Will 5G remake the post-coronavirus world? It already has, say the CEOs of Cisco and Qualcomm

This Q&A has been edited and condensed for clarity.

Welcome to you both. Let’s start with you, Chuck. You’ve said that 95% of your 77,000-strong global workforce is now telecommuting. What have you learned by watching so much of your team work remotely?

ROBBINS: That many have figured out they can be productive in this environment in ways they didn’t understand before. It’s been strange, but this crisis hasn’t been a technological stretch for us because we built this technology; it’s pretty native to us. I think that we’re going to be much more comfortable having meetings by teleconference. So [post-COVID] we’ll have people who will work from home, those who’ll work in the office, and people who’ll do a little bit of both. And I think it’s going to change how we think about our interactions with customers and partners and employees going forward.

MOLLENKOPF: We currently have about 7% of our workforce in the office on any given day. And we won’t grow that too much, too quickly—in part because we don’t have to. The productivity’s been incredible. It’s just amazing how quickly the organization adapted to a new working environment. Part of it was, because of the way in which we do things, we had to put the infrastructure in place to share work across sites internationally, and that same infrastructure was helpful to share work within a city like San Diego [where Qualcomm is headquartered]. It went pretty smoothly. And we have people that are telling us now that I’d rather not come back at all.

ROBBINS: The CEO of a big financial institution recently said to me, “If you had told me in January that 98% of my workers would be working from home and the firm would be running as well as it is, I would have never believed it.” And many of my peers have made comments like that. So I think the paradigm shift with some working remotely and [some working out of the office] is going to stay with us, and we’ll end up in a hybrid world.

College seniors around the country are graduating now, and they’re coming into a whole new world. Many are not getting to experience an actual graduation ceremony, unfortunately. But all are facing an economy that’s going to be radically different from the one that last year’s graduating class entered into. First off, are you still hiring?

ROBBINS: Our plan right now is where I think most companies are— moving forward with their plans to hire the graduates.

And they’ll enter into this hybrid world, as you said.

ROBBINS: These college kids that are graduating, they’re quite comfortable with this. It’s probably going to be much more natural to them that it is to some of us.

And for those who need to be in the office?

MOLLENKOPF:  We reevaluate that on a weekly basis. But you know how there are certain sites where you protect your company’s classified information, or whatever term you use for it? Now you’ll have places that have to be biologically secure. And then for the rest? People can work pretty much wherever they can have connectivity.

You bet on teleconferencing some time ago, Chuck. And Cisco had one of the earliest platforms for that with Webex.¹ And yet people now use a different teleconferencing name as a verb—they talk about “Zooming.” Why aren’t we talking about “Webexing”?

ROBBINS: We’re running at about three times the capacity that we were in February.² And we were already the biggest in the world then. So the numbers have been astonishing, and it’s not slowing down. You know, a lot of people had about nine days to transition to doing business online, and they did it with whatever they could find: duct tape, superglue, Zoom, whatever they had. Now they’re stepping back and trying to determine what the architecture is. And Webex was built for secure, remote productivity.

Steve, just as it did with teleconferencing, COVID-19 has made the use case for 5G—with its enhanced security and greater capacity for data—that much more apparent.

MOLLENKOPF: Obviously, it’s a tragic situation, as we all know, a tremendous human toll. But I never have to answer the question anymore: Why do we need 5G? Because now everybody sees it. How do governments prepare for the next pandemic? Well, they need to invest in telemedicine and remote education, and secure capabilities for connecting people and enterprises. It’s a validation for the direction that we’re all moving in. Being able to have real, secure digital lives for us to work in is a huge thing.

And it’s not just for big companies, and it’s not just the rich schools. It’s really about the fabric of society. You’ve got to be able to have it available to everybody. There’s going to be a tremendous amount of investment in digital infrastructure to make that happen.³ For us—and I think for a lot of companies in this space—the confidence to invest into that wave remains, which is why we’re still hiring people and we’re very confident that there’s an opportunity on the other side of this pandemic. We don’t know exactly when we’ll come out, but when we come out, these technologies will be even more important.

