1 00:00:02,480 --> 00:00:03,377 - I wasn't expecting to start here. 2 00:00:03,460 --> 00:00:06,547 I want to talk about why you were consuming so much caffeine 3 00:00:06,630 --> 00:00:09,280 that you noticed that your heart was skipping a beat. 4 00:00:09,940 --> 00:00:13,597 - So, I love caffeine. So for a very long time, I always said that the ultimate day, 5 00:00:13,680 --> 00:00:15,287 like, the perfect day was 12 hours of caffeine 6 00:00:15,370 --> 00:00:17,070 followed by four hours of alcohol. 7 00:00:18,050 --> 00:00:19,550 That's just like the ultimate. 8 00:00:19,860 --> 00:00:22,847 I did cut out, or at least for now, I've cut out the four hours of alcohol. 9 00:00:22,930 --> 00:00:26,597 But yeah, caffeine is just one of nature's most marvelous things. 10 00:00:26,680 --> 00:00:28,597 But yeah, it turns out you can't overdo it. 11 00:00:28,680 --> 00:00:32,037 And so, yeah, a while ago, I was drinking so much coffee at work 12 00:00:32,120 --> 00:00:34,027 that I was sitting in a meeting a couple years ago, 13 00:00:34,110 --> 00:00:35,937 and I started to feel just a little bit... 14 00:00:36,020 --> 00:00:37,967 Something felt off, and I just took my pulse, 15 00:00:38,050 --> 00:00:41,010 and I realized I was skipping about every tenth heartbeat. 16 00:00:41,480 --> 00:00:43,447 And so, I had like an existential crisis 17 00:00:43,530 --> 00:00:45,387 because I'm like, all right, heart, you know, do I need to call 911? 18 00:00:45,470 --> 00:00:47,497 It's just like, am I about to have a heart attack? Am I about to die? 19 00:00:47,580 --> 00:00:50,897 And so I go under the table, and I Google, and I'm like, "Is this a problem?" 20 00:00:50,980 --> 00:00:53,680 And Dr. Google said, "No, it's okay. It's fine. 21 00:00:53,780 --> 00:00:56,877 You just might want to cut back a little bit on the caffeine." 22 00:00:56,960 --> 00:01:00,497 - You said something that I love, and I never hear other entrepreneurs talk about, 23 00:01:00,580 --> 00:01:03,577 but I think it's super important that you don't have any levels of introspection. 24 00:01:03,660 --> 00:01:05,117 - Yes. Zero. As little as possible. 25 00:01:05,200 --> 00:01:08,997 - Why? - Move forward. Go. Yeah, I don't know. 26 00:01:09,080 --> 00:01:11,417 I've just found people who dwell in the past, get stuck in the past. 27 00:01:11,500 --> 00:01:14,697 It's a real problem, and it's a problem at work, and it's a problem at home. 28 00:01:14,780 --> 00:01:17,117 - So, I've read obviously 400 and, I think, now 10 29 00:01:17,200 --> 00:01:18,467 biographies of history's greatest entrepreneurs. 30 00:01:18,550 --> 00:01:19,757 - Yeah. - And that was one of the most surprising things, 31 00:01:19,840 --> 00:01:21,237 like what's the most surprising thing that you've learned from this? 32 00:01:21,320 --> 00:01:23,427 They're like, "Oh, they have little or zero introspection." 33 00:01:23,510 --> 00:01:26,447 - Yeah. - Sam Walton didn't wake up thinking about his internal self. 34 00:01:26,530 --> 00:01:28,517 He just woke up, he's like, "I like building Walmart. 35 00:01:28,600 --> 00:01:30,357 I'm going to keep building Walmart. I'm going to make more Walmarts," 36 00:01:30,440 --> 00:01:32,047 and just kept doing it over and over again. 37 00:01:32,130 --> 00:01:34,057 - And you probably know, if you go back, before 100 years ago, 38 00:01:34,140 --> 00:01:35,897 it never would have occurred to anybody to be introspective. 39 00:01:35,980 --> 00:01:38,927 Like, the whole idea of, I mean, just all of the modern conceptions 40 00:01:39,010 --> 00:01:41,417 around introspection and therapy and all the things that kind of result from that 41 00:01:41,500 --> 00:01:44,367 are kind of manufactured in the 1910s, 1920s. 42 00:01:44,450 --> 00:01:47,337 - Say more about that. - Great men of history didn't sit around doing this stuff 43 00:01:47,420 --> 00:01:49,050 at any prior point, right? 44 00:01:49,770 --> 00:01:51,020 It's all a new construct. 45 00:01:53,120 --> 00:01:55,037 So, first Western civilization had to kind of 46 00:01:55,120 --> 00:01:56,967 invent the concept of the individual, right? 47 00:01:57,050 --> 00:01:59,357 Which was like a new concept several hundred years ago. 48 00:01:59,440 --> 00:02:02,477 And then, for a long time, it was all right, the individual runs, right? 49 00:02:02,560 --> 00:02:05,367 And does all these things, and builds things, and builds empires, 50 00:02:05,450 --> 00:02:07,737 and builds companies, and builds technology, and does all these things. 51 00:02:07,820 --> 00:02:13,100 And then, kind of this guilt-based whammy showed up from Europe, 52 00:02:13,300 --> 00:02:18,267 a lot of it from Vienna, in the 1910s, 1920s, Freud and all that entire movement. 53 00:02:18,350 --> 00:02:20,057 And kind of turned all that inward and basically said, 54 00:02:20,140 --> 00:02:23,277 "Okay, now we need to basically second-guess the individual. 55 00:02:23,360 --> 00:02:24,357 We need to criticize the individual. 56 00:02:24,440 --> 00:02:26,877 The individual needs to self-criticize," right? 57 00:02:26,960 --> 00:02:29,767 The individual needs to feel guilt, needs to look backwards, 58 00:02:29,850 --> 00:02:31,400 and needs to dwell on the past. 59 00:02:31,550 --> 00:02:32,657 It never resonated with me. 60 00:02:32,740 --> 00:02:35,417 - Do you find a lot of the greatest founders that you've spent time with, 61 00:02:35,500 --> 00:02:38,657 and backed, and partnered with or have low introspection? 62 00:02:38,740 --> 00:02:42,947 - Yeah, generally. Although, in fairness, the introspection is probably linked to 63 00:02:43,030 --> 00:02:45,420 the personality trait of neuroticism, right? 64 00:02:45,880 --> 00:02:50,037 So, a lot of the best founders are, I think, at 0% neuroticism. 65 00:02:50,120 --> 00:02:53,087 They just don't get emotionally fazed by things that happen, 66 00:02:53,170 --> 00:02:55,357 which is a superpower when you're an entrepreneur. 67 00:02:55,440 --> 00:02:59,297 But having said that, some of the great entrepreneurs are, in fact, very neurotic. 68 00:02:59,380 --> 00:03:00,540 That's also the case. 69 00:03:03,250 --> 00:03:05,937 Maybe it's nice to have to be low neuroticism, but not necessary. 70 00:03:06,020 --> 00:03:09,170 And so, there are some that kind of get wrapped around the axle 71 00:03:09,480 --> 00:03:13,187 on kind of personal issues. As you know, these days, sometimes that then, 72 00:03:13,270 --> 00:03:15,907 kind of turns into the use of psychedelics, 73 00:03:15,990 --> 00:03:17,787 different kinds, and hallucinogenic drugs. 74 00:03:17,870 --> 00:03:20,467 And that's like one very interesting kind of trajectory 75 00:03:20,550 --> 00:03:23,227 for the kind of the culture of the country, culture of the world, 76 00:03:23,310 --> 00:03:24,377 and we'll see where that goes. 77 00:03:24,460 --> 00:03:26,377 - So, we've recorded, I don't know, like a dozen of these so far, 78 00:03:26,460 --> 00:03:29,727 most of them with some of the greatest founders living for the show. 79 00:03:29,810 --> 00:03:33,957 I can't believe how many times on almost every episode psychedelics pops up. 80 00:03:34,040 --> 00:03:34,227 - Yeah. 81 00:03:34,310 --> 00:03:36,437 - And they're like, "You should try them." I'm like, "I'm not doing any drugs." 82 00:03:36,520 --> 00:03:39,777 - Just want to be clear, I'm not. I never have. I'm never going to. 83 00:03:39,860 --> 00:03:41,957 You know, the problem is I already have tons of horror stories 84 00:03:42,040 --> 00:03:45,267 from people I know, or know of, that kind of came out the other side like... 85 00:03:45,350 --> 00:03:50,690 Well, actually, my deepest conversation on this was actually with Huberman. 86 00:03:51,220 --> 00:03:54,677 And I was describing this phenomenon where we see in Silicon Valley 87 00:03:54,760 --> 00:03:58,407 where these guys get under pressure, and they kind of feel anxious or whatever, 88 00:03:58,490 --> 00:04:01,437 and somebody tells them about psychedelics, and they try it. 89 00:04:01,520 --> 00:04:03,497 And they kind of come out the other end as a changed person, 90 00:04:03,580 --> 00:04:05,157 and they kind of come out much more at peace, 91 00:04:05,240 --> 00:04:07,607 but then they also tend to quit their companies. 92 00:04:07,690 --> 00:04:10,490 And they move to Indonesia and become a surf instructor. 93 00:04:10,880 --> 00:04:12,247 They're just like, peace out, right? 94 00:04:12,330 --> 00:04:15,487 They're just done. There's been a whole bunch of examples of this, 95 00:04:15,570 --> 00:04:17,767 and I was complaining to Huberman about this. 96 00:04:17,850 --> 00:04:20,467 And in true Huberman kind of wise Yoda style, he's like, 97 00:04:20,550 --> 00:04:23,410 "Well, how do you know they're not happier?" Right? 98 00:04:24,280 --> 00:04:25,477 Maybe that was the positive outcome. 99 00:04:25,560 --> 00:04:27,587 Maybe the thing that was driving them to be a great entrepreneur 100 00:04:27,670 --> 00:04:29,737 was a fundamental level of insecurity, right, 101 00:04:29,820 --> 00:04:32,830 and kind of this unsatisfied, kind of neurotic impulse. 102 00:04:33,470 --> 00:04:34,707 And now they're just satisfied. 103 00:04:34,790 --> 00:04:36,537 Now they're just, whatever the serotonin levels or whatever 104 00:04:36,620 --> 00:04:38,637 have been recalibrated, that they're just kind of satisfied 105 00:04:38,720 --> 00:04:41,170 sitting on the beach and being a surf instructor. 106 00:04:41,670 --> 00:04:45,520 Maybe they're better off. And I'm like, "Yeah, but their company is failing." 107 00:04:45,620 --> 00:04:46,940 And so anyway, yeah. 108 00:04:47,750 --> 00:04:49,877 There's a possibility that there's a better version of you or me 109 00:04:49,960 --> 00:04:53,077 on the other side of Ayahuasca, but I'm not willing to find out. 110 00:04:53,160 --> 00:04:55,877 - I'm not either. Daniel Ek has the greatest way to put this. 111 00:04:55,960 --> 00:04:58,077 He thinks the best entrepreneurs are not optimizing for happiness, 112 00:04:58,160 --> 00:04:59,517 they're optimizing for impact. 113 00:04:59,600 --> 00:05:00,777 - I think that's true. I think that's true. 114 00:05:00,860 --> 00:05:01,917 I think it's certainly true for Daniel, yeah, 115 00:05:02,000 --> 00:05:03,607 who's kind of a great case study of that. 116 00:05:03,690 --> 00:05:06,037 Having said that, I always kind of wonder is that, 117 00:05:06,120 --> 00:05:09,177 well, intrinsic versus extrinsic motivations. 118 00:05:09,260 --> 00:05:12,027 Impact strikes me a little bit as an extrinsic motivation. 119 00:05:12,110 --> 00:05:14,720 It's like, yeah, impact, money, fame, you know... 120 00:05:15,170 --> 00:05:17,247 And by the way, I think extrinsic motivations are fantastic, 121 00:05:17,330 --> 00:05:19,317 and I think they can be very motivating. 122 00:05:19,400 --> 00:05:21,007 The people who kind of get the great rewards 123 00:05:21,090 --> 00:05:22,497 for building great things deserve them. 124 00:05:22,580 --> 00:05:25,037 But at least what I've found is it's the intrinsic motivations 125 00:05:25,120 --> 00:05:27,270 that actually get people up in the morning. 126 00:05:28,150 --> 00:05:30,827 And there's where you're dangerously close to straying into introspection, 127 00:05:30,910 --> 00:05:34,017 but it's like, what is the thing that causes somebody 128 00:05:34,100 --> 00:05:37,150 who's now extremely materially wealthy, extremely successful, 129 00:05:37,420 --> 00:05:40,137 to get up in the morning and continue to kind of punch away at the world? 130 00:05:40,220 --> 00:05:41,817 I think those tend to be interior. 131 00:05:41,900 --> 00:05:45,400 - What's that for you? - Oh, I mean, that would require introspection. 132 00:05:47,270 --> 00:05:48,517 I'll let other people speculate. 133 00:05:48,600 --> 00:05:49,767 - No, you have to have... - It's a lot more fun 134 00:05:49,850 --> 00:05:52,330 to speculate about other people's... 135 00:05:52,920 --> 00:05:53,987 - But I am curious about you, 136 00:05:54,070 --> 00:05:56,367 because you have a series of quotes that I absolutely love. 137 00:05:56,450 --> 00:05:58,257 I save on my phone. I reread from time to time. 138 00:05:58,340 --> 00:06:00,137 One of them, and I'll butcher it, but it's just like, 139 00:06:00,220 --> 00:06:02,407 the world is way more malleable than you think. 140 00:06:02,490 --> 00:06:02,697 - Mm-hmm. 141 00:06:02,780 --> 00:06:05,957 - And if you just pursue something with a lot of maximum effort, drive, and energy, 142 00:06:06,040 --> 00:06:08,737 the world will recalibrate around you easier than you think. 143 00:06:08,820 --> 00:06:09,217 - Yeah. 144 00:06:09,300 --> 00:06:12,677 - And I actually re-read that this morning before I came over here, and I was like, 145 00:06:12,760 --> 00:06:16,737 what is that for Mark? Today, what are you waking up trying to change in the world? 146 00:06:16,820 --> 00:06:18,477 - Yeah, there's a lot that we're actually trying to do. 147 00:06:18,560 --> 00:06:21,197 I'm suspicious that that's my actual underlying motivation. Yeah. 148 00:06:21,280 --> 00:06:22,007 - Why? 149 00:06:22,090 --> 00:06:25,657 - Just because, I don't think an external impact is enough to keep people going, 150 00:06:25,740 --> 00:06:28,507 or at least I've seen way too many people who had a high level of external impact, 151 00:06:28,590 --> 00:06:30,540 and then at some point, they just stop. 152 00:06:30,840 --> 00:06:32,237 - Okay. - Well, here's the problem with external impact. 153 00:06:32,320 --> 00:06:33,777 It's like, okay, it's 4:00 in the morning, 154 00:06:33,860 --> 00:06:37,510 you're staring at the ceiling, is that enough? Right. 155 00:06:37,660 --> 00:06:39,797 External impact is stuff that's happening to other people, right? 156 00:06:39,880 --> 00:06:42,180 - Yeah. - But all right, what is it about you? 157 00:06:42,830 --> 00:06:45,867 The story I like to tell myself is that I'm competing with myself, right? 158 00:06:45,950 --> 00:06:47,507 The story I like to tell myself is I'm getting up in the morning 159 00:06:47,590 --> 00:06:49,027 because I'm trying to become a better version of myself. 160 00:06:49,110 --> 00:06:53,650 I'm trying to become smarter and better informed, and reach better conclusions, 161 00:06:54,240 --> 00:06:57,857 and be better at what I do, and continue to expand my skills. 162 00:06:57,940 --> 00:07:02,207 But again, to actually analyze that properly 163 00:07:02,290 --> 00:07:05,640 would require a level of therapy that I'm not willing to engage in. 164 00:07:07,670 --> 00:07:10,697 So, anyway, so yes, the much more comfortable conversation is, 165 00:07:10,780 --> 00:07:13,497 "What are you trying to do in the world," which I would love to talk about. 166 00:07:13,580 --> 00:07:16,347 - I have almost no introspection either, so I understand that. - Right. Yes. Yeah. 167 00:07:16,430 --> 00:07:18,097 - All right, so tell me what you're trying to do in the world then. 168 00:07:18,180 --> 00:07:20,207 - Yeah, I mean, look, we have had this... 169 00:07:20,290 --> 00:07:23,317 It's actually fairly amazing that it's become a controversial kind of thing, 170 00:07:23,400 --> 00:07:25,937 but we just have this like fundamental view that technology is, on balance, 171 00:07:26,020 --> 00:07:27,927 an enormously powerful force in the world, 172 00:07:28,010 --> 00:07:29,817 and basically that the big problem with the world 173 00:07:29,900 --> 00:07:32,687 is that there's not enough technology, there's not enough information, 174 00:07:32,770 --> 00:07:34,370 there's not enough intelligence. 175 00:07:34,600 --> 00:07:36,097 And we have this opportunity, 176 00:07:36,180 --> 00:07:40,247 we have these special sets of technologies that let us fundamentally improve things. 177 00:07:40,330 --> 00:07:43,857 And then there's this very special kind of personality type of the entrepreneur, 178 00:07:43,940 --> 00:07:46,317 who's able to build the product, and then able to build the company, 179 00:07:46,400 --> 00:07:49,677 and build a phenomenon, and really make an impact on things. 180 00:07:49,760 --> 00:07:53,460 And so when I look at the world, I'm just like, okay, this is just like... 181 00:07:53,580 --> 00:07:55,617 The world we live in is just a very primitive and crude place 182 00:07:55,700 --> 00:07:58,450 as compared to what it should be, and what it could be. 183 00:07:58,960 --> 00:08:02,257 And so the whole thing that we've been trying to do for 17 years at our firm 184 00:08:02,340 --> 00:08:06,377 is build kind of the ideal partner to the founders that are trying to do that, 185 00:08:06,460 --> 00:08:08,247 based on our own experiences of having been founders 186 00:08:08,330 --> 00:08:09,537 that we're trying to do that. 187 00:08:09,620 --> 00:08:12,970 Overall, the world, especially the Western world, is just stagnant. 188 00:08:13,400 --> 00:08:15,147 The overall kind of theme of things- - Mm-hmm. 189 00:08:15,230 --> 00:08:18,607 - is just everything is stagnant, and we could talk a lot about that. 190 00:08:18,690 --> 00:08:21,187 But every once in a while, you have somebody who comes along, 191 00:08:21,270 --> 00:08:22,097 and it's just like, all right, no, 192 00:08:22,180 --> 00:08:24,357 I actually have an idea of how to make things fundamentally better, 193 00:08:24,440 --> 00:08:26,317 and I have a way to build a business around that, 194 00:08:26,400 --> 00:08:28,850 and build a company, build an empire around that. 195 00:08:29,960 --> 00:08:32,347 And those people, include ourselves in this, 196 00:08:32,430 --> 00:08:34,690 but those of us that are trying to do that, 197 00:08:35,170 --> 00:08:37,717 we're like a rough movement basically against stagnation. 198 00:08:37,800 --> 00:08:40,450 But without us, there's nothing but stagnation. 199 00:08:40,560 --> 00:08:42,367 - Mm-hmm. - But it's actually really funny. 200 00:08:42,450 --> 00:08:46,517 There's always this kind of criticism that you get from, whatever kind of, as I say, 201 00:08:46,600 --> 00:08:48,927 the corporate press or a kind of outside critics, which is like, 202 00:08:49,010 --> 00:08:50,957 "Oh, you VCs are funding the wrong things," 203 00:08:51,040 --> 00:08:52,347 or, "You entrepreneurs are building the wrong things." 204 00:08:52,430 --> 00:08:54,997 It's like, well, nobody licensed us to do any of this. 205 00:08:55,080 --> 00:08:58,367 We didn't apply for a permit, right? 206 00:08:58,450 --> 00:09:00,757 Get judged by somebody ahead of time and told, 207 00:09:00,840 --> 00:09:02,647 "Yes, you get to do this, you don't get to do this." 208 00:09:02,730 --> 00:09:05,587 Many people could be trying to do this. Anybody can do this. 209 00:09:05,670 --> 00:09:10,200 Anybody can start, build a product, start a company, start, even try to be a VC. 210 00:09:11,050 --> 00:09:12,697 These are all completely open fields. 211 00:09:12,780 --> 00:09:16,180 And it's just shocking to me how few people actually give it a shot. 212 00:09:16,740 --> 00:09:19,977 And the fate of the world over the next 1500 years 213 00:09:20,060 --> 00:09:23,060 is riding on the people who actually want to give it a shot. 214 00:09:23,460 --> 00:09:26,217 I want to tell you about the presenting sponsor of this podcast, Ramp. 215 00:09:26,300 --> 00:09:28,737 I have been reading a lot about SpaceX lately. 216 00:09:28,820 --> 00:09:31,407 SpaceX is one of the most valuable private businesses in the world, 217 00:09:31,490 --> 00:09:33,777 and one of the main themes in the history of SpaceX 218 00:09:33,860 --> 00:09:36,937 is constantly attacking and questioning your cost. 219 00:09:37,020 --> 00:09:40,867 Ramp helps many of the most innovative businesses in the world do exactly that. 220 00:09:40,950 --> 00:09:44,797 The median company running on Ramp cuts their expenses by 5%. 221 00:09:44,880 --> 00:09:47,137 And one thing SpaceX has demonstrated 222 00:09:47,220 --> 00:09:49,857 is that a religious dedication to controlling costs 223 00:09:49,940 --> 00:09:51,897 can help actually increase revenue, 224 00:09:51,980 --> 00:09:55,157 because you can pursue opportunities you couldn't otherwise. 225 00:09:55,240 --> 00:09:57,747 And we see that in the Ramp data too. 226 00:09:57,830 --> 00:10:02,700 The median company running on Ramp also grows their revenue by 16%. 227 00:10:02,830 --> 00:10:05,807 So, when you're running your business on Ramp and your competitors are not, 228 00:10:05,890 --> 00:10:09,700 you have a massive competitive advantage that compounds over time. 229 00:10:09,860 --> 00:10:14,027 Ramp is the only platform designed to make your finance team faster and happier. 230 00:10:14,110 --> 00:10:17,237 Many of the top founders and CEOs I know run their business on Ramp. 231 00:10:17,320 --> 00:10:19,617 I run my business on Ramp, and you should too. 232 00:10:19,700 --> 00:10:22,417 Go to ramp.com to learn how they can help your business 233 00:10:22,500 --> 00:10:25,437 save time, save money, and grow revenue. 234 00:10:25,520 --> 00:10:29,477 That is ramp.com. So, when you started the firm 17 years ago, 235 00:10:29,560 --> 00:10:31,960 was your thesis exactly the same as it is today? 236 00:10:32,760 --> 00:10:34,660 - I'd say the core thesis is the same. 237 00:10:34,950 --> 00:10:37,750 The specifics have varied; they have changed enormously. 238 00:10:38,150 --> 00:10:39,737 We can talk about both parts of that. 239 00:10:39,820 --> 00:10:43,217 But yeah, no, the core thesis was kind of the startup, the entrepreneur, 240 00:10:43,300 --> 00:10:46,397 the founder is going to be the core engine of progress in the world, 241 00:10:46,480 --> 00:10:48,940 and I think that's more true than ever. 242 00:10:49,120 --> 00:10:51,307 In fact, when we started, it was still controversial, 243 00:10:51,390 --> 00:10:53,077 the idea that a founder would run their own company. 244 00:10:53,160 --> 00:10:54,910 - Even in 2008, 2009? - Yeah. Yeah. 245 00:10:55,300 --> 00:10:56,447 Well, it was still very controversial, 246 00:10:56,530 --> 00:10:58,887 and in fact, there were high-profile companies at the time 247 00:10:58,970 --> 00:10:59,867 that were getting heavily criticized 248 00:10:59,950 --> 00:11:03,100 for basically having these little kids running these companies. 249 00:11:03,240 --> 00:11:05,087 - Okay, so you have this encyclopedic knowledge 250 00:11:05,170 --> 00:11:06,757 of the history of Silicon Valley in your head. 251 00:11:06,840 --> 00:11:08,777 I probably read, I don't know, 30 to 40 books on it, 252 00:11:08,860 --> 00:11:11,050 so I have some level, but not that you do. 253 00:11:11,150 --> 00:11:13,077 I remember reading a book on Nolan Bushnell, founder of Atari, 254 00:11:13,160 --> 00:11:15,887 who was 27 at the time, and it was excessively rare. 255 00:11:15,970 --> 00:11:18,827 It talks about that. In his story, it's just excessively rare 256 00:11:18,910 --> 00:11:25,237 for him not to be replaced, once Atari started growing, with an older CEO. 257 00:11:25,320 --> 00:11:28,340 - Yeah. - Were there other examples before him? 258 00:11:28,500 --> 00:11:33,337 Well, so Christopher Columbus. Alexander the Great. 259 00:11:33,420 --> 00:11:36,527 - Yeah. Right? So, throughout history- - Yeah. 260 00:11:36,610 --> 00:11:38,427 - most of the... Thomas Jefferson. 261 00:11:38,510 --> 00:11:40,787 Throughout history, most of the great things that have been built 262 00:11:40,870 --> 00:11:43,687 have been built by this kind of super-charismatic founder type, 263 00:11:43,770 --> 00:11:46,957 you know, will to power founder type, who, basically, built and run something to... 264 00:11:47,040 --> 00:11:48,417 - Okay, hold on. - Henry Ford. 265 00:11:48,500 --> 00:11:50,507 - Hold on. I love that you went here because you don't remember this- - Yeah. 266 00:11:50,590 --> 00:11:52,077 - but we had dinner in Miami- - Mm-hmm. 267 00:11:52,160 --> 00:11:53,997 with Jared Kushner, a year ago or something, 268 00:11:54,080 --> 00:11:56,987 and me and you would wrestle because I was so excited to talk to you, 269 00:11:57,070 --> 00:11:59,027 and I was trying to get out of you like... 270 00:11:59,110 --> 00:12:01,257 Because I think about how history's greatest entrepreneurs all day. 271 00:12:01,340 --> 00:12:02,987 This is what I do seven days a week. 272 00:12:03,070 --> 00:12:06,197 Who are these entrepreneurs from history that you like? 273 00:12:06,280 --> 00:12:08,747 You just started naming country founders. - Yes, true. 274 00:12:08,830 --> 00:12:10,537 Exactly. There's this recency bias, right? 275 00:12:10,620 --> 00:12:13,247 Which is like the world that we live in today is the normal state of the world. 276 00:12:13,330 --> 00:12:15,447 And everything that happened in the past is weird and different, 277 00:12:15,530 --> 00:12:17,577 and those people were dumber than we are, and all screwed up. 278 00:12:17,660 --> 00:12:19,510 And it's like, well, maybe. - Mm-hmm. 279 00:12:20,100 --> 00:12:22,067 Or, maybe the world worked a certain way for thousands of years, 280 00:12:22,150 --> 00:12:23,487 and we're in the weird time. 281 00:12:23,570 --> 00:12:27,487 Maybe we're in a time that's just really unusual from a historical standpoint. 282 00:12:27,570 --> 00:12:30,707 And I think this is one of those dimensions in which that is true. 283 00:12:30,790 --> 00:12:33,577 It never would have occurred to anybody 100, 200, 300 years ago 284 00:12:33,660 --> 00:12:35,577 that if somebody was going to start something, 285 00:12:35,660 --> 00:12:38,047 that they were going to be the person who ran it, like obviously. 286 00:12:38,130 --> 00:12:39,377 It was just obviously the case. 287 00:12:39,460 --> 00:12:42,347 The book that I always recommend on this topic is called "The Machiavellians," 288 00:12:42,430 --> 00:12:46,537 which is this sort of famous book from the 1940s, by this guy James Burnham, 289 00:12:46,620 --> 00:12:49,220 who's one of the great geniuses of the 20th century. 290 00:12:50,000 --> 00:12:51,167 The way he describes it, basically, is he said, 291 00:12:51,250 --> 00:12:54,167 look, there have been two fundamental modes of business organization 292 00:12:54,250 --> 00:12:56,827 over the course of, basically, the history of capitalism. 293 00:12:56,910 --> 00:12:58,927 There's what he calls bourgeois capitalism, 294 00:12:59,010 --> 00:13:01,707 which, basically, is like the founder runs the company, name on the door. 295 00:13:01,790 --> 00:13:03,987 And the classic archetype for bourgeois capitalism 296 00:13:04,070 --> 00:13:07,117 was Henry Ford, in the 1920s, and today it's Elon Musk, right? 297 00:13:07,200 --> 00:13:08,367 It's just like, that's you. 298 00:13:08,450 --> 00:13:10,777 And by the way, in the old days, it was Ford Motor Company, 299 00:13:10,860 --> 00:13:12,287 you know, it's not Musk Motor Company. - Yeah. 300 00:13:12,370 --> 00:13:15,620 - But everybody knows Tesla and SpaceX, you know, these are Elon. 301 00:13:15,720 --> 00:13:17,717 And again, that maps to this historical thing, 302 00:13:17,800 --> 00:13:19,117 which is that's also how countries ran, 303 00:13:19,200 --> 00:13:21,850 and that's also how cities ran, and all these things. 304 00:13:22,270 --> 00:13:26,260 Religions, by the way. Basically, everything, founders led the way. 305 00:13:26,620 --> 00:13:27,407 That's the historical norm. 306 00:13:27,490 --> 00:13:29,417 And then what he basically says in this book is he goes through 307 00:13:29,500 --> 00:13:33,477 and he says that there's this new model that basically is an artifact, 308 00:13:33,560 --> 00:13:35,757 again, it's an artifact of kind of this weird period of time 309 00:13:35,840 --> 00:13:37,107 between the 1880s and 1920s, 310 00:13:37,190 --> 00:13:40,590 where kind of the modern world, as we know it today, kind of formed. 311 00:13:40,770 --> 00:13:42,367 And he said there's sort of a new philosophy 312 00:13:42,450 --> 00:13:45,850 of sort of leadership and management, which is called managerialism, 313 00:13:46,030 --> 00:13:47,807 sort of the rise of the concept of a manager. 