Chamath Palihapitiya on Why IPOs and Direct Listings Are Broken

I’m excited to be here, quite honestly, congrats to all of your success. You’re a dynamite.

The short version of the long story is that I, like most people, went to school to do what my parents told me to do, and those choices were to be a lawyer, a doctor, or an engineer, and I chose to be an engineer. So I went to the University of Waterloo, and I studied electrical engineering. But also, like a lot of kids, I went into the industry that at the time seemed the sexiest, which at the time was investment banking and derivatives trading, and I worked for an investment bank for a year.

But eventually, reality kind of caught up with me and I realized I hated the job. Or not so much hated the job, but I really felt underutilized. And so I moved to Silicon Valley, and I worked for a small music startup called Winamp, which was bought by AOL and became part of AOL Music. And I rose through the ranks there on the product side and the business side until I was one level below vice president. By this point, I was 24, 25. And then I became the general manager of AOL Instant Messenger by the good grace of my boss at the time, Kevin Conroy, who was my mentor.

Very important to have those kinds of people in your life. And then I ran AIMon ICQ. And during that period, I thought about acquiring or trying to acquire a company called thefacebook.com, which I had met through my colleague, Sean Parker, because when I was running Winamp, Sean Parker ran a company called Napster. And the long and the short of it was that AOL was not in a position to do any sort of acquisition, so I did a business development deal between AIM and Facebook. And then when Parker left, Zupp called me and asked to unwind the deal, and we got to know each other.

And then I joined the company in the two two thousand six, seven time frame and was one of the principal executives there until I left in 2011. And when I was there, I created the growth team. That’s probably the thing that I’m best known for, but also oversaw Facebook platform, our early monetization products, all of mobile, launched product globally in every market of the world outside The United States. And then I started Social Capital more to invest in interesting hard problems outside of traditional consumer technology.

Because at that point, you know, I had been working in consumer tech for for a decade, so I was a little bit exhausted and I wanted to work on things that I felt were more important for society, so healthcare, education, fintech, climate change, rocketry, stuff like that.

Well, it was the second product that I worked on deeply that had a network effect. The first one was Winamp. Winamp had a 100,000,000 users, and we were able to use those users to create two ecosystems. One was for skins, which was sort of the UI layer that sat on top of the media player, and one was plug ins, which was all this incremental third party technology, acoustics, and other things that you could use to make the product better. And why that was interesting is it basically showed me the power of a distributed and leveraged team because Winamp was eight of us, nine of us.

Yet we had hundreds of people building hundreds of skins and plugins to make the product better. At AIM, it was a similar kind of idea where you had these tens of millions of users, and because of those users, we were able to keep the product afloat even during times when the product quality was quite poor, the product strategy was not very crisp, our execution was marginal. And despite all of that, the users would number into the tens of millions on any given day. And so when I put those two ideas together, it very much cemented the value of a network effect, which was not very well trod ground at the time in two thousand and five, six and seven, and not well understood.

Now, obviously, relatively obvious to most people.

You know, the first is that forecasts are pretty worthless because everybody gets them wrong no matter how much data you have. When we were trying to project the impact of some of the things that we did, we were frankly off by an order of magnitude. We thought success would be getting the product to 100,000,000 users plus. Lo and behold, the product now touches 3,000,000,000 users, largely using the same compounding effects and growth rates that were driven by a handful of features that we created very, very early on.

That is the first thing, which is that forecasting is really not that helpful. You have to be in the bowels of a company building. The second is the value of compound interest, which is to say that a lot of things adding up by very small numbers of basis points tends to be the thing over time that makes things work at scale. There are very few panacea silver bullet features in life. I think a lot of people spend a lot of time trying to find the one thing without realizing that disciplined execution over large stretches of time that are really about thoughtful tactics really go a long way.

