The Exchanges

Q so we go back to materials. Your whole thing is like the winner is going to be able to produce more materials than their adversary. I still don't think I completely understand the way you think about achieving that goal. Is the hardware that you're manufacturing has to be as simple as possible and then you're offsetting all the innovation in software? Is that, is that still the basic thesis?

A The idea is that you build hardware that is good enough, um, and build it, um, in such high numbers that you eventually have economies of scale, but also the ability to overcome any Um, you know, adversary just through pure mass. And the way you achieve that is that you, you need to be able to mass produce, you need to design to mass produce, but then crucially you need software to, um, to allow those systems to first of all, be smart and, and be able to To coordinate, um, but you ideally also absorb a lot of the complexity of the, of the hardware that usually, you know, would be these exquisite systems that legacy primes will make into your software so you can make the hardware simpler. That means that your sensors are simpler and you regain a lot of the accuracy through very good AI algorithms. It might also be that your, um, your manufacturing, um, tolerances are a little bit bigger and you regain a lot of the control and accuracy again Through software that might recalibrate the system as it goes. And, and this is what we do. And that works extremely well, but you have to think it through as, as one unified system. And once you do that, you can go into mass manufacturing. So the, the HX-II is now a mass manufactured strike drone. And like we had to go through like all of those learnings in, in July and August last year, where, um, we had to go from dozens of HX-II per month…

AI assessment note: “absorb a lot of the complexity of the, of the hardware... into your software”

Q Were they selling them themselves, or there's, like, vendors inside Walmart?

A They had vendors, and they had partners, and they had their own Walmart card. It was a whatever card. So I wrote them in January before COVID and said, listen, if you're in Bentonville, I'd love to go see you. And lo and behold, he said, yes, shut up, see them with, with Doug. And he introduced me to John Furner, who's now the CEO of Walmart, who's alongside with Doug. They were there for almost 30 years at Walmart, both of them, since they, since they were 17. And John is my age, so we're, we started at the same time in two different continents, and we were still in the same room talking about this, and I said, listen, you guys can build something much better with financial services here. This is not your priority number one, two, or three. It is for us. Let's figure it out. And they did something that never, they had never done. They created a JV, a company that we both go on, and we went together and built a rockstar team We have a new brand. We bought two companies and to build the infrastructure run by Walmart Smile today, and it's called OnePay, and it's one of the biggest financial brands that you've never heard of.

AI assessment note: “They had vendors, and they had partners, and they had their own Walmart card.”

Q like a friendly UI. But he's so competitive and so, like, determined to win that there's just a, I don't even know how to, like, juxtaposition between, like, how friendly he is and just how fiercely competitive he is. Uh, since you mentioned him, uh, I want to bring up something you told me one time that you called the dad terminal. Can you say what the dad terminal is?

A Yeah. So you, you, you, you joke that I'm, you know, kind of a financially minded person, and, and, uh, uh, the Bloomberg terminal is obviously this, like, incredible technology That, you know, people in the finance industry use to ask questions and get information and think and analyze opportunities. And the dad terminal is, is my version of that where I call up dad and we have conversations about business topics and strategic objectives and challenges that I'm facing. And, uh, and it's the most fun, it's the most fun thing ever because, uh, you know, he has more context than anyone but my mom probably on, on me and what's going on in my brain. And he's got a lot of context on the business because we talk all the time. And he's scaled a vertically integrated capital intense hardware company, consumer facing. Uh, there's a lot of similarities between our two businesses, and so I use it as an opportunity to learn from him, and I like to think that every once in a while, you know, he gets a new perspective, or I ask an interesting question, he learns a thing from me.

AI assessment note: “the dad terminal is, is my version of that where I call up dad”

Q We were talking about this before we started recording. This is really interesting. Can you explain?

