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Former Intel CEO Andy Grove passed away this week. Pretty amazing path he took from escaping Hungary, ending up as the CEO of Intel. There were several excellent mini biographies written this week that describe his path. [1]

I think there are two major lessons that investors can benefit from Andy’s philosophy. They were tenets of his management style that directly translate to investing IMO.

1) Consider all viewpoints and make decisions based on facts. Intel had a different culture from many other companies, for example Apple under Steve Jobs. At Intel meetings, everybody was expected to challenge everything. If somebody said something that could not be backed up with facts, he would be shot down immediately. Andy was famous for stopping presentations after one or two page. If the presenter was not adequately prepared, he would get the hook and be told to come back when he had his facts straight. What was unique was that people would challenge Andy and/or Gordon Moore and/or Bob Noyce. It could be a low level contributor. The top guys did NOT take these challenges badly and carry a grudge. If the low level person’s viewpoint had solid facts behind it, it would be adopted.

Contrast that to Apple and many other companies. The CEO not only has god like powers but thinks he/she is god. Try telling Steve Jobs he was wrong about something. It was NOT well received, which I suspect is the more standard operating procedure at most companies. Steve would be happy to tell you exactly how stupid you were for suggesting he was wrong about anything.

The investment takeaway is that you need to put your emotions aside and try to ascertain what the facts dictate. Do NOT get so ingrained into any belief that you immediately consider opposite views as heretical.

2) “Only the Paranoid Survive” is the title of one of Andy’s books. [2] The title pretty much says it all. Intel never rested on their laurels, despite their market dominance. They spent literally tens of billions dollars for both R&D and capital expansion to stay ahead. Even after 40+ years, their wafer fabrication plants/technology is widely considered the best in the world. How many other American companies can you say that about?

The investment takeaway is that you need to consider what could go wrong, when everything seems to be going right. When your investments are printing money like there is no tomorrow, what could change them to cause you to lose money. Stated differently, you need a constant state of paranoia to consistently win over the long term.

I am sure some other investors have offered up these same lessons, but Andy did it a little differently.

We could all be better investors if we heeded Andy’s tenets more diligently, Yoda included.

Rest in Peace Andy Grove


[1] Bloomberg Andy Grove Obituary

[2] Andy Gove book: “Only the Paranoid Survive”
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