How I Built This with Guy Raz - Cisco Systems & Urban Decay: Sandy Lerner

Episode Date: October 1, 2018

In the pre-Internet 1970's, Sandy Lerner was part of a loosely-knit group of programmers that was trying to get computers to talk to each other. Eventually, she and Len Bosack launched Cisco Systems, making the routing technology that helped forge the plumbing of the Internet. But when things turned sour at the company, she was forced to leave, giving her the chance to start something entirely new: an edgy line of cosmetics called Urban Decay. PLUS in our postscript "How You Built That," how Justin Li created a solution for staying cool and hydrated in the heat with IcePlate. See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

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made it feel less like a visit and more like we were actually living there. Plus, taking a trip is the perfect time to host your space on Airbnb. Your place with all of its personal touches and its amazing location could make someone else's vacation even better. Your home might be worth more than you think. Find out how much at Airbnb.ca.com. Hey, it's Guy here. And before we start the show, I just want to let you know that we still have tickets available for our upcoming live show in L.A. It's with Michael Dubin. He's the co-founder of Dollar Shave Club. It's an amazing story of how he turned that. into a billion dollar company. And if you haven't been to a live show, they are so much fun. It's a chance to meet me and meet the team behind the show and also a chance to meet your

fellow HIVT listeners. So if you want to take it, go to nprpresents.org. That show is supported by American Express and hope to see you there. I had to go get another job besides Cisco. And we had only my income. And we were mortgaged the house to the hilt, which we might have lost at any particular. particular time. And we had creditors up the wazoo, and I had people calling me at two in the morning complaining because they didn't have their routers. Yeah, it was very hand-mouthed in a way that I think that people who want to be entrepreneurs these days really don't understand. From NPR, it's how I built this, a show about innovators, entrepreneurs, idealists, and the

stories behind the movements they built. I'm Guy Raz, and on today's show, how Sandy Lerner helped launch one of the most successful companies in the world, why she had to leave it, and how she went on to remake herself again and again and again. If you use the internet today, or if you're listening to me right now through your smartphone or a computer, there's a pretty good chance that that information

is flowing through a network that was developed by Cisco systems. Cisco is the largest networking company in the world. Its hardware, servers, routers, and software touch almost every part of the internet. Now, the idea that one computer can talk to another computer isn't particularly earth-shattering, right? But in the early 80s, this was a pretty big challenge, even at Stanford University. If you worked on a computer and, say, the engineering department, it couldn't talk to a computer in another part of the campus. Things that we take for granted, like email or instant messaging or slack.

There was no infrastructure to make these things work on a big scale. But there was an informal group of graduate students at Stanford that was trying to solve this very problem. And Sandy Lerner happened to be part of that group. She and another grad student, Len Bozak, founded Cisco Systems. Today, it has a market cap of around $200 billion. But that growth, it happened largely after Sandy and Len left the company after Sandy was pushed out. It was pretty devastating at the time, and we'll get to some of that story. But we'll also hear how after all of that, Sandy went on to build another successful and entirely different type of business, a cosmetics company called Urban Decay.

And then she reinvented herself yet again by starting an 800-acre sustainable farm in Virginia. where she now lives. And even Sandy's childhood almost sounds like a fairy tale. Her mom and dad split up when she was just four years old, and there was so much turmoil in the family that Sandy was sent off to live with one of her aunts,

which sounds like it could have been pretty traumatic, except her aunt lived in Beverly Hills and made Sandy the center of her life. I thought it was a wonderful thing to go and stay with my aunt. She was very cool. And she had a very elegant world. We would go to the May Company tea room and sit in that gorgeous blue dining room,

and I didn't think life got any better. So your childhood was spent largely in living with his aunt in Beverly Hills? Until I was six, and then there came a day when my aunt's sister said, if you come and live with me, I'll give you a pony. And my other aunt, Beverly Hills, said, well, if you live with me, when you're 16 and you can have a car. But, you know, when you're six, you're thinking, my God, I might not even live that long. Maybe there won't be cars, so I took the pony.

Wait, they were competing for you to live with them? Did I hit the jackpot or what? So you, at age six, moved to where? Clipper Gap. It's in the higher Sierra foothills up on the northeastern part of the state. Of California. Of California, yeah. And what do they live?

Was it a ranch? Was it a farm? Well, it started out 108 acres, and they were farming. and my grandpa lived up there also and racing some cattle. And I just fell in love with farming. So you, I guess when it was time to go to college, you stayed pretty close, right? Oh, I left home at 15 and got a job working at the bank for a year and a half before I went to college. So where did you go?

To Auburn, six miles down the road. Was it interesting? Did you, was it just a job? You know, my uncle, it was a very small town. My uncle went to Kiowanas with the bank manager. And, you know, I think my uncle was kind of watching out for me and making sure that I had a safe place to work. But it was a terrible job. The bank owner made all of the tellers kneel so he could check that our skirts were long enough. And he called us all Louise.

This is in like 1970, 1971, 1972. 1972. We were all Louise because he knew Louise. And she'd been there a while and we didn't really rate our own names. And were you at that time? Were you enraged about that? Did you see about that? You know, it was the first time I'd ever experienced any sort of sexism.

I mean, on the farm, I was the kid, you know, so you did the boy jobs, you did the girl jobs, you did, you know, I loaded the gas trucks, I drove a truck for a summer. You know, you just got on with it. And it was the first time I hit sexism, and it just completely rattled my world, and I needed to get out. I just needed to get out. So I guess it was around that time that you did decide to go to college, and you went. I think it was Chico State in California. What did you study there? My undergraduate degrees are in international relations with an emphasis on comparative communist theory and a minor in Marxist economics.

