Build with Leila Hormozi: Episode 257 - How Nvidia Built a $1.7 Trillion Company by Breaking EVERY Rule

In Episode 257 of Build with Leila Hormozi, host Leila Hormozi delves into the remarkable ascent of Nvidia from a niche chip manufacturer in 1993 to a colossal $1.7 trillion company by 2025. This transformation, spearheaded by CEO Jensen Huang, defied conventional business strategies and established Nvidia as a cornerstone of modern technology. Hormozi dissects the five unconventional methods Huang employed, offering invaluable insights for entrepreneurs and business leaders aiming to scale their ventures effectively.

1. Transparency in Decision-Making

Breaking the Mold of Secrecy

Most CEOs and founders tend to operate behind closed doors, controlling the dissemination of information to maintain authority and prevent misinformation. Jensen Huang, however, adopted a radically different approach at Nvidia.

Jensen Huang [00:41]: "I don't really believe there's any information that I operate on that somehow only one or two people should hear about. These are the challenges of the company, or this is the problem I'm trying to solve, or this is the direction we're trying to go into. And so all of this type of information, everybody should be able to hear."

Open Book Management

At Nvidia, decision-making processes are transparent, contrasting sharply with the typical "black box" approach seen in most companies. Huang believes in sharing all relevant information with employees, fostering a sense of ownership and alignment with the company's goals.

Leila Hormozi [00:56]: "Most businesses still get stuck. Nvidia doesn't. Now why is that? Because they killed the biggest bottleneck in business. And it goes against everything that you and I have been taught in leadership."

Implementing Transparency in Your Business

Hormozi shares her personal experience with implementing transparency, highlighting the positive impact of educating her team on reading financial statements. This empowerment led to increased ownership and accountability among employees.

Leila Hormozi [01:29]: "I pulled all of my managers in and I taught them how to read the P and L. And that single meeting was one of the most important meetings I could have ever done because everyone from there on out Felt a sense of ownership over the results of the business."

Actionable Takeaway: Evaluate your current communication practices. Transition from one-on-one meetings to group sessions where information can be disseminated efficiently, reducing redundancy and fostering a unified understanding of company goals.

2. Flat Team Structure and Delegation

Minimizing Hierarchical Layers

Traditional companies often feature multiple management layers, which can impede information flow and slow down decision-making. Jensen Huang defied this norm by maintaining a flat organizational structure with over 50 direct reports.

Leila Hormozi [04:31]: "Jensen can operate Nvidia this way because he understands level four delegation."

Four Stages of Delegation

Huang employs a robust delegation framework to ensure that his team operates with maximum efficiency and autonomy:

1. Investigation: Gathering research (e.g., "Go research three manufacturers for our product line and bring me a report.")
2. Informed Progress: Executing with periodic updates (e.g., "Set up our influencer marketing campaign and check in at each milestone.")
3. Informed Results: Completing projects and reporting outcomes (e.g., "Launch the new product line and present the P&L upon completion.")
4. Complete Ownership: Full responsibility without check-ins (e.g., "Run your department as if it's your own company.")

Leila Hormozi [06:10]: "The flatter the team, the faster you typically move. But speed without truth is chaos."

Empowering Through Autonomy

By entrusting top-tier talent with complete ownership, Nvidia ensures that decisions are made swiftly and effectively, eliminating unnecessary managerial oversight and fostering a proactive workforce.

Actionable Takeaway: Assess the level of autonomy within your team. Empower high-performing individuals by delegating complete ownership of their projects, thereby enhancing efficiency and accountability.

3. Open Communication and CEO Accessibility

Direct Line to Leadership

Unlike many corporations where information filters through various managerial tiers, Nvidia encourages direct communication between employees and Jensen Huang. This open-door policy ensures that real-time insights and concerns reach the top without distortion.

Jensen Huang [09:05]: "Every employee at Nvidia at any level can email Jensen directly with their five most important observations, insights or concerns."

Eliminating Status Reports

Huang abolishes traditional status reports, deeming them ineffective as they often become outdated by the time they reach leadership. Instead, he relies on direct, immediate feedback from his team.

Leila Hormozi [09:27]: "Having an open door policy as a CEO is really important if you want to grow your company into being something excellent."

Continuous Feedback Mechanism

This approach not only accelerates information flow but also aligns employees directly with the company's vision and priorities, reducing miscommunication and fostering a cohesive organizational culture.

Actionable Takeaway: Implement an open communication channel where employees can directly share insights and concerns with leadership. This transparency fosters trust and ensures that critical information is relayed promptly and accurately.

