Leading with Trust through the AI Revolution with Cadence

Michael C. Bush (00:00): 

Any Cadence fans here? I thought there might be a few, you just bring people with you to make sure you get that?  

Dr. Anirudh Devgan (00:08): 

Well, Michael, what a great venue. By the way, there is a car hanging up here. I don't know if it's for Michael's show or for the show later.  

Michael C. Bush (00:16): 

If we don't do well, it'll, yeah,  

Dr. Anirudh Devgan (00:20): 

Great to be here, Michael.  

Michael C. Bush (00:21): 

Yeah, thank you very much. I think some people will see it at the concert tonight. I just hope it doesn't come down early, so it's going to be quite a show. So this is Dr. Anirudh Devgan, and I know him well based on his leadership. He's been at Cadence a long time and became CEO in 2021. And actually you weren't here. I talked about your financial performance and with a lot of other great companies earlier. But can you let the audience know what Cadence does and how it touches their life every day?  

Dr. Anirudh Devgan (00:56): 

Absolutely. So at a high level, we are a software company. We make software to design chips, semiconductors, and electronic systems. So almost any chip designed in the world today is designed with some form of Cadence software because these things, if the chips like in the phone or in the cars or in the TVs, these things are very small, typically one inch by one inch and it can have a hundred billion transistors. So they're too complicated to be designed manually. So they're all designed by software. And so we are the leading company to provide software to design chips and electronics.  

Michael C. Bush (01:38): 

Okay, so is it absolutely true that we touch Cadence every day?  

Dr. Anirudh Devgan (01:42): 

Yeah. And thank you for that. So almost all companies, I mean we are B2B companies, all companies, all the words. Max seven, all the big companies are our customers.  

Michael C. Bush (01:53): 

And Cadence has been on our list 11 years in a row. And number 11 ranking on this year's list, the highest thank you. You've been up right there at the top, both under your leadership as a CEO, which is hard to make a great company even greater. So I just want the audience to know kind of who I'm sitting with, one of the world's leading authorities on electronic design automation, old 27 patents, master’s degree in PhD in electrical and computer engineering and other huge achievements in technology space, many that pertain to AI. And so that's what we want to really talk about today, and we definitely have the right person to do that. And I'd like to get your thoughts on this. Is AI hyperbole or is it real and hearsay just to help us all understand we're in learning mode today.  

Dr. Anirudh Devgan (02:52): 

Yeah. First of all, Michael, before we get to AI, I just want to say it has been a privilege to work with Michael and Great Place To Work over the last thank you more than a decade. Thank you very much.  

Dr. Anirudh Devgan (03:03): 

And we have learned a lot from you and from your team. And even recently we did a special survey on AI, right? We'll talk about that later. But on AI itself, I think the funniest thing about AI is the name itself, because it became such a buzzword over the last few years, but nobody clearly defines what AI is. So then everybody calls everything AI, and then of course you're supposed to be doing AI. So there's a little bit of hype that is created by that, but of course it's the fundamental technology. And even sometimes what we used to call computer science is now called AI. So I think it's important to first define what AI is and then we can, so the simplest, because some people say, oh, it's a foundational technology like the internet. To me, I think it can be even much bigger than the internet.  

Dr. Anirudh Devgan (03:59): 

I read this book a long time ago, this is in the nineties, and they define three fundamental sciences. So the first science is science of place, P-L-A-C-E place, and that's geometry. So that's like 2000 years ago. And then the second fundamental science is science of pace, P-A-C-E, which is derivative. So that's calculus. So that's Newton, right? So that's 400 years ago. And a lot of people credit the industrial revolution coming out of calculus and all the things it created. And we are still applying a lot of all these differential equation computers. They're all basically because of calculus. And then they say the third fundamental science is science of pattern, P-A-T-T-E-R-N. And so data pattern, other patterns and AI could be the signs behind patterns. If that's the case, and we have to see how it is much more fundamental, it could last for 400 years or more and transform everything.  

Dr. Anirudh Devgan (05:13): 

It is very, anything that utilizes pattern in a more scientific way can be fundamental to all. In that sense, it is not hype, but of course people talk about it too much, but it will transform all things. Now what will happen is everybody will have to be an AI company because you don't say, well, whether I use geometry or calculus, because everybody uses it. So it'll not be the horizontal part of AI, which will be critical, which is like language models or other kind of, it'll be the vertical application to our own businesses. Whatever business you are in that will be, it's always the vertical application, which is combining AI with what industries we are in and utilizing it properly will be foundational.  

Michael C. Bush (06:00): 

You know what I love about you, Anirudh, you're so respectful, you actually think I understand what you just said. I just love that about you. So the last time I saw you, we were together at Cadence's Fem.AI Summit, and that's where we met Dr. Joy and got to bring her today because of the summit that you were doing. Can you let the audience know why you did that and whether you're going to continue to do it?  

