WEBVTT - World War Microchip, Rare Earth Mineral Issues + Suspicious Fires 0:00:03.680 --> 0:00:11.399 Now really now, well, hello, it's another really no really 0:00:11.480 --> 0:00:15.120 day by Peter Tilden. How are you doing, Jason Alexander? 0:00:15.200 --> 0:00:19.120 See how we're so good? Let me just say we're 0:00:19.120 --> 0:00:21.640 going to get into a topic today that is technical. 0:00:22.079 --> 0:00:24.360 Steve Blanks here now we're going to be talking about 0:00:24.440 --> 0:00:28.200 computer chips, which is apparently in everything. I don't believe that. 0:00:28.240 --> 0:00:30.040 I don't think there's anything in my house that has 0:00:30.040 --> 0:00:34.080 a chip. But supposedly it's a crisis because everything runs 0:00:34.080 --> 0:00:36.199 on a chip and we're running out of chips, and 0:00:36.240 --> 0:00:40.959 I don't really really, how is that possible? Who got blindsided? 0:00:41.400 --> 0:00:43.880 They didn't see, oh bye, the stack is going down? 0:00:44.240 --> 0:00:46.320 How did they? How could we get to a place 0:00:46.640 --> 0:00:48.600 where we're running out of chips? We don't have chips 0:00:48.600 --> 0:00:53.040 and everything needs a chip? Really? No real? Steve is 0:00:53.080 --> 0:00:56.080 a titan of the tech industry. He showed up there 0:00:56.280 --> 0:00:58.720 in sil Valley just as it was starting to boom, 0:00:58.960 --> 0:01:01.080 invested in I think companies. He had a couple of 0:01:01.320 --> 0:01:02.960 huge hits and a couple of notts of the hits. 0:01:03.120 --> 0:01:06.120 But he's also an educator. He teaches at Columbia Teachers 0:01:06.120 --> 0:01:09.240 on the Universities. He also is what does he teach, well, 0:01:09.280 --> 0:01:11.000 he teaches a lot of different stuff. At one of them. 0:01:11.120 --> 0:01:12.840 You don't know how to scale up, no, how to 0:01:12.840 --> 0:01:15.520 scale up, how to scale businesses, the fact that not 0:01:15.600 --> 0:01:18.200 every innovator knows how to run a business. If that, 0:01:18.280 --> 0:01:21.080 did I do that right? Steve? Kind of well close enough? 0:01:22.000 --> 0:01:26.520 So really not, really is there a really a chip shortage? 0:01:27.080 --> 0:01:28.920 And b is there something we don't know about this? 0:01:29.280 --> 0:01:31.120 Because really no, really hard to believe we ran out 0:01:31.120 --> 0:01:35.000 of chips. So that's a great question for twenty twenty two, 0:01:35.040 --> 0:01:37.039 because in twenty twenty three we now have a chip 0:01:37.080 --> 0:01:42.160 plot rather than a chip shortage. And it turns out 0:01:42.200 --> 0:01:44.760 that chips are kind of the new oil of the 0:01:44.760 --> 0:01:46.920 twenty first century. You know where we went to war 0:01:47.080 --> 0:01:50.160 for oil and in the Middle East. Concern is we 0:01:50.200 --> 0:01:52.680 might actually go to war war over chips in the 0:01:52.880 --> 0:01:55.920 twenty first century because they're not made in the US, 0:01:55.960 --> 0:01:59.200 and they're made in a country called Taiwan, at least 0:01:59.240 --> 0:02:01.400 most of the advance chips that you use in your 0:02:01.400 --> 0:02:04.920 iPhones or in other devices. And if you remember, Taiwan, 0:02:05.040 --> 0:02:08.320 while they think of themselves as independent, China believes that 0:02:08.360 --> 0:02:11.560 they're just a breakaway province. And that's A real problem 0:02:11.600 --> 0:02:14.480 for the US is that we're now completely dependent on 0:02:15.120 --> 0:02:18.760 at least the most advanced chips being made in factories 0:02:18.760 --> 0:02:21.920 called founderies, most of them in a foundry run by 0:02:21.919 --> 0:02:24.520 a company and called TSMC, which is a time when 0:02:24.600 --> 0:02:28.200 these company and that's you know, ninety miles from the 0:02:28.280 --> 0:02:32.239 shores of People's Republic of China. And so that's why 0:02:32.360 --> 0:02:34.840 last year the US government, for the first time in 0:02:34.880 --> 0:02:38.280 like seventy five years, stood up a national Industrial Policy, 0:02:38.360 --> 0:02:40.720 which is basically said, we're going to put our thumb 0:02:40.720 --> 0:02:44.440 