4. Continuous Planning and Adaptation

Abandoning Long-Term Plans

Nvidia eschews rigid five or ten-year plans, embracing instead a philosophy of continuous planning and real-time decision-making. This flexibility allows the company to swiftly pivot in response to market shifts and technological advancements.

Leila Hormozi [12:20]: "If you want to do things that change an industry, if you want to change the world, if you want to build something amazing, shit's going to change."

Swift Response to Opportunities

A prime example of this strategy was Nvidia's pivot towards AI computing in 2012. Recognizing the potential of AI early, Huang redirected resources and focused on making Nvidia GPUs the industry standard, positioning the company ahead of competitors like Google, Microsoft, and Intel.

Leila Hormozi [12:05]: "At Nvidia, they don't actually even have a single long term plan. We don't do a periodic planning system...just what we're doing."

Shortening Feedback Loops

Hormozi advises businesses to reassess priorities weekly or bi-weekly instead of relying on quarterly or annual reviews. This practice ensures that companies remain agile and responsive to immediate challenges and opportunities.

Leila Hormozi [13:15]: "We don’t wait until the end of the quarter to reassess our priorities. We should be reassessing our priorities on a weekly and bi weekly basis."

Actionable Takeaway: Replace long-term planning sessions with continuous, short-term evaluations of your business priorities. This approach enables your company to adapt swiftly to changing market conditions and seize emerging opportunities.

5. High Standards and Leadership by Example

Demanding Excellence

Nvidia's culture is characterized by high expectations and relentless pursuit of excellence. Jensen Huang sets a demanding standard, working long hours and expecting the same dedication from his team to achieve extraordinary outcomes.

Leila Hormozi [16:21]: "If you're very demanding of people and your company only exists to generate money for you to put in your pocket, good fucking luck they're all going to quit."

Mission-Driven Demands

Hormozi emphasizes that being demanding is justified when the company's mission transcends profit, focusing instead on creating meaningful impact and innovation.

Leila Hormozi [16:44]: "If you're very demanding of people and you treat them very well and you have a mission that goes beyond making money... then you have more room to be demanding."

Leading by Example

Leila shares her personal commitment to embodying the work ethic she expects from her team, reinforcing the importance of leaders setting the standard through their actions.

Leila Hormozi [17:30]: "Your work ethic, your attitude, the way that you show up creates the culture, whether you want it to or not. If you want to raise the bar, get out there and raise the fucking bar."

Actionable Takeaway: Cultivate a culture of high standards by leading through example. Demonstrate the work ethic, dedication, and commitment you expect from your team to foster an environment of excellence and accountability.

Core Principles of Nvidia's Success

Nvidia’s exponential growth and industry dominance can be attributed to three foundational principles established by Jensen Huang:

1. Move Fast by Keeping Information Flowing: Ensuring that all team members, from interns to executives, have access to the same information simultaneously.
2. Stay Lean and Efficient: Eliminating wasteful processes such as excessive status reports, lengthy approval chains, and internal politics.
3. Attract the Best Talent: Creating an environment that attracts top-tier professionals who are driven by solving complex, unsolved problems beyond mere financial incentives.

Leila Hormozi [18:45]: "The companies that win are not just the smartest companies, they're the ones who can execute faster than anybody else."

These principles foster a dynamic, innovative, and resilient organization capable of outmaneuvering trillion-dollar competitors by staying ahead of technological trends and maintaining a highly skilled and motivated workforce.

Conclusion and Key Takeaways

Jensen Huang’s unconventional strategies at Nvidia provide a blueprint for building an unshakeable and billion-dollar business. Leila Hormozi distills these insights, emphasizing the importance of transparency, flat organizational structures, open communication, continuous adaptation, and leading by a high standard. Entrepreneurs and business leaders can leverage these lessons to foster environments that encourage ownership, agility, and excellence, paving the way for monumental growth and industry leadership.

Key Questions to Reflect On:

• Transparency: Are you sharing critical business information with your entire team to foster ownership and alignment?
• Delegation: Can you empower your top performers by delegating complete ownership of their projects?
• Communication: Do your employees feel they can directly communicate with leadership to share insights and concerns?
• Planning: Are you adopting a flexible planning approach that allows for real-time adaptations to your business strategy?
• Leadership: Are you setting the standard through your actions and maintaining high expectations to drive your team towards excellence?

By internalizing these principles, businesses can emulate Nvidia’s success and navigate the complexities of scaling in today’s fast-paced technological landscape.