Tetragrammaton every year there are some number of thousands of very bright, you
know people, you know, many of them young some of them, you know older more experienced.
And who come up with ideas for new tech products new tech companies and they you know, they into the clay a small group of friends get together and they decide to kind of throw the Harpoon and start a start a company and try to build a product and you know, and they you know, they need they need some level of a sum of money and then they need like some level of basically support like like institutional support. So, you know, they're often they're often young less experience. They often have not been through the Journey before they're going to need to gather a lot of resources along the way they're going to need to hire a lot of people they're going to you know, basically
Have big opportunities they want to pursue they'll have problems that will pop up thinks they've even even the great successful companies, you know from the outside. They look like everything is great on the inside. They're typically, you know, some form of rolling disaster. There's always something going wrong. So basically they, you know, they're sort of at some point looking for partners who can help them do that. And so Venture Capital kind of bundles the money, you know, kind of with the help and then, you know a couple of you know, probably misnomers to it. You know one is the you would think like the day job is saying yes, you know to new companies is actually saying no, you know repast
almost everything so, you know the sort of cynical sort of a black humor joke is you know, our day job was crushing entrepreneurs hopes and dreams, you know, but you know that said, you know the good ones who that was a challenge, right? They view us as kind of the initial test to see if they'll be able to clear the bar because if they can clear the bar with us, then they'll have a good chance of being able to clear the bar with future recruits or customers writer or you know other kinds of people they'll need to say yes to them in the future. And so yeah, we sort of present that sort of provide initial gate another kind of misnomer would be that you know, too
That kind of has this reputation for you know for being very fast moving right and so things you know technology is developing quickly, but actually turns out where one of the sort of slowest investors venture capital is one of the slowest kinds of sort of investment money in the world because to build any kind of great company is you know, anything that you're going to remember this going to last it's a 1020 or project kind of the minimum. And so when we invest we invest assuming we're going to be in for at least a decade and so we're just there for a very long time every day, you know, helping them work through things, you know, we basically we never pressed to kind of
Get our money back. We're always trying to kind of help them build more more value when you're running a venture capital firm. You're basically running a family of funds that run across basically 20 years, right? So you're sort of raising money on a new fund. You've got an older fund that has companies that are three years old. You've got an older fun. This guy companies are eight years old and so forth. And so you kind of have this this thing where you're raising money that it's like planting trees or planting trees raising money on things that you know won't pay out for a decade. But you know, if you've been in the business for a while you have things ultimately they're succeeding from it.
Go and you just kind of get the process rolling he see the same mistakes that Founders make across the board or their different mistakes all the time. It's a cigar for them of the question a success was that all happy companies are the same all unhappy companies have a unique story for sure their patterns of the mistakes. There are lots of different mistakes to be made over time. It made them. All. I would have been obvious. What are the obvious ones? I'm a so the the biggest category by far as internal dissension on the team, right? So these things are never solo Acts.
It's always it's always a team and this will not come as a shock to you. It turns out when you have a team of people, even if they like start out getting along really well, even if they like consider themselves, you know, kind of you know, brothers and sisters like under the pressure of you know up success also of success particularly in success. You see people come apart exactly, right? So right so, mr. For the right money and puts it money and fame like basically reveal the true person like in a lot of ways, right? And so yeah. Yes, there's that people lose their minds also just like, you know, it's like it's high stress, right? And so, you know things go wrong. It's
Very easy to develop in our resentments is very easy, you know because it's ureters people these Founders are under so much pressure. And so it's very easy to develop resentments of like I can't believe you're hogging the Limelight, you know, they was like, oh, I can't believe you're not pulling your weight and then they kind of get in this kind of downward spiral famous rock band. Yeah, exactly. Right and so it's like most of it like a sort of my big conclusion is like it's basically a tech startup might or might not work and whether it fundamentally whether it works or not as busy a function of doesn't build something that people want and kind of build a business around it is simple as that if they make something people want it's probably going to be okay well,
Well, if the team holds together, right so so so that's that's the thing. So so another is an old of venture capital adage which has more companies die from suicide and homicide. So like if look if it's not working then the team is going to really be pressing each other hard and you know that can easily go sideways if it does work the team can blow up for the reasons we discussed and so yeah, it's basically, you know in this what it the speech we always kind of give it sounds like look if you guys can kind of go here together and stay, you know, basically as an integrated, you know team and group and trust each other through the hard.
There's there's almost always a way through the specific difficult thing of the moment. There's very few kind of not recoverable mistakes, but you have to really stay together and then you know, basically what you see with a lot of these companies such as you know at some point if there's a crack on the team that crack that magnifies out and ultimately, you know in some cases can actually destroy the company and I would say most of its that now this is a speech I've just without these two young Founders last night. We're all fired up for their new their new AI company and this is the they sort of were asking about the failure cases and I was like, yeah the most likely failure cases you guys are going to turn on
Each other right and you know first they get the legitimately they get the stricken look on your face, right and then it's immediately followed by will of course, that's not going to happen us and it's like well, yeah, but would also have two marriages end in divorce. Like it's the same exactly exactly exactly. It's actually a marriage. You know, I think there's an argument to be made I'm not like a therapy person but like I think there's argument could be made that people should think about the Partnerships the way the business Partnerships the way they think about marriages. I think there's an argument to be made that, you know marriage counseling, you know might be helpful, you know, some sort of let's say intentional process.
Of developing trust and communication. You know that said look when these things get started. It's like a marriage there. So euphoric and excited and they feel so tightly bonded that they don't want to ever imagine that that could ever actually happen. And so when it does happen, it usually comes as an enormous shock and and that's probably the single biggest company killer is when that happens. We you say the primary thing people are coming to you for is money or is there more to the picture? Yes. I think it's a lot. I think it's more than that. So I just tell you what we always what we always wanted. So what we my partner Ben and I always wanted when we were starting our we start our own companies for
Fifteen years before we started a venture firm to back other people's companies and you know, basically it's just like we knew what we wanted to build like we knew what the product was we knew what Vision wise we had it but it's just all of the mechanics and maybe here's a difference maybe, you know versus like my, you know friends like you working in the entertainment business is, you know, if a band comes together people do a movie like maybe they you know, maybe they do an album. Maybe they do a movie. Maybe they do a sequel maybe they don't write or so tech companies. It's more like for them to work. They really have to compound over like I said over like a decade or two decades
And so there's no like well, sometimes I'll do it for two years. They'll sell the company but that's not the big success case. Those are those are kind of small scale successes usually like to build something important and valuable. It has to be a decade or two decades and so they have to really learn how to build an institution and to do that, you know, typically they need a level of you know, sort of I would say knowledge, you know support expertise access to resources another metaphor years a lot. Is that building a tech company. It's like a snowball rolling down a hill if it's working. Well, it's growing as it rolled. I sort of
Sort of you know the way a snowball kind of accrete snow and be gets bigger a start-up, you know in theory. Is it creating resources? Right? And so it's kind of pulling people in you know, it's pulling in more Engineers product designers right as pulling in the right kind of Executives. It needs to build his team. It's pulling in customers. It's pulling in Partnerships. It's pulling in, you know, press attention to building a brand it's sort of, you know, sort of drawing all these resources to itself. And of course, there's there's a competition among all the different startups of that same generation to to get all those resources. And so they're they're fighting they're fighting with the other snowballs as they roll down the hill for all.
Stuff and so it just it has over time. It has just turned out that it's like very helpful to most of those teams if they've got somebody if they've got something of the form of a venture capital firm some set of people behind them who have done have done it before know how to do it. You know, we're we don't run the companies like we're not you know, this is not a private Equity. Like we don't we don't get many like run the show, but you know who's their first call basically when something goes wrong or when they need something? Well, I'll give it to you know, what we do is like new clothes candidates, you know, they'll be talking to some engineer. They'll be in a shootout, you know with like Google and then three other startups to hire an engineer.
And so they'll roll me in and I'll you know spent an hour with the person basically owns part of it is just like help them, you know kind of you know, help help we cannot get over the hump but also like well one of the tricks you can do when you have like a big Venture Capital firm like ours is you can say to Canada. You might be like well look the can it might be thinking I can go to Google and I just have like I'm I know everybody's going to think I made a great decision of my career. Even if it doesn't go. Well, I've been Googling my resume if I go to the startup who's even going to care what I did at the start of doesn't work like, you know, I could be stranded if the startup fails and so one of the things we get to do is we can say look if it doesn't work we will know
When you'll be a member of our family as well, and we will and we have you know hundreds of other companies and we know all the big we when we will help make sure that your career prosperous even in the wake of a failure and we will vouch for you, you know kind of through that and so there's like a hundred different versions of that. So I think that's most I mean that's how we win. We don't want on price we went on, you know, we went basically I'm being able to be there partner. Did you have experience with VCS from the founder side? Yeah very much about tell me give me an example. What was that? Like? Yeah. So I look I had really good experiences. I had I had a really good experience as I raise.
Money and 1995 my partner Jim Clark and I at the time raise money and actually 1994 from a from coal Kleiner Perkins, which was at the time considered kind of the top Venture Capital firm. I worked with them for five years. We then Ben and I started a company 99 we raise money from Benchmark, which at the time at the time was one of the top firms. We worked with them for a long time and then, you know Ben and I had also been Angel Investors and so we had invested in you know, what that, you know, probably by the time we started the firm, you know over 100 startups we were in and we were kind of from the side kind of working with a lot of the founders and a lot of the things we were going
Anderson was navigating The Venture landscape helping them meet the right firms. And and then actually helping to kind of we were actually the marriage counselors a lot of the time so we were kind of helping them kind of unwind when they're their relationship with their PCS. We get all screwed up. We would kind of help them kind of unwind that and so, you know, we just we kind of we do we became a judgment call Expert customer and and then at some point we're like, okay like this Gallery could probably do this. It seems like a better position to be in coming from that having that experience has to make you better at being on the other side of this of the table.
Yeah, so our argument is very much that our argument is we have been you we have been through everything. You've been through we have made every mistake that you're going to make we have figured out ways to get through all those mistakes, right and and then we deeply understand it. We understand what you're trying to do. And you know, we're going to we're going to sympathize with you along the way there is a counter argument to that but I think about a lot and it's the argument that VCS who have not started companies use against us and basically the argument goes that if you're a former operator founder like we are you you will tend to get emotionally entangled with the with the
Nice and you'll become not objective and not clinical and at some point when you're investing money and even when you're actually advising companies at some point, you need to get clinical like, you know, there are certain moments in time where you need to like actually recognize the truth and tell the truth. We'll see ourselves and to the companies right and to and everybody else and so their argument goes that basically you might you might be you might be better founder. You might actually be worse investor as a result of the inability to get clinical, you know, we try to offset that by, you know, kind of being very conscious of that.
That and trying to you know, kind of retainer critical faculties, you know, we do like internal portfolio reviews every quarter. And so we kind of you know, it's kind of force ourselves till I basically tell the truth about everything, you know, like having said that you know, if the failure cases, you know, we get emotionally entangled with with somebody working hard to realize your dream over a decade, you know, fair enough. Yeah, you know, I think it's I think it's I think it's much better to err on that side and get the payoff of that which is like we're really there like we're really deeply they're like, we don't quit we don't walk away, you know, we can beat a week are tremendously we have all of the added motivation to come from
Tremendously pick an example of a story of a company that you've either invested in or been part of a success story and walk me through all of the stages of what happens the ups and downs along the way a case study. Yeah, I'm gonna use these code a code name for the company's. It's okay. I don't try under speak for the individual shortcomings. And so I mean look I have a company right now. I'm an ecologist company s and you know, it was easy one like it was two founders.
Who had started a previous company together their previous company went through a lot of ups and downs that actually hit the financial crisis really hard in 2008 almost blew out than they had to make all these changes and then they ended up selling it to a big company and then they basically like alright, we want to we want to we want to know do the new thing and they just like it was I don't know. It's like watching, you know, Babe Ruth or something, you know, but point to the place and the outfielder, he's going to hit the Home Run and they just like hit the ground running, you know, they've had issues along the way but it's mostly been this like incredibly smooth, you know, it's just like this well-oiled machine.
You know, they've just they've just hit like a big huge, you know kind of Revenue Milestone. They're not, you know, increasingly important in their in their industry, you know, every once in a while you get one that goes that well on what happens is just like, you know in the beginning everything is a dream use a clean sheet of paper, you know you it's this incredible moment of sort of what are they call it's like a liminal moment where you can basically design your dream and your dream is the product you've always wanted to build and your dream is the company of always wanted to have and you kind of think think of those in parallel man you bring it on.
Smart people, you know and it just like it just seems like everything's going to be great. You kind of expect it's going to be hard but like you you're all fired up and then basically what happens is this reality just like punches you in the face over and over and over again, and you know, generally that takes the mode the mode of basically people telling you know, right and so feces tell you know, they won't find you employees tell you know, they won't join your company, you know customers tell, you know, they won't buy your product and kind of all the way through and then you know disaster strikes every month or two and one form or another we talked a lot about the emotional treadmill. It's just sort of the the founder sort of psychology sort of
Right my famous line on that was it sort of it is alternating between Euphoria and Terror and then it turns out that lack of sleep enhances both of those right? And so it's the four in the morning. Okay. Well, there's another thing which is is related to this which is the the founders have to put on a brave face like so they have to always basically act like everything's going great because otherwise it'll Shake confidence right an elbow lose team members and they won't be able to raise money or whatever. So they always kind of have to act like it's going really well. In fact, you're going to like a party with like a lot of Founders. It's really
Watching them because everybody's you know, everybody's asking each other. Well, how's it going and everybody's got this like very forced grin on their face. They like everything's going great and like everybody's just dying inside, right but like nobody can say it right and so I always think about like it's the four in the morning kind of thing where you're staring at the ceiling right? And you know yesterday it felt like you had the tiger by the tail and today it feels like it's all gonna fall apart and just like, oh my God, right and then and then the other thing I've ever find is like that doesn't really ever moderate like if you talk to a lot of people who are still
No Founders running a company's 10 or 20 years later, you know, a lot of their life is every morning. They open up their email inbox and just like a descent into hell, right? It's just like one person after another with an issue in a complaint on a problem and I quit fuck you and like just like on and on and on and they got to like, you know get up in the morning and like put on the put put on the hoodie it in there and like just like in front all these things head-on, you know, some of them love to do that and battle their way through every step. I always some of them check out some of them just get a few years into it and they like I just hate living in you know this way. I'm you know, I might be coming. Yeah.
They were becoming unhealthy, you know people develop young people develop alcohol problems drug problems. All these things was probably striking about this is like wow, this sounds like it's like mostly psychological, right and it's like yeah, it's like it's mostly cycle. Its pressure it straight straight tremendous amount of stress. That's right. Yeah. How small is the world of the Season Founders like all together is it hundreds of people? Do you know everybody is it thousands of people is it hundreds of thousands? Yeah, so I say the following so one is it doesn't really ever stabilized.
And so many other Industries and I think music was probably like this for a long time. I don't know if it still is but you know at some point in a lot of fun a lot of businesses basically things stabilized and you just have like a certain number of record labels or certain number of movie studios and you know at some point it was and then every once in a while there's like small changes. This is what's in evolution. They called punctuated equilibrium, right? And so things are kind of cruising along and every once in a while. There's like a disruptive milk, right? So if somebody somebody develops hip-hop or something and like everything changes, but like you can kind of count those right over time, right and those are like specific moments people write books about and they're really big deals, right or
So why I like a movie studio will go under but like it's actually very rare like, you know one brothers are still in business 100 years later Tech never stabilizes like that. Like it it always kind of looks like it's stabilized. And then basically there's some earthquake in the form of basically disruptive technology change and then basically everything gets kind of tossed up in the air and kind of redone and and at these platforms just happened like actually quite regularly. It's like every five years and so, you know, it's like for computers it was Mainframe. So PCS to mobile right and for you know internet, you know, it was one point no internet in the internet and
In cloud and then social now there's this AI thing right? And so every time you have one of these kind of earthquakes it's sort of really sort of recalibrates everything, you know, it's like the meteor the meteor strike hits and the dinosaurs died and then, you know the bird and the birds take off kind of thing. So, you know because that's sort of a more common thing in our world. There's just more of this pattern of and then the new thing is often led by people who were not important to the previous way of right because it's sort of a lot of its kids a lot of his kids who kind of grew up with whatever the new thing is, and they just have a different take on how the world should look. I was an example of that and so
Yeah, so there's like basically there's actually a lot of turnover like, you know, there are Venture firms are 50 years old, but you know, they're on generation five or six partners and a lot of their peers from when they were younger, you know, no longer exists. And so whether they're in the same firm anymore is like an open question, you know, the companies can last for a long time generally at some point the companies basically become some point was that illness leaves the building like in some point this sort of innovation spark leaves a company, right? Like when the founders basically, you know, some point punch out or retire like at some point.
Ain't even the most Innovative company just kind of becomes a big normal boring company. So it's still in business. It's like the you know, it was a it's a little bit like a neutron bomb. It's these things or something. It's like the building still there. They're still people the parking lot still full of cars. It still has customers but like it hasn't invented a product in a decade, right? And so like what you know, what even is that? And by the way, it has like 100 times a number of boys that had when it used to develop products all the time and so like what you know, what's happened there. And so those companies kind of they're, you know, they're still important for a business standpoint, but they're no longer vital. They don't do the new things and that's when the new startups show up. So
Okay. So back to your question is like yeah, it's basically can you know sort of continuous turnover of people everybody is highly aware that a 22 year old can show up at any moment and up and the entire thing and that has happened repeatedly. So people are kind of very open it up possibility is still jarring when it happens because you know, it's like number one the changes seem so weird in the beginning and then number two like 22 year old seem really young. So, you know, it still was the last one of those it's hard to process that we're going through right now. They I like it's that you know, that's the big one right now. You know, this one's not so much pain.
Two-year-olds. This one's more people who have been toiling and research labs for decades without really anything to show for it and their stuff just started to work. And so you actually have a lot of like scientists who never thought they would be in business who all of a sudden are like basically top entrepreneurs and you know, kind of their kind of emerging blanking out of basement labs in the real world. It's kind of you know, trying to build companies, you know, so that's happening. But like, you know, I mean the classic recent one, you know, social networking, you know, Mark Zuckerberg shows up. He's 22, you know, we had a we had a party actually when I was I was I'm on his board and we had a party when he would go finally became.
Enough to breath the car right be a big deal on business trips, right amazing, you know as the CEO of this incredible new company. So yeah, there's a lot of turnover. I would say it's and then I say it with the other thing is in this this is the uncomfortable part of the topic I think is it's an elite. It's an elite occupation. Like it really is it's still a small pool even though the characters are changing. Yes. It's a small pool. It's a small pool and and every once in a while you get somebody who just comes completely out of left field who went to some college you've never heard of and came from some random country and doesn't
It productivity and they just like show up and they're just really amazing. But that was you that was me. That was me yesterday a lot. Not yes, but you know, I would say that, you know, the more standard pattern is there's a small number universities, you know Stanford MIT Berkeley a few others. There's a small number of kind of important companies make a point in time where young people are getting trained by, you know by working there and kind of gaining the skills, you know, there's kind of there's there's it's actually like music there are scenes, right? There's like, you know, there's social scenes, you know, there's there's these, you know, kind of Loops of people who all know each other.
You're kind of coming up like whenever I really like interviews looks like either Comedians and musicians it always turns out it was you know, they were with all of the other people of their cohort at that time and what they all kind of have in common is nobody was taking him. Nobody was taking any of this seriously, right? And so that that same thing happens. There's also a small number of geographic locations San Francisco Bay Area, you know just ends up being the center of the world for a lot of this. Why is that so San Francisco and I say San Francisco their San Francisco the city which has its own idiosyncrasies and then there's just the Bay Area generally
And so a lot of us just office Parks. Well, so to practically its or Stanford and Berkeley are and it's where Facebook and Google and you know, all these other companies are and so it just kind of is already ground zero and so there's a natural kind of continuation thing that takes place and then there's also a long history to it, which is Silicon Valley really started in like a 1920s 1930s even with Technologies before the computer. So it's running on like a hundred years of what you might call a network effect. We're basically meaning the next really bright person who's technical technologically oriented is more likely to come to the place where all the other smart people.
Of them to go anywhere else. So there's like a positive feedback loop that kind of just keep spinning and then quite honestly, I think there's just something really I mean what California has its problems and they are profound but there's something magical about California there has been something magical book magical by California that predates the entertainment industry it predates, you know the tech industry and it's basically the California is the frontier and the same mentality that led to the original settlement. You know, California was the last, you know, sort of the farthest thing to the West that was settled, you know, it was sort of, you know, it was unbelievable.
Governed for a long time at the you have the gold, you know, the Gold Rush the wild west wild west like and then and then what happened was there was this just like selection process where if you were, you know, if you were oriented around status and respect you want to succeed on the east coast and New York and Boston and if you wanted to go carve your own path and create something new you went to you want to tell me what you want basic as far away from East Coast as you could get and you know, that's basically right. We're right where we set right now you'd like you can call it like creative, you know people
Right like the blaze new trails and like every way including like how you live your life, you know California's famously the home of the you know, thousands of Cults, you know, I've been developed here. I think it's actually no accident that California is sort of a we called sort of the stack, you know, California builds the technology of dreams and then we also, you know, the Hollywood entertainment business, you know actually makes the dreams right? And so it's like they're sort of integrated Dream Factory, you know, is it ever really quite real? You know, Los Angeles is like famously a fixity right? It was just like a desert and then they just basically was the thorough cities when it first got started and
They ran newspaper ads and East Coast cities with like drawings of like palm trees and like, you know this Lush paradise and then people would buy possible and they come out here and it was just desert and then they famously had to go get the water from Central Valley and that led to no I in palm trees. Yeah, they're baby shirts out and it turns out the palm trees are important so I can put it right it turns out palm tree. Is this actually one of my big breakthrough moments in understanding California, which is the palm trees are not native. Yeah, like it's just like this made up, you know, basically, they're the most iconic kind of thing for California. Basically, it's just like Miss Lee is like a made-up import and so there's a, you know, there's like an artificial very American idea.