ROBBINS: If you step back and think about the innovation that happened after the 4G transition, it was pretty astonishing. And it’s going to be fascinating to see what people think up when there’s that much bandwidth with 5G virtually anywhere. As to Steve’s point earlier around education, particularly the K–12 system, the other thing this pandemic has reminded us of is the inequality that exists. We need to have technologies that will allow us to easily deliver high bandwidth into rural areas, into low-income areas—where people are driving to parking lots or libraries to get on Wi-Fi because they don’t have Internet access.

We have to get this connectivity to people, because once you get them connected, they can build businesses, they can participate in this economy in ways that aren’t possible when they’re not connected. As an industry and as a society, we have to focus on how this technology continues to increase inclusiveness.

Regarding this division of digital haves and have-nots, nearly all of the major 5G phones announced this year are priced over $1,000. How many consumers in a country with 30 million newly unemployed people can afford a 5G phone?

MOLLENKOPF: We’re still in the early days of 5G rolling out.⁴ And if you were to compare how quickly the penetration of 5G is moving down in the price tiers, it’s actually happening faster than it did with 4G. It’s happening fastest in China, where there’s tremendous penetration of 5G. The net result is that it builds scale quicker, and that’s what brings prices down.

On the handset side, we’re going to see the availability of 5G at price points that I think are very consistent with a big penetration to market very quickly. You will also see things that enable tablets and many, many devices to get onto a network much more quickly and economically.

What about on the business side?

MOLLENKOPF: What you’re going to see with 5G (and with all the networking technologies that allow that much capacity to be delivered) is essentially the new infrastructure of business, now securely connected to the Internet. 5G will be like bringing electricity into the factory for the first time. It’s a fundamental enabling technology that’s now available in business where it didn’t exist before.

You’ve mentioned infrastructure a couple of times. In the U.S., it feels like those wireless carriers’ 5G networks are not quite prime time yet. Do you worry that if that infrastructure, that buildout with wireless networks, doesn’t come fast enough, people might wait out their own 5G investments or lose faith in it?

MOLLENKOPF: No, I don’t actually. I think you’re probably seeing—and I’m sure Chuck has a view on this too—I think you’re seeing in China [an attitude that says], “This is a very important fundamental technology to the future of business and therefore society. Let’s make sure that we get it out.” Now, in a society like China you can top-down things more easily than you can here in the United States. But it’s actually going quite well here. And oddly, this is kind of counterintuitive, but I would say it’s easier to deploy things when there are fewer people on the streets. So, I’m not worried about the availability of networks. And I think there’s a lot of intensity, and that’s not the issue.

Chuck, what’s your take on this sort of investment in infrastructure here?

ROBBINS: I think the U.S. is fine. I actually am not worried about it. And I’ve talked to a couple of CEOs of the large carriers and a couple of them actually see the current situation as an opportunity to accelerate the investment, to Steve’s point. And you know when you look at what’s really going to be needed, most of the profit that will be derived from 5G will come from enterprise-use cases. I think that, as Steve has mentioned about the consumer, the cost curve on the consumer side always comes down very quickly. But while there’s certainly the need to deliver higher bandwidth to those handsets, I don’t think the applications that will consume that bandwidth aren’t necessarily here yet. I mean, there are certainly applications and things that could consume it, but not a broad-based set like we have for 4G today. And I think you’ll get those.

But most of the carriers believe that the enterprise services are where they’re really going to derive the profit. And I think there’s probably a discussion to be had around digital infrastructure funding out of Washington as they look at the infrastructure bill and how important it is for us to accelerate this. Steve was talking about how healthcare in general is going to change. That’s one industry that’s going to fundamentally be different because the healthcare industry came to grips quickly with the power of this technology [via telemedicine] in dealing with this pandemic. And I think we’re going to see an acceleration of getting the regulatory roadblocks out of the way.

