Technology: Our new virtual reality

Rob Goldstein: Thanks Zach, and thanks to all of the clients and viewers who are joining us today. As Zach mentioned, I’m Rob Goldstein, I serve as BlackRock’s Chief Operating Officer and also the head of BlackRock Solutions, our Financial Technology arm. I am incredibly excited to be joined virtually today by Chuck Robbins. Chuck is the Chairman and Chief Executive Officer at Cisco, and he’s also an esteemed BlackRock Board member, to discuss a topic that I know is near and dear to both of our hearts, which is technology.

Chuck has been at Cisco for over 20 years, and he’s been a CEO since 2015. Chuck, I feel like the fact that we’re talking to each other virtually, to an audience of thousands of people, is pretty much all the evidence we need about the power of technology in today’s world. But hopefully, we can add just a few insights, nonetheless. So, have you been throughout these past few months?

Chuck Robbins: Well I’ve been doing great Rob. Rob, first of all thanks for having me, and look, this has been a tough few months for everyone, and I think the advantage we’ve had is that we build a lot of the technology that actually enables companies and their employees to work from home, so it’s been fairly seamless for us. And I think, like everyone, we went through a couple months where we were overwhelmed by the positive productivity we seem to be getting, and now I think we’re at that stage where people are getting a little bit tired of it, but we’re doing really well. We’re doing okay right now.

Chuck Robbins: Yeah, I know, I’m certainly getting a little bit antsy to get back into the office, but Chuck, let me start out, I wanted to first thank you as a COO, I don’t believe what’s happened over the past few months, that we would have been successful a few years ago, without the innovations that companies like Cisco have been doing. And over the past few months, we’ve seen just a fundamental shift in the way businesses operate, specifically around their reliance on technology. The pace of technology, change, innovation, it’s advancing rapidly, and if anything, we believe that the trends that we had seen pre-coronavirus, are accelerating as we come out of the coronavirus.

So, as we think about, as we extrapolate these trends into the future, I’d like to start by asking you, what do you think are the most important trends that will be shaking the technology industry over the next five years, the next ten years, and how is Cisco preparing to address those trends?

Chuck Robbins: Yeah, it’s a great question Rob, and I think one of the thing that has – one of the things that’s become very clear is that this notion of a physically enclosed enterprise is definitely over, and we have always had to accommodate mobile workers, workers from their homes, from coffee shops, etcetera, and I think now what’s happened is, everyone realizes that it is possible, even the executives, and the C suite and the CEOs, with who I don’t think were quite as clear on what could be done over this type of technology.

So, clearly, this notion of working from anywhere, and the technologies required to make that happen, are going to be very important. Then when you look at some of the bigger trends, obviously there are many that started a few years ago that typically take a decade or more to actually really come to fruition. We’ve been talking about artificial intelligence for a very long time. We’ve been talking about machine learning, we’ve talked about augmented and virtual reality, and I think those are going to move from, you know, predominantly in the gaming world, into more business applications. We’re going to see more and more of those, I think, as we look at our portfolio.

We think that the availability of mass amounts of data, combined with the availability of compute that can be deployed anywhere dynamically, with machine learning algorithms and artificial intelligence, allows us to do things across our entire portfolio, and every tech company will do this in ways that we just never thought possible in the past. And I think those are some of the big trends that are going to happen, but I think this – this acceleration that we’ve seen in the last few months has really put tech in the center of how all of our customers are thinking about their future.

Rob Goldstein: And I know, Chuck, I’ve been fortunate to have the opportunity to speak with you about how Cisco has been operating over the past few months, and how you’ve been preparing just broadly in terms of your work force, but I think it would be very interesting for everyone to hear about how has Cisco operated throughout these past few months, what are you guys thinking about remote work going forward, and everyone must believe you have some secret technology, but what role do you think technology is going to play just in operating Cisco as a corporation over the next few years?

