Peter Thiel

Peter Thiel is an entrepreneur and investor. He is the co-founder and former CEO of PayPal, started in 1998, redefining the world of secure and fast e-commerce. Shortly thereafter, Thiel was the first outside investor in Facebook in 2004. Additionally, he co-founded Founders Fund, which has backed transformative companies like SpaceX and Airbnb, With a background in law and finance, Thiel has consistently championed innovation, whether through his venture capital firm, Thiel Capital, or the Thiel Fellowship, which provides $100,000 grants to young entrepreneurs who have a vision for a new product. Known for his contrarian thinking, Thiel is also the author of #1 New York Times bestselling book, Zero to One, which challenges conventional ideas about innovation and offers optimistic insight into future progress. ------ Thank you to the sponsors that fuel our podcast and our team: Vivo Barefoot http://vivobarefoot.com/tetra Use code 'TETRA25' ------ LMNT Electrolytes https://drinklmnt.com/tetra Use code 'TETRA' ------ Athletic Nicotine https://www.athleticnicotine.com/tetra Use code 'TETRA' ------ Squarespace https://squarespace.com/tetra Use code 'TETRA' ------ Sign up to receive Tetragrammaton Transmissions https://www.tetragrammaton.com/join-newsletter

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:02Rick Rubin?

  Tetragrammaton.

• 0:22Speaker 01

  I was myself a product of an elite education. I was a Stanford undergraduate, Stanford Law School, and graduated from undergrad '89, Law School, class of 1992. And then, probably throughout the '90s and 2000s, I had a bias towards hiring people from the top universities. I thought there were things that had gone haywire with them. There was too much uniformity, too much political correctness. But I still believed that they were incredibly important ways that the elites in our society get formed, and that one had to reform them or do something about them

• 1:04Speaker 01

  if you're going to have an impact on an elite level in our society. You know, I had my success with... My first really big breakthrough success was PayPal, which was in the years 98 to 2002. And then, best in Facebook in 2004. So by the late 2000s, by many standards, I was quite a successful person. And circa 2007, 2008, I thought that the big philanthropy thing, I wanted to do my one big philanthropy project, was going to start a new university. And it was a little bit vague, but it was... The fantasy was that it was going to be a kind of liberal arts college where people somehow got a broad education about the world. Maybe they also would be trained in computer science or something.

• 1:49Speaker 01

  It would both be good for life and good in sort of a theoretical way and in a practical way. And for about a year, year and a half, one of my colleagues, we did this research project, and we looked at all the universities that had been started in the United States. We arbitrarily picked the 100 years before, so 1907 to 2007. And when you looked at that 100-year process, it was a tale of donor intent betrayed and money wasted. And you sort of got the sense that it was really, really hard to start a new university. And there was somehow this, I can come up with all these theories, why? But just empirically, in a broad brush stroke, almost everybody who tried to do it

• 2:33Speaker 01

  had failed quite badly. And even though I like to think of myself as smarter than other people, I don't think of myself as that much smarter. And so if you've seen something which people have tried to do for 100 years and never succeeded, you start to wonder if maybe something very different needs to be done. And that was at least part of the genesis, the idea that maybe too much money is going into this higher education system. And maybe it would be good to get people out of it instead of pulling them in. And it would be good not to try to hire a few more faculty or graduate students or something, but to

• 3:07Rick Rubin?

  A new model.

• 3:07Speaker 01

  Have a completely new model.

• 3:09Rick Rubin?

  Yes.

• 3:09Speaker 01

  And in September of 2010, there was a tech conference in San Francisco he was going to give a talk at. And it was like 24 hours before we came up with this idea. Again, we're talking about the universities and how they were broken. And we sort of came up with this idea. And, you know, we brainstormed it, and should we have 32 kids? No, that's 32 is like the Rhodes Scholarship. We don't want it to be just a copycat of the Rhodes Scholar. And then we sort of came up with 20 under 20. But it was like a 24-hour brainstorming session. We were figuring it out in the half-hour drive over to the talk I was giving that morning. And then it took off.

• 3:48Rick Rubin?

  What was the first year that you did it?

• 3:50Speaker 01

  Well, we announced it in fall of 2010. And then effectively, the first year was 2011. It was basically envisioned as a two-year program. You know, we gave people stipends of 50,000 a year, 100,000 over two years.

• 4:05Speaker 01

  There were all sorts of things that were imperfect. There are all sorts of questions. Is this really something we should do in a nonprofit versus a for-profit context? But it hit a very raw nerve because it was clear the system was way more exhausted than people thought. And there was a Silicon Valley reporter I did an interview with in 2011. And it was sort of like, this is a very controversial, crazy idea Peter has. It was sort of the way it was presented. But then you looked at the comments section and 70% of people in the comments section agreed with me. And so already in 2010, 2011, it was maybe, maybe it was unconventional for me to articulate this. But there was a sense that the business as usual was not quite working.

• 4:49Speaker 01

  I was always bad at doing the autobiography, personal history thing. But the summary autobiography I always give of myself, and I always see myself as, in some ways, having been very guilty of these same things. You often see your younger version having done certain things wrong that maybe you couldn't have done differently or you would never have known differently. But in retrospect, as a lot of talented kids, was just a hyper track. And so my eighth grade junior high school yearbook, my best friend wrote in, you know, I know in four years you're going to get into Stanford. And then four years later, I got into Stanford and I got into Stanford Law School. And then I ended up at a top New York law firm. And it was one of these very strange places where from the outside, everybody wanted to get in.

• 5:34Speaker 01

  On the inside, everybody wanted to get out. And so in my mid twenties, I had kind of a quarter life crisis. Like, why in the world was I so dominated by social status, prestige? You know, the money was okay. It wasn't that great relative to selling your soul or something like this.

• 5:52Rick Rubin?

  Did you feel like it was selling your soul?

• 5:53Speaker 01

  I felt it was like, on that scale.

• 5:57Rick Rubin?

  In other words, you achieved it because it was the goal to get to. But when you were there, you realized that it was empty for you.

• 6:05Speaker 01

  Yes, but it was sort of an odd goal because if you ask, where did that goal come from? It didn't really come from.

• 6:12Rick Rubin?

  Where did it come from?

• 6:13Speaker 01

  It somehow came from our society broadly. It came from, I would say, two thirds of the undergraduates at Stanford in the 1980s were on one of four tracks. It was pre-law, pre-medicine.

• 6:29Speaker 01

  Pre-banking and pre-consulting. My sophomore year, I decided to major in philosophy. So that was my, so I had this humanities major. And on some level, this is not what I was thinking as an undergraduate sophomore. But in some ways, when you chose to major in philosophy, you're already kind of deciding to go to law school. And so there's sort of all these points where you implicitly make decisions, even though you're not consciously aware of them. Of course, you could have.

• 6:55Rick Rubin?

  Was there any pressure from your parents or none?

• 6:57Speaker 01

  There was surprisingly little pressure. You know, I was born in Germany. We immigrated to the States when I was a year old. So they were, they wanted me to get a good education. So they believed in that strongly. They weren't as immersed in the, you know, elite American system. So it sounded good to them, but.

• 7:16Rick Rubin?

  Why did they move to the US?

• 7:18Speaker 01

  You know, my dad worked as an engineer and he sort of got a master's degree at Case Western in Cleveland. And then working on these sort of large, large engineering projects, sort of a Bechdel kind of a thing. But yeah, there was sort of a way that the tracking was, I would say was very, very socially grooved. You know, it's sort of everyone wants what everyone wants, which is on one level, just a tautology. And another level is this incredibly powerful, dynamical process. And there was something like this that was very powerful. And there was sort of an elite education track generally. And then, of course, there was, were these particular tracks of banking, consulting, law, medicine that dominated the elite education.

• 8:02Speaker 01

  And then I think, you know, I think the strange history of it is that you can think of the global financial crisis in 2008 as the point where all the tracks blow up. Maybe centered the most on banking. Medicine had already gone haywire for a long time. Law, you know, elite law was often adjacent to banking. And in some ways, all these tracks got deranged in 2008. And so there was, you know, around 2009, 2010, when we started the Tale Fellowship, there is actually sort of a real opening to rethink this stuff for the first time in decades in the US. And there are all these different ways you can describe it. You can also describe it in terms of the student debt problem.

• 8:44Speaker 01

  In the year 2000, student debt in the US to 300 billion. It now stands at $2 trillion. So 300 billion was kind of a lot, but in the 90s or 2000s, there was a way you could get a decent job and earn your way out of it. Maybe it took longer to start a family and to buy a house than it otherwise would have. But there was sort of a way in which it was manageable. And gradually, the costs and the debt just went up so much more than inflation that it just sort of ended up in a hole where it got harder and harder to get out.

• 9:18Rick Rubin?

  I have a student debt question, which is, there's talk of government relieving student debt. And the way that it would be relieved would be the government would pay for it instead of the students paying for it.

• 9:28Speaker 01

  Yes.

• 9:29Rick Rubin?

  Why is the idea that the government would pay for it instead of these institutions that have these huge endowments just erasing the debt?

• 9:37Speaker 01

  The place where I am sympathetic, you know, I'm probably a big critic of the Biden administration and of the left. I am somewhat sympathetic to the idea that something has to be done about the student debt problem in some way. And that, you know, in many ways, we've doubled down on the system. So in 2005, the bankruptcy laws got rewritten under Bush 43, where you cannot discharge student debt even if you go bankrupt. And so if you go bankrupt.

• 10:03Rick Rubin?

  Then why would that be?

• 10:04Speaker 01

  Well, because we wanted to make sure the system kept working. The theory is the debt attaches to you as a person. And so you got all this great education and you can't get rid of the education and therefore you also can't get rid of the debt. And if you don't pay it off by the time you're 65, we'll start garnishing your social security checks and use that to pay off the student debt. And then, you know, there are sort of all these ways the debt got worse and worse. And if you do a cohort analysis, if you graduated in 1997, 12 years later, by 2009, most 97 graduates had gotten out of most of their debt. 2009, first year after the financial crisis,

• 10:46Speaker 01

  is the first cohort where, when you look at it 12 years later in 2021, the median person with debt has more debt. Than they started in 2009. So you can't even make the interest payments.

• 10:59Rick Rubin?

  Wow.

• 10:59Speaker 01

  And

• 10:59Rick Rubin?

  That's a big change.

• 11:00Speaker 01

  And so, and of course, it has this backward looking feature where it's a big change, but it takes 12 years to notice that you're somehow in a more corrupt and different regimes.

• 11:11Rick Rubin?

  But even after noticing it after 12 years, nothing has changed.

• 11:13Speaker 01

  Well, that's where the Biden administration tried to start doing some things. But then you have these very crude measures where maybe we just cancel the debt and make the taxpayers pay for it because you don't want to question the ideological assumption you had, which is that college education is so wonderful. So if you start saying, you know, college education is not so good and it's been counterproductive for a lot of people, you know, maybe we'll cancel the debt, but you know, we're going to put these colleges under a lot more scrutiny. You weren't supposed to do that. And so they wanted to cancel it, but then they were boxed in, you know, ideologically in all sorts of ways. I believe the total amount of money in all the college endowments put together is only 800 or 900 billion dollars.

• 11:58Speaker 01

  So it's, it's weirdly less than the, the student debt and it's very uneven. So it's like Harvard and Stanford have like 40 or 50 billion and then it quickly drops off. So, so yes, in some sense, the colleges charged a lot, but they were not terribly well run. And, you know, the money was mostly wasted. It went to a lot of overhead administrative bloat. So if you make the colleges even partially responsible, probably, you know, a lot of them would go bankrupt. And then, you know, the other sort of drastic thing you can do is just say the debt holders are responsible. And then of course, they will say that it had been guaranteed by the government. And then maybe, you know, maybe there's some, some point where the government should

• 12:40Speaker 01

  actually just say, you know, it was, it was really an evil thing to give all these people this debt and you're going to have to take somewhat of a haircut. But it's sort of weirdly boxed in. It's very, very, very slow moving and it's led to this, you know, I think experience for, you know, much of the millennial generation and even more for Gen Z kids now going to college.

