Latest / Masters in Business / Ben Horowitz Discusses Culture and Success

Transcript

Ben Horowitz Discusses Culture and Success · Masters in Business

• 0:02
  Speaker 1: This is Masters in Business with Barry Ridholtz on Boomberg Radio.
• 0:07
  Speaker 1: This week on the podcast, I have an extra special guest.
• 0:10
  Speaker 1: What can I say about Ben Horowitz. He is the
• 0:13
  Speaker 1: co founder at Andrews and Harrowitz, a twelve billion dollar
• 0:18
  Speaker 1: famed vc uh in Silicon Valley. I kind of get
• 0:22
  Speaker 1: the sense that Ben is the inside process guy who
• 0:28
  Speaker 1: looks at the world of venture investing and technology as
• 0:32
  Speaker 1: a series of engineering problems to be solved. His partner,
• 0:36
  Speaker 1: Mark and Reason, also a programmer slash engineer. UM. I
• 0:41
  Speaker 1: get the sense looks at the world slightly different and
• 0:44
  Speaker 1: the two of them have really put together a unique
• 0:47
  Speaker 1: firm in Silicon Valley that has been wildly successful. If
• 0:52
  Speaker 1: you are at all interested in technology startups, venture investing, management, culture,
• 1:00
  Speaker 1: or hip hop, you're going to find this conversation to
• 1:03
  Speaker 1: be absolutely intriguing. So, with no further ado, my conversation
• 1:07
  Speaker 1: with Andresen Harowitz is Ben Harrowitz. This is Masters in
• 1:14
  Speaker 1: Business with Barry Ridholts on Bloomberg Radio. My special yest
• 1:18
  Speaker 1: this week is Ben Harrowitz. He is the co founder
• 1:22
  Speaker 1: and general named partner at Andres and Horowitz, a highly
• 1:27
  Speaker 1: regarded venture capital farm located right on Sandhill Road in
• 1:31
  Speaker 1: Silicon Valley. He earned his MS degree in computer science
• 1:34
  Speaker 1: from u c l A, following a b a in
• 1:37
  Speaker 1: the same space from Colombia. He is the author of
• 1:40
  Speaker 1: several books, including The Hard Thing About Hard Things and
• 1:44
  Speaker 1: his most recent book, What You Do Is Who You Are.
• 1:48
  Speaker 1: Ben Harrowitz, Welcome to Bloomberg. Thank you, Barry. So you
• 1:51
  Speaker 1: began your career at the legendary Silicon Graphics in what
• 1:56
  Speaker 1: was the technology scene like way back then? It was
• 2:00
  Speaker 1: very different, um in that it was just there was
• 2:03
  Speaker 1: just technology people in it. So it's really broadened since
• 2:07
  Speaker 1: then an amazing way. And the reason was, you know,
• 2:09
  Speaker 1: we were selling technology two technology people. It was all
• 2:14
  Speaker 1: B two B. There wasn't really consumer businesses in the space.
• 2:19
  Speaker 1: And then Silicon Graphics was kind of the Google of
• 2:23
  Speaker 1: its stay and that it was where all the best
• 2:25
  Speaker 1: engineers went. Um, you know, it kind of had all
• 2:28
  Speaker 1: the panash Uh. We had done the kind of animation
• 2:33
  Speaker 1: for the Terminator movie, which was like a big deal
• 2:35
  Speaker 1: and that kind of thing. So it was it was
• 2:38
  Speaker 1: super exciting time and just amazing. You know when I
• 2:41
  Speaker 1: got there, how smart everybody was, um, which you know
• 2:45
  Speaker 1: in life. You just never get put in a situation
• 2:47
  Speaker 1: unless you're in a company like that. Quite quite interesting.
• 2:50
  Speaker 1: How did you move from Silicon Graphics to um loud Cloud?
• 2:54
  Speaker 1: How did that come about? Yeah? Well so the big
• 2:58
  Speaker 1: kind of step in between it was be called Netscape
• 3:01
  Speaker 1: UM which I joined. And what was your role in them? Yeah,
• 3:07
  Speaker 1: so I started as a product manager UM on the
• 3:10
  Speaker 1: kind of server product line, which ended up being very
• 3:12
  Speaker 1: important because you know, Microsoft kind of took the money
• 3:14
  Speaker 1: out of the browser product line, which was our first one. Uh.
• 3:18
  Speaker 1: And although that, although it didn't work out all that
• 3:20
  Speaker 1: well for them, eventually led to the anti trust suit
• 3:23
  Speaker 1: which they lost. I yeah, no, it definitely we definitely
• 3:27
  Speaker 1: put the hurt on them, but they kind of forced
• 3:31
  Speaker 1: us to sell the company. So, uh, you know, it
• 3:34
  Speaker 1: was an interesting one where I think they won the
• 3:36
  Speaker 1: battle and we won the war. Also, we broke the
• 3:39
  Speaker 1: Windows monopoly, which was you know, the win thirty two
• 3:42
  Speaker 1: A p I was the kind of key lynchpin of it.
• 3:45
  Speaker 1: And because of Netscape, people stopped writing to that and
• 3:48
  Speaker 1: that kind of enabled the kind of way for everything
• 3:51
  Speaker 1: else that's happened since. So from Netscape, you your partner
• 3:55
  Speaker 1: Mark Andreeson famously created um the first browser. I think
• 3:59
  Speaker 1: he was still in college years old. Yep, then came
• 4:03
  Speaker 1: out and launched uh Netscape, which very quickly when public,
• 4:07
  Speaker 1: really kicked off the whole dot com fifteen months old.
• 4:10
  Speaker 1: When I want public, who U was Netscape? That's unbelievable. Yeah,
• 4:14
  Speaker 1: that fifteen months we we even today as crazy as
• 4:19
  Speaker 1: things have been, although the argument is it's everything has
• 4:22
  Speaker 1: gone much further in the opposite direction. Let me bring
• 4:25
  Speaker 1: this back to you. Um So from Netscape going public,
• 4:29
  Speaker 1: how did you roll into loud cloud with Andresen Yeah
• 4:33
  Speaker 1: so Netscape point uh public. But then eventually, you know,
• 4:37
  Speaker 1: it was a very rough, kind of a legendary battle
• 4:40
  Speaker 1: with Microsoft, and we saw the company to a o
• 4:43
  Speaker 1: L one point six billion something like that. Not well Netscape,
• 4:51
  Speaker 1: this is a Netscape slee So Netscape sold at the
• 4:53
  Speaker 1: time it was four point two billion, but at the
• 4:56
  Speaker 1: point the deal clused was ten billion dollars. Really that's
• 4:59
  Speaker 1: a in transaction. Yeah, amazing trans mid nineties for sure.
• 5:04
  Speaker 1: Oh yeah, yeah, yeah it was it. Look, it was
• 5:06
  Speaker 1: a great outcome for a company. I was four years old.
• 5:08
  Speaker 1: I mean, you can't you can't be mad at it. Um,
• 5:11
  Speaker 1: but at a O l uh we were. I was
• 5:14
  Speaker 1: in charge of kind of a well e commerce. And
• 5:16
  Speaker 1: the interesting thing at a L L e commerce was,
• 5:20
  Speaker 1: you know, it was a way like you come, you
• 5:22
  Speaker 1: pay a well ten million dollars and they put you
• 5:25
  Speaker 1: in the a well mall. That's kind of how the
• 5:27
  Speaker 1: internet worked in those days. And yeah, the walled garden.
• 5:32
  Speaker 1: And once you were in the mall, the problem was
• 5:35
  Speaker 1: that your site would just basically collapse because a well
• 5:38
  Speaker 1: had so much traffic it would basically turn it on
• 5:41
  Speaker 1: you and you would just not even be able to
• 5:43
  Speaker 1: handle fire. Absolutely, Oh my god. Yeah, and so that
• 5:47
  Speaker 1: gave us the idea to create what was, you know,
• 5:50
  Speaker 1: kind of the original or at least the original named
• 5:54
  Speaker 1: so cloud computing company, loud Cloud. The idea is that
• 5:57
  Speaker 1: this is scalable dynamically on a fly. If a ton
• 6:01
  Speaker 1: of traffic comes in and you don't just crash, you
• 6:07
  Speaker 1: get to take full advantage of that traffic. And so,
• 6:11
  Speaker 1: so let me back up a little bit when I'm
• 6:12
  Speaker 1: really curious about you start at Netscape as a middle manager,
• 6:18
  Speaker 1: how do you rise through the ranks and how do
• 6:20
  Speaker 1: you eventually become tight within reason? Yeah, well, I think
• 6:25
  Speaker 1: there were two things UM and they were they were separate.
• 6:28
  Speaker 1: So the relationship with between Mark and myself was due
• 6:32
  Speaker 1: to kind of there's a phenomenon in companies where if
• 6:36
  Speaker 1: you think about UM product strategy and the ability for
• 6:41
  Speaker 1: any individual to create a new proper like to create
• 6:46
  Speaker 1: a new product that works like that lands in the
• 6:48
  Speaker 1: market is a very kind of rare skill. It's kind
• 6:51
  Speaker 1: of rare skill you have in a company, and even
• 6:53
  Speaker 1: in a really big company, they're only like five or
• 6:57
  Speaker 1: six people who can do that, who can create a
• 6:59
  Speaker 1: new product and get a market. And he I and
• 7:01
  Speaker 1: I were like whatever, two of the six at the company,
• 7:05
  Speaker 1: and so we became friends, uh over that, and then
• 7:08
  Speaker 1: I think the rise through the ranks was more. Look,
• 7:11
  Speaker 1: almost nobody in Silicon Valley actually cares about or puts
• 7:16
  Speaker 1: effort into like management and developing people. And so I
• 7:20
  Speaker 1: kind of realized that early and I thought, well, you know,
• 7:23
  Speaker 1: I ought to do that UM and then that will
• 7:25
  Speaker 1: distinguish man. I think that's kind of what led me
• 7:29
  Speaker 1: to being a senior exact and then a CEO. That
• 7:32
  Speaker 1: was a conscious decision, Hey, we're ignoring our staffing, we're
• 7:37
  Speaker 1: ignoring the people who work for us, and if I
• 7:40
  Speaker 1: find a way how to work with these people, manage them,
• 7:43
  Speaker 1: motivate them, etcetera. That's a positive career move. I mean,
• 7:48
  Speaker 1: was it that calculated, Well, um, you know, I don't
• 7:51
  Speaker 1: know if it was that calculated, but that's kind of
• 7:53
  Speaker 1: how it unfolded in that. Uh. Look, you get rewarded
• 7:57
  Speaker 1: in a tech company for kind of having the best
• 8:00
  Speaker 1: ideas and kind of knowing the technology and the products
• 8:03
  Speaker 1: and the market the best like that. That that always
• 8:06
  Speaker 1: gets you points and people usually don't even notice how
• 8:10
  Speaker 1: well you're kind of running your team. Um, at least
• 8:13
  Speaker 1: in the short term. Over time it becomes obvious and
• 8:17
  Speaker 1: uh so that was a big deal. I think that's
• 8:20
  Speaker 1: that was a big deal for me anyway, quite quite interesting.
• 8:24
  Speaker 1: So you go from Netscape to loud Cloud. Eventually loud
• 8:30
  Speaker 1: Cloud becomes OPS where it gets sold to HP for
• 8:33
  Speaker 1: one point six billion dollars. Uh and you stick around
• 8:37
  Speaker 1: HP for a couple of years. What was that like
• 8:40
  Speaker 1: one year? Yeah, like I learned a lot um. You know,
• 8:43
  Speaker 1: HP at that time was I would say, kind of past.
• 8:47
  Speaker 1: It's heyday for sure, and you know it had gone
• 8:49
  Speaker 1: through you know, uh, bunch of c e O s
• 8:55
  Speaker 1: in succession um, which is never generally good. As you know,
• 8:59
  Speaker 1: the culture kind gets twisted around and so forth. Uh.
• 9:03
  Speaker 1: And I think that the thing that I learned was, um,
• 9:08
  Speaker 1: you know, a company's culture kind of goes bad when
• 9:12
  Speaker 1: nobody feels like it's their company, when they all feel
• 9:15
  Speaker 1: like they worked there. And I think we had gotten
• 9:17
  Speaker 1: to that point with HP where nobody felt like, okay,
• 9:19
  Speaker 1: HPS my company. It was like I was meaning no
• 9:21
  Speaker 1: equity participation. They don't feel like it's not a financial incentive,
• 9:26
  Speaker 1: it's a it's more of a spiritual ownership like this
• 9:31
  Speaker 1: is I'm proud of my company and where I work
• 9:33
  Speaker 1: and so forth, and uh, you know, I'm gonna make
• 9:37
  Speaker 1: sure that I represented the best way and the work
• 9:40
  Speaker 1: that we do is high quality and all that kind
• 9:42
  Speaker 1: of thing. Um, they had lost that. And you know,
• 9:45
  Speaker 1: I've never seen a company that had lost it entirely.
• 9:48
  Speaker 1: They had it and then lost it. Oh yeah, I mean,
• 9:50
  Speaker 1: of course you knew work in Silicon Valley that they
• 9:54
  Speaker 1: had it better than anybody. You know. The HP way, Um,
• 9:58
  Speaker 1: you know, Dave Dave Packard was just a legend as
• 10:01
  Speaker 1: a CEO and a manager, and um, you know, and
• 10:05
  Speaker 1: that was kind of they built a lot of the
• 10:06
  Speaker 1: culture of the whole all of Silicon Valley. But by
• 10:09
  Speaker 1: the time I had gotten there, you know, in the acquisition,
• 10:11
  Speaker 1: uh you know, and there there's this kind of thing
• 10:14
  Speaker 1: which maybe you have seen it. People either get rewarded
• 10:17
  Speaker 1: at work for caring or for not caring, a meaning
• 10:20
  Speaker 1: that like, how do you get rewarded for not caring? Well,
• 10:23
  Speaker 1: let's say that the company can't make a decision for
• 10:28
  Speaker 1: whatever reason, it's to bureaucratic. So you work your butt off,
• 10:31
  Speaker 1: you figure something out, you have a new idea, a
• 10:34
  Speaker 1: new project or whatever. You try and bring it forth
• 10:36
  Speaker 1: and get a decision on it, and like it goes
• 10:39
  Speaker 1: nowhere because nobody can decide. Then you're punished for caring
• 10:43
  Speaker 1: because you spend all that time and you get just
• 10:45
  Speaker 1: nothing but frustration. Meanwhile, the guy who was playing video
• 10:49
  Speaker 1: games at his desk, Like, that guy gets rewarded because
• 10:52
  Speaker 1: he did nothing and he's probably going to get the
• 10:53
  Speaker 1: same pay increases, no negative consequences for not caring versus
• 10:57
  Speaker 1: actual time waste and energy way for caring and trying
• 11:01
  Speaker 1: to do. Let's talk a little bit about the early
• 11:05
  Speaker 1: days in terms of raising money and deploying it. What
• 11:09
  Speaker 1: was that like when you guys were first launching A
• 11:14
  Speaker 1: sixteen z as as it's known amongst a small group. Well,
• 11:19
  Speaker 1: it was interesting because we had it had that quality.
