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It’s never easy to admit you made a mistake, or ask for help fixing it — but doing both of those things once saved tech giant Nvidia from collapse, according to CEO and co-founder Jensen Huang.
Nvidia is currently valued at more than $2.2 trillion, powered partially the tech industry’s artificial intelligence boom and high demand for its computer chips. But in 1996, it was three years old, facing layoffs and close to going out of business as a contract with a major partner — video game company Sega — fell apart.
Huang’s strategy to keep Nvidia afloat involved a rare amount of humility for a CEO, he told graduating students in a May 2023 commencement speech at National Taiwan University: “At Nvidia, I [have] experienced failures. Great big ones — all humiliating and embarrassing.”
As part of the Sega contract, Nvidia needed to make chips for rendering 3D graphics on gaming consoles, Huang explained. The contract was a big deal for the young business and it essentially “funded our company,” he added.
The company took an experimental approach to that goal, building low-cost chips that diverged from the rest of the industry’s software standards. “After one year of development, we realized our architecture was the wrong strategy. It was technically poor,” Huang said.
Worse, during that period, Microsoft rolled out its DirectX software interface, which became a standard for gaming platforms — and it wasn’t compatible with Nvidia’s chips.
“If we completed Sega’s game console, we would have built inferior technology, [been] incompatible with Windows and be too far behind to catch up,” Huang said. “But we would be out of money if we didn’t finish the contract. Either way, we would be out of business.”
Huang decided at the time that the best course of action would be to come clean with Sega, and tell that company to find another partner. At the same time, he noted, “I needed Sega to pay us in whole, or Nvidia would be out of business.”
“I was embarrassed to ask,” said Huang. “The CEO of Sega, to his credit and my amazement, agreed. His understanding and generosity gave us six months to live.”
Sega bought out its Nvidia contract, and used chips from Imagine Technologies’ PowerVR for its Dreamcast consoles. Huang used the money from the Sega contract to scrap Nvidia’s initial efforts and to build a new chip — the RIVA 128 — that was compatible with DirectX.
The new chip supported higher graphic resolutions than its competitors, and Nvidia sold more than 1 million units in four months in 1997, marking the company’s first hit product and turning around its fortunes.
It wasn’t easy to admit Nvidia’s mistake and humbly ask a client for understanding, Huang said: “These traits are the hardest for the brightest and most successful, like yourself.”
He was also adamant that swallowing his pride was the right thing to do for his company.
“Confronting our mistake — and, with humility, asking for help — saved Nvidia,” said Huang.
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