Full transcript: Social Capital CEO Chamath Palihapitiya on Recode Decode

“The fundamental process of getting public needs to be completely fixed because it is corrupted.”

By Recode Staff Updated Aug 31, 2017, 3:32pm EDT

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On this episode of Recode Decode, hosted by Kara Swisher, Social Capital’s Chamath Palihapitiya takes over the red chair to talk about how investing in Silicon Valley is a broken process. The outspoken venture capitalist matches wits with Kara, providing a very entertaining and enlightening conversation along the way.

You can read some of the highlights here, or listen to the entire interview in the audio player below. We’ve also provided a lightly edited complete transcript of their conversation.

If you like this, be sure to subscribe to Recode Decode on Apple Podcasts, Spotify, Pocket Casts, Overcast or wherever you listen to podcasts.

Kara Swisher: Recode Radio presents Recode Decode, coming to you from the Vox Media Podcast Network.

Hi, I’m Kara Swisher, executive editor of Recode. You may know me as the person who ignores all of your Slack messages, but in my spare time I talk tech, and you’re listening to Recode Decode, a podcast about tech and media’s key players, big ideas and how they’re changing the world we live in. You can find more episodes of Recode Decode on Apple Podcasts, Spotify, Google Play Music, or wherever you listen to your podcasts, or just visit recode.net/podcasts for more.

Today in the red chair is Chamath Palihapitiya, the CEO of Social Capital.

Chamath Palihapitiya: What’s up?

What’s up? And one of our most popular podcaster guests, essentially, I can’t believe that. Just add to your giant ego. When Chamath came on Recode Decode in March of 2016, we talked about rich douchebags and companies behaving badly in Silicon Valley, so clearly nothing ever changes. He’s also owner — part-owner — of the Golden State Warriors, which I’m told is a pretty good basketball team, and in his spare time he does investing and just mouthing off, essentially, right?

Yeah.

Which is my favorite part. Welcome back, Chamath.

Thank you.

You know, you are one of my favorite people. Don’t tell anyone else here in Silicon Valley, but I enjoy talking to you about these things. There’s so much to talk about, but first let’s talk about what you’re doing. Because you’re, I’ve written a couple stories recently about changes you’re making at Social Capital. Why don’t we go over those and talk about where your company’s headed?

Well, here’s the best way, I think, to frame ... well, take a step back, right? What does capitalists, what function do they serve, right? In a well-functioning economy, right, you have these two things that should come together. You have an economic model and you have a political model, right? The economic model that’s worked for centuries, as far as we can tell, is capitalism, and the political model that’s worked in scale is democracy.

Right, yes. Often well together.

Often well when they’re both combined is where you have these amazing outcomes like America. Now, the problem is that a bunch of these things are decaying. In fact, now we see both are decaying, and capitalists, I think, have a very important job to do, which is they vote with their money about what they want to exist in the future. And when they vote for rockets, SpaceX exists, and when they vote for other things that are not nearly as interesting as rockets, then those things can exist, right?

The way that we do our jobs, though, as capitalists, despite now all of the complexity that you have to deal with, hasn’t changed. So if you think about the thousands of years leading up to 19, maybe, 85, you had mostly dudes making decisions with the sum total of a pencil, a piece of paper, and some combination of an abacus or a calculator.

So not very much information.

And so now — not to take anything away from how decisions were made back then, but an investor or a capitalist could actually do their job because the complexity of the businesses and the things that they had to figure out was actually not that meaningful, okay. These things weren’t dynamic, they weren’t changing. Then somewhere in 1985 the whole world changed, and capitalism completely changed, and the reason was because of this weird little tool called Excel.

And if you really think about the advent of the mortgage industry, the savings and loan industry, then the savings and loan crisis, then the great financial crisis, the boom in hedge funds, the boom in private equity, what is that? Well, what that was was a migration from a person to teams of people, and from paper and pencil and a calculator to Excel.

To a real computer. Right.

And the way that I think about it is, well, that was fine for the last 30 to 40 years, but now things are even more complicated. How do you Excel your way to understanding, for example, of a company like Tesla? It’s impossible. You have to have a more profound operational sense of what they’re doing, and you have to look at fundamentally leading indicators. And when you boil things down to a cell and try to get a numerical answer to really dynamic companies, you tend to have bad outcomes.

So how do you determine it?

So my perspective is, our job is increasingly more important because at the same time as companies are more dynamic, the other side of our equation, the governance model, is breaking, right? So we actually have an even more important job to do. If the government is not gonna fix health care, we need to fix it. If they’re not gonna fix education, we need to do it. So how do you do it?

My perspective is, instead of teams of financial analysts, you now have to have teams of really skilled operators. People who have built companies, and instead of using Excel, you have to use the thing that other great companies use to build great outcomes, which is really now software, data science, machinery.

Right.

And so, my whole orientation about our organization is one where I’m asking ourselves, okay, the next generation great financial services organization, the next great form of capitalism, will be folks like myself and Tony Bates and Mike Ghafari and Argen Seppi, folks that have run businesses figuring out how to put money to work, backed by a deep operational understanding of how to build companies, and that does not come ...

So you’re talking about being a company yourself, like not being here ... As I mentioned, I was just telling someone earlier that someone, I was talking to some venture capitalists and one of them called himself a seller of money.

That’s a horrible way to describe ...

Right, but that’s how it’s been. He said that’s how it’s been. But it’s not untrue, that’s what venture capitalists have been, take my money over your money, over that person’s money because I have this to offer. That’s been the way it’s been.

Yeah, and I think ...

And it’s a very good description.

And I think that historical artifact was fine for a while, but think of now what is possible. This is what I’m saying is, I guess you could continue to do your job that way, but that’s just to me so bland and lacks such courage. Because what you could otherwise be saying is the following. Okay, here’s a great entrepreneur who wants to help, who wants to go and change something in the world and do something really interesting. Here we are, as folks that have kind of been in their shoes in one point in the past.

And at the same time, not only can we give them money, but the expertise of that which is frankly the same, but now there’s something else you can give which is to say, hey, we’ve spent time deploying code, aggregating data deep inside the bowels of hundreds of companies, thousands of companies before you, and what that’s left us with are these artifacts. It’s a knowledge base that basically says when you try this, it works. When you try this, it doesn’t work, across sector, stage, geography. Now all of a sudden, you can actually give people like a list of ... literally, like a punch list of things to help make their business better, but you can only do that with software. You can only do that with machine learning and data.

There’s a great resistance to it, the idea that these ideas are so analog that they just come out of the top of your head, you know, it is a persistent ...

That’s a joke.

I know, but it is the persistent ethos of these entrepreneurs, of these great ideas that push their way, you know ...

Or it’s like, to build on what you’re saying, it’s like Steve Jobs was there dropping acid and that’s how the iPhone came to be. That’s not true, right? Or Facebook just created itself, that’s not true. It was iterated to perfection, right? I’ll give you one example. I don’t own an Apple Watch, but someone who owns the watch was telling me a story about this feature they realized, because it was publicized, where they had a way to determine that sometimes the band would cause your phone to pitch and yaw on your wrist, and they had a way of adjusting for it so that it didn’t trick your accelerometer, whatever.

The only way a feature like that ever gets to market is because it was measured. It was understood to be a problem, and then it was fixed and then they knew that people actually latently had that as an issue, so then you marketed it. That’s a data-driven process of iteration.

Sure.

So the idea that if the best companies are doing it, it’s not right for the smallest companies, to me is insanity.

Right, so you’re talking about the idea of using, giving people all these signals. Creating a venture cap that does something much different than just selling money to them. Here, I’m Chamath, I’m smart because I did that at Facebook or blank or AOL or whatever. But the pitch has always been ...

It’s a knowledge base. And it’s a knowledge base that grows independent of and outlives any current set of partners that may work at Social Capital, and that’s the key because like if you have that kind of a system, a codex, right ...

So what are we to do?

