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I walked in and the first thing I saw was the bottom of the big crane boom arm with the weights I was like, why are there Olympic weights here?

And then I was like, oh because we've got a professional boom arm camera.

This is amazing. All right, let's do it Welcome to season 11 episode 6 of acquired the podcast about great technology companies and the stories and playbooks behind them I'm Ben Gilbert and I'm the co -founder and managing director of Seattle based pioneer square labs and our venture fund PSL ventures

And I'm David Rosenthal and I am an angel investor based in San Francisco and we are your hosts There's an incredible property of the universe where electromagnetic signals can be broadcast and travel through space at the speed of light to be received at a different point in the universe Now a tiny

fraction of these frequencies are detectable by humans as visible light Some other frequencies can be dangerous like x -rays or gamma rays But there's a part of the spectrum that is not detectable to humans and it's not harmful at modest doses That can be used to transmit invisible messages all around

us all the time without any of us having any idea It's like magic.

Yeah These frequencies have been used for over a century to broadcast TV and radio shows Presidential messages and important news updates in the last 50 years humans have gotten tremendously clever at Purposing some parts of the RF spectrum to be used for cell phones But the story of how we got from transmitting

small messages on a single frequency To having billions of humans concurrently sending megabytes or gigabytes of data every minute Has been an incredible journey of invention and entrepreneurship The company most responsible for the mind -bending system of how it all works today is Qualcomm And today we

will dive into their entire history and strategy unpacking their products Which to the outside observer is really best described as a layered series of magic tricks and spoiler alert for listeners This is an incredible story.

I had no idea before we dove into the research like me there This one is up there with like Nvidia TSMC.

There is so much stuff.

You can't make up in this story It's incredible largest fabless chip company in the world Indeed the other thing we should say listeners This was super fun to do this episode live in person in Lisbon our huge Thank you to the Solana Foundation for hosting us at Solana breakpoint many longtime listeners

We'll know Austin Fadera from the slack He was kind enough to invite us and and really fun to do it there Especially given Solana's tie to Qualcomm with Anatoly having worked there for over 10 years indeed All right listeners.

This is a great time to talk about one of our big partners ServiceNow ServiceNow is the AI platform for business transformation helping automate processes improve service delivery and increase efficiency over 85 % of the fortune 500 runs on them and over the past few years they've joined companies like

Microsoft as one of the most important enterprise technology vendors in the world and speaking of Microsoft and service now They just announced a huge expansion of their partnership Specifically integrating the two companies enterprise AI assistance starting in the fall customers will be able to interact

with ServiceNow's Now assist AI assistant directly within Microsoft co -pilot Yeah It's telling for the magnitude of this partnership to see Satya Nadella appearing in the keynote at ServiceNow's big annual event knowledge last month Yes, ServiceNow's now assist will be integrated with Microsoft co -pilot

and will be available directly from office apps Starting with Microsoft teams the AIs are integrated into one seamless user experience without actually sharing data So if for example a user asks co -pilot in teams about how the company's laptop policy works behind the scenes co -pilot shares that request

and context with now assist and now assist Accesses internal company policy with the right permissions for that user and returns the answer to co -pilot in a rich card with options For the user to kick off a workflow via now assist in the future Microsoft co -pilot will also be integrated the other way

into now assist so it can automatically generate office files like PowerPoint presentations and Excel spreadsheets directly from assets and knowledge in the ServiceNow platform It's pretty awesome for both companies and especially awesome for enterprise users So if you want to learn more about the ServiceNow

platform and how it can work with your company's Microsoft services Go over to service now comm slash acquired and when you get in touch just tell them that Ben and David sent you After this episode come talk about it with us There are 13 ,000 other smart kind people in the slack acquired FM slash slack

without further ado on to our live show that's a lot of breakpoint and Listeners know that this is not investment advice David and I may have investments in the companies We discuss in the show is for information and entertainment purposes only well one small bit of ado before we dive into the story

is we owe a big Thank you to Dave mock the author of the incredible book the Qualcomm equation Yep, which is not well known but is the definitive history of Qualcomm and ranks right up there with among the best Business books that business histories that we've used as a source on acquired throughout

the whole history of the show It's awesome and it looks not even really published under like a real publisher.

It's published under an industry association.

There's no audio book There's no Kindle you have to read the physical book.

Yeah, it's you it's amazing I literally the other day texted Ben a photo that I noticed on the back cover and Ben, of course It's seen it to of one of the blurbs.

I'm gonna I'm gonna read it here Now says Dave mock helps uncover the single most important business story Single most important business story that has yet to be told how Qualcomm came to rule the wireless industry Think of it as a recipe book of for one of the most innovative and leveraged business

models of all time Whose words does that sound like Ben?

That sounds like a deep business model thinker and someone who who truly appreciates Capitalism at its finest and is willing to go find the rare gems the rare diamonds in the rough That is written and said by none other than Bill Gurley of benchmark capital for this almost unknown book.

I bet it's gonna be a lot more known after this episode.

Yep well, Dave Starts the book and it's such an apt place to start with a quote by Edwin land Who I was not familiar with until recently when David Center on the founders podcast familiarized us with Edwin Edwin was the founder of Polaroid and Steve Jobs his hero and he had this quote that Dave starts

this book with true creativity is characterized by a succession of acts each dependent on the one before and Suggesting the one after so with act one of the Qualcomm story We start in Austria here in Europe in the mid 1930s in the pre World War two era as Hitler and Mussolini and the Nazis Were rising

to power and we'll start is this the first time we've been able to say here in Europe unacquired It is the first time it is the first time And we start you might think if you know anything about Qualcomm history, I think in mid -30s like oh, I didn't know Erwin Jacobs Co -founder and CEO of Qualcomm was born

in Europe. He was not he was born in New Bedford, Massachusetts We start with somebody very different We start with one of the most famous film actresses Hollywood film actresses of all time a woman named Hetty Lamar and Side note the fact that we're starting with Hetty Lamar on the story of how modern telecommunications

came to be is so cool I remember we reached out to the NCS capital folks and said hey, you know Do any great resources on on Qualcomm and they sent back this excerpt of you should go read up on Hetty Lamar I was like, are they trolling me right now?

Yeah, you cannot make this stuff up.

This is like why we do the show so Hetty Was an incredible she was like just an incredible human being she was world famous Incredibly talented actress incredibly beautiful.

She would later be billed like the way MGM She was one of the MGM starlets marketed her was as the most beautiful woman in the world She was also a genius.

So she starred in Samson and Delilah ecstasy zig -free girl many many more But what most people at the time even up until her death did not know and certainly her husband at the time In Austria in the mid 1930s did not know Was that she had incredible powers of observation and was way more intelligent

than anybody else around her So this said husband it's quite character His name was Friedrich Mandel and he was not a good dude He was a Nazi arms dealer which made him very rich at the time Which is probably how he met Hetty and they became married Hetty though Probably unknown to Friedrich and certainly

unknown to his business associates including Hitler and Mussolini Hetty was Jewish and So Friedrich would bring his beautiful, you know film actress world -renowned film actress bride to his business meetings you know with the Nazi military powers and Hetty was listening in to everything that was going

on and as the situation deteriorated in 1937 she disguised herself as a as one of her maids and escaped to Paris and then from Paris made it to the US Went to Hollywood and lived in Hollywood for most of the rest of her life When she came to the US though She knew like an incredible amount of inside

information about the Nazi war effort And she was incredibly motivated because obviously she's from a Jewish family she hated the Nazis hated her former husband and wanted to contribute and specifically she knew that the Nazis were working on and using to great effect a Radio jamming technique for radio

guided torpedoes that would be dropped from airplanes to attack Nazi submarines It's also pretty amazing at this point in history that we had as humans the capability to radio guide Torpedo and the torpedo, you know gets propelled and you could guide it using radio frequencies deciding which way to

turn the rudder I did not know that technology existed in the 30s This is greatly the computer does the digital computer doesn't exist yet The concept of digital doesn't exist yet because we're gonna get to that in a minute This is all being done essentially with FM radios and so Hetty wants to Contribute

to the Allied war effort and when you say with FM radios therefore pretty easy to jam if you know that someone's broadcasting on, you know jam in 92 .3 and You start another signal on any 2 .3 you disrupt their signal and they're not able to hit their target with the weapon totally so Hetty teams up with her

new Hollywood neighbor a Composer a music composer named George antheal bear with us here.

I promise this is getting to Qualcomm Who is a film music composer and they with her ideas and his musical prowess?

they develop a Concept that they patent and they get issued a confidential patent that says confidential for decades in the US military By the way, this I believe did not become declassified until 1981 that's how long it was buried inside the US government issued in 1942 So four decades that this history

was completely unknown They develop a novel technique to defeat RF frequency jamming by Using frequency hopping and what they describe becomes the origin of something called spread spectrum technology So if you're familiar at all with like the wireless world or Qualcomm or anything you hear spread spectrum

and you're like Oh that sounds familiar spread spectrum technology This is the first like description of it in a technical document and a patent by these two like incredibly unlikely people And what it basically means is any way that you're gonna transmit a single message Across a variety of spectrums.

So rather than just on I'm gonna keep saying in jamming ninety two point three to ground it in radio But instead of just broadcasting on one frequency they came up with this idea to hop so change frequencies during different points in the message to Evade anyone trying to jam the signal and move to

a different frequency and the reason she teamed up with a music composer for this Is that the way you make this happen is you have incredibly precise time syncing on in this case the two ends But in you know wireless use case all endpoints of the communication channel Incredibly precise syncing so that all

endpoints know when to hop frequencies and you're hopping frequencies like dozens or hundreds of times A second and this can defeat jamming.

This is great for cryptography.

This is great for sending coded messages It turns out this was not on anybody's radar pun intended at the time It turns out that this is also the most efficient way to use radio bandwidth but let's put a pin in that for now and first let's go back to this specific use case of we want to Transmit from a plane

to a torpedo and we want to be hopping around to different Frequencies and we want to change that at incredibly precise time So the transmitter knows to change the frequency and the receiver knows to start receiving the message on a new frequency at very Specific points in time the concept of digital

hasn't been invented.

So how are we doing this David?

What's the technology?

used to synchronize a Schedule of frequency hops between a torpedo and an airplane So here's where if this were a you know, Hollywood movie like one of Hetty's films this single -handedly would have like defeated the Nazis and all that Unfortunately, the reality is there was no digital computing at the time

It wasn't possible the US military tried very hard during World War two to make this happen the whole allied military They couldn't make it work because like think about what you're trying to do here and that vacuum tubes and analog computing was what was happening At the time you would literally need

to put like any act on a torpedo and drop it from the sky to make this happen That was not feasible.

It's worth sharing how their prototype worked though So the way that they prototype this heady in the you know 19 early 1940s is they took two -player piano scrolls that had the same Basically song and they mapped each note to a new frequency and they put the same player piano in The receiver the same

scroll on the receiver that they did on the transmitter and they pressed play on the player piano song at the Same time so it would know exactly where to hop around Yes, so there were 88 frequency hops in their technical description of the patent cuz they're 88 keys on a piano So I guess literally you

wouldn't be dropping any act from this guy.

You'd be dropping a piano from this Cartoon Totally.

Okay. So that is the origin that you can't make this up origin of spread spectrum technology.

That's act one Act two we stay in World War two Around the same time but a few years later There is a young PhD grad PhD grad From the Massachusetts Institute of Technology the August Massachusetts Institute of Technology who was working on Code breaking for the Allies very famously at Bell Labs and at the Institute

for Advanced Study in Princeton, New Jersey Where he intersects with luminaries like Albert Einstein John von Neumann Alan Turing we're not talking about any of those three folks But by process of elimination, you can probably figure out who we are talking about.

We're talking about Claude Shannon literally the father of information theory one of the fathers of computer science and the inventor of the concept of Digital of the bit of information like yeah digital did not exist before Claude So during the war all of this effort culminates in what he publishes

after the war his his masterwork on that a mathematical theory of communication Which defines a bit the new field of information theory ushers in the digital era for the world and Combined with the other folks who we mentioned Einstein Turing von Neumann And Bell Labs work on transistors during the war

These things come together to create the modern era of humans and the digital computer.

Yep, so We've described like the Hollywood part described here in Act 2 Claude Shannon, you know birth of computing all that And it's worth maybe sharing a little bit about information theory.

If can I take a second David?

Of course. All right, so I had heard people reference information theory or communications theory Dozens of times over the years and every time I'd open up the Wikipedia page I'd see a bunch of complicated math equations and you quickly want to get to like, okay, but what is this?

Why does everyone keep describing it is so important and I think there's a pretty key concept That was an aha moment for me, which is all communication must happen through a medium there's no communication that happens through nothing you need some way to send signal from a transmitter to a receiver

and the method by which you communicate the way you send signal is Governed by that medium.