And that’s something that I’ve taken away. And then the third thing that I’ve taken away from my time there that has been immensely helpful is trying to study and better understand what creates a moat and being able to be more thoughtful about identifying these moats and amplifying these moats with product features. I think we have become, my team and I have become pretty decent at doing that. You mentioned forecasting

Get better investors. I think the high quality investors also understand the fragility of these kinds of things, and so as a result, do not demand this fake work. It makes for a much more useful conversation. What I tell the people that I work with at the earliest stages, what I want to see are thoughtful documents that really lay out ideally in prose versus deck form, what they intend to do. Then what I want is a very simple and elegant way of measuring those impacts, and being able to then double down on the elements of those that they think are the most impactful.

And what it does is it allows us to not work backwards from something that we know is inherently faulty, I. E, a forecast, and work forwards by having a very reasonably detailed product plan along with a way of demarking success and iteration. I think that that’s just a much healthier dynamic to give an early stage founder. The people that rely on forecasts should really be more in the later stages once the business is much more mature and predictable. At that point, these are things that then get reduced to DCFs and discounted cash flows.

And at that point, the investing mindset is very much different. So I think the early stage founder needs to really use something like that as a litmus test for the quality and the intellectual curiosity of the investor that they are going to work with.

I’m not sure about the semantics, Harry, but here’s what I will say. I think that all of these online social networks are coming to a fork in the road, And the fork in the road is balancing the morality of the employees and the board and the shareholders and the rest of the stakeholders. And in that balancing act, different sites will make different decisions. I think what you are going to see is a distribution of outcomes where you will have more left leaning sites, more right leaning sites, and more centrist organizations.

They will reflect their moral and ethical view into the product and the business decisions they make as a result of it. And I think that that’s no different than what you see in the media landscape today offline. So you have left leaning papers, right leaning papers, centrist papers, libertarian papers, you have the same for radio. You have the same for magazines. You have the same for broadcast television. And I think it stands to reason that what’s really happening right now is the same decomposition and fragmentation of the online landscape that frankly has happened to use TV as an example.

We used to have one or two or three broadcast channels and fast forward seven years later, you have 700 channels. It is probably true that there is not a one size fits all social networking product for information consumption for everybody. As a result of that realization, fragmentation probably creates more flexibility and rules for everybody. I suspect what happens at Facebook specifically is you’ll have certain properties that are much more right leaning or libertarian, if you will, and other properties that are much more left leaning. I think that that’s probably how for them to maintain market cap, they’ll have to acquire or build sites is with a view to different parts of the demographic makeup of society that they don’t have a good grasp on.

I think that’s the same for Twitter, and it’s the same for Snap and everybody else.

I think it was exactly that. When everybody is clamoring to do the same thing and copying, I thought to myself, what have I really done? And I think what I had done was build a very capable and very competent asset gathering machine. The problem is that that would have required me to give up the rest of my life to become the manager of said asset gathering machine. And in order to run that machinery, I think that there is a fundamental element of sales and a fundamental element of traveling and a fundamental element of storytelling that you need to fall in love with.

Now the latter, do love. I I think I really love communicating and getting my ideas across to people. But to be very honest with you, the first two were not things I was very passionate about. I wanted to build a kind of organization that in some ways was a mixture between Berkshire with respect to its capital and capitalism philosophy, bit of elements that are like Koch Industries with respect to its view on amalgamation and building conglomerates, and frankly, a view that’s in part like the Red Cross or Doctors Without Borders, which is a selfless mission driven organization that is trying to do the good and right thing all around the world.

And Those goals and ideals were just not possible with the lens with which I was viewing the world when I was running a traditional venture capital organization. It was a very difficult decision to make. I think it left a lot of my partners unfortunately, in a position where they had to bounce back and find something else to do. The good news is that I think they all landed on their feet. They are all doing wonderful things. The other practical reality is they all made a lot of money, and I am very happy for them.

Can I ask you, Chamath,

No, I think honestly, Harry, as I grow older, I become less insecure, and I am less driven by the inferiority complex of the moment. What I would also tell you is that I made some enormous mistakes in some of the people that I hired that I think that there were a couple of people and they know who they are who have huge integrity issues, and I optimized for capability over integrity. I have said this many times, but integrity really does compound infinitely, and capability always decays.