Yeah, and frankly, I don’t view my role as instrumental. I view my role as part of a process of creating that artifact, and 15 or 20 years from now, there’ll be an entire suite of employees and partners at Social Capital that then continue to build that knowledge base, and then 50 years and 100 years from now. Because the output of that will be better entrepreneurship. The odds of success go up. Your ability to now differentiate yourself goes up, and then going back to how we started, it then does the job not just of capitalism, but of governance to the extent that governance continues to be great.

So how is that different than glomming a consulting company onto a money company, like a money-giving company?

Well, I think economically, actually, it behaves the same way in the following way. This is part and parcel of a comment about what you said earlier as well. Why are VC’s reticent to do it? It’s a money game. When you have nine people running $10 billion, that’s way better than having 90 people run $10 billion because the fee income is so ginormous that you’d rather just chop it up amongst nine people.

So if you go to the entrenched establishment and say, “Hey, you know what, I think what’s in the best interest of the entrepreneur is not that you make eight million bucks a year, but instead that you hire a bunch of machine learning and data science people to help support them.” The answer is yeah, in theory that’s right, but you know what, they should do that on their own.

Right.

Okay, well the problem is ...

They can’t do it on their own, individually.

And it’s not their fault, you know why? The problem, why they can’t do it? Just in the last five years, do you know how much money has gone into Silicon Valley and China?

No, tell me.

One trillion dollars. How does one trillion dollars find a home without the following market conditions emerging: A bunch of companies getting overfunded, many who should otherwise be going out of business so that the talent can then be attracted to the winners. Now instead of like a two-year life cycle from starting to failure, now you have a four- or five- or six-year life cycle where the outcome is the same.

Right.

So any one company now, just statistically ...

Isn’t gonna make it. So they don’t care.

There’s a much lower chance of getting the talent they need to solve these problems. Whereas what I can say is you know what, that infrastructure that can help you do massive amounts of machine learning on top of massive amounts of data to drive real outcomes exists in three companies: Facebook, Google, Amazon.

It just so happens that I was at the worst case, an accidental tourist that helped build one of them, and so I can attract the same kinds of people to work with us across 50 companies.

So what does that make you now? Explain what you’re doing, you can announce right now. You’re obviously transforming this into something else, and people are watching. They’re like oh, he’s just talking, you know. They want to stay in that same old way.

In any given point in time right now, you know, we are parsing through hundreds of terabytes of data in real time, learning. Now, hundreds of terabytes of data is frankly not that much data in the grand scheme of things. But, you know, six months ago or two years ago it was a lot less, and six months and two years from now it’ll be exponentially greater.

I feel like what I felt like 2007 at Facebook, which is that we have stumbled into something here that has deep, profound value, and I think ...

Over other investors.

And I think what we do at the end of the day, the investment decision is a fundamental byproduct of learning, whereas I think investors typically think that they make investment decisions and then they learn. But when you flip it on its head, there are huge ramifications. So one is compensation, right, because you need to have all these other people, and two is hierarchy. You are now putting engineers and product managers, data scientists, machine learning, at the center of an organization, whereas the McKinsey MBA blah blah blah person is now sort of at the edge.

Or the venture capitalists, where they have these extras.

That’s where they are, normally, right?

Mm-hmm.

You put the ...

But the partners get over in debts for their talent and what they contribute.

I mean, most of these partners and most of these firms have never worked anywhere. Their historical artifacts of operational credibility are zero, they’re nonexistent. Like I said, they went to MBA school and before that they worked at some fancy investment bank or consulting firm. They don’t, haven’t done anything, right? So that’s why I think, if you have people that have done things and then you combine that with engineers and PMs and data scientists who then find insights of how to do things better, what you get is, again, is like a blueprint that you can give to an entrepreneur that says we understand what makes companies fail and win.

Right.

We understand the difference between a false positive and a false negative.

So it can be all down to data.

I’ll give you another example. You know, we have, I think, the most sophisticated understanding of network effects in the entire world. Why? Well, myself and my team help exploit to massive effect at Facebook, to a scale that’s unprecedented, and underneath that we built a lot of very nuanced ways of understanding network effects, and I put it in air quotes because it’s so overused. But I think we really do understand it.

So when we look at a business like Slack, why are we so bullish on that company? It had nothing to do with how we thought about it from a very superficial, top-down perspective. This was all about a bottoms-up understanding about how it was completely rewriting the way work was done. How we got to that ground truth was through the data, because we ...

Through some of the amazing insight you had jogging, or doing your ...

No, no. We stumbled into an insight.

Yoga, your hot yoga or something like that?

No. Although I do do that.

Yeah, I figured you would.

Yeah. No, but it was because we stumbled into something, which was we were like, “Wait a minute. This thing is being used across companies,” what we call intracompany network interests, and we see this massive growth in it and then we were able to think about how we were gonna change that business. That’s why we’re so constructive on that business.

So why do we need venture capitalists for?

You don’t.

You don’t.

You don’t.

Yes.

What you need are people with insights.

Right.

So that they can partner with these entrepreneurs, and it just so happens that typically if you are like a “BI” company, you’d force the company to pay you. In this weird twist of fate, what we do is we take all of our insights and we pay the company to be able to give it to them.

Right.

It’s even better.

Right, right. You give them money and they ...

So that’s what we’re building, Kara. That’s what ...

So what do you call it? What are you calling it, then? Because it’s not a venture cap.

It’s like a modern Berkshire Hathaway, meaning ... What is Berkshire, right? Berkshire has the ability to come to an entrepreneur and say, “We will be with you through thick and thin, we have a massive balance sheet, we’ll start ... whenever we start and we’ll never sell.”

Similarly for us, we have a version of that which is, we do seed, venture, growth, we do equity, we can do debt, we do private, we do public. But the most important thing is, once we’ve made a decision to be beside you, we will never go away. We will deploy code, we will deploy people, we will help you every day understand your business better. We will find things and as we find things we will help you exploit those things so that you are building an edge.

So, “You didn’t know this, but let us give you this insight.”

Exactly.

So is that venture cap? What is that?

I think it’s ...

You think that’s what venture has to be going for.

Yeah, and I think the reason is that that is what modern capitalism should be, which is about learning. Because again, the historical artifact beyond putting investing before learning, that we want to rewire, is also what you want to rewire is the psychological bias of investing. So when you do that, what are you gonna do? You’re gonna invest based on pattern recognition. Well, what is the negative byproduct of that?

Dudes.

Dudes, people that don’t look like they could be entrepreneurs, business models that look like they can’t work, all of these things that psychologically tell you to say no should absolutely be a reason to say yes if you actually had ground truth insights.

Right, so they’re basing their decisions on analog. It’s analog, it’s an analog world.

And then if you do that and you allow people to divorce themselves from psychological bias, you have a more functionally complete form of capitalism.

So they’re missing a lot of talent.

Absolutely.

That’s interesting, because I was just talking to Corey. I was in Kentucky and West Virginia looking at these programs to train tech here sourcing all this other stuff last week, and one of the things that was interesting about it is I kept thinking, “Who here is the next billion dollar idea that’s utterly getting missed?” I’m sure they’re here. I’m sure there’s talent here or in a country in Africa, or ... they’re there. They’re there.

Can I build off of this?

Yes, please. I just sit there, I’m like, “I know they’re here. I don’t know who they are.”

I suspect that if you really unpacked it, right, that ... let’s use an analogy people understand. There’s always the head, the torso, the tail for anything, right? There are probably an unbelievable number of entrepreneurs in the torso and the tail, everywhere in the world, building all kinds of businesses that we think may or may not work, but that probably will work. And their ability to get escape velocity or be noticed is really impaired right now.

Absolutely.

And if there was a way to unlock it, what I suspect you would be shocked by is exactly what you said, that the complexion and the type and the ambition of these people would just blow us away.

Absolutely.

And frankly, honestly, isn’t that kinda what we need right now, just a little kind of faith in human nature and humanity? We need a little bit of that. We need not just kids in hoodies, but we need all kinds of interesting people taking the world into their own hands, fixing what’s broken, making it better. But you need a constructive form of capitalism to support them, and I think ...

