May 10, 2021 · 55m · how-i-built-this
Cisco Systems & Urban Decay: Sandy Lerner (2018)
0:00 / 0:00
gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of How I Built This, tech pioneer Sandy Lerner details the grueling founding and eventual ouster from Cisco Systems, followed by her audacious reinventions across animal welfare, the cosmetics industry, sustainable agriculture, and literature.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Guy holds 39.7% of the talking time here. How this is scored →
Guy as informed peer 2.4 Guest teaching 3.9 Guest disagreement 2.9 Guy pushing back 1.3
speaking balance: gold is Guy, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 29:12 Trench warfare metaphor
Lerner forcefully shuts down Raz's attempt to romanticize the startup struggle as exciting, comparing it instead to being shelled in a muddy World War I trench with mustard gas and no sleep.
Hardest push from Guy ▶ 39:05 Pressing on the $170M payoutRaz challenges Lerner's sense of victimization by raising Cisco's counter-perspective that the founders walked away with $170 million and should have simply enjoyed their immense wealth.
Biggest teaching moment ▶ 27:45 Rebutting VC logic on public protocolsWhen Raz suggests VCs were reasonable to think anyone could replicate public domain technology, Lerner bluntly counters: 'Except that if everybody could do it, why didn't they?'
Guy holds their own ▶ 35:42 Raz analyzes vesting schedule implicationsRaz demonstrates immediate technical grasp of startup equity mechanics, instantly identifying that being fired two years into a four-year vesting cliff meant Lerner was being stripped of half her net worth.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Guy as informed peer | Guest teaching | Guest disagreement | Guy pushing back | Why |
|---|---|---|---|---|---|---|
| Childhood in California, Farm Life, and Encountering Sexism | 1 | 1 | 1 | 0 | Guy Raz establishes biographical background with open-ended questions about Lerner's childhood and early work experiences. Lerner shares colorful anecdotes about her aunts, farm life, and her first encounter with workplace sexism at a local bank. | |
| Accelerated College Studies and Pivot to Computer Programming | 2 | 2 | 1 | 0 | Raz asks about her rapid completion of college and pivot from Marxist economics to computing. Lerner explains the financial pragmatism of computer programming in the 1970s. | |
| Stanford Computing Subculture and the LOTS Volunteer Group | 2 | 5 | 3 | 1 | When Raz asks if programming came intuitively to her, Lerner firmly rejects the premise, pointing out she had to work intensely to catch up on advanced math and physics denied to high school girls. She elaborates on the egalitarian subculture of the LOTS volunteer group at Stanford. | |
| Meeting Len Bosack and the Formation of an Intellectual Partnership | 3 | 5 | 3 | 1 | Raz explores the origins of Cisco's networking technology at Stanford. Lerner corrects Raz's assumption that they were motivated to build networks for Stanford's sake, explaining the public-service, collaborative ethos of the ARPANET community. | |
| Commercial Frustrations, Stanford Red Tape, and Founding Cisco | 2 | 3 | 2 | 1 | Lerner recounts Stanford's refusal to license networking protocols and the informal $5 incorporation of Cisco. She also highlights the institutional sexism she faced at the business school, contrasting her administrative authority with being relegated to eat with faculty wives. | |
| Living Room Manufacturing and the Bootstrapping Struggle | 2 | 4 | 2 | 1 | Raz inquires about the physical production and funding of the routers. Lerner corrects Raz regarding their roles, emphasizing that Cisco was fundamentally a hardware company driven by Bosack's engineering genius. | |
| Pitching Skeptical Investors and the Wartime Startup Mentality | 2 | 6 | 6 | 2 | Lerner explains why dozens of VCs rejected Cisco, pushing back sharply when Raz suggests VC skepticism made sense. When Raz asks if the bootstrapping phase was exciting, Lerner aggressively dismisses the romanticization, comparing it to being shelled in a WWI trench. | |
| Sequoia Capital Investment, Corporate Shifts, and Executive Friction | 3 | 4 | 4 | 1 | Lerner details the culture clash after Don Valentine invested and installed John Morgridge as CEO. She describes the hostile environment and her clash with Valentine over predicting Cisco would become a billion-dollar company. | |
| The Sudden Ouster, Solidarity Resignation, and Emotional Fallout | 4 | 5 | 4 | 4 | Lerner describes being abruptly fired by Morgridge and Bosack's immediate resignation in solidarity. Raz pushes back by raising Cisco's perspective that the founders walked away extremely wealthy with $170 million, prompting Lerner to explain the devastating loss of identity. | |
| Redirecting Networking Expertise into Animal Rescue: PetNet | 3 | 5 | 4 | 1 | Lerner explains redirecting her technical knowledge into PetNet before creating Urban Decay to disrupt conventional beauty standards. When Raz asks if mastering cosmetics required years of study, Lerner demystifies the industry by calling it remarkably simple. | |
| Ayrshire Farm and the Enduring Legacy with Len Bosack | 2 | 3 | 2 | 1 | Lerner details the operational difficulties of establishing a humane, organic livestock farm in Virginia. She also discusses her enduring, non-romantic partnership and joint philanthropic foundation with Bosack. | |
| Reflections on Wealth, Value Systems, and a One-Word Epitaph | 3 | 4 | 3 | 3 | Raz presses on the immense wealth Lerner surrendered by selling her Cisco shares early. Lerner defends the decision as necessary for personal independence and quality of life, concluding with a definition of her work ethic and one-word epitaph. |
Statements from this episode (27)
Lerner's 1970s bank employer made tellers kneel for skirt length checks
“The bank owner made all of the tellers kneel, so he could check that our skirts were long enough, and he called us all Louise.”
