The Exchanges

Q What business ideas don't work in, in advertising? Like, what are the business models that just are doomed to fail?

A Trying to be a middleman on top of these large platforms. From my understanding, work, Trade Desk, I know, doesn't work on Google or Facebook at all. It doesn't work with Google or Facebook as a first party, but Applovin, I think only a little bit works on Google and Facebook. Mostly they do their stuff on the, on the unwashed web, basically, outside. So you've got to stay out of Google and Facebook's ecosystems. Because if you're trying to build your business on top of Google and Facebook, or probably soon open AI, uh, as an ad company, you're going to get squeezed. Every time you build a new capability on top of Google, in terms of Google learns what you're building, and Google has the best engineers on the planet, so do Facebook. They will take your capabilities and incorporate it into their platform. There's going to be almost certainly a cottage industry of companies that are going to come and say, I'm going to help you optimize ads in ChatGPT. There's already companies that help you optimize placement In what is called these answer engines called AEO instead of SEO. All of those are not going to create durable enduring companies.

AI assessment note: “Trying to be a middleman on top of these large platforms.”

Q What are the attributes of a good Northstar metric? Like, What advice would you give someone that's trying to pick the thing around which the company is going to optimize?

A Yeah, the North Star metric is a, is a metric that is an indicator of company growth and customer value. So it actually balances customer value and business value nicely. North Star metrics, in my opinion, should not be revenue. It should be something that is directly correlated to customer value. So for example, if customers are doing well, the North Star metric should go up and to the right, but it should also lead in business, the business doing well. For example, for Square, the North Star metric was GPV, which is Volume of Payments Processed. It was not correlated to revenue, it was somewhat correlated to revenue, but it most importantly showed that the number of, the amount of payment processed to the company was continuing to grow. At Facebook, the North Star metric was DAUs. It was actually monthly active users, then it over time went to daily active users, because it was a sense, it was an indication of how engaged users were. Now, one of the most important things about an NSM Is that it needs to be coupled with what we call check metrics. In other words, Nostra metrics, if they're let alone can, as you know, incentives drive behavior. So if you tell a team go and optimize this Nostra metric, they will do what it is going to go up a hundred percent, but then many things that you don't want to go down could go down. So for example, in, in the DoorDash case, you could sa…

AI assessment note: “a metric that is an indicator of company growth and customer value.”

Q How did you approach it from the beginning in terms of the original vision and plan? So it's a distressed asset. Um, that you go in and buy. How do you determine the initial vision? And then what were the first couple steps to execute against it?

A There was a series of transactions to gain control. So it took six months to buy out a majority of, uh, the company of the shareholders to have control. Everyone wants the billionaire to pay a lot and being clear with them that, you know, that this thing could collapse. And, you know, if, if, I don't come in. That was stage one. Then stage two was figuring out, okay, this is a great mountain. Um, but if half of it were private, uh, like Yellowstone club and half stayed public as it was, uh, then it could be a real win-win where they share operating costs and are more efficient. Um, and we can then have a very uncrowded resort on the public side, um, which gets to, uh, Uh, something that's gone on in the ski industry, which is high crowds. So it gets to compete with that. And then on the private side, it's building a 650 home community of, uh, ski lovers where they get their, basically their own enormous ski resort, uh, the size of Heavenly or Vale, um, just for the 600 homes. So it's, it's pretty spectacular.

AI assessment note: “There was a series of transactions to gain control... That was stage one. Then stage two”

Q like the type of company, not the specific choice they're making on a tech tech bed or something like this. Cause it seems like we're going to try everything and that will be great for the world. You know, some stuff will work, but if you had to give them advice on how to orient their business to be successful in this coming world, what advice would you give them?

A It's all about the bottlenecks on the supply chain. So you need to first convince me or convince an investor that you understand the like Three to five bottlenecks that dictate modern chip supply. There's TSMC wafer capacity, there's HPO capacity, and there's, um, like, advanced packaging, and maybe a fourth one would be power. Like, where will you get the power? How will you build these racks? Uh, and I, I wanna hear, like, you should have a great answer to each of those four bottlenecks and how you're gonna work around them, because it's all arbitrage at the end of the day. You're building a chip because you think that NVIDIA has made some choices that are difficult for them to change, which is true. NVIDIA makes a lot of choices that are difficult for them to change. They're not Perfect. They're just really well balanced. And so you want to be spiky. You want to pick something and say, I think they've underpriced the impact of how short we're going to be on HBM. We're going to push really hard in this other direction instead, which, you know, as an aside, I do think is probably the thing to attack most.

