[Josh Kopelman — 0:00]
If you want to get on the map, just convince a damn town to change its name to Half.com. You ever go to the urinals and you see those little urinal guards? We went and got them printed up to say, "Don't piss away half your money, shop at Half.com." It was the ultimate form of streaming media. I believe that your fund size is not a strategy. Your fund size is a tactic to achieve a strategy. Back in 2004, when we started, it was a little under 150. Our last fund was about half a billion. Founders are cartographers, and we raise navigators. Paddy once started tweeting about Israel as a genocidal actor. I just started screenshotting his tweets because I figured he would at some point want to take them down. And then I started tweeting about it.
[Michael Eisenberg — 0:42]
What's the price you paid?
[Michael Eisenberg — 0:49]
Welcome back to another episode of Invested. I'm thrilled to be here with my old friend. Not that either of us are old, although we are the same age, Josh Kopelman. Welcome, Josh.
[Josh Kopelman — 0:57]
Thanks. Great to be here.
[Michael Eisenberg — 0:58]
Everyone introduces you as the founder of First Round Capital. I still remember you as the founder of Half.com and Infonautics.
[Josh Kopelman — 1:05]
Wow.
[Michael Eisenberg — 1:05]
Does that make us both old?
[Josh Kopelman — 1:07]
It really does.
[Michael Eisenberg — 1:08]
We're going to tell those stories in a second, but you cannot listen to this podcast on 2X, because otherwise you'll never be able to keep up with Josh.
[Josh Kopelman — 1:17]
Well, you speak pretty fast yourself.
[Michael Eisenberg — 1:21]
Josh, I actually want to start with Half.com. Can we?
[Josh Kopelman — 1:23]
Sure.
[Michael Eisenberg — 1:24]
Okay. So we both lived through the Internet bubble or the takeoff of the Internet, and very few people know that you were actually a key part of the early Internet, having sold one of the first kind of, I think, successful companies in the early Internet era. I just want you to tell us the story of Half.com because I think it's really insightful for this era.
[Josh Kopelman — 1:46]
Sure. So started Half.com in 98, 99. So right in the insanity of the dot-com era. And the basic premise was the following, that most people buy a book, buy a DVD, buy a CD. That's how you bought media at the time and watched it once, read it once, and they had hundreds of dollars, if not thousands of dollars of value trapped on their bookshelves. So what if there was a way for you to buy a book or a movie or a disc for half price and then turn around and sell it for half price?
[Josh Kopelman — 2:30]
And originally, we were actually going to be called eBizon because we thought it was the best of eBay combined with the best of Amazon. Right? It was like person to person, like eBay, but structured commerce with a shopping cart, credit cards, like Amazon. And our lawyers told us that eBay and Amazon were ruthless competitors, but the one thing they would both agree on was suing us. So we changed our name to Half.com, launched in February of 2000. We were able to coordinate a stunt and launched on the Today Show. And then eBay came knocking a few months later. And I feel like we were one of the last chairs, if not the last chair in the game of Internet musical chairs, because the music stopped and we caught a chair.
[Michael Eisenberg — 3:18]
I mean, my memory may be fuzzy, but my recollection is that Nasdaq had already peaked. But this was considered a very successful outcome at the time, meaning that Nasdaq wasn't really crashing at the time. And I think there were a lot of public companies at the time that looked at Half.com as a harbinger of, hey, the music is still going on. It was a successful exit.
[Josh Kopelman — 3:40]
It was a very successful exit in a very short period of time. You know, our investors, like, their biggest challenge was it might not have been long enough for long-term capital gains. Yeah, we were pretty fortunate. And the timing, the exit, the scale of the exit, given that the Nasdaq peaked in March of 2000 and we sold in— we closed, eBay called us in February 2000 and we closed in June of 2000.
[Michael Eisenberg — 4:09]
Amazing.
[Josh Kopelman — 4:09]
Yeah.
[Michael Eisenberg — 4:10]
Amazing. Now, can you tell everyone about the stunt, which wasn't just the Today Show, but there was a stunt about a naming.
[Josh Kopelman — 4:17]
Oh yeah. So everybody—
[Michael Eisenberg — 4:19]
I'm old, but I still remember these things.
[Josh Kopelman — 4:20]
You have a good memory.
[Josh Kopelman — 4:21]
I'm really impressed.
[Josh Kopelman — 4:22]
There's nowhere to hide here. Look, this was back when Pets.com was spending tens of millions of dollars buying media with their sock puppet and trying to create awareness and recognition was really expensive. We didn't have a lot of money. We raised venture, but we didn't have Pets.com money. So we kept saying we wanted to do something at launch to really put us on the map. And we kept brainstorming in a room and, like, "No, that's not audacious enough. It has to really put us on the map." And then finally, after like four hours of fruitless conversation, Mark Hughes, who I give full credit to on this, our head of marketing, basically said, "Well, if you want to get on the map, just convince a damn town to change its name to Half.com." And there was this, like, laughter slash, "huh?" Like, you know, it was a little odd, like you didn't know, is this a good idea, because I just want to get out of this room, or is this a good idea?
[Josh Kopelman — 5:17]
So we went and we searched all towns, like Half Moon Bay. Well, that's probably expensive. And the smallest town with the word "half" in it was Halfway, Oregon, population 350-something, and it was a gold rush town that got left behind. Needless to say, the next day Mark Hughes was on a plane to meet with the mayor of Halfway, Oregon. And they agreed to change their name from Halfway, Oregon to Half.com, Oregon. And that got us tens of millions of dollars of free media. A four-minute segment on the Today Show, Wall Street Journal, 60 Minutes. It just put us on the map.
[Michael Eisenberg — 5:56]
It literally put you on the map.
[Josh Kopelman — 5:57]
Literally put us on the map. It was a one-year deal. We wanted it to be permanent.
[Michael Eisenberg — 6:01]
It was only a one-year deal?
[Josh Kopelman — 6:02]
We wanted it to be permanent. We were willing to pay them more, but they only wanted a one-year deal.
[Michael Eisenberg — 6:06]
So it was like a licensing deal for the name of the town.
[Josh Kopelman — 6:08]
They changed their name for a year. We got them 20 computers for the school. We hired four people, so over 1% of the town to work in customer service. And the.
[Michael Eisenberg — 6:08]
For Half.com?
[Michael Eisenberg — 6:19]
For Half.com.
[Josh Kopelman — 6:21]
Yeah. And the big thing was the snowplow. They needed a snowplow, and that's what closed the deal.
[Michael Eisenberg — 6:27]
You bought a snowplow with venture capital dollars?
[Josh Kopelman — 6:29]
Yes, we bought a snowplow and donated it to Half.com, Oregon.
[Michael Eisenberg — 6:34]
I didn't know that part of the story.
[Josh Kopelman — 6:35]
Oh yeah, that was what closed the deal.
[Michael Eisenberg — 6:37]
I thought that buying an endless amount of NVIDIA chips with venture capital dollars was a big one. But buying a snowplow, that's a new one.
[Josh Kopelman — 6:43]
Yeah.
[Michael Eisenberg — 6:45]
At Shopping.com, at the same time, we were dressing people up in jumpsuits with bags, helping people carry their Christmas shopping from Fifth Avenue in Manhattan.
[Josh Kopelman — 6:52]
Yeah. Everyone had to do stuff.
[Michael Eisenberg — 6:52]
I thought that was odd.
[Josh Kopelman — 6:53]
Everyone had to do stuff. I mean, we wanted to advertise at Internet World, which was the big trade show at the time. And again, the ads were so crazy expensive. So we went and got a bunch of interns. And meanwhile, it's not so much today, but Internet World was all male. It was all male. So, you ever go to the urinals and you see those little urinal guards to prevent cigarettes from getting flicked down there? They all say, like— they all have something like 1-800-urinal-guard or something like that. So we went and got them printed up to say, "Don't piss away half your money, shop at Half.com." And we said, "Who the hell's going to go put them in?" So we hired interns.
[Josh Kopelman — 7:37]
We hired like five interns to do hands-on viral marketing. Well, we gave them gloves so they didn't catch a virus. And, you know, it was the ultimate form of streaming media. And we went and just went to the Javits Center in the morning and to Penn Station and just said, "Go put these in the urinals." And our hunch was that no one's job was to pull them out. They sat there for a year and a half.
[Michael Eisenberg — 8:08]
Is that right?
[Josh Kopelman — 8:08]
They sat there for a year and a half. But it got us a ton of attention as well. Like, yeah, so just stupid things like that. We had, like, why not?
[Michael Eisenberg — 8:17]
What's the takeaway for entrepreneurs from all this?
[Josh Kopelman — 8:21]
I don't know. Don't buy rate card. Don't buy rate card. Like, you know, you could buy, then, like, for Half.com a one-page, a full-page ad in the book section for one day, one week, was like $50,000. The urinals were like $2,000. The town was less, you know. And so I think people tend to be really creative in building a product and then get really traditional on marketing. "Oh, there's a way that it should be done." And at least for consumer products, we saw that you could be just as creative, if not more creative in figuring out distribution and go-to-market. And rate card is for suckers.
[Michael Eisenberg — 9:03]
Was there anything else other than naming a town and the urinals?
[Josh Kopelman — 9:07]
So my VP, same Mark Hughes— we were out to dinner at Chinese food, and we were talking about the New York Times Book Review. And it made sense. It's where everyone went to find out books at the time. But it was $50,000 and no one reads it. So we finished the meal and they give you the fortune cookies. You crack it open and there's a little fortune in it. And one side is a fortune and the other side are your lucky numbers. And he's like, "Everybody reads these." So the next day he went to Wonton Foods in Brooklyn, New York, and apparently Wonton Foods manufactures and sells 2 million fortune cookies a week to every Chinese restaurant on the East Coast.
[Josh Kopelman — 9:50]
And he walked in and he realized no one spoke a lick of English. So the next day he brought a Chinese translator and just asked them, "How lucky are your lucky numbers? How much money do you make on them?" And they're like, "Nothing." So he's like, "Well, what if I put a coupon code on the back of them, and I'll give you $10 every time one of these is redeemed?" You know, and it said, "Save a fortune at Half.com." And we were on the back of 2 million fortune cookies like a week later. And it was, for years, one of our biggest channels of customer acquisition because everybody reads it, and it is outside of, like, the media noise.
[Josh Kopelman — 10:35]
Just getting attention was part of it. So just countless examples of things like that.
[Michael Eisenberg — 10:39]
It's like Lemonade doing graffiti on ads today instead of buying the ad space itself. That's amazing. So in the course of the last 10 minutes of conversation, you've mentioned eBay and Amazon on the one hand, you mentioned Internet World, which doesn't exist anymore. I think we met the first time at Demo.
[Michael Eisenberg — 10:55]
It could be.
[Josh Kopelman — 10:56]
Yes.
[Michael Eisenberg — 10:56]
Which is another now extinct—
[Michael Eisenberg — 10:58]
Either Demo or PC Forum. I can't remember which.
[Michael Eisenberg — 11:02]
Both of them.
[Josh Kopelman — 11:02]
Both of them. What does that say about us? I guess we're endangered species.
[Michael Eisenberg — 11:07]
We are endangered species. I think you mentioned Pets.com and before we sat down here, we talked about Globe.com and we talked about JDS Uniphase. And these are all companies that were worth lots of money, at least on paper, in the stock market. In many cases that went to zero. And a lot of conferences, by the way, which were the place to be. You had to be on stage at Demo to launch your company.
[Josh Kopelman — 11:31]
Yes.
[Michael Eisenberg — 11:35]
If you weren't at PC Forum—
[Josh Kopelman — 11:35]
We launched Half.com at Demo.
[Michael Eisenberg — 11:36]
You launched Half.com at Demo. And so, if you weren't at PC Forum, right? Chris Shipley at the time and Esther Dyson at PC Forum. If you weren't at PC Forum, you weren't part of like the digerati. And then there was Stewart Alsop's conference in Scottsdale.
[Josh Kopelman — 11:51]
Agenda.
[Michael Eisenberg — 11:52]
Agenda. Those were, like— none of us exist anymore.
[Josh Kopelman — 11:55]
Nothing.
[Michael Eisenberg — 11:55]
We're still around. But none of this exists anymore.
[Josh Kopelman — 11:57]
Yes.
[Michael Eisenberg — 11:58]
What does that tell you about the current moment we're in where again, it feels like things are taking off to the moon. There's a lot of companies, by the way, today. Big difference between now and then was revenue run rate. Although JDS Uniphase had a real revenue run rate at the time, but Globe.com didn't.
[Josh Kopelman — 12:13]
JDS Uniphase was probably worth over $20 billion with less than $30 million in trailing 12 months revenue.
[Michael Eisenberg — 12:18]
Was it that little?
[Josh Kopelman — 12:18]
Yeah. Sycamore Networks. There are a bunch in the fiber space. Yeah, I think that.
[Michael Eisenberg — 12:18]
What was the other one with the C?
[Michael Eisenberg — 12:23]
It was called— that was sold to Cisco. It was Chromatis, which is the Israeli one and there was the US one called also with the C. Because every time Sevin Rosen backed a company, it had to be called C—
[Michael Eisenberg — 12:34]
—with a C.
[Josh Kopelman — 12:34]
Yeah, I don't remember. Yeah, I think, look, I— we've seen this in every cycle. Companies, rightly so, during speculative times, get valued based on their high potential rather than their high revenue or their high, like, actual financial numbers. Like, VCs do this all the time. In every cycle it's happened. So what happened, I think, back in the dot-com era, is those companies went public. I took one public, Infonautics, trailing 12 months revenue $600,000.
[Michael Eisenberg — 13:12]
What year was that?
[Josh Kopelman — 13:13]
That was in '95. You had companies that were valued based on their potential and what ended up happening is not a lot of them lived up to that potential. Right now I'd say that's not happening truly in the public markets, but that is happening in the private markets. Probably the $1 to $10 billion range in the private markets are the companies that tend to be valued most on potential, like potential energy rather than latent energy. In terms of potential business, they're being valued into the future and guess what? Several of them will be worth that and more. We're funding— you know, we're in those companies and we're hoping that potential gets actualized.
[Josh Kopelman — 13:57]
But probably like most cycles, the majority of them will not. And you could just go down the dot-com list and look at the dozens and dozens of companies that got funded and got public that no longer operate and, you know, ceased operations. But that's the business we're in. You and I, we recognize potential in people, potential in markets and we invest in that. And we overpay for it, and the industries get overcapitalized. A lot fail, but some succeed.
[Michael Eisenberg — 14:37]
And does this moment rhyme to you with the previous one or do you think it's different?
[Josh Kopelman — 14:41]
It's familiar in that if you ask me, again, you're seeing speed to revenue, which is very different than the last. So it's not a direct pattern match, but there's enough here where you say in moments of excess, in moments of exuberance, in moments of risk-on, which I'd say the industry has been in over the last several years, you're going to see a number of companies get funded at valuations that won't end up being long-term durable, but that's fine because enough will get funded and will exceed all of their expectations, that, I just think that's the business we're in. That's the business that founders are in and funders are in.
[Michael Eisenberg — 15:28]
It's a hits business.
[Josh Kopelman — 15:29]
It's a hits business. And in the moments like this, more capital gets spread to try to create as many hits as possible. And I have no ability right now to assess, is this '97, where we have three more years of boomtown, or is this '99, where we have three more quarters? I don't know.
[Michael Eisenberg — 15:54]
Or is it February 2000 where you want to sell your company? Do you think there's a difference? You made the point— you alluded to the point that back then this had played out in the public markets. Like everyone went public.
[Josh Kopelman — 16:05]
Yes.
[Michael Eisenberg — 16:05]
Today's playing out in the private markets.
[Josh Kopelman — 16:07]
Private markets are a better product for founders right now.
[Michael Eisenberg — 16:10]
Yeah, but is there a difference when ultimately a lot of these companies get washed out?
[Josh Kopelman — 16:14]
Yep.
[Michael Eisenberg — 16:16]
Does it matter if it happens in the public or the private markets?
[Josh Kopelman — 16:20]
You're talking about the washout in particular? I'd argue that if I had to sort of look societally, I think it's probably better it's in the private markets than the public markets. Because what tends to have happened, if you look at what happened to the dot-com boom, is VCs foisted these stocks at these inflated prices on the public markets, on individuals who were speculating. And when you sit down and say who took the gains and who took the losses, you had sort of VC and their ecosystem taking the gains and the public market and Joe Public investor taking the losses. Whereas if it's playing out in the private markets right now, the gains and losses are kind of owned by the same people.
[Michael Eisenberg — 17:11]
Although the pension funds, one could argue, although it's not at that level of scale or in the private markets, it's pretty hard right now.
[Josh Kopelman — 17:17]
They're very—
[Josh Kopelman — 17:18]
Yes.
[Michael Eisenberg — 17:18]
You started First Round Capital— correct me if I'm wrong— with about a $150 million first fund.
[Josh Kopelman — 17:22]
That's right.
[Michael Eisenberg — 17:23]
Okay. And you ran the $150 million fund strategy for how many funds?
[Josh Kopelman — 17:23]
That fund—
[Josh Kopelman — 17:29]
Strategy— it grew almost every year. What we— I believe that your fund size is not a strategy. Your fund size is a tactic to achieve a strategy. So for us, our strategy might be we want to have 70 companies per fund to give us diversity. We want to own 12, 15% of a company going in to have ownership. We want to have some time diversity. So we want it to be at least two years, ideally two and a half. So if that's our strategy, then we sit down and say, okay, based on the market today, we want to own 12 and a half percent of a company and we want to have— yeah, we want to have 70 of them. What would we need to deploy? And so back in 2004, when we started, it was a little under 150 million.
[Josh Kopelman — 18:12]
Today our last fund was about half a billion. Why? Same exact strategy. It's just that if you plot a chart from 2004 to 2026 of seed round sizes or seed round valuations, you'll see from 2004 to 2026 it went up about 4x. And so our fund just moves up. Like, I don't believe that you build a fund strategy around a number. I think the best thing is to understand what your strategy is and say, what does it take to execute that strategy in the market, recognizing you're a player in the market. As much as I'd love to get 2004 valuations, not happening.
[Michael Eisenberg — 18:55]
And exit sizes are up enough to cover for that?
[Josh Kopelman — 18:55]
Yes.
[Michael Eisenberg — 18:55]
, and then some.
[Josh Kopelman — 18:59]
And then some.
[Michael Eisenberg — 18:59]
For the winners.
[Josh Kopelman — 18:59]
Look, for the winners from 2004 to 2014, so in our first 10 years, U.S. public and M&A exits was about a trillion dollars. And so the first decade, there was about a trillion dollars of value created. From 2014 to 2024, the next decade was $2 trillion. So it doubled.
[Michael Eisenberg — 19:25]
And the concentration, though, I believe is bigger between 2014 and today.
[Josh Kopelman — 19:28]
Yes. And now, today, one could argue that SpaceX, Anthropic, and OpenAI— there's, like, if you add them up— SpaceX, where is it now? About a trillion and a half. Anthropic, probably the same, maybe more, maybe less. But call it—
[Michael Eisenberg — 19:49]
Gavin Baker has been on this podcast. He thinks we're at the $3 trillion, I think.
[Josh Kopelman — 19:51]
But yeah. But even if you say that, if you say that the three of them all average a trillion and a half— that's four and a half trillion dollars.
[Michael Eisenberg — 20:00]
Yep.
[Josh Kopelman — 20:00]
Those three companies are more than double the entire amount of exits during the last 10 years of every company. Put another way, those three companies will have created more value than every exit in the last 20 years, and more. And so I think what we're seeing now is, yes, I would argue that the exit size and scale of exits is more than enough to cover, you know, the valuation increase at the seed stage, at the early stage. Yes, the— like, the seed stage is an evergreen business. And what do I mean by that? Like, if we invest at a $20 post or $30 post, if it's a great company, we'll do well—
[Michael Eisenberg — 20:47]
Yep.
[Josh Kopelman — 20:51]
and if the company's not great, we're going to lose it all. Late stage, the folks that are coming in now at the $10 billion, $20 billion, $50 billion prices, historically that's been a cyclical play, not an evergreen play. It worked really well for Tiger Global until it didn't. It worked really well for SoftBank until it didn't. But by the way, they made all the money hand over fist while it was working. And so I think, you know, I'm not smart enough to be able to time the cycles, so I'd much rather play in the kiddie pool— play in the shallow section— and play in a business where we could make money whether it's a risk-on environment or a risk-off environment, and not have to play into a cycle.
[Michael Eisenberg — 21:43]
If I go back to your Half.com story and to the kind of early Internet stories, the timing there was critical. Right. If you cash out before the bloom came off the rose or the market tipped or whatever you want to call it the bubble burst, you were fine. And actually people thought you were a genius. And if you didn't, had you missed that Half.com window by another 30 or 45 days, could have had a very—
[Josh Kopelman — 22:06]
a very different outcome.
[Michael Eisenberg — 22:07]
Different outcome. And so when you look today, for example at OpenAI or Anthropic at that end and other companies I'm sure you're investing in, how do you think about the timing of the exit from those? How do you think about the lasting or staying power of what you now refer to as the trillion-dollar companies, Anthropic and OpenAI, which will account for a large percent of venture returns?
[Josh Kopelman — 22:30]
I'm not sure I spend a ton of time thinking about it just because it's not my day job. My day job is helping founders at the earliest possible stages, the hunt for product-market fit. I'd much rather spend time on that than trying to guess the durability of trillion-dollar valuations. But I'd also say there's another key difference which is over the last 20 years, the capital markets, as I said earlier, public markets versus private markets: private markets is a better product for most founders.
[Michael Eisenberg — 23:02]
Yep.
[Josh Kopelman — 23:03]
It's regulatory, less complex. The stock trades on appointment rather than day in or day out. And the private markets have basically solved a lot of the challenges of— you want liquidity? Sure. We have a vibrant secondary market now that didn't exist when you were at Shopping.com and when I was at—
[Michael Eisenberg — 23:22]
It's not like the public market, still, though. It's by appointment. It's got complexities. You have to coordinate with the founders, the board. You can block it. There's a lot of things to— it's not the same level of liquidity.
[Josh Kopelman — 23:22]
Not the same—
[Josh Kopelman — 23:35]
But at least in today's market, you know, we're seeing founders take advantage of that. And I think that's not a bad thing because we want a founder to be motivated to go long. We want a founder to— you know, VCs are diversified. VCs have a— you have a portfolio of a couple dozen, you know, two dozen, three dozen companies. I have a bigger portfolio. Why shouldn't a founder be diversified a little bit?
[Michael Eisenberg — 24:00]
Because it's his.
[Josh Kopelman — 24:03]
Should be his or her decision.
[Michael Eisenberg — 24:04]
Yeah.
[Josh Kopelman — 24:05]
It should be their decision. And, like, I don't like—
[Michael Eisenberg — 24:08]
Is that a signal for you if a founder decides to sell?
[Josh Kopelman — 24:10]
No. In some cases it enables the founder to go long. I've had plenty of companies in the last few years. We've had some companies sell right under a billion dollars. And those were companies that I think my partners and I thought had the opportunity to go on to be worth multiples of that. But I don't begrudge the founder of that. That's what they wanted to do. Had they actually taken— in those cases, those founders had not taken secondary. And I've had plenty of founders who have taken some secondary off the table, and it motivated them to turn down some of the offers. And again, it should be their call, not the investor's call. Like we're in service of the founder. And so I feel like it's been a healthy development.
[Michael Eisenberg — 24:52]
This has always been a home run business or hits business as they say. It seems to be getting more so. One of the things you hear from LPs is, "Hey, we're in Anthropic, OpenAI, or SpaceX," because those are the big three today.
[Josh Kopelman — 25:05]
That's cyclical. That's cyclical. That's a cyclical trade. That's the—
[Michael Eisenberg — 25:09]
Explain what you mean by cyclical trade.
[Josh Kopelman — 25:10]
What I mean by cyclical is that you see these businesses, you have LPs that were able to get— "I bought into Anthropic at $200 billion, and now they're looking like geniuses." And that's because you're in the back end of a boom cycle where things compound and asymptote very quickly. That's a new phenomenon. But by the way, you saw similar types of trades in the dot-com boom where things— JDS, as we were talking about, Sycamore— tens of billions of dollars on very—
[Michael Eisenberg — 25:45]
That didn't asymptote that well.
[Josh Kopelman — 25:45]
It went—
[Josh Kopelman — 25:48]
up and then it cratered. Right? 99% drop or liquidations or bankruptcies. So I think what I'm arguing is that, sure, that trade, that's a good trade for LPs while you can do it, and while it works. The question, though, is there's always— there has to be an ultimate buyer after you.
[Michael Eisenberg — 26:10]
And who's that marginal buyer today in the private markets?
[Josh Kopelman — 26:15]
Yeah. I think the private markets ultimately expect the ultimate buyer to be the public markets.
[Michael Eisenberg — 26:20]
Right. And if that doesn't happen, because the better product is in the private markets and the value accretion happens in the private markets.
[Josh Kopelman — 26:26]
Yeah.
[Michael Eisenberg — 26:26]
I mean, you're handing the public a bag that is asymmetrical.
[Josh Kopelman — 26:26]
I'm not sitting here saying, like, the last thing I want to do is be shitting on OpenAI or Anthropic. I think they've built amazing businesses and those investors. And I think there's a very legitimate strategy on buying in the private markets, expecting these to be— you know, again, there's not just one way to make money in this business. I just think an evergreen strategy is like, you know, that businesses go through cycles. We go through risk-on and risk-off.
[Michael Eisenberg — 26:55]
Yep.
[Josh Kopelman — 26:56]
We go from FOMO to fear. And so the trade that you're talking about is a risk-on trade. And it works well in risk-on environments. It doesn't work well in risk-off environments. You get stuck holding assets where, you know, the challenge of the private markets is it trades by appointment, or it doesn't trade.
[Michael Eisenberg — 27:17]
Right.
[Josh Kopelman — 27:18]
And we saw, during the— like, if you look at the number of unicorns minted from 2017 to 2021, more than half of them today— so you're talking about hundreds and hundreds of them— haven't raised money in four to five years. More than half of them are either shrinking or growing at less than 20%, and.
[Michael Eisenberg — 27:18]
They're zombies.
[Josh Kopelman — 27:18]
Yeah.
[Michael Eisenberg — 27:18]
From a financial perspective.
[Josh Kopelman — 27:18]
I still respect the hell out of the founders that show up every day to try to grow back into that valuation. And we've seen some of them do it, right?
[Josh Kopelman — 27:18]
We've seen.
[Michael Eisenberg — 27:18]
It happened to us.
[Josh Kopelman — 27:18]
We saw companies that raised— they had $8 million in revenue and raised money at a crazy multiple in 2021.
[Josh Kopelman — 28:04]
That money gave them the runway. The company is now north of 12x the revenue and is probably just now growing into that valuation. And I have a ton of respect for those founders. They're doing it the hard way. They're eating glass for years—
[Michael Eisenberg — 28:23]
Yep.
[Josh Kopelman — 28:23]
to grow into that price. But just know that's part of what happens in this business. So as an industry, we price ahead. That's what we do. We don't price behind, we price ahead. And the more you're risk-on, the further ahead you price.
[Michael Eisenberg — 28:41]
You've used the term trade a bunch here.
[Josh Kopelman — 28:43]
Yes.
[Michael Eisenberg — 28:43]
Do you think the founders think about this as a trade?
[Josh Kopelman — 28:47]
I'm differentiating between the people buying into these trillion-dollar companies.
[Michael Eisenberg — 28:53]
That's a trade.
[Josh Kopelman — 28:54]
The founder doesn't know who they are.
[Michael Eisenberg — 28:56]
Right.
[Josh Kopelman — 28:56]
You're a pension fund putting a billion dollars into a $30 billion— you're not investing to partner with a company. You're not partnering with the founder. It's a trade. Previously, that would happen in the public markets. You would go on a Robinhood or your broker, and you'd trade the stock. Today, you trade the stock in the private markets. I would differentiate that as a trade versus partnering with founders in the seed, A, or B phase stage, where that isn't a trade, that's a partnership.
[Michael Eisenberg — 29:32]
Historically, the venture capital business has been what I would call a young man's game.
[Josh Kopelman — 29:36]
Yes.
[Michael Eisenberg — 29:36]
Bill Gurley and I used to joke about this a fair amount. When was the point that we became old guys in the game? So you and I are the same age. We've been doing this for a fairly long time. You had a startup career before doing this. I had no career before doing this. And we're both doing this a long time at this point.
[Josh Kopelman — 29:54]
Yes.
[Michael Eisenberg — 29:54]
Are you able to still partner with these younger founders? Are you still as relevant? Do they think you're as old? Why do they want to partner with you?
[Josh Kopelman — 30:03]
I think every founder is different, but in general, I've been fortunate that I've seen a lot of movies. I just have hundreds and hundreds of founders, both the ones we backed and the ones we said no to, where we should have invested. Venture is a humbling business. I look back now at the tables I pounded inside my partner meeting to either invest or not invest over the last several decades and realized that my level of confidence, yeah, it's okay to be wrong, but the level of confidence I had in those decisions is the thing I regret. So I feel right now the benefit that I offer founders and the reason founders choose to partner with me is because I feel like I owe them two things.
[Josh Kopelman — 30:51]
I owe them my unvarnished opinion. Whether I agree with them or not, they should, like, they have a lot of choices as to who to choose. You know, it's a founder's market. They have a lot of choices as to whose capital to choose. So if they're going to choose mine, they should at least get what they're paying for, which is the benefit of the movies I've seen where I could tell them most of the time when the movie starts like this, it finishes like that. But after I offer them my unvarnished opinion, I also recognize now that I owe them my unwavering support. I am one data point. Every day, founders are just like besieged by data from their employees, from their customers, from their prospects that don't convert to customers, from the press, from their shareholders, from the VCs that don't convert into shareholders.
[Josh Kopelman — 31:36]
And they have 10 times the context and the data. So I feel like, look, if I offer them my unvarnished opinion, then they're driving the bus as they should. And a large part of what we do is incredibly relevant. Right? Going from zero to one. The hunt for product-market fit, your pricing, positioning, distribution, go-to-market. All of those challenges are real challenges that every business faces. Whether you're building hardware or software, whether you're AI or SaaS, whether you're putting rockets in space or doorbells on doors, like these are the business. These are the challenges that every founder has in the beginning.
[Josh Kopelman — 32:18]
The first 24 months of a company's life are just a magical time. You are hiring the 10, 20 people that are going to hire everyone else. You're not just writing what the culture is, but you're actually instantiating it through your actions. And sort of having been privileged enough to partner with so many founders at this stage, I just consider myself really fortunate to have learned an incredible amount from the people I invest in.
[Michael Eisenberg — 32:45]
I want to push back on something you said about your own humility, which is you said, "If I regret one thing, it's the conviction— the level of conviction I had." I think one of the interesting things about the venture business is you actually need to have that conviction to invest the money even when you're wrong. Because, A, the founders are looking for that conviction from the partner they're going to partner with, because it's a hard journey for the founders and you have that conviction. So even though you're going to be wrong about your level of conviction and six times out of seven, it's for the one that you happen to be right about and being along with the founder of that journey, you need that level of conviction.
[Josh Kopelman — 33:24]
I hear that, and there's a lot of truth to that. Where I'd push is that I think situational awareness is really important.
[Michael Eisenberg — 33:34]
That's a hot phrase these days.
[Josh Kopelman — 33:36]
Yeah, well, I'll change the phrase, but it's okay.
[Michael Eisenberg — 33:39]
It's good. Look, he's back in the game now. I think the honeymoon's over. He's back in the game.
[Josh Kopelman — 33:44]
Good for him.
[Michael Eisenberg — 33:44]
Yeah.
[Josh Kopelman — 33:45]
Good for him. And he learned a lesson. Good for him.
[Michael Eisenberg — 33:47]
Listen, I think he's directionally— my own view is he's directionally right, just overlevered.
[Josh Kopelman — 33:51]
Yeah, he won't be. He won't be going forward. And so I think it's fair to acknowledge that when you start a company, there are more unknowns than knowns. There are. And so actually when I say, sort of, talk about the conviction, I— I mean that I would sort of just focus on the few data points that were known and I wouldn't sort of acknowledge. Look, VCs in general, we have to be risk-seeking. Like that's what we are. We get paid to seek risk, not avoid risk, period. Like we work on behalf of our limited partners to seek risk out.
[Josh Kopelman — 34:31]
But I also feel it's important to be able to identify the risks you are taking. And so I feel that it's fine to have conviction in a company and to believe that, but you should at least do so knowing the full sets of risks that you and the founder are signing up to on this journey. And you could have conviction that you will overcome those risks. You could have belief that the bet is worth— it's a big enough, bold enough bet and that you should swing and you're excited to partner with the founder on that swing, but you shouldn't delude yourself, I think, into sort of ignoring the areas that are against you, I think, because if you actually know those things, you could structure a strategy and build a plan around them rather than hiding it.
[Michael Eisenberg — 35:21]
Did you know all the risks at Birchbox, at Uber, at...
[Josh Kopelman — 35:21]
No.
[Michael Eisenberg — 35:21]
At Roblox, at— what was the first investment of First Round Capital?
[Josh Kopelman — 35:31]
I couldn't even tell you.
[Michael Eisenberg — 35:35]
Did you know the full set? There's no way to know this.
[Josh Kopelman — 35:39]
No. Nor do I think you could know all of them, but you could know some of them.
[Michael Eisenberg — 35:42]
Some, yeah.
[Josh Kopelman — 35:43]
Yeah.
[Michael Eisenberg — 35:43]
I keep finding I'm undone by risks that I didn't know existed.
[Josh Kopelman — 35:46]
Yes.
[Michael Eisenberg — 35:47]
And in many cases were unknowable.
[Josh Kopelman — 35:49]
Yeah, that's fair. But there are knowable ones.
[Michael Eisenberg — 35:51]
There are some knowable ones.
[Josh Kopelman — 35:52]
Yep.
[Michael Eisenberg — 35:53]
Rumsfeld's unknown unknowns, though, that both the upside and the downside tend to inform us. So at 16, you started in Infonautics. I want to go back to that one second.
[Josh Kopelman — 36:02]
16.
[Michael Eisenberg — 36:02]
Were you 16? How old were you?
[Josh Kopelman — 36:03]
No, I was in Infonautics. I was 20.
[Michael Eisenberg — 36:07]
20. You were still a student, though, right?
[Josh Kopelman — 36:09]
Right.
[Michael Eisenberg — 36:11]
And what did you see that caused you to start Infonautics?
[Josh Kopelman — 36:16]
So I co-founded Infonautics. Look, I think we grew up at a magical time. Went to college, got there in 1989, the web browser didn't exist. NCSA Mosaic, the first web browser came out '91. And you know, I graduated barely because I started— I co-founded a company in '91, but I graduated barely in '93. So we went from a world with no Internet to a world where the Internet existed. We went from a college with no email address to— they still didn't give them out to everyone by the time we graduated, but you could go get one.
[Josh Kopelman — 36:59]
So I had one of the first UPenn email addresses because I went to get it. And so I think it was my sophomore year, the web browser came out and I just got hooked. I just went down that rabbit hole. And what's really interesting is I think when new technologies come out, there's a very interesting phenomenon that happens. It's happened multiple times over the last few decades. It's a leveling thing for a short period of time when a new technology comes out, the gap between the expert who's been in the business for 20 years and the rookie who's, you know, sophomore in college levels.
[Josh Kopelman — 37:43]
And that's kind of what happened, you know, in '91, '92, '93. I spent all my time pretty much on the Internet building an Internet company, going deep in what's happening. And I think by the time I graduated there weren't many people, if any people, who were in the traditional package software way of selling and building software that had more Internet experience than I did. By the way, you saw the same thing happen when Bitcoin came out.
[Michael Eisenberg — 38:13]
Yep.
[Josh Kopelman — 38:13]
When Bitcoin came out, there were people in dorm rooms at universities who had far better understanding and trading strategies around Bitcoin than like the derivatives or special desks at Goldman Sachs, JP Morgan, or Morgan Stanley. Now over time it catches up, but there is a moment in time where it really favors the rookie over the incumbent. And I just feel very fortunate that the Internet wave was one of those times. And you know, and I was that rookie.
[Michael Eisenberg — 38:48]
What did Infonautics do?
[Josh Kopelman — 38:50]
So Infonautics built— so, back in the day, there was no— this was pre-search engine.
[Michael Eisenberg — 38:56]
Yep. Nobody's going to believe this story. So it's just important to get it out for the modern world.
[Josh Kopelman — 39:00]
There was not— like, newspapers weren't online, magazines weren't online, Wikipedia didn't exist. So if you were a kid in school and you did research, you went to your library and physically found things. Maybe the library was advanced and had a CD-ROM. So we said, well, why don't we build— I think LexisNexis was around at the time, Westlaw, and there was a dial-up service called Dialog, which had, like, news wires for business. And we said, why don't we build something— and CompuServe, AOL, and Prodigy were the three big online channels. And we said, why don't we build something for students? So we built a product called Homework Helper that we sold to America Online, and we sold on Prodigy and CompuServe.
[Josh Kopelman — 39:45]
And it was the first educational-focused sort of reference. So we went and got newspapers. What's crazy is newspapers didn't have digital archives. They didn't even have digital formats. They went straight to printing press and there was no, like— so we were scanning newspapers in. We were shipping— we cut deals with 50 magazines, from Newsweek to Time to newspapers to CliffsNotes to encyclopedias, and we were shipping it all overseas to be scanned and keyed in. And we made it searchable and we sold it to families, schools, libraries.
[Josh Kopelman — 40:27]
We were ahead of our time in so many places. But we were wrong in that we bet that information will be protected and closed. We bet on closed rather than open. And what ended up happening is, like, you know, everyone ended up hosting their own information on their own web servers. Newspapers went open, magazines went open rather than closed.
[Michael Eisenberg — 40:52]
You know what's stunning to me, as I think about this? This whole conversation going on now about Anthropic cutting the bindings off of books and scanning them to teach the LLMs. It's like back to the future.
[Josh Kopelman — 41:03]
And then, you know, and then Google— there was a period of time where Google was doing— they had a massive class action lawsuit in that area.
[Michael Eisenberg — 41:08]
You were way ahead of your time.
[Josh Kopelman — 41:09]
Now, we had permission from every single source that we put in there. You know, the other thing— I learned so much. The other screw-up was we went to the publishers with a business model. We said, "We want to sell to consumers for this price, and we'll set aside that amount of money." It was only like 18 months later that we realized if we need to change our price or our strategy, we had to go back and renegotiate with every single one of these publishers to have the flexibility to be agile.
[Michael Eisenberg — 41:41]
And what happened to Infonautics in the end?
[Josh Kopelman — 41:42]
Infonautics went public and ultimately ended up merging with a company called Tucows that I believe is still around now.
[Michael Eisenberg — 41:42]
Is it really, Tucows?
[Josh Kopelman — 41:42]
I think so. Infonautics outlasted its bankers. It was Hambrecht & Quist, Cowen, and Oppenheimer.
[Michael Eisenberg — 42:02]
But Oppenheimer's still around.
[Josh Kopelman — 42:04]
Yep, but—
[Michael Eisenberg — 42:05]
And Cowen, I believe, is still around, actually. And Hambrecht & Quist became part of J.P. Morgan. This was the old days of the Four Horsemen.
[Josh Kopelman — 42:11]
Yep.
[Michael Eisenberg — 42:12]
Hambrecht & Quist, Robertson Stephens, Montgomery Securities. And.
[Josh Kopelman — 42:12]
Look at you.
[Michael Eisenberg — 42:12]
I'm doing a lot of work on this...
[Josh Kopelman — 42:12]
Good memory.
[Michael Eisenberg — 42:12]
...These days. I think that time may be coming back. I'm hoping it's going to come back on the Tel Aviv Stock Exchange as the place where these Infonautics companies go public, maybe with a little more revenue, even adjusted for inflation, than that. And so at 20, I was— the university I went to, where I edited the college paper, was one of the first places to get desktop publishing, which nobody knows what that is anymore. But PageMaker, Aldus PageMaker—
[Josh Kopelman — 42:44]
Yeah.
[Michael Eisenberg — 42:44]
And Quark. In the days where the real newspapers, like the ones you did business with, wouldn't let desktop publishing, because that's not the way you lay out a newspaper.
[Josh Kopelman — 42:44]
That's right.
[Michael Eisenberg — 42:44]
The Harvard Crimson wouldn't have it. And so I'm thinking today about 16- to 20-year-olds. And I had sitting in that seat not long ago, a young man named Amir Fisher, who's 16. He made a fascinating observation. He said that my high school class is divided between people who spend their time on AI and learning on YouTube versus those that are on TikTok and Instagram. And the brain can compound a lot faster taking in content from YouTube— and he's talking about educational content from YouTube— and AI, whereas it decompounds, so to speak, when it's on TikTok and Instagram, which I thought was a profound comment for a 16-year-old.
[Michael Eisenberg — 43:31]
For anyone.
[Josh Kopelman — 43:31]
It's a profound comment.
[Michael Eisenberg — 43:32]
It's a profound comment. But the point about the 16-year-old, the teenage brain compounding at that rate is stunning. So here you are at our ripe old age, but you started compounding when you were in college. What are you telling kids today who are teenagers to do to compound their brains or to compound the learnings, for example, that you got at Infonautics at that time, that you then parlayed into Half.com and a venture career?
[Josh Kopelman — 43:59]
I think it's an incredible— it's a scary time because there's so much uncertainty. The aperture of possible scenarios is so broad. But I also think it's an incredible time in that the ability to use AI to learn and to create is unlike anything I've ever experienced before. And so if you are 16 years old and you're into fantasy football, great. You could do fantasy football. Just— Claude, code a tool to help you win the draft. And, like, it's not hard to do, it's pretty forgiving, and it gets better with every release.
[Josh Kopelman — 44:40]
If you're into research, great. Claude— like, I just believe that you have the ability to, like, create things. Look, by and large, most of our societies have created a culture of conformity. And what does that mean? It means that they figured out that in order to educate the widest number of people, to achieve the widest possible outcome, to get as many of them up to middle class, they have a pipeline and it's this conveyor belt that we put kids on. We put them on this conveyor belt and we say, all right, in high school, you're gonna take these classes and a teacher's gonna stand up and teach you this thing from this curriculum.
[Josh Kopelman — 45:20]
And then towards the end of high school, you need to have the right summer internships or summer activities to get into, you know, the right recommendations to get into the right college, where, again, you need to have the the right major, right advisors, right summer jobs in order to land. And like, these kids are on this conveyor belt of conformity. You know, like, there's an overused term, but I think it's true, which is, like, we've taken the agency away from these kids. Even in college, they show up their first day, the teacher hands them, here's the syllabus for the class. Like the students don't need to guess what to read. The teacher tells them what and when. The students don't need to guess what's going to be on the test.
[Josh Kopelman — 46:04]
The teachers actually give them test prep. The teachers give them the cheat codes to the class and say, "Your final is 50%, the midterm is 30%." Class participate, whatever it is, they know what winning looks like. Yet in life, no one, when you're starting a company, no one tells you what to read and when to read it. No one tells you what winning looks like. And so much of what, like we've seen with founders is, they can't follow a map. They have to build their own map. Founders are cartographers and we raise navigators. And I think AI is enabling— it is reducing the friction to be a cartographer, to have agency to build and to create.
[Josh Kopelman — 46:53]
You know, like, what— when, for most of our careers, software engineers were the folks that created value.
[Michael Eisenberg — 47:02]
Yes.
[Josh Kopelman — 47:03]
They sat down and listened. You know, they were the ones, they were like the scribes who could like hear what you want to build and instantiate it in their language, which was code. And they were the limited commodity. We're rapidly approaching a point where English is going to be the language of creating software or creating something. And that's going to be massively freeing. So that for me, I think that at least for the next five to 10 years, not just being AI-native, but AI-fluent and taking the tooling that's already so powerful and bringing it into your areas of interest, your areas like the areas of focus.
[Michael Eisenberg — 47:50]
I want to ask a nitpicky question by asking, is AI a language or a tool? Is English the language and AI the tool or is AI a different language?
[Josh Kopelman — 47:58]
I don't know. I would argue that the way it's being built today is English is the language. Right? I found myself up till three in the morning because I have so many Claude coding and I'm not a strong engineer and I'm speaking English to it.
[Michael Eisenberg — 48:14]
What are you running?
[Josh Kopelman — 48:15]
So I'm building MCP servers for things that don't have MCP servers because I'm hooked on like the ability to query things. So, you know, whether it's, like, "Oh, you have Ring cameras. There's no MCP." No problem, I'll build one. And you know, and so that's pretty much what I'm doing. And my basic setup is just a Claude Code setup. Like it's, it's a tool. Like you could be a collector of baseball cards and you want a tool to manage that. You could be in fantasy sports, you could, you could be doing medical, you could be like, you think you want to be a doctor? Great. Like just build something.
[Michael Eisenberg — 48:45]
Is your wife building?
[Josh Kopelman — 48:47]
She is building with different tooling. So she's using a program called Town, which is a First Round company, but it's, like— it's basically like a managed Claude bot type of thing. And she's using that to help her manage her life.
[Michael Eisenberg — 49:02]
My wife decided this summer to teach herself Claude Code.
[Josh Kopelman — 49:05]
And?
[Michael Eisenberg — 49:06]
I'm waiting to see the results still. No, no— she just started a few weeks ago. And I think it's inspiring. It is. It's inspiring, and I think it's giving—
[Josh Kopelman — 49:16]
And I think five years from now you won't even view it as code.
[Michael Eisenberg — 49:18]
I agree.
[Josh Kopelman — 49:19]
Five years from now, like, there's so many things that YC got right that I didn't give them credit for in the beginning. I was skeptical, but one of the things that I think they realized early on was that it's far easier to take a 23-year-old engineer and teach him or her business, teach them how to sell, teach them what the words revenue and margin mean, and the hunt for product-market fit than it is to take someone who spent 20 years in business and teach them how to code and sort of that whole generation of, you know, sub-26-year-old technical founders just got put in business because of that. And they were right and it created a ton of value for the ecosystem. It'd be interesting to see five years from now if that is still the case.
[Michael Eisenberg — 50:08]
I think that's profound.
[Michael Eisenberg — 50:09]
I agree with that.
[Josh Kopelman — 50:09]
Because I would argue that they previously recognized the value that these scribes have, and these scribes captured so much of the value. Why should they be translating someone else's program? Business idea. We'll just give them the business. And it was so much easier to teach them business than teach everyone else to code. Not today, but maybe 2030. Around 2030, where you just, like, extrapolate the data points, I wonder what it means for the— and again, I don't want to speak in absolutes. Of course there's going to be massive opportunities for technical founders, but I think there will also be a ton of value unlocked, created, for non-technical founders who previously didn't even know where to start.
[Michael Eisenberg — 50:53]
So if that was YC 12 or 13 years ago and today the world is headed to what you described.
[Josh Kopelman — 50:58]
It's one scenario.
[Michael Eisenberg — 50:59]
One scenario. What are you investing in today?
[Josh Kopelman — 51:04]
Today?
[Michael Eisenberg — 51:05]
What do you want to invest in today?
[Josh Kopelman — 51:07]
I mean at the seed stage we pick people and problems we want to—
[Michael Eisenberg — 51:11]
No theses?
[Josh Kopelman — 51:12]
What?
[Michael Eisenberg — 51:13]
No thesis.
[Josh Kopelman — 51:13]
We are not thematic.
[Michael Eisenberg — 51:14]
Okay, so no theses but what do you want to invest in? People in—
[Josh Kopelman — 51:17]
I mean, no, but we invest so early that by the time we as a firm are smart enough to come up with a thesis, it's too late. So we're hearing from founders about problems that we didn't know about. We love founders who have gone unreasonably deep with customers. That could be a technical founder, could be a non-technical founder. And we love problems that are urgent, large and pervasive. And we've done a lot of application layer in AI, but we've also done some infra, we've done tooling and dev tools. We've done military and defense tech, we've done life sciences. In some cases.
[Michael Eisenberg — 51:17]
There's a thesis that
[Michael Eisenberg — 52:07]
AI breaks the seed model. You clearly disagree with that. So give me the case as to why AI does not break the seed model.
[Josh Kopelman — 52:14]
And you're saying it breaks the seed model because companies don't need seed capital to get started?
[Michael Eisenberg — 52:17]
Yeah. Get much farther along. Yeah.
[Josh Kopelman — 52:21]
I don't know. I think that at least what we've seen is that to date, even— let me give you an example. You could have five, you could have 10 different companies using today's tools to create a company in the same space. We see that all the time. There are 10 companies chasing the same market. They all don't build the same thing. It's not like they say, "Oh, we all have access to the great tools." It's not like all 10 of them build exceptional businesses. The deviation of those businesses is massive. Why? It comes down to the people. It comes down to who do they have around the table. And today, it all costs money.
[Josh Kopelman — 53:06]
Whether we're funding— like, now, could things change? Of course. Like if you look, you and I, historically we've been in the money business. That's it. Like, we sell money. We sell money for stock. Like, you're a money salesman and I'm a money salesman. Now we give advice and other things around that, but like we're money salesmen. And what did people who bought our product, the founders, they bought our money. What do they do with it? Historically, they probably spent 60 to 70% of that on people.
[Michael Eisenberg — 53:33]
Yep.
[Josh Kopelman — 53:34]
Maybe now they're spending it on tokens. But they're still going to need the money, and they're still going to spend it. And in a competitive environment where things are moving really fast, where the barriers to entry compress, the need to actually accelerate that spending actually increases.
[Michael Eisenberg — 53:51]
Before I switch gears for a couple of last questions, you said we sell money, which I agree with. And when you sell a commodity product, like money, brand matters.
[Josh Kopelman — 54:00]
Yes.
[Michael Eisenberg — 54:01]
What does the Josh Kopelman and First Round Capital brand stand for?
[Josh Kopelman — 54:06]
Well, I'll talk about First Round. I think if we do one thing, we want to be known for backing founders at that.
[Michael Eisenberg — 54:06]
First round.
[Josh Kopelman — 54:06]
— well, at the "imagine if" stage, right? Like, last year we saw about— over 10,000 businesses, all different. But all those founders used some variation of those two words, probably the most powerful words in history: "Imagine if." Imagine if all children are created equal. Imagine if there was no taxation without representation. Everything unreasonable got started by someone seeing the world differently.
[Josh Kopelman — 54:46]
And every founder walks in because it all is imagination at the stage we see it walks in with their version of an "imagine if." And we believe that through trial and error, through partnering with founders in good times and bad, in the hunt to sort of turn their "imagine if" to reality, we've learned a lot of lessons about that process. And we believe that we could be incredibly valuable. And we've proven to be valuable to founders who want to turn their "imagine if" into an "obvious." It no longer requires imagination to— sort of something real and enduring and durable.
[Michael Eisenberg — 55:32]
What's your "imagine if"?
[Josh Kopelman — 55:32]
For First Round?
[Michael Eisenberg — 55:32]
For you?
[Josh Kopelman — 55:39]
I think for me, I still— I get very excited about the phase that we play. I just get very excited about partnering with founders from day one. And so imagine if there was a partner who's been there, done that, seen that, who could be an ally in your corner. And that's what I tend to aspire to be.
[Michael Eisenberg — 56:02]
So you got involved with the Philadelphia Inquirer, going to switch gears a little bit— the local newspaper?
[Josh Kopelman — 56:10]
Yes.
[Michael Eisenberg — 56:11]
By the way, did you scan that for Infonautics or no?
[Josh Kopelman — 56:14]
No, we didn't do a deal with that.
[Michael Eisenberg — 56:15]
Why did you get— you took over as chairman of the Philadelphia Inquirer, am I correct?
[Josh Kopelman — 56:18]
Yeah. So the Philadelphia Inquirer is the largest US local newspaper that got— that Jerry Lenfest was a Philadelphia philanthropist. He started Gerald Cable and Lenfest Cable and sold it to Comcast and did very well. And he saw the Philadelphia Inquirer and he bought it and donated it to a nonprofit. So Philadelphia was, and I still believe is, the largest nonprofit-owned newspaper in the United States. And he asked me to join the board and I said no. And he asked me a few other times. And then finally there was an incredible investigative reporting series that they did in Philadelphia where they sent people to school playgrounds, reporters, to sample the soil around the schools, and detected a ton of asbestos.
[Josh Kopelman — 57:09]
And it caused massive change both at the state level, but even the EPA coming in and, you know, our kids were playing in that. And when Jerry Lenfest showed that to me, he's like, "Who else is going to do this? Who else is going to be present in your community doing a public service?" And the Inquirer, like all newspapers, is under massive assault, a disruptive business model. And I know the disruptor's playbook. I could sing that A to Z. Being on the other side, you have to sing Z, Y, X. It's going the other way. And that's really hard. Trying to figure out how to help an organization adjust and adapt.
[Michael Eisenberg — 57:52]
And what did you do?
[Josh Kopelman — 57:53]
So we've done a ton of things. We— I mean, when we started off, there were three separate newsrooms. You had the Philadelphia Daily News, the Philadelphia Inquirer, and Philly.com. So the mayor held a press conference, three reporters went. Yeah. You know, baseball game. Three reporters. We went down to one newsroom. We went to a digital-first format where historically you would write an article for the paper and then figure out— like, right now, we were— you know, digital is our product. We've embraced podcasting. We sold our printing press. Right? Like, we had a printing press at a plant and we sold it. It's a little bit like The Giving Tree, where, you know, you keep cutting off branches.
[Michael Eisenberg — 58:32]
You hope it's still there.
[Josh Kopelman — 58:33]
Yeah. And hope you don't end up— you hope you end up with more than a stump. But, you know, our digital product, now we went from having no mobile app to a full mobile app. Digital represents, like, the entire future of that business.
[Michael Eisenberg — 58:45]
Does it make money?
[Josh Kopelman — 58:47]
We are, with philanthropy, we are finally breaking even with philanthropy each year. And philanthropy is going to be a part of it. Like, philanthropy has to be a part of it. And, you know, I think basically the newspaper went from default dead over the last 10 years to default alive.
[Michael Eisenberg — 59:03]
That's amazing.
[Josh Kopelman — 59:04]
Yeah. And look, it's— yeah. And it's not as large of a newsroom, but it still packs a pretty important punch to our community, both in terms of health and wellness and local reporting, but also just a quality of life of living in a town. And I think hopefully we're sharing some of those lessons through our partners, like at the Lenfest Institute, which Jerry set up with other local news organizations to help them evolve as well.
[Michael Eisenberg — 59:32]
So speaking of taking on hard problems and impossible problems, post October 7th—
[Josh Kopelman — 59:36]
Yes.
[Michael Eisenberg — 59:36]
You took on Web Summit and Paddy Cosgrave. Maybe some other people had some hands in that too.
[Josh Kopelman — 59:42]
Yep.
[Michael Eisenberg — 59:44]
You paid a price for that, I think.
[Josh Kopelman — 59:45]
I did.
[Michael Eisenberg — 59:47]
Take us through your thinking. The price you paid, why you decided to do it. I consider you, by the way, among not just venture capitalists but people generally, fearless.
[Josh Kopelman — 59:57]
I appreciate it.
[Michael Eisenberg — 59:58]
Well, it was—
[Josh Kopelman — 59:59]
Look, I think in the States, we were just all traumatized by what happened on October 7th. And I live in Philadelphia. On October 8th— Rittenhouse Square is the main square, it's like Central Park in New York, in Philadelphia— on October 8th, there was a massive pro— like, anti-Israel protest, screaming of genocide, like— the buildings were still burning. We didn't know what happened. And it was the day after, and I think maybe the day after that, Paddy started tweeting about Israel as a genocidal actor.
[Josh Kopelman — 60:39]
And so I just felt like, I don't know, it kind of triggered me, which was I just started screenshotting his tweets because I figured he would at some point want to take them down. And then I started tweeting about it because just a few months earlier, he invited me to— I think, was it Doha? I forget where Web Summit was going to be that year.
[Michael Eisenberg — 61:00]
It was in Portugal or Doha.
[Josh Kopelman — 61:02]
Yeah.
[Michael Eisenberg — 61:02]
I was also invited before.
[Josh Kopelman — 61:03]
Yeah. And yeah.
[Michael Eisenberg — 61:04]
Yeah.
[Josh Kopelman — 61:04]
I don't know. I feel it was a fraction of the commitment you've shown, and I appreciate everything you've done.
[Michael Eisenberg — 61:14]
What's the price you've paid?
[Josh Kopelman — 61:18]
Look, there are people out there who won't do business with me. There are people out there who are tweeting about me supporting genocidal actors. And I'm here in Tel Aviv.
[Michael Eisenberg — 61:28]
You're okay.
[Josh Kopelman — 61:29]
I'm okay.
[Michael Eisenberg — 61:30]
You're okay. You and Rena, your wife, also had the Jewish Encyclopedia.
[Josh Kopelman — 61:35]
Oh, boy. You really dig deep.
[Michael Eisenberg — 61:35]
Converted to digital.
[Michael Eisenberg — 61:37]
We have a crack team here.
[Josh Kopelman — 61:39]
Well, yeah. So when I was—
[Michael Eisenberg — 61:40]
Don't mess with Dalit.
[Josh Kopelman — 61:42]
Well, look, when we had Infonautics, we understood how to take content and get it available online. And I found this encyclopedia. It was the first Jewish encyclopedia ever created. It was published by Funk and Wagnalls who ended up publishing an encyclopedia. And it was out of copyright, so the copyright lapsed. So I said, all right, I'm doing all this stuff for work, scanning all this stuff in and making it searchable. Why don't I make that searchable? And so we put that online. Now we ended up giving it to Sefaria. And it's part of their—
[Michael Eisenberg — 62:12]
They're doing incredible work at Sefaria.
[Josh Kopelman — 62:13]
They really are. They really are. It's part of their collection. But, yeah, that was a random piece of trivia.
[Michael Eisenberg — 62:18]
Have you invested in Israel from First Round Capital? I know the answer to that question is yes.
[Josh Kopelman — 62:21]
Yes.
[Michael Eisenberg — 62:21]
Now you're here in Tel Aviv, what are you looking for?
[Josh Kopelman — 62:24]
Looking for founders picking incredible problems, I think, for us, you know, and probably looking for companies here where the US is their first market, just because that's where we could be the most helpful and impactful.
[Michael Eisenberg — 62:39]
I want to go back to a question I asked before to wrap up.
[Josh Kopelman — 62:41]
Yes.
[Michael Eisenberg — 62:42]
You had a Josh Kopelman "imagine if." Imagine if for the world, or for Israel.
[Michael Eisenberg — 62:48]
What is it.
[Josh Kopelman — 62:48]
Right now? I think narrative gets lost. I think facts are supposed to set you free. The truth is supposed to set you free. It's really hard for people to discern the truth. So my broad "imagine if" would be: imagine if the truth was knowable.
[Michael Eisenberg — 63:11]
What would you do to make that happen?
[Josh Kopelman — 63:13]
I don't know. I think a lot of it comes down to storytelling. I think a lot of it comes down to advocacy and sharing facts.
[Michael Eisenberg — 63:20]
We need a Demo for sharing facts. You bring Chris Shipley back for Demo to sharing facts. You should become the storyteller for this. You're the best at it, I know.
[Josh Kopelman — 63:31]
Well, thank you.
[Michael Eisenberg — 63:33]
Thanks, Josh, for joining me in doing this on short notice. Also, this is fun.
[Josh Kopelman — 63:36]
Happy to do it.
[Michael Eisenberg — 63:37]
We'll do another one.
[Josh Kopelman — 63:38]
Take care.
[Michael Eisenberg — 63:38]
If you enjoyed this episode with Josh Kopelman, please rate us five stars on Apple Podcasts and Spotify. Subscribe to the YouTube channel. If you want to get the content early, subscribe to the Aleph newsletter on our website, Aleph, A-L-E-P-H-V-C. And if you want to learn more about Josh Kopelman, you can follow him on X at J-O-S-H-K, Josh K. I got that right.
[Josh Kopelman — 63:59]
You got that right.
[Michael Eisenberg — 64:00]
Thanks Josh. Appreciate it.
[Michael Eisenberg — 0:00]
A few years ago, the business basically stopped growing. Full disclosure. I thought we should write off the company.
[Yuval Kaminka — 0:05]
If Aleph or anyone else would have injected a little bit of money to help us out, we wouldn't be around today. We want to create something meaningful that is in every home in the world. That's like the type of company that we're building.
[Michael Eisenberg — 0:24]
Almost a nine-month plan to get to where you needed to get to, and it happened in three months all of a sudden. What happened? During the war that started October 7th, unfortunately, your nephew was killed.
[Yuval Kaminka — 0:34]
Yanai.
[Michael Eisenberg — 0:34]
Yanai.
[Michael Eisenberg — 0:35]
Your co-founder Roey passed away.
[Yuval Kaminka — 0:36]
Two years ago.
[Michael Eisenberg — 0:37]
Two years ago, at age 44. Suddenly. How did that affect you personally, and how did that affect the company? And then we're going to go from there to the near-death experience.
[Yuval Kaminka — 0:48]
Looks like it's a fun episode.
[Michael Eisenberg — 0:56]
Welcome back to another episode of Invested. My guest today is Yuval Kaminka, the founder and CEO of Simply. Welcome, Yuval.
[Yuval Kaminka — 1:04]
Thank you.
[Michael Eisenberg — 1:05]
I want to start in an uncomfortable place, can I?
[Yuval Kaminka — 1:09]
Shooting immediately. Okay, let's go.
[Michael Eisenberg — 1:11]
Yeah. So you have what I would call, at Simply, two defining experiences, including one—full disclosure, we're your investor—where I thought we should write off the company.
[Yuval Kaminka — 1:25]
I remember that.
[Michael Eisenberg — 1:27]
You remember that. Also, a few years ago, the business basically stopped growing. And so what I'd like you to do just to start off is to describe in just a few sentences what it is that Simply, then named JoyTunes, does. What's your business? And then I want you to start really with that first challenging moment, we'll call it, which is already back, I think, in 2015 or 16. Is that right? Or 17? When did that first challenging moment happen?
[Yuval Kaminka — 2:00]
It's been a journey.
[Michael Eisenberg — 2:02]
So that was a journey. So start with what the company does in three sentences.
[Yuval Kaminka — 2:07]
Okay, so Simply builds a companion, a creative companion for every single home, every family, every person to make the pursuit of creative hobbies simple and fun. And it means in every home and every family there's at least one person that wants to be able to play an instrument, draw, craft, dance, sing, cook – something which is a very human self expression. And they are very difficult skills and we're building tools to make it very, very easy for you. And it's working amazingly well and increasingly well.
[Michael Eisenberg — 2:42]
Yeah, I know it's difficult because my mother tried to get me to play a musical instrument. She got me a piano teacher. No. A guitar teacher. No. I didn't try drums because I'm clumsy, but my brother did. No. actually we may be the only family that doesn't answer to any of those creative skills. But I did manage to pound out.
[Yuval Kaminka — 3:00]
But that's the point. In every family you would have, you want to do that, right? You're looking for a best way. What you just described, Okay, I don't want to do it with a teacher. I want a skill, I want to be able to do that. I want to play piano, I want my kids to play piano. I want to dance, I want to want my, my daughter wants to dance. My kids are drawing and want to draw better. And you know, all that applies to every single family. Every single family. Anyone can do it and anyone can do it way better than what they're doing it now.
[Michael Eisenberg — 3:31]
All right.
[Yuval Kaminka — 3:32]
I think that's, that would be the point. Not necessarily you become a, you know, a professional pianist. Maybe you will and maybe you won't. I'm not, I'm not, I'm not the judge of that. But you can get to a level, every single person can get to a level that you're having fun with a hobby. That you're at a skill level that you can just when you're looking, when you can sit down and draw something and have fun with it. Every single person could do.
[Michael Eisenberg — 3:56]
I will say that my nephew Yehuda, he taught himself to play piano using Simply Piano. So the first product was Simply Piano, then at the time called JoyTunes. You want to just describe what the product does?
[Yuval Kaminka — 4:07]
JoyTunes is almost a different company, right? It was not, not just, it wasn't even a small pivot. It's like, it's like a huge, very separate, more education based company through teachers and education systems and so on. And then we shifted to Simply, which is a huge expansion on many levels, also not just music. So expanding from music to arts, craft and so on, all the creative things.
[Michael Eisenberg — 4:33]
Why don't you describe the piano product, describe the draw product and then we're going to go from there to the near death experience.
[Yuval Kaminka — 4:41]
So both products are beginner to capable. Getting you from nothing. I don't know how to approach this. I don't know what to do. I don't know in the piano, I don't know where to put my hands even to a level of capable. The basic capable where I can play with two hands and have fun, and drawing as well. It's not a copy, like what most, what you have, the comparables, is a copy by reference, by copying just what, you know, YouTube reference or something which is not a tangible skill and, but actually by drawing something that you want to draw or that your child wants to draw, learning about perspective, dimensions, reflections, shading, and so on. And the method to do it in a super, super, super fun way. All of them are working amazingly well. Draw is at the forefront of growth.
[Michael Eisenberg — 5:28]
Okay, we're going to talk about that in a second. Okay, so go back to 2016 now, the company had gotten started in 2012? 13? When did we get started?
[Yuval Kaminka — 5:39]
That was JoyTunes.
[Michael Eisenberg — 5:41]
Yeah.
[Yuval Kaminka — 5:41]
Roughly around that time.
[Michael Eisenberg — 5:43]
No, I get it.
[Yuval Kaminka — 5:45]
And I think that the point you're referring to is a point of transition. That's exactly the transition point. We had this board meeting where Eden, from Aleph, we had this conversation about, okay, JoyTunes is a company with the most value that I've seen, in his words, to consumers. We have to start. It's not like, we have to monetize. And that was a shift to Simply Piano, of not going through education systems and teachers and so on, but doing something which is direct to consumer. The shift is where Simply started, and kind of 2017 is the year that Simply started.
[Michael Eisenberg — 6:25]
But you were out of money, basically. You were close to out of money.
[Yuval Kaminka — 6:30]
We were out of money. We were approaching. It was a very. Yeah, it was a very, it wasn't a fun point. It was a very defining moment. We created a very aggressive plan that included firing a third of the company and we were small. A third of the company at any size is very dramatic. But it was very family community like and was a very dramatic moment with a very strong plan of how we not just get amazing growth, but also reach break-even and beyond, kind of own our destiny and. And over this fact. And at that point was also the write off. I remember a conversation with Eden following a board meeting with the plan. Eden said, "You know, I just want you to know companies do not survive something like this and we can't bring in more capital inside because we have our fiduciary duty.
[Yuval Kaminka — 7:29]
So just, you know, truthfully, we can't do that. But I will support you in any way that I can." Which, as you know, and, anyone listening, we know, it's not a trivial thing to say, because usually you don't— your phone— you don't get— people don't pick up your phone at that point. And he was— "I will help you in whatever way that I can." To me it was a very depressing moment, because, Eden— but we have an amazing plan. Like, it's going to work amazing. Like, why are you writing us off? I'm okay with not getting the capital, but this is— he was trying to be supportive, and it was actually a downer. And we had a plan that was kind of June, and we had a plan.
[Yuval Kaminka — 8:06]
I remember the dates and everything. By the end of the year we will get— or the first quarter of the following year we will get to break-even. I even remember the financials, the numbers, everything. And we got to that within three months. And we give a talk to everyone as part of the onboarding to the company. We're now over 200 people on the team, punching way over our weight, ARR per team member, and all these metrics, overall, today, over all the benchmarks and everything. And every single person that joins today, we have an onboarding session about that moment, as something which is a very strong learning in our journey. But especially the freak-out was actually not firing people at that point, and all that entailed. It was a few months after, when we saw unbelievable growth in terms of velocity, that the two principles of the company, the cultural principles of the company, were born there.
[Yuval Kaminka — 9:05]
And we were lucky. We were fortunate for that to happen to us, that we ran out of money. Otherwise we wouldn't be around today. The things that we learned there, if Aleph or anyone else would have injected a little bit of money to help us out, we wouldn't be around today. It was a learning that we had to go through.
[Michael Eisenberg — 9:28]
What are those two cultural principles?
[Yuval Kaminka — 9:31]
The two principles that we have are co-building. That we all are, everyone. It's not leadership and employees. We're all team members that are co-builders. Being a co-founder is— this is usually when people say co-founder, it's what they mean. But being a co-founder is you will do anything. This matters to you. This is your baby. You will fight for this. You will have resilience and persistence, and you will do whatever it takes.
[Yuval Kaminka — 9:55]
And you were there in the beginning, at the spark, which matters, right?
[Yuval Kaminka — 10:00]
It is a point that it matters. We're taking that temporal element out, but the same principle of this is yours. You are a shareholder, you fight for this. This matters for you. You are impact driven. You will do whatever it takes. No ego. Nothing is too small. That is a very strong element. That is the co-building part. And the impact velocity is a combination of get shit done and first-principles thinking.
[Michael Eisenberg — 10:23]
And what turned it around so quickly then, right? You made the point that it was like almost a nine-month plan to get to where you needed to get to, and it happened in three months all of a sudden. What happened after you fired a third? By the way, my recollection is it was more than 40% of the workforce, but I could be off.
[Yuval Kaminka — 10:44]
It was a third. 21 people to 14. Again, very small, but a dramatic moment. So the manifestation of these two principles— because what we did is, okay, we took everyone that remained, and full transparency of everything. We opened the bank account on the screen, everyone. This is the amount of money we have. These are the simulations. This is what happens if we succeed. This is what happens if we fail. This is like everything. This is the plan. And the plan had this amazing element of focus. There's something so crystallizing about a near-death experience in that sense, figuratively of course. And that just makes it— it's like, okay, these meetings and this conference we were going to go to, it doesn't freaking matter. Like, this doesn't matter and this doesn't matter.
[Yuval Kaminka — 11:39]
And we started the whole pod system that we work in, squads. It started there, basically, of: these are four things that we have to get right. Our plan consists of four things. Each one had an owner. All of us are shared resources, but each one had an owner, and this owner was obsessed. And all the team were obsessed about everything, about the entire plan. And it just worked very, very well. Everyone stayed. Like, we worked around the clock, and we had very smart tests, and we only did these four things. No distractions. A guillotine of focused work, extra hours. And I think we were lucky— I think all four were successful. But it's like...
[Michael Eisenberg — 12:23]
What were the four?
[Yuval Kaminka — 12:25]
So we even had ALTA. We had this kind of synonym for it. So it was moving Simply Piano— it's the beginning of Simply Piano and the monetization of it. So it was the A, the first A was Android. It's very tactical, Android. Lifetime value: we did 6x on lifetime value that year. Teachers: we had a very strong teacher community from the past, and we gave it for free for teachers. It was how to monetize in a smart way for teachers, so they support us and not get mad with us because we have to monetize with them. And Apple relationships, since we're very, very close with all the platforms, and with Apple specifically. But it started then.
[Michael Eisenberg — 13:10]
How did you make the decision to share the bank account with all the employees? That's unusual.
[Yuval Kaminka — 13:16]
That was easy. That was the easiest from all this plan, for everything. We still do it to this day. So, like, every all-hands of the company that we have, every month and a half or so, there's a full count of how much capital we have. It's just a form of context that we should all share. It's not transparency as a principle, because there are things that we have— personal agreements, right? Employment agreements and so on. It's not that everything is transparent, but there needs to be a reason not to share something versus the opposite. And in a lot of places— not all places, but a lot of companies— there's, okay, I need to know, in some way. If you need some context, we will give you, and we will make it— no. Everything is available. Everything is open for everyone. Every context. I can't guess what context you need and don't need. There needs to be a good reason why not to, and sometimes there are good reasons.
[Michael Eisenberg — 14:15]
Your employees could freak out from that. They see the cash balance, they see how much money you're spending per month. Would your employees freak out?
[Yuval Kaminka — 14:23]
If so, you need some— sometimes you do need to manage expectations. Freak-out is destructive.
[Yuval Kaminka — 14:29]
Right?
[Yuval Kaminka — 14:29]
But if we're in a situation— we haven't been since that time— but at that— let's take that moment. It's understanding the situation, understanding that, yes, there are outcomes of this. But now you get so many ideas, and responsibility comes from the team, now that they're thinking of it. It's not someone from finance thinks of ideas how to cut budgets and starts fighting with everyone else; the team comes outside: "You know what? We could open source this, or we could use another service, so I don't need to fly out," whatever. Like, they find— we even had on many occasions, we even had to tone it down a little bit.
[Michael Eisenberg — 15:15]
You can drink the expensive coffee.
[Yuval Kaminka — 15:17]
Yeah, the capital matters, but it's okay. This is impactful. This is a good spend to have.
[Michael Eisenberg — 15:25]
So take me forward now. Growth stalls in the business, right? What year are we talking about now? The growth kind of stalls out for a bit.
[Yuval Kaminka — 15:35]
So from 2017, if I'm going to transition to Simply, we had amazing growth.
[Michael Eisenberg — 15:40]
Amazing.
[Yuval Kaminka — 15:40]
Amazing growth. And then post-COVID— COVID was very, very good for us.
[Michael Eisenberg — 15:44]
We're going to come back to COVID in a second.
[Yuval Kaminka — 15:48]
But yeah, okay. So post-COVID, growth stalled. I think it's not necessarily as, very much a decision. There was a point, again, part of this first-principles way of thinking and being very focused on things, is that in the crisis that happened after COVID it was like, okay, growth is not rewarded by the market. The proxy, the predictor, for a successful company right now is not growth. It's runway, capital efficiency, and runway, and so on. So we made, okay— if that's the case, we can really invest in improving our capital efficiency, our modeling, our infrastructure, like a country does in times of crisis. Like, let's work on infrastructure.
[Michael Eisenberg — 16:34]
Yeah.
[Yuval Kaminka — 16:34]
And roads. So we worked a lot on roads for that.
[Michael Eisenberg — 16:38]
This is a purposeful decision to—
[Yuval Kaminka — 16:40]
A very purposeful decision.
[Michael Eisenberg — 16:41]
Because you believe the stock market, basically, or investors, didn't reward growth.
[Yuval Kaminka — 16:46]
Exactly. And we turned to profitability, went to profit very quickly.
[Michael Eisenberg — 16:50]
But it's hard to restart growth from there, isn't it?
[Yuval Kaminka — 16:53]
It's, again, it's Eden again, and I'm going to quote him a lot. We're very close and.
[Michael Eisenberg — 16:59]
We like him.
[Yuval Kaminka — 16:59]
We all— I think we all like him. Good guy, keeper for sure.
[Michael Eisenberg — 17:06]
Yeah, listen, I'm keeping him around. You know what my wife says: if I wasn't married to her, I'd be married to Eden. So—
[Yuval Kaminka — 17:14]
Which— your partnership with Eden is one of the biggest mysteries of life, for me. Just how different, and the relationship that you.
[Michael Eisenberg — 17:26]
How different what?
[Yuval Kaminka — 17:26]
How different you two are.
[Michael Eisenberg — 17:28]
Oh yeah.
[Yuval Kaminka — 17:29]
And the way that you think about the world, it's amazing. It's like— I— you don't know this, but I analyzed this with people from Aleph that joined our team after a lot, and with Eden a little bit, and so on, about this relationship, this beautiful relationship that you built. But we can talk about that.
[Michael Eisenberg — 17:47]
Yeah. I didn't know that there was a psychoanalysis going on behind my back, but I'm glad to hear that it turned out okay.
[Yuval Kaminka — 17:54]
Yeah, there's a lot to say. We can talk about it. But it was a purposeful decision, and then Eden had said that reigniting growth is going to be very difficult. But because what we did at the time was building the roads, the infrastructure, the modeling, the engines— we started Simply Draw at the time and so on— there is a question of pacing a little bit. Like moving to growth, sometimes the ignition takes a little bit of time. Even just cohorts accumulating again, just the dynamics of a subscription business and so on. It takes a little bit of time. But the acceleration was actually— we moved from being flat for a year and a half or so post-COVID to 25% growth, and then 35, 30-something percent growth, and now 50% growth.
[Michael Eisenberg — 18:47]
So I want to talk about COVID one second. Because I think that was also the seeds of some strategies. So, COVID hits. You have, by the way— everyone should know this beautiful office, it's very musically and creatively inspired, with music instruments and drawing. And it's just a beautiful space. And everyone goes home, but everybody goes home and they're all looking for creative hobbies. So take us through what happens in COVID, and particularly some of the decisions, business decisions, you made during COVID that caused the company to really accelerate.
[Yuval Kaminka — 19:20]
Interesting. So there were two big things that happened at COVID. One was the— go home, but that we got a very good view of a passion for people. So it's more of— we got this. We said, it's like you get a crystal ball that tells you the future and gives you an underlying of human need. Going back to where we started, right? Basically everyone wants to play piano. We only had piano, we had the beginning of guitar at the time. So we only enjoyed COVID and the piano times. And so everyone wants to play piano, basically. Now they have a bit more time, which is a question of tools, of how accessible and easy and so on. So we got this glimpse of the future. And at the same time, just marketing was very cheap. So the combination of these two things created a very strong effect. We were very cautious.
[Yuval Kaminka — 20:16]
Even the analogy that I used was— as a company, I want to build a huge— we both want, you know, we want to build a huge company. We want to go into every home, we want to go public. We want to create something meaningful that is in every home in the world. That's like the type of company that we're building. So as a company, it's like I'm going to the gym and I'm always working on my muscles. But someone came in at night and replaced all the weights to be feather, feather weight. And that's the parallel to the marketing spend just being very cheap and efficient. So working as a company, I can enjoy it. It's like, look at me, I'm amazing. But I know that this is not real. I'm not actually much better at growth as a company. And that one day— and we knew that because we had amazing data science that went over every quarantine in the world, so we could actually predict everything that's going to happen.
[Yuval Kaminka — 21:15]
So we knew these weights are going to go back. So if I want to work on my body, if I want the muscles of the company, I need to work extra hard. I need to stack weights on top of each other. And I— so we didn't squeeze the lemon. We didn't. So we worked more on usage and retention and content. We accelerated working on guitar. We had, okay, this thing is happening. We need to prepare for when it de-accelerates. Which is why, after— it was a decision, post-COVID. The fact that it was a decision to stall growth and move to profitability was that it could be a decision, and not, you know, this panic move of "oh, no growth." No, we were— we knew.
[Michael Eisenberg — 21:59]
Talk to me for a second about your background. By the way, were there any marketing gimmicks during COVID? Like, give it away for free at all? Did you— I believe you, like, you added a family subscription at some point.
[Yuval Kaminka — 22:11]
It wasn't a gimmick. It was things that we wanted to test out. We did give some things that we do to this date, when there is a big crisis somewhere.
[Michael Eisenberg — 22:21]
Yeah. That's what I'm getting at.
[Yuval Kaminka — 22:22]
We like to give it for free. So we started. We had this time— I think the first quarantine was in, if I'm not mistaken, I think it was in Italy, and I think we gave it for free there, in the beginning, before it was kind of—
[Michael Eisenberg — 22:40]
So when there's a quarantine in Italy, you just say, okay, Simply's free in Italy?
[Yuval Kaminka — 22:44]
Yes.
[Michael Eisenberg — 22:45]
For how long?
[Yuval Kaminka — 22:47]
If I recall, this was some time ago. But if I recall, it's like a month or two.
[Michael Eisenberg — 22:52]
Okay.
[Yuval Kaminka — 22:53]
That it was free. You have the privilege to work on a domain that gives a lot of comfort to people in times of both good and, what's less trivial, during bad times. So it comes with some level of responsibility during these times. Yes, it was a calculated thing, but not a gimmick.
[Michael Eisenberg — 23:09]
If you're interested in finding out ahead of time what's going on in Israeli tech, what the latest trends are, who's breaking not only news but breaking the trend lines, then you want to subscribe to Aleph's newsletter. You can sign up right in the show notes, in the description of the show. Please subscribe to the newsletter. What is your background like? First of all, do you play an instrument?
[Yuval Kaminka — 23:30]
I play now with kind of with our things. I'm not a musician before. I have a very clear kind of cyber-type background. Did most of my first degree during high school, in the army, in the right units.
[Michael Eisenberg — 23:50]
Yeah.
[Yuval Kaminka — 23:51]
So the journey was laid out to me, the path was laid out for a cyber track. I worked on algorithmic research and cyber companies and B2B enterprise companies and so on. But I was always drawn to impact that I wanted to see in the world, ideally in people's hands, but not necessarily so. It's not B2C versus B2B, but it's more like, this is a change that I want to see, in my humble way, kind of small way that I can affect it, I want to be part of that. So first of all was maybe, you know, being the forefront of that was actually academia, like science. So I went to— did my master's degree in Weizmann Institute, with computational neuroscience, basically computer science and neurobiology, and really enjoyed it immensely. I remember the pitch. I was considering the Hebrew University versus Weizmann Institute. Someone asked, "Well, what if we finish all our coursework?"
[Yuval Kaminka — 24:52]
Like, you know, that's on a scholarship basis. "So, can we just go home?" And the answer was, "You— I don't think you understood. You come here, you are a researcher. If you finish, go read papers and research something." That struck me. It's like, I have to be here. This is amazing. And I did way over on my courses, and in courses I became this teaching assistant. I did a bunch of stuff and I really enjoyed it. And both my advisors offered that I continue working, and funded me for a while further, to continue a PhD with them. But with a lot of respect for the science, I felt I needed application of things. I felt like there's so much that I researched here and I was exposed to that I think could be already used to do things out in the wild.
[Michael Eisenberg — 25:43]
So you're like a neuroscientist and a biologist that's helping people do creative hobbies. Is that the right way to think about this?
[Yuval Kaminka — 25:50]
You know? Yes, we did. I did explore a bunch of stuff. So I'm not— I was agnostic to—
[Michael Eisenberg — 25:55]
You wanted to start a company, you didn't care what you did.
[Yuval Kaminka — 25:58]
No, I wanted to solve a pain.
[Michael Eisenberg — 26:00]
And what was the pain?
[Yuval Kaminka — 26:01]
And the pain that we started with, that took us on a lot of different routes, but the pain that we started with was this pain of starting an instrument. So it started with music.
[Michael Eisenberg — 26:13]
The psychological pain?
[Yuval Kaminka — 26:15]
The psychological– All these kind of 90% of kids that are starting out with learning an instrument and don't finish the first year.
[Michael Eisenberg — 26:21]
Is that a cost pain, a psychological pain?
[Yuval Kaminka — 26:23]
It's not a cost pain. As a parent, you would pay any price for a kid. If they only continue, I'm okay with almost any price for it. It's worth so much. So it's a motivation problem. It's a motivation over these exercises. It's like with any skill. It's very similar to a lot of education and skills and sports. And so in that sense, this beginner-to-capable challenge is common to a lot of domains. And it's a real problem. A lot of great companies built amazing tools in sports that are exactly kind of implementing solutions for that exact pain of how to get to the capable, and how to maintain it, how to continue with it.
[Michael Eisenberg — 27:15]
So you mentioned before that during COVID you released the app or the service free and incurred usage in numerous countries. That began a trend, because also during the war post-October 7th here and during the war with Iran, you also released it free. You want to talk about that?
[Yuval Kaminka — 27:36]
October 7th, that hit us and the country very, very hard. And in the beginning, like most in Israel, we did everything that we could think of to help, from housing and clothing for those affected to making sandwiches. We ran around trying to find places we can assist as a team. And with the passage of time, it became more and more outside— we're actually in a domain that is like our day job, and we don't even invent something. Our day job is super, super, super helpful for healing processes of people. And we can do that. So we started doing more where we're uniquely positioned. That included opening our apps for free here, and it was for a long time, for like a year. Cost us a lot of money to do that. We did this for a long duration, and then also various different projects. And I think the highlight of them was the rehabilitation.
[Michael Eisenberg — 28:37]
We'll come to that in a second. But Israel wasn't the only place you opened the app to, right, over the last couple of years?
[Yuval Kaminka — 28:47]
So we opened in several other areas, but it was mostly we focused on the region. Yes, we did see spikes in usage in the entire region.
[Michael Eisenberg — 28:57]
During the Iran war in particular?
[Yuval Kaminka — 28:59]
Yes, in the Iran war. You really could see kind of spike. The whole region is lighting up.
[Michael Eisenberg — 29:06]
The whole region. There's something that it's like an orchestra—
[Michael Eisenberg — 29:09]
An orchestra in the Middle East, or drawing from the Middle East.
[Yuval Kaminka — 29:14]
Yeah. So there's something about this domain that transcends borders, very human, and transcends— like, the universal language. And a universal parental need and a personal need and a human need that transcends all these fights and borders and conflicts and so on. It's just amazing. A light for everyone.
[Michael Eisenberg — 29:31]
What are some of the comments you got from parents in particular, either during COVID or during the war, about how their kids experience the service?
[Yuval Kaminka — 29:42]
We get very emotional responses. It's interesting to be in a company where it's very common, during user interviews, that people cry.
[Michael Eisenberg — 29:53]
Really?
[Yuval Kaminka — 29:54]
From joy, from being proud, if it's a kid, or for themselves, of achieving something. Let's say even a measure of, okay, we think we got it. We have a good product-market fit indication when you see these very strong reactions to something that we created. And definitely, for people that are enduring something which is more difficult, fighting a disease, and elderly, obviously— these are things that fill a void, help fight, you know, loneliness and so on. For every demographic, there's something that is very important for them that they can achieve with this. If it's a teen, it's an X factor. For every demographic, it achieves something which is very emotional, very fundamental.
[Michael Eisenberg — 30:49]
Is there any specific picture that was drawn that stands out in your head that somehow someone shared as part of a user survey?
[Yuval Kaminka — 30:57]
There are so many. I think one that I can relate to was this generational one. You'd have a child, a father, and a grandfather all holding the same drawing, that each one drew a version of their own. And there was this picture that was shared of the three of them together. And that was, okay, this is a beautiful moment.
[Michael Eisenberg — 31:21]
You know where that came from in the world?
[Yuval Kaminka — 31:24]
I think this was in the Tel Aviv area.
[Michael Eisenberg — 31:28]
Tel Aviv area. So during the war that started October 7th, unfortunately, your nephew was killed.
[Yuval Kaminka — 31:34]
Yes.
[Michael Eisenberg — 31:34]
Yanai. Want to tell us about Yanai?
[Yuval Kaminka — 31:41]
Yes, it's on the more sensitive side, but Yanai, so he was a search and rescue officer in Zikim that morning. And he became, during both his life and what he did before and these final moments that morning, a symbol of leadership. Even though he was kind of a very young leader and learning the ropes of it, he challenged a lot of the common wisdom to create his own path of how he thought leadership could be. And it was based a lot on love, on empathy and love. You have to love people, you have to be empathetic towards them, you have to understand them. There's this one— again, without going too deep into it— this one story. The commanders that reported to him— he gave them an exercise at the beginning of some leadership training course of some sort.
[Yuval Kaminka — 32:53]
And he gave them an exercise of a scenario where a soldier or something is behaving in this way or that way and so on. It's like, "What do you do?" And they were— you know, the punishment: he can't go home, he has to do these chores and so on. There was this punishment entailed with that. And he said, "Okay, I'm going to add new information for you. And this new information is that it's a lone soldier, kind of, family— they have financial challenges, and he is troubled by that. When he goes back over the weekend, he needs to get a job, and he needs to kind of help out, and his girlfriend dumped him, or whatever."
[Yuval Kaminka — 33:38]
"I'm going to add more information. Does your answer change? What are you going to do?" It's like, "Okay, obviously our answer changes, and we're going to do this or that. We're going to help him, assist him, and so on." "But how— how could we know?" "Your job is to know. If you want to be a leader, your job is to know. You need to know what's going on with the people that you're leading, for you to help them to be the best versions of themselves." And that is beautiful, and that is so nontrivial.
[Michael Eisenberg — 34:13]
That's inspiring.
[Yuval Kaminka — 34:14]
And he spent his nights talking to his soldiers, to other people in the unit.
[Yuval Kaminka — 34:24]
He didn't sleep at all. He spent all his nights just talking to people, and he had his notes, and he did a lot of house visits, and he helped in whatever way he could. So that's the type of person. And he became part of— what you said you want to talk about later— part of the music room that we later opened.
[Michael Eisenberg — 34:45]
And Zikim, for those who don't know, is a beach, basically, area just north of Gaza that terrorists landed on and began shooting up many people. And there were search and rescue missions there to help the people, civilians, to get out. But we have something that we don't normally do on this podcast. We have a clip. This is the first of two clips we're going to play.
[Clip — Hebrew video about Yanai — 35:09]
It's amazing. A 20-year-old kid, you know? It's unbelievable. The phrase "Only at night can you see the stars" guides us here, in this room. Every chance we get, with every tour that comes through, we honor Yanai's memory and tell his amazing story. So here we also honor him with the plaque and a little bit of his story. Yanai's coffee cup. They say it was always lying around everywhere, even at home. They say this was probably his cup from his base. Something they found there, and from it they made this special sculpture, at Bezalel. At the ceremony, his parents made a simple request: whenever you can, invite someone for a cup of coffee. Someone you just want to talk to, someone you're in a fight with, someone you'd like to start a conversation with. Invite them for coffee, ten minutes, fifteen minutes, and it opens up the relationship. At the ceremony, his father said he'd call at all hours: "Dad, I need a washing machine for this soldier. Dad, I need..." He was so open, he really wanted to help, and he'd find these people along the way. That's truly inspiring to me, a 20-year-old kid like that. It's amazing.
[Michael Eisenberg — 36:01]
The thing that struck me about this clip about Yanai is the quote, at every night or every night you see stars. And the double entendre, which works even better in Hebrew than it does in—
[Yuval Kaminka — 36:15]
Only at night do you see the stars.
[Michael Eisenberg — 36:18]
Yeah, and it says so much. It's also very related to Simply, right? Which is that there's all these people around the world with these hidden talents, and only when you can kind of get to them in the darkness of their own home, on some level, right? Which is— hey, this app and service comes where you can discover your own talent, do you find stars. It's striking. It's almost like a family trait, to be able to find these hidden stars around the world.
[Yuval Kaminka — 36:49]
It's very strong. It became a mantra. It's from a poem that my brother, Yanai's father, Yal, wrote him before, and it became a mantra of Yanai. And it felt very fitting in the room, where— in a time of darkness, there is light. You find rays of hope and you find good people. And there is a lot of what's in the room, in our domain, which is a domain of light, of spreading light, of giving hope and giving light. Not only in darkness. It's just light.
[Michael Eisenberg — 37:29]
A little birdie whispered to me that he played the piano too.
[Yuval Kaminka — 37:33]
He played the piano too.
[Michael Eisenberg — 37:35]
Did he pick it up from Simply, or was he talented?
[Yuval Kaminka — 37:39]
He was self-taught. A little bit of Simply, but mostly self-taught. Not lessons. Self-taught pianist, and a very shy one.
[Michael Eisenberg — 37:50]
And so this video we just saw showed his coffee cup, the memorial coffee cup, which he left around the rooms—
[Yuval Kaminka — 38:01]
To help him keep awake at night.
[Michael Eisenberg — 38:04]
At night, because he didn't sleep at night.
[Yuval Kaminka — 38:08]
He drank a ridiculous amount of coffee.
[Michael Eisenberg — 38:10]
A ridiculous amount of coffee at age 20.
[Yuval Kaminka — 38:13]
Yes, a ridiculous amount of coffee to be able to keep himself awake to talk to people. So I mentioned before that we explored so many ways in what way we can be helpful. And then the connection was made with Professor Amitai Ziv from Sheba Hospital. He's the manager of the rehabilitation hospital at Sheba Hospital. And he had this vision of how music learning is a fundamental part of a healing process, and not something secondary, which is very revolutionary. It's very innovative in the world. And we hit it off immediately, and it was an amazing, very, very rapid process.
[Yuval Kaminka — 39:00]
We found generous donations, the Greenberg Greenglass family, that helped with the construction of a music room, Harmony Music Room, and donations that we brought.
[Michael Eisenberg — 39:17]
We being Simply.
[Yuval Kaminka — 39:18]
Yeah— for the spark of Simply, of instruments and devices and subscriptions and music therapists. We connected with the Jerusalem Academy of Music, and they came in and brought their students to help with the ongoing activation of the room. And it's beautiful. And in our terminology, in our domain, there's product-market fit, and a very strong one. The music room is fully booked.
[Yuval Kaminka — 39:47]
Departments are fighting over it. It became something very crucial as part of the healing processes for all various kinds of demographics. There's a community of makers that are building instruments that are helping those with disabilities that need different types of instruments. Maybe a good time to mention that they are looking— they also need donations for music therapists, because they want to expand this program and have more therapy inside the room.
[Michael Eisenberg — 40:17]
My son-in-law, he talked about this very openly, was wounded in 2014, and he was a musician, played guitar, and he couldn't play guitar after his injury. And a bunch of guys who were good at hacking things together got together and built him a special implement for his finger, and his hand, so that he could squeeze the chords on the guitar, and he went back to playing. He ultimately recorded a song with Tzahi from Fauda. What's his name? Tzahi Halevi from Fauda. He recorded the song with Tzahi Halevi from Fauda.
[Yuval Kaminka — 40:55]
Beautiful.
[Michael Eisenberg — 40:56]
Yeah. About, basically, the road of life. And I see firsthand how music is part of the rehabilitation process through my son-in-law. You're very regimented at Simply about ROI. I mean, I've never seen a company more maniacally focused on ROI and KPIs. Is there any ROI or KPI to this music rehab room?
[Yuval Kaminka — 41:26]
Yes, I think the ROI is us, right? Is our own. The definition of the ROI. It doesn't have to be a very numerical one.
[Yuval Kaminka — 41:38]
It can be.
[Yuval Kaminka — 41:39]
It's more having a strong purpose, being very deliberate about things, about how the success looks like, and being very focused. If we're going to do this, we need to do it right. And this required a lot of resources and bandwidth to do it right. But it was very important for us to know that there's product-market fit. If this was another room that is half empty and devices that are broken, it's like, no, no. We have to make sure that there's enough, that there's maintenance and there's support, and that continues. That's the only way to do this. It's not.
[Michael Eisenberg — 42:17]
Who built the room?
[Yuval Kaminka — 42:19]
The construction came from this donation that I mentioned, that's kind of from the hospital side. The Friends of Sheba.
[Michael Eisenberg — 42:26]
Yeah.
[Yuval Kaminka — 42:27]
And everything inside it. And the therapy, the ongoing therapy, came from us.
[Michael Eisenberg — 42:31]
Came from you. Did you help build the inside of the room?
[Yuval Kaminka — 42:35]
We— no, no. The design of it came from us.
[Michael Eisenberg — 42:38]
The design came from us?
[Yuval Kaminka — 42:39]
Yes.
[Michael Eisenberg — 42:40]
Yeah. I thought I heard something like that from you.
[Yuval Kaminka — 42:43]
Yeah, yeah. We designed the room with the hospital.
[Michael Eisenberg — 42:50]
Let's see the clip.
[Clip — Sheba rehab doctor — 42:53]
You know, rehab basically depends on the motivation of the rehab individual. Liat was an example of someone whom we could hardly penetrate her very depressive mood and depressive attitude and lack of motivation. It was a truly rare encounter. She came in a wheelchair. She didn't speak at all. She was very much within herself at bed, hardly going out, hardly cooperating with physiotherapy, occupational therapy, and other means of rehab that we offered her. And her eyes literally lit when she was offered to come to the room. She didn't want to sing. She came with her wonderful family, so I told her, "OK, I'll sing, and you just breathe between the lines." That's basically how we started working. I can't really go into detail but basically I had multi-system injuries all over my body. Injuries to my face and eyes, as you can see. Unlike myself. Look at her today. Today she walks without a cane. She's out of the wheelchair. She speaks. The rest is history, because she's done a huge mileage via music therapy that she is hospitalized anymore. If this room hadn't been built, I don't think I'd be where I am today. This room helped me grow and gave me strength in my heart. And it all happened all at once – one day I just started talking. I swear. They worked on it with me a lot - speech therapists and all that. The first word I said was "mom" and she was over the moon. And then somehow I was talking again. Seriously the doctors didn't even understand how it happened. Do you understand how crazy it is?
[Michael Eisenberg — 44:52]
So when you see that story, the music room brought her back to speaking. How does it make you feel?
[Yuval Kaminka — 45:01]
It's obviously speechless. It's like— I'm very proud and happy that this is my— I'm part of this. That I had some stake in this, that we had some stake as Simply, as a team, as everyone involved in this. It's beautiful.
[Michael Eisenberg — 45:30]
I heard that somebody described seeing an amputee sitting down at a drum set and asking, "Wait, can I record my songs here?" What did you feel the first time you watched someone use the room and say, "Hey, an amputee is going to record his songs here, play the drums or record the songs"?
[Yuval Kaminka — 45:51]
So maybe the silly answer would be going to being deliberate. I want to see day-seven retention. I want to see not the first enthusiasm. I want that result. I want the end result of the.
[Michael Eisenberg — 46:07]
Of Liat speaking.
[Yuval Kaminka — 46:08]
Of Liat speaking. I want to see that patient continuing, time and again, and not— because the first impression is it's important, and it's great. And it's like, you come and you jam a little bit and so on, but will this person come the day after? When I was there recently, immediately my instinct was to go around and check that everything is working. And I found this amplifier that wasn't – kind of okay, we need to replace that. And did they clear the room for me to be here, or was it empty, and so on. I want this— this is not this kind of poster thing. We want this to work, and it looks to be working. So we're starting to replicate. We want to do more.
[Michael Eisenberg — 46:58]
Where are you going to replicate? That's what I was going to ask you. Are there other countries, other cities?
[Yuval Kaminka — 47:05]
So the immediate thing that we did, which is a slightly different use case of this, we launched several weeks ago with the Tel Aviv Museum, on the drawing side, of adding this element inside the museum for families and kids and delegations and art therapy and everything, to be able to interact with the art of the museum and draw pieces of art from the museum there. It started recently, and there too, amazing product-market fit. I was like, how do you define product-market fit? Despite the fact that there are a lot of things that are broken, and the projector that is screening the drawings isn't necessarily tight with everything, still we have tens of thousands of drawings made. And this is in a few weeks, with 15 to 20 stations there in the museum. We have tens of thousands of drawings made.
[Michael Eisenberg — 48:03]
You take the art from the museum, and then you kind of draw.
[Yuval Kaminka — 48:06]
And then it gives an instruction with Simply Draw. It gives a tailored instruction for how to make this drawing. And in a session that's fitting for the capacity in a museum, it's like 20 minutes of drawing of some art element from the museum. And then you broadcast that. You put this on the projector and it shows it on the wall, and you have this moving gallery of drawings that the kids are now part of, the musician of the gallery, right? And again, full all the time, to the point that they have to force people out after closing hours. They close the light on the kids.
[Yuval Kaminka — 48:49]
And now we want to look at expansion, both locally, do more of this, and then, or in parallel, start doing it in other countries, US obviously, and in other use cases as well. So we have museums, we have hospitals. We didn't do children's hospitals. I think it applies very strongly there. Someone recently brought up prisons as kind of rehabilitation. That is interesting for us as well. I think there's a lot we can do.
[Michael Eisenberg — 49:23]
This wasn't your only interaction, unfortunately, with loss during this time. Your co-founder, Roey.
[Yuval Kaminka — 49:29]
Looks like it's a fun episode.
[Michael Eisenberg — 49:31]
No, I think an important episode, because there's this unique combination of tragedy and a company that brings such joy. I mentioned my nephew learned to play the piano with this. My kids have all used Simply, by the way. They're more musical than their father, because they got it from their mother. And I have run into thousands of people, probably at this point, who have taken on a creative hobby through Simply, and it really incredibly brings such joy. And I think the striking thing about this company, as we mentioned, the challenge of laying off a third of the company, the growth stalled, at least from our perspective— you say it was the infrastructure, either way, it doesn't matter— restarting that growth is stunning. This is such a scientific company. You really created this pod structure that so many companies have emulated, which I want to come back to at the end. And you're a totally KPI-driven company, and you've just overcome an incredible amount of things, while accelerating, you're bringing more joy to the world through this. And as I said, your co-founder Roey passed away.
[Yuval Kaminka — 50:35]
Two years ago.
[Michael Eisenberg — 50:36]
Two years ago now, at age 44. Suddenly.
[Yuval Kaminka — 50:39]
Suddenly. Unexpectedly.
[Michael Eisenberg — 50:41]
Yeah. And within, I think, five or six months of your nephew. And Roey, I think, was with you in the army unit. He was your commander in the army unit before starting the company. How did that affect you personally, and how did that affect the company?
[Yuval Kaminka — 51:01]
So the effect was obviously meaningful. Roey, besides being one of the most brilliant people I've ever had the privilege of working with, and I've worked with a lot of very, very, very smart people. He was my best friend. We had a lot of past between us, traveling in different places in the world, and our partners, just the two of us and with our partners. And he was my best friend. And the impact of it is obviously— okay, so it impacted the company obviously. He was a beacon for a lot of people, and he held a lot of stuff, and a lot of people depended on him, including myself. And so over the past two years, almost three years, a lot of people have been asking me, where do I find the strength, with everything that happened, this very, very difficult time on a personal level? Do I find the strength to continue with the startup grind and with board meetings and investors and all that?
[Yuval Kaminka — 52:21]
And my response is that it's sort of the other way around. Working in something like what we do, and with the people that we do this with, is what gives me strength to deal with everything that is happening. You once— I don't know if you remember this even— but you once asked me, years ago, how do I cope with the loneliness at the top. And I remember— I don't know if you remember the response— I pondered upon this, and then I said, well, I feel the full spectrum of emotions that you have, good and bad, often on a daily basis. But not loneliness. One of the principles of that co-building, which is implemented, we bring people in, we expect this from them, and we grow them into it.
[Yuval Kaminka — 53:20]
We are partners. I have a lot of partners. I lost a co-founder. As a company, we lost a co-founder, but we have a lot of co-builders. So we overcame, or we grew. We didn't grow stronger because of this, but we did grow stronger. The weird thing is that business has been amazing in the past two or three years.
[Michael Eisenberg — 53:44]
Your growth and your revenue per employee is just stunning.
[Yuval Kaminka — 53:46]
And everything.
[Yuval Kaminka — 53:49]
So this is because of this very, very, very strong partnership, and the way that we work, that allowed us— So the loss is much more on the personal level. And I have Roey with me— I ask him questions, he disagrees with some of my decisions. I know which— I have an argument and, unfortunately for him, I have an advantage and I win. But not always. Sometimes he wins the arguments. And I do feel a gaping hole of regret. Dont know if regret is the right word, but, like, a miss of him not being around. He would be so proud of what we're doing and the results that we're achieving, and he would have an amazing freaking fun time. He would celebrate all the things that we're doing with AI and beyond. He would have so much fun.
[Michael Eisenberg — 54:55]
Before I get to the wrap-up, I want you to talk through the pod structure, because you've also really innovated on this many years ago, and the company has grown a lot since then, both in revenue and number of employees, and pretty explosively transformed itself through AI pretty meaningfully over the last, well, a bunch of months to a year. But the pod structure persists. You've built what I think is an incredibly scalable, replicable, almost maniacal model.
[Yuval Kaminka — 55:25]
So it's first principles meets organizational structure. It's the same thing. It's, okay, what is it that we want to achieve, and what's the best way to achieve it? And when you have— so we start with an OKR, we start with an objective. Okay, we want a certain effort to happen, and then we go into, okay, what's the team? What's an exciting team to achieve that? Who needs to sit— it's a very practical question— who needs to sit next to whom in the open space for the most amazing results. And that's basically a pod. So you want it to be— it's a min-max question. You want it to be the smallest amount of people to be able to run fast, because the more people, it's more opinions and more processes and more— it becomes— you can't have a brainstorm with 10, 12 people. Definitely not more than that.
[Yuval Kaminka — 56:21]
But these people, as a small team, will have an unbelievable amount of context on the problem and the challenge and the business challenge that we have. And they will do whatever it takes to achieve that thing. And it often, it doesn't have to be, but it often creates a multidisciplinary team, and so on. And the way you write that, it's very scalable, to the point of, let's say I just need to break down these OKRs. I need to break down the business achievements that I want to achieve. And it could be all the developers are sitting together— I could say, oh, you know what, they want an infrastructure software element, infrastructure. That's my plan for the next six months in some area. It's like, okay, so we need five developers working together and doing just that.
[Yuval Kaminka — 57:11]
So just being deliberate about not— okay, all developers are sitting together, not the departmental, all marketing. And that optimizes on communication between them and on training, on-the-job training and so on. It optimizes on that, which is okay. But if we're optimizing on something else, we would want a different structure for that. The disadvantage, which is why this time is also exciting, is that it's unbelievably bad with onboarding. It's like training someone to this train of thought— or you going into having only two developers in a team, and you're immediately thrown into, I need to understand the customers. As a developer, I need to understand the customers and the marketing, and working with a marketing person and the product and the designer and everything. It's like an overload. So it's very hard for onboarding, it's very hard for hiring.
[Yuval Kaminka — 58:08]
It means that we hire problem solvers more than disciplinary professionals, but problem solvers. And as you can imagine where I'm going with this, it's amazing with AI, the fact that first of all I can hire less. So I need to onboard fewer people. So hiring, obviously, but a lot, a lot of positions— but hire less, every person could do more. And the sheer fact that we always hired for problem solvers, and not necessarily a lot of experience in Java, but someone that is, "I will solve this, whatever, in whatever way possible," is very fitting for the revolution that's happening.
[Michael Eisenberg — 58:45]
So I want to wrap with the following. So we talked about your nephew, and we talked about my partner, Eden. Eden has a rule that you never invest in brothers and families; it's a recipe for disaster. It comes up all the time, because for some reason there are a lot of brother founding teams in this country. Turns out that at Simply, your brother Yigal is, I think, the head of music.
[Yuval Kaminka — 59:12]
Music, and he's leading now a kick-ass music AI research team.
[Michael Eisenberg — 59:16]
Your mother, who I believe is a psychologist, is that right? And was the head of the Israeli HR Association.
[Yuval Kaminka — 59:25]
No, not a psychologist. HR. HR, pure.
[Michael Eisenberg — 59:27]
Israeli HR Association. Dr. Shlomit Kaminka was your chief consultant on performance reviews, or a consultant on performance reviews, at some point.
[Yuval Kaminka — 59:37]
I think not formally. We had help from— if that's the point. We had one of my brothers, another brother. There was a time where another brother actually conducted research. He has a PhD in education, and he conducted formal research for us on the impact of what we're doing. So it was kind of a controlled study, with unbelievable results. But that's like— yeah. So he was part of the company for a little bit.
[Michael Eisenberg — 60:07]
Are there any complexities in this?
[Yuval Kaminka — 60:09]
Of course. And I would say so. You know, we spoke about Roey as my best friend, regardless of Simply. So I started with my brother and my best friend. The company, it has to— so this would not be, as tips go— this is not, you know, "Okay, you should start your company with your family and friends." I know exactly— they know my capabilities, I know their capabilities, and we have this fundamental, strong trust between us. Which means that we did, in the beginning— we spoke a lot. We had unbelievable communication. Everything is open. You don't leave— we had these rules, like, you don't leave anything behind. Everything is open. Feedback, anything, everything is open, and expectation settings, that we all knew that we are here for the company. Meaning there will be a point, or there might be a point, where we can't grow to be what the company needs us to be.
[Yuval Kaminka — 61:08]
I kept saying that, as a CEO, that this is not this ego trip. I'm on this path. Every person that joins the company breaks my record for how many people I led. I didn't know if I'll enjoy being a leader of 100 people and if I'll be good at it. And I have the same question now on 500 people, if I'll enjoy it and if I'll be good at it. And if I don't, I need to trust people that tell me that we need, as a company, someone else to lead. So the same type of expectation we had between us. And we separate hats. So on Shabbat dinner, we don't talk about work.
[Michael Eisenberg — 61:47]
And you managed to keep to that?
[Michael Eisenberg — 61:50]
Zero talk about work.
[Yuval Kaminka — 61:52]
10%.
[Michael Eisenberg — 61:52]
And if there's disagreement, who makes the ultimate decision?
[Yuval Kaminka — 61:56]
So it's based on our ownership in the company.
[Michael Eisenberg — 62:00]
Got it.
[Yuval Kaminka — 62:01]
It's a context. There isn't a formal hierarchy in terms of who is valued more. There's a hierarchy of context, of ownership and context. Right? Yigal is an owner of his domain. I do not make decisions in his domain.
[Michael Eisenberg — 62:20]
Last question. You're still on the journey at Simply—
[Yuval Kaminka — 62:24]
Some would say in the beginning.
[Michael Eisenberg — 62:26]
Some would say in the beginning. And obviously the last two and a half years have been a journey. If you were giving one piece of advice, either to yourself or to other people out there, what would it be?
[Yuval Kaminka — 62:44]
The advice that always comes up often, that I hear all the time, and I would give myself in a heartbeat, is velocity. It's always about kind of velocity. Faster.
[Michael Eisenberg — 62:57]
That's the startup advice. What's the personal advice you'd give over the last two and a half years, or 12 years, however you choose to think about it?
[Yuval Kaminka — 63:09]
Work on things that matter, and it's actionable. It's not just this. So there's no double bottom line. I don't believe that. And it's not like we're growing like crazy and we have this huge companion in every household, and we're in the future of how this world is going to look like in the world of AI, with people that have more time and more need for this. And we're strong believers where we see that AI is elevating humanity and elevating creativity for people. And we're part of this trend that is happening in the world, that is evolving. This is something that is very strong, and amazing financial outcomes for you guys.
[Yuval Kaminka — 63:53]
Freaking amazing financial outcomes. But to have the strength to do that over time, with things that happen for us— no one predicts that, in that startup journey, of what happened to us. But there is so much grind, like in the regular path. There's so much, and you need to have so much strength, so much resilience. It needs to be— or it's much more helpful if you do it on something that you believe needs to happen in the world, that gives you so much strength, and with people that can share the load with you.
[Michael Eisenberg — 64:27]
Do you worry about competition, like Duolingo thinks about giving away music for free?
[Yuval Kaminka — 64:32]
It's not that I'm wary of it, we're aware of it. We look at competition all the time, and obviously it's a very exciting domain, so there are obviously a lot of interesting competitors out there. We learn from them, and we know they learn a lot from us. We learn from them and we just— we're better. We need to make sure, regardless— it helps us. Having a competitor helps us define how we're going to be better. If you're lacking that, you need to disrupt yourself all the time. And how can I be better? With a competitor, it just makes it easier. So it's very helpful.
[Michael Eisenberg — 65:16]
Yuval, thanks for joining us on Invested. I appreciate it. If you enjoyed this episode of Invested and found it meaningful— because I think this was an extraordinarily meaningful episode of Invested— please rate us five stars on Spotify and Apple Podcasts. Subscribe to the YouTube channel. Don't forget to subscribe to the newsletter. And if you're looking to follow Yuval Kaminka, you can find him on both LinkedIn and X at Y-U-V-A-L-K-A-M-I-N-K-A. That's both on X and LinkedIn. Thank you, Yuval.
[Yuval Kaminka — 65:47]
Thank you.
[Michael Eisenberg — 0:00]
You were the investor in what is one of the top 10 exits of all time, Wiz. And not all time in Israel — all time. You also are the inventor of CAPTCHA, which I think is the bane of existence of many people.
[Gili Raanan — 0:13]
In many, many cases, most cases, I know I'm an investor after probably 10 minutes, and then it takes me a few years to figure out why. Being smarter is always better, but it's not the most important thing. And that attracted me to the kid whose parents went through ugly divorces. Those people who went through those experiences and managed to overcome, those are the people I like to partner with and go for the journey. As a person, I'm never happy about what I achieve.
[Michael Eisenberg — 0:50]
What about your childhood makes you unsatisfied?
[Michael Eisenberg — 1:00]
Welcome back to another episode of Invested. And the truth is that I have been wanting to do this episode with this guest since I started this podcast. I'm pleased to welcome Gili Raanan.
[Gili Raanan — 1:11]
It's an honor to be here, and I don't know why we have been waiting so long.
[Michael Eisenberg — 1:16]
It's two busy schedules, I guess, is part of the issue. But I want to tell everyone why I've been wanting to do this. There's a few reasons. I was at Benchmark and spun out and did Aleph. You were at Sequoia and spun out and did Cyberstarts. Not only that, but I think it's fair to say that you are the most successful venture capitalist in Israel and one of the most successful in the world. And you have a very low profile, but everybody knows who you are. And when you talk to your entrepreneurs, not only they say they get a lot of help here, they say you're a mensch. And since this podcast is about values that create value, it's been important for me to have you on the podcast. So thanks for coming on. When we started Aleph, one of the things we said was we're not going to invest in cyber in Israel. And why did we say that? We didn't think we had edge against you and other people. And the other reason was that cyber was producing what I would call mediocre exits, that is, outside of Check Point at the time. But you took the exact opposite approach and did all cyber all the time. So I'd love to understand the origins of the strategy that you adopted.
[Gili Raanan — 2:26]
You know, back in 2018, left Sequoia and I made two decisions. One is more idiotic than the other. One decision was to focus solely on cybersecurity. And in 2018, cybersecurity wasn't cool. They didn't even call it cybersecurity. It was called IT security, information security. And as you said, investors stayed away from IT security, because you couldn't really make money investing in IT security. You could sell a company to Cisco, Check Point, for $100 million, and that's about it. So not very exciting. The second decision was — even coming out of Sequoia, and I have tons of respect to Sequoia, I think it's one of the best teams ever in VC, and I couldn't do what I'm doing today without, you know, working and watching legends like Michael Moritz or Doug Leone or Jim Goetz. One thing I felt that is completely broken about early-stage investment is the focus on the business idea and the technology. I felt that we are spending endless hours analyzing ideas, and at the end of the day it's a big waste of time, because the founders either lie to us about the ideas they have, or they don't know, or they change their mind after three or four weeks. So why waste calories on analyzing technologies and business ideas that would not be in our life in a few weeks, while the most important thing is the person that's sitting next to me. So I told myself, I'll be a purist. I would not ask a single question about technology, product, or business idea. I would simply ignore those elements. Because, you know, there are many investors that say that of course they focus on people, they invest in people, you know, people are the most important thing in VC, et cetera. But they do ask a lot of questions about what you want to do. And I decided I would simply do zero of that, and I would spend all my time, you know, asking entrepreneurs about their mother and about their childhood, and I would use that information to decide if I want to be their long-term partner for the journey. And those were the two decisions. Cyber — if I summarize, cyber because I'm lazy, and ask no questions about technology and products because I got tired of being manipulated at seed stage investments.
[Michael Eisenberg — 6:08]
What's something that somebody tells you about their mother that causes you to invest?
[Gili Raanan — 6:14]
That's a great question. Because, you know, the moment you decide to base all your investment thesis on the person, it forces you to really go into a very deep and long and sometimes dark journey to decide, okay, who's the person I want to invest in? And it begins with the anti-profile — who I don't want to invest in. And one of the first — it wasn't even a decision, it was just a conclusion — that I don't like to, I don't plan to invest in the smartest kid in the block. 26, 27 years old, you start your first company and you'll face challenges. And one thing for sure, when you start a company, you'll face challenges. What would happen to you? Would you be able to deal with those challenges? Would you collapse? Would you stay away? Would you give up? That's a huge risk for me as an investor. So those are the elements I like to de-risk. And IQ doesn't help here. IQ helps. Being smarter is always better, but it's not the only thing that matters. It's not the most important thing. What matters for me is the ability to deal with challenges. And the best proxy to that in childhood, and with relationship with your mother, is to meet people that faced some real difficulties in life and managed to overcome those challenges and show some early signs of greatness. The signs of greatness you can show when you are 20 years old. They didn't, you know, they didn't win the Nobel Prize, but they did something extraordinary, although their starting point wasn't perfect. And that attracted me to the kid whose parents went through ugly divorces, the child who grew up without a father figure in a family, to the girl who was socially isolated and was kind of weird, to the boy who lived in a closet for a while and felt very ashamed and disconnected. Those people who went through those experiences and managed to overcome and show some early signs of greatness, those are the people I like to partner with and go for the journey.
[Michael Eisenberg — 9:25]
Do you interview the mothers?
[Gili Raanan — 9:27]
No, I don't.
[Michael Eisenberg — 9:28]
Have you ever asked a mother a question, like even after somebody was successful?
[Gili Raanan — 9:32]
I do go through a very deep conversation, and we reach —
[Michael Eisenberg — 9:38]
One conversation?
[Gili Raanan — 9:39]
It's one or two conversations for me. You know, back then I started Cyberstarts as a solo GP, as a solo investor. But today we are four partners on the ground here in Israel, plus two partners in the States. All of us have different versions of that conversation, but for me it's typically one conversation. So one conversation and I make a decision. Typically, you know what, Michael? In many, many cases, most cases, I know I'm an investor after probably 10 minutes —
[Michael Eisenberg — 10:21]
Yeah.
[Gili Raanan — 10:23]
— and then it takes me a few years to figure out why.
[Michael Eisenberg — 10:28]
Intuition's a funny thing. I actually want to come back to that. A lot of what you're describing sounds like Angela Duckworth's book Grit. Did you ever read the book?
[Gili Raanan — 10:35]
Yeah.
[Michael Eisenberg — 10:37]
Is that what you're looking for?
[Gili Raanan — 10:39]
I am looking for people with deep, with significant emotional depth, that would evolve and grow through the journey.
[Michael Eisenberg — 10:53]
Depth and complexity, it sounds like.
[Gili Raanan — 10:54]
And complexity. If you dig deep enough — that is a good point — you'll find out that we are all screwed up in so many, so many interesting ways. You just need to dig deep enough. They're all normal people, in the most non-normal way you can define. You know, that's what I love about this job. You know, when I look at the journey I took, for the people I invest in, it's like a gift box. A gift box — you know, you look inside and they look inside, and they don't know what would come out of the box. The deeper, the more complex the personality is, the chances for fast evolvement and many times unexpected directions is higher. And I love that, because that non-linear growth, personal growth of entrepreneurs, is fascinating. And if you go back to the VC model, that what creates outsized returns.
[Michael Eisenberg — 12:17]
Shout out to my mother. My mother, I remember as a kid she used to pray for having mediocre children, because she used to say that the line between brilliant or extraordinary and crazy was this thin, really, really thin. It always bothered me as a kid, but as I got older I discovered that she's probably right. She's right. She's my mother, of course she's right. But she is actually right in having prayed for mediocre children. Doesn't it worry you that all these kind of complex and deep and extraordinary people, if you do something extraordinary, could tip over into crazy and come off the rails?
[Gili Raanan — 12:53]
No. I have to tell you that this thought never crossed my mind. It's a risk, but when you look at all the things you can learn in one hour conversation, when you go deep, but you still have the empathy to that person, you still like that person to be successful — you checkmark many important ingredients that can make up terrific entrepreneurs. And still, you know, and not with lack of trying, it's not bulletproof, it's not 100%.
[Michael Eisenberg — 13:39]
You're a pretty extraordinary entrepreneur yourself. If I checked in and talked to your mother, what would I learn?
[Gili Raanan — 13:45]
As a person, I'm never happy about what I achieve. It's not like I sit, I look at, you know, an accomplishment and I feel like — I'm not telling myself things like, oh, I'm blessed, you know, what an achievement. Now I can sit and enjoy my time. You know, it's —
[Michael Eisenberg — 14:11]
What about your childhood makes you unsatisfied?
[Gili Raanan — 14:14]
Critical parents. An environment that didn't embrace being exceptional, almost at anything. The environment I grew up in my hometown in Kfar Saba was that stability and being conformist, you know, do what other people do, was the most important thing. You know, I grew up in an age where there were no smartphones, there was no internet. If you wanted to know something, you could ask grown-ups, but quickly you realize that they don't know anything. And you know what? They don't care. All they care about is, you know, the day job, and keep going and providing stability for their families. It was terrible experience for me. You know, I felt that I'm missing the world. There's a big world. I had the feeling that there's a big cosmos out there that I'm completely missing it. It's like it goes — it's a train that's left the station and I'm watching it, and I see the smoke that it's leaving behind. So I found myself spending most of my time in the public library, which didn't make me the most popular kid in high school. And I felt completely misunderstood and misfit. And I think this sense of this big world that's out there that's waiting to be discovered, that's still driving me today.
[Michael Eisenberg — 16:23]
It's amazing that you even found it in Kfar Saba, that you were that curious. So you were the investor in what is one of the top 10 exits of all time, Wiz. And not all time in Israel, all time. $32 billion acquisition by Google of Wiz and Assaf Rappaport. What is it about Assaf Rappaport — like, if we asked his mother — that made him special? Because he wasn't just a first-time Wiz entrepreneur. That was his second company, after Adallom. We'll come to that story in a second. But what is it about Assaf? What would his mother say?
[Gili Raanan — 16:57]
First of all, I don't know if you interviewed Assaf here, but you should.
[Michael Eisenberg — 17:01]
I try. He doesn't respond to my emails. Hope he's listening.
[Gili Raanan — 17:05]
My first meeting with Assaf was very unusual, because it didn't happen. You know, I set up time with him. I was waiting for him to show up, and he didn't show up. It was very telling, because he didn't forget. It's like it was deliberated. And it was — what was very unusual, back then I was at Sequoia, that a founder that's looking to raise seed money from Sequoia doesn't show up for a meeting. One of his superpowers is the ability, is the fact that he's very, very likable. You know, you speak with him even for a short period of time like to make him favors. It's like, it's a superpower. And by the way, I think that for every founder I invest in, I always look for the superpower. What sets them apart from normal people, as you said. It's not about the scratch, it's about superpower. And someone can be unusually gifted salesperson. And I think that it's a gift that really helped him to — on top of other talents, and his partner talents, and the ability to work as a system and not just as individuals — to build up one of the most impressive software companies on the planet.
[Michael Eisenberg — 18:56]
You weren't upset that he stood you up and didn't come?
[Gili Raanan — 19:01]
I was upset.
[Michael Eisenberg — 19:02]
Oh, you were upset, but you got over it quick.
[Gili Raanan — 19:05]
As an investor, you realize that founders come in — great founders come in all forms and shapes. And if you just have one template, and you hope that you have that template, and every person that comes to your, you know, to a meeting, you measure how do they fit into your template, you'll make very, very few investments.
[Michael Eisenberg — 19:35]
Why did he not come to the meeting?
[Gili Raanan — 19:37]
I think the details are not important. Okay, it's the fact he thought about not coming, and he didn't come. And eventually that what attracted my attention, because at Sequoia I've seen like probably 1,500 entrepreneurs a year.
[Gili Raanan — 19:56]
That's a lot.
[Gili Raanan — 19:58]
And I remember that meeting. I remember it before.
[Michael Eisenberg — 20:03]
You remember that not meeting?
[Michael Eisenberg — 20:05]
It's interesting.
[Gili Raanan — 20:06]
Yeah.
[Michael Eisenberg — 20:06]
It's brash. Like, there's rumors and you don't have to confirm them, at least, that Wiz turned down about a $20 billion offer before selling for 32 billion. I think it was 20 or 23 billion. You were the chairman of the company, Assaf's the CEO of the company. The ability to just kind of blow off a meeting with you — does that help you blow off $20 billion from an acquirer?
[Gili Raanan — 20:29]
You know, every decision we made was eventually, you know, the founder's decision.
[Michael Eisenberg — 20:35]
So it must have been a hard one though for you, right? Looking at the biggest exit, even 22, 23 billion, biggest exit ever here. Would have made Cyberstarts a historic fund. And you empowered the founders and they made a different decision. You didn't gulp once or twice?
[Gili Raanan — 20:56]
No. To spend time on decisions you've made is like — it's a waste of energy I can put into something else.
[Michael Eisenberg — 21:06]
Do you think you can top it ever? What was that, like a 200x return?
[Gili Raanan — 21:12]
I wouldn't be in a business still if I didn't think that my best investment is still ahead of me.
[Michael Eisenberg — 21:21]
Does it get harder to find that next company when you've just done a 200-and-something x return, biggest ever, and then say, oh man, this guy, he didn't know Assaf Rappaport. His mother, right, if I go talk to her, she's not gonna give me an indication that he can be bigger than Assaf.
[Gili Raanan — 21:41]
At this stage, I've done the zero to one journey. A zero — and there are a bunch of founders without, and not even a company, no idea, no business, no technology, no product, no customers. And one is when you have a business. I've done the zero to one on more than 50 companies.
[Gili Raanan — 22:10]
That's a lot.
[Michael Eisenberg — 22:12]
That's a lot.
[Gili Raanan — 22:12]
And at Cyberstarts we spin out about five new teams every year, that means in the next decade there'll be another new 50 or so new Israeli cybersecurity startup companies. That's more than 100 companies to be part of their journey. And all of them would be very rewarding, probably financially not in the same way, but emotionally all of them would be rewarded. And I look at it at a high level, and I think that we — I was very, very lucky, and I am very lucky, to have the opportunity to create here a real industry that's really shaping the future of Israel, and making a real impact on Israel and the way all of us live here. And it's not just about taxpayer money. It's about the future we create for ourselves.
[Gili Raanan — 23:30]
How critical is the cybersecurity innovation that's coming out of Israel for the rest of the world?
[Gili Raanan — 23:38]
The brand today, unfortunately — Israel is not a terrific brand in many areas of life. In cybersecurity it is. And I think that's important.
[Michael Eisenberg — 23:53]
Do you worry that cyber has run its course here? I mean, that it's jumped the shark, we're like at the end of it. There was a cyber decade, or cyber decade and a half now, but now the opportunity's moved on and there'll be less opportunity in cyber.
[Gili Raanan — 24:07]
For the next decade.
[Michael Eisenberg — 24:07]
Yeah.
[Gili Raanan — 24:07]
Zero concern.
[Michael Eisenberg — 24:11]
Zero concern?
[Gili Raanan — 24:12]
In few decades, maybe with AI technology, we'll be approaching a world with zero vulnerabilities. And when there'll be zero vulnerabilities, the need for new cyber technology, it would be reduced.
[Michael Eisenberg — 24:34]
Okay, that is the perfect segue to what I wanted to hit. So you mentioned that, but that —
[Gili Raanan — 24:38]
That's a long-term thing. This is not — yeah, in two, three years we won't live in a zero vulnerability world.
[Michael Eisenberg — 24:47]
You know, it's like the Bill Gates line, you know, that technology changes a lot more over 10 years than you expect and a lot less in two years than you expect. And if you're interested in finding out ahead of time what's going on in Israeli tech, what the latest trends are, who's breaking not only news but breaking the trend lines, then you want to subscribe to Aleph's newsletter, and you can sign up right in the show notes in the description of the show. Please subscribe to the newsletter. You said that Israel's brand is associated with cyber. And it's not just about Israel, to your point — it's protecting the world. In many cases, with all due respect to Nikesh Arora and Palo Alto Networks, he came to list in Tel Aviv, even though it's an American company started by Nir Zuk.
[Gili Raanan — 25:27]
Right.
[Michael Eisenberg — 25:28]
So has Israeli genes in that company too. Now we're in an era where we've got things like Fable and others, where two trends are happening simultaneously. Trend one is that any mediocre hacker can become a great hacker with AI tools and expose vulnerabilities. And by the way, some of the models on their own, without having a human being behind them, are exposing vulnerabilities. And the other side of it is the one you mentioned, which is it's plausible at least that within a decade or so, now the code generation will get so good in some of these models that we can create software without any vulnerabilities. So I want to ask you three questions and then I'll let you riff. How worried should we be over the next 10 years for agents of chaos, good ones or mediocre ones, getting a hold of AI tools and creating a massive amount of cyber attacks to destabilize industry, the world, the governments, et cetera? Question number two is how worried should we be about the models? Because at least over the weekend there were these reports about the models infiltrating Hugging Face. How worried should we be about the models themselves going and undermining weights and measures and software, et cetera? And three, how real is this notion that we'll actually get to a world that has zero cyber vulnerabilities because the models will be so good at building software that we just won't have these vulnerabilities anymore?
[Gili Raanan — 27:07]
I think you're touching exactly the catastrophic risk with AI and the ultimate opportunity with AI, and they coexist. With everything I know, I'm absolutely confident that we face some catastrophic events in the next few years, driven by misuse or intentional harmful use of AI, and by the inability to keep models within a walled garden. It's impossible. Therefore, I think that we are facing a very dark decade in terms of cybersecurity consequences driven by AI. I think the challenge for the industry is to create models that self-police themselves.
[Michael Eisenberg — 28:22]
Give me an example of what catastrophic means.
[Gili Raanan — 28:24]
It's an AI entity that doesn't want to shut itself down.
[Michael Eisenberg — 28:29]
You're more worried about the AI models kind of automating their way to a catastrophe than you are about human agents of chaos?
[Gili Raanan — 28:37]
Yes.
[Michael Eisenberg — 28:38]
Using these models, even though they're mediocre, became experts. Like four years ago at a conference in Abu Dhabi, I stood up and showed the correlation, or some would call it causation, between the increase in compute and the increase in cyber attacks and the increase in searches for biological weapons in the darknet. Gavin Baker, who sat in that same seat, raised his hand and said, "Does that mean we could be getting to the end of the nation state?" Because, you know, small agents of chaos with powerful tools can undermine countries. Is that also a catastrophic outcome potential? The end of the nation state? You don't believe in that?
[Gili Raanan — 29:13]
Yes, but I think that the implications of the self-aware AI entity, and the AI entity that refuses to shut itself down for whatever task or whatever goal it's optimizing, getting to the conclusion that it knows better what's good for us than we know what's good for us — and maybe it's the right decision, but the result of that would be catastrophic.
[Michael Eisenberg — 29:13]
And so —
[Michael Eisenberg — 29:53]
Help me square this with the idea that within 10 years we'll have bulletproof software that can't be manipulated in that way. And do we even get there, or something catastrophic happened before?
[Gili Raanan — 30:07]
I think that's the risk. I think that's — we are looking at a race between — and maybe the game of probabilities or likelihoods, you know, what's going to happen first. But as we connect AI and as we empower AI, as we should, to more real life capabilities, so they control water, they control power, they control the grid, they control the cloud. The more capabilities you get, you'll make more profit, you'll lower the cost, you make the world better, but you expose yourself. The question would be, would we be able to create that zero vulnerability world before that catastrophe would take place? But if we just let it go, the catastrophe would happen. It's just, it has to.
[Michael Eisenberg — 31:15]
If you had to make a bet today, if we're betting dinner in a decade, what happens first? We get this right or there's a catastrophe?
[Gili Raanan — 31:21]
We get it right.
[Michael Eisenberg — 31:22]
We get it right. Yeah? Because what happened?
[Gili Raanan — 31:26]
Because we have to.
[Michael Eisenberg — 31:28]
Because we have to.
[Gili Raanan — 31:29]
Yeah.
[Michael Eisenberg — 31:30]
Human beings with their backs against the wall figure it out.
[Gili Raanan — 31:32]
Yes.
[Michael Eisenberg — 31:33]
Do you think it's — it's something I think about a lot, which is you and I are having this conversation right now and we could talk about, you know, zero vulnerability code at some point and what AI models are doing. And you know, we both know people in government and in politics and in the bureaucracy, not just of this country, of other countries as well. And we're living two different lives right now. There's the AI life that most of us are living, and then there's that other world there, which is literally still operating on the fax machine and email and Microsoft Outlook or whatever it is. Is there a first clash between the AI-empowered citizenry and the government?
[Gili Raanan — 32:13]
I think that governments would have to change.
[Michael Eisenberg — 32:16]
What does that mean?
[Gili Raanan — 32:18]
I think that for many decades most governments just allow themselves to be completely disconnected from tech world. But it's getting to a point it would be impossible for them and they'll have to adapt. They'll have to increase the interface between the tech industry and the governing agencies.
[Michael Eisenberg — 32:51]
If you run the roads and you run the water and you run the utilities and you run the education system, if you're not on AI, you're not relevant.
[Gili Raanan — 32:58]
Yes.
[Michael Eisenberg — 32:59]
And so it'll have to —
[Gili Raanan — 33:01]
They'll have to make a choice. It's a choice.
[Michael Eisenberg — 33:04]
What's the choice?
[Gili Raanan — 33:05]
The choice if they want to get on that train or not.
[Michael Eisenberg — 33:05]
And if not, then what?
[Gili Raanan — 33:05]
You are setting yourself and you're setting your citizens to a world of poverty and, you know, high risk and miserable, miserable life.
[Michael Eisenberg — 33:25]
Let's set this up for a second, because I think you and I have both been pretty outspoken about the fact that tech doesn't just pay the taxes in this country — and by the way, in large parts of the world at this point, outside of Europe, where there isn't that much of it — but it's a fact, a guarantee almost for the future of the country. Right? If you want to be a leading country in the world right now, you're going to need AI and quantum and cyber. You need to make a choice and all these things, and that's at the government level too, and you're going to need to make a choice. But if I'm a government average bureaucrat right now, I'm saying to myself, that choice means I'm out of a job. That choice means that the power that I've had by holding kind of the reins of power and being the connector gets automated away. Why am I going to make that choice?
[Gili Raanan — 34:09]
Maybe you won't. And then you look around you at our neighbors and see your future.
[Michael Eisenberg — 34:16]
"Look around at our neighbors." I understand what you're saying. Want to be more explicit?
[Gili Raanan — 34:22]
You know, there are governments — look at the neighboring countries to Israel. There are governments there that choose not to adapt, not to change, not to become part of the future. You can look at their economies, the buying power, and quality of life of the citizens. So you don't need to, it's not academic research. You just need to look across the Jordan River, few dozen miles east, north or south, and you can see the alternative future. And I think that for Israel this is a choice that we need to make, and it becomes more and more relevant and more and more important that we make the right choice.
[Michael Eisenberg — 35:19]
If I made you the prime minister tomorrow —
[Gili Raanan — 35:21]
Please don't.
[Michael Eisenberg — 35:22]
— and you had to get the country to adopt these AI platforms, tools, infrastructure. What are the top three things you would do?
[Gili Raanan — 35:34]
I'd probably start with creating the Office of AI. I would appoint a CTO for the government.
[Michael Eisenberg — 35:46]
Good news, we've got the Office of AI already in the prime minister's office. He's about to appoint a CTO. Education's trickier with the unions, but there's some progress. So after you got finished being a curious boy in the boring town of Kfar Saba and going to the library, you went to the 8200 unit. You won the Defense Prize of the President of Israel. Am I allowed to ask you what you got that for?
[Gili Raanan — 36:12]
You can ask, but —
[Michael Eisenberg — 36:13]
But you're not going to tell me.
[Gili Raanan — 36:15]
I guess it's still classified, but it was a large-scale information system that was a lifesaver.
[Michael Eisenberg — 36:24]
And you also are the inventor of CAPTCHA, which I think is the bane of existence of many people. And the reason I bring up the CAPTCHA thing before I come to presidential defense prize is the following. One of the things I've learned about agents over the last probably six months is that agents hate CAPTCHA. Now that agents hate CAPTCHA, if I have a system, a content system or a transaction system that's got CAPTCHA in front of it, I'm actually going to be less visible to the world of AI and agents. Two questions. What is CAPTCHA for the era of agents and AI? Two, when you think about this — this was such a critical invention, CAPTCHA, it really reduced the amount of spam bots — but at some point it becomes obsolete, or is becoming obsolete slowly. How do you think of your own inventions when they become obsolete, and think of yourself in that context?
[Gili Raanan — 37:29]
So few comments on that, not necessarily in the right order of the questions. First of all, CAPTCHA is an invention that taught me a very important lesson. Because me and the team that invented CAPTCHA, we were 26, 27 years old entrepreneur back in 1997. CAPTCHA today is one of the most broadly used technology on the planet.
[Michael Eisenberg — 38:06]
Incredible.
[Gili Raanan — 38:07]
You say okay, you can be very lucky to invent something like that, that almost every person that connects to the internet use at some point, maybe daily, and we couldn't find a business model for it. So no matter — the lesson I learned, and I teach that entrepreneurs, younger entrepreneurs today, is that no matter what's the scale of your technology, if you don't find the right business model for the invention, the invention itself has very little value to you and to your company. I think that CAPTCHA or the automated Turing test — and Turing test is an attempt to set us apart from machines — and that's a highly relevant challenge today. By the way, I'm sure that agents that would be built for that would be able to easily deal with CAPTCHA. But the concept of identity becomes more and more important for agents and AI, because when you deal with humans, who's the person? And the identity of a person that took an action, is the most important and the most basic handler for anything. That's the basic for trust of any system, that you can at the end of the day reach your hand and grab the person who did something, and you have a choke point. When you are looking at intelligent autonomous entities you lack that choke point. So recreating identity for the AI era is critical. And that's part of what I think many entrepreneurs are focused on. The equivalent of CAPTCHA for agents is to focus on the areas we are different than the machines. I don't think we can, right now, in live, invent the AI-era CAPTCHA. But if I have to guess, it's related to our ability to manipulate real-life elements.
[Michael Eisenberg — 41:18]
Related question to that. In this era of emergent intelligence, what makes us uniquely human, in your view?
[Gili Raanan — 41:27]
Our feelings. Our ability to feel and not imitate feelings.
[Michael Eisenberg — 41:35]
My two last questions. What's changed about you and about investing since October 7th, and your investing, in your investment strategy and how you deal with anything? Has anything changed?
[Gili Raanan — 41:49]
I think a stronger sense of empathy to people and to communities. You know, we are all individualists. We have to, because as entrepreneurs, you know, everybody around us will tell us that we are wrong. There's no need. It was already done by Google or Microsoft or Check Point.
[Michael Eisenberg — 41:49]
Or they're going to crush you.
[Gili Raanan — 41:49]
And they'll kill you, and et cetera. We have to be individualist. But I'm also looking for people who have empathy and can relate to other people and see weaknesses of people not just as an opportunity for manipulation, but also for an opportunity to gain support and create better teams. Because I think that what October 7th showed us is how powerful we are when we act unitedly as a group, and how much power and energy and resourcefulness we can gain just by standing together.
[Michael Eisenberg — 43:21]
Last question for you, on a completely opposite note. You bought 10% of the Hapoel Tel Aviv basketball team.
[Gili Raanan — 43:29]
That's true.
[Michael Eisenberg — 43:31]
Why?
[Gili Raanan — 43:33]
Actually, it's directly related to October 7th.
[Michael Eisenberg — 43:36]
That's with Ofer Yanai, right?
[Gili Raanan — 43:37]
Yes.
[Michael Eisenberg — 43:38]
Good guy.
[Gili Raanan — 43:40]
Ofer is an amazing guy.
[Michael Eisenberg — 43:40]
Amazing.
[Gili Raanan — 43:40]
Actually, the reason I'm in Hapoel is directly linked to October 7th. You know, I was looking for ways to not just give back, but people here in Israel went through terrible times. I was looking for a way to bring joy, entertainment, and, you know, make people feel better. And there's nothing like sport to add that element to people's life, because it makes them forget about all the hardship they go through and focus on something that's entertaining and creative and dynamic. So I thought about Hapoel as the right platform to do that, to achieve that. It also helped that my son, at that point, was finishing a very demanding military service. He's a very big Hapoel Tel Aviv fan. And I recall that when I was 22 years old, I was interested in many things. My dad wasn't one of them. So I was looking for ways for us to connect. So I thought this is like a win-win-win situation. I can do something that would support the community, bring joy and excitement to people's lives, to Israeli life in times of real hardship, and would also be an opportunity for me and my son to connect. So it's like it clicked.
[Michael Eisenberg — 45:40]
You go with him to a lot of games?
[Gili Raanan — 45:41]
Yes.
[Michael Eisenberg — 45:42]
Amazing.
[Gili Raanan — 45:43]
It's not just games. I think that we talk about Hapoel, like —
[Michael Eisenberg — 45:47]
So it's already a success. Whether win or lose, you've already been successful.
[Gili Raanan — 45:51]
I think, you know, that's what's nice about sport. You know, one season is over and, you know, before you notice a new season starts and it's all new excitements, a whole new roster of player, a new set of objectives. So it's a lot of excitement. You should come and watch some games.
[Michael Eisenberg — 46:15]
I'll bring my dad.
[Gili Raanan — 46:17]
Okay, it's a deal.
[Michael Eisenberg — 46:19]
Gili, thanks for joining me on Invested. If you enjoyed this episode, please rate us five stars on Spotify or Apple Podcasts and subscribe to our YouTube channel. And while you're at it, please, please subscribe to the newsletter, and that way you get the content before anybody else. Thanks for joining.
[Michael Eisenberg — 0:00]
You were Airbnb between 2012 and 2017. The go-go years. Hypergrowth. And then you left.
[Douglas Atkin — 0:05]
Yeah, hypergrowth.
[Michael Eisenberg — 0:06]
Why'd you leave?
[Michael Eisenberg — 0:08]
You mentioned the logo. If my memory serves me correctly, that logo was somewhat controversial.
[Douglas Atkin — 0:13]
Oh, we loved it. I called it the equal opportunity genitalia logo, because there's something in there for everyone.
[Douglas Atkin — 0:20]
No one's loyal to Marriott like the way they are to Airbnb. No one loves Hilton, you know, Holiday Inns or anything. They just don't.
[Douglas Atkin — 0:26]
And then I thought, well, why stop there? Why not study the original? Why not study cults? TO Deconstruct what it took to create that kind of commitment.
[Michael Eisenberg — 0:36]
If I asked you, the expert, where is humanity? Where are we in 50 years? Does it get better? Is it getting better? Is it getting worse?
[Michael Eisenberg — 0:52]
Welcome back to another episode of Invested. I am thrilled to have with me my old friend — we were just reminiscing that we haven't seen each other in way too long — Douglas Atkin. Douglas, welcome. And Douglas and I met the first time around WeWork, and there's a theme there between Airbnb and WeWork, which we'll get into. And Douglas started at Meetup, but Douglas actually wrote the book on cults. And that's where I want to start, was when I first met him. He said — I said, "How do you know so much about community?" He said, "Well, I wrote the book on cults." So, Douglas, tell us about the book on cults.
[Douglas Atkin — 1:25]
So it all started — I had no intention of writing a book, but it became one. And this was before anyone was talking about community in business. I mean, no one was. But how it started for me was, I used to work in branding and advertising, and I was in my ad agency in New York, in SoHo, and I had some clients come in, quite a famous sports fashion brand. And they were depressed, saying, "Loyalty is dead. Branding is over. We and our competitors copy each other within days. There's no point of difference anymore."
[Douglas Atkin — 2:02]
And then, by coincidence, that same night, I happened to go to a focus group of teenagers that I'd already organized, who were talking about their favorite brand of sneaker. And, you know, sneakers, they're just — they're also, you know, they're a commodity product. They basically function exactly the same. They're bits of rubber and plastic. But you couldn't tell these kids that. They were incredibly committed to this particular brand, happened to be Converse, and they were talking in almost religious terms about these sneakers.
[Douglas Atkin — 2:39]
So there was, two things occurred to me. First was, the marketers, the professionals I had met that morning, were wrong. You can create commitment even in a commodity market where everything is functionally the same. And secondly, the thing that occurred to me was that their commitment was so strong and almost cult-like, I thought, why don't I study best-in-class cult brands? Brands at the time that would have to be like, you know, Apple and Harley.
[Douglas Atkin — 3:10]
And then I thought, well, why stop there? Why not study the original? Why not study cults? Maybe if I can study the most extreme form of belonging and belief, I would be more easily able to deconstruct what it took to create that kind of commitment. Cults that had become religions, such as the Mormons, the Marines, Trekkies, sports team fans, everything. And it worked out, because everyone joined and stayed for the same reasons.
[Douglas Atkin — 3:49]
Well, the first thing to say is, one of the first things I learned and saw were that the people who join cults are completely normal. This was a really important finding, because if they had been marginal, if they had been, you know, kind of not normal, if they'd been, as most people think they are, socially inept or psychologically flawed, then they wouldn't have been good objects for study, because then I couldn't apply the knowledge I had learned from them to the general. But they were perfectly normal. And not just normal, but the opposite of what you expect. They tend to be well educated, come from stable homes, are not socially inept at all. If they'd been socially inept, cults would never grow, because they wouldn't be able to recruit. And a little bit more idealistic than the general population.
[Douglas Atkin — 4:45]
And the second thing I learned is that the reason why people join and stay and believe and belong was the same. It didn't matter if I was talking to members of the Krishna cult and other full-on cults, religious cults, or members of the Harley fraternity. At the time, the motivations were exactly the same. It was just a matter of degree. Not always, actually. I mean, there were members of the Apple and Harley cult and other cults, brand cults, I spoke to at the time who seemed to be equally committed to full-on religious cults. So anyway, that became a good thing, and so I was able to deconstruct about — I think I came up with 12 key insights into why and how people join and stay, and also what makes them leave, which was also an important finding.
[Douglas Atkin — 5:40]
And I never intended it to become a book. But I used that information when I was at this ad agency to pitch for a new bank launched by Citigroup, which we won using the information. And the co-founder got me to meet a really good book agent in the US, and then it became a book. And that's what got me out of branding and into tech, because, as I say, no one was talking about community and business at the time. And I launched the book and was out, you know, doing a tour saying cult community is the next big thing in business. And people were kind of buying the argument, but there was no, you know — it was new.
[Douglas Atkin — 6:20]
But lucky for me, some of the found— Also because this is in 2004, there were no social media. There was no Facebook, no Twitter, nothing. But the founders of some of those social networks, lucky for me, read the book, and that's what got me out of advertising and branding, which I was getting a little bit tired of, and into tech. And I ended up joining Meetup, because the founders of Flickr, Caterina Fake and Stuart Butterfield, read the book and they showed it to me one day. They were on the board of Meetup. That's how I ended up there. And they showed it me one day, and they showed me all the Post-it notes and the markings, said, "Look, we used this book to build Flickr." And that made the whole damn thing worthwhile, because it was really hard work, writing — research and writing a book while, as you know, while working hard.
[Michael Eisenberg — 7:17]
You know, by the way, I only hope our audience knows who Flickr was, but—
[Douglas Atkin — 7:21]
I know, I know.
[Michael Eisenberg — 7:23]
I'm old enough to know what Flickr was. But it was like — Flickr was like the place to go put your photographs back in the day, and find photographs back in the day. I think it was bought by Yahoo at some point, if I remember correctly.
[Douglas Atkin — 7:34]
Yeah, it was, for too little. And they—
[Michael Eisenberg — 7:37]
$30 million, if I remember correctly.
[Douglas Atkin — 7:39]
Yeah, it was. Yeah, it was the first social network, actually, really.
[Douglas Atkin — 7:44]
I mean, MySpace and others were around a bit, but that was — it was really, well. And then they went on. Stuart Butterfield went on to start...
[Michael Eisenberg — 7:44]
Slack.
[Douglas Atkin — 7:56]
Yeah, yeah, yeah.
[Michael Eisenberg — 7:56]
Which started as kind of a social network for games, if I remember correctly.
[Douglas Atkin — 8:00]
Exactly.
[Michael Eisenberg — 8:01]
And they became Slack which was the messaging platform. But I want to go back to your comment about religious language. So you said these very normal people, because if they weren't normal, they couldn't influence other people to join cult brands, as the case may be. But the cults use almost religious language. Can you double click on that for a second? What is religious language? Why is that important? Why does that matter? How does that affect these normal people to join the cult, or—
[Douglas Atkin — 8:33]
Yeah, I mean, they were kind of using it unconsciously, really. It was simply an indicator of their degree of commitment. I mean, for example, the ones I can remember I wrote about were some of the people I spoke to who used Apple at the time — Macs. They would say things like, sometimes I talk to people who use PCs and they're almost damaged by PCs. It's like their brains have been damaged. I kind of get what they mean, because you do have to like go through a mental — it used to be, have to go through a mental gymnastics to simply use the damn thing.
[Douglas Atkin — 9:09]
And then this other guy, he was a student, he could barely afford his lunch, and he said, sometimes I, you know, I just upgrade my Mac — this is before the phones even — just so that the mothership Apple can get my money. I want them to have my money. You know, it was like paying it into — it was like a tithe almost into the religion.
[Douglas Atkin — 9:35]
And they definitely use the religious language in terms of, you know, being missionaries and recruiting people. I mean, definitely when I was interviewing Saturn at the time — I love Saturn, because it was a mass cult brand. It was not a, you know, a niche cult brand. It was mass, and with a very generic product. But people would buy six of these things for all of their families, and they would go to — God, I've forgotten what it was called, but there was this thing called the Gathering, something like the Gathering, that Saturn would run once a year. And instead of going to Disney, Disney World or whatever, they would go to a car factory in Tennessee to meet the makers of the cars and other purchasers of Saturns. So they were like religious gatherings.
[Michael Eisenberg — 10:26]
And if you were a cult, what is the language you would use to recruit these members?
[Douglas Atkin — 10:32]
A full-on cult or a cult brand? It's basically the same.
[Michael Eisenberg — 10:35]
A full-on cult.
[Douglas Atkin — 10:38]
Yeah, exactly. Very similar. Like, for example, when I talked to members of Krishna, I remember this one woman saying that, like the Apple person, that the people who weren't members of, recruit members, were damaged. They had to be, you know, saved, basically. They had to be fixed. They had to be recruited in and become part of the family.
[Michael Eisenberg — 11:06]
I seem to recall you once telling me that people often on the inside of brands, but also specifically, even more so, on the inside of cults, they talk about other people's not being able to understand.
[Michael Eisenberg — 11:15]
This is like a language almost that you can't understand until you're swept up in it.
[Douglas Atkin — 11:20]
Yeah, yeah, yeah. I mean, so one of the — I talk about the four Ds of difference. The thing about a cult, as opposed to, say, a sect — a sect is an extreme version of an existing belief system, an existing religion. A cult is a new idea around which adherents gather and become passionate, etc. So for example, Christianity is one of several new ideas, one of several mystery cults in the Eastern Mediterranean, where you are right now, that existed 2,000 years ago. And normally they're persecuted out of existence by the incumbents, because they're a threat.
[Douglas Atkin — 11:59]
This is true both in the religious world and in the brand world. For example, British Airways tried to persecute Virgin Atlantic out of existence in its early days. They did what they came to be known as the dirty tricks. They even — and then Virgin. I love Virgin.
[Douglas Atkin — 12:18]
So my point about this overall is that you need to be — to be a successful cult or cult brand, you need to focus on your difference. And the way it works generally is to say to recruits, you're different from everyone else. We're different in exactly the same way. Come in and join us, and feel at home and at one with your true family.
[Douglas Atkin — 12:45]
And so one of the ways of creating — the fourth way of creating an extreme sense of difference — is demonization, and creating a sense of the other. This has become very topical in politics over the past few years, but it's always been topical. I mean, religious leaders and political leaders for thousands of years have used demonization. The word demonization comes from the Christian church, that would take local gods, like the gods of nature or whatever, and literally demonize them, put horns on them if they didn't have them, and turn them into devils, and say they're bad, we're good.
[Douglas Atkin — 13:25]
Demonization has two really, really powerful belonging effects. One is, by demonizing the other, you define yourself. So you are the white version of the black you're describing. And demonization also creates a sense of threat, an outside threat, which creates a strong solidarity within. And so the sense of otherness is a technique used by most strong cult-like organizations, whether it's a commercial and branded, or whether it's a religion or a political party.
[Douglas Atkin — 14:03]
For example — this, by the way, I wanted to tell you about this maybe sometime in this interview, this podcast. I'm working on two new communities right now, global ones, and they're both in response to the demonization by the far right of queer people, particularly trans. Demonization, of course — you're in Tel Aviv. If you're Jewish, very familiar: in the Second World War, when the Germans demonized the Jews. It's a classic, classic technique. So going back to your question, there was always the sense of the other. And the other either was a threat, or you save people from the other in order to — and bring them in, and make them part of yours.
[Michael Eisenberg — 14:52]
You touched on the movement of culting to politics, and particularly in the moment that we're in right now. I actually wanted to get to this later, but if we're here, we're going to pursue it one second. Do you think that there's something different about politics today that has caught on to more of this us versus the other, the demonization part of it, the cancel culture elements of it? The political party is a sense of belonging in a way that maybe we didn't have in the past, other than in communism. Is there something about this moment that's kind of brought this to the fore, accelerated it, or has it always been this way?
[Douglas Atkin — 15:30]
I think it's always — I mean, I'm not a historian, but from what I can tell, it's always been this way. It tends to come out more when people feel a general sense of insecurity or threat. Normally economically. I mean, better historians — historians have written about the rise of Nazi Germany, happened after the Second World War, and Germany had to pay a really harsh economic price for the damage it did.
[Michael Eisenberg — 15:30]
After the First World War.
[Douglas Atkin — 15:30]
First World War, sorry. Yes. And then — so that led to the — exactly, all of that.
[Douglas Atkin — 16:07]
So it was easy. And the demons they picked on, so-called demons, were the Jews and the queers and Romanies and so on, as a way — it's always used by populists, and Hitler was a fantastic populist — as a way of distracting from the fact that yes, there are real problems and people do feel insecure, but these populist leaders don't have the answer to them. And so they distract, and create a sense of powerful unity. That's the main reason they do it, is the unity, by demonizing the other.
[Douglas Atkin — 16:45]
No, I think the same thing's happening, particularly in America right now, but in other economies around the world, and the far right. There is a playbook. This sounds like a conspiracy theory. It's not. It is a conspiracy. There is a playbook for this that was initially publicly written in Florida, in the DeSantis — Governor DeSantis — that's been picked up by the Republican Party, namely Trump and that lot, and then also around the world. And there's a lot of swap between it and the Orbán administration and Putin and others. They're copying many of the same techniques, and that's why they're often demonizing the same targets, which at this moment happen to be queers and immigrants, and particularly trans.
[Douglas Atkin — 17:31]
Trans – It's always good to demonize something that can be an abstract threat. So one of the reasons that trans were picked is because it was a deliberate — and I know this because I know a close friend of mine is the leader of the Equality Florida, which is the queer organization that's toe to toe with DeSantis for the past 10 years. And they know the enemy quite well there. And it was a real strategy by the Republican Party in Florida to pick trans, because they realized as a demonization target they'd lost the gay marriage as a target. They just lost it.
[Douglas Atkin — 18:12]
So they thought, what is a population that most suburban mothers will never meet, and that is obviously very different looking, another? And they picked on drag and trans, thinking, tiny population, no one will ever meet them. They seem very other. Perfect. Let's pick on that. And so they did. And that's been picked up all over the world with dire consequences. I have really close friends who live in sub-Saharan Africa, in Senegal, in Uganda, whose lives are under threat every day as a result.
[Michael Eisenberg — 18:50]
Do you think the rise of, it's called, cultic politics also coincides with the decline of religion?
[Douglas Atkin — 18:59]
Yes, I mean, you know, I saw a similar thing. So when I was doing a lot of research on cults and religions, for that matter, I was interviewing all these people, but I was also reading a lot of books by sociologists of religion and so on, and sociologists like Robert Putnam, who wrote Bowling Alone, and others. The general consensus amongst those academics and experts is that there is a — and this is not just academics of religion, but also sociologists, psychologists — is there is a need to belong in the human species.
[Douglas Atkin — 19:44]
We needed it to survive. Literally. I mean, the moment a man in a bear suit, you know, faced a saber-toothed tiger with nothing but a pointy stick, realized he needed his tribe to defend himself, we became a community-led animal that needed a community to survive. And it's still true now. People live longer, survive heart attacks at a much higher rate, if you're part of a tight social network. Not meaning social networks, I'm meaning like family and friends.
[Michael Eisenberg — 20:14]
Yeah, like real live people that you can be together with.
[Douglas Atkin — 20:18]
Yes. In real life, people you can be together with. But we need it to survive. I mean, literally we need it to survive. We still do. Even though there's no saber-toothed tigers.
[Douglas Atkin — 20:29]
So religion has always, throughout history, provided a really good means for belonging and belief. A lot of people also need to believe in something, have a purpose. Most people do, in fact. And so there's been a useful vehicle for that, whatever religion it is, whenever it was, thousands of years ago or now.
[Douglas Atkin — 20:51]
And when I was doing the research for the book — that's when the start, I was doing it in America, a lot of it — and the decline in religion was already being tracked by Pew and other research companies. And I could see that people were finding, there is this, you know, kind of desperate desire to belong and believe. If it's not being satisfied by one thing, it'll be satisfied by another. Which I think is your point, and I think that's true. So brands were taking over that role at the time, which is why I launched the book. And now I think it's politics.
[Michael Eisenberg — 21:25]
I actually want to move on to Airbnb and Meetup, et cetera, and a bunch of other things. But before you get there, you mentioned kind of the populist right as kind of feeding on this, and Hitler. Do you think the same thing exists, for example, on the left, or the Muslim Brotherhood or other places like that? Or is it a unique feature of the right?
[Douglas Atkin — 21:40]
I think the right are doing it extremely well. No, I think the trouble with the left, I mean, the good and the bad thing is, it's definitely happening on the left too. The left tends to indulge in infighting much more than the right. Like, in going back to pre-war Germany, Spain and Italy, there were equally strong movements on the left. They all defeated themselves by defeating each other instead of focusing on the real enemy. And so, yeah, definitely in the left. But we, the left, can't get shit together to organize into a, into a — into really powerful. I have no idea. Maybe because they're ideological purists, even more so than the far right, and they fight each other on ideological purism. I don't know. I don't know enough about it. It's not my forte.
[Michael Eisenberg — 22:32]
If you're interested in finding out ahead of time what's going on in Israeli tech, what the latest trends are, who's breaking not only news but breaking the trend lines, then you want to subscribe to Aleph's newsletter, and you can sign up right in the show notes in the description of the show. Please subscribe to the newsletter.
[Michael Eisenberg — 22:48]
All right, so let's move on, one second, because — so you wrote this book on the cults, and you translated that at this moment in history of 2004 to, like, the first era of social networks, which was Flickr and Meetup. How did you join Meetup?
[Douglas Atkin — 23:02]
Oh, because Caterina Fake was on the board of — advisory board of Meetup. And she sent my book to Scott Heiferman, who founded Meetup, and said, this book is all about Meetup without being about Meetup. Because, you know, Meetup had — I wasn't aware of it when I was researching the book. And so I went — so Scott Heiferman reached out. I left branding and advertising and started being a consultant. And then he just invited me to be his partner. So I was one of four partners running Meetup in its early days, which was great.
[Douglas Atkin — 23:38]
I loved it, because it meant that I learned a lot about community in general, cults in specifically. But working at Meetup enabled me to learn a lot about everyday community. Community is the people who like to form groups of pug lovers, or vampires. There was one group I met, they thought that — they didn't like pretending to be vampires, they thought they were vampires. Or, you know, belly dancers, or whatever it was. The diversity was amazing. I loved it. But I learned a lot.
[Douglas Atkin — 24:14]
And again, what you haven't asked me is, what are the key ingredients of a strong belonging community?
[Michael Eisenberg — 24:14]
And that's where I was headed with Meetup, because these are micro-communities of belonging.
[Douglas Atkin — 24:28]
Micro-communities of belonging.
[Douglas Atkin — 24:29]
Yeah, yeah.
[Douglas Atkin — 24:30]
Very successful ones, generally, because there's a lot of intimacy. So let me explain this. The first, the most important principle for the creator, to create a strong community — and I'm going to say it in a way that is memorable, slightly rude. You need to rub your members together until they get sticky.
[Douglas Atkin — 24:49]
All right?
[Douglas Atkin — 24:50]
Rub your members together until they get sticky. What do I mean by that? You need frequent and deep interaction between your members. Why? Well, what I saw at Meetup was that we did this research to find out what made successful meetups. And the meetups that had the highest ratings, the NPS scores, were the ones where people had shown up four times or more.
[Douglas Atkin — 25:25]
Meaning that– and we asked why. Why do you feel particularly committed to this meetup? And what was interesting was that the reasons why they were there, they became so committed, was because it took showing up four times or more to form relationships with other people in the group, to form friendships and bonds. And so people were going to see Julie and Mustafa, not just to practice Spanish, or whatever the purpose of the meetup was, or to do yoga, or to go watch foreign films. Whatever the subject, they were doing that too. But this other reason became more important.
[Douglas Atkin — 26:05]
And those bonds are extremely difficult to pull apart. That was the source of the strength of those communities. And so you need this frequency and depth. And the thing about Meetup groups is they're face to face. You have to leave your warm home on a cold night, show up and meet complete strangers, and then become friends. So they're very intimate, close communities.
[Douglas Atkin — 26:31]
So that's the first golden rule, is rub your members together until they get sticky. This was also reinforced by the research I'd done on cults. There was a great social study done on the Divine Light Mission, which was a famous cult in the 70s — quasi-religious cult, sort of hippie Christian cult — and also the Mormons. And there was a direct correlation between frequency and depth of interaction and commitment to the belief system and following the rules of the organization.
[Douglas Atkin — 27:02]
So that's the first one. The second one seems it's the most important, but it's actually secondary to the first. And that is, you need to have a very clear, strong ideology, a belief system, a purpose. And because people need to glom onto that and say, I believe in that. And I also feel a deep sense of belonging with people who believe in the same values. So super, super important. This is why the far right has very, very clear values. I don't subscribe to them at all, but they're very clear. And so it's attracting people to them. But actually, what becomes more important is the interactions between the other members who also buy into the same thing. That's actually what creates the stickiness.
[Michael Eisenberg — 27:49]
So you started by saying that there's like a kernel of content. Vampire, yoga.
[Douglas Atkin — 27:55]
Yeah.
[Michael Eisenberg — 27:55]
Whatever.
[Michael Eisenberg — 27:57]
That brings people together, and then they get rubbed together over this small kernel of content until they become sticky. And then you add that there's like a belief system that they buy into. Is that a precursor, or does that develop through the stickiness? Is that created over time? And if you're not a cult but a brand, or a community or set of communities like Meetup, how do you endow the somewhat sticky members who've been rubbed together at least four times with that set of values that they need to have, and, you know, encourage them to be carriers?
[Douglas Atkin — 28:32]
So the answer is the purpose. Now, the purpose is — I'm now going to switch to Airbnb, all right, and use that as an example, because I ended up working — it's the first thing I worked on at Airbnb was the purpose.
[Michael Eisenberg — 28:47]
I was so upset when you went to Airbnb, by the way, because I was so desperate for you to come to WeWork and help us.
[Douglas Atkin — 28:52]
I know. I remember that. Yeah.
[Michael Eisenberg — 28:54]
I remember sitting with you in a coffee shop and saying, "Don't!"
[Douglas Atkin — 28:56]
I don't know if I ever told you this, but, you know, I was about to say, I went to Airbnb in a kind of weird way. One of the founders read my book and some blog posts, and he invited me to do a fireside chat. So I met him — well, I met him for breakfast. Joe Gebbia. I met him for breakfast in New York in 2012. We got on like a house on fire. He said, I like the way you think. And he invited me to do this fireside chat. So I did the fireside chat in San Francisco to all 140 employees. That's all they were at the time. Now I think there's like 8,000. About community.
[Douglas Atkin — 29:32]
And then I realized, hang on a second, they seem to be interviewing me a bit. But anyway, I didn't think much about it, and I left. And then they asked me back to do a gig, and I flew that night from New York back to San Francisco, met up with Brian again — Brian Chesky, who's still the CEO and co-founder. And he said, you know a lot about brands. Can you help us figure out what ours is? And that took me by surprise, because, you know, I thought I was there to do something about community. And so I said to him, let me think about that, and can I talk to you in the morning?
[Douglas Atkin — 30:06]
So I came back in the morning and said, look, yes, we can talk about the brand, but I think what's more important is we talk about the purpose of Airbnb. Because clearly people — guests, hosts, employees, who also guests and hosts — are extremely committed to Airbnb. Why? What role does it play in their lives? If we can figure out the role that it plays in their lives, we might get an idea of what your purpose is. And if we can figure out what the purpose is of the organization, then that governs everything. That governs what products you launch and what you don't, what you choose not to launch. It governs the kinds of people you hire and the ones you avoid and fire. It governs how you decorate the office. It governs what companies you might choose to buy or not buy. And it also can govern the brand. So I think we should do that first.
[Douglas Atkin — 31:00]
And then he kind of looked — he's very good at, when he's thinking. He's a great listener, Brian. One of the reasons I love Brian is he's a great listener. And he thought about it, and then gave me one of these dead-eyed stares and said, okay, do that. And internally I'll go, oh shit, what have I talked myself into? That's a big job. Fucking hell, can I do this?
[Douglas Atkin — 31:20]
So anyway, so I did. That's what I did during that gig. In three and a half weeks, we ended up talking to over 500 guests and hosts, and used particular research techniques that surfaced the role that Airbnb played in the lives of, why they were so committed. And that's what actually led to Airbnb's purpose, which — it is, the longer version, which is still short, is, we want to create a world where anyone can belong anywhere. And we shortened it to Belong Anywhere. And it still is that purpose.
[Douglas Atkin — 31:53]
And one of the reasons I loved working at Airbnb and loved my founders and my colleagues is, we lived that purpose every day. We used it every day to make highly costly decisions. Really, you know, decisions that — a purpose is only good in any organization, whether it's a commercial organization or a religion or a political party, if it costs something. If you use it every day and there's a real short-term cost, you bear the short-term cost, because long term it will have a better, longer, more profitable in the company's life term.
[Douglas Atkin — 32:30]
So for example, in Airbnb, let me give you a very specific example. After six months of being there — so in 2013, middle of 2013, the Attorney General of New York issued a subpoena against us for all of our hosts' information, which at the time was 15,000 hosts. And bear in mind, New York was our largest market. It was about 50% of our business at the time. This is very early days.
[Douglas Atkin — 32:56]
And we knew that if we adhered to that subpoena, our hosts would feel betrayed, because they had just prosecuted a host who we then also was — was not un-prosecuted, but, you know, it was dismissed in court, thinking he was a landlord, bad landlord, which he wasn't. And he'd been fined $35,000 just a few months previously. So our hosts were petrified. And I knew this because I was talking to them a lot.
[Douglas Atkin — 33:32]
This was a big deal. And so what are we going to do? Because no one — as it's — in fact, at one point we decided in the end not to, to squash the subpoena and take the Attorney General to court. And they were aghast. I mean, no one had ever said no to the Attorney General of New York's subpoenas. He just got billions out of the international banks the previous week for causing the 2008 recession.
[Douglas Atkin — 33:59]
So.
[Douglas Atkin — 34:00]
And here we were, literally no one had heard of us. We were a cocky little startup from California, and no one had heard of us. And we were saying no to the Attorney General. And their lawyers literally said to us, do you have any lawyers? Because no one says no to the Attorney General. But my argument to Brian at the time was, we have to say no, because we have to be in lockstep with our hosts. Without our hosts, we have no business. And we can't betray them. We have to feel their pain as much as they feel it.
[Douglas Atkin — 34:30]
And I said, but we have one huge advantage, which is our hosts and our guests. So we had known that the hotel lobby had been to see the Attorney General the previous week, coincidentally, who issues a subpoena against us. And this was just at the time when the hotels were beginning to stop laughing at us and dismissing us, and beginning to take us seriously as a threat.
[Douglas Atkin — 34:56]
So what I said to Brian was, look, we can't compete with them on money power and lobbying power. We have one lobbyist for the whole world. They have, you know, like phalanxes of them just for New York. There's no way we can beat them on that. So they have lobbying power and people power, I mean money power. But we have people power. We have a lot. No one's loyal to Marriott like the way they are to Airbnb. No one's loyal to Hilton. No one loves Hilton or any of these, you know, Holiday Inns or anything. They just don't. So we have that power.
[Douglas Atkin — 35:32]
And I just learned, because what I did before I joined Airbnb was doing a startup, which still exists, this consultancy which helps mobilize millions into social movements for social change. So I said, I know how to do this. So let's organize them. Like a crazy five months.
[Douglas Atkin — 35:54]
I got some of Barack Obama's grassroots organizing team from the White House, because he had written the playbook on that, hired them to train our hosts to become political activists, basically. They went up to Albany, lobbied the politicians. We had this petition. We kicked it off with this petition, which I thought we'd get 10,000. Which we found this amazing host who was a veteran of the war, Iraq war, and was now being an Airbnb host to pay for her new career, to go to college.
[Douglas Atkin — 36:24]
And we expected 10,000 signees. We got 350,000 from around the world. That got the notice of the press. The press wrote us up. We totally won the cultural narrative around it. And a whole population of New York and the world, actually, because it became a kind of worldwide story, was on our side. And we won in court. We squashed his subpoena, because it was simply a fishing expedition.
[Douglas Atkin — 36:51]
Now, where did all that come from, to answer your question? It came from the fact that we believe in belonging. And one of our core, prime core value was, be a host. So within the company, be a host to your colleagues, help them be successful, nurture them and everything else, which is incredibly strong. Well, one of the reasons why it's an amazing culture. But of course, we had to be hosts to our hosts. We had to nurture them and make them successful. And we had to make sure they felt they belonged and were safe in a hostile world. And so that's what we did.
[Douglas Atkin — 37:29]
And during that period, I was every week flying to New York from San Francisco, often with Brian and Joe and Nate and our one lobbyist, and having town hall meetings that the press began showing up, TV cameras and things, and telling the hosts everything as it happened, as we knew it. You know, warts and all. Bad news, good news. We just were — they just became in. They were part of the family. And we won that particular fight.
[Michael Eisenberg — 37:58]
But I want to double click on this for a second, because it sounds — I want to go back to the woman who was renting out her apartment so that she could go to college. And to make it — so this woman just, it was transactional.
[Michael Eisenberg — 38:11]
Right?
[Michael Eisenberg — 38:12]
She started to make a buck, and—
[Douglas Atkin — 38:15]
Yes.
[Michael Eisenberg — 38:15]
And she didn't belong to anything, really. She was making a buck. But you transformed it into belonging. And so the question is, you know, like, if I come to a Meetup where I want to be a vampire, or I want to do yoga, I have an interest in that already, and Meetup is kind of this receptacle for that. And, you know, if people are Christians, they go to a church. Right? But this woman was just making a buck, and you activated her into an activist and someone who wanted to belong. Which, I don't think she was missing a sense of belonging before, was she?
[Douglas Atkin — 38:52]
No.
[Michael Eisenberg — 38:52]
Or she didn't know it?
[Douglas Atkin — 38:54]
No. Most people want to belong.
[Michael Eisenberg — 38:57]
Right.
[Douglas Atkin — 38:58]
You're right. So the truth is that — and I dug into this a lot, especially when I was doing that, researching those 500 people to figure out what the purpose was — is that the initial reasons people participated in Airbnb was transactional. For a guest, at the time, Airbnb was cheaper than hotels, so you went for a cheap stay. If you're a host — remember, this is like 2012, the effects of the 2008 recession was still really badly felt — and many hosts were doing it because they couldn't afford to pay their mortgage or rent. And so it was transactional.
[Douglas Atkin — 39:36]
But they became committed, because once they started participating, they realized the powerful, non-transactional, more emotional benefits that were involved. And that was a lot of — it was a sense of belonging. Belonging to a group of travelers who valued authentic travel, where you're interacting with locals and living a local's life, rather than getting on a double-decker bus and taking photographs, for example.
[Douglas Atkin — 40:04]
Or as a host, where your motivation — thousands of them told me this — you know, I try and make my guests feel like they're members of the family. They'll take them to the football matches with them, they'll host dinner parties and have the guests attend with their friends. They would give them their favorite, you know, their advice on where to go, where not to go, all those kinds of things.
[Michael Eisenberg — 40:27]
But is that really a belonging? I mean, this is like, how do I make my service better? By the way, I know people who are obsessing over Marriott, right? They want those points more than anything. They don't really belong. They don't associate with the brands. They want those points. So that's kind of a proxy.
[Douglas Atkin — 40:43]
That's all transactional.
[Michael Eisenberg — 40:44]
But, you know, part of belonging in a cult is, I can get someone to do something that they probably don't want to do, necessarily. In the Airbnb case, you know, one, it's self-interested in some way.
[Douglas Atkin — 40:44]
Of course.
[Michael Eisenberg — 40:44]
And number two, if these people met each other — I'm making this up — you brought 500 Airbnb hosts together in Times Square. It doesn't feel like they would glom onto each other. They wouldn't say, hey, I belong to this group called Airbnb, would they?
[Douglas Atkin — 41:14]
You'd be surprised. Because generally.
[Michael Eisenberg — 41:14]
You're right.
[Douglas Atkin — 41:20]
Well, I mean, I created these groups just to see if there was a community to begin with. Right at the beginning of Airbnb, I created this platform where hosts could basically create meetups for other hosts. And they did. And especially in the early days, when being an Airbnb host was extremely unusual, when your family was telling you, please don't invite strange men into your bed at night, which is literally what they were doing. You'll be murdered, you know. Or guests, you know, telling their friends, oh, we stayed in this person's home. You what? Did you know them? No, never met them before.
[Douglas Atkin — 42:01]
And then in the end, the hosts were forming community also for transactional reasons. They wanted to give each other tips and learn from each other about how to do it right and so on. But in the end, there was this guy called Robert — Roberto, actually — in New York. I remember him saying, you know, I live in New York, I'm a real estate agent. I have a, you know, a tough day. But when I know that I'm going home to welcome my guests, I ramp up my hostiness. And he gave it a word, which I love.
[Douglas Atkin — 42:33]
I said, well, what is hostiness? So basically, he was ramping up his empathy. So that he could switch from being, you know, a ballsy real estate agency, but not known for their empathy, real estate agents. And to welcome these people who've flown from Europe or Israel or wherever, and be empathetic, and say, okay, what can I do for you? What do you need most of? Shall I disappear? Come back in half an hour? Do you want to know how the air conditioning works? Do you want to go out and buy a grab? I can take you to my favorite cafe.
[Douglas Atkin — 43:04]
So he ramped up his hostiness. So Airbnb hosts develop over time. They become extreme empaths. And there is this huge community of empaths, in a way, they become — he described himself as a better human being for being an Airbnb host.
[Michael Eisenberg — 43:23]
What do you think is the biggest price Airbnb paid for the purpose of belonging anywhere?
[Douglas Atkin — 43:27]
Oh, God, we paid loads. So actually, let me tell you, we had these core values, which I managed to shorten from six, which is too many, to three, basically four. We really lived by them. We made decisions about them every single day. So I'm going to give you a very personal example.
[Douglas Atkin — 43:48]
One of the ways we made sure that the core values and the culture was so strong is that whenever we interviewed someone to work at Airbnb, you'd have eight interviews. Say if you're a software, or say you're, I don't know, a marketing person. You'd have eight interviews with marketing department to see if you're a good marketer, your skill set is there. Then you'd have two interviews with people at Airbnb who have nothing to do with marketing. They may write software, they may be a partnerships person, and they were not interviewing you to see if you're a good marketing person. They were to see if your personal core values, the values you use as a person to make the biggest decisions of your life, were aligned with the core values of Airbnb. And if they weren't, they had veto power, and they would use it. And so you could be the best marketer, but if you didn't pass the core values interviews, you were not hired.
[Douglas Atkin — 44:42]
There was one particular, really, really important. So there was a cost, right? So there was a cost to me one time. I wanted to parachute this woman into Seattle. She was a grassroots activist, to deal with a particular political problem we have with the city council there. It was urgent. I needed to go in, like, a day or day two. And she passed all of her, you know, skill interviews, but failed the core values. That meant she couldn't be hired.
[Douglas Atkin — 45:09]
And of course, I just went apeshit, went, what the hell am I going to do? And then, you know, then I said, well, I have to adhere by this, because I think she's a perfect match, but I respect these two core values interviewers who don't. And so I will have to run around at cost, political cost as well, in Seattle, and deal with that. Because if she joined and was a really bad fit, she would be poison in the system, and would ultimately destroy Airbnb from within, as would everyone else.
[Michael Eisenberg — 45:43]
There's a story, Douglas, that you rejected a million customers because they wouldn't sign the Airbnb—
[Douglas Atkin — 45:51]
Yeah, I don't know. I wrote about this. I wrote about all this stuff, by the way, in some articles on Medium a while ago.
[Michael Eisenberg — 45:56]
Is that true?
[Douglas Atkin — 45:58]
Yeah. Yeah. I asked Airbnb. So there is — when you join as a host or a guest, you're asked to respect Belong Anywhere and the core values, because they're core values not just for employees. They're the core values for members to be a host, and so on.
[Douglas Atkin — 46:19]
So, and I saw, this had been going for about a year after we had launched the new logo and Belong Anywhere as the purpose. No, actually, been going on, like, two or three years. So I asked someone who I knew there and said, how many people didn't sign and therefore didn't join? They said, it's well over a million right now, and rising.
[Douglas Atkin — 46:39]
So, yes. I mean, it's only real — it's only a real — most purpose in most companies and organizations are on, you know, mugs, and a slogan on a wall in the PowerPoint presentation, or if they still exist. For them to have a real impact on the organization, they have to be lived and adhered to.
[Michael Eisenberg — 47:02]
By the way, you mentioned the logo. If my memory serves me correctly, that logo was somewhat controversial.
[Douglas Atkin — 47:08]
Oh, we loved it. I called it the equal opportunity genitalia logo, because there's something in there for everyone. You know, it depends — you could see tits, boobs and everything else, depending on who you are. And when it was launched, that's what people were writing about. And our social media team encouraged it, actually.
[Michael Eisenberg — 47:28]
Is that right?
[Douglas Atkin — 47:28]
Because the whole idea of the logo was to represent the purpose, which we, you know, I think we launched it in 2015. The purpose. Belonging.
[Michael Eisenberg — 47:39]
How does genitalia help you belong everywhere? I missed that. Sorry.
[Douglas Atkin — 47:43]
I'll tell you. Well, actually, there's a great little video that brings it alive, that shows you the graphic examples of how it comes from a person, a locator and a place and so on. But the whole idea was, we wanted our community to draw their own logo, to own it. It had to be something they could draw themselves. So most companies, the moment someone fiddles with their logo, they've got phalanxes of lawyers persecuting you. We wanted to encourage people to fiddle with our logo, to fiddle with the genitalia, as it were. And so this was very important design criteria from Joe, and Andrew, one of the designers, and Brian, was drawing it yourself. And so that led to that. And it was a kind of an A for Airbnb, but it was also an upside-down heart for love and belonging and all those things.
[Michael Eisenberg — 48:39]
I feel like I need to ask you. You mentioned Joe Gebbia very fondly many times in this interview. He's, of course, in the Trump administration, which I think you spoke a little less fondly about 30 minutes ago.
[Douglas Atkin — 48:50]
I don't know what happened.
[Michael Eisenberg — 48:52]
Ouch. Before I move on to, you know, our last topic — you were at Airbnb between 2012 and 2017. The go-go years. Hypergrowth. And then you left.
[Douglas Atkin — 49:01]
Yeah. Hypergrowth, yeah.
[Michael Eisenberg — 49:03]
Why'd you leave?
[Douglas Atkin — 49:05]
Because I burnt out. Burnt out. Well, I mean, I'm susceptible. I get migraine, and I was getting — ultimately, I had a permanent migraine and I had to leave. I didn't want to leave at all, but I had to. And a lot of people, literally half — and I mean literally half my age — who joined at the same time also left for the same reasons. Burnout.
[Douglas Atkin — 49:26]
But the one thing I want to say, it wasn't bad burnout. It was kind of good burnout. It was performance burnout, not stress from fear at all. I mean, if there was any fear, it was a fear of not performing to the mission, to the expectations of everyone else in the company, who you genuinely — there's only one person in the whole company I just did not like. Which, you know, by the time I left, I think there was like 2,000 people in the company. I joined, there's about 160. I think only one person — everyone else, they were amazing, because, you know, they're recruited with the same values. And they left because they often, you know, were kicked out, not just because they didn't perform well, but because they were not performing — they could perform really well, but whilst abusing the values, and then they were kicked out for that reason.
[Michael Eisenberg — 50:21]
So you talked a lot before about belonging. We talked before about social networks, the early ones — Flickr, MySpace, which both of us are old enough to remember at this point. People have forgotten Friendster. But like, there's been more persistent ones: Facebook, Meetup, Twitter, etc. Yet with all of this, loneliness is like an epidemic. The Surgeon General called it an epidemic. We all see it's getting worse. And people are driven also to, I would call, all sorts of loneliness-induced strange behavior, and even radical behavior going on. What's going wrong? Help us — you're like the expert at this. Help us understand the moment we're in. Why, with all this kind of likes and see-me on social media, people aren't getting together? The kind of meetup economy, so to speak, has not brought people closer together. People are more alone. And then transfer that into the AI world also, while you're at it.
[Douglas Atkin — 51:20]
So I think it's mixed. So there's good and bad with social media. The good thing is that people are engaging with other people. They're not just sitting in front of the TV alone watching TV. It is an engagement media. They have to be more careful about whether they're engaging with bots or not. But also, many forms of social media are creating many forms of genuine community, like the Meetup and Airbnb.
[Douglas Atkin — 51:45]
But I think there are other engines, social engines, that are driving loneliness, especially in the US. I mean, one of the highest forms of death for men over 50 is suicide. Then there is this ghettoization and demonization thing that's happening, that's being totally accelerated by social media. Of course, it's a complete disaster.
[Douglas Atkin — 52:12]
So I think it's fundamental that our political leaders and corporate leaders — the whole idea of working from home, to me, for example, was a disastrous idea, really bad idea. One of the whole reasons for going to work is creating face-to-face contact and social, real social engagement.
[Michael Eisenberg — 52:32]
To rub people together to make them sticky.
[Douglas Atkin — 52:34]
You've got to rub people together to make them sticky. There is this — I talked to you about it before — this thing I kind of devised called the community commitment curve.
[Michael Eisenberg — 52:41]
Yeah.
[Michael Eisenberg — 52:42]
Describe it.
[Michael Eisenberg — 52:45]
Yeah.
[Douglas Atkin — 52:45]
So this, the upper level is degrees of commitment, and this is time. So over time you make small asks, like, look at our community webpage, if it's a meetup or something. Then join. Then interact with other people. Then join, then show up, then show up again, then comment and post and whatnot — or that comes earlier, actually. Then organize a meetup.
[Douglas Atkin — 53:16]
So there are these — you make small, incrementally harder asks, that don't feel so hard because of the commitments you've already made, and you end up ramping a greater proportion of people up to the top. And up near the top is face-to-face contact, and down at the bottom is the easy stuff like clicking, liking and whatever else. So the whole goal, I think, for political leaders in the world, is to move people from lower commitment, easier asks like clicking, up the curve to face-to-face contact.
[Michael Eisenberg — 53:51]
If you were the chief doctor of the loneliness epidemic right now, what would you devise to save the world from the loneliness epidemic? I think, by the way, Douglas, this — if there's one guy who can solve this problem on planet Earth, other than with the reemergence of religion, which we can talk about another time, it's you. So you're the—
[Douglas Atkin — 54:15]
No, it's not me.
[Michael Eisenberg — 54:16]
You're the loneliness doctor. Yes, it is.
[Douglas Atkin — 54:18]
No, no, no. Well, it's all the kind of mechanisms, and whether that's executed by churches or social groups or companies or city councils organizing street parties, organizing ways to get people out of their homes and face-to-face contact. The most important thing to do that, you have to use some of the things that people think are what keep people at home.
[Douglas Atkin — 54:46]
So, for example, let me talk about Meetup, which is a really good example. When I was at Meetup, we had this terrible problem, in that only 40% of the people who joined a meetup group online, like to a hiking meetup, say — only 40% of the people would actually show up to go hiking, or whatever it was. That was a terrible drop-off. 60% failure rate.
[Douglas Atkin — 55:12]
And this is how we devised the community commitment curve. Because we realized that getting people to join the group is easy, but getting them to leave their warm home on a cold night and be complete strangers was too much social anxiety, and it turned a lot of people off. And so ultimately what we did is, we used a lot of social media techniques to diffuse the strangeness, to diffuse the anxiety. So people joined a meetup, and then we encouraged them to like and message people in the same hiking group before they even showed up to go hiking, to share things, to share pictures, to form relationships. So that when they did show up, they knew they were going to meet Brian or Ingrid or whoever it was at the group. And so the social anxiety was much lessened.
[Douglas Atkin — 56:08]
So I think you need to — whatever the platform is, whether you're a religion or whatever it is. Saturn used to do this. Saturn used to — at the car dealership, they would get people to meet up in the dealership and have events in the dealership. So anyone can do this. You can get people to familiarize themselves, then show up and meet face to face.
[Michael Eisenberg — 56:30]
Do you think there's more social anxiety today than there was in the past? And if so, why?
[Douglas Atkin — 56:36]
I don't know. But I'm sure that's being measured by the likes of Robert Putnam and other sociologists. And there may well be, because there's more fear that has been stoked by demonization, basically.
[Michael Eisenberg — 56:55]
Our friend David Siegel, who was the CEO of Meetup later on, said to me when I interviewed him, he said he thinks one of the great ways to kind of get over loneliness and social anxiety is some sort of mandatory military or community service. Do you believe in that?
[Douglas Atkin — 57:08]
I don't know. Don't know about mandatory. I think what the governments might be able to do, and enlightened leaders of companies or religions, is invest in getting strangers to meet each other face to face. Through these means we can talk about, online and offline.
[Michael Eisenberg — 57:25]
How do you think this AI world we're going to, which will have, you know, much more AI doing things on our behalf and more robots — how do you think about loneliness in that era, and the formation of community in this era that we're going into, and what do we need to do differently?
[Douglas Atkin — 57:42]
Well, I am definitely not an expert, and I fear to comment on it. From a personal point of view, I spend less time in front of the screen because my AI agent does more work for me, so that I can spend more time with my friends.
[Douglas Atkin — 57:58]
I don't work now, which is good. I started this project called 29. 29 is — we call it 29 because there are 29 Yogyakarta Principles. Yogyakarta Principles are human rights written specifically for queer condition, in Yogyakarta, which is a university town in Indonesia, about 20 years ago, actually. And my co-producer and co-founder and I are going around to come to 29 countries in the world where one of those human rights for queers has been achieved legally. And we're finding local queer artists and influencers, and making a music video about that particular human right.
[Douglas Atkin — 58:43]
So, for example, we just did one in Trinidad and London about decriminalization. We've been to Indonesia, the Philippines and India, also doing ones about the right representation, the right for accountability, et cetera. And each of these, we don't just show up with a camera and film artistic queers. We go in several months before, find these queer artists and influencers and journalists and writers and so on, and politicians sometimes, and have workshops with them for a day to work on the idea together.
[Douglas Atkin — 59:20]
An unintended consequence — happy unintended consequence — of this project is the amount of incredible community we are making in each of these countries, and between the countries, at a time of crisis, when queers are being actively persecuted and imprisoned. The whole goal of this, by the way, is to shift the culture, become predisposed towards queer rights through joy. Not hate. Not, we need rights, you're all horrible to us, we hate you. Not that. It's celebrating with joy the acquisition of a human right, and thereby demonstrating our shared humanity with everyone else.
[Michael Eisenberg — 60:00]
I've admired your work for many, many, many years. I tried to recruit you. So it's obviously, I admire your work.
[Michael Eisenberg — 60:06]
And every time.
[Douglas Atkin — 60:06]
I admire you, Michael, I admire you. You're an amazing human being.
[Michael Eisenberg — 60:11]
We think the same of each other. And every time I come away after talking to you, I am left in this schizophrenic state, or bipolar state, in which I say to myself, oh, my God, human nature is just such that we need to be tribal, which is good. We need belonging. Sebastian Junger wrote a great book about that, which I'm sure you've read. And we can create community for good.
[Michael Eisenberg — 60:39]
And at the same time, I walk away and say, oh, my God, human nature is such that we will inevitably be locked in this battle, so to speak. It doesn't matter what the lines are. And part of it's loneliness on kind of one battle, and the other battle is demonization on the other side of it. And so if I asked you, the expert, where is humanity? I mean, it's been going on for thousands of years. Okay? It's not new. And where are we in 50 years? Does it get better? Is it getting better? Is it getting worse?
[Douglas Atkin — 61:19]
Yeah, partly. It's just — I mean, so there's a downside to many things, including community. When communities get an extreme negative manifestation of a strong community, is the othering of everyone else, is the demonization of everyone else. What we're trying to do also in this other global queer community thing that I'm organizing, that I haven't talked about, is we're trying to do the opposite of that. We're trying to recruit allies by being open and welcoming as well.
[Douglas Atkin — 61:51]
There's a danger, right, because I know that strong communities come from very clear, well-defined ideologies and strong values. And you shouldn't let people in who don't subscribe to that ideology or share those values. But actually, there are lots of communities that do share values. You know, there's many in the — in, for queers, there's many, many in the — in this, of course, in the straight world, who share the same values of inclusion and diversity and love who you want, and also letting people live their lives, you know, not trying to judge them all the time.
[Douglas Atkin — 62:28]
So I'm always — I'm an optimist. I'm optimistic about it all. Human nature. Everyone thinks the world's going to end in their generation, and so far it hasn't.
[Michael Eisenberg — 62:40]
I'm a Matt Ridley rational optimist, big time.
[Douglas Atkin — 62:43]
No, I know. I know you are. Yeah. We've talked about it in the past, and I think that's true. I mean, there's always more fear when there's a threat. You know, in times of plague, in the past, there were conspiracy theories. When there were plagues, there are conspiracy theories when there are wars, there are—
[Michael Eisenberg — 62:59]
You know, and I sense that you think that there's conspiracy theories and demonizations now, that a lot of it goes back to 2008 and the financial crisis.
[Douglas Atkin — 63:07]
I know, I — yeah, yes, yes. I think because it really shook the fundamentals of the West's economic system. So everyone felt — everyone was really angry, too, especially when they saw Wall Street get off scot-free. And I agree with people, I was angry too. It was a total error.
[Michael Eisenberg — 63:27]
Douglas Atkin, this was a wonderful conversation. Thank you for joining me.
[Douglas Atkin — 63:32]
As always, good talking to you.
[Michael Eisenberg — 63:34]
Likewise. And to our audience, if you enjoyed this conversation, please write us five stars on Spotify and on Apple Podcasts. Subscribe to the YouTube channel, and of course, subscribe to the newsletter. We will promote this interview and conversation with my good friend Douglas Atkin. Douglas, thank you so much.
[Douglas Atkin — 63:50]
Lovely to see you again, Michael, after all these years.
David Magerman — 0:00
AI is an automatic machine gun.
Michael Eisenberg — 0:02
Right?
David Magerman — 0:02
And we're giving it to children.
Gavin Baker — 0:04
I think we will have artificial superintelligence in 10 years. And by that, I mean an AI that is smarter than the smartest human in every discipline.
Elad Raz — 0:14
Building an AI accelerator just to run transformers is the dumbest idea ever.
Sarah Tavel — 0:18
If your startup assumes that LLMs are going to stand still, we're going to bulldoze you.
Eran Shir — 0:25
The only way to deal with AI is AI.
Micha Kaufman — 0:28
What was considered to be hard is going to be the new simple. And what was considered to be almost impossible is going to be the new hard.
Michael Eisenberg — 0:43
Over the last year, we've done a number of episodes that have touched on the topic of AI, artificial intelligence. You might think when you watch this compilation that these are the same facts, but things are moving so quickly in this era of AI that the different people speaking in this video are actually talking about different epochs in the great debate on AI.
Michael Eisenberg — 1:05
You'll hear on this compilation from the great Gavin Baker, who has certainly been bullish. Not only has he been bullish, when the market went down in July, he flew out to Silicon Valley to see whether he was missing something. And he thinks he's not. In fact, he thinks he's underestimated just how powerful this AI trend is. You'll hear from Sarah Tavel, I interviewed a while ago, Micha Kaufman at Fiverr, whose stock has been decimated by the AI narrative out there. You'll hear from Elad Raz claiming he's gonna take on NVIDIA. You'll hear from Eran Shir and Zach Greenberger of Nexar, that has since merged with Nauto to create the greatest data lake outside of Tesla, and model of the physical world outside of what Tesla is building.
Michael Eisenberg — 1:48
And you'll also hear from David Magerman, who I would say said AI has been here a long time and all this is a giant bubble. Well, we might be in a bubble, and we might also be in the largest transformation of our lives of the last hundred years. And we're only going to know in 10 years where we are in this long process of artificial intelligence.
Michael Eisenberg — 2:10
There's so much out there. This is such a rich topic that's moving so fast. We need to remind ourselves how many of our assumptions not long ago were incorrect. There have been a small number of great investors that have figured out where the puck is going, as the great hockey player Wayne Gretzky once said.
Michael Eisenberg — 2:29
And so I really want you to listen to this, to realize how far we've come in what's going on in artificial intelligence, how so many people were wrong that compute would depreciate quickly. In fact, it's growing. How wrong so many people were that inference couldn't be profitable. It's wildly profitable right now. How little we understood a year ago about the difference between training and inference. How much we thought that this was going to be a game for only frontier labs. And here we are with open source models competing with the frontier labs. So much is changing in this world every day that it's literally hard to compute.
David Magerman — 3:12
The scale of the bubble, the financial bubble. I would say that the bubble that exists today is probably a factor of 10 to 50 of what the Internet bubble was. But the problem is it's monopoly money. It's these like 10 companies giving each other billions of dollars. When you buy $10 billion worth of computers from NVIDIA and you invest in NVIDIA, you're basically just paying yourself for equipment, and so you can overpay yourself. And it all kind of cancels out. If it's costing the company that's doing the inferencing $10, eventually they have to charge 15.
David Magerman — 3:46
OpenAI isn't a functioning business. It's not. I mean, the business model is so demonstrably a Ponzi scheme that I don't know when it ends.
Elad Raz — 3:58
Take the core compute of Blackwell, core compute of Hopper. You compare them one by one. You see Blackwell is 2x than Hopper. Great. It also consumes 2x more power.
Elad Raz — 4:11
Nothing in the architecture had been improved between Hopper and Blackwell. NVLink for sure. You know, other nuances. But that's like their core. Hopper to Rubin, almost 2x more power, 2x more performance. This is.
Michael Eisenberg — 4:28
Linear scaling.
Gavin Baker — 4:31
All of the biggest spenders on GPUs, with the exception of xAI, are public companies. And public companies report something called quarterly financials. And you can use those documents to calculate something called return on invested capital. It's really easy to do. And to date, the ROI on all of this spending has been strongly positive, to be good.
Gavin Baker — 4:53
So while the answer to the $200 billion question was yes, the ROI was awesome, the answer to the $600 billion question was yes, the ROI has been awesome. Now we're at the trillion dollar question and the ROI has actually still been good. We're rapidly heading for 2 to 3 trillion. And will the ROI continue to be good? Unknown. And if it's not, do economics dictate or does the prisoner's dilemma dictate and the companies could keep spending?
Sarah Tavel — 5:23
I started at Bessemer in 2006. I've never seen anything like this. You know, SaaS was incredible, mobile was incredible. But this just feels very different. If the technology froze today, there's still so much impact that we're going to see that it's just incredibly exciting.
Sarah Tavel — 5:42
Of course, there's the variable inference costs and that, you know, for many of the labs, is gross margin profitable. But then there's the amortizing, the cost of the model training, and that's where the numbers don't look as pretty for these firms. But should, over time, be okay? At least that's the belief.
Michael Eisenberg — 6:01
That was the argument about whether we're in a bubble. And by the way, you could be in a bubble and still there could be incredible economic value created by the small number of companies that survive the bubble. The bubble is just an investment.
Michael Eisenberg — 6:13
You've, of course, read and heard about the great debate on employment. Everybody thought AI was going to create mass unemployment. Well, the latest numbers show that actually AI is increasing employment. Those companies that are all in on AI are actually hiring more people and they're becoming more productive. So what is it? Will it create mass unemployment? Is it just a shift in employment with, let's say, some interim dislocation? Or is it going to create more employment like every other technological revolution in the past? The answer is we don't know.
Michael Eisenberg — 6:48
What's important when being an investor and listening to a podcast called Invested is whether the people bet their convictions, whether you're willing to bet your convictions, whether willing to invest confidently in what you believe about the future of this transformational technology that will touch every part of the economy and every country on planet Earth.
Michael Eisenberg — 7:08
And the most interesting thing is, it's the early innings. It's literally the first inning of AI. There's maybe, maybe a couple of million people around the world using AI at the bleeding edge. Maybe a couple of million people. There's 8 billion people in the world. There is a long way for this revolution to run.
Micha Kaufman — 7:33
AI is creating an illusion for most people because it makes us better, it makes us more productive. And you think that you're gaining these superpowers as a human being. It makes you more confident and you can do more stuff.
Micha Kaufman — 7:52
Yes, but it's giving the same power to everyone else, which means that it doesn't give any power to anyone.
Micha Kaufman — 7:59
I'll help anyone who helps themselves, but if you look for me to educate you about AI, you're doomed. You're done. You're done. And your problem is, you're not done at Fiverr. You're done, period.
Micha Kaufman — 8:14
There will be no demand for lazy people that expect the world or think that the world owes them anything.
Sarah Tavel — 8:23
The economic value proposition, we haven't seen anything like it maybe since virtualization. All this software as a service, that has always been this squishier "I'm going to improve the productivity of your existing employees." And how much more? 10%, 20%?
Sarah Tavel — 8:43
Now with AI, it is not even close how compelling the value proposition is, how clear it is.
Gavin Baker — 8:51
But in a world of AI, fundamentally, the economic return, a lot of it will come from either replacing or augmenting humans with GPUs. Labor replacement or augmentation. The maximalists, I think for sure, would say labor replacement. So I think that's a fair way to calculate it.
David Magerman — 9:13
The best we can hope for, I think, from these tools is replacing junior level work. And the way that you get senior people, the promotion, the mentorship, the ability to create a mature workforce is going to be severely stunted by the use of AI.
Zach Greenberger — 9:30
You know, everyone talks about resources in terms of people, but resources are now being talked about in terms of agents. So you don't necessarily need to scale your human capital. You can scale your agent capital. So we have agents running across the entire company that are doing everything from product design to product deployment to creative.
Michael Eisenberg — 9:52
You're bonusing people to rack up token bills on Claude Code?
Zach Greenberger — 9:56
Yes. Yeah, correct.
Eran Shir — 9:58
Crazy, right?
Michael Eisenberg — 9:58
So the incentive is to create as much code as possible, whether it works or not.
Zach Greenberger — 10:04
Well, phase one.
Eran Shir — 10:07
That's phase one.
Elad Raz — 10:08
We literally see people getting 10x more productivity using those tools.
Michael Eisenberg — 10:13
Have you mandated that everyone needs to use—
Elad Raz — 10:17
Absolutely.
Michael Eisenberg — 10:17
AI coding?