314 00:13:47,890 --> 00:13:50,720 And specifically a manager as contrasted to a leader. 315 00:13:50,960 --> 00:13:53,727 And so, therefore, the manager, therefore, the idea of a management school. 316 00:13:53,810 --> 00:13:56,447 Right. - Mm-hmm. Therefore Harvard and Stanford Business Schools, right? 317 00:13:56,530 --> 00:14:00,430 Therefore, the idea of the manager who replaces the founder running a company. 318 00:14:00,700 --> 00:14:02,797 Therefore, the idea of management as a skill set 319 00:14:02,880 --> 00:14:05,527 that can be used to run many different kinds of businesses. 320 00:14:05,610 --> 00:14:07,687 In the '70s, this then turned into the conglomerate, 321 00:14:07,770 --> 00:14:09,667 which was the idea that it doesn't matter what the company does. 322 00:14:09,750 --> 00:14:13,250 If you have a good manager, the company should do 30 different things. 323 00:14:13,410 --> 00:14:14,787 And so managerialism is this idea 324 00:14:14,870 --> 00:14:16,817 that you have this kind of interchangeable management skill, 325 00:14:16,900 --> 00:14:18,447 and that that can basically run anything. 326 00:14:18,530 --> 00:14:19,907 And actually what Burnham says is he says, 327 00:14:19,990 --> 00:14:21,637 "Look, people are going to try to draw a value judgment on this, 328 00:14:21,720 --> 00:14:23,377 and they're going to try to say this is better or worse 329 00:14:23,460 --> 00:14:25,017 than the old name on the door model." 330 00:14:25,100 --> 00:14:27,817 But he said, "The reality of the modern world is everything is big." 331 00:14:27,900 --> 00:14:28,667 - Mm-hmm. 332 00:14:28,750 --> 00:14:32,297 - For the electrical power grid to get big, or the road network to get big, 333 00:14:32,380 --> 00:14:34,030 or the car industry to get big, 334 00:14:34,630 --> 00:14:36,917 large-scale systems need to be run by people who are trained 335 00:14:37,000 --> 00:14:38,697 in how to run large-scale systems. 336 00:14:38,780 --> 00:14:39,967 And so he said, "You may or may not..." 337 00:14:40,050 --> 00:14:40,907 And the same thing with countries. 338 00:14:40,990 --> 00:14:42,207 Large-scale countries are going to need to be run 339 00:14:42,290 --> 00:14:44,497 by people who are good at running large-scale things, right? 340 00:14:44,580 --> 00:14:47,747 And the founding personality type is not the manager personality type. 341 00:14:47,830 --> 00:14:48,397 Those are different. 342 00:14:48,480 --> 00:14:50,717 And so there's going to be a handoff when things get big and complicated. 343 00:14:50,800 --> 00:14:52,807 And so that's the model that Nolan Bushnell talks about, 344 00:14:52,890 --> 00:14:55,847 and that's the model that dominated Silicon Valley for 50 years. 345 00:14:55,930 --> 00:14:56,987 The problem with his argument 346 00:14:57,070 --> 00:14:59,117 is that assumes the managers are going to do a good job. 347 00:14:59,200 --> 00:15:02,157 - Mm-hmm. - Right? And I think if there's one dominant theme that we're seeing 348 00:15:02,240 --> 00:15:06,797 in the last 30 years, in the West for sure is that managers, generally, writ large 349 00:15:06,880 --> 00:15:08,390 are not doing a great job. 350 00:15:08,870 --> 00:15:11,577 Or another way to put it is the managers maybe are good at managing 351 00:15:11,660 --> 00:15:13,817 something that's going to be status quo for a long time. 352 00:15:13,900 --> 00:15:17,047 - Mm-hmm. If it doesn't change, maybe they can run the banks for a long time, 353 00:15:17,130 --> 00:15:18,457 or they can run the power company for a long time, 354 00:15:18,540 --> 00:15:21,790 or the car company, and as long as the car is the car is the car, 355 00:15:21,910 --> 00:15:24,460 or soup is soup is soup, it kind of doesn't matter. 356 00:15:24,750 --> 00:15:28,230 But the minute things change, the manager personality type, 357 00:15:28,540 --> 00:15:29,977 because it's not the founder personality type, 358 00:15:30,060 --> 00:15:31,887 it doesn't know how to deal with change. 359 00:15:31,970 --> 00:15:32,587 Not everything is changing. 360 00:15:32,670 --> 00:15:34,117 A lot of things aren't changing, but for the things that are changing, 361 00:15:34,200 --> 00:15:36,147 they're changing like really, really quickly. 362 00:15:36,230 --> 00:15:39,120 I mean, SpaceX is like the classic example of this. 363 00:15:39,400 --> 00:15:41,647 Imagine being a professionally trained manager, 364 00:15:41,730 --> 00:15:43,927 trained at a top management school, 365 00:15:44,010 --> 00:15:47,550 working for a rocket launch company, competing with SpaceX. 366 00:15:48,140 --> 00:15:51,317 And the assumption of the entire rocket industry for the last 100 years 367 00:15:51,400 --> 00:15:54,150 has been the rockets are used once, and then that's it. 368 00:15:54,240 --> 00:15:55,477 And the economics of launch are dominated 369 00:15:55,560 --> 00:15:56,907 by having to build a new rocket every time. 370 00:15:56,990 --> 00:15:59,387 And then, this crazy guy in California comes up with this thing 371 00:15:59,470 --> 00:16:01,067 where the rockets land on their butt. 372 00:16:01,150 --> 00:16:02,500 And you can't replicate it. 373 00:16:03,340 --> 00:16:04,087 Okay, your management skills... 374 00:16:04,170 --> 00:16:05,747 Like, what good are your management skills at that point? 375 00:16:05,830 --> 00:16:08,677 And I think there's like a whole bunch of interesting areas 376 00:16:08,760 --> 00:16:11,200 of human activity where that shift is happening. 377 00:16:11,430 --> 00:16:13,777 And so, I think this is where Burnham's thesis collapses, 378 00:16:13,860 --> 00:16:15,877 where it's just like, okay, the managers actually can't do it. 379 00:16:15,960 --> 00:16:18,157 Yep. Yes, there's a need to run things at scale, 380 00:16:18,240 --> 00:16:20,457 but no, the managers actually can't do it because they can't adapt. 381 00:16:20,540 --> 00:16:22,257 - And the founder can just learn how to run things to scale. 382 00:16:22,340 --> 00:16:24,067 - Well, that's the theory, and that's a big part of our theories, 383 00:16:24,150 --> 00:16:25,577 yeah, the founders can actually learn how to do this. 384 00:16:25,660 --> 00:16:28,557 And look, this is still a controversial topic. 385 00:16:28,640 --> 00:16:30,600 This still comes up because... 386 00:16:31,330 --> 00:16:33,177 - Is it controversial? - Well, it is because founders aren't necessarily... 387 00:16:33,260 --> 00:16:35,747 Especially, founders on day one are not good at doing this. 388 00:16:35,830 --> 00:16:38,787 Okay, so in tech, let's just talk about tech specifically, 389 00:16:38,870 --> 00:16:42,857 in tech, the founder tends to have been in a lab, literally or metaphorically, 390 00:16:42,940 --> 00:16:44,347 for 20 years before they start their company. 391 00:16:44,430 --> 00:16:47,550 They've been probably working by themselves with a small team. 392 00:16:47,970 --> 00:16:50,167 They've been building technology. They haven't been running things. 393 00:16:50,250 --> 00:16:52,397 They haven't been managing large organizations. 394 00:16:52,480 --> 00:16:54,287 They haven't been running public companies. 395 00:16:54,370 --> 00:16:56,327 And so, there is a missing skill set, right? 396 00:16:56,410 --> 00:16:58,337 And on day one, they don't know how to do that. 397 00:16:58,420 --> 00:17:01,370 And so, they do need to be willing to learn how to do that. 398 00:17:01,550 --> 00:17:03,537 And then, by the way, they do need to be capable of doing that 399 00:17:03,620 --> 00:17:06,020 because some of them can and some of them can't. 400 00:17:06,360 --> 00:17:08,827 So this, maybe, is like the core thesis behind our firm, 401 00:17:08,910 --> 00:17:13,627 which is, you're much more likely to build something important in the 21st century 402 00:17:13,710 --> 00:17:16,317 if you start with the founder and train them on management, 403 00:17:16,400 --> 00:17:17,607 than you are to start with the manager 404 00:17:17,690 --> 00:17:21,200 and try to train them on being a founder, on creating new things. 405 00:17:21,610 --> 00:17:23,667 And I think that this trend is intensifying. 406 00:17:23,750 --> 00:17:25,487 Because what's happening is all the old edifices, 407 00:17:25,570 --> 00:17:28,717 all the old incumbent institutions of the last 100 years that are run by managers, 408 00:17:28,800 --> 00:17:31,300 they're all in some state of fundamental collapse. 409 00:17:31,470 --> 00:17:35,120 They're all collapsing in trust and credibility because they can't adapt. 410 00:17:35,670 --> 00:17:38,097 And so, this issue is becoming more and more acute, 411 00:17:38,180 --> 00:17:41,027 which is the system that we thought was necessary and sufficient, 412 00:17:41,110 --> 00:17:43,090 actually, just does not work. 413 00:17:43,350 --> 00:17:45,697 And if anything good is going to happen, it's going to have to be somebody, 414 00:17:45,780 --> 00:17:48,847 it's going to have to be a Henry Ford, Elon Musk type who actually does it. 415 00:17:48,930 --> 00:17:52,570 - You think it's in a vast minority of people agree with you? 416 00:17:52,950 --> 00:17:53,817 - Look, it's becoming more common. 417 00:17:53,900 --> 00:17:55,417 I mean, when you get an Elon Musk and a Steve Jobs, 418 00:17:55,500 --> 00:17:57,217 when you get these kind of archetypal examples of it, 419 00:17:57,300 --> 00:18:01,767 it's a lot easier to sell it. Mark Zuckerberg, we were talking about earlier, 420 00:18:01,850 --> 00:18:04,290 he's now a great case study of this, right? 421 00:18:05,690 --> 00:18:08,917 When Mark started Facebook, he had never had a job before. - Yeah. 422 00:18:09,000 --> 00:18:11,730 - Okay. Not only had he not managed people, 423 00:18:11,990 --> 00:18:13,767 he had not worked for anybody, right? 424 00:18:13,850 --> 00:18:17,127 And so he started with zero, and his learning curve, 425 00:18:17,210 --> 00:18:19,317 which, by the way, happened fully in the public eye, right? 426 00:18:19,400 --> 00:18:21,497 His learning curve was vertical. And by the way, it's still vertical. 427 00:18:21,580 --> 00:18:23,007 He spends an enormous amount of time 428 00:18:23,090 --> 00:18:26,640 learning how to become better at running these things at a large scale. 429 00:18:26,870 --> 00:18:28,257 He's still the founder, and he's still the innovator, 430 00:18:28,340 --> 00:18:30,207 and he's still like a fountain of ideas on what to do. 431 00:18:30,290 --> 00:18:34,307 So, he's like the classic example of the double threat. 432 00:18:34,390 --> 00:18:36,197 And then what happens is other founders look at that 433 00:18:36,280 --> 00:18:38,847 and they're like, "Oh, I could do that." Right? 434 00:18:38,930 --> 00:18:41,517 - Which is exactly what Steve Jobs said when he saw Nolan Bushnell. 435 00:18:41,600 --> 00:18:42,927 - Exactly. - "I can run my company." 436 00:18:43,010 --> 00:18:44,157 - "I can do that." Yeah, exactly. - Yeah. 437 00:18:44,240 --> 00:18:46,917 And by the way, it's amazing how fast this stuff shifted, 438 00:18:47,000 --> 00:18:49,497 because Steve famously had this short period of time 439 00:18:49,580 --> 00:18:51,857 where he worked for Hewlett-Packard, and I think, I don't know if it's true. 440 00:18:51,940 --> 00:18:54,347 The legend is that Jobs pitched his manager at Hewlett-Packard... 441 00:18:54,430 --> 00:18:56,587 - No, Wozniak pitched him. - Was it Wozniak? Okay. All right. - Yeah, Wozniak. 442 00:18:56,670 --> 00:18:57,407 - Okay, okay. Wozniak pitched. - Yeah. 443 00:18:57,490 --> 00:18:59,787 There was some other story where Jobs went into a meeting 444 00:18:59,870 --> 00:19:03,047 with some manager trying to pitch the thing, and the line from the manager was, 445 00:19:03,130 --> 00:19:05,157 "Absolutely not. This is the dumbest idea I've ever heard. 446 00:19:05,240 --> 00:19:07,387 Get your feet off my desk and get out of here." Right? 447 00:19:07,470 --> 00:19:09,137 You can just imagine Steve with his... 448 00:19:09,220 --> 00:19:10,677 - And they had to be bare feet at that time. 449 00:19:10,760 --> 00:19:17,097 - Oh, probably. - My favorite Apple lore is that the first sale in Apple's history 450 00:19:17,180 --> 00:19:20,680 was made barefoot. When he walked into the Byte Shop, he was barefoot. 451 00:19:21,500 --> 00:19:22,377 - What's amazing about that is, 452 00:19:22,460 --> 00:19:25,110 yeah, so Wozniak for sure worked for Hewlett-Packard. 453 00:19:25,350 --> 00:19:26,627 Everything I'm describing was Hewlett-Packard 454 00:19:26,710 --> 00:19:29,147 in the 1950s, 1960s, and 1940s. 455 00:19:29,230 --> 00:19:32,437 That was also Dave Packard and Bill Hewlett were that founder type. - Yeah. 456 00:19:32,520 --> 00:19:35,097 And Dave Packard and Bill Hewlett ran their company, 457 00:19:35,180 --> 00:19:36,717 between the two of them, for 50 years. 458 00:19:36,800 --> 00:19:37,827 - Do you think that's the most... - And, by the way, 459 00:19:37,910 --> 00:19:40,097 Silicon Valley was built, in large part, on HP. 460 00:19:40,180 --> 00:19:42,330 HP was the original Silicon Valley company. 461 00:19:42,550 --> 00:19:44,087 - Okay, that's the next question. - And it was run by its founders 462 00:19:44,170 --> 00:19:45,787 for 50 years, and yet, people concluded 463 00:19:45,870 --> 00:19:47,257 the founders shouldn't run the companies, right? 464 00:19:47,340 --> 00:19:50,357 And so, it's one of those things where it's like it's kind of so obvious, 465 00:19:50,440 --> 00:19:51,467 it was staring everybody in the face, 466 00:19:51,550 --> 00:19:54,217 and so people had to construct kind of, basically, 467 00:19:54,300 --> 00:19:56,857 these elaborate kind of lattices of theories 468 00:19:56,940 --> 00:19:58,557 to basically get around the fundamental fact 469 00:19:58,640 --> 00:20:01,097 that you need somebody who knows what to do, actually running the thing. 470 00:20:01,180 --> 00:20:02,057 - Do you think HP might have been 471 00:20:02,140 --> 00:20:05,200 the most influential company in Silicon Valley history? 472 00:20:05,390 --> 00:20:09,860 It was, for sure, the most influential company from 1940 to 1980, 473 00:20:10,140 --> 00:20:11,990 and then probably after that, Intel. 474 00:20:12,460 --> 00:20:15,267 - Well, go to the founders of Intel- - Yeah. - and you read biographies of them 475 00:20:15,350 --> 00:20:17,697 and they talk about modeling off of HP. 476 00:20:17,780 --> 00:20:19,047 - Yeah, that's right. That's right. Yeah, that's right. 477 00:20:19,130 --> 00:20:22,397 - And then how many founders modeled off of Bob Noyce and Intel 478 00:20:22,480 --> 00:20:23,177 after the fact- - Yeah, yeah. 479 00:20:23,260 --> 00:20:26,007 - including Steve Jobs, who would go to Bob Noyce's house for dinner. 480 00:20:26,090 --> 00:20:26,617 - Yeah. That's right. 481 00:20:26,700 --> 00:20:29,357 By the way, that's another great example, because Bob Noyce, at least, you know... 482 00:20:29,440 --> 00:20:30,497 If you look at photos of Bob Noyce, you're like, 483 00:20:30,580 --> 00:20:32,730 "Wow, this guy's like a pillar of society." 484 00:20:33,000 --> 00:20:34,617 He's very well-dressed, and he's kind of very adult, 485 00:20:34,700 --> 00:20:38,140 and he's famously the leader of the Traitorous Eight. 486 00:20:38,240 --> 00:20:41,627 - Yeah. You know, they're the group that left Shockley to start Fairchild, 487 00:20:41,710 --> 00:20:43,107 - And then left Fairchild to start Intel. - and then left Fairchild 488 00:20:43,190 --> 00:20:43,707 to start Intel. - Yeah, exactly. 489 00:20:43,790 --> 00:20:46,417 - And so Bob Noyce was 100% the Steve Jobs of his time, 490 00:20:46,500 --> 00:20:49,297 just in the short-sleeve white dress shirt and the skinny black tie. 491 00:20:49,380 --> 00:20:50,213 - Yeah. 492 00:20:50,380 --> 00:20:51,997 Again, it's like the exact same thing. 493 00:20:52,080 --> 00:20:54,787 And so, I unfortunately never met Bob Noyce, 494 00:20:54,870 --> 00:20:57,677 but I could easily imagine Bob Noyce and Steve Jobs sitting down 495 00:20:57,760 --> 00:21:00,247 and being able to talk for three hours, and completely understanding each other 496 00:21:00,330 --> 00:21:02,857 despite the fact that the look and feel is completely unlike. 497 00:21:02,940 --> 00:21:06,557 - He was almost like a disciplinarian to Steve because Steve was wild and reckless. 498 00:21:06,640 --> 00:21:08,637 I was also wild and reckless. You need to mature. 499 00:21:08,720 --> 00:21:12,440 And I think Bob's wife, maybe, went to work at Apple early on, too. 500 00:21:13,070 --> 00:21:15,460 He talked about this in his biography. 501 00:21:15,780 --> 00:21:16,957 There's a few great biographies of Bob Noyce, 502 00:21:17,040 --> 00:21:20,217 but he said that the reason he spent so much time after he was really successful 503 00:21:20,300 --> 00:21:21,447 spending time with young entrepreneurs, 504 00:21:21,530 --> 00:21:25,137 he said it was restocking the stream in which he fished from. 505 00:21:25,220 --> 00:21:27,137 - Amazing. - He thought it was really important, and he's like, 506 00:21:27,220 --> 00:21:28,607 "I learned from all the guys before me. 507 00:21:28,690 --> 00:21:31,247 I need to take that knowledge I've built up over multiple decades 508 00:21:31,330 --> 00:21:32,980 and push it down the generation." 509 00:21:33,090 --> 00:21:35,267 I want to go back to starting the firm, though. This is interesting. 510 00:21:35,350 --> 00:21:38,137 What was occurring in your life, either at that time or before that, 511 00:21:38,220 --> 00:21:40,970 that you had this observation that this had to be done? 512 00:21:42,820 --> 00:21:43,847 - We've got all these elaborate theories. 513 00:21:43,930 --> 00:21:45,997 The practical reality of it was, my partner Ben, and I, 514 00:21:46,080 --> 00:21:48,030 had become very active angel investors. 515 00:21:48,430 --> 00:21:50,667 And I'd been an angel investor since the mid '90s, 516 00:21:50,750 --> 00:21:54,527 but then Ben and I started doing it kind of as a real thing, 517 00:21:54,610 --> 00:21:57,157 putting significant time into it, probably starting in 2003. 518 00:21:57,240 --> 00:22:00,740 Well, I did it kind of throughout the early 2000s, but 2003, 2004. 519 00:22:01,120 --> 00:22:03,317 It's hard to remember now, but if you go back to 2003, 2004, 520 00:22:03,400 --> 00:22:05,037 there weren't thousands of angel investors. 521 00:22:05,120 --> 00:22:09,480 There were like eight. It was like Ron Conway and a handful of people. 522 00:22:09,830 --> 00:22:11,697 And then Ben and I were running around doing it. 523 00:22:11,780 --> 00:22:14,297 And this was very significant in the evolution of the venture capital industry, 524 00:22:14,380 --> 00:22:16,377 because this was the point at which the traditional VCs 525 00:22:16,460 --> 00:22:18,627 got disintermediated by angels and seed investors, 526 00:22:18,710 --> 00:22:20,897 who kind of inserted in before the VCs arrived, 527 00:22:20,980 --> 00:22:23,797 which was this fundamental change that changed the whole industry. 528 00:22:23,880 --> 00:22:25,200 But we were part of that. 529 00:22:25,880 --> 00:22:28,087 But as a consequence, we were investing in all these new companies, 530 00:22:28,170 --> 00:22:29,377 basically, at the point of formation. 531 00:22:29,460 --> 00:22:31,910 We were basically playing amateur early-stage VC. 532 00:22:32,740 --> 00:22:34,797 And we were always like, "We're not going on the board. 533 00:22:34,880 --> 00:22:37,177 You're going to raise money from a real venture firm later. 534 00:22:37,260 --> 00:22:38,877 They're going to go on your board and whatever and work with you." 535 00:22:38,960 --> 00:22:41,007 And what we just found, over and over and over and over again, 536 00:22:41,090 --> 00:22:43,447 was we ended up getting pulled into these companies, 537 00:22:43,530 --> 00:22:44,847 either because there were issues that, 538 00:22:44,930 --> 00:22:47,177 just like the other people that they were working with, 539 00:22:47,260 --> 00:22:50,307 or they either hadn't raised venture yet, 540 00:22:50,390 --> 00:22:52,837 or the VCs that they'd raised from couldn't help them with. 541 00:22:52,920 --> 00:22:53,957 And so we just got pulled in, 542 00:22:54,040 --> 00:22:57,840 and the reason was we had been running companies at that point for 20 years. 543 00:22:59,260 --> 00:23:01,337 We at least had some idea of what we were doing. 544 00:23:01,420 --> 00:23:04,537 And then the other was we kept getting brought in to do conflict resolution 545 00:23:04,620 --> 00:23:06,997 between the founders and the VCs, right? 546 00:23:07,080 --> 00:23:07,913 - Yeah. 547 00:23:10,150 --> 00:23:11,927 - Especially because, again, much more common at that time, 548 00:23:12,010 --> 00:23:13,527 especially if the VC's fundamental point of view 549 00:23:13,610 --> 00:23:14,637 is the founder's not going to run the company, 550 00:23:14,720 --> 00:23:17,577 and we need to replace you with a professional manager as fast as possible. 551 00:23:17,660 --> 00:23:20,227 The founders are not necessarily going to like that, and they might resist that, 552 00:23:20,310 --> 00:23:22,517 and by the way, even if they're on board with that idea, 553 00:23:22,600 --> 00:23:25,637 they might not like the person who the VC wants to bring in. 554 00:23:25,720 --> 00:23:27,667 And so, we kept ending up in these kinds of, basically, 555 00:23:27,750 --> 00:23:29,510 as arbitrators in this sort of... 556 00:23:30,000 --> 00:23:31,997 And in theory, we were kind of trusted intermediaries 557 00:23:32,080 --> 00:23:33,827 because we knew the founders, we knew the VCs, 558 00:23:33,910 --> 00:23:35,697 and we could kind of help bridge between that. 559 00:23:35,780 --> 00:23:36,907 But literally, what happened was after a while, 560 00:23:36,990 --> 00:23:40,287 we were spending like eight hours a day just doing this. 561 00:23:40,370 --> 00:23:42,477 And we're like, "All right." And, it's like weird. 562 00:23:42,560 --> 00:23:43,807 It's like you're writing a 100,000 dollar check, 563 00:23:43,890 --> 00:23:46,687 and you're spending all this time doing it and then to basically arbitrate it 564 00:23:46,770 --> 00:23:48,907 with somebody who wrote a 10 million dollar check. 565 00:23:48,990 --> 00:23:50,067 And it's just like, all right, 566 00:23:50,150 --> 00:23:53,050 we should probably just write the 10 million dollar check. 567 00:23:53,770 --> 00:23:56,967 So, I always think like the founders, 568 00:23:57,050 --> 00:23:58,957 always one of my theories of the great founders is, 569 00:23:59,040 --> 00:24:02,407 they tend to be able to operate at kind of a strategic, conceptual level 570 00:24:02,490 --> 00:24:04,377 and then the practical level at the same time. 571 00:24:04,460 --> 00:24:06,847 And so, we had a whole theory I could take you through 572 00:24:06,930 --> 00:24:08,507 for the evolution of the venture business. - Please do. 573 00:24:08,590 --> 00:24:11,057 - Yeah. But underneath that was just this actual... 574 00:24:11,140 --> 00:24:13,937 The lived experience of what was actually happening on the ground. 575 00:24:14,020 --> 00:24:16,347 The big theory of the firm that we had at that time 576 00:24:16,430 --> 00:24:20,087 was linked to this idea of founders running the show, 577 00:24:20,170 --> 00:24:21,367 but it was also a structural observation 578 00:24:21,450 --> 00:24:24,207 of what was happening in the venture industry, which was... 579 00:24:24,290 --> 00:24:26,757 Basically, what we did was we sort of, in line with your philosophy, 580 00:24:26,840 --> 00:24:27,777 we went back and we studied 581 00:24:27,860 --> 00:24:31,717 a lot of other businesses that have similarities to the venture business. 582 00:24:31,800 --> 00:24:36,277 And so, we studied private equity, hedge funds, investment banks, 583 00:24:36,360 --> 00:24:40,530 law firms, management consulting firms, ad agencies, accounting firms. 584 00:24:40,890 --> 00:24:44,777 You know, basically anything where the product is fundamentally a relationship, 585 00:24:44,860 --> 00:24:46,947 a knowledge work, kind of relationship 586 00:24:47,030 --> 00:24:49,750 as compared to something that gets manufactured. 587 00:24:50,070 --> 00:24:52,287 And what we observed is, basically, an example, 588 00:24:52,370 --> 00:24:53,917 Hollywood talent agencies actually is the one 589 00:24:54,000 --> 00:24:55,327 we've probably talked publicly about the most, 590 00:24:55,410 --> 00:24:56,997 and so that was a great case study. - Ovitz. 591 00:24:57,080 --> 00:25:00,027 - Oh, the Ovitz story. - He was in this studio a few months ago. 592 00:25:00,110 --> 00:25:01,110 - Fantastic. - Yeah. 593 00:25:01,510 --> 00:25:04,327 And by the way, we make a point of crediting, 594 00:25:04,410 --> 00:25:06,667 he gave us a lot of this theory, so a lot of this comes from him. 595 00:25:06,750 --> 00:25:11,200 But, well, actually I'll tell it through his experience. 596 00:25:11,460 --> 00:25:15,427 So, when he started his agency in, was it 80-whatever? 597 00:25:15,510 --> 00:25:18,547 No, 75? 75. - In the 70s, I think, yeah. - In the 70s, like in the mid-70s. 598 00:25:18,630 --> 00:25:19,957 It was actually very similar. 599 00:25:20,040 --> 00:25:23,727 Structurally, it was very similar to when we started A16Z in 2009, 600 00:25:23,810 --> 00:25:26,247 which was the configuration of the industry at that point 601 00:25:26,330 --> 00:25:30,067 was basically a bunch of essentially service firms, a bunch of talent agencies, 602 00:25:30,150 --> 00:25:32,150 none of which were at a very high scale. 603 00:25:32,530 --> 00:25:33,287 And then each of them was, basically, 604 00:25:33,370 --> 00:25:36,760 a tribe of basically solo operators and kind of lone wolves. 605 00:25:38,210 --> 00:25:41,697 So, the concept in Hollywood was you had an agent, and that was your guy. 606 00:25:41,780 --> 00:25:44,037 And that agent knew whoever that agent knew, 607 00:25:44,120 --> 00:25:46,187 and had whatever relationships that agent had. 608 00:25:46,270 --> 00:25:49,717 But the other agents at your agency were not available to you, 609 00:25:49,800 --> 00:25:52,677 and there was no collective benefit to the fact that you were at an agency 610 00:25:52,760 --> 00:25:54,787 that had not just your guy, but like a hundred other guys. 611 00:25:54,870 --> 00:25:56,737 There was no collective payoff to that. 612 00:25:56,820 --> 00:25:58,447 They ran that in that way for a very specific reason, 613 00:25:58,530 --> 00:26:01,037 which was this kind of this, "Eat what you kill" professional services mentality, 614 00:26:01,120 --> 00:26:04,107 where everybody should have to go build their own book of business. 615 00:26:04,190 --> 00:26:06,217 But you end up just dealing with a guy as opposed to a firm. 616 00:26:06,300 --> 00:26:08,467 Like, there's no firm, there's no collective thing. 617 00:26:08,550 --> 00:26:11,577 And that was basically the condition of venture capital in 2009, 618 00:26:11,660 --> 00:26:12,407 which is you have... 619 00:26:12,490 --> 00:26:16,277 And at this point, we knew all the VCs really well, and we had raised venture, 620 00:26:16,360 --> 00:26:19,467 and we had worked with all these other companies that had raised venture. 621 00:26:19,550 --> 00:26:23,657 And basically, all of the sort of legacy venture firms at that point, 622 00:26:23,740 --> 00:26:26,097 they were all like that. They were all just like tribes of lone wolves. 623 00:26:26,180 --> 00:26:28,907 And then, the thing that we knew that was not publicly known was, 624 00:26:28,990 --> 00:26:31,047 generally speaking, inside the firms, they didn't even like each other. 625 00:26:31,130 --> 00:26:33,130 - Oh, I hear stories like this all time. 626 00:26:33,830 --> 00:26:37,600 - Right. And so it's like, whatever, there's Joe and Mary, 627 00:26:37,800 --> 00:26:39,907 who are partners at a venture firm, and you're working with Joe, 628 00:26:39,990 --> 00:26:42,247 and Mary has a key connection that you need access to. 629 00:26:42,330 --> 00:26:44,337 And so, you ask Joe, "Can Mary introduce me to so and so?" 630 00:26:44,420 --> 00:26:46,537 And what you don't know is they're having like a brutal fight, 631 00:26:46,620 --> 00:26:50,037 where they're trying to destroy each other because they're fundamentally economics. 