• 11:23
  Speaker 1: There's a quality that you always want and I understand
• 11:25
  Speaker 1: it's better as a venture capitalists and I did as
• 11:27
  Speaker 1: an entrepreneur, but you always really want it when you're
• 11:30
  Speaker 1: starting something new, which is you want people to say
• 11:34
  Speaker 1: you're crazy. That's the dumbest thing that I've ever heard,
• 11:37
  Speaker 1: because if you don't hear that, then you don't actually
• 11:40
  Speaker 1: have a breakthrough because if it's obvious to people, then
• 11:43
  Speaker 1: like it's not it's not that great idea. Um. And
• 11:47
  Speaker 1: so we got that big time, which was awesome. So
• 11:49
  Speaker 1: you know, we went and we when you were when
• 11:52
  Speaker 1: you were launching and greesent Harlot's oh yeah, Now was
• 11:55
  Speaker 1: that a function of we were right in the middle
• 11:57
  Speaker 1: of a meltdown or just enrule, who needs another venture
• 12:01
  Speaker 1: capital farm? Well it was those two things. So it
• 12:05
  Speaker 1: was you know, two thousand and nine was the worst
• 12:08
  Speaker 1: time I think in the last thirty years to raise
• 12:10
  Speaker 1: a new venture capital fund. Only only two new ones
• 12:14
  Speaker 1: were raised us in coastal ventures, and of course of
• 12:16
  Speaker 1: the coast is a super legend and venture capital business. UM,
• 12:20
  Speaker 1: so like, yeah, it was a super bad time to raise.
• 12:24
  Speaker 1: Nobody needed another yet another venture capital firm. And then
• 12:28
  Speaker 1: our idea behind it, which was we were going to
• 12:32
  Speaker 1: use um Michael Ovit's as CIA as the blueprint for
• 12:37
  Speaker 1: the firm. Everybody thought was the dumbest thing that they'd
• 12:41
  Speaker 1: ever heard in their lives. I mean it was just like,
• 12:43
  Speaker 1: what are you talking about? Like this is nothing like Hollywood.
• 12:45
  Speaker 1: You can't do that, you guys, are you know that
• 12:48
  Speaker 1: will never work? Like it's been tried a thousand times,
• 12:50
  Speaker 1: you know, like everything, like it's so dumb, nobody would
• 12:53
  Speaker 1: ever try it to Like it's dumb and it's been
• 12:56
  Speaker 1: tried already and didn't work. Like explain the CIA blueprint
• 12:59
  Speaker 1: what you were doing in how different that was from
• 13:01
  Speaker 1: typical vcs. Yeah. So basically if you looked at um,
• 13:07
  Speaker 1: the talent agency business before CIA, when Michael started in
• 13:12
  Speaker 1: seventy five, I think, um, it was kind of you know,
• 13:16
  Speaker 1: you had you looked at any firm, you had agents,
• 13:19
  Speaker 1: and then you had kind of people in the mail
• 13:21
  Speaker 1: room because there was no emails, so you have to
• 13:23
  Speaker 1: deliver the mail. You remember this Barry it's an old
• 13:26
  Speaker 1: kind of school thing. Are you saying, I'm old? Well,
• 13:29
  Speaker 1: you know, you're you're you're kind of at least close
• 13:32
  Speaker 1: to me, okay, um, And then you have I think
• 13:35
  Speaker 1: I actually have a few years on you. Yeah, okay, good,
• 13:38
  Speaker 1: fifty eight you're fifty four some okay exactly so um.
• 13:44
  Speaker 1: But anyway, so then you had secretaries and like that
• 13:48
  Speaker 1: was the firm. And in the economics where you get
• 13:52
  Speaker 1: ten percent of whatever an actress made or you know,
• 13:55
  Speaker 1: an actor or that kind of thing. Um, And so
• 13:58
  Speaker 1: as an agent, the firm would generate tempers and override there.
• 14:02
  Speaker 1: Some would go to pay for the secretaries in the
• 14:05
  Speaker 1: mail room guys, and then the rest would go to
• 14:07
  Speaker 1: the agents. And you know, that's kind of how they rolled.
• 14:10
  Speaker 1: And so kind of as a result of that, every
• 14:12
  Speaker 1: agent kind of was a little bit you know, playing
• 14:16
  Speaker 1: for himself and that newk. Yeah, what you kill, your
• 14:21
  Speaker 1: network is your network, you know, the guys you know,
• 14:23
  Speaker 1: and so you know, and that's how it worked. And
• 14:26
  Speaker 1: then when you were if you were like a great
• 14:28
  Speaker 1: actor and you were choosing a talent agency, you'd always
• 14:31
  Speaker 1: go with the one that had the other big time actors, right,
• 14:35
  Speaker 1: like it's just an obvious thing. And so the rich
• 14:37
  Speaker 1: got richer, and the kind of same firms had been
• 14:40
  Speaker 1: the top for for you know, decades. Uh So, then
• 14:44
  Speaker 1: Michael comes along and he flips the model and he
• 14:47
  Speaker 1: goes so he and his kind of founding partners deferred
• 14:52
  Speaker 1: all their commissions for the first several years and built
• 14:56
  Speaker 1: what he called the franchise, which was the professional I
• 15:00
  Speaker 1: network for talent agency business. And that basically manifest itself
• 15:06
  Speaker 1: in the uh the pitch meeting where they would pitch
• 15:11
  Speaker 1: the talent. So the way it worked at William Morris
• 15:14
  Speaker 1: was you'd go in, you meet with your agent. They'd say, oh, yeah,
• 15:16
  Speaker 1: I know the president like Warrener Brothers Pictures, and I'll
• 15:20
  Speaker 1: get you into that and the da da da, and
• 15:22
  Speaker 1: that was that was kind of the pitch. You go
• 15:24
  Speaker 1: into C A A. They had thirty people sitting around
• 15:27
  Speaker 1: the table. The first person would say, I managed book publishing.
• 15:30
  Speaker 1: Here are the relationships we have with all the publishers.
• 15:32
  Speaker 1: Here are the new books coming out where I think
• 15:35
  Speaker 1: that you would fit as we turned them into screenplays.
• 15:38
  Speaker 1: And the next person would say, I'm in charge of music,
• 15:41
  Speaker 1: and here's how we can cross promote you there, and
• 15:43
  Speaker 1: then next person say, I'm in charge of international. Here
• 15:45
  Speaker 1: the Japanese television commercials we can slide you into. So
• 15:48
  Speaker 1: it was just an overwhelmingly powerful network. And if you
• 15:52
  Speaker 1: fast forward, you know, fifteen years later, of course, Michael
• 15:55
  Speaker 1: became the most powerful man in Hollywood and they owned
• 15:58
  Speaker 1: you know whatever, ninety percent of all the top actress,
• 16:01
  Speaker 1: a screenwriters, everything, and they transformed the industry and now
• 16:05
  Speaker 1: everybody runs like CIA today. But oh yeah, absolutely, um
• 16:10
  Speaker 1: so we thought, wow, venture capital looks just like this,
• 16:13
  Speaker 1: Like this is exactly how it works. You got a
• 16:15
  Speaker 1: bunch of like partners and they are like jack of
• 16:17
  Speaker 1: all trades. They do beat and they help you with recruiting,
• 16:19
  Speaker 1: and they do this and that, and they don't do
• 16:21
  Speaker 1: any of them well. And we knew that because, like,
• 16:23
  Speaker 1: you know, we'd experienced it, and so we said, oh,
• 16:27
  Speaker 1: we're going to do the CIA model here, and everybody said,
• 16:29
  Speaker 1: you guys are stupid. So that's when we knew it
• 16:32
  Speaker 1: would work. So so the transition from being both a
• 16:36
  Speaker 1: entrepreneur and somebody who was on the receiving end of
• 16:39
  Speaker 1: venture capital that sounds like it very much colored the
• 16:42
  Speaker 1: way you wanted the firm to run. Yeah, no, absolutely.
• 16:46
  Speaker 1: So the other, uh kind of big idea that we
• 16:50
  Speaker 1: had was venture capital was kind of oriented around you
• 16:55
  Speaker 1: had this inventor and you would give them money and
• 16:58
  Speaker 1: then when the company, if the invention worked and people
• 17:00
  Speaker 1: liked it, then you would bring in a professional CEO
• 17:03
  Speaker 1: to build the company. That was the general motion, um,
• 17:08
  Speaker 1: and that we had a couple of observations on that one.
• 17:11
  Speaker 1: If you looked at the history of technology companies, the
• 17:14
  Speaker 1: greatest technology companies were generally run by their inventor founder
• 17:18
  Speaker 1: for a very long time, from you know, Thomas Watson
• 17:21
  Speaker 1: and IBM, Dave Packard and Bill Hewlett at Heulett Packard,
• 17:24
  Speaker 1: Bill Gates, um, you know, and then later on Mark
• 17:27
  Speaker 1: Zuckerberg and all these kinds of things. And so we thought,
• 17:30
  Speaker 1: you know, that's interesting, um. And then as we looked
• 17:34
  Speaker 1: at our own experience, you know, being kind of inventor
• 17:38
  Speaker 1: and you know, in my my case CEO, Like, we
• 17:41
  Speaker 1: knew that professional CEOs could not be taught to innovate,
• 17:47
  Speaker 1: So like you could teach an innovator to be a CEO,
• 17:50
  Speaker 1: but not necessarily a CEO to be an innovator. And
• 17:53
  Speaker 1: so we thought, wow, what if there was a venture
• 17:55
  Speaker 1: capital firm that actually helped a found or become a CEO.
• 18:01
  Speaker 1: And we thought it was two parts of the CIA
• 18:04
  Speaker 1: power network, which gave you a network like a professional
• 18:07
  Speaker 1: CEOs network, and then like the know how, like what
• 18:11
  Speaker 1: is that job? How do you do it? Help them
• 18:13
  Speaker 1: get scaled up? And so that was kind of the
• 18:16
  Speaker 1: idea from from the launch. The idea wasn't let's find
• 18:19
  Speaker 1: entrepreneurs with great ideas and eventually will find the way
• 18:23
  Speaker 1: to turn them into a company. You were looking to
• 18:25
  Speaker 1: create a method to take entrepreneurs with good ideas and
• 18:31
  Speaker 1: turn them into good CEOs of good companies exactly from
• 18:35
  Speaker 1: day one, from day one, and and the rest of
• 18:37
  Speaker 1: Silicon Valley did not embrace that. No, you know, like
• 18:41
  Speaker 1: because they you know, they had been old school and
• 18:44
  Speaker 1: they and look in their defense, it used to be
• 18:48
  Speaker 1: way harder to get ready to be a CEO because
• 18:51
  Speaker 1: if you think about like Tandem Computers, Um, since you're
• 18:54
  Speaker 1: fifty eight, you remember Tandem. Uh. In order to get
• 18:58
  Speaker 1: Tandem to market, you had to build manufacturing, you had
• 19:01
  Speaker 1: to build comprehensive customer support and professional services, and a
• 19:05
  Speaker 1: direct sales channel. To get Twitter to market, you needed
• 19:09
  Speaker 1: like three guys with laptops and aws and like you
• 19:12
  Speaker 1: were gone and very different today, Yeah, very very different.
• 19:15
  Speaker 1: Plus you know they used to go public a lot quicker.
• 19:19
  Speaker 1: There was um relevant to to that concept about three
• 19:22
  Speaker 1: guys in a laptop in And I apologize if I'm
• 19:26
  Speaker 1: confusing books because both of your books kind of all
• 19:29
  Speaker 1: are jumbled in my head. Um, I learned the most
• 19:32
  Speaker 1: important rule of raising money privately. Look for a market
• 19:36
  Speaker 1: of one. Only need one investor to say yes. It's
• 19:39
  Speaker 1: best to ignore the other thirty who say no. That
• 19:43
  Speaker 1: sounds like that comes from real experience. Sadly, yes, yeah, no,
• 19:46
  Speaker 1: so that that that's the hard thing about hard things, right,
• 19:49
  Speaker 1: But yeah, no, that's right. You only need I mean,
• 19:52
  Speaker 1: that's the beauty of raising money. You just need to
• 19:54
  Speaker 1: convince one. And I think entrepreneurs get discourage sometime, you know,
• 20:00
  Speaker 1: particularly if they have a particularly novel or breakthrough idea
• 20:04
  Speaker 1: that's difficult to understand because you know, if it if
• 20:08
  Speaker 1: people can't pattern match it, then you know it's it
• 20:11
  Speaker 1: is difficult to raise money, but you just need one
• 20:14
  Speaker 1: that's interesting. And since we're recording this right after the
• 20:19
  Speaker 1: relaunch of Silicon Valley, the show HBO show your firm
• 20:23
  Speaker 1: was a consultant to the first season at least of
• 20:28
  Speaker 1: right your partner Mark. UM. I think a lot of
• 20:31
  Speaker 1: the rest of America looks at Silicon Valley and they
• 20:35
  Speaker 1: only know it through shows like that. What do you
• 20:38
  Speaker 1: think the biggest misconceptions the rest of the country has
• 20:42
  Speaker 1: about Silicon Valley? Um? Or is the show just dead on?
• 20:46
  Speaker 1: Even the stereotypes and the exaggerations are all based on
• 20:49
  Speaker 1: people we know. I felt you don't like all shows.
