Jensen Huang on Nvidia's first 6 months: Sometimes you have to ignore your customers.

Summary

The script narrates the intense competition in the 3D graphics industry, highlighting the journey of a company that thrived amidst numerous competitors. It emphasizes the importance of understanding the core of one's business, in this case, semiconductor technology, and the relentless pursuit of improvement, as dictated by Moore's Law. The speaker recounts the strategy of ignoring customer feedback that deemed their products too expensive or advanced, trusting in the insatiable demand for better graphics and the transformative power of technological progress.

Takeaways

• 🚀 The 3D graphics industry in the early 1990s was booming, leading to a surge in startups in Silicon Valley.
• 🌟 In 1993, the speaker's company was the only consumer 3D graphics company globally, with Silicon Graphics being the professional counterpart.
• 📈 By 1995, the industry saw an influx of competition, with 50-70 startups entering the same market space.
• 🏆 Nvidia stands as the sole surviving computer graphics company today, outlasting approximately 200 competitors.
• 🤔 The speaker poses a critical question about what factors led to their company's survival amidst intense competition.
• 💡 The importance of perspective in business is emphasized, suggesting that understanding the core of one's business is essential for success.
• 📚 The foundation of the speaker's business was semiconductor technology, governed by Moore's Law, which doubles performance and halves cost every year or two.
• 🛑 The company chose to ignore customer feedback for a time, believing in the insatiable demand for better 3D graphics, despite initial resistance.
• 🔮 The speaker believed in pushing the boundaries of technology, even when it meant creating products that customers initially deemed too expensive or unnecessary.
• 🛍️ Customers' understanding of the business's nature was limited, especially during the industry's formative years, justifying the company's decision to push forward with innovation.
• 💰 The speaker recounts taking a risk with the company's last few million dollars to build a chip that was considered too advanced for the market at the time.

Q & A

What was the state of the 3D graphics industry in 1993 according to the script?

In 1993, there was only one consumer 3D graphics company in the world, with Silicon Graphics being the professional 3D graphics company located up the street.

How did the 3D graphics industry evolve from 1993 to 1995?

Between 1993 and 1995, the industry saw a rapid increase in the number of startups, with around 50-70 companies entering the market to do the same thing as the original consumer 3D graphics company.

What is the significance of 'Mo's law' in the context of the 3D graphics industry?

Mo's law, not a physical law but a law of competition, challenges engineers to improve semiconductor technology, doubling performance approximately every year or two while also reducing costs by a factor of two.

Why did the company decide to ignore customer feedback about their product specifications?

The company believed that 3D graphics was insatiable and that following Mo's law to make their graphics processors twice as good every year was more important, even if customers initially said it was too expensive or not needed.

What was the company's strategy in the face of intense competition from about 200 companies?

The company focused on the insatiable demand for better 3D graphics, doubling the performance of their products annually, and relying on Mo's law as their guiding principle, despite initial customer resistance.

How did the company differentiate itself from competitors during the intense competition period?

The company differentiated itself by adhering to a unique perspective on the insatiable nature of 3D graphics and the continuous improvement promised by Mo's law, even when it meant going against immediate customer feedback.

What does the speaker suggest is the key to surviving in a competitive industry?

The speaker suggests that having perspective on the nature of the business and understanding the underlying technology, such as semiconductor technology and Mo's law, is key to survival in a competitive industry.

Why did the speaker believe that sometimes it is necessary to ignore customers?

The speaker believed that ignoring customers is sometimes necessary because they may not fully understand the nature of the business or the potential of the technology, especially during the creation of a new industry.

What was the outcome for the majority of the 3D graphics companies that started during the boom period?

The majority of the 3D graphics companies that started during the boom period did not survive, with Nvidia being the only surviving computer graphics company in the world today.

What was the company's approach to product development based on the script?

The company's approach to product development was to focus on making their graphics processors significantly better each year, regardless of immediate customer demand or feedback.

How did the company's perspective on the 3D graphics market influence their business decisions?

The company's perspective that the 3D graphics market was insatiable influenced their business decisions to continually improve their products based on Mo's law, even in the face of customer objections or lack of interest.