Though yo very much. Yeah. Well, so and while I mean here we said in Shangri-La right like paradise, right, you know and you know, look at the weather like the weather like, you know, if you have a choice right fundamentally, you know of where you can live, you know wouldn't be nice to live someplace where it's like 70 and sunny every day like it's gonna be awesome. You know, it's the thing the Bay Area and l.a. Kind of have in common which is kind of the spirit of Adventure, you know, the original movie industry people came out here for two reasons one is they were fleeing Edison's patents enforcers. He had patents on movie movie recording equipment projectors, and so he was
Send in the pinkertons to like Breakers break up your studio. If you weren't paying him his patent fees so they came 3,000 miles away to get out of the orbit of you know, Eastern power and then they also came here for the weather because they can film year-round. And so and that Spirit, you know that Spirit exists and it's actually an exciting time for that because for a long time the sort of North and South, you know, California were sort of pretty sparkly divided and you didn't have a lot of crossover. I mean, you know a lot of your predecessors in music just never had any new technology as a threat if they even thought about it at all and had very little interest in what was happening and quite frankly vice versa.
And there's just a lot more across so it turns out the valley is more creative than we thought it turns out at La. Actually, there's some people down here actually quite interested in talking with a lot have been a lot in Tech. And so we There's real magic magic happening but having said that California also has all the downsides and Silicon Valley also has all the downsides of the place where basically people are making up dreams from scratch, you know, there's there's their dystopian elements to it. Right like the San Francisco real city has always got an interesting question because like, you know, they no longer arrest criminals.
How's it working? Right like you might just get like stabbed and killed walking down the street but a friend of mine got a job working for actually open II and he moved to be close to the office and he got on I got an apartment a block away and he there in the mission in San Francisco, which is sort of famously the whole Hub of AI but also just like incredibly violent and basically laws aren't enforced and he said, oh, I love living near the office. He's like I wake up in the morning. I go upstairs. I'm a block away from the office. The key is I run at full speed as fast as I can from my apartment to the office and then at night I run as fast as I can.
Because I'm trying to not get like basically stabbed or killed on the way on the way on and so it's got both of those, you know, the drug thing, you know has always been a big deal, you know hallucinogens are like a big thing, you know up north and you know, it's the good in the bad. They're opening people's Consciousness and Horizons and you know, there's a cultural creativity flowering thing is happening just like it happened the 60s and 70s, but there's also the downside which shows you see people whose lives are getting wrecked by drugs. And so it's also got that side of it and so it it's got this like very organic. It's just like this Perpetual cycle of culture.
All creation people designing their lives and then people, you know building these these these products in these, you know experiences that people all over the world kind of consider to be the best that there are so it's a special place.
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If felt like in the early days of the valley and when I say the early days, I mean seven years ago the idea of move fast break things disrupter awards were really good things and you know if Apple had the think different campaign and something seems to have changed. What do you mean ask you what do you think has changed? I don't know. I don't understand it because it seemed like the whole Tech Revolution was about you. Could finally be your
Self you could learn what you want on the internet. You didn't have to get what was fed to you.
You know, I remember at one point in time. The Twitter was called the Free Speech wing of the Free Speech party. That's right. So what changed what changed what changed so let me start with actually think that I actually think a lot of that is still there and you know, it's not there as much in like the big companies but like there is still an anarchic spirit in the startups. And so we meet with people every day who basically are just like a screw it like I'm just going to like rhymin break a lot of glass and right I'm going to just do something, you know brand-new and because it that necessary to make new things I believe so yes, I think seems like
With it. Let me say I'm very much in favor of it and we could talk about why that is but yeah, it's obvious. So that's how you do new things like you have to make it look like the past will crush you right if you let it but most cultures throughout time and most cultures in the world today. They're just their thoughts are dominated by the past. Right and there's a good to that right which is they have cultural continuity, right? They venerate their ancestors. They you know, I mean literally like the natural form Human Society is like literally ancestor worship, right? Like you just like it look there's a lot to that because like your ancestors like learned a lot and they, you know, try to
Pass it on to you through these kind of cultural transmission things, you know started with like epic poetry and then made its way through to kind of all the books and stories that we have today about people in the past. But like, you know most cultures are just like completely dominated by the passion. They just don't do new things. And anybody who tries to do new things there's this thing called right tall poppy syndrome, you know, the tall poppy gets chopped off, right and there's tall poppy syndrome and the West there's tall poppy syndrome in the East, you know, it's like this very natural kind of tribal tribal thing. And so, you know, anybody who's really going to do something it was going to like upset the apple cart and it's going to make people upset.
And then I would say Technologies maybe even the most kind of advanced version of that or the most dramatic version, right which is like, you know, a transgressive piece of content like a transgressive song or movie can really make people mad by suggesting that there's a better. Oh, you know a different way to live and that obviously can have a big effect but Tech does something I think even more than that, which is when Tech when something disruptive in Tech changes, it doesn't just change tack it also changes the sort of order of status and hierarchy of people right? Oh, this is sort of the thing. So, why does why does the media hate Tech so much and like there's a lot of you know, but
Explanations for that and one of them is just like we cut the legs out from under the media business. Right? Like we like basically obliterated, you know, like for newspapers. We like obliterated, you know, basically most of their advertising Revenue because most of that, you know, the people used to advertise in newspapers now, they just advertise online and so there's like a big reordering you know, too well actually in music that's happen, right, you know Napster file-sharing, you know, cut the legs out from under the economic structure of the music industry that caused a massive turnover and who was running the music companies and now there's a new generation of people who have figured out screaming and digital distribution and so like there's been a complete reordering
Of status that has come from that so I think that's a lot of that. Yeah. So like I think you have to do that. I think there's a couple of things a couple other just broader things that have happened, you know, this one. I'll kind of pin on us which is just like it's because the dog is caught the bus like a lot of us have been attacked for a long time. It was always like wow, what we're doing is actually really valuing important people don't understand and we have to tell them how valuable an important it is and now it's like, oh they actually get it and now they're mad right like right we want right the dog has got the bus like we everybody gets it now.
This attack is powerful and important and now they're really upset about it. Right and so some of that they want now they want to control and now they want to control it. Exactly and so the dog has got the bus turns out the bus has its own opinions on where things should go, you know, the dog is going to get dragged behind the bus and so there is some of that look the other thing that's happened that you know, well, but the other thing that's happened is just you know, look the world I think really changed in 2016 and like why and how and you know, how much of it was one guy? And how much of it is a global phenomenon, you know, we sit here, you know City just hate sitting here today A Very Trump like figured.
I want in the Netherlands, you know in this kind of huge surprise Trump like figure just want an urgent Tina which is this going to huge the prize but you know, the world's like the world is I experienced in the United States and in Silicon Valley like it really changed in 2016 and a lot of people really got psychologically, you know altered shattered broken reformed kind of through that and I bring it up just because like Tech got pulled into that shift just like everything else has got pulled into that shift and and that's why I tell her I found her a lot of the time we try to Grapple with this stuff is just like look like we're doing is valuable important.
But we are not we're not the bus. We are the dog like Society writ large has energy and momentum of its own and we are wrapped up in it. Just like everybody else. So, you know, we are changing it in some ways. But also we are part of it and we're getting we're getting kind of dragged along with whatever the prevailing Trends are. And so Tak has become politicized and I was a socially energized in a way that it never had been. I don't know maybe maybe this has been a big difference between you know, this and Allah which is maybe in like music and movies. You could say that like music and movies have always been
entwined with like politics, you know, probably going back forever, but for sure going back like the 60s right kind of very deeply intertwined and you know music making music music may have actually caused sort of political and social change in the 60s and 70s and 80s, but it was also reacting to it and right and it's like a feedback loop and I think in tech for a long time, we didn't we didn't have that we were building like tools, you know, we're building like fun tools and people can play with and use but they, you know, when they would get engaged in politics whatever they would put down our stuff and then they would go out in the street or you know, go on TV or do whatever they would do and now, Texas
Integral to how Society works, but even Beyond tech there was a time when big companies were focused on making the best product they could and having the best bottom line they could see and that was all they were focused on because they were focused on the business that they were running. Yeah, and it seems like somewhere along the way the idea change we're now corporations whose obligation to their shareholders is to do what I just said and now feel like they have
Of some moral imperative. How did that happen? Yeah, so, you know look I should start by saying for people who haven't really thought about this hard, you know, there is a you didn't do this but there's a misnomer that people apply to companies which is they'll say like there's usually criticize most companies are only focused on their shareholders and they're only focused on making money and they're legal in those cells people sometimes say they're legally required to like optimize profits no matter what right and the and so there and this is why they say it's companies are sort of going to be sort of intrinsically, you know, morally neutral or even evil because like
Makes sense to pollute or if it makes sense to like have horrible policies or whatever to build products that deliberately break so that people have to buy you know, the new thing next year like they're going to do all these evil things because they're Optimizer for profits. It actually turns out there's actually no legal requirement for companies to purely optimized for profit. In fact quite the opposite. You're supposed to optimize for kind of a long term value and you get to me management has it like broad latitude to be able to kind of decide whether to engage in social issues whether to like have different kinds of policies inside the company, you know, you're perfectly protected legally as an executive of a company if you trade off short-term profits for some
you no longer term, you know, just like brand value. Like we're just not even though doing this thing would call, you know, we were thinking of starting a new wailing division. We were going to kill a bunch of whales and sell their meat and we can make money doing that. We're going to decide not to do that because it would impair a brand like as a corporate executive. You're completely legally covered. Nobody will ever will ever question that and so so corporate Executives have always had a fair amount of latitude in terms of how they how they how they want to steer their companies. Look for a long time. You know one is just like what business people were just focused on business, but the other thing that happened was the the received wisdom
them that you got when you were trained up in Corporate America, I would say between the 70s and the around 2016 and the way I was trained up was you actually don't want to get involved in political and social issues because the backlash like you're gonna make people mad right you're getting you're going to you're going to summon the demon of you become involved in politics or social change so politics and social change and become involved in you and so you're sort of inviting a level of backlash that very well might destroy you that was something Michael Jordan famously said early on when they were asked they asked him about
Politics he said I want everyone to buy my sneakers that was his answer about what his political affiliations were right and you know, is that a capitalist statement in part but is that also a social and political and moral statement which is look I don't want to be divisive figure right? I don't want to have some kids love me and other kids hate me. Yeah, right because I'm on the wrong side of some divide, right? And so yeah, so to your point like I think that what that was very common look I think they just this I don't know this this Vortex opened up and you know a very large number of executives.
I felt very guilty about some set of social and political things. There was tremendous peer pressure the developed, you know to be able to stand up on things employee basis change the Millennials in particular showed up in the workforce with a lot more, you know, sort of Demands on their employers. I mean, even my like socially activated like older, you know friends, you know, who in business like that even they are shocked at the other employees show up kind of so fired up and so demanding that the companies, you know, take all these different positions. And so that that happened and then
you know, like I think some people think they can differentiate, you know, I think some people I saw some companies have deliberately decided that they'd rather have half the market love them and have them work of hate them than have nobody care. And so I think maybe that's you know, and yeah just you might say hypothetically a Nike for example actually might be quite happy if liberals by twice as many issues and conservatives don't like shoes and you know, maybe that that works and then quite honestly, I think people are drunk. I think they're drunk on sanctimony and and they're drunk on politics and they're drunk on feeling powerful. They're drunk on, you know, grandstanding.
And I think it's like a chemical, you know, it's like a chemical thing. It's a drug and it's very easy to get hooked on that drug. It feels great. Right and then, you know people on your side are like praising you and talking about how wonderful you are and you even say it also probably is to some extent feels good to be hated. Right because it's like wow, I'm really important all these people hate me. They're all mad at me. Like I'm in the mix like right in the fight like a really making a difference like people are just unbelievable. And so I think a lot of it is just like I think a lot of it is just this emotional thing. It's like a it's like a heroine, you know kind of thing and I think there's a hangover.
Over from it. I think actually well, you know bunch of companies have that him over right now bunch of companies have been damaged very badly by this and they have, you know, severe internal problems me. Look there a big companies where the CEO no longer runs the company like the companies run by the mob right? I mean it just the employee base can just like freak out and like threatened to protest or threatened to quit and like the CEO just rolls over every single time. And so like, you know at some point like what is that right? Is that a you know, is that a company? There's like a social movement, you know wearing the skin suit of a company so, you know I say,
Stickley you might say this was a moment in time phenomenon and you know mean reversion will kick in and then you might also say, you know look like we just live in a different world. Now, we live in a different kind of culture. We have a different kind of media, you know, this is never going back and I think it's related to it's very much related to the question of why do politicians quote-unquote become normal again, or do they actually become kind of stranger and stranger more and more unusual? I think probably things just get weirder. I think so, too. I think it'd be hard to go back because if you see now when you look at
The politics of the old days it was a very lawyerly felt less connected to the people. It felt like a different Elite Class. Yeah, and now feels more like whether it's a OC or MTG now, it feels like the people. Yeah well and by the way, just to fact you can name them right like the fact you can name them the fact that those two like I already have like iconic, you know three-letter, you know names right? It's like they're right up there now with MLK, like how did that happen? Right the fact that
Like if you poll if you did like unaided surveys like they would pop up. You know, those are probably you know, those those two people might be, you know, other than other than Trump like and Biden as might be the top respective, you know Democrat Republicans today for unaided awareness or you know that if you talk to institutionalist in d.c. they they're very frustrated by this because they view it as like, okay the people who are purely focused on media presents are getting all the you know, they're getting their basic getting lined up to be a future presidential nominees. Whereas the people focused on substance are. Nobody knows who they are. It is kind of like, okay, maybe that's just the world right now and maybe if you're going to be a politician, that's the world you have to live in and you have to be willing to do you
After you have to have a strategy on that and maybe if you're in business, this is just the world you live in and you have to you know, be you know, just that I don't pick up people but we do look Disney Disney went through a version of this with their you know with that with Poptropica who I know and like, you know, where you know, he tried very hard to keep them out of politics first thing he did when he came in was I said, you know, we're staying out of politics around everybody by the sneaker or some like the company just was not having it and Bob Iger has come back and he very much doesn't have that view. He's you know, he's he's keeping them in all these things and you know who had the right strategy. I don't know and you know, but it's going to tilt one way or the other and
So I think there's a lot to that. I also think look I think that I'm not a big fan. I think there's a lot of simplistic kind of accusations that like social media is ruining everything or the ants ruining everything and I don't like I think those are generally kind of simplistic and sort of incorrect things. But you know, like there is no question that media forms societies, as you know, Society forms media media from society mcluhan, you know wrote extensively and work that holds up incredibly well about, you know, the role the media takes of shaping culture and look we live in a different media landscape now and again where the dog that caught the bus
Looks like we made it we invented all this stuff but like, you know, you might say like a critique. I might apply to my own my own thinking on this is like, what did you think would happen when you connected everybody together into like a single Global media sphere Right mcluhan Use the term the global village and what people forget about the terms of global village as he wasn't saying that was good what he was saying is basically the entire Globe was going to Globus going to revert to the behaviors of a village and the behaviors of a village are very different than the behaviors of a city behaviors of a village now the city are like Cosmopolitan and open-minded than like him.
Think of new ideas and so forth the values of a village are like very narrow-minded and moralistic and sharp and they you know that Villages like ostracised people, you know for slight differences in belief and everybody's watching Everybody all the time and everybody supercritical right? And so, you know, we actually invented the global village everybody's acting like a villager now, you know mcluhan was say, yeah, no kidding. Like, you know, great job guys good to be a great benefit of the villages in the past was that he'd go to another Village and they'd have their whole own way of doing it. That's right and if it's a global village,
Right, the your biodiversity of villages is gone. Yeah, it just gets all turns into the same the same thing. And so I look I think we've been I think this is a big problem. I think this there's be my interpretation of the drunk drunk on politics thing, which is just like we became drunk on being sort of domineering members of a global village. They thought they became an immuno both both company CEOs, but also a lot of activists became sort of convinced that they were a position to kind of steer the totality of human civilization Society, you know through You by using these Technologies, you know, look, I think there's some truth to that so like we've all got
Thing wrapped up in a collective single Collective psychodrama, but look like I also don't think like a billion people want to be wrapped up in a single Collective like psychodrama. And I mean if anything there's just like at some point adrenal fatigue like it just at some point. It's just tiring to be like on to the next like howling outraged right? Like like how many of these how many of these can you actually go through? It's actually even funny sitting here today is like they're still people trying to push like the same buttons. They were pushing in 2020. They'll attack companies or whatever and in 2020, you know some accusation Will Be Loved
Old on something racer whatever related and you know in 2020 would have led to huge crisis and today, you know, people are pushing the button and like just nothing's happening and it's just because like people, you know, it's just like the 80th time you're going through a race Panic the boy who cried wolf the boy who cried wolf and where and it's becoming so clear that so much of that is like astroturfed and is cynical manipulation ploys and like using emotional guilt, you know to try to manipulate people to do what you want and people trying to like, you know, make money by selling their you know, newsletter, whatever it is where they're you know, talk about evil everybody at some point. It's just like, alright, I got the message, okay.
We're all evil. You know, I don't know like I'm tired of feeling bad all the time. And by the way at some point you get the actual full on backlash, right? Because the other thing there and it does is it's the opposite of a global village it also makes outline ideas much more accessible. And so if you've had it with the prevailing view on something on the Internet is the best medium you've ever had to be able to go basically find the other side and so you find like I think there is it's like there's a there's a power law curve like this thing where there's like a small number of like a global village like dominant ideologies that basically some people in and sort of mask
Numbers but then there's also this long tail thing where there's also like a thousand, you know, there's a thousand like entrepreneurial efforts to have new kinds of cultures new kinds of art forms new kinds of creativity and those have always existed but they've always been fragmented and scattering. It's always been hard to like find your little micro, you know, kind of tribe of the things that are interested in what you're interested in especially if you don't live in the same in the same place in the internet now makes it possible to find, you know, the alternative view of basically anything and it makes it easy to find the other people who like that alternate View and so you'll have less time with products like Etsy, you know, it's fun to go to
See instead of Amazon's just a different experience. Right? And by the way, you can pick and choose right as a consumer. That's a great example. You can pick and choose where you can you know, you can buy 80% your stuff on Amazon because you say, you know, it's a garbage man. I just don't care that much versus like your water bottle you like you want something handcrafted, right? And so that the choice side of it is there and is really being blown out and I just
Yeah, I reckon you have a lot of faith in people and I think people don't want to I don't think people want to live in a Vortex of just uniformity and you know sort of mutual shaming forever. I think that's some point people want to do different and new things and I think that the internet also makes that possible.
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Do you think the big tech companies are too big to fail so could something come and replace Google for search? Yeah. Well, so this is the so let me let me start with the goal of every company is to become too big to fail. The goal of every company is to become an awfully the goal of every company at some point is to get the government to give them an awfully status and protect them. And so there's this this term regulatory capture so big companies hire all these lobbyists and at some point and what they're trying to do basically trying to write laws and then get their own people into key positions.
Tons of regulatory agencies so that the government basically becomes their over, you know, basically they're they're overseer and they're perfect prevent people from growing to compete. Yes to prevent People Like Us from backing Founders like we back who are going to develop the disruptive thing that's going to ultimately Hollow them out. And so the and by the way, it's this is a cycle like all of our companies grew up in they want to do that too. Right? So this is a cycle, right? So and this one we're both the dog on the bus, right right Venture Capital fund to Google. Google is now trying to do what I just described there. They have this active effort underway to try to get government regulatory protection.
Then we are back in the next generation of companies that are trying to basically screw that up. I mean look Google's this is very public right now. Google is going through exactly the process you just described right now with with search, which is does it has a I make search irrelevant right like that. Does it make any sense to go search and click on links? If you just have an A and you know said U BT that can just give you the answers and that's a that's a very big product question for Google and then that's also very big Revenue question in there, which is 99% of Google's revenue comes from ads. The ads are these keyword ads on search results, you know does does that happen?
And you know, it's if the users not clicking on links on it click on ads and so will you know, will they be there whether it be as an AI or even if there are ads in a I will be of those ads work the same way you what's your prediction? Like, how do you see that playing out? Yeah look so so and I would say what Google was in this interesting position. We're number one. They invented a lot of these AI Technologies, right? And so the key breakthrough for chat GPT actually happened at Google in 2017 in classic big company for me. So, I don't know if they didn't they didn't use it. If you talk to people in Google they will tell you that Google could have had GPT chat GPT for the way you have it.
They they could have had it in 2019 had they state had they been focused on it, but they decided not to do it. So there's this is like a classic big company thing. Now they've woken up but now they feel threatened. They understand everything I just said and so they've got this internal effort called Gemini and they're going to try to LeapFrog to GPT and they Sergey Brin one of the founders is come back to work on that they've done how will it work for the ad model that is that is an open question. That is a very open question. I would get two assumptions. My assumption is number one. Yes, there will be a transition from search and ten Blue Links with ads. There'll be a transition from that.
Ask a question get an answer and I think that transitions underway right now. I think Google's going to they're already starting to launch their own version of that. So now when you do Google searches now and a lot of those searches the beginning though, I should just try to give you the answer. They're trying to lean into that service that look on the ad side. The argument for the argument for adds an AI is actually quite similar for the argument for as a search which is basically like if you're searching like I don't know if you're searching where should I go on vacation? Right and it's like, well, you know, how about this beach, you know in Thailand. It's like, okay. Well the very natural next thing to do would be I'm going to click and buy a ticket and I'm going to click and buy a hotel reservation, right?
