WEBVTT - Brad Gerstner on Tech Investing 0:00:02.040 --> 0:00:06.000 This is Master's in Business with Barry rid Holds on 0:00:06.240 --> 0:00:09.600 Bloomberg Radio. 0:00:09.240 --> 0:00:12.720 This week on the podcasts, What can I say once again? 0:00:13.440 --> 0:00:17.040 I have an extra special guest. Brad Gersner is a 0:00:17.200 --> 0:00:23.080 founder and investor in technology startups. His firm, Altimeter Capital 0:00:23.440 --> 0:00:27.360 runs over ten billion dollars. That's after returning a big 0:00:27.440 --> 0:00:31.920 chunk of capital and profits to their investors. He's been 0:00:32.200 --> 0:00:36.959 doing this for about twenty years. They invest primarily in 0:00:37.120 --> 0:00:40.600 private and public companies. They're no longer very much of 0:00:40.640 --> 0:00:46.800 a seed investor. Although Brad himself was a very successful entrepreneur. 0:00:46.920 --> 0:00:50.720 He either started or co founded, or came in to 0:00:50.880 --> 0:00:55.360 various startups, four of which have had substantial exits, to 0:00:55.440 --> 0:00:59.480 say nothing of the companies that he's invested in either 0:00:59.640 --> 0:01:04.320 late stage, private or early IPO and has done exceedingly 0:01:04.400 --> 0:01:07.440 well with. He has been involved in more than one 0:01:07.480 --> 0:01:12.720 hundred IPOs. This is really a fascinating conversation, not just 0:01:12.840 --> 0:01:17.160 because of his acumen as a venture investor, but one 0:01:17.200 --> 0:01:21.360 of the things that Brad is passionate about is making 0:01:21.640 --> 0:01:24.600 every child in America feel like they have a stake 0:01:24.959 --> 0:01:27.119 in the country, they have some skin in the game. 0:01:27.560 --> 0:01:32.480 And his idea for starting every newborn in the country 0:01:32.520 --> 0:01:35.319 with a thousand dollars investment in the S and P 0:01:35.480 --> 0:01:39.200 five hundred, or as he calls it, invest America is 0:01:39.280 --> 0:01:43.920 gaining traction not just amongst venture capitalists and corporate America, 0:01:44.520 --> 0:01:47.680 but on both sides of the isle in Washington, DC, 0:01:48.360 --> 0:01:52.640 and this may actually become a real thing. I thought 0:01:52.640 --> 0:01:56.400 this conversation was absolutely fascinating. I think you will also 0:01:56.640 --> 0:02:02.400 with no further ado my discussion without times brad Gersner. 0:02:02.360 --> 0:02:05.240 It's great to be here, Barry, it's great to have you. 0:02:05.480 --> 0:02:09.280 I'm kind of fascinated by your backgrounds, and before we 0:02:09.360 --> 0:02:11.720 get into what you do, we have to talk a 0:02:11.760 --> 0:02:14.600 little bit about how you got to where you are today, 0:02:14.639 --> 0:02:18.800 because it's a pretty wild ride. Starting with you're working 0:02:18.840 --> 0:02:22.000 with Peter Leegal of Forest River that's later sold to 0:02:22.800 --> 0:02:27.000 Warren Buffett and Berkshire Hathaways, but you're operating as his 0:02:27.480 --> 0:02:30.360 chief of staff. Tell us what you were doing with 0:02:31.120 --> 0:02:31.760 Forest River. 0:02:31.880 --> 0:02:33.720 Well, thanks for having me. I'm a big fan of 0:02:33.760 --> 0:02:37.800 the show, and you know, I grew up in rural Indiana. 0:02:38.760 --> 0:02:41.320 I'm fifty two years old, so it is nineteen, you know, 0:02:41.440 --> 0:02:46.960 early eighties. My dad was first generation college became an 0:02:47.080 --> 0:02:53.120 entrepreneur started an auto parts manufacturing business. He chose a 0:02:53.880 --> 0:02:57.320 challenging time. There are double digit interest rates in America, 0:02:57.520 --> 0:03:01.600 double digit inflation. The Japanese were attacking our auto industry, 0:03:02.160 --> 0:03:03.920 and as you remember, that part of the world was 0:03:03.919 --> 0:03:05.880 known as the rust Belt, yep. So it was tough 0:03:05.919 --> 0:03:08.720 times in America. You know, growing up where I did 0:03:08.720 --> 0:03:12.359 in Northwest Indiana. But you know, when I got to 0:03:12.440 --> 0:03:15.080 high school, I realized my dad's business didn't make it. 0:03:15.840 --> 0:03:17.520 I had to find my way out of this town. 0:03:17.560 --> 0:03:19.840 I was going to have to pay for college. So 0:03:19.880 --> 0:03:23.080 I had a job. And you know, Elkhart, Indiana happens 0:03:23.120 --> 0:03:26.000 to be the r V capital of the world. And 0:03:26.040 --> 0:03:30.440 there was a gentleman I got introduced to named Pete Legal. 