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tv   The David Rubenstein Show Peer to Peer Conversations  Bloomberg  December 25, 2018 1:00am-1:30am EST

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>> in harvard you have a classmate named bill gates. your the 30th employee of microsoft. steve: i was the salesman for ibm. why? i knew how to wear a tie. david: you are the biggest individual shareholder of microsoft. steve: i am a loyal, loyal dude. i still drive fords. my dad worked at ford, and i still own microsoft stock. david: do you give tips to your l.a. clippers coach? steve: no! i hear there are owners who do that, and i'm not going to be that guy. >> would you fix your tie, please? david: well, people wouldn't recognize me if my tie was fixed, but ok. just leave it this way. alright. ♪
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david: i don't consider myself a journalist. and nobody else would consider myself a journalist. i began to take on the life of being an interviewer even though i have a day job of running a private equity firm. how do you define leadership? what is it that makes somebody tick? as we sit here today, you are the owner of the l.a. clippers. let's talk about how you became an owner of the clippers. so, you retired in 2014 from microsoft as a ceo, and the clippers were more or less going to be available. you paid $2 billion for the team, the highest price then ever paid for a sports team in basketball. were all the other owners happy with you because you elevated the value of their franchises? i assume they pat you on the back whenever they see you now. steve: i think there were two reactions.
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number one, yes, as you described. yes, this is a great investment. the second one is, oh my god. i wonder if this guy is going to throw around money, in a way -- and the league has plenty of rules. it is hard to outspend anybody else. but i think there was a little concern about that. david: you were living in the seattle area. now you have a team in l.a. do you go down there and yell and scream like the other fans? steve: i do, in fact. we have 41 home games. i probably made 38 this year and maybe another seven away games. so i make it to a lot of games. and it is fun to be enthusiastic. i enjoy it. you know, things are most fun when it is your kid playing. second most, this owner thing is pretty good because you have a sense of the dynamics of the guys. david: so do you go into the locker room and say, well, you could do this better? do you tell them anything in the locker room or do you give them any tips? steve: i have three principles. number one, don't talk to anybody after a loss. that is number one.
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coach, yes, but not players. number two, pump guys up. which i do usually with texts after a game. after big games in the locker room when we lose or win, our last game of the season, in the locker room. and i go to training camp and give a little speech at the beginning of the year, a pump up. david: you have coached young children in basketball. do you ever take any of the tips and get them to your l.a. clippers coach? [laughter] steve: no! i hear there are owners that do that, and i'm not going to be that guy. david: well, you were famous when you were at microsoft for pumping up people. you have a voice that projects. when you are watching the game, do you yell and scream like everybody else? steve: i yell and scream. i become a little more moderate so i preserve my vocal cords. it can certainly be a problem when you are -- yeah, let's go, let's get these guys. it can be an issue. david: what is more fun, running
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microsoft or the l.a. clippers? steve: running the l.a. clippers. [laughter] steve: running microsoft was a ton of fun. it was kind of inspirational, because we were working on stuff to literally transform the world. i got a lot out of that. the intellectual challenges were strong. i love that. i thought i had unique value to add. but just for fun, fun, fun, it is really no stress running a basketball team, except you really want to win. ♪ [cheering] david: let's talk about your background. you grew up in the detroit area. your parents were immigrants. where were they from? steve: my dad was an immigrant from switzerland. he left switzerland after world war ii, worked as an interpreter at the war trials in nuremberg. because they were looking for german speakers who were not german citizens, because they were afraid of that. he met his sponsor, one of the g.i.'s dads who he had worked with as an interpreter.
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i don't think he finished high school. he was never precise on that. he certainly didn't go to college, but he worked at ford. my mom is actually not an immigrant. her parents were, and i think they came from what was probably russia at the time. david: you did pretty well in high school. you were the valedictorian of your class. steve: yes. david: you went to harvard. and when you were at harvard, you have a classmate down the hall named bill gates. steve: it was interesting, because the guy who introduced us says, you are both weird, energetic guys. you should meet. so we did. and the time we met was just about the time he was starting microsoft, plus or minus a month i want to say. and that clearly was more than this is going to be another random guy. i mean, the guy is starting his own company. it was his second company. he had done one in high school. he was clearly a special guy. and i got to know him pretty well. david: you graduated magna cum laude and decided to go to procter & gamble? steve: i did. proctor & gamble. david: now, very often, procter & gamble gets a lot of talented
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people in their young training programs. did anybody famous work alongside you? steve: funny you should mention that. a number of people did. when i was there, scott cook was there. he started intuit. jeff immelt, who ran ge, he and i worked together on the duncan hines blueberry muffins and snack cake mix. we were the dynamic drivers of brownie mix sales. so he was around. meg whitman came right after i left. it really was a great place. david: you go to stanford and are going to get your mba. then you decide to drop out and go to this tiny startup in seattle called microsoft. what did your father say about that? steve: oh, he was apoplectic in a way. i mean, he did not try to stop me. but i remember when i called home and my dad said, what the heck is software? he had actually been involved installing wang systems, old word processors.
