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[APPLAUSE] >> Thank you, I just had to wear the Stanford red this morning.
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Can you hear me, is this on? Yeah, okay.
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I do want to take your questions, so I'll try not to talk for more than 25 or 30 minutes, so we'll have plenty of time.
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I was asked how long it took me to write the book that I've just released, Tough Choices.
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And I answered that it took me almost as long to decide to write it as it did to write it.
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It took me about six months to think very long and hard about whether I wanted to write this book.
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I knew that if I wrote a book, I would want to write it myself, which I did.
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Every word, there was no ghostwriter, there was no collaborator, for better or for worse, it is my words about my feelings, my experiences.
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I knew that I would want to write an authentic book.
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And what I mean by authentic is a straightforward book, a book that tells it like it has been in my life and my career.
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And that was a tough choice in a way, because when you decide to be authentic, you have to be authentic about yourself.
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So while I had been a very public figure, I had also been a very private person.
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And this is a book that reveals much about me, personally, and my life.
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I also concluded that I would be authentic about the experiences that I've had, and not all those experiences have been good, and of course, that creates controversy as well.
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But I wanted to write this book for about five years now.
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And the first inspiration to write this book came actually when I was sitting on a witness stand being cross-examined.
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You may remember a small, somewhat controversial merger with Compact Computer.
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And you may remember that after a sort of massive battle, shareholder battle, we finally won the vote to consummate that deal.
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And there was one last hurdle to get over, which was, we were sued one last time.
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We were sued because the claim was that we had overestimated the amount of cost synergies that we could get from the merger.
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We had said we would achieve $2.
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5 billion in cost synergies, we went on to achieve 3. 5 billion.
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But at that time, the lawsuit was that that was not accurate, that we were overstating in order to win a shareholder vote.
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So, we went to court in Delaware and I sat on the witness stand and I got asked questions for about a day and a half.
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And what occurred to me, sitting on that stand and answering those questions, is that most people really don't have an idea about how a company operates.
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Because all the questions were about, how do you set goals?
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How do you find common cause and common language with people so that they put their energies against those common goals?
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And so, it occurred to me that one day I would write a book about the story of business.
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And I think the story of business is all about the story of people.
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Now, I got two business school degrees, and I know in business school we talk about profits.
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And particularly if you're here in the Valley, you talk a lot about products, and you talk about how you're going to get rich quick and all of that stuff.
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But the truth is that in my experience, it is people who produce both products and profits.
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And if you don't understand people, if you don't have a sense of why people behave as they do, you can't change what they do.
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And if you cannot change what people are doing, you cannot change either products or profits.
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And so, I decided to write a book about business through people.
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For me, actually, the fun, the fascination, the challenge, the privilege of leading in a business is all about working with people.
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As was mentioned, I did not imagine that I would be a business executive, I had a degree in medieval history and philosophy from here at Stanford at the History Corner.
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It was really fascinating, but it wasn't going to pay the bills.
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I went off to law school because that's what my parents wanted me to do.
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After about a semester in law school, I concluded, I hated it.
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And I also concluded that probably pleasing my parents was not a good life goal.
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Sounds silly, but that was a revelation to me.
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And that was probably the first real adult choice I made.
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And for me, that was a very tough choice.
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I dropped out of law school and I had to pay the bills, so I did the only thing I knew how that would pay the bills immediately, and that was I went off to work as a secretary.
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I typed and I answered the phones, and I worked at a company called Marcus and Millichap, which is on Hanover street, one block from the headquarters of Hewlett Packard.
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Now, when I took that job, I didn't think it was beneath me, I thought it was a good job because it paid my bills, and I threw myself into that job.
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I wanted to be a good secretary and receptionist, which has formed the basis of the career advice I've given ever since, which is, whatever job you have, learn everything you can from that job.
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I was in that job about six months, and two men who worked there came up to me one day and said, we think maybe you could do more.
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Would you like to help us write some deals?
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And that was my first introduction to business.
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That was the first time it ever occurred to me that maybe I could become a business person.
