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  • [SOUND] Thank you very much for taking the time to come in and speak to us.

  • Many of us, are aspiring entrepreneurs, so we'd really quite like to be like you.

  • And, many others, would also like to pitch to you.

  • >> [LAUGH]

  • >> Actually sitting here makes me, gives me a sense of how intimidating

  • that must be, so, I won't, I won't wish it for much longer.

  • >> [LAUGH]

  • >> And perhaps, perhaps we could, just start by outlining

  • the, the three main topics I'd love to cover today.

  • The first is your views on tech and venture capital trends.

  • The second is, how you assess entrepreneurial DNA.

  • And the third is your views on leadership and your

  • leadership experiences, that, that you've had throughout your, your esteemed career.

  • And so, if we could perhaps start with the,

  • that first, tech trends, and go with something topical.

  • You mentioned last month at the Goldman-Sachs

  • conference, that tech was not in a bubble.

  • Rather, it was in a mature deployment phase.

  • And then the WhatsApp deal happened.

  • And Mark is on the board of Facebook.

  • So I just wanted to ask you, what do you

  • think about that deal and how are you thinking about evaluations?

  • >> So I, unfortunately, I can't, ten years, ten years from now

  • I can come back and tell you all about the WhatsApp deal, but

  • right now I'm on the, I'm on the, I'm on the Facebook board

  • and I know that you all would not come visit me in jail.

  • So I will, I will keep that one to myself.

  • so, there's a couple of big things.

  • So, just in terms of thinking about what we've been through in the last 20 years in

  • Silicon Valley, some people in the room are

  • old enough, you may remember there was a bubble.

  • and, it was a fairly big deal, in sort of 1998 to 2000, and there was

  • a very profound crash, which was deeply traumatizing,

  • for those of us who went through it.

  • And then we went through this extremely

  • long period of, basically, you know, years of

  • pain followed by then, sort of, what I think of as, as very slow recovery.

  • I think it's actually been an object

  • lesson in the psychology of markets and bubbles.

  • I think that, people are much more highly sensitized to bubbles after a bubble.

  • If you could be sensitized to them before a bubble, you could make a lot more money.

  • But people get highly sensitized and so there's this phenomena of, of

  • trying to close the, the barn door after the horses have escaped.

  • And that, that is a lot of what all the

  • bubble talk in the last, ten years has been about.

  • And so we, we could talk at length about kinda why I think, in fact,

  • tech is not now in a bubble and has not been in a bubble since 2000.

  • the, the deeper thing, the more interesting is this follows a historical

  • pattern, which is what I talked about at the Goldman Conference, which

  • is based on the, the best thinker on this topic is an,

  • is an economist named Carlotta Perez,

  • who wrote a book called Technological Revolutions.

  • It's probably the single best book.

  • Like, that book and The Innovator's Dilemma are probably the two

  • key books that are really critical to understanding how this industry works.

  • And so she describes in her book, she describes

  • a general model for the deployment of new technologies.

  • And then how technologies intersect with financial markets.

  • And so she's got this whole

  • thing, and it's basically this multi-generational process.

  • And there's what, it's basically these two big, sort of phases of it.

  • There's what's called the installation phase

  • and there's what's called the deployment phase.

  • And it turns out in every single case and

  • this includes railroads and, like, lots, electricity and steam engines

  • and lots of prior new fundamental technologies, there's always this

  • just gigantic bubble and then crash kind of halfway through.

  • And historically that marks the transition from

  • the installation phase to the deployment state.

  • The deployment stage, you could argue, is

  • where the actual interesting thing, things happen.

  • It's where all the tech-, all the new technologies actually start to work.

  • They actually make it into everybody's hands.

  • They actually become cost effective and we actually

  • find out how to actually use all these things.

  • And so that's the phase I think we're in, in now.

  • You know, without talking about the Whatsapp deal in particular,

  • it is interesting to note that the companies that people think

  • are overvalued today, generally either have billions of dollars of revenue,

  • which was not the case, in, in, in, in the 90s.