AI assessment note: “It's all about the bottlenecks on the supply chain.”

Q So much of this story is being good at getting the supply. What does excellence look like there? Like, what makes the best parts of Uber that do this the best? What makes them stand out? What is the, what is the key to being great at aggregating supply?

A So, I think, honestly, we're okay at it. I think we can get a lot better at it. I think one is, I want to get more of our team members to put themselves in the shoes of our suppliers, to drive more, to stand behind the counter of a restaurant. All of our employees are like, Crazy users of Uber Eats and Uber Rides, but they don't necessarily, we don't put ourselves in the shoe, uh, in the shoes of our merchants. You know, after COVID, partially because I was going freaking crazy at home, but partially because I wanted to understand, well, what does a driver courier experience feel like? I bought an e-bike and started delivering food in San Francisco. And Our drivers and couriers and merchants are on our platform much longer than the typical consumer. Typical consumer, you're in, you're out, maybe use us once a day, twice a day, hopefully three times a day, but the interaction is like a 32nd interaction. A driver will have our app, uh, open six hours, eight hours, 10 hours a day, uh, and as a result, the premium that we have to put on quality, making sure everything goes right, you know, like a P-ninety-five bug, Is happening to consumers once a month maybe for a loyal consumer. A P-Nine-y-five buck is happening every single week for a driver who's on the app, you know, six hours a day. And, and we are getting much better. We've got to put ourselves in the shoes of our merchant p…

AI assessment note: “I want to get more of our team members to put themselves in the shoes”

Q I have the same pre-mortem question, which was, if this doesn't work, like, why would that be the case?

A We have debated in the past whether or not people's interaction models with their service can change from on-demand to planned. People get very wed, like our brand has always been known as on-demand, you know, like push a button, get, get a car, push a button, get your delivery, et cetera. And so there was a question mark. Could we go from on-demand to plan? And we started moving in that direction with actually Uber Reserve. In the olden days, you know, Uber Reserve actually, we allowed you to reserve a car, but it was kind of an on-demand dispatch to try to get you that car when you expected it to be there. We have changed the back end to really driver reliability, 99 plus percent, so we're pre-booking with the driver. The driver accepts, makes sure the driver is there before the reserve. And Reserve now is Over five billion dollar run rate. Um, it didn't exist, you know, five, six years ago, and clearly we were able to, um, if we gave a tangible benefit, in this case, higher reliability for higher price, clearly we were able to move both demand and supply. Drivers want to kind of pre-commit to, to your trip. So that gave us the opening to say, wow, this pre-commit thing is a, is another angle that we can explore And travel became, uh, natural for us. So I think the question is, you know, is reserving your ride just fundamentally different from thinking about your vacation two…

AI assessment note: “whether or not people's interaction models with their service can change from on-demand to planned”

Q Say more about that. What do you mean by the private credit?

A Well, just, you know, private credit they're in pain from these SaaS loans. And however much they're marked down, they probably need to be marked down more. Because if the public companies are struggling to adapt, how's like a debt-laden company going, going to adapt, um, and invest in what is a very different margin structure business. But there's a lot of private credit in GPUs too. They were underwriting that to, I think, three or four years. And the disaggregation of inference means that I think these GPUs are going to have 10 or 15 year lives. The AI skeptics are like, oh, these companies are all cooking their books. You know, the useful life of GPU is only a year or two. The useful life of CPU is only four years because of the rapid technological change. No. What rapid technological change has done with the disaggregation of pre-fill and inference is mean that, you know, you can put a Cerebra system or Grok LPUs that NVIDIA acquired. Effectively in front of a hopper, or even an ampere, use that hopper and ampere for prefill, and extend the useful life of that GPU until it melts. Now they do melts. They do melt, so they have a time, but you know, maybe you don't have to run them as fast. This is going to be really good for the whole private credit industry. It's going to help finance the AI build out, because if you can start to finance GPUs at more like, you know, five pe…

AI assessment note: “private credit they're in pain from these SaaS loans. And however much they're marked down”

Q of Nvidia's story for a long time now, that allows you to do a lot with the underlying actual hardware. That you want to sort of eat your way into being as close to the bare metal as possible. And that's what, that's part of this flexibility and being able to control as many of the variables as you can. Is that, is that the journey that you've been on?

A That's part of the journey for sure, but it's also been actually pretty collaborative. So we work really closely with the Annapurna Labs team at Amazon to help to influence the roadmap of, of these chips, because, you know, we, we believe, you know, what we're doing is really stressing the limits of what these chips are capable of. Uh, and that means that, like, a dollar of compute inside our organization goes further than I think it does anywhere else, but importantly, we basically want to, to utilize each chip to its best purpose within the company, so that does mean that, you know, we're building our own compilers. We're really building things from the chip level up in order to have that customization and that flexibility to use it internally the way we think, uh, will generate the most ROI.

