Welcome back to the 20-minute VC with me Harry stebbings now. They show I've wanted to do since I started the podcast over five years and two thousand episodes ago, so diving straight in and it's a huge pleasure to welcome to math palette Kappa Tia to the hot seat today now to math is the founder and CEO Social Capital the organization on a mission to transform Society by using technology to solve The World's Hardest problems socials portfolio includes the likes of slack Yammer front into common Carter to name a few incredible companies as Fortune math prior to founding social he
It's an incredible four years at Facebook including is the original exact in charge of Facebook platform as well as being responsible for overseeing call growth components and overseeing Facebook's mobile efforts. If that wasn't enough to mouth is also an owner at the Golden State Warriors and chairman at Virgin Galactic. And I do also want to say a huge thank you to Shaq for some fantastic questions as always shocked. You are the best before we move into the show stay. I'm sure you've heard about it. But my word this is a product. I love Carter Carter simplifies how startups and investors manage Equity track cap tables and
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Take the guesswork out of remote so that you can really Thrive but really don't take my word for it. Just ask high-growth businesses like Gaston chime learning and hymns all trusting terminal with their remote teams, and you can find out more today at Terminal dot IO that's quite enough for me though. So now I'm very excited to welcome to math palette Hoppity of founder and CEO at social capital.
You have now arrived at your destination Tomas. I've wanted to do this episode for five years since I started the show, so I can't thank you enough for joining me today.
I'm excited to be here and quite honestly congrats to all of your success. You're a
Dynamo. Well, that is very very kind of you. I think I'm more just lucky to love what I do. So, I really appreciate that but I would love to start with a little bit on you. So if anyone has been really living under a rock for the last decade, how did you make your way into the world of tech and come to found Social
Capital the short version of the long?
Story is that I like most people went to school to do what my parents told me to do. And those choices were to be a lawyer a doctor or an engineer and I chose to be an engineer. So I went to the University of Waterloo and I studied electrical engineering but also like a lot of kids. I went into the industry that at the time seemed the sexiest which at the time was Investment Banking and derivatives trading and I work for an investment bank for a year, but eventually reality kind of caught up with me and I
Sized I hated the job or not so much needed the job but I really felt underutilized. And so I moved to Silicon Valley and I worked for a small music startup called Winamp which was bought by AOL and became part of AOL music and I Rose through the ranks there on the product side and the business side until I was third of like one level below vice president by this point. I was 24 25 and then I became the general manager of AOL Instant Messenger by the good graces of my boss at the time Kevin Conroy. Who was my mentor very important to
Those kinds of people in your life and then I ran a man icq and during that period I thought about acquiring or trying to acquire a company called the facebook.com which I had met through my colleague Sean Parker because when I was running Winamp Sean Parker ran a company called Napster and the long and the short of it was that AOL was not in a position to do any sort of a position. So I did a business development deal between a name and Facebook and then when Parker left Zack called me and asked to unwind the deal and we got to know each other and then I joined the company in the
Thousand six seven time frame and was one of the principal executives are until I left in 2011. And when I was there I created the growth team. That's probably the thing that I'm best known for but also oversaw Facebook platform are early monetization products all of mobile launch the product globally and every Market of the world outside the United States and then I started Social Capital more to invest in interesting hard problems outside of traditional consumer technology because at that point, you know, I had been working in consumer tech for a decade and so I was a little bit of exhausted and I wanted
Work on things that I felt were more important for society. So Healthcare education syntactic climate change rocketry stuff like that.
Come on a journey and has been with social. I do want to slightly unpack chronologically back because you managing your time at AOL and they spoke to Chris for a look at first round for the show. And he asked what did you learn from aim at AOL that helped you at Facebook to
think. Well, it was the second product that I worked on deeply that had a network effect. The first one was Winamp when amp had a hundred million users and
We were able to use those users to create two ecosystems one was for skins which was sort of the UI layer that's set on top of the media player and one was for plugins, which was all this incremental third party technology Acoustics and other things that you could use to make the product better and why that was interesting is it basically showed me the power of a distribution and leverage team because when I was eight of us nine of us yet, we had hundreds of people building hundreds of skins and plugins to make the product better at aim, it was a similar kind.