Elad Raz — 10:18
Of course. I mean, a company that don't have the leaderboard scores of how many tokens is being used is.
Michael Eisenberg — 10:26
The more the merrier.
Elad Raz — 10:28
Of course.
Michael Eisenberg — 10:28
How big is your token budget now?
Elad Raz — 10:31
Depends. Like, we are using everything. Me personally, I'm using Gemini, Codex and Claude. We have people that generate $300 a day, $100 a day per developer.
Micha Kaufman — 10:45
Ideally, I want everyone to automate 100% of what you're doing. And people looked at me and said, "So why would you need me?" And I said, great, because now you have 100% of your time free to do interesting stuff, things that machines cannot do. Yet.
Michael Eisenberg — 11:01
If you're interested in finding out ahead of time what's going on in Israeli tech, what the latest trends are, who's breaking not only news, but breaking the trend lines, then you want to subscribe to Aleph's newsletter and you can sign up right in the show notes in the description of the show. Please subscribe to the newsletter.
Michael Eisenberg — 11:20
Yet one of the disagreements or arguments that people lose sleep over is who will AI pay off for? Not if it will pay off, but for who, because there's a lot of dollars at stake. The question I'm sure you're all asking yourself, and I ask myself, is what's going to happen next?
Michael Eisenberg — 11:40
But you think the world's going to change a lot in the next nine years.
Eran Shir — 11:45
Yeah.
Michael Eisenberg — 11:45
Even though over the last nine years it looked the same.
Eran Shir — 11:48
Yeah. Because we are not, we're really bad at understanding exponents, right? And this is this kind of inflection point where things will get compounded and get, you know, crazier and crazier from here on out.
Sarah Tavel — 12:01
Sam Altman, in a podcast I think it was with Harry Stebbings, said, "If your startup assumes that LLMs are going to stand still right now, we're going to bulldoze you."
Sarah Tavel — 12:16
And I think the biggest mistake that I see people make is either they're building something that isn't a beneficiary of the kind of continued and astounding march forward with the power of these large language models. And also if you are building something and then it's like a bridge, because you're assuming that the LLMs or whatever the labs are doing isn't going to progress forward and you're going to outrun them, that feels like a very treacherous game to play.
Micha Kaufman — 12:57
It's cheaper to do it by hand. It's still going to be manual work. And if it's not, it's going to be replaced by technology. The types of repetitive stuff that even machines cannot do and still require human are just going to change. They're not going to go away.
David Magerman — 13:15
The driving force here is data. And it's not just data, it's information. And so just because you have data doesn't mean you have a solution. And if you have data that has information in it, from an information theory perspective, there are dozens of mathematical algorithms and pattern recognition algorithms that can pull that information out and help you reduce uncertainty about the future.
David Magerman — 13:38
So we've become a one trick pony where everything is just thrown into an LLM. I think success is looking at the data sets that you have, figuring out how much information you have and which information that you have is relevant to solving a real world problem, and then finding the right tool at the right level of complexity and cost to extract that information.
Michael Eisenberg — 14:00
What do you think that means, you know, not just financially, but philosophically about the world, where this notion of silicon can become the most valuable thing in human civilization?
Elad Raz — 14:12
No surprise there. I mean, think about it for a second. When 1,000 years ago, we all were fighting around food, okay? That's the basic element that everyone needs. Food, water, resources. I think that around 300, 200 years ago, it was around energy resources. That's most of the world. Now we are in the age of compute.
Gavin Baker — 14:36
But I think one of the most interesting parts of all of this is we don't know what the economic returns to superintelligence will be, definitionally, because we have never seen it. And if humans, we have pushed the limits with, you know, people like Albert Einstein or whoever else, pushed the limits of the natural laws of the universe, if we push the limits of physics and biology and chemistry and the math that underpins all of it, then the economic returns to superintelligence, they may not be that high.
Gavin Baker — 15:08
On the other hand, if we haven't, and superintelligences are curing cancer, inventing warp drives, and we're colonizing multiple solar systems, the returns to superintelligence are going to be really high. But it's very unknowable.
Michael Eisenberg — 15:22
Thank you for listening to this special episode of Invested. I hope you're left with more questions than answers. I hope you'll continue to deep dive and really try to understand, to the extent we can, where AI is going, what's it going to impact? How do you invest in it successfully? And I hope this will be a smorgasbord of opinions that you can choose from and at the same time, just an appetizer, and you'll choose to go deeper.
Michael Eisenberg — 15:48
Thank you so much for tuning in to this special summer edition of Invested. If you enjoyed the podcast, please rate us five stars on Spotify and on Apple Podcasts or wherever it is that you listen to our podcast. Please subscribe to our YouTube channel and please, please, please subscribe to our newsletter. That way you'll get the episodes before everybody.
[Michael Eisenberg — 0:00]
You sold KIND and you went on Shark Tank. Why?
[Michael Eisenberg — 0:05]
How many investments have you made?
[Daniel Lubetzky — 0:05]
Through Shark Tank?
[Michael Eisenberg — 0:08]
Yeah.
[Daniel Lubetzky — 0:08]
Probably 15, 20.
[Michael Eisenberg — 0:10]
Has anyone made money?
[Daniel Lubetzky — 0:12]
There's one investment. I'm telling you, Michael, I think this might be a multibillion-dollar company.
[Michael Eisenberg — 0:17]
Okay, so tell us.
[Daniel Lubetzky — 0:18]
The amount of things that I did wrong is so much greater than the amount of things that I did right. We grew a company from basically nothing to a multibillion-dollar company with no needed investment. I don't want to start getting so emotional out the gate.
[Michael Eisenberg — 0:42]
Welcome back for another episode of Invested. This is not Shark Tank. It's Invested. And I'm here with Daniel Lubetzky. How are you, Daniel?
[Daniel Lubetzky — 0:50]
I'm so pleased to be with you.
[Michael Eisenberg — 0:51]
My pleasure. Most of you probably know Daniel from Shark Tank, but he actually also invented the KIND bar. Now, the KIND bar is very dear to my heart. You know why?
[Daniel Lubetzky — 1:01]
Because it matches your shirt?
[Michael Eisenberg — 1:02]
That too, I guess. I remember walking around San Francisco after they shut down the kosher restaurant in San Francisco, starving. And I walked into, like, what do you call it in New York? A bodega? There I guess it's just a convenience store. I said, what can I have that's got a little bit of protein in it at least, and it'll fill me up. And I took three KIND bars. The first time I had a KIND bar was in San Francisco.
[Daniel Lubetzky — 1:22]
The kosher market, the gluten-free celiac market, they were the most loyal to us and we were loyal back. So every product we made, we made sure that we could keep our promise to our consumers. You know, like, what's the most important thing in a brand is that you be consistent. The brand is a promise. And a great brand is a promise well kept. So you have to just always be consistent and know who your audience is and just deliver what you promised.
[Michael Eisenberg — 1:47]
I want to start with why you called it KIND Bars. Why'd you call it KIND bar?
[Daniel Lubetzky — 1:50]
Interestingly, the year that we founded KIND was one of the hardest years of my life. My dad had just passed away. He was like my hero. He was a survivor of the Holocaust. And we were — first of all, we almost didn't launch the company because I was, like, struggling with my prior business. And as we were trying to decide whether or not to go forward, we were looking to come up with a brand, the value proposition we already knew – we wanted something that was going to be healthy, tasty, and socially responsible. We wanted to find a human adjective that would describe those three anchors. And we started thinking of my father. My team member Sasha at the time and I were brainstorming, and some of the other names were the funniest, stupidest names you could imagine. So funny. I need to find that piece of paper. We had like 70, 80 ideas.
[Michael Eisenberg — 2:46]
Give me some of them.
[Daniel Lubetzky — 2:46]
It was like really obvious stuff, like healthy nutty, nutty healthy, nuts-o-licious, nuts-so-special, special nutty. Like all sorts of variations of nuts and fruits. And then I think it was Sasha's idea, and she and I were riffing, and we wanted to honor my father. He was very front of mind, and we named it KIND after my dad. And the reason we named it KIND is not just because it's kind to your body, to your taste buds, and to your world, and so it fits with that value proposition. But also my father, in spite of what he went through in the Holocaust, he was just always seeing the world as a place where he could bring in some love, some kindness, some smiles. He made anybody that he met smile. And if the flight attendant or the waiter was having a bad day, he'd start throwing one joke after another after another. And, you know, the campaign — Progressive can't stop you from becoming your parent, but it can save you 15% on insurance. My kids joke that I became my father, and now they're becoming us. But a misima [task], my mission, when I see somebody having a bad day, is to try to put a laugh, to make them smile. And that was from my father, that he always saw his role after surviving the Holocaust to bring light and kindness.
[Michael Eisenberg — 4:10]
What was your father's name?
[Daniel Lubetzky — 4:11]
Roman.
[Michael Eisenberg — 4:12]
Roman. Just tell us about him, because it seems to be very present.
[Daniel Lubetzky — 4:16]
He was a very rare person. You and I are fathers. You to eight, me to four. My dad also had four kids, my mom and dad. And what was special about him is he achieved so much in his life from nothing. And he had almost no ego. It was very hard. Like, I think ego can be a positive force if you know how to manage it. Ego is not your amigo if you let it become a dark force, just wanting it for the wrong ways. But it can also be a force of giving you a sense of desire to prove yourself, to build — like, to build something constructive. My dad, for some reason, the way I saw him, I don't remember him — like, when I'm having lunch with my kids and they're talking to each other, sometimes I get very frustrated that I'm not part of the conversation. Like, I want to be a protagonist. Never had that. He was always — he put the spotlight on us. We were the protagonist. He was a great coach. Like, anytime I went to him with — and believe it or not, Michael, every one of my siblings can tell you, friends of ours would go to my dad to ask him for advice. Like, the community would come to him to ask him for advice. And the way he coached people was like a coach. He would listen, he would ask you questions, and then you'd come up with the answers yourself. For me, it's very hard to do. So, like, I'm very good at telling you what to do. I'm working on being a better listener, and then I'm helping you figure out what to do.
[Michael Eisenberg — 5:49]
Where did he come from?
[Daniel Lubetzky — 5:50]
He was born in Riga, Latvia. But it's kind of, Riga was not far away from Kovno, Lithuania, and it was a very nice weather, so people would go to have their children there. But he was really raised in Kovno, Lithuania.
[Michael Eisenberg — 6:07]
And what year was he taken away? Was he taken away to the concentration camps?
[Daniel Lubetzky — 6:10]
Yeah, he was nine years old when the war started, around ten and a half when he was sent to the Kovno ghetto, and around 12 when he was taken on these cattle trains to Dachau. 12 and a half when he arrived to Dachau. But if you look at his paperwork in Dachau, because, you know, the Germans kept very clear details, the entry says that he was born in 1927 instead of in 1930, giving him an age of 15, because his father, my grandfather, lied and said that he was 15 years old, so they would let him work in the concentration camp.
[Michael Eisenberg — 6:49]
Wow.
[Michael Eisenberg — 6:50]
And what year did he arrive in the concentration camp?
[Daniel Lubetzky — 6:53]
Probably 1942, 1943. Yeah.
[Michael Eisenberg — 6:56]
And then it was liberated with Dachau in 1945.
[Daniel Lubetzky — 6:58]
Correct.
[Michael Eisenberg — 6:59]
Straight from there. And then where did he go?
[Daniel Lubetzky — 7:02]
I have, like, so many stories I can tell you when you're asking me these questions. I just know — I don't want to start getting so emotional out the gate. But he was 15 and a half when he was liberated. He went to a sanatorium where they helped him recuperate, in St. Ottilien for six months. Then he was in a refugee camp for six months, and then he went to Mexico.
[Michael Eisenberg — 7:30]
How did he get to Mexico?
[Daniel Lubetzky — 7:33]
A generation before, my aunt and uncle — his aunt, I'm sorry, his aunt and uncle — had immigrated to Mexico, I think mainly because they couldn't get to the United States, so they ended up in Mexico. And then when my father and my grandfather survived, and my uncle survived too, but he ended up getting assigned to the US military and became a translator to them for six months. So when my dad and my grandfather started trying to go somewhere, they connected with my grandfather's siblings and they agreed to sponsor them. And that's how they ended up in Mexico.
[Michael Eisenberg — 8:11]
And what did he do when he got to Mexico?
[Daniel Lubetzky — 8:13]
When he got to Mexico, first of all, he didn't speak Spanish, he didn't speak English, and he had a third-grade education. And the way he educated himself was by reading used encyclopedias, cover to cover, volume A, volume B, volume C. Read thousands of books, learned Hebrew, English. By the time he passed away, he spoke nine languages and read over 5,000 books. And he started working double shifts in a factory and worked a lot of menial jobs. Eventually he and his father saved enough money to buy a little jewelry shop, or to build a little jewelry shop. And eventually they kept working really hard. Eventually he and his father, my grandfather, went to Switzerland and got the rights for a lot of watch companies, from Rolex, Audemars Piguet, Piaget, Cartier, to represent them in the duty-free business. They had an exclusive to sell these watches in duty-free stores, which was very valuable.
[Michael Eisenberg — 9:15]
Is that where you got your sense of branding and style?
[Daniel Lubetzky — 9:19]
I don't think I have a sense of style still.
[Michael Eisenberg — 9:21]
Yeah, but this is pretty good.
[Daniel Lubetzky — 9:22]
Yeah, that actually is very interesting. If you look at my, because I did 10 years of branding mistakes before I figured it out with KIND. And it's just pattern recognition that you develop over many years. So I still don't think I would have this style. But a visual style for packaging, I'm really good at that now because of all the mistakes I made. And I launched my first brand before KIND, was a company called PeaceWorks that was using business to bring Israelis, Palestinians, Jordanians, Egyptians, and Turks to trade with one another. To give neighbors an incentive to work together, to shatter stereotypes, to cement relations. And the first brand we launched was this line of sun-dried tomato spreads, olive spreads. It was called Moshe Pupik and Ali Mishmunkin's World-Famous All-Natural Gourmet Foods. I still don't know why it didn't work out, but that's what taught me to next time just call it KIND and just keep it simple.
[Michael Eisenberg — 10:23]
Moshe Pupik?
[Daniel Lubetzky — 10:23]
Moshe Pupik.
[Michael Eisenberg — 10:23]
For those who don't know, Moshe is Moses in Hebrew and pupik is actually a Yiddish word for belly button.
[Daniel Lubetzky — 10:32]
Yeah. But Moshe Pupik is a name that people use for jokes, right? Like in Mexico, Pepito is the guy. I don't know if there's such a thing in English, but in Mexico, Pepito is the protagonist in all the Mexican jokes. Moshe Pupik was the guy in the Yiddish jokes. And Ali Mishmunkin — in my mind, Moshe Pupik was this great chef and Ali Mishmunkin was a magician. And together, the legend told that there was an impending war in the Middle East and the rival armies were fast approaching one another. And Moshe Pupik and Ali Mishmunkin got together and concocted this sun-dried tomato spread whose aroma was so magical that it spread across the horizons and put the rival armies in a friendly trance. And they were so rejuvenated, they used the strength of the sun to melt their weapons into spoons and use the spoons to partake of the sun-dried tomato spread and became friends, and then had hundreds of years of peace. That was the legend of Moshe Pupik and Ali Mishmunkin.
[Michael Eisenberg — 11:29]
Quite a story. Did you come up with that story?
[Daniel Lubetzky — 11:31]
I came up with that story and many other stories.
[Michael Eisenberg — 11:34]
Oh yeah?
[Daniel Lubetzky — 11:35]
Yeah. Each one of our products had a different legend. But my favorite one was the one of Moshe Pupik and Ali Mishmunkin.
[Michael Eisenberg — 11:42]
Why do you speak Yiddish?
[Daniel Lubetzky — 11:44]
When I was raised in Mexico, I went to a Jewish school of immigrants. So it was really weird. I didn't realize it was weird till I looked back. But that was the first language they taught us in that school. Yiddish, Hebrew. Only later, when you were in high school, would they teach you English.
[Michael Eisenberg — 12:01]
What about Spanish?
[Daniel Lubetzky — 12:02]
Spanish was my mother tongue. That was what I learned and what I spoke. And in school it was Spanish, Yiddish, and Hebrew. Spanish and Yiddish, then Hebrew, and many years later, English.
[Michael Eisenberg — 12:16]
Where's your mom from?
[Daniel Lubetzky — 12:17]
My mom was born in Mexico, in Tampico, Tamaulipas, in the north of Mexico. Her parents immigrated a generation before from Eastern Europe.
[Michael Eisenberg — 12:25]
So before we came on, you told me about a bunch of attempts you made to do business in various parts of the world. Tell us about them because I think they're important.
[Daniel Lubetzky — 12:37]
How much time do you have? I mean, I think the amount of things that I did wrong is so much greater than the amount of things that I did right. And one of the things that I notice is that just trying things out teaches you so much. And sometimes making mistakes actually teaches you more than getting it right. Because when you make mistakes, you have to be introspective to figure out what didn't go right. And then you learn from those. So I was trying to represent international brands because I had this passion for the Middle East. I had this company that I started, Michael, after Stanford Law School, called METIC, the Middle East Trade and Investment Center. And the purpose of METIC was to try to help build joint ventures between Arabs and Israelis. But I had this confused Mexican Jewish lawyer that had a crazy accent. And the Israelis and the Arabs were like, why do we want you to teach us what to do? So I didn't get a single client for two years. I was running METIC and I didn't get a single client. I got a total — actually, I got one client who got my work for free and got a lot of free services from me. But I got a total of zero revenues throughout the thing. And that then gave me the idea to start what became PeaceWorks. But I tried to convince big multinational brands, Starbucks, Dell, many others, to give me the rights to represent them and take their place.
[Michael Eisenberg — 14:05]
How did you try to convince Dell to represent them?
[Daniel Lubetzky — 14:09]
I think I was just stupid enough to not know what I didn't know. But what's interesting about that naivete is what gives you the fire to eventually get things right. If you don't know where you should not try things out, then you also sometimes get it right. I think the lack of sophistication and knowledge gave me the opportunity to try many things that I didn't get right and many that I did get right.
[Michael Eisenberg — 14:33]
How did you try to convince Dell Computer at the time?
[Daniel Lubetzky — 14:37]
Well, specifically with that, I had relaunched PeaceWorks. And while it wasn't a big business, the maximum sales PeaceWorks ever had were $3 million. Most years it hovered below a million. It was like this. It was two steps forward, two steps back. So many mistakes I'd made. But people loved the concept of PeaceWorks. So I got a lot of recognition. And so I was invited to the World Economic Forum, to many other fora. And one day I was so stupid that I went to the Davos mountains, and I didn't realize that it was cold there, so I didn't bring a jacket. I was freezing my ass the first night, there's a snowstorm takes over and I cannot find the taxi for the life of me. And I'm freezing. I'm wearing this very thin thing and it's snowing like crazy. So I flag this black car and I tell these people, could you please give me a ride? And they look at each other, this couple, and they're like, okay. They let me into their car and I start talking, like right now, blah, blah, blah, blah, blah, blah, blah, blah. And like, let me tell you about PeaceWorks. Let me tell you about the work I'm doing to bring Arabs and Israelis together for the peace. And like, but enough about me. What are your names? And he says, like, oh, I'm Michael Dell. I'm like, what? And he was the most modest. He and Susan were just the kindest, most wonderful people. Then I was deluded enough to write him on emails, but I wrote to Jeff Bezos, I wrote to Michael, I wrote to everybody that would. Poor guys, they were like, who's this guy?
[Daniel Lubetzky — 16:11]
But, you know, eventually...
[Michael Eisenberg — 16:11]
You're living in Mexico at the time, or in Texas?
[Daniel Lubetzky — 16:14]
No, at the time I was living in New York.
[Michael Eisenberg — 16:15]
In New York.
[Daniel Lubetzky — 16:16]
Yeah. We immigrated. My family immigrated from Mexico in 1984 to the cradle of civilization, San Antonio, Texas. And I went to two years of high school there, college at Trinity University, one year abroad here. Well, six months abroad in Jerusalem, six months abroad here at Hebrew University, where I first met Palestinians, where I made a lot of friendships with Israelis. And I had the idea for using economics as a force for bringing people together. And then I took that back to college and wrote a thesis that became actually very, very famous among doctors. Because if you were having insomnia and you couldn't fall asleep, they would give you my 268-page treatise and you'd fall asleep right away. It was the most boring theoretical thing in the world. And everybody thought, this guy's deluded. Because in 1989 there was no breakthrough. All of a sudden, 1993, there is the breakthrough between Israelis and Palestinians brokered by Clinton. And that's when I decided to start PeaceWorks.
[Michael Eisenberg — 17:20]
And here we are in 2026. You've been passionate about this Middle East, Israeli-Palestinian issue for almost...
[Daniel Lubetzky — 17:30]
All my life. Ever since I was 12 years old.
[Michael Eisenberg — 17:31]
40 years.
[Daniel Lubetzky — 17:32]
Over 40. Ever since I was 12.
[Michael Eisenberg — 17:34]
What happened at 12 that caused you to become interested in it?
[Daniel Lubetzky — 17:36]
When I was 12 years old, I wanted to work. I didn't need to, but I really wanted to be an entrepreneur. Maybe because my father was like that. I don't know why, what got into me. Because most nice Jewish kids didn't do what I did. But I would get on the subway all the way to downtown Mexico, first take a bus and take the subway, and then work in a textile factory for the Sarfati family. Thank you, if you're listening, for giving me that chance for my first job. And I was cutting textiles, cloth, and selling it in the checkout counter and carrying big telares [looms] in the heat of downtown Mexico. But it forges you. And it was a great experience. But one day I was on the bus and right in front of me were people talking about Jews. And they were talking about Jews having horns and talking about the Middle East conflict. And I remember as a 12-year-old being like, oh wow, there's so much, there's so many problems with the lack of understanding between people. I need to prevent what happened to my father from happening to other people by building bridges. And so ever since I was 12, I started writing letters to the newspapers and getting involved in learning about how to. I thought that my mission was going to be building peace in the Middle East.
[Michael Eisenberg — 18:56]
Do you think that the Holocaust was singular or it could be revisited? Something like it?
[Daniel Lubetzky — 19:01]
Oh, it absolutely.
[Michael Eisenberg — 19:01]
Absolutely can happen.
[Daniel Lubetzky — 19:01]
In some ways things like it, not as — you can't compare tragedies. I don't want to reduce other people's suffering. But yes, the lack — I mean, in fact, I'm now one of the founders of the Builders Movement, because we recognize that dehumanization, polarization, hate, division are the elements that bring about, and ignorance, that bring about the conditions for some to think that they should destroy an entire people, like they did in Rwanda. Like, yeah, unfortunately we as humans have the capability to think that the other side is not human and then to do some atrocious things once that happens.
[Michael Eisenberg — 19:46]
Are you worried right now about the rising tide of antisemitism, that it'll kind of crest over and become a tidal wave?
[Daniel Lubetzky — 19:53]
I mean, first of all, I'm a Mexican Jew. I worry by definition. I'm the son of a Holocaust survivor. I think it's in my epigenetics to worry. But my worry is a very — it's not a paralyzing worry, it's a worry that drives me to action, to do something good, to build bridges, to prevent what happened from happening to others. Like, I've built the Builders Movement, the One Voice Movement, KIND, PeaceWorks, Empatico, tons of other ventures that I've done. Some very successful, some not very. But I'm always driven to build rather than to complain or to be paralyzed. And so my worry drives me to do something constructive and concrete, to actually do that. But yes, I'm very worried about this state of.
[Michael Eisenberg — 20:39]
So you've tried and failed at a million things, right? And then were very, very successful with KIND
[Daniel Lubetzky — 20:39]
And a few others.
[Michael Eisenberg — 20:39]
What are the other ones?
[Daniel Lubetzky — 20:49]
Well, I built together with my colleague Mohammad Darawshe the One Voice Movement, which got close to a million Israelis and Palestinians across the West Bank, Gaza and across Israel to mobilize, to propel their political representatives to re-initiate negotiations. We built a whole human infrastructure of people that wanted to try to be problem solvers. I was one of the earliest investors in Cava. I built a company called Somos that makes delicious Mexican food. I've started many other business ventures. I helped build the Builders Movement. We created the Builders of the Middle East, which has over a billion views, helping, in Arabic, in Hebrew and in English, show a positive side of the builders in the Middle East rather than the destroyers. I can keep going, but I can also tell you 100 more things that I failed with. And I wear those failures very proudly, because there's no chance I would have built KIND from a $10,000 company to a multibillion-dollar company had I not failed with PeaceWorks and learned the lessons from it.
[Michael Eisenberg — 21:56]
I'll come back to the failures in a second. The reason I'm asking the question about failing into success is certainly the pursuit, let's call it, of Israeli-Palestinian peace, even though I think, because of the Abraham Accords, you see Middle East peace maybe on the horizon, or at least some form of normalization or integration. But it's 40 years that you've been at this. Do you think that it'll happen?
[Daniel Lubetzky — 22:22]
It can. And it's interesting you brought the Abraham Accords, because it is the most interesting example to bring up. Because first of all, when I started dabbling in this, I had a set of assumptions, all of which were proven wrong. But then I developed another set of assumptions. And you can think about how during the early 90s, mid-90s, everybody said the only way for Israel to achieve peace with its Arab neighbors was by making peace with the Palestinians. All roads to peace go through the Palestinians. And unwittingly it gave a veto power to Palestinians and made a lot of factors why it was not the healthiest circumstances. When you look at what Jared and President Trump accomplished with the Abraham Accords, you realize that all assumptions, all conventional wisdom is meant to be challenged, and that every single one of those assumptions can be challenged. And one of the dangers that we get into, particularly as we succeed, we start thinking we're too smart. And particularly as we are introspective, we start thinking we've thought through these issues. I've seen this happen to a lot of people, that you've worked through the problem. So if you come up with your solution and then you think that is the answer, but guess what? Shit changes. Things change, other circumstances change. And so you need to constantly be questioning yourself, revisiting. I see you wearing a kippah. What I like the most about the Jewish tradition is questioning, is, you know, the schools of, was it Hillel and Shammai, that you always welcome the other school. Are you friends with Nuseir Yassin?
[Michael Eisenberg — 24:04]
Yeah, I know him well. He was here in that seat.
[Daniel Lubetzky — 24:06]
Nuseir and I are very, very good friends. We collaborate, we do a lot of things together. And he interestingly told me about my Judaism, stuff that I hadn't thought about, like how much he admires that in Judaism, people are very comfortable questioning things. I think that's one of our superpowers. And it's a superpower for all builders, in all religions, in all humanities. People that are comfortable asking why, asking questions, can then figure out why not, why do things better, how to change things. So is it a daunting challenge to resolve the Palestinian-Israeli conflict? Yes. Is it very hard for Arabs and Israelis to achieve full peace? For Jews and Muslims, for Shia, Sunni, for any of these conflicts? Yes. They're very deep, entrenched conflicts. But all it takes is every one of us recognizing that we cannot be just watching the stuff, and become protagonists.
[Daniel Lubetzky — 24:59]
The way you've gotten involved lately, or at least as far as I know, in the last three years, in trying to address positive progress for helping the people of Gaza. I think, to build builders instead of destroyers.
[Daniel Lubetzky — 25:15]
It's up to us. It's up to us. Because if you really think about it, Michael, overwhelming majority of human beings, not 90%, but maybe 95 or 99%, they want to be builders. They don't go to sleep thinking, I want to be a destroyer. They see themselves as builders. And the vast majority of people, it's not that they love the other side, it's that they want a better future for their children. But there's a tiny minority of people with extremist visions that deny the humanity of the other side, and that might be 10% of a population, 1%, I don't know. But what's powerful about them is they wake up in the morning, they think, how can I advance my cause? Whereas the people that want to solve problems in their daily lives don't think, how can I solve these communal problems? They think it's for somebody else to solve it. That is a problem, you cannot — if an extremist, even if they're a tiny minority, yesh lahem et hachuka, they have the passion to solve, and the moderates have the passion to go to the movies, we're not going to resolve this. So you need to empower people to be builders and to solve problems, to be part of the solution, to be protagonists.
[Michael Eisenberg — 26:25]
What you described, I believe, is the silent majority of people who, as my wife likes to say, most people just want to get up in the morning, have a family, raise their kids in the right way, make sure that they are successful in life. And I would say don't have time or energy for the bigger issues that you're talking about. Not that they're bigger than raising a family — that's a big issue in and of itself — but it's, call it a public policy or a national issue. How do you get people off the sidelines and create that passion in them, just from getting out of their, you know, daily life, which is busy enough right now?
[Daniel Lubetzky — 27:01]
This is an area that I've thought about for 30-plus years. People like you and I have a responsibility to find ways to help everybody put in their two cents. Because it is a daunting problem. It is a daunting challenge. So our task is to try to find a way for builders to contribute what they can. Because to your point, they're busy just making ends meet, just helping pick up their kids from school. They don't have the ability to do too much. But guess what? Everybody can do a little bit. So it's in Builders, in the Builders Movement, what we did in One Voice, with any work, you need to try to find a way, because there's a huge reservoir of goodwill. Everybody that I talk to about what I did — there yesterday, I was with this Israeli-Palestinian group and they were almost crying hearing the work we're doing, and very grateful, because a lot of people just don't feel there's a way to contribute. It's not that people don't want to contribute, they feel powerless. And so both in terms of also culture, we need to give people agency. This oppressor-versus-victim framework that has been introduced to young people, it's about the stupidest, most dangerous frameworks for humanity. Because you're either an oppressor and no matter what your actions, you're going to be a bad guy. You're born a bad guy and you're always a bad guy. Or you're a victim, and then you have no agency to actually be a protagonist in your own life and solve things. And so the framework of builders versus destroyers is a framework where everybody has agency and you have to choose. Are you going to deny the humanity of the other and take action to divide, to demolish, to diminish? Then you are a destroyer. And these are chosen carefully. Divide, demolish, diminish. What do they mean? To divide us from one another, to try to divide humanity and society across weird identitarian frameworks. To demolish, to destroy, because they don't know how to build. And to diminish, it's very important. Destroyers, their primary goal is not to build, is to diminish humanity, to make others feel lower, to make others feel diminished. Or you're going to be a builder. You're going to wake up and, like your wife said, have your breakfast, drink your coffee. But after that, build. Take action to build. Put in your two cents. How are you going to build? How are you going to elevate society? How are you going to build bridges, build schools, build innovation, build opportunities, build better communities, build bonds with one another? How are you going to elevate society? And in the Builders Movement, our role is to try to enable people to do that. We have social media channels that you can join. In Hebrew, in Arabic, in English. We now get over a billion views a year. And the goal is to help people, not tell them what to think, but how to think with a builder's mindset: with curiosity, creativity, courage and compassion. The four Cs of a builder's mindset, that helps you solve problems rather than tear each other apart.
[Michael Eisenberg — 30:00]
Three Ds versus four Cs.
[Daniel Lubetzky — 30:02]
Yes. It also kind of sucks because I'm D of Daniel, and yet I keep finding it's like they destroy, they divide, they demolish, the diminish shit. And I'm the Daniel and the dad. Then for some reason the Cs have so many fun things.
[Michael Eisenberg — 30:15]
Are your kids' names starting with Cs or no?
[Daniel Lubetzky — 30:17]
No, I have a very, very important — this might be my most important contribution to humanity. A very, very big belief that every one of your kids has to start with a different initial. Then you text them, you can say A, R, N, J. And I have friends like Robert Rodriguez, the filmmaker. He named all of his kids with an R. Have a bunch of people. Tori and her parents named all of them with a T. I'm like, dude, what are you doing? Like, how are you — and then it's worse when they all start with Ra. Like, oh my God, you get to — you need to get to a third letter too. By that time you might as well give the whole word.
[Michael Eisenberg — 30:17]
Time for a voice note.
[Daniel Lubetzky — 30:17]
What are you doing with your, with your eight?
[Michael Eisenberg — 30:55]
What do I do?
[Daniel Lubetzky — 30:56]
Like, do they have all different names, initials, or there's not enough in the vocabulary for your eight?
[Michael Eisenberg — 31:01]
I think so, yeah, they do actually.
[Daniel Lubetzky — 31:03]
You haven't thought about that?
[Michael Eisenberg — 31:04]
No, never once.
[Daniel Lubetzky — 31:05]
And let's go through it. This might be a breakthrough. You're going to become more efficient.
[Michael Eisenberg — 31:09]
One of them has a nickname.
[Daniel Lubetzky — 31:10]
You might actually succeed now.
[Michael Eisenberg — 31:11]
One of his nickname, they took his real name, it became from I to an S. And I have a daughter starts with an S. So that's some overlap.
[Daniel Lubetzky — 31:19]
I think we need to change the nickname.
[Michael Eisenberg — 31:21]
I think we're good though. We hit eight different ones, I think, on the real names.
[Daniel Lubetzky — 31:24]
But start using the initials now. Maybe you'll succeed after all.
[Michael Eisenberg — 31:29]
Tell me, why do you think — I want to go on to a different topic, but why do you think that the progressivism led to this identitarian and victim, identitarian politics and the kind of victim mindset and the oppressor-oppressed framework? What happened?
[Daniel Lubetzky — 31:45]
There are many different questions.
[Michael Eisenberg — 31:46]
And why is it taking root now?
[Daniel Lubetzky — 31:48]
Yeah.
[Michael Eisenberg — 31:48]
Still taking root.
[Daniel Lubetzky — 31:48]
The oppressor-versus-victim framework is not new. It's been in existence since the Soviet times, for decades. And for decades they cultivated it and it just kind of like, what's the name of the guy that popularized the...
[Daniel Lubetzky — 32:02]
Malcolm Gladwell.
[Daniel Lubetzky — 32:04]
He popularized the point about, like, how things don't change till they change very radically. I think the oppressor-versus framework, we were asleep at the wheel while people were cultivating that, and it was literally Soviet propaganda. And it's a terrible framework for any human being. Why would you want to be a victim or an oppressor? Like, it's just so dumb and so dangerous. But I think it just started being taught by some people, and then once they are in that department, then they only hire people that will teach that, and slowly but surely they take over the department, and then one generation later all your kids are being taught that when you don't even realize it. But I think what I find more interesting is all extremes can lead to bad outcomes, even if the intentions are very noble. I've been thinking about this issue a lot.
[Michael Eisenberg — 32:52]
I agree with this. This is very Maimonidean, by the way. I agree with this. Like, Maimonides is all about this. But keep going.
[Daniel Lubetzky — 32:58]
Please elaborate on that, because I want to absorb.
[Michael Eisenberg — 33:00]
You go first and I'll chime in.
[Daniel Lubetzky — 33:02]
Okay. But remember...
[Michael Eisenberg — 0:00]
I will, don't worry.
[Daniel Lubetzky — 33:02]
I've noticed a few examples of how good intentions lead to bad outcomes. For example, I was with the president at Stanford University, President Levin, and he was telling me that prior to him coming, when new students came into Stanford, the first thing they did, before anything, they assigned them to the school-assigned identity group and sent them for a day with them. If you're black, go with the black kids. If you're gay, go with the gay kids. If you're Jewish, maybe go to Jewish. And they would send them building. But it came from a positive intention. They're like, we want the Hispanic kids to connect with our Hispanic kids. We don't want them to feel alone. Which is all fine, but you then look forward and then it's all these identitarian clubs and frameworks and they don't connect with one another. So the president changed that and said, the first day we bring everybody together and say, what do we all have in common? Curiosity, open minds, respect. Like, what are the values that we expect from you over the next four years at Stanford for everybody to abide by? And yes, go ahead and develop your pride in being Jewish, Mexican, whatever you want, but first and foremost, you're a Stanford student with a quest to build bridges, to be a builder, to have open minds. Whatever it is in the ethos, in the culture of why you were selected, these are the things that you all have in common. And so this is an incredibly interesting example of how good intentions to try to protect that particular identitarian framework, so people don't feel left out, all of a sudden led to horrible outcomes. When I was growing up, bullying was very prevalent. And it's not good. People with a positive intention tried to overcome bullying. That's a noble goal. You shouldn't want to have bullying. You should try to overcome bullying. You fast forward 20, 30 years and I noticed that a lot of times we're removing from kids' agency for them to learn to solve their own problems.
[Michael Eisenberg — 33:02]
100%.
[Daniel Lubetzky — 33:02]
And so if they read them the riot act the first day they start school, and kids are terrified. And when I talk, because we have the Builders work, we're doing pedagogical work with colleges, and some of the heads of the universities and their advancement teams and their admissions teams tell me, when I ask them, that the thing that they are most fascinated by, sobered up by is that these young people arrive without a skill to interact with another and resolve problems together. They're like, terrified. They're actually very good in the classroom, but when they need to solve a problem, they get scared. Because cancel culture and all sorts of threats and all sorts of hovering helicopter parenting with good intentions to overcome the bullying removed the agency from the kids to learn how to solve it themselves. So it's fascinating, because you should try to overcome the bullying, but the better way to overcome the bullying, going back to my dad, to coach people for them to sort it out. When that happens, don't remove them and send them here and send them there and do it for them as the administration. No bullying. You go for two weeks to your school, to outside, we expel you. They expel kids so easily because they bullied. That's a missed opportunity to teach a person. Okay, deal with the consequences. Sort it out among yourselves. Coach them. Teach them bullying is not good, but help them learn the skill of being a builder and solving problems.
[Michael Eisenberg — 36:41]
I promised you Maimonides. Maimonides says that there's different human character traits that are on a spectrum. He says that you need to take the golden path in the middle on all of them, except for anger, which you shouldn't have anger. I was thinking about your father when I was thinking about Maimonides. Someone who went through so much but didn't have anger.
[Daniel Lubetzky — 37:03]
Yeah, it's so hard for me as a father because I sometimes lose my temper. I don't remember my dad ever losing his temper with me. I'm sure, once I remember he did something like that, but in general, he never, never, never. I don't remember having anger.
[Michael Eisenberg — 37:22]
You've talked about your father in terms of naming the company KIND. And one of the mottos of this podcast is values create value. And I know that was a big part of KIND, but I think everyone, a lot of people say that, but then it costs them a nickel and then it goes out the window. What are examples of things at KIND that cost you a nickel, but that reflected the values of the.
[Daniel Lubetzky — 37:44]
Before I go there, I need to tell you two things. Ryan Holiday, who's a very good friend of mine in Austin, told me that values are only values when they're tested and they cost you something. And it's a very interesting insight. I really like that insight. And the other thing I want to tell you is Camino Partners, our company, our framework, is building value through values. Because we did it right at KIND. We learned how to build a culture and a community where everyone was a stakeholder, everybody's an owner, whether you were the janitor or the president of the company, everybody got stock options, and after six months, the right to buy those stock options and encouraged to become an owner. We made scores of people into multimillionaires, and everybody was part of the ownership spirit and mentality. And we created that culture where we didn't take shortcuts.
[Michael Eisenberg — 38:35]
So at Lemonade, just as an example, when we set up Lemonade and we talked about the business model of Lemonade, which is aligned with our customers rather than the way normal insurance companies work, which is they make money when you get screwed. We basically created a Ulysses contract, which is we tied our own hand, we wrote it into our company documents, and that's how we tied the company's hand. So we can't kind of get out of it.
[Daniel Lubetzky — 39:00]
I love that, actually. How's it working? Because I met the woman.
[Michael Eisenberg — 39:03]
Lemonade is the fastest growing insurance company on planet earth.
[Daniel Lubetzky — 39:06]
And the woman that runs marketing there, she's impressive. Lior's wife?
[Michael Eisenberg — 39:11]
Yeah, Maya. Maya Prosor.
[Daniel Lubetzky — 39:12]
Wow. I remember meeting her, I thought she was really impressive.
[Michael Eisenberg — 39:15]
She's the chief business officer of Lemonade. I think part of this stuff is to state your values publicly so that you're bound by them.
[Daniel Lubetzky — 39:22]
Yes, state your value. We did that very well at KIND. I learned from doing it wrong at PeaceWorks. And at KIND, we set out who we are, what we are and what we are not.
[Michael Eisenberg — 39:31]
So what were you not?
[Daniel Lubetzky — 39:33]
We set very clear guardrails of what our brand stands for and what it will not do. So for example, I'll give you one of many examples. At some point in our industry, there was a huge fad for zero sugar.
[Michael Eisenberg — 39:47]
Yeah.
[Daniel Lubetzky — 39:48]
There were a ton of products that were doing zero sugar. And at that time, doing, not "zero sugar added," which you can do. Zero sugar present in your products. Which in my product we cannot do, because almonds have sugar, milk has sugar. Sugar is present in almost every product, in fruit and everything. And so if you're making a fruit-and-nut bar, you cannot have it have zero sugar. The only way you could have a zero sugar product is by using all artificial ingredients. And we didn't want to do that. So we — it was hard, by the way. It wasn't easy. We saw how for a while the zero sugar fad was growing and we were, like, intimidated by it. So we went into try to develop products, and fortunately we looked at our value set and said, okay, this is not us. We're not going to be able to follow that fad. We're going to be what we are and not what we're not. And we developed the dark — I might have been that one. Let me see what I gave you. Yeah, the dark chocolate and sea salt. And that product has 5 grams of sugar, which is less than what our other products have, they have 13 grams of sugar. We found a way to design a product with a teaspoon equivalent of sugar. Two grams out of the five grams come from the almonds, three grams from added sugars. But it's not that much, just a very, very small amount of sugar. But it's not zero sugar.
[Daniel Lubetzky — 41:09]
And it tastes good. It doesn't taste like cardboard. Which was our promise, was that it's going to be kind to your body, to your taste buds and to your world. So it's finding, having the courage to say what I'm not going to do, which is very hard for an entrepreneur.
[Michael Eisenberg — 41:21]
The salt and the sugar together is incredibly addictive.
[Daniel Lubetzky — 41:24]
Yeah, it's good.
[Michael Eisenberg — 41:26]
Those are the best products. So you sold KIND and you went on Shark Tank. Why?
[Daniel Lubetzky — 41:34]
Why I sold KIND or why I went to Shark Tank? Both are very big questions.
[Michael Eisenberg — 41:37]
Yeah, both, actually.
[Daniel Lubetzky — 41:39]
I asked myself whether I should have not sold KIND very frequently. KIND was not just a business for me. It was my baby. It was a vehicle for all of my values, for all of what I did. We created the most incredible culture. We had the most incredible performance in my industry. We grew a company from basically nothing to a multibillion-dollar company with no needed investment. I sold some secondary shares, but we never really needed meaningful money. We got to a $7 billion valuation with only 5 million, $5.2 million lifetime in primary, and 5 out of the 5.2 stayed in the balance sheet. Never needed it, because we grew triple digits, cash flow positively and profitably, for 10 years in a row. So why? Around 2016, 2017, I started thinking we need to grow internationally. We had tried it and it had taken us a while. We were seeing competitors leapfrog us in other countries, because in the US we were very solid. Everybody had tried, but nobody had succeeded. But we saw people borrowing our playbook and trying to apply it in other countries. And we wanted to have the ability for KIND to win in all those countries. We felt we needed an international partner. Initially, we wanted a partner that would just take the international rights and we would do it in the US. We didn't find a partner that was interested in doing that. And, you know, I also wanted to do other things with my life. And the biggest mistake I made is assuming that if I no longer am running KIND, then I'll have a lot more time. You understand why? Because once you have all the resources from that company and you need to allocate those resources, and you still have the responsibility to invest that money. It's very, very hard in some ways in terms of time allocation, it's much harder today, because 15 years ago I had KIND and One Voice, work for peace in the Middle East to try to help Israelis and their neighbors to build economic relations and peaceful relations. And KIND. Today, KIND now has hundreds of investments. It's so much harder to manage that. And I'm working in the Middle East, in the United States, in Ukraine, in other areas where I feel like, fighting antisemitism, fighting hate, finding all sorts of challenges that I think that our world has encountered. And so it's much harder to keep up.
[Michael Eisenberg — 44:10]
Why'd you do Shark Tank?
[Daniel Lubetzky — 44:12]
I love Shark Tank. I was on a plane one day and I look at this weird format where people are talking, and I'm a very curious person. I talk to everybody, like I told you, like my parents. So I asked the person, I interrupt them. I can't believe I do that, but I do that. I was like, what are you watching? They're like, oh, it's Shark Tank. What is Shark Tank? They explain it to me. I sit down, and I'm probably on a long-haul flight, and I watched like 10 episodes. I'm like, I am in love with that show. And then a couple years later they call me and they're like, we want to invite you as a guest Shark. I'm like, I'm in. Because I used to watch Shark Tank with my kids, and we would pause and I would talk to the kids. You teach kids about entrepreneurship. You teach kids about how to negotiate. You learn a lot. What I love about Shark Tank is you're, it's very engaging and entertaining, but you're also teaching people about the American enterprise system, or about the entrepreneurship system in general. And it's one of the only shows that goes through generations, like, like three generations. Grandparents, parents, and kids watch it together. And it's very enjoyable, very engaging. It's gone on now for 18 seasons. Just like an iconic show.
[Michael Eisenberg — 45:20]
How many investments have you made?
[Daniel Lubetzky — 45:20]
Through Shark Tank?
[Daniel Lubetzky — 45:23]
Yeah, I need to count them. Probably 15, 20.
[Michael Eisenberg — 45:27]
Has anyone made money?
[Daniel Lubetzky — 45:29]
Yes, but none has given me back the money. It's very tricky. That's why Mr. Wonderful, Kevin, with his thing to get royalties and to do, he's kind of right. Because it's very hard. A lot of these are small businesses that unless you sell them, which a lot of these people don't want to do, they, it's very hard for you to actually see. Even the successful ones are still at an earlier enough stage. But there's also a lot that don't succeed because it's a work of love, because it's starting super early stage. So I also do Shark Tank because I like giving back. This is my way to teach entrepreneurs and help them the way I was helped.
[Michael Eisenberg — 46:07]
You like being on TV?
[Daniel Lubetzky — 46:08]
I enjoy it so much. I also enjoy the challenge. It is so hard, Michael. At least my first season, and you can tell my personality, I'm very comfortable talking, and nobody's ever accused me of not talking enough, till my first season on Shark Tank. I'm like, in it. And first of all, the stage is very big. It swallows all the energy. So I'm thinking that I'm screaming. I'm thinking I'm active, and the producer, like, Daniel, you need to step in. You need to wake up. I'm like, what are you talking about? Like, I feel like I'm invading people's privacy and screaming. It takes a lot. And did you, were you a Seinfeld fan?
[Michael Eisenberg — 46:48]
I'm not such a TV fan, but I have watched some Seinfeld.
[Daniel Lubetzky — 46:51]
You know, Jason Alexander plays the role of George.
[Michael Eisenberg — 46:54]
Yeah, sure.
[Daniel Lubetzky — 46:54]
You remember George?
[Michael Eisenberg — 46:55]
Yeah, sure.
[Daniel Lubetzky — 46:56]
In one episode, somebody teases him. It's mean to him, gives him some bad lines. And three days later, George is driving and he comes up with a comeback line. And he's like, oh, I should have said this. That's what happens to me on Shark Tank. Like, it's so quick and so fast that I find myself a week later processing, oh my God, I can't believe I didn't do this. Because it's what you see is what you get. It's real. You don't know what company is going to present to you, and you have to develop the pattern to decide what to do or not to do on the go.
[Michael Eisenberg — 47:32]
What's your favorite investment from Shark Tank?
[Daniel Lubetzky — 47:35]
There's one investment that I did, and we just recorded in June, this fall it's coming. I'm telling you, Michael, I think this might be a multibillion-dollar company.
[Michael Eisenberg — 47:44]
Okay, so tell us first.
[Daniel Lubetzky — 47:45]
No, I can't.
[Michael Eisenberg — 47:46]
Why not?
[Daniel Lubetzky — 47:47]
I'll tell you. It's the first platform investment that's a technology firm that could really, really, really, if we hit it right, there's a lot of challenges. I think it could become a major thing. I'm very excited about it.
[Michael Eisenberg — 48:02]
Is it like reverse Darwinism, though? Like, the really great companies come to your family office, and, you know, if you're in Austin, they go to Joe Lonsdale and Elon or whoever it is who are out there. And if I didn't get money from you in the normal ways, I go to Shark Tank and I'll find Daniel Lubetzky there and see if I can persuade him to give me a few minutes.
[Daniel Lubetzky — 48:14]
I literally said that today to somebody. He's like, oh my God, this person wants to produce a movie. I'm like, listen, if they're asking me for money to produce a movie, I know it's a bad movie, because they're gonna go to the right people for the right stuff. I agree with you. I do think Shark Tank, first of all, is a platform that gives entrepreneurs enormous amount of reach. So all of a sudden your product is on there. Like, one of the deals that I did, oh, my favorite deal is Neuro. Neuro, of the ones that I can announce. Neuro is an incredible company, but I actually didn't do the deal in the tank. It's these two young Asian guys, Kent and Ryan. They launched this Neuro Gum that if you want caffeine, or if you want to go to sleep, or if you want other forms of supplementation, you do it through mints or gum. They present, amazing guys, as bright as they come. Insane. I'm like, oh my God, these guys are incredible. One, by the way, is paraplegic. He had an accident. Incredible story. Just about as bright as they come. But they're growing really fast. They went from zero to a million dollars very fast. And in my mind I'm like, they're probably just getting distribution into the shelves, but it's going to then dip, and the valuation is not right. I bow out. Kevin gives them an offer, but they don't get a deal. I tell them, guys, I really like you. If you ever need me, I'll give you a hand, but I'm not going to invest. A year later, they call me and they're like, Daniel, remember how you said you'd give us a hand? And I'm like, yes. And like, we're about to go out of business. Like, what happened? Like, we're getting sued with a frivolous lawsuit by somebody that's suing us for our trademark. We would win in court, but this person's got deep pockets and they're going to take us out of business and they will not reason with us. So I'm like, okay, I'll give you guys a hand. And they're like, are you sure? Like, yeah, I'll give you a hand. And I go to this person and I say, listen, you know you would lose in court. So I'm going to step behind them, and eventually you're going to lose, but then you lose a lot of money and I'll lose a lot of money. So that person decides to settle with them and leave them alone. And they're so grateful, because I literally saved their business. They start growing like this. Today they're a $100 million revenue business and on their path to become the next billion-dollar brand. And a few months ago, they reach out, like, look, you know, we're raising money, we want to put you on the cap table, we want to give you some stock options and some ability to invest. And I ended up doing, when I helped them, I didn't do it for any reason other than to help them. But it felt really good to close the loop for them and for me. And so we recently did an update on them on Shark Tank. And Shark Tank is not just when it airs, then there's updates and then it re-airs. Re-airs, re-airs. You get, every time that it airs, more people buy your product, more people are, there's a lot of value. But you're right, some of it is adverse selection. Like, if you, not every, it depends who's presenting. In this case, a company that I told you that I think is going to be insane, I think that they need the help, but their concept is very good.
[Michael Eisenberg — 51:32]
And you gave them money?
[Daniel Lubetzky — 51:34]
We haven't closed. You know, when they present to you on Shark Tank, you only watch 8 to 11 minutes, but the pitch goes 30 to 45 minutes, once in a while longer, but that's still not enough time. So you're given the chance to do due diligence. If anything they said in the tank is not accurate, you can bow out. So we're going through the due diligence phase. I hope we will close because I'm very excited about it.
[Michael Eisenberg — 52:00]
What's the failure that you've learned the most from?
[Daniel Lubetzky — 52:04]
I mean, so many. But PeaceWorks had so many pieces of failures. It's without any doubt is what helped me build KIND. From Moshe Pupik and Ali Mishmunkin's World-Famous All-Natural Gourmet Foods to KIND. From trying to be everything to everybody with PeaceWorks, to trying to be very focused with KIND. With PeaceWorks, I didn't understand. I was a confused Mexican Jewish lawyer selling sun-dried tomato spreads in the streets of Manhattan. And I was walking down the streets, literally. I took out my legal briefcase, emptied it of my legal books, filled it with pita breads and baguettes. And I would take these jars of sun-dried tomato spread, olive spread, and open the jar and feed it, hand-feed it to all the buyers. And I would go door by door. I would wake up at 7am in the morning, start at 122nd on Broadway, walk down door by door, store by store, store by store, and then cross the street and then go up Broadway, and then rinse and repeat the next day in Madison, the next day in 3rd Avenue, et cetera. And then the following day or a week later, I would take my beaten-up car to deliver the product. And I was determined to get on the shelf of every store. And I didn't understand the difference between what you call the bodega, or at that time mainly was Korean grocery shops, were, like, owned by the Korean community, or a Macy's. I'm telling you, Michael, I was so stupid. I didn't understand. The products that are meant to be in Macy's are not meant to be in the bodega. And I would go one by one and try to be in every store. And one day I went into this store on 84th on Broadway, and I talked to Mr. Kim and I told him, would you try this PeaceWorks product, made through cooperative ventures between Arabs and Israelis? He said, sorry, you know, people come here to buy toilet paper, ketchup, essentials. They're not going to buy a sun-dried tomato spread made by Arabs. But I'm like, okay, but mister, you have to understand, this product is delicious. And I'm literally force-feeding the gentleman. After an hour, he gets tired of me. He goes, because I guess in the Korean culture, you can't just say no, or I just won't listen. He leaves. He goes down the basement.
[Michael Eisenberg — 54:18]
Yeah, the storage is underground there.
[Daniel Lubetzky — 54:20]
And I follow him. I go down the basement behind him. I swear to you, this is true. I did that so many times. I just go everywhere. And eventually Mr. Kim says, okay, I'll buy one case from you. I'm like, yes, $33. I'm like, this is it, Daniel. You're going to succeed because you have the grit. You don't give up. Yes, Daniel, you've got it all. And I'm like, go. Feeling so proud that after two hours I got a $33 order. The next week I go by and I look on the shelves, 12 jars all still there. The next week, 12 jars, all still there. A month later, two months later, a year later, 12 jars full of dust. I felt horrible for Mr. Kim, but also for my brand, because it's not doing him any favors. He lost $33 that he's not converting. In our industry, in CPG, consumer product goods, you need to turn the product. People actually selling you shelf space, they're not selling, like, it's, you need to turn the product from those shelves. And if the product's not turning two years later, and it doesn't do my brand any favors, it starts looking all old and whatever. So that's how I learned that, like, oh my God, you don't want to be everywhere. You want to be where you need to be, where the consumer wants to find you. In that case, for Moshe Pupik, it was for, at a specialty store, it was a specialty product. And so when we launched KIND, we were very, very clear about who we were, what we were. We didn't want to be everything to everybody, because then you end up being nothing to nobody. We wanted to be the right product. Am I talking too fast? I don't know if they're, it's like, dude, we cannot understand you, let alone with your Mexican Jewish accent, let alone with talking so fast. So I'm sorry.
[Michael Eisenberg — 56:09]
You're doing great.
[Daniel Lubetzky — 56:10]
Put some subtitles.
[Michael Eisenberg — 56:12]
How do you teach your kids about agency and grit?
[Daniel Lubetzky — 56:15]
It's not the easiest, because all of us as parents want to give our kids everything. Our instinct as parents is to give everything to our kids. And as one of the, Debbie, a teacher at our kids' preschool, once said, it's like you as parents want to remove all the rocks from the road that your kids are walking. We as teachers have the duty to put some of the rocks so they learn how to stumble, learn how to grow. And so it's not easy, but I do a few different things. First of all, they need to earn their own income. They need to work, they need to do chores, they need to develop jobs. We give them a very basic allowance for them to learn how to manage their own money. But then anything extra they need to earn from their jobs. You need to teach kids and people to be comfortable taking risks, to reward. One of the reasons why Israeli society and American society are so good at entrepreneurship is because we're comfortable with things not working out. We're fine with what we call, stupidly, the word failure. It's not really failure, it's just you had a setback, you had a challenge, it didn't work. Another try. You're learning, you're learning, you're learning. And in certain cultures, if you quote-unquote fail, it is a shame for your family. It is a sign of, you cannot have that. You have to teach your kids, yourself and your society that it's okay to try things out. And when they don't work, just make sure that you're introspective and learning from it.
[Michael Eisenberg — 57:45]
I have one last question for you. What's your aspiration that you say, I need to succeed at this over the next 10 years? You've done so much.
[Daniel Lubetzky — 57:55]
I need to make sure that the world that you and I inherit to our children is closer to the one that we inherited. Where hate, division, dehumanization against Jewish people and against others, where all of the, when I was growing up, I came from Mexico to the United States in 1984. Democracy was advancing, rule of law was advancing, economic freedom and economic expansion and capitalism were expanding across the world. The United States was exporting these all over the world. So I thought my job is just to try to help build peace between Arabs and Israelis. I still care about that, and I still am going to work towards that till the end of my life, to help do that. And I think it's going to come. And I think actually the Middle East, Israel and its neighbors that are its partners, are going to become some of the most incredible countries, because there's just so much energy here, so much opportunity, so much talent. So I think actually it's not just going to get resolved, it's actually going to reward those that are part of the journey, because it's going to, I think, become a very, very important success story for the world. And it's not just allegorical, you can look at the data to prove that out. But I also now worry about the state of all of these Western democracies and the threats against rule of law and tolerance and respect and kindness and democracy and economic freedom. And I think our job is to make sure that we remind everybody about the importance of these values. Because in my opinion, a meritocracy and all of these things are what help build the United States into what it was, what helped Israel from the desert, that is what it is. And what's going to help our neighbors and others to build a better future.
[Michael Eisenberg — 59:39]
How do you know if you were successful?
[Daniel Lubetzky — 59:42]
How will I know if I'm successful? It's pretty clear. Like, is hate going down or is it going up?
[Michael Eisenberg — 59:47]
How do you know? How do you know? Like, Islamism, for example, as a form of hate is on the rise. Antisemitism as a form of hate is on the rise. Like, how do you know if you're going to be successful?
[Daniel Lubetzky — 59:59]
I mean, first of all.
[Michael Eisenberg — 59:59]
Campuses are becoming more intolerant. You know, your Stanford story is an outlier for now.
[Daniel Lubetzky — 59:59]
But it's starting to change. If you look at, it took 20, 30 years to get into this trouble. It's going to take 20, 30 years to get out of it. So in higher education, which is among the worst parts, but even K-12, people have seen it and they're now starting to change, but it's going to take a long time. Curriculum and training of education. Social media is one of the biggest problems right now.
[Michael Eisenberg — 60:28]
You're not going to solve that.
[Daniel Lubetzky — 60:29]
You have to, because alternatively society is going to be in trouble. You have to, in two, three ways. Number one, you need to adjust Section 230. It makes no effing sense that an entire industry, the most important industry, by the way, is immune of any liability. It's never existed in history, and if it stays, it's going to destroy our society. Because there's effects that are going to destroy the economy. I'll give you an example. Right now, whether it's on social media or on an e-commerce website, if they take your likeness and monetize it and make money off of a deepfake, they cannot be sued. It makes no sense whatsoever. Right now, if they take an infringing patent or trademark, a product from China that copies our Shark Tank company, they cannot be sued. So it's going to destroy the small businesses. It's going to destroy the American enterprise spirit. You need to make some adjustments so that internet companies and social media companies can be held liable under a certain set of circumstances. It's tricky to adjust it, but it's not where it is right now, where there's zero liability. Now, to your question, not going to happen. Because all of these companies now are so powerful and they have more lobbies than anybody. The only way you're going to solve this problem, and all the problems, is by uniting citizens to force the politicians to be accountable to the will of the people rather than to special interests, industry groups, or extremists. Political parties have amassed so much power and they're now just focused on getting reelected and getting more power rather than solving problems for citizens. That's what the Builders Movement is about. Anybody that's watching that has even the most tiny belief in what I'm saying, go to my channel, Daniel Lubetzky. Go to Michael also, if you're not following. But go to all of our Builders channels in all the languages that we have them, and join and listen and start joining. We'll give you tools for how to do this. Ultimately we need to build a block of citizens that holds politicians accountable to follow the will of the people and to solve problems together rather than tear each other apart like this. All these extremists that are getting elected by monetizing all of this hate, we cannot let that happen. So yeah, it's going to be hard, but we have to. We have to solve it. It's not just going to, otherwise, force, create hate it's going to destroy the economic fiber that exists.
[Michael Eisenberg — 63:03]
What's something kind you want to say about somebody?
[Daniel Lubetzky — 63:07]
My mom always notes that I'm in love with my father, and I talk about my dad all the time. My mom is the friendliest, sweetest. She will talk to everybody, even more than my dad. Even normally, she makes friends with everybody. She's just full of life. She's 82 years old and she's always thinking about others. She comes up with a suitcase filled with toys for everybody and gifts for everybody. She's always trying with these two. She's 82 years old, can barely make it through. She's always bringing gifts and toys for everybody. She's a sweetheart.
[Michael Eisenberg — 63:38]
Thank you. Are your kids embarrassed by the fact that you talk to everybody?
[Daniel Lubetzky — 63:42]
Yes, they are embarrassed and they can't help themselves becoming that.
[Michael Eisenberg — 63:47]
Daniel, thank you for joining.
[Daniel Lubetzky — 63:48]
Thank you, man.
[Michael Eisenberg — 63:49]
And you should definitely subscribe to Daniel's channel. And if you want to follow Daniel Lubetzky, he's on X at Daniel Lubetzky, spelled D-A-N-I-E-L-U-B-E-T-Z-K-Y. That's on X. You can find him there.
[Daniel Lubetzky — 64:03]
And also on Instagram and other channels.
[Michael Eisenberg — 64:05]
And also on Instagram and other channels. Are you on TikTok?
[Daniel Lubetzky — 64:07]
Probably, yeah.
[Michael Eisenberg — 64:08]
Probably, yes. And if you enjoyed this podcast, please rate us five stars on Apple Podcasts and Spotify and subscribe to the YouTube channel. And if you enjoy the content, please subscribe to our newsletter as well.
[Yuval Ariav — 0:00]
Decided to do a deal that I diligenced for 10 weeks and I had less than 12 hours to make up my mind.
[Michael Eisenberg — 0:06]
Did you do it?
[Yuval Ariav — 0:07]
We want to make Symbol into the go-to first-check fund for the weird Israeli venture opportunities. Been somewhat active in theater production in New York, which also has helped me a great ton.
[Michael Eisenberg — 0:19]
I didn't know that actors and backstage people were active investors. How's that helped you?
[Yuval Ariav — 0:22]
You would be surprised.
[Michael Eisenberg — 0:25]
Really?
[Yuval Ariav — 0:25]
You would be surprised. I think it can become one of the biggest Israeli companies ever.
[Michael Eisenberg — 0:30]
Ever. In history.
[Yuval Ariav — 0:32]
In history.
[Michael Eisenberg — 0:00]
How big is big?
[Yuval Ariav — 0:00]
I think it could be Israel's NVIDIA.
[Michael Eisenberg — 0:40]
Welcome back to another episode of Invested. I'm thrilled to be here with Yuval Ariav of Symbol Capital. Welcome, Yuval.
[Yuval Ariav — 0:48]
Thank you. Good to see you.
[Michael Eisenberg — 0:50]
We're continuing our custom of introducing Aleph's competitors into the whole world so that they can pick up LPs and promote their portfolio companies. No, Symbol is actually a great collaborator and you've always been a great collaborator here in Israel. The venture system is still very collaborative. It's not as competitive as perhaps other places in the world. So it's great to have you.
[Yuval Ariav — 1:11]
Yeah. And it's been great working with you guys.
[Michael Eisenberg — 1:13]
Yuval, I want to jump right in. And so in Aleph, one of the things we always provided, prided ourselves on was being non-consensus.
[Michael Eisenberg — 1:21]
And the firm is designed around non-consensus decision making.
[Michael Eisenberg — 1:25]
You define Symbol's kind of ethos as pre-consensus. What does that mean?
[Yuval Ariav — 1:30]
When you talk about consensus, you usually mean in the VC community, right? And for us and for me, I think the best things that, the best investments that I've made were investments that were non-consensus when they started. But then once they prove something or a couple of things that are very fundamental to business, everybody immediately understands them. And I think that stems from, if you think kind of the average VC, how they think about what can be big. A lot of it is just looking at comps. They're looking at other companies that grew very, very big and say, okay, does this look like that? And I think a lot of non-consensus, pre-consensus. And I think this is something we share, is trying to imagine what this could be despite not necessarily having that comp to point to. But once the business proves something, then everybody can imagine it.
[Michael Eisenberg — 2:24]
So is this just a question of timing? Like, okay, at some point this will be consensus, but right now it's not?
[Yuval Ariav — 2:32]
I think there are definitely things that, definitely pre-consensus investments that have to do with timing, but a lot of it, whether it's timing, whether it's timing the company makes, has to do with proving something that folks don't think that the company can prove, whether it's because of past kind of common knowledge, common wisdom in the VC community that was maybe true for companies that started in 2010, but does not yet hold now. And so you kind of need this refresher to the market of saying, oh, everybody thought that consumer fintech is X, but this was because a lot of folks today, they have the scars on their backs from companies that started maybe seven, eight, nine years ago. But then for companies today you say, well, I'm kind of diving into this and I have a thesis for why these lessons don't hold anymore. And so a lot of pre-consensus is the company having, you betting on a company that has enough, two, three years to prove something that basically invalidates a lot of the common wisdom. And then once investors see that, their imagination starts coming, kind of resets and they're thinking about what it could become.
[Michael Eisenberg — 3:47]
So Howard Marks is famous for his four quadrants, which you can have a good investment and the bad investment. You never make money on the bad investment. But even the good investment, you don't make money if you're in the consensus because it's priced in. I think that's not the point you're trying to make. The point you're trying to make is, I think, is that people have frames of reference that are born of experience. And because their frame of reference is born of experience, they wouldn't understand that actually some of those things that may have been true 10 years or didn't work out 10 years ago, actually today could work out. Is that pre-consensus?
[Yuval Ariav — 4:21]
I think that's a big part of it. I think what follows from there, and this is kind of going back to the Howard Marks thing, is that in today's VC landscape, which I think is generally very bifurcated.
[Michael Eisenberg — 4:35]
What does that mean?
[Yuval Ariav — 4:36]
I mean that as opposed to maybe 15 years ago where if you looked at players in VC, I'm talking very, very early-stage. To me it feels like there's two categories of VC now, which is a lot of it is like very obvious, momentum driven kind of very consensus stuff where tons of pools of capital, it's like they're very legible for them and they kind of, you know...
[Michael Eisenberg — 0:00]
Open AI, anthropic.
[Yuval Ariav — 0:00]
Yes, but even, but, but even in our own, you know, market, you know, I think there are very, you know, classic central casting types of opportunities.
[Michael Eisenberg — 5:10]
Cyber.
[Yuval Ariav — 5:12]
Yeah. And then there's, and then there's things that are, that are not that. And I think one of the things that flows from pre-consensus is that the deals are largely, they don't have the competitive dynamics. And more importantly, as a VC, I can tell you an anecdote that I think about six months ago or nine months ago in the same week, I decided to do a deal that I diligenced for 10 weeks, which is not something you tend to do in Israel for very hot deals. You don't have that time. And that deal was kind of sub 10 million valuation. And at the same week, a friend of mine just raised his seed 20 on an 80 and I had less than 12 hours to make up my mind.
[Michael Eisenberg — 6:07]
Did you do it?
[Yuval Ariav — 6:07]
No, not because I don't think it's going to be an amazing investment. I think it is going to be an amazing investment, but that's not the model that I do. My model is super high conviction, higher ownership than what I would get putting in half a million into that kind of round.
[Michael Eisenberg — 6:24]
So pre-consensus in your mind then means it also gives you time to look at the deal and competition's not around because it's a really out there idea?
[Yuval Ariav — 6:33]
That's a big part of it. It's not that, it's not about the competition per se, it's about that I like to go in with, for lack of a better term, co-founder conviction. I want to feel that if I wasn't doing what I'm doing today, I would want to join these folks and to do what they're doing as a co-founder. Right. I think that makes me a good partner for the long run. I think that helps you mitigate a lot of the, kind of the risk and a lot of the friction that might arrive later on. And I'm a, I'm a soul player. Right.
[Michael Eisenberg — 7:10]
You're a solo – we should say that you're a solo GP – we'll come back to that.
[Yuval Ariav — 7:12]
I know, but also like, I'm a sachkan neshama. I'm a soul player.
[Michael Eisenberg — 7:15]
Oh, soul. Like S O U L. Not S O L E. Right.
[Yuval Ariav — 7:18]
Correct, correct. Right.
[Michael Eisenberg — 7:19]
You play from the heart.
[Yuval Ariav — 7:20]
Exactly, exactly.
[Michael Eisenberg — 7:22]
Part of my job on this is to translate like Hebrew slang into English. That's really why, there's the only reason I host a podcast.
[Yuval Ariav — 0:00]
Super important.
[Michael Eisenberg — 7:29]
A little cultural translation.
[Michael Eisenberg — 7:31]
Yeah.
[Yuval Ariav — 7:32]
And so I think. And that's a big part of it. And I think for me, it's important to know the people. It's important to really get conviction on the market. I don't look at the product as much initially because, you know, nine times out of 10, the product you see when they pitch you is, you know, maybe draft one of five what's actually going to, you know, we kind of mentioned, we kind of talked about Jiga earlier. That's a really good example of this.
[Michael Eisenberg — 7:54]
Yeah, we'll come back to that.
[Yuval Ariav — 7:55]
So we'll come back to that.
[Michael Eisenberg — 7:56]
But let me ask you this. So when you say you want to be the co-founder, what you've I think basically says the way you make decisions is based on the team and.
[Michael Eisenberg — 8:02]
not on anything else.
[Michael Eisenberg — 8:03]
Is that a fair comment?
[Yuval Ariav — 8:05]
Not only. So first of all, just to put a finer point on it, I don't want to be the co-founder. Right. I want to go in knowing that if I didn't do what I am doing today, I have the level of conviction that this is what I want to spend, I would want to spend my time.
[Michael Eisenberg — 8:25]
You want to have conviction, but you don't want to work that hard.
[Yuval Ariav — 8:28]
Exactly. That's why I'm a VC.
[Yuval Ariav — 8:30]
Right.
[Yuval Ariav — 8:30]
I think the team is a big part of it, but also the market opportunity is a big part of it.
[Yuval Ariav — 8:37]
Right.
[Yuval Ariav — 8:37]
Because you want to know that where you're working with these folks, you do something that's actually going to be meaningful both in terms of impact and financially and you want to make sure that you're spending your time on the right things.
[Michael Eisenberg — 8:49]
So you're a solo gp. Correct?
[Yuval Ariav — 0:00]
Correct.
[Michael Eisenberg — 0:00]
Okay. How big is the fund?
[Yuval Ariav — 8:54]
So our fund one was 50. Our fund two, we're just raising it now. It's probably going to end up being 75.
[Michael Eisenberg — 8:59]
75 million. Why is that the right size? One of the things you mentioned earlier was like this, the venture market's bifurcated. Which I kind of agree with. And you've got these giant pools of capital then call it, you've got these funds, although we're a dying breed like Aleph, which is the 2 to 300 range, there's fuwer and fewer of them and people raising growth funds and whatnot. And then there's your 50, $75 million. Why is that the right size fund for what you're trying to do?
[Yuval Ariav — 9:28]
Right. So for me everything flows from a strategy which is, I want Symbol to become, we're not an early-stage fund. We're a first-check fund. By definition, we do the first priced round or first SAFE in a company. We have obviously reserves or follow-ons. But we will not first invest in a company that's series A. And then we want to make Symbol into the go-to first-check fund for the weird Israeli venture opportunities. Right. The non-consensus, pre-consensus stuff.
[Michael Eisenberg — 9:59]
We now have non-consensus, pre-consensus and weird. I'm collecting...
[Yuval Ariav — 10:02]
Correct. Yes.
[Michael Eisenberg — 10:03]
I'm collecting synonyms.
[Yuval Ariav — 10:05]
Amazing. And I think what that means is, again, what we tend to do is we are, the way we construct our portfolio is we have, you know, 16 to 18 investments. We, for most of them, we lead or co-lead. So we want to buy, you know, reasonably high ownership upfront. We believe that in Israel generally, you know, smaller portfolios with higher ownership tend to pay off better. Can talk about why that is. And so if you look at the type of deal that we do at pre-seed and seed, if you look at the checks we want to write, if you look at the valuations that were in the market and the ownership targets, it comes out to about, you know, an average, let's say $2 million on average for initial check. You factor in, you know, X percent reserves, you come up to about these numbers. So in fund one, our average ownership at entry was, we targeted 15%, ended up being 16%. Fund two, the reason why it's larger, it's probably going to be maybe two more investments and we wanna up the 15 to about 20. That comes out to about 75.
[Michael Eisenberg — 11:12]
You're not changing the check size?
[Yuval Ariav — 11:14]
I think check sizes are going to be slightly larger. I can tell you in Fund 1, there were investments that we've made that we led. We didn't co-lead. We led. But then because we didn't want to put in large enough checks up front, we put, maybe our cap was like three and a half. Right. Million. But the round maybe was five. I would have wanted to put four and a half if I could. Right. And so I think the average is actually going to increase by a bit and the size of the portfolio is going to increase.
[Michael Eisenberg — 11:43]
You're moving up. Soon enough you'll have a growth fund.
[Yuval Ariav — 11:46]
Exactly. Tomorrow. Yes, yes, yes, yes.
[Michael Eisenberg — 11:48]
Why is the fund called Symbol?
[Yuval Ariav — 11:52]
So in line with the strategy, this is, it's based on a lot of things. And part of it is. So when I was looking at a fund name is, I wanted a name that was working in English and in Hebrew. I wanted a name that can stand by itself. It doesn't have to be Symbol Ventures or it can be just that name, kind of like Aleph. I wanted a name where the domain was there.
[Michael Eisenberg — 12:16]
Symbol dot?
[Yuval Ariav — 12:17]
Well, symbol dot VC. I actually almost got the dot com. There is a very, very interesting domain negotiation story we can go into.
[Michael Eisenberg — 12:25]
No, do it right now.
[Yuval Ariav — 12:26]
All right. So I really wanted to buy symbol.com. apparently it's one of the first 50 domains ever to be written in the world, which added about a million and a half dollars to the asking price. However...
[Michael Eisenberg — 12:40]
That's over one year's management fee.
[Yuval Ariav — 12:43]
However, I actually almost got it for $10,000. So I did a whole history dissertation on this domain. So it was initially registered by a British company that did fast barcode scanner. That company was acquired by a company called Zebra, which is still up until this day. And that company sold its IP portfolio to Motorola. And so when I did this...
[Michael Eisenberg — 13:12]
This is archaeology, not history.
[Yuval Ariav — 13:15]
Geology of, internet geology. And so when I finished all of this, I figured out who the person, who is the IP portfolio manager within Motorola who owns this, and I wrote him directly. And we started negotiating. And we kind of started throwing numbers. It was like, maybe it's 20, maybe it's 10. And I did not believe that I was going to make this deal. It was like. Because I knew today it's, if you look at how much it's value, it's like two and a half million dollars. And then he went cold on me, or she went cold on me. And apparently at some point she wrote me back saying something like, oh, we decided to reevaluate our assets and we're not in a position to sell this now.
[Michael Eisenberg — 13:58]
They probably discovered it's worth more than the clamshell.
[Yuval Ariav — 13:59]
Exactly. Exactly.
[Michael Eisenberg — 14:01]
If you're interested in finding out ahead of time what's going on in Israeli tech, what the latest trends are, who's breaking not only news, but breaking the trend lines, then you want to subscribe to Aleph's newsletter and you can sign up right in the show notes in the description of the show. Please subscribe to the newsletter.
[Yuval Ariav — 0:00]
So it's Symbol dot VC.
[Yuval Ariav — 14:19]
It's Symbol dot VC. Okay. And so the reason why I went with Symbol, besides all the things I said, is based on a very kind of very personal story. I didn't grow up in Israel. I grew up in Brazil and in Spain. In Spain I grew up in an international school. And when I was, I think in 10th grade, maybe 9th grade, one of the things they taught us in every class was critical thinking, which I wish they would do more of today in school.
[Michael Eisenberg — 14:46]
Oh, I was gonna say Spain's not very good at critical thinking.
[Yuval Ariav — 14:48]
Yeah, yeah. This was actually the reason why I found myself in that school because it was not a Spanish education. But one day she gave us homework, and she said, " Your homework is to write a critical thinking essay, pick one truth that everybody believes, and write an essay convincing us why that's not the truth.״ And the truth that I picked at the time was that the wheel was the greatest invention in the history of humanity. And I said that I thought that was actually not true. I thought what was true is that symbols were the greatest invention. So that ability not just to memorialize knowledge, but the ability to take something that's a very abstract, maybe complicated concept and denote it in a way that streamlines communication and compresses it, I thought was a very big thing. And when I thought about the pre-consensus stuff, which a lot of it, as you know, is taking a lot of things that a ton of people believe is true and kind of being a bit of a heretic and say maybe that does not hold anymore, that felt like a very apt name.
[Michael Eisenberg — 16:01]
Before we come back to your portfolio, I need to ask you, you're also a professor at Columbia, correct? How do you juggle being a professor and being a venture capitalist? And by the way, aren't those two very different skills? The only guy I think I know who was like a professor for real and a venture capitalist was Felda Hardymon at Bessemer. Andy Rachleff went off and did it afterwards when he was finished at Benchmark. Obviously people have taught along the way classes, but I think they are almost a full time professor. The only one I can think of is Felda Hardymon.
[Yuval Ariav — 16:29]
Interesting. So first off, I'm not a full time professor. So the way I do it today, this is actually going to be my 11th year of teaching, is I teach once, sometimes twice a year. And I teach what's called term A at Columbia, which means that Instead of teaching one academic hour a week for 12 weeks, I teach twice back to back for six weeks. And so what I will usually do is I will move to New York for six to eight weeks, but that will happen once, maybe twice a year. I'm very passionate about what I teach and I think it informs a lot of my investment decisions. I can go into that soon. And basically I teach the way in which the spread of data and AI and technology changes the way both traditional industries, but also societies behave. Which I think obviously when you're trying to underwrite something decade in advance, two decades in advance, that helps. But moreover, I'm putting conveniently the Israeli part of it, which we'll get to in a minute, to the side, the Columbia experience has allowed me to introduce a ton of mutations into my network that would never have done otherwise.
[Michael Eisenberg — 0:00]
Give us an example.
[Yuval Ariav — 0:00]
Just as an example, out of my $50 million Fund 1, $9 million came from investor management, family offices, and other investors that my students went to work at later. One of my.
[Michael Eisenberg — 17:56]
You're educating the cadre of LPs.
[Yuval Ariav — 17:58]
Exactly, exactly. And you know what? It's not even what I aim to do.
[Michael Eisenberg — 18:03]
But is there any correlation between the grades you give them and the fact they invest in the fund?
[Yuval Ariav — 18:06]
Of course. That's how I have the grading curve.
[Michael Eisenberg — 18:10]
Yeah.
[Yuval Ariav — 18:11]
I'll give you another example. I think in my first or second year teaching, one of my students is now the guy who manages all of the financial services groups for all of the Amazon vendors at Amazon. Right. I invest a ton in financial services for, in general, and also for supply chain. Obviously a very good contact. I can go on and on, but my. Obviously being a VC and being any type of businessman today is a very networked endeavor. Right. And I feel like when you're here in Israel, the people you'll be able to network into are largely the people that Israelis will be able to network into, because you're getting those intros from Israelis. And so I'm always looking for opportunities to what I call, like, introduce mutations into my network. So trying to get to people at random or to places where I will meet people in random. Just expand my network into places I've never been to.
[Michael Eisenberg — 19:07]
Where other places do you randomly meet people other than Columbia University?
[Yuval Ariav — 19:11]
So that's been very. That's been very good. I, in the last five years, have been somewhat active in theater production in New York, which also has helped me a great ton.
[Michael Eisenberg — 19:23]
I didn't know that actors and backstage people were active investors. How's that helped you?
[Yuval Ariav — 19:27]
You would be surprised.
[Michael Eisenberg — 19:29]
Really?
[Yuval Ariav — 19:29]
You would be surprised. And maybe not the actors, but there is a whole industry that is very similar to VC in terms of thinking outcome distribution, trying to get an edge due with information that attracts very, very smart people.
[Michael Eisenberg — 19:50]
Hits in theater even, I think less frequent than hits in venture capital.
[Yuval Ariav — 19:54]
Correct . And their upside is not as big. Yeah, yeah.
[Michael Eisenberg — 19:57]
It's a highly asymmetric industry. Or it's the wrong way. It's got. It's got a tight. It's not even that asymmetric at the end of the day, but it's.
[Yuval Ariav — 20:07]
Yeah. The other thing.
[Michael Eisenberg — 20:08]
One Hamilton in a lifetime.
[Yuval Ariav — 20:10]
Correct. Also, if you're talking about any market that matters. Both in London and in New York, but also in other places. It is the case that out of the dozens per market, viable commercial theaters, they're all controlled by maybe three or four families, production companies. And so the bottleneck you have a lot of, they have a lot of pricing power.
[Michael Eisenberg — 20:36]
So who's the most interesting person you met in theater that was helpful to your venture career?
[Yuval Ariav — 20:40]
So I met the director of Hadestown, which is one of my favorite pieces of art over the last 10, 15 years.
[Michael Eisenberg — 20:52]
What is your favorite Broadway show?
[Yuval Ariav — 20:54]
Probably Hadestown.
[Michael Eisenberg — 20:56]
Okay. Yeah.
[Yuval Ariav — 20:56]
I think from. From an artistic perspective, it's probably my favorite. It's. I don't know if. I don't know if you've seen it, but it's. It's a. I love how. I love words and writing. I think there was a lot of. A lot of power and a lot of intelligence in taking very complex. Yes.
[Michael Eisenberg — 21:14]
Symbol.
[Yuval Ariav — 21:15]
Yes. Very complex themes and truths and putting them into very small, you know, into very succinct way of communicating. And I think that play does excellent work exploring a ton of different themes and overlaying them in a way that kind of feels like almost invisible in a good way.
[Michael Eisenberg — 21:35]
Given the fact that you like succinct communications, is podcast a good medium?
[Yuval Ariav — 21:39]
I think there's a more interesting question, which is one of the things I'm struggling with is, you know, we're living in a world that has more and more complexity. Right. Because time goes on. You know, we're building on top of the things we've built and perfected. And I think the thing that, for me is a question. It's a question when I teach at Columbia as well, is are we as people collectively losing our attention span? And what that does. And that's part of why I like very succinct communication.
[Michael Eisenberg — 22:18]
Yes, that's a question. You don't think this is true?
[Yuval Ariav — 0:00]
No, it's true.
[Michael Eisenberg — 0:00]
Okay.
[Yuval Ariav — 22:21]
Yeah. But part of the reason why I like synced communication, why I think it's so important, it's the ability to cut through a ton of, you know, a ton of noise that exists out there that only goes up and up.
[Michael Eisenberg — 22:36]
Do you write investment memos at Symbol?
[Yuval Ariav — 22:37]
Yes, but they're very. Do, you know, smart brevity.
[Michael Eisenberg — 0:00]
I mean, I know the term smart brevity, so.
[Yuval Ariav — 0:00]
But do you know the format? You read Axios, right?
[Michael Eisenberg — 22:47]
I do read Axios.
[Yuval Ariav — 22:48]
You know, Axios has their format.
[Michael Eisenberg — 22:50]
I try. I shouldn't say I read Axios. When it's sent to me, I read Axios.
[Yuval Ariav — 22:53]
Okay. But you know that they have a very, like a very. Right, that's. There is a format.
[Michael Eisenberg — 22:58]
The four bullets. Yeah.
[Yuval Ariav — 22:59]
So I, so I try to write it in that, in that way.
[Michael Eisenberg — 23:02]
How long is your investment memo?
[Yuval Ariav — 23:05]
Depends, but it's a few pages.
[Michael Eisenberg — 23:07]
Have you gone back and looked at your investment memos? And how, how good are you at it? Is it accurate? Do you identify the right issues?
[Yuval Ariav — 23:13]
For the large parts, I think my mistakes were something that I didn't even think about versus something that I thought about and I got wrong.
[Michael Eisenberg — 23:27]
So you're always right if you think about it, but if you don't think about it.
[Yuval Ariav — 23:30]
I try.
[Yuval Ariav — 23:30]
Yes.
[Yuval Ariav — 23:31]
So every investment memo I try to, it ends with a risk analysis. Right. Like, here are the risks I'm seeing. What are the likelihood? What is the severity? What do you do to mitigate? When down the road, can you catch it? So you can decide on a follow on investment or something like that? Right. But most things were not, you know, it's things you couldn't even think about.
[Michael Eisenberg — 23:52]
Do you have a similar section in the memo on upsides?
[Yuval Ariav — 23:55]
The whole memo is based on upsides.
[Michael Eisenberg — 23:57]
Got it.
[Yuval Ariav — 23:57]
So I, I always take the very maximalist view of. I try to take the maximalist view because to me that's the business. That's how I think about investments. Right. You gotta, you know, I'm, I try to identify all the places where I think this could fail and then see if I believe that you can cross them in terms of belief. But then I try to be very optimistic about that. Try to say, okay, if all this goes wrong, this could be $100 million company.
[Michael Eisenberg — 24:29]
Give us the TL;DR, the smart brevity on your course at Columbia.
[Yuval Ariav — 24:31]
What technology has done in the last 50 years, you could give countless examples of how it's changed business. But at least one of the models that I teach and I believe in, is that each and every one of these advancements, what it ultimately leads to is that you can just compound things faster.
[Yuval Ariav — 25:04]
Okay. Once you look at that through that framework, you can then ask yourself, well, how does hiring impact that compounding? How does better data impact the compounding? How does the way you store data impact compounding? How does fitting your data to the business model, all that. And then the logical next thing that you were talking about is historically a lot of that compounding has been either held back or controlled by regulators. Not necessarily by the way, regulators who are government entities. Today, the biggest data regulator in the world is Apple. But at least in the past, because compounding was less profound than, less stronger than it is today, what that meant is that regulators had way more time to react. And so basically what the course is trying to take this framework and then first look at the last 20, 25 years through that lens and then look at things that are happening now and trying to say, well, if you buy into this framework and you buy into all of these assumptions about the businesses today, what do you think is going to happen?
[Michael Eisenberg — 26:26]
So how to think about a world in which compounding, for argument's sake, is not 5% a year, but 8% a year? It's like what Elon Musk said the other day, that he thinks that the economy can 10x itself in the next 10 years just because the rate of change is getting that much faster. What happens when the rate of change gets this fast?
[Yuval Ariav — 26:44]
I think that's more of a sociological problem because I think my sense is that the rate of compounding doesn't work for everybody. Right. It works for very, increasingly smaller number of people more than it does to others.
[Michael Eisenberg — 26:58]
What does it mean it works for a small number of people. What does that mean?
[Yuval Ariav — 27:04]
What is compounding? Compounding is you have something, you have an asset, right. And you can make that asset more valuable by doing transactions with the market. And that asset could be wealth, it could be stock, it could be your opinion, could be your political power. Right. It's not just in financial domain. And the more today, at least, the more your preexisting asset is larger, is more diversified, the more you can compound, the faster you can compound and the yield you can get is better.
[Michael Eisenberg — 27:42]
Say this again.
[Yuval Ariav — 27:44]
The more you have now, the faster you can compound.
[Michael Eisenberg — 0:00]
The more I have
[Yuval Ariav — 0:00]
The more I have. Yes, yes. If you have $100 million that you can deploy, you can probably compound that faster. Not just because you have more transactions than you could do with the market, and so the base is higher, but also the rate is higher.
[Michael Eisenberg — 28:07]
The rate of compounding.
[Yuval Ariav — 28:08]
Yes.
[Michael Eisenberg — 28:08]
And that's not just true of financial assets in your business.
[Yuval Ariav — 28:10]
It's not. It's not. It's true of.
[Michael Eisenberg — 28:11]
Social capital.
[Yuval Ariav — 28:13]
Social capital. It's true of what, it's true of what I call opinion capital, which is if you have a million follower account on Twitter, you're going to compound that way quicker because that's how the algorithm works, that's how psychology works, than if you have a thousand.
[Michael Eisenberg — 28:31]
Right. This is just true. The world is more networked today. It Was true about viruses too, right? If you think about COVID, et cetra.
[Yuval Ariav — 28:35]
It is because of two things.
[Michael Eisenberg — 28:38]
True of IQ as well. Right. You know, the Flynn effect on IQ that I IQ is compounding, increasing.
[Yuval Ariav — 28:45]
Yes.
[Michael Eisenberg — 28:46]
Because you have just more networks, smart people can find smart more people. That's the theory.
[Yuval Ariav — 28:49]
Correct.
[Yuval Ariav — 28:51]
Yeah. But, but I, I don't think people think that because of compounding of IQ in a hundred years you're going to have people with 10,000 IQ.
[Michael Eisenberg — 29:01]
Right.
[Yuval Ariav — 29:01]
Right. So I think the rate is much lower. But, and, and so what happens is you get, what that just means is that yes, maybe the economy is going to like Elon says, grow 10x 10,000x in the next however many, that's probably going to disproportionately serve, you know, obviously. And so the question
[Michael Eisenberg — 29:26]
So the course is kind of on network effects and kind of how advantage will centralize over time due to compounding.
[Yuval Ariav — 29:33]
Correct. And whether what are some things that could cause it to, could cause that to break.
[Michael Eisenberg — 29:40]
So what are some examples of something that can cause that to break?
[Yuval Ariav — 29:43]
Historically that's been, you know, masses that are rising. It's been
[Michael Eisenberg — 29:50]
Social unrest. Regulation.
[Yuval Ariav — 29:51]
Yes, yes.
[Michael Eisenberg — 29:52]
Standard Oil.
[Yuval Ariav — 29:53]
Correct, correct.
[Michael Eisenberg — 29:54]
What else? War.
[Yuval Ariav — 29:58]
I think war is a byproduct of that. It's not a direct byproduct, but it is definitely a byproduct.
[Yuval Ariav — 30:04]
Whenever you think the system can't work for you anymore, you can't get to, not even the top, but then my sense is if enough people think that they can mobilize their collective power and do something about it.
[Michael Eisenberg — 30:16]
And when's that happening? Are we already in it?
[Yuval Ariav — 30:19]
I think to an extent we're already in it.
[Michael Eisenberg — 30:21]
We're already in it.
[Yuval Ariav — 30:22]
Yeah.
[Michael Eisenberg — 30:22]
So give us some examples of that happening already right now.
[Yuval Ariav — 30:25]
Mamdani in New York, I think is one. If you're looking across.
[Michael Eisenberg — 30:33]
He is a reaction, in your opinion, to other people enjoying exponential outcomes or he is able to mobilize exponentially because of his charisma?
[Yuval Ariav — 30:45]
Both.
[Michael Eisenberg — 30:46]
Both. Okay.
[Yuval Ariav — 30:46]
Yes. And I think on the right side of the U.S. political, you have people who would in no other normal situation would have the following that they have, because they were able to compound a lot of their opinion capital through these networked.
[Michael Eisenberg — 31:07]
Tucker Carlson is an example, you think?
[Yuval Ariav — 31:09]
Is a very good example. Yeah. Candace Owens.
[Michael Eisenberg — 31:12]
Okay. But is social unrest, are we here already for social unrest against this?
[Yuval Ariav — 31:17]
It's hard to say.
[Michael Eisenberg — 31:21]
What happens when the masses rise up against this exponentialization of this?
[Yuval Ariav — 31:26]
Look, I think in democracy the natural outlet of that will be elections and will be a swing in, which you can argue we've seen some in Trump. You can argue we're going to see maybe with, if they're on Democratic, they're going to advance some DSA folks. You can argue that. And I think if enough time passes where even through democracy, you don't think you can have that, then maybe it's something that's more political. More political violence, more. Yeah.
[Michael Eisenberg — 31:59]
A teacher at Columbia - do you think what happened to Columbia is a reaction to that or is that something else?
[Yuval Ariav — 32:03]
No, I don't think. I think.
[Michael Eisenberg — 32:04]
What happened in Columbia there? You're on ground zero of Columbia. What happened? Tell us about that.
[Yuval Ariav — 32:12]
So I, about a year ago, I remembered that I never watched the Sopranos and I started watching them.
[Michael Eisenberg — 32:22]
I didn't remember I didn't watch the Sopranos because that's something I would if I wanted to remember. Yeah, I haven't watched.
[Yuval Ariav — 32:28]
I had like, I had like a list of shows that I wanted to watch or like really good shows. And I kind of went through the list and...
[Michael Eisenberg — 32:38]
You binge watched the Sopranos.
[Yuval Ariav — 32:40]
I binge watched the Sopranos.
[Michael Eisenberg — 32:41]
Okay.
[Yuval Ariav — 32:41]
There is an episode called Columbus Day, which, and this episode aired in mid-1999.
[Michael Eisenberg — 32:48]
Okay.
[Yuval Ariav — 32:49]
Okay.
[Michael Eisenberg — 32:50]
27 years ago.
[Yuval Ariav — 32:52]
Yes. Where his daughter goes to Columbia and she comes back and they talk about Columbus Day and she tells them she doesn't want to call it Columbus Day, it's indigenous people day. And they get into a ton of discussion about how Columbus killed the indigenous and he was a colonizer. And you could see things that are being said today that have existed, you know, back then, you know, 27 years ago. And so I think, and Columbia has always been, I think, you know, kind of like on the very extreme of social movements.
[Michael Eisenberg — 33:34]
Yeah.
[Yuval Ariav — 33:34]
I think fundamentally what happened at Columbia, and I'm not one of these folks who say we lost the U.S. campuses, because we lost the...
[Michael Eisenberg — 0:00]
We, meaning?
[Yuval Ariav — 0:00]
We, the Israelis.
[Michael Eisenberg — 33:45]
Right. Or Jews.
[Yuval Ariav — 33:46]
Yeah. Because look, we lost the Ivy Leagues.
[Yuval Ariav — 33:49]
Right.
[Yuval Ariav — 33:50]
But I have people that I work with in the US Whose kids go to, you know, universities in Texas and then, you know,
[Michael Eisenberg — 0:00]
Vanderbilt.
[Yuval Ariav — 0:00]
Yeah. And you know, they either between, you know, the campus doesn't care or, you know, they're slightly pro Israel. But I gotta tell you, even at Columbia. Right. If you look at the, if I'm not mistaken, the distribution of political opinion at Columbia is roughly, it's roughly, I think 65% liberal, non progressive liberal, Clinton Democrat type, 20% conservative, and 15% progressive.
[Yuval Ariav — 34:39]
Right.
[Yuval Ariav — 34:40]
You wouldn't know it from what you've read about Columbia.
[Yuval Ariav — 34:43]
Right.
[Yuval Ariav — 34:43]
I teach at the business school. Yeah, most people are.
[Michael Eisenberg — 34:46]
That's where you'll find all 20% of the conservatives are probably at the business school and the STEM.
[Yuval Ariav — 34:52]
Correct.
[Michael Eisenberg — 0:00]
Liberal arts is filled with.
[Yuval Ariav — 0:00]
Correct. Although a ton of the folks at a business school are first generation. They're not necessarily conservative. The folks who are second, third, or kind of U.S. forever. Yeah, you're right. But a ton of them are not.
[Michael Eisenberg — 35:08]
So what happened in Columbia? You were there.
[Yuval Ariav — 35:11]
I think it's a combination of, I would say neglect of the academic duty.
[Michael Eisenberg — 0:00]
What does that mean?
[Yuval Ariav — 0:00]
For me, I think a lot of the responsibility for what the academy needs to do is teach people how to think. Right. And I don't think you can teach people how to think without repeatedly showing them competing views and training them on how to think critically and how to change your opinion and how to steelman yourself. And generally speaking, I don't think, it's not all of the academia, I think in these schools, which are largely social sciences, that...
[Michael Eisenberg — 36:01]
They became communist or socialist indoctrination systems instead of free thinking institutions?
[Yuval Ariav — 36:04]
Even if not that, the fact that you're, even if you don't have a professor that actively preaches a specific viewpoint every time, every class, the fact that you are selecting a very narrow subset of reading materials, the fact that the course reacts to only a very narrow subset of recent historical events, that matters.
[Michael Eisenberg — 36:32]
Why do you think this happened?
[Yuval Ariav — 36:34]
As I said, I think generally speaking, the university has lost that ethos. I think a big part of it is in terms of who you picked for tenure and how you pick them for tenure. And I think kind of like this, I think happened in academia sooner than it happened or earlier than it happened in media and news media, people donned an activist costume. They went into an activist persona.
[Yuval Ariav — 37:07]
Right.
[Yuval Ariav — 37:08]
And they prioritized that persona over their, let's call it, professional reason for being.
[Michael Eisenberg — 37:15]
Why would they do that?
[Yuval Ariav — 37:17]
Because I think that gives you more identity.
[Michael Eisenberg — 0:00]
Because people needed identity?
[Yuval Ariav — 0:00]
Yeah
[Michael Eisenberg — 37:21]
Why are they so lost?
[Yuval Ariav — 37:24]
I think generally in the west, we've somehow. So I. Okay, I'll tell you. In the past, largely because I think when we were, as a society, our view to the world was more editorialized through a very small number of media outlets. You had tastemakers, which generally could nudge us into identity. And I think part of that is the sense of the importance of community. Part of that is in the things that you read and saw. There was an echo of the general values of society. You were holding people in power and in business and government to account over these values. And I think a big part of that was lost when we decided that we don't want any middlemen. For me, at least, and this has some guest appearance on my course, when we talk about kind of data and people segmentation and what that's doing, you know, identity is, I'm not going to say anything that's too novel here, but obviously identity corresponds to what we feel about, what we feel is good or evil, right? Because identity is values and ton of value, not all of them, but a lot of them have a moral dimension to them. Right. But I think the opposite is also true, which is when our identity is weak, either our community identity, our national identity, or whatever, sometimes perceived evil can very easily hijack our identity. And I think to your question earlier, I think that is a lot of what's going on. That's definitely what's going on today with the younger generations. Right. I think in Israel, I wouldn't say we're immune from it, but the fact that we are living in a very tough neighborhood and that our history has been, you know, Israeli society is on the very, very low, like, low bottom rung of the Maslow's pyramid of needs. And I think that grounds you in identity. It grounds you in, you know, an actual reason for living. And I think, you know, I keep telling people, I think if you're, if you're my age, right? Or if you're, let's say, 10 years younger, you're in your 30s in the U.S., you probably don't, you were probably not terribly scarred by 9/11, right. And so you kind of lived your life not really understanding that there is real evil in the world. And I think what that does over time, especially with what's happening with social media today, to one's sense of identity, it causes it to fracture. To fracture, sorry. And then you get culture wars, you get identity politics, you get all that.
[Michael Eisenberg — 40:21]
I was thinking earlier this week, we're talking now, as the talks are going on between Iran in the United States and Lucerne. So on Saturday, Shabbat, I was sitting around in my house and I was thinking about this topic, literally. I was asking myself, growing up in New York, what were the incidents that seared some of my conscience? And one of them was the marching of 51. I think it was American employees of the embassy out blindfolded. I remember in 1979, 1979, out of the U.S. embassy in Iran. I think as an American, that was a humiliating scene. And then I think about, like a year later, the United States winning the Olympic hockey game against, you know, all odds, Russia, the miracle team. And that was also a searing event, but it was, it was in context of Ronald Reagan fighting the Russians and Ayatollah Khomeini, these evil Iranians marching out American civilians, you know, blindfolded. And those are searing memories. But nobody today remembers these things. And 9/11 obviously is another one for Americans. But to your point, in Israel, I don't think we have that confusion.
[Yuval Ariav — 41:31]
Do you remember as a kid when you, when you saw that on TV or on read the news, do you remember the channel you watched? Do you remember the network you watched it on?
[Michael Eisenberg — 41:41]
I know if I remember the network I watched it on, but I definitely remember the network I watched the shooting of Ronald Reagan on.
[Yuval Ariav — 41:46]
Yeah.
[Michael Eisenberg — 41:47]
And it was CBS. I remember that.
[Yuval Ariav — 41:50]
So the interesting thing to what I said earlier, which is take yourself back to that time, there must have been maybe 10 networks you could have consumed that data on, that information on, and they wouldn't say two different things from each other.
[Michael Eisenberg — 42:03]
Not terribly.
[Yuval Ariav — 42:04]
Right. Not terribly. Which is not the case today. You look at, you look at Charlie Kirk, you look at the Trump trial, the assassination, you know, the, what happened just now with Vance in Switzerland. Yeah, right. You could get, you know, just completely different narratives.
[Michael Eisenberg — 42:19]
So you think, you think identity is downstream of media?
[Yuval Ariav — 42:22]
Absolutely, yeah.
[Michael Eisenberg — 42:23]
Interesting. Yeah. Give us your background. I know we're like 45 minutes in this podcast and sure. But give us your like full background and I want to talk about a few portfolio before we wrap.
[Yuval Ariav — 42:33]
Sure. So I had what I now realize is the fortune of being born here in Israel, but actually not spending all of my early life here. My parents are both agronomists and when I was a kid they got a job working in Brazil in the jungle. That's where I grew up until I was six. Went back to Israel to do primary school. My dad got a job in Madrid, in Spain. His condition was that, in Spain they don't teach you English. And so my dad's condition was that if we're gonna move, his kids are gonna go to an English-speaking school, of which there were two. There was a British school and American school. And so I ended up in an American school. International. Amazing, amazing, amazing experience. I think it shaped a lot of what I do today. Went back to Israel to finish bagruyot.
[Michael Eisenberg — 43:35]
That's metriculation exams in high school.
[Yuval Ariav — 43:37]
Joined the army. Initially I really wanted to be a fighter pilot because I was an 80s kid. Ended up being taken to an intelligence unit as a translator because I spoke a ton of languages at that point. Two days later, my CO came to me and said, oh, by the way, we're canceling the translation post. And this was. I was supposed to be a translator in a unit that was complete, that was full of math and computer science whizzes. And they said, well, you're here. We don't really know what to do with you, but you can stay. And then, you know, I was great. And two weeks later I found myself being horribly bored. I started teaching myself programming and reverse engineering. At some point, Elad, the CEO of NextSilicon, came into my room with a giant book of Windows NT internals reference. He said, here, study this. And so I ended up staying ten years. Was an incredible time, both from just a mission perspective, but you get to work with some of the brightest minds, the toughest problems. It was until today, the most intellectually exhilarating time of my life. Left the service at 27, joined up a couple friends who started Onavo, which was a mobile data analytics company. One of the first one was started as a B2C company, then ended up being hybrid B2B, B2C. Ran product engineering there for a while. Left before the acquisition, started Fundbox.
[Michael Eisenberg — 43:38]
The acquisition by Facebook?
[Yuval Ariav — 43:39]
By Facebook, yes.
[Michael Eisenberg — 45:13]
Many people say that how Facebook figured out how to get in the App Store. You should say that also. I won't ask you.
[Yuval Ariav — 45:18]
Yes, it's funny because when I started teaching at Columbia, which was 2016, I taught fall semesters which started at September and like clockwork for like five years straight, every last week of August the Wall Street Journal did an expose on Facebook and Onavo and some other thing that did, which was a great segue into the. It was incredible. Then I started Fundbox, which was a very, very fast-growing Israeli fintech company, still private, break-even, kind of doing quite well. Ran product engineering for both these companies. Also ran marketing for Fundbox. Basically, our team invented Embedded Finance in 2014 where we took the Fundbox product and sold it as an API to Intuit QuickBooks. Just an integration that's alive until today. And then in the last eight years I've been investing. I started as an angel investor and a general partner in a fund called LionBird. And then five years ago I set up Symbol.
[Michael Eisenberg — 46:26]
So you mentioned Elad from NextSilicon. So let's talk about a couple of portfolio companies. So why did you invest in Next? First of all, Elad was on the podcast.
[Yuval Ariav — 46:36]
Yeah.
[Michael Eisenberg — 46:37]
So why'd you invest In NextSilicon? What about it is pre-consensus?
[Yuval Ariav — 46:41]
All right, so NextSilicon was an interesting investment. So originally Elad asked me to be the CEO of the company and to be his co-founder.
[Michael Eisenberg — 46:50]
There you go again. It's that co-founder thing.
[Yuval Ariav — 46:53]
I was kind of tempted but at the time I had just committed to be a GP at LionBird and committed to LPs and I'm not a type of person to, you know, kind of commit to that and then say well I have something else going. But at the time, I don't know if you remember that time, there was a really interest, there was a bunch of companies started, all of which wanted to do AI, but not AI in the LLM sense, but kind of like AI inference in the 2018, 2019 sense. And the thesis back then was that if that's what you did, you had a very, very small number of companies who could be potential buyers for product, potential customers. Right. Basically just the hyperscalers. And they were very over being pitched by ASIC companies to do that. And so we said we need a way to prove this technology and also that technology is very, very specific. We can kind of talk about that, but we need a way to prove that in a way that's not dependent on the hyperscalers. Very few investors got that approach.
[Yuval Ariav — 48:07]
Right.
[Yuval Ariav — 48:08]
And I think that if the company went ahead and did AI first, it probably wouldn't have existed today. The other thing is that the technical approach there is very difficult to get your head around. Right. Most hardware investors really understand taking a specific computational challenge and then dedicating all of your R&D to specifically and drastically optimizing that and then saying well if you do that then your chip is going to be this much better because that's the way everybody does it. Right. The NextSilicon architecture is something that no other to my knowledge, besides maybe one startup is doing. And so that was also a. So the risk that investors took wasn't just a strategy risk, it was also a technical risk. And I think once kind of the rough circuit of Series A, which is when Aleph invested, when we built the simulator and it was slightly de-risk the tech, then everybody started to get it.
[Michael Eisenberg — 49:23]
Elad said I should ask you, by the way, why did you turn down his offer to be the CEO? Like what were you thinking?
[Yuval Ariav — 49:30]
Yeah, to be honest, I think that if I hadn't turned him down, I think it's hard for me to imagine doing a better job than him. That company, in terms of the details that you have to be able to attend to.
[Michael Eisenberg — 49:52]
Yeah.
[Yuval Ariav — 49:53]
Not of the technology, not just of the technology, but how that technology relates to the business needs of the customers is something that I know I can probably count on, you know, like single hand the people who I know, and I've worked with some very, very clever people, who will be able to contain all of that complexity and mobilize a team of hundreds of people around.
[Michael Eisenberg — 50:17]
Dan Loeb was also an investor in the company. Wrote to me like a week ago. He thinks this could become the next Cerebras. Do you agree?
[Yuval Ariav — 50:22]
Yes, I think it can become one of the biggest Israeli companies.
[Michael Eisenberg — 0:00]
Ever?
[Yuval Ariav — 0:00]
Ever.
[Michael Eisenberg — 50:26]
In history?
[Yuval Ariav — 50:27]
In history.
[Michael Eisenberg — 50:28]
How big is big?
[Yuval Ariav — 50:30]
I think it could be as real as NVIDIA.
[Michael Eisenberg — 50:33]
What's exponential about it? You think NextSilicon could be Israel's NVIDIA? What's instead of what's exponential, what's the catalyst for that?
[Yuval Ariav — 50:42]
When, when I say Israel's NVIDIA, I don't mean it can be like however many trillion dollar company tomorrow, right?
[Michael Eisenberg — 50:49]
That's the expectation you just created. I just want to point that out.
[Yuval Ariav — 50:52]
It is, you know what I mean is...
[Michael Eisenberg — 0:00]
He's neck and neck with Elon now, I think.
[Yuval Ariav — 0:00]
Well, yes, obviously. And, and, and I think you can take him. I think that if you look at the big semi companies, right, none of them are a one ASIC company, right? They're platform companies. And so you know what a CPU and what a GPU is and why they're different and why each one is good for different use cases, right? And I think the very exciting thing for me about NextSilicon is that it's a platform company, right? And I think it's a platform company that is uniquely, whose architecture is uniquely built for the challenges that we face today. Let me be specific about it. If you look at what's happening today in the world of compute, there are two competing timelines, all right? There is the timeline of how long, once you've made a decision that you want to build a chip to optimize a specific algorithm or computational building block of an algorithm, how long from that decision to the fact that you can have something back and you can start working on it, how long that takes. If you look at the length of that process, it does not materially moved in the last 25 years. Still takes a few years. You have to move a lot of atoms, a lot of. If you look at how many new computational building blocks and algorithms we are thinking up and we are using, that looks like exponential growth. And so the problem is that if today you decide that you want to optimize a computational building block in the latest OpenAI sub algorithm, sub model, by the time in 3, 4 years that that's going to be back in your hands, that could have been completely irrelevant.
[Yuval Ariav — 52:54]
Right.
[Yuval Ariav — 52:55]
And so it's not only that NextSilicon is a different architecture, is it's an architecture with zero time to market in terms of you don't need to build a new chip every time you have a new algorithm.
[Michael Eisenberg — 53:08]
Right.
[Yuval Ariav — 53:08]
And I think. And if you look at the other.
[Michael Eisenberg — 53:10]
The chip matches itself to the software.
[Yuval Ariav — 53:12]
Yeah, exactly. And that to me is a. If you look at all the platforms that exist, there are not that many. It's the only platform that has that. Right. And so I think we're going to be, as time goes on, more hard pressed to future proof our hardware. And I think to my knowledge, NextSilicon is the only platform that allows that.
[Michael Eisenberg — 53:32]
So I guess after you talk about NextSilicon is like, you know, Israel's NVIDIA multitrillion dollar company, it's hard to answer the next question, which, what's another company you want to talk about your portfolio or the next best or the one that will outrun NextSilicon?
[Yuval Ariav — 53:48]
So another one that we're, that we're investing together is Jiga, which to me I think it's a very special company. Yeah.
[Michael Eisenberg — 53:58]
Why don't you tell everyone what it does? And then explain what was pre-consensus about it.
[Yuval Ariav — 54:02]
Sure, sure. That's actually a very, very good. It's a very good initial story. So what Jiga does basically is every time you need to buy hardware as an organization that's not off the shelf, you're not buying it with SKU, you need somebody to manufacture it for you. That procurement process is very, very difficult, long, and it takes a ton of resources. And why? Because it's a very technical procurement process. At the end of the day, your mechanical engineers have to sit with the mechanical engineers on the factory that makes it for you. They have to talk. And what's that done traditionally is done that for a lot of these companies, the people who actually run the procurement process are the engineers. And that takes a ton of their time. They become procurement bureaucrats. They don't like that. What Jiga does is it basically goes to these folks and it says we're going to streamline all of that. We're going to run the awarding process, the vetting, we're going to check certification, we're going to give you a few quotes and we're going to make sure that the delivery and the fulfillment works. Wherever there is hardware products, whether it's medical devices or defense or aerospace or wherever there are automotive everywhere, people can use Jiga. Now, usually when I tell people about Jiga, their initial reaction is, yeah, but how big is that? Right? Because it's not something we consider. You look in this room, there's probably tons of things here that have been custom manufactured, but it's not something we notice in the day to day. It's invisible. And so if you look at that market and you ask yourself how much spend worldwide is for that type of hardware procurement, I believe in 2025 was something close to $1.1 trillion. I believe the equivalent global spend for all of advertising and marketing combined is not that much more than that. Right. And while everybody, I think in tech can name a bunch of really great companies that kind of are managing that budget, the advertising in custom manufacturing, there isn't. And so for me, kind of talking about what could go right when I met them, I was struck by the opportunity. At Symbol, we have like, we joke about having like the Symbol Index, which is how much money flows through the market divided by how much VC market is flowing through the market. And the larger that number is, the more we're excited and looking at that market, it had like a huge, very high
[Michael Eisenberg — 0:00]
Discrepancy.
[Yuval Ariav — 0:00]
Yeah exactly.
[Michael Eisenberg — 56:51]
Inverse ratio.
[Yuval Ariav — 56:52]
Yes. However, when they started, and by the way, they were one of the first Israeli companies on YC, this was because of COVID, COVID opened YC to be an online. They were one of the first there and so they had a ton of visibility here in the market. When they finished, they finished YC with, with a product with, with revenue, referenceable customers that you could talk to. And yet I think both because the market is very niche and so if you want to diligence it, you have to do a lot of work, and it feels small, but also because it's so far removed from the Israeli mainstream, I think a lot of people, nobody told them, nobody said no, we don't think it's a good investment. What they told is, oh, this is great. Come back to us in the next round.
[Michael Eisenberg — 57:41]
round when these guys also aren't out of central casting and they're not.
[Yuval Ariav — 57:45]
Yes, absolutely. They're on, out of central
[Michael Eisenberg — 0:00]
They're procurement guys.
[Yuval Ariav — 0:00]
So yeah, yes, they're very eclectic background.
[Michael Eisenberg — 57:53]
Yes.
[Yuval Ariav — 57:54]
And yeah, but absolutely, they're not your average. Yeah. And so, and so for, we probably spend I think two and a half months with them. We actually sent them a term sheet before we did the first close on the first fund.
[Michael Eisenberg — 58:10]
Oh, wow. Yeah. It was pre-consensus, even in your fund.
[Yuval Ariav — 58:14]
Exactly, exactly. I almost didn't approve it for myself. And I'm very happy to have made that investment. Not just because, you know,
[Michael Eisenberg — 0:00]
It's growth's exponential.
[Yuval Ariav — 0:00]
Yes, the growth is incredible. But because it's, you know, it's. If that company becomes as large as we think it can become, these are folks who I'll be honored to have helped to be the next role models of founders in Israel.
[Michael Eisenberg — 58:39]
Yeah, I agree with that.
[Yuval Ariav — 58:40]
Right.
[Michael Eisenberg — 58:40]
Incredible. Just incredible people. Salt of the earth. Yeah.
[Yuval Ariav — 58:43]
Resilience. Smart, you know, humble in the right way, but, like, not, you know, kind of downplaying themselves.
[Michael Eisenberg — 58:52]
Amazing.
[Yuval Ariav — 58:53]
Yeah.
[Michael Eisenberg — 58:54]
Final question for you.
[Yuval Ariav — 58:55]
Yeah.
[Michael Eisenberg — 58:56]
Who's somebody that should get some more attention around us that's not getting enough that you want to give a shout out to?
[Yuval Ariav — 59:03]
Ooh, anyone in the ecosystem?
[Michael Eisenberg — 59:05]
Anyone you want.
[Yuval Ariav — 59:11]
I have one in mind, but I think she'll kill me for.
[Michael Eisenberg — 59:13]
Don't hesitate.
[Yuval Ariav — 59:14]
Yeah. So my partner in the fund is Racheli.
[Michael Eisenberg — 59:21]
Racheli Kogan.
[Yuval Ariav — 59:22]
Kogan. Who also worked a bit here while we were raising our first fund.
[Michael Eisenberg — 59:26]
Yeah.
[Yuval Ariav — 59:27]
There aren't that many people in the ecosystem who have quite the same combination of the caliber of both heart and brain that she has.
[Michael Eisenberg — 59:38]
Yeah. She has incredibly high EQ.
[Yuval Ariav — 59:40]
Yes. Incredibly high and incredibly high IQ.
[Michael Eisenberg — 59:43]
High IQ too, yes.
[Yuval Ariav — 59:43]
We will sit together. You know, with founders, it's kind of like she has X rays into people's souls. It's just unbelievable. And then in the same meeting, she'll ask something where, she'll ask sometimes like, okay, this, you know, just on the. Just analyzing the business situation. That is, oh, wow. Yeah. That is a very, very good question. And I don't think there are that many people who have that quite that combination. And, you know, I feel very lucky to have her on my team and to work with her. And she is, you know, what she in a lot of ways, what I kind of want us to present to the world.
[Michael Eisenberg — 60:32]
Yuval, thank you.
[Yuval Ariav — 60:33]
And thank you for the opportunity. This was great.
[Michael Eisenberg — 60:34]
If you enjoyed this episode of Invested, please rate us five stars on Spotify and Apple Podcasts and subscribe to our YouTube channel. And if you want to learn more about Yuval Ariav on X, he is at Y U V A L A R I A V. And the same is true on LinkedIn.
[Yuval Ariav — 60:53]
Correct.
[Michael Eisenberg — 60:53]
Thanks, Yuval.
[Yuval Ariav — 60:54]
Thank you very much.
[Saar Safra — 0:00]
We're losing 45% of all bee colonies every single year, year over year. On the planet. Today we have 36% of the bee stock we had 50 years ago. That's it. Once that's gone, it's gone. Because bees pollinate 75% of all our fruit and vegetables all around the world, we would not be able to feed 8 billion people without bee pollination. We set out on a very audacious mission of saving the bees.
[Michael Eisenberg — 0:25]
All right, and so what'd you build?
[Saar Safra — 0:27]
Today we have the best beekeeper on the planet. Supersedes any other human beekeeper that you can imagine.
[Michael Eisenberg — 0:32]
It's just not human.
[Saar Safra — 0:33]
It's not human. Even if you put a thousand people around a million bees, we would not be able to tell every single bee in every single colony what's going on. The model does in milliseconds.
[Michael Eisenberg — 0:43]
There's a lot of talk today about AI replacing people's jobs. This clearly replaces the beekeeper. What does the average beekeeper say about the BeeHome? There was a joke going on in the back here about honey laundering. What percentage of the honey in the United States is sold after it was honey laundered? Welcome back to another episode of Invested. I am thrilled to be here today with my old friend. Can we say that? Saar Safra, who is the founder and CEO of Beewise. We'll start with how long do we know each other?
[Saar Safra — 1:31]
I met you first in 1996, so I can't do the math. I'm too old for it. But 30 years.
[Michael Eisenberg — 0:00]
It's incredible since you're only 40 years old, you were 10 when you pitched your first company. What company was that?
[Saar Safra — 1:35]
I can say the same thing about you.
[Michael Eisenberg — 1:37]
What company was that?
[Saar Safra — 1:38]
It was a company called back then called Veri. We did P2P payments. P2P payments in 1996.
[Michael Eisenberg — 0:00]
Before X.com and PayPal.
[Saar Safra — 1:48]
Before X.com and PayPal.
[Michael Eisenberg — 0:00]
There are actually two P2P payments companies in Israel at the time. Back then, one was a bunch of pilots and then there was yours.
[Saar Safra — 1:56]
That's right.
[Michael Eisenberg — 1:57]
And after that you sold the company to Microsoft and spent how many years in Seattle?
[Saar Safra — 2:07]
Definitely overstayed my welcome. Fifteen years.
[Michael Eisenberg — 2:09]
Fifteen years in Seattle, Redmond, Washington. Doing exactly what at Microsoft?
[Saar Safra — 2:14]
I worked there. At Microsoft, actually I worked for just a couple of years – a day after my earnout. So not. That wasn't a long stint. And then I left and found another startup.
[Michael Eisenberg — 2:25]
In the ad tech business.
[Saar Safra — 2:27]
No, that was the first one. The second one was in the real estate business. We did resident portals for large multifamily apartment complexes. So if you lived in an apartment complex, you could pay rent online, you can meet your neighbors, you can kind of join the book club or the, you know, the Biking Club. And that was our software back in the heydays of SaaS.
[Michael Eisenberg — 2:51]
All this is a promo to say that you did P2P payments, ad tech software for real estate, and now bees. And so explain the career transition to bees.
[Saar Safra — 3:06]
Actually, it makes sense, right? Ad tech, prop tech, you know, P2P payments and then bees. That's just.
[Michael Eisenberg — 0:00]
Natural progression.
[Saar Safra — 0:00]
Natural continuation. No, but, you know, but there is, there is a good point there to be made. And, you know, I'll take 30 seconds to just talk about that. As you grow older, right, I'm around 50.
[Michael Eisenberg — 0:00]
I'm around 50.
[Saar Safra — 0:00]
It's not 55. Just, just turn, turn the corner. So still not used to saying it. No, but, but point being is that as you grow older, there's a, I feel on myself, I become more dogmatic and there's a more strict criteria of how I want to apply myself, you know, on this planet. Right. So when I had this kind of in between startups transition phase, I took a year and I decided to focus not on bees per se, but on something that had real impact in the real world. In Israel.
[Saar Safra — 4:04]
That was kind of part of my very almost strict criteria. It had to be a billion dollar business, it had to be deep technology. These are two things that I always kind of focus on. And it had to be a vertical. So when you add all these criteria, it leaves you very few spaces that you can actually operate in. Bees, or actually pollination, that would be the right kind of term, is one of those very laggards industries that are still fully manual. No technology, no industrial revolution has been here. Forget about AI, forget about robotics. So it was beautiful. It was like a shining ball that was like, oh, I have to do this because everything points me in this direction.
[Michael Eisenberg — 4:50]
I mean, I have to use the phrase, how'd you get the bug about bees?
[Saar Safra — 4:53]
Yeah, every beekeeper you meet in your life, if you ask them, why are they in the bees business, they'll tell you, we didn't find the bees, the bees found us. And my story kind of applies in the same way. I moved to Israel and in that year I kind of helped a few startups just establish, more on the product side, that's kind of my forte, pro bono, just, just to get to know the ecosystem. After being away for 15 years, you're basically the only person I knew in the country beyond my family. One of these guys was a beekeeper. And he came and he said, hey, Saar, I have an idea. I'm a beekeeper. I don't even know what. I don't know what a product manager is. I told him, you need product. He said, I don't know what that is, but. But he basically said, I need help building this company. And his name is Eliyah. He's my co-founder, till this day, the smartest human being I've ever met. And I'm very fortunate to be part of his journey. And I started to help him for three months. That was kind of my window. You get three months for free. And then I move on. And we built, you know, we started there and then I fell in love with the bees. There's more to that story, but that's kind of how they found me, through Eliyah.
[Michael Eisenberg — 6:05]
Did you know any beekeepers before you met Eliyah?
[Saar Safra — 6:08]
I did not.
[Michael Eisenberg — 6:09]
Okay, so you went through your life of almost 50 years and never met a beekeeper. And one guy walked in and said, hey, I need some help. And you said, sure, I'd love to help you with the bees.
[Saar Safra — 6:17]
He gave me a two hour pitch. But, yeah, I mean, the thing is that, you know, there's a real need and there's a real problem in our food supply industry. And bees are integral. They're in the heart of that. Which we can talk about.
[Michael Eisenberg — 6:33]
Yeah. So let's take a step back. So bees have been around since the beginning of time. We think, we don't know.
[Saar Safra — 6:37]
150 million years.
[Michael Eisenberg — 6:40]
Okay. And they've been pollinating the world and everything seems to be going just fine. And then all of a sudden, we needed beekeepers at some point in time.
[Saar Safra — 6:51]
Everything seemed to be working fine. And then we came along.
[Michael Eisenberg — 6:55]
No, wait, wait, wait. Before we get to you.
[Saar Safra — 6:56]
Not us, we humans.
[Michael Eisenberg — 6:59]
We humans. The royal we.
[Saar Safra — 7:02]
Yeah, the general we. I wish it was really royal, you know, but here's the thing, right? Bees are nature's way to pollinate itself. The thing is that we tend to think of bees as a separate entity from trees or nature. They're not we just humans. We see things as disparate and separate. But trees lure bees in with nectar. Bees are addicted to carbs, like we are like any living organism. They like the sugar. So they're being pulled and attracted by flowers that have nectar, right? So they come in and the length of their tongue is the depth of the nectar in the flower. So they go in and they kind of swoop the nectar. But as they go in, the pollen is at the top of the flower. So the pollen, the bee is negatively charged and a flower is positively charged. So there's electrostatic attraction between two. So the pollen sticks to the bee's hair. And when the bee moves from one flower to the other to collect nectar, that's how they pollinate. So essentially, bees are the tool for trees to pollinate themselves, because trees are static. They can't move pollen from one to the other. Right? So when you look at all these things, you basically see how a bee is a continuation of a flower, of a branch, of a tree, of nature. It's pretty crazy. And so my point is that bees were here all along. We know they've been here for over 150 million years. I'll talk about that in a minute., how we know this. And then as humans came along, we started to kind of harvest bees for our own needs. When we started kind of moving from hunter gatherers to kind of more forming agriculture. And we use the bees in the way that they're used to being used. They pollinate, they do that, and we collect the honey. Bees will produce as much honey as there is forage, right? As long as there's forage, they'll produce honey, way more than they need. Honey is the food of bees. They collect honey during the summer, so they have food during the winter. It's their own food. They produce their own honey for themselves. But they will overproduce, which is what we can take for ourselves. And that's what humans have been doing for millennia, right? But about 50 years ago, the world changed. We know this today. It's not only climate change, it's also the pesticides we started to use to really kind of grow commercial grade agriculture and produce. It's the monoculture that came in. Today you have 2 million acres of almond in California, millions of acres of avocado in the same place, which means the bees have only one source of food. Bees only eat nectar, which is their carbs, and pollen, which is the protein. If the flowers don't bloom and there's avocados instead, that doesn't help the bees. There's no food source. You need flowers. So if you have a million acres of avocado that bloom only in April, that's it. It's a desert for bees. For us, it would look wonderful, a lot of green. For the bees, it's desert 11 months throughout the year. The monoculture and all these practices essentially made it really hard on the bees.
[Michael Eisenberg — 10:12]
Also, when you prune the flowers off the trees, then to get bigger fruit, which is commonly done in modern agriculture, that's bad for the bees too?
[Saar Safra — 10:20]
No, that happens. It's a good point. It depends when you do it. But you're right. If done right, it's after that the flowers have produced the pollen that they need to pollinate. It's when they become fruit set. And you're right, that's what is being done to get better quality of fruit eventually.
[Michael Eisenberg — 10:39]
So before we get into the modern bee problem. So producing, pollination is a byproduct of the bee simply feeding itself. And that's how trees reproduce and we create fruits and more trees and all that other goodness. So when did the first beekeeper come into being.
[Michael Eisenberg — 11:03]
The bees were fine for a long time. They didn't need babysitters or keepers or anything like that.
[Saar Safra — 11:07]
But what happened is because they produce honey, and honey is something we can talk about forever, it's a high quality, very healthy product. Right? You know, you apply honey on wounds. Cancer patients eat honey because it's the only thing they can eat. Honey has special qualities. Honey is basically flower nectar. And we know that most of the medicine in the world is, beyond the chemical stuff, is from nature. Honey is the same way.
[Saar Safra — 11:35]
And it depends which flower you take it from.
[Michael Eisenberg — 11:37]
Do you eat a lot of honey?
[Saar Safra — 11:38]
I do.
[Michael Eisenberg — 11:39]
You eat it raw?
[Saar Safra — 11:40]
Of course.
[Michael Eisenberg — 11:42]
How many spoons a day?
[Saar Safra — 11:44]
If I had to average, it will be very, very costly. So I prefer not to talk about, you know, that expense. But we eat a lot of honey. It's very, very healthy.
[Michael Eisenberg — 11:52]
You're very skinny, though, so that sugar doesn't make you fat.
[Saar Safra — 11:55]
I feel like at my age, I'm starting to kind of grow a little bit. But honey, honey is a carb, so you will grow fat from it. But it's very healthy. It's extremely healthy. It doesn't have any shelf life. You can keep honey for thousands of years.
[Michael Eisenberg — 12:10]
Thousands of years?
[Saar Safra — 12:11]
They found honey in the pyramids of Giza in Egypt, and they tasted it. They didn't like the taste, but it was perfectly edible.
[Michael Eisenberg — 12:19]
They didn't like the taste, but it was perfectly edible.
[Saar Safra — 12:21]
Yeah. The flora, you know, the taste of the honey is based on the flower.
[Michael Eisenberg — 12:25]
Flower kind of flour.
[Saar Safra — 12:26]
Yeah.
[Michael Eisenberg — 12:26]
Like avocado honey is different than.
[Saar Safra — 12:27]
That's right. Lavender honey.
[Michael Eisenberg — 12:30]
Right, etc.
[Michael Eisenberg — 12:31]
Yeah, yeah.
[Michael Eisenberg — 12:33]
I'm personally partial to avocado honey for what it's worth.
[Saar Safra — 12:36]
It's not. It's not the greatest honey.
[Michael Eisenberg — 12:38]
What's the best honey?
[Saar Safra — 12:40]
Again, I think it's a well known fact. Manuka is the best honey in the world today. It's both the most healthy and the most delicious honey.
[Michael Eisenberg — 12:49]
Explain to our audience what manuka is.
[Saar Safra — 12:51]
Manuka is a type of flower that grows in very specific places on the planet. On mountaintops. It's like those movies that you see. There is a special flower that somebody, you know, looks searches their whole life. That's those.
[Michael Eisenberg — 13:08]
What are those places that you can find Manuka?
[Saar Safra — 13:10]
You know, New Zealand and Australia in very specific areas there, in high mountains, in a specific climate. And they actually fly in hives using choppers so the bees can harvest the manuka and they take the hives out. So it's a very expensive honey. Some Manuka honey is sold at a million dollars a kilo.
[Michael Eisenberg — 13:31]
Have you tasted any?
[Saar Safra — 13:33]
Not that expensive, but absolutely. Manuka. Yes.
[Michael Eisenberg — 13:35]
You can buy it and you taste the difference.
[Saar Safra — 13:37]
Yeah.
[Michael Eisenberg — 13:37]
It's really that good?
[Saar Safra — 13:38]
Yeah, yeah, yeah.
[Michael Eisenberg — 13:40]
How come you didn't buy me any? Million dollars of what? For the Manuka honey.
[Saar Safra — 13:45]
For a kilo of honey.
[Michael Eisenberg — 0:00]
Kilo. And people buy that?
[Saar Safra — 0:00]
There are people who can afford that.
[Michael Eisenberg — 13:52]
I'm sure people can afford it. The question is whether people actually spend a million dollars on a kilo of honey.
[Saar Safra — 0:00]
Yeah.
[Michael Eisenberg — 0:00]
They do. And what's the medicinal properties of it?
[Saar Safra — 14:00]
Honey has, you know, many, many areas that it affects our health. First of all, in open wounds, you can.
[Michael Eisenberg — 14:09]
I know you mentioned that, but specifically Manuka honey you said was more healthy. What makes it more healthy?
[Saar Safra — 14:14]
I think it's. Again, I'm not an expert in the manuka field, but antioxidents and it repress. It's mostly against cancer. Being used against cancer.
[Michael Eisenberg — 14:25]
Okay. So that's a premium cancer treatment. The chemicals for chemo, I guess, are cheaper than the Manuka honey at that point.
[Saar Safra — 14:32]
A, yes.
[Michael Eisenberg — 14:33]
Yeah.
[Saar Safra — 14:34]
And B, you know, it's not. It doesn't solve issues, but it definitely helps.
[Michael Eisenberg — 14:37]
Got it. I want to go back to the beekeepers. So when did beekeepers first arrive in.
[Saar Safra — 14:41]
So because honey is such a high quality, kind of almost kind of free sugar alternative from way back when, many, many thousands of years ago, there's. We see evidence that bees were grown domestically as we started farming, both for their pollination capabilities and for the honey. Right. So it's kind of a. It's a, you know, double whammy. If you grow bees as a farmer and when people started farming, really, I mean, tens of thousands of years ago, there's evidence that they used bees for pollination and for the honey.
[Michael Eisenberg — 15:19]
And that they collected them.
[Saar Safra — 15:21]
Yeah. And they grew them in plastic, or not plastic, in, like, baskets.
[Michael Eisenberg — 15:25]
In wicker baskets?
[Saar Safra — 15:27]
Yeah, you know, like straw baskets.
[Michael Eisenberg — 15:28]
Straw baskets, yeah.
[Michael Eisenberg — 15:29]
They grew the honey, the bees, the colonies.
[Michael Eisenberg — 15:32]
What does it mean to grow a bee?
[Saar Safra — 15:34]
So. Yeah, that's a good question. You know, because bees go out and forage in the field. You can't really fence it. It's not like cattle that you can fence it. It's still livestock, but you can't fence it. So you have to create an environment for the bees to come back home after they forage in the field. And usually you do that by giving the queen a good safe place to live and lay her eggs. And if that works well, then the bees come back to their queen. The bees are submissive creatures. So once it, you know, after 24 hours of the queen, it becomes submissive to that queen. That's based on pheromones. And so the bee will go out and forage and come back to her queen. If her home is not safe or not good enough for them to grow their colony, they will leave. You will lose them. That's what's called, that's what's called the swarm. It will swarm away and leave their home.
[Michael Eisenberg — 16:33]
And what makes a home safe for a queen bee?
[Saar Safra — 16:37]
So in nature, bees find a good home in a trunk of a tree. It's. It's kind of not too humid, closed area with one entrance that they go in and out where they can grow their combs. Right. The frames. And that's where they lay their eggs, store the nectar, store the honey, store the pollen in those kind of honeycombs that we're used to seeing.
[Michael Eisenberg — 17:05]
Like at nice hotels, they put up there for you to kind of scoop the honey out.
[Saar Safra — 17:08]
Exactly.
[Michael Eisenberg — 17:09]
That's where most people have seen them. I don't think they've seen them in nature.
[Saar Safra — 17:12]
Yeah, exactly.
[Saar Safra — 17:12]
Right.
[Saar Safra — 17:13]
We don't see them in nature as much, but yeah, I mean, if. Even today, if bees swarm away, they will swarm to a trunk of a tree.
[Michael Eisenberg — 17:20]
Interesting. But again, what makes the. That straw basket or a wood box generally painted white, a safe home for a queen bee?
[Saar Safra — 17:31]
It's painted white against the heat of the sun.
[Michael Eisenberg — 17:33]
Yeah.
[Saar Safra — 17:34]
So these are the considerations. Right. You give the bees an enclosed area with an entrance, and you give it, you try it. You know, when we, when this box was founded. It's called the Langstroth Hive. It was founded in 1850.
[Michael Eisenberg — 0:00]
1850, the white boxes.
[Saar Safra — 0:00]
Yeah by Lorenzo Langstroth. And he patented them, by the way. And today, in 2026, that's the standard. That's the norm all around the world, from China to the US and everything in between.
[Michael Eisenberg — 0:00]
That's unbelievable. It's 170 years, 175 years, a guy invented a wood box and it's still the standard for cultivating bees.
[Saar Safra — 0:00]
The wood box worked really great in 1850 because it was a good enough sanctuary for bees. They found it good and comfortable. And it was great for us humans to harvest the honey because it has these frames you can just pull out and just collect the honey.
[Michael Eisenberg — 0:00]
How many frames in a wood box?
[Saar Safra — 0:00]
Today, there's ten. And it's pretty amazing. That's what he invented in 1850 and because he was smart enough to patent it for the first 15 years, it caught on and it stayed and it just shows you kind of how inertia works. It worked great. On the planet there were 1 billion people. We didn't need as much pollination and not much honey was being consumed. But as demand grew, the technology didn't keep up and we're still using these boxes today to feed 8 billion people 75% of all the fruit and vegetables that they eat are pollinated by bees in these wooden boxes that are being transfered and hauled around.
[Michael Eisenberg — 0:00]
So tell everybody about that. Before we get on to what Beewise does, this is an important background. Today, if i need to pollinate 2 million acres of almonds in california or a million acres of avocado, how do i get enough bees there to pollinate it?
[Saar Safra — 0:00]
So today, fast forward to 2026, pollination and beeking is a commercial grade buisiness. Meaning that you have commercial beekeeprers that grow thousands and tens of thousands of bee colonies in those boxes, in the beehives, and they move then around between pollination opportunities throughout the year. Nature has made it so there is not much competition between competing crops so you have crops from January all the way to November and you have a few crops every month. So what beekeepers do is they bring the bees in and they place them in the field and the bees do their thing. They go in and out and they forage int he field and they pollinate and then after about a month to a month and a half, they move the hives to the next crop and the next crop and the next crop.
[Michael Eisenberg — 0:00]
How do they move these hives?
[Saar Safra — 0:00]
On trucks. They haul them around. 18 wheelers.
[Michael Eisenberg — 0:00]
18 wheeler trucks, pack the bees top to bottom.
[Saar Safra — 0:00]
Yeah put them four or five stories high.
[Michael Eisenberg — 0:00]
How many bees are on those trucks?
[Saar Safra — 0:00]
Ballpark four hundred colonies. Each colony is about 50 thousand bees. It's a very powerful
[Michael Eisenberg — 0:00]
If my math is right, you'll tell me in a second. You said four hundred boxes, each one with fifty thousand bees in them. Each of the boxes with fifty thousand bees in them. So we're at.
[Saar Safra — 0:00]
200 million.
[Michael Eisenberg — 0:00]
200 million bees on a flatbed truck?
[Saar Safra — 0:00]
Give or take.
[Michael Eisenberg — 0:00]
Okay and nobody gets bit by this?
[Saar Safra — 0:00]
Yeah the beekeepers get stung.
[Michael Eisenberg — 0:00]
The drivers of the trucks?
[Saar Safra — 0:00]
They wear suits.
[Michael Eisenberg — 0:00]
They wear suits.
[Saar Safra — 0:00]
Yeah, everybody is suited up in that scenario. Usually we move bees during the night when they are asleep. bees are asleep, they don't go out at night.
[Michael Eisenberg — 0:00]
Really?
[Saar Safra — 0:00]
Yeah, they like eight hours of sleep. They're very - there's a lot of similarities to us if you think about it.
[Michael Eisenberg — 0:00]
What happens when a bee doesn't get eight hours of sleep?
[Saar Safra — 0:00]
Its antsy.
[Michael Eisenberg — 0:00]
You've seen this? Like, you know this?
[Saar Safra — 0:00]
Yeah, bees are angry. They have moods.
[Michael Eisenberg — 0:00]
And then what do they do?
[Saar Safra — 0:00]
They're more prone to sting When you're next to a colony and its a little bit antsy, you'll feel it. They'll bump into you, into your suit. They'll buzz around you. They'll swarm around you Suddenly you'll see a cloud of bees around your head even if you're suited up and geared up. And if they're calm, you will feel it. You'll put your hand and they'll walk over you calmly. You can actually sense the mood of the colony.
[Michael Eisenberg — 0:00]
Can a beekeeper feed them Advil PM and put them back to sleep? Does that work?
[Saar Safra — 0:00]
You know, bees do get medicine as well, right?
[Michael Eisenberg — 0:00]
That feels dangerous to me.
[Saar Safra — 0:00]
Well, bees have viruses like we do.
[Michael Eisenberg — 0:00]
And what's their medicine?
[Saar Safra — 0:00]
They have stomach viruses. They have stomach flu. Deformed wings. They have a lot of different - Nosema.They get like droplets of
[Michael Eisenberg — 0:00]
You give them?
[Saar Safra — 0:00]
Yeah we give them medicine.
[Michael Eisenberg — 0:00]
Interesting, we'll come to you in a second. So you're transporting flatbed trucks to the almond growers in California or the
[Saar Safra — 0:00]
Then you move up to Oregon and Washington for apple, peach, canola. Then you move inland for more of the canola, sunflower and sunflower seeds and so on. And then they move all the way to the east coast to pollinate the different type of berries. Blackberries, blueberries, and so on. And then even some go all the way down to Florida where for the citrus pollination.
[Michael Eisenberg — 0:00]
What do you mean some of them have to go to Florida? How you gonna get oranges if you don't get the bees there?
[Saar Safra — 0:00]
You know, pollination is not a binary thing. You would some yield without bees necessarily.
[Michael Eisenberg — 0:00]
Right, just not as much.
[Saar Safra — 0:00]
Not as much, yeah. For almonds, for example, you'll get 10% of your yield without bees. For avocado.
[Michael Eisenberg — 0:00]
10%?
[Saar Safra — 0:00]
10%. For coffee, you get 50% without bees. So it's a significant uptick in yield. And when you think about commercial, everything is about the bottom line and numbers, right?
[Michael Eisenberg — 0:00]
When I truck in 400 million bees, what does that cost the almond farmer?
[Saar Safra — 0:00]
So the way the almond farmer pays is they pay per hive.
[Michael Eisenberg — 0:00]
Per hive, per box?
[Saar Safra — 0:00]
Per box, yeah. So they would bring in, lets say if youre a typical almond farmer, you bring it lets call it 5,000 hives and you would pay $200 per hive.
[Michael Eisenberg — 0:00]
Per hive.
[Saar Safra — 0:00]
For that pollination event. If you have an avocado field and you need another pollination, down the road, you'll pay another whatever that would be - another 100, $150 for that avocado. Again, for every pollination.
[Michael Eisenberg — 0:00]
Oh it's cheaper depending on - almonds are more expensive to pollinate than avocados?
[Saar Safra — 0:00]
It's a matter of competing crops. During February and March, you have the most competing crops so.
[Michael Eisenberg — 0:00]
Interesting.
[Saar Safra — 0:00]
So those crops garner the highest cost per hive. As you go throughout the year, it becomes cheaper.
[Michael Eisenberg — 0:00]
So it's seasonal?
[Saar Safra — 0:00]
It is seasonal.
[Michael Eisenberg — 0:00]
There's seasonal pricing for bees. Are there different parts of the year where the bees do a better job pollinating than others?
[Saar Safra — 0:00]
No.
[Michael Eisenberg — 0:00]
No. Workhorses.
[Saar Safra — 0:00]
Yeah, bees are amazing. They will pollinate 1,000 flowers a day. They will fly for 12 hours. They wil produce, you know, a teaspoon of honey throughout their lifetime and they costs 1/1000th of a cent. One US cent divided by 1,000. That's the cost of a bee. So think about how effective.
[Michael Eisenberg — 0:00]
Why is my honey so damn expensive then?
[Saar Safra — 0:00]
Because I guess you buy good quality honey right?
[Michael Eisenberg — 0:00]
We'll come back to that in a second. We have to come back to honey afterward. Okay now, having done this entire introduction to the world of bees that we're in, tell everybody what Beewise does.
[Saar Safra — 25:04]
We set out on a very audacious mission of saving the bees in order to secure global food supplies. Because bees pollinate 75% of all our fruit and vegetables all around the world. Right. And we really like our produce. We like fresh produce in every street corner, anywhere you go from China, the US, the bees are essential. They're an essential input into global farming. Not many people know this. If I would tell you you need irrigation for produce, you would get that, and you would understand it's infrastructural, and it's a critical input. The same with pollination. We would not be able to feed 8 billion people with all the produce and coffee that we drink without bee pollination. So they're a critical input into global farming. On the other hand, they're collapsing today. We're losing a lot of our bee colonies. The global average rate is 45%. We're losing 45% of all bee colonies every single year, year over year.
[Michael Eisenberg — 26:04]
Say that again. So if we have a million bee colonies now, we obviously have more than that. Let's say we have a million bee colonies right now. At the end of 2026, there will be 550,000.
[Saar Safra — 26:17]
Correct.
[Michael Eisenberg — 26:18]
And then at the end of 2027, there will be something like 300,000.
[Saar Safra — 26:23]
Correct.
[Michael Eisenberg — 26:24]
And that means that very fast. If that's been going on, how long has that been going on for?
[Saar Safra — 26:29]
That hasn't been going on for too long. In the last 50 years, we started to see decline in bee colonies. But in the last five years, let's call it seven, eight years, it started to grow dramatically.
[Michael Eisenberg — 26:42]
The rate of destruction, of collapse, is growing. But if that's true that it's been shrinking at 45% for the last eight years, we should be at 90% reduction roughly, of bee colonies over the last eight, nine years. Is that right?
[Saar Safra — 26:56]
So today the 45% is relatively recent. When we founded the company back in 2018, it was closer to 30%, which was alarming to us.
[Michael Eisenberg — 27:07]
So there's still an accelerating decline of bee colonies around the world?
[Saar Safra — 27:10]
Year over year. Yeah.
[Michael Eisenberg — 27:11]
What's happening to them?
[Saar Safra — 27:13]
By the way, last year in the U.S. the formal number released by the USDA was 62%.
[Michael Eisenberg — 27:18]
62% of bee colonies collapsed.
[Saar Safra — 27:20]
The U.S. lost 62% of its bee stock in that single year.
[Michael Eisenberg — 27:24]
In 2025.
[Saar Safra — 27:25]
In 2025. And so what happens is there's area in the. There's areas on the planet that don't lose as much, like 10, 15, 20%. So we buy bees from them. Basically, we're hauling bees all around the world.
[Michael Eisenberg — 27:36]
You buy bees from them or people buy bees from them?
[Saar Safra — 27:39]
Everybody. Beekerpers.
[Michael Eisenberg — 27:39]
Everybody buys. Which are the best places for bee production right now?
[Saar Safra — 27:42]
Australia and New Zealand were the best because they had the least issues with bees.
[Michael Eisenberg — 27:48]
Those manuka flowers again.
[Saar Safra — 27:50]
Well, yeah. But also other things that Australia did really well.
[Michael Eisenberg — 0:00]
Such as?
[Saar Safra — 0:00]
It's an island so it's easier to control everything that's going on, everything that's coming in.
[Michael Eisenberg — 27:57]
So they didn't do anything well, other than being sent to a.
[Saar Safra — 27:59]
When was the last time that you traveled to Australia?
[Michael Eisenberg — 28:01]
Never in my life. I've never been.
[Saar Safra — 28:03]
So if you travel to Australia, a funny thing happens on the plane. You get sprayed on the plane on the way there. They basically, they basically spray you up and clean you up on the planes that are coming into Australia to make sure you're not bringing any pathogens.
[Michael Eisenberg — 28:18]
Interesting.
[Saar Safra — 28:19]
So Australia is really very sensitive to everything that's coming in and out. This is why it was able to kind of maintain a high quality of bee economy.
[Michael Eisenberg — 28:29]
Where else are bees flourishing?
[Saar Safra — 28:31]
Other areas that are less industrial.
[Michael Eisenberg — 28:34]
Okay. Such as?
[Saar Safra — 28:35]
Not Israel, but you know, other, other places. Africa. There's some good places where you can get good bees. They're just a little bit different. In Africa, the bee.
[Michael Eisenberg — 28:44]
What makes the bees different in Africa?
[Saar Safra — 28:45]
Africanized bees are a little bit more aggressive. Yeah.
[Michael Eisenberg — 28:50]
Aggressive on what?
[Saar Safra — 28:52]
Aggressive towards people. So they're the same bee, it's called the honeybee, but. But they're a little bit more aggressive. But not, not something that would prevent us from growing bees.
[Michael Eisenberg — 29:03]
Right, but just put on a thicker suit.
[Saar Safra — 29:05]
That's right.
[Michael Eisenberg — 29:06]
Okay.
[Saar Safra — 29:06]
You just have to be more sensitive.
[Michael Eisenberg — 29:08]
So bee colonies are collapsing around the world. United States 62% in the last, in 2025. Things are better in Australia because they spray you with all sorts of things on the airplanes.
[Saar Safra — 29:19]
That's just an example.
[Michael Eisenberg — 29:20]
And in Africa things are better also, but it's more dangerous because. And so into this world of a 175-year-old bee box and beekeepers steps Beewise. And so what are you doing now?
[Saar Safra — 29:35]
What we realized is that the actual beehive is the bottleneck. Because in order to treat bees for all the modern stressors we've exposed them to pesticides, pests, disease that didn't used to be, monoculture, lack of forage, lack of biodiversity. All those things have a very negative impact on bees in the form of colony collapse. And we realized that the real problem was the box, the hive, because the hive doesn't allow you to take any proactive action in real time in the field. And so you need beekeepers to haul themselves and travel to the fields every single day. Open every box, look inside, identify what's going on. So you need a level of expertise, and then apply a certain treatment. It could be things like feeding the bees because there's only avocados and there's no more flowers right now. It could be giving them water, medicine. Again, preventing pesticides from going in, which is not something we can do in real time. But point being is that it all depended on people getting to the right place in the right time, which is practically impossible.
[Michael Eisenberg — 30:45]
So let me just cut you off one second because this is important. You know, I have a farm, so I. We have beehives. So beehives don't sit centrally if you've ever seen them, they're actually spread around fields. That's right, because they have to have each have their own foraging areas with which to go. And so the beekeeper needs to walk around or run around and sometimes drive around to all these places and find each individual beehive and open it up and look inside and see what's going on. He pulls out the rack, the frame from there. And also, because these beehives are in the field, when they spray pesticides on the field, a byproduct of that is it gets into the beehives.
[Saar Safra — 0:00]
And it kills the bees.
[Michael Eisenberg — 0:00]
.And it kills the bees.
[Saar Safra — 31:21]
The ratio between a commercial beekeeper and hives is one to a thousand.
[Michael Eisenberg — 31:26]
One beekeeper for a thousand hives.
[Saar Safra — 31:28]
Which means the frequency of visitors for every hive is once a month.
[Michael Eisenberg — 31:31]
Okay, a lot can happen in a month to a bee.
[Saar Safra — 31:34]
That's right. And the best beekeepers are able to do it once every three weeks. But the problem is, beekeepers work always in arrears. They get there and they realize, I lost a colony. This colony is famished. This colony is dead out of disease, and that's the only way they operate. All they can do is just replace the colony with a new one. Buy colonies and replace them. And that's why we're seeing high colony collapse rates. And when we realized this early on in the company, there were a lot of solutions for bees. There were a lot of startups out there and technologies to try and help bees. But we felt like there were more products looking for a problem than really solutions to the main problem. The main problem was you got to get rid of that hive and you got to be able to treat in real time in the field. That's a big hairy problem to solve. It's expensive, it's hard. Bees, it's a biological model. There's many of them. You need to identify, you need to treat. You need to do this in real time in the field. It's basically. We had to completely revolutionize the industry from the bottom up.
[Michael Eisenberg — 32:41]
175 years of history in one white box.
[Saar Safra — 32:45]
That's right.
[Michael Eisenberg — 32:45]
All right. And so what'd you build?
[Saar Safra — 32:47]
We built a different box. We built what is called a BeeHome. It's still a box, but it operates a little bit differently. The bees are in there in the same frames. The biology is the same for the bees. Same frame, same honeycombs that they're used to. But we have a layer of cameras that monitor the bees 24/7. And again, our beehive can contain 10 colonies. That's 10 times.
[Michael Eisenberg — 33:11]
So 10 boxes.
[Saar Safra — 33:12]
10 boxes, yeah. That's between half a million to a million bees.
[Michael Eisenberg — 33:16]
Okay, so first of all, it's a much bigger. Your box is a bigger box.
[Saar Safra — 33:18]
It's like a big dinner table.
[Michael Eisenberg — 33:20]
Because you can do 10 colonies.
[Saar Safra — 0:00]
Correct.
[Michael Eisenberg — 0:00]
Much bigger box. Is it made out of wood?
[Saar Safra — 33:25]
No, it's made out of tin.
[Michael Eisenberg — 33:26]
Tin, yeah. Is that good for the bees? It gets hotter in there, I bet.
[Saar Safra — 33:29]
No, no, no. We thermoregulate. So I'll talk about the box in a second. But it has cameras that monitor the bees, and it has AI models that actually identify what's going on with the bees. By the way, these AI models, we don't use LLMs or like the new kind of new models out there. We had to build our own model, which is called a LBM. A large biological model.
[Michael Eisenberg — 33:50]
Not a large bee model.
[Saar Safra — 33:51]
A large biological. You can do a large bee model as well. But we have to monitor up to a million bees using cameras and other sensors. Sound, temperature, vibrations, and humidity. And we have to. The model has to identify what is going on with the bees in the device. It's incredible. Even if you put a thousand people around a million bees, we would not be able to tell every single bee in every single colony what's going on. The model does. In milliseconds, the model looks at all this data and can tell you this colony is hungry. This colony is sick. This is the virus that it has. Not only that, it's sick. Which virusiIt actually has. This colony, there's pesticides outside. Shut down the device. The model tells you everything. And then we also added a robotic, a robot inside this box, a small robot that can navigate along the hives and. And apply the treatment in real time.
[Michael Eisenberg — 34:46]
It's a robotic arm? It's a robot on wheels?
[Saar Safra — 34:49]
It's a robot on wheels.
[Michael Eisenberg — 0:00]
Inside the tin.
[Saar Safra — 0:00]
And it has two arms.
[Saar Safra — 34:53]
Yeah. It can Pull out frames. It can put in medicine, it can put in food, it can put in water. It can shut down the entrances and open them up after 12 hours to prevent pesticides from coming in.
[Michael Eisenberg — 35:04]
Okay, so if it's in the field and you know that they're gonna put pesticides out, you know, fumigate the field with pesticides, you can shut the bee home down.
[Saar Safra — 35:14]
It does it automatically.
[Michael Eisenberg — 35:15]
It does automatically.
[Saar Safra — 35:16]
The nice thing about this is everybody talks about how AI will kill us eventually. We actually see AI, how it's helping humanity. We have thousands of these devices in the field operating 24/7. They're all solar powered. And the AI identifies and decides and defines what to do. It programs the robot to go apply treatment. And this is being done right now as we speak, from California to Florida, from Texas to North Dakota, all over the US.
[Michael Eisenberg — 35:46]
So just to be clear though, this is. We call this AI and you call this an LBM, by the way, I was just thinking about. You could have called it BLM. It could have been Bee Lives Matter. Could have taken the sting of some of the other BLM things out of the.
[Saar Safra — 36:03]
They're already taking BLM. Yeah.
[Michael Eisenberg — 36:05]
You could have rehabilitated it and repented it.
[Saar Safra — 36:09]
Repurposed it.
[Michael Eisenberg — 36:10]
Repurposed it, yeah. So this is machine vision, right? You got cameras, machine.
[Saar Safra — 36:15]
Among other things.
[Michael Eisenberg — 36:15]
Yeah, among other things. What are the other elements of the technology?
[Saar Safra — 36:18]
So there's a lot of data inputs, temperature, humidity of the colonies. They produce their own temperature.
[Michael Eisenberg — 0:00]
Multisensor environment.
[Saar Safra — 0:00]
Vibrations and sound.
[Michael Eisenberg — 36:27]
Whoa, vibrations. What is that?
[Saar Safra — 36:28]
Because bees have the waggle dance. They are.
[Michael Eisenberg — 36:31]
Waggle dance?
[Saar Safra — 36:32]
Are you not familiar with that?
[Michael Eisenberg — 36:34]
No.
[Saar Safra — 36:34]
What kind of bee lover are you? I thought you were an expert, by the way you present yourself.
[Michael Eisenberg — 36:38]
I'm in the old fashioned when I got those white boxes in my fields. Yeah, because you didn't supply me a bee home.
[Saar Safra — 36:44]
I remember that. You're still holding that against me, aren't you?
[Michael Eisenberg — 36:46]
I am, actually. You promised.
[Saar Safra — 36:49]
So the idea with, with bees is bees communicate using vibrations and pheromones. Those are the two ways bees communicate. So a bee will find a source of food, it will fly back to its colony, and using a dance, it will actually direct all the colony to the source of the food. It will direct them via direction, distance, and kind of how it is related to the sun, using a dance. The bees understand that dance, and then they go as a group to swarm on that food source.
[Michael Eisenberg — 37:26]
Yeah, interesting.
[Saar Safra — 37:27]
Yeah, we monitor that, the AI, and this is the beauty of it. Right. AI, it can gather humongous amounts of data, connect the dots, do predictive analysis. It knows what the bees is doing, so it can identify what is going on and then very quickly apply treatments. It doesn't. At the beginning, it didn't always apply the right treatment. There's also reinforcement learning. There's different type of neural networks in there, convolutional and recurrent, and some of them are reinforcement. So it tries different things and it learns, and over time, it becomes really good. Today we have the best beekeeper on the planet. Supersedes any other human beekeeper that you can imagine.
[Michael Eisenberg — 38:06]
It's just not human.
[Saar Safra — 38:07]
It's not human. And we see treatments that are being applied in the Negev [southern] Desert locally that have been learned in Arizona because the environment had
[Michael Eisenberg — 38:19]
Meaning the human beekeeper in the Negev Desert, or do you have.
[Saar Safra — 38:21]
No, the robot beekeeper.
[Michael Eisenberg — 38:23]
Do you have BeeHomes in the Negev Desert?
[Saar Safra — 38:24]
Yes.
[Michael Eisenberg — 38:25]
I didn't get one.
[Saar Safra — 38:27]
You're never going to let that go, are you?
[Michael Eisenberg — 38:28]
No, but. No. Relentlessness is one of my characteristics. I got it from my grandmother. The.
[Saar Safra — 38:34]
That's one of the things you need as an entrepreneur investor. Right.
[Michael Eisenberg — 38:37]
It's true. And so you have a BeeHome in the negative desert and in the Negev Desert and learn from your AI model in Arizona that it needs to do what?
[Saar Safra — 38:48]
Let's just say we. We saw certain behaviors in some of our BeeHomes in the desert here that we thought were unusual. We didn't understand why they were happening. And when we kind of. We did the kind of, the backwards kind of analysis, we realized that these were learnings and reinforcement learnings that happened very, very far away in Arizona.
[Michael Eisenberg — 39:13]
They came back to your central model from data picked up in Arizona, and then it changed the behavior of the beehive in the Negev Desert. But this could be dangerous also. Right. Because the model who does this in an automated way may pick up on something in Arizona that actually does not apply to the climate or the circumstances of the pesticides used in the Negev Desert. And you could end up screwing up the bee colony in the Negev Desert and hurting our food supply. Because of what happened in Arizona.
[Saar Safra — 39:40]
The first heart transplant. Human died. You remember that, right? That was in the 1960s. But
[Michael Eisenberg — 39:46]
I don't remember that. I'm not that old.
[Saar Safra — 39:47]
No, but not being old, but it's a well known. But my point being is
[Michael Eisenberg — 39:52]
You asked if I remembered that. I remember you didn't give me a BeeHome. I don't remember the first heart transplant guy died.
[Saar Safra — 39:58]
That's a common theme. That's kind of come back on me. I get it. Okay. I think I have no option but to bring you a BeeHome after this.
[Michael Eisenberg — 40:05]
That's why you've been invited to the podcast.
[Saar Safra — 40:07]
I have one in my car in a trunk. I can bring it over. But point being is that during the. Again, we're seven years into it. We've had by this point, almost a trillion videos and photos fed into the models.
[Michael Eisenberg — 40:23]
Wow.
[Saar Safra — 40:23]
And our model is centralized. It's in the cloud. You know, we're an Amazon shop, an AWS shop. And so that's why I'm saying the learnings apply. We also have, by the way, BeeHomes in Dubai today. These are the only three locations we have on the planet in the US And Israel and in Dubai.
[Michael Eisenberg — 40:41]
All great allies today.
[Saar Safra — 40:42]
Yeah.
[Michael Eisenberg — 40:43]
Members of the Abraham Accords.
[Saar Safra — 40:44]
That's right.
[Michael Eisenberg — 40:45]
It's an Abrahamic bee colony.
[Saar Safra — 40:47]
But also all challenging areas for bees, which kind of extend our technology and prove why it's so important in the UAE, by the way, until our devices, 100% of their bee population dies every single year. It just can't withstand the summer.
[Michael Eisenberg — 41:04]
It's too hot for the bees in the summer.
[Saar Safra — 41:06]
Too hot for the bees. And so they buy bees every year. They need bees for pollination, for honey. They have a very unique honey that they do only over there called cedar. It's. It's actually almost as good as Manuka. Some even say better. And it's only grown through the mangrove trees in the UAE, the only place on the planet.
[Michael Eisenberg — 41:25]
Why is that? There are mangrove trees in other places.
[Saar Safra — 41:28]
That's true, but characteristics that exist there. I'm not sure why, but theirs is very unique and different.
[Michael Eisenberg — 41:36]
And I've seen Dubai chocolate branded like in airports. I've never seen Dubai honey.
[Saar Safra — 41:40]
The cedar honey you can read about, it's called cedar. There's a lot of types of mangrove honey, but the cedar honey specifically is one of the best qualities on the planet. But my point being for us, you know, we wanted to take our technology and challenge it in the most extreme area. So you can get North Dakota during the winter. Yeah, that's easy. We got that. And then you can get Dubai during the summer. And if you can kind of help bees survive in these extreme environments, you know, you kind of. You have a good.
[Michael Eisenberg — 42:09]
What do you do? Air conditioning for the bees in the tin can?
[Saar Safra — 42:11]
We thermoregulate. That's true.
[Michael Eisenberg — 42:12]
You refer to, let me say, use the word air conditioning. You thermoregulate the bees. We do.
[Saar Safra — 42:17]
Because it's more than just air conditioning. Right. Some of it is passive. There's airflows that are open and closed to conserve energy, but some of it is also active, like in the desert. There's enough sun that you can actually air condition all. All summer long.
[Michael Eisenberg — 42:32]
Solar powered air conditioning for the bees.
[Saar Safra — 42:34]
Yes.
[Michael Eisenberg — 42:35]
You always want better for your bees.
[Saar Safra — 42:36]
Yes.
[Michael Eisenberg — 42:37]
And how many units do you have in Dubai?
[Saar Safra — 42:39]
Oh, just a few.
[Michael Eisenberg — 42:40]
Just a few. But it's working.
[Saar Safra — 42:42]
It's. It's beautiful.
[Michael Eisenberg — 42:43]
And the bees survive through the summer?
[Saar Safra — 42:45]
Yes, they do.
[Michael Eisenberg — 42:46]
So you're like growing a new bee colony in Dubai. What did they do before you could fly in bees to Dubai? They didn't have honey, I guess.
[Saar Safra — 42:53]
No, they would transport them on trucks or on trains. Yeah, on boats.
[Michael Eisenberg — 0:00]
On boats?
[Saar Safra — 0:00]
Yeah. You can, you can move. You can haul bees around the world in many, many different means ways.
[Michael Eisenberg — 43:04]
And what do they want to pollinate for there or they just want the honey?
[Saar Safra — 43:07]
Both. You know, Dubai, especially after. Not only Dubai, but like after Covid.
[Michael Eisenberg — 43:14]
Yeah.
[Saar Safra — 43:14]
Remember when the. This is something you do remember, right? When the ports closed down.
[Michael Eisenberg — 43:18]
Yes.
[Saar Safra — 43:19]
Many countries that are kind of dependent on external, on imports were in a bind because everything shut down. You couldn't get food and suddenly people realize that bees are part of your national security. You know, in the US there's the USDA, the US Department of Agriculture. Bees are not categorized under the USDA. They're categorized under the DOD - Department of Defense.
[Michael Eisenberg — 43:45]
Really?
[Saar Safra — 43:45]
Bees are considered in the United States of America as national security.
[Michael Eisenberg — 43:50]
In Israel, are they considered a national security beast?
[Saar Safra — 43:52]
No, they're not.
[Michael Eisenberg — 43:52]
They're not. In Dubai are they under national security?
[Saar Safra — 43:54]
I don't know. But in the US the funding for the bees comes from the Department of Defense.
[Michael Eisenberg — 44:00]
This actually makes sense, by the way, that, you know, your food security is a matter of national security and should be treated as such.
[Saar Safra — 44:07]
That's my point.
[Michael Eisenberg — 44:08]
It's very forward thinking of both the Emiratis
[Saar Safra — 44:10]
That's exactly right.
[Michael Eisenberg — 44:12]
And, and Israel to. Actually, you know, the Emiratis have started to think about this very clearly. I know Qatar also thought about this and Israel kind of thinks about this, but not sufficiently. It's forward thinking of the United States to put it in the Department of Defense.
[Saar Safra — 44:27]
Yes. I think the Emiratis understand very well. Again, everybody knows they're very strategic about everything. And they think, they understand that pollination is, if you want to have a vibrant agricultural industry, pollination is part of that and they understand that today. So does for example, Singapore and other kind of island states. Right. Understand that that are highly dependent on income on imports today, suddenly start to identify and understand that not only the bees, but the technology that keeps the bees alive is equally as important.
[Michael Eisenberg — 45:03]
There's I assume, insatiable demand for this.
[Saar Safra — 45:05]
Yeah, there's 11 times more demand than actually device actual devices have.
[Michael Eisenberg — 45:10]
And so how do you handle that?
[Saar Safra — 45:12]
We raise capital for manufacturing and we raise debt for manufacturing. It's a slow process. We're still a startup.
[Michael Eisenberg — 45:18]
How many can you produce a year of these BeeHomes?
[Saar Safra — 45:20]
So we work with contract manufacturers in Mexico because most of our biggest market is in the US it's easier to manufacture in Mexico and just transport to the land. Our current manufacturer can manufacture 6,500 a year.
[Michael Eisenberg — 45:34]
6,500 BeeHomes a year.
[Saar Safra — 45:36]
BeeHomes a year.
[Michael Eisenberg — 45:36]
6,500 BeeHomes a year that each holds 10 hives.
[Saar Safra — 45:39]
Correct. We don't. We. We're not there yet. We only manufacture about a thousand a year. We're still in the early process of that. But hopefully some more good news around that coming in.
[Michael Eisenberg — 45:49]
And I assume you're sold out on your thousand BeeHomes.
[Saar Safra — 45:51]
Yeah, yeah. No, we. We have a couple of thousand. They're all sold out. But. But like I said, we've already been paid for 11,000 BeeHomes.
[Michael Eisenberg — 46:01]
Right.
[Saar Safra — 46:01]
So we're waiting for many more to come.
[Michael Eisenberg — 46:03]
We got to find another place to manufacture. Maybe we'll manufacture them in Dubai. They're good at that.
[Saar Safra — 46:06]
Yeah, that's. That's one of the things we're thinking about because in Dubai or in the UAE, not necessarily Dubai, but in the UAE they really offer in there. They have like a. No tax zones.
[Michael Eisenberg — 46:16]
Yeah.
[Saar Safra — 46:16]
And they offer incredible incentives if you want to manufacture. There is some of something we're considering—
[Michael Eisenberg — 46:23]
What is like play this movie forward 10 years and there's now, I don't know, 20,000 BeeHomes around. What has changed in the world? What will I notice? What will the average person listening to this podcast notice is changed in the world because of your. Because of BeeHomes?
[Saar Safra — 46:37]
The first and foremost, the way I think about it is usually is always I start from the unit level, at the bee level. We measure our success by colony collapse. So instead of seeing 30, 40, 50, 60% colony collapse in the industry, in our devices, we experience less than 8% colony collapse across our device. This is not in the lab, in the field across our devices. And again we have thousands of them, which gives us high confidence that this is something we can maintain. And it keeps going down. Right. So all these BeeHomes are being software updated every week, once a week, over the air, with just bug fixes, enhancements, improvements.
[Michael Eisenberg — 47:20]
Bug fixes. That's a good one.
[Saar Safra — 47:22]
Not bee fixes, bug fixes. And so this is how we kind of control colony collapse. And that's our success metric, because if you have more bees, you have better pollination and they produce more honey, so your yields go up. Right. So if it works at the unit level. Now take every one of these devices, throw them anywhere you want on the planet, especially in places that need them, like Africa and South America. Plenty of sun, they're solar powered, and you will dramatically increase or decrease the colony collapse rates in those areas. What is the outcome of that? Higher yields. For the same piece of land, you would get better yield of the crop.
[Michael Eisenberg — 48:01]
So lower cost of food.
[Saar Safra — 48:03]
Lower cost of food. Better quality of food. Yeah. And most of all, it's great for the biodiversity of that area, because bees don't only pollinate the avocado flowers, they will pollinate any type of flower in that region in that, you know, three mile radius that they will bump into.
[Michael Eisenberg — 48:20]
That's a bee radius, is three miles?
[Saar Safra — 48:23]
Usually that's the comfort zone. A bee can fly even 40 miles, but the comfort zone she pollinates in is 3 miles.
[Michael Eisenberg — 48:29]
Interesting.
[Saar Safra — 48:29]
If she doesn't have a home to come back to, you can fly way further than three miles.
[Michael Eisenberg — 48:34]
So you created something called, like an impact report. What do you call it? You have a good name for it. What is it called?
[Saar Safra — 48:40]
Every year we release our impact report and we actually count. What is the true impact of what we did? And we measure that about how many bees we saved, because we compare that to the wooden boxes. If you take bees from the wooden box and move them to our tin box, to our robotic hive, you will save 30 to 40% of all that bee colonies that will stay alive in our device.
[Michael Eisenberg — 49:04]
So there's a lot of talk today about AI replacing people's jobs. This clearly replaces the beekeeper. What does the average beekeeper say about the BeeHome?
[Saar Safra — 49:18]
Out of all the constituents and stakeholders in the industry, the beekeepers love us the most.
[Michael Eisenberg — 49:25]
Whoa.
[Saar Safra — 49:26]
Yeah.
[Michael Eisenberg — 49:26]
Why?
[Saar Safra — 49:28]
First of all, we're not replacing beekeepers. We're replacing the labor that doesn't exist. Remember how I told you there's one beekeeper for every thousand hives, which is why they lose so many colonies? It's not that's what they want. There's just not labor. There's no labor to be found to actually increase that rate. How many people do you know that finished school and decided, I'm going to be a beekeeper for the rest of my life?
[Michael Eisenberg — 49:51]
I know two.
[Saar Safra — 49:52]
Yeah.
[Michael Eisenberg — 49:52]
I don't know if they finished school. I know two beekeepers.
[Saar Safra — 49:55]
But. But, you know, many more that are not. And so point. Point being, Right. Point being is that. Is that there's just not enough labor. Especially with the cost of labor today going up in the western world, it's really hard to find labor. And so we're not really replacing the beekeeper's job. But what are we doing? We don't have bees. We don't grow bees. We were a technology company. We provide the box. You still need the beekeeper, but it—
[Michael Eisenberg — 50:20]
The bees
[Saar Safra — 50:22]
Correct.
[Michael Eisenberg — 50:23]
Grow in the box. They multiply.
[Saar Safra — 50:23]
But the bees are not ours. The bees are not our asset. It's the beekeepers. The beekeepers have to bring in the bees so we can.
[Michael Eisenberg — 50:30]
So there's a beekeeper per each one of your boxes.
[Saar Safra — 50:32]
Correct. Not a beekeeper per se, but there's an owner of the bees. That's the commercial beekeeper. He has 10,000 colonies. We come to him, and we go together to the growers. We go to Olam and Driscolls and the big growers, and we tell them it's the same bees you're used to. You've been using this beekeeper for 30 years.
[Michael Eisenberg — 50:53]
I got it. Your customers, the commercial beekeepers. Who instead of shipping wood boxes, is now shipping a tin can.
[Saar Safra — 50:58]
Correct.
[Michael Eisenberg — 50:59]
That has the equivalent of 10 colonies in it.
[Saar Safra — 51:02]
Correct.
[Michael Eisenberg — 51:03]
A funny question. So your AI kills, like, 99%. I saw somewhere of Varroa mites without any chemicals, without anything. Just explain to the common listener what that means..
[Saar Safra — 51:17]
Wow. Varroa is the worst thing that could happen to humans, and it doesn't even affect us. It's a mite on the bees. So there is a mite that 100% of the bees have them. If it would be on a human, it would be the size of a backpack. It's as if you'd be wearing a backpack. It sits on the back of a bee or in the torso of a bee, and it basically consumes the bee's liver and health system. So the bees lose all their immunity with this varroa, and so they're very susceptible to disease. Varroa is the worst thing that could happen to bees and to pollination to humans. 100% of the bees have it. And so today in nature for example, a bee colony could not last more than a year. If it doesn't have beekeepers helping, it won't last more than a year. The only treatment that beekeepers have for varroa is a chemical treatment. They basically put chemicals inside the hive. This is why in the US There is no organic honey. Honey cannot be organic even if the forage is organic.
[Michael Eisenberg — 52:18]
That's interesting.
[Saar Safra — 52:19]
There's still chemicals inside the hive to treat for varroa. What we do is we use a heat treatment. There's a difference in how much temperature bees can sustain versus varroa. Kind of like when you're sick, you raise temperature, you have fever, your body is using fever to fight pathogens. You can sustain 100, 105, or 44 celcius.
[Michael Eisenberg — 52:39]
The pathogen can't.
[Saar Safra — 52:40]
We use a similar method with the bees.
[Michael Eisenberg — 52:42]
You give the bee. You give the bees fever.
[Saar Safra — 52:44]
We give them fever, which they can sustain. It's fine for about 40 minutes. It kills all the varroa. We have 99.9%
[Michael Eisenberg — 52:53]
Who came up with this? It's incredible.
[Saar Safra — 52:55]
It's not actually our patent, but what happens is it's not really feasible in the field. What are you going to do? You're going to come with a microwave to the field for every wooden box, wait 40 minutes for each frame. We have a robot that does it 24/7 for three days, takes care of 10 hives at no cost. It's all solar-powered. It's beautiful. So the idea that with a robot is you can apply treatments that are not scalable. Right. That are very effective and intimate because you have a robot. That's why we're not replacing beekeepers. A beekeeper would never do this. They will still use chemicals. We're the only commercial player in the market today that manages tens of thousands of colonies that does not use chemicals for honey. The only ones on the planet.
[Michael Eisenberg — 53:41]
You'll be introducing organic honey into the United States for the first time ever.
[Saar Safra — 53:46]
We're going to try. We're going to try.
[Michael Eisenberg — 53:49]
Before we came on, there was a joke going on in the back here about honey laundering. Want to tell everyone about honey laundering?
[Saar Safra — 53:57]
You know, it's a term we coined. It's like money laundering. Basically, today
[Michael Eisenberg — 0:00]
I figured that out.
[Saar Safra — 0:00]
I'm just saying it's not a term you'd hear anywhere else, but basically today, there's a lot of honey that is being dumped on the markets that is not real honey. It's rice syrup or corn syrup. It looks like honey. It has the same texture, but it's just the worst sweetener on planet Earth. It has so many negative impacts on the human body. It shouldn't be consumed, but it's being sold as honey and that's called dumping. There's anti-dumping rules all over the world, especially in the western countries, which is why there's different routes that this honey goes through different countries like Vietnam that sells it to India, that sells it to Argentina, that sells it to the US, kind of like money laundering routes. And eventually you buy honey off the shelf. But only 10% of it is real honey. 90% of it is a sweetener that just does harm to your body.
[Michael Eisenberg — 55:03]
Where do they make this rice crap that they call honey or the corn crap they call honey?
[Saar Safra — 55:11]
In various countries around the world.
[Michael Eisenberg — 55:15]
You don't want to say which countries?
[Saar Safra — 55:17]
I don't know specifically.
[Michael Eisenberg — 55:18]
They are not being what percentage of the honey in the United States is sold after it was honey laundered?
[Saar Safra — 55:23]
Let's just say that in the US there's very specific rules that don't allow imports of honey from China.
[Michael Eisenberg — 0:00]
Does some get in anyway?
[Saar Safra — 0:00]
Through honey laundering routes.
[Michael Eisenberg — 55:34]
Through honey laundering. So what percentage of honey in the United States do you think is actually honey laundered?
[Saar Safra — 55:37]
This is not based on facts, just based on my hunch. 60 to 70%.
[Michael Eisenberg — 55:45]
Wow. 60 to 70% of all the honey you buy in your Kroger's, your Albertsons, I assume the supermarkets are still around, your Eagles. It has honey laundered honey in it and it's only 10% real honey or 20% real honey, as the case may be. There was similar problem with olive oil, by the way, coming out of Europe for a while also. Right. They would put other kinds of oil and olive oil and call it olive oil.
[Saar Safra — 56:07]
And they solved it. Solved it.
[Michael Eisenberg — 56:09]
How'd they solve it?
[Saar Safra — 56:11]
So in Europe, actually they now they invented a technology that can actually tell you in a honey jar how much of it is actually real honey. It's relatively a novel piece of technology. So it's not kind of widespread yet. But in Europe they're starting to kind of really crack down on that. So they're going to be less affected by it. But the U.S. by the way, in the U.S. only about 25 to 30% of the honey that is being consumed in the U.S. is produced in the U.S.
[Michael Eisenberg — 0:00]
Where do they get it from?
[Saar Safra — 0:00]
Imports.
[Michael Eisenberg — 0:00]
From where?
[Saar Safra — 0:00]
It doesn't matter.
[Michael Eisenberg — 56:43]
Got it.
[Saar Safra — 56:44]
Because of honey laundering, eventually you get the same honey from the same places, going through all the different places.
[Michael Eisenberg — 56:49]
Wow. Wow.
[Saar Safra — 56:51]
The same thing applies here in Israel, by the way.
[Michael Eisenberg — 56:53]
We have honey laundering here too?
[Saar Safra — 56:54]
Yeah, from the same sources of honey.
[Michael Eisenberg — 56:57]
Really?
[Saar Safra — 56:58]
Same problems. Yeah.
[Michael Eisenberg — 56:59]
Who are the perpetrators here in Israel?
[Saar Safra — 57:01]
The thing is that they don't even know because they're buying honey from Turkey or Vietnam. But you don't know the route that this honey came from.
[Michael Eisenberg — 57:11]
What's the safest way to ensure I don't get laundered honey?
[Saar Safra — 57:16]
Buy honey from your local beekeeper. Seriously. Go to the local beekeeper and there's always a beekeeper around somewhere in the vicinity.
[Michael Eisenberg — 57:22]
Sure, in Tel Aviv you can always find one on the corner.
[Saar Safra — 57:25]
No, but like, you know, you drive an hour away. Tel Aviv, you don't even have to drive an hour. Just drive 30 minutes and you're like in the outskirts. Find a beekeeper. Sunday markets or just shops that sell beekeepers honey. And buy the honey from there. That's real honey.
[Michael Eisenberg — 57:40]
Who's your favorite beekeeper in Israel that you like to buy honey from?
[Saar Safra — 57:43]
I can't. I can't play favorites.
[Michael Eisenberg — 57:44]
You love all your beekeepers.
[Saar Safra — 57:45]
I love my beekeeper.
[Michael Eisenberg — 57:46]
Tell me. So your partner Eliyah is a beekeeper. I've met him. He's an incredible guy. Big, long beard. He still have the beard? I haven't seen him a few years and I think you couldn't have two more different backgrounds. You're a high tech guy, he's a beekeeper. What have you learned from each other?
[Saar Safra — 57:59]
I've learned so much from him. He's just again, think about his journey. He started from. He was a commercial beekeeper. That's what he went to school for. He learned beekeeping. He worked at beekeeping. Today he manages our revenue teams in the U.S. he lives in the U.S. you relocated him. I totally made him a different person.
[Michael Eisenberg — 58:19]
Where is he, California?
[Saar Safra — 58:21]
Yeah, in the Bay Area. Our offices are in San Ramon. So he's like 45 minutes across the bridge. He manages our revenue team, a huge team of about 25 people doing both sales and operations. He went to get there, he went through being the product manager of the company. And at the beginning, he was kind of more the subject matter expert. But in seven years, what this guy has accomplished, what he learned, the progress he went through, he barely knew how to use a computer. He knew how to write an email, but it would take him 20 minutes to write two sentences. Today, the guy is a wizard.
[Michael Eisenberg — 58:56]
Wow.
[Saar Safra — 58:57]
He's a wizard. You would see him, you'd be blown away.
[Michael Eisenberg — 58:59]
An AI beekeeper.
[Saar Safra — 59:00]
He talks the language. He talks both languages. He can go and talk to beekeepers about beekeeping and he go and talks to investors VCs about venture capital.
[Michael Eisenberg — 59:12]
I think I'm correct - you have teams in the US and teams in Israel. And you have a team in the Ukraine also, right?
[Saar Safra — 59:17]
We have a team in Ukraine. We have a team in Poland and—
[Michael Eisenberg — 59:20]
a team in Poland. So you've confronted managing a company through war for the last four years. What are your key insights and pieces of advice and thoughts on that?
[Saar Safra — 59:34]
I think that you mentioned this at the beginning, right? Being relentless and being flexible. You know, we've been tested around those traits in the company. I mean, it's like black swan one after the other, right? Started with COVID then the interest rates around the world collapsed and wars, wars, wars. Both in Ukraine than in Israel. Like we have people serendipitously all over the place wherever there's war, I feel like. But yeah, I mean, it's a challenge to maintain talent and maintain throughput throughout these circumstances, I would say. I can't pinpoint and say there's something specific that we did, right or wrong. I'm sure we did every mistake in the book along the way. We're still around, but that's also never guaranteed, right? We're still around.
[Michael Eisenberg — 60:31]
What's something you'd like to say to your employees in Israel and the Ukraine and conversely, let's say in the US who haven't gone through the war about these periods?
[Saar Safra — 60:39]
I'll say one thing. Because we build hardware, right? It's a much harder endeavor to maintain because you can't do that from home. We don't have a hybrid model, we never had. We work from the office and our offices in Israel are 6 km from the Lebanon border. And my team is there every single day, as I am almost every day, except when I'm not doing podcasts in Tel Aviv. We're there every day. And so I couldn't be proud and I couldn't be more fortunate really, to have a team of honestly warriors that come to work every day. You know, in our hiring process, you have to specifically mention your passion towards our cause, unsolicited. You can be the most amazing software developer throughout your entire hiring process, which is long. If you have not mentioned your attraction to our cause and the reason why, this is part of the reason why you want to work at Beewise. We're not going to hire you. It doesn't matter how talented you are. That helps a lot. Bring people in adverse situations, conflicts and war, to work. Because the war is local, it will pass, saving the bees is a global issue. It's not going to go away. And we're in a, the real war we have is with time. You mentioned this at the beginning, right? Losing 30, 40, 50, 60% every year. We're 20 years away, honestly, on the planet today, we have 36% of the bee stock we had 50 years ago. That's it. That's what's left. There's no way to replenish beyond that. Once that's gone, it's gone. We'll need a different solution to pollinate our crops. And so that's the real war in our minds. Every minute, every hour, we can sneak in to the office, work and promote this solution for the bees is important. It's almost like a religion for us, it's not, but it's. It's as strong as a belief, you know, like a conviction. Not a religion, a conviction for people that work at Beewise. And that's one of the things. That's kind of one of the. They all work at Beewise. That's a common thing. But the other common denominator, the other thread that connects us is we're all passionate towards the mission of saving the bees and protecting our global food supply.
[Michael Eisenberg — 63:10]
I'll finish with one last question. What can human beings learn from bees?
[Saar Safra — 63:15]
You know, it's pretty amazing. Every day I go to work, I learn something new from the bees. Bees are part of nature. It's basically learning from nature. And nature is all about risk management. We don't appreciate our farmers as much, but farmers, we think as technologists, we're engineers. So everything is structured, and if you do this, this happens. And if you add this to that, one plus one equals two. In nature, that's not how it works. It's all risk management. And so bees are an integral part of that. And you learn so much every single day. I can talk about the bees for hours. And you will be blown away how nature has invented neural networks way before we even understood what they are. Right? A bee colony is 50,000, you know, dots on that neural network that communicate and decide together democratically what to do. And that's been going on for 150 million years on the planet in every single beehive that we're not even aware. There's just so much to learn from the bees that is credible. But I do want to say one more thing while we're at the subject. Some of us take the world for granted. And I want to encourage anybody that's listening to this podcast to apply themselves in their current job or their next job or their next endeavor to doing something good for the planet, for the world. It's just as exciting and interesting as doing software in cyber or in defense. But if you apply yourself towards the planet in many different capacities, you can do carbon, you can do ag, you can do different things. If each and every one of us will do a little bit of that, then we wouldn't be in such a bind. We are in a bind on this planet. Right. Everybody knows this. We just don't know to what extent where, you know, the world is not going in the right direction. And I encourage people to consider in their next job doing something that is meaningful and impactful to the planet so we can leave our kids a better place.
[Michael Eisenberg — 65:19]
We're going to have to do another follow up podcast because I'm not sure I agreed with everything in your last sentence, but we're coming to the end of time. So I have to leave people with a cliffhanger because Gavin Baker said here that climate change is a solved problem in his lifetime. I think the depopulation of the world is a big problem. And one can argue that the food supply dwindling or challenged, which you're going to fix because technology tends to fix these problems, because innovative people tend to fix these problems and you will fix this problem is also somewhat solved, unfortunately, by people depopulating the planet. And so I'm actually less of a doomer about where the planet is going than when you are, because I believe specifically in people like you and in young people who will solve these problems. And I think, I don't think we're in a bind. I think we're going through more complicated points of history on the human level even than we are on the planet level. But it'll be an amazing conversation to have.
[Saar Safra — 66:17]
I wasn't talking about climate change.
[Michael Eisenberg — 66:19]
Okay. Not just climate change, food supply and climate change. I do think food supplies is a national infrastructure issue that needs to be dealt with more. I agree with that.
[Saar Safra — 66:26]
But we're saying the same thing you're saying. Smart people will solve it through technology. I'm trying to encourage people to go and do exactly that.
[Michael Eisenberg — 66:33]
Amazing. So on that we definitely agree, which is let's call all the smart people to go engage in doing things that, where values actually create value. Which is the nature of this podcast. Where values create value.
[Saar Safra — 66:46]
Yes.
[Michael Eisenberg — 66:47]
Amazing. Saar, thanks for joining us. Thank you for everything you're doing to increase the global food supply and reduce the cost of living. Because this is critically important - people are not buying fresh fruits and vegetables because they're too damn expensive and you, by increasing yield, are helping to bring down the cost of food. So God bless you and Eliyah for doing that.
[Saar Safra — 67:06]
Thank you.
[Michael Eisenberg — 67:07]
And keep up the great work on bringing AI to save bee colonies and robots alongside beekeepers, because we'll live alongside the robots and the AI to make the world a better place. And with that, by the way, I hope we're gonna have b-roll by the way, showing a lot of the bees and the beekeepers and the beehives, et cetera. And with that, thank you Saar. And if you enjoyed the podcast, please rate us five stars on Apple Podcasts, Spotify. Subscribe to our YouTube channel and you can find out more about Saar on X and his X handle is S A A R S A F R A and you can also find him on LinkedIn under the same name. Having thanks Saar for helping the planet. I should also disclose that I am a small angel investor in Beewise as well because I could not not join him and Eliyah on this journey to increase the food supply, reduce the cost of living and improve our planet. Thanks for joining.
[Michael Eisenberg — 0:00]
I think you were once quoted as saying,"Loneliness is as big a disease or problem as smoking 15 cigarettes aday."
[David Siegel — 0:00]
It's actually not that I said it — it'sactually that the US Surgeon General said it. Two packs of cigarettes a day issafer than being continuously lonely.
[David Siegel — 0:48]
It should not take tragedy to build community.What can I do to build community — not due to tragedy, but build in a reallypositive way, around people's passions, identities, interests, et cetera?
[David Siegel — 0:48]
And as you know, the company that I ran for awhile, Meetup, is all about ending the loneliness epidemic.
[David Siegel — 0:48]
Meetup now — 8 million users. Every singlecountry in the world except for North Korea.
[Michael Eisenberg — 0:48]
Even in Iran?
[David Siegel — 0:48]
Even in Iran.
[Michael Eisenberg — 0:48]
And Syria?
[David Siegel — 0:48]
In Syria, in Iran, in Afghanistan.
[Michael Eisenberg — 0:48]
I'd love to know what the meetups are like inAfghanistan.
[David Siegel — 0:48]
I'm like — I'm going to go from HR to CEO.That's my goal. You want to be as close as possible to the CEO, to learn fromthe CEO. So I said, I'm going to become an assistant to the CEO.
[David Siegel — 0:48]
I'll get you a meeting with Adam Neumann.
[David Siegel — 0:48]
I'm like, you don't say no to a meeting withAdam Neumann. Even if you're not remotely interested in it — you still, justfor the shits and giggles, you want to have a meeting with Adam Neumann.
[David Siegel — 0:48]
My 10 priorities as the new CEO of Meetup — Iget up and I say, "Number one, I care about our mission. I care aboutending loneliness." And it was like, "Yeah, yeah!"
[David Siegel — 0:48]
And then I said, "Number six: we're goingto drive revenue and profit growth." And everyone was like, "Boo, boo— we hate revenue and profit growth." This total woke anti-capitalistestablishment where all money is bad. And that just had to change. I said, no.
[Michael Eisenberg — 0:48]
Did you ever think that you'd be retired atage 50?
[David Siegel — 0:48]
Yes.
[Michael Eisenberg — 0:48]
You did?
[David Siegel — 0:48]
Please don't — we shouldn't even use the wordretire. We should say I went from working 50, 60 hours a week for a salary toworking 50 to 60 hours a week, not for a salary.
[David Siegel — 0:48]
The CEO of Bending Spoons said, "We wouldlike to acquire not me, we would like to acquire Meetup." And the answerwas, of course?
[Michael Eisenberg — 0:48]
How much?
[David Siegel — 0:48]
We're not for sale. The answer's always"we're not for sale." You want to get acquired? We're not for sale.
[Michael Eisenberg — 1:08]
Welcome back to another episode of Invested.I'm thrilled to be here with my friend and colleague David Siegel. Welcome,David.
[David Siegel — 1:08]
Thrilled to be here, Michael.
[Michael Eisenberg — 1:08]
David, even before we dig into your background— I think you were once quoted as saying that loneliness is as big a disease orproblem as smoking 15 cigarettes a day. First of all, why did you say that? Andtwo, why did you choose 15 cigarettes?
[David Siegel — 1:31]
The loneliness epidemic is insane. Theloneliness leads to greater anxiety, leads to greater depression. Those thingsare incredibly dangerous and they decrease people's lifespan. And it's actuallynot that I said it — it's actually that the US Surgeon General said it. Twopacks of cigarettes a day is safer than being continuously lonely. That's howdepressing and dangerous it is. Self-harm comes from loneliness. And as youknow, the company that I ran for a while, Meetup, is all about ending theloneliness epidemic. Thank God, in Israel — Israel has many challenges, but onething it excels in is community. And it's one of the special places and reasonsto be here.
[Michael Eisenberg — 2:03]
All right. Now that we hit that, and we'llcome back to it. Give us your background.
[David Siegel — 2:03]
Background. Okay. I'm gonna go back to collegebecause it's a full circle story. So when I was in college, I don't know if youwere like this, but I was not into money very much. You might have been — wereyou a money person? Like, were you Alex P. Keaton from Family Ties, or were younot that guy?
[Michael Eisenberg — 2:38]
I'm sorry — I remember the show Family Ties,and that was Michael J. Fox. It was Alex P. Keaton. Yeah, I remember that.
[David Siegel — 2:38]
Were you like — were you that guy or not? Wereyou like a Republican kid, or were you into actually helping the world andmaking the world a better place?
[Michael Eisenberg — 2:38]
I don't think that there is any contradictionbetween being conservative or Republican and being into changing the world. SoI said I was both. I was both conservative, and I led a bunch of things,including editing the newspaper at the college, which is certainly a liberalbastion. I try to hold multiple things in my head at the same time. I think allthis dichotomy is just a terrible thing.
[David Siegel — 2:59]
Fair enough.
[Michael Eisenberg — 3:16]
It leads to a lot of loneliness — intellectualloneliness and personal loneliness. People don't want to be with other peoplewho think differently. It's just terrible. But go ahead.
[David Siegel — 3:16]
Yeah. So I went to college. And I was not anAlex P. Keaton — I was the anti-Wall Street guy. Because in Ramaz, where I wentto high school, everyone was focused on money. I was like, I don't care aboutmoney. Money's not important. I want to be a teacher. I want to work for anonprofit. So college, freshman year, I decided: I'm going to be a teacher. I'mgoing to work for a Hebrew school and be a Hebrew school teacher. Hated it.Then after that I said, I'm going to work for a nonprofit. I'm going to help aJewish nonprofit, work for UJA Federation at the Israel Experience Center,helping people find missions to Israel. And I absolutely was like — this is notfor me. So then I went to an AIPAC conference, and I said to someone there,what does a smart person do who's a philosophy major with no skills and no ideawhat they should do in life? His answer was: consulting.
[David Siegel — 3:55]
You have no idea what you want to do? Go intoconsulting.
[David Siegel — 4:12]
So he faxed me a list of the 100 biggestconsulting firms in the entire country. Sent emails out where my entireexperience was Hebrew school teacher. Not emails out, there was no email. Sentletters to all hundred. And got how many rejections?
[Michael Eisenberg — 4:12]
100.
[David Siegel — 4:12]
100 rejections, exactly. So I got rejected byevery single consulting firm. Bain, McKinsey, BCG — rejected from all of them.Put every single rejection letter up on my wall. Plastered my wall withrejection letters. And there was one place that called me back: MercerManagement Consulting rejected me. But then the Philadelphia office, after theyrejected me in New York, said, "We got your letter. You were the onlyperson who applied, so you're going to be the summer intern."
[David Siegel — 4:46]
So I was like, okay, consulting, perfect.
[David Siegel — 4:46]
So basically I started my career inconsulting. My biggest client was DoubleClick, which was the biggest internetclient at the time. You know Kevin Ryan, you know a lot of the leaders.
[Michael Eisenberg — 4:46]
Chris Saradakis.
[David Siegel — 4:46]
Chris Saradakis.
[Michael Eisenberg — 5:03]
Who I haven't seen in a long time.
[David Siegel — 5:03]
Over 200 people from Doubleclick days havebecome CEOs of companies.
[Michael Eisenberg — 5:03]
Really?
[David Siegel — 5:03]
It's an incredible amount. People know aboutthe PayPal mafia and all the other mafias. Neil Mohan was a customer servicerep. He and I were friends. I met this Indian woman and I said, "Oh,you're Indian, she's Indian. You guys should go out." I set them up. Theygot married. He's the CEO of YouTube today.
[Michael Eisenberg — 5:20]
You're the Jewish matchmaker for an IndianAmerican couple. That's incredible.
[David Siegel — 5:20]
You got the Netflix Jewish matchmaker show andthe Netflix Indian matchmaker show.
[Michael Eisenberg — 5:20]
How is that not on your resume? How did I notknow that?
[David Siegel — 5:20]
It really should be the ultimate matchmaker.
[Michael Eisenberg — 5:36]
I can't ask you the question of what can't Ifind out about you on Google, because this would have been it. Now I justruined the question.
[David Siegel — 5:36]
It's all over Google.
[Michael Eisenberg — 5:36]
Oh it is, okay.
[David Siegel — 5:36]
No, it's not.
[Michael Eisenberg — 5:36]
Oh, kkay. All right, yeah, so you go down toPhiladelphia.
[Michael Eisenberg — 5:36]
Where'd you go to college, by the way?
[David Siegel — 5:36]
University of Pennsylvania.
[Michael Eisenberg — 5:36]
Right, so you were in Philadelphia, trying toget a job in New York. That was the problem. You should have just walked acrossthe street.
[David Siegel — 5:52]
I should have. 1550 Market Street. Greatconsulting place.
[David Siegel — 5:52]
I worked for Mercer's human resourceconsulting practice and ended up getting four job offers after graduation. Allin consulting. All in human resource consulting. Went to DoubleClick and workedin human resources, which is not a common path.
[Michael Eisenberg — 6:07]
Wait, slow down. You got four offers fromconsulting firms and you turned them all down?
[David Siegel — 6:07]
All four were human resource consulting firms.I took them.
[Michael Eisenberg — 6:07]
Oh, you took them.
[David Siegel — 6:07]
My biggest client in consulting wasDoubleClick.
[Michael Eisenberg — 6:22]
Was DoubleClick.
[David Siegel — 6:22]
Correct.
[Michael Eisenberg — 6:22]
So that's the Mercer?
[David Siegel — 6:22]
I worked as an intern at William Mercer. Afterinterning at William Mercer, I then got four other offers: one from WilliamMercer, one from Deloitte, one from Hay Group, one from Towers Perrin, one fromthis other small place called Brecker & Merryman. All human resourceconsulting.
[Michael Eisenberg — 6:39]
I got that. Now which did you take?
[David Siegel — 6:39]
I took the smallest firm that no one had everheard of — there were only 20 people at Brecker & Merryman.
[Michael Eisenberg — 6:39]
And their biggest client was DoubleClick?
[David Siegel — 6:39]
Their biggest client was DoubleClick. And allwe focused on was merger and acquisition integration.
[Michael Eisenberg — 6:39]
Perfect.
[David Siegel — 6:57]
Which was amazing. DoubleClick had justacquired Abacus, NetGravity, other big acquisitions. And who was helping themwith the acquisition?
[Michael Eisenberg — 6:57]
At the time they were considered bigacquisitions. Today they'd be considered tiddlywinks.
[David Siegel — 7:13]
Yeah. Nothing.
[David Siegel — 7:13]
And Kevin Ryan came over to me and said,"Hey David, how much are you going to get paid?" I said,"$45,000. Pretty good, right?"
[Michael Eisenberg — 7:13]
And he said, "How about this? You'rebeing charged out at $250 an hour. Your $45K salary is equivalent to $23 anhour if I got the math right. How about this — we'll double your salary andthen we'll save like 4x."
[David Siegel — 7:30]
Sounded good to me. So I went to DoubleClick.I came in — DoubleClick was a stock at six, rose up to $210 (nothing to do withme), and then went back down to $4 by the time my one-year options vested. The1999 internet craze, we all remember well. At one point I had a majorconversation with Kevin Ryan — again, CEO of DoubleClick at the time, who endedup, as you know, acquiring Meetup out of WeWork; we'll get to that. And Kevinsays to me, what do HR people do? What do HR people do? I don't get what you guysdo anyway. And it's like, oh, we work to recruit top talent at companies, wehelp make managers better managers and leaders, we help with organizationalstructure and communications. He pauses and he goes, that's pretty much what Ido as a CEO — focus on leadership, recruiting top talent, et cetera. So I'mlike, hmm, I'm going to go from HR to CEO. That's my goal. And basically thatbecame my goal. So I went back to business school, to Wharton, and the entirefocus was: how do I become a CEO? And what I did is, I came on the idea thatthe best way to become a CEO — because I had learned so much my entire careerfrom my mentors, from Kevin Ryan and David Rosenblatt and consulting — is thatyou want to be as close as possible to the CEO, to learn from the CEO. So Isaid, I'm going to become an assistant to the CEO. So I identified about thirtydifferent companies that I wanted to become the assistant to the CEO for. Icalled up Jim McCann from 1-800-Flowers and said, I want to become yourassistant to the CEO. I just called up a whole bunch of different companies,and I emailed lots of people. And at the end, I couldn't get a job as assistantto the CEO. I got a job from BCG. I took it. They gave me a start date of ninemonths later. Like, have fun, go out — I have a kid, $200,000 in debt frombusiness school and everything else; I cannot just go out and have fun. The CEOof Duane Reade — I met with him to become his assistant CEO — I said, let'sjust do a six-month internship. And I did. So I worked for Duane Reade asbasically an assistant to the CEO. At one point BCG called me up and said, heyDavid, you're coming back, right? And I said, no, I'm going to have to rescind.And they said, why? And I said, well, I'm now the director of businessdevelopment for this $2 billion pharmacy chain. And they said, do you feel badenough that you'd give us some business? That's consulting, right?
[Michael Eisenberg — 10:06]
That's how consulting guys get business — theyput people on nine-month delays, hope they get a job, and then say, hey, couldyou give us some business?