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My family didn't really have any exposure to business, my father was an academic, he taught at the law school for part of his career here at Stanford.
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My mother was a full time homemaker and an artist.
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And those two men taught me something really important, in fact, they taught me one of the most important lessons of leadership.
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And that is that leadership is all about seeing the possibilities.
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Leadership is all about seeing the possibilities in people and seeing the possibilities in circumstances.
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Those two gentlemen, saw possibilities in myself that I did not know were there.
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And because they could see that, I saw something different in myself as well.
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Leadership is all about the possibilities, I think there is a huge difference between leadership and management.
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Management is about the production of known and acceptable results within known conditions and constraints.
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Leadership is about changing the order of things.
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Now, when those two men taught me my very first important lesson about leadership, that leadership is about seeing the potential in others.
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Leadership is about seeing the possibilities in things, that then caused me to think differently about my own future.
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This book is also about fear.
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I talk a lot about fear in this book.
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My own fears, but the fears also of people that I have encountered along the way.
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And I don't talk about fear because it's some psychobabble, I talk about fear because fear is a principal motivator in business, people. Fear change.
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So if you want people to change what they're doing, you have to understand what they're afraid of.
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The natural momentum of any organization is to preserve the status quo. Why is that?
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Well, because people are afraid of the unknown.
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People are afraid to try something new.
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But it's also because, whatever institution you're talking about, whether it's the Stanford Business School or it's Hewlett Packard or it was AT&T, when I first entered it, People who have positions of power and influence want to keep them.
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The status quo advantages them, and so they seek to preserve their advantage. That is human nature.
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One of the things that I didn't know when I started out as a secretary is that people are people wherever you find them.
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I actually thought, when I was a secretary, talking with the guys in the mailroom, I thought that, those people up there, the big bosses, the big executives, they must be different somehow.
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Those people who've made tons of money in business, they must be different somehow.
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The truth is, they're not.
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The truth is, people are people, wherever you go.
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And that means that, some people are able to set their fears or their own personal agendas aside, and some are not.
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So understanding fear and understanding how to motivate people effectively so that they can move beyond their fear and actually try something new is fundamental to leading change.
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If leadership is about changing the order of things, then a leader has to understand that resistance comes with the territory.
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Resistance comes with the territory because people in positions of power want to keep them and because everyone is afraid.
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One of the things that terrified me, when I first saw started in business, is, some of the circumstances that I found.
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My very first job at AT&T, after I was a secretary, I ran off to Italy and taught English for a while.
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I was sort of searching, then I got an MBA, finally, I show up at AT&T.
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And AT&T back then was the Bell System.
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There were a million employees in the Bell System, old Ma Bell.
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I know most of you were too young to remember, but it was a big, huge bureaucracy.
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And I joined that company as a brand new salesperson.
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My very first job was to share an account, very lucrative, profitable account, with an older gentleman. I say he was older.
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I think in retrospect, he was about my age, but >> [LAUGH] >> I thought he was older.
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And it came time to meet the clients.
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And he comes to me and he says, Clara, I know that we've planned to have you meet these clients, but I'm afraid you won't be able to do that.
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And I said, well, why not?
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He said, well, because we're going to be going to the boardroom.
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I said, well, what's the boardroom?
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Well, the boardroom was a strip club.
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It was a very famous strip club where the women would dress in see through baby doll negligees, and dance on top of the table while the clients ate lunch. I was terrified.
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And I had to think long and hard about, well, what do I do?
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Do I show up at this meeting?
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I finally decided I had to.
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Again, most of you, not all of you, were too young to remember this, but there was a book called, How to Dress for Success, for women in the 80s.
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A few of you remember that.
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And it recommended very conservative suits and collars up to the neck, a little bow ties.
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So I dressed that way that day.
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>> [LAUGH] >> Speaker 1: And I carried my briefcase, my newly purchased briefcase, like a shield of honor.
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And I get into the cab, and I say to the cab driver, I'd like to go to the boardroom.
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And he turned around and said, are you the new act?
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>> [LAUGH] >> Speaker 1: So I get there and I come in. It's this dark place. It's loud, it's noisy.