I did not know that, and I was not secure in myself to hire someone who was more mission aligned or morally aligned over someone who was just capable. Now, those capable people ended up becoming lone warriors and in it for themselves, and that was a mistake. I also made enormous issues of compensation. And all of these things, I think, created schisms between me and a few of the folks that worked for me that we could never really overcome. When I was much more blunt, it was because I was also still angry because those feelings were raw.

Fast forward to June 2020, I am feeling pretty good about things. I can be a little bit calmer, I guess.

Well, one of the things you have to decide is whether you are hiring for functional role and competence or whether are hiring for a set of behavioral markers. If you are hiring for the former, for example, like you are going to hire an engineer and you need to understand whether they are a good front end engineer or not or they understand a very specific tool chain better than other people, the concept of integrity actually does not have much place in the world in the hiring decision.

And the reason is because the surface area with which they exhibit integrity does not really exist. I mean, I suppose that they could produce a bunch of fake check ins, but at the end of the day, if you cannot build features properly or you have completely lied about your capabilities, you will get fired. The judgment is in the technical execution, but those are very binary outcomes, things that you write out of their work or do not work. If however, you are hiring for what I was hiring for, which are partners, open ended thought partners who will be there, then it is much more about character.

The only way that you can find people with high integrity is to spend enormous amounts of time with them over a longitudinal period of time. It’s not about two weeks of ten hours a day, it turns out to be five or six months of many, many, many hours every week. The reason is because eventually, their integrity shines through slash their lack of integrity eventually seeps to the surface because you just cannot hide it forever. You see it in the way they treat other people, you will see it in the way that they approach problems, you will see it in the way they eventually let their guard down.

In those decisions, you 100% have to go with your instincts. And at first, my instincts also weren’t that good. And so when I was starting Social Capital, I did not really frankly have a high sense of self worth. So the idea that people wanted to work with me really won me over. Now, what I would say is, I am pretty sure I am a reasonably good person to work with. And I am convinced that I am pretty good at what I do. And so now, would rather take my time and really find people that are morally aligned with who I am as an individual.

And if that means that I lose people, so be it. It’s not the end of the world. And if that means that it takes six months to a year to hire somebody to work with, so be that too. For the right person who’s willing to make that time commitment, it’ll be worthwhile for them and for us.

It is a fundamental challenge. And I think that the reality is though that the surface area, again, is relatively small for these kinds of decisions. So I do not worry about it as much between the founder and the investor. I think between the investor and his or her partners, it is a much more important decision. And the reason is because, it is much harder in 2020 to start a company and fundamentally cheat and lie. You cannot steal money or embezzle as easily as you could have in the past.

You cannot fake a product. You cannot fake customers as easily as you could in the past. The basic questions of integrity, I think, are relatively well answered, because the work product is so iterative and tactical, and there are so many things on a constant basis that an entrepreneur has to do to make a company successful that it is very hard to lack integrity. That being said, be a partner in a venture capital firm, it is very easy, frankly, to lack integrity, because there are no points of demarcation, and you only learn about your fellow partners in very sporadic bursts over very, very long periods of time, largely when it comes to money and credit.

So, know, ego and compensation tend to be these things that are highly amplified in these traditional partnership structures. And it just takes a long time. So if I was a VC, what I would tell myself, my job is to make sure I don’t miss. This may be a jumping off point as well to talk about my investing philosophy, but when I am talking about investing hundreds of millions to a billion dollars plus, I tell myself that I have to be completely predisposed to inaction. I force myself to do nothing, Harry.

The bigger the check, the longer I need to wait, and I force myself to bide my time. The reason is because optionality, when you are writing really, really big checks, the optionality comes from doing nothing. Because once you spill out a billion dollars, in my case, I would only have three left. So 25% of my capital goes out the window, I have to be very careful. But if I am writing a $5,000,000 check, then the predisposition has to be towards action, because 5,000,000 over 4,000,000,000 is just not a lot of money.