0:03:31.040 --> 0:03:34.720 Pete Legal had built an RV company called Cobra, sold 0:03:34.760 --> 0:03:37.440 it or partnered with private equity, had a bad experience, 0:03:37.560 --> 0:03:39.560 left that and said I'm going to do it over again, 0:03:40.360 --> 0:03:43.600 and he had a little startup RV company called Forest River. 0:03:44.640 --> 0:03:48.320 Pete's an absolute force in nature, and you know, so 0:03:48.440 --> 0:03:50.040 when he asked me if i'd come be his right 0:03:50.080 --> 0:03:52.600 hand guy, I had no idea what that meant, but 0:03:52.640 --> 0:03:55.120 I knew i'd learn a lot. So I worked there 0:03:55.200 --> 0:03:58.680 the summers of my junior and senior year, and then 0:03:58.680 --> 0:04:01.640 I'd worked throughout the year a bit, and I learned 0:04:01.640 --> 0:04:04.040 so much from Pete. But Pete was one of these guys. 0:04:04.120 --> 0:04:08.040 He didn't spend a lot of time analyzing right the 0:04:07.120 --> 0:04:11.280 way an entrepreneur does. It is the ab test. They're 0:04:11.320 --> 0:04:13.960 prone to action, right, right, So Pete would say that, 0:04:14.320 --> 0:04:16.120 you know, jump in the car with me and we 0:04:16.240 --> 0:04:19.480 go to a competitor's lot and he'd be measuring, you know, 0:04:19.560 --> 0:04:22.320 the dimensions on the new RVs out from the competitors 0:04:22.320 --> 0:04:24.159 on their lot. He's like, we don't need to waste 0:04:24.240 --> 0:04:27.400 money on expensive architects. We can just you know, do 0:04:27.480 --> 0:04:31.000 this ourselves run a better, lower cost operation. He knew 0:04:31.000 --> 0:04:34.520 about competitive modes, Like I say, Pete knew about Michael 0:04:34.560 --> 0:04:37.000 Porter's five forces, all the stuff you learn at Harvard 0:04:37.000 --> 0:04:40.159 Business School, but he learned it by ab testing it 0:04:40.200 --> 0:04:42.320 in the real world. And so it was a real 0:04:42.320 --> 0:04:44.000 pleasure to work for him. And yeah, he went on 0:04:44.040 --> 0:04:46.560 to that became the biggest RV company in the world, 0:04:46.800 --> 0:04:50.880 would later sell it to Warren Buffett, and Warren writes 0:04:50.880 --> 0:04:52.960 about him extensively in his letters. 0:04:52.720 --> 0:04:57.520 So eventually you get your jd. From the University of Indiana, 0:04:58.120 --> 0:05:01.640 you don't really strike me as a lawyer. Not only that, 0:05:02.279 --> 0:05:07.159 two years later you become Deputy Secretary of State for Indiana. 0:05:07.279 --> 0:05:10.240 So so that happened. So you know, you're you're you're 0:05:10.320 --> 0:05:13.400 highlighting a random background. And we'll come back to this. 0:05:13.520 --> 0:05:16.120 I do think when I look for analysts today, I 0:05:16.160 --> 0:05:19.880 look for interesting backgrounds. You know, all of these things. 0:05:19.920 --> 0:05:22.400 I would say, the thing that connects them is just 0:05:22.520 --> 0:05:25.760 voracious curiosity about the world of politics and you know, 0:05:25.839 --> 0:05:28.279 economies and trying to make sense out of it. But 0:05:28.320 --> 0:05:31.560 because my dad went broke, I have three siblings, so 0:05:31.600 --> 0:05:34.360 there were four of us his father, so my grandfather, 0:05:34.440 --> 0:05:38.040 he came to the grandkids. He sacrificed everything. This was 0:05:38.080 --> 0:05:41.279 a self taught man. I remember his bookshelf. He had 0:05:41.320 --> 0:05:45.520 physics textbooks and biology textbooks, you know, and and he 0:05:45.520 --> 0:05:48.279 would just read them. He couldn't afford to go to college, 0:05:48.640 --> 0:05:50.599 and so he came to the grandkids and he said, 0:05:50.720 --> 0:05:54.919 you can't be entrepreneurs. You have to become professionals, law school, 0:05:55.080 --> 0:05:57.320 medical school, become an architect. But we got to get 0:05:57.360 --> 0:06:00.240 the family back on track, right, And so really to 0:06:00.279 --> 0:06:03.040 honor his wish, I went to law school. As it 0:06:03.080 --> 0:06:07.320 turns out, it's incredible training in just how to think analytically. 