Wow. These were the Vietnam years remember. Yeah, right. Did you have a sense of what you wanted to do? Oh, absolutely. I went through college in two years. And I wanted to be, I had it all mapped out. I would have my Ph.D. by the time I was 22. You did your degree in two years? I mean, obviously, you're, we'll get to this. I mean, you're a highly intelligent person, but were you just sort of, did you feel unusual? I mean, that's very fast. I mean, it was a lot of work. It was, it was a tough two years. But on the other hand, I was so convinced I was never going back to that bank. Never, never, ever, ever going back to that bank and having to put up with that. And I ended up getting an absolutely first-rate education.

So how did you go from studying Marxist economics and international relations to studying computers? Well, I went to Claremont Graduate School because I had a full scholarship. And the first quarter, I ended up being an advisor in the computer room. And, you know, in 1975, I was making $25 an hour computer programming. And, you know, to me it was easy and it was something that I thought would pave the way to being able to enter the job market in a good place. So you are studying, you're sort of exposed to computing at, Claremont, and then what? What was your next move? At this point, I still thought I wanted to be an academic. And so I picked up my little self and applied to Stanford, and because the political

science department, there needed programmers because, of course, they were getting to the point where you couldn't publish anything if it didn't have some numbers in it. They let me in. And I got in and immediately segued into the statistics and computer science department. Now, 1975-76, Stanford, like, now it's a legendary time, right? I mean, it's like we're talking about, you know, the beginnings of the Internet and all these, you know, the people influenced by JCR Licklider and Steve Jobs going through Park Xerox and all that era. That was an amazing time. So you get to Stanford in the late 70s. What does a computer look like at that point?

What were you working with there? Well, I was really lucky at Claremont. We had a Deck System 10, and that's what I learned a program on, and I learned a number of the programming languages and did a little bit of systems programming. But when I got to Stanford, they also, they had deck tens and deck 20s, which was great because it's a huge time sharing system that would have 200 simultaneous users. And since I'd been running the math and statistical software on the time sharing computing at Claremont, they had the lots of volunteers, and so I became a lots of volunteer.

A lots volunteer. Largely overloaded time sharing system. Got it. A little orange time sharing system. So just explain this to me in language that I can understand. When you say you were programming these computers, you were taking in raw data and helping them to create statistics from that raw data? That's right. And this just would come to you intuitively.

Like you just kind of learned this by playing around with it? Absolutely not. I work my butt off. was in high school, girls didn't get to take fourth year calculus. When I was in high school, girls didn't get to take physics. So I had to learn all that stuff in graduate school. You had to learn how to program a computer. Oh, absolutely. What did you love about it? Two things. One, the money. And two, the independence that it offered was hugely attractive to me. You know, not being tied to hours, not being tied to a desk. You know, I've always been

kind of an anarchist. And the idea that you could come and go, and as long as you got the work done, Everybody cared about your day. Yeah. When you got to Stanford, what was your impression of the place? Was it like, wow, I've finally arrived to this amazing valhalla of technology? No, not technology, of smart people. Huh. I wasn't a freak anymore.

They were very welcoming, and I had great friends, the computer science and at lots, the time sharing system. And we would have two meals a day together. With who? This group of engineers? all hanging out around computer labs, basically? The computer system, absolutely. We hear a lot about the, and we know a lot about the gender gap in the tech world. We're talking about the late 70s.

I mean, you must have been like one of one or two or three women around all of these male gradients. There were very few. I was the only graduate level of female, but it was also a very welcoming group, and they didn't care really if you were three foot high green and stink, as long as you could, as long as you had the technical chops and you kept up. And I could do that. There's a small group of people. You know, there were probably about eight, ten, or twelve of us.

People would sort of drift in and drift out. But remember, we had two meals a day together. We spent the weekends and lots together. I mean, I would leave these people at two in the morning. These were just computer geeks, just total programmers, total. One of people had written the first spell checker and typed in the entire dictionary himself. One of us had a triple major at Stanford in a master's degree in 40 years. And we were all computer addicts in love with this particular architecture.

We built our own internet. We maintained our own internet. We built our own printer interfaces. We built our own computer terminals. It was just one of those times in life where what you gave you got back. How did you meet Len Bozac? I met Len the first time when he was interviewing Stanford, and I mean that. Stanford was not interviewing Len.

Len was interviewing Stanford. Go to become a student there. Well, he was thinking about getting a master's degree, and he was kicking around, thinking he needed something to do. And on that day, I remember we went to Chinese food. And remember, these guys are all largely overweight, and they're not the people who were picked on the baseball team. And we're all sitting around there, and these guys are flaming themselves out with hot oil on this. Chinese food, and they're like all red, and they're like perspiring and everything. And Len sat there, and they were all like being very noisy and, you know, of questionable

hygiene. And Len sat there, and his clothes were ironed and his clothes matched. And he had this beautiful blonde hair and this very soft voice. And he could eat with a knife and fork. And when they would get all done arguing with each other, they would look at Len and they would say, well, you know, basically essentially, what is the answer? And Len didn't join in until they invited him. and then he would tell them the answer,

and then they would have another topic and argue and argue, and then they would come back and say, well, Len, what is the answer? And I was just absolutely enchanted. I had never seen a more perfect human being in my entire life. And basically you guys became partners. It was very quiet because the dynamics of the group were that, you know, you weren't supposed to have favorites.

That would have been very destructive to kind of the collegial kind of, of group dynamics there. And so it was really nobody even knew we were seeing each other until we decided that we wanted to get married. So I'm trying to get a sense of what some of the problems you were dealing with at Stanford in the early 80s. Basically Stanford, right, at the cusp of, you know, at the sort of the bleeding edge of the technological revolution, lots of computers all over Stanford, presumably. but I guess they couldn't communicate with each other?

