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Update: Journey to #1 IT company in the world

With GSX 2015 upon us it is a great time to reflect at last year’s challenge and how we are faring on the journey to #1 IT company in the world.

To recap, at GSX14 John Chambers charged us with the goal of being the #1 IT company in the world.  By my calculations we were #4 in the world last year.   Here is my post from last year in case you missed it

So one year later?   While we are still #4 I’m happy to say that we have moved much closer to #3&#2.  Market caps today of ORCL, IBM and CSCO are $160B, $145B and $130 respectively.  So we only have $15B to go for #3 and $30B to go for the #2 spot. That’s down from last years $60B gap to those two.

So, give us one more year and we are at #2.  Call MSFT a consumer company and were #1!

 

 

 

President Truman Library in Independence, Mo

What should you do when in Kansas City?  The answer is drive out to the Harry S Truman library in Independence, Missouri.

 

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This is the 4th presidential library I have visited and I have to say I am absolutely hooked.  Each one is excellent and needs to be seen by anyone who is a fan of this great country.  Fortunately for someone living in Oklahoma there are several within a long drive of me, including the Bush 41, Bush 43, Eisenhower, Truman, Hoover and Clinton libraries.

We all know Truman dropped the bomb and that’s what comes to mind first for many of us, however I learned quite a few things yesterday.  Your top ten list for tonight is titled “Things I learned about Harry S. Truman”:

1. Truman was a puppet.  He was just a farm boy from rural Missouri and when he decided to go into politics he curried the favor of the Kansas City political boss Tom Pendergast, who thought it was convenient to install Truman as his puppet in the Senate and then later as VP.  Nothing is more telling of Truman’s puppet upbringing than his acceptance of the Democratic party’s VP nomination.   You literally see him stand up and wave to the crowd.  When the dem. party leader does not think he is making a good 1st impression he literally grabs Trumans right arm and holds it up high and forces Truman to wave to the crowd.  This would be equivalent to Hillary Clinton when she gets the dem. nomination next year, one Debbie Schultz (chair of the national committee) would push Bill and the rest of Hillary’s family off the stage and grab Hillary and force her to raise he arms above her head. Can you possibly imagine that?

2. Truman was Vice President for a scant 12 weeks. The major decisions he did (drop the bomb, Hitler’s death) were within were within the 1st 16 weeks of his presidency. That’s a heck of a burden to put on someone — from one of 100 senators to president to emphatically end WWII, all within 5 months .  Tough.  The library tells the story of the conversation between FDR’s wife and Truman on the day he became president:

(Elanor Roosevelt) “My husband is dead”

(Truman) “I’m so sorry, is there anything I can do for you”

(Elanor) “Wrong question, is there anything I can do for you”

Some other person (Henry Wallace) was vice-president for FDRs 3rd term, but he must have pissed someone off (excuse the French) and Truman was at the right place / right time.

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3.  The world was a crazy, crazy place prior to my birth. Evidenced by this footnote in the paper:

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Also look at the note just above the Goering headline. With today’s incredible communication platforms it is hard to imagine how bad they were just a couple generations ago.  That’s the same way people got other to stop firing arrows in 1000 AD.

 

4.  TVs and fridges are better today than they were 70 years ago. OK, OK, I didn’t learn that yesterday, but I think it is good to reflect on what the living room looked like for our grandparents:

truman_library_05 truman_library_06

 

 

5.  Truman had one hell of a to-do list.    He wrote the following to-do list a few months after dropping 2 bombs on Hiroshima and Nagasaki, killing ~200,000+ people.  I’d take him pretty seriously.  Apparently one morning after the war was over and he was trying to stave of inflation at home he decided he was not happy at some union bosses. Here is his to-do list, as best I can read it:

-Call in Phil Murray, William Green, Carpenter Hutchison, Daa Tolin (Teamsters Union), RJ Thomas (Longshoremen) and Sidney Hillian (SOB of Musicians). Tell them that patience is exhausted.

-Declare an emergency – call out troops

-Start industry and put anyone to work who wants to go to work.

-If any leader interferes court-martial him

-Lein (?) ought to have been shot in 1942, but Franklin didn’t have the guts to do it.

-Pass Ball-Burton (?) Bill

-Adjourn Congress and run the country

-Get plenty of atomic bombs on hand–  drop one on Stalin

-Put the U.N. to work

-Eventually set up a free world

 

Yeah.   My to do list includes doing my expense report, entering activity into salesforce.com and set up a lunch appointment. I think his list was more substantial.

 

truman_library_07truman_library_08truman_library_09

 

6.  Europe was truly starving in the late 1940s:

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7.   Today’s red states were yesterday’s blue states. Today’s blue states were yesterday’s red states.  Take a look at the electoral college map from Truman’s re-election in 1948.  Note the colors are reversed to what we are used to now — in the picture red represents democratic and blue represents republican.