Dr. Anirudh Devgan (06:32): 

Oh yeah. I love the Fem.AI initiative because a few years ago after I became CEO, we started foundation. We want to do, of course, we have four constituents in my mind, customers, employees, investors, but also the ecosystem, the society we are in. So we want to make an impact on the society, not just of course, investors, customers and employees. So I thought foundation was a good way to do it, and we have well-funded the foundation for several years. And then the thing is what signature initiatives we should have? And Fem.AI is one of the big ones. And of course now it's a little bit controversial, let's say one thing I told already, but just for the audience, what we always talk about is culture, of course. Super critical for Cadence, for any company. And we always talk about team, technology, and customers. By the way, I only say things in threes.  

Dr. Anirudh Devgan (07:34): 

So team, technology, and customers, and of course everybody says you are customer focused. We have to be customer focused to win. But if you don't have the right team and the right technology or products, I mean, you're not going to have good customers. So having the right team and having the right culture is central. And the thing with that is a lot of people talk about it, but it's like what you actually do about it. So in terms of team and culture, again, to me there are three important things. Three again, and the three important things. And we have done this for a while, and I mean a lot of it is common sense, but the main thing is to practice it, not just talk about it. But the three important thing is the foundation is integrity and trust, because I hate politics, so I want to make sure that, and we as leaders have to exhibit that and then everybody else will do that.  

Dr. Anirudh Devgan (08:33): 

So we want to be completely honest with the employees, with the customers, with the investors, build trusted relationships. So without that, you have nothing. Okay? So that's the foundational layer. The second layer of the three layer cake is opportunities for all. And I believe that even before AI was in fashion and not in fashion, because we need to make sure that we create opportunities for all gender, for both genders, for all races, for all locations. Because a lot of times in big companies, if you're close to the headquarters versus, so I fundamentally believe that because this is super critical, but the third thing on top is excellence and meritocracy. So to me, there's all this talk about DEI versus meritocracy. I think that's not the point because we always have to lead with meritocracy and excellence. So without that, we are not going to have good business results.  

Dr. Anirudh Devgan (09:37): 

So to me, they're not in conflict with each other. We have to do that anyway. But the middle part, we should create more opportunities for everyone because we have, what, 12,000 people at Cadence, there are what, 8 billion people in the world. To me, opportunities for all is a competitive advantage to attract the best talent. And it doesn't mean that we will lower our talent. We never lower our talent in the past, we'll never lower in the future. But those three things to me go together. So now in Fem.AI, in AI, only 20% participation is from women, and we want to get that close to 40, 50%. So we have this initiative and there are what, 8 billion people, 4 billion women, definitely millions and millions and billions of them are very capable. So if we create a culture in which we attract the people, we will get better employees and we will perform better for our customers. So to me, that's how I look at it. Yeah, thank you.  

Michael C. Bush (10:48): 

And how are you thinking about how AI is, or just let us know how AI is actually impacting your technology and the customers that you serve and what you feel like it'll do for your employees and the work that they're doing?  

Dr. Anirudh Devgan (11:06): 

Absolutely. So AI has multiple facets for us. There are at least three parts of AI for us. So first of all,  

Michael C. Bush (11:14): 

They're loving the three parts.  

Dr. Anirudh Devgan (11:15): 

Oh yeah, sorry. I see. The thing is that if it's two, it's not, it's like too many. It's too little. If it's four or five, nobody remembers anything. Okay. So I only remember in threes actually my advisor, my PhD advisor, I don't know if you know E, the universal constant.  

Michael C. Bush (11:33): 

See, this is that respect thing.  

Dr. Anirudh Devgan (11:34): 

Yeah, yeah. Okay. But go ahead. If you look at E is natural log number, it's 2.7. So he used to say answer to everything is E, which is 2.7. So it's either two or three main things. So in AI, the three main things are, first of all, we are working with all the big AI companies, whether it's Nvidia or Google, Microsoft. So they all use our products to build Nvidia chips or Google's infrastructure. So that is because the biggest beneficiary of AI in the beginning is the infrastructure. So that is directly, we need to make sure we are relevant to those companies. So that's the first part. The second part is we can use AI to improve our own products. The products we sell, like the chip design software or system design, they can be much more efficient with AI, with this science of pattern or data science, because we always had fundamental things like using physics and chemistry, but you can always augment that with data science.  

Dr. Anirudh Devgan (12:41): 

So we have all kinds of projects, more than 30 projects to inject AI into our tools, our products and the results are phenomenal. And then the third part of AI is using it internally to be more efficient for our employees, for their workflows in making our application engineers or salespeople more efficient, marketing more efficient to improve, let's say the efficiency and the margin, whereas the first two are to improve revenue and customer satisfaction. So I want to make sure we are relevant in all three, and I encourage everybody to do that. And they're going to be different for different companies because again, AI is a combination of the core technology with the domain, but I think it has both benefit on the top line and the bottom line.  