We need to be in the game, and we need to make sure that we have enough chips on the playing field so that if something works out, we get lucky to be a part of it. What I would tell myself if I was a venture capitalist is I am in the latter game. I am in the action game. I have to take my fund, allocate 25% to reserves, and the other 75% and divide it by the number of months I want to go before I raise a new fund, typically eighteen months, and that’s how much money I’m writing every month.

And I would just keep doing it ad infinitum as long as I could raise. Now, that’s where I started. Now, I’m in the business of inaction and doing nothing. So it’s mostly thinking and reading and trying to decide how to reflect my worldview in adequate ways where I could retain optionality and not go broke.

Yeah, in fact, so inaction does not mean you sit around doing nothing, you are working out or you are playing bridge online. Wish my life were that easy, but it is not. The things that we work on are complicated enough that at least for me, I do not know them well enough and so I am trying in a short burst of time, I. E, three to six months, become expert enough to make qualified decision on a large quantum of capital. The way that I break down my periods of inaction is essentially a learning process.

What we are first trying to do is understand the broad landscape, and then we are trying to refine very specific ideas that we then go deep, deep, deep into. And we find experts all around the world, whether they’re university professors or scientists or other entrepreneurs, and we just try to learn. And we ask as humbly as possible for them to teach us. And that process takes another two or three months. And then we take all of that information from the first four months, and then I essentially try to write a narrative that explains an understanding of a market or a particular opportunity in a way where it becomes investable.

Because then that narrative, six or seven pages of single spaced writing, become my way of distilling many months of knowledge and inaction into some potential action. So that’s how it works for me. I’m not saying it’s the best, then I won’t refine it and change it. But it is definitely the process that I have honed in on over the last few years that work best for my style, but that is what I do. It is very, very, very time consuming, and it is very structured, although in many cases, results in doing nothing.

I think that there is not a lot of first principles thinking in many things. I think the best entrepreneurs will tell you, or people will describe them as really great first principles thinkers, which is basically to keep asking why enough times where you get to the root cause where the answer is I do not know. And so if you start asking the question why as it relates to IPOs, you very, very quickly get to an I do not know moment. Now, here is what I have learned, Harry, before I set up this IPO 2.0 platform and tried to create this as an ongoing product that other companies can use.

The first is that from the year 2000 to the year 2020, the number of companies that you could invest in in The United States equity markets has shrunk from 8,000 to 4,000. That is a combination of bankruptcies, M and A, consolidation, etcetera. But that is an incredible thing to understand that the investable universe has shrunk in half. At the same time, the investors, so the practitioners of capital have increased about 100x. There is 100x the number of hedge funds today that there were in 2000. And what’s even more interesting is that the amount of capital has increased by 1000x.

So here you have these interesting market dynamics. And so again, if you start to ask some first principles questions, you’d say, my gosh, like, won’t the public capital markets be better for young tech companies? And the answer is yes. Why? Because you have 1,000 times more capital multiplied by 100 times more participants who are all seeking growth. Why? Because the backdrop is that interest rates in the meantime over the last twenty years have gone to zero, which means that if you need to buy an asset that can grow for the next three or four years, you actually need to buy an asset that can grow over the next five to seven or seven to ten.

And the minute you do that, what you end up is looking at technology companies as the last bastion of investable surface area. So from my perspective, it just seemed pretty obvious if you looked at the problem that way, that a more liquid efficient market for founders would actually be found in the public markets and not the private markets. And so that’s why we created SPACs. Now, why is SPACs specifically? Well, again, if you go to first principles and you say, what’s the goal and who’s the customer?

Well, the first goal to just do it as simply and as efficiently and as transparently as possible. And number two is you do it for the founder and the employees who are the real customers of this. And the thing with the SPAC is that it does both of those two things. Traditional IPOs are very fraught with principal agent problems by the banks who try to feed cheap stock and poor price performance to other customers of theirs, namely the prime brokerage customers of their trading business. Direct listings are very complicated because they are equally as burdensome in terms of time, and equally litigious in the sense that typical IPOs are fraught with shareholder lawsuits, so are direct listings increasingly.

