Chamath Palihapitiya: the best line i ever heard the hardest thing about being a vc is um figure out their founder is delusional or visionary uh it's a very fine line if they're right they're a vision there if they're

SPEAKER_03: wrong then they're probably delusional i'm willing to bet on the delusional ones for sure because if you're delusional and you say yeah you know i think there's something out there and you leave

SPEAKER_04: spain on a ship with some provisions yeah you got to be pretty delusional to think you're gonna hit

SPEAKER_05: land because you might not i like the delusional ones because if they hit land now they're

SPEAKER_07: visionary like you're saying well i'd say i'd put that in the visionary camera delusional are the

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SPEAKER_03: back to the program our guest today is kevin o'connor i met him 28 years ago in 1995 i was running a little magazine called silicon alley reporter and kevin had just started an internet advertising company called double click you remember double click what by google eventually it was founded uh i remember going to poppy tyson on 23rd tree we talked about it the last time you were on the show kevin which was

SPEAKER_04: episode 234 so here we are a decade since your last appearance on this week in startups and uh i guess we're getting close to 30 years since you and i met in new york at the dawn of uh the internet so

SPEAKER_18: welcome back to the program kevin o'connor it's good to see you again it's been a long time it's say we see each other every 10 years we do an episode yeah you know an interesting place to start

SPEAKER_03: would be when you look back on what's transpired since 1995 when we were on those dial-up connections

SPEAKER_20: and then we started getting t1s and isdn lines and the browser started supporting rich media and and you put some of the first ads on the internet when you look back at what happened the internet what is the

SPEAKER_21: theme as an entrepreneur and now an investor that sticks with you the most i think our original

SPEAKER_23: hypothesis and i you know when i first saw the internet probably early 90s i wasn't impressed you

Chamath Palihapitiya: know 2400 bond modem the browser hadn't come out and i was not impressed it really wasn't until the t1 lines came out of the and the uh the web browser i said to have a system where anyone in the world can access the world's knowledge for free that's a big idea it's going to be huge uh i remember our original our original business plan i forget what we had i thought i thought we forecasted something like 10 000 servers and maybe 100 million people would be on it you know in 10 years people thought that was crazy and it was crazy we were way off it's like 100 million 100 million servers and uh or websites and you know a billion users online so i think the theme is you know you know back in the old days people talked about the new economy and i always i always thought that was kind of bs there was no new economy it was just about reducing friction and that's what i think then that's been uh that's been the promise and that's what you know what's happened just made things more efficient more timely

SPEAKER_27: cheaper and when you look at that efficiency now ai has emerged and all this information that was put online three decades of people just pouring their hearts out and scanning every piece of information every piece of art uh you know mapping every nook and cranny uh and scanning every book and writing every comment under every video uh and every blog post now has resulted in what feels like um some form of intelligence uh or knowledge processing that could be very transformative so what's your expectation here as we just wrap up the first year of chat gpt being a public phenomenon obviously you know 3.5

SPEAKER_20: of uh open ai's chat gpt kind of was the starters pistol last november and here we are taping this

SPEAKER_29: november of 2023 is this going to be a similar story or a bigger story than the internet itself

SPEAKER_31: well you remember back in 9500 companies are pitching ai even back then right they're going to

Chamath Palihapitiya: predict everything that you're going to do and and ai faded away because it just never delivered on

SPEAKER_34: this promise and i don't think chat gpt the 3.5 version it was interesting you know like it was the best chatbot out there uh 4.0 blew my mind away and definitely into a realization that this is a

Chamath Palihapitiya: fundamental shift i mean usually once every 10 years there's some cosmic shift you know whether it's ecs the network to internet the mobile to sas and and we were due for another seismic shift and there

SPEAKER_23: seems to be two camps forming on ai as there always is with technology you know it's the hand ringers like it's the end of the world you know everything is overall my god chicken little uh to the you know optimist like i am which is technology is great like how what yeah what could possibly be

Chamath Palihapitiya: wrong with something that can actually turn information into knowledge and make people smarter you know more intelligent make better decisions it's it's phenomenal and when you look at the impact

SPEAKER_20: you think it's going to have we can parallel it with the the internet and i'm with you i mean it seems like there's a ton of upside here there's going to be some downsides obviously um we used to have typing pools we used to have messengers we used to have people sending postal mail fedexes a lot of those things got hit pretty hard when people got email um but you know when you look at

SPEAKER_27: the first year and then you think hey in year two because in the first year it feels like people are playing with it and starting to implement it but in year two i think it's going to get more serious so

SPEAKER_04: where do you think we're going to see this land in 2024 what industries will have the most impact on

SPEAKER_23: well i think the surprising thing at least in my mind uh we always thought i was a i was a developer

Chamath Palihapitiya: for the last 10 years and yeah the computer science has exploded over over over many many years uh and everyone went into it thinking that job will never be at risk and here we are now the safe job and now it's like i remember being on a call with the company they're they're telling us i do venture

SPEAKER_23: capital now they're telling us how complicated and sophisticated the technology was and i was

Chamath Palihapitiya: kind of calling bullshit on them and i asked chat gpt to write the code uh of their product that i posted in our chat i said there's your product right there so you know jobs like that where where um uh i think

SPEAKER_42: legal is going to be dramatically affected uh i think accounting um it's hard it's so hard to predict

Chamath Palihapitiya: technology you know the internet everywhere back in the days you're trying to figure out what was

SPEAKER_36: going to be hit the hardest and when you look back i'm not sure any of us predicted like none of us

SPEAKER_42: predicted amazon amazon was a bookseller yeah um so you know it has a strange new technology has a

