E339: Chamath Palihapitiya Managing Partner of The Social+Capital Partnership -TWiST



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From the LAUNCH 2013 stage, Jason sits down with Chamath Palihapitiya.

Full Transcript

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Jason: Hey, everybody. Hey, everybody. It’s Jason Calacanis. This is ThisWeekIn Startups. What an amazing episode we’re having. I want to thank my friends at Sourcebits. These guys do design-led engineering. Guys and gals. I gotta stop using that gender specific language. I always gotta stop myself from doing that. Hey, listen. They do a great job. Sourcebits made me the crowdfunding app for the Launch Festival. People went crazy for that. One of the companies that launched at the Launch Festival was Social Parent. They did a great job making this great social network. Here, pull up my laptop. You can see this beautiful design. They do design-led engineering over there at Sourcebits. I don’t even have to read the ad copy because I know. Just gorgeous stuff like you see here when you’re doing this SocialParent. Which is like parents… It’s kind of like Facebook for families. They do beautiful stuff. Like when you click on this flower here it pops up and gives you… Oh you can favorite something or email or set a calendar date, do a chat or check in somewhere. Or take a picture and share it. This was all great, really great stuff on a design basis that led us to accept Social Parent into the Launch Festival. Who did all that great design-led engineering? Of course Sourcebits. Go to Sourcebits.com to begin your mobile development journey. They do great imagineering sessions with you. They walk you through the process. Just like they did with me with the Launch Festival app. That turned out great. I kind of feel like they give you discipline around your own thought process and your own business formation process. They’re a great partner to a lot of people. Here look. On my iPad I’m pulling up the SocialParent app. Look. I love when they do that thing where they explain… The tooltips kind of a thing. With a nice chalk. I love that. That’s great design. You’re now a social parent. Look how beautiful this app is. When you click this button see how it… Nice spin out. Oh, how beautiful. Look at that. Oh. I just love that animation. That’s the kind of thing that makes people want to use a product. Just really easy to use functionality. Well done to my friends at Sourcebits. Thank you to Social Parent for participating in the Launch Festival. We’ll see you… Wait. You’re not going anywhere. We’re going back to the interview. Stick around. It’s going to be a great second half of the interview. Thank you @sourcebits. Everybody remember, if you take a meeting with Sourcebits you also get to take a meeting with me. Which you can do by emailingSourcebits@launch.co. Email Sourcebits@launch.co. Take a meeting with them, take a meeting with me. All that kind of good stuff. Thank @sourcebits on your Twitter account and follow them. Just thank them for supporting independent media like ThisWeekIn Startups. Thanks Sourcebits. Back to the program.

Jason: Let me bring up our next guest who I met when I was working at AOL for about 6 minutes after I sold my last company to them. Chamath Palihapitiya is here. Where is he? Come on up Chamath. Please welcome Chamath. Chamath of course is famous because you joined a small company called Facebook when it had how many millions of members were there when you joined?

Chamath: I think it was like 30.

Jason: 30M members. So, it was a fraction of the size of MySpace. You joined the company and was put in charge of “growth.”

Chamath: Not originally. That was an outcropping basically of me doing a really poor job at everything else that I was originally assigned to do.

Jason: Oh, I see. So you failed and you went to growth.

Chamath: You know, when I first came in it was kind of like… We had a COO. That role had changed. Then I had this weird swathe of things which were like platform… Which was kind of cool. Very cool at the time. We had just launched it. It was going crazy. Some ad stuff. We had no ads. We were running party poker ads on the site. So, kind of creating some stuff around that. PR, legal, random random random. Anyways, long story short the ad products got us in a little bit of hot water.

Jason: Yeah. The Beacon.

Chamath: Beacon.

Jason: Which it seems… Is Beacon back now? It feels like it’s a better version of…

Chamath: It’s Facebook Connect. It was just at the time… I think in 2007 or 2008. Probably a little ahead of its day. We had these really interesting ideas of how we wanted behavior to occur so we went and built it. Right? Which is awesome. I didn’t realize that MoveOn.org and everybody else was going to sue us and there’d be news cameras trying to peer in the third floor of like 156 University Avenue in Palo Alto. But it was at the tail end of that that growth started to kind of… what I thought was going to go monotonically negative so you know… pitch this idea of creating this “team” called growth which was to figure out engagement and optimize around things around engagement and virality.

Jason: It’s interesting, when we had our venture capital panel today the venture capitalists were saying, “The main issue for us is not if you can come up with a good idea and a good market and put together a good team and make a beautiful product. There’s a lot of people who can do that today.”

Chamath: Yeah.

Jason: But the key is growth.

Chamath: Yeah. Well I think the thing is… When I first came down to the Valley from Canada I was part of a small little music player company called WinApp. We had like 80M-90M users. At the time that seemed like every single user on the internet. And you fast forward 10 years now and it’s amazing but now you’ve seen products get to 1B users, Facebook. And what you realize is like 10M is the new million. Right?

Jason: Right.

Chamath: And 100M is the new 10M. So there really are these massive numbers of false positives because there are so many people now wired and connected that any single random person can demonstrate enough behavior so that a whole bunch of stuff can actually have a few million users. It just doesn’t mean anything the way it used to.