Right, right. So why does this persist? Why does this, because it’s not that we’re talking about this ... because when I was, yesterday I was in Silicon Valley and I talked to a bunch of venture capitalists, I’m like, “This has to end.” The way they’re doing it, it doesn’t make any sense whatsoever.

Absolutely.

I mean, it just wasn’t intuitive, it was like in my lizard brain that this can’t continue, the way they’re making decisions. We’re talking about how they solve for these sexual harassment problems, I’m like, “The whole system has to change,” you know?

Oh, that’s a joke. That’s a joke.

We’ll get to that, but the whole system’s broken, in that regard. It’s not even broken, never was right, it just was ...

It was never right. Now, you know, you could take the stance, which I think is ...

They’ve made a lot of great companies.

That, and also that you know what, they were participants in a system and they were trained to win a game, and they’re doing that. Okay, so be it, that’s fine, but every now and then you need a couple of us that walk in there and say no, let’s lob a grenade in here, blow it up and restart it. I think this is our moment.

How are people taking that? Because they love that kind of stuff from you, Chamath.

So, engineers, product managers, designers, entrepreneurs ...

They love it.

They eat it up, and because that’s what they’re doing. They see something fundamentally broken and misaligned and they’re like, “Great, I’m gonna fix it.” And they look at us and not only am I trying to fix it, Kara, I’m literally, like, every dollar that is not nailed down, I will put into this to make this work. That’s, to me, I don’t know, I just feel really honor-bound by that and I think that other people who are going through that same struggle say it may work, it may not work, but man that takes a lot of balls and I respect that decision.

So you’re providing investment at any level, right, which usual venture firms don’t, let’s be clear for people who don’t understand it, usually they focus on one area, growth or seed or something like that, so any time you’ll be able to service up to and including the last stage investments, right?

In fact, as a public business too.

Right, as a public business, okay. Advisory in terms of data, this is what’s working, here’s the million companies we’ve looked at, here’s what happens when this ...

So as an example, I’m not gonna name these companies just for confidentiality, but you know, we deploy data scientists and machine learning folks and they’ll spend two to three days a week inside some of our best companies helping them get better every day, and this is not to take away from the work that they do, but it’s to complement that because it just gives them ...

The edge.

Yeah, it gives them a level of human capital leverage. It’s like, for example, you know, we can show up and say, “Well, here’s a gentleman that built the entire data infrastructure for Facebook. He can come in today and help you do the same thing. Here’s a person that basically designed the entire network model for Facebook and Instagram. They can help you do the following things. Here’s a person who is otherwise about to go and spend her entire life fixing a multitude of health issues in Africa who will now come and help you figure out a whole bunch of very complicated, nuanced parts of your go-to-market,” and so those kinds of resources are rare.

I think that many of the people that I get the chance to work with every day are these kinds of 10x contributors, and so our organization, I think, can be very effective operationally and it also just aligns us in the way we behave, in the way we compensate, in our values, in what our expectations are. We don’t look like a venture firm, we don’t operate like one.

What do you call yourself, by the way?

I think it’s sort of like a modern ... like a helper. I think what we are is AWS but for money.

Okay.

What did Amazon do, right? What does AWS really do? You take a very complex and necessary part of building a company, but it’s not sufficient to success, but it’s necessary.

Right, yeah, yeah.

And it’s something that you never thought you would give away to people, right. You would have to do it yourself. I remember Facebook, we were racking servers, and now the idea of racking a server just seems completely archaic.

Right, let’s move that along. Let’s move that along. So what happened?

I would like to do that for the flow of capital. An organization says, you know, there’s an infrastructure that I can plug into that allows them to understand us and gives us deep insights on how to improve, it’s built on top of a knowledge base where the entire system gets better as more companies participate. And along the way, they can now give us differentiated capital.

By the way, here’s why it’s even better for the entrepreneur. Our cost of capital now becomes cheaper, because we more profoundly understand the business, so typical series B is like, “I’ll invest $15 million at a hundred post.” Well, I could invest $15 million in a hundred pre. That’s better for you. Or if you can do a combination of debt and equity, that’s even better for you. So for the entrepreneur, it’s like you get insights and then you get more ownership. It’s kinda a win-win.

Do you have to be their partner at all times? A lot of them don’t want necessarily partners.

No, and in fact, our goal is, there is two kinds of influence that happens in a company. One is sort of the, what happens at the board level and what happens operationally. We’re happy to engage as deeply as they want, if they don’t want our help we won’t. If they want us to disengage, if they want us to reengage, we’re very flexible.

You’ll provide them anything.

It’s just, those resources that we think are really the critical ground truth people that matter, and then we complement them with boards because the earliest stages, it’s a very emotionally fragile relationship when you’re trying to get a company to product market fit, and so we want to support infrastructure there, but we’re also very happy with you finding an independent, finding somebody else because as long as that ground truth exists, we can empower a lot of different kinds of people that you feel comfortable with to govern inside of the house.

But you’re not like those ... remember a couple of years, many years ago, there was all that incubator, remember the incubators, remember Bill ...

Bill Gross.

Bill Gross, yeah, he had a station for PR, that’s not what you’re talking about.

That’s not what we do.

Who would that ... I used to call them incinerators. Who were they?

The historical fact is, you’re right.

You know what I mean? But they had signs, like here’s PR, now move over. Like you were getting a salad, it was crazy and I ...

No, for us it’s more like hey, you know, here are these 15 A/B tests we think you should run and if you want us to, we can run them for you and actually tell you how you do.

It’s not exactly that.

Here’s a huge pricing elasticity framework. Or you know what, can we inject some JavaScript so that we can, across five of our companies, figure out how much overlap there is in lead generation? Why would you spend money on Google and Facebook if we could tell you 30 percent of those leads, we could just give you for free.

Are a waste of time, right, or a waste of time. All right. We’re gonna get into the idea of what happens, then, for venture capitalists. I hope they all go away, in my opinion, but it’ll be interesting to see what happens to them for sure. We’re here with Chamath Palihapitiya, I think you’re just Chamath from now on. I think you’re like Beyonce. I feel like you’ve become that in a lot of ways.

I think she’s amazing.

She is amazing. Anyway, when we get back we’ll be talking about that and more, Chamath.

Did you see her latest set of pictures on Instagram?

No, I did not.

She’s incredible.

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So you were just saying about changing what you’re doing at Social Capital is different, and you’re not a venture capital firm really though you make investments, the way you were describing it I think was perfect. You provide money but also information and all kinds of other services. Using data sciences.

So what’s happening in the venture situation in Silicon Valley? It’s like rocked by sexual harassment scandals, which is one end of the spectrum. Criticized for lack of diversity, which this seems to solve, or is a step in that direction, the way they make decisions, who they invest in, who they get as partners. What is happening and what do you think has to happen? When you look across the spectrum of things.

I think there is a huge rude awakening that’s going to exist in the venture landscape, and it goes along the following lines. Most of the practitioners, exactly as you said, I think are dated both in their philosophy, their framework and their capability, right? These are people that grew up in a different time where the social signaling of where they went to school mattered enough where they could get these prestigious, “prestigious,” jobs. The problem is that it’s not a prestigious job, it’s a critical job, and so the people who get prestige versus the people that get criticality are very different kinds of people.

The rude awakening is going to be the following, which is that when you look across the venture landscape you have a bunch of people who are, frankly, ill-suited to do what they’re doing, and so as a result they feed off historical bias, they kinda focus on the things that they know the best, which will result ultimately in a bunch of marginal investments.

Right, most of which will go nowhere.

Most of which will go nowhere. At the same time, what happens is the public markets provides the investor, in this case the LP, a very reasonable way of actually getting almost the same return, if not in many cases an equivalent and better return. And so now, the LP in these funds have to ask the following question: well, I can lock up money for what is effectively ...

Nine years.

... 10, 12 years now because these companies take longer to gestate, and get basically the same return I can for being in a highly liquid public market security. So from any sort of logical risk-based assessment for a limited partner, I think what happens is there will be a culling. And any of these folks that can’t have differentiated returns, you are not going to take on the risk of being illiquid, especially if you think about in a world that is probably going to become more complex, more dynamic, less stable, you want to have massive amounts of liquidity because you don’t know when the dislocation is going to happen. In a world like that, I think all of these kinda middling, also-ran firms go away.