SPEAKER_23: strange way of affecting it's going to affect every industry to some point i think large language models have its place as a foundational model i think large language models are probably more like the internet it's going to be the stuff that's built on top of it or for the verticalization to highly

Chamath Palihapitiya: specialized language models that are going to probably have the biggest impact yeah it's quite

SPEAKER_20: paradoxical if you narrow the scope of the language model to code it does a better job and if you point it at a code base well it's going to educate the new developer as to that code base so starting day one at slack or salesforce it's just you're going to get up and running so much faster you're going

SPEAKER_27: to be you know it's going to complete half of the of the code snippets you write and it does make sense

SPEAKER_04: to me that accounting and legal also fall into that there's a corpus of work that is finite that is rule based um and that is repetitive right i mean and there is some thread here we could pull if it's repetitive and there's a finite rule set and it's there's a corpus of work it could

SPEAKER_03: be you know automated and ai could could do it pretty quickly huh well hollywood's going to be greatly

SPEAKER_48: effective right yeah you do think that yeah this is a big debate oh it's going to be i mean think about

SPEAKER_23: it i mean how many it's a finite number of stories it's the same story that you know came out of

Chamath Palihapitiya: greece yeah 3 000 years ago you know it's just being retold with different characters the fact that any of us would be able to put that um we'll be able to build a build our own movie i think then

SPEAKER_23: it becomes a little bit like youtube which is or instagram where where the the amount of content is is

Chamath Palihapitiya: exponentially increased most of it is just total garbage but there's going to be that phenomenal once that sort of rise to the top that go viral same thing with music i mean music is pretty you know you can

SPEAKER_53: imagine i mean my prediction is that definitely within the next five years uh the number one song

SPEAKER_27: will be written by ai that makes total sense we've had many number one songs that were um using samples

SPEAKER_20: right and rehashes of old songs so if ai can interpret all of that base of knowledge yeah it's going to hit one for sure there there's no doubt about that and yeah there's only a finite number of movie tropes you know quest comedies rags to riches beat the monster tragedies it's like it's a certain the hero's journey it's it's a certain corpus that yeah i think writers are going to become bionic

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SPEAKER_27: so you've recently become a venture capitalist i understand congratulations

SPEAKER_64: this is 1995 by the way well i mean i thought of you more as a company builder than a venture

SPEAKER_23: capitalist but i was both i did the vc in my uh sort of spare time or in between jobs but you are right

Chamath Palihapitiya: the last three years first time i actually did a fund got it with other other people's well my a lot of my money but a lot of other people's money too so why start a fund and why do that here you

SPEAKER_03: know at this point in time what stage you're trying to invest in and what's the thesis of the fund

SPEAKER_69: i do think that uh doing a startup which i love doing it did three of them uh it's let's say it's a

Chamath Palihapitiya: young person's person's game you know it takes a hundred hour weeks it takes a lot of focus as you get older you get more wise and and i think that's sort of you know i've been doing venture for i said since 95 i've done really well at it i love technology so our thesis has really been on uh if i just sum it up it'd be sas slash ai companies uh with about a million dollars in revenue so let's call let's call it seed sort of early a uh and our specialties we're all operators and we we help these companies get to the next the next level which would be sort of growth growth equity so if they have a million

SPEAKER_26: in revenue that's when you want to meet them or you want to put a million dollars into them

SPEAKER_23: when they have a million in revenue so we feel like the precede is i've always said ideas are cheap

Chamath Palihapitiya: there's a billion crap really bad ideas out there for someone to actually get to that million dollar level that means they have they prove product market fit which is a big risk they've been able to attract people some capital so they really de-risked it in our eyes what they don't know is how do they take it to the next level there's a lot of unanswered questions a lot of this founder-led sales a lot of it is how do i scale how do i how do i deploy a capital efficient efficiently and so you know by by being operators having sort of sort of been in their shoes that's attractive to founders now they like it you know vcs a lot of vcs come from sort of the

SPEAKER_27: opposite extreme yeah i mean there's an argument for people who understand finance um and who

SPEAKER_20: haven't been in the trenches in some ways they can really have a good analysis um like bill gurley of you know the marketplace dynamics they can be thoughtful about making the share price go up and then

SPEAKER_27: there's no substitute for people who actually have run a business right and been an operator and know

Chamath Palihapitiya: exactly how hard that is and i think at our level by the way i think bill gurley has always been one of my heroes i met him when he was a he was an analyst he was covering us double click back in

SPEAKER_78: the back in the uh the mid-90s what was he like tell me when you met him he was still he was very tall

SPEAKER_80: even back then still yeah he's consistently remained tall that is one thing i will say about

SPEAKER_34: bill gurley's career you made a lot of research analysts and most of them are good bill gurley

Chamath Palihapitiya: was just he was a new level he was he was the one guy that really really understood that's just our business but he just he just had a great sort of macro view of what was going on and we always

SPEAKER_72: enjoyed conversations with with with bill where she wasn't retired is he retired i guess he's

SPEAKER_84: i guess that's a really interesting question because i he's theoretically not at benchmark well

SPEAKER_04: he's not at benchmark he's not in the new fund he's still on the boards he was on and he's still frisky and likes to hang out with founders and meet founders so i don't know that he's exactly retired and there was something about the venture community where they wanted to kind of set people out to pasture at a certain age maybe 60 years old etc and like hand over the firms to younger folks i think that was a key component of benchmarks philosophy is kind of forcing people out and letting young people take over but i think that for really great investors maybe sticking around would be pretty great for the founders and people live longer now and they're healthier and sharper in their 50s and