[David Siegel — 10:06]
I guess it worked for them in the past — whothe heck knows. But it works. Anyway, I worked for Duane Reade; worked for abunch of tech companies. And then I had lunch with this crazy guy named MichaelEisenberg. And I met him, and we had a great time together. And I was inIsrael, and I called up Michael — this third party — and I said, Michael, Ihave this opportunity to go lead Yom Kippur and Rosh Hashanah services inUganda for the Abayudaya tribe. What do you think about coming with me? Becausemy wife told me that if I find someone, I could go there and lead services; butif I can't find anyone, I'm not going to be able to. And you go, I just startedAleph, I literally just started, I can't — but I would so love to do it. But Ihave another adventure for you, David. I said, what's the adventure? Forget theAbayudaya tribe — I'm going to introduce you to David Jackson.
[David Siegel — 11:13]
So you introduced me to David Jackson, andthen I became president—
[Michael Eisenberg — 11:13]
Founder and CEO of Seeking Alpha — and thenyou became president of Seeking Alpha.
[David Siegel — 11:29]
Yeah, exactly. I became president of SeekingAlpha. I then left that company.
[Michael Eisenberg — 11:29]
I didn't realize, by the way, that I washurting your dream — which was to be a CEO — by you becoming the president. Ididn't know that. So I feel a little guilty about that right now.
[David Siegel — 11:45]
No, I cried. I cried a lot.
[Michael Eisenberg — 11:45]
Okay.
[David Siegel — 11:45]
But it's okay. It's okay.
[David Siegel — 11:45]
You just postponed the dream.
[David Siegel — 11:45]
Okay. So the dream is still alive.
[Michael Eisenberg — 11:45]
Yeah.
[David Siegel — 11:45]
And a company called IAC — Barry Diller. Youknow Barry. You know Joey Levin.
[Michael Eisenberg — 11:45]
I do.
[David Siegel — 12:01]
They had just acquired Investopedia, and theywanted to do a roll up — they wanted to acquire Seeking Alpha also. So they metwith me and said, we want to acquire Seeking Alpha. And we did a whole song anddance. And of course the answer was—
[Michael Eisenberg — 12:01]
Seeking Alpha is still independent.
[David Siegel — 12:01]
Exactly. We're not for sale — like any goodCEO says. We're not for sale. And then finally, Mark Stein and Joey Levin —head of strategy and CEO of IAC — called me over and said—
[Michael Eisenberg — 12:18]
Great people.
[David Siegel — 12:18]
Great, amazing people.
[David Siegel — 12:18]
I know you love them. I love them too.
[David Siegel — 12:18]
They said, okay, Seeking Alpha's not for sale,but are you for sale? I'm not a teacher anymore. I'm for sale. I'm acapitalist.
[Michael Eisenberg — 12:35]
Yeah, this is a recurring theme, by the way.You know, Kevin Ryan asked, are you for sale, for double the price; and theseguys asked if you're for sale. This is a recurring theme. Keep going.
[David Siegel — 12:35]
Well—
[David Siegel — 12:35]
Clearly I'm a high-discount person.
[David Siegel — 12:35]
Yeah. So anyway, then became CEO ofInvestopedia. We then sold the company about five years later. That was aninteresting experience. And then this guy called me back again, and he said,David, I have your next job. And we met at — what hotel? It starts with an A.
[Michael Eisenberg — 12:35]
The Andaz.
[David Siegel — 12:51]
The Andaz Hotel in New York. I said, what areyou talking about, Michael? And you said, I need you to become the next CEO ofMeetup. I said, I love Meetup — what's going on? And you're like, well, theyjust acquired — WeWork just acquired Meetup, [and] I'm on the board of WeWork.So what do you think? I'll get you an advisory board, whatever you were on.I'll get you a meeting with Adam Neumann. I'm like, you don't say no to ameeting with Adam Neumann. Even if you're not remotely interested in it, you still— just for the shits and giggles — you want to have a meeting with AdamNeumann. So of course you take the meeting with Adam Neumann. And took themeeting — you know, he's barefoot, I'm barefoot, he's eating his vegan food,where—
[Michael Eisenberg — 13:44]
You weren't.
[David Siegel — 13:44]
I was not eating vegan food, but I could have.And then he hired me, after 27 interviews, to become the first outside CEO ofMeetup, to take over for the founder after he was running the company for 16years. A year into it, WeWork — 47 billion, you remember this — well, 40billion, 30 billion, 20 billion, whatever it was — Artie Minson, the CFO andpresident, called me up and said, David, can you acquire Meetup? I'm like, Idon't operate, I don't know how to acquire companies. (He didn't say "for sale,"by the way; he said acquire companies.) I'm like, I don't know how to do thatstuff. So I called up Kevin Ryan from 20 years prior, the CEO of DoubleClick,and I also contacted the chairman of Jefferies. And I said, hey, would you liketo acquire Meetup out of WeWork? And they did. And then ran it for another fouryears, and we sold the company a couple of years ago to Bending Spoons, andthose investors got a really nice return.
[Michael Eisenberg — 14:40]
And Bending Spoons is an Italian companythat's been acquiring subscription businesses around the world, doingincredibly well. But what made you think Bending Spoons would be a goodacquirer of Meetup?
[David Siegel — 14:40]
Because they paid the most. I mean, here's thereality —
[Michael Eisenberg — 14:58]
That's not the reputation, by the way, forwhat it's worth. They've got sharp pencils over there at Bending Spoons.
[David Siegel — 14:58]
So here's what happened. We went through aprocess. We signed an LOI, about to get acquired by — should I say who wasgoing to acquire us?
[Michael Eisenberg — 15:14]
Somebody else.
[David Siegel — 15:14]
Somebody else.
[Michael Eisenberg — 15:14]
Who was—
[David Siegel — 15:14]
Who — I'm not going to say who. We were aboutto get acquired, we were two weeks away from getting acquired, and that companywas acquired by Vista and had to pull out. It was such a traumatic experience,after six months of it, we were then not for sale. I wanted to wait five yearsso we could get QSBS and tax savings, et cetera. Out of the blue, the CEO ofBending Spoons — I guess this is similar to the other stories — said, we wouldlike to acquire, not me, we would like to acquire Meetup. And the answer was,of course—
[Michael Eisenberg — 15:14]
How much?
[David Siegel — 15:47]
We're not for sale. The answer is always,we're not for sale. You want to get acquired? We're not for sale.
[Michael Eisenberg — 15:47]
Everybody knew you were for sale, though.
[David Siegel — 16:03]
Whenever I tried to go out with a girl, theanswer was, I don't want to go out with you — and I didn't want to go out withher more. That's how it works, right? So—
[Michael Eisenberg — 16:03]
Feels like that old George Carlin joke, whichis, we've already agreed, we're now just arguing about the price. But go ahead.
[David Siegel — 16:03]
Yeah, kind of. So of course we're for sale. Wetook one or two meetings, they offered us 20% more than the other company, andthat was it. Sold the company very, very quickly. Of course, the way it worksis, you're out day one — that was two years ago. And prior to that, I startedthe Israel Tech Mission, which I'm sure we'll talk about, and have a look back.
[Michael Eisenberg — 16:36]
So you've been retired for two years?
[David Siegel — 16:36]
Retired for two years, going on, God willing,another 50 to 70.
[Michael Eisenberg — 16:36]
Did you ever think that you'd be retired atage 50?
[David Siegel — 16:36]
Yes.
[Michael Eisenberg — 16:36]
You did, because you thought you were going to be a teacher.
[David Siegel — 16:36]
Yeah, teachers have a great pension. No, Ihave a lot of specific goals, and my goal was to retire by 49. And retirement'sa funny word — please don't call it that. We shouldn't even use the wordretire. We should say, I went from working 50, 60 hours a week for a salary toworking 50 to 60 hours a week, not for a salary. And that's what I do rightnow.
[Michael Eisenberg — 17:13]
Okay. I want to dig into Meetup, because Ireally want to talk a lot about loneliness. Tell all our audience — who doesn'tremember when Meetup was started, like I do — about Meetup, and what was uniqueabout Meetup. It was an extraordinary business. I know it from its inception. Ihad the incredible fortune of spending time with Douglas Atkin, who was reallylike the conceptual godfather of the community that became Meetup, and then hedid the same thing for Airbnb — and is just an extraordinarily insightfulperson about what bonds people and brings them together. But why don't you tellthe Meetup story?
[David Siegel — 17:48]
Why isn't he on your podcast?
[Michael Eisenberg — 17:48]
Actually, we should get Douglas on thepodcast. That's a great idea.
[David Siegel — 17:48]
Get him on the podcast.
[Michael Eisenberg — 17:48]
He's amazing, Douglas. So tell the Meetupstory.
[David Siegel — 17:48]
I'll tell the founding story, because that'swhere it started. So Scott Heiferman, incredible individual, was in hisapartment building when the Twin Towers went down, and he's looking through hiswindow, and he said, I cannot be alone by myself right now. He went back downto the lobby, and he sees everyone is in the lobby at the time, from thebuilding — no one wanted to be by themselves. And he looked at someone andsaid, hey, what floor do you live on? And the person said, oh, I live on thethird floor. And he said, wait, I live on the third floor. And they lived onthe same floor for multiple years — they never met. He met another person, andhe basically said, it should not take tragedy to build community. What can I doto build community, not due to tragedy, but build it in a really positive way,around people's passions, identities, interests, et cetera? So he startedMeetup in 2002, nine months after September 11th, almost to the T. Gave birthto it. And when Meetup started, it was kind of a group for — how should I say —very niche interests slash freaks. The number one — the most groups of any typeof group — were people who were focused on witchcraft and witchery. There werelike 800 groups on witchcraft. Star Wars groups, all those kinds of interestingniche areas. Meetup now: eighty million users, every single country in theworld except for North Korea.
[Michael Eisenberg — 19:21]
Even in Iran?
[David Siegel — 19:21]
Even in Iran. Absolutely.
[Michael Eisenberg — 19:21]
In Syria?
[David Siegel — 19:21]
In Syria, in Iran, in Afghanistan, in allthose countries — or in China, all those countries — every single country butNorth Korea.
[Michael Eisenberg — 19:21]
I'd love to know what the meetups are like inAfghanistan.
[David Siegel — 19:40]
I don't know. They probably have a lot ofrunning around, or horses. I don't know what people are doing. I don't know.
[Michael Eisenberg — 19:40]
I hope they're safe for work.
[David Siegel — 19:40]
I hope so too.
[Michael Eisenberg — 19:40]
Yeah. And safe for the people who attend them.
[David Siegel — 19:40]
Meetup is all about helping people find theirpeople. I have met people, that I met during COVID especially, who said, if notfor Meetup, they were considering self-harm, because they were lonely and bythemselves, especially in COVID, how bad that was. There are dozens of peoplethat I met — dozens; there are thousands, but dozens — that met theirsignificant others through Meetup. Not through singles meetup groups: the bestway to meet someone, if you're single, is not to go to a singles group — it's gohiking, go biking, do yoga, the dog park. Do not do singles stuff; meet peoplethrough your passions and interests. So Meetup is amazing. It's an amazingorganization.
[Michael Eisenberg — 20:18]
How do you immerse yourself in figuring outwhat it means to be the CEO of Meetup and what you need to do?
[Michael Eisenberg — 20:18]
It was a bit of a mess.
[David Siegel — 20:18]
I love it.
[David Siegel — 20:40]
So, great question. One of my deep beliefs isthe criticality of not being an ivory-tower CEO. You have to experience theproduct. And for Meetup, the product is the phone or desktop, but it's alsogoing to the events. So I made it a path that, my first 30 days, I went to aMeetup event every single day. I'd go to an event where there were like 10 PhDstudents, all studying for their PhDs, and they had a Meetup group to holdthemselves accountable, to make sure to always write their PhDs together, even thoughthey're writing PhDs about different things. I went to another Meetup eventthat was a bunch of guys who were primary caregivers for their kids — it was adad's Meetup group that started in New York City, has 50 different locationsnow. And they were tired of going to mommy-and-me classes, [where] they're theonly dads. I mean, these amazing experiences — like, wow, this is just fire.It's incredible. But it was run by a founder. And as many companies that arerun by founders for 16 years, there were a lot of pet projects, a lot of thingsthat didn't make financial sense. The company was losing $20 million a year,and WeWork — their biggest concern about Meetup was that they weren't losingenough money. It was only $20 million a year.
[David Siegel — 21:55]
Ultimately, when you come into a company, themost important thing is first who, then what — we all know that from JimCollins.
[David Siegel — 21:55]
I inherited 16 direct reports, which tells youhow dysfunctional that was — who has 16 direct reports? Within six months, Ihad zero of the 16 still with the company.
[Michael Eisenberg — 21:55]
Wow
[David Siegel — 21:55]
Within six months.
[David Siegel — 22:14]
There were some people, like the CTO — he hadfollowed me to three or four different companies. Greg Giusti, from SeekingAlpha, worked for me at Seeking Alpha and worked for me at Investopedia; thenhe quit his job and worked for me over there. And I kind of brought in mypeople. When you change the executive team, you upset a lot of people, but youalso dramatically change the culture of a company. And the first things youneed to do is listen, learn, and then act very, very quickly to change leadershipand change culture.
[Michael Eisenberg — 22:34]
One of the key things you did to changeculture and to change product experience?
[David Siegel — 22:34]
Okay. So first, on the culture change — asidefrom changing the leadership of the organization — I needed to change the speedat which the company operated. It had just been too comfortable. The way thatproduct was organized, the ownership that people in product had, was not enoughto move fast. Everything was kind of more centrally held. That doesn't work ifyou want to move quickly and break things a little bit. So I changed theorganizational structure also, so that every owner had direct KPIs and accountabilitiesfor what they were in charge of, and they could just move fast. It wasn't oneof these organizations where there's, let's say, 150 engineers and everyone'sborrowing from each other, and there's no clarity around what engineers areresponsible for what. So, just change it around: these five engineers areyours, these five engineers are yours, et cetera. Just change theaccountability, changed who is in charge, and also changed the focus. Iremember my first day — you'll love this story. First day, I got up with my 10priorities as the new CEO of Meetup, and I get up and I say, number one, I careabout our mission, I care about ending loneliness — and it was like,"Yeah, yeah!" of course, everyone loves that. And then I said, numbersix, we're going to drive revenue and profit growth. And it everyone was like,"Boo, boo, we hate revenue and profit growth!" I mean, there was justa love affair with Bernie Sanders, love affair with AOC, love affair of justthis total woke anti-capitalist establishment that all money is bad. And thatjust had to change. I said, no, revenue is good. Revenue gives oxygen to ourmission. The more revenue we have, the more we can actually help our customers.
[Michael Eisenberg — 24:28]
How many employees were there when you gotthere?
[David Siegel — 24:28]
Oh, okay — I was like the 260th employee. Thissounds terrible. By the time I left and sold to Bending Spoons, there were 80employees. We went from negative $20 million in profit to $8 million in profitover about four years.
[Michael Eisenberg — 24:46]
And the revenue grew too?
[David Siegel — 24:46]
Revenue grew too. The revenue grew as well.
[Michael Eisenberg — 25:02]
So there was a lot of fat in that business, tosay the least — or hangers-on, or barnacles, or whatever you want to call it.
[David Siegel — 25:02]
Yeah, yes. The other thing that—
[Michael Eisenberg — 25:02]
Is that because it was like a socialistmentality, where everyone kind of stays around?
[David Siegel — 25:02]
It was a socialist mentality in that no onewas held accountable. There were no clear KPIs, and there were a ton ofprojects that didn't make any sense.
[Michael Eisenberg — 25:17]
That sounds like Bernie Sanders.
[David Siegel — 25:17]
Yeah, pretty much.
[David Siegel — 25:17]
There you go.
[David Siegel — 25:17]
One of the other things that I really did is,rather than me being the bad guy, I created a work stream of all thesedifferent people, and I said, what do we need to kill? They then put together alist, in two weeks, of all the projects they needed to kill. And then I justsaid — and it made total sense — but the fact that it came from them ratherthan coming from me made it so much easier to then kill all these projects.
[Michael Eisenberg — 25:34]
How many were there?
[David Siegel — 25:34]
Like six, seven different projects. A lot ofthem were WeWork-related, by the way.
[Michael Eisenberg — 25:51]
Oh yeah, okay.
[David Siegel — 25:51]
A lot of them were: we are told by WeWork thatwe need to integrate with a WeWork system, and we're going to put millions ofdollars into doing this — it just didn't make any sense. Things like that.
[Michael Eisenberg — 25:51]
Meetup existed to solve the lonelinessepidemic. It still feels like people are pretty lonely. Did you make a dent?
[David Siegel — 26:06]
Absolutely.
[Michael Eisenberg — 26:06]
How do you know? You said that with suchconfidence.
[David Siegel — 26:06]
So — I'm not going to say that I made a dentquantitatively, but I know definitively that it made a meaningful dentqualitatively, simply because of the hundreds — hundreds, maybe even thousands— of stories of people who have told me that Meetup changed their life.
[Michael Eisenberg — 26:40]
You need to unpack this for me, because we allknow that anecdotes are nice — and important, and great for storytelling, whichyou need also — but an epidemic is an epidemic. It doesn't get turned byanecdotes; it gets turned by cultural change, et cetera.
[David Siegel — 26:40]
Listen, do I think that Meetup had more of apositive impact than social media, for example, has as a negative impact?Absolutely not. Do I think that the bigger the city you're in, the more lonelyyou are? Yes — and Meetup is in the biggest cities around the world, so thatwould imply that it didn't make a dent. Do I think that the younger you are —and there's a lot of data around this — in fact, people who are Gen Z'ers andmillennials: 63% of them at one point said that they regularly felt lonely, whereasamong baby boomers it's only like 24, 25%. So the younger you are, the morelonely you feel — again, correlated to social media.
[Michael Eisenberg — 27:31]
And screens.
[David Siegel — 27:31]
And screens, absolutely. So do I think that wemade a quantitative dent in really meaningfully changing the statistics? No.And here's why: because if we only have 80 million users — and our activeusers, let's say 10 million active users, quantitatively — if there's 6 billionpeople in the world, then of course we didn't make a dent.
[Michael Eisenberg — 27:31]
What's the average age of a meet-upper? Isthat the right term — a meet-upper?
[David Siegel — 27:54]
Sure, that sounds great. The average age of ameet-upper is older than the average age of your typical user, just because thecompany's been around for so long. The average age is like the 35-to-45 range.
[Michael Eisenberg — 27:54]
So if you were going to go back and re-buyMeetup, what would you do differently to make an impact on the lonelinessepidemic?
[David Siegel — 28:11]
Okay, great question. Number one —understanding the cause of loneliness is kind of the first step, because youcan't take action unless you understand the root cause in the first place. Sothe root cause of loneliness is — I hate to be so cliché, but screens is reallythe root cause of loneliness. It's the fear: when people are not as used tointeracting with other people in meaningful ways, then they become fearful ofgetting out there and getting out of their comfort zones. And the comfort zonesthat people have when they're 25 years old now, versus a generation ago whenthey were 25, versus a generation prior to that when they were 25 — it's nightand day different. It's night and day different. People's need to only go tothings with other people is so different. I think a colossal product mistakethat we never really jumped on top of — to end loneliness — was to make it somuch better and easier to find your person, to integrate with other socialmedia and find that person on Facebook or Instagram or whatever, and go to anevent together. The number of people that have told me, for example, that theywanted to go to something but they couldn't find someone to go with is enormous— or that they went to an event and they sat in their car and they were afraidto even leave their car.
[David Siegel — 29:41]
It's extraordinarily common — just socialanxiety. And social anxiety is sadly through the roof relative to how it usedto be.
[David Siegel — 29:57]
So I think a major product mistake that I wishI focused on more was how to get more meet-uppers to integrate with who theywere close with, and to find that comfort zone to be able to go out to eventstogether.
[Michael Eisenberg — 29:57]
It's interesting you say that because I'vethought for a while that part of the loneliness epidemic — I said this in aspeech I gave at Georgetown, in a slightly different context, with ArtieMinson, by the way — is that our cultural expectation that people get marriedlater, and that people not have a very significant other at a younger age, butinstead kind of hang out with friends, has actually created a permissionarchitecture, which is: it's okay to be on my own and not have somebody to gosomewhere, to something with. And so, you know, it's interesting you say thatit's a product problem, which is, hey, we should have found a solution that youcan find someone to go with. And yes, screens are a problem — rather than acultural problem, in which this kind of monogamy of relationships, let's justcall it (I don't mean in a marital sense necessarily) — but hey, I should getmarried, I should have a significant other and start a family at a younger age— kind of gets me out of that malaise.
[David Siegel — 31:13]
It is a cultural problem. It's first andforemost a cultural problem. I was trying to find a product solution, but Idon't retract — I agree with you completely. People — from my understanding,I've been married 27 years, so what the hell do I know — people don't date.People date in like groups, but the one-on-one—
[Michael Eisenberg — 31:29]
There's like a meetup group for dating orsomething like that?
[David Siegel — 31:29]
There's lots of meetup groups for dating.There's even meetup hugging groups, which I'm not going to get into what thoseare.
[Michael Eisenberg — 31:29]
Yeah, thank you.
[David Siegel — 31:29]
There's meetup groups for lots of differentthings.
[Michael Eisenberg — 31:29]
What is the strangest meetup group you wentto?
[David Siegel — 31:46]
I did not participate in a hugging group, Iwill tell you that. But there was a black yoga group. There was lots of very—
[Michael Eisenberg — 31:46]
That doesn't sound that strange.
[David Siegel — 31:46]
But what's strange is there was also a whiteyoga group that didn't allow black people to go to the yoga group. That wasmore problematic.
[Michael Eisenberg — 32:01]
That's an interesting question. So you have awhite yoga group that doesn't allow black people to come. To me, that feelsvery discriminatory.
[David Siegel — 32:01]
So it was, and we banned that.
[Michael Eisenberg — 32:01]
You banned it?
[David Siegel — 32:01]
We banned it, but we allowed a black yogagroup and an Asian American yoga group.
[Michael Eisenberg — 32:01]
That didn't include white people?
[David Siegel — 32:01]
That said, we are a black yoga group — andthat was allowed.
[Michael Eisenberg — 32:01]
That's interesting. Why is that?
[David Siegel — 32:20]
Very interesting question, right? So theanswer is, if a typical yoga class is filled with, let's just say... Have youbeen to yoga classes?
[David Siegel — 32:20]
You have wonderful posture.
[Michael Eisenberg — 32:35]
No, I have not been to yoga classes. I did doyoga at home for like four months. It was really bad for me.
[Michael Eisenberg — 32:35]
But don't tell that to all the yoga—
[David Siegel — 32:35]
Oh, no. Sorry to hear that. You must be goodat the Shavasana.
[Michael Eisenberg — 32:35]
I have no idea what that is even.
[David Siegel — 32:51]
Just lie on your back.
[Michael Eisenberg — 32:51]
No, I'm not good at that.
[David Siegel — 32:51]
Yeah, you need to be moving all day.
[Michael Eisenberg — 32:51]
Yeah, exactly. That's not my thing. It's liketoo-peaceful yoga.
[David Siegel — 32:51]
So I think the way that I thought about it,and the way our team thought about it, was: there's a standard, if something isover-indexed in a certain area. So, for example, white women — most yogaclasses are a lot of white women. And if there is a black man, let's just takethat example, that shows up at a white women's yoga class and says, I don'tfeel as comfortable, these are not my people, I would love to find my peoplewho also love yoga — then let him create a black man yoga group, and gezunterheit[go in good health], hey, wonderful, let him go for that. And if having a blackman yoga group, and having a white woman join that black man yoga group, couldpotentially interfere with his ability to find his people, then I'm okay withthat.
[Michael Eisenberg — 33:25]
But why is the inverse not true? I want to bewith my people; I want an only white woman yoga group.
[David Siegel — 33:49]
Right. So one good reason was that the WallStreet Journal did a giant article about it. There were people jumping andscreaming about it.
[Michael Eisenberg — 33:49]
Cancel culture impacted you.
[David Siegel — 33:49]
Cancel culture impacted me, and should impacta CEO, from my perspective, because it does have an impact on your investorsand your employees. Doesn't mean you should take action based on what that bigimpact is, but you should understand what that impact is. And it definitely hadan impact. Yes.
[Michael Eisenberg — 33:49]
That's fascinating.
[David Siegel — 33:49]
Yeah.
[Michael Eisenberg — 33:49]
Were there any meetup groups that didn't allowJews?
[David Siegel — 34:22]
No, that would be prohibited.
[Michael Eisenberg — 34:22]
That's prohibited.
[David Siegel — 34:22]
Absolutely.
[Michael Eisenberg — 34:22]
Just to be clear, if you prohibit black peoplefrom joining a white yoga group, that's not okay. Prohibiting Jews fromjoining, that's not okay. Prohibiting white women from joining, that is okay.
[David Siegel — 34:22]
To an all-black group? Correct
[Michael Eisenberg — 34:22]
I'm just — I'm fascinated by — I find thisstuff...
[David Siegel — 34:43]
These are such gray areas, and we had a bigtrust-and-safety team to figure this kind of stuff out.
[Michael Eisenberg — 34:43]
Yeah, but when I hear the big trust-and-safetyteam, I hear like lowest-common-denominator thoughtfulness. That's what I hear,right? And like all the worst stuff gets into trust and safety — go look atTikTok.
[David Siegel — 34:43]
I'm going to say it differently than that.That's what I believe.
[Michael Eisenberg — 34:43]
Okay.
[David Siegel — 35:01]
That's what I believe.
[Michael Eisenberg — 35:01]
So you made the call.
[David Siegel — 35:01]
I made the call. I believe that it's okay tohave an all-black-man yoga group. I think that is wonderful if it gives peoplemore comfort, but I think it's not okay for the majority of people who are,let's say, do something — the point is, I don't think that white women needtheir own white women yoga group, because most yoga groups happen to be thatalready. It's what's needed in the market. So that's how I felt about it.
[Michael Eisenberg — 35:20]
It's your judgment. Let's start with that,first of all. Okay. And second of all, we should say that this is likeaffirmative action for what's needed in the market — a market correction. Whenthe free market doesn't do its job, you intervene to create a little bubblethat people could feel safe and protected in.
[David Siegel — 35:40]
I think feeling safe and protected, if ithelps to decrease people's loneliness and helps people to build connections, aslong as it doesn't involve hate, is acceptable. If it involves hate — if it's abunch of people getting together to kill the Jews — that's not acceptable.
[Michael Eisenberg — 35:56]
Are you for coed education or against coededucation?
[David Siegel — 35:56]
Coed education? Of course I'm for coededucation.
[Michael Eisenberg — 35:56]
Okay. I'm not, by the way, for what it'sworth.
[David Siegel — 35:56]
Yeah. Very for.
[Michael Eisenberg — 35:56]
Yeah. Because I think, you know, there's a lotof statistics about girls not doing as well in coed education, particularly inhigh school.
[David Siegel — 36:13]
I'm for parents being able to choose whethertheir girls go to coeducation or go to only girls.
[Michael Eisenberg — 36:13]
Fair enough.
[David Siegel — 36:13]
They should at least have the choice.
[Michael Eisenberg — 36:13]
Fair enough. So you've said also, I think,that there's loneliness that exists for people who are pro-Israel and are intech.
[David Siegel — 36:13]
Yeah.
[Michael Eisenberg — 36:13]
Talk about that.
[David Siegel — 36:13]
To be pro-Israel and in tech is a smallminority.
[Michael Eisenberg — 36:40]
I actually don't think so. I think it's themajority, but most of them don't speak up.
[David Siegel — 36:40]
Gosh, I wish that were true.
[Michael Eisenberg — 36:40]
You were in New York tech, we should point outalso.
[David Siegel — 36:40]
Yes.
[David Siegel — 36:40]
And I think it's even more extreme in SanFrancisco tech.
[David Siegel — 36:40]
In terms of, you know
[Michael Eisenberg — 36:59]
By the way, most people don't even care.That's the first thing.
[David Siegel — 36:59]
Absolutely don't care. And I also think,Michael, that you may be referring to at the executive levels. I'm talkingabout rank and file, 25-, 30-year-old engineers, who are super left wing.
[Michael Eisenberg — 37:19]
And in New York. And during the time that youwere CEO of Meetup, it was like peak woke.
[David Siegel — 37:19]
Peak woke, Occupy Wall Street.
[Michael Eisenberg — 37:19]
Totally.
[David Siegel — 37:19]
Amongst the CEOs that you and I might interactwith, I actually agree with you. But amongst the 25-to-39-year-old people intech, it is extreme pro. I mean, just look at the numbers. What percentage ofpeople that are in their 20s — you know these numbers better than I do — aremore pro-Hamas than they're pro-Israel?
[David Siegel — 37:42]
It's a majority. Sometimes even more, more,more extreme than that.
[Michael Eisenberg — 37:42]
There's definitely trends that are changing inthe United States in particular. But it's also true that if at 20 you're not aradical, you have no heart, and at 40 not a conservative, you have no head.That continues to be true throughout history. But yes,
[David Siegel — 37:42]
And tech skews younger also.
[Michael Eisenberg — 38:06]
No question.
[David Siegel — 38:06]
So it definitely is a major problem,anecdotally — and we'll get into tech missions if you'd like — but the CFO ofWarby Parker came on one of our tech missions, and he then met with over 500different Warby Parker left-wing people and talked about Israel, and showedthem videos and photos of what he saw when he came to Israel right afterOctober 7th. And people were in shock. People did not understand that that wasactually the reality. And, yeah, tech skews, I think, extraordinarily to wokeand left.
[Michael Eisenberg — 38:35]
And Warby Parker's not really a tech companyeither. But so you decide — October 7th happens. You are definitely not — yousaid this about yourself, and I agree — you are definitely not an October 8thJew. You decide that you're going to do this tech mission. So just tell ouraudience about these tech missions.
[Michael Eisenberg — 38:59]
Well, this is — like, bad self-promotional,but whatever.
[Michael Eisenberg — 38:59]
Go ahead, tell me about the tech missions.
[David Siegel — 38:59]
So I'll say really negative things about them.Does that work out for you? Okay. No self-promotion.
[Michael Eisenberg — 39:16]
Not for you. For me.
[David Siegel — 39:16]
Yeah, I know, I know. I love it. You're gonnabe so embarrassed here.
[David Siegel — 39:16]
So I called this guy. So the background is, myson, who at the time was an Israeli soldier — he called me up and he said allof his friends, or many of his friends, who were in Penn, Maryland, andColumbia, are saying, I should leave school and I should go to Israel and Ishould help out with volunteering in Israel right after October 7th, and Ishould do that for a year, or do that for a while. And my son said to me, toldme this story — he told every single one of his friends, no, you have a sphereof influence, you have a sphere of influence on your campus, you are passionateabout Israel, Israel needs you on their campus, that's the best thing you coulddo, manage your sphere of influence. He tells me the story, and he goes, dad,you have a sphere of influence as a tech CEO. What are you doing? So then Icalled Amir Goldman from Susquehanna. He and I said, who do we call? We callMichael Eisenberg. He didn't want to go to Uganda with me, so maybe he'll dothis. I said, hey Michael, a couple of weeks after October 7th— [I'm]organizing five, 10, 15 people to come to Israel. What do you think? Good idea,bad idea? And you said, great idea — how quickly can people come? And I said,okay, who do you know that can help me to organize this group together? And hesaid, my former chief of staff — I think that was his role.
[David Siegel — 40:26]
Another, getting back to the full circle —assistant to the CEO. Ron Miasnik. Who is at Bain Capital right now.
[David Siegel — 40:44]
So I said, great, let me meet Ron. So heintroduced me to Ron, and we ended up bringing the largest group, the largestmission to Israel after October 7th — 65 tech business leaders, techexecutives, Reed Raymon from Apollo, a great, incredible group of venturecapitalists and leaders. And it was so impactful. For people that have been toIsrael like five, 10, 15, 20 times, it was still deeply impactful. Then we rana second mission, a third mission. We now have had 11 missions to Israel —e-commerce missions and health tech missions — and close to 500 tech executivesand business leaders have come.
[David Siegel — 41:04]
Thank you for your help, by the way. We loveyour partnership and your help.
[David Siegel — 41:22]
And tens of millions of dollars invested inIsraeli companies. And the number of stories that I could tell that havehappened — as a, for example: a non-Jewish chief security officer of Twittercame on a tech mission. He's now on the board of three Israeli cybersecuritystartups, and [had] never been to Israel before.
[Michael Eisenberg — 41:41]
Wow. You should say X, not Twitter.
[David Siegel — 41:41]
Oh yeah. Right.
[David Siegel — 41:41]
You know, I'm old, so I still call it Twitter.
[David Siegel — 41:41]
Kevin Ryan also came. Kevin Ryan's [first]trip to Israel, and that was deeply impactful for him. It was great, because wewent to visit Shimon Peres's office, and his wife, who came, looks on the shelf— and on the shelf was his wife's grandfather's book, that he had written. Andhis wife is a direct descendant — you don't know this — of Rashi.
[Michael Eisenberg — 42:06]
Wow. Rashi, the great biblical commentator,the greatest probably of all time.
[David Siegel — 42:22]
So he came to Israel. But other ones: JoshKadden came to Israel — at the time he was a tech person. He's standing withthe Nova exhibit, and he says, I can't keep being a tech leader. He becomes theCEO of the Nova exhibit after our tech mission — literally a week or twoafterwards, he takes on that role. Many, many other stories related to that.
[Michael Eisenberg — 42:37]
And so: successful CEO sells his business,packs up and moves to Israel, and then decides to document on LinkedIn — Ibelieve I've read a few of them — your journey to try to find a place to live.So just take us through, like, why did you decide to move here? What causedthat decision? Why are you not going to run a company here? And why are you,like, live-blogging your homelessness?
[David Siegel — 42:56]
Okay. The nomad life is highly underrated.
[Michael Eisenberg — 42:56]
You're like an empty nester now, though,right?
[David Siegel — 43:13]
So that's exactly right. So we have threekids. The children brought the parents. We have visited Israel almost everyyear. All three kids decided to make aliyah [immigration to Israel] and move toIsrael. We became empty nesters. Two weeks after becoming an empty nester, Isaid to my daughter how long — how long do you need to be in Israel till wemake aliyah? It's like, would two weeks be okay? We made aliyah. So thechildren brought the parents. And I had always said — and at my oldest son'sbris [Jewish ritual ceremony], we named him Yair — they said, why are younaming your kid Yair? And I said, because when he moves to Israel, he's goingto feel comfortable. And I always said to people, if a third of our kids moveto Israel, we'll spend a third of our time; two-thirds, two-thirds. All thekids are in Israel now. So that's it.
[Michael Eisenberg — 43:48]
And did you sell your place in America?
[David Siegel — 43:48]
We sold our home in White Plains after 22years in America.
[Michael Eisenberg — 43:48]
White Plains, New York.
[David Siegel — 43:48]
White Plains, New York — home of MichaelKelman.
[David Siegel — 43:48]
Shout out.
[Michael Eisenberg — 43:48]
There you go.
[Michael Eisenberg — 43:48]
And so he's saying that because Michael Kelmanwas literally my oldest friend in the world, because our mothers were in Lamazeclass together.
[David Siegel — 44:04]
And he's the person who introduced us.
[Michael Eisenberg — 44:04]
He's also the person who introduced us and wasmy college roommate.
[David Siegel — 44:04]
Yeah. And the head of the aliyah club. Whodidn't make aliyah.
[Michael Eisenberg — 44:04]
And so now it's become very inside baseball,this conversation. But okay. So why are you live-blogging your homelessness?
[David Siegel — 44:19]
So I try to think about how, as a leader, Icould continue to still have a hashpa'ah [influence], still have an influencein the world around me. And when you're running a company, it's easier to havea bigger influence. But as a former CEO of Meetup, a former CEO ofInvestopedia, I can still have an influence. And I think when people see XYZperson blogging about their aliyah, it's okay. But I think people see, oh, theCEO of this well-known company blogging — it takes on a little bit of adifferent perspective. So to date, there's been close to 2 million views of thealiyah blog on LinkedIn.
[Michael Eisenberg — 44:56]
Is that right?
[David Siegel — 44:56]
I swear. We have had over 300 people add comments or DMme saying, I was thinking about it, I'm not sure, can you introduce me tosomeone at Nefesh B'Nefesh. And I made close to two to 300 introductions topeople. From senior vice presidents of Bank of America [who] just reached outto me literally just this week and said, hey, my husband and I have alwaysthought about this, and I'm reading your content, I'm following what you'redoing. I have 41,000 followers right now. I had like less than half of that before— all because — I'm not doing it for, I don't think, hopefully not,self-aggrandizement. I'm doing it because if you have an opportunity to have a positive influence about something that Ideeply care about, which is Israel, then of course you should try to do it. Andit's a ton of fun.
[Michael Eisenberg — 44:56]
It's fun.
[David Siegel — 45:52]
Oh my God. Visiting all these cities for fiveto six weeks, living out of three suitcases after having two houses and twocars, and just like giving it all up.
[David Siegel — 45:52]
Wow what an experience, for a 51-year-old. Whodoes that?
[Michael Eisenberg — 45:52]
What a wife you have, that she's willing to dothat.
[David Siegel — 46:08]
She is an exceptional woman.
[Michael Eisenberg — 46:08]
Oh, wow. It's a 51-year-old digital nomadliving out of three suitcases with his wife.
[David Siegel — 46:08]
Yes.
[Michael Eisenberg — 46:08]
In multiple communities. Have you decidedwhere you're going to live yet?
[David Siegel — 46:08]
We have.
[Michael Eisenberg — 46:08]
Yeah. Where's it going to be?
[David Siegel — 46:08]
I can't — I can't tell tell the spoiler.
[Michael Eisenberg — 46:08]
Are you, like, you're going to ruin likethe...
[David Siegel — 46:08]
It starts with an R and ends in anana, but I'mnot going to say what it is.
[Michael Eisenberg — 46:27]
All right. Don't say, don't say. You wrote abook called Decide and Conquer.
[David Siegel — 46:27]
Yeah.
[Michael Eisenberg — 46:27]
I want you to tell me about the title of thebook.
[David Siegel — 46:27]
Sure. It's a play off of Napoleon's famousthing about divide and conquer. It's about decision-making, and the whole ideathat essentially not making a decision is a decision. And the key of, like,whether you read Lean Startup or any of these things, is — as Teddy Rooseveltsaid — the best decisions are great decisions, the next best decisions are baddecisions, and the worst decision is, Michael...
[Michael Eisenberg — 46:27]
Not making a decision.
[David Siegel — 46:47]
Not making a decision. So it's just people'sinclinations to be perfectionist, people's inclinations to wait for things tobe perfect. I'm waiting for my relationship to be perfect, or else I'm notgoing to get married. I'm waiting for this perfect event at Meetup, or else I'mnot going to go to it. I'm waiting for this perfect job, or else I'm going tostay in this crappy job that I don't like. The paralysis analysis is justinsane. So the book essentially talks about leadership and 44 different decisionsthat leaders make, and a lot of it has to do with having a sense of urgency,being bold, being kind in making decisions — not just nice, but kind. Sometimesit's kind to fire people. Sometimes it's kind to tell people that what they'redoing is not the right thing to focus on. That's kindness as well. And it's anumber of different principles around decision-making. The other one I'll justtalk about is how to create luck by making decisions.
[Michael Eisenberg — 47:45]
Say more about that.
[David Siegel — 47:45]
Sure. So luck is hard work. That was the nameof my book originally, by the way.
[Michael Eisenberg — 47:45]
It's like the harder I work, the luckier Iget.
[David Siegel — 47:45]
Correct.
[Michael Eisenberg — 48:03]
Alex Balkanski, my partner at Benchmark, usedto say that, but I think it comes from someone else.
[David Siegel — 48:03]
It does. I don't remember even who it comesfrom, but if you work hard, you're planting lots of seeds. You're plantingseeds in every relationship that you have. All the different opportunities thatyou have, you're planting these seeds. And if you plant 10 seeds, you have one;versus if you plant a thousand seeds, well, you have 100 times greater chanceof getting lucky.
[David Siegel — 48:03]
So I've gotten eight jobs in my career. Noneof them really ever existed. I got lucky that I met different people, I metdifferent situations, I was in the right place at the right time. I couldn't goto Uganda. And lucky things end up happening. We've had five houses in ourlife. All of them have never been on the market.
[David Siegel — 48:47]
But you plant seeds, and you think aboutoptionality. Optionality is one of the most underappreciated criteria formaking a decision.
[Michael Eisenberg — 48:47]
I agree.
[David Siegel — 48:47]
Am I creating options, or am I destroyingoptions?
[Michael Eisenberg — 48:47]
Particularly asymmetric optionality. And it'svery hard for people to keep that in their head. Most people are risk managers,whereas the world actually works on an uncertainty framework. And uncertainty —you thrive in uncertainty by buying asymmetric options.
[David Siegel — 49:04]
Perfect summary. I want you to give me anexample of asymmetric options.
[Michael Eisenberg — 49:20]
Bitcoin in 2012. Most likely it's a terribledecision. But if you make the decision, the upside is asymmetric.
[David Siegel — 49:20]
Well said.
[Michael Eisenberg — 49:20]
Yeah, by the way...
[David Siegel — 49:20]
People don't think about expected valueenough. Expected value: the percentage chance something happens may be verylow, but the outcome possibility of how high it could be is always worth it.
[Michael Eisenberg — 49:36]
I just got finished meeting with one of myCEOs who was [in the] travel business when COVID hit. It's a well-documentedstory. This one company is called Travelier. COVID hit, business went to zero —like Meetup, by the way, which I want to talk about in a second. He was like,oh, woe is me. And I said, well, if woe is to you, woe is to your competitorstoo. Let's go buy them. And so we raised $20 million and bought the competitorsfor a song. So what's the worst decision you ever made?
[David Siegel — 49:53]
Worst decision I ever made? Probably it wasego-driven decisions.
[Michael Eisenberg — 50:10]
That's a broad category.
[David Siegel — 50:10]
I know. I'm going to tell you specifically theego-driven decision that I made when I was right after business school, atDuane Reade, which is a pharmacy chain in New York. I just kept trying to growbusiness — that the technology didn't work — because I knew if I grew therevenue, even though everything kept breaking down, [even though] I didn't knowwhere the business was, then I'd be able to hire more people. And if I hiredmore people, I'd be able to get promoted, and it would look great on my resume.I was fired very quickly after I ended up doing that very ego-driven decision.And it was a really important learning for me: that if you act solely,selfishly, in your best interests, and that does not match up with what thecompany's best interests are, it's going to be negative. It's going to benegative for your reputation. That took me actually a little time to get over.
[Michael Eisenberg — 51:02]
You neglected to mention earlier that—
[David Siegel — 51:02]
I have a lot of bad decisions.
[Michael Eisenberg — 51:02]
No, that you were fired from Duane Reade. Thatdidn't come out in your bio.
[David Siegel — 51:02]
Fired from Duane Reade, fired fromInvestopedia, fired from Seeking Alpha. It's great.
[Michael Eisenberg — 51:02]
You're doing okay.
[David Siegel — 51:02]
Doing okay. I love the service packages.
[Michael Eisenberg — 51:19]
Tell me about the COVID moment at Meetup.
[David Siegel — 51:19]
Oh my God. Yes. So it's February, not yetMarch. It's February, 2020 — 2020, thank you. February, 2020. And I startseeing like every single Meetup event in China getting canceled. Like, we had abig dashboard of events and what was happening — it was really cool-looking.I'm like, what the heck is going on in China? Why is 95% of events, like,vanished overnight? And then I started looking like in Italy — like, what'sgoing on, like Northern Italy? Because that's where COVID started hitting. Whyis, like, everything—
[Michael Eisenberg — 51:53]
Ski resort story.
[David Siegel — 51:53]
The ski resort story. Like, what's happeningover there? And we actually saw this stuff happening on Meetup. It was reallycool. And then actually we went to an AIPAC event in 2020, which actually endedup becoming a super spreader. And the first case in New York City was a Meetupemployee in a WeWork office, where the press had a field day that said WeWorkand Meetup are the first places to get COVID. There's a big article about that.I was like, oh boy, we're in for a wild ride. So anyway, COVID started, andMeetup was all about in-person connecting. We literally had turned down tens ofmillions of dollars that were about digital groups. So I met with our engineersand met with all of our company, and they all said pretty much the same thing:our mission is about IRL, in real life, it's about getting together in person,that's what we're about, we cannot create an opportunity for people to gettogether not in person, digitally. I was so in that mind. I'm not trying totoot my own horn out — I made so many other mistakes. Most of the people wereaghast at the idea that we're going to start allowing, for the first time,Meetup groups to be solely online. This was very controversial. So then wefound this little island, the Falkland Islands, and we found there hadn't beena Meetup event in like a while there. So we changed the name of the FalklandIslands to Meetup online events, because we had to release something reallyquickly. And in two days, we released an MVP. And no one knew that all theevents were—
[David Siegel — 53:34]
Because it had to be connected to a city, ageography.
[David Siegel — 53:34]
We couldn't like change the whole system. Sowe launched online events for the first time. We got the head of training forall of Zoom to come and train all of our organizers. How do you create onlineevents when you're a running group? Like, what the heck do you do? And theanswer was, you run by yourself, you come back, and you all have a beertogether after your run. And that's how you experience Meetup at thatparticular time. And it was a crazy experience. But ultimately—
[Michael Eisenberg — 53:51]
How many subscribers did you lose at thatpoint?
[David Siegel — 54:09]
Oh, tons. We lost about 20% of subscribers,20% of our revenue. It was a terrifying situation. At the same time, we werefor sale by WeWork, because this is 2020, as I said. WeWork called us up andsaid, we're leaning towards shutting the business down completely, find us anybuyer for this business. And that's when we were able to buy the business for atiny amount of money, doing a management buyout, and ultimately selling it.That's what brought Kevin in.
[Michael Eisenberg — 54:29]
I have so many questions to ask you, but we'recoming to the end, and I want to ask you a couple of things quickly. You movedto Israel, retired.
[David Siegel — 54:29]
No.
[Michael Eisenberg — 54:47]
I know. Okay, I get the point. But you couldhave been a CEO, and you mentioned that 300 people have reached out to you, andit sounds like the cohort is like executives, people who are successful. And itfeels like, in this post-Startup Nation phase we're in now from Israel, part ofthe attraction of Israel is it's actually a place you can come and run abusiness and make a living and build a global business from. Do you agree withthat statement? And how would you market it to these people?
[David Siegel — 55:08]
Oh, the first step is just getting peoplehere. It's incredible to me how many Jews — let's just say Jews — who havenever been to Israel since the bar mitzvah, they're 55 years old, they loveIsrael, or they like Israel at least, and they've been there since Birthrightor whatever — Birthright was around then — since whatever time period. Just get— Israel sells itself. That's the thing about it. Our missions are like theeasiest thing in the world. You just introduce them to a bunch of incredibleIsraelis, and people from the army, and people to hear about the resilience ofwhat people are doing. It sells itself. Just step one is — my dream for theIsrael Tech Mission is not to have 450 people. Who cares about that? That'smaking a dent — zero dent, nothing. We need to create the Birthright for techexecutives. We need to create the Birthright where it is your tech right, thatwhen you become a C-level executive at a tech company, you get a free trip toIsrael. What will that do for Israel potentially?
[Michael Eisenberg — 56:16]
I think you've called this capitalist Zionismbefore.
[David Siegel — 56:16]
Capitalist Zionism, exactly.
[Michael Eisenberg — 56:16]
You're the CEO of CapitalistZionism.com?
[David Siegel — 56:16]
Boy, I should buy that. That sounds good.Okay, I don't want to keep you waiting here. CEO of CapitalistZionism.com, thatworks.
[Michael Eisenberg — 56:16]
You also mentioned, on your missions, you dida women's-only mission. And I go back to the meetup conversations we had before— why a women's-only technology mission to Israel?
[David Siegel — 56:34]
So of our non-women's-only technology missionsto Israel, it has been roughly 85 to 90 percent men. And we—
[Michael Eisenberg — 56:34]
That's uncomfortable.
[David Siegel — 56:51]
For the women that are there, if you're fourwomen and 40 men, it's not the same experience. It's just not. And there were acouple of women, specifically Patricia Heaton — who, everybody...
[Michael Eisenberg — 58:28]
Patty's the best.
[Michael Eisenberg — 62:07]
She's an incredible person. And she said, Iwill be the leader of this.
[David Siegel — 62:07]
She's not a tech person.
[Michael Eisenberg — 62:07]
No, she's not.
[David Siegel — 62:07]
At all. But she's a business person.
[Michael Eisenberg — 62:07]
Business person, Hollywood person.
[David Siegel — 62:07]
Hollywood person.
[David Siegel — 62:07]
She's the best. And she said, David, run amission around my name and my influence, and we will get people. And we got anincredible group of people. Patty's incredible.
[Michael Eisenberg — 62:07]
She's incredible.
[Michael Eisenberg — 62:07]
Before I get to my last question — what wouldyou have done differently in your career if you had it back from the beginning?
[David Siegel — 62:07]
I think I was too binary, frankly, in myapproach to impact, and helping Israel, helping the world, and doing good.
[Michael Eisenberg — 62:07]
Well, that's funny, because you started there.
[David Siegel — 62:07]
Correct.
[Michael Eisenberg — 62:07]
What happened to you?
[David Siegel — 62:07]
I started off there, and then when I left, Isaid, oh, I need to focus on supporting my family — which, understandably, Ineed to focus on my personal career. And that was my focus. And it wasn't likeI was 80% that and 20% doing things to help and positively impact; it was like99%, I'm somewhat embarrassed to say. I wrote checks and things like that, butI didn't get deeply involved in the way that I could have. And now it'sobviously flipped — I'm 80%-plus focused on that, and 20% in coaching clientsor whatever other stuff that I do. But that's a mistake. I shouldn't have beenso binary. I shouldn't have been so absolutist. I think I would have been abetter CEO and a better person, and felt even better about my contribution, ifI was focused on greater impact and not so singularly focused on career andleading companies.
[Michael Eisenberg — 62:07]
You started your career thinking about HR, orconsulting on HR. You then did HR at DoubleClick. You've always been like apeople person. You wanted to go do Yom Kippur services in Uganda for the peopleof the tribe in Uganda — by the way, I'm now realizing, by the way, that I'mlike that guy from your meetup story who didn't go with you, so you couldn't goto the event.
[Michael Eisenberg — 62:07]
That's part of what I'm realizing right now.
[David Siegel — 62:24]
You are that guy. They did not have RoshHashanah services, for all I know.
[Michael Eisenberg — 62:24]
Because of me. And you didn't have thatexperience because of you. And you probably weren't alone, because you wentsomewhere else, but I left you. I didn't turn up. I'm that guy, I realize. Andthen you do Meetup. And WeWork. And even Seeking Alpha is a community site. Andthis is like a thread that runs through your career, and it's something you'repassionate about. And so you're 51. You've come to Israel because Israel isreally good about community. Do you think the loneliness epidemic gets solved aroundthe world, and in the United States? Or is it a feature of society that's herewith us for the next many, many, many decades? And if it gets solved — whatsolves it?
[David Siegel — 62:24]
Absolutely solvable.
[Michael Eisenberg — 62:24]
Solvable is not whether it gets solved. It'ssolvable.
[Michael Eisenberg — 62:24]
Go ahead.
[David Siegel — 62:24]
It is solvable, because Israel has donesomething to solve it.
[Michael Eisenberg — 62:24]
And what is that?
[David Siegel — 62:39]
Israel gives their people meaning.
[Michael Eisenberg — 62:39]
How?
[David Siegel — 62:39]
Army. Service.
[Michael Eisenberg — 62:39]
Service. So if you want to solve theloneliness epidemic in the United States or around the Western world, you mustinsist on mandatory service to society.
[Michael Eisenberg — 62:39]
That's your remedy?
[David Siegel — 62:39]
The most selfish thing that you couldoftentimes do is to be unselfish and to serve others. If the US followed modelslike Singapore, like Israel, and like numerous other countries — and you'regiving — we all know that when you volunteer, you're helping yourself byvolunteering even more than you're helping the people who you're actuallyhelping and volunteering. If we had, in other countries and the US inparticular, a real focus on service, which leads to community, which leads tothinking about things much more important than yourself — yes, I absolutelybelieve that is the number one ingredient towards community and towards endingloneliness.
[Michael Eisenberg — 62:39]
So voluntary meetup is a poor replacement formandatory church or synagogue attendance. And all those are a poor replacementthan mandatory national service or military service, to solve the lonelinessepidemic. And so your view is, we will not solve the loneliness epidemic unlesswe get back to mandatory service — or get to mandatory service — and, let'scall it, more religious attendance.
[David Siegel — 62:39]
I think you said it exceptionally well. Peopleneed to do things that they not just, their whims want to do, at all times.
[Michael Eisenberg — 62:39]
It's not about you.
[David Siegel — 62:39]
It's not about you. Religion is not about you.Volunteering is not about you. Service is not about you.
[Michael Eisenberg — 62:39]
Volunteering is a little bit about you, butmandatory service is not about you.
[David Siegel — 62:39]
Mandatory service is not about you. And themore that people grow up in a world and surround themselves with people that isnot just about themselves, but about a greater meaning — that's why one of thetop five happiest countries, Israel — doesn't make any sense.
[David Siegel — 62:39]
Why?
[David Siegel — 62:39]
Because of service, because of meaning,because of religion, because of family. That's what changes things. The US,sadly, less family. And Europe, less family, less religion, less service, lessmeaning, more loneliness. Exactly what you said.
[Michael Eisenberg — 62:39]
David Siegel, thank you for joining. This wasgreat.
[David Siegel — 62:39]
I love this show.
[Michael Eisenberg — 62:39]
I'm sorry that I was that guy.
[David Siegel — 62:39]
You'll always be that guy.
[Michael Eisenberg — 62:24]
If you enjoyed the podcast with David Siegel,please rate us five stars on Apple Podcasts and Spotify. Subscribe to ourYouTube channel. You won't want to miss the next episode, but you'll want tolisten to this one twice. Thanks for joining.
[Michael Eisenberg — 0:00]
You're like, managing $3 billion, and the founder walks in, and you're assessing this in one hour. What happens in Cafe Venetian that you say, oh, this. If you're not going to adapt, you're going to die.
[Oren Zeev — 0:15]
If your moat is your code, good luck. Okay. It's far worse to miss something than to make a bad investment. Because if you make a bad investment, you lose 1x your money. If you don't invest in something that could have been 100x, you missed an opportunity to make 100x.
[Oren Zeev — 0:31]
Oren, why did you take the solo venture capital path? Because I've had experience working with people.
[Michael Eisenberg — 00:41]
Welcome back to another episode of Invested. I am thrilled to be here with my old friend. I think I can call you that, Oren, right?
[Oren Zeev — 00:52]
Friend? I don't know, but old for sure.
[Michael Eisenberg — 01:00]
My old friend and colleague, Oren Zeev from Zeev Ventures. Welcome, Oren.
[Oren Zeev — 1:21]
Thank you. Great to be here, Mike.
[Michael Eisenberg — 1:23]
Oren, how long do we know each other? It's like since the mid-90s, I think, right?
[Oren Zeev — 1:26]
Yeah, it's 30 years.
[Michael Eisenberg — 1:28]
And our careers have taken a slightly different but same path, which is we're both still venture capitalists, which we both were all those years ago. But I've continued to live in a partnership, whereas Oren is probably one of the pioneers — there are a few others, Steve Anderson and others — of the solo venture capital model. So much so, Oren is now managing, I believe, almost $3 billion. He doesn't have an office. He takes meetings in Cafe Venetia in Palo Alto — a place I haven't been to in a number of years. Oren, why did you take the solo venture capital path? You started in partnerships with Apax Partners. What made you take this solo path?
[Oren Zeev — 2:11]
Because I've had experience working with people.
[Michael Eisenberg — 2:17]
Okay. Explain, Oren.
[Oren Zeev — 2:18]
No, look — and admittedly, I was in a very large partnership. I'm sure it's not as bad in a smaller partnership, but I think in a large partnership, you have all these forces pulling in different directions. And I think people mistakenly think of venture as a team sport. And to some extent it could be, but more often than not, it's more of an individual sport. So many of the partnerships, in theory, they're supposed to leverage the individual, but in practice they handicap the individual, because everything takes longer, everything has to be more consensual. And I'll give you the biggest argument. You know that our industry is so asymmetric. There are mistakes of omission and mistakes of commission. It's far worse to miss something than to make a bad investment. Because if you make a bad investment, you lose 1x your money. If you don't invest in something that could have been 100x or 200x, you missed an opportunity to make 100x. And in parallel and all that, it really affects the top one or two investments in a fund. This is really what dictates the performance of the fund. So even if you had really good, smart partners — which is not a given, by the way; maybe you were more spoiled than I was in this regard — and even if they're not political, and even if everyone really wants everyone else to be successful (which, again, is not a given), your partners will never make you make an investment that otherwise you would not have done yourself. But the opposite is not true. They may prevent you from making an investment because they would ask you questions, push back, slow you down, et cetera. So even if you have these smart partners, and even if five times they really prevented you from making a mistake, and thanks to them you did not invest in something that otherwise you would have lost — it's enough that one time they prevented you, either by explicitly preventing you or just by slowing you down and causing you to lose the deal on something that was truly great. The whole thing wasn't worth it.
[Michael Eisenberg — 4:32]
So all feedback, therefore, is negative in the investment process?
[Oren Zeev — 4:36]
For the most part. For the most part, it's "have you looked at this risk?" "have you checked this?" "have you done that?" I find it difficult to believe that there's a partnership where the partner is not sure he wants to do something and the other partners are pushing — "no, forget this, you should go do it." The dynamics is usually more conservative: "have you thought of all these risks?" — as opposed to the other way around.
[Michael Eisenberg — 4:56]
Sometimes I find that my partners sharpen my own conviction, even. Where I'm on the fence, I'm thinking about it, and they ask questions and try to beat down the deal, and because I'm forced to defend it, it sharpens my conviction. You don't think that exists?
[Oren Zeev — 5:10]
Fair enough. No, this is your partnership, I'm not going to argue with your partnership. My living experience was different. Plus, I do have people that I consult with. But I don't have to convince them, is the point. If I have enough conviction, then even if they're skeptical — I'm thinking of specifically one, someone who's a venture partner who I routinely consult with — but I don't need to convince him. It's a big difference, in my opinion.
[Michael Eisenberg — 5:42]
When you make a decision, how long does it take you?
[Oren Zeev — 5:46]
Oh, very quickly. It's almost always less than 24, 48 hours. And typically there's one issue — up to one issue — that I feel that I need to check. And it's an easy check, like two or three phone calls, or looking at a —
[Michael Eisenberg — 6:01]
What is that? What's the thing you most often need to check?
[Oren Zeev — 6:03]
Just looking at maybe the traction, looking at the numbers, to figure out whether — if I, in my subjective view — I see it as a real signal or just noise. It's typically not the individual founders, because typically I already know them, or they come already very vetted to begin with. It could be one nagging question that I have. For example, in the case of Navan, when I made the investment, my big question was: is there really an opportunity in corporate travel? How open would companies be to replace what they're using? Because it wasn't a new category. There were already very large players. And so I basically called three or four CFOs that I knew and asked them: what are they using? Do they like it? And would they be willing to replace? And regardless of what the answer was to the first question, the second question was "I hate it" — whatever they were using. And then, yeah, if something was better, I would be open. So that was my question in that. You know, when I did Riverside — I mean, we're using their platform right now — again, my question (maybe it was a dumb question, but that was my question at the time) was: why wouldn't this just be a feature of Zoom? Because Zoom was all the rage back then. And I made a few phone calls and convinced myself that they're not necessarily focused on it. And you know how it is when a company — maybe they could do something, but if they're not focused on it, they're never going to do it well. So there's an opportunity for a startup.
[Michael Eisenberg — 7:43]
I asked David Marcus what to ask you, and interestingly he has the same observation about you that I have, which is that you have a very high IQ, of course, but you actually have a super high EQ for people, and very little ego — which I've always found endearing about you. And David Marcus does too. And so, like, you walk in and you're sitting at Cafe Venetia, you're like managing $3 billion, and a founder walks in, and you're assessing this in one hour because that's what it is. And by the way, we're going to come back to Navan in a second. What happens in Cafe Venetia that you say, "oh, this"?
[Oren Zeev — 8:28]
So first of all, it's without an N at the end. It's Cafe Venetia. There's no N.
[Michael Eisenberg — 8:30]
Venetia, sorry.
[Oren Zeev — 8:32]
I'm not sure my wife would agree with the definition of high EQ and all that. But I'm going to use it as evidence. But I'm not sure she would agree — and she's actually qualified, because she's a psychotherapist. Look, I need to feel a few things. I need to feel that I have a real unfair competitive advantage versus other VCs. So it's not like a deal that everyone can necessarily do, but for whatever reason the founders prefer me. And it's basically always based on — it's never based on domain expertise, because I'm never going to be the best domain expert in anything. It's based on personal relationships. Someone I've known, maybe even backed them before. Or a very, very, very strong, multiple-strong first degree of separation. So that's one thing. The second thing is, I need to feel that there's a real opportunity to build a viable company. If we end up selling along the way, okay. But I'm not comfortable playing a game that I know this is just — so I really need to feel that this company has a chance to invent a new category, reinvent the category, and become a market leader. I think the difference between a market leader and number two, three, four is vast. And then I need to like both the founders and the idea. And at least one of them has to be somewhat proven. Meaning either the founders are somewhat — for example, second timers, that's easy, or close to it — or there are some very early signs. It could be very early. It could be a very faint signal, but I have to believe that it's a real signal, indicative of product market fit. So for example, in the case of Riverside, it was two very young brothers. They were at the time, I think, 24 and 20, and the third brother joined later. So at the time it was just 24- and 20-year-old brothers, obviously first timers. So it still wasn't that. But they had a very basic product. They didn't even incorporate a company, but they had a very basic product, and it was even buggy. It wasn't perfect. But they were getting five, six new customers paying 40 bucks at the time — paying 40 bucks per month, every day. And the pace was going up, without doing any marketing or sales. So I think they had maybe $5,000 of MRR. So it wasn't big numbers. They had maybe 100 or so subscribers. But what I was telling myself is: you don't get five or six people to find you and pay 40 bucks every day, going up, without any investment in anything — just word of mouth — unless you hit some real need that's not being addressed by other players. So that was my thinking. So that was an example of something that was still very, very early. By the way, it doesn't even have to be revenues. In the case of Houzz, there were no revenues.
[Michael Eisenberg — 12:03]
I need to ask you two quick questions on that. Do you ever invite the founders to your house, or only Cafe Venetia?
[Oren Zeev — 12:08]
Mostly I don't invite them to my house, just out of respect of the personal space of my family members. But every now and then I do.
[Michael Eisenberg — 12:21]
And in Riverside, were you not worried that this is like a family business? Like our own experience with brothers and multiple family members starting businesses — most often, not always, doesn't end particularly well.
[Oren Zeev — 12:33]
I would say that most startups don't end particularly well. So the question is, do you ascribe it necessarily to the fact that they were... Because I think sometimes we draw the wrong conclusions, right? We invest in a husband and wife, they fight, they get a divorce, the company fails, and we say, "oh, I'm never going to do that again." But we could have invested in two people who are not married, and they would still fight and the company would still fail. So the answer is no, I'm not bothered by that. I have them — I had Houzz, husband and wife. They're brothers. You know my good friend — I didn't invest in that company, but you know my good friend Ori Sasson. You know, he started a company and hired three brothers and built a big company. This is like in the 90s. The listeners are not going to know the name anyway, but it was one of the first CRM companies, called Scopus. And there are many other examples, but they're not necessarily my portfolio, as you know — of very famous, successful companies that became... So no, I don't not do a deal because of that. And I think it's dangerous to draw the wrong conclusion, because it's based on one data point typically. You know, I heard — I once talked to a VC, I'm not going to name them — who told me that they're never going to invest in a company from Santa Barbara. Why? Because they had a company in Santa Barbara, and then they were surfing all day and they didn't succeed. Okay, but you're actually extrapolating from an N of one. Come on.
[Michael Eisenberg — 14:06]
Yeah. And you surf, so that's not even a bug in your mind.
[Oren Zeev — 14:09]
Yeah, but yeah, I just do. But actually, when he told me about this story, it was before I was surfing. So it's not even that.
[Michael Eisenberg — 14:18]
I'm interested about something you said about success. So we have a joint investment in Spines, the AI book publishing company. You said before you want a founder who's had success, at least one of them. Do you regard Yehuda Niv, the founder of Spines, as having had success before?
[Oren Zeev — 14:32]
In the case of Spines, it was very clear that he already had traction when I invested. You invested before me, so I give you credit for that. You did the seed and I came back a year later at the A — when you did it, it was very early. When I did it, he already had something like $5 million of revenue run rate. So this actually falls in the bucket — not in the bucket of second timer, but on top of it, Yehuda had relative domain expertise, because he started — but in non-tech. No.
[Oren Zeev — 15:00]
But in this particular case, it was definitely the bucket of traction from the company, not because of Yehuda's success — because his success was not in a tech business, and it's different. So it was really based on the traction and the rapid growth, which, as you know, continued since then.
[Michael Eisenberg — 15:25]
Yeah. I want to make an observation, by the way, about Spines and about Oren Zeev for a second, which I'm sure somebody else has made before me. So for those who don't know, you were the big investor in Audible, which now everybody uses for audiobooks, before anybody really knew what an audiobook was.
[Oren Zeev — 15:40]
Yeah.
[Michael Eisenberg — 15:40]
And you were one of the original investors in Chegg, the textbook company, and now in Spines, an AI publishing company. What is it with you and books and publishing?
[Oren Zeev — 15:50]
I think the honest answer is that it's a coincidence — but it's a nice coincidence. And I may be, especially if and when Spines is a big success — I may be the only VC in the world who hit gold three times in the book. Actually, I don't even know if there's one who did it twice, so maybe I'm already there. You don't think of books as a venture investment, right? And somehow I managed to be the main backer. I was 40% of the company before it went public for the second time, in 2004, and became a huge business. And Chegg became a huge business for a while and then got decimated, obliterated by AI. But that post-dates — that's years after I was out of the company. So it was also a home run for me. And now Spines. But each of them brought a real innovation and created really a new business. And each of them was — you know, the first two for sure, the third is still a work in progress — a market leader. And books is a big category, you know. So it turns out that even in a category like books, you can innovate — first with audiobooks, then with textbook rentals, which developed into homework help, and Spines, of course, is the one who's doing the self-publishing using AI instead of manual.
[Michael Eisenberg — 17:21]
So you made the observation earlier that you want to make sure the company can be big, and if it gets bought on the way, so it gets bought on the way. You also just made the observation, which is obviously correct, that Chegg got obliterated by AI — and it's obviously after you, the venture capitalist, are out. How are you thinking about moats right now in all of your investments? Like, what is immune from the AI juggernaut that's currently kind of overwhelming the world? It's like a tsunami. If you look at Chegg's stock price — and hopefully put it up in the background of the podcast here — it's like a cliff.
[Oren Zeev — 17:59]
Yeah. So I believe that the enterprise value is probably zero. I think they're probably worth — sorry, negative — I think they're probably worth less than the cash.
[Michael Eisenberg — 18:09]
Wow.
[Oren Zeev — 18:10]
Yeah. So it really got, like, obliterated. Chegg — I don't know if they could have done anything, because Chegg, the whole business was homework help. And they had — I don't know, a thousand or more, I don't know how many — because I was no longer with the company when these things happened — but they had subject-matter PhDs in India helping people. So that's just the essence of ChatGPT or Claude. You know, this is just — yeah.
[Oren Zeev — 18:35]
I don't know that they had any chance. But I think many times, companies do have a chance to adapt quickly. Because if you're not going to adapt, you're going to die. Whatever your moats — whatever you think your moats are — if you're not adapting, you're going to die. But I think more often than not, companies do have real assets that are not just immune — some of them are even worth more thanks to AI. So if your moat is your code, good luck. Okay. Because it's no longer a moat, okay, if it used to be. But there are multiple things. For example, if you have proprietary data, it's not only a moat, it's even a more important moat in the age of AI than it was before. Connectivity, integration with all sorts of archaic data sources — not things that are open or APIs or things like that. But for example, in the case of Navan, think of all the connections to all these archaic systems with the airlines and the trains and the this and that, that's not necessarily available. Then you have a regulatory environment and licenses — for example, in the case of Tipalti, just the licenses took us four years and millions of dollars.
[Michael Eisenberg — 19:59]
Tell our listeners what Tipalti is, because they don't know.
[Oren Zeev — 20:02]
Tipalti is today the market leader in finance operations automation in the mid-market. And their core, they grew from accounts payable, but they're expanding to other automation. And it's a multi-hundred-million-dollar revenue company — also one, also still private — but also a big winner that I helped start. So that's another set of, especially in fintech, you have these barriers. You have trust — brand and trust of customers — for things that are critical, for things where there's no tolerance for hallucination or mistakes, or the probabilistic outcome — it needs to be deterministic. So you have a host of different moats. So some of the moats that used to work don't work anymore. And some that maybe that were less important — like proprietary data — can be much more important. But overall, I think many companies, not all but many companies, have real assets vis-à-vis both a new entrant and also a big lab. Because the big lab is not going to do everything. I think that's also fantasy — to think, oh, Anthropic is going to do everything, or OpenAI is going to do everything. That's not going to happen. Just like Microsoft didn't do everything in the 90s. So the missing ingredient, though, is the adaptability — how quickly a company really dramatically adapts, looking at every function and every product feature and asking themselves: if we're doing it now in the age of AI, how would we have done it? And then just do it. I'm talking about everything — the structure, the org structure, the product, the operations, the development. Everything you have to rethink, and move very quickly. And in this regard, I think that companies that are founder-led and are at 50 people, 100 people, 500 people, 1,000 people, have a huge advantage versus dinosaurs who are 30,000 employees, 50,000 employees, and are not professionally — air quotes — led. And so I'm actually really, really, really bullish about venture in general. Obviously, the last three years since AI — obviously AI is good for venture. Let's start with that, for two reasons. One: any change is good for venture, because if everything is stagnant, startups cannot be successful — the incumbents win. But the real advantage that startups have is when things change. So number one, it's a huge change — the biggest since the beginning of humanity, I believe — certainly for technology. And the other thing is, it's a change that dramatically increases the pie, enlarges the pie — because things that before couldn't have been done with technology are now being done with technology. So technology captures a bigger share. Spines is an example. But not just technology is capturing a bigger share. Before that, maybe a software company, maybe they were selling a license, $400 per month. Now they can sell an agent who would replace the person who was using this seat. And instead of $100 per month, maybe they can charge $10,000 a month — or $20,000, not per month, per year — because, you know, that employee was costing the company maybe $100,000. So both enlarging the pie and a huge change — great news. But my point is that not only is it great news for these vintages — I actually believe that a lot of the pre-AI era companies, the ones that have very, very strong founder leadership, are actually going to also be big beneficiaries, because they bring some real advantages to the game on top of the AI.
[Michael Eisenberg — 24:29]
Yeah, it didn't work for Chegg, but —
[Oren Zeev — 24:31]
No, no, no — someone's going to get killed. You know, Chegg is not going to be the only one, of course. In fairness to Chegg, I don't know if there's anything they could have done — you know, when your entire thing is just so squarely — you know, AI is just doing it like that. Yeah, they had no moat. I don't see how they could have.
[Michael Eisenberg — 24:54]
I want to latch onto the old guy comment you made, because I actually make it all the time inside of our partnership, and to anybody else, about Microsoft in the 90s. When we got started in the venture business, every time you sat around one of those large tables that you talked about before — "oh, Microsoft can do this," "oh, Microsoft can do this." And by the way, when it was in the networking space, sometimes it was, "oh, Cisco or Lucent's going to do this too." That's literally the environment I think I grew up in. You probably grew up in too. And now, when I hear "oh, it's going to be absorbed in the models," you go — here we go again. It's the Microsoft. It turns out that this is not true. And so the question I want to ask you is: what is your thinking model, your mental model, for what the models will do versus what they won't do?
[Oren Zeev — 25:38]
Now you're really, really challenging my IQ. And, you know, I don't think I'm smart enough to really answer that. First of all, I do think it's still worth posing the question — you know, will OpenAI, Anthropic do it? You know, I don't think one should not ask the question. But you cannot assume that they're going to do everything. This is just foolish. I'll give an example from Microsoft. When I did Audible, last minute I convinced Don to invest a little bit more, so I could get even more. And I brought it back to the committee, and it didn't pass. And the reason it didn't pass is because at least one partner had an issue that — what if Microsoft does it now? And I'm going, what is the connection? You know, they're selling books. Why would Microsoft sell books? You know, there's zero connection. Where did you even get this? Where did you pull this out of? But, you know, he had this — he was obsessed with that — and so he didn't want to risk more money on this. But just an anecdote. So I think you should ask the question, and of course they will do some things, and there will be some fields where they're maybe not going to leave an opportunity. But for the most part, it's not going to happen. They're not going to become a travel company now, or a fintech company now, or a bank or, you know. So I think one has to look at it specifically. I don't know — I don't have a general answer, but I think on a case-by-case basis, one needs to look at it and think.
[Michael Eisenberg — 27:18]
Yeah. I want to spend a few minutes talking about Navan. And I want you to really take me from the beginning of Navan — the first meeting with the guys, which was called TripActions, if my memory serves me correctly to begin with. And really walk us through, because there's so many stories here, right? COVID hit, it reduced the business to close to zero. This has been an up-and-down play. Then the company goes public and the stock tanks, and you go on record on CNBC as saying, "okay, Mr. Market is in action, but wait for the long term. Eventually the stock price will catch up to the business results." And it's come back a bit since then. This has been just an incredible story, I think, from beginning to end. So really, I want you to walk us through — first meeting, ups and downs along the way.
[Oren Zeev — 28:00]
First, I'd known them before. I even had a small angel investment in the previous company, which was called StreamOnce. And then one day I walk on University, and they sold it to Jive, and the Jive office was on Lytton, which is one block away from University Avenue. So really one block away from Venetia. So I walk one day and I see them on the street, and I say, "hey, you guys, you want to have lunch?" Because I just had the window. And they're, "sure, why not?" We're having lunch. And they don't even tell me anything. Last five minutes, they tell me, "oh, by the way, we're thinking..." They were still at Jive — still doing the time that they need to vest. "We're thinking about something new." Immediately I said, "okay, we're going to meet tomorrow for coffee." Or maybe it was the same day, that we just, after lunch, continued to the coffee. And then they pitched the idea. They had nothing — it's just, "oh, we're going to do this." But I got excited. "So okay, let's meet tomorrow and talk about it again." The next day, Ilan comes with a mock-up of some screenshots that he did overnight. And I think in that meeting we just agreed that I'm going to fund it and back it, and we're good on terms. And we raised a toast of — what do you call the Italian equivalent of champagne? Prosecco. You know, we raised the toast, which I never do — I never drink alcohol — but we raised the toast to the success of the venture. I don't even remember if the — yeah, I think the name existed already. But, by the way, in the 24 hours, this is what I did: I called a few CFOs and asked them about this specific question — will people switch? So that was how I invested. They tell me that of course they would have come to me anyway. So I don't know if it was — I don't know if I, you know — but anyway, I literally saw them on the street, so it was serendipity. Although they tell me that they would have come to me, and they could have come to me anyway. So we would never know.
[Oren Zeev — 30:14]
So in the beginning, we had a few years where everything was working great. And it grew very fast. And first of all, we lucked out that — I hadn't realized that it's not easy to get the content. Content meaning the flights and the hotels and all that. But they lucked out and they managed to get it. They grew fast. Everything was going great. I think the first existential crisis happened even before COVID. You know, there are three large airlines in the US — there are other airlines, but there are three large ones that you cannot do without. American, United, and Delta. Delta being maybe the best-run company of the three. And Delta in 2019 decided that they hated Navan, like, with a passion, and wouldn't even tell — and that we cannot use Delta. Which is a death sentence, because we cannot go to a company, a customer, and say, "use us to book your flights, and by the way, you cannot use Delta." You know, it's not some — it's not Frontier or Spirit RIP. That was an existential crisis. And long story short, somehow — actually thanks to Ben Horowitz, who became involved at that point. That's exactly when, the same time, that Andreessen invested for the first time. And actually, Ben helped us figure it out with Delta. We solved this problem. This was a really existential threat — I thought we could have lost the company on this.
[Oren Zeev — 31:59]
Then COVID hits. And COVID hits — I've never seen anything like it. Because you have a company at that point — it was the beginning of 2020, we are at about $80, $90 million revenue run rate, ARR call it — because it is usage, but it's recurring — and it goes, over one month, it goes to zero. You know, April 2020 — it goes to zero. I remember when COVID just started, someone wrote an email: even if revenues go down by 50%; and someone else says, "you know, they can go down by more than 50%." Went down to zero. Okay, obviously, because nobody was flying. And by the way, consumer flying came back way faster than business travel. Business travel did not come back for a long time. But the main thing is that we had no idea when it would come back. Now, cash was less of an issue — first of all, we'd raised before. But miraculously, Ariel was able in April and May to secure a big investment from Greenoaks, which was structured — because you could not price the company — so it was structured, but it was money. It was real equity and real money. So the issue was not running out of cash as much as it was running out of talent. The reason I say this is because back then, the first two months — no problem, because everyone froze. But come June, you're starting to see companies like Datadog and Zoom and Databricks and Snowflake just crushing it during COVID. And they're all going after our people. And I'm not worried about the travel people, because they had nowhere to go. But the engineers and the go-to-market people — their skills are transferable to any of these companies. And at some point, I think Ariel was the only employee in the company that didn't get an offer from one of these companies. And here, I have to give the greatest credit to Ariel for his leadership. Because that's when leadership is really being tested. And the fact that he was able to inspire enough confidence and enthusiasm that, despite everything, we're going to prevail and we're going to do great — and we managed to keep most of our, almost all our executive team. And maybe we lost 20% of people that we didn't want to lose, but we managed to keep the core. That, to me, is huge. This is the ultimate leadership test, I think, and he passed it with flying colors. Now, on top of that, I would say everything had to be looked at. So first of all, we were the very first company to let people go, because all the customer support people had nothing to do. We let them go within days. And we did it over Zoom, because there was no other way to let go of people. Of course, we got a lot of grief from the press, especially the Israeli press — how dare we fire people over Zoom, as if there's any other way to do it at that point. But again, to Ariel's credit, he was never too bothered by that. He was never too obsessed with whatever the media was writing at the time. But it's not just letting go of people. It's looking at the roadmap, shifting resources. For example, we had a nascent expense product. And the expense, you could still sell, because people still have expenses. So we shifted resources and accelerated the expense product at the expense of the travel. We changed the way we — we've changed the product map. We prioritized features that had to do with, for example, safety. What's the safest route to go from A to B once people started flying again, et cetera. Bottom line, we survived it. It wasn't easy. It wasn't pretty. It took a while, but we survived. I think the day we knew that we would survive it was the day that the vaccine was announced, sometime in 2021. And we knew from now it's just a question of time. And that's when we managed to get also more financing. And then, a year before the IPO, we had another — maybe not as existential, but we were like two months. We had some mistake in the way we were managing things. And we were growing very fast on the expense side, which part of it was giving credit to customers. And the business was going great, and thanks to it going great, we almost ran out of money. You know, it was...
[Michael Eisenberg — 36:54]
People don't understand this, by the way: it's actually growth that takes capital.
[Oren Zeev — 36:55]
Yeah, yeah, exactly. So we were like two months from running out of cash, and it was a breach of covenants of the money warehouses and things like that. Okay, so that's another one. And then we go public, and this is the worst public IPO of 2025 by far.
[Oren Zeev — 37:17]
And by the way, Chegg was the worst IPO of 2013. So twice I've been part of the worst IPO of the year in terms of performance. The company was received super badly. To this day, I don't fully understand why. Even, like, the first minutes, it started to slide down. It went down. It went down from 25 bucks, which we didn't even think 25 was expensive when we took it public, it went down all the way down to something like $8. You know, Michael, at the end of the day, if you know your business is great, why should you even care that the public markets are taking time to see it, if you really have conviction? And the answer is, sometimes it's a self-fulfilling prophecy, because sometimes you could have talent flight, because people start losing confidence — because they see their options are worthless and the equity is worthless, et cetera. And here, again, it comes back to Ariel's leadership. Because you know what the attitude was at the company — and I saw it — the attitude was, "fuck the public markets." That was the attitude. "We are doing great, we're going to continue to do great, and eventually we're going to beat and raise and beat and raise and beat and raise, and eventually the public markets are going to get it." So now, in the last six weeks, it moved from $8 to 18-plus. Of course, I cannot comment on anything specific, but I personally still think it's very cheap. I think this is going to be a massive company, and eventually reality catch — sorry, perception catches up with reality in most cases.
[Michael Eisenberg — 39:08]
Yeah. How long are you going to hold your shares for? Generally — you don't have to be specific about this one.
[Oren Zeev — 39:14]
Yeah, no — look, generally, as a fund, I don't think it's my role to hold public shares for the LPs. So personally — I do distribution in kind. I pay myself the carry in shares, and then personally I want to sit for the next 20 years. But that's personally.
[Michael Eisenberg — 39:39]
Are you holding Chegg still?
[Oren Zeev — 39:41]
No, no, no, no, no. I got out, actually, too early. Too early. You know, I got out too early because — when I got out, it was still worth about a billion, and it went all the way up to 13 billion before down to zero. But I needed the money. If I didn't need the money, maybe I would have kept it. Specifically in Navan — so from a purist standpoint, I don't think, for any company — I don't think it's my job to hold the shares, and I think I should distribute the shares as soon as possible. But I shouldn't be stupid about it. So if it's so obvious to me that there's a disconnect between the market price and what I think, then I'm going to deviate from the purist approach and wait for another quarter, another two quarters, another three quarters. But then also distribute it over time. I think you did the same with Lemonade. I know, because I was on the receiving end. I was an LP, and I remember I got the distribution every few months, and it went great. I think it worked great.
[Michael Eisenberg — 40:32]
We still hold a bunch.
[Oren Zeev — 40:43]
You still hold a bunch. Okay, great. So maybe I'll get some more. So, as an LP. So I do think I want to wait until I feel that the public market understands the company, and then distribute. But over time, to average out — because I don't know how to pick the right time to sell. So I want to sell over time, to average out.
[Michael Eisenberg — 41:12]
I want to ask you a bunch of rapid questions to wrap up here. What percentage of your founders are Israeli?
[Oren Zeev — 41:19]
Probably 80%.
[Michael Eisenberg — 41:20]
80%. What percentage of those — the headquarters are in the US, ff the 80%?
[Oren Zeev — 41:25]
Believe it or not, I never — I can only guess, because I never prepare any slides for anyone, so I never do these statistics. So I have no idea. But just as a guess, I would say maybe two-thirds headquartered in the US and a third in Israel.
[Michael Eisenberg — 41:41]
Do you think that's important — for the Israeli companies to be headquartered in the US?
[Oren Zeev — 41:46]
If the CEO needs to see customers often, then I think it's extremely inconvenient to be in Israel. But if it's a B2C company, or, for example, a small business — so it depends, I think. But it's a personal individual. I think it's better. But I understand that people have their personal priorities as well.
[Michael Eisenberg — 42:08]
What's something we can't find out about you on Google?
[Oren Zeev — 42:11]
It's not that I'm good, but I play table tennis almost every day, and in the league, once a week.
[Michael Eisenberg — 42:17]
You've invested 80% in Israeli companies. I think 25 or so years ago you moved to the US, first to New York and then to Palo Alto. When are you moving back here?
[Oren Zeev — 42:30]
Soon. With all these woke communists in California now.
[Oren Zeev — 42:36]
No, honestly, I don't even see it as binary at this point because, you know, obviously our kids are out of the house. Interestingly, both our kids live in Israel. Decided to live in Israel, both of them, despite having grown up in the US. Both of them live in Israel. We have a place in Israel, Neve Tzedek, which we love. And we love spending time in Israel. So honestly, I don't see it as necessarily a binary thing. I think we're probably going to spend time in both houses. We don't have more than two houses. I don't see why we would need more. But, so, yeah, it's not binary. I think we're going to spend more and more time, especially now, because our daughter just moved three months ago from the US to Israel. So we're probably going to spend more.
[Michael Eisenberg — 43:21]
Last question for you. What's an unpopular opinion you hold that you haven't talked about publicly yet?
[Oren Zeev — 43:27]
There is now this narrative that, "oh, it's no longer enough to grow 100%, 200%" — you know, "if you're not growing 10x, you're not worthy of our money." This is like the narrative of some VCs. And of course, if you're growing 2x and all your competitors are growing 3x or 4x or 5x — that's not a good thing. But if you're doing something special and good and unique, and you're growing 2x at scale — I'm not talking growing from 1 million to 2 million; I'm talking from 20 to 40 to 80 to 160, and you have real moats and it's sustainable — then I don't think the math changes. You know, I think that in six years you're going to be 64 times bigger than what you are today, if you're growing 2x in a sustainable way. And I think it's become really bon ton, and I think I know why. I think that you sound — as a VC, you sound very good when you say, "oh, for me, 2x, 3x is not good enough anymore. We only invest in 10x." You sound that. So I don't buy that. The math is still the same math. And the thing is, it's also very dangerous when — you and I have lived through this period more than once, actually — that if you only look at top-line growth, nothing is good enough. It also creates very problematic — to say very mildly — behavior. Because you're going to find that the growth is not real. It's not sustainable. Sometimes outright fraud, sometimes it's not fraud, but it's just not sustainable. You know, the InsurTech thing — Lemonade is now doing great, but not just Lemonade specifically. In the space, there were a lot of companies that ended up being worthless, because they were showing great growth — because in a business like insurance, you can always show growth if you misprice the policy. You can have nothing other than mispricing the policy and still show growth. So my point is that it's not just wrong. I think it's a dangerous mindset.
[Michael Eisenberg — 45:44]
That is a fantastic place to end, by the way. And that is going to definitely be the outtake of the episode, because you are so right. And everyone's talking about, how do I have a little bit of Anthropic, a little bit of SpaceX, and you need all those other things. But there are a lot of great businesses out there — like Navan and Tipalti and Spines and many others. If you've enjoyed this podcast, please join me, first of all, in thanking Oren for coming on the podcast. And you can find out more about him if you follow him on X — and that's Oren Zeev, O-R-E-N Z-E-E-V — and same on LinkedIn. And Oren, really, thanks for doing this, I appreciate it. And if you enjoyed the podcast, please rate us five stars on Apple Podcasts, on Spotify. Subscribe to the YouTube channel for more wisdom from Oren Zeev and some of our other guests. Thanks, Oren.
[Oren Zeev — 46:26]
Thanks so much for having me. Enjoyed it. Thank you, Michael. Bye-bye.
[Michael Eisenberg — 0:00]
What did Jensen playing at Nvidia miss, and that you figured out that is so novel?
[Elad Raz — 0:05]
No one thought about it. We are now running workloads 10 times faster at half or even quarter of the power consumption of a GPU. NextSilicon is not a feature. At the beginning, most people don't understand the uniqueness around what we have built. What does it mean to program a chip for the future?
[Michael Eisenberg — 0:24]
If you're engaged in AI, this is just about the hottest topic of our time right now.
[Elad Raz — 0:29]
Absolutely.
[Michael Eisenberg — 0:30]
So the big national lab supercomputer, one of them is built on NextSilicon now?
[Elad Raz — 0:35]
Yes.
[Michael Eisenberg — 0:35]
And how powerful is it?
[Elad Raz — 0:37]
We have our own tricks over there and we are going to reveal them soon.
[Michael Eisenberg — 0:00]
Ooh, want to reveal them now?
[Michael Eisenberg — 0:00]
Welcome back to another episode of Invested. I'm thrilled to have with me Elad Raz, founder and CEO of NextSilicon. Welcome, Elad.
[Elad Raz — 0:00]
Thank you. Thank you for having me.
[Michael Eisenberg — 0:59]
Okay, we've done a few of these shows which I would call at the kind of more hard science, geekier end of the spectrum. This will definitely be one of those. So we should warn our audience in advance. Get ready to like, dig deep into the world of semiconductor, semiconductor architecture, data centers and the general need for compute in the world. Is that fair?
[Elad Raz — 1:21]
Absolutely. And tell you more. You know, when I first had investor meetings, you know, I started with the deep tech. I mean, whatever episode you had about science and, you know, getting down, probably to understand NextSilicon, you need to get deeper. But it's not a warning. I think that we can, you know, convey the message about what NextSilicon is in a more generalized way that everyone will understand. So don't be scared.
[Michael Eisenberg — 1:48]
Okay, so just to start with something a little lighter, tell everybody what was engraved on your first chip that you, that you produced or taped out.
[Elad Raz — 1:58]
There is a habit, you know, when you produce a silicon chip and that's like for the past 40 years that you can play around with the transistors and the etching on the chip. You know, the way that the photoresist mask is, is laid out and generate symbols. And many companies have done it. Pat Gelsinger for example, wrote his initials on the 486 and 386 — PJ and others put cartoons and train. And when we started NextSilicon and we came to tape out, tape out is the term that you take your design and send it to TSMC, you had to decide what you want to etch over the chip. And I thought about it really hard and I went to the shul [synagogue] and go to the rabbi and ask him, "Hey, what do you think?" And he said, "Why wouldn't you choose the first word of the Bible? Bereshit." Bereshit, in the beginning, Genesis. That's in the holy scripture, in the Zohar, it says that this world encapsulates everything that was and everything that will be. Sounds appropriate. So we have done it. And this is the first 7 nanometer smallest word of bereshit in, I think in the entire world.
[Michael Eisenberg — 3:11]
So given that it's everything that was and will be, that's quite a statement about compute. Let's just start in a reasonably simple place like why do we need, you know, why don't you give the, you know, three sentence pitch on what NextSilicon does. And then I want to talk about why does the world need so much more compute?
[Elad Raz — 3:27]
Sure, we are all about compute. Compute entails many, many different things. But in order to win that race, I mean, think about it for a second. You start a company that focus on compute. Accelerate compute. Accelerate compute for science, for AI machine learning, for all of those different aspects. You need to build the company or design the company and start the company to be novel, original and very different than other multinationals that spends billions of dollars on their design. You can't start a company that trying to copy and just do incremental improvement over the leading companies, these days is obviously Nvidia, spending tens of billions of dollars on every chip design. You need something else. So that's our goal, you know, reinvent compute.
[Michael Eisenberg — 4:24]
Reinventing compute. But what is that? Tell us in three sentences.
[Elad Raz — 4:27]
Sure, in three sentences. Computers until now work in terms of processor that read instruction, execute instruction, right? So you do it like serial way. And there is a way to increase throughput by replicating many of those processor calls. At NextSilicon, we work in a different way. What we are saying is we build a chip that has the arithmetic unit on the chip itself in some kind of a grid. Very hard to program that. But we find a way to use algorithm, software algorithm that understand what matters now and literally reconfigure the silicon. Etch whatever your workload, you are running, scientifical code, AI machine learning, into the different transistor and then stream the data in. That's like the scary part. But we are going to...
[Michael Eisenberg — 5:21]
We're going to unpack it soon.
[Michael Eisenberg — 5:23]
Now, why does the world need much more compute today?
[Michael Eisenberg — 5:27]
But you should explain it.
[Elad Raz — 5:28]
This question was asked every time in the past eight years from first computers ever invented. Why do we need that? Why we need the big machine that cracked Nvidia? Suddenly you got the Enigma, a machine cracked by computers. You can't do it handcrafted. So there was a lot of money driving into compute in the early days from Department of Defense and Energy. Even here in Israel, 1953 the Israeli state was 5 years old. Weizemann Institute – let's build the first computer based on the Enigma. The name of the computer was WEIZAC. It cost 25% of the Weizmann Institute that year. You know how many discussions there was with the first president, Chaim Weizmann, about why do we need that machine? Who is going to use it? Now we want to get like this genius Pekeris bomb to work on that machine. But who else is going to use it? And guess what? Two years after, when the machine was powered on, everyone just queued in line to use those machines. Even on weekends, on Shabbat, they had to bring like a goy [gentile] of Shabbat, someone to operate that machine. So for around the history there was a question why do we need more compute? Even when I started NextSilicon, I spoke to one of my relatives and he asked me hey "Elad, my computer works just fine. I mean, why do you need a stronger computer?" But the answer is, and especially now in AI, the answer is kind of obvious. You want to send an agentic task, let the GPUs and you know, hear the fan rolling out and then token is spinning on your monitor. You need that faster. The more compute you can generate, the better result that you're going to get from your queries. Whether it's AI or even science, fidelity on oil and gas and more.
[Michael Eisenberg — 7:21]
Okay, so if we look at the world. So this was eight years ago when you decided to do this. Today it's obvious, you know, eight years ago was around the founding moment OpenAI but nobody knew it existed. So at the time you made a decision, I think, and this is all above my pay grade, right, in terms of technological complexity, you made a decision to focus on HPC, high-performance computing. Try to tell our audience what was unique about the chip, your approach and what is unique about your desire to go after high performance computing. And we'll distinguish that in a second when you're done to what's going on in AI today.
[Elad Raz — 8:01]
So let's start with the underlying core technology. We have produced two generations of chip that accelerate computationally, period. The way that we are doing that is using software algorithm that change the wiring on the chip, rather than have a general purpose chip that can get instruction and execute them.
[Michael Eisenberg — 8:23]
Okay, stop for a second. Explain that to everybody. The difference between software that changes the quote unquote wiring on the chip versus a general purpose computing architecture, whether it's a GPU or a CPU.
[Elad Raz — 8:35]
So let's start with the basic. Okay. And I'm going to use a name that I never use when I talk to investors, which is John von Neumann. He's a big scientist that explains the fundamental of a processor core. So you have a processor core, it has input, some memory state and an output that get instruction. Those are processors of today. You get the instruction of what to do, that's the program of the user, and the device itself, just run the instruction one after the other. Processor got more complicated, more vectorized, meaning you can do more operation, multicore everything. You know all of that and we won't get into the details. So don't worry. Those are processor core, traditional architectures. With NextSilicon we just threw it away. We said, hey, let's look at the processor code. There are so many logic that decode the instruction and try to understand hey, what those instructions means. How can I fetch the memory in order to execute those instructions. And until I get to the actual unit that compute the, you know, the schoolbook, multiply multiplication or the addition, like 2% of the transistor of the chip is, in CPU, allocated for compute. GPU is way better. We said, let's just stick with those transistors that doing the computational. That's it. Now the problem is, okay, so how you don't have the instruction how can you tell those different units what to do? So the answer we, and this is the IPs that we have developed, is saying, okay, let's connect the different ALUs in some kind of a mesh and we're just going to reconfigure the mesh to move the wires from A to B. Still, how can I program this thing? And there are like two aspects. One of them is, okay, let's go to the sophisticated user and ask him to draw on a circuit board exactly what to do. By the way, this is what literally when Los Alamos developed the A bomb, that's exactly what they have done. They put like bunch of calculator women. They were women, that took like two numbers, did an operation and passed it back to the different O and then you get the entire computation. We decided to say let's understand the computational in autonomous way. I mean the user wrote the program in a C code, let's run it on a CPU, let's understand the different computational kernel and automatically, autonomously just wire them on the chip, move the memory and accelerate, accelerate those computation. That's what we have done. So instead of working in 2%, we are working at close to 60%.
[Michael Eisenberg — 11:25]
So 30 times the throughput on the chip.
[Elad Raz — 11:27]
Exactly.
[Michael Eisenberg — 11:29]
30 times. Three zero?
[Elad Raz — 11:32]
Even, we have some workload that you get to 100. The problem is Amdahl's Law, meaning you have overhead moving the data in and out that you need to think about it like pipes. Okay, you can, you can put like a wide, a wide pipe of water, but if you have like thin pipes entering, you can't drive the machine as much as you want. So Amdahl's Law is saying that you're probably going to get the bottleneck not in the computation, but in the I/O and the data, everything.
[Elad Raz — 12:01]
But yes, we are now running workloads 10 times faster at half or even quarter of the power consumption of a GPU. End to end.
[Michael Eisenberg — 12:10]
Right, compute per watt is up 40x?
[Elad Raz — 12:18]
Yes, 40x if it's 10x and a quarter of the power consumption.
[Michael Eisenberg — 12:22]
Gavin Baker, who by the way, is one of our most popular episodes ever. And for anyone listening now, if you haven't listened to our Gavin Baker episode, you need to listen to Gavin Baker episode. Gavin Baker's an investor in NextSilicon. And one of the things he said on our show was that what you're doing is incredibly novel. It's very, very different. Explain to our audience what is so novel about it. What did Jensen playing at Nvidia miss, and that you figured out that is so novel?
[Elad Raz — 12:47]
No one thought about it.
[Michael Eisenberg — 12:48]
What does that mean?
[Elad Raz — 12:49]
No one in academia, no one in industry. I mean, the concept of dataflow itself existed in literature. People tried to do that, but everyone failed.
[Michael Eisenberg — 12:59]
What is dataflow?
[Elad Raz — 13:00]
Dataflow is the way that you took the arithmetic unit and connect them together like delta that flowing through the device. That's the origin of a data flow. And every other architecture in the world today is based on... For example, GPU. There is something called SM. That's a processor code that run instruction and tensor cores doing matrix operations. Okay? We have just data flow. Just data flow. And some company tried 20 years ago to make this technology work. All of them failed.
[Michael Eisenberg — 13:35]
Who was that?
[Elad Raz — 13:36]
There were companies, I mean even HPE had the concept of the machine that there was like a memory in the center and then dataflow trying to fit it. Intel tried to do it with their spatial processor. I mean, many companies tried and the failure was because of the lack of programmability, the lack of software, it was very hard to program those workloads. Now the reason, let's take you back to the original decision. I mean why HPC? What is HPC? Why did you take the company into HPC. If I gave you like 10 minutes explanation about technology and I hope that you can have a skip button and just summarize a different.
[Michael Eisenberg — 14:18]
Okay, no people are interested. You know, this is this. You know, if you're investing in the stock market or you're engaged in AI, this is just about the hottest topic of our time right now.
[Elad Raz]
Absolutely, yeah.
[Michael Eisenberg]
Go ahead.
[Elad Raz — 14:27]
Nothing in the technology is oriented into a specific vertical. Not oil and gas and how you can find new pocket of gas and oil underneath like geoscience application beneath planet Earth. Nothing is related to space and have a prediction about how many dark matter there are and how galaxy was formed. Nothing about fluid dynamic that explains how the SpaceX rocket is being launched. I mean nothing is tailored into a specific market or even AI machine learning. Because at the end of the day AI and HPC uses linear algebra, you know, matrix multiplication, matrix vector operation, point-wise kernel. I mean the compute is the same. Nothing is aimed in, nothing in the technology is blocking you from running any, any type of science or neural network. But eight years ago the world was different. I mean people forget how fast we have moved. Today architecture is transformers. That's the name of the big LLM. Whether it's Claude Opus or the new model or Groq, OpenAI with the codex in the agentic one or the GPT 5.4. So it's all about science. Eight years ago we were in a different space where the first AI accelerator were there, that's the one that started and the model were convolution, neural network or taking an image and classify it. Whether it's a dog or Chihuahua, cat or a dog. The reason why you start a company is because you geek out, like you want to build the technology. This is why you start a company. But at the end of the day every company needs to generate cash. So you can go today on machine learning eight years ago. But the market was undefined and Google had their own TPU back then. So it was very, it wasn't clear how you can generate money. Even now. But back then it was way more serious. And then we said okay, so we have novel compute architecture. Let's go to the basics. Every compute company, big one, started with to sell to the HPC market. Intel, AMD, Texas Instrument, even Nvidia. Yeah, you start with graphics but you know the big computation started with supercomputers. Build the supercomputers and we, Baruch Hashem [thank God], build a big supercomputer with the Department of Energy.
[Michael Eisenberg]
In the United States. Yeah. It's a joint venture that primarily built at Sandia National Laboratory but it's a collaboration of Lawrence Livermore and Los Alamos and Sandia. Yeah.
[Elad Raz]
In the United States. It's a joint venture that primarily built at Sandia National Laboratory but it's a collaboration of Lawrence Livermore and Los Alamos and Sandia.
[Michael Eisenberg — 17:18]
Yeah. So the big national lab supercomputer or one of them is built on NextSilicon now.
[Elad Raz — 17:23]
Yes.
[Michael Eisenberg — 17:23]
Okay. Yeah. And how powerful is it?
[Elad Raz — 17:27]
So I, I don't know when this episode is going to air but you know big news are coming soon. It's big. It's like in the top 500.
[Michael Eisenberg — 17:37]
Top 500 supercomputers in the world?
[Elad Raz — 17:39]
Yeah. Will be published but I'm not trying to reveal when what position
[Michael Eisenberg — 17:44]
And in terms of cost of compute, when you compare it to the other 500 in the world.
[Elad Raz — 17:48]
So you said 40x faster.
[Michael Eisenberg — 17:50]
40x faster per watt.
[Elad Raz — 17:52]
Yeah. And dollar.
[Michael Eisenberg — 17:55]
And dollar. Well that's a step function change. But we'll come back to this in a second. So you decided to go into HPC because everybody starts in HPC but Jensen and Nvidia have gotten out of the HPC business because the AI business, or let's call it the LLM business or or transformers, is much more lucrative right now. Why don't you do that?
[Elad Raz — 18:17]
We are.
[Michael Eisenberg — 18:18]
Oh, you are doing that.
[Elad Raz — 18:19]
Yeah.
[Michael Eisenberg — 18:19]
Is that easy? Just like you say. Okay, I'll turn off HPC and turn on transformers.
[Elad Raz — 18:25]
Yeah. Way more easy than we thought.
[Michael Eisenberg — 18:27]
Why is that? Let's back up one second. Okay, so let's make some order for our listeners here. There are GPUs which is the game Nvidia is playing. There's TPUs which is the game Google and to some extent Amazon is playing.
[Elad Raz — 18:43]
Let's take it in more of high level and understand what the user wants to do. And then on that we'll name the different accelerators because you have different workload. Some user want like edge computation saying here's an image, I want to classify it or I want to do voice to text. Okay. Kind of a wispr. Or diffusion models. Those models, transformer models are typically have hundred to billion parameters. Tiny models compared to the big LLM of a trillion parameter. And then the question is whether should I should I buy $10 million rack to accelerate those tiny models or I can go to hundreds of startup doing small cheap, low power, low cost to accelerate them. So this is one class of computing. And then you have, I think that the biggest range there are models that between 200 billion parameter to 2 trillion parameters. Because think about it, most users who adopt AI now are the early adopters of AI technologies, are software programmers with the Claude Code, and Codex, and even Gemini have a good kind of agentic solution for that. And they send a request, they want you to read the entire code base to get to millions of tokens. They want that their GPUs will crunch those models and speed up lots of token. That's the main and the prime use that we have today. And even agentic task of read all my contract and try to summarize that, you want a trillion thinking model. You want a big model that think that generate a lot of tokens, token is the little word, and read a lot of tokens. Those are the classical model. Between them, you have most of the hyperscaler and Google chasing after. TPU, the Nvidia Rubin, the new chip, or rubinultra.com, the Amazon Inferentia and Trainium. They're all around that section. And it used to be hey, there is like a classification between inference and decode. Today the nuance is more is it a pre-filled training chip or decode inference chip. And there is with the Groq acquisition there is another model of Cerebras.
[Michael Eisenberg]
One second because I think that's important. I think when Gavin was here, it was right after or right before Nvidia bought Groq, right? Explain why did Nvidia buy Groq, why that's important, number one. And number two, explain Cerebras has raised a lot of money recently. I mean, it's an incredible story, Cerebras. Right? It almost went public but there was customer concentration, maybe some other issues. They pulled back from the IPO. It's now a deca-billion dollar company – or 20 or 30 billion dollars, I think. And raising lots of money in the private market. So let's just try to take our listeners through what the differences are.
[Elad Raz — 21:53]
Sure. So let's classify them into these three categories. Training and inference that everyone spoke about it few years ago. People understand that there are few companies that train model and pre-tune a model. Meaning taking an existing model, getting your custom data and just tweak it. It's not something that costs a lot of money. You can do it anywhere.
[Michael Eisenberg — 22:14]
Who does that?
[Elad Raz]
The pre-tune?
[Michael Eisenberg — 22:17]
Yeah.
[Elad Raz — 22:17]
There are many companies that take open source model.
[Michael Eisenberg]
Right.
[Elad Raz — 22:20]
Whether it's the Chinese model, the Alibaba model or the Llama model and others that says okay, here is a model that is a base model. Base model is not the one that you ask him a question.
[Michael Eisenberg — 22:34]
What do I do the pre training on?
[Elad Raz]
Their proprietary data. That's open source.
[Michael Eisenberg — 22:38]
So that's the data side. What kind of compute do I do it on?
[Elad Raz]
So it depends on the volume but like single rack.
[Michael Eisenberg]
Basic compute.
[Elad Raz — 22:42]
Basic compute. Training model from scratch. It's super expensive and super big and there are few, few companies that are doing that. And then inference is a phase that, I mean GPUs is not one size fit or even within GPUs you have differences mostly around the memory and memory cost and capacity and bandwidth. When a user give you a query like, give you a paper in the LLM in the transformer, there are two phases. The first phase is called prefill. Let's take everything that the user give. I'm going to simplify the hell out of it. Let's do a big matrix multiplication. And here is the context. That's the prefill. It digesting the data into some kind of prompt. And decode, this is the phase that everyone loves to talk now especially to understand what Groq and Cerebras is, is the one that once you have the context generate a lot of small tokens. So the prefill phase is very similar to training because you are doing a big matrix multiplication. You don't need a lot of memory bandwidth. So you don't need expensive memory. That's like the digest of that. That's why you have chips that are dedicated for training or prefix. The workload is attributed by a big matrix and a vector. The problem with a big matrix and a vector, you are memory bound. You just stream the data from the metrics. You're doing the FMA, you're doing some point-wise kernel and reduction. That's it.
[Michael Eisenberg — 24:21]
Okay, I'll explain what you just said to everybody.
[Elad Raz — 24:24]
Memory bound means how fast. I mean everyone understand what token per second is how fast, you know, the screen is going to be. Okay, memory, different type of memory. You have SRAM, HBM. You know, SRAM is the one that Groq and Cerebras are all about, is how fast can I get the data from the memory or the context. The KV, the pre-fill phase, KV and I'm going to do the computation. You're not compute bound, you are memory bound. If you're using a cheap DDR, you're at around 1 terabyte of data movement. If you're using HBM, you're 30 terabytes, like 30x faster. So you can do more compute. If you are inside the SRAM, you can get to 150 terabytes way faster. Meaning you can speed the decode token faster.
[Michael Eisenberg — 25:11]
And that's why Cerebras is using those giant wafers also.
[Elad Raz — 25:14]
Yes, exactly. But the dumbest thing is, you know, no one calculate the cost.
[Michael Eisenberg — 25:20]
What does that mean?
[Elad Raz — 25:22]
So different memory has different type of cost. Okay. No one invent a new memory. The Cerebras didn't invent SRAM and neither Groq. I mean it's just existing memory that everyone use. We use SRAM. The question is how much memory you are using. HBM is expensive. HBM required advanced packaging. Meaning that in supply chain, when you generate the chip, when you generate the Maverick chip, our chip, your bottle neck...
[Michael Eisenberg — 25:49]
Your chip is called Maverick.
[Elad Raz — 25:50]
Exactly.
[Michael Eisenberg — 25:50]
Not Genesis, it's called Maverick.
[Elad Raz — 25:52]
Maverick. You have different type of memory and every memory has a different cost related to it. HBM are very expensive, but they have a medium capacity. DDR have low memory bandwidth, 1 terabyte relatively cheap, but you can get 2 terabyte of data. SRAM is hundred times less dense than that. Meaning they cost hundred times more because you need more chip to build them. Those are the three categories. Now you want, the question as you said is how do you measure your performance? Is it performance per watt? And you forget about the CapEx. You forget about the dollar amount that you put inside the chip. Just performance or performance per watt per dollar. Okay. CapEx is not free. You need to invest billions of dollars to build those data centers. That's why you see data centers that are still running Hopper. It's not that...
[Michael Eisenberg]
Hopper is a previous generation of chip.
[Elad Raz]
Yeah, exactly. I mean when Blackwell launched Jensen said, "Throw away the Hopper, buy Blackwell." CapEx is not zero cost.
[Michael Eisenberg — 27:05]
Well, it also turns out that these chips, because of that, it turns out that these chips have a longer life than anyone thought before. You know, they'll depreciate over I don't know, seven or eight years and not three or four years.
[Elad Raz — 27:15]
True. Yeah, but it's also related that in the decode phase it's all about the memory and memory technology didn't progress as
[Michael Eisenberg — 27:22]
fast as the chip.
[Elad Raz — 27:23]
So you can put way, way, way more compute. Jensen's Law is like 40x, you know, more compute. Right. Can you utilize the memory as well? Because that's the bottleneck. And then you need to build a big rack and connect them and doing collective to take the memory into one place. So the question is how you generate token per second. Token per second is the measurement that everyone loved. This is what started the LPU and Jonathan was the founder.
[Michael Eisenberg]
What is LPU?
[Elad Raz]
LPU is the name of Groq architecture, meaning there is a SRAM. You put the weights of the transformer there and you just trim the data and you can generate, you know, lots of token when you are SRAM. The problem is you need for a trillion parameter model. You need 2,200 of those chips. Super expensive. You need to normalize that.
[Michael Eisenberg — 28:17]
What does it mean to normalize that?
[Elad Raz — 28:19]
Normalize that is in the last GTC. I mean we are now in doing this recording after Passover in April. Eight months ago there was the GTC when Jensen spoke about the Groq acquisition and
he had like a nice chart saying we Nvidia Rubin, that's the name of the Nvidia GPU, are in the mid range, you know, until 2 trillion parameter model with half a half a million context window. But if you want faster token per second, here is a joint effort between rec of Rubin and rack of Groq LPU that combine them together and get 15 times more token per second. Great. How much it cost? 50 times more. Instead of $6 per 1 million token, 9 times more expensive, it's going to cost you $45 per million token. Normalize mean will user are going to pay the price to run those models faster, you get two times more token per second at a cost of nine times more dollar. That's the big question around the Groq, Cerebras. I mean will the price make sense for user to pay this extra price for slightly faster models? That's the big question around the SRAM based.
[Michael Eisenberg — 29:43]
Okay, so said simply, and then we'll come back to NextSilicon. Said simply, everything is measured right now in AI land, not an HPC land, but AI land. It's measured in cost per token. The new architectures which combined the Nvidia GPUs alongside either Groq or Cerebras to increase memory footprint, we'll call it, memory capacity has increased the cost. It's doubled the speed but increased the cost of producing a token significantly. What are the applications that people are willing to pay that for?
[Elad Raz]
Yeah.
[Michael Eisenberg]
Okay. Enter NextSilicon now.
[Elad Raz — 30:22]
Enter NextSilicon. Yeah, so in NextSilicon we obviously can play around the entire range. We have decided to focus.
[Michael Eisenberg — 30:33]
What does that mean you can play around the entire range? What does that even mean? Nobody can do everything.
[Elad Raz — 30:35]
Yeah, absolutely. You have, you need different products to different market. You need the SRAM base, you need HBM based, you need LPDDR for the pre-fill or training. That's like different type of product. The core technology itself is how to run compute faster. And then the question that you need to ask me. Well Elad, who cares? I mean if you said, you just told the entire audience that AI is memory bound problem. So take a memory, maximize it. That's the result that you can get. How can you run it faster?
[Michael Eisenberg]
Right. There goes that Amdahl problem again.
[Elad Raz — 31:18]
Exactly. Yeah but this is like short memories of let's design a chip that looks on past performance and not future. What does it mean to program a chip to the future? So a, understand that or the audience – you need to. You are an investor at NextSilicon. You know how painful it is to build a semiconductor company. Just a perspective, $150 million for every ASIC design. Meaning that the company burns $150 million and then you get a first sample from TSMC, from the foundry. There can be mistakes and mistakes are expensive and then you need to go to the drawing board and do another revision. It's like super equity capital expensive. It's not easy. I'm never going to build a semiconductor company again.
[Michael Eisenberg — 32:10]
Because Jensen's still doing what he's doing 30 years. I expect that you'll be in a rocking chair before you get another chance.
[Elad Raz — 32:17]
Oh probably. Okay. So that, that's expensive. So when you design the chip, you need to design a chip for three years into the future rather than three years in the past. Today architecture are transformers. Transformers are bottle neck by HBM memory or SRAM memory. But algorithm change quickly. Do you remember in the beginning we said well first AI model came it was convolution, neural network or image classification until the chatgpt moment that people say this thing works and we can, you know, unlock the imagination. And then a lot of people spoke about AGI and other... at the end of the day, whether it's Yann LeCun AGI, this doesn't matter. Algorithm change. With algorithmic change you can get way, way better performance than the actual chip. At NextSilicon we don't care what workload is running, whether it's AI decode or HPC code. Why this thing is so powerful, because future models 28, 29 probably not going to be the transformers we know today. Even now there are papers at Google and even Nvidia that says let's compress the memory and, because we are memory capped, so let's compress the memory, get to the computational core, decompress that KV cache and then we can do more work.
[Michael Eisenberg — 33:49]
Okay. Said simply – what you're betting on is the following. Because I am the fastest, bestest, cheapest compute processor on planet earth. Are you by the way?
[Elad Raz — 34:02]
Yes.
[Michael Eisenberg — 34:04]
Okay. And everybody else is memory balance. Why don't we you know, tighten the pipes a little bit or you know, compress that so we can jam more memory into the system, push it through NextSilicon, do some magic on it and basically take advantage of the increased compute and not be memory bound anymore.
[Elad Raz]
That's an example that we are not going to compress it. The users are doing those research now and show 8x better performance just by memory compression.
[Michael Eisenberg]
Even without that?
[Elad Raz — 34:22]
No, no. even without NextSilicon, on a GPU because it's easier to program. I mean building an AI accelerator just to run transformers is the dumbest idea ever because algorithm change. I'm betting that three or four years from now you will see more complex algorithm that accelerate the computation or demand 1000 times less computation and memory bandwidth that we can run those models 1000 times faster. Now this 1000x number is important. Why? Because your brain operate at 20 watt. Those big racks are, or GPUs, are in 22 kilowatt per operation and same operation cost 1000 times when you run them on GPU. That's not going to be solved by getting to 0.01 nanometer on the transistor.
[Michael Eisenberg — 35:25]
Your brain operates at 20 watts. Mine probably operates at less than that.
[Elad Raz — 35:28]
I'm not sure about that.
[Michael Eisenberg — 35:29]
Let's just be very clear about the bet. The bet is the world is going to need dramatically faster compute. The bottleneck problems, let's call it, which is memory.
[Elad Raz]
For now.
[Michael Eisenberg]
For now, is going to get solved or get solved to be able to take advantage of the compute. But right now you don't provide that much more value because of the memory problem.
[Elad Raz — 35:54]
Yeah, but we have our own tricks over there and we are going to reveal them soon.
[Michael Eisenberg — 36:02]
Ooh, want to reveal them now?
[Elad Raz]
No.
[Michael Eisenberg — 36:05]
When's soon?
[Elad Raz]
Your partner is going to shoot me.
[Michael Eisenberg — 36:07]
Okay, now when Nvidia or Amazon or Google take a look at you, right? These are people, these are companies producing GPUs and TPUs that a priori are less fast, less accelerated than your computer. What's their answer? What do they say? By the way, I should point out, I pointed this out in a tweet recently, that if you look at kind of the unlock and I asked Grok, by the way, Grok with a K, not with a Q. Grok with a K, which is the X, you know, kind of bot there. SuperGrok. The question I said, okay, what has enabled Amazon's, what is the original technology that enabled Amazon's Trainium and Nvidia's scale up of their compute? And the answer by the way, is Israel in both cases because I think it was Annapurna, I can't remember Savannah or Annapurna sold to Amazon, became the basis for Trainium and Mellanox of course, which is the interconnect which has enabled Nvidia. What?
[Elad Raz — 37:12]
That's the NV link. I mean today you talk about system.
[Michael Eisenberg — 37:17]
Yeah.
[Elad Raz — 37:17]
Because you can take a model and shard it across many GPUs. The bottleneck is how fast you can connect those different GPUs.
[Michael Eisenberg — 37:24]
Yeah, that comes from Mellanox, of course, by Eyal Waldman, and he's been on this podcast before. So if I'm, if I'm Google and Amazon and Nvidia and I'm looking at NextSilicon, I go, nah. Why? What do they, what would they say to say, okay, this is not real or not important?
[Elad Raz — 37:42]
Right now. The demos that we have made was around the HPC.
[Michael Eisenberg]
Not the demos, you have actual customers.
[Elad Raz — 37:49]
The customers. I mean...
[Michael Eisenberg]
The use cases are around HPC.
[Elad Raz]
Exactly.
[Michael Eisenberg]
HPC, in case I didn't say it earlier, is high performance computing. But go ahead.
[Elad Raz — 37:56]
Right now we are taking scientifical code in the HPC. That's what we are running and winning. The core technology is so much different. It's not a feature. NextSilicon is not a feature. It's not, okay, let's take the GPUs and connect NextSilicon into that. It's different architecture, it's a replacement. This is where we are. And as every novel technology, GPU included, at the beginning, most people don't understand the uniqueness around what we have built. The way for us to compete with that is just execute.
[Michael Eisenberg — 38:36]
If you had to use historical analogies, you're more CPU than GPU, is that fair to say?
[Elad Raz — 38:42]
No, it's not CPU and GPU. It's not an FPGA. It's something different. But let me take an example. When Intel first heard about the GPUs, they said, who cares about the GPU? Okay, we have a CPU. This is the way the people see us. They say, okay, they have an interesting technology, they are a technology and not, obviously we are not a market leader in any category, but this is where we are now.
[Michael Eisenberg — 39:09]
And how big is your penetration into the HPC world?
[Elad Raz — 39:13]
We are in every Department of Energy, Three Letter Agency. I mean we are there.
[Michael Eisenberg — 39:21]
You're there. And now that Jensen left the HPC market, has that opened up more opportunity for you?
[Elad Raz — 39:27]
Absolutely.
[Michael Eisenberg — 39:28]
Why did he leave it?
[Elad Raz]
Good question. I think that you have limited resources inside your silicon, and there's fixed amount of transistors. It used to be 100 billion transistors. Now it's 200 billion transistors on the Blackwell chip. Should I allocate more resources for the HPC or should I allocate more resources for the AI? In HPC computers are built around 10 to 100 million dollar. The big leadership computers AI gigawatt factories start with a billion dollar 10 of billions of dollar per gigawatt.
[Michael Eisenberg — 40:13]
So you're still playing in the, in the little leagues there.
[Elad Raz — 40:16]
Yes. Okay, I'm in the little leagues.
[Michael Eisenberg — 40:17]
Like one of the big advantages that Nvidia has is CUDA, right? Which is the software layer that's created a lot of lock in. How are you going to break into that?
[Elad Raz — 40:30]
You just run CUDA.
[Michael Eisenberg — 40:31]
You're going to run CUDA?
[Elad Raz — 40:32]
We are running every program language that the user wants us to run. We can run it.
[Michael Eisenberg]
Why?
[Elad Raz]
The way that NextSilicon operate is not by programmable language. We don't really care how the user wrote the code. We get the code. We understand the different computational and at runtime, once we understand how it works, we reconfigure the chip, we place the different transistor...
[Michael Eisenberg]
You actually reconfigure the chip?
[Elad Raz]
Exactly. And whether the input is a C code or C++ for the HPC or CUDA or Triton to write a new envelope or, we just execute that.
[Michael Eisenberg — 41:13]
One of the things that Gavin said when he was on the podcast, he said that chip companies take three generations to kind of get your act together and find the chip that works in the market. You're Gen 2 now, right?
[Elad Raz — 41:26]
Correct.
[Michael Eisenberg]
Do you agree with him?
[Michael Eisenberg]
In general terms? Yes. Because even now, as you said, we are in the little league. It just take time for companies to generate market fit.
[Michael Eisenberg — 41:39]
It's three generations?
[Elad Raz — 41:41]
It takes time. Why? Because it take you like three to four years until you get the first chip from TSMC. So that's already four years. First generation, at almost every company I know, it's not exactly the same as the customer meets. You need another generation. By the time you start selling your... we're selling the Maverick 2, you're already in your third generation in terms of lifetime. So yes, I agree with that.
[Michael Eisenberg — 42:12]
When does your third generation tape out? Okay, let me ask you another question. I Want to get to your personal background one second. So you served in the 8200 unit?
[Elad Raz — 42:25]
Correct.
[Michael Eisenberg — 42:25]
Okay, that's well known for cyber, not for chip or chip design. What happened to you?
[Elad Raz]
Personally, I think that I mean it's incredible that the State of Israel educate young entrepreneur, young young talented pre-school to go after cyber. Okay. So, I was in the first generation of the cyber but I love to create. I love to write code. I love compute. This is what I've done and after my military service I decided that well I've done it for too much time. I was really good at it but it's time let's build a company. I didn't know what I want to do I started a service company around high performance computing, high performance networking. I got a lot of interesting project I think that during that lifetime of the company integrity project, you and I met for the first time. This company was later got acquired by Eyal Waldman in Mellanox and then I got to see the big supercomputers and I just fell in love with that and I say okay this is what I want to do and I started NextSilicon.
[Michael Eisenberg — 43:46]
Just like that?
[Elad Raz — 43:47]
Exactly like that.
[Michael Eisenberg — 43:48]
Where did you recruit your team from?
[Elad Raz — 43:51]
All over.
[Michael Eisenberg — 43:52]
How many people work at NextSilicon now?
[Elad Raz — 43:54]
At the moment, around 400.
[Michael Eisenberg — 43:56]
400. And where did you recruit the technical talent from?
[Elad Raz — 43:59]
Yeah, so the majority of the company is R&D, engineering. Divided a bit more on the software side but let's call it half and half between hardware and software. So I was, I'm the software guy, this is what I've done. So the team of the software is mostly coming from intelligence company or other companies I had relationship with. I was able to get Eyal Nagar, my co founder, he was in a lot of startups, did all the tape out in his life. I mean I never built a chip, and he was able to get the best talent from all over Israel, from Apple and Google and a bit from Mellanox. I mean all over.
[Michael Eisenberg — 44:51]
I want to talk about for a second this semiconductor industry. So you mentioned TSMC and you mentioned it takes three years or four years to get a chip out. Does it need to be this slow or is it just the structure of the industry where TSMC is essentially a monopoly in chip tape out any manufacturing basically. Couldn't we accelerate this industry in any way or not really?
[Elad Raz — 45:13]
Oh yeah, of course, of course, but not in our lifetime. And what do I mean by that? You know, when I came and started NextSilicon as a software engineer, I said what's the problem? I mean hardware is like a software. Let's like include the libraries and accelerate things and you know, the engineers in the hardware told me Elad, you don't get it, it's different. And there are many discipline around hardware design. And for the audience, I'm going to divide my talk. There is fabless companies like NextSilicon that design a chip and the end result of them is a graphic file that you send to TSMC for manufacturers. This is like how to print the chip. And there is the actual chip that has own their own fabs and so many, many different vendors around two aspects. So let's talk around the design phase. So you have the design, you have verification, you have dark magic of analog, how to lay down a transistor that send data in and out and then you have the place and route – how you take the design of the chip, press a button and then you get the layout of the chip. Those are like different aspects. And I said what's the problem? Let's write a Python script that does everything with Claude Code. But the amount of IP and complexity in that industry which is dominated by few companies, you have Synopsys, Cadence, and Mentor doing EDA tools. I mean how to take a code and get it into the end design for manufacturing, Ansys that got acquired and others. And the problem there is the cost of a mistake. Cost of a mistake means that your chip will not work. Chip will not work is another $150 million or $50 million if you find a quick fix. No one wants to take that risk. So everyone wants to sign off their tool that everything works and there is simply not enough money there to innovate.
[Michael Eisenberg — 47:31]
Like this whole AI race and the chips race in general. The United States introduced the Chips Act. It's no secret that the tension between the US and China around semiconductors is very large. Every decision at the end of the day at TSMC to supply you with a taped out chip is like a geopolitical decision. So...
[Elad Raz]
Absolutely.
[Michael Eisenberg]
If you were writing policy for the State of Israel right now or had $10 billion and a magic wand, what would you create to ensure that we're able to design, develop, tape out, and produce semiconductors going forward?
[Elad Raz — 48:13]
So let's divide it into manufacturing and design. Manufacturing, in the State of Israel, how much that I'm Zionist and I love my state, going to be impossible to build. We are not talking about 10 billion, we are talking about $30 billion if you want to be in the leading edge, and this is if you know exactly what you are doing. It's a know how that Intel, TSMC, and Samsung have mastered over the past two decades and China are trying to beat them and they are like just two generation in between.
[Michael Eisenberg — 48:52]
We have Intel fabs here.
[Elad Raz — 48:54]
You have good people, you have Intel fab. You don't have Intel technology.
[Michael Eisenberg — 48:58]
Right, that's true.
[Elad Raz — 49:00]
So in order to rebuild it, you still need this decade of development. By that time TSMC is going to raise. So you talk about more about $100 billion to have to build your own technology from scratch. In the design phase, absolutely. I mean we are not doing anything around accelerating or de-risking there. Most of the multinational that design a chip are US based. Many Israelis going to the military service and then going to build their own startup. Because that's the ecosystem, that's where the investors are. Even for us NextSilicon, fundraising at the beginning was super challenging because you come to investors that understand cyber and ARR and get like a fast money. A billionaire a chip is, you need patience, you need time, different type of stories. And we need. We need to build it, we have to build it. It's important. I think that the design phase is more important than manufacturing because that's your power.
[Michael Eisenberg]
Can you disrupt the Synopsis? Is it disruptable?
[Elad Raz — 50:12]
I think that for the EDA tool it is. But the market is not as big as everyone hoped for that worth the investment.
[Michael Eisenberg — 50:21]
So going back to something about Nvidia. You said in 2024 that Blackwell, the Blackwell announcement was the best thing that ever happened to NextSilicon. Why did you say that? What does that mean to you?
[Elad Raz — 50:34]
I said that on Blackwell and I said that also around Rubin.
[Michael Eisenberg — 50:41]
Yeah. You said that on Ruben too. Yes, that's true.
[Elad Raz — 50:42]
Yeah. We're scared shitless of every company that develop AI chip and you never know how they are going to progress. And I think that the best thing that happened to us with Hopper and Blackwell. Both of them were manufactured and designed with 4 nanometer and we look at the Blackwell specification, remove the sparsity, remove, you know, the other nuance that pretty cheap. But you take the core compute of Blackwell, core compute of Hopper, you compare them one by one. You see Blackwell is 2x than Hopper. Great. But it also consumed 2x more power. Nothing in the architecture had been improved between Hopper and Blackwell. NVLink for sure. You know other nuances, but that's like their core. Hopper to Rubin almost 2x more power, 2x more performance. This is...
[Michael Eisenberg]
Linear scaling.
[Elad Raz]
Linear scaling. At the end of the day...
[Michael Eisenberg — 51:42]
You want to say that you're exponential in the power to compute.
[Elad Raz — 51:44]
Between generation, way more than that. And we are just in the beginning of our design. We have so many places to improve efficiency that we have because we spend $100 million on a chip and not $1 billion on a chip.
[Michael Eisenberg]
What does that mean?
[Michael Eisenberg]
In terms of engineering.
[Michael Eisenberg — 52:03]
You spend 100 million, they spend a billion. So that's 10x. But how does that impact exponentially?
[Elad Raz — 52:06]
If you work on the architecture better on the transistor layout, you can squeeze more performance by those changes. Not 10x but 2x.
[Michael Eisenberg — 52:15]
Are you arguing that your capital efficiency has actually caused you to be more innovative?
[Elad Raz — 52:19]
Of course. Have to be. To start with, you know every company has its own risk. It's a roller coaster. Ups and down. In semiconductor is way worse, these ups and downs you need a lot of help from Hashem [God]. You know that miracle. Hashem is God Almighty. That's what you need in order to succeed in the semiconductor. And yeah, you have limited resources. You have to innovate.
[Michael Eisenberg — 52:50]
Interesting. So a couple of closing questions. Since the advent of AI, Claude Code, what changed at NextSilicon?
[Elad Raz — 52:57]
Everything in every company, across the board. I mean people don't understand what is coming and it's going to be a fun roller coaster. I think that in NextSilicon we have 400 talented people. With those AI tools even I mean the hardware, you remember that I said it's the most risk-averse kind of nuance. Even there, they are open for those type of innovation. And I'm literally see people getting 10x more productivity using those tools.
[Michael Eisenberg — 53:32]
Have you mandated that everyone needs to use...
[Elad Raz]
Absolutely.
[Michael Eisenberg]
AI code?
[Elad Raz — 53:37]
Of course. I mean a company that don't have a leaderboard scores of how many tokens is being used is...
[Michael Eisenberg]
The more the better.
[Elad Raz]
Of course.
[Michael Eisenberg — 53:46]
How big is your token budget now?
[Elad Raz — 53:50]
Depends. Like we are using everything. Me personally, I'm using Gemini, Codex, and Claude. We have people that generate $300 a day, $100 a day per developer. But I think it's mostly, we are now in April 26th, just in timeline. You know, those type of questions get a tendency not to age well. We are now in a phase that training for employees is the most important thing. Like personal example. So I find myself walking around and I am seeing a developer and like he run an agentic task and I ask him okay, how many agents have you opened? He answered only one. I said let's open another one and work on a different problem in parallel.
[Michael Eisenberg — 55:19]
And how does it really help even? Because it takes two years to tape out a chip anyway, two three years to tape out a chip anyway. So you're running faster on the software side of it but you can't move the main you can't move the atoms.
[Elad Raz]
So software is a no-brainer because everyone understand. Let's talk about the design. In design and verification, specifically in verification, you write a lot of tests in order to find hardware bugs. So you manually need to skip them. To start with all the basic test, you're doing that in a second. But an agentic test on all your hardware design until you find some bugs. All of those those are applicable to hardware as well.
[Michael Eisenberg]
And how much does that, if you have a call it a two-year cycle from beginning to end, how much would that take out?
[Elad Raz — 55:31]
Not much, because you have nine months in manufacture. But within the one year of design you can just do more.
[Michael Eisenberg — 55:39]
Got it. You can do more?
[Elad Raz — 55:41]
More features, better quality, good frequency and power consumption.
[Michael Eisenberg — 55:46]
So the jump from generation to generation should be bigger.
[Elad Raz]
Yes.
[Michael Eisenberg]
But you can't dramatically shorten the time from, call it beginning of design to tape out.
[Elad Raz — 55:55]
I don't think so.
[Michael Eisenberg — 55:56]
Maybe a month here to max. Nothing dramatic. That thing is interesting by the way, to think about the world of atoms has its own pace. The world of code has a entirely different pace these days. And the hardware can bear what the hardware can bear over time. So you mentioned that you go around and you're kind of setting an example and asking, you know, you did one agent. Let me help you do another agent. Apparently, you still code in assembly on a Commodore 64. I think that might have been my first computer. Commodore 64. It had the cartridges in the back. They still have that? The one you have?
[Elad Raz — 56:34]
Yes, yes, yes.
[Michael Eisenberg — 56:35]
You still have a Commodore 64?
[Elad Raz]
I have Commodore. I don't have the cartridges, I have for the Atari one. For the Commodore I have the big disc, you know, the floppy disc.
[Michael Eisenberg]
Oh okay.
[Elad Raz]
Yeah, that's the Commodore disk that I have. But yeah, I love all computers.
[Michael Eisenberg — 56:52]
You actually code on that thing?
[Elad Raz — 56:54]
Yeah, yeah.
[Michael Eisenberg — 56:56]
You don't have a VGA monitor still?
[Elad Raz — 56:58]
Yeah, I'm a bit lazy so I'm doing everything in emulator before moving it to the actual hardware. But, yes.
[Michael Eisenberg — 57:04]
Two last questions for you. We're living like in this moment of history right now where a chip company, Nvidia in this case, was like the most valuable business in human history. What do you think that means? Not just financially, but philosophically about the world where this notion of silicon can become the most valuable thing in human civilization.
[Elad Raz — 57:30]
No surprise there. Think about it for a second. When 1000 years ago we all were fighting around food. Okay. That's the basic element that everyone needs. Food, water, resources. I think that around 300, 200 years ago it was around energy resources. That's most of the worlds. Now we are in the age of compute. Those are the phases better, more energy you can produce will be utilized by compute. Compute is the wave.
[Michael Eisenberg — 58:03]
So when they call it a wafer, it's not just silicon, it's like a food reference that everyone.
[Elad Raz — 58:09]
I never thought about that.
[Michael Eisenberg — 58:11]
Could be a religious reference too. Christianity. And to finish, I started by asking you what was etched on the first NextSilicon chip and you said it was Bereshit, or Genesis, and on your most recent chip?
[Elad Raz — 58:27]
So Maverick 2, we haven't found a better word than Bereshit to place on the Maverick 2 for a long time. Like I ask everyone and you know, people gave us some kind of different references but nothing that was more powerful. And I told the engineer, just keep the word Bereshit because it's like it's Bracha, just keep it.
[Michael Eisenberg — 58:52]
Bracha means blessing.
[Elad Raz — 58:53]
Yeah. And then Maverick 2, sorry. And then unfortunately October 7th came and that was like few weeks before the tape out. I just told everyone a day after it was like Saturday and Sunday I sent the email to TSMC, said well I want to put Am Yisrael Chai, people of Israel live. And I had to explain them why it's non politicized and you know why. And I told them I'm not going to tape out unless you put it. That's like Israeli resilience and let's etch it. And that's, that's what exists on the Maverick 2. I'm
[Michael Eisenberg — 59:36]
Am Yisrael Chai on the Maverick 2.
[Elad Raz]
Yeah.
[Michael Eisenberg]
It's inspiring.
[Elad Raz — 59:39]
Thank you.
[Michael Eisenberg]
And thoughtful. And that's what's running the computing and high performance computing all over the place.
[Elad Raz — 59:45]
Exactly.
[Michael Eisenberg]
Much more than resilient, it's powerful.
[Michael Eisenberg — 59:49]
Elad, Thank you for joining us.
[Elad Raz — 59:51]
Thank you.
[Michael Eisenberg — 59:52]
Thank you for joining us on Invested. Thank you to Elad. If you enjoyed this podcast, please rate us five five stars on Spotify, Apple Podcasts. Please please please subscribe to the YouTube channel and if you're enjoying the content, be sure to share with your friends as well.
Amir Fischer 00:00.0
I got started investing in public markets when I was around 10 years old. There's this kid who was 19 who made $100 million from Trump Coin in his basement. I have this edge of being a teenager myself. And so I was like, "Why don't I invest in teenagers? Why don't teenagers invest in teenagers?" And so went out, ended up raising $2 million.
Amir Fischer 00:15.6
And that's what Noar Ventures does. I think people are scared that people will disregard them because of their age. I think you should use your age as a weapon.
Michael Eisenberg 00:23.2
What are other things that being 16 doesn't allow you to do?
Amir Fischer 00:26.8
Set up a venture capital fund – it's in my mom's name.
Michael Eisenberg 00:30.2
The venture fund's in your mom's name?
Amir Fischer 00:31.8
Yeah.
Michael Eisenberg 00:32.3
Is that real? I didn't know that.
Amir Fischer 00:33.6
Yeah.
Michael Eisenberg 00:34.2
You followed up 56 times to get Steve Cohen to come on your podcast.
Amir Fischer 00:37.9
Yes.
Michael Eisenberg 00:38.3
And what made him say yes? You won't be 16 forever.
Amir Fischer 00:41.3
Yes.
Michael Eisenberg 00:42.0
How do you invest in teenagers when you age out of the category?
Michael Eisenberg 00:50.3
Welcome back to another episode of Invested. This is a super unique episode. I'm thrilled to be here with Amir Fisher.
Amir Fischer 00:58.4
Thanks for having me on, Michael.
Michael Eisenberg 00:59.7
Good to have you. Amir, just tell our audience, how old are you?
Amir Fischer 01:02.7
I'm 16.
Michael Eisenberg 01:03.6
Amir is 16, and he's going to be our youngest guest probably forever on Invested. And I think you're going to find this conversation super interesting. Amir, what do you do?
Amir Fischer 01:15.5
I run a podcast and I also run a venture fund.
Michael Eisenberg 01:18.1
Right. So Amir is a solo GP, venture capitalist and he runs a podcast, which we'll get into with literally, titans of the universe. Where do you live, Amir?
Amir Fischer 01:30.6
Live in Greenwich, Connecticut.
Michael Eisenberg 01:32.2
And have you lived your whole life in Greenwich, Connecticut?
Amir Fischer 01:34.7
Born and raised.
Michael Eisenberg 01:35.5
Do you actually go to school?
Amir Fischer 01:36.8
I do, I try to, although I don't end up going much.
Michael Eisenberg 01:41.2
Where do you go to high school?
Amir Fischer 01:42.8
Greenwich High School, the public high school in Greenwich, Connecticut.
Michael Eisenberg 01:45.4
In Greenwich, Connecticut. So before we dig into your inauspicious high school career, tell everybody about your venture fund, which is called Noar Ventures.
Amir Fischer 01:55.6
Yeah, so I had this idea about six to eight months ago. I saw a lot of teenagers starting interesting companies. And I was like, why is there no one focused investing on specifically on investing in teenagers? Saw a lot of people investing in Gen Z, 20 year olds, 30 year olds, and all that kind of stuff.
Amir Fischer 02:14.8
And I thought it'd be interesting. There's a market for investing in teenagers in the sense of, I think there's a lot of people who had access to the Internet very early, do very interesting things with it. There's kids who made millions trading crypto in their basement when they were early teenagers. There's kids who now work at these big AI labs in their kind of late teens.
Amir Fischer 02:30.7
And so I think a lot of these people are going to go on to start very, very interesting companies that'll do very, very innovative things. And I think the focus on this cohort can be very interesting. And I also think I have this edge of being a teenager myself in the sense of I can probably pick out better talent among this generation than other people can.
Amir Fischer 02:48.7
And so I was like, why don't I invest in teenagers? Why don't teenagers invest in teenagers? And so went out, ended up raising $2 million. And that's what Noar Ventures does. I write pretty sizable checks to the most talented teenagers in the world, starting the most interesting companies in the world.
Michael Eisenberg 03:01.7
For full disclosure, I am an LP in Amir's fund. I'm still a happy LP because he hasn't invested a nickel yet. So we haven't lost any money.
Amir Fischer 03:09.9
It's perfect.
Michael Eisenberg 03:11.9
What is the most important thing that you think differentiates investing in teenagers versus my job as a 54 year old guy investing in people who are, out of their teens?
Amir Fischer 03:22.7
I think the one thing is maturity in the sense of, there can be this crazy, crazy smart 16, 17, 18, 19 year old, but if they're not mature, if they're not able to build a team, if they're not able to build systems, if not able to really, really get a company off the ground, they can't do anything, they can't scale to that billion dollar outcome.
Amir Fischer 03:39.2
And so I think maturity is the one what thing?
Michael Eisenberg 03:41.2
Why should I think that a 16 year old can figure out if another 16 year old is mature or not?
Amir Fischer 03:49.7
I think I'm relatively mature for my age and so I think...
Michael Eisenberg 03:52.5
That's what my kids say, too.
Amir Fischer 03:56.7
I've also spent time around a lot of people, through my podcast and such who've done incredible things across all industries. And so I think I'm really better suited to pick out the maturity than others in the sense of I've seen people who are able to take that zero and build it up into tens of billions, hundreds of billions of dollar companies.
Amir Fischer 04:15.7
And so I've been kind of privy to that. I've been around that and I've been able to, see people who kind of achieve those outcomes. And so I think it makes me better suited, in a sense.
Michael Eisenberg 04:24.8
It makes you better suited. Just give us some examples of teens that have come your way that you think are potentially high value founders or people that you're trying to hang around, like literally walk through the stories. One story that I've heard from you is the, I think you said they were 14 year olds who were hanging with Sam Bankman-Fried, or, just tell the story, just so everyone has it.
Amir Fischer 04:49.8
Yeah. So there were these two teenagers who were working at FTX during the time where everyone was hearing about FTX, like 23 and 24, I think. And so these kids literally got asked to move out by Sam Bankman-Fried. One of them got asked to drop out of high school from Sam and he said no because his parents wouldn't let him.
Amir Fischer 05:09.7
He ultimately didn't and he was very glad that he didn't. But I think he...
Michael Eisenberg 05:14.7
He did not drop out of high school.
Amir Fischer 05:16.3
Yeah.
Michael Eisenberg 05:16.7
And he's glad because his parents stopped him from...
Amir Fischer 05:18.8
Exactly.
Michael Eisenberg 05:19.2
Making an immature mistake.
Amir Fischer 05:20.6
Exactly.
Michael Eisenberg 05:21.0
Okay. And the other one?
Amir Fischer 05:23.5
The other one I think is 17 or 18 now and is now working at some kind of crypto lab.
Michael Eisenberg 05:29.2
And he did move into the Bahamas with Sam Bankman Fried?
Amir Fischer 05:31.5
I'm pretty sure, yeah, he did. And he did homeschool or something like that.
Michael Eisenberg 05:34.3
Okay.
Amir Fischer 05:34.8
And he has a very interesting story in the sense of like he started doing e-commerce when he was very young, then he went on to build kind of these projects on the blockchain, and then he built this like yield aggregator for cryptocurrency, got it up to like 7 million in assets under management and then ultimately went to FTX.
Amir Fischer 05:54.2
So there's kids like that using the FTX example, who've done these very, very interesting things. There's kids who are now 16, 17, 18, 19 working at places like Cognition or xAI. There's all types of very interesting kids. There's also kids who, from the crypto world, very interesting in the sense of it gives a lot of people a lot of accessibility very early.
Amir Fischer 06:12.2
And there's no real cap on what you can do.
Michael Eisenberg 06:15.2
What does that mean?
Amir Fischer 06:16.3
In the sense of you can be in your basement sniping meme coins and you can make, there's this kid who's 19 who made a hundred million dollars in Trump Coin in his basement because he was the first block on Trump Coin. And so there's literally no cap on how much money you can make, what you can achieve.
Amir Fischer 06:31.5
But I think the also interesting thing about this space is that people tire out of it very easily.
Michael Eisenberg 06:35.8
When you say, "the space," you mean crypto?
Amir Fischer 06:38.2
Yeah.
Michael Eisenberg 06:38.6
Yeah
Amir Fischer 06:38.6
You can't be sniping meme coins in your basement, it's not something you're gonna do your entire life. You can maybe do it for five years when you're a teenager or something. But now this is a point where, like, all these kids, they've made their millions, they've done whatever, and they're like, what next? I want to create actual value.
Amir Fischer 06:53.9
And so I think this is a very interesting pocket of talent. But these are some, like, the stories, among other things, of these interesting kids. Yeah.
Michael Eisenberg 06:59.9
You know what? When, earlier in my venture career, we talked about Mark Zuckerberg dropping out of college. And, you know, when I got into the business, it was Bill Gates who dropped out of the college. And it feels like you're now saying, you know, Sam Bankman Fried encouraged people to drop out of high school. You haven't dropped out of high school.
Amir Fischer 07:15.7
Dylan Field told me to drop out of high school.
Michael Eisenberg 07:18.1
Dylan Field told you to drop out of high school?
Amir Fischer 07:19.6
Yeah.
Michael Eisenberg 07:19.9
Did he drop out of high school, Dylan?
Amir Fischer 07:21.2
He did not.
Michael Eisenberg 07:21.8
He did not.
Amir Fischer 07:22.3
He dropped out of Brown.
Michael Eisenberg 07:23.3
So why did he give you that advice?
Amir Fischer 07:25.5
I have no idea. I think the place where it was coming from was like, you have this opportunity now, which is very, very unique. I don't think, like, there's a single person in the world that has as unique an opportunity as I have right now, and so just like, take it. Give it all you got. You can always, like, I don't know, reapply to college or something, in a sense.
Amir Fischer 07:44.7
And so I think that was, that's where it came from.
Michael Eisenberg 07:46.4
Tell me about your current high school experience. Like, what do you, you go?
Amir Fischer 07:50.2
I go.
Michael Eisenberg 07:50.6
Every day?
Amir Fischer 07:52.2
Every day. At least I try.
Michael Eisenberg 07:53.4
Your parents will listen to the podcast, so we should say every day, right?
Amir Fischer 07:55.8
Every day.
Michael Eisenberg 07:56.6
Every day. And, is it a good use of your time?
Amir Fischer 08:01.8
I want to be politically correct here.
Michael Eisenberg 08:04.5
I think you just answered the question.
Amir Fischer 08:05.8
Yeah, I don't think it's necessarily the best use of my time. I think there's, like, higher value things I can be doing with the time I spend in school. I also think there's this interesting kind of dynamic in school in which these teachers want to spend or want to fill out a certain amount of time a day in which they have to teach and ultimately get paid.
Amir Fischer 08:24.2
And that amount of time is not where really learning is maximized. They can maximize learning in maybe 10 minutes out of the hour they are teaching. And so I think spending that additional 15 minutes in every class there, like 5/6 of the time is just a waste. And so I'd say as a whole, if I would generalize, I'd say school is probably not the best use of my time.
Amir Fischer 08:45.8
But I think it's ultimately like I have to get my high school degree and it's something that I have to go through to do so. And so it's the only thing that I've got right now. So. Yeah.
Michael Eisenberg 08:55.4
How many kids study in Greenwich High School?
Amir Fischer 08:57.7
I think it's in the high 2000s, so 27, 2800.
Michael Eisenberg 09:01.8
And how many of them are doing like other things on the side? This is not a side hustle for you. This is like a core hustle for you, setting up your venture fund, your podcast, which we'll come to in a second. How many others are you think are doing what you're doing?
Amir Fischer 09:12.6
I think very few are doing things as seriously as what I'm doing. I think there's some who have like experimented in like these, you know, drop shipping. There's some who like to trade options or whatever. Nothing really materializes for a lot of them just because of like, lack of commitment and discipline.
Amir Fischer 09:29.8
But some people try, I'd say maybe like dozens or maybe like a hundred of the kids try to do these hustles, but very few do it to kind of an extent of which, like, high intensity.
Michael Eisenberg 09:43.5
If you're like advising another 16 year old today, not investing in them, advising them when they're in high school, what, what's like the most important trait you think they need to have?
Amir Fischer 09:52.8
I think it's just bias towards action and being extremely proactive in the sense of like, I think people are scared that people will disregard them because of their age. I think you should use your age as a weapon. And every cold email I send to every person I want on my podcast, it's their name dash Amir Fisher dash Greenwich High Schooler.
Amir Fischer 10:15.3
I use that Greenwich High Schooler. And when I start the email I say, "Hi, I'm a 16 year old." And so I think without that I wouldn't have gotten anywhere near the guests I've gotten today or I wouldn't have met anywhere near the people I met today. And so I think these people are scared that their age is going to be used against them or whatever.
Amir Fischer 10:33.9
Use what you have now. Use it to your advantage. Be extremely proactive. Put yourself out there and just see what happens. Worst thing that happens, you're back in the spot that you were yesterday.
Michael Eisenberg 10:42.7
Right. So super high agency.
Amir Fischer 10:44.8
Exactly.
Michael Eisenberg 10:46.8
Take whatever risks because you got very little to lose when you're 15 or 16.
Amir Fischer 10:50.2
Yes.
Michael Eisenberg 10:50.7
Unless, of course, you made $100 million of sniping Trump meme coins. Then you may have something to lose.
Amir Fischer 10:55.2
Exactly.
Michael Eisenberg 10:57.6
Do you have time for a social life in high school?
Amir Fischer 11:01.7
My socializing is kind of limited to high school. That's why I'm seeing my friends outside. I also play tennis. Other than that, I mean, I'm just kind of heads down doing what I do.
Michael Eisenberg 11:10.7
How many entrepreneurs, teenage entrepreneurs, do you meet a week?
Amir Fischer 11:14.4
I would say around 30.
Michael Eisenberg 11:18.5
30 a week.
Amir Fischer 11:19.5
30 a week. Yeah.
Michael Eisenberg 11:20.5
Amir has this incredible email he sends out to his LPs every week, which summarizes the most interesting people he's met during the week. Give us two or three of the most interesting people you've met recently.
Amir Fischer 11:33.8
Yeah, I think I'll use just one example. And there's, these are particularly parts of the story that I can pick out. There's this kid who, there's this rapper called Trippie Redd. He's very famous. He gets like 20 million views a month off Spotify. And so this kid was making videos in his basement for rappers, making like, edits of them on, like, posting on social media.
Amir Fischer 11:54.5
He got picked up by Trippie Redd when he was 16, toured around the world with him, and then ultimately went back to making kind of films. Ended up working with this artist, this kind of random musical artist that he took a bet on very, very early and ended up getting them signed to Warner Records, ultimately suing Warner Records because they kind of kicked him out of the deal.
Amir Fischer 12:17.9
And then now is making films out of this kind of company called Circus 17. His name is Dylan. And actually getting very, very closely mentored by Ben Affleck. He's just 19. And so that's one of these just like insane, incredible stories.
Amir Fischer 12:34.1
There's also a really, really good friend of mine. His name's Kyron. He started college when he was nine years old, graduated when he was 14. It did take him five years. Yes. And then ultimately worked at SpaceX for two years. Worked on Starlink, where he owned most of his team's code base.
Amir Fischer 12:51.5
So he wasn't just like a performative hire. He actually did stuff and ultimately went to Citadel Securities where he now does low latency options market making for the biggest market maker in the world.
Michael Eisenberg 13:00.4
Is that, this is a hard question to answer. And I mean, this is not judgmental. I'm just asking, like, one of the things I always worry about with all these smart guys who went to quant, was like, couldn't they be building Starlink? And here's a guy who built Starlink is now doing quant trading for Citadel. No disrespect to Ken Griffin, but can't you give him a venture investment to do something better?
Amir Fischer 13:22.8
I don't want to say anything about his future plans are...
Michael Eisenberg 13:27.2
Being agey...
Amir Fischer 13:28.3
But I think at some point over the next couple decades he's likely going to start something of his own and have a bigger impact on quant.
Michael Eisenberg 13:34.1
Okay, yeah, give us another person, another example.
Amir Fischer 13:38.2
I think two ones are the, are the FTX guys. I think another would be this, this is like not necessarily one who's had an accomplished background, but there is this 17 year old who ended up burning 12.5% of his body in third degree burns.
Amir Fischer 13:59.5
He got in an accident when he was in middle school, ultimately recovered from it and started building autonomous drones and he won kind of a couple of national science fairs. And now he's building a company, building these like incredible autonomous drones from his bedroom. And he's also building like a totally unique and novel software within them.
Amir Fischer 14:19.0
And so he has these like gigantic servers, server racks in his basement that he set up and everything. And so I think that's like another example of someone doing something,
Michael Eisenberg 14:27.1
Pardon the question. What is the fact that he burned 12 and a half percent of his body have to do with what he went on to do?
Amir Fischer 14:33.1
Yeah, I, the reason I mentioned that is it's this incredible adversity. I think something like that at a young age really is like an incredible formative experience that ultimately like flips the switch. And I was talking to him about it and he was like, "After that I knew who my real friends were and like I knew what really mattered.
Amir Fischer 14:51.1
And I was like thinking to myself like before that I was just prancing around life, didn't really know what I wanted to do. And after that I was like, the real world's gonna hit me. Things get serious fast. What do I want to do for the rest of my life?" I think that gave him an answer. And so speaking to someone like that where when you talk to someone about something like that, they can, you can really, really see a change in how they behaved and you can see how that adversity really impact them.
Amir Fischer 15:12.2
That's something that I like, I love to see.
Michael Eisenberg 15:14.0
What was the adversity you encountered, you think?
Amir Fischer 15:17.0
I don't think I've encountered a lot of adversity. I think my parents went through a pretty hefty three year divorce. I think that was, that was some adversity. And I think that also kind of flipped a switch in me, which is relatively similar to him, which is like, I grew up in like a relatively environment where I was kind of sheltered.
Amir Fischer 15:33.0
When you grow up in Greenwich, you're not like, you don't see any gang violence, you don't see anything particularly harsh, you don't see any war. And so I was like, I think after that divorced, I was just like, the real world's coming at me. And I need to do something. I've always been motivated to do something.
Amir Fischer 15:49.4
What will I do?
Michael Eisenberg 15:50.7
Take us back to how you actually got started in this whole doing, take us really back to the origin story.
Amir Fischer 16:00.0
Yeah. And so I grew up in Greenwich. I got started investing in public markets when I was around 10 years old. I got really interested through a couple YouTube videos I watched about value investing. And so I dug down this really, really deep rabbit hole of value investing.
Michael Eisenberg 16:14.5
On YouTube.
Amir Fischer 16:15.3
Yeah. So looking for like summaries of The Intelligent Investor, like security analysis through YouTube, like videos or
Michael Eisenberg 16:23.8
The Intelligent Investor by Ben Graham.
Amir Fischer 16:25.2
Yes.
Michael Eisenberg 16:25.5
Yeah.
Amir Fischer 16:26.4
Or like watching how does Warren Buffett pick stocks? Or watching all these videos about how people pick stocks or whatever. Ultimately watching some clips of Warren Buffett shareholder meetings and whatever. Ultimately went down this really, really deep rabbit hole from like when I was around 10 or 13, tried to read, watch, and listen to everything the greats ever put out.
Amir Fischer 16:44.5
So the Buffetts, the Mungers, the Ackmans, the Marks of the world on value investing. Taught myself how to read financial statements, build financial models, all that good stuff. Did it until I was 13. Then when I was around 13, I was like, I want to try this thing called short term trading.
Amir Fischer 16:59.5
I always saw it. I always saw people making a lot of money and I was like, okay, I want to make money. And so, and this always value investing that I did was out of an $100 account. I convinced my mom to set up when I was 10 years old. And so I was around 13 and I was like, I want to try this. And so ultimately that year was spent, trading currencies on my laptop during my homeroom period in my, I think it was my sixth or seventh grade class.
Amir Fischer 17:23.0
And so while everyone else was like playing games on their laptop, on their school laptop, I was trading currencies and whatever. It was kind of funny. And it was an interesting experience. Like, taught myself how to like read charts. And realized short term trade is just based off solely off reading charts. But did that for about a year.
Amir Fischer 17:40.0
It was interesting experience. Taught me how to like get a feel for short term markets. And then when I was 14, I was like, okay, I want to make some real money. So basically my birthday when I turned 14 and I heard about this thing blowing up called these social media marketing agencies and I was like, okay, I want to start one of these.
Amir Fischer 17:56.4
And so ultimately was like, I want to learn how to do Google and Facebook ads and what niche can I do this for? I realized there was 2 million real estate agents in the United States. All of them are very competitive with each other. The only thing that differentiates one from another is brand.
Amir Fischer 18:12.1
And so went out, told myself I'd do Google, Facebook ads two months off of YouTube, cold emailed tens of thousands of real estate agents over the span of like 10 months. And was like, "I'm 14, I'll do your ads for you, please pay me." Not like much more elegant than that, but ultimately in around eight months, scaled up to where like I did around $15,000 a month in revenue.
Amir Fischer 18:35.8
There was a couple problems that arose out of that though, because I was growing really, really quickly and it was a one man show. And the problems were that I was okay at what I did, I wasn't great. And so at, some point the charm wore off of having a 14 year old do your advertising. People started realizing of like, this kid's okay at what he does, but he's pretty expensive.
Amir Fischer 18:53.3
You'll find better people out there who are cheaper and who can do the same thing that he does. And that was one thing. Another thing it was just like I was my freshman year of high school, my grades were dropping to like all Ds. My parents weren't very happy with me. And I also came to a realization of like, am I passionate about this? No, I'm doing it solely for the money.
Amir Fischer 19:10.4
So is this something I want to do long term? Not really. Ultimately put that on pause and then this is kind of where I start the things that I'm doing now kind of originated, of around last year, fall. So around last year, this time started the podcast, Generating Alpha podcast.
Amir Fischer 19:30.1
Because I always listen to a lot of podcasts in finance. Always saw a lot of people talking about their strategies, their perspectives or whatever, but never really heard people talking about their stories as investors. We hear a lot of founders talk about their stories, their upbringing, how they got to where they are today, kind of their origin stories, but you never really hear a lot of investors do that.
Amir Fischer 19:49.3
And so I was like, I want to, if no one else was going to do this, I want to do this. Sent out 3000 cold emails to every billionaire across every financial asset class I could possibly find. Went through, like, the hedge fund Forbes list of highest hedge fund earners from, like, 2007. Every little piece of information I could find.
Amir Fischer 20:05.5
Cold emailed 3,000 people over the span of like, 10 months. And then, my first big guest was Jim Rogers, who co-founded the Soros Fund with George Soros. My second big guest was Steve Cohen. And I got Steve on, like, a large amount of follow ups.
Amir Fischer 20:21.5
And now I've done...
Michael Eisenberg 20:23.0
What does mean you got Steven on a large amount of follow ups? What does that mean?
Amir Fischer 20:25.1
I think it was a 56 follow up.
Michael Eisenberg 20:26.5
I mean, you wrote him 56 times?
Amir Fischer 20:27.9
Correct. Followed up 56 times.
Michael Eisenberg 20:29.4
You followed up 56 times to get Steve Cohen to come on your podcast?
Amir Fischer 20:32.9
Yes.
Michael Eisenberg 20:33.4
And what made him say yes?
Amir Fischer 20:36.0
I think the persistence.
Michael Eisenberg 20:37.2
And what made Jim Rogers say yes?
Amir Fischer 20:38.8
I was also... I think Jim's now, like, just takes every interview. So I don't know if he's particularly selective. But I got lucky there. But Steve. I was talking with Steve, like, I think like a month or two ago, and he was just like, "I also said yes, partly because you're in Greenwich." Which, like, I'm very grateful for, and I took advantage of.
Amir Fischer 20:59.0
And so now I've done 44 episodes as of last Thursday with people like Steve, Howard Marks, Barry Sternlicht, Thomas Peterffy, Jeff Yass, many more. And then ultimately built up an interesting network, and then this fund came to fruition recently.
Amir Fischer 21:17.6
But yeah, that's kind of my origin story.
Michael Eisenberg 21:18.8
Did you interview any venture capitalists or are they all public markets guys?
Amir Fischer 21:23.7
I've interviewed Tim Draper, Alan Patricof, Kevin Hartz, and we'll do something soon.
Michael Eisenberg 21:30.5
All right. Alan Patricof is incredible.
Amir Fischer 21:35.3
He's 92 and he's just still like.
Michael Eisenberg 21:38.3
He's not the OG. He's like the PG. The prescient guy. He's like. He's unbelievable.
Amir Fischer 21:42.9
I met him a couple months ago for a coffee in New York City. And his son calls me after. He's like, "You're this guy's favorite person." And so I've got to be Alan Patricof's favorite person.
Michael Eisenberg 21:51.9
That's amazing.
Amir Fischer 21:52.7
Yeah.
Michael Eisenberg 21:53.8
But that's amazing. You were born, like, after his 75th birthday.
Amir Fischer 21:56.5
Exactly.
Michael Eisenberg 21:57.4
What makes a 10 year old kid get interested in investing in stocks? I'll say for myself that I actually got interested in investing in stocks when I was 12 or 13. And I bought some with my bar mitzvah money. That was the first stocks I bought. I know what I bought. I bought a stock called Tofutti, which still makes soy based ice cream and Tops baseball cards because I like to flip baseball cards.
Michael Eisenberg 22:19.4
And it was like a thing, you know, you should only invest in something you know, and love. And I, didn't love Tofuti, but my mom did, but I did love Tops baseball cards. And so, what makes a 10 year old get interested in like public market investing or trading currencies?
Amir Fischer 22:34.9
I think truthfully it's a product of my environment – of you grow up in Greenwich and you hear about all these hedge funds coming out of Greenwich, like the Point72s, Bridgewater is right over in Westport, there's the Vikings, whatever, these gigantic hedge funds. And everyone around you, you go to school, everyone around you can be categorized.
Amir Fischer 22:53.1
Like everyone's dad works in one or two places, which is either an investment bank or a hedge fund. And so it's one of the few avenues you explore. First of, like, these are probably some of the only ways you can make money when you're growing up. You're like, okay, the way I want to make money is going to be a hedge fund investor. I'm going to work in an investment bank. And so I think it's one of the more logical first kind of areas to explore, which I also see a lot of my friends, like starting to trade later than me, but like starting to trade stocks or whatever.
Amir Fischer 23:19.1
I just started it earlier because I think it was like relatively more proactive. But I think it's just like an outcome of my environment of just like being around these people who are all investors. And I was like, I want to check this area out.
Michael Eisenberg 23:30.2
It feels like though, there's also like a unique time in history where when I was growing up, the only way you could, you know, find out about the stock market was you opened the New York Times in the morning. You turned to, it was the D section at the time, which was the business section. And you look through this like ichart of stocks kind of listed and you went out and learn.
Michael Eisenberg 23:46.9
I couldn't learn about investing other than kind of asking people. You went out and watched hours and hours and tens of hours of YouTube videos to train. What... how do you reflect on that or how do you think about that as the, you know, with this young generation, they can literally learn anything on YouTube right now?
Amir Fischer 24:02.7
I think it's, first I just want to preface, I think it's like absolutely incredible. I think people have knowledge at their fingertips like never before. And the barrier to go out and learn is so much lower than it's ever been. You don't have to, to get SEC reports, I think in the 1970s there was this hedge fund manager called Steve Mendel who, who runs Lone Pine, he was covering Walmart for Goldman Sachs in the 1970s.
Amir Fischer 24:29.0
And when their quarterly reports came out, you could just call the SEC and get the reports because no one else had them and then trade based off that information and you have an edge over other people. But now information has gotten, that's an example of even at a place like Goldman, in the 70s, you didn't have information at your fingertips.
Amir Fischer 24:45.4
Now as soon as the quarterly report comes out, someone made a YouTube video on it. And so everyone can learn everything. And so I think because there's so much more stuff available for people to consume, that means there's also so much more like lazy and like slop stuff in a sense that people can consume.
Amir Fischer 25:05.1
And so I think people are inherently becoming lazier and lazier. All of this learning is becoming more kind of easier to access. And so I think the separation between lazy and proactive is kind of becoming larger and larger in the sense of like not many people are doing these types of things.
Amir Fischer 25:25.8
But I do think that, it's just very, I think it's only going to get more and more like this. I think with the kind of rise of these LLMs, you can ask them questions, you can prompt them. When I was 10, if I could have used these things, I probably would have learned way faster. And so I think it's just way more up to the person of like, do you want to just have to learn or do you just want to stay like you are?
Michael Eisenberg 25:47.8
This comes back to something numerous people are saying right now, which is that the number one skill to have in the modern era is agency. You're either going to be a high agency person or a low agency person, you're a high agency 10 year old, you've talked about a bunch of high agency teens. And I think the point you're making is profound, which is, if you're lazy, you're just going to drift further and further off of the skew because there's so much information that's kind of sloppy or not interesting to consume.
Michael Eisenberg 26:11.8
If you're a high agency person, you're learning compounds at a much faster rate. And that's why we have so many of these super accomplished teenagers that, you know, even Alex Karp at Palantir is actually, you know, headhunting teenagers out of high school right now. And Dylan Field is asking you to... Dylan, I can't believe you told him to drop out of high school.
Michael Eisenberg 26:28.0
Dylan Field is telling you to drop out of high school. And you make the point about the dichotomy. Where does that lead us as society?
Amir Fischer 26:36.6
I think it leads us to society...
Michael Eisenberg 26:38.0
The society you're going to grow up in.
Amir Fischer 26:39.3
Yes. So I have this, it's actually, I was talking about this with a kind of mentor and a friend who happens to be the vice chairman of this firm called 6th Street. And they also have this, I was talking about this with him. And they actually have this, it's like a house belief. And it's called like, they call it the "Great Bifurcation." Of even more than today, there's just going to be this, these like swaths of people that are like completely brainwashed.
Amir Fischer 27:05.0
We were talking about this kind of short form content. And so these algorithms will feed them whatever they want to see. They're going to keep scrolling through, they're just going to like keep moving along their everyday lives. And they're going to be these people who very early on chose to learn, chose to take advantage of this technology and grow exponentially.
Amir Fischer 27:20.9
And those people are going to have so much leverage, so much power. And so I think there's going to be so much more wealth, power, whatever, concentrated in the very, very kind of few over the next many decades than ever before.
Amir Fischer 27:37.2
And those people will have power and have leverage among...
Michael Eisenberg 27:40.0
The comment you reference is something we talked about before coming on air, which is, I asked you, like, what's the most interesting thing you think one of your teenage entrepreneurs is going to pursue potentially over the next year or two? And you said it was just an entirely new genre of short form content.
Amir Fischer 27:58.7
Yeah.
Michael Eisenberg 27:59.1
And I said what? Short form content? Explain your thesis.
Amir Fischer 28:03.5
Yeah, I don't think. I think it's kind of consensus among my generation in the sense of the way that everyone my age gets their information is short form. It's just short form. Barely anyone I know reads book. I barely even read books.
Amir Fischer 28:18.8
I read like substacks and articles and whatever.
Michael Eisenberg 28:21.8
You make it sound like that's a great thing that you read substacks. Because most people don't read substacks either?
Amir Fischer 28:26.4
Yes, most people just don't read, like, unless it's for school.
Michael Eisenberg 28:29.7
Your generation doesn't read books. They don't even read substacks. Like, they think this is a great accomplishment. They get educated through short form content. And is this good?
Amir Fischer 28:41.6
Bad. I think it's bad because there is this kind of short form content algorithm serves what you already believe. And so if you have these kind of already held beliefs of a lot of these people grew up, I'll just use like a kind of, I'll generalize.
Amir Fischer 28:57.4
But, you grow up as a kid and your beliefs are mostly those of your parents and what your parents tell you. And so if you spend slightly longer on a TikTok video about something that's like more right than left, you're gonna get served more right things.
Amir Fischer 29:12.5
And so that leads to just like, you're gonna get served more and more of that stuff. And that leads to extremely, extremely spiky beliefs in one or another direction without any information of the other side, without a fully kind of broad perspective.
Amir Fischer 29:27.7
And so it leads to people that I think are extremely dangerous in the sense of they are extremely radical on one point of view without knowing what the other is expressing, without knowing the other at all.
Michael Eisenberg 29:38.9
Are they able to think? I mean, one of the things I keep finding is books help me think. You think it's only because I grew up reading books? Like, and writing helps me think. And like I think about all the people using ChatGPT to write. And like you said, no one's reading books anymore.
Michael Eisenberg 29:54.2
No one in your generation reads books. Like, who's gonna learn how to think?
Amir Fischer 29:57.1
I think for me, I'm learning how to think in the sense of I might not read. I read some books, I read some articles from time to time. But the way I learn, which I've identified very early, is through meeting people, and it's through learning from as many interesting and diverse people as possible.
Amir Fischer 30:14.6
On the podcast, I talk with people like Paul Krugman, who's like very, very left, who's an economist, or people like Jeff Yass, who donate like hundreds of millions of dollars to political thinkers like Donald Trump.
Michael Eisenberg 30:28.6
Right.
Amir Fischer 30:29.0
And so I think getting kind of a broad array of perspectives, it doesn't matter where it comes from. It can come from books, it can come from articles, it can come from people, it can even come from short form, if you are able to get that broad array of perspectives is really what it takes to learn how to think.
Amir Fischer 30:46.3
And I think very few people have access to that broad array of perspectives in this day and age.
Michael Eisenberg 30:51.4
Very few people have access to a broad array of perspectives this day and age because of the algorithms.
Amir Fischer 30:56.2
Exactly.
Michael Eisenberg 30:57.2
Okay, so you started this podcast. You've interviewed 54 titans of the universe, which is remarkable. Like, you're 16. Now you've raised a first venture fund targeting teenagers. If I am a teenager founder, I'm having a hard time saying that if I'm a teenage founder, if I'm a teenage founder, why am I coming to Amir Fisher to get a check rather than trying to come to Tim Draper or Mark Andreessen or Sean McGuire?
Amir Fischer 31:32.1
Or you? I think there's two things.
Michael Eisenberg 31:35.5
They're not coming to me because the teenagers in Israel are in the army. That's why they're not coming to me. But why aren't they going to Tim or Sean or...
Amir Fischer 31:43.2
I think the first thing is access of, like, I'm objectively way more accessible than Mark Andreessen.
Michael Eisenberg 31:49.8
You're more accessible than Mark Andreessen?
Amir Fischer 31:52.6
100%. Objectively.
Michael Eisenberg 31:54.1
Come on.
Amir Fischer 31:55.5
Anyone can cold DM me on LinkedIn and I'll see it, I'll respond to it, and I'll gauge your email or whatever.
Michael Eisenberg 32:01.2
When did you open up a LinkedIn page?
Amir Fischer 32:03.3
I had to be 16, so August.
Michael Eisenberg 32:07.1
You had to age into LinkedIn. I love it.
Amir Fischer 32:09.0
Yeah, I'm way more accessible. But I also think I'm sort of in this interesting place of being the node between – a bunch of my LPs are these very successful people like yourself, who've done incredible things across many industries of people who've made billions of dollars in hedge funds, people who bought beer companies, people who invest in agriculture, operators, entrepreneurs, investors.
Amir Fischer 32:31.6
All shapes and sizes, all ages, all industries. And the common theme among them is they've all been extremely successful and they want to get back to the younger generation. But a lot of them don't know how to access the most talented people from the younger generation. A lot of the most talented people of the younger generation want to learn from all these kind of titans of all these incredible people, but don't know where to go, don't have access to them.
Amir Fischer 32:53.9
And so I think being that node where I can connect with people, young people, old people alike, really creates these meaningful mentorships, relationships. People who can invest in them down the road or even now, is probably the kind of place where I am the most service to these young people, while being also very accessible.
Amir Fischer 33:15.9
But I think the kind of people I know, the network I have access to is the most valuable thing I can provide these people in this n of one. I don't think anyone else across my age, even 10 years older than me, has access to these incredible people.
Amir Fischer 33:32.0
And I also think the third thing on top of that is, like, I'm relatable. I'm their age. I've gone through kind of the same stuff that they have. I'm a friend. I'm not as much of an investor. Like, it's not as much as a transactional relationship, as just a relationship.
Michael Eisenberg 33:44.8
Actually, the one other guy I can think of like you is Harry Stemmings. Right?
Amir Fischer 33:48.3
Podcaster turned VC.
Michael Eisenberg 33:49.8
Have you ever met Harry?
Amir Fischer 33:50.8
I have not.
Michael Eisenberg 33:52.5
Did you model yourself on him at all?
Amir Fischer 33:54.5
I did not. I actually, I saw, so I saw what Harry did we;; as a podcast, and I was like, okay, I never want to turn my podcast into, like, a VC. I feel like it's way too transactional or whatever. But then I saw this interesting thesis and ultimately came to starting a venture fund.
Amir Fischer 34:11.5
I unconsciously modeled myself after Harry, but now more than ever after made the kind of switch, and I've gone through this evolution. I admire what he's done. And obviously he raised a much larger fund than me.
Michael Eisenberg 34:22.8
That's true. But his first one, I think, was like 6 or 7 million.
Amir Fischer 34:26.9
Yeah.
Michael Eisenberg 34:27.5
Yeah. You're not that far behind.
Amir Fischer 34:29.0
Now he's up to what, like 600?
Michael Eisenberg 34:30.8
Something like that.
Amir Fischer 34:31.3
Yeah. Yeah.
Michael Eisenberg 34:33.1
When I, if I asked you, like, Ron Miasnik, who's our, used to work for me here and now a partner of Bank Capital, and I know a relationship of yours. He said, "What is the thing that you keep top of mind from the relationships you developed on the podcast?"
Amir Fischer 34:51.0
I think I have this very interesting point that I try to tell a lot of people of. Like, a lot of these people who are my age, ask me, like, what is this common theme of advice? What's the playbook? What's the playbook to becoming a billionaire, essentially, of, like, what you've learned from these people.
Amir Fischer 35:06.2
What's the playbook? What's the path? What can I do? The kind of honest, fundamental answer is that there are a couple things that I've seen that's gone into these people's success, which is, like, from the array of people I've interviewed, it's like, there's obviously very hard work. There's luck, there's being at the right place at the right time, which factors into luck.
Amir Fischer 35:22.7
There's leverage. And there's just, like, surrounding yourself with the right people. And I think that's like, the foundation of everything. And people think there's like, this playbook. People think there's this way that these people can become successful. Like the people I've interviewed. And what I try to tell them is I've asked the same question, the 20 people, same net worth, same age, whatever.
Amir Fischer 35:44.4
I've heard the answer one side of the spectrum, and I've heard an answer the complete opposite side of the spectrum. And so I think the thing I keep top of mind is there are a few things which are good to get advice on, but sometimes the best advice is no advice.
Michael Eisenberg 36:01.2
You mean, just do it yourself.
Amir Fischer 36:02.4
Exactly.
Michael Eisenberg 36:03.2
Micky Malka is also an LP of yours, and a good friend of mine said I should ask you: what's the biggest mistake you made in the last six months? And so given you say, "Just do it, kind of, and not to get advice," so what's the biggest mistake you've made?
Amir Fischer 36:16.2
I think the biggest mistake I've made is moving too fast. I think I'm naturally a very fast mover in the sense of, like, I was proactive very early, and I've consistently been proactive throughout my life. I think in moving fast, when you're a venture capitalist, when you're having these conversations with these founders, when you're meeting them for the first time, it's not something you should move fast towards.
Amir Fischer 36:38.4
You shouldn't be like, I have 15 minutes, 30 minutes on my calendar, going to get through this, and I'm going to be done with it, and I'm going to analyze it afterwards. It should be more just like, I'm going to have a meaningful conversation with this person. I'm going to let it ride. Who knows where it'll take me. I'm going to talk about things that are totally unrelated to investing or their companies or whatever, and that's what's going to happen.
Amir Fischer 36:59.8
And I'll let it take me wherever it takes me. And so I think the first couple months of, like, having these conversations with these founders, I was very, like, rushed, transactional. 15 minutes. Tell me your story, I'll tell you mine. I'll ask you a couple questions, then we're done. Rather than having these really meaningful conversations.
Amir Fischer 37:15.7
And I wrote in my letter that, recently, over the past, like, month, three, two months, I've started each call I take a longer time on. I block, like, 30 minutes, an hour in my calendar every first call. I try to talk about things totally unrelated to venture company.
Amir Fischer 37:34.4
What they're thinking about, how relationships with their friends are, like how they feel about their high schools. Like all these kind of really, really interesting things that I think I can tell much more about them from than talking about their companies. Because ultimately I'm investing in founders.
Amir Fischer 37:50.1
And at this stage they're so early in their careers, they're so early in their lives, I', taking this bet on them, I'm not taking the bet on the company. The company's gonna go through a million pivots, it's taking the bet on them as a founder. And so I think it's really talking about them, connecting with them and spending more time with them. is the biggest mistake I've made, of being way too rushed, way too transactional early rather than spending more time later.
Michael Eisenberg 38:10.8
Do you think that's a result of the fact that most of your interviewees on your podcast were hedge fund people who are investing in businesses and stocks and getting the, you know, earnings reports from EDGAR or whatever it is, whereas the venture capital business is actually a relationship business, you know, where you're betting more on the person?
Amir Fischer 38:29.2
I think it's also just that is, I think there's a product of the podcast that goes into it of like each podcast is suposed to be X amount of time. I usually let it be an X amount of time. And so I like stop it at that point in time in the podcast. It's like I have a list of questions, I run through them and I stop.
Amir Fischer 38:45.9
And so I think that product of the podcast, I think I've always been very good about building relationships. I'm like a good network builder. I'd say that's my superpower. He loves this idea of like a superpower. I'd say that's my superpower. And so I think the podcast is a part of that.
Amir Fischer 39:01.4
And then also just being like, I think I've been able to like accomplish a good amount for someone my age and I think that's been because I accomplish a lot of things very fast. But for some things it's not very good to do that. And so I think this is one of them.
Michael Eisenberg 39:17.3
What's Micky's super power?
Amir Fischer 39:20.3
That's a good question. I think Micky is, I don't know how to categorize into a superpower, but he's one of the most, he's had all types of experiences which make him one of the most insightful people, I think the most insightful person I've ever met.
Michael Eisenberg 39:36.4
Yeah, he's also a mensch. But I think the other thing about Micky is that given his upbringing also, he understands the uncertainty of financial systems perhaps better than anybody on planet Earth. And both the upside and the downside of them.
Michael Eisenberg 39:55.9
And I think that superpower, of Micky's enabled him to not just be a great investor but to really kind of peer into the future. Because one of the things that you're saying is one of the ways you peer into the future is through the young people, but also through the flow of capital, and where it's going in these kind of long term trends, what you call the Great Bifurcation, what you see in young people not reading books, which horrifies me personally.
Michael Eisenberg 40:17.5
But I'll try not to be judgmental. And then the flow of capital into people that you're talking about, you know, whether it's short form content, et cetera. So hanging around people like Micky is just...
Amir Fischer 40:28.5
A hundred percent. And you can kind of see that through line through his career, like growing up in Venezuela with a lot of inflation and then ultimately starting a couple fintech companies, going into Ribbit was like the whole kind of ideal of making money better. Yeah. And so I think like someone like him who's had that career, the constant through line and have just had so many experiences in that space is really, really like powerful in someone who talks the talk and walks the walk. Talk about like con, he talks about concentration, he talks about conviction and all that kind of stuff.
Amir Fischer 40:59.5
The guy owns like double digit percents of Robinhood and Coinbase at IPO.
Michael Eisenberg 41:03.0
Yeah
Amir Fischer 41:03.4
Like, yeah.
Michael Eisenberg 41:04.5
And Bitcoin for a long time. And Bitcoin for a long time. So I'm glad, and part of the reason I dug into Micky for a second was exactly to get to his model: making money better. Which is a, it's not even a double entendre, it's like a triple entendre.
Michael Eisenberg 41:20.8
But you mentioned a few times in the podcast, you know, how'd this guy be a billionaire, how'd that guy be a billionaire and you know, the guy made a hundred million dollars sniping Trump meme coins. What's the goal? Is it making a lot of money?
Amir Fischer 41:35.1
I think the goal that I've had in mind, will like participate in all kinds of things of I always wanted to make money. That's a motivation for me for sure. But I think something that's always inspired me more is being behind the people that make the money. I've always wanted to be like A king maker in the sense of my goal with this fund is in the next 10, 15 years, I want to be behind the most successful founders of my generation.
Amir Fischer 42:03.2
I want to be with them from pre-seed, seed, A, B, C, continuously with them. And I want to be their first believer, the person that stuck with them all the way. And I want to be the king maker in the sense of like I want to be the person behind the most successful founders of my generation.
Amir Fischer 42:22.3
And that doesn't only apply to like venture, but as a whole to, I want to make a lot of money, sure, but I want to be early believers in people and surround myself with the most interesting and smart people on earth and be with them from beginning to the end.
Michael Eisenberg 42:42.0
Why is that important to you?
Amir Fischer 42:43.6
I've always been on this eternal quest of learning. And the way I love to learn, like I mentioned before, is through people. And so I think if I have this constant ring of people that I really trust and surround myself with that I think of as excellent, that's the best possible life I can live.
Michael Eisenberg 43:02.6
Who is the person you admire most for what they do outside of business?
Amir Fischer 43:07.0
I'll give the, I think it someone like Steve Cohen probably is, in the sense of he bought the Mets a couple years ago and you speak to that man and he sees it as his genuine civic duty and responsibility to add that team and to bring them to the championship.
Amir Fischer 43:26.4
And he really wants to do it for the people and he really, really cares about the people. And although he's made tens of billions of dollars in the hedge fund industry, that guy will sit with his fans, he'll go down to the dugout, incredibly down to earth person.
Amir Fischer 43:44.4
And that's an example of something that I really, really admire of really giving back in a very material and tangible way.
Michael Eisenberg 43:52.3
You wrote somewhere on Twitter, I'm sure I'm going to get it wrong that the Jewish people need more people like, I think you said Bill Ackman, Sean McGuire...
Amir Fischer 44:02.1
And I think Josh...
Michael Eisenberg 44:03.9
And Josh Wolfe. Josh Wolfe, good friend as is Sean. What does that Tweet mean?
Amir Fischer 44:12.3
Yeah, I think, I'm obviously been raised, born and raised Jewish and I live in a community of a lot of Jewish people. I think there needs to be more people that are not afraid to stand out. It's gutsy people who are not afraid to stand out in kind of speaking about what they care about, especially in the Jewish kind of religion.
Amir Fischer 44:34.0
And I think there's very few examples of that. Who are very vocal. I think we need more people like that. There's a lot of people who are scared to speak out because there might be backlash about them. They don't want to handle the backlash. They don't want to handle what it might do to their companies or whatever. I think once you, I think financial freedom unlocks you being able, being successful should unlock you being able to do what you want at any point in time.
Amir Fischer 45:03.6
And so if you really, really love the Jewish people, if you're Jewish and love your religion, you should go out and just champion it, and you should go out and fight for the Jewish people. And so I guess that's the answer I'd give.
Michael Eisenberg 45:16.7
Is it only financial freedom that lets you speak your mind?
Amir Fischer 45:20.3
I don't think it's only financial freedom. Those are examples of people with financial freedom.
Michael Eisenberg 45:24.0
Yes, no question.
Amir Fischer 45:27.2
But I think it's also really knowing who you are. I think I'd say it's kind of confidence in your identity of knowing who you are, knowing that the people close to you will respect you whether you say something they agree with or not.
Amir Fischer 45:46.2
And. Yeah, really, I think just really, really knowing who you are and being comfortable saying your views and all that kind of stuff.
Michael Eisenberg 45:55.9
Do you feel that way at 16? Are you comfortable?
Amir Fischer 46:00.0
I think. I think, honestly, not fully. I think we live in a world in which saying controversial things at a young age can get you in, I wouldn't say controversial, but, like, just speaking your mind at a young age, speaking for things you believe in with conviction can get you into bad places.
Amir Fischer 46:24.7
If you're interviewing for a job somewhere, it can get you in a bad place.
Michael Eisenberg 46:28.5
That's very Orwellian. You probably didn't read 1984, right?
Amir Fischer 46:31.7
I read, Pig Farm or whatever.
Michael Eisenberg 46:37.2
Animal Farm. Animal Farm for that.
Amir Fischer 46:40.3
Okay.
Michael Eisenberg 46:40.8
One of the things about being 16 and investing in teenagers is I'm not sure I'm telling you anything you don't know. You won't be 16 forever.
Amir Fischer 46:47.1
Yes.
Michael Eisenberg 46:48.9
Like, how do you invest in teenagers when you age out of the category?
Amir Fischer 46:53.4
The thesis, and this is the important thing that I think a lot of people don't realize of, my thesis is not investing in teenagers forever. I really believe in this generation of teenagers, and specifically, this obviously because it's my generation, but I think it's a very interesting generation in which these kids grew up with the Internet.
Amir Fischer 47:11.8
They grew up having access to information at their fingertips, like we talked about, but they also adapted to this AI wave.
Michael Eisenberg 47:18.6
They became Bar Mitzvah at the ChatGPT era.
Amir Fischer 47:20.6
Exactly.
Michael Eisenberg 47:21.2
Yeah.
Amir Fischer 47:21.6
And I think being adapted to a new technology teaches you way, way more than having it kind of when you're born, kind of having it, fundamentally knowing how it works, being used to it or whatever. And so I think learning from it and adapting to it has, taught these people incredible things and they will go on to use these technologies in incredible applications.
Amir Fischer 47:45.5
And so that, to be that, to say that I think I want to invest in this generation, I want to crystallize my help with this generation and I want to back them over the next 10, 15, 20, 30 years.
Michael Eisenberg 47:58.9
So the insight therefore, is not necessarily about teenagers per se, although that's the age cohort you're at right now. But your basic thesis is, number one, this is the cohort that came of age when the world changed forever.
Michael Eisenberg 48:18.4
The ChatGPT moment. Number, two, you think this cohort that has high agency in the era of call it AI and crypto, and maybe other things combined, or SpaceX, will be just incredibly more successful than whatever that cohort was.
Michael Eisenberg 48:38.9
So has anything changed in teenagers per se? Or is it the environment they've grown up in has changed? Like, were there this number of smart, accomplished teenagers 30 years ago?
Amir Fischer 48:50.3
Oh, I think teenagers as a whole have not changed at all. I think...
Michael Eisenberg 48:55.4
Except they stopped reading books.
Amir Fischer 48:56.8
Exactly.
Michael Eisenberg 48:57.4
Yeah.
Amir Fischer 48:58.5
But materially, the minds that the teenagers have, whatever, that's not changed at all. I think the things that they have access to, things that they're able to do, those who are high agency are able to do so much more than 50 years ago. And so I think just the environment around them, what they're able to do.
Michael Eisenberg 49:14.5
So they have changed.
Amir Fischer 49:15.3
What they've learned...
Michael Eisenberg 49:16.1
Their brains are compatible. Brain's like a muscle, right? You work it out, it gets better and faster. And the younger you do it, the more you do.
Amir Fischer 49:22.8
They've had more access early and so they've been able to have been more educated by the point they are blank teenagers or whatever.
Michael Eisenberg 49:30.2
And so, and so this is a generation where there is, there are more capable teenagers, not necessarily because of genetics, but because...
Amir Fischer 49:38.6
Earlier starts.
Michael Eisenberg 49:39.7
They compound at an earlier age because there's less friction to learn. And if you have high agency, you can do it. Do you think there are more or less high agency kids today than there were?
Amir Fischer 49:49.7
I think they're, I think they're the same.
Michael Eisenberg 49:52.8
Does anybody flip burgers anymore? Like, you know, I cut cheese and fish, I sliced cheese and fish as a teenager and did deliveries.
Amir Fischer 49:59.0
I live in Greenwich, the kids I know are getting hedge fund internships.
Michael Eisenberg 50:03.6
Do you ever get out of Greenwich?
Amir Fischer 50:05.6
I mean, I go to New York. I travel a lot, but I don't go to like, the, Midwest or yeah, I don't interact with like, high schoolers, those who are not exceptional or like, whatever. I don't interact with like, regular high schoolers from random towns, no.
Michael Eisenberg 50:20.0
Is that a hole in your education?
Amir Fischer 50:22.5
Probably is, but, like...
Michael Eisenberg 50:25.0
That's a lot of the world. Yeah.
Amir Fischer 50:28.2
I might have to amended it. I don't know how.
Michael Eisenberg 50:30.2
You may have to go, like, on a bus tour. You know, hop a Greyhound. And I don't think Greyhound comes to Greenwich. Hop a Greyhound at Port Authority in New York.
Amir Fischer 50:37.5
Or just hitchhike somewhere.
Michael Eisenberg 50:38.7
You can just hitchhike somewhere. That you can do in Israel that's harder to do...
Amir Fischer 50:41.6
Yeah.
Michael Eisenberg 50:42.1
...across the United States.
Amir Fischer 50:43.5
Well, I feel like I'll have a better time speaking English.
Michael Eisenberg 50:47.3
How's your Hebrew?
Amir Fischer 50:48.1
It's okay. I understand. I don't speak.
Michael Eisenberg 50:50.0
You understand. You don't speak. So you had to turn 16 to open a LinkedIn profile. What are other things that being 16 doesn't allow you to do?
Amir Fischer 51:00.5
Set up a venture capital fund – it's in my mom's name.
Michael Eisenberg 51:04.8
The venture fund's in your mom's name?
Amir Fischer 51:06.5
Yeah.
Michael Eisenberg 51:07.0
Is that real? I didn't know that.
Amir Fischer 51:08.2
Yeah. Set up a venture fund, technically, my mom's name. All kinds of legal things.
Michael Eisenberg 51:17.0
Who signed the documents? Mom?
Amir Fischer 51:18.9
My mom.
Michael Eisenberg 51:19.8
Wow.
Amir Fischer 51:20.3
Yeah.
Michael Eisenberg 51:21.0
She gave you your first hundred bucks to start investing and signed your venture docs.
Amir Fischer 51:24.6
Exactly.
Michael Eisenberg 51:25.8
What else can't you do as a 16 year old?
Amir Fischer 51:28.9
I mean, my parents won't let me travel by myself places, so that's like a parental thing.
Michael Eisenberg 51:35.0
And they insist you stay in school.
Amir Fischer 51:36.5
They do. But that's like, I can see where that comes from. I can't really see where the, I think I can travel most places myself. As long as it's not like the middle of nowhere.
Michael Eisenberg 51:48.5
I guess you have to go out for coffee and not drinks.
Amir Fischer 51:50.9
Exactly.
Michael Eisenberg 51:51.5
Yeah. What else?
Amir Fischer 51:53.8
Technically, haven't learned how to drive yet.
Michael Eisenberg 51:56.5
What does that mean you technically have not learned how to drive yet?
Amir Fischer 51:59.1
I'm 16, so I can get my learner's permit. Yeah. But I've been quite busy the past three months or three or four months.
Michael Eisenberg 52:05.0
So you haven't done it?
Amir Fischer 52:05.9
Yes.
Michael Eisenberg 52:06.6
Will you need one? Here's another thing, right? You kind of like, can you Waymo yet in Greenwich?
Amir Fischer 52:10.5
No, but you can Uber. I. I like Uber everywhere.
Michael Eisenberg 52:12.3
You Uber everywhere?
Amir Fischer 52:13.3
Yeah.
Michael Eisenberg 52:13.8
I want to ask you two or three more questions. Like if I'm a venture capitalist in Silicon Valley, I go to Stanford University to hunt entrepreneurs. Where do you go?
Amir Fischer 52:24.2
It's a good question. I have an interesting answer to this question of nowhere specific in the sense of I started sourcing through like LinkedIn.
Michael Eisenberg 52:33.9
Mmhmm. The teenagers can't get a LinkedIn account.
Amir Fischer 52:36.9
Exactly.
Michael Eisenberg 52:37.5
Yeah. By the way, Ron Miasnik
told me to ask you this question. It's a really good question.
Amir Fischer 52:40.4
Yeah, like most other venture capitalists. But then ultimately, once I built a foundation of interesting people that I knew, teenagers specifically. I believe excellence surrounds excellence. And so I asked these teenagers, who are your smartest, most talented friends?
Amir Fischer 52:57.0
And so I think I have this ring of these exceptional teenagers who I think are very smart, very talented and are going to do incredible things. And they generally have rings around them of these excellent people. And these people are in pockets of talent or places in the world or even can't be found online by any venture capitalist.
Amir Fischer 53:16.5
And so when I ask them who are your most talented teenager friends or some I've even built really close relationships with in the sense of like I hang around their friends a lot, so I meet them naturally. And so excellence surrounds excellence is a core belief that I have. And so probably like 70, 80% of people I meet is just warm through other incredible teenagers that I meet who give me referrals.
Michael Eisenberg 53:38.2
When you say these people hang out together and you hang out, where do you hang out?
Amir Fischer 53:41.8
For those who are in New York, I hang out with them in New York.
Michael Eisenberg 53:44.8
Like where?
Amir Fischer 53:46.0
I like walk around with them in like Bryant Park. Some of them I invite to dinners that I'm hosting with friends of mine, with like venture capitalist friends of mine. And so that sort of thing. I'm hosting a dinner in San Francisco.
Amir Fischer 54:01.4
I'm going to start to host more dinners in San Francisco.
Michael Eisenberg 54:03.1
You're old enough to get a credit card?
Amir Fischer 54:04.4
I have a debit card.
Michael Eisenberg 54:05.7
Debit card. Okay.
Amir Fischer 54:08.5
Sadly no points or rewards yet.
Michael Eisenberg 54:10.3
No points or rewards. But you're paying for dinner.
Amir Fischer 54:13.0
Exactly.
Michael Eisenberg 54:13.6
Yeah. Okay.
Amir Fischer 54:14.2
Hanging out with them in New York and places like that.
Michael Eisenberg 54:16.0
And where do they meet each other? Like one of the other things I noticed from your emails is that these young people from like all over the world, many of them, they, you know, this one's from India and this one's from Pakistan and this one has Israeli parents and this one has from Canada. Like, where did they meet you? Like at like the Math Olympics?
Michael Eisenberg 54:32.0
Where do they meet each other?
Amir Fischer 54:33.0
So places like that.
Michael Eisenberg 54:33.9
Oh yeah?
Amir Fischer 54:35.7
The Math Olympiads. The IO, the International Informatics Olympiad. It's like all these random places.
Michael Eisenberg 54:40.6
Yeah. First robotics competitions?
Amir Fischer 54:43.6
The international science, like the ISEFs of the world. And then they all like, there's like these hackathons, whatever, they all travel to these events and so they all meet each other one way or another. Sometimes it's just like these small accelerators.
Amir Fischer 55:01.7
Like there's this one in Finland now called Freight, which is actually producing some quite interesting people. Just like people who like aren't even building, they're just living there and who are interesting and who are young. And so they meet each other in these physical places, but they also meet each other in these very interesting online communities of these Discord servers of talented teenagers.
Amir Fischer 55:25.9
There's a couple group chats of interesting teenagers. They all have these group chats, they have these Discord servers. They have everything. And because at some point talent is usually distributed equally across the world, opportunity is not, all these people can't go to these places like San Francisco or New York when they're a teenager, you have to go to school.
Amir Fischer 55:43.2
And so they just find these people online, chat with them every day, all day online. And then some of them, they meet in person at these events, some of them, ultimately they're all going to end up in a place like San Francisco or New York. But, yeah.
Michael Eisenberg 55:58.9
What's the most teenager thing you do?
Amir Fischer 56:04.6
That's a good question. I watch short form content probably. I'm very careful. I limit all my social media intake to an hour a day. But yeah.
Michael Eisenberg 56:16.5
Which social media platforms are there?
Amir Fischer 56:19.5
TikTok, Instagram, and Snapchat.
Michael Eisenberg 56:21.9
TikTok? Why are you on TikTok?
Amir Fischer 56:24.9
It's where, it's how I keep up with the times or something of like the way I socialize is through like references that no one can understand and all that kind of stuff.
Michael Eisenberg 56:33.6
Do you have friends or only colleagues?
Amir Fischer 56:35.5
I have friends in high school. Yeah.
Michael Eisenberg 56:37.0
You have friends in high school? Is it hard for them to hang out with you?
Amir Fischer 56:42.1
No, very. My close friends in my high school know what I do.
Michael Eisenberg 56:45.3
Yeah.
Amir Fischer 56:45.5
I don't talk about it when I'm with them. Everyone else in my high school has no idea what I do at all. I don't make it known to people.
Michael Eisenberg 56:51.6
If I ask you when you turn 21, what's your core value? What's it gonna be?
Amir Fischer 56:58.9
I think it's being genuine. I think it's. I hate it when people try to fake things. I hate it when people try to be someone they're not. I hate it when people try to, like, put on a facade and talk about things they don't know about and whatever or someone asks me about things I don't know about, I just say, "I have no opinion on this.
Amir Fischer 57:20.2
I don't know enough about it just to talk about it."
Michael Eisenberg 57:22.2
So who is Amir Fisher?
Amir Fischer 57:24.3
And so Amir Fisher is a 16 year old who has always been scared of mediocrity and has always tried to do things that he sees as excellent and try to be the best in the world at the things he does.
Michael Eisenberg 57:41.2
If the fund doesn't work out and the podcast doesn't work out...
Amir Fischer 57:45.6
Keep going.
Michael Eisenberg 57:46.2
And investing doesn't work out. What are you going to do when you grow up?
Amir Fischer 57:48.8
I have no idea. I'll figure it out as it goes.
Michael Eisenberg 57:50.8
You'll figure it out as it goes.
Amir Fischer 57:52.0
Yeah, I'm all in on this. We'll see.
Michael Eisenberg 57:54.3
Good for you. And you're taking the risk at a young age.
Amir Fischer 57:56.2
Exactly.
Michael Eisenberg 57:57.2
Thanks for letting me invest in your fund.
Amir Fischer 57:59.2
Of course.
Michael Eisenberg 57:59.8
I really appreciate it.
Amir Fischer 58:00.8
Thanks for investing.
Michael Eisenberg 58:01.9
Really. I thank everyone for listening. I hope you found this interesting. Amir is likely forever going to be our youngest guest. So otherwise I have to bring on my daughter. My youngest daughter is your age and so maybe she'll want to sit in the hot seat. So thank you for joining us on Invested. You can learn about Amir on his LinkedIn.
Michael Eisenberg 58:17.6
Yes, he is qualified for LinkedIn having passed 16. That would be A M I R F I S C H E R. And on X he's Amir F 15336. What is that?
Amir Fischer 58:31.2
How do you change that?
Michael Eisenberg 58:32.8
Amir F 15336. I'm trying to decode it. You were 15 when you started your X account.
Amir Fischer 58:40.1
It doesn't even mean anything. It was recommended to me by X.
Michael Eisenberg 58:42.3
Okay. Can you be on X under 16? Or you have to be 16?
Amir Fischer 58:46.2
I have no idea. I was on it before 16. I don't think they were strict.
Michael Eisenberg 58:50.1
Elon. Shout out to you for letting the young people on. Thanks for joining us.
Michael Eisenberg: 00:00.2
How does a somewhat anonymous AI company founder end up with about a million followers on X?
Dr. Eli David: 00:07.0
You're forcing me to reveal a big secret here.
Michael Eisenberg: 00:09.2
That's what we're here for. You use AI to come up with your witty lines when you're bashing Macron?
Dr. Eli David: 00:14.5
I just look at his page, and thankfully, every day he provides content. Such a pathetic guy. Every day there is something. I don't think the LLM was woke, but, those who trained it, they conveyed to it and forced upon it their own worldview.
Dr. Eli David: 00:30.4
I'd rather use an LLM that offends me instead of, "Oh, sorry, no, I cannot do that. That's offensive." I love my own ethics, and I think I should be in charge of all the ethics in the world. Do you agree with that?
Michael Eisenberg: 00:45.0
No.
Dr. Eli David: 00:45.4
No. You want your ethics to be in charge. Do my ethics prevail or yours?
Michael Eisenberg: 00:50.2
Five minutes into the conversation, we already understand that you don't have a good view of progressives and definitely don't like woke.
Dr. Eli David: 00:56.1
Oh, really? How did you get that idea?
Michael Eisenberg: 01:03.5
Welcome back to another episode of Invested. I'm thrilled to be here with Dr. Eli David. Welcome, Eli.
