The Exchanges

Q Yeah. Uh, can you talk through any restaurant in the country can do delivery? I'm sure there's a lot of folks that, that own restaurants that are listening to this.

A Sure. Um, it takes lower guts. Um, and it takes, um, just that kind of good old fashioned restaurant scrappiness that every restaurant tour already has. If you're in this business, I guarantee you have what it takes because it's just, It's just the same thing it takes to run a restaurant. It's, it's that. It's a little bit of, um, Uh, the willpower just to make it happen. That's, I think, what all of us are going through. So, um, all we did was figure out a menu, and, uh, we launched a website, so someone that knows what to do on the internet, that's not me, um, but our design team drew up a little logo, which is not necessary. Uh, we threw a little splash page on top of canless.com, which is also not necessary. You could just post on Instagram Having to switch to delivery, um, so appreciate you supporting us doing this. Um, it takes, ah, you can do various versions of it, ours is pretty fancy, our servers have it all on their phones, they get the maps, they get the texts, we can do drop-offs, no-contact drop-offs, alcohol, again, talk made all that possible. Um, But you can keep it really simple. I mean, it takes ordering some boxes and some to-go containers, coming up with one thing that holds hot really well, and letting your constituency know that tonight's a great night for takeout. So, um, yeah, we sold out three nights worth of takeout in about 90 minutes.

AI assessment note: “all we did was figure out a menu, and, uh, we launched a website”

Q How did that happen, right? Like, I mean, Silicon Valley was here, but they were in New York. Like, what was going on?

A Yeah, we just, there was a lot of good companies brewing in New York, and my concept with Silicon Valley Reporter was, well, they have Red Herring upside in the Bay, but I own New York, and I had Silicon Valley Reporter, and then I started one called Digital Coast Reporter in L.A. So I had two magazines, two conferences, two email newsletters, and I was kind of king of New York, right? I grew that business to ten million dollars in revenue off my credit cards, um, and, um, Had a, 75 to a hundred people working for me when I was 27 years old, and I didn't know anything about how to run a magazine, how to run Edsels. I taught myself everything.

AI assessment note: “there was a lot of good companies brewing in New York, and my concept”

Q you're going to shed every other product that you sell, and you're kind of going to piss off a lot of your channel, because, you know, what sells really well at these big box stores, those are your barbecue shoes. So can you take us to like one or two of the key moments of the hard part of the decision to drop product lines that weren't about frequent runners?

A Yeah, I think that the key to Brooks is that we knew We are going to have to build the brand at the runner level. Literally a pair of feet at the time. And the retailers, so many retailers told me, Jim, we are not going to build your brand. We'll try it. We'll test it. We were tested at Dick's Sporting Goods, and I'm not kidding for 10 years. 20 stores, 80 stores, 20 stores, 80 stores, 20. So, so you have to build the flywheel in these franchise products. That's how running works. The, the best-selling running shoes continue to be the best-selling running shoes year after year. For as long as they sustain it all around the world. We have two of the best selling shoes now in the United States, the Ghost and the Adrenaline. Um, they're the two top shoes in the performance running category. So, so when we go to retail, uh, biggest customer is Big Five. It's a fine, you know, sort of mid-price sporting goods retailer on the West Coast. We were doing ten million of sixty million of revenue with them at 30 dollar shoes. My first meeting with them is we love Brooks. We see a great future for you.

AI assessment note: “We were doing ten million of sixty million of revenue with them at 30 dollar shoes.”

Q of why we want to tell, hey, it's a great story. But also, like, what Altimeter ultimately becomes, and this, you know, you guys, I think are Maybe the purest play example. Certainly one of the first, if not the first life cycle investor, you know, it was just not at all obvious that you should go join a hedge fund at this point, right? Like how did that happen?