• 20:51
  Speaker 1: It's a very kind of cartoonist version of of how
• 20:54
  Speaker 1: it actually goes. I think the biggest misconceptions are one
• 20:57
  Speaker 1: like it's crush singly hard to build a company. I mean,
• 21:01
  Speaker 1: it is like emotionally and kind of rushes. That's a
• 21:07
  Speaker 1: great phrase. Oh yeah, I mean I think Sean Parker
• 21:10
  Speaker 1: said it's like, you know, eating glass. It's just like
• 21:13
  Speaker 1: and that's what it feels like at times, um, Because
• 21:16
  Speaker 1: like you go out, you tell that you have this idea,
• 21:21
  Speaker 1: you're so excited about it. You raise money like from
• 21:25
  Speaker 1: like you know you generally you start with like your
• 21:27
  Speaker 1: best friends or like your parents are like that kind
• 21:30
  Speaker 1: of thing, or like somebody anybody you know with money. Um,
• 21:34
  Speaker 1: and then you know, you hire the best people you
• 21:36
  Speaker 1: can find, you know, and and then you spend all
• 21:38
  Speaker 1: your time on it. So really the only people you
• 21:40
  Speaker 1: end up knowing in your life for the people who
• 21:42
  Speaker 1: work for you, people who gave you money, because like
• 21:45
  Speaker 1: all your times on the company and then starts going
• 21:47
  Speaker 1: wrong and you go, okay, like, well what happens if
• 21:49
  Speaker 1: this fails? And it's like, well, my like that's like
• 21:52
  Speaker 1: not only do I let down everybody that I care about,
• 21:56
  Speaker 1: but like that's my whole life, Like it's just gonna
• 21:59
  Speaker 1: fail with me. Um. So that kind of pressure is
• 22:04
  Speaker 1: not like something that you experience. And I'm sure you
• 22:07
  Speaker 1: know if you're a soldier or whatever, you feel you
• 22:10
  Speaker 1: have even worse pressure. But like it's a very extreme pressure.
• 22:14
  Speaker 1: And and then you're always hiding it as CEO because
• 22:19
  Speaker 1: you never want anybody on the outside to know there's
• 22:21
  Speaker 1: something wrong with your company. And so that you know
• 22:24
  Speaker 1: that part of it is is really really difficult. In
• 22:26
  Speaker 1: the hours are just crazy hard, um and you know,
• 22:30
  Speaker 1: like and then you know things don't work, they go wrong,
• 22:33
  Speaker 1: You're running out of money, like customers don't like the product,
• 22:36
  Speaker 1: like things blow up, people scream at you. It's it's
• 22:39
  Speaker 1: a very, very tough thing for any entrepreneur. I would say,
• 22:42
  Speaker 1: like even the smallest entrepreneurs go through this. So, since
• 22:46
  Speaker 1: we're gonna talk in a moment about your new book,
• 22:48
  Speaker 1: which is all about culture, I know people outside of
• 22:51
  Speaker 1: the United States who have said to me the genius
• 22:55
  Speaker 1: of America culturally is that you don't punish failure. You're
• 23:00
  Speaker 1: you're describing the pain and agony of failure, of not succeeding.
• 23:04
  Speaker 1: But we seem to be one of the few places
• 23:06
  Speaker 1: that it's not quite I don't want to call it
• 23:09
  Speaker 1: a badge of honor, but it's not punished in the
• 23:11
  Speaker 1: United States. How you tried something, didn't work, try something
• 23:14
  Speaker 1: else seems to be more of a philosophy here than
• 23:17
  Speaker 1: in most of the rest of the world. And some
• 23:19
  Speaker 1: people have credited that as the genius of Silicon Valley.
• 23:22
  Speaker 1: What what are your thoughts? Well, so it is to
• 23:28
  Speaker 1: say it's not punished, I think is um a little
• 23:32
  Speaker 1: bit of it isn't relative to japan Um. I think
• 23:34
  Speaker 1: that's true. You know, there's not the shame you're not
• 23:37
  Speaker 1: expected to commit. Harry Carey at the end of it,
• 23:40
  Speaker 1: even in Europe, if you try something and fail, it's
• 23:43
  Speaker 1: pretty difficult to launch a second company. Yeah, and that, um,
• 23:49
  Speaker 1: I agree, you know, like the kind of rewarding of optimism,
• 23:52
  Speaker 1: although like we're getting I feel like it's um, I mean,
• 23:56
  Speaker 1: well it seems like we work getting punished pretty hard
• 24:00
  Speaker 1: right now prevailing. And I would say that, you know,
• 24:02
  Speaker 1: to contrast that in terms of like how they're looked
• 24:06
  Speaker 1: upon and and like he got a lot of money
• 24:08
  Speaker 1: for himself and all that kind of one point seven
• 24:10
  Speaker 1: billion dollars not counting the money he got actually coming
• 24:14
  Speaker 1: up with the wee company name and right as well
• 24:19
  Speaker 1: as as well as going out and finding buildings owning
• 24:23
  Speaker 1: them himself. And then at least that was that was
• 24:26
  Speaker 1: the story more of what leverage meant than uh, what
• 24:32
  Speaker 1: like it means to fail. I think what it means
• 24:34
  Speaker 1: to you know, if you look at even you know,
• 24:37
  Speaker 1: little companies when they fail, now I get like pretty
• 24:40
  Speaker 1: viciously attacked in the press. And but do those entrepreneurs
• 24:44
  Speaker 1: go on and are they capable of now? If it's difficult?
• 24:48
  Speaker 1: Is like I I don't think it's that easy to
• 24:50
  Speaker 1: fail as an entrepreneur and go on. It is certainly
• 24:53
  Speaker 1: easier than in other countries and I think that, Um,
• 24:56
  Speaker 1: from a societal perspective, Uh, there's death only more support here.
• 25:01
  Speaker 1: But I think the and look among venture capitalists. For sure,
• 25:07
  Speaker 1: venture capitalists are very forgiving and will fund you even
• 25:11
  Speaker 1: if your last company failed. So it's not But in
• 25:14
  Speaker 1: terms of like how you're perceived by people in your circle,
• 25:19
  Speaker 1: kind of people in the broader world, it's pretty rough. Uh.
• 25:23
  Speaker 1: And then the people who work for you, I think
• 25:25
  Speaker 1: most importantly, it's very difficult. There are a few entrepreneurs
• 25:28
  Speaker 1: who do such a great job that they can take
• 25:31
  Speaker 1: somebody for four years or eight years out of their career,
• 25:34
  Speaker 1: get them no financial benefit, and then like start that
• 25:39
  Speaker 1: one again. Let's talk about the book. You pretty much
• 25:42
  Speaker 1: begin by saying culture is everything in business and sports
• 25:46
  Speaker 1: and life. You you write a lot about it. How
• 25:50
  Speaker 1: can a young company that is just getting off the
• 25:53
  Speaker 1: ground develop a culture and maintain that over time? Yeah,
• 25:58
  Speaker 1: and I think that, Um. So there's couple of things
• 26:00
  Speaker 1: in that question that I think are important to understand.
• 26:03
  Speaker 1: One is, um, you don't necessarily have to maintain the
• 26:07
  Speaker 1: exact same culture over time. Cultures do evolve. It's not
• 26:10
  Speaker 1: like whatever a mission statement or something like that. And
• 26:15
  Speaker 1: I don't get the sense that you are the biggest
• 26:17
  Speaker 1: advocate for those sorts of firm mission statements that I
• 26:20
  Speaker 1: don't think they did, you know, like they're they're these
• 26:22
  Speaker 1: kind of there's a lot of this survivorship bias in business,
• 26:26
  Speaker 1: where like you look at something after the fact and go, oh, yeah,
• 26:28
  Speaker 1: they had a great mission statement or a cult like
• 26:30
  Speaker 1: culture or a big Harry audiation. It's like if you
• 26:34
  Speaker 1: that's probably why they didn't succeed, you know, like a
• 26:37
  Speaker 1: doubt that that was the thing, like probably like the
• 26:40
  Speaker 1: phenomenal product they built and then like the rest of
• 26:43
  Speaker 1: it shaped up around them. Another words, go looked at
• 26:45
  Speaker 1: the ten thousand companies that failed and see how many
• 26:47
  Speaker 1: of them had a great mission state? Yeah, exactly exactly,
• 26:50
  Speaker 1: I've seen many. So I don't think that's what it is.
• 26:52
  Speaker 1: And look, when we're talking about culture, we're talking about
• 26:56
  Speaker 1: and Bushido has a great definition of it, which it's
• 26:59
  Speaker 1: not a setuple leafs, it's a set of actions, um.
• 27:02
  Speaker 1: And so that begs the question, Look, how do you
• 27:05
  Speaker 1: get people to behave how you want them to behave
• 27:07
  Speaker 1: when you're not there? So like why do why does
• 27:10
  Speaker 1: that person return that phone call that day and not
• 27:13
  Speaker 1: like a week later or not never? Um, why do
• 27:17
  Speaker 1: people stay at work? Tell eight pm and not five pm?
• 27:20
  Speaker 1: Why do people stay at the four seasons versus a
• 27:23
  Speaker 1: red roof? In when you do a deal, are you
• 27:26
  Speaker 1: optimizing for the price or the partnership? Like? All these
• 27:29
  Speaker 1: things are your culture and they're not in the mission statement.
• 27:33
  Speaker 1: They're not in the KPI s and okay rs and
• 27:35
  Speaker 1: all these kinds of things, And so how do you
• 27:38
  Speaker 1: program program them in? Turns out to be a very
• 27:41
  Speaker 1: very kind of complex effort and not easily done. And
• 27:46
  Speaker 1: I think that, um, you know, which is kind of
• 27:48
  Speaker 1: the rationale behind the book. Uh. And you know, it
• 27:53
  Speaker 1: is hard to start it right at the beginning of
• 27:56
  Speaker 1: the company because you don't know what you want to be,
• 27:59
  Speaker 1: and who you want to be has a lot to
• 28:01
  Speaker 1: do with your actual business strategy. So an example of
• 28:05
  Speaker 1: this if you take Amazon, right, they have a very
• 28:08
  Speaker 1: frugal culture. You know, then they like enforce it in
• 28:11
  Speaker 1: all the famously the desk on top of the two
• 28:14
  Speaker 1: so the door on top of the sources as a
• 28:17
  Speaker 1: desk you reference in the book, Yeah, and the whole thing, right,
• 28:20
  Speaker 1: But you know they have a strategy where that makes
• 28:25
  Speaker 1: sense because they want to be the low price leader.
• 28:27
  Speaker 1: And that's like in like Bezos is like original loop
• 28:30
  Speaker 1: about you know, his his wonderful drawing about like how
• 28:33
  Speaker 1: Amazon works and all that, like that was fundamental to
• 28:36
  Speaker 1: their strategy. Apple didn't have that cultural value, um, nor
• 28:41
  Speaker 1: do they need it, and that they it would be
• 28:43
  Speaker 1: antithetical to what they're doing because they want to have
• 28:45
  Speaker 1: they want the most beautiful products out there, and like
• 28:48
  Speaker 1: they're going to spare no expense. And Steve Jobs actually
• 28:50
  Speaker 1: got fired the first time for sparing no expense, uh,
• 28:53
  Speaker 1: you know, which was on culture for him, but not
• 28:55
  Speaker 1: for Scully. Uh. So you get you know, the culture
• 28:59
  Speaker 1: has to be built for the strategy. Um. And so
• 29:02
  Speaker 1: as you are developing your strategy, you might not be
• 29:04
  Speaker 1: able to really know what you want your culture to
• 29:07
  Speaker 1: be in the beginning. And then look as you scale,
• 29:10
  Speaker 1: you run into different kinds of issues and so forth. Um.
• 29:13
  Speaker 1: But yeah, there there's definitely I would say they're techniques,
• 29:17
  Speaker 1: but you've got to, you know, to get it right,
• 29:20
  Speaker 1: you really have to understand culture in the kind of
• 29:23
  Speaker 1: the gestalto of it, like the entire thing. And uh,
• 29:26
  Speaker 1: that's um how I approached the book and and and
• 29:31
  Speaker 1: why like it took a whole book to explain it.
• 29:35
  Speaker 1: So let's talk a moment about Shaka singor Well, all
• 29:39
  Speaker 1: the proceeds of the book, I have to add, are
• 29:41
  Speaker 1: going to helping people who get out of jail stay
• 29:45
  Speaker 1: out of jail. Tell us why you want to focus
• 29:48
  Speaker 1: on the culture that Shaka am I pronouncing the name right, Uh.
• 29:53
  Speaker 1: Tell us a little bit about Chaka. Yeah. So Shaka
• 29:58
  Speaker 1: uh went to prison when he was nineteen years old
• 30:01
  Speaker 1: for murder that he did commit um and UH became,
• 30:07
  Speaker 1: you know, a rose to kind of a leadership position
• 30:09
  Speaker 1: in a in a very kind of violent prison gang
• 30:12
  Speaker 1: called the Melanax and um and spent nineteen years in prison,
• 30:19
  Speaker 1: seven of those in solitary confinement. Uh and Uh. The
• 30:23
  Speaker 1: reason that I wanted to tell his story of how
• 30:26
  Speaker 1: he did that UM was several folds. First of all,
• 30:30
  Speaker 1: you know, the big mistake people make on culture is
• 30:33
  Speaker 1: they take too much for granted, make too many assumptions.
• 30:37
  Speaker 1: And it's easy to do in Silicon Valley where I'm from,
• 30:40
  Speaker 1: because when employee comes to you, they have a lot
• 30:44
  Speaker 1: of cultural basis. They're already doing a lot of things right,
• 30:47
  Speaker 1: I mean, you know, and it's everything from simple things
• 30:50
  Speaker 1: where they know how to show up to an interview
• 30:51
  Speaker 1: on time, and they know how to go through that
• 30:53
  Speaker 1: process that they've had like some kind of schooling and
• 30:56
  Speaker 1: education and like you know, which includes kind of a
• 30:59
  Speaker 1: cultural background on and how educated people behave and then
• 31:02
  Speaker 1: they've probably worked at a Silicon Valley company that had
• 31:04
  Speaker 1: some elements. When you get a guy in prison, they
• 31:08
  Speaker 1: don't have any of that. They don't they have almost
• 31:11
  Speaker 1: nothing culturally that you can use because the way you
• 31:15
  Speaker 1: get to prison is you come from a very broken
• 31:17
  Speaker 1: culture and that you know, that gets you into behavior
• 31:20
  Speaker 1: that gets you locked up. And so he had to
• 31:23
  Speaker 1: start from first principles on everything, which is amazingly instructive
• 31:30
  Speaker 1: way to understand how culture works. But the other like
• 31:33
  Speaker 1: remarkable thing about Chaka was he got to the top
• 31:37
  Speaker 1: of the gang. He ran it very effectively, but then
• 31:40
  Speaker 1: he realized he didn't like the culture and changed it
• 31:43
  Speaker 1: and uh and had to change himself to do that.
• 31:45
  Speaker 1: So that transformation process, I thought was super interesting as well.
• 31:50
  Speaker 1: And what what organization you're working with that the proceeds
• 31:53
  Speaker 1: of the book are going to to help X cons
• 31:56
  Speaker 1: stay out of prison. Yeah, so there's several one is
• 32:00
  Speaker 1: I one in them all, but the Anti Recidivism Coalition
• 32:04
  Speaker 1: out of l A uh Scott Bude's organization, and then
• 32:08
  Speaker 1: UH cut fifty UM which is was founded by my
• 32:12
  Speaker 1: friend Van Jones, are two of them. Let's let's talk
• 32:15
  Speaker 1: a little bit about VC today. There seems to be
• 32:18
  Speaker 1: a whole lot more venture capital firms now than there were.