A Regulated and deregulated states in the U.S. If you look, it's kind of a history lesson here, but if you look back, you know, over 50 years, electricity is one of the few industries in the U.S. that did not get entirely deregulated. Shipping, uh, airlines, telecom, trucking, uh, you know, electricity in the, in the late nineties, early 2000, actually in California, deregulation, uh, started there. And basically, Enron manipulated the market and kind of busted the power market in California and deregulated deregulation, like, totally stopped. And Rick Perry and George Bush in Texas, like, carried the torch of deregulation. And the public utility commission in Texas pushed this kind of competitive market construct. Now, it's going to get even more complicated. In Texas, 80% of the market is deregulated. 20% of the market is still regulated. So Austin Energy is a municipal utility. So we sit here in Austin in our office that is served by Austin Energy. We cannot be the electricity provider to Austin Energy. Same thing in San Antonio. CPS is a municipal utility there. Same thing in Georgetown. Georgetown Electric is a municipal utility there. There's another category of utility called a co-op or cooperative. This is more in the rural areas, uh, but now there's, there's really big cooperatives like CoServe, who's a customer of ours, or Pedernales Electric Co-op, that's the largest c…

AI assessment note: “Regulated and deregulated states in the U.S.”

Q What's your relationship with fear? How do you deal with it?

A Throughout my life, I felt an awful lots of fear, and it's always been the challenge in front of me. I was afraid of public speaking. I made sure I became the very best. I was afraid of heights. I worked on sailboats. I made sure I was up 96 foot masts, that whenever I feel it, I face it head on. It's almost a challenge. Look, there's a story that my partners know. I had to get a tooth removed. I actually drilled, um, a tooth drilled for a root canal, and I had to go to a meeting right after that, and I told the dentist, Drill without any Novocaine. And he says, you're out of your mind. And my whole life, I wanted to see if I was a badass or not. In other words, am I a fake badass that has this envelope nobody could tell, or am I really a badass on the inside? And I told the dentist, take it out with no Novocaine. And he drilled, and I jumped. And I told the dentist, I won't move again. And I didn't move again. And I used the trick of thinking what it must be like to go to war and lose an arm or two legs. That's pain with consequences. Mine was pain with no consequences. And so I just said, it's just nerve endings from there to my spine, to my brain. Fuck it, I'm not moving. Now, I had to go home and change my shirt because I was a puddle of sweat. But I didn't move. And so, I love fear. It does wonders for me. It gives me the challenge to overcome that gives me then a sense of…

AI assessment note: “whenever I feel it, I face it head on. It's almost a challenge.”

Q a tweet that was interesting, where, and maybe this can tie into the dinner that we had a few years ago, where we had this fierce argument, and I left thinking that we hated each other, and then now we've become friends. But you said something like a 100,000 of your drones could prevent a land war in Europe. What does that mean and why? Why do you believe that?

A Yeah, I said this, I think maybe a year ago or so, and I, I got into a bit of trouble for this because apparently it was deemed to be provocative, but, um, I, I still think that's the case. I think The deterrence that you get out of having a very large number of strike drones at your border, I think is, is pretty, uh, is pretty strong, and the reason is that if you turn up with tanks on the other side, let's say you turn up with 3000 tanks, 100,000 strike drones that are able to navigate without GPS, that are able to find their targets, obviously specifically focusing on tanks, will destroy those tanks, I think, in a matter of hours. It's very hard to defend against.

AI assessment note: “100,000 strike drones that are able to navigate without GPS... will destroy those tanks”

Q all time, still needed to organize his thoughts to somebody else. You are going through, I can't think, you're, you're, you're, you have almost like a singular lived experience, especially for somebody as young as you are. So, I'm curious, like, who plays this role in your life? Like, who do you go to that can even remotely empathize with what the hell you're dealing with on a day-to-day basis?

A Kind of three categories here. One, a lot of the researchers that have been here forever, we've kind of, like, all been through it together, and we've developed this set of, like, shared language, intuition, standards, whatever you want to call it, and That I have not been able to replicate with anybody outside of the company, um, when it comes to, like, the shape of what's happening and what might happen next and where the technology is likely to go. In, in terms of questions of just, like, you know, business and the world, for a long time in my career, Paul Graham and Peter Thiel have been two of the people that I have learned the most from about lots of different phases of my career and are still the two people that I go to if I really have, like, A very non-obvious problem that I'm stuck on. Uh, and there, I have not found anyone else after a lot of looking that has the same kind of ability to, to just, to like think in a super non-linear way. Like, you know, if what LLMs do are predicting what word comes next, those are two of the people that I can predict the least what word is going to come next. And that is a super valuable skill. You go with like a, oh man, I feel really stuck, and I've kind of thought through all these options, and someone that can tell you like, eh, I think none of those options are good. Here's this thing that now seems totally obvious and correct t…

AI assessment note: “Paul Graham and Peter Thiel have been two of the people that I have learned the most from”

Q What was the state of their business when this was happening?