And so what I mean by that in particular is let's use the analogy of a conversation well, if you're in a super loud room, then Your message needs to be very loud and it needs to sort of not be very noisy It needs to be a super clear super loud message because there's a lot of noise in the room whereas

if you're in a really quiet room Then you can have kind of a message with a bunch of noise imagine someone talking But there's a bunch of static.

Well, that's okay If the medium itself the room that you're communicating in doesn't have a lot of noise itself so there's this this relationship between how noisy a message can be and how noisy the medium is that you're communicating in and I think this is this very interesting aha moment where what he

basically deduces is There is a theoretical limit to the amount of signal that you can pump through any given medium based on how noisy the medium is and based on the level of entropy or randomness in the In the the message that you're trying to describe.

So when I say entropy, let's say David you're expecting me You think there's a 99 % chance that I'm coming to deliver the message to you.

I just had breakfast well If it's a in a really loud noisy room and you know There's I'm I'm sick and I'm coughing and I tell you I just had breakfast because you were expecting it It's fine if it's in a really garbage medium But if you have no idea what I'm about to tell you and it could be everything

from like, hey You're fired to a I just had breakfast and you have no idea like we need to have that in a pretty pristine environment with really nice volume or gain on the signal so that's sort of the high -level concept of information theory and more specifically of Shannon Hartley theorem describing

the the relationship between signal and medium.

Yeah, super super cool stuff the So where this all comes together In act three of our story here, which is gonna be a little longer because we're gonna get into Qualcomm as part of this is one Irwin Mark Jacobs an American born in 1933 as we mentioned in scrappy new Bedford, Massachusetts Which used

to be I believe the wealthiest town in America during the whaling era as we discussed during Standard oil or Berkshire?

I think this Berkshire actually it was Berkshire because 45 years before Erwin Jacobs was born in New Bedford the Hathaway Manufacturing company was started in New Bedford in New Bedford before it merged with Berkshire and before of course muffin even by 1933 New Bedford was not the New Bedford the whaling

era shall we say so Erwin is a pretty amazing American story, so he grew up in like a very middle -class family in this super scrappy area of the country His dad worked a bunch of jobs and ended up running a local restaurant called the Boston beef market Erwin was highly gifted in math and sciences as

a kid going through school.

He wanted to Study math and science and probably would have wanted to study engineering if he like knew it existed in college But his high school guidance counselor famously told him that there's no future For math and science in New Bedford and frankly his high school guidance counselor was probably

right So Erwin though had very good grades growing up and the guidance counselor encouraged him to go to the world famous Cornell school of hotel management so that he could learn the hospitality management business and come back and work in the family business at the Boston beef market which he did

like This engineering genius this like American pioneer of the wireless and communications industry That is what he went to college for and he would later Credit the year and a half that he spent in the hotel management school at Cornell before transferring to electrical engineering He would credit

that year and a half with really helping him start first Link a bit his first company and then Qualcomm get out of academia and become an entrepreneur Because he actually learned about like business accounting the real world applications and found that like he kind of loved that too Amazing so after a year

and a half at Cornell in the hotel management school He learns about engineering and it's like oh you can make money with math and science this is actually like in demand maybe not a new Bedford, but like in the rest of America and So he goes to the Dean at Cornell.

He tells this story and he's like Hello, sir, you know, I sophomore at Cornell I would like to transfer from hotel management to electrical engineering and the Dean's like, oh you mean electrical engineering to hotel management, right?

He's like no, no, no hotel management to electrical engineering.

No, I want to do the harder I want to do the hard stuff After the Dean like picked himself up off the floor.

He he allowed it perhaps with a degree of suspicion Which he need not have because Erwin is another genius in this string of geniuses He would graduate go on to a PhD at MIT which he would do in three years finishing his PhD in 1959 Studying under none other than Claude Shannon himself who after the war

returned to MIT as a professor It's pretty interesting because so many of these stories that we tell There's an immense element of genius.

No question Erwin Jacobs and Jensen and at Nvidia and Steve Geniuses and also there were like 10 people in the world who knew this stuff at the time and they were among them Yeah, it's it's the most Incredible right place right time in history too because without studying under Claude Shannon the father

of information theory It's extremely unlikely that Erwin Jacobs becomes the Erwin Jacobs He went on to be totally and then without what's gonna come later and heady Lamar that he would start welcome amazing, so Erwin is so young Erwin is so talented that After he finishes his PhD in three years, you

know mere like five years removed from being a hotel management Major at Cordell and Shannon and MIT ask him to stay on as a professor and MIT like immediately Which he does he spends five years teaching at MIT During which he teaches the first course like for students On digital communications in the world

I believe you know like applying Shannon's theories to like disseminate amongst like practical engineers being trained at MIT He and a fellow faculty member write the first textbook on digital communications that is still in use today You can still like it is the Bible of digital communication theory.

You can buy it on Amazon And written by by Erwin distilled, you know from the father himself of Claude Shannon He spends five years teaching there and then in 1964 he takes a sabbatical and heads out to California to do a sabbatical at JPL at jet propulsion labs working on the US space program and communications

with with satellites in the US space program at the time where He intersects fatefully with another recent MIT electrical engineering PhD grad one Andrea or Andrew as it was anglicized Viterbi a Jewish immigrant from Italy who got his PhD From MIT in 1957 who was working at JPL and they become fast

friends So fast friends in fact that when Erwin returns back to Boston to cold snowy Bleak Boston near his upbringing in Massachusetts After his sabbatical Erwin then gets a call shortly thereafter From one of his former professors at Cornell that a new engineering school in San Diego is being started

the new UC San Diego And there's an opportunity for Jacobs to come out and start the electrical engineering department at UCSD He says well, I really enjoyed my time out there.

I've got this great friend Andy.

Let's do it I would make the exact same decision.

So he and his family Erwin and his family move out to UCSD and While he's out there.

He continues doing his contracting work with defense contractors and JPL and the US space program And this is sort of one -off at the at this time.

I mean, he's like doing it under his own name He hasn't really started a company.

It's just kind of Erwin doing contracting totally He is like the first, you know, like electrical engineering professor at UCSD That's his full -time job.

But because he's in such close proximity to everything going on at JPL and NASA and the like He's doing that on you kind of like one day a week ish and one day He and Andy and another professor from UCLA are up at NASA Ames in Mountain View doing consulting work up there They're flying back and they're

all kind of lamenting.

They're like, this is super cool that we're doing this We're making more money than academia.

We're helping our country.

We're participating in the space race But it's kind of hard to like balance all this stuff that we're doing and they're like, hey what if the three of us band together and Form a company kind of a shell company to just kind of manage this consulting work that we all get we could probably get some You

know efficiencies here maybe hire an assistant help us out that kind of stuff and they say great You know, we don't intend this to be a Real company.

We're not gonna make any products or anything.

This is just to manage our our consulting They sort of tongue -in -cheek decide to call it link a bit like linking a bit It's very like academic joke So who is this third?

partner in link a bit He ends up Not kind of gelling with the other two leaves shortly thereafter His name is Len Klein rock and I read that the first time and I was like I've heard that name before I'm gonna guess 99 % of listeners haven't heard that name But if you're you and me and all we do all day

is study tech history and you know the history of the internet That name should ring a bell.

Yeah. Well, you know at first you read this history and you're like man bummer for Len He missed out on founding Qualcomm Well, he actually ended up okay because instead of founding Qualcomm.

He founded the internet He literally was the I think the founding engineer on the ARPANET project at DARPA Many people were involved in the ARPANET project.

ARPANET which was the precursor to DARPANET Which is the precursor to the internet Len and one of his grad students at the time at UCLA Like the next year right after this has happened.

This is all happening at the same time They sent the first message on ARPANET ever like the first internet Transmission ever from UCLA to Stanford.

He's one of the core founding fathers of the internet So he ended up doing okay, you probably didn't make as much money, but he will be remembered in history pretty amazing so Andy and Erwin they're mostly continuing to work on NASA and Navy defense projects in San Diego because of course San Diego

is a US Navy town and Most of what they're doing is working on satellite communications If you know anything about satellite communications the bandwidth that you have available to you is very Very narrow and you need to be very very efficient with your communications and that's still true to this day.

I mean any any Company in the sort of emerging space economy.

It's a totally different engineering problem than you're used to Today because if you ship code up to your satellite and you find a bug It's like very expensive and very slow to go get enough bandwidth and actually make sure you have the right time window to update the Code on the satellite.

So it still kind of works the way that computers worked 30 40 years ago Yeah, and so they're you know, it wasn't them like this was the military there was as they got exposed to this trolling around to find the most best most efficient ways to use this narrow bandwidth channel that they had and What ends

up getting used but this old patented spread spectrum technology from the World War two era Invented by heavy Lamar and George Antheil and that the timing is perfect because the time of link a bit is this sort of early 80s Where that early 70s.

Oh link if it's early 70s.

Yeah Years of link a bit before.

Oh, yeah. Oh, yeah, there's a long Link of it is involved.

Oh, we are you might not know I've got some good surprises for it So they start doing more and more of this Erwin's exercising the like hotel management sort of side of his brain as he's doing this he finds that he really enjoys it They start bringing on other professors other grad students in to link

a bit to kind of build this sort of like Army of the greatest, you know Information theory and wireless signal minds in the country all for defense contracting almost all for I don't think they were doing any Commercial work at this point.

I think it was all NASA and defense.

Yeah, and almost all satellite work And so they start building the company that eventually in 1971 there's so much going on Erwin decides he's gonna take a sabbatical from UCSD and spend a year just organizing the company he ends up never going back to UCSD ever because during that year They get the idea I

believe it was during this year Maybe they'd start to have inklings of it before that um, you know, it's really nice.

They've got all this technical talent They're consulting on these projects that defense contractors mostly are the prime bidders for They're like, wait a minute Those guys are making all the money We're doing all the differentiated like engineering work here.

What if we started?

Bidding on some contracts ourselves We would probably make a lot more money as like a kind of product like, you know contract focus services company ourselves rather than just as a sub consultant Yeah on these projects if and that that lesson persists to this day, too If you can pull off being the prime

contractor to the government on a big contract That's the economics are much better than if you get subcontracted by one of the primes Well, I'm like, oh man if you can be a prime I mean the primes back then primes being prime defense contractors They're still the primes today.

Like that is a gravy train that like yeah Raytheon Lockheed Boeing all these companies So of course they start doing this but like there's a reason the primes then are the primes now Link a bit is not going to be a prime then or ever So they need to if they're gonna do this they need to move into the commercial

sphere So this is this is like one of these just like so good It's like history was like made for acquired.

Do you know what the first?

like contract project that link a bit Did was if you knew you would just be like I don't smiling so wide right now So they hear about remember their expertise is in satellite communications.

They hear about a Regional retailer No, did they do Walmart's satellite network?

Yeah, they did what?

Yeah, they hear about this eccentric founder of this small Midwestern regional retailer that for some reason wants to beam himself talking every day to all of you know From HQ to all of the local stores of this a local outlets of this retailer link of its first project is Doing the satellite communication system

for Walmart. That's wild listeners for anyone who didn't listen to our Walmart episode Walmart Was for a very long time the most innovative retailer on the planet.

I mean until Amazon basically and One of the illustrations of this is in the late 70s and then continuing into the early 80s when they actually lit it up they invent they invested tens of millions of dollars into building a private satellite relay because the bandwidth available on the internet was Insufficient

for them at the time.

I don't do it. It was just the armpit.

It was wine rack Do it phone lines that the public WAN effectively or a precursor to WAN was insufficient to you know Send the store data that they had actually been collecting and want to tabulate their results on a daily or weekly basis But also this like yes, Sam wanted to broadcast out though, you

know the Saturday So great wait, there's more Walmart to come a little later in the episode stay tuned Literally so This is why we'll probably cut this for the actual episode we get occasionally we get these reviews for acquired or like comments that like One host is like really normal and the other

host is just like laughs at his own jokes crazy person And I'm like, well, you know, at least they remember me we are who we are Nothing's changing at seven years in we're not yeah, I promise you it's not an act ask my wife Okay, so the next thing that they get into is Because they're in they're in video.

They're there. They're in satellite.

They're in video now with Walmart and they're doing these two way communications They build the video Scrambling system for pay TV on cable system so it used to be before the link a bit solution for multiple access cable systems If you like were even mildly technical or could like play around with like

an Allen wrench You could do you could get HBO or any of the early pay TV channels for free Yeah, the the the catchphrase there is security by obscurity Yeah, exactly try and you know find one clever thing that consumers weren't likely to figure out by unscrewing their box and you know Moving one wire

or something and so Jacobs and Viterbi and all the the brain trust at link a bit They solve that problem and the HBO uses them and then all the other all the other Big pay TV channels.

I think that's the inspiration behind the HBO Opener but yes the scrambled because it's like de -scrambling and now bringing you this So create that's Erwin and Andy right there So in 1980 they do this for the whole decade of the 70s in 1980 the Link of it the company gets acquired by East Coast radio

technology company called Macom I think it's how it was pronounced it used to be actually Macom and then it you know It's like weird 80s branding stuff.