AI assessment note: “That's part of the journey for sure, but it's also been actually pretty collaborative.”

Q Is repealed. And so, and so what comes in its place? It's basically just deregulation.

A It's, it's deregulation. And literally after that you saw literally a wave of mergers of combining commercial banks and investment banks. So you saw JPMorgan Chase, there's many others, but There's always, with everything, there's knock-on effects. So that came together, created these powerhouses that could compete with what was going on in Europe, but now you had all these investment banks that weren't commercial banks. So think about my old firm, Goldman Sachs, and many others. Now they had to start competing where they weren't, they didn't have access to cheap capital because they weren't a commercial bank. They had to compete with combined investment banks and commercial banks because a lot of the commercial banks, both in Europe and the U.S., they started to use their balance sheet To get investment banking business. So what did all the investment banks do? They started to leverage up. And that's one of the other stories is leading into the system is sort of the development of the fixed income market. So think about corporate bonds, mortgage-backed securities, asset-backed securities, sovereign debt. That went literally from the eighties to the nineties, went from like seven trillion dollars to 14 trillion. So these are all financing mechanisms that could Finance the investment banks to basically allow them to leverage up. And that's what started to happen. So literally fr…

AI assessment note: “It's, it's deregulation. And literally after that you saw literally a wave of mergers”

Q What have you learned about culture in the many years now that you've been doing this, and especially given this is the thing that you're, you want to keep nurturing?

A I didn't think I appreciated how much culture comes from the top. Um, And so, like, follow-ups. Send handwritten thank you notes. I've sent handwritten thank you notes every way I meet. Almost everybody. I meet, like, every entrepreneur, every company. Guess who, guess who also does now? The twenty-two-year-old analyst. And by the way, we track it and report on it. And, you know, if you just treat people the way you want to be treated, like, that just flows. We've built a culture of, like, Treat LPs like you yourself want to be treated. People appreciate that, and it comes from the top. And, like, the intellectual honesty comes from my partner, Nime. A lot of the creativity comes from my partner, Brian. Now, of course, as you get to be 85, 90 people at a firm, we've built, like, a real training program, which is a result of a lot of work, Nime and Brian, and, like, our COO, Susie's done, and that team, and the recruiting team. We didn't have, like, weekly IC meetings before, like, Three or four years ago. Why? Because the IC was the three of us. We talk every day. Um, and so it's just like a billion processes in place.

AI assessment note: “I didn't think I appreciated how much culture comes from the top.”

Q I love the notion that both of you ran businesses as the CEO, and I'm especially curious about the forged in fire moments from running the Brazilian Railway. What were the aspects of operating as the CEO that you most remember that most shaped how you think about running a business well or investing well?

A Within a few weeks in the business, it was apparent that it was an operations challenge. Meaning the customers around the railroad all wanted to be serviced by the railroad and they couldn't because the service wasn't good enough. And the focus on basically churning the assets faster and more safely was really the driver of the company's success. Which drove me, in turn, to spend a week a month in overalls driving trains and going around the country. That allowed me first to get close to the engineers in the business, basically, which were crucial, the people that run the trains, and given and understand how important they were in that business in every respect. And do things to improve their lives that you could only do if you were out there with them. For instance, I was young and athletic and sitting in a locomotive for eight hours in those really old chairs was really tough. And the cabins were cold because they were not sealed properly. So all of that was not expensive to address. We didn't have the money to buy brand new general electric locomotives, but we could fix that. And we could also fix all the engineering quarters where people sleep between changeovers, which were also in dire straits conditions, and we were able to get them all fixed, get new beds, get satellite TV for sports, and get them all that done. That really drove a lot of support from the engineers. We …

AI assessment note: “Which drove me, in turn, to spend a week a month in overalls driving trains”

Q I'm gonna come back to the everyone being young thing just in a minute, because I think it's so interesting, but when we first had lunch, you told me this story about the funny back and forth with Tim Hortons and your initial outreach to them. Can you tell that story as well?