• 32:25
  Speaker 1: How how has that competition impacted the way venture capital
• 32:30
  Speaker 1: is practiced in general and doesn't have any impact on
• 32:34
  Speaker 1: Andrews and Harrowitz. Well, so I'd say, first of all,
• 32:37
  Speaker 1: like the reason there's so much more money is, um,
• 32:40
  Speaker 1: my partner Mark was right, and software's eating the world.
• 32:44
  Speaker 1: And so what's happened is, you know, as we discussed earlier,
• 32:47
  Speaker 1: it used to be we just sold technology to technology
• 32:50
  Speaker 1: companies and that kind of made the market for new
• 32:54
  Speaker 1: technology companies just not that big. Now every business is
• 32:59
  Speaker 1: because coming a software business, and so the market is
• 33:03
  Speaker 1: greatly expanded. So there needs to be more money to
• 33:06
  Speaker 1: fund all these you know, new ideas. Um, the money
• 33:10
  Speaker 1: coming in has kind of changed the landscape a bit
• 33:14
  Speaker 1: in that you know, the tiers, the kinds of venture
• 33:18
  Speaker 1: capital that you can get are different. You know, there's
• 33:20
  Speaker 1: seed funds and precede funds and a round firms and
• 33:24
  Speaker 1: be around firms and you know, growth firms. And then
• 33:27
  Speaker 1: there's even now kind of substitutes for the public markets,
• 33:31
  Speaker 1: you know, like soft bank UM for US UH, the
• 33:36
  Speaker 1: kind of increased number of firms, I mean, it does
• 33:39
  Speaker 1: change things tactically. There is this other aspect though of
• 33:44
  Speaker 1: venture capital which we benefit from, which is unlike other
• 33:48
  Speaker 1: asset classes. So if you look at UM whatever you know,
• 33:52
  Speaker 1: stocks or bonds or real estate or so forth, like
• 33:55
  Speaker 1: the top managers for like the eighties are never the
• 33:59
  Speaker 1: top managers for nineties are never the top managers. No persistency,
• 34:02
  Speaker 1: no persistence among the top managers because you know it's
• 34:07
  Speaker 1: an open playing field, so to speak. But venture capital,
• 34:10
  Speaker 1: the top managers are super persistent. Like MKOY has been
• 34:13
  Speaker 1: a top firm for you know, fifty years uh. And
• 34:17
  Speaker 1: the reason for that is UM, the best entrepreneurs will
• 34:23
  Speaker 1: only work with the best firms, and so if you're
• 34:26
  Speaker 1: in the top tier, UM, you you don't compete with
• 34:30
  Speaker 1: anybody who's not in the top tier. And they're only
• 34:32
  Speaker 1: about four or five firms in that class, and so
• 34:35
  Speaker 1: US being one of them, we always compete with the
• 34:37
  Speaker 1: same kind of four or five. So it doesn't matter
• 34:40
  Speaker 1: if there's more money coming from left or right or whatever,
• 34:43
  Speaker 1: because like to build a company, it's great to have
• 34:46
  Speaker 1: the money, but there's other things that you need, for example,
• 34:49
  Speaker 1: like how do you attract with so many startups out there,
• 34:53
  Speaker 1: how do you attract employees to come to your company?
• 34:56
  Speaker 1: And you know a lot of that is who did
• 34:58
  Speaker 1: you get money from? Did you get money from the
• 34:59
  Speaker 1: small arst guys, the best guys, or did you get
• 35:01
  Speaker 1: money from somebody nobody heard of who just has some money.
• 35:05
  Speaker 1: And then like that becomes a spiral for you because
• 35:07
  Speaker 1: you don't get the best employees, you don't build the
• 35:09
  Speaker 1: best product, and then you know, you don't get the customers,
• 35:11
  Speaker 1: you don't get the money, and you've go out a business.
• 35:13
  Speaker 1: So so cumulative advantage is a real thing absolutely a
• 35:17
  Speaker 1: venture capital Yeah, it is probably the most the driving
• 35:23
  Speaker 1: factor of returns, much more than um you know whatever,
• 35:26
  Speaker 1: how smart I am. Really you're gonna say, wow, that
• 35:29
  Speaker 1: that's a fascinating statement. So, if you are fortunate enough
• 35:34
  Speaker 1: to be funded by one of the very top tier firms,
• 35:37
  Speaker 1: the statistical odds, the probabilities of you as a startup
• 35:42
  Speaker 1: succeeding are a little higher, a lot higher, a lot
• 35:46
  Speaker 1: higher then a second or third tier firm. Oh yeah,
• 35:49
  Speaker 1: no question. Now, like you may have any repressible product
• 35:52
  Speaker 1: um that just goes viral and berserk and then you
• 35:56
  Speaker 1: know that, yeah, that that can conquer a lot. Although
• 36:00
  Speaker 1: even with that um, the counterfactualism would have done with
• 36:06
  Speaker 1: a top tier fill And then if you do happen
• 36:08
  Speaker 1: to have a competitor funded by a top tier firm,
• 36:10
  Speaker 1: is going to get better employees than that could be
• 36:12
  Speaker 1: a real problem for you. Yeah, that's actually you know
• 36:14
  Speaker 1: a lot of the Facebook MySpace thing, and Facebook just
• 36:18
  Speaker 1: had better people doing better work. Huh. That's quite interesting.
• 36:22
  Speaker 1: You mentioned soft bank as a UM alternative to public markets.
• 36:29
  Speaker 1: Is that still the case? Post we Work, post uber
• 36:32
  Speaker 1: have has a little bit of the blush come off
• 36:35
  Speaker 1: that rose. I know they're already the Saudis are renegotiating
• 36:40
  Speaker 1: the profit split and trying to lower fees and everything,
• 36:43
  Speaker 1: and they're working on raising a second funds, which was
• 36:46
  Speaker 1: originally gonna be another hundred billion dollars. I don't think that.
• 36:49
  Speaker 1: I don't imagine there anywhere close to that and commitments
• 36:52
  Speaker 1: these days, what does SoftBank mean to the public markets. Well,
• 36:58
  Speaker 1: so I think, you know, it's a very bold idea
• 37:00
  Speaker 1: and you know that that that was certainly the proposition
• 37:03
  Speaker 1: to kind of new companies is like you don't need
• 37:06
  Speaker 1: to go public. Well I'll give you or will invest
• 37:08
  Speaker 1: five million or a billion or you know, and we
• 37:11
  Speaker 1: work dollars into you. And uh, you know, I think
• 37:19
  Speaker 1: that definitely over the long term for it to be
• 37:22
  Speaker 1: significant and to change, uh, kind of the landscape ad
• 37:26
  Speaker 1: venture capital and public markets, it's got to work. Uh.
• 37:30
  Speaker 1: And so you know, like the jury is still out
• 37:32
  Speaker 1: on it. It's not done yet. Um, but you know,
• 37:35
  Speaker 1: like terrible pr doesn't help. But you know, even I
• 37:40
  Speaker 1: couldn't tell you the impact of the we work pr
• 37:46
  Speaker 1: on entrepreneurs yet because we're just too early into it.
• 37:49
  Speaker 1: But um, yeah, that's something that they definitely have to manage.
• 37:52
  Speaker 1: So I'm trying to remember the name of the study, um,
• 37:57
  Speaker 1: and I'm drawing a blank on it. There has been
• 37:59
  Speaker 1: a study that specifically looked at the rate at which
• 38:05
  Speaker 1: venture capital firms were forming and raising capital. And in
• 38:10
  Speaker 1: the nineties it was at a certain level. It ticked
• 38:12
  Speaker 1: up in the two thousands, and it really ticked up
• 38:15
  Speaker 1: post crisis like two thousand two twelve and then seventeen
• 38:20
  Speaker 1: in walks the eight hundred pound guerilla with a hundred
• 38:24
  Speaker 1: billion dollars funds forget the future and will let the
• 38:28
  Speaker 1: jury decide on that. What was the impact on things
• 38:32
  Speaker 1: like valuation and raising money of the soft Bank Vision
• 38:36
  Speaker 1: funds since they launched in seventeen, Did they really shake
• 38:40
  Speaker 1: things up and affect things? Well? I think they, Um,
• 38:45
  Speaker 1: they definitely affected the companies they invested in it. You know,
• 38:48
  Speaker 1: I would say more so than the landscape itself, because
• 38:52
  Speaker 1: it's such a like a unique, slash unusual deal. There
• 38:55
  Speaker 1: were some like regular deals that they did, Like they
• 38:58
  Speaker 1: put money into Slack and you know that was kind
• 39:00
  Speaker 1: of in a very regular way, just like they just
• 39:02
  Speaker 1: look like a growth investor. But in many companies they
• 39:05
  Speaker 1: wrote you know, quite enormous checks and uh, you know,
• 39:10
  Speaker 1: with the expectation that the company would live up to
• 39:14
  Speaker 1: deploying that money. And I think you know some of
• 39:16
  Speaker 1: you know, when people write the retrospective on we Work, um,
• 39:20
  Speaker 1: you know, like some of what was distorting for we
• 39:22
  Speaker 1: Work was they already had a very ambitious plan and
• 39:26
  Speaker 1: then soft Bank encourage them to be more ambitious, and
• 39:31
  Speaker 1: the difficulty with a new company and that kind of
• 39:33
  Speaker 1: idea is if you if you're an entrepreneur, and this
• 39:39
  Speaker 1: gets back to what we talked about earlier about how
• 39:41
  Speaker 1: market I met. But you know you have always like
• 39:46
  Speaker 1: not one good idea, but you usually have like six
• 39:49
  Speaker 1: or seven like really good ideas. And you know that
• 39:51
  Speaker 1: we works were all named we something, but we we
• 39:55
  Speaker 1: school whatever we school. Yeah, so you had all those
• 39:58
  Speaker 1: good ideas. Um, the problem is that from a talent perspective,
• 40:05
  Speaker 1: there are only a few people who can get you
• 40:07
  Speaker 1: to product market fit on any of those ideas in
• 40:09
  Speaker 1: your company. So like you just very quickly dilute yourself.
• 40:14
  Speaker 1: So if you if you do like your top idea,
• 40:18
  Speaker 1: even if it's you're not your best idea, there's a
• 40:20
  Speaker 1: real chance you can make it work. But if you
• 40:21
  Speaker 1: do your top ten ideas, none of them are going
• 40:24
  Speaker 1: to work. And that's almost guaranteed. And because you've deluded
• 40:28
  Speaker 1: your talent too much. It's not it's not a money issue.
• 40:30
  Speaker 1: It's a talent issue. And so you know when you
• 40:35
  Speaker 1: and the problem is entrepreneurs don't know whether their first
• 40:38
  Speaker 1: idea is better than their tent idea, So that was
• 40:41
  Speaker 1: a question you immediately that I put myself in that category. Like,
• 40:44
  Speaker 1: it's very hard to distinguish which is your best idea,
• 40:46
  Speaker 1: don't you don't. Really good ideas require the marketplace to
• 40:52
  Speaker 1: validate them, or a little bit of baptism of fire
• 40:56
  Speaker 1: for the entrepreneurs to sharpen their skills and be able
• 40:59
  Speaker 1: to get their best ideas to the market now exactly so. Uh,
• 41:04
  Speaker 1: A very good friend of mine wrote a paper called
• 41:06
  Speaker 1: the Idea Maze, which describes the apology screen of us
• 41:11
  Speaker 1: and I remember seeing that, and in fact, Uh, your
• 41:14
  Speaker 1: partner Mark talks about the idea Maze and is surprised
• 41:18
  Speaker 1: that entrepreneurs come to Andrews and Horowitz not having read it. Yeah, No,
• 41:22
  Speaker 1: it's it's It's one of the I would say, most
• 41:24
  Speaker 1: important things to read if you're an entrepreneur, um, because
• 41:28
  Speaker 1: it describes that process you have an idea, um, but
• 41:32
  Speaker 1: any idea, there's tons of stuff wrong with it because
• 41:34
  Speaker 1: it hasn't right. It hasn't bumped into the market and
• 41:37
  Speaker 1: the partners and the competitors and the technology landscape and
• 41:40
  Speaker 1: all the things that's going to bump into. And so
• 41:43
  Speaker 1: as you hit all those things, you have to navigate
• 41:45
  Speaker 1: your way through to the maze to the actual product,
• 41:48
  Speaker 1: and doing that with one product is like it's hard enough. Yeah,
• 41:52
  Speaker 1: I mean it's like it is like the kind of
• 41:54
  Speaker 1: business equivalent of giving birth. It's very difficult. So like
• 41:57
  Speaker 1: having tried ten babies simultaneously, like all the babies are
• 42:01
  Speaker 1: going to die, and that's that's I think what can
• 42:04
  Speaker 1: happen if you get a giant infusion of cash And
• 42:06
  Speaker 1: so that's the thing that now on the other hand,
• 42:10
  Speaker 1: and Peter Tiel describes as well, there's zero to one,
• 42:13
  Speaker 1: which is getting to this product market fit, and then
• 42:15
  Speaker 1: there's one to end. And I think that, you know,
• 42:18
  Speaker 1: in theory, SoftBank could certainly put money in something that
• 42:21
  Speaker 1: was going one to end and help it get to
• 42:23
  Speaker 1: one to end faster. Um. But you know, like, well
• 42:26
  Speaker 1: we'll see if that's how it works or if it
• 42:28
  Speaker 1: works in a different way. Is too much capital potentially
• 42:31
  Speaker 1: your burden for either the venture fund like the Vision
• 42:35
  Speaker 1: fund or for a scrappy startup um like we work.
• 42:41
  Speaker 1: Is that just too much money for a young, untested
• 42:45
  Speaker 1: sort of green CEO to deal with? Well, I think
• 42:48
  Speaker 1: that it is for a company if it causes the
• 42:53
  Speaker 1: ideas that you try to implement to multiply. If you
• 42:56
  Speaker 1: do that, then then that's going to be very dangerous.
• 43:00
  Speaker 1: Um as opposed to take that one idea and see
• 43:03
  Speaker 1: it through to its natural conclusion. Take it global. Um
• 43:06
  Speaker 1: That like, if you need more money to take the
• 43:08
  Speaker 1: market faster, that's a more scalable activity. It's straightforward, there's
• 43:13
  Speaker 1: kind of known methods and so forth. You can throw
• 43:15
  Speaker 1: money at it, and if you waste it, it's not destructive.
• 43:18
  Speaker 1: But if you throw money at product, that's destructive. And
• 43:21
  Speaker 1: so it's a it's a tricky balance um And yeah, no,
• 43:25
  Speaker 1: it's it's something that they sure surely have to struggle with.