• 13:02Rick Rubin?

  Are the terms of the student loans onerous?

• 13:07Speaker 01

  I don't have the exact numbers in front of me. You know, it's several percent above the risk-free rate. I imagine it's maybe typically a 6%, 7%, 8% interest rate, which is, you know, is probably not an unreasonably high rate, given how risky the debt is. I'm not sure the rate is ridiculously high, but it's just the amount is high.

• 13:31Rick Rubin?

  Understood.

• 13:34Rick Rubin?

  What have you learned from the experience of starting this? What worked, what didn't work?

• 13:40Speaker 01

  It worked very broadly. If we define work simply as a better alternative than going to college. And anyone who got a tail fellowship could always go back to college. They weren't dropping out. We always say they only were stopping out because the colleges, if you stop out of college for 10 years, the colleges still would like you to come back and finish your degree because they have all these statistics and they want to have as high a percent of people who start finish as possible. You know, I think roughly three quarters of the people who went in the program did not go back to college and found better things to do. Not necessarily that their companies would succeed. And a lot of it was tech-adjacent. And they somehow got into this Silicon Valley world, Silicon Valley network.

• 14:25Speaker 01

  And there were a lot of opportunities that came with, you know, you try to do something entrepreneurial, you learn a great deal, you meet a lot of people. And so it was sort of a, you know, I won't say it was an alternate track, but it was a way to restart people's trajectories. That was, that worked quite well. You know, the outliers are way more successful than the median. So you do end up with, you know, a crazy amount of variation. You know, probably the single most successful tail fellow in terms of impact was Scott Buterin, who starred Ethereum. And so it was the second biggest cryptocurrency. And I don't have the number right in front of me, but it's probably like in aggregate worth, you know, $400 billion or something like that.

• 15:09Speaker 01

  I mean, it was sort of this crazy person who had, you know, this fantasy about building a world computer and turning the world into a giant computer. And it would be computing Ethereum. And it wasn't even a company, you know, it was just this computer protocol. And somehow, you know, there were things like that that one could do. And then there were probably things that were extremely ambitious and where, you know, if you're a very young person, you weren't necessarily embedded enough. So you could start something like Ethereum where just a small number of people could do an iteration of the Bitcoin crypto protocol and start Ethereum.

• 15:53Speaker 01

  And that was possible in the world of, you know, 2014. Another one had, you know, built a small nuclear reactor in his parents' basement in Arkansas. But then the problem was, you know, the next thing you have to do is get, you know, $50 million to build a bigger reactor. And then that might not be that easy to do if you're, you know, 17 years old.

• 16:12Rick Rubin?

  Yeah, that's wild, though.

• 16:13Speaker 01

  But it was sort of the opposite of the stories that I know people told themselves when I was in college in the eighties, where, you know, the tracks are set. There's a certain grooved way you're supposed to compete with people. You know, there are a lot of different things people can do.

• 16:30Rick Rubin?

  This was allowing people to try something difficult, exciting, that they're passionate about, that most sane people would say, that's a bad idea. Don't do that. Don't even consider it.

• 16:43Speaker 01

  Yeah, don't even consider it.

• 16:44Rick Rubin?

  Finish school.

• 16:45Speaker 01

  Something impactful. It's always hard to measure this, but something counterfactually relevant where if you didn't do it, it would never get done. I'm not always sure hard is the criterion. This was always a debate. Max Levchin, my PayPal co-founder, and I had in 99, 2000. And he always thought we needed to do things that were hard. And I always said we needed to do things that were valuable. And he would say, well, you know, anything that's valuable is necessarily hard. And I would say, things that are hard are not necessarily valuable.

• 17:19Rick Rubin?

  That's true.

• 17:20Speaker 01

  And so, you know, it's extremely hard to get a medal in the Olympics. How valuable that is in an economic sense, you know? What's the value of the bronze and a bronze medal?

• 17:36Rick Rubin?

  Tell me the story PayPal from the beginning.

• 17:38Speaker 01

  Probably a lot of these companies, it's always so much mythologizing. And you're always tempted to red con the stories, which is this Hollywood term, retroactive continuity, where you somehow tell a coherent, single narrative from the very beginning. And there were, we had elements of that. There were, of course, there was a lot of stuff we had no clue about. If we'd known how hard it was to build a payments company, we probably would have never started. So there were ways in which being clueless was a bug, but also a feature.

• 18:12Rick Rubin?

  Yeah, because otherwise, if you knew how hard it was, you might not have done it.

• 18:15Speaker 01

  You would have known why not to.

• 18:17Rick Rubin?

  Exactly.

• 18:17Speaker 01

  To start it. I met up with Max Levchin. We somehow connected in the summer of 1998. He'd gone to University of Illinois. There were some of his friends I'd met in Silicon Valley. And in the fall of 98, he wanted to start a company. We started brainstorming different ideas. He was into cryptography, which was all these sort of complicated privacy protocols and things where messages could not be decrypted. Had more of a finance background, but I was interested in some financial applications of cryptography. Could one create an, you know? We had nothing like the Bitcoin idea, but we, there were sort of these ideas.

• 19:02Speaker 01

  Could you somehow encrypt money? Could you find a way to shift the dollars away from government control to the privacy of a wallet? We were loosely in this. Financial cryptography idea at the beginning. And then, of course, you have to come up with a way. You have this big picture idea. So changing the nature of money, that's a big, big idea. And then, how you do this? You know, how do you attack the problem?

• 19:28Rick Rubin?

  Do you think of it as digital money or no?

• 19:33Speaker 01

  To some extent. There had already been various attempts at digital money in the eighties, nineties. There was a company called Digit Cash. I think had been started years earlier and had just gone bankrupt around 1998. And there was sort of this, I think it was David Chom was the mathematician, cryptographer, who had helped start it. And so there were sort of a lot of theoretical ideas about it. But there were also these very practical ideas. So you have something that can work in theory, but how do you get people to use it? And there's a, there's a way in which if everyone's using it. So if a billion people are using it, I can understand why the other 999 million plus are using it. But why would the first person use a new form of money or the thousandth person?

• 20:18Speaker 01

  And so we thought a lot about, you know, how do you initiate a new form of money? How do you start it? And it, it looks like a network, but what's the value of a network if, if nobody's in it? And so there were sort of a lot, a lot of these questions. And we had all these different business models. February 1999, our first plan was, you know, we're going to do encrypted money on Palm Pilots, which was, you know, this small computing platform that, you know, a few million people were using. But then, you know, why would you need a money on Palm Pilot if you just had your wallet on you? And so there were all these basic questions.

• 20:52Rick Rubin?

  Did you get it to work on Palm Pilot?

• 20:54Speaker 01

  Yeah. Two, three years later, we had maybe four million users and maybe 6,000 were on Palm Pilot. So it was sort of not the best approach. The question, the sort of practical, you have this big picture theory question about the nature of money, financial cryptography. And then we had this detailed question of how do you get distribution? How do you market it? How do you get people to use it? And the idea, we somehow stumbled, and we were just brainstorming all these different ideas. Summer of 99, fall of 99, as we launched it. And we finally hit on the idea that you had to bootstrap it off some pre-existing network. And the natural pre-existing network was something like email.

• 21:39Speaker 01

  And there were, I want to say, maybe 150, 200 million people with email addresses. And so if you could use someone's email, all you have to do is type in their email. And then you have an account with PayPal and you send them money. And then we create a virtual account in that person's name. You send them $50 and then it's, you've gotten $50. And then you have to click on this link and give us your bank account or other information. And we'll get the $50 out to you. And so email turned out to be a way you could bootstrap it. And you could have what I'd describe as a one-way network. You only needed the sender on, the receiver, who'd be more interested in joining the network since you got the money, would naturally sign up.

• 22:23Speaker 01

  Whereas the digit cash and all these sort of pre-PayPal digital currencies were networks that only worked if other people were on them first.

• 22:32Rick Rubin?

  And describe the world in 1999 technically, so we know what were the devices people were using? Were there search engines yet? What was happening?

• 22:41Speaker 01

  You had search engines. It was dominated by desktops. You know, people had cell phones. There was a thought that you'd eventually be able to do internet things on cell phones, but it was extremely minimal. You know, we had this pitch in June of 99, was we were going to be the world's first mobile internet bank. And this was like a decade too early. But we got Nokia, had a venture firm. Nokia Ventures was our Series A investor in summer of 1999. And then one month after they invested, we told them, you know, we've thought some more about the mobile internet. We think it's actually pretty far away. And so we're going to pivot back to the regular internet. And we're just going to try to bootstrap it off of email. You had a decent amount of e-commerce.

• 23:25Speaker 01

  You know, you had Amazon, you had sort of lots of other.

• 23:27Rick Rubin?

  Was Amazon just books at that time?

• 23:29Speaker 01

  It had already diversified into a wider range of things. And then eBay was was this rather big thing. But when we launched in October of nineteen ninety nine, we had actually no particular idea who would who would use it. And we started with the twenty four people in our office. They got PayPal accounts. And then we thought of all these things. Maybe we could do partnerships with Amex. We spent two months talking to them. We sent them all these boxes. And they couldn't figure out who in their New York office should open our boxes. And the boxes got sent back to us. OK, so we can't do a partnership with a big company. Maybe we can do advertising. Advertising was super inefficient. And then by sort of this weird process of elimination,

• 24:11Speaker 01

  we concluded that the cheapest way to get more people to open PayPal accounts was just to pay them money.

• 24:19Rick Rubin?

  You paid people to use the service.

• 24:20Speaker 01

  And we paid you ten dollars if you opened an account and another ten dollars if you got someone else to open an account.

• 24:27Rick Rubin?

  Tell me about when the light bulb went off. It's like, let's pay people to use it.

• 24:31Speaker 01

  We needed the network to grow as fast as possible.

• 24:34Rick Rubin?

  Yeah.

• 24:34Speaker 01

  And it was like, if you advertised on Yahoo, it would cost you fifty or a hundred dollars to get a customer. And so it was cheaper just to pay people directly. And then, of course, you think, well, this is going to be some really bad adverse selection. But at least if you pay people and I send you money, I'll send money to somebody where there's a connection between the two people. And maybe that's actually a more organic way than if you just randomly advertise on the Internet. You get this these disconnected nodes.

• 25:01Rick Rubin?

  And if it works, it works. That's the other part.

• 25:03Speaker 01

  You know, it it took off exponentially. We were up to, you know, a thousand users by mid-November. By December thirty first nineteen ninety nine, we were up to twelve thousand. We crossed the hundred thousand mark early February of two thousand, and we hit a million by April fifteenth.

• 25:20Rick Rubin?

  When did you have to stop paying people to use it?

• 25:23Speaker 01

  You gradually dialed it back, but we probably burned through about $20 million by mid-April. So it was an exponentially growing user base, exponentially growing marketing base. And then you gradually dialed it back where people have to give us more information to get the referral bonuses. Maybe you have to give us your bank account number. You never fully turn it off, but you just gradually added more conditions to it. And then, of course, as more people are using it, you start noticing the use case patterns. And it turned out that the place where it was used very heavily was on eBay, which was this network of small businesses selling stuff to other people who are often both buyers

• 26:08Speaker 01

  and sellers on eBay in turn. So it was a naturally super networked economy. Very small businesses or individuals typically can't accept credit cards. So in the US, I don't know, there were maybe 100 million people with email. In early 2000, there were maybe 2 or 3 million people who could accept credit cards. And so if you can't accept a credit card, your next best alternative was for someone to send you a check. And that took 7 to 10 days to clear. And then PayPal had the system where the money was good right away. Maybe we'd have to eventually send you a check, but you could then take the money, turn around, and use it. And so it was an extremely natural Great match with eBay. Extremely natural use case.

