From Amazon to Arm: The Blueprint for Scaling Tech Giants with Jason Child

Speaker A: Financial leadership is changing. CFOs no longer record history, they make history. This podcast will help you become a better leader, strategic thinker and digital visionary. Welcome to Secrets of Rockstar CFOs, the ultimate podcast for chief financial officers. Follow along as Jack McCullough engages in exciting chats with accomplished CFOs, learning how they overcame obstacles and position their companies for the future. Here's your host, Jack McCullough.

Speaker B: Hello rockstars, and welcome to another episode of the Secrets of Rockstar CFOs. I'm your host, Jack McCullough. Before we start, a big shout out to our uh, sponsors, Intuit and Planful. Welcome back Rockstars. We have a fantastic guest today and I've been looking forward to this one for a little bit. Jason Child is the CFO of ARM Holdings. And ARM is a really interesting question because it's one of those companies that's not necessarily a household name, but it's one of the most important companies in the world. And I say that with no sense of exaggeration. It is one of the most important semiconductors on the planet, even though most consumers haven't heard of it. Rather than manufacturing the chips themselves, ARM designs the underlying chip architecture and licenses that intellectual property to companies like Apple, Qualcomm, Nvidia and several others. Jason, welcome to the secrets of rockstar CFOs.

Speaker C: Thank you for having me.

Speaker B: And how did ChatGPT do in describing your company? Because I just read the words that it gave me.

Speaker C: Uh, you know, as usual, pretty good, high level, probably not enough detail to do too much with, but I, but uh, I agree.

Speaker B: Well, lucky we have the CFO here and I want to let you know, you know, what people might be interested about that I didn't touch upon, you

Speaker C: know, I think maybe to put some numbers behind it. You know, we've, we've uh, been around for about 35 years. We were uh, created as a joint venture, uh, actually with Apple and a company called BLSI back in 1990 when the goal Apple wanted to create the first kind of battery powered computer. And so they needed a extremely low power chip architecture to be able to do that. And so that's how the company got started. Fast forward now. Uh, I think we've um, we sell designs via a license and then we get royalties from products that get shipped using our technology. And to date we have uh, received royalties on over 350 billion chips that have been shipped over 35 years. And if you kind uh, of put that in context, it works out to be about 70% of the population of the world today is using a product that uh, is got an ARM CPU in it. And you know, the CPU is kind of the brain of the computer. That's what kind of allocates all the workloads in a chip, even at the front of a gpu. You know, it's what drives now, agentic AI and uh, you know, so we started as a mobile company where uh, about 100% of mobile phones use the ARM CPU. It's now extended into, you know, TVs and PCs and cars. Almost, I think 80% of every car on the road is using our chips. And then of course now what everyone is talking about is the cloud and uh, AI and uh, all the hyperscalers are using arm. And you know, we now also just for the first time in history, announced that we're actually now building a chip. So we're out now selling uh, silicon. And that's just something we announced about two months ago. So it's a pretty exciting time. And the company, uh, as you said, has been kind of, I would say integral in uh, this kind of digital, you know, kind of evolution and transformation that we've seen over the past couple decades.

Speaker B: Yeah, no, it's just an absolutely fascinating story and thank you for that. With hindsight you should have just done the intro directly rather than me try to do it. But uh, we're at a good spot now. I want to return to that, but you know, I always like for the listeners to get to know my guest background a little bit. So where did you grow up, Jason?

Speaker C: I grew up in Seattle, Washington.

Speaker B: Oh, that's a lot of fun. And are you from a big family?

Speaker C: Media? No, I'm the oldest of four. So I guess nowadays that's big.

Speaker B: Yeah, Modern standard is that's a pretty good sized family. And I always like to ask, uh, what was your first job? And I don't mean after college, but you know, maybe when you were like in high school or early college.

Speaker C: My first job was scooping uh, ice cream at Baskin Robbins. And then I, I levered that into selling tires and batteries at Sears Automotive. And then that's actually the job I did through uh, through college. And uh, fun fact, I made more money in my last year working 25 hours a week selling tires than I made in my first year at Arthur Andersen as an accountant.

Speaker B: Well that is really something how the uh, the potential of a career in sales right there.

Speaker C: Right.

Speaker B: So, well, what's interesting, the most recent guest, we had the CFO of Wayfair. Uh, she grew up on the other side of the country in Maine, but her first job was also scooping ice cream. So. But I have noticed a lot of CFOs grew up with that background, that their first job was restaurant related in some form or another. So. And uh, where'd you go to school?

Speaker C: Went to University of Washington.

Speaker B: Okay, and you studied accounting?

Speaker C: I studied accounting, yep.

Speaker B: Yeah. And what was it that was appealing because you know, clearly it was a great career decision for you. Uh, what was it that was appealing to the 17 year old Jason about a career in finance and accounting?

Speaker C: Well, I've maybe kind of an unusual upbringing. Um, my dad was a rock star uh, in the 60s and um, my mom was initially met him as a groupie and then unfortunately that marriage didn't last. Um, my mom then got remarried when I was 11 years old to a partner from Waterhouse. And so as I went through college I think I started, I was going to be an engineer and then I graduated in 91. And at that time it's hard to remember but that was uh, that was a recessionary time and I switched my major, I actually went into business, uh, and then I switched from finance to accounting in the last quarter because I had read that the best place to get a job is in uh, the big six. So I, even though I didn't love accounting in school, I thought it was okay. It was a little, you know, a little boring, but it's a great place to get a job. And so I actually uh, then ended up lucky enough to get a job at Arthur Anderson. At that point it was the largest, uh, accounting and professional services firm in the world. And uh, actually once I started working I realized accounting was more interesting uh, I think in actual practice than it was maybe in textbooks.