They changed the brand to m slash a dash c o m Microwave communications, I think.

Anyway, they sell the business for 25 million bucks in 1980 which like nice early win not bad for some former academics 25 million bucks in 1980 dollars like and they had a lot of people at this point I think there was like over a thousand employees it grew within it was on its way there But it didn't

grew over the next five years within Macom to that big So I don't think it was it grew to 1500 people eventually like this is a big freaking business So you know man the things we're talking about like a lot of other retailers started using, you know Satellite networks a lot of other cable TV, you know channels

wanted to use these to like and there were other products that they were Building like this is a huge like yeah, basically they made a big mistake selling the company You know, they they hadn't listened to acquired.

They didn't have all the lessons They wouldn't have had Qualcomm if they didn't sell the company.

Well, that's true. They made absolutely the right decision in selling link of it then So they stay with Macom for five years and then there's a leadership change at Macom and like this is an East Coast technology company, so they all leave in 1985 and they sit around for a couple months and You know,

they're like like we made more money than we ever like dreamed We would we got to be part of so many cool things but like we're still young and like the wireless Communications industry is kind of just getting started.

Yeah, and this is 1985.

So the cellular Telephone industry exists at this point it had just started we had the you know How we were on 5g now and everybody remembers the iPhone 3g that that second phone and the edge network that that the first iPhone launched with was 2g it was a little advancement on 2g.

This was 1g. This was 1g which was analog No digital yet in in cellars analog cellular and cellular had just been an innovation I mean this notion that rather than you know communicating over long distances.

We were actually going to put Cell towers so that you only needed to communicate with your local tower and that that could be relayed and you had this sort of cellularification of all the geography that you needed to cover That was new and it's funny how today we we don't even think about what the word

cellular means But that was the most recent innovation at the time.

Yeah, that's great So, you know Erwin and Andy like they're they are first -rate Academics, you know as hopefully we've told the story here like among the most brilliant minds in the world But they're also like especially Erwin like incredible business people market analysts Like they're very aware like

the products they developed a link of it They're aware that this market is coming and and the reason they're so aware like technically it exists now cellular it's all car phones at this point in time because The way it works is it was essentially it was just like the torpedoes back in the day.

It was essentially a FM radio Broadcaster that you would wire up Our super high power you needed like a lot of freakin power you had to put it in a car for what you're talking about and because you couldn't like there was not a battery available to You needed a running internal combustion engine to

make a power. Yes on the end points.

Yes on the end points and bandwidth was super limited and like these systems were thousands and thousands of dollars in early 80s dollars and Despite all that the consumer demand for car phones Was insane like into like this was just like, you know, there were wait lists years long for consumers to

get car phones installed and the Fledgling carriers at the time like they only had so much bandwidth they could fit because literally it's you know, there's no There's no efficient use of channels.

It's just like the torpedoes back in the day Like they couldn't keep up with all the demand I remember when my parents who were lawyers like they had car phones in the 80s.

Did your parents own?

No, my great uncle had one, but it is interesting thinking about, you know when you're listening on an FM radio you have 99 .1 and then you click up on the dial and it says 99 .3 and then you click up and it says 99 .5 and you can't even have 0 .2 0 .4 0 .6 because that's too close.

There would be interference.

So you start thinking about and this isn't exactly right I'm gonna oversimplify this a little bit, but you start thinking about well, geez How many slots are there to communicate in this analog way with a cell tower near me?

What can a cell tower handle hundred phones 200 phones 500 phones either way?

It's not gonna not like much more than a hundred.

Yeah. Yeah, if you think about how many radio stations there are It's not much more than that So, you know the link that folks are running Andy they see this they know and they're like, oh This industry is in its infancy.

We see this amazing demand.

We are literally the best.

We know there's a better way to do this We know you can do this digitally.

We know you can do it way better.

We know how to do it the best So they found a new company in July of 1985 with seven Total seven in total Andy Erwin and five other of the best link of it engineers they meet at Erwin's house and They decided to start this new company and they name it Qualcomm quality communications, which is short

for quality Communications, which I had no freaking idea.

We did the research but then you're like, oh quality communications, yeah, and then when you know all this history it makes sense like They are the highest quality, you know, but they they know how to do quality communications This is a communications company and they can provide quality than nobody

else There's so many companies named this way to these things become these household brands and then it's it's like you don't even think about what the original Meaning was totally totally because like the industry was still so early and and you think for a minute about what is involved in building

out a Cellular telephone network.

There is enormous capex like, you know laying like cable We've talked a little bit about the cable industry history unacquired like that required enormous capex Like this is like literally putting towers in the ground putting base stations on them Building these thousand dollar mobile phones.

It requires a lot of money to participate in this it's money And it's a bunch of competencies Because not only when are you thinking about the real estate for the tower and putting in the tower and putting the base stations on The tower.

Well, then you need to figure out.

Well, how are those towers?

What's the protocol?

What's the technical method that it's communicating with phones and making sure that the phones have all the correct hardware and it's not just antennas It's very specialized chips.

And so then you're like, okay Well, do we need to then make phones and do we need to build a consumer brand and do we need to market to consumers?

Do we need to be our own carrier?

Do we sell to carriers?

There's a way to sort of like Bite and try and eat the whole elephant here or you could say okay We're just gonna try and be one small part of this because we have an idea for how to make this better But if you're just doing one small part of it and inventing the means by which the the technical method

that the phones Communicate with the towers.

There's a bunch of stakeholders that you've got to get on board with your thing Carriers the government in terms of licensing spectrum phone manufacturers chip makers base station makers So there's this really interesting Crux that they're at at this point of the company where they're saying we know

we can do this better We have a specific idea about how to make this better, which we'll get to in a second But there's really trying to figure out how much of the elephant to try to eat them So in this story, you know this um, hopefully this first, you know, 45 minutes the episode was interesting We

know fun telling this like crazy World War two Hollywood, you know history of all the technical aspect that comes to this The business history of Qualcomm just like Bill Gurley said on the blurb of this book It is one of the most brilliant strategic executions of entering a market Period you know like

writ large ever like this is on par with Nvidia if not, yeah, honestly more brilliant It seems more difficult because if you were to reach me this idea a priori as an investor I would tell you immediately no because I see 15 different needles all of which you must thread perfectly a story That's entirely

path dependent So you're not gonna get one thing until you get the previous thing and that was a needle that you were threading So the likelihood of success is unbelievably low and yet here We are talking about Qualcomm so They knew two things at the outset of founding one This is a massive opportunity

that they eventually wanted to pursue was bringing their expertise To bringing cell phone terrestrial cell phone networks into the digital era and building the dominant gorilla company in this Soon to be massive industry and two they knew they couldn't do it yet So they actually started in the same

fashion that link of it did they're like, okay We're gonna bootstrap up by doing consulting work.

Yep. So one of the first consulting projects they do is with Hughes You know, like one of the defense primes use like Howard Hughes Pretty awesome on a proposal to the FCC for a mobile satellite network Like I will learn about consumer mobile, you know telephony services Enter the market will work on the satellite

network and we're talking like Jurassic Park sat phones.

Yes Like big honking things super expensive But like when you really need it, it's nice that there exists a sat phone network.

Yes So while they're working on this they're like working on like, okay, how can we like we're the experts at you know Optimizing satellite communication channels for efficiency They come up with an application of spread spectrum to use multiple access multiple conversations access the same channels

at the same time that they Call that they they use a technique called CDMA code division multiple access which the first time you hear this phrase sounds like complete jargon like Meaningless and and then you stare at the Wikipedia article for a while to try and unpack each one So we'll break it into

parts multiple access.

Well, that's that's fairly straightforward rather than being broadcast So like a TV network We have multiple endpoints that all want to communicate with each other using whatever the same communication medium is so rather than using One single frequency to all charge trial pile on there at the same time

Which of course wouldn't work in that analog world that we were talking about I want to call you on ninety two three you want to call Bob on ninety two point three My mom wants to call my dad on ninety two point three.

You quickly get into a situation We're like everything's just colliding with each other.

So multiple access on Just a single analog frequency doesn't work So you got to divide up and say everybody gets their own frequency and that's sort of the the way that The way the world evolved so you mentioned code division.

Yeah before we get to code division Can we talk about a different type of division?

Yes We certainly can so before we get to the CD and CDMA code division Let's so we've got the multiple access part bunch of bunch of people trying to communicate using the same medium Well the things that we were talking about before everybody gets their own frequency that was called FDMA frequency

division multiple access So a pretty straightforward way that you might divide up the airwaves in order to have multiple conversations And the way the telecommunications industry works is remember I opened the episode by saying is basically a layered set of magic tricks This is sort of the the next

iteration on top and if you say okay rather than sending analog signals What if we were sending digital signals?

So if I'm talking to David there's a lot of sort of pauses about half the conversation is actually empty error And if two folks out in the audience are talking to each other a lot of your time is actually empty air So we don't both need the entire frequency all the time And if we are communicating using

a digital signal instead of an analog signal Then actually we can parcel up the information into digital packets and just rotate the time of when different packets are being sent Right so you know the very crude example is if we're at a dinner party I can have my conversation for 30 seconds in a room

And then you know I pause and I stop talking a different conversation can happen for 30 seconds of course That's too crude, and that's far too long in a time division network What you'd basically do is say I get some digital packets for these milliseconds Then the next milliseconds you get your digital

packets Then the next few seconds a few milliseconds someone else gets their digital packets And we'll keep around Robin and get between the 20 conversations that that we're all having and When it gets reassembled on the other side by some other phone or something Thanks to transistors and digital technology

this can all happen fast enough that like you don't even notice Yeah, you're like oh the signal maybe sounds a little compressed It's not as good as if we're talking to each other actually face to face But there's no like weird blips or pauses in the conversation even though we're all borrowing Different

time slots on the same frequency it actually sounds pretty smooth to me Yeah, so that's the next iterative event case where Europe was way farther ahead than the US Europe was basically ready to implement this Time division multiple access digital standard in Europe for European cell phone technology

And that was driven by Erickson the big European Infrastructure provider so I think like just to pause and reflect big innovation going from maybe 20 30 50 X Like you get a lot more capacity By saying instead of just one person gets a frequency at any given time You now get a whole bunch of people who can use

that frequency because the signals digital because of time division This is the movement from frequency division multiple access fdma to time division multiple access TD ma it's actually who's at 3050 maybe now that kind of is but like back then it was three to five X Really?

I think the right analogy is like it is time sharing time sharing is what it is And it's kind of like the old computing model of like time sharing on a teletype on a mainframe.

That's what's going on here.

Yep, and so Over to Qualcomm so that they're they're thinking about doing this this satellite communication thing and remember Erwin studied with Claude Shannon So he's always thinking about what is the most efficient way to use all the way up to the theoretical limit of how much signal can be Communicated

in a given medium at a given time and he's sort of looking at TD ma and they're like Ah, I think there's something even more efficient than this and we need something more efficient than this for this Satellite network and these guys were all around the beginning of the internet Yeah, and like you think

about if you know anything about how the internet works and package networks generally packet switching It's not time -sharing.

No, it is. Everybody compresses their data as much as they possibly can Into a digital packet they fire it off and it bounces around a series of places until it hits the other side gets decoded and hopefully the protocol is written correctly where as you're sort of Opening your packets and and sequencing

them all in the right way.

It seems Perfect and how the message was originally intended to be when it was encoded in the first place you said the magic word Decoded and that's what these guys figure out.

They're like Duh, we'll just use code and then like everybody will send all the conversations all at the same time all across all the different channels We'll maximally efficiently use all the spectrum allocated and we'll just depend a little code to the beginning of each digital conversation and it'll

get reassembled on The back end so basically the same way the internet works.

Yeah, so to break that down further So you've got this really interesting situation now where all messages are encoded digitally And I keep like going back to this analogy that they use in the telecommunications industry of the dinner party so rather than The sort of frequency the FDMA model of everybody's

in their own room having their own conversation You know, that's not super efficient or TDMA, which is you put five or ten people in a room But they need to wait their turn to have their conversation Well, what code division basically is the as the analogy goes is well, everybody can communicate in whatever

room They want they're all just communicating in their own language and the person that they're communicating to Understands that language they can sort of listen and and disregard noise that's coming in If I'm expecting your message to be I had breakfast this morning and then like I don't care how

much noise is in the You don't care how much I either know you said that or you didn't say that right?

You're like, I'm disregarding all the Spanish and I'm just listening for English.

That sounds something sort of like Describing someone's state of breakfast and that's an oversimplification If you really wanted to sort of dig into it what you're basically doing is you run any given Packet through like literally an encoding.

So maybe my encoding is 1 0 0 1 0 so you detect So you encode whatever the packet of information is you run it through sort of add it to 1 0 0 1 0 And then you end up with this signal that you can sort of stack on top of other messages So imagine a digital signal like a digital wave Where all of our

messages are layered on top of each other?