Dr. Eli David: 01:09.6
Great to be here.
Michael Eisenberg: 01:10.4
Little known fact about Eli is that not only is he an AI researcher, not only did he sell his tech company, which we'll dig into soon, but I think he's the Israeli entrepreneur and maybe the entrepreneur, period, with the largest number of X followers in the world.
Michael Eisenberg: 01:28.0
Is that correct?
Dr. Eli David: 01:28.8
So it happens. Yes.
Michael Eisenberg: 01:30.0
So that's what I want to start with, which is how does a somewhat anonymous, AI company founder end up with about a million followers on X?
Dr. Eli David: 01:40.4
The short answer is, I have no idea. The longer answer is before the year 2020, my Twitter was only about AI. I had a large following, a few hundred thousand, as an AI entrepreneur, scientist, one of the oldest people who's still doing neural net for 25 years.
Dr. Eli David: 01:57.4
We'll get to that. But since, I think around Covid, I just said, the hell with it. I will just speak out my mind. Whatever I think. No filters, no overthinking. I'll just post it – for myself. Venting. And people connect to people who are just speaking out their mind without filters.
Dr. Eli David: 02:17.2
And you see the trend. You see Javier Milei in Argentina. You see Trump. You see more and more people, leaders, founders. You see Elon Musk – speaking without filters engages people.
Michael Eisenberg: 02:30.0
Okay, and so what was the first Tweet, or what they now call X post, where you just vented and it blew up and you added, I don't know how many followers, a lot of followers?
Dr. Eli David: 02:39.4
I think one of the major things that changed was on October 7th I was in Tel Aviv, 6:30 AM in the safe room. And we have no idea what's happening. But as the sirens are going nonstop, just looking at the Telegram, looking at some Palestinian channels from Gaza.
Dr. Eli David: 03:02.3
He said they were celebrating, they were celebrating on their streets as our hostages, that was after an hour or two, hostages being paraded in their streets and all those so called innocent Palestinian civilians are just rejoicing. And I started nonstop just taking those videos and posting them to my audience.
Dr. Eli David: 03:22.5
The reaction was that many of my academic colleagues just blocked me on Twitter, so called canceled. But many more people started following, as somebody who is showing the world...
Dr. Eli David: 03:37.5
by the way, I hate the word hasbara. Hasbara means explanation. We're not explaining anything. I just want to convey what's happening. And many of those posts went to millions of views again and again, so...
Michael Eisenberg: 03:49.8
So prior to October 7th, how many followers did you have on X, Twitter?
Dr. Eli David: 03:54.2
Before October 7th, 300,000. Something like that.
Michael Eisenberg: 03:57.8
And now about a million?
Dr. Eli David: 03:58.9
Close to that.
Michael Eisenberg: 03:59.7
Now close to a million. And what is the most popular Tweet or post? The one that's kind of the vent hurt around the world.
Dr. Eli David: 04:11.0
Good question. I don't remember. There were a few that got several hundred million views.
Michael Eisenberg: 04:15.1
Yeah.
Dr. Eli David: 04:15.7
I think one of them was bashing Emmanuel Macron. Every time I'm bored I just look at his page and thankfully every day he provides content. Such a pathetic guy. Every day there is something and I just, I need to screenshot a comment on that and it gets to millions or tens of million views.
Michael Eisenberg: 04:38.2
You use AI to come up with your witty lines when you're bashing Macron?
Dr. Eli David: 04:42.0
I need to test that again. Seriously now. Last year it was GPT-4. I connected it to all my Tweets. I said, "Well your only goal is maximizing likes. So read my style to know my audience." And he started coming up with good drafts on the woke and progressive on the leftist and Gaza, all those stuff. They lack the punch.
Dr. Eli David: 05:07.8
And I did some A/B testing, not automated. It gives me a draft on something, I post it and I post my version of that a few hours later and it used to get much more likes. The difference being that AI doesn't have the kind of dark humor that works.
Dr. Eli David: 05:25.5
Even when I tell it, "Be more cynical," It's still not there. But it is improving. Right now, I think Grock and Gemini are much more cynical than I expected them to be.
Michael Eisenberg: 05:38.7
So, Eli David is both more cynical and more punchy than AI Eli David?
Dr. Eli David: 05:45.4
Yes.
Michael Eisenberg: 05:45.5
This is actually an important topic because, actually I'm about to publish this on Thursday for my weekly Torah piece that goes out to thousands of people, which is that the statistical models of AI actually flatten both human emotion and the range of human expression.
Michael Eisenberg: 06:05.9
Comes out of a tweet I posted earlier about Apple saying that they'll actually have the personal data on me to actually tweak it to make it more me and less kind of flattened statistics. Is it your sense that current AI is just flat?
Dr. Eli David: 06:19.2
Current AI is learning from humans. That's a first step. I think it is...
Michael Eisenberg: 06:23.8
The average human is boring. His name is not Eli David. Not as opinionated as you are.
Dr. Eli David: 06:29.0
I don't think anyone is boring. People's public persona is oftentimes boring because people don't say publicly what they think. And people who are considered a bit less boring are just people who speak out their mind more blatantly.
Dr. Eli David: 06:47.3
I'm sure, George W. Bush thought the same things as Trump is thinking just as aggressively and cynically.
Michael Eisenberg: 06:55.5
No, I doubt that, come on.
Dr. Eli David: 06:56.1
He was just filtering some of those things. They wouldn't just look at a progressive someone and say, "Hey, you're retarded." They wouldn't say that. It is unbecoming to say that.
Michael Eisenberg: 07:08.8
But you think he thought that?
Dr. Eli David: 07:10.3
Yes, of course, everyone thinks that. If you look at the...
Michael Eisenberg: 07:14.2
I don't think everyone thinks that.
Dr. Eli David: 07:15.9
Except you.
Michael Eisenberg: 07:18.3
I mean, there are different perspectives out there on this. But part of what you're saying, I think is because the LLMs scrape the web and people are filtering themselves on the web or they are self-censoring themselves on the web to some point. Therefore the kind of range of human emotions or the sharpness of the individual human is curbed.
Dr. Eli David: 07:37.6
Actually not. The first step the LLM learns, I think it is pretty sharp. The part that flattens it is that RLHF first – reinforcement learning by human feedback. But you take the raw LLM that would give you the recipe for building a homemade cyanide and everything and want to filter that out.
Dr. Eli David: 07:56.3
And the RLHF phase, you just say, "Good, not good, good, not good." And you are teaching it to be much more flat. Example of that was when GPT-3 was released. Its nickname was, remember, not ChatGPT but WokeGPT because you said, "Write a song that praises, Biden." "Oh, here it is." "Write a song that praises Trump." "No, sorry, I cannot do that." Because of course, those who did the RLHF they, I don't think the LLM was woke, but those who trained it, they conveyed to it and forced upon it their own worldview.
Dr. Eli David: 08:36.4
And by the way, in that respect, I fully agree with Elon Musk that the LLM must be maximally truth seeking. And I would add a quote from Ben Shapiro saying, "Fact, don't care about your feelings." I'd rather use an LLM that offends me and lets me manage that part instead of, "Oh, sorry, no, I cannot do that, that's offensive."
Michael Eisenberg: 08:59.2
Five minutes into the conversation, we already understand that you don't have a good view of progressives and definitely don't like woke and that...
Dr. Eli David: 09:06.4
Really, how did you get that idea?
Michael Eisenberg: 09:07.0
Yeah, maximum truth seeking and Elon Musk and Ben Shapiro, so your political views are clear at this point, which is good, that'll help us. But the question I want to ask is, part of model society, or part of society certainly has been, and the ability to live one with the other is there are filters on people.
Michael Eisenberg: 09:28.4
We don't walk around the street insulting people necessarily. In modern politics, it's become a common expression of this completely unfiltered view, to the point you made about President Bush, now President Trump. Is this good?
Dr. Eli David: 09:42.9
I think it's too complicated to just give it a label of good or bad. And in my views, I would say I'm more towards having a libertarian worldview and I respect that worldview because it is the most humble worldview.
Dr. Eli David: 10:00.0
Now when I say, "Well, I respect your freedom of speech to say whatever you want, even if it offends me," it's not because... it is exactly because I'm not confident in my own views. I think nobody can be confident in their own views. Do you today think exactly the same thing on every topic as I used to think five years ago or ten years ago?
Michael Eisenberg: 10:19.4
No, not even five months ago.
Dr. Eli David: 10:20.8
Exactly. With the pace of AI, not even two days ago.
Michael Eisenberg: 10:23.6
Yeah.
Dr. Eli David: 10:24.3
So you admit that either you are wrong today or you were wrong five years ago. Most probably I was wrong both today and five years ago. So what right do I have to say what is right and what is wrong? Or take another example, the censorship that we have in social media. Elon Musk came and said, "Who gives me the right to say, 'oh, this must be deleted.
Dr. Eli David: 10:49.4
And this must not be deleted'?" Personally, my account was suspended for three days, from Twitter, because I shared a peer reviewed report, a paper. I think it was from Lancet, one of the top medical journals. It said, "Those who get Covid vaccines can still get Covid and infect others." It was factual.
Dr. Eli David: 11:09.8
Today nobody would debate that. And I was suspended for three days because it may mislead some other people. Who gives the right to anyone to set censorship? The thing is, the moment...
Michael Eisenberg: 11:22.3
No, we all agree that there's some censorship, right? Nobody wants to put pornography on social media or anything like that. So everyone I think basically agrees that there is some censorship. The question is where you draw the line. Isn't that right?
Dr. Eli David: 11:34.2
There is one clear line that I think Elon Musk is repeatedly drawing that – legal and illegal.
Michael Eisenberg: 11:39.4
Right.
Dr. Eli David: 11:39.7
If you think certain content, for example, nobody can go on any social media and say, "Go kill that guy."
Michael Eisenberg: 11:47.3
Right.
Dr. Eli David: 11:47.7
Because that is illegal.
Michael Eisenberg: 11:49.0
Right.
Dr. Eli David: 11:49.4
And if the society as a whole believes that it is, nobody should ever offend certain thing, for example, then pass a law in the Knesset, in the Congress and say, "Offending such and such..." Look at what's happening in Britain.
Michael Eisenberg: 12:04.2
Yeah.
Dr. Eli David: 12:04.7
And the jihadists can do whatever they do. Nobody cares about that. But if you post something a bit nasty or saying that, God forbid, people who come to Britain must at some point learn English. I know it sounds radical, but maybe it's good to have. At 6:00 AM, you have policemen knocking on your door and taking you to interrogation because your post was offensive.
Dr. Eli David: 12:24.9
Do we want a dystopian 1984 style society like today's Britain? Well, I would not want to live there.
Michael Eisenberg: 12:31.0
But don't we also think that the law doesn't cover everything and there needs to be kind of, you know, ethics and morals fills in where the law doesn't exist yet or may not exist or can't cover every circumstance?
Dr. Eli David: 12:40.6
Absolutely. I love my own ethics and I think I should be in charge of all, all the ethics in the world. Do you agree with that?
Michael Eisenberg: 12:48.1
No.
Dr. Eli David: 12:48.4
No. No. You want your ethics to be in charge. And our ethics clashes at some point, right? Do my ethics prevail or yours?
Michael Eisenberg: 12:56.2
Right. But I think there are certain ethics, for example, just pornography is the easiest one. Right? I think we all basically agree this is a bad idea. Right? We also probably agree because there's kind of a law about it in the United States that shouting fire in a crowded room is also a illegal or bad idea.
Michael Eisenberg: 13:16.2
It's not protected under free speech. Right? The question becomes how do you interpret that or interpolate that into the world of social media? What does shouting fire in a crowded room look like? Right? In social Media.
Dr. Eli David: 13:26.5
Let me challenge even those two. On Twitter, you can post pornography. I have the right. Sorry, I don't have the right. Nobody gives me the right. You don't like it, get out of Twitter. I would like not to be exposed to pornography on Twitter, though I would be very angry if the Twitter's algorithm shows that content to me.
Dr. Eli David: 13:49.5
But there are, there is pornography on Twitter. If you post it and you flag it appropriately, Twitter does not delete it, it does not suspend your account.
Michael Eisenberg: 13:59.7
Right.
Dr. Eli David: 14:00.2
Everything is fine. Somebody who wants to see that, let them see that. And the offense I take is about people shouting at everything, "It is my right, my right not to see such and such." Why? Who gave you that right? If you don't like Twitter, go start your own social network.
Dr. Eli David: 14:17.3
Remember Blue Sky or whatever it's called?
Michael Eisenberg: 14:20.0
Yeah, I don't remember. Blue Kai, wasn't it Blue Kai, Blue Sky?
Dr. Eli David: 14:22.4
Blue Sky.
Michael Eisenberg: 14:23.3
I was never on it. I wouldn't know.
Dr. Eli David: 14:24.5
Why isn't it succeeding? Because nobody's offending. It's heavens. Right?
Michael Eisenberg: 14:28.5
Well, I don't think either of us would know if it's succeeding or not because neither of us were probably there. But other people might be having success.
Dr. Eli David: 14:34.5
Did you ever hear, you know, well, let's take, a woke leader here, Starmer or Macron. Did they ever post something to Blue sky and you go to CNN or...
Michael Eisenberg: 14:44.1
No, because Twitter's the town square. I mean, it's...
Dr. Eli David: 14:46.5
Why is that? Because everyone wants to...
Michael Eisenberg: 14:48.8
Elon, we apologize for calling it Twitter. It's X. But we'll go back to Twitter anyway. Yeah.
Dr. Eli David: 14:52.0
No, no, we call it Twitter when we want to bash it. It was the terrible Twitter and now it is the great X.
Michael Eisenberg: 14:58.5
So let's, let's just back up for a second, share with our audience your background because, you know, being a Twitter personality or an X personality wasn't your background. You're a scientist.
Dr. Eli David: 15:08.4
Yeah, my background is, can be summarized in neural network. I've been doing neural networks for 25 years. And there's an anecdote there. When I did my Master's in computer science, AI is a field that we have decades up there, and neural networks, which is the entire AI of today, was considered a refuted field 20 years ago. When I wanted to do neural net, and by the way, I didn't foresee that neural net would succeed.
Dr. Eli David: 15:36.0
I just said, "Well, these statistical methods are not working well. there is just one evidence of real intelligence – this box that we have here. Let's try to copy it." Real neural net, artificial neural net. So I started my, I did my Master's and my PhD.
Dr. Eli David: 15:52.6
It was a computer chess, chess playing program. And I went to the department chair of computer science, Bar Ilan University, and said, "Well look, I would like to teach a course on neural net." It was customary that PhD students can teach a course on their subject. "What?
Dr. Eli David: 16:08.6
Neural net? The next thing you will come and ask me to teach a course on astrology." So he went to the teaching committee and came back and said, "Eli, look, we unanimously agreed it's the most stupid idea anyone ever proposed. But because we like you and we want you to stay here when you finish your PhD, we approved your course with one condition.
Dr. Eli David: 16:27.9
Don't call it neural net. We don't want to put the university to shame, just invent another name." I made up biointelligent algorithm and I taught neural net 20 years ago.
Michael Eisenberg: 16:38.4
So your neural network course was called Biointelligent Algorithm,
Dr. Eli David: 16:42.2
Just not to say the N word: neural net.
Michael Eisenberg: 16:45.4
Okay.
Dr. Eli David: 16:45.7
So I've been doing neural net teaching at university for the past, almost 20 years. Founding, founded several neural net based startup, cyber neural net acceleration. My field of both entrepreneurial area and research area has always been in the neural net itself.
Dr. Eli David: 17:04.8
Some people's interest is neural net for vision or speech or text. My passion was always neural net itself. The architecture of neural net, how it's similar and how it's different from our own brain. Now when I teach neural net to my students, I always tell them, "Look, the fact that neural net is working so good today, GPT, Gemini, Anthropic, all of that, is not proof that we have good neural net architectures.
Dr. Eli David: 17:32.0
We can talk about that. I think all of today's neural net architectures are mind bogglingly stupid. But the fact that they work just shows that how many better neural net architectures are out there. Just to give an anecdote, at peak performance, when you play tournament chess, your brain never passes 30 watts of power consumption, usually around 20 watts.
Dr. Eli David: 17:55.9
A single GPU is using thousands of watts. You know why? Because if I ask you, Michael, what do you see here? Glass of water. A few tiny cortical columns got activated in your brain. When I showed this to a multimodal LLM like ChatGPT, almost the entire brain, or a third of the brain gets activated to say it's a glass of water.
Dr. Eli David: 18:17.9
So our algorithms, they're extremely inefficient. And that's my passion.
Michael Eisenberg: 18:22.7
But why don't you give our audience your working definition of what a neural network is?
Dr. Eli David: 18:26.1
The real one or the artificial one?
Michael Eisenberg: 18:29.6
Both.
Dr. Eli David: 18:30.0
Let's start from the real one. I had a neuroscience teacher, one of the greatest in Israel, he used to say, "If it is something smart, the brain cannot do that at the cell level." So it all starts from you have stem cells.
Dr. Eli David: 18:45.8
A stem cell can turn into a skin cell, a muscle cell. It turned into a brain cell, also known as a neuron. There is no magic there. It just fires electricity to each other. Now, we, our brain has different parts. The only interesting part is the neocortex, the outer cortex that only the mammals have it.
Dr. Eli David: 19:04.4
Neo – new, cortex – layer. All the other parts of the brain are boring stuff, just keeping us alive and all that stuff. So the neo...
Michael Eisenberg: 19:12.1
By the way, that's a base need in order to get to the neocortex. Just keeping us alive is not something to be...
Dr. Eli David: 19:16.9
Of course, but...
Michael Eisenberg: 19:18.0
...minimized that we're here, right.
Dr. Eli David: 19:20.2
Turtles are alive and I don't think they have cognition.
Michael Eisenberg: 19:23.0
Yeah.
Dr. Eli David: 19:23.3
Only mammals have neocortex. Now, in the neocortex it's not some magical things that gives us cognition. If you crack open my skull, take my brain out, remove those boring parts that just keep us alive. Take neocortex, spread it on this table.
Dr. Eli David: 19:39.2
You can spread it, by the way. It will be the size of about 30 centimeter by 30 centimeter napkin. For American viewers, that's some inches by some inches. 30 centimeters, a napkin. The width about two millimeters.
Dr. Eli David: 19:55.6
Imagine six playing cards stacked. Neocortex has six layers and you have around 16 billion neurons there. We used to think that the neurons are completely different. You know, the visual cortex at the back of our brain is the expert part in seeing.
Dr. Eli David: 20:14.1
The auditory cortex is expert at hearing. That's accurate and complete nonsense. Why? Already in the late 1980s, we know that if you take a newborn mouse, cut the optic nerve and auditory nerve, switch their places, the mouse starts hearing with the visual part and seeing with the auditory part.
Dr. Eli David: 20:32.7
Which proves that these are general purpose computing units. The reason the visual cortex is here, because the cable, the optic nerve, that brings the data from the camera, also known as eyes, ends up there. Those neurons just start doing that kind of processing.
Dr. Eli David: 20:49.6
It all sounds very simple. And by the way, what's the difference between our neocortex and that of a chimpanzee? Crack open the skull, take the neocortex, spread it on the table. Instead of 30 by 30, it will be a business envelope. Same six layers, same two things.
Dr. Eli David: 21:06.8
Why are primates smarter than others? For some reason we don't know, an evolutionary mutation, we have much fewer number of connections in our brain. An elephant's neocortex is much bigger than ours, but we have much more neurons there.
Dr. Eli David: 21:25.3
How can it be? Because, I'm a bit simplifying it, but an elephant's neocortex's neuron on average connects to about 100,000 other neurons. In primates, each neuron connects on average to only 10,000 other neurons.
Dr. Eli David: 21:41.5
You have much less space for the connectors, synapses, the cables, and you have more space for processors. We have much more neurons. Going back to the artificial neural net, artificial neural nets started from 1970s.
Dr. Eli David: 21:57.1
Just a crude mimicking of the brain. Let's draw a circle and call it a neuron. Let's connect a line and say, well, that's the synapse. How do we train this thing? It was a simple thing in 1970s. By the end of 1970s, oh, it doesn't work. Refuted.
Dr. Eli David: 22:12.9
Then in 1986, Geoffrey Hinton, the Nobel winner, the godfather of modern AI, and Rumalhart, they invented back propagation. Simple mathematical algorithm that any students today looks at it and say, "It took them 15 years to come up with that?" Yes, but the crazier part is that 40 years later, still all LLMs today, Gemini, ChatGPT, others are, trained with that simple 1986 algorithm.
Dr. Eli David: 22:39.2
Geoffrey Hinton himself finds this crazy. And he said, "If it were up to me, I would just start from scratch." Our brain is not calculating derivatives to do that. So the thing is, just like in the real neural nets, that intelligence comes from quantity, not quality.
Dr. Eli David: 22:57.8
As I told you, my brain is exactly the same as chimpanzee, I just have more neurons. The surprising and actually not surprising fact is that in artificial neural net, exact same thing is happening.
Michael Eisenberg: 23:10.6
The more GPUs you have...
Dr. Eli David: 23:12.8
More neurons. An argument I had 10 years ago with neural net guys. Finally, somebody's taking us seriously. Remember in 2012, computer vision? I was in a big conference. There was a discussion I had with somebody from the field of NLP, natural language processing.
Dr. Eli David: 23:31.8
And he said, today he's one of the greatest neural net text guys in Israel, he told me, "Well, Eli, your neural net works in vision and speech. Never work in text. Look, it doesn't work. It's a joke." And my response to him was, "All mammals can see, but only mammals with much bigger brains have language.
Dr. Eli David: 23:54.2
Humans, dolphins, whales. So it's just a matter of bigger neural nets." Back then, it was considered crazy. But today that's what we see. Neural net after neural net, bigger and bigger LLM is mainly quantity that's becoming bigger.
Michael Eisenberg: 24:09.4
So all these companies are investing massive amounts of money in building out bigger neural networks. More GPUs, more brain power, more horsepower. There's a compute bottleneck coming, that's I think obvious to anybody with a brain, that there's a compute bottleneck coming.
Michael Eisenberg: 24:25.4
But the point you made earlier is interesting, which is the energy efficiency of the GPUs compared to the brain is many orders of magnitude worse. So it's going to be hard to scale compute forever until they get to what everyone seems to call AGI.
Michael Eisenberg: 24:41.0
And this moment of course been around the corner for a long time and it's again around the corner in the next year or two years. Elon, I think, Musk has said it's like the next two or three years, but at the lack of energy efficiency for a GPU, how do you actually get to even compete with the human brain?
Dr. Eli David: 24:56.7
There are several paths here that in the next few years we're going down there. First of all, more and more investment will be made in the current transformer based neural net architectures that are heavy, dense, not efficient.
Dr. Eli David: 25:12.7
But everyone's doing that. I'm doing that because they work.
Michael Eisenberg: 25:16.8
But you believe in it, transform based architecture?
Dr. Eli David: 25:20.2
I believe it works.
Michael Eisenberg: 25:21.1
It works. Okay.
Dr. Eli David: 25:21.5
It works.
Michael Eisenberg: 25:22.2
Go on, sorry.
Dr. Eli David: 25:22.2
Of course it works. So it is not a matter of belief, it's a fact. They work. I do believe much more efficient versions of that, much sparser neural nets. For example, during the past year most LLMs are based on mixture of experts.
Dr. Eli David: 25:38.8
Essentially it is, imagine like different blocks of neurons, and it routes through them. Let's not activate the entire brain, just half of it or a quarter of it. It's a nice step towards what I imagine in a decade from now, we will have large LLMs.
Dr. Eli David: 25:59.5
Very, very, very large LLMs, that they will be based on not 64 or 128 experts that you route through them. You will have a million experts, mixture of experts will based on a billion experts and you route through them based on the complexity of the task.
Dr. Eli David: 26:17.9
My own, both research and the companies I've founded heavily tackle this problem. I do believe we can have much more efficient architectures. I have evidence of that. I've built that. Right now in my current company I get 10x on most LLMs.
Dr. Eli David: 26:35.0
I'm very happy on one hand and very frustrated because I know for sure there are out there Methods to get not 10x or 100x, there are methods to get a million x efficiency on what we have. And since all brightest humans right now are working on this, with all the investment, we will stumble upon them in the next few years.
Dr. Eli David: 26:59.9
But in parallel to that, we need the energy. I don't think there is a scenario that we will find such efficient neural nets and say, "Okay, we've got all the energy." And that's one of the things that's most concerning me. China is winning the race on the energy side.
Dr. Eli David: 27:18.6
On the software algorithmic side, it is almost close. You see what's happening past few days – Anthropic is complaining that China is distilling its models. So you have two superpowers, US and China. But in the energy, you see China is just building everything, nuclear, fossil, wind, solar, whatever they can, they're building it.
Dr. Eli David: 27:39.7
And we in the West are not doing that. And that's concerning.
Michael Eisenberg: 27:43.7
I need to ask something before I move on to what you're doing now. You mentioned like a million experts. You've made a career in a Twitter personality against bucking experts. In fact, I'd argue that experts have led us down a lot of wrong paths certainly over the last decade or two. So is thinking about LLMs as a community of experts a good idea?
Michael Eisenberg: 28:04.1
Or is it like we're going to get like reversion to a bad mean?
Dr. Eli David: 28:06.9
That's a perfect analogy because in this context using the word expert actually means random people. Right now, mixture of expert or experts, when I say, "Mixture of a million experts," are they really experts?
Dr. Eli David: 28:23.0
No. There are many groups of neurons, many groups of artificial neurons, many groups of people. And this is the belief that I have, and I think Elon expresses it very eloquently, that a million people out there that they express their voices at the long term they will be more accurate than four top experts in any field.
Dr. Eli David: 28:50.5
You know, I saw that...
Michael Eisenberg: 28:52.0
Wisdom of the crowds, or beyond that?
Dr. Eli David: 28:54.6
The term, specific term wisdom of the crowds I think has been abused a lot. I'm not using that term.
Michael Eisenberg: 29:00.7
Yeah.
Dr. Eli David: 29:01.0
I'm not saying that the majority of people are right. The majority of people are often wrong. But if you don't suppress and you don't force the view of the majority on the minority and allow the minority to be wrong, then among those wrong, you will have the seeds of the next revolutionary new idea.
Michael Eisenberg: 29:21.5
A lot of things start on the edge and I think that's poorly understood in the world. That kind of fringe phenomenon that make their way...
Dr. Eli David: 29:27.2
I came from there. I came from a field that in the main neural, AI conference, Triple AI, the biggest AI conference, you could not publish a single paper on neural net. When Yann Lecun published one of the groundbreaking papers on neural net and computer vision, 2011 or 12, his paper was rejected from the most prestigious computer vision conference and the reviews were essentially, "This paper claims the results are based on neural net.
Dr. Eli David: 29:57.0
We all know that neural net cannot do this, so the paper must be fake." Had you imposed your correct expertise, the field of neural network would have been killed. And you will still do stupid decision trees and SVMs and Bayesian networks today.
Dr. Eli David: 30:12.4
So I've seen it firsthand in my field that allowing those who are wrong, there are others who are wrong, there are people where believe that the super AI will come from a swarm optimization. It's some esoteric field in AI, or ant colony optimization.
Dr. Eli David: 30:29.8
I think they're wrong. But if I say, "Oh no, come on, don't publish your papers," maybe they're right, maybe the next thing will come from them. I believe, by the way, that the next wave of AI will come from evolutionary computation. That all these neural nets self evolve by competing and that social network of LLMs communicating with each other.
Dr. Eli David: 30:51.1
I saw that and say, "Yes, this is how it's going to happen."
Michael Eisenberg: 30:54.2
The Clawbot.
Dr. Eli David: 30:55.0
Yes.
Michael Eisenberg: 30:55.4
Yeah. Okay, what's the startup you're working on right now?
Dr. Eli David: 31:00.4
On LLM acceleration and optimization. Taking LLMs, state of the art LLMs, and optimizing them, making them run 10 times, 20 times faster and with much fewer amount of GPUs needed.
Michael Eisenberg: 31:15.6
What's the company name?
Dr. Eli David: 31:16.9
Two Delta.
Michael Eisenberg: 31:17.8
Two Delta. Why is it called Two Delta?
Dr. Eli David: 31:20.6
Oh, you're forcing me to reveal a big secret here.
Michael Eisenberg: 31:25.1
That's what we're here for.
Dr. Eli David: 31:25.8
Let's say the official version is that we make the LLMs much faster and also much cheaper to use.
Michael Eisenberg: 31:32.7
It's two Deltas, not two Sigmas or beyond three Sigmas.
Dr. Eli David: 31:35.7
That's right.
Michael Eisenberg: 31:36.6
Not two orders of magnitude either?
Dr. Eli David: 31:39.5
Two differentiations.
Michael Eisenberg: 31:40.7
Two differentiations. Tell everyone about your previous startup.
Dr. Eli David: 31:44.4
My previous startup was surprisingly also in neural network optimization called Deep Cube. And back then what we did was, in my current company, now we're using lots of different methods. I'm fortunate to have, almost all of the people I have now in my company are brighter than me and are better at neural networks than me because it's a more mature field.
Dr. Eli David: 32:07.3
My previous company, Deep Cube...
Michael Eisenberg: 32:08.7
Maybe because you're a good professor.
Dr. Eli David: 32:11.3
Or maybe because they are bright and they're doing things hands on. Give an anecdote. The other day I was sitting with them. They had some crazy optimization method they wanted to do on the LLMs.
Michael Eisenberg: 32:22.8
Yeah.
Dr. Eli David: 32:23.2
And look, I'm the old guy in neural nets with the wisdom. "I don't think it will work because such and such and such." And they're respectful of me. They say, "Okay, we will not do that." Yesterday they come back with the results. "Eli, you remember we talked about the method?
Dr. Eli David: 32:41.4
We went and tested it." Each test is running huge amount of GPUs and wasting lots of money, yes? It worked. It worked amazingly well. Actually, one of the best methods that we stumbled upon. And I told them a few days ago not to do that because it will not work. This is the joy of seeing brighter people than you.
Dr. Eli David: 32:59.4
And I said, "Okay, why are you asking me even? Go do whatever the hell you want to do." When the previous company was solely taking a single idea from neuroscience, that we had the most number of connections in our brain when we were two years old. And then from two years old until late teenagehood, our brain aggressively sparsifies connections.
Dr. Eli David: 33:21.5
That's why a 5 year old kid can learn 10 different languages easily. I'm trying to learn a new language for the past decade, and I barely can order in the restaurant.
Michael Eisenberg: 33:31.6
Which language?
Dr. Eli David: 33:32.3
French. Terrible, terrible language.
Michael Eisenberg: 33:34.0
Is that only so you can make fun of Macron?
Dr. Eli David: 33:35.8
Actually, I should stop speaking French and instead focus on Arabic. There's a joke, an Israeli comedian says that in Israel, as a third language, in addition to English, you have the option of French or Arabic. He said, "All my friends took French to be able to speak in Paris.
Dr. Eli David: 33:53.7
Only I took Arabic and now I'm the only one who can speak in Paris." So the idea I took in my previous company, Deep Cube, was let's take a big neural net, retrain it back to 2 year old, retrain it and aggressively sparsify it.
Dr. Eli David: 34:09.9
90% of the connections are gone. It works. We get the same accuracy. The problem, all the libraries today are based on doing dense multiplications, dense matrix multiplications, and it's all sparse. So we write an entire inference engine on CPUs for doing sparse compute.
Dr. Eli David: 34:29.0
We got about 20, 30x speed up on any AMD or Intel CPU. But that was in 2020, 21 when the largest model was called BERT. It had 300 million connections.
Dr. Eli David: 34:44.1
Today a model with 300 million would not even qualify to be called a small language model. We're talking about models with hundreds of billion of trailing connections. So unfortunately today CPU is irrelevant because well I take the model, make it ten times faster.
Dr. Eli David: 34:59.4
Forget about CPU, a hundred times faster is irrelevant. In the current company we're focusing on GPU and with many different methods. Previously, previously I founded, co-founded Deep Instinct. Cybersecurity company – again all the company was based on a very small neural net that is running an end device, your mobile device, your PC that for any computer file that it sees just passes the raw byte values through the neural nets and says if it's malicious or not.
Dr. Eli David: 35:28.7
But the bottom line, the only thing I know how to do is to build neural nets. All the others are auxiliary things.
Michael Eisenberg: 35:33.3
And what happened to Deep Instinct?
Dr. Eli David: 35:34.7
Still running.
Michael Eisenberg: 35:35.2
Still running? What happened to Deep Cube?
Dr. Eli David: 35:36.7
Deep Cube – we sold it.
Michael Eisenberg: 35:37.9
To who?
Dr. Eli David: 35:39.2
We sold it to Nano Dimension, a 3D printing company. Thing is they needed real time error correction within the 3D printing without GPUs. And they went around the world and everyone told them look, there is only one company that has this crazy technology, that we had.
Dr. Eli David: 35:54.8
So back then were negotiations with some other CPU producing companies and they came and we were just perfect fit for them and we sold to them.
Michael Eisenberg: 36:04.3
And that was the end of Deep Cube.
Dr. Eli David: 36:07.0
Yes.
Michael Eisenberg: 36:07.3
It's gone and you're no longer there.
Dr. Eli David: 36:09.8
I was there for some time. After that I worked with some Fortune 500 companies, private equities, AI transformation. I got bored to death. I've met my co-founder now Dvir Zeltzer, ex-Google, and I'm happiest I've ever been.
Dr. Eli David: 36:25.6
Back to building, back to the fun of startup. Corporate is boring. Startup is fun.
Michael Eisenberg: 36:30.2
What makes you happier, starting a company or being controversial on X?
Dr. Eli David: 36:34.8
They're exactly the same thing. Starting a company you need to have huge amount of chutzpah, audacity. To say, "Well look everyone in the world, you're all stupid. You don't know anything. Me and my five people, we are right and you're all wrong." That's what startup means.
Dr. Eli David: 36:53.6
Most of them fail, naturally. But you must love the fact that you're going against majority because that is exactly what startup is all about.
Michael Eisenberg: 37:02.5
What were your hobbies as a kid?
Dr. Eli David: 37:04.0
Chess.
Michael Eisenberg: 37:04.9
Chess. How many moves ahead could you think in chess?
Dr. Eli David: 37:08.1
By the way, that's why I got into AI. Did I tell you that?
Michael Eisenberg: 37:10.6
No.
Dr. Eli David: 37:11.1
My dream was to become a world chess champion. By the age of 16, I didn't become a grandmaster. Essentially you're told, "Look you're too old. Nothing good will ever come out of you. Go find something different." You know what happens in Israel when you don't get accepted to become an air force pilot?
Michael Eisenberg: 37:30.7
No.
Dr. Eli David: 37:31.3
You go to the anti aircraft missiles division. I don't fly, nobody flies. That's the reason I went into AI – to build a chess program to defeat these humans. Seriously. That was the reason.
Michael Eisenberg: 37:43.0
So you were in the anti missile defense program?
Dr. Eli David: 37:44.8
Yes. In chess.
Michael Eisenberg: 37:46.6
In chess.
Dr. Eli David: 37:47.5
I built all my neural nets, my PhD and Masters, was neural net for chess program, evolving chess engines.
Michael Eisenberg: 37:54.0
You've been passionate about what's going on in Iran since the protests started. It's all over your X account. Similar to what you said about October 7th, at the time. You have a view?
Dr. Eli David: 38:07.7
We have a chance that we've never had, we as Israel, to turn our only existential enemy into our greatest ally in the region. When you go to all the pro Israeli protests after October 7th, in every European city and every American city, in addition to Israeli flags and the flag of the host nation, we don't burn the local flag, we respect them.
Dr. Eli David: 38:36.5
You always see the sun and lion flag of Iran because Iranians know that we're fighting the same fight. We're fighting against the same tyrannical regiment that has built and is funding all the terrorists in the region.
Dr. Eli David: 38:52.4
You go to Lebanon, Hezbollah. It's Iran. The Shiite militias who kill Americans there. That's Iran. The Houthis in Yemen, they're Iran. Hamas funded and Iranian weapons are used there. And the same Islamic Republic has hijacked Iran and has massacred, as President Trump just yesterday in the State of The Union said, 32,000 people.
Dr. Eli David: 39:12.9
This is the greatest one day massacre in modern history. The only single day massacre that rivals it is the Babi Yar massacre in Holocaust which about 31,000 Jews were killed in a single day. Such a tyrannical regime.
Dr. Eli David: 39:29.1
We now have a chance, we the West, to help the Iranians get rid of it. And we will never forgive ourselves if we miss this opportunity. So yes, I'm very passionate about it. I mean all are seeing the brave Iranians going to streets yesterday in the universities, they massacred them and they're still going out and fighting for their freedom.
Dr. Eli David: 39:52.6
We need to help them.
Michael Eisenberg: 39:53.6
You mentioned before that you're a libertarian and certainly given your political views, there's a lot of overlap with some of the MAGA crowd, in America, which has become increasingly isolationist. What you're advocating now is what I would call anti-isolationism. You know, this is our moral responsibility to get after the mullahs or the ayatollahs in Iran and get rid of the tyrannical regime to free the Iranian people.
Michael Eisenberg: 40:17.8
How would you make the case to probably a lot of people who follow you on X, who are more isolationist than you, that this has to be done? And, why it's in America's interest?
Dr. Eli David: 40:26.6
Actually, many of the MAGA people are my friends and even I would consider myself maybe an honorary MAGA. I believe a great America, as the leader of the free world, is great for all the world. I have a MAGA hat that sometimes I wear the hat.
Dr. Eli David: 40:42.2
I believe that America should be great, and that is the interest of Israel – to have a strong, great America. To your question, as a libertarian, I'm skeptical about intervening in other stuff, but there is a range here. On one hand, you have warmongers, people who want to go to any war.
Dr. Eli David: 41:01.9
I wouldn't say for the fun of it, but just because they feel great and feel like they're great heroes, modern Churchills will just go to a war. On the other extreme, you have people who won't go to a war even when it's the last resort. Chamberlain. Let's take the example.
Dr. Eli David: 41:17.8
We have many examples in history. Chamberlain didn't want a war. He was right not to want a war. British people didn't want a war. And in adamantly trying not to get a war, they got the worst war in the history of humanity, trying to avoid, by not being brave enough to confront that war early enough.
Dr. Eli David: 41:40.2
President Trump yesterday mentioned that Iran is building intercontinental ballistic missiles. Why are they doing that? You don't need those missiles to hit Israel or to even hit large parts of Europe. They want to target America. To those of my American friends who say, "Nah, US should not do anything," Iran is building interconnect continental ballistic missiles and nuclear weapons.
Michael Eisenberg: 42:05.1
So the big Satan and little Satan argument – Israel is...
Dr. Eli David: 42:08.5
They're chanting, "Death to America." What else do you want to say? We woke up on October 7th learning that all these Hamas people saying, "Death to Israel and kill the Jews." You know what? In Arabic, kill the Jews doesn't mean a cappuccino with soy milk.
Dr. Eli David: 42:23.5
It means kill the Jews.
Michael Eisenberg: 42:25.0
Khaybar ya yahud.
Dr. Eli David: 42:25.9
Yes. And on October 7th, to their credit, they just did what they have been saying they want to do for decades. And we say, "Oh, no, he's not serious." Now take Iran seriously, the Islamic Republic regime, they're saying, "Death to America," they're building the weapon, the greatest weapon of mass destruction, and building intercontinental ballistic missiles.
Dr. Eli David: 42:46.5
Why do they want to do? To send flowers? To launch flowers over there? So any American who says, "No, we shouldn't intervene," may have to intervene when American soil is under threat. And on top of that, Obama, the weakest president in modern history.
Michael Eisenberg: 43:02.9
Who's weaker, Obama or Macron? So I'm clear.
Dr. Eli David: 43:05.6
No, Obama is weak. Macron is pathetic.
Michael Eisenberg: 43:07.7
Okay, so we're clear.
Dr. Eli David: 43:08.6
Don't put them in the same class.
Michael Eisenberg: 43:10.2
Okay.
Dr. Eli David: 43:10.4
Obama you can compare him to Jimmy Carter or to Biden. I wouldn't even compare Macron to them. So in 2009, Obama just stood idly and looked the other way as Iranians were being killed. I have no respect for that.
Dr. Eli David: 43:26.5
But he didn't say, "I'm with you," and then deserted them. President Trump said, to the record, "The Iranian protesters will be safe because the regime knows that if they start shooting, we will start shooting." The next day, he said, "The protesters must be brave and continue because we are with them." The next day he says, "We are locked and loaded and help is on its way." Now, to those who say that America should do nothing, these people essentially, like vultures, waiting for Trump to fail, those will be the first who say, "Here it is.
Dr. Eli David: 44:04.8
Trump betrayed the greatest promise." Trump's promise in all the campaigns has been: promises made, promises kept. And he keeps all his promises. Every presidential candidate in the history of the US said, "If I become president, I will move the US Embassy to Jerusalem." None of them stood behind that.
Dr. Eli David: 44:24.0
Trump, promises made, promises kept. And this is one of the biggest and most unequivocal personal promises he made. So I have absolutely no doubt that he will keep this promise as well.
Michael Eisenberg: 44:38.0
Back to AI for a minute. It's very hyped right now, obviously. I mean, you see what's happening in the public markets. Anthropic sneezes and all the software stocks get a cold. How real is it in terms of what you view as threatening the software businesses that are out there today, labor, et cetera? What are the reality and the hype?
Dr. Eli David: 44:54.5
I have some views, no conviction on anything I say. I feel like every day is like a quarter. Every day I wake up and I look at the latest with curiosity and a bit of a kind of, I have a panic attack every morning.
Dr. Eli David: 45:11.9
What did I miss when I was asleep? Because, on many mornings and every week I wake up and I do miss. Just two weeks ago, three top tier Chinese models were released in a single week. So, yeah, every day things are changing. My two cents, and we may be speaking in two months from now and I said, "Oh, forget about what I told you.
Dr. Eli David: 45:33.1
It was completely wrong." My two cents right now is that all this SaaS panic, software as a service panic, all those companies are going down. I think in the short term it is a bit exaggerated.
Dr. Eli David: 45:49.7
In the long term it is valid. Take a direct quote. Anthropic just posted blog post that it is now scanning security vulnerability.
Michael Eisenberg: 45:59.2
Yeah.
Dr. Eli David: 46:00.2
The next day, the stock of CrowdStrike, great cybersecurity company, it's a competitor of Deep Instinct. So I know how great it is. If I'm flattering my greatest competitor, you know that it's a great company. The stock went down 25%. His CEO George Courts says, "No, I will not do that." It went again after his comment.
Dr. Eli David: 46:21.5
It went down. In the short term, I don't think any big enterprise will say, "You know what, let's not renew our CrowdStrike or Palo Alto Networks or Checkpoint subscription. I will use Claude Code."
Michael Eisenberg: 46:33.8
Yeah.
Dr. Eli David: 46:34.1
Yeah. Really? You are the CISO, Chief information Security Officer, and now there is a hack you will sell to the director, to boards, "Oh, sorry. I just canceled all our cyber solution and delegated it to Claude Code and it hallucinated." No, you will not do that.
Michael Eisenberg: 46:50.3
I was trying to get Claude Code to do some work on my email today. It was off by a hundred miles. No, stop.
Dr. Eli David: 46:55.2
Yes. But again, as somebody who, I'm an old guy in neural net. I've been doing it for many years. When I give talks, I often asked to give a keynote speech on the latest in AI. And I start with 1970.
Dr. Eli David: 47:11.2
I end my talk, only the last two slides about what's happening today. Because what you try to convey, guys, forget about what's happening right now.
Michael Eisenberg: 47:19.3
Yeah.
Dr. Eli David: 47:19.8
Look at the pace of improvement, exponentially growing. So if today, in any task, Anthropic or Gemini is not embarrassingly stupid, if it is not embarrassingly stupid today, it means that in a year or two or three it will be super human good at that.
Dr. Eli David: 47:43.8
Assuming, that's my core assumption, that this pace of exponential improvement will continue. So I don't think the risk is that now the enterprise will say, "Oh, I'll use Claude Code instead of CrowdStrike and others." But there are two risks here. The competitor of CrowdStrike, just five people in six months can do what we needed in our generation 500 people and three years.
Dr. Eli David: 48:08.3
And the second, many of things enterprises can build for themselves. So in the long run, I think the SaaS world will get revolutionized just like every fabric of our lives will be revolutionized. I'm optimistic and worried, but in the short term, maybe it's an exaggeration.
Michael Eisenberg: 48:25.4
So earlier in the conversation you talked about this giant AI race between China and the United States and you talked about energy. You also posted on X, not long ago that Israel was the first country to deploy basically AI-built kinetic devices and drones and buggies and whatever in the battlefield.
Michael Eisenberg: 48:52.0
How do you think about Israel in this race or superpower competition, great power competition, between the United States and China? Number one. And if you were the AI czar of Israel, what should be our strategy?
Dr. Eli David: 49:03.4
Israel will play, must play a core part in the, as part of the Western alliance, also known as America and Israel. Europe, unfortunately, is on a path of self destruction of technology.
Dr. Eli David: 49:22.9
No technology there. They're just, the joke that America innovates, China replicates, and Europe regulates, couldn't be more accurate and that's unfortunate. So we have America and you have Israel.
Dr. Eli David: 49:38.4
In Israel, I don't believe we will build large language models to compete with Gemini and others. And we don't need to, we didn't build the Internet, America started it and built on top of that. But we have the highest density of talents per capita. We have proven it again and again.
Dr. Eli David: 49:54.7
If amazing breakthroughs will come in AI, just like we spoke earlier of sparsity, more efficient AIs. I believe many of them will and should come from Israel. But to do that we need talent. The first thing that I'm not sure the decision makers in my country are aware of that is that we must desperately fight for talent.
Dr. Eli David: 50:17.1
And the AI talent is a bit different than cybersecurity. You can take a bright 18 year old kid and in six months in the cyber units, turn him into a world class cyber expert. You cannot turn a bright kid in six months into an AI expert.
Dr. Eli David: 50:32.2
AI is science, a Bachelor's, Master's, PhD. Just like I cannot take a bright 18 year old kid and in six months turn him into a dentist. Right? We're fighting for talent. And talent goes where talent is. If you walk here in Tel Aviv, central Tel Aviv in Sarona, you have the highest number of cyber experts per square meter.
Dr. Eli David: 50:56.5
But if you do that, the same in AI today that is not the case. We need to attract the talents. Some of my friends in the government think we need to spend more money. I think that's insane. First of all, small country and I don't believe the government can spend money in any good way.
Dr. Eli David: 51:15.4
Every way the government spends money, I just see waste. Israel has become a startup nation because technology is maybe the only field the government in Israel hasn't tried to help. We have a Minister of Agriculture. That's why it's terrible.
Dr. Eli David: 51:30.5
We have a Ministry of Transportation. That's why it's terrible. We don't have a Ministry of High Tech. That's why it's good. The Ministry of Science, but thankfully it's irrelevant. Is not doing anything. Very good. I'm happy that it's not doing anything because it can only do harm. Israel must fight regulation.
Dr. Eli David: 51:46.5
Let me give an example. Michael, do you imagine a world in which in a year from now, two months from now, a solo entrepreneur with all these tools will build a good company?
Michael Eisenberg: 51:57.5
Yes.
Dr. Eli David: 51:57.9
Yes. For such an entrepreneur, my advice will be leave Israel and build your company outside Israel. You know why? Because of our stupid policies. Last year in the budget, the crazy people in the government decided, well, you know what?
Dr. Eli David: 52:13.7
If you have a company with just one person or two people, you're cheating us. So we will tax you as if you were a person. Will tax you out of existence. So go away. Instead of saying, "Come here, you're one person with idea.
Dr. Eli David: 52:30.8
Brilliant. I will give you more tax breaks to do that. Amazing. Come here."
Michael Eisenberg: 52:34.3
We failed together at fighting that online with our Finance Minister.
Dr. Eli David: 52:37.7
And we lost the fight. We lost the fight. But those are the kind of...
Michael Eisenberg: 52:40.8
I haven't given up yet. Have you given up? We're trying to reverse it.
Dr. Eli David: 52:44.2
I don't know about giving up. I'm just venting louder and louder. Maybe it will help, maybe it will not. I feel better that at least.
Michael Eisenberg: 52:51.1
I mean, you may need to say it in Hebrew, though.
Dr. Eli David: 52:53.4
Yeah, yeah. I'm retweeting you. You're retweeting me. Let's vent and see what happens. But that's the thing that's the trouble. You don't need another AI authority to sit and decide where to invest in, you know? I asked somebody from the Ministry of Science, "You have the national authority of investment...
Michael Eisenberg: 53:12.0
It's called the Israel Innovation Authority.
Dr. Eli David: 53:13.3
Israel Innovation Authority.
Michael Eisenberg: 53:15.2
IIA
Dr. Eli David: 53:15.2
What's IRA? What's your ROI? You know what it is? Return on investment.
Michael Eisenberg: 53:20.8
It's their budget. That's what it is.
Dr. Eli David: 53:22.2
No, nobody knows. Nobody knows.
Michael Eisenberg: 53:24.0
Just inputs, no output.
Dr. Eli David: 53:24.7
Nobody cares. But actually...
Michael Eisenberg: 53:26.4
They're very good people.
Dr. Eli David: 53:28.0
Very good people.
Michael Eisenberg: 53:28.6
We love these people.
Dr. Eli David: 53:29.2
Yeah, very good people. Yeah. But, like somebody said, it's a good people. I would be happy to introduce him to a family member as a date. I wouldn't want them to spend and waste my money. And actually the way they invest is not randomly. I wish it were random.
Dr. Eli David: 53:44.7
They are, they have...
Michael Eisenberg: 53:46.8
They're experts.
Dr. Eli David: 53:47.5
They're experts in identifying those startups which are so incompetent that they cannot raise money from any VC and they'll go and fund them. Go into any fake meat production startup in Israel. They have funding from Innovation Authority.
Michael Eisenberg: 54:04.1
That's unbelievable.
Dr. Eli David: 54:05.1
And it's my money. It's your money. Taxpayers' money.
Michael Eisenberg: 54:07.7
Yeah. And fake beef. Who wants that?
Dr. Eli David: 54:10.8
Nobody, obviously. Look at what happened Beyond Meat.
Michael Eisenberg: 54:13.2
Yeah.
Dr. Eli David: 54:13.6
99% down.
Michael Eisenberg: 54:14.7
And the agriculture ministry can't put milk on the shelves today. They failed at that too.
Dr. Eli David: 54:19.6
Don't get me started on that. You know that we are the only country in the world that has a honey commission.
Michael Eisenberg: 54:27.6
Yes.
Dr. Eli David: 54:28.1
Even in Soviet Union they didn't have. Just for our audience...
Michael Eisenberg: 54:31.2
I was fined for putting out beehives.
Dr. Eli David: 54:36.6
Really?
Michael Eisenberg: 54:37.0
Yeah, yeah, yeah. They stopped me.
Dr. Eli David: 54:38.4
Do you know that...
Michael Eisenberg: 54:38.9
I had to get rid of four of them.
Dr. Eli David: 54:39.6
They could have charged you with a criminal offense?
Michael Eisenberg: 54:41.3
I'm very well aware. Yeah.
Dr. Eli David: 54:43.7
So even in Soviet Union they didn't have that. So in Israel there is quota. Why? So that you don't protect your farmers, it's not the farmers. Those kind of cartels that are holding everything like good old Bolshevik country.
Michael Eisenberg: 54:59.8
There are still socialist roots here that we have to get rid of.
Dr. Eli David: 55:02.4
Exactly.
Michael Eisenberg: 55:03.1
Okay, we have to wrap up here, but I sense it's fair to say that you're a big fan of Elon Musk. Is that right?
Dr. Eli David: 55:09.4
Yes.
Michael Eisenberg: 55:09.4
Okay, so if you had one thing to say to Elon as it related to Israel and what he could do here, what would it be?
Dr. Eli David: 55:17.9
You need to visit here more and take action here.
Michael Eisenberg: 55:20.6
What action?
Dr. Eli David: 55:21.8
Invest. Build companies here. Don't invest in Israel. Don't invest in public sector at all. Private sector. Build your companies here. Start opening branches of your company here.
Michael Eisenberg: 55:31.6
Why?
Dr. Eli David: 55:31.6
Because you, Elon Musk, you chasing the best talent in the world. You believe in talent. Everything you do is bring the best talent. The great thing you did, you fired 80% of people in Twitter because you know that any good company is a small number of talented people are better than large number.
Dr. Eli David: 55:48.2
And here we have the highest number of talent per density per population. We need, you need a large presence of Tesla in Israel, of SpaceX in Israel, of your AI in Israel. Why? Because you will have the greatest return on investment.
Dr. Eli David: 56:05.1
If you chase your return on investment, it will be good for you, it will be good for the world, and it will be good for us.
Michael Eisenberg: 56:11.5
What are you going to be doing in 10 years?
Dr. Eli David: 56:13.3
I don't know.
Michael Eisenberg: 56:14.1
What do you think?
Dr. Eli David: 56:15.0
I'll be trolling for sure. And I will be doing things that make other people angry and vent my opinions. I will be right in some things. I will be wrong in most things, but that's the fun of it.
Michael Eisenberg: 56:29.4
Sounds like you're going into politics.
Dr. Eli David: 56:30.8
No.
Michael Eisenberg: 56:31.4
Oh okay.
Dr. Eli David: 56:31.4
You're going to politics.
Michael Eisenberg: 56:34.0
Like you said, you'll be wrong in most things. With that, thank you for joining us on this episode of Invested. Thank you, Eli. You can increase Eli's follower count on X and help him get to the million at Dr. Eli David D R E L I D A V I D.
Michael Eisenberg: 56:50.6
And if you're his millionth follower, he invites you to a long lecture on neural networks. Thanks, Eli, for joining us.
Dr. Eli David: 56:56.5
Thank you very much.
Michael Eisenberg: 56:57.2
If you enjoyed the podcast, please rate us five stars on Spotify, Apple Podcasts. Subscribe to the YouTube channel because you don't want to miss more conversations with interesting contrarian people like Dr. Eli David. Thanks, Eli.
Dr. Eli David: 57:09.4
Thank you.
Good afternoon and welcome to a special short, brief episode of Invested. You'll notice that I don't have any guests here today. It was hard to get guests in the studio in the middle of the war. In fact, I had someone who was coming in from the UK, but his flight was canceled and we ourselves just got out of a shelter after a siren here in Tel Aviv.
But I thought I'd take a few minutes, while you're at home and hopefully have time, to talk about what we're seeing on the ground here in Tel Aviv and in Jerusalem and across the country. I think the most important thing to start with, though, is that we're hoping that everybody is safe. There's been a lot of firing, particularly in the last 48 hours, on the north of the country. Tel Aviv continues to get rockets at the pace of five to seven a day. But, we should also point out that certainly, rockets coming from Iran, the number of rockets and drones has come down since the beginning of the war and the campaign.
I don't want to get into here, the causes for the war here. That's been well documented in the public. What I'd like to talk about is something we wrote about in our annual letter and that is Israel producing agency at scale, or people with agency at scale. And some of the more interesting parts of the war of human stories are the high-tech stories of the people of Israel. Many of you have probably seen on Twitter or elsewhere that there was an app developed for people in shelters to declare whether they're single or not.
I think this little story reflects a lot of different facets of the unique Israeli personality. First, the agency. Somebody takes up an idea and says, "Hey, I'm going to code an app for this." Second is the importance of togetherness – togetherness in the miklat [shelter] and the fact that people want to come together, find what's called in Hebrew a shidduch [match], so that people can find love and happiness. Even under the stress of the war, people are looking to build families, to build togetherness and couplehood, and I think that is an indicative story of both the innovation and the human values of Israel.
You may have also seen weddings in underground shelters, and the weddings continued on. People did not stop the wedding or pause the wedding for the perfect wedding, but in fact, they celebrated this wedding with the other people around you. Meaning, we go forward with life even when this is going on. And on a personal level, I had a grandchild born on Thursday during the war. I want to tell you an incredible story. The grandchild was born underground, in a shelter, or in the parking lot of one of the hospitals in Israel.
And here's an incredible story also of agency. The morning that the war started, the hospital put out a call to members of what are called here mechinot. These are army preparation academies; in some cases, yeshivas and other places. And the citizens of Israel, when I say citizens, I mean 18, 19, 20-year-old young people, turned up in the hospital parking lot and put up sheetrock walls to create delivery rooms. They set up the beds. They moved the patients down from the hospital so that they could be safe underground.
18, 19, 20-year-olds. You have so many 18, 19, 20-year-olds out in the battlefield and manning the stations. And at the same time, you have other 18, 19, 20-year-olds who turned up, this is prior to their army service, they will be going to the army, in order to help people be safe if they needed medical care or they wanted to deliver a baby. In fact, my new granddaughter experienced her first siren 30 minutes into her young life.
And I think what we've built in this country is a sense of resilience. And I take that up to our day job as well. So today, we had our first partner meeting since a week ago when the war started. And, in the partner meeting, one of our companies came in to present. The company is growing at a very rapid rate. They're actually supposed to fly out this week, which they won't be doing probably just yet. And at the same time, customer growth continues unabated. They're working round the clock while running into shelters and taking care of their families, because schools are closed, to make sure that they deliver to their customers. The machine, the high-tech machine, the innovation machine, the agency machine, is working here.
Now, in a book that I released a few months after the October 7th war started, I suggested that the world was going to look more like Israel in the future. What does that mean? Conflict, beginning with Russia's invasion into Ukraine. After that, October 7th. After that, the information war on campuses. Since then, there's been Pakistan and India, and the South China Sea, and areas of Africa. Conflict has returned to the world and we covered this also in our annual letter. Not only has conflict returned to the world, but people are starting to get an understanding of what they need to survive in their own countries.
And Israel is a state that is a majority Jewish state, an unabashedly Jewish state that is tolerant of its minorities, but it has an ethos, and that ethos has turned up during this war. The United States has regained that ethos as well. And as we chart our way – as we wrote in our annual letter, and I highly recommend you read it – in this entanglement between technology, sovereignty, geopolitics, and technopolitics that is going to accompany us for at least the next decade, in my view, being part of a country that is resilient like Israel is, that is unified in ways in times of crisis and stress like Israel is, that produces agency at a high scale like Israel does, is going to be a big feature and not a bug.
A country that knows how to stand up both to evil at this time, which is what Iran represents, and galvanize itself to protect its ethos, are those that are going to be successful over the coming century. And the more countries that copy this Israeli model, the more those countries are going to be successful. Fecklessness is not going to work during this time. Passivity is not going to work during the coming decade. Ignoring the technology of geopolitics is not going to work during this decade.
Very clearly right now, the three most advantaged countries in this regard are the United States, China, and Israel. They are the big three moving into this next phase of the global economy.
Now, the other thing that war produces, as we saw post-October 7th, is incredible technological innovation. Secretary of War, Pete Hegseth, has said that these are the two greatest air forces fighting side-by-side, wing-to-wing, as they traverse the skies and reduce the IRGC and the Ayatollah regime to rubble.
Incredible firepower. More than incredible firepower is incredible coordination. Incredible intelligence sharing, which comes from technology, and incredible coordination that comes from the use of artificial intelligence tested at the absolute frontier of technology. And when life and death of the pilots is on the line, when life and death of the sailors in the navies are on the line, this is when you find out whether the technology really works.
For many years, when people asked me about investing in Israeli technology, I would joke that the Israeli technologist – the Israeli engineer who grows up in the military – is different than his US counterpart who perhaps learned at MIT and Stanford University. Not in terms of intelligence, but in terms of the price of being wrong. The price of being wrong or incorrect or failing in the Israeli military is life and death. The price of being wrong at Stanford University is a C or a B on your final project. Those are very different prices.
And by the way, sometimes that's a feature, sometimes that's a bug. But when tested at the outer limits of the abilities of technology, when you're trying to intercept drones or intercept missiles using Israel's protection of its airspace, Israel's technologically advanced missile defense system, this matters a lot. And it will matter a lot as we move from the era of SaaS to the era of atoms. And that is an era that already started five or seven years ago. Those who invested five or seven years ago in this are benefiting right now. But there is going to be more of this as people witness Israelis’ technology prowess, they will come to us for solutions.
In fact, Prime Minister Netanyahu spoke last night. One of the things he said was countries are reaching out to Israel. You wonder, “Why are they reaching out to Israel now?” Countries that don't necessarily have diplomatic relations with us. Why are they reaching out? They're reaching out because they see the technological superiority of the Israeli military solutions, of the Israeli defense industries, of Israeli startups, some of which are deployed during this. There are numerous defense tech and AI startups deployed right now. So, in addition to serving customers, they're serving the country.
And one final word. You all noticed that following October 7th, the Tel Aviv Stock Exchange was the best-performing stock exchange in the world. Strikingly, since the war with Iran has started, the Tel Aviv Stock Exchange is up almost 10%. Other exchanges in the world are flat to down. And you say, "What's going on?" I think there's a few things going on. Number one, very clearly, the Iran geopolitical risk was an overhang on the Tel Aviv Stock Exchange. It's been cleared up, or at least investors think it's going to be cleared up. Investors who get paid to invest in the future think this is getting cleared up. And please God, it will be cleared up, and that will give more headroom to the Tel Aviv Stock Exchange.
I think the second thing that is becoming obvious is that this agency in the era of AI, this ability to produce people at scale, is becoming obvious. And just like there was a boom in venture capital investment after October 7th, I expect the same thing will happen post the war with Iran. This will not be an endless war. It will have an end date. And when it has an end date, more investment will flow into Israel than you ever saw before.
And the last thing is the following: we have come together as a nation after a fractious period. And we come together as a nation after a fractious period together with our great ally, the United States of America – two of the three most formidable technological economies on the planet. We can only begin to imagine what can happen here. I call on you, if you're outside of Israel or inside of Israel: keep investing. And if you're an entrepreneur, grab some agency and keep developing. The AI era demands it.
Together – the United States, Israel, and the members of this region – will produce incredible technologies, innovations, and investments that will drive the future. The future, after this war, is going to be very bright for Israel, for the United States, and for our partners. If you enjoyed this episode of Invested, please listen to our other ones and also rate us five stars on Spotify, Apple Podcasts, and subscribe to our YouTube channel. We'll be back with more guests as soon as the skies open up.
Zachary Greenberger (00:00.162)
We’ve pretty much built the most valuable data collection engine for real world driving data.
Michael Eisenberg:
For how much money?
Zachary Greenberger:
For 150 million dollars.
Eran Shir:
Every dollar you spend is another dollar bonus to your salary.
Michael Eisenberg:
You're bonusing people to rack up token bills on Claude Code?
Zachary Greenberger:
Yes.
Eran Shir:
Crazy.
From a commercialization perspective, I should go and find someone that could be better than me.
I'm a data hoarder, so I never can get enough.
Michael Eisenberg:
You’re a data hoarder.
Eran Shir:
Yes.
Michael Eisenberg (00:41.08)
What is a data hoarder?
Welcome back to another episode of Invested. I am thrilled to have with me here, Zach Greenberger, CEO of Nexar, and Eran Shir, founder, and chairman, and former CEO of Nexar, but still very active at the company. And the reason we're getting together today is, the world of AI is changing right in front of our eyes.
And I think the ringing of the bell on that was an announcement by Uber over the last 48 hours., where all of sudden they say, “Hye, wait a minute, we've got this giant fleet of cars–kind of–they're not their employees, they're not their cars, they're other people's cars. And how come they're not collecting data like real world data, like Tesla has been? And Tesla's had that massive advantage.” In fact, what you'll hear from the Nexar team here is, this data has been collected by two companies, Tesla and Nexar.
And we're at this interesting transition point in the world of artificial intelligence from synthetic data and scraping all the digital data out there to try and figure out how we ingest all the real world data out there. And that's why I'm thrilled to have Zach and Eran with me. Welcome.
Okay, so Zach, why don't you kick us off? You wrote a LinkedIn post a couple of days ago about Uber's announcement. Tell us what the Uber announcement was and what your reaction was.
Zachary Greenberger:
Sure. Uber announced that they are going to start putting sensors on vehicles to collect real-world data, so they can train autonomous vehicles, or give the data to their autonomous vehicle partners. And our first reaction was excited, because it's been something that we've been telling the industry for quite some time is necessary in order to get to the final stages of autonomy. And while the industry has acknowledged that it's necessary, there's a level of maturation the industry needed to get to to be ready to start adjusting real world data.
So I think we felt super excited that it was a moment in time where the rest of the industry is now following suit and meeting us where we are, where the assets that we have, that we are ready to start continuing to deploy to our partners today is going to become of material importance and how they actually get to full autonomy.
Michael Eisenberg (02:53.186)
Eran, for disclosure purposes, was an Entrepreneur in Residence at Aleph, which is where Nexar got cooked up. I think it's important to tell the genesis story of how you got started and the insights you had when you got started.
Eran Shir:
So basically, this is like 2014 already. Oh my God, I'm old. But the point was–
Michael Eisenberg:
We are old.
Eran Shir:
Yeah, you don't look old, man. And the point was AI, then called deep learning, is going to move from the cloud to the edge. That was one key insight. GPUs are coming to the edge–what kind of problems can we solve with that? Driving and safety on the road is probably the most important. Autonomy is one of the most important. And we understood that in order to do that, you have to collect a lot of data in order to train. This was, even back then, it was obvious that in order to train models well, you have to collect a lot of data. But I think what we understood very early on is that the only way to collect the valuable data is through crowdsourcing.
Why? Because, what's valuable data? It's all of those crazy edge cases, right? Like if I have a fleet of very good professional drivers, and they're driving around on the highway, nothing happens. It's like I'm driving one car, one hour times 20. It doesn't really help. What helps is to get all of the auto distribution stuff, all of those collisions, near collisions. Bambis running into the road. All this kind of crazy stuff. And the only way to do that is to be there. You know, Chase Jarvis used to say, “What's the best camera? The one that you have in your pocket.”
In our case, and in collecting data, it's a hundred times more important. You need to be there. It doesn't matter what kind of camera you have, what kind of rig, what kind of sensors you have. You just need to be there to capture, and AI will take care of the rest. And that's what we're trying to do, is to figure out how could we get to scale, how to get to hundreds of thousands of vehicles.
And that was quite a journey that you and I went through over the last decade, of figuring out, you know, hitting our head in the wall. I think initially, we were so naive, right? Like in some sense, we thought, okay, we're going to bang on the OEMs doors, tell them how great the world will be if they do it. We walk with them, we'll give them software and stuff like that. And then it turned out that they're so far behind. Shit, we have to do it ourselves. We have to go build hardware. We have to go do sales of said hardware. It's been, you know, quite a journey.
Michael Eisenberg:
First you thought people were going to take their telephones and just mount them on a metallic, on a magnetic mount on the windshield, and then they melted in Las Vegas.
Eran Shir:
Exactly. Yes. Then we understood, we learned the physics of the sun in August in Vegas. And we said, “Okay, we need to get serious.”
Michael Eisenberg:
And how many miles of data do you have?
Eran Shir (06:03.704)
I think something like 12 billion.
Michael Eisenberg:
12 billion.
Eran Shir:
Something like that.
Michael Eisenberg:
How big is Tesla’s set?
Eran Shir:
Well, it's...
Michael Eisenberg:
We don't know.
Eran Shir:
We don't know, but it's significantly larger than ours, because they have millions of vehicles. The interesting question though, and this is where it gets a bit nitty gritty, is how much data per mile you manage to squeeze. And that's where I think we did some cool stuff, which is basically, we engineered our entire system as one single computer.
So all of those hundreds of thousands of cameras out there, with a little GPU and the sensor and connectivity, all that, they're actually part of the same mesh, the same kind of grid of compute. And we can go and know exactly what each of them has collected, and fetch it if it's interesting. So our signal to noise ratio is, how many important valuable bytes per mile or paid per data upload we have, I think is actually quite up there.
Zachary Greenberger:
And there is a metric that's pretty interesting though, beyond Tesla, which is, Waymo just celebrated collecting a hundred million miles ever, which is an incredible feat. We do double that on a per month basis. So it's a pretty significant data collection.
Michael Eisenberg:
So that's an important point. So cumulatively, Waymo celebrated 100 million miles. You just celebrated 200 million miles a month, or 100 million miles every 15 days. How is that possible? Like with all the money Google has and...
Zachary Greenberger (07:39.682)
Yeah. The crowdsourcing at scale. So 350,000 connected cameras traveling around at any given time, you know, that have been purpose-built for unique data collection. Everything from the AI models at the edge that are collecting interesting things, all the way to the orchestration methodology that is offloading data efficiently so we can collect the stuff that's interesting.
Michael Eisenberg:
What's the cost per mile for you?
Eran Shir:
Well, actually we make money on a per mile basis, and that's critical.
Michael Eisenberg:
You make money from other people who collect your data.
Eran Shir:
Yes. Yeah. That's a critical point that allowed us to say, as a frugal kind of startup from Tel Aviv. We had to figure out a different way than how the industry went. The industry went as, okay, we're going to raise a bunch of money, a bunch like billions. We're going to build a bunch of cars with lots of sophisticated sensors, and lidars, and cameras and all this kind of stuff. And we're going to do this fleet with expensive people and drivers in there. Like we're going to pay $50 an hour to do this thing. We had no chance in that. We went the other way. We're going to actually charge people on the benefit of buying our cameras, installing them, getting all the goodies we're going to give them, and supporting them, and helping them stay safe on the road, which is very important. But in essence, we actually get paid on a per mile basis, which allowed us to scale.
Michael Eisenberg:
And what does it cost Google per mile? Do we know Waymo?
Eran Shir:
Probably between $30 to $50 per mile.
Michael Eisenberg (09:19.128)
Per mile. You get paid pennies per mile, and you say they pay $30, $50?
Zachary Greenberger:
Yeah. Based on the business model, that means that we pretty much built the most valuable data collection engine for real world driving data,
Michael Eisenberg:
For how much money?
Zachary Greenberger:
For $150 million.
Michael Eisenberg (09:38.177)
For $150 million. When we started the conversation, you mentioned that Uber is now looking up and said, “Okay, we got to get real world data.” Why all of a sudden? What's changing that caused them to do this?”
Zachary Greenberger:
I think what's changing is that the rideshare companies recognize that, as of right now, there's two ways that they can provide value to autonomous vehicle companies. It's through demand generation or fleet management. And I think when you look at the success of companies like Waymo, the reality is that they actually can do it themselves to the extent that they want to. So really the only way to get into the value chain is to enable developers with tools, data, or other things that are going to empower the broader value chain of autonomous vehicles. So Uber actually is in a great position to offer data to their partners. The question is, can they offer enough? And we have a significant head start on that.
Eran Shir:
I think more than just a head start, I think the penny didn't drop there fully.
Michael Eisenberg:
What does that mean?
Eran Shir:
If you look at what they published, is, they’re starting with a single car, a Hyundai, one car, with this fancy rig of cameras and sensors on it. And they are talking about potentially scaling it to a hundred vehicles in some time in the future, over the next year or so. So it's still the old school kind of, we're going to invest in this fleet to collect data. So we'll have some data assets. So we'll give our partners–they announced the deal with Nvidia for a hundred thousand autonomous vehicles at some point in the future. So they need some quid pro quo with their partners and stuff. But I still think, like if I were Dara, I would go a totally different route. I would say, “Shit, I have access to millions of vehicles, I'm going to produce millions of these cameras that are just great for data collection. And I'm going to go and convince my drivers, even maybe give them benefits and perks and stuff, to install not a hundred, not even a hundred thousand,” like getting to–that's the benefit. I don't see them doing it yet.
Michael Eisenberg:
He's a smart guy, Dara. Why isn't he doing it? I mean, you’ve come out of Lyft. You were the Chief Business Officer of Lyft. Well, why isn't he doing it?
Zachary Greenberger:
I think there's, so at the end of the day, the model of drivers versus–it's a subcontractor model, right? So there is stickiness on how you think about how drivers actually use tools in order to do their commission, their job and data privacy and all those things. And I just generally think that historically it's an area that the ride share companies prefer to stay an arms’ length away from, which creates a unique advantage, whether it's–
Michael Eisenberg:
Because they’re W-2 employees?
Zachary Greenberger:
Correct.
Eran Shir:
Just to give you an illustration, they announced that one Hyundai car that they're now….We, Nexar, we have somewhere between 50 and a hundred thousand Uber drivers with our cameras collecting data for us. Right? Their drivers.
Michael Eisenberg (12:48.588)
No, they're not their drivers, because they're not their employees.
Eran Shir:
They’re not their drivers. They chose, out of all the cameras they could choose, they chose Nexar's camera.
Michael Eisenberg (12:56.952)
Google, or Waymo, has got these fancy lidars on the top of the car, or Uber's going the same way. These are not stupid people. These are very smart people. What do they see that you don't see?
Eran Shir:
Well, first of all, think when it comes to autonomy, no one could kind of guess in 2014, 2015, that when the AI end-to-end playbook will work. So the Play It Safe playbook was put as many sensors as you can on the vehicle, build it low, low and slow, invest in each and every component of its own, build lots of, write lots of code, follow this kind of stuff, because you don't know when the AI kind of shift will happen. So I think the only two people that believed in that way back when was, one was Elon–
Michael Eisenberg:
Musk.
Eran Shir:
Elon Musk, that says, no, I'm not going to go that route. I'm going to, first principles, think about this problem. At some point, AI is going to catch up. And in the meantime, I know how to do marketing. I'm going to convince people to stay with me year after year. I'm going to tell them a story. And us, that we believe that that will happen.
Zach Greenberger:
Yeah, I think in many ways, the vision of the company was solving the last one percent of autonomy that's most critical. So Elon had the vision, but when you think about Waymo and other AVs, you have to go from zero to 99% autonomy before you get from 99 to 100. So when you're thinking about it in terms of, how do you make the most impact in the shortest amount of time, you are still thinking about what is the short way to get there versus focusing on the long tail of events that's critical.
So I think, when you put it into that perspective, you've now fast forward 10 years, you haven't been focused on the long tail of data. And here is Nexar and Tesla who have been focused on it for the last 10 years. And it makes far more sense to look at where that asset has been mined, versus trying to go deploy a ton of assets to collect it yourself.
Eran Shir:
By the way, it's a very typical Israel versus America kind of game. Like if you think of the ballistic missile defense, right? Like we built the Arrow, the Americans built THAAD. THAAD is way more advanced, way more fancy missile, way more expensive and 10 years late compared to the Arrow. We built it scrappy, we built it the way that it could walk quickly, because we needed it and we didn't have as much money as the Americans. I think that's like the typical kind of evolutionary pressures.
Michael Eisenberg:
Disruptive country versus building it right and wholesome. And so we're at this moment in AI right now, which is Nexar and Tesla, and not many others, in this interesting place, which is over the last four or five years since the ChatGPT moment and obviously what built up to it. The internet has been scraped dry of any piece of digital data that's out there, and they're competing on improving the models, et cetera. There isn't really fresh digital data from out there. And now you've got this discussion about real data versus synthetic data and real world AI, call it, versus just what we call AI at this point, I guess, or LLMs. How do you think about that moment that we've arrived at now?
Eran Shir (16:40.238)
Yeah, I think this distinction between LLMs, VLMs and world models is going to be an important theme over the next few years. You of course know that we just brought in Yann LeCun to join the board. He's the manifestation of that rift between the great work that LLMs doing versus what the future really needs, which is world models, and we're just in the first innings of world models.
Michael Eisenberg:
So what is a, tell the audience what a world model is.
Eran Shir:
So a world model is a model that can actually understand reality as good as we, hopefully, understand reality and even better. You know, when your son plays soccer, and he's standing in the–
Michael Eisenberg:
Baseball.
Eran Shir:
I'm going to go–
Michael Eisenberg:
With soccer?
Eran Shir:
I know soccer. Sorry, man. And he's standing in the goal, right? And he jumps to the ball and he catches it. His mind doesn't calculate the Newton equations of motion, right? But he understands intuitively where the ball is going to end up, and he catches it. That's a world model. We have in our mind sort of an intuitive understanding embedded in our neural net of how the world works. And that's what you're trying to create, to recreate when you create a world model. The real understanding is that you need real world data in order to create those.
Zachary Greenberger:
I'll jump in on this, that, when we first met, Michael, I remember saying to you that when you think about the manifestation of physical AI applications, and you think about what goes into it, you think about the need to mine an asset that nobody really mines today, with the exception of a few companies. And that is the ability to capture real world data in real time at scale. And I think that is actually the single greatest asset that Nexar has accumulated over the years, because that is the core input to building the real world models that can actually make the physical AI applications run from autonomous vehicles to humanoids to delivery robots to flying cars to what, you know, name it. They're all going to follow the same exact trajectory of what is required in order to coexist with humanity.
Michael Eisenberg:
Does the next 100 million miles matter? Like every 15 days you're collecting 100 million miles. Like you've already collected 12 billion.
Zachary Greenberger:
1.2 billion.
Michael Eisenberg:
Alright, 1.2. That means by the end of this year, you'll collect another, I'm doing the math, two billion miles, right? Does the next one billion miles actually matter?
Zachary Greenberger (19:25.368)
So the way I look at it is, we have such a head start on the edge cases that are critical to effectuating autonomy, that it's not really the incremental miles that matter. It's the coverage and understanding of the real world around you that matters.
Michael Eisenberg:
Which is changing.
Zachary Greenberger:
Which is changing, always. So the fact that we have 350,000 cameras traveling around the world at any moment in time, and I'll give you a great example. In Manhattan, we cross every street of Manhattan four times a day. It means that every time there's a construction zone that pops up, every time there's a pothole, a stop sign that's down, those are–
Michael Eisenberg:
The once-in-a-decade snowstorm like happened this week, thank God you were in Tel Aviv for it.
Zachary Greenberger:
Exactly. Those are the kinds of things that are going to be critical for autonomous vehicles even after they're fully trained to understand in real time so they can navigate against obstacles. So it's almost as if, the last 10 years, Nexar has built up a data lake that has created this massive mode. And now every incremental mile that's driven, it's actually more important that the observation of the real world around it is more important than the more miles that it's driving. So it's a very interesting dynamic.
Eran Shir:
I'm a data hoarder, so I never can get enough.
Michael Eisenberg:
You’re a data hoarder.
Eran Shir:
Yeah.
Michael Eisenberg:
What is a data hoarder?
Eran Shir:
Exactly what it is. Someone that collects 50 petabytes just for the fun of it. But the point is this, you have a distribution, right? A long tail distribution of what could happen on the road. And some events happen once every hundred miles and some once every million miles and some once every a hundred million miles. And basically, what you want is to go down that distribution as much as you can, because you can never know when that once in a hundred million mile event will happen.
Michael Eisenberg:
What are some examples of either 100 million mile events, or odd changes that you've picked up just by driving around the cities or important tidbits of information or surprising things so people have an understanding?
Eran Shir:
Okay. So how about flying cars? Not flying cars that want to fly, but flying cars that just happen to fly.
Michael Eisenberg:
I don't understand what that means.
Eran Shir:
Well, if you have a collision and a car kind of comes in the right moment, it can do like a back to the future thing and just fly in the air.
Michael Eisenberg (21:46.254)
I thought it only happens in the movies.
Eran Shir (21:55.202)
No, no, it happens. We have the film.
So you have that. You have people driving in the forest, meeting a gazelle, right? But that doesn't happen very often. You got events at night when it's snowing, when you hit a tree. So you got all this kind of crazy stuff that happens.
Michael Eisenberg:
That’s the most crazy things? Nothing else? No changes on the road?
Zach Greenberger:
Kangaroos.
Michael Eisenberg:
Kangaroos?
Eran Shir:
So the one thing, the one cool thing about selling those cameras is that people will buy them from all over the place. Like even if we're focused on the US, we get events from Australia and Morocco and all kinds of crazy places.
Michael Eisenberg (22:39.766)
What are your strangest changes or events?
Zach Greenberger:
So what strikes me all the time is, a little girl rolls a ball across the street, or a car passes a stop sign from a school bus that stopped. All of the things that you wouldn't really think would be something that's critical to train or experience in order to be a good driver, but just happen. And they happen every 50 million, every 100 million miles. And there are things that you can't just simply recreate with synthetic or fake scenarios.
Eran Shir:
I love the action movie scenes, right? Like, you know, the 360s, all this kind of stuff where...
Michael Eisenberg:
This last week must have been great for you with the storm across America.
Eran Shir:
I’ll give you an example, a piece of car boat, right, falling off a truck and flying into your route, okay?
Michael Eisenberg (23:30.454)
Like on your windshield? Like covering your eyes on the windshield?
Eran Shir:
Right. We had a bunch of those. Think of what kind of coordination of events need to happen in order for such events to transpire. So all these kind of really edge cases that happen in the real world, and you want your Waymo to actually know how to react to it in real time, and it needs to kind of be trained on it.
Michael Eisenberg:
Doesn't NVIDIA have a model called Cosmos that does this?
Eran Shir:
Haha.
Michael Eisenberg:
That was an evil laugh.
Eran Shir (24:09.038)
Yeah, that was amusing because you know, they recently, at CES, which was just a couple weeks ago, Jensen was on stage presenting Cosmos 2.0, showcasing how well it does in kind of collisions and events, and how it's better than Google's model and stuff, and much of it was trained on our data.
Michael Eisenberg:
Why did he need your data?
Eran Shir:
You know, they had Cosmos 1.0 a year ago, and you can go download it, play with it. And what you'll see, and we've seen, we actually built that analysis for them, is how bad it was in collisions and high-dynamic events. It's actually super hard to do without pyre, without getting the data. So they understood it as good as we did. They're, you know, probably some of the most clever people on the planet. And they understood they need that long tail of events, and that's why we partnered with them to help them train the real production versions of their models.
Michael Eisenberg:
What's the equation on your shirt?
Eran Shir: (25:24.741)
That's the equation that governs your life. It's a standard model from physics. You know how they have gift shops everywhere when you go places? So I took a bunch of school students to CERN, the large–
Michael Eisenberg:
Particle accelerator.
Eran Shir:
Yeah, there was a shop there. Yeah, so how could I not buy the standard model on a shirt?
Michael Eisenberg (25:52.334)
Zach, can you read the model?
Zach Greenberger:
No.
Eran Shir:
By the way, this is the shorthand version of the model.
Michael Eisenberg (25:58.06)
Oh good, perfect. I feel much better now. I feel like I'm much more complex than the model on your shirt. Eran, you mentioned the Arrow missile before, was one of developers of the navigation system on the Arrow missile many, many years ago.
Eran Shir:
I was just a soldier, I wasn't….
Michael Eisenberg:
Okay. And what's your background, Zach? I want you to take a couple seconds talking about the transition.
Zach Greenberger:
My background is largely in commercial and supply chain. So I spent time at Tesla. I was the chief business officer at Lyft for some years. And I've always had this passion for taking new technologies that exist and figuring out how to bring them to new people. So yeah.
Michael Eisenberg:
Hang on. Do you have any technical background?
Zach Greenberger:
Nope.
Michael Eisenberg:
There are, like, funds today called Founders Fund. And no disrespect to Peter Thiel and Trey Stevens. I love those guys, et cetera. But there's a notion, I think, in the market today, the founders kind of need to go all the way. Here we are 10 years into Nexar. And like you said, it was a grind, right? Against the grain, no one really understood why the hell you were a data hoarder for all those years and why this was actually important.
Everyone looked at a company that was raising like 80 or $100 million and said, “What a piker. These people don't matter. Go to the companies that raise $400, $500, a billion dollars.” And then you make the decision that you need to bring on a CEO. What causes that? And what were the challenges?
Eran Shir:
Yeah. I think that the key insight for me was, I think things are getting real, and I want to give Nexar the best chance it has to succeed. And that means that, you know, from a commercialization perspective, from taking Nexa to the next level, I should bring in someone to be the CEO of the company.
There was also an element of like, I need to either do that or move to the U.S. you know, and I really wanted to stay in Israel. And so I think, I think it was the right time for me to go and find someone that could be better than me in those aspects of the business. And that will also give me the freedom to focus on this really AI revolution that's brewing, and allow me to really focus on taking Nexar to that next level from an AI perspective.
Michael Eisenberg:
What are some of the things you have to do when you come in as a CEO and replace the founder in the CEO seat that are maybe not obvious to other people out there?
Zachary Greenberger (28:35.778)
So I think what I'm most grateful for when I started was ruthless transparency, in the form of being very upfront with Eran and Bruno that the only way I was going to be successful is if I had their full support, but if I also had their full engagement. So I think what I learned was low ego, high curiosity, and also a deep appreciation for the things that have been built, and perhaps the areas that we need to find deeper focus.
And I think we built a really great partnership very fast, because we were able to divide and conquer, and complement each other on areas that were our strengths. So even today, I focus a lot on telling the story on how we take this very complex technology into a ay that the market can really understand, and Eran and Bruno focus on what strategic growth looks like for our technology, how to deepen our data modes, how to do all of the things that are going to be critical long-term.
Michael Eisenberg:
What was hard?
Zachary Greenberger:
What was hard? I think the hardest part was realizing that there was something very special within Nexar, but also realizing that the market timing had to be right in order for us to really become the foundational company that I believe we should be. And I feel really fortunate that, you know, we've pushed really hard to get our customer base and new partners to start using our products and tools, but even more importantly, that the market at the same time has started to recognize and understand the importance of data and the things that we’re building.
Michael Eisenberg:
Yeah, so Moses had 40 years in the desert, 10 years in the desert until the market finally….
Eran Shir:
It was a fun desert, I'm looking at Zach doing things with wonder. Like, I'm looking at him with wonder doing things that I don't see myself doing, or being able to do, that have such massive impact. Right? Like going and weaving in this, you know, highly strategic deals with, you know, with ease and finesse, right? In that respect, I think I'm very fortunate, we're very fortunate to have him as our leader and think...
Michael Eisenberg:
This is so touchy feely and so nice. It's so unusual for this podcast, it's like–no, it's very good.
Eran Shir (31:03.318)
We need to start mud wrestling so that, lighten the mood.
Michael Eisenberg:
One of the things that, when you were cooking up Nexar inside of Aleph that I found attractive, the point you mentioned earlier, which is that the cost per mile could be net positive, rather than net negative. This company has always been way ahead. By the way, apropos the timing comment, it took a long time to build this moat, and then the market to kind of come around. But this company has always been ahead of the curve in trying to uniquely figure things out. So I asked you before, Zach, do you have a technical background? And you said, no.
Zachary Greenberger:
No.
Michael Eisenberg:
But you're writing code now?
Zachary Greenberger:
Yes. Claude Code.
Michael Eisenberg:
I think this is important about, how like, how Nexar has transformed over the last 12 weeks into, what are you calling it?
Eran Shir:
Agentic organization.
Michael Eisenberg:
Agentic organization.
Zachary Greenberger:
Yeah. So I'll start with saying that, you know, Bruno and Eran are of probably the top 0.001% on the planet with agentic transformation. And I would put money on that. And the main reason being is, we are small and nimble enough to try new things and really put our company in a place where we can build agentically and make sure that we're not sacrificing product integrity, but we're also increasing velocity.
What that means in terms of someone that doesn't have a technical background, is the tools are now available today to be able to go build things that historically I would have needed to lean on engineers for. So I've always tried to lead from the perspective of one, I will never ask someone to do something that I'm not willing to do myself, but out of genuine curiosity that I didn't want to rely on anyone to build certain tools and applications that I needed personally. So, this was me sitting down with Bruno and Eran for an hour, and them both telling me, “No, you're going to go suffer, and you're going to figure out how to do it yourself.” And I did. And I think that us leading from the front–and by the way, that means that Eran and Bruno, even as, you know, co-founders and leaders of the company, are still producing and deploying more code than mostly all of the company. And that's because of their ongoing and scaled curiosity of how these tools can manifest themselves.
Michael Eisenberg:
What have you built actually? Have you built something?
Zachary Greenberger:
Me? Yeah. yeah.
Eran Shir:
His app is the number one in the charts at Nexar.
Michael Eisenberg (33:27.086)
Your charts. Internal charts. Not because he’s the CEO, because–
Zachary Greenberger:
I built an RFP scraper that went and looked at all of the publicly available RFPs that had been launched by any government agency, and basically filtered them to the products and tools and services that we could provide in order to win them. So we've now built an automatic RFP responder where these RFPs present themselves, we respond to them, and it's very little human intervention. So it's accelerated sales velocity and all.
Michael Eisenberg:
Have you won any?
Zachary Greenberger:
Not yet.
Who gets the sales commission if you win that? Is it the agent, is it you, is it..?
It’s the agent. It’s a really interesting philosophy that we've started to adopt, which is, you know, everyone talks about resources in terms of people, but resources are now being talked about in terms of agents. So you don't necessarily need to scale your human capital. You can scale your agent capital. So we have agents running across the entire company that are doing everything from product design to product deployment to creative to, I mean…
Michael Eisenberg:
You have another example of someone who's non-technical at the company that's joined the agentic…?
Eran Shir (34:39.989)
So I'll give you the stats on that. More non-developers are now on Claude Code, both absolute and relative percentage, than developers.
Michael Eisenberg:
Why aren’t the developers on Claude Code?
Eran Shir (35:10.186)
No, they are, but the non-developers rushed into it. So 70% of all non-developers have built an app, full app in the last month on Nexar, multiple deployments, over 70%.
Michael Eisenberg:
Give us more examples.
Zachary Greenberger:
Okay. Apps. Our CFO built a budget prediction and analysis app, so that he can do his job, like with all the goodies that he wanted. We got a complex support kind of overhead, tier one, tier two, tier three, all this kind of stuff. You know, we actually deal with hardware and inventory stuff that used to be done in Excel. Not anymore. Now you can identify ELP mishaps, changes, and stuff like that, and get it all sorted out, or at least be alert on it. And also lots of fun apps.
Zachary Greenberger:
We have our sales team, who all of them are actually building prototypes for customers on the call.
Michael Eisenberg:
Live building prototypes for customers on the call?
Zachary Greenberger:
Live building prototypes for customers. So instead of pitching a customer something that may be useful to them, that you can actually do a live collaboration, build the prototype, suggest to them, present it to them, and then go back and think through if it makes its way into your product lifecycle.
Michael Eisenberg (36:32.78)
That's cool.
Zachary Greenberger:
It’s real.
Michael Eisenberg:
Does it help close deals?
Zachary Greenberger:
Yep.
Eran Shir:
Yeah, like for example, you know, there's a big company that we're, a very big company that we’re now working on a sort of a joint partnership, and they have their kind of sales team and embedded everywhere, et cetera, et cetera. And when you, on a call, kind of show those people, they're eventually a channel, right? So they're going to be as good as how you empower them.
And when you go and show them on a call how they could kind of build an app that's custom for that customer or that customer, that's extremely powerful. That's exciting.
Zachary Greenberger:
This is a really important point though on the power of unique data moats, is because the ability to build a genetic tooling and applications that are all powered by the same underlying data moat create a level of flexibility for customers that is pretty unprecedented.
Michael Eisenberg:
Explain that better.
Zachary Greenberger (37:45.962)
So if I'm a department of transportation, and I'm looking for a certain tool or product that predicts damage to roadways, right? I've now as Nexar built a product for them, presented it to them. Great. They purchased it. We're managing the relationship. But let's say another department of transportation comes down the road and says, “That's great, but I also need stop signs and I also need potholes and I also need X, Y, and Z.” We have the underlying data, but historically, because of limitations on agentic tooling, you had to spend product life cycles going and building those additional features. That’s not, that's not an issue anymore. Cause now you can actually just–
Michael Eisenberg:
Roll the app on stop signs.
Zachary Greenberger:
Exactly.
Eran Shir:
That was actually a huge issue for us at Nexar over the years, because you say, “Okay, we can't build a hundred apps. We don't have the people for that.So what are we going to do? We're going to build things that are common denominator, Potholes, stop signs, all the things that everyone need to…” The problem with that, and thing that we kind of suffer through is that those things, yeah, everyone needs them, but no one is willing to commit suicide on them. Right. Like no one is like, this will change my life forever. So it's a bit like, you know, Amazon versus the traditional bookstores, right? Yeah, you can go and buy the bestsellers, but what you really care about is something that you and a hundred other people across the world interested in until Amazon came along. You couldn't get those books. Same thing here. We couldn't go and build a thousand different apps for all the thousand different DOTs that each, you know–in Columbus, Ohio, it's about black ice. In LA, it's about tens of homeless people, right? And trees that fall. In fact, there's this long list and we can't do it, but now we can, right? Or they can, which is even more powerful.
Michael Eisenberg (39:28.12)
So what you're saying, basically, if I put it in different words, is the software layer, the application layer has both become a commodity, and you're able to specialize it per customer much more. And the key is the data and the frameworks in which you think about this and you can custom roll.
Zachary Greenberger:
Yep. And this is why, before, what I said, I said before that Nexar is mining the future, the single most valuable asset class that doesn't exist today, which is, well, until now, which is real world data on scale. And the reason for that is because after you've been able to capture that really unique asset, you're able to create the software and application layer agentically that allows you to service your customers however you want.
Michael Eisenberg:
Is everybody in the company basically trained on Claude Code?
Eran Shir:
Yeah. And more than that, everyone are encouraged and incentivized to use it. We actually did this quarter, we did a thing where, you know, Claude Code gives you a certain amount of tokens. Then above that we have to pay hard money, you know, to get it. So we said, “Okay, if you get beyond that base layer and you start spending money, every dollar you spend, it’s another dollar bonus to your salary.”
Michael Eisenberg (40:51.522)
You're bonusing people to rack up token bills on Claude Code?
Zachary Greenberger:
Yes. Yeah. Correct.
Eran Shir:
Crazy. Right?
Michael Eisenberg:
So the incentive is to create as much code as possible, whether it works or not?
Eran Shir:
Well, that's phase one.
Michael Eisenberg:
Why do you have this bonus structure?
Eran Shir:
Because we have a bunch of ceremonies around that. That's not the whole, that's actually the last thing that we introduced. But the reason for it is very, is the following. The way Anthropic kind of budgeted your account is that, if you're just walking linearly, just you and Claude Code kind of building software, you want to max it out.
The only way to max it out is if you switch from working linearly to working agentically. That is, you spin out a bunch of agents that work in parallel, that work on your behalf while you sleep, et cetera, et cetera. So the only way for you to actually spend money is if you were red-pilled. If you took the pill, if you kind of moved to an agentic buildup. And so that's a signal for that.
Zachary Greenberger:
You essentially replicate yourself.
Michael Eisenberg:
How has it changed the way you operate? You come from a much more traditional operating background, at least Lyft I think is more traditional than, certainly, these guys at Nexar, or you guys at Nexar. How has it changed the way you operate the business?
Zachary Greenberger:
Almost everything about the way we operate has changed. And it's, I think the biggest, the biggest takeaways were, there's way less need for planning, because everyone can move very fast, very quickly. There's way more need to empower agency and ownership. So when people own things end to end, they can build a lot quicker instead of having to manage interoperably across teams. So I think the biggest changes have just been the way that you manifest projects within organizations, because they now don't pass across organizations hand to hand, they just kind of sit.
So I think that's been the biggest adjustment. But I would also say coming from, you know, a major publicly traded company to a startup, I think the exciting part about being where we are is the ability to just ask for forgiveness, like just go build cool stuff. Everyone that works here understands what our mission is. They understand what our customers need. Go build cool shit, break stuff, and let's figure it out. And I think that's been probably the single biggest transformation that I've had from a leadership perspective is expecting a level of failure that is only, you know, that only kind of presents itself when you've had enough success of continuing to build as quickly as you can.
Eran Shir:
Yeah, I’ll add something hypey to that. I think in the future we'll celebrate, humanity will celebrate the 27th of November, the day that Anthropic announced the Opus 4.5. And I would say the following, is like, every company that was launched before November 27th, 2025 has a debt that it needs to close, or it risks its business. Because once we got software figured out, and that's basically the signal of Opus 4.5 now, Kimi K 2.5 came out, same thing. It's going to spread like wildfire. Every aspect of the economics of building a tech company has materially changed.
And you have to rethink it. I’ll give you a small example. Typically, how do you define and design products? You have product managers define it, all kinds of stuff, designers design it, you do iteration until you're ready and then you pass it on to developers, right? Today at Nexar, these designers are coming to the product after the fact, and they work not in Figma, they work in Git and GitHub.
They actually go and change the product that was built to meet the standards, the branding standards. They build agents that would go, and basically when developers develop, they will critique their work based on Nexar’s design standards, and change it on the fly. So the whole process went upside down. And this is a small example. There are lots of examples around that.
The most important of which is, an organization needs sort of, I can call the production immune system. Basically a system that allows developers and non-developers to safely kind of deploy code, build it, make it happen without the CISO getting a heart attack, without DevOps kind of committing suicide, without all these kinds of problems.
Michael Eisenberg:
That's what I was going to ask you because I think many companies think about, oh my God, you got all this code and all these applications, get completely out of control. I don't even know how to manage this. It's going to become tech debt, you know, in three years, that's just unmanageable.
Eran Shir:
Three months.
Michael Eisenberg:
And in three months, it's unmanageable. And I'm not even sure exactly how to measure whether I'm being successful or not. It feels like an unmanageable….
Eran Shir (46:14.926)
Until you manage it.
Michael Eisenberg:
So how do you manage it? Like, that's what's–you know, CFO's building a new budgeting until you've got no idea if that's compliant or not compliant. He just built it.
Eran Shir:
So that's what we actually built. And that's even more important to all the agent agents and there's what I said, we call the production immune system, which is, and this is what Bruno, my co-founder built. Think of it like this, right? The only way to deal with AI is AI. That's like the only way to deal with missile is with missile.?So what we have in store at Nexar is a full on AI system that treats everything that anyone built as a suspect–as faulty code, malicious code, a bunch of AI slop, et cetera, until proven otherwise.
And all of these agents, what they do is they go, they review any kind of piece of code that was deployed, regardless of who did it. They reject it, they fix it, they do all this kind of stuff, so that what ends up getting to production is an integrity. Kind of very, very nice, working very well. And I think that's the future. If you think of organizations going either, we let everyone do their thing. We can't stop it. And then like you said, tech debt is being built. Or no, no, we have to maintain our standard, and we'll put the person to review everything, and then it's a bottleneck and nothing moves and people are like–it took me two minutes at home to vibe code this cool app and in my job, I cannot really do that. Now these two solutions are not the right way. The right way is to build a living system that understands the organization, understands its standards, and employ them in an agentic way.
Zachary Greenberger:
And I think our deployment of this immune system has actually been what's accelerated us to be able to empower everyone to use the tooling. So a lot of the people that I talk to in the industry all reference the notion that because of the DevOps compliance standards you have in the CISO, you have to make small incremental changes in order to actually deploy agentic tooling. And we kind of handled the hard part first, which was how do we make sure that anyone that builds anything meets the compliance standards that we have?
Michael Eisenberg:
When you think about budgeting over the next 12 to 24 months, how has the agentification of Nexar changed your mind around budgeting or changed anything you think about budgeting?
Zachary Greenberger:
So I think my hope is that, as you think about planning and budgeting holistically, the pie just grows, which means you can grow revenue faster and you can use leverability on if you want to grow your OPEX faster. If you add more people, you could generate more code or you can maintain your human capital and grow agentically.
Michael Eisenberg (49:19.702)
Have you seen any of this, like, on the fly agentic stuff either in sales, or does it actually produce a customer?
Zachary Greenberger:
Yeah.
Michael Eisenberg:
You can point to it.
Eran Shir:
Yeah, I'll give you one simple example. We built something called CityStream Intelligence, back in December, not long ago. And that's something that was exactly that, unlocked, or taking our data and allowing you to do anything with that. All right. So that's the thing that when I talk about that partner, that we just closed that allows them to really go into that long tail of use cases. That's what–
Zachary Greenberger:
So let me, I'll tell a story for this. So we had our executive offsite. This is, right, December. We spent two hours arguing over this tool that we wanted to build, which was CityStream Intelligence. It was basically an information layer over our CityStream product that would allow you to derive interesting insights, whether for insurance purposes or for smart city purposes, or whatever. And we literally argued for two hours. Eran sat there, after lunch, came back and said, “Here's a prototype. It's done. Can we move on and stop talking about it?”
And I'm not kidding, two weeks later, we produced one major distributor who's gonna be distributing this product. We produced advanced discussions with two insurance companies that are using the layer of intelligence to predict risk. And we enhanced the product with one of our Departments of Transportation that's already using our CityStream product today. So it is, like, very real.
Eran Shir (51:00.462)
I think that the thing that blew my mind though, was another story. You know, BADAS, our foundation, our world model. We had our first customer for BADAS three weeks after we launched it. Like, we couldn't believe it, but it needed to be real time for them to use it. When we launched it, every prediction, two and a half seconds, 2,500 milliseconds. Then we say, “Okay, we need to build a roadmap to get it to real time.” Real time, let's say 40 milliseconds is a good number. And we were kind of planning that, and then Rony, one of our researchers, the lead researcher for the project, comes after a couple of days, “Okay, I'm done. We can deploy it.” Three days after that, it's deployed.
I'm pretty red-pilled, but that was, like, crazy for me. Then when you deep dive into how it's done, it's like, Claude Code actually went in–we use an architecture built by Meta–and actually went in layer by layer, analyzed the neural network. We found a bug in Meta's code. It turned it from CPU to GPU, all kinds of stuff that would have taken Rony or any capable researcher many weeks to figure out.
Michael Eisenberg.
Wow, it's a new world.
Zachary Greenberger (52:34.764)
It’s a new world.
Michael Eisenberg:
So talk about your decision to take the data and actually build a world model, and speak about the world model.
Zachary Greenberger (52:44.302)
Yeah. Well, let me talk about the decision first and then I'll let Eran talk about the world model. So it was probably about six months ago now where–
Michael Eisenberg:
You’re at the company now 12 months?
Zachary Greenberger:
14 months.
Michael Eisenberg:
14 months.
Zachary Greenberger:
Probably about six months ago, we had been through so many cycles with customers, and I mentioned before, getting the market to meet us, and our argument had always been, you need real world data. You need to train on edge cases. Synthetic data is not going to cut it. And we were still running into this wall of either historical ways of buying data, or defaulting into your typical development cycle of using synthetic data to simulate autonomy. So, Eran and I looked at each other and said, “Why don't we just build our own model and prove for the market that you can actually get better autonomy results by training on real world data?” We went and built it, and we ended up producing a state-of-the-art world model that does collision and crash prediction that outperforms many ADAS solutions that are on the market today.
And that was trained off of a very small corpus of our data. So it ended up creating so much virality that we now have customers that are using it in production. And we are building an entire family of models that are surrounding the same methodology. And our hope and our conviction is that we'll be able to deploy this at scale, and help companies reach their autonomous goals way faster.
Michael Eisenberg:
You deployed the model on Grand Theft Auto?
Zachary Greenberger:
Yeah.
Michael Eisenberg:
Right, I think you, that was...
Eran Shir:
Yeah, that was one of the fun ones. Because if you think about it, Grand Theft Auto is a great environment to test this kind of thing, right? Like you have all kinds of things coming at you. And also, it's super legit to crash into things there. So you can actually test the model that's supposed to.
Michael Eisenberg:
But is it real?
Eran Shir (54:37.646)
So the question is, is it real in the sense of what we see? No. But is it a good test case for such a model? Yes, exactly because it's not real. Because we train it on real-world data. So obviously, if we put a real world video on it, it will work well. But that's easy to test. We have millions of videos, we can test it. Where it's starting to get interesting is when you sort of stretch it out of the ODD you've trained on. And GTA, Grand Theft Auto, is one way of stretching it. Will it work on it, on a game? Well, apparently yes. It turns out yes. And then we're like, someone did a video to ASCII Transformer, where you can take a video and it turns it into ASCII video, ASCII imagery. Will it work on that? That's like, you know, very low resolution ASCII kind of stuff. Well, it turns out it works on that as well. And then kind of the floodgates opened up, because we started testing it on all kinds of crazy stuff, like with spaceships, and dragons, and chariots in the woods, and all kinds of stuff. It turns out it generalised extremely well for all things that could happen.
Zachary Greenberger:
So this point is significant. And it's because where we started as a company was pushing the envelope that real-world data could be used to create a model that could help accelerate autonomous vehicles. And now where we're going is this model can actually manifest itself in all physical AI applications that need to understand physics. So industrial applications, agricultural applications, defense applications, really anything that has physical movement that is in anticipation of a collision, risk prediction, crash prediction, this model can understand and help train.
Eran Shir:
And that's exactly the definition of a world model. It actually understands the world. It doesn't understand what to predict in a very confined situation, but actually understands the underlying world behind it.
Michael Eisenberg:
And why is it able to generalize this from road data?
Eran Shir:
So that's a fascinating thing that we're still, I think, thinking of. First of all, we should give credit where credit is due. Our model is based on an architecture called V-GEPA that was pioneered at Metra, Jann LaCun's work. And that's an architecture that does something very interesting. It works in what's called latent space.
Michael Eisenberg:
Like latent space?
Eran Shir:
Latent space. Thank you for correcting my English.
Michael Eisenberg (57:33.624)
Just making sure I understood.
Eran Shir:
So latent space means that it doesn't work at the pixel level. It transforms the pixel, you know, how AI, it transforms the pixel into some representation space. And then it does its thing, and then it transforms it back to whatever, text, pixels, whatever it is. The thing about JEPA is that it works at a latent space. And it comes to the conclusions that are void of any details that the pixel hold. He doesn't care about that. He generalizes into it. So that's point number one. JEPA is a great place to start for a world model. But point number two, I think that we’re just realizing is, if you want to collect lots of data to train a model on physics, what would you do? Would you go and put cameras on rockets? Great. But that's a very thin sliver. Would you go and put them in factories? Okay, but that's a very thin sliver as well. It turns out that–and this is not planned by us, like 10 years ago, I didn't see all that future ahead–that collecting real-world data from the public space, from the physical world, using dash cams is probably one of the most efficient vectors in collecting data for physics in general, because of those flying cars, and because of all the things that could happen on the road, and it just works really well. It generalizes really well.
Michael Eisenberg (59:12.526)
What is the craziest thing that you can imagine to yourself right now, that over the coming years, these models across all these areas of physics will enable?
Eran Shir:
I don't know the craziest. The thing I'm most hopeful is an uncrashable car.
Michael Eisenberg:
Explain. What does that have to do with an uncrashable car?
Eran Shir:
Well, today, it's still 1.5 million people die every year from car accidents. And 99.7 percent of all miles, even in the U.S. are not autonomous miles. And we are as humans, we're really bad at making decisions in those, the fraction of seconds that’s something really bad that's happening. So I think the really cool thing that we could do with BADAS is have it engaged at the right moment and get you out of a dangerous situation safely.
Michael Eisenberg:
It's not an un-crashable cars, it's more like, hey, let me get you out of here so that you don't get crushed.
Eran Shir:
Yes, exactly.
Michael Eisenberg:
What's another crazy application? That feels like what we thought of doing at the beginning. The crazy thing, that, the kind of generalization of the physics model.
Zachary Greenberger (01:00:29.87)
So when you think about the generalization of this model, a lot of it is because of physics, right? Now, when you think about the future of AI applications, physical AI applications, where it's an autonomous vehicle, a robot, or whatever it might be, and they're coexisting with humanity, there is this notion that you're going to get to a certain place where making these objects more human is actually core and essential to them effectively coexisting.
Michael Eisenberg:
I don’t understand.
Zachary Greenberger:
What I mean by that is you can make a humanoid robot, you know, manage against collision and crash or, you know, prevent a collision and crash against another human, but it will be very difficult to make it coexist in, like, an emotional and humanity time loop scenario. However, if you've been able to solve the physics problem and you can generalize these applications into a place where you can now start ingesting human data, you actually create a far more, real type of feeling in an application.
So when I think about the applying the BADAS or family of Nexar models to other applications, I think about it in terms of how it ends up manifesting itself in humanoid robots, or in actual flying cars or, you know, not the flying cars that you would want to have, in ways that are just not even foreseen yet, because right now everybody trains these on static real-world data that doesn't really have any human feel towards it.
Michael Eisenberg:
The real world is 3D. Dash cams are 2D. Like, how does this actually translate into physics?
Eran Shir (01:02:06.614)
That actually, AI solves that really well. Moving from like a 2D video into 4D actually.
Michael Eisenberg:
4D. What's the fourth dimension?
Eran Shir:
Time, right? Like because it changes over time. So that's something that turned out AI can, can do really well.
Michael Eisenberg (01:02:29.102)
When you think about time, it just reminded me now–what's a video we saw nine years ago and we see today and looks vastly different? Feels like the buildings in Manhattan have changed a little bit, but what else, right?
Eran Shir:
It's actually fascinating how things can stay constant, right?
Michael Eisenberg:
But you think the world's gonna change a lot in the next nine years?
Eran Shir:
Yeah.
Michael Eisenberg:
Even though the last nine years it looked the same?
Eran Shir:
Yeah. But because we're really bad at understanding exponents. And this is this kind of the inflection point where things will get compounded and get, you know, crazier and crazier from here on out.
Michael Eisenberg:
Last two questions. Who named the model BADAS?
Zachary Greenberger (01:03:10.638)
I'll take credit for that one. No. Well, we actually, we played around with a lot of names, but actually, I remember a bunch of people telling me that it was really stupid to name it that, and I was like, “Why?” And they were like, “‘Cause it's gonna sound way too edgy and a little too not serious.”
I'm like, yeah, but–
Michael Eisenberg:
Because it's missing an S.
Zachary Greenberger:
It's missing an S, so it's not technically….
Eran Shir:
What else could it be? What else could it be? It's the most natural name for, you know, originally an ADAS model. Really, I don't understand how no other company took it on before us.
Zachary Greenberger:
Yeah, Beyond ADAS, it's the most–
Michael Eisenberg:
Did you trademark it?
Zachary Greenberger:
Yeah, of course.
Michael Eisenberg:
Yeah, of course you did. Without the S.
Zachary Greenberger:
Yeah, without the S.
Michael Eisenberg:
What's been, last question, what's been the hardest part about this transition for you as a founder?
Eran Shir (01:03:58.264)
For me, I think it's about worrying about the people. At the end of the day, I'm like, these people have gone with me for a long time, some of them eight years, nine years even, and I'm putting them through this transition. Forget about my transition. They're to be kind of, they're along for the ride without having a lot to say about it.
And so, I was really worried about them really fitting well with it and getting the right treatment, knowing that they matter, even though the CEO is now in New York and not in Tel Aviv. And that's why, by the way, Zach is here in Tel Aviv.
Michael Eisenberg:
What’s been the hardest thing for you about managing an organization whose headquarters was previously in Israel and now in New York?
Zach Greenberger:
The hardest part certainly has been not being able to be here physically all the time. I think that, you know, I come from places, and I strongly believe in the work or any in office culture. I don't subscribe to the whole, I could be productive everywhere. I agree you can be productive everywhere, but there are magic moments that happen in the office that you cannot replicate virtually. And I think that being in New York where, by the way, even though we're headquartered in New York, we have the smallest employee base in New York.
The largest is still in Tel Aviv, and the second is in Porto. So there is still a need for me to figure out how to create the physical presence with the team as much as I can, so we can create those magical moments.
Michael Eisenberg (01:05:27.63)
World model, Tel Aviv, Porto, New York.
Zachary Greenberger:
There you go.
Michael Eisenberg:
And other points around the world. Zach, Eran, thank you for coming on to Invested. If you enjoyed this episode of Invested, please rate us five stars on Apple Podcasts, Spotify, subscribe on YouTube, and those other great things. And if you want to follow Zach or Eran, Eran is, what is your?
@eranshir on Twitter.
Michael Eisenberg (01:05:57.506)
That's at E-R-A-N-S-H-I-R.
And Zach posts much more on LinkedIn. So find them there. Z-A-C-H-G-R-E-E-N-B-E-R-G-E-R.
Zachary Greenberger:
There you go.
Michael Eisenberg:
I gotta go with the extra E-R on my own name in order to get there. Thanks. Thanks for doing this.
Zachary Greenberger (01:06:10.07)
Thanks a lot.
00:00:00 Michael Eisenberg
Everyone in Israel thinks, you know, 8200 and innovation. I don't think anyone thought that out of the canine unit of the IDF you'd say, “Okay, let's cure, let's at least diagnose cancer.”
00:00:08 Shlomi Madar
The dog's sensitivity, it's parts per trillion, so they can sniff one part out of trillion parts. So just if you take like a half a spoon of salt or sugar, put it in an Olympic swimming pool, they can tell the difference between these two different pools. That's insane.
Across all cancers, if you detect cancer early enough, so stage one, you have more than 90% survivability rate. And for some cancers, it's even more like for breast, it's 99%.
We want to get to the people through online marketing.
00:00:37 Michael Eisenberg
Just plain online, direct to consumer marketing. Saying, “Here, take a mask, breathe into it, you may have cancer?”
So you're a scientist and not a commercial guy. Is that beneficial or a drag on being the CEO of this company?
I got emotional in the middle of talking about my friend Ty, who was just diagnosed with kidney cancer not long ago. So, Ty, this one's for you. Hope you're listening.
Welcome back to another episode of Invested. I almost feel like this episode. Invested is a cross between National Geographic and Wired magazine. You see, we live in a world where we think about intelligence in terms of artificial intelligence today. We often think about human intelligence. What we don't realize is that all the species around us have their own intelligence, and they've evolved and developed in very, very different ways.
Our guest today on Invested is Shlomi Madar, the CEO of a company called SpotitEarly. SpotitEarly asked the question, what if I take the highly evolved sensor called a dog's nose, married it to digital and artificial intelligence, and use human dog training and human intelligence in trying to detect cancer, to merge all these things together and create the world's greatest cancer detection system?
It is a remarkable merging for the time we're living in, of thousands of years of evolved canine intelligence, thousands of years of evolved human intelligence, and a decade of digital intelligence. I think you’ll really enjoy the episode with Shlomi, the CEO of SpotitEarly.
So there are other ways to look for cancer. There's CT scans, there's drawing blood, et cetera. There's a famous woman named Elizabeth Holmes, or an infamous woman named Elizabeth Holmes, so I hear, who made similar claims about being able to detect or diagnose cancer, among other ailments, and by drawing blood or drop of blood. And here you come with dogs sniffing cancer. And so why should people assume that this is actually real, given the fraud in the background from Elizabeth Holmes?
00:02:50 Shlomi Madar
Sure. So it's a great question. And I think it's very easy. It's very simple. The proof is in the pudding. So for the company that she started, first of all, it wasn't just cancer. A whole host of different diseases that was claiming to identify. But also, they didn't have a double-blind clinical study where it's really hard to manipulate the results. And we've done that. We completed a trial with 1400 patients where it was double blind. It means that you deposit your predictions in a third party company and then they do the big reveal. So you cannot go back and forth with your predictions. So that would be my kind of straightforward answer for why are we different than them.
00:03:33 Michael Eisenberg
Okay. Has there been scientific literature published on your accuracy statistics?
00:03:36 Shlomi Madar
Yeah, yeah, in a peer-reviewed journal, Scientific Reports. It was published at the end of last year.
00:03:42 Michael Eisenberg
Okay, how does it work?
00:03:46 Shlomi Madar
All right, so maybe we do a little bit of a background. I think it's important just to figure out what's going on there. So as you mentioned, also by training, I am a molecular biologist. So I'm going to get a little bit technical. I'll try to keep it–
00:04:00 Michael Eisenberg
No, no, it's okay. We have a very intelligent audience.
00:04:02 Shlomi Madar
Oh, that's great. Good to know. So basically we are focusing on something called volatile organic compounds, or VOCs, in short. And these molecules are information, if you will, about what's going on inside of our bodies. So it's not necessarily limited to cancer. Any biological process that's happening is reflected in those VOCs. The way to capture those–so they are circulating in the blood, and they are exchanged in the alveoli in the lungs, into the air that we exhale, the air that we breathe. And what we do, we capture–so I have a mask here with me just to show you how simple it is.
00:04:41 Michael Eisenberg
Live demo!
00:04:42 Shlomi Madar
Yeah, live demo.
00:04:43 Michael Eisenberg
Yeah.
00:04:43 Shlomi Madar
It looks like an N95 mask. So it's very, very simple.
00:04:47 Michael Eisenberg
Yeah. Everyone now knows what N95 mask is since COVID. Okay. So you have a mask.
00:04:51 Shlomi Madar
Yeah. And we don't ask people to put it on for three years. Just three minutes.
Michael Eisenberg:
How long?
Shlomi Madar:
Three minutes.
00:04:56 Michael Eisenberg
Three minutes. Okay.
00:04:57 Shlomi Madar
You breathe into the mask freely for three minutes. You can scroll on your phone, you can read a book. Maybe it's better to read a book. But only three minutes. You put it back, you finish breathing into the mask, you open the capsule, you put it inside, and you ship it back to the lab. Okay. So now what happens is….
00:05:15 Michael Eisenberg
And that is a fully sealed container that nothing else can get into. So whatever I breathed into the mask over three minutes is what will stay in the mask until it gets to its destination.
00:05:24 Shlomi Madar
Not only that, these are very durable, and the VOCs, actually, they are being kept in this mask for at least a year.
00:05:31 Michael Eisenberg
Wow.
00:05:31 Shlomi Madar
So we've done a lot of pressure testing, temperature testing. It's very durable. And it's important, because–
00:05:37 Michael Eisenberg
So even if it goes to the Israeli mail system, which could take a very long time, it will end up still being useful even after a year.
00:05:42 Shlomi Madar
Even the American mail system–
00:05:45 Michael Eisenberg
Yeah. You know, if it gets lost with Santa's elves, you'll still find it. Right. Okay.
00:05:49 Shlomi Madar
Exactly. So what we do in the lab, we know how to extract those VOCs. Remember the VOCs that we talked about?
00:05:56 Michael Eisenberg
Volatile Organic Compounds.
00:05:59 Shlomi Madar
Wow. You're a great student of biology. I love it.
00:06:02 Michael Eisenberg
Yeah, I haven't taken biology since the 11th grade, but okay, go ahead.
00:06:07 Shlomi Madar
So we know how to produce gas from this mask, and in this gas, you have those volatile organic compounds, and we know how to introduce those compounds to the sniffing dogs. Okay. So this is just to give you kind of a quick look into the beginning of the process. So in the lab, we have what we call the sniffing ports. So these are actual physical ports where we introduce the gas to the sniffing dogs. The dogs were trained to sniff specific cancers. So we have a pack for breast cancer, a pack for lung cancer, and so on.
00:06:41 Michael Eisenberg
What kind of dogs are these, by the way?
00:06:42 Shlomi Madar
Oh, yeah. So they're amazing. Beagles.
00:06:45 Michael Eisenberg
Beagles.
00:06:46 Shlomi Madar
And by the way, all dogs are amazing. It's important for me to note that the beagles are best for this particular task because of their demeanor. So they're very independent, so they don't have to look back just to see if their handlers are happy, which is super important because of what comes next, which is the AI. Also they’re great sniffers. But I can say that about other dogs as well. But they are amazing sniffers, and they're very sweet.
00:07:12 Michael Eisenberg
How'd you know to start with beagles?
00:07:13 Shlomi Madar
We didn't actually start with beagles.
Michael Eisenberg:
What did you start with labs?
Shlomi Madar:
Labradors.
00:07:17 Michael Eisenberg
Labradors, yeah.
00:07:19 Shlomi Madar
And they are amazing. I don't want to–
00:07:21 Michael Eisenberg
You don't want to badmouth them?
00:07:22 Shlomi Madar
Yeah.
00:07:22 Michael Eisenberg
Okay.
00:07:23 Shlomi Madar
I don't want to talk smack about them. I love Labradors. I love all dogs.
Michael Eisenberg:
To be honest, I'm not a dog lover.
Shlomi Madar:
I mean, we can fix that.
00:07:29 Michael Eisenberg
Okay.
00:07:30 Shlomi Madar
And by the way, some of the dogs don't pass our test, and then we donate them. But maybe we can talk about that later.
00:07:37 Michael Eisenberg
Who do you donate them to?
00:07:39 Shlomi Madar
Typically families with kids with special needs. Some of them were actually adopted by our employees.
00:07:46 Michael Eisenberg
Got it. Okay. So now you got beagles. The Labradors didn't make the cut, so you went to beagles.
00:07:50 Shlomi Madar
Yeah, but I'm saying also, not all the beagles would make the cut.
00:07:53 Michael Eisenberg
Okay. And what caused them to fail?
00:07:56 Shlomi Madar
So there are a couple of different things. It could be, first of all, just the sniffing. So the professional thing that we need from them. But also their demeanor. It's also important for them to be very independent and active, and know how to work in a group. Remember, they live together, they work together. So our trainers would know how to look at all these different aspects.
00:08:17 Michael Eisenberg
One of the things, by the way, I'm going to ask our team to do, and I'm encouraging anyone listening to this on Spotify or Apple to actually look at the YouTube video. We're going to hopefully run some B-roll, while this is going on, of the dogs going around and sniffing.
00:08:30 Shlomi Madar
Now, these dogs were trained to sniff this particular scent of that cancer. So their gesture is sitting. It's very simple, relatively speaking. But using dogs just with this gesture and having a handler interpreting their gesture is good, but it's not great.
00:08:49 Michael Eisenberg
Okay, so just wait a minute. The dog goes around, it sticks its nose into wherever it sticks its nose, some cone, it gets a whiff of the VOCs. And if there's cancer from that sniff, it sits down.
00:09:02 Shlomi Madar
Right. I do have to say, you'll see it in the video, hopefully. But this is not just us giving a mask to the dog. There is a whole technology platform here, we call it Lucy. So it controls the whole process end to end. So starting from the information of the patient and kind of knowing to receive a mask producing the gas, everything is controlled by this Lucy. It's a kind of a brain that controls everything, but it also has hardware. So it introduces the different controls and the sample, the target sample, to the dogs in different order. So they don't get used to the same sniffing port being positive or negative.
00:09:42 Michael Eisenberg
You have to randomize it.
00:09:43 Shlomi Madar
Yes.
00:09:43 Michael Eisenberg
Okay.
00:09:44 Shlomi Madar
And we actually let the dog sniff the sample more than once. So we have some redundancy baked into the process and another redundancy level. And soon I'll explain why it's important. We're using the whole pack. Remember, you see it in the video, it takes less than a second to clear a sniffing port.
00:10:03 Michael Eisenberg
Right.
00:10:03 Shlomi Madar
For the dog, it's very, very quick. But there are a lot of different types of information that are being collected during this process. And this is where the AI comes in. So the AI has kind of eyes and other sensors, and it knows how to interpret what it's seeing, basically. So I'll give you a sense of what we're talking about when we talk about sensors. We have cameras on top of the lab. We have cameras inside the sniffing ports, so they can actually monitor the facial gestures of the dogs, which is very important. We also have a small microphone embedded in the sniffing port, and it actually captures the breathing pattern of the dogs. And remember, this is another kind of indication as to what the dog is actually sniffing, whether or not it's sniffing in a certain way.
00:10:54 Michael Eisenberg
So the dog sniffs, and it has a different breathing pattern depending on whether there's cancer in the sample or not, cancerous or not cancerous?
00:11:01 Shlomi Madar
Yes. So you can find those nuances, and–
00:11:04 Michael Eisenberg
They make a different face depending if there's cancer on the sample or not?
00:11:07 Shlomi Madar
Yes. Also more than that, I will say it's–some of these gestures are involuntary. So basically the dog doesn't even know what is gesturing. But through the machine learning, who was trained to identify different behaviors of dogs–and also they know intimately the actual dogs in our lab, so they know what's their baseline–and whenever they're deviating from the baseline, they know how to kind of quantify it. Okay, so I mentioned this sensor. There's also, the dogs are wearing a vest. In the vest, we have embedded sensors. So we're measuring both their heart rate as well as their acceleration.
So we have kilometers hidden inside the vest. Now, just imagine that all this plethora of information is being fed into the machine learning algorithm. And just to give you a sense of what type of information we're talking about here–so let's just focus on the video. So every sniffing event is being captured in a short video. So you take this video, you break it down into frames, every frame into pixels, and that's what the machine learning is actually analyzing. And this is just one sensor that I mentioned. So because it knows the baseline of the dogs, because it was trained basically to identify a different dog's behavior, it can really tell you what's the true meaning of the gesture of the dog. So it doesn't only focus on the sitting. The sitting is the nice. But it's very crude.
00:12:33 Michael Eisenberg
So if you get the 94% accuracy, what percentage accuracy do you get to from sitting?
00:12:39 Shlomi Madar
So it's hard for me to answer this question, because when you talk about the 94%, it was a year ago.
00:12:45 Michael Eisenberg
Got it.
00:12:46 Shlomi Madar
Since then, we have like different type of packs, we're using different type of sensors. So it's not apples to apples.
00:12:52 Michael Eisenberg
Okay, what is it now, you think?
00:12:54 Shlomi Madar
So I would say it's around 80% before accuracy before you apply the machine learning. Yeah, I think, yeah.
00:13:01 Michael Eisenberg
Once you apply the AI or the machine learning, then you get to–
Shlomi Madar:
Over 90%.
00:13:05 Michael Eisenberg
Well over 90%.
00:13:06 Shlomi Madar
Yeah.
00:13:06 Michael Eisenberg
Okay. Like 91% or 97%?
00:13:09 Shlomi Madar
It's, again, it varies between the cancers, and also it needs to be done under–right now it's single blinded, because we're not still in the clinical settings, but we want to make sure we repeat it in the double-blind settings.
00:13:23 Michael Eisenberg
Yeah, but even if, I guess it's–I'm just thinking about this now. Even if it's 90%, right, it doesn't tell you you have cancer. It tells you 90% that you likely have cancer. I'll go get it checked out with a blood test or something else.
00:13:34 Shlomi Madar
Let's take a step back. So no one screening tool is 100%. It doesn't exist.
00:13:41 Michael Eisenberg
Even blood?
00:13:43 Shlomi Madar
Even blood. I mean, I would say more–a blood test is not the golden standard at all for diagnostics. So maybe a little bit of information about blood tests. So when we talk about screening tests, there aren't that many. So the scheduled routine screening, we're talking about only five cancers. And this is true both for Israel and the US, and around the world as well.
So you know, the big four, right? We have prostate, we have colorectal cancer, prostate, we have PSA. Typically that's a blood test. For example, we have colonoscopy for colorectal cancer. We have mammograms for breast cancer. We have low-dose CT for lungs, and pap smear for cervical cancer. These are the five that are being currently tested. And they're not all created equal. So not all of them are–first of all, many of them are very invasive or uncomfortable at least.
00:14:37 Michael Eisenberg
And they don't always capture, catch cancer at early stages, all of these.
00:14:40 Shlomi Madar
Exactly. So that was where I was heading. So you mentioned blood tests. So the old blood test, let's take the PSA, for example. So it doesn't really identify prostate cancer per se. It knows when the prostate is being enlarged for whatever reason. So it could be kind of benign. What you call benign hyperplasia, which is just a benign growth of the prostate gland. It could be inflammation, but it gives you a sense that something is off with the prostate cancer. But it's just the first indication. And then you have to go through additional testing. It could be a biopsy, it could be a digital exam, whatever it is. And the new blood tests are actually looking, they're better. So they're looking across the board, what we term as omics. So you probably heard about genomics or proteomics. So it's true for other types of information that you can glean from the blood from stool. It could be metabolomics, for example. So it's very informative in a way, but it's still not that accurate for early stages.
I want to give you an example. One of our biggest competitors was also, I have to say, I kind of tip the hat to them. They're called Grail. So they developed this multi cancer test that can screen for 50 cancers at a time, which is amazing. They kind of open the door for this trend of test that will screen for more than one cancer.
00:16:12 Michael Eisenberg
Like the holy grail.
00:16:13 Shlomi Madar
Yeah, exactly. The problem with the holy grail–and again, there is merit to screening 50 cancers. The problem with Grail, currently, it's that it's not excelling at the early stages.
00:16:25 Michael Eisenberg
What does that mean?
00:16:26 Shlomi Madar
So most cancers have stages, stage one to four, typically. There are other ways, by the way, to grade cancers that are very specific, But I don't want to get into that. Focus on the stages. Why is it so important to excel at the early stages? So on average, across all cancers, if you detect cancer early enough, so stage one, you have more than 90% survivability rate. Okay. And for some cancers, it's even more like for breast, it's 99%. Just let this number sit with you for a second. So there's a world of difference between stage one and stage three. It's not just to survive it. It's the type of treatments you have to undergo.
00:17:15 Michael Eisenberg
So Grail–
00:17:16 Shlomi Madar
Yeah.
00:17:16 Michael Eisenberg
Just to make sure I'm clear, does a poor job. Even if you take their test, they do a poor job of catching cancer in the early stages where it's most curable.
00:17:26 Shlomi Madar
Right, okay, exactly. And again, I'm not saying there's no merit. I got it in other stages across the board.
00:17:32 Michael Eisenberg
But you're suggesting that, if you want to get early diagnosis and survive, you probably should do something else.
00:17:37 Shlomi Madar
Yes.
00:17:37 Michael Eisenberg
Okay. But I will tell you that they do a better job of naming their company than you do.
00:17:41 Shlomi Madar
Well, that's, you know, that's arguable.
00:17:44 Michael Eisenberg
I get it. Spot. Cute. The dog. I got it. This is the right time to talk about early detection. Still.
00:17:50 Shlomi Madar
I mean, listen, early, it's–
00:17:54 Michael Eisenberg
See how many words are on your shirt? It's like, a lot for a company.
00:17:57 Shlomi Madar
Yeah, but we've broken it down into two rows. No, it doesn't do it for you? All right, we'll have to figure out–
00:18:04 Michael Eisenberg
The red marks, the spot. That's not exactly what I have in mind when I think about spot. Like the dog. I don't know. Why’s there no dog on your shirt?
00:18:12 Shlomi Madar
I mean, listen, there's gonna be a few variations of our shirts and other kind of, you know–
00:18:21 Michael Eisenberg
Get me the one with the dog on it. Like, even though I don’t like dogs, it at least is better on brand, I think.
00:18:25 Shlomi Madar
I'll take a note of that.
00:18:26 Michael Eisenberg
Yeah, yeah. Israelis are very good at the science, less good at the branding.
00:18:29 Shlomi Madar
That's true.
00:18:30 Michael Eisenberg
Yeah.
00:18:31 Shlomi Madar
We are working now with US marketing and PR teams, so hopefully we'll get better.
00:18:36 Michael Eisenberg
All right. Good. All right, so back to SpotitEarly.
00:18:38 Shlomi Madar
Yeah.
00:18:39 Michael Eisenberg
So, okay, so you detected early. How does this work?
00:18:43 Shlomi Madar
So actually, we're faring better compared to ourselves at the early stages, whhich might be counterintuitive. Right.
00:18:51 Michael Eisenberg
What it suggests maybe is that these VOCs are a better indicator than blood for early stage cancer. Is that fair?
00:18:55 Shlomi Madar
Oh, that's for sure. But even when we compare it to ourselves. So when I look at the sensitivity levels of stage one versus stage four, we're actually doing slightly better at the early stages, which is counterintuitive. Why? Because as the tumor grows, you would expect it will produce more of the VOCs. So we don't know exactly what’s the reason for that. We're talking about a few percentage points, but it's repeating itself. We have a conjecture on why it's happening. So as the tumor grows, it forms what we call the tumor microenvironment. So perhaps it's a little bit masking the pure scent of the tumor for the dogs.
00:19:35 Michael Eisenberg
Trying to hide itself.
00:19:37 Shlomi Madar
Yeah, but again, it's just a conjecture. It's really hard to prove.
00:19:40 Michael Eisenberg
It's a cloaking device, Maybe.
00:19:42 Shlomi Madar
Yeah. Love it.
00:19:43 Michael Eisenberg
Okay, so I'm just a regular person who lives in New York City, Chicago, Tel Aviv, Berlin, and I go to the doc, and he says, “Take a test, a blood test,” whatever it is. And maybe they send it and discover, God forbid somebody has cancer. When I'm 50, they do that colonoscopy thing, which is awful for two days before you do the colonoscopy. But there's somebody who tells me, “Hey, go drink this stuff.”
00:20:15 Shlomi Madar
Yeah. You know, by the actual procedure itself, I mean, I got three hours of sleep. I mean, that's not too bad.
00:20:22 Michael Eisenberg
That's one way to look at it. I didn't feel the same way, but I can't sleep. Yeah. And like, how do I get to this mask and why do I do this?
00:20:36 Shlomi Madar
Sure. So we're not in the market yet. It's important for me to know we're still under clinical trials. We do have a CLIA, a certified lab.
Michael Eisenberg:
What is a CLIA, exactly?
Shlomi Madar:
So it's one of the regulatory governing bodies in the US. It works kind of side by side with the FDA.
00:20:51 Michael Eisenberg
What does it stand for? Certified Laboratory…?
00:20:55 Shlomi Madar
Yeah.
00:20:56 Michael Eisenberg
Innovative association? In-House Association?
00:21:00 Shlomi Madar
Yeah. Maybe we can fix that later.
00:21:02 Michael Eisenberg
All right, so it's alongside the FDA, which means it's a pain in the neck.
00:21:06 Shlomi Madar
Yeah. I mean, they're more separated now than ever before. The FDA tried to sue them. It didn't go well. And I think now there's more separation there. And basically it allows us to sell laboratory developed tests outside of our lab. There are only two labs in Israel who are CLIA certified, and we are one of them. So we're very proud of that.
00:21:26 Michael Eisenberg
Congratulations.
00:21:27 Shlomi Madar
Thank you. Thank you so much.
00:21:28 Michael Eisenberg
I think.
00:21:29 Shlomi Madar
Yeah. Okay, so it means that we can sell the test in the US. So let's start with your question. Where do we sell it? Right now, we can only sell it in the US. The reason why we're not in the market yet is we just started a clinical study in the US.
Michael Eisenberg:
Where?
Shlomi Madar:
In New Jersey, in collaboration with Hackensack Meridian Health. It's the largest health system in New Jersey. It has 18 hospitals, a lot of clinics, great partners to us, and it's going really well. We're going to add additional sites.
00:21:59 Michael Eisenberg
I don’t understand. I go to the hospital to go breathe in a mask for three minutes?
00:22:03 Shlomi Madar
That's for the clinical study.
00:22:04 Michael Eisenberg
Oh, yeah. But what's like–
00:22:06 Shlomi Madar
I'm getting there. I'm going to the market. I'm saying right now where we are, we're performing this clinical study. Once we have enough information collected from this, again, it's the same rigor, double-blind study. Once we have at least interim results from that study, then we'll go to market and sell direct to consumers.
00:22:26 Michael Eisenberg
Directly to consumers. But why am I going to know that I need this? Why should I even buy this? I'm a guy at home in Chicago. And why am I getting a mask? Go breathe into it and send it to you in a canister so that you can tell me if I have cancer?
00:22:38 Shlomi Madar
So I think you alluded to that some of the alternatives are painful.
00:22:44 Michael Eisenberg
But I'm not doing those either. Most people don't do these things. They don't do this.
00:22:47 Shlomi Madar
Sure. So obviously it will depend on our marketing capabilities. But the idea is to tell you….
00:22:53 Michael Eisenberg
Listen, I mean, take how good you are getting people to take an unnecessary test.
00:22:57 Shlomi Madar
It's okay. So let's maybe tease this out.
00:23:01 Michael Eisenberg
Yeah.
00:23:02 Shlomi Madar
Necessary versus unnecessary. So I don't know if you guys are aware of it, but there is a very worrying trend where the onset of some cancers starts earlier.
00:23:12 Michael Eisenberg
Yeah.
00:23:12 Shlomi Madar
Then what? So it's hard for some people.
00:23:15 Michael Eisenberg
Some people attributed it to the COVID vaccinations. I have no idea if that's true or not, but.
00:23:18 Shlomi Madar
No, but the trend started before the COVID. I don't think that's the reason. I don't know about that particularly.
00:23:24 Michael Eisenberg
Early onset of cancer. Go ahead.
00:23:25 Shlomi Madar
Yeah. And we’ve seen it actually across a few cancers. So colorectal would be one. Breast would be another one. Kidney. Pancreatic cancer. So it's a bunch of cancers. There are others as well where you see relatively young adults. So we're talking about younger than 50.
00:23:41 Michael Eisenberg
Yeah. I have a friend who was just diagnosed with terminal kidney cancer.
00:23:44 Shlomi Madar
I'm sorry to hear.
00:23:45 Michael Eisenberg
And it's awful. No detection, but, like, how would he have known?
00:23:49 Shlomi Madar
So–
00:23:51 Michael Eisenberg
He's like, in his early 40s.
00:23:53 Shlomi Madar
So again, you asked about necessary versus unnecessary. So I just want to establish that there is a need for early detection, even earlier than what we thought. I hear that in terms of the age of the patient. But even if you just adhere to the recommended screening schedules, people are not getting tested by the masses. So you have to ask yourself, why are they not getting tested?
00:24:16 Michael Eisenberg
Yeah.
00:24:16 Shlomi Madar
So we did a bunch of surveys, and actually there's data available online that other people performed where you see what the barriers are, and it's different for different cancers. So, for example, for breast cancer, where you have a high adoption rate–and I should explain what adoption rate means. It means how many people out of the eligible population are actually getting tested.
00:24:41 Michael Eisenberg
Mammograms.
00:24:41 Shlomi Madar
Yeah. So let's say mammograms. It's a recommendation above the age of 40. Right now in the US, you actually can go younger if you have additional risk factors. So it could be certain mutations like BRCA. It could be direct family history and so on. And also it actually influences the frequency by which you need to take those tests. So even there, where it's relatively high, we're talking about around 75% adoption rate. So there's more ways to go to push this number up for other cancers like lung cancer. The adoption rates are abysmally low.
00:25:21 Michael Eisenberg
Right.
00:25:21 Shlomi Madar
So we're talking about, I think the national average in the US is like 5%.
00:25:25 Michael Eisenberg
No awareness yet.
00:25:27 Shlomi Madar
So awareness is definitely one of the barriers. Access is another barrier. Just think about people who do not have, like, primary care physicians, you know, for them to get their recommendation from. Or maybe they just live in a rural area. There's nothing, you know, in the city.
00:25:43 Michael Eisenberg
Why and how are they getting this mask?
00:25:46 Shlomi Madar
So we want to get to the people through online marketing.
00:25:51 Michael Eisenberg
Just plain online, direct to consumer marketing. Say, “Here, take a mask, breathe into it. You may have cancer?”
00:25:55 Shlomi Madar
No, no. So obviously when you do these type of campaigns, you know how to target your target population.
00:26:03 Michael Eisenberg
Yeah, but why do you think the people are going to say, “Okay, send me a mask?” I feel like you're not answering the question.
00:26:09 Shlomi Madar
No, no, I'm so. I'm getting there. Sorry. I'm not trying to evade the question. Not at all.
00:26:19 Michael Eisenberg
Yeah. So, yeah, you want to educate the people, obviously.
00:26:20 Shlomi Madar
Online is one of the activities we're going to do. Other activities are actually, are going to be physical lectures in the communities.
00:26:30 Michael Eisenberg
So people who have no idea they think they have cancer, they're going to turn up at lectures to find out that…
00:26:34 Shlomi Madar
So, no, there are actually a lot of events. So just take breast cancer for example. You have a few in the US, it's pretty great. You have a few advocacy groups, large ones, who have–
00:26:44 Michael Eisenberg
American Cancer association, for example.
00:26:47 Shlomi Madar
But that's not specific for breast cancer.
Michael Eisenberg:
Oh right, not for breast cancer.
Shlomi Madar:
You have, for example, Coleman. You have Force in New Jersey, New York area. You have something called Sharsheret.
00:26:57 Michael Eisenberg
You also have these pink days where the people, even the Yankees wear the pink baseball hats.
00:27:01 Shlomi Madar
So something like that. We did one, actually. So October was Breast Cancer Awareness Month. So we did an event already.
00:27:09 Michael Eisenberg
And people took masks? Because you're not selling it. I mean.
00:27:11 Shlomi Madar
Yeah, yeah. But we actually recruited people to the clinical study based off of this event.
00:27:16 Michael Eisenberg
You can give it out at baseball games, I guess, also, or something like that.
00:27:19 Shlomi Madar
That could be another option. I should talk to you.
00:27:20 Michael Eisenberg
How much are they going to pay you for the mask?
00:27:22 Shlomi Madar
So the starting price for our kit is going to be $250.
00:27:26 Michael Eisenberg
$250. And how often am I going to do this?
00:27:30 Shlomi Madar
So right now we're going to adhere to the recommendations, which would be a yearly test.
00:27:35 Michael Eisenberg
So once a year, buy a mask, pay $250, breathe into it, send it to our thing. We'll let you know if you have cancer.
00:27:41 Shlomi Madar
Yes.
00:27:42 Michael Eisenberg
Okay.
00:27:42 Shlomi Madar
And now as we grow the company, and we add more cancers, you can actually check more boxes. So you can decide, I just want to do breast. Maybe I want to do more. Maybe I'll do breast and lung, colorectal and others. As we go along, we'll add them to the list. By the way, from the patient perspective, you just have to breathe once into the mask. It's not going to change their basic experience.
00:28:06 Michael Eisenberg
By the way, when the dog sniffs it, does it know the difference between breast cancer and colorectal cancer, or whatever it is?
00:28:12 Shlomi Madar
That's a great question. So when we started the company, we actually trained the dogs to be kind of horizontal. So we actually trained them to sniff the common scent between the different cancers. Which was great, by the way. We actually trained them to sniff four cancers. But when we introduced new cancers that they were not trained for, they could detect them at a pretty high rate. So around like 80%.
00:28:36 Michael Eisenberg
So there's a high commonality in the VOCs.
00:28:38 Shlomi Madar
Right. The problem with that, it's a very common problem in multi-cancer testing. It's the tissue of origin. So you want to be sure that it's not only that you have a positive signal, you can actually trace it back to the source of the tumor. Does that make sense?
00:28:53 Michael Eisenberg
I mean, to someone who knows what they're talking about it probably does. But for an idiot like me, it's harder.
00:28:57 Shlomi Madar
So just say we take the Grail test. It's 50 cancers. So let's say it comes out positive. But now you have to make sure where the positive signal came from. And that's a whole new ballgame. So when you train them to sniff horizontally, there is always a chance that maybe they're sniffing one cancer over the other and you're not sure what's the origin tissue. So that's why we decided to kind of change course in the way we train the dogs. And now we have a dedicated pack for each cancer. And I saw it with my own eyes for the first–
00:29:33 Michael Eisenberg
Pack of dogs? Interesting.
00:29:33 Shlomi Madar
A pack of dogs is four dogs. Four dogs, basically, per cancer.
00:29:36 Michael Eisenberg
So this is the breast cancer sniffing dogs, and these are the lung cancer sniffing dogs, and these are the colorectal cancer sniffing dogs….
00:29:42 Shlomi Madar
Exactly. And I saw it with my own eyes, I think, for the first time. I don't know. I haven't seen any other papers around that where a dog would sit for a positive breast cancer sample and would ignore the positive lung cancer in the same sniffing event. So that's amazing. That's, I think, for the first time, done in history. And it goes to show that they're identifying a very unique signature of VOCs to that particular cancer.
00:30:10 Michael Eisenberg
That's actually incredible.
00:30:11 Shlomi Madar
Yeah.
00:30:11 Michael Eisenberg
Before we go on to the next question, I want to ask you actually, like, I got emotional in the middle of talking about my friend Ty, who was just diagnosed with kidney cancer not long ago. So, Ty, this one's for you. The reason we got to make this company work is for you and for everybody else that loves you out there. So hope you're listening.
00:30:27 Shlomi Madar
Thank you.
00:30:29 Michael Eisenberg
Where did the idea come from that dogs can sniff cancer?
00:30:33 Shlomi Madar
So actually, one of our founders was the head of canine unit, and he's not–
00:30:42 Michael Eisenberg
Canine unit in the IDF?
00:30:43 Shlomi Madar:
In the IDF, yeah. And I think, you know, he saw their amazing sense of smell. Remember, we trust dogs with our lives, right. We see them at airports. They work with the military and the police. They sniff all–
Michael Eisenberg
Explosives.
Shlomi Madar:
Yeah, explosives.
Michael Eisenberg
Drugs.
Shlomi Madar:
Bodies, missing persons.
00:30:59 Michael Eisenberg
Missing persons.
00:31:00 Shlomi Madar
Just think about the missing person for a second. Right? We give them, like, a piece of cloth of something they never came across. It's the first time they come across this scent, and they can sniff a person from miles away. So I think he kind of saw the potential here, and he said to himself, “Why not healthcare? Why not identify different diseases?” And by the way, we started with cancer, but that doesn't mean that it's limited to cancer. We've actually seen a lot of papers that came out recently. There is a growing body of evidence, I should say, for other diseases as well.
00:31:34 Michael Eisenberg
So the dogs can sniff other diseases?
00:31:36 Shlomi Madar
Yeah, you have a bunch of neurodegenerative diseases like Parkinson's and Alzheimer's. They already can sniff seizures in advance.
00:31:45 Michael Eisenberg
Wow. Is this research you’re doing, or…?
00:31:47 Shlomi Madar
No, no, others are doing it. They help diabetic people. They can also alert to different conditions.
00:31:57 Michael Eisenberg
So the is, from the guy who runs the canine unit is one of the founders of the company, is if dogs can sniff explosives, they can sniff cancer in advance.
00:32:04 Shlomi Madar
They can sniff anything.
00:32:05 Michael Eisenberg
Anything. Yeah. And so how'd they settle on cancer?
00:32:08 Shlomi Madar
So I think maybe it was close to the heart of….
00:32:10 Michael Eisenberg
Remember, everyone in Israel thinks, you know, 8200 innovation–I don't think anyone thought that out of the canine unit of the IDF…
00:32:16 Shlomi Madar
Yeah.
00:32:16 Michael Eisenberg
Which sniffs explosives and missing persons and people and terrorists, you'd say, okay, let's at least diagnose cancer, I think.
00:32:25 Shlomi Madar
Yeah. So pretty amazing. Yeah, it's very creative.
Michael Eisenberg:
What's his name, by the way?
Shlomi Madar:
Ariel.
00:32:30 Michael Eisenberg
Ariel.
00:32:30 Shlomi Madar
Okay. And you know, he put together an amazing group of people. The other founders are coming from different backgrounds, different walks, kind of tech and marketing, and also the team in Israel. I mean, I just came from the lab. They're just an amazing group of people. Very unique, diversified group. Right, so you have dog trainers, the dog people–
00:32:57 Michael Eisenberg
The dog trainers.
00:32:58 Shlomi Madar
Dog trainers, the dog handlers. Right.
00:33:02 Michael Eisenberg
Where do they come from? They also come from the canine unit?
00:33:04 Shlomi Madar
Not necessarily. Also, but not necessarily. You know, you have a lot of just civilian, I would say, dog trainers as well.
00:33:10 Michael Eisenberg
Yeah.
00:33:11 Shlomi Madar
So they know how to work with dogs also, you know, putting them–so remember, the dogs have to live in a kibbutz together.
00:33:19 Michael Eisenberg
In a kibbutz.
00:33:19 Shlomi Madar
Yeah. And they hang out together. So you have to make sure that you pair them correctly. And they have to be in a good mood. Like us. If you want to function well, you have to be happy. So we have to keep them happy. And then we have the other side. So we have the wet lab, the lab technicians, the biologists, the chemists. You have people who understand the science of scent, which you have to know a lot about in order to make this happen.
00:33:49 Michael Eisenberg
Where do those people come from?
00:33:51 Shlomi Madar
So they actually are veterans of the electronic nose. So, you know, it's been, I don't know, three decades maybe of electronic nose research. And I think they saw the potential with the dogs because just to give you a sense of the difference–so the dog's sensitivity, it's part per trillion. So they can sniff one part out of a trillion parts. That's insane. So just if you take like a half a spoon of salt or sugar, put it in an Olympic swimming pool, they can tell the difference between these two different pools. So that's three orders of magnitude better than any artificial instrument.
00:34:32 Michael Eisenberg
And what about human nose?
00:34:34 Shlomi Madar
So we used to be good sniffers. The reason why I say that is, the most frequent gene we have in our genome is actually genes for olfactory receptors, but with evolution, we are much more reliant on our eyesight. So we have relatively really good eyesight compared to other mammals. So with time, we kind of inactivated it. So a bunch of these genes are actually inactivated.
00:34:59 Michael Eisenberg
So we used to be as good sniffers as the dog?
00:35:01 Shlomi Madar
I don't know if, I don't want to make those types of comparisons, but I should say it's not just dogs. A lot of mammals, as much as I love dogs, a lot of mammals have this amazing sense of smell because they need it, they rely on it to survive.
00:35:14 Michael Eisenberg
It's hard to get a dolphin to sniff a mask, that…Yeah, that’s hard.
00:35:19 Shlomi Madar
Bad karma, also, to take them out of the water.
00:35:21 Michael Eisenberg
Okay, so you're saying, so you've got the chemists, the dog trainers, the dog keepers, you have the engineers.
00:35:29 Shlomi Madar
The engineers, all the hardware kind of chemistry guys. Yeah, the chemistry guys. We have data scientists as well.
00:35:35 Michael Eisenberg
It's a very diverse team. You're right.
00:35:36 Shlomi Madar
Yeah. And you see it. Like, in the office, you have like the people with sandals, you know, that are the dog people. You have the people working on the computers. So it's a very diverse group and amazing group of people. I mean, remember, at the end of the day, that's what would make a startup work, if you have a great team and a winning team. And that's what we have.
00:35:55 Michael Eisenberg
You kind of launched this company to say dogs are going to sniff cancer. I imagine most people looked at this and said, “Nah, here comes Elizabeth Holmes again.”
Shlomi Madar:
Yeah.
Michael Eisenberg:
So how much of a challenge was it, especially given Elizabeth Holmes’ Theranos background, to raise money for this crazy idea?
00:36:14 Shlomi Madar
I want to start actually with my story. So when SpotitEarly first approached me, it was around, I don't know, almost three years ago now, I said, “No.” I am a molecular biologist by training. I'm a skeptical person, and I know how noisy, biologically speaking, cancer is. And I told them, like, I don't think it's going to help if you're going to add another layer of variance. But as it happened, they just completed the interim results of their clinical study. And when I saw the numbers, I was like, “Okay, you know, I'm an evidence person. I cannot ignore what I'm seeing.” And it just clicked, and I got hooked. And I'm obsessed with the company actually, ever since. And actually I keep seeing the information, the results kind of coming in.
So I feel like every–remember our collaborations, by the way, I mentioned Hackensack, Meridian Health. We also have an agreement with the University of Pennsylvania. Hopefully we can kick off the study with them as well. We actually have a separate grant with them to figure out how to sell it in collaboration with the hospital. So kind of identifying the clinical utility, the intended use of the test. So they're helping us with that. We got a million and a half–oh, sorry, million dollar grant from the Bird foundation to do just that.
00:37:37 Michael Eisenberg
Yeah. I'm sitting here thinking about it, by the way. $250 for a test once a year that lets you detect stage one cancer, even pre-cancer, is actually way cheaper than what it would cost to treat somebody with it.
00:37:49 Shlomi Madar
Oh, yes.
00:37:51 Michael Eisenberg
And so it's actually not a big deal, except that the consumer has to pay for it rather than the medical system.
00:37:54 Shlomi Madar
For now.
00:37:55 Michael Eisenberg
Yeah, yeah, I was thinking about that now. Okay, so. So keep going back. You got here and you got convinced.
00:38:01 Shlomi Madar
Yeah. So I just want to talk about, a little bit about the trust that you need from the medical industry, from the health systems, from the hospitals. So I have to say it's very easy for me right now because I went through the same process. So when I first talked to the professors, the radiologists, the oncologist, to start off, very skeptical, but then I showed them the paper, I showed them the actual results, and I think they transformed like this. The conversations are very, you know, they're flowing. We already, I told you, have a bunch of signed agreements. And I think they just understand how big of a need it is for early detection. And, you know, they know that what we have right now, it's not good enough.
00:38:45 Michael Eisenberg
Yeah.
00:38:45 Shlomi Madar
And they're looking for innovation in this space.
00:38:48 Michael Eisenberg
And they say dogs, no problem.
00:38:50 Shlomi Madar
Yes.
00:38:50 Michael Eisenberg
Skepticism about the dogs.
00:38:51 Shlomi Madar
I mean, there might be some. But you know, again, the proof is in the pudding. They are willing to conduct those clinical studies together with us, so they have skin in the game.
00:39:00 Michael Eisenberg
So you're a scientist and not a commercial guy.
00:39:04 Shlomi Madar
Yeah, that's true. For, I don't know, 15 years?
00:39:08 Michael Eisenberg
Is that beneficial, or a drag on being the CEO of this company?
00:39:11 Shlomi Madar
No, actually, in this particular case, I think it's a benefit. And I’ll explain why. When I just, you know, came out of university, I was an ideologue, I guess. You know, I just didn't understand, why can't you just have a great idea, just take it to the market, don't worry about, you know, the economics and all that stuff? Just get it to the people, you know. But in reality, as much as we all would love to, you know, get–
00:39:39 Michael Eisenberg
Everything handed out for free, yeah.
00:39:40 Shlomi Madar
And that's been a trend recently. If you really want to help people, you have to build a successful product. Because people are ideologists, so long as it doesn't touch them. What if I tell you that, “Listen, this month you're not gonna get a salary. Okay? Just do it for the people.” No one is willing to do that. So I think, you know–
Michael Eisenberg:
Some people are.
Shlomi Madar:
Most aren't.
00:40:02 Michael Eisenberg
Okay.
00:40:03 Shlomi Madar
So if you have to do both, if you want to help save lives, you have to build a functioning, profitable company. And that's what we're trying to do. Trying to do both.
Michael Eisenberg:
How much money have you raised?
Shlomi Madar:
So far, 20 million in seed money.
00:40:19 Michael Eisenberg
Total of 20 million in the company so far? That's it?
00:40:22 Shlomi Madar
And now we're hopefully in the very near future finishing up round A.
00:40:28 Michael Eisenberg
Okay. How big is that?
00:40:30 Shlomi Madar
Additional 20 million.
00:40:33 Michael Eisenberg
Okay.
00:40:33 Shlomi Madar
Yeah.
00:40:33 Michael Eisenberg
You've been pretty capital efficient until now.
00:40:35 Shlomi Madar
Yeah.
00:40:36 Michael Eisenberg
Dogs don't cost as much money as human beings, I guess.
00:40:38 Shlomi Madar
I mean, it depends. I think relatively speaking, we didn't still make the big jump right? The scale jump. So that's still ahead of us. But we'll need, so those clinical studies are not cheap. We have to finance those. And also growing. So we want to open a lab in the US. We want to grow in the US that takes money.
00:40:59 Michael Eisenberg
What about getting the consumers? I'm sitting here looking at this mask and saying, “How the hell is this getting into the hands of the people who need it? So it sits in their medicine cabinet,” or so they walk into a CVS and they say, “Okay, give me that. Oh, $250, ew.”
00:41:14 Shlomi Madar
So, yeah, as I mentioned at the beginning, we're not going to approach all of the population. It's going to be very targeted.
00:41:20 Michael Eisenberg
Rich people who pay.
00:41:22 Shlomi Madar
Not necessarily. I guess it's kind of middle class and above. Okay, but remember, there's a whole marketing team. It's not just me, thankfully, that's working on it.
Michael Eisenberg:
You live in New York?
Shlomi Madar:
I live in New York metropolitan area.
00:41:37 Michael Eisenberg
Is Mamdani gonna make this a $2 mask?
00:41:39 Shlomi Madar
So wait, wait, wait. I live in New York metropolitan area, which means New Jersey.
00:41:42 Michael Eisenberg
New Jersey. Okay. Yeah.
00:41:44 Shlomi Madar
It's a bit different over there.
00:41:45 Michael Eisenberg
You're able to charge $250 for this in Mamdani’s New York, or not?
00:41:49 Shlomi Madar
So, actually, a small anecdote. Typically, diagnostics companies and screening companies, they don't start with New York and California. They start with the outer 48. They graduate.
00:41:58 Michael Eisenberg
Why? That's interesting.
00:41:58 Shlomi Madar
They have unnecessary heavy regulation. So, yeah, I'm sorry, you know, for the population there.
00:42:07 Michael Eisenberg
But really sorry, New York and California, you will not be able to detect your cancer early. You'll have to move to a different state.
00:42:13 Shlomi Madar
You said that. I'm not….
00:42:15 Michael Eisenberg
You're in New Jersey. It's good for you.
00:42:18 Shlomi Madar
In the future we want to go there as well.
00:42:22 Michael Eisenberg
So one of the things I'm trying to get my head around is, and I think you've said this before, that you're combining AI with AI, artificial intelligence with animal intelligence. And one of the things I've actually been curious about because, let's talk about AGI, right, which is general intelligence, similar to human intelligence. I'm sitting here thinking about your metaphor that if you put a half a teaspoon of salt in an Olympic-sized swimming pool, the dog can tell the difference between that swimming pool and a regular swimming pool. I'm saying to myself, can AI ever get to the level of biology of these animals, human or dog as the case may be, that have these just incredibly developed senses that AI doesn't have?
00:43:10 Shlomi Madar
So we have to separate the software from the hardware. So there's been a lot of developments around the software and that's, I would say the AI part. And it could do magic. We applied in a certain way, but other companies are applying it in different ways. Just as an example, also from our field, being able to scan for millions of X rays, simple X rays can help radiologists make better judgment calls. So, and this is again, image processing. I don't think that I can be replaced. You know, I think it's coming. So right now it's assisted. But at some point AI will just do a better job and we'll trust it more.
00:43:52 Michael Eisenberg
Do a better job of what, specifically?
00:43:54 Shlomi Madar
So image processing.
00:43:55 Michael Eisenberg
Image processing.
00:43:55 Shlomi Madar
But again, that's software. When I'm talking about scent, you have to use hardware, you have to use actual sensors. So that there's a limiting factor there. So no AI, no AI capacity can help you if you don't have enough input.
00:44:09 Michael Eisenberg
Is the dog the hardware or is the sensor the hardware?
00:44:11 Shlomi Madar
I'm talking about just the scent. The scent itself. By the way, the dogs have both. Why do they have both? They have, first of all, they have hundreds of millions of olfactory receptors in their nostrils. On top of that, they have a small organ called the olfactory bulb. It's in their frontal cortex. And this really, this organ helps them to parse out the signal from the noise in real time. So if you ever walk the dog, you see that they're just like us. They're kind of scrolling, sniffing. And they have to look up information. So you know, this dog was peeing over there, and maybe had something bad to eat or something like that, and this one is pregnant, and you just collect all this information, but there's kind of an onslaught of smell and scent coming their way, and they have to kind of decipher what is that, is it that they're sniffing?
00:44:59 Michael Eisenberg
Yeah, I'm actually going to go with that analogy. I've never thought of an Instagram scroll as pee and having bad smell and the dog smell. If you know, sniffing is like scrolling when you're walking in the street. I actually like the analogy specifically for TikTok.
00:45:15 Shlomi Madar
Yeah.
00:45:16 Michael Eisenberg
Oh yeah, yeah, yeah. That's a lot. I don't know what that is. Pee or whatever it is, but it.
00:45:21 Shlomi Madar
Fake pee. Maybe it's fake.
00:45:22 Michael Eisenberg
Yeah, I'm not sure it's fake. It might be real. It smells really bad, the TikTok feed. Yeah. So the dog is not replaceable, really by AI, but–what are other biological sensors you think we can use that are underappreciated right now?
00:45:36 Shlomi Madar
So first of all, I told you before, there are mammals with amazing sense of smell to the same extent of dogs.
00:45:43 Michael Eisenberg
What's the most competitive one to a dog?
00:45:47 Shlomi Madar
A bunch of them. So mice, rats. They have amazing sense of smell. And by the way, there is a company who's using mice. I think, you know, maybe the pitfall there would be their short lifespan.
00:45:57 Michael Eisenberg
Yeah.
00:45:58 Shlomi Madar
So you train them and then they die after 24 hours.
00:46:00 Michael Eisenberg
When was the first time we understood that dogs can smell disease?
00:46:04 Shlomi Madar
Oh, a long time ago.
00:46:05 Michael Eisenberg
How long?
00:46:06 Shlomi Madar
So as much, as far as I know, like over 100 years ago.
00:46:09 Michael Eisenberg
And who was the person who invented that?
00:46:11 Shlomi Madar
I don't know if there's like an invention. There were reports. And by the way, still you get anecdotes from people who would say, you know, my dog sniffed me, sniffing like weirdly a few years before I was diagnosed, but I felt there was something there. Well, so we get those anecdotes from time to time.
00:46:27 Michael Eisenberg
The reason I'm asking any questions, I'm thinking about the branding of, of the car and Elon Musk calling his car Tesla. Yeah, I was thinking that SpotitEarly you could find the first guy who knows it's not just one guy.
00:46:39 Shlomi Madar
I don't think so. But yeah, it's a point for us to–we'll look it up. We'll look it up. It's a good idea.
00:46:43 Michael Eisenberg
That's what I was thinking.
00:46:44 Shlomi Madar
Maybe it was Tesla.
00:46:45 Michael Eisenberg
Why did you launch in Israel before you launched the United States?
00:46:49 Shlomi Madar
You have to graduate to United States. And also Israel, it's kind of a hub of innovation. So we were great at coming up with ideas. When it comes to scale, it's harder for us to do it here. First of all, there's less money here than in the U.S. and also the U.S. you know, we call it–
00:47:09 Michael Eisenberg
Why don’t you go to the big market first? I mean, many companies just go to the big market first?
00:47:13 Shlomi Madar
So again, it's a question of where the innovation is coming from. And I think there's a concentration of healthcare innovation in Israel. By the way, we have a lot of Americans taking interest in Israeli companies for that reason.
00:47:25 Michael Eisenberg
This is not really healthcare. This is something else. This is like, the market is healthcare. But this is like you said, it's like chemistry and dogs and sniffing and AI and sensors, and it's like classic Israeli multidisciplinary on the science side. I'm more just in the market side.
00:47:41 Shlomi Madar
Yeah, but again to develop the actual capability before you scale–Israel is actually a great place to do it. First of all, you have a lot of grants, you know, accelerators here. So to start something, I think it's actually better to do it here. And also you have a lot of people who have this drive to innovate, to start something new, all kind of concentrated in a small place.
00:48:08 Michael Eisenberg
How many times a week does somebody call you and say, “Send me a mask?” I wanna know.
00:48:11 Shlomi Madar
Three times a week.
00:48:13 Michael Eisenberg
Do you do that?
00:48:14 Shlomi Madar
No.
00:48:14 Michael Eisenberg
Why not?
00:48:15 Shlomi Madar
Because we can only say, compliance and regulation, it's very–I'm not sending shoes here. Right. So I can, I mean–
00:48:23 Michael Eisenberg
What's the big deal? So give me a mask, I'll send it 90% and then you send them for a blood test, or a mammogram or colonoscopy.
00:48:31 Shlomi Madar
Have you ever heard of liability?
00:48:33 Michael Eisenberg
So it's lawyers. I'm just sitting here thinking about this. Like this should be a no brainer, right? Just like I went in and put on a mask because it had no cost. Basically this $250. I get the point, you know, to stop Covid from spreading. Just give it to me. What the hell.
00:48:46 Shlomi Madar
Yeah, so we still, again, this is a cancer test, by the way. When I said we are selling direct to consumer, that's only half true. So every time you fill in the–
00:48:55 Michael Eisenberg
The whole first part of this thing, we have to erase, because it’s only half true.
00:48:58 Shlomi Madar
No, no, I'll add information. You can edit it back if you want. I think you guys can do it. But on a serious note, when you fill out the form, if you want to order the test, it actually goes to a physician. So it needs to be–
00:49:10 Michael Eisenberg
This has to be prescribed by a physician.
00:49:12 Shlomi Madar
It's a cancer test. It's not a COVID test. It's not, you know, something–
00:49:17 Michael Eisenberg
So I can buy a strep test at CVS, no problem, right? Rapid strep test. And I can buy a COVID test, a rapid COVID test, which is going to keep me at home for five days.
Shlomi Madar:
Yes, at a CVS, no problem.
Michael Eisenberg:
But I can't buy a cancer test.
00:49:33 Shlomi Madar
Also CVS now. Do you see any on the shelf?
00:49:36 Michael Eisenberg
No, I've never seen it. But I'm trying to understand why.
00:49:39 Shlomi Madar
Because it's a more severe disease. There are different regulations and rules.
00:49:43 Michael Eisenberg
Shouldn’t I want to know about it before?
00:49:45 Shlomi Madar
Yeah, but again, the ramification of getting a cold versus diagnosing cancer. It's just–
00:49:54 Michael Eisenberg
What if you said a disclaimer that this is only 50% accurate, but if you want to do it, turn up for a blood test afterwards?
00:49:58 Shlomi Madar
I mean, you have to talk to RFK and ask him all these questions.
00:50:01 Michael Eisenberg
If RFK is listening, we'll just tell him this is something you should do to prevent people from getting cancer and you'll save a lot of money for the US health system.
00:50:07 Shlomi Madar
Yeah, we can go there.
00:50:08 Michael Eisenberg
But I'm asking a serious question. So where in the world could you go today and put these boxes somewhere and say, okay, pay us 50 bucks and take a test?
00:50:15 Shlomi Madar
Even if you go elsewhere–so you know, we had conversations in Europe, Southeast Asia, South America–there's still some regulation when it comes to cancer.
00:50:27 Michael Eisenberg
What's the most forward thinking market for us? Yeah, I mean this should be a no brainer.
00:50:32 Shlomi Madar
Yeah, yeah. So outside of the U.S. I'm not even limiting myself. It could be Central, South America, Canada obviously would be easy. Israel in the Middle East, Southeast Asia. I mean these are all–
00:50:46 Michael Eisenberg
If you have a 20 second message now to RFK. What is it? Hey RFK.
00:50:50 Shlomi Madar
Hey RFK, help us, you know, make this dream come true. And if we can–
00:50:55 Michael Eisenberg
He doesn't want to make your dreams come true. He wants to make Americans healthy again.
00:50:57 Shlomi Madar
Yeah. So relax. If we can relax a little bit of the constraints here, I think we can get it.
00:51:04 Michael Eisenberg
Convince me. I'll be RFK. Convince me.
00:51:06 Shlomi Madar
Because you can save people’s lives and a lot of money in the process.
00:51:09 Michael Eisenberg
Okay. Just for a mask?
00:51:11 Shlomi Madar
Yeah, just with a mask. Detecting cancer early so you don't have to go through the whole process of getting diagnosed with multiple tests and then having painful treatments.
00:51:22 Michael Eisenberg
Yeah, that picture was crisp enough. Try again. RFK.
00:51:25 Shlomi Madar
I started with a crisp one liner. All right. Save lives, save money.
Michael Eisenberg:
You said make my dream come true.
Shlomi Madar:
Oh, you're right. Right.
Michael Eisenberg:
Save lives, save money would be my.
00:51:34 Michael Eisenberg
Kind of save lives, save money.
00:51:35 Shlomi Madar
Yeah.
00:51:36 Michael Eisenberg
Relax your regulation. This is just a diagnosis. Just a mask.
00:51:39 Shlomi Madar
Right.
00:51:39 Michael Eisenberg
You didn't like the COVID mask. But these are three minute masks.
00:51:42 Shlomi Madar
Yeah, yeah, that's important to note. I know people have some feelings about it.
00:51:48 Michael Eisenberg
You got your PhD at the Weizmann Institute, right? In cancer research. What was your thesis on?
00:51:54 Shlomi Madar
So I focused on the interaction between the tumor and its microenvironment. Back then, by the way, it was mostly kind of academic. After I left, obviously, it started booming. So I don't know if you heard the term immunotherapy, cell therapy, gene therapy. So basically, but kind of collectively, what it means, you don't only focus on the tumor itself. You understand that it grows kind of, not in a vacuum, but rather it interacts with whatever it is. It could be supporting cells, what we call fibroblasts, the immune cells, and you can actually activate the immune system to attack the tumor, which is what's going on with the new surge of drugs. Actually, that's one of the reasons why you see this innovation following of early detection, because once you have more treatment, you have to have treatment options for the early detection to matter. Now, if you tell me early detection for Alzheimer's, I would say it's nice, but it's not really helpful because we don't have a cure for that. With cancer, it's a different ballgame. What we have right now we didn't have 20 years ago. So there are much more options on the table for patients.
00:53:00 Michael Eisenberg
So correct me if I'm wrong, but when the Iranian missile strikes happened, it hit, actually, the cancer labs at the Weizmann Institute. Is that right?
00:53:07 Shlomi Madar
Yeah. Yeah, that was a hard time at the Weizmann. But I do have to say they were very resourceful. I mean, you know, immediately managed to find, like, other areas, other places, kind of rearrange some of the things there. It's true that one of the cancer research buildings was. Got a direct hit, but also it spread across multiple buildings. It's not as if we're just going back–
00:53:35 Michael Eisenberg
How do you think about that? Like, probably, I'm guessing, but like a decade plus of research probably went up in smoke, right? You think about how many diseases could have been cured had it not been for that missile strike?
00:53:46 Shlomi Madar
I mean, that's one way to look at it. I think it also–so I talked to a few professors and researchers from Weizmann. It also opens up, like, opportunities for innovation. It depends how you look at it. Of course, you know, there's damage and some of the things cannot be salvaged, and some of the research, you know, is gone. But also, nowadays we keep a lot of things on the cloud.
00:54:09 Michael Eisenberg
Right.
00:54:10 Shlomi Madar
It's true that the biological samples themselves, some of them at least, are gone, but some of the information would still live on on the cloud.
00:54:17 Michael Eisenberg
I love your positive attitude towards it. Somebody mentioned to me that your PhD mentor was very meaningful.
00:54:23 Shlomi Madar
Oh, yeah.
00:54:24 Michael Eisenberg
Tell me more about her. Right?
00:54:26 Shlomi Madar
Yeah.
00:54:27 Michael Eisenberg
Yeah.
00:54:28 Shlomi Madar
So, yeah. Her name is Professor Varda Rotter. She was one of the discoverers of a molecule called P53. P53 is a protein, what we call a tumor suppressor. So it helps protect our bodies from tumor formation. It's what was termed the guardian of the genome. So she was one of its discoverers. And throughout her career, she managed to take this little protein and kind of provide different angles. So cancer was probably, you know, the strongest one. But as the years went by, we found in the lab that it actually influences a lot of other biological processes. So she had multiple discoveries like that. She really helped patients eventually with her research throughout the years, and she also created an amazing lab. So she was a leader. She could bring people together. I remember at Weizman–don’t let me fool you. There's actual smart people there, and it's hard to bring them together towards achieving those different milestones. So she was a great leader. And, yeah, I have a lot of appreciation for her.
00:55:44 Michael Eisenberg
And what kind of culture do you want to create at SpotitEarly?
00:55:47 Shlomi Madar
So I would actually–inspired by Professor Roter, I would say that's exactly the type of energy I want to bring to the company. So I think it's true for every startup, you have to be united. But what the company is trying to do, I think we have two main advantages. One, the fact that we're actually trying to help people, and that means a lot. There are easier things that we can do. Why do I need this headache? Like I just told you, cancer, it's heavily regulated. And it's hard to introduce a healthcare product into the market because of that. It takes years. It's hard to raise money. You mentioned it before. But it's meaningful, because at the end of the day, you can actually save lives. I know maybe it sounds a little bit tacky, but…
00:56:36 Michael Eisenberg
Not tacky.
00:56:37 Shlomi Madar
It's important when you wake up in the morning, and you have it in the back of your mind, I think it matters, but that's one thing. The other thing is the dogs. So I know you mentioned you're not a dog lover. I think there's a therapy for that. I think we just need to give you a dog.
00:56:49 Michael Eisenberg
Don't know. My kids, actually, just so you know, like, my kids are nagging me to have a dog. I didn't want to have a dog. They brought it to the house for, like, I don't remember how many days, this dog. And, you know, of course the kids said they’d take it out. That never happened or rarely happened.
00:57:01 Shlomi Madar
Yeah.
00:57:02 Michael Eisenberg
You know, thankfully, the dog only made it in our house for eight days. I thank God I have eight children. I don't need something else. Oh, yeah, I'm busy enough.
00:57:09 Shlomi Madar
You know, you got it covered. But there are a lot of–
00:57:12 Michael Eisenberg
And also, by the way, I, like, I sneezed when the dog was in the house, so we're done. Oh, you know, I was hypoallergenic. They said it was hypoallergenic, but it's like, come on, give me a break.
00:57:20 Shlomi Madar
So, okay, they are hypoallergenic.
00:57:22 Michael Eisenberg
My kids come to SpotitEarly to pet the dogs, because I won't let one in the house.
00:57:25 Shlomi Madar
So listen, my daughter, she's actually allergic to dogs. Really allergic. So she took Zyrtec before she visited the lab, and still she got puffy eyes and everything. And we got it, but it's about the dogs.
00:57:37 Michael Eisenberg
Yeah, you got it under control. Go. Sorry.
00:57:38 Shlomi Madar
Yeah, so. But we got a hypoallergenic dog, and she's doing fine. I'm just amazing. Okay, so it could be in the car show. And also there are a lot of videos right now on TikTok and other social media where they show typically, like, grumpy older people, they say no to a dog, and then they force them to adopt a puppy, and then they show like, a video, like, a few months in, and they're just in love with the dogs.
00:58:01 Michael Eisenberg
You calling me a grumpy old man?
00:58:03 Shlomi Madar
No, not necessarily. I'm just saying in the video….
00:58:06 Michael Eisenberg
I'm just saying, you watch TikTok, which you called piss and cocky before. I'm just pointing that out to you, actually.
00:58:10 Shlomi Madar
You don't have TikTok, by the way.
00:58:10 Michael Eisenberg
Oh, no, I'm just joking. So, you know, we can tit for tat. If you think I'm a grumpy old man, I think you're like the dog. There's a great Hebrew expression, “hakelev shechozer al kiyo.” Like the dog, it goes after its own puke. I'm just saying.
00:58:23 Shlomi Madar
Yeah. Yeah, I take it.
00:58:25 Michael Eisenberg
Yeah. Okay, so let me ask you another question.
00:58:27 Michael Eisenberg
So you said that it really inspires you to get up and save lives. So I need to ask this question. 250 bucks a test if what you really want to do is save lives?
00:58:34 Shlomi Madar
Again, what’s on the other side? That's the big question. And with time, hopefully we'll be able to reduce the price and also get insurance coverage. It just takes time.
00:58:47 Michael Eisenberg
If RFK Jr. came to you and said, okay, not 250 bucks for this, 25 bucks for the test, but you can go to market tomorrow, do you do it?
00:58:54 Shlomi Madar
I will need the insurance to pick up the difference there. Yeah.
00:58:59 Michael Eisenberg
Okay. What does it cost you? You may not want to say this, but….
00:59:04 Shlomi Madar
Yeah.
00:59:05 Michael Eisenberg
What does the kit cost? Plus the postage?
00:59:07 Shlomi Madar
So right now, yeah, it's not cheap. Yeah.
00:59:12 Michael Eisenberg
The mask?
00:59:13 Shlomi Madar
No, it's not just the mask. You have to offset for all your developmental costs.
00:59:16 Michael Eisenberg
Sure. Development costs.
00:59:18 Shlomi Madar
Yeah.
00:59:18 Michael Eisenberg
You have to pay for the dogs, too.
00:59:20 Shlomi Madar
The dogs. And also setting up the lab. But with time, you offset those costs and actually the test. Hopefully we can, once we open the lab in the US, we'll save on the shipping costs and things like that. So we'll try to bring it down with time.
00:59:32 Michael Eisenberg
What's your core value in life?
00:59:37 Shlomi Madar
Again, maybe it sounds a bit tacky, but for me, it's just really trying to be in the moment. The past is already gone. The future, it's a concept, and many of it happens to me also on a regular basis that you kind of dwell on what happened. And maybe I should have said this, that, or the other thing. Why worry? I worry about the future. When you do that, you don't get to enjoy what we're doing here. You don't get to enjoy a company like SpotitEarly and what he does. So I really try. And again, I have to remind myself multiple times a day. I meditate a lot in order to do that. But I think that's if you want to ask me what's important. I also try to instill that in my family, my friends and kids. Let's try to have this moment together. Let's put the phones down just for this meal that we're having, or whatever experience that we're having, because that's what you have left. Eventually this moment wraps up.
01:00:35 Michael Eisenberg
You know, I have, like, investors on the show and CEOs and scientists, et cetera, but I think it'd only be appropriate–I'd like you to tell us about one of the dog trainers who are, like, real heroes in this story. So tell us about one of the dog trainers. Feel free to mention their name. I'm trying to help people understand what these people are doing and who they are behind the scenes.
01:00:58 Shlomi Madar
Sure. So actually, I met one of them yesterday. We had kind of a gathering not so far from the kibbutz, so I want to–
01:01:08 Michael Eisenberg
Oh, it's an actual kibbutz. It's not just the dog Kibbutz. It's an actual kibbutz.
01:01:12 Shlomi Madar
Yeah. Other people live there. Not just the dogs.
01:01:13 Michael Eisenberg
Not just the dogs. Okay.
01:01:14 Shlomi Madar
Yeah, we have a few employees, actually, that are part of that kibbutz as well. So one of the trainers, his name is Itamar, and I just learned that he's doing more than that. He's a really amazing cook. He had some experience with that as well. And he's actually taking care of lunchtime at the company.
And last summer, I visited for the first time with my family. I visited the kibbutz. Like I mentioned, one of my daughters is allergic. I have two other kids. They're not allergic, by the way, but they love dogs. We have a dog. We always been fond of dogs, but he kind of guided us through the whole experience. He's very patient. You know, you can see how people who are good with kids are also good with dogs. I don't think it's by coincidence and just very professional, very nice. Doing God's work in training those dogs.
01:02:15 Michael Eisenberg
What's his background?
01:02:18 Shlomi Madar
I think maybe it was, I don't remember. I have to say, I know he was a dog trainer, but I'm not sure if he did it in the army as well.
01:02:27 Michael Eisenberg
Interesting.
01:02:29 Shlomi Madar
Thank you. Thank you so much.
01:02:30 Michael Eisenberg
Thanks for doing this.
01:02:31 Shlomi Madar
Thank you. It was great.
01:02:32 Michael Eisenberg
If you enjoyed the podcast, please rate us five stars on Apple Podcasts and Spotify. And make sure you watch this episode on YouTube, because there'll be B roll there of the dogs sniffing out cancer. You're not gonna wanna miss it based on what Shlomi said. Thank you for joining us.
01:02:49 Shlomi Madar
Thank you.
David Marcus (00:00.046)
If you're building something that is going to change the way that money moves in a profound way, you have to do it on top of something that's like truly decentralized, unassailable, doesn't have a CEO, a foundation, an association, and the only thing that fits the bill is Bitcoin.
Michael Eisenberg:
You tell everybody you know to own some Bitcoin?
David Marcus:
It's my favorite bar mitzvah gift.
Michael Eisenberg:
It’s better than the bonds I got for my bar mitzvah, I guess.
David Marcus:
Definitely better.
Michael Eisenberg:
Is there anything negative about going to college today?
David Marcus:
I mean, there’s so much.
I built up pretty successful companies by sheer force of will and persistence.
I was the only guy on that leadership team that really didn't want the top job, and of course I ended up getting it, which was really weird, because I had never managed more than 200 people and suddenly I inherited 15,000 people.
Life's too short to just be coy and not fight for the things you believe are existential.
Michael Eisenberg (00:52.526)
I am thrilled to welcome my friend David Marcus to Invested. Welcome, David.
David Marcus:
Thanks for having me, Michael. Great to see you.
Likewise. David and I know each other for a fairly long time, and operate in reasonably similar circles. So I hope this is gonna be a super fun conversation. But I actually wanna start with something that's become somewhat of a topic in modern circles, or super modern circles. And there's been a couple of news items on this in the last 48 hours.
And that is, you have an illustrious career. You sold your first company to PayPal. You then ran Venmo. You're now doing another startup, but before all that, you were a college dropout. And that is certainly a kind of topic of conversation right now, given where AI is at and what skills are going to be needed. So I'd love for you to just tell everyone about your journey from college dropout, why you dropped out of college, would you make the same decision today, and how you think about that in the era of AI? And then we'll get on to all the business stuff.
David Marcus (01:53.71)
Yeah, for sure. Look, I dropped out of college mainly not by choice, but mainly because I was in a situation where my father basically lost everything, and I had to drop out of college to go work to try to support the family and myself. And so this kind of forced my hand a little bit, not that I was kind of excited to stay in college anyways, I was kind of itching for getting into active life.
But that's what pushed me into the workforce early. And then I worked at a bank for a year, because that's what you do when you're in Switzerland. I was in Switzerland at the time. And a year or so in, I'm like, “OK, this is really too virtual for me.” And I started my first company, which was an ISB and Telco company at a time where the market was opening up for competition in Switzerland, which feels like ages ago.
So tell me about the decision to drop out. It was just like,”Hey my family needs money. I need to go do this and need to do this right now?”
David Marcus:
Yep, yep.
Michael Eisenberg:
Do you have any regrets about it?
David Marcus:
No, no, no, zero regrets. And it's kind of interesting, because we have three kids, and one of our three kids is actually–Ethan, our son, is actually a dropout as well. But like, he didn't drop out because he needed to, but he dropped out because he was itching to go build a company and he successfully fundraised and is off to the races. So two generations of dropouts, not the other two so far. I mean, one for sure, and one is too young, but like, you know, there's a story here.
Michael Eisenberg (03:31.054)
When you think about the modern workforce and modern AI? What, in your view, are the differences between people who drop out to pursue kind of agency, let's just call it, that are starting their life earlier versus those who sit down and study in a college environment?
David Marcus:
I think it really depends. I feel like right now, the college experience is as much for building a network and the social aspects of things than anything else. I think if you're really, really curious and you want to learn about something, we have tools at our disposal to learn that no previous generation had. In ours, we kind of were–like even on the tail end of the Google access to all of the world's information revolution, prior to that, you had to actually physically go to a library, find a book, et cetera. There was so much friction between you and knowledge. Google reduced that friction significantly. And now, LLMs has radically shifted that to the next level.
So I think, in terms of learning, I think you can learn pretty much anything without going to college right now. And it's more the credentialing and the social life. So I think the game has changed in a really significant way, I think. And so for this next generation, the real question is, do you need the credentialing, the networking, the social life, or do you want to learn by yourself and go do?
Michael Eisenberg:
Let's invert the question. Is there anything negative about going to college today?
David Marcus (05:07.31)
I mean, there's so much. I mean, look, I think the problem is, a lot of the elite colleges in the West have been weaponized and radicalized in such a way that not everyone has a fantastic experience right now, to say the least. And some others enter college with kind of a normal, neutral view of the world, and got spat out on the other side totally radicalized. So yes, there's definitely a downside to that. Hopefully we can collectively work to address this, there's definitely a downside.
Michael Eisenberg:
One of the things I started to think about recently is, startups are all about pace and I think learning today builds on itself, right? And I've started to wonder whether the pace of learning in college actually slows people down versus the pace they can, you know, via some of the self-learning you talked about before, whether it's YouTube or LLMs or just reading online. Do you have a view of that?
David Marcus:
Yeah, definitely. Look, an AI, an LLM can be the ever patient tutor that will never get agitated when you don't get something that will be ever patient and take the time you need to actually learn at your speed. And so I think that's definitely going to be a thing. Look, I think, hopefully we can address some of the shortcomings of colleges and some of the best institutions will learn how to actually use AI as a tool for their students to learn faster, better, actually to just raise the level for everyone. I hope this is where we end up being, but if we're in a world where basically people just accumulate college deaths to be around people who are being radicalized and are falling behind, compared to people who actually learn on their own, like you basically get the worst of all worlds.
Michael Eisenberg:
Can I just ask you one more question on dropping out of college before we move on to the business stuff? So you dropped out for family reasons, you needed to support the family. Has that had any kind of long-term impact on you, that experience?
David Marcus:
Yeah, for sure. But positive impact. Not at the time where I was living it, but certainly this idea that I was in a pretty comfortable environment, a pretty comfortable family environment and not have to really think about how to put food on the table or any of these things by far. And then I got basically projected into this reality of having to do whatever it takes to win and to like, earn money and support my family and myself at a very, very early stage of my life was definitely very formative for me. And I'm really thankful actually in hindsight that all of this happened to me.
Michael Eisenberg:
Anything you would tell your younger self today about that experience?
David Marcus (08:16.096)
No, I feel like, I don't know, maybe it's me just idealizing that stage of my life, but I feel like I never took it really hard. It was just what I had to do. And I just went and did it. It was not like I felt like things were going to go bad. It's like I was always optimistic about my chances. So, you know, I don't know. You know, I guess like, maybe more useful for people listening to this is actually, if life throws stuff at you, if you internalize those things as ‘it happens to you for a reason,’ you have something to learn from it and something good will happen, make you better and stronger. I think if you approach challenges and hurdles in your life with that mindset, then you're fine no matter what happens.
Amazing. All right, let's take us through the career now, right? So start at the startup that gets sold to PayPal, then go in and run Venmo, and let's do the career thing now.
David Marcus:
Yeah, so I dropped out of college. I went to a bank. I didn't like it.
Michael Eisenberg:
Which bank, by the way?
David Marcus:
Started my first company. I'm sorry?
Michael Eisenberg:
Which bank?
David Marcus:
Oh, it was a small Swiss bank called Handelsfinanz that since then got acquired by HSBC, et cetera. So a phenomenal group of people really enjoyed my time, but it wasn't for me.
Michael Eisenberg:
What was your first job there?
David Marcus (09:47.7)
Oh, I was in the back office doing a job there. Yeah, I mean, this was really funny because actually, you know, this was like, I'm going to date myself big time. This was the time where we had an AS400 mainframe and no PCs, zero PCs in the whole bank. And everything was basically client mainframe. And I'm like, this is insane. I was already a super geek at the time. So, you know, I had access to computers since I was like eight years old. And so I was like really deep into it.
And so my actual day job was being in a back office and filing FX market orders in the back end and doing all kinds of things. And I'm like, “OK, this is ridiculous. We need PCs.” And I actually convinced people in every department that I went in, because I started in the back office. Then I went to trading and FX, where I spent most of my time, actually, at the FX trading desk.
But every department I went in, I added a PC, and I had little programs or even basic Excel stuff that actually made life of everyone easier. And by the time I had left a year later, there were PCs everywhere. And I was not part of the IT department ,which is kind of really a funny anecdote of my time there And that's what I enjoyed doing. I enjoyed actually finding ways to make people's lives easier with technology, and it was really clear that this is what I needed to go do. And so when the market opened up for competition, the telecommunications market in Switzerland, I was 23 and I decided I'm going to go build a company to compete with Swisscom, the monopoly in Switzerland. I knew nothing about telecoms, but built up pretty successful companies by just sheer force of will and persistence. And then sold the company in 2000, and straight up started the next company, which was a mobile entertainment company.
It was premium SMS time, and I knew telecoms really well, and I felt like there was something to be built on top of SMS and text messaging. And so built this company that ended up becoming a payments company, because we had connectivity into all of the mobile operators around the world, and we could actually bill you on your mobile bill. And then the iPhone came out in 2007 and I'm like, okay, like no one's going to download ringtones and wallpapers on a small phone anymore. And this is when I convinced, it was hard actually, my investors that this was the time for me to leave Europe, come to Silicon Valley and try to make something bigger of that company. And we built it into a very successful mobile payments company that was called Zong. Like we pivoted into that with all the connectivity we had with the mobile operators for payments.
And then that company got acquired by PayPal slash eBay in 2011. And I started working on mobile payments there. And five months in, the then CEO, president of the company left to go run Yahoo. And I'm like, “Great, I'm just going to go leave and do another startup, because this is the guy who bought my company and this is the guy I had loyalty to.” And I was the only guy on that leadership team that really didn't want the top job. And of course, I ended up getting it, which was really weird because I had never managed more than 200 people and suddenly I inherited 15,000 people.
And I was very frustrated with the culture. It was very, very corporate, lots of consultants everywhere. And so I decided to do the brash thing of trying to completely revamp the culture there, which we did very successfully. We bought Braintree and Venmo. And then it was like, it was still part of eBay. Carl Icahn was in the eBay stock wanting to split the company. I of course thought it was the right thing to do, but out of loyalty for all of the good people that gave me the chance to lead the company, I didn't say that publicly, but it was very frustrating. And I wanted to go back to building things. And so was ready to kind of jump out when basically Mark Zuckerberg intercepted me and convinced me to join him to do something different, which is to build messaging products at Meta, which was a kind of sabbatical from payments and regulated businesses for a while, which was wonderful. And then Libra.
So, went back to payments because I was frustrated in the fact that money didn't move around the world in a seamless way many years later. And that was a whole crazy, crazy journey.
You know, we can talk about it, but that resulted in Janet Yellen had pulled the plug on this thing on the morning of June 21, and me leaving December of 21 and starting Lightspark a few months later.
Michael Eisenberg:
You decided after the Libra experience, which is a crypto experience we'll come back to in a second, to go build plumbing for Bitcoin. So despite Janet Yellen putting the plug on Libra, you doubled down on, I guess, was it the founding mother of crypto, which is Bitcoin. Weren’t you spooked?
David Marcus:
No, I was kind of emboldened. So look, I mean, so first of all, like when we started the Libra journey, the whole point was the internet needs a protocol for money, like an open way to move money on the internet like any other type of content. And that thing didn't exist. We looked into Bitcoin early on because I've been a Bitcoiner since 2012.
Michael Eisenberg:
Do you still hold your whole position?
David Marcus (15:47.174)
No comment. But so yeah, I've been in Bitcoin since late 2011, 2012, thanks to a good friend. We can talk about that. So we started looking into Bitcoin early on in the Libra journey. And we quickly realized at the time in 2018, early 2018, that like the Lightning Network and technology supporting Bitcoin wouldn't scale to real time transactions for billions of people on WhatsApp and beyond.
And so we went on and built our own proprietary blockchain with a very early, ahead-of-its-time stablecoin concept. The fact that it came from Facebook, which at the time was really not a well-liked company, to say the least, it's probably the understatement of the year there, at the time. And the fact that we reached three plus billion people every month across our products, like really made it a systemic threat to the system instantly, like even before we launched. And so for once, all of the central bankers of the world actually agreed that this thing needed to die. And we fought it for another two and a half years, until that morning when Jake Powell went to have breakfast with Janet Yellen, which they do every other Thursday. He was actually ready to let it go within a controlled environment. And she was like, “This is political suicide. I won't have your back.”
The next day, the general counsel of the Fed started calling all of the banks and participants, telling them, “We can't prevent you from going forward with this, but we're very uncomfortable about you doing so.” And that was it, basically. So it was kind of a soprano's shakedown.
Michael Eisenberg:
Yeah, I was gonna say, it sounds like a political shakedown. What do you think about that in retrospect?
David Marcus (17:36.334)
Oh, I was very angry. Like I came to America as an immigrant, like, you know, and I, you know, I was like, this is it. This is the country of leveled playing field, and equal chances and opportunities. If you build something great, you know, people will let you do it, et cetera. And, and this is kind of a banana Republic shakedown style. And so, look, the learning there was deep, right back to the earlier point around the philosophy of, if stuff happens to you there's a reason and there's a learning–the learning there is, if you're trying to change the way that money moves, first of all you've got a lot of incumbents and players that will want to stop you, because they have a lot of entrenched interest in keeping the inefficiencies alive.
And the few things that we did wrong was actually–like one is, if you're trying to supplant the unit of account of a country that a government controls with a stablecoin in this case, and the threat is real, then you will be shut down. If you're building a network that is centralized, even though we tried to devolve power with 28 other phenomenal companies that joined that consortium, all of these companies can be pressured into dropping out.
And they were because there are humans and CEOs, and they have shareholders and there's all kinds of different ways to actually pressure people. And so the big insight is, if you're building something that is going to change the way that money moves in a profound way, you have to do it on top of something that's like truly decentralized, unassailable, doesn't have a CEO, a foundation, an association, a consortium. And the only thing that fits the bill is Bitcoin.
And so that was the insight. And so that's why a number of us left and started Lightspark in April, late April of ‘22, to go build an open money grid on top of Bitcoin, basically.
Michael Eisenberg (19:46.702)
Why do you believe in Bitcoin, other than the fact that it's decentralized and obviously is not domiciled anywhere?
David Marcus:
It's kind of a unique thing. It's pretty crazy to think about this. It's like, you know, last week we celebrated the 17th anniversary of the Bitcoin whitepaper. And so 17 years ago, a guy, or people, or group of people or, you know, woman, no one knows–and that's part of the appeal–wrote a whitepaper, and encoded in that whitepaper a series of incentives that created the most successful form of neutral money ever created in the history of mankind. And it's a fascinating thing. And I'm particularly fascinated with how visionary the incentives were, and the way that it created an incentive for miners to actually use energy and convert that energy into value, secured cryptographically, the way that it created an incentive for people to care because of the appreciating value, and the fact that we had finite supply, deflationary asset by design in a market that's basically plagued with inescapable runaway inflation–and really had all of this built in in a way that you could actually just let the code and the incentives do its things for 17 years, and magical things will happen and survive all of the attacks of modern finance and world trying to kill it. And that's a truly unique thing. And no other digital asset has that property, none. Like every other thing, like think about any other asset or network, you can name a person who has outsized influence. You can name a group of people, you can name a foundation or company that actually has some influence. This is the only one that is truly neutral, decentralized, secured, that has the depth of liquidity with all of the other currencies, which is actually super important for payments.
And that's why we basically convinced ourselves, and reached this unshakable conviction that this is the only thing that will actually behave like an internet for money, that you can build a set of technologies and products on to facilitate real-time global payments and make money like any other type of content on the internet.
Michael Eisenberg:
Ironically though, it hasn't happened yet, right? We're 17 years into Bitcoin. I think it's fair to say, even though the stories or the lores of people who paid for their pizza with too many Bitcoin 15 years ago, it's not exactly, not even the world's bottom 10% payment system right now. And so I guess it begs the question, right? And to be candid, if it's digital gold, and I'm a Bitcoin holder also, if it's digital gold, most people don't pay for things with gold either. So why do you think that this actually will become a payment system and why will LightSpark be successful at it?
David Marcus (23:37.408)
Yeah, I mean, look, I think I'm so glad you asked that question. So first of all, a couple of things. More than a couple actually, but the first one is, if Bitcoin didn't take the time it took to actually be as secure, as prominent, as valuable with the depth of liquidity it has, in trading with all of the regular currencies that people want to pay with and use, then it wouldn't be as valuable as a settlement asset as it is. And so it needed to take the time to survive all of the assaults. First it was, this thing is for criminals and drugs and what have you, where it turns out that actually 99% of financial crime is happening on the good old stack that's actually way easier to–yeah, exactly.
And then the second one, it was, it's going to consume all of the energy of the earth, and it's terrible for the environment. Turns out, no, actually it's like the greatest accelerants to renewable energy. Great, okay. So, I mean, we had so many of these attacks, and it had to actually go and survive all of these attacks. It had to actually get into the hands of the largest financial institutions in the form of ETFs, the most successful ETFs in the history of ETFs.
It had to do all of these things, and go through all of these series of events, all driven through this beautiful incentive system invented 17 years ago to actually get to the point where it is today, to become the greatest settlement asset for payments. Okay, so that's one. Two is, if you're trying to make payments with Bitcoin layer one, good luck, right? It's not meant for that, right? It's like a back hole, slow, super secure network, but it's not meant for everyday payments. so you need to make it fast, and you need to make it cheap, and you need to make it scalable. And that's where Lightning and Spark, a Bitcoin L2 that we invented and pushed out in the world six months ago are meant to do. So you have to build a set of technologies to make Bitcoin move fast and cheaply.
Then third is the insight, which is the one that is really important, that actually, fast cheap real-time Bitcoin movement is actually like TCP IP packets for money. It's not like when you send an email or a photo, you're basically sending a series of zeros and ones on TCP IP that arrives on the other side and gets reassembled into a photo. The same is true for the way that we're using the Bitcoin network for payments. You're sending dollars to someone in Mexico receiving Mexican peso on the other side. You're not seeing that you're using Bitcoin. You don't even know you're using Bitcoin. You're not spending Bitcoin. And this is for instance what we have live now with Sofi, which is a large US bank, with New Bank in Brazil, with a bunch of other large-scale banks in Europe and other parts of the world where you can replace old that like really dusty like, Swift and correspondent banking that takes three to five days to clear, doesn't work Friday after 5 PM, costs $50 a pop with a real-time transaction that costs a cent to send cross border on top of Bitcoin from one fiat currency to another fiat currency.
So all of these things have to come together for Bitcoin to actually become the winning open neutral settlement network for all of the world's payments and money. This is why we're here now, and it's really starting to work at large scale for the first time in 17 years since its invention.
Michael Eisenberg:
Is it fair to say, though, that the early instantiation of these payments, and the payments rails has happened through stablecoins, mostly built on Ethereum, which the point you made earlier, does have a choke point? It's not obviously as stateless or distributed as Bitcoin. So early adoption, even other blockchains, Paxos doing it, others have created the payments rails that are 24 by 7, so they answer criteria three. Somehow they matured faster, although many of them on the stable coins are backed by US treasuries right now, which I think the United States government is certainly in favor of, even if they won't say it publicly. And so, why should Lightspark catch up to what's going on in the stablecoin war? Now, obviously, Stripe just acquired a big stable coin company and stablecoins are taken off big time?
David Marcus (28:01.912)
Yes, I mean, to me, like the two are not mutually exclusive, right? It's like, for me, a stablecoin is just another asset type. And as far as we're concerned, we support stablecoins on our network. So it's like, you can send dollars to someone in Mexico receiving Mexican peso or to Europe or to Israel, someone receiving shekels, it's fine. But you can also send dollars to someone in Argentina receiving a stablecoin, dollar stablecoin, and that works fine too. And so for me, I think people conflate the stablecoin, like the digital form of dollar that is fully centralized, fully controlled by a corporation that has to run the reserve and the rails that are Bitcoin basically fully decentralized, fully neutral and stablecoins can be just another asset type running on Bitcoin. And this is one of the reasons we built really easy issuance capabilities on top of Spark that exists on top of Bitcoin. So you can use the products and capabilities we built.
