Recode Decode: Keith Rabois

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It's the only business software you'll ever need. It's an all-in-one fully integrated platform that makes your work easier. CRM, Accounting, Inventory, Ecommerce and more. And the best part?

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That's Odo.o.o.com. Hi, I'm Karis Swisher, editor at large of Rico. You may know me as someone who's always picking a fight on Twitter and usually with Keith Roboy. Anyway, we'll do that after this podcast.

Okay, in my spare time though, I talked to you listening to Rico decode from the Vox Media podcast network today and the Red Chair is Keith Roboy, an investor and entrepreneur who I've known a very long time and who was on a very early episode of this podcast many, many years ago. He was co-founder of Pay Pound and investment partner, CoSleVentures. Keith, welcome back to Rico decode. It's a pleasure to be here.

I was not a co-founder of PayPal. I was an early executive. I was an early executive. I was a co-founder.

I wish I was a co-founder. Yeah, definitely a part of the mafia. Peter and Max are technically co-founders with Elon. I think all of you is like a big old group.

But although Elon came from the X.com. He did. He's a co-founder in March 2000 right before the Internet Bubble Clops. Yeah, who wrote that for the Wall Street Journal?

That's a very special question. So, indeed. You went on to fame and fortune in many different areas. You now are an investment partner in CoSleVentures.

So, that's what we want to talk about. One of the things I do like about you, we don't agree a lot of things. We definitely argue over on Twitter, but it's a very lively discussion, a very civil discussion for the most part about various issues around ethics issues, around a lot of things. So, I want to really have a lively discussion today about things that are going on.

So, let's get people familiar with your history. Go through it really quickly. Sure. Actually, I started as a litigator on Wall Street and moved out here in 2000 when Peter Thiel became an interim CEO of PayPal in September 25th, 2000.

You knew him from Stanford. I did. I met him my first, sort of fortuitously met him my first day of freshman year when he was delivering his alternative newspaper to my dorm room. And I happened to be there and was interested in starting with him.

In any event, I met Peter, almost 30 years ago, when he resumed the reigns at PayPal, he recruited me to move back out here. So, I joined PayPal, which is a bunch of this fits, losing a lot of money. We were burning $10 million a month actually at the time, which in 2000 was a lot of money. And we're running out of money very fast.

Peter sort of displaced Elon Musk as CEO. And November 2000, I moved out here to join PayPal. And within a year, we were able to turn the company around because they actually actually profitable, filed a go public, right? Actually, literally filed the day before 9-11 and still was able to have our IPO in February 2002 subsequently sold the company to eBay after being a public company and then re-joined Peter to help fund and start new companies in 2003 while the rest of Silicon Valley was dead.

I thought there was going to be another way of innovation, which is really the consumer internet wave was done. We found some entrepreneurs that were still interested in starting things and were able to help propel them. I went up joining LinkedIn about a year later, Reid Hoffman, who obviously had worked with us at PayPal, had been my first boss, actually at PayPal, started LinkedIn. And from the very early days, I was interested, I invested in the company and then later joined full-time and stayed through the Reid regime.

He eventually found a successor, CEO, and I left to go join Max Lovechin. It's a company called Slide that most people don't remember. People do remember Max, fortunately, but don't remember Slide, which eventually was acquired by Google. I came in and mocked you all the time.

That is true. You wrote a great set of series of kind of quotes. It was a gaming company. It was a gaming company.

It was a social gaming company on a platform. It was the worst idea. It actually made some sense. We used a lot of data to program our games.

The problem was we locked a top-down vision. I think you need both the data and the vision. We let users vote with their feet and we optimized around that. We ultimately acquired by Google, but it wasn't a very successful ride after about three and a half years.

I stayed at Google for about two weeks and got persuaded to join this company called Square, which I haven't launched yet. It was about 17 to 20 employees. Jack Dorsey had founded it and then funded it and was working on launching it. I got recruited to join, decided to do that, went through a rocket ride, actually, very reminiscent of my PayPal days.

And then eventually joined Vinot, who had been on my board, Vinot Coosla, at Square, joined him as a managing director at Coosla Ventures. And believe this or not, March of 2013 is almost six years ago, which is an eternity. So long time, right. Yeah, it's an eternity.

Yeah, I never thought you'd become a venture cap, but you're sort of an operator. Well, I was an operator, but I was an angel investing for about a decade before, from about 2003 to about 2013. I probably invested in about 80 companies and actually enjoyed the process of meeting with very early stage entrepreneurs. We're talking about the proverbial two kids in a garage.

Found a lot of really interesting companies before other people knew they existed, developed a bit of a track record and enjoyed that. And sort of always thought that one day I'd want to be a venture capitalist and decided finally in 2013 to take the stress side of my life, which when you're operating a company every day, there's a crisis. You know, Jeff Jordan taught me a long time ago that 1% of the time, from OpenTable, he's also a venture capitalist. The capitalist, he's a big executive who's champion, actually the acquisition of PayPal back in the day.

But Jeff had this rule of thumb when he was managing people that about 1% of your employees have a crisis every day. And that could be a personal crisis, a professional crisis, a medical crisis, a family crisis. And when you're the boss, all those crises are yours. Yeah.