A Yeah. I mean, so there's a little bit more in between, you know, so September 11th happens, which is, you know, really catastrophic event, particularly for our company. That was an online travel company. And so we negotiated kind of the soft landing with IAC. I won't take you through all the Trials and tribulations, but it was a good outcome for General Catalyst. I thought I was going to go back and join David and Joel. I knew they were two extraordinarily special human beings, and they were going to build something really big, but I had kind of been bitten by the startup bug. A friend named Bejo Samaya, who now runs Lightspeed in India and Southeast Asia, had an idea, and it effectively was, think of Yelp pre-Yelp. And so, Beige and I started this business, um, we bootstrapped it, had a bunch of venture capital term sheets for a variety of reasons, didn't take them, and we sold that business a couple years later to a public company in Seattle. And again, in the first transaction, you know, I'd worked really hard at NLG, and I think I walked away after being the CEO and helping put the deal together with a million dollars, which for poor kid from Indiana, that was game changing. But by Silicon Valley standards today, people would be like, you know, are you clueless? There was a lot of work that went into that. The second business I started with Beige, I think I owned 40% of the…

AI assessment note: “I mean, so there's a little bit more in between”

Q So is my characterization maybe not fully accurate then that I'm, I'm thinking of blue and MCA as sort of opening up a seam for artists, but then closing it again, but maybe that's not totally accurate. Uh, is, uh, How, how would you characterize Lou then and what he did with universal?

A I don't think that they gave participations out. They didn't stop it. They negotiated hard and tough on their side, no different than we did on our side, but they were sympathetic to, they didn't just say, look, we're not doing this. We're reversing it all. And frankly, as CAA gained momentum in the eighties and early nineties, they didn't have a lot of choice because of the 50 top grossing directors in the, for example, in 90, CAA represented like 45 of them. So it was impossible. You couldn't say no. I remember when we signed Mike Nichols, may he rest in peace, a great director. I'll never forget a call he made to me. He was getting two and a half million to direct. And when he became a client of ours, and he, we went to make a deal for him, I called him up and I got him five million. And he said, I don't understand. That's not my price. And I said, well, it is in the context of being a CAA client. Because five million was what the top directors made at that point in time. So I said, Mike, you're a top director. I said, if you want, I'm happy to take two and a half of it and donate it to charity. At the time I was raising money for the UCLA hospital, we were going to rebuild it. So I said, I'd be very happy to take that two and a half million for the hospital. And he said, I'd love to do that, but I'm very pleased to have the full amount.

AI assessment note: “They didn't stop it. They negotiated hard and tough on their side”

Q to start analyzing JP Morgan's financials, you kind of see this one thing that jumps right out at you Which is the efficiency ratio. For every dollar that you make compared to your competitors, you get to keep 15 cents more of that dollar as profit. It's not hard to see how that compounds and how that allows reinvestments, and why is your efficiency ratio so much better than competitors?

A It's, it is literally continuously investing, and gaining business at the margin, and not stopping, and not stop starting, and the thing is, the thing about margins too is that we, we have that margin while investing a lot. It's much easier to have that margin and just, you know, we can cut billions of dollars of marketing out tomorrow. We can stop opening branches and save a billion dollars next year. We could do a lot of things. Your margins will go up. Your growth will go down. Your long-term margins will probably get worse. Uh, so we kind of look right through the cycle, and we look at the actual economics that we do, not the accounting of what we do. Uh, and you know, we have, you know, we've built it over time. You know, we have great people and great products, and there, there's some secret sauce I'm not gonna tell you about. We do Investor Day, and we tell everyone everything, and I'm sitting there watching my, I never do presentations, I'm watching them do the presentations, I'm saying, oh god, we're just giving away too many secrets here, but

AI assessment note: “It's, it is literally continuously investing, and gaining business at the margin”

Q Why did you move him to Server and Tools?

A I thought it would be great to, we had Chi. So we, we could probably move him. I thought it would be important to give him other experiences to try to get him right to, you know, be able to be CEO. Cause he was on a list of three or four internals at that time who said he'd been on a list of guys we had been talking about. Cause we did an annual succession plan thing. Uh, you know, succession plan has two candidates. It's what happens if you get hit by a bus and what happens if you get served to term, whatever term feels like. And they're different people, right? If you get, Satya gets by bus, if Satya serves another five years, it's probably a different person. Um, no, I think that's true in most, most companies, you got to think about it differently anyway. Uh, so I said, hey, get them another experience. You know, he hasn't worked in apps, hasn't worked in server and tools, and it was kind of a good time to sort of switch things around. You know, Bob wound up obviously being super successful because Bob was running, uh, uh, server and tools at the time, and, uh, I love Bob. Bob's one of my favorite guys I've ever worked with.

AI assessment note: “important to give him other experiences to try to get him right to... be CEO”

Q And are the Clippers and the Intuit Dome fully paid off at this point?