0:06:07.640 --> 0:06:10.320 I love that take. That was my experience as well. 0:06:10.400 --> 0:06:13.120 But you kept going. You said, Hey, if law school 0:06:13.200 --> 0:06:15.840 is good, what about business school? And off to Harvard 0:06:15.839 --> 0:06:18.800 Business School you go. What was the career path? What 0:06:18.839 --> 0:06:23.080 were you thinking about? From politics to law school to 0:06:23.160 --> 0:06:23.720 business school. 0:06:23.720 --> 0:06:25.239 Well, the truth of the matter is I was lucky 0:06:25.320 --> 0:06:28.479 enough one I came back from studying overseas to work 0:06:28.520 --> 0:06:31.920 for an incredible statesman, Indiana Senator Dick Lueger. He was 0:06:32.000 --> 0:06:35.440 nineteen ninety ninety one. He and Sam Nunn were denuclearizing 0:06:35.480 --> 0:06:38.120 the world with the Sam Nun Bill. This was post 0:06:38.160 --> 0:06:40.200 the fall of the Wall, the end of the Cold War. 0:06:40.560 --> 0:06:43.239 It was exciting times. And I just hit it off 0:06:44.400 --> 0:06:47.080 with this incredible man. And so when I graduated from 0:06:47.160 --> 0:06:50.240 law school, he pings me one day and he said, hey, 0:06:50.240 --> 0:06:52.040 I would like for you to accept an appointment as 0:06:52.080 --> 0:06:56.440 deputy secretary of state. And it was really a launching 0:06:56.480 --> 0:07:00.680 pad in Indiana for higher political office by who became 0:07:00.720 --> 0:07:03.680 our governor and a US senator had been deputy secretary 0:07:03.680 --> 0:07:06.640 of state. So I knew what it meant, but I 0:07:06.720 --> 0:07:09.320 took the job. I got there. I think it paid 0:07:09.360 --> 0:07:13.200 sixty thousand dollars a year, and I realized, you know 0:07:13.240 --> 0:07:15.840 how poor I was, and I had grown up poor, 0:07:16.400 --> 0:07:18.040 and I didn't want to spend the rest of my 0:07:18.120 --> 0:07:20.480 life begging for money. So the truth is, I thought 0:07:20.520 --> 0:07:22.600 to myself, if I could get into one of these 0:07:22.600 --> 0:07:25.720 fancy business schools, I'll go there, I'll figure out how 0:07:25.760 --> 0:07:27.960 to make a million bucks, and I'll come back and 0:07:28.000 --> 0:07:30.360 I'll run for governor. And that was twenty five years ago. 0:07:30.440 --> 0:07:33.000 Well, if you ever get to the million dollars, you 0:07:33.000 --> 0:07:33.960 can run for governor. 0:07:34.600 --> 0:07:38.560 Right So, Harvard Business School, it was a transformative time 0:07:38.680 --> 0:07:42.560 nineteen ninety nine two thousand. The Internet was blowing up 0:07:42.760 --> 0:07:44.800 and that would change really everything. 0:07:44.960 --> 0:07:48.320 So you joined General Catalyst right out at a business school, 0:07:48.440 --> 0:07:51.080 and then par Capital Management. Tell us a little bit 0:07:51.160 --> 0:07:55.440 about both of those experiences at fairly established venture funds. 0:07:55.520 --> 0:07:58.280 Well, at the time, there was no General Catalyst. It 0:07:58.320 --> 0:08:01.600 was nineteen ninety nine, was going wild. There were some 0:08:01.760 --> 0:08:05.880 established venture capital firms in Boston, Matrix, Charles River, Graylock, 0:08:06.280 --> 0:08:07.480 High Highlands, et cetera. 0:08:07.600 --> 0:08:07.840 Bain. 0:08:08.680 --> 0:08:11.960 But there are these two enterprising young guys, David Fialco 0:08:12.000 --> 0:08:15.560 and Joel Cutler, forces of nature, and they wanted to 0:08:15.600 --> 0:08:17.400 start a venture firm, and so we knew we had 0:08:17.440 --> 0:08:19.920 to put together a launch deal in order to launch 0:08:19.960 --> 0:08:22.560 this venture capital firm. I help them put together that 0:08:22.640 --> 0:08:23.280 launch deal. 0:08:23.400 --> 0:08:26.960 Wait, so when you joined General Catalyst, it wasn't already established. 