Someone used to call them big giant babies to me. Yeah. So after 13 years of suffering through a crisis every single day and kind of the sine wave of emotions, I decided to be a venture capitalist, which at least smoothed out those waves. It has less adrenaline and longer feedback cycles.

But the day to day ebbs and flows are no longer your problem. And what did you be coastal? What was the, there was a lot of, there's a lot of different retroferms. And this is pre-soft bank and with interest in horror, what's existed, right?

Yeah, interesting. I think it was started around 2009. So as I mentioned, for no coastal, I founded the firm, was on my board at Square. So I knew them quite well.

Also David Whiden, who's another general partner at KV today, had been on my board at slide. So two of my three GPs really had been on my board for the last five or six years. And I think that's a very healthy way to start a venture relationship because you really need to have a lot of trust and confidence in each other. You don't see each other that much.

We typically see each other only on Mondays. Right. And yeah, we have a coastless difference because every venture firm is different. Some go for the whole like group thing, some think of other things.

You guys are sort of independent players. We are independent in many ways. We take feedback from each other and really learn a lot from each other, which is the benefits of being in a partnership. We also, though, one other distinction I really thought would be meaningful is we like to take technical risk.

So we invest as early as possible. We try to be bold in our bets as early as possible and as impactful as possible. And I wanted to do more technically founded investments. What does that mean to you?

It means that the core risk is the technology. Can this actually happen? Can this be done? For example, a very popular topic would be can you build an autonomous driving automobile?

That's a technical risk. The market is there. If someone could deliver for a reasonable price point in an autonomous vehicle, there's definitely people who will buy that. But the question is, can you do it?

How accurately can you do it? How many miles of data do you need? How many years is it going to take? One of the perverse side effects of deploying driverless cars, but 40,000 Americans die every year in automotive accidents at about 60, 40 to 60 percent are completely preventable.

It's because the driver is distracted with his or her phone, with drugs or alcohol, with talking to their passenger. But there's no doubt that if the technology exists, there's something to do with it. Sometimes you're taking market risk, which is it's very easy to see that the technology will work, but no one cares, no one wants to buy it. We take a lot of technology risk.

That was different for me, but I was excited to learn about that. It allowed me to branch out into areas I hadn't been involved in, let's say healthcare investing, which I was really interested in, healthcare systems complete in the US and probably globally. There hasn't been a lot of innovation recently, and I thought that I would want to spend the next decade of my life diving into new areas like that. As a result, actually, the last six years I've spent about maybe 25 percent of my time in money investing in healthcare innovation, which is something I'd never been able to do before.

You were looking for technical solutions versus market, but you do do do investments in both of those. I do both. What would you say yourself to investors when you do it? Sure.

The thing I actually have done for almost 20 years now is I invest primarily in founders. I'm really a people-based investor. I'm basically assessing the opportunity that the people in front of me have of changing the world. Do you think about how ridiculous Silicon Valley is in some ways, on a rational basis, is completely ridiculous to wake up in the morning and say, I'm going to change an entire industry that's been around for centuries, but it happens all the time.

People succeed, but it is kind of irrational and kind of ridiculous to start that way. My core expertise is once in a while being correct about meeting someone who's 19 years old or 25 years old or an immigrant that's never done anything, has no traditional credentials, and saying, you know what, this person may be able to do that. I'm going to give them my time, my money, and my credibility lend them it and see if they can pull it off. I've been somewhere between 30 to 40 percent of the time.

It's actually pretty good in investing. When you're thinking about this scene right now from when you started today, talk a little bit about the landscape now, because a lot of things have happened. You had Intricent Horace, which has sort of burst onto the scene and has been around for a long time, but still, you had been known as a huge personality and also a huge reputation. It was mostly business as usual, until just recently it was Softbank's entrance with the giant massive fund that they brought in.

I think Softbank's had radical implications on the late stage, the growth round, so to speak. What we do at Coastal is more early stage, what I think of as traditional venture capital, which is a seed finance or a series A round, where obviously Softbank's been deploying a lot of capital in big bets in mostly late stage investments, and that has had significant impact in the entire ecosystem. To talk about that, because... Sure.

I think it's deferred some companies' aspirations of going public. I think it's created a crutch for other companies that really don't have an economic model that's working, and it's created a bank account that people can top into and not have to solve their business problems. Right. I personally believe that scarcity capital is a good thing.

It's a desperation, pre-tinnovation, and that you need constraints to actually execute well and innovate. If someone gives you this pile of money, I think it creates a lot of excuses in Softbank. To some extent, this is what happened to us at Slide. We raised one of the first monster growth rounds.

It was basically Fidelity and T-ROW. We raised a $50 million round in 2008, and that was unprecedented actually for a private company from public-stage investors. I think it made us a little sloppy in several ways, and we thought we had infinite resources and infinite time, and it didn't force us to solve our fundamental issues right away. I think that that is likely to happen with a lot of companies that Softbank invest in.

I think they've invested in some very good companies that are clearly going to be successful, and they've invested in a lot of companies that probably have some fundamental root-caused problems and giving them a lot of money isn't probably going to solve them. Right. And so with the theory behind it, what do you think of this theory just throwing hundreds of millions of dollars? Yeah.

The theory even if it doesn't affect you, it does create a mentality up and down the system. I agree with that, too, for all. I think the mentality of throwing money at companies and making them successful just doesn't work. I've never seen real examples of just you take money and you crown a winner.