A Uh, the Clippers are fully paid off. I paid them off the day I bought them. Uh, that's not true. Uh, I didn't want to sell stocks at the time, so I borrowed some money, which is long paid off. Intuit Dome, we borrowed some money against Intuit Dome, so I don't owe any money on it. Oh, that's not true. I owe some, I had some margin debt, uh, that I used to, but again, it's just a timing thing. I didn't want to sell stock, so took some margin debt, which as dividends come in, I'm reducing the margin debt. Uh, but the building itself has debt on it. Why? Because to sell the building, let's say something was to happen to me and Connie, uh, my wife had to sell, sell it. It obviously has a lower value. The buyer would have to come up with less cash because it has debt on it. So call it worth X billion. Right.

AI assessment note: “the Clippers are fully paid off... but the building itself has debt on it.”

Q Yeah. So, uh, how would you explain it to a novice?

A Well, explaining the learning curve theory is simple, uh, but one would be foolish if one just takes the simple explanation, you know, and thinks that that's all it is. The simple explanation of learning curve is that, uh, as you make more of one thing, anything, Uh, actually it started with refrigerators and the cars, you know. If a company makes more cars, then It's cost per, per car. Unit cost goes down. That's why it's also called experience curve. You gain more experience, you become more efficient. That's a simple explanation. But, ah, if one, ah, just takes that simple explanation and thinks that's all it is, it is about, you know, ah, then you really haven't Learn anything at all. All right. Anyway, um, ah, the learning curve. Well, Bruce Henderson, who is now, ah, considered, ah, the father of, ah, Uh, strategies.

AI assessment note: “as you make more of one thing... You gain more experience, you become more efficient.”

Q Is this common, by the way? It seems like it would be in a customer's interest to come to you and say, I need to buy zillions of chips from you. I need all your wafers, because they have no skin in the game of you spending all the money.

A I know. I know. Well, back, uh, in the nineties, in the first, uh, let's say 15 years, first 10, 12, 15 years of our existence, We were short of capacity almost all the time, uh, and what you just said happened all the time, you know, and so we figured out, uh, that we will require a deposit from the customer, and, uh, we'll even Confiscate the deposit if the time comes him, comes for him to, to take the wafers, and he doesn't, you know. And everybody delights in the word, confiscate. It was first used by me, okay. I told the salespeople in San Jose, I said, tell the customer that they need, we need a deposit from them because, you know, just as you said, you know, It's our money, and it's only their words, you know. They may not want the wafers when the time comes, and I told the salesman, tell the customer they will confiscate the deposit, and ah, the salesman never heard anything like that before, you know, and so they were, they were They were, you know, in uproar, uh, in, in happiness, you know, I mean, now, you know, they, they could actually stand up and tell the customer, uh, that, uh, we might even counter confiscate your money. But of course, uh, it really, we never confiscated any money. No, it, it, it did happen. Quite often. Uh, particularly in the 2000, uh, 2000, we had, uh, I think it was called an internet, uh, Yeah. Recession, I think, yeah. Because in, in, in …

AI assessment note: “what you just said happened all the time”

Q Sax and Friedberg weren't, there was no besties originally, right?

A It was just you and Chamath. No, no, and to be the truth, like, uh, Friedberg and I weren't besties before All In. I mean, we knew each other, we were friends, but not besties. I was besties with Sax and Chamath, and now Friedberg is a bestie, um, and, but he, he played in the game, obviously, and we had just started to have a developer friendship, but anyway, That foursome kind of clicked, right? Pretty quickly. Um, and I think, you know, I was a really good interviewer. I'd studied interview techniques, and really, you know, after doing a, whatever, I'd done at least a thousand episodes of Twist at that point. And I had had Saxon many times, and Chamath, so I was very comfortable with them, and at the poker game, we break chops, and I make jokes, um, and Chamath's a great host, and we're just very comfortable with each other, uh, and, and Freeburg kind of joined that group, and, um, it clicked, and I think during the pandemic, and I, I thought maybe this last 10, 20 episodes, but during the pandemic, I think people wanted information, and, and I realized, like, oh.

AI assessment note: “Friedberg and I weren't besties before All In. I mean, we knew each other”

Q the product developed, You scaled with such beautiful capital efficiency, but you did spend money on marketing. I mean, you joked about the billboards, but there are Zoom billboards now. Um, uh, I asked them, you know, how did, how did Eric and Zoom think about spending money on marketing? Um, and, uh, well, I'll let you tell the punchline, but, uh, uh, how, how did you think about it?

