tv The David Rubenstein Show Peer to Peer Conversations Bloomberg November 3, 2021 9:00pm-9:30pm 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 it was private equity. [laughter] and then i started interviewing. i watch your interviews. [laughter] 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 said fine. i never negotiated with him. i did no due diligence. david: i have something i would like to sell you.
you don't feel inadequate now that you are 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 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 a chance to find out what unique quality it takes to be an investor and a great 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 any better? are you worried about this being a bubble, not unlike we had the tech bubble busts in 1999 and 2007? reid: you always worry about the market getting stimulated. there is some risk within the general market. now, that being said, technology is accelerating the
transformation of all industries. there is what artificial and can do to all industries. that is the leading edge of software. there's things happening with ar nvra. there's things happening with crypto. all of this is accelerating. that is part of why the venture industry has been so good, is because technology is important and 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? silicon valley as -- better than other areas of interest in the united states? reid: there is. silicon valley as a number of overlapping network effects. it has a network effect of being the have at which
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 a the hub of talent for people growing this companies, part of the reason i wrote this book "blitz scaling," about how do you build companies and attract the talent? there is the network effects of learning and out of sharing information. it is part of the reason why silicon valley -- the area has 3.5 million people tops, and why half of the nasdaq emerges out of silicon valley. it is for those kinds of reasons. in 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.
there are large companies that have this policy 996 -- 9:00 , a.m. to 9:00 p.m. six days a week, you are discoverable at your desk. and that is kind of like, you know, tens of thousands of people in technology companies. and they are doing a lot of innovation. there is 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: 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 united states is dominated by two few -- 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 going from -- we are going from massive 5 tech companies to 10. we are naturally heading in that direction. you can see it in things like netflix and salesforce and all these other companies which are continuing to also grow in strength and create a breadth of additional global, very strong technology companies. as an investor, when you go around and ask, the venture capitalists no, we are having , more and more startups, more ability to create amazing new tech companies. if anything, i think we are already naturally on that 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: i think we are already in that world. 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 the notion of the technological platforms of the future are in deep, like, there is 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. and we are already seeing chinese that form companies beginning to make strong head roads into the u.s. bytedance and tiktok is an obvious one. you already see it in drone manufacturing and dgi. there's a whole bunch that are already getting massive global
relevance. david: let's talk about the future. some things 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 hamilton. >> ♪ bitcoin needs to be centralized, needs regulation ♪ reid: i funded and produced a rap battle between alexander hamilton and satoshi nakamoto and that is 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: ok. 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 literally a question of when, not if, and how soon for it we
have autonomous vehicles. it will make all of our societies better. it will save thousands of lives. it will enable a huge amount of increase in productivity. so i think it is a great thing that we should be accelerating to as societies. david: have you been in one of the cars where you are not the driver and you feel safe? reid: i do. and i do. part of the thing that all of them, not just aurora, but all of them have, is safety, safety, safety is 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: ok. what about flying taxis, is that in our future? reid: there is. as you know, i also helped bring joby public via spac, and it has helped move the transport grid from 2d to 3d, redefined cities, make commutes much less arduous,
onerous, being able to live more remote and then coming to the cities. i think the jetsons is no longer science fiction, but 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. who obviously are -- and i have put some money into space x. that is more because elon and this amazing transformation in the world -- but it is officially an important area. i ended up in it sometimes just by who i know. ♪
david: let's talk about how he 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 than an epidemic, i am going to be an investor. is that right? reid: it did not start with investor. it started with product creator. it 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? this medium of software, of constructing new products. it was like i was beginning to get that lens of, what does the internet mean? and how do we all 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 lefton started paypal, they each invited the friend who most understood and had the entrepreneurial experience 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 have been helping us so much on the board and you understand this stuff and we have so much to do. 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 redefine the payments, with os with something that was in front of it even as it was exponentiating it's 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. he 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 may be investors that entrepreneurs think are devil investors. [laughter] angel investors are individuals usually with some knowledge of the entrepreneur that 10 to -- that tend to invest usually in the early stages of a company, frequently on 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 also individually, not with a firm, the resources and assets of a firm, the platform and the 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 out with and
participate in. david: you did it relatively prolifically. you became known as may be the most active and maybe 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 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. so when you look at the usage curve and go, this is interesting, the person who created this is really interesting. even though back then mark was really 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 that he was very smart, and you could see what was the trajectory that facebook was on, was really interesting. david: let's talk about this. you're an ngel investor, you are doing really well. people are coming to you with deals. and while you might miss one or two, basically you are doing quite well. why did you join a firm called greatbatch, excellent venture-capital firm why did you , need to join a venture-capital firm when you already had your own venture capitalist firm. reid: not surprising, i think in networks as platforms. one of the things i think a those 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. david and neal, who were then 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, these are people -- i would be delighted to be partners with these folks, so let's build the firm there. david: when you are starting at greylock even though you already had a good career as and angel investor, i think one of the legends in silicon valley is that the deal you wanted to do was airbnb. and a senior partner at your firm said, look, it's a terrible deal. it's going nowhere. were you were intimidated by that because he had a lot of experience? how did you push that through? reid: there is even more drummer -- 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 is the reason i am at greylock. so i bring in airbnb, it is my first deal and bringing into the partnership, and david, who i am super close to, have the deepest respect for, has returned billions of dollars to the fund, looks at me and says, every vc has a deal they can learn from and fail from, and airbnb can be yours. and i was, like, whoa! david is supersmart. [laughs] ultimately, i have to have the conviction. he gave me the hunting license, the permission to do the deal. so i did the deal. to david's credit, six months later, the numbers had not changed a lot. he came back to me and said, i thought about it a lot, i think you were right, i was wrong. what did you see that i didn't see? i said, all the factors were correct, but 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.
it would be literally, it , transforms the entire industry, and that is the thing i saw. david: you had some time -- i don't know where you got the time from -- 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: so, in addition to venture investing, you have some had some time -- i don't know where you got the time from -- 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 -- ultimately sold to microsoft for roughly 26 billion dollars, 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. is to 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 with hin in 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 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. 1a's, 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. and then 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, i would say that 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: so 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 entrepreneur, because i think it is a little easier, well, the game is hard, the definition
is easier, which is -- you have a vision of 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 the kind of 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 includes 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?
and the key thing that is a difference between being the entrepreneur whereas the all-end focus is everything i am doing , and the investor, you are not running the race of the investor. the founders and the entrepreneurs, they are running the race. you are helping as much as you can, but you have to judge, can they do that? and then, can you help them as best as you can, get there? it is the key difference in scale. david: so to help people who aren't as successful investors as you are, do you have any some failures you can tell us about, where you made a terrible mistake and you lost money just to make the rest of us feel good? reid: do we have days? i can go through the list. and actually, by the way, the interesting question of analysis here is not so much 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. so, like, missing twitter. missing snapchat. missing pinterest. those are much worse outcomes, than he put in $100,000, or $1 million, or $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 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 that i am still hoping to be the next reid hoffman myself. [laughs] that being said, there is a number of people who are like this in silicon valley, who bring an entrepreneurial mindset , entrepreneurial success together with an investing mindset and who play a central role in the network. many of these folks are folks that i work with. i could literally spend another
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