Right, the $200 million firms or even the higher?

No, I think it’s irrespective of AUM, it’s just folks whose approach is just sort of dated and not current.

Right. “Come to our office, enjoy our khakis.”

You know, we’re nine people, we’re gonna try to raise the next fund, we’re gonna chop it up amongst ourselves, it’s about us and we make the best decisions we can. Which again is okay, but again I think LPs really start to push back. Separately what happens is you’re going to have different folks who have different approaches.

I suspect, actually, the most disruptive entrant into the venture capital landscape can probably be Google, Microsoft and Amazon. Why? Because most of the businesses are built on top of them and so it doesn’t take much logic to actually view a world where Amazon’s like, well, I’m renting you the computer, I’m renting you the storage, I’m renting you the algorithms, I’m renting you all of the stuff, oh, just give you some money along the way as well. And they do that with credits, but they don’t really take it to the next level. That’s something across ...

And that’s something, that’s not corporate venture capital. No.

No, this would be like, it’s almost like a function of Amazon.

Because they would buy these companies anyway.

It’s a function of the U.S. This should just be a thing in the marketplace. Here’s your cost of capital, and there’s probably a place on a website you can go to where every third-party seller on Amazon can understand his or her quality, you know, how are they relative to all the other sellers on Amazon, which is probably how Amazon decides how to lend to them.

So it’s not an artisanal business.

By the way, Amazon has lent billions of dollars to these companies. So, what’s the difference between them and a venture capitalist? Nothing.

Right.

Except they do it systematically, quantitatively, unemotionally.

Right.

Right? And so then, as a result they get a lot more people in the game. So my whole point of view here is that in the next five to 10 years, all of that comes home to roost. Massive balance sheets, Amazon, Facebook, Google ...

Apple.

Microsoft, potentially Apple, all the Chinese big internet companies, folks like us who are providing key insight based on some amount of proprietary data, whether it’s gleaned from AWS or it’s gleaned from server logs that you practically give to an investor, and then everybody who isn’t that, the LPs say, “Well wait, you have an undifferentiated product which then forces you to invest in the marginal outcomes, which now ties up my money for a shitty return, relative to what I can get in the public markets,” and so that’s what happens to venture capitalists.

Right. Right, and then they go ... because treated artisanally there’s a special sauce they bring, if you have this particular venture cap ...

Awesome joke. It’s a total joke.

They do sell it well.

Hindsight bias and navel-gazing bullshit.

So, how come it worked for so long?

Because there was never any competition, and now there is. And also, there was never supposed to be a guy like me with a couple billion dollars. That’s just not supposed to happen. Because that’s the last thing they want, is some loudmouthed kid with a lot of money who frankly is gonna build whatever he wants to build and enough, I’m not saying I have a lot, but enough credibility to get enough critical people to get it past that existential product market-fit phase, which we are.

And then what happens is, all these investors who otherwise, they were not sure I was a cultural fit for, I wasn’t sure they were a cultural fit for, they all capitulate.

So it’s a little like, I’m thinking “Moneyball” or whatever when he came in and started doing data, rather than the gut of the people that watch people on ...

What’s the quote? It’s like, it was a Billie Bean quote like, “We’re not hiring these guys to help them fill out their jeans, we’re hiring them for a bunch of statistical things.”

Why does that whole gut thing persist?

I think now that is more of a physiological bias of men, which is that ...

“I knew this guy.”

There is just a need to act with bravado, especially when you have power. I think men treat power very differently, frankly, than women do, and I think men have a very hierarchal way in which they impose power, so it’s kinda hard power and I think they love the bravado of that idea of, “Oh, my gut told me.”

I do believe that your limbic system is a very powerful ...

Zuckerberg kid, “I knew it at the time.”

But it’s like, the idea that you just knew it at the time ...

It’s a good story.

Come on, it sounds cute. Nobody knew, you know.

So speaking of that, it leads to bad outcomes such as what’s going on with the sexual harassment stuff. How do you solve that? Do they just need to go away, like dinosaurs or what?

I think that there’s a couple things. One is like, when these things happen ... so I actually think, well I don’t know. I hope that this first wave of the obvious stuff, I mean, this is a terrible way to describe it, but low-hanging fruit of sexual harassment, maybe we’ve dealt with that. Here’s what’s much more insidious that we now have to ...

Down on the other end.

It’s all of the conscious and unconscious bias. It’s all the little snide remarks, it’s all the ways people are included and excluded.

Yeah, I agree.

That’s the stuff that’s super corrosive, and so how do you overcome that? Well, one is you have to have people that give a shit and when you see it, you root it out fast. And you act decisively. It does not matter how important that person is, how they’ve behaved in the past, how much money they’ve made you, you put them on ice and you put them on a path to get better or you kick him out. Period, end of story. No. 1.

No. 2 is then on the other side of that, you have to have a support infrastructure that creates a different way of giving these people an outlet so that they feel supported. So for example, there are so many great people in YPO, but there’s so many great people who don’t believe that’s a great fit for them, right? So do we need other forms of that? Absolutely. Should they be by definition more inclusive? Absolutely. Should they include people that are not necessarily CEOs so you get a more inclusive group? Absolutely. These are obvious things, right?

And so if you have that, you have the mechanism now to actually support people, and then you have a mechanism to teach people, and then separately, when you find these small edge cases, it’s just so easy to let it go. The way that somebody says something, the way that somebody does something, and we all do it. And the question is, can we all now become a little bit more empathetic and say, “You know what? We’re all gonna find ourselves where against something or somebody or some group of people, we all have and carry a latent bias.”

Yeah, absolutely.

Well, somebody else thoughtfully and say, "”isten, just FYI, blah blah blah,” and then you learn, and then in the same way you repay that favor, in a way that’s non-threatening.

Right. What’s interesting is they’ve become real hot-button issues, like look what’s happening at Google with James Damore, who keeps saying one appalling thing after the next every time he’s interviewed.

So you can tell me if this is true and I’m not completely up to speed on this, I didn’t read it, but my understanding is that he was part of a group where Google actually asked him to write this thing. Is that true?

No.

Okay.

Not that I understand.

You know, this reminds me of ...

No, because Google’s been one of these places where people just get to say what they want all the time. I mean, I’ve been in meetings where they discuss Sergei’s shirt and insult it, so it ... that was early.

This reminds me of when at Facebook, I took four months off and I wrote my unified theory of relativity and no one read it. Actually, sorry, that didn’t happen because I was fucking working.

So you know, part of this is like, if I want to understand the views of social psychology ...

Where’s your memo, Chamath? You’re a walking memo?

I mean, Jesus Christ, I’m working.

I know. I get it. I know. But they have like nine places for people to do this stuff at Google. They do.

It’s pretty nutty.

They get to say whatever they want, at any time they want, and now they’re used to it and when you actually say, “Oh by the way, you can be fired for some of it,” they get real mad.

Yeah, to be honest, I have less of an issue with you saying it. It’s just kinda like, where’s the operational control so that you can just bumble around for months working on some branded memo? Aren’t you supposed to be hard to be an engineer in code? Fucking code.

Yeah, well, they don’t think of jobs as jobs, do they? Jobs are on the side, that’s ...

Do you know how many people would want that job?

Yep. No, I get it.

Do code?

I get it.

Code. Then code. Then write it on your spare time.

Really, it’s very interesting, but how many people came to his defense about that was interesting. And I was sort of like, you can say that on the corner, on Charleston Road, but not right inside of Google. It was interesting. It was an interesting thing, how much the board he did have until he went sort of alt-right and then it went off the rails.

I think all these people should ... we should all be doing our jobs.

Shut up, right, yeah.

Just fucking get better. I mean, I just have no tolerance for this guy.

Yeah, they fired him, that’s all. Yeah. Yeah.

So, is that like a product of excess in Silicon Valley, now, is that they get to do whatever they want, they’re not doing their ...