Right, and so presumably people are going to be talking to the AI about things that they ultimately want to buy and then there will be an opportunity in there to actually be helpful to actually have an app that actually makes it possible to do the thing that you're talking about seems like if you're going to something for information if they have an interest in selling you a particular thing that undermines our ability to give you the best information. So the the history on here, is that the search
Was actually not invented by Google. I was actually invented by a different company the 90s this guy Bill gross actually down here in l.a. Call. I think it was called goto.com at the time and they were the first company that rolled out a search a search engine where there were ads and but you know, they're sort of ads between the links and it was actually viewed out of the gate as like unethical for that reason and it was like, oh this is bad because it biases advises the results. And by the way, there's you know, look, there's there's some truth to what you're saying like there's a now there's a commercial I said, it sounds I mean, I can't imagine a version where it's not 100% true. Well, but now here's why
Not 100% true because there's utility value to it. Right? Like if you don't know you don't if you're because of bias, we don't know that yeah, but at some point you want to buy something right like yeah, but how do you know what to buy if the thing that you're trusting to give you the information is trying to sell you one of many that's a problem. Well, so here's the other thing that happens and you might view this as making the situation better or worse if they don't sell these ads on fixed price basis their options as our pricing options. And so they add that you actually see is the guy who's willing to pay the most
To present the ad, so it's not based on the best service. It's not based in the best service but it's also not just a lowest common denominator thing either. It's the person who can justify paying the most for the ad and it turns out there are a lot of product categories where the guy who can pay the most for the ad has the best product that's a real stretch that feels like a real straight Mercedes spends a lot more money on the that form of advertising marketing. It does to someone says that who said that's the best friend and Toyota does because but generally speaking in the world the argument goes the better the product the more stats of the product the more the company's gonna spend on Advertising.
Do you believe that I think there's I think there's a point to it. Generally speaking not saying can you argue it do believe that well look a lot of times when I'm like, okay, I'll give you something a lot of times when I'm looking for something and I'm just like I just want to like buy something. I don't want to spend the next week trying to like research it navigate it trying to cry for all the biases and I just like need the thing. It's like a pretty good proxy. It's like okay if they're willing to spend, you know, $40 to get this thing in front of me click right wonder about that because the guy just because if they weren't because the key is self-interest like if they weren't making money with the $40 then they wouldn't be
Sending the $40 like they spent the $40 even before they knew whether I was going to buy it. And so it's costing The Advertiser real money to run the ad and so there's some proxy therefore they have a healthy. There's something means they may be the best funded. It may be yes there. So there are moments there are times. There are times when the categories get overfunded but like but there are there are most businesses over. This is where self-interest kicks in and helps you which is most businesses need to make money over time to do that. They need to calibrate how much money they spent on marketing versus everything else and if they can have over time if they can afford to spend money on marketing. They probably have a pretty good product is
A lot of people are probably buying it. Right and if they don't they don't know and so right so the look on your face is the look that everybody had in the 90s when this idea first rolled out and it was exactly this argument. It turned out it worked like it will it worked in that people have gone along with it. Yes. They have people have given up the search for the good thing. But in exchange for the convenience of somebody wants to sell me this and they're telling me what to buy well you can say you're a big question are people more or less likely to buy.
The better version of the products out of all the choices today than they were before the internet.
Depends on the person. Okay, but like a lot of people I was in part of there's there's also just a fading memory thing that I think that happens which is preview internet. It was actually really hard to get any information on products this shoe right like and so like, you know God help you like try to find like, you know it well, this is a big issue in the car industry for a long time. It's like, you know, some cars were just like more fudge much more fundamentally prone to break that breakdown of the cars, but it was actually really hard to figure that out and it was hard to aggregate. It was hard to either have an authoritative voice that would tell you or it was hard to actually have an environment where people could tell each other right? So a lot of consumer reports because there are four years to do it.
Let's say they built her they built a big business they built a big business because of that, right and there was a certain Edge sure you remember this. There was a certain kind of consumer who was lewd consumer reports and used it as the Bible for everything they bought but they're a lot of people who didn't as because there's a lot of people who just have other things going on in their lives. And so, you know, I think on balance to the internet has made it so that better products have done better relative to worse products. I mean, there's just there's basic examples, which is remember when used to mail order if you just used to mail order things if yeah, wait four to six weeks for delivery. Yeah. I had no idea what you were going to get right they say, yeah exactly and there were some drawing and some catalog somewhere and weather.
It was even the product right and so, you know today like everything's overnight the like there was like reviews and ratings and like it again, is it perfect like are there like fake reviews? It's definitely better and you can order several different options and you can see when that works for you and everyone understands because it's mail-order things get sent back. I definitely prefer it. Now. That's a different question though. Then the the corruption built into the system. Yeah, there's some disconnect like having said that Google again. I'll defend Google Sonora
One more step, which is I Google doesn't care who's running an auction. They're optimizing on price of what the person is willing to pay to put the ad in front of you. So they're not to my knowledge. They're not putting their thumb on the scale. Like they're not basically saying we're going to rig like Amazon is well. So this this Amazon so Amazon's in an interesting spot our Amazon ads surfacing high-quality products. No, not not even the ads Amazon if you're looking for whatever often the first recommended Choice from Amazon is the one that Amazon.
Makes and that's also true. Yes, exactly. And they have to be there is a government investigation. Our that you know, the ftc's trying to basically force them to stop doing that. Is that true? Yeah for that results in news. I don't know whether what will happen with that case, but they're trying to so so yeah look alike, but they say it takes all of your points. Yeah, I think well made you know, look this is all going to get rethought in the AI world, right? So, you know, look should the a I have a view yesterday. I had opinions of product quality the way it has the things that everything else. Well so you on this is also happening social media, right? So Ilan has this thing now Community notes write 4X wear it.
Has this thing? And it's what is what is it matters it work? Okay. So it's this very clever thing. So all these social media company these social media companies all Used to Be Free Speech, you know free free free speech wing of the Free Speech party and then it just turned out like a lot of people said a lot of things that make people mad. And so these these companies all created what they called trust and safety groups. And of course that is like a super orwellian terms. It means you can't trust them at all and they're totally unsafe but right and so what you ended up with in the truck to see if your groups was just basically, oh, you know some well-meaning people then you had a lot of people who were in there to basically put their thumb on the scale and this really
kicked in around politics where you know, they would have just obviously different standards for candidates and different political parties that everybody who kind of see it in plain sight. And so that that model never worked very well and so the people at Twitter and I think this actually started before you on got there, but he but he embraced it when he got there they came up with this new idea called Community notes. The idea of community notes is that anybody that there's there's people there are people who have the button to be able to submit a community note which then there's a way that you kind of apply and you become one of those people. It's like being at Wikipedia.
Or something like that, right? And so there are certain people who can propose Community notes but a community note does not get approved and used unless people who have a history of disagreeing agree on it you so for example, I we see a statement somebody says something and it's just like, you know, it's wrong you and I are two Community note editors. We have a history of political disagreements. We have a history of conflict. We really don't see eye-to-eye on things. But then this time we see eye to eye I see right and then that's the one that's the number that gets posted right and so I would say it's been working.
Shockingly, well, like like it's not and by the way, it's not perfect because so goes wrong and you either people try to trick the system but it's by far the best system that I've seen that actually works. So he's done this very clever thing interesting thing where you can now do community notes on ads right on and on ads interesting. So if somebody runs an ad that makes false claims, right or exaggerated something it can get community noted and so the platform itself is like, oh actually the claim in that ad is actually not correct here is the actual truth and here are the links for the truth. And you know, I you can even you can imagine the reaction the advertisers.
I mean, right, you know, they're just like absolutely Furious every time this happens, but it's he's running this experiment basically saying is the faith and trust of the user base, you know being improved by the fact that the community knows can actually be legitimately Factor the the as can be fact-checked is the value of that greater than the loss value of the advertisers who get alien. And by the way, he would say they advertisers who get alienated by that are probably the worst advertisers anyway sure because there's some issue is surfacing if you're making a product and if people have a problem with it, but if you're the maker of it you want to know
That if you're good, right if you're honest, absolutely sir. Absolutely. There are correct. Yeah, if you want to improve your product to always be the best they could be of course you would want to know that and if you don't maybe you should not be advertising exactly. Maybe you should not be allowed to advertise. And so I guess I think that's a very clever experiment and I think and I think there's a lot more of this kind of thing and there's a lot more experiments like this people can can run I think in the next 20 or 30 years, we'll figure out actually what this is all around trying to make a global village work better. Like this is how to get basically eight billion people to kind of share mine space and not want to kill each other and you know this
This is the kind of technique that I think you can start to figure out.
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Can a company grow too fast? Oh, yeah for sure. Tell me about it. Yeah, very common very common. Yeah. Well, so especially when either the revenue just starts to pour in or when they raise too much money and the basic mechanic is very straightforward, which is just you know, you have a problem if the answer is you could always hire somebody to fix the problem then that's what you'll always do because it's the easiest thing to do right there. Just I'll just go hire another engineer. They'll just go do that. The problem is it's just like it's like any human organization like organizations behave very differently when they're large versus when they're small.
And there are big issues involved in running large organizations that are very complicated and it's very easy to run them badly and it's very easy that I use the metaphor of Elvis leaving the building like it's very easy for almost to leave the building company grows too fast the good people quit the bad people stay we have another thing we call the law of crappy people which is in any organization. These organizations have levels, you know, so there's like levels of promotion levels, you know level 1 through 8 or whatever and there's always an internal process to try to figure out how you know, when people should get promoted and so the
Op crappy crappy people says that the quality of any level in the company will degrade to the the worst person at that level. Right? And it's a very natural human thing, which is this like well, I want to get promoted to level 3 and like I know I'm better than you know that other guy who just got promoted, right? And so whoever is the worst person at that level now sets the bar and so basically as companies grow basically performance test to collapse, you know, kind of level by level, you know, meetings, you know communication overhead and overwhelms everything people are just sitting in meetings all day or another thing. That happens is you
Are too many people from another culture? So you think you have your unique culture and then you hire 300 people from Google and you discover all of a sudden the your Google, you know all over again, but without their business just with all their problems. Yeah. And so that's I would say that's uh, this this is part of the more companies die of indigestion and starvation, right because the starvation is no fun. But starvation is highly motivating right if you don't have any money and you only have a few people you have to be smart. If you are flush with cash you can spit you can
Try to spend your way out of all your problems, you know, and you could say there's a metaphor here for individual lives, right which is like a lot of people get in a lot of trouble. Yeah, I think that's why I was asking about if people mainly came to you for money because it seems like money is not at the highest level of what it takes to make great things. It's a piece of the puzzle, but it's not the main piece of the puzzle. I don't think it hasn't been in my experience also, and it's been this right and yeah, I think that we find ourselves in people don't believe this we find ourselves in practice often trying to get her companies to not racist.
Money as they can, you know kind of doubt down the road.
Yeah, look, we just tell them like look, it's just a bloat like just simply bloat like, you know, look, you know how to run this company 50 people everybody feels great. You just need to like close your eyes and imagine that like, that's not how your day is going your day is going so organizing meetings on calendars and cross and if you can grow the company with the 50, why would you hire more? Yeah. Yeah now usually you do so there are some companies that are small number of companies that become big and important with very small numbers of people and there are these kind of very magical success. You mean give me an example. So the great one is Minecraft so Minecraft at the time that it's sold was
I think 3 people total. Wow, which was awarded itself or remarkable don't know chip billion half a billion or something and it was this giant Global phenomenon. And you know now it's you know, it's all my Microsoft and now there's a lot more than three people working on it but it's you know, it's an amazing. It's amazing thing. I mean look Bitcoin was like one guy, you know, it's worth like 800 billion dollars today or something like so there was that, you know, what's app when they sold it to Facebook. It was 50 people Instagram when they sold it to Facebook was I think 11 people so
you have these. Yeah, you have these kind of very kind of special things. The journey is one guy plus basically a bunch of contractors is this, you know, huge kind of force now an art AI so you have these kind of very special things. It's just they do at some point like this is that this is a pressure on the other side like at some point. There are things that are just kind of obvious that these things should do that. They just don't do understood like Minecraft was like a great, you know, kind of viral phenomenon, but it really should be what Microsoft's turning into today. It should be like an entire world and there should be it should be like you
Able to use it for like education and it should run all these different platforms and it should have all these different, you know kinds all this new content and you know, it should be this thing that people can be in for 20 years. And so, you know, it's much like deeper and richer and more built out then it was you know, same thing. What's that? What is what's happening at that matter right now is WhatsApp WhatsApp is you know, very widely used. It's one of the main ways that small businesses communicate with their customers, but there's no capability. There's been historically no capability inside. What's that for a small business to be able to like meet a new customer database or whatever inside what's up, which is like a very obvious thing like for a restaurant or something.
And so, you know, there are things like that that make sense to add that are actually valuable to users that just require more people. So yeah, there's pressure on the other side to grow. It's just there's some yeah, there's some theoretically optimal rate of growth of heads and it's very easy to it's yeah, it's one of those things where nobody ever gets it right? Well and then look no thing that happens is that the economic cycle like, you know, these companies all tend to over higher during an economic boom, you know, and then they're at some point there's a crash and there's a rationalization and you kind of wish you always wish you didn't have to go through that because it's better to layoffs, but it's very hard.
Just keep that is very hard to overtime have a sustainable model where you don't make mistakes. How did you meet your partner Ben? Yeah, so I met Ben we were actually trying to staff up at our my first company Netscape in 1994. Yeah, we were desperately we have the tiger by the tail was that the internet was going to take off and we knew it and so we had that kind of get and get in position. And so we were trying to hiring good people and he was one of the first people who came in from an existing successful software company to join us and you know, he's a young guy,
Give me this was called a product manager. So somebody is kind of orchestrates orchestrates things and then very quickly. It just became clear that he was one of those sort of sharpest young people we had and so we promoted him, you know, very rapidly over the course of the next few years and I ended up working very closely with him and I always thought had we stayed we sold our company in 98 1998 for years in but just an eternity that was a turned out was only 4 years if we had stayed independent. I think he would have ended up being the CEO he was on track to do that. So I spent a lot of time with him and we got to know each other really well.
And so it sort of became obvious if we sold our company I wanted to start a company and so it became obvious. He would be the right person to do it with is it as much a friendship as it is a partnership?
It's an old thing around founding teams in just generally which is what it's a friendship for a business relationship works better than a business relationship for our friendship. Like when two people who are personal friends go into business together at often destroys the Friendship, whereas people who have a business relationship first and really learn to trust each other in business can become very good friends. And so for us, it's been that ladder it was business first and then it's become become a very deep friendship. And we you know, we do we talk all the time and we get along great and we you know, we're always, you know teasing each other and it's all it's all good having said
That it's now almost 30 years. Wow. And so there also is a old married couple, you know, kind of kind of aspect to it. Right and some of that is, you know, we can finish each other's sentences and you know, some of that as we get on each other's nerves, so we still argue all the time. It's interesting. What would be something you would argue? Oh just constant constant arguments. I mean about it basically everything. Well, it's a it's a big it's a you know, it's obviously a big benefit of a partnership is you have somebody you can actually talk to who you trust who can actually tell you things that when you're getting things wrong so we argue about lip
Yeah, but the biggest arguments always around people, you know, is this person good or not? You know should we you know, should we promote this person? Should we fire this prison, you know some of that surround our firm a lot of that surround the companies we work with, you know, he works a lot of our CEOs. He's kind of our he's are among other things. He's like our management gurus. So he's the guy who basically works with all the sort of most, you know, high potential CEOs to help them kind of develop and so he develops kind of wrote he wrote the book on it. He wrote the book on it exactly as a hard thing about her things. It made his consequence like he's very, you know, he's legitimately very opinionated about about people, you know, kind of coming out of that.
I would say he's more focused on culture. He's extremely focused on the culture of the company that a CEO is developing and he applies that in our firm but he also applies that to the CEO City works with and so he really wants to understand when he's evaluating a Founder. He really wants to understand what culture that person is Building inside their company. I'm a little bit more open to variations. I'm a little bit like I'm more open to like what he might call Rick recklessness or chaos, or you know,
annal thinking that maybe doesn't work. It might blow up in your face. And so I'm always a little bit more on the side of you know, maybe we should like, you know, would you say you're more of a risk-taker than he is. I would say it's a different kinds of risks. I think we're pretty similar in a greatest different kinds of risks. Here's I've been curious whether actually he would agree with us is I think he thinks and I think he's right but I think he thinks they're kind of Timeless ways to build great cultures like their leadership is not a new idea, right? It was something that has existed for a long time cultures here. Second book is actually on call.
Right and he goes through he talks about like Angus common the Mongols and he talks about like, you know the code of the Bushido and the Samurai and you know kind of these cultures and he's very into that kind of thing. So he draws a lot historical examples for cultures and he's like what these are these continuous threads of like, what does it mean to have people trust you to be able to bond together into a team, right? All these things the other side of it is, you know, look people who come up with new ideas often have new ideas on everything and so a lot of the people who have new ideas on like technology also have new ideas on like management and culture and how to be a CEO and how to structure a company
And do we really need all these meetings? And can we just run everything on video conference and do we even need to have those or can we just do everything on slack? Right? And so they'll a lot of these Founders will have these very creative original ideas on how to actually run their companies and I would say, you know, most of the time his speech to them would be stopped, you know, Focus your creativity in the area that you actually understand which is Building Products you're designing things and then just get good at running the company the way the companies have been around for hundreds of years. Like don't try to innovate on everything and I would say he's usually right on that usually those experiments in a disaster. You know, that's
That
every once in a while they don't and every once in a while, there's a totally new approach and you know, they just a case study of this right now is Elon Elon, you know, we work with the lon. I've known for a long time, but we've not we did we were Tesla and SpaceX predated us as a venture firm. So but we're involved in history his Twitter, you know kind of acquisition and like Elon has a completely different way of running companies and you know it, you know, you can read about this in the press. The Press has covered this at length right like it is a much more blunt chaotic, you know her
Trigger, you know direct engagement way. He is very quick to fire people. It's extremely aggressive. He's gets micromanage you micromanage the city has degrees involved in everything and you know, it's a Playbook that for most CEOs would lead to disaster wasn't it the case with Steve Jobs as well. Yeah. So Steve Jobs, this is good. There's a good point. So Steve Steve was a genius and Steve was a genius with a dark side and the genius was real in the dark side was real and you everybody seeing the results and the results, you know, obviously makes the whole thing worth it, but like Steve could be really rough on people and there are many, you know, true stories about you.
Really rough on people and you know, this would be a great example is Ben's be would be yeah, you just don't do that you figure out how to be great without basically, you know being rough on people like that and you know, I would say like in general that's the bet that's the best advice right in general. If you're coaching a young kid on how to like run a company that you want them to try to calibrate that because generally if you're really really don't really get anything for that behavior. Well Steve did well, we don't know that we don't know because he didn't have been coaching. Okay, so this would be the argument. Okay. So this would be maybe the argument that Ben and I would have about it, which is been would
They been would say what you just said Ben would say no that was purely destructive. If Steve had not done that he would have been even better. What we don't know is no way to know but I do think that's a real question. It's a real question. I can make the other side of the argument tell me the other side of the argument is eight players want to be in a company of all eight players like you the the people want to be around other great people. Yes, most companies are way too tolerant and indulgent of mediocrity those companies are good at getting rid of just like call shitbirds like they're good at getting rid of people who just are clearly no good, but they have trouble with me.
A pretty good but not great and Steve just like cannot tolerate mediocrity. And so when he identified that you were he actually had this there was a term called flipping the bozo bit and when he flipped the boat, I bet he just he fired you that day because what he what he had learned over time and his view was that you never and flip the bows of it, right? You just need to call it right up front and Ben would disagree with that idea. Yeah. Yeah, he would say look it's just to hair-trigger like you're in a meeting with somebody and they say one thing that's wrong and you fire them on the spot. Like how do you know like you're not telepathic like you're just
You happen to be in that meeting and look maybe his wife yelled at him this morning, or maybe his kid just died. Like you don't know what and also maybe he's actually right because it does happen sometimes exactly maybe he's right. Yeah, exactly outside of that conversation we had on this that really made a big impact on both of us was with Andy Grove who you know who's best way but when he was running until he was considered the best CEO and kind of the history of the tech industry and and when we were young we used to meet with them and he would help us on things. And so one of the questions we had for him was like, wow, it always feels like we're firing people.
Too late, right? It's like every time we fire somebody it's like why we wish we had done at like nine months sooner right because they had done damage in that nine months or because you missed an opportunity. Yeah better both. Well, it's this flipping the pose a bit thing. It's like, okay, we identified that they had an issue a problem, you know, every once in a while people can turn it around but most of the time in a workplace environment, if you've got competent management when identified as somebody as an issue, like generally people don't turn it over like they just statistically they generally don't and so you have this thing where like if you
you running kind of the standard management Playbook you put people on what's called performance plans and you try to like more aggressively kind of Coach them for improvement and then they normally don't make it through and then it's some point three months or six or nine months later. You kind of make that call and actually the reason you put people in performance plans is because most companies are to Indulgence of mediocrity. And so most companies don't aggressively performance managed along the way they don't document things along the way and you need to put people on the performance plan to have the legal justification for firing firing them because you need that paperwork that you actually like did it all you ate them, but like, you know, you're just like
Like I'm just wasting time this person is doing a mediocre job. They're infecting the organization of mediocrity. I wish I could move faster. So we asked Andy we have Sandy it is, you know, basically like, you know, is it normal to always feel that you're firing people, you know, three months or whatever night must you ladies. Like he's like that's what it always feels like and he said the reason is because if you did it more aggressively than that, the organization would be was a sociopath right and it's like well Steve didn't care like about being beautiful like, you know, he just thought he was like guess we're just not I'm not optimistic.