So the top of the peaks of some of the wave are extra high and the troughs are extra low for others And when it all arrives all together on the other side The other side knows how to decode all of our messages So it individually subtracts all of our messages which are layered all on top of each other

off the very same digital signal Until it basically has all of our messages spread apart It disregards any of the ones that doesn't match the code that I'm looking for that I'm listening for and it says I'm I Just care about the message that came from Ben, which was 1 0 0 1 0 or whatever code I just

made up and that it reassembles it the shtick for CDMA and What these guys do just this brilliant like they saw it they had the background they had the engineer They like everything right place right time and the business sense They developed this and they freaking patented In 1986 well before years

before Qualcomm gets actually directly involved in the cellular industry at all They patent the method and technique for code division multiple access applied to terrestrial Cellular networks in 1986 in US patent number four million nine hundred and one thousand three hundred and seven Which is one

of the most valuable patents in history Yep Unreal like literally they played such a long game and they threaded needle after needle after needle and that was just the first and and when You think about why that is so valuable when you really distill down what the CDMA patent is It was the very first

time that you could say well rather than thinking about one one specific frequency just imagine you have all the frequencies available to you and Everybody can all the time broadcast their message on whatever the next available frequency is and we have the technology to just figure it out On the other

side. Oh, and by the way, you don't even need to do it with super high power So it's good for battery life and that sort of thing because since it's encoded an internal combustion engine to power this thing Right the other side knows what it's looking for So this is the equivalent of there's a bunch

of people whispering in a gigantic house to each other all in different languages So it's this like way more efficient way to use a given medium to have the absolute maximum amount of conversations or signal transmission in that medium Okay, so Qualcomm founded 1985 patent issued 1986 or applied for 1986

which is worth remembering so it'll expire in 2006.

That's right. That's right Looking ahead foreshadowing Qualcomm doesn't enter the wireless industry until 1989 what happens in the interim This is this is the next Walmart.

Oh, it's so good. You literally just can't make this stuff up So they get approached to bid on another contract fledgling Qualcomm does from a company called Omni net Which has this idea that they think the Qualcomm folks are gonna be perfect to implement They want to make a mobile satellite network

specifically to connect commercial semi -trucks on the roads in America and network them up to the distribution centers for retailers and other People who companies who ship a lot of things in the US.

This is right in their wheelhouse Qualcomm and and Erwin are like great.

We're gonna bid on this contract.

They win it. They start working with Omni net and they Make it work.

And one of the very first customers is of course Walmart which implements it on their own proprietary fleet of trucks Building further their technical advantage over just about every other retailer in America And at this point they've walked away from the satellite contract, right?

They sort of like yeah They want the Hughes satellite thing that actually just never happened.

So they develop this technology they patent it They were like, oh, but there's no money here because the contract the FCC was like Yeah satellite Jurassic Park phones not gonna be a thing.

Right? So instead they're focused on this Omni net so they focus on this and they also have like a lot of the Business, you know relationships already from the previous iteration of what they were doing in link of it Including with Walmart many of the other large companies and retailers I believe it's

Schneider Trucking.

Yep becomes one of the actually the first customer I think for that so They work on building that it becomes pretty clear like this is gonna be the interim main product Qualcomm and Omni net merge in 1988 they raised three point five million dollars in funding as part of that They bring the product

to market at the end of 1988 as Omni tracks people might have heard of it It was part of Qualcomm for a long time before I believe it ended up getting spun out to private equity And in 1989 in the first year of business for Omni tracks, they do 32 million dollars in revenue in 1989 which is something

like it's like inflation adjusted a hundred million dollars It's a lot of money and there's a lot of demand for this product in the first year of the product law your one Now there's a lot of cogs like this isn't SAS revenue.

No. Yeah. Yeah talking about and There's particularly a lot of cogs because one of the things they learn from doing this and one of the reasons the companies merge The first kind of like the link a bit days, you know They remember Walmart was their customer for the link a bit satellite, you know thing

Walmart is very happy to integrate and implement technology themselves Most other customers are not so they go around and they're like, you know pitching this to trucking companies and retailers and the like And and most of them are being like, well, this is like cool But we're not gonna operate our

own dispatch centers and messaging.

We try to have a small an IT department as possible Are you asking us to do all this work and just handing us this pile of technology?

Yeah, so Erwin is like well what if um what if we just operate it for you and We provide a whole full stack solution.

We don't sell you a technology.

We sell you a solution Which is like every enterprise company that you ever you know What company has become enter prisey when they cross the chasm and their website no longer has like products Pricing about and it changes to solutions.

Yeah They make the business scary of solutions We all should say like this is a tremendously dilutive financing event This is Qualcomm saying we need money so badly to fund the development of Omni tracks for this this customer Omni net that the most attractive option for us is to sell half The equity

in our company so everyone gets diluted 50 % by merging with the customer themselves In order to get just a few million dollars to continue funding this effort It's a pretty different time than today where you go raise a seed round and you sell 5 10 20 percent of your business for To I don't know too

many seed rounds that are happening for a 5 % dilution these days, but but they were they were and so It's it's a very it's crazy to think the position that they were in where everyone was looking at Erwin and he was like Hey, I think this is literally the best path forward in order for us to get the few

million dollars We need to and I think some people were pretty bitter about that totally and you could imagine too It's not like an idea like they had done a bunch of work already.

This was going to happen They were going to go to market.

They were just a couple years away from Making a hundred million dollars in inflation adjusted dollars and yet they had to give up half the company Yeah, they literally were a couple years away from making actual hundred million because the business Doubles every year for like five years from a 32 million dollar

base like Wow freaking awesome so now that this is in place that like all right, we have both a cash flow spigot that we can use and Now like a base of business that we can finance and like borrow against and raise equity against to pursue the real big idea and our original patent and Here's the other

just be a brilliant thing.

What happened originally was not in fact.

There were other people who Knew about code division multiple access You know other folks could have been in a position to patent this and pursue it But at the time nobody believed it could actually work because you needed such sophisticated processing power on both the Endpoints on the base stations

and the endpoints to actually make this work like it sounded completely freaking crazy It needs to happen in real time.

I mean people need to have conversations without a perceptible delay and you are cutting a You're first doing the analog to digital encoding where you're taking their voice and you're actually turning it into a digital signal You're cutting it up into a bunch of packets You're encoding those packets

with every users unique code You're sending it over the airwaves to your most local cell tower That cell tower is relaying it across a variety of other cell towers to where the other person on the end of the conversation is Having the call and then the whole pipeline is happening in reverse on the handset

on the hand So this is a thing like me real could believe you could do this processing on the on the base stations on the infrastructure side But like the idea that like that a car like something powered by an internal combustion engine Like in a car or or haven't forbidden our car like a mobile phone

like a Zach Morris phone that you know Somebody would hold in their hand That you could do this on something like that was crazy in 1986 But the Qualcomm guys they know about Moore's law which like most people didn't know about at that time They're like, yeah, I'm pretty sure you give it one or two

more, you know turns of the crank on Moore's law here And like I think we could maybe do this There are so many things that we've talked about in the last I mean on acquired generally, but especially in the last year where their success came from correctly Forecasting more where Moore's law would be

at the time that they ship their product.

Yeah, so knowing that some Shipping now like it's not possible today But when we're gonna ship this which is still gonna be several years in the future.

It will be possible then Like so cool and like the fact that it's like there were so few people that knew that then and like ah crazy We want to thank our longtime friend of the show Vanta the leading trust management platform Vanta, of course automates your security reviews and compliance efforts So

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and David sent you and thanks to friend of the show Christina Vanta CEO all acquired listeners get a thousand dollar followers of free credit Vanta comm slash acquired so in September of 1988 All these factors, you know, they've got the financing capability to take a swing at this They see a path with Moore's

law to it being technically feasible.

They've got the patent They're literally the only ones that can do this and then the market timing.

So in September 1988 the US Cellular Telecommunications Industry Association or CT I a as most people know it and then it's related entity the TIA the Telecommunications Industry Association they release performance requirements the spec for performance requirements for the planned upgrade of the US's

Cellular networks from the analog 1g networks to the new digital 2g networks and this is just the US one Europe has its own Europe's already well on its way Yeah, GSM Erickson TDMA.

It's all happening here in Europe The Qualcomm folks, of course, they eagerly anticipate the release of the spec and they look at it and they're like Oh my god, this could not have been written better.

It's written for us.

It's a dream It's written for us.

They realize two things one Of course TDMA is the the front -runner and Erickson now that to like You know to the US too because they're successfully doing it in Europe and and not only is it being done in Europe It makes sense to adopt in the US to because it's kind of nice to have a global standard

and because it's quite believable Like okay, one big thing I have to believe is we're switching to digital I can believe that another big thing I have to believe is that you're able to use the same frequency for several conversations at once Through cutting up, you know different time windows.

Okay, I can believe that but gosh How much new stuff are you trying to invent all at the same time?

Anything better than that feels like I gotta take a leap of faith and show me it can work and Erickson's well on the Way to like pilots proving showing it works.

This actually works.

They're big companies.

They've succeeded before they're the right vendors that everyone trusts So the spec that the CTIA publishes Qualcomm guys, so this must have just been like some beaming year to year They realized that TDMA because of the capacity limits of TDMA.

It's not gonna meet spec Like you got the best inflammation implementation of TDMA It's not gonna allow for enough compression to actually meet the spec that the US wants to hit So here this is a I've been I've been like waiting to bring this thing up so at this point in history the US standards body

has is Correctly forecasting the incredible popularity of cell phones in the US So they're setting a really high bar for the amount of phones that need to be able to use this network and the reason that they have Since changed their tune is in 1980.

This is a fun bit of trivia AT &T who has been the incumbent for a hundred years on all things telecommunications Commissioned McKinsey and company to predict a case cell phone it all goes back to McKinsey always always To predict the cell phone usage in the United States in the year 2000 So flash forward

20 years in the future the consulting group argued that cellular telephony would be a niche Market.

Yes, of course. They forecasted 900 ,000 people would be subscribed to a cellular telephony network in the year 2000.

I think I have 900 ,000 cellular connections personally So as you know that number was off by over 100 X There were 109 million people not 900 ,000 109 million subscribed in the year 2000 So it does make the point that in 1980 It was super not obvious like you had some of the smartest people in the world

both in domain depth at AT &T And just good business model thinkers at McKinsey wildly misforecasting this and to illustrate how big the miss was AT &T eventually bought macaw cellular for 12 .6 billion dollars to become AT &T wireless, which is the AT &T We actually all know today and catch up in mobile

telephony So that this like 2g spec that was written is is right around the time that a lot of the people in the industry are Starting to realize like uh -oh where we have super wrong and what we all thought just a few years ago The potential of this thing was so that's like, you know back to the original

Edwin Land quote starting the episode of like creativity Like one act following another, you know enabled by it suggested to suggesting the next like this is the next like needle day thread You know domino that falls of TDMA didn't hit the spec and they could kind of foresee this You know because they

knew what the demand was and they knew TDMA wasn't gonna be able to do it.

So Here's the next this is cool.

Like I didn't expect to get into kind of like geopolitics on this but the one great that you know the US has like a ton of bureaucracy and regulation like all of this being like, you know case in point but one Incredible.

I think this took five years to eventually and like these standards bodies and like all like this is not the free market like by any means but he the one difference in the US process for all this versus the European process and it was the difference that made all of the difference was the US government

said The industry associations you guys can set the specs and all that and that can be official But it's not mandatory.

So like in Europe. It was like mandatory like The TDMA which DSM was based on like mandatory.

That's it and plenty other countries Yeah mandatory in the US was like this is the industry standard and like we recommend that any mobile carrier follows it But if you want to do your own thing like as long as it meets the performance spec You can use whatever technology you want and importantly standards

bodies are decoupled from government agencies So the FCC allocates spectrum, but these standards bodies are literally just industry industry associations And they need to exist because there's so much coordination between all the different manufacturers and carriers and companies involved that like

You need to have a standard.

Otherwise, the innovation doesn't happen Because no one knows what to build against and no one can sort of effectively collaborate enough So once all this the standard comes out Qualcomm immediately like goes to Washington like Erwin and Andy never they go they go to they Go to DC and they're like hey

just to make sure we just want to like be crystal clear Can you confirm to us that even though this other thing is the standard if a given carrier mobile operator?

Wanted to use something different as long as it used a spec like that's cool.

That's not illegal, right?

And they're like, yep, that's the case.

They're like, okay, cool.

Thank you. We'll be back and So that was like the next needle they thread They're totally undaunted.

They go like great We can go pitch individual carriers on Using CDMA as a technology.

So they start a sales process.

