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  • [SOUND] Thank you very much for taking the time to come in and speak to us.

  • Many of us, are aspiring entrepreneurs, so we'd really quite like to be like you.

  • And, many others, would also like to pitch to you.

  • >> [LAUGH]

  • >> Actually sitting here makes me, gives me a sense of how intimidating

  • that must be, so, I won't, I won't wish it for much longer.

  • >> [LAUGH]

  • >> And perhaps, perhaps we could, just start by outlining

  • the, the three main topics I'd love to cover today.

  • The first is your views on tech and venture capital trends.

  • The second is, how you assess entrepreneurial DNA.

  • And the third is your views on leadership and your

  • leadership experiences, that, that you've had throughout your, your esteemed career.

  • And so, if we could perhaps start with the,

  • that first, tech trends, and go with something topical.

  • You mentioned last month at the Goldman-Sachs

  • conference, that tech was not in a bubble.

  • Rather, it was in a mature deployment phase.

  • And then the WhatsApp deal happened.

  • And Mark is on the board of Facebook.

  • So I just wanted to ask you, what do you

  • think about that deal and how are you thinking about evaluations?

  • >> So I, unfortunately, I can't, ten years, ten years from now

  • I can come back and tell you all about the WhatsApp deal, but

  • right now I'm on the, I'm on the, I'm on the Facebook board

  • and I know that you all would not come visit me in jail.

  • So I will, I will keep that one to myself.

  • so, there's a couple of big things.

  • So, just in terms of thinking about what we've been through in the last 20 years in

  • Silicon Valley, some people in the room are

  • old enough, you may remember there was a bubble.

  • and, it was a fairly big deal, in sort of 1998 to 2000, and there was

  • a very profound crash, which was deeply traumatizing,

  • for those of us who went through it.

  • And then we went through this extremely

  • long period of, basically, you know, years of

  • pain followed by then, sort of, what I think of as, as very slow recovery.

  • I think it's actually been an object

  • lesson in the psychology of markets and bubbles.

  • I think that, people are much more highly sensitized to bubbles after a bubble.

  • If you could be sensitized to them before a bubble, you could make a lot more money.

  • But people get highly sensitized and so there's this phenomena of, of

  • trying to close the, the barn door after the horses have escaped.

  • And that, that is a lot of what all the

  • bubble talk in the last, ten years has been about.

  • And so we, we could talk at length about kinda why I think, in fact,

  • tech is not now in a bubble and has not been in a bubble since 2000.

  • the, the deeper thing, the more interesting is this follows a historical

  • pattern, which is what I talked about at the Goldman Conference, which

  • is based on the, the best thinker on this topic is an,

  • is an economist named Carlotta Perez,

  • who wrote a book called Technological Revolutions.

  • It's probably the single best book.

  • Like, that book and The Innovator's Dilemma are probably the two

  • key books that are really critical to understanding how this industry works.

  • And so she describes in her book, she describes

  • a general model for the deployment of new technologies.

  • And then how technologies intersect with financial markets.

  • And so she's got this whole

  • thing, and it's basically this multi-generational process.

  • And there's what, it's basically these two big, sort of phases of it.

  • There's what's called the installation phase

  • and there's what's called the deployment phase.

  • And it turns out in every single case and

  • this includes railroads and, like, lots, electricity and steam engines

  • and lots of prior new fundamental technologies, there's always this

  • just gigantic bubble and then crash kind of halfway through.

  • And historically that marks the transition from

  • the installation phase to the deployment state.

  • The deployment stage, you could argue, is

  • where the actual interesting thing, things happen.

  • It's where all the tech-, all the new technologies actually start to work.

  • They actually make it into everybody's hands.

  • They actually become cost effective and we actually

  • find out how to actually use all these things.

  • And so that's the phase I think we're in, in now.

  • You know, without talking about the Whatsapp deal in particular,

  • it is interesting to note that the companies that people think

  • are overvalued today, generally either have billions of dollars of revenue,

  • which was not the case, in, in, in, in the 90s.

  • For example, Facebook, people argue Facebook as an example.

  • Facebook went from $0 to $10 billion of revenue in less than ten years.

  • And so that is definitely not what happened in the 90s.

  • The other thing is the companies that people debate

  • today, for the most part, have extraordinarily high customer, count.

  • user, user count.

  • Market sizes have expanded gigantically and so you've

  • got these things now that people are arguing

  • about that have, in some cases, a half

  • billion users, on their way to a billion users.

  • And if people want to take a position that you

  • can have a large scale internet service that's worth a

  • billion users that's not gonna be worth anything, you, you

  • could take that position, I'm not sure you would recommend it.

  • >> Yeah, no, that makes sense.

  • When you, as you say, when you look at the, the cost per user, it's

  • actually only $36, which is much, much less

  • than in many others for the What'sApp deal.

  • But another thing you, you previously mentioned was that, MBAs

  • flocking into the tech sector is a sign of the bubble.

  • So to play devil's advocate.

  • >> Yeah.

  • >> Many of the people here are flocking to the tech sector.

  • >> Yeah.

  • >> So, could that, perhaps, be a sign of a bubble?

  • >> So things are heating up.

  • And so, [LAUGH] Historically, there's actually

  • been, and I suspect everybody in the

  • room knows this, there has been a

  • direct correlation between, PE multiples and, MBAs.

  • tilting, tilting, tilting into the, tilting

  • into the, the tech industry, for sure.

  • So I think something different is actually happening.

  • I think something different is happening with how companies are getting built.

  • And maybe I can do the long version, kinda the, the slightly long version of

  • this, which I, I think there's actually a whole new, a whole new way companies are

  • being built in the last ten years and, and I think that business people and MBAs

  • turn out to be very central to it in a way that's different than the past.

  • So I kinda divide the story of

  • how technology, the great technology companies got built

  • kind of in the three phases and I think we're in the third phase now.

  • The first phase was in the 40s, 50s, 60s, 70s.

  • And it was so crazily hard.

  • If you talk to people who were in business then or you

  • read the stories, it was so hard to build a new tech company.

  • It was such an unbelievably, sort of exceptional thing to do that you,

  • you, you only really have these really extreme characters who, who would do it.

  • And there were a pretty small number of them.

  • And they were extreme, extreme characters, like they were, they

  • make all the current, like, high octane entrepreneurs look like wusses.

  • And the ones I'm thinking of, Thomas Watson Senior.

  • If you want to read, like, what it's like to work

  • for somebody who's harsh, read the book on Thomas Watson Senior.

  • You know, he makes, he makes all

  • of today's entrepreneurs look like cream puffs.

  • >> [LAUGH]

  • >> He would just literally sit in his staff

  • meetings for like five hours and just scream at his,

  • scream at his guys, there's just this, then he built

  • this astonishing company, IBM, off the other side of that.

  • David Packard.

  • David Packard, actually, was quite a character.

  • He, David Packard, people now remember for the HP way and for kind

  • of that whole warm and fuzzy, you know, kind of approach to running companies.

  • When, when David Packard was actually running HP, he had two nicknames.

  • One was Pappy, which is kind of what

  • people remember in a kind of paternal instinct, type.

  • His other nickname was the Mean One.

  • And he similarly would just, you know, tear people apart.

  • And then Ross Perot is my favorite example.

  • Ross Perot built the first great outsourcing company,

  • one of the big tech successes in the 60s.

  • And of course, you know, he was fantastic as a business builder

  • when he came into contact with the American public, people went, what?

  • and, you know, again this sort of extreme personality.

  • So you get into this, this kind of, this

  • sort of will to power thing that was happening.

  • and, by the way, the VCs in those days, I think, were very similar.

  • Tom Perkins, who's become re-famous again lately, you

  • know is, is the same kind of character.