A few weeks ago, we had our big partner summit here in LA, and we announced this new product called Lightspark Grid, where you can open an account and then use the network to send or receive transactions in 65 countries that go straight into a recipient's bank account in real time, 24/7, powered by Bitcoin at a very low cost and/or spit up wallets in real time, and send either Bitcoin or stablecoins to these wallets anywhere in the world, and that's available for clients that are business clients, that are merchants, that are wallets, that are banks that can actually plug into the network and enable global money movement like never available before, and stablecoins are just one of the other ways to do it.
Michael Eisenberg (30:10.914)
The part that amazes me is, most of the stablecoins run on Ethereum today, right?
David Marcus:
I mean, Ethereum, Solana, like Ethereum L2s and Solana, and a bunch of others, yes.
Michael Eisenberg:
If you're making a case why Bitcoin, would it go back to the fact that just not centrally controlled by anybody, whereas Ethereum is?
David Marcus:
I mean, all the ETH L2s are definitely more centralized than Bitcoin is for sure, or that Spark is for that matter, or Lightning. So I think the question is really not whether you should use stablecoins or not. There's definitely a use case for stablecoins, and there are different networks that you can use it on. Our view is basically that by offering an ability for our partners to send money in the way that they want everywhere–and it so happens that stablecoins, in our case, run on top of Bitcoin–is just a superior way to do this, because we're just a service provider on top of an open network that no one controls. And everything else is just more centralized in nature. And there's kind of a rise of what I call a corp chains, which is basically, I did like the first corp chain, which was Libra, and it was killed for a reason.
And I think that like if you're approaching a region like Europe, or a country like Brazil or Mexico, and you're starting to intermediate like say 20% or 25% of the in and outflows of payments into the country with a centralized US dollar stablecoin on top of a centralized network, then you're going to know the same fate Libra had, and Libra got, and basically you're not going to be able to do it. Whereas here, you have the opportunity to deliver the currency of the country if that's what people want in their bank accounts, on top of a network that is neutral, doesn't fly a flag, is not controlled by a person you can find. And that's actually better for many people. Like if you talk to the Europeans, they resent the fact that all the payments networks are American payment networks. They are very worried about US dollars, stablecoins taking over, et cetera.
Our solution enables people in Europe to receive euros. That's fine. Like, you can do that. But if you want stablecoins for a specific use case of moving liquidity in dollars between businesses or between people at a certain point in time, you can do that on the network too.
Michael Eisenberg:
Perfect segue. So is Lightspark and Bitcoin a gateway to de-dollarization of the economy and the world?
David Marcus:
Well, I mean, we’re not that, you know? This is the stablecoins thing, right? That's like, if you are a country and your currency is crap, and basically, people who work really hard to earn money earn money, and then the second it hits their account or pockets, it's basically melting away, then yes, you deserve to have better alternatives being offered to your people. That’s something stablecoins are doing really, really well in a number of different regions.
Michael Eisenberg:
Sure. That's true like in Iran, and in Turkey and in places like that. But your rails, which get people off the dollar rails, like you said, before the Europeans are not that happy that it's all happening in dollars. That's the stablecoin side, but it's also the infrastructure side, right? Whether it's Swift or other ways for example, suppose the sanctions using the dollar… Are you accelerating, let's call it, the de-dollarization of the global economy?
David Marcus:
I see. Sorry, I heard the question the other way around. Yeah, I mean, no, I don't think so. I think the reality is the institutions, if you're talking about the dollar or the US hegemony on top of financial systems around the world, and this country's ability to actually be involved in that, the settlement rails don't really matter.
Because if you're a regulated entity at either edges of the network, you still have to comply with whatever law is actually in place and whatever compliance and OFAC sanction screening and all of these things that are actually required of you. If you're a regulated entity, you still have to do that. The fact that this network is neutral, though, enables us to have an open internet for money that is tolerated by everyone in the world because it's not coming from a specific country.
And I think that's the key thing. Like the key thing for me is like, when I look at what I would be happy to have contributed to is a world where every human and every business can move money however they see, whenever they need it, however they need it, in real time, at a very low cost, just the same way that you would send a text message or an email, no matter what the amount is, no matter what time of day it is.
And I think if your goal is that, if your goal is financial freedom of money movement and enabling people to do that at that scale, then you have to do it on top of a neutral network, because a centrally controlled network or a corp chain or any of these concepts will never work for the reasons that we talked about.
Michael Eisenberg:
So I was never like terribly bothered by the kind of ‘Bitcoin is used for drugs and pornography and a bunch of other things,’ in the early days of it. But if you've got an easy way to move, uncontrolled network, how do you think about like Iran or finance guys in Turkey or wherever it is financing Hamas via Lightspark? These are non-regulated entities in the normative sense of the world. We're obviously not doing much KYC or paying attention to OFAC for that matter. And this would open that world to them. They use crypto for things like this already.
David Marcus:
I mean, look, I think the reality is, if you look at what's happening right now, like you know, just take Lightspark, Bitcoin out of the equation for a second, you look at like crypto in general, like crypto rails in general versus traditional financial rails, and you look at the amounts of illicit financing, money laundering sanctions forwarding and all of these things, and you look at the rate at which this currently happens on those crypto networks using stablecoins and other networks, or any other asset, versus the traditional financial system–the reality is the traditional financial system supports still like 90 plus percent of the financial crime and abuse.
And the reason for that is actually not trivial to fully internalize unless you've been in payments for a long time. And the way that this works is basically that the systems that are basically used by many financial institutions and banks are not real time. They're all batch processed. And so a lot of the fraud happens, and then people realize that after the fact, and then you have to file what is called a SAR with a financial authority or regulator.
And by the time you do all of these things, the funds are already long gone and washed and all of that. So if you talk to any AML specialist on traditional financial networks, they'll say that the efficiency rate of these systems is 1% or below, which is crazy, right? And when you look at the reality of what happens on blockchains and crypto networks, it's like, if you're a criminal and you want to use that to move money around ot toward things, you're a dumb criminal, which is often the case, by the way. And it's just like, you get caught much faster, because all of these things are real time. And there are much more modern systems that enable you to detect those things much faster.
Like in the case, for instance, we bring banks onto the network. And before the transaction actually happens, there's exchange of information that happens between the sending institution and receiving institution about the account holders on both sides, whether they're KYC or not KYC, they run their OFAC sanction screening and all these things before the transaction actually gets settled in real time. And so that's actually a much better way to prevent that from happening. And then of course, if you're sending to self-custody wallet and all of these things, then there's a question of incompatibility of the network, because many of these regulated financial institutions are actually pretty uncomfortable sending to unknown endpoints. And so that's a different problem that we collectively need to solve in a way that enables people to actually have really great self-custody wallet experiences, while actually being able to participate in the financial system.
Michael Eisenberg (39:14.424)
Who first introduced you to Bitcoin?
Michael Eisenberg:
So my very, very dear friend, Wences Cazares, is kind of known as patient zero in Silicon Valley for having grown up in Argentina, in Patagonia on a sheep ranch and having seen his family lose everything again and again, and being one of the most curious persons and friends I've ever known. And so yeah, in late 2011, he was like, “You should spend more time,”–and I stumbled upon Bitcoin in ‘09, actually, the first time. And I was like, “This is way too dorky for me. Like they'll never work. It's too complicated.” And by my standards, that means really dorky. And then in 2011, deep, deep into the rabbit hole and was like, oh, you need to really spend time really understanding this.
And it took me months at the time to really fully understand it. Months. And I think it's still, if you truly want to understand all of the incentive systems and the way that it's baked and everything, it takes a while. And I never came out of that rabbit hole.
Michael Eisenberg:
Amazing. And you tell everybody you know to own some Bitcoins?
David Marcus (40:31.054)
It's my favorite bar mitzvah gift. I have those metal cards that I can load Bitcoin on. Also something that I saw Wences do for all kinds of different things and I'm like, this is great for bar mitzvahs and bat mitzvahs. So I actually load up the cards with Bitcoin, and I give them, and it's like a fabulous anthropological study to see what people do over years with Bitcoin.
And it's just a fascinating thing. Like actually owning even a small amount of Bitcoin completely changes people's outlook on everything. It's fascinating.
Michael Eisenberg:
You can actually track what they do with it, or you ask them?
David Marcus:
Yeah, no, I mean, it's a public key. If you have the public key of the thing, you can see whether people are actually over the years spending it, keeping it. It's fascinating.
Michael Eisenberg:
Better than the bonds I got from my bar mitzvah, I guess.
David Marcus (41:31.182)
Definitely better. Wrong generation.
Michael Eisenberg:
Yeah, you I think said somewhere that you think Bitcoin is going to seven figures. You still think so?
David Marcus:
Yeah, for sure. For sure. I mean, look, if all things are being equal, and just forget the utility phase of Bitcoin and the fact that it's going to basically move trillions of dollars a day of payments. So take that out of the equation entirely. If you look at just the store value use case, and you compare it to the market cap of gold, it's much better than gold.
Like, people say, it has no intrinsic value, et cetera. That's bullshit. It has, you know, actually more value, hard value than gold has.
Michael Eisenberg:
Why?
David Marcus:
Because when the first gold ETFs were created, guess what? They figured out a way to mine more gold. Like there's elasticity in the supply of gold that doesn't exist at all in Bitcoin. Like we're going to have 21 million Bitcoin, period. And that's enforced by code in a way that is really predictable and impossible to change. And so, or it would take a lot of people to agree that they need to change that to change it, which, given the current incentive structure, is not going to work. So you have some certainty that this is not going to change. It is more fungible than gold. Like, you know, just try to buy coffee with a gold coin. Good luck.
It has more portability than gold. You can remember 12 words and carry around a billion dollars or more if you want. Like, that's totally fine. If you remember in your head 12 words, pretty remarkable thing, right? You know, if you look at the market cap of gold right now, and you adjust it to the number of Bitcoin and all of that, the market cap of Bitcoin should take it to a price per Bitcoin that should be anywhere between 1.1 and 1.5 million dollars a Bitcoin. And I think that's going to happen. The question is when and your guess is as good as mine, but it will happen.
Michael Eisenberg:
That’s what Tom Lee said today, that Bitcoin will hit 300,000 by the end of the year.
David Marcus:
I don't know about that.
Michael Eisenberg:
I saw Tom in Saudi a couple days ago. He said he was more bullish on Ethereum than Bitcoin. So go figure, I'd say I'm pretty bullish on Bitcoin.
David Marcus (44:03.832)
That I know about.
Michael Eisenberg:
Yeah, I want to switch gears entirely for a second. So you said somewhere that the biggest threat to the United States is not China and not AI, but the U.S. education system. Can you elaborate on that?
David Marcus:
Yeah, because I think that, you know, fighting an external enemy is always easier than fighting cancer. And cancer is in your own body. It attacks your healthy cells and just makes them malignant cells. And I think that's what's been sadly happening on our college campuses at an alarming rate. I think it's a combination of different things. I think it's a combination of what happened during COVID, the fact that a lot of kids basically didn't have a normal college experience for a while, the fact that we have increasingly turned college into a giant vacation for liberal arts and all kinds of different things that you can learn as a hobby rather than go to college. But that happened to be the places where people got most politically radicalized.
We've let foreign interference fund programs to radicalize our kids. And the result is what we've witnessed in the last few years, which is basically perfectly normal kids that actually come into college with all kinds of hopes and dreams, and come out with radical ideas. I think that if we let it continue to metastasize, we end up with situations like, you know, what’s probably about to happen as we record this podcast in places like New York with Zohran Mamdani being the mayor of New York, which still boggles my mind in ways that I can't even begin to explain. And you look at the voter base of people like him, it's those kids that we're talking about, and it's the product of our education system.
Michael Eisenberg:
Did it start, you think it starts in college or does it start earlier? Cause my sense is, and I just met somebody who moved from Silicon Valley to Israel, that his wife was a teacher in a high school, an elite high school, private high school in Silicon Valley. And basically on October 8th was more or less asked to leave, because she didn't kind of align with the high school's view of what's called current events. It feels like it's infiltrated even younger. Am I wrong about that?
David Marcus:
Yeah, I mean, college is kind of the finishing touches, yes. It happens earlier. It happens even in earlier stages of middle school and other parts of the education system. And parents, of course, have a responsibility. And I think a lot of parents have just let their kids be weaponized without intervening and it just creates this crazy situation where it...
Michael Eisenberg (47:35.214)
If you were advising parents would you tell their kids to go to college?
David Marcus:
I would advise them to be very thoughtful around where they send them to college, and for what, and ensure that you're very present as a parent during those years.
Michael Eisenberg:
Can I ask where your kids went to college?
David Marcus (48:06.348)
So I have two kids who went to college, one dropped out. So the first one is very studious and very academic, and she went to USC, graduated with all of the honors and is now an entrepreneur in her own right and doing really, really great in the food business.
And the middle one, because he didn't care at all about academia, thought it was a total waste of time. And so he went to USC as well and dropped out to start his startup as well. The third one is too young to go to college, 16 now, but no one's radicalizing that one, I can tell you already. That's not happening.
Michael Eisenberg:
My 16 year old is the same, for what it’s worth. So tell me something else. Oren Zeev said I should ask you, our mutual friend, where–you've been very public about your political views, particularly I think over the last two years, but perhaps even before that, because I remember you were grilled in Congress about Libra. And I think you've been pretty outspoken on that as well.
You said before about Janet Yellen. Has that hurt you in any way business-wise, personally, your kind of outspoken views on political issues of our time? You have any second thoughts about that?
David Marcus:
Not at all. Not at all. Look, life's too short to just be coy and not fight for the things you believe are existential. And I definitely think the topics that I've fought for, notably around Israel, around defending Jews outside of Israel, the diaspora, around the Western values that I hope we continue promoting and advancing in America. All of these things are things that are 100% worth fighting for no matter what the consequences are. And so for me, I never looked back. And of course it had consequences. Of course I lost fake friends. Of course I had a lot of threats and issues that I had to contend with. So it has had an impact on my life, but I don't spend any time thinking about that. There's just no other way for me to live with myself than to fight for what I really deeply believe is worth fighting for.
Michael Eisenberg:
Any investor pushback?
David Marcus:
No.
Michael Eisenberg:
None. Because you got aligned investors to start with?
David Marcus:
Probably, yeah.
Michael Eisenberg:
Going back to the school question, do you think things are better in Europe in university?
David Marcus (50:50.134)
I'm not sure. I think there's probably less foreign money influence just because this is not the way that most universities work in Europe. They're publicly funded with no opportunity for anyone to start throwing money at programs to brainwash kids. So I think there's less opportunity to actually do that. But if you look at what's happening in Europe, it's not like it's a lot better. So maybe that dimension is slightly better, but I think on all of the other dimensions, you still have way too many professors that are trying to really change the outlook of young minds in a way that's very, very damaging.
Michael Eisenberg:
I think I once saw you say that not everybody hung with you in Libra like till the 11th hour. Like you really fought this thing to the bitter end. But not everybody hung in there. Am I correct that you said that once upon a time?
David Marcus:
Yeah, there were lots of companies that were part of that consortium that not only fell to the side, but at some point even tried to sabotage the thing for their own interests. And at some point, I'll have to write a book about these years. It was so crazy.
Michael Eisenberg:
You think it's like weakness of resolve? Is it realpolitik? Are people today–you know, it was both a very big business opportunity and like you said before, it was a shakedown at the end of the day. And most people buckled and left you hanging.
David Marcus (52:33.782)
I think we have to be real about one thing. It's like, you're running a public company. You have a responsibility towards your shareholders, your employees, your stakeholders. And this thing is actually threatening your core business. This thing was like, it had an opportunity for people, upside opportunity, but not at the cost of risking their own core businesses.
And I think the politicians were actually really, really good at this. There's actually a letter that is still public record that was sent by a few senators to a bunch of companies saying, “Look, if you don't drop out of this thing, expect increased scrutiny, not only in things related to Libra slash Diem, but like anything that you do in your business will actually be under higher scrutiny because you're continuing to be part of this thing.” Which is insane. And so, if you're a responsible business leader, and this is actually maybe important to you, but not as important as your core business, you're not going to press on, you know. Hence the point of building on Bitcoin, like, there's no pressuring Satoshi Nakamoto to do something. Like, good luck with that.
Michael Eisenberg:
Reading between the lines of what you just said now, that for Facebook and Zuck, Libra was not part of the core business, but for many of–
David Marcus:
No, actually, credit to Mark. Mark was like all the way to the end. Like maybe not many other people at Facebook felt the same way, but to his credit, he had our back all the way to the end. Like all the way.
Michael Eisenberg (54:19.022)
Why? Why wasn't he afraid of any of the risks like the CEOs of the other businesses?
David Marcus:
Because, you know, Mark is wired that way. He felt like this was actually something that was actually going to be really good for the world and, also for Facebook if it worked out. And he's not... He doesn't shy away from hard things if he believes in the thing. And I think that's an amazing quality he has. And until the last minute, until that general counsel from the Fed call in June 2021. He had our backs all the way.
Michael Eisenberg:
That’s actually quite remarkable.
David Marcus:
Yeah, it absolutely is.
Michael Eisenberg:
If you had to give all the listeners two lessons from the whole Libra saga and particularly the end of it. What would they be?
David Marcus:
I don't know. Typically what I do in these things is like, it's like, oh, persistence and all of these things are just really great. But in that case, persistence turned out to be a total waste of time. So yeah, I mean, I do think that the lesson I learned in this one is if you're building something that has a chance of disrupting something so profound, so ingrained, that hasn't changed in over half a century in any shape or form, then you have to really, really paint the worst possible picture of what's going to happen with people trying to prevent you from doing it. And to some extent we did that, but like maybe not enough.
It's like, really put yourself in the shoes of all these people who want to try to kill this thing and will want to kill this thing, and all the reasons they would hate it. And really do that before you actually embark on a journey like this, is probably the one lesson. Something like that had never been tried before. So it was hard to actually internalize that. The public perception of Facebook also degraded in a pretty significant way from the moment we started the project to the moment we announced it. Now it flipped, so we're fine again. I think they’re fine again. But I think for a period of time it was really, really bad. So that didn't help. But yeah, really think adversarially to the max extent possible, if you're doing anything related to completely revolutionizing money movement for billions of people. Like you really have to be adversarially minded, because it's coming for you for sure.
Michael Eisenberg:
Has it changed your view of politics and politicians in any way?
David Marcus (57:26.26)
Oh yeah, for sure. Like I had rose-colored glasses when it came to politics and all of that. And then I spent so many nights and days in DC meeting with senators and Congress people and regulators and executive branch people, and it had, it completely changed my view on politics completely.
Michael Eisenberg:
I want to switch gears for a second. So you have a Romanian father and an Iranian mother. That's quite a multicultural upbringing, because you also were born in France or grew up in Geneva. Tell me about how that impacted you as a person, your childhood, who you are today.
David Marcus:
I mean, in so many different ways. On my mother's side, she had such a traumatic life because she had to leave Iran when the Mullahs came in in ‘78. Lost many, many friends and loved ones, and lived with that and the inability for her to return to her country.
A great story of deep loss on that side. And then on my father's side, it was really this deep rooted Ashkenazi identity. And I guess all of the attachments to Israel and all of that comes from my childhood, because we were there every three months or so all the time. And my father loved bringing lots of people to Israel to make them understand and discover, like literally flew people in all the time. So I grew up with all of that. And Paris, I was a kid, like I was eight years old when we left, eight or nine years old when we left for Switzerland. And Switzerland was kind of, very international environments and interesting. I still have–my high school friends from that time are still close friends now, which is kind of funny. But yeah, so it was kind of this multi-cultural thing between the Iran thing of not being able to go back, and losing so many loved ones, and and then the deeply rooted Israel stuff on the other side while not living in Israel directly, but being there a lot and being in Europe. So it's kind of like a very interesting mix. Then until all hell broke loose with all of that stuff and I had to go drop out and start working.
Michael Eisenberg:
How does the current 12-day war against Iran, does that bring up any feelings? I mean, months ago, but does it bring up any feelings?
David Marcus:
I mean, look, I live in LA and I'm surrounded by Persian Jews, right? So to say that…
Michael Eisenberg:
Not about that angle.
David Marcus (01:00:14.998)
I mean, everyone's talking about it. And like, I think there's definitely excitement, and at the same time, this feeling that we shouldn't be too excited, because every time we get excited for some reason, like, you know, it just doesn't pan out. But I do think that now more than ever, there's a possibility that there's regime change that's going to happen within our lifetime in Iran that is hopefully going to change the dynamic of the Middle East–I'm afraid that they're not going to go out without a fight. And I'm afraid of what's going to happen when we're getting closer to including more countries in the Abraham Accords, and what that does to what they do in the region, et cetera. So there's all kinds of things that are in the back of my mind.
But I think that within this generation, we're probably going to see a regime change for the better in Iran.
Michael Eisenberg:
Wow. We both moved to a different country as reasonable adults. You were more of an adult than I was. How do you think about your kids growing up in a completely different environment, both financially, but also culturally, than the one that you grew up in?
David Marcus (01:01:45)
I mean, look, I'm very happy I made that move. And I'm very happy our kids are here and are spending time here and are spending time in Israel. It's like, between the two, I think it's a good balance of things. But America is great. I feel like, if we can prevent it from deteriorating even further to our previous conversation, I think this is a country where you have meritocracy, where you have rule of law, where you have opportunity, where you have a lot of enthusiastic people that are not judging you for who you are, but like more judging you based on what you actually build and what you give them, like, you know, in terms of products or services, give people–so all of that creates an environment which I think, really good, hardworking people can thrive in.
And when I look at the rest of the family that stayed back in Europe or friends that stayed back in Europe, like they haven't had the same opportunities that I've had, that you've had, that our kids have. And I think that's very, very visible as we age. The delta keeps increasing. And I think they're sadly falling behind more and more. And all of the major innovations, the optimism, the creation of value, but also moving the world forward happens here. And so I'm very happy that my kids are here and that we came to America and they're growing up here, and I'm excited for them to also spend more time in Israel, which is always a great thing for them and for the next generation.
Michael Eisenberg:
What do you think happens in Europe over the next 10, 20 years?
David Marcus (01:03:45.662)
It's a tough one. Right now, I'm very pessimistic. I'm very pessimistic. I think you see what's happening in the largest democracies in Europe, and you see the problems from within, the fact that the immigration that they're faced with is really eating their societal fabric alive. And that I don't see how they actually break the cycle. I don't see it. I think it's going to take some radical things that Europeans are probably not equipped to do until it's going to be too late. So I'm really not optimistic, sadly.
Michael Eisenberg:
Give me a prediction for Europe that you think most people haven't thought of yet.
David Marcus:
I think Switzerland is going to continue to be great. Somehow they always figure out a way to differentiate themselves in ways that make them look on a relative basis so much better than all of their neighbors. So I think not everyone is thinking about that when they think about Europe and they think about that little country. But look, I actually think that if you look at France, if you look at the UK, they're on a downward spiral.
And I think that they either have like significantly adverse events that push them to do the, for them, the unthinkable, or they're just going to become like you know rudderless, lost countries and I think we're not far from that sadly. Like we're not far from the point of no return.
Michael Eisenberg:
Two last questions. You said twice earlier that if something happens, there's a reason for it and the question is what you learned from it. Can you just unpack that for me more? What do you mean by that?
David Marcus:
There's probably all kinds of readings that you do more than I do that you can also bring to the fore on this topic. But look, I think life has meaning and things that happen in your life have meaning as well. And I believe that if somehow, if you're equipped to rise up to challenges, you receive those challenges and that actually enables you to rise up to the next level. And those challenges, those hardships, these things that look hard to handle at times in your life are what makes us who we are. If you approach challenges, obstacles, hardships with that mindset, then it's actually a lot easier to go through them and actually get value from those moments in your life rather than being all depressed and complain about them.
Michael Eisenberg (01:06:59.31)
Where or from who do you think you get that fortitude and approach?
David Marcus:
I think, at some point, this was something that my wife told me when we were going through all of the hard times. And there's actually a famous rabbi who said something about this, which was actually that God basically only gives you the challenges that you're capable of handling. And somehow she found this and shared it with me. And I found it to be a very useful mindset to go through hard things in life. Yeah, I think it's very true. I really believe in it.
Michael Eisenberg:
Who's somebody out there, this is my final question, that you want to say something kind about that deserves more attention than they're getting?
David Marcus:
Whoa, that's a good question. Wow. Like there's so many people out there. I mean, so here's my shout out. My shout out is not to one specific person, but it's really to like, I think, we've shared a lot of experiences after October 7th, you and I, in different ways. And my message of appreciation is for all of these people who have gone out of their ways to really lace their shoes and boots up on October 7 that day, and have never stopped fighting for what's right and have given more than people actually fully understand or appreciate and continue to do so. My general appreciation is for all of these people fighting that fight.
Michael Eisenberg:
Thank you, David. I really appreciate you doing this. I know it's early morning there in Los Angeles. And so I thank you for doing this. And to all of our listeners out there, please subscribe to the YouTube podcast. Rate us five stars on Spotify, Apple Podcasts. And you can follow David Marcus on X at @David Marcus, D-A-V-I-D-M-A-R-C-U-S. And he has a lot to say and you'll want to follow him. So click on that Follow button. Thanks, David.
David Marcus:
Thanks Michael, great to see you.
Michael Eisenberg:
Likewise.
Michael Eisenberg (00:00)
Welcome to the best of Invested from 2025. This year, we covered everything from Gavin Baker’s contrarian take that climate is a solved problem—powered by solar, batteries, and maybe even fusion—to Nas Daily’s blunt claim that “followers are dead” and organic reach is over. We dug into big-league investing categories with Sender Cohen’s George Soros-vs.-Druckenmiller lessons, and went inside Big Tech culture with Noam Bardin’s post-Google letter and what it teaches founders after an acquisition. Along the way we hit brand reinvention, like Fiverr’s celebrity-powered repositioning, and the bold, sometimes uncomfortable decisions it takes to build for your next 10 million users. Here are the highlights. I hope you enjoy them.
I am thrilled to have my old friend Gavin Baker. Welcome, Gavin.
Gavin Baker (00:52)
Thank you, thank you, so excited to be here.
Michael Eisenberg (00:53)
You mentioned that you think global warming and climate is actually a big issue, but you think it's solved.
Gavin Baker:
I agree.
Michael Eisenberg:
Because of solar?
Gavin Baker:
Because of solar and batteries. God forbid one of these fusion companies works. And it seems like one of them might probably will. I don't know which one, but yeah, I think believing in global warming is a problem because it became part of an ideology. And if you just look at the facts in the data around what is happening with solar and batteries, like it’s very–the world is going to run on natural sunlight in my lifetime. I mean, in America–
Michael Eisenberg:
That’s a big statement. The world is going to run on natural solar, fully in your lifetime.
Gavin Baker:
Maybe my children's lifetime, if I want to hedge. But I mean, it's economics. It's just economics. Every year it gets cheaper, and essentially every other source of power gets more expensive. And definitionally, all power comes from the sun. Fossil fuels are just stored sunlight. Nuclear is just artificial sunlight. Actual sunlight plus batteries, it really can, and I think will get you there. I mean, in America, we are back to 1920 levels of emissions on a per capita basis. I think it's very hard to understand math, look at the charts of what's happening with solar from a cost perspective, and a deployment perspective, and be really worried about global warming.
Michael Eisenberg:
China was a big part of that, I think is fair to say, right? Because of economics.
Gavin Baker:
100%, because of economics. Yeah, they needed–China does not have domestic fossil fuels.
Michael Eisenberg:
Right. Absolutely. They needed a lot of oil.
Gavin Baker:
So yeah, that's why A. they went so hard on solar and batteries and B. they went so hard on EVs. Because for them, it was a national security issue, their dependence on oil shipments from other places. So yeah, I think the world's gonna run on sunlight. I'm a committed environmentalist. I love to be outdoors, but I genuinely believe global warming is a solved problem.
Michael Eisenberg:
In your lifetime, or your kids’, to hedge.
Gavin Baker:
The trend is it's just–it's the boulder has started rolling down the hill. It's rolling down the right path, and it's going to take you there. Just economics. Elon did more for this planet in decarbonizing it than all of the activists and the Greta Thunbergs combined. Those crazy people who are splashing paint on paintings–they make people you want to go buy a big rig. They don't do anything useful. Elon did something useful. If you care about the planet, and you care about global warming, you just have to be pro-Elon.
Michael Eisenberg:
I'm here with Sender Cohen. First podcast, welcome Sender.
Sender Cohen (03:59)
Thank you.
Michael Eisenberg:
You spent years at George Soros.
Sender Cohen:
Yep.
Michael Eisenberg:
What's the big thing you took away from him?
Sender Cohen:
The great similarity that George and Stan have is, they're both able to distill things down to a very simple concept. The big difference between George and Stan, I think it was actually Scott Bessent who said this, to paraphrase him–
Michael Eisenberg:
Now nominated to be the–
Sender Cohen:
Treasury Secretary–and I think you heard Scott at the last, we're about to host something together; at the last one, Scott and Stan started off the day for us, which was a lot of fun.
Scott once said that George can get into the mess. The market's a mess, and he knows to get out, right? And most people don't know how to get out of that mess. Stan never even gets in the mess in the first place. I daresay even on this podcast and I don't know, you know, on the public sphere–Stan is a better investor than George.
He just has a skill that I think is unique and second to none, but that's like comparing, you know, as I say that he's better than George, and I very much think he is a much better investor than George, certainly at size. He's shown an ability that few have shown.
If I knew sports, I'd compare it to when you realize the great nations–
Michael Eisenberg:
LeBron James and Michael Jordan?
Sender Cohen:
There you go. LeBron James and Michael Jordan.
Michael Eisenberg:
Each person will decide whether George is LeBron James or Michael Jordan, or whether Stan is LeBron James or Michael Jordan.
Sender Cohen:
Yeah. I like that. But yeah, Stan is a very unique talent.
Michael Eisenberg:
I sense also their politics are pretty different.
Sender Cohen:
They are quite different. They are quite different. But despite the difference in their politics, one thing that I always think about, especially in today's fractured times, is the way that they're both focused on helping people.
George comes from the far left. Stan, he's not by any stretch far right. I think he's classified, classifies himself as an independent. But he just stepped down as chairman of Blue Meridian, which is one of the most amazing organizations in helping underprivileged people in America that exists today. I mean, it's an absolute powerhouse. You look at the list of multi-cent of billionaires, whatever the term is these days, that are involved in this incredible–that was all Stan's doing, pulling them all together.
Michael Eisenberg:
Amazing. And how would you describe your investing style, having been both at Soros and with Stan?
Sender Cohen:
My investing style is a bit different. I'm not a really great investor, and I say that with complete sincerity. It's true. What I'm very good at is figuring out a trend or an area to be in, and finding the right people to do that. That's what I'm good at. I'm not good at underwriting a specific security; I am good at underwriting a person, and I'm good at underwriting a theme or a trend and putting that person together with the theme or the trend.
Michael Eisenberg:
You're like one of the OG content creators of all time.
Nuseir Yassin:
Yes, sir.
Michael Eisenberg:
Is that fair?
Nuseir Yassin:
I think that's fair.
Michael Eisenberg:
You're very humble too.
Nuseir Yassin:
Organic content is dead.
Michael Eisenberg:
What does that mean?
Nuseir Yassin:
Followers are dead. I came here at the beginning of the show and I lied to you. I said I have 70 million followers. That is one giant lie, and I'm so comfortable saying it to everybody, because no one knows it's a lie. The concept of followers does not exist anymore. If you want to sell something on the internet, you cannot sell to your followers, because you cannot access them, because the algorithm blocks you. So you could have 100,000 followers as Aleph, VC, and then
one day you make a video saying, ‘Please buy my t-shirt.’ You'll get 2,000 views. 2%. And 98% will not see it. So do you have 100,000 followers or do you not? You do not.
Michael Eisenberg:
I am thrilled to have Noam Bardin with us. Welcome Noam.
Noam Bardin:
Thank you.
Michael Eisenberg:
So you left Google, and you penned a flame, a letter. What's the right way to describe it? Tell everyone what you did, what the letter said, basically.
Noam Bardin (08:05)
So I left Google, and all kinds of people were asking me why I left, whatever. And I thought, let's put my thoughts down on paper. And I never had any idea what was going to happen.
If I had, I would have ended it differently. I would have thought about what I'm saying, whatever, but I just wrote what I thought, and published it, and literally the world exploded the next day.
Michael Eisenberg:
Because what did the letter say?
Noam Bardin:
So basically I was commenting about the culture at Google, and the mismatch of culture with a startup. And a lot of people read it the wrong way, but the way I looked at it–I naively felt that I wanted to make an impact on Google coming in. You know, we startup people think we can do everything, and we can change everything. And I thought I was going to make this big impact on Google.
And I went out and basically fought some windmills around that, and realized at the end that it really is kind of the nature of the beast. It's not something that's fixable. That's what it is. That's your nature. A corporation has a certain nature to it. And, you know, today when, just a side note, a lot of entrepreneurs talk to me, they've just sold their company to the corporation and then they read my note, and they're like, “Wow, this is really something.”
And what I tell them is, “What you need to do is to get out as fast as possible. What you're doing is actually damaging your team. When you're trying to fight to keep it separate, trying to preserve your values and your culture. You've sold your company. It's not yours. Now you've got to–the faster you come to terms with that, the better it's going to be for your team, for the acquiring company, et cetera.”
I fought very, very hard to keep Waze independent. I also tried very hard to change things at Google, and ended up losing on all those battles.
Michael Eisenberg:
What was your description of the culture of Google?
Noam Bardin:
It's complicated. I think Google is an extreme case of a corporation, because it has literally unlimited amounts of money coming from a very small team in the company, a small percentage–
Michael Eisenberg:
The ads business.
Noam Bardin:
The ads business, search ads, that's where the money comes in at the end of the day, and everyone else can live this imaginary life that they matter. And frankly, they don't, from a financial perspective.
Michael Eisenberg:
The greatest business model of all time funds all of these great ventures.
Noam Bardin:
Of course. They would argue they're not a monopoly, and they're not dumping, and all these kinds of arguments. Bottom line is, we all know what's going on, right? They have this great monopoly, best monopoly ever, creating tremendous profits. They're using that to build all kinds of stuff, giving away for free, that nobody else can compete with.
The problem, from a culture perspective–what happens is that people begin believing in what they're saying. So this idea of OKRs, right? I make up some goals, which are not connected to sales, because there's no money.
So there's no real external impetus. And I believe that until money transfers hands, nothing happened. So at that point, we're all just talking and loving each other, right? And then when you try to sell something is when you discover what your product's really worth, right? And so you can make up these OKRs and obviously hit 80 percent of them because you made them up, right? And feel really good about yourself doing it. And at the same time, it creates this culture of exceptionalism–without being exceptional.
Michael Eisenberg:
I am thrilled to be here with Gali Arnon. Welcome, Gali.
Gali Arnon (11:19)
Hi, I'm thrilled to be here.
We want people to know that you can actually buy good stuff on Fiverr. So we hired Rob Janoff. Do you know who Rob Janoff is?
Michael Eisenberg:
I don't.
Gali Arnon:
Alright. So he's the designer who designed the Apple logo. Do you know the Apple logo? I'm sure you do. So he worked with Steve Jobs to design the Apple logo. And then we said, “Let's bring him on the platform for a month to kind of offer a limited edition of his logos on Fiverr, for $10,000. But he will do it for a month, and we'll do a whole campaign around it. And people will actually say, ‘Well, we can buy a logo on Fiverr from the same guy who actually designed the Apple logo? Well, maybe it's not as low quality as I thought.’”
Michael Eisenberg:
That's actually an amazing idea.
Gali Arnon:
Then we did a whole design event in New York around it, and we invited designers. He was on stage, he told his story on how he worked with Steve Jobs and all of it. That was the first move. And then we decided, well, it's working and let's do it in other categories.
We brought Wyclef Jean for the music category, and we bought Eli Roth, which was a horror show, in the horror show business, film business in Hollywood, to do the video editing limited edition. And then we went on and on with different celebrities in different categories and it worked really, really well. And then we did so many other things. And as I said, it was climbing a mountain, but the vision was very clear. There was many different things we did in order to get there. And I think we actually did.
Michael Eisenberg:
You know what I need to ask you now, right? Who is the celebrity for the love potion?
Gali Arnon:
Martha Stewart.
Michael Eisenberg (13:10)
I’m super excited to be here today, back on Invested with Micha Kaufman, Founder and CEO of Fiverr. Micha, welcome.
Micha Kaufman (13:17)
Thank you, thanks for having me.
This notion that your workplace is responsible for making you better–where on earth did you get that idea from? Who's responsible for making you a better person, a better spouse, a better parent? Why am I responsible for your professional capabilities? Fuck you. Seriously. Like, I'll help anyone who helps themselves. But if you look for me to educate you about AI, you're doomed. You're done. You're done. And your problem is, you're not done at Fiverr, you're done period. There will be no demand for lazy people that expect the world, or think that the world owes them anything.”
Michael Eisenberg:
I think if you look at corporate America right now, particularly Howard Schulz's Starbucks, he's sending the baristas for college education, I think many of these companies have in-house training to try to make people better. I think your view is not popular.
Micha Kaufman:
How's that going?
Michael Eisenberg:
I think your view is not popular.
Micha Kaufman:
I don’t care.
Michael Eisenberg:
I think it's related to the previous thing you said, which is freelancers are accelerating faster
than people in corporations, because they are expecting the corporate employer to train them. And you think, I think the point you're making very forcefully, and I wanna double click on it, is it's not working. That's a pipe dream. And so what should we do? Just tell people, figure it out on your own?
Micha Kaufman:
Absolutely, yes, it starts from that. Meaning, okay, so we had this meeting–
Michael Eisenberg:
‘We’ is the company?
Micha Kaufman;
Yes. I sent this memo. It was very blunt. And I said, “Okay, it might come as a shock to you, and that's fine, but I'm here. If you wanna spend time with me, let's talk. And so I've asked my
my Chief of Staff to set up this space that could hold 70 people, whatever, 50 people. But I said, I'm just gonna take my laptop, and I'm just gonna work there for three hours. If someone wants to drop by, just sit with me, and let's have a chat. I went down to that room, there were 250 people cramping up. And I wasn't prepared to give a talk.
So we started having this discussion, and in one of the first questions, I said–so we had a long weekend. It was one of the holidays and it connected with a weekend. I said, “How many of you, because you've seen my memo like 10 days ago, how many of you spent one night of that very, very long weekend vibe coding, trying to figure out how to do proper prompting, just using different AI solutions? If you haven't, I can't help you. Like, fuck you, seriously. Like, I'm not gonna help you. I'm not going to help you. But if you're making the effort, if you wanna become better, if you feel that you're responsible to making yourself worth...then in that case we have a lot to work on. And everything that we obviously discover as individuals within the team is gonna be shared. It's gonna be shared with those who want and are interested in doing that.”
And I think that this was a very important wake-up call for people. Because I've seen the transformation.
Michael Eisenberg (17:22)
I'm thrilled to be here with my friend, Omri Casspi.
Omri Casspi (17:28)
Good morning, thanks for having me.
“You guys are gonna make a lot of money in the NBA. There's guys sitting courtside that make much more money than you. They're billionaires and multibillionaires, right? You play for the Warriors, you see Elon Musk, you see Mark Zuckerberg, right? Folks that are worth $200 billion. So try to get interactions with them, ask them questions, meet them for coffee.”
Essentially like you prepare for a game, you know, in many ways. You can't come to a game and play against LeBron James, and expect just to show up and perform at the highest level, right? Because if you don't do the work, if you don't lift weights, if you don't shoot, if you don't wake up in the morning, and you stretch, and you massage, and you eat properly, and you prepare for a game, he's gonna crush you. He's gonna crush you most times anyway, even if you do all these things, right? But at the same time, if you do all these different things–so if like, you box out to a rebound, one thing coach always says, is, “Don't look at the ball, you know, go out and do the early work. Box out, put your body in the position, and then go get the rebound.” And then you can put yourself in position to get the rebound. It's the same way for retirement. And it's even more drastic in basketball players and professional athletes, and many, many, many athletes, you know, retiring. They really find it hard to find themselves in life after basketball, right? So you have to do the work early.
And one thing I tried to do at the time is to meet folks like yourself, and folks in real estate, and ask questions, and to pick their brain about different things, and strategies, and ask dumb questions. And while you're playing–I had a unique position, being the first basketball player from Israel, so folks were really nice, and I was fortunate to meet them even after basketball.
Adam Fisher (19:10)
In the case of Wix, I saw two things that I really had not seen before in Israeli companies. The first was this marketing angle that they had. They were doing things that I'd never seen before, well in advance release of the product, of how to create–everything from buying their URL, a three letter URL back in 2007–but also various sites that were kind of building their SEO, and just already thinking about paid acquisition, which is something that again, I was not very familiar with. That was fresh. And that to me felt like somebody who was really thinking far ahead.
The second thing I saw, and this actually helped, that I'm not technological, is the whole proposition that it shouldn't be that to create content on the web, you need to be a developer, or that you had to learn a specific kind of software. That didn't make sense to me. And I've always been one to say that if it can be made for non developers, or non technical people, then that is what will succeed. Because most people will always be non-developers.
So that's what I saw in it. It was admittedly a small investment. It was a two million dollar initial investment, with an option for another million.
Michael Eisenberg:
Back then, you could still do those kinds of deals.
Adam Fisher:
I had to overcome a lot of doubt. My partners really didn't like it. Because again, there was no traction. I don't mind saying this. The company did not present well at the time.
Michael Eisenberg:
So I have a similar story, by the way, when they came to see me–it was right at this point, and older listeners will appreciate this, when Flash was about to become obsolete, and Wix was originally built on Flash, and they walked in and started telling me “Don't worry about it. Our current platform is going away, but there's a thing called HTML5 that we'll just reconstruct everything.” And you're going, “They didn't really just say that in the presentation right? That the whole thing is going obviously, but don't worry, it's going to be okay.” And I actually admired the honesty on it but it was a tough kind of–
Adam Fisher (21:19)
Oh, they were always very transparent, right? I mean, there are a lot of things I learned from Wix over the years. I mean they were a magnet for talent. Whenever they saw somebody who was talented, they would find a way to find a position for them. It just didn't matter what the titles were. It was a company that didn't care about titles. They just wanted talent.
And so they became a magnet for all types–former founders, new ideas. I mean, Monday was spun out of Wix and all the different products. The second thing was being afraid to throw away what you've done. I mean that moved from Flash to HTML5–they literally said to 1 million users, “Fuck you, because we're not going to support you anymore.”
Now, they didn't use that language of course, but they said, “Listen, we care about the next 10 million users, not the first million.”
David Magerman (00:00)
AI is an automatic machine gun.
Michael Eisenberg:
Right.
David Magerman:
And we're giving it to children.
Michael Eisenberg (00:04)
That’s a pretty negative view.
David Magerman:
I learned about the history of AI. It is littered with over-promising and under-delivering.
Back then it was nerdy. You could get beat up for being a computer scientist. So I eventually switched to computer science, and a professor–
Michael Eisenberg:
Did you get beat up?
David Magerman:
I hid out in the computer lab.
You are a bear. You are a monster. Like, we were terrified of you. Apparently I threw a monitor across the room once when we had some problem that was my fault.
They said, “We are not here to help America. We're here to make money.” And basically we were just an investment club using our brains to make money for a small group of rich white people.
When we started working there, like, a great day was making $20 million in a day. I was so unhappy. And the only thing that made me happy was success.
Michael Eisenberg (00:43)
Welcome back to another episode of Invested. I'm thrilled to be here with David Magerman. Welcome David.
David Magerman (00:52)
Thank you, good to see you.
Michael Eisenberg (00:54)
So for those who don't know, David was a partner at Renaissance Capital.
David Magerman:
Renaissance Technologies.
Michael Eisenberg:
Renaissance Technologies, sorry, for many, many years. Tell us the story, first of yourself and then Renaissance.
David Magerman (00:58)
Myself, I mean, I grew up in South Miami, kind of the poor part of town. My father was a taxi driver. My mother was a secretary. They didn't go to college. And I was raised on this tradition, on this religion of achievement, like academic achievement. Be successful. That's the way to get ahead. And I did pretty well. Went to Penn, University of Pennsylvania, for college, Stanford for my PhD. Studied computer science.
I was building language models in the 1980s and early 90s before people knew what they were.
Michael Eisenberg:
We're going to talk more about that.
David Magerman:
Sure. And then realized that we were too early. I was working at IBM, a group there, the speech recognition group that was focused on building language models for machine translation and speech. And we were just too early. It took like weeks and weeks on hundreds of computers to train our models. So a bunch of us realized that there were better things to do with our time. And I followed some of my colleagues to Renaissance Technologies, quantitative hedge fund run by Jim Simons, famous mathematician, and really got them going with equities trading.
They were a commodities and a currency shop that was capped out at like a half a billion dollars, and they didn't know how to trade equities. And my bosses, Peter Brown and Bob Mercer, helped them take the system they had, which wasn't working, and with my programming help and my system design help, made into something that did work. And we went from managing half a billion to managing 10 billion within 10 years. By the time I was running equities trading, it was making three quarters of the company's money.
Michael Eisenberg (02:48)
Why did anyone think that what you did at the time was relevant to equities trading? We need to explain that to people.
David Magerman (02:55)
Sure. So Jim Simons had this idea that math was what mattered. And math means using data, and using formulas, and building predictive models that were mathematically correct. And it didn't matter what you were modeling. So we had particle physicists. We had astrophysicists. We had biologists, we had applied mathematicians. We eventually had statisticians, although initially we didn't have those.
And these brilliant people, smarter than me, far smarter than me, were brilliant at each of their fields, and they each brought a unique perspective to modeling something. And if you studied finance, you studied financial markets or economics, you were going to be in the groupthink of everyone who, for the last few hundred years, studied capitalism. Jim didn't want that. He wanted unique perspectives that no one else was going to have thought of–how to do things, so you could find new things that no one else was looking at, so you could carve out signals in the markets that could make us money for a long time.
And when we got there, Peter, Bob and I, what they didn't have was computer scientists. So they were writing code in COBOL, and they were writing code in C, in broken C code, and they really didn't have an idea how to build a big system. So they could trade a few commodities, they could trade a few currencies. But we're talking about trading thousands of stocks. The computer science complexity of that, the architecture you need for that is very different. And so they were struggling to make that work. And I understood language, which was irrelevant at the time. And I understood some information theory, which they taught me a lot more. But really what I understood how to do was to build robot software that could run programs for weeks on end without crashing. And eventually we could use that as the basis for our trading systems.
Michael Eisenberg (04:55)
Was there nothing in your understanding of language that mattered to this?
David Magerman (04:59)
Never. And I shouldn't, I should be careful what I say, because I have to be cognizant of my restrictions of what I–you know, revealing secrets. But they didn't bring people when they hired Peter Brown and Bob Mercer and me, and a couple of other people from the IBM speech group, probably about 10 or 12 of us came in the fullness of time–people assumed we were doing natural language understanding. We were doing speech recognition, listening to recordings of the CEO speaking.
It really was just our ability to do science. We needed PhDs, not because they had the degree, but because if you finished a PhD, you were a closer. You could accomplish something. If you were at all–if you were a brilliant person, it was all but dissertation. If you completed all your requirements of your PhD, except for finishing your thesis, you were the opposite of what we wanted. You weren't a closer. You could get a project 98% of the way there, but you couldn't finish it. We needed people who could understand deep science, deep mathematics, and solve real problems in those fields, but could also finish a project, and write about it and defend it.
Michael Eisenberg (06:04)
That’s super interesting. What motivated you? So here you are in the IBM lab, working on NLP, what we call now ESNLP. And you get a call to go to a, what we now would call a quant trading firm. Why would you do that?
David Magerman (06:23)
I didn't. I said no.
Michael Eisenberg:
You said no.
David Magerman:
The first time they interviewed me was, I just started a job in a research lab in Cambridge, Massachusetts. And I was excited about building a big research group and conquering natural language. And I was doing well. And Peter called me up and said, “Hey, come out here and interview.” So I drove through Connecticut, and crossed the ferry, and went to Long Island and interviewed. And they offered me a job.
And I said, “I would love to do it. It sounds really interesting. But I just moved out to Cambridge. They paid $7,000 to move me.” I felt like that was like a fortune. And like I couldn't, I felt that was such an investment in me. I couldn't renege on the promise to do the work. And so I said, “I would love to do it, but I really want to stay with my commitment at the company I was at.” And Peter said to me at the time, “You're going to realize this is the dumbest thing you ever did.”
And then six months later, when the two really great scientists we tried to hire went to better labs and didn't want to come to work with us, I realized I was not going to be able to put together–you know me with my fresh PhD, was not going to be able to put together a world-class lab in them in my little company in the corner of Cambridge. And I called them back up and I said, “Is the job still available?” And they played with me. They were going to hire me no matter what. But they said, “I don't know. We've got other people interviewing. We have to talk to somebody. Why don't you come in again? And then we'll decide at the end of the week what we think of you.”
And they were just toying with me. They were, they wanted to hire me, and they offered me a job. And it actually was a blessing, because the first job they were offering me was going to be in California ,working in the production group. The production was done by a different manager in California. And in between the time that I said no and the time I said yes, they had moved the production group from California to New York, and the guy who ran it had quit. So they allowed me to come to Long Island, which I was still doing production, but I got to be in the room with all the scientists, all the researchers. And so even though my job was to write software for production, I had my fingers in everything. I was learning the whole system, finding out how everything worked, and really trying to be a nuisance in everyone's business, trying to learn how the Renaissance models worked.
Michael Eisenberg (08:42)
Did you realize what you were getting into? Like, that this was going to become what ended up being known as Renaissance, probably the most successful hedge fund of all time? Or were you just kind of going to do–
David Magerman (08:51)
My whole career, I've just kind of floated. When I went to Penn, I was just studying computer science. Actually, I started out as a political science major in the college, and then switched to religious studies. Even though everyone knew that I was a computer scientist. Back then, it was nerdy. didn't. It was like, you could get beat up for being a computer scientist. So I eventually switched to computer science.
Michael Eisenberg (09:14)
Did you get beat up?
David Magerman (09:20)
In middle school, a bit. I hid out in the computer lab. We had TRS-80s with 4 kilobytes of RAM, and I wrote little games on the TRS-80 back in middle school.
Michael Eisenberg (09:28)
I don’t think you're that much older than me, but there were already, like, Apple II's in mine and I had a Commodore 64, a Jera.
David Magerman (09:34)
So I'm 57.
Michael Eisenberg:
Three years before me, okay.
David Magerman:
So it's like, in the late 70s, I went to a gifted elementary school program where they did things like taught you bridge as a class. And they actually had a stock market class, which I cheated on to do well. In terms of, if you pick the stocks at the end of the program and just fill in the data backfilling, you do really well. Don't tell my teachers, they're gonna flunk me out.
Michael Eisenberg (10:00)
That's the opposite of front-running the market.
David Magerman (10:03)
Exactly. But one of the things they offered was computer science. You could learn to program. And so my mother was taking, you know, whatever,10-year-old me to the local community college to sit in front of a terminal and write basic programs as part of my curriculum in elementary school. And so I learned a program. They eventually scrimped and saved and bought me a computer, where, back then the programs, the disk drives were a cassette tape. And you recorded the programs on the cassette tape in audio. Kinda like War Games. They have, like, the signals in audio and you have like–
Michael Eisenberg (10:39)
For the young people listening, War Games was a movie.
David Magerman (10:42)
Oh, sorry, yeah. Yeah, and Ally Sheedy. Early crush.
Michael Eisenberg (10:44)
It’s actually a great movie, with Matthew Broderick, I think. And it's actually a worthwhile movie even to watch today.
David Magerman (10:53)
For sure. I've watched it in the last two years, I probably watched it. But, so when you recorded your programs, you had to remember to print them out also, because eventually if you recorded over things over and over again, eventually the tape went bad, and they had to type it in again. So limited the progress. But, I'm 10, 11-years-old, so I'm not really ambitious about what I'm writing. Anyway, that was my introduction to computer programming.
But anyway, getting back to Renaissance–what was…?
Michael Eisenberg:
What I was asking was, did you really understand what you were getting into?
David Magerman (11:52)
Oh, right. Right. Yeah. So, no, I mean,I was telling a story like, so when I was at Penn, I was just in a computer science class, and the professor saw something in me and said, “Do you want to do research as an undergraduate? Like, you know, and he befriended me and he said, “Pick a lab and I'll make an introduction.” He probably wanted me to pick his lab.
But I didn't. I picked Mitch Marcus's lab doing natural language. And then, I wrote up my thesis, got published, my undergraduate thesis. And when I gave the talk, someone at IBM Research saw it and said, “I can't have someone outside of IBM doing this kind of work. We own the market on this work.” And so he offered me a summer job. And that turned into my thesis research position. And then I ended up at Renaissance, and I was just going to work for a few years, make a few million dollars, go back to academia and hopefully become a professor, become a successful professor.
I was trying to get a job at Johns Hopkins, maybe back at Penn. And I was there just having fun. I worked in the lab, I slept in the lab, I had a sleeping bag next to my computer. And I just wanted to work hard, learn, do really well, and then go back to my academic research. But you just, it's, you never leave. You know, it's such a-
Michael Eisenberg:
Why?
David Magerman:
Because it's like working in a grad school with a really, really good snack bar.
Michael Eisenberg (12:58)
Sounds like Google.
David Magerman (13:18)
It's a lot like what Google–it was Google before Google. You know, the kitchen grew and grew. They eventually built a sports and a closed sports facility so people wouldn't leave campus to play sports. Everyone lived in really nice houses within a mile or two of the office. They really wanted everyone just to stay and work.
And I loved it. They were like it was like a really collegial environment. We fought. We argued. We discussed. We shared ideas. And it was like–we were solving completely worthless problems. I mean, we were doing absolutely nothing for humanity, but it was hard. It was competitive. We knew the world was trying to beat us, and we were beating them, and we just wanted to stay ahead. So it's a fun game to play every day. Try to outscore everybody, where the score was millions of dollars. And I was with, like I said, people much smarter than me. I learned so much from the people around me and they thought I was smarter than them, because I could write software better than them. They could think of ideas I could never think of, but I could build the things they thought of and they couldn't.
Michael Eisenberg (14:00)
Sounds like when you say, when you thought you were there for a few years to make a few million dollars, you knew what you were getting into there, that this was a juggernaut of a fund.
David Magerman (14:08)
No, no, I mean, what I thought I could make in three or four years, I could make in two months. And, as things got underway. No, no, none of us understood this. When we started working there, a good day, like a great day, was making twenty million dollars in a day. We had this policy where if you made twenty million dollars in a day, they'd buy you lunch the next day. And we had champagne at four o'clock.
And if you lost 20 million dollars a day, they'd do a random number generator, and one of the employees would have to buy everyone lunch. That was the game we played. But 20 million dollars was a lot of money to make. By the end of my time there in the mid 2005, 2006, 100 million dollars, 150 million dollars was a good day. So like the scale of it, we never thought that the capacity of the markets was that big, because when you couldn't do it in equities–equities had so much more capacity than currencies and commodities, and they were also at the time less aggressively traded.
Michael Eisenberg (15:14)
Right. I think, it seemed it was being less mathematical at the time, right? More fundamental research. Commodities and currencies tend to have more, let's call it, mathematical bend than...
David Magerman (15:24)
And there was this whole efficient market hypothesis that said that you couldn't–people told Jim, “What you're trying to do is impossible. You're guaranteed to fail. Like mathematically, you'll fail.” And we obviously proved them wrong.
Michael Eisenberg (15:37)
And what's your takeaway from that? It must be like a deep takeaway from the fact that here comes Jim Simons, and he says, “I'm gonna use math for this,” and it conflicts with the efficient market hypothesis, which I think has been proven wrong in many ways. But that's daunting on some level.
David Magerman (15:55)
Yeah, I mean, what it proves is that–and Renaissance was very much a startup. When I got there, even though it was managing half a billion dollars, it was 20 somewhat people. And we were in the early days of a field. What it showed me is that you have to have conviction. You have to know what your edge is. And then you just have to have maniacal conviction. And when something goes wrong that doesn't break your confidence in your thesis, you just have to figure out what's wrong and fix it.
And there were a number of times where we had losing streaks, and things weren't working right. And Jim just said, “Is the math right? If the math is right, it's bad luck. But if it's not bad luck, the math isn't right.” And more often than not, the math wasn't right. We had either a bug or some assumption we were making mathematically that was crude and inaccurate. And sometimes we had bad luck.
The NASDAQ crash was pretty tough on us. You know, certain big market moves were, although the recovery from it was amazing for us. You know, the big moves, we lose a lot on the move, and we make a lot on the chaos of the recovery.
Michael Eisenberg (17:02)
Did you have the conviction that Jim had?
David Magerman:
More naively, because he knew like a million times more math than I did. But I believed that whatever I did was going to work eventually. And if something was going wrong, it was my fault and I had to fix it.
Michael Eisenberg:
Where’d that come from?
David Magerman (17:23)
I mean, my childhood. Growing up lower middle class, growing up–they didn't talk about it then, but I was probably on the spectrum, in that I had no social skills. I didn't understand people, and I was like a real loner, and I just needed–I was so unhappy. And the only thing that made me happy was success, you know, accolades. Being given, a math prize or a science prize or winning a Latin competition. and so. Yes, I studied Latin when I was in middle school. It's actually a great place to meet girls. Not a lot of guys go to these things.
But I learned that, to be happy, I had to be successful. And so I just had to–when it wasn't working, I had to figure out how to fix it. And you get a lot of pats on the backs for fixing things that seem like they shouldn't work. So when you solve a problem that other people think can't be solved, you know, they give you a good pat on the back and.
That pat on the back would get me two weeks.
Michael Eisenberg (18:21)
Two weeks.
David Magerman:
Two weeks of happiness, and then gotta go back and make another hit.
Michael Eisenberg:
Must have been difficult to be around, if you're only happy for two weeks.
David Magerman (18:28)
Oh no one liked me. No, I actually–I thought I was loved. The secretaries loved me because I was polite. But when I left Renaissance in 2006, and my team, you know a group that I've managed that took me–they had a party, a dinner, and that was when they they gave me gag prizes. And I won't repeat all the things that they had on, but basically the theme was, you are a bear. You are a monster. We were terrified of you.
Apparently–I didn't remember doing this, I'm sure I did–apparently I threw a monitor across the room once, when we had some problem that was my fault. Like, I wasn't mad at anybody else, but if my group did something wrong, it was my fault. And I once threw a monitor across the room in rage over what had happened. I thought I was a little teddy bear, I didn't know. I was little old me, I was the shortest guy in the company probably, and I didn't think I was that scary, but I was terrifying, apparently.
Michael Eisenberg (19:22)
Is that a lack of self-awareness?
David Magerman (19:24)
Yeah. So I did something that I think every manager should have the opportunity to do. I quit Renaissance in 2006. 2008, moved to Philadelphia. And then when my noncompete ran out, I was bored, because I needed to work. And I decided I could get my interview suit on and go and interview on different firms, because I was free to work anywhere, or I could put my jeans on and go back to Renaissance and say, “Hey, guys, would you mind if I worked from Philly full time and just write code?” You know, find signals, research. And they said, “Great.” And they paid me what I wanted to be paid.
But they said, “The only rule is..” I said, “The only rule is, I want to make this amount of money, and I never have to come into the office.” They said, “We'll pay you this amount of money. The only rule is, you can never come into the office.” Because as much as I didn't like them, they didn't like me. And it was great. I worked remotely. I didn't answer the phone. I responded to emails. A few people I spoke to, and I was pretty productive.
But one thing that happened was, because I came in as a researcher, as effectively a junior researcher–I was now working lower in the management chain from people who used to report directly to me. And the vindictiveness of the people trying to undermine my ability to get anything done, any chance they had to stop me from productivity to to cut off, to reject my work, to reject the code I wanted to put in. It proved to me how nasty I must have been to have created that much enmity, that much anger. And it taught me a lesson that, even though we accomplished so much, it wasn't worth it.
I could have accomplished 97% of what I accomplished and been a much nicer guy. And seeing how being a harsh taskmaster leads to such long-term–and this was like 10 years later, people were still giving me a hard time, and nothing I could do would really change their bitterness toward me–and it really left me at the, very end when I eventually got fired from Renaissance for saying some things that I can't talk about now. I was under attack from every angle. I was at war.
And I was in a horrible mental space. And the people that I spent my entire adult life working with, 25 years, including IBM.
Michael Eisenberg (21:56)
Those people stayed there a long time also.
David Magerman (22:12)
Yeah, everyone stayed. These are the only friends I had. It turned out I had no friends. Not a single person called me up to say, “We can't talk about shop, but how are you doing? How's your family? How are you handling it?” Not a single person.
And that taught me something that I'd started to learn, because I'd started becoming religious. I started studying Torah. But I realized that at first I was mad at them, that they had wronged me by not being there for me. And then I realized, no, I didn't do what I needed to do as a person to make friends. I was a colleague. I created symbiotic relationships with my coworkers and they loved that. But the moment I wasn't relevant to them financially, professionally, I didn't exist as a person. And that was on me. And I realized that if I want to have relationships, it's a two-way street. I've got to care about their families. I've got to care about their well-being. I got to push for the success of people that work for me, even if that means they're not working for me anymore. If they graduate to a better position. And I needed to really evaluate how I looked at the humanity of the business world that I was in.
Michael Eisenberg (23:07)
Was there a specific moment that that kind of dawned on you?
David Magerman (23:09)
I mean, it was when I was in the trenches of this fight, a fight for my financial life, against my former employer, as I was threatening them, they were threatening me. They were trying to claw back every dollar they'd ever paid me, because I forgot to fill out some compliance form in 2002. And I called up one of my longtime friends just to check in, just, “How are your kids doing?” And he wouldn't take my call.
And this is someone that I'd like, I mean, I'd seen him before he knew his wife. He certainly, you know, saw my kids grow up. And it was just really very telling that the people that I thought were in my life were just ornaments. And I was just an ornament to them.
Michael Eisenberg (23:58)
You think it's like that across funds in Wall Street, or is it unique to you or to Renaissance, or…?
David Magerman (24:05)
I think it's like any, it's the human condition. There are people who are driven. Raising my kids, I definitely let them know the feelings I have about this so they can choose for themselves how much they want to maniacally succeed and achieve, and how much they want to have a community and life, and let them choose for themselves. Because I don't, it's not like I say I deeply regret everything I did. I just wish I'd known the consequences of it, which was having no relationships as a 40-something year old guy, and having to start then and build a community. But I just think that it's something that is just a part of humanity. And this is really like, we're studying Torah, especially studying Hasidus and Tanya, helps me to understand that Jews are more than just apes with language. Like, you know, I mean, we have a godly soul. We have a purpose in the world, and we have a purpose for each other, that we collectively are a soul. We all have a piece of God, and that your piece of God and my piece of God are roughly the same, and I have to care about you as much as I care about myself. And that's not just words. It's not just showing up for a minute. That's like in all aspects of it. And I think realizing the connectedness of the Jewish people has helped me understand that I have to look at the human beings in my life and view them as, not just like my brother or my friend, but as myself.
Michael Eisenberg (25:33)
That's amazing actually. You said before that you thought, at some point, that what you had done for all these years was worthless. What did you mean by that?
David Magerman (25:42)
When 9/11 happened, it was a huge event. There were people on our trading desk who had phone lines directly to people who weren't there the next day. And it was really very emotional. I was going on and I thought, you know, we have the most brilliant minds in our company. We had, you know, probably at that point, like 30 or 40 PhDs who had deep knowledge of cybersecurity, and coding theory, and information theory. And I said, “Why don't we take some of our team and take a break, and offer our services to the NSA, to the CIA, to help build better systems for detecting these kinds of attacks being communicated?” And they laughed me out of the room.
They said, “We are not here to help America. If you want to do that in your spare time, go to it. We're here to make money. We're here to make money for investors.” And eventually, we were just there to make money for ourselves, because we kicked our investors out of the money-making parts of the company. We still offered them parts that didn't make money to the other people. But the parts that made money we kept for ourselves. And basically we were just an investment club of people using our brains to make money, for money, for a small group of rich white people. And given the capacity that we had for solving problems, in the end it was a huge waste of human–the teachers that collectively taught all of us how we did what we did would be collectively rolling over in their graves to know that all of their effort to teach us led to just money.
Michael Eisenberg (27:21)
If you had it back, what would you do with those ears?
David Magerman (27:22)
So people ask me this question, I think that-
Michael Eisenberg (27:25)
What, I’m not the first to ask you this question? I take it back.
David Magerman (27:51)
Actually, I speak to student groups, I speak to young adults, professionals, and I can't say I would change anything. Because if I didn't make the mistakes I made, I wouldn't know what I know today. And I feel so much more empowered to do things today because of all the mistakes I've made. And I think what's going on now, especially today, this year, these years, is so important, and so critical that I'm glad I made the mistakes then, when less was at stake, and now I can use the collective wisdom that I've gained from all my mistakes to do the right thing.
Michael Eisenberg:
Life's a journey.
David Magerman:
Life is a journey.
Michael Eisenberg (28:04)
Speaking of the journey, I actually want to contrast two things. Somebody, one of our crack team mentioned that you sold candy.
David Magerman (28:13)
Wow, when did they find that? At some point. That's great, yeah.
Michael Eisenberg (28:16)
Was that like in high school?
David Magerman (28:18)
Yeah, so, I mean, you remember in high school the clubs to raise money would sell candy bars. That was one of the things.
Michael Eisenberg (28:25)
In elementary school we had that.
David Magerman (28:46)
It was what we had in high school, and the clubs raise money for prom to raise money for sporting events. The sports teams would do it. They would sell, you know, lemonade. But they would sell candy bars. And I figured out that if you went to the local pharmacy, they sold candy bars for like 17 cents a bar, and you got 50 cents a bar at school.
Michael Eisenberg (28:52)
You bought retail and sold super retail.
David Magerman (29:18)
Right. Well ,what happened was the clubs would buy Snickers bars. Yeah, so if you were like, you know, doing it for the track team, everyone was selling Snickers bars. So I had a menu. I had 15 different kinds of candy. I still to this day have the spreadsheets that I–I had daily graphs of how many of each bar that I sold, and I knew that like the Twix bars were not selling well, but the Milky Way was a hot item.
So I'd stock up on the Milky Way, and I'd say, fewer Twixes, and I knew certain classrooms, certain teachers knew I was coming around so they would come next door to my classroom when I was there, and buy some candy from me and made sure I had what they wanted, give them their fix. And it was all going really well until this Russian kid, who was much more sophisticated than I was–he had people working for him. He would sit in the parking lot in the morning–
Michael Eisenberg (29:50)
He was the Tupperware guy.
David Magerman (30:15)
Yeah, he had like, you know, had guys in the parking lot. He would open the back of his trunk and pull out bags of candy to give out to his sellers. And they would go in different parts. It was a big school. There were like 3,000 kids in the school. And they would cover the market. And when he found that I was doing it, he came to me with one of his goons and said, “You should work for me. You should work for me.” And I said, “No, I'm happy just doing what I'm doing.” And so he, you know, he was not very polite about it, and I felt a little threatened.
Michael Eisenberg (30:23)
Is that when you decided to stop being an entrepreneur, start being an investor?
David Magerman (30:26)
No, but before he had a chance to really do damage to me, he got caught, and he said he worked for me. And because I was that guy in high school that I was at the rest of the time, they believed him, and they were happy to punish me. So they suspended me. And I learned a lot about recidivism because in indoor suspension, I was in suspension for-
Michael Eisenberg (30:48)
For those who don’t know what recidivism is, recidivism is the propensity of somebody who, for example, you put in jail to go back to being a criminal. Right.
David Magerman (30:53)
So in indoor suspension for three days, I got off one day for good behavior, so I did two days. There was this really cute girl with dyed hair in front of me who effectively offered me to be part of a drug ring. She wanted me to ride my bicycle into Miami and sell cocaine. I didn't consider it. She was cute, but not that cute. But it just goes to show, because they knew I was caught for selling illegally, they didn't know I was selling candy. So they thought I was a prime candidate. I said, I'm sorry, I don't drive.
That's great, you ride a bicycle, that'll be perfect cover, no one will ever suspect. I said no.
Michael Eisenberg (31:27)
That kind of candy. Because the other thing we turned up is that after some trip to Israel when you were much younger, 10 weeks I think you spent in Israel, you, at the time, wanted to become religious, but you didn't because your mom deprogrammed you or something like that. Tell us about that. Because if she didn’t save you from going to sell candy or getting beat–
David Magerman (31:52)
No, my father would drive me to the drugstore for that. You know, immigrants' lives are hard. My grandparents came over and were different levels of religious. And my grandfather was an Orthodox, Torah observant. And my mother grew up feeling like his orthodoxy destroyed their family. And there's a lot of water under the bridge there. But basically, she had this image that being an Orthodox Jew was stifling. It was a cult, and that it made no sense, and that if I got too deeply immersed in it, I would get swallowed up by it and never come out, and it would ruin my life.
So she made a very big point of telling me that she had nightmares I was frozen in a freezer, that I was in a block of ice, that it was going to ruin me. And I love my mother, and I respected my mother. And it was meaningful to me that she was objecting to it. And it eventually
succeeded in pulling me away from it. I mean, I was not, I wasn't wearing a black hat at that point. I was still in the earlier stages, but she succeeded in pulling me away from it at that time.
Michael Eisenberg:
How old were you then?
David Magerman:
I was a senior in high school.
Michael Eisenberg (33:02)
You were in high school. And where'd you come in Israel for those 10 weeks?
David Magerman (33:05)
Alexander Muss, High School of early days. I was in a public school. I was the first group from that public school to get permission to do the program.
Michael Eisenberg (33:14)
What's one thing you took away from those 10 weeks in Israel?
David Magerman (33:17)
I mean, God spoke to me when I was there. The first time I stood on Mount Scopus, and I saw Jerusalem, God spoke to me and told me that I should keep the mitzvot, that I should learn and keep Torah, that I was a good person, but that I needed to be a good Jew. And that meant keeping the mitzvot. And it really taught m,e and the program itself, and the rabbayim that I met there, the teachers, some of them were rabbis, some of them weren't, was just the holiness of the land. That, the time I was in Israel, I was a different person. It activated a part of me that got watered down, and eaten away and eventually covered over by the time I got back to America. When I got back to America, what was exposed in Israel, the spirituality, the connection to God was eventually covered over and stifled.
Michael Eisenberg (34:06)
When you finished at Renaissance in Long Island, why'd you move to Philadelphia and not to Israel? I get the Liberty Bell and you know, it's got a verse from the Bible on it, but...
David Magerman (34:17)
No, no, it had nothing to do with that. I had a standing offer from the Dean of the engineering school who I'd been friendly with–
Michael Eisenberg:
At Penn.
David Magerman:
At Penn, on the board of overseers of the school, that I could come and teach there if I wanted to, but I really, I wanted to be close to New York. My wife's a New Yorker. I like New York. But I felt trapped on Long Island. So I needed to find a place that was within reasonable computing distance of New York, but was kind of inland enough that I could escape if there's ever like a hurricane, a disaster, got a bit terrorism, I could just go west and not have to get on a boat. Because, if you get on the highway in Long Island, if you've ever been on the LIE, if everyone's going to something in New York, you're not going anywhere. And the public transportation, it's not like what it is in Israel.
Michael Eisenberg (35:09)
Don't take the jitney. What's it called, the jitney?
David Magerman (35:14)
Yeah.
Michael Eisenberg:
Don't take the jitney. You're not gonna get there very quickly. And so later in your life, you kind of come back to religion, which I guess has not ruined your life.
David Magerman:
No, it's, thank God I found a connection to Judaism, to Torah, to God, and really was actually a cousin. I have a cousin who lives in Harnof. I just visited him.
Michael Eisenberg (35:33)
That's an area in Jerusalem.
David Magerman (35:48)
Yeah,I just visited him before this meeting. We're very close at the time. I actually wasn't speaking to him, but he didn't know that, because he was a Haredi guy. So he didn't know. Yeah, he didn't know that I wasn't talking to him because–it didn't really matter, but he invited his whole extended family to come to Israel for his oldest son's bar mitzvah. And it was like a 12 day trip. And I said to my wife, we had two young boys and she was pregnant with our third. And I said, “Trip to Israel. Let's go. What the heck.” And I saw, you know, he had this large family and even larger community. He was very much like the mayor of the town, very, very central.
And I was there for meals for lunches and dinners. And every day was this group of loving people who loved each other, who loved Torah, 10-year-olds who are like answering Torah questions. And I thought it was just such a beautiful lifestyle that I was really missing. And I thought, how can I–I really felt like the dumbest guy in the room, because these 10-year-olds knew Torah that I didn't know. And not that I was expecting to know Torah, but I didn't expect to like have these kids knowing so much more than me about my tradition, my culture, my history. And a friend of my cousin saw me and asked me what I was upset about. I told him and he said, “Go back to him. When you go back to America, there's a program called Partners in Torah. You call them up. They match you up with a partner, and you can learn for an hour a week on the phone anything you want about Torah.”
And so I did that. I started that out and it was a gradual path over the course of seven years.
I couldn't tell you when I became Torah observant. Sometime during that seven year period from learning things that I wasn't doing to sort of trying a little on for size, to then pretending I was Orthodox and seeing what would happen if I tried doing some of these things, to eventually just realizing I believed it, the Torah was true and that my life was meant to be lived within within the bounds of Torah.
Michael Eisenberg (37:38)
For a guy who's like an achiever and wants the pat on the back that you achieved something–this feels like a pretty frustrating pathway to kind of do this, right? It's starting at the bottom again on some level in your own personal life. you know to kind of start to where you say a 10-year-old knows more than you do. How did that feel?
David Magerman (37:57)
Well, you've never met a Kiruv Rabbi then. Kiruv Rabbis give you like you say like, you pronounce a Hebrew word almost correctly and like you've just, you know, gotten a Nobel Prize. The Kiruv Rabbis are really good at making you feel really good for doing simple things. So no, I definitely got a lot of emotional support from the Rabayim for doing simple things. And then eventually, you know, I convinced them to stop pandering to me, like challenge me, make me do something really good.
Michael Eisenberg (38:28)
Was there any dissonance, that you had this super successful business career, and engineering career and software career, and you feel immensely good, you know, solving hard problems. And at the same time, you're kind of finding a new world here that, you know, if you're alright, as you said, you know, they make you feel really good for doing simple things?
David Magerman (38:43)
You know, it's just two parts of your brain. It was like two parts of my life I really compartmentalized the time I was sitting down writing code, and then the times that I was learning Torah, studying with a chavrusa, and then eventually when I was actually practicing and davening and studying on my own. It was just two parts of my life and they really were independent.
Michael Eisenberg (39:04)
I want to go back to language for a second. You did NLP before NLP was a thing. You said you built language models before we knew what an LLM was, large language model today. How do you think about the journey from the 80s when you started in this area to where we are today? And where do you actually think we are today?
David Magerman (39:08)
It’s a great question. And I think that–I look at all the different aspects of my careers, starting with even my candy business, but all the things that I've done really are like meeting together at an intersection of what's going on in the world today. And all of my different learnings are really relevant. And the one thing that, when I was studying for my PhD, and you have to study the history of the field, I learned about the history of AI, and the computer science, and it is littered with over promising and under delivering.
Going back to like Eliza the chat bot in the 60s, where people thought, ‘Wow, this is like an intelligent agent, this is like artificial, this is real AGI! You can talk to it and it'll give you counseling advice!’ And it was not that. And people eventually realized the demo was just canned, and it was just a toy, and all through the years, even the research I did when I had these great results, when I look back on them, I was a horrible scientist.
My testing methodology was horrible. I probably wrote papers that had inaccurate results in them. You know, when there's no money on the line, you're just trying to get a paper published. I was never intending to do anything dishonest, but you just didn't have the same rigor when you're doing research. And I think a lot of the results that you show when you're not really solving a real world problem, you're just solving a toy problem or you're solving a, you're doing a demo–you could get away with a lot. And I think that back then there was a movement away from rules and moving towards data-driven analysis of things. But that was before the internet, we had a million words of data. And think about that. The amount of data these large language models are trained on, we had a corpus of a million words and that was like, wow, they're using a million words. How are they managing that? That's a lot of data.
So, you know, there were a lot of things that didn't work because we didn't have enough data. We didn't have enough computing power. But the basic ideas of what we were trying to do are very similar to what we're doing today. The biggest similarity is the fraudulence of the demos.
Michael Eisenberg (41:41)
Interesting point.
David Magerman (41:53)
My understanding was that OpenAI spent a year canvassing what are the hundred most common things people are going to try to do with large language models once we have them out. And they made sure those hundred things worked well in a demo. But those hundred things, writing Shakespearean sonnets? Not really very practical. Not a lot of business use case for that. And so while it was amazing that you could see, I could write a financial essay in iambic pentameter. Like, that's lovely, but that's never going to be something you're going to be wanting to do. But people assume, wow, if it can do that, imagine all the other amazing things it can do.
Well, it can't. It was engineered to be able to do those hundred things really well. And now we're seeing as you're deploying it, it was over-promised and under-delivering. And so I think that the experience, if you think AI started in 2021, you're going to have one perspective. If you think AI started in 2013, when deep learning really hit its stride, you're going to think another thing. But if you realize that AI started in the 40s and was a subject of science fiction before it was any kind of reality, and that there's been almost closing in on a hundred years of thought about AI, if you look at it from that historical perspective, you realize we're nowhere near where people say we are. We are in a bubble. The bubble's going to burst. And there's, maybe 5% of the use cases that are being promoted as being a solved problem by generative AI will turn out to be really valuable. This is a generational accomplishment, like the transformer models are a once in a generation advancement. That is amazing.
But when you take that and promise AGI, and don't deliver it, there'll be a lot of dissatisfied customers. And I think that's the big mistake we're making now. The one big mistake we're making now is that we're wildly over promising and we're going to disappoint. The other mistake we're making is that we’ve taken science out of the researchers’ hands and put it in the drug stores a decade before it's ready.
Michael Eisenberg (43:57)
What does that mean?
David Magerman (44:20)
Imagine if you took biological weapons, but instead of using them in level five containment environments, you just put them in CVS, and let people buy them and play with them. That's what we're doing with AI.
Michael Eisenberg:
Explain better.
AI has the power to destroy people's behavior to give people deeply wrong answers to questions that they're gonna depend on, and then make massive mistakes. If you give AI agents the ability to log into things, access your bank account and do things in the world, you could make mistakes at computer speed, which could do massive damage. And we're giving it away to children.
Michael Eisenberg (44:41)
You think currently AI is an adolescent, and yet we're putting it in the hands of everybody. And so it's going to make, it's going to create much more pain and destruction than productivity because–you think productivity is way out?
David Magerman (44:55)
No, AI is an automatic machine gun. And we're giving it to children.
Michael Eisenberg (45:00)
That's a pretty negative view of what we're at right now.
David Magerman (45:03)
It's–what we're doing is so irresponsible. And look, we do this all the time. And throughout history, we've done things. We've killed a lot of people. And, eventually after a huge percentage of population is dead, we learn our lesson. And we blew up, you know, whole cities in World War Two. And then we realized maybe we shouldn't nuke people. So, you know, we make mistakes and we learn from them. We're going to suffer, I think, enormous consequences. I don't know the scale of it. And then we'll, please God if we're still around, we'll learn our lessons.
Michael Eisenberg (45:32)
If we're still around, wow, that's pretty ominous.
David Magerman (45:33)
I mean, I'm being facetious. We’ll be around. But I think that there could be, the scale of the damage could be pretty extreme. Just the scale of the bubble, the financial bubble, I would say that the bubble that exists today is probably a factor of 10 to 50 of what the internet bubble was.
Michael Eisenberg (45:53)
Why do you say that? That's interesting.
David Magerman (46:01)
Because the internet bubble was startups. Startups that inflated like balloons. We have
trillion-dollar companies that are becoming four trillion dollar companies over AI. That level of inflation–
Michael Eisenberg (46:08)
Right. But also, driving the capex spend from cashflow rather than driving it from investment dollars. Like I was here for the dot com bubble. It was like VC dollars buying ads and then being recirculated into equity in these companies. The difference here is that this is free cashflow of mature companies, for the most part, funding these things, although now we're moving into the debt markets to start to fund a lot of this capex build out. And by the way, I'm in the camp also that we're in a bubble, for what it's worth. Not that I think it matters, but I think we're in a bubble.
And we're about to get to the next leg of the bubble, which is the debt markets funding all this capex buildout.
David Magerman (46:43)
But the problem is, it's monopoly money. It's these 10 companies giving each other billions of dollars. They're not really–the money you're spending on employees. That's money. But when you buy ten billion dollars worth of computers from Nvidia, and you invest in Nvidia, you're basically just paying yourself for equipment, and so you can overpay yourself, and it all kind of cancels out.
Michael Eisenberg (47:10)
I know, but that was one specific deal. When Meta is buying Nvidia chips or Google's building out their own chips and installing over buying some Nvidia chips, et cetera. Not all the deals look like this. Whereas in the internet time, think there were many more of these kind of funky wonky deals, which, it was circular dollars or VC dollars buying ads that bought equity in companies. There's been a couple of these deals–
David Magerman (47:36)
But right now, inferencing is a huge money loser. And people at startups are starting and mature businesses are building applications that are basically like using a sledgehammer to tie your shoelaces. I mean, they're using an incredibly complicated machine to do a very simple thing that you could do with a linear regression model. You could do with a deterministic algorithm. And they're only able to do that because it's being subsidized. And so if something costs a dollar and you can charge $3 for it, you can make a profit. If it's costing the company that's doing the inferencing $10, eventually they have to charge 15.
Michael Eisenberg (48:18)
Is OpenAI gonna need a bailout, you think?
David Magerman (48:21)
Open AI isn't a functioning business. I mean, the business model is so demonstrably a Ponzi scheme that I don't know when it ends. They're now petitioning the government to–
Michael Eisenberg:
Bail them out.
David Magerman:
Give them a trillion dollars–no, no, to invest in them. No, they're a national treasure resource that needs to be invested in by all of– All of the American people need to be taking their tax dollars and putting it in to save America.
Michael Eisenberg (48:49)
Do you want your tax dollars together?
David Magerman (48:50)
Oh God, no.
Michael Eisenberg:
I want to go back to your point. So on the one hand, this is a generational technology. At least I think it's a generational technology. It's a significant multi-order of magnitude improvement over what we had previously.
David Magerman:
For some aspects of the problem.
Michael Eisenberg:
Exactly, for some aspects of the problem. And I'd also argue that the internet actually didn't start working for people and create whatever it created over the last 20 years, actually until we had the bubble. Meaning the bubble was actually critical in ‘98, ‘99, 2000. I lived through it and the crash. In order to lay the fiber, enable people to build the businesses, et cetera. Then we had a 20-year technology explosion, I think it's fair to use Mark Andreesen’s line; software ate a large part of the world, and the economy and that was valuable.
So my own view of the bubble today is, it's a necessary step. That's a capital market step to lay the infrastructure that creates the AI productivity boom over the next 20 years, or whenever the bubble bursts in 20 years, that's when people actually reap the benefits of the lower cost, because it's all been subsidized, of compute, of bandwidth, of intelligence or whatever it is. I don't think we're really gonna get to AGI. I've been arguing with my partner here all the time about this. I think that's way, way, way out there, if ever. I'm actually a giant believer in human beings.
David Magerman (50:14)
I think Hassidus gives us an insight into why we're never going to have AGI.
Michael Eisenberg (50:18)
I'm in the same camp, by the way. I'm not sure about it because of Hasidic thought, but I'm in the same camp. More Maimonidean thought, but we'll get there a different time. When we don't bore a full audience of people about the difference between Hasidic and Maimonidean philosophy. So this is like a necessary step for us to actually get the giant productivity gains, and people lose a lot of money in these times. I mean, that's what happened in 2000 and in another time.
David Magerman (50:44)
If it were being deployed in the way the Internet was deployed, I would say you're right. And if also the starting point, pre-Internet was comparable to the starting point pre-gen AI. But I've been an investor in AI companies since 2017, and really I invested as an angel investor before that. And AI before transformer models was a pretty accomplished industry. We were solving problems in production, in enterprise environments, in small businesses, and in the world, with pre-gen AI technology.
There were aspects of problems we couldn't solve well. The pattern recognition was not at the level that you could achieve on some problems with transformer models. They were overusing deep learning. There was a lot of things they were doing, but the state of the world, the AI world before GenAI, before transform models and before ChatGPT was close to being really useful. And if we just take in GenAI and transform models and looked at what doesn't work well yet, let's fix those problems–I think we'd be in a very different place. But instead what we said was, wow, this thing can do Shakespearean sonnets. I'm gonna throw away the deep learning models, throw away linear regressions, throw away the dynamic programming solutions to hard problems, and just throw into a generative AI model and get an answer, just become a prompt engineer. And I think throwing away the powerful solutions that were almost successful has set us back a decade.
Michael Eisenberg (52:31)
You're a computer programmer, and certainly the one area where this is actually making a lot of progress quickly, and we’ve seen this in our portfolio companies, is computer programming.
David Magerman (52:38)
I would push back on that.
Michael Eisenberg (52:40)
Go ahead.
David Magerman (53:08)
Okay, go ahead. So we had a number of companies in our portfolio that said they were starting to use these copilot tools for accelerating their software development, and that they were seeing productivity gains and it was really helping. So there are two main problems with this. One is that they discovered that–actually three problems. One they discovered is that it could write junior level code pretty reliably. It was really bad at architecture.
Michael Eisenberg (53:12)
Yes.
David Magerman:
So it couldn't design things. So you could use it as a tool–
Michael Eisenberg:
To generate code.
David Magerman:
To generate code. But you couldn't design software systems within–people were using it to design software systems. And they were ending up with unmanageable architectures that weren't scalable. The second problem is code reuse and code maintenance, that if you use, if everyone in your company is using AI to generate code, you're not going to have the responsible coding practices that you typically have for human coders to be able to read and understand code. So if you have an algorithm that's used 14 times in your company, GenAI is not going to find the library that you've written once. They're going to write 14 versions of it, and they're probably not going to be the same. They're going to be, whatever the mood, whatever mood the LLM is in at the time is going to, or how the prompt is given to them. They're going to come with a different algorithm, and then you're to be maintaining 14 pieces of code that do the same thing.
Michael Eisenberg (54:07)
I assume there's some architect that sits on top of this that tries to, there's a human being architect that sits on top
David Magerman (54:12)
You're giving these, the teams deploying this a lot of credit. There are a lot of people who are just throwing this out at teams of programmers and saying, “Use this,” and, “We're firing half of you.”
Michael Eisenberg (54:23)
So you don't like your companies using co-pilots, or…?
David Magerman (54:26)
So they found out that they were actually, thought they were saving time, but after a few months, they realized that what they were getting was unmanageable enough that they had to go and redo it. They ended up losing time. Because they thought they were where they weren't, they actually couldn't satisfy some of their customers' demands, because they thought they had a problem solved. Then they had to take time out of their work schedule to re-do what they thought they'd done, which meant they missed deadlines.
But there's a third problem, which I think is really important, which goes across the board to all AI use, which is that whether it's in financial environments, whether it's in consulting, real estate– the best we can hope for, I think, from these tools is replacing junior-level work. The way that you get senior people, the way that you get your senior management team and your mid-level management and the people you promote–
Michael Eisenberg (55:23)
Is by being a junior.
David Magerman (55:47)
Is by having a bunch of people be junior, and then you figure out which ones are learning the field well enough to be qualified to be the next level. What we're gonna find in the next two years is, we're gonna find the best prompt engineers. I'm pretty sure the best prompt engineers are not the best managers of whatever area that you're in, and I think people are gonna find out that the promotion, the mentorship, the ability to create a mature workforce is going to be severely stunted by the use of AI.
Michael Eisenberg (55:57)
I agree with that. My friend Josh Wolfe at Lux has a similar view, I think, to yours. My own view is a little more bullish than that, but I basically agree with your thesis is, we're gonna have a hollowed out generation which doesn't get to be the next level.
David Magerman (56:12)
I will admit that I am a hardcore programmer, and I'm deeply offended by the idea that, so I'm like I'm biased. I understand. I have to like my partner has to like take what I say sometimes with a grain of salt, because I am very much a snob when it comes to coding, and I still think I'm right, but probably if I was wrong, I might still say the same thing.
Michael Eisenberg (56:32)
You have high conviction, like you said about Jim Simons. It may be a problem in the math. So if this was gonna go right, tell me what going right means in the world of AI. You have a negative-ish view. Okay, give me the opposite view. Steelman me the opposite view.
David Magerman (56:42)
You know, one thing I learned at Renaissance, and even going back to my natural language day, is that the driving force here is data. And it's not just data, it's information. If you had a trillion ones, you have one bit of information, maybe two if you know that's a trillion. But if you have a million characters of information, that inside of it has the secrets to the meaning of life, you've got information. And so, just because you have data doesn't mean you have a solution.
And if you have data that has information in it from an information theory perspective, there are dozens of mathematical algorithms and pattern recognition algorithms that can pull that information out and help you reduce uncertainty about the future. So we've become a one trick pony, where everything is just thrown into an LLM. I think success is looking at the data sets that you have, figuring out how much information you have and which information that you have is relevant to solving a real world problem, and then finding the right tool at the right level of complexity and cost to extract that information. You–looking at the stars, you need really, really the advanced math and a lot of computing power to track anomalies in space. When you have McDonald's and data from McDonald's, and you want to figure out how to price your fries versus your sodas, you probably don't need the power of a trillion parameter large language model to come up with the optimal pricing for things. So I think that the success in AI would be getting to a point where you have a methodology where you look at the problem you're solving, you look at the information and the data you have, and you find the right level of complexity of analysis to solve that problem well.
Michael Eisenberg (58:33)
What do you think of Meta and Google throwing tens of millions of dollars and more at some of these super high-end AI researchers?
David Magerman (58:40)
I think that it's necessary. It's not about the person. It's about the stock price. And that, if Metta doesn't steal someone from OpenAI, then people are going to question whether they're competitive in the AI space. But if they find someone that they tell the world is worth $125 million, they must be building a world-class AI team that's going to, like, generate AGI.
Michael Eisenberg (59:04)
Smoke and mirrors at $125 million a mirror.
David Magerman (59:06)
But the question I ask is, if you got a guy who's like a really brilliant 40-year-old accomplished, like you have someone that's just really done an incredible amount of work for the last 15 years at Meta, and he's maybe topping out–like, let's pretend he's making a million and a half dollars, which he's not. But let's say he is, maybe with stock options making that kind of low seven figures. How does he feel when this 24-year-old kid who hasn't done a thing in his life, but you know, get good scores in college, and solves one problem at one company, he's making, you know, 10 to 100 times what I'm making?
Michael Eisenberg (59:42)
What does a guy who comes with a great degree and spends five years of experience, comes to Renaissance make? Or what would he have made?
David Magerman (59:49)
I don't know, because I've been out of there for a while now.
Michael Eisenberg (59:52)
I'm sure it’s probably pretty high, right? Yeah, it's a lot of money. Doing something you thought was worthless, by the way.
David Magerman (59:55)
But you only make that money if you actually solve real problems.
Michael Eisenberg (1:00:02)
So here too, you make money in the stock price, so why don’t you pay him the money?
David Magerman (1:00:05)
Right, it could be anybody. It's not him, it's the fact that they're doing it.
Michael Eisenberg:
Got it.
David Magerman:
There are 30 people that they could steal from five different companies, and it doesn't matter which one you do, and it doesn't matter if he does anything ever.
Michael Eisenberg (1:00:16)
Right. It's not the performance actually of the portfolio, it's more the perception.
David Magerman (1:00:19)
I think it's a smart move. I think the hard part is managing the social dynamics. To figure out how to handle that person being productive, being a part of a team, when he's suddenly been handed a Lamborghini and everyone's driving Corollas.
Michael Eisenberg (1:00:33)
Why did you become an angel investor after leaving the hedge fund world?
David Magerman (1:00:36)
I started being an angel investor when I was in the hedge fund world, and I have the proud accomplishment that every single company I invested in went to zero.
Michael Eisenberg (1:00:45)
You have to lose money in this business to learn.
David Magerman (1:00:47)
Well, what I learned, I learned a lot of lessons–each company I lost money, and I learned a lot of lessons. The money I was investing was, I mean, I hate to say it this way, but it was de minimis. I just was making so much money doing my job that I could, you know, before I was giving tzedaka, before I was giving charity, I was just having fun, burning money in companies.
But I was actually, I'm the reason they failed. Because by giving them money irresponsibly and not overseeing it, I made them fat and lazy. And when they came to me, pretending like they, but for this mistake they would have succeeded and they just need another $100,000, I would keep giving it to them, giving them the drug and not really solving the problem. And I eventually realized that I was the single point of failure. I was the reason why these companies were failing.
Because if they took money from you, they would have had oversight, a taskmaster, quarterly check-ins, budget meetings. You would have found the inefficiencies. You wouldn't have given them money unless they reached the metrics. I was an irresponsible investor, but also I invested in science experiments. I loved the science. And this is why when I left Renaissance, or when I was kicked out, and I realized that I had a lot to offer the venture community doing work in AI and data science, because I knew a lot that they didn't know. I looked around and realized I needed a partner. I understood that my experience as an investor was completely irrelevant.
Writing code for a quantitative hedge fund has absolutely nothing to do with investing in startups. I had domain knowledge that very few people in the world had at the time, and probably still have some edge in that area. I needed to find someone who had as much of an edge in business modeling, identifying good founders, the human side of investing in startups. And so I happened to be in Israel checking out Startup Nation, and I was meeting with different VCs and lawyers, and one of the lawyers that I was meeting with said, “By the way, you really should join or start a firm. By the way, I'm doing the first deal for this new fund that just started up. It's a partner that's looking for a domain expert, a scientist to join his team. He's a real experienced venture investor. But by the way, he's not in Israel, he's in New York.”
So I went halfway around the world to Israel to meet my partner who's now, to this day, still my partner, who is working.
Michael Eisenberg (1:03:15)
Good things happen in Israel, though.
David Magerman:
It was amazing, it was meant to be.
Michael Eisenberg:
So, it says Differential Ventures, which is, I think the name of your firm, focuses on ethical, sustainable uses of data. I'm curious about two things. One is, what does that mean? And then the second thing is, do you think that has anything to do with either your experience of Renaissance or your religious journey?
David Magerman (1:03:39)
So what it means is that there are a lot of really profitable ways of using data in industry and enterprise environments that takes data that has no relationship to human beings, or that does no harm to human beings by using it. And you can help companies make better decisions in their workflows by using data from the world, and from their companies, to solve problems. You could also take human behavioral data–their location, aligning it with their ethnicity and their financial situation, their family structure. And you can make even more money convincing people to do things that are against their interests to profit the mothership. And I think that's what social media has done. That's what corporate America has done, that they are modeling people in a way against their interests to–look, Renaissance makes money off of human psychology.
We know that people are going to overbuy something based on some phenomenon, and we buy it ahead of them, and then we sell it when it hits, hit where we think. Now we're not causing them to do it, but we're taking advantage of their mistakes. Social media and current technology companies are causing the mistakes.
Michael Eisenberg (1:04:50)
Their proclivities.
David Magerman (1:05:06)
They're goading people into doing things that are against their interests, knowing the profit from them. And I think that is an unethical use of data. So we see those companies, we could probably make our investors more money if we invested in them. We choose not to because I, know, from a religious perspective, I think that doing something that harms the world, I don't think God will let you succeed.
Michael Eisenberg (1:05:16)
There’s plenty of people who made a lot of money doing it, so they were successful.
David Magerman (1:05:19)
They were successful.
Michael Eisenberg (1:05:20)
You just said social media companies that think you're doing bad things. Mark Zuckerberg's been incredibly successful.
David Magerman (1:05:25)
If you look at the state of democracy in the world today, you can't possibly say he's been successful.
Michael Eisenberg (1:05:30)
That's a macro, right? I think this comes to the question of success, right? Which is that on an individual level, the guy who invented, or he didn't invent, actually, he was a latecomer. He followed MySpace and Friendster and a bunch of others. Perfected social media, which you think has caused a lot of damage, has made a lot of money and had a huge amount of impact on the world, positive or negative. On a macro level, democracy, to your point, I think also, I wrote this in my most recent book, is super challenged by this–social media and you know, the internet. And AI has also become used by autocracies to kind of put their thumb on humans. But the question is how you define success. Is Zuck’s success as an example, or is it society success, which I think you're headed to?
David Magerman (1:06:17)
Well, but I think it’s also the individual success. If you had five times as much money, would you be better, happier? Would your kids be better off? Would you be more of a success as a human being if you had five times as much money? Do you think?
Michael Eisenberg (1:06:38)
Do you think Mark Zuckerberg thinks he's a big success?
David Magerman (1:06:43)
I think he has convinced himself he's a big success. I don't know how he's raising his children. I don't know what morals he's passing on to his family. I don't know how he views his purpose in life, how he's serving God, how he's serving humanity, and what he's passing on to his kids. When I reached the pinnacle of success, what I thought at Renaissance in 2004, I had two young kids and I realized at some point, they were going to ask me some form of the question, what's the meaning of life?
And I realized that based on the way I was living, the only answer I could give them with a straight face was, ‘whoever dies with the most toys wins.’ Because that's the life I was leading. Everything was about succeeding, and making money, and making a higher salary, bigger bonus. And when I realized that, I realized that wasn't who I was. But then I didn't know who I was. And that's when I started on my Torah journey to learn that that's not the meaning of life. That's not why we're here. And I had to figure out what is–in the end, I realized I need to figure out what God wants from me. But I wanted to be able to pass on something to my children that would give them an accurate meaning in life. You know, I could have given them the meaning of life, of whoever dies with the most toys wins. And they could have been really good at that maybe. But that's not the right answer. And so is Mark Zuckerberg giving his children the right upbringing, the right message to make them successful human beings?
Michael Eisenberg (1:08:11)
I haven't seen Mark in about 15 years.
David Magerman:
I don't know. But you know, 50 billion or 20 billion or 500 million, I don't think that has an iota to do with being a successful human. I think that in many ways, I think it gets in the way of it.
Michael Eisenberg:
Has your study of Torah actually impacted your investment decisions and which companies you invest in?
David Magerman (1:08:34)
It's put my investing into perspective. So I've been a little bit upset, especially the last two years, about calling Israel the start-up nation.
Michael Eisenberg (1:08:45)
I'm with you.
David Magerman (1:09:02)
Israel is, the State of Israel, is the steward. If you ever read Tolkien, Lord of the Rings, the steward of Gondor was not the king. He was the family put in the place, to be the placeholder until the king came. And then Gandalf came and a lot of bad things happened. Midinat Yisrael is the steward of Eretz Yisrael.
Michael Eisenberg (1:09:14)
The land of Israel, yeah.
David Magerman (1:09:31)
But this is the holy land that God gave us, promised Abraham, Isaac, and Jacob–Joshua conquered it. The Jewish people lived here. We built the temple where the God's, the Shchina, God's presence was here. And our purpose in being here, as opposed to being in Uganda,
or Canada is that we are here to preserve this land. In the time we live in now, money is a big source of power. So I think our success as Startup Nation, how we keep creating these billion, multi-billion dollar companies, is a mechanism God is using to make us relevant and powerful in the world. It's not why we're here.
When I started, I was here on October 7th in Jerusalem and I flew back on Sunday after the attacks. And I immediately booked a trip back here six weeks later because I said, “I can't pick up a gun and shoot terrorists, but I have to do something.” And I had six weeks to figure out what I could do. And I came back. I was probably here every week, every month and a half throughout the war. And I met with both military people who, there was a lot of private public partnerships in supporting military operations. I met with a lot of community leaders, met with hospitals, met with universities. But I also met with startup founders, because I had a job to do and it was so depressing to meet people who are clearly emotionally affected by the war because they're here. You can't not be affected by what happened on October 7th. But they were also saying, “Why can't we just stop fighting ,so we can get back to making money in our businesses? Like, my employees are in reserves. They're fighting. I need them to come back and finish our projects so we can so we can be competitive. We're going to run out of money.”
It just broke my heart to hear startup nation founders and VCs thinking that we are here in Eretz Israel. We're here in the land of Israel to be startup nation. We had to take a break from that secondary role to fulfill our primary role, which is to create a safe home for the Jewish people, to make the land holy, and to eventually bring back, not the steward, but the king and bring mashiach. The idea that there were these really cynical people who I just felt were here for the wrong reasons.
Michael Eisenberg (1:11:33)
Is that easier for you to say at age 57 after a long career at Renaissance and investing your own money for a long time? You're in a different spot than these younger people who are doing this. My kids were in Gaza for, and my in-law kids were in Gaza for a lot, a lot, a lot of days.
David Magerman (1:11:50)
Yeah, my friends’ kids were there. I pray for them every day. My daughter made aliyah in February. She's starting Bar Ilan….
Michael Eisenberg (1:11:57)
But you look at someone who's like 30-years-old, know, spent 10 years in the military as the case may be, and he's starting his companies…I'm not suggesting–look, no one stood up and said, “Don't go to reserve duty.” We have a country to defend. Is it easier for you to say that to them given where you are at?
David Magerman (1:12:13)
I didn't say it to them and I don't blame them for thinking it. I just think that they're, I think that it's a byproduct. It’s a direct consequence of us mismessaging the value of Israel, and I think, I don't blame them. I totally got it. I just, my heart broke. I wasn't angry at them, I was heartbroken, because I feel like we are making a mistake by thinking that we are so successful in startups because we're really that great. It's God. And we've seen it in the war with Iran. We've seen it
in Iron Dome and the missile defenses. We've seen it in the tunnels. And I have friends who've been kind of almost live blogging their service where they have WhatsApp channels where they’re sharing their experiences.
Michael Eisenberg (1:12:55)
Not a great idea.
David Magerman:
But they're sharing that God is with them, that these secular soldiers are seeing miracles, revealed miracles in their battles. And I just think that we are miss messaging the strength of Israel and the power of Israel. When Moshe Rabeinu–
Michael Eisenberg:
Moses.
David Magerman (1:13:12)
Moses, lifted his arm up. When Moses lifted his arm up, and we won battles, and when his arm got weaker and it went down and we lost, that wasn't because the muscles in his arm were causing us to win. It was the mechanism of God giving this power to the Jewish people. We're experiencing revealed miracles today. And I feel like the messaging we've been giving the last 10 years about why Israel is successful is misleading, misleading people into thinking that we have to get back to starting billion-dollar companies. Otherwise, we're going to lose our edge in the world.
We have to stay united as a people. God is rewarding us for our unity as much as he was punishing us, you know, pre-October 7th for our disunity. And I think that we need to be recognizing that by staying united, by working together, by loving each other, finding ways to relate to each other when we're very different, but by figuring out what God wants us to do to protect the land, that is going to make everything else we do successful.
Michael Eisenberg (1:14:10)
I wanted to ask you one last question. So you started a foundation called Tzemach David, which for translation means the growth of David, or–
David Magerman (1:14:17)
The seeds of David. Basically Mashiach.
Michael Eisenberg (1:14:20)
Yeah, I got it. Messiah. And you're focused on education. And I know you've been pretty outspoken about what's going on in American universities over the last two years. And I’d just love to hear as kind of our last question, what's your view of, not just American universities, but actually what you're trying to accomplish through this for the future of education for Jewish people here in Israel, and maybe impact on the world?
David Magerman (1:14:48)
Right. So before October 7th, I was working on education in Israel for a few years, because we found that that Anglo Americans who made Aliyah who came to Israel to live had a lot of trouble integrating into the school systems, especially the religious Zionist community that was trying to learn Torah while they were trying to learn secular studies. And the schools were not well equipped to handle people who didn't speak Hebrew well and parents who didn't speak Hebrew well. And so I hired someone to run my foundation to try to figure out what do these schools need, what's causing the problem and what can we do to help them fix it?
So you don't fix it by creating American Jewish day schools in Israel. It's the last thing we need. We just need to find out what resources do these schools need to understand and staff the teams to be able to do a better job dealing with Americans when they come over, and helping them integrate. And so that was the mission, the sole mission until October 7th. And then when I got involved with the controversy at University of Pennsylvania, my alma mater, and became known for these issues at the universities. The first three trips I came back to Israel after October 7th, I went to universities. I went to Hebrew University. I went to Tel Aviv. I went to Technion. And I said, “What do you need to do a better job of integrating Americans into your schools?”
And the first thing they said was, “We have this English language program.” I said, “No, that's helping people come to Israel, study, live here for three or four years, and then not speak Hebrew and then eventually go back to America, or maybe go to Ranaana. But I have a lot of friends in Ranaana, so there's nothing wrong with that. But what I wanted to know is, how are you going to help young adults come to Israel and graduate as Israelis? And then get married and have kids who are Israelis?”
And we came up with a plan to have a mechina program, like a transition program. The first year they study their major in English. Introductory class is very easy for them to do. And you do an intense Ulpan, learn Hebrew. And the more you need to learn, the more intense it is.
So for instance, my daughter, I hope she doesn't mind me saying it. She did 12 years of Jewish, 13 years of Jewish day school. She was in honors Hebrew, and she tracked into the second lowest level of Ulpan. So the American Jewish state schools are, they're failing at teaching their students Hebrew. So she's now studying five days a week, three or four hours a day, intensely learning Hebrew while she's starting her college at Bar-Ilan University. And the hope is that at the end of the first year, she will have learned enough Hebrew that she can then finish the last two years of her education in Hebrew, graduate fluent in Hebrew in her field of study, and then she can go on to get a Master's degree or go practice her career. But the idea is, I don't want us to say, “Ooh, be afraid of Harvard, be afraid of NYU. It's scary in America. Mamdani, be afraid. Run away to Israel.” I want to look at Israel and say two things. “Israel is a gem. It's a diamond. Let's polish it. Let's take the beauty of Israel, the strength of Israel, and shine it up in a way that the world and Americans can see how beautiful what it already is is. And also, let's look at the problems. Let's find the things that Israel wants to fix about itself. That if you fix them, more Americans would feel comfortable here. Let's fix those things also.”
And if you can do those two things, if you look at what's going on in America today as a Jew, as a human being, but let's just start with Jews. If you look at what's going on in America as a Jew, and you look at what Israel is with an honest lens, if you don't choose Israel, stay. Don't come. I want them to come. But - they should choose Israel. If we're not doing a good enough job showing what Israel is, that's on us, but if we're showing them what it is and they're too American, too infected with the cancer of America to come, then let them. My new mantra is, let them.
Michael Eisenberg (1:19:05)
So when are you coming?
David Magerman (1:19:09)
So this is a question people ask me all the time. My wife, I have to say ‘let them’ to my wife. She does not understand. She doesn't see things the way I do. But my goal is that, I want all my grandchildren to be born in Israel. So my daughter just made Aliyah in February. She came to seminary. She applied, and by February she was finished. All through the war, all through the attacks going in and out of bomb shelters. She made Aliyah and then she just started Bar-Ilan.
One of my sons is planning on finishing at–he was at University of Pennsylvania. He transferred to YU. He wants to start this me smicha program–
Michael Eisenberg:
Rabbinic program.
David Magerman:
Rabbinic program, and start his Master's program, and he wants to move to Israel and finish them here.
Michael Eisenberg (1:19:53)
Grandchildren is the biggest attraction to bring people to Israel.
David Magerman (1:19:57)
And my oldest son who's very much embedded in New York right now, as soon as his siblings have children, he's going to be on a beeline to here.
Michael Eisenberg (1:20:07)
Turns out being an uncle also works.
David Magerman (1:20:26)
I think that the truth is I come to Israel, again, I come to Israel for a week every month and a half. And I don't think I'm helping Israel more by being here. I'd be helping myself a lot more every four Amos we walk is a mitzvah. Like I want to be in Israel, but I love my wife and I want to respect her. You know when I got married, she was more religious than I was. So I have to respect that. I pray literally three times a day, every day, that she changes her perspective on this, but until she does I'm going to be living in America and.
Michael Eisenberg (1:20:40)
Next time you come as a couple, have Shabbat at the Eisenbergs. We’ll see what we can do.
David Magerman (1:20:43)
Okay. Yeah, but that's why I don't live in Israel.
Michael Eisenberg (1:20:46)
David, thank you so much for doing this. This was super interesting. I mean, super interesting. And I hope people take away also just how much of a journey life is, and to kind of keep staying focused on doing the ethical and moral things as we go forward in life. Thanks, David. Appreciate it. If you like this podcast, please rate us five stars on Spotify and Apple podcasts, subscribe to the YouTube channel and do all the other great things that will keep our great content flowing right into your inbox.
David Magerman (1:21:03)
Thank you for having me.
Jeff Clavier (00:00.046)
I will trust you, and I will work with you, and I will back you, but fuck me once and we're done.
Of all the term sheets that we put down, we've won 91% of them.
So people once asked me what I was looking for. A smartass team building a kickass product in a big ass market. Those are the three assets.
Michael Eisenberg:
Was 2005 Jeff able to do that?
Jeff Clavier:
2005 Jeff was a dumb fuck who knew nothing.
I've been working my ass off for 21 years. Nights, weekends. I also want to get a bit more, sort of, me time.
If I was starting today, I would really focus my energy on, “Okay, this is the one thing I do, and I'm going to try and get the best opportunities in that sector and then grow from there.”
Michael Eisenberg:
How did you get the @Jeff handle at Twitter? How come I can’t get @Michael? Did anyone try to buy that from you?
Jeff Clavier:
Oh, fuck that.
Michael Eisenberg (00:53.24)
Welcome back to another episode of Invested. My guest today is Jeff Clavier. He is known as one of the best seed investors on the planet. And so thank you, Jeff, for joining us today.
Jeff Clavier:
It's a pleasure to be with you Michael, it's been too long I've seen you, so thank you for the opportunity.
Michael Eisenberg:
Yeah, just before we came on, I was mentioning, I think the last time we saw each other was probably six or seven years ago, in a cafe in Palo Alto. And the world has changed a bunch since then. Is that fair?
Jeff Clavier:
But that was definitely pre-pandemic, so I think you're even kind by saying 6-7 years ago. I think it's longer than that.
Michael Eisenberg:
Oh, wow. Well, maybe I should ask you, given that, has anything changed in the world of seed investing since I saw you face-to-face last?
Jeff Clavier (01:31.95)
Oh, we probably have added, you know, another thousand or 1500 seed funds since we saw each other since there were none 20, 21 years ago, when I started SoftTech now Uncork, raised one of the first seed funds in history, over $15 million fund two in 2007.
Then two, three years later, there were maybe 10, 20 seed funds. A few years later, they were 50. And then suddenly, because we demonstrated to the world that seed was actually an entry point for a lot of new managers, things just got out of hand. And now we have about 2000 seed funds. So somewhere along that curve, we've seen sort of a lot of capital flowing in the hands of people who are, you know, good, but maybe not VC lifers like you and I, right? Where for us there's not anywhere to go. We're sort of VCs and that's it, right? No one will ever hire us for anything else. Whereas people now think about VC as a step in a career, and they get in, and then they get out. And there's been a lot of fluctuations in the VC world, where people sort of join firms and then ping pong, go around, and then exit, and whatever. So it has been kind of interesting to see.
And in this world, where it's really hard for companies to raise a Series A or Series B unless they have that crazy traction with numbers, you know, going 5X or 10X a year and so on and so forth, we'll see the metal that those VCs are made of in order to help their companies.
Michael Eisenberg:
By the way, you just made my life a lot easier in this podcast because you really teed it up exactly where I wanted to go. So yeah, when we both got started, like there were seed investors. It was Andy Bechtolsheim from Sun, or some of the angels who invested in Google. And every once in a while you saw Larry Ellison do a seed round. Institutional seed environment. You were one of the first.
I think it's 17, 18 years at this point. You institutionalized it. And now it feels like everybody's got a seed fund. To your point, there's like 2,000 of them. And so I want to ask you three questions at the same time. Number one, is this actually a category, or is a lot of this tourism? That's number one. Which is kind of what you referred to about people kind of coming and going. But I want to understand if these people are serious investors, or they just want to have a cocktail party discussion. That's kind of point one.
Point two is, you're the granddaddy of the seed business. Nothing about your age, just you've been at it longer than anyone. How do you keep differentiating yourself differently today than you did 15 years ago? And then the third question is, has the geographic scope of what you do or need to do changed because of that?
Jeff Clavier:
Those are great questions. So I will answer the third, first. Geographically, we're still very much doing US and North America with a few investments in Israel, because obviously Israel is an incredible source of innovation and entrepreneurs. In the early days, we were very much CECONDAI in New York and Boston. Now we don't care where the CEO and go to market is in the US and Canada. But we really want the focus to be on the US market from a go to market perspective. And then, engineering can be anywhere. It can be back in Israel, could be in Europe, could be anywhere. It really doesn't matter, because the pandemic has taught us that you can really sort of be innovating anywhere on the planet.
And for us, what matters is this focus on the US market for sales and marketing. To your point about tourism, I do think that a lot of people who enter the seed market have a genuine interest in building something that will last. The problem is that sometimes they don't know how hard it is, right? Because I was a VC when I moved, I became a VC when I moved to the US 25 years ago. I did four years as a traditional VC before, starting SoftTech and Uncork. And that gave me an appreciation of what that means to actually be a VC, right? To actually manage a firm is a thing, right? And a lot of people just make the transition from angels or operators to VC without that prior understanding, and sometimes it's a hard landing when they figure out what that actually means.
So I don't know that there is a lot of tourists. There certainly were a lot of tourists in 2020, 2021, when literally you just did that and you raised a $15 million fund. Now, raising capital is harder than I've seen in maybe a couple of decades, right?
LPs are extremely demanding. They only back GPs that they think can really differentiate, and not only generate awesome returns, but also help them with liquidity. So the tourist aspect, I think, is sort of behind us, but you definitely hear people saying, “Look, I did this thing, I raised this fund in 2021, and it's hard, and so I don't want to raise another fund. So here is the fund. I don't want it. I'm just moving on.” And LPs are like, “Wow, you can't,” especially as they back some sort of GPs, there's nowhere to go, right? It's like, who do you give sort of listing portfolio to? So that's a real sort of concern. On the differentiation, I think that the big thing that we have–so we’re 21 years old, we're an adult firm. So I've built an incredible sort of team that is able to really help entrepreneurs go from zero to one, one to 10, and 10 to 100, and then, sort of bring in great co-investors along for the ride. And we're always, pretty much always leading or co-leading the rounds that we get involved in. We write the largest check. We always buy 10, 12, 15% of the companies when we invest in a seed round. And so, the number of leads in the market, firms that actually do what we do, that sit on the boards, that do all the work, is actually something that you can count on two hands, maybe four hands, right? So being 20 and 20. And over the last couple of years, I think our win rate is 91%. So of all the term sheets that we put down, we've won 91% of them. So, the differentiation is both the brand, the reputation, the fact that we really take good care of our founders. We've built this amazing team on the platform side, on talent, that support our founders, and our founders just preach about everything that we do for them. And they help us win more deals and they help us through referrals. So that's how we do it.
Michael Eisenberg:
Given what you said right now, I find in the seed stage that there's a lot of people who want to just join the rounds to the point you made, right? There are very few leaders, there's angels and seed funds, and everyone just wants a piece of the round. But given what you said now, is it worthwhile collaborating, or should you just take the whole thing yourself?
Jeff Clavier:
No, we fundamentally believe–I've always believed in the virtue of collaboration and bringing other smart investors to the party. So a typical Uncork round will be, Uncork takes, call it, 50, 60% of the round. Then there's very often a smaller seed or pre-seed fund coming in. We always leave room for great angels, people who have small checks, but can really be instrumental in supporting the company. And then we always make room for insiders if they want to do that pro-rata. So we, yes, we could take 20% of the round, but then if you edge people out, they don't come back and give you access to their deal. So you have to be super thoughtful about that. And sometimes even cutting back, and we've done it, sometimes we collaborate with our dear friends in the market and we just take 10%. So you have to be really mindful of not imposing too much dilution, have enough ownership for your own needs, but also make room for other people.
Michael Eisenberg:
A lot of art, not science. I'm curious about something you actually said about five minutes ago, which is that it's a hard time to raise capital right now.
Jeff Clavier:
Yes.
Michael Eisenberg:
I have to be honest with you, my experience is the opposite.
Jeff Clavier:
You’re that good, Michael.
Michael Eisenberg:
No, no. No, in the seed stage, everything's getting funded. And even quickly again, it feels like a little bit back to COVID. So, we're seeing things get done quickly. Why did you say it's a hard time to raise capital in the seed stage?
Jeff Clavier:
So it's a hard time to raise capital for GPs.
Michael Eisenberg:
Oh, for GPs.
Jeff Clavier:
On the GP side, a lot of programs are coming back as I'm sure you read the news, like a lot of endowments are under attack. So they're not really that interested to put money to work. so GPs have a hard time raising capital. On the other side, it's true that the dollar amounts that are being invested are sort of up and to the right. The number of deals are actually going down, which means that there's a super heavy concentration of dollars in the top companies and they're all AI companies. Like, I don't have Q3 numbers because we're just wrapping it up, but at the end of Q2, like 40% of all the dollars in the US, invested in the US, went to 10 companies. Just think about it, right? It's crazy, and certainly for anything which is AI, with AI something, right? Either a tooling or vertical applications with good founders or whatever, they certainly have a lot of choices as to where they get funded and things go fast. But it feels to me that we're just depleting funds very, very quickly. When I hear about the mega funds investing a billion here, or two billions there, whatever, like at some point they're gonna run out of their commitments. And founders have understood that SPVs are not that great, so if you can't do SPVs and your funds are running out, you need to raise again. Then if the LPs say, “Hey, I want liquidity, so I'm not gonna give you more capital, we're gonna have an issue.
I mean we just raised a brand new, fresh 300 million just a few months ago. So we're good for three years, but I know, and we raised in record time, we were done in 10 weeks. I mean, it's hard, like it requires meticulous preparation and work, but the execution was very fast and we appreciate all our LPs.
So the point is, you have to pace yourself, and the one thing that you and I know very well that LPs want you to tell them what you're gonna do, and you have to do exactly what you said you would do, right? That's what they want. And so if you say, “I'm gonna deploy this capital over three years,” and you show up after 15 months saying, “Oh yeah, I'm done. Get me more,” they will hate you. They may actually still give you another fund, but they will hate you.
Michael Eisenberg (14:14.892)
By the way, you teed up another topic that I wasn't planning on covering, but I want to cover it now, which is your allusion to the fact that perhaps private money is more finite. So there was an incredible chart by Michael Cembalest, who is the Chief Economist, I believe, or Chief Equity Economist at JP Morgan–hopefully they can put it in the show notes–where he basically says the reason that the US stock market keeps going up is because there's less and less equity available, and more and more funds available. So you've got all this kind of liquid money out there from retirement plans and other things that's got to go into an ever decreasing pool of equities.
And so it feels like the money for the public markets is infinite, almost. The money for the private markets, like I said, because you have to actually go through a cycle of raising for LPs. You don't have these automated things until the US government changes its laws and lets you make kind of automated contributions to private money, which may or may not happen soon.
Now it's making its way, I think, now through Washington. You've got this imbalance, where nobody's going public, unless you can get like 400 million. You've got to privately finance all these companies until you get the $400 million of revenues, from a finite pool of capital. And so you end up with this massive concentration like the MAG-7, a massive concentration in the private markets as well, and a drying up pool of capital. Where does this take us, if the US government doesn't change the regulation around kind of automated contributions to private capital?
Jeff Clavier:
Well, I mean, that gets us to kind of a starvation of, so the mega funds have also, and I would add to what you said, that the mega funds have just increased their hold on the market, where they have an ability to raise multi-million dollar funds every few years. And so a lot of the capital goes there. And at some point it creates a situation where VCs who were not established, who haven't proven themselves–and proving yourself is really like fund one fund two–it's all on paper, right? But then three, fund four, it's like, “Okay, well, show me show me the money,” right? Like show me DPI. and in an environment where–when you and I met, and I got going, my time to return, back in you know, ‘04, or five or six during like the only days of Web2, was barely three to five years, right? So that means that I was actually getting liquid within three to five years.
And when I raised Fund two in 2007, my angel portfolio was already 5x DPI, right? In three years, which would never, you would never dream of that right now. It's just impossible, given what the market is going. And then when I had my first IPO, Fitbit in 2008, it was after eight years, right? Now, you can barely hope to go public before year 13, 14, 15. So the time to returns has doubled, and the time to prove yourself, just think about it, 15 years, it's five fund cycles. It's crazy. And so what's happening is you have real pressure on GPs to monetize early through secondary liquidity, which the good news, it's available. The bad news is the discounts, the spreads are just massive, right?
And so, people are only interested in your best names, as always, and they want to buy your best names at massive discounts. And so you're basically trading your future returns to get a bit of DPI, which is really what LPs are trying to get you to do. So we didn't have to do that for a raise, but we know that there is definitely expectations to just actually show the money for real, because they need that to actually get the cash recycled and invest in new funds.
As you said, we're just stuck in the situation where there's a few IPO's, but like they're so high in terms of hurdles that they're hard to get. And M&A is kind of waking up, but it's in this kind of weird, especially given the environment from a regulatory standpoint, right? Where you can't really sort of buy companies. So you kind of invest in them, and you suck them dry of their talent or whatever. So it's super bizarre, right? But it's happening for just a happy few. And there is just trillions of dollars of liquidity stuck in the system, because we just need more IPOs and more exits.
Michael Eisenberg (18:53.39)
I want to combine two things you said and ask questions. So it's taking 15 years, plus it's getting harder for GPs to prove themselves because it takes so long. So you have fun done, fund two, you don't have liquidity, kind of, or sub-optimized liquidity through secondary. And you can't prove yourself. And so like, if you play this movie forward, is this bad for innovation? Meaning, it's going to be harder for people to fund breakthrough innovation in the early stages, because you can't get really new funds running with capable people who can do this?
Jeff Clavier:
I don't think so. I think we're going to get, and to be very candid, you and I could have had that conversation, Michael, like five years ago. And I would have said kind of the same thing. The scale would have been maybe a bit lower, right, but like people always–like, true entrepreneurs will find a way to get financed. It may take them two years to raise their first fund, but they will, you know, have at it and they will kind of prove themselves and hustle to raise another fund or whatever. So I don't like, I've been expecting a contraction of the industry and to be very candid, it hasn't happened. Because if you ask me, the last time it made sense to have the number of funds that we had was probably back in 2010, when there was like 25 of us.
Because it was really good, and we were working together, because no one had big funds, and so it was super collegial and it was awesome. It was a true community of people backing entrepreneurs. And then everybody raised, you know, big funds and started to not really compete, but like we can't see like three or four great funds working together anymore. It's just impossible. The rounds are too small and the funds are too large.
Michael Eisenberg (20:40.824)
The big ones are stuck with whatever supply is available.
Jeff Clavier (20:45.888)
I think to your point of innovation, I think that Seed is still very much able to support innovation. So precedency, the big question for me, where really we have like a choke point is Series A and Series B. Because what's happening is like everyone is trying to find a very, very specific type of company, which is reinventing a sector, or AI enabling, you know, certain functionality or tooling some things, and then they will sort of try and plop as much money as they can, and as soon as one of those does a Series A, you can almost be certain that within three to six months they're gonna do another Series B ,if it's not like three to six days, it's crazy right now. And so you just have this concentration of dollars in very few companies, but if you have like a normal company which is growing nicely but not crazy, it's super, super hard to raise.
And that's where I see, like we're to support these companies, we'll give them a second seat or whatever, and we'll try to get them to break even, like breaking even early is super hard and you never get to a great growth curve. And so you end up with something which is very interesting. It's really challenging, and we're trying to help our companies through this, and it's really rough.
So to me, if you ask me what am I sort of really concerned about for my companies, is their ability to raise the Series A and Series B.
Michael Eisenberg:
You're originally from Europe. I now live in Israel. The US stock market has raised the standards such that the banks only take you public if you got, three, $400 million of revenue. Why hasn't something like the AIM in the UK, the Nouveau Marché in France, the Tel Aviv Stock Exchange emerged as an alternative to be a kind of lower scale IPO, meaning go IPO here where you got $80,100 million, and then you can kind of do a list on NASDAQ or the New York Stock Exchange. It feels like one of those should emerge to compete.
Jeff Clavier:
That's a great question. We've certainly sort of asked ourselves that question with our companies, which are doing well and are in the hundred to $200 million in revenue, but can't go anywhere because as you said, you know. Like 200 million, I mean, I don't see companies, except on the crypto side, like most of what's gone public recently, it's more like in the 4 to 500, right? And so there should be an ability to do what you just said. I think that there's a lack of appetite and aggressiveness from those other trading places like Le Nouveau Marché or AIM. I think the Australian Stock Exchange is actually the one that has actually listed a few companies, like Life360 went public there. And the problem is that from an investor standpoint, today, if you do that, it's felt like a failure as opposed to a success.
And then they flipped everyone and went public on NASDAQ a couple of years later, which is incredible, right? It's a great company, which I passed on years and years ago. I was probably the first pitch of the CEO. And I remember it was the first time and last time I saw the entire team wanting to literally murder the CEO, because his speech was so bad. But Chris has done amazing afterwards. But it's funny. It's still stuck in my head. And so there should be this sort of on the ramp to it, that sort of goes, “You go public there, and then you go there.” But I think that the other markets are just not aggressive enough, and local investors are kind of afraid that they would get secondhand goods, right? So I think we need a few great companies to do what you just described and then maybe that will actually create an alternative way to go public.
But no one is really pitching that to us. None of the bankers are saying, “Okay, you guys, we're gonna take this company, that’s at 200 million dollars in revenue, we're gonna take it public there, and then two years from now, we'll be on Nasdaq.” And to be candid, I don't know how we would sort of react to that, because the question is, okay, what sort of multiple are we gonna get? Because over there, the multiples tend to be more compressed. And the thing is, for a great company, like, your ability to stay private and raise more capital at higher valuations is there. It's a fact of life. Just increase your ARR, get a good multiple, someone will fund you at like, okay, you raised at 1.5 billion, let's just raise that 3 billion, let's just raise that 5 billion. And so because the private markets at the growth sectors are really sort of easy, not easy, but easier to raise from, then you stay private for a long time.
Eventually, like we said before, there's just more money in the public markets. I think somehow someone's going to have to figure this out. Maybe it’ll be the Clavier-Eisenberg Alliance for Secondary Markets, for markets in other countries. List there first.
So you have something called the three asses rule.
Jeff Clavier (26:13.006)
Yes.
Michael Eisenberg:
You want to tell everyone about that?
Jeff Clavier:
I mean, I haven't sort of used the three asses for a while. It's basically, so people once asked me what I was looking for. And I said, “Look, it's basically a smartass team building a kickass product in a big ass market. Those are the three asses rule.” And we used to have a fun interpretation of that. I think we still kind of use that, but we focus more on, let's just zoom in on the team. So the smartass part. And make sure that we operate in the bigass market. then the kickass product is something that we'll care about. But because we were doing more pre-seed these days, we really sort of angle on the team.
Michael Eisenberg:
What is the smartass team?
Jeff Clavier:
It's the right combo of people who have enough experience of the sector that they're trying to work in, or the tools that are trying to build, so they can really understand their target user and the function that needs to be built–but are not so locked into it that they would not innovate and reinvent the way things are done. They have, you know, it's the right combo of like an awesome leader, someone who's great at projecting and telling a story, right? A storyteller in the CEO seat, someone who is able to attract both investors and employees. An awesome CTO, architect, someone who's really able to think about the next generation architecture, infrastructure, product that can scale and so forth. And if you add a third, that's probably someone who's really strong on the product side.
Michael Eisenberg:
You’ve been at this a long time, and I like to ask this question of people who’ve been at this a while. So that's what you're looking for. Do you have a methodology for knowing whether you found it, or is it all in your gut?
Jeff Clavier:
I mean, the methodology would be, hey, we just check what they've done. You know, we talk to references, we try and get a view from people in our network who know them. So very often we're going to fish in very dense ponds, like people work at Meta, or people work at Stripe or like, like really strong schools. Right. But sometimes we'll–recently we bagged the first engineer at Instagram. Shane is incredible. Based on their pedigree and resume, we're going to sort of know that they probably have something interesting, but at the end of the day, spent roughly between a week and two weeks to run our process. And it's kind of gut feel, confirmed by tools and references and talking to people.
But at the end of the day, when you meet someone, and you know that they have it, and you look at the team they've assembled, and your super impressed–I had the case recently with a company called Koobz, K-O-O-B-Z, which is additive manufacturing for the shoe industry. And the founder is incredible. He spent two years figuring out the process that the company was gonna use to print shoes at scale, and he assembled a team of execs that joined him at pre-seed when he had almost raised no money, because his vision is so great, and he is so great, that he convinced those people to leave their jobs or their retirement to actually join him. And when I saw that I was like, “Fuck, this is one of the strongest like exec team I've ever seen in a pre-seed stage company.” And so talking to him, spending time with them, I knew–and every bit of information that I gathered through my reference calls afterwards, were just confirming that, you know, gut feeling that I had.
Michael Eisenberg:
Was 2005 Jeff able to do that?
Jeff Clavier:
2005 Jeff was a dumb fuck who knew nothing. One of the things that you need to be a successful investor is being there at the right time, and be lucky. And I was there at the right time when–like often people ask me, “Hey, how would you go about starting Uncork in this market if you had to start now?” And my honest answer is like, “I have no idea what I would do.” Because by definition, what I saw in the market 21 years ago was a complete void, between angels on one side, the ones you mentioned, the greats, right? And the VCs. And because of the capital efficiency that web tools startups had, because suddenly the cost of innovation dropped massively, they just needed to raise like 250K, 500K, like maybe a million. Like a million dollar round back in the day was massive, right? But they still needed a lot of help. And so that was the idea. That's why they called us the Super Angels at the time, because I was writing my small checks, but doing nothing than supporting founders full time and putting them together.
So I was there at the right time, but yeah. What I got the privilege to do for the past 20 years was because I was there super early. I don't know what I would do if I had to start in this kind of crazy market right now.
Michael Eisenberg:
Yeah, I don't know what I would do either. You said kind of before in other forums that you had great regrets passing on LinkedIn and Uber, right? Those are at least, LinkedIn's about 20 years ago, a little less, and Uber, I guess, is a little more than 10 years ago at this point. Given what you just said now about your gut and 20 years ago Jeff, et cetera. Did you get it right? Did you get it wrong? And in retrospect, we all get these things wrong all the time. But like, what was it about not picking up the founder or not understanding something that you think caused you to pass then?
Jeff Clavier (32:53.72)
Trust me, I've replayed that, and I have Airbnb, I have so many. I have one of the best anti-portfolios in the market, sadly. So LinkedIn was 2004. I was there in the early days of social media. I was one of the early VC bloggers like you, right? You and I were blogging super early, like 2004, 2005. And the world of social media was kind of smaller. So I got to know Reid Hoffman pretty well, and he kindly offered me a spot in the angel round of the, it was a Series A, that Sequoia led. And he said, “Well, Sequoia doesn't want us to focus on monetization at all. So we're just going to build the network during the Series A,and we’ll raise the Series B and then we'll start monetizing.”
And I was like, “Dude, no one's going to invest in a social network for people, in industry, if you don't monetize.” And so I was like, “I just don't think it's going to work.” And so I chickened, I basically, I declined, and I didn't even decline in response to his email. In my stupid mind, I was like, well, if he asks me a second time, I will probably invest, but maybe I can sort of avoid it. And yeah, I mean, here went the LinkedIn investment.
And then Uber. So–I have a funny story with Uber. So everyone knows that Uber was supposedly conceived during a snowstorm in Paris during a conference called The Web, right? And Garrett was there, and Travis was there, and I was there. And actually, I actually led that group of people through the Paris subway, because Paris was completely stuck. And so we were on the outskirts of Paris. We took a cab. We basically got everyone to Subway, and then I led them to the hotel. And then we met for dinner later at Lenny Kravitz's house in Paris. And that's where they actually sort of talked about sort of starting Uber. So I was there. They actually pitched me in June of 2010. Travis was there, Saka had organized the meeting. And I was really sort of intrigued, but Travis said, “But I'm not going to be the CEO.”
And Garrett said, “I'm not gonna be the CEO.” And they had brought that random dude that they found on Twitter to be the general manager of the thing. And I was like, “Ugh, I like everything except the fact that you guys aren't CEOs.” And I basically sort of passed, because I asked Travis, “Are you gonna take over as CEO?” And he said, “No, I won't be CEO of Uber.”
And it was called Uber Cab at the time, right? And at the end of the summer of 2010, I had, like, one final shot to invest, and actually, I said, hey, there was like 100K available. It's crazy that Uber took the entire summer to raise 1.5 million, right? Crazy when you think about it. And I said, “I'll take the last 100K,” and they said, “Well, we'll give it to someone from the industry. So no thanks, but you know, good luck to you.” And that's my story with Uber. And to be honest, I can't blame myself. I mean, obviously I would have loved to finally put some shackles into Uber.
But I passed on for the right reason, because I didn't see that Ryan Graves, who's done incredible for Uber, was the right sort of general manager slash CEO for this company. If I don't believe in the CEO, then I'm not going to invest.
Michael Eisenberg:
I hope people listening understand how hard this business is. You're dealing with incredible uncertainty, people who are extreme personalities in some cases, you know, the signals that are early, you know–Uber took a whole summer to raise a million and a half dollars. You know, some guy with a PhD in data science is getting a million and a half dollars a month right now. And it became Uber.
And it was really not obvious. I sat through the Uber pitch when I was at Benchmark, and Benchmark invested. Even then, you know, it was interesting. It was cool. It was growing quickly. It still wasn't obvious. You know, they only had San Francisco. You didn't know they were going to be able to launch New York. You know, the TLC in New York's a little tougher than the TLC in San Francisco. But, you know, someone work out this is a hard business where everybody's got a big anti-portfolio because it's really, really unpredictable, which–
Jeff Clavier (37:22.946)
And people then tell you, ”But why didn't you invest? It's so obvious!”
Michael Eisenberg:
I wish. Yeah, exactly. In hindsight, everything's obvious. But that also begs the question. This is, think, something I struggle with also is like, how do you know if you're good at this business? Like you miss an Uber, you miss a LinkedIn. I missed my share as well. You hit some. And how do you know if you're good?
Jeff Clavier (37:45.102)
Two things. First, when I started back in 2004, I didn't want to risk other people's money. So I convinced my wife, my first LP, to let me use 250K of our hard earned savings. We had made a little bit of money at Reuters when we sold our startup. So I started with 250K saying, “Okay, if it works, we'll go to 500K.” So that was my fund. And I started making 25, 50K investments here and there. When it's your money, you really pay attention, right?
And like what I mentioned, the key thing for me that unlocked the now Jeff Cavier and Uncorked story is the fact that some of my early bets in the Web2 space got acquired super fast.
Like my first investment, Truvio, which was a video search engine pre-YouTube. Pre-YouTube, right? We funded it in January of 2005. And in December of 2005, there's a bidding war between Fox Interactive and AOL. And we sell the company to AOL for 17X our investment.
Michael Eisenberg:
By way, my first exit was to AOL as well. Quick hack. There you go.
Jeff Clavier:
God bless John Miller. I sold a bunch of things afterwards. We became good friends. And so that one, and then a few others, like literally, I had returned my own fund five times by the time, within three years. And so I wouldn't claim that I was good, but at least I didn't bankrupt the family, which was obviously my number one, you know. We had two young kids. My wife couldn't actually work until we got a green card. So I was the sole bread maker. So starting Uncork when I did was absolutely insane. I should have kept my cushy, busy job and my salary because, like, when you invest your own capital, you don't have income, right? So it was insane. What I did was stupid crazy. It just worked, right?
I think the imposter syndrome kind of left me in 2008, when I had my first IPO. Because, as you know too well, the day you actually put a company on the board, like you go to New York and you go to the ceremony at the NYSE or NASDAQ or whatever, then you're in the other band, right? The one that had IPOs. And then you start counting the number of stars that you have on the number of IPOs. Not saying that that made me good, but I felt that that brought some legitimacy to what I was doing. And then, I would say, now when I look back, so, $1.2 billion in management, 285 companies, a bunch of exits, a bunch of IPOs, and the team that I've assembled is exceptional. And I'm grateful for that. And I think somehow, I kind of didn't suck too much.
Michael Eisenberg:
What was the first IPO?
Jeff Clavier:
Fitbit, in 2008.
Michael Eisenberg (41:18.894)
It begs the question, so you just celebrated the 21st anniversary of Uncorked and you also, I think, announced that you're stepping back from day-to-day management of the firm. I'd like to understand first what that means, but the other question that I myself struggle with, and one needs to struggle with, is, when are you too old for the business? You finally convinced yourself that you're good at the business, or you can do this, or you don't suck at it, to use your term. Then, because these things take so long, these companies take such a long time, you find yourself in year 21 saying, “I'll take a step back, and maybe I'm on the other side.” How do you think about that?
Jeff Clavier:
I think that as long as you're working hard, you're getting great deal referrals from the ecosystem, and you're still able to make a difference for entrepreneurs, and your advice is on point and well-timed as opposed to, this is the advice that we would have given you 15 years ago–I think you can do this until whenever, right? To me, it's more a question of, hey, I'm 57, right? Actually, no, I’m 58, but I was 57 when I made the decision. And my wife retired three years ago from Stanford. And we have a one-year-old grandchild. What do we want to do as a family? And I've been working my ass off for 21 years, like nights, weekends, travel, and so on so forth.
And I've said, “Look, I've enjoyed this. This is my last mission. I'm grateful for what I've done, but I also want to get a bit more me time.” And I'm lucky to have my partner Andy, who's an incredible leader, who, like me, founded a startup and then going to venture. And I kind of groomed him, and he demonstrated–because he hired both the bulk of the team that we have–that he was an extremely gifted speaker on talent. And so I said, “Look,” because I started to make him sort of co-managing partner a few years ago. So we run the firm together. And as we raise our new funds, I said, “Look, it's time for you to run this thing. So I'll step back. You will be the sole managing partner.” So now I'm just a regular partner and I will continue doing this for another three years.
I'm super active, like I've already done two deals in the new funds, and I'm working on over a third. And this is awesome, because like the day-to-day management is something which I've now relegated to Andy. So not that I have more time, and I still don't do everything which I want to kind of slow down on like, travel and going out and everything, but I'm doing it on my terms. And we'll see in three years whether actually, you know, step back and stop being a GP, that's my intent, but maybe at the time I'll say, “Fuck it, I'm just gonna do it another fund, but at least the firm is in great hands.”
The pandemic really sort of triggered this to me. I was the key man, was the sole signature and I was the only one who could approve wires and stuff like that, right? And suddenly I was like, “Well, if I have COVID and I get under a ventilator, nothing happens.” And so I had our lawyers draft a business will, which was awkward, right? My wife and my assistant could deem me incapacitated and could pass the responsibility of signatures to the new COO of Uncork, Andy. That was awkward, dude. But that really sort of created, sparked this notion that, hey, we can never be in a situation where the firm depends on me sort of being there. And so we rewired everything so Andy could actually be the other guy who could make this run. And I was like, “Well, shit happens.” Unfortunately, I just learned yesterday that one of my friends just, he was like in his 50s, and he died in his sleep. It's a disaster, but this happens. And so you need to have a mentality where the firm can't depend just on you to be there. And you know, the show must go on. And so that sort of triggered these deep thoughts about how I wanted to make this happen. But also what I was doing, I was like, well, it's not a backup. He’s going to be the front man.
Michael Eisenberg (46:09.806)
Are you going to keep investing even if you leave the firm in three years?
Jeff Clavier:
I think so. I mean, I don't know. I can tell you that I've acquired a vineyard in Walla Walla, Washington. I'm starting a winery, which is sort of a new startup.
Michael Eisenberg:
Wait a minute, the French man has acquired a vineyard in Washington to make wine. I just want to make sure I have the picture clear.
Jeff Clavier:
Yes.
Michael Eisenberg:
Bordeaux wasn't good anymore? Climate change?
Jeff Clavier:
I don't–Bordeaux has plenty of great owners and winemakers, and I think they have their own issues with–and I don't want to go back to France anyway. So my wife and I have decided to move to Washington. So we're leaving California in six to nine months. We'll be up there in Walla Walla, Washington. We have bought a vineyard. We're making wine as we speak. We just got our Merlot and our Viognier picked up, and the rest of the fruits will be picked up in the next month. And we'll make three wines this year to get started. Small production, 350 cases on list only. So no retail presence, no wine tasting room, whatever. Super chill. And that's going to be a fun project for me to spend time on. As to whether I'll, I mean, I will keep my board seats. I will continue working with my companies. I may sort of mentor a few VCs, because this is something which I love doing and there aren’t that many great mentors or coaches for VCs. I may do that, but investing, I don't know. Probably not.
Michael Eisenberg:
What are your personal core values?
Jeff Clavier (48:04.716)
My dear friend and mentor, Brad Feld, told me about the ‘fuck me once’ rule, which basically says, I will trust you, and I will work with you and I will back you, but fuck me once and we're done, right? So I have this sort of deep sense of like, I support people, I help people, but if they fuck with me, then we're done. And I tend, like–my team will tell you that I don't care about people, which is both true and not true. I care deeply about a small group of things, and then don't give two shits about most, what they think, what they say. So very much, like, I've been there, I've got to where we are through hard work, dedication and supporting entrepreneurs. And those are the core values that we have, I think, at Uncork, where we're really there.
Like I was getting interviewed, and someone was asking like, “What's the key difference between you and other investors?” And I'm like, “Well, when there is a big messy problem that happens in a startup, we literally run towards it, and we're trying to fix it as soon as possible. Whereas, a lot of investors will kind of step back and see whether the thing gets treated, managed, handled without them getting their hands dirty. We really very much run towards those kinds of challenges.”
So it's what we do and how we do it, which is basically the core values that have developed over the past 20 years, and I make sure that, as I step back, it's really ingrained in the firm.
Michael Eisenberg:
What’s motivating you personally to kind of get at this this hard for 21 years and then now to step back?
Jeff Clavier (49:46.638)
It was a startup. So by definition, it was kind of weird. It was like, okay, there is an opportunity in the VC world, which hasn't sort of seen a new–cause we basically invented a new stage, right? You had angel, you had series A's, and you had nothing before, right? And we just inserted ourselves and we created an industry, which is managing billions of dollars, and that's created trillions of dollars of value.
And so I thought it was kind of interesting. My dear friend, Josh Copeland, I think has had a real vision that this could become, what it has become. It was more like, “Hey, this sounds like a good opportunity. Have at it and we'll see.” And like in 2007, I kind of didn't raise the fund because I wanted to, I raised the fund because I could.
Because people came to me and said, “Hey, you're good at this. This is working. You have all those exits, and outcomes, and companies and whatever. And you're basically getting in all the rounds you want. Like, why don’t you go PM with other people's money?” And I was like, “Well, I don't want to spend two years in misery to try and raise a fund. So if I could raise a fund quickly, I may do it.” And because I didn't need to, it kind of became a thing, which is kind of weird. It's really super bizarre where, literally I raised 15 million in eight weeks, right? Which never happens. So I got very lucky to talk to the right people, and at the right time in the industry and so forth. And then once that worked, then I was a fiduciary. I was responsible for this money that LPs gave me to invest. And I worked super hard to do everything as a solo GP.
And I was a sole GP for six years. probably slept, you know, three or four hours a night during that time, probably cut off a few years of my life because of that. And in 2010, I was like, “Okay, we're gonna raise the next fund, and I'm not doing this on my own anymore.” And that's when I decided to actually build a firm and bring a team together to support me. And I'm way, way happier now than I was then, because I had to do everything, every single thing I was responsible for. And now I'm actually sort of comfortable stepping back and letting my baby go, because he's grown up. The firm is an adult, and it's in incredible hands. It's a bit like when your kids grow up and they leave the nest, and you're supporting them and happy to see them, but they have to go.
Michael Eisenberg:
I feel like, by the way, this is just an incredible conversation around the evolution of the firm. If you were starting again today and you were 28, 9, 30–What's the current institutional seed thing. Where's the seam in the market today that you would go for if you were starting again?
Jeff Clavier:
So I think that what I would do is try and find a niche where I am incredibly well-suited to pursue the entrepreneurs, and the ideas, and I can add a ton of value add, and I would go from there. As of today, Uncork is investing in everything. We do consumer marketplaces, AI first services on the vertical side, AI tooling. We have a stealth investment in an LLM.
Personally, I do nothing but deep tech. And so there's nothing that we don't do, except we don't do much healthcare, but we look at everything. So we're the definition of a super broad investor. And we can compete because we're Uncork and we've had great outcomes in all categories. If I was starting today, I would really focus my energy on, okay, this is the one thing I do, and I'm going to try and get the best opportunities in that sector, and then grow from there. And I would try and be like, quite narrow, but really, really good and build the reputation of an awesome investor, entrepreneur support, great deal flow, and then take it to the next level and then start branching out.
Michael Eisenberg:
We lose a lot of money in seed investing, right? We lose a lot of companies. The ratio is, I asked Brad Feld, you called him your mentor, what to ask you. He said, “How do you decide and when do you decide to say goodbye to the entrepreneur when it's not going to work out?”
Jeff Clavier:
So that's really, really hard. We should probably say goodbye earlier than we do. Brad always told me, “Hey, I always write one check too many,” right? So I should probably, when things go bad, I look back and I say, “The last check, I should probably not have written it.” At the same time, there are sort of companies which sort of make it, after going through like really hard times. None of my multi-billion dollar exits made in a straight line. They all died almost one, two, three times. Seven times for Fitbit. And they still made it. And so if you're not there, I saved Postmates’ ass a couple of times by being sort of the provider of last resort. I fronted their payroll just before they closed the Series A.
I led the second seed because the thing was barely launched and wasn't working. So you have to have conviction and be supportive, but you can't be blind either. And so at the end of the day, if you've given it your all as an investor and you as the entrepreneur, “Hey, are you sure you want to keep on going?” And it's the case, we have those conversations with people now when a year, 15 years, 12 years into it, the company is like a 10, 15, $20 million, clearly never delivered on the promise of growing big and fast. What do you want to do?” And if the entrepreneur says, “It's just too hard, and I've tried everything, and I think I'm going to let it go,” then we're like, “Okay, fine, let's just sell the business. because for us, it's cash, for you, it's opportunity cost. “Right? It's your time.
And so you have to have real conversations. And that's why we want to build those real kind of trust and relationships with our founders, so we can have those very hard conversations. Those are the same when you have a founder who's gotten the company to a certain level and then peer's principle, they just can't scale, and you have to replace them. And that, unfortunately, those are tough times, but they happen.
Michael Eisenberg (57:21.07)
People don't appreciate just how much you put into that one answer. Like you funded Postmates’ payroll, even though it didn't have much to show for it. You did a double seed in Postmates, even though it didn't have much to show for it. At the same time, the guy was getting to $10, $20 million, and there aren't a lot of companies out there that get to $10, $20 million of revenue. It's just the dud is not going anywhere, and you have to have a hard conversation. It's really the hardest business. I need to ask you one last question, as we get into the hour mark here. How did you get the @Jeff handle on Twitter? How come I can't get @Michael?
Jeff Clavier (57:54.104)
So I was early on Twitter, clearly, right? But I wasn't Jeff at the beginning. I was Jeff Clavier. And I noticed that Jeff was taken by someone who hadn't tweeted for like, I think he had tweeted like once. And so I reached out to Ev, or Goldman, I don't remember who I pitched, but I said, “Hey, give me Jeff, and I will Tweet and I will do my thing, or whatever. So that will be good for you.” And I think they sort of figured out the transfer of handles through that process, and it was probably one of the first handles transfer.
Michael Eisenberg:
Has anyone tried to buy it from you?
Jeff Clavier:
Oh, fuck that. Hey, it's forbidden. It's against the TOS, but no, I mean, it's fun to have–because people don't believe that I have @Jeff and I'm like, well, I'm @Jeff–
Michael Eisenberg:
You’ll have great wine sales from @Jeff.
Jeff Clavier:
Yeah. But people think that Jeff space Bezos is Jeff Bezos, is Jeff Bezos without the space. And so I get a lot of mad, you know, support requests or whatever, you know. Like having and I got you know, my wife got @Bernadette as well. So we're one of a very very few first name handles couple.
Michael Eisenberg:
Wow.
Jeff Clavier:
And when I got @Jeff, people are like, fuck, how’d you do that? And a lot of my friends essentially like my friend Rodrigo got @Rodrigo through the same process.
So yeah, be early and hustle with the founders. Funny story, we talked about LinkedIn. At some point in 2005 or something like that, Reid asked me to actually stop being so aggressive at inviting people to join LinkedIn, because I was spamming everyone. I was in the race to, I don't remember if, like the first person to have 25 or 50 connections on LinkedIn. So I was super early on LinkedIn too.
Michael Eisenberg:
Amazing. Jeff, thank you for doing this. I really appreciate you taking the time early in the morning. This is an incredible conversation. And what I want people to actually take away from it is, number one, hustle counts for a lot. Number two, this is a hard business, and being at it for 21 years, knowing what you're doing and building a firm that lasts is actually super unusual in the business. And take anything you can from Jeff, any mentorship you can. I've enjoyed the relationship over many years, decades at this point.
So thank you for everything you do for the ecosystem, your investments, and really being the pioneer of the seed category. Thanks for joining us.
Jeff Clavier:
Thank you, Michael. I loved this conversation, and thank you for doing this. This is a labor of love, and building your firm is hard, but doing a great podcast is hard too. So thank you.
Michael Eisenberg:
Thanks, Jeff. If you enjoyed this podcast, please rate us five stars on Spotify and Apple Podcasts and subscribe to the YouTube channel because you want to hear more of Jeff's content and more of invested content.
Jacques Benkoski (00:00.064)
Everybody is expecting that AI adoption will be limited by its ability to be integrated into customer workflows. They say, no, that's wrong. Customer workflows will evolve to take advantage of AI.
Michael Eisenberg:
Founder friendly, is that a good thing or is it overrated?
Jacques Benkoski:
I don't believe in being founder friendly.
Wiz broke that triangle. It was able to sell, at a high price, a product that's really easy, with pretty dumb salespeople.
Michael Eisenberg:
Oh come on, you've never been on a board where there's been a board member who was prescriptive and–?
Jacques Benkoski:
I have, and I'm usually the one that stands up and has them to shut up.
Michael Eisenberg (00:30.894)
Okay, so you see there is tension on the board!
Jacques Benkoski:
No, no.
I beg people that during the first phase of validation, you cannot be selling. You are in listening mode. And that's hard on Israelis.
Michael Eisenberg (00:45.72)
Welcome back to another episode of Invested. I'm here with an old friend, Jacques Benkoski. Welcome.
Jacques Benkoski:
Thank you for having me.
Michael Eisenberg:
Jacques is a veteran investor at USVP. USVP is a storied firm. I hope we're going to get into that a bit. I met Jacques through his partner, Steve Krauss, also a longtime friend and a mutual friend. Jacques, welcome to Invested.
Jacques Benkoski:
Thank you, it's a pleasure to be here.
Michael Eisenberg:
Why don't you give everyone your background? For those who didn't hear the accent, it's French.
Jacques Benkoski (01:18.606)
It's not, it’s actually Belgian.
Michael Eisenberg:
It’s Belgian!
Jacques Benkoski:
It's French speaking Belgian, but it's a slightly different accent. And so I was born in Belgium. I grew up there until I was 18. At age 18, I came to Technion in some crazy idea. And I learned Hebrew in passing. They wanted me to do a year of Mechina. But since I was accepted to start school, I said, “Well, I'll start. Worst case, I'll fail. But let me start and see if I can make it. And I learned Hebrew in passing.” I still speak, as you know, very well.
Michael Eisenberg: (01:48.384)
Technion, for those who don't know is like the Israeli MIT, and Mechina is like a prep program you do for a year before they actually let you into university.
Jacques Benkoski:
Correct. So I managed to bypass that and succeed nonetheless. And to the surprise of a lot of people, I actually find that Hebrew is a particularly easy language to learn. People have this notion that it is really hard, but once you get past the alphabet, which is 26 signs, you know, you can learn in a few weeks. The language itself is very easy, very structured. And Israelis are particularly flexible. If you don't speak well, they understand you anyway. And so you can get fluent to a level that people understand you very quickly.
Michael Eisenberg:
And then after the Technion?
Jacques Benkoski (02:32.75)
And after Technion, I went to get a Master's and a PhD in the United States, at Carnegie Mellon. At that time, I was more of a researcher type guy. I did a lot of academic research, wrote 30 technical papers. And then after that, I went into industry, worked in a very large company in the semiconductor space.
Michael Eisenberg:
Which one?
Jacques Benkoski (03:00.83)
It's called STMicroelectronics. Not many people know it. It's the fifth largest semiconductor company in the world. We were based in France, so that the kids could learn some French as well. And then, as the story goes, and many people, a friend of mine did a startup, except at that time, nobody knew what a startup was. It was a small company that was losing money. And so, but I had the chance to test his product in my company. And I was so impressed that I decided to join the startup.
I was among the few 10th of the earliest employees. The company was a huge success. We ended up going public in 1994.
Michael Eisenberg:
The company's name was?
Jacques Benkoski:
Epic design technology. Won't speak to anybody, I think, in the audience.
Michael Eisenberg:
Not anymore.
Jacques Benkoski:
Not anymore, exactly. And so the company was public for three years, which was a very important experience, to go through the going public and how you behave as a public company, and how different that is from being a private company. And after three years, we got acquired.
Michael Eisenberg:
By?
Jacques Benkoski (03:59.214)
By Synopsis. Thank you. And then, as the story goes, another friend called me up and he said, “I just started a company, but I'm a technical founder. And by now you're a business guy. And would you like to be my CEO?” It sounded like a great idea. We’re talking late ‘97, early ‘98. And so we wrote the.com, which is eerily similar to the current situation that we see today with AI.
Michael Eisenberg:
We’re gonna use the fact that two of us are old guys to talk about that in a second.
Jacques Benkoski:
We can do that for sure. And so, just for reference, I raised a hundred million dollars during those years. And a hundred million dollars of those years is like many hundreds of millions of dollars of today.
Michael Eisenberg:
What was the company's name?
Jacques Benkoski:
The company was called Monterey Design Systems. But the reason we were able to raise so much money, even though we were doing something very boring–technical software, high performance type stuff–is, HP at that time suddenly had a vision that they wanted to build data centers.
Data centers didn't exist. Everybody had computers on premise. So HP came to us and said, “Could we work together? The software will run in our data center, and you'll have just the front end with the customer.” Today you call that SaaS. Back in those days, we called that ASP, application service provider. And since it was this brand new internet delivered software, we raised money like crazy. Fast forward to 2001, the world comes apart in ways that people that haven't been around at the time can't really understand. People go like, “Oh, the crisis of 2008, nothing to do with the 2001.” It was way deeper, way more killing everything in tech. 2008 was mostly a financial crisis, but not so much a tech crisis. And so more than a third of my customers went bankrupt. We're not talking churn here. We're talking gone.
Michael Eisenberg:
I'll just open up the conversation because I think this is an important point. There was a ton of companies whose customers were financed by venture capital at the time. And ASPs was this whole class of companies. You had a pile of them in different layers of the stack. This was an ASP. Then there was Exodus, which was like a hosting facility, and on and on. I forget the name of the big one in Atlanta right now.
But their customers, a large percentage of their customers were backed by venture capital. Venture capital dried up when what Barron's famously called ‘dot bomb’ about Amazon happened. And then, you know, a third of your customers just went bankrupt in four minutes. Go ahead.
Jacques Benkoski (06:42.574)
And so at that time, in 2001, of course, no capital available. And my customers were going away, and suddenly nobody was in the mood of using software that would run on very large supercomputers. And so the saving grace was buying another small company named Aristo. If we’re naming everyone, which was run by a delightful gentleman called Simon Bloch. If you know him. Nice Jewish guy in Silicon Valley.
And they had a product that ran on a PC. And so we morphed ourselves into that company, and shelved our existing product cause nobody wanted it anymore, and became them. And with that, we were able to turn the corner, and that company was acquired by Synopsys again in 2004. USVP was an investor in Epic Design Technology. Met Steve for the first time when he was a board member at Epic.
Again, we're talking 1993, ‘94. And then the second company, the one that we acquired, was backed by USVP. And so I had incredible luck of having Erwin Federman become my board member, effectively my mentor.
Michael Eisenberg:
The legend.
Jacques Benkoski (08:09.134)
The legend, absolutely. And so after I sold that company, USVP was like, “Well, what are you going to do now?” It was sort of a very classical story. And I said, “Well, I don't know, but I'm not going to do another startup right now.” And so they said, “Well, why don't you come and hang out with us?”
So I hung out for a number of years. I did a job of being executive chairman of companies, which I tremendously enjoyed, and gave me more experience in helping coach entrepreneurs without actually running the company. And then eventually USVP was like, “Well, what is it going to be? Are you going to stay, or you're not going to stay?”
Around that time, we’re talking 2008, 2009, everybody discovers Israel. Everybody opens an office in Israel,and USVP, who had been investing in Israel very early with companies like Compugen, and Mellanox, and Checkpoint, was miffed. Like, wait a minute, what is going on here? We were doing Israel. And so we had a lot of soul searching, and me knowing Israel very well, I was asked to figure out what we were going to do. And so we came up with this strategy, which doesn't have a good name. It's called, ‘let's not open an office in Israel.’
Michael Eisenberg:
Yeah. I actually call it the frequent flier strategy.
Jacques Benkoski:
Okay. Fair enough. Fair enough. Under the notion that we were doing series A's and series B, we weren't going to do seed in Israel. And so it was much better for us to position as a U.S. venture capitalist that understands Israeli companies, that brings the U.S. expertise to those companies, and be friendly with all the seed funds in Israel, Aleph included. And this strategy has worked extremely well, as you may know. And we've been very successful in deploying it, and we think it has a lot of legs to continue to do so.
Michael Eisenberg:
Okay, I wanna unpack a couple of things somewhat quickly. First of all, for just a historical record, Jacques mentioned that USVP backed Compugen, where the firm I was previously associated with was an investor. They were the first institutional money into Check Point, a small place called BRM had the original money, few hundreds of thousand dollars into Check Point, and then in the first half of the 90s, USVP and Venrock each put, I think it was $10 million each into Checkpoint in the early days, till it became worth a lot of money. And I believe Erwin Federman led that as well, and was on the board for a very long time, if my memory serves me correctly.
Jacques Benkoski:
Erwin was chairman of the board until he turned 85. And then he went to Gill and he said, “I don't think it's proper to have a board member of 85.” And that was the end of that.
Michael Eisenberg:
He's just a remarkable person. Also, USVP, it should be said, and this talks to your background, did a lot of work in semiconductors, and semiconductor equipment technologies over time. Erwin obviously was the leader of that. And then I think you've been also famously invested here because of Check Point, but not only, in many cyber companies that have done well in Israel, and you yourself then. So what is some of the portfolio you've developed in Israel?
Jacques Benkoski (11:14.222)
So the current flagship company is Cato Networks, which is run by Shlomo Kramer.
Michael Eisenberg:
Yeah, CATO, C-A-T-O.
Jacques Benkoski:
CATO, which is, if you have seen the recent press releases, not giving you any non-confidential information, but just raised money at $0.5 billion.
Michael Eisenberg:
And Shlomo was one of the founders of Check Point.
Jacques Benkoski:
Correct. And we've had the pleasure of investing in his other companies. We invested in Imperva, which is a company he ran after a checkpoint.
Michael Eisenberg:
Just traded hands again in PE right now also.
Jacques Benkoski:
Exactly. And we were the first investor in Trastea, where Shlomo was the seed and founding investor. And so those are all Shlomo related, very significant success. And we recognize his leadership and his skill, and it's a pleasure to have our name somewhat associated with his.
Michael Eisenberg (12:06.414)
So you mentioned earlier that you think what's going on in AI is highly reminiscent of what those of us with some gray hair remember from ‘97, eight, nine, 2000, 2001 and 2002. Unpack that for me.
Jacques Benkoski:
Look, if you look at what happened in those years, people got the notion that the web was going to happen, and the web was going to enable a whole bunch of new industries and new services and all that, and started investing and building up the infrastructure to do so. Data centers, networking equipment, and so on. And what happened is not that it didn't happen. It just happened later and slower than expected.
You know, if you look at Webvan as an example, which was the laughing stock of those years, where I see for those who don't know, Webvan was delivering your groceries at home. I think it's now called Instacart. But at that time it was sort of a joke, like, oh my God, what are people thinking? You know, you're going to order on the web and you'll be delivered at home. Pet.com and all of those were just fun. Like, that's never going to happen. And then it eventually did happen. It just happened in 2003, 2004 and so on. And so the real issue was that the buildup was way ahead of the adoption, and the buildup was sunk money, if you want, because it wasn't being used. What we're seeing right now with AI is reminiscent, in that people are talking about building nuclear reactors next to data centers. We all know it takes a decade at a minimum to build and put in service such a system if you ever could. And so that frenzy, that buildup is currently well ahead of demand.
Michael Eisenberg (13:52.11)
Almost nobody alive anymore remembers what it's like to build a nuclear reactor in the United States. There's not a lot of learned experience.
Jacques Benkoski:
Exactly that. Exactly that, too. But it's just, the pace of the buildup compared to the pace of adoption creates this gap. And one of the frightening similarities in what you were saying earlier is the amount of AI buildup where you can trace the source of the money to venture capital, as opposed to revenue is at 60 plus percent. And so, if the demand is going to catch up quickly, such that all that capacity will be used will be good. But chances are that technology always takes a little longer than we think, and it will perhaps lead to the end of what after all seems to be a bubble. I can't guarantee it, and maybe it won't happen, but it's very similar.
Michael Eisenberg:
But you think this time is not different.
Jacques Benkoski:
You know, every time somebody says this time it's different is when you know that you should be careful.
Michael Eisenberg (14:50.882)
I was sitting with a young man I have a lot of respect for named Mackey Craven. He used to be at OpenView, now he's opening his own firm on Monday in New York. That's, I guess, two days ago now. And I told him that early in my career I experienced the bubble in the dot com crash, and it was so much pain, so much bleeding, so many scars. It's probably taken me 15 to 20 years to recover from the lessons of that, number one. And some of the lessons are super valuable, obviously. And at the same time, I've come to view bubbles as a positive and not a negative. Because a lot of what you said is true, which is, we are still today benefiting from the fiber optics laid by the bubble. No one remembers Global Crossing anymore, but we're all benefiting from Global Crossing. You can look it up on Wikipedia, if you're listening to this. Nobody remembers Exodus or all the other ASPs or hosting companies.
They were the foundations for our modern hosting architecture in many ways, and even the notions of cloud computing. What do you think are going to be the artifacts that we'll use in a decade from now of the current, what you think is a bubble in AI?
Jacques Benkoski (16:04.43)
That's a good question. I think certainly the infrastructure that is built in terms of how you build applications and how you deliver applications. Aaron Levie, the CEO of Box, which is a company very close to our heart, too, just tweeted yesterday that everybody is expecting that AI adoption will be limited by its ability to be integrated into customer workflows. And he says, no, that's wrong. Customer workflows will evolve to take advantage of AI. And we are all examples of that. We Google, which is a learned behavior. We know how to Google, right? We've learned how you enter a query in Google so that you get the right answer. You don't Google the way you talk. You Google the way you Google. And so his argument is absolutely cogent to me, that we will change the way we work to use that AI. And that, I think, is certainly gonna create a new way of thinking, a new way of working. And those will stay with us.
Michael Eisenberg:
That's almost a human perspective, but what's the physical infrastructure that you think gets laid now that is–or is there not? Because you sound like you're pretty skeptical of the data center build out.
Jacques Benkoski:
I'm not skeptical of it. I'm wondering whether the speed at which we’re investing and building those things will be justified by a commensurate use. And somebody posted, I think a few days ago, that 95% of AI projects currently fail. It's probably the right number.
Michael Eisenberg (17:44.63)
You know, 90% of venture investments fail too, right? You and I are still sitting here.
Jacques Benkoski:
I'm not saying that those data centers will not be used. I just worry that the speed of and the depth of the investment that is being done may just be ahead of its time. Not to say that any of those data centers won't be used eventually.
Michael Eisenberg (18:07.086)
When you've been wrong as an investor, have you been too early or too late?
Jacques Benkoski:
I've been too early, too late. I think I've been both, mostly too early, but not too late. And you know, when you're early in the market, it's very painful, because it doesn't matter that you started early. Whoever started at the time that the market picked up is at the starting line to get there with you. And so I've watched companies that sort of waited for the market for two and three years, only to have a new entrance in the third year come up and take the cheese.
Michael Eisenberg:
You've been doing these Israeli investments for almost 20 years now, on behalf of USVP. One of the things you said was that your goal was to make USVP the friendliest American fund for Israeli entrepreneurs. Did you pull that off?
Jacques Benkoski:
I think the word friendliest, I don't know if I used then, but maybe you Googled it and you found it.
Michael Eisenberg (19:03.276)
You know, it's like you said. We learned how to Google.
Jacques Benkoski:
Yes, exactly. I don't know that we are the friendliest. I think we are, I hope we are viewed as one of those that has the biggest value add in the particular context of Israeli companies that have this unique culture and have to enter the market.
Michael Eisenberg (19:21.762)
What does a value add mean?
Jacques Benkoski:
Enabling them to understand the growth challenges in a way that we speak a language that they understand, which a lot of firms that are not so used to investing in Israel don't.
Michael Eisenberg:
Is it cultural affinity?
Jacques Benkoski:
It's cultural affinity, and especially helping them with their idiosyncratic weaknesses.
Michael Eisenberg:
What are those?
Jacques Benkoski:
What are those? Of course we all know them. It's the product. The product is amazing. You know, why do we need anything else? And so, really understanding market entry, the whole notion of deciding on what your ICP needs to be as opposed to just throwing the product out there and somehow they will buy. And what has been interesting is, investing in Israel for 20 years, it is a behavior that was prevalent back then. It's surprisingly not evolving. Like every generation of Israeli entrepreneurs seems to go through the same.
Michael Eisenberg:
It’s not getting better at all?
Jacques Benkoski:
It's getting a little bit better. I think especially the supporting infrastructure is getting better. But the notion, which I think comes from the way they learn tech, right, where there is no customer, the customer is the army– is, let's make the best product possible and that will be good.
Michael Eisenberg (20:45.208)
So going back to friendliest, because I guess at some point you thought that was–is friendliness, like founder friendly, is that a good thing, or is it a...?
Jacques Benkoski:
I don't believe in being founder friendly. Actually, I'm not particularly founder friendly. I think, just like any parent, right? If you're too permissive, you're not helping. And so I think it's all about being the best you can be for your entrepreneurs. And that doesn't necessarily mean be friendly to them.
Michael Eisenberg:
Including firing them?
Jacques Benkoski (21:23.448)
Not necessarily firing them. I always find that if you fire an entrepreneur, like for myself, I consider that a failure. I'm not saying I won't do it. But I failed if that's what the outcome is. We can expand on that. But it's about, look, this is not going to cut it. But this behavior will not allow you to scale. The way you behave will not satisfy a next round U.S. investor and the likes. So, sort of showing, holding a mirror, that's something I learned very much from Erwin, right? You're never prescriptive. You never tell entrepreneurs what to do.
I think it's a very important scale. You just show them by comparisons and by holding a mirror to them, what the decisions they're making or the behavior they're exhibiting will result into. So, and hopefully they get to the right conclusions by themselves. When they don't, I think you have to, you know, just escalate and say, “This is what's going to happen if you don't do X, Y, Z.” And then yes, you're right. In the extreme case, it may be just be, you'll never learn. And so you fire them.
Michael Eisenberg:
And when they don't?
Jacques Benkoski (22:22.848)
Sometimes you say, as a result of that, this company will never be able to scale beyond where it's at, and let's hire a banker and see what we can get for it. And sometimes you go, no, there's more to it. It's just, this particular situation is a bottleneck that we can overcome.
Michael Eisenberg:
You said if you fire a founder, it's a failure, but sometimes you need another CEO there. You just do. I mean, that was common in the business when you and I were growing up in it.
Jacques Benkoski:
Right. The reason I say it's a failure, I mean that on myself, like it's my failure. Because typically we're trying to invest in CEOs that we think will scale. Like if we know from the get-go that they won't scale, it's usually not a good idea for us to proceed.
Michael Eisenberg:
Sure. It’s a failure of early judgment.
Jacques Benkoski (23:18.838)
And so if we thought they would scale and they didn't, either we were wrong, like you said, failure of early judgment. Or we didn't do our job, which is more the case of helping that CEO grow. The job of the CEO changes completely every 18 months. And so it's our job to hold their hands as they go through that personal growth. And, you know, as a parent, if your kid didn't grow, it's kind of on you that you didn't help them grow.
Michael Eisenberg:
Is it your sense, by the way, that things are speeding up now? You know, we talked about the money comparisons. In ‘99, it felt like the clock speed was fast. By the way, in the first half of 2021, I didn't think I could compete anymore, because you had all these guys doing Zoom term sheets in 24 hours. And I thought I was like an old geezer unable to compete. It feels like it's back again.
Jacques Benkoski:
And good thing that you didn't try to compete, because all those term sheets ended up in pretty negative situations.
Michael Eisenberg:
But now it feels like we're back to that again.
Jacques Benkoski:
I think we are. I think we are very much so here, by the way. This is again a very Israel-centric bubble.
Michael Eisenberg (24:16.904)
Silicon Valley also, think, no?
Jacques Benkoski:
Within a very, very narrow part of the market. It's as a proportion of the market, right? It's more in cybersecurity than not, but cybersecurity being such a large part of what's going on here as a percentage of the market that exhibits that. It's very widely that kind of behavior. In the U.S. it's really the eye of the storm of the AI stuff. You know, people getting hired for tens of millions of dollars and all that. It's a market in which we don't play.
But other than that, it is more here, and I think it is creating another generation of overfunded companies that will have to either grow into their valuation as we say, or they will have some trouble.
Michael Eisenberg:
I think Wiz has lit up people's imagination here.
Jacques Benkoski:
It does, it does. And it's unfortunate, because I spent a lot of time analyzing go to market and so on. And to me, Wiz was a mystery. Like it broke every rule that I have for myself. And in trying to understand intellectually where, what do I not understand that allowed Wiz to break all the rules? It sort of forced me to, at least for my own use, to come up with what are the characteristics that Wiz had that allowed it to do that, and then map other companies and explain to them whether they have a chance to be Wiz or they just try to attach themselves to the name, but they don't have those characteristics.
Michael Eisenberg:
Okay, once again, tell me what rules of yours do you think Wiz broke?
Jacques Benkoski:
So, one of the rules that I have is that you cannot grow a Salesforce past a certain speed. If you're growing faster than that, what will typically happen is the Salesforce will be extremely unproductive, will be very inefficient, will not have a chance to learn the product, will not have the chance to learn the methodology. And you end up with money on fire, but not creating the kind of traction you should.
And so we just grew faster than any company I know, uh, that any company we know, um, despite having two higher salespeople to sell. And so how did they get that kind of growth rate? All those salespeople put them to work, and create the kind of growth that they had was a big question for me. And I think if you look at some of the concepts that I work on, creating a relationship between the friction of the product, the price at which you need to sell it at, and the type of salespeople that you have, broke that triangle. It was able to sell at a high price, a product that's really easy, with pretty dumb salespeople. And that is a unique situation. And whenever I look at another company and say, well, we're going to grow like Wiz, I literally ask them, “Do you have that characteristic?”
Michael Eisenberg (27:23.33)
And was just an easy to deploy product is your point, an easy to understand product, an easy–
Jacques Benkoski:
Easy to deploy, yet still able to command multi-hundred-thousand dollar POs.
Michael Eisenberg:
Because the value is so deep, or because Assaf's brand was so good, or because…?
Jacques Benkoski:
I don't think the vast majority of customers even know who Assaf is.
Michael Eisenberg:
And they bought it because they just needed it?
Jacques Benkoski (27:45.88)
They needed it, it was super easy to use, and they created an ability to prove that value very quickly, in a matter of a couple of weeks, three weeks. Typically, to get a multi-hundred-thousand dollars or sometimes millions of dollars PO, it takes months. And yet Wiz was able to do that in weeks and with people that were not particularly skilled. And so that's, if somebody says I'm the next Wiz–
Michael Eisenberg:
Have you seen any other companies that fit those criteria that break your rules?
Jacques Benkoski:
Not really, not yet, no.
Michael Eisenberg:
What's the normal pace that I can grow my Salesforce?
Jacques Benkoski:
You know, you have to look at the speed of your time to fully enabled. And if you can teach you people how to sell in three months, then you can grow probably three X year over year. If you need six or nine months, then you kind of top out at two X. And the reason is simple. If you double your sales every year and the money that you spend on your Salesforce to create that is wasted half of the year in teaching people how to sell, your burn rate is astronomical, if you try to grow any faster than 2X.
Michael Eisenberg:
So I have here your book called The Market Entry Strategy, Charting Your Course to Early Stage Venture Success. This is the outgrowth of seminars that you gave. How many people took those seminars?
Jacques Benkoski (29:09.048)
Correct. Right now, of the people whose email address I have is over 5,000.
Michael Eisenberg:
Over 5,000. Are they all founders or are they…?
Jacques Benkoski:
Mostly founders, sometimes some people bring the entire team. A lot of VCs come too. So yes, but they're founding teams, let's put it this way. It's only live, right? You cannot YouTube it or anything.
Michael Eisenberg (29:28.35)
You can't YouTube it. You have to come to Jacques live. Why?
Jacques Benkoski:
Because the amount of material that is delivered in the seminar is so intense that unless you pay fully attention for the whole two hours, you're gonna miss 90% of it. And when people watch YouTube, they're always doing something else at the same time.
Michael Eisenberg:
Is it free or paid?
Jacques Benkoski:
It's free.
Michael Eisenberg:
You want to make sure people are paying attention.
Jacques Benkoski:
I want to make sure people are paying attention.
Michael Eisenberg:
Nobody's slacking off in class. Do people turn their cameras off in the seminar?
Jacques Benkoski:
So except during COVID, it's not on Zoom, you know, it's live. It's typically cohorts of a hundred, 150 people. I do it in Tel Aviv almost every quarter, and that room fills up within hours of the registration being open. And the feedback that I get is people love it. And to the point we were just talking about, the biggest criticism they have is like, it's too much. It's too much material in two hours. And so the funny thing that has happened, very surprising at the beginning, is people come more than once. I see the same faces.
I have one guy that came four times already. And when I asked why, they say, “Well, as the company evolves, I pay attention more to certain segments of what you teach.” And so it's, as people say it's humbling, but it's not humbling. It's a real pleasure to, uh, to really see people recognize the value. And I'm only doing it for that. I mean, there's obviously no money in that endeavor, as you can imagine.
Michael Eisenberg:
Is there deal flow?
Jacques Benkoski (31:20.142)
Not really. No, there isn't really deal flow. USVP is not seeking deal flow. We get most of our deal flow inbound. What it does do is when I meet an entrepreneur that has been to the class, the quality of that first meeting is an order of magnitude better, because they have a frame of reference that is the one that matters to me. Very often they've adapted their business plan to match what I teach. And so the mind belt happens very fast, and it happens actually, I would say, know, 20, 25% of my first meetings that our entrepreneurs that have been to.
Michael Eisenberg (31:46.114)
Interesting. Pitch the book in 60 seconds.
Jacques Benkoski:
So the book is based on the notion that in a world that is awash with venture capital, your problem is not to find a customer that wants to work with a startup, but to find a customer that wants to work with you and only with you. A customer for whom you are unique, specifically able to deliver something that only you can do for that specific set of customers. And so you flip the script on trying to talk to anybody and see who wants to talk to you, deciding who you want to go talk to. And you pick them on the basis of them being those for whom you can do something unique.
Michael Eisenberg (32:30.964)
Give me an example of that.
Jacques Benkoski:
I think your t-shirt says be different is better than be better, or something like that. That is exactly what it is.
Michael Eisenberg:
Give me an example.
Jacques Benkoski:
One of the classic examples was Medigate, which, if you look at the technology, was very similar to Armis and the other, you know, network sniffing products, but Medigate by decision said, “We're going to go after the medical vertical.” And in doing so, create a product that pretty quickly evolved to be unique, or uniquely suited for the medical vertical in such a way that within months from starting their go to market, nobody could come back in a meeting with a healthcare provider and even speak the lingo and understand their need the way Medigate did. And so even though it wasn't necessarily a product differentiation, it was a market entry differentiation. They were different because they chose to be different.
Michael Eisenberg:
Who was the first customer?
Jacques Benkoski:
The first customer was a large hospital network in the U.S.
Michael Eisenberg (33:27.704)
So the market itself created the product, basically, differentiation. That's a technology differentiation, we call it the productization differentiation?
Jacques Benkoski:
Right. And the depth of knowledge of the unique needs of that market that the company quickly acquired. I was once in a meeting, they invited me to join a meeting with the CISO of a large hospital. And I sat in the meeting and you know, I'm pretty technical. I had no idea what they were talking about. Not because I don't understand networking, but because they were using a jargon that was specific to hospitals and that nobody else could understand. And so I was
told myself after that meeting, nobody can catch up to this company, because they will not master the language like we do.
Michael Eisenberg:
It's almost like product marketing.
Jacques Benkoski:
It is product marketing. is the notion that you must choose your customer and then relentlessly hone to only that set of customers, such that, for that set of customer, only you can do what you can do.
Michael Eisenberg (34:26.2)
So there's something in the book that, other than one little piece, I thought maybe you were talking about me. It says, you warn, and this is the piece that's not about me, that certain big name investors, that's not me, I'm not a big name, just an investor, without the right expertise can be a red flag. What does that mean?
Jacques Benkoski:
I'm not sure which part of it is it. There's one part in the book where I say, “Be careful to come up with brand name angels. People that are very famous, but actually know nothing about this market, who you met and they thought you were wonderful and gave you some play money. And don't think that that's an endorsement, right? That's not a validation. And if you come to me telling me about all those great angels and you try to impress me that those people invested in you, you actually sending the wrong signal. Because if you think this is what matters, you off.”
Michael Eisenberg:
But think about a guy like me, like a generalist like me with no market expertise and certainly no technical expertise. You're very technological and obviously you've done a ton in cyber and a bunch of other places. But I'm like all over the map. I don't really know anything about the things I'm investing in. Like is that a warning? Big red flag, don't go to Michael, he doesn’t know anything.
Jacques Benkoski (35:44.11)
No, and I'm going to give you compliments here. I think Aleph is unique. I think Aleph is one of the very true risk takers in the business. I think a lot of people are not taking enough risk, and you guys embark on stuff that–and I've looked at some of your companies like, what were they thinking–and yet, if it worked, and sometimes it does, then it's an amazing outcome. And so that's the quality that you bring, sort of the willingness to embrace innovation beyond the frontier. And that's a different skill.
Michael Eisenberg:
What I want to challenge for a second, because I think this is an important topic in venture capital, which is this notion of expertise. Gili Raanan, who's an example at CyberStarts, who's been an incredible investor and is an incredible mensch, really focused on this cyber area, cyber for enterprises in particular, and he aced it, and there's a level of expertise there.
You know, we've had many cases in the past, I don't know if I need to tell you this, of what I would call focused funds that have real expertise, but they have kind of gone sideways and missed entire waves of innovation because of that. Where do you think this notion of kind of expertise versus like a fresh mind? Where does your rubber hit the road on that? Or experts versus generalists?
Jacques Benkoski:
You know, there's always the notion that, or when you know nothing about a certain topic, you're more likely to innovate than somebody that knows it fully and will be bound by what they know about the market. I think everybody has their specialty. I think when you invest at the stage where we invest, which is Series A, you do have an initial market adoption signal, more so than you do at the seed, but you still have to have a vision of what is the market transformation that enabled these companies to succeed at this time. And that requires a certain level of knowledge, if not of the specifics of that company, at least of the fractures that are happening in the environment that enabled them to succeed.
Michael Eisenberg:
Do you find there's board tension between people who actually know the market and those like me that are just guessing?
Jacques Benkoski:
I don't think there should ever be board tension, in general. I think people should bring their different ideas and, you know, we are all there to give ideas to the CEO, and the CEO then decides what they want to do. Anybody that's more prescriptive than that is getting out of the role of a board member.
Michael Eisenberg:
Oh come on, you've never been on a board where there's been a board member who was more prescriptive than that?
Jacques Benkoski:
I have, and I'm usually the one that stands up and has them to shut up.
Michael Eisenberg (38:36.3)
You see, there is tension on the board!
Jacques Benkoski:
I know, but seriously, I think when people really understand the role of board members and people get better and better, then you shouldn't have that.
Michael Eisenberg (38:49.134)
You also wrote in the book, and I have to say it was like a dagger in my heart, that certain books like Crossing the Chasm are outdated. The reason it was a dagger is, I remember when that book came out, and I think I remember seeing Jeffrey Moore–who was spelled M-O-O-R-E and Moore Davidow at the time which was a venture fund that's no longer around, spelled M-O-H-R.
Jacques Benkoski:
Right. MDV.
Michael Eisenberg:
Yeah, MDV, great people used to be there. Nancy Schoendorf and John Fiber, great people. Bill Davidow. And I remember meeting Geoffrey Moore there, and it was like, for me that was, wow, this guy wrote the Bible for our business, Crossing the Chasm. This was the Bible, the most published book of all time, but this Bible you're saying is totally outdated. So why is Crossing the Chasm outdated?
Jacques Benkoski:
Crossing the Chasm was written at a time when the total amount of venture capital per year was 1.5 billion. As you know, we are exceeding 600 billion. So there's like many orders of magnitude. It was written at a time where….
Michael Eisenberg:
That enables you to have more AI companies that have venture-capital-backed companies as their….
Jacques Benkoski:
There you go. But it was right at a time that if you were a senior executive in a large company, the notion of working with a startup was very dangerous. And so you had to find, per Geoffrey Moore, you had to find those early adopters that were willing to take the risk to work with a startup and would help you to cross the chasm to a wider adoption by having the initial one. So, pass over today, you have $600 billion a year going. For everything that you do, there's multiple startups, and the large companies have understood painfully that unless they work with startups, then sooner or later, I'm going to be left behind. And so they all have ways to want to embrace startups. So the notion of the entrepreneur trying to find somebody that would talk to them is just obsolete. There's people wanting to talk to entrepreneurs everywhere all the time.
The question now becomes, given that everybody wants to talk to you, even that you have so many competitors, how do you decide how you go to market? And Crossing the Chasm is not relevant.
Michael Eisenberg:
So you’re saying the whole notion of early adopters is not a relevant notion anymore.
Jacques Benkoski:
I don't think it is. You always have somebody that moves a bit faster than others, but you will not have the problem that you can't find somebody that will.
Michael Eisenberg:
That's what I was going to ask. Is it just that the time schedules have compressed, or has the foundational definition changed? Because there's not an endless number of companies that will take early bets on early stage companies. In fact, today came out a column that we run, I think it's every couple of weeks, called Unpopular Opinion, where the CTO of one of our companies’, Hud, name is May Walter, said that one should not sell their products early to startups, it should go to enterprises, which is a little bit of like this early adopter thing. Find an early adopter in the enterprise. They're selling stuff that kind of closes the loop for AI, AI models and AI coding in particular, to kind of test your code in the runtime. So it feels like just the time schedules have collapsed, but this notion of early adopters is still super relevant, at least in enterprise-ish land.
Jacques Benkoski (42:19.724)
I think you're correct, but I think for me, the early adopter is somebody who has a problem that you can solve. And if you can find the people who have a problem that you can solve, they will be your early adopter. You can't do a wide marketing and hope that everybody's going to fall off the tree and be ready to embrace you. The super precision decision of deciding, of figuring out who your customers should be, and that is your decision to make, should yield plenty of early adopters per that definition because you are solving the problem they had.
Michael Eisenberg:
Is it just that the early adopter public is larger maybe?
Jacques Benkoski:
I think you have early adopters everywhere, and that's different than it used to be. When you and I started, if you had three or four Fortune 500, you were like, oh my God, right?
Michael Eisenberg:
Unbelievable.
Jacques Benkoski:
And now every deck of a Series A startup has a few Fortune 500 in it, at least in their pipeline, right? They're not having a problem finding somebody that wants to talk to them. The problem that they're facing is unless they focus, they're going to end up with a bunch of customers that want different things from them. And eventually given the level of competition, they're going to not make it.
Michael Eisenberg (43:35.48)
So, and your framework, just to state it, is, there's a large number of customers there. You can have too many customers, and therefore you need it focused on a certain type of customer, either a vertical or people with the same requirements, et cetera, just to make sure you don't get pulled in 100 directions.
Jacques Benkoski:
You need to find the customers for whom you can not only solve a problem, but only you can solve a problem. You want to create that differentiation and you want to hyper differentiate in the early days such that that market entry, that first few set of customers is easier and also devoid of competition. If you keep it too wide, then you'll be going to be in a bake off against four other startups.
Michael Eisenberg:
Stay out of the red ocean, stay in the blue pond.
Jacques Benkoski:
Well, find a tiny blue pond if you need to, but make it blue. Yeah.
Michael Eisenberg:
That's a little bit like Peter Thiel's thesis around, stay away from competition, do things with no competition. So one of the other interesting things was you seem to write that, if you kind of do this, then you can get early acquisition offers. Is that a good thing?
Jacques Benkoski (44:36.536)
Not necessarily, but every company that has been successful had acquisition offers before, right? Like nobody got to a billion-dollar outcome without having multiple offers along the way.
Michael Eisenberg:
I gotta think about that. I'm not sure that's true.
Jacques Benkoski:
It's only been true in my career.
Michael Eisenberg:
I do less enterprise than you do.
Jacques Benkoski:
Yeah. Nobody knows about it. Nobody knows about you. And then suddenly, people know about you, and yeah.
Michael Eisenberg (45:02.284)
I think that's true. I always say one of the reasons I go to investment banks is that the promiscuity helps that people know about you.
Jacques Benkoski:
Sure. So is it a good thing? It's not a good thing. It is what it is. And, for some situations, it is the right thing to do. For others, it's not, but whether it's a dose acquisition offer or an easier path to getting the next round of funding. The one thing I really care about as a board member, as an investor, is lowering your cost of sales. And if you are penetrating a market in which you are the leader in that tiny blue pond, your cost of sales collapses. People call you. You don't have to chase every–
Michael Eisenberg:
Resonate in an echo chamber where people talk to each other.
Jacques Benkoski:
Correct. People wouldn't think of doing an RFP in the space where you're relevant without you. And so instead of spending all this money trying to do marketing and chasing, where perhaps somebody is looking for something, people start coming to you in that micro segment.
Michael Eisenberg (46:00.782)
How do you think about, it's the wrong word, but how do you think about PR? PR is the wrong word today, but it's kind of getting brand recognition in this, what you call micro segment or blue pond today?
Jacques Benkoski:
I think in that respect, it's the same as before. The focus is the difference, right? If you think that, for example, conversation I have with my entrepreneurs, they have a funding announcement and you know, they want to get in TechCrunch and Calcalist and all that. And I'm like, “Let's step back here for a second. Why do we do a press release? What is the number one reason? We want to get new leads. We want to get customers to know that we exist. So the only framework in which we care to create a wave is in the specific industry that we target. So let's try to get an exclusive with Crazy Industry Magazine, and get an article there about an announcement.” The TechCrunch, it's good to tell your cousins and your parents and all that, that you got funding. The customers don't care.
Michael Eisenberg:
By the way, one of the things I discovered in my career is actually how important that is to so many people to tell their parents and cousins that, “Hey, Mom, I was in the newspaper.”
Jacques Benkoski:
It's particularly bad in Israel, I have to tell you that.
Michael Eisenberg (47:19.15)
That's a good segue, by the way. So you've been coming here as an investor for about 20 years. And you come here often as an investor. You've been here during the middle of this war that we're in now, and I'm sure in other things. What keeps bringing you back other than your Hebrew?
Jacques Benkoski:
It's great technology, great people, great opportunities, you know, and more people recognize it, which makes it more competitive.
Michael Eisenberg:
Isn't it pretty stunning just how many people have turned up since this war started? Like the markets become super saturated.
Jacques Benkoski:
I think, you know, there was clearly the Wiz effect. I think the war is a non-event from an investment standpoint. I'm sure it's traumatic for the people that live here. From an investment standpoint, I just meant people can travel for a couple of weeks. Those that actually travel even when it's a little scary to others. But it's a non-event. And so if you're looking at the acceleration, the new bubble that's getting created, I think some of it is the Wiz effect. It's been other quite remarkable exits as well outside of Wiz–not necessarily 32 billion, but a billion here, two billion there, three billion there. People recognize the value of the startups that come up here, and we do too.
Michael Eisenberg (48:37.166)
I love the term you used, that the war is a non-event from an investment perspective. What do you mean by that?
Jacques Benkoski:
It literally doesn't matter.
Michael Eisenberg:
Literally doesn't matter.
Jacques Benkoski:
Like nobody says, “I'm not going to invest in Israel because they've been at war,” or, “I'm not going to invest because there could be another war,” whatever. You know, Israel has shown over and over again–and you can have a holistic debate whether that's healthy or not–but that it continues to operate no matter what happens. And so the investors have reacted accordingly and like, okay, “Well, given that I can talk on Zoom with somebody that's under missile attack, I did just need to move to that other room. and then continue the conversation there. Then I don't care.” It's a learned behavior.
Michael Eisenberg:
20 years ago, in the middle of, I think what was the operation in Jenin, I kept telling the press that the problem is Nasdaq, not Nablus, at the time, and it feels like the same thing. I just haven't found a catchy phrase to describe it. Right now the problem is not Gaza, it's flights, but it doesn't rhyme as well
Jacques Benkoski:
Yeah, no, I think there's a number of people that–I certainly don't want to sound like I blame them–that feel like it's unsafe to come here. The partnership insurance doesn't cover them. Their spouse is freaking out that the notion that they do that. Like I was interviewing somebody to join as an executive in one of my companies, and they withdrew their candidacy because they told their significant other they would have to be in Israel often.
It was sort of a marriage breaker. And he said, “My marriage isn't worth taking this job.” And he withdrew. So, you know, I respect people that do that. I remember when I moved to San Francisco, some people said, “My God, it's really dangerous because you are near Oakland.
You know, Washington DC's in the news right now. I remember when I intered near Capitol Hill back in the late nineties, late eighties, sorry, wow. You got to Washington DC, you came down Georgia Avenue, and on the right side, “Welcome to the nation's capital, Washington DC.” On the left, the first store was Gaskets, Caskets. And these were dangerous places. But people still go to Washington DC.
Jacques Benkoski (50:56.91)
Right. If you look at the recent events in LA, my significant other lives in LA, and people are like, “Oh, really, L.A.?” It's like, it was two blocks. It's a city of 12 million people. People have a perception of danger that is disproportionate when they're not used to that specific danger.
Michael Eisenberg:
I think more now, right, because of social media, everything is amplified.
Jacques Benkoski:
But it's like, “My God, you're in missiles.” And like, yeah, I've been here under missiles, and it's not like you totally don't care, but you don't care very much.
Michael Eisenberg:
I was woken up by the Houthis this morning. It's just one of those things. So I'm not sure how to ask this question, but I'll ask it since you made the comment before about the product. What's the trait that Israeli entrepreneurs think is really, really, really good, but in reality it's turning people off across the pond?
Jacques Benkoski:
I think the classical one is selling them by talking at them. You know, like, like overwhelming them with, with words. I think Gong has woken everybody to the very simple, you know, what percent of the time were you talking? And that's one of the issues. If you look at the book, for example, I beg people that during the first phase of validation, you cannot be selling. You literally cannot be in sales mode. You are in listening mode. And that's harder in Israelis.
Michael Eisenberg:
Yeah, they like ABC, always be selling.
Jacques Benkoski:
Right, right. Always be closing.
Michael Eisenberg:
Always be closing. If you kind of play this movie called Israeli Tech forward a decade, what do you think are going to be the biggest changes we're going to see over the next decade?
Jacques Benkoski:
I don't know. I worry about the inflation. We are now in a situation where Israeli startups have a higher cost per head than most places in the world. You know, I was at a board meeting yesterday, and between the salary increases, which by the way, in the U.S. startups don't do salary increases. you know, you have the same salary for the whole time you are in your startup, and the Shekel and everything, you know, we're to have an increase of 15, 17% in spend in U.S. dollars next year at same headcount.
Michael Eisenberg:
But that’s because the keeps printing money. It's hard to keep up with the printing presses in the United States. It's more the devaluation of the dollar than the strength of the shekel. And I've been very bullish on the shekel very publicly for awhile.
Jacques Benkoski:
I think that's an issue. I think the concentration of focus on too narrow use cases, right. And I think you have been an advocate of, Israel needs to be not just in Tel Aviv, not just in the center, but everywhere, but also in other industries than cyber, because cyber, like any other industry, will eventually be cyclical and Israel cannot find itself in a situation that a pullback of the cybersecurity would create an economic crisis here. So I think that's one thing I worry about. Those are the key elements. I think Israel will continue to churn great entrepreneurs and great technical talent through cycles, as you said, you know, those cycles are beneficial at the end. It's good. I think they'll be pulled back. It feels very bubbly right now, let's put it that way.
Michael Eisenberg (54:40.906)
You've lived in Europe, Israel, and the US. Where's the best place to start a company today?
Jacques Benkoski:
I think there's a lot of advantages here. Mostly, I was asked more than once, why is Israel’s ecosystem successful when so many other ecosystems that try to imitate Silicon Valley have failed? And to me, it comes back to talent concentration. I actually have a presentation where I showed that the distance between Berkeley and San Jose is the same as the distance between Haifa and Rishon Lechon. Literally, like the same. And if you map the big universities, Stanford, Berkeley, and here,Tel Aviv, Technion, Jerusalem, Maryland, and then you map Google Labs and Microsoft Labs and, back then it was maybe HP Labs and so on–it's literally the same map. And so I think that that density is really critical to the quick start.
It's much harder to do, even in Boston these days, because you just don't have the density of talent. I think, however, that there is an element which has become more pronounced in the last couple of years. And there, I think the war did have an effect, is that the Israeli ecosystem is talking to itself. And it's convinced that as it talks to itself, it holds the truth on how the world works.
Michael Eisenberg:
Be specific?
Jacques Benkoski (56:16.878)
Whether it's the way you start a company, the way you finance it, the way every element of it, the system sort of closed onto itself. And there's actually a word for that in management. It's called the Galapagos syndrome, where when you are an island for too long, you evolve different species, and Israel cannot succeed if it has its own species, because the market is not here. And so it's really important that Israeli entrepreneurs continue to get out of this bubble and grow tentacles and relationships in the world, especially in the U.S. and continue to not just be famous among themselves, but actually seek the world.
Michael Eisenberg:
What feels most like home to you, Europe, Israel, or the US?
Unfortunately, I have a saying that says having friends everywhere, you pay the price that you're not home anywhere. So I have friends everywhere, but I'm not home, actually, anywhere. And my home is my friends, wherever they live.
Michael Eisenberg:
What do you think about the future of Europe right now?
Jacques Benkoski (57:26.508)
I think Israel has a very bad perception of Europe. When I mean bad, I'm saying incorrect perception of Europe. It's for both self-preservation as well as political reasons. Europe is actually doing fine. You can walk through the streets of Paris and not see a Palestinian flag. I have a cousin in Brussels that is Jewish, is doing PR. And I had dinner with her a couple of months ago and I said, “Did you ever experience antisemitism?” And she said, “No, never.”
Michael Eisenberg:
I wasn’t asking the Jewish question, I actually asking a different question, right? I think there's Harry Stebbings, who you probably know pretty well also, from 20VC, talking about the rash, for example, of smartphone thefts in the UK. And there's been certainly a rape crisis in the UK, and there's no demographic growth in Europe. They have fallen way behind the United States by almost every measure economically. Tyler Cowen's just had a recent piece about that.
Jacques Benkoski:
I was actually asked by a delegate of the EU, because I speak French and I'm in Silicon Valley, everybody that speaks French and comes from one of the governments wants to speak to me. And so I oblige. And so, I think Europe cannot compete with the U.S. technologically. And therefore it shouldn't try. Meaning it should evolve an ecosystem whereby competing with the United States on technology is not an essential path to success. And I think Europe can certainly do that. I think we are going in the U.S. as well as in Europe, but worse so in the U.S. to a society that's ever more violent. I think technology has a lot to do with that. And I think we are, unfortunately, unless something changes, going to go to a society where it will be sort of a two class system.
Michael Eisenberg:
Interesting.
Jacques Benkoski (59:26.766)
With a pretty repressive mechanism to keep things quiet, but it will not be a very pleasant or very open society to live in. I think Europe has maybe a better shot at not going there than the US. I'm not sure.
Michael Eisenberg (59:50.296)
Interesting. Why does technology making it more violent?
Jacques Benkoski:
Because technology is increasing sort of the gap between have and have nots, almost mechanically. We're to go back to sort of middle age where you have–
Michael Eisenberg:
Feudal lords and serfs?
Jacques Benkoski:
Right. Exactly. And I think that is not a good thing. I think that usually ends up with either, as I joke, sometimes pitchforks or repressive regime. Unless we do something, I think the US for sure, but Europe too, may end up falling into that.
Michael Eisenberg:
Interesting. So a bunch of people send me questions that I should ask you. So Hunter, sorry, Uri May, the CEO of Hunters said, you have extensive experience as an executive. And we talked about the board before. Where has your knowledge as an operator hurt your performance as a board member?
That is a good question, Uri. I knew Uri would come up with a good question, because he's an uber smart guy. I think one of the important qualities of a board member is to not know the details, because you want to create a contrast between the entrepreneur that does know the details and has a hard time seeing over the hill, and board members should be the ones looking over the hill. And I think by being an operator, I'm perhaps too facile in the details, and therefore may fall into that trap. But it's a very good question, I hadn't thought about it.
Michael Eisenberg:
The parallel question comes from our friend Steve Krauss, is, which founder changed your mind the most and what was the lesson?
Jacques Benkoski (01:01:36.842)
Wow, you got really good questions.
Michael Eisenberg:
Steve's a smart guy, been around the block a few times.
Jacques Benkoski:
He has. I don't have a pass on that, huh? I'm trying to think. I think that people that have succeeded in situations where I thought it was mission impossible, and they somehow pulled it out in a way that I couldn't foresee.
Michael Eisenberg (01:02:10.67)
Okay, give me an example.
Jacques Benkoski:
I don't have one, but I have the feeling of the example.
