tv The David Rubenstein Show Peer to Peer Conversations Bloomberg November 7, 2021 10:00am-10:30am EST
♪ david: this is my kitchen table and also my filing system. over much of the past three decades, i've been an investor. the highest calling of mankind, i've often thought, was private equity. [laughter] and then i started interviewing. i watched your interviews, so i know how to do some interviewing. [laughter] i've learned from doing my interviews how leaders make it to the top. >> i asked him how much he wanted. he said $250,000. i said fine. i did not negotiate with him and i did no due diligence. david: i have something i would like to sell. [laughter] and how they stay there. you don't feel inadequate now
being only the second wealthiest man in the world, is that right? [laughter] one of the most successful investors and entrepreneurs in silicon valley is reid hoffman. as an entrepreneur, he helped to 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 the chance to find out what quality 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 but the returns are very high. can it get better than this and 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 market getting over stimulated. there is some risk within the general market.
that being said, technology is accelerating the transformation of all industries. there is what artificial intelligence can do to all industries, you know, the leading edge of software. there's things happening with ar and vr and things happening with crypto and fintech. all of this area is very much accelerating to the future. i think that is part of the reason why the venture industry has been so good, is because technology is important in re-defining many key industries. david: silicon valley is not the only place in the united states where there are technology investments, but it seems like the 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 tech in the united states? reid: there is. silicon valley itself has 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 to start their software or technology businesses. there is the hub for capital and knowledge and investing. there is the hub of talent for people growing these companies, which is part of the reason i write this book, "blitz scaling," how do you build companies at a global scale lightning fast and the talents, there is network effects of learning and out of sharing information. it is part of the reason why silicon valley -- the whole bay area has 3.5 million people tops not in the tech industry and you know why half of the nasdaq emerges out of silicon valley. 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 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 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 the technology world of the united states is dominated by a limited number of companies, google, facebook, apple, netflix, microsoft, i'm sure you are familiar with all of this. do you think the united states is dominated by too few tech companies and something should be done to weaken their power,
or do you think everything is ok as it is? reid: where i think we are heading to is where we are 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, strong global technology companies. is a perspective of an investor, when you ask kind of what, is a venture capitalist, no, we are having more and more startups, more ability to create amazing new tech companies. if anything, i think we are already on the trajectory. david: do you think that large chinese technology companies, ali baba, 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 competing with chinese
technology companies for market share outside the united states and china? reid: so i think we are already in that world. if you look at things that alibaba is doing, in terms of spreading the ali pay and everything else into south america, into africa. you know, i think the notion of the technological platforms of the future are in deep -- like, there is a fast-moving competition between companies in silicon valley and companies in china. and i think that is part of, which systems will be the systems that the world operates in is in deep competition. that being said, i think we are already seeing chinese buy from companies beginning to make strong had roads into the u.s. tiktok is an obvious one but i think you already see it also in drone manufacturing in dgi. there are a whole bunch that are already getting massive global
relevance and you can see it already. david: let's talk about the future of some things people are interested in. let's talk about cryptocurrencies. are you a cryptocurrency aficionado or not? reid: i am. actually, if you go to youtube and search for bitcoin rep battle, this is inspired by alexander hamilton the musical. >> ♪ if crypto is going to be our salvation it needs to be centralized, needs regulation ♪ ♪ reid: i funded and produced a rap battle between alexander hamilton and satoshi nakamoto. that's because i think there is a real role for cryptocurrencies in helping us evolve. david: so do you invest in its cryptocurrencies yourself? reid: i do. david: what about transportation? are you a big believer in autonomous vehicles? reid: i am.
