CEOs in Conversation: Eric Yuan and Matthew Prince

Hey Eric, it's great to have you on Cloudflare TV. Thank you so much for joining us. It is Cloudflare's birthday week. We returned 10 years old as of yesterday. A little bit of an older company than you guys are, although you've sprinted ahead in a lot of ways over the last little bit. You and Zoom are companies that a lot of the team at Cloudflare have really admired, so I really appreciate you coming on and joining us to talk about your journey. Thank you for having me. I'm a huge fan of you and of Cloudflare. Thank you. Well, thanks. So you started out studying, I think, Applied Mathematics and then you got a Master's in Geology. And I remember the first time that we met in person, the thing that struck me is you said, I hate to travel. And I would think that as a geologist, you'd have to travel a lot because you'd have to go around to wherever the rocks or whatever you're doing are. When did your hatred of travel start? My parents, their background is geology engineering. So when I master degree, essentially also related to the computer application. But anyway, so I do not know why when I was a kid, I also did not like traveling. And now actually over the past several years, I told myself every year for the business travel, I only travel at most twice. So maybe that's the reason why I worked so hard to make a video conferencing Zoom better. Is there any part of you that during this time when we're all locked down and sheltered in place that you're secretly missing getting on an airplane? Or is this sort of your ideal situation? Thank you. That's an ideal situation for me. Give me a good excuse. I even don't need to travel twice a year. I don't think you may be able to go a whole 18 months without getting on an airplane, which is pretty great. So I think you came to the U.S. and I think you were one of the early engineers at Webex. And then Webex got acquired by Cisco. And at least as the story goes, you were there sort of pitching on how Webex needed to really reinvent video conferencing and they didn't listen. What is it about big companies that makes it so hard to be innovative? Yeah, you're so right. I came to the Silicon Valley in 1997, joined Webex as one of the first several founding engineers. Ultimately, I became a vice president of engineering. I think after the company got sold to Cisco, Cisco is a great company. It has a huge market share on the networking, security, and also they also wanted to enter into collaboration business. That's why they acquired Webex. However, after I was there for several years, every day I spent a lot of time on talking with customers. I realized the requirements were totally different. When we built Webex, the architecture, everything is about data collaboration. We never start with a video. And back in the year 2010, 2011 time frame, you know, every customer I talked to, they talk about the video quality, attendees coming from all over the world, and the mobile experience. I realized there's no way to tweak existing solutions. The only way is to build a new solution. But back then, Cisco's collaboration strategy was about social networking. I failed to convince others. Finally, I had to leave to build a new solution. Had you pictured that you would be an entrepreneur someday? Was that a scary transition? Was it something that you were excited about? How did you take that? How did your family react? Did they think you were crazy? Yeah, so yes and no. When I was a kid, I always wanted to start something. That's why even when I was in China, I always liked reading stories about Apple, HP, all those, Microsoft, Bill Gates' story. After I moved here in 1997, I called Silicon Valley, Worldwide Innovation Center, I called that a startup. And I knew somebody I'm going to start a company. I just did not know when. The day when I decided to leave, I think on the one hand, I was so excited. Finally, I can go back to the startup ecosystem now. On the other hand, it's also a little bit scary because of full of uncertainty. I remember one of my wife told me that you had a great decent job at Cisco. Why do you want to do something new, start over? A lot of friends always told me that, hey, what's the point for you to start another company? And you already joined a startup company. Anyway, I think that's my dream. I always wanted to start something new. What were those first few years like? What was easy? What was hard? What surprised you the most in those first few years? I remember when we were starting Cloudflare, the thing that just surprised me so much was how hard it was to hire people. All day long, every day, all you were doing was just begging people to come work for you. And that's definitely something that's gotten easier as we've gotten bigger. What were some of those first years like at Zoom? You are so right. I think for the first two years, always got to think about how to hire a team, how to hire those people who can fit very well to your culture. It's very hard. I think easy part, looking back, is at that time, I do not every day look at my calendar. I probably spend 90% of the time on product. I think that's the easiest part, just to laser focus on one thing. But the harder part is during that process, you had no idea when the product is out, will your customer like it or not? Full of uncertainty. What if a competitor that came up with something way better than your solution? What if the requirement totally changed? What if we failed to raise the money? And always think about how to survive almost every day. That's the tough part. For people who don't know how hard, just technically what we're doing right now is behind the scenes. What are the really amazing things and architectural decisions and product decisions that you made that has allowed Zoom to become as successful as it has? We heavily invested into engineer. I gave one example. To build a video conference solution, it's not very hard. However, to build a solution that really works on any environment with any device is not that easy. I take a noise reduction, for example. We have a dedicated