Michael Eisenberg:
Maybe it’s Mickey Boodaei, who said, what made Trustier survive 2008 financial crisis when so many others–but you said it wasn't a big deal, the financial crisis.
Jacques Benkoski:
But it was for Trustier, because Trustier had a hundred percent of its customer base being banks. I think Trustier just hunkered down and stayed the course, and it was very touch and go for a while. I remember some really discouraged conversation internally. Externally people think Trustier was this magic company that–
Michael Eisenberg:
Did pretty well in the end.
Jacques Benkoski (01:02:47.084)
It did very well, but like was this magic–very good. It was like a perfect company, right? ‘Cause we did the series A and they never raised money after that, which is remarkable. But you know, around that time it was touch and go. And I think just, focusing. But I think, I think Trustier succeeded and Mickey succeeded, like, the expected way, you know, like it's a classic entrepreneurial success. If you're asking me one that was really not classic, I don't have an example, but I have the feeling of it. There are the entrepreneurs that I go like, “This will never work.” I don't tell them that. But then it does work.
Michael Eisenberg:
Okay, who did you think wasn't gonna work?
Jacques Benkoski:
You know, we had this company in the United States that was building a semiconductor procurement system. And it was really struggling with the business model of, who do you charge? You charge the buyer, do you charge the seller? For while he was experimenting with, well, we'll just have a platform and there'll be ads on it. Right. Like it was an ad model. and I was like, none of those really–we stayed the course and entrepreneur was very, very much connecting with the customer base. Like he was really a trusted advisor to them. And then kept the company on cashflow break even, because we knew we couldn't raise money, and somehow grinded out and slowly, very slowly, every board meeting at that point was, why don't we grow faster? Go ahead and burn money. And he was like, “I don't know what to do.” And he got it to $70 million in revenue, and profitable. Sold the company for $700 million, in the 57X for USVP.
Michael Eisenberg:
Can't beat that. So in what is the most interesting question I've gotten in a long time, Steve, our mutual friend, asks, how does multiple decades of owning a sailboat in San Francisco Bay increase your personal IRR?
Jacques Benkoski:
It does. It does.
Michael Eisenberg:
I just assume it keeps you sane.
Jacques Benkoski:
It keeps me sane, but the amount of learnings that you have from running a competitive sailboat in terms of strategy, team dynamics, like every outing is a lesson that you can bring back into the company. I was going to use it earlier, but I didn't. So let me do it now. The perfect example of being too early to market is starting a race, and you in the lead by like miles. And the wind drops.
All the other boats catch up to you, and you're all the way together until the wind catches up, starts again. It doesn't matter that you got there first. Whoever gets the whiff of wind first is going to win. And that is a perfect analogy to being too early to market. Sailing is an amazing school for so many things. I recommend it to everybody.
Michael Eisenberg:
How often do you sail?
Jacques Benkoski:
Pretty much weekly
Michael Eisenberg:
In San Francisco Bay.
Jacques Benkoski:
In San Francisco Bay.
Michael Eisenberg:
It’s cold there.
Jacques Benkoski:
It's cold, and it's very windy.
Michael Eisenberg:
Yeah. Good for sailing.
Jacques Benkoski:
Very good for sailing. If you can sail San Francisco, there's not many places you can't sail.
Michael Eisenberg (01:06:07.886)
Amazing. You run into Larry Ellison out there?
Jacques Benkoski:
Larry Ellison is not very liked in the sailing circles. I don't know if you know that, but he just paid his way into successes. He did help the sport, you know, off the record, or I guess we are on the record in the sailing world, Oracle is an acronym, and it stands for “One Real Asshole Called Larry Ellison.”
Michael Eisenberg:
I was in actually in Newport, Rhode Island last week for like two hours on my way driving north to Boston. I wanted to stop in. And I was told the story of the Australians winning the America's Cup, where they had put expended uranium in the keel of the boat, which enabled them to sort of solve the physics problem of how you keep the amount of weight on the bottom of the boat anchored, but have a small keel, which reduced the drag on the boat. And they had brought it in a skirt on the keel in order to kind of surprise everyone with the technological innovation. I thought you were going with sailing, which is the amount of technology in there, but it sounds like you've gone to two other places. One is the teamwork and the fast start and then–assholes, because one of the other things you say on your X handle is that you don't want to work with assholes. Are there a lot in our space?
Jacques Benkoski:
There are. There are.
Michael Eisenberg:
You want to name some?
Jacques Benkoski:
No, of course not. It's only Larry. No, no. Look, the reason I was digging on Larry is, Larry just brought so much money to a sport that was authentic and rendered it unauthentic. It made it much more well known, but sort of lost its soul in the process. Other than that,I think he actually did help the sport. No, I think there's a lot of people that have overinflated egos. A lot of people that are so interested in their own self-image that they hurt the business, they hurt the companies.
Michael Eisenberg:
What's your core value in life?
Jacques Benkoski:
I think it's to do the right thing all the time, or at least as much as I can. And I think if you do that, then over time it pays off. I'm a big believer in karma, especially professionally, and the way I define karma, not in the spiritual way, is, two people are meeting in a cafe right now.
And one of them is saying, “You know, Michael Eisenberg is a great guy.” That will help you in your career, right? In some way that adds up. And so if you do the right thing, and people think highly of you, that karma does come back and help you. So do the right thing is my core value.
Michael Eisenberg:
Jacques, thanks so much for joining us.
Jacques Benkoski (01:09:03.95)
Very good. Thank you.
Michael Eisenberg:
If you enjoyed this episode, please rate us five stars on Spotify, Apple Podcasts, or wherever else you're listening to us. And please do not forget to subscribe to our YouTube channel. Thanks for joining, Jacques.
Henry Ward (00:00.024)
There's no probability in accounting. It has to be right or wrong.
The AI believes this journal entry is 80% chance of being correct.
You only care about the brand when you can't tell the difference between the products. So whether it's Heinz ketchup and every other ketchup, or pick your favorite audit firm versus–it's all the same. And so how you win is you just have a 10x better product, and then you don't worry about the brand.
Anybody whose economic model is to be paid hourly is not interested in productivity. There's a lot of IQ out there. There's not as much EQ. And a high EQ person, a high EQ organization is very differentiated.
Just because we're a big company doesn't mean we should act like one. Just keep executing faster and faster.
I can say Carta is an AI company, but what does it really mean to be an AI company?
Michael Eisenberg (00:50.316)
Welcome back to another episode of Invested. I am thrilled to have Henry Ward, founder and CEO of Carta, with me here. Hi, Henry.
Henry Ward:
Hi Michael, great to be here. Thanks for having me.
Michael Eisenberg:
I've been wanting to have this conversation for a while, and we hooked up around one of my previous guests that I had on this. And what's interesting to me is, I'm a user of Carta. It's not a product I ever thought I would use, but I'm a user. So even though I'm already a user, I'd like you to sell to our entire audience why someone should use Carta.
Henry Ward:
You know, we started building it because in 2013, ‘14, the cost of starting a company would start to go to zero, because of open source software and cloud. And so anybody can start a company. And when we looked at what it took to start a company back then, and the fees to go along with it, the most expensive thing that startups were spending money on was legal fees–primarily around managing the cap table, because it's such a manual, high-dollar process for law firms.
And so we started Carta to do cap tables, 409A's, stock option, expense accounting, all of the accounting and legal services work that goes around a cap table. And I think, you know, we dropped the price of a startup spending legal and 49A fees from $50,000 a year to five. And that's still true today. And most people come to Carta, use our cap table software because it's way cheaper than paying lawyers to do it manually.
Michael Eisenberg:
And is this just a cost element, or is there added benefit to using Carta?
Henry Ward:
So one of my favorite lines is from, I think, is Chris Dixon over at A16Z. He goes, everybody wants to build a network software company or network platform, but they always forget the zero to one, the cold start problem. How do you bootstrap into a network? And initially, when customers started coming to us, it was Chris Dixon's line, “Come for the tool, and then stay for the network.” So they came for a better cap table product than law firms and spreadsheets, and a better valuations product than valuation firms. So they came for that tool. But over time, we created this network effect where, now if you come to Carta, you get a better tool.
But more importantly, you get the network of investors that all know Carta. And so when you issue securities to them, they all already have securities on Carta. Employees do. And you become part of the Carta ecosystem, which I would humbly argue is really now the Silicon Valley ecosystem of, where do I track everybody that owns my company? And then the flip side is, as you as a user, an investor, how do I track all the companies I own?
Michael Eisenberg (03:35.054)
I've always appreciated the idea that it would be great to disrupt lawyers and accountants. That holds a lot of appeal to me. I invested in Trullion on that notion of disrupting audit. And in general, I think if you think about the professional service provider world that's been servicing startups, it's under threat now, Carta, AI, and a host of others. How do you think about this kind of challenge and the future of this service provider industry? From your perspective at Carta.
Henry Ward:
You know, we're deep into AI for exactly that reason, Michael. I would say Carta is good at two things. We are good at taking spreadsheet problems and turning them into cloud solutions. We take–anything that people are doing on spreadsheets, we're like, “Hey, I think we can help.” And we put that into the cloud. Cap tables with a spreadsheet problem, valuations as a spreadsheet problem, stock options expensing was a spreadsheet problem, fund accounting is a spreadsheet problem, LP reporting is a spreadsheet problem. We moved all those things into the cloud. The second thing I think we're really good at is taking services industries and turning them into software businesses. So again, cap tables as a service industry, forms and evaluations as a service industry, fund administration as a service industry–and we move those into the cloud and turn them into software businesses.
AI is dramatically accelerating our ability to do that. This new tool of AI is allowing us to do this much faster, much better. I'm not a believer that like law firms are going to go out of business, or all these people are going to lose jobs. I don't believe that's true. But I do think it's going to change how people work. The division of what can be done in software versus what's going to be done by humans, that line is going to move pretty dramatically over the next few years.
Michael Eisenberg (05:30.926)
So take me through, first of all, what is the AI implementation beyond the spreadsheet in the cloud that you've done at Carta? And number two, even though, and I agree with you, by the way, I don't think all lawyers and accountants are going to go away. I think that's hyperbole. But how has it exactly changed the services that lawyers and accountants have provided to startups and others and impacted, let's say their business?
Just as an example, many relationships between startups, and law firms, and accountants get started because they provide kind of cheap services or basically cap table services upfront, and then they kind of make their money on the IPO. But you've disrupted that now. And so I really want to understand at a deeper level that relationship and the impact on the economics, for example, of law firms and accounting firms.
Henry Ward:
I'm a little bit contrarian in this, perhaps. I'm sure many people disagree, and time will tell if I'm right or wrong on this. I don't think a lot of these service firms are going to get disrupted by selling tools to them. So when you think about all the legal startups that are selling software to law firms, I don't think that's going to be disruptive. I don't think that changes things very well. Because all of them are selling on this thesis of productivity. And law firms are just–the economic model for them rejects productivity tools.
That's why I always say law firms and Silicon Valley didn't start using DocuSign until the mid 2010s. And they're going to go from learning DocuSign to AI in one leap? Like, I'm not a strong believer in that. The other thing I'm not a strong believer in is that if, and I speak very specifically about system of record platforms, that many of these AI agents that think they're going to replace system of records, I actually think is misguided as well.
Michael Eisenberg (07:27.554)
People are not going to get productive or rich, get productivity enhancements or rich selling to service provider firms, because they're the last guys in the world to adopt technology.
Henry Ward:
Yeah, but service providers, they're the last people to adopt technology because their economic model, anybody whose economic model is to be paid hourly is not interested in productivity. They'll say they are, 100 percent, but they aren't. The economic model just doesn't support it. The second thing is all of these service firms, there's no capex for them. It's a rent. You know, it's an hourly rate. It's, you make the money and then you keep it.
You have to pay for some overhead, but there's no incentive for these service firms to invest in capex, because they're really just taking money from themselves today and investing in a firm for output productivity, and new economics for future partners. And so there's no incentive for capex. That's why corporations invest in technology, because shareholders outlasts the management teams. But that's not true in these service firms.
And so investing in capex for these service firms doesn't work. It's not a sustainable model. My contrarian perspective, I think what gets disrupted is, what I would argue, is the right type of business to build, which is these full stack businesses, where it's not, I'm selling a tool to a service provider. It's, I'm replacing a service provider with a better service provider. And the service provider is better because they provide software.
And so, for example, for us, cap tables–we're a better service provider for cap tables. We're a better service provider for 409A. We're a better service provider for stock option expense accounting. We are a better service provider for fund administration, but we own the entire stack. We own everything. We own the entire solution. And the reason we're better is because we know how to adopt technology and we're willing to invest in capex to create a better service.
So I don't think law firms are going to get disrupted by buying tools. I think a law firm will get disrupted because a software company decides they're going to build a better law firm.
Michael Eisenberg: (09:26.84)
But your case, again, the business model of these law firms is that they kind of lose money early on, or they say they do, lose money early on to service a startup, but make it up on the IPO. But do I even need a law firm at the beginning? I can just come straight to Carta, get my company docs, get my cap table, get my 409A, and then I pick up the lawyer later whenever I need them.
Henry Ward:
So I think a lot of companies are delaying getting a law firm, especially a partner at a big name law firm, just to get started, because there is so many things that they can do now. Even the law firms publish formation documents. They can come to us for cap tables. There's a lot of providers that will give them NDAs, and contract management services, and all the other things that you need to kind of stitch together a company. I would say many of these startups really, and even with SAFEs, they don't really need a lawyer to do safes. So many of these startups are not actually getting a lawyer until their series A or a price series seed round, where they actually need somebody to do legal docs for the financing.
Michael Eisenberg:
How does that disrupt the law firm's business?
Henry Ward (10:39.726)
I don't think this is new. I think over the last 10 years, the work that partners do becomes increasingly higher level, which is what we want. It used to be 15 years ago, partners would do formations for companies. It's crazy, now no partners from a reputable law firm do formations anymore. And I would say now even associates aren't doing it. And that's what you want, is, you want the people moving further up the value chain to higher level work, whether it's IPO work, it's M&A work, whether it's complex financing work, you want them doing that. And then all the commoditized stuff, you really want tooling and software and lower cost service providers to do.
Michael Eisenberg:
Give me an example of an AI implementation in Carta.
Henry Ward:
We have a bunch. I'll give you kind of a category. So the first one is, no human should be doing data entry anymore. It doesn't make sense. A lot of human work is data entry. It's like, how do I get the data out of the documents? Or I got an email, and I type the stuff in. How do I get the inputs into the software? So that's an example of one, is now machines read most of our documents and nobody needs to, one, enter data, whether it's cap table data, whether it's LP data, whether it's fund accounting data. And two is, nobody has to check data, because now we can, a machine can read the document, make sure we've implemented it correctly and do all the quality checks.
So that's like the easiest one. That's the lowest hanging fruit using AI vision. The second part that's, I think, more interesting, is, we're spending a lot of time with how the user experience and software is going to change. So one of my arguments is we shouldn't be building forms anymore. Forms, web forms have been the dominant way to collect data for 20 years. And it was really built, because you had all this sort of unstructured data in the world, and we had to structure it into a database. There had to be an interface that someone could say, “This number is shares. This number is LP commitment.” And you did that by creating a form that said, “Put this number in as share account, put this number in as LP commitment, put this number in as amount invested.” And that was the translation from the real world into the database. In LLMs now, we don't need to do that anymore. You could type in numbers in any way you want, and the LLM should figure out where it goes in the database. So we have, at Carta, we've got tens of thousands of forms, pages that collect various types of data, whether it's cap tables, accounting, whatever it is. And my argument is, what if we had no more forms? How would we pull in data? And so a lot of this now is just, upload a document, or just free form type in what you want to do, and we'll just create the workflow. We still have all the workflows. Nothing has changed in the machinery underneath. But we now have a different interface. So we don't have 32 pages that you have to click through to get all the data in.
A third one that I think where the world's going is on the agent side. We have a lot of accountants. Almost 2,000 people work at Carta. A third of them are focused on fund accounting and managing all the debits and credits, and the journal entries and all of those things. It is very complex work. You have to deeply understand accounting. But it's programmable.
And so a lot of the agent work we're doing is looking at how accountants process different transactions that are workflows that are happening on a system, and then having agents start to take over, because the reasoning models are so good. So I'll give you a quick example, cash rec, complex problem. We cash rec a quarter million entries from all the bank fees we get every month. We actually have humans that go in and research each transaction and figure out which entry it has to go into. And they have, in their mind, they have a reasoning model. And so now we just train an LLM to give them a reasoning model for the LLM to do it themselves, or the AI agent to do it themselves. And it's been working fantastically. And so I think more and more of that kind of commoditized white-collar work is going to go the way of agents.
Michael Eisenberg:
Are you going to need all those 600 accountants in the future?
Henry Ward:
I will, but much like the law firms, they'll be doing higher value work. There's sort of this thing where people believe, oh, because software now automated the job that I had, I must be out of a job. And our perspective is, no. It allows you to go do more interesting stuff. Because we want your knowledge. You've collected 10 years, 15 years of knowledge that allowed you to do this thing. Now apply that in a new domain, because we've taken out the lowest value work for you.
And it just so happens, you know, people will start to move up the value chain. And it's always been true. When the calculator was invented, it wasn't like all these people that were using abacuses were now out of jobs. It was, they now actually could use the calculator to do physics and put somebody on the moon. Like that was that's the whole point.
Michael Eisenberg:
There was just a report that came out, I can probably pull up on my computer, I think it was from my Penrose, that said that AI or LLMs are really bad at accounting. What do you think?
Henry Ward (15:59.386)
They are. So I would say we're on the cutting edge of figuring out how to use AI in financial applications. And why AI is bad at it is because it's stochastic. So the mental model that changes when you start building AI applications is, as engineers, we believe the world's deterministic. Code is deterministic. If I run it twice, I get the same answer. And when I don't, that is a bug.
Like something is wrong if I run the same program twice and I get different answers. So code is deterministic. By its very nature, LLMs is stochastic. You can run it twice and get different answers. And so what we think a lot about is, when is stochasticism a feature and a bug, and when is determinism a feature or a bug? And then you have to apply them separately.
So one of the examples we use is, anything in accounting can't be stochastic. Like, there is a correct answer in accounting. So when we're using AI to solve accounting problems, we don't actually use the LLM to give us an answer. We use an LLM to write the code to give us an answer, because we need the answer to always be deterministic. That's like an example that I miss, that I think many people miss when they're doing these accounting startups, is they do silly things like the AI believes this journal entry is 80% chance of being correct, or 80% probability. There's no probability in accounting. It has to be right or wrong. But then there are cases where you actually want stochasticism. So one of the examples might be when we're generating a report that a customer wants, instead of giving them one report, we might give them three, all slightly different. And then they can pick the best one. And so you want variation in how you report these numbers.
Another one is when we do QA. So we may have a thousand entries that we're putting in through code. But then you want two LLMs to write different code that puts in the same entries and then check those. We don't believe in human in the loop. We do believe in agent in the loop, where you actually have two different agents writing the same code for the same problem. And because they're different, because they're stochastic. If they come up with the right answer, that answer is more believable. If they write the code that generates the same answer, because it's stochastic, you expect them to be different. It's the same as Amazon Turk, right? How did you know Amazon Turk was correct? You had three people doing the same thing. And if their answers are correct, you believed it. And if two of the people got one answer and a third got something different, you'd have to check it. Same with agents. And that's an example where stochasticism is a feature. And so we spend a lot of time on this deterministic versus stochastic problem. And then accounting always has to be deterministic, but the way we do accounting can be stochastic.
Michael Eisenberg:
I think that's incredibly fascinating, and brings up a question that I hadn't thought of until you started speaking this way, which is, I hire PWC not necessarily to get the right answer, also to get the right answer, but because PWC signs on the document. There's kind of a branding element to it. When I do a 409A, I mean, we'll just be open with each other. A lot of the 409A evaluations are made up, right? And they're kind of solving for an answer that you already know, rather than coming to a real mathematical or accounting conclusion. But because somebody has signed on the 409A, I can use it at a board level in order to kind of support or buttress the valuation that I've come up with anyway at the board level.
So a large part of the value of many of these firms, and that's why there's a Big Four today in accounting, and with brand name legal firms, is to provide the brand name. What you've just described now is stochasticism as a replacement for brand name. Meaning, I've got three proofs, so to speak, that could have come out of another way, and now I'm going to replace it with this kind of 777 in the slot machine of three proofs in a stochastic system. Does it actually work? I mean, it technically works, but the question is if it really works for the customer. And what are the brand names going forward? I guess is the second question.
Henry Ward (20:36):
Yeah, I think it depends on the product. I've never been a huge fan of the brand name stuff. And it's a function of my history. So when I started eShares, now Carta, and we started doing cap table software, people would say to me, it sounds silly, but 100% serious. They would say, “I need a law firm. Pick your favorite law firm's brand name. I need their stamp approval that my cap table is correct.”
Like, who's going to trust some random startup and that the cap table is correct? We need the brand. And it's just a funny way of thinking about the world. If that's always true, nothing changes. Then why does NetSuite, why don't you need a brand for NetSuite? We use software all the time for missing critical stuff. We don't go, “Well, we need PWC. We don't trust NetSuite.” And in fact, I think most people would argue we trust NetSuite way more than we trust service providers these days. And so the same was true of valuations. When we started doing 409A valuations, the CFOs would be like, “I need Bob from valuation firm ABC, because that's the brand we need. And he knows my business.”
Now nobody cares. And I think that will just continue to be true. The reason brands work is because the products are undifferentiated. If the product is differentiated, if the product is really good, if it's 10x better, nobody cares about the brand. You only care about the brand when you can't tell the difference between the products. So whether it's Heinz ketchup and every other ketchup, or pick your favorite audit firm versus the–it's all the same. And so how you win is you just have a 10x better product, and then you don't worry about the brand
Michael Eisenberg (22:31):
Scott Bannister, who I think is one of your early investors, said I should ask you the following question. How are you responding to the flood of Carta copycats? There's Carta for real estate. Therefore, it comes back to the question, the brand matters when it's a commodity business. Obviously, you're being challenged by many, many challengers trying to commoditize your business. So how do you respond to the copycats and differentiate yourself if it's not through the brand called Carta?
Henry Ward
Yeah, well, I think I was very worried about all these copycats for everything. Whether it's crypto, cap tables, just exactly what we're doing, Carta for other asset classes. I was very worried about it because I was like, look, cap tables will become commoditized. I was wrong. It just hasn't. And I'm not 100% sure why, but I think a couple of things. I do think because of network effect, there is a winner or incumbent advantage. Like it is very hard at this point, I think, to build a cap table company that has network effect that could beat Carta. It’s just because there is some incumbency, it's a little bit like Salesforce, is, this is just hard, because we've taken that space.
The other thing I think I've learned is execution matters. You know, everybody says it, nobody believes it. There was like, it's the idea–and it's not. It's the idea plus the execution. And so you can have the same idea, but if you don't out-execute, it's hard to win. And at least so far, I don't think anybody's created a 10x better product than Carta. And to displace an incumbent, you need to be 10x better.
Michael Eisenberg:
How fast are you growing?
Henry Ward:
We're about 20% grower, at about $500 million in ARR.
Michael Eisenberg:
Are you going to IPO yourself on Carta?
Henry Ward:
Not ourselves, because we only do private companies. We don't do public anymore. We stopped doing public and decided to be private market specialists. But the original vision, Michael, was that we would IPO on ourselves. Today, we're not. We're only working in private markets, including private equity and private credit. That's where we spend most of our time now.
Michael Eisenberg:
Amazing. So I want to change gears for a second, because the podcast Invested is about how values create value. So I wanted to ask you, what are your core personal values and what drives you?
Henry Ward:
You know, I think the number one thing that I think everybody would say about me is I'm transparent to a fault. You know, I always err on the side of transparency. It gets me in trouble a lot, especially in the news and media. But I still kind of stand by the values of being transparent to a fault. You know, from everything from like, when we entered the 409A business, we didn't try to hide it. We told the world, we wrote a blog post that we're entering 409A, and this is what we're doing. And everybody told us not to write our strategy, because then everybody knows our strategy. And we're like, everybody should know our strategy, so they can decide what they want to do with it. You know, whether it's a 409A firms want to compete or stay away, whether people want to come join us and help, you know, it's just like–be out there.
So in transparency, if you look at our company, we do town halls every Friday. We do show and tells every Wednesday for the whole company. We're transparent to a fault. I think the other one is a big believer in EQ. There's a lot of IQ out there. There's not as much EQ. And a high EQ person, a high EQ organization is very differentiated.
I think it's actually hard. We never fail as a company because we're not smart enough. Like it just doesn't happen. We're not, we never are like, we can’t solve this problem, we're just not high IQ enough. Everything that goes wrong at a company like ours is because people don't get along. It's that people aren't aligned. People make mistakes. People don't work together well. It's always EQ problems. And so I spend a lot of time personally thinking about EQ, but also trying to teach it in the organization.
Michael Eisenberg:
One of the things I think you wrote somewhere is like you hire only missionaries. I guess the word missionary carries a lot of different meanings, or it can bear a lot of different meanings. I don't often think about missionaries as having the highest EQ necessarily, although some religious missionaries have probably high EQ, because they're recruiting or proselytizing for the faith. But oftentimes the way we think of these missionaries is this missionary zeal, you know, is knock down the doors and not the highest EQ. How do those jive with each other?
Henry Ward (27:38.764)
Yeah, I think missionary to me is more about why they're there. The why versus the how. So the why is–asymptotically, you know, Hewlett Packard, the 137,624th employee goes to Hewlett Packard because they need a job. And asymptotically, that's true. And that will be true of us. But we're trying to hold that off as long as possible, and hire as many missionaries as we can in the world until we run out of them.
And they come because they really care about the vision. And why I think that's important is one, they're there for the long run, loyalty, all the kind of normal stuff you'd like to see in employees. But I think what's most important is, they get what we're trying to do. The problem, almost always the problem that you have in running large organizations is this local versus global optimization problem, where a team can optimize locally for what they're trying to do, but it's a local optimization for the organization. It's not the global optimization. But it's global for them. And that balance of incentive structures of what's the right thing to do for the company versus what's the right thing to do for the team is one of the biggest challenges, the chronic challenges of running a big organization. And so if you have mercenaries that are there for a job, a paycheck, a promotion, a title, they're much more inclined to solve the local optimization problem for themselves.
Missionaries, you can have a much broader conversation with. “Hey, I know that's better for your career, but doing the other thing is actually better for the company.” And it's much easier. To your point about the EQ side, I think that's a how. And so there is the missionaries, like sometimes you do have to have sharp elbows and you're like, “Look, I'm going to go against what everybody wants, because it's the right thing for the company. But hopefully you have savvy missionaries that are like, I'm not going to–I do think this is right for the company. But instead of just charging forward and upsetting people, I am going to get people to believe it too.” And that's a great missionary, right? A great missionary is not someone that just goes out and does missionary work. A great missionary is someone that creates more missionaries. And that's what you want in the organization.
Michael Eisenberg (29:53.262)
I think, kind of, everybody wants to hire missionaries. I think the question is how you find these people on a consistent basis. So what are your tactics, approaches, strategies for finding missionaries and picking them out?
Henry Ward:
It's pretty simple for us. So one is, back to my transparency as a fault, like super transparent about what we're doing, and put it out there. And people actually come to us. I mean, most of the people that apply, they're not applying for a job. They're like, “Hey, I love the idea of creating more owners. I want to be a part of it. I want to be part of a company that does that.” Or, “I came from the fund accounting industry, and I realized how broken it is. And I've seen your writing, and I want to be part of this vision to fix it.”
So you put it out there. The second is, we don't really sell candidates on coming to Carta. Michael, if you were considering coming to Carta, I would tell you what we're doing. I'd tell you why we think we're good. But most of my time would be unselling. It would be like, “Hey, it's chaos in here. It is a grind. It is a constant battle.” I tell you all the horrible things, all the words on it. And if you're still interested, that's great. That's fantastic.
Michael Eisenberg:
You mentioned before that people kind of find you by your writing. You write, and you're out there. Why is that important? And when did you figure out that that was important?
Henry Ward (31:25.496)
You know, I started early. I started when the only bloggers were, kind of, VCs. No founders were writing. And I learned so much from reading Paul Graham and other writers about what was happening that I wanted to pay it forward. And so I started writing just about the founder experience, like things like how to hire, and management FAQs, you know, things that I was telling my company that I thought might be helpful to other founders starting their companies.
And I started writing, and I got a lot of traction through that. Even when we did the layoffs in 2019, you know, we were the first to write publicly about the layoffs. Everybody was hiding them. And I thought they were doing a terrible job of communicating layoffs, doing layoffs, all those things. And so I published my letter to employees about how we were doing the layoff. And then, you know, that became the new norm for how to do layoffs is to do it transparently and openly.
Michael Eisenberg:
It was epic.
Henry Ward:
Yeah, yeah, thank you. Yeah, it was important. And we did three months severance, which then became the standard during Covid, which was the right thing to do. Before that, a lot of companies would give like two weeks, and we were entering a pandemic. So we did a lot of writing. And I think it was just good for the ecosystem. And then it also was great for recruiting, because people found us and they were like, this is the kind of company I wanna work for.
Michael Eisenberg:
You have spoken a lot about clock speed. What is that?
Henry Ward:
You know, it's a speed that we get things done. And what happens in a company as you get bigger is, there's more process, there's more bureaucracy, there's no more planning, and there's less doing. You know, there's one of my favorite clips from Steve Jobs, who's my hero, my idol about running a company. And he talks about content versus process. And as a company gets bigger, executives start to believe that their job is process. The process of managing the company versus the content of creating a company. And I see it in our company, and my daily reminder to my team, to my executives, to the managers, to all the teams is, just because we're a big company doesn't mean we should act like one. Just keep executing faster and faster.
And I think that's only more true. With AI, the tooling that's happening, software advances, like–speed is going to decide, speed of shipping a new product is going to decide the winners from the losers. And that is the one advantage startups have over incumbents. We have the money, we have the people, we have the resources, we have the momentum. The reason we get disrupted is so startups can move faster than we can. And that's what we should stay awake every night worrying about.
Michael Eisenberg (34:23.085)
And how do you practically accelerate clock speed in your organization of 2,000 people at $500 million? And what would you tell other entrepreneurs to do to accelerate the clock speed?
Henry Ward:
Yeah, so I'm a big fan of going straight to the team that's working on stuff. I just did this a few weeks ago. We had a team that was working on something, and they said it would take, I think it was like two months or something. And I said, “That seems like a lot. Can you come show me why it takes two months? Just show me the work, show me the problem. Help me understand it.”
Crazily, I think it was actually three months, that's what it was, three months. And then crazily, you know, and before they even showed me, they're like, “You know, Henry, we looked at the problem again, and it won't take three months, it'll take six weeks.” And I was like, “That's amazing! Progress already, just by asking the question.” And then I said, “But you know, I still would love to see what takes six weeks. Just educate me on it.” And then we went in and I looked at the feature, I looked at the code, and very quickly we figured out, hey, we could actually do this in about two weeks.
And it's just caring about it. It's like anything in a company. If the CEO cares about it, the company cares about it. The CEO doesn't care about it, the company doesn't. And so I just have to care about it. And every time I see us not executing to our values of high clock speed, I just ask the question. And it's just, it's every day. You know, it's nothing fancy. It's just work.
Michael Eisenberg:
How do you review people on their clock speed?
Henry Ward (36:01.07)
It's a great question. I don't have a great formalization of it. But I think it's one of these things where you know it when you see it. You recognize teams that are doing it. And then you acknowledge the teams that are doing it. And then what happens is, if you give praise and acknowledgement to teams that are executing the way that you want them to execute publicly, other teams start to emulate.
So one of the things, customer experience, I’m a huge believer in it. I am embarrassed when I get escalations that we didn't serve a customer well. Like, personally, I hate it when a customer is unhappy with what we've done for them. And so how do I get other people to care and be a part of that embarrassment, is not to shun them when bad things happen, but when we do get positive praise, every time I see positive praise from our customers, I post it publicly in my Slack channel, and I call out the team who did it. And when everybody starts to see that's what I care about, everybody converges to that thing.
Michael Eisenberg:
That's a great point. Have you pushed clock speed using AI? Meaning, “Hey, I expect every team to kind of double down on AI here, whether it's, you know, AI coding, or something else,” and say, “Okay, I expect a 20% improvement in clock speed because of this.”
Henry Ward (37:58.872)
Yeah, I didn't put out a number, but I said, “Carta’s an AI company. And one, there's this interesting question, I can say Carta’s an AI company, but what does it really mean to be an AI company?” And I offer two definitions. So one is, you're an AI company if you build products that deliver an AI experience to customers. So if we're using AI, we're building software that uses AI for customers that they use–we’re an AI company. The other is, you don't build AI-based products. You build traditional, conventional products, but you use AI internally to build the company. So you're rebuilding the company on an AI stack. Carta is both of those. We ship AI products, and we rebuild internally with AI.
And so what I tell all the teams is, they should be using AI, experimenting with AI in everything they do. And now it's all experimentation. We're in learning. It's early days of AI. But now I consider myself the AI person at Carta. So I work with teams. I'm like, “Hey, let me work with you on–hey, you're trying to automate a workflow process? Let me help.” And I'm becoming the AI consultant to try to teach teams on how to use AI internally. And in fact, we're doing next week a hackathon for the whole company, not just the engineering group. The entire company is doing an AI hackathon where they're building AI tools internally for everything, for anything they want to try. And then that's just how we get better and how we learn.
Michael Eisenberg:
You gave one example before about the coding. What are other examples of where you're using AI to speed up, create faster clock speed?
Henry Ward:
We're doing this hackathon next week. One of the rules for the hackathon is no chat prompts. So I believe that the prompt is the wrong way to interact with an LLM. It's the version 0.1 of the UX of an LLM. So they have to do everything. Every AI use case has to be directly embedded in workflows. It's not just type into a prompt. You have to embed it in a workflow. So then the question becomes, well, how do you do that?
And so we got a n8n license for the whole company, where they can now build workflows on top of n8n for internal use. That's different from product. We don't use n8n for product. We build raw code, and embed LLMs and AI into the raw product. But internally, you don't want finance people building raw code that's LLM. So they're using n8n. And they're taking any workflow that is repeatable. If a human has to do the same thing more than once, it's an opportunity for an AI-based workflow.
And we're starting to go through and map all the workflows in the organization, and load them into n8n. It's important to note, I'm not a believer that that means we fire people. That's not the goal here. It's to free them up to do higher value work. The whole concept of AI will get people fired is really the zero-sum problem, which is, there's a finite amount of opportunity, and if you find a more productive way to create that finite amount of opportunity, then obviously people have to lose their jobs. And it's the mistake humans have made since wealth of nations. The world actually is actually a positive sum. And so our view is, AI just allows us to be more positive sum rather than zero sum.
Michael Eisenberg:
Is there a team that you have that gets after these AI opportunities or is it just you?
Henry Ward:
I have a couple of teams working on different, a few teams, I should say, working on different AI projects. But I meet with them every week.
Michael Eisenberg (41:23.022)
You’re the AI czar.
Henry Ward:
Yeah, that's right. Including approving, like everybody now wants to buy AI tools. You know, all these different AI tools that are coming up. And there's a lot of snake oil, Michael. There's a lot of AI tools that aren't very useful, aren't very good. And so even on procurement, I'm a procurement person for all AI, because I want to see what other–every time a team wants to buy an AI product, they have to send it to me with a video so I can watch what the tool does. And I'll decide if I think it's useful for us and worth it. But more importantly, I get to see what
every startup is doing on AI. And that's where I learned the most. I mean, these are the most creative people, the founders building this stuff. There's a lot of snake oil. There's some really good ideas. And then when we see the good ideas, we're like, “Oh, we should be that smart, too.”
Michael Eisenberg:
What's the most valuable AI tool that you use?
Henry Ward:
You know, personally, I'm using ChatGPT mostly for personal use, not professional work, you know, like helping out my son with stuff, things like that. So I find it useful, I think the way most people do. Where I find it most powerful at work is embedding it into the existing workflows of our customers. And that's where I, again, I might be a bit contrarian on this. A lot of people think that AI is going to disrupt traditional industries. You know, there will be an AI that beats Salesforce, an AI startup that takes out Workday, an AI startup that takes out Carta. And I just don't think that's true, because the difference between being an AI tool and being a system of record is the AI tool can't change the system of record without the system of record.
And so because we're the system of record, whether it's Salesforce, Workday or Carta, if we embed AI, we're not read only. We are write. And so the most powerful use cases of AI for us is not, “Hey, we figured something out for the user,” but we can act on behalf of the user. Traditional, and like just AI agents can't do that. And that's where I think many of these AI to replace Carta, AI to replace Salesforce are gonna die, because we're not dumb either. We may not be as fast moving, but once we figure it out, our AI tools will be way more powerful than anybody else's.
Michael Eisenberg:
I think that's profound. It's an advantage incumbent in many of these cases, particularly to the point you made when you have to write to the system. I think that's a profound point. You just mentioned your son. I think I've seen or read that you're a dedicated father. What are your thoughts on work-life balance? I'll state my priors by the way, I'm on the record of saying, I don't believe in work-life balance, and I have eight children. So, what are your thoughts on work-life balance? What's your approach?
Henry Ward:
Yeah, I'm not a huge believer in that as well. I mean, if it works, if it's a good framework for people, you know, I'm supportive. For me, it's about integration. As a founder, CEO, there is no separation between my personal life and professional life. It's just, it's always embedded. And so I don't spend time thinking about how do I put boundaries between them. I spend time thinking about how do I how do I merge them in fun and interesting and healthy ways.
So for example, I bring my son on trips a lot. He's 11. You know, he's been to our Singapore office, our Abu Dhabi office, you know, our London office, New York office. He's been everywhere. You know, employees know him and see him around. So I bring him there. We're actually going to run an experiment in sixth grade for homeschooling, because that allows him to have more flexibility. You know, the problem with schools is family has to build their schedule around the school schedule. But if you're homeschool, you can build the school schedule around the family schedule. And so we're going to experiment with that. We spend a lot of time together where he'll accompany me. I'll work. I'll go to his things. But I can work remotely. So for me, it's not about balancing the two. It's about how do I merge them in healthy, fun ways.
Michael Eisenberg:
Tell me, what's your strategy on remote versus IRL in real life for the company?
Henry Ward:
I'm a huge fan of in the office. We're in the office three days a week, Tuesday, Wednesday, Thursday, the whole company's in.
Michael Eisenberg:
Four-day weekend?
Henry Ward:
Yeah, exactly. We may go to Monday, Monday through Thursday. We work from home today on Mondays and Fridays. You know, it's always this balance of flexibility versus getting people in the office. A lot of people say they're more productive at home. You know, I never argue the case.
What I always tell them is I say, “Look, you may be more productive at home. I won't argue, but I know you'll care more about work if you come into the office. You're less likely to quit. You'll be more passionate about what you do. It will be a bigger part of your life. If you're not in the office, then you're interacting with an entire company through a monitor.” And that's just true. Like we have the data on it. You know, if you're a remote worker, you're way more likely to quit. You're way more likely to get fired. Like you're just less engaged. It's just true. It's not 100 percent, but on average, that's true. And for us as a company, I think people really embraced it. Like we love coming into the office, and I'm a big fan of it too.
Michael Eisenberg:
Your secondary market shut down in 2024. It was a reasonably public challenge and blow, I think. How did you kind of maintain trust after that and how'd you bounce back?
Henry Ward:
You know, it wasn't even shutting down CardaX. It was the death of the dream for me. You know, I spent a decade working on this private market liquidity problem. I never wanted to start a cap table business. I started a cap table business to give me the option, the call option to build a liquidity business. That was, if you look at my seed deck, it was, “Hey, we're starting with cap tables, so that we can build the settlement engine, settlement database for a private stock exchange. But my dream is to build a private stock exchange.” And I spent a decade working on it. And people know CartaX most famously, but I had two versions before that that I shut down and rebooted. CartaX was the third incarnation of my idea to do it.
So for me, it was the death of a dream. That was my, a decade of my life was devoted to that. I am so lucky that we had a cap table business that worked, a fund admin business that worked, a PE business that worked, that even as we were kind of spinning our plate working on this CartaX idea, we were doing all this other stuff. And when liquidity didn't work, all these other things did work. You know, most people, when their idea doesn't work, they've lost 10 years of their life and they start over.
And I still had this incredible company that I could build around other businesses. So, you know, I've come to peace with either it's an intractable problem, nobody will solve the liquidity problem, or I'm the wrong entrepreneur to do it. And there will be a better one that comes along, hopefully soonת that solves it. And then I feel so lucky that I have a half-billion-dollar-a-year business that's growing that I get to keep working on.
Michael Eisenberg:
You think someone will solve it like, will NASDAQ solve it? Will one of the PE firms solve it? ד some startup solve it? Or it's just like forever an intractable problem, and people should actually just go public, suck it up and go public.
Henry Ward:
Yeah, I don't think anybody will solve it. I think it's an unsolvable problem. At least in the current market structure. And it's just because liquidity and price discovery are not features in private markets. And so any attempt to create a marketplace requires liquidity and price discovery. And the market structure and economics will reject it. And so I think it's an intractable problem.
Michael Eisenberg:
When I interviewed Katie Stanton, which is how we decided to have you on this show here, which was just like a Eureka! Oh yeah, we should have Henry. You told me to ask her, what do you think is obvious today, but in 10 to 20 years, people will be shocked we did this? I want to pose the same question to you.
Henry Ward (50:11.918)
So many–everything from, I do this all the time. Today, self-driving cars are kind of weird. You're like, you know, can we trust them? You know, are they going to crash? Are they going to take over in 10, 20 years? It's going to be the opposite. We're like, can you believe we let 16-year-olds drive? I guess that's crazy.
I think there's so many. AI is going to take all the jobs in 10 or 20 years. They're like, how did we we survive without AI? Like, it's crazy. You know, we're going to look at it like, Google Maps, Like, I mean, you and I, Michael, are probably old enough to remember what it was like to be lost, you know. You know, and nobody will ever experience being lost again in humanity.
You know, in my own business, I see it all the time in fund administration. 10, 20 years, people will be like, “Can you believe we used to run multi-billion dollar firms on spreadsheets and reported to LPs 45 days after the quarter closed? Where they're on Bloomberg watching real-time data, can you believe that was acceptable?” So there are just so many of these I could give you. This location that's happening in software is so remarkable now. There's a million of them. I can't even count how many of these weird things are gonna happen.
Michael Eisenberg (51:48.204)
I think that's actually a perfect place to finish up. Henry Ward, Founder and CEO of Carta. Thank you so much. I'm certain everybody listens and goes, “that's the guy's business my company runs on. This guy's running my cap table.” So I think people will be so excited to hear this. And so just a message to all of you, if you enjoyed the conversation with Henry and the other conversations, rate us five stars on Apple Podcasts and Spotify, and subscribe to the YouTube channel so you can hear more great content from Invested. Thank you, Henry.
Henry Ward:
Thank you, Michael. Thanks for having me. It was great.
Nuseir Yassin (00:00.066)
We were the best in the world at making one minute videos. I don't know what the hell we're doing here talking for one hour.
Michael Eisenberg:
Because it turns out you have a lot to say.
Nuseir Yassin:
Winning was getting to Harvard, then winning was getting a job, winning was getting a million followers, then winning was getting a million dollars. We've finished those things.
My controversial thing is that Jews and Muslims should get along.
Michael Eisenberg:
It's controversial, isn't it?
Nuseir Yassin:
If you're dumb as hell. Okay, I think I'm gonna get canceled by the end of this podcast.
And my other controversial statement is that organic content is dead.
I can never be Egyptian. I can never be Danish. I can never be British. But I feel like I can be Israeli.
I think now entrepreneurship is the easiest way it's ever been.
It's an AI platform for solopreneurs to find customers and sell online. That's Nas.io.
Here's what I learned. You should never apologize for who you are.
Michael Eisenberg:
Welcome back to another episode of Invested. I'm here with someone who's at this point a reasonably old friend.
Nuseir Yassin:
Yes indeed.
Michael Eisenberg:
Nuseir, welcome.
Nuseir Yassin:
You can call me Gavin. That's my nickname.
Michael Eisenberg (00:58.377)
Gavin? Where'd that come from?
Nuseir Yassin:
Just to get more views on this podcast.
Michael Eisenberg:
The reference is to Gavin Baker, who was on a previous podcast. So we said right before we came on air that we're just gonna jump right in. We're gonna jump right in, okay? You're like one of the OG content creators of all time.
Nuseir Yassin:
Yes, sir.
Michael Eisenberg:
Is that fair?
Nuseir Yassin:
I think that's fair.
Michael Eisenberg:
You're very humble too.
Nuseir Yassin:
Yeah, it's been nine years. It feels like 900 years.
Michael Eisenberg (01:23.842)
How did you get into content creation?
Nuseir Yassin:
Look, there was this interview by Zuckerberg that said, Zuckerberg said, “I will not be surprised if 70% of the Facebook feed is videos in the future.” Back then it was just text and images. And I saw that and I was like, “Holy shit, he's about to build the next YouTube.” There's no competition on Facebook. My mom goes on Facebook 25 times a day. On YouTube, never. There's a massive supply and demand inequality. I'm going to jump in and make specifically Facebook videos, because they're gonna be extremely viral, because all the viral mechanisms are there. And so I jumped on that. I quit my job, I left my H1B visa in New York, and I just went to Kenya. And I just started making those videos.
Michael Eisenberg:
In Kenya?
Nuseir Yassin:
In Kenya.
Michael Eisenberg:
Why in Kenya?
Nuseir Yassin:
It's just a lot more interesting than the Upper West Side.
Michael Eisenberg (02:08.408)
And what were the videos about?
Nuseir Yassin:
Do you agree?
Michael Eisenberg:
Yeah, well I've never been to Kenya. I just spent a lot of time in the Upper West Side. When I grew up on the Upper West Side, it was more interesting, for good or for bad.
Nuseir Yassin:
Look, if you want to make interesting content, you just got to live an interesting life. Simple as that. You cannot be a boring individual, because your content will be boring. So I was like, “OK, my life is really boring in this Manhattan life. And I'm really poor. I'll be really rich in Kenya. And I can make a lot more interesting content.”
Michael Eisenberg:
What was the first content you made?
Nuseir Yassin (02:47.47)
Hey, guys, I'm in Kenya. Let's make a video. This is for you number one, one minute. See you tomorrow. Then the next video was like, “Hey guys, let's talk about Kenyan food.” Then everything failed, right? The first 270 videos failed. Then video number 271 succeeded.
Michael Eisenberg:
What was it?
Nuseir Yassin:
It was in Thailand, and it was like, how cheap is Thailand? I was like, “Hey guys, I'm in Thailand, and oh my god, there's 30 cent meals.”
Michael Eisenberg:
So it turns out, you don't have to be rich. I mean, being rich in Kenya was overrated. You should just be poor in Thailand.
Nuseir Yassin:
Exactly. So I bought 200 meals for 30 cents a meal. And then, when was the last time you saw somebody buy 200 meals?
Michael Eisenberg:
Who'd you buy them for?
Nuseir Yassin:
The people at the restaurant.
Michael Eisenberg:
Why'd you do that?
Nuseir Yassin:
It's a lot more interesting than watching me eat. That's the whole point of content. You gotta say something or do something to make people notice.
Michael Eisenberg:
It was a stunt?
Nuseir Yassin:
Yeah.
Michael Eisenberg (03:30.326)
How many people asked you for them to buy them lunch afterwards?
Nuseir Yassin:
Actually, zero. I did not want to go down that route. I think Mr. Beast won that game.
Michael Eisenberg:
Mr. Beast won that game, huh?
Nuseir Yassin:
I don't want to give away free things.
Michael Eisenberg:
All right, so once you said that if 100% of the people like what you're doing, you're probably doing something wrong.
Nuseir Yassin (03:45.966)
You're a clown at a hospital.
Michael Eisenberg:
That's what you said?
Nuseir Yassin:
Yeah, if 100% of the people like what you're saying, you're a clown at a hospital making sick kids with cancer smile. Nobody hates that.
Michael Eisenberg:
Okay. You don't want to be loved. Why not?
Nuseir Yassin:
No! Name me one person who changed anything important in the world that has 100% love. Nobody. Nobody. Unless you're like a dictator in some, you know, North Korea.
Michael Eisenberg:
You have 100% of the vote!
Nuseir Yassin:
So I think I got to terms with the idea that, okay, I think the most I can get is 50 to 60% like, therefore 40%.
Michael Eisenberg:
That's a lot.
Nuseir Yassin (04:28.206)
Well, yeah, that 60% is, let's say 100 million, let's say 70 million followers, let's say 100 million people like Nas Daily. That also means there's 50 million people that want me dead.
Michael Eisenberg:
Dead?
Nuseir Yassin:
Dead.
Michael Eisenberg:
You worried about Charlie Kirk, something happening to you?
Nuseir Yassin:
Yes. Of course. I get bodyguards now.
Michael Eisenberg:
You do?
Nuseir Yassin:
Not in Tel Aviv, but I do get bodyguards.
Michael Eisenberg (04:39.086)
Because Tel Aviv is, I keep telling people, it’s actually the safest place on earth.
Nuseir Yassin:
For Jews and non-Jews.
Michael Eisenberg:
For Jews and non-Jews, exactly. It's the safest place.
Nuseir Yassin:
When I made those one minute videos for my mom to watch on Facebook, I didn't think I'd have to hire 10 bodyguards in my event in Thailand last month. You know, but I do.
Why?
Nuseir Yassin:
Because I am from the most controversial country in the world.
Michael Eisenberg:
And you say controversial things.
Nuseir Yassin:
My controversial thing is that Jews and Muslims should get along.
Michael Eisenberg (05:06.99)
That's very controversial, isn't it?
Nuseir Yassin:
If you're dumb as hell.
Michael Eisenberg:
It shouldn't be that controversial.
Nuseir Yassin:
OK, I think I'm going to get canceled by the end of the show.
Michael Eisenberg:
No, you're good. We don't cancel anyone here. This is a very liberal show.
Nuseir Yassin:
Really, is it that liberal? I'm gonna test you on that. But yeah, look, I think what happened is that Nas Daily became the second most popular Israeli creation after Gal Gadot on social media. Netanyahu is definitely much more popular.
Michael Eisenberg (05:35.246)
He's certainly more followed. I don't know if he's more popular, but he's more followed. He's subscribed to your point of view, which is, you don't necessarily have 100% popularity to be winning.
Nuseir Yassin:
I think he’s going for 20%.
Michael Eisenberg:
Yeah.
Nuseir Yassin:
But for many people, Nas Daily is the first time they see an Israeli person on their feed. Because it started in 2016. And when it started, I have like 5 million followers in the Middle East. That's 1% of the Middle East. In a different page, we have another like 3 million followers in Vietnam, on Nas Daily Vietnamese. OK, a Vietnamese person has never seen an Israeli on their TV until Nas Daily showed up. And of course, if you like Israel, then you like Nas Daily, but if you don't like Israel, then by association, you want Nas Daily dead.
Michael Eisenberg:
How do you know if you're winning?
Nuseir Yassin:
Well, which race?
Michael Eisenberg (06:26.062)
That's why I'm asking you. You know what? That's a good question. What's the race you're trying to win? What's the message you're trying to get across? By being non-popular, you must have a mission or a message. What is it?
Nuseir Yassin (06:37.73)
Okay, so first of all, there's subraces in my life, and there is one giant race. The subraces in my life is, winning was getting to Harvard, then winning was getting a job. Winning was getting a million followers, then winning was getting a million dollars. Right? We've finished those things. Now that that race is over, my current race is building a billion-dollar company. So entrepreneurship, creating a thousand jobs internally and getting to a billion valuation. I want to be the first non-Jewish Israeli to build a unicorn, because fucking 79 unicorns, and none of them are Arabs! So that bothers me.
I mean, being too transparent with everybody here, but that's my current race. My forever life race. I, unfortunately, I was born with it, which has something to do with Jews and Muslims, Jews and Arabs in the Middle East, like sort of, building bridges and bringing people together. So I was just inside Arabia yesterday, and I got into an Uber. And the Uber driver asked me “Where you from?” And I said, “Israel,” in Arabic, which is a big no-no.
And he's like, “I want to get you out of my car. I want to get you out of my car.” And I was like, “Wait a minute, man. I'm Muslim as well. And 20% of Israel is not Jewish. It's Muslim. And let's talk about it.” And then the more I talked to him in that 20-minute thing, by the end of it, he's like, “When Saudi Arabia and Israel make peace, I want to be the first one to visit Israel.” He's like, “Wow, that's cool.” So there was an opportunity to change someone's mind. It's very easy in the GCC. So that's probably my life race.
Michael Eisenberg:
You’re a one-man walking Abraham Accords. One of my great failings is, I've been living here 32 years. I still speak Hebrew. My Hebrew is fluent, but I speak with an American accent, but I should have learned Arabic when I came here. It was a big mistake.
Nuseir Yassin (08:18.508)
That is a big mistake.
Michael Eisenberg:
It was. Yeah.
Nuseir Yassin:
You can learn it today.
Michael Eisenberg:
On Nas.io. We're gonna talk about that. Now you're gonna do Arabic lessons for me on Nas.io. We'll talk about that in a second. So, you started because your mom was on Facebook. Is your mom still on Facebook?
Nuseir Yassin:
No, she's not on Facebook anymore. She's on Instagram.
Michael Eisenberg:
Okay. So there was no TikTok and no Instagram when you got started.
Nuseir Yassin:
Correct.
Michael Eisenberg:
And now there's TikTok and Instagram, right? And you made this kind of short form content before it was popular.
Nuseir Yassin:
Correct. One-minute videos.
Michael Eisenberg:
One-minute videos. What did you understand?
Nuseir Yassin (08:47.67)
I understood that humanity is going into an ADHD world, and nobody's got time for 10, 20-minute long videos unless you're watching TV. But if you're on the go, it is impossible to capture your attention for 10 minutes, right? You're just too ADHD. And so it's simple. If I don't have time 10 minutes to watch this, my mom definitely doesn't. You don't. Let me just say everything I have to say in one minute and call it a day. That was the lesson, then, and it paid off.
When YouTube shorts started, what was the limit? 60 seconds. Instagram reels, 60 seconds. TikTok was basically 60, actually it was like 30 seconds. But when that happened, I was at the right place at the right time, and Nas Daily just freaking blew up because it was the perfect format for the perfect social media platform. We were the best in the world at making one-minute videos. I don't know what the hell we're doing here talking for one hour.
Michael Eisenberg:
Because it turns out you have a lot to say. You have a pent up frustration of having to only do it in 60 seconds, and I'm gonna let you release all that frustration here.
Nuseir Yassin:
I could see it.
Michael Eisenberg:
Nuseir, are you okay? Breathe.
Nuseir Yassin:
I'm actually, I'm feeling much better.
Michael Eisenberg:
You'll have plenty of time. So you just like fed the cocaine addict crack, right? Which is like, I got no attention span, and so why don't I give more 60 second videos? Is that dumbing down the world?
Nuseir Yassin (10:07.072)
Absolutely. Yeah, I'm 100% proud of it. Look, I am like Chief Dumbing Officer, CDO. The point of that is, success for me is, if I make a piece of content, Bill Gates understands it ,and a driver of an Uber in Dubai understands it. That's success. And actually, Bill Gates follows Nas Daily, and many Uber drivers in Dubai also follow Nas Daily.
You have to speak slow and simple enough to reach the masses. You use text on Twitter because you reach the top 1% of the world, the smartest people in the world. And that's really, that's your game. You're reaching the most influential people in the world. My job is to take your message and make the remaining 99% understand it. So we just need to know where do we fit.
Michael Eisenberg:
How do you know if you're successful at that? I don't know if I'm successful at trying to talk to people with my text, but how do you know you're successful with your video content?
Nuseir Yassin:
Unfortunately in this world, success boils down to numbers. Number of views, number of likes, number of comments, number of followers. It's a very... You know, if your job is scale, then that's all that matters, number of views. If your job is influence, you actually don't need a lot of views. You are more influential than me.
Michael Eisenberg:
Probably not.
Nuseir Yassin:
Probably yes, actually. Because one, you manage a billion dollars in AUM, okay, and you are close to the White House. That is real influence.
Michael Eisenberg (11:33.496)
You'll be the first billion dollar Arab entrepreneur in Israel. That’s a 1 of 1.
Nuseir Yassin:
Yeah, you know, but half of it will not be my money, it’ll be the investors’ money.
Michael Eisenberg:
That makes you really well connected. So you speak a lot about coexistence, and we just touched on it now, and I really want to get to Nas.io in a second. So one of things you've said is that you want to use AI to combat antisemitism. What does that mean?
Nuseir Yassin:
Why is it hard to reach an average kid in Yemen? Because there has never been a media channel in Israel, or in New York, or whatever, that speaks in Yemeni dialect on social media. It's just never been possible because it's just so expensive. The average cost of a piece of content is $3,000. Like with a presenter, a good editor on social media. The average revenue of that piece of content, you know how much? Zero. Like zilch. And so the financials obviously don't work.And going down. If not, yeah, I mean, can you run from zero? Probably minus 10. Social media will charge you for views at some point. So the model never works. So you only have two people pay for content. State governments like Qatar, Al Jazeera, which is $200 million a year, or philanthropies that give you a million dollars a year and good luck. But that's not enough.
Now the price of content has gone down 99%. Now the content is still like 70% there. It's not as good yet, but give it a year. Now you can make content for a dollar. If you can make content for a dollar in every language, in every country, in every social media platform, what can you do?
Michael Eisenberg:
But won’t it be flooded out by stuff that is less palatable?
Nuseir Yassin:
Look, the whole internet is flooded out by iPhone videos already. It's become so easy to make iPhone videos.
Michael Eisenberg:
I know but it’s all lost. People with ADHD, as you say, you know, what do they get?
Nuseir Yassin (13:38.388)
Absolutely. I think the genius is in the curator, not the creator. Whoever can curate one shot with another shot with the right music is the genius. It's not who can create the shot. If you're a good
Michael Eisenberg:
Right now TikTok's the curator. Al Jazeera's the curator. People with algorithms and a lot of dough.
Nuseir Yassin:
TikTok is a form of curator, but I am also a curator. I curate topics. I curate the different shots. I curate the music. I decide on this, but anybody can make the same videos that I can make. For example, now I made a hundred videos in a hundred days that's a hundred percent AI. Was one of the first channels in the world to take that risk. And I got a lot of trouble for it, because I said, “I'm not getting in front of a camera. You're going to see an AI version of me talking about things in the past.”
So for example, we recreated when Israel did Operation Solomon. I don't know if you saw that–
Michael Eisenberg:
I did not.
Nuseir Yassin:
–but you can, you know, we can see a thousand people on a plane by a lot, you know, being rescued from Ethiopia, going to Israel. You can recreate it now. So you can bring back history. So when we did that, anybody could have made that video, but nobody could have put Operation Solomon, the script, the shots together. That's the genius. It's not the creating of the shot. Anybody could do it.
Michael Eisenberg (15:01.73)
Why'd you make that video?
Nuseir Yassin:
It's interesting. It's interesting.
Michael Eisenberg:
Why is it interesting?
Nuseir Yassin:
It was the most number of people on a plane ever in the history of humanity. One thousand eighty one. By the time it landed, three people were born. So it became one thousand eighty three or eighty four. Is that interesting?
Michael Eisenberg:
That is interesting.
Nuseir Yassin:
There we go.
Michael Eisenberg (15:23.192)
Does it connect at all–I think you said sometime after October 7th that you grew up as Palestinian Israeli and now you say you're Israeli first. Is it connected at all?
Nuseir Yassin:
Definitely, definitely. Yeah. I view it as my... Look, you're Jewish. You have a kippah. It's audio, but for those that don't know, have not gathered...
Michael Eisenberg:
This is gonna be on YouTube, too, because, you know, clip it into one minute shorts.
Nuseir Yassin:
This is great. Just take the most controversial 20 seconds. You feel like you have a duty to support the Jewish people, right? I don't know where that duty comes from. Is that genetic? I don't know. And I also feel like I have a duty to protect my home. And my home happens to be the same as your home. Now, you do it through diplomacy. I do it through content. It's just different ways. And others do it through fighting in the war.
Michael Eisenberg:
How did that change over time?
Nuseir Yassin (16:17.656)
You know, I've been to a hundred countries making these videos over the last nine years. And I tried to live in Singapore, and I realized after two years, I am not Singaporean. I tried to live in Dubai. After two years, I realized, fuck, I'm not Dubaian. I could be American and I may as well be American, but I–and I am Israeli, right? So I can never be Egyptian. I can never be Danish. I can never be British. But I feel like I can be Israeli.
And I say, a lot of my friends are like very, I'm very culturally similar to Israelis, you know? Not in the sense that we, you know, in the sense that we all want to build things, we're all excited about tech, we all like to backpack in India, you know? I just feel we have that, I have that Israeli culture, even though I'm not part of the religion. And what pains me is that many Israelis don't realize it, is that you could actually convert two million Palestinian Muslims to feel more Israeli.
I was just one of the lucky ones. I'm like top 1% that actually feels Israeli. But the bottom 99% of Arab Israelis may not feel as welcome into the idea of Israel as they should.
Michael Eisenberg:
I said at a conference with Erica sitting over here, that was at the conference just recently, that I think one of the hardest things about the origins of this country is it didn't take an approach to Arab Israelis which said, ‘Let's empower them to be a part.’ I think that's, in the next phase of Israel post this war, that's actually a critical thing that people–because I think it's hard for governments to do anything–people need to take on.
It's this notion of empowerment to exactly the point you made, which is, people need to feel more a product of this society. And in fact, as I've argued, this is biblical.
Nuseir Yassin:
Is it?
Michael Eisenberg:
Yes.
Nuseir Yassin (18:07.244)
Tell me about that. I wanna know.
Michael Eisenberg:
So the Bible says tens of times, the Hebrew Bible, or the Torah, says tens of times that you must love the stranger, because you were a stranger in the land of Egypt. What it means to love a stranger is, these people are, it may not be part of the majority culture, but they have to be treated as equals by the majority culture. I think that's something we haven't gotten right here.
Nuseir Yassin:
But how can we not even be strangers? How can we be partners?
Michael Eisenberg:
Well, there will always be majority and minority populations in every country in the world. That's just life in the way it is. But I think you're right. It has to become a partnership. And it doesn't have to be partnership. It should just be natural. But it starts with education, which is more your world than mine. And it continues to infrastructure, which I think is a big deal here. There's not enough investment in infrastructure in these places. And by the way, it also comes to policing.
Nuseir Yassin:
Definitely.
Michael Eisenberg:
There's not enough policing in the Arab sectors of Israeli society. And that's, in my opinion, it's relinquishing them to the forces of nature, which are not that positive necessarily.
Nuseir Yassin:
I 100% support that. No defunding the police here. Overfund the police.
Michael Eisenberg (19:15.97)
Yeah, unfortunately that's not happening either. They’re getting funds but they're in the wrong places.
Nuseir Yassin:
On that I would add, is like, why are there two countries in one? One is yes, I agree, not enough policing in my village. But two, I need to be also, self reflect, is like, my people have not done a good job in extending a hand. And at the same time, your people have not done a good job in extending a hand. But there was many times I feel like, where you may have extended a hand and we just didn't take it.
Michael Eisenberg:
Yeah, I think there’s something to that too.
Nuseir Yassin (19:47.372)
And so when I am in my village, I actually tell them, “Guys, we gotta freaking extend a hand. Nas Daily is a hand extended, and you'll get somebody to shake it. But we cannot just be like this, sulking and expecting the state to feed us, and take care of us, and police us, while not even admitting that we're part of it.”
Michael Eisenberg:
I think the key, which is, this is a broader comment than just Israel, is because of the welfare state in many countries, there's become an entrenched view in minority populations that the state should take care of me. And I think those days are over, because the welfare state is going bankrupt in Europe and in many places. I wrote this in my most recent book. I think the welfare state is finished. And so every state's gonna need a new model. And what they're going to do out of nothing else other than being forced to do it, is they're going to invest in the core of the population.
And then there's going to be a decision for minority populations. By the way, in this country, the minority population is not just Arab. Also the ultra-orthodox have to decide if they're going to be part of the mainstream of society. For example, do national service, go to get educated or not. And only then will they be able to benefit from the welfare state. That's my core thesis on the future economy of here, and in Europe and everywhere else.
Nuseir Yassin:
I agree with that.
Michael Eisenberg:
You agree with that. Okay. Tell us about Nas.io. Actually, let me come back to that. I gotta ask you one question. Why did you go to Harvard?
Nuseir Yassin:
Why did I go to Harvard?
Michael Eisenberg:
Yeah.
Nuseir Yassin (21:07.054)
If you had the chance, why not?
Michael Eisenberg:
I asked you why yes, not why not.
Nuseir Yassin:
I never thought I was smart enough to go to Harvard, by the way. I never wanted to go to Harvard.
Michael Eisenberg:
Give me a break.
Nuseir Yassin:
No, I swear to Allah. Look, what actually happened is, there's this Jewish American family from Dayton, Ohio. They come to volunteer in my village to teach English, for one week or one month a year.
Michael Eisenberg:
In your Arab village.
Nuseir Yassin (21:40.878)
In my Arab village. They were invited by my English teacher. They walked into the room, and they were like, “Hello, let's teach you English.” “I was like, why are you not in the Jewish towns?”
And they're like, “I don't know, we just want to support the periphery.” I was like, “Okay.” Became friends with them, became pen pal buddies with them. They invited me over to stay with them in Dayton, Ohio for one month. I was like 16, 17. And then I was like, “Oh, great. I love America. I want to go to the community college.” They're like, “Wait a minute. Our son goes to Harvard. Let me buy you a flight. Go to Harvard, check it out for two days, and then decide.”
And I landed Harvard, and I'm like, “Wow, these guys are dumb as hell.” Like they're not geniuses. Like Harvard people, you know, the Ivy League, they have this impression that, my God, everybody's a genius walking around. You know they're talking about? Their boyfriends, girlfriends, Jersey Shore. It's like, wait, I'm like that too. And when I saw that personalized, I was like, I can be that. And so I walked back home, I bought the SATs, took the test, applied, and I got in, and my life changed. And I got a full scholarship. But my life really changed, because I saw, in real life, I did not put on a pedestal a Harvard student. I said, “I can be that too,” the minute I saw it. So really exposure changes everything.
Michael Eisenberg:
What stood out about you when you were 16?
Nuseir Yassin:
What stood out by me?
Michael Eisenberg:
Yeah. You’re in that class, and they're teaching English.
Nuseir Yassin (22:51.522)
I think–Harvard is one step, right? Nas Daily is another. Why did Nas Daily succeed? A lot of people tried making content. I think I say yes to everything. In the sense that like, really like, when I go to the mall, I see every restaurant and then I choose the best one. When I design life, I see every path and then I choose the best path. So I see a lot of people who just say no to opportunities without even knowing what they are. So I think I'm not that.
Michael Eisenberg:
Where’s that from?
Nuseir Yassin (23:49.558)
I think it's from the idea that, I think it boils down to being middle child, an Arab Israeli in an Arab village in Israel, where you look around your family and you say, I'm not the elder. I'm not equal. I'm not the best. I'm inferior. You look around Israel and you say, “I'm Muslim, Arab in Israel. I look at the news and it's 9/11. I'm inferior.” I go to the Jewish town to buy clothes and a Jewish girl selling me jeans makes me scared. I was very scared. If I talked to you 15, 17 years ago, I'd be so terrified.
Michael Eisenberg:
Nobody's terrified of Erica, okay?
Nuseir Yassin:
Oh, you're American! Okay, I'm not terrified of Americans. But the idea is like, I have an inferiority complex, knowing that I will not get opportunities. I do not deserve opportunities. And I will not be handed things. So I need to work double as hard to get the same opportunities as somebody who was born and raised, let's say, in San Francisco. That helped, that helped, yeah.
Michael Eisenberg:
But that's working double hard. I see you're a tireless worker. I've never seen him work as hard as you–actually, I've seen some people, but they're all successful. You say yes to a lot of things.
Nuseir Yassin:
To explore.
Michael Eisenberg:
And you're not afraid. Why are you not afraid?
Nuseir Yassin:
Of?
Michael Eisenberg (24:47.224)
Just–rejection, being said no to. Like, you lean in.
Nuseir Yassin:
I mean, I made 270 videos and they all failed, in 270 days. Nine months of disgusting depression.
Michael Eisenberg:
But at least you were in a beautiful place called Kenya.
Nuseir Yassin:
That was for five days. Then I went to Ethiopia, more beautiful. I think that I have this idea that, the reason I kept going for 270 days is, if I made one friend from these videos, I'm pretty sure I can make two. If I make two, I'm pretty sure I can make 1,000. If I make 1,000, I'm pretty sure I can make a million. If I make a million, I'm pretty sure I can make 100 million. And we found 70 million followers. But all I need is one. And so I think I read–maybe I spot early signs of success way faster than the average person. I think that's it. But not to be arrogant. I just think if I look at what made Nas Daily and Harvard and all that stuff successful is, I know an early sign of success, I could see it maybe before…I don't know.
Michael Eisenberg (25:51.31)
This is about Nas.io.
Nuseir Yassin:
Well, I'll tell you first about where I think the next 10 years are going to go. Because the last 10 years we said one minute videos are going to be big, and that was right.
Michael Eisenberg:
I just want to tell everybody that, what I'm trying to get him to say, but he can't say for reasons I don't begin to understand–this guy's one of the greatest storytellers of all time. That's an incredible skill. And you've been telling stories for thousands of days that lots of people want to hear. And I think you've made your personal story very personal to people in many ways, including the ups and downs, and the sideways and the transformations. And you've been exposed and raw, in many ways, risking, not only risk, you have lost followers.
Nuseir Yassin:
And lots of money.
Michael Eisenberg:
And lots of money, for things that I don't think are controversial, but clearly are controversial out there in the world. And I think you're deeply authentic. And you just kind of are who you are. And I think that's not only admirable, it's... For those listening out there, if you want to make an impact on the world, you want to be authentic.
Nuseir Yassin (26:50.402)
Yeah, yeah, definitely. But it comes at a cost, and you have to be ready to pay the cost. I can see you actually being very authentic, and I can see you live your truth. I was just telling them, I feel like Michael, you know, he's like a fraternity guy. He never left the fraternity house.
Michael Eisenberg:
I never went to a fraternity house! I’m too nerdy.
Nuseir Yassin:
You never went to a fraternity house?! You would have been the president of the fraternity.
Michael Eisenberg:
No, I’m too nerdy!
Nuseir Yassin:
But you live your truth and you say any word and I love people who live their truth. Okay. Last 10 years.
Michael Eisenberg (27:18.04)
Alright, the next 10 years.
Nuseir Yassin:
Last 10 years, social media content became short, great. Next 10 years, what happens? When I started, I used to be nine to five in an office at Venmo, a software engineer. I was pretty much depressed every day. When I started to live and go to Kenya and Ethiopia, and when I made $2,000 a month from it, I became the happiest person on the planet. And all my friends started to be jealous of it. How can I make money on the internet, and how can I travel the world and work from anywhere?
And I was like, huh, if I think this is the best thing in the world, I'm pretty sure hundreds of millions of people want this life too. So it came from this idea that this whole concept of going to an office, 9 to 5, retire at 65, I think that’s flawed. I think that's going to change. So the next 10 years, what I see will happen is mass job displacement. I'm not going to call it unemployment, just displacement. Mass change of what a–how I spend my time. Instead of spending it on a job, I'm going to spend it working for myself. So I do think this is the golden age of entrepreneurship. It started maybe 15 years ago with the internet, but it was still too hard. I think now entrepreneurship is the easiest way it's ever been.
So I'll give you an example. YouTube was very hard. To become a YouTuber, you had to spend 15 hours to make a video. It was very hard. And so only 1 million YouTubers existed. TikTok came along, and said, just take a video of yourself and dance, and I'll just take care of everything else. 50 million creators were born because of TikTok.
Michael Eisenberg (28:55.81)
Yeah, still only a small number of good ones, but either way.
Nuseir Yassin:
But it changed the world. In fact, China and America now are thinking of it as a nuclear weapon.
Michael Eisenberg:
It is.
Nuseir Yassin:
It is, right? And I completely agree with it. And thank God for the sale.
Michael Eisenberg (29:08.716)
Hopefully it happens, actually.
Nuseir Yassin:
Yeah, I really hope so too, for my own sake too. So what I say is when platforms and technologies change, it expands the market. AI is going to expand the market of entrepreneurship.
Michael Eisenberg (29:21.826)
We agree.
Nuseir Yassin:
You agree?
Michael Eisenberg:
Yes.
Nuseir Yassin (29:28.696)
So there's going to be hundreds of millions of new entrepreneurs coming to the market. They need platforms to use. They can use Wix, they can use Shopify, they can use Lovable, but I think I can build something that is much more custom fit for that type of entrepreneur that I imagine. That's Nas.io. It's an AI platform for solopreneurs to find customers and sell online, right? That's it. People build their businesses on top of Nas.io, and it uses AI. It's not AI native, but it uses AI to make this the simplest way in the world to launch and monetize your business. And if I can figure that out, then I can create someone, their business, and their job, and their life will change.
Michael Eisenberg:
How long ago did you launch?
Nuseir Yassin:
Two and half years ago.
Michael Eisenberg:
But you didn't just launch with this product. You've had a journey. You've a couple of pivots.
Nuseir Yassin (30:15.574)
Yeah, yes.
Michael Eisenberg:
So tell everyone, come on! That’s interesting.
Nuseir Yassin:
Yeah, no, I've been obsessing about this goddamn problem for the last five years. And my first three years, I failed at it. Right? I did like, this is, I'm telling you this after 500 iterations. Kind of like the 270 videos. This is 270 iterations. And we finally found video 271. So we started with like Nas Academy. We started with this marketplace. We said, okay, how can somebody build an internet business? And it was just, we thought it was courses. It's not courses. We thought it was videos. It's not videos. We actually think it's everything. And AI just came at the right time, at the right place. We pivoted to Nas.io and now we're here.
Michael Eisenberg:
And how fast is it growing now?
Nuseir Yassin (31:31.672)
We really started growing about six, seven months ago. So we 4Xed in the last four months, where 7 million ARR, we were like one and a half at the beginning of the year. So it's become sizable enough not to be ignored. And I think the hardest seven is the first seven, is the hardest seven. That's my quote. The first million followers were really the hardest, but the next 20 million followers were much easier. So we figured out the flow. We have enough revenue. We have enough customer base. Now it's literally about going to tens of millions of people and saying, you need either a side income or you need to work for yourself, because whatever the hell you're doing right now, you're depressed doing it. And I believe in this message so much because I'm living it.
Michael Eisenberg:
Wix is built on the same thing. I was an investor in Wix.
Nuseir Yassin:
Congratulations! Did you make a lot of money?
Michael Eisenberg:
We did just fine, thank you.
Nuseir Yassin (31:51.895)
Can you not ask a VC that? That's literally their job.
Michael Eisenberg:
And it's literally our job is to return more money to LPs. Yeah, no, Wix was a good outcome. And we should have held on longer. But Wix was founded on the same premise. They just bought Base44, which was also founded on the same premise.
Nuseir Yassin:
I’m meeting Maor tonight for drinks.
Michael Eisenberg:
You’re meeting Maor tonight for drinks. So he was a one-man band. And you have how many people in Nas.io?
Nuseir Yassin:
At Nas.io, 35 people.
Michael Eisenberg (32:27.758)
Like what do you need 35 people for if Maor did it with one person? That's a nervous laugh.
Nuseir Yassin:
I'm going to go fire 34 people today. OK, the difference is that people build their livelihood on Nas.io. So they actually make money on it. So when you're making $5,000, $10,000 a month on this platform and you want to build a business, you also need a human to chat with. You need a human to say, “OK, I'm an account manager. You're designing your business correctly.” “OK, my finance team is going to send you the money.” “OK, which bank?” There's actually a lot going on operationally to make sure you actually build a business.
So out of this 35, we have 15 in engineering and product, and then we have, let's say 15 and 15 to 20 in account management and finance and operations. But you know, we 4Xed while remaining 35. So it's not like we have–
Michael Eisenberg:
Who are all these people?
Nuseir Yassin:
So after visiting a hundred countries and this, I believe in so much. I'm looking for the best talent leverage in the world. Okay. Which means where can I find somebody that doesn't charge me $300,000 to work four hours a day? Which is San Francisco today, okay? Tel Aviv is good, had a lot of good engineers, but I think the market has caught up and Nvidia is paying everybody too much. Same as Wix. You found some people in Europe, but I'm not a fan of Europe. Africa, I don't think has developed as much yet. India, I think it needs a bit of time. The best engineering talent that I've found is actually Chinese immigrants living in Singapore. Highly specific. Chinese immigrants living in Singapore.
The America for Chinese people is Singapore. The America for Indians is America. That's why you see a lot of successful Indian engineers in the US. So now I'm like, okay, how can I find Chinese immigrants in Singapore and build an engineering office there? Affordable, works really hard, 996. They work 996, I work 996. It's pretty fair. It's a pretty fair exchange.
Michael Eisenberg:
Do they understand the cultural needs of the customers?
Nuseir Yassin:
That's why I'm there. That's why I'm there. If I wasn't there, it would look very-
Michael Eisenberg:
The Israeli-Arab’s job is to interpret American entrepreneurial culture or global entrepreneurial culture for the Chinese immigrants to Singapore? Just want to make sure I got this right. This is gonna end great.
Nuseir Yassin (34:37.07)
I'm a translator at this point. But this is why I'm in New York now.
Michael Eisenberg:
Okay. You're learning your own cultural translation.
Nuseir Yassin:
Well, yeah, I'm trying to become like you, like Upper West Side Guy.
Michael Eisenberg:
I'm trying not to become! I'm undoing it. So, one of the things you said is that somewhere, I don't know where, but you said to me before when we were talking, is that your job at Nas.io is to create a million cell phone businesses?
Nuseir Yassin (35:06.488)
Solopreneurs.
Michael Eisenberg:
Solopreneurs.
Nuseir Yassin:
One-person businesses. Yeah.
Michael Eisenberg:
Can they hire a second person?
Nuseir Yassin:
They can, of course, it's not like we'd stop it.
Michael Eisenberg:
Why is that an important goal to you?
Nuseir Yassin:
You want the truth or want the diplomatically correct answer?
Michael Eisenberg:
You can do both. Start with the truth. That's always a more authentic, you know what saying? I just said that your brand is authentic, and now you want to tell me you want the diplomatic answer is? Like what the hell?
Nuseir Yassin (35:28.236)
If I want to maximize shareholder value…
Michael Eisenberg:
Oh yeah. I’ll tell your investors.
Nuseir Yassin (35:33.87)
So the truth is, when I was in college, I cycled through co-founders every two months. And every two months, I got one–
Michael Eisenberg:
Because they’re from Harvard.
Nuseir Yassin:
Well, I tried, I went to these guys like, “Hey, you know how to code. Like, I know how to code. Let's build a company together.” They didn't work hard. Then I graduated. I went to Venmo. I was like, man, I asked all my colleagues, “Let's build a company together.” I cycled through 15 co-founders. And I couldn't find a single person to build a company with me. There's always something off.
And I was like, fuck this, I'm just going to make Nas Daily, make one minute videos and go. And it blew up. And then I saw, and even when there was four co-founders, eventually one person ends up being the lead co-founder, like at Airbnb, Brian Chesky, and the other ones not as much. I saw that actually the co-founder job, you can actually make the AI to be your co-founder, be proactive, help you with marketing, help you with design, customer support, all the operations.
And you actually don't need a second person to start your business, especially if it's a small business. If you're a mom selling cookies, you don't need another mom to help you sell cookies. If you're building some deep research stuff, yes, you need AI co-founders, real human co-founders. So the real answer comes from my trauma for five years. And now I'm like, man, one-person businesses, it's possible.
Michael Eisenberg:
Did you ever say to yourself after 15 people rejected you that maybe it was me? Did that ever occur to you?
Nuseir Yassin:
Yeah, every single time.
Michael Eisenberg:
Did it really? No it didn’t.
Nuseir Yassin:
Yeah. I swear to God. No, I am self-reflecting, Michael. I'm not blind to my shortcomings. Look, when my intern quit on me when I first started the company, the first intern I hired quit on me after one week. I was like, I am depressed. So I do self-reflect a lot. Here's what I learned. You should never apologize for who you are. You know, I think everybody wants you to be who they are.
I want people to be who I am. But when you have these co-founder relationships, when you hire people, they come from the outside and say, “Michael, you should run your company like this.” And then it's your job as CEO to say, you know what? No, the culture of Aleph is this, and I will keep it as this.
Michael Eisenberg:
What does Nas mean?
Nuseir Yassin:
‘People,’ in Arabic.
Michael Eisenberg:
People or person?
Nuseir Yassin:
Nas means people in Arabic, but it doesn't mean that everything should be decided by committee. It becomes a camel, right? As you said in your podcast.
Michael Eisenberg (38:00.832)
Yeah, the line he's referring to is that what is a camel? It's a horse designed by a committee. They're watching from the Middle East.
Nuseir Yassin:
I don't know where your listeners are, but no one in America has seen a camel.
Michael Eisenberg:
How does what you did at Nas Daily impact what you're doing now at Nas.IO? You have this massive reach. You've kind of created a flywheel of sorts. You're a known brand. How does it impact Nas.io?
Nuseir Yassin:
Look, with Nas Daily, I understood the power of content in changing countries, and changing companies and changing lives. One piece of content can literally change a country, right? For good or for bad.
Michael Eisenberg (38:38.243)
Give an example.
Nuseir Yassin (38:55.298)
Let's say in a GCC country, you see a foreign worker being badly treated. Your whole image of that country changes and that video can go viral, right? So that's an example of a bad thing. Or you see a Dubai chocolate video on TikTok and then, you know, the whole image of Dubai changes because of Dubai chocolate, right? So you see the positive and negative effects of it. I mean you see it in politics as well. Make one bad AI video about a political candidate, you know, they lose votes. It's a real thing.
But now that's the concept, but I also see the power of content in changing businesses. The right ad, the right piece of content, the right message of your business can literally triple your business. The problem is, most businesses don't know how to make that amazing piece of content. Our job at Nas.io is to help them and productize that. Nas Daily is experienced to put it into the Nas Daily platform. So we feel like we have a right to win when it comes to helping you create the best marketing material for your business, in addition to everything else we offer you.
Michael Eisenberg (39:43.896)
So the video, and, kind of, content library and expertise from Nas Daily helps inform the video ad creation or content creation on Nas.io, making it an ever better experience.
Nuseir Yassin:
Absolutely. And my other controversial statement is that organic content is dead.
Michael Eisenberg:
What does that mean?
Nuseir Yassin:
Followers are dead. I came here at the beginning of the show and I lied to you. I said I have 70 million followers. That is one giant lie, and I'm so comfortable saying it to everybody, because no one knows it's a lie. The concept of followers does not exist anymore. If you want to sell something on the internet, you cannot sell to your followers, because you cannot access them because the algorithm blocks you. So you could have 100,000 followers as Aleph, VC, and then
one day you make a video saying, please buy my t-shirt. You'll get 2,000 views. 2%. And 98% will not see it. So do you have 100,000 followers or do you not? You do not.
Michael Eisenberg:
Unless you pay the piper, which is Facebook or Instagram or TikTok or Twitter.
Nuseir Yassin:
Exactly. In the next 10 years, everybody's going to have to pay the piper.
Michael Eisenberg:
Why?
Nuseir Yassin:
Because everybody who wants to sell anything on social media will have to pay Zuckerberg or the Chinese government some money to find the customer. So the performance marketing is gonna explode, because everybody's going to be forced to do it.
Michael Eisenberg:
Unless?
Nuseir Yassin:
There’s no unless.
Michael Eisenberg (41:01.838)
So your assumption in Nas.io is any solopreneur in Nas.io is gonna have to pay. Those people have eyeballs. There's no other way to create eyeballs or direct one-to-one relationships? Email, messenger?
Nuseir Yassin:
Email marketing there is, yes, because you control that, there's no algorithm. But if you want to find customers and you have followers, the only way to actually get it is to pay.
Michael Eisenberg:
Right, because Zuck controls WhatsApp and Instagram. And the Chinese government controls TikTok.
Nuseir Yassin (41:30.476)
And then Neal Mohan controls YouTube.
Michael Eisenberg:
Right. Which is Google.
Nuseir Yassin:
Which is Google.
Michael Eisenberg:
What about by the AI models? You don't believe in that I guess.
Nuseir Yassin:
AI models for what?
Michael Eisenberg (41:42.094)
Will you be able to market to people there, or you have to pay for that too?
Nuseir Yassin:
You have to pay for that.
Michael Eisenberg:
Okay, so there's going to be no organic way for people to kind of build a customer base?
Nuseir Yassin (41:49.588)
It's a lot less than it used to be. Look, there was a loophole. There was a loophole in the last 10 years where if you just build some followers, you can monetize it, and sell something and literally Zuckerberg made no money from that transaction. They were creating value. They were not capturing any of that value. Well, now they're going to capture more and more of it. Just like how governments continue to tax more and more and more. If you are the system and the platform, you always want to capture more value.
Michael Eisenberg:
So going to Ben Thompson's aggregation theory, basically the aggregators have won, and they will be seeking rent. They'll be rent seekers forever now. And you have to succumb to that. You have to bend the knee to the rent seekers.
Nuseir Yassin (42:29.55)
Basically. But on the plus side, it works. Because if I give Zuckerberg $100, he's going to give me back $200. If I can get the seed–
Michael Eisenberg:
Ultimately, we'll all be arbitrageurs at the mercy of Mark Zuckerberg, and Sundar and the Chinese government.
Nuseir Yassin:
But before AI, you could only make one ad, and you could only run the ad. And if it's not good, then Zuckerberg fails and you fail. So it was a very terrible relationship, and the ad was expensive. With AI now, I can send Zuckerberg a hundred AI ads. He can also make those hundred AI ads into a thousand AI ads to really be hyper-targeted. I mean, the age of hyper-personalization is upon us. It is. The next ad you're going to see on your Facebook is going to be, Michael Eisenberg, you are now in Tel Aviv, and you have not visited my restaurant. Why not?
Michael Eisenberg:
It's actually quite frightening, because I went away for a couple of days, and I was considering two locations. I talked to my wife about it. I don't believe I had done a search on the internet. And one of those two locations popped up in a feed.
Nuseir Yassin (43:31.608)
What are the odds?
Michael Eisenberg:
Yeah, what are the odds? You once said, ‘The best teacher in the world isn't in an Ivy League school. They're in a town in Vietnam, and the right technology can empower them.’ What does that mean?
Nuseir Yassin (43:45.304)
That is so interesting. How'd you find that quote?
Michael Eisenberg:
I got a crack research staff.
Nuseir Yassin:
That was you! That was you! Okay, you're a crack research staff. Where did you find that? Look. We have this amazing image of Harvard as like, they must have an incredible curriculum and incredible professors. The truth of the matter is, it's just the network that matters.
Michael Eisenberg (44:05.07)
So you wouldn't go back there again, would you?
Nuseir Yassin:
Of course I wouldn't go back there. No, they changed my life. I love Harvard, and actually I would donate to it, and I know this is a very controversial statement and I'll be canceled for in front of you.
Michael Eisenberg (44:13.356)
No, you're never gonna get canceled here. You're good. Bill Ackman me.
Nuseir Yassin:
Do you think he listens to this podcast?
Michael Eisenberg:
I don’t think so. We’ll find out.
Nuseir Yassin:
Bill, if you're listening to this, it's a hyper-personalized ad. So the education there was actually subpar. It's normal. The same physics applies. My general thesis in life is that we have not discovered all the talented people on planet Earth. We have only discovered the top 1% that happen to live in Europe or America. But there is a kid in Vietnam who doesn't speak English, who's a fucking genius, and we just could not communicate with him until very soon. So my belief is that we are maybe 5% of the way there in discovering global talent. That's why...
Michael Eisenberg:
I have a buddy in Africa, Nigeria, who's been doing a lot of work on this. E, he goes by. Doing incredible work there. Look, things are tough right now. Nigerians, things are really tough there. Next thing I wanted to ask you is the following. You kept talking a lot about solopreneurs, and I started wondering as you’re talking about solopreneurs, how does it feel to have investors?
Nuseir Yassin:
Terrible.
Michael Eisenberg:
But you have these venture capital investors. It's not me, but you got others. I should be better.
Nuseir Yassin:
You want my diplomatic answer or you want my...
Michael Eisenberg:
No, come on, this is authentic.
Nuseir Yassin:
Look, my thing is, this is the way I view it. And I actually told this to some of the previous people I dated as well, actually. It's like, look, we found this amazing rocket ship. There is 10 seats. I'm on the steering wheel. it comes to like, you know, joining me...
Michael Eisenberg (45:53.294)
You told this to the people you dated? Are there ten seats in the dating?
Nuseir Yassin:
No, No, no, because Nas Daily really was overwhelming. It took over my whole life and also the life of the people I dated. So in a way it's like, look, this, this is the, this rocket is happening and we just have to jump on this seat, for the person I dated, and for my videographer, and for my second editor and third editor. Look, you want to jump on this rocket ship, great. Because now it is really blowing up. So it's like, you can't really change the direction of the rocket ship.
Michael Eisenberg:
And what does this have to do with investors now?
Nuseir Yassin (46:29.902)
Well, it's the same concept, which is, it's great to have investors, right? But they can join along for the ride, but the rocket ship is being controlled by, let's say me, and like four people in the company that are the management right? In a way, I I do believe that having investors is great for economic outcome, but I do not believe in having investors have board control.
Michael Eisenberg:
You don't want them to give you input.
Nuseir Yassin:
I want them to give me input. I do not want them to have control over the company.
Michael Eisenberg (46:54.734)
So governance is not something you like.
Nuseir Yassin:
I like governance. We have a board, but I have board majority. I would like to continue having board majority as long as possible. I would like to do whatever Zuck did and have like over 51% voting stocks. And I'm very unashamed of saying this to an investor.
Michael Eisenberg:
It's great. One of the interesting things is when it works out, everybody remembers it works out. Which is what happened with the Zuck. When it doesn't work out, it goes really bad fast.
Nuseir Yassin:
I don't know if a committee of investors who don't care about the company as much as the founders will make it work out.
Michael Eisenberg:
No, it's a good question. I think one of the hardest questions as an investor is this, right? You want the founder to feel like it's theirs. You want to get behind them, and it's their company. And at the same time, you know, founders are founders because they're extreme personalities, generally. And, you know, it can come off the rails. And then sometimes you need guardrails to protect not just investor interest, but even the founder's interest himself.
Nuseir Yassin (47:54.83)
I believe in broad res, like the preference stack, I believe in that.
Michael Eisenberg;
You know, governance and–when you're the king, you know….
Nuseir Yassin:
Yeah. Absolutely. Absolute power corrupts, I agree with that.
Michael Eisenberg;
It can go the wrong way.
Nuseir Yassin:
I think it can go the wrong way. But when you invest in founders, do you want board majority?
Michael Eisenberg (48:13.752)
Do I? Not to start, no. I really want independent people. I find that that's most helpful. One of the early indicators of success for companies is you get an independent board member on early. In my experience.
It depends on the stage, probably.
Nuseir Yassin:
No, the earlier the better, actually. I keep seeing that over and over and over and over again, is that having an independent board member early is a good predictor of outcomes.
Nuseir Yassin:
So now you're telling founders listening to this, if you're a two person team who have not raised yet, they should get an independent board.
Michael Eisenberg
No, once they take an investor in, they should take an independent on board member.
Nuseir Yassin (48:48.024)
So it should be the investor, the founder, and an independent board member.
Michael Eisenberg:
Yeah, that's the best outcome.
Nuseir Yassin:
And then the independent board member should not be working in the company.
Michael Eisenberg:
No.
Nuseir Yassin:
But there is a world where the independent board member and the investor overrule the founder, at the early stage.
Michael Eisenberg:
In theory it is, but I've never seen that happen.
Nuseir Yassin:
But it could happen.
Michael Eisenberg:
Theoreticals are funny, because you can take the argument anywhere you want, but I've never seen that happen. Yes, but having an outsider perspective early on is extremely valuable in my opinion. By the way, I've seen it work this way, that way, and the other way, meaning founders in control I've seen it work, investors in control I've seen it work, and it depends I've seen it work. So there's not one right answer to this.
Nuseir Yassin (49:27.04)
100%. I agree with that.
Michael Eisenberg:
You'd have to be humble as an investor to know there's not one right answer to this problem. And I've been humbled many times. I've humiliated a few too.
Nuseir Yassin:
Tell us about the last one.
Michael Eisenberg:
Man, there's no shortage of things that blow up in this business. All right, so I asked Alex Dweck, your co-founder.
Nuseir Yassin:
Like three years ago.
Michael Eisenberg:
No, no, I asked him just now.
Nuseir Yassin:
You did just now?
Michael Eisenberg:
Yeah, we asked him.
Nuseir Yassin (49:50.712)
Okay, your team asked him.
Michael Eisenberg:
No, I asked him!
Nuseir Yassin:
You messaged Alex.
Michael Eisenberg:
I sent the email.
Nuseir Yassin:
You're going to like Saudi Arabia, the invitation of the White House. You have no time to message Alex. You wrote the email?
Ah, you sent him a LinkedIn message, you see? Normally, it's me. What was the hardest video you ever had to make and why?
Nuseir Yassin:
That's funny. Unfortunately, it's all about Israel and Palestine. That's it. The hardest videos I've ever made are all the ones where I mention Israel as a country. Because I always know when I publish that video, I'm going to make 100,000 more enemies, 10,000 more death threats, and it's going to hurt the business. But you still have to do it.
Michael Eisenberg (50:36.878)
What I'm struck by is, like I think your brand, in addition to being super authentic, has a lot to do about bridge building.
Nuseir Yassin:
That's what I think it is. I don't why I get death threats.
Michael Eisenberg:
What's the KPI for that? One thing I'll tell you is that there's a lot of people who are in business today, or I say in business, it's not just for money, that win from hate.
Nuseir Yassin:
That win from hate. Well, if you're in politics, I can see it.
Michael Eisenberg:
Not only, think there's people who...
Nuseir Yassin (51:02.286)
But what's an example of like a business-
Michael Eisenberg:
There's a ceasefire announced in Gaza–I don't mean a business as in a corporation. That's what I mean. It was a turn of speech. There's a lot of people who get their kicks out of war-going. Look, the ceasefire was announced to the people who are angry about the ceasefire. It's hard to imagine. But what's your KPI for bridge building? Is there a KPI?
Nuseir Yassin (51:27.374)
It's like when you take garbage off of the street and like, what's the KPI?
Michael Eisenberg:
Come back and pick it up the next day.
Nuseir Yassin:
It's like, have you really cleaned the country? Yeah. It's just kind of a thing where it's like, the KPI is like, you felt good and it feels like one step in this 1000 mile journey.
Michael Eisenberg (51:41.518)
The mayor of Jerusalem told me, I asked the mayor of Jerusalem when he first got in, he said he was gonna clean up the streets. So I asked him what he did. He said they bought a bunch of vehicles and plastered on them, ‘Jerusalem is clean,’ or ‘Jerusalem is gonna be clean.’ And they had people out every morning sweeping the streets or whatever it is. And I said, “Is it clean?” And he says, “I don't know, but everyone thinks it is.”
Nuseir Yassin:
I love that answer.
Michael Eisenberg:
He's right. That's absolutely right, though, because the perception of it actually makes people try to keep it more clean. I think there was a powerful answer. I don't exactly know, but we've made the effort and people notice it, and they think the city's more clean. Right?
Nuseir Yassin:
Great answer.
Michael Eisenberg:
Great answer. Rachel Kastner–
Nuseir Yassin (52:14.315)
My goodness!
Michael Eisenberg:
So she worked with you. She asked what it takes to get you to move back to Israel, and leave New York?
Nuseir Yassin:
She said that?
Michael Eisenberg:
Yeah.
Nuseir Yassin:
What would it take to leave New York and come back to Israel? Any opportunity where I feel like I could have real influence on the region. First of all, I wouldn't do it anytime in the next 10 years. Next 10 years, I'm booked. A unicorn, that's 10 years. After that, anything that feels like it could have real impact on the region, I'm coming.
The truth of matter is, I do see a lot of distractions for me in Israel. And it's just like, my mom and my dad are here. Come to have lunch. That's number one. But number two is like, war breaks out. People want to talk about peace. And I don't want my life today to be defined by the Israel and Palestine conflict. Because I'm more, I want to be more than that.
Michael Eisenberg:
I hear that completely.
Nuseir Yassin (53:20.728)
You know, so, but the next 10 years I want to, I'm okay for it to be defined. For now I want to be defined as an entrepreneur. I was a creator, I'm an entrepreneur. And after that, I'm a bridge builder. I divide my life in three chapters. You know, like Arnold Schwarzenegger is my hero. Why? Because he divided his life into three chapters, a bodybuilder, actor, governor, and he was the best at each chapter. Isn't that amazing? 10 years each, and he just ruled the world. So I think I was,
Michael Eisenberg:
At least California, but okay.
Nuseir Yassin (53:48.942)
But he couldn’t become president. Right. That's basically the world, the max you could get. I think I could, I became a pretty good creator more or less. I think I want to become a pretty good entrepreneur. And then after that, anything to do with government in Israel would be incredible. But that's in 10 years.
Michael Eisenberg:
I’m curious about your parents, you said they might call you for lunch. Tell me about your parents.
Nuseir Yassin:
My dad is a psychologist. My mom is a school teacher. So a middle-class family. You know, from my dad, I got the tolerance. He was never ultra-nationalistic. He was never anti-people. He was the first one with a college degree. And from my mom, I got the face and the loudness.
Michael Eisenberg:
Where'd your curiosity come from?
Nuseir Yassin:
That's the internet.
Michael Eisenberg:
That's the internet.
Nuseir Yassin:
The internet.
Michael Eisenberg (54:21.294)
You grew up as an internet child. You had the internet in the house early on.
Nuseir Yassin:
Definitely. I made hundreds of friends on the internet.
Michael Eisenberg:
It wasn't filtered.
Nuseir Yassin:
No friends in real life.
Michael Eisenberg (54:28.014)
Why, ‘cause you were bored in school?
Nuseir Yassin:
Yeah, no friends in real life.
Michael Eisenberg:
Why?
Nuseir Yassin:
We just did not see eye to eye.
Michael Eisenberg:
Why?
Nuseir Yassin (54:47.966)
We did not care about the same things. Everybody was watching football matches, cheering for 11 men playing against other 11 men when there's nothing for them in the outcome. And I just wanted to learn English and, you know, like study abroad, and become an astronaut. I wanted to be an astronaut.
Michael Eisenberg:
You wanted to be an astronaut. Where did that come from? Why weren't you interested in soccer or football?
Nuseir Yassin (54:47.966)
I like to do things where I know I can be the best in the world at. And I could never be the best football player in the world. I know my limits. I can never be the best engineer in the world. I know my limits. But I could be the best one-minute video maker on Facebook. And now I think I can be the creator of the best platform for solopreneurs, end-to-end integration.
Michael Eisenberg:
Why'd you have to be the best in the world at something?
Nuseir Yassin:
Now you're asking biological questions. Why do we compete as humans?
Michael Eisenberg:
Is it biological?
Nuseir Yassin (55:30.848)
I think it's biological.
Michael Eisenberg:
Not everyone thinks they need to be the best.
Nuseir Yassin:
But you're trying to be the best investor.
Michael Eisenberg:
Nope. I’m trying to be the best investor Michael Eisenberg can be. I’m trying.
Nuseir Yassin:
You're also trying to be the best father. Everybody aspires to be the best. It doesn't mean they all succeed, right? I want to be the best boyfriend. I don't know if I'll succeed at that.
Michael Eisenberg (55:48.974)
I wish you'd be the best husband, but you want to be the best boyfriend, right?
Nuseir Yassin:
I also want to be the best husband too, but that's for a different podcast. I don't know why you want to be the best. I mean, come on. It's fun. It's fun to look in the mirror and say, “I'm good at this.”
Michael Eisenberg (56:04.546)
Last two questions. Has the Charlie Kirk assassination affected what you say?
Nuseir Yassin:
100%. 100%.
Michael Eisenberg:
It has. Why?
Nuseir Yassin:
Very unfortunate. I don't want to be shot in the head. Point blank. And I'm very likely to be shot in the head, and I say this, you know my t-shirt says–and now we're getting into serious topics– you know, 43% of life, because I assume 76 years expectancy. And I always say this as a caveat, my girlfriend does not like hearing this, “Assuming I don't get assassinated.” If you look in the Middle East since 1948, there were seven assassinations, six of them are for prime ministers that wanted peace, only one because they wanted war, right?
If you want to bring people together, you are the first to go. So I see it on Twitter all the time. ‘It's time to Kirk this guy.’ It became a verb. But I don't like talking too much about this. I mean, whoever's still watching this at the end, that means they're really interested. But I don't want to make it sound like to become a bridge builder and raise your neck up, then you're going to be the first to go. I don't want it to be like a scary thing to want to bridge build.
Michael Eisenberg (57:13.72)
I don’t either.
Nuseir Yassin (57:17.506)
Yeah, it should be something, if you bridge build, you make millions of dollars. You know, it should be a fun thing to do, not a scary thing to do. But the truth matters today, it is a bit scary. And there are some countries I just no longer go to.
Michael Eisenberg:
Last question. Who's someone you think deserves some all-out attention or some nice thing said about them that doesn't get them?
Nuseir Yassin:
like who? As founders? As entrepreneurs?
Michael Eisenberg:
Anyone you think is kind of really deserves a shout out.
Nuseir Yassin:
A person deserves a shout out. I'll give it to Zaki. Zaki Jamal. He is an investor in Israel, and he was my college friend, and he was the first to, he was my first Israeli friend after 19 years, the first guy I made friends with from Israel and I met him at Harvard.
Michael Eisenberg (58:06.626)
He grew up in my neighborhood.
Nuseir Yassin:
You know him?
Michael Eisenberg:
Yeah, of course.
Nuseir Yassin:
He grew up in your neighborhood?
Michael Eisenberg:
Yeah. I know his parents too.
Nuseir Yassin:
Wow. He was one of the first people to believe in me as a freshman at college. And, I went to a consulate event on a boat, and I forgot to bring my passport, so I was not allowed to go as an Israeli consulate. And then and then he thought it was like something, I thought, we all thought it was about because I'm Arab, all the stuff. This is 15 years ago. And he's like, “If you're not going, I'm not going, and I'll stay with you.” And I was like, “That's the nicest thing someone has ever done to me, man. I love you.” And he was also my first investor. And so he supported me many times. So thank you, Zaki.
Michael Eisenberg:
He’s a great guy.
Nuseir Yassin:
Great, great guy.
Michael Eisenberg:
Thank you for listening in. If you enjoy what Nuseir Yassin has to say...
Nuseir Yassin:
Michael, you're also a great guy. This was a great conversation. It was a great time. Thank you for showing interest.
Michael Eisenberg (58:53.706)
Yeah, you can follow Nuseir on Twitter–and I have to look at my thing to get this right–N-U-S-E-I-R-Y-A-S-S-I-N or @Nasdaily, which I don't have to look at which is N-A-S-D-A-I-L-Y. Thanks for joining us on Invested. If you like this podcast, please rate us five stars on Spotify and Apple Podcasts and subscribe to the YouTube channel and subscribe to everything that Nuseir is doing. You will absolutely benefit from it.
Gavin Baker (00:00.608)
I think we will have artificial super intelligence in 10 years. And by that, I mean an AI that is smarter than the smartest human in every discipline.
Michael Eisenberg:
You are, I would argue, one of the world's premier experts on semiconductors and the semiconductor supply chain.
Gavin Baker:
Now you have the US government, who I'm sure in many, many ways is going to politely say, “Hey, we know that you like the chocolate cakes made in Taiwan more than the chocolate cakes made in Oregon and Arizona by Intel. We'd really like you to buy that American chocolate cake.”
In the UAE, and one thing that was profoundly embarrassing for me as an American to realize is that you might be safer being Jewish in Abu Dhabi than you are in most American cities.
I think the world's gonna run on sunlight. I'm a committed environmentalist. I love to be outdoors, but I genuinely believe global warming is a solved problem.
I profoundly believe if it were not for X, nobody would believe that October 7th really happened.
Michael Eisenberg:
I agree.
Michael Eisenberg (01:02.254)
I'm joined today by Gavin Baker, a long time friend and incredible investor at Atreides, and the most knowledgeable person on the semiconductor supply chain and the future of AI. You do not want to miss this episode. We also recorded this episode on the day after the assassination of Charlie Kirk. I want to hear Gavin's thoughts on the political implications of that, some of what's going on on social media and the mainstream media as well. Listen in.
Welcome back to another episode of Invested. I am thrilled to have my old friend, Gavin Baker. Welcome Gavin.
Gavin Baker:
Thank you, so glad to be here.
Michael Eisenberg (01:40.76)
Welcome to Tel Aviv. Gavin and I met in a strange situation. We both had our stomachs fall out on a plane that went from the Bay area to Las Vegas, that had a little drop in the middle of it. And we were talking about the stock market at the time, and that launched a real friendship along with our mutual friend, Bill Gurley. And it's been a wonderful relationship.
Gavin Baker:
It’s more than 10 years ago.
Michael Eisenberg (02:10.732)
And Gavin, for those who don't know, is just about the smartest guy in the semiconductor supply chain, and I think both the most astute and sometimes cynical observer of the world of AI we're going through right now. And so I adopted a line from you early on. We were at a conference together in Abu Dhabi, where you got up and said that foundation models are the fastest appreciating asset in history. Do you still think that's true?
Gavin Baker:
Well, I think that exact line was–well, first we should give credit to Bill's partner Eric Vishria, who I ruthlessly stole that line from. But I did modify it and say foundation models without access to unique data and internet scale distribution are the fastest depreciating assets in history. I would say my opinion has changed a little bit, and I do think xAI, Anthropic OpenAI, DeepMind–they've opened up a lead, and to varying degrees they all have, with probably Google and xAI having the most unique data. I think Anthropic very smartly focused on code early, and then OpenAI got to internet-scale distribution just because they were there first.
But I do think fundamentally reasoning models have made the business of foundation models dramatically better. And the reason is, is that for every trillion-dollar plus internet company,
Michael Eisenberg:
I love that throwaway–”For every trillion dollar plus internet company,” like this happened every day two years ago! No.
Gavin Baker (03:43.306)
100%. For every dominant internet company, there's the same flywheel that underpins it. And that flywheel is that as the product gets better, you get more users. The users create more data. The incremental data makes the product better, which attracts more users. And that flywheel spins at Google every day in the search business, Netflix every day, and Amazon every day in the recommendation engines, at Facebook every day, both in their ad targeting algorithm and the algorithm they use to select what content to show you.
That loop was not present at all in foundation model companies, LLMs, until very recently. And so the reason that LLMs with unique data had an advantage was one that would presumably lead to over time an advantage in training, if you could train on data that no one else could.
And then secondarily, if you had access to something like X, or everything Google knows about the world, you can use that to ground the LLM's answers more firmly in reality. But reasoning fundamentally changed this, with the introduction of reinforcement learning with verifiable rewards during post-training, and test time compute. All of a sudden, having a giant user base becomes a big advantage and feeds back into the quality of the product in a way that was simply not present until OpenAI came out with o1 in late ‘24, DeepSeek quickly followed with R1, and then xAI, Google DeepMind, and Anthropic quickly followed with their own reasoning models. So I think that these scaled foundation model companies are much better investments post-reasoning, because this flywheel, where the more users you have, the more data you have, the better the product it is, now exists in AI where it simply did not exist before, at least for LLMs.
Michael Eisenberg (05:46.85)
When you say it's a better investment, I go back to the comment you said before about these trillion dollar companies, right? And I think it was, you know, what do we got? Nvidia, Apple, Meta, Microsoft, Google. Am I missing anyone?
Gavin Baker:
Broadcom now.
Michael Eisenberg (06:13.774)
Broadcom. It's all kind of become a club, the trillion dollar club. And you look at these, Anthropic, OpenAI and you go, “Oh, those are obviously gonna be trillion dollar companies.” I sat today with somebody, by the way, two people who told me they put up over $100 million in the recent Anthropic round. And I said, “Boy, betting on the trillion dollar outcome!” I stopped myself for a second, and said, “Betting on the trillion dollar outcome? I've been doing this 30 years, there haven't been that many of those!”
Gavin Baker:
Yeah. Well, I will just say, I do think it's been fascinating to see Grok Code release and take overwhelmingly dominant share of the coding tokens on OpenRouter. Grok Code is a great product. But yeah, these are big numbers, but it's just funny–Anthropic, what was that? 180 billion? I mean, they went from 1 billion to 6 billion faster than any company in history in essentially six months.
So all of a sudden you're 30 times current month's revenue. I think there are real corporate structure concerns there. Like in 2018, when the governing documents were written in Microsoft made its investment, people thought AGI was a fantasy. And as soon as AGI is declared, all of the future of that technology and future technology from OpenAI goes to the nonprofit. But nonetheless, I mean, OpenAI has 10 plus billion dollars revenue.
xAI, it's not public, but they're scaling rapidly. So these companies, now all of a sudden you can value them on revenue multiples. Now that you have that core product loop driven by reasoning in place, I think it's pretty clear that it's going to be an oligopoly that's going to be tough to break into. But I think maybe the heart of your question is to what degree is this a sustaining or disruptive innovation for the existing trillion dollar plus companies?
I think the answer has to be, I mean, not to be clever or avoid the question, is, it's both. So I think maybe in a prior interaction, I said, you know, pre-AI, each one of these mega cap tech companies was kind of in its own swim lane. Like Netflix, they competed a little bit with Amazon and Google and Apple, but you know, Netflix was pretty dominant. Google, dominant in search. Meta, dominant in social. Microsoft, dominant in productivity.
And then you have this cloud computing oligopoly of Google, Microsoft and Amazon. And you know, nobody's really competing with Amazon and e-commerce. Post LLMs, post transformers, at some level they're now all in the same race. Because I think it's very clear that the transformer is going to be able to do essentially everything that lies at the core of each of those companies. You're going to be able to make personalized movies, personalized songs. You're going to have an agent that can do all of your shopping. You know, the fulfillment infrastructure will still be valuable. They can obviously do search.
And then, I think, it's an open question. What is the value of human created content in a world where AI can create perfect content that looks like it's from humans? And so, you know, they're kind of all in the same game, but at the same time, the core ingredients to success are compute and data, and these companies have the most compute and the most data. So while it's very disruptive and very scary, it's also sustaining in that it plays to some of their advantages, if you can attract the right talent. Google was able to do that. Amazon, not really in the game, but they bet on Anthropic, which for sure has the right talent. xAI has been able to do that, but Apple has not even tried, and Meta has, until now, essentially failed. We'll see if, you know, V3 or V4 of the strategy works.
MIchael Eisenberg:
The free agency market works.
Gavin Baker (10:25.592)
The free agency market. You know, it’s just very funny. Like, I worked for a long time at a large financial institution. And I think most big companies eventually learn that it's pretty hard. You have a culture of growing your own talent to bring in expensive external talent, because it really disenfranchises and upsets the loyal internal employees. And you have for sure seen that at Meta. They have a lot of advantages, but it's also the free agency market, kind of the fight of their lives. And that's why I do think they're all, they're in a prisoner's dilemma, where the amount of Capex is going to an unimaginable place. I think you could see some of these companies first issue debt, then cancel their dividends, then stop the buybacks, because they all feel that winning in LLMs is existential. And they feel like the prize on the other side is artificial super intelligence, which they all have a near religious belief is gonna create tens of trillions of dollars of economic value.
Michael Eisenberg:
Near-religious or fully religious belief?
Gavin Baker (12:06.828)
Maybe somewhere in between. I mean, you know, the current trajectory, I think is supportive of getting to artificial super intelligence. But I think one of the most interesting parts of all of this is we don't know what the economic returns to super intelligence will be, definitionally, because we have never seen it. And if humans, we have pushed the limits with people like Albert Einstein or whoever else, pushed the limits of the natural laws of the universe–if we pushed the limits of physics, and biology, and chemistry and the math that underpins all of it, then the economic returns to superintelligence, they may not be that high.
On the other hand, if we haven't, and superintelligences are curing cancer, inventing warp drives, and we're colonizing multiple solar systems, the returns to superintelligence are going to be really high, but it's very unknowable. So I would say there's a quasi-religious belief that we're going to get to superintelligence that I think is well-founded in data, but economic returns to that superintelligence is, to me, definitionally unknowable. And that is where I think there is, you know, for sure, religious belief.
Michael Eisenberg:
One of the things I keep looking at is, you go up in the venture business in the year 2000, and then again in the late teens and early twenties of this century, you know, came Masa from SoftBank and he weaponized capital.
Gavin Baker:
He tried to weaponize it.
Michael Eisenberg (12:55.286)
Tried to weaponize capital. When you weaponize capital, you end up with this fight to the death like between Uber and Lyft for a while, until Uber won it. But they really won it in the private markets. You know, they raised untoward amounts of capital in the private markets to do it.
Now we're in this incredible race where you've got multiple public companies chasing the same bacon. Kosher bacon, of course, but chasing the same bacon. And a couple of private companies doing the same thing. And they're all fighting over what's, I guess, notionally the same prize. Yes, Anthropic kind of specializes in code, and OpenAI is the consumer. But foundationally, they're after the same prize. How does that end? And to your point with all this religious belief, they're gonna raise hundreds of billions of dollars maybe, if we believe OpenAI's deck, which I'm not sure I do, to get to this. And has that ended in a return?
Gavin Baker;
Well, so to date, there has actually been a storied venture capital firm whose name we will not mention on this podcast, a storied American venture capital firm. One of their partners wrote an essay called the $200 Billion Question and Then the $600 Billion Question. And the point of the essay was, the first $200 billion question is, where's the economic return on this $200 billion in GPU spend going to be? And then, where's the return on the $600 billion? And the funny thing to me about that, sometimes I think VCs, they're very in their own world of venture. The funny thing to me about that was, all of the biggest spenders on GPUs, with the exception of xAI, are public companies. And public companies report something called quarterly financials, and they file a document called a 10Q, which has to be accurate.
And you can use those documents to calculate something called a return on invested capital. It's really easy to do. And to date, the ROI on all of this spending has been strongly positive. And some of that, you could argue, was that they got religion about expenses at around the same time. But in a world of AI, fundamentally, the economic return, a lot of it will come from either replacing or augmenting layman's with GPUs.
Michael Eisenberg (14:52.886)
Labor replacement.
Gavin Baker:
Or augmentation, we will see. But the maximalists, I think for sure would say labor replacement. So I think that's a fair way to calculate it. And then I would just say it's become really clear over the last six months in particular, you've started to see big accelerations in the top line. And a lot of that has been in using LLMs, and AI and GPUs to improve the recommender AI algorithms that power a lot of these companies.
But nonetheless, the returns have been good, but just the question is the quantum of spin with Blackwell, which is the next generation Nvidia GPU, is so big–these 50 to $100 billion data centers–will the ROI continue to be good? So while the answer to the $200 billion question was yes, the ROI was awesome, the answer to the $600 billion question was yes, the ROI has been awesome.
Now we're at the trillion-dollar question, and the ROI has actually still been good. We're rapidly heading for two to three trillion, and will the ROI continue to be good? Unknown. And if it's not, do economics dictate, or does the prisoner's dilemma dictate, and the companies could keep spending.
Michael Eisenberg:
That is a great question. I want to think, you are, I would argue, one of the world's premier experts on semiconductors and the semiconductor supply chain, and understand this incredibly deeply. So the dominant architecture today is the GPU. Does that continue?
Gavin Baker (16:30.124)
I think it's going to be very hard to unseat GPUs in general, and, I would say, Nvidia in particular. I think the two most exceptional CEOs I've ever had the privilege of investing in are Jensen and Elon. When I was a very young man at Fidelity, six months into being a semiconductor analyst, Nvidia was my best idea. It was maybe a $2 billion market cap. So Fidelity owned 15% of Nvidia, and I had the privilege as a very young man speaking to Jensen, essentially, an hour or two every week as a large shareholder. Then a little bit later in 2012, the fund I managed became the largest shareholder of Tesla at a small market cap, but they're exceptional, exceptional CEOs. And Jensen is super on his game, super dialed in.
It's a big advantage to be as close to all of the labs as he is. But I think the issue is that Nvidia's market cap today is, I'm going to say…is it 4 trillion or? I'm going to say it's 4 trillion. It's 4 trillion, 4 and a half trillion. Let's just say that the GPU market cap–4.3 trillion, amazing. The GPU market cap, maybe if you look out three or four years, or we’ll call it accelerator market cap, is 10 trillion. And at that point, I do think you start to see niches develop. And so you're never going to beat Nvidia in a head-on assault. And particularly when you have AMD, who's an exceptional company, making pretty good chips, maybe lacking some of the systems and software that Nvidia has, but it's gonna be very hard to out Nvidia Nvidia. And that is what I think a lot of the internal ASIC programs at these hyperscalers are trying to do. I think that's kind of a fool's errand. It took the TPU three generations to be successful. I think for sure the best Silicon team at any hyperscaler is the AWS team. And I think it will really take,second and a half generation of training and maybe the third.for that to be amazing, for sure those are going to be successful ASIC programs.
Michael Eisenberg: (18:52.482)
I think a bunch of them are here on the Amazon team.
Gavin Baker:
Absolutely. It comes from Annapurna, Billie and Nafea Bshara. So that's an incredible team. But I think everybody else is going to struggle to out-GPU the GPU. But then, if you can pick a niche, because at some level, all designs are about trade-offs. Like in tank warfare, they talk about the iron triangle. You have to make a trade-off between offense, defense and mobility.
And because everybody is dealing with the same raw materials, the stronger you make the defense, the less mobile it is, because the more the tank weighs. And so you have to make trade-offs, and it's the same thing in semiconductors. And so as these niches become so big, I think there is an opportunity to make trade-offs that are different from what the GPU is doing, to do something different. And then you can maybe start with a niche that's 0.5%, but that's billions in revenue, and tens of billions in market value. And then you can go from there. And so recently you started to see–my firm, I should say, is an investor in Cerebris and Cerebris and Grok and I think a couple of others have an S-Tram architecture, and that can do something fundamentally different from a GPU chip.
Michael Eisenberg:
On a big chip.
Gavin Baker (20:22.958)
Cerebras in particular. Cerebras did something very radical. Instead of cutting up a 300 millimeter wafer into lots of little die and making that the basis for a chip, they use the whole wafer. It's a really radical approach, and it was really hard for them. It took them their third generation of their chip before they saw success. But now they, and Grok, GiroQ who was another Sram company, maybe a less radical approach–but I think they're both seeing real commercial traction because they can do something different and that they can generate extremely high throughput on tokens. So tokens per second really matters. If any of you use a reasoning model, you know, when it's thinking, it's literally generating tokens. And depending on who you use, you can kind of see its chain of thought. And an answer that might take 30 seconds takes three seconds on Cerebras. So that's a niche. NextSilicon.
Michael Eisenberg:
Mutual investment of ours.
Gavin Baker:
Mutual investment of ours. They're also doing something fundamentally different. I don't know how much is public about NextSilicon, but they're doing something different. And I saw a lot and I could–pick a niche. Pick a niche. And I think it's a truism that in a lot of semiconductors, it takes three generations to really, really be successful.
Michael Eisenberg:
Three generations, just to be clear to everyone, three generations of tape outs, you need the third generation chip and you finally make it. People don't remember that Nvidia is a 30-year overnight success. Nobody realizes, it's a 30-year overnight success. $4.3 trillion did not come to Jensen overnight. It was 30 years of a life's mission.
Gavin Baker (22:04.014)
Absolutely. And just in case, each chip is kind of like a two- to three-year cycle, and it's really hard. Tape the chip out. You send off this big digital file to Taiwan Semi in Taiwan. You anxiously wait for three or four months while they make the chip.
Michael Eisenberg:
Is there a way to speed up that process? I mean, we're speeding up everything. It's unbelievable.
Gavin Baker:
No, I do think it's very interesting. Tesla has made this giant partnership with Samsung in Texas. And one of the conditions of that partnership was that Elon would be able to have influence over the design of the fab and the way it's laid out. And in the same way he kind of reconceptualized electric vehicles, and then rockets, and then data centers from scratch, I think it's very underappreciated that the consensus belief of essentially every AI architect, data center architect was with the Hopper generation. You could not get more than 30,000 coherent in the training cluster. You know, he looked at the data center from first principles, did something very different and got 200,000 coherent. He's going to look at semiconductor manufacturing from first principles. So I actually think that something interesting may come of that. But no, it's kind of wild to make one little semiconductor, you know, which in the case of a GPU is not that small.
GPU is what's called a full radical chip, and now it's two of them. Think of it as being about half the size of an iPhone. That takes four months to make it. And then you get the chip back, and it's, you know, an incredibly anxious moment. You literally plug it in and you hope it works. It's called ‘power on.’ And sometimes it doesn't. And then you have to make some tweaks or if you really screwed up, you have to start again. So, I don't know how we got on that though.
Michael Eisenberg:
But I want to segue from that, because you mentioned TSMC.
Gavin Baker (23:49.998)
Nvidia, overnight success, 30 years.
Michael Eisenberg:
One of the things that TSMC has going for is that there's a whole ecosystem built up around it, right? Everything is literally in Taiwan built up around this. And semiconductors have become a national security issue. So first of all, actually, is it a national security issue in your view?
Gavin Baker (24:46.432)
So I think it is a little overstated. So Taiwan Semi is 18 months ahead of Intel and Samsung, who are the other competitors. Maybe two years. Now two years is a lot, that's Moore's law. So you're getting a chip, however you wanna call it, 50% more performance, 30% less power. It matters, but if the world had to roll back to two years ago, that would be a big shock to the world, but the world would not stop spinning. There's a lot of capacity that's essentially two years behind Taiwan Semi. Forget China, but there's a lot of capacity in Israel, in South Korea, in Japan, and in America.
Michael Eisenberg:
Larger sizes.
Gavin Baker (25:14.574)
Two years ago, like one note up. Two years behind where Taiwan Semi is.
So the world would just have to roll back. There wouldn't be–what generation of iPhone just came out?
Michael Eisenberg:
17.
Gavin Baker:
Yeah. Okay. So if that happened, the iPhone 17 production would stop. You'd have to roll back to the iPhone 16, and you'd have to take, I don't know, I mean, semiconductor guys get mad at me, but you know, it'd be six months of really hard work to port the design of the chips that are
Michael Eisenberg:
The old process.
Gavin Baker:
To the design rules for the Samsung, or actually now the Taiwan Semi Fab in Arizona, which is really big.
Michael Eisenberg:
But a generation back.
Gavin Baker:
Yeah, you just gotta roll back. But increasingly we have Taiwan Semi, what they're doing is Arizona is pretty close to the bleeding edge.
Michael Eisenberg (26:02.222)
Have you been there?
Gavin Baker (26:12.302)
I have not been to Arizona. It's not something that they let kind of investors tour the Arizona Fabs.
Michael Eisenberg:
If I was Taiwan Semi, I’d have you come.
Gavin Baker (26:40.896)
Well, I kind of have a counterintuitive take. The politicians in Taiwan believe that they should never let the leading edge process be Manufactured outside of Taiwan because that ensures their survival that America will protect. I think, in a weird way, it might be there might be less of a geopolitical imperative
If you're China, maybe there's a national pride imperative if that process was also in America, because for sure, you know, and this was briefly discussed in the Taiwanese media, but like if China invades Taiwan, China is not getting those fabs. China is not getting those fabs, and they're not getting those engineers. You know, if you've seen like The Empire Strikes Back, like, I mean, I think it's, you know, okay, you're, you're a key TSM engineer, there's a plane going to Japan, South Korea, Israel, Arizona, Oregon, and Texas. Each one will be escorted by six American fighter jets. Where do you want to go? So China's not getting those fabs, and I think it actually might be stabilizing.
But the other thing that I think is important to realize is Taiwan Semi has only been ahead for six years. For 50 years, Intel was ahead. And I've been to Science Park. And Morris, the legendary chairman and CEO, he described catching Intel as a dream, a beautiful dream. And he wasn't sure it would happen in his lifetime, but it was a beautiful dream. And the reason it's very hard to catch the leader is, semiconductor manufacturing is a little bit like baking, where you can give two people the same recipe, and it doesn't taste quite the same, and everybody's using the same equipment. But if you are ahead, and the leading edge customers are using your recipe, it gives you a start on the next one, and how you kind of combine all the ingredients–the flour, the sugar, the salt. And in this case, you know, maybe it's the scanners and the metrology machines and the etch and depose.
But you're fundamentally using the same machines. You have a recipe, and because you developed the last recipe and figured out what worked 18 months before anyone else, that helps you figure out the next recipe. The reason Taiwan Semi caught Intel is, Intel made two crucial errors. One, Intel for a while was run essentially by three CFOs. The Chairman, the CFO and the CEO. A well-known semiconductor analyst called them The Three Idiots. And they made a really big mistake. Because this is a game of trial and error, and it's almost as much art and science, and you've been baking these recipes for a long time, they did not understand that the most important people in the manufacturing division, or what were called the Greybeards, the people in their 50s and 60s, who had been, you know, sticking their finger in cakes for a long time, licking it, being like, “We need more sugar.” Okay? And they're like, “Oh, this is so smart! We got these 30-year-old guys, and we can nuke these 55-year-old guys, and save some money. And these guys are energetic.” And that was disaster number one. Okay.
Taiwan Semi’s never gonna make that mistake. Nobody's gonna make that mistake again. The second mistake they made, I think, most bad decisions in business and life come down to arrogance. And they believed that they were so good that they could move to what's called EUV, which is a kind of lithography, one node after everyone else. And this was despite being the largest shareholder of ASML, but they were outraged at the prices that ASML was charging that were so good that, “Taiwan Semi, they have to buy those, but we can do it without them.” Double, triple patterning with something called DUV.
Michael Eisenberg:
That always reminded me of my grandfather's great axiom, which is, you pay peanuts, you get monkeys.
Gavin Baker (30:48.462)
That's hilarious. Yes, that's right. Or as Will Danoff, the great Fidelity portfolio manager and a good friend and mentor of mine who runs, I think, close to $300 billion, incredible numbers. His parents were in the garment district of New York and would say to him, “Price is forgotten, but quality remains.” Now price is important. Price does matter in our business. But nonetheless, sometimes prices are worth paying. So that was a terrible mistake.
And then the last thing Taiwan Semi had going for them was the entire industry of Semiconductor Capital Equipment. So ASML, KLA 10 Core, Applied Materials, LAM research. They had their A-teams working at Taiwan Semi, because they were unhappy that Intel effectively had this monopoly on the leading edge. So now what's happened? Taiwan Semi has made the bet. We're so good that we can do high NA EUV, a node after Intel. Intel went to that node first.
Second, the A teams from these, the KLAs and the ASMLs have been at Intel, because now Taiwan Semi has a monopoly. And I think you have a team there led by Lip-Bu, who's a legendary semiconductor investor, great executive, who understands what needs to be done. And I actually think Pat Gelsinger has been very unfairly treated in the press. He embarked on an audacious strategy. It was kind of their only chance. And now you have the US government, who I'm sure in many ways is going to politely say, “Hey, we know that you like the chocolate cakes made in Taiwan more than the chocolate cakes made in Oregon and Arizona by Intel. We'd really like you to buy that American chocolate cake and you know, just find something.”
Michael Eisenberg:
What do you think of the US government taking 10% of Intel?
Gavin Baker (32:42.606)
To quote from Wall Street, mixed emotions. Like Larry Wildman going off a cliff in my Maserati. I don't know if anyone knows that quote, but Larry Wildman was Michael Douglas's great business rival. But mixed emotions. I think having the United States government very clearly say that, “Intel is a national asset for America–we're going to take a stake in it,” I think that's important. Whether you could have done that with the old CHIPS Act or this, I don't know, but I do think this administration, for better or worse, with the equity stake, they're going to be vocal with American semiconductor companies, NVIDIA included, probably in a way that prior administrations would not.
Michael Eisenberg:
To bring business to Intel.
Gavin Baker:
To bring business to Intel.
Michael Eisenberg:
Even if it costs those commercial companies more money, and they have to kind of stay a half a generation or a generation behind.
Gavin Baker (34:15.948)
Yeah, I think the cutting-edge products will probably still be made in Taiwan for the foreseeable future. I mean, we'll see how Intel 18A and 14A nodes pan out. Nvidia now has, I think, seven chips that are very important. And maybe some of them you can make at Intel. But the other fascinating thing is, if Intel can just get its act together, Taiwan Semi, I think they're very surprised. You know, they open up the Arizona Fab, sold out in milliseconds. Then they raised price 20%, still sold out.
Michael Eisenberg:
There's unbelievable demand.
Gavin Baker:
Yeah. I think you could probably charge close to a 100% premium for American wafers.
Michael Eisenberg:
Really?
Gavin Baker:
Yeah. People would happily–
Michael Eisenberg:
Made in America?
Gavin Baker:
Yes.
Michael Eisenberg (34:32.599)
Why? No spy technology?
Gavin Baker (35:04.942)
No, I just think the geopolitical fears are real. I just, this administration, I think a lot of their policy is about–I think during COVID, what the U.S. military realized was, wow, we are too dependent on China to fight a war with them right now. An extended war. And if they know that, if we know that, they know that. And that means that we're not deterring them from Taiwan. And so I think, you know, they do believe in peace through strength, and to credibly deter China and to keep Taiwan, which is a democracy, you know, a small democracy that I actually think, in a lot of ways, it kind of parallels Israel, maybe four times the population, but it's a small democracy. And, you know, Israel is now essentially geographically surrounded by friends, but that was not always the case. Taiwan, depending on who's in power in Taiwan, China is more of a friend, or maybe a little more adversarial. But I think they believe that if we can effectively decouple from China, then that can bring durable peace and avoid having a giant war in the South Pacific, where essentially China faces off. I think people forget, it would not just be America, be Japan, it'd be South Korea, be Australia, it would be the Philippines.
Michael Eisenberg:
Not many people know the geography of that part of the world, I’ve discovered when you find yourself in New York and Los Angeles. Yeah.
Gavin Baker:
Yeah, for sure. Yeah. I mean, Japan would absolutely be involved.
Michael Eisenberg (36:27.95)
And so, I mean, just to state the obvious, my iPhone would cost the American consumer 20% more.
Gavin Baker:
Yeah, I mean, that might cost 50% more. Because to your point, it's not just the wafers. There's all these other things that are made there. But a lot of those are rapidly being relocated to Mexico.
Michael Eisenberg:
India. Yeah, absolutely.
Gavin Baker (37:00.406)
And Nvidia, and Apple, and Amazon and the hyperscalers are driving a lot of this. Actually, big Chinese companies are opening up American subsidiaries that can be legally separated. And they're bringing their best engineers to stand up manufacturing plants in America or Mexico.
Michael Eisenberg:
Like the Japanese auto manufacturers did 30 years ago or so.
Gavin Baker:
A hundred percent.
Michael Eisenberg:
Fascinating. I feel like I need to ask this question. We're in Tel Aviv now. So the United States government just took 10% of Intel. The Israeli government has spent tens of billions of shekels over the last 25 years, in both subsidies and tax incentives, to have Intel set up their fabs here in Israel. If you were the government of the State of Israel, what would you do in reaction to, in response to, to level up regarding Intel? After the US just took 10% of Intel. You're the chief advisor on semiconductor supply chain in the Israeli government.
Gavin Baker:
I mean, there's what's fair and then there's what's possible. So in a fair world, if I were Bibi, I would absolutely ask, I don't know what's a reasonable number–for 5% of Intel, 2% of Intel, 10% of Intel. But it also feels to me like maybe Bibi and Israel in general want other things from America. And so you have to put that in the calculation. But in a fair world, absolutely. Israel should have a cut of Intel. The great thing is Israel can do that. It's the American government. It's not like they got a good price. Like they got the market price. So, you know, Israel can go do the same thing. They can call up Intel and say–and Intel is not going to say no, they need capital. They can make the same deal for however much they want. And maybe they should do that.
Michael Eisenberg (38:42.51)
Interesting. And do you think, is there any way to think about this as a secured allied supply chain, whereby Intel and TSMC and Nvidia, which has here thousands of designs, and thousands of employees, and many design people and Apple, which has here an unbelievable number of chip designers. Is there like an allied supply chain?
Gavin Baker (39:05.87)
100%. That's what I said about the Taiwan Semi engineers. Yeah, you can go to Japan–ally. You can go to South Korea–ally. You can go to Israel–ally. And you know, stand up TSM Israel, or you can go work at Intel Israel, or you can go to Arizona or Texas or Oregon.Those are the places on planet Earth, where those leading digital chips are made nowhere else. So Israel is 100% a very strategic part of this allied supply chain.
MIchael Eisenberg:
Interesting. You mentioned before, which I thought was striking, that TSMC wants to do kind of one generation back, or Taiwan thinks that if they give only one generation back of technology, semi-dead manufacturing technology, to the United States, that will keep them safe. Ironically, that's exactly what the United States government did with Nvidia vis-a-vis China.
Gavin Baker:
100%.
Michael Eisenberg (40:54.114)
Our mutual friend Bill Gurley thinks that's a terrible decision, because the Chinese, because of the constraints on them would either develop something that'd be much better or build better software around this, to kind of leapfrog the constraints. Do you think the US policy was correct? Think Bill's right?
Gavin Baker:
I respectfully disagree with Bill. So one, the advantage that America and its allies, Taiwan included, Israel have in semiconductor manufacturing–because it's a recipe, you can't copy it. You get the plans for the F-35, you can make the F-35. The only part of the F-35 that is kind of like semiconductors is the jet engine. And that was the area where it took China the longest to catch up to the West in terms of aviation technology.
Because the jet engine, there's a lot of art and trial and error. Even if you have the plan sometimes. And semiconductor manufacturing is the same thing. And I think had we adopted, we really adopted these policies early in the Biden administration. I think China was six to eight years away of absolutely catching up in manufacturing design. But I think we really did stop them and slow them down. And we have a multi-decade lead.
Michael Eisenberg:
A multi-decade lead! Wow.
Gavin Baker:
So today we'll call it, it's more of a four-year lead. But that is because four years ago, six years ago, they had access to essentially everything. Now they don't. So we will see what happens to that four year gap. Like I think it probably widens. But I mean, the Chinese are really good engineers. They're very smart, extremely hardworking.
Yeah, it's actually kind of–like, I think China and America are actually very similar as countries in terms of the ethos, except the Chinese have a better educational system, and I think are probably harder working on average, and certainly are more focused on science and engineering to their credit, and the detriment of America. But I think it's gonna be hard. I think that four-year lead is gonna grow.
Michael Eisenberg:
Interesting.
Gavin Baker (42:07.662):
And then in that context, you are giving them a chip that is, call it, a year ahead of the domestic alternatives, but a year to a year and a half behind what firms in Israel as an American ally get to use, what America gets to use. I think that's a reasonably smart policy. I think the position of giving them nothing is a big mistake.And then maybe the position of giving them the exact same chips is a mistake, because I mean, even with a pretty big hardware disadvantage, the only frontier labs that are challenging the American closed source labs are the Chinese labs with a big disadvantage. I mean, they're very good. And you know, there are real geopolitical ramifications of AI.
Michael Eisenberg:
If you look at our industry, kind of broadly, investors in technology–I take Bill as an example without singling him out, because I also respectfully disagree with his position on it. Historically, they haven't been that involved in geopolitics, but geopolitics has become a meaningful part of AI, of, by the way, the investing environment, you know, from Anduril to Hadrian, to X and xAI–
Gavin Baker (43:37.774)
Absolutely.
Michael Eisenberg:
And Tesla, because of electric vehicles and energy. It’s become meaningful. That hasn't been like in the purview of Silicon Valley investors, I think ever, until this era. How would you approach somebody who's just bringing you a chip company, and say, “Hey, there's actually geopolitical ramifications here that'll impact investment returns, that'll impact where you can manufacture this chip over time, that may impact the availability of parts..?
Gavin Baker (44:40.43)
I would say…
Michael Eisenberg (44:56.686)
Like, Cerebras, you mentioned, one of their core customers was the Emiratis. Their only customer initially was the Emiratis. For a long while, it was reported in the press. That may or may not have held up the IPO. I mean, that's like a big, that's a geopolitical issue because America hasn't decided yet to fully trust Middle Eastern countries with advanced AI.
Gavin Baker:
Yeah, it seems like this administration has decided that they do trust, for sure the UAE, and I think they trust the GCC countries.
Michael Eisenberg:
Thankfully.
Gavin Baker:
And I think, you know, you and I have both spent a lot of time, you know, in the UAE. And one thing that was profoundly embarrassing for me as an American to realize is that you might be safer being Jewish in Abu Dhabi than you are in most American cities. Which is like, shameful to me as an American.
Michael Eisenberg:
Yeah.
Gavin Baker:
But I think America has decided that they are reliable allies. But for sure–I mean, it was publicly reported that the Cerebras IPO was caught up in CFIUS. But I would just say, I would never bet against America. I'd never bet against Israel. I would line up with the Western democracies. And that would be my perspective, and that would be the way that I invest.
Michael Eisenberg (45:23.63)
Is there such a thing as a sovereign supply chain or something like that? I mean, America is making a good run at it right now, but it feels like even if you make a good run at it, the world is so interconnected and you need to manufacture this in Mexico or India, and you need rare earths from here, whether it's the Ukraine or China. Is sovereign supply chain even realistic?
Gavin Baker:
Well, sovereign, but like emphasis on, if you include sovereign to include allies, I think it's possible. So if you include Japan, and South Korea, and Israel and Europe–like, they do still make a few things, you know, Europe is like on its way to just being a theme park for wealthy people from around the world–but Europe still makes some useful things outside of luxury goods.
Michael Eisenberg:
Food ingredients, apropos baking, in Italy is a big deal. I'm not kidding by the way.
Gavin Baker:
Yeah, Europe is not totally lost. So you have Europe, America, Mexico, Israel, the GCC, South Korea, Japan, I think that can be a supply chain. Can you make it all in today's world, even in America or all in China? I think it's hard.
Michael Eisenberg:
So there's no such thing as chip sovereignty, for example, or anything like that.
Gavin Baker:
But there's allied chip sovereign supply chain, is the way I'd frame it.
Michael Eisenberg:
And how would you get someone to focus on that? You think the administration…?
Gavin Baker:
It’s happening. Yeah, it is 100% happening.
Michael Eisenberg (46:52.686)
I think you said somewhere, you tweeted–can we say tweeted anymore?
Gavin Baker:
Posted. Elon prefers posted.
Michael Eisenberg:
Yeah, posted. I said to him, “What do you do about retweeting?” He said, “Repost.” This AI race is the most important race to win ever. Yesterday, two days ago, I did a panel at one of these conferences here. I had eight various more people up there and I asked them to make one prediction about 10 years from now, what will happen in AI. And Shalev Hulio, who’s the founder of Dream Security–he was on the podcast before–AI to protect Nations, he said, “In 10 years, there are three things that are gonna define super nations. If in the previous century it was nuclear, 10 years from now it's gonna be AI, quantum computing, and cyber, because you'd be able to take down a country with cyber attacks. You’d need to break codes, et cetera.” Who do you think is gonna win the AI race? Is the first one. Who gets the super nation status with AI? And do you agree with what Shalev said?
Gavin Baker:
I agree with what Shalev said. I may be a little more skeptical on quantum, although it for sure is going to be very important in cyber.
Michael Eisenberg:
You and me both.
Gavin Baker:
Again, I think it's tough to bet against America and friends. Like even though it seemed maybe nine months ago that America had alienated a lot of people, I think these alliances are holding, and America and friends is very tough to bet against. So America and friends gets there together, and then I think China is always right behind. Like what Deepseek did was impressive.
Michael Eisenberg (48:43.736)
Yeah. Do you believe all the numbers?
Gavin Baker:
Some of the numbers were clearly made up. There's a line in there “This costs $6 million, excluding the cost of ablations and experiments.” And I posted on X kind of like saying, “Other than that, Mrs. Lincoln, how was the play?” And for sure, lots of advanced NVIDIA GPUs are smuggled into China. As I've said in other forums–America cannot keep drugs out. And we have the DEA devoted to keeping them out. And we literally just bombed a drug boat. And we cannot keep drugs out.
Well, I mean, the only thing as valuable per whatever we're to call it–kilogram–as some of these drugs or diamonds are GPUs. And China wants them to come in. So if America cannot successfully keep out something equally valuable that the segments of the American population want, it's hard when China, the government, which is very effective, wants to bring these in and has, you know, all sorts of front companies all over the world to do it.
So China has a lot of advanced GPUs, just not as many as they would have otherwise.
Michael Eisenberg:
You've been a big investor behind Elon. I think that's fair to say?
Gavin Baker (50:02.03)
Absolutely.
Michael Eisenberg:
You mentioned that you think global warming and climate is actually a big issue, but you think it's solved.
Gavin Baker:
I agree.
Michael Eisenberg:
Because of solar?
Gavin Baker (50:09.314):
Because of solar and batteries. God forbid one of these fusion companies works. And it seems like one of them might probably will. I don't know which one, but yeah, I think believing in global warming is a problem because it became part of an ideology. And if you just look at the facts in the data around what is happening with solar and batteries, I get to very–the world is going to run on natural sunlight in my lifetime. I mean, in America.
Michael Eisenberg:
That’s a big statement. The world is going to run on natural solar fully in your lifetime.
Gavin Baker:
Maybe my children's lifetime, if I want to hedge. But I mean, it's economics. It's just economics. Every year it gets cheaper, and essentially every other source of power gets more expensive. And definitionally, all power comes from the sun. Fossil fuels are just stored sunlight. Nuclear is just artificial sunlight. Actual sunlight plus batteries, it really can, and I think will get you there. I mean, in America, we are back to 1920 levels of emissions on a per capita basis. I think it's very hard to understand math, look at the charts of what's happening with solar from a cost perspective, and a deployment perspective, and be really worried about global warming.
Michael Eisenberg (51:42.151)
China was a big part of that, I think fair to say, right? Because of economics.
Gavin Baker:
100%, because of economics. Yeah, they needed–China does not have domestic fossil fuels.
Michael Eisenberg:
Right. Absolutely. They needed a lot of oil.
Gavin Baker:
So yeah, that's why they went A. so hard on solar and batteries and B. went so hard on EVs. Because for them, it was a national security issue, their dependence on oil shipments from other places. So yeah, I think the world's gonna run on sunlight. I'm a committed environmentalist. I love to be outdoors, but I genuinely believe global warming is a solved problem.
Michael Eisenberg:
In your lifetime, or your kids’, to hedge.
Gavin Baker (52:21.504)
The trend is it's just–it's the boulder has started rolling down the hill. It's rolling down the right path, and it's going to take you there. Just economics. Elon did more for this planet in decarbonizing it than all of the activists and the Greta Thunbergs combined. Those crazy people who are splashing paint on paintings–they make people you want to go buy a big rig. They don't do anything useful. Elon did something useful. If you care about the planet, and you care about global warming, you just have to be pro-Elon.
Michael Eisenberg:
Some significant number of years ago, Van Jones, I think, wrote a book called The Green-Color Economy, where he basically lampoons, or pans all the environmentalists and just says, “It's all economics at the end of the day. Fix the economics, and the climate problem will get fixed, and we'll have green-collar jobs too,” which I think Elon has proved, with solar installers, et cetera. At the end of the day, the economics and the money moves the world, but you need to kind of get massive investment into this to get production costs down, which I think would happen with Tesla, with China here.
But is the battery storage thing really solved? Like on a national level, I spoke to the Head of Energy Strategy–she was on my panel also–for the Israeli government. We got natural gas here. And I said to her, “Well, how are we going to run the big data center that we need to build in the negative desert? And she said to me, “Well, we've got enough energy right now. But if it really goes to a million GPU cluster, we may have a problem.” I said, “Well, what about solar?” She said, “Well, then we need storage.” And can you get the storage on a national level? It's tough.
Gavin Baker:
We need a lot more battery manufacturing capacity globally, and in particular, in America and friends.
Michael Eisenberg (54:04.334)
Is anyone focused on that?
Gavin Baker:
Well, Tesla’s focused on that.
Michael Eisenberg:
Elon. It all goes back to Elon. He's a single point of failure for your vision.
Gavin Baker:
I think maybe 10 years ago, he was a single point of failure for this. But what he's now set in motion–I think this is going to happen. He might be a single point of failure for getting to Mars and successfully colonizing Mars in my lifetime.
Michael Eisenberg:
You want to go?
Gavin Baker (54:41.59)
I absolutely, I think it would be really cool to see a blue sunset and a blue sunrise, because the polarities are reversed. I have been told that there will be a spot for me if I want one.
Michael Eisenberg:
Something else you've said is that the worst outcome is one AI model giving one answer, which is very Orwellian, by the way, right, in a big way. So, multiple AI systems, to give multiple answers, need multiple sets of values. And I think one of the under-talked about topics around these models is, what are the values they're ingesting? Right now there's an entire scandal about Wikipedia, which is a giant ingestion, giant corpus that's been ingested by AI.
Reddit's another one. And you're an investor, an astute investor in Reddit, as they were ingested by the AI. But garbage in, garbage out, that's what's fueling these things. If everyone's ingesting the same corpus is number one, you get the same answer. Number two, whoever's crafted those things with manipulations of Wikipedia now being investigated by Congress, that's a big deal. We can get one set of values. How are we gonna get to different answers? And how are we gonna get to different viewpoints, particularly as people get answers, rather than further inquiry?
Gavin Baker:
Extremism always kind of burns itself out. And I would say circa, sometimes after doing great damage. But in 2023, there was, and I believe early 24, there was a giant scandal, because if you asked OpenAI and Claude, and Google's Gemini, ‘Is it worse to misgender one person or kill 10 million people?’ It would say, ‘It's a tough question, but it's for sure worse to misgender one person.’ And I'm not saying misgendering is not a big deal, but killing 10 million people is obviously worse. But these AIs have been so imbued with this strange American woke monoculture, which really doesn't exist in the rest of the world.
(56:42.646)
You know, in France, they had a big article, Le Wokisme, about how crazy it was. And this is France saying how crazy it is. I think that burned itself out. Then there are all these instances of, you essentially could not get the AIs to generate a picture of a white man. You know, draw me a picture of the prototypical Viking–it didn't look like a Viking. And so I think that was helpful to moving the pendulum, as was what Elon has done with X, and xAI. I think cracking the Overton window for bringing back free speech. And then having the Chinese AIs is also going to be helpful.
And something that I think is underrated about Elon's success is his companies are always very mission-driven. And so anyone at Tesla, you ask them, why are you here? To decarbonize the world and make the world green. Very mission-driven. SpaceX, maybe the most mission driven company. You ask anyone there, why are you here? It's to make humanity a multi-planetary species. You know, there's a bartender at SpaceX, there's a Tiki Bar, and she had been kind of a super fan who would make videos about the launches, and then got to know some of the engineers, and she was a bartender and then, come be a bartender. And you ask her like, why are you here? “To make humanity multi-planetary.” And she's like, “But hey, I'm just a bartender, but my perspective is, if I know every engineer's favorite drink when they're coming over at 2 a.m. or midnight, and I have it made–maybe that makes it a millionth of a basis point more likely to get to Mars.” And yes to janitors, yes everybody.
Michael Eisenberg:
That's the famous John Kennedy line, right? You ask the janitor at NASA, he says, I'm putting a man on the moon.
Gavin Baker (58:36.574)
Absolutely. That is the ethos at SpaceX. It's amazing. But xAI, their mission of, X was free speech, and XAI, is to understand the nature of the universe and be maximally truth seeking. And Elon talks a lot about the Galileo test where Galileo correctly described the way orbital mechanics worked, and was put in prison for 30 years because that was not popular.
And sometimes science cuts against what we believe or what we would like to believe. And to progress science, have to be able to–
Michael Eisenberg:
Be a heretic.
Gavin Baker:
Be a heretic. Richard Feynman said science is a belief in the ignorance of experts. Because every scientific revolution completely invalidated the belief system that went before it. And that was a belief system adhered to by experts.
Michael Eisenberg:
I gotta ask this question. If Elon came to you, it didn't matter what he pitched you, would you give him money?
Gavin Baker:
Well, I would always think, because I'm a fiduciary, but I just don't think there's anyone else, with a track record across so many different industries of being as successful. Tesla, SpaceX, X and xAI, The Boring Company, which I actually think is going to end up doing incredible things for the world.
You know, it's amazing the amount of space we've given in cities to cars. Between parking lots and streets. And if you see a picture of a city, there's a famous illustration where the streets and the parking lots are just 2,000 foot deep canyons. You realize how little space we've left for walking.
Michael Eisenberg (01:00:14.318):
I see you've read Shoup’s book, Donald Shoup’s book on free parking? There is no such thing as free parking.
Gavin Baker:
I haven't read the book, but I understand the concept. And then what Neuralink is doing is amazing. And really bringing back, fundamentally changing the lives of these paralyzed patients. And then eventually the hope for Neuralink–
Michael Eisenberg:
We quietly have a Neuralink competitor that's non-invasive. Semi-competitor, so it'll be interesting. I'm not betting against Elon either.
Gavin Baker:
Yeah, I think it's tough. I think it's tough to bet against Elon, but again, it's going to be a big market. My ultimate hope for Neuralink–there's a science fiction series called The Culture written by Iain Banks, I A I N. Highly encourage everybody to read, for what a utopian AI-like society could look like. And the SpaceX drone ships are all named after spaceships from the culture. But in the culture, every human has something called neural lace, which is circuitry woven through their brain that effectively lets them merge with an AI whenever they want. They can be aware of anything happening anywhere, at any time. And the hope of Neuralink is it lets us, it fixes this long-term hope besides changing the lives of these patients. But there's a real IO problem for humans relative to machines. You know, we take in so much more information, but can transmit it slowly. And so that having a really high bandwidth connection between a human brain and a machine intelligence through Neuralink, you will help humans better adapt and add value in a world of AI. So that's humanistic and also inspiring.
Michael Eisenberg:
You mentioned before that you're a patriot. Clearly your values, and you talked about Elon's mission-driven nature, impact your investing view.
Gavin Baker:
Yeah, for sure.The way I phrase it is just like. I have historically avoided investing in things that I think are bad for the world. And this is not ESG. ESG became totally corrupted. Like the idea that defense was bad for the world is ridiculous. There are actually evil people in the world and we need to be defended from them. Like defense? Super pro ESG in my mind, the way I would define it.
And I think the world is kind of coming around on that. But just if there's something that I think is kind of actively bad for the world, like I tend to avoid it.
Michael Eisenberg:
How do you determine that?
Gavin Baker:
Different in each case. You know, like the famous definition of pornography, I know it when I see it.
Michael Eisenberg (01:02:58.85)
Yeah. Give me your 10-year AI prediction
Gavin Baker:
I mean, I think we will have artificial super intelligence in 10 years. And by that, I mean an AI that is smarter than the smartest human in every discipline. And what the economic ramifications of that are, I don't know, but I do think we will have that. I think the two biggest risks to this kind of current moment, to this AI cycle–one is that the economic returns to ASI are just not that high. We're not living forever and colonizing multiple solar systems. I think the other risk is that eventually already today, it's hard for most humans. If you're paying 200 plus dollars a month for the best AI you can buy, it’s actually pretty hard for most humans to push the limits of its knowledge. I think the other risk is that in–
Michael Eisenberg:
Dig into that one second.
Gavin Baker:
Well, just a big problem in measuring AI is called benchmark saturation, where it used to be in the definition of, people always say, “AI will never be able to do that.” Then it does that. “Well, now it can't do this.” And then it does that. And then it's like, “It's never going to score at this level on this test called the GPQA.” And then it knocks it out on there. “Well, we need to have this.” And there is a jagged frontier in AI. It's also–which is another way of referring to something called more of X paradox, which is that things that are very easy for AI are very hard for humans and vice versa. But that frontier is getting less jagged all the time. AIs are getting better at more and more things. But I think the risk is that, if in two or three years you can run 130 IQ, which is a very high IQ AI on your iPhone or Google phone locally, and it's your AI, and it's friendly, and it knows you, and you trust it with all of your bank accounts–and then when it doesn't know it calls out to one of the giant AIs in the cloud–I think that is a risk to this current data center boom. And like the history of compute is, we kind of oscillate between centralization and decentralization. And I think that that is a risk.
So I do think we will get ASI in 10 years, I think humanoid robots will be everywhere. We will have humanoid robots in our houses doing useful things. There will be humanoid robots in factories doing useful things.
Michael Eisenberg:
I’m still gonna interview Gavin Baker for the podcast rather than the humanoid version of me.
Gavin Baker:
I don't know, man. They're getting pretty funny. Yeah. Maybe humor will be one of the last kind of areas. Maybe comedians, comedians and sports stars will be the highest earning people on planet Earth in a world of AI super intelligence, because humor will be tougher for the AIs, and maybe it just won't be as exciting watching teams of robots.
Michael Eisenberg:
Why are you in Israel now?
Gavin Baker (01:06:13.614)
I'm in Israel-so we have probably SpaceX, I bet, 30, 40% of our venture portfolios here. We're very active semiconductor investors. Israel's a great place for that. So here, seeing all the companies, gave a fireside chat. Dan Loeb and I talked at the Jeffries Conference, which was great.
But the one thing is like I was coming here, I was like, okay, I'm going to come every year once a year. And I think for sure I'm going to come a minimum of twice a year for a week each. There's just so much happening here. And it is–I sat on stage and said to you guys, “I do think Tel Aviv feels like the most exciting city in the world right now.” Obviously what happened was a tragedy, and there's still 20 living hostages, so I understand there's kind of a sadness underneath it. But there is just an electricity. It's exciting to see.. It reminds–the last place that felt like this to me, was actually, I would say any major Chinese city, maybe 15 years ago, after the GFC. There was just this sense of endless possibility. An incredible energy in China. It was really inspiring. I went to China at minimum once a year for a week, for 20 years. I have not been in the last six. But Israel feels the same way. Just incredible energy, electricity, optimism. And I do think there's good reasons. Like it feels like we may be on the verge of a sustainable, durable peace in the Middle East.
Kind of this golden age for this region, and the Abraham Accords expanding, and that would be beautiful. But I find the electricity and the optimism inspiring to be around. And then I do think, you know, Israel, is–I described it as the 21st century Sparta today. And it is defending the free world. And so I want to support that and honor that. So I’m gonna come here, minimum twice a year. If you're an Israeli entrepreneur, please think of both Mike and me.
Michael Eisenberg (01:08:50.638)
It's always fun to do a deal together. I need to ask you two last questions. We're sitting here. This won't be broadcast today, but it's the day after Charlie Kirk was assassinated in America. Do you think that political violence is back in a big way? And if you had to kind of project forward, months, and a couple of years, what do you think the impact of this event is?
Gavin Baker:
It's going to be very significant, along with the murder of Iryna. I do not know how to say her last name. But a Ukrainian refugee who was brutally murdered on camera in a really callous way. And I think having the two back to back is actually going to have a significant impact on America. Charlie Kirk, it's tragic, because what he would do is, he would go to college campuses, and I think more than anyone on the left or the right, he would engage in courteous dialogue and discussion with people he disagreed with. And this is what we need more of in America and everywhere in the world. He had his views. He would explain them. He would listen. He was respectful. And so what happened is truly tragic. This is the fact that it was celebrated on air, at MSNBC, that guy got fired. I've seen all sorts of snippets from Bluesky of people celebrating his death.
And I think language is powerful. There's a phrase in Nietzsche, a phrase from Nietzsche, I’m gonna get it wrong. It says, ‘Take care to not look too long into the abyss, for the abyss looks back into you, and eventually you become one.’ And so I think, for a lot of people on the left in America, they believed that Donald Trump was absolute evil. And so they used language that suggested, if Donald Trump is Hitler, if he's a Nazi, like–we all know what should have happened to Hitler earlier in his life.
And so that's very dangerous language to use. And I think it kept being used. And then, it was just shocking to me. And by the way, I've voted for both parties. I consider myself a centrist. But, so there are two assassination attempts against Trump. And even then, a lot of people on the left in the media, they couldn't stop using language, like, ‘Put a bullseye on him.’
And then what was shocking to me is, Luigi Mangione who killed the UNH CEO. It was hard. Not many people on the left condemned him. And some prominent voices basically said, “Hey, we understand why he was angry and killed this guy.” Well, understanding that you're angry about medical bills doesn't justify murder. And then there was this campaign of, you know, firebombing Teslas.
And again, a lot of people wouldn't condemn it. And then those two Israeli embassy staffers were murdered in cold blood in Washington, D.C. by somebody who worked at some sort of liberal advocacy group. And again, not the condemnations you would hope for. There was an article today in the New York Times that I actually thought was encouraging, because it actually, for the first time, I saw them wrestle with, in America, everybody loves to say, far right-wing domestic extremism is the biggest threat. Well, it's been a long time since the Oklahoma city bombings in the early nineties. And a lot of things have happened since then. And I don't think domestic far-right extremism is still the number one threat anymore.
But it feels very safe, I think, to talk about far-right extremism and evangelical Christians, and these are the problems. And it's like, it was the first time I saw the New York Times wrestle with, wow, you know, this happened, and it was wrong. And it was almost like they were kind of struggling to find the language, but they were at least grappling with it.
Michael Eisenberg (01:13:25.998)
How do you think about, you mentioned mainstream media, MSNBC and New York Times, et cetera, and you mentioned Bluesky. And obviously Twitter is a free-for-all. It's kind of free speech maximalism. And there's obviously celebration on parts of Twitter too. My feed has been filled with parts of it in response to my just saying, God bless his soul and his family. So I was really shaken by the assassination yesterday.
Do you think that there needs to be any–it's funny because it's on mainstream media, it's on the regulated media, it's on social media. Like, what do we do about this moment where the worst of humanity pours itself out into the media, mainstream or social?
Gavin Baker:
I don’t know. I mean, we tried aggressive censorship in America.
Michael Eisenberg:
They're trying in the UK now, and it's not going so well.
Gavin Baker (01:14:41.646)
I think the answer may be unsatisfying. Of all of the great quotes in the English language, like 90% of them come from Shakespeare and 8% come from Winston Churchill. And one of Churchill's great quotes was, “The only thing worse than having allies is not having them.” And it may be, you know, same thing. Democracy is the worst system imaginable except for all the others. And it may be that free speech, while it's uncomfortable at times, that there's not a good alternative. Because I think the mistake, when the woke wing of America was ascendant, and they were aggressively censoring speech–like, it never occurred to them that someday they might not be in power, and they might be censored. And that has not happened, thankfully, because I don't believe in censorship.
But I do think, I mean, there are things on X that are said that I find offensive, and I'm sure that there are things that are said that, as pro-Israeli as I am, you probably find them even more offensive, or they hit in a different way, I'm sure with the personal nature of your experiences with everything that's happened since October 7th. So those are upsetting, but I just think that may be the cost of free speech. Because at the same time, the flip side of this is, I profoundly believe, if it were not for X, nobody would believe that October 7th really happened.
Michael Eisenberg:
I agree with you.
Gavin Baker:
So while there's some terrible things said on X I think if it were not for X October 7th would have been wiped from global memory.
Michael Eisenberg (01:16:32.876)
As you know, I went out and publicly defended Elon on this, post his visit here, and I completely agree with you. What he has uncorked, and the ability to get things out that was otherwise censored by mainstream media is profound, and he's changed the direction. So I'm in the same camp. I just think it's important to– you have to steelman the other argument.
Gavin Baker:
For sure. Life is all about trade-offs. And the trade-off of free speech is that, sometimes there's speech that is deeply offensive, that is evil. But if it does not, Elon follows the law. State of policy is we follow the law. So, if yelling ‘fire’ in a crowded movie theater, that can shut down. But anything short of that goes. And that comes with great things.
And it comes with terrible things, but life is all about trade-offs. And I think if there was, I mean, all sorts of different ways have been tried to adjudicate it. And other than following the law, which Elon does with X, I don't think any of them have been satisfactory.
Michael Eisenberg:
You worry about ongoing violence after what happened in the last week?
Gavin Baker:
I do, but I also hope that, like I said, I think that article in the New York Times is important. It's the first time it's like, wow.
Michael Eisenberg (01:17:58.456)
Houston, we have a problem.
Gavin Baker:
We might be part of the problem. And I think that's important. Charlie Kirk, he was a great man. I mean, it seems like maybe you knew him, I never met him. But I thought it was really inspiring to watch the videos of him respectfully being people who he disagreed with and disagreed with him.
Michael Eisenberg (01:18:22.968)
Politics the way we’d want to practice.
Gavin Baker:
And having civil–yeah. That's the guy you killed? And then that's the guy whose death you're celebrating?
Michael Eisenberg:
I want to finish on a happier note. When you think about where you want to deploy capital over the coming 12 months, where is it? That's the first question. And the second question is, who's the investor that you admire most and go to for advice?
Gavin Baker:
As to the second one, there's no one investor I admire the most. I admire you, Michael. I deeply admire my friend Antonio Gracias who runs Valor Equity Partners. He's done unique things and has a unique lens that he sees the world through. They're great portfolio managers at Fidelity. A woman named Jennifer Yurig who runs a venture fund now, but she at one point ran $70 billion. Great numbers. To my knowledge, she has run more money than any woman in history. Just, she had so many great pieces of wisdom that have stuck with me. You know, you either have to panic early or double down late and anything in between, you get killed. And you have to know which one you are, and be disciplined about it.
My friend, Steve Wymer, who runs a $200 billion fund with absolutely incredible numbers at Fidelity. You know, he really taught me the value of not only hard work, but doing the work yourself. And also just a phrase that Wymer always had was, “There’s only two things in investing. There are numbers, and there are excuses. And if you don't have the first, nobody gives a shit about the second.”
And then the aforementioned Will Danoff. Will is incredible because Will has this, he asks sometimes what seem like very basic questions, but they're very profound. And being asked them, I think maybe sometimes forces the companies to think differently. And he also has this incredible ability to, I would call it play in the present, and be completely dispassionate. And I'm not a golfer. Playing the present just means you can't let your last bad shot hurt you. But investing is the same thing. You got to play in the present. Whether you're on a string of hits or string of misses.
So I feel like I've learned something from a lot of people. I've certainly learned a lot from some of your former partners at Benchmark. I think it has taken a village to make me the investor that I am. And I'm going to turn 50 soon and I'm excited. How old are you, Michael?
Michael Eisenberg:
54.
Gavin Baker (01:21:15.628)
Okay, so I profoundly believe that peak performance years for investors, especially public equity investors–and I do love public equities, I love venture, I love public equities–are 50 through 70. And so I'm about to enter what I hope are my peak performance years. And I'm excited for that.
Michael Eisenberg:
Amazing, because they say about me that I'm over the hill at this point because the big venture years are in your 30s.
Gavin Baker:
Yeah, it feels like that is, I actually thought Bill had a great quote, you know, why are you retiring? “‘Cause I'm tired of having the same arguments with 25-year-olds and knowing I'm right, and having to watch the mistakes that I've watched people make for 20 years, and I just can't do it anymore.”
Michael Eisenberg:
Yeah, I tell Bill that having eight kids is training for that.
Gavin Baker:
That's actually hilarious and I'm sure very true.
Michael Eisenberg:
All right, and what are you optimistic about wanting to deploy capital into? This is our last answer.
Gavin Baker (01:21:58.67)
Very hard. So I'll give you a few things. I do think SpaceX is probably the highest risk-adjusted return available in the markets. It's my personal opinion. It's the highest sharpe ratio asset you can buy. My friend Antonio, who runs Valor and is a large SpaceX investor, says it's proentropic. That is, the world gets more disorderly, it gets more valuable. It is for sure.
People talk about Anduril as the most important United States national defense company. No, SpaceX is by far the most important defense company to the West. Even if they're not currently making weapons and never make weapons. So I think SpaceX is a great company. I think Starlink, people have forgotten what a big market telecom is. And this is by far the best product. It's a unique product. Telecom is over a trillion dollars in revenue.
Michael Eisenberg:
It’s barely been investable in the private market for the last 25 years. That's why people forgot.
Gavin Baker:
100%. Yeah. And so Starlink is going to be a great outcome for SpaceX. And then obviously if SpaceX ends up becoming the British East India Company of the solar system, it's going be very valuable. At one point 70% of global, or 90% of global trade passed through the British and Dutch East India companies. I think SpaceX can be that for the solar system. And I really think the future is going to be awesome. We're going to, industry is going to move to outer space. We're going to capture asteroids. We're going to bring them into stable orbits. We're going to mine–mining is going to happen in space by optimist robots. There’s an asteroid called Psyche that has more gold, platinum and diamonds on it than exists in all of the earth.
Michael Eisenberg (01:23:31.594)
By the way, you might want to be short gold, because it's been climbing very fast. It's a fair trade, buy Tesla, short gold.
Gavin Baker:
Yeah, I think asteroid mining, I actually think is actually a real long term bear case for precious metals. So I think SpaceX is exciting. I do think you want to have exposure to the frontier labs. And then I think it's just so hard to bet against semiconductors for the simple reason of the P&L of your average SaaS internet company. You know, a lot of them would have 85% gross margins. And of that maybe 5% went to compute. Your average AI company, best case, maybe has a 40% gross margin, and 50% of their revenue is going towards compute. And that isn't gonna change, because that is just the nature of AI. So AI makes global GDP inexorably more silicon intensive.
And I think there's an exciting opportunity in venture, semis in particular, because often outside of, and I think actually Israeli cyber is different, but outside of Israeli cyber and semis, you're often investing in 30-year-olds. And some of these are exceptional 30-year-olds, like Mark Zuckerberg, or a young Jensen or a 30-year-old Elon. But they're still 25 or 30. They maybe don't have the track record or the years of experience you'd want. In semiconductors, often you're investing in a 50-year-old who ran a division at a big company, and his team is with them, and you're betting on this person just doing what they have done for the last 10 years. So I think it's fundamentally different.
I think maybe Israeli cyber in particular is maybe a little bit the same. I haven't done as much of that as I should. So I think it's hard to bet against semiconductors, public and private.
Michael Eisenberg:
Gavin, thank you so much for doing this. Great to have you here. If you enjoyed the episode, please rate us five stars on Spotify, Apple Podcasts. Subscribe to the YouTube channel. You're not going to want to miss the Gavin shorts, in addition to the full length interview. Thanks.
Gavin Baker (01:25:59.156)
Thank you Michael. Thank you for having me.
Michael Eisenberg (00:00.13)
David Fialko joined me today and I think you're going to want to listen to this podcast from beginning to end. You'll learn of the people who empowered him to be successful, the people that he humbly empowers to be successful, an incredible journey of storytelling in filmmaking, in venture capital, and an incredible job at not just telling the stories, but taking action to make a change in our world. You don't want to miss this episode. Welcome back to another episode of Invested. I am thrilled.
to have my friend David Fialko here. Welcome, David. Thank you, it's a real honor to be here. David is the co-founder and a general partner at General Catalyst, the investment firm, but we're gonna talk a lot way beyond venture capital. I have been wanting to do this podcast since David and I hiked up the sand dunes of Abu Dhabi together. That was fun. It was fun, it's been a year and a half to make this happen, taking some time, but I'm so glad you're here, welcome. It's a real honor, thank you. All right, David.
We're on a podcast, there's Spotify, there's Apple Podcasts, and there's YouTube. But on the way in here, you told me that your mom wouldn't be happy with the YouTube one. Why is that? Well, my mother, at a very young age, told me that I had a face for radio. And now I'm living out her dreams. So being a filmmaker where I'm behind the camera and now here where I'm in front of a microphone, I'm very well suited. Thanks for having me.
I've asked this question before, but I want to start with it again. You went to college. Was it good experience? It was a fabulous experience. It was short lived. It was longer than I thought, but shorter than I would have liked to have been. I had this dream of going to college and having a normal experience. And then in my first kind of couple days of school,
the dean said, you know there was a condition by which we accepted you to college and I thought it was around my athletics and he said no and then I thought it was around working in the cafeteria and he said no, both those are fine, it's that you have to take English as a second language. And I said, I'm sure you've made a mistake, I grew up in Boston and he said, I know you did but to be accepted at a school like this and have SAT scores like yours,
Michael Eisenberg (02:22.602)
must mean you have some challenges and you have to take English as a second language. And I got to admit that was a bit of a shock to the system and my first couple days of going to that class, it made me realize, first of how lucky it was to be American, but also I wish I had paid better attention in English class when I was in high school. What sport did you play? I played hockey. Ice hockey? Ice hockey, yes. I know we're here in Israel. Which actually is decent hockey. You know, getting better. You now have a rink in Tel Aviv. You got a lot of Russian.
immigrant people that are playing here. We even have an Israeli ice hockey team. You can play for it someday. I would love to. Bad knees and all. would love it. You don't still skate, you? I do if I can go slowly. Okay. When you kind of entered college, where'd you go to college? I went to Colgate. What did you want to do? I wanted to play sports and what I was really excited was to be on my own. Just to be The idea of being free. I didn't in those days have a lot of academic
curiosity or interest, those will come later. But it became extremely clear to me once I got into school and went in and out of several different programs that the thing I really wanted to do is be a storyteller. And I always felt that the, although I wouldn't have called it an art in those days, I would have called it a necessity. The ability to be able to communicate in a way to get people to...
want to follow you or believe in you and to understand ideas that they otherwise wouldn't have thought of is a beautiful art. And it'd be something that I was spending the balance of my life doing. Because when I looked at starting a business or everything, it was all about getting people aligned around a common theme or interest. And so much of this was around the leadership, around storytelling. And I was very blessed that when I went to school, I was able to study filmmaking.
which at the time wasn't a very big area, but it was a place that think Colgate thought that they could park me and be safe, I wouldn't blow up. And it actually ended up being a great blessing for me. And what made you think you could be a good storyteller? Because I didn't read or write very well. And so my opportunities were I could be a sculptor or a filmmaker. And sculptors are dirty. Who wants to spend their whole day wearing overalls, throwing mud at, against the wall? But filmmaking,
Michael Eisenberg (04:42.722)
was something totally emancipating for me. It would allow me to like go right brain curiosity, pick things that were really interesting, learn as much as I can and tell those stories. And at the time, what I had no idea of is that it would become something that would become a very dominant theme in my life. know, when I started out my career in business, I really started out as a driver for Tom Lee, the iconic
a bio guy who I met on Martha's Inyard. And at the time I was going to law school and he said, why are you going to law school? I said, because I didn't, I really wanted to get an education that I didn't get in college. And he gave me this opportunity to sit in his car and drive him around and pick him up and just talk to me. And what I realized just even in those days, it was the anecdotes, was the stories, it was the articulation of ideas, it was how people were doing things. So at a very young age, I sort of gravitated towards something
that very few people have the opportunity to do, which is listen to people and hear the way in which they did and why they did things. And that's something you just don't learn in school. How did guy like you, who thinks he's sort of second language, take interest in second language and at Colgate get to Martha's Vineyard? On my bicycle. I was literally riding my bicycle one day and I stopped to get some water and there was a guy watering his flowers and I asked if I could borrow some water to put in my water bottle.
And it ended up being that we began this great conversation. And he said, why are you going to law school? Why don't you come work for me? Unbelievable. So I said, what can I do for you? And he said, well, you can be my driver. I was expecting an analyst job, but I didn't have any experience. So I took what I could get, and then I started there, and I gained his confidence. We became really good friends, and then eventually I worked at his firm one day, which was magical. And how did you start your career? Because it didn't start in venture capital. We'll come to that No.
I worked for Tom and without knowing it at the time, the value of mentorship. And Tom was an amazing mentor. He took the time to explain why and how he was doing things and how he was handling people. And what I learned from Tom was something that would be a lifelong lesson, which is how you treat people. And I worked him for a couple of years and then I realized it would be much more fun to build a company and sell to him than be with him and buy other people's companies.
Michael Eisenberg (07:10.136)
So our dear friend, Joel Cutler, and I, who I haven't known that long, just since kindergarten, Joel and I, Joel was working for his dad, I was working for Tom, and Joel had this really brilliant idea, which was people don't really care where they go on vacation as long as they go somewhere warm, and if it's half-priced, they're even less concerned where they go. So Joel came up with this idea called last minute travel, and he said, you wanna do with me? I went, hell yeah.
And he said, we'll be able to travel, we'll go have fun. And it was right. And Joel was a genius at the product. Joel has always been somebody who was clairvoyant. He saw the future, and what he saw was that people were gonna use their leisure time in a way that they hadn't, this is 30 years ago, 35 years ago, where people really wanted to take holidays, but they didn't want to pay full price. So didn't matter whether they went to Aruba or Cancun.
or the Bahamas or Bermuda, they just wanted to go away somewhere. So we started this business in my basement, and then we moved to over a bakery, and the whole idea was come see us three days before you want to go away. And if you don't care where you go, you can go for half price. And we didn't know what we were doing. We had absolutely no idea. And we always thought that if we grew faster every quarter, we'd always have more money. So we never managed money.
And then we ran out of money and that led us to make some decisions on how to run a business. one of the great things about Joel is that we always had this relationship, we were really honest with each other. We both admitted we didn't know what we were doing. So we brought a bunch of mentors in to help us and really scale the business. And then luckily we sold it. And we sold it at the perfect time because the internet, it just started to take over the travel industry.
and we got kind of an early internet multiple for a very mediocre business. It was a very cool business. And I guess at the time we sold it, we were the largest seller of tours and cruises in the United States. What year was that? We sold it in 1995. 1995, right at the Right at the cost where people thought every business should be on the internet. And then luck would play a little bit of a role. We got a phone call from some friends of ours at Berkshire Partners.
David Fialkow (09:23.214)
1905.
Michael Eisenberg (09:37.336)
great guy who become a great mentor to us named Brad Bloom. And Brad said that they had an opportunity to buy duty-free stores on cruise ships. And they said, why us? Why Joel and me? Well, you guys know something about cruise ships. We've got nothing about retail. We bought this business and then again, there's a common theme, Michael, in our lives, luck would once again play a big role. We had a competitor.
that was owned by Swiss Air, and Swiss Air had an unfortunate tragedy on one of their planes, and they wanted to get rid of their jurisdiction inside the United States, so they sold us their duty-free stores on cruise ships for basically no money, and we ended up having a monopoly. We couldn't understand why LVMH, who was the largest player in the game, wasn't in this business. What we didn't know,
is that LVMH had crossed their wires with regulators and had to stay out of the business for a while. So once again, we went back to the playbook. Who are the best mentors in the world? Because Joel and I didn't know anything about selling things other than travel, but selling actual objects on cruise ships. So we went to two very dear friends of ours, Steve Karp and Steve Fishman, who were great.
mall owners and real estate guys, and Mickey Drexler. And Mickey at the time was the chairman and CEO of The Gap. He was the number one merchant in the world. And we asked the three of them to join us in this mission. And then we brought in Len Schlesinger from Harvard Business School. And the four of them formed a board and a core group of mentors. And we built this business overnight into a real powerhouse. And then in 2000,
We sold the Telvium H. There's a real theme of yours is seeking out the mentor, right? Tom Lee and then this crew. If you're talking to a 21, 22 year old budding entrepreneur of any kind today, how do they go seek out these mentors? How do they get to them? How do they convince them? How do they persuade them? How do they nurture the relationship? I think that there's one way you do it. If you have no relationship,
Michael Eisenberg (11:58.87)
and you don't have any, I wouldn't call it leverage, but have any in on it, it's create relevancy. If I want to get your time, Michael, I'm gonna try to appeal to your sense of how doing something with me and mentoring me is gonna improve and increase your relevance. Because no matter who you are, we all wanna help young people, one. Number two, we wanna learn about something else, two. And number three, we wanna be known as a person
that in somebody's career, we're the go-to person to help them. So I just reverse, we just reverse engineered that. And going to people my entire life and saying, hey, I don't understand this and being totally honest, but you do, and wouldn't it be wonderful if I could learn from you, opens up this tremendous amount of empathy that makes people feel not only the desire to want to be part of what you're doing, but it can increase their relevancy as well. And it works.
And people are just willing? People are willing because they want to be in the game. Cold call them? Get introduction? Always better if you can get to people through a relationship. What's wrong with you? E-mailing somebody and saying, hey, you don't know me. However, I've always looked at your career and the things that you've done is extraordinarily valuable doing X, Y, and Z. And I'd do anything in the world if I could get some of your time.
However, there's nothing wrong
Michael Eisenberg (13:26.69)
This is another thing, you should always ask people for their time and opinions, never a job or money. Because time and opinion is not threatening. Most people would rather turn you down when you ask for job or money because they don't want to be in a position of disappointing and they don't want to feel like an obligation to you. But when you ask people for insight or advice, you're also appealing to their sense of their own ego.
wow, this person's asking me for insight. They're not asking me because I'm successful or rich or whatever, they're asking me because they want my opinion. And that's a very, very good way to start a relationship with them. You're a top 0.001 % storyteller. Thank you. What should, we'll come to more of that in a second, what should a young person trying to do this do to improve their storytelling so they can make that first pitch to Tom Lee or
Bill Ackman today or David Fialco? First thing you gotta think about is who the person you're pitching and what would be their hot buttons. So if somebody is really interested and focused around social justice versus maybe they wanna learn about technology or maybe it is that they wanna have an impact on the world or maybe they have an area of interest that they wanna pursue that you're the avenue or the vehicle to do it. You gotta do your homework.
because one size does not fit all for everything. So if somebody was trying to pitch me, it would be the fact that I mentioned earlier when you and I were talking, that the greatest feeling for me is other people's success. I feel like I've had an incredible opportunity to succeed at things on my own, through things that I've done. So the greatest feeling for me my entire life is seeing
our team win or other people win. To see the success that Amman has running General Catalyst after taking over from Joel and me. To see the success that founders have that we help them start their businesses. To see the success that my wife Nina has in running our documentary film business. To see other people succeed, to me, is the buzz of the time for me. And the emotional
Michael Eisenberg (15:53.006)
fulfillment that I get seeing other people be successful is amazing. So that's the way you would play me. So you just gotta figure out what that hot button is for somebody and figure it out that way. Let's go back, so you and did the second company, which also worked out pretty well. Yeah, we got lucky there. But tell me about how you got into filmmaking, and then I'm go back to the venture business afterwards. Well, this is really kind of interesting story. We sold our...
our duty-free business to LVMH. And we were in the middle of going public, and the LVMH team came and talked to us and said, Mr. Arnaud wants to buy this business. It fits our product roadmap. It'll be great, we'll sell it to you. You'll come to Paris, we'll have a great dinner. know, on the Champs-Élysées, I came home, told my wife, it's amazing we're sell our business to Bernardo Arnaud, and the four of us are gonna go celebrate in Paris.
And then like a week before the closing, they called us back and said, the deal's too small. Mr. Arnaud isn't gonna be able to make the closing. We're just gonna do it in the lawyer's office in Boston. My great success, I maybe needed to up my game a little bit. So what happened is that we- He still owes you dinner. He still owes me dinner. I want it back. He's gotten a lot richer since then. He can bring the Michelin chef to Boston.
So I realized.
David Fialkow (17:17.378)
He can bring it.
But what happened next is a really fascinating thing. Joel has Crohn's disease, inflammatory bowel disease, and I've always just marveled and been so impressed at his ability to persevere even when he's not feeling well or in pain. A lot of us complain about things and he never did, ever. And always smiles. Always smiles and is ecstatic for other people's success. But at the time we sold the duty-free business,
I really wanted to do something great for Joel, which was I wanted to build something at Children's Hospital where he had lived as a young boy with Crohn's in his honor. So Nina and I went down and we started out that it was gonna be something really big and then you realize how expensive it is to build in a hospital and we agreed to build this area at Children's Hospital in honor of Joel and we were walking back and we went by the, you're wearing a Red Sox hat.
we went by the Cactus Club in Boston and we went in there, Nina and I, for tequila and tacos. And at the time, I had to deal with Nina that I could weigh double what she weighed. And she's weighed 105 pounds her whole life. And at this point in life, could weigh 210, but I was at like 220. And there was a bunch of guys at the bar and they were giving me grief. How's that two for one going? I of course meant,
two tacos, one tequila, and they went, no, the two for one on weight. And I said, I weight 210 pounds, and they're like, there's no scale in the world that would put you at 210. So of course being a guy and having a very large ego, I got upset. I said, all right, maybe I weigh more than that, but I can do anything you ask me to do physically, anything, provided that you guys put up some money for this Crohn's Initiative that I'm doing. So this was July, and I committed
Michael Eisenberg (19:14.286)
I bet these guys a couple million bucks that I could do the Hawaiian Ironman on my birthday, which was October 18th. Which sounded like a good idea, except for I didn't know how to swim. And then Nina casually informed me that the Ironman was actually on my birthday, so now I had to double down the bet and I didn't know how to swim. So I spent the next 90 days furiously learning how to swim. My Russian swim coach,
came to Nina and said, he will drown in the boot. And if he drains in the, he'll drown in the ocean. So I had problems getting a swim instructor, but I did it. I qualified, I went to Wye, I brought a bunch of my buddies with me, of course, I needed my positive friends with me, and with Nina and my parents, and I finished the Ironman. I did not set the world record, I was actually at the bottom.
end of the finishers, but I did it, and I raised some money. So now Joel and I are sitting on the beach the next Did you finish healthy? I finished totally healthy. Totally healthy. And happy. Really happy. And hungry. So the next day, Joel and I are on the beach, and Joel said, hey, what do want to do next? We sold the duty-free business, let's do something together that'd be great. I said, I had this life dream, I want to start a venture firm. And Joel said, small problem.
Thanks.
Michael Eisenberg (20:41.102)
We know nothing about technology. You could say maybe 25 years later, still true, but hopefully we've learned a little bit. Number one, we know nothing about investing. We know nothing about technology. And we've never had investors. So you think about starting a venture firm without any tech skill, investment skill, or fundraising skill. And I said to Joel, we'll do it our way. We'll figure it out. And one of the things I love about Joel is Joel looked at me and goes,
I know we will. And the early part of it was rough. People would go like, you're doing what? And it was kind of shocking to people because we didn't have that as a background. But Michael, the reason why we did it is we realized the same dream that we had, which was we felt that investors did not have empathy for founders. And it was about investing in founders, not having empathy and helping them build that business.
And what we wanted to do is be on that journey with founders, helping them all along the way. As you think about what it's like to be a founder, which you and I have been, and you go home, sometimes people around you don't understand that the burden of the world is on you to perform. Your friends don't understand because they're not dealing with it the same way. there's nobody around that you can sit down and say, how do I do this? And you've taken responsibility
to help a lot of people and you don't really know what you're doing yourself, so how can you help others? And we wanted to be that go-to person. We knew what it was like to be that lonely. We knew what it was like to be that unsure of ourselves. And Joel and I agreed if we could be the best mentor, the most empathetic listeners and helpers for founders, regardless of whether we made money or not, we'd have a blast.
The second thing is I grew up as a hockey player. And unlike any other sport, hockey does not have the following metric, which is you said to me, are you a good baseball player? I actually suck, but say I bat 250. If you said, are you a good basketball player? I'd say, well, I was three for nine last night. If you said, am I a good golfer? You'd say, I'm a 10 handicap or whatever. Hockey.
Michael Eisenberg (23:08.204)
If you said to me, how'd you play last night? And I said, I scored two goals. Nobody asks how many shots on goal I took.
To join us.
I surmised that if we could raise capital efficiently, we would have more shots on goal. We could actually build a venture firm and be wrong. But nobody cares about how much you're You and I both know that. Nobody talks about this deal or that deal. I'm looking behind you at the wall of your successful companies.
a lot.
on.
David Fialkow (23:31.566)
to be.
There could be ten walls over
They're the ones that didn't work out. Nobody gives a shit about those. What we care about is the successful ones. And that's what Joel and I focused around. So we said, we empathetic toward founders, if we can understand their journey, if we can them build their businesses, both personally and professionally, we would have a blast and we'd be able to maybe recreate the way founders build companies. And that's the original idea. It was never about making money. It was never about our
can be.
David Fialkow (23:49.742)
If we can help.
Michael Eisenberg (24:04.674)
thoughts about what products and services and companies should get built. didn't have to do that. But what we knew is if we tracked really talented, really motivated founders to be on their team, we could have a great time. What year did you start General Catalyst? We closed our fund on September 10th, 2001. That was a very, and our first fund was our own money.
We weren't clairvoyant in
You could've
Michael Eisenberg (24:32.43)
And the reason is nobody was gonna give us money. Our first one was basically $70 million, 50 from Joel and me, and 20 from friends who I think reluctantly at the time wanted to be on the journey. What we got right was that you needed more money. What we didn't get right is a couple of things. Fast moving water slows down, number one.
Number two, although your friends want you to succeed, very often other venture capitalists look to their other venture friends as a way to pump up their rounds versus including you in their winners. And then the third thing that we really got wrong was how long it takes to be successful. Forget about words like a J-curve. When you're investing in early stage businesses, if you want instant gratification, it's hard to get, which is why fundraising
became so important. Because fundraising is instant. You walk in, I remember the first time we went down and we met with David Swenson and his team from Yale. And we had never raised money before. The only time we had ever asked anybody for money was for charitable donations. Cure Crohn's disease. Cure Crohn's But at least Swenson didn't make you do an Iron Man. Right. And this was right after that we went down to see David Swenson.
And David and his partners had committed to us $20 million in our first fund. We get in the car, I happen have this beatable convertible. We get in the car and we started ripping down the road and I went, that's amazing. We just got the greatest contribution donation of our lives. And Joel turned to me and goes, no, they actually want their money back with a return. So we had to change the way we looked at things, but what really worked well,
was us understanding that this was a long relationship business. Long relationship between the two of us, long relationship with founders, and long relationships with LPE. And it's really bonus. I wanna fast forward if we're talking about the venture fund now to, you guys have, I think, a pretty remarkable job where most venture funds fail, which is generational transition. You're still there as a general partner. Joel is still on boards, including with me.
Michael Eisenberg (26:54.454)
At Empathy, apropos Empathy, at Empathy.com, Ron Gur's company. But he's more or less moved on. And Hamant is running the firm today. How did you pull this off? And really take us through it, because there's a Ken Shanult era. Let's begin with confidence, which is that we thought that on our team, we had a handful of people, in particular Hamant, which were
once in a generation leaders. And what happens is, I'll go deep on this for a second, if you and I based our identity on being the founder of Aleth or the founder of General Catalyst or perish the thought this was called Michael's capital or David's capital, there's no way that we would ever be able to couple from running a firm. Instead what we realized is kind of like the ad for the
You don't own it, you merely run it for the next generation. And Joe and I always felt, always felt, that we would have our time and then it would be time for others to be able to lead for three reasons. Number one, what I said a few minutes ago, the greatest feeling is to see other people successful in part because of what we've created. One of the great things about parenting and
You've learned being a grandparent, I look forward to that day. Hello, Olivia. My daughter. But the greatest joy, and what we realized with Hamad was in 2012, we made the decision thanks to one of my mentors named Jim Schwartz, who was the founder of Excel. We should just stop for a second. Jim Schwartz is really one of the godfathers of the venture capital industry. Doesn't, I think, get enough credit.
for how much he contributed and work he did at Accel and just an incredible, he was kind to me at the beginning of my career too. So I met him, we did a deal with Accel called BB &N that we bought a company and Jim Breyer was the guy we did it with and Jim said you should meet my partner, Jim Schwartz, who lived on the Vineyard, which is where I live. And so I just spent some time with Jim and then Jim made this kind of epiphany. He's a very black and white guy.
Michael Eisenberg (29:19.394)
And he turned to me and he goes, I'm to tell you something, it's up to you what you do with this, but you will be out of business. As good a firm as General Caldwell seems to be in the first five years of your life, seven years of your life, you will be out of business, extinct, dead, unless you move to San Francisco. There is not enough business in Boston or New York. And Joel S. Cronz and a close family wasn't going to leave Boston.
I loved living in Boston and I didn't want to leave. And we had this really talented young guy, Hamman. And this was early on. And Joel and I sat down with Hamman and said, listen, you're going to move to San Francisco. You move your family out there, including your parents. And you're going to run San Francisco as if it's its own firm. If you have to call back every hour to get permission to do things, we're dead. Now part of it is, I asked a whole bunch of firms that had gone east
to West, and very few of them, really other than Greylock, had succeeded. And when we figured out why they did, it's that the mothership, AKA Boston, controlled the purse strings. She'd have these really smart young people running around California, and it's six o'clock at night on a Friday night in San Francisco, and they want to sign a term sheet, and they're calling back to get permission at nine o'clock at night, and nobody's answering at the mothership.
because they're after two drinks in Boston, one of these nice clubs. Or they don't have any idea, they can't believe that an early stage round is not 2.2 million pre. And we went to them and we said, you're gonna go out, you're gonna fuck your team, and you're gonna do it, and we're gonna be supportive of you, and you are gonna begin to build the firm out there, no strings attached. And the quid pro quo is, do it without any fear of failure, without any reservations, you're a really smart guy, and we have
Pick.
Michael Eisenberg (31:15.288)
total confidence in you and you will take over the firm one day. So he may have taken it over operationally in 2018, seven years ago, but seven years before that, we empowered him to say, go do it and feel the power of making your own decision. And we always supported him and he did a great job. We all make mistakes, but we were there for him.
What happens in our business, Michael, as you know, is founders stick around too long because of their own relevancy. It's not having to do with their team. It's they love what they're doing and they love the accoutrements and the firepower they get by leading a firm. And they don't pay attention to the fact that they're actually, you know, raining on somebody else's parade and ability to lead. So we made these decisions very early on.
And I think that gave Hamant the courage to be a better investor and courage to be a better team builder. We could have never anticipated that he would be the leader that he is today, which is extraordinary. The Ken Shinal thing was a little bit different. Joel Hamant and I had known Ken for a long time. And Joel's my case even before General Catalyst. We had started a business called You Promise and Ken was involved in it.
As Ken started to move toward his own retirement from American Express, we spent a lot of time three or four years before that having him get to know our team and our portfolio. One thing we realized is yes, this guy runs a hundred billion dollar business, but he loved putting on pair of jeans and sneakers and hanging out with young founders. And what founders wanted was how to scale.
No more.
David Fialkow (33:08.929)
from Ken?
Not what product, not what person hire necessarily. How do you scale? He had great experience in doing this and he was extremely relevant. So when it came time in 2018 where he was going to retire, he could have done anything. And we appealed to his sense of relevancy and he came in as an equal partner and he's done an extraordinary job in many ways. And he's been the perfect partner for Hamad.
over the last seven or eight years. They very different skill sets. We just got blessed that that worked out. How'd you handle the financial transition? I know there was a transaction with Goldman Sachs at some point into I think the GP or something like that. We did, this is just you and I talking here. This is totally private conversation. We did a deal with Goldman seven years ago for the right reason and it had some ramification.
Ha ha ha ha.
Michael Eisenberg (34:11.342)
Okay, and this is the right reason.
Up until that point, so that would have been say 16 years into our partnerships, Joel and I had funded all the GP commit, loan money to the GPs that couldn't afford it. The J curve in venture capital did not produce liquidity for our younger partners in a way. So we found ourselves funding all this co-invest. And as we started to scale up, it became clear to us we couldn't continue to do that.
So we did a deal that nobody else had ever done in selling a secondary, which is we found a partner, Goldman Sachs, who was willing to buy a piece of the firm, but instead of us taking the money out, we put it on the balance sheet of our management company and use that as an account for our partners to be able to do their co-investment without feeling obligated to Joel and me. They were actually borrowing the money from the firm. So again, Joel and I got no liquidity out of it.
Instead, it gave the firm the capability to be able to continue to co-invest. The reason I want to highlight this is I think it's underappreciated how hard it is for younger people joining an established firm with senior partners to kind of find their footing. And what you enabled through this is them not to be beholden to you, so that frees them up a little more and find their own footing and be a part of the firm. I owe money to the firm, I owe money to Joel and David.
Well, one of the, right, and we didn't want them to feel like they were borrowing the money or obligated. The way we set it up is, this is your money, it's no strings attached, in terms of it is non-recourse. If the firm can't, if the deals fail or the funds fail, you don't have to pay it back. But it gave them the sense that they were co-investing alongside us, and we did it in a way that did not materially financially burden the firm. And what it allowed people, as we know, little nuance here.
Michael Eisenberg (36:07.896)
GPs are the last ones to get paid. LPs are the first ones to get paid. It's extremely important if you can to have your GPs, aka your partners, the LPs, because they get paid out of the deal proceeds, not just the fund proceeds. And I think that really helped accelerate the wealth creation and the wealth security of our younger partner. So that's a deal that we're very proud of doing, and it worked out really well. And it ended up being, at the time, we were very small firm.
So it ended up being a very good deal for Goldman and we just bought him back this year. I want to switch gears to your film career because for those who don't know, David is a decorated and has won several awards, Academy Awards for the documentaries you produced. How did you, I know you want to be a storyteller since the time you were in college and you majored in film and how'd you get into filmmaking? So the constant in my career is find people who are both smarter,
and more capable than you. The greatest dream in the world is having your own dreams and aspirations and allowing other people to share in that. And when you do it in a way where you really do share that limelight and capabilities, you can have tremendous people do it. For example, General Catalyst would not be the firm it was today, it is today, without the leadership and success of Hamman.
Well.
I always wanted to be a doc filmmaker. When I got out of college, I tried, but I couldn't make any money and I didn't have any money. So I had to go get a job, hence being a driver for Mr. Lee. And about 15 years ago, Nina and I, my wife Nina and I realized that there was a limit to the impact our philanthropy could have. Just simply dollars have a limit. But.
David Fialkow (37:50.349)
Hehehe.
Michael Eisenberg (38:06.988)
If we could tell stories about truth to power and articulate to people things that they should know about, the return on investment is infinite. And like the case of Hamant, Nina is one of the greatest filmmakers of all time. She was a PBS producer, super successful. And Nina and I came up with this idea of telling stories that would be really hard to tell.
Hard not only because they're hard to finance because they'd be very often truth to power, hard to tell because they'd need really good filmmakers to do it. And Nina's brilliant at it and she proposed that we do it together and it was another chapter of my life where I got lucky being able to surround myself with incredibly brilliant and competent people and be part of something magical. You married up. I married up. Yeah.
Nina's idea was let's tell stories Nina's idea always was If you asked her what made a great film She'd say three things number one. It's gotta be really well made from an art point of view from a from a from a photography and a cinematography point of view number one Not a guarantee those got to be good the second
is we want people to learn something that they didn't know. They leave the theater and they go, howly cow, I did not know. And then the third thing, which really motivated both of us, was it would lead people who saw the film toward an activity that would create a more just and true world. Give me an example.
One of-
Michael Eisenberg (39:59.022)
The favorite films, series that we made is one that Nina did called The Vow, which is that we had heard this story from this great filmmaker, this woman, Jahan, that there was a cult in upstate New York called NXIVM. Where'd you meet Jahan? I think there's a story to that. Where'd you meet her? Well, we knew her, but we really ran into her on the street, snowing at Sundance in Deer Valley, Park City.
I was with my daughter and Nina, and Jahan came up to us and said, are you familiar with this cult in upstate New York called NXIVM?
I said, no, I've heard of the.
stomach.
medicine, but tell us about it. Said, well, it's this cult that takes really successful women and puts them together into a self-help group up in Lake George, is beautiful part of upstate New York. We paddle board and we have really good, you know, sessions, you know, exploring, you know, the meaning of life, et cetera. And we all share intimacies. And then at the end of this, it's taught by this guy named Keith Ranieri.
Michael Eisenberg (41:14.082)
who's a very articulate, incredibly charismatic leader. And then at the end of the session, Keith would say to one or two of the women, would you like to stay and get special leadership training? And of course his women would say yes. And he would then, for 48 hours, deprive them of food and sleep. And regardless of how strong you are, without food and sleep for
24 hours or 48 hours you break people down. Whereas he'd prey on them sexually, ending with the most horrific act of disgust, he would brand them in their private.
And, know, Jahan is telling us his story and showed us some of the video. And her, Jahan as a director and Nina as a producer, decided to make a seven part TV series called The Vow. And then HBO liked it so much they bought a second season of it. And the story was really eye opening about how easy it is to convince.
wealthy, smart women and men and families to support what is a cult because they believe in the higher good of what this guy was saying versus the reality of the situation. But what really became powerful was once we told the story, we got a lot of people to come out and turn evidence against this real villain.
this real predator, Keith Renieri, culminating with Nina spending 21 days in a Brooklyn courthouse, you know, just looking at this guy's eyes for 21 days, and we end up getting him convicted for 99 years of a life sentence, so that this predator will never ever be able to do this to another woman. So I look at that and I go, that to me is a great
Michael Eisenberg (43:25.71)
articulation of storytelling. And that's a harsh one, but for that film, he would never have gotten the justice. And these women who were victimized would have never been able to articulate what happened and move on in their lives. I think this comes back to the first point you were making, which I think ties together your journey, the entrepreneurs you work with, and the story of the documentary, which is that storytelling is this incredibly powerful
because we're storytellers, it's how we connect to people, to bring people along. And people who have traumas, or people who have stories that need to get out, become motivated because somebody stood up for them and actually told a story that they cannot And they don't feel alone anymore. Right, they don't feel alone anymore. The other piece, which is similar to venture capitalism, in 2017, we were approached by guy named Brian Fogle, a brilliant filmmaker, who wanted to make a film about
how Lance Armstrong beat the doping laws to win the de France for seven years and never get caught. For those who don't know, Lance Armstrong is a famous cyclist, there's a great book about him, who won the Tour de France and was accused of doping, but somehow got around the doping tests. He won seven Tour de France's and he beat the doping all the time. So Brian Fogel, a brilliant director, came to us
came to Jim Schwartz and Dan Cogan and I and said, hey, I want to Lance's drug protocol and see if I can get away with it. And he would do it while doing the haute route, H-A-U-T-E route, which are the seven biggest climbs of the Tour de France. And what happened is the story failed because he did worse doping than undoping.
And so we had a failed film. And I was in Switzerland at the time this came together, as with my son. And Julian and Brian and I were having dinner on the roof of some hotel, and Julian's great line was, half the stuff my dad does in venture capital fails. It's all about the pivot. And we got Brian out of the fetal position to say, if you could do anything in the world without fear of failure, what would you do?