  • For example, Facebook, people argue Facebook as an example.

  • Facebook went from $0 to $10 billion of revenue in less than ten years.

  • And so that is definitely not what happened in the 90s.

  • The other thing is the companies that people debate

  • today, for the most part, have extraordinarily high customer, count.

  • user, user count.

  • Market sizes have expanded gigantically and so you've

  • got these things now that people are arguing

  • about that have, in some cases, a half

  • billion users, on their way to a billion users.

  • And if people want to take a position that you

  • can have a large scale internet service that's worth a

  • billion users that's not gonna be worth anything, you, you

  • could take that position, I'm not sure you would recommend it.

  • >> Yeah, no, that makes sense.

  • When you, as you say, when you look at the, the cost per user, it's

  • actually only $36, which is much, much less

  • than in many others for the What'sApp deal.

  • But another thing you, you previously mentioned was that, MBAs

  • flocking into the tech sector is a sign of the bubble.

  • So to play devil's advocate.

  • >> Yeah.

  • >> Many of the people here are flocking to the tech sector.

  • >> Yeah.

  • >> So, could that, perhaps, be a sign of a bubble?

  • >> So things are heating up.

  • And so, [LAUGH] Historically, there's actually

  • been, and I suspect everybody in the

  • room knows this, there has been a

  • direct correlation between, PE multiples and, MBAs.

  • tilting, tilting, tilting into the, tilting

  • into the, the tech industry, for sure.

  • So I think something different is actually happening.

  • I think something different is happening with how companies are getting built.

  • And maybe I can do the long version, kinda the, the slightly long version of

  • this, which I, I think there's actually a whole new, a whole new way companies are

  • being built in the last ten years and, and I think that business people and MBAs

  • turn out to be very central to it in a way that's different than the past.

  • So I kinda divide the story of

  • how technology, the great technology companies got built

  • kind of in the three phases and I think we're in the third phase now.

  • The first phase was in the 40s, 50s, 60s, 70s.

  • And it was so crazily hard.

  • If you talk to people who were in business then or you

  • read the stories, it was so hard to build a new tech company.

  • It was such an unbelievably, sort of exceptional thing to do that you,

  • you, you only really have these really extreme characters who, who would do it.

  • And there were a pretty small number of them.

  • And they were extreme, extreme characters, like they were, they

  • make all the current, like, high octane entrepreneurs look like wusses.

  • And the ones I'm thinking of, Thomas Watson Senior.

  • If you want to read, like, what it's like to work

  • for somebody who's harsh, read the book on Thomas Watson Senior.

  • You know, he makes, he makes all

  • of today's entrepreneurs look like cream puffs.

  • >> [LAUGH]

  • >> He would just literally sit in his staff

  • meetings for like five hours and just scream at his,

  • scream at his guys, there's just this, then he built

  • this astonishing company, IBM, off the other side of that.

  • David Packard.

  • David Packard, actually, was quite a character.

  • He, David Packard, people now remember for the HP way and for kind

  • of that whole warm and fuzzy, you know, kind of approach to running companies.

  • When, when David Packard was actually running HP, he had two nicknames.

  • One was Pappy, which is kind of what

  • people remember in a kind of paternal instinct, type.

  • His other nickname was the Mean One.

  • And he similarly would just, you know, tear people apart.

  • And then Ross Perot is my favorite example.

  • Ross Perot built the first great outsourcing company,

  • one of the big tech successes in the 60s.

  • And of course, you know, he was fantastic as a business builder

  • when he came into contact with the American public, people went, what?

  • and, you know, again this sort of extreme personality.

  • So you get into this, this kind of, this

  • sort of will to power thing that was happening.

  • and, by the way, the VCs in those days, I think, were very similar.

  • Tom Perkins, who's become re-famous again lately, you

  • know is, is the same kind of character.

  • He's, he's an ex-, he's a very, very

  • extreme character and, and, and he always was.

  • But that's what it took, you know, for him to do

  • what he did in the 70s, and 80s in venture capital.

