WEBVTT - This Is What Happens to Silicon Valley in a Downturn 0:00:10.360 --> 0:00:14.440 Hello, and welcome to another episode of the Odd Lots Podcast. 0:00:14.520 --> 0:00:18.319 I'm Joe Wisenthal and I'm Tracy Alloway. Tracy, you know, 0:00:18.400 --> 0:00:21.000 I don't know what's going on right now with the 0:00:21.040 --> 0:00:26.160 broader I'll let you finish well. There are so many 0:00:26.160 --> 0:00:28.480 different ways that sentence could have done. We could start 0:00:28.520 --> 0:00:31.280 every episode with I don't know what's going on anyway. 0:00:31.320 --> 0:00:33.680 I don't know what's going on right now with the 0:00:33.800 --> 0:00:37.680 broader American economy, but I do sense that the tech 0:00:37.760 --> 0:00:41.320 industry Silicon Valley is in a real downturn. It seems 0:00:41.360 --> 0:00:44.680 so um, I shouldn't laugh, because obviously, for a lot 0:00:44.720 --> 0:00:46.920 of people, this is very very serious. We've had a 0:00:47.080 --> 0:00:50.080 number of tech companies coming out and saying that they're 0:00:50.120 --> 0:00:54.640 going to be firing literally thousands of people in this downturn. 0:00:55.000 --> 0:00:58.720 And what's kind of remarkable about it is this is 0:00:58.760 --> 0:01:02.360 something a lot of people we're kind of expecting. You know, 0:01:02.440 --> 0:01:05.319 these are all growth companies. They tend to do very 0:01:05.440 --> 0:01:08.920 very well during periods of low interest rates. Once rates 0:01:08.920 --> 0:01:13.280 start going up, we see the pressures sort of added on, 0:01:13.400 --> 0:01:16.679 and then we see these cyclical downturns, right and you know, 0:01:16.880 --> 0:01:19.399 like the story of the twenty ten with tech was 0:01:19.440 --> 0:01:22.440 really the first industry to come sort of roaring out 0:01:22.440 --> 0:01:24.319 of the gate, and that recovery and the broader use 0:01:24.319 --> 0:01:27.880 economy never had a great recovery in that decade, but 0:01:28.000 --> 0:01:31.880 tech was absolutely booming. And so there is this flip. 0:01:31.959 --> 0:01:34.080 And you know the other thing is like, when I 0:01:34.120 --> 0:01:36.080 think of Silicon Valley or Tech, you know, I have 0:01:36.160 --> 0:01:38.679 certain ideas of like what a boom looks like and 0:01:38.720 --> 0:01:41.839 all these amazing perks and free dried cleaning and free 0:01:41.840 --> 0:01:46.000 steak dinners if you stay at the office, and free 0:01:46.040 --> 0:01:48.520 bean bags, all of it. I don't have a great 0:01:48.640 --> 0:01:52.640 intuitive sense about what a downturn looks like Silicon Valley, right, 0:01:52.680 --> 0:01:55.760 And I think it's never really been promoted as part 0:01:55.840 --> 0:01:59.160 of Silicon Valley. It's always, you know, come to this place, 0:01:59.720 --> 0:02:02.200 create a start up out of your garage or whatever, 0:02:02.280 --> 0:02:05.040 and become a billionaire and enjoy all this money and 0:02:05.080 --> 0:02:09.360 all these perks. But as we just mentioned, it is 0:02:09.400 --> 0:02:13.239 a cyclical industry. There are as many downturns as there 0:02:13.240 --> 0:02:16.720 are upturns at this point, and yet they don't get 0:02:16.760 --> 0:02:21.000 as much attention. No, there's definitely it's a boom bust industry, 0:02:21.040 --> 0:02:23.040 and you know, I've talked about many times my first 0:02:23.080 --> 0:02:25.720 memory of markets or during the dot com bubble, and 0:02:25.760 --> 0:02:27.359 then there was the bust and we sort of forgot 0:02:27.400 --> 0:02:29.800 about tech for a while and all these companies but 0:02:29.840 --> 0:02:32.359 they kept plugging away. But yeah, I don't know really 0:02:32.440 --> 0:02:35.760 what happens to this industry in a downturn, And I 0:02:35.800 --> 0:02:38.160 think it's like an interesting question. I don't know when 0:02:38.160 --> 0:02:40.680 it will rebound, but right now we're definitely in one. Yeah, 0:02:40.760 --> 0:02:43.120 So we have really the perfect person to talk to 0:02:43.160 --> 0:02:45.920 us about previous downturns. That's right. So we met this 0:02:46.000 --> 0:02:49.040 guest recently. We were out at