• 26:52Speaker 01

  And of course, there were all these questions about fraud that we ignored and we then dealt with later. In the world of 1999, 2000, all this stuff was way less regulated. It was pre-9/11. You could not have started a company like this after 9/11. There were relatively few know-your-customer requirements. Maybe if you had tens of thousands of dollars, but if someone's moving $50 in the world of early 2000, nobody thought, you know, this is probably just a terrorist or something like this. And so there was sort of an opening to start a business like this, for it to gain traction. You could not have done it a year or two earlier, and 2 years later, it probably would have been completely illegal.

• 27:37Rick Rubin?

  And then how long did you continue to build PayPal? And tell me about the PayPal mafia, just because it's storied.

• 27:44Speaker 01

  So we launched the product in late 99. Elon had a competing company four blocks down the street. He was at, you know, he was at 384 University Avenue in Palo Alto. We were at 165 University Avenue. And it was this crazy war. And then we sort of.

• 28:02Rick Rubin?

  Is that how you met him?

• 28:04Speaker 01

  They were just competing like crazy. And then we decided to do a 50 50 merger in early March of 2000. You know, of course, we had both had exponential burn rates.

• 28:14Rick Rubin?

  It's interesting. Both of you had a similar vision for this digital payment system.

• 28:19Speaker 01

  Yeah, it was his company was X.com. You know, Elon with his, with his X word obsession. His vision was for it to be sort of this, this multifaceted online bank and, you know, checking accounts and there'd be all these different things you could do. But he had sort of by late 99 also zeroed in on payments as the initial piece to start with. You know, we, we combined the companies. We figured out ways to, to keep scaling it. We gradually started charging people for making payments.

• 28:52Rick Rubin?

  Like 12% a small.

• 28:54Speaker 01

  Yeah, like two, two and a half percent, like, you know, roughly the same as a credit card. And then parts of them were funded by credit cards. That was sort of a very low margin part. But then about, about half the payments ended up being funded through ACH, which is like a, through someone's bank account. And that was sort of one of our big innovations. And, and then, you know, we burned through a lot of money, but we quickly reduced the burn rate. And the company was profitable by fourth quarter of 2001.

• 29:22Rick Rubin?

  Wow.

• 29:23Speaker 01

  You know, when it went public in early 2002, this was now all after the dot com bubble had burst. But it was sort of one of the, we were one of the few survivors. And then there were these natural synergies with eBay where, you know, in some ways, you know, there are all these. Mixed things one could say about it. It was sort of this very boring MBA run kind of a business. And you had this crazy PayPal business that was running the checkout counter. And they only needed to figure out how to get their own checkout counter to work once. They weren't quite able to figure it out. And so it was sad that we ended up selling PayPal to eBay. But it was fortunate that, you know, they were too incompetent to run their own checkout counter since otherwise we would have been probably, it would have just ended, uh, ended more badly.

• 30:05Speaker 01

  So we, yeah, we combined the company with eBay in the fall of 2002. And in some ways-

• 30:12Rick Rubin?

  Do you have any feelings of remorse doing that or only good feelings?

• 30:19Rick Rubin?

  It's the first time you built a company and selling it. There must be some emotional component.

• 30:24Speaker 01

  It felt like clearly the right thing at the time. You know, the synergies were, were very big. And then at the same time, it is very sad because, you know, you lose control. And there were things, all these things about that were, you know, crazy and charismatic. And, you know, of course, sort of a wild libertarian crypto anarchist undercurrent. We were now going to become this boring corporate culture. You know, it was sold for one and a half billion to eBay, which seemed like a lot of money in 2002. You know, decades, a decade and a half later, when PayPal got spun out again as its own standalone company, it would eventually get to a market cap of north of a hundred billion.

• 31:08Rick Rubin?

  Wow.

• 31:09Speaker 01

  And so, you know, then when you look back, it's like, wow, do we really have to sell it for one and a half billion if it's worth a hundred? But it felt hard to navigate through all the things because if 70% of the payments are on eBay, and that's the part that's growing the fastest, it was just, it was just so natural.

• 31:28Rick Rubin?

  Yeah. Did you guys continue to run it with eBay? Or did you immediately take off when it was sold?

• 31:34Speaker 01

  It varied for different people. I was the CEO at the time. I think the CEO is always the single most redundant person in an acquisition. And so it was probably- Natural for me to leave. It was probably highly desired by the senior eBay management that I laid. Quite a number of the other senior people left within a few months. And it was also by this point, it was just a well running machine.

• 32:01Rick Rubin?

  Yeah.

• 32:02Speaker 01

  And so we had figured out all these creative product things. Maybe there were some more things one could have figured out. We didn't have that many ideas left.

• 32:11Rick Rubin?

  And the mission was accomplished.

• 32:12Speaker 01

  There was a part of it where we're kind of out of ideas.

• 32:14Rick Rubin?

  Yeah.

• 32:14Speaker 01

  There were new things people did in payments years later. There were things to do in mobile payments. There were, you know, there were all sorts of somewhat different things, but not that much happened. I would say in the payments world in the six years, let's say, after we sold to eBay and before the iPhone gets started.

• 32:32Rick Rubin?

  At that point in time, did you see yourself as a serial entrepreneur or investor? And this is what I'm doing for the rest of my life?

• 32:42Speaker 01

  Well, the PayPal thing felt really big. It was really insane. So I, you know, it was like, you know,

• 32:48Rick Rubin?

  You couldn't think past it.

• 32:49Speaker 01

  You had every day, you had a near death experience and you were going to take over the world and you move between heaven and hell five or six times a day.

• 32:59Rick Rubin?

  Very exciting.

• 32:59Speaker 01

  And if you told someone this is going to go on for like this for 26 years and it's a marathon, that would have been an incredibly exhausting thought to have at the time. And so a lot of it was just, how do we survive the next, you know, month, the next three months, the next six months, things like that. And then I think things were quite unformed in 2002, 2003. And there was sort of a way, at least for myself, you know, there were all these different things I, I thought of doing, you know, you know, I scaled up a hedge fund. I started doing angel investing as a venture capitalist. I was involved in, you know, starting several different businesses. We tried a variety of things that were more old economy.

• 33:41Speaker 01

  And then the piece that worked by far the best were these iterations on internet ideas. And yes, it was in a way, it was sad for me and for a lot of the PayPal founders to leave. But it was also, it was actually a good time because it was probably the point of maximum depression on the internet in 02, 03, 04. It felt like there were no new ideas possible, nobody was trying. And in retrospect, that was actually, it was a good time to start all sorts of things. You know, I, I meet Mark Zuckerberg by summer of 2004, ended up being the seed investor in Facebook.

• 34:23Speaker 01

  You know, I started a company called Palantir.

• 34:30Rick Rubin?

  Tell me about the first time you met Zuckerberg.

• 34:32Speaker 01

  You know, it was at my office in downtown San Francisco.

• 34:36Rick Rubin?

  Did Facebook already exist or no?

• 34:38Speaker 01

  It existed as a, as a website. They had some kind of messed up corporate structure. Zuckerberg was 19 years old, it was just past his sophomore year at Harvard. He moved to California for the summer. I'm not sure he had actually decided to stop out of Harvard yet. They had launched it at Harvard and maybe 20 other colleges. And they basically just needed to buy some more computers to launch it at 100 more colleges in the fall.

• 35:07Rick Rubin?

  Was there already the plan to go beyond colleges? Or was colleges the whole plan at that point in time?

• 35:13Speaker 01

  Colleges was the whole plan, but I had started one of these conservative student newspapers when I was an undergraduate at Stanford. And I already had sort of a little bit of this monopoly idea. And I thought, you know, actually, you have to think of Facebook, it's like the student newspaper. It's the online media equivalent of a student newspaper. And we have a chance to have a single media company that will be the, the new economy version of thousands of student newspapers. And if you could aggregate the thousands of student newspapers.

• 35:48Rick Rubin?

  It's a great idea. It's a great idea. Even if that's all it was, it would be a great idea.

• 35:52Speaker 01

  I mean, that would be like, I don't know, a billion dollar business. And then in a way, you know, you had these small but very tight networks at every, at every single college. I believe at Harvard, it was something like 6, 7,000 undergraduates, maybe a little bit more in the graduate school. But it was, it was something on the undergraduate level, I believe it was something like, within 10 days of launch, you got to 60% market share, 60% of the undergraduates that signed up. And so the pro-Facebook, pro-meta.

• 36:24Speaker 01

  The thing that I very strongly believed at the time, and I am still quite partial to, was that people were actually pretty isolated in college. It was quite scary to go to college. When you leave high school, you don't know anybody. And it was sort of a way to make some friendships before you even showed up. It was a way for people to get better connected in college life and to make it to make it a much richer experience.

• 36:52Rick Rubin?

  It seems like communication is always good.

• 36:56Speaker 01

  I don't know if I'd be quite as panglossian as that today, but there probably are contexts where it also really deranges people. And so if you, if we don't like each other and we just tell each other how much we hate each other, and maybe peace through separateness is better than just ever more deranged communications. But, but certainly the, the picture in the world of 2004, 2005 was, you know, it was more transparent, more efficient, you know, just a very different world from the sort of disconnected 20th century you had just left behind us.

• 37:33Rick Rubin?

  How would you compare the roller coaster ride that you witnessed with Facebook versus PayPal? How were they similar? How were they different?

• 37:42Speaker 01

  PayPal was in a way a much more complicated thing because you had to think about how to integrate with all these existing credit cards and bank accounts. You know, you needed, you needed a lot of customer service. If people had questions, you know, if you have a hundred dollars stuck with you, you have to have an actual human being to answer questions. You know, there were sort of more problems of a fraud nature. It was a incredibly complicated product in a way. Facebook, it was just sort of this, it just hit the zeitgeist perfectly. And, and maybe something like this would not have quite been possible a few years earlier where there was not enough broadband.

• 38:27Speaker 01

  And so you couldn't actually download all these pictures and all these images. And so Facebook sort of starts to be possible in a world of 2004, probably was not quite possible in 99 or 2000. So there was sort of a, there was a way that, you know, it was in the air. There were, you know, there were all these. Different approaches to social media that people had. Close rival was this company called MySpace. I often think the names of companies are incredibly important. You know, PayPal was in a way like was this easy to spell, two-word name.

• 39:06Rick Rubin?

  Friendly, sounds friendly.

• 39:07Speaker 01

  It sounds friendly. Initially, it was just to pay your pal.

• 39:11Rick Rubin?

  Yeah.

• 39:11Speaker 01

  But then it turned out the meaning had the second more important meaning was it was your pal who helps you pay.

• 39:17Rick Rubin?

  Yeah.

• 39:17Speaker 01

  And so it had this fantastic dual meaning. You know, Facebook alluded to, you know, a college Facebook where you put something about yourself and then you read about other people. And MySpace was sort of the LA. Facebook starts at Harvard, MySpace starts in LA. They're both social media. They're both about self-expression and about learning about other people. So they involve both writing and reading.

• 39:49Rick Rubin?

  They started at the same time?