  • So those were kinda the extreme days and then I think both VC and

  • entrepreneurship, tech entrepreneurship, sort of professionalized, and

  • so you had a lot of VCs then.

  • And this includes great VCs, John Doerr, Mike Morris, Jim Breyer, you

  • know, who are business people or investors first, and, and never ran companies.

  • And then you have this kind of move through the 90s where you had this kind

  • of default model where the one thing everybody

  • knew was that founders couldn't possibly run their companies.

  • And so you would have a founder and then you would basically promote or fire them

  • to chairman or CTO and then you'd put in a professional CEO as fast as possible.

  • And I think what happened is that model just got extreme.

  • And i think by the late 90s in the Valley, we were mostly building

  • companies that were kind of shells, or, you know, kind of like puff pastries of

  • companies where, you know, they didn't really

  • have, at the height of the bubble in

  • '98, '99, the products that were getting built for the most part weren't very good.

  • And these companies were kind of on this bomb run to get public as fast

  • as possible, and you had all these catch phrases, like go big or go home.

  • Or my other favorite one at the time which was, forget details, just do deals.

  • And so you have this really kinda

  • mercenary, hit and run approach to building companies.

  • And then all those companies vaporized after the crash

  • cuz it turned out they didn't have valuable products.

  • They didn't have deep engineering capability.

  • And then all the engineers who worked

  • for those companies hated working for those companies.

  • Cuz they were completely sales-driven, sales-led,

  • these kind of mercenary kind of exercises.

  • At, at the, at the height of, of, of how bad it got.

  • Now I think you've got the exact opposite thing.

  • I think the pendulum has swung all the way in the other direction, which is, now

  • we all understand and take for granted, founder

  • CEO, technical founder CEO is a good thing.

  • You know, Mark Zuckerberg is kinda the apotheosis

  • of kinda the, the idea that we have now.

  • And so now what's been lost for a lot of the entrepreneurs.

  • A lot of the entrepreneurs are engineers, but not business people.

  • Now what's been lost is a lot of the actual art of building a business.

  • and, in particular, what's been lost is the art of sales and marketing.

  • And a lot of today's founders, one of the

  • big issues we deal with is they're very technical.

  • They're very product-centric.

  • They're building great technology and they just don't have a clue about sales and

  • marketing, and what's more is they almost have an aversion to learning about it.

  • It's almost like a post traumatic stress kind of

  • thing, you know, like 15 years after the crash.

  • And so now the challenge for a lot of

  • these companies is how to take what are actually fantastic

  • products and fantastic technology and then integrate in top-end business

  • thinking, top-end sales and marketing

  • thinking, and top-end operational thinking.

  • So I think we have actually collectively have

  • a huge opportunity to put the pieces back together.

  • And I think that's what the next five years are going to be about.

  • >> Could you see the role of MBAs in

  • terms of helping scale through that sales and marketing function?

  • >> Yeah, so, yes, definitely and, and, in fact, in the abstract,

  • there is kind of two models, that are both actually working quite well.

  • The kind of reference model now is the Mark Zuckerberg, Sheryl Sandberg model.

  • And I work with Sheryl at Facebook and I tease her all the time.

  • She's lost control over her own name.

  • It's now become a proper noun.

  • >> [LAUGH].

  • >> You know every 24-year-old technical founder,

  • you know, was like, I need a Sheryl.

  • And I'm like, so do 400 other people.

  • Unfortunately, human cloning is not quite at the

  • stage yet where we can fulfill everybody's need.

  • But basically the model of a very high-powered business person with

  • deep capabilities in sales, marketing, and operations, who's able to partner

  • as a number two, as a president or COO, with a

  • technical founder, CEO, when you have somebody like a Mark Zuckerberg.

  • So that's one model that works very well.

  • And one of the interesting things about the last five or ten years is more

  • and more of the top end business leaders in Silicon Valley have figured this out.

  • And, like Sheryl, have chosen to partner not as the CEO, but as

  • the president or COO with a

  • great technical founder and build great companies.