Speaker 1: Get in touch with technology with tech Stuff from how
Speaker 1: stuff works dot com. Hey there, and welcome to tech Stuff.
Speaker 1: I am your host, Jonathan Strickland. I'm an executive producer
Speaker 1: with how Stuff Works and I love all things tech,
Speaker 1: and today we are going to do a listener request
Speaker 1: tech Stuff. Listener Gauge asked that I do uh an
Speaker 1: episode or two about a big, big company in technology.
Speaker 1: Once upon a time it was the biggest company in technology.
Speaker 1: That would be Cisco, also known as Cisco Systems. This
Speaker 1: is a company that many of you probably have heard about, uh,
Speaker 1: but maybe you don't know too much about it. The
Speaker 1: company's mission statement is pretty humble all things considered. It
Speaker 1: is quote shape the future of the Internet by creating
Speaker 1: unprecedented value and opportunity for our customers, employees, investors, and
Speaker 1: ecosystem partners end quote. So, you know, just shaping the
Speaker 1: future of the Internet. As it turns out, Cisco and
Speaker 1: the Internet are deeply connected. The the company would not
Speaker 1: exist without network computers. That's the whole core of what
Speaker 1: the company was about, especially from a hardware perspective. Early on,
Speaker 1: So Cisco Systems, particularly back when it was called Cisco Systems,
Speaker 1: really made its fortune through creating the equipment that serves
Speaker 1: as the infrastructure for various computer networks, including the network
Speaker 1: of networks we call the Internet. It's mainly a business
Speaker 1: to business corporation, meaning its customers tend to be other
Speaker 1: big businesses. It did kind of dip its toe in
Speaker 1: the consumer market, where it sold some products meant for
Speaker 1: the average person such as myself, but it doesn't really
Speaker 1: do that anymore. However, Today the company employs more than
Speaker 1: seventy thousand people and it generates more than forty eight
Speaker 1: billion dollars in revenue. But that's not how it all started.
Speaker 1: Way back in and actually, Cisco Systems origin story is
Speaker 1: one that has over time been somewhat oversimplified and romanticized.
Speaker 1: This should come as no surprise to anyone who has
Speaker 1: ever followed any companies in the tech sphere, really any
Speaker 1: company at all. A lot of companies oversimplify their origins
Speaker 1: because the truth of the matter tends to get pretty
Speaker 1: complicated and sometimes it requires a whole lot of explanation. Now,
Speaker 1: a lot of Silicon Valley companies have a similar mythic
Speaker 1: origin story. Typically, you hear stories about how young engineers
Speaker 1: turned into entrepreneurs. Sometimes they're fresh out of college. Sometimes
Speaker 1: they drop out of school in order to pursue a
Speaker 1: business opportunity, and they're almost always seems to be a
Speaker 1: garage involved in some pivotal part of the early business history,
Speaker 1: and after some vague amount of time, the company's profile
Speaker 1: skyrockets and the entrepreneurs become gazillionaires. See also Microsoft, Apple, Google,
Speaker 1: et cetera. Cisco Systems origin, or at least the version
Speaker 1: of the origin story that tends to be told, is
Speaker 1: not that far off from that particular archetype. However, instead
Speaker 1: of students, the founders were employees of Stanford University. They
Speaker 1: were computer scientists who are managing various computer departments at Stanford.
Speaker 1: In fact, at the time they were a husband and
Speaker 1: wife team. They headed up different computer labs essentially at Stanford,
Speaker 1: and instead of a garage, they operated outside of their
Speaker 1: or in their living room in San Jose, California. That's
Speaker 1: where Cisco Systems got its start, was in their living room.
Speaker 1: They named their company after the sister city of San Francisco,
Speaker 1: so Cisco Systems. Also, if you look at the logo,
Speaker 1: it's these the lines of vertical dashes. Uh, those vertical
Speaker 1: dashes are an abstract of the Golden gate Bridge. Now,
Speaker 1: the simplified story of the origin of Cisco Systems has
Speaker 1: two protagonists. There's Sandy Lerner, she was in charge of
Speaker 1: the computers for the Graduate School of Business at Stanford,
Speaker 1: and there was her then husband that they've since gotten divorced,
Speaker 1: Leonard Bozak, who oversaw the computers in the computer science department.