A Yeah, that's, uh, yeah, even today, you know, every Tuesday, you know, we have a three hours So, you know, staff meeting, right? You know, this morning, the first topic read about reviewing our marketing, top 10 marketing programs, even today still. I think it's very tricky. The reason why is you do not have, I would say is a sort of like a formula, right? You know, when to spend more, when to spend less. It's not like that. As a founder, you know, you have to spend time on marketing as well. Do not always focus on product or the sales. Marketing also is very important, right? However, when to invest in marketing is very tricky. Everybody is different. In our case, we specifically, you know, made a decision. No marketing team for the first several years. You know, because this is not something new, right? This is a product, or, you know, this is very, very, you know, mature market, everyone understands video conferencing, you know, how, if your product works, you really don't have marketing team, right? We, we try to prove that point. You know, after that, after we have paid a customer, a lot of customers, a customer told us, Eric, I never heard about Zoom, but I try to product, product works. Why is that? We received a very consistent feedback like that. I know that's a signal, right? Then we doubled down on that. Then, in 2015, we created a marketing chip. And also, even afte…

AI assessment note: “In our case, we specifically, you know, made a decision. No marketing team”

Q Could you just tell us a little bit about that? What is the book?

A So the book is Running With Purpose, and Brooks has been a fabulous journey, and I'm, I'm a person that believes in life, ah, the journey is to be, you know, just cherished and, and enjoyed, because the finish lines are fleeting, and we all want goals, we all want finish lines, but you gotta enjoy the journey along the way, and I think we're all creatures of our journey, so, Brooks has been through a lot. And it's a David and Goliath story, it's a turnaround story, It's a purpose-driven, culture-driven brand story. It's a focus, um, niche, challenger brand story in an industry like so many that's dominated by platforms, one really, really fabulous platform, and so we've navigated that. We built, we're building a really cool brand with lots of runway yet for growth, and, ah, and it's a great business, too, and, and so I wanted to tell that story because if you're not a runner, We haven't marketed to you. I mean, we are so focused. Every nickel has gone to people that are putting one foot in front of another, but the story continues, and I wanted to tell it.

AI assessment note: “So the book is Running With Purpose, and Brooks has been a fabulous journey”

Q And this is all out in the Bay Area, right?

A Yeah, that's right. And what was the scale of it? Well, in theory, if one had infinite capital, one could have made 10% on a few hundred million dollars a day, maybe. So I think twenty million was the size of this trade. Now, we did not have a few hundred million dollars of capital at the time, which is very frustrating. We still made like a million dollars a day from it during that period. So it was still a fantastic trade. Like it was amazing. But meantime, we were doing everything we could do to scale up our capital base because we're just like, look, we can just like print insane. Like what's the APY of this? It's a number that doesn't even sound real. Like, I don't even want to say it because it's like, it's like, you hear that number, like, oh yeah, Ponzi scheme. That's what you said. Right. Um, so I, I, and unfortunately we basically scaled up capital base the day that the ARB went away. Um, and so we failed to really ever get to the, to the point where we could have gotten with it, but it's still an amazing trade for the three or four weeks that both, like, we were active and it was alive.

AI assessment note: “Yeah, that's right.”

Q And was that even across major exchanges, not even going esoteric?

A Coinbase to Bitstamp was usually like one or two percent. And, and that's not even looking at like Bitfinex or anything based on Tether or Japan or Korea or anything like that, right, which would sometimes get in the twenties of percents. Um, so, so, okay, what's this number say, right? You have like some number of percent, I don't know, let's say two percent maybe you could make times a few billion times one percent of volume, right? So one percent of volume is twenty million, I don't know, dollars of volume or something like that. Make two percent on that. Um, I think that's like 200 grand. And, and, and, and so, okay, that's an estimate for how much money maybe you could make per day doing arbitrage. Um, and that's a lot of money to make each day, you know, like, like I sort of saw that and it's like, oh, wow. Like, I, I mean, again, I don't know, right. This, this all might be fake, but, but if, if, if it's not fake, that's, that's pretty compelling. And that was enough for me to like go create some accounts on exchanges and, and try and do it and see what happened.

AI assessment note: “Coinbase to Bitstamp was usually like one or two percent.”