On top of that, the ability for directors to get D and O insurance via direct listing is next to impossible. And I went through this at Slack, I can tell you firsthand. Meanwhile, you can’t raise primary or secondary capital. So IPOs are a little Byzantine and broken. Direct listings are Byzantine and broken. They both take eighteen plus months to pull off. And then lo and behold, there’s this tool called the SPAC where you pre bake it. That is what I do. I pre bake the IPO already and get the SEC approvals, etcetera.

Now, all of a sudden, it is a ninety day process. You go public via a merger, which means that you can actually spend time with Wall Street. You can create a forecast. Did you know that you cannot create a forecast when you go public through a traditional IPO?

You cannot show a multi year projection of what you think the business can do. So there’s all these arcane rules that you can work around that a SPAC solves. It is very transparent. You can add any amount of money to the IPO that you want. You can do any mixture, primary and secondary. You can remove all the lockups so that the employees and the founders are free to get liquidity from day one. I didn’t invent this back, so I can’t take credit for it. It’s been around for decades.

I just think it was pretty simple first principles thinking.

I cannot say that I have the answer. The reality is that the SEC has very strict regulations with how many of these you can do at the same time. So to your point, it is not as if software could automate this where you could have a thousand or even a 100 or even 10. But I think that that is also right, because I think that if that happened, you would have a bunch of fly by night folks who viewed this largely as a scheme to get rich.

And I think whenever that happens, a market can get perverted by those kinds of actors. The reality is these things take time. They are a little bespoke, each one. They are handcrafted. They take people who have an interesting cross section of skills, you have to be particularly if you are going to work with a tech founder, you have to be on the one hand, relatively savvy on the capital markets and a decent investor, but on the other hand, a good translational layer that can explain the product and the technology and help the CEO transition them into being public.

So that is a unique skill set that I do not think many people have. I do think some people and a handful more than I, but I think it a unique enough thing where if we can do our part in getting that 4,000 closer to 8,000, I think we’ll all be better off.

It is a tool. It is not the end in and of itself. I think what I do with these SPACs is continue to refine our toolkit of investing, continue to understand how to punctuate long periods of inaction with things that are highly accretive. I think that is a definite skill. If you think about investing more broadly speaking, it is an infinite game. The only real competitor is yourself, because the only thing you are really fighting is not really market gyrations, but it is your own psychology.

And if you can manage your own psychology, you have the ability to survive. And when you are trying to win an infinite game, the only marker of success is survival, right? Because by definition, if you get to the end of your life and you are still in the game, you have won. And it does not matter how much you have or how much you lost, it is just that you never lost the game. And unfortunately, I think a lot of people treat investing as the opposite, which is a finite game, where you are trying to sum up something, your net worth or your assets or whatever, and I just do not think that is what it is.

I think the financial markets are a beautiful test of your ability to self actualize and to psychologically evolve and survive and to build true emotional resilience. Because if you do it, I think the best investors have that. And Buffett is a perfect example. So When I talk about wanting to build Berkshire, in many ways, it is a selfish way of defining a goal for myself that is frankly a lot about me and moving to a better place where I psychologically have a better handle on my emotions.

I understand when I have these bouts of inferiority, I find a way to just constantly become a little bit calmer, a little bit more humble, a little bit more focused, find a way to be kind to myself, like I have had opportunities to make money, have given them up, I have had opportunities to sell instead of held shares of a company that I believed in and lost money. I can really punish myself or I could learn to be kind and it has been a great test.

You have to be very vulnerable, you have to be super authentic, you do not know the answers. And so all of these things, if I describe those things, you could go to a therapist, which I do, but I mean, could go to a therapist with these things as personal evolution, but in this crazy way, Harry, it’s also a professional evolution. So by taking social capital public, what I think I will have said to myself and then said to you and other people is that I feel like I have gotten to a point where I am no longer my own worst enemy, which means I would be very comfortable with you entrusting me with some portion of your capital for the rest of our lives.

