Elites & Experts with David Sacks

the media has been having a collective meltdown about what Elon is doing for the last month first they accused him of being a Thanos type super villain for snapping 50 of the employees out of existence then they said that he was starving the employees by charging for lunch uh and then most recently they said the company was going to have an imminent collapse why because Elon offered the employees a generous voluntary severance package if they didn't want to return to the office and work hard and it's now two weeks later and the site is still running just fine there's been no collapse and yet all these media personality and uh you know these pundits were tearfully saying their goodbyes on Twitter as if the site was gonna you know implode a couple of weeks ago so you have to understand that he is being attacked in this ridiculous way [Music] welcome to another episode of conversations with Coleman my guest today is David Sachs David is an entrepreneur Tech investor film producer and the co-host of the all-in podcast which I highly recommend he's General partner at craft Ventures a venture capital firm he co-founded he was the founding CEO of PayPal which makes him a part of the so-called PayPal Mafia which includes folks like Elon Musk and Peter Thiel he was an angel investor in Facebook Uber SpaceX Airbnb and many other successful companies and he produced the film Thank You for Smoking which was nominated for several Golden Globes David and I talk about his background as an entrepreneur and investor we discuss his critique of what he calls the expert class as well as the professional class we talk about the problems with Elite colleges and universities we discuss the attributes that made the PayPal Mafia so successful we talk about Elon musk's takeover of Twitter and his controversial leadership style and finally we talk about our mutual hobby chess so without further Ado David sacks [Music] foreign of the all-in podcast me and my girlfriend both are actually and so that's the the majority of where I've encountered you and your views are on that podcast which I really recommend to fans of this podcast I think you'll uh they'll enjoy that one um so I guess before I get into all the various topics of mutual interest that we have I want to know just a little bit about your bio did you always want to be an entrepreneur and Tech investor or or was that a goal that you had as a teen and young adult or did you kind of stumble into it uh probably both um you know when I was a kid I I was sort of entrepreneurial I sold candy and Pepsi's at soccer games and things like that and uh you know the classic Lemonade Stand but I didn't know how to get into entrepreneurship I graduated Stanford in 1994. this was the year before um the internet really took off in a commercial way and it wasn't clear how you got on an entrepreneurial track and um and so I ended up going to law school like most people of that era who didn't quite know what to do and then eventually I got a phone call in 1999 for my a friend from college Peter Thiel who was starting a company and that company ended up becoming PayPal and he recruited me into it and that's how I kind of got into the whole Tech thing so you are a member of the so-called PayPal Mafia which included people like Peter Thiel Elon Musk Reed Hoffman and a surprisingly High number of other extremely successful CEOs of major tech companies um so I'm curious in your view why has the pay for PayPal Mafia gone on to be so successful like what was it that you were just a highly talented self-selected group of people from the beginning or was there some lesson learned from the PayPal experience that that spawned all of these other successful companies I think it was both those things I think it was the people I think it was the Lessons Learned I think it was also the timing so on the people the thing to understand there is that the PayPal crew was primarily recruited through friendship networks so Peter recruited his friends who he had gone to college with at Stanford um those people then recruited their friends Max levchin who went to U of I recruited his engineering friends from college and and a big part of the reason why is no one wanted to to work for this company you know we were a bunch of total unknowns in their 20s um I don't even think Peter was 30 yet and uh doing a startup in the late 90s was still considered to be an incredibly risky thing to do so um Peter was unable to really recruit anybody except for his friends and um and so that's how the initial team got recruited we didn't use Headhunters and recruiters and so forth as a result of that the um the personality types were um they were sort of cut from the same cloth there were these very entrepreneurial types and so when PayPal was ultimately acquired by eBay and then eBay kind of was very corporatist in their culture and they kind of drove out all these entrepreneurial types they went on to create uh more companies they were kind of wired to do that the um the timing of it was such that PayPal was uh it ipo'd and then was acquired by eBay in 2002 is really it was the first successful IPO Tech IPO after the.com crash and so the timing was that everybody else had kind of given up on Silicon Valley the joke back in the early 2000s was that B2B met back to Banking and b2c meant back to Consulting I mean everyone had kind of packed up and gone home and at that very moment you had this Exodus of talent from from PayPal who wanted to create more companies that had a good experience they um you know they weren't disillusioned the way that so many people were after the.com crash and then the final piece of it is they had the playbooks they had the lessons that had worked so well at PayPal specifically in being able to hack distribution you know creating viral products and those playbooks would go on to be used by the PayPal Mafia companies in the following years so you had this Confluence of very entrepreneurial people having a successful experience knowing the playbooks and having the field basically to themselves as a result of the.com Crash and that enabled us to have an outsize impact on the next call it 20 years of Silicon Valley so is it true that you only invest in software companies uh and if so you know why not Branch out into retail with a mind like yours do you think you're leaving money on the table or is there a philosophy behind that I I've generally learned that it's very hard to make non-software businesses work on a risk Return base they're just so much harder actually the problem is as soon as you're dealing with the physical world you're dealing with cogs you know like the physical components of products they're actually much tougher businesses to make work and also the the um the upside isn't as great so operationally they're more more complicated it takes it takes actually a really good operator to make a physical world business like a low margin business work whereas with software it's a pure you know it's a high gross margin business it's um if you the thing that Bill Gates figured out about software that made him the richest man in the world is that all the cost uh consists of creating the first version the first instance the product every subsequent copy of the product is free and so if you can actually create Mass Market software you know it's um it's pure uh it's a pure you know intellectual property business it becomes extremely profitable um at um you know at high numbers of customers so you you start with something that um you know is very high margin uh and at the same time the wind is at your back there is a huge demand for more and more software business is always changing and so there's always more needs for software and it you know as a Founder you really only have to be good at two things you have to be able to create a product that people want and then you have to be able to distribute it or sell it and um or at least recruit a partner who's good at sales I find that's like a much easier playbook for um Founders to implement than again running an operationally complicated business and when I've branched out and invested in some of those more operationally complicated businesses hasn't worked as well as what I've invested in either the pure software or sort of pure Marketplace business so the point you make about the first copy costing money and every subsequent Copy being free that's a point that has been made about the music industry and the the move with which I'm old enough just barely to remember a world with CDs and the move to mp3s and the frenzy about you know LimeWire and FrostWire