Q Okay, so why start FTX? You've got this quant crypto trading firm. It's going well with Alameda. You're finally landing some, some, um, some big institutional capital to, you know, have, have real AUM here that you can make interesting money with. So you decide to start a futures exchange?

A Right. So I guess there are a few things going on there. And the first is frankly, um, When you do the math, like, in order to really scale up to where it needed to go, um, Alameda would have needed, and it did eventually succeed in this, but to actually get a substantially bigger capital base than it had, um, if you look at, I mean, the amount that we're paying on capital combined with, like, just a bunch of other sort of difficulties there. Um, the bigger thing, though, was I mean, one cool thing about crypto is it's very transparent from some perspectives. It's very easy to see how much are the exchanges making as an example, right? That is basically public. Um, and I, it's basically public and it's also big, like really big. Um, and You know, to give some sort of like sense of what that means, like how big is big. Um, well, again, it's all public. You can do, you can do the math. So this is circuit late, um, well, they were transacting how much per day, you know, globally five to ten billion dollars. What were their fees? They're making like four basis points on average on that. Right. Um, And, uh, all right, you can sort of do the math there, actually, right? Like, that's a few million dollars a day that they're making. It's a billion dollars a year of revenue. Um, it's a lot of revenue, and the core business model of an exchange from some sort of, like, really simplistic …

AI assessment note: “It's very easy to see how much are the exchanges making as an example”

Q you know, you, you start an optionality position. There are two copies of the multiverse where this works, and then X amount of time passes, and you start to Have more of a view of which copies, you know, two out of 10, and now, you know, maybe it's like two out of five, or two out of three, or like, you know, as it evolves, what do you do?

A There's like kind of two scenarios that you can really see this happening. Like a good example is beyond Peloton before the pandemic, you know, and the stock obviously went parable, like they were huge beneficiary of work from home, but it's also still just a really dynamic company, you know, that's early in its life cycle, building a brand and a platform. And so with a company like that, you know, I think it's still early days to call that business resilient for, for many reasons, both just like the, the context of the company of we're going through a digestion after, you know, the, the, the, kind of a, a record year for, for them and off the charts here, I should say. So for a position like that, we'll actually, we'll just trim it. And, you know, we have this cap of how big in the portfolio we allow optionality positions to get. And so I think that it's generally pretty clear, like how much of this is something that's a really durable inflection in the business. And sometimes, like I said, it's both like, I think Peloton is definitely a different company in this version of the universe versus the non COVID version of the, of the, of the metaverse. Right. But, um, I think we, we can't cross it over.

AI assessment note: “So for a position like that, we'll actually, we'll just trim it.”

Q There's, um, there's a pretty cool, um, military history, right, with, with the restaurant, and starting with Peter too, right?

A Yeah, so then on the other side of the family are a whole bunch of folks who have served in the armed forces, um, and that is, uh, just continues to be, uh, something that we're really proud of in this family, and, and something that we've, many of us have chosen to do, and, um, and represent, I think, some of the sweetest years At least for my own life, and I would say that the same is true for my dad, and my grandfather, um, and my brother. So, uh, I was in the, I was in the Air Force with Brian. Uh, Dad was in the Navy. Grandfather was a Marine for 43 years. I don't even think you can do that anymore, but back then you could, and, um, so we have, yeah, that's just been a part of our family story, and, and to be completely honest, a very large Um, influence on the way that we lead. Last, you know, yesterday, we're running this crazy drive-through, we've got cars everywhere, shut down traffic, and I get a, um, I get a phone call, and I have hearing aids, so the thing just comes, like, straight into my head. It's as if, like, the phone is ringing in your brain. So I just answered it, because I thought it was our, our road team. And it was the colonel that I worked for, you know, 25 years ago, Colonel Mueller, a man that just had such a remarkable influence. On the way that I lead, and it was random. I haven't talked to him in years, and I was like, Colonel Mueller, no way. Um, …

AI assessment note: “I was in the Air Force with Brian. Uh, Dad was in the Navy.”

Q The story is, am I right, you bought the swimming pool on Amazon?