  • He's, he's an ex-, he's a very, very

  • extreme character and, and, and he always was.

  • But that's what it took, you know, for him to do

  • what he did in the 70s, and 80s in venture capital.

  • So those were kinda the extreme days and then I think both VC and

  • entrepreneurship, tech entrepreneurship, sort of professionalized, and

  • so you had a lot of VCs then.

  • And this includes great VCs, John Doerr, Mike Morris, Jim Breyer, you

  • know, who are business people or investors first, and, and never ran companies.

  • And then you have this kind of move through the 90s where you had this kind

  • of default model where the one thing everybody

  • knew was that founders couldn't possibly run their companies.

  • And so you would have a founder and then you would basically promote or fire them

  • to chairman or CTO and then you'd put in a professional CEO as fast as possible.

  • And I think what happened is that model just got extreme.

  • And i think by the late 90s in the Valley, we were mostly building

  • companies that were kind of shells, or, you know, kind of like puff pastries of

  • companies where, you know, they didn't really

  • have, at the height of the bubble in

  • '98, '99, the products that were getting built for the most part weren't very good.

  • And these companies were kind of on this bomb run to get public as fast

  • as possible, and you had all these catch phrases, like go big or go home.

  • Or my other favorite one at the time which was, forget details, just do deals.

  • And so you have this really kinda

  • mercenary, hit and run approach to building companies.

  • And then all those companies vaporized after the crash

  • cuz it turned out they didn't have valuable products.

  • They didn't have deep engineering capability.

  • And then all the engineers who worked

  • for those companies hated working for those companies.

  • Cuz they were completely sales-driven, sales-led,

  • these kind of mercenary kind of exercises.

  • At, at the, at the height of, of, of how bad it got.

  • Now I think you've got the exact opposite thing.

  • I think the pendulum has swung all the way in the other direction, which is, now

  • we all understand and take for granted, founder

  • CEO, technical founder CEO is a good thing.

  • You know, Mark Zuckerberg is kinda the apotheosis

  • of kinda the, the idea that we have now.

  • And so now what's been lost for a lot of the entrepreneurs.

  • A lot of the entrepreneurs are engineers, but not business people.

  • Now what's been lost is a lot of the actual art of building a business.

  • and, in particular, what's been lost is the art of sales and marketing.

  • And a lot of today's founders, one of the

  • big issues we deal with is they're very technical.

  • They're very product-centric.

  • They're building great technology and they just don't have a clue about sales and

  • marketing, and what's more is they almost have an aversion to learning about it.

  • It's almost like a post traumatic stress kind of

  • thing, you know, like 15 years after the crash.

  • And so now the challenge for a lot of

  • these companies is how to take what are actually fantastic

  • products and fantastic technology and then integrate in top-end business

  • thinking, top-end sales and marketing

  • thinking, and top-end operational thinking.

  • So I think we have actually collectively have

  • a huge opportunity to put the pieces back together.

  • And I think that's what the next five years are going to be about.

  • >> Could you see the role of MBAs in

  • terms of helping scale through that sales and marketing function?

  • >> Yeah, so, yes, definitely and, and, in fact, in the abstract,

  • there is kind of two models, that are both actually working quite well.

  • The kind of reference model now is the Mark Zuckerberg, Sheryl Sandberg model.

  • And I work with Sheryl at Facebook and I tease her all the time.

  • She's lost control over her own name.

  • It's now become a proper noun.

  • >> [LAUGH].

  • >> You know every 24-year-old technical founder,

  • you know, was like, I need a Sheryl.

  • And I'm like, so do 400 other people.

  • Unfortunately, human cloning is not quite at the

  • stage yet where we can fulfill everybody's need.

  • But basically the model of a very high-powered business person with

  • deep capabilities in sales, marketing, and operations, who's able to partner

  • as a number two, as a president or COO, with a

  • technical founder, CEO, when you have somebody like a Mark Zuckerberg.

  • So that's one model that works very well.

  • And one of the interesting things about the last five or ten years is more

  • and more of the top end business leaders in Silicon Valley have figured this out.

  • And, like Sheryl, have chosen to partner not as the CEO, but as

  • the president or COO with a

  • great technical founder and build great companies.

  • A recent example, Dennis Woodside, who's a

  • top-end Google product or business executive, just left

  • and became number two at Dropbox to Drew Houston, who's another one of these guys.

  • And so that's one model and I think that's

  • a very exciting model and I think it's working well.

  • The other model is what you might call

  • sort of the Bill Campbell, Scott Cook model.

  • Or maybe the Dick Costolo, model as sort of

  • the other example, which is, in the case where these

  • companies don't have a founder who's capable of being CEO

  • or who wants to be CEO, to have a business

  • person, become the CEO, but with the sort of, with

  • a much more advanced understanding of the role of founders

  • and the role of product strategy and technology strategy than

  • I think the professional CEOs got into in the 90s.

  • So, and, and this is the, I, I describe this as the Bill Campbell-Scott

  • Cook model because that's maybe the best example in the history of the Valley.

  • Which is, you know, Bill Campbell, probably well known to the folks

  • in the audience, you know, is not himself a technologist or a product

  • person, but is an outstanding operator of businesses, has profoundly deep respect

  • for founders, and has profoundly deep

  • respect for products and, and for technology.

  • And always makes it a point in, in his career, he's always made

  • it a point to partner with the engineers as opposed to be threatened

  • by them or feel like, you know, they have to be, you know,

  • in the case of the technical founder, they have to be forced out.

  • And, of course, Apple, Apple over the years has been a case study of

  • this, and, of course, Bill came up for Apple and so he saw this.

  • And so you kind of contrast the now legendary

  • kind of John Scully-Steve Jobs model to to the

  • Bill Campbell-Scott Cook model and you kind of see

  • how, you know, kind of where that came from.

  • And so that's a model that can also work very well.

  • And so as, as the folks here think about as you build your careers, and think about

  • these things, I think if you're gonna be

  • in the tech industry, the really key question, you

  • know, it might turn out either way, but

  • the really key question is what's the partnership that

  • you're gonna have with the technical visionary, in

  • the company who will often be a technical founder?

  • And I think if you can crack that code, I think there is

  • just an enormous opportunity to, you know, to have one plus one equals three.

  • >> So at, at Andreessen Horowitz, the, the VC fund

  • you founded, you invest in many of these founder COs.

  • They all want a share-all?

  • >> Yep.

  • >> And finding a share-all isn't, isn't necessarily that easy.

  • And you've built up a, a very disruptive model within the venture capital industry

  • where you provide a lot of value-added

  • services including hiring and marketing, to portfolio companies.

  • Could you talk a little about, how you came up with that disruptive

  • model and what opportunities you see going

  • forward to continue shaping the VC industry?

  • >> Yes, so my partner and I came up as entrepreneurs

  • kind of in the phase where the assumption was that you

  • fire or demote the technical founder and you bring in the

  • professional CEO and you become a sales, sort of a sales-driven company.

  • And so, and we, we kind of, we have a lot of experience with that model.

  • Like I said, sometimes it works sometimes it doesn't.

  • But we thought, this is, we started our firm, we planned our firm in

  • 2007-2008 and started it in '09 and our basic take was there was an opportunity.

  • Many of the other venture capital firms had tilted hard in the direction of sort

  • of professional sales-driven CEO, we decided to tilt

  • hard in the direction of technical founder CEO.

  • And so, we basically said, how would you build a venture capital

  • firm optimized for a technical founder who wants to become a CEO?

  • That let us, and by the way, not religious, that's not the only thing we

  • do, but like, how would you center the culture of the firm around that idea?

  • And I'll, I'll come back to the other part.

  • So we kinda decided on two things that would come out of that.