team to focus on that, to keep optimizing. Sometimes the only 2% or 3% CPU optimization is pretty hard. Take iPhone, for example. We even had to write assembly language code to optimize. A lot of smaller things like that. That's why we have a very good engineer team to optimize video quality in a very poor network environment, audio noise reduction, and how to make the back end very secure, scalable. A lot of hard work. I think that part, even today, is still a lot of work tasks in the pipeline. How much of that is on the front end and the client, versus how much of that is going on in the network and the back end? Where are your engineering resources split between those two paths? I would say most of the optimization technology is on the client side, in terms of video codec, and how to optimize my virtual background experience, noise, screen sharing quality, and low latency. I know server-side is more about how to make it very scalable. If you have 10 times more traffic overnight, can you scale up your back end? That's also not that easy, especially for a very large meeting, very large webinar. How to support that is also some technology behind that. Tell me about the last little bit, just from a technical perspective. As the world has really turned to Zoom to be able to continue to get work done, you've been part of what's held the workplace, society, education, all these things together. Tell me about what the last eight months have been like from your technical team, your DevOps team, because they're a lot of the unsung heroes that are allowing us all to get work done still. I think it's very similar to what you and Michelle built also. You look at the back-end architecture, it's very scalable. Our back-end also. We have our own data center. Prior to the pandemic crisis, most of the paid customers are using our own data center. When the pandemic crisis hit us, you have 10 times, 20 times more traffic. There's no way for us to deploy so many hardware servers in our own data center. Our architecture can leverage the public cloud. We can provision a tens of thousands of servers a night on Amazon AWS or Oracle Cloud. With that, we can accommodate a lot of new traffic and new users. Otherwise, I think we already failed because we cannot survive to deploy so many hardware servers. Even if you want to deploy servers, guess what? It will take weeks' time to deploy tens of thousands of servers. Had you built the systems to be able to fail over to the public cloud or burst over to the public cloud before the pandemic? Or was this a lot of work that you had to do in the last eight months to make sure that calls like this continue to work? You are so right. When we designed the architecture, we already had a philosophy. What if you suddenly have 10 times, 20 times more traffic? Can you survive? On day one, we can fail over our traffic from our own data center to the public cloud. We already support that architecture. That's why when pandemic crisis hit us, from that transition perspective, it's pretty seamless. What are some of the surprises of use cases or things that you've seen in the last eight months that you didn't anticipate? I've seen trials. I've seen weddings that have been done over Zoom. Are there any stories that you're particularly proud of? I think two stories I'd like to share with you. Prior to this crisis, I do not think my kids know. They know what I'm doing. Seriously, they never talk about that. That's not their interest either. I remember when my kids at school, junior high school, my daughter in junior high school, is great. When they moved to online classes on Monday morning, my daughter asked me, the first time asking me the question, how to raise my hand, how to raise hand. I feel very proud because the first time my kids asked about how to use Zoom, I think maybe the reason why I worked so hard, maybe for their online classes, that's one moment. Another moment is Zoom marriage is legal in New York. I'm very excited. Not to mention we do not have a feature, nobody can divorce on Zoom. I was struck. I don't know if it's your official tagline, or you just have it. I've seen it on LinkedIn and other places, but you always talked about delivering happiness, which is the Tony Hsieh, Zappos. Were you inspired by that, or his book, or was that something that you came up with on your own? Yeah, very similar. Actually, we came up on our own even before Zoom and back to Webex. I found one thing is because I was a VP engineer, management engineer team, I found one thing interesting. If engineers are pretty happy, the code quality is pretty good. If you are not happy, in a bad mood, I think, my God, I got a lot of bugs. That's why I realized how to make sure you have a happy culture. Paul also realized the purpose of life, to pursue sustainable happiness as well. That sustainable happiness comes from making others happy. Also, when I got the book, Delivering Happiness from Tony Hsieh, I said, wow, that's amazing. It's a very similar philosophy. Good news, he already wrote a book. At that time, I also recommend my team engineers to read his book as well. That's so well. If you look at what makes people happy in their jobs, eliminating commuting is the number one thing. You have probably done more to eliminate commutes than just about anyone else. One of the things I've always been struck by with you is you have an engineering background and you said you spend 90% of your time on product, but you're one of the best salespeople I've ever met. I remember when we were at Cloudflare, we were trying to decide what video conferencing platform to use. You were calling me every day saying, don't do that one. It's the wrong choice. You were right. Again, has that always been part of your culture or how did you become such a good salesperson? I can tell you, actually, thank you for being a great partner. Otherwise, I'm going to drive from San Jose to San Francisco to meet you and Michelle. You did. You came up. It was right after you'd gone public and right as we were getting ready to go public. You were so incredibly generous with your time and advice. I