Speaker B: Yeah, it's boring as heck and is a collegiate study, but when you actually get into it it can be kind of interesting. And you know, I tell young people that they don't really believe me.

Speaker C: So I tell people it's the language of business. And if you. And I don't know how many MBAs I've hired over the years that basically said I wish someone would have made me uh, do an undergrad in accounting because there's too many classes, you can't do it as a master's, there's just too many classes to take. And I wish someone would have forced me to do it when I was younger to have that base knowledge. And so that is something I do tell folks as well that Makes sense.

Speaker B: And I'm intrigued. I somehow didn't know that your dad was a rock star. Is he someone I might have heard of?

Speaker C: Uh, oh, he played a bunch of bands in the northwest in the 60s. So there was Paul Revere and the Raiders. There was the Kingsman Band called Dawn of the Good Times, which was from guys from both of those bands. And uh, yeah, and so he recorded a few albums with them and was on a. Basically ah, in the whole circuit. And uh. Uh. So yeah, so everyone in my dad's side of the family is an artist. They're on the creative side. And so I was the black sheep. And they always felt sorry for me and said, even though you're going to do business, you still might be happy. I said, okay, I'll try.

Speaker B: There you go. So, well, the Kingsman, was that Louie Louie? Yeah. Wow, that's fantastic. Wow. That is the best piece of trivia we've had on all of our guests so far. But anyway, I'd like to chat a little about your career journey. You mentioned that you started with Arthur, uh, Andersen, which was one of the original monster firms, but um, you know, one of the great places to work. I, I never worked there, but they were my auditors in my first job out of public accounting. World class professionalism, very impressive company. And you know, they had uh, an uh, ending that was a little unfortunate. But what have you learned from public accounting that maybe is still relevant to you, you know, from a leadership perspective and a skills perspective even at this point in your career?

Speaker C: I found that public accounting was an incredible training ground, you know, and one of the things I always tell folks that I, you know, advise or have a chance to mentor is, is getting a chance to go work with, you know, just really intelligent people in an organization that really invests in people and invests in development and invest in giving folks kind of on the job, training, education, capability, maybe, maybe even in the classroom, whatever. And you know, Anderson at the time was pretty unique in that they had the highest percentage of revenue spent on development. I think it was something like 7% of revenue. You know, they had this St. Charles, uh, campus in, Outside, uh, of Chicago. And so, you know, and I must have gone at least once a year for the seven or eight years I was there and just that focus on development and growth and you know, ultimately curiosity to, to want to be able to kind of grow was super helpful for me and probably one of the most important aspects of, of my career.

Speaker B: Fantastic. And then, um, you know, when I was looking at Your career, you worked for a series of, you know, groundbreaking companies, I think it's fair to say. Obviously, Amazon changed business and retail as we know it. But you and I met when you were the CFO of Groupon and you've worked for Splunk and a lot of others. Were you just sort of naturally attracted to that sort of company coming out of public accounting? Or, you know, is it a conscious decision to follow that sort of path?

Speaker C: I would say, uh, I generally, as probably most CFOs, I have a natural orientation towards probably lower risk and more risk averse in general. And what was interesting is I was, I'd been at Anderson for seven and a half years. I spent four, three or four years or something like that as an auditor. And then I moved into the consulting side, uh, what eventually became Accenture. And I actually had really gotten excited about Amazon as a product because I was in charge of like the book of the month for our consulting group. Book of the month kind of, you know, where you pick a book and we'd all go read it and learn from it and whatnot. And that's how I got into Amazon. And this was in 1998. And then one of my former clients had gone there and just said, hey, you know, they're looking for someone in this role. You should come talk to this company. And so I met with the cfo, met with the whole team. I mean, we only had 300 people in Seattle at the time. It was a very small company at that time and basically thought, okay, you know, they offered me a job. And I remember everyone telling me, why would you leave the world's largest professional services firm? Uh, you know, you could be a partner and you could do great. And I don't know, I just felt something about this opportunity. So then, uh, you know, first week they sent me to Germany because that wasn't part of the job, but why not? And then literally in the first month, I realized this job was so much more exciting and interesting than anything I'd ever done. And then I kind of just got addicted to this being in this high growth, uh, environment that was trying to build an industry that didn't exist. And apparently that meant I now went from risk averse to a little more risk on. And so I spent, you know, Almost, I guess, 11 and a half years at Amazon. When I joined, we were a sub billion dollar company. By the time I left, we were about a $50 billion company. And so, you know, really got a front row seat at building, you know, the FP And a team. At, uh, one point I was controller. So I got to, you know, do some of the accounting, um, you know, some of the accounting stuff back when pre socks, when things were a little more complicated, you know, and that growth and that, just the thrill of trying to create an industry which is both painful and exciting. I don't know, I somehow got used to that and then, you know, and that's kind of what then launched me into my next opportunity, which was at Groupon, which was, uh, you know, at the time, the fastest growing company in history. And, uh, it was, I think, went from zero to a billion in two years. And then I went, the year I joined, which was year after year two, it went from, uh, 1 to 4 billion in its third year, and then it went from that to 7 billion and the other year and a half later. And so that was kind of the. From my perspective, having been in Amazon, then Groupon, I guess I just got kind of excited about how this, you know, the world of, you know, at one point it was Internet. Then it became, you know, E commerce. Then of course, it became mobile and so on, uh, just became an area that, that really fascinated me.