632 00:26:50,120 --> 00:26:53,450 They're going for a greater slice of the profit pool. 633 00:26:53,900 --> 00:26:54,677 And so they're really going at it. 634 00:26:54,760 --> 00:26:57,127 And so, we saw example after example of a venture firm 635 00:26:57,210 --> 00:26:59,407 that was, basically, either two things, actually. 636 00:26:59,490 --> 00:27:02,947 One, it's either melting down due to just internal strife and conflict. 637 00:27:03,030 --> 00:27:04,827 Or by the way, the other was generational succession, right? 638 00:27:04,910 --> 00:27:07,767 The other issue is a lot of the dominant venture firms in 2009 639 00:27:07,850 --> 00:27:09,487 had been around for 30 or 40 years, 640 00:27:09,570 --> 00:27:11,247 and they were now on their third generation of partners 641 00:27:11,330 --> 00:27:13,580 going to their fourth generation of partners. 642 00:27:13,940 --> 00:27:14,897 And again, it's the same thing. 643 00:27:14,980 --> 00:27:16,567 They had been founded by dynamos, 644 00:27:16,650 --> 00:27:20,697 and then, the later generation people were not like that. 645 00:27:20,780 --> 00:27:23,487 So, we basically said, "Oh." This is where the Ovitz thing comes in, is we said, 646 00:27:23,570 --> 00:27:24,547 "Look, that's not going to last." 647 00:27:24,630 --> 00:27:28,407 And so our theory of it was what we call death of the middle, or we sometimes... 648 00:27:28,490 --> 00:27:30,147 The negative way to frame it is death of the middle. 649 00:27:30,230 --> 00:27:31,830 The positive way is the barbell, 650 00:27:32,050 --> 00:27:33,347 which is what's happened in all these other industries, 651 00:27:33,430 --> 00:27:36,630 which is basically the industry gets stretched apart like taffy. 652 00:27:37,530 --> 00:27:40,937 And what you get is you get this barbell thing, and on one side of the barbell, 653 00:27:41,020 --> 00:27:44,860 you get early-stage angel seed investors who are really like first money in, 654 00:27:44,960 --> 00:27:47,487 staying very light on their feet, writing a relatively small check, 655 00:27:47,570 --> 00:27:51,407 but being involved in companies extremely early on, taking a lot of risk. 656 00:27:51,490 --> 00:27:54,117 And then on the other side, you get basically scaled platforms, right? 657 00:27:54,200 --> 00:27:57,747 So, you get large-scale enterprises that have a lot of throw weight, 658 00:27:57,830 --> 00:28:01,147 a lot of access, very big networks, and then access to a lot of money. 659 00:28:01,230 --> 00:28:03,377 The other comparison we always make is to retail shopping, right? 660 00:28:03,460 --> 00:28:06,337 Which is, there used to be department stores like Sears and J.C. Penney, 661 00:28:06,420 --> 00:28:08,857 which basically, where the brand promise was 662 00:28:08,940 --> 00:28:11,757 a pretty good selection of products at pretty good prices, right? 663 00:28:11,840 --> 00:28:13,517 And now, those are dead. 664 00:28:13,600 --> 00:28:16,697 And what you have instead are boutiques like the Gucci store or the Apple store, 665 00:28:16,780 --> 00:28:19,097 and then you've got this super scale e-commerce companies 666 00:28:19,180 --> 00:28:20,530 like Walmart and Amazon. 667 00:28:20,790 --> 00:28:22,227 We're to the point where it's just like, there's no reason 668 00:28:22,310 --> 00:28:25,057 to ever go to a department store because it's got less selection 669 00:28:25,140 --> 00:28:28,127 than Walmart and Amazon, but it doesn't have the quality tier 670 00:28:28,210 --> 00:28:30,257 and the special experience of a Gucci or Apple store. 671 00:28:30,340 --> 00:28:31,727 - But you had that thought in mind- - Yeah. 672 00:28:31,810 --> 00:28:32,917 - when you started A16Z? - Yeah, 100%. 673 00:28:33,000 --> 00:28:34,287 Yeah. Exactly. Yeah. - Wow, okay. 674 00:28:34,370 --> 00:28:36,137 - It was a conceptual leap for venture capital at the time, 675 00:28:36,220 --> 00:28:37,917 but the exact same thing had happened to private equity. 676 00:28:38,000 --> 00:28:39,477 The exact same thing had happened in hedge funds. 677 00:28:39,560 --> 00:28:40,907 The exact same thing had happened in investment. 678 00:28:40,990 --> 00:28:42,737 - And you knew that by what? Just reading about the issue? - Reading. 679 00:28:42,820 --> 00:28:45,217 So, the investment banks are the classic example. 680 00:28:45,300 --> 00:28:49,057 So, if you read about the sort of the original investment banks in the US, 681 00:28:49,140 --> 00:28:52,257 between 1880 and 1920, they were all like boutique venture capital firms 682 00:28:52,340 --> 00:28:54,220 in the 1970s, 1980s, in the US. 683 00:28:54,600 --> 00:28:57,377 It was like 20 guys. - These are more like merchant bankers. 684 00:28:57,460 --> 00:29:00,397 - Yeah. Well, and so, the classic stories which I love so much, 685 00:29:00,480 --> 00:29:03,307 so J.P. Morgan's one of my kind of favorite historical figures. 686 00:29:03,390 --> 00:29:05,957 And J.P. Morgan was an example that. 687 00:29:06,040 --> 00:29:09,857 The J.P. Morgan investment bank was basically very important, 688 00:29:09,940 --> 00:29:12,047 but it was like this tiny little operation. 689 00:29:12,130 --> 00:29:14,727 It fit in a single office. It was, I don't know, probably 20 principals 690 00:29:14,810 --> 00:29:17,790 and some office staff or something. It was not large. 691 00:29:18,030 --> 00:29:22,930 And actually, the hidden secret to J.P. Morgan was he was the son. 692 00:29:23,380 --> 00:29:25,317 The father was Junius Morgan. 693 00:29:25,400 --> 00:29:28,377 - Okay. I literally, when you were talking, I was like, wait, 694 00:29:28,460 --> 00:29:29,887 it was shocking that you would say pick him 695 00:29:29,970 --> 00:29:32,787 because I actually found his father a more formidable individual than him. 696 00:29:32,870 --> 00:29:36,267 - Yeah, he was. So, he was, which is almost always the case 697 00:29:36,350 --> 00:29:37,377 with any famous public figure, 698 00:29:37,460 --> 00:29:39,877 is the father is almost always a more interesting story, 699 00:29:39,960 --> 00:29:41,077 which a lot of examples of that. 700 00:29:41,160 --> 00:29:44,337 But however, yeah, so Junius Morgan and then J.P. Morgan has filled 701 00:29:44,420 --> 00:29:46,767 a specific economic role that's gotten lost in history, 702 00:29:46,850 --> 00:29:48,777 which is basically Junius Morgan... 703 00:29:48,860 --> 00:29:51,827 The Junius Morgan Bank was in London. The J.P. Morgan Bank was in New York. 704 00:29:51,910 --> 00:29:53,357 And what the Morgan family was doing 705 00:29:53,440 --> 00:29:56,267 was they were funneling money from the old slow-growth economy of Europe 706 00:29:56,350 --> 00:29:57,577 into the new high-growth- - Yes. 707 00:29:57,660 --> 00:29:59,727 - economy of the US. But again, it was exactly your point, 708 00:29:59,810 --> 00:30:02,370 like it was this little boutique family operation. 709 00:30:03,020 --> 00:30:04,327 The other great thing about that era of history 710 00:30:04,410 --> 00:30:07,600 is they were all bifurcated by religion. 711 00:30:08,320 --> 00:30:12,177 - Yeah. - So, they were the Protestant investment banks, and there were the 712 00:30:12,260 --> 00:30:13,437 Jewish investment banks. - Yeah. 713 00:30:13,520 --> 00:30:15,807 - And they did not mix. - No, not at all. 714 00:30:15,890 --> 00:30:16,657 - Completely different worlds. 715 00:30:16,740 --> 00:30:19,887 And as a consequence, the Protestant banks like J.P. Morgan 716 00:30:19,970 --> 00:30:21,147 were able to fund the railroads, 717 00:30:21,230 --> 00:30:23,147 which were considered the real businesses at the time. 718 00:30:23,230 --> 00:30:25,457 - Yeah. - But then, all the disreputable stuff 719 00:30:25,540 --> 00:30:27,537 like movie companies and department stores, 720 00:30:27,620 --> 00:30:29,617 those are all the Jewish investment banks. 721 00:30:29,700 --> 00:30:32,337 By the way, almost entirely Jewish founders with like... 722 00:30:32,420 --> 00:30:35,757 And then, J.P. Morgan is the big survivor of that today 723 00:30:35,840 --> 00:30:36,827 in the form of J.P. Morgan Chase. 724 00:30:36,910 --> 00:30:40,847 And then, on the Jewish side, it's Goldman Sachs is the great survivor. 725 00:30:40,930 --> 00:30:42,307 But again, if you go back, there were... 726 00:30:42,390 --> 00:30:45,177 - You consider that the barbell in investment banking. 727 00:30:45,260 --> 00:30:48,497 You have the J.P. Morgan, kind of like family partnership, 728 00:30:48,580 --> 00:30:50,647 and then you have the complete scale of like Goldman Sachs. 729 00:30:50,730 --> 00:30:54,427 - And so what happened was both J.P. Morgan and Goldman Sachs started out, 730 00:30:54,510 --> 00:30:57,717 a hundred years ago, they were actually in the middle. 731 00:30:57,800 --> 00:30:59,750 They were kind of, again, this sort of, 732 00:30:59,900 --> 00:31:02,700 they were boutiques, but they were, of their time... 733 00:31:03,790 --> 00:31:05,297 Today, you'd call them mid-market, 734 00:31:05,380 --> 00:31:07,627 we sometimes call it bulge bracket kind of thing, 735 00:31:07,710 --> 00:31:09,437 as opposed to just like a solo operator or something. 736 00:31:09,520 --> 00:31:12,637 Actually, the way JFK's father got started 737 00:31:12,720 --> 00:31:16,117 was he literally hung out a shingle in the 1920s, which is Joseph P. Kennedy, banker. 738 00:31:16,200 --> 00:31:16,517 - Yeah. 739 00:31:16,600 --> 00:31:20,287 - Private banker, and he just did deals, and he was an angel investor at the time. 740 00:31:20,370 --> 00:31:21,527 And then you had the big commercial banks, 741 00:31:21,610 --> 00:31:23,447 but the big commercial banks had no interest in issuing loans 742 00:31:23,530 --> 00:31:25,827 to these speculative, crazy entrepreneurs. 743 00:31:25,910 --> 00:31:28,627 And so in that time, J.P. Morgan, and Goldman Sachs, 744 00:31:28,710 --> 00:31:31,797 and Kuhn, Loeb, and Drexel, and all these other kind of mid-market banks, 745 00:31:31,880 --> 00:31:34,480 Morgan Stanley, the banks that became Morgan Stanley 746 00:31:34,790 --> 00:31:35,667 were kind of these mid things. 747 00:31:35,750 --> 00:31:37,487 Now, what's happened sitting here a hundred years later, 748 00:31:37,570 --> 00:31:39,367 those are now the scaled players. 749 00:31:39,450 --> 00:31:42,100 The ones who didn't scale are kind of long forgotten. 750 00:31:42,600 --> 00:31:45,237 Having said that, there's one firm that survives in the old model, 751 00:31:45,320 --> 00:31:47,837 and that's Allen & Company. And there are other boutique investment banks today, 752 00:31:47,920 --> 00:31:49,727 but Allen & Company was founded in the 1920s, 753 00:31:49,810 --> 00:31:54,327 and is uniquely the one that survived in the original model of boutique 754 00:31:54,410 --> 00:31:56,647 and deliberately being a boutique investment bank, 755 00:31:56,730 --> 00:31:57,957 and it stayed that way for a hundred years. 756 00:31:58,040 --> 00:32:00,607 And so one way to think about it is that today that's the barbell in banking, 757 00:32:00,690 --> 00:32:01,887 which is Allen & Company on the one side 758 00:32:01,970 --> 00:32:04,820 and then J.P. Morgan and Goldman Sachs on the other side. 759 00:32:04,920 --> 00:32:06,557 - I found one of my all-time favorite quotes 760 00:32:06,640 --> 00:32:07,957 when I was reading the book "Zero to One." 761 00:32:08,040 --> 00:32:11,067 The quote says, "The single most powerful pattern I have noticed 762 00:32:11,150 --> 00:32:14,807 is that successful people find value in unexpected places, 763 00:32:14,890 --> 00:32:17,227 and they do this by thinking about business 764 00:32:17,310 --> 00:32:19,667 from first principles instead of formulas." 765 00:32:19,750 --> 00:32:24,470 That is exactly what AppLovin has done with their new advertising platform, Axon. 766 00:32:24,640 --> 00:32:28,140 Axon is the most powerful advertising platform in a generation. 767 00:32:28,240 --> 00:32:30,820 Axon allows you to capture undivided attention. 768 00:32:31,140 --> 00:32:36,390 Axon ads are full-screen videos that are watched for an average of 35 seconds, 769 00:32:36,510 --> 00:32:40,030 retention that blows other ad platforms out of the water. 770 00:32:40,130 --> 00:32:41,787 And you can launch in minutes. 771 00:32:41,870 --> 00:32:44,117 You set the goal, and Axon achieves it. 772 00:32:44,200 --> 00:32:47,077 No complex setup, no expertise needed. 773 00:32:47,160 --> 00:32:48,717 And Axon scales quickly. 774 00:32:48,800 --> 00:32:52,250 They can put your ads in front of over a billion potential customers. 775 00:32:52,380 --> 00:32:54,797 Other businesses have seen immediate results, 776 00:32:54,880 --> 00:32:57,967 scaled to hundreds of thousands of dollars of spend per day, 777 00:32:58,050 --> 00:33:00,257 and increased their revenue by millions. 778 00:33:00,340 --> 00:33:04,130 And most advertisers aren't even thinking about this channel yet. 779 00:33:04,230 --> 00:33:09,557 Less than 1% of advertisers have access to Axon, so you want to get started quickly. 780 00:33:09,640 --> 00:33:12,987 And you can do that by going to axon.ai. 781 00:33:13,070 --> 00:33:15,120 That is axon.ai. 782 00:33:16,130 --> 00:33:18,757 So, are you reading about this while you're founding the firm? 783 00:33:18,840 --> 00:33:20,557 - Yeah. - Before you're founding the firm? 784 00:33:20,640 --> 00:33:24,057 Yeah, both. Ben and I spent about a year and a half planning the firm, 785 00:33:24,140 --> 00:33:27,377 and part of it was he was in, we call it industrial servitude. 786 00:33:27,460 --> 00:33:29,847 He was working for Hewlett-Packard after we sold our company to HP. 787 00:33:29,930 --> 00:33:32,550 So, he was running a big part of HP at the time. 788 00:33:32,830 --> 00:33:35,757 And so, we couldn't literally start a new full-time thing until he got free of that. 789 00:33:35,840 --> 00:33:38,797 So, we had a year and a half to kind of study and think and work. 790 00:33:38,880 --> 00:33:41,507 - And because you had this period from 2003 or 2002, 791 00:33:41,590 --> 00:33:43,577 when you're doing angel investing a lot- - Yeah. 792 00:33:43,660 --> 00:33:45,297 till you start your company six, seven years later. 793 00:33:45,380 --> 00:33:47,207 - Yeah. - You're observing all of the weaknesses 794 00:33:47,290 --> 00:33:49,957 in the model, and that's where you have, "Hey, why don't we take the CAA?" 795 00:33:50,040 --> 00:33:51,897 I think Ovitz calls it like the phalanx, 796 00:33:51,980 --> 00:33:52,987 where it's like if you have- - Yeah, right. 797 00:33:53,070 --> 00:33:54,787 - one agent at CAA, you have all of us. 798 00:33:54,870 --> 00:33:56,627 - That's right. - And they would like roll deep. 799 00:33:56,710 --> 00:33:59,717 I think he says in his book, it was like, "Oh, my agent's coming to the premiere." 800 00:33:59,800 --> 00:34:01,477 No, it's like 20 agents are coming. 801 00:34:01,560 --> 00:34:03,927 And I think they'd be dressed in the same kind of suit maker, 802 00:34:04,010 --> 00:34:09,510 and they were intentionally trying to intimidate their competition. 803 00:34:09,600 --> 00:34:14,030 - Armani suits, Sulka Shirts was a shirt maker in Beverly Hills, 804 00:34:14,260 --> 00:34:17,020 and all sober colors, white shirts. 805 00:34:17,340 --> 00:34:19,517 And then, I think he had a bulk purchase deal, 806 00:34:19,600 --> 00:34:21,907 I think, with the local Jaguar dealer. 807 00:34:21,990 --> 00:34:24,547 And the legend, at least, has it that the license plates all said 808 00:34:24,630 --> 00:34:26,680 CAA one, CAA two, CAA three. 809 00:34:27,020 --> 00:34:30,740 And so, you'd go to a premiere, and there would be 20 Jags lined up. 810 00:34:31,720 --> 00:34:34,070 And then 20 guys in identical suits coming out. 811 00:34:34,230 --> 00:34:35,467 And yeah, this is exactly the thing. 812 00:34:35,550 --> 00:34:37,367 It's just like, now that's the Hollywood version. 813 00:34:37,450 --> 00:34:40,087 But, just imagine the psychological impact of that 814 00:34:40,170 --> 00:34:41,977 if you're just like an old school agent. 815 00:34:42,060 --> 00:34:44,910 I mean, this is sort of... Michael is a very dear friend. 816 00:34:45,050 --> 00:34:46,367 He became very controversial over the years, 817 00:34:46,450 --> 00:34:48,167 and the reason he became so controversial, I think, 818 00:34:48,250 --> 00:34:50,497 is just because he smoked his competition so severely. 819 00:34:50,580 --> 00:34:53,870 Like, he pounded them so hard. There was no response. 820 00:34:54,410 --> 00:34:57,567 You're just a guy working for an old agency, and you've got your clients, 821 00:34:57,650 --> 00:35:00,057 and these 20 CAA mother****** are showing up. 822 00:35:00,140 --> 00:35:02,130 And like, yeah, it's this force. 823 00:35:02,240 --> 00:35:03,657 And the clients, if you talk to, by the way, 824 00:35:03,740 --> 00:35:06,187 a lot of his clients are still active today from the period. 825 00:35:06,270 --> 00:35:08,087 If you talk to them, it's just like, yeah, it's just a no-brainer. 826 00:35:08,170 --> 00:35:10,287 It's like, do you want to work with a guy or do you want to work with a firm? 827 00:35:10,370 --> 00:35:11,810 It's just obvious. 828 00:35:12,590 --> 00:35:13,407 I don't know if he told you all these stories. 829 00:35:13,490 --> 00:35:15,497 Did he tell you about his morning schedule thing? 830 00:35:15,580 --> 00:35:20,027 - The getting on the bike, doing the karate call? - No, for the firm. 831 00:35:20,110 --> 00:35:21,787 - No, no, no, no. I don't remember this. 832 00:35:21,870 --> 00:35:23,297 - So this is, again, something that's specific to Hollywood, 833 00:35:23,380 --> 00:35:24,967 but it's a great example of the... 834 00:35:25,050 --> 00:35:28,917 Okay, at the time he started CAA, the agency business was like 835 00:35:29,000 --> 00:35:30,107 90 years old or something, right? - Yeah. 836 00:35:30,190 --> 00:35:32,617 It started out doing Vaudeville bookings and music halls, 837 00:35:32,700 --> 00:35:35,027 and it had been around for decades. 838 00:35:35,110 --> 00:35:37,297 And so, the people involved in it had had decades 839 00:35:37,380 --> 00:35:40,747 to think about the best way to do it, and they had arrived at a set of practices. 840 00:35:40,830 --> 00:35:42,367 And one of the practices, I think I'm getting this right, 841 00:35:42,450 --> 00:35:44,007 one of the practices was at every agency, 842 00:35:44,090 --> 00:35:46,977 they would have their staff meeting in the morning at 9:00 a.m., 843 00:35:47,060 --> 00:35:49,797 and whatever information was going to get shared in the agency 844 00:35:49,880 --> 00:35:50,657 would get shared at that point. 845 00:35:50,740 --> 00:35:52,757 And oh, this studio head wants a script to do. 846 00:35:52,840 --> 00:35:54,867 He wants to do a crime thriller, and here's the script and whatever. 847 00:35:54,950 --> 00:35:57,907 And then, this is the point where there would be minimal, whatever, 848 00:35:57,990 --> 00:36:00,237 minimal handoff existed to the other agency. 849 00:36:00,320 --> 00:36:01,837 And so this is where everybody would kind of get updated. 850 00:36:01,920 --> 00:36:04,887 And so, the staff meeting would go from 9:00 a.m. to 10:00 a.m., 851 00:36:04,970 --> 00:36:06,567 and then at 10:00 a.m., they would start calling their clients. 852 00:36:06,650 --> 00:36:08,587 And they'd be like, "Oh, we heard there's a whatever. 853 00:36:08,670 --> 00:36:10,607 There's going to be a casting call for this great new role 854 00:36:10,690 --> 00:36:11,617 for this professional thief or whatever- 855 00:36:11,700 --> 00:36:12,687 - Mm-hmm. - and you should consider doing that." 856 00:36:12,770 --> 00:36:14,187 And so, of course, Michael's like, 857 00:36:14,270 --> 00:36:17,220 "All right. Well, we'll have our staff meeting at 7:00 a.m. 858 00:36:18,570 --> 00:36:20,237 We'll be done at 8:00." - Yeah. 859 00:36:20,320 --> 00:36:22,147 - "Between 8:00 and 9:00, we'll call the clients. 860 00:36:22,230 --> 00:36:25,970 By the way, we won't just call our clients. We'll call their clients." 861 00:36:26,130 --> 00:36:27,557 Right? And so imagine you're, whatever, 862 00:36:27,640 --> 00:36:31,490 Paul Newman, and you've got some agent you've been working with for 20 years. 863 00:36:32,430 --> 00:36:34,947 Your agent calls you at 11:00, and is like, "I've got this great role." 864 00:36:35,030 --> 00:36:38,167 And you say, "Oh, the guys at CAA called me about that three hours ago." 865 00:36:38,250 --> 00:36:40,737 And your agent's like, "They don't represent you." 866 00:36:40,820 --> 00:36:42,097 And Paul's like, "Yeah, isn't it great? 867 00:36:42,180 --> 00:36:43,280 Isn't that fantastic?" 868 00:36:43,580 --> 00:36:46,267 And so you just, again, you rinse and repeat that a thousand times, 869 00:36:46,350 --> 00:36:49,390 and to the client, it's just completely obvious what to do. 870 00:36:49,900 --> 00:36:53,547 And so yeah. So, the reason I go through this, the moral of the story is, again, 871 00:36:53,630 --> 00:36:57,707 it's sort of this idea, incumbency status quo. 872 00:36:57,790 --> 00:36:59,410 Like you just end up... 873 00:37:00,300 --> 00:37:02,447 In any business, you just end up with all these embedded assumptions. 874 00:37:02,530 --> 00:37:04,337 Generally, and then 90 years later, right? 875 00:37:04,420 --> 00:37:08,217 So, the founders of the agencies 90 years ago, they weren't involved anymore, 876 00:37:08,300 --> 00:37:10,707 so the people who were running competitive agencies were managers, 877 00:37:10,790 --> 00:37:12,890 same thing, managers, not founders. Right? 878 00:37:13,540 --> 00:37:15,817 But the thing a manager never does, unless they're under duress, 879 00:37:15,900 --> 00:37:18,160 is reconsider fundamental assumptions. 880 00:37:18,330 --> 00:37:19,200 They hate that. 881 00:37:20,960 --> 00:37:23,767 The whole point of running something big is you don't have to do that. 882 00:37:23,850 --> 00:37:25,047 You get to run the big thing at scale. 883 00:37:25,130 --> 00:37:27,667 You don't have to go in and reinvent it from scratch. 884 00:37:27,750 --> 00:37:29,550 That sounds like a nightmare, right? 885 00:37:29,890 --> 00:37:34,137 But anyway, as a consequence of that, you end up with all these embedded assumptions 886 00:37:34,220 --> 00:37:35,757 that are basically just unspoken. 887 00:37:35,840 --> 00:37:37,517 Nobody's questioning. It's not happening. 888 00:37:37,600 --> 00:37:41,227 And if you take the time, you can kind of go in, first principles, 889 00:37:41,310 --> 00:37:43,437 you can kind of go in, and you can say, "Okay, well, how did they arrive at that?" 890 00:37:43,520 --> 00:37:45,257 And what we've found in just industry... 891 00:37:45,340 --> 00:37:46,677 I mean, this is what our founders do every day, 892 00:37:46,760 --> 00:37:48,387 is just in industry after industry after industry, 893 00:37:48,470 --> 00:37:49,987 there's all these embedded assumptions that made sense 894 00:37:50,070 --> 00:37:53,400 in 1970 or 1930 or 1880 that just don't make sense anymore. 895 00:37:53,680 --> 00:37:56,817 - I love that you did that. I always say it's not what you do, it's how you do it. 896 00:37:56,900 --> 00:38:00,027 And if the idea that you could take... I'm like, I'm not running a talent agency. 897 00:38:00,110 --> 00:38:01,637 - Right. - But there's so many of these principles 898 00:38:01,720 --> 00:38:03,007 that I could apply to venture capital. 899 00:38:03,090 --> 00:38:04,987 In your blog archive, which I absolutely love, 900 00:38:05,070 --> 00:38:08,170 and I told you I've read multiple times, I did episodes on it, 901 00:38:08,370 --> 00:38:09,717 you would give advice to young people. 902 00:38:09,800 --> 00:38:12,007 And my advice is go work in an industry 903 00:38:12,090 --> 00:38:15,077 where the founders of that industry are still working. 904 00:38:15,160 --> 00:38:18,977 - Right. When I read Ovitz's book, the way I would summarize his approach, 905 00:38:19,060 --> 00:38:20,707 because he is in this big, stodgy, 906 00:38:20,790 --> 00:38:23,947 slow-moving, very bureaucratic organization, 907 00:38:24,030 --> 00:38:26,467 is like, oh, mediocrity is always invisible 908 00:38:26,550 --> 00:38:28,407 until passion shows up and exposes it. 909 00:38:28,490 --> 00:38:29,447 - Oh, interesting. Yes, right. 910 00:38:29,530 --> 00:38:30,837 - And that's what he did. - Yeah, that's right. 911 00:38:30,920 --> 00:38:33,377 - He's just like, "There's so many things that you guys could be doing better here. 912 00:38:33,460 --> 00:38:35,137 I can't do it in the..." And if I remember correctly, 913 00:38:35,220 --> 00:38:37,007 he took some of these ideas to his boss. 914 00:38:37,090 --> 00:38:37,717 - Oh, yeah, yeah, yeah. 915 00:38:37,800 --> 00:38:39,557 - Because that guy was his mentor. I can't remember his name. Yeah. 916 00:38:39,640 --> 00:38:41,157 - He famously worked for the CEO of William Morris. 917 00:38:41,240 --> 00:38:43,907 - Yeah. - Yeah, which was the biggest of the talent agencies at the time. - Yeah. 918 00:38:43,990 --> 00:38:46,237 So, were you and Ben essentially just designing 919 00:38:46,320 --> 00:38:47,817 what you wish you had when you were founders? 920 00:38:47,900 --> 00:38:50,397 - Yeah, that's right. And again, that may be a cheat code, 921 00:38:50,480 --> 00:38:52,637 but yeah, if you've been the customer, obviously, 922 00:38:52,720 --> 00:38:54,407 this all becomes a lot more obvious. 923 00:38:54,490 --> 00:38:56,177 - And I don't know if you want to answer this question or not, 924 00:38:56,260 --> 00:38:58,497 but in Warren Buffett's shareholder letters, he has this great line 925 00:38:58,580 --> 00:39:02,877 where it's really important to pick, to play against weak competition. 926 00:39:02,960 --> 00:39:06,467 - Mm-hmm. - Did you feel like that point in time 927 00:39:06,550 --> 00:39:08,737 in venture capital history, that you were going to be playing 928 00:39:08,820 --> 00:39:10,547 against weak or weaker competition? 929 00:39:10,630 --> 00:39:12,427 I would say not exactly. We didn't view them as weak. 930 00:39:12,510 --> 00:39:13,857 We viewed them as basically... 931 00:39:13,940 --> 00:39:17,370 We viewed them as running on a status quo set of ideas. 932 00:39:18,200 --> 00:39:20,797 And to be clear, and part of why we think about it this way, 933 00:39:20,880 --> 00:39:22,517 we had raised money from at the time, 934 00:39:22,600 --> 00:39:24,567 in the time we were probably the two best venture firms. 935 00:39:24,650 --> 00:39:26,037 So, Kleiner Perkins in the 90s, 936 00:39:26,120 --> 00:39:28,637 and I worked with John Doerr very closely for five years in Netscape, 937 00:39:28,720 --> 00:39:30,877 and then Loudcloud, we raised money from Benchmark 938 00:39:30,960 --> 00:39:32,237 when they were like king of the hill, 939 00:39:32,320 --> 00:39:34,117 and Andy Rachleff, who was one of the founders of the firm, 940 00:39:34,200 --> 00:39:36,300 and is a legendary, brilliant VC. 941 00:39:36,630 --> 00:39:40,327 And so we had worked with... We just had through accident of history, 942 00:39:40,410 --> 00:39:43,337 we had worked with two of the, whatever, top five or whatever people 943 00:39:43,420 --> 00:39:47,430 in the field for a long time. And they were and are, by the way, 944 00:39:48,010 --> 00:39:51,967 brilliant at running on the model that existed. 945 00:39:52,050 --> 00:39:54,057 Like John was brilliant at that, Andy's brilliant at that. 946 00:39:54,140 --> 00:39:55,277 They're still brilliant today. 947 00:39:55,360 --> 00:39:57,187 It was less a competition of, oh, these people are soft, 948 00:39:57,270 --> 00:39:59,167 or these people aren't smart. It was none of that. 949 00:39:59,250 --> 00:40:00,987 It was, "No, they're really good at executing 950 00:40:01,070 --> 00:40:02,770 against this particular playbook." 