• 43:29
  Speaker 1: So in in the book, you quote your partner Mark Andreessen,
• 43:34
  Speaker 1: you only ever experience two emotions euphoria and terror. I
• 43:38
  Speaker 1: find that lack of sleep enhances both. Yeah, that's a
• 43:41
  Speaker 1: description of entrepreneurship. So so is all that extra capital
• 43:47
  Speaker 1: not helpful if it or does that takes away some
• 43:50
  Speaker 1: of the euphoriaan terror? And I think that that is
• 43:53
  Speaker 1: actually dangerous because it's that level of focus caused by that,
• 43:59
  Speaker 1: Like you have to be able to handle the emotion.
• 44:01
  Speaker 1: But like nobody ever, it's very hard to build a
• 44:04
  Speaker 1: great company without that kind of feeling of oh my god,
• 44:11
  Speaker 1: I've got one bullet and I have to hit the
• 44:16
  Speaker 1: target and if I don't like, that's it. Like the
• 44:19
  Speaker 1: level of focus you have to have to do that
• 44:22
  Speaker 1: is kind of what makes the company. The culture, like
• 44:25
  Speaker 1: everything gets built off of that. And if you take that, like,
• 44:29
  Speaker 1: if you take that away, you just have like, you know,
• 44:33
  Speaker 1: you just end up with a big, fat, slow, bureaucratic startup.
• 44:38
  Speaker 1: You know which big companies don't execute that well generally,
• 44:43
  Speaker 1: but they do. They are so large they can just
• 44:46
  Speaker 1: pound you with money, but they've got a sustainable underlying
• 44:49
  Speaker 1: engine like Google Search or something. If you don't have
• 44:52
  Speaker 1: that underlying engine, you just have the money somebody gave
• 44:54
  Speaker 1: you and you start acting like that. That that that
• 44:56
  Speaker 1: can be super, super destructive. So I'm fascinated by your
• 45:02
  Speaker 1: concept of the hard thing about hard things, which is
• 45:05
  Speaker 1: effectively spoiler alert, Hey, there's no formula for doing this,
• 45:09
  Speaker 1: there's no framework. That's what makes them hard. It's a
• 45:13
  Speaker 1: case of first impression. Um, that was a really insightful observation.
• 45:19
  Speaker 1: Does that come from your work as an entrepreneur or
• 45:23
  Speaker 1: is that something you really see as a venture capitalist
• 45:26
  Speaker 1: or both. Well. I think it was mainly my work
• 45:29
  Speaker 1: as an entrepreneur. I think that UM crystallized being a
• 45:33
  Speaker 1: venture capitalist working with other entrepreneurs, realizing that my experience
• 45:36
  Speaker 1: was far from unique. UM. But yeah, And I think
• 45:40
  Speaker 1: this is what's wrong with most of the business literature
• 45:43
  Speaker 1: as they try to put it into some framework like
• 45:45
  Speaker 1: here are the three steps you need to go good
• 45:47
  Speaker 1: to great or be a built at last or whatever
• 45:49
  Speaker 1: gym concepts. Because it's not like it is very situational.
• 45:54
  Speaker 1: It's very specific to your company and your product and
• 45:57
  Speaker 1: your market and your people and and all these kinds
• 45:59
  Speaker 1: of things, and so um, yeah, the things that you're doing,
• 46:05
  Speaker 1: you know, you have to understand at a different level.
• 46:07
  Speaker 1: There's not the A. B C's of building a company.
• 46:10
  Speaker 1: You can follow the thirty steps of building a company
• 46:12
  Speaker 1: that anybody puts out and get nowhere all the time.
• 46:16
  Speaker 1: And you know the same with the culture. Uh, you know,
• 46:18
  Speaker 1: with the uh the new book, like people have these
• 46:21
  Speaker 1: step by step Oh, have an off site and like
• 46:23
  Speaker 1: you know, create your values and then like put it
• 46:26
  Speaker 1: in people's performance reviews. That doesn't do anything other than
• 46:29
  Speaker 1: get you a hypocritical culture where people go, yeah, we
• 46:31
  Speaker 1: have those values on the wall that we don't live. Uh,
• 46:34
  Speaker 1: so you know you have to get to the real thing. Um.
• 46:38
  Speaker 1: In other words, create your own values, don't follow someone else.
• 46:41
  Speaker 1: Understand how systems work, you know how well, it's not
• 46:45
  Speaker 1: even so much create your own values. It's like you
• 46:48
  Speaker 1: got to focus on, like how do you get people
• 46:50
  Speaker 1: to behave the way you want them to? Give you?
• 46:52
  Speaker 1: An example is so like Tom Coughlin could have put
• 46:56
  Speaker 1: values on the wall that said, like we're going to
• 46:58
  Speaker 1: be very detail oriented, we're gonna care about like everything
• 47:01
  Speaker 1: more than anybody else does, and like nobody would have
• 47:04
  Speaker 1: done anything. But what he did is he said, here's
• 47:07
  Speaker 1: the role. If you're on time, you're late, and if
• 47:10
  Speaker 1: you came to meeting on time, he'd find you like
• 47:13
  Speaker 1: thousands of dollars because you needed to be there five
• 47:15
  Speaker 1: minutes early. Now, like why is that better? One? Like,
• 47:18
  Speaker 1: as soon as he says that if you're on time,
• 47:21
  Speaker 1: you're late, you go like where the hell am I?
• 47:23
  Speaker 1: Like what is this? Why is he saying that? And
• 47:25
  Speaker 1: when you ask yourself why is he saying that? Then
• 47:27
  Speaker 1: what you're gonna find out is because like we're out
• 47:30
  Speaker 1: working everybody, we're paying more attention to everything than anybody,
• 47:33
  Speaker 1: Like the way we practice every detail that we go over,
• 47:36
  Speaker 1: like we're going we're gonna be here before everybody. Then um.
• 47:43
  Speaker 1: And if you run into it every time you go
• 47:44
  Speaker 1: to a meeting, like you can't like get away from
• 47:47
  Speaker 1: that cultural value. Whereas like you put on the damn
• 47:49
  Speaker 1: wall and you see it once a year in your
• 47:50
  Speaker 1: performance review, come on, like that's not doing anything. And
• 47:53
  Speaker 1: for people who may not be familiar with it. Kauflin
• 47:55
  Speaker 1: was the coach and New York Giants one two Super Bowls.
• 47:58
  Speaker 1: Wrote a book, Earned the Right to Win, which I
• 48:02
  Speaker 1: do not love sports books as business metaphors. This is
• 48:06
  Speaker 1: a great book. Really really comes across his meeting we'll
• 48:10
  Speaker 1: we'll talk about this later, his whole concept of meetings.
• 48:13
  Speaker 1: If you're not there and and prepared and thinking about
• 48:16
  Speaker 1: what's going to happen at the meeting, like you can't
• 48:18
  Speaker 1: show up at the line of scrimmage a moment before
• 48:21
  Speaker 1: the bullet snapped out. It's all the prep work that
• 48:23
  Speaker 1: goes into it. He he was really a very deep philosopher. Yeah,
• 48:28
  Speaker 1: and a cultural philosopher. Yes, yes, absolutely. We have been
• 48:32
  Speaker 1: speaking with Ben Horowitz. He is the author of what
• 48:36
  Speaker 1: you do, is who you are, how to create your
• 48:38
  Speaker 1: business culture. If you enjoy this conversation, be sure and
• 48:42
  Speaker 1: come back for the podcast extras, where we keep the
• 48:45
  Speaker 1: tape rolling and continue discussing all things venture capital related.
• 48:49
  Speaker 1: You can find that at Apple iTunes, Stitcher, Spotify, Google Podcasts,
• 48:54
  Speaker 1: wherever your final podcasts are sold. We love your comments,
• 48:58
  Speaker 1: feedback and suggestions. I to us at M I B
• 49:01
  Speaker 1: podcast at Bloomberg dot net. Be sure to give us
• 49:04
  Speaker 1: a review on Apple iTunes. Check out my weekly column
• 49:08
  Speaker 1: on Bloomberg dot com. Follow me on Twitter at Riolts.
• 49:11
  Speaker 1: I'm Barry Retolts. You're listening to Masters in Business on
• 49:15
  Speaker 1: Bloomberg Radio. Welcome to the podcast, Ben, Thank you for
• 49:19
  Speaker 1: doing this. I have been chasing you down for a
• 49:21
  Speaker 1: good couple of years to join. I eventually had to
• 49:26
  Speaker 1: work my way through the rest of all the employees
• 49:29
  Speaker 1: at Andres and Harowitz, and now I have you in
• 49:32
  Speaker 1: my in my lair, I have to ask about the
• 49:37
  Speaker 1: origin of a sixteen Z. I know that there are
• 49:40
  Speaker 1: sixteen letters between the A and Andrews and the Z
• 49:44
  Speaker 1: and Harrowitz. How did that come about? And full disclosure?
• 49:48
  Speaker 1: When I was in your office, you guys gave us
• 49:50
  Speaker 1: some swag. I have that hat which I where all
• 49:54
  Speaker 1: the time. I really enjoy it. Where where did a
• 49:57
  Speaker 1: sixteen Z come from? Well, so we named the The
• 50:01
  Speaker 1: reason we named the firm first of all Andrews and
• 50:03
  Speaker 1: Horowitz was the big question we got when we were
• 50:07
  Speaker 1: raising money from the LPs was they were like, hey,
• 50:10
  Speaker 1: you guys are like already kind of successful entrepreneurs. Why
• 50:15
  Speaker 1: are you really going to stay doing this venture capital thing.
• 50:18
  Speaker 1: We think you're just gonna like raise some money and
• 50:20
  Speaker 1: then quit and really yeah, yeah, yeah, that was a
• 50:23
  Speaker 1: big objection. And uh so I actually got the idea.
• 50:27
  Speaker 1: It was like Mark, like, if we name it after us,
• 50:30
  Speaker 1: then they'll still be stuck to it, and then they'll
• 50:33
  Speaker 1: know we're stuck. And yeah, so that was Andrews and
• 50:36
  Speaker 1: Horowitz and then but then we had an immediate problem,
• 50:38
  Speaker 1: which is, uh, nobody could spell that if they were
• 50:42
  Speaker 1: going to send us email or something to ease to
• 50:44
  Speaker 1: S is an inres and not an easy name to spell,
• 50:47
  Speaker 1: not at all. And so I came up with the ideas.
• 50:49
  Speaker 1: So when I was an engineer, like way back in
• 50:51
  Speaker 1: the Stone Age, it's such a geek thing to do. Yeah,
• 50:54
  Speaker 1: we used to have to internationalize code um to make
• 50:58
  Speaker 1: it work, you know, make it go from like whatever
• 51:01
  Speaker 1: single to double by uh strings and all this kind
• 51:04
  Speaker 1: of thing. And so we called that internationalization and we
• 51:08
  Speaker 1: abbreviated it I eighteen and I eighteen letters in the end.
• 51:12
  Speaker 1: And I was like, oh, this will be great. Book
• 51:14
  Speaker 1: called a six Z and and the domain was easily available.
• 51:19
  Speaker 1: Not that entrees in Horowitz probably wasn't available. You know,
• 51:22
  Speaker 1: that was available to it was just a nightmare to
• 51:25
  Speaker 1: right now. So when I had UM your CFO or CEO,
• 51:31
  Speaker 1: Scott Scott Cooper, So he was in his book, he's
• 51:35
  Speaker 1: telling the story that essentially post opswear loud Cloud, you
• 51:41
  Speaker 1: and Mark were effectively I think he called you check
• 51:45
  Speaker 1: book vcs. You were funding companies literally out of you know,
• 51:50
  Speaker 1: writing a check to people. And and he didn't say this,
• 51:54
  Speaker 1: I put these words in his mouth. But he's like
• 51:56
  Speaker 1: a very he's a lawyer. He's very rigorous, he's very struck.
• 52:00
  Speaker 1: Shared I pictured him like, what are you guys doing? Wait,
• 52:03
  Speaker 1: you're just writing checks out of your purse. Like I
• 52:06
  Speaker 1: pictured him losing his mind and saying no, no, no,
• 52:08
  Speaker 1: we have to set up a legal structure we have
• 52:10
  Speaker 1: to get organized. There's a lot of um, you know,
• 52:14
  Speaker 1: a little urban legend about the origin stories of how
• 52:19
  Speaker 1: how accurate is you guys were just kind of like, yeah,
• 52:22
  Speaker 1: let's give these guys money and give those guys money.
• 52:25
  Speaker 1: Well we I mean we were, but like we started
• 52:27
  Speaker 1: out as an angel fund before we even like formed
• 52:30
  Speaker 1: the kind of structure of the firm and so forth,
• 52:32
  Speaker 1: which now we have many entities, so Scott is very
• 52:35
  Speaker 1: happy with that. I can't even count all the entities
• 52:37
  Speaker 1: we have. Uh, but you know, like we would meet
• 52:40
  Speaker 1: entrepreneurs and we were writing you know checks for hundred grand,
• 52:44
  Speaker 1: two hundred thousand dollars. I mean that does sound like
• 52:46
  Speaker 1: a lot of money, but right it's seed or angel
• 52:51
  Speaker 1: rounds and yeah, so if we loved an entrepreneur, we
• 52:54
  Speaker 1: would you know, yeah, absolutely, Um, and you know a
• 52:58
  Speaker 1: lot of those turned out uh really you know quite well. So, Um,
• 53:04
  Speaker 1: what were some of those first checkbook firms? Uh funding?
• 53:09
  Speaker 1: What companies did you fund? Yeah? Yeah, so well there
• 53:12
  Speaker 1: was a few that where I mean, like probably the
• 53:14
  Speaker 1: best checks were like things like, uh, LinkedIn and Twitter.
• 53:19
  Speaker 1: I think we're probably the you know, two of the best,
• 53:22
  Speaker 1: but you know one that I really um meant a
• 53:26
  Speaker 1: lot to me. Was a company called app Nexus. I
• 53:28
  Speaker 1: don't know if you know them, they're here in New York,
• 53:30
  Speaker 1: but they sold to A T and T for well
• 53:34
  Speaker 1: over billion dollars and um, you know they those guys.