Was that that was a problem? Well, it used to be that you either bought deck computers, you bought IBM or you bought HP or you bought Data General or you bought Wang or you bought whatever. Because those were the only ones that could communicate. Like an IBM could only communicate with an IBM. No, it wasn't. That is true, but the reason was that it was so new,

you entered into this unholy alliance with the vendor and they would help you. I see. So some departments had IBM, some had, Some had deck, some had wang, whatever was around. Well, whatever they felt matched their research or their, you know, pedagogical requirements. They were a law into themselves and they bought what they wanted. Which is typical of universities, right?

Everybody wants autonomy. So there are 5,000 computers. Probably many more at Stanford today, obviously. But this is the late 70s and these computers could not talk to each other? That's right. And meanwhile, Stanford, I guess, was actually trying to build its own computers. network, right? I mean, and that wasn't working? So what? In the meantime, we built one. You were doing a shadow network yourselves. Yeah. You, Len, and this group of engineers, you guys are trying to figure this out. Plus all the people in the ARPA net community who were working on parts of this. And ARPENET is this precursor to the internet. This was the thing funded by the government. Yeah. And that's what ARPA was for. It was a network to foster the interaction and intersharing of ideas and information. among the different people who were taking ARPA money.

And that's what we were doing. So how are you doing this? Was Stanford aware of what you were doing? Officially? Absolutely not. We were definitely under the radar and we kept it under the radar. And it wasn't until one day, I think it was by 1981, our time sharing Ethernet became the Stanford University Network. Wow. Just one day, it just, you know, the benediction went in our direction.

and then we were the Stanford University Network. So you created a system that would allow these computers to communicate. What today we would, I guess, call a router. You build a network at Stanford. What was the thing that was motivating you guys? Why did you want to do this for Stanford? I didn't do it for Stanford. I think there's a lot of misunderstanding about those early ARPA years.

We did it because it was the right thing to do. ARPA was giving money. It was all public domain. Nobody had a financial motive. And the thing that ARPA did that was so amazing even today was it gave the right people the right money. It wasn't political. It wasn't there wasn't any religion involved in it. It was just this collection of these incredibly smart, dedicated people who made things. And I was really, really lucky to get to be a part of that. I mean, everything. that you could do every day and you could hook something new up or you could, you know, you could get a message someplace or you could, you know, you could get these milestones. And it was, I guess if you're a nerd, it was just a tremendous adrenaline rush. Hmm. So you are in your 20s at this time. And ARPA, this government agency is funding all these cool projects that eventually would help

to create the Internet. You are part of this team that creates a network that Stanford then adopts as its protocol. And at that point, these 5,000 computers are able to talk to each other? So what, at that point, you and Len, were you married at that point? Yeah, we married in 1980. We both graduated from Stanford, same department, same platform in June of 1981 with master's degrees. And Len had walked into a job as the head of computing systems for the Department of Computer Science.

and I had gotten a job running computers from the business school. So we were looking at long, happy, nerdy careers in that environment. But didn't you want to do something with the routing technology that you'd worked on? Oh, absolutely. But Stanford said, no, you cannot license this technology. They would not entertain any licensing. We had done our part and we had taken the government's money. This is all public domain.

We'd invented all of these wonderful things. But the Office of Technology licensing didn't let anything out. And Stanford was not even letting us sell it to the universities. So you and Len are frustrated because you believe that this technology needs to get out into the world, that there's all kinds of uses. We took carpet money. This is United States money. We don't have a right to this stuff. We did develop it, but we didn't invent it. It was a community of people were very smart and very committed in all of these different places. And in Stanford, all of these different departments, there was a huge community at that. point, and Stanford was saying, just no. And you didn't care. You weren't saying, hey, we're

going to take the money for this. No, the money would go to Stanford or whoever owned. You didn't care. We didn't care. You just wanted it to be out in the world. Stanford could have taken 100% of it, as long as you know, they paid the bill for the parts. I see. We had good jobs. So was it at that point where you and Len just said, we better start a company and do it ourselves? At that point, I believe that Len knew a whole lot more about business than I did. And at some point, And he looked at me and he says, well, we're just going to have to go and build this stuff on our own money because we can't do it. The university won't allow us to do it within the university. So one day I drove up to San Francisco with a $5 bill and started the company.

A $5 bill for... Cost you $5 at that point to register with the California Secretary of State for a new company. And so you are trying to build a company that, just in layman's terms, would help computers communicate. We were trying to build terminal service and routers. Right. And you called it? Well, that came later. Cisco was actually the 36th name that we tried to get.

Anything having to do with computers we couldn't have. Because it was taken by someone else. So Cisco as in San Francisco? Yes. And I designed, it was my name, and I came up because remember at that point, a router's a gateway. So I came up the little logo of the Golden Gate Bridge. Which is still the logo for Cisco.

Absolutely. And it was a part of San Fran and Cisco. And so we just, with tears on our eyes, basically said, well, I guess we've got to go do this. I had no idea what we were getting into. I mean, you had no interest in leaving your jobs at Stanford at that point, leaving this comfortable life, you know, sort of servicing their computers. By this time, this was 1984. And there were starting to be creeks. I mean, I was paid half of what my predecessor made, and I was paid a third of what my successor was paid.

Wow. And, you know, when the faculty would meet at the beginning of the year to plan the curriculum, even though I was ahead of all of the computing facilities, both administrative and the curriculum computing, I went and had lunch with the faculty wives because where they had their annual meeting didn't allow women. This is in 1983, 84. Yeah. So it was starting to creak, and I was getting a little bit bored. And, you know, the mini-computers were starting to come in. I really didn't have a lot of interest in that. So I would say that I was ready for something else, but, you know, it's a complete misunderstanding of the times to think that Len and I had huge dollar signs in our eyes and knew that this company was going to go public and make a bazillion dollars.

Okay, so Sandy, based on whatever, this is really where the story gets a little complicated here. So I'm going to try and abbreviate things and just say that during that period, you, I think you, You leave Stanford, and then Len also leaves. And then around the same time, Stanford looks at what you guys are doing with Cisco. And they claim that you've stolen their technology, right? And they threatened to take legal action. Yep. So how did you deal with that situation?