Jason: Right. Getting to 2M or 3M users today is promising but if it’s not growing…

Chamath: It’s a starting line.

Jason: It’s a starting line.

Chamath: It’s a starting line to say, “OK I actually potentially could have something that could possibly maybe be really interesting.”

Jason: When you left Facebook, however many years it was later, how many millions of users were there after you left.

Chamath: I left when it was like 750M-800M. It was weird too because, you know, along the way we made a bunch of adjustments. One of them was we used to talk about growth as sort of the only primary metric. We used to talk about engagement and platform. We talked about them but almost secondarily. The outcropping of that was it was an extreme maniacal focus on this one group. So much so that even a bunch of my compensation was tied up in getting to a bunch of these numerical goals. So I had every reason in the world to stay but I just got to a point around 750-800, I looked at it and said, “Wow. We’re going to get there. It’s going to take another 18 months but we’re going to get there.” So then the real question is, am I going to sit on top of this thing? Right? Or am I going to try to get myself out of my comfort zone. Because that next 18 months I felt like I’d just be preventing the guys that worked on my team who are, frankly, better than me. They should have been running the team anyway.

Jason: Right.

Chamath: I just would have been a blocker.

Jason: Yeah.

Chamath: You know. And I wanted to do these other things. So it was kind of the right time. July of 2011 is when I left.

Jason: The maniacal focus on growth, was it at times too maniacal that that’s why we saw some of these…?

Chamath: 100%. And it was the absolute right thing to do. LIsten. Most people and most companies can barely get one thing right. We all kid ourselves about doing so many different things but there is a value to focus which is it constrains optionality and it forces you to have clarity of thinking. Because otherwise what happens is you have all these outcroppings of people within a company that can have their own anecdotal point of view about any kind of random thing. If they practice that rhetoric enough they sound like they know what they’e talking about. Then what happens is you invariably try a bunch of different things and then you end up nowhere. But if you constrain the problem to say there’s one thing. It forces everyone to be an expert or know that one thing, then speak intelligently and most importantly factually about that one thing. So you can’t bullshit and you can’t grin fuck people. When you can’t do that you actually have good decisions and you force clarity of thought. That’s hard.

Jason: At a place like America Online, which I was coming in the revolving door. You were leaving. We waved in the…

Chamath: On the way.

Jason: On the way. We did see a lot of that brain fucking going on as you’re saying where people were intellectuals and they were smart…

Chamath: Listen. That is the place… I tell people, “It was the best experience of my life in many ways because nothing worked.” So you learn all the things of what not to do. In success we will all conflate luck and skill cause that’s what happens. “I’m the best. This is amazing. It’s going up and to the right because of me.” It’s probably like 5% true but 95% of it are a bunch of extranalities that are bit hard to account for. But when things are not working you know what you did and you know that it didn’t work. You should be intelligent enough to put 2 and 2 together and actually say, “Hey. This is a great lesson learned.” You got to understand. In 2001 we were at WinApp and we were kind of putzing around and we were like, “Let’s use all the cards on file…” Cause they had like 25M credit cards… “and let’s let people buy songs for 99¢.” This sounds crazy that I’m even telling you this story cause it sounds like I’m this person that’s reliving the past but that’s what we did. They launched a download store for 99¢ and the thing worked cause it was just one click. I remember, it was like Red Hot Chili Peppers, Sarah McClachlan. There was only like 12 songs you could buy. Click, click, click, click like crack. Boom, boom, boom, boom. So we put all the numbers together and we said we think there could be something here. Maybe somebody should try to build it out. It took two years of meetings for that to get to a no.

Jason: Two years to get to a no.

Chamath: Two years of meetings to get to a no. I remember being in New York when Apple launched their store… I remember we were talking to labels and we would leave the meeting or we would be coming into a different meeting with the label and say, “Oh, yeah. Eddie Q and James Zigga were here.” You’d just here it over and over. So you knew they were up to something.

Jason: Apple?

Chamath: Apple.

Jason: They were coming.

Chamath: Then in 2002 or 2003 whenever that was you just sit there and you’re like, “How could we completely screw the pooch on this?”

Jason: Yeah.

Chamath: 25M cards on file. At the time 80M users of a downloaded media player. Another 50M or 60M user of your music product. Try as we might we could not figure out how to crack the bureaucracy. Amazing lesson learned for all the things of what not to do.

Jason: It seems like Facebook figured out how to not have bureaucracy.

Chamath: It was great.

Jason: Was that just the power of the structure that Sean Parker put in place with Zuckerberg sort of owning the company for all intents and purposes?

Chamath: I think Zuck is responsible for the culture. I think Parker was responsible for never allowing the random intentions of other people to get in the way and potentially replace Mark in those early formative years where the risk was the highest that that could happen.

Jason: So he protected Mark from getting taken out by some VC?

Chamath: He allowed Mark to become what is now a great CEO or a very good CEO and will be a great CEO.

Jason: Right.

Chamath: I think a combination of those two guys deserve credit for that. Zuck is incredible because the guy is just like black and white, unemotional, listens to a cajillion different opinions, can bring it all in and doesn’t get influenced by ego. It is a huge learning. I remember when I walked in there we used to celebrate the engineering culture. I had this real chip on my shoulder because my background was in EE. I didn’t think that coders were engineers. I’m like, “No. I’m an engineer. I’m a device physicist. That’s engineering. You’re scripting.” I remember having this massive chip on my shoulder. He helped me unlearn so many bad habits you know. Now I just see the clarity of that thinking and that culture. Now we all try to emulate it in all the rest of our companies.