A Sure. I was able through a common friend to get a dinner with the CEO near Toronto, and I flew out there. We had a great dinner, really hit it off, and he was open to potentially receiving a proposition to put the companies together, which we, maybe a week later or two weeks later, went to Warren, and Warren was super, super reassuring. As we talked about in an earlier instance, I mean, I remember 10 seconds into the call with Warren, he really, really praised the quality of the business. And then and I always go back to that and saying how right he was, and we didn't even fully appreciate how good a business it ultimately was, which we do now. But anyway, so that went really well. So we had the financing lined up. He was open to receiving a proposition. We put a proposal together and we presented it to him. Then there was radio silence for a week. We felt radio silence for a week is normal. That's a big deal. They're deliberating about it. But then that became two weeks and three weeks. The four weeks.

AI assessment note: “Sure. I was able through a common friend to get a dinner with the CEO”

Q But I want to hear about the roots of how you built this empowering, very talented younger people into positions of not just importance, but control and ownership and all these things. Like what is the legacy of this feature?

A It's predicated first and foremostly on this desire to be a great place for the best talent. And one of the things that we think is appealing to this sort of cohort of people is that go to a place where they know that there's a decent chance that someone's going to make a bet on them early, earlier than probably anywhere else. Then of course, just making a bet on them earlier than anywhere else is not good enough if they don't have a real chance of succeeding. And the real chance of succeeding comes from surrounding them well, when you make these bets. For instance, as Dan said, when he was running Burger King, I was there as active chair for him. I had done it before. I was trying to help him everywhere, each and every way I could. And also, we brought people on the team at Burger King that have been involved in prior Instances at the brewery and the railroad and other places in senior operating functions on sort of the same processes or things that we wanted to implement there. So that sort of, that combination of things set you up for success. Nothing guarantees your success and you have to be prepared, but some of these things will not succeed. Some of these risky promotions won't succeed. But you have to maximize the chances that they work. So my co-founder is one of the board of the railroad that was helping me. One of them was on the board, Beto, and taught me a lot in t…

AI assessment note: “predicated first and foremostly on this desire to be a great place for the best talent.”

Q What was the most stressful period for you as CEO of Burger King? What was that moment like?

A I try not to get too stressed work-wise. I try to always keep things pretty even keeled. I had this basketball coach who once said, pressure is something you put in a tire. So I always try to keep that in the back of my head. I'd say there was one time that I was pretty stressed. Was this was the summer of 2014. We had bought Burger King in 2010. Billion and change of equity. Within a couple of years, it was objectively a great outcome. Everyone got all their money and then some back, and by mid 2014, we were like a ten billion dollar company, and we had owned 70% of the company, so objectively good. And we all decided, Alex, myself, and Josh Kabza, who was in our CFO, we all got really excited about buying Tim Hortons. And we were actively negotiating an acquisition, a merger of Tim Hortons. Alex was meeting with their CEO on a regular basis. Alex was our executive chairman and I was a CEO then. And we're in the middle of doing this prolonged negotiated deal. We get wind from the reporters at Bloomberg that they're going to run an article on us at Burger King, really centered around our ages, the ages of the management team. We're trying to buy this iconic Canadian institution asset, Tim Hortons. And there were some probably reservations on the Tim Hortons side and around us and business and Burger King. And so we're in the final stages of negotiating this deal. The article co…

AI assessment note: “I'd say there was one time that I was pretty stressed. Was this was the summer of 2014.”

Q What people in hip-hop, specific people have had the largest impact on you personally, and how?

A Nas is a very good friend of mine, and, um, he, uh, he's definitely had a big impact. Just the lens at which he sees the world is so Different, um, and interesting for me. So we're both like very big fans of Rakim, who is kind of like the John Coltrane of rap. So Rakim, uh, had one of his first big song was a song called My Melody. And, uh, Nas and I are listening to My Melody. And the, the first line is turn up the bass, pull up a chair, hand out a cigar. I'm letting knowledge be born. I'm, my name's R. And so he, Puts it on, hands out a cigar, ah, and he pauses it, and he goes, Ben, Why is he handing out a cigar? And I go, I don't know why. Then he plays the next line. I'm letting knowledge be born. He's like, it's a birth bin. He's passing out cigars at the birth of knowledge. And I was like, oh shit. It's like a thousand times. I never heard that. Um, and I can't tell you how many times like he sees or hears something, uh, that's there that I don't see. So having, you know, somebody that, I can talk to who has just like a completely different perspective of all things in life. Um, and it was interesting, you know, uh, we did the Coinbase deal together, uh, and he had called me like two weeks prior to us really kind of, um, seeing that, uh, cause he wanted to learn about Bitcoin. So, you know, I explained to him how it worked and, you know, he was very interested. And then, …

AI assessment note: “Nas is a very good friend of mine, and, um, he, uh, he's definitely had a big impact.”