really appreciate that. Also, you made sure we bought some Zoom and we did. Actually, I told our team, if I start over my career, I wanted to start from sales team. I like the way for sales team to interact with the customers because when I started, I joined Webex as an engineer. Even prior to that, also, I wrote a code as well. I feel like engineers is great. You work on a product. However, how to make sure you stay close with customers, really understand the pain point from the customers. That's even more important than developing the product. That's why I always like to spend time with customers. Plus, also learn one thing is to build a startup company. Normally, when you started, you focus on product side. But quickly, when the product is ready, we got to drive the product culture to the sales focus or customer focus. Maybe after several years, we will back to the product focus. We got to take the turn. Otherwise, even your product is good, guess what? Customer may not know your solution. Did that come naturally to you? Was it hard at first talking to customers, especially when customers told you that they didn't like your product? Back in the Webex days, that's not always fun. First of all, I do not think that's hard. I really enjoyed that because when I met an engineer team to develop the product after many months of hard work, guess what? If the customer do not like your solution, what's your feeling? That's why I always wanted to say, anytime when we develop a feature or service, I always want to get a feedback from customers. If a customer do not like the solution, I'd like to take a step back to understand why. Very likely, the reason why is not because of the engineer fault. It's because the problem we heard about from customer, that's a totally different problem. The engineer, they try to build something is to fix a totally different problem. That's why I think how to stay close, spend all the time on talking with the customers to understand their pinpoint is even more important than building the product itself. How do you build that internally at Zoom? How do you get your other engineers to be excited? Because oftentimes, engineers just want to sit and write code and they don't want to get out there and talk to that. They often think of sales sometimes as a dirty word. How have you built that culture internally? I truly believe that's lead by example. Before this meeting, one hour ago, I had another call with a friend and somehow his audio microphone has a problem. I do not know what triggered that. After the meeting, I sent a meeting ID with a screenshot with one of our engineers, let him investigate. Because I always try to send a problem to our engineers. When I do that, they also try to understand why, what had happened. If I do that, they also do that as well. If I spend all the time on talking to the customer and understand their pinpoint, engineer will do that too. Do you remember when you were growing up as a kid, were you a natural salesperson back then? Were you selling candy to your friends or anything like that? When did that develop? I think I cannot afford to buy the candy and resell the candy. It's too expensive when I was a kid. I think probably when I was a kid, I wanted to make money. I used the copper lines to sell to the recycling center. Try to make some money. At that time, I realized, wow, you can sell something that's awesome. You can get some money back. That's really great. As you look forward at Zoom, what are some of the innovations, what are the things that you're excited about, especially as all of us are relying on your product today? What are the things that you think are opportunities to make it even better? For now, actually, even if we all work from home, from a productivity perspective, there's no productivity loss. However, the social interaction is a problem. Mental health is not a problem. The reason why the tools like this, no matter how good we think it is now, but it cannot deliver a better experience than face-to-face meeting. I did not see you for a while, man. I want to give you a big hug. You cannot feel my intimacy over Zoom. You are getting a cup of coffee. I also cannot enjoy the smell, not like you and I in the Starbucks coffee. I think technology-wise, I think in the future with those cutting-edge technology, we should believe the video conferencing like Zoom can even deliver a better experience than face-to-face meeting. I can shake hands with you remotely. You can feel my hand shaking. Even if you speak a different language, with AI, with real -time language translation, I think those technologies can truly help make sure the online video communication is better than face-to-face meeting. I think in the next 10 or 15 years, I think we will get it with some technology. It's interesting. I find when I have days that are back-to -back-to-back-to-back Zoom calls, I do find myself tired at the end in a way that's different than an in-person meeting. I think a little bit is if you're staring at nine different faces at the same time, our minds aren't programmed to be able to do that. I actually typically alternate between audio only and then audio-visual and flipping back and forth. Do you have teams internally that are looking at the psychology and actually understanding what it is that makes people happy when they're in a Zoom meeting versus other technology platforms? You're so right. I think prior to this crisis, we do not. Now, we think that's a bigger problem. We do. It's not only about technology. It's about psychology, about the user experience. You have a lot of back-to-back meetings, how to fix that meeting fatigue problem, how to let you feel like, even if you look at others, try to relax a little bit. Don't let the other side feel like you are multitasking. It's a lot of small things like that that can truly help shape the experience for the future. You're in this really interesting position. How much your life has changed in the last eight months where you thought you were building a good business-to -business company. Now, all of a sudden, you have almost a business-to-consumer