The year is 1993. Location? Denny’s restaurant in San Jose, California, on Berryessa Road. Denny’s at 2484 Berryessa Rd offers breakfast all day. This Denny’s is famous for something else, and it’s not the Super Bird sandwich. This Denny’s has a famous corner booth.

Sitting at a corner booth we find Jensen Huang. With him is Chris Malachowsky and Curtis Priem, meeting to discuss their project. “Creating a chip that would enable realistic 3D graphics on personal computers”. This Denny’s was the birthplace of a company ahead of its time.

Methods of Prosperity newsletter is intended to share ideas and build relationships. To become a billionaire, one must first be conditioned to think like a billionaire. To that agenda, this newsletter studies remarkable people in history who demonstrated what to do (and what not to do). Your feedback is welcome. For more information about the author, please visit seanallenfenn.com/faq.

Last week on Methods of Prosperity

Peter Theil would consider Facebook a natural monopoly. It’s become THE social networking platform. Most people connect with family and friends on Facebook. Features including the “Like” button solidified its early dominance in the market. Facebook introduced the Like button in 2007. Which simplified user interactions and promoted content based on engagement. As a second–order consequence, sensational or divisive content is often prioritized. Facebook introduced the Open Graph in 2010. Which further integrated web content into Facebook. This enhanced the presentation of shared content. False information became an issue.

During the 2016 U.S. Presidential election, the spread of misinformation became problematic. Fabricated stories and Russia-backed content aimed to influence the election. Distorted information reached millions of Americans. Cambridge Analytica had something to do with it. They used millions of unauthorized profiles to influence voter behavior. This raised serious privacy and data manipulation concerns. Mark Zuckerberg faced congressional scrutiny over these issues. His net worth fluctuated since then. As of October 2024, his net worth is approximately $206.2 billion.

The following is Methods of Prosperity newsletter number 42. It was originally deployed April 4, 2024. As of December 12, 2024, original subscribers have received up to issue number 78: Sam Zell (continued).

Part 42:

Jensen Huang

Co-founder, President and CEO of NVIDIA

TL;DR

In 1993, Jensen Huang, Chris Malachowsky, and Curtis Priem met at a Denny’s in San Jose, California. They talked about creating a chip for realistic 3D graphics on personal computers. This is the origin of NVIDIA. Huang is an immigrant from Taiwan. He’d previously worked at the same Denny’s. Later he worked at semiconductor companies before founding NVIDIA. NVIDIA lacked a business plan. Still, Huang secured funding from Sequoia Capital. His former boss at LSI Logic recommended him. NVIDIA’s journey began with challenges, including layoffs. NVIDIA found success with the RIVA 128. Going public in 1999, NVIDIA saw a substantial stock surge by 2007. Forbes recognized NVIDIA for its impact on the gaming industry. The company’s GPUs later became crucial for AI research. Which would lead to breakthroughs in deep learning. NVIDIA has a strategic focus on R&D and expansion into diverse fields. This includes autonomous driving, computational biology, AI computing and data centers. Which contributed to its significant market capitalization and Huang’s substantial net worth. As of 2024, NVIDIA remains a leading force in technology innovation. Jensen Huang has ambitious plans for the future of computing.

Key lessons:

• Have a vision large enough to invest in.

• Do the hard thing no one else is doing.

• Build systems that create abundance.

• Don’t waste time on a business plan.

• Reverse-engineer your life’s work.

• Your reputation precedes you.

• Embrace pain and suffering.

• Stay humble.

Huang was born in Tainan, Taiwan in 1963. He was 9 years old when his parents sent him and his brother to the US as unaccompanied minors. They landed in Tacoma, Washington, to live with an uncle. Their uncle sent them to the Oneida Baptist Institute, in Kentucky. Huang’s parents later immigrated to the Pacific Northwest in the US. That’s when he got his first job at age 15 washing dishes at a Denny’s restaurant in San Jose. Huang worked there every summer for years to come. He credits this experience with teaching him “humility and hard work”. After working as a dishwasher and cleaning toilets at Denny’s, he went on to other jobs. Which included various positions at semiconductor companies. He worked at LSI Logic Corp and Advanced Micro Devices from 1984 to 1993.

Back then, the microprocessor market was still in its growth phase. Demand for personal computers and other computing devices grew. Microsoft didn’t release Windows95 yet. But gamers were playing video games like “Doom” and “Myst” on personal computers. However, graphics accelerator cards didn’t exist yet. Products for 3D graphics in gaming and multimedia applications didn’t exist yet. This was the opportunity.

That day at Denny’s, they decided to solve problems that a normal computer couldn’t solve. Chris and Curtis left Sun Microsystems and invited Jensen to start a new company. The only problem was, they didn’t have a business plan and Jensen didn’t know how to write one. Back then, there were brick-and-mortar stores. They were similar to a library, except you could buy the books. Jensen discovered a book on writing business plans at one of these “book stores”. The book’s title was, “How to Write a Business Plan”. Only there was a limitation. The time it took to read this book was more than the time it takes to start a company.

Jensen and his wife only had about six months of funds in the bank. By the time he would get through all 450 pages of How to Write a Business Plan, they would run out of money. Instead, his former boss at LSI Logic came to the rescue. He connected Jensen with the most sought after investor in Silicon Valley.