i invested in aurora and nuro. because in fact, it is a question of when, not if, and out soon for when we have autonomous vehicles. it will make all of our societies better and save tens of hundreds of thousands of lives, enable a huge amount of increase of productivity. so i think it is a great thing we should be accelerating to as societies. david: have you been in one of these cars where you are not the driver and you feel safe? reid: i do and i do. look, i think part of the thing all of them, not just aurora, not just nuro, 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: [laughs] no. david: oh, you don't. what about flying taxis, is that in our future? reid: it is. i helped bring joby public and it has moved the transport grid from 2d to 3d, redefined cities, make commutes much less onerous,
being able to get to the airport on time, being able to live remote and coming to the cities. the jetsons is no longer science-fiction but en route to science fact. david: what about space? do you invest in outer space-related investments? reid: not as intensely as some of my friends like elon. who are obviously -- i put some money into space x -- elon and this amazing transformation of world, but it is obviously an important area. i have ended up in it sometimes just by who i know. ♪
david: let's talk about how you became an investor and an entrepreneur. you were going to be an academic, and then on the road to damascus kind of epiphany, you said, i am not going to be an academic, i am going to be something more important, an investor. is that right? reid: it did not start with investor. it started with product creator. i wasn't necessarily starting with entrepreneur. it was, how do we think and speak better? how do we make ourselves better as individuals and as a group? well, this medium of software, this medium of constructing new products, i was like just 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: well 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. 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 know, you have been helping us so much on the board and you understand this stuff and we have so much to do, because paypal was an early blitz scaler. it's theory was that it would be a bank and that was not a workable theory. so we had a great customer acquisition engine, but how do you redefine the payments, with
payments with something in front of it, even if -- even as it was exponentiating 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 and then became an angel investor. for those who don't know what an is an angel investor, as opposed to a devil investor, what is an angel investor? reid: [laughs] sometimes there are investors that entrepreneurs think are devil investors. [laughter] angel investors are individuals usually with some expertise in this area or 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. although, that has -- all investment has professionally scaled and also 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 rather
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 you think this would be one 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 kind of a university campus network, not the whole world. when it opened up to campus, six weeks, 80% of the campus was using it. you could look at the usage curve and say this is interesting. the person who created this is interesting. even though back then mark was quiet, tended to not talk very much, long pauses, minutes long pauses in the conversation where you are like, is this
conversation over? he was smart and you could see the trajectory facebook was on was interesting. david: let's talk about this. you are an angel investor, you are doing really well with people 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, a venture capital firm, and why did you need to join a venture-capital firm when you already your own venture capitalist? why would you join greylock? reid: not surprising, 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. and i was originally thinking of building my own and then david and others who were general partners at greylock 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 was like, i would be delighted to be partners with these folks, so let's build the firm here. david: when you are starting at greylock even though you already had a good career as and angel investor, you would think one of the legends of silicon valley that the deal you wanted to do was airbnb. and a senior partner at your firm said, it is a terrible deal, it is 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. it is my first deal that 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, which sent me and says, every vc has a deal they can learn from and fail from, and airbnb can be yours. i said, david is supersmart. [laughs] i set 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. 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 that i didn't see? i said, all the risk factors you saw were correct, but i realized if you navigated through the risk factors, then you would end up with a redefine
d company of an industry. it would be literally -- you just transform the entire industry and that is something 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. ♪ david: when you invest in the company and it becomes a public company, do you want them to take policy issues or just worry about shareholder return? reid: i think it is a blend of the two. it is not just shareholder return. although one could argue with what i am about to say it has a long term to shareholder return and so is still part of an intense shareholder return. what is your mission as a company?
what are the things that will enable you to succeed? those are the things you should think more broadly of than just is the customer making the money. sometimes, that is what we need to have a stable society, rule of law, enfranchisement in our democracy, so voting rights as a thing. david: you have been involved in public policy issues as of late. have your venture investors said, look, stick to venture investing in don't be a public figure talking about public policy or do people encourage you to get more involved in public policy? reid: one of the things i love about greylock, you are a person first and greylock as a firm is 1000% behind me. some would say that is your issue but is it -- it is important to you helping society
so we are comfortable with it. david: are you ever going to run for office or take a point in position of government? reid: i don't thing i will ever run for office. i think many are skilled -- more skilled at that than i. but i have -- i have worked with democrat leaders, republican leaders, leaders from other companies. it is our responsibility as citizens to help them as much as we can. ♪ david: so, in addition to venture investing, you had some time -- i don't know where you got the time -- to start a little company called linkedin. how did you 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 abz planning. think about the spread of outcomes. what is the greatest 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 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. reid: yes. david: let me ask about that. microsoft was a technology company that came out of nowhere, became a dominant software company. many people thought it would go 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 -- 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 other kinds of things and being willing to be bold in the creation of xbox and the gaming franchise. now, that being said, you know, 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, you know, 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. if to be an investor, you need a certain skill set, what is that skill set and how is it different to be an entrepreneur? reid: so, i will start with an entrepreneur, because i think it is easier. well, 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, or 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 products 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 the build of building something from nothing. and then in blitz scaling, getting it really large, really fast. as an investor, what you are looking at is judging entrepreneurial talent in that same kind of circumstance of, can this set of people, can she or he, or, you know, 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 is that 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? and can you help them as best as you can get there? but it is the key difference in skill. david: so to make people feel good that are not as successful as investors as you are, do you have any failures where you made a terrible mistake and you lost money just to make the rest of us feel good? reid: well, it depends. do we have days? i can go through the list. actually by the way, the interesting question of analysis 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: if somebody said i want to be the next reid hoffman, a person who is starting companies, investing in good companies, doing good things for public policy, what would you say is the best training ground to do that, and how should somebody prepare to be the next reid hoffman? reid: well, i am still young enough i am 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. and play central in networking. many of these folks are folks i work with. you know, i could literally spend another hour listing
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