SPEAKER_03: 60s and 70s like no cosa there he's like yeah you can basically drag me out of here i'm i'm i'm not going anywhere but no cost is yeah as active as ever so i i don't know what bill's deal is i think he

SPEAKER_04: should just do seed investments yeah two million dollar uh seed investments when you look at how

SPEAKER_20: being a founder has changed when you and i were starting in the 90s the idea of building an internet

SPEAKER_27: company was well you're going to have to spend a million bucks a half million bucks on setting up your servers and hardware you're going to need to put a half million dollars down on an office space and get a lease put a letter of credit down i mean you were blowing a couple of million dollars just firing up a startup now two or three people go to an accelerator they get some free credits from azure or whoever and they're up and running and they build something on the weekend and get 10 customers so it feels like many more startups are being built at a much lower pace so so how is that going to change things as we go forward here and then it's quite possible ai makes things even faster for founders in terms of finding product market fit i think you had two things going on one is um

Chamath Palihapitiya: there was a long drought of entrepreneurs after the dot-com crash right everyone kind of fled to safety and then things came back and i came back roaring um with free money and i think the venture market was oversaturated there was just too much money it was kind of back in like the dot-com days where people are just chasing any deal and any price i actually think downturns like this are being are going to be good uh because there's just a lot of junk out there and i'm amazed and sort of amazed at what what people are investing in so i think raising money is is much more difficult now we've shifted i think more from you know growing any any cost which i never understood i i think that's just where people you take a large sum of money for a model that's not quite perfected and you just lose more money uh and i think those days are over and it shouldn't be over just a bad way of doing business you know about a year and a half ago when it back to sort of the age

SPEAKER_23: thing one of the things you do get with age is i have to do like four of these cycles like you you know you know what's in the basement you know you know you know when things go bad they're way worse

Chamath Palihapitiya: than you ever expected you remember those days yeah uh so getting people to cut back early you know and convincing them that look you gotta you gotta conserve money we gotta trade off growth uh with earn uh and that's okay you know if we if you get through the cycle it's better i do think with the ai the fact that any person can describe a business model at some point not today but could describe what they want to do and not go to it not go to expensive uh often overpriced engineers to get it done and like you said it's all the groundwork is is there you know putting up data centers i don't

SPEAKER_27: know if you remember the i mean you had one yeah and then you had the building on 32nd on the west side with the basketball court on the roof was that 32nd street or something remember it was west of them yeah 33rd 33rd west of uh madison square garden you had a basketball i remember we played hoops on

SPEAKER_20: the roof one time where we shot some hoops we did um double click you brought your team

SPEAKER_101: yeah you brought your stack west west 4th street yeah we had uh well you know we used to play at

SPEAKER_20: chelsea pierce a bit and uh we had a pretty good team they did listen selling software is hard enough

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SPEAKER_27: boom and bust cycles you raised that secondary for double click you also were able to to sell some

SPEAKER_20: shares yourself and lock down a win so explain how founders should ride the cycle i am in agreement with you the valuations i'm seeing on startups because we do do precede with our accelerator and we do

SPEAKER_27: seed right around the the point uh in time you're talking about typically 500k uh but you know 500 to a million is pretty close and the same kind of thesis right you figured something out you got some

SPEAKER_04: traction you can't fake it uh generally speaking so this moment in time is the time to build and there are some advantages to building in a down market what are the advantages to building in a down market and then hey you know in another 5 10 15 years if it's a crazy up market what's the proper thing

Chamath Palihapitiya: rational thing for founders to do in both markets compound question there uh i mean always like i tell ceos and everyone never your number one job has not run out of money so the three main reasons companies go to business the first one is they solve no known problem uh which i think gets back to the the dot com as well as today where people are investing in cool technology uh let's say crypto nfts uh exhibit you know our current examples they solve no known problem blockchain okay great another

SPEAKER_23: another ledger been around nothing new uh so a lot of money goes towards that so yeah i think people are

Chamath Palihapitiya: focused more on you you solve a problem the next reason they run they they go out of business is they don't raise enough money and then the third reason is they raise too much money look at all the uh we were calling death of corns i don't know if that's a word we made up or if that's a a word give me that one up yeah death of corn so like okay death of corn so all these these companies that raised 100 million dollars last year they're going out of business it's like yeah what the hell kind of governance is that i i don't i don't understand yeah that's just not responsible so let's just as those are just bad you know again business doesn't change economics doesn't change and and we really push that on our on the founders you've got to build business is really simple

SPEAKER_23: you solve you find a big problem you solve it better than anyone else and good things happen you know people give you money um and if you do a really good job they give you a lot of money and then you get this thing called profit and then once you get profitable then you then you don't have to depend on anyone but on the flip side if you do get into a as we tell founders you get into the growth phase where you have a playbook it's replicatable and you have a high degree of conviction then you gotta you gotta use capital a lot of people are like wow i can borrow money that's a

Chamath Palihapitiya: lot harder these days but yeah you know the whole debt financing like debt financing of a tech company is just i'm sorry it's absurd get some debt get some debt as a sort of a insurance policy but if you got to use debt to grow an unprofitable business you're screwed everyone's screwed it was incredible i

SPEAKER_119: guess in the zerp environment i had series a companies that didn't really have product market

SPEAKER_27: fit they were truly seed companies figuring out product market fit but they were getting serious