An example of what’s possible is what we’re doing in Canada today, with the Center for Addiction and Mental Health. We built a remote data network into rural areas of Canada where they have high rates of depression in the teenage community—but where they don’t have enough mental health experts, locally, who can help them. So being able to deliver expertise into these rural areas is critical—and that would apply to the U.S. Think about the healthcare that you could deliver into rural communities, the amount that you could do over telehealth through a combination of learnings from this pandemic and even the technology we’re using right now. Add in the 5G technology that Steve’s company and we are building to actually make these networks work, I mean the outcomes could be pretty phenomenal.

This interview is for our Fortune 500 issue, and so let’s turn to your big-company customers. If you would, please talk a bit about those enterprise sales and the prospect of businesses spending money on IT right now. What does it look like from your seat? Are people spooked by COVID-19 and what’s happening in the economy—or are they ramping up?

ROBBINS: I think it varies by industry. For those customers who are again at the heart of this crisis, whether they are in hospitality or travel, those customers are obviously focused on their own liquidity and how they navigate the next two, three quarters. So, my suspicion is that if their technology infrastructure is working, they’re probably willing to just let it be. We obviously, like other large technology companies, have extended some very aggressive financing vehicles for those customers if they need them. They can defer out costs until 2021, etcetera.

But we had a session yesterday with a global advisory board of customers—I think we had forty or fifty customers from around the world on it—and of those who aren’t dealing with their own liquidity issues, many said that this pandemic highlighted the need to modernize their infrastructure so that they can be prepared better next time.

Speaking of which, these kinds of crises are opportunities for innovation. Necessity is the mother of invention, after all. But such crises also bring out the urgency of invention—and the need to doing things in a new way. Steve, you’re a guy who’s got thirty-eight patents to your name, so you know a little something about invention. How has the pandemic sparked new thinking at Qualcomm?

MOLLENKOPF: I’ll give you my sense. Our company is really an engineering-focused company, an innovation-focused company. We don’t have factories. We produce patents and we produce inventions. And since we’ve started to work from home [on March 12], which is about eight weeks ago, our patent disclosures have ramped up by like 30%. I mean, it has been an incredible amount of productivity.

But to answer to your question, the thing that was most noticeable to me was not how the engineering group reacted, though they did a tremendous job. It was actually the opportunity for HR and IT to really shine. They either had to deliver or the organization would come to a halt. And you know what? They did. They did deliver. And they delivered because they’d been planning for these things for a while.

The companies that have been doing well during this pandemic are those that have invested in culture for a long period of time. And so, in our case, it has been parts of the organization that don’t get as much glory during most of the time. But boy, in a situation like this, you really see that you have a good organization.

That’s a great point. And Chuck, this is a question for you too. Cisco is known for its culture in many ways. What has evolved for you in the wake of COVID-19—or, I should say, in the midst of COVID-19?

ROBBINS: You know, it’s ironic. I think that we had a view that Cisco had very frequent, transparent, authentic communication with our employees over the last several years. But it’s clear this situation requires so much more. Back on March 6, we were in discussions with several medical specialists about the coronavirus. We have one doctor at Stanford who works with us directly, and we obviously have a medical professional on staff who coordinates things for our employees. And as we were talking to them about what was going on with the pandemic, we decided to host a video session just to allow our employees to ask questions. And they literally threw it together. We sent out emails, said we’re going to host this in a half-hour, if anybody wants to join. This was on a Friday in the middle of the afternoon. We had fifteen thousand people join that video session with a half-hour’s notice. What that said is our employees were dying for interaction.

So what we started from that, we now do this weekly. We have twenty, thirty, forty-thousand of our employees join, and similar numbers—probably bigger numbers—who watch the replays during different time zones, if it’s not convenient. We’ve added health experts from around the world, we’ve added mental health experts—because this is testing people in ways that are very different depending on where you are in life, and who you are and whether your kids are home or your elderly parents are home or, frankly, if you’re by yourself and you reach a new level of stress. We also include business updates and we have some fun. We’ve brought on some musicians, some actors, and just had a little fun with them. Now we’re in the middle of talking about return-to-office strategies and they’re all asking questions about that.

This COVID situation is very, very tough for us all to deal with collectively, but it’s probably not the worst thing that we’ve had to deal with as a company in the last two years in terms of existential threat or anything. We just have to get through it.