That's their philosophy. I don't believe that works. I think that's the whole history of Silicon Valley is that he's upstart with very limited resources and a bunch of misfits have rearranged every single industry. And they've done it over and over again.

Every time someone thinks somebody in Silicon Valley is dominant, whether it's Yahoo or before that AOL or whoever, they get upended by a new startup. It's a bunch of dropouts that have very limited amount of dollars. And so I just don't believe that money is the panist, it's not the panistian, it's certainly not the keys to the kingdom. I think there are some companies, very selective few, where they have an engine that is polished and ready to rev and you're just giving gasoline to an engine that works really well.

But there's very few of those. Those are very rare. And so I don't think if something makes 50 investments, maybe five at most of those kind of companies, the discipline companies that really get product market fit without a lot of capital are almost surely going to do better than the ones that chase hundreds of millions of dollars. So how do you infuse that?

And this is how do you compete in the system when you're in this system? I think sometimes it takes time. It's hard. I mean, a lot of my job is really explaining things to entrepreneurs.

I don't have any power. All I have is influence. And so I try to explain the trade offs. And sometimes it just takes a cycle for people to see other people get burned by experience before things make sense.

Even if you can explain things rationally without the emotional context. So for example, we grew up in Silicon Valley that went through 2000 to 2002. And then 2008, right? Yeah, but in 2008 was a very short sort of.

2002 was 2003. It was called nuclear window here. And almost everybody met and had a job. They were out of work.

And I think those who went through that experience, and you can see it on Twitter, things that like some of like the girly tweets, it just frames your perspective in a way that you realize not everything is always up to the right and that you need to have control of the levers in your company and control of your destiny. So when the world does change, you're not caught blindsided. But if you've never been through that kind of experience, I work with a lot of young entrepreneurs that are basically post 2008 and they've been through 10 years of uninterrupted growth. And this doesn't make any sense to them when you talk about, well, the world can change and capital is always going to be free or very cheap.

Like this week. Yeah, this week is going to shake potentially shake things up. And I can see a little bit of nervousness on some entrepreneurial friends of mine's faces this week, the ones that are in town. And they're asking questions for the first time.

The kind of questions that three years ago or five years ago, they were completely ignoring. And so I think the benefits of some experience are that you can see how the world shifts and that you can be prepared for it. But I think in total, the world of soft bank goes through an evolution. I think it's going to be very hard to teach and quotes people that down sides of taking soft bank capital, which I mean.

Right. We'll talk about other issues there. And the next one that I'll mention around the Saudis and everything else. So to finish that second, what is the state of venture capital right now as we're going into 2019?

How would you describe it right now? Interestingly enough, I think in the last month or two, it's really cooled down. I think you can see the certainly series being later level, a fair amount of hesitation of pulling the trigger on monster investments. At the sea level, it's not as obvious how much impact we've seen in the last 60 weeks.

It's also a little difficult because venture capitalists can automatically go on vacation in December. And it was very busy, shockingly busy December. But I think that was the run on the bank sort of experience. Because what do you mean?

Everybody I think felt a little bit on ease. So every company that could and every founder that could and every VC that could was raising money ahead of the curve before 2019 started. So typically December slows down for investors and for companies because they're sort of derivative from the venture capital schedule. I felt like December was the busiest of my venture career by far.

And I think that investment are raising. Raising. Raising. And I think it was because people felt that the world could be changing and shifting and they're all trying to fuel up with money as fast as possible so that they weren't caught last, you know, in the sort of last-care stand-in kind of problem.

So we'll see what happens in January when everybody comes back to work, everybody's in the same place. But the market turbulence is certainly going to exacerbate and amplify some of those feelings. So but whether it's a real correction or a temporary blurb, I don't think anybody absolutely knows. As you know, Peter T likes to say, the only thing he really knows is we're 10 years closer to the end of this bubble than we were.

But no one can predict the timing. So when you look out at 2019, are you optimistic? Pessimistic? Or are you just going to keep?

Pessimistic at the later stage version of Silicon Valley. We'll talk about IPOs and awesome. I think there's going to be a real sad- there's already been a 30% correction of public market prices with technology stocks, which is a reasonable amount already, but I suspect there's a little bit more there. But I'm very optimistic about the innovation in Silicon Valley that the fundamental building blocks of technology are accelerating.

Like the innovation at the root level is exciting. Every partner meeting on Monday, we have companies present and because we invest early- You see early times. We see like the future and the future is great. I mean, on all kinds of dimensions, we see fascinating innovation every week.

So I'm incredibly optimistic. And these companies are going to bake over the next three to five years. So what happens in January? It doesn't really matter to them.

It's like having a baby and it takes a couple of years to grow up before you even know much about the child. I have children. Do you have children? It takes a long time.

All right. When we get back, we're talking to Keith Rubei. He's an investment partner at Coastal Ventures. And he's actually one of the most interesting thinkers in Silicon Valley.

We're going to take a quick break now and we'll be back after this week. On Network in Shell, I'm joined by tanks and ultra, the meme king with over 15 million followers across tanks, good news, influencers in the wild, and his personal account. Tank is breaking down what the meme economy really is, how much a single sponsored post pays, why major brands are throwing serious money at jokes and how mean culture think preparation age, starter packs, and a perfectly timed screenshot is actually reshaping how we think about money and value. Get ready for a conversation that'll change the way you scroll, make your rethink, what going viral is really worth, and prove that sometimes the most serious money moves are wrapped in the silliest of jokes.