the Berkeley Forum on 0:02:49.160 --> 0:02:51.200 Corporate Governance and we talked to her there and we 0:02:51.280 --> 0:02:54.120 just had to talk to her again for the podcast 0:02:54.280 --> 0:02:57.920 itself because it's very interesting, someone who's very informed on 0:02:58.040 --> 0:03:01.000 this question. We're going to be speaking with Margaret O'Mara. 0:03:01.200 --> 0:03:04.320 She is a professor of American history at the University 0:03:04.400 --> 0:03:07.640 of Washington and she's also the author of the book 0:03:07.880 --> 0:03:11.200 The Code, Silicon Valley and the Remaking of America. So 0:03:11.280 --> 0:03:13.840 a great person to talk to about the history of 0:03:13.880 --> 0:03:16.000 the valley, the history of tech, and all the changes 0:03:16.200 --> 0:03:19.480 it's undergone. So Margaret, thank you. So much for coming 0:03:19.480 --> 0:03:22.760 on the Odd Lots podcast. It's great to be here. 0:03:22.800 --> 0:03:25.680 Thanks for having me. Yeah, we had to after chatting 0:03:25.720 --> 0:03:28.280 with you recently out in San Francisco, had to have 0:03:28.360 --> 0:03:31.520 you on the show. So you know, we do have 0:03:31.639 --> 0:03:35.080 this idea of like what what what tech, what these 0:03:35.120 --> 0:03:38.520 firms do in the boom times and it sounds pretty great. 0:03:38.560 --> 0:03:40.360 So it's pretty fun. Makes everyone want to flog to 0:03:40.520 --> 0:03:43.440 San Francisco or you know, the valley and be part 0:03:43.480 --> 0:03:46.960 of this world. But uh, we don't really talk about 0:03:46.960 --> 0:03:49.080 the other side as much. We instead we sort of 0:03:49.080 --> 0:03:51.840 forget about it. But obviously there for every boom, there 0:03:51.920 --> 0:03:55.880 must be a bust. Yeah, what goes up must come down. 0:03:56.400 --> 0:03:58.720 Which was actually uh I was reminded of it was 0:03:58.760 --> 0:04:02.040 that was a song of one of the many commercials 0:04:02.040 --> 0:04:06.200 of pets dot com, which was maybe the emblematic dot 0:04:06.320 --> 0:04:11.280 bomb story of the last big notable downtown durn In 0:04:11.320 --> 0:04:13.360 tech which was the dot com boom and then the 0:04:13.440 --> 0:04:17.360 dot com bust. Yeah, this is a cyclical industry. Grows fast, 0:04:17.440 --> 0:04:21.039 grows hot, and uh and then there's a cooling period. 0:04:22.120 --> 0:04:25.159 So I mentioned interest rates in the intro, but you know, 0:04:25.240 --> 0:04:27.400 I don't think it just boils down to that. Can 0:04:27.440 --> 0:04:32.360 you maybe talk about what is the common thread in 0:04:32.480 --> 0:04:36.480 terms of sparking bus in tech, Like, what is it 0:04:36.520 --> 0:04:41.000 that tends to set these things off sets the industry 0:04:41.240 --> 0:04:44.520 into contraction. Yeah, well, there's some things that are very 0:04:44.560 --> 0:04:48.400 particular to the industry, and then there are macroeconomic conditions 0:04:48.480 --> 0:04:50.919 that are that are sparking at two. It's usually you know, 0:04:50.920 --> 0:04:53.839 they're always working in combination. I think a common thread 0:04:54.120 --> 0:04:57.200 is there's a big market run up um and a 0:04:57.240 --> 0:05:01.760 lot of froth and excitement and and excitement about you know, 0:05:01.839 --> 0:05:06.520 companies that are are legitimately you know, minting money by 0:05:06.560 --> 0:05:09.200 doing usually by doing something new and a new class 0:05:09.240 --> 0:05:12.440 of products. And also around that surrounding that some some 0:05:12.560 --> 0:05:15.400 businesses where the you know, fundamentals aren't strong and they're 0:05:15.400 --> 0:05:18.400 being buoyed by this general enthusiasm in the market. We 0:05:18.440 --> 0:05:20.680 saw this in the sixties with what was then called 0:05:20.760 --> 0:05:25.200 space age stocks, all these transistorized electronics that these companies 0:05:25.279 --> 0:05:27.840 kind of the first gen of Silicon Valley companies that 0:05:27.880 --> 0:05:31.719 were very much attached to defense electronics and NASA and 0:05:31.760 --> 0:05:33.919 the space program. You know, so you have a little 0:05:34.000 --> 0:05:36.600 you have some froth, and then of course macro economic 0:05:36.600 --> 0:05:39.159 conditions are are shaping that too. You have low interest 0:05:39.240 --> 0:05:42.440 rates that are giving, you know, incentivizing investors to go 0:05:42.880 --> 0:05:45.440 and play the stock market, and and tech seems like 0:05:45.960 --> 0:05:48.760 a good uh, a good bet. And there's also you know, 0:05:49.160 --> 0:05:52.919 usually a boom is fueled by an entry of a 0:05:52.960 --> 0:05:55.920 new group of companies and particularly platforms and products that 0:05:56.400 --> 0:05:59.200 are high growth, whether it be the space age stocks 0:05:59.240 --> 0:06:03.600 the sixties, or the personal computers of the early nineteen eighties, 0:06:03.720 --> 0:06:07.599 or the commercial Internet of the nineties, or more recently 0:06:07.680 --> 0:06:10.320 and and for quite some time. This is a very 0:06:10.360 --> 0:06:12.520 long boom we're coming off of, you know, the big 0:06:12.560 --> 0:06:16.520 platform companies of quote unquote big tech. So you kind 0:06:16.520 --> 0:06:20.640 of need this sort of like nice confluence of story 0:06:20.760 --> 0:06:24.360 in macro, like you need the investor enthusiasm. Low rates 0:06:24.400 --> 0:06:26.560 probably help in some way, but there also has to 0:06:26.560 --> 0:06:29.040 be like a thing that people get excited about for 0:06:29.160 --> 0:06:32.200 because low rates itself, what did you know we're talking about, 0:06:32.200 --> 0:06:34.600 like it kind of joked about, like the bean bags 0:06:34.680 --> 0:06:37.360 and all the perks. Isn't that always been part of 0:06:37.400 --> 0:06:39.919 the booms? Like how long have they been sitting on 0:06:39.960 --> 0:06:42.839 bean bags out there? Maybe sitting on bean bags for 0:06:42.880 --> 0:06:45.279 a while Um, I mean the bean bag goes back 0:06:45.320 --> 0:06:48.120 to the early seventies. Uh. And and you know it's 0:06:48.160 --> 0:06:51.000 this it's this interesting kind of but you know, if 0:06:51.040 --> 0:06:53.440 you think about maybe not bean bags themselves, but this 0:06:53.520 --> 0:06:56.920 idea of a different sort of corporate culture, more informal 0:06:57.760 --> 0:07:01.120 corporate culture, non hierarchical get that goes way back. I 0:07:01.160 --> 0:07:03.480 mean in in case of the Valley, you know, you 0:07:03.520 --> 0:07:07.600 can maybe start that with Hewlett and Packard and the 0:07:07.600 --> 0:07:11.320 famous HP way, the what they called management by walking 0:07:11.320 --> 0:07:15.920 around no corner offices, shirt sleeves. Tie ties still had ties, 0:07:15.960 --> 0:07:18.360 but we took off the jacket. Um. And this was 0:07:18.400 --> 0:07:20.800 in the nineteen fifties. You know, Hewlett Packard was you know, 0:07:20.920 --> 0:07:25.200 founded in a garage, iconic garage startup in nineteen thirty nine. 0:07:25.240 --> 0:07:28.680 By the fifties, it's a publicly traded company. It's extremely successful. 0:07:28.800 --> 0:07:31.560 And Hewlett and Packard are very kind of self consciously 0:07:32.240 --> 0:07:36.040 working against the organization man paradigm that was the you know, 0:07:36.120 --> 0:07:39.720 that was corporate capitalism in the nineteen fifties. So so that, um, 0:07:39.720 --> 0:07:43.240 you know, setting that creating a culture where management and 0:07:43.840 --> 0:07:47.880 the rank and file engineers are all kind of on 0:07:47.920 --> 0:07:50.920 the same side is uh. It's taking the culture of 0:07:50.960 --> 0:07:55.040 the engineering lab and transferring that into a corporation. And 0:07:55.040 --> 0:07:58.200 it also was you know, I think philosophically too, it 0:07:58.320 --> 0:08:01.280 was this was the high water mark of private sector unionization. 0:08:01.560 --> 0:08:04.640 People like like Dave Packard, we're very much against unions, 0:08:04.800 --> 0:08:06.360 just saw them as you know, that's a sign that 0:08:06.440 --> 0:08:09.400 something's wrong with a company if if you can't find 0:08:09.400 --> 0:08:12.840 a way to get along, and that instead that employees 0:08:12.960 --> 0:08:16.400 of all rank should be rewarded with stock options, they 0:08:16.400 --> 0:08:18.880 should have a stake in the ownership of the company. 