—STEVE MOLLENKOPF

Obviously, the pandemic has been a test of leadership for both of you. And interestingly, you both came in following some iconic figures in your company. Chuck, you followed John Chambers; Steve you followed Irwin Jacobs and Paul Jacobs. What lessons did you learn from them, if any?

MOLLENKOPF: Basically, make sure you have enough liquidity and make sure the organization can make it through. Then your job as a leader, in this type of crisis, is really about being visible. And you need to provide just a palpable sense of optimism and stability. And the message that I give to people during this whole thing is that the company’s fine, you’ve got a lot of things to worry about, don’t worry about the company from a strategy, financial, or job perspective. So I actually view this is an opportunity. And we’ve had this in the course of the company’s history—and this has been embodied by Paul and Irwin: that there are times when you just have to be visible, optimistic, and authentic. And that’s kind of what our employees want right now.

Now I’ve had the benefit—and Chuck has got the same—of being at the company a long time. So you already have a relationship and a track record. And this is kind of about staying calm and treating people right, treat your communities right, then we’ll all get through it.

ROBBINS: Yes, Steve is spot on. I’ve been in this job almost five years now. I think this week was the five-year anniversary of the announcement that I was going to take over, which is hard to believe. But I’ve been here twenty-plus years, so I’m also pretty known. Still, the thing that always stood out to me is that in times when there’s something really tough going on, it requires an immediate shift to, “Okay, what are we going to do?” Let’s first figure out what’s going on, then make a plan. And to Steve’s point, in our case, we don’t worry about liquidity, so the company’s fine. Now, the task is to quickly characterize our strategy and make it very clear to our teams, that we’re focused on our employees, our customers, and communities, period.

Just communicating that—and just communicating that, specifically to your management teams—is key. Because, frankly—and Steve nailed it—when you show up, when you’re calm and you’re not worried, they’re fine.

Now, during the pandemic, one of the things that I have reiterated to our leaders is that we have employees working from home who also have children at home, or who have elderly parents at home. And if they have a three-year-old in their house, that child doesn’t understand what your work calendar looks like.When they need their parent, they’re going to need their parent. You have to be flexible in understanding that. And so it’s a whole different way of thinking. I just told our leadership team it’s not a time to be a manager. Yes, it’s time to be a leader, but it’s more important this time to be a human. And that’s what I think people need right now during this stressful time.

There is no common playbook for this, but you both went through the financial crisis and the dotcom bubble bursting. After the financial crisis, Cisco had some cash on hand and was able to scoop up a number of companies. And Chuck, you have a pretty healthy balance sheet now.⁵ (I could see a bit of a smile peek out when I said that.) Are you on the lookout for strategic buys?

ROBBINS: Yeah, absolutely. I mean we have paused at looking at acquisitions—but we’re also not changing our strategy. There may be targets that are more attractive because of valuations, but those targets might not be interested in selling at devaluation. I’m not one to do a deal that isn’t mutually positive for the acquiree and for us. So it’s not like the current economic situation creates a new list of targets that weren’t there before.

Let me ask you the same, Steve: You came close not long ago to doing a very big deal, hoping to buy [the Dutch-American company] NXP Semiconductors. That didn’t work out. Are you still looking to expand?

MOLLENKOPF: The short answer is yes. We’ve just come off, over the last several years, a pretty big capital return program. And right now we’re in the process of really getting the balance sheet in a position where we can take advantage of some strategic opportunities we see. One little lesson that we learned in 2008 during the financial crisis, quite frankly, was that the investments we made in that dip were the things that carried us through the next decade. There were things that we’d done in smartphone technologies, LTE, others, that really propelled the company afterward. We actually got a relative advantage over companies that didn’t do that. While I’m not going to point to a particular target now, here’s one thing I think you can think of: The architecture of the cloud—and the evolution of the enterprise itself—is moving toward the “edge.”⁶ And it’s going to create a tremendous amount of economic value. We did a recent study that predicts this transition [enabled by 5G] will create something on the order of $13 trillion worth of economic value in 2035.