Speaker 1: Now back, as the story goes, the two were frustrated
Speaker 1: that despite working for the same university and having offices
Speaker 1: five yards apart from each other, they could not send
Speaker 1: emails to each other. Their respective accounts were on different
Speaker 1: computer networks and there was no intercommunication channel between those
Speaker 1: two networks. The Business school had its network, the computer
Speaker 1: science division had its network, and the two were kind
Speaker 1: of autonomous and step brit entities. Then, as the story goes,
Speaker 1: the two decided to create a multi protocol router to
Speaker 1: connect the two systems together and allow this couple to
Speaker 1: communicate via email. And then they saw how useful their
Speaker 1: technology was and decided that they should turn it into
Speaker 1: a product, asking Stanford to do so. Stanford said that
Speaker 1: they they the the university could not really do that.
Speaker 1: So then they decided to launch their own company called Cisco,
Speaker 1: and the rest is history. But again that's an oversimplification.
Speaker 1: The reality is that a lot of different people were
Speaker 1: working on a solution to this problem of facilitating communication
Speaker 1: between disparate computer and networks. But before I detail that history,
Speaker 1: I thought it might be helpful to talk about what
Speaker 1: the heck a multi protocol router is, why are they necessary?
Speaker 1: And that means that we need to define a few
Speaker 1: different terms like land when, and explain the purposes of
Speaker 1: protocols in general and what a multi protocol technology does
Speaker 1: in particular. So first of all, let's talk about lands.
Speaker 1: So a land L a N is a local area network.
Speaker 1: This is a computer network that covers a limited area.
Speaker 1: It could be a single home. You could have a
Speaker 1: local area network set up in your home, and you
Speaker 1: may very well have this. If you have a router
Speaker 1: connected to a modem in your home, then you have
Speaker 1: a local area network. It could also be an office,
Speaker 1: it could be an office building, it could be a
Speaker 1: university campus. So the scale of a local area network
Speaker 1: can get quite large, but it's still confined to a
Speaker 1: geographic region. So let's say your office has a local
Speaker 1: area network and your office purchased all the equipment to
Speaker 1: run and maintain this network. So while some other companies
Speaker 1: made the actual uh the components of the infrastructure, the
Speaker 1: infrastructure is owned by your company because they bought those
Speaker 1: products and then installed them. So there's no connect ativity
Speaker 1: to any other network, So you don't have a channel
Speaker 1: out to the Internet. This is all self contained. Anyone
Speaker 1: who connects to that network and they have privileges on
Speaker 1: that network, they have the ability to communicate with others
Speaker 1: on that same network, or they can store and retrieve
Speaker 1: files on the network whatever system has been set up.
Speaker 1: But that's the extent of the reach on that local
Speaker 1: area network. And these technologies really begin to emerge in
Speaker 1: the early nineteen seventies, particularly with the invention of Ethernet
Speaker 1: out of Xerox Park. I'll talk a little bit more
Speaker 1: about that in a in a second. A WHEN or
Speaker 1: w a N is a wide area network. These networks
Speaker 1: cover larger geographic regions and also tend to rely upon
Speaker 1: telecommunications circuits that are owned by some other entity. So
Speaker 1: there's some company that owns the actual infrastructure that a
Speaker 1: wide area network is relying upon. Typically it doesn't have
Speaker 1: to be that case, but that's typically what happens. So
Speaker 1: that means there has to be some sort of agreement
Speaker 1: between the administrators of the wide area network and the
Speaker 1: companies that actually own the infrastructure, the actual fiber and
Speaker 1: the switches that the network relies upon. A wide area
Speaker 1: network might connect numerous local area networks together, which allows
Speaker 1: for a channel of communication between those local area networks.
Speaker 1: But that's easier said than done because back in the
Speaker 1: early early days when everyone was trying to start creating
Speaker 1: local area networks, there were a lot of different companies
Speaker 1: that were developing their own proprietary approaches to creating these
Speaker 1: local area networks, with their own proprietary hardware and software
Speaker 1: and their own protocols. So if you like analogies, like
Speaker 1: I do because it was an English lit major, just
Speaker 1: imagine again that you are in a big office building,
Speaker 1: and each floor of that office building has an office
Speaker 1: where people speak a single language and only that language.
Speaker 1: And let's say that the first floor is all French speakers,
Speaker 1: the second floor is all German speakers, the third floor
Speaker 1: is all Finnish speakers, the fourth is Swahili, and the
Speaker 1: fifth is English. People within a single office have no
Speaker 1: problem communicating with each other. Right, if you're one of
Speaker 1: the people who speaks English and you're on the fifth floor,
Speaker 1: you can speak to everyone else on the fifth floor.