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There's this long bar down the side.
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There's a stage right here.
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And my colleagues have seated themselves way over there.
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And the only way I can get there is to walk across that stage with my briefcase and my bow tie.
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And, of course, wouldn't you know, there are ten women having an act.
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I really did look like an idiot, and I was terrified.
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Now, two hours later, probably my male colleagues were even more uncomfortable than I was.
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And when that day was over, everything had changed.
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When I came back to the office, everything was different because I had shown that while I was terrified, I wouldn't be intimidated.
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And while I could not pick those circumstances, I could choose how I dealt with them.
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And that gentleman colleague and I, we never talked about that again, but we became great colleagues, great teammates.
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We found a way to find common ground.
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And that also is what business is all about, finding common ground and common language so that you can approach common goals.
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When I became a manager for the first time, I remember being introduced to my new team of people.
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I only managed three people, but to me, it was a huge accomplishment.
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And I was introduced as our token bimbo.
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Now, why do I tell you these stories?
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I tell you these stories because I believe everyone faces situations that are difficult and frightening.
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Everyone has to choose how to deal with those.
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But I also tell them because business should be, but business is not yet, a meritocracy.
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I mentioned that AT&T was a huge organization.
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And many large organizations, most large organizations, at the end of every year, employees would be evaluated.
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They would be given performance ratings and rankings.
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And the way that occurred at AT&T is the same way it occurred in Hewlett Packard or any other large company.
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As groups of managers would come together and they would talk about their employees.
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And I imagined initially that this was a very rational process.
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Everybody would come in, they would have all their employees accomplishments, they would talk about it in a reasoned way.
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And, of course, bosses would be willing to say, well, yeah, it sounds like your employee did more than mine.
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Of course, they should be rated higher.
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Well, I found out very quickly in that first session that isn't how a lot of people operate, some people do.
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But for some people, that rating and ranking session was all about a power struggle.
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It was all about, I'm a better boss if I have more employees who are rated higher.
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I also found out that day why a meritocracy is so difficult to build.
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It's difficult to build because people are comfortable with people like themselves. That's human nature.
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It's not bad, it's not good, it's just human Nature, and so I observed that when people were talking about their employees, if the employee was a lot like the boss.
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The boss was more comfortable with them, they knew them better, and therefore they would talk more fluently and more enthusiastically about that employee's accomplishments.
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And if the employee was different than the boss, the boss was a little uncomfortable with the employee, then the boss talked with less fluency and less enthusiasm.
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That is why meritocracies are difficult to build, because people are more comfortable in many cases with people like them.
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Business, of course, should be a meritocracy, it is much better when everybody can play.
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Which is why from the In 1998, when Fortune magazine named me the most powerful woman in business for the first year, by the way, think about it.
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That first year, Oprah Winfrey was number two, I mean, that's ridiculous on its face, but it made a great story.
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And from 1998 on, for each of the next six years that I was named the most powerful woman in business, I would say to Fortune, don't do a numbered list.
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If you want to highlight women who are successful in business, great, but when you number us 1 to 50, you imply that business is like tennis.
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There's the women's ladder and there's the men's ladder, and women have to compete against each other 1 to 50 because we're not strong enough or good enough to compete against the guys.
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Business ought to be a sport where everybody gets to play, and when everybody can play, the game is better and we have still a ways to go.
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I believe that change requires both optimism and realism, realism, cold eyed, clear eyed realism about where things really are.
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I also believe it requires optimism because optimism is the belief that things can get better, and unless you're an optimist, you can't change anything.
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Pessimism and cynicism are easy, you don't have to do anything, all you have to do is kind of comment and critique.
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So back to the subject of change and needing cold eyed realism, when I came to hewlett Packard in 1999, this was an iconic company.
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A mythic company with founders that were larger than life, and Hewlett Packard had deep emotional significance for people.
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And as the years went by, history became mythology and mythology almost became religion.
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And yet this was also a company in 1999 that was falling further and further behind in the middle of the biggest technology upturn in history.
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This company had missed nine quarters in a row while the company was lagging behind in every market in which it competed.