SPEAKER_04: a evaluations and then yeah different banks were like well we have this money sitting here so we'll give you you raise 20 we'll give you 5 million you raise 30 we'll give you 10 million and then the founders just tacked that on to their runway okay i have 18 months of runway i'll just you know i'm spending a million a month so i raise this 10 i raised 20 so i got 20 months and then i got 10 million in venture debt or seven that's seven more months and i say no you're not supposed to use it for that rainy day fund but don't use it as runway because then a vc has to look at your deal and say okay i'm paying down 7 million in debt i'm putting another 20 million in and 7 million goes out the door to pay a bank yeah that doesn't make any sense um and in a down market with this globalization happening how do you think about work moving around the planet because there's something unique that happened with remote work you and i were in the in-office culture for two-thirds of our career and here we are you know a lot of people want to work from home so do you believe in work from home

Chamath Palihapitiya: or do you think people should be in offices we'll start there yeah i mean i was talking to the uh i'm gonna forget his name now he's at the hoover institution but he's he's like the expert and and sort of this whole work from home and i was like what's the answer we just ended up a binary answer there is no answer i'm really torn you know i i think for certain jobs and for certain types of people working at home is great i think that it's really bad socially and i think you get more done when you're in the office yeah you know for our work i can do board meetings now you know with a you know five minute notice you know i'm in a board call as opposed to traveling for three days and wasting time that's great but most people aren't that disciplined you know a lot of people aren't disciplined you know they they need mentorship they need they need help they need socialization

SPEAKER_119: yeah there's a socialization part where people get weird working from home staying at home all the

SPEAKER_27: time they need mentorship that's a lost part of this and i'd say the top 20 of performers are

SPEAKER_20: more uh effective at home it's probably about another 30 that are equally effective in the bottom half are not nearly as effective as if they were in an office being mentored and part of the

SPEAKER_27: yeah i'm trying to reverse this at my companies and it's just incredibly hard because you have such a great talent pool of people at my venture firm with 22 people and then we can hire people faster than in silicon valley people don't want to be here anymore and it's too expensive to be here so i would get a lower quality person who wanted to be here versus this incredibly high quality person at a lower price will stay longer it's it's incredibly frustrating in some ways but

Chamath Palihapitiya: it does seem to be reversing curious i'm curious for you i mean you're you're a uh uh you're an opposite side of the spectrum as i am you're extroverted very extroverted yeah it's got to drive

SPEAKER_23: you crazy not to be it's socializing it's really it's maddening and um i am now reversing it so i'm

SPEAKER_04: going to get like a space just so i could have like a co-working type space for my founders in my portfolio because i do need to be out and about i host events i do jam sessions one of the things that um i learned from travis from uber he'd have these like jam sessions chris sacco would do them too

SPEAKER_27: we're just five or six founders we had around just hang out have dinner or just hang out at somebody's house and talk about their businesses for a couple of hours and try to help each other think through problems and strategies and blind spots and so i'm sort of codifying that where i do these jam sessions every couple weeks bring together 20 founders you know go to uh our law firm wilson

SPEAKER_20: sencini or femwick's office get a big conference room and just talk for four hours and it's really really energizing for me and then doing the pod you know i get to talk to you and other you know investors founders from around the world and that does fill my bucket and give me that energy but i i think this has been great for introverts who you know they get to focus more and getting rid of commutes if we didn't have the community issue i think this would be like people would be much more open to coming back to work here in the valley apple i think is four days a week now or four days a week in the year there might be three or four right now zuckerberg's kind of forcing people

SPEAKER_04: back and then roblox said either come back to the office or res you know resignation accepted um so i

SPEAKER_03: think they did it like a gentleman's riff basically you know we're going to reduce the force by the number of people who don't want to come back to the office so i think it'll start changing i also notice that um people looking for work from home jobs are saying that they're having a hard time

SPEAKER_147: finding them you know as you get a thousand you get a thousand applications because anyone could be

SPEAKER_04: exactly do that job right so now and then if you're a silicon valley person who wants to work from home you've got the expensive silicon valley but you want to work from home you don't want to get on the bus i understand it but now you're competing against somebody in portugal argentina manila canada whatever it is and those folks are going to have a cost of living that's one-fifth one-tenth of the cost of living you have so they can accept a salary that's much lower and all the management kevin have learned how to manage remote workers and that's actually the thing that is really mind-blowing to me once you learn how to manage a remote worker in south america canada portugal manila whatever it's no different it's all the same you're in a slack room you're on zoom you're doing huddles you're using notion or coda all it's all the same so i think it also increases efficiency you could have somebody in the job in the role within two weeks whereas what would a job spec take getting somebody to new york you double click you paid people to move to new york you paid them to

SPEAKER_149: come out for an interview like think about those days of reload the concept of a 30 000 relocation

SPEAKER_42: package that was a thing right yeah danny siegel uh a guy i used to work with he had a great

SPEAKER_34: observation when kobe first started hitting he's called the great reshuffling of america and his theory was that people are going to move to somewhere where they wanted but but once that pendulum swing back what you're going to see is that people in the office can promote it because they're there it's facetime uh people who are remote you send them an email and they're gone like you have no

Chamath Palihapitiya: personal relationship with them yeah so i think you're gonna probably see a bit of a pendulum i think a lot of it comes from the top down uh you have executives who have second homes that don't want to go back they want that we all thought commuting would be easier now that everyone works at home but it turns out no one's actually working they're all driving driving around to go to go golf and do stuff we have plenty of examples in our companies that where people have multiple jobs

SPEAKER_34: um that's the crazy part they're not doing doing a job you know it's just it's we'll see i think it's

SPEAKER_27: going to swing back there's a reddit it's either overworked or over employed and it's over employed over employed uh and if you read this reddit it is awesome because it's people trading strategies

SPEAKER_149: on how to fool their bosses and have two three or four simultaneous jobs there's a lot of times