I’ve always equated what I call alignment to a tree, right? Alignment in a company is like rings of a tree. So if you cut down a huge redwood, what you notice is there’s many thousands of rings, and that pretty much it sorta embodies how a company works, which is we’re at the center. You have the founders and the core hundred or 200 zealots and they are 100 percent aligned, right? And when you think about that original group at Google, what a master class of technical, just I mean ...

Yep, absolutely.

Unbelievable. Facebook, same situation. Unbelievable.

There’s still there, a lot of them, yeah.

But then as you hire more and more people, you basically have less and less aligned people, and then that thousandth ring, which is your 75th thousandth employee, they’re at best 10 percent or 20 percent aligned. What that speaks to is the fact that you just have really a very difficult way of having operational control over values and culture at scale. That’s really what it speaks to.

And so, you start things. For example, the 20 percent time, what’s probably for George, Harry, who if anybody knows, is an absolute genius.

Yes, fantastic.

He is a superstar of superstars.

Look at him go.

It probably was like where George was like, “You know, one day a week I’m gonna code this other thing that also changed the world for Google.” But, by the 75th thousand employee, 20 percent time it’s kinda like, “Oh, you know, I’m gonna write memos. I’m gonna build ...” So I think there’s a decay that just naturally happens in organizations, and it just takes a very special kind of discipline and focus to want to fix it.

Right.

And I think that’s what it really speaks to in the Valley, which is that at the end of the day once these businesses become commercial enterprises, they’re like every other business. They effectively do decay, which is what causes them to eventually be decayed.

Sure. But when you’re talking about what you’re sorta trying to disrupt — I don’t want to use the word disrupt — just to change the venture industry, how do you then disrupt this culture? Because it seems that a lot of this stuff is happening because they don’t have anything else to do, it’s just go to lunch and harass a woman, essentially.

Well, one of the things that we really believe strongly in is the power of entrepreneurs outside of Silicon Valley. So everything that happens here is magical, and we’re all lucky to kinda be a part of it, but the reality is the people that are not here tend to be dramatically more earnest and open-minded than the people that are here, because after some number of years of being in, being grist in this mill, you become jaded.

Yeah. You live in Westeros.

Yeah, exactly. Every startup looks great.

Or the capital.

I’ve heard of every mission statement possible, you become fatigued, right? And you become a little cynical, and so one of the things that we do is we try to go outside. Because you can find all these really interesting people and if you can celebrate them, and there’s ways in which we can do that, which would be really interesting at some point to talk to you about, but that’s some special stuff that I think we ...

You’ve brought in. We explained who you brought in, Marc and ...

And separately, what we do is internally within our organization, we really try to gut check who’s at the table. And so what does that mean? For us, we love operators, we love folks that have kinda been in the grind doing stuff. We also love folks who have warts, who have gone through, they have lashes on their backs. It didn’t all work, right? And so you learn things from them, they have a certain kind of humility about them that’s really helpful, and then they’re more open-minded about the types of people that they’re willing to coach and mentor. And then you have a different class of young people that you can bring in and bring into the organization.

You know, we just hired this amazing data scientist. Her name is Kelly Jiang, and she was at Stanford, she was graduating, and she kinda had her pick of jobs and she was gonna go back and do a lot of nonprofit work in Africa, and she had done some amazing work, and she’s a data scientist, a star. And we were able to convince her, give us a shot, and what we’ll be able to do is you’ll be able to come and again help build this knowledge base that helps all kinds of entrepreneurs, including these entrepreneurs in Africa. But in order for her to be successful here, we had to onboard her in the right way, we had to give her the right mentor, we had to give her the right visibility. That’s tough to do.

No, it’s ... keeping people is really, it’s not bringing them in, it’s keeping them.

It’s tough to do, and I have found that having other operators who have gone through this process empathize with that struggle and then they take more care and they’re willing to make sacrifices so that at the edges, me, Tony Bates, Marc Mezvinsky, you know, Mike Ghafari, Argent Seffi, if we had to make sacrifices and compensation to bring somebody in, I think we all would have wanted to do this. And I just think that’s, just to know that. It’s not we’re never going to have to do it, but to know it, it’s like okay, what else will they do that I can count on them to do? One of them is mentorship, guidance. So we as an organization are actually pretty cool. We’re good people.

If you do say so yourself.

I think we really are. And also, we check ourselves. When shit goes south or there’s behaviors that we don’t like, we get together, we talk about it and we fix it. And that’s also hard. We do these all-hands and it’s just like, they’re complicated because we get into these deeply nuanced decisions. For example, hard decisions are really important because the knock on effects are huge. Oh well, here’s this great business and we decided that after it went from great to not so great, and we tried our best and couldn’t support it. What do we do in these situations? These are complex things and we have to explain to our team why, right?

The why of how you make these decisions is critical. So there’s all these things that go into building a good organization. We try to do the best we can internally, and then separately we try to go outside of Silicon Valley to find these entrepreneurs we can celebrate.

So why isn’t that happening in Silicon Valley? Because it does feel like there’s a danger of sort of, it’s like eating its tail at this point.

I think it’s ... like I said, it’s easier if you are five, six, seven, eight, nine guys sitting around a table making millions of dollars a year to not fuck with what’s working. And really, think about it in the following way, Kara. If you were an ad sales person back in the early 2000s, you could probably see that your ad sales job was probably going to get impacted by Google, and then ultimately Facebook, etc., etc. Let’s just say you were selling the Yellow Pages.

But the way you make your decision about your career is like the following, I suspect, which is ... Well listen, my kids are in like grade eight, grade nine. I’ve got five or six more years, I still think the industry’s going to be reasonable by then. I’ll get to where I need to be and I don’t really have to contemplate change and I can kinda live the lifestyle I want for the rest of my life, pay for my kids to go to college. There’s all of these other things that come into decision making.

A version of that, although a much higher-class problem, exists among these VCs, which is why they just don’t need to. They’re going to bide their time, and then they’re gonna get ...

They’re gonna ...

Their firms will blow up.

Yeah, I think about that, Hollywood, a lot. Like, why isn’t Hollywood changing?

Hollywood is the perfect example, right? You had a bunch of people, unbelievably ego-driven, ego-ridden, ego-filled, right? Power brokers, power mongers, betrayers, cajolers, all of these people sitting on top of what really wasn’t a huge industry. Kind of a meh industry, but it had a lot of social capital, right, to be a producer meant something. And then here you have this company of a few hundred people, not a few thousand people, who were like yeah, I’m just gonna charge eight bucks a month and I’m just gonna completely fucking blow it up. And so when it happens, it happens fast. And maybe we’re the version of the eight dollars a month.

Right, this is Netflix, right?

Yeah, Netflix.

I remember when I kept saying it, but over here, and then I realized they liked wearing their suits and their cars. They just liked it, and they weren’t going to change anything.

Parking spots with their names on it.

They’re just gonna tap out, and I realized oh my god, they are, they have like eight years left, they probably will just, there’s no reason for them to change.

No, ego’s a very kind of ... ego’s a very powerful thing, right? It can empower you to do things, but ego’s a very corrosive thing, which is that it can entrench you in a set of decisions that fundamentally are about outsider’s perceptions of you versus your true-north internalization.

Right. Or if you want to do much or maybe you’re just lazy.

All right, we’re here with Chamath, CEO of Social Capital. We’re talking about all kinds of things. When we get back, we’re gonna talk about all the companies, we’re gonna dish on all the companies, you ready to go?

Yum.

Yum. Okay.

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We’re here with the Chamath, the CEO of Social Capital. So we’ve been talking about a lot of different things, how venture’s gonna change and people’s behaviors, but let’s go through some companies, because you like that. You love that.

Yeah, yeah.

Last time we focused on Twitter. Let’s just quick: Twitter. What is going on there?

It’s unfortunately now past a point of interest, and what I mean by that is ...

Never been more relevant, though. Everyone’s using it, everyone, Charlottesville communicated on Twitter. The president uses it all the time.