Chuck Robbins: Well, I think what we have – what we’ve all learned is that we can actually operate productively in this environment. I know that your CEO, Larry, other CEOs in major financial institutions have told me that if they had ever dreamed that they could have 95 to 98% of their employees working from home and the firm still functioning, they would have been shocked. And I think, as we have – the real irony in it is that our company and our employees believe that the fact that we’re actually further apart physically, but we feel closer as an organization, has really been a strange phenomenon, because we’ve been doing weekly check ins over this technology, over video, and our employees actually come into our homes and they see what’s on our shelves and we are much less formal and it just has created this sense of sort of family that has been somewhat ironic, given that we’re all apart, but I think as you look to the future, I think it’s going to change how we think about, obviously our corporate real estate footprints, I think it’s going to change how we look at hiring, where we believe we can hire talent, and where they can be productive. Do they have to be in my headquarters, or can they be somewhere else? I think that’s going to open up access to a lot of talent for a lot of companies.

I think that it will affect the amount of travel that we all do. I’ve heard my peer CEOs say that they days of 13-hour flights for a two-hour meeting are probably behind us. There’s clearly tradeoffs of when you need to meet and build relationships, but I think this technology’s going to continue to impact that. I think that, you know, for us, we have always operated over this technology and through working from home, working in the office, and I think we’re going to be in a hybrid world going forward. I think people are going to do a little bit of both.

Rob Goldstein: Yeah, I agree with that, and just going back to the personal components, I was recently on the phone with you and my daughter walked in, and that’s just what life is today. So, when you think about WebEx, I’ve been on a thousand WebEx calls in the past few months, what does WebEx look like in five years and ten years?

Chuck Robbins: Yeah, you mention your daughter, it’s interesting, early on in this pandemic, I was in Atlanta and my granddaughter was staying with me, and she walked in my office while we were doing a companywide meeting, and I intentionally brought her over to just demonstrate to our employees that this is the way it’s going to be right now, we all need to be comfortable that our personal lives and our business lives are actually intertwined in ways that we had never even experienced in the past.

And as we think about WebEx in the future and what’s going to be possible, we’re already bringing technology out where you’ll be able to, you know, control your meeting experience with your own voice, you can actually start meetings by just speaking to a digital assistant. We – we’re implementing technology that will be a virtual assistant during the meeting, that will do translation services, they can take action items, but you’ll also see augmented reality coming in where you can have 3D images of things and you can begin to work with your intellectual property around manufacturing strategies, or building the automobile of the future.

And so, I think that all of these technologies coming together, and at a time where you’ll have voice recognition, and you’ll actually get intelligence that will be displayed in the meeting about the topics that are being discussed, to the extent you’d like to have that, so if I’m talking to a customer and their mentioning their stock price, I might have a real-time stock price pop up right next to them so that I can actually refer to it and see how its performed, etcetera. Those are the kinds of things that I think you’ll see in the not too distant future Rob.

Rob Goldstein: Yeah, that would be amazing. And Chuck, I know you are someone who travels constantly, and someone who I think has been very focused on engaging with your employees’ life, so where do you see Cisco pivoting, yourself pivoting, with really using technology relative to traveling constantly?

Chuck Robbins: Great question Rob, and I think some employees just – are just saying I want to be in the office. And then others are saying I’ve worked from home for the last decade, this is not that big a deal to me. But I think if you really get down to what are the types of things that are better done in person versus what can be done over video, I think that a lot can be done over video. If you’re having a lot of just back to back meetings and updates, etcetera, you can do that over video.

The one thing that I think our teams are going to do is to get back into conference rooms with whiteboards, right, creativity, innovative sessions, actually having engineers working on design, that’s where I think that – you can get some of that over video clearly, but I think it’s more effective in person. So, I think when we start looking at returning to the office, there will be a large portion of employee preference. There’ll be a portion of that is what’s required of the job that you do, and then there’ll be a portion of it that is sort of driven by this need to creatively innovate together, I think. And there are probably use – other cases that we’ll learn about as we get into it that are going to be more effective in person. But it will be a combination for sure.