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Missing nine quarters in a row in the middle of the biggest technology upturn in history, employees were getting record bonuses, why?
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Because the way success was measured inside the business had nothing to do with the way success was measured in the marketplace.
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We were no longer a meritocracy, 82% of our employees had said for each of the past 10 years that the company didn't deal with poor performance, 75% of our people were superior or excellent.
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What used to be a meritocracy became a bureaucracy, we were a technology company and yet we no longer innovated.
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We were no longer even in the top 25 innovators in the world, we had this set of values called the HP Way.
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But people had stopped talking about the values themselves and what they really meant and started instead just using the shorthand, the caricature, the label, the HP Way.
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And the problem was that the HP Way became a way of stopping change, innovation.
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I would go to meetings and people would, I would observe, people would say, well, we don't do it that way.
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It's not the HP way, When culture becomes convention, then something has to change, now I said that I think business is all about people.
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There are probably people, some among you, I've worked around technologists all my life.
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I am not a technologist by training, but I've worked around engineers, managed engineers, worked with technology companies all my career.
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And I know that from, for many technologists talk about people and behaviour and values and culture, it just sounds like a bunch of bs, it's soft stuff.
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The truth is, I think culture and values and behavior, the stuff that makes people tick is actually the really hard stuff.
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A better analogy I think is it is software, it is the software of a company.
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And just like in a computer system, if you want to change a company, if you want a computer to perform more effectively, you have to deal with the software as well as the hardware.
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For Hewlett Packard, the hardware was what is our strategy?
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, we had to choose to lead, once again we had to choose to say, you know what?
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We want to be a leading company in the 21st century, we had to change how we structured our business fundamentally, we were 87 stand alone business units.
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None of them talked or coordinated among one another for customers.
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Believe it or not, when I arrived at hp, we didn't even know how many employees we had because 87 different business units all had their own everything.
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Their own IT systems, their own HR systems, their own brands, and the heads of those businesses jealously guarded that power, it is human nature.
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So we had to change how we were organized so we could collaborate more effectively on behalf of customers.
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We had to put together processes so that, for example, at the end of my tenure, we had a single email system, not 87.
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Pretty important if people are going to communicate effectively, we had to change how we measured and rewarded performance.
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And when you start changing how people are paid, it is deeply personal when you start to say to people, you know what, it's not actually realistic.
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Or competitive to have 75% of our people be rated superior or excellent when we are failing to compete in the marketplace.
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Logically, people understand it, but emotionally, it is very personal for people.
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When you have to take, you know, during my tenure, I took 36,000 people off the payroll, that's very hard, people become angry, resentful.
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And then there's all this really important software called Culture and Values, and so we had to go back to things like, you know what?
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Innovation is one of the most important values in the HP way, what does innovation mean?
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Well, it means we actually have to innovate, it means we have to invest in innovation, it means we have to measure and value and reward innovation.
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I asked when I first arrived, how many patents do we produce? Nobody knew.
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I asked what percentage of our revenue stream comes from new product introductions? Nobody knew.
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By the time I left, we were generating 11 patents a day for two years in a row, and we had become once again among the top five innovators in the world.
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That kind of change, fundamental transformation from the bottom up, not to mention a huge controversial merger undertaken in a bear market announced the week before September 11th.
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In a down economy, in a technology recession, that kind of transformation not only creates huge resistance, but it also takes a tremendous amount of time.
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So this book is a lot about change and what it really takes and what's the software of change as well as the hardware of change.
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Now, of course, as was mentioned in the introduction, you sort of can't talk about the story of me or the story of Hewlett Packard without also saying something about the media.
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And I'd be happy to talk more about this when I take your questions, which I'm going to do in about one minute here.
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But I think as business people, it's important for you to think about what is the impact?
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When in this always on information, age, fact, fiction and fantasy are out there and they have equal authority.
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Think about the information flow you get every day.
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Fact, fiction, fantasy, opinion, informed or not, have equal weight.
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It's hard to distinguish between them.
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It is a part of what is going on around us.