In 1993, Wilf Corrigan (CEO of LSI Logic) phoned Sequoia founder Don Valentine. Wilf suggested Don meet with Jensen Huang. In Jensen’s words, “It was a bad interview”. After meeting Huang, Valentine told him “that wasn’t very good. But Wilf says to give you money so against my judgment I’m going to give you money. But if you lose it, I will kill you.”

Jensen gained the support of his former boss and funding from Sequoia Capital. Their support wasn’t based upon his pitch-deck, resumé, or business plan. They based it upon his reputation. He was a great employee. He “washed the living daylights out of those dishes” at Denny’s. Jensen Huang became a great CEO.

30 years ago, cloud computing didn’t exist. Accelerated Computing was new territory. The first killer app was going to be 3-D graphics. The application was going to be video games.

“At the time 3-D graphics were impossible to make cheaply. It was a million dollar image generator from silicon graphics. So it was a million dollars and hard to make cheap, and the video game market was zero billion dollars. So you have this incredible technology that’s hard to commoditize and commercialize, and you have this market that doesn’t exist. That intersection was the founding of our company.”

– Jensen Huang

The first product they shipped was the NV1. It was a first-of-its-kind computer graphics processor to support multimedia features in gaming. Sequoia Capital and Sutter Hill Ventures provided $10 million to fund the project, but it wasn’t a home-run. The start-up had to lay off half of their employees in 1995. In 1997, NVIDIA released the successor to the NV1, the RIVA 128. Which stands for “Real-time Interactive Video and Animation”. That put Nvidia on the map. NVIDIA went public on January 22, 1999, offering its shares at $12. The company raised $40 million in its IPO, giving the company a valuation of around $625 million. By 2007, Nvidia stock surged more than 2,000% since its IPO, with annual profits climbing 50%.  At the time, the gaming industry was NVIDIA’s main focus. They manufactured graphics cards for the PlayStation 3. By 2008, they’re recognized as Forbes’ company of the year. By 2011, researchers utilized their GPUs to power the large language models behind AI. In 2012, Alex Krizhevsky developed deep learning technology. He was a graduate student at the University of Toronto. Krizhevsky’s technology runs on Nvidia GPUs. This caught the attention of tech giants like Facebook, Amazon, and Microsoft.

“You have to decide as a company – you have to decide as an engineering team or as an innovator – to say, you know what, I don’t need to change the world overnight. I’m going to change the world over the next fifty years.”

– Jensen Huang

Fundamental computing was about to change. Before NVIDIA, computing was retrieval of pre-recorded content. That’s where the computer retrieves information, recomposes it, and delivers the output. In the future, computers will not so much retrieve information. The AI will understand context; able to generate the information.

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NVIDIA has cracked Moore’s Law. The number of transistors in an integrated circuit doubles about every two years or 100 X every 10 years. NVIDIA increased computation 1000 X in eight years.

“I never look forward from where I am. I go forward in time and look backwards. You figure out what is the end result that you’re looking for, and you work backwards to achieve it.”

– Jensen Huang

To build a machine that builds machines is inventing an entire market from scratch. NVIDIA was the last computer graphics company founded. Today, everything they do involves creating technology and creating markets. They were early in autonomous driving, deep learning, computational drug design and technology. NVIDIA merged biology with computer science, cryptocurrency and generative AI. NVIDIA invests heavily in R&D, with a budget of $8,675 billion in January 2024.

NVIDIA announced a new chip in 2020, its A100 GPU. Jensen called it “the company’s largest leap in performance to date.” It boosts the performance of AI training up to 20 times compared to its older GPUs. Microsoft Azure, AWS, Google Cloud adopted it for their supercomputers and data centers.

Half of NVIDIA’s revenue comes from data centers using its GPUs for AI computing in 2023. Big Tech firms and governments across the world use its chips. NVIDIA Corp (NVDA) was the hero of tech stocks in August of 2023. Their stock exceeded expectations with a 101% increase from the previous year.

NVIDIA (NVDA) stock has shown significant growth in 2024. Year-to-date, the stock has increased by approximately 182.04%. The stock reached a high of $152.89 on November 21, 2024, and a low of $47.32 on January 3, 2024.

This year, they introduced Blackwell, a major new GPU architecture. Blackwell promises significant performance, efficiency, and scalability improvements. Blackwell improves both datacenter and consumer applications.

In conclusion, compare NVIDIA to traditional corporations. For example, the first corporation based their organization upon military operations. Refer to Part 5: The Dutch East India Company and the Invention of Capitalism. Huang designed his organization more like a computer stack than a traditional corporation. He designed NVIDIA like a computer. Information is evenly distributed, without hierarchy of command. This allows for agility and removes bottlenecks.

It’s also worth noting that the business model is that of a computing platform. Which serves the entire industry, instead of a single computer company. It took NVIDIA over 30 years to build, and Huang has been CEO from the start, which is rare. He is a long-term, first-principles thinker. He’s willing to endure pain and suffering, which is what builds character. He approaches his life work with an informed naiveté, asking “How hard can it be?” when he’s aware that building a company is very hard.

“Trick your mind into believing that it’s not that hard,” he advises.

As of December 2024, Jensen Huang, has a net worth estimated between $120 billion and $130 billion. His wealth has surged due to the rise in Nvidia's stock value, where he holds a 3.5% stake. This increase has placed him among the top 10 richest individuals globally.

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