0:08:18.960 --> 0:08:20.840 So it was a different model and that that kind 0:08:20.840 --> 0:08:22.960 of percolates through I mean HP, there are a lot 0:08:22.960 --> 0:08:26.400 of HP veterans that go on to start venture firms, 0:08:26.520 --> 0:08:30.880 start other companies, and they bring that laid back California 0:08:31.840 --> 0:08:52.240 more sort of ostensibly egalitarian and corporate culture with them. 0:08:52.280 --> 0:08:55.120 Can you give us some examples of what companies tend 0:08:55.200 --> 0:09:00.040 to do during an industry downturn, Like, is there a 0:09:00.080 --> 0:09:04.079 typical playbook that stands out to you with your you know, 0:09:04.400 --> 0:09:08.600 decades of historic knowledge, or like does it tend to 0:09:08.760 --> 0:09:12.199 vary by firm and firm culture, So for instance, I 0:09:12.240 --> 0:09:15.600 could see, you know, if your business starts coming under pressure. 0:09:16.160 --> 0:09:20.160 There's obviously an incentive to cut back on spending, maybe 0:09:20.280 --> 0:09:23.960 start to trim your workforce and lay people off. But 0:09:24.000 --> 0:09:27.520 there might also be some companies that are especially aggressive 0:09:27.559 --> 0:09:29.640 and decide we're going to try to write this out 0:09:30.040 --> 0:09:32.320 as much as we can and just use this as 0:09:32.320 --> 0:09:36.080 an opportunity to take market share. Yeah, and I think 0:09:36.120 --> 0:09:38.720 it depends a lot on the financial position you're coming 0:09:38.960 --> 0:09:42.280 into the downturn with, and and particularly if you're an 0:09:42.320 --> 0:09:46.000 early stage company. I point to Google as the you know, 0:09:46.480 --> 0:09:50.400 the ultimate example of a company that benefited from a downturn, 0:09:50.440 --> 0:09:54.680 notably the dot com bust. Google's founded in kind of 0:09:54.760 --> 0:09:57.640 late on the cycle of the hype cycle of all 0:09:57.679 --> 0:10:03.240 these dot com startups, and they secure this unbelievable seed 0:10:03.320 --> 0:10:08.559 round of million dollars split fifty fifty between Kleiner and Sequoia, 0:10:08.640 --> 0:10:11.560 which you know, these big firms don't do deals together, 0:10:12.240 --> 0:10:14.920 but everyone wanted an end and so they had, you know, 0:10:14.960 --> 0:10:17.520 they kind of had this foundational capital. And then the 0:10:17.960 --> 0:10:20.280 all of these other companies go out of business. And 0:10:20.400 --> 0:10:22.920 two things that you need back then in two thousand 0:10:22.960 --> 0:10:26.040 one or so is you need people. Ever you always 0:10:26.040 --> 0:10:28.520 need people, um, and so Google is able to acquire 0:10:28.559 --> 0:10:32.319 engineers for less than they would have had to pay otherwise. 0:10:32.360 --> 0:10:35.119 And also just you know, the talent was now available, 0:10:35.200 --> 0:10:37.800 there was more oxygen in the labor market. And they 0:10:37.840 --> 0:10:40.640 also needed computing power. This is before cloud computing, right, 0:10:40.679 --> 0:10:42.839 that is when you had to go buy a piece 0:10:42.920 --> 0:10:47.640 of hardware and server blades and high powered CPUs to 0:10:47.640 --> 0:10:50.680 to power your search engine. And so they were able 0:10:50.720 --> 0:10:52.360 to do that as well. They were the sort of 0:10:52.400 --> 0:10:55.440 their capital expenditures ultimately gave them a lot more runway 0:10:55.600 --> 0:10:59.000 and a lot more time to not have to turn 0:10:59.040 --> 0:11:02.520 a profit. Was you know, they were really advantaged by that. 0:11:02.880 --> 0:11:05.320 And you know, I think thinking about kind of company 0:11:05.320 --> 0:11:08.360 behavior in a downturn. You know, we see when we 0:11:08.360 --> 0:11:11.160 talk about Silicon valley, oftentimes we're thinking about the very 0:11:11.200 --> 0:11:14.920 big consumer facing platforms, right, the ones that ordinary people 0:11:14.960 --> 0:11:17.600 were that were interacting with every day. And there are 0:11:17.600 --> 0:11:20.320 many different Silicon