Well, when Len and I left, well, when Len left Stanford, a great deal of the engineering team behind the Internet at Stanford left. And so Stanford was left with a network. it didn't have any ability to run and certainly nothing to maintain. So within that very fortunate confluence of events, a very serendipitous confluence of events, we actually did have some bargaining power and we ended up paying them, I think, a very fair royalty for the first, gosh, I want to say $3 million a product or something, a very fair royalty. And we had to fix their network for three years. So that's a pretty good deal.

You know, it's the deal they should have made to begin with. You know, if they'd have said, here, pay us a modest royalty that you can handle from a cash flow point of view and maintain our network. We'd have gone, okay. And how are you, first of all, how are you funding your company? I mean, to build credit cards. We mortgaged our home. A friend of mine that used to work for me at Stanford would sit on the telephone and tell our vendors that the check was in the mail.

How were you even getting customers? You were just, just word of mouth. The internet. The internet knew me and Len. The internet knew about the routers. The internet was the internet. And everybody who was part of that wanted what you were offering? Absolutely. By 1987 with no sales force, we were booking a quarter million dollars a month.

Wow. Who were your customers? Our first customer was Hewlett-Packard Laboratories. Second one was Rutgers University. Third one was Boeing. And by that time, the Internet community had matured, and it was no longer just the bleeding edge that we're ordering these internetworks, which were networks of networks. So it had kind of moved into the keeping up with the Joneses in the sense that if you didn't have an internet, it was kind of you were backwards. So the style had changed. And you guys were building these in a...

In our living room and lens parents. Like, soldering irons? Absolutely. I'm trying to figure this out. Absolutely. Really? Well, jobs started in a garage. At least I had a living room.

I had heat. What did the actual, when I'm trying to imagine you guys soldering and building these routers, what do they look like? Was it a giant thing? Was it the size of this room? You know, I would say it was a size of a good-sized bread box. So it wasn't that much, it was more or less the size of today's routers. Well, today's routers are that size. But, you know, it was a size of a microwave.

Yeah. Can I ask you a dumb, I'm going to ask you a dumb question, because you and Len were programmers. You guys could sit at a terminal and figure out how to create these programs that would then do things. Cisco is a hardware company. That's what I want to know. How did you know how to build the hardware? Is this something that you just kind of figured out? I had nothing to do essentially with the hardware,

but Len is a superb hardware engineer, and that's how Cisco made its money because of Len and his hardware engineering. Len also happens to be an unparalleled systems programmer. Len's just really good. Were you stressed out about, I mean, okay, I understand that you were not motivated, by money, but you had to have money. That company had to be sustainable. Oh, absolutely. I had to go get another job besides Cisco. I worked for Slumberger Computing computer and systems laboratory running their computers. And we had only my income. And I didn't have a car. And we had seven people

that we were working. We were mortgaged the house to the hill, which we might have lost at any particular time. And we had creditors up the wazoo. And I had people calling me at two in the morning complaining because they didn't have their router or their terminal server. And, yeah, it was stressful. Because you didn't have a factory. You were making each one. We didn't have the money to build the damn things. We were having to buy parts on credit.

Wow. We had every credit card maxed out. Kirk Lougheed, who was one of the founders, gave us $10,000. Len's parents gave us $10,000. Robert Michaels loaned us $10,000. He worked at HP Labs. But everybody, all these people wanted to buy them from you. You just could not make them fast enough and you didn't have the money to make them.

Well, think about the university payment cycle. You know, universities by the time, they're budgeted. Right. They're paying 90 days later. Yeah. And, I mean, literally, we would get the money. We had pretty good margins. I mean, we were doing a good business.

We would get the money and we would pay off the two months bills before. Wow. But then if you had an order for another 20 boxes, we had to borrow it. We had no collateral. We'd already mortgaged the house. So here's what I don't get. You guys, it's just a few of you, mainly you in Atlanta's the beginning, trying to build this. You obviously have this thing that a lot of companies are interested in a lot of universities.

A lot of people are interested. Why didn't you just go and get some investors to put some money into the company? We went through about 70 or 80 of them. 70 or 80? And the problem was that, you know, at this point, the investor community, which was, a whole bunch of old, you know, Fairchild Semiconductor salesman, they didn't think that you could make any money on a public protocol because, of course, everybody would do it. You know, deck net was a proprietary protocol. S&A was proprietary protocol. PUP was proprietary protocol. But of course,

your technology was in the public domain. So they thought, you know, anybody could do this, right? You don't own this. Right. Everybody else was going to do it. Which makes sense, right? Except that if everybody could do it, why didn't they? So when you went to investors and you pitched them on this? They had no clue what I was talking about. First of all, there was a woman founder. And they're all 60 or 70. They just didn't know how to relate to a woman in business, you know.

And, you know, Len is a great guy, but he's not normal. Meaning? Well, two of us are pretty abnormal. I mean, so I was basically a translator a lot of times. You were the face? You were the front man? Well, not a lot of people can have a conversation with Len. And were you feeling, I don't know, were you feeling dejected or nervous or anxious?

I mean, you needed to build these. You didn't have money. I think that I've never been in a war, but I think that we had all of us who were there. There were probably about 10 or 12 of us at that time very much had a trench mentality. How were you paying everybody? We could get enough income fast enough to meet payroll. And we had a whole bunch of free labor. Lenz parents were building cables and my aunts came down and did Xeroxing for us and I was managing the cash flow. But it was very hand-mouthed in a way that I think that people who want to be entrepreneurs these days really don't understand.

