As is typically the case when one company jumps ahead of the others, analysts like me get asked what makes Nvidia so much more successful than its peers. While my peers may have different answers, I think there is one predominant cause for this success: Nvidia’s CEO, Jensen Huang.
Huang has had three clear advantages that most other CEOs lack. First, Huang’s technical proficiency allows him to set and execute a vision. Second, Huang is a founder, which typically grants unusual loyalty and power over the company. Finally, he is the longest-serving tech CEO in recent history.
I say “recent history” because Nvidia is around 30 years old, and IBM’s first CEO and founder, Thomas Watson, served for 42 years during a time when IBM pretty much was the tech industry and was even more successful than Nvidia is now.
Thomas Watson had the same three advantages as Huang. When Watson’s son, Thomas Watson, Jr., took over, he inherited those same advantages and took IBM to even greater levels by being additive. Huang has a son, Spencer, who works at Nvidia, but his true heir is AI, suggesting it could be either his or Spencer’s successor. Let’s talk about that this week.
We’ll close with my Product of the Week, my new favorite smartphone, the Google Pixel Fold.
Why the CEO Job Is Broken: The Overcompensation Problem
CEOs are overcompensated, and this creates significant financial and operational problems in both public and private companies. CEOs weren’t always the highest-paid positions.
When I first entered the tech field, one of my jobs was managing compensation, and some of our sales reps made significantly more than the founding CEO. Granted, founders had founder stock, which eventually raised the CEO’s compensation when that stock was sold. But unlike today, CEO compensation wasn’t massively higher than that of other executives. Today’s CEOs are overcompensated, and that leads to three big problems:
- The disparity creates friction among employees who feel they are doing the work while the CEO gets all the rewards. This situation is particularly problematic when a CEO institutes a layoff or salary reduction plan, and the employees feel they are being treated unfairly, given the CEO, even with salary cuts, is making crazy money. This reduces loyalty to the CEO, making the company less efficient and key employees less likely to remain with the company.
- The CEO is motivated to acquire things that, in turn, need to be managed, detracting from doing the job they are paid to do. Some CEOs have multiple mansions, yachts, and rare car collections that are all enviable, but these things have to be managed and take away time from the CEO’s ability to do the job they were hired for. This additionally exacerbates the feeling in the rank and file that the CEO is taking advantage of them, particularly when cutbacks occur.
- This overcompensation can convey a feeling that the CEO can do whatever they want. They are so used to having crazy money and extreme authority that they get the idea that rules don’t apply to them and discover the hard way that some rules do. CEOs getting fired for misogyny, mishandling of company assets, and other types of misbehavior are common and very disruptive to the company.
The Advantage Enjoyed by Founders
Successful founders tend to prioritize the company and often aren’t known for excessive spending. This doesn’t mean they don’t sometimes spend excessively (Bill Gates did build a hotel of a house and then regretted it), but their possessions don’t significantly degrade their focus on their company and people.
So, while I do think excessive compensation degrades their performance, it doesn’t seem to do so in a material way because their job and hobby are both the company and their true passion, and thus, they are able to outperform their more compensation-based peers.
Founders also know the company more intimately because they directed its construction. They know better than anyone what the company is capable of and can better set an achievable vision for the firm’s future. Hired CEOs may never truly understand what a firm is capable of and avoid “the vision thing” altogether because they don’t want to be seen as failures.
The Succession Problem With Founders
When a founder leaves, a company seems to lose its way. I was one of the folks who studied IBM’s decline and near collapse, and it was clear that when Thomas Watson Jr. left, IBM started to die. Interestingly, it didn’t start to die when Thomas Watson Sr. left because Jr. effectively took his father’s advantages and enhanced them, as he’d been groomed to do that.
Still, even though I’d argue IBM has the best internal CEO training program and deepest bench of potential CEOs than any other company, it had to go outside that structure once, reset, and then rebuild because this “founder” capability was lost in transition.
Corporations are supposed to be eternal, though Founder CEOs don’t always want them to be because they don’t want to be overshadowed by their successor. Watson Sr. was one of the exceptions since he, as most fathers should, seemed to want his son to be even more successful than he was.