951 00:40:03,100 --> 00:40:04,307 And by the way, that's why it's okay. 952 00:40:04,390 --> 00:40:07,887 Like, if we're going to do this, we need to be playing by a different playbook. 953 00:40:07,970 --> 00:40:10,347 - There was no such thing as scaled venture capital at the time. 954 00:40:10,430 --> 00:40:13,837 - No. At the time, no. No. Because the firms, they all hit this limit. 955 00:40:13,920 --> 00:40:15,880 They all fundamentally hit this limit. 956 00:40:16,070 --> 00:40:20,277 They all hit this limit where the idea of a partnership of equals 957 00:40:20,360 --> 00:40:22,420 or even a hierarchical partnership, 958 00:40:22,530 --> 00:40:26,247 like it just breaks at some point because there's just too much internal dissension. 959 00:40:26,330 --> 00:40:28,547 It is too hard to coordinate, and then everybody's fighting 960 00:40:28,630 --> 00:40:31,980 for slices of what was viewed, at the time, to be a fixed-size pie. 961 00:40:32,290 --> 00:40:34,240 And so none of the other firms could... 962 00:40:35,070 --> 00:40:37,127 Structurally, there was just no way to get to scale. 963 00:40:37,210 --> 00:40:40,607 - Where else did you take ideas from besides the agent business in Hollywood 964 00:40:40,690 --> 00:40:43,107 and the merchant bank, investment banking industry? 965 00:40:43,190 --> 00:40:46,257 - Oh, I mean, it was just very obvious that it happened in private equity. 966 00:40:46,340 --> 00:40:48,617 This was the time when it was actually really... 967 00:40:48,700 --> 00:40:51,037 This was around the time when KKR and firms like it 968 00:40:51,120 --> 00:40:52,227 were hitting their stride with... 969 00:40:52,310 --> 00:40:55,137 They're actually building a lot of operational capabilities in-house. 970 00:40:55,220 --> 00:40:58,337 They were actually building their own investment banks in-house. 971 00:40:58,420 --> 00:41:01,137 One of the things we've never done, but has always been on the idea list, 972 00:41:01,220 --> 00:41:03,320 is to actually just have an in-house bank. 973 00:41:03,710 --> 00:41:06,977 And KKR had actually done that, just build a captive bank. 974 00:41:07,060 --> 00:41:09,560 And so, they had done a bunch of things like that. 975 00:41:09,980 --> 00:41:10,757 So, we saw it happening, 976 00:41:10,840 --> 00:41:13,757 which is the mid-tier private equity firms were collapsing, 977 00:41:13,840 --> 00:41:15,197 and you either needed a solo, 978 00:41:15,280 --> 00:41:17,807 very light on your feet kind of solo operator on the one side doing small deals 979 00:41:17,890 --> 00:41:20,290 or you needed to have a scale platform like KKR. 980 00:41:20,410 --> 00:41:23,090 It happened in hedge funds. It happened in... 981 00:41:24,140 --> 00:41:27,360 Actually, the TV show "Mad Men." 982 00:41:27,740 --> 00:41:29,457 "Mad Men" tells the structural story of this happening 983 00:41:29,540 --> 00:41:31,840 in the advertising field in the '60s and '70s. 984 00:41:32,290 --> 00:41:34,117 And I will ruthlessly spoil "Mad Men" 985 00:41:34,200 --> 00:41:36,857 because it's been off the air for like 20 years at this point. 986 00:41:36,940 --> 00:41:39,857 But a big part of the arc of "Mad Men" is those guys are working... 987 00:41:39,940 --> 00:41:43,950 Sterling Cooper is a classic mid-market ad agency, right? 988 00:41:44,640 --> 00:41:47,140 And then at the end of whatever, the third season, 989 00:41:47,390 --> 00:41:50,900 they sell it to McCann, which was the scale player at the time. 990 00:41:51,160 --> 00:41:52,397 And they show you all the pros. 991 00:41:52,480 --> 00:41:54,147 They clearly talked to people who had been through this 992 00:41:54,230 --> 00:41:56,037 because they showed you all the pros and cons of working for McCann, 993 00:41:56,120 --> 00:41:57,047 because McCann's this giant machine. 994 00:41:57,130 --> 00:41:59,237 And so if Don Draper's used to making all the creative decisions, 995 00:41:59,320 --> 00:42:00,977 and now he's just in this conference room 996 00:42:01,060 --> 00:42:03,777 arguing with people until he just gets up and walks out. 997 00:42:03,860 --> 00:42:06,907 - But then, Don Draper and Roger Sterling start their own startup. 998 00:42:06,990 --> 00:42:09,077 They start Sterling, Cooper, Draper, Pryce. 999 00:42:09,160 --> 00:42:12,207 That's the second one, which starts out as a true startup, 1000 00:42:12,290 --> 00:42:13,467 as a true boutique startup. 1001 00:42:13,550 --> 00:42:16,447 And then they have this, whatever, year and a half of just f***** hell. 1002 00:42:16,530 --> 00:42:18,177 Like, they can't get anywhere. 1003 00:42:18,260 --> 00:42:20,817 They can't get clients because they're too small. 1004 00:42:20,900 --> 00:42:22,340 - Yeah. - They're subscale. 1005 00:42:23,750 --> 00:42:25,687 And then I think in the end, I forget. It's been too long. 1006 00:42:25,770 --> 00:42:27,837 But I think they end up selling it. 1007 00:42:27,920 --> 00:42:29,947 No, no, no, no, no, no, no. Sorry. I got it wrong. 1008 00:42:30,030 --> 00:42:32,830 They sell the first one to the British- ad agency- - Mm. 1009 00:42:33,000 --> 00:42:36,197 - that just completely destroys it, and then they sell the second one to McCann. 1010 00:42:36,280 --> 00:42:38,880 So, they actually show that process happening twice. 1011 00:42:39,800 --> 00:42:40,827 Again, if you go back in history, 1012 00:42:40,910 --> 00:42:44,407 that is what happened to the ad agencies basically between the '40s and the '70s. 1013 00:42:44,490 --> 00:42:45,737 Basically, television catalyzed that. 1014 00:42:45,820 --> 00:42:48,497 When television emerged, advertising became a much bigger deal 1015 00:42:48,580 --> 00:42:52,227 than it had been before, and it had to be professionalized in a different way. 1016 00:42:52,310 --> 00:42:53,217 The other thing that happened is, of course, 1017 00:42:53,300 --> 00:42:54,797 the external environment changes, right? 1018 00:42:54,880 --> 00:42:57,357 So, everything we just talked about just has to do with the internal mechanics 1019 00:42:57,440 --> 00:42:58,327 of how these things run. 1020 00:42:58,410 --> 00:43:01,667 But the other thing happens is the external environment changes, right? 1021 00:43:01,750 --> 00:43:03,287 I think what Michael would say, I think he would agree with this, 1022 00:43:03,370 --> 00:43:05,547 part of what made CAA possible is at one point, 1023 00:43:05,630 --> 00:43:07,760 basically Hollywood was just movies. 1024 00:43:07,970 --> 00:43:10,197 And then there was whatever, a low kind of TV division. 1025 00:43:10,280 --> 00:43:11,690 And by the '70s and '80s, 1026 00:43:12,290 --> 00:43:14,177 Hollywood was becoming much bigger than just movies, right? 1027 00:43:14,260 --> 00:43:16,897 It was movies and TV and advertising and music and sports 1028 00:43:16,980 --> 00:43:20,460 and politics and culture and all kinds of things. 1029 00:43:20,750 --> 00:43:23,040 In fairness to kind of our competitors, 1030 00:43:24,400 --> 00:43:26,437 Silicon Valley between, call it 1950 to 2010, 1031 00:43:26,520 --> 00:43:28,757 was primarily just in the tools business, right? 1032 00:43:28,840 --> 00:43:31,187 Primarily, the companies, starting with Hewlett-Packard, 1033 00:43:31,270 --> 00:43:33,547 the companies that we all backed and built, were basically just building tools, 1034 00:43:33,630 --> 00:43:36,197 and you'd build a tool like an operating system or a disk drive or something, 1035 00:43:36,280 --> 00:43:39,097 and you'd sell it to people and they'd figure out what to do with it. 1036 00:43:39,180 --> 00:43:41,087 It was right around the time we started our firm 1037 00:43:41,170 --> 00:43:44,137 that the Valley was going from being primarily tools businesses 1038 00:43:44,220 --> 00:43:48,947 to actually building directly competitive companies in incumbent industries, right? 1039 00:43:49,030 --> 00:43:52,340 And so Airbnb going directly into the hospitality industry, right? 1040 00:43:52,460 --> 00:43:56,307 So, alternate universe Airbnb is just boutique booking hotel software, right? 1041 00:43:56,390 --> 00:43:58,557 For an Airbnb. So, it's a tiny little boutique business 1042 00:43:58,640 --> 00:44:00,527 building basically little spreadsheet software. 1043 00:44:00,610 --> 00:44:03,080 But no, Airbnb, Brian Chesky decided brilliantly, 1044 00:44:03,360 --> 00:44:04,917 "We're just going to go into the hospitality business 1045 00:44:05,000 --> 00:44:06,597 and compete with hotels directly." 1046 00:44:06,680 --> 00:44:09,697 Uber and Lyft in the old world were just taxi dispatch software. 1047 00:44:09,780 --> 00:44:12,397 In the new world, they're full transportation providers. 1048 00:44:12,480 --> 00:44:16,130 Tesla in the old world would've just been software for self-driving cars. 1049 00:44:16,490 --> 00:44:18,740 Tesla in the new world builds the entire car. 1050 00:44:18,890 --> 00:44:20,700 By the way, Facebook, same thing. 1051 00:44:21,030 --> 00:44:24,397 Prior to Facebook, if you built online ad software, 1052 00:44:24,480 --> 00:44:26,630 you were selling it to the media companies. 1053 00:44:26,810 --> 00:44:28,597 Mark's like, "No, we're just going to be the media company. 1054 00:44:28,680 --> 00:44:29,637 We're just going to build the entire thing." 1055 00:44:29,720 --> 00:44:32,227 And so this was the other thing that happened for us, 1056 00:44:32,310 --> 00:44:33,607 was that that was right around the pivot point 1057 00:44:33,690 --> 00:44:36,027 when the Valley's ambitions went from just building tools 1058 00:44:36,110 --> 00:44:38,257 to going directly into incumbent industries. 1059 00:44:38,340 --> 00:44:39,627 And then, this goes back to the scale thing. 1060 00:44:39,710 --> 00:44:41,767 It's like, okay, why do you need to scale a venture firm? 1061 00:44:41,850 --> 00:44:44,117 Was because the companies need to scale, right? 1062 00:44:44,200 --> 00:44:46,277 And then of course, AI now makes that crystal clear, right? 1063 00:44:46,360 --> 00:44:49,277 Because the winning AI companies are raising billions, 1064 00:44:49,360 --> 00:44:52,537 tens of billions, in some cases hundreds of billions of dollars, right? 1065 00:44:52,620 --> 00:44:54,767 The old world of 10 million or 30-million-dollar 1066 00:44:54,850 --> 00:44:58,837 or 50-million-dollar checks, where VCs tap out, is just not a relevant thing anymore. 1067 00:44:58,920 --> 00:45:00,977 - But did you know the scale was changing at the time you founded the firm? 1068 00:45:01,060 --> 00:45:02,317 - We had a pretty good idea. 1069 00:45:02,400 --> 00:45:06,487 So, I'd been involved with Facebook, basically informally since inception, 1070 00:45:06,570 --> 00:45:08,670 and then formally on the board since 2007. 1071 00:45:09,550 --> 00:45:10,777 And that thing hit the knee in the curb. 1072 00:45:10,860 --> 00:45:11,757 It was just very clear. 1073 00:45:11,840 --> 00:45:14,697 To us, it was just very clear that we didn't know how big it was going to get, 1074 00:45:14,780 --> 00:45:16,547 but it was going to get much, much bigger 1075 00:45:16,630 --> 00:45:18,940 than the internet 1.0 companies had gotten. 1076 00:45:19,740 --> 00:45:21,327 And so there was that. What else? 1077 00:45:21,410 --> 00:45:24,117 It was also around the time Apple was directly entering the cell phone market, 1078 00:45:24,200 --> 00:45:26,200 which was another great example of this. 1079 00:45:26,330 --> 00:45:28,187 Silicon Valley didn't used to make cell phones. 1080 00:45:28,270 --> 00:45:29,637 The original cell phones weren't made by Silicon Valley. 1081 00:45:29,720 --> 00:45:31,557 They were made by these giant industrial companies 1082 00:45:31,640 --> 00:45:35,467 like Sony and Nokia and whatever, and Motorola in Illinois or whatever, 1083 00:45:35,550 --> 00:45:38,807 and then Silicon Valley would make the chips that go into them or the software. 1084 00:45:38,890 --> 00:45:40,307 And of course, Steve was like, "Yeah, no, screw that. 1085 00:45:40,390 --> 00:45:41,697 We're just going to make a phone," right? 1086 00:45:41,780 --> 00:45:43,037 There were these signals that it was happening, 1087 00:45:43,120 --> 00:45:46,287 and then the other thing was just the internet itself was maturing, right? 1088 00:45:46,370 --> 00:45:50,080 And so, at that point, the consumer internet was 15 years in 1089 00:45:50,540 --> 00:45:52,290 and we had seen every part of that. 1090 00:45:53,370 --> 00:45:55,087 I forget what the number was, but that was probably around the time 1091 00:45:55,170 --> 00:45:57,717 the global internet penetration was crossing a billion users 1092 00:45:57,800 --> 00:45:59,150 on its way to five billion. 1093 00:45:59,370 --> 00:46:02,357 - Yeah, you have a very interesting lived experience where you were there 1094 00:46:02,440 --> 00:46:04,390 at the very beginning of the internet. 1095 00:46:04,660 --> 00:46:06,327 One thing that I'm fascinated by, 1096 00:46:06,410 --> 00:46:09,797 and this actually was going to be the first question for you, 1097 00:46:09,880 --> 00:46:12,827 because I've never heard you speak about this, at least on a podcast, 1098 00:46:12,910 --> 00:46:16,237 but your partnership and relationship with Jim Clark. 1099 00:46:16,320 --> 00:46:17,787 - Yep. - You were what, 20 when you met him? 1100 00:46:17,870 --> 00:46:19,107 Ho old were you? - I was old-fashioned. 1101 00:46:19,190 --> 00:46:20,937 I actually graduated from college and got my degree. 1102 00:46:21,020 --> 00:46:23,770 It's a very Stone Age concept these days. 1103 00:46:24,060 --> 00:46:28,270 So, that was in 1994. So, I was probably 22. 1104 00:46:28,620 --> 00:46:29,727 - So, there's this great book, 1105 00:46:29,810 --> 00:46:32,227 I don't even think you like the book written by Michael Lewis, 1106 00:46:32,310 --> 00:46:34,087 "Silicon Valley's Story." - I've skipped it. 1107 00:46:34,170 --> 00:46:36,927 - I've read it twice, just because I don't know if anything's in there is true, 1108 00:46:37,010 --> 00:46:40,937 but the portrait he paints of this very eccentric character 1109 00:46:41,020 --> 00:46:42,847 is just wildly entertaining to me. - Yeah. 1110 00:46:42,930 --> 00:46:45,087 - But what's shocking to me is when you talk to young founders, 1111 00:46:45,170 --> 00:46:47,430 I'm like, this guy started three... 1112 00:46:47,660 --> 00:46:48,997 I think he was the first person in history 1113 00:46:49,080 --> 00:46:51,667 to found three separate billion-dollar technology companies. 1114 00:46:51,750 --> 00:46:53,667 - Yeah, I think that's right. - And almost no one knows who he is. 1115 00:46:53,750 --> 00:46:55,467 - Yeah. - Can you just talk about how you met him? 1116 00:46:55,550 --> 00:46:56,667 What was it like working with him? - Oh. 1117 00:46:56,750 --> 00:46:59,447 I knew exactly who he was, and the reason was because his company, 1118 00:46:59,530 --> 00:47:02,957 Silicon Graphics, his first company, they were the company in the Valley, 1119 00:47:03,040 --> 00:47:06,507 between call it, yeah, '87 to '94 or something. 1120 00:47:06,590 --> 00:47:09,807 They were like, whatever, Google or OpenAI or whatever comp you want to make. 1121 00:47:09,890 --> 00:47:13,157 They were like the company. And by that I mean they were the company 1122 00:47:13,240 --> 00:47:15,277 where the smartest people in the industry all wanted to work there. 1123 00:47:15,360 --> 00:47:16,487 They built the products that were 1124 00:47:16,570 --> 00:47:18,687 the coolest products you could possibly imagine. 1125 00:47:18,770 --> 00:47:21,477 They had this incredibly young and vibrant, and dynamic culture. 1126 00:47:21,560 --> 00:47:25,337 And then they hit this cultural moment that was just incredible in, I think, '92, 1127 00:47:25,420 --> 00:47:28,527 which was the turning point in the movie business 1128 00:47:28,610 --> 00:47:30,277 when computer graphics really kicked in. 1129 00:47:30,360 --> 00:47:33,457 And the two movies back to back were "Jurassic Park" and "Terminator 2." 1130 00:47:33,540 --> 00:47:34,787 - Run on the machines they made. 1131 00:47:34,870 --> 00:47:36,347 Built on the machines they... - Yes. - It was the technology they made. 1132 00:47:36,430 --> 00:47:39,477 Technology Jim invented was the technology that made that possible. 1133 00:47:39,560 --> 00:47:42,197 And those are still two of the great all-time movies. 1134 00:47:42,280 --> 00:47:45,087 But at the time, I mean, I still remember the chills that you get 1135 00:47:45,170 --> 00:47:47,627 seeing dinosaurs on screen. It's just like, "This is..." 1136 00:47:47,710 --> 00:47:51,597 And then there's this company that builds the machines that do this. 1137 00:47:51,680 --> 00:47:54,657 By the way, the Silicon Graphics computers are actually in the movie. 1138 00:47:54,740 --> 00:47:57,797 There's a scene in "Jurassic Park" where the kids are navigating through Unix. 1139 00:47:57,880 --> 00:48:00,357 - Yeah. - And it was actually the 3D software. 1140 00:48:00,440 --> 00:48:03,380 Those were actually the Silicon Graphics computers. 1141 00:48:05,540 --> 00:48:10,537 That was this moment where they're just the absolute it company of all time. 1142 00:48:10,620 --> 00:48:14,110 But by the way, their legacy lives on in Nvidia. 1143 00:48:15,720 --> 00:48:20,867 Nvidia is Silicon Graphics', basically, it's like a Traitorous Eight thing. 1144 00:48:20,950 --> 00:48:22,947 It had to be a new company for reasons we could describe 1145 00:48:23,030 --> 00:48:26,947 to do the GPUs instead of the workstations and servers. 1146 00:48:27,030 --> 00:48:29,237 Nvidia fundamentally is based on Jim's ideas. 1147 00:48:29,320 --> 00:48:30,797 That's where that stuff all comes from. 1148 00:48:30,880 --> 00:48:34,107 And so, he was already legendary. And again, he was one of these... 1149 00:48:34,190 --> 00:48:37,247 He was the full deal. He was legendary as an innovator in technology 1150 00:48:37,330 --> 00:48:41,387 because he has a PhD in computer science, and he himself invented the original, 1151 00:48:41,470 --> 00:48:43,617 I forget what they call it, I think it was the reality engine. 1152 00:48:43,700 --> 00:48:47,487 The original interactive 3D graphics on a chip thing was actually him, 1153 00:48:47,570 --> 00:48:49,150 I think it was his PhD thesis. 1154 00:48:49,910 --> 00:48:52,960 And then he started the company, and then he ran the company. 1155 00:48:54,070 --> 00:48:57,067 By the way, and then the VCs brought in a professional manager. 1156 00:48:57,150 --> 00:49:00,037 By the way, and the reason we know about Nvidia today and not SGI 1157 00:49:00,120 --> 00:49:03,580 is because of this founder-manager issue, which we can talk about. 1158 00:49:03,720 --> 00:49:04,797 - No, let's talk about that real quick. 1159 00:49:04,880 --> 00:49:06,717 - Yeah, yeah. - Because I don't remember this part of the story. 1160 00:49:06,800 --> 00:49:12,050 - Yeah. By the way, there's two sides to the story. And I wasn't there. 1161 00:49:14,100 --> 00:49:16,047 And so, I just reflexively side with Jim Clark, 1162 00:49:16,130 --> 00:49:19,080 but I'll try to at least represent both sides of the story. 1163 00:49:19,350 --> 00:49:21,517 So Jim... I don't even remember what's in the Lewis book, 1164 00:49:21,600 --> 00:49:27,210 but Jim is like a true Elon, Steve Jobs level guy. 1165 00:49:27,730 --> 00:49:30,007 And so, incredibly creative, incredibly bright, 1166 00:49:30,090 --> 00:49:32,137 incredibly charismatic, but he's volatile. 1167 00:49:32,220 --> 00:49:37,337 Like, he's exciting. He's exciting. 1168 00:49:37,420 --> 00:49:39,177 It's like being around him is just incredibly exciting. 1169 00:49:39,260 --> 00:49:41,037 There's always something new. He always has new ideas. 1170 00:49:41,120 --> 00:49:42,597 And again, that was in that time where it's just like, 1171 00:49:42,680 --> 00:49:45,007 okay, that's the personality type that clearly can't run the company. 1172 00:49:45,090 --> 00:49:48,070 And so the VCs brought in a guy out of Hewlett-Packard, 1173 00:49:48,620 --> 00:49:50,197 who had been trained at Hewlett-Packard. 1174 00:49:50,280 --> 00:49:53,887 Because at the time, what happened is he wanted to hire a professional CEO. 1175 00:49:53,970 --> 00:49:56,897 He went and hired a general manager out of either Hewlett-Packard or IBM, 1176 00:49:56,980 --> 00:49:59,057 were the two training grounds for this guy. 1177 00:49:59,140 --> 00:50:01,197 So, they brought in a really, really sharp guy. 1178 00:50:01,280 --> 00:50:02,347 I don't really know. I think I met him once. 1179 00:50:02,430 --> 00:50:05,437 I don't really know. By all accounts, he was like a very good example 1180 00:50:05,520 --> 00:50:08,540 of this kind of HP general manager type who became a CEO. 1181 00:50:08,940 --> 00:50:10,537 He took over the company. 1182 00:50:10,620 --> 00:50:14,007 And by the way, in his defense, under him, the company scaled enormously. 1183 00:50:14,090 --> 00:50:17,397 I forget when he took it over, but it was like '87 or '88 or something. 1184 00:50:17,480 --> 00:50:20,927 And then by the time I got to the Valley in '94, this company had become huge, 1185 00:50:21,010 --> 00:50:24,460 and whoever's running the company gets at least some credit for that. 1186 00:50:24,800 --> 00:50:26,950 But anyway, they got in this classic fight. 1187 00:50:27,250 --> 00:50:30,247 They got in this classic fight, and the classic fight was... 1188 00:50:30,330 --> 00:50:32,110 It's the same story every time. 1189 00:50:32,400 --> 00:50:35,257 The founder is talking to the CEO, like, 1190 00:50:35,340 --> 00:50:37,237 "We need to do things completely different." 1191 00:50:37,320 --> 00:50:39,677 And the CEO's like, "No, like what we're doing is working. 1192 00:50:39,760 --> 00:50:43,347 Stop f***ing with the thing that's working." 1193 00:50:43,430 --> 00:50:44,137 And the founder is like, 1194 00:50:44,220 --> 00:50:46,457 "No, it's working now, but it's not going to work in the future." 1195 00:50:46,540 --> 00:50:49,457 And the CEO's like, "Well, then we'll deal with it in the future." 1196 00:50:49,540 --> 00:50:51,807 And the founder is like, "You can't wait to deal with it in the future, 1197 00:50:51,890 --> 00:50:53,767 because by the time the future arrives, it's going to be too late." 1198 00:50:53,850 --> 00:50:55,697 And the manager is like, "Why are you in my pants? 1199 00:50:55,780 --> 00:50:57,787 I'm making you all this money. The company's super successful. 1200 00:50:57,870 --> 00:50:59,527 Like, get out of my shorts." Right? 1201 00:50:59,610 --> 00:51:03,160 And you see this, and that was exactly the deadlock that they got into. 1202 00:51:03,380 --> 00:51:05,457 And Jim Clark basically made two predictions 1203 00:51:05,540 --> 00:51:06,547 as the founder of Silicon Graphics. 1204 00:51:06,630 --> 00:51:08,487 So, Silicon Graphics at the time was selling... 1205 00:51:08,570 --> 00:51:11,367 Their computers, basically started list price at like 50,000 dollars 1206 00:51:11,450 --> 00:51:14,087 for a desktop workstation and then scaled up into the millions. 1207 00:51:14,170 --> 00:51:16,647 And Jim was like, "Look, two things are going to happen." 1208 00:51:16,730 --> 00:51:19,687 It's amazing that he... And he figured this out by 1991 or something. 1209 00:51:19,770 --> 00:51:20,627 He said, "Two things are going to happen." 1210 00:51:20,710 --> 00:51:23,427 He said, "Number one, everything that we sell today for 50,000 dollars 1211 00:51:23,510 --> 00:51:25,327 is going to go on a chip, and that's going to go on a card, 1212 00:51:25,410 --> 00:51:27,887 and it's going to go on a PC, and it's going to cost 300 bucks. 1213 00:51:27,970 --> 00:51:29,637 And either we're the company that's going to make that, 1214 00:51:29,720 --> 00:51:32,207 or we're going to get destroyed," right? 1215 00:51:32,290 --> 00:51:34,840 Which, by the way, is what happened. That's Nvidia. 1216 00:51:35,530 --> 00:51:37,167 Like that's what actually happened, right? 1217 00:51:37,250 --> 00:51:38,947 So, he was completely correct about that. 1218 00:51:39,030 --> 00:51:40,377 The other thing that he had was, he's like, 1219 00:51:40,460 --> 00:51:43,317 "Look, this idea of standalone computers is not going to be the thing. 1220 00:51:43,400 --> 00:51:44,777 These computers are all going to get networked together, 1221 00:51:44,860 --> 00:51:46,787 and the network is going to become the important thing." 1222 00:51:46,870 --> 00:51:48,717 At the time, there were different terms. 1223 00:51:48,800 --> 00:51:51,307 People were using terms like information superhighway, 1224 00:51:51,390 --> 00:51:53,357 or video on demand, or 500 channels. 1225 00:51:53,440 --> 00:51:55,527 You had all these kind of concepts kind of coalescing 1226 00:51:55,610 --> 00:51:57,210 around what became the internet. 1227 00:51:57,440 --> 00:51:59,277 And even before the internet kind of became a mainstream thing, 1228 00:51:59,360 --> 00:52:00,657 Jim was just like, "Look, it's just inevitable 1229 00:52:00,740 --> 00:52:01,777 that this is all going to become connected, 1230 00:52:01,860 --> 00:52:03,027 and then the function of a computer 1231 00:52:03,110 --> 00:52:05,107 is no longer going to be mainly what just the computer does. 1232 00:52:05,190 --> 00:52:07,547 It's going to be the fact that it can talk to all the other computers. 1233 00:52:07,630 --> 00:52:10,737 And we need to do that." And to do that, he actually went to Japan. 1234 00:52:10,820 --> 00:52:12,437 He actually got this incredible deal. 1235 00:52:12,520 --> 00:52:15,840 Nintendo then and now is like this giant video game company. 1236 00:52:16,130 --> 00:52:18,917 So, he actually had this deal with Nintendo, where number one, 1237 00:52:19,000 --> 00:52:21,117 and Silicon Graphics actually did this, 1238 00:52:21,200 --> 00:52:22,787 actually built the original 3D graphics chip 1239 00:52:22,870 --> 00:52:26,290 for a consumer game player, the Nintendo 64. 1240 00:52:26,460 --> 00:52:28,467 So, he did that deal, and then he went to Time Warner, 1241 00:52:28,550 --> 00:52:33,167 which at the time was this very important media company doing all kinds of things. 1242 00:52:33,250 --> 00:52:35,867 And he struck a deal with them to do what's called interactive TV, 1243 00:52:35,950 --> 00:52:37,277 which was basically pre-Internet. 1244 00:52:37,360 --> 00:52:41,320 Basically, it was like Netflix before Netflix in like 1991, right? 1245 00:52:42,630 --> 00:52:46,200 Like, amazing foresight, right? Just like amazing foresight. 1246 00:52:46,580 --> 00:52:49,407 But again, he and the CEO got in this conflict, and the CEO's like, 1247 00:52:49,490 --> 00:52:53,267 "Look, we just can't. We have to focus on the thing that we're doing. 1248 00:52:53,350 --> 00:52:54,157 We're not going to do these things." 1249 00:52:54,240 --> 00:52:57,787 And so Jim did the classic founder thing, and he left. 1250 00:52:57,870 --> 00:53:00,387 And when I met him, basically, that was the state that he was in, which was, 1251 00:53:00,470 --> 00:53:04,857 "Okay, I, Jim, am in the prime of my life. I know I have all these ideas. 1252 00:53:04,940 --> 00:53:06,427 I don't know exactly what to do with my next company, 1253 00:53:06,510 --> 00:53:08,477 but I know it should be a software company, not a hardware company. 1254 00:53:08,560 --> 00:53:11,337 I know it needs to be a company that is able to anticipate these changes 1255 00:53:11,420 --> 00:53:13,020 that are happening in the world. 1256 00:53:13,200 --> 00:53:15,507 And I know that Silicon..." And he was very sad about this. 1257 00:53:15,590 --> 00:53:17,907 "Silicon Graphics is not the company that's going to be able to do these things 1258 00:53:17,990 --> 00:53:20,897 and so I have to build the new company that's going to do it." 1259 00:53:20,980 --> 00:53:24,117 - Brad Jacobs has started eight separate billion-dollar companies. 1260 00:53:24,200 --> 00:53:29,147 He said, "I've come to know a lot of extremely successful people in my life, 1261 00:53:29,230 --> 00:53:31,057 and they all have one thing in common. 