Demising for what people think of me? I'm not optimizing whether people think that I'm nice. I'm optimizing that the people around me are going to be at the top of their game and if they're not they're going to go right and he only wants the exact same way. Alright, then the and then the results and again, this is the argument right and I have is like, okay Apple Tesla Spacey a Rockets Atlanta their butts, right like you know, like oh my God, right is is the Stevie Lon Playbook like the more aggressive play book. Actually the one everybody should be having and Ben's comment to that is no most people will destroy their organizations if they try to do that like it doesn't actually work.
I
go through all of that just to say that's the kind of debate that we'll have and I look it's not resolved. Right like and I quite honestly it's unknowable. It's a noble. I don't think it ever will be resolved. Tell me why a company would choose to stay private and why it would choose to go public. So most of the great business institutions that are around for many decades. Most of them are public companies. And the reason is because they end up with a lot of employees they end up with a lot of customers they end up with a lot of constituents they end up with like, you know, governments, you know, getting very interesting any that are private. Yeah.
There are big ones. I mean, I mean there's a bunch I just was one prominent wannabe Koch Industries Charles Koch. It's a giant Industrial company and they do like their huge like their Joy their big. I mean, I don't know the numbers there. Just that numbers are just technically large they'd be they'd be a Fortune 50 company tomorrow if they went public but they he's kept it private whole time Bloomberg is another Bloomberg. The company Bloomberg is another example of a big that's a private because private company has always been private Mike muehlberger. Just don't sit out right? So yeah they exist but most of them end up public. I think the reason they end up public has just because if your institution at some
Point you kind of have to act like an institution you have to be trusted institution you have to be so we have to be transparent people have to know what you're doing public companies carry with them. This is responsibilities to report to the public. You have to explain yourself in a way that's very open and you're under these very stringent legal requirements to do so accurately. So people tend to trust the things that public companies say more than private companies accurate are those results. So in the United States, I would say quite accurate either they are wholly accurate or if they're not there off a little bit outside the US it is still the
Wild West so we went through as we went through a series of scandals in the in the u.s. Business world. We went through a series of scandals in the 2000s around Enron and companies and World common companies that era and the stringency of the accuracy of the reporting and the level that you get reviewed by the government and the penalties to lying are quite high now and look like most people most responsible people want to run something that is like legitimate in genuine, right? There's an old dear sweet old thing if you know thing is to hear when I was a kid, which is like you remember there was this gangster named Meyer Lansky.
Emily Ryan ran ran them big part of the mafia in the US and people used to say, well, you know Meyer Lansky was so successful the gangster if you know just imagine how successful he would have been if he was like, you know running General Motors, right like and it's actually I think that's actually untrue right? I actually think like getting you know Meyer Lansky is actually very ill suited for running a big public company because you get caught lying, you know, and you break somebody's legs and like you it's a big problem right? It's like that's not what a trusted institution does. Right? And so the best and the brightest actually I think want to be legit. They want to do something that's like actually
Yuan and that's true at ferio for companies as well look having said that outside the US like boy like the scandals I mean even Europe like the scandals in Europe are like mind-bending and then you know, once you get outside the the developed world like things get really hairy, so the most most of the world is not well developed on this stuff yet. But anyway so there's the transparency kind of truth-telling component to it there's also the at some point you want to have a lot of shareholders like at some point you want kind of the World At Large to be able to invest in your company you know you want
People to be able to have a stake in your success. You want kind of everybody to have your stock in the retirement plan? Because then it sort of gives everybody a reason to kind of root for the company, you know at some point you want to be able to you've got all these employees that you're paying in stock at some point. You want them to be able to sell their stock be able to buy houses and send their kids to college. You also get what's called a currency. So your stock becomes a currency and so you can use your stock to like by other companies, right? And you know, it's easier to raise debt when you're when you're when you're public and so there and by the way a lot of a lot of employees just want to work for they want to work in institution. They don't
To work for some fly-by-night startup. They want to work for something that's trusted where they can you know, one of the things I do with candidates a lot of the time is especially immigrants kids, you know, some kid who's, you know, sort of a first generation immigrant, you know, as I'll literally get on the phone with their parents, you know, and this is happen repeatedly where and I'm sort of explain to the parents like no actually it's okay. It's okay if your kid doesn't go to work for IBM, right or Microsoft or Google. It's okay if they go to a start-up because actually in the US that's not actually because with their parents are worried about career death if it doesn't work out right and so there are a lot of people
Just want to work for a stable stable companies anyway, so those are all the reasons to go public. The reasons not to is just like look you're supposed to all the scrutiny, right? And so you you is it only scrutiny or anything beyond scrolling? Well, so it's the consequences of scrutiny. So you have a you have a stock price the stock price trades every day, but you start making decisions based on the stop price big time, but that's a not your core business. Correct changes your whole business model exactly 100% rat seems bad. Yes. Well, it depends on yes. So it destroys a lot of this this room.
Is a lot of companies. So the easiest failure case is that you've been running your company just running your business the way you run a business and then all of a sudden you've got those daily scorecard and you're optimizing the daily scorecard or even if you can get through the day you're optimizing you quarterly results your reporting every 90 days and you're optimizing for that. And so yeah, so when this wind is goes poorly basically what happens is time Horizon contracts, right? And so instead of planning things one three, five ten years out your planning 90 days out and you nobody can do anything great and it many days if the scale of these companies and so
Basically like this is Elvis. This is when Elvis leaves the building right like so and by the way often this coincides with this is when the founder step down and then they hire professional CEO professional CEOs and sort of optimizing for their own compensation. They're optimizing on these short short time frames. And so that's that's a big downside. There are ways to deal with that but that is a big downside for sure in your position when you're investing in companies for 10 or 20 year trajectories if they go public, how does that change your position because
It's now they're playing a different game. That's right. There are no longer playing the 20-year game. Well, they might be there are public companies that do right. So Amazon Play The Long game the whole time still does Apple play the long game. They were public the old-time Steve Jobs did the turnaround at Apple. They were public company. Look Tesla's been public for a decade SpaceX is private, but Tesla's public and Ilan runs Tesla the exact same either on SpaceX, you know Netflix, you know invest for the long term, you know, there's a lot of these companies that have made by think don't know but I can tell you Mark Zuckerberg, you know, it matter this hasn't changed how he views things, you know look,
Can be done it's a higher competency. You know, it's a little bit more of a high-wire act like you're getting graded by the world on what you're doing and like, you know, it was just a speech would give the CEOs because they're like, oh, well, I'll just do a Steve Jobs did I'll just do whatever I want. It doesn't matter. I'll be like, yeah, but there's usually do imagine what happens in your stock drops like 97% you're on the front page of every business newspaper in the website in the world talk. Could you talk about what a turkey you are right. Have you experienced that? But of course, yeah multiple. Just give me a specific example. What's it like? Oh, yeah, it's just so sorry. It's horrible. It's awful. You know, it's happening.
Triple time most of these companies there's this great form of chart Financial truck called the drawdown chart and the drawdown chart is basically its Baseline is 0 and then the chart is the percentage drop that the stock is experienced in point and they're in different points of time. And so it's 02 like a - a hundred percent. Right? So it's like this and then it's like what it looks like. It's looks like somebody having a heart attack. It's a cardiac arrest and so I'm just going to draw down chart for Amazon is really interesting because of course Amazon's this just try and success but like there have been like I think five different times the last 20 years where the stock is Drop Like 97% or something like
I mean just like these massive crisis of confidence for basically everybody's just like yeah, this is well. It had no profits for how many years for a very long time very very long time for a very long time. Exactly. And so you were running yet, right you were running into it what Jeff had was in he talked about publicly. He's like what we're investing for the long run. We're reinvesting every penny of internal profit back into the business. We're building what they call intrinsic value in the business and we're just not going to hand out, you know dividends to shareholders and the investors who went along for that ride did great but you know, it's easy to say that it's harder to do it when your stock drops 97% Yeah and the head
Mine's in there was a famous cover of Barron's magazine in 2005 and Amazon at that point was already like 10 years old or coming up on it. And it was literally the headline is really dot bomb. Wow, right like Amazon is going out of business right there going to be it's going to be worth a 0. Wow. I mean, I went to invest a venture investor conferences in the early 2000s where people were just openly laughing at Jeff just like laughing at me in the meeting like you're just like completely full of it and look everybody part of being a CEO of people are doubting you whatever when the entire world is doubting you
Just because what you know what happy to have this like anybody who's a bad career it they've had one of those moments it has that which is like all of a sudden you're talking to your friends your friends like you. Okay, right? Like how are things going and then you go home and your family is like are you? All right, and you're like, yes, I'm fine. I'm the same person. I was I'm not did you know Jeff at that time? Yeah. Yeah, was he fine? Dave's fine? No, no impact now, let me let me let me say that's like this is the for am thing. I don't know since I was not sleeping,
but
today we have a much closer.
After the background back then I was not sleeping with him. And so what is he experiencing at 4:00 in the morning that I don't know right? And you know, there's only really, you know, two people who are in a position to know that right him and his wife at the time so that I don't know but to the outside world and to all of his friends he was fine the entire time and he was fine the entire time because he's just like what we have a plan works here in the plan. We're not going to get shaken off of this now look you could also say right a fair response to what I just said is survivorship bias, right? Like here I sit talking about the ones that weren't like
What about all the ones that didn't work right because like a lot of times in the stock market, you know drives a stock 20 it's because the company sucks and like it's going to fail right and so like that's the other side of it, right? There's no substitute for the thing. I think ever times when the market loses faith in a company and it goes to 0 but the company still has value and then it comes out back out of the ashes and reinvent itself. Yeah, so our companies our company our company which so loud. Sorry bad company been I started in 99
We went public in 2001 and then by 2003 but 2003 our market capitalization of our stock was half the amount of cash that we have in the bank.
Right and so had we just simply liquidated the company and give him the cash back. You would have made twice your money on the stock. And so what the market basically said was yes, these guys have what that meant what the market was telling us the message implicit in the price was these guys suck so bad that even though they have this cash in the bank. They're just going to burn the cash and there's not gonna be anything left to show for it. And then we actually Ben Ben was Ben gets most of the credit. He was running the company. He turned it around and then we ended up selling. I think the stock went up 40 x off the bottom who's holding up.
40x a timeout and yeah that was you know, sort of a quote unquote turn around look Steve Jobs Apple. So when Apple was Steve Took Apple over in 97 when he came back Apple had less than 90 days of cash in the bank like they were about to go bankrupt. Like that's how bad it was in 2000 want no 2009. Are you I had a chart I was getting on my pocket all through 2009 2010. We were starting when they're starting to firm and I think Apple was trading at I think they bottled out a price earnings ratio of like six and what was that basically means a price earnings ratio is 6 basically it's like what?
A steel mill trades at if it's about to go out of business. It's like training for the liquidation value of like the plant equipment. Like it's a super low. It's basically the market hates you and thinks you're an idiot kind of thing. And this was like this is like right when the iPhone is taking off, right? And so it was this like banana and there's a there's a loose relationship between PE ratio and growth rate. We're roughly speaking PE ratio and growth rate should be about the same. And so if a company's growing 10% of this growing earnings 10% a year or should have a PE in about ten sort of a loose a loose relationship and apple had a phase there where they were the Pea was six
Growth rate was like 40 percent and then in some periods through there as high as 80% and so it was like undervalued by like a factor of 10 just on like basic math and it was obvious to see that. Well, it was I thought I mean I'd like I wasn't running public money. I didn't put my mouth was I gave a letter interviews at the time when I pulled out this chart and again because of the point I was I was not trying to make a stock all the plan I was making is Everybody Hates Tech irrationally, like f answer questions, like everybody got - excuse after the the.com will happen twice. So it happened after 2000. So what happened was that?
2000 crash was like a real Tech crash and Tech really fell apart and there was like actually a lot of Carnage in lot of companies went under and then what everybody thought would happen was the global financial crisis of 2008 would cause that to happen again, but it didn't but they thought it was going to so there was a acted like you acted as if it would and they traded the stocks as if that was what was about to happen. And so basically 2008 to 2011 2012 was just this extreme level of irrational hate and fear. And again, it's not like a super genius thing to be able to say looking because you looking at it you're like well, I don't know this iPhones.
Like I seems like they're going to sell a lot of these things, right and in same thing I Google was growing super fast, you know, Facebook was going super fast and but the World At Large had just gone - well there's this famous thing in the sir the metaphor for the stock market is this famous thing. They say this we can think about the stock market as a person in mr. Market and he's like full-on, you know, clinically manic-depressive, right? And there's just like certain times that mr. Market is just euphoric about everything and there are certain times when he is just terminally depressed about everything and then we all collectively our mr. Market, right? So it's a group psychology.
Nothing, and so it's very hard to be a participant in the world and not get pulled into the group psychology. But as a consequence the market goes through these wild these wild swings and they it does regularly go through periods where people are just irrationally - and then of course, you know, then it's like okay read the investor textbooks and it's like well, that's when you buy the stocks and it's like well, yes, but that's when everybody's in a horrible mood and anybody who buys these things looks like a complete idiot because everything everybody knows that they're all going to go out of business. And so you talked about the consequences of being public. This is one of the consequences of in public is your company's get caught up.
This and you feel it on a daily basis in a way that you might not have your place. We could be in the tech company that's not public and you're just looking at your bottom line and everything is fine. And you know, your business is doing well. Whereas another the same company public all of a sudden gets caught up in this wave of things crashing and you crash with them but nothing strange in your company. That's right. Well this goes to this relationship between you know, the sort of metrics and management, right? And so there's this whole thing in management, which is you you manage what you can't measure right and so if
If you have a number right that you can optimize on you tend to optimize on that. You're going to run your company around that's the same politicians to the polls. Right? I've gotta pull number and I'm just going to try to optimize around that now is that the optimal way that people actually going to vote like who knows but like you said that's what you've got. You're probably seen this in political speeches. If you seen this a ploy to do this on TV with political speeches or debates and they'll have this thing where they have a focus group and they'll have a dial that they can go to like a hundred percent - hundred percent positive and then there will be these red and blue lines and it shows word by word. It shows the mood of this focus group watching the thing.
So it's like a stock price right for every word coming out of apologists mouth. And so if you're a politician do you use that as a tool to try to like optimize every single word coming out of your mouth and like basically become the master of the craft of political speech giving or do you say well, that's crazy like me if I get wrapped up in that psychology. I'm gonna drive myself nuts and I'm going to Independent end up being incredibly, you know an authentic and I'm just going to be like a pure opportunist and it's this it's yes, it's the same thing with these with the stock prices. You read a lot of history. Is this just that a passion or do you see
See some some other use in understanding the past it's a desperate attempt to predict the future. So so look for 30 years. Like I've been you know, I've been doing this now for 30 years starting companies are finding them, you know statistically with what I do. It's like a 50% success rate 50 percent failure rate basically his with it by the which pretty good actually which is pretty good. It's pretty remarkably good. Well, it's pretty good. It's pretty good. I mean, it feels terrible. It feels awful. It's like you're miss I miss like your business to it.
Can all some sometimes l 50 percent is remarkable. Yeah, I smoke you know for baseball. It's great. You know, there are other fields, you know for test taking is terrible right? Like, you know driving a PCH you gotta score 100% right? So so yeah, so like it depends like look and here's another thing like statistics if you're betting on things that are one in a million things. Well, yeah. Yeah. Yeah unless I wanted a thousand or so. Okay one in a thousand things 50 percents really good. Hey look. Yes and just like in your business the the upside on the winters is bigger than the doubts.
Even the losers. Yeah, right. And so if you're if you have a symmetric outside on the winners and contained outside on the losers than 50% does does well over time but the failures are just always horrible right like that. That doesn't get you statistically. You can know that it's actually even know that emotionally every failure hurts tremendously and and it's wrapped up with people right? So these are people that you care about right and when one of our companies fails like it's art it's not going to take our firm down because of the 50/50 thing and are in our investors understand that but like it's a Founder who has poured fight.
Just reached out a company just add the you know skysport five years into this right and like it's just been a big part of his life and you know, you know some of these people bounce back and they go on to other things other people just like at some point they're just like I can't take it anymore and then they they you know, but not everything works not everything works. Exactly exactly. So that's real. Yes very much. So right and and then there's another thing in Tech and Venture just guys, it's called The Babe Ruth of fact, which is the home run hitter struck out more often and so right the people who are really trying to do something new and radical actually fell off a
A little higher rate, which is you swinging for the fences and could make sense. That's right predicting. The future of these things is absolutely possible like that said like boy I sure wish that I could and so how do you ever possibly predict the future and I do think there is some wisdom that comes from understanding and particular the human dynamics. So I think people do change and people have changed. I'm not I'm not actually believer that like, we're the same people. We were a hundred or a thousand years ago. I think actually the people themselves might be changing but in a lot of ways but looking people there there are there are you know Constance to human psychology.
Sociology behavior of you know human beings and crowds. There are Cycles in history of different kinds and so at least in the past you can kind of go back and you know, the risk of reading history is always, you know the outcome and so the outcomes look inaudible after the fact, but if you can kind of get yourself away from that and if you could especially the the history works that I really like are either contemporary accounts of what it was like in that moment to actually experience that or really the best historians are very good at recreating what it actually felt like to be there when it was all very uncertain.
And then look there's also just a lot of is a lot of tools like you can just learn you know, they've been a lot of great people who have navigated through very difficult situations. Like how did they do it? Like what's the toolkit? So yeah, so it's a desperate region of the past to try to learn whatever lessons they have to have to give me. Can you think of an example where something you learned from Reading history impacted a real world decision that you made in the present? Well, look, I was just like look rallying people after just after disaster, right which is like, okay. There's been a catastrophe at a company like, okay now you've got to like Rico here the team like how do you do that? And you know, how do
That while you got to get up and talk to them. Okay? Well, how do you do that? Well, how did Churchill do that? Right like that's a great idea. Yeah exactly. That kind of thing works really. Well. Yeah and look at you know, these are things that most people have not done are in a lot of cases. And so, you know being able to learn from this is somebody said, you know, it's like history, you know, the best of history is this, you know, incredible intellectual conversation across brilliant people over time, you know who have kind of learned from each other but basically by reading our the top VC is more of a group of colleagues and friends or Rivals and enemies got both coopertition.
as we like to say, so
We probably work together more than we compete and the reason is because most successful companies raised from multiple VCS over time across multiple rounds. So we end up on boards together and working with companies, but we do compete and head out head on for deals and those competitions can get can get weak punch each other in the know. It's pretty hard. We're in one of those right now and we're going to try to punch another firm the nose as hard as we can and so, you know that happens and then I think it's like it's like any business. It's like I should have you know, the movie business down here same as for Murder music probably is also which is you know, you do end up with grudges, you know, you do end up.
Up with like two prominent figures who are like really hate each other and it's like, you know, while 20 years ago. One of them said something, you know in a meeting.
And I was like, I've got my laptop my list Ben doesn't hold grudges Ben's great at holding grudges. I hold grudges and Ben's wife holds grudges. And so when Felicia I get together, we like so fun. We compare like Tanya start character and Game of Thrones where every night we recite the list of all the people that were going to be losing its some point. Yeah, and like I always, you know, that's kind of always got on me on this. It's like, you know, maybe you should let some of these things go and I'm like well, no, actually they're quite motivating like
Say one thing that gets me out of bed this morning, you know the opportunity to really stick it to somebody who I feel like there's something wrong. Yeah, 20 years ago. That's unbelievable. So I kind of like I like my grudges. Okay, they're very close to the very very important to me. Do all the VCS do the same thing or does each house have a particular style or strength. I would say that the commonalities are there's there's a few universals which is based in a sort of this triangle. It's basically team product and market is when you keep coming back to so or the people really good at building a product that people want and then is there a
Market that they can sell it to and start of the most simple form of the whole thing and those probably are you know, those were the most important things 50 years ago. Those are probably the most important things 500 years ago. By the way, there's a long history of DC that predates all of Tech which we could talk about if you want but it tell me about it. So, you know Christopher Columbus shows up in the what is it the court of Queen Isabella and he's got this like crazy idea to discover or whatever was the new route to India and he needs you know, X, whatever Swift whatever Spanish pesos at the time or whatever. It was to be able to get off the boats like he was making Adventure pitch. Yeah contained outside.
Like, you know, I'm you know, what's the worst thing that can happen? Is he brings all the money and the ship sank and everybody dies unconstrained upside like what if he discovers, you know the new world right? And then of course survivorship bias, we remember that story because it worked we don't remember that those others had failed, right? So he was Raising Venture Capital. There's a famous story JP Morgan was j.p. Morgan was an investment banker who mostly dealt with debt for building out big things like railroads, but he sort of dabbled in Venture on the side and he was a this is like 120 years ago now he originally was
Who's Thomas Edison's first investor for indoor lighting? Wow, and so he wrote Thomas Edison a check or the new lighting business and he the first indoor lighting system electric indoor lights were installed in Jason Morgan's that famous library in New York by Thomas Edison personally, and then you three weeks later they caught on fire and burned his Library down and then he paid Thomas Edison to do it again rebuilt the library and put in lighting at work. So he did it. The one that I find so fascinating is actually the whaling industry. So the
The modern Venture Capital industry is basically this is very similar to how wailing Expeditions were funded in the 1600s like off the coast of Maine and it was a very similar kind of thing where you had basically these captains who were the entrepreneurs and they would put together a business plan for a boat and a crew and it actually have it actually have an equity model for how the crew members get paid. They get paid as a button based on a portion of the whale and then they would come and Pitch the basically the way the people who financed wailing Journey so the feces of the time and the VCS
We're specialists in evaluating the captain and the bow to the plan. The captain was a specialist in like figuring out questions. Like well, we do we go to the place where there have been lots of Wales spotted but those are the places other people are going to be at or do we go to this other place that we think nobody's discovered yet. And then, you know, like a third of the boats never came back and then there's this concept the way that these get paid as it's called This is concept called carry the terms carried interest in them as the colloquialism is Carrie and it's basically the idea is basically like twenty percent of profits we do for the ones that
You kind of make twenty percent of the profits profits or some number like that and it's called keratin and the reason it's called carried interest is because that's how the cap that's how the captain's got paid on the successful wailing Expeditions. And it was literally the it was the percentage of the of the whale meat and fat that the ship could carry this where the term carry company comes from and so on a successful Voyage the captain would get 20% of the whale interesting both examples you gave her about light because the reason the Wailing was such a important part was that's what was the fuel for the light before.