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If you take out the green for the 3rd party candidate and paint those all red it is so similar to today’s political map– except most state are now for the opposite party.    I don’t know what’s harder for me to believe — New York and Vermont going republican or Texas going solidly Democratic?

 

8.  Dewey defeats Truman.  We all know the picture and the headline, but look at this from an original copy of the paper.  The printing is upside down?  I guess they were in a hurry to go to press?  Is this what news looked like back then?  How could you trust it?

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9. Truman’s atomic weapon was no so bad.  I know that sounds nuts to say, but he was briefed that the singe A-bomb would be about equivalent to 2,000 B29s firebombing the city.  Considering a few weeks before Hiroshima, an air raid went over Tokyo with 500 B29s dumping on the city and you see he just approved a raid only 4x greater than he did the week before.   What we have today with nuclear weapons makes Hiroshima/Nagasaki look like nothing.

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10.  This purple heart and accompanying note got to me.

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the text says:

“Mr. Truman:  As you have been directly responsible for the loss of our son’s life in Korea, you might just as well keep this emblem on display in your trophy room, as a memory of one of your historic deeds.

Our major regret at this time is that your daughter was not there to receive the same treatment as our son received in Korea.

Signed, William Banning, Nursery Rd, New Canaan, Connecticut”

 

 

 

 

Unfortunately for me, I ran out of time at this point.   I can’t wait to go back and get to all these libraries one day soon.

 

 

A good quote from Walter Isaacson

I think it’s wacky and outdated that we teach school math as a process leading up to calculus. That’s a relic of the Sputnik era, when were were all going to calculate rocket trajectories. Instead, starting in fourth grade, I think we should be teaching mathematical logic, proofs, and algorithms. We should also emphasize statistics and probabilities. Every kid should be able to do Boolean algebra and formal logic, rather than getting mired in just traditional algebra. We should also teach programming languages, especially C++, but we need to make sure that kids are also comfortable with the theory and concepts of algorithms, which underpins all programming language. Also, like Ada Lovelace, we should learn that math is a beautiful thing to be visualized, and not just formulas to be memorized. When we see an equation or algorithm or logical sequence, we should visualize it just as we do a line of her dad’s poetry, such as “she walks in beauty like the night.”

My Halloween Trick-or-Treaters 2014

274 trick or treaters at our door this year! Here are all the costumes from most popular to least:

Row Labels Sum of count
elsa 14
ninja 12
batman 11
witch 7
mouse 6
princess 6
fairy 6
spiderman 6
power ranger 5
tenage mutant ninja turtle 5
zombie 4
cat 4
pirate 4
vampire 4
ghoul 4
anna 3
skelleton 3
fantasy girl 3
ironman 3
army skeleton 3
convict 3
bumble bee 3
cowboy 3
teenage mutant ninja turtle 3
mickey mouse 3
captain america 3
dracula 3
nerd 3
grim reaper 3
guardians of the galaxy 3
sport person 2
skeleton 2
thunder players 2
minion 2
snow white 2
monster high 2
lion 2
generic princess 2
scarecrow 2
baby 2
cat girl 2
girls 2
clown 2
dorothy 2
butterfly 2
balerina 2
thor 2
indian 2
general 2
regae 2
wolfman 2
angel 1
red riding hood 1
turtle 1
greek goddess 1
sharknado 1
basketball player 1
ghost 1
groovy girl 1
alice in wonderland 1
cat lady 1
robin 1
heart girl 1
smurf 1
hippie 1
supermodel 1
hot dog 1
gi joe 1
hulk 1
waldo 1
hunter 1
purge 1
incredible hulk 1
reindeer 1
cat woman 1
butcher 1
chef 1
bad surgeon 1
jelly 1
sophie the first 1
john lennon 1
supergirl 1
johnny bravo 1
swat team guy 1
joker 1
the purge 1
cinderella 1
toga 1
clone wars 1
giraffe 1
kit kat 1
wig creepy clown 1
batgirl 1
elmo 1
little red riding hood 1
raggadey ann 1
luigi 1
busted con— 1
marty mcFly 1
riddler 1
mermaid 1
santa claus 1
axe man 1
schoolthing 1
minecraft 1
shiner 1
minie mouse 1
fireman 1
cow 1
football player 1
black/brown guy 1
buzz lightyear 1
cross dressing girl 1
sully 1
mummy 1
superhero 1
muscle man 1
surper girl 1
deer 1
genie 1
doctor 1
texas chainsaw massacre 1
nothing 1
baseball player 1
optimus prime 1
tinkerbell 1
ou fan 1
transformer 1
panda 1
two faced ghost 1
peanut butter 1
vampire gypsy 1
piglet 1
whinnie the poo 1
pink lady 1
cat america 1
boba fet 1
jsaon 1
20′s girl 1
killer 1
Grand Total 274

 

Meraki Easter Eggs

So the Meraki dashboard is awesome.  In addition to doing things like manage wireless and wired networks, it can do several other things.   I know of 3. Add more in the comments if you know them:

In the make-a-wish field at the bottom of the dashboard type:

“unicorn”

“make me a sandwich”

“make me pink”

So who is the #1 IT company anyways?