  • Which is, one is, if you have somebody running a company who

  • has not run a company before or has not, maybe, necessarily been

  • a manager in some cases before, or, in some cases, maybe has

  • not held a job before, they become CEO of their own company.

  • It really shines a very bright light on the, the background, and caliber

  • of the general partner that you're going to propose to put on their board.

  • And we just made the decision that, and there

  • are many different kinds of successful VCs, but we

  • just made the decision at our firm, the general

  • partners will be people who have built technology startups before.

  • And so I think at this point, seven of our eight GPs,

  • I think I'm the only one who hasn't actually been the CEO.

  • I think seven of the eight of our GPs have been a, a

  • CEO and I think five or six of the eight now have been founders.

  • And so, sort of by definition at our firm, you get

  • somebody on the board who really knows, has been through the war.

  • Really understands, you know, what things are like.

  • And so, when something goes wrong, and, you

  • know, things are just, like, horribly, like, crashing.

  • You know, the key engineer quits, or the founders can't get along.

  • Or the biggest customer dumps you.

  • Or a competitor comes out with a much better product.

  • And all these really horrible things that happen.

  • You can't raise money, that we have somebody in the board seat who is

  • a really good advisor and can say, I was in that situation before, and I

  • can tell you what doesn't work, cuz I probably made all those mistakes and

  • then I can tell you, you know, gives you some advice on what does work.

  • So that's one, and then the other thing we said was we said, okay, well

  • what's, what's the, you know, we sort of thought about what are the reasons why?

  • You know, if, if a VC brings in a professional

  • CEO and fires the founder, why do they do it?

  • Part of it is likely experience.

  • The other thing a professional CEO brings in, is very, very deep network.

  • If you've been a, you know, VP or general manager,

  • or CEO in Silica Valley for 20 years, you have this

  • enormous network of executives who you can hire and engineers, and

  • recruiters and you know all the reporters and all the editors.

  • And you know all of the customers.

  • You know CIO's, and CTO's and you know how to go sell the

  • things and you know all the VC's you know how to raise money.

  • So you just have the business people in

  • the valley, who have been in the valley, have

  • this just giant network of people and these technical

  • founders often don't because they've often been heads down.

  • You know, writing code most of their, most of their lives.

  • And so basically, what we decided was, let's preconstruct the network

  • that will basically, where we can take a technical founder, inject

  • it straight in the network, and sort of give them super

  • powers of a network that's comparable to what, John Chambers might have.

  • And so, and, and that's been a very big effort on our part.

  • We have about 60 full-time professionals now,

  • across five operating teams in the firm.

  • That are not GPs, but are full time

  • professionals organized around the different areas of the network.

  • So, sales, business development, corporate development,

  • marketing and PR, executive talent, engineering talent.

  • And so, as an example when it comes time to find

  • a sharer as a consequence, we, waiting for, we are trying to

  • build very deep relationships with all the sharer of both genders, throughout

  • the valley just a sort of a normal part of sort of

  • art network building exercise, and then when we have companies that are

  • kind of maturing to the point when they need somebody like that,

  • you know, as one example, we will know who those people are

  • and we'll have kind of you know, very easy access to them.

  • You kind of help them to sort of bridge the gap.

  • >> No that's, that's very understand, helpful understanding

  • how you lean in once you've identified the founders.

  • >> That was good, that was good.

  • >> Stop it.

  • >> That was good.

  • >> The how do you actually identify them initially?

  • And so what do you think are the, the traits that founders have and I'd

  • also love to hear about some of the best and worst pitches you ever heard.

  • >> So the, the basic math is the, so there's

  • a basic math component and then there's the, all the intangible.

  • So the basic math component is there's about 4,000 start-ups a year that

  • are founded in the technology industry that would like to raise venture capital.

  • We can invest in about 20.

  • So the falloff is significant.

  • we, I like to say our day job is crushing entrepreneurs' hopes and dreams.

  • We actually have focused very, very hard on being very

  • good at saying no cuz that's mostly what we do.

  • We see actually, we see 3,000 inbound referred opportunities a year.

  • We narrow that down to a couple hundred that are taken particularly seriously.

  • And I would say there's kind of this very

  • interesting kind of process where there's you know, say the

  • hard thing is deciding which one's we're going to

  • invest in, because we can just invest in so few.

  • The somewhat easier thing actually it turns out, this has been

  • a surprise, it's actually after you have been in it for

  • a while, the thing that's actually fairly easy to tell is,

  • will this team and company be fundable by a top VC.

  • Will it get funded by a top VC.

  • It may be, it may be Sequoia, or Excel, or Greylock, or who, who

  • knows who it is, but you know, does this company kind of clear the bar?

  • And I think the way the math works, basically, is, you

  • know, there's about 200 a year that are fundable by top VCs.

  • That, that, that get funded.

  • By the way, within the 200, about 15 of those

  • will generate, you know, 95% plus of all the economic return.

  • So just cuz it gets funded by a top VC doesn't mean, it,

  • even the top VCs right tank, you know, generally, about half their deals.

  • So even if you get funded by a top VC, it's not complete validation.

  • So about 200 a year that are kinda fundable by top VCs.

  • We can fund 20 and then 15 of them actually generate all the returns.

  • And so, it's kind of a white knuckle thing when it gets

  • right down to it, to try to make, you know, the picks.

  • And if there's one thing that's frustrating in this job, that every VC

  • deals with it's, you know, you miss most of the big winners, right?

  • It's like, the thing all the top ventures have in common is they did not

  • invest in most of the great successful

  • technology companies, which is an incredibly frustrating thing.

  • So, that's the basic dynamic, and that's the framework within

  • which, you know, people come in and pitch to us.

  • At the heart of it, there's two things which we look really, really hard for.

  • I mean, there's the kind of surface level stuff you look for.

  • So if you look for a huge market, you look for, you know, differentiating technology.

  • And you look for you know, incredible people.

  • I think in practice, I think

  • that we collectively and certainly, we specifically

  • and then we collectively, VCs, I think we probably, we, we spend a lot

  • of time talking about markets and technology

  • and we have lots of opinions and

  • I'm not sure that those opinions are

  • actually all that relevant, all that often.

  • I think probably, the decision ultimately, is and should be around people.

  • As like 90% of the decision.

  • The two things we really zero in on on people are, you know, two things.

  • They sound simple and they end up being very difficult: courage and genius.

  • Courage is the one we talk about a

  • lot because it's the one that people can learn.

  • You know, courage which is to say not giving up in the face of adversity.

  • You know, just being absolutely determined to succeed, you know, is

  • something that, you can, you can like, force yourself to do.

  • It can be very painful, you can force yourself to do it.

  • The genius part is a little bit hard to force yourself to do.

  • You know, courage without genius might not get you where

  • you need to go but genius without courage almost certainly won't.

  • And so, we're looking for some kind of magic combination of genius and courage.

  • You know, there's there's one of my partners

  • quotes, he quotes Nichie a lot on these, he

  • says it's, it's will to power, it's, it's

  • you know, it's people who simply will not stop.

  • and, and by the way, right, there's always been this kind of thing at

  • Silicon Valley of like, sort of this, like I call it the failure fetish, right?

  • Failure is good, right?

  • Failure, you guys have probably all been taught this.

  • Heard about this from a lot of people like failure is a wonderful

  • thing, failure teaches you all this stuff, and it's great to fail a lot.

  • Like, and we don't like buy any of that.

  • We think that's all complete, complete nonsense.

  • We think failure sucks.

  • [LAUGH] We think failure is a terribly, terribly depressing thing to go through.

  • We think success, on the other hand, is wonderful.

  • You know, you wouldn't think that this is

  • something you have to actually say out loud.

  • But we, we do find it to be clarifying when we point it out.