on the scale and give fifty plus billion dollars to 0:02:44.639 --> 0:02:48.240 US chip manufacturers to start building factories in the US. 0:02:49.120 --> 0:02:52.600 Getting involved in industrial policy was something this country just 0:02:52.760 --> 0:02:55.519 never did for a long time, and now we're actually 0:02:55.600 --> 0:02:59.120 doing that. I've read that we are now making significant 0:02:59.160 --> 0:03:05.480 investments in US based chip production. But those factories, Am 0:03:05.480 --> 0:03:08.240 I wrong? They take like a decade to build one 0:03:08.240 --> 0:03:10.960 of these places, doesn't it? Yeah, two to four years. 0:03:10.960 --> 0:03:14.720 So the TSMCRE now building a couple of Arizona and 0:03:15.160 --> 0:03:18.760 they'll come up to speed maybe late this year, next year. 0:03:19.560 --> 0:03:21.960 But it's not just how long do they take, it's 0:03:22.200 --> 0:03:25.080 still even when they are functioning, there are maybe two 0:03:25.120 --> 0:03:29.680 percent of t SMC's output out Taiwan, right, and different 0:03:29.960 --> 0:03:32.840 different kinds of chips. They're not what my understanding too, 0:03:32.919 --> 0:03:35.880 is it in Taiwan, they're making this an A grade 0:03:35.960 --> 0:03:38.320 chip and they ain't going to share that technology. They'll 0:03:38.320 --> 0:03:40.600 make other chips down here, but they're not stupid. They 0:03:40.640 --> 0:03:45.280 want to keep their chip as the gold standards, so 0:03:45.400 --> 0:03:48.240 to speak. Correct. There are kind of three types of chips, 0:03:48.480 --> 0:03:51.520 ones that think called logic chips, and those are the 0:03:51.560 --> 0:03:55.760 brains of most devices, and those are made for companies 0:03:55.920 --> 0:04:00.119 like Intel that make microprocessors. But also what this company 0:04:00.160 --> 0:04:03.360 in Taiwan does is they don't design any of the chips. 0:04:03.680 --> 0:04:07.160 They actually make them for other people. So IBM and 0:04:07.480 --> 0:04:11.200 AMD and Ballcom and the video names that might not 0:04:11.280 --> 0:04:15.400 be familiar but are familiar with Technology Crowd. They design 0:04:15.480 --> 0:04:18.039 the chips, but this company in Taiwan makes them on 0:04:18.080 --> 0:04:21.599 the most advanced technology that exists on the planet. Well, 0:04:21.680 --> 0:04:25.359 Intel designs it and makes them themselves. Those are logic chips. 0:04:25.800 --> 0:04:28.560 The other types of chips that are used in you know, 0:04:28.600 --> 0:04:32.000 in iPhones or anything else you might have are memory chips, 0:04:32.279 --> 0:04:35.960 chips that store information, and those are kind of made 0:04:35.960 --> 0:04:41.120 by American companies like Micron and South Korean companies like Samsung, etc. 0:04:41.800 --> 0:04:46.040 And also you know China, People's Republic of China has 0:04:46.080 --> 0:04:48.560 a big memory company as well. And then there are 0:04:48.560 --> 0:04:52.040 other chips. And this goes back to the glut conversation 0:04:52.160 --> 0:04:55.359 versus the shortage that are analog that is, instead of 0:04:55.440 --> 0:04:59.039 ones and zeros deal with kind of different voltages like 0:04:59.120 --> 0:05:02.920 power and right relate temperature and things like that. They 0:05:03.320 --> 0:05:06.560 used a lot in automobiles and one of the bigger 0:05:06.640 --> 0:05:10.880 companies for that is in Japan. And what's really interesting 0:05:11.000 --> 0:05:14.040 is that last year the year before, there were a 0:05:14.080 --> 0:05:18.160 series of fires in those factories, those what are called 0:05:18.160 --> 0:05:22.680 fabs in Japan that made automotive chips. And if you 0:05:22.760 --> 0:05:26.839 were an automotive company and depending now on chips to 0:05:26.880 --> 0:05:30.320 control a lot of the functions in your car, when 0:05:30.360 --> 0:05:33.000 the factory went up in smoke, you look at you're 0:05:33.080 --> 0:05:35.800 just in time inventory and said, it's you know, none 0:05:35.800 --> 0:05:38.839 in time inventory. We don't have chips, and therefore we 0:05:38.839 --> 0:05:43.240 couldn't make cars unless you were