In 1985, Andy Grove was president of Intel, working with CEO Gordon Moore. The company had created the memory chip industry, cramming ever more transistors into small chips in accordance with Moore’s now-famous law. But it was watching fast-moving Japanese competitors do the same, commoditizing the business. Profits plunged from $198 million in 1984 to less than $2 million in 1985.
As Grove recounted in his book, Only the Paranoid Survive, he and Moore had been agonizing for weeks over the crisis when something hit him. “I turned to Moore and I asked: ‘If we got kicked out and the board brought in a new CEO, what do you think he would do?’ Gordon answered without hesitation, ‘He would get us out of memories.’ I stared at him, numb, then said, ‘Why shouldn’t you and I walk out the door, come back, and do it ourselves?’”
And that’s what they did, leaving memory chips behind, shifting to microprocessors, and positioning Intel for decades of new growth. Grove was able to divorce himself from the daily struggle and see that, in order to save the business, he had to give it up. In doing so, he laid the foundation not only for the modern computer industry, but for modern management. The mantra? Don’t protect the past. Don’t let a product define your business. Always disrupt yourself.
Separately, if you could rebuild the energy industry from scratch, what would it look like? That’s a question at the core of our Brainstorm E conference, being held in Carlsbad, California, on May 16. The gathering will include the smartest people we know at the intersection of energy and technology, including Ford Executive Chairman Bill Ford, Monsanto CEO Hugh Grant, former Secretary of Energy Steven Chu, the CEO of Virgin Galactic, and many more.
The conference is by invitation only, but CEO Daily readers get special consideration. Register here, and I’ll look forward to seeing you in Carlsbad.
More news below.
• Brussels is under attack
Terrorist attacks in central Brussels and at its main international aiport Zaventem have left at least 26 people dead and many more injured, according to Belgian media, in the worst day of violence in the country since World War 2. Bombs were detonated in the departures hall of Brussels’ main airport, Zaventem, and on a subway train close to the headquarters of the European Union Commission.
• Valeant infighting is getting nasty
The woes at embattled drug company Valeant Pharmaceuticals continued to worsen on Monday, when news that it was getting rid of its CEO Mike Pearson wasn’t even the most dramatic update from the company. In announcing its succession plan and the addition of hedge fund manager Bill Ackman to its board, Valeant also aired some of its own dirty laundry, saying that its board had asked one of its members, former CFO Howard Schiller, to resign. Schiller refused. The company is now alleging “improper conduct” by the former finance chief, allegations Schiller quickly denied. That back-and-forth comes after Valeant said it misstated financial results, which it told investors about last month.
• FBI may not need help to unlock iPhone
Justice Department officials say the FBI may have found a way to unlock the iPhone used by one of the shooters in the San Bernardino terrorist attack without Apple’s assistance. Less than 24 hours before a highly anticipated hearing over access to the phone was set to begin, Justice Department lawyers requested a delay. A federal judge in California agreed to postpone the oral arguments in which Apple and the U.S. government were set to face off over whether a court could force Apple to help the FBI unlock the phone. The Justice Department added that the FBI “has continued in its efforts to gain access to the phone without Apple’s assistance, even during a month-long period of litigation with the company.”
• Carnival wins right to sail to Cuba
Carnival on Monday became the first U.S. cruise ship operator in 50 years to win the right from Cuba authorities to sail from the United States to the Caribbean Island. The company said it would begin to travel to Cuba on May 1 on its 704-passenger MV Adonia through its newest brand, the social impact-focused Fathom line. Carnival is part of a rush of U.S. companies trying to get a piece of the action as the Caribbean Island opens up to U.S. tourists. Hotel operators including Starwood and Marriott have been aggressive in jockeying for entry into the island.
• FanDuel, DraftKings to shut down in New York
A pair of fantasy-sports operators have agreed to shut down in New York, their largest market, as part of a settlement announced Monday with the state attorney general’s office. The attorney general had tried to force the companies to stop accepting money from New Yorkers and pay restitution to contestants who lost money playing on the sites. Importantly, the FanDuel and DraftKings sites could reopen if New York lawmakers expressly legalize daily fantasy-sports contests. Otherwise, the companies’ paid contests will remain closed to New Yorkers until an appeals hearing in September.
The Wall Street Journal (subscription required)
Around the Water Cooler
• Apple lowers entry into ecosystem
The hype and hysteria that generally accompanies Apple’s special events was all but missing on Monday: no surprises were unveiled by the tech giant’s executives and the various new iPhone, iPad and Apple Watch debuts weren’t all that revolutionary. But the iPhone SE, introduced on Monday, is a modernized 4-inch iPhone that is about more than just finding success in emerging markets. It is also about lowering the entry cost to Apple’s ecosystem. That device will have a starting price of $399, far below the $650 premium for entry Apple used to charge. It means customers no longer need to sacrifice performance for price by buying an already obsolete device.
• AmEx cuts CEO pay to lowest since 2008
American Express cut Chief Executive Officer Kenneth Chenault’s pay 26% to the lowest level since 2008 after the credit-card lender’s stock and profit slumped last year. The board awarded him $18.5 million for 2015, according to a filing on Monday. Chenault, the company’s leader since 2001, has ranked among the U.S. financial industry’s highest paid CEOs in recent years, with a $25.1 million package for 2014. But the lender’s stock tumbled 25% last year as net income dropped 12%. The shares have slid an additional 12% this year. “We recognize that our 2015 performance was disappointing,” Chenault told investors during an annual presentation earlier this month. “I can assure you, we’re not standing still.”