• 39:51Speaker 01

  Start, I want to say it was roughly the same time, but the emphasis is different in a subtle way. Where MySpace, it's a little bit more this narcissistic LA self-expression. And so it's more dominated by writing and less about reading. And then Facebook, the stress is 90% on reading about other people. And then that turned out to be the correct balance. And you know, Facebook was in a way, the stress was more on everybody else. MySpace, the stress was just on.

• 40:25Rick Rubin?

  To create.

• 40:26Speaker 01

  You as a disconnected person. And I think even the name somehow anticipated the arc of the company. And then, but yeah, it just hit the zeitgeist in an incredibly powerful way. I don't remember exactly when it got opened more broadly. I think it was about two years, maybe 2006, early, maybe 2007, that you start opening Facebook to everybody. And it was just this incredible exponential growth for years and years and years. And then it was not just the US, it was in some ways the whole world.

• 40:57Rick Rubin?

  And you were on the board of Facebook for a long time, yes?

• 40:59Speaker 01

  2005 to 2022, 17 years.

• 41:02Rick Rubin?

  And why did you decide to leave?

• 41:05Speaker 01

  Well, 17 years is a long time to be on a board, for sure. There always are. Lots of different things to say on this. There's a way that that public company boards are much less fun than private company boards. You know, once you're on a board of a public company, you know, in some sense, it's a formal, more legal kind of a thing. It's a lot more process, a lot less, you know, creative brainstorming substance. And so, you know, Facebook went public in 2012, and I probably was talking about leaving the board.

• 41:41Rick Rubin?

  Since then.

• 41:43Speaker 01

  Then, and then.

• 41:43Rick Rubin?

  Soon after.

• 41:44Speaker 01

  And then I, and then at the same time, I was genuinely grateful to Mark for letting me invest and, you know, all the success I had. And so, and so I, you know, I stayed on the board for another decade after, after it was public. And of course, you know, yeah, there's, there are all these different ways that the big tech companies became, you know, bigger than anyone would have thought. And then, I don't know, it's the, you end up with all the, you know, attributes of the Judeo-Christian God, where it's, you know, omnipotent and omniscient. And if it's not omnibenevolent, it must be omnimalvolent. And, uh, and so there were, you know.

• 42:19Rick Rubin?

  Yeah.

• 42:19Speaker 01

  Endless number of crazy dynamics, but they kicked in at Facebook at a, at a much, much later stage than at PayPal.

• 42:27Rick Rubin?

  You talked about the names of companies. If we think of companies that have either mission statements or mottos, like Google had, don't be evil.

• 42:37Speaker 01

  Uh huh.

• 42:38Rick Rubin?

  Where does the idea of a motto or a mission statement fit in in your world?

• 42:42Speaker 01

  I think it's very important. You know, I, I don't know whether it always has to just be this super short motto, but I think there's always some kind of a tight narrative you want on how, you know, what is this company doing that is unique, that is different? I believe it's in. Tolstoy's, I think it's Anna Karenina, where at some point Tolstoy says something like, "All happy families are alike, and all unhappy families are unhappy in their own special way." And I always have this weird cut where something like the opposite is true with companies, where all unhappy companies are alike because they're somehow undifferentiated

• 43:27Speaker 01

  and they're, you know, hyper-competitive. All happy companies are unique in their own special way. And they've found something that they're doing that nobody else is doing, or that they're doing better. So I always think there's some kind of a narrative like that that you want. On some level, you know, companies are about capitalism and success and making money. But it's a very lame company where you don't have some kind of a narrative of why it matters, why it matters to the larger world, why if you weren't doing it, this wouldn't happen, things of that sort. And then, of course, the place where I'm always hesitant,

• 44:09Speaker 01

  though, with the, I don't know, the corporate speak, is that it can get hijacked in all these ways. There's a way that you have a mission statement that can be really powerful in certain ways. And then, at some point, you know, so "Don't be evil", I think was a charismatic mission statement. And I don't know exactly what it meant, but what I imagine meant in the Google of the early 2000s is, you know, "We're not just going to squeeze out every last dollar in every way possible. And, you know, there are all these things we can do that are questionable, but we don't need to do them.

• 44:52Speaker 01

  We don't have to be evil to have a great company." And then, at some point... It either gets hijacked, where maybe it becomes a vehicle for incredible corporate political correctness, where if the company's not politically correct, it gets redefined as evil. And so it becomes this weapon for all sorts of fights inside the company. Or there are all these ways that if you want to criticize Google, you can say it's being evil in some way. And then, you know, it becomes this all-purpose excuse for self-destructing. And so there's something about the motto that was very charismatic in the world of 2005 and that, you know, maybe a decade later had somehow deranged.

• 45:37Rick Rubin?

  Yeah, the idea of retiring that particular slogan seems, just seems wild.

• 45:43Speaker 01

  I think they retired it a while ago, though.

• 45:45Rick Rubin?

  Because it's so open and poetic, what it means, it can mean a lot of things. But to make the active statement, "We're going to take away, 'Don't be evil' from our company, is just a wild idea.

• 45:59Speaker 01

  Again, it's always easy to say these things with 2020 hindsight. But I would say with 2020 hindsight, you should have thought about that before you came up with a slogan like that. You should have realized that it's a very, very dangerous slogan because maybe you're setting yourself up to an impossible standard. You're like a minister in a church. And that's, it's probably a good thing to be a preacher. It's probably a really, really tough standard. And again, easy to say with 2020 hindsight, probably much harder to say ex ante.

• 46:37Rick Rubin?

  You sold PayPal to eBay. Were there other suitors?

• 46:41Speaker 01

  It was a very strange dynamic because there was only one natural buyer and one natural seller. Because if something like 70% of our volume was on eBay, someone else bought it, eBay could always threaten to shut us off.

• 46:58Rick Rubin?

  I see.

• 46:59Speaker 01

  And then, at the same time, there were obviously enormous synergies with eBay because most of their users were still not using PayPal. And so they could push it to them. And there would be sort of an enormous lift for the PayPal service if eBay owned it. And then if you, yeah, if you have a merger transaction in which there is only one seller and only one buyer. And then if you say, well, you know, it ended up being one and a half billion. But let's say, you know, our next best offer would be 500 million. And let's say it's worth 3 billion to eBay, up to 3 billion or more to eBay.

• 47:41Rick Rubin?

  Yeah.

• 47:41Speaker 01

  And then, you know, if we'd sell for 500 and they'd pay up to 3 billion. The question is, how much would the price go for? And I think the theoretical answer is that it's completely arbitrary and completely up to the relative negotiation skills, the two parties. And so it's the kind of combination that's extremely valuable and extremely hard to negotiate.

• 48:04Rick Rubin?

  What do you think happened to eBay since then? Because it felt like I used eBay all the time. And somewhere along the line, me and everyone I know stopped using eBay, but I don't really know why.

• 48:17Speaker 01

  Yeah, it's a complicated story. So it was certainly, if you look at it as a market capitalization of the largest internet companies. I want to say initially, the biggest one was Netscape. And from 1997 to 2001, the biggest sort of pure internet company was Yahoo. And 2001 eBay overtakes Yahoo. 2005, it gets overtaken by Google. So eBay was the largest pure internet company for four years. It probably during that time had a market cap two or three times as big as Amazon, which in some ways is the one that really replaced it on e-commerce. Yeah, there are all sorts of things one could say.

• 49:01Speaker 01

  The eBay site had this auction format. And then an e-commerce site is sort of a commodity product which sell a whole bunch of things. And then there were, there were things that involved elements of both on eBay. There was, you know, these small businesses that would sell things and not everything they sold was unique. And then somehow the auction format.

• 49:26Speaker 01

  Was valuable, but for only a pretty small part of of e-commerce. Maybe it's good to auction stamps or rare coins or things like this. Collectibles. But then, once you you shift to books or maybe old, rare, used books are collectibles. But then, most books are are not in that category. Probably there was some way where the product should have iterated a lot and become, you know, a lot more of an e-commerce site. And I think they didn't have the vision to do that. You know, it was it was working well enough. It was profitable. It just worked. But there was a limit to how much it scaled.

• 50:09Speaker 01

  And and there was sort of a weird way that the eBay business of the early 2000s, it was a hybrid of this really valuable, let's say, auction monopoly and this bigger, but more competitive e-commerce business. And it was not as big a monopoly as it looks. It was a valuable core monopoly and then a big, more competitive business. And somehow, they didn't think that through and navigate it as well as they could have, probably.

• 50:36Rick Rubin?

  Tell me the story of the book Zero to One. How did it come to be?

• 50:39Speaker 01

  It was a series of lectures I gave. You know, I've been giving various speeches about this stuff for for years and various perspectives on how to start companies and various lessons I learned. And then, it was in in the spring of 2012, I did a sort of a big Stanford class with, you know, hundreds of kids. And it was just, I'm gonna just teach everything I've learned about starting businesses in one class.

• 51:03Rick Rubin?

  How did you prepare for that?

• 51:04Speaker 01

  You know, in retrospect, it was actually quite uneven. You know, there were some lectures were really good, some were more mixed. About half of them, I just had material that I did and you sort of put into these, you know, pretty good PowerPoint formats. There were a bunch of other ones where I just had conversations with people in Silicon Valley. And, you know, a lot of them were sort of these high-profile people. A lot of them weren't that interested in saying anything controversial. So there were parts of it that were fairly uneven, but there was there was a lot of material. One of the people in class, this guy Blake Masters, who I became friends with, he posted it on the internet, which was sort of a good format, because if someone else takes notes and posts them, you know, there can be all sorts of mistakes in it. You don't need to double check it.

• 51:49Speaker 01

  But you got hundreds of thousands of readers. And then that was a compelling pitch to the publishing house that

• 51:57Rick Rubin?

  That's interesting.

• 51:58Speaker 01

  You know, so many people had read it on the internet that even more people would buy the book. And I had all these charts and it was one of the charts that came back to over and over. We had a zero to one was on an X axis and one to N was a Y axis. And so on the X axis was extensive growth where you do more of the same. And then on the Y axis, the vertical axis was, you know, intensive growth where you do something new. And then somehow Blake came up with this idea of zero to one is the title.

• 52:27Rick Rubin?

  It's a great

• 52:28Speaker 01

  And then, you know, it's as soon as I, as soon as I heard the title, it's okay. The title is good enough. We have to just do the book.

• 52:34Rick Rubin?

  Yeah, yeah.

• 52:35Speaker 01

  You know, it's creation from nothing. It's like God creates the universe in a zero to one move. And so somehow it is like the creative act.

• 52:45Rick Rubin?

  Yeah.

• 52:45Speaker 01

  In a way.

• 52:46Rick Rubin?

  Very similar.

• 52:47Speaker 01

  And then it has, you know, it has this computers, zeros and ones. It has this world of bits vibe to it. It's just two numbers that are, you know, that are the most basic. You know, we sold a crazy number of books in China. It somehow got pushed.

• 53:01Rick Rubin?

  That's interesting.

• 53:02Speaker 01

  I have all sorts of sociological things, but we published in fall of 2014. And I did a two week book tour in China in 2015. It somehow got pushed by the Communist Party like crazy. And, you know, it's since then, it's been sort of semi deplatformed and, you know, but we're selling, you know, I think we sold maybe a million and a half copies in China, on which I got paid royalties. And there's, you know, there are all these interesting cultural cuts you have on different societies. So there's probably something about, I want to say maybe it's specific to China, but it's where you often

• 53:36Speaker 01

  You have some of these categories of things that are numerically coded. So it's like the threefold way of the Tao or the Gang of Four.

• 53:44Rick Rubin?

  Yeah, the sixty-four hexagrams of the.

• 53:47Speaker 01

  You have these, these numbers that are very important. And so somehow it was a very Chinese book because we had two numbers in the title.

• 53:58Rick Rubin?

  Yeah.