Tesla, who managed to 0:05:43.279 --> 0:05:45.880 figure out how to redesign their cars on the fly 0:05:46.080 --> 0:05:49.480 to use different chips at a speed that the other 0:05:49.520 --> 0:05:54.599 automotive companies couldn't do because Tesla was vertically integrated, meaning 0:05:54.600 --> 0:05:57.560 they had all the technical people capable of saying, well, 0:05:57.600 --> 0:05:59.560 if we can't use this chip, we'll use another one. 0:06:00.120 --> 0:06:02.760 So GM and Ford and everybody else just put it 0:06:02.760 --> 0:06:06.000 around with their hand out going please more, can I 0:06:06.080 --> 0:06:09.479 have some more? Well, other companies were actual and innovative 0:06:09.520 --> 0:06:14.000 to redesign around that. Steve, Yeah, Steve, don't. I don't 0:06:14.040 --> 0:06:15.600 want you to have to say anything or go on 0:06:15.600 --> 0:06:17.800 the record, so you just do it with blinks. But 0:06:18.240 --> 0:06:20.200 I think what you're saying yes or no, A blink 0:06:20.240 --> 0:06:22.599 will tell me A guy at Tesla knew a guy 0:06:22.640 --> 0:06:24.839 who knew a guy who had a match who went 0:06:24.880 --> 0:06:27.680 over to a Japanese company, And is that possible? Is 0:06:27.680 --> 0:06:32.000 that what you're saying? Just just blink, just I saw blank, ye, 0:06:32.839 --> 0:06:36.080 a couple of plants. Actually, what's really interesting is that 0:06:37.320 --> 0:06:44.520 there were no fires in the Chinese companies I saw blinking, 0:06:44.520 --> 0:06:47.479 I saw a lot of this is my original question, 0:06:47.560 --> 0:06:49.680 Rose really, no, really, we ran out of chips, with 0:06:49.720 --> 0:06:52.680 the subtext of did we really? Is somebody hoarding him? 0:06:52.680 --> 0:06:55.480 If somebody sending him, somebody prioritize what's the real story 0:06:55.600 --> 0:06:58.200 underneath he ran out of chips. You can't just be 0:06:58.320 --> 0:07:01.400 that simple. And the story was there were a lot 0:07:01.440 --> 0:07:03.920 of quote accidents in a lot of places that made 0:07:03.960 --> 0:07:08.680 chips in very specific areas. And then once there's a shortage, 0:07:08.760 --> 0:07:11.720 what happens in almost every industry, particularly the chip industry, 0:07:12.120 --> 0:07:15.320 is people double and triple order that as you order 0:07:15.400 --> 0:07:17.720 more than you need. And now we're in this other 0:07:17.800 --> 0:07:21.000 phase of a glut where everybody's over ordered, and now 0:07:22.560 --> 0:07:25.400 we got more chips than we need. Plus at the 0:07:25.440 --> 0:07:28.280 same time, we've basically told China they can no longer 0:07:28.280 --> 0:07:31.600 buy the machines to make their most advanced chips. So 0:07:31.640 --> 0:07:34.840 we're kind of in a chip trade board, which, oh, 0:07:34.880 --> 0:07:36.800 it's good. Can I ask you about China. It's really 0:07:36.800 --> 0:07:38.840 funny because it because let's get tough with China. Let's 0:07:38.840 --> 0:07:40.600 do this with China. We're not going to let China 0:07:40.680 --> 0:07:43.960 do this. Kim Cook at Apple's gone, yeah, let's get 0:07:43.960 --> 0:07:49.200 tough with China, because he's blinking, blinking, blinking. If China 0:07:49.280 --> 0:07:52.360 screws him over, Apple's kapusky. I'm sure they're looking at 0:07:52.400 --> 0:07:55.160 other places to do stuff, but either the prices will 0:07:55.200 --> 0:07:56.880 go through this, So that's got to be a strange 0:07:56.880 --> 0:08:01.680 relationship between a company like that. And because he can't 0:08:01.720 --> 0:08:03.760 turn his background China tomorrow and say yeah, we're gonna 0:08:03.800 --> 0:08:06.720 get tough and yes, President Biden, we're gonna do it. Wow, 0:08:06.880 --> 0:08:11.440 they're beholden right, And in fact, both Apple and Tesla 0:08:11.520 --> 0:08:15.120 are both in the same place. Half of Tesla's businesses 0:08:15.920 --> 0:08:21.880 now from manufacturing faculty in Shanghai, which supplies not only China, 0:08:21.920 --> 0:08:24.840 but a good part of the Europe as well. And 0:08:24.960 --> 0:08:27.520 so there are a number of companies that are beholden 0:08:27.560 --> 