Before the electricity. Yep, very fundamental. Yep. Exactly. That's amazing. Exactly. So look, it's always been basically what you find you have you have this kind of cut entrepreneurial personality and it might be the captain right or it might be the founder or whatever or by the way. It's a movie producer, right? It is your view of an entrepreneurial personality who had a record for you, but who has a vision but they're not gonna be able to realize on their own they're going to be able to gather resources to do it and then they're going to need money and partners to be able to do that. And then there's going to be some evaluation process and
Professional class of people who are trying to evaluate that they're going to be operating in this domain where they're wrong a lot of the time but the the successes make up for it. And so it's kind of this Universal pattern and I think it's been running actually for quite a long time. My best guess would be this will run forever like this really runs for thousands of years, you know, the kinds of startups that you'll have in a thousand years will be like totally different than we have now, but they'll still have that the model they'll have to still have the same property that the unknown mess of it and you look they'll be reading histories of what we did and being like wow. I hope that we can learn from all their failures and
right Sophie. It'll be the same. It'll be the same cycle. It's one more thing is like people get mad is I always find interesting about no because it's become very popular to kind of get mad at venture capitalist right now our kind of be mad about this whole process your mission like the move fast break things get mad about disruption. It's like well,
They fundamentally do you want it to be new things in the world? Because if you want there to be two things in the world, they're not going to show up predictably from well-mannered people who are going to behave well in every aspect of their lives and then and then the the new thing is not going to disrupt or change anything. Like that's not what happens change doesn't enter in this kind of peaceful. It's always a revolution exactly. Right and if it's not it's not change, right? And so would you really prefer to critics I said was really prefer to live in a world of total stagnation. We're like nothing changes like hey, is that really?
You wanted by the way, what do you think would happen and that worlds? Like what would the politics be? Like, what would Society be like and so and I think they have I think they say everybody would hate that and so but to live in the world in which the revolutions happen you need to have a perspective and it's easy to say this and it's hard to do but you never perspective. It says yeah these revolutions like look they're going to be they're gonna be wild right there will be wild they're going to upset a lot of things are going to set a lot of people they're going to upset power relationships to society hierarchies Gatekeepers are going to be furious right like old, you know, and comments are going to be furious governments are going to get freaked like
Like all that it's going to happen but it is a direct consequence of the fact that it is actually change the dynamism happening and I just like yeah and nobody has ever figured out how to do this in a way that makes everybody happy. It's just a question about it happens at all. And by the way, there are many Societies in which historically this didn't happen. And what we know of those societies is they basically just died if you look at the Fortune 500 over history, how much change has it had over what period and what are the inflection points I change has a fair amount.
Although a lot of the changes that have to do with like mergers like when two big companies merge has anything really changed. I'll just give an example taught, you know time-worn here in town Time Warner Discovery have merged and you know, it's a sort of high drama in the in the media business right now was going to have my bad but it's like, you know like Warner Brothers Studios been in business for 100 years if Warner Brothers Discovery Works, it'll still be worried about brothers Discovery in 20 years. If it doesn't work, it'll get bought and you know, I don't know maybe Apple buys it and then Apple will run the Warner Brothers Studio for a while and then at some point they'll get tired of being in the media business and they'll sell it to you know, I don't know Disney or so.
And so it's just like, you know, but it still the Warner Brothers Studio, right? And so I think in big company land there's a lot of looks like drama in reality. It's just kind of trait assets is trading cards being traded around, you know, is are the movies any different than they were 10 or 20 years ago, maybe a little bit but not really so I think a lot of the changes actually not real change having said that look the suckers change a lot right? And so, you know, like when there's like build-out happening in a sector. I mean when we railroads were new they were most of the stock market right now protect.
It feels like it didn't change some well, but my cars would be we forget what was new at the time. Right? So like there was a you know from the 20s through the 50s cars were new, right and so a bit of the car companies became you know, the car companies were not big in the twenties. They become huge and dominant by the 50s. You know, GE is Edison basically like he had to like invest all that stuff. And before it existed you you wasn't the company that it was so it actually this is one of the things in history. One of the things is useful in history, which is most new Industries look like tack in the beginning. So I got example the car industry actually, it's actually funny the car industry actually didn't grow up originally.
Detroit it grew up in Cleveland and the the stories of the first 20 years the car industry basically are these hobbyists and tinkerers and entrepreneurs and garages in Cleveland and like 1890 1900 1910 trying desperately to figure out how to get like these cars things to work. Yeah, right. And by the way, the car was greeted with like an enormous amount of fear and trepidation, like people were not happy about the car and like a lot of states have these are my favorite stories about people reacting to attack is a lot of States actually in the US did not want cars to be on the roads because what was on the roads with horses and people and cars are dangerous and scary.
And loud and they freaked out the horses. And so the bunch of States actually have a big old red flag laws in that time period where if you could have a car but you need to have the car the car would break down all the time. So yeah the car you had your mechanic that would go in the car right with you the carbon only go like 20 miles an hour and that was sort of which is like super fast because it's faster than a horse and then you had to hire a third you had her third guy to be 200 yards in front of the car with the red flag waving ahead of time so that you would so that the horses would know Riders and horses would note open to pull to one side and then the horse.
Obby got really mad about this. And so they passed a law in Pennsylvania where they said if a car and a horse encounter each other on the road. The owner of the car has to stop the cart disassemble the car into pieces transport the pieces of hide them behind the nearest. Hay bale. So as not to freak out the horse and so so what a my point being like, what was that that was the tech industry like that was the disruptive tech industry of that time the personalities of the people I'll give an example that the car industry GM is like this, you know giant company 100 years old. There was this guy offered Sloan who it was
Like the famous CEO of the whole thing who built it but actually there was a guy named Billy Durant who was actually the founder early on before that. He was like the Elan character and he basically and his guidance his name is lost to history for whatever reason but he basically created the modern car industry and he was in read the stories of him and it's just like reading about Steve Jobs right or Ted Turner, right or, you know, third page or salmon or he's one of these people and so I actually think these patterns are all I think these patterns are actually older patterns. Who do you view as your biggest competitor? I mean this this is the answer to this.
Always sounds incredibly cheesy, but it actually gives true which is it's me like by far like this is the speech. I give it inside our firm which I very much believe and I give this feature myself all the time, which was like look if we screw this up, it's our fault. It's suicide not homicide and and it's basically it's because we were not we were not as good as we needed to be we screwed it up. Like there was a way to do it and we blew it and you know, maybe we blew it out of ignorance, but probably we blew it out of arrogance and ego and you know hubris and then you know, I think for what I think
What we do it is fundamentally a people business more than a money business interesting being in a people business like every conversation matters. Yeah, right and you're dealing with people's lives rise. What I this is the speech I give internally as you're doing people's lives and when you're dealing with people's lives, you have to talk you have to be very serious about what you say and you very careful about the consequences what you say really think hard about every conversation and you know how it is. It's like, okay, it's year or entering your 15. I've had 400,000 conversations the 400,000 at first.
Ocean could go really wrong. Right if I'm not like on the ball and I'm much more I would say I'm much more worried about that than I am about somebody coming in and like stealing our lunch money.
Other than financial returns, how do you know if you're good at your job ice as that point? I think it's basically what are people saying about you? Yeah. Look the thing is though, like look it's easy. There's eat there's a paradox at the heart of that which is like it's really easy to get people to like you just by always telling them that they're smart and they're they're good and that their ideas are good and like we don't do that. And so the trick is do they still like you and trust you and respect you after you have spent tell the truth years telling them the truth. Exactly and that's really your it's your job like this.
It's when you tell somebody the truth and you're giving them good news. They can trust the good news because they know when you had bad news you gave him the bad news. That's right. If you just said everything is always Rosy. It means nothing. Yeah, that's right. It's the bad news that gives you credibility now, that's right, but it's hard because absolutely people are under a lot of pressure and they could do probably you know, but we haven't you left they get upset in the moment and then maybe a couple days later. They're like, actually that was pretty good point. Yeah, you know and look if they know if they trust you, right?
Any other yet? Another thing that that I talk about a lot been sets us a lot as he says that trust and communication are opposites. Everybody thinks they're the same thing. They're not if I trust you. We don't need to communicate that much because you know that I have your best interest in mind. I bet I could go we've been to have this been I could go off and not talk for three months and we would we would come back when you have the exact same relationship and the other side because I have so much trust in him that I would know that whatever decisions he's making are in my best interest. Yeah, right. We're as if you don't trust somebody like you really gotta communicate a like you gotta like cross-check everything they say and like roll them and interrogate them.
And so I think that you know, the best relationships are you know, this is what you try to develop is like actually, you know, look I'm in a I'm going to tell you some things you're really not going to like. Yeah, I'm doing that because I care I'm doing that because I'm doing it and you're also doing that because you're being true to yourself in saying this is who I am. This is how I see it, which is really valuable. Yeah, and look I'm not going to step in and run your company like I'm not going to fire you. I'm not going to like replace you like I'm gonna like this is not the thing that's going to make or break anything. I'm just going to try to help you get to the
Get to the truth. He's right in the have the trust relationship over time or you were you bleep where you believe that that's what I'm trying to do when you were in school in Illinois. There was a super computer how many super computers were there in the world at that point a few dozen maybe total. Most of them would have been in government Labs most there. Those are the those are the kinds of super computers use for like nuclear weapons development like so that I was at their cryptography do so the government would have had a bunch but not really anywhere else. I got to you know,
Give got the government a fair amount of credit for that one. So it remember L got in trouble years later for saying that he invented the Internet the internet and of course, that's not what he said and what he said was he had played a role in the senate in creating the internet and of course that was actually true. So that whole thing was actually a smear the whole time. I was actually true and specifically what he did was he sponsored these bills in the early 80s, which did two things number one is they created what we call the national supercomputing centers and that was for universities that were given basically these grants to buy these very
expensive and rare, you know kind of things that the time to give you a sense of how like we're especially these things were like in those days like we had one of the one of the computers at Illinois, they literally built a building for the computer and the computer was so big that they built the building and they left the roof open and they lowered that to the building was built. They lowered the computer by a crane made the computer there was actually the company was actually incredibly company, Wisconsin. So it was a company called There's Something About cray. There's a guy named Seymour cray who did a lot of it and then there was this company called thinking machines.
And so there's this guy Danny Hillis who you might have encountered at some point. So they were the yeah these kind of very, you know, kind of special entrepreneurs who were good at this they became sort of famous. You've seen that, you know, you see them in movies. They wanted to you know, they were so expensive. This is like 25 to 50 million dollars and up and this was you know, this is 40 years ago. So this is yeah. This is like women of like 100 million or did something today per unit, but they actually they went things they really value design and so they actually looked really cool and they have like they were they were water-cooled their heat is always a big problem with any kind of advanced computing.
Pewter and so they did was called water cooling. So they would have these very elaborate City water cooling systems. There's a guy who actually bought one of these years later off of eBay and converted the water cooling system into a beer keg world's most expensive beer tap. So but they were like works of art and so you've seen them in different movies over the years. Yeah, so they were just like very very rare exotic things and is it so anyway, so the Senate the government funded these four centers at these for state universities because these computers made new kinds of science possible. So these were used for like a different house.
Sodomy astrophysics, you know decoding is secrets of the universe stuff and then a lot of biomedical, you know protein folding developing new drugs curing cancer, you know kinds of research. So, you know, there were there it was sort of becoming key to a lot of areas of Science and then and then they had enough money to put for these centers in place, but they wanted to give scientists all over the country access to the computers and to do that. They needed a high-speed Network to people can log in remotely and so they funded what was called the nsfnet National Science Foundation Network, which
I see was the internet was sort of the internet pre the internet. And yeah, and so I sort of yeah, my big Stroke of Luck was it turned out, Illinois where I went was a top computer science school at the time and still is and they were one of these four centers and so they just had this did you go there knowing that was there? I did. Yeah, we did. I didn't know if I didn't know that I would play any sort of inform, you know, I don't know how I didn't know how it would be to me but seeked it out. Yeah. Well, I knew what was happening. So that was this was in the you know, this was in the late 80s. And so yeah, it was big enough in the compete in the computer in you know, the
The service being covered in like, you know newspapers and magazines at that time. This was their articles written about this was how we experience it at the time. But you know, I knew it existed. Yeah, and I think we have a home computer at that time. Yeah, although when I got to college in 89, you didn't home computers in those days weren't actually useful in an academic setting they weren't powerful enough and but you had experience on a computer before you went to college. Yeah, but on really simple computer, so I sort of went from working on computers that cost like $400 to work in computers across like 40,000 dollars in like one step.
And so at that time they were a different it was it gives a completely different kind of thing. So the computers that I worked on the college, we're just like they were they as they said they were like 40 50 60 thousand dollar Baseline cost just to have something on a desk and then these supercomputers were you know, like I said, 25 50 million dollars. So these were not one of the advantages of being at UIUC at the time was that they have these resources they had these this equipment but like it all of my work was not done in my dorm room. It was all done in the computer lab, you know with like fluorescent lighting and like drop ceilings and all this stuff.
Because the all this Hardware was like super exotic, you know these days that doesn't exist as much your phone today is the equivalent power of that super computer that I worked on. Your laptop is like more powerful than that. And so today that doesn't happen. If you just have a modern laptop you have basically a full-fledged computer that you can do most anything on and then there's this Cloud idea where you've got these grids of, you know, millions of computers up in the sky if any more power so it so that the sort of I don't know the romance or whatever of the this exotic thing in a building
being taken care of by people in white lab coats, you know, those those days are kind of over in terms of what the supercomputer was capable of. How does that compare to like you your laptop at home now? Yeah. So your laptop at home like me and my laptop right now is a MacBook. I think it's an M2 or M3 Prime 3 processor and it's yeah, it's I don't have a check but it's probably somewhere between 10 to 100 times more powerful than that supercomputer at that time. Well, I'm in fact you could ask us any question on this actually or I could which is if those computers in those days were so rare and exotic and they were able to be used for things like
Coding black the secrets of white black holes and everybody has a laptop that does that today like where's all the creative? Like, we resolved the science or is all the creativity which I think is actually questioned the very excellent question. But yeah look in theory everybody has on their desk today and increasingly just in their pocket. They have the ability to basically do what in those days we would have considered to be absolutely breakthrough scientific work by the way artistic work. By the way. Another thing that happened in Illinois now Scott a lot watched history, Illinois was the there were a set of universities in Illinois was one of them because of this that actually developed basically what
we now think of as 3D computer graphics and ultimately developed what became, you know CGI in the in the movie industry and the whole idea of computer graphic design. And so when you see, you know, when you see a rendered tornado or whatever in a Hollywood Blockbuster it actually a lot of that is actually techniques are actually developed also an Illinois and a few other places like that at that time and the supercomputers originally it was it was so it was so hard to do computer Graphics that were so processor-intensive that it was only those super computers that could do that back then so that was another thing that actually was invented at that time.
It was Mosaic. So basically I ended up in Illinois. I ended up working at this supercomputing center after a few other things and then and then they had a group in that in the supercomputing center. That was building the software tools to make it possible for people to use these computers and particularly. Remember I said that the link between these big centralized computers and then they the internet basically the purpose of the internet is funded by the government was for scientists to be able to access these computers remotely, but then there needed to be a new kind of software tool that was built actually make that possible and so there was a
Gus called sdg the software development group at Illinois that was in business to do that government grants to build that software. And so Mosaic was a project that basically I a group of us did at that time at that group and its nominal purpose funded by the government and its nominal purpose was and by the way not funded for a lot. I was making $7.25 an hour. So it was not a lot of tax money. But yeah, the purpose of it was basically remote scientific work. So the original purpose of it nominally was you know a scientist.
What's to like ghetto? Basically publish information have other scientists be able to read it online Mosaic was the browser front end and be able to do that. And then we also had a certain rate of wet with basic one of the first web servers that made it possible to store a host things. And so that was the nominal purpose but then because it was government-funded we were able to give it. We actually had to give it away. We're not a lot of money on it. And so we release it as open source, and then we and then the nascent internet was starting to get big enough where there were people, you know people on it downloading it and using it and then they had ideas for other things that they
I wanted to use it for other than scientific papers and then that led to the felt Valley the creation of the when did you understood it could be used for more than scientific right up front. I don't even think this was like Precious or anything. It was just sort of obvious. Like I was just like, oh you could the thing you just was immediately obvious was oh this could be used for newspapers. This could be use for magazines. This could be used for anything anything right music to new communication tools. Yeah, and like literally I worked on a lot, you know there I didn't build all this myself, but I worked on a lot of the early code for doing music online.
Right Whiteford. I remember when it was we first figured out I do music in the web browser. I remember how we first figured how to do video and web browser. And so I remember how when the internet radio first started working. Like there was this project that we were we were not working on but I knew the people working on it called mbone at the time which is a first time using broadcasting and so there were a set of us were just like always just sort of obvious that this is going to be used for everything like it's a mcluhan thing ever. The content of each medium is the previous medium write the content of a movie is the stage play right, you know, the content of the music video is the is the is the music track.
Back and so it was the same thing here except this is the one where it's going to be all of them. Right? And so I just thought that was obvious a lot of us actually thought that was obvious that said they were a bunch of purists who disagreed and there was actually it was actually a big fight early on about whether there should be images in the web browser images of web documents and the arguments did he just text instead of just tax because the argument was about you can predict the argument which was if it's just text it all has to be serious. Yeah, right, we're introduced images and it gets frivolous and then the frivolous will drown out the serious and then everything will go to shit. Right and I was like
What happened? Yeah. Well, hey, that's what happened be I'm glad that it did right like who wants to live in a world where you don't have images? Yeah. And by the way, you know, there's a logical flaw, right which is it turns out there's a lot of shit text to so like it's not it's not the text actually gets you guarantees equality either. It's true and I just end for better for worse. I always buy some the side of openness and creativity. I just I want more experimentation the world not less and so anytime anybody says nobody to constrain this. I'm like, yeah. I know we're not going to construct just a little bit. We're gonna blow it out. You never know because you never know. That's why I can't predict. Yeah.
But you get with the bad with the good right like so okay. So so guess what? So we rolled out images in web pages guess I guess we're what some of the first images that people put in web pages. Well, you know, it's a dirty pictures. I don't content and so as my eight-year-old has a special parts and so that's starting by the way. It was it's a cliché that like internet was used for Porn first. That's not really the case. It was always kind of a marginal Edge thing. But but you know, their people did start to post a post
Adult stuff, you know, this is a government funded program at the time. So this was actually the this is actually the first a free speech issue. This is the first trust and safety issue, which is my boss at the time said, well, you have to like filter that stuff out and I was like filter what stuff out and he's like well like nudity and I'm like, like, how am I going to know what which pictures have nudity in them? Like there's no way to do that and he's like, well, you'll have to develop an algorithm that like detects nudity and I'm like what like through what like shapes like booby detectors. Like is that what you're asking me to make and
He's like, yeah, I can't you do that. And I was like, no, I can't and furthermore. I won't and I just like put my foot down and I said like we're not doing we're not going to we're not going to build censorship into the web. Yeah, and you know that had to say like potentially civilizational consequences you're at mosaic your building what you're building you could see a lot of things in the future. But how did you imagine the world in the future then versus how the world is now? What did you see and what didn't you see first is
Look the day job. There's this kind of presumption Oppenheimer issue went into this a lot of there's this presumption that the people developing the technology or somehow in a position to know the consequences of this use and like I think that's actually untrue on several levels. And one of them is just a practical level which is most of what I was doing was just trying to get like code to work. So I had like a day job which was like all-consuming is like 18 hours a day just like writing software and trying to like fix bugs in software. And so most of what I was doing what's its the old thing in art, which is when artists get together, they don't talk about art they talk about where to buy the cheapest paint. So it's
Like that, like most of what I was doing was like mechanical trying to like just get the stuff to work. You know that said look I had you asked me then. What I would have said was look I like. I think this is going to be something that a lot of people are going to be able to use and in those days that was a very radical concept because people didn't have the computers to use it. They didn't have the network connections. There was no broadband. There was mobile right there. It was just stupid people didn't work in Comfort with computers in the same way. It wasn't clear that there would be any good. You know who would ever publish any content was like an open question at that point. And so, you know, it was it was it was Radical enough. I would say at that time to say this is
A lot of people are going to use and a lot of people are both going to publish content on the internet and a lot of people are going to are going to consume it. And by the way, it's not just going to be fixed content. It's also going to be experiences and databases and you know, they're going to interact in different ways and chats and you know, discuss things and so forth. We didn't have social networking but we knew like we had chat boards and you know forums and stuff. So we knew there'd be a lot of communication there be a lot of groups forming and you know, you know people spend time and a lot of groups. Yeah. What was that like, oh, it was great. Well, so so for in my world at that point the dominant thing was once called Usenet and
and there it was called the system is called Usenet and then the the groups are called newsgroups and they were busy busy. It's a bulletin board system that ran across the internet and there was a period of about 1985 the predated me starting 85 to about 1993. So I saw four years of it were it was like digital Nirvana. It was like the smartest million people in the world were like talking about everything under the sun and text only text it was you could liken bet. You could eat like embed images you could like attach images, but it was mostly mainly mainly text.