This is now the beginning of 1989 They start a road show they go out pitching this new Novel CDMA standard versus the TDMA Industry standard and this starts what is known literally I tweeted this the other day in the Wikipedia entry for all this This is like canonically known as the holy wars of wireless

There's so much telecom nerdery and it really is holy wars because it's about belief so many people were just like I don't believe you that CDMA will work and You know, it was literally only the Qualcomm folks who thought it would work and Not just you know, I'm reminded of the Don Valentine like I

knew the future Based on all they didn't know the future per se but based on all their experience They were very very confident that it would work and it would win despite the seemingly overwhelming odds Because they knew a secret Which was that at the end of the day as long as there was not government

enforced standardized regulation They knew that economics would win in the market and there's so many benefits of CDMA Versus TDMA.

We've covered some of them You know one of the other ones is that like the voice quality is actually much better than TDMA Like it's all like there's a whole litany security is much better I mean is originally created for the government to beam stuff up and down to satellites another huge one is it

literally if you're Operating a cell network and you can have more subscribers per unit of infrastructure is literally cheaper So you're you're gonna be a lower -cost technology.

This is the thing There's one benefit that actually matters all the others are like nice to have on a feature spec There's one benefit that is gonna allow them to be super sure they're gonna win Which is that it is like an order of three to five X More efficient to operate.

Unfortunately, they originally pitched 40 X.

Yeah, right. That's the standard that everyone was benchmark Oh, that was versus animal versus analog.

I think it was three to five X more than TDMA Yeah So that meant if you were a carrier and you went with this crazy CDMA thing and it actually worked You could fit on a given set of spectrum that you are operating with you could fit three to five X more Subscribers three to five X more monthly revenue

Yeah on that same fixed cost base than your competitors who are using TDMA And if you know anything about like if we've learned anything unacquired about economics of industries and power and Hamilton Helmer and all that Like if you have a scale advantage like there you have a power advantage of differential

profit margins versus your competitors You are gonna run the table on your competitors in any given market Yes If a customer is worth more to me than they're worth to you and we can offer them the same value There I'm gonna win.

Yeah, cuz you can just lower prices and get all the customers and make more profits along the way and there's We've only sort of scratched the surface on this episode of reasons to doubt That code division was the right technology.

There were all these other crazy hoops They had to jump over one of them is the the near far interference problem.

Oh, yeah This is like like if you think about it, so like let's keep the whispering analogy going The code division idea is that we can all talk really quietly and use the smallest amount of power and the smallest amount of sort of gain in our signal To communicate with each other so it's much more

efficient than these all these other High gain high power high volume signals that everyone else is trying to use well, if I'm using a really low gain signal and I'm far from my the base station from the cell tower That's an issue because the people who are really close are gonna sort of drown me out

Imagine we're all whispering but I'm miles away.

Well, you're gonna hear the person whispering right next to you So, you know, we're very early days in powerful chips powerful power management And you've got Qualcomm pitching the industry that they're gonna do this and people are like wait But you have to turn down the gain on anybody really close

to the towers and turn up the gain on anybody really far From the towers and you have to know In real time and adjust in real time All of that so you have to be good at power management chips Also, how are you going to know how far away someone is from the tower and they're like, well, we'll be able to

just Observe the signal that is coming back from the tower or perhaps do it on the tower observe the signal coming from the phone itself And we will in real time determine if it needs to go up or down and this is blowing people's minds in the mid 80s So like are you they're like don't worry.

We got that in real time You're gonna modify a signal based on what you're currently hearing from that signal and then Qualcomm comes in way over the top and says Oh also, there's this new thing called GPS that is coming out and we're gonna know about from the military Basing the technology on GPS so we

know how far away someone is from the cell tower based on GPS Which doesn't really exist yet.

Like there's all these impossibilities with the system that theoretically is better, but We've never witnessed any of the building blocks that are going to go into it actually work in practice Yeah, and back to the magic thing like just the technological Magic that went into this at every stage of the way.

They're like, yeah, we got this figured out and they patent every Single piece of this.

Yeah every single piece Unreal the first patent we talked about is the most valuable But like there is a whole string of you know, dozens hundreds thousands of other patents that come after this Yeah, that are just incredibly valuable.

So they start the red show pretty quickly in February of 1989 One of the largest carriers in the Southern California area PACTEL wireless is interesting because they get it like this economic argument like it's you know, basically they're like Alright, this works like yeah, you got us So they put up

a million dollars to fund a prototype like okay prove to us that this works build a prototype Qualcomm for the rest of year works on this November of 1989 They host a demo, you know with the PACTEL money, but they invite the whole rest of the industry in San Diego And there's a famously a little hiccup

where like they're about to you know Erwin's giving like a big speech introducing it then they're gonna do the actual demo They've got vans driving around the city and then like a base station back at Qualcomm HQ They're gonna make it all work he's giving the interest speech and one of the engineers

is like Frantically waving in the back like keep talking keep talking with they had to reboot the GPS system And so like he's you know, he makes a little quip of like as a former professor It was easy for me to keep talking.

He's told this story like a million times Anyway, there is something funny too about this original demo where they're not a consumer Hardware manufacturer yet.

They've never built a phone.

They're a bunch of academics and consultants and you know Electrical engineers and so for this demo the the cell phone that they build basically looks like a mini fridge With like a handset hanging off of it.

Yeah, I mean they build the most there's a photo of it in the book.

It's awesome It's awesome.

We'll come back to building handsets in a sec So it works like PACTEL is a great we're in And then some of the other act tell by the way would eventually get rolled up into Verizon I think they're basically a Verizon's West Coast operator at this point Some of the other industry folks who come they're

like, well, this is impressive it works, but like San Diego is a pretty forgiving environment for cellular technology Like this is a very like geographically easy city to operate wire if or in terms of wireless signals prove to us that this can work in like an urban jungle environment and Qualcomm's

like, okay, how about New York?

And they're like, well, we'll see you there.

So in February of 1990 They do a successful demo in Manhattan in New York City on the back of that.

They sign 9x 9x mobile, which is one of the largest of New York carriers and then in August they sign a Maratec Which is one of the largest Chicago, I think the Chicago.

Yeah, I think at a big chunk of the Midwest And then there's another brilliant move they start going international.

So like here in the US there's all this like forward momentum That's already happened with the 1g analog services and you know the TDMA and all that They're like, what if we go out to countries where it's just tabula rasa like clean slate and we pitch this as like the obvious best technology and famously

South Korea back to the like government mandated standards.

The South Korean government is like, yep.

This is clearly the best Government mandated all you know, they were building up the first Cell phone networks in San in South Korea that we're gonna be these digital, you know next -gen networks Yeah, all CDMA all Qualcomm South Korea for a time was I think close to 40 % of Qualcomm's revenues Cuz the whole

country like and it was one of the you know, most advanced mobile countries All the season Qualcomm.

There's lots of benefits to the free market and freedom and there's also benefits to Regulatory and government capture yes coming in over the top with an edict is also beneficial in December of 1991 on the back of all this they go public.

There is a paltry 68 million dollars in their IPO Series B.

Yeah, totally 21 series B So Finally in 1993 the US industry associations the CTIA and the TIA Does actually adopt CDMA as a second standard officially is like okay now you have our blessing It's like well, it doesn't matter.

We already got like half the industry signed up with us.

Anyway, you know, thanks for nothing At that point Qualcomm does a secondary offering there is another hundred and fifty million on the public markets a couple years later They do or maybe a year later.

There is another five hundred million on the public markets So they're very well capitalized and why are they raising all this money back to the Omni tracks and like this, you know solutions discovery of like enterprise, you know The people that they're pitching as their core customers the wireless

carriers They are sophisticated operators But there's a whole ecosystem of technology providers to them and they already Except in the case of South Korea, you know, they already have built out like towers infrastructure They kind of replace all that and so, you know, it's a big ass even with the economic

advantage It's a real big ask for a pack tell or you know 9x or any of those if you're a pack tell you're like It sounds great to me that you are going to have this much better standard and this much better technology Are you gonna replace my towers?

Are you gonna replace my base stations?

Are you gonna replace all of my customers handsets like like all of our customers buy phones from phone manufacturers?

So are those phone manufacturers signed up?

Yeah, right is it quickly becomes a rat's nest of industry dependencies You know Qualcomm knew they like this, you know, still relatively small San Diego, you know technology startup They can't do all this stuff.

So they do start signing some partnerships with both base station Infrastructure providers and handset makers.

They signed Nokia big win big European manufacturer as a partner But they realize, you know to do this whole solution like specifically there's kind of four parts to making a CDMA wireless network Work, we've talked about all of them, but just to enumerate them here You need the core IP and technology

that we've talked about, you know Qualcomm's got that for sure.

You need the Infrastructure the CDMA like base stations that go on the towers You know all that like the back ends of switching all that you need that infrastructure Needs to be CDMA the old stuffs not gonna work with it.

The TDMA stuffs not gonna work with it Need the handsets for consumers to work same deal.

There's got to be CDMA and Then probably most importantly in order to make those two sets of infrastructure work You need the silicon the semiconductors that go into them Yeah, and so somebody's got to do all four of those things, you know It was like all four of those things need to happen Qualcomm's

for sure got number one covered The question is who's gonna do two three and four?

I was like, you know, they signed start signing partners, but they're like, you know, we really need to spur adoption I think we kind of got to do everything ourselves.

We need to offer the complete solution complete Solution and this is a major undertaking.

This is why they raise all this money in the public markets which is quite interesting because Despite I mean, none of us are buying Qualcomm phones today like no Qualcomm brand yet phones today Spoiler alert Qualcomm today is the largest fabulous semiconductor company in the world That crazy bigger

than Nvidia bigger than Nvidia and they don't make and don't make infrastructure.

I think They're bigger than Apple.

Oh, yeah Yeah in terms of numbers of orders they're placing with chip foundries Qualcomm is the biggest Yeah So how do you get from there to here?

so they did need to run this really interesting playbook where even though it wasn't going to be the thing that they Necessarily did long -term in order to get their solution adopted.

They had to do it in the moat strap it up so They do another just brilliant move.

They create two joint ventures I believe I believe both of them I know the hands at one but I believe both were 51 percent owned by Qualcomm 49 percent owned by the partner On the infrastructure side they partner with northern telecom Nortel to do a JV to manufacture CDMA base station equipment and then

another Wonderful acquired in a full -circle moment.

They call up our friends in Japan.

They call up our friends in Japan who at the time their US manufacturing headquarters was based in San Diego.

That's convenient, California very convenient Our friends Sony I guess well Akio Morita was running it.

Yeah at that point in time Yeah, the Sony corporation to partner in a JV to make handsets So I actually had a Qualcomm handset back in the day probably a lot of those little flip phones Yeah, well the field that was a lawsuit with Motorola.

No. No, I had a brick phone Like a small brick not as act more as brick but a small brick Here's Qualcomm phone that was made by the JV with Sony.

I was a Sony phone With Qualcomm branding, but they're doing all this to sit to be able to answer Yes, when a carrier is coming to them and saying well great will be CDMA, but question mark question mark question mark Qualmars Qualcomm's like yep.

Yep, and yep. We make all that stuff.

Yep. Yep. Yep. You should feel safe adopting us IP Infrastructure handsets silicon that goes into both we got all of it So we just talked about one two and three and they didn't talk about the silicon and to be clear on the silicon People know the snapdragon brand today.

This is not snapdragons.

This is not Systems on a chip CPUs.

This is not a competitor to Apple's a 15 this is Literally the silicon to power the radios and just that it's to do the encoding decoding power management of literally just attenuating the airwaves to send CDMA encoded telephony back and forth You're making it sound Trivial but this is actually this is this is the final

I'm not making his own trivia.

Well, that's right.

I mean I couldn't you do it.

Yeah, right you do it This is the final just brilliant masterstroke in this long series of brilliant masterstrokes that Irwin and and Qualcomm, you know did at this time.

I don't know any other chain of just brilliant brilliant strategic decisions one after the other If this had been ten years earlier They would have had to do the same thing with silicon They would have to partner with Intel or you know, AMD or somebody.

Yeah, or TI Texas instruments You know one of the real men that had one of the real men That had fabs.

Of course, we're referring to um, AMD founder CEO.

I think so Jerry Jerry Who once said that real men have fabs and of course was proven desperately wrong over there They would have had to do the same thing They did with Sony and Nortel on the semiconductor side and maybe you know They could have had some value capture from the Qualcomm IP, but they

would have had to partner to make this stuff But thanks to our acquired superhero Morris Chang fabulous semiconductors in 1989 1990 1991 just starting to become a just Starting to become a thing so they could design their own ships without having to actually have a foundry in house to make them and they

could outsource that they could actually do all the Important value -added work like it's totally it's it's a rigging Ben Thompson smiling curve in this industry If you go from, you know, one to four of the IP the two manufacturing and then the semiconductors All the value all the differentiation in this industry

is in the IP and the semiconductors and the manufacturing is a commodity and Qualcomm would have been a great company if they had just captured the first They captured the first and the last they got all of the value like all of the value It's just and and and you know, like we talked about on the Nvidia episodes

it was equally crazy and like future seeing to know that fabulous was a thing that foundries were a thing to be to work with foundries And Qualcomm did it It's like how many times is this company gonna be in the right place at the right time and and just to you know the silicon and know it yeah and right

and right seize it and the You know, we're gonna talk more about silicon and Qualcomm as we go here But you know just to you know paint the punchline here Today Qualcomm's total revenue is what close to 40 billion annually, I think yeah of which 85 percent is their semiconductor business.