  • And so we are strongly biased towards people

  • who are so determined to succeed that they

  • just, they never give up, they never quit, and I think that's a huge part of it.

  • And that's something we really look deep, we look incredibly deeply for, you

  • know that's the kind of thing that's not listed on a resume right.

  • That's something that has to be deep in somebody's, fundamentally deep

  • in somebody's character and you have to see it in their backgrounds.

  • >> And what has been your, talking of courage, what has been

  • your most courageous moment, and perhaps the moment of which you're most proud?

  • >> Oh, the moment, actually this is actually a good day to

  • ask that question because my partner Ben's book actually came out today.

  • So if you haven't bought it yet, number one on Kindle in management, $14.44.

  • $14.44.

  • [LAUGH] Makes a, makes a great birthday present for all of your friends.

  • [LAUGH] He actually tells the story in his book,

  • it's actually in his book, and it's it's when our,

  • it's actually it's it's when our, it's it's, our

  • second company, Loud Cloud, when, when got just taken apart.

  • We started our second company Loud Cloud in September 1999.

  • And it was classic, you know, we were, I mean it was fantastic.

  • It was incredibly high rapid growth rate off of a standing start.

  • Straight into the, you know, the the last six months of the bubble.

  • You know, unprecedented growth.

  • Cover of Wired magazine.

  • On and on and on.

  • We took it public in 18 months, and then

  • just the world caved in, our entire business caved in.

  • burning, you know, an enormous amount of cash, cuz we

  • were, we had, created a company for much, much higher growth.

  • And and our stock, ultimately bottomed out at half of cash.

  • So our shareholders, made the judgement, that not only were we so incompetent,

  • that we were not capable of justifying the amount of cash we had in

  • the bank, but that we were certain to burn at least half of

  • it before we would call it quits and just give them the cash back.

  • Those were probably the dark days.

  • And then, you know, NASDAQ, you know, start sending the D-listing letters

  • and they send about one a day saying if you don't get your,

  • your, your stock back above a dollar, we're gonna D-list you and

  • you'll be on the pink sheets and we came within days from that.

  • And so guiding through that, and by the way, guiding

  • through that kind of thing at the same time it

  • looks like the entire world is ending, that it looks

  • like you know the tech industry will never ever recover.

  • I think we, the thing we are most proud

  • of is, is, is actually working our way through that.

  • >> Fair enough that is a tough thing to get in.

  • The You spoke about Ben's, Ben's book and, and Ben talks a

  • lot about these, these challenges, the whole notion in the book is

  • dealing with the hard things and have there been hard moments in

  • your relationship and can you talk a little bit about that relationship?

  • I remember once reading that, he described you as the Beyoncé of the

  • relationship and him as Kelly Rowland, so how do you feel about being Beyoncé?

  • >> Yes, yes.

  • I'm hoping, I'm hoping that wasn't a commentary of

  • my figure, that's my, that's my main, that's my.

  • [CROSSTALK].

  • >> Or your dances.

  • >> Or my dance moves.

  • So, I would, let me, maybe brought it up,

  • so it goes to the nature of business partnership.

  • So Ben and I have been partners for 18 years, so I first met Ben in 1995.

  • He actually tells the story, in the book, of how

  • we met, which is a whole story in and of itself.

  • It involves a lot of curse words.

  • You know, we kind of describe ours, I mean we, we, we love

  • each other and we, we, we do everything together, everything in business together.

  • We you know we describe ourselves a little bit as the old married couple.

  • Yeah, you know that, you see like out on the park bench in the park in

  • the middle of the afternoon, sitting on opposite

  • ends of the bench kinda staring at each other.

  • They're always there, but they're not talking, you

  • know, and maybe they argue every now and then.

  • But they're there this year and they'll be there

  • in five years, they'll be there in ten years.

  • So you, you know I would say at this point, at this point it's troubly hard

  • to untangle how the partnership works other than

  • just we've been working together for so long.

  • And so we have the we have a deep level of trust that

  • comes from understanding each other very deeply, and so I know exactly what he's

  • good at and I know what to defer to him on and I know,

  • he knows exactly what I'm good at and what to defer to me on.

  • And then both of us trust the other, you know.

  • So we, we both know that we'll make decisions in both of our best

  • interests, and there's never anything that's you

  • know, advantages one of us over the other,

  • and so, as a consequence, each of us are very comfortable, you know, essentially

  • caving to the other on any topic, which I think is, is actually very helpful.

  • That said we argue about everything and we constantly argue.

  • and, you know, we often come at things from very different points of

  • view and, you know, in you know, I don't even know how to describe.

  • We, we just have different backgrounds from before we have

  • kind of different reference points for how we think about things.

  • He is a far better operator than I am, so he's much better at running a business.

  • So for example, a lot of things, when we, when we used to run companies together.

  • A big thing we'd argue about is, you know, I would,

  • I, I, sort of I think what he would say about

  • me is that I'm sort of abstract, so I think about

  • things like products and strategy and business in an abstract way.

  • And so for me it's like, okay, what's the right answer?

  • Like, what, what's the, you know, what should we do?

  • And then the way he thinks about it is, from an organizational standpoint,

  • from a management standpoint, is, what I, what are we capable of doing?

  • And so I will often propose things that, where he's like, you're out of your mind.

  • Like, the entire, you know, yes, in theory that might be a

  • good idea, in practice, you'll destroy the entire company if we try that.

  • And I'm like well, that's a pretty good point.

  • And then, you know the argument in the other way is you know,

  • look, I know that the organization is gonna get challenged by this and I

  • know it's gonna be hard and we might lose people, but it's so important

  • that we have to do this thing, that we have to really push it.

  • And so I think a lot of the theories that he and I have

  • developed over the years about how to run companies are kind of at that

  • intersection point of what's kind of intellectually

  • the correct thing to do or the

  • optimal thing to do and then the actual practical reality, of what can be done.

  • He talks a lot about one of his theories that

  • we use a lot at the firm is uses his book

  • is kind of all about this is we, we call

  • it, there are no silver bullets, there are only lead bullets.

  • There's this, there's this temptation especially when you get into crisis.

  • When you get into real, real, real problem, there's

  • this temptation to think there must be a magic answer.

  • Like, there must be some stroke of genius, you know.

  • It's almost, it's like what you, I don't know.

  • if people watch the new Sherlock Holmes, you know, TV series, which I just love.

  • It's like, you know, Sherlock is gonna have, you

  • know, no matter how dire it gets and no

  • matter how like evil Moriarty is, Sherlock's gonna have

  • that stroke of genius that's gonna save the day.

  • And there's this really strong tendency to kind

  • of think, that that, that that's out there.

  • And we see a lot of entrepreneurs that kind of cycle through different silver

  • bullets, and then they don't work and they don't work and they don't work.

  • Ben's point is always, it's probably the answer,

  • it's probably firing a whole bunch of lead bullets.

  • And so the answer probably is, you know,

  • the engineers working, you know, later at night

  • for, you know, six months and, you know,

  • getting the next version of the product out.

  • And the answer is probably for, you know, the

  • sales reps to go call in twice as many customers

  • and try to close some more deals and the answer

  • is probably to, you know, your stock price is low.

  • You know, go find the investors who are willing to invest when you're

  • trading at half the cash cuz it turns out they actually do exist.

  • And then your stock goes up a little bit.

  • People start to regain confidence.

  • And so, I would say, I've, you know, I've

  • certainly come around to that point of view a lot.

  • And so whenever we work with entrepreneurs we often

  • have very similar advice cuz it's kind of, it'll be

  • tempered through the very practical realities of what you

  • have to do to get through a situation like that.

  • >> At yeah, that, that seems a, a very healthy argument.