and pirating around say 2006 giving way to the Spotify and apple music era where it seems like major artists you know they can post their uh they can post their dividends from thousands and thousands of plays on Spotify and it seems pretty meager relative to an earlier era uh precisely because it costs nothing to Simply you know to stream basically an MP3 so and and I suppose I haven't paid attention in the past couple months but I know earlier this year uh Spotify stock was going down in value uh and there was a sense that maybe people had overestimated the the soundness of the streaming model uh do you have a take on that on Spotify in particular and on the soundness of streaming in general I don't have a specific take on streaming businesses I think you make an interesting point that um that music and Hollywood in general meet the media business does they are intellectual property businesses as well and so they have a similar Dynamic where all the expenses in the first copy incremental copies are free and so therefore the more customers that you can sign up the more profitable they become and this is why um you know both Hollywood and the tech industry have benefited tremendously from globalization you just want the markets to be as big as possible and it just makes the winners as big as possible the same thing has happened in sports right this all tended to happen I think it started in the 1990s where uh you know Michael Jordan uh became not just you know a famous American athlete but a global you know Global athlete same thing with Tiger Woods and golf um you had or you know JK Rowling in um in books you know and you could go on is that you started seeing the creation of these billion dollar type winners because the markets just got so big they became totally Global the the difference between Tech and I think entertainment is that historically Tech has been a more open ecosystem there have been ways of getting distribution that don't rely on going through Gatekeepers and I think the big problem in entertainment whether it's music or movies or any of these types of content businesses is that um Hollywood has kind of um a cartel of a small number of Studios or you know big media companies and they tend to own distribution and so most of the profits in that business tend to accrue to these like gatekeeper type companies the very very best creators are able to demand a deal that sees them rewarded but the long tail of creators just don't do very well in technology it's been the case that uh that again there are ways of getting distribution that do not rely on going through Gatekeepers so in the case of PayPal we figured out that we should make the product viral in other words that users would recruit each other the distribution was person-to-person or P2P Facebook used similar tactics where they would basically Slurp in your address book and invite your friends who are on the product yet first it would look to see who was on there and it would make it very easy for you to friend them uh and you know other social networks did something similar there's a whole bunch of these tactics these these viral tactics that have been turned into playbooks or called growth hacking and so it's possible for that new startup to get very big without um having to pay an exorbitant tax to uh to Apple or Google I mean to be sure there are Gatekeepers now in the mobile world and we're seeing this play out right now in this um in this uh few that that Twitter and um and apple are having because it seems like apple is now threatening to kick Twitter out of its App Store that was the latest news so there are absolutely these gatekeeper companies that have now emerged in in Mobile and there are reasons to to fear that the mobile ecosystem is much much less open than the web was but certainly in the Heyday of the World Wide Web um it was completely wide open and it made it possible for Founders to capture the fruits of their labor the benefits of what they had created without having those Innovations effectively be owned by the um by the gatekeeper companies and a similar breakout has not been possible in the entertainment business [Music] what are your favorite holiday meals activities and traditions whether it's Thanksgiving or Christmas cooking probably comes to mind and 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membership and 10 off your first order so sign up today at butcherbox.com Coleman and use the code Coleman to get 10 off your first box and ground beef for the life of your membership that's butcherbox.com Coleman and use code Coleman to claim this deal I just want to know we're talking on November 30th and the news is moving so fast on Twitter and apple and other topics we're going to touch to that uh By the time someone listens to this things may have changed slightly but um so I want to go back before we get into Twitter and Hollywood and some other things I want to discuss I want to talk about college because I've heard you on the all-in podcast have a critique of of colleges that I think is uh in line with with things I've talked about on this podcast I remember being a sophomore in college and reading the The Economist Brian kaplan's book the case against the case against education which argued that almost all of the income boosts that you get from having a college degree comes via the signaling value of having completed the degree rather than from any new skills that you acquired by actually attending classes and uh like like most great arguments it the second I heard it it seemed sort of obviously true in retrospect but was I guess counterintuitive um at the time you know the notion that college is effectively a four-year IQ and work ethic test rather than an experience that actually makes you a smarter and more valuable worker uh just made sense of a lot of the strange Dynamics and busy work and um you know everything else that I experienced at Columbia I'm curious what what is your general critique of college and the values that they the value that they do or don't transmit to students yeah it's um it's interesting I I think I had a similar experience uh as you did was it like almost 30 years ago now um my way into this actually is to look at polling data if you look at the political scientists uh Roy Tashara he's written a lot about this that the biggest divide in the electorate is um is over whether somebody has a college degree or not um this single variable accounts for something like a 30 point gap in uh voting preferences but as between Republicans and Democrats and uh it's it's quite stunning I think this is probably the biggest Gap in the electorate it transcends other types of divisions and um you know Tashara writes a lot about this he calls the the folks with college degrees it's the professional class and those without college degrees or the working class America is a predominantly working class country it's about two-thirds working class about one-third professional class but the um it's all the college graduates who control the institutions because you do need these credentials and degrees and um and I think this is fundamentally what is creating all of the sense of stress and fracture in our society is that the um is that the professional class runs all the institutions including the colleges uh for their benefit and in accordance with their ideology and it is not the same ideology as the majority of the country and that sets up in a democracy that is unsustainable somehow and it sets up this um I think this fundamentally is the battle line of what's going on our society and just to be clear Tashara is a the Democrat you know back in the early 2000s he wrote a book called I think it's called the emerging Democratic majority in which he predicted a a coalition uh that would create democratic presidents as far as the eye can see as a coalition of um women minorities young people and and working class and they would come together and and to Sure saw this as a very sustainable majority um and he was hailed as a prophet within the Democratic party when Obama uh seemed to create that very Coalition uh to become a two-term president but lately over the last few years he's been warning that the Democratic party has abandoned its working-class roots it's become a professional Class party and he thinks that it's moved far to left on social cultural issues that basically it's developed this kind of Elite and a feat professional class sensibility and um he's been kind of warning them to to course correct around that in any event this is sort of like what's happening politically I think that all of this is ultimately