Yep So like without 37 billion of their 44 billion of revenue is so but for this strategic decision 85 % of today's Qualcomm revenue would not exist Like and they are the largest fabulous semiconductor company in the world bigger than Nvidia who's number two crazy Totally crazy.

It makes sense. They started a couple years before Nvidia.

So You know compounding.

It's a thing. That's right So They pull this whole freaking thing off.

It's just crazy. There's nothing more to say than it's just one of the most impressive Business stories I have ever heard CDMA gets adopted as a major 2g standard for the next set of phones that come out 57 percent market share in the US in 2g 100 % market share in countries like South Korea.

They end up getting I should know this I Either 100 % massive market share in China, which is adopting, you know mobile self For the first time and like this is so much so the first 1995 is the first year that these networks go live in the US and internationally Qualcomm does 383 million dollars in revenue

in 1995 in 1996 they do 814 million dollars in revenue.

Oh my gosh, but here's the here's the crazy thing.

So here's another like just Wild you can't make this stuff up You would think Wall Street would love the stock Wall Street bets would be going nuts for this stock the equivalent at the time not at all the case the stock is like basically flat Wall Street kind of hates it because the manufacturing operations

and the JVs Require so much capital and they're tying up all the profits of the company It gets the stock gets punished basically all the way up until January of 1999 and a few interesting things happen Are you okay jumping in 99?

Yeah, great. Let's go.

Let's go in there anyway.

So a few interesting things happen in 99 one Qualcomm starts to realize it's a pretty serious drag on our business to have this super capital intensive Manufacturing operations either we're funneling all this money that could be free cash flow for the business or could let us Reinvest in new R &D into

making phones and making base stations.

We got to do something about this So in March of 99 they sell their infrastructure business the base stations to Erickson which was one of their competitors their big competitor there was part of a licensing deal of all the loss or a Settlement deal of all the lawsuits that popped up between the two

companies along the way.

They're like, oh great.

We'll sell you our manufacturing This I mean this is basically them looking and saying I don't think we need that to bootstrap our strategy anymore I think at this point we've got enough momentum that we don't need to make our own base stations We don't need to make our own cell phones.

So a thousand of the ninety five hundred Qualcomm employees become Erickson employees Then they look over at their mobile phone business one one fun little Not fun at the time but fun now little footnote on that sale to Erickson the the employees that got transferred as part of that were So freaking

pissed that they lost their Qualcomm stock options They actually filed a class action lawsuit against Qualcomm to like get their stock options back I mean over the next 18 months the stock would basically be Tesla stock Like that's this crazy moment that we're about to talk about December 1999 Kyocera buys Qualcomm's

mobile phone business So they now officially just sell chips that they call QTC the Qualcomm CDMA technologies group and then they've got a second group QTL which is Qualcomm technology licensing.

It's just the model is now set they make silicon they make licenses They make they sell very high margin revenue licenses to their patent war chest.

That's the business model for the future They no longer have this drag on them and they sell relatively high margin semi conductor designs Yeah, because they don't fab any of the semis and when they're selling these designs, they're not just saying here's a chip Give me five dollars for it.

They're saying how much you sell those phones for yeah We'll take five percent of that and you say what?

What if I want to raise prices on my phones and Qualcomm says yep You'll still pay us five percent of that and you're like, what do you mean?

I'll just go somewhere else and they're like where you gonna go We own all we own all the patents and by the way in addition to paying us five percent of the phones I think you should pay us to license these patents too and all the customers go what and Qualcomm goes Where else you gonna go?

So you make them sound so evil I mean they did invent it all so they do have a right to monetize it But an apple did and the DOJ did not the FTC sued them for antitrust.

Well spoilers. We'll get to that the punchline of all this after the December of 99 offloading of the handset business to Kyocera, which is actually a Japanese company.

I also had Kyocera phones growing up Well, you bought all the good ones.

I got all the good ones Well, you were on you were on a TDMA network, right?

I was on singular which was a GSM network Which became which got bought by AT &T wireless, but it doesn't matter.

It all becomes CDMA.

Anyway, actually a sec as we will see In the year 2000 after this sale the height of the tech bubble, you know This is like on the benchmark episodes.

We're talking about eBay e -boys benchmarks making billions of dollars Yahoo's going nuts.

Like it's that it's the internet bubble.

It's the tech bubble and people are looking around They're like what power is the internet and what's gonna power the next generation of the internet the single best performing stock for the entire year 2000 is Qualcomm it Appreciates the Qualcomm stock appreciates 2 ,621 percent the 366 days of the year

2000. I think it was a leap year.

Yeah, I it's Yeah, unreal twenty six point two X in the public markets in one year the best performing stock of the craziest year until 2021 until last year and the stock markets However, you would have had to know just the right moment to sell because it did not stay up there for very long It would crash

down over the next year such that it be an 18 months such that it became only a 4x from its pre 1999 high But if you bought it on the way up you lost a lot I'll take only a 4x on my 2021 investments all day long these days Yeah, pretty great so You know, that's that's like the core Just crazy business

story of Qualcomm did to take it from there to today the next generation of cell phone networks 3g which Ben and I probably but vividly remember probably many folks listening.

Yeah do to 3g, you know there that's when there was a lot of debate, especially in the US about GSM versus CDMA and all you know, I'll think like Naively, you would think at the time like oh, well all the folks were going GSM like this bad for Qualcomm GSM switched to CDMA anyway, so like all basically

all 3g was CDMA in Europe and in the US just Worldwide.

I mean they just ran the table Yeah And the reason for that was 3g was all about data speeds broadband internet data speeds and CDMA was just like the vastly superior technology for Totally.

You didn't have to you didn't have to encode anything from analog to digital when you're talking into your phone You got to encode the signal But if you're downloading a website or you're sending an iMessage or you're sending a tweet all that's digital information Anyway, so it's already packets it

like it lends itself perfectly to CDMA is digital required infrastructure.

Totally then in 2005 Erwin retires as CEO, I believe and also as chairman of Qualcomm and Interestingly his son one of his four sons Paul Jacobs takes over and becomes the company's CEO Paul actually has a PhD in electrical engineering as well Spent his whole career Qualcomm rose through the ranks Becomes

the CEO. So an important thing.

Remember I put a pin in the idea that 20 years from 1985 when they filed that first patent something else would happen So Paul Jacobs become CEO also in 2005 Qualcomm buys Flarian technologies for six hundred million dollars Now Flarian did some interesting like they had some interesting products But

they had a lot of patents that would become essential for 4g so When we talked to some industry analysts about this one view was and I quote it was to refill the pot of missiles That Qualcomm promises not to fire at their customers if they pay Additional money so the key set of technologies here were OFD

ma which is we're not gonna get into it But it was sort of that's what 4g becomes.

It's sort of 4g was based on OFD ma instead of CD ma Orthogonal frequency division multiplexing.

Yeah, we're not gonna dive into it, but it was more efficient than CD ma CD ma Well, it was the definitely the knight in shining shining armor versus the previous set of technologies it didn't quite hold up to the claims or the future proofing of sort of its evolution path that Which makes by this point

in time, it's 20 year old technology So but what we do see here now is after the Flarian acquisition Qualcomm is able to continue their same exact business model because all of the patents that would be required for 4g and LTE and All that going forward.

They own a lot of those two.

Yeah, it's interesting, you know So the Paul the Paul Jacobs era of Qualcomm from 2005 to 2013 I think 13 14 so somewhere about a decade.

Yeah No, I think it's like very viewed at a very mixed light His big strategic initiative was getting Qualcomm into IOT IOT didn't really become a thing at least at that time and the same and maybe it's starting to work now But yeah, it's starting to work now, but like not not in the time.

Yeah, everyone thought it did And it was kind of like a lost era for Qualcomm, but you know when you look back on it two things that actually like were really great then one was that acquisition and Getting because initially Qualcomm was was fighting OFDM and trying to have CD ma still be the standard

for 4g Eventually, they did pivot and get into OFDM.

So that was kind of a you know, an initial wrong move But then it then a pivot in a save But too that's when they start building the Snapdragon you know and you know mobile systems on a chip and CPUs and taking on more of the processing on the early predecessors to Smartphones and that would just put

them in such a good position for the modern smartphone era They sell the high -end Android chip today I mean the world has sort of standardized around Apple makes the a series chips for your iPhone And if you're buying a high -end Android phone, it's a Qualcomm Whatever, I don't know all the model numbers,

but series 8 gen 1 or something is the Snapdragon that dragon Yeah, and they now brand everything Snapdragon.

They do which makes teasing some of this apart very confusing because they've just slapped the Snapdragon label on so much that you're like wait, but that's just an RF antenna How come it says Snapdragon and they're like yeah faked you out like that's the whole point of calling everything Snapdragon I

mean, I guess to be fair like the Silicon Engineering and the chip design is so complete even for like Oh just an RF antenna like yeah That is like a million times more complex than like any processor in a phone ten years ago.

So It is truly differentiated work that they're doing but that was you know, obviously a huge win and I you know to the point I think today Qualcomm makes on average about $20 for every Smartphone sold in the world including Apple iPhones.

Yes. So let's let's get into that So I've got the timeline from here.

So Going to 2009 this is when like all the litigation really starts to happen and people's flip from Qualcomm we think really highly of you and you're a Pioneer of technology and true inventors which they are they still spend a ton of the company's revenue and reinvest that into R &D, but where they

really start to be Known by their customers and the media and the ecosystem as value capture pioneers.

And so They lose a law you capture pirate That's a new way.

We shouldn't that's another acquired teacher value capture pioneer or what's the phrase that I use for Apple maximally extractive over their ecosystem So Qualcomm loses a lawsuit with Broadcom in 2009 has to pay 900 million dollars in 2012 Paul Jacobs well at the helm makes a Really bad bet maybe is a good

bet but bad outcome on a reflective display technology called Mirosol They spun over a billion dollar fab to make it.

Well, they actually made a fab Zero customers for this next year.

The promise real companies don't have fabs it was supposed to be like a screen that looks like a magazine page, but they were never really able to reproduce the the Image quality right?

I was working at the Wall Street Journal at this time.

I'm like, oh man That was the future The iPad was the future.

Yes, Steve mallen kampf comes in and becomes CEO where I suppose gets promoted to become CEO very technical leader He was COO before was COO before but the problems Problems they keep growing revenue.

They keep doing well as a company But the the ecosystem issues for them and ecosystem reputation continues.

So in 2015 They enter into not just an issue with other companies, but now with nations So they have a licensing dispute with China You have an activist investor who comes in that same year John a partners to try to split up the licensing and the chip business the that Activist investor is kind of saying

why do these need to be the same company the licensing business is printing cash And at this point in time many semiconductor companies have split out the actual like yep Operations and the IP like a lot of old semiconductor companies are basically just litigation companies at this point Yeah, so that's

the Broadcom model.

So it's interesting to say, okay What is Broadcom at this point Broadcom is actually a company called Avago where the CEO of that?

Basically made a bet and said I think the semiconductor industry is no longer experiencing growth I think that industry should be harvesting profits because I think I think it's predicated on Moore's law Decelerating but basically saying I don't think that this industry should be reinvesting as much

in R &D anymore because it's a it's a Settled frontier and what should be happening is we should be rolling up these companies So Avago buys Broadcom takes broad cods name buy some other stuff like LSI logic LSI logic.

Oh big Sequoia win Don Valentine's.

Yeah one of his very first very few investments And and really the the Broadcom strategy is to roll up the semiconductor industry Squeeze them.

Well as much as possible.

In fact, they're basically a private equity firm Broadcom is borrowing Lots and lots of debt to make the acquisitions that they're making and then squeezing them for profitability so John my favorite piece of Broadcom history trivia that Avago the sort of core of the you know, what Broadcom is Actually

started its life as Hewlett -Packard's chip division What a sad state of affairs.

Yep 2015 The company shakes off Jana Partners and doesn't split out the two businesses I think that was the right call and I'll tell you why and playbook But we were talking about Broadcom 2018 Broadcom comes in and tries to do a hostile takeover at a 117 billion dollar valuation and Interestingly,

it was financed by a hundred and six billion dollars of debt.

So that company for the rest of its life I mean that that would basically just be Qualcomm servicing the debt.

So Interestingly, the Trump administration got involved and said it would be a national Security concern and block the deal and while that may have been true for the reason that the Singapore based Broadcom was sort of joined at the hip with Huawei and did a lot of business with Huawei this I Think

ends up being a big win for Qualcomm's lobbyists I think they had great relationships with the US government and always have since the early days in being a government contractor and a lot Of people that we talked to viewed or at least that I talked to viewed this as Qualcomm being able to call in a favor And

say yeah, this is a national security concern.