company. What's that been like? It's a very different thing to be running what is effectively the next Facebook or the next whatever versus thinking that you were selling to other businesses. You're so right. That's totally different because the company was built to serve enterprise customers. You look at our internal process in terms of how to prioritize, how to talk with the customers. Overall, everything is centered around serving enterprise or business customers. Now, we have so many consumers. On the one hand, I think we have to. It's time for us to show our corporate social responsibility to help people stay connected. On the other hand, how to truly embrace the new users, new use cases. We got to change. The good news, we realized that we have to change. We also think the lines between the work and the life, working from office and working at home, that line is tending to blend. Actually, it's not like it before. This is completely, totally different consumer use case. This is like the business use case. I think with that, we can deploy a one tool to give the users Zoom for business communications or for their personal use. I think that's a huge opportunity. That's why we decided to completely embrace those new use cases. I think that the fact that you early on made Zoom available for education environments at no cost and did a bunch of things around that, I think that was such a ... Again, that helped so many people around the world continue to be able to learn and get their jobs done and everything else. Again, I think that's something that's been incredibly valuable. You're one of the only companies I can think of, maybe Toby at Shopify, who have gotten to over $100 billion in market cap by doing one thing well. Usually, companies, you look at a Microsoft or you look at a Salesforce or you look at an Adobe and they do lots of different things and they sort of bundle it together. Do you think you can keep doing this, doing just this experience and being the best in the world? Or do you think that Zoom evolves into being more things over time? Yeah, Toby and Shopify, they are our role model. I really enjoy learning from them. I think video is a new voice. For now, it looks like just one thing, but also we also have a platform. We let a third party build all kinds of applications upon our platform. We also have another service called a Zoom phone service, essentially to replace your existing on-premise phone system to a cloud-based phone system. Because we truly believe video and voice, those two are converged into one service. Also, given that so many consumers are using Zoom for the different use cases like online yoga class, telemedicine, telehealth, I think a lot of things can be built upon those new use cases. I think essentially, video conferencing itself is more like infrastructure there. You can build all kinds of vertical applications and focus on telemedicine, telehealth, online education, or even online gaming as well. That's why I think the market opportunity is even much bigger than we saw. We have to innovate faster to embrace those new use cases. Also, figure out a way how to monetize down the road. As you look out, we're talking, Cloudflare, we've been at this for 10 years and it's amazing. I was reflecting this last weekend on how much different the pandemic would have been if it had happened in 2010 versus 2020. You've been a big piece of helping us all get through it. If you fast forward over the course of the next 10 years, what are your predictions for the future of the Internet? What do you think that's going to look like? I think the way I look at this is, first of all, with the Internet of things, almost every device, every smart thing at home, they will be connected to the Internet. I think that's the future. Plus, the Internet is going to become smarter and smarter with artificial intelligence. They will know me and what I'm going to do, what I'm thinking, and where should I go, what should I do. I think with the Internet of things, devices, with AI, I think can help to make our life much better and much easier. Essentially, with that, you have several assistants to help you and to help you make sure your work and life much better. What's the thing that you wish you had an assistant, a virtual assistant, an AI assistant, that could help you do in your life right now even better? For now, it will let me know where I should order the food, what I should eat for dinner. Now, I need to go to the door, I should find this and that. Automatically, I know what I'm going to eat in the evening. Automatically, I'll order something ahead of time. Are you guys thinking about AR and VR? That seems like it could be a very natural extension to what it is with Zoom, and it doesn't feel like it's had its killer application yet. You're so right. I think AR or VR can truly transform the overall online video conferencing experience. Unfortunately, those devices are not ready. I think probably five years out, and those technology or devices will be ready. For now, it's hard to use. Too heavy, it's not a natural experience, and it's not good for now. We've got about one minute left. Again, I really appreciate you doing this. Are there any technologies that you're watching carefully, or any companies, either on the business-to -business side or the consumer side that you're excited about and playing with yourself these days? I think, again, it's back to the artificial intelligence. I think that is going to empower a lot of services or devices to make all those devices become smarter. I think AI is something I have huge confidence can make our lives better. Eric, I really appreciate you taking the time. I know you've got a million things going on. You're literally holding society together. On behalf of the entire Cloudflare team, and really on behalf of almost everyone in the world, thank you for building such an incredible product and helping us continue to get work done, even when we're all forced to not travel, just like you don't like to. Thank you for having me. I truly appreciate it. Thank you. Absolutely. Take care. Stay safe.