John Chambers has given us a consistent vision over the past couple years – transforming Cisco into the #1 IT company worldwide.

Awesome!

During the breakouts I started reflecting on this vision in a little more depth. The first obvious observation is that if our goal is to be the #1 IT company worldwide then we can’t be #1 yet.

So if we are not #1 who is? And how far away are we from that position? How will we know when we get there?

Turns out there actually is a Wikipedia entry dedicated to this question.  Their criterion is annual revenue, which is a good start, but I don’t think greatest revenue equates to #1 IT company.  In my mind the #1 IT company would be a leader in annual revenue, market cap, and number of employees.   Market cap in particular would be the most compelling singe statistic to me.

So how do we (Cisco) rank among our IT peers in market cap?

As of August 2014 Cisco is the #41 largest market cap corporation in the S&P. That is #41 of all companies, not just IT companies.

This begs the question “Of the 40 companies with a larger market cap, which companies are IT companies?”  As we have articulated all companies are IT companies now (Ford is an IT company that sells cars, Coke is an IT company that sells soda) – and that is very true. There are no companies large or small that can survive this market without a strategic vision enabled by technology. However, for the purposes of this article let’s just agree that IBM is an IT company and Exxon is not an IT company, OK?

So pulling out the Exxons, Proctor&Gambles and Pfizers of the world I get that we are currently the IT #10 company by market cap. This is based off of S&P data – so only US companies considered here.  Here is the list:

it1

OK – so how long reasonably would it take us to get from #10 to #1?  Well, let’s say the Internet of Things is that vision of every tree and cow is an internet connected tree and cow and the growth engine for us to get to say ~15% revenue growth a year for the next 5 years . On top of that say we can grow total earnings a year by 20% and say we even get P/E multiple expansion from where it is now at 15 to 20 – the math comes to

it2

So that gets us to $431B market cap. Note that projection is waaaaaay optimistic. Everything would have to go right and then some to get to those kinds of numbers.  Consider that 5 years ago in August 2009 we were at $130B market cap and $36B in sales – so in the last 5 years we have grown market cap by donuts and sales by a total of 25%.  To think we will grow sales 100% in the next 5 years when we only did 25% in the last five is definitely stretch thinking.

Well, even at $431B five years from now, that still 30% smaller than Apple is today.  Could Apple decline significantly?  Sure. The iPhone is getting older and who know if the iPhone phablets will be a big bust? So sure they could decline over the next 5 years.

How about Google, currently in the #2 position right now?    $431B would be bigger than Google right now, but it is real hard to see how Google would decline over the next 5 years. In fact, 5 years from now there will be more ad spending on digital media than TV media. Could they lose advertising dollars to Facebook?  Sure, but the point is someone will win – weather it is Apple vs Microsoft   or   Google vs Facebook.    So the short answer is no, even in a best case scenario we will not be the #1 IT company in 5 years.

These aren’t the droids you are looking for. If you look at the list closely, I’d argue that the top ones on the list are all consumer companies (Apple, Google, Facebook), leaving less enterprise challengers in our path (IBM, Oracle, Cisco).   So, if you take the vision is to be the #1 Enterprise IT company in the world (which actually I think is the vision JC has) then things get more possible.

Here is the list again with the enterprise focused companies called out in green

it3

I think IBM and Oracle are well within our sites.  There is no reason we can not have an Advanced Services arm like IBM and I don’t see what propels names like IBM, Oracle and HP forward over the next 5 years.  We have Internet of Everything and growth in mobility.  They have— old technology.

So yes, even at a more reasonable 5% annual revenue growth and 10% annual earnings growth with no P/E expansion, that math gets us to

it4

So yes, if IBM and Oracle stagnate and we execute, in 3-4 years we will be a bigger market cap player than either of those.

Microsoft however is a different story. We would need the optimistic scenario to play out to overtake them. If they grow at expectations and we grow at others’ expectations of us then we will not surpass Microsoft in the next ten years.

 

So here’s to double digit revenue growth and 20% earnings growth! I personally am looking forward to the journey of becoming #1!

 

If you have made it through the article to this point then tweet me back (@nevilleaga)  I am curious to see who you think is the #1 IT company right now and who we are going to take down when we achieve our vision.