Listen, wherever you get your podcasts or watch on YouTube.com slash your rich BFF. We're here with Keith Rubei. We've been talking about innovation and where it's coming from. He was saying the future is bright.

You see a lot of ideas. Can you give me like a five minute idea of what that is? What do you mean? What is coming that you find so intriguing?

So a couple areas in healthcare, the use of data to improve outcomes is really starting to happen where math actually does a very good job correcting for the errors and mistakes humans make. And so we're starting to see the FDA actually approve technologies and products that use math instead of humans. And that's encouraging a positive feedback loop where people are more willing to invest in companies that are going to displace human judgment and make either access more affordable or more. Diagnostics, yeah, diagnostics are a good example.

The treatment's a little bit more tricky. We don't do biotech per se, like, I mean, the actual drugs we wanted to. So there's a nice trend of using software instead of pharma, which is interesting. We can produce the same outcome by using like an application to retrain your brain in different ways.

And the FDA is also blessed that. So actually one of the benefits of the Trump administration in so far is already. I think most people would find that the FDA's been much more rigorous but also innovated innovation friendly. That's a lot of people are talking about it.

And it's leading to positive outcomes. I mean, these are real people that need new treatments and I think the FDA, the new FDA is very consciously aware that they have to ruthlessly enforce principles but they also should look for new ways of doing things. All the FDA was way behind Europe or another. Yep, you can use unusual for being behind Europe.

Yeah, extremely unusual that the US agency is more heavy-handed and more intensively regulating than the equivalent in Europe. And that was probably going on for a while but it has been corrected in the Trump administration. So that's one of the best areas of the Trump administration, particularly these have been Silicon Valley. All right, so healthcare, what else?

What other areas for innovation? You know, we've had some investments in satellites and rocket companies. One that's already sort of pretty public is Rocket Lab, which is producing very low-cost rockets that will put satellites into orbit quickly and regularly. Low-hanging satellites, right?

I talked to Jerry Yang is also on a bunch of those. Yeah, this one's actually, we'll put it into orbit. And for less than the cost of SpaceX and the goal is to actually be putting rockets into space as frequently as we expect airlines to take off. You know, if you think about when planes were invented, the idea of the planes would be flying every hour everywhere was probably pretty crazy.

There will be a point probably in your kids' lifetime where rockets are taking off just like we expect planes to take off. And that will change a lot of things. The cost of putting a satellite in orbit in the delay associated with putting a satellite in orbit handicaps and hamper's innovation. And so when people realize that they'll be able to put a dedicated launch into orbit for less than $5 million and that they can bank on the predictability of putting that into orbit and replacing it, there's going to be a lot of innovation that can be done in space.

So I think the space race is back. I spent a little bit of time this year reading about Apollo 8, this great new book called Rocket Man starting to get back familiar with how much innovation and the kinds of techniques people use and the kind of thinking people use. So I think we're going to see a wave of that innovation. Is that something you've been investing in?

This is more deployment of different satellites. That's not a lot of the thing. The deployment of satellites are satellites. Well, communications and data are incredibly important to everybody.

From military applications to civilian applications. So it's not surprising. So you're girding the globe with satellites. Yeah, that is going to increase.

Transportation, we've looked at some transportation innovation. We haven't really invested in any. There's a supersonic plane called Boom that a lot of people find very promising. Super sonic plane.

This is going to travel from California to New York. We've talked about this with the defense agencies working on some of this. It's almost surely doable. The questions are really what's the cost going to be?

What are the trade offs in terms of sound and noise disruption? It's a little bit like the Concorde was built on technology really from the 1950s to 60s. And no one's really rethought the Concorde since then. The Concorde for disaster.

No, it's fairly advanced for the 1970s. It wasn't perfect for the 80s, 90s and level 2000s. So it's really 40, 50 year old technology, which is an eternity in the tech world. So I think there's going to be some innovation there, but we haven't funded any yet.

We have funded autonomous driving startups and the kind of sensors and core technology components that would be very critical in deploying driverless or autonomous vehicles. I think that timing is going out. I actually think it's sooner rather than later. One of the reasons why is humans are not very good at this.

And so if you're basically, it depends a little bit on this, we'll talk about this with other policies, but another baseline is absolute perfection or your baseline is how many humans die every day. And to me, if the technology is better than human driving and people die less frequently, we should deploy it as fast as possible. Where some people would say, well, you have to prove it's perfect. And the same, we had this debate, if you like to read, you know, old school history around electricity.

Electricity at first was a fairly dangerous technology. Yeah, it's got blown up. Yeah, all the time. And you can read a great book, historical fiction by Graham Moore about, you know, Tesla versus Edison and Westinghouse.

And it was an awesome part of American history. But if the framework had been, is electricity perfectly safe, we never would have had electric lights. And so I think with technology, and gas was more dangerous. Gas was absolutely dangerous.

Once the technology electricity got to a certain predictability, that's why nobody uses gas anymore for most things. So I absolutely really reject the idea that new technology should be perfect, that that's not the milestone. The milestone is it better than what we do every day. And if that's the case that autonomous driving is going to happen sooner rather than later, I don't think humans will stop driving for a while.