Don't you think we're calling in the favor now?

Yeah, it's totally true I mean like this deal was gonna go through and Qualcomm was gonna be Everything you were just talking about with with Broadcom, which would have been very especially now like we know about like semiconductor like every like it's just like This is one of the huge wins of the Trump

administration, you know For like America was keeping Qualcomm an independent American company like whether it was Qualcomm calling in a favor or just what like I think we can all look back in 2022 and be like This was an enormous win.

Yep. So in 2017 going back one previous year both the US Federal Trade Commission and Apple sue Qualcomm for basically the same thing saying that Qualcomm was using its market position as the dominant smartphone modem supplier to force manufacturers Into paying excessive fees and this is one that I

want to sort of dive in on we spent a bunch of time advancing through The timeline to really get to this particular point Which I think is is a great place to zoom in on Qualcomm strategic position today is is this Apple lawsuit?

So some background Apple has always used either Samsung processors in the first iPhones until they switched to their own But they still had to pay Qualcomm patent royalties for whatever RF stuff they were using so whether you know Let's treat the CPU as its completely own world transitioning from Samsung

to the a series processors Apple Probably has to buy stuff from from Qualcomm.

Maybe they could look somewhere else But either way, they're paying Qualcomm the licensing for it Today Apple does use Qualcomm cellular modems which started in 2011 and there was just one year where they used Intel where they did not use Qualcomm we're gonna talk about that so the way that I Essentially

perceived this and and why Apple eventually initiated the lawsuit is Qualcomm got greedy They had patents on technologies that were part of standards that were set by industry Consortiums all over the world and they leverage those patents in basically every way possible And here's the economics as far

as I could sort of suss it out So they asked Apple for seven dollars and fifty cents per phone sold which comes to about two billion dollars a year Plus an additional eight to ten when they were gonna raise prices later And so you quickly get to a situation where that that Qualcomm was sort of expecting

Apple to pay $17 just to license patents, right?

Which is no chips on top of the price that they were paying for those baseband chips So rack rate for a baseband chipped when baseband chips are the same thing as sort of cellular modems Is $30 a chip and it's not actually $30 It's more like five percent of whatever the average selling phone price is But

I guess what phones have a really high average selling price iPhones and so if you think about 250 million phones a year that is seven and a half billion dollars a year That Apple would be paying Qualcomm That would be 20 % of the QCT revenue 20 % of all of the chip revenue that that Qualcomm makes and Further

if you back out the 14 million a year from the from QCT their chip segment that doesn't come from The chips for handset specifically, but rather there's some other stuff They're working on automotive IOT and this new thing that they're calling the RF front -end radios product line Which we'll also talk

about this is cool Apple could make up up to one third of Qualcomm's handset chip revenue Now analysts have estimated that Apple negotiated down from $30 to $10 Apple's general counsel during the lawsuit Let the number $18 slip.

So whether it's 10 18 or 30 bucks a pop That is an enormous amount of revenue that Apple pays Qualcomm Again, not for a snapdragon not for the CPU not for the system on a chip just for the RF cellular modem Wild so there's some other interesting things that came out in this lawsuit Qualcomm asked Apple

to speak out against WiMAX, which is a competing technology.

They were like we need you to vocally Speak out that our competitor is a bad piece of technology They also Stipulated that if Apple ever used a competing supplier and keep in mind this deal is signed In the early days of the iPhone if they ever used a competing supplier to Qualcomm, they would owe Qualcomm

a billion dollars So what Apple is basically doing is biding their time for there to be an actual credible competitor and they had to wait all the way up until the 4g days until they're like looking at Intel and they're like Especially if we work with you and we work closely with you We think you can be

a credible competitor to Qualcomm right now We think your cellular modems business is like close enough where our customers won't notice the difference and we can tell Qualcomm that we're gonna use you and Try to get a little bit of leverage What Qualcomm interpret that as is?

Well now you us a billion dollars because Look at our original deal we did The What this basically comes down to from a legal perspective is because Qualcomm owns patents that are a part of an industry standard They have to charge a price that is fair reasonable and non -discriminatory or frand is the industry

terminology And Apple is basically alleging look you're abusing the market because it's not fair reasonable and non You're highly highly unreasonable in the way that you're charging us this So Around the time of the iPhone XS and XR those phones actually did use Intel modems But what was basically happening

is the Intel modems were falling further and further behind Qualcomm Apple was realizing.

Oh crap We're gonna miss 5g because there's no chance that Intel catches up right and can actually develop a credible 5g chip and so they end up settling and sort of backing off the their big lawsuit with Qualcomm when this the way that for a We're gonna escape our Technical level of competency quickly

if we haven't already but like 5g is like it's pretty cool this is where like you were talking about patents this all sounds a little so like icky, but like the amount of engineering and like IP and like work that has to go into like What we described originally back in like the World War two and they're

like that was so crazy complicated to make this stuff work back Then now it's just like a factor of a million more like the amount of processing What Moore's law has had to come up the curve to enable something like 5g is unreal like there's a dedicated processor in front now of The RF stack.

Yep to do all the crazy multiplexing that is required for 5g bandwidth to work, right?

Yes, so this RF front end.

Okay. So here's a fun little So what is 5g?

It actually is an open question When 5g was first proposed the proposal was to use the millimeter wave spectrum this super high frequency part of the spectrum That for years people thought was basically impossible to work with because it was it was yeah It just requires incredibly sophisticated electronics

to make it work. Not only that but when you have really high frequency And again, we're right on the edge of our competency here, but when you have really high frequency radios They can't transmit through a lot of stuff.

It doesn't handle concrete Well, and so you end up needing a little base station on every street corner now It can give you like 10 gig internet like it's crazy but it needs to be really close to you and so as the the Telecoms were starting to build this out.

Of course the initial review they say we're we now have 5g In fact, they even rebranded a bunch of LTE stuff to be 5g So it would show up as 5g on your phone AT &T did this right like they were like yeah all of a sudden because I was on AT &T at the time used to say 4g LTE and then all of a sudden it

just said 5g on my phone.

It's like what? You're like really 5ge like that.

No, that's exactly the same stuff.

I was using before but now you've rebranded it So occasionally you'd walk by something that actually had a millimeter wave tower and it would over it would be like oh my god This is the fastest internet I've ever experienced and then you'd like walk across the street Oh, I remember like the lie at the birds

doing like yes The world's expert.

Yeah. Yeah, like on a specific street corner in like New York City or San Francisco getting like 5g's a 10 out of 10 And then you take one step to the right and you're like right back on 4g so here we are 20 22 5 years after the initial hubbub about 5g started for consumers and What is 5g well the industry

has decided to a lot two more areas of spectrum that are not millimeter wave and are easier to work with and are cheaper to build infrastructure for and are slower as 5g also, so now what that does to chip makers is it says if you're building a cellular modem in your phone You have to have a really

complex RF front -end or what Qualcomm is calling their RF FE business The the RF front -end basically needs to at any given point adjust in real time Depending on what flavor of 5g you're accessing so many different windows of spectrum.

Yes so far across the spectrum bands that like Yeah, there's all man think about like back to the original Hedy Lebarn frequency hopping like it was all within one band Yeah, it's now we're talking about like see what they have to a crazy number of bands.

So Apple look going back to the Apple lawsuit Apple sort of realizing We're screwed here.

If we don't have Qualcomm as our customer.

So They settle with Qualcomm In this is in 2019 Apple says we will continue using Qualcomm's radios for now I think they negotiated some discount to the exorbitant fees that they were having to pay Qualcomm They Apple also paid 4 billion now switching over to the licensing side of the house To secure

the patent licenses over the next six years.

I think it's four and a half billion dollars for a six -year deal It's actually unclear who really wins here.

I think Qualcomm wins in the short term because Apple's backup solution of Intel's modem fell entirely behind But in the long term, I mean what ended up happening is Apple actually bought that division away from Intel And they've been developing their own cellular modems in -house We know based on I

don't know if it was a slip of the tongue or an intentional thing but we know from the most recent Qualcomm earnings call a week ago that The next version of the iPhone that comes out in November of 2023 Will continue to use Qualcomm's chips like even though Apple has been working on their own So they're

trying to do the PA semi on the modem.

Yes, it's Ludicrously hard to build the stuff that Qualcomm has built.

So even next year's iPhone will have Qualcomm Wow RF front ends and I think they use our reference and cellular modems but after that Apple is definitely gonna try and take this in -house but Cristiano the CEO of Qualcomm said on the most recent earnings call after that we do anticipate having almost

$0 come from Apple in our chips business.

So at least they're Shout foreshadowing to their shareholders Qualcomm is that they think Apple is gonna succeed at this.

It's just gonna take a couple years well, this feels Like the perfect time to talk about the other strategic chess move that Qualcomm made here.

Yes new via new via so This is another 2021 move.

So Qualcomm bought this company called new via for 1 .4 billion dollars What is new via?

Well new via was founded by former Apple Silicon people including the chief architect of the a series chips That seems like a good get yeah, and so active PA semi Yes So this one way to look at it is this is Qualcomm's ticket into the laptop CPU slash system on a chip market They already make snapdragons

for the high -end Android phones and soon They'll be able to make a competitor to Apple's M series chips for laptops and desktops and maybe even servers and phones too I mean like iPads phones tablets like so it's crazy.

This is where it's interesting.

So snapdragons For anyone who listened to our arm episode, you'll remember the difference between arm makes a instructions that architecture that you can license or You can go big with them and just buy one of the actual arm design ships off the shelf like buying a solution You might say yes Snapdragons

use an off -the -shelf arm design for their CPU Apple just uses the arm instruction set but has done their own custom design to get the most performance And that's why Apple Silicon is so far ahead.

Yes the Nuvia team can just Do their own custom design of chips and actually be differentiated from stock arm CPUs just like Apple is doing unfortunately, like Qualcomm everything cool about the The snapdragon chip doesn't actually include the CPU the CPU is just a standard issue.

Yeah the standard issue arm does arm designs So this is cool.

So this is the path for Snapdragon to get on par with Apple Silicon.

Yes and for their CPUs to actually exactly So but one caveat to this whole thing about like maybe they'll do laptops.

Maybe they'll do servers Qualcomm actually doesn't really want to do any of that Qualcomm historically has failed every time they've tried to do servers or watches or smart home or Displays like every time they've strayed too far from their core competency.

It hasn't been good probably what Qualcomm really wants is 20 bucks from Apple for every iPhone.

I think that's a reasonable path forward The CEO is pitching a much broader story than that to shareholders these days.

So what? Qualcomm actually wants is for the Nuvia team to sort of like invest where they see the frontier going where they see a much bigger Tam where Qualcomm sees a Multi -hundred billion dollar opportunity and that is IOT automotive and the RF front -end and so they they sort of describe phone modems

and phone Systems on a chip as almost like a legacy business and they're highlighting these other areas as sort of the the growth business as the frontier Interesting, but either way Nuvia seems to be the ticket because if you can custom design Chips using the arm ISA but be like the performance of Apple

Silicon. I don't care what you're putting those in That's a really good.

Yeah powerful thing.

Well, just I mean even like for technology the technology industry writ large to have just like with Android you had a You know iPhone rivaling operating system available off the shelf for any kind of application that let a million flowers bloom Yep to have the same thing for Apple Silicon.

Like that's pretty cool Alright listeners.

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think let's just sort of skip I'll mention them briefly But let's get into analysis Paul Jacobs got kicked off the board of Qualcomm in 2018 He tried to take the company private through a buyout When there was all this sort of tumult about is it gonna be bought by Broadcom all this stuff?

And the board said if you're gonna try and make a hostile takeover and LBO the company yourself You can get right off the board And so there are no members of the Jacobs family on the board of directors anymore The other thing that happened 2016 to 2018 Qualcomm tried to acquire NXP semiconductors But

I think eventually China sort of just like drag their feet enough to kill it get tied up in the whole Broadcom thing yes but Quick review of where they are today, and then we'll go into analysis Qualcomm today has a 120 billion dollar market cap which two things one that's astonishing That's impressive

their technological pioneers, and they're amazing at value capture Two that is the same price that it was worth at the peak of the dot -com bubble Wow and Just about the same amount that Broadcom offered to buy it for her right yep Which is interesting you know by revenue?

I think revenue and probably also a number of chips They are the largest fabulous semiconductor company in the world bigger than Nvidia Yeah, but a way lower market cap than Nvidia.

Yep. I mean are you gonna make a bet like here's my view on that Qualcomm versus Nvidia.

Do you bet on the intelligent connected edge as as the CEO Cristiano?

I'm on would put it or do you bet on AI and Like they're both mega trends AI has a far bigger potential in my opinion than the intelligent connected edge Which is wonderfully buzz although.

I do really have a genuine appreciation after doing this episode for like the amount of engineering that goes into wireless technological advances Which almost at a Moore's law like well, that's lower than Moore's law like pace, but a steady drum be have continued to Improve an exam.