0:08:27.040 --> 0:08:28.960 No, in fact that in fact, I think they were 0:08:29.520 --> 0:08:32.480 still investing money off their balance sheet called FC Capital. 0:08:32.720 --> 0:08:34.760 Fialco Cutler Capital gotcha. 0:08:34.960 --> 0:08:37.960 Okay, all right, now that may that chronology. 0:08:37.559 --> 0:08:40.880 Makes This was an early online travel company that we started. 0:08:41.760 --> 0:08:44.480 We would eventually not only eventually. So that was nineteen 0:08:44.520 --> 0:08:46.560 ninety nine. I was still in business school helping them 0:08:46.600 --> 0:08:49.120 incubate it. I became co CEO of the business and 0:08:49.160 --> 0:08:51.440 we sold our stake in the business to Barry Diller 0:08:51.760 --> 0:08:55.679 in two thousand and one. You know, the Internet had crashed, 0:08:55.679 --> 0:08:58.760 but our business was working really well. It was fortuitous 0:08:59.040 --> 0:09:01.400 and on that succes well launch deal they were able 0:09:01.440 --> 0:09:04.320 then to go raise General Catalyst one. I learned a 0:09:04.320 --> 0:09:07.480 tremendous amount from them. They're both still dear friends. But 0:09:07.600 --> 0:09:11.040 one of the things I learned in that first startup, 0:09:11.080 --> 0:09:13.880 I had two guys on the two investors who were 0:09:13.880 --> 0:09:17.240 not traditional venture capitalists. One was Seth Clarmen, the founder 0:09:17.280 --> 0:09:19.480 of bow Post Sure, and the other one was Paul Reader, 0:09:19.520 --> 0:09:22.680 the founder of Park Capital. So these guys would be 0:09:22.679 --> 0:09:24.199 bucketed as hedge fund guys. 0:09:24.360 --> 0:09:26.360 Okay, not traditional vcs. 0:09:26.400 --> 0:09:28.160 But the truth of the matter is, if you think 0:09:28.200 --> 0:09:32.600 about Warren Buffett's hedge fund, Seth Klarman's hedge fund, Paul 0:09:32.640 --> 0:09:37.160 Reader's hedge fund, they never quarantined themselves to just public investments. 0:09:37.600 --> 0:09:40.680 They just made great investments. Sometimes they were private, sometimes 0:09:40.679 --> 0:09:43.760 they were public. And so I was really a believer 0:09:44.440 --> 0:09:46.880 that this was going to be the future of venture capital. 0:09:47.080 --> 0:09:49.839 The companies were going to scale faster, that there was 0:09:49.880 --> 0:09:51.600 going to be a lot of information flow that you 0:09:51.600 --> 0:09:54.559 could extract out a venture into the public markets and 0:09:54.640 --> 0:09:57.440 vice versa. I had an appetite for both the public 0:09:57.480 --> 0:10:00.000 markets and the venture markets. So I went to Paul, 0:10:00.000 --> 0:10:04.960 who was the founder of Park Capital, and I said, Hey, 0:10:05.200 --> 0:10:07.920 how about if I build your technology practice, I'll run 0:10:07.920 --> 0:10:11.120 a public sleeve and I'll also run a venture sleeve 0:10:11.160 --> 0:10:14.480 in technology. Paul was crazy enough to invite me on board. 0:10:14.600 --> 0:10:17.120 So wait, at this time, you really didn't have a 0:10:17.160 --> 0:10:20.720 whole lot of investing experience. You were both a lawyer 0:10:20.720 --> 0:10:23.520 and a business school graduate, so you had a lot 0:10:23.559 --> 0:10:28.160 of academic knowledge. What was that transition like once you're 0:10:28.400 --> 0:10:30.720 in the trenches and actually deploying real capital. 0:10:30.880 --> 0:10:34.640 Yeah, so what I mentioned my grandfather, you know, he 0:10:34.720 --> 0:10:37.840 sacrificed everything. So it was a surprise when he passed 0:10:37.840 --> 0:10:41.320 away that we learned that he left one hundred thousand 0:10:41.360 --> 0:10:44.840 dollars twenty five thousand to each of the four grandchildren. 