Speaker B: Wow. Yeah, you picked some good ones. And in fact, one of them, um, you were, I think you, you spoke at the MIT event. You were with Jawbone. Is that the name of the company? Yeah, yeah, yeah. You gave all of the organizers, this speaker and I know, I know Jawbone. You know, I don't recall how exactly they ended, but I gotta tell you, I still use that.

Speaker C: Yeah.

Speaker B: It was so far ahead of the pack.

Speaker C: Yeah, Jawbone was, uh. Unfortunately, I was only there for a year and a half. The business, I got there late. The business really had been. Unfortunately, it just was a little too far gone. But they invented the first wireless, uh, headset, which we all used back in the late 2000s, 2010s. Then they invented the first, uh, wireless speaker. And then they invented the first, um, kind of, uh, Fitbit, you know, type device. They actually invented that category. So they kind of created three categories. Unfortunately, others monetize it way better than they did. But. Yeah, so, you know, it was another company that kind of fit that mold of these guys are, you know, they have some of the best designers and best, Some of the best engineers in the world. Um, in that case, great ideas, great concepts, financially had not been managed well. And by the time I got there, it didn't take me more than a couple months to realize that they had severe challenges. So they're, uh, no longer a Business anymore.

Speaker B: Yeah, always sorry to hear that. But I often, you know, because I, I work out in my basement, so, you know, that's when I, I blame my 1970s rock and roll on it. So, you know, often I think of you when I put it on. So. But, uh, no, that's great. So one, one question I want to ask about your earlier career because, because it's relevant to a lot of the members and listeners is, you know, you worked phenomenal companies along the way and you must have had some great mentors. And I'm wondering if, when you look back, if they're a couple that kind of stick out as, you know, hey, they really made an impact on my career and maybe they don't even know it.

Speaker C: There's so many mentors, I would say, probably, um, it's funny because the notion of mentoring, there's like formal mentoring and there's informal mentoring and I would say informally. I've probably had mentors throughout my entire journey that I, you know, that I would sometimes kind of informally ask or somehow create a relationship. And I certainly had those at Anderson. Uh, I would say at Amazon, I had some formal, uh, mentors. Uh, one of them was Jeff Wilkie, who was the CEO of retail for many years there. He had actually, you know, he actually approached me and offered to be my mentor. And that was actually really cool. And that was probably the only real formalized mentorship I had. But I worked very closely with Andy Jassy, who's now, of course, CEO. I worked closely with a guy named Jason Kylar. He's the guy that left to go found Hulu. Uh, and then actually Joy Kobe, the first CFO was fantastic, uh, and was, I guess, you know, an early mentor. And then over the, over the past probably 10 or 12 years, Mary Meeker was on our board at Groupon. And she became, and I had known her for my days at Amazon. And you know, she's just, when it comes to big picture Internet, you know, thinking, I mean, there isn't anyone better. And so I'd say she was one. Uh, John Connors, the old CFO from Microsoft who was on our board at Splunk, has been, he was actually part of the reason I met arm. He was a key person on that, kind of, kind of helping identify the opportunity for both sides. And you know, but, but there's, honestly, there's so many. I, I, there's so many mentors along the way, but those are, you know, some of the, the big ones I can think of.

Speaker B: Fantastic. I want to Go back to arm, because it's inherently fascinating. And, um, at the risk of asking a really dumb question, you know, can you tell us, you know, about how the opportunity came about and what made you decide to take it? And I think I could probably guess pretty easily why you decided to take it. But, uh, yeah, it's.

Speaker C: Well, it's a. You, it's.

Speaker B: It.