Was it exciting or was it? No. It was nerve-wracking. If you can imagine being in a World War I trench in the mud being constantly shelled by the Germans and the mustard gas and no food and no relief and no sleep, it was that exciting. When we come back, how Sandy and Len finally did get their funding for Cisco Systems and why they both eventually walked out of the company they built. Stay with us. I'm Guy Raz and you're listening to How I Built This from NPR. Hey, welcome back to how I built this from NPR. So by the mid-1980s, Cisco Systems was up and running.

And Sandy and Len went through a bunch of different investors trying to get their router company funded. Until finally, they found the guy they needed. I guess it's at that point where you come across a guy who becomes pretty well known to people who follow the investment, the VC world, a guy named Don Valentine. You come across him, and this is a time where you are really desperate for cash. And what is Don Valentine? He's with Sequoia Capital. What does he say to you? Don told us that, well, you know, I've taken 200 companies public. You walk into his office and, you know, like your little cubes back there. He's got like all these Luside cubes, you know, making this kind of untenable mountain.

And he says, you know, you'll be part of the Don Valentine group of companies. He had already launched tons of companies. Yeah, including Apple and Intel. Wow. Oh, yeah. So the guy who launched Apple and Intel is coming to you and saying, I'll invest in you. Yes, and telling us that, oh, don't worry about getting your own lawyer, you know, we'll pay for it. You know, Len and I walked into a four-year vesting plan after funding the company for three.

three years, clearly a mezzanine investment. We were making, we were booking a quarter million dollars a month at that point. For your investing plan means that your, we had four years to, to put in, to get our stock, and no employment contract. And what did he get? What did he give you and what he get? He gave us $2.6 million and I got about 30%. But remember, he was the chairman of the board of the company, and he got stock from that, and all of his friends got stock. Okay, I think we're foreshadowing that this story does not end well, but we're going to get to why. So Don Valentine is now essentially the boss, right? And so does he say to you guys, I don't want you to run the company anymore? No, no, he was, Don is much more clever than that. You know, Don said, well,

for the good of the company, we need to get you a professional CEO. For the good of the company, you know, we need a professional CFO. And Len and I were still kind of doing the, I think we wanted to believe it. Yeah. You know, we had given our health, our marriage, everything for this company, and here's this guy who's been wildly successful, and we truly did want to believe that that was for the best. And his next strategy was to bring someone in who was hostile. As a CEO. As a CEO. This is John Morgridge. Yeah, and he denies it, but I will swear on the lives of my cats, the first thing he said to me was, I hear you're everything that's wrong with Cisco. When the first time you made, the new CEO of the company that you started, he said,

I'm not aware of that. So when John Mortgage comes in to run the company, tell me what he would have thought was wrong with Cisco. Well, Cisco by this time had a sales force. Remember, the sales force looked like Don Valentine, but younger. Salesmen way into this current millennium are still having the parties with the naked girls jumping out of the cake and all of this stuff. There was a type, you're saying, that came into Cisco. Yes. So it sounds like once the money came in from Don Valentine and Sequoia, there was just a complete, like they kind of took over the culture that you guys had.

You had this culture of passionate computer programmers and they brought in salespeople who had a different motivation, right? Well, they know they had a different motivation. They had a very different set of experiences. And we had a very complicated product. I mean, we were people who have been talking to each other for a decade. at that point. You were all at Stanford together. And, I mean, if you think about it, 20 years ago, try explaining what a router did to people. And we didn't talk normal things. And the salesman, they would come in and they would start talking to, you know, Dave Means or Len or Robert Michaels or, you know, Kirk Laughey or Greg Zatz or one of those people.

And the engineers would just like be staring at them. They weren't speaking the same language. They had no clue. And so I was trying, A, to translate and B, to take the flack from the salespeople. people, translate it, write it up, and discuss it with the engineering people. And these guys were used to having a product that they frankly didn't understand. But to sell a Cisco box, I think you had to understand some part of it because it's what made us different and it's what's made us successful. And at one point, I looked at Don and I said, because he was arguing that we didn't need more floor space because we literally didn't have a place to set the boxes that we were

making. And he says, every company I invest in always wants more space and they always go out of business. And I said, you don't understand, Don, this is going to be a $1 billion company. And he looks at me and he goes, how do you know that? And I said, look at the people here. And then I said the most stupid thing I've ever said in my life, which was leaving me out of it. These people are really, really special. And I did it because I felt, I grew up with a grandma who said, Priti is as Priti does, and you don't say nice things about yourself.

You know, I was being modest. I was saying, you know, even if you don't like me, which he didn't. He loathed me. Look at these other people. They're truly special. I mean, these were people that came out of Stanford at the end of the 70s. You don't know what you've got here. How many women worked at Cisco at that time?

Well, not very many, although we had a couple that were doing inside sales. And we had my friend who was still at that point running the purchasing department. I do remember that at the executive meeting, the head of HR, who was the former Miss California and I, we're the only women. So this is another part of the story where it's a little complicated. And there are obviously different versions of what happened. But essentially there was a lot of tension at Cisco. And it seems pretty clear that there was somebody or some group of people who wanted you out.

That's right. And so I guess one day that your CEO, John Morgridge, calls you into his office. Yep. And what do you remember about that day? Everything. What happened? I was sitting in my little office in the corner as I did every day, and he came in, and he sat down in the chair without making an appointment, and he said, you know, I think it's time you retire. That was it. That was it.

You've got all this money now. You're just time to retire. And I said, well, John, I'm not even half-vested yet, and I've got a lot. I still think I'm doing here, and I started, of course, in my practical way to tell him what I was doing. And he practically told me to shut up. And basically I was fired. Wait, but your share of the company was going to fully invest in four years. This was two years. Bingo. So if you were to walk out of that point...

I'd be walking out with half my net worth. And notice they only fired me and not Lynn. And you could do nothing about that? You know, at that point it was women don't get along. They're not playing team players. You know, this was six months after the company IPO. So you fire one of the founders, big deal. And Len and I were not getting along.

