• “I’m often credited with the motto, "Only the paranoid survive." I have no idea when I first said this, but the fact remains that, when it comes to business, I believe in the value of paranoia. Business success contains the seeds of its own destruction. The more successful you are, the more people want a chunk of your business and then another chunk and then another until there is nothing left. I believe that the prime responsibility of a manager is to guard constantly against other people's attacks and to inculcate this guardian attitude in the people under his or her management. The things I tend to be paranoid about vary. I worry about products getting screwed up, and I worry about products getting introduced prematurely. I worry about factories not performing well, and I worry about having too many factories. I worry about hiring the right people, and I worry about morale slacking off. And, of course, I worry about competitors. I worry about other people figuring out how to do what we do better or cheaper, and displacing us with our customers. But these worries pale in comparison to how I feel about what I call strategic inflection points… Sooner or later, something fundamental in your business world WILL change” - intro

Intel Abandons Their Identity of Memory Chips for Something Better

• “You can be the subject of a strategic inflection point but you can also be the cause of one. Intel, where I work, has been both. In the mid-eighties, the Japanese memory producers brought upon us an inflection point so overwhelming that it forced us out of memory chips and into the relatively new field of microprocessors. The microprocessor business that we have dedicated ourselves to has since gone on to cause the mother of all inflection points for other companies, bringing very difficult times to the classical mainframe computer industry. Having both been affected by strategic inflection points and having caused them, I can safely say that the former is tougher.” - applies to so many industries, like ATMs changing banking, discounting changing retail, AI changing medical diagnosis, streaming changing music…
• “The story I'm going to tell you is about how Intel got out of the business it was founded on and how it refocused its efforts on and built a new identity in a totally different business — all in the midst of a crisis of mammoth proportions.” → Intel was founded in 1968 and its first revolutionary product was memory chips, being able to store 64 digits and improving the tech over time so they were the top memory player
• “Then, in the early eighties, the Japanese memory producers appeared on the scene. Actually, they had first shown up in the late seventies to fill the product shortages we had created when during a recession we pulled back our investments in production capacity. The Japanese were helpful then. They took the pressure off us. But in the early eighties they appeared in force — in overwhelming force.” → they developed whole buildings just to produce 64k and 256k memory chips that were better quality and cheaper than Intel! (Japanese companies had access to more capital and were creating a supply glut)
• “In one instance, we got hold of a memo sent to the sales force of a large Japanese company. The key portion of the memo said, "Win with the 10% rule.... Find AMD [another American company] and Intel sockets. ... Quote 10% below their price ... If they requote, go 10% AGAIN. ... Don't quit till you wiN!" → they had been developing microprocessors but their entire identity was memory chips, so they kept investing in this even though they were hemorrhaging money fighting the Japanese (competition kills returns)
• Grove to CEO Gordon Moore: "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?" (Accepting reality)
• “Intel equaled memories in all of our minds. How could we give up our identity? How could we exist as a company that was not in the memory business? It was close to being inconceivable… I suppose that even though our minds were made up about where we were going, our emotions were still holding both of us back from full commitment to the new direction”
• Now they could fully focus on their microprocessor line, providing a differentiated product with their 386 chips and sparking their growth to the behemoth company today
• “Intel in 1994 was a $10 billion-plus producer of computer chips, the largest in the world… In 1994, most of our business revolved around microprocessors and it revolved very well indeed. We were very profitable, growing at around 30 percent per year.”

Change is the Only Constant in Technology

• Change is the only constant in technology, either you’re moving forward or backwards - Akio Morita SONY, Howard Marks, Ben Thompson, now Andy Grove
• The most dangerous form of inflection points are substitution, otherwise what we learned about in the Innovator’s Dilemma episode, where competing technologies start off very basic and serve a certain niche then quickly improve and move upmarket until they’re far more convenient and cheaper than the incumbent (examples ie rebar minimills and intuit accounting software)

The PC Inflection Point

• “When computers could be built around a simple commonly available microprocessor and, consequently, the personal computer appeared on the scene, it brought with it a cost-effectiveness that was easily ten times greater than was available with the type of computing that preceded it. In a little over five years, the cost adjusted by performance decreased by 90 percent, an unprecedented rate of decline. Such an enormous change in the way computing could be done had profound consequences on the computing business.” → the old computer industry was all vertically integrated with high costs, where companies like IBM had to create their own chip and software and programs to sell one unit
• With the advent of the microprocessor and personal computers, this eliminated the need for a vertical stack and instead now people could pick their preferred chip and computer manufacturer and operating system for $2000 which was 10x cheaper than the old model (it wouldn’t work as well because of the lack of integration, but it’s worth the headache for that discount - the old vertical players struggled…)