I’m actually more Darwinian and I’m like, “How interesting would it be for all of us to run a race?” because I suspect some of the people who would win these races are very atypical than the folks that have historically won the race.

And that, to me, that delta and that change and that chaos is really interesting. I just want to be in a position in my lifetime to observe it. I suspect that the sort of prototypical person that would have otherwise gone to a very good private high school and gone to an Ivy league school, then worked at an investment bank, then got an MBA, and all of a sudden is in control of something, is probably not, the person that will be in charge in the future.

That’s a really interesting thing to play out. And it probably won’t be a guy, and he probably won’t be white, and all of these things are actually important reallocations and redistributions of power.

https://www.youtube.com/watch?v=UZn8MEsQwOg (12:37)

https://www.youtube.com/watch?v=7TOnKXBabpM (22:05)

Our “high touch” venture business is amazing. But I kept again, asking the question, guys, the rules of the game are changing. More and more entrepreneurs, whether it’s because of choice or whether because of non-optionality, are not going to be in the United States. There also increasingly not necessarily going to be in Silicon Valley and New York City because it just costs too much to be here. So how do you find these people? How do you go to where they are?

The analogy is the following: About a year ago, I was in a situation where I thought about getting a massive line of credit from a massive bank.

I am risk on all the time. I’m not afraid.

It was a $1 billion credit line, and I’m sitting with the CEO of the bank. I’m like, I want $1-2 billion of credit, I might do whatever I want with it, I’ll secure it against my [personal assets]. Let’s go.

Now, when somebody asks for that amount of money, you get a meeting. As you can imagine. But I’m the same person that, two weeks earlier, applied on that same bank’s website, for a credit card, because I needed to give it to our au pair. And so, that was a $500 credit decision.

It’s the same institution, one is high touch, one is automated decision making. And my takeaway from that process was, well isn’t that how venture should also work?

When you want to raise a $10-15 million Series A, of course we want to spend an enormous amount of time with you, get to know you intimately well, forge a relationship, and work together.

But if you’re odd around the world or you can’t necessarily get into the United States, but you’re starting something that’s vibrant and it’s working, why shouldn’t you be able to describe your business in a really logical, honest way? Numerically, and have people be able to back you and support you?

The way that we think about this service, which we call “Capital-as-a-Service,” is an automated compliment to everything that we do that is our high touch business. And our high touch business will always be the center, it’ll always be the heartbeat. We have a group of eight people, by the way, half men half women, I mean kick-ass team; they fucking rock.

And then we have this other business now, which is, “Hey, if you’re anywhere in the world, 24/7/365, and you want money to move your business forward, just fill out the form, and we promise to get back to you right away.” In a lot of the cases, we’re able to say yes.

And that’s just a transformational thing. We’ve seen 5,000 companies in 7 months. Less than 100 [checks]. Our goal this year is to write 100. Our goal next year is to write 1,000. And then our goal every year thereafter is to write 10,000 checks a year. Time will tell whether we can pull that off. We don’t know whether that’s gonna take an extra four years. We don’t know how we’re going to fund it.

Think of all the companies that may want to support us in this process. Think of all the governments that may want to support us in this process. Think of all the philanthropies, all the foundations. Think of all the sources of capital. The World Bank, the IMF, all these people who want what we can enable in some small way, which is people who can take control of their own futures. To self-actualize, to be economically self-sufficient, everywhere in the world.

We know for a fact, when you do that, on a need-blind basis, more women, more minorities in the game, that never would be in the game, that’s the path to economic stability, and that’s the path to prosperity. That’s the path to peace. That takes 25 years to build, but you gotta get these people in the game. They’re at the starting line, screaming out that they want your help. And so we’re like, “Yeah, let’s go do it.”

Those are high-class problems. If we’re in the situation where I have to beg, borrow, and steal to find people who want to support entrepreneurship all over the world, so be it. I will be on a plane the rest of my fucking life.

https://www.youtube.com/watch?v=7TOnKXBabpM (17:00)

What I realized along the way was that I didn’t want to be some sort of bitter minority guy who’s like, “I’m getting fucked.” I didn’t get fucked. I got really lucky. But I empathize with that struggle. I empathize with the struggle of women, of other minorities, of LGBT.

The reason is that we all have to deal with signaling that’s telling us, “Here’s the pathway,” and you just don’t fit the pathway. And so you have a choice. My choice was to get enough capital where I could opt myself out.