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what is software? my mom said, why would a person ever need a computer? today, you would say that is crazy, but it was not crazy in 1980. but they said ok, ok, we hear you. if it doesn't work out, you go back to business school, right? i said, right. then i never came back. david: the summer ends and you stay there and you are the 30th employee of microsoft and ultimately you become, next to bill gates and paul allen, the biggest shareholder. what were the jobs you had as you worked your way up? steve: i started off as the assistant to the president. i was billed assistant, basically. chief cook and bottle washer. i set up the accounting. there was some, but we needed it professionalized. i was the hr department. i hired everybody. when ibm came the first time about their personal computer, i became the salesman on ibm. why? i knew how to wear a tie. i was about the only guy around the place and bill said, you
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have a tie and suit. why don't you come to the meeting? david: when did you realize this is not a little startup that is going to be a nice little company in one part of the software world? it's going to be a dominant company in the world. steve: by the late 1980's, for sure, i knew that the company would be something. i remember when andy grove, who ran intel, said one day there will be 100 million computers a year sold. bill and i looked at each other and said, he is nuts. there will never be 100 million. these days, there are 300 million plus computers sold a year. david: what did your mother and father say at this point? steve: they got comfortable when we went public. they knew i was not going to be broke. bill actually offered me a decent starting salary. it was either $40,000 or $50,000, i can't remember, which looked good in that day and age. so they knew that was a good choice. my dad still had a little skepticism. there were all these people and there was nothing physical. he said, what do all these
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people do? there is no product. what do they all do? so that was a confusing point. i mean, he is a smart guy, but he always asked me that every time we went through the campus. david: you are the biggest individual shareholder of microsoft, is that right? steve: that's right. david: how come you didn't sell more shares? bill gates and paul allen sold a large part of their shares. steve: when i was ceo, somehow it didn't feel right to me. i should stay invested. i should stay there. but i am a loyal, loyal dude. i still drive fords. my dad worked at ford, and i still own microsoft stock. ♪ david: so in the year 2000, you
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become the ceo. bill decides to sort of retire and became the chief software architect, but no longer ceo. steve: correct. david: so you now can run the
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place. were you surprised that bill decided to retire? steve: i was surprised. i was surprised. bill had asked me to be president in 1998. i said fine. that was another number two position. and i was fine with that. and bill came to me and said, hey, will you be ceo? i asked him, do you want me to be ceo, or do you want me to be a figurehead? just tell me. he says no, i really want you to be ceo. i would say, was i ceo? because bill stayed working every day until about 2008. i would say i did not feel like a total ceo, probably, until bill was not working every day in 2008. because there was a lot of shared responsibility. david: talk about some of the things that happened while you were ceo. you moved into video gaming, i guess xbox. steve: yeah. we were saying, what is the path for software, if you will, into the living room? and the only path that was really clear at the time was the video gaming systems.