• 53:59Speaker 01

  But it was an extremely non-Chinese book because as far as I can tell, the numbers zero and one almost never get used. Because the way the numeric category thinking goes is you have categories of, it has to be at least two in a category to have a group and to sort of abstract about the group. And it's almost like reasoning starts with a number two or three.

• 54:24Rick Rubin?

  If China continues to build itself based on imitating what happens in the States, your book would be a guidebook to what happens in the States, so it would resonate.

• 54:34Speaker 01

  Yeah, look, you know, paradoxically, of course, my book was also about how one shouldn't imitate, how you should do new things and how you should think for yourself. I think one of the ways it resonated in China was that the sort of the question of, you know, should China just imitate or should it do something new? Was already a very acute question in 2015, 2016. And the argument that China should just imitate the West is, I'll get these numbers somewhat garbled, but it's, you know, the nominal GDP is one-fifth, one-sixth per capita of the United States. And so if you just copy the US, there's so much room to catch up. You don't need to do anything creative.

• 55:19Speaker 01

  And this is, this is sort of the boring part of the globalization story that in some ways, the developing world to become the developed world, it just needs to copy. You don't need to come up with new things. You just need to somehow transpose Western institutions and Western knowledge and Western technology. And if you can just copy it. You know, there should be a lot of catch up in that. And then there's always some intuition that maybe there are limits to Western style growth. You know, maybe if everyone has a, you know, a combustion engine car, there's not enough, there's enough oil for that in the US, but there's not enough oil for eight billion people. And so you need to have electric vehicles if everyone's going to have a car.

• 56:01Speaker 01

  So I think that was already a very acute debate behind closed doors in China somehow was this question, can we just copy, which is the straightforward thing? Or do we need to do something new? You know, in some ways, of course, Japan had been the society that in important ways had just copied in the seventies and eighties. And then it worked incredibly well. And then at some point it kind of hit a wall. And so if you do as well as Japan, that's pretty good, but you're still going to hit a wall. Is China like Japan in 1970, where there's another 20 years of copying? Or is it like Japan, you know, in 1995, where it's kind of hit a wall?

• 56:41Rick Rubin?

  Tell me the story of Japan post-World War II.

• 56:47Speaker 01

  I've spent a moderate amount of time there. It's obviously in some ways, this society that copied the West like crazy. And then in some ways, the forms also stayed very different from the West culturally. I probably always approached these things through somewhat of an economic lens. There was some kind of manufacturing, export oriented growth model that Japan was able to perfect and to do incredibly well at. And there was-

• 57:23Rick Rubin?

  Mainly Toyota?

• 57:24Speaker 01

  Well, it was Toyota. I think it started with all sorts of silly games and then eventually moved up into like small cars and then more luxury cars. You know, there was a big semiconductor part to this. You know, all, all kinds of sort of very complicated industrial-

• 57:42Speaker 01

  Machinery. And of course, there was a pre-World War II history too, where you had the Meiji Restoration in the late 19th century, and somehow Japan radically modernized incredibly fast in the 19th century. It was one of the very few societies that wasn't simply overwhelmed by the West in the 19th, early 20th century. It was very traditional, but somehow, you know, they were able to turn it, to radically transform it. Commodore Perry shows up in Tokyo Harbor, 1850s or whatever that is, and it's been this closed society for almost 200 years. And then within 20, 30 years, it radically transforms. It also advances on

• 58:23Speaker 01

  the military side very quickly. It's 1905 where they defeat Russia. Wow, Japan by 1905 is strong enough to defeat one of the great European powers. And then, yeah, it obviously goes haywire with the fascism and the militarism in the 30s and 40s. But then, yeah, after World War II ends, there is some way the energy gets channeled in this relatively peaceful, but aggressive modernization. It ends up being incredibly competitive. It violates every free trade theory one would have, because it's super mercantilist. You have all sorts

• 59:05Speaker 01

  of, effectively, you have massive tariffs in Japan on any goods that get produced outside of Japan, and then culturally, people don't buy them. And so, there's a way, the consumer standards of living are relatively low. It's this unbelievably competitive machine. And in some ways, there are these processes they do better, where it becomes more efficient and smoother functioning. And then somehow, it somehow hits a wall in the 80s and 90s. Again, maybe the zero to one prism I'm tempted to give on it is that there's some point where they more or less caught up with the US, but then they needed to do something

• 59:50Speaker 01

  new. And they were not, it was just...

• 59:54Speaker 01

  Not geared towards innovation at all. It was process innovation of the sort where you build a more efficient factory, but it was not, you know, inventing radically new things. And then maybe the globalization piece that worked for Japan, where you had, you know, the labor was cheaper, the environmental standards were more lax than in the US. So you had this sort of arbitrage. Then the Asian tigers start to apply the same to Japan, where it's cheaper to have a manufacturing plant in South Korea or Taiwan or Southeast Asia. And then by the 2000s, you know, China does the Japan playbook against Japan.

• 1:00:36Speaker 01

  And so the sort of manufacturing tradable goods, where you build goods that you can trade globally, was extremely powerful, but it had, it had this hidden problem because there were billions of other people who were paid even less that might eventually catch up with you. And, you know, China wasn't necessarily going to just keep the Cultural Revolution and the mass insanity going forever. And so, so, yeah, the Japan thing worked extremely well. It was the only country in the world doing it. But then it had some hidden problems with it. And, you know, there's, there's always a part of me that, that thinks something that went wrong in the US is that we de-stressed manufacturing a great deal.

• 1:01:20Speaker 01

  We have these incredible trade deficits, current account deficits, which doesn't seem like that good a way to run the economy. But the problem we don't have that, that Japan ran into is there's some way where the US has to compete much less directly with labor in other countries. And people in the US, they're basically in these non-tradable service sector jobs. And there's, there's some way in which the US is the most immune from, from global competition, which is good and bad things to it.

• 1:01:55Rick Rubin?

  How important is manufacturing for any country? Can you be a successful country without a manufacturing base?

• 1:02:04Speaker 01

  It's very important in some dimensions. And the disturbing thought I have, and again, it's very multidimensional, but I'll simplify this, where maybe it's less important economically than you think, and it's more important militarily than you think. And so if you build ships and you have to compete with people in South Korea or in China or Vietnam, you're never going to make any money building ships. And so it's going to be economically not great. But then if you can't build ships in general, it probably gets very, very expensive to build ships only for your navy.

• 1:02:47Speaker 01

  So yeah, so the, I don't know, the crazy intuition I have is maybe, maybe in a global world where there's sort of these massive differences in incomes and standards in different parts of the world, globally traded manufacturing can be quite a tricky economic proposition, but it's very important militarily. And then that's where there are all these extremely odd dynamics in the relationship between the US and China. We, you know, economically, it probably is really efficient to have, I don't know, the iPhone factory in Shenzhen. If you try to move that to Wisconsin, it wouldn't work and people wouldn't work for $2 an hour and they wouldn't be as perfectionist.

• 1:03:32Speaker 01

  And there's all these ways, it just wouldn't work at all. And then there is this question, you know, how much are we losing this geopolitical battle with China as a result to?

• 1:03:43Rick Rubin?

  How much is the markup on iPhones?

• 1:03:48Speaker 01

  It's a crazy amount. I don't know. My intuition is it's something like 50%. And so Apple makes incredible profit margins. And of course, it's all the services that get layered on top of just the handset itself. It's probably wrong to simplify it into just two companies. But if you have Apple, which is sort of the design and marketing firm, and you have Foxconn, which is the, you know, employs 2 million plus people and is sort of the manufacturing, assembly firm. The market capitalization of Apple in 2011, when Steve Jobs passes away, is something like 200 billion. The Foxconn market capitalization is something like 100 billion. And you think of it as a, like a duopoly of sorts.

• 1:04:31Speaker 01

  We have the design branding firm and you have the assembly manufacturing firm. And one's worth twice as much as the other, but they're sort of roughly same ballpark. You fast forward to 2024, 13 years later, and I want to say Apple is, you know, about 3.5 trillion and Foxconn is barely over 100 billion. Apple's captured a lot. And what's weird is how little Foxconn's been able to capture it. And then the qualifier to this is maybe there are more bespoke parts that are further up the supply chain in China. So maybe the people who make the machines that Foxconn uses to assemble the iPhones, maybe the machine makers really make some money. Or maybe there are other parts of the supply chain where people make money.

• 1:05:17Speaker 01

  But if you simplify it into just those two companies, it's simply a mystery to me why Foxconn hasn't been able to extract slightly more value.

• 1:05:26Rick Rubin?

  Tell me about the difference between mysteries and secrets. It's from the book.

• 1:05:34Speaker 01

  Well, probably these words are all like a little bit misused, but the way I use it in the book.

• 1:05:40Rick Rubin?

  Yeah.

• 1:05:41Speaker 01

  A mystery is something that is just unknowable. Maybe there's some metaphysical mysteries about the nature of the universe that are. Deeply unknowable. And then a secret is something that's not yet known, but that is humanly knowable, that we can figure out. And there's somebody who'll be a first person to figure it out. And maybe, you know, it's a fuzzy line with a mystery, with a secret. But from the point of view of the 16th century, you know, the map of the world, it was still a mystery because no one knew it. But then, at some point,

• 1:06:21Speaker 01

  you have these explorers, and you can be the one to to figure this out. So so geography and exploration, it was a thing to do. And then, of course, you know, at some point, you know, the whole world's been explored, and that's not a place to even look for for secrets anymore. And then the question is always, what are things in the 21st century that are analogous to Christopher Columbus discovering the New World in, you know, 1492? What are the things that nobody knows, but somebody might be able to figure out?

• 1:06:55Rick Rubin?

  Because those are the breakthroughs that could be

• 1:06:57Speaker 01

  And that's where I think you will have fantastic breakthroughs, fantastic businesses, or at least, yeah, you're gonna change our society, change the world.

• 1:07:06Rick Rubin?

  Tell me about the first internet bubble popping.

• 1:07:12Speaker 01

  It's always hard to even tell these things in retrospect, 24 years later. But

• 1:07:20Speaker 01

  the NASDAQ peaked at something like 5,000 in March of 2000. It had probably gone up from 2,000 to 5,000 in, you know, less than 18 months. And then it crashed something like 80% over the next two plus years, and then gradually built its way back. And then, you know, all these individual stocks you can describe. So I think there was a pre-split adjusted Amazon was $113 a share in December of 1999. By October of 2001, it was down to five and a half bucks. Amazon went down 95%. And then, if you'd held on to it, you'd get back to this December 99 level at the end of 2009. So it took a decade

• 1:08:03Speaker 01

  just to get back to where you started. And then if you'd held on to it for another 15 years, you would have made 30 times your money. So you would have made 30 times your money from December 99. But if you bought it at the bottom, You would have made 600 times your money. Because it went down by 20, into 1/20th, then it went up 20x and then another 30x. And so, one cut I've had on the bubble of 99.

• 1:08:30Speaker 01

  And this is a little bit retrospective, but I've had this for a while, was that in some sense, 99, March 2000, was both a peak of insanity and a peak of clarity. So there was a psychosocial mania and, yeah, people had just lost their minds. And then, at the same time, they saw with perfect clarity that the internet was going to take over the world, that the new economy was going to replace the old economy. And so, there was some way in which this was, you know, an extreme peak of clarity. And then, you know, B2C was, you know, business to consumer, and B2B was business to business. And then, you know, the post-bubble loss in 2001, 2002 was B2C meant back to consulting,

• 1:09:14Speaker 01

  and B2B meant back to banking. And in some ways, you can think of the Bush 43 era, which starts right after the bubble bursts. And we went from, you know, went from BRICs to clicks in the 90s. And then we went from clicks to BRICs in the 2000s, real estate, or BRIC, B-R-I-C, Brazil, Russia, India, China, the sort of old economy, emerging market, story. And there was some way in which, it looked like we went back to sanity in the 2000s, but it was just, maybe that was just a giant detour for eight years, and then it was only the last 15 years that you had this slow build, and what happened really did. So.