Speaker 1: They can understand you, you can understand them, because you're
Speaker 1: all communicating within that same language. However, communication between offices
Speaker 1: is much more challenging because the inhabitants of those different
Speaker 1: offices speak different languages and they do not speak other ones.
Speaker 1: This is where protocols come in. So a communications protocol
Speaker 1: is similar to a language, but a communications protocol is
Speaker 1: really a set of rules that computer systems have to
Speaker 1: follow in order to send and receive data right to
Speaker 1: send data to other computers and received data from other
Speaker 1: computers or other devices that are connected to the network.
Speaker 1: It's not just computer systems. It could be things like
Speaker 1: handheld devices, or it could be printers, could be lots
Speaker 1: of different stuff. These protocols dictate the form or syntax
Speaker 1: that the data has to take in order for it
Speaker 1: to transmit across this network, and there are also rules
Speaker 1: that govern what to do in case and error occurs.
Speaker 1: How do you recover data in that in that instance,
Speaker 1: or how do you synchronize data between different components on
Speaker 1: the network. And these protocols often will depend both upon
Speaker 1: hardware and software, and because you have different companies creating
Speaker 1: these different local area networks, it could mean you have
Speaker 1: different incompatible protocols that are making up all these rules. So,
Speaker 1: again going back to that office building analogy, think of
Speaker 1: each office floor not as having people who speak different
Speaker 1: languages on every floor, but different computer networks that are
Speaker 1: working on a different prietary protocol in each floor. That
Speaker 1: means that computer systems on a single floor can communicate
Speaker 1: with each other easily because they're following the same set
Speaker 1: of rules, but computer systems on different floors can't communicate
Speaker 1: easily they are each following a different set of rules,
Speaker 1: so you have this disconnect. This is where the concept
Speaker 1: of multi protocol infrastructure comes in. In the case of Cisco,
Speaker 1: it was a multi protocol router. Now, a router is
Speaker 1: a device that sits between networks. It's kind of a
Speaker 1: connecting point. Sometimes we call them gateways, although for a
Speaker 1: while there was a differentiation between router and gateway. Today
Speaker 1: they are largely one and the same. But these are
Speaker 1: connecting points between one network and another network. It could
Speaker 1: be two local area networks, so you could have a
Speaker 1: router between those two. It could be a router between
Speaker 1: a local area network and a wide area network, include
Speaker 1: being a local area network and the Internet. So your
Speaker 1: typical home router sits between a residential networks such as
Speaker 1: one that covers one household. Let's say that it's your
Speaker 1: personal router, and it sits between that and the Internet
Speaker 1: at large. Routers direct traffic on the Internet, so when
Speaker 1: data flies across the Internet, it does so in packets.
Speaker 1: I've talked about data packets many many times. I won't
Speaker 1: go into it here, but packets can hop from one
Speaker 1: router to another until they arrive at their intended destination.
Speaker 1: At different packets from the same file can travel very
Speaker 1: different pathways to get to that destination. Multi protocol routers,
Speaker 1: as the name suggests, are able to communicate through more
Speaker 1: than one set of rules, so they're kind of like interpreters, right.
Speaker 1: They can kind of interpret in one language and translate
Speaker 1: it into another language, So they can accept data following
Speaker 1: one set of protocols and send it in a different
Speaker 1: set acceptable to the recipient and vice versa. So if
Speaker 1: you have two local area networks and a multi protocol
Speaker 1: router in between the two, it can accept data from
Speaker 1: network number one and then translate it into a form
Speaker 1: that network number two can facilitate. So it's an important
Speaker 1: component if you want to have communication between networks. So
Speaker 1: now we recognize that computer networks communicate through various protocols,
Speaker 1: and that those protocols can be different from one another,
Speaker 1: especially in the early days of networks, and that necessitates
Speaker 1: some sort of component between the networks to facilitate communication.