Jason: Right.

Chamath: I don’t know how and where he developed that perspective but it’s amazing.

Jason: Where do you think they go from here? They have the billion users, they were able to buy Instagram. Obviously the IPO was a little bit of a clusterfuck, shitshow, clusterfuck.

Chamath: Yeah.

Jason: I don’t know exactly how… Somewhere between those two.

Chamath: Yeah.

Jason: So what happens… Obviously they’re working their way through whatever happened in the IPO. What happened in the IPO? Why did that go off the rails so poorly? Go off so poorly, go off the rails so easily.

Chamath: I could speculate cause that’s all I could do. But you know it seems to just be a combination of like people so amped up and so excited on the folks that were sort of empowered to run the process from the bankers side. You know. How you build a book. All of that stuff it’s like I think everyone got way too excited. Now, so what is left for them? It’s what every other good company that’s trying to be a great company tries to do. Which is to iterate. That’s the big difference between startups and these bigger companies is you’re in a channel where now the expectations are iteration, the expectations aren’t revolution. Right? Now when you can be a big company that does revolutionize, i.e. an Apple. You get these massive discontinuing improvements. The status expectation is iteration. Maybe there’s an outlier chance that those guys revolutionize something again. I don’t know.

Jason: Yeah. You think Google will? It feels like the YouTube purchase was pretty revolutionary, that product is. Now the Google Glass movement and obviously self driving cars. How do you…

Chamath: They’re a great company. For me, I had this really special opportunity to have dinner with someone and he said, “You know what the difference…” He listened to my vocabulary. He said, “Chamath your expectations are out of whack.” He’s like, “Every company that you think is great I think is good. Every company that you talk about fleetingly is really great. There’s only been 3 or 4 great technology companies in Silicon Valley. Apple, MicroSoft, Google, Intel. Multi hundred billion dollar market cap companies that have been around for 30+ years or will be around for 30+ years and finds a way to grow at scale. So by that definition he’s right. So Facebook is a good company. A really good company. Hopefully will be a great multi hundred billion dollar company. Ebay is like that. Yahoo is like that. So in that definition it seems to me that the real challenge is how do you figure out where are these random few things that nobody’s thinking about to do differently. To me it’s like that’s a really hard problem. Not fit for me. That’s why I cut and run.

Jason: Yeah. So you cut and ran and started a venture firm, Social Capital Partnership. I know you raised the first fund was… I don’t know, $200M, $300M, $400m.

Chamath: Yeah. It was $275M.

Jason: You took a different approach in the LPs, the limited partners. These are not… if I read it correctly in the news and what you said previously… not the CalPers of the world, not the Harvard endowments. These are high net worth individuals in general.

Chamath: When I left I felt really lucky because I felt like I worked hard, I did my best and in many ways… Maybe this is like the immigrant guilt or growing up poor and then not being poor anymore. I just felt like I got more than i deserved. This is like the inherent bag and chip on my shoulder. So then I’m like what do I do with it? The biggest thing that I felt was… I just always felt that I am reasonably good but I don’t think I’m that good. I see people everyday that are so much better than me but then there’s all these impediments. So why isn’t someone really focused on building and using technology to basically remove those barriers? Cause those are like the interesting problems of our generation. There just wasn’t enough focus on that. So I wanted to do that. But in doing that the problem is when you go and talk to traditional limited partners what they want to hear is, “Well. What was your return?” The reality is when I was an angel investor I crushed it as an investor. But I just had this massive chip on my shoulder of like, “I don’t want to prove to you how/why it’s all about the numerical returns. I took like literally $14M-$15M and I literally almost 10X’d it. I mean, I know how to invest. But that’s not the point. You know what I’m saying?

Jason: Yeah.

Chamath: The point is like, “What’s the value?” The value isn’t when you exit and you get a check. The value is what is the legacy in the tail that’s left over? So I wanted to find people that resonated with that message where… I was like, “Listen guys. Worst case I’ll beat the S&P and I’ll crush it for you.” So as an example we publish our numbers to Cambridge and Associates. You know they’ll show you it’s like you look at the S&P last year, 17%. We were almost 3 times that. So on any numerical basis we are dramatically outperforming. But that isn’t the point. I don’t want to talk about numbers.

Jason: Right.

Chamath: I want to talk about why healthcare is broken. I want to talk about all the people… all the women in this audience who could, some of you, have a gene expression for breast cancer and why you can’t get an answer for that because it’s going to cost $15K and it should cost $5. You know. Or why a lot of us graduated with so much debt… If I didn’t get lucky, frankly, I don’t know what I’d be doing cause I’d be buried under hundreds of thousands of dollars in debt. Why isn’t that problem getting fixed? Why aren’t all of us finding easier cheaper ways to get access to money? So it was just easier to find a group of individuals who are either already extremely successful and wanted to find a way to focus on those sort of like as a way to create their legacy.

Jason: Yeah.