valleys, There many different parts of the 0:11:20.520 --> 0:11:22.520 of the whole industry. If you look at the dot 0:11:22.559 --> 0:11:27.200 com bust, for example, there were companies, you know, semiconductor 0:11:27.240 --> 0:11:30.760 companies that were still hiring people. There were other you know, 0:11:30.840 --> 0:11:33.880 hardware kind of the people who were doing the fundamentals 0:11:33.920 --> 0:11:38.080 were still there was that the transition to commercial internet 0:11:38.559 --> 0:11:40.960 was still very much underway. There was a lot of 0:11:41.000 --> 0:11:44.080 real there were so many, you know, important use cases 0:11:44.120 --> 0:11:46.160 that have been proven in the early days of the 0:11:46.160 --> 0:11:48.600 commercial Internet that there was still a lot to be 0:11:48.640 --> 0:11:50.360 done and a lot of business to be had. It 0:11:50.440 --> 0:11:54.400 was just these very giant, you know, splashy consumer facing 0:11:54.960 --> 0:11:58.760 websites and and platforms that went out of business that 0:11:58.800 --> 0:12:00.320 were the ones that got a lot of the menine 0:12:01.400 --> 0:12:03.800 what about you know, just in terms of so layoffs 0:12:03.800 --> 0:12:07.200 and other restructurings. Do the bean bags go away? Do 0:12:07.200 --> 0:12:09.880 do the ties come on? Like like, is there a 0:12:09.920 --> 0:12:13.600 sort of I don't know, reun liberalization of culture in 0:12:13.679 --> 0:12:16.120 a downturn where it's like, okay, we have to get 0:12:16.160 --> 0:12:21.439 serious here. Yeah, you know, I think that the I 0:12:21.440 --> 0:12:23.480 wouldn't say the ties come back on. There have been 0:12:23.520 --> 0:12:25.920 times when the ties come back on, you know, I 0:12:25.920 --> 0:12:28.320 think the most the standout example is is Apple. If 0:12:28.320 --> 0:12:30.720 you go back to the eighties, the mid eighties Apple, 0:12:30.760 --> 0:12:33.640 when it's growing fast, John Scully is brought in from 0:12:33.679 --> 0:12:37.080 Pepsi as this literally the guy in the suit. So 0:12:37.120 --> 0:12:39.200 that's a great example. Could we have like, right, could 0:12:39.200 --> 0:12:41.200 we all have this perception of Steve Jobs, and then 0:12:41.200 --> 0:12:43.199 they bring in a Pepsi executive to running Yeah, the 0:12:43.200 --> 0:12:45.160 guy who sold sugar water. Yeah, there was lots of 0:12:45.160 --> 0:12:47.760 lots of grumbling about that. And then of course, kind 0:12:47.760 --> 0:12:51.760 of spectacularly and famously infamously, he and the board fire 0:12:51.920 --> 0:12:57.120 Steve Jobs shortly thereafter, because Max sales that the Macintosh 0:12:57.200 --> 0:13:00.160 comes out with a splash. We all remember that per 0:13:00.200 --> 0:13:03.440 Bowl add the iconic Super Bowl ad and the Mac 0:13:03.679 --> 0:13:06.920 being this game changer. But what's forgotten in that story 0:13:07.000 --> 0:13:09.120 is that it had a big splash but actually did 0:13:09.160 --> 0:13:12.439 not kind of flatlined a bit. It wasn't another Apple, too, 0:13:12.480 --> 0:13:16.360 which was the first giant hit that Apple had, and 0:13:16.559 --> 0:13:20.000 Apple was getting IBM had gotten into the personal computer business. 0:13:20.000 --> 0:13:23.240 Remember with those Charlie Chaplain ads that were everywhere. Anyone 0:13:23.240 --> 0:13:25.760 who was, you know, around in the nineteen eighties might 0:13:25.760 --> 0:13:29.080 remember those. And so they were eating Apple's lunch, and 0:13:29.160 --> 0:13:30.920 so so Scully, you know, the suits are brought in, 0:13:31.440 --> 0:13:33.840 Jobs is fired, and then Apple has a pretty dismal 0:13:33.880 --> 0:13:38.040 decade after that, and Jobs comes back and it is 0:13:38.040 --> 0:13:41.240 brought back in CEO, and then after that it's up 0:13:41.280 --> 0:13:45.320 into the right and that arc. Actually I think has 0:13:45.480 --> 0:13:49.040 um squashed the suits and so so to speak, that 0:13:49.120 --> 0:13:52.000 the answer. But I think to your question, there is 0:13:52.040 --> 0:13:56.520 a real, you know, more conservatism in terms of spending 0:13:56.720 --> 0:13:59.040 and due