Outlines

00:00

🚀 Rise of 3D Graphics and Intense Competition

This paragraph discusses the emergence of 3D graphics as a dominant industry in the early 1990s, particularly in Silicon Valley, and the subsequent rise of numerous companies attempting to capitalize on this trend. The speaker reflects on the intense competition that ensued, with approximately 200 companies competing in the same space. Despite the competition, the company Nvidia stands out as the sole survivor in the computer graphics industry. The speaker ponders the reasons behind this survival and success, setting the stage for a deeper discussion on business strategy and competition.

🤔 The Essence of Business and the Role of Perspective

The speaker delves into the importance of understanding the core of one's business and the essence that makes it successful. They highlight the role of semiconductor technology, specifically referencing Moore's Law, which dictates the pace of technological advancement and cost reduction. The paragraph emphasizes the need for businesses to have a clear perspective on their industry's growth potential and the importance of innovation, even when it seems that customers are not asking for it or are resistant to change.

🛠️ Ignoring Customer Feedback for Innovation

In this section, the speaker recounts a strategy that involved ignoring customer feedback to some extent, which is counterintuitive to conventional marketing wisdom. The company chose to focus on making their graphics processors significantly better each year, regardless of immediate customer demand or willingness to pay. The speaker shares an anecdote about presenting product specifications to major tech companies, all of which rejected the idea as too expensive. Despite this, the company continued to innovate, driven by the belief in the insatiable nature of 3D graphics and the benefits of Moore's Law.

Keywords

💡3D Graphics

3D Graphics refers to the creation of visual content that appears three-dimensional, providing depth and realism to images. In the video's context, it is the central theme as the speaker discusses the rise and competition within the 3D graphics industry for PCs and consumer products. The script mentions the intense competition that arose in the mid-1990s with numerous startups focusing on 3D graphics technology.

💡Silicon Valley

Silicon Valley is a region in Northern California known for its high-tech innovation and startups. The term is used in the script to highlight the location where the 3D Graphics Company was founded and the competitive environment that existed at the time, with many companies starting up in the same field.

💡Consumer 3D Graphics Company

A Consumer 3D Graphics Company is a business that focuses on creating 3D graphics technology for consumer use, as opposed to professional or industrial applications. The script indicates that in 1993, the speaker's company was the only one of its kind, emphasizing the novelty and potential of the consumer 3D graphics market at that time.

💡Professional 3D Graphics Company

This term contrasts with 'Consumer 3D Graphics Company' and refers to businesses that cater to professional markets, offering more advanced or specialized 3D graphics solutions. Silicon Graphics, mentioned in the script, is an example of such a company, focusing on professional-grade 3D graphics technology.

💡Startups

Startups are new businesses that are typically seeking to develop and scale innovative products or services. The script describes a surge in the number of 3D graphics startups in the mid-1990s, illustrating the rapid growth and interest in the field.

💡Mo's Law

Mo's Law, also known as Moore's Law, is the observation that the number of transistors on a microchip doubles approximately every two years, leading to performance improvements and cost reductions. The speaker uses Mo's Law to explain the rapid advancement in semiconductor technology, which is fundamental to their 3D graphics business, and the pressure to improve products continuously.

💡Semiconductor Technology

Semiconductor technology is the foundation of modern electronics, including the chips used in computers and other devices. In the script, the speaker identifies semiconductor technology as the core of their business, emphasizing the importance of understanding and leveraging advancements in this field for 3D graphics development.

💡Competition

Competition in this context refers to the rivalry among businesses striving for market share and success in the same industry. The script discusses the intense competition faced by the speaker's company, competing with well-established giants like IBM, HP, and Silicon Graphics, as well as numerous other startups.

💡Insatiable

The term 'insatiable' in the script describes the perpetual demand for better performance in 3D graphics, regardless of customer feedback suggesting otherwise. The speaker argues that even if customers did not ask for or could not afford more advanced graphics, the company should continue to innovate and improve its products in line with Mo's Law.

💡Perspective

Perspective, in the video's narrative, refers to the unique viewpoint or approach that a company takes towards its business and the market. The speaker believes that having the right perspective, such as understanding the insatiable nature of 3D graphics and the benefits of Mo's Law, is crucial for survival and success in a competitive industry.

💡Ignore Customers

This phrase, used in the script, may seem counterintuitive but is part of the speaker's strategy. It suggests that sometimes, to innovate and lead in a market, a company may need to disregard immediate customer feedback if it aligns with a long-term vision of continuous improvement, as dictated by the relentless pace of technological advancement.