Divide e aware you had these tens of millions of users and because of those users we were able to keep the product afloat even during times when the product quality was quite poor the product strategy wasn't very crisp. Our execution was marginal and despite all of that. The users would number into the tens of Millions on any given day. And so when I put those two ideas together at very much cemented the value of a network effect, which was not very well trod ground at the time in two thousand five six and seven and not well understood now, obviously,
Tively obvious to
most absolutely and I do want to say then you'll see moved to Facebook and probably some of the most transformational years of your career and I have to ask in terms of the lessons that you learn that what lessons did you learn at Facebook? Maybe he's specifically building the growth team that you still use today. Do you
think you know, the first is that forecasts are pretty worthless because everybody gets them wrong no matter how much data you have when we were trying to project the impact of some of the things that we did. We were frankly off by an order of magnitude. We thought success would be getting the product to
A hundred million users + lo and behold the product now touches 3 billion users largely using the same compounding effects and growth rates that were driven by a handful of features that we created very very early on so that's the first thing which is that forecasting is really not that helpful. So you have to be in the bowels of a company building. The second is the value of compound interest which is to say that a lot of things adding up by very small numbers of basis points tends to be the thing over time that makes things
things work at scale. There are very few Panacea Silver Bullet features in life. And I think a lot of people spend a lot of time trying to find the one thing without realizing that disciplined execution over large stretches of time that are really about thoughtful tactics really go a long way and that's something that I've taken away and then the third thing that I've taken away from my time there that has been immensely helpful is trying to study and better understand what creates a moat and being able to be more
Thoughtful about identifying these modes and amplifying these modes with product features and I think we've become my team and I become pretty decent at doing that you mentioned
forecasting that is bicycle schedule, but I didn't expect this early but you mention forecasting that I work with a ton of early-stage Founders and then often concerned about creating forecasts. As you said, it's highly unpredictable. It's very difficult to forecast in the first place and then also investors bash Founders, if you don't hit your forecast, how would you advise Founders in terms of forecasting in the early days when everything is so
transient get better?
Investors, I think the high quality investors also understand the fragility of these kinds of things and so as a result don't demand this kind of fake work and it makes for a much more useful conversation. You know, what I tell the people that I work with at the earliest stages what I want to see our thoughtful documents that really lay out. Ideally mm Pros vs. Deck form what they intend to do and then what I want is a very simple and elegant way of measuring those
Acts and being able to then double down on the elements of those that they think are the most impactful and what it does is it allows us to not work backwards from something that we know is inherently faulty IE a forecast and work forward by having a very reasonably detailed product plan along with a way of demarking success and iteration and I think that that's just a mulch healthier Dynamic to give an early stage founder. The people that rely on forecasts should really be more in the later stages.
Once a business is much more mature and predictable but at that point these are things that then get reduced to DCFS and discounted cash flows and at that point the investing mindset is very much different. So I think the early stage founder needs to really use something like that as a litmus test for the quality in the intellectual curiosity of the investor that they're going to work
with. Yeah. Absolutely. I always say if you don't think the founders been worried about hitting that full cost but weeks before the board meeting when they have to say they haven't and you got another thing coming in terms of the investor. I do want to ask the final thing on Facebook and I
Oscillating your own with the last few weeks. It's kind of with Trump and lack of they're adapting his posts. Unlike Twitter me becomes about the question of discussion on any platform versus publisher and whether you can be both to me, maybe I shouldn't say before I hear your answer to me. You can't be both and maybe Mark was right. How do you view maybe the decision and whether you can be both platform and publisher and how maybe you would have at
it? I'm not sure about the semantics here. But here's what I will say. I think that all of these online social networks.
Are coming to a fork in the road and the fork in the road is balancing the morality of the employees and the board and the shareholders and the rest of the stakeholders. And in that balancing act different sites will make different decisions. And I think what you're going to see is a distribution of outcomes where you will have more left-leaning sites more right-leaning sites and more Centrist organizations, and they will reflect their moral and ethical View.
Into the product and the business decisions they make as a result of it and I think that that's no different than what you see in the media landscape today offline. So you have left-leaning papers right-leaning papers Centrist papers libertarian papers. You have the same for radio. You have the same from magazines. You have the same for broadcast television, and I think it stands to reason that what's really happening right now is the same decomposition and fragmentation of the online landscape that frankly has happened to use tv as an example. We used to
have one or two or three broadcast channels and fast forward seven years later. You have seven hundred channels and it's probably true that there isn't a one-size-fits-all social networking product for information consumption for everybody. And as a result of that realization fragmentation, probably creates more flexibility and rules for everybody. So I suspect what happens at Facebook specifically is you'll have certain properties that are much more right-leaning or libertarian if you will and other properties that are much more left-leaning and I think that that's probably how
For them to maintain market cap, they'll have to acquire or build sites is with a view to different parts of the demographic makeup of society that they don't have a good grasp on and I think that's the same for Twitter and it's the same for snap and everybody
else. I think it's a really interesting proceeds compared to the other days of TV that I do want to kind of move on to Social and discuss what has been a fascinating Journey if we start at the earlier days you had an awesome portfolio you had fantastic people. Everything was going great. I remember being in the valley when I was 18 and social
was absolutely the top Topic in Silicon Valley and bluntly every Venture fund was worried about you coming in. So I guess my question is with everything's going so great. What was that realization moment that the way that you are building at the time wasn't what you wanted to
build. I think it was exactly that when everybody is clamoring to do the same thing and copying. I thought to myself what have I really done and I think what I had done was build a very capable and very competent asset Gathering machine. The problem is that that would have required me to
Give up the rest of my life to become the manager of said I said Gathering machine and in order to run that Machinery, I think that there's a fundamental element of sales and a fundamental element of traveling and a fundamental element of Storytelling that you need to fall in love with now the latter I do love I think I really love communicating and getting my ideas across the people but to be very honest with you. The first two are not things I was very passionate about I wanted to build a kind of organization that you know in some ways was a mixture between
Ween Berkshire with respect to its capital and capitalism philosophy the developments that are like Koch Industries with respect to its view on amalgamation and building conglomerates and frankly a view that's in part like the Red Cross or Doctors Without Borders, which is sort of a selfless mission-driven organization that is trying to do the good and right thing all around the world and those goals and ideals were just not possible with the lens with which I was viewing the world when I was running.