For each person like me, who can create a safe harbor for their minority class, there are all of these people who are still trapped. They may resonate with you, but they are not empowered to get out.

It came to a head, where I was like, “If I’m going to do something, what are the things that I can do well and what do I want to accomplish?”

There’s a very capitalistic tendency that I have which is like, “I want to win, and I want to win at scale, and I want to prove that I’m one of the smartest people around. Whatever the game is, as the game gets more and more complex, I want to win the game.” I’m not a corpo-fucking-executype.

The more the complexity, and the higher the stakes get, I think I can actually get better and I like that challenge.

I want to be Steph Curry. It’s not good enough to hit 3’s from 29 feet. I want to be the guy that can hit consistent 3’s from 40 feet! Because that’s a dagger. When you’re that guy, you are unstoppable.

The reason that’s powerful is then you get a bully pulpit, where when you say something, it matters and it becomes the de facto expectation.

Whenever I have issues in relationships with people, even when my wife thinks I’m a total jerk, it’s because I sometimes get really Darwinian. Whoever wins the race should just win. But then I realize, how amazing it would be if everybody could run the race?

What if in every single fucking dimension, the best of the best won everything? What if the entrance into Harvard was a pure meritocracy. Total blind admission. You could not put your name. 15 million kids all around the world. Every fucking kid that went to that school would not be the kids going to the school right now.

Those kids [currently at Harvard] know, in their heart of hearts, they’re imposters. They’re there because somebody pulled the string, somebody wrote an essay, somebody packaged them.

The best of the best are not at Harvard. The best of the best are bumbling around, at best they could be at IIT, they could be at Waterloo, but they’re most likely working at a fucking cement factory in Nigeria.

To me, the disruption of upheaving society’s value system became all-encompassing. I think that solves all these problems. It solves people wanting to attack London, people going on shooting rampages in Paris, people lighting themselves on fire. Maybe nothing would change — but wouldn’t it be so interesting to see what happens?

Social Capital is trying to advance humanity by solving the world’s hardest problems. There are systems that are highly asymmetric today, that you can level with technology. You can make them totally symmetric, and in [so doing] you can get more people to the starting line.

Doing this can also make you, literally, trillions of dollars.

In all this technological upheaval there’s going to be massive wealth created, it’s going to get allocated to somebody. Better people with a moral imperative, who have a sense of equality and a sense of social justice, than a bunch of rich douchebags that are already rich.

Also in doing that, you work on the most interesting things.

And, you have a better chance of building them, because people are actually more interested in working on those than the shitty companies that they’d be working at.

And then, you create a system that’s interesting because you don’t know what the outcome is. It’s not pre-determined. And that’s what Social Capital is. We started as a venture firm because it allows us to use money and to invest capital on things that can be really enormous, and really impactful. It allows us in success to really define for people, incrementally, what those really important and valuable things are.

https://www.recode.net/2016/3/21/11587128/silicon-valleys-homogeneous-rich-douchebags-wont-win-forever-says (31:10)

That allows you to build things that you know can be complementary. But also, when you see things that you know are being built that we are a part of that will dramatically impair what they are doing, you can have some really constructive discussions and/or you can, get on the other side of that.

It forces us to really think, these are all companies, they’re just in a spectrum, at a point in time. Day 1 of a company, day 10,000 of a company. Everything is a very elegant composition of those dots in between. It’s our job to try and figure out what things we’re looking at depending on what day of its life that company is in.

That’s a wonderful challenge because it forces ourselves to not conflate luck and skill. It is constantly changing the way our team has to reevaluate our understanding of the future and then use that to understand the risk.

That’s very important for us because we will hopefully, then, not take ourselves too seriously, and think we’ve solved it.

https://www.youtube.com/watch?v=Nqy6CcU84Xs (29:10)

I think it has to be the opposite. Yesterday we had a massive insurance company and they have an enormous balance sheet. Now the discussion has quickly transitioned to: How we can use our collective balance sheets to solve some important problems for you, that I care about?

What do they care about? They care about different ways of repricing risk. They care about different ways of process automation. They care about understanding what all this gobbledygook around big data and machine learning are. What I said was, “Here’s some of the things that we’re doing. I could be compelled to learn about those things, but let’s do it together in a way that makes sense, where we share the risk.”

Those can be one-off things, those can be broad balance sheet type discussions.