SPEAKER_27: as developers or you know marketers and they're like here's all the techniques to be on two conference calls at the same time but have the light line of sight on your two laptops and i had this

SPEAKER_03: happen where somebody said hey um we got this great google um executive who wants to come work for us and that's great yeah he's willing to take a pay cut i'm like oh that's amazing right it's entrepreneurial so donnie wants to keep his job at google and they'll says he has 40 hours a week for us but he'll do it at like a third of his salary from google he said uh is that ethical well it's

SPEAKER_27: his problem not ours and i said is it because when google finds out and he's writing code for you

David Friedberg: during work hours do they own that code well there's a word for it yeah it's called fraud fraud

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SPEAKER_167: burger bench whatever partners just wrote an article on the over over employment problem

SPEAKER_23: and we're getting a lot of pushback of people saying well that's just the employee employee relationship is transactional now so there's no meaning to it so i'm like so it's okay to commit fraud like what's the limiting factor here you know he's feeling the reason is you see this transaction because you're a negative pessimistic person right and that it just becomes self-fulfilling prophecy how can you possibly compete with a full-time employee and an equivalent full-time employee you can't yeah so you'll be the first one to go uh as they should be and they'll end up

Chamath Palihapitiya: i used to say when you have two girlfriends you have zero girlfriends you know it's like it's

SPEAKER_20: we have two jobs you'll end up with none yeah very very weird moment in time that yeah the the relationship between employers and employees is quite transactional and it this is one of the things

SPEAKER_04: that loss is loss is the culture right we the culture of companies really mattered people would stay with a company and now switching is taking one laptop putting it in a box sending it back to

SPEAKER_20: your old company opening up the new laptop logging into a new slack logging into a new notion coda salesforce whatever it is hubspot and then just starting over and you do it in like the same day

SPEAKER_04: there's no culture to i guess in some ways that is efficient but in other ways something's lost yeah

Chamath Palihapitiya: yeah i mean look at the tech market it's tech employment like you see these uh number of jobs filled every month going up those are people with part-time jobs everyone's trying to avoid the the full-time so they're taking another part-time service-oriented job i mean the tech industry is in a full-on recession right now that depression you know i think a lot of people moved when when the moving was hot you know that became very transactional i'm going to take who's paying me the most

SPEAKER_23: the best advice i had in college the guy says whoever pay never take the job that pays you the most because there's a reason they have to pay you the most it's like because it's a crappy job so find a

SPEAKER_81: company i like i don't think it should be transactional i think it's easier when when you're remote and you have no personal connection to the person so yeah when you look at ai companies

SPEAKER_27: there's this derogatory term ai rappers hey they're just wrapping chat gpt or claude or you know

SPEAKER_20: whatever uh language model with some accoutrement but they're going to be displaced by the primary model open ai wins it all destroys all competition what's your take on that so we have probably five

Chamath Palihapitiya: ai companies now that were doing it before you know my last company we ended up being bought by amazon and alexa doing natural language processing large language models can answer some of those questions but they can't answer all of them because you have to actually have the data you have to have real-time data a lot of the the ai companies we're we're invested in now are using the large language models well let's say for for uh classification purposes like they have their own models but they're using it for sort of the long tail that's it is quite good at that but it doesn't build the application so yes people are seeing it as again as a as a technology to be used um and it's a very good technology but it's not it's not the app i mean it's not the total solution to the problem they're trying to solve uh so one of the companies called rogo what they're doing is they're taking think of it as sort of a uh uh investor analyst junior investor analyst they're taking all the proprietary research from the investment bank all the decks all the thousands of decks they've done

SPEAKER_23: for clients and they're adjusting all this private data you forget large large language models are all public data that they're all all the llms are going to look pretty similar it's going to be that private stuff the stuff that no one else has that's going to be the differentiator i think ai whether it's medical legal less so because most legal stuff is public i think legal is going to be dramatically changed but again i don't think large language about i don't maybe they'll shift to that maybe

SPEAKER_183: they'll they'll get a vertical component something that's more real time i don't know do you think

SPEAKER_20: the language models become commodified and you know it seems like open source models on hugging face are getting better and better and falcon out of the uae is you know available uh in an open source way and it just feels to me like all these language models are gonna for 90 of tasks be good enough and they're going to be indistinguishable in the same way you know you open up any laptop and you fire up a browser it's all the same right the browser doesn't matter it's the content on the other side the service on the other time so it feels to me like it's all going to get commodified and you know like bandwidth it feels like bandwidth in some ways remember they built out all that bandwidth we're all common everybody and then they over built it they all went out of business and then people bought the bandwidth on pennies on the dollar it feels like that's what's going to happen to me i could be wrong

SPEAKER_187: i don't know no i think you're right i think it's going to be it's going to be very someone trying to

Chamath Palihapitiya: get us to invest they want to do it an llm like and they needed 100 million dollars like what are you kidding me so it's going to be give me two or three three players at the most they're going to have the llm it's going to be like text-to-speech apis or speech-to-text apis you know it's kind of magical in the beginning and there just becomes a you know single api call or translation services or something

SPEAKER_03: it's such a good analogy kevin because i bought drag and dictate three times in my life just you know as a writer and a communicator i was like you know what when my when i'm my hands are tired i

SPEAKER_04: just like to be able to talk into it spent hours training it when i was running the magazine and the blogging company and it you know worked well for me and then now you open up your iphone i don't

SPEAKER_03: know if you saw like the latest version my lord when you hit the microphone key it works flawlessly and apple's not good at this stuff they they tend to be like the worst at it and the the apple's latest

