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Chamath Palihapitiya

lines on the record: 166
first: 2017-08-28
most recent: 2017-08-28
sittings or episodes: 1
sources: podcast

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“And then what happens is all these investors who otherwise were, you know, they were not sure I was a cultural fit for, I wasn't sure they were a cultural fit for.”
2017-08-28 · Decoder with Nilay Patel · Recode Decode: Chamath Palihapitiya, CEO, Social Capital · IDENTIFIED FROM THE TRANSCRIPT
“Some loudmouth kid with a lot of money, who frankly is going to build whatever he wants to build. And enough, I'm not saying I have a lot, but enough credibility to get enough critical people to get it past that existential product market fit phase, which we are.”
2017-08-28 · Decoder with Nilay Patel · Recode Decode: Chamath Palihapitiya, CEO, Social Capital · IDENTIFIED FROM THE TRANSCRIPT
“Because there was never any competition. And now there is, yeah, and also there was never supposed to be a guy like me with a couple billion dollars. That's just not supposed to happen because that's the last thing they want.”
2017-08-28 · Decoder with Nilay Patel · Recode Decode: Chamath Palihapitiya, CEO, Social Capital · IDENTIFIED FROM THE TRANSCRIPT
“Particular venture kit. Awesome joke. It's a total joke. Yeah. They do sell it well. Hindsight bias, naval gazing bullshit.”
2017-08-28 · Decoder with Nilay Patel · Recode Decode: Chamath Palihapitiya, CEO, Social Capital · IDENTIFIED FROM THE TRANSCRIPT
“Right, and so then as a result, they get a lot more people in the game. So, my whole point of view here is that in the next five to ten years, all of that comes home to roost. Massive balance sheets, Amazon, Facebook, Google, Microsoft, potentially Apple, all the Chinese big internet companies, folks like us who are providing key insight based on some amount of proprietary data, whether it's gleaned from AWS or whether it's gleaned from server logs that you proactively give to an investor. And then everybody that isn't that, the LP say, well, wait, you have an undifferentiated product which forces then you to invest in the marginal outcomes, which now ties up my money for a shitty return relative to what I can get in the public markets. And so that's what happens to venture capitalists.”
2017-08-28 · Decoder with Nilay Patel · Recode Decode: Chamath Palihapitiya, CEO, Social Capital · IDENTIFIED FROM THE TRANSCRIPT
“No, this would be like it's almost like a buy these companies anyway, it's a function of AWS. This should just be a thing in a marketplace. It's like, here's your cost of capital. And there's probably a place on a website you can go to where every third party seller on Amazon can understand his or her quality. How are they relative to all the other sellers on Amazon, which is probably how Amazon decides how to lend to them?”
2017-08-28 · Decoder with Nilay Patel · Recode Decode: Chamath Palihapitiya, CEO, Social Capital · IDENTIFIED FROM THE TRANSCRIPT
“And so it doesn't take much logic to actually view a world where Amazon's like, well, I'm renting your computer. I'm renting you the storage. I'm renting you the algorithms. I'm renting you all of this stuff. I'll just give you some money along the way as well. And they do that with credits, but they don't really take it to the next level.”
2017-08-28 · Decoder with Nilay Patel · Recode Decode: Chamath Palihapitiya, CEO, Social Capital · IDENTIFIED FROM THE TRANSCRIPT
“Know where we're nine people, we're going to try to raise the next fund, we're going to chop it up amongst ourselves. It's about us. We make the best decisions we can, which again is okay, but again, I think LPs really start to push back. Separately, what happens is you're going to have different folks who have different approaches. I suspect actually the most disruptive entrant into the venture capital landscape can probably be Google, Microsoft, and Amazon. Why? Because most of the businesses are built on top of them.”