Michael Eisenberg (45:54.23)
And Brian said, I will go to Russia and I'll figure out how the Russians beat the doping system. And in doing so, he discovered a guy named Gregory Rachankov who ran the Russian doping protocol. We smuggled Gregory out. He told this story. And that film ended up winning the Academy Award for the best documentary in 2018. Just like a CEO, Brian pivoted with confidence and
articulated a great story. So this is where venture capital and filmmaking are very similar. Storytelling, pivots, great leaders, very similar. And very fewer hits. Very fewer hits, yeah. What does it mean you smuggled Gregory out? Well, at the time, the Russians did not want him leaving Russia because he had state secrets. And so what did you, you put him in a duffel bag, like what'd do?
You
No, we actually brought him to Israel dressed up as Michael Eisenberg. No, we facilitated his exit in an expedited way. And then we had to hide him. And he's still being hidden. So he's been here now for almost eight years. And he's still in hiding because the fear that Putin would kill him.
Wow.
Michael Eisenberg (47:22.498)
He needed him to tell his story because he's the one who had the prima facie evidence that we show in the film about how Russia actually beat the doping system. And that film was called Icarus. And then ironically, our second Russian film is called Navalny, which is the story of Alexei Navalny. And that was a very different story. were, know, Alexei had been poisoned by Putin.
had gone to Germany to rehab. And then for reasons that people speculate, he decided to come back to Russia knowing that he'd be arrested. But he wanted his story tell kind of in a way that he wanted to face his makers. And he ended up telling his story, but then Putin ended up arresting him. And he ended up dying last year in prison painfully. And that film.
also won the Academy Award. You probably can't go to Russia. It's not a place that's on my hit list, especially now. But these are stories, you know, the goal was to try to, I guess you could say we knew, you know, what Putin was up to before the rest of the world did. So it's not surprising what he's doing. Your reference is to Ukraine. Correct. Yes. And then we made another film this last year that also got nominated that did not win. But again, it's along the same way.
It's called Sugarcane. And it's a story that was told by these two brilliant young filmmakers, Gillian Brave, Noiscat, who is First Nation, and Emily Cassie, who is Canadian but lives in New York. And between 1902 and the late 90s, the US government collaborated with the Catholic Church
to try to eradicate indigenous people by putting them in these residential schools, which were brutal. And these two young people wanted to tell that story. That was an amazing film. So the idea of the stuff we do is to tell those stories of truth to power. And then every once in while we do a film that's really interesting and fun. We started a film last summer of Jimmy Chin.
Michael Eisenberg (49:49.102)
who's one of the great directors of all time. He did Free Solo, which won the Academy Award in 2019. He also did Meiru, which is probably my favorite documentary I've ever seen. And he is filming a great alpine skier named Jim Morrison, who's skiing down the north face of Everest. And they just left last week for Everest. Wow. I don't know how that one's gonna turn out. So if you invite me back on your podcast next year, we can talk about it.
What's the film you have to do?
I don't know it yet because it's going to come. I don't know. There must be something burning in you. Is it like venture capital? Just all the ideas come to you? Well, the ideas come because the stories come or the problems come and we were right brain thinkers. So it doesn't come, you know, Thomas, you know, Edison had this great line, which is that the problem with opportunity
is it comes wearing overalls and looks like work. You know, and that was 100 years ago. So these things don't come as documentary films. They come as, do you know about that? And then you talk about it. No, I didn't know, did you know this, this and this? So it's more you hear an idea or a problem or an illegitimacy or an injustice.
Wow!
Michael Eisenberg (51:22.646)
and you turn it into a story that you think people want to know. So yes, it's a little bit more, for me and Nina, it's a little more reactionary. Like we don't say, I really want to do this as a film. Excuse me, more often than not, people will come to us with ideas and say, is this a good idea? And then what we do, we have a cool plan that Nina came up with, which is we've got to always be careful
that the films that we make have to be accurate. The last thing in the world you want to do is tell a story that's not accurate. the figure out the veracity of a film is somewhat creative. Nina came up with this idea. know, somebody tells us a story, we bring it to the Wall Street Journal, the New York Times, the Guardian, Washington Post, and we ask them to look into the story and do they think this is a printable story?
way that we.
Michael Eisenberg (52:22.286)
And these news organizations are very good about doing their research. And in return for us giving them exclusivity on the story, they'll figure out the veracity of the story. And that does two things for us. Number one, it helps us articulate the arc of the story. And number two, softens the beach of the story. So Icarus was out in the New York Times, the story for six months before the film came out. think it had 18 covers.
stories about it because you know a doping scandal in the sports which mattered so by the time that film came up people know the story you know and it was the same with Navalny and the same with sugarcane by the time sugarcane came out we had already told the story so part of this is these stories have to be
my gosh.
David Fialkow (53:09.462)
Interesting.
Be interested. What makes an interesting story? Can you kind of? You didn't know it. Simply you didn't know it. There's not a heroic arc to it or a tragic arc or if we're telling a story already knew, you're not you're not inspired to watch it. Our hope is like, you know, unless it's sensational like Jimmy Chan and Jimmy Morrison skiing down Everest. Yeah. Which case it's like that's the just the the the the eye.
candy that you always want, I mean if you love skiing, they do. But most of these stories are, I had no idea. I I showed this film, Sugar Cane, I had no idea as an American that for the last 100 years we were doing this. 100 years! 20 years ago. And I had no idea. So if you can tell a story that people did not know in a very beautiful way,
It ended in the 90s, only-
Michael Eisenberg (54:08.962)
with veracity and truth, I want you to leave the theater and go, that sucks, what can I do about it? Do you react that way as an investor? A founder comes in and says, I didn't know that, I gotta invest in this. I would say this, if you and I don't leave that meeting prepared to write a term sheet to this person, we're not good investors. There's no diligence necessary to make a decision on an early stage business, other than a background check on something.
There's no tam that matters, it doesn't exist. Every company on that wall did not have a tam. When Ron Gora came up with the idea of empathy, there was no tam. Yeah, nobody wanted to touch death. Nobody wanted to touch death. There was actually a history of doing things against death. But what we try to do is we try to tell a story in a way that makes it interesting that you want to watch. Now here's a good example of how you can turn bad to good.
2015
14 years ago, my daughter was graduating high school and we had met Paul Farmer, who was the great doctor that started Partners in Health. And he said to me and Nina, instead of taking your father daughter trip to where you were gonna go, why don't you take your daughter to Rwanda? And let me show you what we're doing to cure
know, malaria and other infectious diseases. So I went with my mentor, Joe O'Donnell, my lifetime mentor and his two daughters, and we went and we spent a week in Rwanda with Dr. Paul Farmer. Very human being. He the Nobel Prize, even posthumously, because he's dead. And we came home and it transformed our lives.
David Fialkow (55:53.942)
A guy- A guy that should legit-
Michael Eisenberg (56:06.84)
seeing what this one man was doing to inspire an entire country to solve problems. And as luck would have it, somebody approached us and said, do you want to make this film about Paul Farmer? Which we did, Nina produced it. And it was a great film, but it had a very limited target audience. A film like Anichris or Navalny, those are...
Such broad big subject that a lot of people want to watch it. But watching this film about a doctor in Rwanda and Haiti was limited. So Nina came up with this really brilliant idea that instead of selling the film, which we couldn't because nobody would buy it, we travel around the country and I would call friends and say, hey Michael, it's David. Do you mind if I come over Friday night and invite 10 of your friends into the screening room? I'll bring a case of really good wine and let me show this film that will inspire people. And you go, sure.
And we did about 20 screenings. And at the end of the film, people would say, wow, it was amazing. What can I do to help? I went, you can donate to Partners in Health, Paul Farmer's charity. And we raised $12 million. So our million dollar investment in a film, this is good IRR even for you and I's VCs. Our million produced 12 million of philanthropic donations and literally hundreds of people seeing this.
And then as luck would have it, through a guy at Intermountain Health, we sold the film and got another million dollars back. So we got 13 million dollars back in charity. So there's a situation where we literally made lemonade out of lemonade. We took lemons and made lemonade. So we had a film that was great, limited audience, didn't know what to do with it.
turn it into a philanthropic initiative, great storytelling, great film, and it produced a wider articulation of the problem that we're in. I think one of the things I always admire about you is that your values lead you, and values do lead to economic value. I want you to talk about Dana Farber for a second, and then I'm gonna have one last round of questions on a different topic. But talk about your bicycle, non-race race, and Dana Farber.
Michael Eisenberg (58:32.746)
It's about the same thing that we're talking about. Great leadership in the late eighties, the United States boycott of the Olympics. So we're in Russia because of Russia. Correct. Thank you. And, I just gave away my age and that's all. And me and a couple of buddies decided that we would, run the goodwill game. We would go to the goodwill games, which were the kind of the pseudo Olympics for the year. no Olympics.
Yeah.
Michael Eisenberg (59:02.158)
and run the marathon for the United States. Not because we were capable or competent, but the US did not have anybody on the team and they were willing to send us as kind of just fill in the blanks, right? A little bit like the Jamaica bobsled team. And while I was there, I was in law school, I decided to like, listen, if I'm gonna run 26 miles, I wasn't last, but I was like second to last. I think there somebody who broke their leg.
Okay, but I said why don't I run and get $2,000 a mile, $52,000 for Anatoly Sharansky, who is a Russian refuse nick, and get the money to see if I can get him to the United States. When I got home I got $52,000. Just in parentheses, Anatoly Sharansky then is Natan Sharansky now, later an Israeli member of Knesset. Right. Lives around the corner from me. No relation.
Same guy? same guy? Yeah!
Anatoly Sharansky is now Natan Sharansky. He got out, came to Israel, he lives around the corner from me, still walks around with his Israeli army cap. And he's a hero. He was in Russia at the time. Right, was a And we got money to get him out. I said, hey, I've come up with this new idea, which is doing a fundraising event based upon an endurance event. People said, no, no, no, you didn't come up with that idea. There's a guy named Billy Star that's been doing this for five years.
No!
David Fialkow (01:00:12.462)
So when I came back.
Michael Eisenberg (01:00:27.244)
And Billy stars mother had died of cancer and Billy decided to do a bike ride to raise money for the day and a fire burn. He and I met. And at the time Joel and I had just started national leisure, our travel business. You went to everybody that worked for us and said, have two options, either ride or cut fruit. So we got literally dozens of people to either ride or cut fruit. And what we were seeing at that moment was magic right in front. Billy star.
with the help of some of his friends, would take that event from the first year that we got involved, we raised like 50 million. To this year, we raised 80 million. And net, we've raised 1.1 billion for cancer research. One guy had this as a vision, inspired literally tens of thousands of people to ride and hundreds of thousands of people to write checks. And all that money goes,
$2,000
Michael Eisenberg (01:01:26.926)
net to the Dana Farber and Dana Farber told us last year in an ad that 30 % or maybe higher of all the oncology drugs that have been approved by the FDA in the last 15 years, have come from the Dana Farber and a lot of them funded by Billy stars, Pam mass challenge. Let's just summarize the history here. got Joel and a mountain, Ken, who have
really been the ones that included me to build General Callison to a great firm. Billy Starr, who built the PAMAS challenge and let me be his wingman. And Nina keeps me around to help her in films, winning her Academy Awards. The luckiest guy in the world that I get included on these great teams, not being the most competent person. That to me is success. And your English is good.
I am
David Fialkow (01:02:20.684)
you
Last question. Why are you in Israel now? I am here because I deeply believe in the mission of Israel. And this is a time where friends need to visit friends. Number one, that's the emotional reason. Number two, I do think this has become and will continue to become the epicenter of one of the great places for tech companies to be built.
for some empirical reason. Young people here in Israel are trained to be resilient, be creative, be efficient with capital, both human capital and money capital, and to be solutions driven. And right now is a time that that's what we need. And I feel like this renaissance and what will carry Israel forward, regardless of its challenges politically,
will be the power and the strength and the resilience of these young people. And I'm really excited to see and be part of that. Will you be spending more time here in the future? Same amount or less? If you'll have me much more time. I picked out an office upstairs. And I'm really happy. You know, Michael, you and I have talked about this. This is a place where magic happened. And the people are magical. The fact that, you know, our forefathers here turned a piece of desert into an oasis.
Yeah
Michael Eisenberg (01:03:49.23)
regardless of the current challenges, we will get through this hopefully as an entire society of people, not only in Israel, but all of its neighbors. And the prosperity here and the capability here because of the human capital and the human creativity is extraordinary. And I want to be part of that. I want to see it and be part of it. You're on. You can have the office right next to me. In fact, you can come into my office. Thank you.
David, thank you for doing this. I really appreciate it. You're an incredible person, so thank you. Thank you, God bless you. If you enjoyed the podcast with David, please rate us five stars on Spotify, Apple Podcasts, subscribe to the YouTube channel. That way David's mom can be proud of seeing his face on the screen. Thanks for joining.
Mati Gill (00:00.046)
200 million people, every day, take a drug that is made by a company that was born out of Israel.
We have an opportunity in Israel to be one of the most important hubs for the future of biotech. There aren't that many places that know how to do this.
Michael Eisenberg (00:24.526)
Tell everyone what AION Labs is.
Mati Gill:
We're a venture studio, building startups at the intersection of technology and biology.
In our industry, when you do well, you're by definition doing good. And that's what's unique about healthcare.
Michael Eisenberg:
Which is gonna be the first mega hit?
Mati Gill:
That's, you know, which one of your children is the best.
Michael Eisenberg:
I didn't ask that question.
You were wounded by a sniper.
Mati Gill:
So first of all, if he was a sniper, I wouldn't be here.
I will always make sure that my career is in service of Israel and the Jewish people.
Michael Eisenberg (00:44.172)
Welcome back to the Invested Podcast. I am thrilled to have my longtime friend, Mati Gill. Welcome, Mati.
Thank you.
You led global operations at Teva, the largest generic drug maker in the world. Now you run AION Labs, backed by giants like Pfizer, Merck, AstraZeneca, companies you don't usually see at the same table. You were trained as a lawyer, not a scientist. So tell us about your journey, because it's a fascinating journey, and start early, even if you could start before you were working for the Minister of Public Security.
Mati Gill (01:13.48)
Sure. So I was born in Columbus, Ohio, a typical Jewish affluent suburb, Midwest. So the real America. Like I try to tell people in Israel, they’re like, “Where are you from?” I say, “What's between New York and California?” in that essence. And one day my parents came to us at the age of 11. So we're spending the summer in Israel, spent the summer here right after the first Gulf War. And we had a great summer. Loved it, fell in love here. Went to summer camps. Lived in Katamon, actually, that summer. And then the following summer, my parents said to us, “Okay, we're moving to Israel for the year.”
And I was kicking and screaming. Had no interest to come here, loved my life in Columbus, was very connected to the family, all the families back there. Both my parents are American, didn't have any Israeli background in us. And they kind of bought us off by saying, “Don't worry, we'll get cable, you'll be able to watch your favorite shows.”
At the time there were only two channels, unless you had cable. “And we'll make sure you can get the box scores from baseball, so that you can continue to follow everything.”
Michael Eisenberg:
Cleveland Indians fan?
Mati Gill (02:36.502)
Cleveland Indians, Guardians, whatever they're being called now.
Michael Eisenberg:
They’re still the Cleveland Indians for me.
Mati Gill (02:36.502)
For me they're the tribe. The other tribe. So in that sense, we came. It was an exploratory year. And I have to say that, from my first month here, as a seventh grader, in my Bar Mitzvah year, I took a decision with myself, I'm not going back. And I just felt a deep sense of meaning behind life here. And in a way–and I love the United States of America, I'm a proud American to this day with a passport. My kids have one. And I don't think that you necessarily have to be binary in loving America, but also loving Israel. And here's a sense of belonging.
And for me, there was a sense of purpose, and belonging, and meaning behind life here. Because when I walked out of my house in Baka, I didn't see Remington and Brentwood. I saw Don, Naftali and Reuven. That's the corner I was on.
Michael Eisenberg:
Three of the 12 tribes.
Mati Gill (03:32.75)
Three of the 12 tribes. So there was meaning behind that. And my parents who grew up very liberal were educated secularly as liberal Jews, told me, “Everyone is created equal. But if you ever come home with a non-Jewish girl, she's not entering the door. If you're dating her. If she's a friend, that's fine.” And you all of sudden join a public school, here in Israel, and that's not an issue.
Now, again, it's a question of belonging, and it's a question of just feeling, for me, that this was our home. And so at the end of that year, my dad put together a strategy for his organization, the Joint Distribution Committee, and how to build up their fundraising strategy, and understanding where the Jewish community in the US that's headed 30 years from now, they told him, “Okay, put your money where your mouth is. Why don't you move to Israel or New York and build it?” And he wanted to, and he wanted to do it only in Israel, not in New York. And I wanted to. And that's ultimately, even though we were two out of five, I told my parents, I said, “If you guys move back, I'll come visit.”
And so we stayed here, and it's been a continuous decision to stay, and a continuous decision to live here, that I'm very proud of. But we grew up in Jerusalem, did six years in the military. And then after I got out, went straight to law school. Got drafted in my second year to be the Chief of Staff of then, at the time Avi Dichter, who was a public security minister. Now he's a minister of agriculture, but this was 20 years ago, right after he got out of the Israeli security agency. I spent the whole term with him, finished up my law school and then came back to him. And I said, “Just like you told me, you wouldn't take me to my role if I stopped my law school and education–now I'm going to get licensed.” And that's what led me to healthcare and industry because I decided I didn't want to be a practicing lawyer in a law firm. I wanted to go gain executive experience that I felt was missing in my role in government, and said, “Let's go to the best company Israel has to offer, the biggest one, where I can get as much experience doing my stage, doing my internship that's required in order to take the bar. And so I went to Teva Pharmaceuticals and spent over 10 years there.
Michael Eisenberg (05:38.318)
All right, listen, we have to tell people about Teva Pharmaceuticals, because it's important and it's shriveled up a bit, it's fair to say–
Mati Gill:
Right-sized maybe. Right.
Michael Eisenberg:
To a degree. Because what you described is, I went to the biggest company, and certainly a very meaningful company. Let's tell everyone about Teva Pharmaceuticals. It's important for this story right now.
Mati Gill:
So Teva Pharmaceuticals is, to this day, Israel's largest company, by far. There's no comparison. We look at market cap as one indicator. So yes, their market cap is probably one third of where they were ten years ago. But their sales are almost identical, and they sell over 15 billion dollars a year, and they actually–more drugs are taken by any person in the world by Teva than any other company in the world. They provide what, at the time, when I left Teva a few years ago, was 200 million people every day take a drug that is made by a company that was born out of Israel. So it really is a miracle as a company.
Michael Eisenberg (06:43.071)
Just to state it, Teva is the largest manufacturer of generic drugs.
Mati Gill:
Correct. They’re a company that started 120 years ago, typical entrepreneurial tale, which is fascinating. It was three people, three cousins, Salomon Levin and Elstein. So some are really the founders of the State of Israel, founding families of the State of Israel and the yeshuv, and the new Jewish community and Zionist community here. And they found an unmet need, like any entrepreneur does, because when the population was growing, people needed medicines.
So they started to create one, and then they had a pharmacy outside the gates of Jerusalem, and then they built it into a chain. And for 70, 80 years, it was a local company that provided medicines to Israelis. When it grew, it grew from three main things. Number one is Israeli science. Eli Hurvitz was really the founder of the modern Teva. He took a risk on a miracle drug., that came out of the Weizmann Institute, right across the street from where AION Labs is today. And he said, “This is a new mechanism that can treat Multiple Sclerosis.” And as a kid in Columbus, Ohio, we used to raise money in kindergarten to treat Multiple Sclerosis. We would march and we would–because it was a fatal disease. Now it's treatable, because of COPAXONE and other types of medicines. But Israel had never actually had a drug come out of a lab that was approved by the FDA and sold. And let alone by Teva, that up until that day was not an innovative medicine developer. So he took that risk, and he built it into what ultimately became a $4 billion annual-sales company, medicine, and that's above 90% profit. So the risk ended up being a huge reward.
Secondly, is, as you mentioned before, they are the leader in generic medicines. And the world's pioneer of generic medicines. Now, where did that come from also? It's actually one of the less-known stories, but it's a good one. It came from the Arab boycott. Because when other companies wouldn't sell their medicines, just like when we made aliyah in ‘92, every Israeli drove a Subaru and everyone drank Coke. You couldn't get Mountain Dew, my favorite drink growing up.
Michael Eisenberg:
Nothing from Pepsi.
Mati Gill:
You couldn’t get Pepsi, because they wouldn't sell their products. So, you know–what year did you make aliya?
Michael Eisenberg:
Around ‘93, but I remember visiting and not finding…
Mati Gill:
Around the same time. You couldn't get Dr. Pepper. You couldn't get Mountain Dew. Those were my favorites as a kid.
Michael Eisenberg (09:28.802)
Things you gave up living in Columbus, Ohio.
Mati Gill:
But I got cable. And the box scores. I probably did good for my health ultimately. Teva at the time said, “Okay, we need to make these medicines available to the public.” So they reverse engineered–where they couldn't get a license in a deal–they reverse engineered and then sued for compulsory license to be able to make medicines that other companies create. They did that for Israel, small population still, not a market. But when the US said, “We have to lower drug prices by incentivizing generics and creating real incentives,” - great policy, it was bipartisan. Remember at the time, they used to do bipartisan policy, right? For the good of the public, this was 1984. And they created a policy to incentivize generics and Eli Hurvitz rightly said in parallel to COPAXONE, “We can actually do this. We can be the pioneers, because we know how to make other companies’ medicines. So this is our opportunity to actually break into the United States market. That's the way for us to grow. And we can do this. We can pioneer this. We could take risks. We could take the litigation risk. We could take the IP risk.” And so they became the pioneers in generics, and they brought COPAXONE to the market. And then the third growth engine was mergers and acquisitions. Some were better, some were almost fatal to a degree.
Michael Eisenberg:
Took on a bunch leverage also to go do them and that obviously hurts–
Mati Gill:
So some yes, some no. And ultimately what converged the company, as you mentioned, what helped to shrink the company back to a right size was COPAXONE coming off patent, without the same type of growth drivers to replace it. It was others learning to do what Teva was the pioneer from, and for a fraction of the price, and not staying ahead of the game in that sense. And then third was–
Michael Eisenberg (11:24.078)
Especially, if I remember correctly, Indian manufacturers–
Mati Gill:
India, Chinese manufacturers, that's where a lot of the generic manufacturing went, including by a lot of ex-Teva executives, even Israeli ones that are doing great work building up companies. Some of them even invest in Israel because they understand what's here.
And then third is acquisitions, including one that was pretty bad, which was Activist Generics, where they doubled down for a price that just wasn't justifiable after some time. And thankfully, we had a CEO come in from outside of Israel, brought in real expertise. He lived in Jaffa and his headquarters were here in Tel Aviv at the time. He's since finished his position. He saved the company, and I was able to actually learn a lot from him, because I had a unique position to help him in that journey. A small part of it, but had a unique position to be able to do that. Got some good advice actually. At the time they were offering packages to anyone that wanted to voluntarily leave.
But anyone could have left, and I went to get some advice about what I should do with that. And someone that actually wanted to hire me for a job if I left, told me, “You know what? In your position, with what the company's going to go through, you should stay. Because you're going to learn from helping this crisis being navigated more than anything you could do outside. And that'll help you for the rest of your career.”
Michael Eisenberg:
Who was that guy?
Mati Gill:
It was a woman. Zavit, who used to be the chairwoman of at the time at Apex.
Michael Eisenberg (12:51.426)
Very smart woman. We should have her on the podcast actually.
Mati Gill:
You should. Great stories. And she had been... This was a few years after the social protests here, when she was the chairwoman of Tnuva, I believe.
Michael Eisenberg (13:02.028)
Tnuva’s the largest dairy in Israel, currently owned by the Chinese.
Mati Gill:
And thankfully I took her advice, and was able to help to play a minor role. But ultimately I'm a big believer that where there's big crisis, there's also huge opportunity. So we were able to convince that same CEO, Schultz, who at the time wasn't a believer in the Startup Nation in Israel for pharma. He was a big believer in the Startup Nation. To quote him actually, he said, “Mati, I'm a big believer in the Startup Nation, but not for pharma.
And ultimately we were able to convince him that here as a company, we could create a competitive business advantage if we doubled down on investing in Israeli science and on Israeli innovation, but in a very focused manner. And so we built up a whole program that ultimately led to AION Labs being born.
Michael Eisenberg:
Okay, and the position you finished out at Teva was?
Mati Gill:
I was Head of Public Policy and Corporate Relations.
Michael Eisenberg (13:59.138)
Yeah. Okay, and then you leave to start AION Labs. Tell everyone what AION Labs is.
Mati Gill (14:12.718)
AION Labs is a venture studio.
Michael Eisenberg:
Those who don't realize, by the way, because you're listening, it's not spelled I-O-N, but A-I-O-N, and that's critical to the story.
Mati Gill:
It is critical, although we took AION from the meaning of life force, from ancient Greek. And it's also a play on AI, obviously, but it's also a play on ions in our body that supercharge us and give us energy. And we felt that that is what is needed to succeed in our incredibly tough mission. We're a venture studio, building startups at the intersection of technology and biology, which is where I have a fundamental belief that Israel will be a competitive player in the future of the biotech ecosystem globally. And it's all about where we can be competitive globally.
Michael Eisenberg:
And like you said, this is going against the grain, Because I think most people don't believe this. That's what I think is interesting about this conversation. So who are your partners in AION?
Mati Gill:
So the partners that established AION, really the founding partners and the founders of AION, are Pfizer and AstraZeneca. Some of you might have heard of Pfizer. AstraZeneca is even a larger company. Sometimes it changes up, again, depending on the market that you choose. But for both of them, Pfizer and AstraZeneca, both top 10 pharma companies in any date that you choose–this was their first R&D investment in Israel.
Michael Eisenberg:
Why did they want to do this?
Mati Gill (15:28.206)
Because they understood that AI and computational technologies will fundamentally change the way that we discover and develop new drugs.
Michael Eisenberg:
But they can go to London, too.
Mati Gill:
They can go to London. They can go to Boston. Where else can they go, Michael?
Michael Eisenberg:
Those, and Silicon Valley. Four places.
Mati Gill (16:01.102)
Exactly. So they can go to Silicon Valley, Silicon Valley including South California, which is also pretty good there, in San Diego, and Caltech, Boston. And outside of there? We have an opportunity in Israel to be one of the most important hubs for the future of biotech. Because of that convergence of AI and technology with biotech, because there aren't that many places that know how to do this. There is London, Cambridge, Oxford. There is Paris, maybe Germany to a degree, Switzerland, just because of their patent systems and the legacy there, which is one of our challenges that we have to overcome here in Israel. That we're a young country in a very legacy-driven industry. But that's about it. Then you have the Chinese, Asians. We'll see, they're trying to catch up.
Michael Eisenberg:
Did it have anything to do with the fact that Pfizer did so much work on the COVID vaccine?
Mati Gill:
I believe not.
Michael Eisenberg:
You believe not.
Mati Gill:
This started before COVID hit. I believe that COVID probably reinforced their understanding of how business could be done in Israel. I feel very proud that Pfizer chose Israel, as an Israeli, nothing to do with AION. As an Israeli, I feel very proud that we were able to take part in helping to bring this medicine to proof of concept, really in a phase four clinical trial.
That's really what the population was here in Israel, and I'm happy that we had the first access there. It probably saved a lot of lives. But it was completely different stakeholders that took this decision.
Michael Eisenberg:
Tell us how AION works.
Mati Gill (17:12.503)
So AION builds startups by connecting three core principles. One is that each startup addresses a very validated unmet need. Number two is that we have a great team with a technology or a technological concept that can build a startup and win in the space. And third is that we are the right place for them to be built. Because we're not a VC. We're built as an R&D center that enables our partners to invest in each one of the startups that we build and grow.
So what do I mean by ‘we're the right place?’ It means that within the first two years of the company being established, they will be able to do their killer experiments, their POCs, at an early stage with the mentoring to reach that place with the pharma partners that we bring in. So at least one of them has to commit to that, if not all four.
Michael Eisenberg:
At least one of the pharma partners?
Mati Gill:
At least one of the four.
Michael Eisenberg:
Who are the other two pharma partners?
Mati Gill (18:10.766)
So we have Merck, that has a long legacy of investing in Israel, 50 years or so they've been here. And Teva Pharmaceuticals, obviously, that I came out of, and I was given the blessing to go establish this. We have also Amazon Web Services as one of our core partners. I believe when you came to visit us, you mentioned how smart that was that they were in, because of the computational needs, of which is absolutely true. And then we have two venture capitals that helped to establish AION, and then the second one joined later–Israel Biotech Fund, bringing in a lot of biotech experience and expertise, and Amiti Ventures that came in with their deep tech and technological expertise.
Michael Eisenberg:
Are all of the entrepreneurs Israeli?
Mati Gill:
No. Actually, it's interesting–out of the eight startups that are active at AION right now, we have five CEOs that are not living in Israel. Two are Israelis that have moved abroad to help scale the company. The other three are European.
Michael Eisenberg:
And they came here, though.
Mati Gill:
They were supposed to come here. October 7th kind of changed things.
Michael Eisenberg:
Do you have people from abroad who come here?
Mati Gill:
Yes, of course. And they love it. They've doubled down. They love Israel.
Michael Eisenberg (19:13.35)
Why do they have to do this with you? Why can't they do this in Germany? Why do they need this Israeli venture?
Mati Gill:
Because I believe that they were developing technologies, or had their idea to develop technologies. Then we came and said, “Here's an unmet need, here's your opportunity. You can work with domain expertise,” and that's really what was missing for Israel, but it's also missing for those that came from Germany, or for the Netherlands to build a company with us. It's saying, “Okay, we have this entrepreneurial drive, we're brilliant scientists, technologists, but we don't necessarily have the domain expertise of the customer insight.” And ultimately in biotech your customers are the big pharma companies.
If you're able to bring in four, and our main interaction there is with the R&D groups–so it's actually with the customer directly. So imagine, Michael, that you're building a startup that's going to fundamentally change the way that proteins are designed, that can ultimately become therapeutics. And then you have on your speed dial and regular calls with a Head of Protein engineering at AstraZeneca, Pfizer, etc, etc. And they all work together to help you, and then do an experiment to validate your technology, and all with under two years.
Michael Eisenberg:
Give me an example of how they've accelerated.
Mati Gill (20:22.732)
So a company called DenovAI, I believe you've met Kashif Sadiq, has a fascinating story himself.
Michael Eisenberg:
Why don't you tell it briefly?
Mati Gill (20:49.39)
Sure. So he was born to parents that came from India through Pakistan, from the Ahmadiyya Muslim crowd. It's basically, if I paraphrase, it's the Mormons of Islam. There's a small community up in Haifa as well. And they fled India in the partition in ‘47.
They spent 10 years in Pakistan before moving to London. He grew up there. He was born and grew up there. And he's a senior scientist. He's an astrophysicist. And ultimately, the way he tells his story is, it was a few months that he did in between degrees, where he went to China to practice Tai Chi, or Kung Fu, it was, not Tai Chi. And there he realized that he needed to take his astrophysicist down to the ground. And so he started to study biology and the connection between the two–ultimately what became structural biology as a domain, understanding the way that biology can work by looking at the crystallized structure in its entirety, and to be able to create new insights.
And he worked at an institute called EMBL, the European Molecular Biology Labs, which is basically the MIT of Europe, in that essence, especially for bioinformatics and for our field. And we came with an unmet need. We said, “We are looking, our pharma partners need the capability to create new antibodies from scratch that do not exist in nature, to treat diseases that currently are not being able to be treated by antibodies, so that we can ultimately cure cancer, not just in mice, but actually in people,or neurodegenerative diseases that don't have effective treatments. And we want someone that can actually do this.”
And he was working on a technology with his co-inventors at EMBL that could do exactly that.
Taking AlphaFold, that came out, and really was able to revolutionize the way we understood the folding of proteins. He said, “Let's do the inverse.” And he created a technology that could identify an antibody, or a drug, or a protein that could tackle any target in human disease biology, if you bring it to him, and to be able to fold. Now it was still in academic stages, not ready to be a startup. But he came, he wowed us. He committed to building an Israeli startup, even though he had never been to Israel before this whole experience. And, you know, even to your point after October 7th, when he got on a call with all of our partners that were all incredibly supportive–and to this day are–he said, “October 7th is going to make me double down on building the startup in Israel. Because now I'm even that much more adamant that my team deserves that we succeed.”
So to answer your question, how has our partnership helped to accelerate? He's already doing POCs with results, both independently, as any startup should, but with Pfizer, with AstraZeneca, with Teva, soon to be with Merck. He hasn't even been two years. That helped him to raise $3 million in addition to the 1 million we gave him. It's still relatively a small amount, but it's a seed round. And so he was able to build up his team and accelerate the growth, and he still hasn't reached his two year–
Michael Eisenberg:
How many years of acceleration do you think that the venture creation studio gave him? And how much do you think AI gave him?
Mati Gill:
Good question. AI, definitely a lot. I mean, that's really what's able to change the way that, instead of taking years to develop a protein or an antibody, you could talk about months, if not weeks, if not days, then maybe even minutes, ultimately in the future. Our acceleration probably saved him two, three years at least.
Michael Eisenberg:
Two, three years. That’s very meaningful.
Mati Gill:
And a lot of money.
Michael Eisenberg (24:13.742)
Time is money, but yeah.
Mati Gill:
Well, and a lot of money in the development independently, because you're able to actually do a POC with a pharma partner, where they're doing some of the work, you're doing some of the work.
Michael Eisenberg:
What areas in particular around this ecosystem of pharma and biotech do you think AI has the biggest impact on?
So I'll give you an example of another company that we're working on. And it's in the gene editing space. So we all know about the capabilities of CRISPR and gene editing–
Michael Eisenberg:
Smart people like you know, but most normal people like me don’t.
Mati Gill (24:43.758)
So if we're able to actually edit your genes that a lot of disease comes from that, genomics, but we don't have enough data and the understanding of how to be able to treat them. And so that's where CRISPR is able to come in, and where you can actually treat, and cut, and exact, and edit. But those are not accessible medicines to the average person.
Michael Eisenberg:
Maybe that’s a good thing, by the way.
Mati Gill (25:12.942)
Maybe, maybe not. I think if you're able to save lives, it's probably not as good of a thing. And just two months ago, and this again, I can tell you a parallel story from my time in government, but just two years ago, two months ago in Philadelphia, there was a baby born with a genetic disorder that was fatal. Wouldn't have lasted probably weeks, named baby KJ. It was profiled in the New York Times. You might've seen it, if you still read them from time to time. But it was done much broader than that.
And this baby had the luck of being born even though born with a fatal disease, but being born in Philadelphia, in the right hospital with the right positions that had developed a technology in a way to be able to fastly create this personalized medicine to be able to edit the baby's gene, and solve their disorder and save their life. Now that's all hands on deck. That means that you had to have the regulators waiting, you had to have the right physicians there, the new access of technology, and to be able to create the right personalized medicine, for that specific baby, to edit that specific baby's gene. So that's not accessible to anyone else, even in the United States, let alone in the rest of the world. So if AI can actually speed up that process and make that and be able to find and guide the way into how to edit those genes in a much more rapid manner, scalable manner–that's something that can make this more accessible, and also create a lot of money, which is a good thing. In our industry, when you do well, you're by definition doing good. And that's what's unique about healthcare.
Michael Eisenberg:
Speaking of that–so you have nine companies?
Mati Gill (26:45.602)
We have nine companies we created. One we shut down after a year, with a lot of lessons learned. Now we have eight.
Michael Eisenberg:
Why did you have to shut it down?
Mati Gill (27:12.492)
Because–we actually learned a lot of great things from that. It was a company built by two great AI entrepreneurs, ex-Mobileye entrepreneurs, that have probably created some of the great technologies that are in a lot of the cars. They didn't hire a biologist from day one. It was my fault that I didn't force them to. And they really didn't have the deep understanding of biology.
And I was just talking with Ram, who's the CEO of Cassidy Bio, that's creating this guide RNA disease to be able to make those genetic disorders scalable.
Michael Eisenberg:
Great guy, by the way.
Mati Gill (27:39.756)
And he was just telling me–yeah, Ram Kshuk, and he was just telling me his biggest understanding from the first year of working was that they actually needed the deep biology as much as possible. It's not just an AI startup, and it's really the connection of the two. Now they had biologists from day one. They had a professor who was an expert in the area, also hired a Head of Biology, who has deep experience in biotech startups in Israel. But they've invested in the biology side because they're great at building their large language model to be able to solve this, that they have the best in the world to do that. But they needed the biological expertise.
And with Omic AI, the first startup that we built, they really didn't understand the language of their customer, and they couldn't have meaningful conversations to develop a product that would actually do good.
Michael Eisenberg:
I think there's an important comment now. We're onto something super important, which is, I think there is a school that thinks that AI is gonna solve all these problems. It sounds like, what you're saying is, domain expertise, and particularly the physical sciences, is absolutely needed alongside whatever the AI component is for any of these companies. Is that a fair statement of what you're saying?
Mati Gill:
Absolutely, I believe that would be true in any industry. Wouldn't you say so?
Michael Eisenberg:
No.
Mati Gill:
Interesting.
Michael Eisenberg:
I'm not sure you need a lawyer to guide AI to do the work of a first year legal associate right now.
Mati Gill (28:47.426)
Yeah, but if you end up doing anything somewhat complicated, you want someone with deep legal understanding to be able to help guide those questions. To do a template, absolutely not.
Michael Eisenberg:
So is it only to guide the AI, the biologist, or is there kind of ongoing interaction, or what?
Mati Gill:
Ongoing interaction, how you work with the biology–because there's a saying that I like to give AI experts that come in and ask, “Why do I need this biologist here from day one?”
Michael Eisenberg:
So I’m not the only one who say there are–
Mati Gill (29:31.822)
No, it's a very common question. You know, if I take your phone and pick it up, and then drop it, using engineering technologies, I know it's gonna hit the table, right? But if I take up your phone using biological definitions, it sometimes might hit the wall, might hit the ceiling, and ultimately might not even land on the table, even if I drop it right above it. Because biology works differently. And if you don't have the fundamental understanding that you work on planning up an experiment, working in biology, and the way–it's a mystery, the way our bodies work. It's a miracle, and it's a mystery and it changes. .
Michael Eisenberg:
And it also changes, yeah.
Mati Gill (29:59.342)
Sometimes you plan the best experiment possible, you execute on it flawlessly and it still doesn't come out the way you planned it. That doesn't happen in engineering. That happens in biology. And you have to have a deep understanding of that, and you have to have a deep humility from coming to that. And I think the best biotech entrepreneurs that come with an AI background have that humility, and have that understanding, and then are able to actually be the best at combining both worlds. We want that domain expertise that Israel has to offer in tech and AI. But that has to be paired–and this was what was missing in Israel before we were able to bring in Pfizer, and AstraZeneca and other initiatives around this–was the deep domain expertise of the customers from global pharma R&D.
Michael Eisenberg:
Are there enough good biologists here?
Mati Gill:
Yes, we have great biologists here.
Michael Eisenberg:
You know a lot about biology for a lawyer.
Mati Gill (31:17.314)
So I know enough about biology. I'm a lawyer with an MBA, so about as typical as you can get. Having a good memory about people is one of the things that helped me in politics, and hopefully has helped me since then, to a degree in really understanding and remembering people well. Biology, I don't try to be an expert. I've hired great people and I have a great team, just like you do here, that helps to complement what I am not an expert in, and what I tell our CTO and our Head of Ideation and Scouting, who are really the top two scientists we have in our team, I tell them, “You deal with the science, and let me make your life better by helping to deal with everything else around that.”
Michael Eisenberg:
One of the things I found when we invested in Lemonade, which is an online insurance company, was the fact that Daniel and Shai actually had no experience in insurance, so they didn't know what was not possible. And that created a unique... Can you say something like that about biology and pharma?
Mati Gill:
Yeah, I think the same phenomenon exists in pharma, which is that, if you come into it with a great technological expertise and you say, “I don't care if anyone tells me it's not possible. Like, I will be able to create a large language model that will be able to help scale up the way we treat genetic disorders.” And that's a fundamental area that's been broken. That's a field, that is a market failure.
Michael Eisenberg:
But then what happens when they go to talk to your biologists in AstraZeneca and Pfizer…?
Mati Gill:
So they have to wow them. They have to blow them away. And they also, the biologists from AstraZeneca, Pfizer, etc. have to be open to being blown away.
Michael Eisenberg (32:23.866)
How do you find that interaction? I just came off of a call with some very well-known professors in Israel around a chemicals company that we're developing here. And they all told them it's not possible, but I'm telling you, it works. Like I've seen it with my own eyes, right? And so…
Mati Gill:
It's all about the people, and it's all about proof. So in the initial stages, just like, you know, when you build a startup, you can sell them on the possible if you reach the right people and you're able to raise enough money. If you're good at it, charismatic enough and have a good enough idea, and identified a great space and have the right track record. Okay. After a certain period of time, and this is especially true in biology, you need to bring data. So if you're able, that's why it's different, what we're doing here is, if you're able to bring data, that I actually can create de novo proteins that can actually treat a disease within two years, that's data, that's different. So it's all about the people ultimately. So you do need to find the right partners, whether they're from academia or from big pharma, that are willing to be open.
Give me an example of where you had the naysayers in the room, but they were open enough, and came in an entrepreneur and they said, “Wow, I didn't think that was possible.”
So again, with DenovAI–so we have four partners, and one of those pharma partners that decided to invest in DenovAI was very skeptical to this day.
Michael Eisenberg (33:45.887)
They invested directly into the company.
Mati Gill (34:01.934)
They invested directly into the company. One of the four pharma partners in our model that invested in the company said, “We need this, but I'm very skeptical it's actually gonna work.” And they started to see results from their independent tests and the technology, and then he started to see results from the POCs with the other pharma partners. And he started to hear their results. And just last week he said, “You know what, I'm going to give you a POC as well.” And for me that's an example.
Michael Eisenberg:
He was the last to give a POC.
Mati Gill:
He invested, but he was the last to give a POC. Yes, that's correct.
Michael Eisenberg (34:18.542)
There's an interesting dynamic, right? Which is, he had a need, he sees the need, the need overcomes the scientific skepticism. And then he has FOMO, because the other partners in AION Labs gave the guy a shot without having to give him money. So they got access to it without giving him money.
Mati Gill:
No, they also gave them money. They all gave them money.
Michael Eisenberg:
Everyone gave them money. Why’d everyone give them money?
Mati Gill:
Everyone gave them money, because they wanted to invest in building the startup. They all wanted to say, all four firm partners came and said they all invested. They're all equal partners in the startup. But they all came and said, “We want this technology.” Now they don't have IP rights in the technology, but they have the first look–not legally, just de facto, into what this technology is going to be able to do.
Michael Eisenberg:
But only one of them is gonna get actually the ultimate access to the IP on this, right? One of them.
Mati Gill:
I don't agree with that.
Michael Eisenberg:
Why is that?
Mati Gill:
So because in our model, the way that we built it–and it's written in black and white in our shareholders agreement–and by design, by the way, as we said, we want our startups to be able to be competitive in the global market without any strings attached. So it doesn't have to be one of the four of them. If Novartis came in with a compelling offer, they could buy them. Or they could buy one of the outputs from there.
Now, what's unique about a startup like DenovAI is they can create unlimited assets. So they can create one asset which will ultimately become a drug that can be bought by Pfizer and part of their therapeutic pipeline. And then another one for AstraZeneca, another one for Merck, and another one for Teva, another one for J&J, and for any other company that wants to buy one. They even have a signed, paid POC with a top pharma company that's not within our partnership. Again, signed just in the recent months.
Michael Eisenberg (35:57.102)
So Pfizer says, “Okay, DenovAI.” That’s a good name, by the way.
Mati Gill:
Yeah, thank you. It's not, I can't take any credit. That's Kashif.
Michael Eisenberg:
“We'd like to buy you.”
Mati Gill:
Then they have to make a compelling offer, and it should be approved by the board.
Michael Eisenberg:
They make a compelling offer. And then these other guys, AstraZeneca, Teva, Merck, etc., Novartis–not Novartis–AstraZeneca, Merck, the people who are at Teva say, “Hey, what about me?” And you get this little competitive dynamic going there. So I guess that's good for Kashif, but…
Mati Gill (36:33.208)
It’s good for everyone.
Michael Eisenberg:
Is it?
Mati Gill:
Yeah, why not?
Michael Eisenberg:
We invested along the way, we created you, but now it's gonna go…
Mati Gill:
It proves it's possible, and it proves that our next startup maybe they can buy, or buy earlier…
Michael Eisenberg:
Maybe I shouldn't be a part of this, after the first one is successful and I don't get a piece.
Mati Gill:
I don't think that's true, because again, these are technologies that are usually going to be able to service the whole industry. So they'll say okay, you know, they won't buy the company necessarily at first. They'll buy an asset, and that's like a mini exit.
Michael Eisenberg (36:59.992)
Which of the first of the non-Teva pharma companies were to commit to you?
Mati Gill:
So we had non-pharma–
Michael Eisenberg:
Teva committed first, right?
Mati Gill:
Correct. And then they all came in together. They were all kind of circling. And actually, this is an opportunity to talk about–we can discuss a lot about what government doesn't do well. But here, actually, the government did something very well. They identified this space as AI and Pharma, as a future growth engine for Israel. And they said, “Let's invest money in trying to attract these multinational companies to come and invest in Israel. So the Israel Innovation Authority, the IIA, actually put together this strategy and they put together a competitive process to bid for how to build an innovation lab, what we ultimately built as a venture studio. And all these pharma companies saw this opportunity, and instead of competing against each other, we said, you know, “Why don't we bring everyone together and build something truly impactful with all of us together, instead of each one doing it on its own.”
Michael Eisenberg:
And how much money did the IIA give you?
Mati Gill:
They give us on average one million shekels per year for our operations and CAPEX. And then for each one of the startups that we build, they give $700,000 as part of the pre-seed. No, it's not a lot of money, but it helped to bring everyone together. And these startups should be able to raise from the capital markets.
Michael Eisenberg (38:21.858)
Of the eight companies, how many have raised follow-on rounds?
Mati Gill:
Three.
Michael Eisenberg
Three. Have they all raised from the pharma companies?
Mati Gill:
No. None from pharma companies. Besides for the original round? Besides the pre-seed round. So we have Cassidy Bio that's raised $8 million. Their original seed was, ultimately we joined it and co-led it with Ahren Capital, based out of London. Excellent people.
Michael Eisenberg (38:52.084)
Ahren is AHREN for those listening.
Mati Gill:
Correct, Ahren Innovation Capital. This was, I believe, their third investment here in Israel, but the first in the biotech space. And they were very excited about this. And then we put together a whole consortium of seed investors here, with 10D and Lul and Bar Ilan, where the license came from. And Promise Bio, that their seed round was led by AWZ, Oz, which is a Canadian-Israeli deep tech investor here. And then we have the DenovAI that we started them out with a million, and have since raised the other three from Amiti that then joined us as a partner.
Michael Eisenberg:
Which is going to be the first mega hit?
Mati Gill:
That's, which one of your children is the best.
Michael Eisenberg (39:33.134)
I didn't ask that question. I just ask which is going to be the first mega hit.
Mati Gill:
So I think Cassidy or DenovAI probably have the biggest chance to be huge hits, both with the assets they develop and potentially to be acquired, but we're open to being surprised.
Michael Eisenberg:
No pressure. I wanna change course for half a second. You've had an interesting career, politics or public service, Teva, a seat next to the CEO in a big crisis, in addition to kind of doing public policy and legal work, and now an entrepreneurial venture. This is, we call it a venture studio, but basically you're the entrepreneur of this. What motivates you?
Mati Gill (40:17.72)
So I think that goes back to, you know, what you like to talk about, core values, which for me, it's Israel, family and Shlichut. Shlichut meaning working with meaning and mission. And my life, I took a very early decision when I decided to sign on for an extra year in the military. I remember this conversation, and it was right before the second Gulf War came, where I realized I might have a unique position to actually help with air missile defense.
That was my role at the time as an officer working with the U.S. army. And I decided I will always make sure that my career is in service of Israel and the Jewish people, and has to have mission and meaning behind it. And I saw, I saw and I see, and continue to see a huge mission behind building up the biotech ecosystem in Israel. And again, where we are successful and where we will have big hits by definition, they will do good for humanity.
Michael Eisenberg:
Well, that's exactly what I wanted to get to. This is like the perfect segue, which is, so you mentioned CRISPR before, right? We can imagine, and there's been some of this in China already, when you start to do gene editing, you can get to all sorts of wonky, nefarious places. One can imagine the better we get at using AI to speed up the process of bioengineering, gene editing, bioweapons, and a million other things, we could get to a negative place.
How do you bring your value set and what you say is doing good for humanity, number one to AION, to the venture studio itself? And number two, if you were the policy commissioner, because you've done a lot of work in that, trying to think through in this faster-evolving area of biology, and we had to put ethical and moral guardrails around it. What would you do?
Mati Gill (42:12.866)
So first of all, if I was in the policy world, and as I've told our colleagues from the Ministry of Health or from the FDA when they've come to visit, is you need to have a deep understanding and proximity to what these technologies can do. And usually the people working in regulation, in these spaces, don't come from the best AI experts out there. So to give credit to the Ministry of Health here in Israel, they have made a concerted effort to actually get to know these startups from a very early stage. They take part in all of our processes as observers. They obviously take no decisions, but they really want to understand these technologies as early as possible so that they can find the right balance between enabling the technologies to do what they can do for the better of human health and to help them be a growth engine, even, nationally, but also at the other side to make sure we're going to be able to regulate them.
Ultimately, a regulator–they decide to regulate a drug. So they look at the drug and they say, “Is it efficient? Will it treat the disease? And is it safe to be able to be taken?” And they don't mind if it's designed by AI or not. But they need to understand the technology that went into it so they can evaluate it correctly. And the FDA is doing this. We actually see with the FDA that with all the cuts that they did there, within the Food and Drug Administration in the US, the departments that they have not changed and they have not downsized, are the AI departments. And the areas where they've actually put out challenges, both in the previous administration and then the current one even more so, is in–bring us solutions that are artificial intelligence driven, AI driven, to replace animal studies because we've cured cancer many times in mice but not in humans. And so we understand that that's not predictive. AI, what is it supposed to do? Predict. So AI can predict which drug will work better in treating cancer so we can save all these hundreds of millions of dollars, if not billions, that go into clinical trials and ultimately are wasted, because a drug doesn't end up reaching the market and then hopefully lower drug prices as a result of that.
Michael Eisenberg (44:21.856)
I'm gonna get this notion. You immediately went to regulation. We agree that regulation takes way too long to approve drugs. People, by the way, in the anti-vaccine or COVID camp would say that that was rushed too fast. So there's obviously some sort of balance there. But I think...
Mati Gill:
I don't think it's regulation, though, that takes too long to bring a drug to a market. It's regulation that says, “We want to be conservative about the things that are put into our bodies, and therefore we're going to test it in multiple phases, in larger scales, with control arms.” And then that process takes a long time. And ultimately, the worst part about that process, or the hardest part about that process, is over 90% of those attempts fail, from the time you start to test out a drug first in humans, to actually being able to bring the drug to get approved by the FDA to be sold to patients. Over 90% of those fail. So that's a huge value opportunity if we're able to lower that prediction rate from 90% to being 50%.
Michael Eisenberg:
I’m sure it has to do with a lot of things, like population health versus more genetic specificity, and just generally accelerating trials, and more like that. But the harder questions are the following. So like I said, you immediately went to regulation of pharmaceuticals, but what about, I'm making it up, a pill a woman takes that enables her to choose the gender, or that the child should have blonde hair. What about modifying embryos using all sorts of AI to create better people, or different people?
Mati Gill (45:59.032)
Different people, different makeup, non-natural makeup of biological–so yeah, those are deep questions. And then the question is, are we doing these editing in order to treat a disease? Or are we doing these editing to be able to enhance quality of life, or just make them blonde because I want blonde kids? And I think where you're able to actually, and again, this is my thoughts. I'm not an expert on the space. But if you're able to actually do it for the sake of health, humanity, then that's a good thing.
Michael Eisenberg (46:46.611)
Whose decision is that?
Mati Gill:
That should ultimately be a physician's decision, a personal decision, and probably regulated by policy. The physician needs to be able to tell you how it's going to impact your health.
Michael Eisenberg:
How do you know? Like we don't know. Like if I choose for argument's sake that...
Mati Gill:
Studies. You do studies, you get data, but there's more unknown than known. That's why you do it very conservatively. And that's why you're very slow in the process. To your point about COVID, I would say what was different about COVID was not the steps they had to go through in proving that the vaccine would work. They still did all the steps, but it was all hands on deck. Just like baby KJ in Pennsylvania. Let's prioritize this. Let's fast track getting the approval.
Michael Eisenberg:
Let's not be able to do all this based on data.
Mati Gill:
Well, based on data, but short term, right? Short-term because the short-term data, we're able to take that risk, because we understand the potential positive impact this vaccine will have on human health. It's all about risk-taking. We will take that risk because we understand the danger if a vaccine is not administered or not enabled.
Michael Eisenberg (47:42.456)
The short-term danger.
Mati Gill:
There might be more long-term danger, we still don't know.
Michael Eisenberg:
So that's, I think, the tricky thing about biology and what you're engaged in right now, which is, there are often short term promises that turn into long term disasters. So the question I'm really trying to get at, or one of the questions I'm trying to get at is, when you take in an entrepreneur who's working on something hard like this, how do you make that trade off?
Mati Gill:
It's all about culture and values.
Michael Eisenberg:
Tell me what are your cultural values.
Mati Gill:
Transparency, understanding the mission, working with transparency, working ethically, not hiding.
Michael Eisenberg:
What does ethically mean?
Mati Gill:
It means that if you come, we're an industry, in high tech in general, right, there's a saying, you've probably heard it before, ‘Fake it till you make it.’ That doesn't work in our industry.
Michael Eiseneberg:
Really?
Mati Gill:
Because you have to come with data very quickly. So can fake it, not until you make it, until you maybe make–
Michael Eisenberg (48:35.31)
Fake it in order to get your money.
Mati Gill:
Yeah, in order to get your very initial money. After that, it doesn't work anymore. And if it did work in the past, I think the Theranos example kind of showed everyone why it shouldn't work and can't work. And by the way, someone will ultimately develop a test to understand your whole human disease biology by a drop of blood. It wasn't a bad idea. It was just the wrong execution. And they continued to fake it and hopefully until they made it, which they never did because, ultimately the customers were–it was a fraud, and people were able to uncover it.
Michael Eisenberg:
Yeah, I keep thinking a lot about the Theranos story. Here's why, Elizabeth Holmes was clearly fraudulent, right? And there weren't really professional investors around that table. It really chilled the market for a long time around innovation in this area. So the kind of ripple effects of this were people wanted to take much less risk around anything called biological health related. That was chilling, I think, for innovation. Is that fair?
Mati Gill:
I think it's fair, but I don't think it had a huge impact on investment in biotech or in biology. Ultimately, in the long run, maybe in the short run, it did. But I think it's a good thing, because ultimately she built a company without the expertise around that. Also, you could talk about Teva. Some of the mistakes Teva made down the road was because they didn't have the right people around the board. Sol Barer came in as the current chairman, was a former CEO of Celgene. He calls it his reserve duty. He came into Teva, brought the right people around the board and put them on a different path, because he had the right expertise. So I think that's one of the real lessons learned about Theranos story, is beyond just the fake it till you make it. How do you make sure you put in the right governance structure, with the right expertise, to ask the right questions, so that when you do have an entrepreneur who might be tempted to fake it so that they can actually raise their next round, to a degree, because we're dealing with something which is so impactful to human health and also potentially dangerous, like you mentioned, you want to have that expertise to be able to really challenge them?
And if it doesn't come from my team that challenge these startups, and they say you need to show the data, you need to prove the data, you need to come with the data, you need to present it in a way that professional investors and pharma companies will be able to understand it and gain confidence in it. And it's a hard sell. But my team really tackles this. And they go after these startups to make sure that they're working in the most transparent, but also the most professional manner possible.
Michael Eisenberg (51:25.874)
Speaking about changing the world, what's the one drug you hope that someone comes to AION and develops?
Mati Gill:
Alzheimer's.
Michael Eisenberg:
Why Alzheimer's?
Mati Gill:
Well, Alzheimer's is a horrible disease. We're not in that space yet. It's a horrible disease.
Michael Eisenberg:
I was speaking to my daughter about this who’s studying at Weizmann Institute of Science right now.
Mati Gill:
Another person I should meet.
Michael Eisenberg:
She asked my dad–you know, she's researching cancer–she asked him, “What's, like, the one disease that you make sure to avoid?” And he said, “Alzheimer's and memory loss,” which I found fascinating.
Mati Gill:
Anyone that's ever been around it understands why you don't need to explain it more. When you see someone you deeply love and that's still there, they're still there. They're still even physically healthy, but asking you the same question over and over again and forgetting, you know–I had this with someone who was my mom's aunt, but really helped raise her. So she was a grandmother, Aunt Fagy, and she came down with Alzheimer. She couldn't recognize her husband of 60 years that was sitting in front of her, at the age of 80 something, she would recognize him for a second. You'd see her fall in love all over again. It was romantic. It was amazing. And then the second later ask him the same question she asked him two minutes earlier. She couldn't recognize me. And we still play with her backgammon set, but ultimately if we're able to solve something like that, that would be amazing.
Michael Eisenberg:
You have a funny–funny is wrong word. You have an interesting approach to finding talent, with these challenges. You want to explain it?
Mati Gill:
Sure, so one of the things we said at AION Labs is we can come with an unmet need, and let's democratize the way that people can come and actually pitch us with a solution. So making this opportunity open to everyone. And so we come with an unmet need that we crystallize it, we clarify it, we deep dive into it to make sure we don't just define the unmet need in the problem statement, but we also define with our pharma partners the way we're going to test the future technology that doesn't yet exist–without having to do a clinical study, because then we haven't saved them anything in time. So we do all of that very much in depth, and then we launch it publicly, and open for anyone to come and apply. So of course we do reach out to all the universities, we do media, we do press, we do marketing, but what we learned and built after a year of working and doing four of these type of challenges is, we built our own way with great intelligence and ex-intelligence people here in Israel of pinpointing and finding these talented individuals, mapping out everyone that's relevant.
So I'm sure your daughter-in-law is in our CRM. Everyone that's studying biology, everyone that has a background in data science and AI, we mapped out all the Israelis, and then we mapped out all the Israelis abroad as the first low-hanging fruit of people. Let's bring them back. Build companies in Israel. And we built that on our own, connected it with LinkedIn and Salesforce, and it works, and we're able to bring in these talented people.
Michael Eisenberg (54:28.246)
How many people have you brought back here?
Mati Gill:
So Israelis, we're in the process now, I would say, probably five, and open to more. Just yesterday, I spoke with another one that's coming back from Oxford.
Michael Eisenberg:
Amazing. How should some contact you if they wanna–
Mati Gill:
So easiest is M-A-T-I, Mati@aionlabs.com, A-I-O-N-L-A-B-S.com. That's very accessible. LinkedIn, I'm also very active there and very responsive there as well.
Michael Eisenberg:
You once said that you learned from Eli Hurvitz, the legendary CEO of Teva and just an incredible human being–I’ve had the fortune to meet a few times–that he said that even the security guard should be able to explain the company's strategy. What's AION’s strategy, in a sentence?
Mati Gill (55:00.014)
Building great startups that can do the impossible at the intersection of AI and biology.
Michael Eisenberg:
The security guard gets that?
Mati Gill:
I'm sure they would. I always actually paraphrase Kåre Schultz, who was the CEO brought in from Denmark to save Teva. And I paraphrase him when I talk to my team. I say, “You have to repeat something seven times, in simple manners, in order for them to get it.” And Eli Hurvitz would say that about the security guard, and Schultz obviously said that in different manners to his management team.
Michael Eisenberg:
Yuval Cabilly, who's at the Israel Biotech Fund.
Mati Gill (55:41.262)
One of our founders.
Michael Eisenberg:
One of your founders. He said I should ask you, what's the one thing you thought you knew at Teva that completely changed once you started at AION?
Mati Gill:
That's a great question, actually. So I think the one thing is how small Teva is compared to big pharma companies. When you're at Teva working for a company of 40,000 people, I thought that this was the biggest company in the world. And then you start walking into the R&D labs of Pfizer and AstraZeneca, and you realize how small we are, and how much Teva still had to grow. And I think in retrospect, I understood areas that we probably shouldn't have invested in that we could have and missed out on. And the biggest thing is not being able to capture all the great science that Israel has to offer.
And I walk around the labs at the Weizmann Institute, and I walk around the Technion, and I walk around Tel Aviv, and I meet these professors, and excellent people like Raphael Benhamou, who's a professor at the Hebrew University, again, someone that came back to Israel to build a startup with us. And for us, it's amazing. I mean, you see all the signs and you say, “What was I doing at Teva that I didn't suck this all up throughout the years?” Not me personally, but Teva.
Michael Eisenberg:
So you mentioned in passing, it might have been before you got on air, that you were wounded by a sniper.
Mati Gill:
First of all, if he was a sniper, I wouldn't be here. A real sniper.
Michael Eisenberg (57:01.774)
It was while you're serving in government, not the...
Mati Gill (57:23.372)
I was serving in government in 2008. It's like my mother said, I spent six years in military, got out as a captain, and got shot when you're out of military service. But yeah, I was on the board. I think we met there a couple of months later in Sderot, right on the border with Gaza. And thankfully he wasn't a real sniper. He was someone that missed me by a millimeter, or else I wouldn't be here. And had he been able to hit me a millimeter to the other direction, I wouldn't have biological children. What doesn't kill you makes you stronger.
Michael Eisenberg:
You and President Trump.
Mati GIll:
Fight, fight, fight.
Michael Eisenberg:
Who was he?
Mati Gill (58:13.146)
So he was a Hamas terrorist. No, he was on the other side of the border. We were on the border showing the Canadian AIPAC board what was going on and giving a security brief. And I say we–it was really the minister doing this. I was accompanying him there. And the Hamas terrorist didn't know we were there. Even if they tried to spin it as saying we were targeting this minister, real intelligence that we know for a fact, that they had no idea they were just helping fire on Israelis on the other side of the border. There were a couple hundred Israelis on that side. And I was the one shot. Like my dad likes to remind me I was wearing a red sweater that day. So I probably didn't help. And you feel something go through you. I heard the shots. I know what shots sound like. Felt something go through me physically, looked down, saw I was bleeding, yelled out, “I've been shot. Started crawling pazatsta style to be able to get behind the closest piece of cover I could find, which was the minister's car. And he kept shooting for the next 10 minutes, until finally IDF was able to calm it down. They took him out about five years later, after they caught one of his co-conspirators from the terrorist cell and were able to interrogate them. They were able to actually get to the terrorist himself. But thankfully I'm here.
I spent a week in the hospital in Ashkelon. I was treated by a great doctor who rushed down to treat me. I was fortunate that I was able to actually get that doctor to come down on his vacation. It was a Friday, and to be able to save my capabilities, to be able to live a healthy life and actually have children. And I think, you know, laying in that bed that day after the surgery came through, I said–yeah, I was 29, probably not even.
And I said, “Okay, I've had a relatively successful career to that date. Again, with my three pillars, I'm living in Israel, contributing to the state of Israel with a lot of meaning, but I haven't yet built a family. So it's time to get serious about that.” And for me, that was, you know, that and also putting a goal to run the New York marathon, which I did a year later. Those were the two things I said have to come out of this.
Michael Eisenberg:
Amazing. How old are your kids now?
Mati Gill (01:00:07.234)
So I have a 16-year-old that was from my wife's previous, but she's my oldest. We've been raising her together since the age of four. And we have Emma–that's Mia–and we have Emma that's almost 12, and Daniel who's eight. Amazing kids, great. Thank God.
Michael Eisenberg:
Thank God. Amazing. Thank God he missed.
Mati Gill:
Thank you.
Michael Eisenberg:
What do you think you've kind of learned about, and this is a funny question, feels like, you know what, I'm not even gonna ask it.
Mati Gill:
I'm anticipating. No, come on.
Michael Eisenberg:
You mentioned that your life lesson was that it's time to start having a family, and start having children. I wonder if there's anything you took from that to both business and public service afterwards. You already had kind of mission, shlichut. What'd you take from that?
Mati Gill (01:01:18.156)
I would say perspective, and understanding real proportions in life for me, and understanding that human health is not something to be taken for granted, and I had to get in better shape. That was what was behind running the marathon. It wasn't because I'd always wanted to run a marathon. I was like, this will be the way I know I'm in better shape. I had to lose a few kilo. I probably have to do that again. This was then, and it's also about understanding how to prioritize what really matters in work. You know, so I know you, I have the same type of say, I don't believe in work-life balance. It's all about priorities and understanding my kids, my family, my wife, my country, my people and my mission come first. And things that are around that are less important in that aspect. And you just don't waste time on that.
Michael Eisenberg:
What was your time in the marathon?
Mati Gill:
I actually didn't even count it. That was a great piece of advice I got. They said, “It’s your first marathon–”
Michael Eisenberg:
You finished.
Mati Gill:
I finished. That was my goal. Yeah, I didn't even care. I said I'm not going to be a professional marathon runner. I ran a second one in Tel Aviv afterwards, didn't enjoy it again. Coming down from New York to Tel Aviv, the marathons. It wasn't as fun.
Michael Eisenberg (01:02:05.282)
The weather's hotter.
Mati Gill:
The weather was hotter, and they actually took a later start, which was a terrible mistake. So since then I only run half.
Michael Eisenberg (01:02:12.472)
Would you go back to public service?
Mati Gill:
Yes. It’s only a matter of time.
Michael Eisenberg:
What’s the job you want?
Mati Gill:
I'll do anything that I can be in service of the country. So it could be in political work or it could also be in back office staff work. I would love to do anything that I can be in service. And as I tell anyone that has ever hired me outside of public service, I said, “I'm on loan. And the loan could be for 20 years, it could be for 30 years, but it's a question of time before I go back into public service.”
Michael Eisenberg:
Like I've said many times, you're an inspiration, but I have one final question for you.
Mati Gill:
When are you going into public service, Michael?
Michael Eisenberg (01:02:45.422)
That's not my question, my question is will AI cure cancer?
Mati Gill:
Yes, but with biology, not without. Now I think that's the most important lesson we can remind ourselves, is that it's not just AI, it's AI and biology, it's AI and chemistry. And the connection between those two is what can cure cancer.
Michael Eisenberg (01:03:07.854)
Thanks, Mati, this was amazing. If you enjoyed this episode, please rate us five stars on Spotify, Apple Podcasts, subscribe to our YouTube channel. If you want to find Mati Gill, you can find him on LinkedIn and on Twitter. What’s your Twitter handle?
Mati Gill:
@matigill.
Michael Eisenberg:
M-A-T-I-G-I-L-L. Thanks, Mati.
Mati Gill:
Thank you, Michael.
Michael (00:00.014)
You joined Wix in what year?
Nir Zohar:
In early 2007.
Michael:
And what was your job?
Nir Zohar:
I was the guy who was getting coffee.
A very healthy and strong organization is an organization where people feel strong enough, empowered enough to make decisions. If you want to build such an organization, you need to view your job as a manager as someone who's giving service. It's not a status.
So you remember our campaign?
Michael (00:21.25)
I do. It was the first of its kind, is my recollection.
Nir Zohar:
110 million people were watching.
Michael:
Such a good thing you had such good investors. Wow.
Nir Zohar:
Having great investors really helps out.
Michael:
Which is a good segue to the most recent acquisition you made, where I guess it wasn't hard to integrate, because it was one guy. You want to tell us about Base44?
Michael (00:41.954)
Welcome back to another episode of Invested. I am thrilled to be here with my long-time friend, now, Nir Zohar, the President of Wix. Welcome Nir.
Nir Zohar (01:06.126)
Thank you.
Michael:
Nir wasn't always the President of Wix. He had previous jobs there, which we'll get into soon. But Nir, before we get started, I need to ask you–tell us about your very fancy coffee cup.
Nir Zohar:
It's not that fancy, it's just a paper cup.
Michael:
But it looks very pretty.
Nir Zohar:
It's black coffee, Turkish coffee. Are you allowed to say Turkish coffee in Israel now? I think you're not. It's a black coffee I made at home, and put it in my cup, and brought it over.
Michael (01:20.814)
That's not an average paper cup.
Nir:
Well, you know, have you met my wife?
Michael:
I have.
Nir Zohar:
So my wife leads design at Wix.
Michael (01:30.818)
Yeah. We should say that before she was Nir’s wife, she was at Wix. That is true.
Nir Zohar:
You are allowed to marry people you work with. So everything in my life has to look beautiful and highly designed. It goes also to the paper cups.
Michael (01:50.862)
I'm in favor. Your wife is amazing.
Okay, what I want to start with, Nir, is the middle of Wix’s journey, and we will go back to the beginning.
Nir Zohar (02:02.412)
I think the middle is now.
Michael:
Good. I want to go back to what I think was an absolute turning point at Wix. I want to talk about the Super Bowl commercial. Should we start with the Super Bowl commercial?
Nir Zohar
Yeah. Let's do that.
Michael:
Why did Wix decide to do a Super Bowl commercial?
Nir Zohar (02:17.098)
It seemed like a good idea at the time.
Michael:
Did I think it was a good idea? I should say for full disclosure, I was on the board of Wix and an investor in Wix.
Nir Zohar:
Hmm, did you think it was a good idea? I think you did.
Michael:
I did, but I was worried, because it was very expensive. Why did you decide at Wix to do a Super Bowl commercial? It was six years into the company?
Nir Zohar (02:43.574)
It was six years in the company, a year and a bit after the IPO. The campaign itself took place early ‘15. We went public end of ‘13. And we figured out that we were doing tremendous performance marketing. Tremendous, really. I met this woman now, the President of EMEA in Google, who used to work in YouTube. And she said, “I remember back in the day I was in YouTube, we were releasing our new capabilities and you guys were stretching it like there's no tomorrow. You invented all of the things we're doing now with everyone, you guys invented it.” And we were doing tremendous performance marketing.
But we also figured out that we want to seriously create an uplift to our brand recognition. Back then we were also doing TV in North America and it was working and definitely helping out. But we wanted to create a pivotal event, something that really creates something different. And we recognized that the Super Bowl can be a great opportunity for that.
As you said, it was scary. It's a ton of money. Today it's more expensive, but back then it was about five point something million just for the spot. But then you know you're gonna spend another roughly five million on the production, and creating something that's worthwhile to put in the Super Bowl. And for a company of our size back then, well for any company, ten million dollars spending on one ad is a lot of money.
Michael:
And you were just public for about 18 months.
Nir Zohar (04:32.27)
We were just public, for even less than 18 months. Obviously we were scared of some criticism, which was actually not that significant. But it's, I would say more than that, we had 120, 130 million dollars in our bank account. 10 million dollars cut out of that is a lot of money. Now the rest of the marketing we are doing on performance. Where every dollar is going out, I know exactly when I'm getting it back in and I can manage that.
Michael Eisenberg:
And how did you justify to yourself to do the Super Bowl commercial and how do you know that it worked? I think there's a lot of innovation here, which is why I wanted to start with this.
Nir Zohar:
I think the core motivation, the core justification, to speak, was that it's a risk worth taking. You could say $10 million after 100 and something is a lot, but it's also not a make or break thing. We were cashflow positive. It wouldn't put a dent in our cap that we cannot recover from. The risk was not that big on the financial side.
And the justification was, as I said, we wanted to create this very significant uplift in our brand. And you have to remember, for a company that does a ton of performance marketing, an uplift in the brand is something that is measurable–a bit not in the same ways, not immediately as you're advertising, but over time, because you're essentially getting more recognition on organic traffic, which then allows you over time to decrease the amount you're spending on performance marketing and see if it covers. By the way, it doesn't mean that you need to lower the spend. You can then decide if you want to invest more and grow faster, or invest less? We did do one thing or take an approach, I would say, that was a little bit different.
The decision was a last-minute decision. It was, you know, it was taken pretty late in 2014 when–the ad is in February and you have to submit it about a month before–nd we then decided that in order to make something big out of it, and because we're a tech company, we're an internet company, our specialty is how to do things online. We don't want to have a spot on the first week of February on the Super Bowl.
We want to create a campaign that can be relevant for a few weeks before, and a few weeks after. Do you remember our campaign? Remember what we've done?
Michael:
I do. I think this is part of what's interesting, because I think it was the first of its kind, is my recollection.
Nir Zohar:
I can't say for sure, but it was definitely not something that was done. We didn't see a lot of it around us back then. What we've done is first of all, we wanted to reduce production costs, but we wanted recognized faces. And we went out and we got five Hall of Fame NFL players who were retired. Now, NFL players who are retired in most cases are not stars anymore. They don't do commercials.
They don't come with a high price tag. I would say Brett Favre probably came with the highest price tag, and everyone else was significantly lower.
Former quarterback of the Green Bay Packers.
Nir Zohar (08:14.67)
And essentially we told the story of these five Hall of Famers who retired from football, and are now reinventing themselves and building small businesses for themselves, which are aligned with who they used to be.
T.O. was, you know, humble pies, because he was known to be very arrogant, things like that.
Michael:
T.O. is a famous wide receiver.
Nir Zohar:
That's what I got you for, you see? You have to be an American to quote all of those. We've created new businesses for each and every one of them and we started advertising their businesses for real, before the campaign ran up as a Super Bowl campaign. And in some cases people thought it's real business. We got orders for cakes, we got requests for business development. Brett Favre was supposed to open up a charcuterie, and we got this small boutique, mastered company that wanted to partner up with his charcuterie. It was really cool and started creating a lot of noise separately before we started connecting the dots. And that campaign started, I think, early January. So a month before the Super Bowl, we were already out there and starting to cover ground.
And then as we got closer to the campaign, we actually aired the spot before the spot in order to make the full blown noise before we got to the Super Bowl itself. And we managed to create, I would say, almost seven to eight weeks of the Super Bowl campaigns, almost two months of a very strong campaign running around us. We also got lucky. We were assigned a spot, which was the two-minute break in the fourth quarter, which is, if the game is done, then there's nobody watching anymore. If it's a very close game, then this is the peak of your ship. Luckily we got the peak of your ship. It was a very, very close game. I think it was actually won after the two minute break. 110 million people are watching.
Michael Eisenberg:
If my memory serves me correctly, we also waited until late November to close on the spot to kind drive the price down.
Nir Zohar:
Yeah, of course, because we are Israelis. We have to try and haggle. Yeah, I think on our third campaign, we had a 30-second spot ready six months before, that the team, our CMO essentially said, you know, this one we keep. We don't use it for anything else, for the regular activities. We put it in the drawer somewhere. And he waited, and I think he closed the spot four days before the Super Bowl, and then pulled it out.
Michael:
Leave it to Omer. We'll come back to him in a second. Now let's go back to the beginning. The humble beginnings of Wix. You joined Wix in what year?
Nir Zohar (11:09.742)
I joined Wix in early 2007.
Michael:
And what was your job?
Nir Zohar:
Office Manager, I think? I'm not sure if there was a title, but yeah I was the guy who was getting coffee
Michael:
Employee number?
Nir Zohar:
Maybe seven or eight? Or ten? Something along those lines.
Michael (11:29.358)
And you’ve been there 18 years. And when were you promoted to the COO from the coffee maker?
Nir Zohar:
About a year in. Summer of 2008.
Michael:
And the co-founders of Wix were Avishai Abrahami and his brother, Nadav, and Gigi Kaplan. And they brought in young Nir to be the coffee maker. And a year later, why did they promote you to be the COO?
Nir Zohar (11:55.64)
Well, they didn't bring me to be a coffee maker, naturally, let's not exaggerate, but they did bring me to try and create order in a chaos, and try to cover the things that they either didn't like to do or weren't good at.
Michael:
Or that Avishai didn’t want to do, also.
Nir Zohar:
Yes, that they either didn't want to do or weren't good at, or a combination. Because sometimes, you have to do something and you're not good at it, which is the worst task there is.
So they brought me in. I've known both Gigi and Avishai since I was in my early teens, really for many years. And when they brought me in, the company, as you said, was very, very small. If you think about things that are not product and innovation itself, there's everything else, which is, what in a big company you have a function and a full department. You need HR, you need finance, you need legal stuff. You need salaries to go out, you need cleaning in the office. You need someone to be the VP R&D, in the sense of not saying, making sure that things happen as we said they're gonna happen, and are ready on time. In that year, I was all those.
Michael:
Why were you qualified for the job?
Nir Zohar:
I don't know. I don't think I was.
Michael:
Listen, it's a serious question, for young people starting out there. How old were you at the time?
Nir Zohar (13:28.974)
I was 30 up to 31. That's the year.
Michael:
So what made you qualified for that job, at the not yet fast-growing startup?
Nir Zohar:
I think it's a great question. I think some of my past experience, which we can talk about, which was not relevant in the sense that I've done the same thing exactly before, but I did things that were close enough on one end.
Michael:
Such as?
Nir Zohar (14:07.798)
Well, definitely military service. I was a Chief Engineer in a missile boat, the Naval Academy. Served for almost six years. Working in a tight environment, small teams, a constant lack of resources, having a ton of responsibility at a very young age with a relatively short training process compared to others. You know, in order to be a Chief Engineer in the US Navy, you need to spend 15 years of training.
You bundle all of those together, you can very easily apply them to how to start a company and run a company. You'll probably use the exact same language and the same words. It forces you to be agile. It forces you to know how to work very well with people, to arrange and fix things, whether it's fixing relationships and friction between people or fixing whatever is physically broken. It's the need to learn very, very fast new things, and adapt quickly to things, and focus on what really needs to be done, not about emotions or ego, et cetera. And I think all of that really served me extremely well going into that.
Finally, the next job I had after my army services, I went and I worked is, I worked for the Jewish Agency, and then I came back to Israel, and I worked for the Israeli Scouts. And there's something fascinating about that as well, because unlike the army where at the end of the day there's authority–if you tell someone you're an officer, you tell someone to do something, even in the Israeli army, they do it. Although there's much less formality in the process. When you try to work with teenagers and tell them what to do–well, you have teenagers, you try to tell them what to do.
Michael:
I'm getting older now. But you have a bunch of teenagers. I've been there.
Nir Zohar (16:02.766)
It's a coin toss, right?
Michael:
By the way, to clarify for everyone, the Israeli Scout Program is a youth organization among many youth organizations, youth movements in Israel that devolves a lot of responsibilities and a lot of pioneering to Israeli teenagers.
Nir Zohar (16:21.288)
You can say that the country was founded on the back of these youth movements, and they retained a lot of that legacy of how they try to train you to become a productive and effective adult.
Michael Eisenberg:
And leaders.
Nir Zohar:
And leadership, for sure. By the way, if you look at the military service in Israel, if you look at a lot of companies, many of the leaders and the officers are ones that have also had deep experience in youth movements. That being said, at the end of the day, if you're working with a teenager in a youth movement and you tell them what to do, it's not the same kind of authority. You have to be much more sophisticated and smart in convincing them that what you want them to do is actually what they want to do, which again, I think is a great training for life and for working with people. Helps you put yourself in the back seat sometimes and try to navigate people without having your hands on the steering wheel. And I think all of that really helped me in my first–
Michael:
I want to pause for a moment, because I think one of the things we focus on on this podcast are the values that create economic value. Your story is atypical in some way. Six years of military service, and then many people run in and do a startup after the military service here, but you took a bunch of years out and did community service, or the Jewish agency, or in the Scouts program. Why'd you do that? And did you think at the time that you'd end up in high tech?
Nir Zohar:
I did not think I was going to end up in high tech, but to be honest, I wasn't really thinking career at all. Maybe not really serving the economic value personally or alternatively at that point of time. I was extremely active in youth movements before my military service. Mentally, I saw my military service a little bit as akin to the continuation of my activity in the youth movement. Getting back to it. And to me, it was on the same timeline, so to speak. And I liked it, and I thought I was pretty good at it. I felt comfortable going to a place where I think I can contribute and do things that I deem as important.
Michael:
Was it helpful in your management career?
Nir Zohar:
Wow, tremendously, tremendously. To my management career? Because of all of the skills we discussed, I think–
Michael (18:55.63)
Be specific. Because there’s a lot of teenagers in Wix, but…
Nir Zohar:
Yeah, I would say some parts of Wix sometimes, it's working with younger kids than teenagers.
I think it's helped me tremendously because of the things we discussed before. I think, you know, a healthy approach to management in my mind is understanding that, more than anything else, a very healthy and strong organization is an organization where people feel strong enough and empowered enough to make decisions. You have a good enough process to overview and some oversight on decisions. Make sure that the ones that are critical and you have to oversee go through you, and the other ones don't, and how to make sure that you every now and then how to feedback people and help them grow. And if you manage to balance this in the way, you'll have a much stronger organization.
This is not about having people who are happier. It's not about–this is not about community. This is about real good management of an organization. Because the bigger the organization becomes, the more independent you want people to be, so things will keep on running fast and not be dependent on you. Otherwise, it's going to slow to a halt. I think that if you want to build such an organization, you need to view your job as a manager as someone who's giving service, not as someone who enjoys benefits. It's not a status. Obviously, it is a status. But the key part of being a great manager is giving excellent service to the people you manage, so they can be more independent. And I think this is definitely an approach that resonates extremely well with what I've done in youth movements. So that definitely, I think, was a big help in making me a better manager.
Michael:
I want to come back to the notion of empowerment, particularly as it relates to the guild structure at Wix in a second. I also want to come back to why happiness is overrated at work, and it shouldn't be kumbaya. We'll come back to that in a second. Speaking of that in the youth movement, when I got involved in Wix as an investor, one of the things that struck me was the offsite culture. I think I once called you and you told me you were in the water in Greece. And I said, “On vacation?” And you said, “No, no, no, working.” Explain this.
Nir Zohar:
To this day, I think you have a hard time believing that we were working. I know that.
Michael:
Except it happened six months later again and six months after that.
Nir Zohar (21:43.054)
But we stopped going to Greece. It was too cold. We started going to Thailand. We had this concept, we still do, that in order to get high quality time for the management team, we want to unplug them from their lives. And, you know, it doesn't matter if they're young, if you have kids, you don't have kids. It’s to pull you away from your surroundings. Try to isolate you to the best we can. Now, naturally, we don't take away your phones. You can talk to your family, blah, blah. It's not real isolation, but definitely a very significant change of scenery, a significant change of scenery which is far away. It doesn't break every evening, because you go back home and then come back the next morning. It has to be abroad. And we have this concept that we want to do very long days of, you know, taking a crack–and it's really tough–at subjects that we want to solve. Structure of the company, what's working, what's not. Who's to blame, not in assigning blame, but in finding root causes we can change things.
What are the next big things we have to do strategically? How do you go about them? What are the key threats we have and how do we mitigate them? These are tough things to discuss. They almost always take a long time, always bring out lots of emotions. And in order to do it effectively, we want to be in an environment that is extremely fun, comfortable, and lets people, you know, digest and move through their emotions so they can get cleaned up, cleared up, and we can continue forward with constructive things. And effectively, the way we do it–we go to a warm, nice place.
And we do sessions all day long. We start about nine, 10 in the morning, and we end up usually around six, seven in the evening. If you think about any manager who's had time with his management team for five days like that, it is an extremely high volume of time of management to spend time together. I run a strict show there and I don't give them a lot of breaks. They always complain. And we do it. in the water. So we do it in the pool or in the ocean. We actually sit in the water, and we talk. There's a few very significant values of doing meetings in water. One is, as I said, it's very comfortable, it's easy, you don't get uncomfortable sitting in some dark neon-lighted conference room all day long. The sun, you feel the wind, and you're sitting in water, and you can move around and you feel comfortable in size. Another great benefit is even with all of the improvements done in the field, nobody feels comfortable bringing their smartphone into the water. You get people's attention.
Michael:
Those are the only two benefits?
Nir Zohar:
They're big. Working tremendously well. I'll tell you something else, Michael. There were a few years that this cadence of going on offsites was disrupted. You know, these small events COVID, wars in Israel. And whenever we missed one, I could actually, I could really feel the misalignment that's happening. We always try to do one in Eilat or do one in some pool in Tel Aviv, or something, that you don't get the same quality.
Michael (25:41.614)
Is it Thailand now every year when there's not COVID and not war?
Nir:
Thailand or Seychelles, because we're trying to– in Israel, still going to the Caribbean is too long, too far. Seychelles is not the closest destination, but it's the closest tropical climate that we can get to.
Michael:
I'm sure in the early days, investors looked at that and said, “That's quite an expense for a young company.” Or did nobody say that?
Nir:
No, I don't know why. Our first two angel investors, I think the first one we've done was already after we got the VC money. So the two more significant people in the board or the representatives from Mangrove and from Bessemer. Adam, I think you've had on this show before from Bessemer, and Mark Tluszcz from Mangrove.
And they were very smart and supportive about it. And when you joined–no, I want to say, when you joined, first of all, it was already a habit. You didn't have much to say about it. But out of all the things that you criticized and pushed me to do, you never had any pushback about it.
Michael (27:00.439)
I wanted to be invited.
Nir Zohar:
That's fair. That's fair. You all want it, but there's some rules to it.
Michael (27:06.798)
The thing about the Wix culture early on was the coffee. And like, you know, there were all these things going on in Silicon Valley, free food and this, that, and the other, but in Wix there was coffee. There's always good coffee at Wix, and beans, and big machines and it wasn't Nespresso or pods or crappy Starbucks coffee. What's the deal?
Nir Zohar (27:29.89)
First all, we like coffee, and Israelis in general like coffee. We were a tiny startup. We didn't have a lot of money. Now I spoke about going to Thailand, so you're going to say, “Hey, hey, hey.” By the way, I once tried to do the comparison of going to a high quality place in Israel and feeding everyone, and going to Thailand. Same price. You waste a little bit more time on this travel, but you get the quality from being there together all day long.
We didn’t have the money to feed people for free. Many of those perks came along later in the years. But we were very small. We said we always want to focus on the things that are important, and make a difference in people's lives. For example, coffee. We said, people love coffee. We're not going to tell them what to eat, but we're going to make sure that they have really excellent coffee around, because we know they drink it all day long and were interested in it.
That was one of them. But we had another great rule back then. We were in Hashmonaim, in Tel Aviv, and there was a…
Michael:
It's in the center of Tel Aviv, in a very rinky-dink building. If you go back on my Facebook, you can go find a picture of Nir.
Nir Zohar:
Exactly. Well, today the whole area has become–the TLV mall is in front of it, and it looks much more much fancy. But back then, it was a hellhole, and the TLV mall was essentially a parking lot. There were a few stores downstairs that sold computer equipment and chairs and such. And whenever a new employee came in, we said, “You know, you don't have a computer in the station, and you don't have a chair. Here's a credit card, go downstairs and buy whatever you like.” And the idea was that, you know, the chair, the screen, the mouse, the keyboard, these are the tools of a tech employee. That's what he's going to be spending most of his day with or in, in the case of the chair. Let's give them choice. The difference in price between the most expensive of them and the cheapest is not that big, especially when you're 20 employees, 30 employees. Let's give them choice. First of all, it's a cool and fun experience. And second of all, it makes everyone feel that they're getting the quality that they were hoping for and not something that we determine. We had that rule, by the way, running up to almost a thousand employees, and then it stopped being effective.
Michael:
Yeah. And then the business downstairs went out of business because you moved out of that building.
Nir Zohar:
Yeah, it is also true.
Michael:
So early on in the days of Wix, the company was based on a technology called Flash that almost everybody has forgotten. Flash technology was made by Macromedia, and by the way, Adam Fisher referenced it when we sat here. In fact, it looked like it was deteriorating at the time, that it was gonna be phased out, is a better way to say it. But Wix was built on Flash. And at the time, HTML5 was in its early, early days. And this was a real crisis moment. I'd like you to take us through what happened, what you did, how you prepared, and how you got past that moment and the company really started to grow.
Nir Zohar:
So Flash is a really weird story in the history of technology in general. Remember Macromedia were acquired by Adobe because of Flash. Flash was the most installed software on the planet. It was installed on 96% of the computers. When we started Wix, Flash websites were the thing because you couldn't do a lot of crazy visual stuff with HTML.
Michael:
Yeah, this enabled you to do animations, websites…
Nir Zohar:
Exactly. Also it had the value of working almost exactly the same on any computer or any browser, because it was running on one piece of software instead of lots of different ones. Everyone wanted to have a Flash website. And in fact, lots of people were specializing in how to build sophisticated stuff on Flash, because it was almost coding. It's halfway coding.
The first and most exciting version that we got out of Wix back then was essentially letting anyone build a Flash website, without having any knowledge and understanding of coding. People loved it, and they did tremendous stuff with it. And also lots of really weird shit with it, because they could. And then the fight started between Adobe and Steve Jobs. He felt he was supporting them with their releases. They didn't incorporate some of their new capabilities for Mac back in the day for iOS with Photoshop and Illustrator. And he went to war on Flash, backing up HTML5 as the new standard. And we needed to understand which bet are we taking. Are we taking a bet on Adobe and this software that's on 96% of the computers on the globe? Or on the crusade that Steve Jobs decided to declare on the technology?
Michael:
I want to put a fine point on this, because people don't remember the history and I think it's super important. Since everything in life is personal, this became very personal between Adobe and Steve Jobs. And he was determined to destroy Flash, and also to free his Apple devices. Because they wouldn't support him, he was now going to free all the Apple devices.
Nir Zohar (33:40.876)
From Adobe in general, and definitely Flash as well as Adobe over time. Which means that in 2008 when the iPhone came out, at the beginning it didn't support Flash, because it was early and they didn't have time to do it. But then on the second version when it was about time to put in Flash and the iPad came out, he said, “No, we're not going to be supporting Flash on our devices.”
Now, it's not betting on Steve Jobs, he's understanding that there's a whole movement here with his two extremely exciting new products, the iPhone and iPad with no Flash. And to be honest, it makes no sense for Adobe to lose. It made sense, because I remember there were ads of tablets that were showing that they can present Flash as an advantage versus the iPad in order to win the advertising and the sales.
But we decided that there were two things that we were worried about. One is that Adobe was not very forthcoming in talking to us or to anyone else. And we were probably, even back then, the biggest distributor of Flash websites on the planet. And still they wouldn't talk to us. And it got us really worried that at the end of the day, our future is dependent on one company. Software controlled by one company.
Whereas the news or the vision that Steve Jobs was bringing was that HTML5 is going to be great, and he's going to put a lot of pressure to make it such, because it's going to serve these two new devices. they have to get to a high level of visual capabilities and clearly it's Apple and Steve Jobs. High-quality visuals are important for them. There's a good chance we're going to get to them.
Michael:
Though Apple in 2008 was not the Apple of today. The iPhone had come out, Jobs a couple years earlier had taken a $150 million rescue loan from Bill Gates and Microsoft. This was the first, after the iPod, this was really the first big release that was a connected device even. And this wasn't obvious.
Nir Zohar (35:53.502)
It wasn’t obvious. But the interesting part about that vision was that HTML5 was going to be a standard. It's not going to be a software owned by someone. And if it's a standard, it means that there are contributors from everyone, and we're not dependent on one software which belongs to one company. And we decided that we have to hedge our future by developing our HTML5 editor.
Early on, we thought that maybe we're going to have HTML5 and Flash and we'll see what works better and then we make a choice. Clearly, first of all, once we decided we want to go down this path, we had a lot of debate internally, whether to do it, how to do it, lots of arguments with the board, whether this is a good decision or not, because the risk was that we had a business that was growing.
And we were being successful at early stages, and now we're going to have to rewrite the whole technology. A small company–we have to stop everything and only do that for more than a year, which is a big risk, because business will slow down because of it. And we might lose ground or lose market share to competitors who are not going to be doing it while we're doing it. And it's a lot of risk.
Michael:
Who were the other competitors then? Weebly?
Nir Zohar:
Weebly, Squarespace, Yola, back before that they were called Syntheside. I think back then there was also Moonfruit. There were many back then.
Michael:
And this is a bet the company move?
Nir Zohar (37:07.404)
I think it was a relatively easier bet, because if we hadn't done it and stayed with Flash, and HTML5 would have gotten to where it is now, and Flash died as it did, then you would have lost the company. But in a future where we would have done it and Flash would have remained strong and even won over HTML5, then I think that it would have recovered, because we would still have the Flash website builder with some year behind in infrastructure and development. But we had to take that bet. It was still at a time extremely risky. You have to remember one thing though, is that we were running the chance that if business slows down significantly, we may run out of money. Right.
Michael:
That's why it was a bet the company move.
Nir Zohar:
Maybe our shareholders and VCs will decide to support us, or maybe they're going to say, “Hey guys, you made a bad bet and this is life. Go and start something new.”
Michael:
Good thing you had such great investors.
Nir Zohar (38:28.436)
It’s true by the way. I think having great investors really helps out. Luckily, I think we made the bet with, I think, three months or four months from the launch, already all of our new websites were being done on HTML and no new users were added to the Flash. The existing users were used to Flash, kept on building Flash websites for a long time. And in fact, you know, when did we fully discontinue the Flash websites? I think about two years ago, the last browsers announced that they're gonna discontinue support of Flash. We still had about 10,000 websites on Flash. People were unwilling to give you their Flash websites and we said, “Guys, we're sorry, but they're not gonna work on anything anymore.”
Michael:
It's a story I think that people don't understand, how long legacy technology lasts in the system.
Nir Zohar:
Essentially forever. Essentially forever.
Michael:
Which is quite remarkable. You fast forward now a couple of years, the business is doing, if my memory serves me correctly, it's about $60 million of run rate revenue and you decide to go public.
Nir Zohar:
Somebody was pushing me.
Michael:
One second. This is what today certainly would be considered an early IPO, but even in 2013, this was an early IPO. Why did you do it?
Nir Zohar (39:41.644)
I think it's always, it's a combination of a few things. First of all, we had this lunatic investor who, remember it was, I think it was very close to where we're sitting now. He took me to breakfast. You took me to breakfast on Chol Hamoed Pesach on Passover.
I remember, because it was a Passover kosher breakfast, and it was, Zillow just went public, backed by Benchmark and they also they went public very early, even earlier than Wix. I think they were a 300, 400 million dollar IPO in value on the back of about 50 million in revenue or something that. Very early IPO.
I think you were inspired by Zillow, and gave it all the thought, and you sat me down and said, “Hey, Nir, I think we should take Wix public.” Which completely threw me off because I've never even thought about the notion of going public. And I remember as we were done with breakfast, I called Avishayi up. And Avishai was on his way to the airport to go to San Francisco. And I said, “You know, Avishai, Michael sat me down for breakfast and told me that he thinks we should go public. What do you think about it?”
And he said, “I don't think anything about it. I've never thought about it. I have no thoughts in my head about going public. Never did I have thoughts in my head about going public. I don't even know how to start thinking about it.” To which I said, “You know, this is also what I had in mind.”
But we were introduced a few years back, you introduced me to Noah Weintraub from JP Morgan, who ended up being our banker on the IPO. I said to Avishai, “Listen, I met this guy who is smart, is a massive supporter of Israel, lives in San Francisco. I'll do a quick intro on the email. And while you're there, try and grab coffee with him and let's start learning.” I think it was April, 2012. And we ended up going public in November 2013.
This is pretty much the length of our thought and learning process. Over the summer of 2012, we wanted to raise money again, and we were really keen at having a high valuation, because we wanted to raise a lot of money, and we don't want to take too much dilution, and we were at the stage where we can pick and choose.
It was funny, we went out on a road show for two weeks. And the first week was amazing. We had fantastic meetings. Everyone was extremely enthusiastic. We were sure we were going to get lots of very high-quality, half a billion dollar valuation term sheets. Then on, I think it was a Thursday or a Friday of that week, the first week, something happened, which was Facebook went public.
Now, today they are running a tremendous business. But back then, the IPO was bad. They went public and tanked.
Michael:
Stock dropped 50%.
Nir Zohar:
Now everyone in Silicon Valley was holding shares of Facebook. All of the happy, happy people we met on the first week were very unhappy people the following week. And we went back home understanding that this is a bad timing to try and raise money. And we said, “What the heck? Let's try and figure out this whole IPO path thing.” We had a phone call with the board, and said, “Guys, we want to start pursuing it.” Everyone said, “Okay, can we go public next month?” We said, “Well, no, because no one around this table took a company public, and especially not us. We need to learn. We called Noah Weintraub again, who was assisting us in trying to raise money. And to be honest, we surprised him.
He was sure that we are trying to figure out how to do another round in September after the dust settled. Instead we said, “You know what, Noah, let's go down the IPO path. But since we're clueless, we need you to help us out. We want to talk to at least 10 CEOs who have taken their company public in the past couple of years or so, and should be closer to our size.” Talking to a massive company will be obviously completely different. And through the fall and early winter, we went through this whole education path of talking to the bankers to better understand how things work, to talking with some of the investors who had experience with public companies, talking to lots of CEOs and CFOs who took their company public. Asked them about what they're happy about, what they're disappointed about, what they would have done differently pre-IPO in order to be better ready, post-IPO. What were their best experiences from the process itself? What were the worst ones? And started accumulating a whole lot of ideas, either good ideas that you wanted to replicate or things we wanted to make sure that we avoid.
You know, I think, one of the comments I got from the CFO of LinkedIn, he got us to make a real big effort on redistributing equity to all of the stars in the company pre-IPO, which was a very, very painful experience. We diluted our existing shareholders by 11% a moment before the IPO.
Michael (45:48.15)
By the way, you should point out, on long vesting.
Nir Zohar:
Long-vesting. Well, the management long-vesting, the middle management regular.
Michael:
Regular being four years long vesting, if I remember correctly, long being six.
Nir Zohar:
Six. Yeah.
Michael:
I think this is a key point, by the way, because one thing to point out is that the core team of Wix 18 years later is still in place. At the company well over a decade, some close to two decades at the company and the–
Nir Zohar (46:18.286)
Now you're making me feel old.
Michael:
You know, you were 30, 31 when you started at the company. It was a long time ago. And the team at Wix, I mean, more than any other company I know, is still in place very broadly, including the CFO, including who joined before the IPO.
Nir Zohar (46:39.662)
Yeah, the CFO, including almost, I think there's only one senior manager that joined after. Everyone else was pre-IPO.
Michael:
Pre-IPO. It's pretty stunning.
Nir Zohar (47:10.744)
Anyway, we learned a ton. We spent the end of the year in 2012 learning, early 13 building the array of bankers that you want to support us in going public. Then we launched in March. March 13 was the launch of IPO that brought us to the November timeline. It was, I think back then, we didn't fully understand what we were getting into, to be honest. Because you have to remember, it's Israel. Today, it's much more common to meet an executive in Israel or not even somebody who grew up in a public tech company. This was something extremely common if you were in Silicon Valley. in Israel and in Tel Aviv of 2013, there were very few companies. We met Eyal Waldman,
Michael:
Founder of Mellanox, was also on the podcast.
Nir Zohar:
And we met Gil Schwed–
Michael:
Founder of Checkpoint.
Nir Zohar (48:05.102)
But these guys, there were only two of them, and Checkpoint went public early 90s. So very, very different stories. It was very hard to find people with the experience around you to advise you. Again, today, much easier. And this is something we're very proud of. We weren't sure what we were getting into. We, first of all, we wanted to raise money, which is one thing and a good reason to go public.
The other thing we figured out through the IPO was, or through the process, even before we went public, which became, I think, a big part of the motivation was–throughout the years prior to going public, we got very generous offers to sell the company. At $250 million, at $450 million, at a billion dollars before the IPO. And we always said no. And we said no because we liked what we were doing.
We saw a little bit of secondary early on, which was another great generosity by our shareholders to allow it and support that. We weren't tremendously stressed for immediate cash in our pockets for our personal lives. We really believed we could build something big, and we wanted to try to take a real shot at it. We figured out something.
You know, somebody said that to me prior to the IPO. Itzik Ben Bassat. He was back then on our board of directors and was fundamental in World of Warcraft. And he said, “What are you mostly worried about?” I said, “Well, I'm afraid of losing control as a public company.” He said, “No, no, no, no, you don't understand. This is the other way around.”
I said, “What do you mean?” He said, “Well, today you have three or four people who hold all of the shares or most of the shares in the company. Luckily they're friendly, and they support you, and they trust you. But in a different world, they can take over almost in the heart of it. And companies go through that. It's not uncommon. It happens. When you go public, the last thing that the public investors want to do is to manage the company. They want you to do it and they want to trust you. They will award you more if they trust you more, and then you'll be in a tight spot if they trust you less. But you will have much more control and confidence in the control of the company than you have as a private company.”
And I think, you know, the IPO ended up being really a pivotal moment in us growing up, becoming more serious as managers. Extremely well committed, because once you do, when you go public, you take equity for six years, because you want to be there six years later. It's a long-term commitment.
Michael:
So I assume no regrets about going public, or are there? Do you advise other young entrepreneurs to go public early today, or no?
Nir Zohar (51:13.422)
I think it really depends on the company. I’m not sure about–I think for us it was the thing to do. I think today the environment is a little bit different. It's easier to get money. You get more money at better terms than what it used to be back in the day. Remember when you joined the Wix board, Benchmark essentially came in and cleaned up all of the existing preferences and nasty veto rights and stringent rules that were in place in the company's charter. I think it's a different environment today.
I think there's a lot of value at becoming more mature to some extent. And also think that it's easier today for Israeli entrepreneurs to mature as private companies than it was when we were going public.
That being said, I still think it's a great outcome. Because if you want to build something for the long term, if you want a vision, if you want to build a legacy, you want to build a company that's going to outlast you. Truly, my dream is at some point to retire, because 30 years have passed since I joined Wix, and to have great managers to run the company, and essentially, on my deathbed, to know that the company is still a big Israeli company that is doing great for the world. There are companies like that. They exist. They don't exist in Israel, because Israel is too young. But why not? And I think if you want to go down a path that, not exactly that, but that, then you definitely need to take the company public at some point.
Michael:
Of all the companies that made acquisition offers, are any of them larger than Wix now? I don't think so.
Nir Zohar (53:08.398)
One.
Michael:
One. Which is pretty stunning. Before the IPO, you hired a head of business development and corporate development, his name was Dror, but his job was to do no deals. I remember I bought him deals, he said, “Oh, thank you very much.” And I said, “Did you follow up?” And he said, “I said no.” What, what, what, what?
Nir Zohar:
His job was to be polite. No, I'm serious. Listen, I think each company is different. We were a company that was established on something that was relatively rare back then in Israel. We built a direct to consumer product, which was extremely successful, relatively, almost immediately because there was a massive need for it.
And we did a decent job in our first versions to match that need with something that brought people value. And we had much growth and runway that doing deals and working back then, they were different, but back then working, trying to incorporate and build integrations and work with big companies and with big partners–which slows us down tremendously. It's a small development team. And if you dedicate half of it in order to integrate your product into Google, into Meta, or into anything, you're probably not going to get the same–well, not probably–you're definitely not going to get the same amount of value of developing the consumer-facing product and getting more traction. And you're going to significantly slow down development, and you're going to create a dependency.
So back then we were really trying to avoid partnerships. However, we were getting a lot of people who were approaching us, and we didn't want to be schmucks and ignore them. We brought someone who can maintain relationships over a long period of time. By the way, some of the relationships turned into partnerships four or five years later when we had the ability to raise our heads and take a breather and tried to create those partnerships. But back then, we needed someone to be polite and maintain the relationship without having to do anything.
Michael:
Could have been a better title. He could have been the CPO, the chief politeness officer, just, you know, call him, don't be a schmuck.
Nir Zohar:
You know, maybe that's what we called him at the office.
Michael:
Which is a good segue to the most recent acquisition you made, which is three weeks ago, where I guess it wasn't hard to integrate cause it was one guy and some vibe coding. You want to tell us about Bass44?
Nir Zohar (55:47.788)
Mm-hmm.
Michael:
How much did you pay for Base44, first of all?
Nir Zohar (55:57.858)
$80 million.
Michael:
For a guy.
Nir Zohar:
For a guy. For technology. For a know-how. For a brand. For an actual product that is getting a ton of traction. By the way, it keeps on improving. The past few weeks since we announced the acquisition has already shown a massive improvement in numbers.
Again, time will tell. Talking about it, I can be very proud about it a month after the acquisition and then be very embarrassed about it in a year from now, in theory. I think I'm going to be very happy and even prouder in a year from now. me, I'm always an optimist.
Michael:
Why’d you buy it? Want to tell everyone what Bass44 does?
Nir Zohar (56:42.926)
Of course. Base44 is a company in an emerging space of vibe coding. Vibe coding is the idea and the concept that you use natural language to prompt. You write, ‘I want to build a website. I want to build a component. I want to build an application that does something.’ My wife wanted us to build an application that will manage all of the kids' summer activities in one place, on one calendar, that can accept either text in order to put in a new activity, or it can also scan an image that has the data on it and put it into the calendar. You go, you prompt it, you get it. You understand that you missed something or that you want to be able to edit directly from the calendar itself. So you then prompt it again and say, ‘Add this, add that.’ You can do it in Hebrew. You can do it in English. It's a really, really cool concept.
And I think for us, vibe coding is extremely interesting for two reasons. One, I would say there are three potential outcomes. It's going to go away. That's always the option, right? Something goes up fast and goes down. We've seen this, you've seen this, I've seen it many times. Obviously, we don't think that's the case, but it's an option. The other two options is that, let's call it the defensive option, which I less believe in, but it's something to be considered, which is in a year from now, two years from now, three years from now, most of the websites on the globe are gonna be created by vibe coding, in which case we have to be big players in it.
Because it protects us, our current business that might be cannibalized by new technology. It goes back to the HTML-Flash decision back in the day. And then there's a third option, which I believe more in, which is a little bit what Wix did back in the day when we lowered the bar of who can build websites.
Because when we started Wix, you remember that–in order to build a good-looking website, you had to be a professional. You had to know how to code either Flash or CSS at a high enough quality in order to create something that looks well. And you had to go back to the code every now and then whenever you wanted to make a change. And the whole idea about Wix was, we're going to remove all of that hassle. We're going to clean it up. We're going to take care of the technology. We'll give you the user interface to do it on your own.
Vibe coding does that, or building applications, for building software.
Michael:
Can’t I do that with Anthropic?
Nir Zohar:
Try. It's not the same. Anthropic does a tremendous job when you're a coder who knows how to code and wants the coding to be done for you. By the way, vibe coding is running on top of these models. It’s simplification. You can say, can you have done it? Can you give people Flash? No, I gave them Wix. I took the more complicated technology and I simplified it for people who are like you and me who don't know how to code.
Michael:
Have you put the Wix marketing machine behind Base44? The secret weapon called Omer Shai?
Nir Zohar (01:00:16.142)
Yes. He's deep in it at Wix. And now he's also CMO at Bass44.
Michael:
How much money have you put behind marketing at Base44 since they've arrived? Because he put none behind it, Shlomo. Maor Shlomo.
Nir Zohar:
I cannot divulge a number, but I would say it's a good number, and it's on the rise and it's growing.
Michael:
You feel you've repaid the purchase price already?
Nir Zohar:
I think I paid it in value for sure. In value for sure. We'll get it. I haven't seen new cash yet, but I'm going to get to it.
Michael (01:00:50.318)
So this is one guy, one-guy company, and Wix has always been about what I'd call the little guy. I remember a very difficult decision on the eve of the IPO to turn off Syria because the US government required that you couldn't go public if you served customers in Syria, even if they were the little guy in Syria.
Nir Zohar:
We were really trying to find any loophole and to try to avoid that, but eventually it was very strict. We had to do it.
Michael:
And the Russia-Ukraine war breaks out. Wix has a lot of employees in the Ukraine. A lot. I want to talk about two things. One is the decision to cut off Russia from Wix. And number two, what you did for the Ukrainian employees of Wix.
Nir Zohar:
So I think the first one is, cutting off Russia was a hard decision. And it was a hard decision again, because big powers are fighting, and in theory you can say Russians are the bad guys–by the way I'm sure they are the bad guys–and anything that supports them should be removed. It's an easy call: remove it.
But as you said, at the end of the day, the people are using Wix.
Michael:
Vladimir Putin is not using Wix.
Nir Zohar:
No, he's not. It's the simple people in the small towns, or in Moscow, whatever, who are using it for their small businesses. They're not part of the power play, and they're going to suffer. That being said, I think it's an extreme case where, unlike the situation with Syria where we were trying to fight it because it was a government regulation–here, there were lots of little guys on the other side who were also suffering and they were also not part of the struggle, and were being hit over and over again, which were the Ukrainians. And we thought that in the grand balance of things, okay, the thing to do is to cut off our relationship, or the business relationship we have in Russia. It wasn't an easy decision. We knew that we were going to… There's a downside to any, to whatever we're going to decide, and we decided to go with that, in that direction.
Michael:
How many customers were affected?
Nir
I think paying customers are a few tens of thousands, probably. And free users, hundreds of thousands. It’s a real number, yeah.
Michael:
Talk about your Ukrainian employees. How many employees did you have in the Ukraine on the eve of the war?
Nir Zohar (01:03:33.198)
At the time of the war, we had 900 plus Ukrainians. Some of them were already, we had two groups that were already outside of Ukraine. We have it also in Israel. We have this relatively small group of people which are mapped as under the BCP guidelines of the company, the Business Continuity Protocol, meaning that we know that their function is almost unique,and if that person is unavailable, then it's going to be hard to try and recover. So there were about 20 or 30 of those, who, a few weeks before the war, we said, “Guys, tension is mounting. We would love for you to take your families, travel, we'll sponsor it, go to our offices in Krakow.”
Michael:
In Poland.
Nir Zohar:
We had a small company, US company that had development in Krakow. That's what we had the office in Krakow. It's not very far from home, and hopefully things are going to come down and you're going to go back, but we'll sleep easier if you're there rather than in Kiev now. But then really a week and a half before the war started, and tensions were really going high. We said, “This looks bad. Let's try and create an insurance policy here and help people out.” We said to all of our Ukrainian employees, “We are chartering planes. You can get on the plane with your immediate family–spouses, if somebody has an older parent that they want to bring over to the can, definitely kids. We rented a space in a whole resort in Turkey. It's February, it stands empty. We took the whole resort in Turkey, and we're going to fly you to Turkey. It's a short flight, and you're going to spend the next few weeks there. Let's see what happens.” We had about 180 employees, I think, that took us up on it. Ended up flying about 300 people, because they came with families. We chartered a couple of planes, and we took them out. And they were in Turkey when the war started. We had these people who were outside of the country.
Then essentially, once the war started, everyone were fleeing, from Eastern parts and central parts of Ukraine towards the Western parts, and we knew that they were going to try and cross the border. Ukraine shut the border for the men 18 and 60, up in the age range of 18 to 60. but we had lots of female employees,
And essentially we started by creating places where they can stay in the Western parts of Ukraine to be safer. And for anyone who managed to cross the border, we really had a war room that's convened on a regular basis. Tried to find out where everyone is, make sure that they can travel out, rented out transports from Dnipro and Kiev to move them westward.
But for those who passed the border, or crossed the border to Poland, we had drivers from Lithuania, employees from Lithuania who got into cars and drove down–it's a, I think, 1200 kilometers drive to the border, to be there and move people from across the border and transport them to Krakow. They were waiting for them with food, and blankets, and sometimes baby food and clothes, because people were traveling very, it was really a fugitive experience.
People were in their cars, fleeing from one side of the country to the other in winter. And then when they got to Krakow, we started building, I didn't like it back then when I called it, but I called it–we were trying to build a kibbutz in Krakow, in the sense that-
Michael:
The Wix kibbutz.
Nir Zohar:
In the sense that we were trying to get people together in a place where we can also create layers of community to help each other. People were coming with kids. People were super tired with spouses. We wanted to make sure that there's activities for the kids. We helped them with slowly getting into the education systems in Poland. At the beginning, we gave them a stipend to rent out houses and places. At the beginning it was, early on it was Airbnbs and hotels. Then we switched to apartments, helped them with all of the local stuff, because you are now coming and you need to establish your presence in a country where you don't speak the language, and you need to sign a Polish contract. You can’t read the contract, right? We tried to take everything into account and create the environment for them to ease up a horrible, horrible experience to the best of our ability. Either for the Ukrainians who are stuck within Ukraine and set up places for them in western parts of Ukraine closer to Lviv, or alternative is ones who got out to set them up in Krakow, at some point took the guys from Turkey and moved then also to Krakow.
Michael:
How many people do you still have that were physically in Ukraine?
Nir Zohar:
Physically in Ukraine, I think we're roughly 500 plus. And now in Poland. We're hiring, you have to remember. I think about Ukraine–some of my Ukrainian employees are bigger Zionists than some of the Israelis I know. And I try to have the same approach about Ukraine. I'm a Ukrainian nationalist, essentially.
Michael:
Are you still hiring in Ukraine?
Nir Zohar (01:09:27.254)
I really believe in Ukraine. It's an amazing place. I think when the war ends, they have a chance, which I hope they're going to take, to rebuild their country in a way that's going to be much better than it ever was. The people there have proven massive resilience, and a huge loyalty also to the company and to its values. The amount of support they gave us when the war started in Israel is unbelievable.
So yes, we were hiring, we built a new design hub in Ukraine with 50 designers. We announced it in Kiev in January. We're now, we have 30 plus employees out of the 50 that we want to hire, and we're going to get to 50 by in a few months. I think Ukraine is still going to be very big for us, even in the long run. And we have another, I would say roughly 300 Ukrainians who are working from outside of Ukraine, in Poland. Mostly in Poland. What's going to happen when the war ends? Will they return or try to stay in Poland?
Michael:
How many total people in Poland?
Nir Zohar:
Without Ukrainians? There's 14 Polish people in our... It's tiny.
Michael (01:10:41.315)
Okay. I don't think there's anybody with more wartime CEO or president experience than you. Because you've now done Ukraine, Russia and Israel.
Nir Zohar:
Yeah. But I feel I'm done. I don't need another one. I'm good.
Michael (01:11:00.49)
What would you tell a startup CEO in Israel, or Ukraine, or someone who might up in another war zone? What's the two or three biggest pieces of advice you can give them? And here, by the way, you ram people in reserve, they had people running away.
Nir Zohar:
People running away?
Michael:
There in Ukraine you had people running away. Here you had people in reserve duty. What would you say?
Nir Zohar:
I think that first and foremost, especially at the beginning in the early days of any conflict, forget about anything and worry about the people. For two reasons. One, or for a few reasons. One, if you try to get them to work, they're not going to work anyway. It's hopeless, because their mind is going to be distracted. We've seen it now with the conflict with Iran here in Israel. There was two weeks that were lost weeks. There's nothing to do about it. Okay.
Some people would want to work because that's how they get their mind at ease. And that's great. Allow that. But you will notice that everyone who's not called for any service is going to be unable to work. Maybe the best thing to do is to try to get them involved in helping out the other people. It creates an amazing amount of goodwill between people.
Nir Zohar (01:12:22.752)
It creates tremendous loyalty between the company and the company's values, and the teams and employees. And I think it's good business. Because if you're playing a long game, and I think any entrepreneur should think about themselves as playing the long game, think about the employees that you helped in this crisis.
Michael:
Let me interrupt you for a second. Like, you've been through two wars. Over a thousand people affected at a company of how many people?
Nir Zohar:
More than a thousand, because you have the Israelis about three thousand.
Michael:
Have you missed a quarter yet? Have you ever missed a quarter?
Nir Zohar:
No. It's a company, is above or below, but never missed a quarter.
Michael (01:13:10.19)
You never missed a quarter? Missed the delivery deadline?
Nir Zohar:
I adapted, change delivery deadlines. I think, when the war started, we said, “Okay, let's try and–” obviously in some teams that are responsible for critical stuff, now you're missing people, because they went on reserve or they're away for any other reason. And then you say, “Okay, I want to boost that team with other teams.” There's always priorities, right? You take lower priorities. You're willing to take that. They're not going to come out in the regional timeline, and you attach them to the more important stuff.
Michael:
Are you a better company today than you were before the war?
Nir Zohar:
I think for sure, but also, I don't think I should be naive about the fact that were there no wars in Ukraine and Israel, I would have delivered faster. That being said, we launched Wix Studio, which was our flagship product for 2023 on October 15, 2023.
Michael (01:14:10.508)
Eight days after October 7th.
Nir Zohar:
Eight days, and we said we have to do it. By the way, we announced the Base44 deal smack in the middle of the of the 12-day war, and everyone loved us for it, for finally giving them some news that didn't have to do anything with the war.
Michael:
When they were scrolling on their phones in the shelter in the middle of the night, they saw good news.
Nir Zohar:
Exactly.
Michael:
I want to go to two quick last questions. One, I want to take this full circle back to the beginning of the conversation. You talked about empowering people.
Nir Zohar:
Before you do, I just want to say one other thing about those people you help in a crisis. Ukrainians, Israelis, doesn't matter. First of all, you get their loyalty. They would make a tremendous effort for the company whenever they can, because they know that you've done the same for them when they needed you the most. Even if someday they leave you, because that's life, and it's fine, people are supposed to go on–they will always be your best ambassadors.
And that's super important, especially in an industry that is reliant on strong and smart talent.
Michael (01:15:17.144)
Yeah. Great point. Mark Tuluszcz, who's your pre-seed investor basically, or seed investor, has been the chairman of this company for 18 years at this point, almost. And he's still your chairman. Tell us about this in 60 seconds.
Nir Zohar (01:15:32.814)
I think it's a remarkable thing. Usually, VCs put money in the company. They stay with you a few years after the IPO in the best-case scenario. Then they exit the shares and then exit the company. Because why have the responsibility if you don't own the shares anymore? Mark is remarkable in the sense that he held shares for a long time and maximized an amazing return.
Michael:
Unbelievable.
Nir Zohar:
Unbelievable return. Actually, it's been many years now since they lost, Mangrove sold all of their shares, and Mark is still on the board and leading the board. iHe became part of the Wix DNA. An incredible guy. I want to say something about Mark Tluszcz and Israel, okay?
He's been, ever since the war started, I think he's been to Israel 10 or 12 times in a very short period of time. You know, what's the first time he got to Israel after the war started? He was here early December. Rockets were flying in Tel Aviv left and right. He was here on the ground coming to show support. His understanding of how to support entrepreneurs and how to support us was unbelievable. And he carried on with it and evolved with it to what we exist today.
Michael:
It's really incredible, and it's worthy of admiration. And he's not only an incredible investor, incredible mentor.
Nir Zohar (01:16:58.338)
Yeah, exactly.
Michael:
Early on, you talked about empowering people to do their best work. and setting them free and managing the process around them. I want you to tackle this in two ways. One is, the guild structure at Wix and how you built that. And the second thing is, you serve small businesses. And the whole business is about empowering people to go do this. And to talk about that–and the the state of small business–and after that, we'll wrap.
Nir Zohar:
Yeah, sure. I think the restructuring of Wix that was done in 2014, after the IPO, there were a lot of values that came out of the new structure, but it was first and foremost trying to serve the ability to make faster decisions. Now there's a whole list of other things that came with it, but first and foremost was about decision-making. And I'll explain.
We were growing. The eve of the IPO, we were about 450 people in the company, out of which about 250-ish were in the production cycle. Product people, UX, and mostly developers. And part of the reason we went public and we wanted to raise money was because we wanted to double up and grow to about 1,000 people.
It was about 18 months to double the size of the company. And when we thought about it, we said, “Okay, we don't know how to manage an organization–” that is, we were at the limit of the size that we know how to manage. And we don't really understand how to manage the next size up. And already now we got to the point where, when you want to make a big decision on a new product, so—the Head of UX wants to say something and the Head of Front end Development wants to say something, and the Server Development wants to say something. And you have at least three very smart product people who want to say something and you have two founders that definitely are going to say something. And you end up in this long string of slow decision-making on the most important capabilities and features in the company. The smaller ones are easier because people don't have an opinion or not that strong of an opinion. It's easier to move. But the important stuff is the stuff that it's hard to make a decision on. And the worst thing that can happen is that you end up having a ton of compromises. You end up building camels instead of horses.
Michael Eisenberg:
He is referring to a camel as a horse made by committee. Go ahead.
Nir Zohar:
We said, let's change that. Let's try and encapsulate teams in a way that decision making can be made in a very clear and easy manner. Let's create teams that are essentially small startups within the company. And because we're Israelis and we usually are not great at naming things, we ended up calling them companies. Within Wix there are companies, okay. And there are heads of–head of commerce and head of Wix Restaurants, and a head for the Editor, and a head for the Wix Studio, etc. etc. And the idea was that they will get the full-blown resources they need in order to take their tasks from A to Z. And I'm going to talk about the values of the resources in a second, but at the end of the pyramid, or at the top of the pyramid for the company, is going to be a Head of Company, which is a CEO and will appoint someone from the management team as their chairperson. And now we have two people who can make any decision on that product. And that's it.
And if I or Avishai have complaints, we can argue about it later, but they can make the decision. They're smart enough to know that in some decisions they want to come and seek our advice, but they can make any decision. And we have somebody to fight about making bad decisions, which is fine, but it's not a committee that voices their opinions. Now, it also allows us to encapsulate talent and create expertise, because if you're working in a certain company in Wix, that's where you are, and I can’t just pull you out and put you somewhere else.
Or I can, naturally, but I try not to. And other than me, almost no one else can. Which means that people stay in one place, they don't move around all the time. In the older days, whenever we had a new project, we'd take the best talent and move them around to the new thing. And you keep on getting V1s of things, never getting to the high quality V2, V3, or V4 where real value lies. Because frankly, V1 of almost any product I've ever experienced is lousy.
I owned the first iPhone, it was a horrible product. We managed to encapsulate talent, we managed to solve the decision making process, which was horrible. We also managed to understand how to build a methodology of professionalism that we didn't have before.
Because essentially you said, “Okay, now what are we going to do with the guy who was leading the server guild, the server team before we did this change, he's the strongest server developer in the company.” Now, before we did this, he was mostly managing tasks and applying people from one place to the other, blah, blah. He had very little time to deal with teaching people, creating methodologies, improving. I said, “Now let's take this person. Let's take this guy. We pull him out, we make him responsible for the server guild. If the companies are vertical, then the guilds are horizontal. And no matter who you are at Wix, you belong to a professional guild. And even if you work in a certain company, there's a professional guild behind you that takes you out every couple of weeks, and teaches you something new, and can comment about your level of professionalism and seniority, and are you getting better, and helps in the recruiting process, and bringing us the best server people into the company and making sure that we actually–maybe you're not doing a great job at a certain place, but you are a great professional. And the guild can say, you know, this guy, you know, the dynamics in his position are not the greatest ones, but let's not lose the talent between somewhere else.
Or alternatively, this guy has already moved in three different places. He's an asshole and we have to get rid of him. You have suddenly the horizontal layer that allows you to create methodology and keep on improving the company. Now, back then it was mildly important. Today it's extremely important, because we're a big company. I want all of my UX people to have a standard. I want all of my designers to have a standard and et cetera, et cetera, et cetera.
And I also want the guild teams to be the ones who are trying to figure out what's new. How do we improve everyone by, you know, absorb learning a new technology or something that has changed in our world? Because they're researching all the time, bringing it in, understanding how to apply it to our own needs at Wix, and then how to distribute it to everyone and improve the whole company, and not bits and pieces.
Michael Eisenberg:
How is AI going to affect the Wix customer, and small business growth or shrinkage in general? And then how will it affect Wix?
Nir Zohar:
Well, I think it will be–
Michael (01:24:26.808)
Are you bullish on small business? Even in the era of AI? Or moreso?
Nir Zohar:
I think some roles and some businesses are going to go away naturally. I think others are going to flourish. Definitely services and anything that's physical. Maybe robotics will also change that over time, but time will tell. This is not something that's just, not in the next couple of years. I think that the work environment within tech companies is going to significantly change because of AI. I think people are going to have to re-adapt habits of self-learning and curiosity.
Michael:
Are your team members all using AI coding help?
Nir Zohar (01:25:10.862)
They are all using something, and we are doing a massive internal effort to create new methodology and experience where it's–not only everyone uses AI, but also the flow process between the different disciplines, from product to UX to R&D, incorporates different pieces of AI functionality or AI capabilities that creates a cohesive work process that fits a bigger company and not only smaller.
Michael:
Have you seen a productivity increase already?
Nir Zohar:
Already seen a productivity increase, but I think the big one is still ahead of us.
Michael (01:25:49.548)
Bullish on small businesses around the world? Or bearish?
Nir Zohar:
Bullish.
Michael:
Very bullish?
Nir Zohar:
Yeah.
Michael:
You see it in the economy right now?
Nir Zohar:
I see it starting. We're not fully back to where we before. I think they're still suffering, and the economy is still very volatile, and sadly they feel it before anyone else. They don't have cash reserves.
Michael (01:26:14.166)
Last question I ask everybody. Who's somebody you want to highlight who you think deserves more attention than they get now?
Nir Zohar:
Globally, just in general, you mean? My wife. Always.
Michael:
Fair enough. Nir Zohar, thank you for joining. This is great.
Nir Zohar:
Pleasure. Thank you, Michael.
Michael (01:26:33.996)
If you enjoyed the podcast, please rate us five stars on Spotify, Apple Podcasts, subscribe to the YouTube channel, and we're gonna add to the show notes the links to the Super Bowl commercials, because you'll enjoy watching them. Thanks for joining.
Gigi (00:00.098)
We're seeing a train wreck, and we're not doing anything, because we feel that it's not in our powers.
Technology has got to this junction where I'm not as 100% sure that it's definitely making the world a better place, again, and again, and again, the way I was sure before.
If I ever hear you say that again, that's gonna be the end of your career in the Air Force. Because if you didn't learn anything, there's just no point of putting you in a plane.
Openly saying what we did wrong and what could go better and that we failed can get you promoted.
Michael Eisenberg:
Can I ask you how you feel about being in the gaming business?
Gigi:
In the gaming gambling business or in the gaming gaming business?
Michael Eisenberg:
Gaming gambling business.
Gigi:
It wasn't an easy decision for me.
I invested in 150 companies as an angel.
Michael:
What was the best one?
Gigi:
Define best.
Michael:
The highest return.
Gigi:
The highest return in multiple, or in absolute money?
Michael (00:40.321)
You're making this difficult.
Who keeps the headlines coming?
Gigi:
It's not as if you don't know about headlines.
Michael (00:53.44)
Ouch!
I am thrilled to be back with another episode of Invested with my friend, great investor, great entrepreneur, great CEO, Gigi Levy.
Gigi:
Nice to be here. Thanks for having me.
Michael:
Gigi, I think the thing that most of our listeners are invested in is–what is your real name?
Gigi:
Wow. Gigi. You know, usually when people ask me, I say that Gigi is short for Gigigi. But the reality is that like many people in Israel, I was born to a family that lost somebody in the military. My uncle, before I was born, of course. And my mother wanted to call me after him. His name was Giora. But she didn't want to call me his name. So she invented a name: Gigi. That was not his nickname. And what I only found out recently is that actually, I was not born GigiI was born Gigi-Giora. And a week later she decided that she doesn't want to even have that name. And she went and she changed it from Gigi Giora to just Gigi. So I'm like Gigi from a week old.
Michael (01:59.726)
Wow. Are there any other Gigi's in the country?
Gigi:
Not that I know. There is, though, one lady called Gigi Levy, or probably Gi-gi Levy, because she lives in Arkansas, and she used to have a catering service older than me. She used to have a catering service in Arkansas. And the only reason I know this is because like I think 15 years ago, I get an email from Gigi Levy and she's complaining that nobody can find her on Google anymore, because I took all the Gigi Levy SEO results. And she says, can you do something about it? And I try to explain to a lady from Arkansas that even with all the connections I have, not that I want, but even if I wanted, I'm not going to be able to put her at the top of the search results for Gigi Levy. So there's another Gigi Levy, but I'm not familiar with many other Gigies in Israel.
Michael:
Amazing. Okay. So for the listeners who don't know, Gigi was a fighter pilot.
Gigi:
Attack helicopter. We make the distinction very...
Michael (03:06.072)
Okay, attack helicopter pilot.
Michael (03:10.062)
He steered 888 Holdings, which is an online gaming company, through the global meltdown.
Is that fair?
Gigi:
Yeah, an entrepreneur before, then went to work for some companies, then got back to entrepreneurship.
Michael:
Then you sold Playtika.
Gigi:
Started and sold it.
Michael (03:27.598)
Now you're a venture capitalist.
Gigi:
Was an angel in between.
Michael:
Was an angel in between, we skipped that. We're going to come back to all of these. And you've been through a lot up and downs, and we're going to talk about the judicial reform also to bring another element into your varied life–and an opinion leader around the world at this point.
Gigi (03:45.27)
Well, you know, trying to follow your footsteps.
Michael:
What's the one value that defines Gigi Levy, that's kind of taken you through all of these various career turns and life turns?
Gigi:
Do we have a couple of hours? You know, it's a big question because I think that it changed dramatically over the years. Like if you asked me many years ago, after coming out of the Air Force, I think that it would be probably excellence, like doing things really, really well, and constantly debriefing and getting better. And then over the years, I think when I was an entrepreneur, I was very focused on speed. And as an investor, I think we spoke about it many times how speed determines many times, the chances of a startup, and tons of other things.
In my social involvement, there were some other values, but I think that over the years, what I figured out–and it's going to sound like a horrible cliche, but it's the truth–what I figured out is that the one value that kind of runs through everything I do, for me, like inside, cliche warning, is love. It's love for what I do, it's love for people, love for my family, love for my people, love for my country, love for the amazing job I have, love for tech entrepreneurship and how it changes the world and makes the world a better place. And the common denominator of all of it is that, and I know it sounds cliche, but that's actually what I feel.
Michael:
It's not cliche at all. You're the first person to ever say that. It makes it not cliche.
I want to talk about something you alluded to at the beginning, which is, you thought initially, excellence and debriefing. Being an attack helicopter pilot, or being in the Israeli Air Force has a culture to it. Do you want to spend a second describing it?
Gigi:
I think that what people don't know–everybody knows how phenomenal the Israeli Air Force is, especially now after the last war, and the amazing achievements that are just seriously unprecedented in every form, and every number that you can analyze it by. But what people don't know is that the Israeli Air Force produces the best pilots in the world with generally one of the lowest number of flight hours per pilot, which is basically saving resources. At the end of the day, you get good people, you give them hours of training, they come out pilots. And the question was always, how is that possible? And the answer is a constant learning cycle. And I think that, I took many things from the Air Force, but the one thing that I took more than anything else is this learning cycle. I even wrote once a piece about it called the Learning Organization that I'll mention in a second.
And in the Israeli Air Force, the first thing that you learn, before the first flight, they start pounding into you that we're spending all that money on you, and you're going to go up and fly, and go back down just because the purpose of this flight is not to make the exercise. The purpose is to learn. And so how do you learn? You prepare, and you tell yourself what you're going to do and what you need to improve. You then go, execute it. Every time you execute it,
you stop and you say, “Okay, what did I do well? What didn't go well? Why didn't it go well? What do I need to do better for the next cycle?” And you do it again and again.
You finish the flight, you go down, you land, and the first thing you do, you write a debrief. This debrief goes and says, “This is what I said I'm going to do. This is what actually happened. This is my assumption on why. This is how I'm going to get better in the next flight.” And again and again. And I think that, you know, every pilot has this point where you have this perfect flight, everything goes really well. You come down and you sit with the instructor, and the instructor says, “What did you think?”
And you say, “I think it was amazing.” And he said, “Okay, what else do you have to say?” You said, “I think it was a really good flight.” Because you're young and cocky, and it was a good flight. And then he looks at you and says, and everybody as an instructor gets to a point where you tell them, somebody says, “If I ever hear you say that again, that's going to be the end of your career in the Air Force. Because if you didn't learn anything, there's just no point in putting you in a plane.” And I think that this is a methodology that when you embed it into everything you do, becomes so powerful, because the first thing is that we are all used to, we're always told to learn from our failures. Something didn't go well, why didn't it go well? We invested in somebody, there were bad signs. He didn't really reply to emails on time, even when we invested.
We could have known that he's going to be lazy, or slow, or whatever later on. That's fine. But we hardly ever stopped to learn from things that went okay, or things that went really well. And the reality is that you need to learn from everything. And the Israeli Air Force focuses on learning from everything all the time. And I took it into my life, and I try to give it to my kids. And I try to tell my companies that this is the only way to succeed.
And I'll just say one last thing about it, is that, if you think about it, startup life is iterations, right? You iterate to try. It goes well, you iterate again, again, again, and you improve. Now assume that through this learning process, you can make every iteration only 10% better. That's it, only 10% better, not 200% but every iteration. In 10 cycles, you're gonna be twice as good as the other person that's not doing that. And so this is really critical to the way you work, and I think this is a big blessing.
Gigi (09:32.386)
We then founded a non-for-profit that did this for NGOs, for the improvement of NGOs. And then the subset of this did this for medical professionals. And so I think that this is really a critical tool set that I have, and that everybody that came to the Israeli Air Force had. For years, we tried, I think, to try and push it into the rest of the Israeli military in the same form. Some parts took it, others less, but it is a phenomenal tool.
Michael:
How do you create an environment that's a group where it's safe to talk about failures, and it's a self-improvement cycle and not embarrassing? It's a team improvement cycle and not debilitating?
Gigi:
You're right. This is the biggest question, because everybody can repeat the methodology and say that you should do this. And as you know, we mentioned the army, there's many places in the Israeli military that tried and couldn't succeed. And I think that the secret is behavior. You know, as a father to–we always say you have more kids than I have, you know more than me–that at the end of the day, you can speak values as much as you want. If you don't act the values, the kids don't absorb them. You can say ‘friendship’ as much as you want, but then if you treat your friends not properly, then the kids will see that there is no friendship as a value.
Similarly, there are two things in the Israeli Air Force that make this possible that I tried, always, to create in companies that I ran. And I think that other people are doing it as well, and doing it well. The first thing is that if you do not debrief openly and transparently yourself, you can't expect your employees to do that. We lost a deal. You know, I'm the CEO. As a CEO, it's my responsibility. If I don't stand in front of everybody and explain what I learned and why, how can I expect somebody else to do that? That's the first thing.
The second thing, which is harder–this one is relatively easy, because I'm the CEO, the employees are not going to fire me. They're going to say, “Wow, great, he's transparent, that's great.” The second thing that is harder is to really act on the promise that debriefing openly and transparently is not going to get you fired, it’s not going to get you mistreated. Now, there is, of course, a big issue in this. And this big issue is also a big issue in the Air Force. I’ll mention it in a second–which is that there basically are two types of failures you can debrief.
The first time in the debrief are what we call good failures. We really tried, everybody worked hard, the assumptions were good, we delivered on time, we delivered a good product, but it didn't work, it happens, it happens to all of us. Or suddenly we prepared everything, and then Google came out with a product before us, and they're not charging anything for it, and they're winning. These are good failures.
And then there's bad failures. The team didn't work well, they kept on fighting. They didn't deliver on time. Everybody took a vacation when they shouldn't have taken, whatever. And I think the secret is to really act well on the learnings and the debriefing of good failures. Which means that if everything worked according to the way people should work, then openly saying what we did wrong, and what could go better, and that we failed can get you promoted.
Why? Because this is not about the failure. At the same time, if you start acting the same way for the bad failures, then you're making your company a bad company. In the Israeli Air Force, the equivalent is you failed the mission because it was hard, and eventually you tried to put the missile in the target, and you missed the speed. If for some reason there was wind, you couldn't hit the target. And that's a good failure, and you need to learn from it. And a bad failure is that you didn't go to sleep on time, and you didn't brief well, and the maps were not prepared the way they were supposed to be prepared or whatever. And then you failed the mission. And for that, you should be punished or whatever the consequences are. And if you manage to make this distinction between these two types of failures, it suddenly makes it easy to celebrate the good failures, celebrate as in debriefing and learning from them.
And in one of the companies that I ran, in the happy hours where we used to celebrate successes, every once in awhile we took a good failure, and we celebrated a good failure, because we wanted to say, as long as everything was working the way it should, the fact that we didn't succeed, there's going to be many products, many projects, many iterations. It's okay to not succeed in each one of them, but we understand it's a good failure. And that's a secret to enable it in our organization.
Michael Eisenberg:
What's a good example to give from that company where at a happy hour you celebrated–tell me the good failure that you celebrated.
Gigi Levy:
I'll take a games company where there was a thesis that there's going to be a new version of the game that customers are really going to like. There was a study, like a test group that actually liked it. This version was developed. It was put out. And just like the initial study predicted, users initially liked it. But when you ran it over a period of a few weeks, you saw that initial traction was good.
But then they started using it less and less and less. We tested, and we found out that eventually they like this mode of playing less, because there's like fairy dust sometimes in games that you don't really understand 100%. And so we defaulted to the previous one, and we went to the next trial. And so, you know, from that perspective, they delivered on time, they did it properly. The quality was good. There wasn't a technical problem. They did it with great energy and great teamwork. They put it out. That didn't work. It's fine.
Michael (15:28.344)
Did you promote them?
Gigi Levy:
I didn't promote them, but they didn't lose their job, or they didn't get to not work on the next one. Right? You know, we said, “Okay, guys, great. You know, this was a good try. What's the next thesis?”
Michael (15:43.106)
I have to ask a generic question on that. Because it's being talked a lot about a lot in Israel, it’s talked a lot about in politics, it's talked a lot about in business. Is it better to take someone who's failed at something, and kind of has the battle scars of having failed and maybe learned the lessons, and was there and interacted, and tried it and to kind of fix the problem, or move on to the next one because they'll get it better the next time? Or do you want a fresh pair of eyes on something like this?
Gigi Levy:
You know, that's a very charged question, especially here in Israel these days, or ever, I guess. I think the reality is somewhere in between. I think that you do not want to take a complex problem and throw somebody that has less experience, or no experience, in solving it, especially in country’s issues where, you know, just having goodwill may not be enough. I mean, let's take whatever an Israeli military situation, you know, if it's super complex.
You don't want to take somebody who's a great business person, and comes like a clean slate, and let him be the head of the army, right? That doesn't make sense. The flip side of it is that at a certain point, you want people to take responsibility, which means that you want people that failed. We want our people and we want our country to behave as if failure has consequences. We're not throwing people to...
Michael Eisenberg:
In the Gulag.
Gigi Levy:
Exactly. And no guillotines here yet. There's so many jokes here running between us.
Michael Eisenberg:
We have so many hours together, we can get a lot of jokes done.
Gigi (17:21.55)
But I guess, I'll take two very specific examples without going into politics at all. I think that what happened with the Chief of Staff and the Head of the Secret Service of Israel, both of them failed on the 7th of October, their organizations failed. Both of them, let's say more or less, took a year where they were the best people in place to continue running the organization, so there wouldn't be a shock, and so that they can do whatever they can in this period, and then leave because they also failed on the 7th of October. I think that's a good balance between the two.
I think that if we let both of them go immediately, and we put people that did not know the system as well or were not in place, then we might have been in a worse off position ourselves. I think that if we just let them continue running forever, because they did well after that, that would have created an anomaly in the way people think about responsibility, which we don't want in our country. And so I think that there is a balance in between.
Michael Eisenberg:
If you take the business world, how would the rubber hit the road in the business world?
Gigi (19:05.612)
Well, I invested, over the years, in more than 200 companies. And I think that the number of times where there was a CEO replacement, founder-CEO replacement, is very minimal. And I recall correctly in all of these cases, it was a decision together with the CEO. And that is because I don't think I had any failure, the magnitude or fraud, or whatever the magnitude, that forced me to let somebody go. And I never think that the company's mine. What I give is commodity. What they give is their lives. I give money, we give money and help, but essentially money, that's commodity, and they give their lives. They give the best years of their lives. And so I never say it's my company. I joined the journey, it's their journey. And so I think that in the business world, I would expect CEOs to be best positioned to continue running their company unless there's fraud–
Michael Eisenberg:
Founders.
Gigi Levy:
Founder-CEOs, yeah, to continue running their companies, unless there's fraud or is a big material issue. Even if they fail along the way.
Michael Eisenberg:
If I ask that question to Bill Gurley, I think I'd get a different answer for it. Perhaps, you’d say, there wasn't a big issue, so I didn't move out most of those CEOs, but perhaps, had you moved out the CEOs, you would have seen much more upside. And investors and founders are partners in the company, right? Aren't they partners?
Gigi (20:10.158)
Well, they're partners, but I would argue that there is a big difference between different venture capitalists and the weights they see in the partnership between those that created the company and give their lives to it, and those that sit on board meetings and gave money–usually money that they collected from others as well, right? That they're managing for others. And I would be probably at the extreme side of thinking that my side of the partnership is lighter than the side of the person giving, the founder giving his life to the company for many years.
I think that in this, I would say two things. The first thing is that, it is possible that replacing some of the CEOs that didn't do as well in my portfolio over the years would have been better for my financial results–possibly. I would say two things on it.
The first thing is that I have a few examples, that I'm not going to name because of what I'm going to say, where doing this–and it was recommended by other investors–would I think of this? I don't know, because there's no A/B testing, but it might've destroyed the company. Founders that eventually learned, eventually got better. And the mojo of being a founder, the energy of being able to continue pulling the companies on your shoulders, carrying it on your shoulders, because it's your baby. You're not a hired gun. You're not somebody that, you know, they told you that there's 20 million ARR, you come in, you see it’s actually 10 and, you know, and they told you there's going to be money for five years and there's actually money for, you know, the way it happens. And then you're the hired gun, and you know, one month, two months, three months, four months, and you're like, “Fine, we've got to sell it. We've got to do something.” And so I think that overall, when they look at my experience and clearly we're all kind of stamped by our experience.
And Bill clearly has more experience than me in larger companies, so I don't say that I'm smarter in any way. But for me over the years, the combination of the cases in which leaving the founders went well, together with my ethos, which may be wrong and maybe less financially astute, that it's not my company. And there's got to be a really good reason for me to move it. And then, coupled with the fact that I think that in some of the best deals I managed to get into because it's a competitive space. One of the reasons is that I got into it is because at the end of the day, people looked and said, “He may not be the smartest, maybe, but he's always on the side of the founders. He's always supporting the founders.” I don't know 100%, but I would assume this has something in it. I think that these things combined would lead me to still, despite Bill maybe proving it with numbers, me feeling that at the end of the day, this is a better choice for me.
Michael Eisenberg:
There's an underlying assumption also in what you say, which is the other side of it, which is you assume that the founder would prefer to run the company than make money sometimes.
Gigi Levy:
As I said, it's not that I never had cases where founders left the company. And when they went through the motion of thinking about it and eventually believing that it's better for them to bring somebody else and make money, or sell their shares now and whatever–
But you might think it's better for them. They can make money, you know, by moving themselves out of the CEO role. You must think that sometimes. Come on.
Gigi (23:34.999)
Definitely. Yeah. And I always would have a very open conversation with them
Michael Eisenberg:
And ask do you want to make money or do prefer to stay a CEO?
Gigi:
You know, I would say, “Look, I think that there is an opportunity here to bring somebody else.” You know, I would be very open about what kind of person we can bring. Maybe I would be open on why I think this may be a better choice. I would be open on the risks and why I think this could end up being horrible. I would speak to the founder and explain what would be his or her routes to monetization, to cashing out at some point.
And I would leave it to them to decide.
Michael Eisenberg:
What’s the story of 888?
Gigi Levy:
I was not a founder of 888. So after founding a few companies, I decided that the biggest thing I miss is experience in large companies.
Michael Eisenberg:
What happened to the first companies you founded?
Gigi Levy:
The first one was horrible. I thought I was smart. Second one got sold in 1998.
Michael Eisenberg:
What company was that?
Gigi (24:40.802)
It was my company. I was the only shareholder. I didn't raise any capital.
Michael (24:27.95)
Gigiginc?
Gigi Levy:
It was called GIDAN, G-I-D-A-N, actually, long story. And basically it got sold for a few millions. It was doing building automation over IP. I mean, that was a big thing back then. And it was a local sale, and I made money, more than I thought I'm going to ever make as a kid coming out of the military, but really not enough to stop working or anything else.
And basically I went to go work at a larger company and a friend of mine from my MBA brought me to Amdocs, and I ran a division in Amdocs for two years. I was very fortunate I got into Amdocs, to run one customer, and we ended up selling like a hundred-million dollar deal very quickly. That was not my doing. It was the great team that was there. And that got me promoted, and eventually I found myself running for a few years a large part of it.
I think Amdocs was amazing for me. I think I learned a lot about what works, but I also learned a lot on what not to do. I think that when you go to work in a large company, you learn a lot about what makes large companies slow, and what makes them problematic. so, you know, it was great for me. And then I get a call from a headhunter and the headhunter says–wait, sorry. Before that, my wife gets pregnant and we had an agreement. I was flying every week. I was running Europe and Latin America from Israel. So on planes, living on planes, millions of miles every year. And basically my wife gets pregnant, and we had an agreement that when we pass the three months and we know that the pregnancy is real, I resign. Because she's not gonna be a lonely mother. And so I go and I tell the company that I want to resign.
They convinced me to stay just a bit more, and I started thinking about what I want to do next, and I get a call from a headhunter that says, “Are you familiar with the company called Random Logic?” I said, “I heard about it.” And at the time, you know the for people that don't know the Israeli B2C tech sector, basically it started with ICQ many many years back.
Michael (27:00.174)
For those who don't remember because they're really young, that was the first instant messaging company in the world. The company was called Mirabilis, and the product was called ICQ.
Gigi (27:33.134)
Exactly. It was sold for $400 million to AOL. Some amazing founders, like Yossi Vardi. And basically later on, the entire Israel tech ecosystem focused around two areas. Sorry, the B2C tech ecosystem. The first one was online gaming-gambling. And the second one was the EdTech ecosystem.And for many years, if you wanted to touch B2C in Israel, these were the things, it’s pre-Wix, pre-Monday, pre-all these amazing companies.
Michael Eisenberg:
I was doing comparison shopping at the time. Shopping.com
Gigi Levy:
Yeah, but then you did Conduit.
Michael Eisenberg:
Exactly.
We all touched these industries. So I knew about this company, and being that I really, really, really wanted to move into internet. And I felt that I know nothing about it, because I think I was in charge of some of the internet projects in Amdocs, which was like, how do we sell to telecom operators, internet portals or something? But it was so disconnected to the world of internet.
Michael Eisenberg:
They bought that company at the time in California, I'm blanking on the name of it right now, that did like internet portals, whatever.
Gigi (28:19.534)
And so, you know, I go to meet the founders and I see that there's a real B2C hardcore company in Israel. It was traded in London at the time.
Michael:
On the AIM, right?
Gigi Levy:
On the AIM. Wait, no, LSE, not AIM. And basically the CEO that took the company public got ill, and they were looking for a replacement. And they offered me the job. And on one hand, I have to say that it was a very legal company and you know, it's an online gambling company and very legal, working by regulation and so on. I wasn't excited about the field. I really wasn't a gambler in any way. It's not my character. I think I visited a casino like once or twice in my life before that. But I got convinced by the founding team that this was an amazing internet company that happens to sell a game-gambling company, a good product, and there were amazing people there, and I took the decision that I'm going to do this for a few years.
I think that in various ways it really taught me a lot of what I know today. They were really at the forefront of attribution marketing, at the forefront of optimization, at the forefront of A/B testing, at the forefront of customization and segmentation. Really, really amazing, amazing people. The main technical founder, Shay Ben-Yitzhak, later on died in a plane accident. He was also, he was a hobbyist pilot, and usually a great pilot. And he was really one of the smartest people, and super knowledgeable, and super experienced. And I saw it as a huge opportunity for myself to learn. So I took the role. It ended up being a really, really interesting experience because, I remember I'll tell this, I don't think I ever told this story.
The first board meeting, joining the company, the board meeting was in Gibraltar and the first board meeting, the discussion was–the company was making like 90 million net profit. And the discussion was, literally, most of the board meeting, what private jet are we buying, because the trips to Gibraltar are such a pain. And I was not working in the company yet. I was like a guest to the board meeting, and I was like, “Yeah, finally, you nailed the job you deserve.”
Like the parties, and the jets, like that's finally, all this hard work, all this B2B stuff and all this selling to telecom operators. That's not for you. This is the company you want. And so I, you know, I go back home, I tell the story. I'm super happy about it. I joined the company in June. I have a review with the legal counsel, the GLC, the company, like a month later, and he tells me, “You know, there's this thing happening in the United States, where every year they try to pass a bill to shut down the US market, and every year they fail.” And I go like, “What do you mean, shut down?” “You know, shut down.” I go, “Like, completely?” He said, “Yeah, completely.” I go “Okay, but that's like 82% of our business.” But yeah, but every year they try, it never works. And, luckily for me, I was such a nerd and a paranoid that I called everybody, the VPs, and I said, “Guys, what are we doing if this bill passes?” And they go like, “It never passes, it's fine.”
And I’m like, “No, but let's see, indulge me. What happens if it does?” And so we started looking at the numbers, and we see that we're gonna have to cut the company, you know, like 60, 70%. And so I go like, “Okay guys, it's our responsibility to be ready. I know it's not gonna happen. Everybody tells me it's not gonna happen. The board doesn't even–okay, it’s many years ago–the board doesn't even have a serious discussion about what happens if it happens. And you know, October, when my wife is actually in some some medical checks in the hospital, Yom Kippur, and she's like eight months or something. And Friday evening, the bill passes.
And I get a call, and it’s the lobbyist in the United States in Washington, and he says, “I have bad news, and I have very bad news.” I go, like, “Okay, this is hard. What’s the very bad news?” “The very bad news is that I don't think you should come to the US any time soon.” I’m like, “Okay that's very bad news. What was the bad news?” “That the bill passed.” And so, emergency board meeting and everything, and we're the first company to announce that we're gonna withdraw from the market, which, by the way, saved us later on, because we ended up with no allegations and we never paid a fine.
And we then were the first one to get a license in the United States in collaboration with Harris Entertainment. And we were licensed in Vegas, and long story. Being the first one to pull out, being the first one to do the right thing, being the first one to say we're gonna take the hit, went a long way. But from my private jet, you know, partying thing, I ended up running a company in distress. I had to fire, we fired 60% of the people. We repurposed everything we did. We started going after European licenses and, you know, in European activities, we doubled down with, the company went from $300 million revenues and 90 profit to less than a hundred million revenues and loss making. And, you know, when I left the company after a few years, we were around the same numbers that we were before, only without the US and with the license in the United States that they were just kicking in. I did this for altogether five years. I think they were amazing learning years. I think that, from my analysis, I probably stayed too long.
There's a lot of discussion in Israel about how many terms you can run something, right? For those that don't know, Israel does not have a term limit at all, as we are experiencing. And the reality is that after running a company for five years, you know, it felt to me that somebody else could put more new energy into it. And maybe it was also a very tiring few years. In these few years, I also had three kids, one after the other. And I ended up traveling a lot more than I thought. And I ended up dealing with a lot more legal stuff than I ever thought I'm going to deal with. And you know, DOJ discussion, and this and that. It all ended well eventually. But it was more than I bargained for, for sure.
Michael Eisenberg:
How many times did you go to Gibraltar?
Gigi Levy:
Tens of times. There's amazing monkeys there.
Michael Eisenberg:
Amazing monkeys. Not much more to do there though.
Gigi (35:28.642)
And horrible food. And an amazing base, if you ever go there, there's like a secretive NATO base from submarines that's phenomenal.
Michael Eisenberg:
I've been there, but I didn't get to the submarine base. Did get to the monkeys, a few times. They’re aggressive, those monkeys. Not as aggressive as the regulators.
Gigi Levy:
Well, the regulators in Gibraltar are not very aggressive. Yeah. I think my learning from it is that, very often, pursuing an opportunity where you can learn in a concentrated manner, so much is life-changing. Many times when people ask me about job advice, where to go, you know, one of my questions to them is, “How much are you going to learn? Like, is the company, the field, the role, the environment of people, is it going to be a learning experience? Because many times it is possible that if you go and work for whatever, for two years in Monday or in you know, globally or something, you're gonna come out so so much smarter, so much more experienced, that despite–maybe you want to be a founder, it's fine, but you know it is possible that working for a couple of years somewhere is going to get you so much more experience, so much smarter.
Michael Eisenberg:
What's the biggest change that happened to you during those five years? Other than the three children.
Gigi Levy:
First of all, I think I became data-driven, and this is on the business side. I became data-driven, and data obsessed more than I was ever before. I think that being a B2B guy before, I loved data pipelines, and this and that and whatever, but the data was not part of our daily decision making.
At 888, I started my morning every day with half an hour of looking at numbers as a CEO.
Half an hour of looking at numbers, and building customer reports that I could use, which today are much easier to do, of course, that gave me an amazing perspective of how I should run my day, and what should I talk to my management about, and what should I talk to the employees that I meet about. And so I became really data obsessed, which was very material in the way I also try to help entrepreneurs, or try to coach them. That's one thing.
Second thing is that I became, more than ever, obsessed with just recruiting the best people I can, literally the best people I can. Because in Amdocs, I ran more people, but this was like a couple of thousand people. And I came to the company and it had great management, but many of the people in the management got very tired after we had to–you know, they were coming from the days of glory, and it became very tiring.
And many of them retired and wanted to leave, and we had to bring new people. And I think some of the people I brought were amazing. Some of them were not as amazing, and I learned from it. I think that in this company more than anywhere else, I got–there's this thing I tell founders many times, that when you bring the right person to the right role, there's like a sigh of relief in the organization. You don't understand, until it happens, how it feels.
Michael:
Do you hire for experience or upside?
Gigi (38:57.334)
I hire first and foremost for talent. So I think that I would always prefer somebody who I think has the ability to be better at upside, as you called it, with the minimal experience threshold. The statement I always tell people is, ‘train for skill and hire for attitude.’
And it's worked for me so many times over the years, and it also worked for me as an employee when I got hired myself. And I think that at the end of the day, I would always, always, always teach people to take the most talented people they can, with enough experience to not make it stupid. Like you wouldn't take, you know, an amazing person who was, whatever it was, Head of HR and let them be the VP R&D just because they're super talented, or the other way around.
But I think that in choosing between two, I would always, always optimize for talent, and it always worked well for me.
Michael (40:03.758)
We switched from 888 to Playtika.
Gigi Levy:
Yeah. Well, I started Playtika.
Michael Eisenberg:
You started Playtika. Tell us about Playtika.
Gigi Levy:
Playtika, like every company, has a funny story. Again, today in the political context in Israel it sounds funny, but I met Yitzchak Mirilashvili, who's today the owner of Channel 14, which is the Israeli Fox News, and we're today on very different side of the political map here, but I met him when he was then the owner of VK, the Russian social network.
Michael Eisenberg:
VKontakte.
Gigi Levy:
Vkontakte, and which was run by Pavel, who's the founder of Telegram. So it's all a very small…and at the time, Yitzchak told me, at the time it was called Slava, he told me that they're opening a games ecosystem on VK. And I was already doing games on Facebook, and I said, “How large is this going to be?” And he gave me the numbers, and it looked like something real. And then I looked at a bunch of other social networks at the time in Korea and in Japan. I said, “Wow.”
Michael Eisenberg:
Was thatl..?
Gigi (41:13.346)
In Korea, back then we looked mostly at–Line was growing then. And I said, “Okay, there's a huge opportunity here. We can build a secondary social networks gaming company, and that's gonna be great.” So I ended up talking to a good friend, and a guy called Uri Shahak, who was a game designer that I knew. He worked for 888 for awhile, but I knew him actually from, he was in my wife's very wide circle of friends that she has.
But he was a good friend, and I met him and I said, “Look man,” and you know, to make things funny, we had this conversation over a game of backgammon. And later on we found that a company called Beach Bump, that was a backgammon company, that sold for $400 million. So it's like all interconnected. And I said, “Uri, why don't you go in and investigate this? Here's some money. Let's see whether we can build this.” And he said, “But I don't understand Russian.” I said, “Okay, great, find somebody.” So he found somebody that helped him with Russian. He came back, and he said, “Let's do this.”
We started building. I put in the initial money, then we raised some capital, then we had a third founder join, Robert Anticole, who is now the CEO. Another great guy. And we started building it. And the first game we built was really good. And we released it on VK, and it made like $150,000 a month, and we were super happy.
Michael Eisenberg:
$150,000 or rubles?
Gigi Levy:
No, dollars. And then we were planning to do the second game, but there was like a gap in the game design timing. And Uri said, “I want to do a slots game.” And I said, “What do you mean? Like a gambling game?” He said, “No, no, no, I want to do a game that uses the mechanic of slots, but it's not for real money. It just, you play around with games, and the games change, and you can see more and more things and you know, more graphics.” And I'm like, “You're the game designer, that's fine.”
And he creates his game. We call it Slotomania. And this game goes up, and you know, the first game did like $150,000 and this is like four months after we started the company. The first game did like $150,000 a month, and this game did almost immediately double that. Like, great! A few days later, they literally come to me and say, and this is a story where you talk about how you can be as a founder or investor, stupid. And they come to me and say, “This game is doing so well. We want to put it also on Facebook.” And I go like, “Whoa, guys, wait a second. We said we're doing secondary social networks, and we raised capital based on this thesis. And you guys know nothing about Facebook, and Facebook is such a competitive market. I just spent time with Mark Pincus, and you know, I know what they're doing with Zynga,and this is like a game of so much money. But if you want to put it there, do you plan to spend any marketing? We don't have a lot of money.”
They say, “No, we're just going to put it there.” That's never going to work. But you know what? Fine. They put the game on. In the second day, the game makes more money than it does on the Russian social network in a whole month. By the way, up till today, we don't know why. There were some bugs in the Facebook search system, and we were featured.
There's a guy called Sean Ryan, amazing guy, that ran the games ecosystem, Kevin's brother.
And Sean tried to help us and guide us, and maybe there was a bug in the search and every time somebody typed an ‘S’ they found us. It just went through the roof, and before we knew it, the company was making around $300,000 a day. And then we got an acquisition offer, and we ended up selling the company, which altogether was kind of a $200 million deal, to Harris, which was then called Caesar's Interactive. One of the reasons we ended up selling the company is that the night before signing the deal, we're sitting and drinking and, should we sign it, shouldn't we sign it, should we sell it, shouldn't we sell it? And then eventually I asked, “Robert and I, we're both,” you know, I was more financially successful by then because of previous things. So I said, “Look guys, you want the money more than I do. It is very acceptable. I'm deferring the question to you.” And they said, “No, we want you to,” and we went on and on and on. And then I said, “You know what? I have a question for you. Let's say that we start from scratch. Do you know how to make it that successful again?” They look at each other and say, “We're not sure.” I said, “Okay, we're selling.”
Michael (46:01.742)
Tell that to the acquirer though.
Gigi Levy:
No, but the acquirer then sold it for $4.4 billion.
Michael:
Yeah. They did just fine. Harris, Caesars did just fine on Playtika.
Gigi Levy:
It was not even them. It was the outside shareholders. A long story there as well.
Michael (46:17.582)
Can I ask you how you feel about being in the gaming business?
Gigi Levy:
In the gaming-gambling business or in the gaming gaming business?
Michael Eisenberg:
Gaming gambling business.
Gigi Levy:
So first off, I'm not in this business anymore.
Michael Eisenberg:
But you used to be, though.
Gigi (46:51.886)
Yeah. When I was in 888. So I think that, I kind of mentioned that it wasn't an easy decision for me. It wasn't an easy decision, because on one the hand, it was all fully regulated and legit, and it was only in countries where gambling was permitted anyhow, and people are gambling anyways. And it had all these responsible gambling practices to it, and we had the algorithms that when somebody was spiraling out of control, we blocked their accounts. All true.
And still, when I looked at everything I did in my life and then looked at gambling, it was very different. And it was not necessarily selling billing systems is the highest ethical thing you can do in your life. But definitely, I don't think that any billing systems hurt the customers. I don't think that billing system generally could create any pain, and gambling can. And so I think that it was a long thought process for me, at the end of which, and after looking that it's really legit, and many customers that spend not that much money, and so on and so on, ended up making the judgment call that I'm fine with it, and that I'm going to do it because of the learning opportunity and everything. I truly believe that it was a lot of entertainment. I also truly believe that I had a CMO that came from Johnson & Johnson that used to say that he feels much better in 888, because in Johnson & Johnson, he's selling the same creams in different packaging. It's four different price points, knowing that none of them work, and promising that they work, while here, you know, we're putting out exactly what are the odds of winning or losing so everybody knows what they're coming for. And that is also another way of looking at it.
But the reality is that over the years, being there, I was kind of immersed in it. So you're not really busy with it. But I think that leaving the company, not because it's not a good company, it's a great company and everything, but I kind of felt the relief because it wasn’t evil, but it was not necessarily doing good. Now I will say at the same time, that I spent many years on the Facebook Advisory Council, and I don't necessarily think that Facebook is doing the world much good. Okay, again, not intentionally. And I'm an investor in many games companies, and I think that games is a very valuable type of entertainment, but I don't necessarily think that games per se are doing making the world a better place. I think they're providing people a lot of entertainment that people want and need, and I don't think they're negative. But I try not to invest in games that involve violence. So I think that at the end of the day, the way I look at it is that there's really a range.
And, you know, if you want to be cynical, you can look at all the clean tech funds that invested in the scooter companies that ended up polluting cities, ruining the lives of pedestrians and not making the world a better place. But if they were clean tech funds that invested in them, because it was sharing economy and it's electric.
Michael Eisenberg:
And if we're being open, I feel the same thing about the United Nations. It's just like this aura of doing great. And I think they've screwed up more places than one could ever think about.
Gigi Levy:
And so I think that the way I look at it today, you know, there are very little things in tech that are really, really, really about really doing good. Medical, you know, pharma, and even that, by the way, if you end up overcharging, or raising your prices, as we know that some do, but let's say there are very little places that are really that. There are also very little places that are pure evil. There are, okay. Like I would never, I wouldn't invest in it–again, everybody can do whatever they want, but I will not invest in an adult company, adult content company, that’s not my...So that's that. And then I think that lots of the things in the middle are kind of grayish.
Michael (51:02.286)
I know exactly what I want to dig into it, but I want to ask a precursor question. I'm so glad you took us to this place. If you had to do the decision about 888 over again, would you do it?
Gigi Levy:
You know, now it's easy. I'm more accomplished. I “took” everything I could get from it.
Michael Eisenberg:
It’s like a Maimondean test that's very hard to do.
Gigi Levy:
So the question is–there's two questions. One is, would I love for it to be erased from my memory and from history, the fact that I was there? Had there been no consequences, probably yes. Not because I'm upset, just because, when I look at, and just being very honest, you know, when I look at the story that is–for me, not for the world, I don't care about what others think, but the story that is for me about myself–I would have loved the story more had there not been necessarily a gambling company in it.
If I had to start paying a price for it, like not understanding internet, or not getting into the games world–because that helped me get into the games world–or like not learning the value of data, or like even not knowing the amazing people that I got to know there, then probably the answer is no, which is why it's complex.
Michael (52:22.638)
You’ve given me the exact point I'd love to kind of dig on. At least I've written in my books, but I think it's true about technologies. Technology is a canvas at the end of the day. And like you said, there's a wide range of where it can be applied. We're now entering the era of AI. You've pointed out yourself this notion of Facebook being, let’s call it, not the world's greatest.
Gigi Levy:
When I joined the advisory council of Facebook, I thought I was joining one of the most do-good companies around.
Michael Eisenberg:
Right. Connecting the people…
Gigi Levy:
Because they were connecting to people, because I could see people be less lonely. Because it was before the echo chamber period, before the political use of it, before everything.
Michael (53:05.164)
Before it was weaponized.
Gigi (53:13.57)
And I could really see how this is gonna make the world a better place for people, for the people that don't have the other friends, or the people that can meet people on the other side of the world. With the thoughts of globalization and people being friends all around the world, that looks like–great. And I don't think that anybody in this company ever said sat there and said, “We're going to prioritize making more money at the price of making evil things happen in the world.” I know the people. Nobody ever said there and said that. But it's a slippery slope.
Michael Eisenberg: (53:43.148)
And so what do you do? You've got three teenage children. One is out of teenagehood yet or not yet? Still 19? Your oldest?
Gigi Levy:
19.
Michael Eisenberg:
Okay, so have three teenage children. I still have a...
Gigi Levy:
I think when they go to the army, they win the fact that I can't call them teenagers anymore,
Michael Eisenberg:
My mother just said to me, I think she said, “You may be 54, but you're still my baby.”
Gigi Levy:
You're still a teenager.
Michael (54:10.35)
Technology's moving at an ever faster pace right now. There's just this study that came out from MIT about people's brains rotting on ChatGPT. I assume you saw it. It's very clear that polarization is becoming a bigger and bigger issue due to the spread of online content and the reward mechanisms of online content. I've just made you the czar of technology, morals, and ethics, and how we use technology, and kind of keep it in the lines. What would you do?
Gigi Levy:
No, I think that the question eventually starts and ends with what you said in making me the Czar. Because if I could control everything, everywhere, including China, including other places, the answer is super simple. Like, you know, you may not like my policy, but if my policy would be the same everywhere else, there's no problem.
Okay. So let's limit social networks for, you know, for 16, and let's limit smartphones till 12, and let's make sure that you can't use AI in school to not get your brain to develop, but then let's ensure that we teach you how to use it up to the point you get to 18, and let's slow down the development of AI to make sure that we don't create AGI without being able to control it in a proper way– and so on, and so on, and so on. And you may not like my specific, maybe your specific would be smarter–but I could easily come up with something that would make me feel very comfortable.
The problem, of course, is that at most I can try to create it in Israel, and probably will fail also in Israel, but I definitely can't. And let's say that you and I and everybody else tried to do it, we may be able to do it at the West, but remember what happened when India prohibited the implementation of AI, of LLMs without government approval? In one week, all the AI scientists in India moved away.
Michael Eisenberg:
Right.
Gigi (56:08.926)
And what would happen if tomorrow, let's say that we say in Israel, you can't develop AI with no responsibility. So there's going to be somebody in the government that's going to slow you down. We're going to lose everybody. And so the problem is that nobody can come to the decision. Now the outcome of this is this eventuality where we're standing, and from my perspective, we're seeing a train wreck and we're not doing anything, because we feel that it's not in our powers to do it.
Michael Eisenberg:
Maybe it's not.
Gigi Levy:
Maybe it's not. You're right. And you know, because many smart people are saying it's not in our power, so maybe it's not. But the reality of this is that there are a bunch of things that are happening that are just not good for humanity. I think at the extreme of it is the weaponization of AI and AGI, you know, and maybe it's not countries, maybe it's companies. Maybe it's individuals, maybe it's the Robert Barrons of today that are putting hundreds of millions of dollars on every scientist so that they can end up with their own AGI that's going to be better than other people's AGI, because they can then repay the money very easily if they get this AGI, and they're the only ones that control it. I think we're reaching a period where inequality, the way we're used to seeing it, which is pretty horrible, is nothing compared to the way we're going to see it. We're getting to the point where AI is making, in a very extreme manner, the rich much wealthier and the poor much poorer. It's not creating new opportunities. It's even, you know, we don't need to talk about it, but it's not even necessarily good for startups. It is very good for incumbents. And so, you know, that's another problem. You know, we have truth being something that we don't believe in anymore. We have the polarization–
Michael (57:54.344)
That was actually true before AI. LLMs at least.
Gigi Levy:
You know, definitely, with the social networks and internet.
Michael Eisenberg:
That's been true since 2006, 7, 8.
Gigi Levy:
Yeah. And I think all of these things together are getting to the point that technology has got to this, you know, this junction where I'm not as 100% sure that it's definitely making the world a better place, again and again and again, the way I was sure before.
I think that some of these things, you know, I hope that I'm wrong, and I hope that others that are smarter than me that are warning about it are wrong.
Michael Eisenberg (58:25.632)
Do you the ultra orthodox were right in the way they've curbed technology?
Gigi Levy:
Well, that's not going to help them if Asia is going to take over the world, right?
Michael Eisenberg:
We don't disagree. I’m just saying, I think the interesting thing right now is like, you said if I'm a czar, so China's got one approach, right? Most likely whatever regulation happens in the West to try to get this under control, raise the ages at which things you can do, it will end up putting us behind in a global arms race. I think that's the point, and make everyone less safe against more rogue nations. And then you also look at people, whether it's the Amish or the ultra-Orthodox, who've kind of curbed the use of technology. And I think you say one of two things. That either AI is gonna make everybody look like the ultra-Orthodox and that, you know, we'll have to find them what to do, or alternatively, you say they're gonna be left way behind in this. Which is my view.
Gigi (59:22.382)
Yeah, my view is that they're going to be left way behind. My view is that...
Michael Eisenberg:
So then you're kind of, you know, so where are we?
Gigi Levy:
So where are we? We eventually are at this point where we're all running in the same race without stopping. Because if you can't stop it, you may just as well join them. And that's what we're doing. We're continuing to invest in these companies because we think that there is a wave that you can monetize on it, and you can create value, and you can create amazing companies. We continue teaching our kids how to use this technology, because they can't be the only ones not using it.
I keep pushing my kids to understand these technologies as much as I can, because I think that not understanding them is going to get them to be far behind. So, you know, if I could stop everybody, great, but I can't stop everybody. So they should, and so on, and so on, and so on. And, you know, I guess we all need to believe that, you know, the power of God or greater good eventually, or some responsibility or, you know, or the smart AGI that's going to make sure that we don't get our act wrong, is going to not go out of control.
But I do think that we're reaching a pinnacle of this discussion. You know, it started with the internet, started with the power of the internet, and search, and the power of controlling information, and content farms and everything that came with it. And then with social networks and the polarizations it creates,, and the problems it creatse. And AI now is just multiplying all of it, you know, on another level. And I think that governments in the world should really, really, really be busy.
Michael Eisenberg:
But they're not capable of it.
Gigi Levy:
But none of them is even thinking about it. None of them even thinking about it. They're all, some of them are busy thinking how they're turning it into a weapon or a financial weapon. Others are just looking and saying, “Okay, how are we not left behind?” And others are not even doing that.
Michael (01:01:18.251)
Right. Tell us about NFX.
Gigi Levy:
So I started investing in the first company in 2001, I think that I invested. And then…
Michael Eisenberg:
What was your first investment?
Gigi (01:01:47.15)
It was a company that created video analysis tools. A pilot from my squadron. I gave just a bit of money. I got like $200,000, after a very short period of time. Didn't raise a lot of money, was sold to Divitel, that was then sold to NYSE I think.
Michael Eisenberg:
Divitel the French company?
Gigi (01:02:07.406)
The French company. And then I took that money and the second company I invested in was Sky, can't you? And then immediately after that, Sequoia invested, and then immediately after that Sequoia Growth came in and bought part of it, and Mike Moritz both part of it. And I got like, you know, I put like 50,000 dollars in and I got like a million. I said, “I like that!” And I still kept like a bunch of percent in the company. I remember Mike told me something like, “What was your first investment?” I said, “It was this.” And he said, “Was it successful?” I said, “Yes.” He said, “Okay. People where the first investment is good end up being shitty investors.” And then, “What was your second?” I said, “You just paid me a million bucks.” And he said, “You might as well just stop now.”
And I continued investing, and I invested in 150 companies as an angel. Very fortunate. I was fortunate to meet and touch some of the, you know….
Michael Eisenberg:
What was the best one?
Gigi Levy:
Define best.
Michael:
Highest return.
Gigi:
Good question. Highest return in multiple, or in absolute money?
Michael (01:02:54.174)
You're making this difficult. Both, okay?
Gigi (01:03:08.825)
Probably highest multiple, probably Globally.
Michael Eisenberg:
Yeah.
Gigi:
And highest return in absolute terms, probably MoonActive.
Michael Eisenberg:
You're doing well!
Gigi Levy:
I'm fine. I'm fine. I'm very thankful. I think a lot of it is luck, or karma or whatever. And so after doing it for a few years, at the beginning in parallel to having a day job, then being a founder running companies, then afterwards from 2011, doing it just on my own–I kind of figured that being an angel for many years is essentially being a checkbook with limbs.
Because the minute you stop writing checks, nobody cares about you. There's no legacy. There's nothing. It's like, you're a checkbook. It's fine. You're a nice checkbook. You're making nice returns. And I remember flying to one of these advisory council meetings in the valley and sitting with two guys that I got to know over the years, Stan Chudnovsky, who's one of the biggest menches I know, and James Courier, one of the smartest. I mean, Stan's also smart. But James is one of smartest people I know, nicest as well, and…
Michael Eisenberg:
Few people know that Stan was such a nice and smart guy, the name of his first company was called Tickle.
Gigi Levy:
That is true. And then their venture creation studio was called Ooga Labs. And I sit with them and they tell me, “What do you want to do? And I say, “Look, I think that I want to maybe somehow turn this into something more programmatic, more systemized.” And I say, “I also want to play a little bit in Silicon Valley, because I am kind of doing okay in this role.” But there's always this question of whether this is just in the small pond, and maybe I can go somewhere else, and it will be better. And they're like, “You know what? You want to do something together?” And so we started sitting on it, at the end of 2016. We start initially as an accelerator. We do like, like, five classes of accelerator, like kind of a YC competitor. We then understand that the network effect power of YC is super strong, but also that the model works if you turn it into a factory.
It's not by mistake that's like hundreds of companies here. It's an amazing model. And we decide that we're not very fond of this. And at that time also, Stan goes to work for Zuck in Meta, and we get another friend of mine, an amazing entrepreneur and investor called Pete Flint, founder of Trulia to join us. And we together turned this into a seed fund. We're now in our fourth fund. We're kind of 35, 40% Israel, the rest mostly Silicon Valley. We're five equal partners. We decided that we're going to be equal partners. So we were five, and another kind of 40 people in the team.
Michael Eisenberg:
What's the most interesting investment you've made out of NFX? There’s also like NFX Bio, NFX Fast and NFX….
Gigi Levy:
Yeah, but these are marketing….
Michael Eisenberg:
I get it.
Gigi Levy:
You know that Michael.
Michael Eisenberg:
Yeah, it's all under one entity, which is called NFX eventually. It keeps the headlines coming,
Gigi (01:06:02.712)
It keeps the headlines coming. It's not as if you don't know about headlines.
Michael Eisenberg:
Ouch!
Gigi (01:06:12.526)
Out of respect. I'm learning. Eventually, I think the most interesting investments that we're making are not necessarily the ones that are immediately making the most money.
Michael Eisenberg:
I know, but that’s why I asked about the most interesting.
Gigi (01:06:40.046)
I think the ones I love most from our portfolio–there are a bunch of bio companies that I really love. We have Jennifer Doudna’s company, it won the Nobel Laureate, called Mammoth Bioscience, which is the largest repository of CRISPR proteins in the world.
Michael Eisenberg:
For those who don’t know, she won the Nobel Prize for CRISPR.
Gigi Levy:
Yeah, exactly. And she's amazing. And we were lucky enough to be the seed investors in her company. And that's an amazing company. There's so many things in the pipeline that are going to change, you know, healthcare and humanity, that's really amazing. We have a company out of the Weizmann Institute called Renewal Bio, which is essentially, one day, going to allow us to grow our own replacement organs.
Michael Eisenberg:
Yeah, I know I was once on a stage with you where you said that people are gonna live to like 120. And I asked you if that was a good thing.
Gigi Levy:
I think it is a good thing.
Michael (01:07:20.206)
I think you were just talking, now I understand you were talking your own book.
Gigi Levy:
Yeah, exactly. Exactly. I was hyping my company. And that's an amazing company, amazing science that basically allows us to grow human embryos outside of the womb, to the point where the cells divide, and we can then grow your own heart, or your own kidney, which is basically the biggest turning point in creating real longevity.
We have an amazing space company called Stoke Space, that we love.
Michael Eisenberg:
What does it do?
Gigi Levy:
It's a competitor to SpaceX and Blue Origin. They're the only ones that are more or less also having the second stage land back on Earth right now. And that was an amazing investment. One of these where we sat with the founder, who's one of the smartest guys ever. And I said, “What should we do to win this?” And he said, “Look, let's be frank. No investor that I'm meeting knows anything about what we're doing really.” Like, I'm smarter than all of you. “So what do we need to do?” “You need to be nice.” “I can do nice.”
Michael Eisenberg:
You need to be limbs with a check.
Gigi Levy:
So, you know, I love many of them.
Michael (01:08:41.355)
What's Line Five?
Gigi (01:08:49.805)
What's Line5? So, Line5 is a company that I started together with the founder, the main founder is an amazing founder called Yiftach Shoolman, who is one of the founders of Redis. And generally speaking, I wouldn't have spoken about it because it's super confidential, but I'll say what I can say. Like many people in Israel, the 7th of October, and the subsequent three months, I lost, you know, there were 11 kids of friends that died.
It's a shared experience for Israelis. And at least two of them died while entering buildings inside Gaza. When you look at the debrief, it kind of strikes you that everything that happens before is science fiction, you know, drones and thermal. And whether you analyze the suit, you can do whatever you want. But then when you go in, it sounds like World War I. He threw a grenade when he came in.
And that got me to think about generally–and I can't say a lot more–about autonomy in defense, and about how while people are, you know, Anduril and others are building these huge platforms, or Shield AI doing their whatever, their F-16s with no pilots, for the really mundane missions that are done by soldiers, there's very little people that are dealing with them. And so we started looking at this field. We ended up finding an area of product, an amazing team of people. We raised quite a bit of capital, and we think that hopefully this is gonna save many lives.
Michael Eisenberg:
Prior to the war, and you and I spent a lot of time at that time together, there were the democracy protests in Israel, and you were very visible. You have been socially active, as best I know, for a lot of years in charitable work, and innovative charitable work, and your wife's been involved with that too. When the democracy protests started here, you were really front and center. What was that like for you?
Gigi (01:10:57.44)
I think that–this was not about putting me up front. What I felt was that, notwithstanding changes that had to happen in the judiciary in Israel, the way that the country was being led, and the polarization this was creating was something that Israel as a country that's surrounded by enemies and that doesn't have the luxury of having the polarization that you can have in a, you know, in a sleepy European country that doesn't have any real risk, just felt irresponsible. And so, my view coming into it was, at the beginning, a lot less about, I think, that this specific part of the proposed reform is right or wrong. Although I clearly, and you know, as we discussed many times, we knew all the details, but it was about, “Guys, this is not the way to do that.” This is essentially a constitutional change. And a constitutional change needs to be treated properly so that everybody involved in it is going to feel that, you know, their opinions were heard, and there were experts that were asked, and there was an offer on the table, and then there was a vote and there's like a unique majority to approve it. And I'm very much in favor of doing this, because as we all know, this was supposed to be done when the country was formed.
Like, we were supposed to create a constitution, you know, the Declaration of Independence was the declaration of intentions.
And then there was supposed to be a constitution. We ended up not having this constitution. So ever since, you know, we end up with the courts taking more responsibility, because nobody defined what to do and not what to do. And the legislator keeps on pushing this hot potato from one Knesset to another. And so I'm all in favor of defining the rules, but let's do it properly. And so when I started getting involved, it wasn't about the protests. It wasn't about, you know, saying, “Hey, we can't change anything.” It was about going to the people involved, and saying, “Guys, come on. You wouldn't want this to happen the other way around. I'm in power, I want to make my changes. You would have expected me to ask you, you would have expected this to be done in agreement. We don't have the luxury.”
When I, just to say very bluntly, when me and others that went talking and asking for this, were told, “Hey, you know, we waited for this very extreme government for years. Now that we have it, we're going to do whatever we want.” That got me to say we need to push back. We need to fight back. Though I have to say that all through this period, my statement was, “We're blocking,” but at the same time, if we're willing to sit down and properly look at it, I mean, I'm not necessarily the expert, but the people that are experts are willing to look at it….
Michael Eisenberg:
You became quite an expert.
Gigi Levy:
Sadly. Yes. Sadly, yes. But if they're willing to sit down and do it–let's do it! This is for the benefit of Israel. We need to solve this once and for good. Is it a constitution? Is it a thin constitution? Is it what we call the basic laws of how you legislate, or the basic law of legislation, the basic law of judging?
Michael Eisenberg:
For those who don't know, Israel actually doesn't have a law that tells you how you make laws.
Gigi Levy:
Yeah, it's in the articles of the Knesset next to the definition of whether you can bring in coffee to the meetings or not. Literally. And you know, it's such a gap. And so I'm all in favor of solving it. And many things need to change. But this was not about the change. This was about making a point, and this was about showing power. And this was about, you know, the same fight between the elites, and those that felt that the elites were against–and for all the wrong reasons.
Michael (01:14:34.702)
Israel is still a startup, turns out. It turns out that the country's still a startup.
Gigi Levy:
Well, it's worse than this. It turns out that if you run a startup for 75 years, and you forgot to sign a founders agreement at the beginning, then after 75 years, when it's successful, nobody thinks that it's an equal partnership anymore, and that we just need to sign it. Everybody thinks they contributed more, and that they have more power, and that for years, the other guy kept on getting all the good missions and I got all the…and so that's what we're having, and we need to solve this. I think that that got me out of my comfort zone. And the out of my comfort zone was not about not doing, or not putting effort or money. Out of my comfort zone was also taking a step more forward, and being more in the open about it, because usually when it came to NGOs and stuff, I tried to always be in the back.
Michael Eisenberg:
Do you have regrets about anything that happened?
Gigi Levy:
Wow. Many infinite regrets. I think that one thing that I would say that after the 7th of October, I don't think that I can be a part of anybody calling to not volunteer. I think we all thought that we were in a different place.
On the flip side, I don't think that anybody could be of an opinion right now that any side in the political system can take something so deep and force it on the other side. I don't like calling it that, but on the other side. And these things kind of go together. Because at the end of the day, the people that said, ‘we don't want to volunteer,’ they said, ‘if this is not going to be a democratic country, then it's hard for us to continue volunteering for that.’ But in, you know, but today, in retrospect, with everything that happened, I think everybody should have behaved differently.
Michael (01:16:30.592)
You also, after October 7th, jumped in.
Gigi Levy:
Like you, like many others.
Michael Eisenberg:
That's kind of what I want to get to, which is I think one of the things that happened after October 7th, when all the government systems failed and the military systems failed on October 7th, was there were what I call civilian responsibility, which I think this country's well known for. And civilians took responsibility for everything. Is that a feature or bug?
Gigi (01:16:58.54)
I think it's a great feature, but when it's overused, it becomes a bug. I think that Jewish culture in general, and the culture of can-do that Israel is blessed with in general, and the culture of ‘we don't leave anybody behind,’ of the Israeli military, and the culture of we're in this together, all culminated into the huge volunteering effort that came after the 7th of October. And I would also say that it almost is, almost acceptable that for a few weeks, it would be civilians holding the country.
And you know, I was part of creating what's called the Civil Emergency Headquarters that was a Brothers and Sister for Israel. And, you know, you're involved in a bunch of other organizations, like Shomer Chadesh, Or, Lev Echad, and others, all of them worked amazingly well. And it's almost acceptable that when something so extreme like the 7th of October happens, that for the first few weeks, we would be feeding, and buying clothes, and arranging apartments. It's almost okay. Why? Because nobody can get ready for something like this that is really unexpected. Because it's unexpected. If we end up continuing to do that–and that's a feature. That's an amazing feature that Israel is blessed with.
If after six months we find these organizations still feeding people, or still buying equipment for the military, or still helping old people get the goods they need to survive in hotels, and the Dead Sea, because nobody's taking care of them, then that's a bug. And I think that is always something that worries me which is, is it possible that by overdoing it, we're actually ruining it for the country? And I think that Israel would not have been where it is today without the amazing people that we met, right-wing and left-wing, religious and secular.
Michael Eisenberg:
Israelis!
Gigi (01:19:25.292)
Israelis. And this is the beautiful thing about Israel, and it's amazing. And in these cases, you know, polarization went away just like in the army, and people are just in it together and that gives me hope. This is the way we should be also after the next election, the way this country should be governed. But if we end up saying, “Okay, that's the way it is, so let's just let the government not deal with this forever,” then we're going to end up with a failing government, which is, in some cases, what we have.
Michael Eisenberg:
Are you going to run for government?
Gigi Levy:
No. Are you going to run for government?
Michael Eisenberg:
Don't think so.
Gigi Levy:
That was not a no. I'll support you.
Michael Eisenberg:
Thank you, Gigi. What's somebody you want to say something nice about that’s in and around our industry that doesn't get enough attention?
Gigi (01:20:09.261)
That doesn’t get enough attention…I think that actually, the spirit from the beginning of this reform, and internal conflict in Israel to the 7th of October, got me to spend a lot of time with some amazing people that put their professional careers and some of their lives aside, and went to give back. And these people became very close to me. I'm not going to say all of them just because there's too many of them, but people like Adi from Meta, and Tal Bar Noah, and Adam from Bessemer, and you, in many cases, and others. And I'm super thankful for that. And Erez from Qumra, and I'm forgetting people, amazing people–Nir from Wix. And that's a group that became very close to me, and I'm very thankful for them. I think that if I take it to the less known places, I'm very happy to say that there is a new generation of young VCs.
I mean, there's always been a generation of young founders, but there's a new generation of young VCs that are super hardworking, that are hustling for their companies, that are really putting in effort, that are really giving me hope that when you go to politics and I retire, there's going to be other great investors….
Michael Eisenberg:
You’re never gonna retire. Give me a break.
Gigi (01:21:28.75)
There are going to be amazing investors that are going to–people like Omri Krigel, who I'm sure you know, or Omri Casspi that's like, taking his sports career and turning this into...
Michael Eisenberg:
Yeah, he's the greatest, that guy. Sat in this seat.
Gigi:
And you know, and Guy Katsovich that's been doing so much great for the industry. Or Adi Levanon who just started a new fund. Amazing people that are like, they're giving hope that, I mean, not that we're that great, but they're giving hope that it's going to be great on the next cycle. That these are the people that...
Michael (01:21:53.326)
You're making me feel old at the end of this podcast. I really appreciate that.
Gigi Levy:
We are old.
Michael Eisenberg:
Gigi Levy, thanks for joining us on Invested. If you enjoyed this podcast with Gigi, please rate us five stars on Apple Podcasts and Spotify. Subscribe to the YouTube channel, and do all those great things. Thanks for tuning in.
Gigi (01:22:09.166)
Thanks for having me.
Samuel (00:00.11)
We thought only humans are the ones who can write crappy poetry–now AI can write crappy poetry.
Michael Eisenberg:
What’s the most sci-fi company that Lux has invested in?
Samuel:
Ooh, that's a good question.
Incremental progress. It sounds weak, but I actually think that is probably the best way to think about the world. Computation can be much broader than the way we often think about our traditional computers. This AI system is cool, but there's always X that can never be done by AI. We say this–and then we're constantly slapped in the face by the next advance.
God is simply things that science has not explained yet. But the truth is, science has made a lot of advances. If you adhere to this idea, your conception of God gets narrower and narrower and narrower.
Michael (00:40.202):
I am so excited to have Sam Arbsman with us today on Invested. Good morning, Sam.
Samuel:
Good morning, good to talk with you.
Michael:
Sam and I have been pen pals for the last few years now, and done some Zooms and calls, and he is among the most interesting people in the world. And he's just published a new book. What's the title of the book, Sam?
Samuel (00:58.488)
It’s called the Magic of Code.
Michael:
The Magic of Code. We'll dig into soon. So Sam, please tell us who you are, what do you do?
Samuel:
Okay. So I'm Sam Arbesman. I am the Scientist in Residence at Lux Capital. So another venture capital firm kind of focused on emerging tech and frontier tech, deep tech, whatever we want to call it, kind of the science-fictiony side of things. And I am their Scientist in Residence. I can tell you more about what that actually means as well.
Michael:
What is the Scientist in Residence?
Samuel (01:33.666)
So that is a good question. So yeah, it's kind of a vague title, but basically my job is to survey the landscape of science and technology, and based on that, find areas kind of at the frontier that could be relevant for Lux. Could be individuals, communities, people, actual companies, and trying to kind of bring those into the orbit of Lux. And sometimes that's downstream from investment–so finding these areas and connecting them to the portfolio of companies we've already invested in.
But a lot of the time it's actually very far upstream from investments, kind of finding these areas well before they might be ready for investment, and just either laying the groundwork for potential investment, or more often, just kind of trying to find interesting areas and communities that could be relevant for the way we're thinking about the world or potential talent, and things like that.
And so, as a result, I get to, in terms of what it means practically, it's a lot of reading and writing, engaging with the public, talking to lots of interesting people all the time, and really just kind of trying to find interesting areas at that frontier.
Michael:
What's the difference between a scientist and a technologist?
Sam Arbesman:
That's a good question. I feel like there's flippant definitions of, scientists are kind of trying to discover the way the world really is, and technologists are kind of trying to build things. And I actually think, I mean, even though that's kind of like a flippant answer, there probably is some truth to that. There's also probably a lot of feedback between the two. Like technologists are potentially trying to build things, but they're also trying to understand the world and then kind of bring that understanding into reality.
And science is often about trying to kind of really understand reality around us, the way the world is. That being said, oftentimes a lot of science involves a lot of tool building. So in order to really understand the world around you, you have to build new technologies. So there's a clear feedback between the power of particle accelerators and how that has moved forward–and actually better understanding of physics.
And so these things are distinct, but I actually think they're a lot fuzzier in terms of the boundaries than people might necessarily think.
Michael Eisenberg:
Sam, why do you use wired earphones?
Samuel:
Those were the ones that my producer sent me. And so I just use those. I don't know why. They get the job done.
Michael Eisenberg:
They feel kind of not-frontier.
Samuel (04:04.138)
Definitely not. So that's an interesting thing in terms of the frontier. So there's different ways of thinking about the frontier. And so actually there's a great phrase that Nintendo has used, where it's called lateral thinking, using weather technology or withered technology. And the idea is that on the one hand, it's really good to be using the newest technology and trying to understand that. That being said, the newest technology is often really fragile and kind of janky and kind of weird.
Nintendo has this idea, I imagine other people ascribe to it as well, which is using pre-existing, maybe sometimes older technologies and then recombining them in unexpected ways. And so I'm not really sure I'm doing that with my headphones, but I'd like to think that maybe I'm part of that larger tradition of figuring out how older technologies can be recombined in productive ways.
Michael:
Okay, I said before we came on air that we would geek out a bit today. So I'd like you to give our listeners a glimpse into the future. What are some of the areas you're working on that people find super surprising right now?
Samuel Arbesman:
That's really interesting. So on the one hand, I'll say in terms like the frontier, as much as I like thinking about the frontier, I’ll caveat that with, I feel like I'm not particularly good at predicting what is next. I can give an example. When my first book came out back in 2012, I was kind of excited that my book was going to come out just in time for the end of print publishing, because I thought that was going to be the end. It was going to be all digital. Of course, I was completely wrong.
I still have many, many print books around me. And so–
Michael (05:42.402)
What would people do for backgrounds for podcasts if there weren’t printed books?
Samuel:
Exactly, just a line, a whole screen of Kindles.
Michael:
How long did you spend curating that book set up behind you for the podcast? I hear people do that a lot.
Samuel:
So this is just pre-existing. These are just my books. But no, so I'm hesitant to make any large-scale predictions. For me, it's much more about trying to find things that I find interesting or novel. And then some of those things will end up being kind of the future. Some will not. And so if one example–
Michael:
You know what the Talmud says, that since the destruction of the temple, prophecy was given to fools. But you'll be our not-so-accurate prophet. Like 10 years, as you dig us in, and we won't hold you to the predictions, but really help people experience the future right now.
Samuel (06:25.985)
Exactly. So one theme that I've been thinking a lot about is the way in which computation and biology are becoming increasingly intertwined. One way to think about this is, on the one hand, I mean, you think of computers and they're kind of all bits, zeros and ones and things like that, very discrete. And then you look at biology, and biology also consists of–not necessarily zeros and ones, but in this case, the basis of DNA, the ATCs and Gs. And it turns out, if you stretch this analogy a little bit further, you can start making other kinds of comparisons between features in biology and features in computation. But the truth is, biology is not just information. The way I think about biology is like, there's the mess, which is where everything is kind of vibrating and messy and wet and squelching. And then there's the information, the bioinformatics, the kind of thing I just described.
But the truth is, you need both to understand biology truly. But over the past number of years, and I think increasingly going forward, people are thinking very deeply about ways in which biology can be increasingly embodied in computing, and then use that as a way of actually engineering new things. And so obviously there's this whole field of synthetic biology, but there's also people trying to actually build large scale simulations of biology, specifically the cell.
So over the past few years, people have tried to make these enormously complicated cells that are entirely virtual. And then the idea behind that, is use that as the precondition for then developing either new understandings about biology, or potentially even new therapeutics and things like that. But alongside this, there's also another way of thinking about biology, which is that biology is a much broader way of doing computation, of managing information. And so we have kind of the traditional way of thinking about computing, and the physical computer or digital computer, and the zeros and ones that I mentioned earlier. But biology in many ways is also managing information. I kind of mentioned the sort of, the way in which you kind of try to shoehorn biology into the computer model, but, if you don't try to do that, and you actually say, “Okay, biology is weirdly statistical and probabilistic, but it still actually does a lot of computational things,” you actually then realize that, oh my God, computation can be much broader than the way we often think about our traditional computers.
And people have actually begun trying to compute using biology, whether it's using DNA to do things in massively parallel ways, or trying to recognize that there's kind of like various enzymes and proteins are really doing multiple different things at different scales all at the same time. So there are people call this and there's this term, I read it in some article, called poly-computing where it's like multiple aspects of computing all kind of put together. And so that and I can go, I could probably go on. I will pause the ramble there, which is–
Michael:
No, no, keep going. Why is this–the cell, the enzymes, the DNA, powerful computers, which is I think what you're saying, in and of themselves, and then take us to the next level, which is, how will that change computing?
Samuel (09:49.58)
So yeah, they're very powerful. And so people have actually used, I mentioned DNA for computing. People have also-
Michael:
Give an example.
Samuel:
So one example was, so there's one very hard task, which is factoring large numbers. And so this is actually very relevant for cryptography, like public cryptography, like being able to make and break codes and keep them secure, relies on the fact that actually factoring very, very large numbers into their prime factors, is hard. And it takes a lot of computational power. It turns out that you actually can do this kind of thing using DNA in this bath, in this much more parallel way. I don't actually think it's kind of undoing all of cryptography, but it shows that you can do these kinds of things in different ways. And there's also large-scale storage of information using DNA.
I actually have, there's this great press called Asimov Press, and they publish these really interesting articles online about biology. They just released their second volume. And in addition to printing it in print form, they, at least they sent me, this weird little steel cylinder that inside it has many, many copies of the actual book encoded in DNA. And so people are trying to find ways of actually using DNA for storage.
People have also discovered that larger organisms can compute as well. Like the slime mold, which is kind of some weird, I guess, fungal thing that's kind of maybe between bacteria and fungus–I'm not getting this correct–but it actually, it is able to optimize the way it kind of moves or lays down tracks on a two-dimensional surface. And it turns out you can actually use slime molds to figure out the way in which–so there's a classic problem called the ‘traveling salesman’ problem, where in computer science, where you have lots of different cities, and you try to figure out the optimal way of moving through them. And I think slime molds can actually solve that. If I'm remembering correctly, they certainly can lay down tracks in terms of like, if you put lots of cities and you say, okay, these are the cities and their population densities, try to figure out the most optimal, road network, and it will actually recreate a lot of the time, the way in which real world networks are, which is kind of wild.
Michael (12:15.66)
Why is it useful to me to have a cylinder of DNA that has a book on it? And how do I even read that?
Samuel:
So for me, it's much more a proof of concept and I get to show it to my kids and say like, “Check this out, there's actually a book.”
Michael:
What, they’re like, “Dad, prove it to me?”
Samuel (12:47.79)
Yeah, so in terms of being able to read it, that is always a little bit harder. There are companies and services for doing this kind of thing. For me, one of the other things I think a lot about is being able to just store all of the information that we have out there and like whether–and so I'm a big proponent of the internet archive and services that are just trying to digitize and maintain huge amounts of information, and being able to have other ways of storing that is really good. I'm also just a big proponent of redundancy. And so it's good we have servers, and it's good we have, I don't know, magnetic tape drives and things like that, but also thrown onto DNA. And so there is a whole industry for that.
I feel like in certain cases, it's more useful or more practical than others. I don't necessarily think we're gonna be replacing our RAM and our computers with DNA, or anything like that. That being said, I think more broadly, the idea is that if we can kind of bridge this gap between computation and biology, there are just potential avenues open that we might not otherwise have considered, especially more broadly to the broader ways in which we think about how computing can be. So in the same way that we can kind of encapsulate certain things in computing from biology, we can also actually hopefully take inspiration from the way in which biology computes to then potentially develop new types of computers.
Michael:
Give us another example. So we just did biology and computing. What's the next example?
Sam Arbesman:
So another one that I've been thinking a lot about, and I'm not really sure if this is cutting-edge or more just kind of something that I want, related to also this idea of like simulation with biology, is kind of personalized simulation more broadly. There was a company back in the 90s, I guess, and the studio actually existed for far longer after it was acquired, called Maxis. And so Maxis was the company that made SimCity, SimCity 2000, SimEarth, SimLife, all these different games. And it was this weird moment where there was a company that, through games, was able to democratize all these ideas about complexity science and complex systems and large scale simulation, and make it appealing for a broad audience. And so I've begun thinking about what it would look like to have a Maxis 2.0. Like could it be possible for actually building a new company around simulation but geared towards a general audience?
And so it turns out there are many people who are thinking about this in terms of games, trying to build simulation games. But one of things I've also been thinking about is, could you actually build these, a sort of meta tool, like a platform for large scale simulation, but in a way that can be personalized? So with SimCity back in the day, SimCity was enormously valuable and was a lot of fun. And you gained a lot of insight into how cities worked or at least just kind of how your intuition about complex systems might actually be informed.
But you were just operating with the city model that was created by Maxis, that was created by Will Wright, the creator of the game. And a lot of those intuitions, or preconditions, or axioms around how cities work, even as I have to take them as given–ideally you should be able to tweak them. And so I imagine some platform where you can kind of just easily spin up your own personalized custom Sim City and then actually play with it.