We have to be positioned like any other smart, strategic, flexible company, with really smart people, who are just trying to build a big business ourselves.

When we are too brittley defined in what we do, like $5 million series A’s, it limits those discussions. Instead what happens is the corporate VC is rendered as the last mile cheque-writer, who often does deals, frankly, that are the crappiest, in really bad structures, and that’s just unproductive.

They’ve actually been solving big, important, problems. We, together, have a better chance at solving some of these big, important, problems.

My experience in building our healthcare portfolio with the corporate VCs we partnered with has been unbelievable. We need them, to exist. For us it’s been a really constructive experience. There’s a trail of breadcrumbs to a much brighter future on how that should work together.

I find that the funds that are not founder-driven are the most open. I also find the ones that are the furthest away from tech are the most open-minded. At the intersection of non-founder-driven and least technology, are actually some of the brightest, most thoughtful, capable people I’ve interacted with.

At the centre are all these dopes that have conflated luck and skill, who think they know what they’re doing, and they are a huge waste of time.

https://www.youtube.com/watch?v=Nqy6CcU84Xs (25:00)

When people see your results in your portfolio, investors want to come through your door, and want to get to know you. These guys have huge pools of money. I’ll talk about a sovereign wealth fund I was just in. They have $680 billion of assets. And I always start the conversations with the following:

“You should be prepared to understand that every asset you have is either already impaired, or will be impaired. What you haven’t uncovered yet is the technology that’s going to do it.”

I think corporates face many of the same challenges.

Look at the automotive industry. You look at all of these corporate balance sheets, and you look at all of these corporations that have been producing and manufacturing really complicated things in a highly complex supply chain environment at scale for decades, and generating hundreds of billions of dollars of topline revenue: they have a very specific skill, but they’re clearly under threat. The best thing for them to do is to not have some grandiose vision that they present at the board and say, “We’re going to solve this problem ourselves.”

That’s bullshit. Doesn’t happen.

No great engineer is ever going to go work for GM or Ford; it’s never going to happen.

What they can do, is they can find those pools of people in Silicon Valley that can be those magnets, and then partner. They can use their shared balance sheet. That’s where you can create some very innovative ideas and ways of allocating capital that don’t exist today.

It happens a lot in private equity, but it doesn’t happen enough in venture. The reason is because most VCs have a very brittle definition of their job, and, at the end of the day, they aren’t managing their own money. They’re managing somebody else’s money, so their propensity to take risk is non-existent.

Corporates can find a handful of folks — Lonsdale is an excellent example, we’re a reasonable example, and Andreessen with their market development team is a good example — and say, “What are our true strategic problems?” And then you go and have some of us be the actual tip of the spear that goes and actually solves them.

We actually just did this with Ford. Ford has a big autonomy problem. There’s a repeat entrepreneur that made us a lot of money in 2013 and 2014. He’s going to set up the software layer that sits on top of these ADAS (Advanced driver-assistance systems). Us and Ford; it’s great.

They got a right to buy, and we’ll see if they exercise that right. We negotiated a framework that we thought was fair. I would do that 50 times in a row.

https://www.youtube.com/watch?v=Nqy6CcU84Xs (21:55)

It’s not as if we had a predictable rate of return that said, “We’re going to close our eyes here, double our money, and walk away.”

The reason I brought that up to them: Our decision-making can’t bleed over time. Right now it’s very hard for us, as an organization, to know how much should be mission driven and how much should not. When should we really double down on things that aren’t working, when should we not. When should we just give up?

It is the thing that we are now the most emotionally sensitive to. The opposite may be true: If the diabetes business turns out to work, does the 101st person that works in Social Capital say, “Fuck it, we’re just going to buckle down.” When they’re writing cheques and we’re 50 million deep into something and it’s clearly not going to work, was that it?

I don’t have a really good answer, but it’s the thing that I think about the most.

When do you know, how do you know, to keep going for it? When do you know that it’s too much? When do you know that your decision making is bleeding into a vein that is not constructive? I have no idea.

It’s powerful to be able to say, “I don’t know.”

American culture is a weird thing of know-it-alls. Everybody has to know everything. How the fuck can you ever learn [if everyone has to know everything]? When is that going to be valuable?

Own that one line: I don’t know.