  • Perhaps I can bring you on to a, an

  • argument that, that's probably much harder to deal with.

  • I mean, in general you enjoy an incredibly strong public image.

  • And, last week, Carl Icahn, rather than using either silver

  • or lead bullet, used the kind of badly trained Gatling gun.

  • [LAUGH] And when, he a, he brought up, as an investor of

  • eBay and that eBay should divest PayPal and allege the you had

  • a conflict of interest and could you speak a little bit about

  • how it feels dealing with those sorts of allegations in the press.

  • >> I think that the and by the way it's not just, it's

  • you know, Carl has become very active in a bunch of Tech companies lately.

  • It's actually not just Carl, there's a firm called Elliot Associates, it's

  • a top hedge fund that's become very active buying beaten down tech companies.

  • There's a bunch of others.

  • Actually this, this is part of my theory of we're

  • not in the bubble, which is when activists become interested

  • in a sector it's because the PEs are low, because

  • the cash balance is high and the debt levels are low.

  • And so, it, it, you know, although I'm not, not, I'm not getting

  • that much of a thrill out of the, my current level of personal engagement.

  • This stuff is, I view this, all this

  • activist, and, activity as validation of, of my

  • thesis, which is, we're not only not in a bubble, we're actually still in a bust.

  • Especially the big tech companies are still in a bust.

  • Multiples are very low, cash balances are very high.

  • It's the kind of thing where I think time will cure that.

  • Because in time, PEs will expand.

  • In time companies will invest more of their cash in their own business or find

  • other things to do with it and the

  • activist will go back to harassing steel mills.

  • >> Yep.

  • Fair enough.

  • >> And oil companies and airlines.

  • >> Yeah, it was, it was interesting to see that in, as you, as you blogged in 2011,

  • he was advocating exactly the, the sorts of board

  • management that he's now seems to be criticizing it.

  • >> Yeah, Carl Ichan in 2011 was extremely enthusiastic about

  • board nominees with conflicts of interest that came from his organization.

  • And so I, I posted from this morning

  • extensive exerts from his communications from that time.

  • And so, as far as I'm concerned he can now argue with himself.

  • [LAUGH].

  • >> And it's very helpful for us as, as

  • students to understand how you actually spend your day.

  • And, and I'm sure it's a, an incredibly busy one.

  • So, thank you for taking the, the time out today.

  • But could you perhaps describe what yesterday looked like?

  • [LAUGH] >> Oh, yesterday?

  • Good lord, what did yesterday?

  • What day was yesterday?

  • >> Monday.

  • >> Monday.

  • Okay, good.

  • So Monday is butts in seats day for us.

  • So Monday is all day partner meeting.

  • And all the VC firms kinda have this in common.

  • And so, like one of the really critic, when you're starting a

  • company, there's all these really critical

  • issues, like what product you're gonna build.

  • [UNKNOWN] are going to go into.

  • And he start a VC from what's really important and what your

  • conference table gonna look like, and how comfortable your chair is gonna be.

  • Because you are gonna be in those chairs for along time.

  • So it's basically, it's, you know, sometimes, yesterday was like eight hours,

  • it can be as long as 12 hours straight, of just straight meetings.

  • And so, it's basically two things happened on a Monday.

  • Well three things happened on Monday.

  • So we have a, breakfast every Monday.

  • Then we alternate breakfasts.

  • We have a general partner breakfast, and then

  • we have a general partner plus senior operating

  • staff breakfast and we alternate back and forth,

  • and we kinda do all the firm related things.

  • And then we have back to back, what we call the all GP pitch meetings.

  • And so these are the companies that we are most likely to invest in.

  • And so the signal if you're raising pension money,

  • if you get invited on Monday, that's a good sign.

  • If you don't get invited on Monday it's not a good sign.

  • And so, and we have, and I think yesterday we had three of those back to back.

  • Sometimes we have four or even five.

  • also, by the way, pitch early in the day not late in the day.

  • Just helpful advice.

  • so, we do those, and then and then we have, at

  • the end of the day we have what we call [UNKNOWN] review.

  • so, we actually do that twice a week.

  • Most firms do that once a week, but we wanna

  • move a little faster, so we do it twice a week.

  • Mondays and Thursdays, and so that's basically a complete, you know,

  • sort of, you know, basically a

  • complete pipeline report, maybe possibly interesting.

  • So, so we actually run our deal process

  • like a sale, like a, we actually use salesfirst.com

  • and we actually run our entire process and the

  • firm like a sales first runs a sales pipeline.

  • And so we have comprehensive tracking of kind of the stage of every.

  • All the way from all initial inbound deals, all

  • the way through the ones that are being closed.

  • And so we kind of review that entire pipeline, and we

  • actually have a team that you know, a team that manages that.

  • And a great, a great operating person who who manages all that.

  • And so we, we go through all that.

  • And that's where we have.

  • That's basically a long argument and we go

  • through it and we argue about every company.

  • And we argue about everything else we can think to argue.

  • And then we go home and collapse.

  • >> In those in those deals for the meetings, are there any technologies?

  • I know, for example, you've blogged recently about Bit Coin and how

  • excited you are about Bit Coin and the future of the news industry.

  • Are there any particular technologies or

  • industries that you're, you're most, excited about?

  • >> So there's a two part, two part answer to that.

  • And so, the first answer I will answer the question in the second part, but the,

  • the, the first answer is, we, this is

  • another kind of theory we have at the firm.

  • So, there are venture capital firms that are

  • very top down and thinking about markets and technologies.

  • So, if you go inside a particular sequoia and Excel, and

  • Bessemer, and I think Kleiner Perkins used to, and may still.

  • The way that they, they, they actually are,

  • those firms are actually very explicit about how

  • they think about Protestant markets, and so they

  • actually will have I think in each case, they'll

  • run an annual planning process, where they will

  • actually get together, you know, at the beginning of

  • each year, and they'll literally draw a map

  • of what they think markets are gonna look like.

  • And, so, you know, and, and it, it's basically a value chain map.

  • And, so, it's an interesting exercise to think about.

  • It's like, okay, like for example, for networking, is that, like,

  • fiber optics and communication chips, the family of such things like routers,

  • but, then we get into things like, you know, ISP's and then

  • ultimately lead into things like, you

  • know, and other wireless businesses, whatever.

  • Kind of draw that entire thing out, as a map.

  • And then you basically have boxes for each of the product, product categories.

  • And then, you know, a VC firm can invest in one company per category.

  • And then basically the goal for the year is to put a name in each box.

  • And so they sort of consider it a success at the end of the year

  • if they've invested in the best possible company

  • they can in each box that they've identified.

  • That's kind of one extreme, we decided to be more on

  • the other extreme, which I think is a little bit more what

  • I would call the benchmark approach or, in the old, in the

  • prior generation, it would have been called maybe the Arthur Rock approach.

  • Which is basically, and, and by the way, we

  • have all the same theories, like we can't help ourselves.

  • We just sit around and talk about this stuff all day.

  • But, we need to climb more towards the

  • other side, which is basically, the big breakthrough ideas.

  • The, the entire art of venture capital in our view, is the big breakthrough ideas.

  • The nature of the big breakthrough ideas is

  • that they're not that predictable and in fact often

  • upon first contact they seem nuts and it actually turns out to be the case, now all

  • the crazy ones also seem nuts so it's a little bit of a you know they called

  • Einstein crazy but they also called Charles Manson

  • crazy you have to be cautious on this stuff.

  • But, the really, really breakthrough ideas often seem nuts the first time, the first

  • time you see them and, and it's the fact that they seem nuts, can be

  • a very positive signal because number one, it, that, that can explain why that thing

  • already isn't being done by an existing

  • big company, cuz it's just considered too strange.