A It was pretty early. It was in the first year of the company. Our company was founded around the same time as them. Of course, our PR firm didn't become Andrel, but it was around the same age at that point. And they were in the process of defining what the company was. They had actually been in semi-stealth the whole time where there was the website and the website provided just enough fodder for all these conspiracy theories about what, what is Palmer doing, but not enough information. It wasn't like today where you do your launch moment and you have your cinematic launch video and it was just like the company existed and there was rumors and gossip about it, but Not fully defined, and they, to their credit, recognized that it was time to really define it.

AI assessment note: “It was pretty early. It was in the first year of the company.”

Q So give me some more examples from some of your, your, like the way they described their mission. They distill it down to like the, the existence of their company. What is their company doing for the people, their customers and the people that use their products?

A You asked about Shopify, and Toby is very good at this, where he talks about, there's kind of two levels of Shopify. One is the level of this wondrous technology and what it means for the world, and in some ways, it is the technology backing entrepreneurship, and entrepreneurship is going to be the last bastion of human economic value. If they take everything from us, we will always have entrepreneurship. So, Shopify is sort of like a hedge against every job being taken because they can't take from us our agency and our ability to start new things. Shopify creates the technology to make that happen. Shopify is infrastructure for entrepreneurship. That's one level for it. Another level is the merchants. Toby and Harley do a wonderful job of telling the Shopify story through what it has done for the merchants. Skims. Successful company, probably going to IPO was possible because Kim and Jens and the team didn't have to sit down and say like, okay, we want to start this store, but first we have to figure out how to individually do a web portal and payments and design and all of these things patched together. How many people have that as an insurmountable obstacle before they're able to actually bring their business online? So the story of one merchant going from someone's dream, and it might be somebody in a small town who is If somebody is retiring and has always wanted to open a…

AI assessment note: “Toby and Harley do a wonderful job of telling the Shopify story through what it has done”

Q rebuilding from scratch. It's the same platform that more than 300 startups who have grown to over a billion dollars in valuation grew their businesses on. And now HubSpot for Startups offers this service at up to a 90% discount exclusively for eligible startups. Visit HubSpot.com forward slash startups to learn more. That is HubSpot.com forward slash startups. Have you had a chance to nerd snipe him back since then?

A Yes, on Linux. So I switched to Linux about two and a half years ago, and first I had this, uh, soft on-ramp as most people switch to Linux. I used Ubuntu. That's the most popular Linux distribution. That's fine. I mean, actually it's great in many ways because Linux has all these different distributions. They have Ubuntu and Fedora and Red Hat and whatever, but it's all the Linux kernel, like the magic of Linux Linux is the Linux kernel and then the ecosystem of all these tools that are around it. And whether you package them in this one way or package them in this other way is not the make or break of it. So just getting into Linux for me was a huge thing. I'd been on the Mac for well over 20 years. I was completely a Mac head as in thinking this is a Mac is computer. Like I don't want to use another computer. Windows certainly is not for me. I don't know. Linux is for people who like pocket protectors and just The kind of nerd that I can relate to, I can respect, but it was not a me thing. Then finally, Apple pissed me off enough that I thought I cannot in good conscience continue to spend money on their products if I have such deep disagreements with how they run the company. So fine, I'm going to try something else. And as I said, I gave Windows two weeks and I realized, man, shit, I can't do it. I'm going to come crawling back to the Mac if there's not something else. But…

AI assessment note: “Yes, on Linux. So I switched to Linux about two and a half years ago”

Q I don't think people understand these, these products, now you're essentially selling products, right? They can scale to insane, like insanely large degree.