Q Crazy. So something like Gemini come three comes out, you know, the public interpretation was, oh, this is interesting. It seems to say something about scaling laws and the pre-training stuff. What is your frame on like the state of pro general progress in frontier models in general? Like what are you watching most closely?

A Yeah. Well, I do think Gemini three was very important because it showed us that scaling laws for pre-training are intact. They, you know, stated that unequivocally, and that's important because no one on planet Earth knows how or why scaling laws for pre-training work. It, it's actually not a law, it's an empirical observation, and it's an empirical observation that we've measured extremely precisely and has held for a long time, but our understanding of scaling laws for pre-training, and maybe this is a little bit controversial with 20% of researchers, but probably not more than that, it's kind of like the ancient British people's understanding of the sun, or the ancient Egyptians understanding of the sun. They can measure it so precisely that the east-west axis of the Great Pyramids are perfectly aligned with the equinoxes, and so are the east-west axis of Stonehenge. Perfect measurement.

AI assessment note: “Gemini three was very important because it showed us that scaling laws for pre-training are intact”

Q science and recruiting and the pipeline and the crazy number of applicants and so on. Once they're here, making sure that They get the most out of it, and you get the most out of them, which is, you know, mutually beneficial. What are the sorts of traditions and things that you do that you think have most contributed to it being the kind of place you want to work?

A Ultimately, the most important thing is to be very clear on what kind of company you want to be, your principles, your values, and then hire people who embrace those, and, and then you yourself As a person who's maybe more visible than others, try as hard as you can to be the best paragon of those values as you can be, because that, that's most, more important than any, you know, manifesto or initiative or big, uh, uh, proclamation. There are certainly things you can do that help, uh, on the margins, help foster those values a little bit further. A few things we do that are, I think, are unusual or we love are, one is called State of the Spoon. It's twice a year. We have somewhat the equivalent of an Apple keynote, but it's just internal, and most of our teams take turns on stage presenting their most proud achievement, and also failures and lessons learned of the past six months, what they're planning for the future, and it's always, um, there is an element of comedy and self-deprecation, uh, which makes it, I think, quite entertaining. You laugh a lot. I always, it's like 3:04 hours, and at the end of it, I have, like, my My jaw is painful because I laugh too much. It's just fun. We organize all sorts of kind of almost cabaret things, and, uh, it's a great tradition, and it just helps us, you know, be proud of the things you do well. Remember not to take ourselves too serious…

AI assessment note: “one is called State of the Spoon. It's twice a year.”

Q To rewind the clock a little bit, if we were writing the book, uh, Kareem's entrepreneurial journey or something, what, what do you think would be like the prologue? What would be the opening scene?

A I mean, it would, it would certainly have to, to start in, in Lebanon, in Beirut, which is where I grew up. And I grew up in a very interesting period of, of Lebanon's history because I, I was, uh, Born right at the end of the civil war. And if you rewind the clock a lot in Lebanon, you'll see that it's, it's always been periods of, uh, peace followed by some form of conflict and war. And I was like born in, in, in 89, 90. And I spent the first, uh, 1617 years of my life, um, there. And it was a relatively calm period, always spurts of conflict, but nothing really major, but you could tell Uh, growing up there that a lot of, uh, um, the, the previous generation was scarred from the war and, and, uh, everyone was kind of living on edge. So in other words, I'd say a sense that things are very ephemeral and could disappear very quickly was, was there and in the air for my parents of, uh, um, Hey, you're going to have to do the best you can so that you maximize your chances of Um, getting out of here and, and, uh, getting into the best school that you can so that you can get, uh, uh, a visa and build a better life for yourself abroad is, is very important. So there was, I was living with that stress maybe hanging over my head in a country that was constantly exposed to all sorts of risks that I've learned to live with, um, external risk, uh, very well.

AI assessment note: “it would certainly have to, to start in, in Lebanon, in Beirut”

Q shook the US in terms of the progress that had been made in AI in China, that I haven't heard more about it since. And, and so I'm curious your impression of AI in China, the, the country and the party's orientation towards it, The state of the technology relative to the leading US, you know, research labs, et cetera. What does AI in China feel like to you today?