But there's probably a point even in my lifetime where humans are not allowed to drive. Well, essentially, I gave a speech two years ago and I said someday I'm only a car is only a horse. Like you'll have it at your ranch and you'll drive it around or you'll be in entertainment versus a real transportation. I agree with that.

And they shouldn't be in cities. There shouldn't be cars in cities. Well, yeah, I actually funded one company that's still a quasi stealth mode. I won't talk too much about it.

But that's reinventing the idea of a city and predicated on the idea that transportation is completely archaic and is really built on the 18th century or 19th century. And we'll have something live later maybe this year even. It was interesting years ago, if you remember when Larry and Sergey from Google were going to put ski lifts in San Francisco, do you remember that crazy scheme? At the time I was like, that's actually the way we're going to get around.

We're not going to have cars. We're going to get around by these vehicles. Whatever they are, I've heard a little bit. And take off.

I was like, this is actually how it has to be in cities. Cars have to leave. Cars have to leave. A non-autonomous cars have to leave.

Non-autonomous cars take up like just the parking implications. I've read studies that between 20% and 40% of real estate in the city can be allocated to parking. That's not crazy. Think about how much housing you can build or what else you can do with that real estate if you didn't need as many parking spots.

Absolutely. So let's do anything else in the other area. So autonomous healthcare. Everybody talks about AI.

So that's the other topic. The heights of topic. The way I think about AI is maybe a little bit different, which is I actually believe in AI and I believe there's a lot of innovation that's already happened and still accelerating. However, to me, the end goal is that the customer, the normal person on the street doesn't even know that the technology is powered by AI.

So for example, I was a lawyer. There's no reason you couldn't replace a lot of what lawyers do with AI. So I actually want to fund some people doing that. I'm looking into various ways to do that.

But I don't know if the end purchaser or legal services needs to know whether it's a human or machine creating the brief. But I want a brief that's not drafted by a human or the ratio of drafting of a human to a computer is 99 to one or something or one to 99. So I think there's going to be a lot of technology components under the hood that are powered by AI, but the product looks like a normal product. It just costs a lot less and works a lot faster.

So for example, on a Y Combinator, we funded a company that does patent filings by AI. So they use AI to patent filings with some human labor, but the customer is delighted because instead of going to a patent firm paying an absorbent cost, patent filing and waiting three to four weeks, we can do it in one to two weeks for a third of the cost. So you're seeing a lot of stuff like that. And then more people will consume it.

Oh, there's diagnostics. There's all kinds of things that are higher level jobs that are seen, but they're still, to me, they're like manufacturing. They're like working in a factory, some of these things. Well, there are more than people.

I think this is the thesis that we've had for a while at Coastal Ventures. We've been funding replacing human judgment with AI, not the manual labor. But there's jobs that allegedly entail human judgment or a lot more like manufacturing than people realize. I mean, I was a lawyer.

A lot of what lawyers do is like working in a factory. That's why I escaped. Right, right, exactly. So we're talking about innovations going, but how do you assess this here?

Let's talk about some of the ethical issues, like with Facebook and with Khashoggi and this investment by the Saudis. Do you think that this group of people is equipped, you know, with all these exciting things that are ahead to deal with it? How do you assess sort of the ethical health of Silicon Valley right now? Well, I would also frame this very differently, which is compared to who and compared to what?

All right. Okay. These are who did go on and on about how good they are. Yeah, that's very difficult.

But people do come to Silicon Valley with a mission. And the mission is to improve some element of society that's probably broken or inaccessible. And I think that's what's powered the best company is in history of Silicon Valley forever. So I believe that that's true and that's the missionary zeal.

I still can value has become more important. It's a bit like old Steve Jobs quote of the pirates and the Navy. Everybody roots for the pirates until they're successful. Then you have to act like the Navy.

And Silicon Valley has historically been the pirates upending in improving archaic interest. Let's be honest. Yeah, but it's actually quite relevant, which is I mean, I actually think I coined this in terms of the change I did an interview with Travis about five years ago. Yeah, on stage and as he was talking, it occurred to me that basically what was happening was technology companies becoming so important that they were really more like the Navy.

And when you're the Navy, you have to act like the Navy. You can't act like the pirate anymore. And that transformation probably lined a bit, especially at some companies like Uber, but maybe even across Silicon Valley. But to me, humans are humans.

And they've been humans like you reach Shakespeare. There's nothing that's happening in Silicon Valley that you can't find in Shakespeare. Humans have always been humans or if you reach sapiens, you get a feel for that too. Going back, you know, it's not just centuries, but like yawns.

And so to me, like when you talk about ethical debate, the question is, are we doing things better than we used to do better than other humans? Better than a hundred years ago, better than a thousand years ago? And the answer to most of those questions is yes, yes, and yes. And so yes, people can improve.

Yes, Silicon Valley can improve. But if you compare it on any benchmark and yardstick to humans in history, it's usually pretty damn good. So we can talk about this very specifically on any of these topics, but I don't start with the premise that Silicon Valley should be so bulletproof and so perfect or it's fair to criticize Silicon Valley. Right.

Okay. So what do you think of the criticism? It's mostly focused on Facebook, of course. Yeah, which I think in some sense is also a little unfair.

