tv The David Rubenstein Show Peer to Peer Conversations Bloomberg November 6, 2021 9:00am-9:31am EDT
♪ david: this is my kitchen table and also my filing system. over much of the past three decades i have been an investor. the highest calling of mankind i have often thought was private equity. [laughter] then i started interviewing. >> i watch your interviews. david: i have learned in doing my interviews how leaders make it to the top. >> i asked him how much he wanted, he said 250. i didn't negotiate. i did no due diligence. david: i have something i would like to sell you.
and how they stay there. you don't feel inadequate now, being the second wealthiest man in the world, right? [laughter] one of the most successful investors and entrepreneurs in silicon valley is reid hoffman. as an entrepreneur, he helped build paypal and he started linkedin. as an investor, he has been an early investor in facebook and airbnb and now is a partner in one of the leading venture firms in silicon valley. i had a chance to find out what unique qualities it takes to be an investor and entrepreneur in my conversation with reid hoffman. the venture-capital world today seems like it could never get any better. everybody seems to be making money. the values are high and the returns are very high. can it get any better? are you worried about this being a bubble, not unlike we had the tech bubble burst in 1999 and 2007? reid: you always worry about the markets getting overinflated. that being said, i do think there is some risk in the general market in this.
that being said, technology is accelerating the transformation of all industries. there is what artificial intelligence can do to all industries, the leading edge of software. there's things happening with ar and vr and crypto. all of this area is very much accelerating in the future. so i think that's part of the reason the venture industry has been so good. technology has been written port and -- technology has been important in redefining many key industries. david: silicon valley is not the only place in the united states where there are technology investments, but it seems like these silicon valley companies seem to be the most valuable and that is where the most activity is occurring. is there something about silicon valley that makes it unique and better than other areas in the united states? reid: there is. silicon valley as a number of overlapping network effects. it has a network effect of being the hub by which a lot of english-speaking entrepreneurs from around the world come to start their software or key technology businesses.
there is the hub for capital and the knowledge and the investing that goes into it. there is a hub of talent for people growing these companies, which is the reason i wrote this book, how do you build companies at a global scale and attract the talent? there is the network effects of learning out of sharing information. it is part of the reason why silicon valley, the whole bay area has 3.5 million people tops, that's not the tech industry, and why half of the nasdaq emerges out of silicon valley. it is for those kinds of reasons, and those network effects are what makes silicon valley great. david: what about around the world, is china likely to pass silicon valley as a leader of technology? reid: i think it's one of the greatest concerns that silicon valley-knowledgeable people have, because china is amazing. it has huge amounts of tech talent. everyone's acting like an immigrant, you know, with hunger.
large companies have this policy, 996 -- 9:00 a.m. till 9:00 p.m. six days a week, you are discoverable at your desk. and that's kind of like you know tens of thousands of technical people in technology companies. and they are doing a lot of innovation. there's things that we learn from china. and so, i think that china is going to have one kind of very strong creation of the technological future. it is one of the reasons why in blitz scaling, we call it the land of blitz scaling. i think silicon valley has some edges too, but i think it's very much of a game on circumstance. david: now, some people would say that the technology world in the united states is dominated by just a limited number of companies -- google, facebook, apple, netflix, microsoft. i am sure you are familiar. do you think that the u.s. is dominated by too few tech companies and something should be done to kind of weaken their
power, or do you think it is ok as is? reid: where i think we are heading to is where going from five massive tech companies to 10. we are already naturally heading in that direction. you can see it with things like netflix and salesforce. all these other companies which are continuing to also grow in strength and create a breadth of additional global technology companies. with respect to it as an investor, when you ask kind of what's, as a venture capitalist, no, we are having more and more startups, more ability to create amazing new tech companies. so if anything, i think we are already on the trajectory. david: do you think that large chinese technology companies, alibaba, tencent, baidu, bytedance and so forth can have their technology become very dominant or important the united states and around the world? and are we in a world now we're -- where we're competing with chinese technology companies for
market share outside the united states and china? reid: we are already in that world. i think if you look at things that alibaba is doing, in terms of spreading the alipay and everything else into south america, into africa, i think that the notion of the technological platforms of the future are in deep -- there is a fast-moving competition between companies in silicon valley and companies in china. and i think that is part of, like, which systems will be the systems that the world operates. i think is in deep competition. that being said, i think we are already seeing chinese platform companies beginning to make strong head roads into the u.s. bytedance and tiktok is an obvious one. but i think you already see it also in drone manufacturing and dgi. there's a whole bunch that are already, that are already getting massive global relevance and you can see it already.