Speaker 1: But back in this wasn't something you could just pick
Speaker 1: up off the shelf yet, at least not until Cisco
Speaker 1: came into being. People had to suss out how it
Speaker 1: would work. So the story of Cisco's origins are tied
Speaker 1: together with that process. When we come back, we'll look
Speaker 1: at the people and events that led to Cisco becoming
Speaker 1: a company. But first let's take a quick break to
Speaker 1: thank our sponsor. Before Cisco was launched in nineteen eighty four,
Speaker 1: a few years of work went into the development of
Speaker 1: the technology that would give the company it's real start,
Speaker 1: and while Lerner and Bozak were involved, so were a
Speaker 1: lot of other people. First, Stanford's connection to the Internet,
Speaker 1: both figuratively and literally, stretches back to before there was
Speaker 1: an internet, way back in nineteen sixty nine, Stanford was
Speaker 1: the site of one of the four original Interface Message processors.
Speaker 1: Those were special mini computers that were part of the
Speaker 1: experimental ARPA Net. That was the computer network that would
Speaker 1: serve as a stepping stone toward the development of the Internet.
Speaker 1: A lot of the protocols that would be used on
Speaker 1: the Internet were developed for the Arpanet first. The other
Speaker 1: three imps. By the way, those are the the interface
Speaker 1: message processors. The other three were at the University of California,
Speaker 1: Los Angeles, the University of California Santa Barbara, and the
Speaker 1: University of Utah. Back around late nineteen eighty or early
Speaker 1: nineteen eighty one, Stanford received some Alto workstations from the
Speaker 1: Xerox Palo Alto Research Center better known as Xerox Park.
Speaker 1: If you listen to my episodes about Xerox, you might
Speaker 1: remember the Alto. It was the computer system that would
Speaker 1: inspire Steve Jobs to return to Apple and push for
Speaker 1: the Macintosh and the Lisa systems to incorporate a graphic
Speaker 1: user interface or gooey. It was bigger than a computer
Speaker 1: desktop would be these days, but smaller than a lot
Speaker 1: of other mini computer systems. Xerox only reduced a couple
Speaker 1: of thousand of these machines. Mostly they used them internally
Speaker 1: at Xerox, but they did distribute around five hundred of
Speaker 1: them to various universities and research facilities, including Stanford and
Speaker 1: The Alto was pretty cool, especially since Xerox first started
Speaker 1: producing them in the early nineteen seventies, more than a
Speaker 1: decade before we would see gooey based computers in the
Speaker 1: consumer marketplace, stuff like the Macintosh and then later still
Speaker 1: the Microsoft Windows operating system. But the technology that really
Speaker 1: got computer scientists excited that was incorporated into the Alto
Speaker 1: was ethernet. I mentioned it earlier while Bob Metcalf over
Speaker 1: at Xerox, pioneered ethernet development in nineteen seventy three. Over
Speaker 1: at Park he was working on a way to connect
Speaker 1: auto computers to printers initially, and he developed a networking
Speaker 1: platform and cabling system in order to do so. See,
Speaker 1: printers were really, really expensive, so it didn't make a
Speaker 1: whole lot of sense to get a printer for every
Speaker 1: single computer system. It made more sense to set up
Speaker 1: a system where multiple computers could share the printer as
Speaker 1: an asset. After all, you're not sending jobs to the
Speaker 1: printer all the time, so most of the time the
Speaker 1: printer would just sit idle, which mean it wasn't a
Speaker 1: very efficient use of technology. By allowing multiple computers to
Speaker 1: share the single printer and meant that you have you
Speaker 1: have boosted the efficiency of the printer. It's in operation
Speaker 1: more frequently and it's not just sitting there. So it
Speaker 1: was an interesting approach to this problem, not just connecting
Speaker 1: a computer to a printer, but a way of making
Speaker 1: a printer a more effective asset for the team at large.
Speaker 1: So he developed the networking platform and the cabling system
Speaker 1: in order to do this, and he designed the standards
Speaker 1: that would guide communication across the cable. The Ethernet standard
Speaker 1: either NEET made it easier to create a system in
Speaker 1: which computers and other devices like printers could communicate with
Speaker 1: each other. But how would you connect disparate networks, particularly
Speaker 1: ones that relied on other protocols besides the Ethernet standard.
Speaker 1: The director of Computer Facilities at Stanford at the time,
Speaker 1: Ralph Goren, made a general request. He said, I kind
Speaker 1: of want some form of technology that could serve as
Speaker 1: something like a network extension cord to create networks between
Speaker 1: computers that are more distant from one another. So while
Speaker 1: we're pretty good at linking computers that are fairly close
Speaker 1: to each other, I went a way to extend that
Speaker 1: to beyond just the computers that are all within the
Speaker 1: same room or same building. A group of Stanford computer
Speaker 1: scientists tackled this problem, actually pretty big group, and there
Speaker 1: were some that were contributing hardware. There were some who
Speaker 1: were creating software for this, and they were all working
Speaker 1: to try and make a thing possible. One of those
Speaker 1: people was Andy Bechtelsheim, who would later go on to
Speaker 1: found a little company called Sun micro Systems, and he
Speaker 1: developed the computer board that would sit inside this router.