0:10:45.440 --> 0:10:47.640 And you know, I vowed on that day that I'm 0:10:47.679 --> 0:10:50.560 going to I'm going to multiply this money. Like this 0:10:50.640 --> 0:10:54.440 guy sacrificed everything, I'm not wasting it. And you know, 0:10:54.559 --> 0:10:56.360 so in law school, I went and got my Series 0:10:56.400 --> 0:10:59.840 seven and sixty three. I started plotting stocks. I started 0:11:00.000 --> 0:11:03.040 thinking about public market investing. I started doing some of 0:11:03.080 --> 0:11:06.360 my own public market investing. And you have to understand 0:11:06.440 --> 0:11:09.080 what this felt like for a kid on the outside 0:11:09.120 --> 0:11:11.560 looking in who never had money for the first time 0:11:11.960 --> 0:11:14.400 to buy a stock, to make some money, to sell 0:11:14.440 --> 0:11:16.880 a stock. And so I would say I had an 0:11:16.920 --> 0:11:21.160 appetite for the public markets. When Paul met me, I 0:11:21.320 --> 0:11:25.920 was modeling companies like Priceline in my spare time and 0:11:26.040 --> 0:11:29.160 investing out of my you know, probably Fidelity account at 0:11:29.200 --> 0:11:31.480 the time, and Paul said, hey, I think you would 0:11:31.520 --> 0:11:33.800 be good in this hedge fund business. And I said, Paul, 0:11:33.880 --> 0:11:37.800 I don't know anything about managing a public portfolio. But 0:11:37.920 --> 0:11:39.760 the deal we made with each other, I actually said 0:11:39.760 --> 0:11:42.040 to him, I'll come work for free. I said, you 0:11:42.120 --> 0:11:44.040 just have to agree to have lunch with me every day. 0:11:44.480 --> 0:11:46.960 If I love the business, I'll probably start my own. 0:11:47.000 --> 0:11:48.960 Because by this time I had started and sold a 0:11:48.960 --> 0:11:52.320 couple companies and I knew I was an entrepreneur. And 0:11:52.520 --> 0:11:54.800 you know, I will tell you I still talk to 0:11:54.840 --> 0:11:58.720 Paul every week. He's an incredible friend, an incredible mentor, 0:11:58.800 --> 0:11:59.800 and a super investor. 0:12:00.080 --> 0:12:02.880 You have one of the wildest backgrounds. It's really quite 0:12:02.880 --> 0:12:07.400 amazing to me seeing how you were driven and you 0:12:07.400 --> 0:12:10.120 were running pretty fast and you really didn't know in 0:12:10.160 --> 0:12:12.240 what direction you wanted to go, and once that came 0:12:12.280 --> 0:12:16.840 into focus, lots of pieces fell in quickly. Now you're 0:12:16.960 --> 0:12:21.800 running Altimeter Capital. You launched it at a really fortuitous 0:12:21.840 --> 0:12:26.439 time fifteen years any second thoughts that was this what 0:12:26.480 --> 0:12:30.439 you were born to do? How does it feel having 0:12:30.480 --> 0:12:33.000 spent so much time not knowing exactly what direction you 0:12:33.040 --> 0:12:36.120 want to go, and then suddenly it's all falling into place. 0:12:36.280 --> 0:12:40.880 You know, you always have to contextualize those moments in 0:12:40.920 --> 0:12:43.920 your life. So I had started a third company called 0:12:44.000 --> 0:12:47.520 Room seventy seven that we had end up selling to Google. 0:12:48.800 --> 0:12:51.160 I had just gotten married in the fall of two 0:12:51.200 --> 0:12:53.480 thousand and seven. I had my first child in June 0:12:53.520 --> 0:12:56.600 of two thousand and eight, and I told my you know, 0:12:58.280 --> 0:13:01.280 you know, very pregnant wife at the time. You know, 0:13:01.320 --> 0:13:02.920 we didn't have a lot of money, that I was 0:13:02.960 --> 0:13:05.920 going to leave this secure job. Now the first half 0:13:05.960 --> 0:13:07.480 of two thousand and eight, I was doing pretty well 0:13:07.480 --> 0:13:08.920 in the fund. I think I was up twenty or 0:13:08.920 --> 0:13:11.880 twenty five percent, and so I was feeling pretty good 0:13:11.880 --> 0:13:14.320 about things. I said, you know, now I've been thinking 0:13:14.320 --> 0:13:17.319 about starting my own firm. Now's the time I had 0:13:17.360 --> 0:13:21.199 soft circled a couple hundred million dollars from some endowments. 0:13:21.320 --> 0:13:23.280 These are folks who said, we'll give you money, we 0:13:23.320 --> 0:13:24.839 think you're good at this, we want to help you 0:13:24.920 --> 0:13:27.720 launch your own firm. And explicitly what I was going 0:13:27.760 --> 0:13:30.360 to do is move to Silicon Valley and start a 0:13:30.440 --> 0:13:33.880 crossover firm by a founder so I had started three companies. 