0:08:30.920 to the Chinese market and more importantly Chinese suppliers. When 0:08:30.920 --> 0:08:34.680 the US offshore that has took its manufacturing to the 0:08:34.679 --> 0:08:39.160 lowest cost places to build stuff, which was Southeast Asia 0:08:39.200 --> 0:08:42.680 and China, not only took those specific industries, but it 0:08:42.760 --> 0:08:47.199 took the entire ecosystem, which means if you moved automobile 0:08:47.280 --> 0:08:50.640 manufacturing somewhere, you just didn't move that plant. All the 0:08:50.640 --> 0:08:53.000 guys who made machine tools and all the companies that 0:08:53.160 --> 0:08:57.280 made plastics and seats and whatever. Pretty easy to understand 0:08:57.440 --> 0:09:00.600 when you move a manufacturing plant. But the same thing 0:09:00.679 --> 0:09:04.600 happened starting in the twentieth century when we moved chips overseas. 0:09:05.000 --> 0:09:07.240 Not only did those things go, but all the other 0:09:07.280 --> 0:09:10.719 machinery and software and whatever now moved with it. It's 0:09:10.720 --> 0:09:14.760 the same when you moved your iPhone manufacturing overseas. All 0:09:14.760 --> 0:09:18.760 the suppliers are now around the places that assemble the iPhone, 0:09:18.800 --> 0:09:21.760 which happened to be in China. So we ended up 0:09:21.760 --> 0:09:25.360 hollowing out, in a bipartisan way, of a whole set 0:09:25.360 --> 0:09:29.520 of industries in the United States to achieve lower cost 0:09:29.600 --> 0:09:32.480 and higher profits. The irony is, of course, the last 0:09:32.520 --> 0:09:35.520 people we believed who were complaining about this were the unions, 0:09:35.800 --> 0:09:40.400 who said, you didn't understand a set of industries, and 0:09:40.480 --> 0:09:43.719 we went out these inefficient guys. They just wanted, you know, 0:09:44.040 --> 0:09:46.680 their jobs. And it's all about Jimmy Hoffa for those 0:09:46.679 --> 0:09:49.480 who remember that their criminals or whatever, all might have 0:09:49.480 --> 0:09:51.320 been true, but they were they were the people who 0:09:51.360 --> 0:09:54.160 were one hundred percent absolutely right. Is that when you 0:09:54.200 --> 0:09:57.920 offshored industry acts, you're actually hollowing out a whole set 0:09:57.960 --> 0:10:01.280 of other industries. And I think we that the results 0:10:01.280 --> 0:10:04.600 of that by accident in the twenty sixteen election and 0:10:04.679 --> 0:10:07.480 some of the polarization of areas of the country. They're 0:10:07.520 --> 0:10:10.480 now left out right and by the way, that this 0:10:10.600 --> 0:10:13.600 offshoring wasn't a democratic or Republican thing. It was. It 0:10:13.640 --> 0:10:18.199 was bipartisans. It was everybody who got money from financial 0:10:18.200 --> 0:10:20.880 industries that thought it was a useful thing to do 0:10:20.920 --> 0:10:23.959 to optimize profits. And it did much cheaper to get 0:10:24.040 --> 0:10:27.080 cheap stuff in Walmart now because it's made cheap labors 0:10:27.160 --> 0:10:30.040 somewhere else. But one could argue whether that was actually 0:10:30.160 --> 0:10:33.080 great for the American economy or democracy as a whole. 0:10:33.440 --> 0:10:35.520 Was it real the schip shortage? Now you're saying there's 0:10:35.520 --> 0:10:37.520 a glut. Are they going to Are they going to 0:10:37.559 --> 0:10:40.600 adjust so this won't happen again? Are they going to adjust? 0:10:40.720 --> 0:10:43.240 The just in time production? As I understand it is. 0:10:43.440 --> 0:10:46.360 We used to wearhouse stuff, but that's costly, so just 0:10:46.480 --> 0:10:49.120 in time means it shipped just when you needed to 0:10:49.120 --> 0:10:51.360 complete the car or whatever, and you don't have to 0:10:51.400 --> 0:10:54.240 wear house but you leave yourself vulnerable to whether conditions 0:10:54.320 --> 0:10:56.240 or fire or whatever. Are we going to change the 0:10:56.280 --> 0:10:58.079 way you do business here? Are we still going to 0:10:58.200 --> 0:11:00.920 continue and this will be a problem in the future 0:11:01.000 --> 0:11:03.520 yet again? Yeah, I think it's going to be a 0:11:03.520 --> 0:11:06.920 