Speaker 1: William Yeager, who was a research engineer, wrote the software
Speaker 1: for the multi protocol router. He had previously found success
Speaker 1: in networking machines between the medical center computers and the
Speaker 1: computer science department, so this was sort of taking that
Speaker 1: approach and then making it more flexible to allow for
Speaker 1: even more types of local area works to communicate with
Speaker 1: one another. Now. I didn't find a full list of
Speaker 1: all the people who contributed to working on this multi
Speaker 1: protocol router. I suspect more than a dozen people made
Speaker 1: some sort of contribution throughout the whole process, because this
Speaker 1: was not something that was, you know, a couple of
Speaker 1: weeks in the works. This was a project that lasted
Speaker 1: quite some time as people began to develop hardware and
Speaker 1: software for it, tested out, tweak it, make changes, make
Speaker 1: another addition, and it was definitely a collaborative effort. The
Speaker 1: result was what the computer scientists called the blue box.
Speaker 1: The blue box, it's because the device was inside a
Speaker 1: blue case. Goren would later say that while he asked
Speaker 1: for an extension cord, what he actually got was more
Speaker 1: like a power outlet strip. It was much more versatile
Speaker 1: than a simple long distance connection between two different lands.
Speaker 1: It was a device that could allow for communication across
Speaker 1: lots of different networks and Yeager software, while being fairly unsophisticated.
Speaker 1: According to one Stay and Ford employee who would later
Speaker 1: go on to work for Cisco, it was incredibly adaptable,
Speaker 1: so maybe not terribly you know, seamless or sophisticated, but
Speaker 1: easy to tweak so that you could incorporate different protocols.
Speaker 1: Bozak and a learner founded Cisco Systems in December four
Speaker 1: with the intent to market these routers for the burgeoning
Speaker 1: network industry, as well as networking cards for computers. They
Speaker 1: didn't get started right away. Stanford officials decided in nineteen
Speaker 1: to undertake a comprehensive networking project to connect the various
Speaker 1: networks across campus together, and as part of that initiative,
Speaker 1: the officials wanted the project to rely solely upon the
Speaker 1: Internet Protocol as a communications protocol. So, in other words,
Speaker 1: simplify matters by settling on one standard for protocols and
Speaker 1: not allow anything else. This is it turns out, is foreshadowing,
Speaker 1: but we'll get to that later. Bozak and an engineer
Speaker 1: named Kirk low Feed approached Yeager and asked him for
Speaker 1: his software. They said, can we get your software for
Speaker 1: multi protocol routers and they planned on modifying that for
Speaker 1: the new Stanford project whether solely Internet protocol as the
Speaker 1: communications protocol in question. So Yeager agreed, He handed over
Speaker 1: his software, and Bozak and lo Feed made changes to
Speaker 1: that software. They stripped it of its ability to route
Speaker 1: other communication protocols because that was not part of the
Speaker 1: Stanford project, and they enhanced the Internet capabilities of the device,
Speaker 1: And in other words, they did make substantive changes to
Speaker 1: the technology as part of the Stanford project. But apparently,
Speaker 1: according to Yeager, they did not reveal that they had
Speaker 1: also gone through the process of incorporating a new company
Speaker 1: and that Bozak had an outstanding request to Stanford to
Speaker 1: allow this new company to sell a version of this
Speaker 1: blue box router. Stanford is a non profit university, and
Speaker 1: as such they could not legally enter into the manufact
Speaker 1: during business, but the router had undeniable utility. However, the
Speaker 1: university did not see eye to eye with Bozak and Learner,
Speaker 1: and they said no way san Jose. But that didn't
Speaker 1: stop Bozak and Learner from building routers and network cards
Speaker 1: out of their home in San Jose and selling them
Speaker 1: by late night or by some accounts, early What's more,
Speaker 1: other members of the staff of Stanford got all head
Speaker 1: up because of the couple and some of the stuff
Speaker 1: they were doing. First, it seemed pretty clear that at
Speaker 1: least some of the development for Cisco's router product happened
Speaker 1: on Stanford's time when Bozak and law Feed and Learner
Speaker 1: were supposed to be working for the university. The Learner,
Speaker 1: by the way, would leave Stanford first before anyone else
Speaker 1: would second, and more to the point the Cisco router
Speaker 1: appeared to contain work that came from other members of
Speaker 1: Stanford's computer science community, as did the network cards. Nick Vezad,
Speaker 1: who worked with Yeager, claimed that there was no real
Speaker 1: difference between the router Cisco sold and the ones that
Speaker 1: Stanford was using on their own systems, and that there
Speaker 1: might have been some theft if you're if you're being
Speaker 1: really you know, stickler for it. There were those who
Speaker 1: essentially were accusing Bozak and Learner of stealing intellectual property
Speaker 1: that belonged to other people without compensating them for it.