We did have an adjustment period where it was very difficult to create. Your marriage was suffering at that point. We'd given everything up for the company. Our health, our marriage, you name it. Which sounds like it. I mean, I don't know how you could have had a normal marriage. And people handle stress in different ways. And they were simultaneously pandering to Len's ego.

And I had no idea Len had an ego until then. But, you know, he went on the road show. he got the board seat. And I was literally chopped liver. And so they very consciously tried to drive this wedge between us. Sounds like it was working. Well, except for one thing, and someone like Don Valentine has no way to really internalize. Len, for all of his things that can make him very unusual and sometimes very difficult,

he is fundamentally fair and decent. And it is inviolable. And I went to him and I said, Len, I don't know, you know, you're on the board, whether you've heard about this, but mortgage just fired me. And then looked at me in his usual way, his little nose kind of goes up one side, and he says, I am sure you are mistaken. And I said, well, I'm sure I'm not.

The words, you are fired, leave the building, were said. And so, Len, I think you probably could have knocked over both Valentine and everybody else, like little bowling pins when Len walked up there and walked out with me. He walked out in solidarity with you. He absolutely did. He gave up half of his... Potentially. We ended up getting it back, but only because it would have looked very bad for the stocks

six months after when both of the founders walk out. And you can't tar and feather the other one with girls don't know how to play on a team. Wow. So you did manage to retain your one-third stake in the company? With our lawyer and threatening to expose all this stuff six months after the IPO. Right. It speaks to the power of your intellectual partnership that Lynn walked out with you. I mean, it speaks to how much he respects you.

I agree with you. And Len and I, you know, we respect each other as people and we adore each other and we're each other's best friend. And I should say you're not. no longer married today, right? That's right. But what fundamentally hit was something that they could not have reckoned on, and that is that there exists people in the world who fundamentally see black and white, right and wrong. And Len is one of those people that has an unerring sense of ethics.

Did they, they must have panicked when he walked out with you. They did. That could have sunk the company. They were wholly, wholly taken aback. They had no plan B. So, Sandy, somebody who knows, somebody who's hearing the story and knows a little bit about it might ask you this question, which is, when you and Lenn walked out, it's been reported you walked out with $170 million. Their argument, Cisco's argument was, look, you guys are now rich. Just go enjoy life.

And so, I mean, you did have all that money. Was any part of you like, yeah, all right? I mean, I did my job here and, okay, I'll move on. You know, it could have been that way had the sequence of events been less brutal and less personal. Yeah. They could have bought Len and I out. We could have kept, you know, a facade of a relationship. It could have been done 500 ways that would have been a positive thing.

Yeah, it was probably time for me to go. It was probably time for LEM to go. We're just not good people in a collaborative environment. So you both leave the company. And how was your emotional state at that time? Oh, I was a wreck. You know, my entire adult working life was tied up in everything that had been done and sacrificed and built in that company. And the people who stayed there were now longer not my friends.

Yeah. The people who were customers of them were no longer, now not my friends. And it was a time that any kind of tentacle or root that I had managed to put down was just forcibly ripped up. I was on my own. I had a comfortable amount of money. Remember that right after that, Lenin I put 70% of the proceeds in the charitable vehicles. Which does not get distributed until both of you guys are long gone, right? Well, yeah, and we've paid out about $50 million on a private charity that we've.

been funding since since that time. So, you know, I had money, but we're not talking about billions. We're talking about, you know, a tenth of that. You guys sold all your stock. We did. You know, certainly people would say, well, you look, you're crying all the way to the bank. Yeah, how much money can you spend? How much money do you really need? I'm not somebody that, you know, I live in a log cabin. You know, what they had taken for me was what they meant to take for me, which was basically my whole working identity. And the amazing thing is, you were 35 years old when this happens. You are a very young person. So you're 35. You're ousted from the company that you founded. You do have quite a bit of money at this point. So what did you do? You know, I come from a family that believes very

strongly in the common good. I've been given great values with respect to work. And, you know, I decided that animals were always my first love. And there were five animal shelters in the Bay, that if your pet happened across the street, it could end up in a shelter 60 miles away. And they had no way to tell where your pet was. And a lot of times by the time you figured it was really missing, it had been euthanized. And I went across the street to the animal shelter and I said, you know, hey, I have this idea for network. And we could put all these animals, you know, in this database, it would be shared by all of these five networks that ring the bay. And we could call it PetNet.

And, you know, you guys could just sit there and, you know, take a picture of the animal in, like, type in a few things about it, and people could sit at home and see where their animal was. So I just started working really, really hard with Marin and Peninsula and San Jose and the Palo Alto and the Oakland Shelters building Petnet. You spent a couple years in the Bay Area after you're ousted from Cisco. And then I guess in the mid-90s, you started a cosmetics company, Urban Decay, which is a complete, like total totally different direction, right? Oh, yeah.

How did that happen? My aunt, whom I adored, I was turning 40, and she said, hey, kid, it's time to lose the t-shirts and jeans, and by the way, you could use a little makeup. And I adored her, and I thought she loved me, and so I took that to heart, and I thought that jeans and t-shirts were not a negotiable item, so I would concentrate on the makeup.

And I went to go look at that, and I went to the department store, and it was all great if you were Christy Brinkley. You know, I don't look like Christy Brinkley. And I've always been kind of a hippie kumpunk sort of person, just because I don't fit in. So I tend to gravitate toward those fashions that belong to those people who enjoy not fitting in. And, you know, it was all pink. And I just go, I can't do this for the rest of my life.