Its biggest problem right now is the decay in human capital that’s happening within that organization. There are just too many other interesting good companies that one can go work at if you are a very credible, talented contributor at Twitter, and the problem is in the absence of them completely kind of figuring out their true northern star metric, the next version of product market fit, it’s a thing that just kinda stagnates and decays. So product engineering talent, and eventually that seeps into the quality of the business.

Right. So what happens?

It does not make sense, with respect to how you could do either a take private or a hostile, yet. I think the stock price needs to get to sort of the 11 to 12 dollar-ish range ...

To go pro.

And I think you need to have one or two of the existing large shareholders, so what that really means is institutional and/or Steve Dahmer, basically, decide that they want to participate in a strategy to fix it. Is it fixable? Absolutely. Would it be a fun thing to do? Absolutely. Would it be valuable for the world? Absolutely. Could you make a lot of money? Absolutely. But I think it requires day-to-day full-time leadership and a vision, and it’s probably best in my opinion it comes from the outside in, at this point.

So private, most people thing.

You have to take it private. I think, yeah.

Yep, I think so. But never more relevant, fascinating.

Yeah. In terms of information consumption, I think it’s great. I think from a product perspective, it is now one generation behind the times.

Absolutely, at least.

This summer, I really started to get into Stories for the first time, mostly because of Instagram brilliantly merchandised it to me, and then I would switch back and forth between it and Snap, just to kinda really figure out the use case. And what I realize, it’s just completely changing information consumption.

So the thing that Twitter has to be careful of is all of those users are also probably Twitter users, and it’s not that complicated for you to have one or two turns of the dial, and I think Discover on Snapchat shows you what that looks like, where a more visually interactive, snackable form of Twitter becomes the way.

Absolutely. They tried. They were first out the gate with their Moments.

Yeah, moments was not ... it was ...

Yeah, but it was right directionally, it was correct.

No, because it was too curated.

Too curated.

Yeah.

So it should have been more like ...

Bottoms Up.

Bottoms Up.

All right, Snap. Seeing some troubles in their IPO?

So here’s where I think Snap really ... it got bamboozled, I think, by the IPO bankers into a really farkakte idea process.

I love bamboozle and farkakte in one sentence.

Thank you.

Okay.

And the reason is because, what Morgan Stanley did in my opinion is unconscionable, which is like when you spend weeks with a management team and then you come out, right, you generate a model and you put a price target, and then you take them out public. You had the most access to that company that anybody in the world, and you put a price target on it, 28, 29 bucks a share, and then they miss earnings by $4 million and then you’re like, “We made a mistake,” and then the price target is 16, and then it trades another 15 to 20 percent boom with that price. And now I think, you know, so that to me is just, I just can’t.

They knew.

I just, I feel bad for the company. So where otherwise what they should be left to be doing, because whatever you say about that company, they have created ...

Innovation, for sure.

An unbelievable awareness and understanding of how to consume information, and they’re gonna continue to push that. Now whether that means that they’ll never really get a moat, because Facebook copies it, that’s less of my concern. My concern more is like, how does it tax the creativity of those people.

Right, can they come up and hit at it.

That they have to deal with this kind of distraction. So I think the biggest takeaway to me from Snap is that the fundamental process of getting public needs to be completely fixed because it is corrupted.

Yeah, I’d agree with you on that.

But I think it’s a really interesting business that has some great assets. I would love to get into the bowels of that company and really figure out how to make it grow. I think we could do some pretty cool things. I’ve never met Evan, so I can’t even say I’ve had the conversation, but ...

Can they fight off the Facebook moat?

I mean, if we help them then we can easily ...

Chamath is offering you services, Evan. But you feel like that’s what will happen, or now that they’re just stuck in this position of being public and having to be distracted by that part?

So I think the whole equity story now is a distraction that they have to overcome; meanwhile, they have to land the next great product iteration.

Yeah, but how many hits can you have, right?

I mean, they’ve proven pretty resilient.

Yeah, they are. They really are.

And he seems at least on the outside in, a pretty thoughtful, creative person.

Mm-hmm.

My only hope for them is A) they get more quantitative and data driven because I think it could help at the edges, and then B) that they can figure out a narrative so that the public equity part of their story kind of doesn’t distract them from being creative.

Doesn’t distract them from getting into the Twitter position, yeah. Away from the data thing, there is an element of creativity. You’re talking with Beyonce, there’s a creativity that is deep within that company, it seems like.

Yeah, I mean, listen ...

That you can’t do a data thing about. You can and you can’t, you’re right. I see your, I know what you mean.

I mean, look, I’ll tell you some stories that are kinda crazy, but some of the most creative people in the world literally, I’m not gonna say who he is but he’s an unbelievably well-known comedian who has landed some of the most interesting content of the last 10 years. A/B tests everything.

Everything.

And this is a person who does it manually. He manually A/B tests five to 10,000 jokes and skits, and not just the jokes themselves, the timing. How he lands it. And when you see it up close, you think that this guy just woke up and was just funny.

Woke up and just a font of creativity.

Font, and they are creative because to come up with the 10,000 scenarios takes true creativity. But to really understand the psychological reaction of a consumer to it, that is what you test. It’s like Apple can create a beautiful watch, but to realize that the thing shuffles around on your wrist and to adjust for the yaw is quantitative.

Yeah, absolutely. You’re right. Quantitative.

Okay, so going from Snap: Facebook? Your old stomping grounds.

Unstoppable. I think the thing that Facebook and Google will both have to contend with is regulatory headwinds, specifically starting in Europe.

I agree.

At the end of the day, what both of those two companies are ...

Amazon, too.

Less so. And I can tell you why.

All right.

Facebook and Google more than anything else now are a psychological map of humanity. Your behaviors, your patterns, what you do, what you say, where you go, and to have that amount of knowledge that can be learned on concentrated in two for-profit companies can be in the eyes of governments extremely scary. And so at scale this becomes a huge issue as people realize the actual scope and scale of their ability to predict your behavior. So I’ll just leave it at that.

But I’ve thought really deeply about this issue, and that is the government. It’s government intervention for both of those two businesses, starting in Europe.

Starting in Europe and moving here. Somewhere.

It moves from there quite quickly.

Right.

Amazon is different because their fundamental market is dramatically more tam-unconstrained than Facebook and Google. The thing with Facebook and Google ultimately is that Facebook is basically about consumption and advertising, and Google is about intent in advertising. Those two are bounded markets that are in the mid hundreds of billions. Big markets, okay.

Amazon at scale is fundamentally about consumption, which is effectively GDP. And that’s, really you’re talking global GDP is what, 80 trillion? Amazon is 100 billion. It’s literally a drop in the bucket, it’s an irrelevant company in that context. Whereas Google and Facebook are more than 50 to 60 percent of their market.

I’m thinking more, you know, I always think, we’ll talk about Trump in a second, Donald [Trump] has a lizard brain of understanding where things are going and he’s attacking himself for the wrong reasons. I think you’ll see a lot more attacks on them because of job loss around retail, replacing companies, I think there’ll be a lot of attacks by their competitors that are more ...

And it’s even more incumbent on Amazon to figure out how they add capital also as a service to their offerings.

Right, right.

Because if they can then also say on the other side of ...

We’re helping create jobs.

The degradation of retail, exactly. They’re a front for entrepreneurship, they’ve solved the problems.

Yeah, I know. They’re gonna, you’re gonna have to see warm fuzzy Jeff Bezos over there.

They’re gonna have to be very creative. But I just think that the ...

I think they’re easy to attack, but ...

They’re easy to attack, exactly, but the regulatory headwinds, structural headwinds to them ...

No, but they’re easy to attack and they get mired in that for the longest time. Again, I always feel ... [Trump] really does have a sense of how you could make that narrative around Amazon. Ruining Main Street, ruining Walmart, ruining ...

He’s trying.

Yeah, I know, but it’s ... he’s aiming at the Washington Post, which is not the point.

Which is not the point.

Yeah. The death of retail jobs is really, that’s Amazon. Most people feel like he’s like ...