Speaker 1: Bozak and Learner said that they had taken the technologies
Speaker 1: and they had made substantial changes to them, and also
Speaker 1: Stanford was not going to sell them. Stanford wasn't going
Speaker 1: to get into the manufacturing business. It couldn't as a
Speaker 1: nonprofit utility or university, I should say, so they did
Speaker 1: what they had to do in order to actually make
Speaker 1: it a working product. Meanwhile, Bozak was still working for
Speaker 1: Stanford at that time. By early he was given the
Speaker 1: choice to either work for Stanford or just work for Cisco,
Speaker 1: but he could not do both of the same time,
Speaker 1: and he was also accused of operating Cisco during his
Speaker 1: hours of working at Stanford, and therefore Cisco's routers were
Speaker 1: being made at the university's expense. So this was a
Speaker 1: pretty tough accusation, and on July eleven, Len Bozak and
Speaker 1: Kirklawfeed both resigned from Stanford. Learner, as I had said,
Speaker 1: had already left the university at that point. Cisco also
Speaker 1: hired on two other Stanford employees, Greg Satz, who joined
Speaker 1: Cisco as a programmer, and Richard Troyano, who would oversee sales.
Speaker 1: So this group of former Stanford employees start Cisco Systems. Now. Eventually,
Speaker 1: Stanford and Cisco would come to a settlement agreement to
Speaker 1: resolve the problem that Stanford technology was incorporated into Cisco's router.
Speaker 1: The university chose the settlement as the best option out
Speaker 1: of a bunch of not totally awesome choices. So the
Speaker 1: other choices they essentially had was they could pursue a
Speaker 1: court case, which ultimately might have stopped sis sco, but
Speaker 1: it wouldn't accomplish much else, or or they could have
Speaker 1: done nothing at all and just allowed Cisco to operate
Speaker 1: and not even objected. The settlement saw Cisco pay Stanford
Speaker 1: about twenty thousand dollars in cash, with another hundred fifty
Speaker 1: thousand dollars promised in royalty fees from Cisco sales, and
Speaker 1: also in agreement to sell routers to Stanford a discounted
Speaker 1: rate and to provide essentially free I T support less Earnest,
Speaker 1: who was Bozak's former supervisor, alleged that Bozak had also
Speaker 1: done business with Xerox using some of Stanford's technology in
Speaker 1: networking boards. That charge also didn't go so far as
Speaker 1: a court case. Cisco would settle out of court for
Speaker 1: a seven thousand dollar cash settlement and two routers. Those
Speaker 1: routers each cost about four thousand dollars, So Cisco's origins
Speaker 1: were somewhat troubled. Now, when we come back, we'll take
Speaker 1: a closer look at the co founders and then talk
Speaker 1: a little bit more about what the company did in
Speaker 1: its early years. But first, let's take another quick break
Speaker 1: to thank our sponsors. Al Right, Well, here's a closer
Speaker 1: look at the co founders of Cisco Systems. Leonard Bozak
Speaker 1: was born in nineteen fifty two in Pennsylvania and graduated
Speaker 1: from the University of Pennsylvania in nineteen seventy three, he
Speaker 1: became a hardware engineer at Digital Equipment Corporation, better known
Speaker 1: as d e C. D e C would later be
Speaker 1: acquired by Comback in nineteen ninety eight. By the way,
Speaker 1: in the late nineteen seventies, Bozak was accepted into Stanford
Speaker 1: University and studied computer science. He met Sandy Lerner sometime
Speaker 1: around nineteen seventy seven while both were pursuing postgraduate studies
Speaker 1: and both of them were working on the mini computers
Speaker 1: in Stanford's labs, and he became a staff engineer at
Speaker 1: Stanford around nineteen eighty one. Sandy Lerner grew up in California.