problem in the future. Oh good, you know, but there 0:11:06.920 --> 0:11:10.040 are now just new variables, including amature we're going to 0:11:10.200 --> 0:11:13.280 import from China versus Now we'll move some of that 0:11:13.840 --> 0:11:17.240 manufacturing assembly to other places that have a low cost 0:11:17.280 --> 0:11:20.920 of labor, like Vietnam or India or or or again 0:11:20.960 --> 0:11:23.200 with a Chips Act, trying to enshore some of those 0:11:23.240 --> 0:11:27.440 critical things back to the US. It's it's a pretty 0:11:27.520 --> 0:11:30.439 just for that one industry. It's a pretty interesting mess 0:11:30.480 --> 0:11:34.959 about how globalization has both tied us up and how 0:11:35.040 --> 0:11:38.960 vulnerable we are to disruptions from the supply chain. And Steve, 0:11:39.040 --> 0:11:41.920 isn't there also an element point? You know? It's it's 0:11:42.040 --> 0:11:47.280 it's terrible when you only have smatterings of of information, 0:11:47.360 --> 0:11:49.280 which is where I live most of the time. But 0:11:49.320 --> 0:11:54.120 I thought I remembered something about there's a critical mineral 0:11:54.320 --> 0:11:57.000 or or that you must have an order to manufacture chips, 0:11:57.000 --> 0:11:58.880 and maybe it's something like lithium or something like that, 0:11:59.320 --> 0:12:03.120 and that we are actually in some jeopardy of running 0:12:03.200 --> 0:12:06.240 out of this critical element in order to manufacture these 0:12:06.280 --> 0:12:09.280 chips at all. Is there? Am I getting that right? Yeah? 0:12:09.600 --> 0:12:15.800 I think that's usually called money, But I think the 0:12:16.720 --> 0:12:20.400 lithium you're talking about is a critical element in making batteries, right, 0:12:22.160 --> 0:12:24.000 And then there's a whole set of what are called 0:12:24.080 --> 0:12:28.360 rare earth materials, which is a fancy word for materials 0:12:28.440 --> 0:12:31.320 I can't even pronounce jitrium and all the other things 0:12:31.360 --> 0:12:35.000 that are used in high performance magnets that are used 0:12:35.000 --> 0:12:38.240 in electric motors and electric cars. And one of the 0:12:38.320 --> 0:12:41.839 interesting things about about raw materials is Ukraine was a 0:12:41.920 --> 0:12:44.880 key supplier of something called neon, which was a gas 0:12:45.080 --> 0:12:48.440 used in making actually in some of the equipment that 0:12:48.559 --> 0:12:52.720 made the chips theography machine, and that neon needs to 0:12:52.720 --> 0:12:55.520 be replenished every couple of months in these machines, and 0:12:55.640 --> 0:12:58.040 we had to find other sources. So the world is 0:12:58.120 --> 0:13:00.880 kind of interdependent. The China kind of owns most of 0:13:00.880 --> 0:13:05.800 the rare earth materials, export control on us. We'd be 0:13:06.000 --> 0:13:08.559 are pressed to scramble to make some of those stuff up. 0:13:08.960 --> 0:13:11.680 But I think your point is a bigger one. The 0:13:11.760 --> 0:13:14.839 world is kind of injured dependent on a whole ton 0:13:14.880 --> 0:13:18.199 of materials. Russia still supplies most of the titanium in 0:13:18.240 --> 0:13:22.720 the world used in aircraft and other manufacturing. Cobalt is 0:13:22.760 --> 0:13:26.320 sourced from places in Africa that are the same place 0:13:26.440 --> 0:13:29.320 that blood diamonds come from, so it's kind of a 0:13:29.360 --> 0:13:32.480 complicated set of supply chains. And the whole idea about 0:13:32.520 --> 0:13:35.360 some of these industrial acts that the US is thinking 0:13:35.400 --> 0:13:37.839 about is how do we in fact get some of 0:13:37.880 --> 0:13:40.560 the stuff made and sourced in the US now, or 0:13:40.559 --> 0:13:43.360 at least among our allies and a world that's becoming 0:13:43.400 --> 0:13:46.679 a little less interconnected, and that we're thinking that maybe 0:13:46.720 --> 0:13:49.160 we need to be self sufficient in some of these things. 0:13:49.559 --> 0:13:52.720 We used to have on national supplies of this stuff. 