Chamath: Or people, frankly, that wanted to use technology to work on really big problems and that narrative just resonated with them. I found it much easier to raise money from them. I also found it more credible for myself where I woke up everyday and said, “Chamath, what are you going to do? Are you basically going to fund the sale of indonesian wood bobbles on the internet or are you going to try to solve cancer?” I was like, “Fuck it. I want to solve cancer.” If I burn through all my money that I made at Facebook doing that I don’t care.

Jason: Right.

Chamath: I was born poor, I will die poor and the only thing that’s going to be left over is what is the legacy of all that cash?

Jason: Right.

Chamath: It’s not going to go to my kids.

Jason: Right about now I think your kids are crying. Will a little bit go to them?

Chamath: You know, it’s so interesting. It’s like you have kids and how do you raise kids when you’re in this weird state? I had this really great meeting a week ago with this guy David Fialkow, who runs general catalyst. He said the most amazing thing. “You’re kids only know you as you are.” They don’t know you with all the struggle that you went through.

Jason: Right.

Chamath: Right? And for all of you guys out there, all of you who have children, may have children the craziest thing is like you really are at the pinnacle of your industry. The fact that you’re even here, that you’re doing this stuff you’re already in that sort of… to use a cliché, that 1%. So it’s almost like this weird thing where your kids just see that.

Jason: Right. That’s their own world.

Chamath: They have no idea all the stuff that happened as a preamble to get you to that place. That’s like a really big challenge. Which is another reason why you focus on big ideas. They see you everyday get up and just go and grind it out for 12 hours. You come home you’re haggard. You have meetings on Sunday. Your kids bouncing the ball. They’re like, “Why is he in the dining room with all these random people?” It’s progress.

Jason: Yeah. Hey, everybody. Hey, everybody. What a great, great show we have for you today. Everything is going great at ThisWeekIn Startups. The show is doing great. We’re sold out for months in advance. We got a great team. Brandice, Kirin, Demant, Crute. We’re just really crushing it. The reason we’re able to do this program and do it consistently with expensive microphones and great lights and great guests and traveling across the country to find those entrepreneurial stories, to find those investors/angel investors/venture capitalists to explain how it’s all done and how they scale companies is because of great partners like Hiscox which provides small business insurance. You can get the right insurance right now. They do something that nobody else does. They give you a quote right now. You just go to HiscoxUSA.com. Go toHiscoxUSA.com/smallbiz. You get tailored coverage. It’s all the coverage that is customized to your specific needs. You don’t have to go and meet with an agent and all that kind of stuff. Not that there’s anything wrong with agents but I mean we’re busy as entrepreneurs. When we want to get stuff done we do it at 1 o’clock in the morning or whenever. It’s great value. Competitive rates start from just $22.50 a month. Yes you heard that correctly. They have a real passion for service over there. 96% of their customers, including this one, would recommend them to a friend. Products include things like professional and general liability. You need to have this stuff. Business owners policy, workman’s compensation insurance. Get your quote by going to HiscoxUSA.com/smallbiz. Once again, HiscoxUSA.com/smallbiz. Thank @hiscoxsmallbiz on Twitter for supporting independent media like ThisWeekIn Startups. Really customized coverage and competitive pricing. That’s all you need to know. You’re going to get your quote right now if you go toHiscoxUSA.com/smallbiz. Thank you Hiscox. It’s been great having a… I guess we’re in like the second or third year of our relationship together. You guys have been a tireless supporter of entrepreneurs, a tireless supporter of startups and ThisWeekIn Startups. I really do personally appreciate that very much. Let’s get back to this amazing episode.

Jason: Let’s talk about some of the investments. There was a company you were telling me about that helps people test their blood.

Chamath: Yeah.

Jason: I forgot the name of it. Tell me about it.

Chamath: This is a great example that kind of like epitomizes sort of my frustration with traditional venture and why… I don’t know if we’re going to be successful but we’re going to try. So we find these 3 PhDs… I know it’s like the starting of a bad joke. They’re running around the Valley and I meet them because a guy that worked with me at Facebook went to CalTech with these guys said, “Chamath. This stuff is crazy. Basically no one will talk to them. Which is right up your alley.” I was like, “Sweet.” So I sit down with these guys and he pulls out a chip. Right away, if you load the last 10 or 15 years of investing, if all of a sudden you’re trying to pitch something in silicon… I mean you… People would rather take $5M, put it in a pot beside the entrepreneur and light it on fire and watch it burn than give it to this guy because it had a higher likelihood of returning capital. OK?

Jason: The cash burning. Yes.