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there was no way to be in the video game business and not build the hardware. we had been in the hardware business in a small way. we had our mouse products and a few other products along the way, and frankly, i think we in many ways should have done more hardware sooner. david: well, you made another investment at the time that was actually criticized, an investment in a company called facebook. i think you invested about $300 million or so. why did you do that, and do you regret trying not to buy the whole company? steve: i did try to buy the whole thing. zuckerberg came up to seattle. we met there. i put a concrete financial offer on the table. but -- ross perot tried to buy microsoft from bill gates in, like, 1979, and bill said no. founders have a lot of love and passion around their stuff. even though facebook was tiny, i think it was 2009, and i offered, i don't know, $20 billion plus, something like
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that, mark had absolutely no interest. david: ok. a couple of other businesses, the smartphone business that apple has more or less perfected, at least in the united states. you were skeptical that that would be a great business. do you think microsoft could have gotten into that business earlier? steve: yes. we could have and should have. we should have gotten into that business, and i blew that. david: one of the other things that happened during this period of time when you were ceo was cloud computing. your neighbor, amazon, built this big business under your nose. were you surprised they became so big in cloud? steve: they have had more success than i anticipated. i did not sell them short, but they have had more success. here is why i think i was completely dubious. it is very hard sometimes for a big company to do something very different. i call it doing a second trick. at the time, i would call amazon a one trick pony. it was doing this retail stuff, it was doing an awesome job. but to do a second trick, you
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don't get a lot of companies who do that. it does not mean microsoft is out of the game. we started this thing called azure and office 365. and my successor has taken the thing to very much new heights. david: and right before you left, you tried to buy and ultimately, they completed the nokia acquisition. and that was an effort to get into smartphones. that didn't work out. why do you think it didn't work out? steve: i think there were probably two reasons. number one, maybe it was late. number two, after i left, the company went ahead and bought it. i don't think there was the same level of enthusiasm at the board level and management level for scaling up and investing in it. david: ok. so you ultimately decided to leave. and your successor is satya nadella. were you surprised when he was selected? steve: no. he was the recommendation i made. he was the recommendation bill gates made. i thought he was the candidate
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to replace me, which is why we moved him into running one of the big divisions. and i was glad he got the job, because he has done a great job. david: when you were there, you dramatically increased sales and earnings were dramatically higher. the stock price did not go up. why do you think there was not a correlation between stock price, earnings, and revenue? steve: probably two factors. number one, i took over at the worst time if you want your stock price to go up. i came in right at the heart of the dot-com bubble. everything was sky high. the bubble breaks, and by the way, a judge orders the breakup of microsoft. that happens within several months of me taking over. and things fall down, and then you have to build back up. that is number one. by the end of my tenure, i had a certain, kind of reputation with wall street. and not that favorable. not about my performance, but certainly people, this guy is a grinder, he is going to keep doing this thing.
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but are all these new things going to actually break through profit wise? number two, i think mostly people on wall street said that i over invested. i was spending too much money. the only chance to reposition the company really came when satya started. and, you know, he has done a good job of repositioning the company in investors minds. david: the stock has gone up, and your net worth has gone up a fair bit as a result. you are the biggest individual shareholder of microsoft, is that right? steve: that's right. david: why did you not sell more shares? bill gates and paul allen have sold a large part of their shares. steve: when i was ceo, i did not think it was right. somehow it did not feel right to me. even what i have done to diversify at that time, it was not like i was going to go broke if the microsoft stock does poorly, and it wasn't doing poorly. and i ran the company. if i didn't believe and people knew i already had enough money. i should stay invested.
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i should stay there. when i left, i still love the company. i did a little bit of stuff to diversify lightly. i put some money aside for charity, but i am a loyal, loyal dude. i still drive fords. my dad worked at ford, and i still own microsoft stock. david: you are well known for very visible and vocal expressions of your thoughts. steve: it turns out i have a knack. and part of that is getting in front of your troops and pumping them up, and tell a story. you know, at the end of the day, at least i can get into the game and be verbal and vocal. [screaming] steve: developers, developers, developers, developers, developers. developers, developers, developers, developers, developers.
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[applause] steve: yes. [cheers and applause] ♪ david: so you retire as the ceo
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at the age of 57. what did you decide you wanted to do when you left? steve: i had not really given it a ton of thought until i left. i, again, had this hard-core notion. just give it all for microsoft until i leave. so i leave, and what am i going to do? well, owning a sports team was attractive. so within a few weeks, i went and visited roger goodell and adam silver, the nba and nfl commissioners. i thought that would be a fun thing to do.
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my wife, who had been involved in philanthropic stuff, focused in on foster kids and disadvantaged kids in the state of washington. she said, come on, dude, time. you have to get involved. so i did. at first, i said the government takes care of these problems. and she said, no, philanthropy has a role, but it intrigued me to what degree the government really does help disadvantaged kids. i had a hard time finding the numbers, which led to me starting this thing called usa facts, and between the clippers, usa facts, our philanthropy, and having a good time, which in my case is exercising and playing golf, my life is pretty full. david: ok. i don't play golf. because my theory was if i had a meeting with you and you thought i was competent and intelligent and you saw me on the golf course, it would destroy the illusion of competence. [laughter] so that's why i don't play. steve: you are probably right, and i still play. david: let's talk about the organization you started, usa facts.