A traditional Venture Capital organization. So it was a very difficult decision to make I think it left a lot of my partner's unfortunately in a position where they had to bounce back and find something else to do but the good news is that I think they all landed on their feet. They're all doing wonderful things. The other practical reality is they all made a lot of money and I'm very happy for them.
Can I ask you to math? And sorry this for the is all scheduling that's a very compassionate and more humble description than I've heard you say before as your mindset changed is to those days when you did
I
think I think honestly Harry as I grow older, I become less insecure and unless driven by the inferiority complex of the moment. What I would also tell you is that I made some enormous mistakes in some of the people that I hired that I think that there were a couple of people and they know who they are who have huge Integrity issues and I optimize for capability over integrity and I've said this many times but Integrity really does compound infinitely and capability always decays, so I didn't know that
And I wasn't secure in myself to hire someone who was more Mission aligned or morally aligned over someone who is just capable. Now those capable people ended up becoming loan Warriors and in it for themselves and that was a mistake. I also made enormous issues of compensation and all of these things. I think created schisms between me and a few of the folks that work for me that we could never really overcome and when I was much more blunt it was because I was also still angry because those feelings were raw, you know fast forward to June of
20 I'm feeling pretty good about things. I can be a little bit calmer, I guess.
Yeah, absolutely. It's a much calmer conversation than I anticipated. So that's super nice. I do have to ask in terms the Integrity element that I'm really interested when you think about human psychology that human assessment. How do you assess for this level of Integrity when evaluating either people's join social stay Founders to invest in and they're kind of leading indicators signals that you've learned signal high integrity
people. Well, one of the things you have to decide is whether you're hiring for functional role and competence or whether
Hiring for a set of Behavioral markers if you're hiring for the former, for example, like, you know, you're going to hire an engineer and you need to understand whether they're a good fun and engineer or not or they understand a very specific tool chain better than other people the concept of Integrity actually doesn't have much place in the world in the hiring decision. And the reason is because the surface area with which they exhibit Integrity doesn't really exist. I mean, I suppose that they could you know produce a bunch of fake check-ins, but at the end of the day if you can't build features properly or you've completely lied about your capabilities
You'll get fired. The judgment is in the technical execution. But those are very binary outcome things that you write other work or don't work if however you're hiring for what I was hiring for which our partners open-ended thought Partners who will be there. Then it's much more about character and the only way that you can find people with high integrity is to spend enormous amounts of time with them over a longitudinal period of time. So it's not about two weeks of 10 hours a day. It turns out to be 5 or 6 months of many many many hours every week and the reason is because of
Eventually their integrity shines through / their lack of Integrity eventually seeps to the surface because you just can't hide it forever and you see it in the way they treat other people you'll see it in the way that they approach problems. You'll see it in the way they eventually let their guard down and in those decisions you 100% have to go with your instincts and you know at first my instincts also weren't that good? And so when I was starting Social Capital, I didn't really frankly have a high sense of self.
If worth and so the idea that people wanted to work with me really won me over. Now. What I would say is I'm pretty sure I'm a reasonably good person to work with and I'm convinced that I'm pretty good at what I do. And so now I'd rather take my time and really find people that are morally aligned with who I am as an individual and if that means that I lose people so be it's not the end of the world and if that means that it takes six months to a year to hire somebody to work with so be that to for the right person who's willing to make that time commitment it will be worthwhile for them and for
us I'm
Be with you all the time commitment. Honestly, there's from a thing. I'm struggling with is like the velocity of funding answer today is so fast that you don't have the time with the speed of rounds in the execution of them to really understand the psychology of the founder and determine the Integrity between the two of you. How do you think about like the velocity of rounds and is that on a fundamental challenge to the determination of their integrity?
It's a fundamental Challenge and I think that the reality is though that the surface area again is relatively small for these kinds of decisions so I don't worry about it as much.
Each between the founder and the investor I think between the investor and his or her partner's it's a much more important decision. And the reason is because again, it's much harder in 2020 to start a company and fundamentally cheat and lie, you can't steal money or embezzle as easily as you could have been the past. You can't fake a product. You can't fake customers as easily as you could in the past. So the basic questions of Integrity, I think a relatively well answered because the work product is so iterative.