1262 00:53:31,140 --> 00:53:33,870 They think differently than most people. 1263 00:53:34,210 --> 00:53:37,897 All of them, to a person, have rearranged their brains 1264 00:53:37,980 --> 00:53:42,057 to prevail at achieving big goals in turbulent environments 1265 00:53:42,140 --> 00:53:45,090 where conventional thinking often fails." 1266 00:53:45,240 --> 00:53:49,377 What Brad noticed is that great business leaders are pattern spotters, 1267 00:53:49,460 --> 00:53:52,867 but you can't spot patterns if you can't see all of your data. 1268 00:53:52,950 --> 00:53:55,817 Most businesses only use 20% of their data. 1269 00:53:55,900 --> 00:54:00,127 Why? Because 80% of customer intelligence is invisible. 1270 00:54:00,210 --> 00:54:03,577 It's hidden in emails, transcripts, and conversations. 1271 00:54:03,660 --> 00:54:05,480 That's where HubSpot comes in. 1272 00:54:05,670 --> 00:54:07,617 With HubSpot, all of your data comes together 1273 00:54:07,700 --> 00:54:10,087 so you can see the patterns that matter. 1274 00:54:10,170 --> 00:54:12,907 This is important because when you know more, you grow more, 1275 00:54:12,990 --> 00:54:15,667 and that is a pattern that never fails. 1276 00:54:15,750 --> 00:54:19,580 Visit hubspot.com today. That is hubspot.com. 1277 00:54:20,640 --> 00:54:22,347 I want to hear more about what it was like working with him, 1278 00:54:22,430 --> 00:54:26,610 but there was a very astute observation you made in your blog archive 1279 00:54:26,960 --> 00:54:30,327 because you were trying to, essentially this post was trying to educate founders, 1280 00:54:30,410 --> 00:54:32,037 just like recruiting is the most important thing you're doing 1281 00:54:32,120 --> 00:54:33,917 at the very beginning of a company, maybe forever, 1282 00:54:34,000 --> 00:54:36,657 and you're underestimating how difficult it is, 1283 00:54:36,740 --> 00:54:39,597 and you tell the story of Jim Clark in the blog archive. 1284 00:54:39,680 --> 00:54:41,837 You're like, "This guy was a legend." - He was, yeah. 1285 00:54:41,920 --> 00:54:44,707 - Like, most famous person, best entrepreneur, 1286 00:54:44,790 --> 00:54:47,667 and he tried to recruit all these other people, and I don't know, 1287 00:54:47,750 --> 00:54:48,787 it was like 100 people, and you're like... 1288 00:54:48,870 --> 00:54:52,277 Well, you were one of two or three that actually followed through- 1289 00:54:52,360 --> 00:54:55,357 - Yep. - and took the chance and jumped and started working with him. 1290 00:54:55,440 --> 00:54:59,237 - Yeah, again, this is like, I don't know, Zuckerberg or Sergey Brin or Elon 1291 00:54:59,320 --> 00:55:00,747 or whatever decides to start a company. 1292 00:55:00,830 --> 00:55:03,247 That was his candle power wattage in the community at that time. 1293 00:55:03,330 --> 00:55:05,737 And so, yeah, you would think that the obvious thing people would just say, 1294 00:55:05,820 --> 00:55:07,347 "Jim Clark wants us to start a company with you," 1295 00:55:07,430 --> 00:55:09,580 just the obvious thing is you just say yes. 1296 00:55:10,010 --> 00:55:12,180 It was not happening. 1297 00:55:12,780 --> 00:55:15,907 I don't know if I told this story, but the crystallized memory 1298 00:55:15,990 --> 00:55:19,727 is a dinner of 12 of us at this famous Italian restaurant 1299 00:55:19,810 --> 00:55:21,417 in Palo Alto called Il Fornaio. 1300 00:55:21,500 --> 00:55:23,417 It's where a lot of these companies were formed. 1301 00:55:23,500 --> 00:55:24,827 It was Jim's favorite restaurant at the time. 1302 00:55:24,910 --> 00:55:26,347 And so Jim had like a dozen of us, 1303 00:55:26,430 --> 00:55:28,777 and us being people who were in existing companies, 1304 00:55:28,860 --> 00:55:31,327 who were basically technical people who he knew. 1305 00:55:31,410 --> 00:55:33,027 Well, this is another thing. He was constrained. 1306 00:55:33,110 --> 00:55:34,817 He had a non-solicit agreement with Silicon Graphics, 1307 00:55:34,900 --> 00:55:38,797 and so he couldn't just rip people out, and he didn't want to violate that. 1308 00:55:38,880 --> 00:55:41,427 And so he needed to basically reach out to the technical community- 1309 00:55:41,510 --> 00:55:43,417 - Mm-hmm. - and find new collaborators. 1310 00:55:43,500 --> 00:55:44,647 So, there were like a dozen of us in there. 1311 00:55:44,730 --> 00:55:48,647 And I remember that dinner very precisely for two reasons. 1312 00:55:48,730 --> 00:55:51,580 Number one is I was the only one of the dozen to say yes, 1313 00:55:51,900 --> 00:55:55,450 and then the other was it's the first time in my life I drank red wine. 1314 00:55:56,210 --> 00:55:58,060 And I didn't know what to make of it. 1315 00:55:58,420 --> 00:56:01,870 And so, I kept sipping it, trying to figure out if I liked it or not, 1316 00:56:02,040 --> 00:56:05,040 and I didn't realize that I was getting completely hammered, 1317 00:56:05,230 --> 00:56:08,010 because I had no idea how to calibrate red wine. 1318 00:56:08,530 --> 00:56:10,997 And so, the true version of the story is, I leave the dinner, 1319 00:56:11,080 --> 00:56:12,227 and I'm like, "Wow, this is amazing." 1320 00:56:12,310 --> 00:56:13,807 Like "I'm going to say yes to this. We're going to do this." 1321 00:56:13,890 --> 00:56:16,767 And I go to my car in the parking garage in Palo Alto across the street, 1322 00:56:16,850 --> 00:56:20,027 and my brand new car, my first new car I've ever owned, right? 1323 00:56:20,110 --> 00:56:22,267 My brand new car. And I gun it, and I pull out, 1324 00:56:22,350 --> 00:56:24,650 and I rip the entire front end of the car off. 1325 00:56:25,570 --> 00:56:29,817 It's like this screaming metal sound. 1326 00:56:29,900 --> 00:56:32,637 So, the whole front end of my car is just hanging on the ground, 1327 00:56:32,720 --> 00:56:34,340 and I'm like, "Oh, f*** me." 1328 00:56:34,710 --> 00:56:37,007 So anyway, I park the car, get out of the car, walk home. 1329 00:56:37,090 --> 00:56:37,817 - No Uber this time. 1330 00:56:37,900 --> 00:56:43,617 - No Uber. I'm just like... A three-mile walk at whatever, 11:00 at night 1331 00:56:43,700 --> 00:56:45,477 with six bottles of red wine. 1332 00:56:45,560 --> 00:56:47,797 - And you're what? 22? - No problem. Twenty-two, yeah, exactly. 1333 00:56:47,880 --> 00:56:51,430 - Twenty-two. I'm like, "I think I probably won't mention this to Jim." 1334 00:56:52,960 --> 00:56:54,387 I don't know, there are some wild stories in that book. 1335 00:56:54,470 --> 00:56:56,077 He might have admired you even more. 1336 00:56:56,160 --> 00:57:00,160 - He might have. Yes. - How many founders of the company? It's just you and him? 1337 00:57:00,580 --> 00:57:01,967 - So, yeah, originally it was him and me. 1338 00:57:02,050 --> 00:57:04,027 - Okay. - Yeah, we started the company, and 1339 00:57:04,110 --> 00:57:07,477 it was again one of these things where we had long conversations about what to do. 1340 00:57:07,560 --> 00:57:11,467 Well, okay, so then the problem that he had was... 1341 00:57:11,550 --> 00:57:15,347 There was the idea of doing the graphics chip, and again, that’s what NVIDIA did. 1342 00:57:15,430 --> 00:57:17,567 But NVIDIA was essentially a spin-off of SGI. 1343 00:57:17,650 --> 00:57:20,107 But at that time, starting a new chip company from scratch would’ve been tough, 1344 00:57:20,190 --> 00:57:22,820 and he didn’t want to compete with SGI doing that. 1345 00:57:23,190 --> 00:57:26,037 And then the interactive... What you would call the interactive is lost to history, 1346 00:57:26,120 --> 00:57:28,427 but this interactive television, it wasn't time for that yet. 1347 00:57:28,510 --> 00:57:30,217 There wasn't actually time for Netflix yet. 1348 00:57:30,300 --> 00:57:33,267 And so it was going to be cost-prohibitive. 1349 00:57:33,350 --> 00:57:36,067 Time Warner had rolled out this interactive television thing in 1350 00:57:36,150 --> 00:57:37,777 Orlando, Florida, to 500 people. 1351 00:57:37,860 --> 00:57:39,617 - Yeah, and Microsoft was involved 1352 00:57:39,700 --> 00:57:41,457 in some way. Yeah. - They were doing a ton in Oracle. 1353 00:57:41,540 --> 00:57:42,897 At the time all the big companies were... 1354 00:57:42,980 --> 00:57:44,907 - It's all these Bill Gates biographies. - Yeah. Exactly. 1355 00:57:44,990 --> 00:57:49,057 He talks about that a lot. But the CapEx per house was like 50,000 dollars 1356 00:57:49,140 --> 00:57:51,707 or something, because you had to have a Silicon Graphics workstation in the house, 1357 00:57:51,790 --> 00:57:54,790 and it wasn't going to work. So he couldn't figure that out, 1358 00:57:55,060 --> 00:57:57,237 and then we cycled through a whole bunch of ideas. 1359 00:57:57,320 --> 00:57:59,837 He actually went back to Nintendo, and we almost 1360 00:57:59,920 --> 00:58:03,587 pulled the trigger on basically building what today you'd call Xbox Live, or 1361 00:58:03,670 --> 00:58:06,117 what is it called? PlayStation Network or Xbox Live? - Yeah. 1362 00:58:06,200 --> 00:58:08,087 - An online gaming service for the Nintendo 1363 00:58:08,170 --> 00:58:12,240 64 in 1994, which might've been a good idea. We thought it was too early. 1364 00:58:12,640 --> 00:58:15,637 We almost did that, and then what happened literally was the internet... 1365 00:58:15,720 --> 00:58:18,947 I had worked on the internet in college, and then, this is 1366 00:58:19,030 --> 00:58:22,670 fortunately only a few months later, but the internet just kept growing. 1367 00:58:23,100 --> 00:58:25,427 - Hold on, Marc. - Yes. - You had worked on the internet 1368 00:58:25,510 --> 00:58:27,077 a little bit? That's a little bit modest. - I had worked on the internet. 1369 00:58:27,160 --> 00:58:27,993 Yes, well... 1370 00:58:28,410 --> 00:58:30,267 - I think a lot of people listening to this will know, 1371 00:58:30,350 --> 00:58:33,800 but you should probably explain how you were working on the internet. 1372 00:58:34,060 --> 00:58:36,177 - So this is part of the story. At the time, it was not that big of a deal. 1373 00:58:36,260 --> 00:58:40,010 It's not nearly that much big of a deal at the time as it's viewed now. So, 1374 00:58:40,220 --> 00:58:43,187 the internet... I've told this story many times, so I won't go into huge detail, 1375 00:58:43,270 --> 00:58:46,737 but yeah, a group of us at Illinois did this thing called Mosaic, which was 1376 00:58:46,820 --> 00:58:50,127 the first, as I said, widely used web browser, than the first one with graphics. 1377 00:58:50,210 --> 00:58:53,587 - Explain what was different about what you made compared to what existed before. 1378 00:58:53,670 --> 00:58:55,697 - Yeah, so the previous web browsers were text-based. 1379 00:58:55,780 --> 00:58:58,047 There was this nascent concept of the web, 1380 00:58:58,130 --> 00:59:01,757 but it was text-based terminals, and then it didn't have graphics. 1381 00:59:01,840 --> 00:59:02,977 It wasn't point-and-click. 1382 00:59:03,060 --> 00:59:06,937 It didn't work in the way that you would expect this type of software to work. 1383 00:59:07,020 --> 00:59:11,507 And then, by the way, it didn't also have scripting language, no security, 1384 00:59:11,590 --> 00:59:15,667 none of the actual capabilities that make the browser a useful thing. 1385 00:59:15,750 --> 00:59:18,887 And so there was this nascent idea, but it needed to get built into a full thing, 1386 00:59:18,970 --> 00:59:23,867 and so we built the original kind of full thing, a full browser, at Illinois. 1387 00:59:23,950 --> 00:59:27,537 And then we also built the first kind of mainstream web server, like 1388 00:59:27,620 --> 00:59:30,017 the first web server, again, that kind of had everything that people needed. 1389 00:59:30,100 --> 00:59:32,620 This had been a project at college, 1390 00:59:33,560 --> 00:59:37,410 and again, at the time, the internet was not viewed as a consumer phenomenon. 1391 00:59:37,600 --> 00:59:39,427 - Wasn't it illegal to commercialize? 1392 00:59:39,510 --> 00:59:41,617 Steve Case of AOL tells a story that - Yeah. 1393 00:59:41,700 --> 00:59:43,257 - he had to lobby and get a law changed. 1394 00:59:43,340 --> 00:59:45,717 - Yeah, that's right. Yeah. - What were the details there? 1395 00:59:45,800 --> 00:59:50,410 - So the internet as we know it today, in the 1980s, was called the NSFNET. 1396 00:59:51,170 --> 00:59:53,097 NSF stands for National Science Foundation, 1397 00:59:53,180 --> 00:59:56,037 which is a branch of the U.S. government that funds research, 1398 00:59:56,120 --> 00:59:59,230 and the National Science Foundation funded the internet. 1399 00:59:59,610 --> 01:00:02,237 The reason I was able to do the work, I was able to do it at Illinois is because 1400 01:00:02,320 --> 01:00:06,137 the NSF had actually dumped a ton of money into four universities 1401 01:00:06,220 --> 01:00:08,797 around the country to build what were called the supercomputer centers, 1402 01:00:08,880 --> 01:00:11,137 and then those were also the main hubs for the NSFNET. 1403 01:00:11,220 --> 01:00:13,457 And the function of the NSFNET was fundamentally to 1404 01:00:13,540 --> 01:00:15,597 connect the supercomputers to all the people 1405 01:00:15,680 --> 01:00:18,957 who were going to use them. So it was this government research academic program, 1406 01:00:19,040 --> 01:00:21,707 and it was very exciting in the technical field. But 1407 01:00:21,790 --> 01:00:25,790 there was no conception that ordinary people were ever going to use any of this. 1408 01:00:25,900 --> 01:00:29,320 Nobody thought that this was a thing that normies were going to use. 1409 01:00:29,540 --> 01:00:35,557 And NSF, it's taxpayer funding, so the government at least is not supposed to be 1410 01:00:35,640 --> 01:00:38,810 funding businesses directly, although sometimes they do. 1411 01:00:39,110 --> 01:00:45,907 But there were formal legal restrictions on funding things with 1412 01:00:45,990 --> 01:00:47,807 commercial applications. And so what there was was 1413 01:00:47,890 --> 01:00:50,637 there was something called the AUP, Acceptable Use Policy, 1414 01:00:50,720 --> 01:00:54,657 and the Acceptable Use Policy said that basically the internet, 1415 01:00:54,740 --> 01:00:58,397 the NSFNET turned internet, was for academic and research use, and 1416 01:00:58,480 --> 01:01:01,687 commercial activities were strictly prohibited, literally not allowed. 1417 01:01:01,770 --> 01:01:04,217 And again, it's just like, as a taxpayer, that makes total sense. 1418 01:01:04,300 --> 01:01:07,217 I'm glad my tax money's not going to fund something like that. 1419 01:01:07,300 --> 01:01:09,567 But as a user, you're just like, "All right, that's nuts." 1420 01:01:09,650 --> 01:01:13,397 That's clearly crazy, right? And if you took the conceptual leap 1421 01:01:13,480 --> 01:01:15,457 to say, "No, this is going to escape the lab, 1422 01:01:15,540 --> 01:01:17,587 and this is going to be something that normal people are going to use," 1423 01:01:17,670 --> 01:01:20,547 then it just became obvious that it would have to have commercial activities. 1424 01:01:20,630 --> 01:01:24,157 Yeah, and then AOL was one of the early pre-internet online services that 1425 01:01:24,240 --> 01:01:25,867 wanted to connect to the internet. I think they 1426 01:01:25,950 --> 01:01:28,297 famously connected to the internet in 1993. 1427 01:01:28,380 --> 01:01:30,397 Do you know about the concept of Eternal September? 1428 01:01:30,480 --> 01:01:35,137 - No. - Oh, okay. So there are two internets. 1429 01:01:35,220 --> 01:01:37,047 There is the internet that existed before 1993 1430 01:01:37,130 --> 01:01:39,037 and the internet that existed after 1993. 1431 01:01:39,120 --> 01:01:43,070 People who were on the internet before 1993 often describe it in utopian terms, 1432 01:01:43,470 --> 01:01:46,207 because it literally was like you take the whatever million 1433 01:01:46,290 --> 01:01:48,247 smartest people in the world and you put them on a network together, 1434 01:01:48,330 --> 01:01:51,597 with no commercial activity, no advertising, no nothing, 1435 01:01:51,680 --> 01:01:53,647 just the million smartest people in the world, and 1436 01:01:53,730 --> 01:01:55,097 you just let them talk to each other, 1437 01:01:55,180 --> 01:01:57,537 and it's just amazing. It was amazing. Like, there was this... 1438 01:01:57,620 --> 01:02:00,717 The old messaging system was called Usenet, and the discussions on Usenet 1439 01:02:00,800 --> 01:02:04,057 were just absolutely spectacular. It was amazing. 1440 01:02:04,140 --> 01:02:06,417 It was the most pure, clean, 1441 01:02:06,500 --> 01:02:11,777 intellectual, vibrant space since, I don't know, Athens in 500 BC. 1442 01:02:11,860 --> 01:02:13,377 It was just this amazing phenomenon. 1443 01:02:13,460 --> 01:02:15,027 And then AOL connected. 1444 01:02:15,110 --> 01:02:18,817 AOL had, I don't know, whatever, a million or two million people at that point. 1445 01:02:18,900 --> 01:02:21,917 They connected all the AOL users, which were just normal people, 1446 01:02:22,000 --> 01:02:26,840 to the internet in September 1993, and that became Eternal September. 1447 01:02:27,640 --> 01:02:29,657 That's the day the internet changed. And by the way, 1448 01:02:29,740 --> 01:02:32,357 I'm pro that, I'm glad that happened. But the pro and the con of that is 1449 01:02:32,440 --> 01:02:35,737 that took the internet from this ivory tower kind of thing to this basically 1450 01:02:35,820 --> 01:02:38,367 mainstream consumer, ordinary people thing, 1451 01:02:38,450 --> 01:02:42,087 which is, of course, just a fundamentally different thing, obviously, right? 1452 01:02:42,170 --> 01:02:44,447 The concept of Eternal September literally was 1453 01:02:44,530 --> 01:02:47,477 when every new wave of college graduates graduated 1454 01:02:47,560 --> 01:02:49,337 and got their first job, and then went online. 1455 01:02:49,420 --> 01:02:53,470 September is when the new crop of internet users showed up for a long time, 1456 01:02:53,590 --> 01:02:56,347 so the "September effect" didn't just happen once. 1457 01:02:56,430 --> 01:02:59,737 It happened over and over and over and over and over and over again. 1458 01:02:59,820 --> 01:03:02,457 And every cycle of internet users would basically be like, 1459 01:03:02,540 --> 01:03:05,057 "Oh my God, this is great, but it's all going to get ruined in September." 1460 01:03:05,140 --> 01:03:07,977 - Yeah. - Right? And so the internet that we live in today is the result of... 1461 01:03:08,060 --> 01:03:09,257 - If they could only see us now. 1462 01:03:09,340 --> 01:03:15,147 - 30 Septembers, right? But yeah, and by the way, there was controversy 1463 01:03:15,230 --> 01:03:19,507 at the time about whether the Acceptable Use Policy should be revoked. 1464 01:03:19,590 --> 01:03:24,070 There was controversy over whether normal people should be on it or not. 1465 01:03:24,290 --> 01:03:27,107 There was controversy over whether the kind of content normal people 1466 01:03:27,190 --> 01:03:28,817 wanted to be on it should be allowed to be on it. 1467 01:03:28,900 --> 01:03:31,027 There was controversy about whether there should be... 1468 01:03:31,110 --> 01:03:33,177 There was controversy... We got quite a bit of flak at the time for 1469 01:03:33,260 --> 01:03:34,717 putting images into web pages, 1470 01:03:34,800 --> 01:03:37,027 under the theory that that would fundamentally make everything worse 1471 01:03:37,110 --> 01:03:40,620 because you'd have normie content, and that would be bad. 1472 01:03:41,000 --> 01:03:44,000 And it's the same about e-commerce. By the way, advertising, 1473 01:03:44,310 --> 01:03:47,890 I remember there was actually a moment that... 1474 01:03:48,810 --> 01:03:51,817 There was a guy named Sanford Wallace, and he became known as 1475 01:03:51,900 --> 01:03:57,000 "Spamford Wallace." He literally sent out the first spam message on the internet 1476 01:03:57,110 --> 01:03:58,377 in 1992. 1477 01:03:58,460 --> 01:04:01,487 And literally, it was the first internet ad, and it was a spam for, I don't know, 1478 01:04:01,570 --> 01:04:03,187 whatever, legal services or something. 1479 01:04:03,270 --> 01:04:06,757 He just drops it on the UseNet, and it was like a thermonuclear explosion, 1480 01:04:06,840 --> 01:04:10,890 because it was like, "Get this commercialized crap out of my newsfeed." 1481 01:04:11,170 --> 01:04:16,127 So all of these things were hot and controversial. 1482 01:04:16,210 --> 01:04:18,587 I was generally on the other side of all these arguments 1483 01:04:18,670 --> 01:04:20,657 because I was like, "Look, this thing is great. 1484 01:04:20,740 --> 01:04:22,797 Obviously, everybody should have access to this. Obviously, 1485 01:04:22,880 --> 01:04:26,607 we need to connect everybody to this. Obviously, to do that, these need to be 1486 01:04:26,690 --> 01:04:28,867 businesses, there needs to be commerce. There needs to be advertising. 1487 01:04:28,950 --> 01:04:30,837 All these things obviously need to happen." 1488 01:04:30,920 --> 01:04:33,827 - So was that the discussions you and Jim were having, where you're like, "Okay, 1489 01:04:33,910 --> 01:04:36,257 we're going to start an actual company around this"? - Yeah. 1490 01:04:36,340 --> 01:04:39,087 So yeah, that's how we got to the conversation Jim and I had, which was 1491 01:04:39,170 --> 01:04:41,827 basically like, okay... Because that was right at the pivot point. This was in 1492 01:04:41,910 --> 01:04:44,970 early '94, so the AUP had just been revoked, and 1493 01:04:45,270 --> 01:04:49,467 AOL had just done the first September, and the whole thing was just about to tip. 1494 01:04:49,550 --> 01:04:56,380 And I knew that because I was tech support for the browser personally. 1495 01:04:58,800 --> 01:05:00,570 - No, explain that. - Just me. 1496 01:05:00,710 --> 01:05:03,717 Well, Mosaic at the time was the browser everybody used, and so if you 1497 01:05:03,800 --> 01:05:06,187 used Mosaic, there was a Submit a Bug report or whatever, 1498 01:05:06,270 --> 01:05:08,367 "You have a question, submit it here," and that went to an email box, 1499 01:05:08,450 --> 01:05:12,140 and that email box was me. So I became tech support for the internet. 1500 01:05:14,180 --> 01:05:17,700 For like three years. - How? - I got all the emails. 1501 01:05:19,070 --> 01:05:19,937 - How many emails were you getting? 1502 01:05:20,020 --> 01:05:22,697 - Well, there were actually two. That was one email box, and the other email box 1503 01:05:22,780 --> 01:05:26,137 was... Mosaic was actually created under... It was also funded by the 1504 01:05:26,220 --> 01:05:30,627 National Science Foundation. So it was actually not... The original license said 1505 01:05:30,710 --> 01:05:33,557 it couldn't be used for commercial use, it was for academic, research, and 1506 01:05:33,640 --> 01:05:37,387 individual use. So, we had this thing. We did a deliberately ambiguous license, and 1507 01:05:37,470 --> 01:05:40,987 we said, "If you want to use the browser commercially, you need to email us 1508 01:05:41,070 --> 01:05:42,807 to arrange terms." Now, we had no 1509 01:05:42,890 --> 01:05:45,747 concept at all of what those terms would be, but we just said we need to 1510 01:05:45,830 --> 01:05:47,317 create this incoming flow. So 1511 01:05:47,400 --> 01:05:49,407 I was getting bombarded with tech support requests. 1512 01:05:49,490 --> 01:05:50,137 And by the way, 1513 01:05:50,220 --> 01:05:52,787 tech support for the internet means you're tech support for everything. 1514 01:05:52,870 --> 01:05:58,217 So it's like the old PCs had CD-ROM trays, you press the button, 1515 01:05:58,300 --> 01:06:00,687 the CD-ROM tray comes out, you put the disc in the thing. 1516 01:06:00,770 --> 01:06:04,447 The problem is a lot of people thought that those were cup holders, right? 1517 01:06:04,530 --> 01:06:06,317 So you press the button, the cup holder comes out, 1518 01:06:06,400 --> 01:06:07,427 you put your cup of coffee down, 1519 01:06:07,510 --> 01:06:10,257 and then 10 seconds later, the cup holder retracts back into the PC, 1520 01:06:10,340 --> 01:06:11,777 spills your coffee all over the place. 1521 01:06:11,860 --> 01:06:14,217 You're like, "How the f*** do I keep the cup holder out," right? 1522 01:06:14,300 --> 01:06:16,497 - Let me email Marc. - Yeah, let me email Marc. 1523 01:06:16,580 --> 01:06:19,050 It's like, "Sir, that's the CD-ROM drive." 1524 01:06:19,650 --> 01:06:22,130 So there was a lot of that. 1525 01:06:23,350 --> 01:06:25,637 One of the funnier things you can always do, 1526 01:06:25,720 --> 01:06:28,517 in politics, they call this "focus groups," but you could do user testing. 1527 01:06:28,600 --> 01:06:30,907 You see this over and over at tech companies, 1528 01:06:30,990 --> 01:06:33,627 take whatever amazing new thing you have and just 1529 01:06:33,710 --> 01:06:35,907 put it in a room with normal people and let them try to use it. 1530 01:06:35,990 --> 01:06:40,097 You just learn so much about how much of a bubble that you're in, - Yeah. 1531 01:06:40,180 --> 01:06:42,367 about the kind of things that you're familiar with, that normal people 1532 01:06:42,450 --> 01:06:44,157 are just like, "I don't know what the hell Yeah. any of this stuff is." 1533 01:06:44,240 --> 01:06:46,037 So, there was a lot of that. 1534 01:06:46,120 --> 01:06:49,537 But then I had this other email box, which was all the commercial licensing requests. 1535 01:06:49,620 --> 01:06:51,217 And so I saw the consumer takeoff 1536 01:06:51,300 --> 01:06:52,967 on the one side, and then I basically, I think that... 1537 01:06:53,050 --> 01:06:56,317 And then the commercial requests hit 400 messages 1538 01:06:56,400 --> 01:06:58,197 of people wanting to pay money for this thing. 1539 01:06:58,280 --> 01:07:00,537 And so I basically took those to Jim, and I was like... 1540 01:07:00,620 --> 01:07:03,780 - There's a business. - Yeah, this is going to happen. And then 1541 01:07:03,890 --> 01:07:10,557 we actually went to... My old boss at NCSA actually had gone to... 1542 01:07:10,640 --> 01:07:13,097 We actually went to Washington in '93 to try to get 1543 01:07:13,180 --> 01:07:15,310 NSF funding to staff a support desk 1544 01:07:15,510 --> 01:07:18,857 and so that it wasn't me answering all of the emails. 1545 01:07:18,940 --> 01:07:21,287 And the National Science Foundation people were very nice, 1546 01:07:21,370 --> 01:07:23,727 and they were like, "Yes, the National Science Foundation is not in the business 1547 01:07:23,810 --> 01:07:26,807 of funding customer support desks for your software." 1548 01:07:26,890 --> 01:07:30,840 And so I still have the denied NSF grant that would've kept the whole thing 1549 01:07:31,420 --> 01:07:36,967 an academic project. But yeah, at that point, at least to Jim and me, 1550 01:07:37,050 --> 01:07:38,897 it was just obvious that that was going to be a business. 1551 01:07:38,980 --> 01:07:41,217 By the way, again, very controversial, 1552 01:07:41,300 --> 01:07:43,447 the original press coverage on Netscape for the first year 1553 01:07:43,530 --> 01:07:45,557 was that these people would never make money. Like, this is ridiculous. 1554 01:07:45,640 --> 01:07:47,437 Everybody knows the internet's free. 1555 01:07:47,520 --> 01:07:49,487 Everybody knows that none of this is going to work, so, 1556 01:07:49,570 --> 01:07:51,867 - What did you think the business model, though... 1557 01:07:51,950 --> 01:07:53,197 - even then it was controversial. 1558 01:07:53,280 --> 01:07:54,557 - Was just literally licensing it? 1559 01:07:54,640 --> 01:07:56,927 - It was a combination of things. So, it was definitely software licensing, 1560 01:07:57,010 --> 01:07:59,177 and we made this thing up where the browser was free, 1561 01:07:59,260 --> 01:08:00,637 but the server software cost money. 1562 01:08:00,720 --> 01:08:03,147 And then, out of the gate, we started building all these, we called, 1563 01:08:03,230 --> 01:08:08,057 applications, server-side applications. So we built the first publishing system 1564 01:08:08,140 --> 01:08:11,407 for running a newspaper or magazine online, a content management system. 