Chamath Palihapitiya Weighs in on the Biggest Issues in Tech

do you think this administration gets what needs to be done when it comes to encouraging innovation versus regulation I mean I think the the practical answer is that it is too nuanced to really understand from so far away I think the good news is things like these meetings probably say there's some amount of effort being given but the reality is most people in Silicon Valley don't even understand what a is and so the idea that you know until we really grapple with what it really means what actually exists you know fact versus fiction it's probably going to take many years before government really understand what's at risk and what's at play we saw Mark Zuckerberg testify before Congress many of the lawmakers didn't seem to quite understand how Facebook works that said do you think tech needs to be regulated and do you think Congress can design the right regulation well I think the right way to think about this is when technology was a small part of the economy it was probably best left alone and I think we did a good job of self-regulating now the reality is technology is pervasive right there is no industry that isn't being refactored or remade by something new using technology at its core and so with that I think should come a natural expectation that we need to live by the same rules as everybody else says so a few months ago you talked about how you feel tremendous guilt about what you built at Facebook it caused a bit of a stir as some things you say do and you later said that you genuinely believed Facebook is a force for good in the world that was before Cambridge analytical and there may be many more Cambridge analytical's we have no idea how many we have no idea how many millions or even billions of people may have had their data compromised so how does that impact your your level of guilt now look I think the reality is that Facebook is probably going to be the company that leads the way out but the reality is that there's a bigger problem which is not a facebook problem it's a question amongst all of us as consumers we have grown addicted to things that are free and we very rarely pay for things when asked to on the internet it's just not an expectation but in the rest of our lives we actually expect to pay for things for doesn't give us free cars you know whole food doesn't give us free grapes we have to pay for all of these things and with those payments comes expectations and rights and privileges etc and so similarly I think what we have to do as consumers is ask ourselves how much of this do we want to have for free and if we want rights how much are we willing to pay for those rights and those rights should extend to things like data privacy etc I think in that is the solution to future versions of this problem so you think Facebook should do a subscription model I think that's two tactical of a solution I think it's a bigger question at hand which is we have all assumed that the only way to make money on the internet is to give software worry for free and then use advertising to make up the difference the problem with that is that we have a very weird and undefined gray area between who is the consumer who is the customer and how much of a product are you a part of and I think that's where you have to introduce things like payment and subscription so that those marks are clear for example when you look at Netflix as business model it is unambiguously clear there is a buy party relationship between Netflix and the consumer Spotify has the same thing Apple in many ways has the same thing when you're a customer of Amazon Prime you have the same thing and so I think there are many examples now of an evolution of internet business models and for example in my organization a lot of what we talk about is that and how do we move away from just relying on ad supported businesses and think about an embracing subscription because it clarifies a lot of these problems so let's talk about something we definitely don't get for free and that is a Tesla you once said that you think Apple should buy Tesla and make Elon Musk CEO that was a long time ago the last few weeks we've seen Elon Musk calling analyst questions boneheaded and boring we've seen bad April Fool's jokes what do you think about that kind of behavior is that okay so unlike most people who read the peanut gallery version of that earnings call has a large holder of the convertible bonds I actually listened to the call and honestly what I would tell you is that I think that a lot of the stuff was overblown now in fairness to public market investors they provide critical liquidity for his companies and specifically in Tesla's case they are at a critical point where they may need more money and so I do think it makes sense to make sure that you have the right kind of exchange I'm not sure though quite honestly whether quarterly earnings calls are the best ways to get at them I think they're too perfunctory in general and for business as nuanced as Tesla there's frankly really no opportunity to ask the right questions in fact what I would rather see Elon do is take the four or five analysts that really understand the business and at the top of the list I would put Adam Jonah Smith and that would bring him under the tent and say let me really explain these businesses to you and then have you articulate that to the rest of the Wall Street and I think that would probably be a step that bridges the gap between people's interpretation of the call and people's frustration with the actual content of the call let's talk about Apple you know in the past you've talked about how they have a problem with innovation we've seen however Apple earnings and I know we don't love quarterly earnings but defy expectation just by being stable and sort of defying this the smartphone market slump do you think Apple still has an innovation problem I think that Apple has a fantastic cash machine I don't think Apple has demonstrated yet what the next lily pad is and why that's so critical in technology businesses is that the underpinnings of your business model are constantly changing so you know a simple example if we move from ad supported businesses to subscription but we may move from subscription to something else there may be something that comes after a phone perhaps it's a VR headset in all of this is a lot of change and so in order to accommodate change I think the best course of action is to try many things be okay with failure don't be embarrassed by it it's learning and it'll help you refine the ultimate thing that works and so I as a investor would love to see more public facing experimentation that says we know that the iPhone business isn't going to be around forever and so we're going to try some things at scale now in fairness to them they've tried some things that are for example air pods are fabulous that is an unbelievable product I think everybody who uses them loves them but certainly not the price point of an iPhone it's an excellent point it is not going to be the thing that replaces the iPhone business and so you need to find multi hundred billion dollar or trillion dollar markets and for whatever reason there are only a few health care education autos housing and so they have to try something big I think you've talked about some public market stocks you think are undervalued Fox for example what else where do you see opportunity that public market investors aren't seeing yeah so if we go back to where we started I really think that over the next 15 to 20 years consumers are waking up to the realization that they are going to want to have rights and be the ultimate customer what that means is I believe businesses like Netflix Spotify and there are many others that are subscription-based are going to do incredibly well and in fact I think that they will massively over perform other kinds of