Tactical and there are so many things on a constant basis that an entrepreneur has to do to make a company successful that it's very hard to lack Integrity that being said to be a partner in a venture capital firm. It's very easy frankly to like Integrity because there are no points of demarcation and you only learn about your fellow Partners in very sporadic bursts over very very long periods of time largely when it comes to money and credit so, you know ego and compensation tend to be these things that are highly Amplified.
I'd in these traditional partnership structures and it just takes a long time. So if I was a VC what I would tell myself my job is to make sure I don't miss and this may be sort of a jumping off point as well to talk about my investing philosophy. But when I'm talking about investing hundreds of millions to a billion dollars plus I tell myself that I have to be completely predisposed to in action. And so I forced myself to do nothing Harry and the bigger the check the
I need to wait and I force myself to bide my time. And the reason is because optionality when you're writing really really big checks. The optionality comes from doing nothing because once you spill out a billion dollars in my case, I'd only have three left and so 25% of my Capital goes up the windows. I have to be very careful. But if I'm writing a five million dollar check than the predisposition has to be towards action because 5 million over four billion is just not a lot of money and so we need to be in the game and we need to make sure that
We have enough chips on the playing field so that if something works out we get lucky to be a part of it. So what I would tell myself if I was a venture capitalist is I'm in the ladder game. I'm in the action game. I have to take my fun allocate 25% to reserves and the other 75% and divided by the number of months. I want to go before I raise a new fund typically 18 months and that's how much money I'm writing every month and I would just keep doing it ad infinitum as long as I could raise now, that's where I started now. I'm in the business of inaction and doing nothing so it's mostly thing.
And reading and trying to decide how to reflect my worldview inadequate ways where I could retain optionality and not go broke.
Can I ask you like to structure those moments of inaction in terms of the structuring of the research the structuring of the work that you do in that time, and there's nothing like a couple of lessons you've drawn from maybe specific occasions where your mindset has changed either positively or negatively in those moments of
inaction. Yeah, in fact, so in action doesn't mean you sit around doing nothing you're working out or you're playing bridge online. I wish my life were that easy but its not
not the things that we work on are complicated enough that for at least for me. I don't know them well enough and so I am trying in a short burst of time. I eat three to six months become expert enough to make qualified decision on a large Quantum of capital. And so the way that I break down my periods of inaction is essentially a learning process. And what were first trying to do is understand the broad landscape and then we're trying to refine very specific ideas that we then go deep deep deep into and we find experts all around the world whether their University professors or
scientists or other entrepreneurs and we just try to learn and we you know, we ask as humbly as possible for them to teach us and that process takes another two or three months and then we take all of that information from the first 4 months and then I essentially try to write a narrative that explains an understanding of a market or a particular opportunity in a way where it becomes investable because then that narrative six or seven pages of single-spaced writing become my way of distilling many months of knowledge and inaction into some
All action, so that's how it works for me. I'm not saying it's the best and I won't refine it and change it but it's definitely the process that I've honed in on over the last few years that work best for my style. But that's what I do. It's very very very time-consuming and it's very structured. Although it many cases results in doing nothing.
Yeah. Anyway, obviously on the side you want to talk about kind of the structures through which you do investor because you've Champion the spat model very recently and you need been doing it for last year's and I think social being the holding company that is why didn't you
Use this pack model. And why do you think is preferable over the other models that are in place today?
So I think that there's not a lot of first principles thinking in many things and I think the best entrepreneurs will tell you or people will describe them as really great first principles thinkers, which is basically to keep asking why enough times where you get to the root cause we're the answers. I don't know and so if you start asking the question, why as it relates to IPOs you very very quickly get to an I don't
no moment. Now, here's what I've learned Harry before I set up sort of this IPO 2.0 platform and try to kind of create this as an ongoing product that other companies can use. So the first is that from the year 2000 to the year 2020 the number of companies that you could invest in in the United States Equity markets has shrunk from 8,000 to 4,000. That's a combination of bankruptcies and then a consolidation Etc. But that's an incredible thing to understand that the investable Universe has shrunk in half at the same time.
The investors so the practitioners of capital have been creased about a hundred X. There's you know, a hundred X the number of hedge funds today that there were in 2000 and what's even more interesting is that the amount of capital has increased by a thousand X. So here you have these interesting market dynamics. And so again, if you start to ask some first principles questions, you'd say my gosh like won't the public Capital markets be better for young tech companies and the answer is yes. Why because you have a thousand times more capital.