0:13:34.160 --> 0:13:37.080 This was somebody who was venture first, public market second, 0:13:37.840 --> 0:13:40.679 and I thought that was a really unique wedge into 0:13:40.720 --> 0:13:45.120 the venture community in public investing. But of course I 0:13:45.120 --> 0:13:46.600 didn't know the world was going to melt down in 0:13:46.600 --> 0:13:49.480 two thousand and eight. So by August the world started 0:13:49.520 --> 0:13:52.720 melting down. Remember I've got a three month old child, 0:13:53.720 --> 0:13:59.240 and September rolls around every morning. Every morning, I'm on 0:13:59.400 --> 0:14:02.760 you know, watching NBC. It's gapping down five percent, six percent. 0:14:03.679 --> 0:14:06.520 Advisors were calling me saying, don't leave your firm. The 0:14:06.559 --> 0:14:09.640 world's ending. This is a terrible time. But what I 0:14:09.880 --> 0:14:12.680 had was having started three other companies on the back 0:14:12.679 --> 0:14:15.720 of a napkin. I knew what it felt like to 0:14:15.760 --> 0:14:17.920 be in a windowless office on the back of a 0:14:18.000 --> 0:14:20.320 napkin by yourself. And I just said to him, the 0:14:20.400 --> 0:14:23.040 horse has left the barn, like I'm doing this and 0:14:23.120 --> 0:14:25.360 I'll have whatever money I'll have. And I knew that 0:14:25.400 --> 0:14:29.200 Seth Klarman had started with very little money in eighty one. 0:14:29.640 --> 0:14:32.440 Paul Readers started, I think with less than five million dollars. 0:14:32.440 --> 0:14:36.320 In nineteen ninety one, the SNL crisis, Tiger Chase had started, 0:14:36.440 --> 0:14:40.240 you know, in the wake of the Internet melting down 0:14:40.280 --> 0:14:42.080 in two thousand, so a lot of folks who I 0:14:42.160 --> 0:14:45.480 knew and respected had to stress ERA firms. So I 0:14:45.480 --> 0:14:48.240 started with less than five million bucks. My first trade 0:14:48.600 --> 0:14:51.880 I bought price Line on November one, two thousand and eight. 0:14:52.000 --> 0:14:56.160 Last week we celebrated our fifteenth anniversary, and I would 0:14:56.160 --> 0:14:58.760 own price Line. I bought it when I was at 0:14:58.800 --> 0:15:04.160 par We bought it, you know, at I think it 0:15:04.200 --> 0:15:06.320 was ten bucks a share. We would own it when 0:15:06.320 --> 0:15:08.240 it was over two thousand dollars a year. 0:15:08.480 --> 0:15:15.160 Unbelievable. So you start three separate companies. NLG eventually gets 0:15:15.160 --> 0:15:19.720 sold to Dillar's ic open Lists, which goes to march X, 0:15:19.840 --> 0:15:25.080 and then Faircast gets sold to Microsoft. Am I missing anything? Well? 0:15:25.120 --> 0:15:28.960 The third company I starts, Room seventy seven that Google bought, Faircast, 0:15:29.080 --> 0:15:32.280 was an investment, a Series B investment we made in 0:15:32.360 --> 0:15:36.160 two thousand and five. I believe, in fact, we backed 0:15:36.280 --> 0:15:39.200 the head of artificial intelligence. Listen to this very yeah, 0:15:39.240 --> 0:15:42.440 two thousand and five we backed the head of artificial intelligence. 0:15:42.480 --> 0:15:44.240 People don't realize AI has been here for. 0:15:44.280 --> 0:15:46.560 That was my first AI investment. Two thousand and five. 0:15:47.400 --> 0:15:50.200 We back it. He was out of the University of Washington. 0:15:50.880 --> 0:15:54.640 He had an idea for being able to build predictive 0:15:54.640 --> 0:15:58.600 analytics into the future movement of airline ticket pricing using 0:15:58.720 --> 0:16:02.480 early AI technique, and we would go on to sell 0:16:02.480 --> 0:16:05.320 that business to Microsoft in two thousand and eight. Now 0:16:05.440 --> 0:16:07.840 here's the interesting part of the story. The person who 0:16:07.920 --> 0:16:10.680 bought Faircast in two thousand and eight for Microsoft was 0:16:10.720 --> 0:16:11.480 Sacha Nadela. 