A Yeah, so carbon tomato sauce, you know, for example, which is sold in thousands of doors across America, right? More than you could ever penetrate with a restaurant. Only so many people can come to a restaurant in a day or a month or a year, right? So, you know, Carbon sauce has become an enormous business for us, which is growing at a pace we never even expected, you know, and it's really put us at the top of kind of the premium sauce category, and it actually has worked incredibly harmoniously, where even though that's a product that you sell, that you buy in the, uh, store, you know, and costs less than 10 dollars, right, it's a little A piece of what people see and aspire to, you know, at the restaurant, and they don't contradict each other, right? One is, at the end of the day, they're both standing for the same thing, which is being the best expression of something that you're familiar with, right? When I say that, I mean that, you know, carbon, everyone's had jarred tomato sauce, right? Whether it be ragu or whatever it might be. We make the best one. It's not going to be something you've never had before. It's going to be the best version. That's our entire thesis around restaurants, right? And food. If you look at our menus, very rarely am I going to serve you something that's the first time you've ever had these foods or this dish. Our goal is just to make you the bes…

AI assessment note: “sold in thousands of doors across America, right? More than you could ever penetrate”

Q How many employees did you have at Grok when you did the partnership with the video?

A About 450, but it was more difficult to manage than a typical group of 450. So in the military, depending on your rank, you are allowed to, um, to have a certain number of people reporting into you. And the higher your rank, the more you can have as an officer. But when you're, when you have scientists reporting to you, the number is actually much smaller, like dramatically smaller. Because I had such a creative organization, it was much harder to manage them. The problems manifested. And so it probably was more like managing a group of 5000 people than it was 450 in many ways. In other ways, it was like managing an even smaller group because innovations would just happen on their own. But, like, The better the people, the harder they are to manage.

AI assessment note: “About 450, but it was more difficult to manage than a typical group of 450.”

Q bias and applying it to not only the talent, but also these meetings you're having in product. Uh, in product design and, uh, things that would make your product better is actually really important. You mentioned before that you learned from an episode of Founders on Michael Jordan, uh, one way to do this, where he would challenge his teammates to bets. Why was that an interesting idea to you?

A When I heard your episode on Michael Jordan, I was thinking like, yeah, so he is very intentionally throwing his keys over the fence, so he has to go fetch them. What he's doing is Michael Jordan, he, he's a very sort of aggressive competitor. Where he would make bets on everything. Like, could you throw a quarter and hit a target closer or something like that? Just weird stuff like that. And he would just nonstop do it. Most people are afraid to sort of taunt someone else, a competitor, because if they lose, they're going to feel really, really bad. Remember, that loss bias is heavy. Like, if I'm like, we're going to go play basketball, I'm like, I'm going to wipe the floor with you. And then I lose. That's humiliating, right? What I suspect Michael Jordan was doing was he was very intentionally taunting the other players so that a loss would be humiliating to force himself to perform at superhuman levels. He was just doing it over and over again. Most people are so afraid of putting themselves out there and suffering the negative outcome that they won't get their hopes up. They will actually, um, keep, keep their sights much lower. But entrepreneurs, They start a company and they're like, of course I'm gonna be successful. I'm gonna tell everyone. I'm gonna go raise money. I'm gonna put my reputation on the line, and I'm gonna be forced to perform.

AI assessment note: “taunting the other players so that a loss would be humiliating to force himself to perform”

Q What would that look like? My partner Rob was running through Central Park this morning listening to Spotify, so he was exercising while using your app.

A Okay, so this is going to come out in a few weeks, so I'll tell you kind of what we're going to talk about at Investor Day. Um, I'm a runner, I'm passionate about running, and we see a lot of people running with Spotify, and they make their own playlists. One of the things I want to be possible that's going to be possible Very soon is that you go into Spotify, you just tell Spotify, this is one of the good use cases of AI. I think you say to Spotify, you know, I want, um, running playlist for like an eight minute mile and I want it to be in my taste, but I want it to be on the downbeat, either on my, on both my feet or just one of my feet.

AI assessment note: “you just tell Spotify... I want running playlist for like an eight minute mile”

Q When you were 18 years old, 19 years old, it was just all music all the time?