  • And then number two, you know, if, if it works, like if, if the bit flips

  • at some point and it goes from being nuts to being like, oh, that's a good idea.

  • Like, then, you know, those are the companies that could just explode.

  • Could become just gigantically huge.

  • And most of the, big ideas, the PC seemed nuts

  • at one point, the internet seemed nuts, BitCoin today seems nuts.

  • And, Airbnb seemed nuts Uber seemed nuts in the beginning.

  • And so you kinda wanna in, in our view we have this

  • sort of approach, you wanna kinda tilt into the really radical ideas.

  • But by their nature, you can't predict what they're gonna be.

  • And so what you basically wanna do is have as prepared a mind as you possibly can.

  • And learned as much as you can about as many things as you can.

  • And then basically enter as close to a zen

  • like blank slate kind of state at the beginning,

  • you know kind of zen, you know set ideal

  • of kinda perfect humility, which is hard for venture capitalist.

  • You know, sort of perfect humility at the

  • beginning of the meaning basically saying teach me.

  • And then they either, you know, they either do or they don't.

  • But then, you know, the, the hope is, you know, if Larry and Sergey walked in,

  • and they're like, I know this is the 35th search engine but this will be the one

  • that works you know, you're open-minded enough to

  • say, you know, yeah, that might work, as

  • opposed to, you idiots, don't you know that

  • that's been tried and failed so many times before.

  • And so we're way more on the side of we've gotten sort of opportunistic

  • trying really hard not to let ourselves

  • be educated by the really smart entrepreneurs.

  • You asked about the best and worst pitch meetings.

  • The worst pitch meetings by far, are the rip.

  • And, I mean, we try really hard to not have these get to us but.

  • You know, snap trap for dogs.

  • Like, it, it, you know, it's the I, I.

  • [UNKNOWN] This is not a startup thing.

  • I was giving an example.

  • You see it in Hollywood, right?

  • It's like one volcano movie works and then there's like 400 volcano movies.

  • It's like how many freaking volcanoes?

  • It's like 35 of the top hundred games of the iOS

  • app store and now are like Flappy Bird clones, like, and

  • so and, and, and Paul Graham in, in, in the adventure

  • community Paul Graham calls this the Hollywood approach to, to startups.

  • Which is, it literally is, you know, it, you know, is Airbnb for parrots.

  • It's just, it's these infinite variations of all the successful ones that you get.

  • And by the way, the ones that sound silly also just ones vertical search engines.

  • When Google worked, so search engines went

  • very deeply out of style when Google worked.

  • And then there were vertical search engines in every

  • single category, and, except for travel, they all failed, right?

  • Cuz it turns out there was just gonna be a search engine.

  • There wasn't gonna be a search engine for health,

  • there was just going to be a search engine.

  • and, so, it's all the variations and clones and kind of, the

  • mercenary kind of, kinda hit and run, you know, kind of stuff.

  • So, we, we try really hard not to sit in those, because those are very painful.

  • The ones that are the most exciting are the ones where it's a, it's a

  • really, really bright founder who's done a tremendous

  • amount of work and completely understands the domain.

  • And walks in with a really crazy idea and then

  • in the course of an hour, can basically walk you through.

  • Where we have this sort of concept we use called the idea maze, which is the really

  • bright founders with these really radical ideas tend

  • to go through what they call the idea maze.

  • So they tend to have worked for years.

  • Working their way through the idea to try to figure out how to get from kind of

  • the initial crazy starting point to at the end,

  • something that will actually work in the real world.

  • And the really great entrepreneurs can walk you through the

  • idea maze and make you understand the flow of thinking

  • that got, got them to the point where they actually

  • came out the other end with what is a great idea.

  • And what's interesting about that is those are generally not, there's this kind

  • of you know, theory in venture

  • capital that you want back coachable entrepreneurs.

  • The entrepreneurs who really have the radical ideas are generally not

  • in a way coachable, they generally react with hostility to being coached.

  • And so one of the things we test for, is you

  • know, basically say, have you thought about doing it this other way?

  • And what we're not looking for is the, oh, that's a great idea.

  • What we are looking for is the stare that's just like, you idiot.

  • Right?

  • You moron.

  • You've been sitting here listening, you know, this is

  • them to me, you've been sitting here listening to

  • me for 20 minutes and I've been working on

  • this for five years, and you think you understand this

  • so well that you can make me a suggestion

  • and not only are you an idiot for thinking you

  • can do that, but I will now explain to you in detail why you're that big of an idiot.

  • We love those.

  • [LAUGH] Boy those are fantastic, those are outstanding.

  • and, so, and it goes right back to the

  • combination of genius and courage I was talking about.

  • And so in particular I mean part it's of us in the

  • word, but part of us it's just the look on the face.

  • We love that look, it's like caviar.

  • >> So I want to turn it over to Q and A, so perhaps you

  • can just finish with one question, which is

  • you had built two very, very successful companies.

  • And then in 2009 you decided to not run a technology

  • business, and instead found, what's become

  • the fastest growing venture capital business.

  • People were probably telling you, you're nuts, like you just said.

  • >> Oh, yeah.

  • >> Yeah.

  • Well we went, we went, we went around to see, we went around to see, cuz

  • we'd worked with, we were working with all, all the, all, most of the big, most

  • of the big VCs, so we went around to see all of our friends in venture

  • capital, and tell them what we were thinking,

  • and they all told us we were nuts.

  • Actually with two exceptions actually, two of them are incredibly helpful,

  • Jim Breyer and Neil [INAUDIBLE] were both just tremendously, tremendously helpful.

  • And we are very grateful to them for all their help,

  • but the rest of them pretty much told us we were nuts.

  • >> So what, what drove you?

  • And, and perhaps you could answer in this context when we apply to the GSP we all

  • get asked to write an essay on the

  • following question, what matters most to you and why?

  • So what today matters most to you and why?

  • >> So we're really deep believers in the power of technology.

  • Like we, we, we, we think that the technology industry has

  • made the world a radically better place in the last 70 years.

  • And we think it will make the world a radically better place

  • yet in the next 30 years, and we think it's just starting.

  • You know, the fact that we've just now

  • after seven years in the computer industry gotten

  • to the smart phone, which is the first

  • computer that can get to everybody on the planet.

  • That everybody on the planet is gonna have one of those.

  • You know, that is a you, you know, we're

  • just reaching the point now where we're able to apply

  • technology to a, a lot of really fundamental problems

  • in the world, a lot of fundamental problems and opportunities.

  • And so it, it, we, we just all feel or I, I

  • feel like we have spent, we, I spent my career and then even

  • previous generations of entrepreneurs the value

  • they have spent their career getting to

  • the point where we can now do the things that we can do.

  • And so it's an amazing, it's an amazing, amazing time in terms of what we can do.

  • In terms of starting a venture capital firm there is an aspect to starting

  • there are some serial entrepreneurs who like

  • starting seven or eight companies in a row.

  • Dave Duffield is probably the best example of this.

  • I think [UNKNOWN] is company number 8 for Dave which is amazing.

  • I've done it three times, Ben did it twice.

  • Well, it depends how you count but twice, two and a half times.

  • it, for some of us at a certain point it starts

  • to be like, you know, it's like you climb all the way

  • up the hill and then you end up back at the

  • bottom of the hill and you have to start the climb again.

  • And so at some point you start to think, maybe there's a way to contribute.

  • That has to do with helping people climb the

  • hill, as opposed to being the person out in front.

  • And so I think we've reached that point.

  • And we're very, you know, we're very happy doing that.

  • >> Thank you, thank you so much.

  • Now we can have some smart questions.

  • >> We're actually hosting the Future of Media Conference here tomorrow.

  • So I was interested to ask you about the news business.

  • Of course you've been tweeting and writing and thinking a lot about that lately.