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how did you get involved in this idea and what is this now doing? steve: i want a consolidated view of what government does. where does the money come from? where does it go? and oh, by the way, what are the impacts? if we are transferring wealth, what does quality of life look like? we are investing in education. what is the quality of the outcome? how well are our kids doing? david: what are your philanthropic goals, would you say, in terms of the areas you want to focus on with the wealth you have? steve: we are single-purpose. what can we do to improve the chances that kids born at the bottom of the economic totem pole, their parents are, move up economically? you are always going to have some people at the bottom of the economic totem pole. it should not be the same people all the time. people should be moving up. people should have a shot at the american dream, which is the chance to do whatever you want to do. and that is not true for a lot of kids. when they are born, their
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probability of staying where they are economically is very high. i don't think that is ok. there are a lot of reasons. people point to education. education is part of it. but there are a lot of reasons why kids can't get an education. and i think it is important to take a look at that chain and find, not only the not-for-profits to invest in, we think it is important to stimulate the right behaviors by government and the right spending by government, because it can make a huge difference. david: so if you look back on your extraordinary career at microsoft and now what you are doing, any regrets? or are you happy with the way everything worked out? steve: i am pretty happy with the way things worked out. i mean, i could go back and there are decisions i would make differently if i was at microsoft, but if i look at the span of work, we went from a company that had $2.5 million in sales and 30 people to 180,000 people, $80 billion roughly in sales and lots of profit. i can feel good about that even though there were mistakes. i started out the process with a lot of friends.
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i still have mostly the same friends as i did, which i feel very good about that. i am in a very good place in my life now, probably in a way the best ever, although i would not trade out anything i did in the past, at least at this age. i like being a little less busy. that is good for me. i am pretty pleased. david: so as a leader, you are well known for very visible and vocal expressions of your thoughts. is that a style you consciously adopted, or it just happened that way? steve: i was a very shy kid. very shy kid. i was a shy kid when i got to harvard. and then i built my confidence as my -- i built it because i was doing things and being successful. i was shy when i got to business school. oh, when i got to procter & gamble, the guy who is my roommate said it like this -- hi, my name is steve ballmer. my palms are so sweaty because i am nervous. so a shy kid.
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but i got better and better. i developed some confidence in public speaking. and it turns out i have something of a knack, and part of that is getting in front of your troops and pumping them up and telling a story. i will do -- and basketball is a weird environment. of course, i don't have a lot of credibility. i'm an owner, for god sakes, not an expert. but at the end of the day, i can get into the game and be verbal and vocal. david: ok. what would you say is the most important characteristic to be a good leader? steve: commitment. you really have to have your head in the game and be committed to be a good leader. there are two parts to leadership, one is leading people. and that is about commitment and people understanding you have commitment. the other part of leadership, which does not get talked about much, is you have to be a leader of ideas. the worst thing you can do is for your people in general is to say, let's go. you point that way, and the truth is you should've gone that way. so leaders have to be leaders of
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ideas. the ideas compel the people, but then the ideas have to be right and you have to stay committed. david: if 25 years from today you are looking back on your life, what would you want people to say was your legacy, what you contributed to our country? steve: well, you asked a very specific question. what have i contributed to our country? what i hope we do is make some difference in the lives of kids. that is number two. number one, we democratized computing. and putting that kind of power and capability for people to thrive, to investigate, to be smarter, to create more, i feel immense pride about that. i put that number one. i think that was not only something that affected this country, but the world. whatever we do philanthropically i hope makes a big difference. it is hard to make a bigger difference than being involved in the popularization of computing.
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david: and the five nba championships you will have won, that will be important as well? right? steve: yeah, that is kind of a zero-sum game. when we win them, somebody else does not win them. it is harder to say it is a broad contribution, but in l.a., that would be a big contribution. ♪ david: where did the name
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"virgin" come from? richard: one of the girls laughed and said, are you a virgin at business? david: did she get a finder's fee for that idea or not? [laughter] david: you begin building other companies. richard: the only reason we would go into a new sector is if we felt it was being badly run. david: is there something in your life you have not achieved? richard: we are on the verge of finally, finally fulfilling that dream, the virgin galactic spaceships going to space. david: now you are a sir, you were knighted. richard: i was slightly nervous that it would be a slice at the head rather than a tap on the shoulder. >> would you fix your tie, please? david: well, people wouldn't recognize me if my tie was fixed, but ok. just leave it this way.


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