Speaker C: You may not know. The story is probably different than you think. So, um, I had been at Splunk for about three and a half years, you know. Now Splunk, of course, sold to Cisco. And I think this was disclosed, but maybe not fully, not a lot of attention to it, but, but Cisco, uh, approached Splunk, uh, after the CEO had been fired. And we had an interim CEO, board member who was running, uh, the company at the time, and they had approached us. And so I went through this three month process of this deep diligence process, you know, all the financials that kind of helped figure out what the price could be. At that time, the board, you know, for whatever reason, just decided they didn't want to sell and hired a new CEO. And, you know, I honestly thought that that was not the right approach that, you know, I think we were trading at 110 bucks and this other company offered something like $195 a share. So it was, uh, pretty large. And so they eventually sold, ended up selling for less than that. And so I think in hindsight, it, yeah, it was probably, it would have been the right decision at the time, but. And so I, I, as a result, with a new CEO coming in, you know, when you're a cfo, you get hired, typically by the CEO. And I got hired by the CEO, a guy named Doug Merritt, who's phenomenal CEO. And then, you know, for a variety of reasons, he ended up kind of moving on. And when that happens, as a cfo, you're just naturally kind of in a. Well, where am I? You know, and most CEOs want to bring in their CFO. And actually we brought in a new CEO, and he was great. And I don't know, there was no issue there, but I kind of just felt like, you know, we didn't pick each other. And so it's always one thing that at least made me kind of think about things. I'd say the biggest thing was I actually, right at that time, this was, I think, June of 22, I got diagnosed with prostate cancer, uh, which unfortunately, as you probably know, like one in seven men are going to get diagnosed with it at some point. So it's shocking, but not too shocking, unfortunately. It's one in seven. And so then I spent a month or two trying to go figure out my situation and what I was going to need to do, and I got that. So I started going down that path and I was going to go take. Go have surgery and do a medical leave. And I got a call from a headhunter saying, ARM really wants to talk to you. And I just said, look, I really, this isn't going to work. I've got some health issues. And they said, well, they still want to talk to you. So I had a discussion with Rene Haas, who had just been appointed CEO a couple of months earlier. And, um, it was one of those, like, instant love connections. Like, we just completely saw the world the same way, you know, And I just, I flat out said, look, just so you know, I. I'm about to have surgery. And I, you know, and so this is kind of an awkward discussion. And he was like, ah, you know, I know a bunch of people that have prostate cancer. You'll be fine. And I said, that's it. And he is like, yeah, that's it. I said, okay. And so, uh, so, you know, literally interviewed the rest of the team, and I think I had an interview with Masa from Softbank, who is the chairman, you know, within four or five days. I think I had an offer in like seven or eight days. Wow. And I thought, wow, for, you know, 40, $50 billion company, that's not a usual process. Um, but it showed the level of conviction that I think the CEO and the team had and myself. And then I, of course, had a lot of conviction. You know, the company is a pretty incredible company. And I thought, wow, this is a real once in a lifetime opportunity. So anyway, so then I went and, you know, took a couple months to go deal with my health issues and happy to say, everything's fine now. So it's been, you know, that's great. Four years now. But that process, this is my fifth CFO job. And so what that basically means is over four CFO jobs, there was probably a bunch of things that I felt like I could have done better or I just. Something. Something didn't work the way I'd hoped it worked out. And so luckily now, you know, almost four years in at arm, you know, this is, you know, it's probably the best. It's the best job I've had. And it's the job where, you know, all the pieces that I've kind of figured out over time, you know, the Fit with the CEO. The product kind of, you know, where is it with the market needs and does it have the right product at the right time? As you know, timing is everything. Culture of the company team, uh, dynamic, you know, investor base, chairman, board, all that stuff. There's so many ingredients that go into whether or not it's going to be a, uh, really successful, you know, CFO role. And this has kind of been every job I've had until now. Had some great pieces and then had some pieces that just weren't quite right. And this one is kind of where it's all come together. And so it's been a pretty incredible experience thus far.

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Speaker B: well, congratulations on surviving cancer as well. So I did not previously know that about you. So I'm glad that you beat it. But you use the phrase once in a lifetime and it seems to me, you know, as I look at your career, you've had sort of three once in a lifetime types of things, right? With Amazon Group on and now arm. But you know, it's what was interesting to me about the timing when you joined arm, um, you know, before this conversation is you were hired several months after Rene and seems like they get Rene, they get Jason. Clearly they're, they're building the leadership team to take the company public. And uh, you know, then that indeed is what happened. But you know, what's it like to take a company like that through an ipo? Uh, that's you know, again, not famous with the general public, but a truly critical company to the overall economic infrastructure and therefore highly visible in the markets.

Speaker C: So I've taken two companies public and they're both um, at very different ends of the spectrum, I would say. And so the first one was Groupon and you know, M. Mary Meeker on the board, you know, loves to. It was her, it was John Doerr, I think, Marc Andreessen, we had Howard Schultz, we had all these, you know, like fairly, you know, well known characters that were all brilliant in their own right. You know, they will all kind of Tell you, wow, Groupon. I'd never seen a company that had so many things just all converge from a challenge perspective like that are so far beyond maybe even just any of the actions the company took. Just, just so many things that came together that made it really tough. And in particular, you know, when I joined the company, it was literally its second year anniversary and it just hit a billion dollar run rate. And then the year I, that next year we went public about almost exactly a year after I joined. In that period, we went from 1 to 4 billion. We went from one country to 48 countries and we basically went from about 10 million to 150 million customers all in one year. And so, you know, so then after we go public, we have, you know, we have some issues where the auditors got picked by PCAOB to do the review. So we had, after we did earnings, we had to delay the filing of our first 10k, which then meant you had to wait more timeframe. And then with a company growing that fast, that that's, that is that young, you have to go in and reevaluate your accruals on things like refunds. And if you remember grief, uh, Groupon at the time, it grew so quickly. Our average customer was only with us for three or four months and we were having to make projections on customer behavior on a customer cohort on an average of three and a half months, which basically means you got a high, you know, a fairly low confidence interval on exactly what it's going to be. And so the more time you have to try to predict. In this case, we had, we basically filed our 10K, you know, the full 90 days right after the end of the quarter. We saw that the returns, uh, behavior was increasing. So we had to basically adjust our financials. And so then that created all this, you know, downward spiral of lack of trust in the market because you had to make a revision. It wasn't a restatement, but it was revision to our financials, all that stuff. So having kind of gone through all that, I basically just, you know, it was a, it was really, really tricky, very early stage. And I thought, you know, uh, in fact, you probably know that the JOBS act came partially out of that IPO that was, there was all sorts of quiet period violations because the company just had so much focus on it that it was just impossible to try to control the process. And they actually came up with the, uh, you know, kind of the confidential filing in the JOBS act just right after that. In part, part because of how crazy that IPO was. So I kind of always thought if I'm ever going to do another ipo, it's going to be very different than that one. And so when I heard about arm, I thought, okay, so here's a company that actually was public before, went public in I think 98, went from a billion to roughly $25 billion valuation in 2016. Masa buys the company for 32 billion, does a lot of experimentation, does a bunch of things as a company does when it's taken private. And now they've kind of tweaked the business model and they're getting ready to, you know, to take it public again. And so my thought was, okay, well this seems like the exact right setup I'd like to see relative to what I saw at Groupon. We have incredible customer, uh, kind of um, you know, cohort information on predictability of the business. Uh, we can, in fact our business is extremely predictable. You know, we basically sell licenses. Most of those license are renewals. You know, we retain 99.5% of our customers by someone else. And then, you know, the products that we sign contracts for and the royalties we receive, uh, we're signed up right now. We just said this at our Arm Everywhere event two months ago. Our royalties for the next five years are already 85% under contract. So all I really have to do is predict what do I think the whole industry is going to do because we get paid on almost every chip of the industry. So as a result I was like, this is a great setup as a cfo because I definitely learned that the public markets really love a predictable business that doesn't disappoint and has low volatility. And so that was certainly a key ingredient. I also felt like Rene had a, he was a first time CEO at about 60 years old. So, you know, a very mature, seasoned leader who honestly hadn't been CEO before just because he didn't, he didn't really care to be, but he certainly had the talent, capability. It just wasn't a focus. And so, you know, so he had a, I think a really good kind of makeup of someone who is mature, uh, experienced and you know, just, just really kind of had the right mindset. And uh, you know, and then we had Masa, who as my boss likes to joke, he's the only true, long only investor. He basically bought the company 2016, hasn't sold the share since 2016 and even today people say, Gosh, he owns 87% of the company. When are you going to, you know, when the Stock goes up, he must be willing to sell. And it's like, no, he believes his company's worth way more than even what our public company value is. So it was a really good setup to, you know, as a CFO who's trying to always control all these somewhat dynamic variables that are non controllable, it was a really good setup to at least minimize some of the things that can create a lot of volatility.