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And so how does a leader both be aware of that, but also stay focused on the mission at hand and keep people focused on the mission at hand?
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This book is also about something that I don't think we talk enough about as business people.
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And that is the fundamentals of judgment, perspective, and ethics.
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I'm troubled as a businessperson that every time we see some new scandal or some dysfunction in a boardroom, in an executive suite, I'm troubled that when we see all of this backdating of stock options, for example, people kind of immediately run to, what rules should we change?
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When Tyco and Enron and WorldCom and Adelphia happened, everybody started thinking about, how do we change the rules?
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And some of those changes in rules are helpful.
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But when you think about backdating of stock options, it appears to me that what has happened, among other things, is people have said, if there's not a rule that says I can't, I can.
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There is no substitute for judgment.
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There is no substitute for personal ethics.
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There is no substitute for a sense of values that say, you know what, there is a difference between what's right and what's wrong and it matters.
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But if you believe that as a leader, the tone has to be set at the top because people watch the walk rather than listen to the talk.
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And so not only does a leader have to role model that, but it means sometimes the toughest choices you have to make are to fire somebody not because they're not getting results, but because their values and their judgment are inconsistent with what you say you stand for.
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The toughest personnel choices I've ever had to make in my career are where I've had to deal with people who are abusive or dishonest.
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And let's be honest with one another, abusive, dishonest people get results in business.
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If you tolerate it, if you send a message that that's okay, then everybody concludes that's okay.
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All that matters are, do you get the numbers?
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If you want people to actually believe that values matter and character counts, then you have to act even if people are getting results based on their behavior.
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I was taught long ago, and I'm going to stop here and take your questions.
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I was taught long ago that values are what guide your behavior when no one's looking and when you think no one will find out.
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And if you don't have a strong set of values, it will infect the organization of which you are a part.
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And we see many, many examples of that every day all around us, unfortunately.
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Finally, how many of you have read any part of Bob Woodward's trilogy about the Iraq war?
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I happen to be reading right now, State of Denial.
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Any of you read any of that stuff?
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Not so, wow, you must be studying really hard.
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Well, set aside your politics for a moment.
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Among other things, what those books are about is how a political process can become dysfunctional because people's personal agendas, personal rivalries, personal fears get in the way of a sound decision making process.
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It happens in business every day.
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It happens in boardrooms, it happens in mailrooms, it happens in every management meeting.
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And so a big part of what has to happen in any team of people is to pay a lot of attention to the decision making process and whether people are putting the real issues up on top of the table and talking about them and debating them and understanding them fully, or are they hiding the real issues under the table?
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If you have people who are hiding issues under the table and are not able to put all the facts, all the opinions up on the table before a decision is made, you won't get a sound business decision.
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And yet it happens all the time.
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These are the software of business and they're things that good leaders have to understand or you cannot change anything, because change is all about how people behave, what they believe.
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And if you want to change products and profits, you have to change those things about people.
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Okay, I'm going to stop, who wants to ask a question?
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I think they're microphones.
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We're supposed to wait, I think, for microphones.
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>> Speaker 1: Just >> Speaker 1: No, you just stand up and, yes, ma' am, right there.
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>> Speaker 2: What do you think the biggest challenges are to business being a sport that everyone can play equal to?
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What do you think business schools should, if anything, be doing in order to address those challenges?
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>> Speaker 1: Well, I think some of it is, frankly, we just need more practice.
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You know, old habits are hard to break, new habits are hard to form And because we don't have enough practice at some of this, the language we use and the experiences that occur are just different.
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I'll give you a recent example, I'll give you two recent examples.
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I shared a podium with Bill Clinton recently and he said, when I talk about a topic and I'm detailed about the topic, people call me substantive, they call me erudite.
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When Hillary talks about the same topic at the same length, people say she's lecturing, it's just an example of the difference in language.
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Last week there was a column that noted that both Patricia Dunn, the former chairman of Hewlett-Packard, and I were women.
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And a middle aged white man decided to go on and on about the sisterhood, interesting.
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>> [LAUGH] >> I learned a long time ago it's kind of good to know what you don't know.