Steve, you played lacrosse in college; Chuck, you played basketball.⁷ Now you’re both in the wrestling world—which is to say, the technology sector. But suddenly everybody seems like they’re just holding hands these days. What’s happening to the tech world?

ROBBINS: We’re all just becoming softer and gentler! Look, I think on issues of philanthropy or in times of crisis we’ve always risen above the competitive nature. We have efforts in Silicon Valley that we’ve been working on for two and a half years, meeting quarterly and focusing on areas like hunger, homelessness, and education. This crisis is no different. I mean this is much bigger than any one of us or any company. And the human toll is much more important than any petty competitiveness. We’ll have to see how short our memories are. But it would be great to think that we could reintroduce more compassion back into our society.

MOLLENKOPF: People understand that we have a broader responsibility in society. But I can assure you, it’s still very much a gladiator business. You win one product to give you the right to play to the next product and you have to win them all in order to stay around.

We don’t worry about liquidity. We just make our strategy clear: Focus on our employees, our customers, and our communities, period.

—CHUCK ROBBINS

Speaking of which, you’re both in a very global business. Much of your trade is global. With respect to China, for instance, you’ve got suppliers there, you do business in China, you sell chips to China, you sell routing equipment to China. And yet we’ve been in the midst of another anti-globalization backlash; and the rhetoric against China from the White House and others has been particularly pointed of late. How do you manage that, given the influence that China has on your respective businesses? Steve, in your case it was Chinese regulators who killed your NXP deal in 2018, which was then nearly two years in the making. What’s the playbook going forward for that?

MOLLENKOPF: You know I’ll tell you what I do. I try to make sure that I’m important to other people’s business, which essentially is another way of saying that we try to give the customer, our customers and our customer’s customers value. We do a lot of what I would call “aligning” in the worldwide ecosystem of cellular. And typically, if we can find something that we all think is important to work on, the rest of it falls away. Luckily, we’re working in technologies that are relevant enough and important enough to the fabric of society—and particularly to the fabric of digital society—that we can find points of alignment.

So I have found that being integral to the other person’s success has created stability in the business. And I feel like the roadmap for that continues, even in the context of all of the difficult sort of rhetoric between the two countries. Now part of that is the supply chains are really intertwined. And it’s very difficult, practically speaking, to talk about decoupling that part. Now that’s a very different position than a lot of other industries, as you know. But anyway, that’s what we do: We try to make sure we that we have good stuff and make sure that we’re a good partner. Then, if there are issues, we can deal with them.

Chuck, how do you counter this antiglobalization narrative?

ROBBINS: We have to focus on what Steve just described. I think we focus on our customers—and our customers are governments, enterprises, and telecom providers. And we have to stay above the noise to some extent. Our business in China, as an example, has never been more than low single-digit percentage of our overall business. But we’ll keep trying to do the things that we believe to be right in every country in which we operate. And hopefully that results in us growing our share there.

China is no different. I think the whole notion of decoupling is off the mark. There’s no doubt, on the global basis, that we could have all probably done a better job handling this pandemic. But the whole notion of decoupling and creating different standards for technology makes little sense. Can you imagine a future that would be any more difficult to navigate, particularly in times of global crisis, than if we end up with separate infrastructures and we’re not able to communicate effectively at all?

Yes, this pandemic should be a great example of why we need to figure out ways for us to ensure data privacy—and to ensure that countries’ regulatory strategies around data privacy are respected. But I do think we need to focus on maintaining a global set of standards for how we build technology and how we interoperate and how we communicate. I think that’s really important and it’s something that is going probably a little bit in the wrong direction right now.

Steve let me ask you specifically about Huawei though. Do you support the policy to ban the Chinese telecom giant from U.S. 5G networks? [Editor’s Note: On May 14, eight days after this interview was conducted, President Trump extended his May 2019 emergency authorization preventing U.S. companies from working with companies that the government deems a national security threat, a ban that includes Huawei.]