SPEAKER_20: version of speech to text is better than any dragon dictate or anything i've used over the years and it's free it's built into your phone and so it does i think it's a very good analogy that's something

SPEAKER_154: that used to cost 5.99 3.99 is just essentially free now so if you remember find the best turn to

SPEAKER_23: the graphic we had we were building unbeknownst to us until until uh google talked about the knowledge graph uh it turns out we were like well wait a second we got that we got a way bigger knowledge craft than than uh google does then we were basically collecting all this sort of real-time information from everywhere from you know stocks to colleges to you name it we had it and trying to convince people we were talking to apple at the time and amazon and google and apple was about to buy us for siri because siri had a problem it couldn't answer a lot of stuff we always approached the problem as it's more like jeopardy yeah you have to know the answer first and then figured out the questions easy everyone in the ai area was focused on understanding the question

Chamath Palihapitiya: and that's a it was a it was a fast backwards way of approaching it and we got in this big political

SPEAKER_23: issue apple was going to extend an offer for us and then they pulled it the last second and it was because their head of engineering at the time was convinced that ai would solve all problems

Chamath Palihapitiya: and he ended up he ended up i don't know if he got fired or losing his job not that long after because ai does not solve all the problems especially at that time you have to find the best and you

SPEAKER_04: were organizing hey these are the best headphones these are the best laptops these are the best ski mountains and by putting all of that into tables that's when you kind of had the aha moment of hey this semantic data is going to lead us somewhere no okay we thought we could connect the two together

SPEAKER_23: and it would be it'd be interesting when we were trying to convince those companies that we had

Chamath Palihapitiya: they could use our data to power their voice services they didn't believe it somebody uh it was actually iver berkovich and and dylan uh wenslow did a hackathon and they ripped out alexa's brain and they put our brain into it it literally just took an afternoon uh to be able to tap into our knowledge graph and and uh they took a video of it and they sent it to uh jeff bezos and i guess jeff sent an email with somebody saying who the hell are these guys why are they better than we are uh without anyone knowing about them so it really came down to the data understanding wasn't a problem that was trivial it was the mass in the data turned out to be a pain in the ass you have to you have to

SPEAKER_72: tap into i think we had something like 600 different databases data sets that we were pulling in from all over everything from health data to you know real-time bls data stock data how do you think about

SPEAKER_20: entrepreneurs today not to be curmudgeonly old men here but the traits that are timeless across the decades across the generations that you find are lead to just incredible outcomes and incredible the

SPEAKER_21: incredible founders who have incredible outcomes what are the traits that you see when i typically

SPEAKER_23: look for all employees i call it saga which is smart athlete great attitude so you can't teach iq so

Chamath Palihapitiya: you got to have you got to be smart you got to be competitive as hell not you got to hate losing i love that question do you value winning more or do you hate losing it's the hate losing it's like you can't fail and it's just a great attitude i think with entrepreneurs i have this sort of test i give people to colleges and there's 10 questions and how they score it whittles down to just a couple of people and the final question is are you delusional uh because no one's sort of like a perfect 10. but a lot of it is just this sense of urgency it's not manana it's today i gotta i gotta get i gotta get on this now this is an opportunity it's somebody who's willing to sort of look at data

SPEAKER_23: that has a high conviction in what they believe but are also open enough to realize it's everything in life is a hypothesis if the data shows you wrong then you change it uh and being able to know that you can um switch i look for charisma you know charisma is a bit of a pejorative term but charismatic people

Chamath Palihapitiya: are you know they're visionaries people believe in them they the best line i ever heard the hardest thing about a being a vc is um figure out their founder is delusional or visionary uh it's a very fine line if they're right they're visionary if they're wrong then they're probably delusional i'm

SPEAKER_03: willing to bet on the delusional ones for sure because if you're delusional and you say yeah you

SPEAKER_04: know i think there's something out there and you leave spain on a ship with some provisions yeah you gotta be pretty delusional to think you're gonna hit land because you might not i like the delusional

SPEAKER_05: ones because if they hit land now they're visionary like you're saying well i'd say i'd put that in the

SPEAKER_23: visionary camera delusional are the ones that just refuse to listen they just they're just held bent on i am right everyone else is wrong i don't care how much information is coming you know you're

SPEAKER_20: biased you know they just won't listen at all i see yeah that's a yeah i thought delusional as in like i could do something that nobody's ever done before but yeah i get your point if you define delusional as they're pig-headed and they will not change their mind in the face of new data you know that is like what's wrong with american politics today you could have new information and people

SPEAKER_21: will just not change their position in the face of new information you look at what happened to science

Chamath Palihapitiya: and coveted what happened to media yeah what have the politicians the data was so obvious i'm having an argument right now with with a a covet you know health expert how they completely screwed up our our country based on by just simply not looking at the data the data was so obvious from day one why they didn't listen to it it just became so political it became political and then once you give

SPEAKER_80: advice you can't say well you know what now based on the statistics we have hey we're six months into

SPEAKER_27: this we're nine months into this you know if you're surfing at the beach and you're outside and you're healthy and you don't have comorbidities you're gonna get covered at some point but you're gonna be fine and if you're old and you've got comorbidities you really don't want to get this thing so stay home and limit your interactions uh and yeah if you get a cold make sure you come to the hospital so we can give you one of these drugs but yeah it was pretty crazy how nobody could

SPEAKER_183: think sensibly for two years well a lot of people could think sensibly but they were shot it down

Chamath Palihapitiya: you know if you remember the great barrington declaration you know jay baccaria of uh stanford i mean he was great he was he was just seen as ridiculed as you know crazy and pixie dust and you know he's completely right you know we all knew remember with omicron that's talking about covet