A Yeah, it just, um, as a fan, I listened to music all the time. I fell in love with it. I wanted to be involved in whatever way that I could. Uh, hip hop was just starting in New York City. It was still a totally underground movement, so the only place you could hear it was at one club downtown where I, where I was going to school. Um, there was only one club that you could hear hip hop, and that was once a week. But other than that, it was only in, it was in the Bronx, it was in Brooklyn, But really just in, like, community centers and outdoor parties, it was underground and not well thought of kind of music. It was street music, and, um, and I would go to this club every week and hear the music, and at that time there would be, A few hip hop records coming out, 12 inch singles, no albums, only 12 inch singles, and, um, there'd be maybe one new record every two or three weeks, and that's all there was. And I would, so, go to the club every week, hear the music there, and then I would buy the one single that would come out every few weeks, and the singles didn't represent what the energy in the club was. And I wanted to feel that energy of the club. So I started, the first record I made was called It's Yours. And the purpose of that was, I was just trying to capture the energy of the club on record. And I didn't know anything about recording. I wasn't a professional. I was a kid…

AI assessment note: “Yeah, it just, um, as a fan, I listened to music all the time.”

Q Okay. So there is four decades separating when you're working with LL Cool J and today, how similar or different from what, like, if you're working with an artist today, how different is what you're doing with that artist today compared to what you did with LL four decades ago?

A Probably not so different. It's, it's probably pretty similar. Just, it, it depends on the artist. Like, because LL was a solo rap artist, and he didn't have a, a band or make music, I was responsible for making the, the tracks, and my version of that was a very stripped down minimal thing. But now I get to work with bands sometimes that have a big sound, and there are a lot of players, and I'm looking for the essence of each of these artists, and the essence tends to be stripped down, but it's stripped down to what they are. Just finished a new album with The Strokes, and they're a band of five people. So it sounds like a band of five people, doesn't sound less than that. Sounds like what they are.

AI assessment note: “Probably not so different. It's, it's probably pretty similar. Just, it, it depends”

Q tells a story of like the Phil Spector coming to the studio with like a butcher's, uh, in a butcher's outfit. And he's got like Guns strapped to him everywhere, and David Geffen's in the studio, and John Lennon's getting drunk. Do you have any, like, things that stand out from you? I've never heard you here tell any of these, like, stories of stuff you've seen inside the studio.

A I can remember doing a session with ODB, Old Dirty Bastard, from Wu-Tang Clan, and I remember being nervous, because I'd never met him before, and his reputation preceded him, so I didn't really know what I was going into, and, um, and I thought, I'm gonna, I'm gonna bring my dog. I had a Pooley, which is a dog that has dreadlocks. And I'll be, and that would be, whatever's going on, if you see a dog with dreadlocks, it's interesting. Like it, it, it, it doesn't, it's fascinating in its own way. And I had a friend of mine also filming everything because I thought, well, if there's a camera and if there's a dog, it's going to be okay.

AI assessment note: “I can remember doing a session with ODB, Old Dirty Bastard, from Wu-Tang Clan”

Q It's incredible. Ok, so you're 32. You're doing this turnaround. What are the insights you're driving at Fox that you're going to wind up using later on when you do take two?

A So the, the biggest insight, well, we can get into how I work with creative people because that's probably the most important long-term thing. But the, I think going back to your question of video games, so it's now mid eighties because I've been there for a couple of years and I now really understand the economics of the movie business. So like maybe I'm slow to pick it up, but I, I got it and they're terrible. They're terrible underlying economics, and they were bad and they've been bad since 1955, since the consent decree that basically disaggregated distribution from production and turn the motion picture business from a studio system into a boutique system and a rubric for good versus bad entertainment businesses. A boutique system is generally bad and a studio system is generally good or can be good. The studio system was long gone. And studio system means your creative talent. All your talent is on the payroll. Boutique system is they're not on your payroll. They can auction their services. And obviously talented people are auctioning their services for every project. It's going to be much more expensive than if they're on your payroll in success. Um, so you have a structure in the motion picture business since 55 a century. It wasn't didn't happen overnight. 55. But by the by the late sixties, early seventies, mid seventies, where It's heads I win, tails you lose. If th…

AI assessment note: “rubric for good versus bad entertainment businesses. A boutique system is generally bad”

Q Let's go back to that story where you're like, well, we need a 20th Century Fox. We need a business guy. Let's grab this guy. So when you realized you needed an AI person, did you create an entire role? Like, how was the structure?