That is an it is just a different level of risk and responsibility that I have that I didn’t have when running Social Capital because I viewed it more as a finite game.

It has become less and less of an issue because it does not really hit me. Meaning, if somebody gives me a compliment, I know enough to be thoughtful and gracious to accept it. But if you could walk through what is happening in my mind, imagine there is me standing there with a big glass dome and somebody is throwing something at me and what I hear is, bing, it just bounces off. And the reason is because I have really come to believe that the only person I am really trying to impress is myself.

It does not mean that I do not care what others think or that I cannot be a good, honorable person to the people around me. That is not what it means. But it just means that if I look at my desk, I have one piece of paper and I have written on it the following things, which and I just told you what they are, but I will say them again. This one piece of paper on my desk says the following things, calm, humble, focused, kind to myself, vulnerable, authentic.

And it is a way of reminding myself every day who I am battling, and I am battling myself to find an incrementally better self on these dimensions every day. That is how I think about it.

It’s a really thoughtful thing you just said. You know, I was robbed of my childhood, Harry. And that may seem like a really dramatic statement, but when I see my children, there is a level of lightness that my children have as they approach their day to day life. They can run and jump and swim and play and they do not live with the scepter of fear. And my childhood was largely about making sure that I understood where my dad was in his psychological state. And that was the only way to protect myself physically as well as psychologically.

So it robbed me of a childhood of that likeness. But what it also did, it forced me to become extremely superficial in the sense that I did not learn how to build any intimacy with people. What I was taught very early on was that adults will let you down. What I was imprinted inside me was that I was pretty worthless, because why else would somebody treat you like that? You must not be a very worthwhile individual. And all of those things created enormous dysfunction that cascaded into my adult life.

What I would tell you now though, is that I wouldn’t have changed it for the world, because it was in that struggle that I’ve learned that these are the things that really matter. And in fixing it, I found things that I never thought existed in the world. So emotional intimacy, deep sort of sensations of like love and kindness and the ability to be just a wonderfully loving parent or friend, those were things that I fundamentally did understand and probably in many ways, disrespected in my mind, because I thought that they were signs of weakness.

It has allowed me to get to a much better place. I am now, what I would say is my dad did the best he could, and my mom did the best that she could. And it took me many years of therapy where it started off from bewilderment and then anger and then all the stages of grief, but now I have accepted it and I said, despite all the things that they may have done wrong, they did one fundamental thing right, which is they gave up their entire life, they moved from Sri Lanka to Canada, and they did whatever it took.

And at the end of the day, that has made the single biggest important impact in my life, because I do not think I could tell you that I would be here talking to you had I not grown up in Canada. So I owe them everything, but it has made me realize that the things I did not have, I did not have many material things, but it did not really matter. What I really did not have was a childhood. And now I the only thing I can do is try to give that to my kids and use it as a way to just, again, go back to the things that I am trying to be and reward myself with this kind of psychological progress.

I think that children in many ways are the best and worst reflections of you as a parent. So what they can give you is complete unfiltered, nonjudgmental love. They look up to you like a hero. And it is an incredible sensation, because probably in most of our lives, unless we were some famous singer or athlete or whatever, we probably were not adored by anyone really until we had a child. And when you have a child and you see them look at you, you are the single solitary thing in their life.

And it is an incredible, incredible feeling. And so for me, it was a realization actually, Harry, about how much I did not have growing up emotionally. And it was what really said to me, I have to go on this journey and figure out what all of this means. What does it mean to have grown up the way that I did? What does it mean to not have had a childhood? How do I think about giving a childhood that is light and free and full of possibility and love to my children?

That is the best gift that I will give them. So they did that for me. The other thing that they did was really help clarify for me what was important, because what was not important was then any monetary or other demarcation. What was really, really important was the ability to allocate my time so that whenever I was making sacrifices for my family, it was resulting in something that mattered to them. What matters to them is that their dad is happy, because then their dad gives more happiness back to them.