Downstream of the universities I mean the universities were I guess a question you have to ask is why does a college degree create this 30-point Gap in voting preference and in you know it's not just uh political party affiliation it's also like on every hot button social issue you could pull on uh it creates these large divides and um and I think the simple answer is that um so the colleges and the education the elite education system in general were captured by the far left a long time ago and they've kind of turned them into indoctrination centers and re-education camps and so the fundamental quid for a quo of our civilization is if that if you want the economic and social advancement that a college degree brings you you have to submit to voluntary re-education for four years it may be longer and I I tend to think that you know so many of our political divides are essentially Downstream of this this problem um now I I do think that there are different reactions that people have to this phenomenon I tend to think there's three types of students or student reactions to this so I tend to think that the first is that you can rebel against it um I tend to think that maybe one percent of the students do this and then and those those people tend to become either Founders which is why I can stay in business having the views I have um or they tend to become kind of more conservative or Independent Media personalities I think the the vast majority are kind of go along to get along they let this ideology wash over them they're more interested in professional advancement and so they're not super ideological but they're kind of predisposed to accepting the the sort of the dominant ideology of the of the this professional class I'd say that's probably about uh 80 of the students and then I think the other nineteen percent become are True Believers and then they go on and staff uh they they tend to do the professional class jobs that don't pay very well uh so I think the the sort of go along to get along types go work at McKinsey and Goldman Sachs and the True Believers go staff the um the non-profits and the activist groups and the Democratic party and the foundations and um and and the media you know they go on to to Media sort of mainstream media jobs and um I I tend to think this explains a lot of the um the division in our in our society right now yeah so I'm sorry that was a long time dissertation well you have a lot to say about it and uh so I was definitely in that one percent that rebelled when I was at Columbia I tried writing for the student newspaper but it was so absolutely captured by uh by students with far left ideology that you know I could hardly write a sentence without them trying to fact check me on a book they'd never read and so I you know at some point gave up and just started I had a hunger to not just say things I was supposed to say to get along and I I also had I think what my friend Camille Foster calls the melon in force field which is you know the the fact the fact of the matter is as a as a black person a lot of the people critiquing me on campus were white and in their mind that gave them less uh less standing to critique me if I did have contrarian views and and in some way made it easier for me socially to actually be honest about what I thought I think relative because I couldn't really be called a racist which was um which was just a ubiquitous a slur hurled at people um and I I remember thinking at the time when I was finally able to find people on campus to sort of openly talk about the the insane capture with and I guess I should just provide context like you know I grew up in a very blue town I think I knew one Republican in my town growing up it was just you know Obama signs as far as the eye could see and that was my context and I was you know a default Democrat and you know in in my self-concepts quite Progressive and then I got to Colombia and I felt like I was dropped into a simulation where you know the concern about racism was cranked to 10 where and the actual racism was cranked to zero it was like the most Progressive least racist Place most privileged place I'd ever been in and yet everyone was hyperventilating saying you know we are experiencing racism every day on campus and I knew that to be untrue from my lived experience to use a phrase that is kind of in Vogue at that time um but you know I I think when I was there I would talk to some friends and I estimated that like you maybe one percent of students spoke out against the Orthodoxy my estimation was like 85 or 90 of students are kind of the the herd if you will like they many of them will privately critique the excesses of it but will never publicly do so and in my estimation the True Believers were no more than maybe five to ten percent of the student population and it it was I don't know if there's a name for this Dynamic but I I know others have pointed it out that you don't need you don't need 30 40 of the population to believe something in order for a whole subculture or a whole society to you know sort of pay lip service to those views so that's that was my experience there yeah that's how I mean that sounds um you know very similar to the Dynamics on campus uh when I was a student um I think that's exactly right I mean I I think you were Brave to Rebel even though you couldn't be called a racist um you know there are other horrible names they can throw at you no certainly and um so um yeah I think I think I think it's exactly right I mean I think your percentages are probably you know at the end of the day more more accurate um that the True Believers have an influence that goes well beyond their their numbers and a lot of it has to do with the cancellation tactics that they're willing to use the way that they will smear anybody who disagrees with their agenda if you're you know if you're part of it again that what 80 90 percent of the herd you just don't want to stick your neck out and there's just no upside for you in um in challenging uh the the untruths and being called you know being accused of something so um this is a huge part of the dynamic and we see it now um you know in the media and and the tactics that that they use it's um you know it's a Non-Stop um you know smear machine and and sort of narrative generation machine and as soon as one narrative has been disproven they're on to the next one and they completely memory hold the fact that they were just spouting something completely untrue um well it's you know it's like Andrew Sullivan says we all live on campus now I mean that same sort of fevered dynamic in which we're constantly being told something untrue that we're living in you know the simulation um is it feels like it's being pushed on us by the mainstream media every day um it feels incredible you know the world today feels more like um Stanford when I was a student there as um as it ever has and I think you know a lot of people back when Peter and I were rebelling against it in the early 90s um and you know we we wrote you know we we wrote a bunch of stuff about it I think people were kind of like ah this is you know campus hygiene so it doesn't really matter um well it ended up mattering a lot because all of those graduates from Elite schools went on to go staff all the institutions you know from The New York Times to the school boards to um you know the foundations and so on and um and you've seen this very far leftward shift uh you know again in all of our professional institutions they've all kind of gone woke at the same time and I think including the Fortune 500 you know um you sort of this Dynamic of world capitalism and you know again the question is why how is it that the Fortune 500 and the New York Times and the non-profit world all went woke at the same time well it's a class Dynamic I mean that doesn't happen um you know that that can only happen when the attitudes of an entire class appeal shift and that class is a professional class and again I think it's all Downstream of what happened at the academy uh decades ago so I think I mean I in the past I I've said you could view this whole phenomenon just through the word latinx which you know so I'm half Puerto Rican and the Puerto Rican half of my family came here in the late 50s and settled in the South Bronx and were very poor uh and so I grew up often visiting my my grandmother who lived in the South Bronx and my Spanish-speaking family and you know never once heard that term and then I got to Colombia and I had you know people who who didn't even speak Spanish telling me that latinx was the polite way to refer to Hispanic people and I just