• 1:09:56Rick Rubin?

  Did it have to happen?

• 1:10:00Speaker 01

  I don't think it had to happen. I think it was a very natural thing for it to happen, because... If you can see that the internet is going to take over the world, but not too quickly.

• 1:10:12Rick Rubin?

  Yeah. It was more a question of timing.

• 1:10:15Speaker 01

  There are some catastrophic approximations that come with that. And so you can, do you value it like it's going to dominate the whole economy? Or do you value it like a bunch of it will go broke first? Or, you know, the internet might take over, but the specific companies might be different. So Yahoo and eBay might turn out not to be as dominant as they appeared. So the companies might, might change. Facebook didn't yet exist in 99. Google existed, but wasn't public till 2004. But yes, I'm tempted to give it that gloss because it was such a formative period for me. Because PayPal was 98 to 2000.

• 1:10:52Rick Rubin?

  And you lived through it.

• 1:10:53Speaker 01

  We lived through the bubble and the bust.

• 1:10:55Rick Rubin?

  And survived.

• 1:10:55Speaker 01

  And we survived. So it was probably overly formative. And so I probably think about it too much. But the 2024 cut I have is maybe AI is like the internet in 1999, where it's real, it's very big, it's going to change things. And it may, may still be a completely crazy bubble.

• 1:11:18Rick Rubin?

  Yeah. Tell me about Silicon Valley bank crash.

• 1:11:21Speaker 01

  You know, Silicon Valley is the only sector of the US economy that is extremely under leveraged, where there's very, very little debt. You know, debt is always this more complicated product in a way than equity. And one way to think about it is that if you're a tech company, early on, it's very risky. So you invest as a venture capitalist and it's in equity. And then later on, if the company succeeds, it's so wildly profitable, it never needs to borrow any money. And so I believe the tech sector as a sector is one where the companies have way more cash than they owe money in bonds or debt. They're very, very under levered as companies. And almost every other sector of the US economy, you know, debt is a big part of the corporate structure.

• 1:12:07Speaker 01

  It's a big part of your structure of a bank has debt. Manufacturing company has debt. There's sort of all these ways you have cash flows and you can borrow against the cash flows. Real estate, of course, is, you know. Mostly dominated by debt with typically a much thinner tranche of equity. And so Silicon Valley is this unusual place that's extremely light on debt as a sector. And then sort of maybe a cultural gloss on it is you have a bank that's called Silicon Valley Bank and it tries to be part of the Silicon Valley culture. The self-image, I believe, at Silicon Valley Bank was that they were not bankers at all. And, you know, we don't know anything about debt. You know, we're like these tech companies.

• 1:12:50Speaker 01

  We're going to copy our customers and we're going to be as clueless about debt as our customers are. You know, even though Silicon Valley Bank, it sounds like it's a technological bank. Maybe it should roughly have the connotation, I don't know, Bank of Nigeria or something like this, where it is, it is a completely clueless bank. And you know nothing about the stuff. You don't know what's going on. And so that's, that's roughly my understanding of why it was run in this unusually risky cowboy-like way, because they were copying the tech companies and it would be a low status thing in a tech company to understand debt too much. And somehow, that should not have been true on the level of Silicon Valley Bank, but

• 1:13:35Speaker 01

  I think, I think they

• 1:13:37Rick Rubin?

  They got swept up in the name.

• 1:13:38Speaker 01

  They wanted to be like Google or something like that.

• 1:13:40Rick Rubin?

  Where do you think is likely to be the next Silicon Valley on the planet? Can there be another?

• 1:13:50Speaker 01

  Man, this is, this is like the multi-trillion dollar question. You know, there are obviously all these countries that would like to have it or states that would like to have it. It's been very, very hard to engineer. You know, there's a strange history of Silicon Valley where a lot of it came out of defense spending in the 50s and 60s. And then somehow it was also part of the hippie counterculture and then, at this point, is pretty divergent from both of those, I would, I would say. I have for a long time been in the camp that there should be ways to build tech companies outside of Silicon Valley. And then it has also been quite difficult. I remember a talk I gave at Stanford back in 2005.

• 1:14:35Speaker 01

  And it was entitled, Where Do You Find The Next Google? So it's a search problem. We're searching for the next Google as an investor. And my answer was, you know, it's pretty hard. It's a very hard search problem. It's very valuable. I think there is a 50% chance you will find it within a five mile radius of this auditorium where I'm giving the talk, which I'm not getting the numbers right, but I want to say is like 1 millionth of the surface area of the planet.

• 1:15:01Rick Rubin?

  That's wild.

• 1:15:01Speaker 01

  So I'm reducing it by six zeros.

• 1:15:03Rick Rubin?

  Wow.

• 1:15:03Speaker 01

  But there's a 50% chance you will find it within a five mile radius of this talk I'm giving at Stanford in 2005. And then in retrospect, you know, I would say the next Google was Facebook and it was located 1.7 miles by bike, 1.8 miles by car from where I gave that talk.

• 1:15:21Rick Rubin?

  Incredible.

• 1:15:22Speaker 01

  I was already involved in it. I didn't think of it that way at the time at all. And then, you know, the updated version that I've been tempted to give over the last decade is there's less than a 50% chance it's within a 100 mile radius. There's a better than 50 50 chance it's somewhere outside of, outside of Silicon Valley. I still don't know if that is true because there are these network effects. There's this know-how. There's this capital in Silicon Valley. There's a scale and there's an argument that maybe it gave Silicon Valley a small but decisive advantage. So, you know, the internet was supposed to get rid of the tyranny of place. And yet it all happened to first approximation.

• 1:16:06Speaker 01

  I mean, you had Microsoft and Amazon were in Seattle, but to first approximation, so much of it happened inside of, inside of Silicon Valley. There's an argument I've made that maybe at some point, the network effects can shift from being positive to negatives. You have positive network effects where you have the wisdom of crowds or you're connected with all these people and you have these positive externalities and you communicate and you get ideas. And then maybe there's a point where network effects become negative and the wisdom of crowds becomes the madness of crowds and it's dominated by group think or political correctness.

• 1:16:39Rick Rubin?

  That would be the argument against the universities now.

• 1:16:42Speaker 01

  Against the universities or even, you know, maybe, maybe the Silicon Valley version is that it's gotten so expensive and so competitive that you have more space to be creative in LA or Austin or, or somewhere very different. But then I don't know whether that's just wishful thinking on my part or or deep reality. There's probably a lot of it that is specific to the vectors of technology. So tell me what the next technology will be, and maybe that tells us something about the geography. So consumer internet was this thing where small differences made an enormous difference. You had to be extremely fast. And so the the sort of advantages Silicon Valley had were of decisive

• 1:17:22Speaker 01

  importance. Maybe in 2020, 2021, it looked like crypto was going to be this next big thing. And there was something about crypto that was decentralized and also decentralized geographically. And so people could build the crypto protocols, and some ways it was better to do it outside the US. So if crypto would have dominated all of tech, maybe that would have been a more distributed type of technology. We fast forward to 2024, it looks like AI is the is the next technology. And that one seems concentrated in a way that I

• 1:18:02Speaker 01

  find disturbing inside Silicon Valley. The the big AI companies are Google, Facebook, Nvidia, of course, with the chips in Silicon Valley, OpenAI, Anthropic, the big large language models, new companies, startups, pure companies are all in Silicon Valley. The AI engineers are all in Silicon Valley. So the geographic mapping on AI is that it's perhaps even more concentrated in Silicon Valley than the internet was, let's say, in 1999.

• 1:18:33Rick Rubin?

  How has moving from Silicon Valley to Southern California impacted your life?

• 1:18:40Speaker 01

  And Southern California is such a more pleasant place to live than Northern California. And the weather is better. You know, the the real estate is somehow vastly better. Silicon Valley is probably the worst real estate place in the world, if you sort of adjust for wealth. You know, like, if someone makes X dollars, what quality of a place do they live in? And it is probably the absolute worst in the world. There are some pieces of it I do miss. I think, you know, I think there's a way You have a lot of really talented people in Silicon Valley. You know, there's a part of it that felt to me like it was exhausted

• 1:19:22Speaker 01

  and had gotten more on the madness of crowds and the wisdom of crowds side back in 2018, when I moved to Southern California. But it's complicated. I don't think it can be fully replicated.

• 1:19:34Rick Rubin?

  What's the etiquette in Silicon Valley between the companies and players?

• 1:19:44Speaker 01

  I think the etiquette is better than it is in the entertainment industry. I think in both industries, people pretend to be nice to each other. And I think in Silicon Valley, the niceness, the trying to find ways for people to work together are... I wouldn't say it's all fake in Southern California, but it's fairly authentic in Silicon Valley. You never know who's going to succeed. There's been a part of it that's been this massive gold rush for decades. And if you're too zero-sum, if you get too difficult a reputation,

• 1:20:25Speaker 01

  that seems like a very, very suboptimal strategy in a Silicon Valley context. I do think probably there are ways it changes with the scale of the players. And so the Silicon Valley of the 1990s, you know, it wasn't all small companies, but it was not dominated by a really big tech company. The one big tech company of the 90s was Microsoft, but it was far away in Seattle. And you now have these companies that are on a truly, truly enormous scale. And I think probably the social graph at a place... I'll pick on Google, at a place like Google. It's a very internal world. You know, most of your friends will be other people who work at Google.

• 1:21:10Speaker 01

  Maybe Apple's even more this way. And it's somehow...

• 1:21:13Rick Rubin?

  It's a bubble.

• 1:21:13Speaker 01

  It's somehow surprisingly less connected to the rest of Silicon Valley. In that sense, maybe Southern California, maybe the entertainment industry in Southern California actually is more network than Silicon Valley is at this point.

• 1:21:29Rick Rubin?

  What is Palantir?

• 1:21:32Speaker 01

  Well, I'm always tempted to just sort of give a J R R Tolkien literary reference where it's this round orb originally built by the elves. It's this very powerful device that enables you to make sense of things in faraway places and maybe even different times. You know, it's a very important in the Tolkien Lord of the Rings. It's one of my favorite books as a kid. It's a very important plot device for all sorts of reasons I could go through. But it ultimately gets used for good, even though it can also get misused. Yeah, I was this Tolkien fan and it was this company we started in 2003, 2004. It was all these contradictory motivations we had.

• 1:22:14Speaker 01

  It was sort of a libertarian, deep state adjacent company to help the CIA find terrorists in ways that wouldn't violate civil liberties as much as they would if they were just relying on Luddite, low tech, highly intrusive airport security machines and making everyone take off their shoes and stuff like that. And that was sort of the founding vision. It was kind of, yeah, sort of this James Bond type company that

• 1:22:43Rick Rubin?

  Is it still that?

• 1:22:45Speaker 01

  It's a decent amount of work with intelligence agencies, with the military. Probably about, you know, roughly half the revenues are sort of government related, which is, I think, always a very difficult place to work. But I also think it's sort of an important one. You know, I'm sort of this anti-government libertarian. And so the glass half empty version is you should never work with the government because it's endlessly frustrating. And then the glass half full or glass one tenth full version is that there is so much room for improvement and there are so many ways that maybe the government is the single institution that could be most improved by technology. And then, you know, I always define technology as doing more with less.