A Well, no, so, uh, for, we like to test things out on staff parties, and the goal of a staff party is to throw one that the staff would willingly come to If they had no association with the restaurant, right? So if you just said, look, you guys, it's a true day off, or it's a true night off. Like, do whatever you want. And also, we're gonna be throwing this party over here, and it's like, totally, like, no expectation come. Only let me just talk about it. So, um, Anyway, yeah, at some point, uh, we were throwing a luau. Oh, yeah, we had covered the parking lot and sawed, uh, because we were like, it's not cool to throw a party in a parking lot in cement, and wouldn't it be cool if it was grass? So we sawed the thing over, and we threw a volleyball party and made a pig roasting, and somebody said, at some point, well, every luau needs a beach. So, we, like, brought in sand, and then I went on Amazon, and I'm like, no, wait, you could buy a pool for, like, 2000 dollars. Well, that's cheaper than You know, in the world of staff parties, this stuff adds up quickly. So anyway, we bought a pool, and we filled it up, um, and then it just kind of like went from there. So then, that was a really successful party, and we were thinking about fun things we could do over the summer, and we thought, well, why don't we just throw the staff party for the city? And honestly, you guys, I thought,…

AI assessment note: “then I went on Amazon, and I'm like, no, wait, you could buy a pool”

Q Were you set to go to college somewhere else?

A Well, that's another story, but I was set to go to Brooklyn College. I got into that. I had also taken the police exam to be a police officer. So my brother went into the force and then I said, you know what? I'm going to see if I can go to college and make that work. So I'm going to Brooklyn College. So I decided to work during the day and then I went to school four nights a week, six to nine PM. Carried full credits, 16 credits a semester. And, ah, I would work fixing laser printers all day. I was a bad student. Uh, I was always that student who underperformed. I didn't find great meaning in academics, but I had a computer when I was in high school, and I was more interested in playing with my 300 baud modem, which then became a 1200 baud modem, and my PC junior, so it kind of, you know, like many people of that era, we were sort of set on a path, because we were the first generation to have a computer at home. Uh, I actually had an Atari 2600, and it could play Tank, was the game that came with it, and Pong. And so my dad bought this for us when I was six or seven years old, in 1976, 1977, and he had one of the first Pong's in Brooklyn in his bar. So.

AI assessment note: “I was set to go to Brooklyn College. I got into that.”

Q Well, the first question I have for you is, how, how did this all get started? Like, take us to the moment where you became crypto-curious, uh, for, for lack of a better term, or maybe a tongue-in-cheek term, and, uh, and how you started digging in on all this.

A Yeah, so the first thing I did, I can actually step-by-step go through it, because it's a pretty simple process. Um, I went to coinmarketcap.com, um, I clicked on Bitcoin, And then I clicked on markets. That was my first investigation. And, you know, and I guess I'll, I'll do that right now to see what it, what it shows today. Cause I think it's going to be an interesting contrast. So, so if you do that today, right, it's going to show you a bunch of markets for a Bitcoin and just sort of looking across the prices here. Um, I, It's not, the data here is not perfect. Like, they don't understand Tether's pricing extremely well, but sort of the range of numbers that I'm seeing, with a few exceptions that we can get to, is, um, you know, 48 thousand and 280 at the low end, and 48,320 at the high end. Um, and so that's like a, you know, what a 10 basis point difference, I think, between sort of like the low end and high end of pricing of a Bitcoin across major cryptocurrency exchanges. Um, and that's like about typical today. You know, if you're thinking like, is there an arbitrage in Bitcoin? The answer is like, maybe, sort of, I mean, it's 10 basis, you're gonna be paying a few basis points fees on both sides, right? So, and, and this data, it's like, it's not perfect, it isn't perfectly synchronized, they're not pricing tether quite right. So, so, so really the answer is like, ah…

AI assessment note: “the first thing I did... I went to coinmarketcap.com, um, I clicked on Bitcoin”

Q But, but, but, before we get into what you do next, what was the model that you and Sandy built at Citigroup?

A Okay. First of all, I am thrilled to be here. I want to congratulate these guys for building the acquired. It's a, it's a great, intelligent addition to what we need to learn in society, and so, I would say it wasn't quite the model, because if you look at what we did at Commercial Credit Primeric, which then Travelers and Mergers, we were a financial conglomerate. We bought lots of companies and lots of different businesses. We fixed them up, we turned around, we made money, and then we merged it with Citibank, which obviously was a huge bank. And, ah, you know, my view is I was, we should skinny it down and kind of shed the parts that aren't that important to the rest of the company, and keep the things that strategically belong together together. It was one of my small disagreements with Sandy about the future of the company. And so, um, but it was big, it was making a lot of money, it was quite successful at the time, ah, and then I got fired.