A Yeah, I think, um, AI for me, um, what is most important is going to be, um, in the next five years. Today, I think that the US still has a decisive lead on most aspects of artificial intelligence, um, mostly because it has the compute resources here. It has the leading NVIDIA chips, and China does not. But I think if we are going to have much more AI in our lives, I think the competition is much more of a toss-up. Again, looking forward in the next five years, which is a lifetime by the standards of a lot of AI, but maybe, maybe a shorter time span for, for the rest of us. And here is where I think China actually does have a lot of advantages in AI relative to the US. So if we have much broader AI in our lives, we're going to be using AI for all of our queries. We're going to also demand much more power than we currently have. And the US has not been doing very well on adding new power to the grid. As I said, it is only going to be adding something like 50 gigawatts of solar this year, relative to 500 in China. No new nuclear plants under construction. Maybe that will change because the Trump administration is more friendly towards nuclear. The US has simply not added much by way of power, and China, I think, as a civilization, um, is, um, as the engineering state civilization, is just very interested in making sure that no heavy industry ever goes hungry for power, and so jus…

AI assessment note: “Today, I think that the US still has a decisive lead on most aspects”

Q What do you think the greatest aspect of the U.S. system is that you have the hardest time imagining getting truly adopted in China?

A Pluralism. I spent six years living in China. I moved to China at the start of 2017 to be a technology analyst at an economic investment research firm called GovCow Dragonomics. At the time that I moved there, at the start of 2017, Trump had just taken office I remember watching these kind of strange confirmation hearings for his cabinet officials right when I left. And I lived through this period when Trump launched a trade war that quickly morphed into a tech war, and I wrote a lot of research notes about what exactly was happening to companies like Huawei and other sanctioned entities. Um, and throughout this time, I was open to the idea. I didn't necessarily believe it, but I was open to the idea that We're at the start of something like an Asian century, in which China and India were going to become much bigger powers. Um, by the time that I'd left in twenty-twenty-three, when I returned to the US to be a fellow, not too far away from here at the Yale Law School's Paul Tsai China Center in Connecticut, I thought that, you know, the experiences that I lived through, some incredible technological successes, Along with worsening repression, along with a worsening geopolitical environment for China, um, along with the centerpiece of zero COVID, all three years of which I was there. I started being skeptical that China could tolerate debate, could really encourage some measure …

AI assessment note: “Pluralism. I spent six years living in China.”

Q What's next for you? What, what having completed this really epic project that I think will be the, you know, seen as the definitive account of what's going on in China, visit the U S for a long time. What, what, what do you do next?

A Uh, curl up on my couch and read some great novels. Uh, everyone's reading middle March. Uh, I haven't read, read middle March yet. Uh, so that, that is something that's quite exciting for me. I want to be engaged with The broader Chinese diaspora, um, people who have decided to move to Thailand. There's a set of, um, people who've moved to New York, and they host feminist stand-up comedy, um, in Mandarin, and I want to be supportive of these sorts of efforts. Um, the sort of engineers I know in, uh, Silicon Valley, I want to help, uh, integrate them, um, into society and, you You know, help them appreciate the good parts of America that I enjoy the most. Um, if there's anything that they, um, can't necessarily, uh, access very easily, I want to be helpful in trying to give them a little bit of community. Um, and then otherwise, um, as I always do, uh, think big thoughts and then, uh, write them down in my letters.

AI assessment note: “curl up on my couch and read some great novels.”

Q In the earliest days, uh, when you knew you did not want to be an agent, but rather create things, uh, there was this confrontation in your book. I think you were at 23 years old with Charles Bluedorn. Can you talk about that fight that you had over, over something?

A What happened is, so I go, After I leave William Morris, and I go to ABC, and I'm 23 years old, and ABC at the time, there were only three networks, and they had a hundred percent of the viewings. They were all, each of these networks were very powerful. And, but ABC was kind of run like a candy store, because it was the youngest of the three networks, and it hadn't yet bureaucratized itself. So if you wanted responsibility, it was there. And anyway, so I'm in the program department, And no one else was doing it, so my responsibility was to buy movies from the major studio producers of movies at the time to put on television, because that was a big diet of television watching then, was to watch theatrical movies on television. And Charlie Bluedorn, this great industrialist of the sixties and seventies, uh, had bought Paramount, uh, and In order to justify his purchase, he wanted to sell all their old Turkey movies. And so he convinced the chairman of ABC, uh, in a meeting where he couldn't wait to get rid of the mad Austrian Charlie Bluedorn, uh, to, uh, buy all these movies and blue. The chairman called me up to his office. I was the only one on the floor at the time, uh, and said, okay, you do this. And, and I told Mr. Bluedorn after he would thought he'd clenched this deal to kind of save his purchase of Paramount Pictures. And I said, I'm not buying any of these movies. The…

AI assessment note: “I told Mr. Bluedorn... I'm not buying any of these movies. They're all turkeys”

Q Can you talk about what happened in that camping incident and with your brother and the impact that those two things had on you?