business models and in part what that means is those other kinds of businesses ad-supported businesses will get revalued and re rated in my opinion there will also be the sceptre of regulation there will be the sceptre of privacy risks and so to me where we are spending a lot of time is finding companies that express that view subscription-based relationships with customers why is it the industry changing faster why are you one of the few people out there talking about this I think there are two reasons the first is that there is a dirty little secret in Silicon Valley which is that there's not a lot of incentive to change because technology markets are frankly quite small still and they're growing very very quickly and so the returns you generate by basically staying the same or high enough to keep you in business for a very long time so the fundamental underlying incentives for general partners or venture capital firms to retool don't exist now why are we doing it differently because to be honest with you I just think it's a poor business decision I think that if you put the best people on the field and in order to get those people you close your eyes and ask the same questions and make the same judgments you end up with a more diverse team because you find that there are people you would otherwise exclude who are frankly better than the people you would otherwise pick give me evidence is it showing in your returns yeah yeah and in fact you know the way that we look at it quite simply is like how performant are we relative to the S&P 500 and it's dramatically over performant and again I you know I think back and I say who is built the top decile firm in Silicon Valley over the last 10 years right who can compete with kleiner or Sequoia or Excel and I would say that there are three organizations andreessen horowitz Y Combinator and ourselves and now we've all taken different approaches to get there my organization only started seven years ago so to have done this in such a short amount of time I think represents a commitment to this idea that really good thoughtful hiring of people who are qualified independent of race gender creed etc just turns out to be the smartest business decision you can make so why not do it one of your new experiments is called capital as a service where you basically built this machine or this algorithm that will identify companies global entrepreneurs around the world without any humans being involved and basically the computer decides whether or not they get funding what sort of results are you seeing what does this model actually work yeah in fact you know humans do get involved it's just that after the computers make a recommendation and what we found even in our first batch was these were businesses that 40% were founded by women 80% were founded by minorities they were companies that spanned 17 countries of the globe many of the states in the u.s. that would never have received venture capital funding meaning not California and not New York and so what we find is actually what you'd think we find which is there are amazing people everywhere and they're trying their best to solve really important problems that improve the quality of life of the people around them and when you take a need-blind approach and instead ask simple questions that had everything to do with the quality of the business versus the demographic makeup of the founder you invariably find an amazing collection of people and you intend to scale this to 10,000 investments next you know III have told the team that my goal if they can execute and build this thing for scale is to support a thousand companies this year and ten thousand a year every year thereafter now listen part of me know managing a really sophisticated technology team is to set audacious goals it's not fury at whether we'll be able to build it to such a scale and to be honest with you it's also not clear whether 10,000 investable opportunities a year exist but just by mandating something like this I think what it allows us to do is really ask the hard questions how do we train our algorithms how do we use data judiciously how do we help businesses that may be very close to funding get over the line and be better how do we actually become more democratic in teaching people how to be entrepreneurial you know how do we integrate with the massive companies like Amazon and Google so that people can start businesses in an even simpler way so it's forcing these conversations and frankly in many ways it brings me back to my roots of just building really interesting products that start with very small steps but can turn out to be quite transformational over years speaking of AI and algorithms you know I know you see a big opportunity there how are we thinking about this and are we thinking about AI in the right way I think that AI is sort of a misnomer and the reason why it's a misnomer is that people think about these computers making decisions for us but there's actually an important step that happens before it which is how does the computer get trained well a computer gets trained with enormous amounts of data and so really what we are invited Nai and computers are there not necessarily unbiased they're not and that's about the iteration of how things things you know improve over time but the point is that this is a land grab for data and you know why there's so much concern about these large companies the large internet companies is because of the enormity of the data that they've collected because on the one hand you could use it to improve basic core services but on the other hand it may be too much power in the hands of a few and so what we really need to do is have a more nuanced discussion when we talk about AI and we talk about the perils of it it really comes down to who is collecting the critical information that will train our computers over the next 20 to 30 years to make important differentiated decisions on our behalf so who is I mean who's who's who's in the lead well there's the obvious companies in certain categories so if you said you know who is going to be the leader in collecting data around consumption I would say it's Amazon if you asked about you know intent it would be Google if you talked about content consumption it would be Facebook but for example in health care there's no clear winner yet in education and adaptive learning there's no clear winner yet in financial regulation the issuance of credit there's no clear winner yet so there are these many many markets where we don't know yet and so now it's about figuring out how to start companies quite honestly who think about this as their core primary reason to exist and then collect data and then use it in a really thoughtful and honorable way I have to ask you about this back so you've raised 600 million dollars to help startups go public and six million six hundred ninety million dollars excuse me to help startups go public unconventionally everybody wants to know if a start-up has been chosen has a start-up and chosen yeah I'm trying to read your body language you're very excited about it don't call them would you consider an overseas company if they were consumer I really can't comment okay but why you know part of it is that I want I want to respect the confidentiality of the process but also part of it is just the practical realities of SEC regulation which I want to honor and so until there's a deal to be done we can't say anything but I really think by the way more generally speaking we're going to find a lot of utility for products like this because what it allows us to do is bring scaled financial capabilities and tool boxes to tech businesses and I think what that will do is accelerate great companies to being fantastic

Channel: Bloomberg Technology

Views: 118,835

Keywords: Bloomberg

Id: hZY986XSHxM

Length: 15min 6sec (906 seconds)

Published: Tue May 08 2018