The way that I am happy is not by making more money, but is when I feel like I am learning and I am psychologically evolving around these dimensions. So they gave me the courage to change my business. They gave me the courage to be able to tell you confidently that I go through long periods of time doing nothing, reading, thinking, meeting, but nothing. But it is okay, because it makes me a person that they are more proud of. And that is very good for me.

Not yet. I think that it still ebbs and flows and I think that two things will happen. One that is an outside in is when my business is public and I can really feel like I’m doing right, not just by me, but the people that have aligned beside me. And then the second is when I don’t need this piece of paper on my desk. Because the one thing I didn’t tell you about the note is that there are those things, but then there’s a word that’s written before it, which is the word be.

And so I’ve really kind of told you a half truth. The real note, it says be calm, be humble, be focused, be kind to myself, be vulnerable, be authentic, which is just a reminder that I’m not always those things. So one is a responsibility towards others, and the other is a responsibility to myself. So when the business is public, and I do not have this note on my desk, I know that sounds crazy, but I will feel like I have really accomplished something.

I am not a huge book reader, to be completely honest with you. The book that I am reading right now that I found is really brilliant is the Shane Parrish, The Farnam Street, the one that breaks down mental models. I think that that’s wonderful. But probably my favorite book is something fun. It’s called Liar’s Poker written by Michael Lewis. It’s about the bond trading desk at Solomon Brothers in the eighties. Wonderful, fun, guilty pleasure. Most

Easy one. So when I was 33 years old, I joined the ownership group of the Warriors. I bought 10% of the business. I was one of six major holders of the business. And my first board meeting, you know, I was one of the first minorities to join the ownership ranks of a professional sports league. So I was checking a lot of firsts, but the first board meeting I ever had at the Golden State Warriors was incredible. I was sitting beside Jerry West. If you don’t know basketball, he’s the logo on the NBA.

And it’s just this enormously large imposing figure. And, again, you know, he’s the logo. This is the entire league is built around Jerry West at some level. So Jerry West couldn’t give a fuck. He will talk whenever he wants to talk. He talks about whatever he wants to talk about. He’s Jerry West. And I had a brilliant, brilliant time, and it was the honor of my life to sit beside him. And he would, you know, whisper to me constantly about things that he was thinking. It it was incredible.

It was incredible.

I think that governance really matters, especially as a company scales, because people will use success as a reason to not compound integrity. So I think learning from someone who really understands that integrity is not a question of leverage. It’s sort of a binary decision. And so I would make sure that you really understand what’s right or wrong, and you stand up for yourself because there is no board that’s worth sitting on when they start to behave in a way that violates your moral compass. It is just not worth it.

Invariably, the best CEOs see it and then they appreciate it, because in many ways, a lot of CEOs test the boundaries almost in a curious way to see who has the balls to tell them no. And I think that is a really important thing to learn. The other thing is that I would really encourage you to get the CEO to write a multi page prose memo before every board about what he or she is thinking about the company. And I would study that, and I would be really prepared.

I think that not enough CEOs do it, and then as a result, not enough board members are really prepared to really help understand their point in their own psychological journey in running a company. What is your biggest strength and your biggest weakness do you think? My biggest strength is that I think I have a very good mind for understanding risk and what is a good risk and what is a bad risk and how to make risk adjusted bets. I played poker for a long time and I have refined it there, where I put people to the test for huge decisions, huge amounts of money and vice versa, I have been put to the test.

I have learned to really assess risk and what I know and what I do not know, so I think I am pretty good at that. I think my biggest weakness is that I still have these pangs where because of these self worth issues, I can be somewhat destructive, and I give myself a harder time than I need to. So I have had these inferiority complexes, and that is probably my biggest weakness still. What would you most like to change about the world of venture that you see today?