Chamath: Literally I was like don’t show me silicon. He was like, “I’m going to show you silicon.” I’m like, “Alright. What does it do?” He said, “I took a CMOS sensor, the chips that drive your camera phone and I made a mass spec out of it, a mass spectrometer.” All of a sudden the light bulb goes off. I’m like, “You did what?” He says, “Yeah. I’m trying to build basically a sub $200 device that’s like about yay big. It’ll sit on your countertop. I can replace a $600K machine that you use to analyze your blood.” I said, “Go on.” He’s like, “It’ll only be a drop of blood.” Then I’m thinking to all the times where… Go to the doctor, he takes vials and vials and vials of blood, it takes a week, I sit in some random place, at LabQuest or whatever, Quest Diagnostics. I get these random results on paper that’s like faxed to me. I’m like, “What is going on here? This is the state of the health care system. No wonder people are dying left and right.” He’s going to replace it to where I can empower myself. It’s using line of sight on a technology that basically is putting technology in front of a really big problem of saying OK this is just going to scale. It’s Moore’s Law. These are sub $1 tests that run on a $100 device. So anyways, on the spot… I don’t normally do this. It could still be a huge mistake, it may not work. Although it’s kind of working right now. I funded on the spot. Didn’t talk to my partners, didn’t talk to anyone. I’m like, “You’re done. Boom.” Then I called my guys. I’m like, “Guys I think I found something. We should drive to their house in Redwood Shores maybe.” Anyway. So we drive there that night. You pull up to this random house. I mean this is like so beautiful. That’s why this thing has to work. It’s like a random house in Redwood Shores. I walk in and it basically looks like 3 bachelors live in this place. I’m like, “OK. Show me the goddamned mass spectrometer.” They’re like, “OK. Follow me.” They walk me into the garage and they had built a fab in their garage. They had a clean room in there. There was a table where they had constructed the device. Literally the cops would show up. You look at the power draw on that thing. They thought it was a crystal meth lab. If you walked in there you would have thought Al-Quaeda was building a bomb in that place.

Jason: Yeah.

Chamath: It was crazy. But they had done that on half a million dollars and they had run out of money. So what they were doing was building a different version of the machine and selling it on eBay. Cause they couldn’t find people to take the risk. So that’s an example where like man I could lose $20M in that company. I don’t care. So proud of what those guys are doing. Now, a year later, it’s like 20 people, an amazing caliber of folks…

Jason: What will the outcome be if it’s successful?

Chamath: The outcome will be all of you will have a little device… Well at the minimum the outcome is when you go to the doctor he or she… It’s the 21 century version of a stethoscope. They’ll carry it around. It talks to their iPhone. With a drop of blood do 200 panels. Just a basic metabolic panel, complete blood workup, lipid panel, whatever you want it will tell you in 3 minutes or less. With a drop of blood. OK? But the best case…


Chamath: The point is like it gives all of you guys a chance to take control of your own health. I’m convened that you can do more for each other than the help care system can do for you. All you need is the information. So that’s what we’re trying to solve. But the best case is that $100 device sits on your countertop. You wake up in the morning, while you’re brushing your teeth, you’re like, “Hey. I wonder what’s going on inside my body.” You prick your finger, a little drop of blood, in 3 minutes, boom, you know. You go off to work and you just know that you’re doing the things that you need to do. And when you’re not doing the things it helps you course correct. It helps you course correct early with simple things. You know, diet, exercise, changes in behavior, motivation. That’s what we all need to do for each other if we want to kind of like live as long as we can. You know?

Jason: Let’s shift over to education. We had a company here last year, Alltuition. They won the 2.0 competition with a very beautiful product and a great team, including Sue, who wowed the audience with her vision and helping people get into school and figure out what school was the best value. You guys fell in love with the entrepreneur but not exactly the idea. You thought there was some bigger ideas and you worked with her and pivoted. So tell us about that interaction from the Launch Festival last year till now.

Chamath: Yeah. Sue’s presenting tomorrow at 10:30. So I would encourage you all to hear about the idea. I won’t from run it too much but I was lucky enough to be a guest judge.

Jason: Yeah.

Chamath: I’m sitting there and she walks up and she and her co-founder, Silas, one of her other two co-founders, who is the Chief Head of Product is on stage. They’re talking about the thing. And it’s like a tool to help you consolidate school debt and manage it or whatever. It’s technically a very difficult problem cause you have a bunch of disparate sources of data, you have to normalize a really gnarly data set. Just things that are technically burdensome. I thought to myself, “They built a good product and they deserve to win on the basis of that.” It was beautiful. It looked really nice. But I just thought that the idea was crap. I’m like, “Here are really good folks that are going to waste a bunch of time, in my opinion, on a marginal idea.” So they ended up winning Launch. It was great. I sent them an email because you hooked me up with them. I had them over and I said, “Look guys. I love you I don’t love this idea.” Here’s this other thing that I’ve been wanting to do for a while that is not well addressed. Can we iterate on that concept together? So the three of us spent a few weeks and came up with this totally different articulation of the problem. Nothing related to school debt. All related to people. Our intellectual capital, our human capital. How much are we worth? How do you make sure that the best people are able to float to the top on a totally meritocratic basis? You know. Identify the best. Give them access to the best jobs, education, etc… She came back to me two weeks later and said, “You know what? We’re going to do it.” They moved the company from Chicago. They moved it into my office and we’ve been working on it ever since. You’re going to see it. The progress is pretty stunning. There’s growth that I didn’t expect. It’s early but it’s working. it’s just really an amazing story of just like folks that had the courage to question the conventional thinking. It’s not to say that this idea is the best idea since sliced bread but it’s really ambitious. The likelihood of failure, I tell all people, the likelihood of failure is 99%. I don’t care what you try. You’re probably going to fail. That’s just the nature of startups and how they work. So you might as well just swing the bat on something crazy and big and audacious. Because that 1% chance that you slip stream in there you’ll look back and you’ll be like, “How did I just do this?” Right?