0:13:52.720 --> 0:13:55.040 We would stockpile. We stock by the oil, and we 0:13:55.280 --> 0:13:58.800 stockpiled strategic materials during the Cold War, and when we 0:13:58.840 --> 0:14:01.680 thought the world was, you know, unified, we kind of 0:14:01.679 --> 0:14:04.320 sold most of that stuff off. I think we're going 0:14:04.400 --> 0:14:08.680 to start stockpiloting again. It's thank god, thank god for stockpilot. 0:14:08.720 --> 0:14:11.680 That means warehousing, that means trucking. It moves America. I 0:14:11.679 --> 0:14:12.800 gotta ask you, do you have a guy like you. 0:14:12.840 --> 0:14:15.160 Do you have a vision board? Do you have a 0:14:15.920 --> 0:14:17.800 vision board? You know where you put up I'm so 0:14:17.880 --> 0:14:20.120 glad you said what a vision board? And I put 0:14:20.200 --> 0:14:23.000 up visions of things that you want to accomplish on 0:14:23.040 --> 0:14:25.040 a board so you can see him everything I want 0:14:25.040 --> 0:14:26.160 to do that I want to do that, I want 0:14:26.160 --> 0:14:28.360 to do it. No, no vision board. You know, my 0:14:28.480 --> 0:14:30.520 vision board extends to make it to the shower in 0:14:30.560 --> 0:14:37.440 the morning. He's too busy doing stuff that I go making. Okay, 0:14:37.440 --> 0:14:40.320 so doing stuff you're an entrepreneur. Here's another question. I 0:14:40.400 --> 0:14:43.120 really not really So guys come to investors like you, 0:14:43.240 --> 0:14:46.560 really smart ice who want to start businesses. It used 0:14:46.600 --> 0:14:48.360 to be you had to give fundamentals to give. Now 0:14:48.360 --> 0:14:51.440 it seems like they got a vision in a story 0:14:51.480 --> 0:14:54.320 that they're telling and ent up with thorough nos didn't 0:14:55.000 --> 0:14:57.120 or what's his name, Sam Bankman Freed? And I don't 0:14:57.160 --> 0:14:59.000 like people with three names anyway. I'm very suspicious to 0:14:59.120 --> 0:15:01.640 the three and three name. How are they pitching in 0:15:01.720 --> 0:15:04.600 Silicon Valley that that can happen? These are smart people. 0:15:04.640 --> 0:15:07.760 I look at the board of Pharaonos. It was major people, 0:15:07.760 --> 0:15:10.800 and nobody went, can we see how this item works 0:15:10.840 --> 0:15:13.880 before we give you another round of funding. Nobody says that. 0:15:15.600 --> 0:15:20.560 You know, every entrepreneur believes they're a visionary, and there's 0:15:20.640 --> 0:15:23.400 enough data to say that about ninety five percent of 0:15:23.400 --> 0:15:29.560 them or more are hallucinating, and so the differences, you know, 0:15:29.720 --> 0:15:32.200 to be able to figure out which ones or which 0:15:32.440 --> 0:15:35.200 But the problem is and what you just describe is 0:15:35.240 --> 0:15:38.400 that in a bubble economy, that is, when you can 0:15:38.480 --> 0:15:42.160 make money on any idea, the ideas, and it's whether 0:15:42.200 --> 0:15:45.640 it's could be profitable, it starts becoming less important. And 0:15:45.840 --> 0:15:48.880 so the end of twenty twenty two we were in 0:15:48.920 --> 0:15:52.320 the greater fool theory of like remember musical Chairs as 0:15:52.360 --> 0:15:56.320 a kid, everybody invested, the next guy paid more and more, 0:15:56.400 --> 0:15:59.560 and I sold it off, and so everybody was making 0:15:59.600 --> 0:16:02.720 profits until someone said, hey, the emperor has no clothes. 0:16:02.880 --> 0:16:07.680 There is no business here. And the venture business, that 0:16:07.840 --> 0:16:10.880 is the people who invest in startups make money on 0:16:11.640 --> 0:16:14.960 those crazy times, and they also make money on the 0:16:15.160 --> 0:16:17.840 bad times. But then they need different rules, and as 0:16:17.880 --> 0:16:21.120 you just explained, in the bubble times, the rules are, 0:16:21.440 --> 0:16:23.520 can we make money from the next dope who's going 0:16:23.600 --> 0:16:25.840 to put more money in at a bigger valuation. So 0:16:25.840 --> 0:16:28.280 it's a beer miss game. It's a beer miss game, yes, 0:16:28.600 --> 0:16:34.080 and it's more like a beer pod I'm sorry for clarifying, 0:16:35.520 --> 0:16:38.280 Oh my god. Time. That is, if you're actually doing 0:16:38.320 --> 0:16:40.800 this to see who has a company that