Michael C. Bush (13:35): 

Well, from our work together, we knew really starting about a year ago, we began to understand the impact that AI was going to have and that it was moving faster than most people thought. And we had a lot to learn. So one of the things we did was started in our listening tool in pricing, try and find out how employees feel about it. And so we put into our question set whether or not employees were excited about it. And at Cadence number popped out, 75%, it's three out of four people are excited about it, and therefore we came to you and said, Hey, we'd like to understand this so that we could really come up with an index to let companies know whether they're ready or not, which all comes down to trust and fear. 

Michael C. Bush (14:27): 

So over the last six months, we've been working together and got some pretty impressive results. We already know that 75% is two times the average in companies, a big difference. And some of the things that we found out, which I'll share and then ask you why you were excited about this just like we are, it's going to benefit everybody that's here. We found that employees enabled with AI training tools are or nearly twice as likely to feel supported in using AI. And over 80% express excitement and optimism about AI impact on their careers and create this growth. So they see AI as it's going to help Cadence and it's going to help them as people. And they also report higher levels of confidence in management and management's decision making. And when there's clear communication from leadership about the uses of AI, they're three times more likely to embrace and adopt. So we're just six months in and this is what we see. What do you feel like you're doing right to make this true? This is good advice for people here all faced with the same challenge.  

Dr. Anirudh Devgan (15:43): 

My opinion is that people always, and I used to do real work right now, I do less of it now. I do talking and email and PowerPoint, but people always want to learn new things. And AI is such a great technology. I think by nature, who doesn't want to get better? You just have to create an environment that is done in a positive way that not in a “got ya” way, but that you're actually helping the employees and helping the company. But by nature, people want to do good things and improve their skillset, assuming they think it'll not be used negatively by the company. So the trust is important. And also the other thing that used to trouble me a lot was that the promotions and all that should be fair. What troubles high performance more than anything is low performers getting rewarded.  

Dr. Anirudh Devgan (16:47): 

They can understand, okay, I didn't get rewarded because I need to do more. Then you say, oh, this person got promoted. So I think the reward systems have to be correct, the culture has to be correct, but people definitely want to learn new things. And what we try to do is also to incentivize the management team. So this is also a little bit controversial, but I think it has worked very well. We have something called Cadence culture modifier. Okay? So 20% of the bonus is affected by this and have freedom of defining it every year based on what is new or what is current. So now I didn't do it for everybody, but we did it for the top a hundred leaders because they have large organizations they're managing. There are people who are reporting to me or people who are reporting to them. About 10 people are reporting to me, but I think that's not enough, in my opinion.  

Dr. Anirudh Devgan (17:48): 

That's not enough to change the culture. But at a hundred, because each of them have 10 people reporting to them and they are all running large organization, you can make a difference. So 20% of their bonus is affected by this Cadence culture modifier. And we used to have it on hiring, like diverse hiring and things like that. And we'll modify that now with some of the new rules. But AI is one of them. Now we want to make sure that these leaders incentivize the teams to actually use these new technologies. And so just create an environment empower people, make them learn, and it'll benefit the company anyway. There's no rocket science.  

Michael C. Bush (18:27): 

Yeah. Okay. Well, we've got a lot of people in our audience that work at great companies like yours, and we have some people in the audience because they let me know that's not necessarily the case. We did a session yesterday where I asked the audience, how many of you know what it feels like to be at a great place to work? And about 50% of the people raised their hands. And then I asked, how many of you know how it feels to work at a horrible place to work? It was like a hundred percent, which is great for my business. But that's a side note. But knowing that you're talking to a group of people who are in both camps, what final two thoughts, not three. Okay. What final two thoughts would you like to leave with the audience?  

Dr. Anirudh Devgan (19:16): 

Well, first of all, it's great to be here. I mean, we are always, like I said, team, technology and customers. So we are always aligned with the business goals. See, to me, it is always the business goals and what is aligned with that. So we are not doing it for charitable purposes. We are a great place to work because it helps our business. So the first thing always is talent. So if any of you are interested coming to Cadence, we are still hiring. And by the way, Michael, this is a good day. Good job on the stock market. I'm feeling much better than yesterday.

Michael C. Bush (19:52): 

Yesterday, yeah, it's better than yesterday. It's good that you're here today.  

Dr. Anirudh Devgan (19:54): 

So we are still hiring if you or any of your friends are, because honestly, this whole thing, whether it's Fem.AI or whether it's a great place to work in the end, it is to get the best talent so we can serve our investors, customer, employee, and the societies. That's number one. And number two thing, Cadence is always a good investment if you need to buy some stocks for your portfolio, that's part of my job.  

Michael C. Bush (20:20): 

Please give a warm, Great Place To Work welcome and thank you to Dr. Anirudh Devgan. Thank you.