Speaker B: So no, that. What a fascinating story. That is so cool. And you know, one of the questions I'd like to ask, you know, ARM just is making its biggest strategic move, I guess ever. And you know, so as a CFO and you know, you're a uh, very strategic forward looking cfo, what does that mean for you?

Speaker C: So um, what it means is, uh, our business is going to get much more complicated as a cfo because we, you know, really part of the reason this, I hadn't worked in the semiconductor business but because ARM really looks more like a software company. You know, that's why it made sense that I'd come from Splunk. And you know, and some of the things they wanted me to deal with were more to deal with. You uh, know, I, I helped trunk, uh, Splunk go through the transformation from on premise or enterprise software to SaaS. And so that's when you have to do things like ARR or ACB and try to figure out how to reconcile some of the lumpy rev rec with, you know, metrics that can help you understand what the fundamental health of the business is. So those are some of the things that, you know, that was interesting and needed to be solved for Army. And so um, by now moving into a business where you still have that software component, but now we're also selling chips, then you get into the whole world of you've got to deal with all the supply chain aspects and the working capital pieces. And these are things I've dealt with in part at Amazon and in part at Jawbone, where I had to go out and get asset backed loans and ABLs to fund working capital, or had to go to China and meet with contract manufacturers and go figure out how to, you know, work on defect rates or you know, return provisions because you know, of some sort of an issue that uh, occurred at the factory. So, so I've had exposure to some of those issues. But you know, those are much more complicated issues than dealing with software, which is mostly around Revreck and net retention and how do I make sure the customers love the product. So that is Going to be a challenge for us. Luckily we've got a number of folks on the team who have worked in the silicon industry and so they understand a lot of the supply chain pieces. But, but you know it is a, ah, fun but, but there is a lot of complexity certainly from a CFO perspective on that.

Speaker B: So it's interesting because the change is profound. And you know I always say the CFO is you know, the most trusted person within the company. So you know, you've got a narrative with the investor community and the financial community generally. How do you sort of take that approach about this is why we're changing because you know, it's not like you were doing poorly before this change, right?

Speaker C: No, well you know we, we um, so we spent a lot of time on our big announcement event, it was called ARM Everywhere. And we did this in San Francisco uh, in uh, late March. And so you know we certainly did the big unveil where the CEO shows the chip and talks about you know, why, why now is the right time. And certainly you know, the timing kind of was perfect. You know the rise of agentic AI which really kind of just took off with the open claw moment in back uh, in February. And you know agents is very much a CPU oriented workload versus training which is more, more, much more of a GPU or XPU oriented workload. And what we were launching was a cpu. So the fact that this happened to be, you know, just two months after this shift to CPO occurred meant our timing was kind of perfect. And so that, that was, I mean we've been working on this for a while so you know, you can't predict that stuff. So that was certainly something that helped us. The thing I had to do then um, in my financial presentation was kind of explain from a financial perspective why is this the right thing. And basically had to, you know, I had to put together some slides that basically showed, you know, when we sell IP we have two different flavors of the intellectual property that we sell. We sell just kind of IP blocks which would be here's a cpu, here's a gpu, here's an npu, you know, different, here's uh, memory configuration and we'll charge a certain um, rate for that. Typically it works out to be about a 5% as a percentage of the value of whatever the end product is. And since this is a server chip, server chips are usually anywhere from 1 to 2 or $3,000. And so I basically just said on a per $1,000 basis if we're selling just basic IP blocks, we get about 5% or call it $50 if we build, uh, what's called a compute subsystem, which is a fully optimized, uh, almost a compute die. So or like a chiplet where it's basically a CPU memory, any of kind of the fabric or mesh that a chip needs and it ends up being probably about 80% of the design of the chip. Uh, if we sell that, which we just started selling when we went public a couple years ago, uh, we get about a 10% rev share or a hundred dollars. But if we sell the full chip we actually get about a 50% margin, we get about $500. Okay, so it's about a 5 to 10x more profit per unit than you get if you're just selling the royalty. So I think, you know, so then the question is, okay, well I get that. So then help me understand how you're going to manage the fact that you used to sell just the IP tier customers. And I think our perspective was, well, now's the perfect time because the market for this product is so massive, there's really no way anyone can serve all the demand. And so really there's so many different pockets of demand that what we're going to sell is only going to work for certain use cases. Amazon builds their own IP on ARM, so does Nvidia, so does Microsoft, Google, Alibaba, ByteDance, every one of them. And so but a bunch of those folks also want to buy a chip from us because they have different workloads and different use cases. And so anyway, so that was basically the needle we had to thread. And uh, it seems to have gone pretty well. And certainly the stock prices had uh, a positive reaction since then. But it's also too early. We haven't shipped the product yet. It doesn't ship until later this year. So I kind of have to keep telling everyone, look, everyone just, we're not shipping until end of this year. So everyone please don't run too far ahead of us. There's a lot of demand, but there's also a lot of supply chain constraints. No one could get memory, tso, SMC is sold out. There's all sorts of challenges. So there's a lot of execution that still needs to occur.