could be 0:16:40.800 --> 0:16:43.800 profitable and deliver real products, etc. Then you look for 0:16:43.840 --> 0:16:47.880 different things and you invest on different criteria, meaning you say, hey, 0:16:47.960 --> 0:16:50.240 can you actually sell stuff that people want to buy? 0:16:50.320 --> 0:16:53.000 What a great idea. That's not what's happened in the 0:16:53.080 --> 0:16:55.680 last two or three years. I think we're getting back 0:16:55.680 --> 0:16:58.360 to that in twenty twenty three and twenty things about 0:16:58.360 --> 0:17:00.320 it and you read what people investing in. I want 0:17:00.320 --> 0:17:03.240 to know the next trend. But I'm noticing that Jeff 0:17:03.240 --> 0:17:07.200 Bezos and Musk and all those guys are investing in neuralinks. 0:17:07.760 --> 0:17:10.439 A lot of them are thinking about the computer that 0:17:10.600 --> 0:17:12.800 links directly to your brain. You know, you eliminate the 0:17:12.800 --> 0:17:15.280 whole deal, goes right to your brain. And when I 0:17:15.320 --> 0:17:18.320 see that much investment in that, is that real? Is 0:17:18.320 --> 0:17:20.600 that something that everybody thinks is going to be happening 0:17:20.680 --> 0:17:23.720 or is that a pipe thream? Well, when I was 0:17:24.440 --> 0:17:33.520 young and foolish, that was called the LSD went right 0:17:33.560 --> 0:17:36.280 to your brain and you've got to see visions completely. 0:17:36.320 --> 0:17:39.359 But I think there's a set of amazing stuff that's happening. 0:17:39.400 --> 0:17:42.159 Neuralink is one of them, and if possible, it's going 0:17:42.200 --> 0:17:45.880 to provide people ways to communicate. I mean, think about 0:17:45.920 --> 0:17:48.119 the good part of that. People who are paralyzed and 0:17:48.240 --> 0:17:51.600 people who can't communicate or don't have the motor skills 0:17:51.600 --> 0:17:55.400 to do that. It also has a dystopian view that says, Gee, 0:17:55.400 --> 0:17:57.600 I'll plug people in whether they want to or not. 0:17:57.720 --> 0:18:00.359 And so I think it's going to be in interesting 0:18:00.359 --> 0:18:02.960 to see how that turns out. You know, I think 0:18:03.000 --> 0:18:04.919 that the part when we talk about tech, though, and 0:18:04.960 --> 0:18:07.760 you talked about neuralink, the part that really doesn't get 0:18:07.800 --> 0:18:10.040 talked about much in the same breath is all this 0:18:10.080 --> 0:18:13.040 stuff that's going on in what's called biotech and life sciences, 0:18:13.119 --> 0:18:16.600 the people who are using entrepreneurship and innovation to create 0:18:16.680 --> 0:18:21.000 new drugs, ethical drugs, meaning pharmaceuticals and vaccines and whatever. 0:18:21.760 --> 0:18:24.760 And you know, when you're talking about iPhones and hardware 0:18:24.800 --> 0:18:27.520 and chips and whatever, we tend not to look at 0:18:27.520 --> 0:18:30.560 the other side of technology innovation. In the last couple 0:18:30.560 --> 0:18:33.080 of years, there's been some breakthroughs that are just amazing 0:18:33.119 --> 0:18:35.880 to make people healthier and safer in a way that 0:18:36.200 --> 0:18:38.159 we didn't think it was going to be coming for 0:18:38.200 --> 0:18:48.200 a while. Is there altruism there in Silicon Valley? Are 0:18:48.240 --> 0:18:50.480 these guys only money? You know? You read all these 0:18:50.560 --> 0:18:52.760 articles and it seems like the Internet was supposed to 0:18:52.760 --> 0:18:55.159 be a shared thing, and it was supposed to be 0:18:55.760 --> 0:18:59.240 democratic whatever, And now you're seeing being with the fines 0:18:59.280 --> 0:19:02.400 from the EU Facebook that it's all about the money. 