  • And I guess if I could sum up your views, your optimistic

  • about the prospects for journalism to thrive using a variety of business models.

  • So I'm a former journalist and a lot of the

  • issues that you are thinking about now have been being discussed

  • within the industry for maybe eight or ten years, a

  • lot of you know, soul searching and, and reflection and experimentation.

  • So what I'm curious about is why did you get interested in it now?

  • Like what prompted you to get excited about that

  • space and to start thinking and talking about it?

  • >> Also, less from an investment standpoint, cuz

  • we don't really, content's not content, generally, so

  • we don't really, we're not gonna be making

  • a lot of investments in, in media production.

  • Just cuz it's a, it's a different field.

  • We, we can talk more about that.

  • My interest in news, in media, is sort of twofold.

  • One is, as a, is a gigantic consumer of

  • it, and somebody who thinks it's very important, and then

  • two, because everything I've worked on my whole life

  • gets constantly blamed, for the decline and fall of journalism.

  • so, the Internet.

  • Everybody knows, right, the internet has completely destroyed the news business.

  • The internet has destroyed journalism.

  • The democracy is in peril, and it's all my fault.

  • so, at a certain point, I, you know, I start to, I get,

  • get, the, the, and, and, on behalf of all the people I, I worked

  • with, to, to, to build, to build things like the web, it's like okay,

  • maybe it's, maybe, maybe it's not the new technology's fault at a certain point.

  • So my observation is, and that I think it's a very interesting

  • topic, so I think the news, and I focused on the news

  • business, cuz that's kinda the, the, the pointy end of the spear,

  • in terms of, you know, the thing that people are most worried about.

  • I look at it as, as, I, I look at it,

  • I do what very few people have been willing to do,

  • I think, which is look at it purely as a business

  • and basically say, and, and, so here's my basic position is.

  • Our view of what the news business is, and about journalism is, is an artifact of a

  • specific period of time, from 1945 basically into,

  • basically 1945 to 2005, and basically post-war post-war US.

  • If you go back to the news business,

  • before World War II, if you start in Colonial

  • days, and if you extend all the way

  • to the 1930's, the news business worked very differently.

  • It was a very successful business and it was, a lot of

  • people were in it, a lot of people made a lot of money.

  • But like, as an example this whole idea of objectivity, the journalist now take as

  • kind of this, kind of, you know, kind of, purer concept that has to be maintained.

  • Like there was really no such thing.

  • Like I always say like in in, sorry to say, like objectivity's

  • an artifact of an era in which news businesses were monopolies or oligopolies.

  • In the days when news businesses were

  • fully competitive, subjectivity was out it went.

  • And they always say, you know, you're a scumbag, how can you say that, and I'm

  • like well Ben Franklin was a subjective journalist

  • and so stop calling Ben Franklin a scumbag.

  • You know, he actually knew what he was doing.

  • He was actually a very successful journalist, a very successful publisher.

  • There's a great book on the news business in

  • the Colonial era in the US called Infamous Scribblers,

  • which was what, it was a pejorative at the

  • time for reporters, which could come back into fashion.

  • and, it's a great articulation of how the news business actually grew up in the US.

  • And then in the 20s and 30s, it

  • got really interesting with figures like Hurst and Pulitzer.

  • And so, you can kinda, you can actually study,

  • kinda, the historical news business, kinda through, I think through

  • those two time periods and then you kinda look at

  • post World War II, and you say, well what happened.

  • Well monopolies and oligopolies got established and so for and it, it was

  • sort of this era of centralization in a lot of parts of the economy.

  • But it was very clear in the news business, you had, you know,

  • you'd have one major newspaper per metro area, because of the cost of distribution.

  • You'd have, you know, three TV networks, nationally,

  • because of the limited bandwidth for VHF TV.

  • You'd have, you know, a handful of local radio stations.

  • You'd have a handful you only had a handful of magazines.

  • You could only really have three general news magazines on

  • newsstands cuz you just couldn't afford to distribute more than that.

  • You scale, scale economics kinda ruled the day.

  • And so, so the news business went into this

  • mode where they kinda said, okay, we're a monopoly.

  • We're a monopoly or an oligopoly.

  • And if you're a monopoly or an oligopoly,

  • it's incredibly important to stay out of antitrust trouble.

  • And the best way to stay out of antitrust

  • trouble is to not, to not make anybody angry.

  • And the best way not to make anybody angry, is not have any opinions.

  • And so therefore let's be objective about everything.

  • And then we can we can just basically

  • say, First Amendment objectivity, don't break us up.

  • And that worked really well, as long

  • as the distribution was controlled, which it was.

  • The distribution was locked down.

  • And then the internet showed up.

  • And then the internet introduced basically took the legs out from under all the

  • distribution monopolies and then all of a

  • sudden there are you know millions of voices.

  • So my point as a business person is okay that, that's

  • the past, right, that's, that's, that's the old days that's over.

  • We need to look back to what

  • happened when these things weren't monopolies and oligopolies.

  • We need to look back to the thirties and twenties.

  • And back to the colonial era, and we need to basically think about

  • how to build news businesses, media

  • businesses, that thrive in a competitive market.

  • And that has to do with being, you know, incredibly aggressive.

  • That has to do with in many cases having a very strong point of view.

  • It has to with, not with the idea that you're gonna be the only point

  • of view, but you'll be one of many and you have to argue things out.

  • You have to have the right cost structure

  • you have to think about market segmentation and you

  • have to, you have to do all the

  • things that people do when they actually build businesses.

  • The issue in the news business is that a lot of the executives in the business did

  • not grow up in a competitive market and and

  • so they just don't know how to do that.

  • So, now what's happening is, the new entrepreneurs like Jonah Peretti

  • at Buzzfeed, or Sarah Lacy at Pando, or, you know, the

  • people, the folks who built, you know, you see a lot

  • of this in the tech industry, TechCrunch and all these things.

  • You know, a, a lot of these new things, they're, or,

  • you know, what Pierre Omidyar is doing with First Look is,

  • you're getting, now, very smart people who are coming in from

  • outside with very fresh points of view, building very exciting things.

  • And all the traditional journalists are like,

  • oh yeah that doesn't count, but healthy business,

  • healthy journalism you have to get the

  • healthy business before you get the healthy journalism.

  • And so, so then you look at market size and you

  • basically say, well how big is the market for all this stuff?

  • And it turns out the market for news is

  • gigantic and it's growing very fast because so many people

  • are becoming part of the modern world and so many

  • people are getting access to information for the first time.

  • And so the global market for news is going to be five

  • billion people within ten years and everybody needs to know what's going on.

  • And so the market's gonna be large.

  • And so I think there's huge opportunities for market growth, but it's gonna

  • be from companies that are, that are able and that are willing to compete.

  • >> I'm looking for an internship in High Tech, and

  • there is a great quote that software is eating the world.

  • And what I think is going to be next, and if you were

  • an MBA, which university would you go to work to for the summer?

  • Oh, that's a good question.

  • So I think that, I mean, so the big one, the big one, the big one's clearly.

  • The big one's clearly on deck are

  • healthcare, education, and financial services I think

  • are the next three, kind of, giant

  • sectors where software can have a revolutionary impact.

  • We're actually putting, we actually started out saying

  • we're not going to do any healthcare, was one

  • of our things we, we had a bunch of no fly zones when we started our firm.

  • No rocket ships no no flying cars no space elevators no,

  • no drugs either in the drug development sense or any other sense.

  • And then and then and then we said, no biotech

  • no healthcare because it's, you know, it's a different category, and

  • if you're gonna make you know, pharmac-, you know, industrial biotech

  • companies or medical device companies, FDA approval, it's a different thing.