Speaker B: Yep. So many things beyond your control. Even the best management company. So, but I want to uh, ask you, you know, so you know, what does success look like for um, say five years from now? Uh, and you know, we live in such volatile times. That's a very difficult question to ask. But what will fundamentally have changed about the company in the next five years?

Speaker C: Well, I'll give you, there's the objective answer which was we actually certainly as CFOs we hate to give long term targets, right? It's the, the bane of our existence because then you're, you're stuck and committed to, you know, the future. Well, when we had this event, because this was such an important shift, we had to be a little more aggressive and we actually gave a five year target of where we expect to be and we basically said look, we went public at about a $2.6 billion revenue company and then we're now just shy of 5 billion, so about doubled in you know, roughly two and a half years. And over the next five years we're going to grow to a $25 billion company. So we're going to grow 5x. So the objective answer to your question is where's our ARM going to be in five years? Well, it's going to be five times bigger and uh, it's going to develop, you know, it's going to be five times bigger in revenue and it's going to be, I think it's about six or seven times more in earnings per share. So that's the objective measure. Well, so how do you do that? Well, you have to continue to deepen our penetration across all the various aspects of the cloud AI as well as edge AI. And luckily we're one of the only companies on the planet that virtually every smartphone, you know, tablet, PC, whatever, they're all highly, highly dependent upon arm. And so as you start to see, you know, the AI move from mostly a cloud based product but starting to go into self driving cars or robots or smartphones and or smart devices, um, Meta, you know, Apple glasses, all the different products out there, they're all using army. And so uh, we certainly have an opportunity and of course our internal targets are to do much better than the 5X. Uh and so I do expect that we are in a pretty unique spot to see as we watch AI proliferate. I think there's all sorts of pretty aggressive aspects of when are we going to hit AGI or asi, when are humanoid robots going to be constructing data centers and fabricating chips in the moon, all that stuff or on the moon? I think all those things are certainly possibilities. But the good news is our designs, because of how efficient they are, generally are at the heart of every one of these kind uh, of efforts. So it's uh, exciting.

Speaker B: Oh, that certainly is exciting. And I'm going to start using the answer to the. I'm about to ask you a question and the answer that you give is the one I'm going to start giving to everybody because I think you're uniquely positioned to answer it. But there's this ongoing debate around AI investment and whether it's going to deliver real long term return. I just hear it all the time and you know, you're in the throes of it. What do you think? Is it for real?

Speaker C: Yeah, I think, well, if you step back and say, well what is the uh, so return obviously is going to be profit or cash flow. The next step before that is it needs to be like revenue. Are we seeing revenue from AI? Well clearly if you just look over the past few months we hear about OpenAI, which of course our uh, chairman is a big investor in and we also see everything coming from Anthropic and even you know, Gemini and all the, the different products out there. The revenue growth is been effectively through the roof for all the model companies. And so I think what we've seen now is, I think it's pretty clear that the agentic AI revenue model is pretty significant. Like in fact, um, unfortunately it's so significant that it's really causing a lot of question if you're uh, a big SaaS investor because we don't know what the terminal value of those companies are anymore and what is the terminal cash flow and profitability and to what extent are they going to be disrupted. So I think the question on revenue and ROI progressed a lot just in the last three months now I think the next question though is it's still we're constrained by compute and compute is, you know, there's power data centers and chips and all these things are constrained right now. And unlike, you know, there's always talks about bubbles, whatever. If, if there's a bubble now, it's going to be different than any other bubble we've seen. You know, I think everyone famously talks about the 2000, the dot com uh bubble where we had a huge infrastructure build out but it wasn't really being used. It literally took 15 to 20 years until a lot of that infrastructure got used. And what's so surprising right now is all the infra infrastructure that's being deployed is literally getting utilized immediately. And now a lot of the, like you go on to Claude, you're throttled. They don't have enough compute capacity. And OpenAI has uh, similar challenges. So what's interesting is, is there going to be enough constraint that will force much more efficiency and effectively lower the cost per token, which could significantly help the I part, the investment part, which then theoretically could really make the profit on every dollar of revenue created significantly increase. If you look at the cost per token, I think it's come down something like 100x just in the last uh, two years. So everything we see is it's likely going to continue to get much, much more efficient. So, so I think the ROI of AI is actually not. It doesn't take a lot of guesswork or I think it's pretty clear. I think the question's going to be it's more about the displacement, like what, what part of white collar jobs are taken from, you know, are going to be, be replaced with AI, uh, and then what are the new jobs that are going to be created? That's the piece that I think will be really interesting too. And I, I don't, I don't know for certain but there's definitely going to be some pretty interesting uh, um, transformations occurring.