Jason: Somebody has to.

Chamath: Somebody has to.

Jason: If it’s 1 in a 100 somebody has to be that 1 in a 100 that hits, makes contact with the ball.

Chamath: Somebody has to.

Jason: Right.

Chamath: You know what? If it’s indonesian wood bobbles so be it.

Jason: So be it.

Chamath: So be it. Everybody needs a good bobble.

Jason: You’re the best poker player in the technology industry. I’ve played with everybody. You went the furthest in the World Series of Poker. You got down to the top 100 or so?

Chamath: Yeah.

Jason: The main event we’re talking about a 7,000 person event. About the size of this event actually. So how does poker inform your thinking on life and startups? Obviously you’re very risk tolerant.

Chamath: Poker’s amazing.

Jason: It’s basically how we became friends was just at the card table.

Chamath: It was playing poker. I mean I thought you were a jerk.

Jason: So does most people when they meet me.

Chamath: I realized you were such a jerk. I was like, “This guy is such a jerk.” Then the more and more I spent more time with him it’s like God… then I was like you’re like a fungus. You just grow on people. Then it’s like you can’t wash it off and then you like him, you love him, then there’s nothing you won’t do for him. It’s like…


Jason: I’m sorry. It’s when you called me a fungus that’s when the spit came.

Chamath: You’re unbelievable. You’re a beaut. You know. You’re a total beaut.

Jason: A fungus? OK.

Chamath: Yeah. You’re a beaut.

Jason: Wow. There’s the quote of the event.

Chamath: No. But we bonded over poker. Poker is an amazing thing because like you learn to take risk and you learn to love risk. You learn to make decisions in ambiguity. It’s like the cycle of a startup condensed into 2 minutes.

Jason: Let’s do that decision of ambiguity. Unpack that.

Chamath: Well you start with a hand. It’s kind of like you start a company with an idea. You have no idea whether it’s good or not good because you really have no context in knowing everything else that’s out there. Meaning, in this case, the other hands. Or in the startups case all the other companies. You try, you take a bunch of risk, you expend a bunch of capital. Sometimes you win and sometimes you don’t. Sometimes you win for the wrong reasons. Sometimes you lose for the wrong reasons. Sometimes you win for the right reasons. So it’s just a really great teacher of like life. For me, I love it. The other thing that I love is that I really like to understand people. What makes me reasonable in that game is my ability to read people. Anything that I can do to refine that skill I think is just time well spent and poker tends to be a great outlet. The game that we play, that J and I play in is just so great because like it’s like you, me, Sachs, Goldberg. You get all these… Ted Maidenberg… you get all these really interesting folks. We spend time talking and we debate stuff. At the end of the day like you know you win or lose a little bit of money, no big deal. All my public poker playing I play on the behalf of the Boys and Girls Club of East Palo Alto. My goal eventually… I will win a big tournament. I will win a multi-million dollar tournament and their going to hit the jackpot and it’s going to be great. They make signs, they tweet about it. I was 15th in the LA Poker Classic HighRoller. You know. I could have won them $300K then I lost. This week there’s one in San Jose. I’m going to play in couple tournaments trying to win them some money. It’s great man. I love it. I absolutely love it.

Jason: And the fund… How much of that $275M has been invested now?

Chamath: The great news is you know we’ve has some really good early success in fund one.

Jason: Yammer was a huge hit.

Chamath: Yammer was a huge hit. I mean last year across all the things that I’m invested in, my early stage stuff and Social Capital, we participated in about $2B of liquidity. So we’re doing well for a fund that’s two years old. So things are going well. So we made the decision to kind of raise the second fund now. Which we did. So you know we have more than $275M. We’re not going to say the final number. But we raised a really good healthy chunk from the same folks. Plus added a handful of new really key amazing people. By the way let me tell you about like… I just want to kind of like… Here’s where I will talk about making money. So last year when we had a distribution we made a bunch of money on Yammer. Thank you David Sachs. We shipped it all back to all of us. Right? Myself and all of the other investors. A few weeks later… Mayo Clinic is like one of our investors.

Jason: The Mayo Clinic?

Chamath: The Mayo Clinic. Yeah. Which if you’re like… I’m Buddhist so I’m not even religious but I’ll say, that phrase, “They do God’s work.”

Jason: Yeah.

Chamath: They’re doing God’s work to the extent that you believe in God.

Jason: Yeah.

Chamath: I mean this is like a quaternary care facility. Like when you or someone that you love is on death’s doorstep they are the ones that will do more to save that person than anybody else in the world. So when you’re working on their behalf and you make the money and then you’re back there at Rochester, MN and they point to the 8th floor and be like, “Chamath if you ship us another $20M you know what we’re going to do? We’re going to rehab the entire floor.” That’s the kids cancer unit or whatever. Man, that’s amazing.

Jason: They know how to work it. Yeah.

Chamath: But I mean you want to work on behalf of guys like that. You know?

Jason: Yeah.

Chamath: They are on the side of good.

Jason: Right.

Chamath: You know what I’m saying?

Jason: Yeah. They’re just not going to buy a boat or something with the return.