AI assessment note: “we were a financial conglomerate. We bought lots of companies and lots of different businesses.”

Q You've got AI going on, you've got AR going on, you've got VR going on, um, would you pick the name Meta if you were going to rename the company today?

A I like Meta. It's a good name. You know, finding good short names I mean, this actually was a thing that we talked about for a while, because it was pretty clear that, you know, Facebook is continuing to grow in importance in the world, which I think a lot of people don't appreciate, and it's kind of mind-boggling at the scale that it's at. But the, the others, I mean, you know, we went through a period where it's like, we had Facebook and a handful of small apps, and now we have, like, you know, four apps that have a billion people or more using them, you know, hopefully in the next few years, five with threads, if that continues scaling. And, um, This was a conversation that we had a bunch, where it's like, does it make sense for the name of the company to be one of the apps as the other apps, as it's really becoming a family of apps? And it was important to me, this was also coinciding with a lot of A lot of the challenges that we were having, right? The political brand challenges, different things, and a lot of people were proposing that from the perspective of running away from the Facebook brand, right? They were like, oh, well, like, is the, does the Facebook brand have issues? Do we need a new brand? And I was like, we don't run away from that.

AI assessment note: “I like Meta. It's a good name.”

Q that, I mean, I know how meaningful that is in any company, but for you, given that, I feel like the NVIDIA journey is, um, particularly amplified on these dimensions, right? And like, you know, you went through two, two, if not three, like 80% plus drawdowns in the public markets to have investors who've stuck with you from day one through that must be just like, So much support.

A Yeah, yeah, it is incredible, and you hate that any of that stuff happened, and, and most of you, you know, most of it is, is out of your control, but, you know, 80% fall, it, it, it's an extraordinary thing, no matter how you look at it, and I forget exactly, but I mean, we, we traded down at about a couple of Two, three billion dollars in market value for a while because of the decision we made and going into CUDA and all that work, and your belief system has to be really, really strong. You know, you have to really, really believe it and really, really want it. Otherwise, it's just too much to endure. I mean, because, you know, everybody's questioning you and employees aren't questioning you, but employees have questions.

AI assessment note: “Yeah, yeah, it is incredible, and you hate that any of that stuff happened”

Q Yeah, you're a primary source now. What's going on?

A Well, that was a challenge, right? Because I started out, I had no access. I didn't know anyone. And in some respects, I miss those days. I still remember the first time I had a company very angry at me and calling me in and it was Twitter actually. Cause I had teased out of their results that their direct response program was failing. This was like years ago and they got super mad in my next update. I'm like, well, it's possible this, and I kind of like walked it back a little bit and the next quarter came out and they're like, yeah, we're going to need to, I don't know if they took a write down, but it was a big thing. And they said like, it's not working out. And I was totally right. And I was so mad that I kind of walked it back a little bit, but I'm glad it happened because When I started out, no one cared. No one paid any attention. Now people care and sort of paid attention. And so I'm glad I was right on that one because it sort of gave me courage going forward. But one that's interesting about feedback from companies is everyone like from COO down or VP down, they always push back and they're like, no, you got this wrong. You understand XYZ. I never get pushed back from CEOs, even when I'm wrong. And what I've come to realize is CEOs are surrounded by people telling them what they want to hear. That's their incentives, right? The reason why the VP is attacking me is be…

AI assessment note: “Because I started out, I had no access. I didn't know anyone.”

Q their interests. And so you then introduce this third thing, which is the thing you care the most about, which is support of the founder and empowering the founder. When do those things get hard? How do you balance those things? I assume most of the time you're indexing strictly to we're partnering with this founder and we trust them, but when, when do you have to juggle those things?

A Yeah, I mean, it's, um, People go to therapy, often they only talk about the shit that's going wrong. And I think it's useful to think about what's going right. And if there's not a DSM for flourishing, there's, there's a DSM for dysfunctions. We could open that book up and we can have all sorts of flavors of dysfunctional. And I'm, I think we could do that. And that would be illustrative and informative about how it can go wrong. I would flip it and say, when it works well, What are the preconditions of where you have alignment? And then, and then you look at degradations from that. I think one of the words that's sort of vital to any durable founder benchmark partner relationship is vulnerability. And if, if there's ever caution or pause that I can't share this information with my, then we've, um, degradated the relationship and we have to fix that. And you fix trust is fixed. Intimately, one-on-one, you have conversations that allow you to zoom up to say, okay, what's the collective purpose? And I think that we could talk about Uber, we could, I have every reason to believe Travis's purpose was, um, the biggest, most extraordinary Uber imaginable. And, you know, we had a collective gaze on that together, and, and, and in many situations, this was one of them, Pathologies creep in, and you learn this through a course of firm experience, which is when you start to see that hap…

AI assessment note: “when you start to see that happening, you need to act immediately”

Q At least one of them was a completely free product, I think, right?