A No, we have a new CTO, Dave Klein, and it all reports to Dave, because it's technology. It sits within the technology world, and no, I don't, you know, Not in any way to minimize the effect of all things AI. But first of all, the words mean different things to different people. And we're a technology company that makes entertainment. We always have been. So this is not new to us and engaging with technology aggressively to create better products, to market them better and to run our business better is what we do. You know, innovation and efficiency. So it fits well within our system and we've Pushed really, really hard to be as ambitious as possible. And even so, I would say we're getting internal criticism and that we're not moving fast enough, but we're trying to.

AI assessment note: “No, we have a new CTO, Dave Klein, and it all reports to Dave”

Q Was it making ten million a year in revenue and you guys were spending another 10?

A Yeah, that's fair. Yeah. Yeah. In that ballpark. And, uh, but just the, you know, the other thing was we didn't own the rights to the merchandise, the library, the video games, uh, DVDs, which were big at that time. So all we bought when we bought the company. Was those three letters UFC and old wooden octagon and some contracts that we have, that we had obligations to. Um, and maybe it was eight or nine. That's it, eight or nine contracts. We have almost a thousand guys under contract now. All the ancillary stuff was sold off to Lionsgate because the old owner was trying to stay alive. So to, to show you People can't wrap their head around this now. How much people didn't believe in the UFC? We went back to Lionsgate, and we bought the rights back for like, I don't remember what it was, but it was like two and a half, three million bucks. We bought all those rights back.

AI assessment note: “Yeah, that's fair. Yeah. Yeah. In that ballpark.”

Q Well, you just wanted to have an app because you saw everything shifting there?

A Yeah, I wanted to have an app because I wanted to own the audience before we got into anything else, and so actually, like, that, that transition that goes to the third app we launched was the first version of App Levin. It was an app discovery app, and this was, I think it was in, in late summer to fall, 2011. You and I would go connect on this app, App Levin, and it would tell you, hey, Adam's playing Words of Friends, you should go play Words of Friends with him. And that was the entirety of the app. It was just an app recommendation app. The app itself stunk, but when you got that push, the response rate was through the roof. Everyone who was on that app was going and downloading other things. So we're like, okay, well, there's a, potentially this app source is going to be bigger than people realize. There's gonna be a ton of content. This app stinks, but this recommendation algo is really cool. And so that, that's what really turned into what we became, which is we took that recommendation algo and just launched it. Eventually as an advertising platform on other apps.

AI assessment note: “Yeah, I wanted to have an app because I wanted to own the audience”

Q Can you say more about these nine separate companies? I think you just described two of them.

A Yeah. We publicly talk about all of them. So I would say there's, um, um, there's a people systems company that actually builds It's the Roblox operating system and has all of our recruiting and people and performance management stuff. There's an infrastructure company and that's running like our 40 data centers and all of our compute and bandwidth. Persistence, they're building out cool persistence systems as well. Uh, game engine, simulation tooling, and Roblox Studio sitting in a group or a company. There is a group, um, called the Economy Group. It's literally All of the things around how we have Robux, how we monetize, how we, um, you know, collect money, the ledger, all of that. There's a very large group, arguably the largest safety and civility group, engineering, product, policy, and live ops under a single threaded leader, chief safety officer, Matt, who can just run that whole thing and make decisions. There is a user-facing group that is all involved with Social Graph, Virality, um, the various apps we have for having Roblox run in different places, so it's like a wide range of these user groups.

AI assessment note: “there's a people systems company that actually builds It's the Roblox operating system”

Q But how does a twenty-one-year-old kid decide, because you even said it in the book, that you're like, I want to build a company at the intersection of technology and liberal arts. What was happening that you were interested, like, in doing that?

A Part of it was my background growing up. So I went to school, uh, in Santa Monica here, uh, you know, and, and, uh, at a school called Crossroads. Uh, Crossroads, you know, the, the full name for Crossroads is actually Crossroads School for Arts and Sciences. So it actually is, you know, the intersection of science and art together. And actually a lot of what the school is focused on is developing empathy, building empathy. And they have this thing called council, for example, where you sit with about 12 other students and, you know, speak from the heart, uh, and take turns expressing yourself. The school's really oriented on, on how you build strong relationships, build empathy with other people. And so I, I literally, I grew up at a school that was so focused on the intersection of art and science, but then also wrapped all of it in, you know, a commitment to humanity, to understanding one another, to building relationships, you know, to giving back. I mean, the school is very anchored in community service. Uh, our, our, three of our kids go there, uh, now, which is fun. Uh, some of the teachers are still there, but I think a lot of it was from my upbringing and that being a real, Focus. And then, you know, as I, as I got a bit older, and I got, you know, into things like graphic design, and I built my own computer, I was always sort of working at that intersection of, of art…

AI assessment note: “Part of it was my background growing up. So I went to school... at Crossroads”

Q This is the important part. Can you say why? Because I think you took an idea from there for your next business, why it failed.