Speaker 1: She was born in nineteen fifty five, and she was
Speaker 1: mostly raised by two of her aunts. Her parents divorced
Speaker 1: when she was four years old, and she ended up
Speaker 1: living with her aunts mostly when she was growing up.
Speaker 1: She grew up partly on a cattle ranch and even
Speaker 1: started making money raising and selling cattle. She bought her
Speaker 1: first steer when she was just nine years old, and
Speaker 1: she sold it for a profit when she was eleven.
Speaker 1: In fact, her cattle business would end up funding her
Speaker 1: college tuition. She got an undergraduate degree in political science
Speaker 1: at California State University. Then she pursued a master's degree
Speaker 1: in econometrics at Claremont College. She joined Stanford's program for
Speaker 1: Statistics and Computer Science, and that's where she met Bozak,
Speaker 1: and the two were married in nineteen eighty. They found
Speaker 1: success very early on in their business venture once they
Speaker 1: left Stanford and focused on Cisco. Within the first month
Speaker 1: of operating, they had landed more than two hundred thousand
Speaker 1: dollars worth of contracts. Now, I should say that's a
Speaker 1: contract for two hundred thousand dollars or contracts worth two
Speaker 1: hundred thousand dollars. That didn't mean that they earned two
Speaker 1: hundred dollars in the first month. They still had to
Speaker 1: deliver upon the promise of that contract in order to
Speaker 1: get that payment. Learner would later tell Forbes that quote
Speaker 1: we suspected that Procter and Gamble in Des Moines was
Speaker 1: going to want to talk to Proctor and Gamble in
Speaker 1: San Francisco end quote, meaning she could see a business
Speaker 1: case for the networking products right away. She said, these
Speaker 1: are going to be components that every large business and
Speaker 1: ultimately middle sized businesses and maybe even small businesses down
Speaker 1: the road. Will all need, but that would require the
Speaker 1: business to scale up. They couldn't just work out of
Speaker 1: their living room. They were never going to be able
Speaker 1: to meet the demand and they would always be behind
Speaker 1: if they didn't scale up. That would require more capital
Speaker 1: than what they had at their disposal. Bozak and Learner
Speaker 1: had already maxed out their credit cards. They also took
Speaker 1: out another mortgage on their home, and they did this
Speaker 1: all to keep the business afloat while they tried to
Speaker 1: deliver upon those contracts. Learner had also taken a job
Speaker 1: as a manager for the Research Computing Systems group over
Speaker 1: at Schlumburger Computer Aided Systems Laboratory, and it was clearly
Speaker 1: just not going to be enough. They started to look
Speaker 1: around for investors. Originally it didn't go so well. Bozak
Speaker 1: would later say, quote, we must have talked to eighty
Speaker 1: or ninety different venture firms. We got turned down by
Speaker 1: just about every one end quote. In January, the co
Speaker 1: founders decided to hire on William Graves as president and
Speaker 1: chief executive officer. Graves it previously were for Bell Aerospace
Speaker 1: Textron where his job was I don't know, it says
Speaker 1: classified on LinkedIn. I don't have classification. Back in six
Speaker 1: Cisco's revenue was a hundred twenty nine thousand dollars, which
Speaker 1: sounds not bad. Nine thousand dollars now, that's revenue for
Speaker 1: the whole company, and the two were able to well,
Speaker 1: really more than two. The five virginal employees were able
Speaker 1: to land contracts that were worth more than a hundred
Speaker 1: twenty nine dollars, but delivering upon those contracts was a challenge,
Speaker 1: and once you took the expenses for the company into account,
Speaker 1: they were essentially kind of breaking even, and the following
Speaker 1: year saw some improvement. By the end of Cisco's fiscal
Speaker 1: year in nineteen eighty seven, by the way Cisco's fiscal
Speaker 1: years end in July, Cisco would achieve revenues of one
Speaker 1: and a half million dollars with a ten percent net
Speaker 1: income before taxes, which meant the company was able to
Speaker 1: make enough money to stay afloat while looking for an investor.