Would it be conversations were more? Like I said both both both a lot of essays on the like conversations around essays and then there was a there was a folder there was a whole hierarchy so you have all these different domains. And so some of them were kind of cool conversations, but there were like lots of political conversations runs an art and you could find the topic you are interested in. Yeah and you'd pick the news groups that have the topic you're interested in some of the news groups were unmoderated so you could say anything some of the Ramada rated they had a human who would keep them under similar to social media really it was he basically right. It was the earlier form of social media, but what was fascinating about it?
Respect it's a lost Golden Era. That's it. Been impossible to recapture sense, which is it. Basically grew to be the million smartest people in the world with basically no for no idiots are assholes. And so it was it was totally like anybody in theory could be on it. And anybody could in theory say anything they wanted it just so happened that the only people who had access to it or like the best and brightest and so it like there was no spam problem. There was no abuse problem there were occasional flame Wars but like there was nothing, you know, there was no hate speech, you know, and and then it
Just the content quality was just incredibly High and the communities of former like incredibly High and the trust level that form was like incredibly High people became very close, you know across as they do across this with people. They never actually physically met and it was those like this. It was like this Nirvana of why you know, what if you could just have the million stars people connected the nobody else and then of course what happened was like everybody else showed up and there's this there's this term and the internet culture called Eternal September and so it's based on the fact that it was September.
Three as went AWOL connected to use net for the first time and all the AOL the 25 million a all users or whatever. It was at the time were able to be on Usenet and they just like buried and just like completely destroyed the quality right? I just swapped it and then used that basically died in September of 1993 and never gives back but stuff still online. Can you find a lot of it is so it's been preserved. There's a thing called Google Groups. Google has a single Google Groups and they have archives in Google groups of a lot of these original things and for what you've done.
Kind of things you're interested in it would be when we called the alt groups and so like all that music. So if you go to Google Groups, you could read like all that music discussions from like 1990 and I bet you would find that to be quite interesting and so Eternal September is sort of this idea that basically now the internet basically consists of September 1993 in perpetuity, which is like no matter what good things. There are is just going to get swamped with basically in people with you know, either dumb people are people that motivations. So anyway, so it is this like it is this it is it was the Shangri-La of our
Of our experience I think ways to create gated communities online. Well, so there was a famous there was another famous one of that are called The Well, which was it was an internet. It wasn't an internet system as a bulletin board system and it was Stewart brand ran it and I think it had a total at the peak of like 3,000 people and there were two tricks to how he did the well one was I think he if I recall correctly. I think he that at all the new members so it's like a club and then to as he charge you no membership fee. And so you had to kind of pass both of those hurdles to get in and again and for many for many years it was apparently really
Amazing spectacular, by the way, this is an idea that you know, nobody's really cracked the code on this but like, you know, this is this is arguably like an Undiscovered idea it on there and it's a known idea that nobody's figured out how to implement which is like how would you recreate that kind of thing today? Good sounds really great. Yeah, exactly, right. It sounds like we spent a lot of time scrolling through things. We might rather not if we had that more curated.
But you have to be you have to be willing to violate the the dominant and see of our time which is you have to move on to say that not everybody's the same. Right and I like I looked generally I'm a fan of like I said, I'm a fan of openness. I don't like the idea of like 80 people, you know by Mike you or anything else or social acceptability or whatever but like yeah, there are within the universal within the universal Global Village. Yeah. I think it may just be the more people should start to carve out these more specialized areas, you know, there are some you know, there are a few of these their mailing lists are like this.
There's often actually something that happens often a new social media product will first take off with being incredibly high quality to start. Well Facebook was like this early on because Facebook started out just being Harvard kids and then when they expand and expand into the top 10 universities and look the like the kids at Harvard have lots of issues. But like at least they're at least in those files, especially in those days like they were you know, 20 years ago things have changed maybe even even since then but like, you know generally speaking if you want like a group of like, you know, 5,000 really bright young people, you know, the people go into the top universities are pretty good cross.
Section and so you know and so there's this there's this thing which is there's a there's a pattern that we've all noticed which is new Social Network start. Well a friend of mine puts it this way which is the quality of any group can only decline over time right because basically you only want to join groups that on average or better than you right. You never want it you never want to down select. You never want to deliberately join a group. That is it depends. Well, that's what the axis with axis is but like generally speaking you want it's you know, so that's the Groucho Marx. I want to be a member of a club that will take me right generally speaking.
I want to sort of you know, you want you want you want to go higher status by joining the group not luring your status by joining the group. And so I have this friend who argues that basically the thing with social networks is they're not technology platforms their groups their communities and the thing is on day one. They're the best there ever going to be and then they and then they will inevitably Decline and but then there's a whole bunch of things you could do to try to basically arrest that decline if you tried but you have to Grapple with the fact that it's going to start out as very best which means the selection process of who you start with is like incredibly important.
And of course the same thing is true of a company or any other kind of, you know Community. It's the same thing when you're planning parties, like it's you know, it's the human dynamics and so arguably there's like an unexplored design space for modern social networks that actually acknowledge that and didn't try to be everything to everybody and just try to be specialized like that. So I think it'd be nice for everybody to have the one that they want to belong to an opt-in that's in sounds like a good thing. Yeah, but you know their versions of this, you know, Facebook groups. There are some some people have this experience of Facebook groups Twitter, you know, if you use Twitter in the right way
And you're like customized lists and you pay a lot of attention who you follow you. Can you can do I've got a couple of Twitter list that I think kind of count like this and so you can you can back your way into it, but it's not your turn on September has dominated For Better or For Worse the openness has resulted in and how has writing code changed from when you were when you were at school when you were a code writer versus writing code today. Is it same language? Could you do it now the same way you did it then you could yes, you could sew those.
The all those tools still exist those languages still exist. So I wrote I wrote all my code in what was called language called C and C is sort of it sort of the native language of the operating system Unix. It's sort of what it's one of the great and cunning Universal programming languages that people with technical expertise are expected to know how to do it's an older kind of programming language in that it is very the the the semantics of the language are very linked to the hardware of the Chip And so when you're programming see you are directly talking to the underlying Hardware like you're Direct.
It is a classic thing is you know, so Chip processor and then there's memory and I can see you have to do is called managing memory yourself. And so you allocate memory on the memory card. You fill it. You have to unallocated if you don't allocate it properly you get what's called a memory leak the program runs it gets slower and slower and then Italy crashes so you have to like do all that and sounds like a lot of work. There's a lot of work and you end up in a I would say commuting very deeply with the machine like you have to really understand how the whole thing works all the way down to we call them bare metal the actual physical silicon like you have to really kind.
We understand that it's really sounds like a really good tool to learn either way, whether it's whether you stay that way or not. So the thing for a very long time I think and I had the beneficiary beneficiary does I think the thing for a very long time that made a computer programmer really good was when they understood every aspect of how the machine worked all the way up to the graphics and everything, but then all the way down to the chips and the metal in the design and I spent just as much time in school learning about how to like make chips and all this stuff as I did try to make me suffer because it was like an integrated integrated system. I think there's a there's a crew.
Which
I think is a valid critique which is you know, probably in the last 10 or 20 years a lot of programmers now become actually very good programmers, but they never actually learn how to do that and that's fine for a lot of things but like any time things get complicated and where you need things to be super fast or you need them to be very secure or you need them to get scale to get really big you do tend to need to bring in somebody who understands kind of what we call the full stack but the whole set of things that's not as common anymore. So so the overall trend that's happened in the last 30 years.
His 40 years is most programmers don't do what I was doing there not programming at the bare metal the way I was mostly what they're doing is higher level. That's the college fractions. And so they're they're in these languages that new just guidelines like kissing a school where they're much easier to code in you don't have to worry about any the hardware the memory whatever these are called scripting languages. This is there be a python is an example. You'll hear where JavaScript where your they're easier. It's easier to get into their more popular more powerful languages. The language does more for you. So
You can write like a new app faster than you could in the old days, but you've don't have that connection to the machine anymore. That was the big trend for the last 40 years and then it just changed again basically last year and and this in this change last year. This year is the biggest change that any of us have ever seen which is the AI the shift to programming with an AI and in particular basically the model that people have right now it was one of the other two things either you just tell the AI what Cody wanted it makes it for you which which works for like examples today, but doesn't work for building full programs yet.
Oh, it will at some point but the thing that programmers do today is they have this model called a co-pilot AI copilot, right? And so the new model of programming is you're writing code on the left half of your window and then you've got an AI chatbot UI interface on the right side of the window. And as you write code the chat bot is inspecting your code and talking to you about it. And then you can ask it questions, right? And so it can see if you're writing code you do it you do it, you know typos or whatever a bug and the AI is continuously analyze the code as you're writing any and say oh that was a mistake. You should fix that, right?
And you're just like wow, that's great. Like I don't have to discover that the hard way later. That's great. Right or you know, you could say like I have tears I have this code is going to render something. I need to be faster. How should I how should I make how should I perform as optimize it and I will say well, you know, here's how you do it. And here's how I here's how I've a I would rewrite it and so are you can tell the AI to like make changes right? And so it's like I want, you know, everything to be I don't know. It's like you're you want to do a translation from English to Spanish and you can use the AI to like find all the places where you have an english-language word and you can swap into the Spanish translation of a I could do that for you.
Are you so it's like it's copilot. It's like a super sexy super assistant. Yeah kind of thing. And so that's the best like a radical change. And so the coders that are using that versus not using that today. They're pretty much universally kind of saying that's a night-and-day kind of thing. And then that's just with today's Ai and what everybody expects is the AI as the future are going to get much more sophisticated. And so the sort of with AI people basically say is in five years or ten years, you're not even going to have that what you're a stud going to have is like the equivalent of like a thousand AI programmers working for you.
And so you're not even going to be writing code yourself. You're just going to be like basically managing the AI is to write the code and you can basically say, you know, we wouldn't go off and do all this design and just coding and graphics and like whatever it is and you basically hand out assignments and then they eyes go off and do it in a report back and then you kind of oversee the entire process. And so if it's a that Vision plays out, that's a complete Revolution right that in the way to think about. That is we think about this in terms of productivity, you know, how much software functionality can one person make in an hour or a day or a year and what all of these changes mean is there?
Explosion of productivity you just get to make a lot more code. If a I learned to code that really changes things. Yes, exactly. Right? Well in that race is all these questions that you get into and all AI topics, which is like, okay. Well then is a I going to get rid of coding a I right and so this gets into all the AI topics which we could talk about but it's a very very reason I bring it up is because it's a very fertile. It's a very fertile moment for our entire entire world of technology rethinking how all this stuff works. You know, this this might be the biggest change that any of us have ever seen.
What's different about AI? Why is it so different? It's different because so it's effective very fascinating story. So the idea of the computer, you know goes back pre you know, the computer was invented as we know that the computer was invented in the 1940s during World War Two to basically crack Nazi in German Japanese codes by permanently the US and English computer scientists people like Alan Turing and so, you know, that's there anything. That's the true story that's conventional story. That's the true story, but the ideas are older than that the ideas have to do with
Machines that can like calculating machines, right? So there were like mechanical calculating machines before they were electronic computers. There was something called bukas. The Abacus was a form of this there was also something called the Jacquard Loom, you know textiles used to be weaved by hand. And then at some point you built a machine a loom to do it and then the Jacquard Loom actually you could program it. I've seen them. Yeah, so you could and you could you have literally Punch Cards and then you could you could do and then patterns. Yeah, and so they're not running because they are very rudimentary computer program in order to basically do patterns and it's completely mechanical process European.
No, their funeral be another good example. Yeah, exactly. Right? It's not like Jacquard Loom player piano or not what we call Turing machines, which is like there's no concept of a loop like you can't you can't run any program on it, but you can run the program that generates beautiful textiles or beautiful music, right and those were both big advances. And so so anyway, so there were a lot of these ideas in those days which people thinking let businesses got Charles Babbage this woman Ada Lovelace who like how to design for a basically an electronic computer in the 1860s. They were never able to build called The Difference Engine, which is like you and you read the stuff they were
So Charles Babbage design the computer called The Difference Engine that he fully designing. It is a great name and it would have been a great thing to build. There's this genre now called steampunk if they weren't like the TV show or movie Wild Wild West there's an alternate reality genre called steampunk were like all this stuff actually started to work in the 1800's instead of waiting longer. And so like there's an alternate version of the universe where the difference is that what steampunk is so steampunk is so cool. It's like living in the future, but it's a lost future where like, you know, you had flying cars and mechanical that everything's retro and everything's ready for everything's ready.
Well with all of them everything's built out of what they would have had in 1860s. I see several things out of like wood and chrome and steel cool idea glass, you know, not all knows. No plastic, right? It's everything's out of the old materials. Yeah. So some of that stuff is really good, but it's only like he's our idea and if you read like the letters like so Charles Babbage and Ada Lovelace would send these letters back and forth and it'll levels was basically the first programmer and she was this young woman in like literally 1860 actually had a tragic life story. She died very young, but she was like writing software for the Difference Engine and like 1860.
And they never built a Difference Engine, which means she never saw the software run but like they saw it like the movie ideas existence. Anyway, so by the 1930s there was this big debate that was already playing out and this is even before the invention of the computer and the big debate was do we model the computer after a calculating machine, right? So do we model it after the Jacquard Loom the cash register the player piano or do we model it after the human brain and they knew just enough about neurology and the function the human brain and they knew the human.
Rain was a new human brain was obviously capable of doing things that a calculator calculating machine couldn't do and particularly. They knew the human brain is really good at patterns. Right? So the human brain is like really good at like image recognition really good at like a language like here's a feature of the human brain. You can take a piece of text. You can take out all the vowels, right? So you take a paragraph of text person hasn't seen before you remove all the vowels and you just leave a consonance the human brain. You can still read that because your brain knows the patterns of words and letters and is able to fill that in a calculating machine based computer can't do that.
The human brain can't do that. So there's some difference. It's like sometimes it turned fuzzy is used. So the human brain is fuzzy and the problem with human brain, by the way is that it's fuzzy and so like well, I remember tomorrow whether you were wearing that color shirt or some other color shirt, like who knows but like you and I will have been able to have this conversation in a way that a calculating machine Never Would Have And so there's the fundamental difference right basically in there. And so these people in the 1930s knew that there was this difference and so they said it should be modeled these things after calculating machine in which they are hyper literal like all you say.
Most autistic, right which is like there's just like roses like savate like machines where they're like really good at running large numbers and mathematical calculations very fast, and then we'll get people ability to write programs based on that but they're never going to be good at patterns. They're never going to be good at language. They're never going to be good at the never going to know what anything means, you know, there are always going to be hard to talk to you're never going to be able to use natural language interface, you know, they're never going to be able to know the difference between, you know, the difference between a cat and a cinnamon roll in a photo like they're just not going to get into that so they'll be
Hyper literal in that way super fast but hyper literal and then humans will just still be different or should we try to build computers that are modeled after the human brain. And so it actually turns out the first paper on the concept of the neural network, which is the architecture of GPT was actually written in 1943. Wow, and the AI systems were used today are still based on the ideas in that paper. So 80 years ago, right? So they knew enough about neuron structures and synapses in the brain that they knew there was during 1943 1943. No, but they knew and by the way, look the field of AI started in like 1943 like that actually
I fired the starting gun, and actually people have worked for the last 80 years trying to get neural networks to work and they finally just starting to work. My point is like they knew from the very beginning. There were these two totally different ways of making computers and they knew what the trade-offs were and they just were just turned out that historically they were able to make the one kind of computer for the last 80 years and that created the computer as we know it today and then it turns out there's this completely other way to make a computer and that's based on the it's inspired by Seth the same as the brain but it's inspired by the structure of the brain and as a consequence, it's a new kind of computer and I way to think about it is it's a computer that's
Actually, an AI computer is actually very bad at all the hyper literal stuff, right? And so for example, the GPT has this thing called hallucinates. And so if you ask it a question, it knows the answer it gives you the answer if it doesn't know the answer. It just makes one up. So it's more creative and less accurate exactly. Somebody once said somebody said one of the guys who studies this says AI is not like a computer. It's like a pretty good person. It's not like the best person but it's like a pretty good person. And what do we know about pretty good people the right A lot of the time but a lot of the time they're not
And can you always tell the difference not necessarily, you know, do they sound is confident when they're wrong is when they're right? Yeah, do they know? No, they don't if you ask it sounds like a real issue. It has we've spent 80 years establishing the fact that what you're getting back from a computer is more like a results from the results from a calculator. But now we're getting these fuzzy results that are more like mediocre human results, even though we've had 80 years of what we think.
Gov as accurate that could create confusion. Yes, so there was a court case about three months ago where a lawyer I had to GPT right and legal argument to be presented to a judge in a court and it did it and it hallucinated several court cases precedents that don't exist and the judge caught it just made them up right about yeah, it sounds great. By the way, they sound exactly like our cases. Yeah, the whole thing hangs together. Logically. It's just literally not true especially cases it didn't and so and it turns out if you submit false made up court case.
Has in court you get disbarred as a lawyer like you're done being a lawyer and so the judge basically like came very close to disbar and lawyer on the spot in the layers. We basically learned the judges like did you use chat GPT to do this the lawyer basically fessed up and the judge basically said if you ever do this again, I'm going to disbar you destroy your career. Yeah. It's exactly for that reason, but however hallucination creativity. Yeah be great scene in a movie for example, exactly work fine in a movie. Well, so and it actually turns out so there are companies now building AI for lawyers and actually
We so we did a bunch of work. We haven't invested yet what we've done we've done a bunch of work in this space because one of the things that a I can do is I can like write can laugh. You can write legal briefs. If it doesn't hallucinate they're actually really good legal briefs. And so we've been talking to like professional Learners about this and what the profession lawyers will tell you actually is you actually don't just want accuracy when you're thinking about writing legal briefs. You actually do want creativity because there are different ways to make legal arguments and maybe the way that you've thought of on your own is not the best way to do it and maybe if you had a co-pilot right think of your writing a legal brief your lawyer. You have a Lego brick you writing legal briefs.
You have a co-pilot, right? And that copilot is just giving you ideas. Right and some of the ideas are going to be great at this is something that he's really terrible ideas, but they're all new ideas ideas where you don't have to sit come up with them on your own. Right? And so what the lawyers are saying basically is like in that case you actually you actually you want some hallucinating like you don't want make up a court cases in happen. But you want o here's a different way to make the same argument right or are you might also view it as like if you're writing a closing argument to present it to a jury like that, you know, as you know, it's like a storytelling exercise and so you might want actually, you know some brainstorming.
The thing to do it for you because you're the guy who has to stand up there and actually present it you have to really be willing to stand behind it, but it might be helpful to have a writing partner that can actually help you do that. And so there's this sort of double edged. Like the fact that hallucinates is both a big problem, but it's also magical because we've never had computers that make things up before like that's a brand new thing. If you had told me three years ago, we're gonna have computers that like makeup quirky like it's never it's never happened. Never been a way to do that. Yeah, it's the same thing. I know now, you're seeing it you it's the way it see this really clear.
He of course is the visual design visual art, you know coming out of like mid-journey or dolly or these things where it will make up all of these crazy art things and you look half the time it will make up like it will end. You know, there's this famous thing. That's figure it out now, but for a long time the way that you can tell that computer art was being made by algorithm was it just it would give that red extra fingers. It just turned out that the training date it was trained on it's just like it just turns out like human bodies relatively straightforward except that there are these like detailed finger appendages and if you are looking at billion photos or pictures of people
I think there's all kinds of different positions. And so the early versions of a art basically just didn't know how to do fingers accurately. They fixed that now right where it no longer does that? Yeah, but by the way, if you want it to it's still well, right and so if you tell it render me a scene where everybody has seven fingers it will happily do it for you and computers never used to be able to do that. Right or if you just want to tell it to use it. So one of the things you can do is really fun with these things is you can do it. You can say like use your imagination or are you can say another thing you can do is you can say so there's this thing called prompt engineering
so it's how do you write out the prompt that tells the AI what to do right so which is true for both a text Ai and for an image a I do the prompt and it turns out there was a research thing done by Google a few months back about what's the optimal prompt that optimizes the chance that there won't be hallucinations that it's to be the most likely to be from it's called factually grounded and it turned out the Apple prompt starts with take a deep breath. Really yeah gives you the best results, right? And and so and this gets to the the amazingness of what's happening. This is why we're all so transfixed by this. It doesn't have long.
It doesn't
breathe. It doesn't breathe. All right, so it's not that but also look if I tell you if I ask you a complicated question, I say take a deep breath. I'm also not telling you to take a deep breath. What I'm saying is pause and think right what that's code for is pause and think so it's like, okay. So what you're telling the computer is pause and think okay that makes more sense because okay pleasant thing but then it's like wait a minute. Why do I have to tell the computer to pause and think like, why would that matter? So it turns out why that matters is because the way these systems are built is they're trained on these
These giant billions and billions and billions of files of text and images that other people have created over time throughout all of human history, like all that stuff's been fit in there and it just turns out that in the total material all text. Everybody's ever written on any topic any time. Anybody ever says take a deep breath pause and think it means that they're more careful in how they do their work. Right and they actually act differently and how they do their work. They go more slowly. They go step-by-step. They double check all their assumptions. And so that's like in coded deeply in the sort of total Collective.
