Learning from ARM

Long time no blogging, right? Here is the new stuff. I am writing in the conference room at Goldman Sachs Private Internet Conference at Bellagio Hotel in Las Vegas.

I just finished a great talk with Tom Lantzsch, from ARM. It was a 1:1 – that type of session you register and spend about 30 minutes with people you want to meet alone. I regret a little bit to request that session when it is approaching because I suddenly realized that I don’t have any intersection between my business and chip design business, and I worried that it may end up with nothing essential and waste both party’s time, and it turned out to be exactly the opposite. Here is a brief note about what we can learn from ARM.

1. Long Term

ARM is a 22 year company. In its first 20 years, 20 billion chips was using ARM architect, and they got 6 billion on the 19th years, and about 10 billion after that. It was then ARM become widely known. They charge license fee, and royalty fee, and in the first many many years, they only run the company to be covered by the immediate license fee. Royalty fee is the big part (0.07 USD per chip) but that came much later. This is not common even in semi-conductor field, and their success is really postponed by focusing on long term.

2. Keep Small

ARM is a 17 billion USD company now. However, it only has 2000 full time employees. They intentionally keep the company small.

3. Run it Cheaply.

ARM is about cheap. They build a culture of cost. As executive committee members, Tom still travels on economic class, and most of ARM’s clients sitting in the section before in flights. Although it does not impact the company financially for CEO to fly business, it does affect the culture. We talked about Google, and talked about the expansion in people, and the¬†luxurious travel package. We all agreed that it is one way road, and cannot come back. ARM charges 0.07 USD per chip (this includes the more expensive chips), and that is the core of its business.

4. Run it Different.

ARM is not a design firm. They feel lucky that several of their principles worked so well in the last 20 years. Thanks to the slow advancement of battery technology, ARM’s core competence around low power consumption chips are stronger over time. I assumed a senario that battery life goes 10x, whatever ARM does not matter that much. Tom agreed.

ARM is also about partnership. Since they don’t design chips, they set standard, and create the architect, so they have few thousand partners, and they used that as a big network effect component: More partners on the equipment side, the more partners on the chip designer side. They played it in a really big and long term way.

Inspiration for me

I was impressed. Many great companies share some common ground. That is very different from the majority. “Luke 13:24: Strive to enter the strait gate”. Follow what most companies are doing and suggesting, and you are doomed.

By talking with great leaders, I can understand how to keep the peace inside, and keep doing what we believe to be true.

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