picture how much my family from the South Bronx would laugh at that absurd bastardization of a term which doesn't even fit the the physics of Spanish um and and you know I thought that was a and then and then years later I was I was pleased to see that something like 95 or 96 of of Hispanics in America don't identify or prefer that term yet it is you know it is used now from leaders in the Democratic party as if it's what the Hispanic Community is demanding when really it's what the you know Elizabeth Warren staffers are demanding because they all went to the colleges where that's used and and of course there's nothing inherently wrong with there being a bubble right like a we all live in bubbles kind of by definition but as a politician I think you have to be aware that you are living in a bubble you have to make an effort to correct for your bubble and I see very you know anyone who who points this out someone like Matthew Iglesias who I think was you know formerly and probably still quite respected as a sort of democratic strategist or or a sort of thinker in the Democratic party or someone like David Shore anyone who points this out is is demonized uh and in Shore's case Hound it out of hounded out of the the company he was at and so um you know it's a it's a dangerous uh Dynamic for the the left wing of the democratic party to refuse to see outside a sort of elite kind of upper class bubble of its own creation right right is this sort of it's the prevailing attitudes of this um I guess you'd call it the coastal Elite but it's basically the this white Progressive uh woke professional class and the message is I think it's alienate you see this reflected in the in the polling numbers that Hispanics are moving to the Republican party in big numbers and I think there's two reasons for it one is that the Republican party is sort of realigning as a working-class party and the other is that the um the attitudes and ways of communicating that the Democratic party has which again is is targeted at more of this um this college educated kind of a feat woke Progressive sensibility it does that message does not resonate uh with Hispanics so I think we're seeing a big political realignment and not just Hispanics but um lots of other minority groups are increasingly moving to the Republican Party there's clearly a big shift or realignment underway and I think it again has a lot to do with the Democratic Party abandoning its roots as a working class party and kind of you know going uh all in on um on on this on the on what to share calls professional class hegemony um so yeah it's it's interesting you know the the um again I would come back to I think the biggest problem is just that the media is completely dominated I'm talking about the mainstream is by um by this sort of professional class sensibility and um the media is the prism through which reality is refracted I mean the media creates the simulation and um when they're describing things in a way that's simply not true it um and there's no feedback mechanism for really changing that I mean I guess people just opt out and then they start getting more and more their news information from alternative sources I guess that's the reaction but um but I think that I think more and more people are realizing that the media is just hopelessly biased is hopelessly bought in to this ideology and um and I I think it really does account for again a lot of the division we see in our society today I just read a CNN article I think two days ago about how daylight savings time has a disproportionate impact on black people and therefore is structurally racist um right I mean I think that says it all right there's this total preoccupation obsession with um with you know racial differences and um it they're imagined when they don't occur um stories that uh that don't need to be about race or somehow made about race um it is it is this um all-consuming preoccupation of this sort of what Progressive left and um it's counterproductive it's untrue and it's counterproductive I don't see how it's helping anything so uh on the all-in podcasts which again I really recommend to people you often have a critique of I think I think you've used the term expert class uh and your critique of experts in the past three to six months has often centered around covid policy and and more recently around foreign policy and Ukraine in particular so what is it that irks you about the experts in general and and on those two topics I'd say the lack of accountability is probably the number one thing um we have this this class and this is very much tied in with the this professional class of Gemini we have this class of of experts and they're anointed by the media and they are always wanting to tell us that we can't have an opinion on something like covid because we're not experts And yet when the time comes to hold them accountable for their views which turn out to be so wrong they want some sort of amnesty this is actually an article in the Atlantic recently about how um we need a coveted amnesty program um for all the the bogus predictions that were made by the experts and um this I think this is really offensive I mean first of all no one's talking about Prosecuting experts who are wrong I don't think so what we're talking about for amnesty is to not remind people of all the predictions that they made of all the policies that they recommended that were so unbelievably destructive I mean the lockdowns the impact on small businesses the learning loss that's gonna hurt kids for an entire generation we're just not supposed to forget all of that we're just supposed to give them sort of carte blanche amnesty well seems to me that if you want to hold yourself up as an expert and say that only experts should decide you also have to be accountable for your track record and um again they they want immunity from that and this there's a very similar Dynamic with the foreign policy establishment the same people who got us into all of these failed wars in the Middle East the Iraq War which we were Allied into uh the 20-year occupation of Afghanistan which is a total failure our failed interventions in Libya and Syria and on and on I mean there's just no accountability for the people who made those decisions and in fact many of them are back and they're now conducting our Ukraine policy so it seems like we have this professional class that again purports to be an expert class it believes that only it should make all the decisions and that it shouldn't be accountable when everything goes to horribly awry if you've been watching my videos for a long time you may or may not have noticed this but I certainly have my hairline is slowly receding and I don't like it I am one of the almost 42 percent of men who experience hair loss in their lifetime the good news is that there are options available to help stop balding in its tracks 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quarterly plan go to row.co Coleman that's ro.co Coleman right now Roman has a special offer for our listeners use the link and get 20 off your first order just go to row.co Coleman today once again that's ro.co Coleman for twenty percent off hmm yeah so the way I've thought about this is you know we know how how deep partisan bias shapes most people's opinions there's you know countless condiment and diversity studies like if you ask a group of Democrats what they think about Trump's latest policy they will give you reasons why they think it's bad that don't have to do with Trump or partisanship but if you ask you know the same group of Democrats or a similar group of Democrats what they think of that same policy but instead you tell them Obama actually implemented it they will come up with all these reasons why it's actually a good policy most people are like this and you would think that very intelligent people you know high IQ people are less vulnerable to this kind of bias but I think it was economy and diversity studies or some similar researchers which really found that they're not and in fact very intelligent people are just better and more clever at working backwards from the partisan conclusion that they've already come to and coming up with with a post-hoc rationale and and you know what are experts but high IQ people that that have studied a topic at the end of the day so I've I've seen that with the expert class on politicized topics I want to emphasize that because on non-political topics something like astronomy for example the experts are great they really do know more than the rest of us and we pretty much should shut up and listen uh because astronomy is not