1565 01:08:11,490 --> 01:08:14,247 We built the first e-commerce system for selling... This is pre-Amazon, 1566 01:08:14,330 --> 01:08:16,807 so we built the first e-commerce system for selling things online. 1567 01:08:16,890 --> 01:08:20,300 So we built and sold a lot of that software. 1568 01:08:20,650 --> 01:08:25,097 And then we owned the main website that the browser had as its default homepage, 1569 01:08:25,180 --> 01:08:28,677 and so we built the original internet advertising business, was basically... 1570 01:08:28,760 --> 01:08:32,267 So Netscape was the largest internet advertising company until, I think, '97. 1571 01:08:32,350 --> 01:08:35,147 - That's incredible. I didn't know that. - When Yahoo passed us, yeah. 1572 01:08:35,230 --> 01:08:39,117 And so yeah, we invented, or people at the firm invented, at the company invented... 1573 01:08:39,200 --> 01:08:42,757 I don't know exactly who gets credit, but the original ad formats 1574 01:08:42,840 --> 01:08:46,097 were right around that time, and a lot of them rolled out on our site first. 1575 01:08:46,180 --> 01:08:51,680 So it was literally advertising pre-Yahoo. It was e-commerce pre-Amazon. 1576 01:08:51,880 --> 01:08:56,077 It was, yeah, content pre... We literally sold... 1577 01:08:56,160 --> 01:08:57,437 I mean, we put The Wall Street Journal online. 1578 01:08:57,520 --> 01:08:59,367 That was our software that did that, 1579 01:08:59,450 --> 01:09:02,637 and a lot of other newspapers, magazines, and all that stuff. 1580 01:09:02,720 --> 01:09:05,567 And so yeah, it was a lot of that, and then it was the web operation. 1581 01:09:05,650 --> 01:09:09,387 And again, it all looks obvious in retrospect, but 1582 01:09:09,470 --> 01:09:11,687 again, it was like, okay, when we started this... 1583 01:09:11,770 --> 01:09:13,437 I don't know what the total number was. 1584 01:09:13,520 --> 01:09:15,437 So we started the company in April '94. 1585 01:09:15,520 --> 01:09:17,657 There couldn't have been more than two million people total online, 1586 01:09:17,740 --> 01:09:20,740 right? And then almost everybody was coming in over dial-up. 1587 01:09:21,050 --> 01:09:22,407 This is like pre-broadband, right? 1588 01:09:22,490 --> 01:09:25,157 So everybody's coming in on, like, 14.4 kilobyte modems, 1589 01:09:25,240 --> 01:09:28,287 and we're hoping that people are going to upgrade to 56 kilobyte modems, 1590 01:09:28,370 --> 01:09:30,007 that that would be like super helpful. - Yeah. 1591 01:09:30,090 --> 01:09:33,017 - Computers at that time did not come with TCP/IP installed, 1592 01:09:33,100 --> 01:09:35,427 so to get your PC actually on the internet, 1593 01:09:35,510 --> 01:09:38,177 you needed to buy a TCP/IP stack. 1594 01:09:38,260 --> 01:09:40,907 Try explaining to a normal human being what a TCP/IP stack is. 1595 01:09:40,990 --> 01:09:42,240 It makes no sense at all. 1596 01:09:42,880 --> 01:09:44,687 - They're going to ask if they can put it next to their cup holder. 1597 01:09:44,770 --> 01:09:47,607 - Exactly, yeah. It was just like talking to Martians, right? 1598 01:09:47,690 --> 01:09:49,267 Their talking to us was like talking to Martians. 1599 01:09:49,350 --> 01:09:53,300 And then monitors were like three feet deep, and just bathing you in radiation. 1600 01:09:54,340 --> 01:09:57,537 You're kind of hoping that the radiation stays up here and not everywhere else. 1601 01:09:57,620 --> 01:09:59,797 In retrospect, it was super early, and it was all very... 1602 01:09:59,880 --> 01:10:02,570 And then again, it was just like, "Okay, e-commerce, 1603 01:10:02,810 --> 01:10:05,447 are people going to buy things online?" It's like, "I don't know, maybe." 1604 01:10:05,530 --> 01:10:07,937 But the press at that time was just like wall-to-wall, like, 1605 01:10:08,020 --> 01:10:10,267 "If you put your credit card number online, hackers are going to steal it." 1606 01:10:10,350 --> 01:10:11,587 - I was going to say, if you read any books that were 1607 01:10:11,670 --> 01:10:12,497 around this time, they're like, - Yeah. 1608 01:10:12,580 --> 01:10:13,617 - "There's no way in hell anybody's - Yeah. 1609 01:10:13,700 --> 01:10:15,087 - ever going to put their credit card on the internet." 1610 01:10:15,170 --> 01:10:15,857 - But by the way, the other thing 1611 01:10:15,940 --> 01:10:18,717 you would never ever do is put your real name online 1612 01:10:18,800 --> 01:10:21,347 because it would be immediate identity theft, your life would be ruined. 1613 01:10:21,430 --> 01:10:22,817 So you would never ever do that. 1614 01:10:22,900 --> 01:10:24,917 By the way, the other thing was right in the beginning, 1615 01:10:25,000 --> 01:10:27,897 you had all the panic around kids, "This is going to destroy children, 1616 01:10:27,980 --> 01:10:30,447 this is a huge risk to children." So you had all that panic. 1617 01:10:30,530 --> 01:10:34,077 And then there was immediately the beginning of the calls for censorship. 1618 01:10:34,160 --> 01:10:35,897 There's clearly all this stuff that you have to take down. 1619 01:10:35,980 --> 01:10:37,137 The New York Times kept running stories 1620 01:10:37,220 --> 01:10:38,767 talking about how the whole thing was fake anyway. 1621 01:10:38,850 --> 01:10:40,637 They kept saying that all the numbers were made up, 1622 01:10:40,720 --> 01:10:42,317 and there actually wasn't anybody online. 1623 01:10:42,400 --> 01:10:43,677 It was like a tiny little user base, and 1624 01:10:43,760 --> 01:10:45,927 we were all inflating the numbers and committing fraud. 1625 01:10:46,010 --> 01:10:48,067 So it was just this... 1626 01:10:48,150 --> 01:10:51,907 In retrospect, it's all quaint and cute and sweet, but it was like the precursor. 1627 01:10:51,990 --> 01:10:55,917 It was all the moral panics around technology today. - Okay. But... 1628 01:10:56,000 --> 01:10:57,737 - You could see nascent versions of them back then. 1629 01:10:57,820 --> 01:10:59,297 - You pick up on something that... Because 1630 01:10:59,380 --> 01:11:01,837 me and you have read a bunch of the same books, where it's like, humans' reactions 1631 01:11:01,920 --> 01:11:03,277 to something new is just consistent - Yeah. 1632 01:11:03,360 --> 01:11:06,127 - throughout history. - Yeah. - And so I heard a podcast with you. 1633 01:11:06,210 --> 01:11:07,177 I thought I was the only one that 1634 01:11:07,260 --> 01:11:09,247 would tell the story in private about bicycle face. 1635 01:11:09,330 --> 01:11:10,320 - Bicycle face. 1636 01:11:11,840 --> 01:11:15,097 - Exactly. Do you want to say what bicycle face is? - Bicycle face. Bicycle face. 1637 01:11:15,180 --> 01:11:16,937 Bicycle face, yes. So it basically turns out 1638 01:11:17,020 --> 01:11:19,677 every new technology is greeted with what they call a "moral panic," 1639 01:11:19,760 --> 01:11:23,207 right? So, a moral panic basically is, whatever this new technology is, or 1640 01:11:23,290 --> 01:11:25,377 this new form of media is, it's going to ruin everything. 1641 01:11:25,460 --> 01:11:28,927 Specifically, it's going to ruin society, it's going to ruin morality, 1642 01:11:29,010 --> 01:11:31,477 and then, especially, it's going to ruin the children. 1643 01:11:31,560 --> 01:11:34,407 And then back... The bicycle was pre-feminism, 1644 01:11:34,490 --> 01:11:36,197 so it was also going to ruin the women 1645 01:11:36,280 --> 01:11:37,987 very specifically. It's going to ruin the women, 1646 01:11:38,070 --> 01:11:41,367 because women, clearly, in 1880, cannot be trusted to 1647 01:11:41,450 --> 01:11:44,810 use a bicycle without getting into real trouble. I'll explain why. 1648 01:11:45,240 --> 01:11:48,417 So this is this persistent theme, and basically you go all the way back, 1649 01:11:48,500 --> 01:11:52,427 and this is like this famous thing where Plato and Socrates thought that, 1650 01:11:52,510 --> 01:11:55,387 basically, written language was a big mistake, 1651 01:11:55,470 --> 01:11:58,767 that all information transmission should be oral, and they had this whole thing 1652 01:11:58,850 --> 01:12:01,127 back in 500 BC. And then it was just like every... 1653 01:12:01,210 --> 01:12:05,227 You just have to imagine. So I always like to hypothesize that 1654 01:12:05,310 --> 01:12:07,467 the first guy who brought fire, like, 1655 01:12:07,550 --> 01:12:08,887 down from the mountain. - They probably killed him. 1656 01:12:08,970 --> 01:12:12,337 - Yeah. They're like, "What the f*** is this?" Right? Exactly, like, 1657 01:12:12,420 --> 01:12:14,907 "This thing is horrible. This thing could burn down the village. This is awful. 1658 01:12:14,990 --> 01:12:16,517 This is going to destroy everything." 1659 01:12:16,600 --> 01:12:18,717 And so it's just been this consistent thing. 1660 01:12:18,800 --> 01:12:21,837 There's this great website called Pessimist Archive, where 1661 01:12:21,920 --> 01:12:24,247 these guys go back and they find all these newspaper articles that are 1662 01:12:24,330 --> 01:12:27,657 contemporaneous to these things. But it's everything. So when I was a kid, 1663 01:12:27,740 --> 01:12:32,470 it was like heavy metal music, Dungeons & Dragons, like all this stuff was awful. 1664 01:12:32,900 --> 01:12:35,957 I remember the moral panic around the Walkman, the very first portable cassette 1665 01:12:36,040 --> 01:12:39,037 player with the headphones, because it was going to destroy society 1666 01:12:39,120 --> 01:12:41,677 because everybody was going to just be listening to their own music. 1667 01:12:41,760 --> 01:12:43,457 I remember the moral panic around the calculator, 1668 01:12:43,540 --> 01:12:44,747 it was going to destroy education 1669 01:12:44,830 --> 01:12:46,757 because kids were not going to learn how to do math anymore. 1670 01:12:46,840 --> 01:12:48,067 And then you go back, and 1671 01:12:48,150 --> 01:12:51,817 it's like in the '50s, it was like comic books, and it was rock and roll music, 1672 01:12:51,900 --> 01:12:54,117 obviously, it was going to ruin everything. In the '20s, by the way, 1673 01:12:54,200 --> 01:12:55,707 jazz music was going to ruin everything, 1674 01:12:55,790 --> 01:12:58,287 playing cards were going to ruin everything. What else? 1675 01:12:58,370 --> 01:13:01,857 Novels, paperback novels, were taking... 1676 01:13:01,940 --> 01:13:03,997 Kids were going to sit around and just read novels all day 1677 01:13:04,080 --> 01:13:05,317 instead of doing any real work. 1678 01:13:05,400 --> 01:13:07,797 So it's just over and over and over again, it's this constant story. 1679 01:13:07,880 --> 01:13:09,680 So the bicycle one is the great one. 1680 01:13:10,630 --> 01:13:13,457 The bicycle rolls out in like 1870, 1880, and so the U.S. 1681 01:13:13,540 --> 01:13:17,417 still, at that point, was thinly populated from today, but the West had been settled. 1682 01:13:17,500 --> 01:13:20,037 So you had all these little towns and villages scattered all over the place, 1683 01:13:20,120 --> 01:13:23,087 but to get from one town to the next was like 5, 10, or 15 miles, 1684 01:13:23,170 --> 01:13:25,070 and people didn't generally walk that. 1685 01:13:25,390 --> 01:13:27,627 And so the bicycle comes out, and all of a sudden it's easy to go 1686 01:13:27,710 --> 01:13:29,087 five miles into the next town. 1687 01:13:29,170 --> 01:13:31,997 And then young people discover the bicycle, and they discover that 1688 01:13:32,080 --> 01:13:33,687 there are young people who they didn't grow up with 1689 01:13:33,770 --> 01:13:36,577 who are in the next town over, and they head out to do it. 1690 01:13:36,660 --> 01:13:38,360 And so the specific- - "To do it." 1691 01:13:38,980 --> 01:13:43,097 - Well, to do it, yes. To do everything. To do whatever it is that young people do, 1692 01:13:43,180 --> 01:13:46,247 they're going to head to the... Yeah. Because look, it's just the nature... 1693 01:13:46,330 --> 01:13:49,287 If you've known the same group of people since you were two, 1694 01:13:49,370 --> 01:13:51,707 you're going to want to... Yeah, it's going to- - What's over that hill? 1695 01:13:51,790 --> 01:13:53,577 - What's over that hill? Yes, exactly. Right. 1696 01:13:53,660 --> 01:13:56,950 I grew up in a small town. I can identify with that. 1697 01:13:57,520 --> 01:14:01,627 And then specifically at that point, young men, obviously, 1698 01:14:01,710 --> 01:14:03,967 but specifically young women started to do the bicycle. And so 1699 01:14:04,050 --> 01:14:06,687 this was a big threat. And so, if you're a guy in a town and omen are 1700 01:14:06,770 --> 01:14:08,907 all the attractive young women are heading over the hill 1701 01:14:08,990 --> 01:14:11,077 to the next hill on this bicycle thing, that's a big problem. 1702 01:14:11,160 --> 01:14:14,607 - Mm-hmm. - And so the press at the time created this thing called bicycle face. 1703 01:14:14,690 --> 01:14:16,377 And the idea of bicycle face... 1704 01:14:16,460 --> 01:14:19,937 It was part of the moral lecture that was given to young women in the press 1705 01:14:20,020 --> 01:14:22,237 at the time, which was basically that young women should not 1706 01:14:22,320 --> 01:14:24,807 use bicycles because if you go on a bicycle, you have to exert yourself, 1707 01:14:24,890 --> 01:14:26,217 and if you and if you exert yourself on the bicycle, 1708 01:14:26,300 --> 01:14:30,167 you're going to end up making an exertion face. 1709 01:14:30,250 --> 01:14:33,600 But the thing was, if you did that too much, your face would freeze 1710 01:14:33,770 --> 01:14:36,947 into bicycle face. - They literally thought it would stay that way 1711 01:14:37,030 --> 01:14:38,577 permanently. - It would stay that way permanently, 1712 01:14:38,660 --> 01:14:40,537 and then you would never find a husband. 1713 01:14:40,620 --> 01:14:43,457 Right? And so yeah, that was that moral panic. 1714 01:14:43,540 --> 01:14:46,837 Yeah, and so these things just rip through every... 1715 01:14:46,920 --> 01:14:50,177 I mean, well, it's incredible. Music is always a great one, because it's like... 1716 01:14:50,260 --> 01:14:53,667 I don't know, it's over now, but in the '90s and 2000s, 1717 01:14:53,750 --> 01:14:55,337 there was all this moral panic around hip-hop. 1718 01:14:55,420 --> 01:14:57,497 - Dude, Jimmy Iovine, who is your neighbor, 1719 01:14:57,580 --> 01:14:59,537 - Yeah. Yeah. - he was in here two weeks ago. 1720 01:14:59,620 --> 01:15:02,170 And he had to deal with... They called him a - Yes. 1721 01:15:03,100 --> 01:15:06,567 - chemical gas or mustard gas. They compared him to literally, 1722 01:15:06,650 --> 01:15:08,607 what he's doing is the same as genocide 1723 01:15:08,690 --> 01:15:10,657 because he's funding hip hop music, - Yes, that's right. 1724 01:15:10,740 --> 01:15:12,667 - and white kids are starting to listen to hip hop music. 1725 01:15:12,750 --> 01:15:14,537 - Hip hop music in the late '80s, early '90s. 1726 01:15:14,620 --> 01:15:15,797 - In front of... Like, - That's right. 1727 01:15:15,880 --> 01:15:17,567 - congressional hearings on this. - That's right. 1728 01:15:17,650 --> 01:15:18,887 - The media behind him. - That's right. 1729 01:15:18,970 --> 01:15:21,447 - He was pushed out of a conglomerate. - Yes. 1730 01:15:21,530 --> 01:15:24,997 - This wasn't a joke. - Yes. That's right. And it's actually funny because we... 1731 01:15:25,080 --> 01:15:28,297 I'm not in the music business, but hip-hop has become so normalized that 1732 01:15:28,380 --> 01:15:30,580 today it would just never even occur to you. 1733 01:15:30,970 --> 01:15:32,177 In fact, hip hop was kind of 1734 01:15:32,260 --> 01:15:34,317 a cultural phenomenon. It's even kind of fading today. 1735 01:15:34,400 --> 01:15:36,067 But yeah, no, that was super intense 1736 01:15:36,150 --> 01:15:38,447 at the time, and then rock and roll, that was super intense in the '50s and 1737 01:15:38,530 --> 01:15:40,007 '60s. And then the amazing thing is that- 1738 01:15:40,090 --> 01:15:41,767 - Remember Elvis Presley? They wouldn't - Yeah. 1739 01:15:41,850 --> 01:15:43,697 - shoot him because he would shake his - That's right. 1740 01:15:43,780 --> 01:15:46,177 - hips, so they're like, "No, it's waist-up 1741 01:15:46,260 --> 01:15:47,877 on TV from now on." - Yes, that's right. 1742 01:15:47,960 --> 01:15:49,617 But here's the one that I love, jazz. 1743 01:15:49,700 --> 01:15:51,487 They said all the same things about jazz 1744 01:15:51,570 --> 01:15:54,727 in the 1920s and 1930s. It was jazz music corrupting the... 1745 01:15:54,810 --> 01:15:56,410 And it was the exact same thing. 1746 01:15:56,780 --> 01:15:57,837 It's because kids are going to get together, 1747 01:15:57,920 --> 01:15:59,737 and they're going to dance to jazz, and then who knows what happens. 1748 01:15:59,820 --> 01:16:02,107 And then it was like there was a jazz musician that's smoking pot, 1749 01:16:02,190 --> 01:16:04,237 and that means all the kids are going to start. 1750 01:16:04,320 --> 01:16:08,467 So it's the same story over and over and over and over again. 1751 01:16:08,550 --> 01:16:12,647 And I'll just say, by the way, in fairness it's not that society doesn't change. 1752 01:16:12,730 --> 01:16:16,777 Many of the technologies that we just described did cause society to change. 1753 01:16:16,860 --> 01:16:18,597 Things are different pre and post the bicycle. 1754 01:16:18,680 --> 01:16:20,397 They're different pre and post the car. 1755 01:16:20,480 --> 01:16:23,977 They're different pre and post the creation of modern culture, rock and roll, 1756 01:16:24,060 --> 01:16:27,657 roll, or whatever. But again, this idea of the moral panic, 1757 01:16:27,740 --> 01:16:30,207 this idea of just outright panic, end of the world, 1758 01:16:30,290 --> 01:16:32,857 is just this repeated over and over again thing. 1759 01:16:32,940 --> 01:16:37,767 And then what's happened is, this is the obvious way to sell newspapers, right? 1760 01:16:37,850 --> 01:16:41,067 This is the meta story of the press, which is just like, 1761 01:16:41,150 --> 01:16:44,517 "Whatever's happening is horrible and awful, and it's going to kill everything. 1762 01:16:44,600 --> 01:16:47,130 Be sure to buy our newspaper tomorrow." 1763 01:16:47,990 --> 01:16:51,537 - Deel is the best company in the world at building infrastructure for global hiring. 1764 01:16:51,620 --> 01:16:52,967 Deel will help your business hire, 1765 01:16:53,050 --> 01:16:55,387 pay, and manage any worker anywhere in the world. 1766 01:16:55,470 --> 01:17:00,667 Deel is one platform for payroll, HR, benefits, and device management across 1767 01:17:00,750 --> 01:17:02,737 150 countries. 1768 01:17:02,820 --> 01:17:06,647 Deel gets you everything you need to run a high-performing global workforce 1769 01:17:06,730 --> 01:17:09,177 on a single AI-native platform. 1770 01:17:09,260 --> 01:17:12,177 From the first offer to final off-boarding, 1771 01:17:12,260 --> 01:17:15,657 Deel handles the complexity so you can stay focused on your business. 1772 01:17:15,740 --> 01:17:19,387 The best founders and operators in the world have one thing in common. 1773 01:17:19,470 --> 01:17:22,537 They control as much of their business as possible. 1774 01:17:22,620 --> 01:17:24,827 The founders of Deel do exactly this. 1775 01:17:24,910 --> 01:17:28,237 When you use Deel, you aren't using a third-party payroll processor 1776 01:17:28,320 --> 01:17:30,737 or a messy network of in-country providers. 1777 01:17:30,820 --> 01:17:33,467 Deel built and owns their own rails. 1778 01:17:33,550 --> 01:17:37,437 That means faster speed, better service, and total accountability. In fact, 1779 01:17:37,520 --> 01:17:39,577 Marc Andreessen's firm, A16z, 1780 01:17:39,660 --> 01:17:42,257 has been investing in Deel for more than half a decade. 1781 01:17:42,340 --> 01:17:47,087 Deel has built AI teammates that take action. Most HR AI stops at chat. 1782 01:17:47,170 --> 01:17:49,727 Deel puts AI inside the workflows themselves, 1783 01:17:49,810 --> 01:17:52,167 so it can run real work across hiring, 1784 01:17:52,250 --> 01:17:55,267 payroll, mobility, IT support, and reporting. 1785 01:17:55,350 --> 01:17:57,527 Grounded in compliance-vetted knowledge, 1786 01:17:57,610 --> 01:18:02,997 Deel AI takes action to help teams move faster without adding headcount. 1787 01:18:03,080 --> 01:18:06,087 Deel is trusted by over 40,000 businesses. 1788 01:18:06,170 --> 01:18:07,977 Learn how they can help your business today 1789 01:18:08,060 --> 01:18:12,420 by going to deel.com. That is D-E-E-L dot com. 1790 01:18:12,720 --> 01:18:15,057 I want to go back to Jim Clark real quick. 1791 01:18:15,140 --> 01:18:16,877 - Mm-hmm. - Is there anything that you learned... 1792 01:18:16,960 --> 01:18:19,067 Because Jim Clark was, what, probably 20 years older than you? 1793 01:18:19,150 --> 01:18:22,067 - Yes, about that probably. - So, is there anything that you learned working... 1794 01:18:22,150 --> 01:18:24,567 What a f***ing education you had to be able to work with that guy 1795 01:18:24,650 --> 01:18:26,047 when you were in your early 20s. - Yeah. No, that's right. 1796 01:18:26,130 --> 01:18:28,037 - So is there anything that you learned 1797 01:18:28,120 --> 01:18:32,130 by working with him back then that you still use today? 1798 01:18:32,860 --> 01:18:34,277 - I mean, yeah, a lot. 1799 01:18:34,360 --> 01:18:37,797 It's easy to say it was very formative for me, so a lot of it. But yeah, I mean, 1800 01:18:37,880 --> 01:18:40,347 you mentioned that sort of quote earlier about the world is a malleable place. 1801 01:18:40,430 --> 01:18:42,597 Jim was like the ultra version of that. 1802 01:18:42,680 --> 01:18:45,307 And so yeah, he would just... Yeah, when he had an idea... 1803 01:18:45,390 --> 01:18:46,917 And he was right. His ideas were correct 1804 01:18:47,000 --> 01:18:51,487 almost all the time. And he would just pound the world into adopting them, 1805 01:18:51,570 --> 01:18:55,370 into believing them. The idea of being like a complete force of nature. 1806 01:18:55,730 --> 01:18:57,537 - One thing that was malleable was himself. 1807 01:18:57,620 --> 01:18:58,587 He has this great quote in that book - Yeah. 1808 01:18:58,670 --> 01:19:01,937 - where he calls himself a "self-described loser" at 38 years old. 1809 01:19:02,020 --> 01:19:05,647 I mean, the guy had like two PhDs, he was a professor, but I think 1810 01:19:05,730 --> 01:19:08,227 he'd been in his second or third divorce, and he just snapped one day, 1811 01:19:08,310 --> 01:19:08,817 and he's just like, 1812 01:19:08,900 --> 01:19:12,777 "I had woke up one day with the undeniable urge to achieve something." 1813 01:19:12,860 --> 01:19:15,537 And that's when he goes from academic to founder - Yeah. 1814 01:19:15,620 --> 01:19:18,277 - and just rips off company after company for like a few decades. 1815 01:19:18,360 --> 01:19:19,327 - Yeah. - So it's like, oh, 1816 01:19:19,410 --> 01:19:22,607 he realized that he's malleable too. He just reinvented himself 1817 01:19:22,690 --> 01:19:24,567 over and over and over again. - Yeah. And of course, he does that 1818 01:19:24,650 --> 01:19:27,747 not just by starting a company, but inventing interactive computer graphics. 1819 01:19:27,830 --> 01:19:30,480 - Yeah. - Like completely changing the field. - Yeah. 1820 01:19:30,770 --> 01:19:33,007 - Indirectly, like completely changing Hollywood. 1821 01:19:33,090 --> 01:19:34,827 - But is there anything about recruiting or managing or 1822 01:19:34,910 --> 01:19:37,477 any other way that he ran his company? - No, so my two mentors at that time 1823 01:19:37,560 --> 01:19:39,207 actually were, in some ways, polar... 1824 01:19:39,290 --> 01:19:41,537 They always got along, but they were kind of polar opposites. They were both Jims, 1825 01:19:41,620 --> 01:19:45,207 so Jim Clark and Jim Barksdale. So the Jim Clark side of my personality is like the 1826 01:19:45,290 --> 01:19:49,140 will to power, "I'm just going to bludgeon the world into doing what I want." 1827 01:19:49,810 --> 01:19:54,357 And then the idea of just like trying to be a fountain of creativity. 1828 01:19:54,440 --> 01:19:59,050 There are many new ideas out there, and you just need to go find them. 1829 01:19:59,730 --> 01:20:02,457 And then I would say also... How to put this, like 1830 01:20:02,540 --> 01:20:05,197 a sense of professional dissatisfaction, like, "Okay, whatever..." 1831 01:20:05,280 --> 01:20:06,587 Look, this is the other part of the story. 1832 01:20:06,670 --> 01:20:09,277 A lot of founders would have had a success selling graphics, 1833 01:20:09,360 --> 01:20:11,737 and that would have been it. They would have spent the next whatever... 1834 01:20:11,820 --> 01:20:13,777 Whether they were totally happy with how it turned out or not, 1835 01:20:13,860 --> 01:20:16,227 they would have spent 30 years just coasting on that, right? 1836 01:20:16,310 --> 01:20:18,297 And having a great time, taking credit for it, and the whole thing. 1837 01:20:18,380 --> 01:20:22,807 - Mm-hmm. - But Jim was always, at least in that part of his life, 1838 01:20:22,890 --> 01:20:25,017 dissatisfied, in the productive, positive sense of like, 1839 01:20:25,100 --> 01:20:27,047 "Okay, no, there's something better, there's something bigger, 1840 01:20:27,130 --> 01:20:28,717 there's something new that we should do." 1841 01:20:28,800 --> 01:20:31,907 So there's that side of it. And then Jim Barksdale was the other, 1842 01:20:31,990 --> 01:20:37,630 who I just literally was with yesterday in Jackson, Mississippi. 1843 01:20:38,250 --> 01:20:39,837 Jim Barksdale's on the other side, which was... 1844 01:20:39,920 --> 01:20:42,067 Jim Barksdale is the manager of managers. 1845 01:20:42,150 --> 01:20:43,917 So Clark is like the ultimate example of that 1846 01:20:44,000 --> 01:20:47,207 bourgeois capitalist thing I mentioned, so the Henry Ford, Elon Musk type, 1847 01:20:47,290 --> 01:20:50,850 and then Jim Barksdale's the ultimate example of the super manager. 1848 01:20:50,950 --> 01:20:53,827 And Jim had run big parts of IBM, AT&T, 1849 01:20:53,910 --> 01:20:57,767 and Federal Express, and came in to run Netscape. 1850 01:20:57,850 --> 01:21:00,507 What was interesting was that's kind of where I got a lot of this from, 1851 01:21:00,590 --> 01:21:03,697 and a lot of my skills from. I got trained by both of those guys, and then 1852 01:21:03,780 --> 01:21:05,107 kind of both of those guys at the same time, 1853 01:21:05,190 --> 01:21:07,637 and then was able to very clearly observe 1854 01:21:07,720 --> 01:21:09,687 what is just the difference between those mentalities. 1855 01:21:09,770 --> 01:21:12,637 But then the other is, of course, how those concepts converge, 1856 01:21:12,720 --> 01:21:15,607 right? Because just the fountain of creativity, 1857 01:21:15,690 --> 01:21:19,247 you can't build anything big just with that. 1858 01:21:19,330 --> 01:21:22,127 Just the management, you don't do new things. 1859 01:21:22,210 --> 01:21:25,097 - Who's a great example of that from history? So would it be like Nikola Tesla? 1860 01:21:25,180 --> 01:21:26,187 Fountain of creativity... 1861 01:21:26,270 --> 01:21:28,257 - Oh, that's right. Yeah, so... - He needed like a George Westinghouse 1862 01:21:28,340 --> 01:21:30,847 to commercialize his ideas. - Well, it's a Tesla versus Edison. 1863 01:21:30,930 --> 01:21:35,167 - Okay. - Yeah, so Tesla versus Edison. So I'm an Edison guy. 1864 01:21:35,250 --> 01:21:38,917 I mean, that's the thing. So Elon's a Tesla guy, obviously. 1865 01:21:39,000 --> 01:21:41,747 But Elon, of course, himself has now become the really outstanding... 1866 01:21:41,830 --> 01:21:45,067 I mean, he's obviously become an outstanding manager in his own way. 1867 01:21:45,150 --> 01:21:47,527 In fact, to the point where I think he's actually inventing an entirely 1868 01:21:47,610 --> 01:21:49,807 new school of management, which we could talk about. 