Rob Goldstein: Yeah, one of the things that we’ve spoken about a lot, and spend a lot of attention within BlackRock on, is that this fully virtual model has a time decay aspect to it, and it really demonstrates itself through trying to do big new things, innovation, and just towards that end, from our perspective it seems like the pace of change is just greater, it’s accelerating. So, having a workforce focused on continually learning, adapting, is absolutely critical. How do you encourage your employees to innovate, to reskill, to change, just to accept and prepare for a future that’s continually changing?

Chuck Robbins: It’s interesting because we have a – we’ve begun to try to actually implement these opportunities for our employees to interact with different groups within the company about opportunities and try to cross pollinate between the organization. So, I mean, think about it, the old school job fairs we used to do, we’re literally hosting these where different leaders from different parts of the company will talk to employees about the opportunity for them to learn and move and pick up something new and do something different with your career.

And those are – you know, that’s turned – that’s become very effective for us. On the innovation front, we do like everybody else. We do hackathons, we run innovation contests, I mean all the things that I know you do as well, and I think that, you know, just having an open, transparent, authentic communication culture, encourages people to bring forward those ideas, because what I found in my career is that most of the great ideas comes from – come from those people who are closest to the customer, and they have to travel through the organization, and you have to make sure that you create an environment where those ideas bubble up, and I think that’s something that we continually focus on.

Rob Goldstein: Yeah, we couldn’t agree more. So, Chuck, final question, I know that one thing both firms are just incredibly passionate about is helping our communities through this challenging time. And Cisco has been a leader in this, committing $500 million, I double checked that number, to the global COVID-19 response in March. Can you just share, why is this so important to you, to Cisco, and how do you think it’s applying that money?

Chuck Robbins: You know, first of all, Rob, I think it’s incredibly important for companies to play a role in their communities, and so, when this all transpired, we, like a lot of companies said, we’re going to focus on our employees, our customers, and our communities, and I heard that in so many CEOs. And in our communities, when you first look at those who are most impacted, it’s those who are living paycheck to paycheck, the homeless in our communities, that business has not historically actually engaged with.

So, we went hard early on in making sure that we were contributing money to help those most in need and we broke our strategy into four pillars. One was around our community, the second was around families. In that case we actually opened up our daycare centers to children of first responders, as an example.

The third was around research and resilience, which is pretty straightforward, about trying to figure out how do we get to vaccines, how do we get to therapeutics. And then the final one is around strategic recovery, where we’re working with – you know, how do we work with universities to better plan for education in the future. How do we better work with healthcare institutions to really embrace architectures that support telehealth going forward, which we think both of those industries are going to change forever. Both of those, you know, the university system as well as the healthcare system.

So, it was a combination of cash, it was a combination of our technology. So many of our customers needed WebEx and security and cloud security, and technology to help them work from home, but we just gave it to them, and we said we’ll figure it out later. And so, that’s how you get to the $500 million, and our teams just did a good job, and it’s just part of our culture.

Rob Goldstein: Well Chuck, I can’t thank you enough, both for what you’ve done for the communities, the important role that Cisco has played in enabling BlackRock over the past few months through this crisis, and for joining us today to provide all of us with your thoughts on where you see technology going.

Chuck Robbins: Well Rob, thanks for having me, and you know, it’s a pleasure always. I think that our company and your company share a lot of the same cultural values and so, it’s always a pleasure to spend time with you.

Rob Goldstein: Great. Thanks Chuck. And with that, let’s bring in Tony Kim, Head of Technology Investing for BlackRock’s Fundamental Active Equity Team, to discuss how these trends are translating into investment ideas and portfolios.

Tony leads Technology Investing for our Fundamental Equity Division. What do you see as the important themes and just the dominant trends shaping technology over the next five to ten years?