2017-08-28 · Decoder with Nilay Patel · Recode Decode: Chamath Palihapitiya, CEO, Social Capital · IDENTIFIED FROM THE TRANSCRIPT
“10 12 years now because these companies take longer to gestate and get basically the same return I can for being in a highly liquid public market security. So from any sort of logical risk-based assessment for a limited partner, I think what happens is there will be a culling. And any of these folks that can't have differentiated returns, you are not going to take on the risk of being a liquid, especially if you think about it in a world that is probably going to become more complex, more dynamic, less stable, you want to have massive amounts of liquidity because you don't know when the dislocation is going to happen.”
2017-08-28 · Decoder with Nilay Patel · Recode Decode: Chamath Palihapitiya, CEO, Social Capital · IDENTIFIED FROM THE TRANSCRIPT
“Most of which will go nowhere. At the same time, what happens is the public markets provide them provides the investor, in this case the LP, a very reasonable way of actually getting almost the same return, if not in many cases an equivalent and better return. And so now the LP in these funds have to ask the following question well, I can lock up my money for what is effectively.”
2017-08-28 · Decoder with Nilay Patel · Recode Decode: Chamath Palihapitiya, CEO, Social Capital · IDENTIFIED FROM THE TRANSCRIPT
“So, the root awakening is going to be the following, which is like when you look across the venture landscape, you have a bunch of people who are frankly ill suited to do what they're doing. And so as a result, they feed off historical bias. They kind of focus on the things that they know the best, which will result ultimately in a bunch of marginal investments.”
2017-08-28 · Decoder with Nilay Patel · Recode Decode: Chamath Palihapitiya, CEO, Social Capital · IDENTIFIED FROM THE TRANSCRIPT
“Think there's a huge sort of rude awakening that's going to exist in the venture landscape, and it goes along the following lines. Most of the practitioners, exactly as you said, I think are dated both in their philosophy, their framework, and their capability. These are people that grew up in a different time where the social signaling of where they went to school mattered enough where they could get these very prestigious quote-unquote prestigious jobs. The problem is that it's not a prestigious job. It's a critical job. And so the people who get prestige versus the people who get criticality are very different kinds of people.”
2017-08-28 · Decoder with Nilay Patel · Recode Decode: Chamath Palihapitiya, CEO, Social Capital · IDENTIFIED FROM THE TRANSCRIPT
“It's not exactly. Here's a huge pricing elasticity framework, or you know what? Can we inject some JavaScript so that we can, you know, across five of our companies figure out how much overlap there is in lead generation? You know, like, why would you spend money on Google and Facebook if we could tell you 30% of those leads? We can just give you for free.”
2017-08-28 · Decoder with Nilay Patel · Recode Decode: Chamath Palihapitiya, CEO, Social Capital · IDENTIFIED FROM THE TRANSCRIPT
“No, for us, it's more like, hey, you know what? Here are these 15 A-B tests we think you should run. And if you want us to, we can run them for you and actually tell you how they”
2017-08-28 · Decoder with Nilay Patel · Recode Decode: Chamath Palihapitiya, CEO, Social Capital · IDENTIFIED FROM THE TRANSCRIPT
“It's just those resources that we think are really the critical ground truth people that matter. And then we complement them with boards because at the earliest stages, it's a very emotionally fragile relationship when you're trying to get a company to product market fit. And so we want to support infrastructure there. But we're also very happy with you finding an independent, finding somebody else because as long as that ground truth exists, we can empower a lot of different kinds of people that you feel comfortable with.”
2017-08-28 · Decoder with Nilay Patel · Recode Decode: Chamath Palihapitiya, CEO, Social Capital · IDENTIFIED FROM THE TRANSCRIPT
“No. And in fact, our goal is there are two kinds of influence that happens in a company. One is sort of the, you know, what happens at the board level and one happens operationally. We're happy to engage as deeply as they want if they don't want our help. We won't. If they want us to disengage, if they want us to re-engage, we're very flexible.”
2017-08-28 · Decoder with Nilay Patel · Recode Decode: Chamath Palihapitiya, CEO, Social Capital · IDENTIFIED FROM THE TRANSCRIPT
“Or if you can do a combination of debt and equity that's even better for you. So for the entrepreneur, it's like you get.”