0:16:11.880 --> 0:16:13.080 Oh really, he. 0:16:13.040 --> 0:16:15.080 Was running bing at the time, right, and he was 0:16:15.120 --> 0:16:18.560 buying this as a search business into the search platform. 0:16:18.560 --> 0:16:20.640 And I said, I had dinner with him the other night, 0:16:20.920 --> 0:16:23.320 and I said, do you remember the conversation we had 0:16:23.560 --> 0:16:26.520 when you bought fair Cast And he said, yes. What 0:16:26.560 --> 0:16:29.440 I said was, we'll never beat Google with ten blue links. 0:16:29.680 --> 0:16:32.680 We have to get to answers. They think about that. 0:16:33.360 --> 0:16:38.200 Fifteen years before chat gpt started producing answers, Sacha knew 0:16:38.560 --> 0:16:40.480 that that's where they had to get to if they 0:16:40.480 --> 0:16:43.520 were going to leap for all Google. Such a fascinating and. 0:16:43.440 --> 0:16:46.000 Here we are, and they really put fear gun to 0:16:46.120 --> 0:16:49.720 Google with chat GPT. It was incredibly disruptive. 0:16:50.120 --> 0:16:54.520 I think, you know, I've had the true luxury of 0:16:54.560 --> 0:16:59.000 investing into what we call four super cycles. You know, 0:16:59.080 --> 0:17:04.560 I think Sacha calls them platform disruptions Internet, mobile, cloud, 0:17:04.880 --> 0:17:08.399 and now AI. And I've said in several places I 0:17:08.440 --> 0:17:13.280 think that the platform disruption around augmented intelligence is going 0:17:13.320 --> 0:17:16.159 to be bigger than the Internet itself. Now follow me 0:17:16.240 --> 0:17:19.880 on this. If you think about what AI is already 0:17:19.920 --> 0:17:23.840 doing for the enterprise, we're seeing thirty to fifty percent 0:17:23.920 --> 0:17:28.280 productivity improvements in engineers. There's never been a technology in 0:17:28.320 --> 0:17:31.639 the history of technology. There's never been a tool that 0:17:31.800 --> 0:17:36.960 increases productivity almost instantaneously by thirty to fifty percent. Call 0:17:37.040 --> 0:17:40.320 centers are now fifty percent more productive, So you're seeing 0:17:40.359 --> 0:17:42.760 margins explode as people are able to run their call 0:17:42.800 --> 0:17:46.879 centers more effectively. Sales centers are more productive. So you 0:17:46.960 --> 0:17:50.000 want to know why Meta doesn't have to cager its 0:17:50.000 --> 0:17:52.639 employee head count at forty percent anymore. You want to 0:17:52.640 --> 0:17:55.680 know why Dara reported for Uber that again their number 0:17:55.680 --> 0:17:58.639 of employees was down quarter over quarter. I wrote this 0:17:58.760 --> 0:18:01.080 letter a year ago, Time to get Fit. It was 0:18:01.119 --> 0:18:04.680 an open letter I published ta Meta. You know Mark 0:18:04.720 --> 0:18:07.040 would go on to write his letter Year of Efficiency. 0:18:07.680 --> 0:18:10.879 This is what we're seeing. The power of AI is 0:18:11.000 --> 0:18:15.320 unleashing incredible potential within the enterprise. And then look at consumers. 0:18:15.880 --> 0:18:18.639 I was speaking at the Javit Center, two thousand people 0:18:18.680 --> 0:18:21.320 in the audience. I asked, how many of you have 0:18:21.480 --> 0:18:23.639 used chat GPT in the last two days as a 0:18:23.680 --> 0:18:26.679 replacement to Google. Half the hands in the room went up. 0:18:27.320 --> 0:18:30.399 That is the first time in twenty years there's been 0:18:30.440 --> 0:18:34.040 a challenge to Google search monopoly. And Google search monopoly 0:18:34.280 --> 0:18:37.440 represents over one hundred percent of the profits of the business. 