SPEAKER_69: yeah no it's okay they said they said uh oh the vaccine will stop you from getting getting covet and we all had omicron like everyone we do had like literally it happened to me three weeks after i got the

SPEAKER_27: vaccine i got the vaccine i went to sax's christmas party his super spreader uh spectacular

SPEAKER_149: as i called it i got omicron and uh i didn't know i had it my wife said i heard i sneezed twice we were skiing and she said you you got covet and i said i don't feel anything i went to bed i had a little

SPEAKER_20: bit of hot sweats i went skiing two days later i felt fine i tested positive for cover for 19 days

SPEAKER_27: i felt it was the meekest cold for 12 hours i've had in my life probably all right i'd rather have

SPEAKER_69: i'd rather have cover than it cold we were in we were in the caribbean we couldn't couldn't get

SPEAKER_63: back to the country because we kept testing positive the nurse made so much money yeah just every day

SPEAKER_224: three hundred dollar test three hundred dollar test trying to get back to the states i mean

SPEAKER_27: it really is like i'm now moved to the point where i'm very resentful of i don't resent the first year because i think people were trying to do the right thing and it was unprecedented it was spreading but i'm really resentful of like year two and how they position the vaccine like it's absolutely you have to take it because you're going to become a blocker and i was like you know what that makes sense to me if i don't spread it and i'm a blocker great we go to a party there's eight blockers there's two people could spread it hey chances of spreading get go way down and even that wasn't true

SPEAKER_33: yeah look we got it we ended up traveling all over the world by the way it's the best time

SPEAKER_23: ever to travel every place we went there was no lines we went to airports with no people it was great we were when i looked at the data i'm going okay not old not morbidly obese no comorbidities my probability of dying is zero yeah like it's not going to happen so we just went all over it was fun but you know i convinced my kids to get it just because they were uh in their 20s i was like you don't need it i think there's no way you need it but your life is going to be painful like you won't be able to do it you won't be able to travel the whole thing all right no more

SPEAKER_04: about covid yeah no i mean there's some lessons there too from like uh the censoring on youtube and

SPEAKER_149: stuff like that it's very interesting having a podcast and then having your podcast flagged and i'm like but we're having an intellectual discussion about this you don't need to flag my podcast it's just here's what you have to believe and i'm like really i have to believe that and i have to put this warning on your content i'm like on this week in startups really okay so i i wrote an editor of the

SPEAKER_23: wall street journal defending big tech probably about three years ago and my argument is like it's very libertarian argument you don't want to go to the site don't go to their site it's their property they

SPEAKER_34: can do whatever they want i didn't realize that the government was actually interfering you know basically

Chamath Palihapitiya: doing uh censorship yeah uh using them on their behalf to me i was i was like i want to retract that

SPEAKER_23: editorial it was unbelievable that they were doing censorship and i think that's why people have have lost trust lost trust in so many many of our institutions i think what elon must you know for

SPEAKER_34: freedom of speech you know he can be a bit crazy often uh but you know you got to love the freedom of

SPEAKER_27: speech there's downsides to it yeah i mean it was it is a very hard thing to champion freedom of speech because that means you have to champion some things that are pretty gnarly and you have to tolerate some things that maybe are ugly and that you don't agree with uh but our generation i think that was like a core tenant and it's just very weird to watch generations feel like they're going to be like absolutely disturbed because somebody said something they don't agree with it's bizarre they need you

David Friedberg: don't need to be protected from words like they're just words like we're in the dictionary yeah it's

SPEAKER_81: weak very weak like there are true there are no trigger warnings in life you know bad bad stuff happens

SPEAKER_20: to you very suddenly that's the thing i look for in entrepreneurs we're back to the entrepreneurial

SPEAKER_04: question is some amount of resiliency and some core beliefs that you believe in that you know you're not going to just be shaken from like if you believe that this thing should exist in the world and you're resilient and you're going to fight the fight for that thing and you have that belief in the thing now of course you have to have some amount of smarts and some amount of you know hatred of losing and you'll get there but man i i do like principled people and then you know they can be hard to get along with but the world absolutely needs them what do you think about valuations now just to go on to another tangent you know things have gotten crushed in the public market starting to come back we had a pretty good year here it feels like things are stable but private market comps public market comps is pretty gnarly for sas and you've chosen sas where do you think this all winds up you said you wanted

SPEAKER_03: to invest in companies with a million dollars in arr let's say what should they be valued at today and

Chamath Palihapitiya: what will they ultimately be valued at so we invest in companies outside silicon valley primarily for that reason i just don't you know you know we're down in santa barbara if a company comes to us you know they could throw a rock and kill 10 vcs um you know why are they coming to us why would they wait they take money um clearly most you know huge percentage of great companies come out of silicon valley but it's also even a greater percentage of money is in silicon valley so the competition is extremely extremely fierce i look at some of the valuations where people have

SPEAKER_23: given like 250 times revenue i just i don't get it i don't know how you grow into it maybe i'm maybe i'm missing something but you know we tend to look at you know obviously growth rate retention

Chamath Palihapitiya: churn uh we just and then we do you know we think is a reasonable number based on growth rate yeah it's above you know most public no public company growing at 200 300 anymore but we just don't go crazy evaluations and yeah maybe we lose some deals yeah that's it that's our part of ventures

SPEAKER_248: you lose deals and those deals some of those deals go go off and do great things and founders have

SPEAKER_119: kind of figured it out too they know how to in today's day and age back in our day

SPEAKER_20: it just wasn't a lot of information or insights into how the whole system worked to even understand how a convertible note worked or how rounds were priced it was all kind of in a black box you had to really go discover that information now it's all out there and how to run a process is all out there