diligence. I think, you know, the tail that 0:13:59.080 --> 0:14:03.120 always wags valley dog is venture capital. Right, Um, what 0:14:03.160 --> 0:14:06.680 are the vcs doing? What are they hunting? How much 0:14:06.920 --> 0:14:09.199 you know, what are they spending on? How much do 0:14:09.240 --> 0:14:13.480 they have to spend? And they are really kind of 0:14:13.600 --> 0:14:16.520 driving what you know, first, they're picking the winners or 0:14:16.559 --> 0:14:19.600 the potential winners, and they're also you know, what they're 0:14:19.600 --> 0:14:24.520 demanding of of founders and their portfolio. Companies will change 0:14:24.520 --> 0:14:26.920 in a downturn and there'll be a lot less tolerance 0:14:27.000 --> 0:14:31.280 for the splashy parties with ice sculptures, for sure. This 0:14:31.400 --> 0:14:35.000 was something that Jason Callicanis brought up on our podcast, 0:14:35.040 --> 0:14:37.960 which was, you know, it's easy to criticize a lot 0:14:38.000 --> 0:14:42.160 of tech companies for expanding too much during the boom, 0:14:42.240 --> 0:14:46.080 but his point was this is what investors, ie venture 0:14:46.120 --> 0:14:49.160 capital was asking of them. They was all about growing 0:14:49.200 --> 0:14:52.560 market share and it's not until you know, things start 0:14:52.680 --> 0:14:56.359 to pull back that there's really that pressure on companies 0:14:56.400 --> 0:15:02.200 to maybe either start spending money or actually produce a profit. Yeah, 0:15:02.320 --> 0:15:06.440 that's exactly right. The venture capital world m is you know, 0:15:06.440 --> 0:15:08.880 a lot of these vcs were once operators to right, 0:15:09.000 --> 0:15:11.120 so you know where do vcs come from? And some 0:15:11.200 --> 0:15:13.520 of them are have backgrounds in banking, but some of 0:15:13.520 --> 0:15:16.360 them were founders themselves or people who were you know, 0:15:16.440 --> 0:15:19.320 part of the core teams of companies that were very 0:15:19.320 --> 0:15:21.680 successful and they turned that into the you know, the 0:15:21.760 --> 0:15:24.480 high tech venture capital model. The Silicon Valley style of 0:15:24.520 --> 0:15:27.760 venture capital model that starts in the sixties is is 0:15:27.800 --> 0:15:30.480 one that is not just money, it's expertise, and it's 0:15:30.600 --> 0:15:35.320 and it's importing very particular type of culture and cultural 0:15:35.400 --> 0:15:38.960 values that is very growth focused, moving fast and break things. 0:15:39.200 --> 0:15:42.920 Breaking things has been a Silicon Valley mantra since the 0:15:42.960 --> 0:15:47.120 early years of the semiconductor industry because by necessity you 0:15:47.160 --> 0:15:49.960 had to move really fast and be incredibly agile and 0:15:50.080 --> 0:15:53.600 lean and ready to pivot at any moment and moving 0:15:54.320 --> 0:15:56.840 really aggressively to get a chunk of the market. And 0:15:56.880 --> 0:16:01.840 so that sensibility has uh even you know, the hyper 0:16:01.880 --> 0:16:04.280 focus on growth. I think that's that that that's the 0:16:04.320 --> 0:16:06.480 origins of that and that you know, and of course 0:16:06.480 --> 0:16:09.840 that was an utterly different business than than what the 0:16:10.280 --> 0:16:13.120 dominant business of Silicon Valley, which you know, software dominant 0:16:13.120 --> 0:16:17.080 dominant rather than hardware dominant. But nonetheless, I think founders 0:16:17.080 --> 0:16:19.960 get a lot of heat for excess, but someone gave 0:16:20.040 --> 0:16:22.120 them the money to do it. So I think it 0:16:22.160 --> 0:16:25.920 was like the day we met in San Francisco several 0:16:25.920 --> 0:16:27.680 weeks ago or maybe the day after, and it was 0:16:27.720 --> 0:16:31.880 just like the complete implosion of f t X. And 0:16:32.000 --> 0:16:34.400 the reason I ask is, you know, one of the 0:16:34.520 --> 0:16:37.840 other things that's sort of like crumbling here. And again 0:16:37.880 --> 0:16:40.000 I don't know if it's how cyclical it is, but 0:16:40.120 --> 0:16:43.240 you know, I associate Silicon Valley with this like the 0:16:43.360 --> 0:16:46.880 cult of the individual, the individual founder, particularly so the 0:16:46.960 --> 0:16:51.160 f SBF cult obviously the Steve Jobs called maybe the 0:16:51.160 --> 0:16:54.040 Mark Zuckerberg cult at some point the Elon Musk cult. 0:16:54.320 --> 0:16:57.280 Who started that? Where did that come from? The yeah, 0:16:57.360 --> 0:17:01.120 where did that come from? Well? That is really deep roots. 