I think something Facebook has done or unique to Facebook and that's a legitimate topic to discuss and criticize. Facebook has done or actually things other technology companies or other non technology companies have done and the meat has been fairly inconsistent in single Facebook. So for example, let's take a classic example. People talk about using certain data to target ads on Facebook and they can complain about you can target on this way or that way and they find nefarious examples of such allegedly.

I would posit that anything you've seen on Facebook in terms of targeted ads can be done on steroids, i.e. more targeted with more data that's more personally sensitive using direct mail and direct mail is around, you know, these since 1940s, but I don't read the New York Times writing exposities on direct mail. They have written stories on direct mail. So why do you think this?

Is it the size of the massive impact? The number I think is probably why. I think it's jealousy, truthfully. I actually think a lot of journalists are jealous of tech.

They have colleagues that are comparable, people that went to school with them at Harvard Yale, et cetera, they went into tech companies that are saying age and make a lot more money. No. Secondly, the biggest issue is gatekeeping, it's the removal of a gatekeeper role. So when I was growing up, which isn't that long ago, the media had massive gatekeeping obligations and impact.

So if CBS News didn't want to cover your story, there really wasn't a way to communicate directly with the American people. Or even when I started in Silicon Valley in 2000, basically at the New York Times Wall Street Journal, Fast Company, Wired, or maybe one or two other publications wouldn't write about you, there was nothing you could do. That's changed with the proliferation of Twitter or Reddit, Facebook. There's so many channels to communicate your ideas that the role of the media has been eviscerated.

The media cannot stop ideas from spreading anymore. And I think that frustrates a lot of people in media and they want to put the genie back in the bottle and you see that in a lot of coverage. It's either explicit or implicit. But, you know, Naval was the first one to really point this out.

In a blog post he wrote in 2012, I believe, he basically predicted this whole trend that the media would push back on the lack of gatekeeping that they historically performed. What about you? You've got to keep you can't utterly dismiss some of their sloppy management at Facebook and over and over again. There's instances of not being gatekeepers being problematic.

Yeah, that's fair, but compared to what? I mean, again, as Tyler Cowan has written, I don't know any criticism of Facebook that wouldn't have been written about the printing press. Yes, there was. Yes, but the printing press was obviously one of the most important things in the history of the human race.

And it created revolutions. Like before, it really just, you know, sex control, dissemination of ideas and after printing press, it couldn't. And so there were lots of new religions that created revolutions. And that's exactly what social platforms were doing.

They're creating revolutions. But the printing press was clearly... And the printing press was available to lots of people. The Facebook is run by one person, if you really...

Yeah, but they're not Facebookers, Twitter, and if that's Twitter, they're Reddit... The Facebook by far is the biggest. I don't believe that. Actually, I think Twitter has more impact on policy.

Yeah, I actually don't think Facebook has nearly as much impact as people think. Like for example, Google's pretty influential. Like it's hard to live without Google. I don't find it hard to live without Facebook.

It doesn't perform a utilitarian function for me. Twitter does perform utilitarian function for me. It's like my New York Times, which is growing up on Sundays. I would sit at my table, have a bagel, and consume the New York Times.

Now I wake up in the morning. I don't have a bagel anymore, but I have eggs instead. But I also read Twitter all morning, and then I click through on the links that are interesting. Including New York Times.

Yeah, absolutely. It's a reasonable fraction of stuff I make click through. But fundamentally, my go-to constellation is Twitter. What would you criticize Facebook for?

So I think their communication strategy has been intellectually bankrupt. I think they've been incredibly defensive. They should be framing some of these debates instead of waiting for the exposé and they're reacting to it. I think they've struggled with whether they really want to embrace a censorship role or not, which is a complicated topic.

I think, for example, if you take their mission seriously, which is to serve all humans and certainly all Americans, they really shouldn't be censoring content unless it's libelous, obscene. That's about it. Port of Gothic. Yeah, maybe directly inciting violence, which is the standard for Supreme Court in 1969.

But anything else, I don't think you can serve these. How do you have the performance around political advertising in the Russian? Let's talk about that. So there are some laws that apply to the purchase of ads by foreign entities that have been a lot of the United States for a while.

In Facebook, like any other media should observe those laws. So if you can't buy a TV ad, if you're a Russian entity, you should be allowed to buy it out of Facebook. It should be consistent across channels. But if you can buy a TV ad, then you should absolutely be able to buy the same ad on Facebook.

So I think they were negotiating some of that. Now that said, a lot of the complaints because it's a total expense. It was around the content. I understand that advertising wasn't quite...

Yeah, it's the content. It's the content. But the content, if those people are allowed to publish a book in the United States, why can't they share the content on Facebook? It's amplified.

It's problematic. But I'm just trying to put them in the zero. But if I publish a book, I can buy ads for the book. I can run an ad in New York Times for my book.

Yes. I can go on radio and talk about my book. I can do a book tour. But look at the difference.

It was interesting. There's a pushback of Alice Walker at the New York Times just even mentioning a book versus Facebook and being used without explaining that these are Russians that are trying to influence the election. You know what I mean? Until lately, that wasn't the case.

Well, I think influencing elections is something every government in history has tried to do. The government went down. I think the biggest issue was the American government was not wary enough about the agenda of certain other countries, particularly in South Carolina and China. And the tech companies in some ways were following the leader of the government.