Multiplied by a hundred times more participants who are all seeking growth. Why because the backdrop is that interest rates in the meantime over the last 20 years have gone to zero which means that if you need to buy an asset that can grow for the next three or four years. You actually need to buy an asset that can grow over the next five to seven or seven to ten and the minute you do that what you end up is looking at technology companies as the last Bastion of investable surface area, so
For my perspective. It just seemed pretty obvious. If you looked at the problem that way that a more liquid efficient market for Founders would actually be found in the public markets and not the private markets. And so that's why we created spax now why is back specifically well again, if you go to First principles and you say what's the goal and who's the customer? Well the first goal to just do it as simply and as efficiently and as transparently as possible and number two is you do it for the founder and the employees who are the real customers of this and the
With the spa is that it does both of those two things traditional IPOs are very fraught with principal-agent problems by the Banks who try to feed cheap stock and you know poor price performance to other customers of theirs namely the prime brokerage customers of their trading business direct listings are very complicated because they are equally as burdensome in terms of time and equally litigious in the sense that typical IPOs are fraught with shareholder lawsuits or direct listings increasingly.
On top of that the ability for directors to get d&o insurance via direct listing is next to Impossible and I went through this at slack so I can tell you firsthand. Meanwhile, you can't raise primary or secondary Capital. So IPOs are a little Byzantine and broken direct listings are Byzantine and broken they both take 18 plus months to pull off and then lo and behold there's this tool called us back where you pre-baked it, you know, that's what I do. I pre-baked the IPO already and get the SEC approvals Etc now.
All of a sudden it's a 90-day process you go public via a merger, which means that you can actually spend time with Wall Street. You can create a forecast. Did you know that you cannot create a forecast when you go public through a traditional IPO. Now if you cannot show a multi-year projection of what you think the business can do. So there's all these Arcane rules that you can work around that is fact solves. It's very transparent. You can add any amount of money to the IPO that you want. You can do any mixture primary and secondary. You can remove all the lock up so that the
employees and the founders are free to get liquidity from day one. I didn't invent this back so I can't take credit for it. It's been around for decades. I just think it was pretty simple first principles thinking.
Can I ask for you either when you think about kind of rolling this out and doing a lot more aggressive they were just moving forward using it more as a structure is it not frustrating that it's like one at a time and you have to raise them one by one and how do you think about kind of gaining velocity of spax over
time? I can't say that I have the answer the reality is that the SEC has very strict regulations with how many of these you can do it.
Same time. So to your point, it's not as if software could automate this where you could have a thousand or even a hundred or even ten but I think that that's also right because I think that if that happened you'd have a bunch of fly-by-night folks who viewed this largely as a scheme to get rich and I think whenever that happens a market can get perverted by those kinds of actors. The reality is these things take time. They're a little bespoke each one. They are handcrafted and so they take people who have an interest.
Eating cross-section of skills. You have to be particularly you're going to work with the tech founder. You have to be on the one hand relatively Savvy on the capital markets and a decent investor, but on the other hand a good translational layer that can explain the product and the technology and help the CEO transition them into being public. So that's a unique skill set that I don't think many people have I do think some people and a handful more than I but I think it's a unique enough thing where if we can do our part in getting that 4,000 closer to 8,000. I think we'll all be better
off.
Would be question I had when I thought about this fact strategy that you have is like in your mission to really make social into the Bourgeois generation, which I've heard you say before is that a strategy one step on the Milestone process to getting there or is it the step which scales with the size of the stack itself? How do you think about the mass tones to get to that angle of the Bush of Our
Generation? It's sort of a tool. It's not the end in and of itself. I think what I do with these facts is continue to refine our toolkit of investing continue to understand.
How to punctuate long periods of inaction with things that are highly accretive I think that's a definite skill if you think about investing more broadly speaking. It's an infinite game and the only real competitor is yourself because the only thing you're really fighting is not really Market gyrations, but it's your own psychology. And if you can manage your own psychology, you have the ability to survive and when you are trying to win an infinite game the only
Marker of success is survival, right because by definition if you get sort of to the end of your life and you're still in the game You've Won and it doesn't matter how much you have or how much you lost. It's just that you never lost the game. And unfortunately, I think a lot of people treat investing as the opposite which is a finite game where you're trying to sum up something your net worth or your assets or whatever and I just don't think that's what it is. I think the financial markets are a beautiful.
Test of your ability to self-actualize and to psychologically evolve and survive and to build true emotional resilience because if you do it, I think the best investors have that and you know Buffett is a perfect example. So when I talk about wanting to build Berkshire in many ways, it's a selfish way of defining a goal for myself. That is frankly a lot about me and moving to a better place where I psychologically have a better handle on my emotions. I understand what a night.
These belts of inferiority. I find a way to just constantly become a little bit calmer a little bit more humble a little bit more focused find a way to be kind to myself. Like I've had opportunities to make money. I have given them up. I've had opportunities to sell instead. I've held shares of a company that I believed in and lost money. I can really punish myself where I could learn to be kind and it's been a great test. You have to be very vulnerable. You have to be super authentic. You don't know the answers and so all of these things if I
Describe those things you could go to a therapist which I do but I mean you could go to a therapist with these things as personal Evolution. But in this crazy way Harry, it's also a professional Evolution. So by taking Social Capital Public what I think I will have said to myself and then said to you and other people is that I feel like I have gotten to a point where I am no longer My Own Worst Enemy, which means I would be very comfortable with you and trusting me with some portion of your cap.