Succession just doesn’t seem to be a priority in most firms. Most CEOs seem more worried that their successor will be selected prematurely — and for good reason, because that often happens, which conflicts with a good succession process.
Digital Human Advantages
Nvidia has created the concept of “digital humans.” Today, they are built mainly for sales and customer support, but they could evolve into replacements for almost any job. For instance, Cognition Lab just launched the first AI software engineer called Devin, which can autonomously write apps. It can complete real-time jobs posted on Upwork and has autonomously resolved 14% of the GitHub issues found in real-world open-source projects.
This is just the beginning of the emergence of digital humans.
When it comes to succession, digital humans have several clear advantages over non-digital humans. One is that the digital human would be created to fully emulate the founder, so it wouldn’t reflect badly on them. Even when it out-achieved the founder it replaced, its hard connection to the founder would ensure the founder got the credit, so the prior CEO is less likely to sabotage the effort.
A digital human doesn’t have a compensation problem as it wouldn’t need compensation, and it wouldn’t be distracted by personal possessions or family as it wouldn’t have those either. It also wouldn’t have the drives that often cause CEOs to misbehave, though you’d want to ensure the information stream the digital human was receiving was uncompromised, and you’d need to ensure that the digital human was surrounded by sufficient security so it couldn’t be hacked.
In other words, given how quickly a digital human could act, assuring they continue to perform in the best interests of the firm, its employees, and investors would be even more critical to ensure a human CEO didn’t go off the rails.
Wrapping Up: Why Nvidia Will Have the First Digital Human CEO
The reason I think Nvidia will be first is that it has the greatest need to preserve the advantages it gets from its founder, Jensen Huang. In addition, Huang is an AI advocate, which means that Nvidia not only leads in AI solutions but also uses AI internally. So, Huang has been a significant driver in both the creation and use of digital humans.
Nvidia has the greatest need, the strongest foundation to create one, and by creating one it would have the best showcase for how a digital human could outperform a human at certain jobs. If a digital human could do the CEO’s job successfully, the question flips from “what could it do” to “what couldn’t it do,” with the latter list becoming ever shorter.
Jensen Huang has at least a decade of service ahead of him, so I doubt this will happen quickly. Still, I could see him spinning up and training his digital twin long before he left the company to increase his reach, and he might not just create only one. I can imagine a future where “digital Jensen Huangs” are sold to firms as advanced CEO digital assistants and eventually as CEOs even before the real Jensen Huang steps down.
The Google Pixel Fold
(Image Credit: Google/YouTube)
My favorite smartphone was the Microsoft Duo 2, but with Panos Panay’s departure from Microsoft, I doubt Duo and Surface are long for this world.
There is a rumor that a foldable Duo 3 is coming, but my Duo 2’s battery has degraded to the point that it won’t even stay up for 5 hours, let alone an entire day. I read books on my phone, so that’s a problem. So, I bit the bullet and went looking for a replacement. The dual-screen Google Pixel Fold comes the closest to both what the Duo 2 was and the Duo 3 might be (if it ever launches; I have my doubts).
I’ve been using this phone for about a week now, and so far, it is as good a reader as the Duo 2 and has far better battery life, even though it has both a foldable screen in the middle and an additional screen on the cover.
One downside, however, is that Pixel Fold uses the Google Tensor G2 processor and not the Qualcomm Snapdragon solution, so it lacks several features. The one I miss the most is the ability to use a head-mounted display for movies. For me, the best advantage with Snapdragon is that everything just seems to work, and alternatives simply don’t provide that same level of capability.
The phone isn’t a cheap date at $1,799. If I could have waited, I would have waited for the coming Pixel Fold 2, which is due out in a few months. But I couldn’t wait that long because my Duo had degraded to the point that it wasn’t usable, and I needed my phone to work.
Since the Pixel Fold helped me solve my dying Microsoft Duo 2 phone problems, the Google Pixel Fold is my Product of the Week — and I really do enjoy using it.