• 53:38
  Speaker 1: You know, it was just a bet on Brian the CEO,
• 53:40
  Speaker 1: and uh man like he was tough. He just went
• 53:44
  Speaker 1: through everything and you know, changes of the business, like
• 53:48
  Speaker 1: you know, people giving up on him and all these
• 53:51
  Speaker 1: kinds of things, and he just kept going and built
• 53:54
  Speaker 1: quite the company. So so so a couple of my
• 53:56
  Speaker 1: favorite quotes from the book and I'm not again I
• 54:00
  Speaker 1: jezz I don't know which book this is from. I
• 54:03
  Speaker 1: think this is from the Hard Thing book. No matter
• 54:05
  Speaker 1: who you are, you need two kinds of friends in
• 54:08
  Speaker 1: your life. Explain that. Yeah, so that was you know,
• 54:13
  Speaker 1: it was just kind of trying to come up with
• 54:15
  Speaker 1: a the way to describe my friend Bill Campbell you know,
• 54:21
  Speaker 1: late Bill Campbell Um was the chairman of Into It,
• 54:24
  Speaker 1: chairman of the CEO and then chairman of into it um,
• 54:27
  Speaker 1: you know, and kind of legend around Silicon Valley. He
• 54:30
  Speaker 1: mentored Steve Jobs and Larry Page and a bunch of
• 54:32
  Speaker 1: other guys but someone called him that. That's in the
• 54:35
  Speaker 1: book the trillion Dollar Coach, Trillion Dollar Coach, right exactly.
• 54:40
  Speaker 1: But you know the way I always saw him was, um,
• 54:42
  Speaker 1: you know there there there's two kinds of friends you need.
• 54:44
  Speaker 1: One is, you know, if something good happens in your life,
• 54:48
  Speaker 1: who do you want to call? Because they're going to
• 54:50
  Speaker 1: be as excited about it as you would be yourself
• 54:54
  Speaker 1: like and then you have very few friends like that,
• 54:55
  Speaker 1: you know, like your faith. And that's always a great
• 54:57
  Speaker 1: line between like fake friends and real friends. Is your
• 55:00
  Speaker 1: fake friends, you know, like they hear it and they
• 55:01
  Speaker 1: pretend they're happy, but they're not really happy and ahead
• 55:05
  Speaker 1: of me again. Uh and then uh, you know the
• 55:09
  Speaker 1: second kind is like if you're really in trouble, like
• 55:12
  Speaker 1: you know, like you're in jail and you have one
• 55:13
  Speaker 1: phone call to make, who you're gonna call? And you know,
• 55:15
  Speaker 1: both those guys for me were Bill Campbell. That that's
• 55:18
  Speaker 1: quite um, quite fascinating. Um. Another quote from that book,
• 55:24
  Speaker 1: what's the worst thing that could happen? What would I
• 55:27
  Speaker 1: do if we went bankrupt? And you described that as
• 55:30
  Speaker 1: a very freeing question. Yeah, yeah, I know, so that
• 55:34
  Speaker 1: was so you know, I didn't know what called sweats
• 55:36
  Speaker 1: work until he became a CEO, and then you know,
• 55:38
  Speaker 1: I'd be you know, it would be three o'clock in
• 55:40
  Speaker 1: the morning, I'd be wet um and you know, awake,
• 55:44
  Speaker 1: and my guts would be boiling, and I'd be like, oh,
• 55:46
  Speaker 1: this is what they meant. And so, you know, we
• 55:49
  Speaker 1: were in a lot of trouble. Um. The company was
• 55:52
  Speaker 1: definitely hitted for big bankruptcy. And I asked myself the question.
• 55:55
  Speaker 1: I was like, okay, like, yes, what what's the worst
• 55:58
  Speaker 1: thing that could happen? So, like, what is the worst
• 56:00
  Speaker 1: thing that could happen to the company? And I was like, Okay,
• 56:02
  Speaker 1: the worst thing that could happen is world go bankrupt.
• 56:04
  Speaker 1: I'll lay everybody off. All of our customers who trusted
• 56:07
  Speaker 1: us would fail, like all the investors who trusted me
• 56:09
  Speaker 1: would lose their money, and like I'd have no friends.
• 56:12
  Speaker 1: And I was thinking, Wow, that's like pretty bad. And
• 56:16
  Speaker 1: so then I then my next thought was like, well,
• 56:18
  Speaker 1: is there a way to kind of oh And then
• 56:22
  Speaker 1: the last part of it was really essential, which is well,
• 56:24
  Speaker 1: maybe after all that I could buy the intellectual property
• 56:28
  Speaker 1: out of the bankrupt thing and make it into a
• 56:30
  Speaker 1: new company. Um, and then I thought, whoa, why wait
• 56:35
  Speaker 1: for bankrupt? Yeah, maybe I could do that before we
• 56:37
  Speaker 1: went bankrupt, and that that's how loudcloud became ops where exactly?
• 56:42
  Speaker 1: And that worked out pretty well? Yeah, no, thankfully, um
• 56:45
  Speaker 1: it did, it did. I would probably not be here
• 56:47
  Speaker 1: today had that worked out, you know, speaking of failure
• 56:50
  Speaker 1: like that failure would have my life would have been
• 56:52
  Speaker 1: very different. I think if we had failed at that,
• 56:54
  Speaker 1: Why did loudcloud not work? Was it just too early
• 56:58
  Speaker 1: in the evolution of bandwidth, server technology, etcetera? For like
• 57:04
  Speaker 1: that was Amazon Web Services a good couple of years before. Well,
• 57:09
  Speaker 1: and I would say all those are true. And then
• 57:12
  Speaker 1: maybe the most fatal thing was it was built pre
• 57:15
  Speaker 1: UH virtualization, which there's a technology called UM virtualization which
• 57:21
  Speaker 1: kind of transformed UM your ability to do cloud computing
• 57:25
  Speaker 1: costs effectively, which is you could take a single computer
• 57:29
  Speaker 1: and make it look like many computers. And breakthrough technology
• 57:33
  Speaker 1: from a company called vm ware many years ago, uh,
• 57:36
  Speaker 1: and that really kind of changed the nature of it.
• 57:39
  Speaker 1: Vm Ware I E. MC bought them about them right
• 57:44
  Speaker 1: right right, And that was another giant uh pre Amazon
• 57:49
  Speaker 1: cloud UH data storage company back from late nineties. Yeah, yeah, yeah, no,
• 57:56
  Speaker 1: absolutely one of the biggest. Uh. There was one other question.
• 57:59
  Speaker 1: I wanted to pull out one of your quotes that
• 58:01
  Speaker 1: I thought was so interesting. Oh, um, this one. I
• 58:07
  Speaker 1: love this quote. A healthy company encourages people to share
• 58:11
  Speaker 1: bad news. A company that discusses its problems freely and
• 58:14
  Speaker 1: openly can quickly solve them. A company that covers up
• 58:18
  Speaker 1: its problem frustrates everyone involved. Describe that, well, look, um,
• 58:25
  Speaker 1: you know there's this whole saying that like NBA has
• 58:28
  Speaker 1: come with a lot of the time, which is, you know,
• 58:30
  Speaker 1: don't bring me a problem unless you have the solution.
• 58:35
  Speaker 1: And that's kind of good, except for what happens when
• 58:39
  Speaker 1: they don't have the solution. Um, And then what you're
• 58:43
  Speaker 1: really saying is don't bring me problems. Uh. And that
• 58:47
  Speaker 1: can become like pervasive in the culture where you know,
• 58:52
  Speaker 1: and I always uh liken it to the Wicked Witch
• 58:56
  Speaker 1: and the Whiz where you know she sung that song,
• 58:58
  Speaker 1: ain't nobody bring me no bad news? You know, like
• 59:00
  Speaker 1: you don't want the whiz wicked Witch running the company
• 59:03
  Speaker 1: because you need you need to know what's wrong, because
• 59:06
  Speaker 1: the faster you know it, the better it is. Uh.
• 59:09
  Speaker 1: And the slower you know it becomes a Kimchi problem.
• 59:12
  Speaker 1: The deeper you bury at the hutter it gets. And
• 59:15
  Speaker 1: so but it's a very much a cultural thing because
• 59:17
  Speaker 1: people don't want to be associated with problems, so you know,
• 59:21
  Speaker 1: getting them to bring them to you, you know, there
• 59:24
  Speaker 1: there has to be some kind of like reward in
• 59:27
  Speaker 1: the culture for doing that. And one of the things
• 59:30
  Speaker 1: we didn't get to doing the earlier segments I wanted
• 59:34
  Speaker 1: to ask about. I I work in the financial services industry.
• 59:38
  Speaker 1: Diversity is a big problem there. Um, it tends to
• 59:42
  Speaker 1: be male dominated, it tends to be not a lot
• 59:45
  Speaker 1: of people of color. I know a lot of firms
• 59:47
  Speaker 1: are working on that, but it's progress has been slow.
• 59:51
  Speaker 1: You guys have have created specifically a cultural Leadership Fund
• 59:56
  Speaker 1: to try and change that. Tell us about the lack
• 1:00:00
  Speaker 1: of diversity and venture capital and and what andrews in
• 1:00:04
  Speaker 1: Harwitz is doing about that. Yeah, so, like, let me
• 1:00:10
  Speaker 1: this is big. So there's a chapter in the new
• 1:00:11
  Speaker 1: book called Genghis Khan Master of Inclusion, which kind of
• 1:00:15
  Speaker 1: goes through this theory. And uh, it's a very I
• 1:00:18
  Speaker 1: think it's very important topic. And it's something that you know,
• 1:00:21
  Speaker 1: generally silicon values getting exactly wrong. And I think Wall
• 1:00:24
  Speaker 1: Street probably the same. And it's not intention so like
• 1:00:28
  Speaker 1: the first misinterpretation as people think, oh, everybody is racist
• 1:00:31
  Speaker 1: and sexist and finance and in venture capital, and that's
• 1:00:34
  Speaker 1: not actually the thing. Um. And in fact, starting from
• 1:00:38
  Speaker 1: that point actually makes you effectively systemically racist and sexist.
• 1:00:43
  Speaker 1: And I'll tell you how, because then you go, oh,
• 1:00:47
  Speaker 1: I need you know women minorities in my company, and
• 1:00:51
  Speaker 1: then you hire them, and then everybody in your firm
• 1:00:55
  Speaker 1: knows they came in the side door, the women and
• 1:00:57
  Speaker 1: minority door, as opposed to the front door. Um. And
• 1:01:00
  Speaker 1: the real problem is you can't see the talent. So
• 1:01:04
  Speaker 1: i'll give you a metaphor on this. So my friend
• 1:01:06
  Speaker 1: Steve Stout, who ran Sony Urban Music, calls me one
• 1:01:09
  Speaker 1: day and he talks in these kind of ways. He goes, Ben,
• 1:01:13
  Speaker 1: I ran Sony Urban Music. And I was like, yes,
• 1:01:15
  Speaker 1: I know that, Steve, but I also knew he was
• 1:01:17
  Speaker 1: going to tell me a longer story. And he goes,
• 1:01:22
  Speaker 1: but it wasn't Sony Urban music. It was Sony black music. Um.
• 1:01:25
  Speaker 1: But we couldn't call it urban music because or black
• 1:01:28
  Speaker 1: music because that would have been racist, So we had
• 1:01:29
  Speaker 1: to call it urban music. I was like well, that's
• 1:01:31
  Speaker 1: kind of silly, and he goes, no, that wasn't What
• 1:01:33
  Speaker 1: was silly, he says, because we called it urban music,
• 1:01:35
  Speaker 1: I couldn't market in rural areas, like no black people
• 1:01:39
  Speaker 1: live in rural areas. And I goes, wow, that's really dumb.
• 1:01:41
  Speaker 1: He's like, Ben, you're not even listening to me. I
• 1:01:44
  Speaker 1: had Sony urban music. I had Michael Jackson. What white
• 1:01:48
  Speaker 1: people don't like Michael Jackson. It's not black music, it's music.
• 1:01:52
  Speaker 1: And I was like, oh my god, that's what we're
• 1:01:55
  Speaker 1: doing in Silicon Valley. We call it diversity, but it's
• 1:01:58
  Speaker 1: really urban talent. It's this like we've categorized it into
• 1:02:02
  Speaker 1: something that it doesn't need to be categorized in because
• 1:02:06
  Speaker 1: we haven't trained ourselves to see that kind of talent.
• 1:02:09
  Speaker 1: So just give you an example of what I mean
• 1:02:12
  Speaker 1: by that. So at my firm, when we started, UM,
• 1:02:16
  Speaker 1: we were like, you know, we were like every other firm.
• 1:02:19
  Speaker 1: I had Frank Chen and he was running research, and
• 1:02:22
  Speaker 1: everybody in research was Asian. And I had you know, Margaret,
• 1:02:25
  Speaker 1: she was running marketing, and everybody in marketing was a woman.
• 1:02:28
  Speaker 1: And I had you know, Cooper. Everybody he hired was
• 1:02:31
  Speaker 1: an investment banker, and like it just went on like that.
• 1:02:33
  Speaker 1: People hire people who look like them, sound like them,
• 1:02:36
  Speaker 1: have their backs. I know what I'm good at, I
• 1:02:39
  Speaker 1: value it highly, and I can test for it in
• 1:02:41
  Speaker 1: an interview. So by default, that's what I'm hiring. And
• 1:02:44
  Speaker 1: so I go to market and I go market. What
• 1:02:46
  Speaker 1: is in your criteria where no man can get the
• 1:02:50
  Speaker 1: job in marketing? Like? What is it? And you know
• 1:02:52
  Speaker 1: what she said to me? Helpfulness? Really? And I was like, oh, snap,
• 1:02:56
  Speaker 1: I don't know any helpful man. And but then, but
• 1:02:59
  Speaker 1: like here's a real dumb thing about what I was doing.
• 1:03:01
  Speaker 1: Is we're a venture capital firm. We're in the services business.
• 1:03:07
  Speaker 1: You don't think helpfulness is important in the services business,
• 1:03:10
  Speaker 1: like to be able to anticipate somebody's needs to get
• 1:03:12
  Speaker 1: to it before they know you do. You don't think
• 1:03:14
  Speaker 1: that's a differentiation. And so like, we didn't have that
• 1:03:18
  Speaker 1: in our criteria for anybody's profile other than hers. When
• 1:03:21
  Speaker 1: we added it, that's all we did. We don't have
• 1:03:27
  Speaker 1: anywhere like a head of diversity, a diversity program, nothing,
• 1:03:33
  Speaker 1: people were women. All we have to do is actually
• 1:03:36
  Speaker 1: be able to see the talent. We're a talent blind
• 1:03:40
  Speaker 1: and so the right thing to measure is blind. Yeah,
• 1:03:43
  Speaker 1: the right thing to measure on diversity inclusion is what
• 1:03:47
  Speaker 1: is it like like from attrition standpoint, employee satisfaction standpoint
• 1:03:53
  Speaker 1: for your diverse groups, Because the only way you get
• 1:03:55
  Speaker 1: that to be where it should be is if you
• 1:03:57
  Speaker 1: can see the talent. And if you can see the talent,
• 1:04:00
  Speaker 1: guess what, You're not gonna have a pipeline problem. You're
• 1:04:02
  Speaker 1: not gonna have any of those other problems that people
• 1:04:04
  Speaker 1: run into because you can see it and the talent
• 1:04:06
  Speaker 1: is out there. And so when you get to the
• 1:04:09
  Speaker 1: Cultural Leadership Fund, people think that's actually a diversity idea.