A Yeah. I mean, there were a number of reasons why it failed. I think, first of all, we, we really focused on building the perfect Product for way too long before we got feedback. So, you know, I think we worked for like 18 months to build this perfect full featured product, which was like indirect contravention to like how I was always taught to build things, right? Which is like build a prototype, build an MVP, get in front of people, learn as quickly as possible. Um, but we had, we had spent all this time building this like perfect piece of software and we hadn't thought enough about distribution. And so while we built this great piece of software, our competitor at the time called So Naviance, which I think still today is probably the leader in like this college application sort of software world, they had secured distribution through all the different, uh, college counselors, right? So like what piece of software are you going to choose to help your kid get into college? The one recommended by the college counselors or the one, you know, from two kids at, at Stanford? I mean, I think it's a pretty easy, it's a pretty easy choice. So we just saw very early that we had no distribution advantage. And, you know, even if we loved our software, that people weren't going to use it, um, because we didn't really have a scalable way to get in people's hands. Around that time, when we …

AI assessment note: “we really focused on building the perfect Product for way too long before we got feedback”

Q So, 5000 people serving a billion, uh, billion users. You mentioned, uh, you have a bunch of different revenue lines, or ones that are growing. Like, how does, can you tell me about the ones that, like, are new?

A One of the new ones is our subscription business, uh, which is growing really, really rapidly, called Snapchat Plus. Um, And I think it's a really good fit for Snap's culture. You know, we, we adopted the advertising model very early on. I think it's like well understood. It's a huge opportunity and we have a ton of, you know, engagement on, on Snapchat. So advertising is a big opportunity for us and allows us to offer our product for free, which is great. Um, but I think, you know, the heart of Snapchat is, and our company is about building stuff that people love and that they want. And we were getting so many requests for all sorts of You know, new and different features from our, our, the most passionate members of our community, and we wouldn't, we can never really find time to resource and invest in them, um, because we were focused on things that everyone would use, not just like our most passionate, not just the most passionate Snapchatter. So we decided to build Snapchat Plus, which is essentially gives you access to like new fun features on, on Snapchat. We listen to our community and the things that they, they want, and we'll test stuff and release new things for, for Snapchat Plus. And for like four bucks a month, you can join Snapchat Plus and get access to all these new Uh, these new features, that's now grown to like, twenty-five million subscribers, which is like…

AI assessment note: “One of the new ones is our subscription business, uh, which is growing really, really rapidly, called Snapchat Plus.”

Q Why would people use it? Like, give me a use case.

A Because it's a calendar built for your friends. So, like, it is so difficult. I mean, I don't know if you've experienced this with your Partner, but with my wife, like, it's so hard to get my work calendar to match with her work calendar. It's like almost impossible. And let alone get that to map to our fifteen-year-old's calendar, right? And you know, everything he's got going on after school. And so I think all of a sudden there's a solution that like works really well for our fifteen-year-old who doesn't have like a whole corporate email or whatever, but like wants to share his calendar with, with friends, right? We can have visibility into each other's calendar and it all works Centered around your phone and your mobile number, right? So it's, so it actually is a social calendar rather than being like a work-oriented calendar. That just makes things easier.

AI assessment note: “with my wife, like, it's so hard to get my work calendar to match”

Q Did anybody have any restaurant or, or actually not even restaurant experience, because you're not even in the restaurant, any delivery, any of the founders have anything to do with logistics or delivery, anything?