Highlights

3D graphics for PCs and consumer 3D became a hot trend in Silicon Valley in the early 1990s.

In 1993, the company was the only consumer 3D graphics company in the world.

Silicon Graphics was the professional 3D graphics company located nearby.

By 1995, there were 50-70 startups in the same 3D graphics industry.

Nvidia is the only surviving computer graphics company today.

The company faced intense competition from IBM, HP, Silicon Graphics, and others.

Mo's Law, doubling performance every year or two, was a key factor in the company's strategy.

The company's core business was based on semiconductor technology.

Understanding the essence of the business was crucial for survival.

3D Graphics was seen as insatiable, with potential for continuous improvement.

The company decided to ignore customer feedback for a time to focus on technological advancement.

Customers were not always aware of the potential of the business.

The company's perspective was that Mo's Law was a friend, driving innovation.

The decision was made to make graphics processors twice as good every year.

The company took a bold step by investing in a chip that was considered too advanced for the market.

The importance of having a unique perspective on the nature of the business for success.

The company's strategy was to push the boundaries of what was considered possible by customers.

Transcripts

3D graphics for PCs and and consumer 3D

Graphics became the hottest hottest

thing and so everybody in Silicon Valley

was starting a 3D Graphics Company we

were um in 1993 the only consumer 3D

Graphics Company in the world silicon

Graphics uh up the street was the

professional if you will uh 3D Graphics

Company by the end of a couple of years

or so 1995 uh there were probably 50 70

startups doing exactly the same thing we

were trying to do

and over time we competed with about 200

companies Nvidia today is the only

surviving computer Graphics Company in

the world and so the question is then

what

happened competition is

intense everybody has smart

people everybody has money we competed

with IBM we competed with HP we competed

with silicon

Graphics we competed with son 3d effect

S3 serious logic big small international

local we competed with companies all

over the world so the question is what

happened um I would argue that that um

uh 300 companies armed with exactly the

same

technology armed with exactly the same

people the company that wins and let's

say they all execute and they did with

300 companies you know 50% of them were

going to execute on any given point in

time and so the question is why does one

survive well I think that it matters to

have perspective and let me give you

some

examples um I always believed that uh

you need to understand the reason why

your business

work what is the essence of your

business what makes it work now the

foundation of my business uh at its core

is semiconductor

technology here in Silicon Valley we we

usually like to refer to semiconductor

technology as Mor's law mors law is not

so much a physical law as it's a law of

competition it is a law of um

challenging

Engineers um it's a law almost of

setting

pace and Mo's law

approximately gives you twice the

performance every year or

two and

so understanding that the fundamental

ingredient of our of our business

improves by a factor of two every

year and

simultaneously reduces in cost by a

factor of two every year the question is

what makes a survivable business and so

our first perspective was that 3D

Graphics was

insatiable it was insatiable that if I

made something twice as good every year

even if the customer never asked for it

even if the customer told us it was too

expensive even if the customer when you

went to float that product specification

to them told you that they're not

interested and in fact that was the case

I took I took our product spec to uh to

Dell and HP and IBM and Gateway and they

all told me it was too much money you're

well outside of the boundaries of what

they were willing to pay

for when your customers all tell you not

to do something

the question is then what do you do in

our case because we had this unique

perspective that 3D Graphics was

insatiable and Mo's law was our friend

therefore uh we should make our Graphics

processors twice as good every

year and so for the first 5 years of our

company we just turned off our blinders

and said we're going to ignore

customers now which one of your of you

guys are going to go through your

marketing marketing courses and the

lesson that it teaches you is ignore

your

customers well sometimes you have to

ignore your customers and the reason for

that is because they don't know the

nature of your business and while the

industry is being

created before there's common sense

about the rules of that business there

is no way they can possibly know and so

we uh I I took the last few million

dollars of the company's money and uh

built a chip that is way way way too

after we were started uh 3D graphics for

PCs and and consumer 3D Graphics became

the hottest hottest thing and so

everybody in Silicon Valley was starting

a 3D Graphics Company we were um in 1993

the only consumer 3D Graphics Company in

the world silicon Graphics uh up the

street was the professional if you will

uh 3D Graphics Company by the end of a

couple of years or so 1995 uh there were

probably 50 70 startups doing exactly

the same thing we were trying to do