david: let's talk about the future. some things our people are interested in right now. one of them is cryptocurrencies. are you a cryptocurrency aficionado or not? reid: i am. i actually -- if you go to youtube and search for "bitcoin rap battle," this is inspired by alexander hamilton the musical. ♪ >> ♪ it needs regulation ♪ reid: i funded and produced a rap battle between alexander hamilton and satoshi nakamoto because i think there is a real role for cryptocurrencies in helping us evolve. david: so do you invest in its -- in cryptocurrencies yourself? reid: i do. david: what about transportation? are you a big believer in autonomous vehicles? reid: i am. i have invested in aurora and nuro. in fact, it is literally a question of win, not if, and how soon for when we have autonomous vehicles. it will make all our societies better.
it will save tens to hundreds of thousands of lives. it will enable a huge amount of increase in productivity. i think it is a great thing we should be accelerating to as society. david: have you been in one of these cars where you were not the driver and you feel safe? reid: i do. part of the thing that all of them, not just aurora, but all of them have safety, safety, safety as the very first thing. so when i have been in these cars, whether there is nobody in the driver's seat, it has been good and fine. david: do you wear a crash helmet when you are in those cars? reid: i don't. david: ok. what about flying taxis, is that something in our future? reid: it is. as you know, i helped bring joby public by spac, and it has moved the transport grid from 2d to 3d, redefined cities, make commutes much less onerous, being reliable to getting to the
airport on time or being able to live remote and come into the cities. the jetsons is no longer science fiction, but we are en route to science fact. david: what about space? do you invest in space related investments? reid: not as intensely as some of my friends like elon. obviously, i put some money into spacex. that is more because of elon and his amazing transformation of the world. but it is obviously an important area. i have ended up in it sometimes just by who i know. ♪
david: so, let's talk about how you became an investor and entrepreneur. you were going to be an academic, and then on a road to damascus kind of epiphany, you said, i am not going to be an academic, i will be something more important, an investor. is that right? reid: well, it did not start with investor. it started with product creator. it was not even necessarily wanting to be an entrepreneur. it was, how do we think and speak better? how do we make ourselves better as individuals and as a group? actually, this medium of software, this medium of constructing new products. it was like i was beginning to get that lens of, what does internet mean and how do we work together and play together and live together, using the internet to redefine our space and our networks in order to be better, and i should go create that. david: as you were starting this career, you were invited to join a company called paypal. paypal turned out to be a gigantic success, later sold to
ebay. what was your job at paypal? reid: so, when peter thiel and max started paypal, they each invited their friend who most understood and had the entrepreneurial experience to be on the board. so that was me for peter. then after a year of being on the board, i was thinking of starting another company. peter said, no, come join paypal full-time and help us, because you have been helping us so much on the board and you understand this stuff and we have so much to, because paypal was an early blitz scaler. it's theory was that it would be a bank. that was not a workable theory. so we had a great customer acquisition engine, but how do you redefined the payments os with something that was in front of it even as it was exponentiation its burn rate? so i joined paypal, stepping off the board. david: paypal was ultimately sold to ebay for about $1.5 billion or so. you got your share of the
profits. you then became an angel investor. for those who don't know what an angel investor is, as opposed to a devil investor, what is an angel investor? reid: [laughs] sometimes there are investors that entrepreneurs think are devil investors. usually it is more post facts. angel investors are individuals usually with some knowledge of the entrepreneur that tend to invest in the early stages of a company, frequently an idea on the back of a napkin or an entrepreneur just thinking about doing something. but like all investment that is professionally scaled. and does so individually, not with a firm, the resources and assets of a firm, the platform and network that a firm brings. that is what i started doing. mostly because i was interested in other folks who were building these great projects that i wanted to help with and participate in. david: when you started doing that, you did it relatively
prolifically. you became known as may be the most active and may be the most successful angel investor in silicon valley. one of the companies you invested in, was that facebook? reid: yes. david: what did you see in young mark zuckerberg? did he think this would be where of the best companies in the world, or you just said, i will take a chance? reid: facebook had already successfully launched a product that when it opened up a campus -- when i did the investment, it was strictly only a university campus network, not the whole world. but when it opened up a campus, in six weeks, 80% of the campus was using it six times or more per day. you could just look at the usage curve and go, this is interesting. the person who created this is really interesting. even though back then mark was very quiet, so i had a tendency to not talk very much. long pauses, minutes long pauses in the conversation where you are, like, is this conversation over? you could see he was really smart and he was really smart