It is just, look, I took a lot of flack, there was a lot of emotional sturm und drang amongst my coworkers at Facebook because I tweeted it out, and I probably shouldn’t have done it, but you know. I think it was in 2013 or 14 I basically moved most of my equity holdings in Facebook into Amazon and I did it mostly because I felt too emotionally linked to Facebook, I felt I could not make good decisions. But also when I looked across the landscape and I spent almost a year and a half, two years trying to figure out where I could, what I could own, it to me is just the most unbelievably, profoundly interesting company in terms of the scope of data, what they’re learning, and the ability to fulfill it and to do it.

And again, you bring up very good points, but I still think fundamentally where they will get massive more runway. They’ll be much, much bigger before they get the level of scrutiny that Facebook and Google will.

Mm-hmm.

And so I’m just a huge bull on the company. I’m also a huge bull on the culture. And I think that again, all I have is my perception of what it’s like on the outside in, but it seems to be a place that is willing to fail because failing equals learning, and I really respect that.

Phone, remember the phone?

Oh, my gosh. Yes.

And then he came out with ...

We talk about that all the time. Our job is to learn, but you know what? That’s like kind of like, meh. What is it? It’s like hey, you failed, this fucking sucks. I suck, I want to quit, and it’s like no no no, you learn, and he’s like shut up. I mean, it’s hard to really live it out.

Facebook recovered from its phone, which you were involved in, right? Amazon went right on and did Alexa. Why didn’t Google and Apple do that, I mean really?

I mean, I’ve said this before but that was a period ... okay, again, now I’m saying the counterfacts on what I said. For me, a personal creativity that I was the most proud of, the ideas that I was kinda cooking up, most of them were utterly cockamamie, but it was a great time. I wish Facebook had a phone, I think it would have really been great.

So what are the products all those companies should focus in on? VR? AR? They’re in VR, but I mean, I think Apple’s gonna move head-on into AR.

I actually think the manifestations, the things they’re gonna do about machine learning are probably much more profound and important than any of that stuff.

Right. I agree.

I mean, that stuff is kinda like interesting, it’s kinda cute.

It’ll also be able to help other businesses if they do that.

In a way, I think we materially misunderstand ...

No, I think that’s exactly what they’re gonna do. Take it and AWS it.

And again, you’re changing deterministic software, right? If this then that, do this. While this happens, perform this thing. And you’re replacing with, huh it could be this, huh it could be that. Huh, kinda do this. Huh, probably this.

There’s a lot more than that.

You know?

When did you become an old Jewish man?

I’ve always been that.

I feel that.

It just comes in a ...

Cockamamie, oy, my colon is killing me.

All right, speaking of colons killing me, Uber. Come on, Chamath. What the hell. Are you the new CEO? That would be fun.

You know, I think there isn’t just, there is an obvious person that should be CEO of that company. She’s not gonna take it, she said she doesn’t want it, that’s okay.

Who’s that?

I mean, I think you can guess.

Sheryl.

I didn’t say it. I think she would ...

She’s not gonna do it. Sometimes she trolls me, she’s like, “I’ve just taken the job of Uber CEO,” just to troll me.

I think she would just be such a slam dunk blockbuster.

Why would she do that? Why would she waste her beautiful reputation on that?

Because it’s a really important company.

Yeah, she doesn’t ... yeah. She can work anywhere she wants. She can sit there and make triple the money.

Yeah, you’re right. But I think from an impact perspective, I think Uber can be really credible. If you think that whoever becomes CEO will immediately become the largest employer in the United States, wow. That’s a big statement. Second thing is that they become an enabler of GDP and commerce and vitality for lower- and middle-income people than anything else the government could ever do. Wow. That’s an amazing thing.

And the third is, you save lives and you can really create something special in a world where autonomy happens.

I hadn’t thought about it like that. That’s actually true.

Those three things, those to me are, those are presidential pillars.

So who should be the CEO, besides Sheryl? She’s not doing it.

The current course on speed is Jeff Immelt, and I don’t know him from a hole in the ground so I have no idea. I would want someone who was dynamic and entrepreneurial, and the reason is because this company’s best days are not yet at hand, and I think that it needs a combination of a steady hand, but real stewardship and creativity.

So why not Travis 2.0? That’s what he talks about.

I think the history will always ask the question, should he have cured ... what we don’t know, Kara, though, is what was in the report and what really went down. And by the way, that’s a little shocking thing where I just thought that whole Holder report, it would be in your hands, hot.

I’m waiting, listen. They’re holding onto that, I’m trying. I’ll get it, you know I’ll get it.

It must be bad, just really bad.

That’s what I ... I’ve had parts read to me.

And let me just defend the partners at Benchmark. I know them all, I’ve worked with one, I’m very close with another. These are good people, they are not there to get in the muck and mire of this. So clearly, there’s just an entire story that none of us know.

I agree, that’s what I wrote about. There’s the real story, that something is not ...

And eventually we’ll get a ...

Parts of it have gotten out, through us and others.

But I think it all kinda ... all roads lead back to that Holder report, is my suspicion.

What did you think about the lawsuit? A lot of people are slapping Benchmark for that, for doing that. And I keep thinking, what must they have seen that they had to do it?

That’s what I’m saying. This is what I’m saying.

They wouldn’t do it on their own, if you know them at all.

Why, you know?

Yeah, I know. They’re not jumpy like that.

They’re not, and they’re kind of in it for the long term, and they’re great with the companies that they work with and they’re unbelievably supportive and they tend to be quite relentless.

And they’ve managed to make Travis look like a victim, which is something fresh.

Of the whole generation of VCs, to me they’re the ones that I frankly respect the most. I think they’re the most credible. So it is beyond shocking that it happened, which means that it must be really bad.

Right, so do you think they’re gonna be affected by having done the lawsuit?

Yeah.

And they still did it. That’s to me, what happened?

Well, then you get into the game theory of does it really matter? Because if you really land Uber and make it successful and it’s a hundred billion dollar company and then you do the carry waterfall and you do all the profit redistributions and then you think about Snap and you think about rework, it may not matter what happens after this anyways, economically.

They’ll do okay.

Beyond, beyond okay. So that may not be what it’s about. It’s really then the question of, what do the ultimate, what does the ultimate impact to deal flow, and that really just depends on the founder’s psyche. Does the incremental founder think that he or she will be more or less protected, or they’ll be more or less supportive, or did they believe, “Oh, that’s the kind of objective stuff that I would want.”

Right.

It’s very much DVD ...

Or, “I’m as bad as Travis,” or, “Am I as bad as whatever happened there?”

I think the propensity will be, again, if you can get counseled by angel Investors, not the wisest, find the most benign supporter who will basically let you have run of the place. I think the right answer is actually, you want to have some intellectual tension. Not moral and ethical, but intellectual tension. That probably creates the best outcomes.

Right. For this thing.

So then the question is like, if they believe that they can still get the right intellectual tension at Benchmark but you can still be aligned, then it can’t hurt deal flow. But if enough folks are whispering in young folks’ minds, or ears rather, hey listen, there are easier ways to skin a cat here, then you will have a long-term effect.

Right. People are definitely trying.

I agree, they’re smart and so they probably went through that risk calculus and again, the fact that they still did it should mean that ... and probably, thank god that these guys are I guess from, they’re both sides going into arbitration so you’ll never, we’ll never find out unless it gets leaked to you and then you write it and then I’ll read it.

I’m trying.

But man, that’s just a ...

I’ll get my hands on it. I know, it’s juicy.

It’s delicious. What’s going on, people? Somebody leak this thing to Kara.

If you get it, send it right to me.

I mean, I’m not gonna get it. No one will ...

I was thinking of sneaking over to Arianna’s house, pretending I’m bringing cookies and then wander through and look through her things.

Oh my god.

You know it’s sitting right there on the nightstand.

Oh my god, how funny would that be? It’s like, where is it? It’s just right on her bed, and it’s got a bunch of, it’s dog tagged, dog marked, yeah.

She does take notes in margins.

Highlighted, oh my gosh. If it were that easy.