A I was at this camp and I was Eight, seven, eight, nine, yes, somewhere in there, um, and I was, yes, as you saw, I didn't want to be there, and the only person in my dysfunctional family that I thought I could have any dependence on was my mother, because I certainly couldn't depend on my father, and my brother was a sadist monster, uh, and so I, I, I said, come and get me, and she said, okay, I will come and get you, And it is a, it is a describable scene of sitting, uh, in a, in a, you know, kind of the part to the entrance of the campground and whatever on a kind of near a tree stump and waiting hours for my mother to come and rescue me, uh, And the waiting of it became this bitter, sad, sweet moment of me saying, I cannot depend upon my mother, which meant I can't depend upon anyone other than myself. And it was a resolve that from that moment on, uh, I would, I would, I would force the world around me that I was dependent on no one. Which was, at that age, a kind of, well, kind of harsh, but it was a truly revelatory moment of being my own savior.

AI assessment note: “it was a truly revelatory moment of being my own savior.”

Q If you think about the marketing to these people, like how you get, obviously you would want to monopolize like the people that have that trait to come run one of your companies, that would be a great virtuous cycle. How do you do that? Is it just word of mouth? Like, are you more deliberate about it?

A The answer is it's word of mouth. And so, you know, um, one of the students goes and has a great experience running a business. Their friend hears about Alpine, calls them and says, Hey, is this real? And the friend says, I am having the absolute time of my life. Like, I didn't even know this exists. I can't believe this even exists. And it is as or better than advertised. Um, and that word of mouth is, um, I mean, that's, so the best thing we can do is just deliver on the experience, starting with giving them a winnable game and, and a lot of support. And, um, you know, I think last year, uh, this might, this would be surprising probably to you, but Alpine was the number one most applied to job at Harvard Business School, Stanford Business School, Kellogg Business School, the Alpine CEO and training program.

AI assessment note: “The answer is it's word of mouth.”

Q something CEOs to run sometimes very large companies and the search and development process of those young, of that young talent, those young CEOs. So maybe you can like explain when did you plant that acorn seed? Like what, why, how has it grown? Like I, we can spend as much time as you want on this thing. Cause it does seem to be like a elemental part of this.

A Yeah, that's right, Patrick. That is core. So The way it came about was in the early days, we were doing all kinds of things. We got a lot of, a number of businesses. We weren't, weren't going well. So one of us, um, would go out and run the company. So Dan Sander, one of my partners today, we moved to Detroit, uh, for like a year. Will Adams moved to, um, Maine for two years to run this horrible business. And a guy named Mike Duran was in Chicago, you know, and I, I ran one of our companies, um, A slot machine business for a while. When we were in the recession and we had all this time to kind of look back at our track record, the best deals that we did were always ones where we put in either us or someone just like us to go run this business who knew nothing about the industry, but had these.

AI assessment note: “The way it came about was in the early days, we were doing all kinds”

Q Why does that interest you? Like, why is the fifty-year version of a business story more interesting than a ten-year version? Which, I'm picking 10, because it's like, 10, a decade's a long time.

A Time is the best filter. Time is the only filter that I trust. You know, most of the people I cover are dead. Uh, if they're not dead, they're, they're, their careers, they're at the end of their career, they're an older, wiser person, and they're, they're passing on these lessons, right? Um, and I remember people, I got a lot of pushback when FTX was taking off, and all these people were telling me, you gotta do an episode on SPF, this guy's a genius, he's the fastest person to like a thirty-five billion dollar net worth, or whatever the number was, And so I was like, oh, like, maybe I'm, like, missing something. Like, that's, maybe they're right. And we got to talk about Todd Graves in the episode I just did, because I'm really proud of it, and I think, you know, when people ask me, yeah, when people ask me who's my favorite living entrepreneur, they expect me to say, like, a tech entrepreneur. It's like, no, the guy that owns Raising Cane's, they're like, what are you talking about? Like, he owns 90% of a business that he started in college, he's been doing it for 30 years, the business is worth at least ten million dollars, he's growing at 30% a year, and he refuses to sell. What would be the opposite of that, right? The slow grind to To really perfecting what you're doing before you try to, like, just scale it up. There's a great line, I think, in Nick Sleep's, ah, Partner…

AI assessment note: “Time is the best filter. Time is the only filter that I trust.”

Q Just to pause on the, on just like the concept of combining skill, scope, trust, you know, traditional economies of scale. Of different types. Is there another business that comes to mind, maybe it's Amazon, that you think captures all these same things that has interested you through time? Just to like draw a comparative point for people.