2017-08-28 · Decoder with Nilay Patel · Recode Decode: Chamath Palihapitiya, CEO, Social Capital · IDENTIFIED FROM THE TRANSCRIPT
“I would like to be that for the flow of capital so that an organization says, you know, there's an infrastructure that I can plug into that allows them to understand us, that gives us deep insights about how to improve. It's built on top of a knowledge base where the entire system gets better as more companies participate. And along the way, they can now give us differentiated capital. And by the way, here's why it's even better for the entrepreneur. Our cost of capital now becomes cheaper because we more profoundly understand the business. So a typical Series B is like, oh, I'll invest $15 million at 100 posts. Well, I could invest $15 million at 100 pre.”
2017-08-28 · Decoder with Nilay Patel · Recode Decode: Chamath Palihapitiya, CEO, Social Capital · IDENTIFIED FROM THE TRANSCRIPT
“And it's something that you never thought you would give away to people. You have to do it yourself. Like I remember Facebook, we were racking servers”
2017-08-28 · Decoder with Nilay Patel · Recode Decode: Chamath Palihapitiya, CEO, Social Capital · IDENTIFIED FROM THE TRANSCRIPT
“What did Amazon do, right? What does AWS really do? You take a very complex and necessary part of building a company, but it's not sufficient to success. But it's necessary.”
2017-08-28 · Decoder with Nilay Patel · Recode Decode: Chamath Palihapitiya, CEO, Social Capital · IDENTIFIED FROM THE TRANSCRIPT
“I think that many of the people that I get the chance to work with every day are these kinds of 10X contributors. And so our organization, I think, can be very effective operationally. And it also just aligns us in the way we behave, in the way we compensate, in our values, in what our expectations are. We don't look like a venture firm. We don't operate like one.”
2017-08-28 · Decoder with Nilay Patel · Recode Decode: Chamath Palihapitiya, CEO, Social Capital · IDENTIFIED FROM THE TRANSCRIPT
“And this is not to take away from the work that they do, but it's to complement that. Because it just gives them these CEOs. Yeah, it gives them a level of human capital leverage. It's like, for example, we can show up and say, well, here's a gentleman that built the entire data infrastructure for Facebook. He can come in today and help you do the same thing. Here's a person that basically designed the entire network model for Facebook and Instagram. They can help you do the following things. Here's a person who is otherwise about to go and spend her entire life fixing a multitude of health issues in Africa who will now come and help you figure out a whole bunch of very complicated nuanced parts of your go-to-market. And so those kinds of resources are rare.”
2017-08-28 · Decoder with Nilay Patel · Recode Decode: Chamath Palihapitiya, CEO, Social Capital · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so as an example, I'm not going to name these companies just for confidentiality, but we deploy data scientists and machine learning folks, and they'll spend two to three days a week inside some of our best companies helping them get better every day.”
2017-08-28 · Decoder with Nilay Patel · Recode Decode: Chamath Palihapitiya, CEO, Social Capital · IDENTIFIED FROM THE TRANSCRIPT
“So you're providing investment at any level, right? Yes. Which usual venture firms don't, let's be clear for people who don't understand it. Usually they focus on one area growth or seed or something like that. So anytime you'll be able to service.”
2017-08-28 · Decoder with Nilay Patel · Recode Decode: Chamath Palihapitiya, CEO, Social Capital · IDENTIFIED FROM THE TRANSCRIPT
“Because that's what they're doing. They see something fundamentally broken and misaligned, and they're like, great, I'm going to fix it. And they look at us. And not only am I trying to fix it, Kara, I'm literally like, every dollar that is not nailed down, I will put into this to make this work. So that's like to me like I don't know, I just feel really honor bound by that. And I think that other people who are going through that same struggle say, it may work. It may not work, but man, that takes a lot of balls and I respect that decision.”