I mean Obama famously ridiculed Romney for calling out Russia as a potential threat. And so why Facebook should be more prescient than Obama about the threat of Russia to me makes no sense? I think Obama went wrong. Yes, absolutely.

They have a lot of information about what's moving on there. Well, really Obama had a lot of information about the information I hope for this year. Yes, yes. And definitely, I think people within Facebook said we warned them.

Certain people said we didn't warn them. Others say we didn't warn them enough. But let me come back to the metaphor of a book, though. I think if you can publish a book in the United States, then you should be absolutely free to share the content on Facebook or Twitter.

Even if you can hide who you are. Well, what are the rules of publishing a book? This country was founded on anonymous or synonymous pamphlets. So if you can tell- The cool names.

Well, somewhere, somewhere, somewhere- No, I know that. I know that. I mean, it's a classic American history. This is the reason why we teach American history is not just for obscure facts.

It's so that the base and principles can apply to today's world. I don't see why. There should be a rule that says you have to publish under your own name. I think if you buy ads, there's a legitimate paradigm that's been established that only some people can buy ads.

So does it worry you as American citizens that this is allowed to happen? Not really, but here's why. So the one study I've been waiting for someone to show me is a survey of some type. You can debate the methodology.

It's not the exact methodology for a second. That the voters in 2016, in some net way, were less informed. They will never be able to figure it out. Yeah, but I actually would argue that in 2016, the average voter knew more about society in life than in any of the time in American history.

If you think about how much of the average American do in 1906? Yeah, for the more information. Yeah, so show me a study of some kind of- In some way that there was more confusion, more misreformaticing, more misunderstandings than any other election. I actually think that's impossible to prove because it's actually actually wrong.

The average American was pretty manipulated by a lot of media and actually wasn't that well educated. I mean, in total like 1960, 70s, 80s, even the idea of going to college was the sort of preserve of the elite. Now everybody debates with everybody, so everybody should go to college for free. All right, so we finished the section, but what would you imagine will happen to Facebook?

Well, I think Facebook has generally played some of their political arts pretty well. They're pretty deft about using their connections through Peter being very- Peter was on the board. Peter on the board. I've listened to Joel Kaplan, who's getting a lot of coverage.

I think Google is a lot less careful about their perception of Washington. And there's an interesting problem that these tech companies, the major tech companies, particularly Facebook and Google, to some extent Amazon, they have, which is the left wants to regulate tech companies. The left doesn't like accumulated power, traditional left view. And the right who should be the natural defender of not using the government and regulation to interfere in private businesses actually feels that these companies are monocultural liberalism and doesn't really want to lift a finger to defend these companies that are sort of left-wing institutions.

So the tech companies kind of have this fundamental problem, which is their natural ideological defenders don't really like the culture and the employee base views and the contributions, political contributions of these companies. So they're not very excited about defending from the left the regulation. I mean, I talk to my friends all the time on the right and they understand the views about why they should be opposed to what the left wants to do. But they have a scarce time in their life and their scarce political gap.

And they're like, why would I defend Google? Why would I use my capital for that? Do you feel like regulation is coming? And I trust correct.

Well, and I trust is complicated because- Changing. It may change, but the fundamental principle of consumer harm is pretty deeply embedded in a trust philosophy in the United States. And it's very difficult if not impossible to show consumer harm. But you love Amazon, right?

Yeah, these are, well, they're free products for the most part. They're great. So it's hard to show raising prices and monopoly profits. Secondly, Amazon tends to have a fairly low price, but not below marginal cost.

So it's been traditionally very difficult in the United States to show, you know, and I consumer behavior when that's true. Same thing with Google and Facebook. So what do you imagine the regulation? I think the regulation certainly out of Europe will continue to increase because they have a different history of antitrust regulation where it's more of a policy and politics decision.

Secondly, I think that until 2020, the administration is going to be in the hands of mostly people who buy the Borke in view of antitrust policy, which is a need consumer harm. If Trump were to lose and the Democrats to win, then I think you can see ahead of the FTC or head of antitrust division that really tries to rewrite American antitrust doctrine. Yeah. And that's what I talked about.

Before that, yeah, you see occasional academic journals. I mean, this is what I used to do for a living as a lawyer, as an antitrust litigator. And the problem you have, and I've thought about this a lot and debated it with some of my colleagues on the right, is come up with a neutral principle, a principle that would apply to tech companies, but that wouldn't completely undermine all the antitrust history. It's very difficult to find.

I can think of a few, but it's not easy at all. And at least if I were in government, I'd want a neutral principle that I could defend as would work for every industry. Because you're making Delrae was talking about when I'm treating the same thing. Yeah, absolutely.

You need neutral principles. And if you don't have a neutral principle, I don't think you want to start a process where you're just scapegoating people. That's kind of exonia in some ways. And I think that's a very bad precedent.

So what do you expect? If you probably... I think here's a lot more hearing. So certainly the gavel, the fact that the Democrats have control the gavels, one of the nuances of being the majority in the house is you can call hearings that we want.

Only the majority can schedule hearings. So I think you're going to see Sundar on stage a lot more, maybe Mark on stage and Cheryl on stage. And any use to those things or just... Well, occasionally those things is backfire.

So when you're on stage, one misstatement can really create a firestorm. And most of these tech leaders have not been under pressure like that. It's not like doing a journalist interview. It's more like doing a TV interview.