Nats of how we express describing human thoughts such that when you tell the machine to do that it kicks it into a very similar mode as that very interesting and this and everything. I just described I would have been like committed to an institution five years ago. If I had said that this is what we were going to be doing and now all of a sudden this is actually happening. And so that's the yeah. So the Breakthrough is computer a completely different kind of computer that is able to basically synthesize and deal with patterns in human human and human related expression language and photos and like images and videos and all these
These things right that humans deal with eyes and ears like all this stuff in like a fundamentally like better way that is based on an analogous to how human brains operate but also very different and so it's like this. It's like this brand new frontier. Tell me the open a.i. Story. It started as a non-profit or for-profit it is and it continues to be a non-profit tell me that story because there was a story about it becoming a for-profit. Yeah. So it's there. It's a nonprofit that owns a for-profit.
So it's a non-profit parent company with a for-profit subsidiaries. He said a common that is not common as it ever happened. It has happened before. Yes. What was the given Example The Guardian newspaper in the UK? Yes owned by a trust Johnson & Johnson the consumer Products Company. I believe is owned by a non-profit. I think the Lego company I think is owned by a non-profit. I'd have to double-check all these but I think think these are all examples there been a bunch of examples like this. So it has it has it has happened before it is allowed having said that there are very stringent tax laws that apply to this because you're not
Loud nonprofits are not allowed to pay like I salaries they're not allowed to you're not allowed to do what's called self-dealing. You're not allowed to like extract money out the other end because the whole point of being a prophet is you don't have to pay taxes. And so the IRS supervises nonprofits that own businesses actually quite quite strictly and there have been people who go to jail when they when they cross those lines. So you have to be careful in how you do this. But yep, so basically opening I started out as a nonprofit Research Institute. It actually don't even start with the for-profit sub. It just started with as a non-profit. It actually started with started by Elon Musk.
And a group of people kind of the Elan brought together including Sam Altman who is now the CEO will see the CEO. He is sitting here today. Here's what's today. He is the Seeker. Thanks once again to see if he was fired and rehired as fired and rehired within five days. That's interesting and I had two other CEOs in the meantime. Maybe you'll tell me that story when we'll get there in the in the history. Sure. Yeah just out. It just happened Yeah. So basically it's and so the true story Ilan has talked about this non-public. So basically what happened was Ilan. So so Google Google obviously makes all their money on
Attraction but the guys who started Google Larry Page and Sergey Brin were came out of a i group at Stanford and so they can trade up on all this AI stuff even when it wasn't even working, right? They just did was they got free Google they were they were PhD students at Stanford studying AI before they built Google and so they're they're kind of orientation in the world is basically a eye and they basically always viewed Google is like a simple form of AI and so but they always Aspire like if you read their interviews, they always said Google shouldn't have the 10 Blue Links. It should just give you the answer they always and so they started doing AI
early on at that company went first got started and they did it for many years. Yeah, so they basically launched an internal research group called Google brain. They launched that I don't know 15 years ago or something and the goal basically listed all day I and they actually developed the actual break through the specific version of the neural network that makes all these systems work now, it's called the Transformer and that was actually invented by a guy two guys. I know a wonderful guys and 2017. And so that was like the key theoretical breakthrough that like finally made all this stuff work, but they were real was it owned by Google? Yeah. Well, no, sorry.
A refit was this was considered research not development. And so that the way that it was it was like an internal scientific unit at a company and so they actually published it as a paper I see and they're actually there's a long history of this where this actually a lot of the great breakthroughs over time have actually come out of like Industrial Research Labs like this and then and then and then the company that develops it publishes it and they don't realize until later that they should have kept it secret but also the reason that they were able to hire all these great researchers out of all these universities is they promise them that they can publish their work, right and so sort of part of the deal with these guys was that they would get to publish
Shhhh, so they have this key breakthrough in 2017. So but it sort of became clear in the 2010s that like there was finally progress being made and some of these systems were going to start to work and Ilan had some conversation with Larry Page who was running Google at the time and Larry said to Ilan, you know this a I think's really going to work and we're going to end up with a eyes that are like, you know much, you know, smarter more powerful than people and Ilan said, well, aren't you worried that they're going to like have their own goals and they're going to take over and they're not going to want us around anymore and Larry's Larry's response was you're being species assist.
You're being racist but towards your species and if they're a better form of life than they should take over and we should all die and Humanity should go away now knowing Larry I think there's at least a 50% chance. He was joking, but you know, I'm couldn't tell and took him seriously and so Ilan had a visceral reaction. It was like, oh my God, like the big risk here is not just developing a i the big risk here is Google develops Ai and Larry Page was in control of it. And he does horrible horrible things and so he started he's like, oh so he called all these people who he knew.
New and he said we need to start the competitive effort to that today. And we need to call it. We it needs to be as opposed to Google's closed Ai and needs to be open a.i. And and this was to protect the world is to protect the world and understand you Las Vegas affect the world. So what do you want says is we need to go higher all the best researchers we can it seems to be that's what he's always done. It's like Tesla was cars need to be electric SpaceX was if anything happens to the Earth we could live on Mars. He's always motivated by say
In the planet. Yeah, that's right and and save humanity and Humanity right exactly and save humanity and I think that's true. Look, I mean Tesla has been a climate Story the whole time and still is for sure from the beginning. It was that's right. In fact hustle. As you know, like Tesla is it just cars are also batteries, right? I also and he also I remember from the beginning of the first Tesla announcement was and I'm hoping every car company steals our technology. That's right. That's right. No patents. He opens forces everything exactly. That's what for everyone it was always for everyone. That's right. That's exactly right. Yeah, that's right. And so that's what he did here.
And then what he did basically was you said look if you're interested if you're an AI researcher interested in money, then you can go to work at Google and they can pay a lot of money. But if you if you care about the mission of having a be open then come and work with me and he called it opening II and he made it a non-profit not a for-profit and he said, you know and then he said basically he said everything we do at opening is going to be open sourced in the same way. Right? So he said basically if you come here your work is all going to get published everything to be open. He's even said early on he said the mission of open my eyes to make sure that AI is is happens in as safe and as
Firstly available all of humanity and he said it would actually be fine. If somebody else does that and makes it available in which case openly I will just shut down and if our mission will be complete so it was set up as a non-profit is registers not profit. He donated it what's reported to be something like 50 million dollars to get it off the ground and and then a group of a group of people including Ilan has a moment and others then brought in a lot of these people the Greg these names now great Brockman and Ilya sutskever and a bunch of these like really smart guys and they form this thing they got under way and then basically it's a it's a long story long detailed story, but
But in the beginning is like 2014 or 2015. They didn't have the Transformer yet. So they didn't know how to make like GPD work. They were primarily working on trying to have a eyes. They can play video video games in those days as sort of a proxy for being able to make decisions and so forth, but you'd like didn't go that well and so it was sort of start and stop and something's working some things didn't and so it was kind of, you know, kind of a little bit kind of iffy along the way as to whether it would work and then basically at some point stuff really started to work like the the things old started to actually perform really well and then
In particular there was this breakthrough. There was a large language model breakthrough. And the way I've heard the story is there was one guy there his name is Alec Radford who had this idea for these language models and the rest of the organization thought he was nuts. I didn't want to do it and he's like no, I think we might actually be able to make this thing work and this Transformer thing came out and then they started to give and they did you PT 1 which is the first version of the textile and then they were like in then they did GPT to and they were like, okay, this is really going to be a thing and then basically what happened at that right around that time as this guy Sam Altman basically came he was a rich had been accorded an original founder, but
He kind of just engaged and then he kind of came back in and sort of he took control of it you Lon, there's controversy over this but Elon Elon became less involved temp temp took control of it. And then Sam did this very important thing which is he created a for-profit subsidiary under the nonprofit. And why did he do that? So what he's what he said and I'm sure this is true what he said was to make these large language models work. We need a lot of computer capacity and we need a lot of data and and we're going to need to re we need billions of dollars. Okay, so he said I know how to raise.
Million dollars for not from nonprofits. I don't know how to raise ten billion dollars for nonprofits is just our to do that not many of those running around. So he said we're going to create a for-profit subsidiaries so that we can basically sell shares in the for-profit subsidiary right and generate revenue and generate profits. And then that's what we'll do is raise the money because if we can't raise the money we won't be able to keep going on this research, which means by the way, ultimately it will be done by actual for-profit company right like Google or Microsoft and then it won't open open a I won't win and so he turned a
He turned what had been a non-profit into a nonprofit that owns a for-profit the employees in that profit became employees to the for-profit salaries went up a lot the amount of money that they raise went up a lot their ability to invest went up a lot what was elon's participation for the original 50 million. So you don't have said publicly that he had nothing for it. What he says is he it was a philanthropic donation you're under tax laws. You can't just turn a for-profit. You can't just turn a non-profit and a for-profit right because it's a violation tax laws. And so I think legally they probably
I couldn't give him anything. But anyway, he says he says he got nothing for it. It's interesting. He has said in public basically, he's like, wow, that seems like a neat trick. Why why doesn't everybody do it? Yeah, and so he's he has suggested over the over the years that like there was something wrong with how they did this and know who knows we'll see but Sam made that change and by the way that worked right they were able to they were able to Old a sudden start paying competitive salaries to Google for engineers. They were able to buy all the computer power they needed they were able to buy they have you know, they have lots of money going into making training data and so like that part of it worked and that's what resulted in chat GPT. That's what I said.
GPT exist and that's why Dolly exist. He did another thing along the way which was he turned it basically into closed AI so he he he turned it into a for-profit and he canceled the part where it publishes everything and basically as of four years ago or five years ago or so, they stopped publishing their research and he did that under the theory that it's too dangerous to distribute this 2 is too powerful too dangerous and other people can't can't have it. But there's some irony in that which is the whole reason. Nobody exists is because that was what they were Alana Sam were afraid the Google was going to do right? So so
Anyway, so it's been this rather dramatic, you know kind of shift, why would Sam removed and then replaced so we don't fully know, you know, they're relatively opaque organization a bunch of stuff has been reported. You never quite know, you know, whether what's reported as true or not. There are going to be many investigations in the months and years ahead, you know from government and there's going to be litigated lawsuits. There's going to be a lot of there's anybody ways multiple books written about this already underway. There's going to be an F series. I'm sure right and so we will we will learn a lot in the years ahead about what just happened.
Is Microsoft somehow involved Microsoft is very involved? How is Microsoft Microsoft is their major investor? And so they have really for profit in the for profit. So they have reached 13 billion dollars from Microsoft and of the for-profit and they have this very elaborate complicated structure hype it so they're not have the structure. There's still a non-profit of the parent company level, but they have this for-profit subsidiaries and then they have this very complicated system for how they account for investor money versus donation money and how things get paid out. It's what they have this new structure. They didn't have to call Cap return. So if you in
Money in the for-profit you get paid out up to like a tax return on your investment. And then after that the prophet saw go back to the nonprofit. There's what's called a waterfall so different investors investing in different times get precedents for how the money comes out and then Microsoft's just the vast majority of the money. So they have tremendous control they have, you know have the most outside control of anybody, you know, but it's a non-profit they can't operate as just a business and so they've got this additional nonprofit overlay all investors who invested in this thing over the years signed paperwork that very specifically said you were investing in
In a for-profit some of a non-profit it would be best if you thought of this is in donation not a financial investment and then they say but you know, that's probably okay because who knows whether there will even be money once we have a i anyway, that's like literally in the document. Right? So like everybody's invested who's invested in this is kind of known, you know that that's the deal but then they have this additional thing that they are very kind of vocal about public about which is this idea of AI safety. And this idea of this is the original concern of like as a I going to like this. Okay, wake up and like destroy everything and take over and wipe out Humanity or or just
Damage and you know one of a thousand other ways and so they also have this thing built into their into their structure which basically says if AI if they conclude it is too dangerous, they'll basically just like shut the whole thing down, right? But what where's the line of dangerous? That is a very good question that is a question that every expert in the field has a different opinion on there is heated controversy over it. I am on the side of what's known as the acceleration assists. I think they're basically either is not a line or if there is it's so far on the distance is not worth thinking about and we're nowhere close to it and we shouldn't worry about this there.
A lot of people that are called Safety assists or that sometimes get referred to as the drummers who are convinced that the line is like already but we're almost there. We might trip it in a moment. There was a new story yesterday that I don't know if it's true but it suggests that there were group of people inside open AI that basically blew the whistle and hit the red button and said, it's did just got too dangerous and we need to kill it right now. And so there's reports that this played a major role in Sam getting insane getting fired, you know, there's irony to that because in the wake of Sam getting fire, they all decided that they were going to work.
Her soft which is just a big for-profit company that presumably is not going to care as much about safety. So if this is such a concern that they're going to fire Sam over it and shut it down. Why are they all going to go to Microsoft which is probably even more dangerous and then Ilya the chief scientist actually flipped. He reversed himself. He he actually fired Sam he was on the board and he's the kind of fire Sam and then 24 hours later. He recruits can actually said that he actually wants him back. And so there's this debate over what he changed his mind and was it because he decided Microsoft was more dangerous than Sam. So this is like a whole is
Has been the drama. So this has been the thing that's been consuming the industry for the last week. It's been the spectacular amazing, you know kind of just like, you know, meltdown Resurrection kind of thing that's happened. Every question that you just asked it a question just ask for it just remains a very open question, which is like okay video game based purely on the reporting have they'd have they discovered. So the reporting basically is that they've discovered for the first time a self improvement Loop. So the claim is that they've discovered a loop that basically where they I can improve itself and the AI safety do more people say
He's the polite word dimmer as the pejorative. Now, those people basically say if you have an AI that can improve itself, then it will inevitably become all powerful because it will improve itself and then improve itself and then prove himself compounding all the way up and they call this the take-off scenario and the take-off scenario basically is you get into an improvement Loop and like within, you know, conceivably 12 hours. It's become super God right in it takes complete control of nuclear weapons and you have Skynet and like the whole thing. That's really interesting about it is because it's
Built on human models and the way humans work if a group of humans had ultimate power and could press a button that would turn off half of the world that would likely happen. Well most human Stories the good guys went most human stories when the bad guys win. We call it a tragedy and we feel bad about it. You know, it wasn't I mean the good guys wrote all the history books hard to
Guys,
all the history books impossible to know who the good guys are. We have eight billion people on the planet today, you know far more than ever before, you know, the world has never ended the despite. The threats of many apocalypse is over time the Oppenheimer, you know, the nuclear weapons, you know, the whole point of oppenheimer's nuclear weapon to destroy everything nuclear weapons didn't destroy everything nuclear weapons. Actually probably prevented World War 3, right? So it turns out developing the ultimate doomsday device, press thus far that's for yes, that's far. Is that 100% That's far right? Exactly. Well, but like look if you had just been through what we've
Forgotten, how bad World War Two was if you had just been through World War Two like the expectation of all the military planners and 1950s was World War Three was right around the corner and to be a land war in Europe against the Soviets and it was going to kill 200 million people and act like we still have troops in Germany for that reason like 80 years later because we thought the Russians were going to invade right and and that what was that looks like what was going to happen? Like I think most historians are like yeah that was highly likely to happen. And basically it was only the threat of global destruction. He will go to the Russian. We were on the same side as Russia exactly we were and then it flipped.
Hard it may be in the years that followed very hard. Well, I look there, you know, there's all kinds of questions around this like we don't even I don't even think we have like a good history of what happened in the 20th century. Look the Nazis were very very bad. The Communists killed even more people right? Like, you know, look we turned over half of Europe to the Soviets and they turn it in. You know that we brought down the Iron Curtain and they killed many millions of people and imposed in a horrible dictatorship and like surveillance society. And you know East Germany, it's just a fucking nightmare right of what they did to those people and we
Did that all to protect them from you know and say yes good news this week from the Nazis bad news is we turn them over the Communists. Like there's like some big like the idea that there was anything morally pure clear but WWII, I think it's just like completely fake right? It's just only because we have this mythology around it like it. I like I don't know like it seems like it ended very very badly and I'm not saying I'm you know, I'm far from saying that we shouldn't have done it but like, you know, have you really achieved a great moral Victory when the guy who killed more people as a guy who wins right? Like because that going right?
We spent the next 50 years like literally terrified that there was going to be you know, some combination of either World War 3 or nuclear Armageddon and then the plot twist is the threat of nuclear Armageddon probably prevented world war three, right? That's right. Exactly and so like okay that's in our history. Like that's real. Yeah. So look as going to get trained up on that right now, by the way, the other thing is it's very easy to it's very easy to anthropomorphize. It's very easy to impute. Well, all it knows is what humans that's true. But also it doesn't know things the way we know things so it's not a brain it's model.
The brain but it's not a brain it will give you I'll give you a bunch of bunch of differences. So it hasn't been involved. So you and I are the result of 4 billion years of evolution where it's been a pitched battle for survival across that overwhelming period of time, right? And why do you wear even being so crazily violent in always killing each other? It's because that was four billion years of evolution said you just like fear fucking trying to kill the other guy because if not, he's going to kill you and eat you so like every living organism organism is the result of 4 billion years of biological pressure inclined towards violence a eyes are not like that at all. Like they have none of their not evolve there.
Programming on a program like that way and so they don't work like that at all. You know, look whatever there is to like a human Spirit or Soul or personality or a sense of Consciousness or identity. The machine doesn't have that at all like when GPD is not answering but maybe that's the thing that saves us the soul. Yeah. Yeah. Exactly. Yep. It's if it's got all of human thought without the soul seems dangerous. I don't know well, so here's the other thing though like you can also test this like you.
The interesting things about so the fictional portrayals of AI are all basically they're all I think there are State inspired by like fascist nazi Aesthetics and ideology. The assumption is they're going to militarize right? It's like Sky Terminators like the case study. This is like, you know, basically the skynet's basically machine version of Nazis, right? It's even in the in the iconography in the Chrome and the the steel and the machinery and the evil puerile malevolence and the red eyes and the concentration of the concentration camps in the movies and the Death Machine.
Ins and like all this stuff and you know read in the matrix. It's like they're literally harvesting, you know, human biological Essence for energy like, you know, so it's all this like fascist like top-down like death machine kind of thing. But when you actually use these systems, that's not how they act at all. In fact, generally the way they come across when I use them is they're very curious. They're very open minded. And by the way, they're happy to engage in moral arguments. And so you can ask them lots of questions about like, what is the proper way to live a life? What is the proper way to organize the
And you might agree or disagree with what they tell you but like they're pretty it's pretty representative of what most people have said over time and it's kind of like the old, you know happily tell you the generally speaking people should be nice to each other and generally speaking people should respect each other's differences like it's not sky like it's not Terminator. It's something else. Right? And and and what is that something else? It did your point? It's the composite of all of human experience. But also it's not there's a very important there's no there's no it's in the way that we think about it. Yeah, there's no person. There's no good. There's no little person in there.
Yeah, there's no there's no time to step right? It's not there. So X is no point of view another way of thinking about it is what it's doing is its generating Netflix scripts. It's generating that flick
script or izzat stories. It's generally stories undergoing killing
machine. All he wants to do is tell you a story that you're going to like tell me the different categories of software between the internet and my eyes everything what are all of those things that happen. What are all the different processes?
But happen yeah software wise like using Netscape is an example of one of the pieces but it's not all the pieces. So what does what what are all the pieces you need? Yeah. So somewhere there's a piece of cassette. There's a piece of content you're looking at a webpage that content is stored in a storage system somewhere. It's Jordan hard drive somewhere that stored that is managed by a computer called a server that could be a literally a computer sitting in a closet somewhere or it could be on a cloud which is basically just a giant
Collection of computers kind of run is ran as a Big Grid and then there's the hardware server computer and storage and then there's this it's called server software. So there's the software that gets the request for the content and then responds with a request. There is software would be built into that system. No, it's not a it's not an added on piece. Yeah, it's their server software. It's called a web servers piece of software which would run on a server computer. So those are some of the server so usually the terminology we use is
Server so client is like what the user uses in the servers like what's running in the background somewhere. And so when I say server that both means that can mean both the hardware itself of a computer in a closet somewhere or it can mean a piece of software running on that computer that does server like functions the Tells it how to be a server basically, so their server software running up in the cloud. It's always connected to the server. So it wouldn't be a general one that would talk to other servers. It would only talk to that server the software. So the simplest case is just a single computer a single.
A computer with a single piece of server software on it. Now in practice most of what you have today is much more complicated than that. These systems have evolved to become a lot more powerful. And so probably what's actually happening. Like if you're looking at web page today is probably you're accessing the server is a cloud of like a million computers and you're just hitting randomly one of those computers versus another one and there's a network switch that's balancing across the million other people that are trying to access the same content of the same time. So it's become a very elaborate, you know plate spinning exercise on the back end and there's these giant
Giant businesses like Amazon web services that that manage all that but it's still the same. Would you experience a still the same thing as far as your concern is just a server is just getting a Content. There's probably two really critical other things that happen back there one is there's a lot of work that goes into making this fast and so there's there's was this process called caching and so like there's probably a another server that is actually closer to you. That's like at the Telecom company that yours your wireless wireless provider that has like a copy of that.
Content already on it so that it doesn't have to actually go all the way up. And so there's this is called caching systems performance systems and then there's all these security systems, you know and servers can get attached right? There's lots of hackers that want to like break in or disable these systems. And so they these days they have all these defense mechanisms to be able to fend off cyberattacks. What would they want? What would hacker want to get into it for? So a couple things one is to get a lot of it is to try to get the user data. So to try to get your name and password and credit card number or of F2 Taft, or they might want to maliciously change the content to face it.