2017-08-28 · Decoder with Nilay Patel · Recode Decode: Chamath Palihapitiya, CEO, Social Capital · IDENTIFIED FROM THE TRANSCRIPT
“Okay, so be it. That's fine. But every now and then you need a couple of us that walk in there and say, no, that's lobby grenade in here, blow it up, and restart it”
2017-08-28 · Decoder with Nilay Patel · Recode Decode: Chamath Palihapitiya, CEO, Social Capital · IDENTIFIED FROM THE TRANSCRIPT
“That and also that, you know what, they were participants in a system and they were trained to win a game and they're doing that.”
2017-08-28 · Decoder with Nilay Patel · Recode Decode: Chamath Palihapitiya, CEO, Social Capital · IDENTIFIED FROM THE TRANSCRIPT
“To change. We'll get to It was never right. Now, you know, you could take the stance, which I think is fair. They made a lot of great conversations.”
2017-08-28 · Decoder with Nilay Patel · Recode Decode: Chamath Palihapitiya, CEO, Social Capital · IDENTIFIED FROM THE TRANSCRIPT
“I know it just wasn't intuitive. It was like my lizard brain that this can't continue the way. The way they're making decisions, we're talking about how they solve for these sexual harassment problems. I'm like, the whole system has to change. Do you know what I mean? We'll get to that. But the whole system's broken in that regard. It's not even broken. It never was right. It just was.”
2017-08-28 · Decoder with Nilay Patel · Recode Decode: Chamath Palihapitiya, CEO, Social Capital · IDENTIFIED FROM THE TRANSCRIPT
“Right, right. And I think so. So, why does this persist? Why does this? Because it's odd that we're talking like this because when I was yesterday, I was in Silicon I talked to a bunch of different venture copists. I'm like, this has to end the way they're doing it. It doesn't make any sense whatsoever”
2017-08-28 · Decoder with Nilay Patel · Recode Decode: Chamath Palihapitiya, CEO, Social Capital · IDENTIFIED FROM THE TRANSCRIPT
“But we need all kinds of interesting people taking the world into their own hands, fixing what's broken, making it better. But you need a constructive form of capitalism to support them.”
2017-08-28 · Decoder with Nilay Patel · Recode Decode: Chamath Palihapitiya, CEO, Social Capital · IDENTIFIED FROM THE TRANSCRIPT
“And if there was a way to unlock it, what I suspect you would be shocked by is exactly what you said, that the complexion and the type and the ambition of these people would just blow us away. Frankly, honestly, isn't that kind of what we need right now? Just a little faith in human nature and humanity. And like, we need a little bit of that. We need not just kids in hoodies.”
2017-08-28 · Decoder with Nilay Patel · Recode Decode: Chamath Palihapitiya, CEO, Social Capital · IDENTIFIED FROM THE TRANSCRIPT
“Absolutely. There. Can I build on this? They're there. Yes, please. I suspect that if you really unpacked it, let's use an analogy people would understand. There's always the head, the torso, and the tail for anything, right? There are probably an unbelievable number of entrepreneurs in the torso and the tail everywhere in the world, building all kinds of businesses that we think may or may not work, but that probably will work, and their ability to get escape velocity or be noticed is really impaired right now.”
2017-08-28 · Decoder with Nilay Patel · Recode Decode: Chamath Palihapitiya, CEO, Social Capital · IDENTIFIED FROM THE TRANSCRIPT
“So they're missing a lot of talent. Absolutely. It was interesting because I was just talking before I was in Kentucky and West Virginia looking at these programs to train tech here sourcing all this other stuff last week. And one of the things that was interesting about it is I kept thinking who here is the next billion dollar idea that's utterly getting missed. I'm sure they're here. I'm sure there's talent here or in a country in Africa or they're there. Can I build on this? They're there. Yes, please. I sit there and I'm like, I know they're here. I don't know who they are.”
2017-08-28 · Decoder with Nilay Patel · Recode Decode: Chamath Palihapitiya, CEO, Social Capital · IDENTIFIED FROM THE TRANSCRIPT
“And then if you do that and you allow people to divorce themselves from psychological bias, you have a more functionally complete form of capitalism.”