• 1:23:30Speaker 01

  And so the Palantir version would be, can we have more security with less intrusion into civil liberties? And that's, that's what a technological solution would, would look like. Whereas, you know, the, the standard way these ideological debates are grooved is, you know, more with more, which I'll say would be the draconian

• 1:23:53Speaker 01

  Dick Cheney, security state versus the less with less, the 20th century Luddite ACLU approach. And my view is you had to try to find a third way. I worry that if you frame it as the Luddites versus the totalitarian tech people, you know, the totalitarian tech people will, Cheney will always beat the ACLU after you get a terrorist attack. And so, yeah, part of the pound here, hope is that we can, you know, it was in the aftermath of 9/11 that we started it. And the hope was we will stay a free country or relatively free country. You know, it's important to prevent these attacks from happening because after they happen, the civil liberties always go out the window.

• 1:24:38Rick Rubin?

  Tell me about the connections in general between the government and Silicon Valley. How deep are the tides?

• 1:24:46Speaker 01

  I think historically, they were very deep in the 50s and 60s. I think they are quite decoupled in general in the post-Cold War era. Let's say post 1989. Washington DC and Silicon Valley are very different places. They feel very different. You know, DC is sort of this functioning, middle-class city from the middle of the 20th century. That's sort of, it's the land, the time for God, something like this. And DC is too focused on government. You know, Silicon Valley, even with all the liberal political biases, the center of energy is completely on the private sector. You know, it's fairly low on the civic side.

• 1:25:31Speaker 01

  Even in extremely liberal San Francisco, it's just, you know, the city governance doesn't work. Nobody cares about it. Nobody thinks about it. So somehow, politics, governance, getting these things to work is something that people in Silicon Valley don't think about very much. You can almost say that this escape into virtual reality, into the internet, to the world of bits, you know, the world of atoms got regulated and governed. And it got governed and overregulated, especially in California. And so, in a way, the natural thing. For an entrepreneur or someone who wanted to make a difference in the world to do

• 1:26:13Speaker 01

  was to escape into this world of virtual reality, into the world of bits. Or, you know, Southern California is more entertainment. And all these parts of our world that interfaced with, I don't know, city zoning laws and building a house or, you know, the schools or the, all these things have maybe gotten more neglected in California than elsewhere.

• 1:26:36Rick Rubin?

  What sources do you trust for news?

• 1:26:40Speaker 01

  You know, I have a Bloomberg terminal, so I end up getting a lot of my news from there. I always think I should not trust them at all because it is like just this official center-left establishment voice. You know, I get physical copies that still of the Wall Street Journal and the New York Times. I think there's sort of all these interesting ways to, to read the New York Times where it's like, you know, there's probably some way to read Pravda. And so I, and probably this is too confident, but I trust my ability to decode the New York Times and to actually figure out things about the world from the extremely distorted way they talk about it.

• 1:27:21Rick Rubin?

  What's the most controversial idea you believe?

• 1:27:26Speaker 01

  Probably way too many, but I don't think ideas always being controversial, I certainly don't think that makes them correct. I do have this intuition that when there are things we can't talk about or that are, that are somehow blocked, it doesn't necessarily make them right, but there's, there's something about those things that's interesting to think about. But yeah, I don't know, I don't even know what's, what's controversial at this point. The COVID vaccine, I mean, I got vaccinated three times and I don't think I should have gotten vaccinated. I don't think it works in any way. It probably has all these, these bad side effects. And three, four years ago, that seemed too crazy and too unscientific for me to question the vaccines. And now that doesn't even seem controversial.

• 1:28:11Rick Rubin?

  Yeah. What have been the most interesting things you've seen in anti-aging? Going forward, what are you most excited about regarding anti-aging?

• 1:28:25Speaker 01

  What's crazy about it is how we're somehow not trying enough. And it's somehow, it's a very uncomfortable topic because, you know, we're probably not making progress quickly enough that the two of us will live forever. And then psychologically, there are all these ways. It's so uncomfortable to think about, but it's crazy how we've almost given up on making progress. And so, yes, I think anti-aging, biotech generally, it should be this area where there should be so much innovation. There's so many things, you know, we should be able to do. And when I look at it, my frustration is, man, we've made some progress in cancer,

• 1:29:09Speaker 01

  really modest, we had almost no progress on things like dementia, 40 or 50 years. And I don't think these things are unsolvable mysteries. I think there should be ways really to make progress. And so, I always find it shocking that we're as stuck as we are. You know, I shifted to starting to use some of the Ozempic, Manjaro things a year and a half ago. It seems powerfully effective. You know, there probably are all sorts of side effects that, I don't know what the trade-offs are. But, yeah, I think there's probably some very basic stuff like, you know, getting your diet under control that we can do. It's not a panacea, but it's a big lift.

• 1:29:54Speaker 01

  And then I'm always interested in the psychological question, what, you know, if eating healthy or not eating too much. Diet means both a healthy diet, but a non-excessive diet in particular. If it's that straightforward, why are we so blocked from it? And then the meta-level psychology theory, I often wonder, is where you know what you're supposed to do, and that almost becomes the excuse for not doing it.

• 1:30:19Rick Rubin?

  Yeah.

• 1:30:20Speaker 01

  You know, yeah, there probably are some esoteric secrets that need to be discovered and that could be discovered that we're stuck on. And then there is, I think, a lot of relatively basic things that we kind of know and just are, I want to say psychologically blocked.

• 1:30:38Rick Rubin?

  In the book, you talk about diversification in business as a bad strategy. Tell me about that.

• 1:30:47Speaker 01

  Well, it was meant in the context where it's not a perfect metaphor, but I often think a good startup is it's kind of like a sports team. And it's different from a sports team because it's not like a set game you're playing. So it's but for a sports team to be effective, it really is this whole is greater than the sum of its parts, the people, there's sort of these deeply complementary skills. You respect one another. It's not everyone's a clone, but there's a lot of complementarity. You have vigorous debates, but then you also find a way to to get in sync and on the same page and move on. And so it's not an endless debating society.

• 1:31:31Speaker 01

  Yeah, if you define diversity as difference for its own sake, that's probably not quite the right metric.

• 1:31:43Rick Rubin?

  And in investing also, you talk about not having a diverse portfolio, but focusing on the area that you think is the area of growth.

• 1:31:51Speaker 01

  Yes, I always think there aren't that many great ideas. And, you know, you could say here 20 pretty good ideas, and maybe there's a nihilistic reality where they're all pretty good, but you can't differentiate them. And then you should invest in all 20. But I think that's too nihilistic. And maybe maybe the truth is you can actually figure out here are the one or two that are the best, and you should concentrate on those. And it's uncomfortable because it feels really risky. But actually, the synonym, maybe diversification sounds good, but it's really synonymous with nihilism or not thinking.

• 1:32:34Rick Rubin?

  Hedging your bets.

• 1:32:35Speaker 01

  Yeah, well, it sounds like you're hedging your bets, but you're sort of being willfully ignorant or oblivious, and you actually know more than you think you do. And you just somehow bring that out. You know, in the corporate culture, there are definitely ways that I think having vigorous internal debates are very important. And then there also are ways that It's good for people to be aligned on a product or some transcendent mission. Early on at PayPal, this is sort of a silly example. We like to say that we were a Star Wars, not a Star Trek company. And Star Trek is sort of communist because you have the transporter and you have no material shortage and there's no money in the world of Star Trek.

• 1:33:20Speaker 01

  So we have a new payment system. And then Star Wars starts with Han Solo and he needs to get some money to pay off these debt COs. And we were a Star Wars company, not a Star Trek company. Maybe it's not necessary for everyone to like Star Wars more than Star Trek.

• 1:33:36Rick Rubin?

  But it worked.

• 1:33:37Speaker 01

  It worked and it would have been odd in the PayPal context if someone was a crazy Star Trek fan.

• 1:33:43Rick Rubin?

  Do you invest in anything outside of tech?

• 1:33:47Speaker 01

  I end up doing a lot of smaller investments where I just find it interesting what the person's doing or I think it's worthwhile. But yeah, the place where I'm really anchored is tech. At times it feels extremely overvalued, but I don't know what else moves the needle. And so I keep having this diversification thought that I, on some level, should diversify out of tech. In theory, that's the diversification portfolio. And then when I try to concretize it, I have no idea how to do it. And it's very likely it would be much worse. And so I end up never... In theory, I should do it in practice. You know, I don't.

• 1:34:28Rick Rubin?

  Can hardware be tech?

• 1:34:31Speaker 01

  I always think technology simply means a place where you're innovating and where you're doing new things. So if we sat here in 1967, the year I was born, technology would have meant computers, but it would also have meant the green revolution in agriculture and it would have meant supersonic aviation and rockets were tech and new medicines were tech. And that sort of reflected a society where there was progress and advancement on many different fronts. And then an odd thing that's happened the last 30 years is that tech has sort of collapsed to becoming synonymous with IT, with software bits, internet, mobile internet, and even semiconductors.

• 1:35:14Speaker 01

  Maybe there's been a return to that with the AI chips. But for 30 years, we're seen as somehow powerful to the software tech story. And so I, yeah, I would hope that the definition of technology would broaden out again, because that would be indicative of our society advancing on many fronts versus this incredibly intense but incredibly narrow cone of progress we've had around the world of bits, where the world of atoms has been sort of inert, regulated, too hard to do things in.

• 1:35:50Rick Rubin?

  Who do you see yourself in competition with now?

• 1:35:54Speaker 01

  I'm always bad at these self-reflective questions. You know, I don't want to ever be in competition with anybody is my reflection. There was a zero to one essay that I had where, you know, it was competition is for losers.

• 1:36:10Rick Rubin?

  Yeah.

• 1:36:10Speaker 01

  And if you want to compete like crazy, if you want Darwinian competition, nature bare, red and tooth and claw, you should open a restaurant. And, you know, capitalism and competition are opposites. Capitalism is about accumulating capital. A world of perfect competition is a world where all the capital gets competed away. You know, and I think from the inside, you're not always perfectly self-aware of these things. But to the extent I am, you know, I try to avoid it like crazy.

• 1:36:42Rick Rubin?

  That's great.

• 1:36:43Speaker 01

  The people I think of as extremely successful, as more successful than myself, you know, are the ones I want to compete with the least. So I don't know. The person on this planet I would want to compete with less than anybody would be Elon Musk. That just sounds like a recipe for losing.

• 1:37:01Rick Rubin?

  Yeah. If competition leads to competing away profit, how does the luxury and fashion market fit into that idea?

• 1:37:15Speaker 01

  I don't know much about it. And I think there's this very mysterious thing called brand, which when you get a brand, you get some kind of pricing power. And then it is a somewhat mysterious process, how brands get created or strengthened, you know, get monetized. Occasionally, they also get eroded. And for the most part, I think of fashion as centered on this extremely mysterious thing called branding. It obviously, on some level, it works. And on some level, I suspect there's a, there are some interesting secrets that people who succeed in that industry

• 1:38:00Speaker 01

  could say about what they did or how it worked that are very, very divergent from the official story. And then, for good reason, they would not tell us those secrets because that probably would be the surest way to erode it. And then there's probably a time-dependent thing where there were ways to create new brands in the 70s and 80s. And, you know, it's maybe very, very different today.

• 1:38:28Rick Rubin?

  Tell me about the age of most of the founders of successful unicorns.

• 1:38:34Speaker 01

  I think all these things are massively contested. And probably are all these different ways to skew the data, even on something as seemingly basic as the age of the founder. I'll do the pro-young and the anti-young person argument. So I think the consumer internet companies were founded by people who were quite young, you know, typically in their 20s. I was 31 years old when, you know, I was one of the PayPal co-founders. And I think 31 was relatively old to start one of those businesses. The other three people I started PayPal with were 23. Maybe that was a little bit on the younger side.

