Andy Grove: Lessons from an American Role Model

Business historian Richard S. Tedlow joined the Harvard Business School faculty in 1979 and has taught MBA and executive courses. Currently he’s leading an MBA seminar he developed titled The American Business Executive in Fact and Fiction, which covers business leaders from Benjamin Franklin to the subject of his latest book, Intel’s Andy Grove. Tedlow’s Andy Grove: The Life and Times of an American was named one of BusinessWeek’s 2006 Best Business Books.

It is the first of Tedlow’s 10 books to focus on a living person. To research it, he spent more than a year in Silicon Valley getting to know Grove, Intel’s third employee and one of the most admired business leaders of our times. New Business publisher Mike Roberts recently spoke with Professor Tedlow about his new book.

New Business: In deciding to write about Intel’s Andy Grove, I assume you were looking for something that was not just an interesting story, but a microcosm of a bigger phenomenon.

Richard Tedlow: Yes. There were two things that struck me going into it. One is that Andy Grove is the last American CEO—as a matter of fact, globally he’s the last chief executive—who has survived both the Nazis and the Communists. He started in Hungary with fascism for the first 10 years of his life, add communism to the mix, divide by two, and you wind up with a capitalist. I was intrigued.

Second, his is a classic American success story. He crawled out of Hungary on his belly 50 years ago, got here and went to public schools—City College of New York (CCNY) and the University of California at Berkeley—because he had no money. He started with nothing and wound up at the center of the world. Under his leadership from 1987 to 1998, Intel’s market capitalization increased from $4 billion to $197 billion.

Grove in 1963 with his parents when he earned his Ph.D. at Berkeley and in 2005 at CCNY, home of the Grove School of Engineering.

As I learned more about Andy, one incident that I found fascinating was the moment of truth the company experienced in 1985 when it got out of the memory chip business and into microprocessors.

NB: How did Intel make that transition?

RT: They knew they had to get out of memories. Freud talks about a cognitive state he calls “knowing but not knowing,” which he defines as a state of rational apprehension that does not result in effective action. Intel was being clobbered by Japanese manufacturers. They knew something was happening, but they didn’t know how important it was. They were feverishly debating various ideas of how to respond.

Andy proposed a thought experiment to his then boss, Intel CEO Gordon Moore. “What would happen,” he asked, “if the board kicked us out and brought in new management?” Moore immediately replied, “They’d get us out of memories.” Andy looked at him and said, “Why don’t we walk through the door, come back, and do it ourselves?”

By creating a fantasized new management, he was able to escape from the legacy of Intel as the memory company. At least in part because of that moment, the United States today is the world’s leading manufacturer of microprocessors.

NB: Tell us about your impressions of Silicon Valley and how it has changed.

RT: Silicon Valley was originally called “The Valley of the Heart’s Delight.” In 1971 a journalist dubbed it Silicon Valley. If it were named today, it probably would be called something like “The Valley of the Virtual Community,” because that’s what Google is putting together with the long tail. That’s what eBay is.

A decade ago, everybody was talking about Intel. That’s not true anymore. Now, everybody is talking about Google. And people are so caught up in the present that they assume Google is all anyone is going to be talking about in the future. There is a sense that anything is possible. There are a lot of people out there willing to take 20 big risks for one gigantic reward. That hasn’t changed. That was true in the era of Arthur Rock [MBA ’51], and it’s true in the era of John Doerr [MBA ’76].

NB: It feeds on itself. Every success story increases people’s sense of what is doable.

RT: One Google can make up for a million search engines that nobody ever heard of. One iPod can make up for a million such devices that failed.

I think the Valley’s focus may in some strange way be changing from engineering—devices such as semiconductors—to community. Although there’s surely a great deal of engineering genius behind Google, for example, engineering genius is not what Google is about. It’s about a social phenomenon.

NB: What can we learn from Intel and from Andy himself?

RT: Lenin said that we have to keep the revolution forever young, and that’s very, very hard to do in a big company. There are a lot of companies that die. One way of approaching renewal is to start all over again with a new company. That’s something that America seems to be very good at. That is an awfully important part of our economic infrastructure. It’s a precious national asset, and policymakers have to be careful not to get in the way of it.

As the leader of Intel, Andy continually had to make strategic decisions that took a lot of courage to stick to. As is true in a lot of, if not all, business at this level, it becomes not so much a test of IQ points—because you don’t get there if you’re not smart—but a test of character and the courage of your own convictions. Courage with regard not just to ethics but to strategy. Andy has that courage.

NB: Some people are surprised to learn that business history is part of the Entrepreneurial Management Unit at Harvard Business School.

RT: I remember presenting a paper on George Eastman and Kodak when I started working on Giants of Enterprise, a book I published in 2001. One of the commentators was Bill Sahlman, who was then co-chair of Entrepreneurial Management at HBS. He asked me how the company was financed—what was the relationship between George Eastman and his angel investor, Henry Strong. To me the story was all about democratizing photography, but Bill helped me see that a critical part of this company’s history was how it was financed.

This perspective also forces you to ask why one firm succeeds and not others. Why Ford and not Studebaker? Why IBM and not hundreds of other companies? The classic definition—developed here at HBS—says that an entrepreneur is somebody who reaches out for opportunity without being constrained by a lack of resources. That basic entrepreneurial mindset, combined with a society that encourages this kind of activity and does not excessively punish failure, is what made America great in the 19th century, when so many of its companies were founded. Another aspect of how business history fits is its focus on people. Entrepreneurship centers on the entrepreneur and the entrepreneurial act, not just the context and the opportunity and the deal. People are at the heart of it.

NB: Does Andy characterize himself as an entrepreneur?

RT: I’ve never heard him do so. His first job, and the only full-time job he had other than Intel, was at Fairchild Semiconductor, which was the Google of the 1960s. He’s a born contrarian. And he challenges his own assumptions. Although he didn’t have founders’ stock in Intel, he was employee number three, and he really made the company. I’m not sure he was a sufficient condition, but I’m absolutely sure he was a necessary condition. “Intel culture” is Andy Grove’s invention.

But he is definitely entrepreneurially minded. He’s got that remarkable ability and willingness to look at the world with fresh eyes.

NB: What about from the perspective of measuring entrepreneurship by the ability to seek out opportunity?

RT: In that case, the answer is yes, because he was there in July 1968 when Intel was founded. And he saw the opportunity to replace magnetic core memory in mainframe computers with semiconductor devices. That’s a technological discontinuity. It’s a disruptive innovation. It’s what people write about all the time. He had to whip that industry into shape. Andy brought discipline to that company.

He also brought passion for truth seeking, which to some degree came from his youth in Hungary. Not knowing the truth under the Nazis or the Communists could cost you your life. For Andy, battling denial and deceit was a survival mechanism that he learned early on and never forgot. He brought it with him to Intel and because he became an icon of Silicon Valley, to the entire region. §