politicized but on any topic that becomes politicized like a topic like race and racial inequality which is my specialty the experts are atrocious and and on you know on Race specifically the experts skew heavily left so the mistakes they make are always in the same direction right yeah it's um I think that there's a huge amount of uh tribalism obviously political tribalism um I think there's a huge amount of starting from the political result you want and then reverse engineering to uh the position you're supposed to have on any given issue which produces a ton of unprincipled you know inconsistency so I remember like during the pandemic like one small example of this was the way the media just wouldn't cover any of the alternative therapies for covet that were being developed and the reason was they wanted everyone to get vaccinated that was sort of the end result that they wanted to get to and so therefore you know anything that was presented as an alternative this is the money Colonial antibodies for example they just wouldn't cover they wouldn't treat it as something that needed to happen this is like one very very small example but but yeah it's it's very much reasoning back from the political result you want to achieve um I think that's a huge part of what's going on you know I think there's also just a a class bias to the to the whole thing to this idea of of um of experts who need to be empowered and should be the sole deciders of things um I've you know there's uh I've recently kind of uh been looking at the work of uh James Burnham uh you're at the managerial Revolution are you are you familiar with his stuff or no I'm not it's it's it's it's it's um it's enjoying a little bit of a Resurgence because he talks about the um the biases of the uh sort of the professional managerial class and he was writing in you know back in the mid 20th century like you know 1940s 1950s and let me just read you a little passage um this is actually Sir George Orwell wrote the introduction to berno's book on the managerial Revolution and um I think Orwell does a nice job summarizing Burnham's thesis I'll just let me just read this one paragraph and you tell me if it sounds like where we are today so Orwell's description is of Burnham's thesis is capitalism is disappearing but socialism is not replacing it what is now arising is a new kind of planned centralized society which will be neither capitalist nor in any accepted sense of the word Democratic the rulers of this new Society will be the people who effectively control the means of production that is business Executives technicians bureaucrats and soldiers lumped together by Burnham under the name of managers so basically the sort of mid-level managers experts Technic rats these people will eliminate the old capitalist class crush the working class and so organized society that all power and economic privilege remain in their own hands so this is uh I think that's oral writing in 1940 about Burnham's thesis um it's quite remarkable I think what Burnham is suggesting is that in an advanced capitalist Society what happens is you have a need for mid-level managers and um and so you start with the kind of the the heroic figure of the original Bourgeois capitalism or I just call it entrepreneurial capitalism the kind of the original um entrepreneurial capitalism that America was sort of built on you had this figure of the captain of industry the great entrepreneur you could deride them as the Robber Baron in any event they create these great Industries these great businesses but eventually they die or retire and you need to hire professional managers to run these companies and um the professional managers are cut from a very different cloth as the entrepreneurial figure and we even see this today they go to the right schools they get you know Harvard mbas um they are preoccupied with a resume and their credentials because the captain of industry creates whether whereas the manager is hired and that just creates hugely different incentives to some degree the the manager is always going to be a yes man because again they have to put themselves in a position to get hired what ultimately happens is that the loop gets closed once managers hire other managers we're now at a state of capitalism where most companies are controlled by Boards of directors those Boards of directors are not the founders may not even be on those boards anymore they retired a long time ago and so and in fact those um those board members don't even necessarily own a lot of the company so they are just professional managers hiring other professional managers and so we've entered a closed loop where um the society is not controlled by the original entrepreneurial capitalism it's it's being controlled by these agents and I think that and there's a principal agent problem basically the the agents are a class of people who I'm referring to principles versus agents who are now pursuing their own interests and they seek to entrench their own power and prerogatives um at the expense of the owners of of capital and and I think there's something similar going on in our democracy the the in in politics the um the analogous group to the owners of capital would be the people I mean they get to vote and so they vote in a class of people but though there can be a principal agent problem where those politicians ultimately represent their own interests and I think this is even more true um at the level of the um of the think tanks and the parties and the political establishment which is even more insulated from the voters and I think you certainly see this with the foreign policy establishment that the foreign policy establishment chooses their own ranks they police their own ranks as a result there's a tremendous amount of group think um and they control the foreign policy of the United States and they do so for their own benefit um it can be economic benefit like the sort of the military industrial complex but it's mostly for their ideological benefit that they pursue they pursue the policies that are interesting to them that they are deeply invested in that they're um you know the ideology they believe in it's basically they're on a on a crusade um so I I tend to think that this is one of the huge Dynamics happening in our society right now is that is that an advanced capitalist Society needed to create middle Managers from both a um in both in the economic sphere and in the political sphere but those mid-level managers have now usurped the power that was really delegated to them uh I mean their power should only be a delegation from from the people who own the companies or from the voters and yet they've now found themselves in this position of being in control and I think their goal now is to entrench themselves and perpetuate their Privileges and the way they do that is to make themselves immune from criticism and accountability and um and you see this with the um like we're talking about with the the expert class and they need to get amnesty they can't be held accountable for any of the reviews you see it with the rise of censorship this professional class and especially the media which used to be the biggest Advocates of free speech because their entire industry is based on the First Amendment they now are fully bought into the idea of censorship why because it protects the professional classroom criticism they can basically censor their opponents so it's a it's an interesting um critique of what's happening in our society this sort of um sort of Burnham idea obviously he hasn't been around for like 50 years something like that but um but the the people there's again a Resurgence of interest in his work because um it just seems so relevant to what we're experiencing today you know it's it feels like very deeply uh cultural it's it's not just like one issue and so it it really feels like there's this deeper class divide in our society that's fueling a lot of things so that segues into Elon musk's takeover of Twitter because Elon obviously is famously an owner and founder and an incredibly successful one who is now managing a company that he did not found but um but managing it with the mindset of a founder and he is the he is the classic paradigmatic example of the um of the hero of entrepreneurial capitalism sort of the old Bourgeois capitalism as opposed to the new managerial capitalism um yes he didn't found this particular company but he is a Founder he's a captain of industry or you know derive as robber bear and that that type of Personality it's that Larger than Life yeah iron Randy and type right figure and all the uh forces