I mean now there's like no difference between 5g and like home broadband like And that's like you're standing on the right street corner.

Okay? They do 44 billion in revenue chips make up most of that at 37 billion licensing fees make up only 7 billion, but the licenses Are a much higher margin business?

It's a 69 % Margin, I think it's earnings before tax margin on licensing versus only 34 % for the chips So there's a super efficient business there in licensing revenues are growing 32 % earnings are growing 47 % year -over -year.

This is an amazingly high growth rate company.

Yeah, that's pretty awesome They almost doubled their revenue over the last couple of years, too So that the Christianos definitely does seem to be doing a good job.

Christiano is the new CEO as of last year I think he's been for been in for about a year.

So into analysis. What power do you think that Qualcomm has?

patents Is that a cornered resource?

I think that is a cornered resource.

Oh, I think yeah Hamilton in Seven powers.

I think he does say patents are cornered.

I think they're in the canonical description of a corner research that for sure they Had at least maybe still do have network economies in the infrastructure side of the telecom Industry and the handset side like yeah, you have one locks in the other one locks in the other like if you control the infrastructure

Standard all the handsets will have to use that.

Yep. If all the handsets use XYZ standard then the infrastructure off to you and so like being able to control both like I think there actually was a network effect There.

I also think there's scale economies if you are a fabulous Chip company then totally is worth all the R &D the amount of R &D You can for a snapjack designing and creating a snapdragon and realized across a huge number of customers So like it's really hard to start the next Qualcomm if the front the frontier

you want to compete on is making a better Snapdragon that's not gonna happen I've got a fun one here that's both fun to talk about because it always is but I think actually as a I Feel reasonably confident in I think Qualcomm during the golden years that we told the history of had real process power

I think it was equivalent to the Pixar brain trust like that set of people Working together under those set of circumstances Were wholly unique in the industry and the world.

Yeah, and actually it's interesting like I read all you know Besides the Qualcomm equation book from Dave Mach, which is amazing There's a ton of history out there about Qualcomm, especially in like local, San Diego Like like the lots of local San Diego publications and history books and stuff Especially

cuz the Jacobs has given hundreds of millions of dollars to support the kid.

We didn't talk about this But everyone is love it.

Erwin is one of the great philanthropists of the past century like Undoubtedly, but to UCSD the UC system So many like so much of building infrastructure in San Diego comes from Qualcomm and the Jacobs family So going and doing all the research all these local San Diego publications and and you know

historical documents they all talk about the like wealth the wellspring of Startups and other technology companies that came out of Qualcomm and indeed they're like, you know link a bit in Qualcomm They're like a hundred plus In the San Diego area they came out of Qualcomm But you compare that to like

the Silicon Valley like what came out of Intel what came out of Fairchild What came out of the traders see there's not the same Diaspora of success in Qualcomm like the plenty of success and you know, Solana and totally is part of the Qualcomm this diaspora so it's not like there's none but not at the same scale

and I think that actually De facto shows there was process power like it was that unique group of people in that unique situation interesting sort of like proof by example Yeah, huh deductive proof.

Do you want to talk about the bear and bull case for the company?

I Have a few. Okay.

Go for it. All right.

So here's the bear case Qualcomm has very real competition from the low -end that we didn't talk about An example is media tech who not only makes the baseband modem chip But also systems on a chip using the stock arm CPU designs so media tech systems are way cheaper than Qualcomm and I think they actually

just surpassed Qualcomm in terms of number of units shipped and so all the low and mid -end Android phones are using media tech and so Qualcomm kind of needed to buy Nuvia in order to Differentiate the CPU and not just be using the stock arm design that media tech and everyone else is using on much cheaper

chips ways Historically, they failed that everything that was not a phone that we talked about before and now they're sort of Saying the future is IOT and automotive these things that are not phones.

We'll see They're just constantly in lawsuits I mean that we didn't talk about this but like China South Korea EU Taiwan all these companies all these nations have sued So many law firms must just be making a fortune off of right industry And the last one for the the bear case for me is I really think

that they finally poked the bear Talking about their customers enough to make them want to actually do something about it The the the goal for Qualcomm should have been make as much money as you can without pissing people off too much And I think over the last decade They really upset Samsung Apple

so many people that are starting to at least make their own radios or even consider systems on a chip And so now that there's very viable alternatives for silicon that people could either use in -house or Competitors coming around at different angles Qualcomm may lose their leverage to actually get a royalty

out of each phone sold now Licensing business is going to continue to be a juggernaut smaller in revenue, but higher in margin But you know that that is the sort of bear case on the current Silicon business now the bull case like maybe the lawsuits thing is actually a bull case they managed to keep

making more and more money and have been reaffirmed over and over again at a bunch of jurisdictions that you know, they settle their way out of these lawsuits or they Whatever, but they're able to keep making tons of money the big bull case is you believe that this shift to automotive IOT and 5g RF

front -end is real and so for those keeping track at home Everything I'm about to say is a part of the chip segment that does that 37 billion dollars in revenue Automotive does 2 billion in revenue That's a very real business the RF front -end business that we were talking about that does 4 billion dollars

a year in revenue It's interesting.

I mean we rented a car here in Lisbon and for the family and of course it has Data built -in, you know 4g or 5g data, right in as does like just about every new cars these days.

Yep The IOT segment is now doing over 7 billion dollars a year Qualcomm thinks overall.

This is a 100 billion dollar opportunity There's a bigger narrative that Cristiano is trying to espouse around this intelligent connected edge that they call a 700 billion dollar Opportunity that's running the massive numbers Reminds me a lot of the quality Nvidia slide that talks about their trillion dollar

Tam I Mean they're executing very well, but I think they're trying to sell a story in terms of addressable market that is Hand wavy.

Yeah All right playbook so in the early days, this is a thing that we didn't talk about we talked about the Some of the ecosystem stuff but there was this incredibly delicate dance of needing to be the best supplier to win deals But also have other credible suppliers No phone company was going to take

a dependency on the CDMA technology when just one vendor existed And so they need to evangelize and create their own competitors So that their customers could feel safe with this new technology But of course as long as they kept some things secret of how to eke out the absolute best performance from the innovations

They actually could still be the leader So it was like figure out how to get a bunch of other people just good enough, which is fascinating And it's such an amazing case study in bootstrapping an industry.

Yes Yes Similarly, they had a clever tactic in their IP strategy So at Qualcomm where I think they have something like 17 ,000 patents now There's a decision every time there's a novel piece of technology About whether they should patent it or keep it a trade secret and there's enough things patented

so that you you can't achieve any of these things these magical things that we've been referring to all episode these layers of magic without paying Qualcomm, but they don't patent everything because they want to keep an advantage for Like consulting revenue or implementation fees or signing big deals

where they say not only do you get access to our patents?

Which may expire at some point But if you work directly with us you get access to the trade secrets and you can pay us to you know Basically generate services revenue for you to work with our engineers It's all I was thinking about this for playbook as we were going to there's this really interesting

dynamic to this Industry that lends itself well to the IP and patent Monetization scheme that Qualcomm has adopted which is that the successive generations of wireless network, you know G's Happen just fast enough that it's within the patent lifetime.

Yes So that like, you know all that core CDMA pad like all those patents are expired now But it doesn't matter because we're so many generations beyond that like those patents are now Worthless.

Yeah, so you get all the useful life during the protection period of the patent and then when it's you know It's not like a generic drug where like, you know, Advil is still or Tylenol or whatever is still like, you know useful, right?

That's a great point It's also interesting that if you miss the window like if Qualcomm had missed the window in the early 90s of evangelizing the technology For 2g they made out of survive long enough to catch the next window ten years later for 3g so this is like one of the few industries where There's

these super quantized time windows that exist when you can actually get in.

Yep Another one that I thought was pretty interesting because I mentioned I think the businesses actually make sense together the Licensing business offers Qualcomm Predictable high -margin revenue that they can basically use to fund R &D So because they know they're gonna keep getting that and because it's

a big revenue stream It lets them sort of take bets on New R &D and when they do more R &D that fuels the flywheel where they both get new products and they get more IP that they can Continue putting into the licensing flywheel.

So there is I think there is a credible argument of why you want to keep them together There's also a and Qualcomm makes that argument explicitly totally the not very credible argument is this thing's a cash cow And we want to keep our rich uncle around to make this a nice place to work And you know,

like they have several and give nine airplanes like it's a it's a it's a relatively cushy company from what I understand Well, San Diego is a very nice place.

Yes I do think the big picture is that the US government's patent system has granted Qualcomm a monopoly and I I think there's like This is one of the few things we've covered on the show where The business exists because of the US's regulatory system They've basically said and then reaffirmed in a lot

of these rulings You are allowed to capture a ton of value from this and there's so many good debates about Whether the patent system exists and serves its intended purpose of enabling People to spread the news about their innovation so other people can add it and the way we compensate you as we give

you a 20 Year exclusivity window or whether something like this is an abuse of the system But there's no way to argue that this is anything but a perfect execution of the game on the field Yeah, it strikes me telling this whole story that like think about early stage venture capital company building

and the like, you know, you said Ben who are telling the story if you were to Give a venture capitalist the Qualcomm pitch and like there's so many they're like at least six or seven Different hops where you know ex ante it looks like well And then a miracle happens and then we succeed at this and then

another miracle happens Then we succeeded that and like usually, you know My pattern matching as an investor in early stage companies is like anytime there's a single and then a miracle happens Automatic pass like because if you're betting on it, but but sometimes if you have a team Because this wasn't just

like and then a miracle happens if you listened closely and like really knew this team They like really knew they had really high degree of confidence that all of these tight You know threading the needle moments We're gonna happen.

Yep And it really to a degree that just blows my mind.

I've never heard anything like it.

Yeah And it just makes me think that like sometimes like to maybe just be a little more open to that You know that like sometimes like if some person off the walk Walked in off the street and said like gave you the Qualcomm pitch for sure.

It would not work for sure and and the hardest thing about being a technology investor or someone participating in this ecosystem in any way is It's a power law dynamic.

This is a business of exceptions and I've seen and I'm sure you have to so many counterfactuals to where Incredibly credible teams walk in off the streets with miracle like then a miracle happens and yeah It still doesn't work like you know, but sometimes but sometimes but sometimes it never works But

sometimes it does sometimes it does.

It's what makes our industry fun All right So we're gonna not do grading because we've decided to kill grading until we otherwise resurrect it But I do think it's worth articulating a little bit of a takeaway so my takeaway on Qualcomm is The the last decade was basically the best decade for their business

model and being in the right place at the right time to have an incredible business model around capitalizing on mobile and In order for the next decade to be as successful They need to be absolutely correct about their growth businesses around IOT around Automotive and around whatever the intelligent

connected edge ends up describing because I think those are technologies that we don't quite know what they are yet Yeah I think if they continue to try to Run the same playbook in just the handset market that they have been the best days are behind them because people have caught on To their games

a little bit and and are gonna gonna squeeze them from a bunch of different directions.

Yep. Well Yes, totally agree I think to paint the best version of the intelligent connected edge that I've heard Cristiano articulate is you're sort of put plainly like Hey, we all agree that like cloud is like I think like we did the AWS episode There's over a hundred billion dollars in like revenue

backlog in the cloud Yeah we talked about on the AWS episode like Snowball and snowmobile and like getting data to and from the cloud It's like still like one of the major pieces of lock -in and like you think about how data gets in and out of the cloud Most of it's not by snowmobiles Most of it is wireless.

Yep connected on the edge.

And so if you think about it like that, you're like, okay Yeah, I can buy that This is a you know trillion dollar market But how do you capture value in that and can they capture it in the same way that they have in the past like very much open questions Whoo listeners That was a total blast David crazy

to do a live show like that with no guests for two and a half hours on stage Just you and I yes And a professionally operated boom arm camera Yes If you haven't watched the video version of this Just go check it out on on YouTube or Spotify or anywhere just to see what that looked like It was a very

fun spectacle to get to do that our huge Thank you to the Solana Foundation for hosting us at breakpoint this year It's a really great event and fun to be in Lisbon When you finish this episode come talk with us acquired .fm slash slack 13 ,000 other smart thoughtful kind people If you want some of that sweet

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rare interview to get Jay is the founder of the 21 billion dollar firm TCV formerly technology crossover ventures about their story and his personal philosophies TCV was a major investor on much of the journey of companies You know like Zillow Spotify and Netflix which we spent a lot of time talking

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We'll see you next time

[The Magic of Wireless: The Story of Qualcomm]-[Qualcomm]

📋 Summary

The Magic of Wireless: Unpacking the Qualcomm Story

The Unlikely Origins: Hedy Lamarr and Spread Spectrum

The Birth of Information Theory

The Linkabit Era and the Pivot to Cellular

CDMA: The Holy Grail of Wireless

The Strategic Masterstroke: Fabless Semiconductor Dominance

The Modern Era and Future Challenges

🎯Key Sentences

📝Key Phrases

📖 Transcript