0:17:01.200 --> 0:17:03.640 I mean I think this is you know, this goes 0:17:03.720 --> 0:17:08.479 extends beyond and before the Valley itself and kind of 0:17:08.560 --> 0:17:12.840 American culture, American political culture a a a nation born 0:17:12.920 --> 0:17:17.840 of revolution and uh that is always lifted up and 0:17:18.240 --> 0:17:21.600 mythologized the you know, the so called self made man 0:17:21.880 --> 0:17:24.560 um you know, the since the nineteenth century, I mean 0:17:24.600 --> 0:17:26.600 that this has been these you know, the heroes have 0:17:26.680 --> 0:17:30.600 been these, these you know, individual geniuses, whether it be 0:17:31.119 --> 0:17:35.239 Thomas Edison or or you know, going forward and and 0:17:35.280 --> 0:17:37.680 of course the you know, the real story is whether 0:17:37.760 --> 0:17:41.800 it's John Wayne style Cowboy or the great inventor Edison. 0:17:41.840 --> 0:17:46.720 They yes, you have an iconic, charismatic, extraordinary individual, but 0:17:46.880 --> 0:17:51.760 also you have an individual who's got good timing, has connections, 0:17:51.840 --> 0:17:54.480 has a whole team behind them that is part of 0:17:54.520 --> 0:17:58.480 an ecosystem. And that the secret of Silicon Valley is 0:17:58.600 --> 0:18:02.240 the fact that it's this extraordinary ecosystem and networks of 0:18:02.280 --> 0:18:05.040 people again that you know, we think about, you know, 0:18:05.119 --> 0:18:08.439 these these founders, whether it be uh, you know, Jobs 0:18:08.560 --> 0:18:10.920 or Musk or you know, on and on and on. 0:18:11.480 --> 0:18:15.200 They're all people who you know, of of standout talent 0:18:15.320 --> 0:18:19.119 that also were lucky and had had some help and 0:18:19.240 --> 0:18:23.159 have a team. And I think Jobs and Apple are 0:18:23.320 --> 0:18:25.960 really great example, um when we go back to the 0:18:26.000 --> 0:18:29.520 beginning of Apple found you know, founded in a garage 0:18:29.680 --> 0:18:34.240 like many a computer startup at that moment, and Jobs 0:18:34.240 --> 0:18:36.600 and was um were like you know, there were a 0:18:36.640 --> 0:18:38.840 lot of guys doing what they were doing. Some of 0:18:38.880 --> 0:18:44.199 them were in fact building technically better machines. But what 0:18:44.400 --> 0:18:47.800 none of those other ones had was Steve Jobs. Not 0:18:47.960 --> 0:18:51.200 Steve Jobs his own capacity to do all this himself, 0:18:51.560 --> 0:18:54.040 but the fact that he recognized in his you know, 0:18:54.119 --> 0:18:57.200 while he's still walking around barefoot with his beard, that 0:18:57.440 --> 0:18:59.639 he needed to hire the very best marketing person in 0:18:59.680 --> 0:19:01.600 the valve, like he needed to get the very best 0:19:01.680 --> 0:19:05.080 venture capitalist. He needed to get a really good operator 0:19:05.119 --> 0:19:07.320 with experience he could take them from a garage and 0:19:07.320 --> 0:19:10.720 turn them into a real company. And that is what 0:19:10.760 --> 0:19:15.680 he did, and all those people made Apple into what 0:19:15.720 --> 0:19:18.919 Apple was and allowed Jobs to be the storyteller in 0:19:19.000 --> 0:19:22.679 chief and be the ultimately the transformative figure he became. 0:19:24.119 --> 0:19:27.520 So I have a slightly different crypto related question. But 0:19:27.640 --> 0:19:31.000 since you brought up, since you brought up personal computing, 0:19:31.119 --> 0:19:33.800 and this is something that stands out in your book, 0:19:33.880 --> 0:19:37.000 this idea that Silicon Valley time and time again kind 0:19:37.040 --> 0:19:40.840 of frames these new technologies as some sort of revolution. 