Speaker B: Yeah. Oh yeah. It's a fascinating time to uh, be in the professional world. So a couple of questions. I will quit. Uh, I'll just kind of skip over a little bit.

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Speaker B: Jason, one thing I'd like to ask you about is KPIs and even though you have an accounting background, you're not like a traditional CPA CFO at this point in your career. But when you measure success and report success to your colleagues, what are three or four of the most popular KPIs that you personally like to use that you find meaningful?

Speaker C: First, I'd say you're right. To be honest, I wasn't that great of an accountant. I was an okay accountant. And luckily, you know, uh, in the spirit of what the two most influential words ever, uh, mouthed, which are know thyself, was that Socrates? Or I don't know, some, some uh, philosopher who was pretty smart. I, pretty early I realized being around some genius accountants, I'm not a genius accountant. And so I, I probably better fig something else that I'm better at. I would say when I think about where I'm at now as a cfo and I try to figure out like, what are the KPIs that I use, ah, to measure success. To me, one of the things that was really, really instilled in our culture at Amazon was this concept of bar raising. We always want to hire people that are, that make us nervous because they're better than we are and we know that we're going to learn from those people that we hire. And so that was just such a core part of the Amazon, um, kind of, uh, culture and still is. And it definitely kind of created a, uh, mutation in my DNA. And so as a result, to me, the best measure is as a CFO. I've now had five CFO roles. How many CFOs have been produced from the finance teams, you know, that I've, that I've been able to, lucky enough to manage? And as of a couple months ago, I did a check. I think it was up to something like 30 plus CFOs that have kind of been, you know, part of my team at uh, Groupon or Jawbone, uh, or Opendoor Splunk, and now arm. And that means that clearly these are organizations that are providing the right development, the right exposure and the right growth to be able to launch careers that are fulfilling for folks. And so that to me is probably the most, to me that's the best metric that encapsulates, I think, uh, that at least the organizations that I've been able, lucky enough to manage are actually creating great opportunities. That's honestly probably the, that's the main metric I focus on. Uh, I think, you know, the one other thing I, I try to always do is it's also a bit unique, I'm told. But I basically, for all of my direct reports, I know right now there's a CFO shortage. And so I tell them like every year, or probably more like every six months, I just say, tell me like, you know, where do you want to go, what do you want to do and how can I help you? I probably get, uh, one solicitation every couple days on CFO jobs. And I tell them like, I will. The ones that are really good, I'll share them with you and I will, you know, and I'll have a discussion about, does this make sense for you? Uh, is it the right fit for you? Is the right opportunity for you? And then I tell my team, you know, as we go further down the organization, how are we always finding opportunities for folks that are going to help grow and develop. And first I hope that's in the company. But if they're outgrowing the company or outgrowing the role and there isn't an obvious opportunity for them, how do I help them be able to find that opportunity outside the company? And I find if you have that approach, you will get the best people and they will be loyal to you and the company because they know that you have their own, you know, uh, interests at heart. And so that's probably, I'd say one other, it's not really a metric, but that's another kind of core, core focus.

Speaker B: Now that's great. And at the end of the episode I am going to share Jason's email and you're going to be getting about 2,000, uh, controller Cao, VP of finance resumes mailed directly to you. Everybody should have a boss like you at some point in their career. You know, I have a theory and you didn't mention Amazon as one of the companies, but my personal theory, which an academic could prove or disprove. But I think that Amazon as a company has produced more CFOs amongst their alumni than any other company in the country. Just I meet so many people, including you, who are highly successful CFOs that worked at Amazon at some point in their career.

Speaker C: Now the uh, Bezos early on said we're a low margin business and we need to hire world class finance. And so Joy Kobe, who was brilliant, she basically had kind of, you know, retired. And Bezos said, I gotta go hire the best. And so he went to GE and in 1999 that was the best place to hire CFOs from. So he hired Warren Jensen. And then after, you know, Warren was uh, a very successful GE CEO and then he brought in Tom Scutek, another ge, a successful uh, uh, and so I kind of spent a lot of time training under those folks. And the mentality that GE had built for so many years, as you know, was kind of, as the cfo, uh, kind of factory because you created not just smart CFOs but smart general managers that could um, really understand the business from all angles and then hopefully have the detail orientation to understand all the core technical aspects. And so that was definitely uh, apparent at Amazon. And you're right, I didn't count anyone at Amazon because while they may have worked for me, I wasn't the cfo. And I would give that to the cfo. I'll let the cfo, uh, now Brian Olsavski, he can count those folks. But you're Right. There's probably there may be a hundred CFOs that came from Amazon now. I don't know. It's a big number though.

Speaker B: Yeah, I bet. I bet there are a hundred. So cool. So, you know, one thing, I'd like to chat with you. And you've sort of had a front row seat as a participant in it, but just the simple nature of the CFO roles changed so much over the last 10 to 15 years. And you know, how do you see it changing in the next few years? And, uh, are there any parts of it that you don't think will ever change?