SPEAKER_21: so founders know how to run a process and get the valuation they want if they're trying to optimize for valuation but i'm not sure optimizing for valuation is a great idea um like you said before about optimizing for your salary is not a great idea well i have a lot of sort of canned speeches i give to

Chamath Palihapitiya: entrepreneurs um you know i think some of the biggest mistake you mistakes you'll see like on

SPEAKER_23: these death of corns they've piled on so much preferred they'll never see a penny right they could build a great company you know 100 million dollar company not bad right i'd take one of those uh and they'll receive they'll receive nothing um so taking out too much money is just as bad as like not

Chamath Palihapitiya: having enough money it causes bad habits you know we can usually get around the valuation i mean what it's a tough it's a tough market to raise money in you know if you've got a great company it's pretty easy you know there's a lot a lot of vc funds that are not able to to raise raise another fund there's gonna be i'd say 50 of vc funds would be gone you know within a year i'm raising my current fund and

SPEAKER_119: we're halfway to our target we hit our first target and now we're going for the stretch goal and it has

SPEAKER_04: been 10 times as much work as when i raised the the previous uh funds and a lot of the other fund managers i'm talking to have given up they're just out of the market and you're starting to see the layoffs happen quietly at venture firms you wouldn't see it because people stay as you know they're partners but they're not getting paid anymore they're getting a small draw whatever they're kind of winding down i would call them zombie funds and then they're maybe hoping next year they can go raise a fund or the year after but for those of us who have money to deploy this feels like the greatest

SPEAKER_03: time ever because you get to see a lot of companies people are running their companies in an intelligent

SPEAKER_29: fashion and they're focused on what matters product market fit customers revenue so it feels to me like

SPEAKER_23: this is the best possible time to be an investor i mean that's always irony right when when the market our fund was a 2021 vintage and um it's doing great yeah yeah on a relative basis but you know

Chamath Palihapitiya: when valuations are high people will only give you money when they're when they're low you know they're at once and what's nervous we're about halfway through our our fundraise as well i've never understood why one of the models i think that's broken adventure i don't know what your gp commit is but you know most of these vcs there's not a big gp commit no why not why not yeah it's to me it's the best

SPEAKER_21: place best place i can put my money i'll have a couple of million dollars into my fund yeah so it's

SPEAKER_20: yeah it's not it's i've got a lot of skin in the game and if you believe in yourself uh yeah there there i think there were a lot of folks who were putting in like well below one percent of their fund like the entire partnership five people might be like one percent of the fund it's like really you

SPEAKER_224: have a quarter million dollars in your fund wow that's incredibly risk-taking of you like yeah how

Chamath Palihapitiya: much is your second home i think i'll be i think i'll be like 20 but the first one it was probably yeah about 30 percent yeah 20 20 30 percent i don't take salary because i want to use it to to invest in other people i mean i just i don't have any income i'd rather have capital gains carry

SPEAKER_263: yeah car is the way to go absolutely are you have you moved to the institution raising money from

SPEAKER_27: institutions yet yeah we're just starting that process so i'm meeting with uh sovereign wealth funds

SPEAKER_20: family offices you know like larger family offices so i guess those aren't institutions

SPEAKER_04: fund to funds but yeah you know we're not going to at a hundred million dollar fund size ever be a fit for calpers or harvard you really need to get to like you need to put in 50 million dollar checks is my understanding and yeah they're reducing the number so those institutions are pretty hard i think family offices fund to funds to the extent they exist and sovereigns

SPEAKER_03: are you know the the likely route for any sub 500 million dollar fund we haven't done we're about

SPEAKER_34: trying to raise about roughly the same we just started first time going to going to more funded

Chamath Palihapitiya: funds institutions we haven't done sovereign haven't done anything offshore yeah are you having any

SPEAKER_04: success there or yeah i think it well not yet but i've been meeting a ton of people and i think that they are very interested in having a seat at the table and the people who have a seat at the table are on pause so then you have this interesting market dynamic okay the people who in the us are over committed they have the denominator problem stock market came down their venture portfolios didn't get marked down so they went from 10 allocation and venture to 25 they haven't liquidated their tick tock or their stripe or other companies that need to go public and so they need to get their venture commit down to 10 again or 15 from 20 or 25 and that's going to take equities going back up or

SPEAKER_03: returns coming in and clearing some of that venture position so i think they're largely on pause for 22 23 and 24. so you know if you're harvard if you're yale if you're stanford it's just going to be a big long pause uh while you and then you've already committed to great firms so you don't there's no rush here right they're thinking in decades so for fund managers who need to raise during these two or three years it's going to be very hard it's going to be very hard and i have a track record so i think

SPEAKER_76: i'm you know in a good position but i would say it takes 10 times as many meetings to raise half as

SPEAKER_23: much yeah the first one was a bunch of emails say you interested boom yes that's okay we're finding

Chamath Palihapitiya: there's like the smaller funded funds or the smaller smaller institutions that they don't have it much venture exposure so but you are right the larger ones yeah massive checks as people are saying

SPEAKER_20: pencils down right now yeah people are pencils down right now and that's okay um it'll come back and as long as you have some money to invest you and i have our own money so you keep investing and you're going to get the pick of the litter right now it's not like deals are taking you know five days two weeks to close they're taking two months six months to close a deal so on the on the buy side when you're investing you have plenty of time to get to know a founder

SPEAKER_27: again and due diligence which is good for everybody it's great for the ecosystem all right i got to jump kevin o'connor great to spend time with you and let's catch up next time you're in the bay area