0:18:37.680 --> 0:18:40.080 So this is one of the most fascinating times I've 0:18:40.119 --> 0:18:42.560 seen in my twenty five year career. And we're just 0:18:42.600 --> 0:18:44.280 getting started. The irony of. 0:18:44.560 --> 0:18:48.480 What's going on with Google is, and I'll use a 0:18:48.520 --> 0:18:52.480 dirty word, a lot of the big tech companies having 0:18:52.560 --> 0:18:57.080 going through a process that Corey doctor calls and notification 0:18:57.760 --> 0:19:01.400 and Google search results have become worse and worse. It's 0:19:01.400 --> 0:19:06.000 festudent with ads. Pick a company, Amazon, Apple, Microsoft, any 0:19:06.080 --> 0:19:09.119 large tech company. At a certain point they kind of 0:19:09.160 --> 0:19:11.960 lose touch with what made them so successful in the 0:19:12.000 --> 0:19:15.320 first place. So I don't use Google half as much 0:19:15.359 --> 0:19:18.640 as I used to. And before I start the research process, 0:19:18.680 --> 0:19:21.680 I use a little app called Perplexity, which is a 0:19:21.720 --> 0:19:25.760 pretty decent AI And who is Brad Gersner in upcomes 0:19:26.040 --> 0:19:29.760 like pages and pages of information organized in such a 0:19:29.920 --> 0:19:33.119 useful way. It's not different than what I would have 0:19:33.119 --> 0:19:36.359 found from Google, but it saves me ten steps in between. 0:19:36.840 --> 0:19:40.280 At the end of the day, you know, a lot 0:19:40.280 --> 0:19:42.359 of the information on Google you could have also found 0:19:42.359 --> 0:19:44.360 in a card catalog in a library, but you would 0:19:44.400 --> 0:19:46.040 have to drive there, you would have to open the 0:19:46.080 --> 0:19:49.200 card catalog, you would have to go find the periodicals, 0:19:49.480 --> 0:19:51.080 you would have to find the books, you'd have to 0:19:51.119 --> 0:19:54.159 read them yourself. So really, when you think about it, 0:19:54.280 --> 0:19:56.719 I described Google, it's the largest card catalog in the 0:19:56.760 --> 0:19:58.920 history of the world. Right, it's ten blue links, but 0:19:58.960 --> 0:20:00.879 it's an infinite number of blue links. But you have 0:20:00.920 --> 0:20:02.919 to open the blue link, you have to read the 0:20:02.960 --> 0:20:06.200 information yourself. And you know, So I did this experiment 0:20:06.240 --> 0:20:08.720 the other day. I was lucky enough to be having 0:20:08.800 --> 0:20:11.600 dinner in Omaha with Paul Reader, you know, and Paul 0:20:11.600 --> 0:20:14.359 and I were flying back to New York, and I 0:20:14.440 --> 0:20:16.879 needed to know the answer to the question what is 0:20:17.000 --> 0:20:18.679 and we'll talk about invest America in a bit. So 0:20:18.720 --> 0:20:21.040 as related to that, I wanted to know what was 0:20:21.080 --> 0:20:25.000 the aggregate amount of corporate matching dollars for four oh 0:20:25.080 --> 0:20:28.520 one k's on an annual basis. I said to Paul, 0:20:28.880 --> 0:20:32.000 you use Google and I'll use I'll use chat GPT. 0:20:32.880 --> 0:20:36.240 I got the answer instantaneously. It took him three or 0:20:36.240 --> 0:20:39.280 four minutes of hunting and pecking around. It was full 0:20:39.320 --> 0:20:42.480 of ads about four oh one K providers and everything else. 0:20:42.840 --> 0:20:45.480 And the reality is this is a was a better 0:20:45.560 --> 0:20:49.320 tool simply because it made us more productive. In the moment. 0:20:49.720 --> 0:20:54.240 Google is an extraordinary business. A healthy Google is good 0:20:54.240 --> 0:20:58.320 for Silicon Valley. The challenge is they are facing a 0:20:58.440 --> 0:21:04.240 massive innovator's dilemma. The organizing philosophy principle for the Internet 0:21:04.320 --> 0:21:09.320 for twenty plus years has been Internet search, and it's changing. 0:21:09.960 --> 0:21:11.960 So I said to somebody the other day. They said, yeah, 0:21:11.960 --> 0:21:14.520 but Google's got AI. You know, they've got Barre, They've 0:21:14.560 --> 0:21:17.960 got this and that. I said, I will stipulate. I 0:21:18.000 --> 0:21:21.399 will stipulate they'll be successful in AI. But do you 0:21:21.480 --> 0:21:24.640 think they can cross the chasm? And on the other 0:21:24.800 --> 0:21:28.600 side of this chasm, knowing they have to compete with METAAI, 0:21:29.160 --> 0:21:34.240 with chat GPT, with Copilot, with claud at Anthropic, with 0:21:35.119 --> 0:21:38.080 you know whatever the post AI to series going to 0:21:38.080 --> 0:21:40.159 be at Apple. Do you think they're going to be 0:21:40.200 --> 0:21:44.560