Lerner earned $25 per hour programming computers as a student in 1975
“And, you know, in 1975, I was making 25 bucks an hour computer programming.”
Stanford peer wrote the first spell checker and manually typed the dictionary
“One of the people had written the first spell checker and typed in the entire dictionary himself.”
Stanford computing group built and maintained its own network hardware
“We built our own internet we maintained our own internet, we built our own printer interfaces, we built our own computer terminals.”
Stanford Ethernet precursor ran under the radar until around 1981
“We were definitely under the radar, and we kept it under the radar, and it wasn't until One day, I think it was by 1981, our time-sharing Ethernet became the Stanford University Network.”
Early ARPA network development lacked political or financial motives
“ARPA was giving money. It was all public, public domain. Nobody had a financial motive. And the thing that ARPA did that was so amazing, even today, was it gave the right people the right money. It wasn't political.”
Stanford refused to license federally funded router technology, Lerner says
“Stanford said, no, you cannot license this technology. They would not entertain any licensing. We had done our part, and we had taken the government's money. This is all public domain. We'd invented all of these wonderful things, but the Office of Technology L…”
Cisco was the 36th name attempted for the networking company
“Cisco was actually the 36th name that we tried to get. Anything having to do with computers, we couldn't have.”
Stanford paid Lerner half her predecessor's salary and a third her successor's
“I was paid half of what my predecessor made, and I was paid a third of what my successor was paid.”
Stanford excluded Lerner from curriculum meetings held at a men-only venue
“When the faculty would meet at the beginning of the year to plan the curriculum, even though I was the head of all of the computing facilities, Both administrative and the curriculum computing I went and had lunch with the faculty wives because where they had …”
Cisco settled Stanford IP claims with royalties and network maintenance
“We ended up paying them, I think, a very fair royalty for the first, gosh, I want to say three million dollars a product or something. Very fair royalty. And we had to fix their network for three years.”
Early Cisco booked $250,000 monthly without a dedicated sales force
“With no sales force, we were booking a quarter million dollars a month.”
Cisco's first three customers were HP Labs, Rutgers, and Boeing
“Our first customer was Hewlett Packard Laboratories. The second one was Rutgers University. Third one was Boeing.”
Cisco pitched 70 to 80 venture investors in early fundraising efforts
“We went through about 70 or 80 of them.”
Early venture capitalists believed public network protocols could not be monetized
“The investor community, which was a whole bunch of old, you know, Fairchild semiconductor salesmen, they didn't think that you could make any money on a public protocol because, of course, everybody would do it.”
1980s venture capitalists struggled to relate to a female founder
“First of all, there was a woman founder, and they're all 60 or 70. They just didn't know how to relate to a woman in business, you know.”
Sequoia imposed four-year vesting despite Cisco booking $250,000 a month
“Len and I walked into a four-year vesting plan after funding the company for three years, clearly a mezzanine investment. We're making, we're booking a quarter million dollars a month at that point.”
Don Valentine invested $2.6 million for massive Cisco equity and control
“He gave us 2.6 million dollars, and Len and I got about 30%, but remember, he was the chairman of the board of the company, and he got stock from that, and all of his friends got stock.”
Incoming Cisco CEO John Morgridge told Lerner she was 'everything wrong'
“Yeah, and he denies it, but I will swear on the lives of my cats, the first thing he said to me was, I hear you're everything that's wrong with Cisco.”
Lerner: It was probably time for Bosack and me to leave Cisco
“Yeah, it was probably time for me to go. It was probably time for Lem to go. We're just not good people in a collaborative environment.”
Lerner and Bosack placed 70% of Cisco proceeds into charity
“Remember that right after that, Len and I put 70% of the proceeds into charitable vehicles.”
Sandy Lerner launched Urban Decay in three months with only $50,000
“Makeup's a very easy thing. You can do it three weeks. We're on the shelf in three months. You know, just add 50,000 dollars and stir.”
Cosmetics brands all use identical raw ingredients, Lerner says
“Everybody uses the same stuff. It's just how they put it together and what they're willing to pay for.”
Lerner sold Urban Decay because cosmetics lack intellectual property protection
“Oh, I, for the simple reason that there's no intellectual property. You can't patent color.”
Lerner says farming is harder than building tech or graduate physics
“Farming is the hardest thing I've ever done. Much, much harder than learning calculus as a graduate student and, you know, physics and the rest of all of that stuff. It's much, much, much harder than anything I've done, and it takes more work. And more heartac…”