All for the rest of our lives. That's an it's just a different level of risk and responsibility that I have that I didn't have when running Social Capital because I viewed it more as a finite game.
Can I ask you mentioned that the investor psychology? I'm really interested giving your success given the experience that you've had given funding the financial elements that you've enjoyed every one can tell you you're wonderful and how smart you are and how Berlin you are. How do you like manage your own psychology especially and I didn't mean this kind of sycophantic we thought
When you get to your stage when everyone can suck up to you and be nice to you and tell you those nice things. How do you check yourself at the door
almost? It has become less and less of an issue because it doesn't really hit me meaning if somebody gives me a compliment. I know enough to be thoughtful and gracious to accept it. But if you could walk through what's happening in my mind. Imagine there's me standing there with a big glass Dome and somebody's throwing something at me and what I hear is being it just bounces off and
The reason is because I've really come to believe that the only person I'm really trying to impress his myself. It doesn't mean that I don't care what others think or that I can't be a good honorable person to the people around me. That's not what it means. But it just means that by look at my desk. I have one piece of paper and I've written on it the following things which and I just told you what they are, but I'll say them again. This one piece of paper on my desk says the following things calm humble focused.
Kind to myself vulnerable authentic and it's a way of reminding myself every day who I'm battling and I'm battling my self to find an incrementally better self on these Dimensions every day. So that's how I kind of think about it.
No, I mean I absolutely love that man really seen every time kind of strength through vulnerability. I'm really interests. You said about the emotional resilience and I hope it's not too personal but he's smoking a little bit before about kind of growing up and seeing elements of alcoholism depression psychological abuse I guess
The question I had was like how did you deal with that and bluntly to map and you know, I open up on the show sometimes maybe too much but my mom's got a mask multiple sclerosis and it's super tough to go from being the child to Being the adult much earlier than you thought. How did you deal with it? And how do you get through
it? It's a really thoughtful thing. You just said, you know, I was robbed of my childhood Harry and that may seem like a really dramatic statement. But when I see my children, there's a level of lightness that my children have as they approach their day-to-day life they can
Run and Jump and swim and play and they don't live with the scepter of fear. And my childhood was largely about making sure that I understood where my dad was in his psychological State and that was the only way to protect myself physically as well as psychologically so it robbed me of a childhood of that lightness, but what it also did it forced me to become extremely superficial in the sense that I didn't learn how to build
Any intimacy with people what I was taught very early on was that adults will let you down. What I was imprinted inside me was that I was pretty worthless because why else would somebody treat you like that? You must not be a very worthwhile individual and all of those things created enormous dysfunction that cascaded into my adult life. What I would tell you now though is that I wouldn't have changed it for the world because it was in that struggle that I've learned that these are the things that really matter and in fixing it.
I found things that I never thought existed in the world. So emotional intimacy deep sort of sensations of like love and kindness and the ability to be just a wonderfully loving parent or friend. Those were things that I fundamentally didn't understand and probably in many ways disrespected in my mind because I thought that they were signs of weakness and it's allowed me to get to a much better place. So I am now what I would say is my dad did the best he could and
Bob did the brass that she could and it took me many years of therapy where it started off from bewilderment and then anger and then you know, they'll all the stages of grief but now I've kind of accepted it and I said despite all the things that they may have done wrong. They did one fundamental thing, right which is they gave up their entire life. They move from Sri Lanka to Canada and they did whatever it took and at the end of the day that has made the single biggest important impact in my life because I don't think I
could tell you that I would be here talking to you had I not grown up in Canada. So I owe them everything but it's made me realize that the things I didn't have I didn't have many material things but it didn't really matter. What I really didn't have was a childhood. And now I'm the only thing I can do is try to give that to my kids and who's it as a way to just again go back to the things that I'm trying to be and reward myself with this kind of psychological progress.
Can I still having children change your
Facts even your reflection on your own childhood. And also how do you having children change your operating mentality because it's such a life transition. I think the
children in many ways are the best and worst reflections of you as a parent. So what they can give you is completely unfiltered non-judgmental love they look up to you like a hero and it's an incredible sensation because probably in most of our Lives unless we were some famous singer or athlete or whatever we probably were.
Weren't adored by anyone really until we had a child and when you have a child and you see them look at you, you are the single solitary thing in their life and it's an incredible incredible feeling and so for me, it was a realization. Actually Harry about how much I didn't have growing up emotionally and it was what really said to me. I have to go on this journey and figure out what all of this means. What does it mean to have grown up the way that I did?
It what does it mean to not have had a childhood? How do I think about giving a childhood that's light and free and full of possibility and love to my children. That's the best gift that I'll give them. So they did that for me. The other thing that they did was really help clarify for me what was important because what wasn't important was then any sort of monetary or other demarcation what was really really important was the ability to sort of allocate my time, so
Whenever I was making sacrifices for my family, it was resulting in something that mattered to them. And what matters to them is that their dad is happy because then their Dad gives more happiness back to them. And the way that I am happy is not by making more money, but is when I feel like I'm learning and I'm psychologically evolving around these Dimensions so they gave me the courage to change my business. They gave me the courage to be able to tell you confidently that I go through long periods of time doing nothing reading.