2017-08-28 · Decoder with Nilay Patel · Recode Decode: Chamath Palihapitiya, CEO, Social Capital · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, and I think the reason is because that is what modern capitalism should be, which is about learning. Because again, The historical artifact beyond like putting investing before learning that we want to rewire is also what you want to rewire is the psychological bias of investing. So when you do that, what are you going to do? You're going to invest based on pattern recognition. Well, what is the negative byproduct of that? Dudes, people that don't look like they could be entrepreneurs, business models that look like they can't work, all of these things that psychologically tell you to say no. Should actually be a reason to say yes if you actually had ground truth insight”
2017-08-28 · Decoder with Nilay Patel · Recode Decode: Chamath Palihapitiya, CEO, Social Capital · IDENTIFIED FROM THE TRANSCRIPT
“We will deploy code, we will deploy people, we will help you every day understand your business better. We will find things, and as we find things, we will help you exploit those things so that you are building an edge.”
2017-08-28 · Decoder with Nilay Patel · Recode Decode: Chamath Palihapitiya, CEO, Social Capital · IDENTIFIED FROM THE TRANSCRIPT
“I mean, I think it's a venture capital. It's like a modern. We do seed, venture, growth, we do equity, we can do debt, we do private, we do public. But the most important thing is once we've made a decision to be beside you, we will never go away.”
2017-08-28 · Decoder with Nilay Patel · Recode Decode: Chamath Palihapitiya, CEO, Social Capital · IDENTIFIED FROM THE TRANSCRIPT
“What you need are people with insights So that they can partner with these entrepreneurs, and it just so happens that, you know, typically if you are like a quote unquote BI company, you'd force the company to pay you in this weird twist of fate. What we do is we take all of our insights and we pay the company to be able to give it to them. It's even better.”
2017-08-28 · Decoder with Nilay Patel · Recode Decode: Chamath Palihapitiya, CEO, Social Capital · IDENTIFIED FROM THE TRANSCRIPT
“Although I do do that. No, but it was because we stumbled into something, which was we were like, wait a minute, this thing is being used across companies, what we call intra-company network edges. And we see this massive growth in it. And then we were able to think about how that was going to change that business. That's why we're so constructive on that piece. What do we need venture?”
2017-08-28 · Decoder with Nilay Patel · Recode Decode: Chamath Palihapitiya, CEO, Social Capital · IDENTIFIED FROM THE TRANSCRIPT
“I'll give you another example. You know, we have, I think, the most sophisticated understanding of network effects in the entire world. Why? Well, myself and my team help exploit it to massive effect at Facebook to a scale that's unprecedented. And underneath that, we built a lot of very nuanced ways of understanding network effects. I put it in air quotes because it's so overused. But I think we really do understand it. So, when we look at a business like Slack, why were we so bullish on that company? It had nothing to do with how we thought about it from a very superficial top-down perspective. This was all about a bottoms-up understanding about how it was completely rewriting the way work was done. How we got to that ground truth was through the data.”
2017-08-28 · Decoder with Nilay Patel · Recode Decode: Chamath Palihapitiya, CEO, Social Capital · IDENTIFIED FROM THE TRANSCRIPT
“Most of these partners in most of these firms have never worked anywhere Know their historical artifacts of operational credibility are zero. They're non-existent. They're, like I said, they went to NBA school. And before that, they worked at some fancy investment bank or consulting firm. They haven't done anything. Right? So that's why I think if you have people that have done things and then you combine that with engineers and PMs and data scientists who then find insights of how to do things better, what you get is again is like a blueprint that you can give to an entrepreneur that says, we understand what makes companies fail and win.”
2017-08-28 · Decoder with Nilay Patel · Recode Decode: Chamath Palihapitiya, CEO, Social Capital · IDENTIFIED FROM THE TRANSCRIPT
“And I think what we do at the end of the day, the investment decision is a fundamental byproduct of learning. Whereas I think investors typically think that they make investment decisions and then they learn. But when you flip it on its head, there are huge ramifications. So, one is compensation. Right? Because you need to have all these other people. And two is hierarchy. You are now putting engineers and product managers, data scientists, machine learning people at the center of an organization.”