• 1:04:14
  Speaker 1: It's not. It's actually a bet on black exceptionalism. And
• 1:04:19
  Speaker 1: what I mean by that is this is us recognizing
• 1:04:23
  Speaker 1: that in the last hundred years, every new musical art form,
• 1:04:28
  Speaker 1: from jazz to blues, to rock and roll to hip hop,
• 1:04:32
  Speaker 1: was invented by the same group African Americans, African Americans.
• 1:04:38
  Speaker 1: Almost all new fashion ideas were created by African Americans. Lately,
• 1:04:42
  Speaker 1: almost all the important new visual artist African American. What
• 1:04:46
  Speaker 1: does that mean. It's means like you have a group
• 1:04:48
  Speaker 1: that's genius at moving consumer behavior, like we can see that.
• 1:04:53
  Speaker 1: So we partnered with the best leaders, people like Quincy Jones,
• 1:04:58
  Speaker 1: Sean Combs, so forth, where they would invest in our
• 1:05:03
  Speaker 1: cultural Leadership Fund. We could then connect them to our entrepreneurs,
• 1:05:09
  Speaker 1: get an advantage on moving consumer behavior, and then we
• 1:05:13
  Speaker 1: just take the money and put it back into getting
• 1:05:16
  Speaker 1: more African Americans into tech. So for us, it's a
• 1:05:19
  Speaker 1: bet on talent that we can see that the other
• 1:05:21
  Speaker 1: venture firms can't necessarily see and we're benefiting greatly from that,
• 1:05:25
  Speaker 1: and you know, we win deals all the time on that.
• 1:05:28
  Speaker 1: Uh So, you know, it's just the right way to
• 1:05:30
  Speaker 1: think about diversity and inclusion, which is like, how do
• 1:05:33
  Speaker 1: you gain advantage And you can't gain advantage if you're
• 1:05:35
  Speaker 1: running around blind and then changing your criteria to race
• 1:05:38
  Speaker 1: and gender. That's not going to get you anything that
• 1:05:40
  Speaker 1: you just set up Urban HR. So you mentioned hip
• 1:05:43
  Speaker 1: hop um amongst the list of musical inventions from African America.
• 1:05:51
  Speaker 1: So we're only about five years apart in age. But
• 1:05:56
  Speaker 1: my hip hop fandom kind of stuff opt with Poles
• 1:06:01
  Speaker 1: Boutique and right, I mean, Paul's Boutique is a spectacular album.
• 1:06:07
  Speaker 1: I think most people will admit the scratching and mixing
• 1:06:11
  Speaker 1: and sampling in just just an unbelievable In fact, that
• 1:06:16
  Speaker 1: was before the copyright wall came down, so they were
• 1:06:20
  Speaker 1: doing stuff that you really came later charge. But I
• 1:06:29
  Speaker 1: don't know, if what what the basis for my lack
• 1:06:32
  Speaker 1: of because I still listen to new music, but most
• 1:06:36
  Speaker 1: of it tends to be jazz and pop new stuff
• 1:06:40
  Speaker 1: that comes out. How have you managed to stay current
• 1:06:44
  Speaker 1: current in uh hip hop? And what are you listening
• 1:06:47
  Speaker 1: to these days? Oh? Well, you know, like I get
• 1:06:52
  Speaker 1: that's an interesting thing to describe. I think the art
• 1:06:54
  Speaker 1: form really evolved in um, you know since Paul's boutique. Uh,
• 1:06:59
  Speaker 1: you know rock Kim was just an amazing breakthrough lyrically, uh,
• 1:07:03
  Speaker 1: and then Dr Dre musically, and then you had the
• 1:07:06
  Speaker 1: great I'll Go. You know, I progress somewhat. Yeah, that
• 1:07:10
  Speaker 1: era I mean Wu Tang nas jay z uh Notorious
• 1:07:15
  Speaker 1: b I G was an amazing kind of era. UM.
• 1:07:18
  Speaker 1: So that there's still like very good things happening. I mean,
• 1:07:21
  Speaker 1: so Young Thugs new album is quite good, Like I
• 1:07:24
  Speaker 1: would recommend it highly uh so much fun as the
• 1:07:28
  Speaker 1: name of the album. UM, I think that you know
• 1:07:32
  Speaker 1: the baby is uh, like everybody loves the baby, and
• 1:07:35
  Speaker 1: he's got a new album out that's pretty good. Um
• 1:07:38
  Speaker 1: that I like. So there's there's definitely good new stuff
• 1:07:41
  Speaker 1: happening to Like Drake is amazing. I think he doesn't,
• 1:07:44
  Speaker 1: you know, because he's almost so big that like real
• 1:07:47
  Speaker 1: hip hop hits don't give him the credit he deserves.
• 1:07:49
  Speaker 1: But this guy is an absolute genius, and uh, it's
• 1:07:52
  Speaker 1: putting out continues to put out phenomenal music. I Um,
• 1:07:56
  Speaker 1: I just got a new car not too long ago,
• 1:07:59
  Speaker 1: and all the new cars have them the music hard
• 1:08:04
  Speaker 1: drive that if you so, between the phone and the iPod,
• 1:08:07
  Speaker 1: I got a bazillion things. But every now and then
• 1:08:10
  Speaker 1: I just bring out a stack of discs and transfer
• 1:08:12
  Speaker 1: it to the to the drive and right, I mean
• 1:08:17
  Speaker 1: that's where we are. The previous car, you could use
• 1:08:20
  Speaker 1: the SD drives. This car you can't taken. You can
• 1:08:23
  Speaker 1: take your phone on Bluetooth, yeah of course, but you
• 1:08:26
  Speaker 1: know the phone only has you know, five twelve gigs
• 1:08:29
  Speaker 1: of music and I want to put some of my
• 1:08:31
  Speaker 1: favorites in. But the reason I'm bringing that up is
• 1:08:35
  Speaker 1: I brought I brought out seven James Brown discs and
• 1:08:41
  Speaker 1: I transferred um, the James Brown Party people three dis
• 1:08:46
  Speaker 1: set and then the Showtime three four disc set, And
• 1:08:50
  Speaker 1: as I'm listening to all this stuff with a hundredth time,
• 1:08:54
  Speaker 1: it's amazing how much hip hop pulled vocal samples, beats, baselines, rhythms.
• 1:09:02
  Speaker 1: Just I don't I have a lot of young guys
• 1:09:04
  Speaker 1: in my office. Brown was originally like the most sampled guy.
• 1:09:08
  Speaker 1: I don't think people realize how influential he still is
• 1:09:12
  Speaker 1: to this day. Amazing driving music. It's it's just fascinating.
• 1:09:16
  Speaker 1: So I've got a tip off your James Brown fan.
• 1:09:18
  Speaker 1: So there's a there's a show called Tales from the
• 1:09:20
  Speaker 1: Tour Bus might judge, there's to James Brown episodes. You
• 1:09:25
  Speaker 1: have to they're the most from It's on I think Cinemax.
• 1:09:31
  Speaker 1: But it's uh, it's an amazing show generally, but season
• 1:09:35
  Speaker 1: two James Brown amazing. Like so first of all, like
• 1:09:41
  Speaker 1: just how genius he was the band he put together,
• 1:09:44
  Speaker 1: and how incredible they were, and how absolutely nuts out
• 1:09:48
  Speaker 1: of his mind was He never really like he barely
• 1:09:52
  Speaker 1: drunk and he never did any drugs until he was
• 1:09:54
  Speaker 1: fifty five, and then he started on Angel Dust like
• 1:09:58
  Speaker 1: that was his first rock. He didn't anything part way,
• 1:10:01
  Speaker 1: he was Yeah, pedal to the metal, and so you know,
• 1:10:03
  Speaker 1: when people see him at the end, they wonder, like,
• 1:10:06
  Speaker 1: what the hell happened? Is Angel Dusk? And so like that.
• 1:10:08
  Speaker 1: The whole thing is just like a crazy tale of
• 1:10:11
  Speaker 1: of of him. So it's much better than any of
• 1:10:14
  Speaker 1: the James Brown movies. So last question before I get
• 1:10:16
  Speaker 1: to my favorite questions, what what else are you watching?
• 1:10:19
  Speaker 1: I mentioned Silicon Valley? What what are you streaming? What
• 1:10:22
  Speaker 1: are you watching these days? Well, the new season and
• 1:10:24
  Speaker 1: Mr Robot, which one of the great the last season,
• 1:10:27
  Speaker 1: final season, Yeah, what an amazing The first season was
• 1:10:31
  Speaker 1: very stressful, Yeah yeah, yeah, like and that was like
• 1:10:35
  Speaker 1: challenging to work your way through. Yeah yeah, yeah, that
• 1:10:38
  Speaker 1: was It was very intense. Um that it continues to
• 1:10:42
  Speaker 1: be intense. Yeah, uh, you know, I watched uh succession.
• 1:10:47
  Speaker 1: Um people like that. It's you know, it's a very
• 1:10:50
  Speaker 1: well done show. I a little little bit of touches
• 1:10:54
  Speaker 1: the Murdochs, I know, and I'm friends with them, and
• 1:10:57
  Speaker 1: I feel like it's not fair if you look at
• 1:10:58
  Speaker 1: it through that lens, But it's still like a super
• 1:11:01
  Speaker 1: well done show. So if you saw that, did you
• 1:11:04
  Speaker 1: see loudest voice in the room. I haven't seen that
• 1:11:06
  Speaker 1: yet things about it's the showtime I want to say
• 1:11:10
  Speaker 1: it's a six or yeah, who's amazing in it? And
• 1:11:13
  Speaker 1: it's based on the Gabriel Sherman book. Really it's shocking
• 1:11:17
  Speaker 1: to look at Russell Crowe and say, how did's one
• 1:11:20
  Speaker 1: guy play Roger Ales and some of the Gladiator and um,
• 1:11:27
  Speaker 1: what was the beautiful mind? Like, it's incredible? How different range? Well,
• 1:11:33
  Speaker 1: and then the really unusual thing about him to me
• 1:11:36
  Speaker 1: is he not only has the range, but he also
• 1:11:40
  Speaker 1: has the intangible. He's a movie star. He's a Humphrey Bogart,
• 1:11:44
  Speaker 1: He's like a Denzel Washington like that. But those guys,
• 1:11:48
  Speaker 1: you know, the most movie stars, they're amazing because they're
• 1:11:50
  Speaker 1: movie stars, but they don't have rain like Robert de Niro,
• 1:11:53
  Speaker 1: but they don't have that kind of acting range as well.
• 1:11:55
  Speaker 1: So he's he's really unique. Um, what we'll give me
• 1:11:58
  Speaker 1: one more thing that you're watch him. Um, let's see
• 1:12:02
  Speaker 1: what else I watched. I want to give you a
• 1:12:05
  Speaker 1: good one. By the way, I'm gonna have to add
• 1:12:07
  Speaker 1: this as a regular question because this is a really
• 1:12:09
  Speaker 1: interesting question. Yeah, I'm trying to think what, oh you know,
• 1:12:12
  Speaker 1: what I liked is uh, the Righteous Gemstones. Really yeah, yeah,
• 1:12:16
  Speaker 1: that did started out a little slow, but you know
• 1:12:19
  Speaker 1: it's the guys who did Vice Principles and He's bounded down,
• 1:12:22
  Speaker 1: which are both like outstanding. So now I have your
• 1:12:27
  Speaker 1: I think Righteous Gemstones may be the best of the set.
• 1:12:30
  Speaker 1: So I only have you for a few minutes. Let's
• 1:12:32
  Speaker 1: uh get to my favorite questions and I'm gonna do uh,
• 1:12:36
  Speaker 1: I'm gonna do an abbreviated version of this. What's the
• 1:12:38
  Speaker 1: most important thing we don't know about Ben Harwitz? I
• 1:12:44
  Speaker 1: feel like people know so much now really, because I
• 1:12:47
  Speaker 1: think you're kind of an enigma. Your partner is more
• 1:12:50
  Speaker 1: public than you are, generally speaking. Yeah, no, he definitely is.
• 1:12:55
  Speaker 1: Well I am, I mean, and maybe people don't know
• 1:12:57
  Speaker 1: this about me, but I am the best barbecuer in
• 1:13:00
  Speaker 1: all of Silicon Valley. Yeah that's a really low bar. Yeah,
• 1:13:03
  Speaker 1: you know it's a low bar, but like still I
• 1:13:05
  Speaker 1: wear the crown parality. There you go. Um, who are
• 1:13:07
  Speaker 1: some of your early mentors you mentioned Bill Campbell has
• 1:13:10
  Speaker 1: to be on Andy Grove. I would say Andy Grove
• 1:13:13
  Speaker 1: is super high on that list. What an amazing, amazing guy. Actually,
• 1:13:17
  Speaker 1: the highlight of my professional career was when he asked
• 1:13:20
  Speaker 1: me to write the new forward High Output Management, And
• 1:13:24
  Speaker 1: I still think that's the best thing I ever wrote
• 1:13:26
  Speaker 1: in my life? Is that for it? Because it just
• 1:13:28
  Speaker 1: meant so much to me? What amazing, amazing human thing.
• 1:13:31
  Speaker 1: That's an amazing pair of mentors. Um, what venture capitalists
• 1:13:36
  Speaker 1: influenced the way you think about venture investing? Or maybe
• 1:13:40
  Speaker 1: I should, knowing knowing your firm, I should ask who
• 1:13:45
  Speaker 1: really influenced your approach the venture capitalists? You mentioned Mike
• 1:13:48
  Speaker 1: ovit's before who else influenced? I think like structurally in
• 1:13:52
  Speaker 1: the approach. You know, Michael Ovits in terms of how
• 1:13:54
  Speaker 1: we run the firm was by far the most influential.
• 1:13:57
  Speaker 1: I think that, you know, in being vcs UM, you
• 1:14:00
  Speaker 1: know we we knew a lot of the great So
• 1:14:02
  Speaker 1: you know Jim Bryer, you Kosla, you know John dor Um.