1869 01:21:49,890 --> 01:21:51,187 - Let's go there next. - Yeah. Okay. 1870 01:21:51,270 --> 01:21:52,827 He's maybe the greatest manager of our era, 1871 01:21:52,910 --> 01:21:55,510 despite the fact that nobody thinks of him that way. 1872 01:21:55,720 --> 01:21:58,247 So I actually think Elon's more like Edison than he is like Tesla. 1873 01:21:58,330 --> 01:22:02,110 And there was a big war, and it was kind of this thing because 1874 01:22:02,470 --> 01:22:05,917 everything kind of turns into these little morality plays. And so kind of the 1875 01:22:06,000 --> 01:22:08,807 basic story of Tesla and Edison was Tesla had all these ideas 1876 01:22:08,890 --> 01:22:11,397 but couldn't commercialize them, couldn't turn them into companies 1877 01:22:11,480 --> 01:22:14,727 ultimately, couldn't figure out how to make money on them, couldn't build 1878 01:22:14,810 --> 01:22:17,187 big companies kind of based on them. 1879 01:22:17,270 --> 01:22:20,807 And then Edison basically, at least the way the legend goes, he was more of this 1880 01:22:20,890 --> 01:22:23,457 grinder. He was less incandescently brilliant, and he was more of a grinder, 1881 01:22:23,540 --> 01:22:25,547 and he's just like, "We're just gonna try a thousand things." 1882 01:22:25,630 --> 01:22:27,627 When they invented the filament for the light bulb, 1883 01:22:27,710 --> 01:22:29,897 they just tried like a thousand different combinations of things 1884 01:22:29,980 --> 01:22:32,407 to get to the filament, and sort of this brute-force approach. 1885 01:22:32,490 --> 01:22:34,277 But then he built General Electric, 1886 01:22:34,360 --> 01:22:38,950 right? He built the national electric grid and built these giant companies. 1887 01:22:39,810 --> 01:22:42,547 - Funded by... - Funded by J.P. Morgan - There you go. 1888 01:22:42,630 --> 01:22:46,197 - as a venture capitalist in his spare time. 1889 01:22:46,280 --> 01:22:51,887 Yes, exactly, 100%. And then Edison also invented the movie projector 1890 01:22:51,970 --> 01:22:55,387 and then literally spent years trying to enforce his patents, right? 1891 01:22:55,470 --> 01:22:56,327 - And the phonograph. 1892 01:22:56,410 --> 01:22:58,797 - And the phonograph. - Which you tell the story, and 1893 01:22:58,880 --> 01:23:00,697 I knew because I read the book too. - Yeah. Yeah. 1894 01:23:00,780 --> 01:23:03,957 - We should tell people what he thought the phonograph was going to be used for. 1895 01:23:04,040 --> 01:23:06,647 So this is a bit of a digression, but it gets to the personality type. 1896 01:23:06,730 --> 01:23:08,677 So, one of the things that people look for is just like, 1897 01:23:08,760 --> 01:23:10,687 "Oh, what are the consequences of a new technology going to be? 1898 01:23:10,770 --> 01:23:13,417 Oh, let's go ask the people who invent them, because obviously, they know." 1899 01:23:13,500 --> 01:23:16,230 And so this is what happens when, for example, 1900 01:23:18,690 --> 01:23:20,977 the pioneers of AI get interviewed in the press. 1901 01:23:21,060 --> 01:23:23,260 It's like, "Well, tell us the future of AI." 1902 01:23:24,230 --> 01:23:26,560 The one I'll pick on is Geoffrey Hinton, 1903 01:23:27,210 --> 01:23:28,437 who's an actual self-declared socialist. 1904 01:23:28,520 --> 01:23:31,297 He's an actual capital socialist, and people ask him, "What's the future of AI?" 1905 01:23:31,380 --> 01:23:31,977 And of course, he says, 1906 01:23:32,060 --> 01:23:35,047 "It's going to be rampant unemployment, and we'll need to give UBI to everybody." 1907 01:23:35,130 --> 01:23:36,657 It's like, what a coincidence, the answer from - Yeah. 1908 01:23:36,740 --> 01:23:39,727 - a socialist is communism. Like, what an amazing coincidence. 1909 01:23:39,810 --> 01:23:41,927 But people think, because he's one of the inventors of AI, 1910 01:23:42,010 --> 01:23:43,097 that he must be the guy who knows. - Yeah. 1911 01:23:43,180 --> 01:23:45,407 - And so, the story I always tell is the Edison story. 1912 01:23:45,490 --> 01:23:48,647 Thomas Edison was a very proper WASP. 1913 01:23:48,730 --> 01:23:51,197 He was a WASPy personality type of that era. 1914 01:23:51,280 --> 01:23:56,960 - Yeah. Extremely proper gentleman, always impeccably dressed, kind of very ethical, 1915 01:23:57,950 --> 01:24:02,887 upstanding kind of citizen of that time, and very religiously devout. 1916 01:24:02,970 --> 01:24:05,767 And so, for him, it was just obvious that the application of the record player 1917 01:24:05,850 --> 01:24:07,347 was that everybody would buy a record player, 1918 01:24:07,430 --> 01:24:11,347 and then everybody would buy a library of discs that would be the great sermons of 1919 01:24:11,430 --> 01:24:14,067 - Yeah. - religious sermons from all the great preachers of the time. 1920 01:24:14,150 --> 01:24:16,277 And then you'd get home at night after a long day at work, 1921 01:24:16,360 --> 01:24:19,147 and you'd turn on the record player, and you would listen to a sermon, 1922 01:24:19,230 --> 01:24:21,977 with your adoring wife and kids - Yeah. - gathered around you. 1923 01:24:22,060 --> 01:24:24,837 And of course, the record player drops, and immediately, of course, it's music. 1924 01:24:24,920 --> 01:24:26,267 It's just, like, obviously music. 1925 01:24:26,350 --> 01:24:28,307 And it's ragtime, and swing, then it's jazz. 1926 01:24:28,390 --> 01:24:30,297 And Edison's just completely horrified. 1927 01:24:30,380 --> 01:24:32,517 - He didn't know that if you put the phonograph in the window, 1928 01:24:32,600 --> 01:24:36,577 and you play good music, then you have all these girls on bicycles coming over the... 1929 01:24:36,660 --> 01:24:39,307 With bicycle fists. - Exactly, exactly. 1930 01:24:39,390 --> 01:24:40,777 And so, this is what I always tell. 1931 01:24:40,860 --> 01:24:42,737 This is always my thing. It's like, if Edison didn't know 1932 01:24:42,820 --> 01:24:45,667 what the phonograph was going to get used for, the idea that, - Yeah. 1933 01:24:45,750 --> 01:24:47,667 - I don't know, whatever, Joe AI entrepreneur is 1934 01:24:47,750 --> 01:24:49,227 going to be able to forecast the economic implications... 1935 01:24:49,310 --> 01:24:51,367 You're like, "No. No. That's not going to happen." 1936 01:24:51,450 --> 01:24:54,397 And in fact, the people who invent the technology are often the least qualified 1937 01:24:54,480 --> 01:24:56,227 people to understand the long-term implications, 1938 01:24:56,310 --> 01:24:59,607 because they're too buried in the specifics of the here and now. 1939 01:24:59,690 --> 01:25:02,397 And then, all these other questions, you know, these are all big 1940 01:25:02,480 --> 01:25:04,550 cultural, social, economic questions. 1941 01:25:04,730 --> 01:25:07,527 And by the way, I don't know if there's anybody that can predict big cultural, 1942 01:25:07,610 --> 01:25:10,217 or economic or social trends, but it's certainly not somebody 1943 01:25:10,300 --> 01:25:11,877 who's been in the lab for 20 years, including myself. 1944 01:25:11,960 --> 01:25:14,907 - So, how this started, you think you greatly benefited from the two Jims, 1945 01:25:14,990 --> 01:25:17,737 essentially, being polar opposites, - Yeah, basically. - and showing you... 1946 01:25:17,820 --> 01:25:19,707 - But also working very closely together. 1947 01:25:19,790 --> 01:25:20,497 - Did they get along? 1948 01:25:20,580 --> 01:25:22,907 - I don't know if I've told this story publicly, so I should tell this story. 1949 01:25:22,990 --> 01:25:25,607 So, they got along great and became very good friends. 1950 01:25:25,690 --> 01:25:27,907 They both did great, and they're both very responsible 1951 01:25:27,990 --> 01:25:30,347 for certainly everything that Netscape did, and everything that I've done. 1952 01:25:30,430 --> 01:25:34,380 But it's different disciplines, different worldviews. 1953 01:25:34,870 --> 01:25:36,547 So, there's an oil-and-water kind of aspect to that. 1954 01:25:36,630 --> 01:25:39,990 And so, Clark ran the company for the first nine months, 1955 01:25:40,210 --> 01:25:43,087 which, at the time, this was Internet time, 1956 01:25:43,170 --> 01:25:46,037 it felt like much longer, but it was like this highly compressed nine-month period. 1957 01:25:46,120 --> 01:25:48,487 And it was like, we were doing all these new things. 1958 01:25:48,570 --> 01:25:49,587 We were doing all these new things. 1959 01:25:49,670 --> 01:25:51,847 The company was just doing a hundred new things. 1960 01:25:51,930 --> 01:25:55,460 It was amazing. But nothing was being systematized, right? 1961 01:25:56,390 --> 01:25:59,620 By default, it was not going to turn into a large company 1962 01:25:59,830 --> 01:26:00,817 without the management part. 1963 01:26:00,900 --> 01:26:03,057 And so, Barksdale comes in, and he basically is like, "Wow, 1964 01:26:03,140 --> 01:26:06,397 this inventiveness is great, but we need to actually start to have systems, 1965 01:26:06,480 --> 01:26:10,230 and schedules and processes, and actually, run this thing like a business." 1966 01:26:10,690 --> 01:26:14,667 And as founders do, Clark originally found that a little bit frustrating 1967 01:26:14,750 --> 01:26:16,287 because it's like, whatever is the latest idea 1968 01:26:16,370 --> 01:26:19,677 is not the thing that we're just going to turn the entire company to pursue. 1969 01:26:19,760 --> 01:26:22,257 And this is when Clark was still coming to Jim's Barksdale staff meetings. 1970 01:26:22,340 --> 01:26:26,090 And so, Clark got up 1971 01:26:27,900 --> 01:26:29,627 He had a negative reaction to Barksdale, saying, 1972 01:26:29,710 --> 01:26:30,667 "No, we're not going to do this new thing. 1973 01:26:30,750 --> 01:26:32,267 We're going to keep doing the thing that's already working." 1974 01:26:32,350 --> 01:26:33,827 You know, it's one of those moments. 1975 01:26:33,910 --> 01:26:36,797 And Barksdale's like, "Can I talk to you outside?" And so they went out back. 1976 01:26:36,880 --> 01:26:39,200 And I heard the story from both of them later. 1977 01:26:39,360 --> 01:26:41,357 And Clark's like, "Look, this is the whole reason 1978 01:26:41,440 --> 01:26:43,437 we're here is because we do these new things. 1979 01:26:43,520 --> 01:26:45,597 And if we don't do these new things, we're going to destroy the company." 1980 01:26:45,680 --> 01:26:49,070 And Barksdale looks right at him and says, "Jim, I hear you. 1981 01:26:49,450 --> 01:26:51,320 This is as serious as dick cancer." 1982 01:26:53,640 --> 01:26:54,473 What? 1983 01:26:57,020 --> 01:26:58,870 In the deep Mississippi drawl, right? 1984 01:26:59,320 --> 01:27:02,520 And Clark stares him right in the face, and bursts out laughing. 1985 01:27:03,740 --> 01:27:05,540 And they got along great ever since. 1986 01:27:06,660 --> 01:27:08,267 They loved each other ever since. 1987 01:27:08,350 --> 01:27:11,710 It was first up basically saying, "Look, we're not going to make 1988 01:27:11,830 --> 01:27:13,767 these decisions in a state of kind of superheated passion." 1989 01:27:13,850 --> 01:27:15,057 - Yeah. - "Like, we're not going to do that. 1990 01:27:15,140 --> 01:27:16,517 We need to have the full version of this conversation, 1991 01:27:16,600 --> 01:27:18,737 but we're going to have it in kind of this longer 1992 01:27:18,820 --> 01:27:20,697 and maybe more dispassionate way." - Yeah. 1993 01:27:20,780 --> 01:27:23,280 - But it was to puncture the stress of the moment. 1994 01:27:23,640 --> 01:27:26,240 And so, I will say I have used that one a few times. 1995 01:27:27,530 --> 01:27:29,080 - Yes. But I could see Clark... 1996 01:27:29,290 --> 01:27:30,877 - And Clark thought it was hysterical. 1997 01:27:30,960 --> 01:27:33,477 I mean, nobody had ever talked to him that way before, so. 1998 01:27:33,560 --> 01:27:35,297 - But I could see Clark like, "Oh, no, here we go. 1999 01:27:35,380 --> 01:27:38,017 This is a replay of what happened at Silicon Graphics, though." 2000 01:27:38,100 --> 01:27:42,427 - I think he was, probably, afraid of that to a certain extent. But yeah, yeah. 2001 01:27:42,510 --> 01:27:44,990 And then I would say, "Yeah." 2002 01:27:45,210 --> 01:27:48,357 I don't want to say anything negative about the SGI guy, but yeah. 2003 01:27:48,440 --> 01:27:49,897 I mean, like I said, Clarke was just like... 2004 01:27:49,980 --> 01:27:52,087 Barksdale was the manager of managers. 2005 01:27:52,170 --> 01:27:53,940 He was so advanced on this. 2006 01:27:54,310 --> 01:27:56,777 That story notwithstanding, Barksdale never took the position of like, 2007 01:27:56,860 --> 01:27:58,960 "No, it's time for the new ideas to stop." 2008 01:27:59,250 --> 01:28:02,407 But it was always like, "Okay, we need to thread the new ideas into a business," 2009 01:28:02,490 --> 01:28:04,517 which is kind of the hybrid of the two. 2010 01:28:04,600 --> 01:28:07,867 - So, I just had this thought while sitting here listening to you speak. 2011 01:28:07,950 --> 01:28:10,417 Is there something about your partnership with Ben, - Yeah. 2012 01:28:10,500 --> 01:28:14,030 - where he's more Barksdale, and you're more Clark? - Yeah. 2013 01:28:14,490 --> 01:28:18,520 - Although we do mix it up a little bit more, because he does have his own edge. 2014 01:28:18,890 --> 01:28:23,130 But yeah, there is some of that. Yeah. So, for example, he runs the firm. 2015 01:28:23,580 --> 01:28:26,897 And then, yeah, I tend to come up with new... He comes up with lots of new 2016 01:28:26,980 --> 01:28:28,947 ideas, but I do tend to come up with new ideas, and then, 2017 01:28:29,030 --> 01:28:31,660 we do have this kind of discussion frequently. 2018 01:28:32,060 --> 01:28:35,247 - So, if I was to follow you around without you knowing with a camera, 2019 01:28:35,330 --> 01:28:37,187 - Yeah. - what would your day look like then? 2020 01:28:37,270 --> 01:28:41,127 Are you just a fountain of ideas? Are you this uncontrolled energy like Jim Clark 2021 01:28:41,210 --> 01:28:41,897 back in the day? 2022 01:28:41,980 --> 01:28:44,517 - But I've got both. This is the thing, because they both trained me, I've got 2023 01:28:44,600 --> 01:28:48,437 both parts of it. Okay. - So, you're not as uncontrollable or unmanageable 2024 01:28:48,520 --> 01:28:51,057 - Yeah. - as Clark? I believe Ben would tell you... 2025 01:28:51,140 --> 01:28:52,677 Oh, I mean, look, Ben's been working with me now for 30 years, 2026 01:28:52,760 --> 01:28:54,147 and so I think if this was a real issue. 2027 01:28:54,230 --> 01:28:56,247 I think their partnership would not have lasted. 2028 01:28:56,330 --> 01:28:59,157 - But I think he would say that I have a pretty strong internal edit function. 2029 01:28:59,240 --> 01:29:02,640 - I want to see unedited. - Well, unedited is really fun. 2030 01:29:03,750 --> 01:29:07,080 Unedited is very enjoyable. It is very disruptive. 2031 01:29:08,160 --> 01:29:11,007 And so yeah, it has to be calibrated. 2032 01:29:11,090 --> 01:29:12,940 - When do you show the unedited side? 2033 01:29:14,750 --> 01:29:18,960 I don't tend to do it in the spur of the moment... Yeah, this is the thing, and 2034 01:29:19,140 --> 01:29:22,940 Elon threads this incredibly well, just incredibly well, as does Zuckerberg. 2035 01:29:23,730 --> 01:29:25,120 It's like, is this thing, 2036 01:29:25,990 --> 01:29:27,757 and again, this goes back to the Edison-Tesla thing, 2037 01:29:27,840 --> 01:29:33,467 that when you're responsible for an organization, 2038 01:29:33,550 --> 01:29:37,200 when you're responsible for a team of people that's more than five or 10, 2039 01:29:37,420 --> 01:29:40,007 if you're going to have an organization that's a hundred or a thousand or 10,000 2040 01:29:40,090 --> 01:29:42,807 or a 100,000 people, you can't change the plan every day. 2041 01:29:42,890 --> 01:29:46,427 You just can't. You'll just burn everybody out, you'll destroy everybody, 2042 01:29:46,510 --> 01:29:50,160 there'll just be mass confusion, and people will quit. You can't do that. 2043 01:29:50,370 --> 01:29:52,457 There has to be some calibrated middle-ground. 2044 01:29:52,540 --> 01:29:55,917 There are a handful of examples of great business successes 2045 01:29:56,000 --> 01:29:58,287 where it's one, or two, or three people, right? 2046 01:29:58,370 --> 01:30:02,257 And so maybe it's like Bitcoin and Minecraft and WhatsApp and Instagram, 2047 01:30:02,340 --> 01:30:06,727 and then, I start running out of examples. But with AI, there will probably be more. 2048 01:30:06,810 --> 01:30:09,717 There will probably be more single-person companies - Yeah. - from here on out. 2049 01:30:09,800 --> 01:30:13,520 Or, by the way, an artist, a novelist. 2050 01:30:13,780 --> 01:30:16,447 Let me say, there's a difference between a novelist and a movie maker. 2051 01:30:16,530 --> 01:30:19,177 A novelist, it's like, you can put whatever the f*** you want in your novel. 2052 01:30:19,260 --> 01:30:21,617 But if you're a director of a movie, you can't change the - Right. 2053 01:30:21,700 --> 01:30:24,237 - entire plot on Tuesday while you're shooting the movie, or there's 2054 01:30:24,320 --> 01:30:27,327 three hundred people who are relying on you to complete a movie. 2055 01:30:27,410 --> 01:30:31,760 So anyway, the point being is in tech, if you're going to have an organization, 2056 01:30:32,070 --> 01:30:34,547 or by the way, in anything, in any field of activity, if you're going to have an 2057 01:30:34,630 --> 01:30:38,250 organization, you do need to have some calibration, titration process. 2058 01:30:38,820 --> 01:30:42,167 Change does need to happen, but it needs to happen in a measured way. 2059 01:30:42,250 --> 01:30:44,930 And so, you can't just blow it up every day. 2060 01:30:45,550 --> 01:30:48,100 And so, yeah. So, either what you need in that case 2061 01:30:48,990 --> 01:30:51,677 to get kind of the holy grail of the large-scale organization that's still 2062 01:30:51,760 --> 01:30:54,167 innovating, either you need two people involved 2063 01:30:54,250 --> 01:30:55,567 who are able to balance each other. 2064 01:30:55,650 --> 01:30:58,647 And by the way, you could say this is like Steve Jobs, and Tim Cook would be - Yeah. 2065 01:30:58,730 --> 01:30:59,567 - a canonical example. 2066 01:30:59,650 --> 01:31:02,467 Or by the way, early on, Zuckerberg and Sheryl Sandberg, or early on, 2067 01:31:02,550 --> 01:31:06,137 Bill Gates and Steve Ballmer. So, you can have that kind of configuration. 2068 01:31:06,220 --> 01:31:09,387 Or every once in a while, you can get that in a single person, right? 2069 01:31:09,470 --> 01:31:13,347 Which is very rare. But Jensen Huang would be a single-person example of that. 2070 01:31:13,430 --> 01:31:15,280 So, every now and then, you get that. 2071 01:31:15,690 --> 01:31:16,947 And so, I would say Ben and 2072 01:31:17,030 --> 01:31:19,627 I have a version of the yin- and-yang kind of aspect to it. 2073 01:31:19,710 --> 01:31:21,347 But like I said, he's very creative on his own, 2074 01:31:21,430 --> 01:31:23,567 and I have this, because I have the Barksdale training. 2075 01:31:23,650 --> 01:31:28,027 I have this additional level of sort of, most of the time, sort of self-governance. 2076 01:31:28,110 --> 01:31:29,620 Like I get it. I'm not... 2077 01:31:30,310 --> 01:31:32,877 But so my big thing is just like, look, if I'm going to walk in and I'm going to 2078 01:31:32,960 --> 01:31:35,017 throw a fit and I'm going to be like, "We have to change everything tomorrow," 2079 01:31:35,100 --> 01:31:38,000 and Ben's going to be like, "F*** you, this f***** sucks." 2080 01:31:38,120 --> 01:31:40,020 That leads nowhere good,right? - Yeah. 2081 01:31:41,130 --> 01:31:44,400 And so, yeah, I do do a lot of self-editing. 2082 01:31:44,710 --> 01:31:45,397 - You just said something, 2083 01:31:45,480 --> 01:31:48,897 - I think you said you believe Elon is inventing a new way to manage. 2084 01:31:48,980 --> 01:31:52,057 I think he may have figured out the best way to reconcile the two, the fountain of 2085 01:31:52,140 --> 01:31:53,247 ideas with the systematic builder. 2086 01:31:53,330 --> 01:31:54,957 I think he might have figured out a fun... 2087 01:31:55,040 --> 01:31:56,927 I don't know if it's a new way to do it, but I think he might have cracked the 2088 01:31:57,010 --> 01:31:59,567 code on how to do that for the next hundred years or something. 2089 01:31:59,650 --> 01:32:02,607 - So, break down what you've observed, with the way that Elon's managing. 2090 01:32:02,690 --> 01:32:04,157 - Yeah. So I'll just start by saying, look, 2091 01:32:04,240 --> 01:32:06,997 Elon's method has been described by people before. 2092 01:32:07,080 --> 01:32:09,117 And I should say, I work with him, but from the outside. 2093 01:32:09,200 --> 01:32:10,717 So, I've not worked in one of his companies. 2094 01:32:10,800 --> 01:32:14,197 So I have one layer of indirection, but I work with him quite a bit now, 2095 01:32:14,280 --> 01:32:15,867 and I study him very, very carefully. 2096 01:32:15,950 --> 01:32:18,187 It's this extreme focus on substance. 2097 01:32:18,270 --> 01:32:20,257 It's this extreme focus on getting to the truth. 2098 01:32:20,340 --> 01:32:22,147 So, one of the things you notice in any organization 2099 01:32:22,230 --> 01:32:25,017 with multiple layers is that, basically, there's compounding lies. 2100 01:32:25,100 --> 01:32:27,517 And I got this lesson early, because I worked for IBM at 2101 01:32:27,600 --> 01:32:30,217 the point of their kind of maximum size and importance in the world. 2102 01:32:30,300 --> 01:32:32,607 - Can you explain? I don't think people understand 2103 01:32:32,690 --> 01:32:37,300 - Yeah. - just how big, and powerful, and almost monopolistic IBM was. 2104 01:32:37,630 --> 01:32:40,377 - Yeah. So I worked for IBM at the very height of their power, 2105 01:32:40,460 --> 01:32:41,920 right before they fell. 2106 01:32:43,180 --> 01:32:45,830 It was my first job when I was in college. 2107 01:32:45,930 --> 01:32:47,757 And they were in the mid-'80s, 2108 01:32:47,840 --> 01:32:51,077 they were 80% of the market capitalization of the entire tech industry, right? 2109 01:32:51,160 --> 01:32:52,367 -There's nothing even close to that today. 2110 01:32:52,450 --> 01:32:53,397 - There's nothing even close, right? 2111 01:32:53,480 --> 01:32:54,557 So this is like Google times 10 or something. 2112 01:32:54,640 --> 01:32:59,687 It's just Apple times 10. It's a level of scale and importance that just nobody had. 2113 01:32:59,770 --> 01:33:02,457 And by the way, the TV show actually that does a great job of this is 2114 01:33:02,540 --> 01:33:04,327 Halt and Catch Fire, - Mm-hmm. - in the first season, 2115 01:33:04,410 --> 01:33:05,977 has this point where these guys are 2116 01:33:06,060 --> 01:33:09,447 basically inventing the PC effectively, and it's a point where IBM shows up. 2117 01:33:09,530 --> 01:33:13,187 And it gives you a sense of... It's like the CAA story you told earlier. 2118 01:33:13,270 --> 01:33:14,317 It's like the phalanx. 2119 01:33:14,400 --> 01:33:16,907 It's like 20 people in blue suits who are just here to completely crush you. 2120 01:33:16,990 --> 01:33:19,537 It was just this overpowering kind of thing. 2121 01:33:19,620 --> 01:33:21,470 And they invented all kinds of stuff, 2122 01:33:21,560 --> 01:33:23,057 and the industry wouldn't exist today without them, 2123 01:33:23,140 --> 01:33:25,447 and they were an incredible company for a very long time. 2124 01:33:25,530 --> 01:33:28,477 And the whole thing, and by the way, run by their founder for 30 years, 2125 01:33:28,560 --> 01:33:32,527 run by the founder's son for 30 years, this incredible company. 2126 01:33:32,610 --> 01:33:33,557 But then, they're not that anymore, 2127 01:33:33,640 --> 01:33:37,037 but they're still a big and important company today, 2128 01:33:37,120 --> 01:33:40,347 whatever, 1940, so 80 years later. 2129 01:33:40,430 --> 01:33:43,330 It's like how many companies survive in tech for 80 years? 2130 01:33:43,500 --> 01:33:45,367 My favorite IBM story is Thomas Watson Sr. 2131 01:33:45,450 --> 01:33:49,480 had been convicted of antitrust crimes before he started IBM. 2132 01:33:49,620 --> 01:33:52,470 - Is this the cash register? - The cash register. - Yeah. 2133 01:33:53,990 --> 01:33:57,657 And so, he had previously run a company called NCR, National Cash Register. 2134 01:33:57,740 --> 01:34:00,467 And he had been convicted by the federal government of monopolizing the cash 2135 01:34:00,550 --> 01:34:03,230 register business before he even started IBM. 2136 01:34:03,940 --> 01:34:06,117 And then at IBM, he monopolized the mainframe business, 2137 01:34:06,200 --> 01:34:07,900 and then they convicted him again. 2138 01:34:08,870 --> 01:34:12,887 He's a double dipper. He got very used to being in antitrust court. 2139 01:34:12,970 --> 01:34:19,477 So he was incredible. By the way, there's Kevin Maney, old-school tech reporter, 2140 01:34:19,560 --> 01:34:22,457 who wrote a book, a biography of Thomas Watson Sr., in which you... 2141 01:34:22,540 --> 01:34:24,837 It's called "The Machine and the Man" or "The Man and the Machine," right? 2142 01:34:24,920 --> 01:34:27,127 I'm not sure if it's that one, but it's one of those. 2143 01:34:27,210 --> 01:34:28,127 I think it might be that one, yeah. 2144 01:34:28,210 --> 01:34:32,857 And he actually went back, and we're talking about the 1940s, 1950s, 1960s. 2145 01:34:32,940 --> 01:34:35,097 And he went back, and he got the... At that time, 2146 01:34:35,180 --> 01:34:39,017 they had a secretary transcribing, in real time, all of the executive staff 2147 01:34:39,100 --> 01:34:40,677 meetings every Monday morning. 2148 01:34:40,760 --> 01:34:42,497 And he went back, and he actually got the 2149 01:34:42,580 --> 01:34:44,237 archives of the transcripts of the executive staff meetings, 2150 01:34:44,320 --> 01:34:47,900 and Thomas Watson is just cursing everybody out, 2151 01:34:48,820 --> 01:34:52,537 and just like a complete tyrannical psychopath, just screaming at people. 2152 01:34:52,620 --> 01:34:56,880 And it's all in the records. And so, how much of this stuff ever changes? 2153 01:34:57,410 --> 01:34:59,967 It's like, I don't know, whatever Elon gets accused of 2154 01:35:00,050 --> 01:35:02,257 or whatever Steve Jobs, it's like, oh, no, that guy was... 2155 01:35:02,340 --> 01:35:05,990 - Yeah. - Whatever it is, it's a pale version of what that guy was doing. 2156 01:35:06,570 --> 01:35:07,747 But anyway, the point being is IBM... 2157 01:35:07,830 --> 01:35:10,347 So by the time I got involved in IBM, it was 60 years later. 2158 01:35:10,430 --> 01:35:12,577 Anywhere, yeah, 50 years later after that. 2159 01:35:12,660 --> 01:35:14,277 And so they were kind of peaking in their power. 2160 01:35:14,360 --> 01:35:16,517 But what happened was, I remember this because I was there 2161 01:35:16,600 --> 01:35:17,937 as an intern, and I was trying to figure out 2162 01:35:18,020 --> 01:35:19,967 whether I should work there after college. 2163 01:35:20,050 --> 01:35:23,177 And their internet was a mainframe app. 2164 01:35:23,260 --> 01:35:25,957 And one of the functions was the org chart, 2165 01:35:26,040 --> 01:35:27,877 and it calculated that there were 12 layers of management 2166 01:35:27,960 --> 01:35:30,297 between me and the CEO. Which meant the following: 2167 01:35:30,380 --> 01:35:34,080 It meant that my boss's boss's boss's boss's boss 2168 01:35:34,980 --> 01:35:40,360 had a boss, boss, boss, boss, boss, before it got to the CEO. 2169 01:35:40,740 --> 01:35:43,890 And then, really, the story of the thing, really what happened, 2170 01:35:44,060 --> 01:35:46,560 and I saw this happen, I saw this happen up close. 2171 01:35:46,770 --> 01:35:48,487 What I saw happen was that each layer of management 2172 01:35:48,570 --> 01:35:49,777 was lying to the one above it, right? 2173 01:35:49,860 --> 01:35:52,557 And because each layer wants to look good and wants to, 2174 01:35:52,640 --> 01:35:54,187 whatever, put a little spin on the ball. 2175 01:35:54,270 --> 01:35:57,467 And if one layer lies to the next layer above it, maybe that's okay. 2176 01:35:57,550 --> 01:36:00,057 But when that happens two or three times, the lies compound. 