• 1:39:17Speaker 01

  But let's say, you know, mid-20s was probably a good, reasonable age. Now, the anti-young person thing that I believe is that There is something where an entrepreneur, you're sort of good at a range of different things. You have people skills. You have ideas about where the world's going. And a lot of these skills actually are ones that get developed over a long time period. And the great entrepreneurs at 45 are better than at 25. You know, I don't know how old Zuckerberg is now. I think he's maybe he's 43, 44 years old. And I think a 44 year old Zuckerberg is way more talented than a 19 year old.

• 1:40:02Speaker 01

  And so in that sense, the 44 year old is better than the 19 year old. But he's not available. He's busy with Facebook. And so there's a selection effect where if you started a great company, most of the time it made sense to keep running it. It's the PayPal story is actually sort of unusual one where it got short circuited and all these people started new companies, started over. And then if you compare the 19 year old Zuckerberg with, let's say, a 44 year old professional CEO you would bring in where there'd been four or five semi failed companies in the past. That's much less clear. So I think, I think there's an, yes, I think empirically,

• 1:40:45Speaker 01

  it seems to favor people who are quite young. But maybe it's just a selection effect.

• 1:40:51Rick Rubin?

  Why do you think boards for public companies tend to like to remove founders and put in operators in their place?

• 1:41:01Speaker 01

  I don't know if it happens as much in Silicon Valley anymore. This was certainly the way Silicon Valley operated in the 80s, 90s. The, in the 90s, the generational story was it was Gen X, people like myself that started the companies, the 90s. And we got replaced by boomer CEOs. And so there was sort of a, you can describe it as, yeah, this professional management versus wild eyed founder. Or you can describe it in terms of some kind of generational warfare in the 90s. You know, at this point, it not absolutely, but it has, somehow the balance of power in tech has shifted more to the founders. You know, they often get.

• 1:41:45Speaker 01

  Voting shares where they have more voting control, there's a lot that's worked to them. Even when they don't have voting control, I think Elon owns like, I don't know, maybe 13, 14% of the Tesla shares. And in theory, could be voted out by the other shareholders. But then, you know, there's been a lot of volatility that came with Elon. But you'd be out of your mind to get rid of him. And that's, that's the story that has tended to dominate. You know, there obviously are still some exceptions. At some point, the board got rid of Travis Kalanick at Uber. Not sure that was a good idea. Yes, there were ways, he was probably a very uneven person.

• 1:42:27Speaker 01

  And still, I wonder if they would have been much better off finding a way to keep him. But in public companies, you can think of as almost extensions of the government. This is the way I always describe it when a company goes public. It's private, it's like private sector, public is like public sector. And when you go public, you have an IPO, an initial public offering, and you sell shares to the public. And it's not just sophisticated, wealthy, small number of sophisticated, wealthy investors. It is your 70 something grandma, and she has to be protected by the SEC. You have to have more disclosure. And then the CFO, you know, has to have perfectly accurate numbers.

• 1:43:10Speaker 01

  And if he doesn't, or she doesn't, you go to jail. So the CFO is sort of this important quasi-government actor. The accountants are, the lawyers are super important, the HR department, you know, is important. And in some ways, the board has this quasi-governmental role. And again, the private sector is probably more geared to

• 1:43:35Speaker 01

  Taking crazy risks.

• 1:43:36Rick Rubin?

  Move fast, break things.

• 1:43:37Speaker 01

  The public sector is more geared to risk reduction. And there's some kind of balance, but the balance shifts radically. And so I, yeah, I, and it's a little bit of an exaggeration, but I, yeah, I often tell CEOs that when they take their company public, they should think of it as in part a government takeover that's happening. Like you're empowering the lawyers, you're empowering the accountants, you're empowering all these people who are quasi acting on behalf of the government or on the rules. And they will have more power. And then there's some other set of people who maybe are maybe the more creative people, the engineers, the product people will have correspondingly less power.

• 1:44:15Rick Rubin?

  What do you think the government's good at?

• 1:44:19Speaker 01

  Let me frame it more negatively. I don't think pure capitalism is good at everything. And I don't think every problem can simply be solved in a corporate context. And then, you know, there are, I don't know, there's the example I gave with manufacturing companies might not be great companies, but they're important if you want a military. Or there are all these things that have the nature of a public good, but that wouldn't necessarily be provided by the market. And so I, I'm always inclined to these deep government critiques where it's really inefficient. It often ends up being political and the people who are empowered are the political

• 1:45:04Speaker 01

  actors and not the, the technocrats or not the people who are necessarily the best at doing these jobs. And then I suppose the pro-government argument is, is that we often don't have that great an alternative to the government. If we're going to have a military, the government has to be heavily involved. It can't be probably just a pure private sector thing. And there probably are ways governance can work better and less well. There, you know, there probably are states in the U.S. that are better governed, that are worse governed. There are states where, you know, it's, it's pretty efficient. There are states where it's very bloated. So I think, I think there are sort of a lot of gradations that, that one can look at.

• 1:45:49Rick Rubin?

  How did you get involved in the Hulk Hogan lawsuit?

• 1:45:52Speaker 01

  I have all these sort of complicated thoughts about media and the nature of media. You know, it's extremely powerful. It's important as a communication channel. It's an important vector of technology, radio, television, internet. And then I think there also are dimensions of it that are not purely good in sort of a

• 1:46:20Rick Rubin?

  Bad acts.

• 1:46:20Speaker 01

  First Amendment absolutist sense where speech is always good, more speech is always better. And there's sort of a part of it that has, you know, this is always where I have this sort of Girardian scapegoating intuition where it's probably a celebrity part of the media, but there's a political part where part of it is to put people on pedestals and to raise them up in order to tear them down. And that it is kind of this deification and scapegoating cycle that the media's kind of engaged in it. And you can say that, you know, a startup founder like myself where the media helps

• 1:47:02Speaker 01

  PayPal in important ways when we were getting started, or if you're a Hollywood celebrity and the media, you know, is essential to helping one break through. And then there's, there's some point where we have to find some way to talk about that and also to talk about the ways in which it can become extremely resentful, destructive, and that it is sort of like this, like, almost like a, like a hate factory or a scapegoating machine. And then I think there were new media forms that this also took on. Gawker Media, you know, it started in the early 2000s as a kind of transgressive, gossipy blog.

• 1:47:46Speaker 01

  And it was, it was very powerful because it looked like it had this sort of authoritative, objective voice, even though on the psychology of it was just these, you know, extremely angry, underpaid, deranged writers. It would be wrong to say they were all individually sociopathic, but I think, I think on an institutional level, it was deeply sociopathic. And then there were sort of You know, there were all these ways I ran into even in the tech industry, which again is not, you know, where there's a media dimension. But the idea had never been that, you know, it was mainly about the personalities,

• 1:48:29Speaker 01

  the founders or these larger than life characters. Or that, you know, if you were the CEO of a tech company, you were making a different trade off from being an A-list celebrity. And there was some idea that you still should have had some privacy or something like this. And, uh, yeah, there were all these ways that, uh, you know, we started in Canada, this, you know, very, this very toxic Gawker blog. And it went after very, you know, probably one of my first friends that went after was Sean Parker, who was the Napster guy early on the Facebook board. And then there was a number of other people, ways they went after, there were ways they went after me. And then there was always a sense there was nothing you could do.

• 1:49:11Speaker 01

  You know, it was basically if they're beating up on you, you're supposed to bury your head in the sand and hope they get tired and move on to beat up on someone else. And at some point, I don't know, I sort of started to really think, isn't there something you can do? And, and then, you know, got pulled into financing Hulk Hogan and the litigation against Gawker. And, you know, I think Aaron, my friend Aaron De Souza, who ended up being sort of the day to day mastermind of the Gawker litigation. And the way I think he initially convinced me to do it was something like, you know, I made some categorical argument that was, it felt like there was nothing one could do. And then it was some triggering thing.

• 1:49:53Speaker 01

  He said like, Peter, do you really believe there's nothing you can do? And this sort of appeal to figuring out a way to regain some agency, just-

• 1:50:03Rick Rubin?

  Tired of being bullied.

• 1:50:05Speaker 01

  Tired of being bullied, tired of implicitly co-opting in the bullying of others. Because you're always hoping they move on and bully someone else.

• 1:50:13Rick Rubin?

  Yeah.

• 1:50:14Speaker 01

  You know, and-

• 1:50:15Rick Rubin?

  Doesn't feel good. None of it feels good.

• 1:50:17Speaker 01

  You know, and then we somehow, you know, what sort of thing do you go after? You don't try to use libel as the main argument because you don't want Gawker to be simply conflated with the most elite media where it's just sort of this First Amendment protection. And then we somehow stumbled early on on the Hulk Hogan case where they had, you know, posted a video of- Him having sex with his best friend's girlfriend, wife, in the privacy of their bedroom. And so that's, okay. And so it was initially not about libel, but about privacy. The point I always make is, you know, if you think about it in terms of constitutional law,

• 1:50:59Speaker 01

  there's a First Amendment, which is freedom of speech. But there's also a Fourth Amendment, which is where the right to privacy comes on. And it is against unreasonable search and seizure. And that means not just, you know, the police officer's not supposed to rummage through your whole car, your whole house, without, you know, a search warrant. And, but it also means a private actor can't do this either. And, uh, and then, you know, what does the right to privacy mean? And it means something, you know, like when you get cameras in the late 19th century, it starts to mean something different from the 18th. And then, and there's a question, what does it mean in this age of the internet, the 21st century? And, uh, you know, the case involved this core, the place where I think the Fourth Amendment should trump the First Amendment.

• 1:51:43Speaker 01

  So that's the constitutional law version. But then, yeah, I think the, yeah, the bigger story was that it's this very complicated trade-off between, you know, a media that's transparent and communication, and one that, you know, becomes sort of a sociopathic hate factory. And in my judgment, Gokul was extremely unbalanced and being more towards the latter.

• 1:52:10Rick Rubin?

  Would have been the ramifications since then. What effect do you think it had?

• 1:52:17Speaker 01

  I think it was powerful, and I think we, we do live in a very different world from, you know, 2007. Gawker outs me as gay, even though this was already generally known. And Hogan wins the lawsuit and Gawker gets bankrupted in 2016. But I think, I think we're in a very, very different world because in the world of the... 2000s, early 2010s. The media was extremely biased, but people didn't know that they were biased. And so they believed them. And today, today, the media is very biased, but it's known to be biased and therefore gets discounted correspondingly.

• 1:52:59Speaker 01

  And I think is somehow, it can still be very damaging in certain contexts, but it's somehow shockingly less effective at the, at the sort of scapegoating violence it's trying to inflict. You know, the gay version of this, I always say is that, you know, what's the difference between outing and bullying? And in 2007, when, you know, I was outed, it's this person is gay and they have a psychological problem because they didn't want us to talk about it. And then in 2015, they did a similar story on the Conde Nast CFO, it was Tim Geithner, the former New York Fed chair's brother, but it got described as bullying in 2015.

• 1:53:44Speaker 01

  Where, and bullying is a story about someone who's gay, but the psychological question gets asked, not about the subject of the story, but about the reporter writing it. And so it was, what is your problem and why, why do you have to make this such a big deal? And why do you need to weaponize this in this way? And why are you such a hateful person? And this was in some way, yeah, 2007, you know, outing was considered acceptable. By 2015, bullying was not. And that's, that's what I think was sort of the, the big cultural shift that happened, where we've come to learn more about how the sausage making in the hate factory works. And in all these ways, it's, it's working less well.

• 1:54:27Speaker 01

  So that's, I think that's the big cultural shift that happened. I'd like to tell a story where I was a big part of this, but maybe that just is sort of a way that the, the internet has matured.

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