-- he was really smart and you can see the trajectory facebook was on. david: let's talk about this. you are an angel investor, you are doing really well. people are coming to you with deals while you might miss one or two, basically you are doing quite well. why did you join a firm called greylock, an excellent venture capital firm. why did you need to join a venture-capital firm when you already your own venture capitalist? why would you need to join greylock? reid: not surprising coming from the guy who built linkedin, but i think in networks as platforms. one of the things i think a small number of very elite venture-capital firms within silicon valley and other places do is create a network. i was originally thinking of building my own. and then david and anil were general partners at greylock,
and they came and said, we are in the process of moving the firm from boston to silicon valley, where it is a rebirth of the firm which has a great set of investors and pedigree and culture and learnings and all these things that will be very helpful. but also this idea of network amplifier for venture capital. we love it, we would love to do it with you. i said i would be delighted to be partners with these folks, so let's build the firm here. david: when you were starting at greylock, even though you already had a good career as and angel investor, one of the legends is that the deal you wanted to do was airbnb. and a senior partner at your firm said, it is a terrible deal, going nowhere. so, were you intimidated by that because he had a lot of experience? how did you push that through? reid: there is even more drama than your question suggests. the senior partner is david zee who was an amazing general partner, my board member from greylock and linkedin. he was the reason i was at
greylock. so i bring in airbnb is my first deal i am bringing into the partnership and david, who i am super close to, have the deepest respect for, he has returned billions of dollars to the fund, he looks and says, every vc has a deal they can learn from and fail from, and airbnb can be yours. i said whoa, david is super smart. [laughs] ultimately, i have to have the conviction. this is a portfolio. he gave me the hunting license, the permission to do the deal. so i went and did the deal. now, to david's credit, six months later, the numbers had not changed at all. he came back and said, i thought about it, i think you were right and i was wrong. what did you see i didn't see? i said, the risk factors were correct, i just realized that if you navigated through the risk factors, which i could see it as able to do, then you would end up with a redefining company of an industry.
literally, it transforms the entire industry, and that is the thing i saw. david: you had time to start a little company called linkedin. reid: the goal was building something that enabled every individual professional to transform their career by collaborating within a network. ♪ what's your mission is a company? what are things that will enable
you to really succeed? those are the things you should think more broadly of then, just, is a customer paying the money? we need to have a stable society , rule of law, and enfranchisement in our democracy. david: you have been involved in public policy issues of late. do people say, don't talk about public policy, or do they encourage you to talk about public policy? reid: one of the things i love about greylock, everyone their views them self as a citizen and a human being first. on some of them, greylock as a firm is 1000% behind me, on other things they go great, that's your issue. but it's great trying to be a citizen trying to help society. david: do you think you will ever run for office or take a
pointed position in government? reid: i don't the guy will ever run for office. there are much more people skilled that that -- skill that that then i. but i have worked with democratic leaders, republican leaders, leaders from other countries, because they jump on the public service grenade and it is our responsibility to try to help them as much as can. david: so, in addition to venture investing, you had some time -- i don't know where you got the time from -- to start a company called linkedin. how did have time to start a company called linkedin, while you're a partner in a venture firm? reid: well, actually, i started it much earlier than greylock. that's actually how i met greylock, because david zee led my series b. so, i was doing angel investing
while i was the founding ceo and the co-founder of linkedin. but i didn't start venture investing until after i had hired jeff wiener to be the ceo of linkedin. david: and linkedin openly was sold to microsoft for roughly $26 billion, or something like that. did you ever anticipate something like that when you started the company or helped to start the company? reid: so, one of the things to think about when you are strategizing, and my first book has this framework called abc planning. think about the spread of outcomes. what is the great possible outcome? what is the worst outcome? what are the intermediate outcomes? what are the things that change the landscape of it? so, i always knew that linkedin could be a network as a platform that would be transformative. and i also knew that it was the kind of thing that most aligned with microsoft's mission. so, did that mean that i knew microsoft was going to end up buying it for the largest acquisition in its history? the answer is no.