arrayed against him or the forces of managerial capitalism it's the media it's the mid-level managers who are complaining they don't want to have to be submit and be accountable to him the owner they want to control the policies the trust and safety policies they're the ones who think they're the experts um and of course it's their class allies in the media who every time Elon does something or become hysterical and predict the company's imminent collapse um I think there's like a huge again sort of very deep class component to this and um you know biology who's a servan Austin who's a friend of mine a tech founder had some tweets about this that I thought were just so spot on let me just read this to you um he said there's the individual dimension of capitalism iconoclastic heroic entrepreneurial risk tolerant and then there's the bureaucratic Dimension corporatist conformist hrified risk-averse woe capital is the latter they don't like capitalism they like the worst parts um so dembology says I might be obvious but I put my finger on it why did these people who purported to hate capitalism become omnipresent at big companies partly hypocrisy yes but also these people wanted reward not risk power not purpose and a big company not a small startup all the parts the founder likes about capitalism the creativity the lack of structure the adventure and the motivation provided by the yawning Chasm of failure below is what repels the conformist they hate economic risk as viscerally as the founder loves it I think this is a great description of again the the old entrepreneurial capitalism versus the new managerial capitalism it's startups versus big companies it's the contrarian versus the conformist it's the risk and Adventure Seeker rather than that sort of risk-averse mid-level manager it's the it's the person who thinks they can find a new need and a new opportunity that entrepreneur who can spot something that's missed as opposed to the mid-level manager who simply wants to avoid risks who thinks that all the answers are known they don't really have to think about it very much they can just conform to whatever the expert class says um that just as a description feels very correct to me and um and you know I see it like because I deal with the founders and we also deal with Fortune 500 type execs and I see that you know my old company PayPal has become one of those Fortune 500 type companies run by those types of execs and you really see the the transformation um I think one of the only reasons that I can I can speak out in the way that we're talking now and have the views that I have is because venture capital is the last or a doubt of the old Bourgeois Capital capitalism model the old entrepreneurial capitalism model it's the last place where that future captive industry the person who is nothing today and comes from nowhere but one day hopes to rise to be that great person lead that great adventure Venture capitalism is the last redoubt of that old model I certainly cannot you know State My Views and be any kind of podcast or media figure if I was a Fortune 500 executive it just would absolutely not fly and that is because the Fortune 500 is completely in the grip of the managerial Elite just like the media is just like the universities are just like the Democratic party is and and so on Down the Line so it seems to me Elon is trying to do what you're saying is is impossible which is to be a CEO the CEO of Twitter and also be able to have hot takes which may be viewed as political even if they're correct post memes um you know and just have this really casual relationship with communication and and so forth um and you know I would never bet against his success because that's just a losing proposition historically but I do worry that the way he's approaching the communications aspect of it may may backfire right like you you could say he's just being transparent and funny and communicating directly like Trump did uh in some ways but you know Trump's appeal got old and and um you know he was wasn't even appealing to half the country to begin with so is there something to be said for you know a strategy where behind closed doors Elon is the captain of industry entrepreneurial fire half half of the company startup energy VC CEO but public facing is kind of more outwardly boring neutral does that would that not bode greater success long term well I think you could quibble with this or that tweet that he puts out but I think that in general uh he has to be able to defend himself I mean the thing to realize is that he's under constant attack um so let's let's go back I mean the the media has been having a collective meltdown about what Elon is doing for the last month uh first they accused him of being a Thanos type super villain for snapping 50 of the employees out of existence then they said that he was starving the employees by charging for lunch uh and then most recently they said the company was going to have an imminent collapse why because Elon offered the employees a generous voluntary severance package if they didn't want to return to the office and work hard and it's now two weeks later and the site is still running just fine there's been no collapse and yet all these media personality and uh you know these pundits were tearfully saying their goodbyes on Twitter as if the site was gonna you know implode a couple of weeks ago so you have to understand that he is being attacked in this ridiculous way and then on top of it we now find out that um you know apple is talking about I guess potentially uh kicking Twitter out of the app store which is insane uh that they would be able to use their Monopoly power to do something like that and yet it's being cheered on by these same types of people in the media so in other words um these media critics of Elon are now encouraging Apple to do exactly what they attacked Elon for supposedly doing which is destroying Twitter so this is the point we're at and I just think that Elon has to be able to fight back and the way that you fight back against the managerial Elite is you go over their heads directly to the people and again I mean the the fundamental problem with these mid-level managers for out of control is that they um they've taken advantage of a delegation of authority that ultimately comes from either the um the owners the shareholders in the business sense or uh or the people in a political sense and uh and you need a figure you know one like Elon I think to be able to appeal to people directly to go over the heads of this sort of um of this um managerial class because they will never convey your story accurately so again you can quibble with this or that tweet but I do think that he has to be able to make his appeal directly now whenever such a figure arises who's able to go directly to the people the media will have a freak out about that and they will criticize that figure as being a Caesarean figure you know um but I think the proper way to see it is that um that these types of rare figures are able that what they're seeking is not some sort of dictatorship what they're seeking is a restoration of accountability is to remind the professional class that they ultimately work for the people or work for the shareholders of these companies that the um that the people and the shareholders are not subordinate to The Experts that the experts work for them and the restoration of that accountability I think is the should be the larger political goal I think here um I don't think at the end of the day that um the solution to the problem of managerial capitalism is like some sort of Revolution you know it's not you know no one's going to win a class War I think that advanced Capital societies do need managers you know um but I think that we need a restoration of accountability so it makes it clear that whether it's in business or politics the managers work for somebody and um and I think that should be the political program is the restoration of that accountability um yeah well let me stop there because I've kind of gone for a while yeah so um I mean at at the bottom of this Twitter Elon situation is a question of whether Twitter is a Town Square obviously legally it's not it's a private company that can do whatever it wants uh within the bounds of the law but how do you look at at Twitter do you see it as a Town Square do you think it should be like a Town Square I do um I think it is the de facto Town Square and you know one of my critiques of censorship is that is that the town square has become privatized you know when speech became digital um the uh when speech got digitized the um the