And a TV interview is really difficult. You interviewed Mark on stage, for example, years ago. It was very difficult for him. He did very well in the pod chest.

I think podcasts are easier than TV interviews because it's your... You know, it's Nixon and the famous Kennedy Nixon problem. Right. You know, arguably.

It's very strange. Yeah, no one likes to be on TV. I mean, there's not any event. I suspect you're going to see them on stage a lot.

And that will cause someone to screw up where they say something inappropriate, you know, not ideally framed that leads to an investigation which may uncover some evidence. I think, for example, if you were to subpoena Facebook and Google, you would find documents that are not particularly exciting. Their emails have got to be awful. They have to be awful.

They have to be awful. Yeah. And then they'll be embarrassing. There's more ones that come out.

I'm like, oh... Yeah, well, imagine either you lift their Microsoft. That's exactly right. That's exactly where they're going to get them with the emails.

And it's so careless. And they all have these internal message boards. It's impossible to police those perfectly. Like someone who used to run companies.

You can try to remind people that one day someone may look at this in the context and please be careful what you write. But you need people to do their jobs too, which is to communicate directly, succinctly powerfully off the... Slack and the message boards alone. This stuff's going to be very embarrassing.

So the question is, what's the legal doctrine and legal hook that allows someone to subpoena this evidence and get hands on this treasure trove. Once you get the treasure trove, all hell is going to break loose. Because you're going to be very embarrassing. Slack.

Well, you have Slack where people think of as instantaneous. The more instantaneous something is the less people edit. Right, text. Oh, god.

There's so much. It's going to be really embarrassing for messenger. This one's really quickly to... Absolutely, Kishogi.

You and I share the same opinion about this in terms of... So talk about that. Well, to me, it wasn't surprising. Saudi Arabia has been a big investor, the US off bank and others.

Saudi Arabia has discriminated against gays, women, Jews, officially, explicitly for decades. It executes people who are gay. It executes people who are Jewish. So the idea that they would murder someone isn't surprising to me.

To me, it's like surprising that more people weren't paying attention to the evils of Saudi Arabia for the last 30 years. Now, there's a reason why is they've been politically helpful with some other battles that the United States has had in the Middle East. So it's a marriage of convenience. But that doesn't mean that Silicon Valley should be participating in this.

We talked on your show, actually, your podcast two and a half years ago, or maybe three years ago, actually, that people boycott in Silicon Valley, North Carolina or Georgia for somewhat mundane legal changes, whether it's the bathroom labeling or something equivalent. Yet they take money from Saudi Arabia where it's illegal to be gay. It's illegal, like a crime. It's not just like you can't go to the bathroom that you choose.

It's like we're going to shoot you. Or if you're Jewish, you could be discriminated against in any possible... I am with you. So what will...

So I think people are incredibly hypocritical here. What will happen? Will they keep taking the money? Over time, probably not.

In the short term, yes, because especially as the economy gets softer and so like a valley, the desperation for money among late-stage companies is going to be higher. But a lot of entrepreneurs are definitely having these debates. And some have been hesitant. I know some entrepreneurs who could have taken so much money that have decided not...

So I think half of its fund is from Saudi Arabia. It's more like 90%. It's more like 90%. If you...

It's half of you allow them to do a county that makes it 90% to 90% to 90%. It's the best funder. Yeah, there is there is no... Is there any clean money?

Is there any clean money? I mean, where it comes from. They were stack ranking at a party that I was at recently. Yeah, no, that's true.

You do have this issue of late-stage money, right? A lot of money comes from Russia. Right, Russia. Which is no longer acceptable.

You have money coming from Saudi Arabia, which at least to me should be unacceptable. And you have money from China, which has its own set of issues. And actually, the money from China may not be coming for other reasons in China anyway. So, yeah, you can get money from key-row price or defixel or fidelity.

Where do they get the money from? They get the money from... More traditional sources. Doesn't mean all Americans are good or all American money is clean.

But fundamentally, if you're taking money from an investor that's trying to effectively lawn over the money, which is one a lot of countries have been doing, and that's been propping up some of these late-stage financings, to me, I think that means you go public. And if you go public, you take money from normal, everyday Americans. You have the disclosure obligations and the serious scrutiny and accounting requirements that's associated with taking money from normal Americans. But that degree of disclosure and credibility and scrutiny and transparency is actually a good thing.

I think it's a good thing for your company, actually, to be subject to auditors and subject to reporting. Where are you getting money from? Well, not just where you're getting from, but how are you performing? Right, exactly.

Yeah. I think people are trying to insulate themselves from accountability. Well, that's true. That's 100% true.

I mean, I asked the question of what... I should ask you on Twitter. And of course, Antonio, he's a companion. He has.

Antonio Garcia Martinez, who was also very argumentative person on Twitter. And I enjoy him doing that. I think we want a video of the probal fistfight. We don't fistfight.

The gays don't fistfight. No. That's so okay. So here's one from Jason Del reaction.

What is the definition of contrarian in 2019? Because you're known as a contrarian. Well, I like to think from first principles. I like to think for myself, which means occasionally I line with you, in case I don't.

But I like to be a non-derivative thinker. It's not always possible. Everybody lives in concentric circles. You're a professional circle.

You're social circles. And that obviously influences you. Right. But I try to have my own perspective.