0:19:41.000 --> 0:19:45.160 So the personal computer was going to revolutionize our work lives, 0:19:45.640 --> 0:19:51.080 the dot com boom was going to revolutionize access to information. 0:19:51.400 --> 0:19:55.840 Crypto was going to be this big new financial system. 0:19:55.880 --> 0:19:59.920 And yet with every boom, you know, as we've been discussing, 0:20:00.119 --> 0:20:03.000 there does tend to be a bust and a lot 0:20:03.040 --> 0:20:07.600 of disappointment. Can the tech sector can silicon value like 0:20:07.960 --> 0:20:14.840 maintain this revolutionary narrative or this revolutionary idea if people 0:20:14.880 --> 0:20:19.280 are sort of becoming more experienced with booms and bust 0:20:19.320 --> 0:20:22.320 or maybe it's just me getting older, but it feels 0:20:22.320 --> 0:20:24.720 like we've gone through a number of these disappointments at 0:20:24.720 --> 0:20:28.040 this time. Yeah, we have, but yet we we key 0:20:28.119 --> 0:20:32.639 up again. Um. You know, the revolutionary declarations are always 0:20:33.000 --> 0:20:37.520 somewhat overblown. But also you know, think about all the 0:20:37.560 --> 0:20:42.639 devices we're using, um, even to conduct this conversation, and um, 0:20:42.680 --> 0:20:47.040 they it is extraordinary the rate of technological growth and 0:20:47.640 --> 0:20:50.600 development of computer hardware and software in a very short 0:20:50.640 --> 0:20:52.879 amount of time. And so some of the storytelling and 0:20:52.920 --> 0:20:56.119 the hype and the amount of capital that's been infused 0:20:56.240 --> 0:20:59.720 to make that come to be has you know, there's 0:20:59.760 --> 0:21:03.120 there's a there's a they're there. You know, it's interesting 0:21:03.160 --> 0:21:06.119 and one of the hallmarks of these you know, the 0:21:06.440 --> 0:21:09.479 latest generation of revolutionaries is in a way they're they're 0:21:09.520 --> 0:21:13.719 answering a problem, they're fixing the errors of a past generation, 0:21:14.000 --> 0:21:17.399 whether it be uh, Steve Jobs or Bill Gates, as 0:21:17.480 --> 0:21:20.680 these new style CEO s rising up like phoenix is 0:21:20.720 --> 0:21:23.600 out of the ashes of stagflation in the seventies when 0:21:24.119 --> 0:21:27.600 big business and C suites of all kinds were pretty unpopular. 0:21:27.840 --> 0:21:31.040 And here's something very very different, kind of promising to 0:21:31.119 --> 0:21:33.840 change the world and empower you. Um, these are the 0:21:33.880 --> 0:21:37.119 new types of business enterprise that are so alluring in 0:21:37.440 --> 0:21:41.879 many different ways to politicians and media and two ordinary 0:21:41.960 --> 0:21:44.679 users and to a kind of baby boomers who are 0:21:44.760 --> 0:21:47.600 kind of looking for self actualization in there the things 0:21:47.640 --> 0:21:50.000 they buy and now have the income to buy it. 0:21:50.640 --> 0:21:53.959 And if you fast forward, even just looking reflecting on 0:21:54.280 --> 0:21:57.600 FTX and same bank and Freed and his very very 0:21:57.680 --> 0:22:01.159 rapid downfall, you know, part of his rapid ascent was, 0:22:01.680 --> 0:22:03.919 you know, bankman Freed was not only a you know, 0:22:03.960 --> 0:22:06.560 he's he's rising at a time when when the the 0:22:06.640 --> 0:22:10.960 last generation of wonder boys are starting to get more tarnished. 0:22:11.160 --> 0:22:14.560 Right that there's the tech lash, there's critique of of 0:22:14.640 --> 0:22:18.359 Zuckerberg and and Um and Bezos and these other people 0:22:18.400 --> 0:22:22.320 who once were at one time viewed more generally uncritically. 0:22:22.760 --> 0:22:25.760 And and also you know, I think SBF was a 0:22:25.800 --> 0:22:27.840 standout in the crypto world where there were a lot 0:22:27.880 --> 0:22:30.879 of people that seemed like hustlers, you know to the 0:22:30.920 --> 0:22:35.199 outside observer, and here was someone who seemed more you know, 0:22:35.400 --> 0:22:39.320 was proclaiming, you know, he was philanthropic, altruistic, and a 0:22:39.359 --> 0:22:44.680 lot of blue chip investors and leading vcs bought into 0:22:44.680 --> 0:22:48.800 that very in a very very big way. So you know, 0:22:48.840 --> 0:22:51.879