This is not right. Why is your nails red? Well, because it has to match your lipstick. Why? Do you stand there and put your hands up by your face? No, your nails should maybe match your clothes. How about that? for your nails, ratcheter clothes. So makeup's a very easy thing. You can do it three weeks. We're on the

shelf in three months. You know, just add $50,000 and stir. Because at this point, you were like, I am never going to outside investors ever again. Bingo. So you had the money and you funded this company. That's right. And because you could do that, you can make it happen quickly on your terms. And so what was the, what was urban decay? What would make it different? Well, I just thought, you know, there's a whole market for people like me that really grew up in the time of, you know, Vietnam War and hippies and punks. And, you know, I was, I was really heavy into the punk scene at that point. I was a little delayed gratification. So I just started making these really cool colors. Like beautiful blues. We had a kind of a light steel blue that was called UVB. We had plague,

which was kind of purple with a green tint. Roach, which was an absolutely drop-edged, gorgeous brown and we had mildew which was a really lovely lovely green we had oozy which was a gorgeous kind of steel steel color wow so you were making up colors and giving them some interesting names um and in really really good ingredients the first place we were in was in Nordstrom's and neiman marcus wow we were using top of the line ingredients and it was absolutely committed to no animal testing and because you put your money behind it it was you were able to How did you get Nordstrom to agree to carry it? Because A, it was a really good product.

And B, I think it was good timing because, you know, you're talking about the mid-90s. You know, you're talking about Nirvana and, you know, the grunge wave and, you know, Pearl Jam and that whole thing. And I think Nordstrom rightly felt that they were missing a market. So it's, I mean, it's really cool because you sort of had spent so previous, like, two decades, really understanding, learning, mastering computer technology. and I have to assume that you had to dive into cosmetics in the same way, because, I mean, did you know? No, it's really easy. You know, the base of the nail polish, how much mica you want to put in it,

the base for the, you know, the color cosmetic eye shadow, what kind of micro you're using, how much mica, how much pigment you're putting in it. Everybody uses the same stuff. It's just how they put it together and what they're willing to pay for. So you would go to these factories that make makeup for 100 different companies, and you would tell them exactly what you wanted. No, we would make it.

You would make it. We would sit on the bench with the people and make it. And we had three weeks to get it out on the shelf before the same company would knock it off for the other people down the street. I mean, you were and you are such a highly respected technology pioneer. And you had all these friends in this community. Did anybody ever say, Sandy, cosmetics? That's interesting. That's like a total departure.

I wanted it to be a total departure because, and I was using my technical chops for PetNet. So I was doing that. And the makeup, to me, was really, I was quite offended by the makeup industry putting all the women in this pink box. You know, our first adverb in decay was, does pink make you puke? You know, to me, it was about choice. I guess to illustrate like how kind of punk this urban decay was, I've read that. Dennis Rodman used it. Dennis Rodman, The Cure used it. The Cure used it.

Gwen Stefani used it. I mean, we had a whole lot of people who were using our makeup. So why did you, I mean, I think it was like five years after you launched Urban Decay that you sold it to LVMH, which is the company that includes Louis Vuitton. Why? Oh, for the simple reason that there's no intellectual property. You can't patent color. Right.

like other companies could keep knocking you off. So you just figured. What about this? Yeah, done with this. Was it worth the price? Was it worth selling it? I made money. And I believe, by the way, I think Urban Decay is now owned by L'Oreal.

Yep, $400 million. $400 million. That's not what they paid you in 2000, unfortunately, right? No. But still, you know, you started this company. It's probably cool to see this around. I mean, it's still around. Absolutely.

So you have this entirely other part of your life, which is arguably the biggest part of your life, which now, which is a sustainable farm in Virginia. You completely left the West Coast. You built your life in the Virginia countryside where you raise rare breeds of cattle and pigs and chickens. And turkeys. Tell me about that. How did they start? Well, you know, I was raised on a farm, and I believe in eating meat. I mean, we've got these pointy teeth right here. That's why we survived the ice age, which may come again. But, you know, the idea that you had factory farm to me was beyond horrifying.

And I absolutely believe that. We did not use that kind of farming when I grew up. We farmed the way my grandfather knew how to farm, which was the manure on the fields, and you fed your cows good things. And at the end of the time, your cow fed your neighbor. I mean, we would know more of poisoned our cows because we would have poisoned our neighbors at that point. So I was convinced that I could find an economic model because I had, the resources to raise large livestock profitably in a sustainable, organic, and humane paradigm.

And I am. But I mean, I have to imagine that, like, doing this kind of farming is hard. You know, I'm one of those people that doesn't have, I guess, the good sense God gave it up to just not do something because it's going to take a whole lot of hard work. Farming is the hardest thing I've ever done. Much, much harder than learning calculus as a graduate student and, you know, physics and the rest of all of that stuff. It's much, much, much harder than anything I've done.

And it takes more work and more heartache and more aggravation than you can ever imagine. You know, Sandy, something that is really striking to me is that you still have this partnership with Len. Like, even though you haven't been married since the 90s, you still collaborate together. And clearly, like, you still value each other tremendously. Yeah, and our foundation is called the Ampersand Foundation because it stands for Len and Sandy. Oh, that's so cool. And we both have put our money in no matter what we do with our personal lives, the rest of our lives. We are each other's legatees.

Yeah. But, you know, it is good that Len and I found each other because we probably were more suited to each other than most everybody else in the planet. You know, my parents thought Len was a space alien until he fixed my uncle's chainsaw. And he was like the golden boy. But when my parents and Len's parents met each other for the first time, I think they were each expecting sort of like E.T. and wife, you know, because both of their children were so bizarre. You know, it was a little touchy there for a while. I mean, I know you've been asked this before. It's a bit of a touchy question, but I want to ask you it anyway.

You have been able to do almost anything you wanted to do. and you've given away so much of your wealth. Had you and Len kept that stock, it would have been worth 50, maybe more billion. Yeah, last time I checked, I think I would have been worth $9 billion, but it's probably gone up since then. What do you think about that?