i thought it was a possibility. it was it was an outcome. it wasn't the goal. the goal was building something that enabled every individual professional to transform their career by collaborating within a network. david: when you sold the company to microsoft, you went on the board of microsoft. let me ask you about that. microsoft was a technology company that came out of nowhere, became a dominant software company. many people thought it would go south as it was getting older and older, but transformed itself when satya nadella became the ceo. were you shocked and surprised at how the company has become one of the most valuable companies in the world again? reid: no. for a number of reasons. microsoft has always had an enormous amount of talent throughout the whole company. the technology depth at microsoft has actually created a whole range of products not just on the commercial side, but also microsoft research. so there is always this raw amount of talent. obviously, having some key
franchises like office and windows and being willing to be bold in the creation of xbox and the gaming franchise. now, that being said, the thing that satya brought back with vigor to the company was a focus on earning the ability to build the next generation of products, starting with azure, but also transforming across the company, a "we are only one company in this universe and we are doing our absolute best to surprise and delight our customers." david: let's talk about the different skill sets. to be an investor, you need to have a certain skill set. what is that skill set and how is it different to be an entrepreneur? reid: i will start with an entrepreneur, because i think it is easier. the game is hard, but the definition is easier, which is, you have a vision for where the world is moving towards, where
you can help build it towards. frequently in the case, a new technology or a market shift, something that gives you that market opportunity, you can assemble through your network the assets -- not just capital, but talent, the ability to build the new product or service, and you are driven by the cadence of a complete focus on how do you navigate that path. which can include pivoting, it can include risk management and a bunch of other things, but it is that building something from nothing. and then blitz scaling, getting it really large, really fast.
as an investor, you are looking at judging entrepreneurial talent in that same kind of circumstance of, can this set of people, can she or he, or sometimes better to have two or three founders, run this race? the key thing that is a difference between being the entrepreneur, where it is the all-in focus is everything i am doing and the investor, you are not running the race of the investor. the founders and the entrepreneurs are running the race. you are helping as much as you can, but you have to judge, can they do that? can you help them as best as you can get there? it is the key difference in skill. david: so to help people who aren't as successful investors as you are, do you have any failures where you made a terrible mistake and you lost money just to make as investors -- the rest of us feel good? reid: do we have days? i can go through the list. actually by the way, the interesting question is not as much of the companies that you invested in that went to zero. there is a large list of companies that did that.
the real thing is the companies that you missed. like missing twitter. missing snapchat. missing pinterest. those are much worse outcomes, than when you put in $10 million in this other company that went to zero. david: somebody said, i want to be the next reid hoffman, a person who is starting companies, investing in companies, doing good things for public policy. what is the best training ground to do that, and how should somebody prepare to be the next reid hoffman? reid: i am still young enough and still hoping to be the next reid hoffman myself. that being said, there is a number of people like this in silicon valley who bring an entrepreneurial mindset together with an investing mindset. many of these folks are folks that i work with. i could literally spend another hour listing names.
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jon: i think it's still a pretty good time for real estate. texas and florida are well-positioned. you should stay away from buggy whip businesses. ♪ david: jon gray went from aspiring journalist to become one of the top real estate investors in the world. jon: when i met my wife in english class, i showed up wearing a suit and tie. everyone else was in birkenstocks. it was clear i'd made a decision which path i was on. david: jon joined blackstone in 1992 and was the second employee in its real estate divis