I know, wouldn’t that be good? Wouldn’t that be, I think of every way I can get my hands on it and I just, I’d love to see that. I have no idea why they did this, why they did the lawsuit.

I’m ...

But could there be Travis 2.0 coming back there?

Yeah, absolutely.

How so? What would you do to make it?

I think what you cannot take away from him is just how good he is, how dogged he is. Now, I don’t know if he’s brilliant or not, but definitely dogged. And so the real thing is, if he can refactor the parts that kinda direct that towards all the negative stuff and instead replaces it with a more constructive kind of way of behaving.

Why not?

Why not? There is clearly an institutional knowledge that he has that is fundamentally unique and then also, the ability to lead those people is just unique when you are the iconic founder. Now, it doesn’t mean that that should be what happens, but I saw this tweeted. Jeff Immelt equals Scully 2.0. I saw that tweeted, on Twitter, and I thought oh, that’s a really interesting analog. Hopefully that’s not how it plays out, because I think you would want Uber to do well.

True, but I don’t think Jobs had this much bad management under his ...

Oh now, I think it was more about commenting about ...

Yes, I get what they’re doing.

Jeff was ...

I get doing it, but Steve Jobs didn’t preside over so much bad management, all over the ... I mean, brilliance aside and all these great instincts, there’s like a list of other things.

There’s nothing Machiavellian there.

And also just bad management, how did it get to that level of toxicity? Not just gender, just everything, there’s so much toxicity everywhere. Someone’s ignoring something and needs help, but I see what you mean, because Silicon Valley’s all about redeeming, right? That’s what Arianna and I, we always argue. She’s like, “Kara, you are Old Testament. I am New Testament." I’m like, “Yeah, I’m Old Testament.”

You know, in fairness to you actually, there isn’t a lot of redemption stories in the Valley.

There aren’t. Just Jobs.

It’s not true. Just Jobs.

They always live for the Jobs one.

Just Jobs.

It’s just Jobs. Everyone else, gone.

Honestly it’s like, at some point they realize, “Oh my god, I hit the jackpot, I got unbelievably lucky.” And when they really internalize that, they’re like, “I’m fucking out of here.” Take the money and run.

Or else they’re just drummed out. They get, people get drummed out and people forget that because they love that Jobs thing and I’m always like, “You’re not Jobs.” There’s only one, there can be only one, like Highlander.

Okay, last question, Chamath. What is the most ridiculous thing right now, that’s driving you crazy? Lots of things drive you crazy. Overhyped, just like are you kidding me.

No, to be honest with you, I think it’s like what is really driving me crazy right now is we have not done a good job of divorcing ourselves from the bullshit in Silicon Valley, and there’s all layers of bullshit. You know, like we talked about some earlier, like, “Oh, I just came up with this thing, it was divine intervention.” That’s a crock of horseshit. “Oh, I knew this entrepreneur from Day One.” That’s a crock of horseshit. “Oh, I knew this thing would work and that thing would fail.” That’s a crock of horseshit.

So there’s just layers and, “Oh, I found this thing,” so there’s layers and layers of this stuff. And the problem that it creates, I think, is that it just doesn’t make it a fun place to be after a while. Because everybody in dealing with it, they all are like, “Wait a minute, you’re bullshitting, you’re bullshitting, you’re bullshitting.” They all become incrementally more mercenary, and then when that happens, because you have to put up a shield, right, you’re less sympathetic, you’re less connected to the people around you, and then you just, it’s just not great.

So to me, what is driving me crazy is that. I would like for this to be like what it was, and now I sound like some nostalgia, okay, I’m back to the 70-year-old.

That’s all right, yeah.

What it was like, that first bubble. There was a kind of communal sense of, we were all trying.

There was.

You know? And we were all grinding, and when somebody would win we would be like wow, that’s great. Now I feel it’s more zero sum. Oh, if you’re winning, I’m losing. Your equity that you’re getting, oh, it’s taking away from my equity that I should be getting.

Right, right.

And so, that frustrates me.

I do think it’ll change, because I think the world is crashing in on Silicon Valley in a way that never had ... not just the culture wars, but everything. The immigration stuff, the real stuff, and you have a government that’s spinning out of control, like you said.

Out of control in real time, yeah.

Someone has to take responsibility for it and stop being in your little self-absorbed bubble.

So this is why, if we could end by basically going back to the beginning. Peace and prosperity comes from a combination of great governance and great capitalism. Democracy and capitalism, and in a world where we see what’s happening on the governance side, we have to take things into our own hands and just build the things we need.

But in order to do that, people shouldn’t be job-hopping every two years. People should take bets on folks, people should trust folks if they’re well-intentioned, people should try to learn from their past mistakes. All of these things can be more systematic, and if you do that then you’ve got a chance. And so that’s what I would hope for, because I think we need it more than ever, and there are folks who will put a lot of our own money behind trying to make it so. And then along the way it’s gonna roil a bunch of people and piss a bunch of people off, but it’s the right thing to do.

And how should Silicon Valley react to Trump? I mean, they’ve been sort of milquetoast-y, to me. Some of them have been more outspoken than others.

To me, it goes back to the James Damore thing. We can be tweeting and we can be writing, or we can be building. We are builders, and when we build things that need to get built, we tend to do the right things and there’s so much more progress. And so I just think that however you’re, what you believe about him, it’s fine to do it in your spare time. I get a lot of, it’s popcorn material reading Twitter, I think it’s great, but at the end of the day, Kara, Monday morning I’m there to grind and to build and to help others grind and build.

Although you can’t divorce yourself from the impact. You have self-driving cars, it’s gonna affect jobs. That’s gonna push populism more. You know, it does ...

If it’s not properly allocated. This is what I mean by conventional capitalism will exacerbate these issues. A modern form of compassionate or ethical capitalism will do it in a very different way, but in order to do it you have to first get these businesses to success, and then have the partnership with an entrepreneur where they respect you for having helped them, where you can have this conversation. Okay, how do we allocate autonomous cars? How are these markets built? Is it sort of this zero-sum game where we take everything to zero and only you win?

There’s so many different ways where you can construct markets, but those nuances we don’t have time for because he or she doesn’t have a partner. So the first step is, get these companies to actually win, and the second is because you have that social and political capital, to basically cash it in and then have those discussions. That is what we need to do.

Yes. Chamath, I think you should run for office.

No.

But you love Beyonce, right?

She’s really impressive. I have a lot of respect for her.

Maybe she could run Uber.

Oh my god, I thought you were gonna say president. I’d vote for her too. Oprah. Oprah would be amazing, I’d vote for Oprah.

Would you vote for Oprah?

I’d vote for Oprah.

I don’t think she’s running. What about Sheryl? Sheryl maybe will get to ...

She’s badass, I’d vote for her. I’d vote for Oprah. I’d vote for ... I was gonna say somebody that has ... I’m not gonna say that, because I almost leaked somebody’s name. I gotta take it back.

All right, take it back. We didn’t hear it. All right, Chamath, as usual, this is great. Thank you for coming back on the show. You’re a little nicer now, it’s nice. I like it.

I turned 40.

Did you?

Yeah.

What did you do for your 40th birthday?

To be honest with you ...

Yes, don’t lie to me, please.

I got sleeved.

What? What?

I had this Japanese tattoo artist who has a huge backlog and I got sleeved.

Really?

Yeah, it was great.

You’re gonna show it to me later, right?

Yeah, I’ll show it to you.

What’s on there?

It’s basically symbols of myself, my children, my wife, my religion, Buddhism.

Wow. Sleeved. You’re gonna get the other sleeve?

Half sleeve. Just half sleeve.

Half sleeve. Okay.

Bicep up through shoulder and pec.

I want to see this. You know, I have had tattoos for years, you know that.

Yeah.

Not too many, not a sleeve. I might have to get sleeved.

It was like an awakening.

It sounded so dirty, and now it’s just a tattoo. How sad. A sleeve. All right, Chamath, as usual, it was great talking to you, you tattoo crazy man.

This article originally appeared on Recode.net.

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Full transcript: Social Capital CEO Chamath Palihapitiya on Recode Decode

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