Speaker 1: They didn't have to take out even more loans. Sequoia
Speaker 1: Capital and Investment Firm eventually stepped up to invest in
Speaker 1: the company, but Donald Valentine, who was the backer at Sequoia,
Speaker 1: he was ready to invest in late nineteen eight seven,
Speaker 1: but felt that Larner and Bozak lacked the experience to
Speaker 1: grow a company and lead it effectively, and apparently he
Speaker 1: felt that Graves just didn't cut it either, so he
Speaker 1: insisted in n on installing a new chief executive officer
Speaker 1: to take the reins and lead the company. After ast
Speaker 1: installing an interim president. Valentine ultimately chose John Mortgaridge in
Speaker 1: October nine. Sequoia would also get a thirty two percent
Speaker 1: ownership of the company, and in return, Cisco would get
Speaker 1: two and a half million dollars in investment capital. Bozak
Speaker 1: and Learner would retain thirty percent ownership of the company,
Speaker 1: which would vest over the course of four years. Mortgridge
Speaker 1: was an NBA graduate from Stanford, but he graduated in
Speaker 1: nineteen fifty seven, so he preceded Bozak and Learner's time
Speaker 1: at Stanford by a couple of decades. They did not
Speaker 1: cross over. He had worked for Honeywell Information Systems and
Speaker 1: then later on he was the chief operating officer of
Speaker 1: a company called Grid Systems. According to Learner, the first
Speaker 1: time she met Mortgadge, he had already been hired on
Speaker 1: to be CEO of Cisco. So there was a little
Speaker 1: bit of acrimony between the co founders and John Mortgadge
Speaker 1: because they didn't really have any say and who was
Speaker 1: going to lead the company they had founded. But if
Speaker 1: they didn't go along with this, they wouldn't get the
Speaker 1: investment money they would need in order to scale up.
Speaker 1: At the end of the fiscal year Night, which was
Speaker 1: just a few months before Mortgage was officially installed as
Speaker 1: president and CEO, Cisco was on the upswing with five
Speaker 1: and a half million dollars in sales. Mortgage would take
Speaker 1: the company even higher, and Valentine would end up becoming
Speaker 1: the chairman of the board of directors. This, however, did
Speaker 1: not mean everything was going smoothly at Cisco. So while
Speaker 1: Cisco continued to create network infrastructure hardware for clients, the
Speaker 1: co founders were clashing with their new management. In February,
Speaker 1: Cisco held its initial public offering or i p O.
Speaker 1: This is when a company goes from being a privately
Speaker 1: held company to a publicly traded company. According to invest Opdia,
Speaker 1: a one thousand dollar investment would have netted you fifty
Speaker 1: five point five five shares of Cisco stock, which by
Speaker 1: my math means the stock price must have been somewhere
Speaker 1: around eighteen dollars per share. By the end of the
Speaker 1: first day of trading, the share price had risen twenty
Speaker 1: four percent and the company's valuation was was estimated to
Speaker 1: be two twenty four million dollars. The company found much
Speaker 1: of his success early on in overseas markets. It was
Speaker 1: selling network infrastructure hardware to tons of clients. Things were
Speaker 1: going great, except that the co founders were still not
Speaker 1: really happy with the way the company was being led.
Speaker 1: In August, Sandy Lerner, co founder of Cisco, was fired
Speaker 1: from her job, and in a show of solidarity, Lynn
Speaker 1: Bozak resigned from the company as well. The co founders
Speaker 1: had left, and they sold off their shares in the
Speaker 1: company for around a hundred seventy million dollars. Their marriage, unfortunately,
Speaker 1: had taken some hard bumps along the way. They had
Speaker 1: been working endlessly on the company, and they found that
Speaker 1: they were no longer really working well as a married couple,
Speaker 1: and so in the ninet nineties the two would divorce.
Speaker 1: Sandy Lerner would go on to fund several other ventures,
Speaker 1: including the Urban Decay cosmetics line that was her project.
Speaker 1: She also headed some philanthropic efforts. Bozac would go on
Speaker 1: to found a company technology company called x k l
Speaker 1: l C. In Now. In the next episode, I'm going
Speaker 1: to cover more of Cisco's history, how it grew to
Speaker 1: be the most valuable company in the world, and how
Speaker 1: it lost more than three quarters of that value as
Speaker 1: a result of the dot com bubble burst, and then
Speaker 1: how it was able to recover after the wake of
Speaker 1: the bubble bursting. That will be in the next episode.
Speaker 1: If you guys have any suggestions for future episodes of
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