I would love to take away the management fee, and I would love to replace it with a little bit more carry so that we really see the dynamics of when you have to work for decades to get paid like the founders and employees of companies. If you could form a

I would put my friend Rob Goldberg. He was a really instrumental part of my friend circle, and then one of them passed away, Dave Goldberg, his brother, four years ago. And what I would have told you about Rob before was that he was kind of the goofball in our group. And over the last four or five years as I’ve gone through my journey, what I’ve realized is he is the most empathetic and emotionally intelligent person that I have really met in my life as a man.

He has been instrumental so that it has helped me build valuable relationships with other men. Because otherwise, everything else was basically like a dick measuring contest, which was about am I superior to you or are you superior to me? And it’s not healthy. Sometimes we need relationships that are de escalated. So that’s one person. My second is my partner. She has been transformational in my life, Natalie Dompe. She has a level of emotional intelligence and compassion and empathy that it’s is just unique. She has got an energy meter that I have never seen before and so she has really helped me be kind to myself and at a very basic level, love myself a little bit more.

I think those two would be the principal people and then if I had to add one more person, I would probably choose somebody that did not like me. Who does not like you? I think a lot of people dislike me, but for the wrong reasons. I think the initial UI that I give some people perturbs them. I think the reality though is, Harry, that a lot of people hate in others what they hate the most in themselves. And when a lot of people are angry or judgmental about something, what they are really judging is something in them that they would want to fix.

I would want somebody like that because it is a good, again, barometer of how fast I am evolving. Eventually, when that person is not mad at me anymore or does not hate me, again, it probably means that I have gotten to a place of peace. That is an abstract idea of a third person, but that is who I would want.

I think we are seeing the decentralization of entrepreneurship. I think that entrepreneurs come in all forms, genders, races, colors, sizes, sexual orientations, and they all come in every geography. And I think there are really great initiatives like Y Combinator, startup school, things that are sort of abstracting the fundamental building blocks of being an entrepreneur to something that can be consumed by many, many people all around the world. And in that, I think that there is an enormous momentum and pendulum that is swinging towards global innovation.

The thing that I think people need to realize is as that happens, returns will decay. And it happens in every market when you expand. So real estate used to generate 30% IRRs. Now they generate high single digit IRRs, but the asset class and the category is a 100 times bigger than it’s ever been. Private equity used to generate 30% or 40% IRRs. Now again, high single digit IRRs, but the asset class is bigger than it has ever been with trillions of dollars. Similarly, I think we want innovation and startups and company building to be a global endeavor, where we can absorb hundreds of billions of dollars a year, trillions of dollars a year.

I think the reality that people need to confront themselves with though is that this is going to be a business that generates single digit IRRs. But that is good because the net impact for society will just be that much greater, which is why I think again, going back to what I said earlier, dispensing of the management fee and getting people to be carry oriented, I think really gets people who are invested in the process and have a love for company building.

Well, I think when you look at the compensation of venture funds, if you took a five person venture fund and raised $500,000,000, that’s $10,000,000 a year in fees. I don’t think that that’s required to pay five people $250,000 a year. So the reality is that if you had just a very simple budget based approach, I ran my fund as budget based. I never ran it as a flat fee. Now, I ended up using the 2% because I had many, many tens of people. I had data scientists, we had HR, we had PR, we had all these outsourced resources, all those things consumed capital.

But what I did not have was a situation where I was paying myself $34.05, $6,000,000 a year. Many venture firms are set up that way. Sure. And so the idea is if you basically crush the fees down to virtually nothing, and you made people have to transparently disclose what they made, then I think entrepreneurs would demand that they pay themselves no more, no less than the CEO themselves, which is fairly reasonable. And you really only make money when you can actually help build a company for success.

In the next five years, what I would really like to prove to myself is that I can do these large concentrated investments in a repeatable way, meaning I can learn, I can refine a decision making process and one or two decisions a year or every eighteen months, I basically have a very, very high hit rate. That is what I would like to prove over the next five years.

I think at that point, that is a really good demarcation where if I think that I can continue to grow as a person at the same rate or even half the rate that I had over the last couple, then I think I’ll be in a really good position to take that next step, take the business public and get this piece of paper off my desk. Chamath,

It’s

Harry. Thank you.