Tony Kim: Yes, first on a general level, one constant undercurrent that will describe the next five years, will be a period of accelerated rate of change, even probably more than the last five years. And the speed of pace of innovation will be a persistent force that will drive the entire technology sector. But to summarize, if I were to identify two dominant themes over the next five years, I would suggest first, this notion of technology expanding beyond tech, tech beyond tech, and secondly AI, the next generation computing architectures.

Rob Goldstein: So, Tony, double click, what does tech beyond tech mean?

Tony Kim: Yeah, this is a notion of how technology will expand her reach beyond just the technology sector and impact a move into every other sector or industry on this planet. We’ve seen elements of this over the past decade. You’ve seen it with retail, ecommerce impacting it, and media with over the top streaming. But next we’ll see many other industries, manufacturing, automotive, healthcare, financials, insurance, agriculture, construction, etcetera. Nothing will be spared. No industry will be spared.

And unlike any other industry, technology attacks other industries, and I use that word attack. You know, in this regard she’s unique. She’s somewhat predatory if not Darwinian, in that these attacks can be a very direct frontal assault, or it can be an indirect attack. And I expect over the next five years, you’re going to see a crazy pace of change impacting every industry.

Rob Goldstein: how are innovations in artificial intelligence manifesting themselves when you fast forward five years?

Tony Kim: Yeah. You know this goes to, in my view, the core foundational layer of the entire technology industry. You know the substrate, if you will, which is at its core, software, and silicon, these two components. I expect to see exponential advances in AI machine intelligence. You know, AI will be able to program itself, it will be able to create its own languages to communicate with each other. this AI, which is driving a lot of those changes, this is occurring on a global scale, where many countries will be vying for leadership. This is what’s going to push an AI quantum arms race.

Rob Goldstein: And towards that arms race, one of the themes that has come up during this conference, is the fracturing of globalization. So, speak for a couple minutes about China, the US, technology acceleration, and just the deglobalization of the internet.

Tony Kim: Yeah, let me start first with China’s role. You know, first we all know that it’s the number two economy in the world, and the number one in digital users. You know, I’ll say that China has impacted the world, and it innovates and leads the world, especially in consumer facing technology. We’ve seen this with live streaming, in online payments, and they’re leading that payment revolution in China. and ecommerce, with innovative ecommerce.

And these – these innovations have spilled over to the rest of the world, and I have no doubt China will continue to lead in these areas. However, China is behind in this core, this deep technology, this foundational layer of technology, where they are still largely dependent on western IP, especially at the silicon and the software layer. And you know, China’s hellbent on building its own sovereign capabilities, and what I call these core foundational technologies, and which include AI and quantum.

And to your question on deglobalization, in a word I would answer that yes, we are seeing the balkanization of certain areas of the technology industry. Expect to see a continued bifurcation in these core technologies, in the software and silicon, that will split more and more between the US and China.

Rob Goldstein: What technology are you most excited about from a personal and as an investor?

Tony Kim: Okay, number one, you know this notion of AI acceleration and computing platforms. We’re going to need more and more. Two, AI analytics and database, and data management software, to handle this tremendous onslaught of data. Three, no code software, basically allow anyone to code without being a coder. Four, this notion of APIs software everywhere. It’s basically the deconstruction, the Lego blocks, if you will, of software. I’d say another one, five, machine to machine software and communications. Six, advances in material science at the subatomic level, especially around silicon, or something carbide, gallium nitride and those new exotic materials.

I’d say seven, the EV wave is coming, the electrification of the entire transportation industry. And then I’ll end, number eight, with this notion of tech beyond tech into just new industries that you might not even imagine. You know, I’m looking at things in agriculture, construction, and logistics, that haven’t been touched by technology. And then on a personal level, I have a lot of interest in quantum computing and new architectures. I, in fact, even own an old architecture enigma machine.

Rob Goldstein: Well, Tony, I think it’s a few years before you get your own quantum computer, but we’re certainly living in interesting times, tremendous opportunity. I, for one, am very excited to see how things continue to evolve in the coming years. Tony, thank you, and thank you all for joining. Thanks again to both Chuck and Tony, and now Zach, back to you.

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