  • We've actually got much more involved lately

  • in the cross-section of health care and IT.

  • And there's all kinds of interesting things happening.

  • At the intersection of healthcare and, and IT and software.

  • And, actually, there's things happening, actually, on the medical side, and

  • a lot of that, it's very interesting, things now happening around genomics.

  • And big data applied to genomics.

  • And then there's another whole set

  • of things happening around healthcare information.

  • and, you know, making, like, health

  • marketplaces work better and, you know, direct

  • access for consumers to doctors online and all these incredible kind of new services.

  • So, I think healthcare is gonna be really interesting

  • and we're, we're diving in much more aggressively there.

  • education, you know, is a big one.

  • That I talked about a lot in public.

  • But I think education is right for, for transformation.

  • Actually, Clay Christianson has been doing really

  • amazing work on that th, it's worth reading.

  • He's very passionate about that.

  • And then financial services I mean we think it's go time for financial services.

  • We needed a breakthrough software technology to

  • be able to go after financial services.

  • Financial services right.

  • The big problem for startups and financial services is, it's regulated to death.

  • And so and it's gotten worse, right, through, like we,

  • we call Dodd Frank the big bank protection act of 2012

  • like it's, it's the largest wall in the world for a

  • startup to have to climb over to really compete from scratch.

  • But Bit Coin and Crypto currencies gave us that

  • technology change that we needed to after financial services.

  • And so we are now looking at a very broad

  • cross section of, new kinds of, whether it is new kinds

  • of lending, new kinds of insurance new kinds of derivatives new kinds of small

  • business financing, new kinds of fundraising, crowdfunding, crowdsourcing.

  • We think now there's enough technology change happening

  • and both consumers and business are desperate for alternatives.

  • There's some very interesting financial services companies to get built.

  • And in the long run the two we would like to work

  • on, we haven't gotten to yet, but in the long run law and

  • government are the other two really big ones but those are probably

  • more in the out here, talk about that more at a future date.

  • >> How do you see about, how do you see sort

  • of the path of affordable internet for the rest of the world?

  • And when will Edgarson Crow It start investing in future rocket technologies?

  • >> I'm sorry, what was the last question?

  • >> When will Edgarson Crow It start investing in future rocket technologies?

  • I just didn't catch the.

  • >> Frontier, frontier mode.

  • >> Frontier.

  • >> Oh, oh, it's developed like, developing worlds.

  • >> Yeah.

  • >> Or whatever the, yes, yeah, the term is.

  • [LAUGH] It's a, it's a, it's hard to keep up with all the terms.

  • So we don't so we consider, I would say the following.

  • We consider that the basically the, the, the amazing opening

  • of the developing world or whatever terms you wanna use.

  • The, the billions of people around the world who have not had access to what

  • we would consider to be modern education, modern

  • information, modern communication, modern politics access to markets.

  • You know, most of the world has not,

  • has not had access to those things historically.

  • Most of the world is in the process of getting access to those things.

  • And so we think the biggest thing happening in our time is

  • the just tremendous flowering of, of

  • basically the en-, the entire developing world.

  • And it's all over the planet.

  • And it's happening at different paces but it, it's really all over the planet.

  • There's extraordinary stories now in almost every country

  • on the planet of just amazing things happening.

  • And we think it's a twin story, it's you know, it's a political and economic

  • development story and a, and a markets development

  • story, but then it's also a technology story.

  • And, we think it sort of is the rise of

  • the developing world with first the PC and now the smartphone.

  • It's not an accident that it's happening now.

  • and, you know, it's, it's on the heels

  • of satellite TV and fax machines and so forth.

  • And, and, and the internet, but now it's smartphones.

  • And so we think a world in which everybody on the

  • planet has a smartphone with internet access is a completely different world.

  • Not just because they can play floppy birds

  • but because they can, you know, very fundamental things.

  • They can get up to date market information on pricing.

  • Which is very important if your a

  • farmer and you've never had that information before.

  • Or they can get up to date health information, or

  • they can educated, kids can get educated in ways, you know.

  • A lot of countries around the world like

  • they don't have textbooks much less like modern

  • education systems so there's just an enormous ability

  • to upgrade modern education across the entire world.

  • And then of course huge political change and

  • a lot of that is a consequence of people

  • number one being able to see what they're

  • missing and then number two being able to organize.

  • And we think the potential for these technologies as a

  • way for, for political organ, organization, political protest to happen.

  • Everybody I ever talked to who has been through one of these kind of

  • political protests in the last five years

  • talks about the centrality of this technology.

  • It's only Western media commentators that say it doesn't matter.

  • It's the people on the ground that are all over all the new stuff.

  • So, it's really, really fundamental.

  • We as an investment firm, are not, we're a single

  • office firm, we're a boutique firm, so we're just investing out

  • of Silicon Valley and we're mostly investing in U.S. companies

  • and maybe a few, a few companies in markets like Europe.

  • We're not really set up to invest on the ground in the developing world.

  • But a lot of the companies that we're investing in are building

  • products that we think are going to be transformative on the ground.

  • And so I'll just give you one example.

  • Lyft is a company that we're involved in.

  • Lyft actually is, is a ridesharing company.

  • That's a, it's a, Lyft and Uber are kind of roughly in the same market.

  • The difference with Lyft is that anybody can become a driver.

  • So it's not professional drivers, it's ordinary people being drivers.

  • Lyft is actually based on the founder's experience

  • on the ground in Zimbabwe, when he was working

  • on a development project where he saw in, like,

  • poor villages in rural areas all over the world.

  • You know, you have you know, there might be a couple of

  • cars and if somebody's going to take a drive into town, you know,

  • anybody who wants to get in, in, you know, is gonna like

  • chip in for gas, and everybody's gonna get to go on that ride.

  • So ridesharing is kind of a thing that happens when not everybody has a car.

  • So, Lyft is basically gonna take the concept

  • of ridesharing global and gonna make it an information

  • system, so you can have a much more

  • optimal, right, spread of drivers and cars and rides.

  • And so you can have transportation work much better, all

  • throughout the world, including in the poorest parts of the world.

  • Right, all through the smartphone.

  • Which could be a huge boost to quality of life.

  • Air BnB, same thing.

  • Air BnB, you know, it's, you know, it comes across as a

  • way for kids to travel around and stay in other people's houses.

  • The founder of Air BnB, and by the way this is

  • a classic case, the founder of Air BnB Brian Chesky went around

  • and tried to raise venture capital everyone said you're crazy that's this,

  • you know, nobody will ever stay in somebody else's house that's nuts.

  • He was getting really depressed.

  • He went home for Christmas and talked

  • to his grandfather, and his grandfather says, oh

  • yeah, yeah, yeah back in the 30s and 40s, that's what we used to do.

  • Like, if you were going to go to another

  • city, you would find out a friend of a friend,

  • and you would say, hey can I, you know,

  • use your spare bedroom, cuz like we couldn't afford hotels.

  • And so the opportunity to take real

  • estate globally, and make it much more accessible.

  • And make it much more cost effective for people to be able to stay,

  • you know, be able to stay whenever their on the road, whenever their traveling.

  • To make it possible for everybody who owns a house or owns any kind of

  • property to be able to open it up for be able to make extra money.

  • You know we think many of these ideas can scale,

  • basically all the way up and all the way down.

  • We think that these can be very broad-based ideas

  • and so we can kind of come at things,

  • ridesharing, real estate sharing, education, financial services, all these

  • things, and we can make them very, very broad.

  • So that is what we are trying to do.

  • >> Mark we're sadly out of time, so thank you so, so much.

  • >> Thank you everybody.

  • >> Thank you.

  • [SOUND]

  • [MUSIC]

[SOUND] Thank you very much for taking the time to come in and speak to us.

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