You know, I think that nobody can see the future and that Len and I agreed to sell our stock on a very joint basis, and we did it because we fundamentally had no respect for people running the company. And it wasn't really that we didn't believe in the company. I mean, I was the one who said that Cisco would be a billion-dollar company. And I knew that that was, as long as those people stayed there, even without me and Len,

they had a technology legacy that they would be successful. It was because Len and I did not wish to live our lives with those people having any more control over our day. It had nothing to do with financial. You know, we made a pile of money, and it really had nothing. to do with, you know, ROI or, you know, P&E rates and, you know, what that company was going to do. It had to do with the quality of our life and how we wanted to look at the morning. How much of your success do you attribute to your intelligence and your hard work and how much do you

attribute to just luck? You know, I've always said that it's a third being smarter, a third working harder, a third luck. No, take that back. It's half being smarter, half working harder, and a half pure luck, because that adds up to more than one. And there were times that Cisco could have just been an asterisk and a footnote. I mean, there were so many times that company could have gone under, and we were saved by circumstances out of our control. So there was huge luck in there.

I still work harder than anybody I know. That's my great gift, and I love work. I'm besotted with work You know, I've already designed my epitaph. It has one word on it. What do you think it is? One word. Wow, that's tough.

One word. I can't summarize your life into one word, Sandy. I don't know. I have no idea. Bold. Bold. Sandy Lerner, co-founder of Cisco Systems and founder of Urban Decay makeup.

By the way, Sandy did get right, when she once predicted that Cisco was going to be a billion-dollar company, it is now more like a $200 billion company. In addition to running Ayrshire Farm and running its restaurant, Sandy also started a library in the UK, the Chottin House Library, which contains thousands of books written by female authors around the time of Jane Austen, who Sandy says is her drug of choice. In fact, a few years ago, Sandy wrote a Pride and Prejudice,

It's called Second Impressions. And please do stick around because in just a moment, we're going to hear from you about the things you're building. Hey, thanks so much for sticking around because it's time now for how you built that. And today's story begins about seven years ago, outside San Diego, literally on a manhunt. We were searching for an armed suspect. The mission was tough. The suspect was even tougher. This is Justin Lee. He was a sheriff's deputy at the time, and he was one of the people chasing that suspect in the California desert.

It was incredibly hot. A hundred degrees is really hot if you're in San Diego. And we were sweating a lot. We were carried about 40 pounds of gear. And Justin kept thinking there has to be a better way to stay cool out here. Now, he didn't know much about design or engineering, but after he got home, he called up a friend who did. Oh, yes. J.D. is a management. Science and Engineering major from Stanford. JD and Justin started to bat around a bunch of different ideas. And after a few years, they eventually designed a piece of clothing that could keep someone

comfortable in hot or cold weather. It's just a compression-based layer shirt that would look a lot like a Nike or an underarmor shirt that somebody might buy a Dick's sporting goods, but it had unique pockets that could hold heating or cooling elements. So they took this idea and put it up on Kickstarter. And a few weeks later, the phone rang. And it was actually the U.S. Army. The Army had been looking for a way to keep soldiers cool,

and they said to Justin, hey, we love the shirt, but can you make it stay cooler for longer? One way that we put it is we built a scalpel for athletes, and they asked us to build a sledgehammer for soldiers. But how were they going to build that sledgehammer? Well, Justin and J.D. were stuck for several weeks. And then... I was having drinks with a few friends that.

had just come home from Afghanistan. They had remarked that our shirt that was on Kickstarter reminded them of how they tried to stay cool overseas, which was they freeze bottled water, and then they jammed in their body armor. And that is when I had the light bulb moment of, oh, Justin's light bulb moment was maybe I could create a frozen water bottle that you could strap directly to your body, like a flat plate of armor. Well, that's exactly what J.D. and Justin came up with. The way it works is you fill it with drinking water, you freeze it overnight, and then you wear it, and as your body heat melts the ice, you have cold water to drink. J.D. and Justin called it the ice plate, and they made it

so it could stay cold for like two to four hours. They took it back to the army to pitch it, but, okay, this is the army, right? So it turned out it was going to take years. to deal with all the military red tape before Justin and JD could actually get a contract. And we just couldn't do that. We were going to basically go broke. So we took it to the commercial market in August of 2016. But they started to get some pushback. Negative pushback from the market.

Oh, it'll never work. That's a dumb idea. There was every objection to some. People just didn't get it right away. And we were just like, oh, my gosh, we just made the biggest mistake of our lives. But just a few weeks after they launched the ice plate, their luck completely changed. September 2016, we got a live chat from a gentleman named Kevin Frye, who worked for Chick-fil-A at the time. Chick-fil-A happened to be looking for a better way to keep their outdoor employees cool on hot summer days.

So Chick-fil-A now uses the ice plates at about 200 of their stores. So, yeah, we've been busy. And since they launched their company two years ago, Justin and JD have sold about 20,000 units to law enforcement, to construction workers, even to the Secret Service. This is the most fun I could have ever dreamed of having. It's nerdy engineering stuff. It's helping the men and women who protect our country and our communities. It is so much fun. I couldn't have designed a job this much fun if I tried.

Justin Lee, his company is called Core Performance. based in McLean, Virginia. And if you want to find out more about it, or hear previous episodes, head to our podcast page, How I Built This, npr.org. And of course, if you want to tell us your story, go to build.npr.org. And thank you so much for listening to the show this week. You can subscribe wherever you get your podcasts. And while you're there, please do give us a review. You can also write directly to us. That's hibt at npr.org. And if you want to send a tweet, it's at how I built this. Our show is produced this week by Rachel Fockner with music composed by Rumteen Arableu. Thanks also to J.C. Howard, Nur Kudsi, Neva Grant, San Azmesh Kempur, and Jeff Rogers.

Our intern is Mia Venkat. I'm Guy Raz, and you've been listening to How I Built This from NPR.