Chamath: Heaven forbid any of us or our loved ones ever have to see the inside of that building. But the fact that there are people there doing that work. It’s a non-profit. Then we do what we do well. You know cause everyone asks us… everyone asks me and we go through that whole cycle right? Like you get successful and then people knock on your door. It’s like foundation this, charity that or whatever. I actually just took a step back and said, “You know what? That’s just not me. It’s not how I’m wired. I like to sit and grind it out with product managers and engineers. I like building stuff. I like watching stuff. I build companies.

Jason: It’s just as viable as giving money to charity. In fact it’s more.

Chamath: It’s more. Cause you can a lot of the problems that some foundations, frankly, and non-profits are just not well equipped to solve. Because you need technologists. You need engineers. A lot of these folks are choosing between Twitter and Google and Facebook and Square. They’re not choosing to go to a non-profit. You need a cap table, you need capitalization, you need the chance to make the millions of dollars. Then they’ll come work for you. So I want use that to direct the folks on the side of making history. Right?

Jason: That’s why it’s the Social Capital Partnership?

Chamath: Exactly. That’s where, like you know, making money is kind of cool cause like I’m not inherently that charitable necessarily. You know? But there are a lot of folks where if we are successful they’re going to do great things for the rest of us. We will have enabled them to do it. They’re experts in that. We’re experts in company building and kind of doing cool, crazy stuff.

Jason: So what else have you invested in, as we wrap up? What are the other companies that you’re particularly proud of in the first year and a half of the firm?

Chamath: It’s really hard to pick out a few. But we have a balanced approach, you know, which I’ve told you about. Which is, you know, we’re taking a lot of pretty crazy bets. There’s a high probability that most of that stuff goes to zero. So how do you balance that? We balance it by saying OK out of a roughly $300M fund we’ll take $100M of it and just compound the shit out of it. Right? So this is where Yammer, Box, SurveyMonkey, huge stallworth names. You know, you go to bed easy at night. They’re going to crush. They are crushing…

Jason: You say stallworth but they’re going to be in the future. I think you see that before other people.

Chamath: They’re monsters.

Jason: Yeah.

Chamath: Pure storage monsters in the making. Then that gives me a ton of confidence.

Jason: Right.

Chamath: Cause that is like awesome. We’re going to return better than 99% of all these funds anyways. That’s just with that. Then now this other stuff will free roll. So you know stuff on the medical side that we’ve done, you know integrated plasmonics as we just talked about. We built this really cool bio sensor company. Which are sensors that can basically detect the potassium and sodium ions that flow across your muscles as you work out. So we’re building clothing that has these sensors built in. On your phone you can see exactly how your body is moving and the intensity. It can do injury prevention. It can do rehabilitation. Stuff like that. We’ve done some really, really interesting stuff in the enterprise and SaaS marketplace. On the education side Treehouse is here.

Jason: Yeah. Carson’s company.

Chamath: This is by the way… When we talk about education we talk about skills. The idea that there is a country here where we need to all realize and decouple value from education and say, “It’s not about a degree that makes you smart and valuable. It’s about how you can do cool, useful, interesting things.” So a skill driven economy is like the basis of GDP expansion. Right? So that’s what Ryan is doing. Teach every single person how to code, get them into a really good job, get them in an ability to be retrained. That’s how we keep people who are going to stay in the work force now until they’re 70 years old engaged and productive. That’s how the US wins. It’s not necessarily about getting to an Ivy League school. It’s not necessarily about being $100K in debt. It could mean paying $30 a month. We as a society need to respect this person as much as we respect that person. Once we do that it’s a huge sea change.

Jason: It seems like the change has already happened here. It just hasn’t happened to maybe outside of a couple of major cities. People still respect some of these degrees.

Chamath: We would do this interesting psychological analysis when I was at Facebook. Which is just trying to figure out like what are the social norms in which societies operate by? One of the most interesting social norms that exist in most western, developed economies is when you meet someone the narrative for introducing yourself to someone knew always generally starts with what you do and where you went to school. Right? Because we’ve now established this sense that that is the most preeminent qualifier of your skill and your value. Nobody ever starts by saying, “I’m a dad of three and I really like to play golf and I run.” People say, “I work at Facebook.” “I went to the University of Waterloo.” That’s where I went. Not that well known here but it’s a good school.


Chamath: It’s a damn good school.

Jason: I actually never heard of it. Keep going.

Chamath: That’s cause you’re a fungus.

Jason: Where is it?

Chamath: It’s outside Toronto. Where they invented penicillin for fungi.

Jason: Got it. Full circle. Well done. Boom.

Chamath: But anyways the point is we’ve been taught, we’ve been entrenched that that’s what’s valuable.

Jason: Right.

Chamath: Right? But if you look 20 years and 30 years forward it’s like… You think the people in China and India, where most people aren’t going to get into Bay Dow IIT are saying that. They’re just going to refacture themselves and their social value around other things. Their economies will just expand and move forward. So we need to sort of like question hey these archaic, simple subtle symbols are holding us back. We need to kind of chip away at those things. So I want to find when a company is built with great engineers that doesn’t necessarily go to any great school. You know. That graduated from Treehouse, did whatever, that has skills, got good jobs working for you guys. You guys build great amazing things. That’s what chips away. That’s when the rest of The United States and particularly the east coast kind of starts to question all that historical bias.