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But beyond that, what I found fascinating about that was that very same week, four male CEOs bit the dust over stock option backdating.
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There was no comment about the brotherhood.
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>> [LAUGH] >> There was no comment about the pattern.
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When the CEOs of WorldCom or Adelphia or Tyco or Enron all stood up and declared their innocence right until the end, nobody talked about victimhood or brotherhood, the language is just different.
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So some of it is we just gotta get more practice.
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Secondly, as I said at the outset, I think people have got to straight talk about real issues.
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One of the things I finally concluded in Hewlett-Packard, we talked a lot about diversity, we talked a lot about meritocracy, but we weren't making enough progress.
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And so I said in my tenure, you know what, we're going to measure it, because we measure everything else that's important in this business, that diversity is important.
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We're going to measure it and we're going to expect progress every single year.
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And I think finally, so you got to talk about it, you have to make it part of what people focus their attention on.
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And business runs by measurements, results, so if you want to value something, you have to measure it.
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Finally, I think that businesses need to be a lot more creative because we can be now with all the tools of technology.
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There are a lot more creative about having an environment where people can make their own choices.
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With the technology we have at our disposal today and the 24 hour nature of a global business.
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There's no reason that people have got to make these agonizing choices between should I be at the baseball game with my son or daughter or should I be in the conference room.
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We ought to be able to accommodate those kinds of things.
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So all those things matter.
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Yes, sir, and then I'll start- >> Speaker 2: So this week, Constantin and I are launching a podcast series on women innovators and leaders, which by the way we'd love to have you on- >> [LAUGH] >> Good Salesman.
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>> Speaker 2: And I'd love to hear from you, who are some other women leaders that you look up to and admire that you think you're hearing from?
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>> Speaker 1: Well, there are several right here in the Valley, I mean, Meg Whitman is a great women leader.
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I'm delighted by the way, that since I left Hewlett-Packard, there have been three new women CEOs named, and Indra Nooyi for example, PepsiCo is an outstanding leader.
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And I think that the more progress we can make in terms of talking about leaders and showcasing leaders of all kinds of, of all genders, of all backgrounds.
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As opposed to saying, let's talk about women leaders, the more progress we're going to make.
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Because there are some aspects of leadership that have nothing to do with gender.
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A leader is an authentic communicator that has nothing to do with gender, a leader tells it like it is, that has nothing to do with gender.
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A leader collaborates effectively with lots of different people, that has nothing to do with gender.
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So I would encourage you as well to think about maybe instead of perpetuating the latter thing, there are women leaders and men leaders.
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You ought to think about a course in leadership and just work really hard to make sure that you're showcasing a very diverse group of leaders, which of course would include women. Yes, sir.
36:47
>> Speaker 2: I'd like you to speak a little more about your personal life in terms of whether or not you're married, you have children, and if not, why not.
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>> [LAUGH] >> [INAUDIBLE] very demanding position, cause you to make any trade offs on that front and in storyline.
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>> Speaker 1: Well, I do talk about that in the book and it's also a great, it's a great opportunity to illustrate what I meant before about the media.
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So one of the stories that came up a lot during my tenure, in addition to the fact that I travel with a hairdresser and a makeup artist, that's not true, by the way.
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>> [LAUGH] >> Speaker 1: And we will have arrived when people suggest that Donald Trump maybe travels with a hairdresser.
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>> [LAUGH] >> His hair is really much more complicated than mine.
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>> [LAUGH] >> But another story that went around all the time was, well, Carly was too ambitious and so she chose not to have children.
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That became the story, and frankly, a lot of women were angry about that.
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So one of the things I talk about in this book is, first of all, I am married, my husband is standing right back there, that's Frank in the yellow shirt.
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>> [APPLAUSE] >> When we were married, he had two young daughters which we raised, we now have two granddaughters, 10 and two, they're perfect by the way.
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>> [LAUGH] >> We very much wanted to have children, worked hard to have children of our own, was not God's choice.
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So you can imagine how personally hurtful it was for people to say, well, she made this choice because she's such an ambitious, the B word.