Thinking needing but nothing but it's okay because it makes me a person that they are more proud of and that's very good for me
final one before the quickfire, but I do have to ask it and I said she before the show and listen to many many hours of you speaking before now you sound completely at peace with yourself and where you're at mentally and we're at professionally familywize. Do you feel that now?
Not yet. I think that it's still abs inflows and I think that two things will happen. So one that's an outside-in is
When my business is public and I can really feel like I'm doing right not just by me, but the people that have aligned beside me and then the second is when I don't need this piece of paper on my desk because the one thing I didn't tell you about the note is that there are those things but then there's a word that's written before it which is the word be and so I really kind of told you a half truth the real note. It says be calm be humble be focused be kind to myself be vulnerable be authentic, which is just a reminder.
Under that. I'm not always those things. So, you know one is a responsibility towards others and the other is a responsibility to myself. So when the business is public and I don't have this note on my desk. I know that sounds crazy, but I will feel like I really accomplished
something isn't I think I'm going to be adding that night to my desk and trust me. It's going to include be as well. So don't worry about that one. I do want to move into my favorite they which is the quickfire and I've so enjoyed this discussion. So I thank you for that. But I do undo the quick fire round. So I say short statements math and then you give me your immediate thought.
It's does that sound okay fabulous? Okay, so your favorite book and why
I'm not a huge book reader to be completely honest with you the book that I'm reading right now that I found is really brilliant is the Shane Parish the Farnam Street one that breaks down mental models. I think that that's wonderful, but probably my favorite book is something fun. It's called liars poker written by Michael Lewis. It's about the bond trading desk at Salomon brothers and the 80s wonderful fun. Guilty
pleasure. Most memorable bull member you sat on a board with and why
easy one, so when I was 33 years
Old I joined the ownership group of the Warriors. I bought 10 percent of the business. I was one of six major holders of the business and my first board meeting, you know, I was one of the first minorities to join the ownership ranks of a professional sports league, so I was checking a lot of Firsts but the first board meeting I ever had at the Golden State Warriors was incredible. I was sitting beside Jerry West if you don't know basketball, he's the logo on the NBA and it's just this enormously large imposing figure and again, you know, he's the logo this is the entire league.
Is built around Jerry West at some level. So Jerry West couldn't give a fuck. He will talk whatever. He wants to talk. He talks about whatever he wants to talk about. He's Jerry West and I had a brilliant brilliant time and it was the honor of my life to sit beside him and he would you know whisper to me constantly about things that he was thinking it was incredible. It was incredible.
I have to take this opportunity to office. I'm just doing my first bullets have lost two years fundamentally. I'm very very insecure about it. I sit with people who've been doing it for 20 years and found very smart what have
Would you give me really looking to be the best full band that I can
be? I think that governance really matters, especially as a company scales because people will use success as a reason to not compound Integrity. So I think learning from someone who really understands that Integrity is not a question of Leverage. It's sort of a binary decision. And so I would make sure that you really understand what's right or wrong and you stand up for yourself because there is no board that's worth sitting on when they
they start to behave in a way that violates your moral compass. It's just not worth it and invariably the best CEOs see it and then they appreciate it because in many ways a lot of CEOs test the boundaries almost in a curious way to see who has the balls to tell them no, and I think that's a really important thing to learn. The other thing is that I would really encourage you to get the CEO to write a multi-page Pros memo before every board a board he or she is thinking about
Company and I would study that and I would be really prepared. I think that not enough CEOs do it and then as a result not enough board members are really prepared to really help understand their point in their own psychological journey in running a company.
What's your biggest strength in your biggest weakness to think
my biggest strength is that I think I have a very good mind for understanding risk. And what is a good risk? And what is a bad risk and how to make risk-adjusted bets and you know, I played poker
or a long time and I've refined it there where I put people to the test for huge decisions huge amounts of money and vice versa. I've been put to the test and so I've learned to really assess risk and what I know and what I don't know so I think I'm pretty good at that. I think my biggest weakness is that I still have these paintings where because of these self-worth issues. I can be somewhat destructive and I give myself a harder time that I need to and so I've had these inferior
Ready complexes and that's probably my biggest weakness. Still
what would you most like to change about the world of venture that you see
today? I would love to take away the management fee and I would love to replace it with a little bit more carry so that we really see the Dynamics of when you have to work for decades to get paid like the founders and employees of companies. If you could follow pulled
of personal directors feel personal life who would get the two to three seats and why
I would put my friend Rob Goldberg he
Was a really instrumental part of my friend Circle and then one of them passed away Dave Goldberg his brother for years ago. And what I would have told you about Rob before was that he was kind of the goofball in our group and over the last four or five years as I've gone through my journey. What I realize is he is the most empathetic and emotionally intelligent person that I've really met in my life as a man. He has been instrumental so that it's helped me build valuable relationships with other men because otherwise everything else was
Sickly like a dick measuring contest, which is about Mi Superior to you or are you Superior to me? And it's not healthy. Sometimes we need relationships that are D escalated. So that's one person. My second is my partner. She has been transformational in my life Nathalie. Don't pay she has a level of emotional intelligence and compassion and empathy that it's just it's Unique. She's got a energy meter. That's I've never seen before and so she's really helped me be kind to myself at a very basic level love myself a little bit.