A Oh man, they don't make money. Yeah, so, and, and Under Armour is trying to sort through that now, right? They, they're starting to shrink. So is Adidas. So those tools are really powerful for data, but how do you monetize it? And so we haven't gone there yet, but we're building, we're building a Brooks Run Club. Finally, we've, we've launched. It's not a loyalty program, but it's a zealot. We want to engage our zealots. We want to engage our, our true believers, and the data piece of that is going to be key. We want to come up the kinetic chain And, and find a sensor system and a, and a data capture system that can get to your biomechanics as you're running, because what happens is, if you run a marathon, your gate in the last five to 10 miles really degrades, and that's where injuries happen. So, so we, we're doing a lot of, we have a lot of partnerships, and we're really trying to figure out how we get good runner data in real life, um, not just in the lab. In the lab, We can test everything, but we want to get out in the wild.

AI assessment note: “Oh man, they don't make money. Yeah”

Q Uh, what about, um, Redfin is still in the market, another great Seattle company. Are you concerned about them as a competitor?

A Are they, are they, Above or below a billion dollar valuation right now. No, I, I think, I think, I think actually the mistake I made last time was I did a basket of these, these real estate stocks. It is a massive market that is awful to operate in right now, as, as a lot of people who bought a house over the past year, uh, have realized. I think that Redfin's gonna do really well. I think that Zillow, now that it's kind of back to its, uh, original focus is gonna continue to do really well. I, I still love Zillow. Uh, and I think that Opendoor is gonna do the, the best. I think they have the biggest lead in, in iBuying, and I think that's a huge, huge opportunity Particularly because they have the best company value in all of the world, which is bips for breakfast. Like, they pull every basis point out of operating these houses, and that is a really, really valuable thing. Like, it does remind you of another Seattle company, Amazon, uh, in that, like, that you really need to get your costs right, and they're the best by far at doing that.

AI assessment note: “I think that Redfin's gonna do really well. I think that Zillow...”

Q and how is the right time for a company that finds themselves with a large power opportunity as a platform to start capturing that value? Famously, everybody thought that Google was nuts with YouTube because it lost billions of dollars for more than a decade. And in retrospect now, perhaps that was a brilliant strategic decision by Google. Uh, how do you all think an operator should think about that?

A For me, the key thing here is to remember that the product market fit and power questions are different questions, and one doesn't necessarily answer the other. In fact, often doesn't. And that it may be that When you have a business model that gets you to product market fit, there may be a power opportunity embedded in that, and there may not be. And so those are two very different problems. One is the problem of capitalizing on an inherent potential for power, and the other is trying to figure out what are you going to do that will get you power in something that currently doesn't have it. And that second is a very hard problem, right? It's a second invent that's every bit as hard as the product market fit invent. So think of Steve Jobs trying to figure out where to take Apple when the PC business turned out to not have any power, right? Um, here's the most brilliant innovator of our generation. And yet, uh, he couldn't solve the problem and he ended up losing his job.

AI assessment note: “remember that the product market fit and power questions are different questions”

Q How did you decide on wanting to go to HBS? Did somebody inspire you or encourage you to do that?

A It's a slightly embarrassing story. Like, I didn't really do much research. I remember taking the, you know, the entrance exam like the last day, scrambling to fill out the application. In fact, I didn't even finish the application because I ended up getting an interview, and I remember the person who interviewed me said, this is a unique situation. I can't say that I've ever Interviewed somebody who didn't have time to complete the application. And so he started with, why didn't you have time to complete the application? You're like, well, I'm deputy secretary of state right now. I went through it and it wasn't, you know, it was just, I decided late and I was, I was working my ass off, but I said, now's the time. And we went through it.

AI assessment note: “I didn't really do much research... I decided late... I said, now's the time.”