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Every, Successful person, I don't care what your definition of success is, my definition of success is have you made a positive difference, and do you own your soul at the end of your journey?
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because there are lots of opportunities to give it up.
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However you define success, every successful person has a family and supporters around them.
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I happen to have had a great husband and a great gift, and when I became the CEO of Hewlett Packard, he retired from his own pretty high powered career to support me.
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I think that was a tremendous gift and a tremendous choice, not all men understand that choice, but the point is, it's our choice to make.
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And the work environment should be one in which people can make their own choices, and whatever choice they make, they also can make a contribution. Yeah.
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>> Speaker 2: Can you speak to any events prior to your becoming CEO that's really pay that roll and Are you [INAUDIBLE] specific experiences that [INAUDIBLE] really sort of culminated in helping you lead [INAUDIBLE]?
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>> Speaker 2: Well, that really is what the book is about.
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I mean, honestly, having written 360 pages, I can't get it down to one sentence.
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But to try and be responsive to your question, I think I'll give you an unexpected answer, perhaps.
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Every job I had, I learned something from, something important.
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And I think the goal is to bring all of your experience and all of yourself to a challenge.
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However, when I was growing up, we moved around a lot.
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I went to five high schools in four years.
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I went to school overseas, I went to school in various parts of the United States.
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I became used to, accustomed to, comfortable with the pattern of change.
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It became a habit for me to feel afraid of going into a new situation and then realizing that if I could connect with people, find common language and common cause, that I could get over the fear and move on, I became used to that.
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And so for me, change was not as frightening as it was for other people, it was part of life, that helped me tremendously.
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But I also knew that feeling, I recognized that feeling that people have when they're so afraid of what they're going to have to let go, that they can't move forward.
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And I understand the resentment that change can create as well. Yeah.
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>> Speaker 1: What is your take on the HP scandal of late?
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And if you had been CEO or chairman, you knew that something was leaking from your board, how would you have thought about handling that?
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>> Speaker 2: Well, I did have a leak when I was at Hewlett Packard, and, First, let me say, when you go through a transformation of a company from bottom to top, culminating in a merger, the largest, most complex merger ever attempted in the history of the industry, and it still is that.
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And you do that in a bear market and a down economy, in a technology recession, it's going to be tough for a while, and people are going to take very much a wait and see attitude.
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And I bring all that up because all of that creates pressure on a board.
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So in January of 2005, when I faced a leak, the board felt tremendous pressure.
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The stock price was stuck, the press was bad.
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Despite the fact that we had gone from a GAAP loss of $900 million in 2002 to a GAAP profit of 3.
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5 billion in 2004, generating 11 patents a day, we were leading in every business line, every business was profitable.
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Despite a clear trajectory of progress, press and stock price create pressure.
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The board and I were having a discussion about how to reorganize the business and who to put in which chair.
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And we hadn't come to agreement on that, we agreed on some things and we'd done them and we didn't agree on some other things.
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And so we had agreed to continue talking, that's what a deliberate decision-making process is all about.
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And about four days later, I see all of this on the front page of the Wall Street Journal.
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Now, obviously that can be very disruptive, not to say against the rules.
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I mean, that is a selective disclosure that is material to a company.
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And a couple board members took it upon themselves to put even more pressure on the situation by putting something in the Wall Street Journal.
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What I did was to talk plain, we can't do this, we can't have a boardroom in which confidentiality is not respected.
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I had a series of direct conversations with board members, who did this, why did you do this?
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because again, I know from 25 years in business that when people stop talking directly and start going under the table, people can't speak plainly with someone to their face, they go off and talk behind their back, bad things are going to happen.
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And then I asked our outside counsel, Larry Sonsini, to continue those direct conversations.
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No investigation, no pretexting, just let's have some direct conversations.
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But my goal was to also begin an assessment process.
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In my management teams, I used 360-degree feedback, I used tools to help us assess the dynamics of our decision-making processes, because those are things effective teams do.
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And I and a couple other board members had wanted to bring those tools into the boardroom, it was resisted mightily.
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Some board members thought it was a waste of time, why-