0:19:02.440 --> 0:19:05.000 It's all about engagement and money. Is there altruism still 0:19:05.000 --> 0:19:08.720 in Silicon vallement? So you've got to remember who you're 0:19:08.760 --> 0:19:13.680 asking the question to a guy in a giant room. Yeah, well, 0:19:14.200 --> 0:19:16.560 you know, I remind my students you get that at 0:19:16.600 --> 0:19:20.800 the end of your career. Hopefully not if you're asking 0:19:20.800 --> 0:19:22.800 the entrepreneurs, that is, the people come up with the 0:19:22.840 --> 0:19:26.199 idea and the technology and the vision and whatever. You know, 0:19:26.240 --> 0:19:29.120 I'd say at least half, if not more, of them, 0:19:29.200 --> 0:19:32.840 maybe three quarters, are doing it because they see something 0:19:32.880 --> 0:19:34.880 that they want to create and they want to bring 0:19:34.920 --> 0:19:37.200 it to reality and they want to make the world 0:19:37.280 --> 0:19:40.159 better or at least more interesting, or or create something. 0:19:40.560 --> 0:19:42.639 But remember the other half of the people we are 0:19:42.680 --> 0:19:46.679 talking to are extreme capitalists. Those are the venture capitalists. 0:19:46.680 --> 0:19:49.600 Their goal is to make an obscene return on some 0:19:49.640 --> 0:19:53.600 of those investments, because they're not like a bank wanting 0:19:53.640 --> 0:19:57.119 five percent interest knowing that most of their bank wants 0:19:57.480 --> 0:20:01.840 almost all their investments to succeed. Capitalists realizes that most 0:20:01.880 --> 0:20:05.240 of them will fail. That's a big idea that's a 0:20:05.320 --> 0:20:09.160 crazy type of financing that never existed before the last 0:20:09.200 --> 0:20:12.080 quarter of the twenty first twentieth century. That made all 0:20:12.080 --> 0:20:15.239 these things that we take for granted possible because who 0:20:15.280 --> 0:20:17.640 else would it invest in ten things knowing that eight 0:20:17.720 --> 0:20:20.919 or nine of them won't work. That's called a Broadway backer. 0:20:21.119 --> 0:20:27.200 That's that's it. It's called the producers. That's exactly right right. 0:20:27.520 --> 0:20:30.399 It's a new type of what's called financial asset class 0:20:30.440 --> 0:20:34.040 that says we're going to take extreme risk for extreme return. 0:20:34.600 --> 0:20:37.960 And so those are the capitalists. When you see people 0:20:38.080 --> 0:20:40.360 funding these crazy you go, well, I would anybody fund 0:20:40.359 --> 0:20:41.960 one of those? Well, that's why I would have said 0:20:41.960 --> 0:20:44.640 about Apple and in the nineteen seventies, or they would 0:20:44.640 --> 0:20:47.240 have said about Bill Gates or whatever. And as I said, 0:20:47.320 --> 0:20:51.240 most of them fail. But those are different people than 0:20:51.280 --> 0:20:53.280 the people who start the company. So you need to 0:20:53.320 --> 0:20:57.040 separate out the entrepreneurs from the venture capitalists who are 0:20:57.040 --> 0:21:00.280 taking financial risk, moving entrepreneurs who are taking career risk 0:21:00.480 --> 0:21:03.600 and taking taking failure risk in a different way. And 0:21:03.800 --> 0:21:06.360 so let me ask this because it kind of segues 0:21:06.400 --> 0:21:10.520 into this, and I know you're you're not necessarily an 0:21:10.560 --> 0:21:14.199 expert in these other new kind of most of anything, 0:21:14.400 --> 0:21:20.000 these cryptocurrencies. But I have never understood cryptocurrency specifically, and 0:21:20.040 --> 0:21:22.600 I have friends who have invested in it, and they 0:21:22.640 --> 0:21:25.440 made a whole bunch of gains and now they seem 0:21:25.440 --> 0:21:27.159 to be making a whole bunch of loss. And I 0:21:27.200 --> 0:21:30.760 know that's the Sam Bankman freed thing. Is this a 0:21:30.800 --> 0:21:35.399 real thing, this alternative sort of tech currency. Does that 0:21:35.440 --> 0:21:37.639 have legs? Do you believe in it? Or is it 0:21:37.720 --> 0:21:41.919 a fesso and something that just doesn't really make much sense? 0:21:42.400 --> 0:21:44.919 So I normally don't pass on any question, but this 0:21:44.960 --> 0:21:48.040 one is way above my pig right, Okay. I mean 0:21:48.080 --> 0:21:50.440 I have a bunch of students who start crypto things 0:21:50.480 --> 0:21:53.719 and it all gets confused with bitcoin and blockchain and 0:21:54.000 --> 0:21:58.000 you know, digital good currency and distributed finance, and some 0:21:58.080 --> 0:22:01.800 of it has some real legs that will like distributed 0:22:01.840 --> 0:22:05.200 finance and things built on blockchain that will bypass all 0:22:05.240 --> 0:22:09.200