Behind that is a self-awareness and confidence that I think is increasingly rare.

https://www.youtube.com/watch?v=PMotykw0SIk (46:35)

I don’t view my role as instrumental. I view my role as part of a process of creating that artifact. 15 or 20 years from now, there’ll be an entire suite of employees and partners at Social Capital that then continue to build that knowledge base, and then 50 years and 100 years from now.

Because the output of that will be better entrepreneurship. The odds of success go up. Your ability to now differentiate yourself goes up. Then, going back to how we started, it then does the job not just of capitalism, but of governance to the extent that governance continues to be great.

Well, I think economically, actually, it behaves the same way [as glomming on a consulting company to a money giving company] in the following way. This is part and parcel of a comment about what you said earlier as well. Why are VC’s reticent to do it? It’s a money game. When you have nine people running $10 billion, that’s way better than having 90 people run $10 billion because the fee income is so gi-normous that you’d rather just chop it up amongst nine people.

So if you go to the entrenched establishment and say, “Hey, you know what, I think what’s in the best interest of the entrepreneur is not that you make eight million bucks a year, but instead that you hire a bunch of machine learning and data science people to help support them.” The answer is, “Yeah, in theory that’s right, but you know what, they should do that on their own.”

Okay, well the problem is, they can’t do it on their own individually.

And it’s not their fault, you know why? The problem, why they can’t do it? Just in the last five years, do you know how much money has gone into Silicon Valley and China?

One trillion dollars. How does one trillion dollars find a home without the following market conditions emerging:

A bunch of companies getting overfunded, many who should otherwise be going out of business so that the talent can then be attracted to the winners. Now, instead of a two-year life cycle from starting to failure, now you have a four- or five- or six-year life cycle where the outcome is the same.

So any one company now, just statistically has a much lower chance of getting the talent they need to solve these problems. Whereas what I can say is you know what, that infrastructure that can help you do massive amounts of machine learning on top of massive amounts of data to drive real outcomes exists in three companies: Facebook, Google, Amazon.

It just so happens that I was, at the worst case, an accidental tourist that helped build one of them. I can attract the same kinds of people to work with us across 50 companies.

https://www.recode.net/2017/8/28/16212318/venture-capital-chamath-palihapitiya-social-capital-investing-vc-kara-swisher-recode-decode-podcast (9:08)

I don’t view my role as instrumental. I view my role as part of a process of creating that artifact. 15 or 20 years from now, there’ll be an entire suite of employees and partners at Social Capital that then continue to build that knowledge base, and then 50 years and 100 years from now.

Because the output of that will be better entrepreneurship. The odds of success go up. Your ability to now differentiate yourself goes up. Then, going back to how we started, it then does the job not just of capitalism, but of governance to the extent that governance continues to be great.

Well, I think economically, actually, it behaves the same way [as glomming on a consulting company to a money giving company] in the following way. This is part and parcel of a comment about what you said earlier as well. Why are VC’s reticent to do it? It’s a money game. When you have nine people running $10 billion, that’s way better than having 90 people run $10 billion because the fee income is so gi-normous that you’d rather just chop it up amongst nine people.

So if you go to the entrenched establishment and say, “Hey, you know what, I think what’s in the best interest of the entrepreneur is not that you make eight million bucks a year, but instead that you hire a bunch of machine learning and data science people to help support them.” The answer is, “Yeah, in theory that’s right, but you know what, they should do that on their own.”

Okay, well the problem is, they can’t do it on their own individually.

And it’s not their fault, you know why? The problem, why they can’t do it? Just in the last five years, do you know how much money has gone into Silicon Valley and China?

One trillion dollars. How does one trillion dollars find a home without the following market conditions emerging:

A bunch of companies getting overfunded, many who should otherwise be going out of business so that the talent can then be attracted to the winners. Now, instead of a two-year life cycle from starting to failure, now you have a four- or five- or six-year life cycle where the outcome is the same.

So any one company now, just statistically has a much lower chance of getting the talent they need to solve these problems. Whereas what I can say is you know what, that infrastructure that can help you do massive amounts of machine learning on top of massive amounts of data to drive real outcomes exists in three companies: Facebook, Google, Amazon.

It just so happens that I was, at the worst case, an accidental tourist that helped build one of them. I can attract the same kinds of people to work with us across 50 companies.

https://www.recode.net/2017/8/28/16212318/venture-capital-chamath-palihapitiya-social-capital-investing-vc-kara-swisher-recode-decode-podcast (9:08)