A No. No, it's actually why we had to do the deliveries. I mean, I mean, the reason why we did so, the reason why we were so hell-bent on doing the deliveries, besides the fact that we had no idea whether we had any business recruiting other drivers was, How does this work? How should it work? I think DoorDash early on, even to this day, but early on, it was so hard to explain because it was actually, even to build the MVP, yes, to test it was just this website, you know, paloelto.com, but we had to build like four things. We had to build this website for consumers. We had to build some app for the restaurants actually received the orders. We had to build an app for the drivers, the dashers, and then we had to build the dispatch system. You know, that actually could oversee all of the operations. So even in the very beginning, we realized, wow, this is actually pretty interesting. It's just such a fun problem that you, in order to actually just bring you a burrito, you have to build these four things. And then to do it really, really well, I mean, that's why we did all the deliveries to figure out how you actually do that.

AI assessment note: “No. No, it's actually why we had to do the deliveries.”

Q Was there a specific source where you were finding people like this?

A Not really. There wasn't, um, in fact, to this day, I don't really look at people's backgrounds that much. I think one of the things I discovered along the way, you know, probably in the twenty-fifteen to twenty-twenty era when, especially when DoorDash was building out its team, um, there were more attributes that I was listening for than there were things on a resume that I was seeking or looking out. A bias for action, you know, and a lot of the ways I can tell in an interview is actually just what people naturally talk to me about. You know, for example, Christopher Payne, our first Chief Operating Officer, I didn't ask him a single interview question, but after a two-hour discussion about our logistics algorithm, he went home that night, it was Friday, drove with his son for four hours doing deliveries. I didn't ask him to do that. I also didn't ask him the next morning to write me a 3000 word email about why our logistics algorithm sucks.

AI assessment note: “Not really. There wasn't, um, in fact, to this day, I don't really”

Q don't know if you want to answer this question or not, but in, um, Warren Buffett's shareholders, he has this great line where it's like really important to pick, uh, to, to play against weak competition. Did you feel that there was going to be weak, like that, that point in time in venture capital history that, that you, you were going to be playing against weak or weaker competition?

A I would say not exactly. We didn't view them as weak. We, we viewed them as basically, we viewed them as running on a status quo, on a status quo set of ideas. And so, and, and, and to be clear, like we, we, and part of why we think about this, we had to raise money from at the time, in, in the time we were probably the two Ben Fisher firms. So Clare Perkins in the nineties, and I worked with John Doerr very closely for five years in Netscape. And then we, we, Loud Cloud, we raised money from, from Benchmark when they were like King of the Hill and Andy Ratcliffe, who was one of the founders of the firm and as a, you know, legendary, brilliant VC. And so we had worked with, we just had, you know, for accident of history, we had worked with two of the whatever top five or whatever people in the field, you know, for a long time. And, and, and they were, and are, by the way, um, brilliant at running on, on the model that, that they, that, that existed. Like John was brilliant at that. Andy's brilliant at that. They're still brilliant today. It was less a competition of, oh, these people are soft, or these people aren't smart, or it was none of that. It was, no, they're really good at executing against this particular playbook. So, and by the way, that's why it's okay. Like, if we're going to do this, we need to be, we need to be playing by a different playbook.

AI assessment note: “I would say not exactly. We didn't view them as weak.”

Q Who's influencing your thinking in terms of like the kind of company that you want to build and the way you want to build it back then?

A There was a book called PayPal Wars, which talked about the early days of PayPal, and it's actually pretty remarkable. You go back and look at what, you know, Peter Thiel and Elon, Max Levchin, all these guys were doing, David Sachs, they actually had many similar ideas to Bitcoin. They were, they were trying to create a decentralized form of money that could be permissionless global on the internet. It, you know, because of the history of the company and how it got acquired by eBay and a lot of the people left, it ended up being more just like a checkout alternative with credit cards and stuff. But actually having worked at Airbnb, that, that, that actually gave me a good picture into what was possible as well, because in college, you know, I went to school at Rice University in Houston, amazing school. I loved it. And, but it didn't really have like a startup environment. It wasn't like Stanford or something. And so I had never really seen a successful startup from the inside. I had tried doing my own startup, which Didn't go super well. And inside Airbnb, it was like, it was like some magic was happening. Like they'd caught lightning in a bottle and thing was growing like wildfire. They were, the way that they hired people and had this really high bar for excellence and design, the way they did the decision making, like a lot of things I got to see working there. And then I,…

AI assessment note: “There was a book called PayPal Wars, which talked about the early days of PayPal”