Town Square uh got privatized and control of it got centralized and the uh the hands of a small number of large tech companies and they now control our public discourse so I don't see how you can have an effective uh First Amendment right or Free Speech right in our society if all the major forms are controlled by tech companies that are putting their thumb on the scale and exercising censorship on behalf of one political party or one political one how do you um so so how do you see the existence of something like parlor like if you if you're able to start another another company why isn't isn't it isn't this just a case of good old-fashioned competition and start your own company if you don't like it well isn't parlor an example of the opposite what happened with parlor is parlor was on its way to being one of the most successful social networking apps it was number one and downloads in the App Store and when it got too big all of a sudden it was shut down by Apple and Google removed from their app stores so then they went to the web and tried to you know run it as a website and then AWS kicked them out so the point is you know when are you going to say that these giant Tech monopolies have too much influence I mean is there really an ability to compete if Apple and Google can throw you out of their app stores is there an ability to compete if Amazon can kick you off the internet um and so I I'm not sure that there really is an effective ability to compete as long as these companies can do that um I do in this this example right now of Apple making noises that they're going to kick Twitter out of the App Store is a great example of this um so I think at a minimum if we're going to have the type of competition that you're talking about we're going to need to put some constraints on the ability of these giant Tech monopolies to control the ecosystem I don't think we can have a healthy start ecosystem in general if the monopolies are allowed to run roughshod over upstart competitors and you know I would tell you is um aside from maybe Microsoft in the 1990s apple is the most powerful Tech Monopoly that's ever existed it's certainly the most profitable one and everybody in Silicon Valley knows this to be true everybody talks about it privately certainly every application company from the smallest ones to the biggest ones live in fear of apple and what Apple might do to them and this is a running conversation behind closed doors but nobody will say it publicly because they are so afraid of retaliation from from Apple so I think at the end of the day we're going to have to have some constraints on Apple and Google and then I think secondarily Microsoft and Amazon otherwise we aren't not going to have a healthy startup ecosystem and we're not going to have free speech and we're not going to have competition among the various providers to try and be a more Innovative Town Square do you know how much your subscriptions really cost most Americans think they spend around eighty dollars a month on subscriptions when the actual total is over two hundred dollars that's right you could be wasting hundreds of dollars each month on subscriptions you don't even know about to take care of this I use an app called Rocket money which used to be called truebill the app shows all your subscriptions in one place and then cancels whichever ones you no longer want rocket money can even find subscriptions you didn't know you were paying for you may even find you've been double charged for a subscription to cancel a subscription all you have to do is press cancel and Rocket money takes care of the rest get rid of useless subscriptions with rocket money now go to rocketmoney.com Coleman seriously this could save you hundreds of dollars per month that's rocketmoney.com Coleman cancel your unnecessary subscriptions right now once again at rocketmoney.com Coleman in some way every social media company is a natural monopoly because it benefits from networking effects like you know everyone's already on Twitter which gives it a huge advantage over even a slightly better product that is starting up today and in in the past I've made a lot of that fact uh you know but it you know it it also occurs to me that can be taken too far you know like I I could I could have said that about myspace in 2005 that it you know has huge networking effects and is therefore a natural monopoly and it's unfair and then Facebook comes along and just totally destroys it um so I mean I guess the question is if these things are in some way monopolies these tech companies what's the logical solution is The Logical solution heavy-handed government intervention uh breaking up the big tech companies or what do you see as a path forward well okay so there's there's a few different kinds of tech monopolies or or you know uh Tech moats the most powerful one by far is the operating system Network effect where the operating system that has the most applications on it is the one that everyone wants to use and then that becomes it creates total lock-in once the ecosystem is tipped and there's only really two operating systems there's the it's the Apple Google duopoly it's it's IOS and Android um they are even more powerful certainly collectively than um Microsoft was in the late 90s because mobile Computing is just so much more powerful than desktop Computing and it's so much more omnipresent in our lives and furthermore with the old desktop Computing model you could get on the web through a browser and so Microsoft did attempt to control that and that was what the whole litigation around Netscape was was about is whether Microsoft would be allowed to extend their operating system Monopoly you know into the browser and then from there into controlling the internet and I think it was a good thing that the government stopped that um but you already have now the same thing has already taken place where apple and and Google Android they not only control your your phone the hardware but they also now control your access to Applications through the App Store and it's already significantly less free than the internet was so that is like I think the biggest problem that needs to be addressed is there have to be limits on their ability to benefit themselves at the expense of all the downstream applications otherwise what's going to happen is systematically these companies will eventually replace all of the key application verticals you saw this with with Google search in the early days of Google search almost every search result LED you off-site off property now something like more than half of Google searches do not take you off of Google they keep you on there they've been systematically replacing the biggest categories of of clicks that might take you off site I think that eventually something like that will become true as well in the mobile space that once the mobile ecosystem becomes mature Google and Apple will start to you know again replace the the downstream apps and they're already doing a bunch of things um that are cutting into the businesses of their applications the egregious 30 fee there's um you know what they're doing on Advertising uh benefiting themselves at the expense of the applications in any event this is a dynamic that will keep going and and the problem with it is it will lead to way less Innovation there's no reason for a VC like me to fund a new startup when even if it succeeds wildly in innovating and creating a great product the all the valuables may be captured by the operating system company so I think this absolutely must be addressed and the only way to do it is is legally um now when you go to to the other uh types of apps um there are issues with Microsoft and Amazon but they tend to be a little different with Microsoft the big issue is bundling and we could get into that and the big issue at Amazon is the way that they privilege their own products over third-party products on their platform and there are some issues with that and then you've got you know sites like Facebook and Twitter which do have Network effects and that is the mode around their business but it is a much less significant moat than the um than the operating system Network effects and um and like you said those Network effects are are not in Super Bowl they could be overcome potentially I do think that the antitrust authorities have been focused on the wrong company I think they've been focused on Facebook and if you just look at the market cap performance over the last year Facebook has lost me like 70 percent whereas Apple's doing just fine it's now Apple's now I think it's like almost 10 times more