2177 01:36:00,140 --> 01:36:02,277 If that happens six times, the lies really compound. 2178 01:36:02,360 --> 01:36:04,747 If that happens 12 times, the CEO has no idea what's happening, 2179 01:36:04,830 --> 01:36:07,107 like absolutely no clue what's going on in the company, 2180 01:36:07,190 --> 01:36:08,987 which was the state of play that IBM had. 2181 01:36:09,070 --> 01:36:10,337 They actually had a term. There was actually a term. 2182 01:36:10,420 --> 01:36:11,637 They had a whole vocabulary. 2183 01:36:11,720 --> 01:36:14,570 I mean, this company was like a nation-state at the time. 2184 01:36:14,960 --> 01:36:16,617 You could live your whole life in Austin, Texas, 2185 01:36:16,700 --> 01:36:18,147 and never meet anybody who didn't work for IBM. 2186 01:36:18,230 --> 01:36:20,117 It was just this incredible thing. 2187 01:36:20,200 --> 01:36:22,437 They had this concept called "The Big Gray Cloud." 2188 01:36:22,520 --> 01:36:24,557 And it was literally the cloud of men in gray business suits 2189 01:36:24,640 --> 01:36:27,877 who followed the CEO around, and prevented him from ever talking to anybody 2190 01:36:27,960 --> 01:36:29,367 who was ever actually doing the work. 2191 01:36:29,450 --> 01:36:31,897 And so, when he would come to visit, it was like a state visit. 2192 01:36:31,980 --> 01:36:32,777 - Yeah. - It was like a visit from the king, 2193 01:36:32,860 --> 01:36:35,310 and it was like the king and the traveling court. 2194 01:36:35,450 --> 01:36:35,677 - Yeah. 2195 01:36:35,760 --> 01:36:39,057 And so, it was a completely impervious bubble to get information through. 2196 01:36:39,140 --> 01:36:40,667 But I tell that story because that's the polar 2197 01:36:40,750 --> 01:36:42,587 opposite of the Elon approach, right? 2198 01:36:42,670 --> 01:36:46,677 And by the way, being the CEO of IBM in 1989 was a great way to live, right? 2199 01:36:46,760 --> 01:36:50,660 Because it's just like, "Wow, everybody's bringing me good news all the time." 2200 01:36:51,320 --> 01:36:53,767 I wake up in the morning, and everything is great. 2201 01:36:53,850 --> 01:36:54,167 - Mm-hmm. 2202 01:36:54,250 --> 01:36:58,227 - And I'm famous, and I am rich, and I am successful, and I've got a chauffeur, 2203 01:36:58,310 --> 01:37:01,567 and I've got a jet, and I've got these 80 guys in gray suits who are taking care of 2204 01:37:01,650 --> 01:37:03,857 everything for me. And I don't have to ever talk to engineers, 2205 01:37:03,940 --> 01:37:07,610 and this is great until it's like the turkey on Thanks giving, 2206 01:37:08,080 --> 01:37:09,407 until things change and there's a problem, 2207 01:37:09,490 --> 01:37:11,787 and then you have no idea what to do about it, which is what happened to them. 2208 01:37:11,870 --> 01:37:13,897 The Elon approach is the polar-opposite of that. 2209 01:37:13,980 --> 01:37:16,117 And the polar-opposite approach is literally like, 2210 01:37:16,200 --> 01:37:17,957 I'm only going to talk to engineers, right? 2211 01:37:18,040 --> 01:37:21,067 And so, when there's an issue, I am going to go straight to the source of truth, 2212 01:37:21,150 --> 01:37:24,057 and the source of truth is the engineer who actually knows what's going on. 2213 01:37:24,140 --> 01:37:26,457 And so Elon, I've seen him do this, so he literally does this. 2214 01:37:26,540 --> 01:37:28,827 When there's an issue in one of his companies, 2215 01:37:28,910 --> 01:37:31,617 he goes to whatever is the engineer who's working on that problem, 2216 01:37:31,700 --> 01:37:33,817 and he sits down with the engineer, and they solve that problem. 2217 01:37:33,900 --> 01:37:37,027 And I can just tell you, the number of CEOs in tech, even the great ones who do 2218 01:37:37,110 --> 01:37:39,187 that, I mean, almost nobody ever does that. 2219 01:37:39,270 --> 01:37:41,967 Why does nobody ever do that? Well, first of all, it's just like a giant pain in 2220 01:37:42,050 --> 01:37:44,417 the ass, because your life consists 2221 01:37:44,500 --> 01:37:46,237 of having to actually solve all these problems. 2222 01:37:46,320 --> 01:37:48,897 The whole point of being big, and powerful, and successful is you pay 2223 01:37:48,980 --> 01:37:50,717 people to do that, and now you're doing it. 2224 01:37:50,800 --> 01:37:52,797 And you're in there at two in the morning doing it, right? 2225 01:37:52,880 --> 01:37:56,390 It just sucks, right? And so, most people won't do it. 2226 01:37:56,980 --> 01:38:00,547 And then the other is, it means the CEO of the company has to have the skill set 2227 01:38:00,630 --> 01:38:01,730 to be able to do that. 2228 01:38:02,030 --> 01:38:05,457 So the CEO has to not just be a great CEO, they also have to be a great 2229 01:38:05,540 --> 01:38:07,947 technical technologist, and not just that, they have memories of having been a 2230 01:38:08,030 --> 01:38:10,167 programmer at one point or whatever, a chip designer. 2231 01:38:10,250 --> 01:38:12,107 But where they can actually sit down with the chip designer, 2232 01:38:12,190 --> 01:38:14,157 right on a Thursday night at 2:00 AM in Austin, 2233 01:38:14,240 --> 01:38:16,607 and they can actually figure out what's wrong with the chip. 2234 01:38:16,690 --> 01:38:21,150 And Elon has that ability, and he's like encyclopedic on every area of technology, 2235 01:38:21,310 --> 01:38:23,257 and is able to go hands-on with rocket designers, 2236 01:38:23,340 --> 01:38:25,537 and AI designers, and everything in between. 2237 01:38:25,620 --> 01:38:27,070 And almost no CEO has that. 2238 01:38:27,670 --> 01:38:28,737 But that's literally what he does. 2239 01:38:28,820 --> 01:38:30,647 And then the way that he thinks about it, 2240 01:38:30,730 --> 01:38:34,567 I think, is basically, he runs whatever, six companies at once or something, 2241 01:38:34,650 --> 01:38:37,447 and it's like, basically, at any given week, 2242 01:38:37,530 --> 01:38:38,977 he thinks about everything as a basic 2243 01:38:39,060 --> 01:38:41,770 production line, sort of production process. 2244 01:38:42,230 --> 01:38:44,037 He's actually like an old-school industrialist. 2245 01:38:44,120 --> 01:38:45,577 So everything's like a production process. 2246 01:38:45,660 --> 01:38:48,557 And then, any given week, in any production process, 2247 01:38:48,640 --> 01:38:49,857 there's always a bottleneck. 2248 01:38:49,940 --> 01:38:53,630 So there's always the thing that is slowing down the process the most. 2249 01:38:53,730 --> 01:38:55,460 And that's always one thing. 2250 01:38:55,810 --> 01:39:00,247 So what he does for each of his companies is he identifies, he charts, he literally 2251 01:39:00,330 --> 01:39:03,347 maps out the production process, and that's like, he literally has these 2252 01:39:03,430 --> 01:39:05,780 monitors where he has the whole thing laid out. 2253 01:39:06,000 --> 01:39:07,157 And then, he basically says, 2254 01:39:07,240 --> 01:39:09,707 "Okay, this is the issue that's holding up production this week." 2255 01:39:09,790 --> 01:39:11,607 And that's the thing that he goes to work with the engineer 2256 01:39:11,690 --> 01:39:13,187 on, is he goes to fix that bottleneck. 2257 01:39:13,270 --> 01:39:16,407 And he does that every week for every company, right? 2258 01:39:16,490 --> 01:39:19,100 And so, I think this is why Tesla is smoking, 2259 01:39:20,450 --> 01:39:21,727 has been so much dramatically 2260 01:39:21,810 --> 01:39:23,277 outperforming the rest of the auto industry, is 2261 01:39:23,360 --> 01:39:26,577 because he's fixing the critical production bottleneck 2262 01:39:26,660 --> 01:39:30,190 at Tesla 52 times a year, himself. 2263 01:39:30,550 --> 01:39:31,383 - Yeah. 2264 01:39:32,270 --> 01:39:34,217 - I can tell you what the CEO of the legacy automakers are doing. 2265 01:39:34,300 --> 01:39:35,450 They're not doing that. 2266 01:39:36,040 --> 01:39:37,077 That is not what's happening, right? 2267 01:39:37,160 --> 01:39:39,327 And so, in contrast, a normal company, 2268 01:39:39,410 --> 01:39:41,957 it might take six months to solve these problems, and Elon's fixing 2269 01:39:42,040 --> 01:39:44,837 it right now, tomorrow. Like, let's go fix it right now. 2270 01:39:44,920 --> 01:39:47,630 And so, he just runs this loop over and over again. 2271 01:39:48,090 --> 01:39:50,760 He's absolutely indefatigable. 2272 01:39:52,050 --> 01:39:54,077 He famously, for a while, he had sold all of his houses, 2273 01:39:54,160 --> 01:39:56,137 and he was literally couch surfing as one 2274 01:39:56,220 --> 01:39:58,407 of the most successful people on the planet. 2275 01:39:58,490 --> 01:39:58,967 - Yeah. 2276 01:39:59,050 --> 01:40:01,387 -And so they have a vacation house, and I offered him, I said, "If you want to take 2277 01:40:01,470 --> 01:40:03,757 a week and use the vacation house and whatever, take the kids, feel free." 2278 01:40:03,840 --> 01:40:05,577 And he'd sent back five minutes later, 2279 01:40:05,660 --> 01:40:09,007 it's like, whatever, 11 o'clock at night, the forward response, 2280 01:40:09,090 --> 01:40:11,140 "I don't take vacations." Right? 2281 01:40:11,770 --> 01:40:13,467 Which, again, is like, there's no CEO like this. 2282 01:40:13,550 --> 01:40:14,383 - Yeah. 2283 01:40:14,520 --> 01:40:17,570 - The whole point of being a CEO is you get to go jet around. 2284 01:40:17,980 --> 01:40:22,187 And so anyway, so he's doing that, and then he turns this into a routine. 2285 01:40:22,270 --> 01:40:26,017 And so, he does that a day a week at each of his companies, 2286 01:40:26,100 --> 01:40:27,677 and he'll basically do it all day. 2287 01:40:27,760 --> 01:40:32,440 He'll do a 12-hour to 14-hour stretch where he'll do design reviews with... 2288 01:40:32,900 --> 01:40:36,257 But the way that he does it, he does it with five minutes per engineer, right? 2289 01:40:36,340 --> 01:40:38,910 And so he does 60 divided by five... 2290 01:40:40,080 --> 01:40:41,927 It's been way too long in this podcast. 2291 01:40:42,010 --> 01:40:45,960 How much is that? 12? - 12. - He can do 12 design reviews an hour. - Yeah. 2292 01:40:46,050 --> 01:40:47,937 - Yeah. - And then he does it for 10 hours a day. 2293 01:40:48,020 --> 01:40:51,537 So, Elon will do 120 design reviews in the course of a day. 2294 01:40:51,620 --> 01:40:53,677 - Are these one-on-one? - I have not actually sat in on these. - Okay. 2295 01:40:53,760 --> 01:40:55,357 - I suspect there are other people around, - Okay. 2296 01:40:55,440 --> 01:40:57,147 - including people who work for him, 2297 01:40:57,230 --> 01:41:01,027 and probably, some of the leaders of the companies are involved in different ways. 2298 01:41:01,110 --> 01:41:04,057 But it literally is the thing I know. It's literally a rotating cast. 2299 01:41:04,140 --> 01:41:06,867 It's the point engineer on each of the important things 2300 01:41:06,950 --> 01:41:08,807 coming in and presenting for five minutes. 2301 01:41:08,890 --> 01:41:11,787 And then the question is, if it's going great, that's great. 2302 01:41:11,870 --> 01:41:13,057 If it's not going, what's the problem? 2303 01:41:13,140 --> 01:41:14,657 And then how does that problem rank, right? 2304 01:41:14,740 --> 01:41:16,880 Is that the production bottleneck? 2305 01:41:17,320 --> 01:41:20,107 And if it is the production bottleneck, then that's the thing that he then fixes. 2306 01:41:20,190 --> 01:41:21,737 And then that's when he's there from, whatever, 2307 01:41:21,820 --> 01:41:24,707 eight o'clock till 2:00 AM, working with that engineer to fix that problem. 2308 01:41:24,790 --> 01:41:29,597 One way to think about this is the velocity in military affairs, it's called 2309 01:41:29,680 --> 01:41:35,717 maneuver warfare, right? So the speed at which he operates is just, the cycle time 2310 01:41:35,800 --> 01:41:38,557 is just so much faster than anybody running in a traditional method. 2311 01:41:38,640 --> 01:41:41,997 It's hard to even compare the different... It's like four hours versus six months. 2312 01:41:42,080 --> 01:41:43,990 It's just this incredible gap. 2313 01:41:44,350 --> 01:41:47,357 And then, the other part of it is, somebody that I know once, went to work 2314 01:41:47,440 --> 01:41:50,427 for SpaceX, and they asked what it was like, and he said, "It's like being 2315 01:41:50,510 --> 01:41:53,720 dropped into a zone of shocking competence. 2316 01:41:54,650 --> 01:41:56,860 It's like everybody is ultra-competent." 2317 01:41:57,320 --> 01:41:59,997 And the reason everybody's ultra-competent is because, 2318 01:42:00,080 --> 01:42:04,550 number one, if they're not, Elon sniffs it out and fires them. 2319 01:42:04,810 --> 01:42:08,457 But he knows, because he's talking to the people actually doing the work, so he 2320 01:42:08,540 --> 01:42:11,927 knows at this point, you know, having done this for, whatever, 25 years, he can 2321 01:42:12,010 --> 01:42:13,307 sniff this out really quickly now. 2322 01:42:13,390 --> 01:42:14,827 And then the other is, the best engineers in 2323 01:42:14,910 --> 01:42:18,927 the world want to work for him because he's the one CEO like this, who's able to 2324 01:42:19,010 --> 01:42:21,267 work with them as a peer on whatever the technology is. 2325 01:42:21,350 --> 01:42:23,547 And as an engineer, you're just like, "This is..." 2326 01:42:23,630 --> 01:42:25,467 Like, what would be better as an engineer than being able 2327 01:42:25,550 --> 01:42:28,337 to design a rocket engine with Elon Musk as your engineering partner, right? 2328 01:42:28,420 --> 01:42:31,227 And so, he just has this incredible positive selection where the smartest 2329 01:42:31,310 --> 01:42:32,357 people in the world want to work for him, 2330 01:42:32,440 --> 01:42:34,357 and then anybody who can't cut it gets fired. 2331 01:42:34,440 --> 01:42:37,757 The world sees this as raw aggression, but it's beyond that, right? 2332 01:42:37,840 --> 01:42:41,357 It's a very systematic way of optimizing these companies to be able to take on 2333 01:42:41,440 --> 01:42:44,067 these profound challenges, and then being able to actually solve all the problems, 2334 01:42:44,150 --> 01:42:46,567 and do these things, and at a speed that is just completely unmatched. 2335 01:42:46,650 --> 01:42:50,467 The challenge of all of this is okay, that all works great, if you've got Elon, 2336 01:42:50,550 --> 01:42:55,737 right? And so, one of my concepts is I think we need a metric for founders in 2337 01:42:55,820 --> 01:43:00,167 Silicon Valley called the "MilliElon," right? And so, how many MilliElons are 2338 01:43:00,250 --> 01:43:02,547 you, right? Are you 10 MilliElons? That would be great. 2339 01:43:02,630 --> 01:43:05,497 - Yeah. - Are you 100 MilliElons? That's 10% of an Elon. 2340 01:43:05,580 --> 01:43:06,767 - Yeah. That'd be fantastic. 2341 01:43:06,850 --> 01:43:11,007 You know, 500 MilliElons, I'm going to give you all the money, right? 2342 01:43:11,090 --> 01:43:15,440 Most people are one MilliElon or 0.1 MilliElon. 2343 01:43:15,550 --> 01:43:16,727 The question that falls out of this, 2344 01:43:16,810 --> 01:43:22,017 which is a question that [unintelligible] ask, is, like, okay, you can't clone him. 2345 01:43:22,100 --> 01:43:23,327 You can't bottle the essence. 2346 01:43:23,410 --> 01:43:27,970 So, what out of that can be transplanted to normal human beings? 2347 01:43:28,220 --> 01:43:33,437 - And how much of it is predictable, or knowable when he's much younger? 2348 01:43:33,520 --> 01:43:39,640 - Mm-hmm. - Because the famous example of this is Michael Moritz's passing. 2349 01:43:39,980 --> 01:43:42,427 Made all his money in PayPal with Elon. Obviously, there was contention there. 2350 01:43:42,510 --> 01:43:43,797 He got kicked out and everything else. 2351 01:43:43,880 --> 01:43:45,710 But then Elon pitched him Tesla. 2352 01:43:45,950 --> 01:43:47,627 - Yep. - And he passed because he's like, 2353 01:43:47,710 --> 01:43:49,767 "There's no way that you're ever going to surpass Toyota." 2354 01:43:49,850 --> 01:43:52,727 And then Moritz, to his credit, was just like, "I drastically 2355 01:43:52,810 --> 01:43:56,687 underestimated the guy's determination and pain tolerance," I think is the term 2356 01:43:56,770 --> 01:43:59,097 he used. -Well, I wasn't there for that, so I don't know about that. 2357 01:43:59,180 --> 01:44:02,947 I will say the idea of having been a software entrepreneur, 2358 01:44:03,030 --> 01:44:06,437 and building a car company... Okay, when Tesla started building, 2359 01:44:06,520 --> 01:44:08,917 there had been no new successful car companies in the 2360 01:44:09,000 --> 01:44:10,567 For 100 years, right? United States for 100 years. 2361 01:44:10,650 --> 01:44:13,497 - Yeah. - It was like 2000 of them - That's right. 2362 01:44:13,580 --> 01:44:17,727 - founded from 1900 to 1910, and three that survived. 2363 01:44:17,810 --> 01:44:21,757 - That's right. And the previous real attempt to start a car company in the US 2364 01:44:21,840 --> 01:44:24,157 before Tesla in the preceding decades was? 2365 01:44:24,240 --> 01:44:25,507 Tucker or something? Tucker Automotive. 2366 01:44:25,590 --> 01:44:26,407 - Yeah, yeah, Tucker. 2367 01:44:26,490 --> 01:44:30,387 -Which was such a disaster that they made a movie called "Tucker," which is about 2368 01:44:30,470 --> 01:44:31,720 what the disaster it was. 2369 01:44:32,560 --> 01:44:36,420 And so, obviously, you don't do that, obviously, 2370 01:44:36,540 --> 01:44:38,417 this is insane, and for a software guy to do this is insane. 2371 01:44:38,500 --> 01:44:39,997 Oh, by the way, this is only one of the things he's doing. 2372 01:44:40,080 --> 01:44:41,417 He also has the rocket company. 2373 01:44:41,500 --> 01:44:46,520 - Yeah. Which is also insane, right? And so, yeah And by the way, I didn't see it. 2374 01:44:47,230 --> 01:44:49,627 I'm a software guy, and I was like, "I don't know, whatever. 2375 01:44:49,710 --> 01:44:52,077 I guess he's going to go do cars. I don't know anything about cars." 2376 01:44:52,160 --> 01:44:56,327 So, it's not like I saw it, but I'm just saying the level of incredulity 2377 01:44:56,410 --> 01:44:59,557 that he was greeted with at the time was, I think, almost uniform. 2378 01:44:59,640 --> 01:45:01,897 And there's that famous photo. The most famous Elon photo, 2379 01:45:01,980 --> 01:45:05,267 I think, the most powerful one is the one where he's, it's young Elon, probably 2380 01:45:05,350 --> 01:45:08,317 2005 or whatever, and he's in the... - He's in the shorts and a polo, - Yeah. 2381 01:45:08,400 --> 01:45:11,117 - and he's crouched down, and there's nothing but 2382 01:45:11,200 --> 01:45:14,830 the explosion remains of the third rocket, the second or third rocket. 2383 01:45:15,550 --> 01:45:17,467 - yes. - The one he had been funding personally, like... 2384 01:45:17,550 --> 01:45:19,967 - Yes. - Did you ever read Eric Berger's book, "Liftoff?" 2385 01:45:20,050 --> 01:45:21,407 - No, I didn't. - Oh, you got to read it. Is it? 2386 01:45:21,490 --> 01:45:23,260 I'm surprised you haven't. 2387 01:45:23,760 --> 01:45:27,627 I like these company histories that focus on the first six years. 2388 01:45:27,710 --> 01:45:29,357 - Yep. - And it just stops. - Yep. 2389 01:45:29,440 --> 01:45:31,487 - It's a first six years history of SpaceX. 2390 01:45:31,570 --> 01:45:33,867 - Yep. - And it's just, nothing good in the book. 2391 01:45:33,950 --> 01:45:37,187 It's just reading one failure after another, after another, and one 2392 01:45:37,270 --> 01:45:39,497 catastrophe after another, after another. It's a good read. 2393 01:45:39,580 --> 01:45:42,307 -Yeah. When my kid was five, he loved rockets, and so his favorite rocket video 2394 01:45:42,390 --> 01:45:45,190 was the compilation of all the SpaceX rocket explosions. 2395 01:45:45,490 --> 01:45:50,057 - Geez, well, Elon talks about this, that before his friends, after he sold them 2396 01:45:50,140 --> 01:45:52,957 to... I think he had 180, I think the story tells 180 million after taxes, and 2397 01:45:53,040 --> 01:45:56,087 he's like, "I'm going to do this rocket company." 2398 01:45:56,170 --> 01:45:59,217 One of his, I think Adeo Ressi, or I forgot the friend, sat him down, 2399 01:45:59,300 --> 01:46:01,837 and they made him watch all the rocket... 2400 01:46:01,920 --> 01:46:05,567 There was a compilation, this is probably pre-YouTube, of just rockets blowing up 2401 01:46:05,650 --> 01:46:06,267 over and over again. 2402 01:46:06,350 --> 01:46:08,727 Like, "No, you're literally going to light your fortune on fire. 2403 01:46:08,810 --> 01:46:10,510 It's going to explode in the sky." 2404 01:46:10,940 --> 01:46:13,997 - Yep, exactly. Exactly. - So, I mean, obviously it's working, right? 2405 01:46:14,080 --> 01:46:17,297 So, his method, obviously, is working, and it's obviously working far better than... 2406 01:46:17,380 --> 01:46:19,867 I mean, it's certainly working far better than anybody else's method in cars and 2407 01:46:19,950 --> 01:46:23,100 certainly working better than anybody else's method in rockets. 2408 01:46:23,470 --> 01:46:25,267 And then in a bunch of other areas also. 2409 01:46:25,350 --> 01:46:27,617 So, it's clearly working, and so it's like, "Okay." 2410 01:46:27,700 --> 01:46:30,737 And then he just draws, because of just who he is and what he's doing, 2411 01:46:30,820 --> 01:46:34,420 and how he does it, he just draws so much heat, there's just so much... 2412 01:46:34,720 --> 01:46:38,120 The environment is just full of criticism and attacks, just nonstop. 2413 01:46:39,340 --> 01:46:41,247 And we all kind of get sucked into these narratives. 2414 01:46:41,330 --> 01:46:46,007 But I think the key thing, for me, it's just like, okay, there is a method 2415 01:46:46,090 --> 01:46:48,737 there that he has been working on and refining for 2416 01:46:48,820 --> 01:46:51,817 coming on 30 years that has worked better than anybody's method. 2417 01:46:51,900 --> 01:46:54,307 Like I said, I don't know how many people can do it. 2418 01:46:54,390 --> 01:46:56,367 And maybe there's just a fundamental limitation, 2419 01:46:56,450 --> 01:46:59,227 which is you can do it if you're Elon, and you can't do it if you're somebody else. 2420 01:46:59,310 --> 01:47:01,387 Or maybe, you need to be above 30 MilliElons, 2421 01:47:01,470 --> 01:47:02,947 but not below or something like that, right? 2422 01:47:03,030 --> 01:47:05,467 Maybe there's some threshold where you break through on this. 2423 01:47:05,550 --> 01:47:07,217 But it is clearly the best method. 2424 01:47:07,300 --> 01:47:09,617 Like, it clearly is generating the best results. 2425 01:47:09,700 --> 01:47:12,800 And then, again, conceptually, I like it, because again, 2426 01:47:12,950 --> 01:47:16,640 it's this bridging of the founder mentality with the manager mentality, 2427 01:47:16,880 --> 01:47:19,137 because he's not just doing, these are not just one-offs. 2428 01:47:19,220 --> 01:47:20,697 He's scaling. Everything is scaling. 2429 01:47:20,780 --> 01:47:23,007 What is it? Starlink just hit, what was the number? 2430 01:47:23,090 --> 01:47:25,607 Starlink just hit 10... Was it 10 million subscribers? 2431 01:47:25,690 --> 01:47:27,657 - I'm one of them. - Yeah, exactly, right. 2432 01:47:27,740 --> 01:47:30,517 You probably have read about Iridium and Teledesic. 2433 01:47:30,600 --> 01:47:33,227 - No. - Oh, okay, okay. So, Elon's not the first guy who said, 2434 01:47:33,310 --> 01:47:35,407 "We're going to do satellite-based internet access." 2435 01:47:35,490 --> 01:47:36,323 - Mm-hmm. 2436 01:47:36,650 --> 01:47:39,457 There was Bill Gates, Craig McCaw. 2437 01:47:39,540 --> 01:47:42,157 So, when Microsoft went on top of the world, 2438 01:47:42,240 --> 01:47:45,557 and Craig McCaw, basically, built cellular telephony in the US, built 2439 01:47:45,640 --> 01:47:46,990 what's now AT&T Mobile. 2440 01:47:48,560 --> 01:47:50,547 Those guys teamed up in the early '90s and did this thing 2441 01:47:50,630 --> 01:47:53,777 called Teledesic, where they put up satellite-based voice, and then it was 2442 01:47:53,860 --> 01:47:55,197 going to be internet access. 2443 01:47:55,280 --> 01:47:57,457 Complete catastrophe, total bankruptcy, complete disaster. 2444 01:47:57,540 --> 01:48:00,957 And then Motorola, which used to make all the cell phones in the US, 2445 01:48:01,040 --> 01:48:03,897 had another one system that's actually still up called Iridium. 2446 01:48:03,980 --> 01:48:06,497 And again, it's just this classic business school case 2447 01:48:06,580 --> 01:48:07,947 study of just complete disaster capital - Mm-hmm. 2448 01:48:08,030 --> 01:48:10,117 destruction. And so Elon's like, "I know. 2449 01:48:10,200 --> 01:48:13,407 I'm going to do number three of those with Starlink as 2450 01:48:13,490 --> 01:48:15,257 a side project at the rocket ship company." 2451 01:48:15,340 --> 01:48:15,807 - Yeah. 2452 01:48:15,890 --> 01:48:19,827 Right? And, you know, in retrospect, it's total genius because he's like, 2453 01:48:19,910 --> 01:48:21,517 "We're going to be putting up... If the rockets are reusable, 2454 01:48:21,600 --> 01:48:22,837 we're going to be launching them all the time." 2455 01:48:22,920 --> 01:48:24,807 And then the question becomes, "What's going to go in the rockets?" 2456 01:48:24,890 --> 01:48:26,887 And he's like, "I could wait for the customers to come to me with more 2457 01:48:26,970 --> 01:48:29,277 stuff to put in the rockets, or I could just put up my own satellites. 2458 01:48:29,360 --> 01:48:31,807 "What would be the satellite to put up? Oh, it would be consumer-grade, 2459 01:48:31,890 --> 01:48:33,687 consumer-priced internet access. 2460 01:48:33,770 --> 01:48:36,517 And it's just like, "Okay, anybody who knew anything about the history of 2461 01:48:36,600 --> 01:48:40,497 satellites, knew that that's the new craziest idea in the world. 2462 01:48:40,580 --> 01:48:44,247 And of course, it's this giant success. It's like the side project. 2463 01:48:44,330 --> 01:48:46,197 There's clearly a method. It clearly incorporates invention. 2464 01:48:46,280 --> 01:48:47,507 It clearly incorporates scale. 2465 01:48:47,590 --> 01:48:49,640 It does a brilliant job at both of those. 2466 01:48:49,960 --> 01:48:52,710 It's clearly in part, Henry Ford, whatever, 2467 01:48:52,920 --> 01:48:55,190 Alexander the Great method, clearly. 2468 01:48:55,300 --> 01:48:57,930 But there's also real scale and heft to it. 2469 01:48:58,400 --> 01:48:59,617 SpaceX now is building, you know, 2470 01:48:59,700 --> 01:49:04,107 they got their own city, down in Texas, right? And so it's a formula that 2471 01:49:04,190 --> 01:49:08,397 captures both sides of it. And it may be the least studied and understood thing 2472 01:49:08,480 --> 01:49:10,130 I know of in the world right now. 2473 01:49:10,230 --> 01:49:12,647 - It's incredible. Mark, we're running out of time. 2474 01:49:12,730 --> 01:49:14,647 When I started the show, you were at the top of my list 2475 01:49:14,730 --> 01:49:16,707 for one of the guests I want to talk to. Thank you so much for doing this. 2476 01:49:16,790 --> 01:49:18,157 I hope you come back in a few months, because there's a 2477 01:49:18,240 --> 01:49:19,717 million other things we need to talk about. 2478 01:49:19,800 --> 01:49:21,287 - Good. Awesome. Fantastic. Thanks. 2479 01:49:21,370 --> 01:49:22,667 I hope you enjoyed this episode. 2480 01:49:22,750 --> 01:49:26,007 Please remember to subscribe wherever you're listening and leave a review. 2481 01:49:26,090 --> 01:49:27,557 And make sure you listen to my other podcast, 2482 01:49:27,640 --> 01:49:31,897 Founders. For almost a decade, I've obsessively read over 400 biographies of 2483 01:49:31,980 --> 01:49:35,057 history's greatest entrepreneurs, searching for ideas that you can use in 2484 01:49:35,140 --> 01:49:39,617 your work. Most of the guests you hear on this show, first found me through 2485 01:49:39,700 --> 01:49:40,533 Founders.