MOLLENKOPF: Well I think the U.S. has already gone to other suppliers. And, as you know, we don’t actually compete with them in that area. The question is really what happens in Europe, and China, and Asia, where they have a very, very strong footprint. In some cases, it’s 40-plus percent of the infrastructure. So quite a lot of installed base. First, you want to do exactly what Chuck said: You want to make sure you have international standards. It’s incumbent upon companies—like, for example, Qualcomm and Huawei—to work together on common standards so that we make sure that moves in the right direction. And we do that. We’ve been doing that for years. And it’s actually a very good thing that we do that. If we didn’t, you would have a very, very different world—and one that would be much harder to deal with than what you have today.

I’d mentioned those thirty-eight patents on which you’re named as an inventor. What’s your favorite one?

MOLLENKOPF: None of them are very interesting. I wouldn’t bet too much on those. There are ones I’m proud of, but I think that the value of the company is probably not in my named inventions.

ROBBINS: Hey Steve, the one thing we know for sure is they’re better than mine.

What do you want to know about Steve that you don’t already know, Chuck?

ROBBINS: I want to know how his golf game is, that’s what I want to know.

MOLLENKOPF: It’s not good. I talk about fishing and I talk about golf way more than I do them. But I’ll tell you, I am really good at email, and getting on the phone and talking.

ROBBINS: What kind of fishing do you do?

MOLLENKOPF: You know my favorite thing is to go saltwater fly fishing. I grew up on the Chesapeake and spent a lot of time with boats and the outdoors and I love it.

Steve, what do you desperately want to know about Chuck? Now’s your chance. You can ask anything. Don’t waste it on fishing.

MOLLENKOPF: Chuck could be a television host or a senator or something. I see him around town and he’s pretty smooth. How did he get so smooth? I’ve seen him interview people—he’s really, really comfortable, I mean he’s good at it.

ROBBINS: What position did you play in lacrosse?

MOLLENKOPF: I was center “middie.” Back then people would face off. I faced off.

ROBBINS: See he’s a tough guy. Those guys are tough guys, the lacrosse players.

That brings up a good last question. Steve, what’s it like to be at peace? You don’t have an activist investor circling around; you’re no longer in a massive fight with Apple.⁸ It must be an odd feeling.

MOLLENKOPF: You know, that’s a very insightful question. This is a competitive industry. We just look like we’re genteel. And you actually have to like that part of it, meaning you can thrive in that part of it—when you’re amped up all the time. When you’re kind of in peacetime, you miss it a little bit. But I’m very happy to be in that position. I much prefer peacetime in terms of how the rest of the organization reacts to it—even if I miss the fight a bit.

Between the lines

(1) “Please mute your lines”: Cisco acquired Webex in 2007 for $3.2 billion from its founders, Subrah Iyar and Min Zhu. (Iyar, notably, was an early investor in Zoom—as was Qualcomm Ventures.)

(2) Meeting creep: Webex hosted more than 20 billion meeting minutes in April, up from 14 billion in March—which, in turn, was double the number in February.

(3) Global investment in 5G wireless networks: Expected to increase from $612 million in 2018 to $6.8 billion in 2021 (Source: Gartner).

(4) 5G devices as a share of smartphone shipments: 8.9% in 2020 (projected); 28.1% in 2023 (projected) (Source: IDC).

(5) Pocket change: At the end of January, Cisco had $10 billion in net cash (cash minus debt). In 2019 the company also posted the highest annual profits in its history.

(6) Behind the buzzword: Edge computing involves migrating power from a data processing center in the cloud to, say, your mobile phone (or other connected device)—where the information is actually being produced or consumed.

(7) Hoop dreams: Robbins, who played JV basketball for the UNC Tar Heels, once scrimmaged against Michael Jordan.

(8) Peace—or at least a cease-fire: In April 2019, Qualcomm and Apple settled their patent dispute, agreeing to a six-year licensing agreement, among other things. Qualcomm remains in litigation with the Federal Trade Commission, which has accused the company of using anticompetitive tactics. The U.S. Court of Appeals for the 9th Circuit granted a partial stay; Qualcomm is awaiting the outcome of its appeal.  

A version of this article appears in the June/July 2020 issue of Fortune with the headline “The Conversation.”