Jason: How hopeful are you about The United States? You spent some time internationally. I know in China and India, etc… Are we deluding ourselves that we’re going to continue to be as competitive as we are?

Chamath: I’m sir lankan. When I immigrated from Sri Lanka to Canada we were in the midst of the beginning of a huge civil war that ravaged that country. In part why my father, when he left, decided to stay in Canada at the sake of everything. Just gave up everything. We grew up in Canada which was like a sort of wonderful social meritocracy that really optimized for the middle. Then I came here and I was blown away. America is the best country in the world. Best, best, best place in the world. I could not have done what I did anywhere else. I feel super lucky that I was able to immigrate, that I was able to get a green card, that my kids were born here. I feel super lucky. but that’s not enough to sort of have it be great for the next 30 years.

Jason: Right.

Chamath: You know? This is where, honestly, I feel there is so many of us that are at this fork in the road where it’s like, “Am I really going to try something crazy or am I going to do the iterative next thing?” I don’t know health care but should I try to start something there? I don’t know education. Should I start something there? Or should I improve macros in excel? I think a lot of us, unfortunately, take the road that path. This is where I feel like I feel lucky to be here. I feel every day when I encounter people it’s kind of telling them like, “Hey man. Whether you were born here or not or you’re here the point is you’re going to be celebrated for failing so you might as well be celebrated for doing something crazy. Because if you’re successful you’ll be celebrated for doing something successful. But more importantly you’ll be merchant of progress. That is the sickest thing in the world that you can be. Not rich, not cool, not popular but you move the world forward. That’s an illusive thing. You know? Like for me that’s like the only thing now that I give a shit about. I want that. I want to be a merchant of progress. I don’t know how to do that but I’m going to try.

Jason: On that note, Chamath Palihapitiya.

Follow On Twitter

Jason: @jason
Chamath: @chamath
Hiscox: @hiscoxsmallbiz
Sourcebits: @sourcebits

Special thanks to the members of the TWiST Backchannel Program!

Executive Producers


Associate Producers

  • Brad Pineau
  • Kat Ganesan
  • Nicholas Christian
  • Mau Frontier
  • Kyle Braatz
  • Serena Ehrlich
  • JD
  • Alex Lotoczko
  • James Kennedy
  • Benoit Curdy
  • Asher Nevins
  • Mike Kaltschnee
  • William Doom
  • David Lee
  • Jake Kerber
  • Sarp Coskun
  • Giuseppe Taibi
  • Tyrone Rubin
  • Keno Vigil
  • Paul Peters
  • Jamal Waring
  • Nick Ostroff
  • Alex Binkley
  • John MP Knox
  • Bryan McCormick
  • Marcos Trinidad
  • Allen Cordrey
  • Daniel Mich
  • Joshua Rosen
  • Grant Carlile
  • James Smith
  • Christopher Rill
  • Elliot Myhre
  • Nihon Giga
  • Nathan Gielis
  • Greg Meadows
  • Rick Cartwright
  • Jacques Struwig
  • Robert Ward
  • Adam Gering
  • Shelley Gaskin
  • Jim Shute


  • Ryan Hoover
  • Michael Cranston
  • Josiah Thomas
  • João Fernandes
  • Petrus Theron
  • Michael Wild
  • Dale Emmons
  • Tim de Jardine
  • Alejandro Vasquez
  • Milan Babuskov
  • Chris Rowe
  • Nelson Melo
  • James Dawson
  • Toddy Mladenov
  • Daniel Torres
  • Chris Macke
  • Piotr Zuralski
  • Armand Konan
  • Brian Vogel
  • Paul D
  • Jennifer Sun
  • David Kolb
  • Sue Marrone
  • Eugene Granovksy
  • Will Blackton
  • Ryan Dodds
  • Brett Arp
  • Jason Cresswell
  • Edwin Orange
  • Daniel Bradley
  • Shawn Daniel
  • Priidu Kull
  • Patrick Desroches
  • Alex Lam
  • Paul Secor
  • Ryan Urabe
  • Madhu R.
  • Paul Ardeleanu
  • Ian Thomas
  • Manny Alarcon
  • Charlie Osmond
  • Christopher Smitley
  • Roshan H.
  • Barcy Cordrey
  • Matt Beaubien
  • Matthew Smith
  • Oscar Bueno
  • Tim Hoyt
  • Ian Gerstel
  • Taphon Maddison
  • John Bradley
  • Luigi Armogida
  • Dave Ferrara
  • Janus Lindau
  • Chris Mancil
  • TR Ludwig
  • Giles Thomas
  • Jason Cartwright
  • Michael Del Borrello
  • Joshua Rosen
  • David Karlberg
  • Marcus Schappi
  • Justin Furniss
  • Mike Hauck
  • Jess Bachman
  • Isaac Hill
  • Robert Haydock
  • Dan Sfera
  • Flaviu Simihaian
  • Kiko Cherman
  • Chandra Siva
  • Kasper Andkjaer
  • Zach Woodward
  • Chris Galasso
  • Chad Olsen
  • Michael Grabham
  • John Shiple
  • Gregory Hoffman
  • Chris Rickard
  • Eskil Steenberg
  • Jay Moran
  • Karim Sarkis
  • Michael Davidovich
  • Petru Marchidan
  • Sam Drzymala


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