Speaker C: Okay, so the things that will never change, one of my mentors had told me, is you have to realize that the CFO gets a pass fail on compliance and accuracy. And that just has to be the case. So whatever it takes to make sure that the numbers are right, that the company and the market can trust what you say and the numbers you're projecting, that just won't change. Uh, but you get a pass fail, you don't get a grade. It's just pass fail. Then there's, I'd say the strategic piece, which is really about resource allocation and what are the mechanisms we use to try to have the best kind of estimate of where do we deploy our capital and our resources and how do we get the optimal ROI from that over whatever time horizon. And that of course is like the core part of the job, but at every company it's so different based on industry time horizon, you know, just depends on so many factors there. But I don't think that changes either. I think the mechanisms and the tools that help you understand your resource allocation. I mean, we've never had better tools than we have right now. I literally, I get, uh, someone saying, hey, should ARM consider looking at acquiring XYZ Company? I could just go into ChatGPT and say, Give me a quick SWOT analysis on whether or not we should acquire this company and does it make sense? And in five minutes I can get an answer that I used to pay a consulting firm or a banker or my corp dev team would have to go spend two weeks doing. I can now get it in five minutes. And you know, it's just, it's phenomenal, the access to information that exists that I think can really help accelerate that resource allocation process. Which, you know, when I started my career, that was a long process, but kind of going back to the AI thing. When I started my career at Anderson, I had a briefcase and yellow paper and pens, and then I would go to the office and I would call the, uh, my voicemail and it would tell me where I was supposed to go. And then five years in I got a, I, you know, I got a shared notebook, then I got my own notebook, then I got Excel. And I was like, how many people in this world today are live and die in Excel? I mean that didn't exist more than 25, 30 years ago. It didn't even exist. And so when people say, oh, it's this AI, it's like, you know, it's going to crush all these jobs. And it was just like, well, a lot of these jobs didn't even exist before 25 years ago. And so, or uh, they were just completely different. And so I think what's happening is, you know, the, the Excel spreadsheet jockey. Well, that job probably is going to have a short life. It had a 25 year existence. But how you use these tools to get to an answer on resource allocation I think is incredible. And so I do think you could see CFO teams that could be a lot smaller than they used to be. And I think the structure of those teams, the ratio of senior to middle to lower management probably changes a bunch. I think those two aspects of the CFO role just don't change.

Speaker B: Yeah, no, it's, it's interesting because I think Excel came out when I was a senior in high school, but like when I decided to study accounting, uh, you know, a lot of people, smart people by the way, they were, just ended up being wrong. But they told me to get out of accounting because information technology would replace accountants. Yeah, the exact opposite happened. It created, it empowered accountants and financial people generally. So. But no, that's a great answer. And you know, I always like to ask because our listeners tend to be on the cusp of their first CFO job or maybe actually in their first CFO job. But what's some advice that you could give to the next generation of financial leaders to help them achieve some of the success that you've achieved?

Speaker C: I don't think there's a better time to start your career than now and the uncertainty and there's all this kind of AI doom that you can find at least in the U.S. it's not as, it's different, you know, different countries have different views. It's kind of interesting. But I think the, for someone who is curious and you know, wants to work, wants to, you know, has some aspect of tenacity and grit and really just wants to go figure things out, you have more tools at your disposal. Than you've ever had, and they're cheaper and easier to access than they've ever been. And you don't have to have gone to one of the top schools. You don't have to have been born in the right place. I mean, uh, a lot of the things that determined whether you were going to be successful before, they just. They're just mostly eradicated. And so I would say, like, the opportunity is just. The world's been flattened in a pretty massive way. And so I think, uh, you know, all I would say is, you know, follow your curiosity and, you know, I think every successful person I know, you know, has probably just made tons of mistakes. I've had, you know, five CFO roles of which, you know, there's been a lot of nasty articles and messages that I've had to get over bad decisions or being in the wrong place at the wrong time or just made a mistake. And, you know, it's not like that will happen. The question is, how are you gonna. How are you gonna deal with it? Are you gonna have the resilience to basically learn from it and then not make that mistake again?

Speaker B: Yeah, I hear. I hear. You know, one thing I noticed, my first CFO job, it was kind of from the Boston area. It was like being the manager of the Boston Red Sox because everybody thought they could do the job better than I could. You know, just. They didn't really appreciate how hard it was and how you had to prepare for the role and just anyone could walk in and be a cfo. Uh, it's. That's no longer the case, although there are still pockets of people like that. So. But anyway, I think that's great advice. And, Jason, I know you're a really busy guy, you know, one of the really interesting companies in the world, so I want to thank you for your time. I also just want to give you the final word if you have any parting thoughts for our listeners.

Speaker C: I would just say be curious. The world is changing so quickly. I would say embrace AI. I'm energized by what I see with AI and what I am learning myself by constantly using my AI partner to just help me check things that I thought were truths, and I find out maybe they're not. And, of course, you also want to double check to make sure you're not a, uh, recipient of a hallucination. I feel like with curiosity plus AI, the learning and growth opportunities are like we've never seen.

Speaker B: That wraps up this episode of the secrets of Rockstar. CFO's a huge thank you to our sponsors Intuit and Plantful. Don't forget to subscribe and leave a review@rockstarcfos.com until next time. Rock on.

Speaker A: Thank you for listening to this episode. To continue your end exploration of this role that focuses on strategy, leadership, finance and technology, listen to more episodes of the show at. Ah rockstarcfos.com join this revolution episode by episode. Push yourself to achieve great things and unlock the best opportunities available to you. CFOs are creating a legacy and it's time for you to leave your own unique imprint on the the world today. That's all for now. See you on the next one.