valuable than Facebook so um maybe about uh seven times anyway the point is just that the antitrust Authority has been completely focused on the wrong on the wrong companies um my main problem with on the sort of speech regulation side was when these social networks were literally colluding with each other uh to engage in censorship so at the old Twitter before elon's ownership yeah Twitter and Facebook and um snap and pretty much every social network they were all following the same speech controls and so it wasn't the problem wasn't that any one of those companies had a monopoly on speech it was that they had formed a cartel to regulate speech they had formed a speech cartel and that was my problem with them yeah mine mine as well um I want to Pivot for my last two questions before I let you go you're a film producer as well you produced Thank You for Smoking and uh another project that has yet to come out I believe right yes I have a movie about uh Salvador Dali the painter so what is it like to be an Unapologetic conservative and a film producer um well it's um I'm not sure anybody's really figured that out to be honest um so maybe I shouldn't have said it yeah you know um uh as a producer you kind of uh give support to a project but ultimately it's on the actors and the director to create the the creative products so um you know I support the the projects that are interesting to me and there's nothing political about the Salvador Dali movie it's really an artist um biopic uh Thank You for Smoking what did have uh an interesting political Dimension to it it wasn't partisan politics it was more a satire of the use of spin as a corporate and political PR tool and I think people are interested in politics on both sides of the spectrum can appreciate that movie it was written the book was written by Christopher Buckley who is the son of William F Buckley and really understands politics well and um Chris is a great humorist and satirist of our political culture so um that was a movie that was interesting to me because I guess of my interest in politics but um uh but it wasn't I don't think it's like pushing a um a political agenda I mean the thing about if you're trying to do something artistic it's just not very interesting or creatively fulfilling if you're just trying to push an agenda I mean this is one of the reasons why I think so much the entertainment coming out of Hollywood right now is just not very good is because their politics are just too overt and it's not what people tune in for so um so yeah I mean I I guess I've kind of dabbled in in movie producing but it's not it's um it's sort of a separate activity for me it's not a an extension of of you know what I'm doing politically or saying on media okay so final question you and I share uh a Fascination and I think perhaps obsession with chess yeah and uh and I I first of all what's your ELO it's not good it's like 15 to 1600 of that range that's better than my my uh chess.com I'm like 1460 rapid Okay and like 1100 Blitz okay so yeah I just play like three two Blitz and um I'm in that you know 15 to 1600 range if I'm like playing exceedingly well maybe I can get to like 1700 or something like that if my mind is calm and relaxed but um but yeah I so I maybe I'd be better if I played longer games I don't know I don't really have time so I generally pay it plays at the quicker games I heard on the all-in podcast you played a a game against Magnus as part of two teams you were playing with prognananda against Magnus and someone else that's incredible yeah it was what was that like and what was the occasion it was a really cool event so um there was a a little tournament that was held in Silicon Valley is called like the chess and Tech tournament where there were four grand Masters so it was uh Magnus uh prognander who's my partner um Wesley so and Anish Geary nice and they each had an amateur as a partner we played partner chess where what would happen is the um we would alternate moves and we couldn't talk to each other about or suggest each other what to do so my party would make a move then I would make a move and so on and you're so it's team chess and you got to have uh one time out where you could go consult with your partner for a minute on what was happening but otherwise you couldn't um you couldn't communicate and you know we had some time before the game to kind of sync on strategy but um it was fun I mean I think that and then you know the the uh the amateurs were all sort of roughly around my level and uh it was it was a lot of fun obviously to be able to play with Magnus and you won we did win yeah um so it's interesting that you know what I was trying to figure out with with partner chess is like what the strategy should be and I think it's pretty obvious that um when you have um four Grandmasters who are in the 27 2800 range and then four amateurs who are at you know called the 1500 range that the differences between the grand Masters are irrelevant and really what matters is just minimizing the um the amount of blunders by the amateur right and that really becomes the strategy it kind of took um uh problem and I a game the first game we actually Drew um and we realized that or you know that that this basically was the strategy and so we made a couple of adjustments in the second and third games where um first of all Prague who um used the timeout we didn't use the timeout in the first game that was a huge mistake and um basically in the subsequent games he would use the timeout when he spotted a blunder by the other side that I could then capitalize on so that was huge yeah yeah and then the other the other interesting thing was um I just realized I should play extremely solid I should not try to um play too aggressively I should let uh progdananda basically make the aggressive moves and then I would just try to follow what what he was doing um just to minimize the potential for blunders and any event once we sort of figured out that that should be the strategy um it got it got easier but um it was you know it was really fun to um play with those guys you know I do watch quite a bit of um you know chess online I do too I watch I mean I watch Gotham chess's Recaps of all the games I watch I think I got to my current level by watching Daniel nariditsky's speedruns who is in my opinion the best chess teacher on the Internet by a long shot um and I watched Hikaru and uh I'm curious also who is on magnus's team so uh Max's team he was partnered with um Yuri Milner's daughter and um she's a good young chess player I think she's around 10 years old or something like that uh but she's a very good young chess player all right well it's been really fun to talk to you David yeah absolutely thank you for doing this and um I just want one last time to direct my listeners in the direction of the all-in podcast which is a really fun Roundtable podcast you can hear David's takes every week uh sometimes maybe even more more than once a week and if there's anywhere else you want to direct my listeners now is the time your Twitter your uh anywhere else yeah I have a Twitter account and um but yeah I think the podcast is the main thing all right but uh great to talk to you today and for this you know great to have this kind of long-form conversation and to work out with you some of these ideas that I've been noodling over um you know the all in pod tends to be well there's four of us and uh four of us constantly interrupting each other and so uh we're not like doing any like deep thought pieces it's more like um this hot takes um so it's fun just to talk through some of these um you know ideas with you yeah it's fun for me too I've wanted to do it for a while thanks David appreciate it thanks Coleman if you appreciate the work I do the best ways to support me are to subscribe directly through my website Coleman hughes.org and to subscribe to my YouTube channel so you'll never miss my new content as always thanks for your support [Music] foreign

Channel: Coleman Hughes

Views: 67,650

Keywords: politics, news, politicalupdates, policies, currentaffairs, political, society, highsociety, modernsociety, contemporary, intellectualproperty, debate, intellect thoughts, opinion, public intellectual, intellect, dialogue, discourse, interview, motivational, speech, answers, Coleman Hughes, talkshow, talks, artificial intelligence, facial recognition, trust issues, apocalypse, neural network, ethics, intelligence, medicine, discrimination, racial bias training, deepfake, software, David Sacks, Elites & Experts

Id: RGbAoR1D9vc

Length: 78min 10sec (4690 seconds)

Published: Mon Dec 12 2022