More I think those two would be the Principal people and then if I had to add one more person, I would probably choose somebody that didn't like me. He
doesn't like you.
I think I think a lot of people dislike me, but for the wrong reasons, I think that I think the initial UI that I give some people perturbs them. I think the reality though is Harry that a lot of people hate in others what they hate the most in themselves, and when a lot of people are angry or judgmental
About something what they're really judging is something in them that they would want to fix and so I would want somebody like that because it's a good again barometer of how fast I'm evolving and eventually when that person isn't mad at me anymore or doesn't hate me again. It probably means that I've gotten to a place of Peace. So that's an abstract idea of a third person, but that's who I would
want know, I like that addition and penultimate one. What is the future of Silicon Valley in your mind? Is it always going to be the center of
Always seem to decentralization of
Entrepreneurship. I think we are seeing the decentralisation of Entrepreneurship. I think that entrepreneurs come in all forms genders races colors sizes sexual orientations, and they all come in every geography and I think there are really great initiatives like y combinator's startup school things that are sort of abstract engaging the fundamental building blocks of being an entrepreneur to something that can be consumed by many many people all around the world. And in that I think that there is an
Normos momentum and pendulum that's swinging towards Global Innovation. The thing that I think people need to realize is as that happens returns will Decay and it happens in every Market when you expand. So real estate used to generate 30% irrs. Now, they generate High single digit irrs, but the asset class and the category is a hundred times bigger than it's ever been private Equity used to generate 30 or 40% IRS now again High single digit IRS, but the asset class is bigger than it's ever been with trillions of dollars.
Similarly, I think we want Innovation and startups and Company building to be a global Endeavor where we can absorb hundreds of billions of dollars a year trillions of dollars a year. I think the reality that people need to confront themselves with though is that this is going to be a business that generates single-digit IRS, but that's good because the net impact for society will just be that much greater, which is why I think again going back to what I said earlier dispensing of the management fee and getting people to be carry oriented. I think really gets people who are invested in the process and
Have a love for company building
sorry and this is a penultimate one. I promise you but if you remove the management fee, I'm totally with you. How do you get paid? I mean it does it not make Venture more exclusive because you have to have existing
money. Well, I think when you look at the compensation of venture funds if you took a five-person venture fund and raised five hundred million dollars, that's 10 million dollars a year in fees. I don't think that that's required to pay five people two hundred and fifty thousand dollars a year. So the reality is that if you had just a very simple budget
Based approach I ran my fund as budget based. I never ran it as a flat fee. Now. I ended up using the 2% because I had many many tens of people I had data scientists. We had HR. We had PR we had all these outsourced resources all those things consumed Capital, but what I didn't have was a situation where I was paying myself three, four, five, six million dollars a year many Venture firms are set up that way sure and so the idea is if you basically crush the fees down to virtually nothing and you made people have to transparently disclose what they made then I think entrepreneurs
Would demand that they pay themselves no more no less than the CEO themselves, which is fairly reasonable and you really only make money when you can actually help build a
company for Success. Yeah it is and I do agree with that but very pleased here about the budget based as well. Final one one of the nice five years. Hope for you and for social. How do you think about that exciting road map
ahead in the next five years. What I would really like to prove to myself is that I can do these large concentrated investments in a repeatable way meaning I can
and learn I can refine a decision-making process and one or two decisions a year or every 18 months. I basically have a very very high hit rate. That's what I would like to prove over the next five years. And I think at that point that's a really good demarcation where if I think that I can continue to grow as a person at the same rate or even half the rate that I had over the last couple then I think I'll be in a really good position to take that next step take the business public and get this piece of paper off my
desk jimbob.
As I said at the beginning of want to see this ever since I started doing the show. This has been such a pleasure. So thank you so much for joining me
today. It's a real pleasure Harry. Thank you.
I have say that was one of my favorite shows that I've ever recorded for me. I love it when we go beyond the world of venture and actually really touched on a lot more personal aspects. I want to say a huge. Thank you to Matt for being so open if you'd like to see more from trimethyl which is a must and you can find me on Twitter at your math. Likewise it be great to welcome you behind the scenes here you can do so on Instagram @ H stabbings 1996 would to bees however before we leave you today. I'm sure you've heard about it. But my word this is a product. I love Carter Carter simplifies how startups and investors manage Equity track cap tables and get
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