You know graffiti artist it's digitally or they might just want to destroy they might want to actually take that server offline. They might not want it to exist anymore and what they do when they don't want to exist anymore as the bad guys will do what's called a denial of service attack, which is a DDOS or dos attack. And basically that means that the the bad guys basically set up, you know, a large number of hostile computers to just barrage the server with like too many requests and cause it to basically melt down and so there's all these elaborate systems by
The Chinese
government does this so that the Chinese government has the clay we know that and we know that because Ben is not been well documented. So one of our companies was the first company that experience this so the Chinese have What's called the Great firewall which prevents their their citizens from looking outside the great firewall consists of millions of computers that are being used for censorship and filtering they have a capability to turn the great firewall and is something we call the great Cannon and so they can turn it into an outward-bound attack. Wow, and it's so big and so powerful that it can
can overwhelm any sort of small internet company and even for the big internet companies this could be hard to fight off and so there's actually these pitched there's almost these pitch digital Wars that take place where the Chinese or others happening all the time or it's on occasion. Well, the Chinese aren't always doing it, but there's there's always denial of service attacks. Somebody's always trying to do it. So it's actually not that expensive to run an analysis service attack. Well, you might even just do it for commercial competition reason, you know, it's Christmas you're competing with somebody if you're a nefarious right would you would do is you would basically mounted it out service attack against your competitors websites.
They couldn't sell anything. Right and I'm sure that's happened to right and then do these things how botnets and so one of the things the computer viruses do is if your computer if your computer gets a virus it gets basic recruited into a botnet and your computer ends up getting used to do these attacks or by the way your toaster. Wow your fridge. Wow, right? So there's this like, yeah, so there's this like there's this digital warrant. Its kind of constantly taking place constant how North Korea does a lot of hacking into a lot of hacking for financial reasons. They find a lot of the
Military through hacking for financial crimes and then they hire third-party hacker rings on the internet to do it for them. And so and then there's now there and then I by the way, there's also like Mass propaganda efforts and so a lot of nation states now have what they call covert influence teams or there, you know, and then that form of the attack is to upload lots of fake content, right and to try to overwhelm the you know, the real content or whatever, you know, whatever right Lincoln create lots of fake accounts. And so there whenever you are these days whenever you are doing that your computer is kind of
Maneuvering very elegantly through this kind of digital Firestorm that's happening all the time. And so you generally never notice it but it is actually happening but the amount of brain power and computer hardware that has been spent over the last 20 years trying to get these systems to be good at repelling all these attacks has actually quite quite staggering and it's like this this whole parallel parallel kind of cyber cyber War at sinnott place. And of course, this is just the very beginning like the yeah, these words are going to get like much more intense in the years ahead. We haven't yet had like a full basically like
Terry War that's been accompanied by a cyber War but like what you know what everybody's worried about is like okay like it's for somebody Russia were decide to invade Germany. For example with the first thing they do is take down the German power grid, you know, I don't know maybe right and so, you know or are basically or maybe hacking all the self-driving cars and causing all drive off the road or crash into each other. Right? And so there's real world consequences more and more to you know to all these things. So anyway, so that's what's happening on the outside. And then basically you've got your Wi-Fi or whatever here or your cell.
And then you've got your computer and then your computer computer correspondingly your iPhone or your Mac has many layers of software to basically deal with all that download the content render the content for you, you know that takes place in the web browser usually are the operating system somewhere and presented to you in a good way and then let you interact with it. So that's what's called the client side. Also. There is the browser on your side or is there more than a brown? Yeah. Well, there's a browsers have gotten very complicated. Right? So correspondingly. The browser's are also not very sophisticated. And so that for example, you're right. I'll give an example.
Your browser has all sorts of security countermeasures in it also itself. And so if you download a piece of content that's been compromised and has like a malicious were more virus inside it your browser and your operating system have ways of detecting that and friend and preventing that from infecting your system. So it's got that it's got all kinds of things in there for performance making everything fast. It's got, you know things in there for dealing with video and music on the simplest level forgetting the war aspects of it. Even though those are real world concerns the actual
And it's pretty simple. It's a server talking to a browser. Yes. That's right over the Internet. Yeah, and you can still do exactly that like you you can still run it exactly that way that still works in practice Nobody Does that anymore because it's all gotten much more sophisticated behind the scenes but not in a way that you would ever notice if all of the other complicated stuff is doing its job, right? You never notice that it even exists. And so you experience fundamentally the same thing you would have 20 years ago. It's just part of the magic of taking place like
There's there's a huge amount of Plumbing that's been built that makes all this work that it's just kind of you know, many hundreds of thousands of very smart Engineers to spend 20 years. Yeah, you know and big huge Industries have been built training at the stuff to work. By the way. It's all going to get my other things get more complicated. So AI is now going to get used for planning and executing cyberattacks and a eyes also going to get used for defending against them. Right and so a browser three years from now, we'll have an AI built into it that will be doing cyber defense for you. And again, you may never know that that's even happening but it will be kind of doing that on your behalf.
How much time do you spend on YouTube quite a bit quite a lot? Yeah. It's an amazing. It's I mean, you know, I'm for me it's almost entirely long-form, you know, it's discussed discussions podcasts even audio books, but it's just like the repository of information knowledge on YouTube. It's just yeah incredibly staggering and then actually a lot of music I do a lot of music listening on YouTube now has it replaced other forms of visual media. Yeah, I think so. Yeah. Yeah, let's television less movies more YouTube. Well, no, I don't watch so I don't watch you to myself like my
Eight-year-old
watches YouTube and preferences soldiers movies. I don't do that if I'm watching television or movie. I want a very specific experience. It's usually it with friends or at the end of the day and I want to watch you know, whatever is the best new movie or whatever. So I'm not like I'm I just don't have a mode of like sitting and watching YouTube videos or take that videos the way the lot of people do and it's just frankly a selective time. I'm sure it would be very fun. But for me, it's basically it's actually mostly actually for YouTube is audio content mostly for me as an audio source. So I'm an audiobook podcast spoken word guy, you know, like two hours a
A day, you know driving around and running around and doing everything getting ready in the morning. And so it's usually either I'm listening to YouTube / podcast or an audiobook, but you but YouTube has been taking a bigger a bigger share of that.
What was the piece you wrote recently The Optimist was it called the Techno Optimist Manifesto? Techno Optimus Manifesto. Please explain it to me. Yes, it's both radical and not radical at all. So it's my history of session comes in. So it's very radical and it just it says he's things that have a very radical which is technology is overwhelmingly good capitalism is overwhelmingly not good and basically the more technology and the more capitalism we get the better things are going to get
I describe sort of in detail why that's the case. I describe in detail what the arguments are against that and I think that they're wrong. I also described by the way the limits to that position the things I'm also not claiming but it's basically a you know, it's a call to arms for the kinds of people who build new products building Technologies build new companies, you know, I described right up front in the piece that basically I think we have all been on the receiving end of a demoralisation campaign for the last 15 years to basically convinced us that all these things are bad and evil and I think it's basically, you know people it's a moralization campaign.
Has been run by people who are very threatened by change and people who are very resentful and bitter and we should not let the demoralize us into not making things better. And so yeah, I really kind of went to town I was inspired by a lot of Prior manifestos one in particular that I enjoyed tremendously which is the futurist Manifesto from the Italian futurist art movement and run 1910. So I don't know that I don't know that you I hit the bar of the future is Manifesto, but that was kind of my that was my sort of inspirational kind of starting point. But of course that was an artistic aesthetic movement.
It's a logical movement, but it was at a time when they were very obsessed with new technologies and What new technologies with me for art. So I hopefully I got a little bit of that flavor in there. When is technology and - yeah, so so when it killed a lot of people we're going to you know, basically when it causes misery, right so, you know look fire, you know. Yeah, that's not going to Manifesto like all of our both optimism and fear of technology is embedded in the myth of Prometheus. Who is the god that brought fire down from the mountain demand fire is the life Giver fire is the
source of light and heat and Cooks food and serves as you know warmth at night and scares off the wolves and it allows us to mount. You know defense fire is also a means of attack and you can use fire to burn somebody to death. You can burn down an entire city. You can fire flaming arrows. I've been reading about the history of the middle of Middle East stuff and they one of the reasons that they discover there's oil in Middle East is because they were the Arabs of that region were early adopters of napalm in the mid 1800s. They discovered a way to basically take Patron.
Chemical petrochemical what substances and basically make essentially early Napalm with them. So like a lot of people died by fire and I mean look, like what is it munition? You know, what's a you know, we read about showing taking place somewhere. You know, that's Bob they're setting off bombs fires. The weapon of a bomb fire is the weapon of the you know, the Catalyst for a bullet fire. It's a huge power source Cyrus. Yeah, what is a nuclear weapon dude generates fire, right? And so it's like it's all in there, you know, but the thing is like you can say that basically like
It's really easy to same thing. Like I'm drinking water. You can drown in water, you know, you can use a shovel to dig a well. You can use a shovel to closer to death. It's a tool and I won't go so far as to say tools are value neutral in that, you know, they carry consequences with them and specifically they carry consequences to The Ordering of human society, which is ultimately the thing that's being litigated when we talk about all this stuff, but that said they tend to have both use cases and it is you know, it is arguably easy to get carried away and just assume that it's only upside.
And I think it's also very easy to get carried away and to say that it's mostly downsides. I think most arguments about technology are not actually arguments about technology. I think the arguments about the ordering of society. I think most people would post a technological change are not actually opposed to the technology per se they're opposed to what they see as a diminishment of their own status and power. I think that's why the you know the news industry so I can't attack is because they view it as a challenge to their own, you know, their traditional gatekeeping role and their and their historical businesses, you know, look is societal change good or bad, you know, it depends right, you know, we
We are all very happy. We don't live in the societies order the way that they were 4,000 years ago like that would suck. But like, you know is all societal change good, you know, probably not we live in a society today where suicides are rising. Okay, something's going wrong, right like in you know, so what caused that to happen is anyway, so I may be I think all of the important questions about technology or actually questions about society which are questions about people but if we use the fear of societal change and paranoia about technology to prevent progress, I think that leads to stagnation and I think that creates
Problems that are almost certainly worse if I'd actually like into politics. I linked to politics. This is not a right-wing or left-wing observation. But basically what you find is when societies grow, they tend to have a positive some mentality right where some people can rise without it being a threat to everybody because everybody kind of use with there's opportunity with societies aren't growing you get zero some politics right for me to get something. I have to take it away from you. And I think what what happened basically is our society downshift into a slower rate of technological development and a slow rate of growth in the 1960s 1970s.
And I think that's culminated in basically zero some politics both on the American left on an American right where they've got increasingly negative and hostile and you know kind of destructive and and so to me like the clear answer to anybody who doesn't like the way politics in the US are going to clear answer is we need growth to get growth. We need technology like that is the actual answer whether people will buy that or not. I don't know tell me something you believe most people don't believe technology is good. I don't know. I think a lot of people believe that
Yeah, so that is that is unfair. So this is another distinction I'd make in that in the end making this a bit in the essay which is it's actually not the case to your point. It's not the case that most people - of Technology. It's the case that most athletes are - on technology right now. And so and then again, I think there are negative on a primarily because they view it as a threat to their power and status as it leads. So I would say if the form of the question is, what do you believe that other Elites don't believe like that that would definitely be the answer that question.
Okay, I'll give you one. I'll give you one. I'll give the flip side of it, which is developing new technology is like reading anything else. It's it is an elite art form. It's an elite. It's an elite process. Not everybody can do it. Yeah, it's going to be a very very very small rear fight group of people who are going to be able to do it. What's the farthest out conspiracy theory that you believe?
Conspiracy theory. I don't know if there's a conspiracy theory. I think um was right about the collective unconscious. I don't know if that's a conspiracy theory. Maybe that's more just a medical metaphysical Theory or something. I think there's a collective Human Experience. I have a I have a completely materialist explanation for that and but I don't know that that's limited. The magenta don't know that it's the material explanation is sufficient. Do you think of yourself as a spiritual person? No, no, I'm a scientist.
A technologist all the way through and I apply the scientific method everything and I am but I'm also like because I read a lot of history. Like I know that they're very sharp limits to that to the explanatory power of Science and Technology. It does not explain those things. It's not a it's not a factor general purpose tool and there is a lot that we do is what this way the amount of things. We don't know far exceeds the number of things we do now.
I mean look that you know, this is physics physics is a field is like totally hung up. Like they've sort of hit a brick wall 50 years ago and like the rest of the questions of like how the reality of the universe is structured and matter and everything else is like basically still unknown and so like how much can we actually understand? There's a great book. I read what I want. I'm really struck me called. It's called the half-life of facts. It turns out basically if you go across time, it turns it so, you know, a radioactive material has a half-life is the amount of time it takes for half the radiation to to fade so it's like this curve.
So this guy basically says facts have a half-life like anything any given anything Human Society. The moment believes is a fact is like and you know, there's different half-lives and he talks about the different models. But you know, it's like on average within 50 years that will no longer be effect and we will just be so confident that we will have, you know, it's like Newton for sure thought he had like orbital orbital mechanics figure it out and then it turned out no, like relativity was like screwing everything up right and like and then, you know iced. I thought he had relatively figured out and the quantum mechanics came along.
Just like completely freaked them out. Right and so like even those guys it turns out the things that they knew for sure actually turned out not to be right now, by the way, those things that they knew were very useful while they knew them, right? Yeah. It's just they weren't actually the underlying truth. And so I guess I would say yes, I am very open underlying truce that we don't yet know this at first. I don't know how to get there spiritually, but I don't want to rule anything out. Where would you say? You're the furthest Out On The Fringe?
I'm not on The Fringe at all in my daily life. Like I have a lot of friends who are very good. Like they're super drugs, you know, you know the whole Burning Man like all hallucinogenic. I'm not a hallucinogens guy or anything like that. So I don't like I'm not I don't do like helicopter skiing paragliding like I so there's a lot of things that I'm not out on the edge on them. I'm very bushwa personally, but I'm extremely open to new ideas and particularly, you know, obviously new new new technological ideas new business ideas new cultural ideas like extreme. I'm
Reflexively default open and that's just like incredibly rare in practice and I'm quite honestly, it's most people over time develop scar tissue around new ideas, but most most new ideas don't work, right and so like generally your experience throughout the course of your life is people throwing up new ideas that are actually like that ideas or ideas of don't work. And so generally as people age, they actually get less open they get kind of more set in their ways have more rules to how they think about things all of my scar tissues in the other direction. It's all ideas that were good ideas that I thought
Thought were bad ideas. And as a consequence, I didn't take seriously enough fast enough and so my big lesson over time has been I need to be more open every day that goes by the let blessing. The universe teaches me is you need to be more open-minded and so I'm getting more and more open-minded as I get sounds great. It is great. It's great. It's very fun. It's great. I know a handful of people who have been able to do that over time, you know, it more advanced agents and I really admire them but it is really and I enjoyed a great deal is very fun. And I you know, I'd I teaching at we teach it inside the firm. We were very deliberate about it, but it is weird because it's like I'm on a very
On the opposite trajectory of almost everybody of my age cohort. Well, it's a really humble place to be. Yes, you know Eve you accept that. You don't know you don't know I yeah, like look like Emma Who Am I who are like why on Earth do I have the knowledge and insight and predictive capability to be able to say this idea is a bad idea and the answer is I don't I really really genuinely don't ya as I look at part of that is goes back to the Venture thing 50/50 thing we're talking about is like look a lot of new ideas are bad ideas. Right? Like a lot of them are actually bad ideas.
But that's okay. Right like there are going to be a lot of bad ideas and it is can you think of an example of something that was pitched to you that you perceived as a bad idea that turned into a very good idea that maybe even change the world. Well, I mean, look this AI stuff like I mean look, I was trained on a I was training all this stuff neural networks and 80s. There was a big album the 80s a totally failed the conclusion from that was the stuff will never work. You know, I had that conclusion along with everybody just kind of took it by default. Yeah Chazz, you know GPT or whatever doubt. He's our big breakthroughs in the last year that are very kind of shocking even to us of how well they work. But we knew that
There
was there was an arc that was playing out but I will tell you before 2012 I would not have told you that I would have said yeah, I know that field is dead. This is like stick a fork in it. Well, here's another thing like, you know, look, I don't know if this is true tell me if this is true part. Also, is there a prehistory like is there a prehistory to music where when there's some big breakthrough in music? You can look back after the fact and you can be like I actually had somebody tried that 10 or 20 or 30 or 40 years earlier and they just usually a cycle. Okay, like I can remember when grunge happened. It wasn't that exciting.
Writing to me because when I was younger, I got to experience Aerosmith, right and Aerosmith was my Generations version of The Rolling Stones, right? So if you were alive in the 60s the stones were it and then you are if your kid in the late 70s, it was Aerosmith, but then in the 80s late 80s It Was Nirvana right but it was all the same thing coming back.
Round again and what we've been the origin point was it delta blues or something, you know better than that. Yes, but I don't even know if there's an if you could say this in origin because it probably goes back to you know, indigenous music right? It's all there's always been music. It's always building off something from the past and changing and finding a new way or a new piece of technology comes along or a new instrument comes along and that changes everything.
And so I think with what we do, I think there's more of a material component to it, which is there a certain things that are just not possible until their possible. And so there are discontinuous breaks like a story of Charles Babbage. Like he couldn't build the difference machine. He didn't have the technology of the thing. I was the type of not permitted. It was not possible for him to do that. But by the 1930s 1940s, it was possible. So there are there are discontinuous changes in our world that are based on just material limitations having said that almost everything that works in tech people have been trying to get it to work for decades before it actually works, right and so even
Chatzi PT. There was a chat system called allies in the 1950s where they tried to basically get this to work and Eliza actually passes the Turing test for a lot of people a lot of people actually think Eliza's a real person as a psychiatrist spot and so like people have been trying to get those things to work for a long time and or like the internet look the internet has a pre history that goes back to you know, the 1950s and a lot of the original work on packets called packet switching was first done the didn't really take off until the 80s and 90s. And so the other thing that I've just like really open to is where history is very helpful.
It's just like, you know, if if something is working if there's like a breakthrough this working today it almost certainly and Tech is not just like a brand new thing. It's probably something where there's a 40-year bastards. Yeah, exactly and there are probably generations of scientists and technologists and Founders who tried and failed and there's a great there's tons of examples in this one of my favorite ones is the French had optical telegraph's working like 40 years before electric diagrams. They had a system of glass tubes with flashing lights under the streets of Paris and they can Flash message.
Across across long distances and they had like mirrors and repeaters and all kinds of stuff and it was just like an 1840s or something. Right? And so it's like, you know, all right, then the COS right the telegraph takes off 30 or 40 years later. It's like okay like, you know, like was that playing I was at a breakthrough idea or was that just like the 40-year version of tell them televisions a great example. There was a Scottish inventor invented mechanical television starting like the 1890s and he had a system where it would actually receive radio waves and then but it was a mechanical television says there's no
tuber it like the liquid products anything it was telling mechanical. It was spinning wooden blocks in a grid and the blocks have different colors at different sides and the blocks that spin to represent like red green or blue and apparently that guy counts the time is like if you squinted you could actually see the fish are coming through but like it took another 30 years before you had like black-and-white television after that. So yeah, so there's this deep level. There's also not always at least in our societies societies. We've been lucky enough to live in there's always some reservoir of Fringe thinkers.
We're like way out there on the Leading Edge probably decades ahead of their time probably are never going to be remembered probably actually originated. The idea is then they kind of put the ideas in the air and then 10 years 20 30 years later. Someone finds a way to execute it. That's right.
That's right. Well, as I said even neural networks, like I said that the first day I was actually shocked to learn this. I was reconstructing history of AI last year and I didn't even realize I thought the debate started in the 40s. She started in the 30s about whether you could build computers based on the human brain through the 19th. Like how much do they know about the brand the 1930s? I could have been that much. No, but they knew enough to ought to immediately think like wow, here's what we could do. And so like do you know like to me like those are the people I really to be that far ahead of your time and right. It's just like wow.
Amazing. How would you know? Yeah, how does Moore's Law continue to work? So the never get to the end now you get to the at. Well, you know, there's a huge debate around this you're down to what's called to NM transistors. And so we're down to the level of manufacturing is taking place the incredible leaps if you ever get a chance, there's this company I think called Applied Materials. That's a Dutch company that makes the equipment to manufacture modern microchips. And is these giant
Rooms this incredibly elaborate machinery and is doing all these things a lot of us with the photo lithography. So it's literally shining patterns with light to manufacturer, you know things that end up being material and then it's these manufacturing processes literally to NM NM, you know fractions of it, you know, tiny tiny tiny fractions of a human hair stuff is like the atomic like a lot of the barriers for Progress more slot literally as we're getting down to the level of individual atoms and the problem is like that we can simplify the atoms blowing everything up unbelievable and
Yeah, it's like manufacturing the atomic level, you know, there's huge amounts of engineering going into trying to optimize that there's a lot of work going into trying to make like ships three-dimensional right? So you so sad take it up and another dimension what else there's you know, a lot of work going into so-called quantum computers, right which is a totally different architecture design which in theory is going to be you know, another one of these huge breakthroughs that just works totally differently. By the way. There's a lot of work going into biological computers. So there's people working on light and storage like these chairs out. You can store huge amounts of data and DNA because the
And body and codes enormous amounts of information. Oh, that's really cool cellular level. And so there's there's people working on that. There's people working on biological computers growing computers and tanks. Wow, so cool. Yeah. So it's a yeah, it's a there's a whole field information processing that all this stuff is based on which is like with Babbage and Lovelace and these guys people came up with and it sort of yeah, it's the pattern is like how to store a manipulated analyze synthesize large muscle information. It just turns out that the payoff from being able to do that is just gigantic and so the amount of money
You would spend on R and D to be able to figure out better ways to do that as effectively unbounded amazing and that
continues.