A I actually love the comparison Amazon. You know, there's a famous, there's a video I saw once I'm famous, but I love it, where Jeff Bezos is describing why books is the first best place for an internet business. And he talks about how the selection matters so much. And then he talks about how you can get the books and you can ship the books and, and, um, you know, um, And you can pay for the, people can pay for the books. Well, imagine if, I, I actually think that from a consumer's perspective, used cars is just as great as books. The selection space is infinite. Selection matters an enormous amount. Um, also what I described of Carvana system is a lower cost to operate system than the traditional dealership system. It's a better experience. But the thing about books is it's really easy to do. Imagine if you had to start Amazon, but you couldn't just call the manufacturer and get books. You had to manufacture them. And imagine if, you know, you couldn't just call FedEx and have them ship the books. You had to build basically FedEx. And imagine if you couldn't just like accept MasterCard, right? You had to build a financing platform And Lord knows you can't just sell the person the book. You have to do title and registration, right, and all that. And, you know, with books, the stakes really just aren't that high. Um, and so people are willing to try it, and if it doesn't go so w…

AI assessment note: “I actually love the comparison Amazon.”

Q In the time that you would be in studio with Roy, What was that like? What would you, what was his affect? What was, what was his style? What did you learn from him?

A I love that guy. He is the opposite of me. He is at the same speed, 99% of his life. He doesn't let anything bother him. He knows what he's doing. He enjoys his work. He, there's a zen-like Quality around him. And when people say that you kind of go on nonsense, you know, people say that, but man, he had it. He had this aura about him of calmness and determination, passionate about what he did, excited about his art, but no emotional swings, just lived his life, enjoyed his life. We brought him to LA for six weeks to paint a 28, 26 foot high mural. In the lobby of our building that I am paid design. It was the greatest six weeks of my life. I sat there and watched. I talked about this on the last podcast. I watched this guy create something off a white canvas out of his head. To me, that's the ultimate definition of being creative.

AI assessment note: “He had this aura about him of calmness and determination, passionate about what he did”

Q So if I wanted to go through that process and said, I want to create my own, what are the, what are the building blocks of that process? Like I could, I guess I could start to describe, I like plums and I like fennel. Is it that simple?

A And then it can be. So like, let me tell you how it's done today and then how we're changing it. So the way that you get a fragrance design today, and I'm not even talking about launching the full product, like literally just the smell. There's more that you have to do to launch the full fragrance. You submit what's called a brief. So a brief, um, in other industries would be called a request for proposal or an RFP. And it can be anything. So it's actually very, very free form in this industry. That itself could be revolutionized. So let's say you write a Word document and you describe your brand. Um, you're gonna describe what you want it to smell like, who you are, what you want the brand to be resonant of. And then at the bottom, you'll usually specify two pretty important things. What's the benchmark? So is there a scent that you want to beat? And usually that means I kind of want my thing to smell like this, but make these changes. And then what's the price you want to pay? So how many dollars per kilo? Which can be as, you know, low as like, you know, 10 bucks per kilo. It can go, for fine fragrance, it can go up into the many hundreds of dollars per kilo. Just depends on what you want to launch. You submit that brief to a fragrance house. And, ah, and again, this is the traditional way. Somebody receives that, and in their kind of weekly meeting, they read the brief. The…

AI assessment note: “You submit what's called a brief. So a brief, in other industries would be called a request for proposal”

Q By turning it into a liquid first, or just directly?

A Directly. So what it does is it, is it pumps air into these vials with a needle syringe, so it'll get dropped in here, a needle will be pushed into it. It'll basically, will suck the air, and will concentrate it onto You know how, like, Kodak film absorbs light? We have film that absorbs scent. And they basically concentrate the smell on that thin piece of film, and then you move that needle and you inject it into the spectrometer, and it uses a flash of heat to remove all those molecules. It kind of develops the film. And then the normal machine runs, we analyze the data with AI, and then we can pull back out what the scent actually was. So this means that we can analyze Flowers, and vegetables, and people, and fruits. Uh, and so what we did, the first scent that we fully teleported digitally was a, a fresh summer plum. So it was like, kind of the purple plum. You know, like the really good ones have like a snap when you bite into it? It was like one of those fresh ones, so we sliced it, we put it into one of these vials, we analyzed the smell, and then we actually reprinted the smell on the other side of the lab, which I'll show you. The other thing you can do with this machine, which is really cool, is you can pause the smell at any point in time, and you can just sniff molecule by molecule. So a scent will be like 30 molecules, a hundred molecules, all blended together, dif…

AI assessment note: “Directly. So what it does is it, is it pumps air into these vials”