• 1:14:09
  Speaker 1: We're all very influential. You know Neil Boozery, although he's
• 1:14:13
  Speaker 1: more of an entrepreneur than a venture capitalist, but like
• 1:14:15
  Speaker 1: he certainly was very kind of helpful and influential on
• 1:14:21
  Speaker 1: at least me early on. Um, those are some of them. Yeah,
• 1:14:25
  Speaker 1: let's talk about books. What are some of your favorite
• 1:14:27
  Speaker 1: things to read? Technology related or not well. So I
• 1:14:31
  Speaker 1: have been reading Victor Sebastian's um Lenin biography, which that's
• 1:14:38
  Speaker 1: Vladimir Lenin Vladimir Iliot. Uh. That's a pretty big book
• 1:14:42
  Speaker 1: if I remember the big book. Um, it's just astoundingly amazing,
• 1:14:48
  Speaker 1: and you know, particuling in today's time because you know,
• 1:14:51
  Speaker 1: people people have sort of forgot the hundred year history
• 1:14:54
  Speaker 1: of communism, which just a brief summary everybody dies U
• 1:15:01
  Speaker 1: but going down, going back through the Bolshevik Revolution, you
• 1:15:04
  Speaker 1: can really see why. And it's you know, it's a
• 1:15:08
  Speaker 1: really interesting systems thing because it's marketed as power to
• 1:15:13
  Speaker 1: the people and it's the exact opposite thing, which is
• 1:15:16
  Speaker 1: it's a massive concentration of power where you transfer all
• 1:15:21
  Speaker 1: the wealth to a very few number of people running
• 1:15:23
  Speaker 1: the government. Yeah, it's well, but it's too high a
• 1:15:28
  Speaker 1: level of power. So like if you get anybody gets
• 1:15:30
  Speaker 1: too power, Like if there was a company like Evil
• 1:15:32
  Speaker 1: Corp is in Mr Robot, that company would be massively
• 1:15:36
  Speaker 1: destructive because it's just too kind of concentration. So it's
• 1:15:40
  Speaker 1: not specific to government or business or anything else. It's
• 1:15:44
  Speaker 1: just specific to power. And I think the problem with
• 1:15:47
  Speaker 1: communism is it's just such a big concentration of power.
• 1:15:49
  Speaker 1: And you really see this. I mean, so just some
• 1:15:52
  Speaker 1: of the things in the Bolshevik revolution, you know, the
• 1:15:56
  Speaker 1: so the first thing is, okay, anybody in government, anybody
• 1:16:00
  Speaker 1: can do a government job. You know, any peasant could
• 1:16:03
  Speaker 1: do it, because like, these are just the rich people
• 1:16:06
  Speaker 1: who have these jobs, and they're all evil, And so
• 1:16:08
  Speaker 1: he gives all the jobs to peasants. And within three
• 1:16:10
  Speaker 1: months of them taking control, there's a famine so bad
• 1:16:13
  Speaker 1: that they have to put out propaganda to keep parents
• 1:16:16
  Speaker 1: from eating their children. And then like so coming off that,
• 1:16:19
  Speaker 1: like what do we do about the famine, Well, we've
• 1:16:23
  Speaker 1: killed all the rich people, so now we've got to
• 1:16:25
  Speaker 1: start killing the kulaks who were farmers with like two horses,
• 1:16:29
  Speaker 1: and so like this is how it rolls when you
• 1:16:32
  Speaker 1: kind of give somebody massive power and you're driven on
• 1:16:36
  Speaker 1: hate of anything, and like, you know, I mean, I
• 1:16:39
  Speaker 1: understand people don't like rich people, but like hating anybody,
• 1:16:42
  Speaker 1: um is just a very bad source of uh political ideology.
• 1:16:47
  Speaker 1: So forty million deaths later, what what ends up happening
• 1:16:51
  Speaker 1: in uh Communist Russia? Yeah, I mean, you know, like
• 1:16:54
  Speaker 1: and then we discover it and then you know, it's
• 1:16:57
  Speaker 1: very hard to convert from a system like that into
• 1:17:00
  Speaker 1: another system, is you know, you know, we're we're finding
• 1:17:04
  Speaker 1: also it's complicated in China, it's complicated buttitarian than it
• 1:17:10
  Speaker 1: is communists. But they go to totalitarian and communism go
• 1:17:14
  Speaker 1: together because you're going for that concentration of control like
• 1:17:19
  Speaker 1: you can't have kind of So here's here's the thing
• 1:17:21
  Speaker 1: on communism that you know, my friends who have grown
• 1:17:24
  Speaker 1: up in you know, Russian Romania and so forth say,
• 1:17:26
  Speaker 1: it's like people think, oh, Stalin was crazy. Stalin wasn't
• 1:17:30
  Speaker 1: like if you read his work and so forth, like
• 1:17:31
  Speaker 1: he wasn't very smart. The problem is you've taken away
• 1:17:35
  Speaker 1: the carrot, so all you have is a stick. And
• 1:17:37
  Speaker 1: so if you all you have is a stick, then
• 1:17:39
  Speaker 1: you need totalitarianism to control the people. You need to
• 1:17:42
  Speaker 1: be you need you need to go to work because
• 1:17:45
  Speaker 1: you're not paying him. Um that's one book. Give us another. Um, well,
• 1:17:52
  Speaker 1: you know, i'll reference. Let me reference kind of the
• 1:17:55
  Speaker 1: book that I've read over and over again in preparation
• 1:17:57
  Speaker 1: for this book. It says The Black Jacoban's by C. L. R. James,
• 1:18:01
  Speaker 1: which is, uh, so you appreciate this story. It's recommended
• 1:18:04
  Speaker 1: to me by the late Christopher Hitchens. And all I
• 1:18:07
  Speaker 1: asked him was like, what books should I read? He's like, oh,
• 1:18:10
  Speaker 1: the best book, like is The Black Jacobin's written in
• 1:18:14
  Speaker 1: nine seven, you know. And really he said that this
• 1:18:17
  Speaker 1: to me maybe like seven eight years ago. Uh, and
• 1:18:21
  Speaker 1: that was the story of the Haitian Revolution And just
• 1:18:23
  Speaker 1: an amazing book. Is that how that you found its
• 1:18:26
  Speaker 1: way into this book? Absolutely? You know that was the
• 1:18:29
  Speaker 1: kind of uh that's the very first thing I read
• 1:18:32
  Speaker 1: kind of on the Haitian Revolution. Uh and really really
• 1:18:36
  Speaker 1: really amazing tell us about a time you failed and
• 1:18:39
  Speaker 1: what you learned from the experience. Uh, well, you know,
• 1:18:43
  Speaker 1: I wrote a whole book on how I failed to
• 1:18:45
  Speaker 1: build the first cloud computing company. Uh. You know, I
• 1:18:49
  Speaker 1: felt a lot of things. I actually just um, so
• 1:18:52
  Speaker 1: one of the let me tell you, like a really
• 1:18:56
  Speaker 1: one of the many failures a loud clouds. So the
• 1:18:59
  Speaker 1: company you and we came out of the gates faster
• 1:19:02
  Speaker 1: than any company that I've I've seen since. So in
• 1:19:06
  Speaker 1: quarter number three after founding, we booked twenty seven million
• 1:19:10
  Speaker 1: dollars in revenue, like so like just astound. And that's
• 1:19:13
  Speaker 1: when seven million dollars was a lot of money in
• 1:19:17
  Speaker 1: uh and we were growing so fast that the fire
• 1:19:21
  Speaker 1: marshal was threatening to shut down the company. UM, so
• 1:19:24
  Speaker 1: I had to get yeah, and so it's had to
• 1:19:28
  Speaker 1: get more real estate. Um. And so I kind of
• 1:19:32
  Speaker 1: delegated it to uh my finance team and um and
• 1:19:37
  Speaker 1: I just didn't pay any attention. I was just like,
• 1:19:39
  Speaker 1: get as more real estate. We got to get it
• 1:19:40
  Speaker 1: before they shut us down. So we leased the building. UM.
• 1:19:44
  Speaker 1: I signed off on it thirty million dollars in restricted
• 1:19:47
  Speaker 1: cash to hauled it down. And it was kind of
• 1:19:51
  Speaker 1: at the time, I think it was like ten dollars
• 1:19:53
  Speaker 1: a square foot a month. Within two months of that,
• 1:19:57
  Speaker 1: it was very pricy. Within two months of that that
• 1:20:00
  Speaker 1: Tom crash real estate in the next twelve months drop
• 1:20:03
  Speaker 1: to nine cents of square foot. Like we had a layoff.
• 1:20:07
  Speaker 1: We never really and Ernest moved into the building. UM
• 1:20:10
  Speaker 1: and I had this thirty million dollar bill. Uh. You know,
• 1:20:13
  Speaker 1: in a startup company, it was which was just absolutely
• 1:20:16
  Speaker 1: killing us. And you know, the thing I learned was
• 1:20:20
  Speaker 1: like I knew when I delegated it it was probably
• 1:20:25
  Speaker 1: a problem. Um, but I didn't want to deal with
• 1:20:28
  Speaker 1: it for even five minutes. And uh, you know. What
• 1:20:31
  Speaker 1: I learned is like, if you see pain, darkness, failure,
• 1:20:38
  Speaker 1: you have to run towards it. You can't run away
• 1:20:41
  Speaker 1: from it. When you're CEO, embrace the pain, run straight
• 1:20:45
  Speaker 1: at it. So let me move this in a different direction.
• 1:20:48
  Speaker 1: What do you do for fun? What do you do
• 1:20:50
  Speaker 1: when you're not in the office? Yeah, yeah, so you know,
• 1:20:54
  Speaker 1: I listened to hip hop. I've got like an amazing
• 1:20:56
  Speaker 1: sound system. I am a big sports fan, so I
• 1:20:59
  Speaker 1: give who's your sound system, what's your MP and what's
• 1:21:02
  Speaker 1: your speakers? By the way, this question is for seventeen people.
• 1:21:07
  Speaker 1: It's a little company called Aristecca, and they have this
• 1:21:12
  Speaker 1: amazing technology which is there's a software layer kind of
• 1:21:17
  Speaker 1: that runs over the top that like a problem with
• 1:21:21
  Speaker 1: speaker systems is certain sounds hit you first. So like
• 1:21:26
  Speaker 1: the vocals, the guitars, the base don't all hit you
• 1:21:29
  Speaker 1: at the same time. They hit you at different speeds.
• 1:21:32
  Speaker 1: This makes it so they all hit you at the
• 1:21:34
  Speaker 1: exact same time and the clarity on the system is justable.
• 1:21:40
  Speaker 1: I promise we are going to get emails from audio
• 1:21:42
  Speaker 1: engineers challenging that. We'll see, we'll see what the pushback.
• 1:21:46
  Speaker 1: My final two questions because I know we have to
• 1:21:49
  Speaker 1: get you elsewhere, right, Um, what sort of advice would
• 1:21:53
  Speaker 1: you give to a recent college grad who was interested
• 1:21:56
  Speaker 1: in the venture capital world. Well, I'd say do something
• 1:22:00
  Speaker 1: else before you going to venture capital, because the most
• 1:22:04
  Speaker 1: important thing in venture capital is understanding there. One of
• 1:22:07
  Speaker 1: the most important things is understanding the process of how
• 1:22:10
  Speaker 1: companies get built, and that's a little bit difficult to
• 1:22:14
  Speaker 1: do from the outside. So if you can do that
• 1:22:17
  Speaker 1: from the inside and then you know, maybe going to
• 1:22:20
  Speaker 1: venture capital later, I think that works better. Uh. And
• 1:22:24
  Speaker 1: then the the other thing is right if venture capital
• 1:22:27
  Speaker 1: is like one of these dumb fields and that doesn't
• 1:22:29
  Speaker 1: prepare you very much for anything else. So like if
• 1:22:32
  Speaker 1: you have a tenure career and it doesn't work, then
• 1:22:35
  Speaker 1: that you know you're really starting from scratch, Whereas if
• 1:22:37
  Speaker 1: you're an entrepreneur or you work at a startup, then
• 1:22:40
  Speaker 1: there's many things you can do off. It's something the
• 1:22:42
  Speaker 1: full back on. And finally, what do you know about
• 1:22:45
  Speaker 1: the world of venture investing today? You wish you knew
• 1:22:49
  Speaker 1: when you guys were getting launched in the late nineties,
• 1:22:52
  Speaker 1: I'm sorry, the late two thousand's. Um, Well, that's a
• 1:23:00
  Speaker 1: great question. Isn't it though, Yeah, I think, um, probably
• 1:23:06
  Speaker 1: I wish we knew more about the investing process, like
• 1:23:10
  Speaker 1: what did good investing process look like? I think it's
• 1:23:13
  Speaker 1: something that we've learned over the years, and you know,
• 1:23:16
  Speaker 1: we've had to develop, uh, and we're you know, like
• 1:23:19
  Speaker 1: I would say, we're way way, way better at it
• 1:23:21
  Speaker 1: now than when we started. And I think, you know,
• 1:23:23
  Speaker 1: like at this point I can tell that we're as
• 1:23:25
  Speaker 1: good as the best firms because you know, we end
• 1:23:29
  Speaker 1: up landing like any deal, you know, just by the
• 1:23:33
  Speaker 1: deals we pick, Like you can tell by you know,
• 1:23:35
  Speaker 1: what they really smart competitors pick. So we've gotten much
• 1:23:38
  Speaker 1: better at it. But it was something we learned kind
• 1:23:41
  Speaker 1: of the hard way. I would say, quite quite interesting. Ben,
• 1:23:44
  Speaker 1: thank you for being so generous with your time. We
• 1:23:47
  Speaker 1: have been speaking with Ben Harrowitz, co founder and general
• 1:23:50
  Speaker 1: partner at Andrews and Horowitz and author of the new
• 1:23:53
  Speaker 1: book What You Do Is Who You Are How to
• 1:23:56
  Speaker 1: create your business culture. If you enjoyed this converse station, well,
• 1:24:00
  Speaker 1: look up an Inch or down an Inch on Apple
• 1:24:03
  Speaker 1: iTunes and you can see any of the previous two
• 1:24:07
  Speaker 1: eighty seven conversations we've had over the past five years.
• 1:24:11
  Speaker 1: We love your comments, feedback in suggestions right to us
• 1:24:14
  Speaker 1: at m IB podcast at Bloomberg dot net. Be sure
• 1:24:18
  Speaker 1: and check out my weekly column on Bloomberg dot com.
• 1:24:22
  Speaker 1: Sign up from my daily reading list at Ridhalts dot com.
• 1:24:26
  Speaker 1: I would be remiss if I did not thank the
• 1:24:28
  Speaker 1: crack staff that helps put these conversations together each week.
• 1:24:32
  Speaker 1: Karen O'Brien is my audio engineer. Michael Boyle is my producer.
• 1:24:37
  Speaker 1: Michael Batnick is my head of research. I'm Barry Ridholts.
• 1:24:41
  Speaker 1: You've been listening to Masters in Business on Bloomberg Radio.