2017-08-28 · Decoder with Nilay Patel · Recode Decode: Chamath Palihapitiya, CEO, Social Capital · IDENTIFIED FROM THE TRANSCRIPT
“In any given point in time, right now, you know, we are parsing through hundreds of terabytes of data in real time learning. Now, hundreds of terabytes of data is frankly not that much data in the grand scheme of things, but six months ago or two years ago, it was a lot less. And six months and two years from now, it'll be exponentially greater. I feel like what I felt like 2007 at Facebook, which is that we have stumbled into something here that has deep, profound value. And I think what we're doing”
2017-08-28 · Decoder with Nilay Patel · Recode Decode: Chamath Palihapitiya, CEO, Social Capital · IDENTIFIED FROM THE TRANSCRIPT
“They don't care. That has a much lower chance of getting the talent they need to solve these problems. Whereas, what I can say is, you know what? That infrastructure that can help you do massive amounts of machine learning on top of massive amounts of data to drive real outcomes exists in three companies, Facebook, Google, Amazon. It just so happens that I was at the worst case an accidental tourist that helped build one of them. And so I can attract the same kinds of people to work with us across 50 companies.”
2017-08-28 · Decoder with Nilay Patel · Recode Decode: Chamath Palihapitiya, CEO, Social Capital · IDENTIFIED FROM THE TRANSCRIPT
“One trillion dollars. How does $1 trillion find a home without the following market conditions emerging? A bunch of companies getting overfunded, many who should otherwise be going out of business so that the talent can then be attracted to the winners. Now instead of like a two-year life cycle from starting to failure, now you have a four or five or six year life cycle where the outcome is the same? So, any one company now just statistically says.”
2017-08-28 · Decoder with Nilay Patel · Recode Decode: Chamath Palihapitiya, CEO, Social Capital · IDENTIFIED FROM THE TRANSCRIPT
“And it's not their fault. You know why the problem, why they can't do it? Just in the last five years, you know how much money has gone into Silicon Valley in China.”
2017-08-28 · Decoder with Nilay Patel · Recode Decode: Chamath Palihapitiya, CEO, Social Capital · IDENTIFIED FROM THE TRANSCRIPT
“Well, I think economically it behaves the same way in the following way. This is part and parcel of a comment about what you said earlier as well. Why are VCs reticent to do it? It's a money game. When you have nine people running $10 billion, that's way better than having 90 people. Run $10 billion because the fee income is so ginormous That you'd rather just chop it up amongst nine people. So if you go to the entrenched establishment and say, hey, you know what? I think what's in the best interest of the entrepreneur is not that you make 8 million bucks a year, but instead that you hire a bunch of machine learning and data science people to actually help support them. The answer is, yeah, in theory, that's right. But you know what? They should do that on their own. Okay, well, the problem is”
2017-08-28 · Decoder with Nilay Patel · Recode Decode: Chamath Palihapitiya, CEO, Social Capital · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, and frankly, I don't view my role as instrumental. I view my role as part of a process of creating that artifact. And fifteen or twenty years from now, there'll be an entire suite of employees and partners at Social Capital that then continue to build that knowledge base. And then 50 years and 100 years from now, because the output of that will be better entrepreneurship. The odds of success go up. Your ability to now differentiate yourself goes up. And then going back to how we started, it then does the job not just of capitalism, but of governance to the extent that governance continues to degrade.”
2017-08-28 · Decoder with Nilay Patel · Recode Decode: Chamath Palihapitiya, CEO, Social Capital · IDENTIFIED FROM THE TRANSCRIPT
“Whatever It's a knowledge base. And it's a knowledge base that grows independent of and outlives any current set of partners that may work at social capital. And that's the key. Because like if you have that kind of a system, a codex, right?”
2017-08-28 · Decoder with Nilay Patel · Recode Decode: Chamath Palihapitiya, CEO, Social Capital · IDENTIFIED FROM THE TRANSCRIPT