and move forward.

Steve Pomeranz: Rip the band-aid off.

John Hennessy: And that’s not traditional in the academic setting nor in many large companies. But in a small company, you have no choice, and that I’ve found that worked better.

Steve Pomeranz: John, who do you go to for advice?

John Hennessy: I have worked with a variety of different people over time, both some fellow board members and CEOs.

But since I also had a board of trustees with significant learned people who had great experience. So I found my board, particularly my board chairs really served as mentors. I also built a culture among my senior staff where they were not afraid to come in and say, John, that’s a really stupid decision you’re about to make, you shouldn’t do it.

And getting your staff to help you avoid mistakes is absolutely crucial.

Steve Pomeranz: In the end of the book, you have a whole chapter on the books that you have read that have influenced you. What book are you reading right now?

John Hennessy: I’m reading Ron Chernow’s biography of Grant, which is simply spectacular.

It’s going to do for Grant what David McCullough did for John Adams and Truman, so it’s a spectacular book.

Steve Pomeranz: Well, that chapter includes books from Abraham Lincoln or about Abraham Lincoln, FDR, Churchill, and topics ranging from science to history and living a good life. Okay, may I recommend two books for you?

John Hennessy: Surely.

Steve Pomeranz: There’s a book called The Thread Across The Ocean by John Steele Gordon and is the story of laying the first transatlantic cable. Very interesting, talk about against all odds, that type of thing.

John Hennessy: Right.

Steve Pomeranz: And then a book called Against the Gods: The Remarkable Story of Risk by Peter L Bernstein, that’s a wonderful book.

John Hennessy: Great.

Steve Pomeranz: Yeah, so I just wanted to throw that in there. So, let’s talk about leadership again. Is it possible to have a company with co-leaders, two people of equal rank trying to run a company?

John Hennessy: It’s difficult, I think, [LAUGH] it maybe as a holding pattern.

And I think long-term what I’ve actually seen in some organizations that have done this. What it actually leads to is a slow-down in the decision- making process. So it’s not that deadlocks and outright fights occur. What simply happens is when the two parties are not on the same page, they just don’t make the decision and move forward.

Steve Pomeranz: Yeah.

John Hennessy: And so in the end, I’ve seen it work as a holding pattern. But I’ve never seen it work in the long-term.

Steve Pomeranz: Well, you’re dealing with two individuals that have reached the pinnacle of their prospective companies or institutions. So not only do they have vast knowledge and leadership skills themselves, but I’m sure their egos are pretty big.

John Hennessy: I’m sure.

Steve Pomeranz: So you bring together that mix as well, right?

John Hennessy: Yes, and so it makes it just more difficult. In the second startup that I helped co-found, a company called Atheros that built one of the first wireless chip sets for WiFi that are now everywhere, we had a point where it came time to replace the CEO. And we started to search and we just had a hard time finding somebody. So we started operating the company in the interim as sort of an office of the president with three or four people leading the company.

But what happened was, one person emerged as the clear leader.

Steve Pomeranz: Yeah.

John Hennessy: And the rest of the team actually came and said, this is the person we should make CEO. So it worked out, but it was a risky approach to leadership in a company and a startup.

Steve Pomeranz: What is your day like? Some leaders talk about practicing daily meditation, and a four-day work week, and so on and so forth. How do you handle the stress and also the demands on your time?

John Hennessy: Well, I’m religious about exercising every single day. I found back when I became president if I didn’t do that, not only was my physical condition not as good as it would be, but the stress levels were higher.

And learning to manage stress, I think is a critical issue. You have to learn to do it or you cannot do the job. You can’t do any of these jobs very long without that.

So that’s where I start, I normally if I have something serious to do like write something or put together a presentation, then I’ll reserve the first hours in the morning, the early morning hours, for doing that. Rather than let them get used up with email and other things which don’t require as much attention and focus as putting together a presentation or writing something.

Steve Pomeranz: My guest has been John Hennessy, former President of Stanford University, and also winner of the Turing Award, which is recognized as the highest distinction in computer science.

It’s like the Nobel Prize of computing. And he’s now Chairman at Alphabet, Google’s parent company. And his new book Leading Matters Lessons: From My Journey. John, thank you so much for joining us today.

John Hennessy: Thanks, Steve, I enjoyed it.

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