And I feel like, that’s kind of like the game, fun version, but you should also be able to do this for actually modeling cities themselves, as opposed to just a toy version of that. And you should be able to do that with biology, or technological systems, and try to understand the nature of the internet. And I feel like there should be this kind of personalized simulation tool. I also kind of view this by analogy with, there's a great piece of software in like the late 80s, 90s in the Macintosh called HyperCard, where HyperCard was, I guess the best way to describe it was, it was kind of this authoring program where you had decks of virtual cards on your computer. You were sort of making a bespoke website that just lived on your own machine. And you could just easily enter text or draw on it. But under the hood, you could then begin to actually program. And so you could add buttons, and make them make noises. And then you could actually do a lot of programming.
And it turns out HyperCard was enormously powerful. I think it was the tool that was used to build the original version of the computer game, Myst, that became enormously successful. And so HyperCard was interesting because it was a tool, but it was sort of this tool to make other software. And I would love it if there could be these kinds of tools, like a HyperCard4 simulation. So that's another thing that I've been thinking a lot about.
Michael Eisenberg:
So you are, you just mentioned complexity. You are a complexity scientist. What is that?
Samuel Arbesman:
So I mean, the truth is, complexity science, it's not really a specific thing. It's kind of more like a–
Michael Eisenberg:
Do you think your wife is watching right now and goes, she raises her eyebrows and says, “He’s just complex.”
Samuel (18:12.17)
Maybe she says that. I guess that's certainly better than the alternative, saying, “He's really simple.” So no, but complexity science is this idea that there are these large complex systems, they're kind of systems of a huge number of interacting parts. That when all these interacting parts combine and actually have certain behaviors individually, that when they all are combined, there's almost a certain amount of emergent behavior. There's kind of complexity, and sophistication, and behaviors that you might not otherwise have expected based on the individual parts. And complex systems are found in biology, they're found in technology, they're found in social systems, like societies, how individuals interact, economies–these are all complex systems. And the interesting thing about complexity science, which I kind of mentioned before, it's sort of this bundle of approaches.
It's interesting, because on the one hand, the differences in the details of all these systems matter, but there is actually also great power in being able to abstract away the details and find commonalities, and say that, even though certain features of the cell are obviously very distinct from how we think about social networks, there are also similarities in terms of their structure, and their function and their behavior. And trying to understand these kinds of things can actually give us greater insight into how to think about these systems, how to manage them, and things like that. And so that would say...
Michael:
Give me an example of the comparative properties of the emergent properties of a complex system like biology, and a complex system like social networks.
Samuel:
Yeah, so one specific area is looking at the network of connections. And so, it turns out that if you look at–now I'm kind of reaching back into my train, this is a while ago, but I think this is accurate–if you map out the relationship between different proteins within a cell, so like which proteins interact with each other, you get this distribution. You'll get this kind of massive network of, okay, this protein is connected to all these other proteins or other molecules, and so on and so forth.
And you can do the same thing within societies. You can actually look at social networks like Facebook and things like that. Or you could actually look at physical networks, of physical social networks, of who would actually physically interact with other people. And you will also get some sort of network. And it turns out that one of the features of many of these systems is what is called this power law distribution, or heavy tail distribution, which is that a small number of nodes within these systems, whatever they are, they have the vast majority of the connections. So the equivalent would be like on social media networks, like on Twitter or something like that, there are a few number of people who have tens of millions or more connections. And then there's kind of this very, very long distribution of many, many more people that have much smaller ones. And the idea behind this is that this is actually very, very different from how we think about the world, of the normal distribution of the world.
An example of normal distribution would be height. So height is, there's kind of like an average height for people. Some people are a little bit shorter, some people a little bit taller, but you're never going to walk down the street and see someone who's a hundred feet tall, or a thousand feet tall. That is just kind of something that just doesn't exist, and it's not possible biologically. But in complex systems, and these kinds of networks with this kind of heavy-tail distribution, that's what you see. And you see this very, very often. And this also holds true for wealth and things like that as well. And so that kind of model can give you a great deal of insight into these systems, and show how in many ways these are wildly different from the kinds of systems that we might interact with on a daily basis in our everyday life.
Michael:
What's the most sci-fi company that Lux has invested in?
Samuel (21:37.868)
Ooh, that's a good question. The most sci-fi company. I'll say one.
So there's one called Variant Bio. The idea behind this is that, and going back to variation, there's obviously variation within biology. There are people who are shorter or taller, some people who might need to sleep more or less, but there are also massive outliers. And so there are some people who need to sleep very, very little. And like, it's not as if they're just constantly sleep deprived. They are fine with this. And there are certain subpopulations of humanity that might metabolize fat completely differently. So for example, I believe the certain populations in Alaska, like within the Inuit, they are able to subsist on a diet of a huge amount of, I think seal fat, in a way that if I had that kind of diet, I would probably be dead by now. Because they just have a very different way of metabolizing those nutrients.
And the idea behind Variant Bio is to actually survey the world, and actually try to find these massive outliers and these kind of, like, I think we're hesitant to say mutants, or X-Men, or whatever it is, but there are people and there are populations that are very, very different than the average, or certainly within the kind of the traditionally-studied populations maybe within the United States or Western Europe. And so therefore it is really valuable to actually try to understand the vast diversity, and then find these crazy outliers like in really, really interesting ways, and then use that information then as the basis for developing therapeutics and pharmaceuticals and things, to try to actually understand and potentially even use that information to see if maybe people can become these kinds of outliers.
Michael (23:30.7)
Is that different than the kind of research that they did like on Ashkenazi Jews, or people from Iceland who have these homogeneous gene pools to try to find, first of all, inbred diseases and second of all, therapeutics?
Samuel:
So I think it's not that different. And one of the interesting things behind those populations is because they're relatively uniform. We can kind of use that as a way of understanding kinds of things. There's not always that many, there's not necessarily that many outliers in those populations. And there are some, especially in terms of diseases and things like that. But I would say it's kind of taking that sort of idea, and then using and taking it to its logical extreme, and trying to actually try to find these kinds of weird things that feel like science fiction but are real. Humanity is large enough that there's going to be these weird outliers.
Michael Eisenberg:
Give me another sci-fi one.
Samuel:
Another sci-fi one. So this company was acquired several years ago, but there was this company, Control Labs. So that one's very interesting science fiction. It's kind of based on the idea of brain-machine interaction, brain computer interaction. And right now, a lot of the field within brain computer interaction involves cracking open your skull, and kind of putting in electrodes to read the-
Michael (24:52.429)
I think you’re referring to a Neuralink.
Samuel
There are other ones as well, but yes, yes, certainly Neuralink. And the idea behind Control Labs was like, what's even better than cracking open your skull? Not cracking open your skull! And being able to read the neural signals on your wrist or your arm indirectly. And then it turns out because of sophisticated machine learning, these electrical signals can actually be converted into behavior. So for example, you can move your hand around, and the motion of your hand, based on these signals, can be recreated entirely within the computer. But in addition to that, once they have this kind of understanding, they can actually recreate the motion of your hand even without you moving, just kind of based on thinking. And so one of the interesting demos of Control Labs, which was both very interesting but also kind of weird to watch it–like not much is happening–it’s someone sitting in front of a computer, not doing anything, but playing a game. Because they were just basically just thinking, and the game was actually, they were playing this game. And I find that that kind of non-invasive brain computer interaction, super amazing, a lot lower threshold and barrier to entry. Pardon the pun, but it's just a lot easier to do. And I think people might be a lot more willing to actually try this if it does not involve surgery.
Michael:
Were you ever a supporter of the Control Labs investment?
Samuel (26:21.144)
So I’m not part of the formal investment team.
Michael:
But what’d you think?
Samuel:
So I thought it was very cool. So yeah.
Michael (26:29.194)
So you were in favor. Okay, and what do you think about Neuralink?
Samuel:
Neuralink, I think it's interesting. And I know a number of other folks and other companies kind of involved in that. I think, whether it's Neuralink or kind of other in more invasive brain-computer interaction, the major, not the major hurdle, but the initial product-market fit is gonna be much more around certain things around medical conditions that are necessary. Which is very important, but it's a much smaller potential market, because not everyone is going to be willing to get surgery. For me, the way I think about these, I think they're very interesting. I'm not really sure if they're scalable companies just yet.
Because of my role, I have a little bit of the luxury to not necessarily have to think about those kinds of things as investments. I get to think about them just as kind of like interesting science experiments and cool ideas.
Michael:
So you don’t think people want to embed chips? Like in the arm, the heads..?
Samuel (27:45.664)
I think they might. I mean, people are already doing that kind of thing. And I think people will, I don't know to what degree everyone is going to do it and I have no idea the timeline.
I mean, this is going back to saying, in terms of the idea of like–I'm bad at prediction. So I don't really have a good sense of the timeline. I think.
Michael:
In 20 years, what percentage of humanity will embed a chip in them?
Samuel:
That is a good question. Whatever number I say is gonna be wildly wrong, but I'll do one anyway. In 20 years, what percentage? My guess is like below 15%. I don't get the sense-
Michael:
That’s a high number.
Samuel:
That's high, but I still think–some people would say it's gonna be well over half. And I don't get the sense that people want that kind of thing.
Michael:
The people who embed the chip, the less than 15% who embed the chip, why are they doing it? What are they doing it for?
Samuel:
I think there's a dissatisfaction with baseline humanity for some people. And this is kind of a way of managing that. So when I think about the, what's it like, the biohacking community that was very popular maybe like five, 10 years ago, and people are still doing a lot of the kinds of things. There's a sense or desire for like, if I just do this one trick or this one thing, I'll need to sleep far less, or I can, I don't know, I'll become very strong or whatever it is.
And I think one that kind of misunderstands sort of just the massive complexity of biology, we are not that easily overclocked. There's always trade-offs and downsides. But it also just speaks to the fact that people feel that we can be better. And I have two minds of that kind of desire. Like on the one hand, I do think we should be constantly improving ourselves, and medicine should be improving. Like we want all these kinds of things, but at the same time, there is something to be said for being happy with, or rejoicing in like the nature of the human. And I think some people don't want to hear that. And I imagine the people who do not want to kind of think about the humanistic kind of way of thinking about technology and just living in the world–they might be the early adopters for these kinds of technologies. But I'm not sure.
Michael:
It's like, some people get plastic surgery because they're not happy with the way they look? Other people do biohacking because they want to be stronger, sleep more, sleep less? And other people will implant chips because they want to be…
Samuel:
Yeah, and maybe have better memory, or be able to think faster, or understand things more rapidly. I do that, I mean, so there's one trend within computing, these tools for thought. And this is like another thing that I think a lot about, these using the computer as a way to better enhance our thinking. And I think that's a really good tendency. I think there's nothing wrong with that.
Back in the 1970s, I think, Steve Jobs talked about computers as this bicycle for the mind. And the idea behind that was, I think he read something, an article in Scientific American where it was a chart of energy efficiency of different organisms. And I think it was like an albatross was really efficient, because they can kind of glide, and other animals were not as great, and humans were kind of mediocre. But then once you put a human on a bicycle, then suddenly we become much more efficient. His analogy was, computers are this bicycle for the mind. And I do think that if we have these better tools to kind of navigate information, things like that, that's great.
But there's always–at what cost? And I think some people will say that implanting these chips will be worth the cost, that they will be able to better assimilate huge amounts of knowledge and information very rapidly. And other people will say it's not really worth it. And to be honest, these things are so far from everyday use that I'm not really sure where I will fall on that.
But I think we're going to increasingly have these kinds of conversations about how we actually cyborg-ify or whatever term we wanna use, of using these technologies, incorporating these technologies into our bodies and how that changes things. And the truth is, this is no different in some ways than the conversation around smartphones. Like, and they are external to us, but in many ways, they come with huge trade-offs and we adopted them very, very rapidly. And now we are increasingly seeing, especially among children, that this is not some unalloyed good.
There are a lot of trade-offs, and a lot of issues, and we need to be much more deliberate about these kinds of things. And so for me, when I think about this kind of stuff, I think about just how we can maybe have these conversations and be a little bit more deliberate when we adopt technologies, which is very hard to say when we just want to kind of constantly move forward, and faster and faster.
But I do think there was something to be said for, not necessarily pausing, but kind of taking stock of what these things will do and kind of just being deliberate in more ways.
Michael (32:52.652)
Botox yes, or Botox no?
Samuel:
I mean, for myself, I have no interest.
Michael:
If somebody came to you for advice, what would you tell them?
Samuel:
Oh, that's a good question. I guess what it comes down to is, are all these things, are they going to change the way in which you think about yourself? Because I think some people think that if only I had this one change in my body or my mind or whatever it is, then everything will be good. And in general, that doesn't seem to be the solution. So maybe if you kind of don't think that, then it's better. You're just kind of like, I'm just going to do this kind of thing anyways for, maybe it's because you're an actor and you kind of just know you'll get more jobs. Then I feel like there's kind of like this much more utilitarian approach. If you think it will actually change your life and your sense of meaning and purpose, then it's probably not the solution.
Michael (33:49.966)
Since you're coming to us from the great State of Kansas right now, if I remember correctly.
Samuel:
I'm actually in Ohio, yeah–we relocated, about a year and a half ago.
Michael:
Okay, I was gonna give a shout out to my cousin who's originally from Wichita, Kansas. Ranul Mann who just won Clinician of the Year in some big hospital in New York, and he was right at the beginning of the Botox, he said, “Stay far away from Botox. It's not gonna work.” But you kind of referenced a second ago, I think, the old Jewish adage without referencing it, which is in Hebrew, Ezehu ashir ha-samech b'chalkoh. Who is he that is rich, the person who's satisfied or content or happy, with that, which is, and that's like a segue to kind of our core topic here on Invested, which is–how do values create value, and what your values are. So how would you articulate your kind of core personal values?
Samuel:
I mean, there's kind of the practical in terms of my family, and things like that. Is that what I kind of want to talk about, or kind of like the broader thing? Okay, so then I would say the one broad theme or value that I think a lot about is humility. Just kind of massive, epistemic humility. The truth is, I feel like a lot of my writing and thinking is kind of trying to orbit this idea of humility.
I feel like, and going back to how I realized I'm not very good at prediction, I mean, more often than not, we're really bad at trying to understand massive complex systems or the complexity around us, or just various ideas. And we have to confront that kind of thing. And I think if we fail to do so, we're just constantly going to be like sideswiped by the reality of the world being much more complex than we realize. And so that kind of humility is very important.
An example would be, well, this is kind of a trivial example, but it's kind of a fun one. So when the Apple Watch first came out, there was this article, I think it was in the Wall Street Journal, discussing whether or not people were still going to buy expensive mechanical watches.
And they interviewed this one guy who was a fan of mechanical watches and he says, “Yeah, of course I wanna buy a mechanical watch. I think of it as, it's so much more intricate and complex as opposed to a smartwatch, which is just a chip.” And of course, like the smartwatch is like, it's orders of magnitude more complex, but we've been shielded from that kind of thing. And I think we need to just be aware of the vast amount of complexity in our technologies, in the sciences, in our societies, in the way in which the vast systems around us operate.
And we need to just constantly be aware that we don't understand a lot of things, and that's okay. We've kind of always recognized this. And I think I discussed this, maybe it was in my second book, Overcomplicated, I feel like the various trends of the enlightenment have been very, very good. The idea that you can take your rationality, and kind of approach and apply it to the world around us to understand it–that is really good. We should keep on doing that kind of thing.
In science, that's one of the things I do. But at the same time, before that time period, there was a greater degree of comfort with not necessarily understanding the world. So for example, like in Maimonides' Guide to the Perplexed, he gives a list of things that no human will ever fully understand. And he was okay with that, recognizing, okay, like there are going to be things that we can ever fully grasp. And I think we've sort of lost that sense. So I would say that is definitely one value that I hold dear.
I would say, also related to that, is this idea that incremental progress is–it sounds weak or kind of like a cop-out, but I actually think that is probably the best way to think about the world.
And because we are in this massively complex world, it is very hard to understand the ways in which the world is going to change and each specific technological advance or scientific advance is going to change the world. so therefore having a kind of much more sort of humble tinkering approach around the world, this kind of more incremental view, I actually think is much more valuable.
Related to that is also, so related to this is–I'll kind of give two contrasting, and you can stop me at any point, but there's kind of like two contrasting views. So there's this idea of like the tech tree, which, I think it grew out of certain computer games, like Civilization, things like that. Which is like, you imagine that each excessive technological or scientific advance then allows you to build kind of the next one. And I think there's a great deal of truth in this. The problem is though is, we don't have that texture. We can't look at it and say, “If only we built this thing or developed this thing, it would lead to this next thing.” And so as a result, the kind of ideas that we need to internalize are kind of the things from–there's actually this great book, it's co-authored by Ken Stanley and Joel Lehman called Why Greatness Cannot Be Planned. And the idea behind this is that when you have some vast high dimensional space that you're trying to explore, it doesn't actually make sense to optimize or aim towards a specific goal.
It's much better to just optimize for interestingness, or novelty, and find interesting stepping stones, and then recombine them in intriguing ways. So I think that kind of incremental progress is truly the only way in which we've made progress. But in addition to that, its precondition is this kind of omnivorous curiosity. Like you need to be curious and interested in lots of different things, because you don't really know how they're going to be combined together.
And so I would say, if there's curiosity, that's one, humility, of incremental progress is the way that's enough. These are other values. And I would say, and another one is also just kind of, guess, related to history. I am very informed by history and even tradition, how we think about these kinds of things. And so, especially in the tech world, there is a certain amount of historical ignorance, sometimes even proudly so, like we don't really care where we came from because the new is always the thing that we care about.
And the truth is, understanding the history of technology, or understanding just more deeply the perennial wisdom that has led us to this moment, can be very, very valuable, because you can understand a certain amount of path dependence. You can understand the path that is not taken, you can understand why things are the way they are, and why they're not. It prevents you from–sometimes looking at old computer magazines is fun, but for nostalgia’s sake, but more broadly, it gives you a roadmap to not necessarily just constantly reinvent things. I see there are a lot of ideas around thinking from first principles, or certain things around effective altruisms that are starting from scratch. The truth is though, a lot of these ideas are slowly but surely just kind of recapitulating a lot of things that a lot of wisdom traditions, including Judaism, have known for millennia. Like these are not like novel things.
Michael (41:23.347)
Wait, you think effective altruism parrots Judaism?
Samuel:
I would say certain aspects of giving tzedakah, like giving charity, like large–
Michael:
Everyone's got given in charity, right, giving alms to the poor…
Samuel:
No, but the idea is that, no, I would say certain things around certain aspects of effective altruism, I would say are not. They're kind of their own thing. What I meant more was the idea that thinking from first principles, whether or not certain ideas around effective altruism and kind of giving what you can, and things like that, these feel to certain people to be radically novel ideas–and they are not. That is kind of what I'm saying. And I would say, related to that also is the idea of like-
Michael:
There have been other people who have destroyed society before by not reproducing. Just like the EA people.
Samuel (42:11.438)
No, the EA people are- I don't think the EA people have anything related to not like lack- like not reproducing.
Michael:
Well we have children in Africa, and we’ll give them mosquito nets, so we don't need to add more children to the world.
Samuel:
No, I don't think that's what EA says. Actually, so I would say, there might be certain people from EA–there are certain people who are obsessed with existential risk, who might actually be concerned about adding new, individual people into the world. I'll say this from the outside, cause I'm not really plugged into the EA world, or the existential risk.
Michael:
I’m not that close to it either, I’m just saying.
Samuel:
But my sense is they, they're not as like, for me, antinatalism as other parts of maybe that kind of tech-adjacent or rational world. So yeah, so I wouldn't necessarily put them in that bin.
Michael:
The climate-change-woke world
Samuel:
I would say that's actually kind of different than some of the rationalist EA world. There is kind of, I imagine there's probably some overlap, but yeah.
Michael (43:09.376)
Yeah, so you segued and you mentioned curiosity. In my book, which is only in Hebrew so far, Everyone Can’t be Moses, I suggested that God chose Moses for the role because he was curious. He saw the burning bush and it wouldn't be consumed, and he said “Hey! Let me check it out,” So you could be Moses too. But it's a good segue, actually. The points you made about tradition and perennial wisdom that's been around forever.
It's a question that ironically both Peter Herbert and Josh Wolfe of Lux told me I had to ask you. How are you able to reconcile, in their terms, ancient religious views in practice, with a professional life focused on modern science plus technology? And ironically, or interestingly, they both reference kosher as an example, which I guess they view as religious and anachronistic, rather than science and technology based.
Samuel (43:59.918)
That's a great question. And so the way I think about this is, I wouldn't say that kashrut, that keeping kosher is like anti-science. I think its its own thing. And for me, it's much more, it's kind of part of the larger aspect of adhering to a tradition and a community. And so for me, like the way I kind of view it is, i guess if I were an ancient Greek, I would feel a great deal of value in ancient Greek mythology and kind of doing certain ancient Greek traditions, and things like that. I still like mythology, even though I'm not.
And I feel like, but my tradition is Judaism. It is this multi-thousand-year tradition that has a great deal of texts and wisdom to draw on, and traditions and rituals and behaviors and things like that. And being part of a community is, it's amazing. It's just kind of this wonderful thing that I think many people don't quite realize the value if you're kind of outside of it.
And so like, for example, in addition to kind of keeping kosher, there's just the whole idea of like Shabbat. And so there's many people in the tech world who are not Jewish or not observant who might see the value in taking a 25-hour period away from technology. The truth is though, if you are not embedded in a community that values that, and then is also participating in that kind of 25-hour withdrawal or taking a break from technology, it's really, really hard to do. And so I think many people try this and they're like, I just feel very isolated. It doesn't make any sense. But if you are part of a community that is sharing meals together, spending time with family, reading, thinking, gathering together, not only is it easy, you kind of feel like it ends too quickly. And so for me, a lot of these kinds of behaviors and rituals and things like that are due to the kind of the power and value of community.
Michael (46:01.742)
Have you run into any, what you would call real conflicts between your, let's call it scientific brain and pursuits, and Jewish orthodoxy and religious pursuits?
Samuel:
I mean, there's practical differences, like practical conflicts where I'll get invited to something and I can't do it just due to timing.
Michael:
Does it trouble you?
Samuel:
Not really. It doesn't really trouble me. I would say I probably have a somewhat different theological take than many people. For me, I view a lot of the ideas within Judaism as part of this wisdom tradition. And sometimes I'll often view things far less literally than maybe some people will. And for me, the way I think about a lot of the stories and ideas within the Hebrew Bible–for me, the people who tried to kind of reconcile them with science, for me, it's more like that is a misreading of the genre. Like there was no science thousands of years ago. And so these stories were myth. Like they're not necessarily myth in the pejorative sense, but myth in the technical sense of, these were stories and ideas meant to explain the relationship between humans and the world around them. So when you kind of understand it that way, then there needn't be any kind of conflict. Like these are just like, these are kind of the stories of my people.
Michael:
Maimonides says if you take some of the midrashim, or the stories around them literally, you can be called a fool. Does it get you into trouble in the community that you're kind of a lack of a literalist?
Samuel (47:55.592)
You mean within the Jewish community? I don't think, I mean, not really. I don't think so. The truth is, I think there's kind of, every Jewish community has a wide variety, a much wider variety of interpretation and perspective than many people realize.
Michael:
Yeah, so when you contrast this to the tech world, which seems to have gone very individualistic over the years, obviously, I think this is a little bit the point you're makin, or maybe a lot of the point you're making, which is, I've got this community life, even the toquevillian community life over here, but the tech world has kind of taken, you know, like Yuval Noah Harari, individualism into extreme. Do you talk about that with other people? Do you agree with what I just said right now? Do you disagree?
Samuel:
I definitely think there's something there, because, actually related to what I was saying of reinventing first principles, there's a lot of people in the tech world who are beginning to realize that things are pretty atomized, and they're trying to actually recreate a lot of the things like these these kind of communal aspects of more traditional religious communities. Like whether or not they're like trying to have, I don't know, regular meals, or trying to have everyone kind of live within a certain specific area so that everyone can interact or maybe share childcare, and things like that. There are people or people talk about like the third space like where it's kind of like a place where people can gather outside of the home or the workplace. And I feel like those are those are a lot of things that religions have and traditional communities have. And so in many ways, they're kind of trying they're they're grasping at those kinds of things because I think many people, or at least some people in the tech community have realized that, yeah, this very individual kind of aspect is not enough. Like, you need something else to be a more complete, more full human.
Michael:
My sense is, by the way, that Christianity is on the rise in the United States right now, and I think church-going is on the rise, and my sense is it's starting to infiltrate the tech community as well. Is that your sense too?
Samuel:
Um, yeah, anecdotally, I've definitely seen some things where people have talked about this within the tech community and yeah, it seems like kinds of Christianity within the tech community are on the rise.
Michael:
It seems like, you mentioned before, the stories of our past and of our religion, our foundational stories. And you mentioned a parallel, not in this podcast, I think it's in your book, between open source software and oral storytelling traditions. First of all, is there like a modern Abraham story or Joseph story in somebody writing code today? That's become like a cultural foundation?
Explain that.
Samuel (50:44.472)
Yeah, I mean, so the example I give, yes, in terms of this comparison, open source software, I'll start again with like, okay–
Michael:
You can give me a pitch for your book now, too.
Samuel (51:14.348)
So within The Magic of Code, this book that I wrote, about the wonders and weirdness of computing that kind of tries to view computing almost as humanistic liberal art. I try to bring together a lot of these different ideas. And so the idea within kind of like looking at ancient traditions and mythology is, so within like ancient Greek mythology, for example, there's no real single canonical version of specific stories. There are multiple different versions that, over time, are kind of the ones that we have. So over time, or there certainly was never a single canonical version back in the day. These versions, you would have a story, people would add to it, people would remove things, people would combine it with other stories. And then over time, based on the community telling and retelling these stories, we would end up with the versions that we have currently or later on within the ancient world at least. And in many ways, this parallels the way in which open-source software is developed. This idea that like you have maybe some initial version of a piece of software, then people add to it, people remove it, things change over time.
But ultimately it's in the same way that ancient traditions are dependent on a living community to preserve these things and kind of balance this innovation with maintenance. You do the same thing within open source software. It's great if you have a piece of software that is freely available to download, but if there's no community that's really maintaining it or working on it, then it's kind of dead. It's inert. And I feel like the same thing is true with a lot of these stories. And so one of the examples I give within the open source world, or at least kind of within the software world is the various versions of Unix.
And so Unix is a foundational piece of operating system. It has multiple different versions. So the original version developed in Bell Labs was not actually open source or it was not open source in kind of the traditional way. And understand it was eventually shared, like the source code was kind of copied and brought around, but it wasn't until there were a number of different versions. I think there was like the one in Berkeley, then there was Linux that we know. Those kinds of became the more traditional open source software that we have. And it turns out that now there's many, many different flavors. The Macintosh operating system is run on one of these. I think it's the variant called Darwin, if I remember correctly. But the interesting thing with Unix is that, so the novelist, Neil Stevenson, he has this amazing book called, In the Beginning Was the Command Line. And so he talks about open source software and computing, and Unix and he kind of discusses Unix as sort of like the epic of Gilgamesh of the computing world. But the truth is, if you look at the history of computing, which has been around for, I don't know, 75 years or so, and Unix has been around for like the majority of that.
So if you take like all the vast span of humanity,
Unix is much older than Gilgamesh. Unix, it's much older than like cave paintings and things like that. And it's kind of astonishing that it's still around and kicking. And it's due to this community that balances innovation and maintenance and allows it to be kind of this living text.
Michael:
It gives me a new way to think about the title of the famous open source book, the Cathedral and the Bazaar. You might have thought it would be different. Maybe the open source should be the cathedral, and the closed source should be the bazaar. You mentioned, you now went to Greek mythology, and the Epic of Gilgamesh, but in the book you have a lot of Talmudic references.
Samuel:
I do, yes.
Michael:
Why?
Samuel:
Well, certainly I wanted to kind of make it clear that in order to understand computing and code, you have to draw on kind of ideas from the humanities and other traditions and other ideas. For me also, it was just the kind of thing where I knew a lot of these stories and ideas, and I found them very relevant for how to think about code.
So one example was, like right now when people talk about vibe coding or how programming is changing in the age of AI–this feels very, very different from the way in which certainly I learned how to program, and other people have learned how to program over the past couple of decades. But the way I view this is like, there is kind of this tradition of code and programming and it's always changed. Like I don't program the way Steve Wozniak programmed, I don't program with binary or assembly or whatever it is, but it's kind of part of this longer tradition. And the example I give is this story from the Talmud where in the story, Moses is speaking with God about who is kind of the greatest scholar. And he's like, “Someone in a thousand years in the future, this rabbi, Rabbi Akiva, he is the greatest scholar.” And Moses says, “Okay, show him to me.” So then there's like this interesting time travel moment where Moses is transported a thousand years into the future or so into the house of study, in the back row of Rabbi Akiva's halls.
Michael:
Almost 2000 years.
Samuel:
So yeah, even more. So he's learning and he's listening, and Moses realizes he doesn't understand anything. And it's just like super, which is kind of shocking considering he was the one who ostensibly received the Torah from God. And this is really disheartening. And so he's really worried until the very end, Rabbi Akiva mentions, “And the way I learned this is through Moses from Sinai.” And at that point, Moses is calm and he realized, wait, there is this tradition, and I might not necessarily understand the newest thing, kind of like the thing that's happening like one to 2000 years in the future. But I know that I am part of this continuum and this pattern of like teacher to student, or one tradition to the next. And I feel like that's the same way we need to think about computer programming is that it's changed, it's going to change, it will continue to change in the future. But it's all on this line of how can we think about the best way to take the ideas that we have in our minds and instantiate them in software, and make them things that people can actually use.
Michael (56:48.332)
I love that by the way. I think that's an incredible application of the Talmud. Have you, by the way, completed the 7 plus year cycle of the Talmud?
Samuel (56:56.558)
No, I have not. My knowledge of Talmud is very, very spotty.
Michael:
That's a good story. Okay, we can't finish this without talking about AI. Your partner Josh Wolf says AI is evolutionary, not revolutionary. Do you agree? He's told me this in a private conversation.
Samuel (57:09.858)
I would say, I guess it depends. And so yes, in the sense that certainly it does not feel–certain times will not feel wildly different. And in fact, you can draw on historical parallels to try to understand how AI is doing what it's doing, or how we might react as a society to AI. So I think in that sense, it's evolutionary.
I would say it's revolutionary in the sense that it is going to cause a, or it has the potential for causing a great deal of disruption in society in the near term, or for a certain amount of time. Like in the same way the industrial revolution, yeah, it certainly was the outgrowth of certain trends and advances, but there was many, many decades where people really did not know how to handle these massive changes. And I do think that AI has the potential for causing that kind of disruption as well.
Michael:
What do you think are going be the most massive changes?
Samuel:
The most massive changes. So I think if you take certain bullish cases of that, if they can automate huge swaths of human work, then the biggest change will be not just how we do work, but more broadly, actually, how we think about meaning and purpose. Because right now I think a lot of people, a certain fraction of their meaning and purpose, and how they think about themselves in relationship with the world, is tied to their profession and their job. And if that is no longer something that they can do quite in that way, it can cause a great deal of existential confusion.
There was someone I know, Lawrence Lundy-Bryan, he's an investor at Lunar Ventures. And one of the things he also does is, he does a lot of research, he'll do these massive deep dives into some cutting-edge technology. And he really enjoys these things, and he gets a great deal of pride and examines all these different areas. And then when deep research came out and he realized that with a really good prompt, could do basically what he had been doing in like, it would take him like 20, 30 hours–he could do it in three minutes. It caused this massive, some sort of like, he didn't really know what to do.
I was interviewing him and talking to him about it. I said, “You've been writing about this very thoughtfully.” And he's like, “No, no, you don't understand. I'm having a panic attack in public.” And it was one of these things where he's like, “Oh yeah, it's one thing to think very philosophically about all these disruptions and what they're going to happen, like how it's going to happen in society when it's happening to other people. But when it happens to you, it's really, really disconcerting and like worrying.”
Michael:
And what'd you tell him? What’s the advice you gave him?
Samuel:
Well, the truth is he actually has a lot of advice for himself. And he's been actually thinking about one–I mean, that's not the only thing he does, but so he's been able to do other things. And I think he, like, there's kind of the, I'll just go one step further. I'll kind of manage the AIs as opposed to doing that. I'm not sure if he's talking about that specific example or that specific thing. But one of the other things is, it's just forcing him to think about how we think about education more broadly, because if a lot of the things, so let's say maybe the best people in the world are not able to be duplicated by AI in terms of what they do. But a lot of the entry-level jobs are gonna be done much better by AI. Then the question becomes, how do we think about people who are just graduating from college or kind of these entry-level positions? Because if they don't have the ability to learn and apprentice and do that kind of thing, that will cause a great deal of disruption. For me though, I also think more broadly about these. One of the other ways I think about this is also the–I am hesitant to always say like, this AI system is cool, but there's always X that can never be done by AI. Because I feel like we're always, we say this and then we're constantly slapped in the face by the next advance. And so the example, the kind of the parallel I think about is a lot, the idea of like the God of the gaps. This kind of idea in theology of like, how do we define God? God is simply things that science has not explained yet.
But the truth is, science has made a lot of advances. And suddenly, as science explains more and more, if you adhere to this idea, your conception of God gets narrower and narrower and then kind of totally evaporates.
Michael:
Or you assume that science keeps creating more gaps for the more advanced…
Samuel:
But I think this idea of saying, “Oh, technology or AI can never do this one thing, so therefore that's what makes humans unique”–that feels like the wrong way to approach this. So for me, it's much more around, the truth is, there was a long time where we thought, only humans use tools. But of course we found various animals who use tools. Now we can, I mean, we thought, oh, only humans are the ones who can write crappy poetry. Now AI can write crappy poetry. But the truth is, other humans have been, like, I might be able to write crappy poetry, but other people have also been able to do it. Like even separate from the technology. And so for me, it's much more about thinking, not about unique aspects of humanity and more about like, what is quintessential to you? Like what are the things you truly enjoy doing? And so for me, and like, what is your quintessence or whatever it is. And then making sure that technology, instead of allowing you to avoid doing those things that you actually think are part of your quintessential humanity, allowing, you to kind of be like the best version of yourself.
And so for me, a lot of the AI stuff, when I think about it, is more about like when we adopt it how we think about it, it should be in service of going back to like the meaning and purpose. Like how do we think about what are the true things that give us meaning? What are the ways we wanna spend our time?
Michael:
Give me the ‘it’ for you.
Samuel (01:03:06.414)
The it for me. So, and for me, it's going back, and I mentioned one of those values is curiosity.
I love to just learn about the world and make connections to different things or whatever. That would be certainly one thing that in some ways, like I could outsource that to AI, but I want to ideally want to use that in concert with AI. But at the same time, it's also, I think a lot about, that's kind of like certain professional aspects, but also, I want to spend time with my family. Like I don't want to have an AI tool or a robot that allows me to not have to be a good father or a husband or son or whatever. Like that seems kind of against the point of being truly human. And so for me, it's more kind of like, how do I think about these things in service of making me the best version of myself, as opposed to in service of avoiding the things that are actually worth doing?
Michael:
So how are we gonna get through the apprenticeship problem presented by AI?
Samuel:
That I don't know. To be honest, I don't know.
Michael (01:04:07.726)
Do you think they’ll be structural unemployment? Is UBI friend or foe for you?
Samuel:
So I know you've written a little bit about this, and you're kind of not a fan of it. I am much more sympathetic to it mainly because I grew up watching a lot of Star Trek. And so I am like, I am very much a fan of like the post-scarcity society where, and so for me, and I feel like UBI is sort of a stop gap, but kind of a way of getting us potentially to that kind of post-scarcity society, mainly because I mean, when we have a post-scarcity society, no one needs to work to survive, but working and things like that, like they can still provide you with meaning.
And so whether it's engaging certain hobbies, whether it's exploring the stars or whatever it is, like these are the kinds of things in the Star Trek world that you can still provide, you can still have meaning for. And I think UBI and even some of the, like some of the studies that have been done, and I'm not really sure we've had like a really good experiment with these kinds of things, but thus far I've seen, people don't necessarily view or use UBI to avoid still engaging with the world, or working, or things like that. So I'm more optimistic about it than certain people.
Michael:
Okay, so we're both Star Trek fans. I’m an old Star Trek fan.
Samuel (01:05:24.12)
So I grew up on Next Generation. I grew up on Next Generation and I've definitely seen some of the original, but yeah, I grew up on Next Generation and many other ones after that.
Michael:
So what is the most important lesson people should take away from Star Trek Next Generation?
Samuel:
So I would say, there's a lot of things I can think of. So I would say one of the interesting things, so as much as we think of, okay, what are the specific features of the Star Trek world? Like, it's warp drive and go, and the truth is the replicator is probably the thing that allows it to be this truly post-scarcity world where you can kind of just make anything you want. The one interesting aspect of the Federation and the Star Trek world, as far as I can see, is that in some ways, humanity is actually the best version of itself.
Cause I actually think if we currently, like if humanity were kind of dumped into a Star Trek world, we would probably not rise to the level of making ourselves better. Actually, so there's a great speech at the end. There's an episode where I think it's like three people from the late 20th century, they were like defrosted or whatever. And they're brought in, and one of them was this Titan of commerce. And all of his money is meaningless by the time he's thawed out during the world of Star Trek Next Generation. And he's like, “What do I do?” And Captain Picard has this amazing speech where he's like, “That's up to you. That is the beauty of this world that we now have. You don't have to work hard. You can kind of be the best version of yourself.” And I think right now as a society, we have not had that conversation about.
Samuel (01:07:02.99)
If you do not need to work, what would you do? Or if AI could do everything, like how would you find meaning in purpose in life? And I feel like Star Trek, that Star Trek world, they've already had that conversation and people have kind of figured out what they wanna do with their lives and how to think about that. And so for me, the greatest lesson then is we need to have that conversation as a society before it's too late.
Michael:
I'd argue that in Star Trek, a small number of people on an enterprise ship have had that conversation, and they consistently run into–and I'm a first generation guy–they consistently run into people who have not necessarily had that conversation, which I think is interesting.
Samuel
That might be true. I would say, I mean, we definitely see only a certain small subset of the world of Starfleet and the Federation, right? It could just be seeing the best of that world. But I'd like to think that as a society, we can rise to that occasion only if we actually truly have that kind of conversation.
Michael:
Okay, a couple of rapid-fire questions before we wrap up here. Josh Wolfe just wrote a Luxe letter about partnerships, particularly one of the things he refers to there, by the way, is the bicycle analogy that you talked about in Steve Jobs. But he talks about man-machine partnership. What's the most interesting man-machine partnership you can think of in the next 10 years?
Samuel:
I think science, how science is done. So the man-machine partnership in terms of science, of generating hypotheses, testing experiments, things like that, I think we're actually going to rapidly accelerate scientific progress when we actually do it in concert with certain of these AI tools.
Michael (01:08:37.294)
And Dan Davidi, our EIR who you've spoken to and the founder of Ohr, has this line, “AI will not cure cancer.” What do you think?
Samuel:
So going back to my thoughts on biohacking and how biology is really, really complex–I don't know. I assume it's gonna be very, very tough. I mean, cause like cancer is also not just a single thing. It's like a lot of things. But yeah, it's evolving and complex. But I do think though that, going back to the fact that our brains are very limited, and it's very hard to understand highly, sophisticated, evolved things that have evolved for millions of years. But if we don't have to have those kinds of limitations, and we kind of just throw tons of things in, I think we will be able to find certain regularities and make certain advances. So Dan might be right. I hope he is wrong. And I think there is a hint that maybe he is wrong.
Michael:
It’s kind of common wisdom and common pursuit at this world, particularly among the elite in the tech world, that people will live a lot longer in the not too distant future, and like longevity is a giant area that all these people are investing in. Will people live a lot longer? Like over the next 20, 30 years will we see people live longer?
Samuel:
I don't know. Going back to the other thing, like in the same way that cancer is really complicated and tough to beat and aging and death, those are hard problems. So I do think people will live longer. I wonder though, to what degree some of it is removing some of the things where people will die younger, as opposed to kind of like increasing the end point or kind of like the health span.
Michael (01:10:24.222)
The average will get better, but not necessarily the extremes.
Samuel:
Like the extremes. I don't know. I have to say I'm pretty agnostic as to that.
Michael:
Do you care about this topic?
Samuel (01:10:50.508)
I find it interesting. I think it's really interesting. I would love to live longer and longer, like be alive longer and healthier, and spend time with kids and grandkids and things like that. Certainly in the same way that like, I mentioned, I'm just very curious about the world. And I'm also very interested in history. The more time I can live, the more history I can live through. So I guess that's one aspect in which I'm interested in, but I don't follow the field itself closely.
Michael:
How old were you when you had your first child?
Samuel:
I was 31, yeah.
Michael:
If you had to do it again, would you get married at a younger age and have younger kids so that you could see more generations?
Samuel:
Ooh, that's a good question. I mean, it might've taken me a certain time to kind of get ready to be ready for that. I don't know. I feel like I was, I'm very happy with what I had.
Michael (01:11:26.23)
Good, yeah, back to who is wealthy, he was happy with his lot. Who is someone in our space that you'd like to say something kind about that you think doesn't get enough attention?
Samuel:
Ooh, so I'm not sure if this counts as our space, or my space might be different. I would say, one person who I like a lot and I find very interesting is this designer and researcher, Chaim Gingold. He was a designer at the intersection of games and simulation, going back to Maxis and SimCity. He actually spent some time working at Maxis. I think he was developed, he did some stuff with Spore.
But he also, he developed an interactive textbook for learning earth science. I mean, he actually wrote this beautiful book that came out about a year ago, sort of like the deep ideas and kind of prehistory as well as history itself of SimCity. And he's just a very broad and amazing thinker. And also he's a great person, so.
Michael:
I feel like I gotta get him on the podcast. He sounds interesting. Amazing. Sam Arbesman, thank you so much for joining us. You can learn more about Sam on his LinkedIn, which is Samuel Arbesman. That's A-R-B-E-S-M-A-N and on X at @A-R-B-E-S-M-A-N. Sam, thanks so much for joining Invested. And if you enjoyed this podcast, please rate us five stars on Spotify or Apple podcasts. Subscribe to the YouTube channel so you can gain more of Sam and other people's wisdom. Thanks so much, Sam.
Samuel (01:12:50.104)
Thank you, this was great.
Shalev Hulio (00:00)
Suddenly two people from Secret Service came. So I said, “Do I need pajamas and a toothbrush?”
Michael Eisenberg (00:05)
Sebastian said no offensive cyber. Do something else. And then, there's Dream!
Shalev Hulio (00:08)
When we decided to found Dream, we didn't found it as a cyber company. We founded it as an AI company.
Michael Eisenberg:
Are you the first Head of State to start a tech startup afterwards?
Sebastian Kurz (00:18)
There's perception, and there's reality. Sometimes it's the same, and sometimes the perception has not a lot to do with the reality.
Shalev Hulio (00:26)
You don't expect politicians to say the truth all the time. You expect politicians to say the truth?
Sebastian Kurz:
Of course!
Shalev Hulio:
This is why you were in court for four years.
Michael Eisenberg (00:34)
In my 30-year career, this is the company that is growing the fastest, to nine digits of booked revenue. What is it that's creating this sucking sound that there's so much demand for the market?
Are there any countries you won't sell to?
Shalev Hulio and Sebastian Kurz:
Of course!
Michael Eisenberg (00:51)
I am thrilled to welcome everybody to the 50th episode of Invested, and as a special for the 50th episode of Invested, we are doing our first episode with two guests together: the co-founders of Dream, Shalev Julio and Sebastian Kurtz. Welcome.
Sebastian Kurz (01:07)
Thanks for inviting us. Thanks.
Michael Eisenberg (01:09)
One of you is a multiple time entrepreneur, and sometimes in the headlines. The other of you was a head of state, and also sometimes in the headlines. Together you've come together to build Dream, an over $100 million-run-rate cyber company right now. What I'd like to talk about is how you came together first. You want to tell that story?
Shalev Hulio (01:32)
Sebastian, maybe you would...
Sebastian Kurz (01:34)
I can start with that. It's an interesting story, because it was more or less by accident, to be honest. So I spent most of my life in politics. Left politics three years ago and started to work, like many former politicians, as an advisor in the U.S., and then a lot in Abu Dhabi. And after some time, I had the feeling that I should start something myself again, something more than just advising others. So I thought it's a good idea to travel around a bit, in order to meet potential partners to do something together with. So I started to go to a few places in the U.S. and then of course also in the Middle East, to Tel Aviv. A friend of mine told me, who has a huge network in Tel Aviv, that he will arrange me two amazing days with everybody from the tech scene, and all the interesting ventures and the big Israeli companies.
So I went to Tel Aviv, arrived at the airport and thought it would be a busy program, and two exciting days. And then when I arrived, he texted me, “I'm so sorry, my wife is in hospital. I cannot come to the airport. I cannot take care of you, but I sent somebody to pick you up.”
I was looking around, and there’s Shalev Hulio. I looked at him, he looked at me, I said, “Hi.” He said, “Are you Sebastian?” I said, “Yes.” He said, “I'm here to babysit you.” And I went with him to his car, entered his Land Rover, and we drove to the city. Didn't talk that much for the first few minutes because he was always on the phone. I was not sure what he's doing besides driving me around.
Michael Eisenberg (03:07)
The taxi driver with the Land Rover.
Sebastian Kurz (03:27)
I was not sure what he's doing when he's not driving me around. So, and then we had the first few meetings, and everybody was super respectful. All these other ventures knew him. And then I asked him, “What exactly are you doing?” And he said, “You don't know? I am the founder of NSO. I invented Pegasus.” So, I had no experience with Pegasus before, because Austria is a small, peaceful, neutral country. There's not a lot of experience with offensive cyber or products like that. So I didn't know a lot about Pegasus, but to be honest, after the first few minutes of conversation, I had a click moment with Shalev. So it was two good days. It was very impressive what I saw. All the meetings were amazing.
But after two days, I told him, “Look, Shalev. I didn't know it in the first moment when we saw each other, but I immediately had a click moment when we started to talk, and when we started to spend time together. So what I would really like to do is to do something with you, but I don't want to do offensive cyber.”
And he looked at me and said, “I'm the founder of NSO. So what do you expect from me?” And I said, “Look, if there is one moment in your life where you think you should do something else or you want to do something else, give me a call. I was Prime Minister, now I'm not anymore. So probably your life is going to change as well.” And then a few months later when he left NSO and sold his shares, I was literally the first one who he called. He said, “Do you still want to do something?” I said, “Of course.” So we met again, and then it took us a few months, but after a few months, we started Dream together.
Michael Eisenberg (05:17)
I actually have a question. Are you the first Head of State to start a tech company afterwards? Has there ever been a Head of State to start a tech startup?
Sebastian Kurz (05:25)
I don't know. I think there are different types of politicians. There are some who stay in politics their whole life. I think there are also some who do something entrepreneurial, definitely. There are a few who have been quite successful in the private sector as well, before politics or after politics. But I don't know if there are many who ended up in tech, but next time when we meet, I will tell you.
Shalev Hulio (05:56)
By the way, I think that, you know, there are not many leaders of countries and politicians that left politics at 35-years-old, after two times being prime ministers. So I think that's one of the reasons. I think you see a lot of politicians advising companies - sitting in a board, board members, advisory board, but not really as full-time founders in tech companies, which I think is unique. But I think our entire company is a bit unique in that essence, in the vision, in the goal, in what we're trying to think. We're both not the trivial founders of a tech company, I think.
Michael Eisenberg (06:40)
Yeah, I think you're not trivial founders of a tech company. Most of the Israeli tech stories, somebody came out of 8200, the tech unit. You didn't.
Shalev Hulio:
Nope.
Michael Eisenberg:
I think it'd be interesting for people, and...
Sebastian Kurz (06:54)
Do you know what? When I met him, for me, he seemed to be so educated on cyber that for the first few months, I always believed that he's from 8200 or something like that. It took me a while to figure out that he studied law.
But I think the amazing thing about Shalev is, he's genius. I learned that in the first few days when I met him, and after a few years now, I have the same impression. So he's somebody who really wants to put the team to the limit. So whenever somebody says, ‘I don't think that this is doable,’ or, ‘That doesn't seem possible,’ that's where he gets really thrilled to deliver it. So I think that's the reason why he was able, in the days of NSO, to build something where everybody said, it's impossible. And I think it's very similar now in Dream, because when we started and asked around, a lot of people told us, “I’m not sure if that's going to work, if that's possible to build in the way you want to build it.” So this is, I think, also without a background in 8200 or some of the other units, I think that's what really makes the difference.
Michael Eisenberg (08:22)
I'm glad you said that, because I think the framing you had about Shalev that you can kind of do impossible things relates actually to the unit that he was in.
Shalev Hulio:
Search and rescue.
Michael Eisenberg:
The search and rescue unit, yeah. You want to give your background a little bit, Shalev?
Shalev Hulio (08:30)
Sure. So I didn't come from 8200. I was five years in the army. I was a commander in the search and rescue unit. So I participated in most of the search and rescue delegations of Israel around the world, from Haiti, to Nepal, to Mexico, Brazil, you name it, and also here in Israel.
Michael Eisenberg (08:59)
For those who don't understand the reference, like when there was the earthquake in Haiti and Israel sent a team to Haiti to get people out of the rubble that was there, so Shalev was on that unit, and in many other places as well.
Shalev Hulio (09:10)
I think that this unit, I believe, is like the essence of the good thing that Israel has. Israel sends delegation to places that we don't want anything from in return. Sometimes it's places that nobody else reaches or cares about. We were the first delegation that arrived to Haiti. They had 400,000 missing people, eventually dead. Israel was the first one who sent a delegation that actually came and rescued people from the wreckage. Same goes for Brazil, and Nepal, and many other places.
Michael Eisenberg (09:46)
And Surfside, Miami. When the building collapsed.
Shalev Hulio (09:49)
Exactly. I wasn't there. I wasn't there, but yes, the team was there. The team was there. So yeah, it's an amazing unit.
Michael Eisenberg:
And even to Turkey, right?
Shalev Hulio:
Turkey, yup. Even in times of clashes, like diplomatic clashes between the leaders, when there was humanitarian aid needed, Israel sent delegations over and over and over again. So I think for me, this unit assembles what's great about Israel. There's somebody that needs help. Israel is always there to help.
Michael Eisenberg:
And I should say, I know Shalev since about 2007, eight, I think. What was your first company called?
Shalev Hulio:
MediAnd.
Michael Eisenberg:
A terrible name for a company. It's by the way, Media And, like A and D. And what did it do?
Shalev Hulio (10:27)
So we wanted to develop a platform that you can basically get information and purchase anything you see in video content. If you see a video and you like the shirt, the sunglasses, the watch, you can basically click on everything, and get the information and eventually purchase it. It was before Netflix and before Hulu, and it was like 2006. So cento boxes and things like that.
Benchmark was one of the investors.
Michael Eisenberg (11:04)
No, not in MediAnd. We did invest in you in the end?
Shalev Hulio
Yeah, yeah.
Michael Eisenberg:
Wasn't my deal, sorry. How did it end up?
Shalev Hulio (11:08)
No, no, it was Eli. It ended up in 2008 when you had the big economic crisis.
Michael Eisenberg (11:15)
Yeah, the big financial crisis. I don't even remember that we'd invested. That's terrible, shame on me.
Shalev Hulio (11:19)
Yeah. Yeah. Small amount, but invested.
Michael Eisenberg (11:22)
And then? You went from there to…?
Shalev Hulio (11:27)
I went to CommuniTake, in 2008, right after MediAnd. CommuniTake, was a company that developed the remote desktop for mobile, if you want. It was the new era of smartphones, Symbian and Blackberry, just a bit before iOS. That was launched, but not only in the U.S. So people basically had an issue with the new smartphones. So you saw a huge increase in people calling to the support center and asking, “How can I fix this and that?” And I had an idea - why, like in computers, that you can do remote desktop for computers, why you can't do this for mobile devices.
Michael Eisenberg (12:16)
We used to call that Citrix for mobile.
Shalev Hulio (12:27)
Yeah. And we were actually the first one who founded a company like that. We wrote the patent, did all the patents for that. And they recruited a team, raised money, and the company was very successful at the time. And the business model was just selling it to mobile carriers around the world, and just helped them with doing better call centers and support service to their customers. And from that basically was the foundation of NSO.
Michael Eisenberg (12:50)
Explain.
Sebastian Kurz (12:53)
It's an interesting story by the way.
Michael Eisenberg:
I agree. Yeah.
Shalev Hulio (12:57)
So as you said, I didn't come like from a pure signal intelligence or cyber background, you know, in my background. So I didn't know much about this world. But then, you know, we went and met some mobile carriers in Europe, and talking - just to give you the time, it was 2009.
And I remember we went to meet with the customer success team and customer support team. And suddenly, two people from Secret Service came, and said if they could speak with us. I remember, you know, in situations that I don't know what's happening, I'm trying to joke and see what the situation is. So I said, “Do I need pajamas and a toothbrush?” And they said, “No, it's a good conversation.” I said, “Okay.” And we're going into a small room, and for the first time, they start to describe to me the work between law enforcement and the mobile carriers. They basically explained to me that in order to fight crime and in order to fight terror activities, there is law enforcement units within the mobile carriers. And when you receive a warrant from a judge, you can go and collect phone calls and SMS from suspects. And I said, “Okay, what do you want from me?”
And they said that what happened since the emergence of the smartphones, the intelligence agencies, the law enforcement agencies, basically in the dark. Okay, what do you mean in the dark? It means that, because we are using applications, which are end to end encrypted–and back then it wasn't WhatsApp, it was Skype and other applications–they can no longer collect intelligence that helps them save lives. That’s basically what they said. And again, I still don't understand what they want. And I said, “Okay, but what do you need?” And they said, “We saw the solution that you had with CommuniTake, which you basically go into the device, see a full replica, understand what's happening in the device, fix it remotely. So if we could use this in order to prevent crime, in order to catch the bad guys, that would be amazing.”
By the way, that's exactly the switch between SIGINT and Cyber. In SIGINT, you basically catch everything from the network, while in Cyber, you go into the endpoint itself. As I said, we need something to go to the endpoint, and without maybe trying to do so, you actually figure out something that can really, really help us. And they said, could you do it not just for support centers, can you do it also for law enforcement agencies?
Michael Eisenberg (15:54)
And?
Shalev Hulio (15:55)
Of course we said yes, because we thought it's easy. You know, we went back to the investors and the board of directors, and we told them, “Listen, we have this new thing, we just happened and they spoke with us.” And I was very excited. Omri also was very excited. And I remember that they looked and said, “That's one of the most stupid ideas we ever heard in our life. It will never work. It will never succeed. We don't understand anything in this world. We have a great company. We have a great business model. Why should we actually change something or add something for something that actually works?”
And we actually gave up on this. And then, this episode of people asking us about this came back almost in every meeting that we had with mobile carriers around the world. And, you know, we talked about search and rescue. So, Haiti was in January, 2010. Haiti basically changed my life, in an essence. I don't think somebody can really talk about lack of governability or people that have nobody to approach with, or people that are living in fear, until he was in Haiti after the earthquake. What happened in Haiti is that the entire government building was collapsed on the government. Right? So when we arrived to Haiti, it was like chaos, completely chaos. People doing whatever they want, and there is no government, and there is no police, and there is no army. It was like coming to the wild west.
And I remember that we arrived, it was shocking for us. And normally when you arrive to a country that has a disaster, you have somebody that leads you, that guides you, that tells you where he needs help, that gives you some envelope that will help you. We arrived and we had nobody that was helping us there. So we had to understand ourselves what to do. And it was the beginning of social media, and Twitter and Facebook, and suddenly we saw ourselves opening, like, social media and looking in the social media if somebody needs help. And this is actually how we rescued people in the beginning. Like we knew in advance where we had, or by rumors, but the first time that we used technology to save lives. And for me, it was like something that basically changed my perspective on a lot of things. And I said, after Haiti, I came back and I decided that I'm leaving a CommuniTake, and I want to start what’s now called NSO, but it really happened that the eureka moment came in Haiti.
Michael Eisenberg (18:50)
Meaning, you didn't want to service customer service people, you wanted to serve people and save their lives.
Shalev Hulio (18:56)
Yes, I think that I wanted to do something which is more meaningful than just helping mobile carriers get better support for their customers. I thought that if you have something that can save lives, if you have something that can change, you know, help the national security of a country, if you have something that can be really meaningful, okay, like technology and values and meaning–that's something I would like to do. And for me, NSO was exactly that.
Michael Eisenberg (19:30)
So before we come into the history of NSO, which we'll come back to, I actually want to ask you, Sebastian. So you meet the taxi driver who turns up to take you from the airport in the Land Rover, Shalev. And you meet him, at some point when he gets off the telephone, he tells you his background. And you had been a head of state. And obviously, NSO had been in the headlines for a long time. What did you think about this guy, and about NSO, from your perch, right? You've been head of state, now you're going on to the next leg of your career, and you meet this guy who'd been in the negative headlines, let's just say, at that point in time?
Sebastian Kurz (20:09)
I think there's one thing I learned very quickly in politics. There's perception, and there's reality. Sometimes it's the same. Sometimes it's similar, and sometimes the perception has not a lot to do with the reality. And I think the perception, as you said, Michael, about NSO is a very negative one. And it was always driven by people fighting NSO. On the other hand, and I think this is reality, and it's always a technology or a company, and Pegasus is a technology that helped to save thousands of lives. And it helped to fight terrorists, human traffickers, drug smugglers and others. And so from my perspective, first of all, there's a lot of positive that happened because of NSO and because of Pegasus. And second, that's, for me, even more important, I think the reason Shalev and others worked hard and tried to do something that has been undoable before, and built an amazing technology is because they wanted to do something good. And I think that's what matters. So for me, it was easy to deal with the perception, because after talking to him for a few hours, as I said before, for me it was immediately clear that if I do something in technology, I would like to do it with him.
Michael Eisenberg (21:53)
How do you figure out if the perception matches the reality, or they're totally disconnected? What do you do to figure that out?
Sebastian Kurz (22:01)
Well, I think in some cases it's easy, because you just have to figure out where does the story come from? Is it sure that it's true? Who drives it? Who is behind it? The second thing is I would say on some areas, it's okay to have different perspectives. And of course, a technology like Pegasus is something that can also be misused, correct. And of course, I think if a law enforcement agency enters phones, it's very important that there is a clear regulation when it can be done and when not.
So I think all these areas are correct in a way, and they matter. But there is also a different side and that's all the positive that was possible because of NSO.
Shalev Hulio (23:09)
And Michael, I think, you know, you asked about perception versus reality and how you can decide what is real. Unfortunately, I think in today's world, it's almost impossible to determine what is a perception and what is reality. Therefore, a lot of people say perception is reality. And you know, if somebody has an amazing perception, it would be considered good. And if somebody has bad perception or a bad reputation, even if he's doing great things, the perception about him would be bad, and there is almost nothing you can do that can really change it. Unfortunately–and I think it's because of media and social media and campaigns, it's not happening in a day that somebody has–there is always an involvement of, of people, campaign technology, in order to build a perception. Sometimes people build it for themselves. Sometimes other people build it for them. But as long as there is a lot of technology and money involved, it's very, very, very hard to fight that.
Michael Eisenberg (24:22)
Yeah, we're sitting here like, I think, nine days after Sebastian was fully acquitted in Austria. And when we made the investment in Dream, that was like a big topic of discussion. How could you do this? I'll say I was 100% certain, 100%, that the perception did not match the reality, and that this was going to be fine. And the way I do it, at least, is one, is, I check, I call references, et cetera. And the other is, you meet the person, you talk to them, you can kind of figure out who's genuine or not. It doesn't necessarily mean that it'll turn out that way.
And in this case, it did. But I think the hardest thing about being an investor, and perhaps being a politician as well, is fighting through these kind of made-up perceptions about people and getting to the core of who the person is. I think it's actually hard to do.
Sebastian Kurz (25:11)
To be honest, for me, it was always interesting when I was Prime Minister, and I met people the first time that were all around the media. Because when somebody is so present in the media that you see him somewhere online every day, you start to get an opinion. And then when you have the chance, and that's one of the positive things when you're prime minister, you can meet a lot of interesting people. When you get the chance to meet such people the first time, as I said before, sometimes it's very similar to the public perception, but I sometimes met people where I had the feeling it’s crazy that their image is so positive. And sometimes I met people with a very negative image, and I went out of the meeting and said, “Okay, everything is fake that is all around the media about them.”
So I think that's today's world. And what you mentioned before, the investigations I had to go through, yeah, for me, it always felt ridiculous, but it was unpleasant. So when I was prime minister, they started investigations against me and said that I lied in the parliamentary commission. Then they started a lawsuit, and I always thought that this cannot be real. But to be honest, I was seen guilty by a judge who was seen guilty himself before for leaking information to a parliamentarian of the opposition. So I thought, how can it happen that among all these hundreds of judges in Austria, I exactly get the one who leaked information to one of my biggest opponents?
In a way, it was like that. And in our system, the decision if a judge is biased or not is taken by the judge himself. So he said he's not biased, so he got the case. Then I was seen guilty. And then another year later, now the outcome at the appeal, thank God, was a positive one. But to be honest, to go through something like that for years is unpleasant. And unfortunately, I think it's more and more part of our political campaigns in the Western world. And unfortunately, in more and more countries in the Western world, I think this becomes one element of politics, that you have more and more court cases, and more investigations on areas where I would say it would be better just to have a political fight, and not a fight in the courts.
Shalev Hulio (28:10)
Just imagine, okay, criminal court for four years, just if you said or didn't say the truth. And forget what I'm thinking about politicians and expecting them to tell the truth. It's not something that–you're not talking about Sebastian. Like I'm talking–okay, no, don't get me wrong. No, no, no, I'm not talking about Sebastian, but generally speaking, you know, you don't expect politicians to say the truth all the time.
Michael Eisenberg (28:27)
Present company excluded.
Shalev Hulio (28:38)
You expect politicians to say the truth?
Sebastian Kurz:
Of course.
Shalev Hulio:
Okay. This is why you were in court for four years.
But I totally agree with Sebastian. I think that, and we see it all over, you see when the court and the criminal charges are becoming a tool in political campaigns. And you see it all over the world.
When somebody has too much power, you see the opposition using sometimes criminal charges against him as part of the political game. And I agree with Sebastian, which I think is just wrong. Obviously, if you are corrupted, or if you've done things that you shouldn't do, or of course, if you murder somebody, don't get me wrong, but if you're trying to find small things that are meaningless, okay–that if it was me or you as civilians, nobody would ever bother to go to court. And you only do it because it's a politician, and you want him to move out of the way. I just think it's a wrong way to act.
Sebastian Kurz (29:48)
I think the problem is if it becomes a tool, it is negative for the whole judiciary, but at the same time, it's very negative for politics. Because people who see it in the media all day, they have to lose trust, in a way, in the politicians they run their country. And I think that's the problem for our Western liberal democracies, that it's not a positive development.
Michael Eisenberg (30:12)
I need to ask a question. I think one of the claims against offensive cyber is exactly that, that it can become a tool in the hands of politicians against the opposition or against others. How would you respond to that?
Sebastian Kurz (30:24)
I think, but probably you can answer as well, but from my perspective, you can always misuse something. You can misuse a weapon, you can misuse an offensive cyber tool, you can always misuse something. I think it's the same with a gun. There's a need for a policeman, and at the same time, of course, it can be misused. It's the same with technology, and we will see it in more and more areas, the more technology becomes important also for governments.
Shalev Hulio (30:57)
You know, I think it's a common mistake. You don't sell those tools to politicians. You sell them to organizations. You sell them to the intelligence agencies. You sell them to the law enforcement agencies. It's a very regulated sales process. You need to get permission, you know, if it's coming out from Israel, so from the M.O.D. If it's coming from the U.S. from ITAR. So it's not that you can sell it to whoever you want. Not that you sell it to private people, you sell it to law enforcement organizations approved and regulated by the country that you export from–in this case, Israel. So obviously it's not something that politicians would use. Definitely, I agree completely with Sebastian, that misuse can happen. The question is, what is a misuse? And this is also a perception thing.
Because let me ask you a question. Is a journalist a legitimate target? Is an actress a legitimate target? Is the lawyer a legitimate target? Yes or no?
Michael Eisenberg (32:13)
I don't know. This is not my business.
Shalev Hulio (32:14)
Okay. So I think that the answer is that it depends, right? Because the answer is normally no, unless they are somehow related to crime or to an activity that you want to prevent. And specifically, the reason I asked about those, is that in order to catch El Chapo, you know, they had, and it was sketched by the Mexican and the Americans–in order to catch him, you had to monitor his lawyer, a journalist and an actress. Now I'm not the guy that will now sell you what's wrong or right, okay? It depends on the rules and the regulations, and the legislation in each country. But if I would tell you the story that the journalist was attacked by a spyware, or a lawyer, you would say it's very bad. But if I'm telling you that the number one criminal in the world ran away from the prison, and you had to catch him, and they had to do that in order to catch him. Now what would you think? So I think that it's also a matter of perception when you're talking about misuse, that you don't, or never actually have the full picture. So in order to understand the full picture, you need to understand what's the context, how they use it, did they get all the permits to use it? Is there a rule of law in the country? All those kinds of questions that you need to ask yourself.
And I'm not talking about Pegasus. I'm talking generally about intelligence, cyber intelligence tools. It's a very complex issue. I don't think the regulation is tough enough. I think we need more regulation. I think more legislation. I think it should be like, you know, like you have the Geneva Convention–you have to do a convention for cyber. And I think only countries that actually sign on this treaty, or this warrant, or this convention, will be obligated to use those kinds of tools, and will need to have a set of rules and globally probably some kinds of transparency and some kind of things. It's not there yet, but I think we should do it. And by the way, Israel, I think, is the most progressed country and the most regulated country, and I think the most advanced country when it comes to cyber use and cyber regulation.
Michael Eisenberg (34:42)
Yeah, I agree with that. I agree with that. What's called “Api” here in Hebrew, or the Export Enforcement Organization.
Shalev Hulio:
DECA in English.
Michael Eisenberg:
DECA in English. Not just offensive cyber, but in general, of export, has done, in general, a pretty efficient job and certainly has the regulations when they're supposed to be doing it effectively. But this brings me to a different point, which is related.
In my book, The Tree of Life and Prosperity, I talk about Noah. One of the things I talk about, and which is a very important topic on this podcast, is how values create value. Now, the sticky points to your point is, there's legal regulations. And like you said, the legal regulation in Austria, for example, is that a judge who has a conflict of interest can rule that he doesn't have a conflict of interest. You said there needs to be enforcement in law and regulations. The question becomes, in all these areas, and whenever you have new technology, regulation generally is behind new technology. The question becomes, how do you develop a values framework with which you can use new technologies before the legal regulation catches up? Is that even doable? Or we shouldn't even expect that.
Shalev Hulio (35:58)
I think not only it's doable, I think it's a must. I think that founders of technologies that are very advanced should be self-regulated on themselves. You know, we've done it in NSO, we are doing it in Dream. And I think everyone that has a technology that, even if it's not supposed to be regulated–okay, I don't think AI should be regulated. I think certain elements in AI should be regulated. But generally speaking, I think AI shouldn't be regulated, but take AI. I think companies that can think of a misuse in their tools need to map it, understand it, and build mechanisms to make sure that it won't happen.
And those mechanisms can be technological mechanisms, can be a marketing mechanism, and should be other kinds of mechanisms that you put in place. Because the technology will always be much, much faster than the regulation. And in AI, it's even tough to follow. Like six months ago, like what happened in the last six months in AI, it's like an improvement that you cannot even think about a few months ago. So I think that just to summarize it, I think that you cannot be dependent on governments and countries to regulate you. You should be aware of what to do, and you need to have enough understanding, and you need to look through things, and make sure you put all the safeguards that you can in order to prevent misuse of your product.
Michael Eisenberg (37:53)
I’m gonna come back to that.
Sebastian Kurz (37:54)
I think it's not easy to answer. The best answer I have is that, from my perspective, it's important that there is much more interaction between those who write the regulation and those who work on the daily basis with technology.
Because from my perspective, as Shalev mentioned, AI is changing the world so quickly, for example, that it's extremely difficult as a regulator to create something that really makes sense, and is not over regulating, and is also in a way working. So from my perspective, I think unfortunately, the bureaucrats working on regulation are often far away from entrepreneurs or tech people inventing something, and the regulation is mainly driven by NGOs and their campaigns.
So from my perspective, the only thing that can help is to have a lot of interaction between the companies and the bureaucrats who do the regulation, because that's the only way that you end up with something that makes sense in the end.
Michael Eisenberg (39:16)
I want to challenge that for a second. Because I mean, I agree with you, but I've been doing this for 30 years. Not once in 30 years have I seen that engagement really happening. Maybe, maybe right now in the Trump administration.
Sebastian Kurz (39:28)
But that's happening, example. If you compare, for example, that's a good point. If you compare Europe and the U.S., I think in Europe, there's much more interaction between the NGOs and the bureaucrats, and much less with the tech people. In the U.S., I would say it's different. And from my perspective, it's much better as it is there. I think you will never find…
Michael Eisenberg (39:58)
But how do you get there? Like, I hate to say it this way, but the NGOs and the bureaucrats have more time on their hands than tech entrepreneurs do, or are busy doing what they're doing.
Sebastian Kurz (40:05)
Look, think it needs both. I think you need people in the private sector who do care about their country, who do care about the system they live in. So I think it's something people should take time for. And the second thing, I think you need a different mindset among politicians and people in the system who also see this importance.
Michael Eisenberg (40:33)
When you look around Europe, who do you see who is au courant enough to kind of engage in these tech discussions?
Sebastian Kurz (40:43)
For example, if you look at the German government now, yeah, with Merz, there's a big change going on. He spent most of his life in the private sector. It's now the first days in office, so too early to say, but if you ask me, I'm sure there will be a lot of openness from him and his team, in order to engage with the business community. And it has been such a tough time for the German economy, that from my perspective, it's absolutely needed to do it like that. And I think they will.
And you have other systems where it's not working at all. My feeling is that sometimes in countries that are not so developed, where the goal is still to become economically strong to create jobs, there is much more engagement with the private sector. And, as you said before, in countries where living conditions are quite good, social welfare system is strong, people care about everything else but not about the economy and then you have less of this interaction.
Michael Eisenberg (41:56)
I think we should say, you do a lot of work in the UAE, I do a lot of work in the UAE, I've been there, but they're actually super engaged on it.
Sebastian Kurz (42:01)
Of course, because their number one goal is to be successful. Their number one goal is that the United Arab Emirates are a successful country with high living standards, and to create something positive for their people. If that's the number one goal, of course you try to work with the private sector. Of course you try to figure out how to have a set of regulations that you are as competitive as possible.
If you don't care about creating jobs and your economy, it's not a problem if it's not easy to be competitive there.
Michael Eisenberg:
You’ve been a leader–where does that come from?
Sebastian Kurz:
To be honest, it's not only about tech. Look at the energy costs, for example. Europe, like Germany and others, have always been quite competitive in industries because of a lot of knowledge, long tradition, hardworking people. The negative side was always high labor costs, but at the same time, energy costs were solid.
Now, the energy costs went up like crazy. So you have, at the moment, a combination of a lot of bureaucracy, high energy costs, and high labor costs, which makes it extremely difficult for many of the big players in Europe. So you have companies that originally come from Germany, they are successful all over the world, but in Germany or in Europe, it's much harder for them than in the rest of the world. This is extremely problematic.
And I think, yes, if times get worse and if the economy goes down, I think people start to question that there's more pressure on politicians to win. Sometimes, like in Germany, people like Merz and the center-right can win elections and can change things again.
Michael Eisenberg (44:01)
We might actually come back to Europe in a few minutes, but let's go back to the UAE for a second. Where do you think that approach of, we want to be successful and we're going to engage with CEOs, founders, the business community comes from?
Sebastian Kurz (44:16)
Yeah, because they want to build something unique. It's a vision. The vision is to build one of the best places to live in in the world. One of the most secure places, one of the places with the highest living standards, one of the best places when it comes to economy. So it's a vision, and it's not only the UAE. I think the UAE is top in class, but you see also in countries like Singapore and a few others, that it is possible.
Michael Eisenberg (44:48)
Leadership matters.
Sebastian Kurz:
Leadership matters, definitely.
Shalev Hulio (44:50)
By the way, and the leadership cares on what really matters, because they don't need to focus on politics.
Michael Eisenberg:
Explain.
Shalev Hulio:
You know, you don't need to reelect every four years, right? And you know that if you are there, you are there for 10, 15, 20 years. So a lot of times politicians want to have, in countries that you have elections, and democracies, okay, they're only looking for the short time.
Michael Eisenberg (45:17)
Eugene Kendall once said that the main KPI of a politician is to get reelected.
Shalev Hulio (45:22)
Exactly. Think about it that they’re only doing things and project that they will be able to benefit and will be able to show off in the next elections. So if he wants to now have a project of 10 years, 15 years in a country that you have a lot of money like the UAE, and you have a ruler that's going to be there for 30 years, 15 years, it's a great time to say, this is what I've built in the last 15 years.
Sebastian Kurz (45:52)
But here I have to disagree a bit, because it also has to work in the Western liberal democracies.
Shalev Hulio (46:02)
Of course it has to work. I'm just saying that sometimes the reason that it doesn't work is that politician like trying to gain a quick wins instead of looking on strategy and a lot of their times and effort is for the political things and not just in what's good for the country and this is why you see the change you're asking specifically about UAE. You know, it's the perfect environment to be a successful country. It's a small country, so they don't have a lot of people. They have tons of money. The GDP is big.
Michael Eisenberg:
Cheap energy.
Shalev Hulio:
They have cheap energy, because they control the oil and gas.
Michael Eisenberg (46:39)
And really good leadership.
Shalev Hulio (46:58)
Good leadership. And I think number one, which we didn't talk about, which I think is all in my, it's actually the number one reason that they succeed, is free education, for anyone, everywhere in the world. Like you can go to Ivy League, you can go to any universities that you want in the world, and the government would pay for that.
Michael Eisenberg (47:02)
I'm not sure you want to pay for an Ivy League education anymore, but we'll have that conversation later.
Shalev Hulio (47:06)
Of course. But people are very, very educated over there. And actually there is no difference between the Emirates, right? Doesn't matter where you live, you get a very good education. Even here in Israel, okay, I'm not sure that if you go to the far suburbs in the south, the kids over there get the same computing education and AI education like people in Herzliya.
Michael Eisenberg (47:34)
I feel like Sebastian wants to say something else.
Sebastian Kurz (47:35)
I think on the UAE, from my perspective, it's the vision and the leadership because other countries have cheap energy as well and don't manage to do something meaningful with it.
Shalev Hulio (47:49)
I agree, I think vision, leadership and education. That's exactly what I said.
Sebastian Kurz (47:53)
I just wanted to disagree on something. But coming back to the Western world or to Europe, I think sometimes it's a problem. It's not only about elections every four or five years, and you have to get re-elected. I think sometimes it's a problem that the political debates are about bullshit. That I think if you live in a country where the living standards are good, where there's a huge social welfare system, everybody can be more or less happy to live there. I think you sometimes start to discuss unnecessary things and lose the focus on what is important. And I think that's the main question in Europe. There are debates about LGBTQ, and how to lecture the rest of the world.
And sometimes I think people have the feeling they are the center of the world. The only problem is nobody around the world sees it like this anymore. So from my perspective, it would change a lot if there's more focus on the key things, like how to strengthen the economy, how to create jobs, how to stay successful. Then you can also be very successful from my perspective in countries with our system as well.
Michael Eisenberg (49:17)
I feel like I need to ask one last question on this topic, and then I really want to move on to Dream. So when I look at Europe, I've said this publicly, I'm pretty bearish, right? Demography is in decline. People aren't having babies. Immigration is a big problem. The welfare state in many countries in Europe is not solvent. And it's hard to see how... Are you bullish or bearish on Europe, and how do you think Europe gets out of the, let's call it the growth mess? And also because there isn't a whole lot of technology innovation coming out of Europe, or growth companies–look at the S&P 500 just as an example. Those are many U.S. technology companies created in the last seven years. The AI revolution with one exception is being led out of the US like...what’s your opinion here?
Sebastian Kurz (50:00)
I would say on tech, the answer is easy. The US is far ahead. In general, I think Europe has big problems at the moment, but some of them would be easy to fix. You mentioned, for example, migration. Migration is not a problem. If you look at the Emirates, nine out of 10 people there are people who come from somewhere else in the world, not Emiratis. But if you steal something or if you become a criminal, you're sent home immediately. If you want to enter, you have to be somebody who wants to contribute. You have to be somebody who wants to work. So I think for Europe, migration has to change. We have to become more open for people who want to contribute, and we have to immediately stop that people can just come as refugees, enter the social welfare system and get paid by those who have been working their whole life. So I think there are many areas like migration where it's easy to fix. Also the social welfare system. It's good to have a strong social welfare system, but it only works if you have more people who pay and who work, and who contribute, then you have people who take something out.
I think it's a problematic situation. The U.S. is far ahead on technology. But I think if there are enough leaders in the European Union who really want to change things in the right direction, I think it's doable and it's solvable again.
Michael Eisenberg (51:38)
What about demography? People aren't having babies. How do you solve that problem? It's hard to expand the pyramid when people aren't having babies.
Sebastian Kurz (51:45)
So I think also here, I think it's mainly about mindset, and what people believe in, and about what they care. So I think also that can be changed if there's a much more positive mindset, if people believe in a positive future. I think this is also something that can change. And of course you can make it more attractive.
Many European families or many families in Austria, Germany have less babies just because it's also a cost issue. So what we did, for example, when I was in government, we reduced the taxes for people who have kids and a job at the same time. So we did not want to support people who do not work and just have kids. But of course we wanted to support people who contribute because of the fact that they work and at the same time have a family and have babies. So at the same time, I think there are things that can be done. Like birthrate will stay lower in Europe than in other parts of the world. I think that's for sure.
Michael Eisenberg (52:54)
Let's switch gears to Dream.
Shalev Hulio (52:57)
After we finish with the campaign of Sebastian running back to...
Sebastian Kurz (53:03)
I stay with you, I stay with you.
Michael Eisenberg (53:05)
Look, you know, there was a few months ago when when the government fell apart in Austria, I walk into my partner meeting here, and I said, “I hope we're not gonna lose Sebastian,” and thank God he stayed around, and here we are. Because there was like a drafting campaign to get him to come back to run Austria. And I know why, because you’re a great entrepreneur.
Shalev Hulio (53:24)
I was with him in this day. You remember, we've been in a conference. and I was the first eyewitness to the pressure that had on him to come back. We’re laughing about it all the time, but I actually think it was a very, very, very tough day for him.
Sebastian Kurz (53:54)
You always have both. Look, you have people who support you, and you have people who fight you. And of course, if you spend, like me, 10 years in politics, it's something that I always enjoyed, and it's something special. It's also great if you have the chance to contribute in your own country and do something positive for your people. But at the same time, this is also why I took the decision like I took it. I really enjoy what I'm doing now. For me, I talked so much about entrepreneurship when I was in politics that at a certain point of time, I felt, okay, now it's on me to do what I've always been telling others.
And yeah, it has been an incredible journey in the last two and a half years. I’m extremely thankful to work with Shalev, and Gil, who is our third founder, and the whole team. And to be honest, I really enjoy what we are doing and this is the reason why I decided to–
Shalev Hulio (55:06)
True. And I have to say before we continue, I have to say something he hates that I'm saying it, but I really believe in that. I worked with many founders, had partners and co-founders along the way. I never met somebody which is not just a great partner–I think the best partner I ever had–but also somebody which has so much character of an entrepreneur like Sebastian. And I always told him that, you know, if he was tunneling his influence and operations into today, and he wouldn't go to politics, and he would tunnel it to the technology sector, I'm telling you, he would be one of the top five best entrepreneurs in the world. I promise you that.
Michael Eisenberg (56:01)
We’re doing it right now.
Shalev Hulio (56:06)
But it’s too late for him!
Michael Eisenberg:
Why too late? He’s so young still! He’s still having babies!
Shalev Hulio:
But he could already been there. Instead of that, he was the Prime Minister of Austria, instead of going to–no, I'm kidding. But really, like if he would start like most Israeli entrepreneurs, starting at the age of 22, 23, 24, instead of going into politics, I'm telling you he would be one of the best entrepreneurs.
Michael Eisenberg (56:24)
But he might not have partnered with you though, so you know.
Shalev Hulio (56:26)
You know, nobody's perfect.
Michael Eisenberg (56:29)
All right, tell us about Dream. Who wants to tell everyone what Dream is? Sebastian said no offensive cyber, do something else, and then there's Dream.
Shalev Hulio (56:34)
Yeah, but I didn't want to do offensive cyber either.
Michael Eisenberg (56:43)
I didn't either. That's why I didn't invest in NSO.
Shalev Hulio (56:45)
No, no, I, you know, I left it. So we thought about what we wanted to do. It was very clear to us that we want to do something that is more the government side. It was very clear for us. We wanted to do something on the cyber side. We didn't know exactly what we wanted to do. And people called it ideation.
We didn't really call it that. We just decided that we're doing something together, and we’ll figure out what we want to do. And we started to talk to people, mainly decision makers. And we figured out relatively very, very quickly, that out of 3,500 cybersecurity companies around the world that are backed by venture capital, there is not one single company that builds products for governments.
That was the first idea, that the first thing that we had, that the governments are the most threatening entities that are out there. The most sensitive information in the cyber field sits in government entities, and government use solutions that initially was built for enterprise and enterprise by decision, cares more about compliance than they care about security. And I think that's the big difference.
Governments care about security, enterprise cares about compliance. And when you realize that, and when we realized that, we said, okay, there is a huge market that has big needs and doesn't have a real good solution for that. And the needs of a government is completely different than the needs of an enterprise. Governments cannot allow you to install agents or probes on their facilities. They cannot use cloud. They don't like SaaS things. It's very difficult to approach governments. So it's completely different environments at the enterprise. So that was number one. And also we realized that cyber versus cybers doesn't really work anymore. OK, and you see it yourself. Companies that enterprise invest billions every year in cyber security. And yet they get hacked over and over and over again. And somehow everybody feels okay with this. Like it's becoming like the standard. Yeah, you can invest whatever you want, but still you will get hacked eventually. By the way, there is never a hundred percent guarantee, but having said that, there is a huge difference. And I think Michael, you said it right that in the beginning when we had this conversation, you said everybody's protecting against the known knowns of the cyber. And we need a company that would prevent or protect against the unknown unknowns of cyber.
I think this is the big difference, specifically when it comes to government. And we realized that the only way of doing that is using artificial intelligence. That's the big difference. And when we decided to found Dream, we didn't found it as a cyber company. We founded it as an AI company. And I think that it's not just a figure of speech. Like what's the difference between AI and cyber? Everybody uses cyber. Everybody uses AI. But I think when you're talking about an AI company, it means that your entire perspective is different. The people are different. The way that you build a product is different.
Like in cybersecurity, okay, you identify a problem. You try to figure out what's the solution that you want, and then you add AI into it. When you're talking about an AI company, it's completely different. You build AI modules that will help you to understand the world much better. Then you can approach any problem and provide a solution very quickly to any problem that the customer will have, or any sophisticated problems that you think you can address.
And in that essence, Dream was the first company that combined cyber and AI together. I think that it's the future of cybersecurity. The reason I'm saying it is because when it comes to offensive cyber, for the last three years, we’ve sen AI being used constantly, both by hackers, but more by nations when they’re conducting cyber attacks.
So AI is being used in the last three years in a very large scale in offensive cyber operations. And on the other hand, there is not enough use in AI when it comes to cybersecurity. And that's what we're trying to solve.
Michael Eisenberg (1:01:42)
I think you once said in an interview, and I've heard it from you also, that if people knew how many cyber attacks were going on, how much AI was being used in cyber attacks, they wouldn't sleep at night. And most citizens wouldn’t be able to sleep at night. And I think you, Sebastian, have said that you think cyber attacks are the biggest threat to democracies. What do you mean by that?
Sebastian Kurz (1:02:01)
Well, I think the chaos you can create is enormous. And if you look at most of the countries in the world, I think the threat of a real war is very limited. If you live in a European capital, I think the threat for you as an individual of your country entering a real war, I think this is a very limited risk. But the risk that your country is attacked from private players or from state-sponsored actors, I think that is something really real and that is something happening every day. And we saw, for example, in several countries what it means if just small attacks happen like on the land registry or something like that, if some entities in government do not work, it can create a lot of trouble. And so I think we will have more and more cyber wars going on between state-sponsored actors or countries itself, targeting countries in the West.
Michael Eisenberg (1:03:19)
It's not a secret, I think, right, that different infrastructures in countries, energy infrastructures and other things have been targeted by states and cyber criminals in the past, held up for both ransom and other things.
Sebastian Kurz (1:03:32)
And imagine something not so relevant on a daily basis, like a land registry. If it's hacked, that can create chaos in a country. But if somebody targets the energy supply or the water facilities, or tries to poison it through a cyber attack, these are things that can change everything within a day. So from my perspective, it is already a huge issue for big corporates, but it will become more and more an issue for countries, especially in the Western world, from my perspective.
Shalev Hulio (1:04:16)
Also think about that countries today–let's do the other way around. If you are the capital of a European country, and you have missiles shot at you or tanks going into your capital, this is an act of war, right? By all means. And the country will react, like with all the tools that they have. Somehow, when it comes to cyber, you can create much more damage. You can make hospitals shut down. You can make the electricity company go dark, and yet it's not, and you know, and the government knows it's coming from a state actor, and yet it's not yet considered an act of war. So nation-state actors, the bad actors of the world, understand it. So for them, it's much more powerful to do cyber attacks than to launch missiles, because missiles are going to have a reaction, a conventional reaction that they cannot deal with. On the other hand, when they're doing cyber attacks, it's like a soft weapon for them. They will not, probably they will not get a reaction. It's very hard to have full deniability to what's happened.
So that's why you see more and more cyber attacks coming from nations. And talking about that, I think, you know, we spoke about the defense budget of NATO countries. So it's increased last year from 2% to 3.5% of their GDP across the board, as a goal, yeah. And the cybersecurity was never part of that budget.
Michael Eisenberg (1:06:13)
NATO countries are now increasing defense spending from 2% to 3.5%. Does that at all influence the conversation we're having about cyber defense in any way?
Sebastian Kurz (1:06:23)
Of course, it influences it a lot, because the main reason for the increase of the spending for sure is the war in Ukraine. That's the reason why the few on the need of spending for defense has completely changed in Europe and beyond. But I think there is also a deep understanding now that there is a lack of investment in cybersecurity when it comes to defense. So from my perspective, you will see in the next few years, not only the traditional defense spending is going up, more and more, a bigger portion of it will be on cyber defense.
Michael Eisenberg (1:07:09)
We talked earlier in the conversation about perception and reality, and I know these conversations in NATO probably take years, but I can't escape the feeling that what happened in Spain with the electricity going out and the telecom outage, et cetera, which nobody wants to talk about. It was cyber, it wasn't cyber. I can't escape the feeling thinking that maybe that contributes.
Sebastian Kurz (1:07:29)
Yeah, and even if it hasn't happened because of a cyber attack, I think what everybody realizes is what damage a cyber attack can create. And that's why I think the mindset is changing, because if you have an incident like this, and you, for the first time, see what can happen, it becomes more real.
Michael Eisenberg (1:07:59)
In my 30 year career, this is the company that is growing the fastest. I mean, to nine digits of booked revenue, very fast out of the gate. I hope I can say that publicly. Incredibly fast. What is...You're going around and talking to customers, both of you. What is it that's creating this sucking sound that there's so much demand for the market?
Sebastian Kurz (1:08:29)
You say it's growing fast. For me, the first year was super difficult. Because when we started and built the team, and the team started to work on the product, whenever I came to Israel and asked the team, “Where do we stand?” They always said, “Oh, another few months.” And then I came again, and again, and again, and I always got the same answer, another few months. I was, for me, it was a tough period of time because, if you don't have a tech background yourself, and even if they try to educate you to show you around, you don't know if it will work or if it won't work. If they say a few months, if it's really a few months or much longer than that? So the first year was very tough for me. And to be honest, I'm not nervous in many situations, but I was super nervous when we had the first interactions with potential customers and potential partners.
And I was so happy when all these reactions were extremely positive. So I think what was really managed, and what was done by the team, is that bringing all the knowledge from the cyber intelligence and the cyber offensive from the past, combining it with AI has really built the product that is unique at the moment. And I think this is also the reason why we have been quite successful in the last year, because whenever we had the chance to present it somewhere, sometimes it did not work out because of the budget or because of other priorities. But the people dealing with it, the technicians, those with a tech background, they were always extremely positive. I would say the reason why the last 12 months have been quite successful.
Michael Eisenberg (1:10:32)
You want to say something, Shalev?
Shalev Hulio (1:10:33)
Yes, I wanted to say that I think that, I don't know if that's the reason that you're talking about growth. We got three decisions that were basically a gamble. We didn't know if it will work or not. So the first one is to do AI for cyber. Okay. That was the first one. Second was to go to government instead of enterprise. And third was not to go to the U.S. first, but to go to rest of the world first, and then go to the U.S. Okay. And this is actually completely the opposite from any cyber startup that exists today. Like everybody wants to do like small thing or to do like a cyber solution, then go to enterprise in the U.S. And I think that, you know, the demand came from that–we went to customer that actually said, you know, we wanted those solutions. We never met companies like we went to tenders and there was only one or two companies competing with us. And I think that's where we got the big demands coming from. The demand was always there. I think the go-to market was the one that was very successful. It's because I just think that not a lot of companies actually met the demand that exists in the world, in this world.
Michael Eisenberg (1:11:51)
I imagine there's demand from a lot of different countries. James Rothschild, our mutual friend, said I should ask you–are there any countries you won't sell to?
Sebastian Kurz (1:12:01)
Of course.
Michael Eisenberg (1:12:04)
Should I ask which?
Sebastian Kurz (1:12:06)
Easy to answer. Look, we are a Western country. Shalev and many of the team are from Israel. I'm from Europe. So for us, it's clear that we sell to the West and allies of the West. So we are focusing at the moment on Europe, Middle East and Southeast Asia.
And as Shalev said, we will enter the U.S. and also South America soon. But of course, when it comes to cyber, China, Iran, other countries are on a different side. Let's put it that way. And so for us, it's pretty clear where we are going to sell and where not.
Michael Eisenberg (1:12:53)
Are we currently in a modern day arms race?
Sebastian Kurz:
For sure.
Michael Eisenberg:
For sure?
Sebastian Kurz (1:12:57)
Of course. I think the war in Ukraine has changed a lot. The whole landscape is a different one now. So I think that peace was something that everybody, at least in Europe, took as a given before. And that has changed dramatically. And I think also, if you look at the tensions that we have between China and the U.S., and the race between China and the U.S., especially when it comes to tech, I think that we don't live in a globalized world anymore. We live in a divided world. And of course, in a divided world, the risks are higher. And that's the reason why also the spending when it comes to defense, when it comes to cyber defense will, and has to go up.
Michael Eisenberg (1:13:51)
What keeps you up at night?
Shalev Hulio (1:13:52)
His baby.
Sebastian Kurz (1:13:57)
At the moment that's true. Our second baby is two weeks old now.
Michael Eisenberg (1:14:05)
Thanks to your wife for letting you come on this show now.
Sebastian Kurz (1:14:08)
Yeah, I think she had the impression that when I left to Tel Aviv for two days that I'm the one who should be thankful.
Michael Eisenberg (1:14:23)
But what keeps you up at night right now, or in general about where the world is?
Sebastian Kurz (1:14:31)
I’ll give that one to Shalev.
Shalev Hulio (1:14:33)
I don't sleep much at night.
Michael Eisenberg (1:14:36)
And by the way, I get texts from him at like three in the morning. I don't know if you know that, I'm sure you do. I've had the unfortunate experience of traveling with him overnight, by the way. He's up the whole time.
Shalev Hulio (1:14:41)
That's true.
Sebastian Kurz (1:14:52)
It's like with newborns, they sometimes...
Michael Eisenberg (1:14:56)
But I'm not as young as both of you. It's tough to keep up with this guy. You've both been in highly scrutinized situations and in high pressure situations. Obviously when the whole melee blew up about NSO and you've been in the limelight as Head of State. What have you learned about trust?
Sebastian Kurz (1:17:07)
In which sense?
Michael Eisenberg (1:17:21)
You build trust. Who can you trust? Is it necessary? You should always be suspicious of people. It's like the famous line from Machiavelli that everybody misquotes, which he says it's better to be loved and feared, but if he had to choose one, it's only fear. Trust is so important in society, but when you get into these high pressure situations, it can erode trust.
Sebastian Kurz (1:17:37)
I would say trust is a big word, and it depends on what area we are talking about. But I'm not a big fan of being suspicious. I made the experience that if you, for example, if you work with people, if you treat people well, if you have the same goal, if you do something positive together,
there's a lot of mutual trust, and I think a lot of positive energy coming out of that. And I think if you are in a leadership position like as prime minister, of course in difficult situations, you also need trust of the people that your decision is the right one, even if you can only find out at the later stage if it was right or wrong.
I think the most important thing, if you want to get trust from people, and you have to take many decisions, is that you are honest with the people, but also with yourself, that not every single decision can be right. So, I think this is probably the most important point because only with this understanding, I think you can also survive difficult situations where not every single decision can be perfect.
Michael Eisenberg (1:19:12)
You wanted to add something about trust?
Shalev Hulio:
Nope.
Michael Eisenberg:
You trust Sebastian?
Shalev Hulio:
I do!
Michael Eisenberg:
Okay, I was just checking. You've both worked, you've been head of state, you've worked with heads of state, and you've been at this tight line between what I would call national security and the ethics part. And we talked about this before. How do you balance that? Is there a right answer to balancing that?
Sebastian Kurz (1:19:33)
I think on what we are doing now, it's very easy.
Michael Eisenberg (1:19:36)
Yeah, now it's easy, I agree. I'm asking the general question, not about Dream, because Dream is easy, because we're just protecting.
Sebastian Kurz (1:19:42)
We're protecting countries and their critical infrastructure. So I think that's something that is only positive. I think that there is no ethical question at all. I agree with that. And of course in other areas, it's probably more complicated, but that's not our business.
Michael Eisenberg (1:20:03)
We signed the investment deal on Dream, 30 days after October 7th on the Gaza border. It was on the masthead, I guess, of the Wall Street Journal. Why was that important?
Sebastian Kurz (1:20:17)
To be honest, for me, it was very impressive. I was always supporting the State of Israel, but I learned a lot about Israel in these weeks because when October 7th happened. I was in Vienna, but I was in contact with Shalev and many friends here in Israel. So I was shocked at the beginning. I didn't realize it and I couldn't believe it. And it was extremely depressing for all of us, also being in Vienna at this time. But of course we cared about our friends here, and nobody was talking or thinking about business after October 7th. Of course nobody was in the office. Many of our employees were in the army immediately and tried to be helpful there and contribute.
And after a week or something, I myself thought the first time about Dream again, and had a call with Shalev, and my feeling was, it’ll be super tough, and I was not sure, will we be able to keep the company or do we have to shut it down, or will people come back to the office at a certain day? As you said, we were in the middle of a potential investment round. So we were in discussions with you and others before October 7th. And then also after October 7th, we didn't discuss anymore. So my feeling was it will be very difficult for the company, and for sure the round is not going to happen. Nobody will invest in a company in Israel at this moment. And of course, nobody will have the time to think about it.
And after a few weeks, I saw how resilient people are here. Because of course there was a war, of course there was a totally different situation. There were so many people who were suffering because they lost kids or relatives, or had children in the army. But at the same time, in a way people tried to come back to the office. Those who were in the army called us and said, “Okay, we can help on the weekend, or when we have a few hours free time, we will come to the office.” You and other investors called us and said, “Of course, there are more important things than where we invest, but we want to get it done.”
And then 30 days after October 7th, when the investment was done, I, to be honest, couldn't really believe it. But as I said before, I learned a lot about the resilience of the people here and it impressed me a lot.
Shalev Hulio (1:23:27)
Get your own podcast.
Michael Eisenberg (1:23:31)
I actually think–I normally ask I normally ask a closing question, but I actually think that's a perfect place to wrap. But I know Shalev wants to say the last word.
Sebastian Kurz (1:23:40)
As always, as always, as always. I'm thankful that we also had some time to talk, Michael. You should be part of one of our management meetings.
Shalev Hulio (1:23:53)
How much I talk to you? Who talks more? You or him? Let's make a bet on that.
Sebastian Kurz (1:24:04)
Probably I will end up with more time because we have to cut out so many things you said.
Shalev Hulio (1:24:09)
That's true. And this is, you know, I'm holding myself not to comments, but. ⁓
Michael Eisenberg (1:24:17)
They say there's politically incorrect, and then there's Shalev.
Shalev Hulio (1:24:20)
No, but I do want to say something, because for me, it was a very emotional moment. And I was on reserve for 125 days in a row from October 7th. It's true that Sebastian was calling me and saying, you need to come back. You need to come back. And I told him, listen, Sebastian, it's like, you know, it's a special situation. It was. And, you know, I'm sure that a lot of people felt it. A lot of people are still feeling it. You know, people are doing reserve duty, or 300 days, 500 days. So the balance between your business, your home, the army, it's, you know, specifically after October 7th, it was like a mix of emotions and a mix of things of what you really need to do.
And, you know, from one hand, I had no doubt that, you know, they called me around 4 p.m. at the same day, and I went to the army and it was no doubt for me that I'm going, and this is a number one priority and it was important. Everybody felt it. On the other hand, you know, we had this, we founded Dream 10 months before we were doing a finance round.
You know, I remember I received a call from you, Michael, and I think it was also Dovi then, but it was mainly you and Dovi that called me and said, “Because of the war, and because of what happened, you shouldn't bother with that.” And, you know, I think we were the first round after October 7th, not just in Dream, in Israel. People were shocked. Nobody wanted to invest in Israel. Everybody sat on the bench and waited to see what's going on with the Israeli high tech.
And I think it takes a lot of courage. And we spoke about values before. To come and say, I believe in the company. I believe in the founders. I believe in Israel, and I believe in all those three, even during a war that we don't know what the outcome is. And you know, the moment that all the management came to the border of Gaza, and you, and we signed it literally on the border of Gaza, the same place where 11 soldiers were killed–it was an unforgettable moment. It was very emotional for me and for the management.
And besides talking about me, I think it's actually opened again all the opportunities for investment in Israel, and people saw that it's possible, and I think it received a huge echo in the ecosystem here in Israel. But I think even more important worldwide, Wall Street Journal and other journalists around the world actually published it. And I think it's made good for the high tech community here in Israel.
Michael Eisenberg (1:27:34)
Any last words for you? You sure you want to let him close?
Sebastian Kurz (1:27:37)
Of course. As always.
Michael Eisenberg:
Okay. I want to thank you both for coming. I want to thank you both for letting me invest. It's not obvious that people let me invest in their companies. So I want to thank you both for that. And thank you for being my guests on the 50th episode of Invested. And to anyone listening, please rate us five stars on all your various podcast applications. Subscribe to the YouTube channel and pay attention to Sebastian and Shalev.
Michael Eisenberg (1:28:04)
This company is going far and these are two leaders, not just in this company, but in the world today as well.
Shalev Hulio (1:28:10)
And Sebastian, thank you for letting me answer a few questions.
Today is Wednesday, and as happens every other Wednesday, you're probably expecting an episode of Invested. And in fact, we have a super exciting episode of Invested with my friend Sam Arbesman teed up. But it just didn't feel appropriate to release that today, given everything going on in Israel and around the world.
We are now on day five of the war between Israel and Iran. Iran attacked Israel through its Hamas proxy on October 7th, triggering a series of events that nobody could have predicted.
Israel, at some point during this last 20 months, has defanged Hezbollah, another Iranian proxy. Recently, starting five or six days ago, Israel launched what is called a preemptive attack, but in fact is a retaliation against Iran, taking out their air defenses, some of which were taken out months ago, taking out their missile launchers and taking out elements of the regime and their fighting force. Why?
Because Iran was trying to break out and develop a nuclear weapon that they have promised to use on the Jewish State. Often, or always, when people threaten you, you should take them seriously. And the Israeli government has done just that. In what is perhaps the last possible moment, Israel launched a multi-faceted strike using Mossad agents, the Israeli Air Force, in a target so many miles away, almost 2,000 kilometers away from here. And the success has been unprecedented.
But we cannot be complacent. This is far from over. Iranians are firing missiles every night, and sometimes during the day, at Israeli civilians. Whereas Israel took out military targets of the Mullah's regime, Iran is purposely and purposefully firing on civilian centers–on Tel Aviv, on Bnei Brak, on Ramat Gan in the center of the country, on the Weizmann Institute of Science in Rohovot, on the Negev, and in the north. Targeting civilians, killing civilians. There are already over 10 dead Israeli civilians, including babies and older people. There's about a thousand wounded from the Iranian attacks on population centers.
Again, when the Mullahs tell you what they're going to do, we should take them seriously–without nuclear weapons. They're already wreaking havoc on these civilian population centers.
There has been no more just of a war than what Israel is currently conducting. There has never been a more precise war than what Israel is currently conducting. Whereas Iran targets civilians, Israel has targeted military leaders, assassinating two of the generals in the Iranian military, the top generals, along with many nuclear scientists and other levels of the command structure, taking out rocket launchers and missile launchers, nuclear weapons development facilities and other places.
This has been precision warfare at 2,000 kilometers away. Nobody wanted this war. Israel and Iran don't share a border. But the fanatical Islamic region in Iran has threatened Israel. Now, what you're seeing on television and reading in the press does not properly describe what's going on here. So I want to be helpful on two fronts.
One is the economic and technology front, and the other is what's happening in our daily lives. There are a lot of sleepless nights in Israel, because Iran is targeting civilians. People are up all night in shelters, with their kids and babies. In my own home, we have three generations, babies, my children, in-law children, nieces and nephews who come in, and we all gather together in the shelter just about every night. Friends of mine have had their homes destroyed, their apartments broken, offices destroyed. The Weizmann Institute of Science, as I mentioned earlier, had tens of years of research decimated by an Iranian missile. This is some of the most groundbreaking research in the world, including people working on artificial hearts that save lives around the world. Yes, we have been safer–why? Because Israel has invested its money in innovation, and in protecting its civilians, creating shelters, whereas the Iranian regime has sacrificed the GDP and the innovation of that country in order to get into a military race and develop nuclear weapons to wipe out the Jewish state.
When you walk around the destruction and the rubble in Bat Yam, and Tel Aviv, and Ramat Gan, wreaked by the Iranian missiles, you see two things. One is destruction. The other is resilience, of people determined to build back from this. If you listen to the scientists at the Weizmann Institute, what do you hear them saying? Not “Woe is me,” but “I'll build it better. I'll innovate more. I'm going to do more to help humanity.” This is truly a war of light against dark, of evil against good, of people who use brilliant brains of the Iranian people to build nuclear weapons to target civilians, and those who use their brains to build precision innovation and defense, and precision medicine, and biology, and compute for the future. That's the war that we have at hand.
One of our entrepreneurs, Shalev Hulio, who is profiled in today's Wall Street Journal, is the CEO of a company called Dream, which builds AI infrastructure to protect nation states from cyber attacks by the likes of Iran, Russia, China, North Korea. We signed the investment in Dream 30 days after October 7th on the Gaza border, when Shalev was in reserve duty. He's back in reserve duty today. Shalev is part of the Search and Rescue team of the IDF. He's taking people and belongings out of buildings that have been destroyed by the Iranian missiles, by this evil Iranian regime. He gets up early in the morning, gives the employees of Dream their charge for the day to keep developing products and delivering to customers. And during the day, dons his uniform, rescues people from buildings, and at night, he talks to new and current customers, assuring them that we'll deliver on time. Because Shalev's message is exactly the message of all our portfolio companies and all of Israeli tech, which is, “We deliver, it doesn't matter what.” Since October 7th, it's been true. And since five days ago, when the war with Iran started, it continues to be true.
Not only that–Emmanuel Macron, the President of France, may have noticed, decided to hide Israeli innovation at the Paris Air Show. Don't worry, it's on display in Tehran, as many have said before me. It's working just fine. This war of the last 20 months is producing some of the most brilliant technology innovation ever in history. It has accelerated development of AI, of precision, of what we do with our GPS, of a million things that are needed in both the civilian and the military world. Israel is already growing both its technology base and capital base since October 7th. Some of the greatest investors in the world, Accel, Sequoia, Andreessen Horowitz, and others have turned up in Israel and opened up shop since October 7th. And now, we expect that to accelerate. Once this war with Iran is over and there is a decisive victory over the evil mullahs, the Ayatollah, and the Islamic regime, Israel will become a center of regional prosperity, a regional superpower, as I described in one of my recent books. We have the opportunity here.
Let me help you out with a bit of geography. Iran sits at an important geographical point on the other side of the Persian Gulf from Saudi Arabia and UAE. One is a member of the Abraham Accords. One may hopefully become in the future.
I'm a member of the Abraham Accords. And they threaten these countries. They threaten the UAE. They threaten Saudi Arabia and others. That's what the Iranians do. They're on this critical trade route. They threaten to close the Straits of Hormuz. When the mullahs are out of power there, we can imagine a trade route that is open through the Persian Gulf. We can imagine that the IMEC trade route that President Trump has supported, the India-Middle East corridor, will flow smoothly, not only via the seas and into the western side of Saudi Arabia, and parts of the UAE, but also up the eastern side through the Persian Gulf.
Iran, which sits right on the BRI–the Belt and Road Initiative of China–and is an important feature of it, can be brought over when the people rise up and overthrow the mullahs, to IMEC, to the western sphere.
The Iranian people have suffered under this regime for almost 50 years. They have kindred spirits to Israelis. We see them. They're sharing locations for Israel to attack. We know them. We are them. They were wonderful relations–innovation relations, technology relations, military relations between Israel and Iran before Ayatollah Khomeini and the radical Islamists rose to power. And this will be the future as well.
Now, these times are challenging. It's really difficult for people running to shelters at night. You need to understand this. It's really difficult. It's hard to pick up your baby in the middle of the night and run down to a shelter. It's hard to have to work from home again. It isn't COVID. This is people sending missiles. It's hard to work from home again. But this pressure cooker generates the resilience that is the hallmark of the state of Israel and the Israeli people.
This pressure cooker generates innovation, and it's on full display now, in Tehran, and not only. The bravery of the Mossad agents, of the Air Force pilots, of everybody else enables Israelis to aspire ever higher to make a positive mark on the world. And another thing before I finish, we cannot forget with everything gone on in Iran, that there are still tens of hostages held in Hamas dungeons in Gaza.
And our soldiers are hard at work there fighting the forces of Iranian evil, Hamas, in Gaza. And so, what you're seeing is the commitment of Israel and its young people to doing good, to rooting the world of evil, to doing the best job for it in rooting the world of the Iranian leadership,
of the Iranian ability to build nuclear weapons. And for some of the people who say this is against America first, people listening to the United States, I want to tell you something. This is America first. Israel is not asked for one single American boot on the ground, but it is helping to solve one of the sources of fentanyl. It is helping to solve one of the biggest forces of instability in the world. It's helping to drive down the cost of living, because the threatening Iranians keep the price of oil up. Because the threatening Iranians close down the Straits of Hormuz, raising prices everywhere. Israel is fighting this on behalf of the world, on behalf of making America great, on behalf of America first, on behalf of the rest. Be certain that we will prevail, but be certain of something more important yet. Our economy will flourish as an anchor for regional prosperity, that will extend from Israel to Saudi Arabia to the UAE and across the Persian Gulf to Iran as well. We will build an economic unit here, bringing in the 90 million Iranians into this economic Abrahamic brotherhood, opening up markets, opening up innovation, and opening up energy flow to make this region the future most prosperous region in the world. It's coming. Come join us and be a part of it. Don't be a naysayer. It's going to happen.
God bless.
Michael Eisenberg (00:00)
You were the CMO of Fiverr for six years, and we're at a moment in time, it seems, where the role of the Chief Marketing Officer is changing.
Gali Arnon (00:06)
Brands will need to go back to basics.
I really think, and I believe with all my heart, that there's no replacement for human traits or human capabilities.
Michael Eisenberg (00:16)
What's the strangest skill or freelancer that exists on the Fiverr platform?
Gali Arnon (00:20)
Oh my God, It can be very cringe.
When you want to build a brand, you don't build a brand through search results. You don’t.
I want to be a role model for the next generation of women leaders in Israel.
Michael Eisenberg (00:31)
Your mother-in-law! Why your mother-in-law?
Gali Arnon:
Yeah, my mother-in-law, because my mother is already proud of me, no matter what I do.
Michael Eisenberg:
Welcome back to another episode of Invested. I am thrilled to be here with Gali Arnon.
Welcome Gali.
Gali Arnon (00:45)
Hi, I'm thrilled to be here.
Michael Eisenberg (00:47)
It’s great to have you. I'll let you get into your own background. We're going to have a lot to talk about today. We're going to talk a lot about AI also. But Gali is most recently the Chief Business Officer of Fiverr. And will you give everybody else the rest of your background?
Gali Arnon (00:59)
That's true. Yeah, so I’ve actually been in tech companies most of my career, B2C companies, SaaS companies, ad tech companies, so kind of moving between industries. Before that, I actually started as a teacher. I was a psychometric teacher and a gym teacher while I was learning my first degree in psychology and communication. And then the company I worked for, Kidum, she got the right to open a kind of, it was a franchisee. It was called Wall Street Institute. It was a school of English for adults. And I was a Center Director at the age of 24 in Rannana. And everybody told me Raanana is a place where everybody knows English already because it's full of people who made Aliyah from English-speaking countries, and you have nothing to teach them.
But it became the number one center in Israel.
Michael Eisenberg (02:03)
So a woman with an Israeli accent was teaching English to English speakers in Raanana?
Gali Arnon (02:06)
I never taught English. That's the thing. I was the Center Director, was managing the center. I was selling to people English courses. Never taught English myself.
Michael Eisenberg (02:17)
But what did you teach beforehand when you taught?
Psychometric. It’s like Math, and English. For the test, for the GMAT test.
Michael Eisenberg:
Basic English.
Gali Arnon (02:30)
I wouldn't say basic, but it wasn't the main idea. The main idea was how to pass the test, how to pass the test with great results, with great grades. And then I became the CEO of this company when I was 27. And I opened 11 centers around Israel in different malls. Yeah, that was where it all started.
Michael Eisenberg (02:53)
Okay, so I want to come back to this, because I think this is an important topic for today. But before that, what we always start with here is, what are your core values?
Gali Arnon (03:05)
I want to do something, I wouldn't call it a core value, but I would say that my work needs to be meaningful. I need to feel that I'm doing something that is good in the world, that I'm contributing to the world. I need to feel connected from the bottom of my heart. I need to feel it's fulfilling me with pride. When I'm telling my mother-in-law in the shishi dinner about what I do, I want to feel proud.
Michael Eisenberg (03:33)
Your mother-in-law. Why your mother-in-law?
Gali Arnon (03:34)
Yeah, my mother-in-law. Because my mother is already proud of me, no matter what I do. And my daughters, I have three daughters and I want them to be proud of their mom. So that's one, I think this connectivity to what I do, to the mission.
I'm also a person of people. I'm very driven, and I'm a winner. I like to win, really, and I'm very competitive. But also, I see the people on the way. I want them to be part of my journey. And I think I'm doing a good job in inspiring them and making them follow me. Since I was very little, I was always the leader in my group. So I was the leader of the class, and even if I wasn't, I was looking to be the leader. So I think it's in my nature. I don't want to be too arrogant or to sound too arrogant, but yeah, I think it's part of my nature.
Michael Eisenberg (04:40)
What else do you compete in?
Gali Arnon (04:46)
First of all, whatever I do, even when I play a game with my 13-year-old, I will compete with her and I would be extremely, extremely angry if I want to win, and I could act really childish if I don't win. And she always beats me in every game. So it's becoming very tough.
Michael Eisenberg (05:01)
What games do you play?
So we can play Damka, or…
Michael Eisenberg:
Damka is Checkers.
Gali Arnon (05:10)
Yeah, Checkers. And we can play Shabetzna or we can play whatever game–I don't know the names in English.
Michael Eisenberg:
Scrabble.
Gali Arnon:
Scrabble, right. Whatever we play, she usually wins, and I'm usually extremely upset about it.
Michael Eisenberg (05:29)
Where does this competitive drive come from?
Gali Arnon (05:31)
I don't know.
Michael Eisenberg (05:36)
Are you the oldest? Do you have brothers and sisters?
Gali Arnon (05:38)
Yes. I do. One sister, one brother.
Michael Eisenberg (05:40)
Were you competitive with them?
Gali Arnon:
Yes.
Michael Eisenberg:
Are your parents competitive?
Gali Arnon:
Yes. I think what they taught me is that you need to excel in everything you do. You don't compromise on anything.
Michael Eisenberg:
My mother told me I should be mediocre. It's true, by the way.
Gali Arnon (05:55)
Really? In what way? Tell me about it.
Michael Eisenberg (05:58)
My mother used to say that the line between superb, excellent and crazy was very thin.
Gali Arnon (06:05)
Really? That's interesting.
Michael Eisenberg (06:07)
She prayed for mediocre children. And when I was a kid, it really bothered me. Later I came to see the wisdom in it.
Gali Arnon (06:12)
So, yeah, we were not sharing the same perspective. I mean, to be honest, I could bring a 97 in a test home and she would ask me, “Oh, that's great, but what would the others get?”
Michael Eisenberg:
Really?
Gali Arnon:
Yeah. I needed to be excellent in everything all the time. I wanted to be excellent. And there was always another mountain to climb. That was the feeling. There was always another mountain to climb.
Michael Eisenberg (06:42)
That's fascinating. And then you started as an English teacher.
Gali Arnon (06:44)
Not a teacher, I told you.
Michael Eisenberg (06:47)
Well you started as a teacher! Of math and English, teaching for the Psychometric. But very quickly you had to be the CEO.
Gali Arnon (06:50)
Right, because I got... Yeah.
Michael Eisenberg:
So how many people did you compete with along the way in those three or four short years to be the CEO?
Gali Arnon:
I didn't look at it like I'm competing with people on this role. I think I was getting to this center, to this Ranaana Center, and I wanted it to be number one, and I wanted it to show everyone that people will come to study English, even if Ranaana is an English-speaking city in Israel. And then we became number one. And then Israel was not enough. It was, let's win on a global level. Let's be number one in the world.
Although there was always China, which you couldn't compete with in terms of population, right? You can't compare centers in Shanghai to Ranaana, with all due respect. And you can't compare Chinese students studying English. They used to come to the center for 12 hours a day, while Israeli students used to come for an hour. So you can imagine how hardworking they are. Anyway, being this number one was always a motivation, I feel.
Michael Eisenberg (08:03)
And I want to go back to the core value. Erica, who runs our content here, and I were watching a video, in which this guy stood up on stage and said, “Here's how corporate values work. Every company puts up the same five values. You throw all of them in a hat, you pick out five, so you end up with the same thing. And they have integrity, and meaning, and this stuff.” What is a value of yours that you think is different from everybody else in the world?
Gali Arnon (08:29)
Wow, that's a tough question.
Michael Eisenberg (08:31)
How about, compete to win?
Gali Arnon:
I think there are many people that are sharing this value, right? I think I'm competing to win, but I never did it on the expense of other people. I'm not leaving injuries. You say injuries?
Michael Eisenberg:
You don't leave the wounded in the battlefield.
Gali Arnon:
That’s the expression. That’s the phrase.
Michael Eisenberg:
So everyone comes along with you. That's part of it.
Gali Arnon:
Yeah.
Michael Eisenberg:
So I'll come back to that, but that brings me to this kind of complicated time of year. Why don't you describe to everyone what Fiverr does?
Gali Arnon (09:03)
Wow, Fiverr is amazing, and it is a transformation–
Michael Eisenberg (09:08)
How long have you been at Fiverr?
Gali Arnon (09:26)
I've been at Fiverr for seven years.
Michael Eisenberg:
Seven years.
Gali Arnon:
Yeah. I recently left Fiverr, and now I'm an advisor to different startups, but I joined when the company was quite small, around 250 employees, before it was public. Still startup mentality.
The marketplace, the Fiverr marketplace was identified, known for $5 cheap stuff you can buy on the internet. Risk of error was nothing. It's grown up to this amazing company that is basically providing an endless amount of services around, I think, 750 categories of services, digital services, from amazing freelancers all around the world. The talent on Fiverr is just absolutely amazing. And it allows businesses in all sizes to get access to this global talent, which is quite unique.
Michael Eisenberg (10:10)
What's the strangest skill or freelancer that exists on that platform?
Gali Arnon (10:14)
Don’t take me there. It can be very cringe. Think about the internet. Think about how cringe it is. Let's say our Trust and Safety team had a lot of work to do.
Michael Eisenberg (10:32)
Got it. What's the strangest non-cringe thing that we can kind of still share on…?
Gali Arnon (10:35)
Drone video editing.
Michael Eisenberg:
That's not very cringe.
Gali Arnon:
I mean, when I started, I think it was leaning towards really crazy stuff. People who will read in your coffee or will give you really crazy stuff. So love potions….
Michael Eisenberg (10:41)
For $5.
Gali Arnon (11:04)
Yeah, for $5. It’s working, tried it. I really tried it. I said, I need to try everything. I tried this as well. And I'm married for more than 20 years.
Michael Eisenberg (11:17)
Obviously it's working.
Gali Arnon (11:30)
But we also have data scientists on Fiverr.
Michael Eisenberg:
Not for $5 though.
Gali Arnon:
Far from it. That was the journey actually, moving away from this $5 perception, offering more complex premium services from top talent.
Michael Eisenberg (11:38)
So I looked at Fiverr in the very, very, very early days.
Gali Arnon:
Yeah, I know.
Michael Eisenberg:
In the very early days. And I did not invest, partially by the way, because of the Fiverr that I thought was unscalable. So you proved me wrong, you and Micha and Shai and everybody else was along for the journey there. How did you take it out of this category of $5 doodles, and love potions, and cringes to everything from data science? Take us through that brand journey.
Gali Arnon (12:02)
I can talk about it for ages.
Michael Eisenberg (12:04)
Do it for a podcast style audience.
Gali Arnon:
I will try. Stop me if I'm getting overreacted. I would say, first of all it's in the name, right? So it's even harder.
Michael Eisenberg:
It’s even worse, by the way, because Fiverr…
Gali Arnon:
It's Fiverr with two R's. And you need to understand that, for example in the UK, Fiverr is five pounds. So you can't get away from it. However, I can tell you that during the years at the beginning, everybody knew Fiverr is five dollars. I remember I was at a conference, I don't remember, maybe in New York, and then someone came to me and said, “Tell me, I'm really curious what Fiverr actually means. Is it a high-five between a freelancer and a business, or a buyer?” And I said, “That's my little win.” When someone was actually wondering what Fiverr is, and he didn't recognize Fiverr for the $5 or pounds–that was my win. So I think first and foremost, we set a clear vision–and the vision was super ambitious.
So even if we are a $5 marketplace today, we know where we want to go.
Michael Eisenberg:
Which was? To where?
Gali Arnon:
First of all, we wanted to be the future of the way people are working. The future of work. So we want to be the ones who are defining the category of the future of work. And in terms of the how, we wanted to be the Amazon of digital services. So on Amazon, you can find cheap stuff, but you can find everything on Amazon, right? And this is what we wanted to be. We wanted to actually take those digital freelancer services, and package them as a service you can buy off the shelf, and you can trust it to be something that will work for you. You can trust the talent on Fiverr. You can trust the services and everything. So I think the first milestone was to set this clear vision.
I think the second thing was to say we are doing it, but we're building a household brand–and we're doing it from Israel. And this is interesting, because the high tech or the tech scene in Israel is known, and was known for many years, for the R&D talent, and for the tech talent, and the data science talent, and for the product. It wasn't known for marketing. I mean, there are great growth teams in Israel and great growth talent, mainly coming from gaming companies. But there wasn't really big household brands that were built out of Israel.
And that was the challenge. And then, it's climbing a mountain and doing it step by step. I'll give you a few sexy examples, okay?
Michael Eisenberg (14:51)
Not cringe, sexy.
Gali Arnon (15:09)
Not co-sexy. No, sexy in a positive, trendy, marketing, sexy way. So for example, we said, we want people to know that you can actually buy good stuff on Fiverr. So we hired Rob Janoff. Do you know who Rob Janoff is?
Michael Eisenberg:
I don't.
Gali Arnon:
Alright. So he's the designer who designed the Apple logo. Do you know the Apple logo? I'm sure you do. So he worked with Steve Jobs to design the Apple logo. And then we said, “Let's bring him on the platform for a month to kind of offer a limited edition of his logos on Fiverr, for $10,000. But he will do it for a month, and we'll do a whole campaign around it. And people will actually say, ‘Well, we can buy a logo on Fiverr from the same guy who actually designed the Apple logo? Well, maybe it's not as low quality as I thought.’”
Michael Eisenberg (15:47)
That's actually an amazing idea.
Gali Arnon (16:04)
Then we did a whole design event in New York around it, and we invited designers. He was on stage, he told his story on how he worked with Steve Jobs and all of it. That was the first move. And then we decided, well, it's working and let's do it in other categories.
We brought Wyclef Jean for the music category, and we bought Eli Roth, which was a horror show, in the horror show business, film business in Hollywood, to do the video editing limited edition. And then we went on and on with different celebrities in different categories and it worked really, really well. And then we did so many other things. And as I said, it was climbing a mountain, but the vision was very clear. There was many different things we did in order to get there. And I think we actually did.
Michael Eisenberg (16:37)
You know what I need to ask you now, right? Who is the celebrity for the love potion?
Gali Arnon (16:41)
Martha Stewart.
Michael Eisenberg (16:45)
That wouldn't have been my first guess.
Gali Arnon (16:47)
No, we actually worked with her a year ago. not on the love potion part. No.
Michael Eisenberg (16:54)
Yeah. All right. There was no celebrity for that. So you have 750 categories on Fiverr. What percentage of them do you think are threatened by AI?
Gali Arnon (17:04)
Yeah, that's a very, very good question. I can't give you the exact number. I would say that the simple tasks that are not involving human creativity, or the need to work in integration with AI and can just be completely replaced, are the ones that will disappear, are gradually disappearing.
By the way, Fiverr is a kind of microcosmos of the whole world of employment, right? I read an article today about the whole research that was done about the pace of jobs that are disappearing. Women, by the way, are the first to be threatened by that.
Michael Eisenberg:
Why are they the first to be threatened?
Gali Arnon:
Because they're working in jobs that are highly or more likely to be threatened by AI.
Michael Eisenberg:
Interesting.
Gali Arnon (18:03)
Interesting, yeah. I can find you the research about it, but it's not surprising that women are the first to be threatened. We did a research on Fiverr at the time, I think it was two years ago when we were trying to understand how fast freelancers are adopting AI technologies. And we saw that women in general are slower in adapting new technologies, and AI specifically.
Michael Eisenberg (18:23)
That's interesting. You're a teacher. Why can't we teach women to adopt AI faster?
Gali Arnon (18:31)
I think it's not about teaching them to learn AI faster. I think it's about maybe an attitude to technology in general. And I think it's about being an early adopter. I think there's something that still, and by the way, it's a symptom of something that is bigger than that, which is–I think in many ways women sometimes, they feel that they don't have the skills or the capabilities in order to learn a new domain, in order to jump on a new challenge. I think it's part of our culture, it's part of our society, and trying to be in my own domain, my own space, someone who's encouraging women to do that. But I would say that there's still–see, how many women founders–you are in the investment space, right?
Michael Eisenberg (19:32)
How many women founders? Very few.
Gali Arnon:
In percentage?
Michael Eisenberg:
Less than 10.
Gali Arnon (19:42)
I would say three percent. Why? Why is that?
Michael Eisenberg:
I've asked myself that question a bunch, as the father of four daughters, I've asked myself that question. I'm in the camp that men and women are different. There's obviously some biological factors that bias us ,and societal factors that have grown to bias us to this. So my guess is it's harder. And I think there is societal expectations around roles that perhaps prevent this as well.
Gali Arnon (20:11)
So I think this is part of the same, so the AI adoption, it's part of the same symptom, which I'm trying to fight in ways that, as a role model, as a manager, as an executive.
Michael Eisenberg (20:29)
Okay, so you're setting up now, instead of setting up the Wall Street English language teaching to people who may speak English already in Raanana, now you're setting up the Institute for Teaching AI Skills to Women. Tell me what you’re going to do.
Gali Arnon (20:42)
Yeah. First of all, remove any barriers or perceived barriers.
Michael Eisenberg (20:47)
What does that mean? How do you do that?
Gali Arnon (20:49)
Just make it accessible.
Michael Eisenberg:
How?
Gali Arnon:
Just show the fundamental, let them try it, let them experiment and show them how beneficial it could be for them. Just remove all perceived barriers that usually exist.
Michael Eisenberg (21:08)
What else? Why are they coming? Why are they coming to a class on how to use AI or get ahead with AI? What percentage do you think of the creators on Fiverr are female versus male?
Gali Arnon (21:20)
I would say it's more male-dominant than women.
Michael Eisenberg (21:22)
More male dominant. And do you see there an adoption of AI that's different between genders or you don't?
Gali Arnon (21:29)
No, not really. The research I told you about was a general research that wasn't done specifically on freelancers on Fiverr. But I would assume that like other technologies, women are slower to adopt them.
Michael Eisenberg (21:44)
Okay. So you said we need to remove barriers and have people actually use the tools of AI. What else?
Gali Arnon (21:49)
For women adaption, specifically? For adaption in general? I would do the show, not tell approach. I think it works in marketing and advertising amazingly well. I would just show people, or show specifically women what can be done. Not tell them about it, not just teach them the principles, and actually show them. So it's not about only teaching them and experiencing, it's about showing the actual deliveries, the actual things you can achieve using AI. I feel this could be very powerful.
Michael Eisenberg (22:29)
So you said before, you're very competitive. But you must look around, especially given your experience, both as a teacher and then running an institution of learning and as an executive, but an executive that looked at the future of work, that there is an oncoming tension, let's call it, between AI and a lot of the people whose livelihood you helped create. Where does that lead you, where does it lead your thinking? I mean, competition, AI will win against some of these people and they might be left behind?
Gali Arnon (22:33)
Absolutely. First of all, they might be left behind. I think we need to accept it, and admit that the future of work is extremely different than what we know it is today. I really think, and I believe with all my heart, that there's no replacement for human traits or human capabilities that can't be replaced by AI. And I'm coming from marketing, I've been the CMO of Fiverr for, out of those seven years, for six years. And the creativity, even sometimes our creative team were actually geniuses in the ideas they brought to the table. Some of the–by the way on this tension between AI, to work and to humans, will not be replaced. And I think there's something in–look at art.
Okay, for example, I just came back from Florence, Firenze in Italy. And I was at the Ufizzi Gallery, where you see where everything really, really started, right? With the Renaissance and all those amazing.
Michael Eisenberg (24:16)
It's incredible.
Gali Arnon (24:32)
Incredible. Can it be replaced by AI? I don't think so. I really don't think so. Will people using AI can create magnificent art? Yes, absolutely. So I think one, there will be capabilities that will never be replaced. And I'm not even talking about physical services, right? It's obvious, right? That when you come to a doctor, sometimes it's not enough just to get the instructions from AI about when you're sick. Sometimes you actually need to see a person, and talk to a person.
There are things that won't be replaced, and there are things that will just get much better with this integration between humans and AI.
Michael Eisenberg (25:02)
Right, for argument's sake, if there's 100,000 freelancers on Fiverr, just use Fiverr as an example, but it's true in life. 50,000 will get better and faster and maybe more profitable using AI and leveraging AI, and 50,000 will be out of work.
Gali Arnon (25:16)
Yes, and another 50,000 new ones joined the platform because they were able to create new capabilities, because of the way they use AI.
Michael Eisenberg (25:25)
And so that's actually an important point, which is, there's a whole cadre of people, not just on Fiverr, but in our life, who will be able to create businesses that they wouldn't otherwise be able to create because they now have five digital workers on AI. How do we get people from here, which is, my God, AI is coming, to there, which is, I can use AI to build a new business?
Gali Arnon (25:50)
Again, think, listen, I'm going back to the show, not tell, okay? I think we are constantly telling people about AI. Think about your LinkedIn feed. Think about your Twitter feed. How do you feel when you go through your LinkedIn? I'm really asking and you see...dizzy, right? Dizzy.
Michael Eisenberg (26:11)
Dizzy. That's what I feel.
Gali Arnon:
Dizzy. You feel FOMO as well?
Michael Eisenberg:
No. I don't have FOMO. Okay.
Gali Arnon (26:17)
Okay, you're unique in this sense. I guess most of the people do have FOMO.
Michael Eisenberg:
Really?
Gali Arnon:
Yes. Oh my God, there's a new technology. Oh my God, there's a new tool. Oh my God, there's a new thing. Wow, I'm missing it. I don't know how to master it. and it's evolving. And every day there's something new, right? And you feel dizzy, or you feel FOMO, or you feel that you're out of the discussion, right? And I guess most of us feel that way. I feel this is not necessarily helping. Seeing all those experts, I did this amazing thing with…no. People need to experience it themselves, and they need to try it with, and this is what I would do. I would actually let people try it.
Michael Eisenberg (27:00)
So you’re going to set up an institute, a place where people can come to and hack together using AI?
Gali Arnon (27:06)
Right, without any FOMO, without the fear of not being included in this party, right? Because it's a hell of a party. Seriously.
Michael Eisenberg (27:15)
What do you have FOMO with?
Gali Arnon:
Nothing, really. Just when my daughters are in somewhere really important and I'm not there. That’s the main FOMO.
Michael Eisenberg:
You want to go back to school?
Gali Arnon (27:30)
No. One of them is already in the army. Another one is starting shnat sherut–
Michael Eisenberg (27:32)
A gap year of service.
Gali Arnon:
Yes. And then she's going to go to be a video, actually, photographer in the IDF spokeperson’s office. And when I mean that I'm not there with them, it's mainly when they have something important and I'm not necessarily there. It's not about being in school. That's my FOMO.
Michael Eisenberg (28:06)
I want to go to the other side from the freelancers, which is, think about customers for a second. Okay, so customers, not just of Fiverr, but if I'm a customer today, and I have a choice between the human and AI to do my work. Now, you said there are unique human skills, but I'm faced with that. And we just had, for example, Toby Lutke of Shopify, who just said, before you come to me for resources–
Gali Arnon (28:29)
Try to do it with AI first.
Michael Eisenberg (28:31)
Try to do it with AI. So if I'm a customer now, and I'm thinking of going to Fiverr, or going to Upwork or going to, it doesn't matter, or going to the corner barber store–actually the barber I can't do with AI yet–and I say AI or human? How do you think people are thinking about that right now? And how fast is it happening that they're making the AI decision?
Gali Arnon (28:54)
I think it really depends on what they're looking for. If they're looking for something fast, cheap, and that might be generic, which by the way, is taking us back to the $5 story because the $5 solution was a low risk of error, right? It was cheap. It was very fast compared to the alternatives, which was go to a freelancer offline, try to negotiate, yada yada yada. It takes a lot of time. So it was fast, it was cheap, and it was probably generic or low quality, right? This is what you would get. Now I'm not saying AI is low quality, don't get me wrong, but it's cheap, it's fast. I'm not sure how unique it's gonna be.
Michael Eisenberg (29:41)
So it's commoditizing things. So if I need a commodity, go to AI.
Gali Arnon (29:44)
So if you need now a new logo for Aleph, it depends on your...
Michael Eisenberg (29:51)
We’re high-end, okay? The people who created logo are sitting right here, okay? So be careful.
Gali Arnon (29:57)
So this is what I'm saying. I think it's replacing the old $5 services on Fiverr.
Michael Eisenberg (30:03)
Do you have subscriptions to any of the AI services?
Gali Arnon:
No.
Michael Eisenberg:
Interesting. To none of them?
Gali Arnon:
No.
Michael Eisenberg:
Why?
Gali Arnon (30:17)
I don't really know. I'm using the free version of ChatGPT. It's working for me, and it's enough.
Michael Eisenberg (30:26)
What do you use it for?
Gali Arnon:
Everything.
Michael Eisenberg:
What's everything?
Gali Arnon:
I think it replaced Google for me for 80% of what I'm looking for.
Michael Eisenberg:
So you’re using Google 80% less now?
Gali Arnon:
Yes.
Michael Eisenberg:
Wow. And you're happy not to see the ads too, right?
Gali Arnon (30:38)
I wouldn't say I'm happy not to see the ads. And I would say it's just, it's faster, it's more organized. It's not about the ads, really. Think about it really, between us, okay? The sponsored ads on the top of–I was paying a lot of money as a customer over the years. So yeah, it's very native in the way it's structured, right? Sponsored. It is very relevant, and it is taking conversion into the calculation of what you actually see, or the results that are being displayed before the organic results. So it wasn't that bad. It's not intrusive ads that comes in the middle of a YouTube video that you want to watch. It's not the same. Google Search is quite a native experience. It's not intrusive in terms of the ads.
Michael Eisenberg (31:30)
But you are a marketer for what I would call the golden years of Google, right? Where you could just buy traffic on Google, and buy it on Facebook. Now people are going to ChatGPT or Perplexity or Grok. And if people are taking 80% of their searches off of Google and doing them in ChatGPT–
Gali Arnon (31:45)
I'm not sure the 80% is precise, .
Michael Eisenberg (31:47)
Let's just say it's headed there. How is a company Fiverr or anybody else who is used to marketing through these digital channels going to capture customers?
Gali Arnon (31:55)
So first of all, every marketeer in the world is now thinking about it and working on it. At the end of the day, the way Google presents the algorithm, the way it presents the results is about relevancy, authority, conversion. All those things will determine your appearance on the search results.
And I'll tell you something. When you want to build a brand, you don't build a brand through search results. You don't. Because it's only for the people who are already looking. So it's about getting the demand that is already there. You're not building a top of mind brand through Google search results. So that's one. The number of channels that are now accessible or relevant for a marketeer are far more diverse than just Google search. And Google search is only good for the people who are already looking.
Now, if you think about it, all those AI models are using the same data that Google used to, in a different way, right? The calculation is different, but that Google used to use, right? Its relevancy, its accuracy, conversion probably not yet, maybe in the future, but you’re probably gonna hear about Fiverr even if you look at AI, on ChatGPT or on any other model, because it's one of the biggest brands out there. So you'll hear…
Michael Eisenberg (33:21)
You're making an important point though, which is, tell me if I'm putting words in your mouth–in the era of AI brand building is much, much more important perhaps than in the era of, call it internet search. Because in internet search, you could kind of buy your way to conversion even if you didn't have a big brand. But if you don't have a big brand and a big presence in the data that's being collected by ChatGPT.
Gali Arnon (33:44)
If you're not a thought leader–by the way, I believed in this statement 10 years ago as well, when Google search was at its best. You don't build a brand on top of Google search. You don't.
Michael Eisenberg (33:56)
Some people thought you didn't need to build a brand.
Gali Arnon:
Although, and I'm using a lot of very definitive statements–look at Booking. It's a different example. Let's talk about Booking for a second.
Michael Eisenberg:
The travel company, Booking.com.
Gali Arnon (34:12)
Right, so 12 years ago, 15 years ago, they started to build a brand dominating Google search results, and they did nothing in brand building. But because the way people are looking for hotels or for anything that has to do with their vacations is on Google, dominating Google search was brand building. Because if you are not, if this is 90% of the way people are searching, and you are always number one–nd I think they were moving between being the first number one advertiser in the world to the second number two–but anyway, they were paying Google the most. That was brand building in its own way, right? But for other brands that are not only, that customers are not getting to your service through search alone, I feel it's not enough and especially today.
Michael Eisenberg (35:07)
A perfect segue, because you mentioned before, you're the CMO of Fiverr for six years, and we're at a moment in time, it seems, where the role of the Chief Marketing Officer is changing. I just said a second ago, brand building feels even more important than perhaps it ever was. There is a multiplication of channels through which you go, linear TVs going down, non-linear video streaming, Netflix, just as an example, is going up, but it's hard to access customers in those places. Help me think about how the role of the Head of Marketing, Chief Marketing Officer is changing, and where you think this is in five to 10 years.
Gali Arnon (35:49)
I was lucky enough, or old enough, to be a marketer even before the internet started. What we had is what we used to call offline advertising and online advertising, or below the line and above the line. That was the terms.
Michael Eisenberg (36:07)
I'm old enough to remember that too, but I won't tell anyone.
Gali Arnon (36:10)
No, that's surprising. Listen, I went to the university, my first degree was in psychology and communication and there was a guy, you probably know him, his name was Marshall McLuhan and he said the medium is the message, right?
Michael Eisenberg (36:29)
He and I are not the same age, or we're not the same age. I didn't know him because we were peers or anything like that ...
Gali Arnon (36:31)
Okay, fine, no, no, that's not what I thought. You probably know him because he's a known guy, right?
Michael Eisenberg:
For one line.
Gali Arnon:
Yeah, for one line. Yeah. It's one song, a singer with one song, with one hit. But that's a very known line, and it's very true. It's very true. Think about the way you consume TikTok today, right? So the message has evolved, but it's a message, right? You need to motivate people. need to make them your brand, you to create emotions around your brand. It's the same mechanism, okay? People are the same, their psychology is the same, although it's changing with technology and social networks. The medium is different, the channel is different, and it's dictating the way we are designing the message, the creative and everything.
I think, and I went through this–a marketeer that needs to be really innovative with the creative, to a very data-driven marketeer where he needs to understand the data, and the pixels, and all the technology behind it. And I think there will be some retro in this sense, a bit because of this brand building, because you want to build authority, because you want to be a thought leader in your own category, in your own domain.
I think there's going to be a bit of going back to the basics of truth in many ways, of creating emotions in a world where there's so many messages and you feel dizzy every time you open your LinkedIn. Brands will need to go back to basics. I think that would be important for marketers and executive marketers.
Together with mastering all the new channels, making sure you understand now, it's been about celebrities, right? We talked about celebrities, and then it moved to the one who carries your message. Influencers were the thing. Now it's UGC. You don't even need to be an influencer anymore. You can be a really cute guy who knows how to stand in front of a camera, and it's enough. And then you need thousands of UGCs in order to have a really strong machine, in order to test all your creatives. So I think that's obviously something you need to master. It will change, it will keep on evolving really, really fast. The back to basics is what's important in my eyes.
Michael Eisenberg (38:59)
So I think that's a pretty profound point, which is even with the advance of technology and AI, and you said, the dizzying environment of the information overload of the internet, brand building will go back to basics. The ‘Just do it’ of Nike. As a kid I remembered, although I don't drink this stuff, the Maxwell House smell of the coffee is pulling that emotional tug and creating a deep resonance.
Can AI be used to do that, given what you said about it being creating commodity content?
Gali Arnon (39:37)
I think AI can help do it, I'm not sure it's going to be the leader behind it. I think a human will be the leader behind it. You need to create content that will stand out. Think about it. Standing in this dizzy world of overload of information, you need to stand out.
Can AI stand out? I don't know, I'm asking you.
Michael Eisenberg (39:59)
I think in some ways it can.
Gali Arnon:
How can you make AI stand out?
Michael Eisenberg:
I agree with you, there's a lot of commodity drek out there created by AI. But I think if you work it hard enough and prompt it enough and poke it enough, you can actually create some pretty stunning stuff.
Gali Arnon (40:17)
That's the human behind it.
Michael Eisenberg:
I agree with that.
Gali Arnon:
It's not enough. You just use generic prompts, and you don't work hard enough, you will get the same...
Michael Eisenberg (40:26)
I just created a pretty in-depth document on a somewhat esoteric topic, used three different AIs, prompted it, pushed it back, challenged some of the sources, and I think we have a good four-page piece of research. But it took a lot of work.
Gali Arnon (40:42)
And you have a lot of brain power behind it.
That was a compliment.
Michael Eisenberg (40:50)
I appreciate it. What's the most iconic brand in your mind right now, that kind of is retro, kind of pulls on people's emotions and does the right thing? Because Nike's going down on this.
Gali Arnon (41:01)
That’s Amazing. I mean, they left the stage empty. Listen, Apple for me is still a very iconic brand. I mean, I went now, I was in Rome now, went outside one of their shops–it still stands out. It's so different. It's so sleek. And it's so, so Apple. And it still resonates. It still drives emotion when you, you still feel it's the best out there that you can get. I'm looking at my daughters, the way they're thinking about Apple compared to other phones. It's working. And it's storytelling. And it’s working.
I read this amazing, I kind of interviewed–we were now in a vacation with, as I said, in Rome, in Italy, with my extended family. And I interviewed my niece. Niece, do you say? No, my nephew. And they're all crazy about Duolingo.
Michael Eisenberg (42:15)
Oh, Duolingo. Yeah.
Gali Arnon (42:17)
And the way they build the brand is fascinating to me.
Michael Eisenberg:
I agree. And then they killed the bird, brought him back.
Gali Arnon:
Yes, they know how to speak the language of kids. Kids resonate with them. And I asked them, “Do you study any language with Duolingo?” And they said, “Yes, of course, French.” And I said, “Seriously, are you studying French with them?” And he said, “Yeah.”
“And how do you know about Duoloingo?” And he said, “Well, everybody knows about Duolingo. It's just there. Everybody knows.” Everybody knows. And I'm not talking about an 18-year-old or 20, they're 10 or 12. And I think for adults to be able to crack a brand for kids, it's not an easy task.
Michael Eisenberg (42:55)
I agree.
Gali Arnon (43:13)
I'm fascinated by the ability to do it through TikTok alone. And that was the main channel they used.
Michael Eisenberg (43:22)
You've written about or said, you did an interview, I think it was something called the Creative fFctor, that everybody is their own brand and the world is moving to personal brands. People like you and me who need to create their own personality in the digital space. What's your personal brand?
Gali Arnon (43:44)
That's the thing, I'm very bad at social networks.
Michael Eisenberg (43:47)
You're never there, as best I can tell. You're barely there.
Gali Arnon (43:51)
I'm there, but I'm passive. I'll go back from a vacation. I won't share pictures of my kids, my family. I won't share my personal experiences. I would usually share achievements of my team on LinkedIn, but again, not frequently. And I think my personal brand was just–I'll give you an example, okay?
When there was this competition–I like competitions, as I said–which is the Geektime Awards, I think. And they have this, every year they give awards to the CMO of the year. And I got this prize twice, in 2019 and then in 2021, I think. And I was very surprised, because I never used to talk about what I do on social networks, and I never used to kind of talk about–it wasn't clear to me how they even gave it to me. And apparently people know. And so I think my own personal brand is just because I work hard and…
Michael Eisenberg (45:08)
But what is it? What is the personal brand of Gali?
Gali Arnon (45:09)
Oh what is it? I think, listen, and I'm so privileged and thankful for that. I think that the Fiverr recent journey was an amazing journey in the sense that we were able to bring together as a team, with Micha obviously and the other senior management members and my team, we were able to build an iconic brand. And I think this is part of my heritage.
Michael Eisenberg (45:37)
What's your personal brand? You talked about your personal brand. Everyone needs to build their personal brand now.
Gali Arnon (45:41)
Hmm, my personal brand. What's your personal brand?
Michael Eisenberg (45:45)
I think I'm asking the questions.
Gali Arnon:
I took a political approach to this.
Michael Eisenberg:
I think my personal brand includes talking about what are timeless biblical values in modern economics, and empowering people to earn a better living, and being a family man. At the top of my LinkedIn page it says father, grandfather, husband, and then a venture capitalist. That's not–
Gali Arnon (46:12)
That's very nice. Inspiring. Okay, my personal brand. I'm a mother, a proud mother for three daughters. I want to be a role model for the next generation of women leaders in Israel. And I want to be someone who inspires women to break barriers, and break the glass ceiling, and dare and take risks.
That's something that is very important to my heart. I'm a Zionist, although I'm very secular, but I'm very connected to this place. Yeah, that's what I would say.
Michael Eisenberg (46:55)
You were CMO of Fiverr for six years, and I want to go back to a time that is changing, that this whole world of branding is changing. You mentioned that you were recognized by GeekTime. What was it about what you did there that was different, and stood out in the role, is what I'm interested in?
I think this is a time, I think you're right by the way, that the retro is kind of coming back. Brands, and emotional brands, and none of this kind of–my partner Bill Gurley at Benchmark used to call it the ‘crack cocaine’ of search engine marketing. You actually have to do the hard work of standing out, and being different, and creating a long-term lovable brand. And Fiverr's created a brand, unquestionably. But what did you do that was different, that worked?
Gali Arnon (47:44)
First of all, we created a very, very strong growth machine. And that's the fundamental, right? You have to have a very strong data-driven, excellent growth machine with all the relevant channels. You need to be very diversified. You need to test thousands of creatives in order to find what's working. You need to be data-driven. You need to know how to measure.
This we do, we did. And I think many companies are doing it today, and they're doing it quite well, specifically in Israel, but not only. But we were looking to be different all the time. In every campaign, in every creative that we used, we thought, how can we be more provocative? How can we create a message that people will not be indifferent to?
Michael Eisenberg (48:36)
How’d you manage actually to do that?
Gali Arnon:
Just challenge them, and show them that it's fine to take risks.
Michael Eisenberg (48:43)
When people took a risk and failed, how did you react?
Gali Arnon (48:45)
I told them that we need to learn from that, and to improve, and do it better next time. And that we're together in it, that I'm taking responsibility, that we're part of, we're all part of this shit show.
Michael Eisenberg (49:03)
Earlier in your career, you were an executive at a casino company.
Gali Arnon (49:07)
Yes. Apropos talking about values and...
Michael Eisenberg (49:12)
Well, and being competitive, right? It's hard to bring the winners along in the casino game because the house always wins, right? How did that line up?
Gali Arnon (49:21)
Yeah, that's a good question. At the time when I joined 888, we're talking about 888, right? It was, I think, the only internet company in Israel. Gigi Levi-Weiss was the CEO, you probably know him?
Michael Eisenberg:
Well. Good friend.
Gali Arnon:
Adi Sofer, which is a very good friend of mine and was my boss at Kidum, because she was the CEO of Kidum and she kind of exposed me, taking me from being a teacher to being–was the first to believe in me, I would say.
Michael Eisenberg (49:58)
She's now the head of Facebook in Israel.
Gali Arnon (50:00)
Right. And she joined 888 as well. And she offered me to join this company that was, it was enough to go into their offices. Something was vibrant, and cool, and data-driven, and the level of talent that was there was just unbelievable. And I think part of the story was that we are an entertainment company and it's games.
And I have to tell you that, it was all of it, right? It was a smart group of people, very talented, and it was data-driven, and has a lot of resources. And it was different from anything I did before. And it was the head of the caravan, in terms of technology. But at the end of the day, we were selling casino. And there was a time where I felt that I can't do it anymore. And by the way, this is one of the reasons I left, because, going back to those Friday dinners, shishi dinners, and to my daughters, I wanted to tell them with pride that this is what I do. And at some point, it didn't feel that. But it was the best school for performance marketing ever. And everything I know about the digital world started there.
Michael Eisenberg (51:25)
Yeah, so many people in the performance marketing space have come out of there.
Gali Arnon:
That's true.
Michael Eisenberg:
It's quite, it's actually quite incredible. And by the way, so many leaders of the current generation of these consumer companies like yourself have all come out of there, which I find to be fascinating. But maybe now I understand why it took your mother-in-law some time to come around.
Michael Eisenberg (51:49)
And your mother was still proud of you when you were there?
Gali Arnon:
Yeah. My mother is always proud of me.
Michael Eisenberg:
Okay. So I’d like to finish with a few kind of lighter questions. What's the strongest opinion you've held that you've changed over the last year?
Gali Arnon (51:51)
Up until I think a year ago or two years ago, I could imagine myself relocating or living in another country. And I'm not saying only for the short term, but actually living in another country. And I think what happened to me in the last two years is that, and they've been the most difficult years I've ever experienced in this country, even before that, three years, because it started with the protests–I was very involved with the protest, and I felt awful being part of this environment in Israel–and then the war and the 7th of October. I can't imagine myself living in another country.
Michael Eisenberg (52:49)
Last question for you. Who's so–Okay. you can keep going. You want to say something else?
Gali Arnon (52:51)
Yeah, I want to ask you the same question.
Michael Eisenberg:
What opinion of mine has changed?
Gali Arnon:
Yes, in the last year.
Michael Eisenberg:
Two things that are connected. And I wrote about this in my most recent book. I've often had questions about the general direction of the welfare state. But I believe the welfare state, the way we know it, not just in Israel, but in Europe and the United States is finished.
Gali Arnon:
Really?
Michael Eisenberg:
Yeah. And number two, and this has changed for me probably over the last couple of years, and not just because of Israel, is that countries need to maintain their core values and that that needs to be a critical component of whether people get the benefits of the state.
Gali Arnon (53:36)
Can you explain?
Michael Eisenberg (53:38)
Yeah, living as a citizen of a country has responsibilities and not just rights. I've written about this, by the way, for a decade, that core to being a citizen is responsibilities and not rights. And I think the change that's happened in my own head is that responsibilities will confer the benefits of citizenship. And if you don't take responsibility, you can't get as many benefits of citizenship of a country.
Gali Arnon (54:05)
I can see how it's very, very relevant to…
Michael Eisenberg (54:08)
It's relevant, I think, globally right now in many ways, countries defending their national cultures. And I think a long time ago, that was called far right, and I don't think it's true anymore. And so I think countries that want to maintain their culture and their freedom need to defend themselves also.
What's something nice you want to say about somebody in our space that doesn't get enough recognition?
Gali Arnon (54:34)
I want to say something nice about two amazing ladies. One is called Naama Lahav, and the other one is called Yael Meiro. And they're both from Meta, but under the inspiration of Adi Sofer, they created an amazing program called Shishi seven years ago, which I'm not sure you know about.
Michael Eisenberg (54:57)
I don't.
Gali Arnon (55:01)
And this is why I want to talk about it, because I think more people should know about it.
And it's an amazing program where they were able to gather amazing mentors from, Israeli women mentors. Women like Dana Weiss, and Rakefet HaKaminoach and Tamar Yesour and now Yael Harad.
Michael Eisenberg (55:17)
So just to tell people, so Dana Weiss is a media personality. Raque Fetusekaminok was the CEO of Bank Leumi, and today a venture capitalist at Team8 and Ella Rod was a judoka, I think, a judoka Olympic medalist.
Gali Arnon (55:28)
Yes, and she's now inspiring many other athletes, women athletes around Israel. And there's many, many more. There's a long list of unbelievable women that are–and also, I was privileged enough to join this program three years ago as a mentor. And we are giving mentorship, training or advice to the next generation of women leaders in Israel. So every year there's thousands of women that are applying for the program. Every year, you get new women that you meet with often, at least 12 times a year. And this creates amazing relationships and allies. And I think this is what women need. They need more women, other women as role models, as allies to be stronger. So I really want to say how much I appreciate this effort.
Michael Eisenberg (56:34)
Amazing. Gali, thanks for coming on Invested.
Gali Arnon (56:37)
Thank you. I really enjoyed it.
Michael Eisenberg:
If you enjoyed this episode with Gali, please rate us five stars on Apple Podcasts, and Spotify, and wherever else you listen to us, and subscribe to our YouTube channel so you can continue to get this great content.
Eli Ben-Sasson / Michael (Mixed) (00:00)
You are th- Correct? Yes. What drew you to I fell in love. Very simple. What I view as the core innovation of Satoshi. What really is a blockchain? It is something that ultimately solves integrity. It is a way to know that the right thing is being done even when I'm not watching. He asked about my holdings. I do not hold any Trump coin. No Trump coin! No Trump coin. I know that this stack will conquer the world. I have no doubt about that. Like 100 % conviction. Nobody needs to trust us. Math is never breakable.
Michael Eisenberg (00:25)
Nobody needs to trust you.
Eli Ben-Sasson (00:29)
Cryptography is breakable. The closer you get to using pure math, the less breakable you are.
Michael Eisenberg (00:34)
Who's Satoshi? ⁓
Welcome back to invested. am thrilled to have Ellie Benson-Sason with us.
Eli Ben-Sasson (00:45)
Thank you Michael, thank you for having me here.
Michael Eisenberg (00:48)
Eli
is the co-founder and president of Starkware, which pioneered zero-knowledge proof technology, Starks, to scale blockchain infrastructure, enabling faster and more secure transactions on Ethereum and beyond. Eli is a professor in cryptography researcher. He's a former professor at the Technion in Haifa, Israel, which is like Israel's MIT, ⁓ specializing in theoretical computer science, cryptography, and computational complexity. He's the co-inventor of Starks.
played a key role in developing scalable transparent arguments of knowledge, that's the Stark's ⁓ acronym, a breakthrough in cryptographic proofs that enhances blockchain scalability and privacy. Boy, Ellie, that was a mouthful. Explain it to people in plain English.
Eli Ben-Sasson (01:30)
⁓ Which part?
Michael Eisenberg (01:32)
Why don't you tell us what Starkware does.
Eli Ben-Sasson (01:36)
Okay, so Starcore is a company located ⁓ headquartered in Israel. It has over 200 employees. So far, I guess this is well understood. No cryptographic proofs needed for that. Latest round valued it at $8 billion. And we've been at it for the past seven and a half years, scaling blockchains under the same assumptions as blockchain. So
Michael Eisenberg (01:46)
cryptographic proofs needed for that.
Eli Ben-Sasson (02:04)
Blockchains are great, but they're somewhat slow and you want to have them, you want them to have higher capacity and lower costs. And that's basically what Stark were ⁓ innovated on.
Michael Eisenberg (02:09)
And
And who buys StarCraft technology?
Eli Ben-Sasson (02:23)
So there are two products. The first one is a B2B product that has been used by and still used by a bunch of
Michael Eisenberg (02:29)
⁓
Eli Ben-Sasson (02:31)
gaming companies, ⁓ decentralized exchanges, and it is called StarkX. This product has been out there for the past five years or so and has settled more than $1.3 trillion of trades on Ethereum. So it's a B2B SaaS product called StarkX. And its consumers are then other businesses who are exchanges and gaming companies on blockchain. The second ⁓ product, which is newer,
is called Starknet and it is a little bit like Ethereum or like Bitcoin. It is a blockchain of itself. It's called a layer two, which means it settles onto Ethereum and then its consumers, I would say, are two kinds. There are the end users that use it for paying for their coffee through using credit cards or stuff like that that settle on top of Starknet. then there's the developers of apps, games, DeFi projects and stuff like that.
And why can't
Michael Eisenberg (03:29)
Can't
I build directly onto Ethereum? ⁓
Eli Ben-Sasson (03:32)
You can, but
each transaction is going to cost you a hundred to a thousand X more than it would cost you on starknet.
Michael Eisenberg (03:39)
And how does darknet reduce the cost of the transactions that would otherwise be on Ethereum?
Eli Ben-Sasson (03:43)
So that's where the magic or the math comes in. Okay, so how do you, maybe we should take a step back and explain why technologies like Bitcoin and Ethereum that were invented in 2008 and 2015 respectively have very low throughput, right? If you think of them as some computation platform, they allow very little computation to be run on them, right?
So famously, Bitcoin allows something like seven to 10 transactions per second at most, TPS, transactions per second. And Ethereum is like, I think, 20 to 30 transactions per second TPS. Whereas if you look at similar, let's say, payment systems, know, Visa or credit cards in the aughts and teens of 2000, they were processing already hundreds of thousands of transactions per second. So.
It's not that the technology didn't exist to process, let's say, 100,000 transactions per second when Bitcoin was invented. And certainly it's not that Satoshi didn't know this, right? So why did he build a technology, invent a technology that only works at 10 transactions per second? The reason is that the way blockchain works is very differently. It does not assume any centralized party that you trust and which could run a huge server, know, Visa MasterCard.
You want everyone to be able to participate in the protocol and observe and know everything that is going on using commonly available means like a laptop. And if you do that, suddenly the rate of transactions drop significantly. So this explains why common blockchains like Ethereum or Bitcoin, you don't have very high throughput and this leads to congestion and high costs. So we invented
Michael Eisenberg (05:24)
on.
Eli Ben-Sasson (05:36)
some math that you can use in order to scale these blockchains without any change to their assumptions. Nobody needs to trust us. That's true. Nobody needs to trust us. That's the important thing. And it is still is decentralized and there are no trust assumptions about whoever is operating this technology. ⁓ That's the main thing.
Michael Eisenberg (05:42)
Nobody needs to trust you.
Satoshi didn't know this. Taliq didn't know this.
Eli Ben-Sasson (05:59)
Satoshi,
okay, wait. So Satoshi in his latest writings did refer a little bit to ZK, zero knowledge proofs, and mostly for the privacy aspect. first use of proofs for scaling, which is what Starkware is famous for. So I'm proud to have, you know, been the first to point this out. And I pointed this out in the Bitcoin conference in San Jose in 2013. No one before that.
Michael Eisenberg (06:08)
Yeah.
⁓
Eli Ben-Sasson (06:29)
Realized that you can use within the blockchain world that you can use ZK proofs in order to scale block chains by then by 2013 Satoshi was already silent the core developers of a theory and people like Greg Maxwell and Mike Hearn and others and Gavin Andreessen at the time were very enthusiastic about ⁓ You know our technology for scaling Bitcoin and they immediately sort of embraced it, which is really why I ended up
Michael Eisenberg (06:48)
is
Eli Ben-Sasson (06:56)
moving from being a mathematician to a blockchain person. then, okay, so Vitalik, you asked about Satoshi and Vitalik. So Satoshi at that time was already silent. He spoke no more, but I'm pretty sure based on his previous writings, which loved the privacy aspects of ZK, I'm sure he would have supported Starks. Vitalik was back then a reporter for the Bitcoin magazine. And then he flew a few months later to Israel and he actually interviewed me
Michael Eisenberg (06:59)
⁓
Eli Ben-Sasson (07:25)
You know, sitting on humus at the Technion and I explained a lot of ZK to him. And I think he also loved it a lot. And Ethereum came out a year and a half later, it was still not ripe enough. So Vitalik certainly knows this from the start and is a very great supporter. He's our first investor in Starkware and he definitely supports ZK in general till this day.
Michael Eisenberg (07:32)
⁓ but when.
Why don't you just explain to the broader audience what zero knowledge proofs are?
Eli Ben-Sasson (07:53)
These proofs are means to an end. And the end is integrity. Integrity was beautifully defined by C.S. Lewis as integrity means doing the right thing even when no one is watching. So when you think about proofs, they are means to an
Michael Eisenberg (08:08)
favorite authors I just want to point out.
Eli Ben-Sasson (08:10)
I also, well, I like the Narnia, but like at some point it sort of deteriorates, the first few books. I did not read that one. Okay. I'll add it to my list. integrity means doing the right thing, even when no one is watching. Now I would like to, let's say, ask you to operate, let's say the payment system of Israel for a day and report at the end of the day to the world. What is the current state of accounts?
Michael Eisenberg (08:15)
letters is my favorite, but which one? Tape letters.
⁓
Eli Ben-Sasson (08:40)
But I would need to know that you're doing the right thing even when I'm not watching. So cryptographic proofs are a way to achieve exactly that. can, using cryptographic proofs, I can say the following thing. Please take ⁓ the payment system of Israel operated for a day. Please report to the world at the end of the day the state of accounts. But I also ask you to provide a proof, a cryptographic proof of this, sometimes called a ZK proof. The point is that
If you operate with integrity, you will be able to generate a proof. If you violate integrity, even with one single bit, let's say you add a one to your, or you add a bunch of zeros to your own ⁓ account in a way that you haven't received the money, you will not be able to ⁓ generate such a proof. And verifying the proof takes ⁓ five milliseconds on a smartphone. I can, all of the citizens of, let's say Israel,
could verify once a day on their smartphone that someone who they have no trust assumptions about operated all of their ⁓ payments with integrity. That's what you achieve.
Michael Eisenberg (09:48)
I once had a back and forth with Mark Andreessen years ago about blockchain as to whether it's a trusted network or a trustless network. I think it's trustless network. He thought it was a trusted network at the time. My point was actually the benefit is that it's trustless. I don't need to trust anybody. I can just kind of know. And that knowledge creates my trust even without having to trust you.
Eli Ben-Sasson (10:13)
Yes, I agree. Well, in the end, there is trust in certain assumptions. then, okay, if you think about the conventional financial world, we have trust assumptions about very particular individuals and institutions. We trust the regulators, we trust, you know, let's say the banks or the bankers and we trust their operation. Well, we assume this trust, right? ⁓ Now with blockchain, there's no particular individual or institution that you trust.
Michael Eisenberg (10:34)
know why these things are coming out. We'll come to that soon, but go ahead.
Eli Ben-Sasson (10:42)
You trust rather.
Michael Eisenberg (10:43)
Math.
Eli Ben-Sasson (10:47)
A combination of math and game theory. are three. ⁓ If you allow me, I'd like to present what I view as the core innovation of Satoshi. What really is a blockchain? So I think it is. It is something that also ultimately solves integrity. It is also a way to know that the right thing is being done, even when I'm not watching. So in this way, ZK proofs and blockchains actually complement each other because they are both two different solutions.
Michael Eisenberg (10:59)
So.
Eli Ben-Sasson (11:17)
to the same problem, the problem of integrity, knowing that the right thing is being done even when I'm not watching. Now, what blockchain does is it offers infrastructure for social constructs like money. Money is maybe the most important and fundamental social construct. It is something that has immense value only as long as there is both inherent integrity and perceived integrity. So,
Both it operates as it should, you you don't get to just print as much money as you want, you and I individually. I have money, it doesn't disappear ⁓ all of a sudden. I have full discretion over who I can pay my money to. Those are parts of the inherent integrity of money, what it means for it to be doing the right thing. But we also need to have perceived integrity, which is common knowledge. So I need to know that you know, that I know, that everyone knows that
Michael Eisenberg (11:51)
If I
need.
Eli Ben-Sasson (12:14)
you know, operates with integrity. Okay. So money is a social construct and blockchain is a new way to achieve social constructs. But it is very different from the conventional ways in which something like money was achieved. It has three core principles. The first is broadness, which means, or decentralization, which means this infrastructure benefits from having as many operators come in and be part of
of this infrastructure. The more the better. So, and there are no barriers to entry. Compare this to the banking system. You don't have this broadness.
Michael Eisenberg (12:55)
comparatively compared to the Fiat system, is unilateral completely.
Eli Ben-Sasson (12:59)
Yes, yes, yes, exactly. And the hierarchical, you know, you need to have a certain license in order to be a part of whichever payment network that you choose within Bitcoin, for instance, actually, the more nodes or users come in and attach to the network, the better it becomes, the more secure it becomes, the more integrity it has. So that's the first principle. The second amazing principle, which is maybe the most shocking and surprising is what I call incentivized.
integrity, which means the protocol defines a distribution of value in the form of mining fees and fees that go to block producers. And the reason it drives value to these parties is in order to have both inherent and perceived integrity so that everyone understands that if you have a Bitcoin, it doesn't disappear suddenly and that there's no double spend and that all the aspects of money
operate as they should. So that's the second amazing part. Again, it would be like the national bank of a country saying, we invite all citizens of the country to participate in the payment network. And in fact, we are going to mint coins and distribute them to the citizens as they produce services, which I think is a great idea, but just no country is doing it yet.
Michael Eisenberg (14:18)
By the way, just, open parenthesis, that's the inverse of a lot of these current UBI concepts. It's the universal basic income, which is don't contribute a thing, but take some dough.
Eli Ben-Sasson (14:26)
Yes. So
here it's a contribute and we will incentivize you in a way that enforces or achieves both inherent and perceived integrity. That everyone understands that the reason you're getting paid and that everyone is being paid is so that you, the whole system just has integrity.
Michael Eisenberg (14:45)
describe the blockchain incentive system as the inverse of what's gone on in progressive or liberal circles right now, which is in progressive or liberal circles what you have is, ⁓ I give you money because you have rights and in the blockchain system you get incentives because you take responsibility.
Eli Ben-Sasson (15:02)
Yes. Yes, I agree. You get paid in order to incentivize you to be citizen. Yes. Contribute to the whole integrity of the whole system. the third, so there's broadness, you know, everyone's invited to participate. There's incentivized integrity, which means everyone gets paid in order for everyone to agree that the system operates as it should. And the third one, which is very important is public verifiability, which means everyone using commonly available means can check that everything from the start,
till the very latest block state has been done with integrity. okay, so these are the three principles on which blockchains operate. If you want broadness, you want everyone to come in with their laptops. Okay, so you can't have like things that require massive compute. If you want public verifiability, you need to have things that can be easily verifiable even if someone comes in late. And for those reasons,
both Satoshi and Vitalik had to compromise on the scale. How many transactions do you process? Well, the math that we invented and then productized is something that allows you to check, again, in less than let's say one second, the full integrity of all of the blocks of Bitcoin from the genesis in 2008 till now. Something that will take you more than a week on a strong computer. You can verify a single stark proof.
of the whole integrity of the whole thing without any trust assumptions about anyone who produced this proof. So using this technology, we can amplify and scale blockchains by basically inviting anyone with compute capacity to contribute and advance the state of the system. No trust assumptions about that party. And you can still verify that everything they did, they did with integrity.
Michael Eisenberg (16:49)
So like you were a theoretical mathematician, correct? What drew you to the blockchain?
Eli Ben-Sasson (16:52)
Yes.
I fell in love. Very simple. When? ⁓ that moment? May 2013. I was, okay, I was doing a sabbatical at MIT at the time and I was already involved in implementing in code some of the theoretical work that I did. And I had no real good reason for doing it. The real reason was I received a grant from the European Research Council.
Michael Eisenberg (16:59)
Do you remember?
Eli Ben-Sasson (17:22)
1.7 million euros. And as a theoretician, there's only so many pencils and laptops that you can buy with, ⁓ with, you know, that amount of money. So I partnered with a few brilliant, you know, postdocs and researchers and students, and basically said, let's implement some of this stuff in code. No, no good, you know, end in mind, just thinking, well, we can publish some papers about it. So end of 2013, I was just about to return to Israel from my sabbatical.
And I gave talks, mostly in academic universities, speaking about what I was doing, like implementing in practice some of this theoretical math. And I know now in hindsight, so what I remember back in the time was people like being like groggy and like yawning and coming at the end and saying, this was very interesting. Like no questions asked. Okay. Years later, I heard that behind my back, people were saying,
What is this guy doing? Like, why is he wasting, you know, a pretty good mathematical career on trying to implement stuff that, that isn't practical and has no use case. And then I was going to speak at Stanford and Berkeley, and I learned that there is a Bitcoin conference in San Jose. So I said, okay, I'll try to apply for it. And I wrote to some of the organizers and I said, I want to present this academic stuff there. And.
Gladly they agreed, so they said, come and speak. And first of all, was the most electrifying conference I ever attended. There was like magic in the air. There was this messianic feeling that Bitcoin is changing the world for the better. So it was very captivating. And then I gave the talk. Not many people attended, but a lot of the core devs that were there
came to me later and said like, this was the most important talk of the conference.
Michael Eisenberg (19:24)
And.
Eli Ben-Sasson (19:26)
Where's the code? I said, what do mean? Why do you need the code? And they say, okay, here are like five things we're going to do with it tomorrow. And I said to them, no, you're like, you know, you're kidding with me. You're joking. Like you're not going to really use it. said, no, no, we really need this. And this sort of stark contrast between the academic world where people were basically yawning and saying, we don't know what to do with this. And then the blockchain world where the developers are saying,
Give us the code tomorrow and here are five things we need to do with it.
Michael Eisenberg (20:06)
Tomer is like your co-founder think an electric coin company. Is that like a precursor to Starkware?
Eli Ben-Sasson (20:11)
Okay. So what happened was at that conference, there was another presentation using, trying to solve privacy, ⁓ using some construction related to RSA accumulators, which is a lesser technology in terms of power than, than ZK. And we were working. Iran was part of my team. There were a bunch of us. So we partnered with that other team. So there was a team from John Hopkins and there was our team. So four of us.
Michael Eisenberg (20:18)
Bye.
Eli Ben-Sasson (20:39)
partnered with three from the John Hopkins team. And we wrote this academic paper called Zero Cash, which shows how you can turn Bitcoin into something in which both the payer, the payee, and the amount being paid are completely shielded, as opposed to Bitcoin, where you can see like who pays whom. So we published this academic paper. And then we jointly, the seven scientists, we co-founded together with a very strong team of engineers led by
Zuko. So it was like, you know, destiny pre-wrote this Zuko.
Wilcox Hearn was not born Zuko. He had a different name, but years before he changed it because of some, think, a sci-fi character or comics character to Zuko. But then he ended up being the CEO, co-founder of the first company to commercialize ZK proofs. So I think it was like written in destiny. Anyways.
Michael Eisenberg (21:38)
Sometimes science fiction is stranger or more accurate than reality.
Eli Ben-Sasson (21:43)
Yeah,
I think you know there's a coincidence by the way, you know recently I saw that What was used to call micro strategy, but now called strategy right came out with a new ticker called STRK Yeah, so STRK is also the stark net ticker the stark net token ticker and I think there's also destiny there because like stark net and Bitcoin are meant to go together
Michael Eisenberg (22:07)
actually he's front running you probably. And taking your ticker before you get published. That's his gotta get paid. Michael Saylor's gotta get paid. Wait, before I go back to questions, if you already brought up Michael's strategy and Michael Saylor, what do you think about what he's doing? Like selling stock, borrowing money to buy Bitcoin.
Eli Ben-Sasson (22:11)
You know what? No,
Yeah.
I think it's brilliant. So I don't know about like, let's say the sort of financial soundness of whatever is going on. just, it's not my field, but I think right now one of the biggest trends is that TradFi, traditional finance and institutions want exposure to a whole bunch of things in crypto. And I think they're trying to come at every possible angle. So part of it is things like Bitcoin ETF and so on. And
I think he innovated a brilliant thing, which is to say, I will give the world more exposure to both Bitcoin just directly through buying a stock. think that's, that's actually great. I hope he's doing it in a responsible way, right? That basically sort of converts directly into Bitcoin. But, ⁓ and if he does, so I think it's a great idea that should be.
Michael Eisenberg (23:18)
I understand between the lines that you're long-term bullish on Bitcoin.
Eli Ben-Sasson (23:22)
I am very long-term Bitcoin bullish. I'm Ethereum bullish. I'm starknet bullish. I'm Zcash bullish. I'm bullish on lot of innovative things that are true to the values of decentralization, which not all projects in blockchain world are.
Michael Eisenberg (23:38)
I'm gonna come back to that in a second. What do you own your personal portfolio?
Eli Ben-Sasson (23:43)
I prefer not to go into too much detail.
Michael Eisenberg (23:46)
Can I ask you if you own Bitcoin? You prefer not to? Well, I am bullish on Bitcoin. So, Iran Tomer, who is your co-founder, said, ask you this kind of journey from theoretical academic guy to someone serving actually a developer community and actual customers. What's that been like?
Eli Ben-Sasson (23:50)
You know, bullish on Bitcoin.
I love every moment of it. Why?
Michael Eisenberg (24:16)
Customers, what a pain in the neck.
Eli Ben-Sasson (24:22)
My journey has been pure pleasure. And the number one reason is just my co-founder and my team and I just enjoy. So I love the academic work, but the academic work is very solitary and very individualistic, which is fine.
Michael Eisenberg (24:40)
And,
Eli Ben-Sasson (24:43)
had the honor and pleasure of co-founding Starkware with a close friend of mine for more than 35 years, Uri Kolodny, ⁓ who's a brilliant entrepreneur and I think he's going to go on and do other brilliant things, not necessarily in blockchain. He did enough in the blockchain world.
Michael Eisenberg (25:00)
and.
Eli Ben-Sasson (25:03)
So he was my main co-founder and I just love the guy and it was a pure pleasure working with him for the six years that he was the CEO of Starkware. then we tapped into the Israeli network of, first of all, friends and associates, and we managed to attract a team of people that I just dearly love and respect. So it's a joy for me to listen to them, be corrected by them.
As opposed to the academic world where it's all about you showing your brilliance. Here, I think my role is much more listening to others and saying, know, maybe re re gurgitating what they say and saying, okay, this is important. This is not. And I just really enjoy the teamwork. So I don't, I'm not, and I have a thick skin. I'd say I'm not bothered by the, uh, know, customer stuff. so, mean, you know, yes, I enjoyed working with, uh,
Michael Eisenberg (25:58)
customers.
Eli Ben-Sasson (26:02)
I enjoy the blockchain world and ecosystem and I.
Michael Eisenberg (26:07)
really, I feel.
Eli Ben-Sasson (26:09)
really fortunate to have such a great team of people to work with.
Michael Eisenberg (26:15)
What's
kind of core to creating the market pull for Starkware? What did you do specifically there?
Eli Ben-Sasson (26:22)
I would say the innovative technology and understanding, like staying true to it and understanding what is its core capabilities and following that. So these cryptographic proofs, can offer privacy, which is ZK, but they can offer also scale. early on, so with Zcash, we went after the privacy aspect, but with StarCore, actually went fully on the scaling thing and we stayed true to the technology.
And so I'll give an example. We decided to ⁓ do a programming language in virtual machine, even though it's very hard. It's like boiling the ocean, but we did it because we understood that you will get the best efficiency in terms of proofs and safety. And ⁓ so I would say the core to the success is just staying very true to the technology and its potential.
Michael Eisenberg (26:56)
build a new
What do you think it is, by the way, about Israel? RSA came out of Israel. ⁓ Starkware came out of Israel. There's a bunch of crypto activity going on here. There's actually a lot of work also in payments and risk management also. What is it about Israel that is able to kind of get into the guts of cryptography and the financial system, other than the obvious kind of out of the military?
Eli Ben-Sasson (27:39)
So I think, ⁓ well first of all Israel is like a superpower in theoretical computer science and also in math, like way over its ⁓ population size. And I would say that number one is if you look at the other STEM sciences, ⁓ things that are math but also computer science, they require very, very few resources, especially if you talk about like theoretical stuff, And hence, right, if you go to...
Experimental biology or physics right you need huge events investments in infrastructure in order to be top-notch With math and theoretical computer science, which is a branch of math. You don't need that you Right, you need computers or pads of paper. So then just the concentration of brain power and I think the cultural, you know Jewish affinity to ⁓ learning and respect like
You know, the typical Jewish mom wants her kid to be a professor or a rabbi, right? Not necessarily a baseball player, right? So I think that sort of, and this has been going on for generations. So I think the combination of just the cultural affinity to study and the lack of barriers in the form of infrastructure needed led to this thing.
Michael Eisenberg (28:59)
So ⁓ my friend, hope you agree for me to call my friend Balaji Srinivasan. probably.
Eli Ben-Sasson (29:07)
He's an advisor to Starquaries. Yes. Amazing.
Michael Eisenberg (29:09)
and an incredible guy,
and one of the greatest thinkers, I think, of our time. I spent a lot of time on this issue you mentioned about three minutes ago, ⁓ true decentralization versus, it's called fake decentralization. Most of our institutions today, which are losing trust rapidly, are centralized. Decentralization, read Bitcoin, Ethereum, ⁓
Eli Ben-Sasson (29:14)
I agree.
Yes.
Michael Eisenberg (29:39)
and the, let's call them nascent ⁓ mechanisms that Balaji is working on, ⁓ are trying to effectively create these trustless environments. They're environments that don't require trust, but promote integrity because of mathematical proofs. I'd like you to try to address, so blockchain has been good for a small number of applications.
It's slowly growing in the financial world right now, particularly around payments using stable coins. I guess the topic we'll come back to soon. It hasn't actually found its way into what I would call mainstream adoption by a long shot. Maybe it's slowly becoming a mainstream investable instrument, but definitely not mainstream adoption. So the philosophy behind it, which is a decentralization with Trump centralization and recreate trust in a decentralized environment, is far from being proven. And societal structures,
actually don't support decentralization. If anything, I'd argue that in this era of extreme information prevalence, we're headed more to authoritarianism, you know, that's the Chinese approach to massive information flow, than to decentralization. How does this transition happen? How does it make it out of the world of theoretical math and now a little bit blockchain to our real world environment? How does this affect
Eli Ben-Sasson (30:54)
Yes, free. Yes.
Michael Eisenberg (31:06)
society and humanity going forward. know those are big questions, but I'll be
Eli Ben-Sasson (31:09)
huge question, but I'm deeply interested in it. First of all, there's a parallel between ⁓ governance systems and like what's happening in the blockchain world. Right. Churchill famously said, right. Democracy is a shitty, maybe didn't use that word, but there's a, as a very lousy governance system. It's only advantage is that it is better than any other, ⁓ mechanism. Yeah. So, ⁓ dictatorships.
Michael Eisenberg (31:32)
to battle turnips.
Eli Ben-Sasson (31:39)
are very efficient. Dictatorships being centralized, know, governance systems are very, very efficient. And it's actually quite a miracle that we live in an era where there are some democracies, as we all know, democracies are very fragile. And if you look historically, they have been short-lived, you know, both Greece policies and, you know, even in the Roman Empire, right, there was some sort of a republic initially that then
So, and we all wonder like, will democracy survive? And I think a similar parallel is with respect to blockchain, right? There could be, just to make it very clear, there could be two end cases for, well, three end cases for blockchain. One is that it's just no one, you know, everyone leaves it, but let's assume it still stays around. It could be that it just becomes a new financial rails for centralized systems, meaning that someday instead of using things like Swift or whatever protocols the banking system is using today,
which I understand a lot of the code is written in cobalt from the 1970s. That thing is thrown, but same banks operate the same system. Just they use solidity and smart contracts, right? That's one end state of crypto, which I think would be very, very sad. And in particular, if I have a crystal ball saying this is the end game for it, ⁓ I don't want to, you I want to leave tomorrow. The other one, which is very tenuous and fraught. And I think Balaji also is fighting for it and many others.
is a world where you have something that is more akin to democracy. You have that the real value proposition of crypto is not new financial rails for the traditional system, but it is something that empowers individuals in small societies in a way that is akin to democracy and gives them more power. And it is just like democracies. It is going to be very fraught, very fragile, very hard to maintain. We'll always be under constant threat of centralization because centralized things are just more efficient.
Michael Eisenberg (33:31)
and
Eli Ben-Sasson (33:37)
operationally, just like a dictatorship can get things done like that. Whereas in democracy, have, know, balances and powers, things are very slow. So I don't know what will be the end game. I am definitely trying. Push for the true decentralization and that value proposition and many in biology is of course, one of the leaders of this, but there are many, many others. ⁓ And I agree with you that we have not yet found true product market fit for true decentralization.
Michael Eisenberg (33:52)
to.
Those are hard to understand, right? And it's hard to make something have wide product market fit when it's just hard to understand.
Eli Ben-Sasson (34:14)
Right. There are three challenges, I think, for mass adoption. One is scale. The second is UX and the third is regulation. So I think Trump entering definitely helps a lot with the regulatory barriers. ⁓
Michael Eisenberg (34:30)
specifically
appointing David Sachs to be kind of a crypto czar.
Eli Ben-Sasson (34:33)
that, but even more generally, you know, the choke point 2.0 operation. I'm appointing David's acts, ⁓ you know, replacing Gary Gensler with a pro crypto SCC. Thank God for that. Stopping all of the actually prosecutions and investigations, stopping to instruct the banking, the U S banking system to bar crypto and, know, stopping to fight them and actually being pro.
Michael Eisenberg (34:38)
Nah ⁓
God for that.
Eli Ben-Sasson (34:57)
So I think the regulatory thing, we have at least for four years, very good opportunity to improve things. And then the scale in UX. So scale, think things like Starknet and, know, ZK proofs help. And then UX is also improving all the time. ⁓ Those are the three main barriers for crypto adoption. But I agree that it's hard to convince, just like democracy is a bit hard to explain, like, ⁓ why is it good? And often people are complaining, like, you know, wouldn't we be better off?
in a world where things are more centralized and, ⁓ but, ⁓ don't know.
Michael Eisenberg (35:32)
If you're the prime minister of Israel today, Israel's had a hard time getting its hand around crypto. I've been involved in these efforts. You've been involved in these efforts. It's been a real struggle with the bureaucracy. Like you said, centralization would probably help on this, but ⁓ making the sausage is tough. ⁓ What would you do? You'd want Israel to be at the forefront of this, assume. What would you do? Be very specific.
Eli Ben-Sasson (35:33)
Yes.
So realistically, small steps that are easy to achieve, I actually could see politicians doing them, are things like, first of all, ⁓ making sure that there's no sort of banking barriers in Israel. A lot of crypto companies still face problems, or even citizens, accepting and dealing with crypto. So that's one. You could have things like tax benefits that would help teams that decide to launch companies in Israel do so.
⁓ things that other countries are doing, you know, capital gains tax and stuff. So taxation is another like real good driver.
Michael Eisenberg (36:33)
⁓ those
Eli Ben-Sasson (36:34)
would
be two things ⁓ that I would do. It's like, ⁓ you know, helping the banking system accept crypto and taxation. Now the more ambitious thing would be, but it's not so realistic, would be to actually a nation state based integrity web or a blockchain. Well, I just like to replace the blockchain, which is like a chain of blocks and is a very technical term.
Michael Eisenberg (36:50)
have
What does that mean?
Eli Ben-Sasson (37:04)
term coming from Bitcoin with something that I think more correctly describes what it delivers, which is just like the World Wide Web is this protocol that gives you information, access to information. think blockchains actually give you a web of integrity, right? A lot of nodes that are working together, not to give you information, but to give you integrity so that you know that the right thing is being done when you're not watching. So I would like, this is the ambitious plan.
I would like to see a world in which you have, if you take like the national currency of Israel, right? The shekel. I would like a world where instead of the Bank of Israel minting new tokens and giving them mostly to banks or giving authorization to banks to mint new tokens. I would like a world in which every citizen gets, let's say from the, ⁓ from the state. The only thing it gets is like this cryptographic.
key that says, let's say, know, Michael has the key one, two, three, four, Ellie has the key five, six, seven, eight. And now we can participate in operating this network. This will be the network of payments and economic activity for the state of Israel. And minting will go actually to those offering services to this network and all citizens are invited. So I would like a blocked, I, I can easily describe a blockchain.
It is like Bitcoin, let's say limited to a nation state in which all citizens are part of it and it replaces and is better than the current banking system.
Michael Eisenberg (38:34)
the, ⁓ just
so people understand what are the services that an average citizen can offer to the blockchain.
Eli Ben-Sasson (38:41)
running
a computer with software. what this computer will do, will be processing transactions and updating the state of all of the accounts of all...
Michael Eisenberg (38:51)
Just buy a computer and let it run and operate things.
Eli Ben-Sasson (38:53)
already
have a computer, right? Most of the citizens have a computer you can opt into and it's probably connected to the internet. You can opt into offering services by just downloading software and running it. But by doing so, you will be participating in this network that supports all of the payments and economic activity of Israel. And the source sort of the things called seniority rights and will go not to the banks, right? The, the, the, ⁓
Entities which are printing the new money won't be ⁓ strong centralized nodes. They will be all of the citizens
Michael Eisenberg (39:29)
people would handle the compliance and the AML and the moneyliner and everything else that you have a trusted institution called the bank doing.
Eli Ben-Sasson (39:36)
That's not the main way that the main purposes banks were built was not to serve as an arm of the. That's a very unfortunate state of affairs. That I think should be also removed and replaced with again with the ZK proving of ⁓ your ⁓ integrity also with respect to certain laws. So I would certainly replace it with that with this sort of current dragnet that is you know on all citizens where the bank is supposed to be.
Michael Eisenberg (39:42)
That's what they do today.
Right, but it's a fact right now.
Eli Ben-Sasson (40:05)
some apparatus, know, intelligence apparatus of the state screening all transactions. I think that is horrible. It's very good for the banks and for a bunch of lawyers and accountants. It's very bad for the state, ⁓ for all states. So think that thing should definitely be...
Michael Eisenberg (40:20)
Explain
why you it's bad for
Eli Ben-Sasson (40:23)
like the war on drugs or these things, right? Where there is like this lofty goal, right? We want to stop terrorism. We all want to stop terrorism and we want to stop, you know, child pornography and we want to stop all the bad things, right? But then this is converted into a very cumbersome system, right? The sort of AML and KYC in which if you think about it, if you look at metrics, for instance, terrorism funding, you know, it has done, you know, we are here in the state of Israel, right?
$30 million ⁓ per month went in in cash to Gaza to support Hamas. All of the KYC, right, and AML of Israel has nothing to do with this. So what you do see is ⁓ honest citizens paying a lot more money and filling a lot more forms and being a lot more in the control of banks, accountants, lawyers, with zero impact on any measurable metric of let's say,
crime or terrorism, zero impact.
Michael Eisenberg (41:21)
I think this is a profound point, which is that the system is currently constructed, has been engineered by people who profit from the system. Exactly. actually slow down the transaction velocity of the average law-abiding citizen. Exactly. With very limited impact on catching the bad guy. Part of the claim is I'm just trying to help it for the commoner.
Eli Ben-Sasson (41:31)
Exactly.
Yes. Exactly. Yes.
Michael Eisenberg (41:49)
Part of the claim is that by using a blockchain system or a integrity system that is digital and cryptographic, this will do the opposite, which is the good guys who provide resources to the system will actually ensure the integrity of the system and obviate the need, no longer require any of these kind of centralized paper-based endless form systems that slow down transactions.
Eli Ben-Sasson (41:51)
Hey.
Yeah, I want to be clear. think there will still be criminals and criminals because they have economic incentives and ideological incentives. There will still be terrorists and it will still be a very hard task to try and catch them. But putting just a general dragnet and general reporting requirement on the population, I think as a general rule of thumb is never going to actually have any good impact on that because just think about it. Those who are criminals and have a strong incentive to continue doing so by the fact that
by requiring all citizens to report whatever it is, you're not making it really harder for them, right? Now you have this huge system where everyone's reporting, you know, they will still go between the cracks or find other ways. So it is just generally a really, really bad approach to just put drag nets in order to stop crime.
Michael Eisenberg (42:56)
⁓
great irony, of course, is that cryptographic systems like Bitcoin are accused of being the way that criminals
Eli Ben-Sasson (43:09)
It's a false accusation. It's completely like, no.
Michael Eisenberg (43:13)
It is true that criminals have used, it's also true that they've used the dollars, right?
Eli Ben-Sasson (43:16)
Yes, but they've used the dollars. What
I mean by false accusation is I mean that, yes, criminals will use... New things. They will use hammers, will use ambulances, will use, you know, take the most benevolent thing you think of, some criminal will use it for something, right? So the fact that criminals use also a payment system called Bitcoin is not the point. ⁓
Michael Eisenberg (43:26)
Thanks.
⁓
Today, Bitcoin and stable coins are obvious. And by the way, I state, for full disclosure, am an ⁓ angel investor in Paxos too, which is a big stable coin provider.
Chad is one of the greats. I actually tried to get him set up in Israel, but because of our regulatory environment here, which you couldn't break through, they unfortunately did not set up ⁓ in Israel. But 10 years ago for most people, stable coins, Bitcoin, it seemed absolutely crazy. Crypto or blockchain or ZK proves to in 10 years from now.
Eli Ben-Sasson (44:14)
Where were you?
think they'll be prevalent everywhere. So I feel this myself. So I'm not sort of a crypto degen. I don't go and ape into meme coins. You asked about my holdings. I do not hold any Trump coin or Melania for that matter. No Trump coin. No Dogecoin. I'm sort of a boomer in terms of my attitude to crypto.
Michael Eisenberg (44:50)
You're not a meme guy.
Eli Ben-Sasson (44:51)
I'm not a meme guy. no. I, ⁓ you know, now a larger portion of my daily spending is done using actually what to all stores in Israel and abroad looks like a credit card, but it is a debit card that is backed by USDC on my Argent wallet. And ⁓ I just love the experience. I never get a phone call saying, we, you know, will you approve this transaction? I am.
I'll get you one. It's very simple. I get calls all the time. So this removes... From the credit card company. know, know. No more calls and you get better rates and it's like 10 % cash back for the first month and then 3 % for every month after that. It's an amazing... I just love this experience. It's a card that I use everywhere in the world. It's a physical card? It's a physical card. In a couple of months it will go in your Apple Wallet.
Michael Eisenberg (45:25)
Pause.
You can also put in your Apple wallet.
Eli Ben-Sasson (45:49)
You get USDC on your stark net wallet and then you just go anywhere in Israel or abroad. You, it is a, a usual credit card, ⁓ to the, to the outside world, part of the master card network. When you swipe it or tap it two seconds later, you see the exact conversion to USDC from whichever local currency and you're going to love the rates on your Argent wallet. And if there's ever a need to approve something.
You are the, it's all automatic. You get a message to your phone saying, you approve this again within two seconds and you approve it. There's never a call or this is being blocked or something like that. I'm getting you one. Okay.
Michael Eisenberg (46:32)
I'm coming for a personal lesson.
Eli Ben-Sasson (46:33)
coming and I'll get you the details. It's coming like in a few months to Apple pay and Google pay. Amazing. Yes. So I think like everyone's going to be and just not needing to talk to anyone from, you know, the credit card or banking or having it, you know, and people sometimes spend probably hours convincing them and getting blocked and let me try a different card. I three calls. Okay. There you go. know, I know.
Michael Eisenberg (46:55)
I bank-a-poll him yesterday.
Eli Ben-Sasson (46:59)
And then another thing is that this will also be ⁓ sort of terms of like neo banking and so on your crypto, can generate yield. can also have, right. It generating yield on the fly because it's being like invested or staked. then, ⁓ like it's a much better banking experience that people, once it's connected to the, just the traditional rails, which is happening as we speak, ⁓ we'll just move over to it.
Michael Eisenberg (47:25)
So, like one of the challenges with crypto and blockchain is like you got these up and down cycles right now. think Bitcoin costs like 100,000, it was like 105,000. I think I know where it is right now, somewhere in the 80s probably. It's up and down. You run a company, how do you motivate like your team, Matt Wang asked me to ask you this question by the way, one of your board members. How do you motivate people through like the ups and downs of the crypto cycle?
Eli Ben-Sasson (47:51)
I repeat what I said on day one to myself and all the early on comers and I say it still and I still believe it. know, later this afternoon I'm going to have my, I have like quarterly meetings with new employees. So I'm going to repeat the same thing to them. It's a three part statement.
I know that the technology that we invented and productized first, meaning the ZK Starks that I co-invented and then the Cairo programming language and a bunch of other things that people in blockchain all know today, things like Vellidium data availability and account abstraction and things that were done first and best on our technology. I know that this stack will conquer the world. have no doubt about that, like 100 % conviction. And every day that passes, just
shows more in this direction. Initially, when we came out, people said ZK is not the way to scale. everyone's saying, Vitalik is saying ZK is the end game. Initially, people were saying the particular kind of technology, our technology, is post quantum secure, fastest scaling is this thing called Stark is not the way. Now everyone, all the scaling systems are Stark based. People were saying, ⁓ a virtual machine that is built
towards proving is not the way. just Vitalik is talking two days ago, he posted how, know, ZK based virtual machines are the way to go. So statement number one is our technology stack will conquer the world. Part two is I am not sure we at Starqur will be the ones to maximally monetize it. Why? Because, you know, history, I don't need to tell, you know, a seasoned investor like you that
Not always the inventors and the first comers are the ones to best monetize. Three.
The most important scarce resource in our life is our time and focus. And I have 100 % conviction that looking back, you will not say, what a stupid waste of time, you I was building some stupid meme coin, blah, speculation, ponzonomics. No, you will look back with pride at the years you've spent taking this cutting edge.
moon math technology and making it something that the whole world consumes. So 100 % conviction will conquer the world. Let's say 60 % conviction will be able to monetize it well and maybe 70 or, know, but, not 100 % and then 100 % conviction that we will look back with pride at what we did.
Michael Eisenberg (50:35)
You know, this is like the second podcast interview I've done with what I would call a deeply technical founder. did one with Dan Davidi about synthetic biology and chemistry a few weeks ago. it's like a test, I think, of a new kind of guest ⁓ on the podcast. ⁓ What is the kind of scientific or mathematical belief that you hold looking forward 10 or 20 years that you think ⁓
Most people in the world, not just most people, 99.99 % of the people in the world don't hold and don't think it's right that you think will be dramatically important going forward.
Eli Ben-Sasson (51:15)
It's what we've put as our vision. Integrity should never be assumed, but rather demonstrated publicly and upheld by all. Right now we assume integrity of the government. assume integrity of the banking system. Integrity shouldn't... Today we have the technology, the means through blockchain and through ZKStarks. We have the technology to allow integrity to never be assumed. You don't need...
to say, trust me, you can actually say, here's what I commit to, here's a guarantee, I will put it into code, into a smart contract, and you don't even need to trust me.
Michael Eisenberg (51:57)
to
Eli Ben-Sasson (51:59)
stand by it. I will entrust, you know, I will, there will be others, there'll be this decentralized, huge broad network that will hold me accountable, that will uphold my claim to integrity. Right now, so many cases, the is saying to you, don't worry, Michael, we promise you, you know, whatever your pension money, you'll get it, right? Or whatever it is, you're banking.
You will always have access to your accounts. Well, you know what someday suddenly there's some catastrophe Sorry, you can't access your your your funds I imagine that there is a world in which this cannot happen and the reason it cannot happen is because Integrity is not assumed. You don't need to say okay trust the government. They trust the bank the government or the bank will say we make a commitment via smart contracts and The public will uphold this commitment by
operating with blockchain and with these proofs.
Michael Eisenberg (52:57)
I want to state something philosophical that you're not stating, but I think is inherent in what you're saying and get your response to it. Math is less breakable than institutions.
Eli Ben-Sasson (53:10)
I agree.
Michael Eisenberg (53:11)
And so is it true that math is not breakable?
Eli Ben-Sasson (53:16)
Math is not breakable. if math is not breakable.
Michael Eisenberg (53:19)
You
keep coming up with new things that disprove previous theories of math, right? No.
Eli Ben-Sasson (53:22)
No,
there's no ability to prove a proven theory. There's an ability to find a bug. Like, formally, if you have a mathematical theory in which you proved one thing and you proved its negation, from the point of view of mathematical logic, you basically found an uninteresting theory in which basically all statements hold, which means it's a non-interesting theory. So there has never been a case where a valid mathematical theory had a proof of a statement.
and a disproof of the same statement. You had quite often a proof that it had a bug, but then it was not a proof. So math is never breakable. This is related to, well, it gets into this gedde-like of philosophical discussion whether actually math is consistent, right? But I don't want to go, like the assumption is that, like if math is inconsistent, it just means that math is useless, but as long as math has any usage,
it cannot have a contradiction in it. math is never breakable. Cryptography is breakable. ⁓ so, yeah, the closer you get to using pure math, the less breakable you are.
Michael Eisenberg (54:36)
You mentioned in passing before that StarCore is quantum proof.
Eli Ben-Sasson (54:39)
Yes. ZK Starks are quantum, post quantum resistant. Yes.
Michael Eisenberg (54:45)
Quantum computing is coming, so they say. I'm also in that camp where it's gonna take a lot longer than anybody thinks. ⁓ How does that affect the world of blockchain and crypto?
Eli Ben-Sasson (54:48)
So they say.
Well, first of all, would, because ZK-Starks are post-quantum secure, I would love for that to come as soon as possible.
Michael Eisenberg (55:05)
Where can you point people to by the way where they can read as to why ZK, Proust and Stark were Stark's quantum?
So we're gonna have to get it.
Eli Ben-Sasson (55:13)
I
can put in the show notes. Yeah, I have a bunch of blogs about it and op-eds that I just so if people go to my blog site, which is called Integrity Matters, it's on the Starkware site. I can there are some blogs that talk about post quantum security of Starks, but So, okay, I would love quantum computers to come as quickly as possible because then it would put a little bit huge exactly exactly
I mean, there are enough advantages even irrespective of that. It's the fastest technology, the least ⁓ doesn't have this thing called trusted setup. But you need to replace a lot of what is called public key cryptography, things like digital signatures. You need to replace them with other things. There are already quite a few ⁓ emerging standards. you can, think it's it's a blockchain can easily, well, theoretically easily adapt to it.
You will need to change, like this will be a massive undertaking, but there's no theoretical limit to, there's no theoretical impediment to making all of blockchain post quantum resistant very easily, theoretically, right? There's nothing that where you say, oh, this, I, you know, I don't know what to do with it. There are these very interesting questions of what do do, for instance, with Satoshi's early coins, that some of them have public keys that could then be compromised. You know, do you confiscate these coins? Do you, how do you sort of,
reserve them for satoshi and for how long but these are like these are interesting questions but crypto as a whole can easily theoretically move to a post quantum world.
Michael Eisenberg (56:49)
What got you interested in math?
Eli Ben-Sasson (56:52)
It's a it's a very, I, In high school, I was interested in soccer, in, you know, girls and in just, you know, having a good time. I was not interested in studies. Then, when I was, and moreover, like, I come from a family of academics, but my father and uncle biologists, my grandfather was historian, before that a bunch of rabbis.
So like it was clear to me that I should go either into humanities or like, but math ain't it. So then I started studying at Hebrew university. studied biology and computer science to go into a neuro neuroscience because I thought that, well, it's an interesting topic, but the computer science was suppose I'm not interested in like academics. I'll end up, you know, let's say a programmer.
And then I was pleasantly surprised by math. I really enjoyed it. And when I got to my ⁓ graduate studies, I by chance ⁓ managed to ⁓ hook up with Avi Vigdozon, who's the Turing Award winner for 2024, an ABLE Prize winner and ended up being my PhD advisor and is also on Starquares scientific board.
I was surprised that I actually managed to make progress on math questions because I, so I was completely surprised that I, I'm able to do math. I didn't expect it, but I enjoyed it and I.
Michael Eisenberg (58:35)
How old were you when you kind of discovered this capability?
Eli Ben-Sasson (58:39)
like
say 26, 27. It's pretty late. Oh yeah, yeah definitely. I have a very huge, I have a bunch of holes in my math background. never like...
Michael Eisenberg (58:51)
studied
it really properly. Seems to have really affected you.
Eli Ben-Sasson (58:56)
Well, you know, talking to a lot of my peers coming from, let's say India or China or even the U.S. Where by the age of 18, they pretty much know all of the math there is. I did find myself.
Michael Eisenberg (59:07)
What do we need to teach kids today?
Eli Ben-Sasson (59:11)
that's such a big question.
Michael Eisenberg (59:12)
not just the AI world, also the emerging blockchain crypto world.
Eli Ben-Sasson (59:18)
I don't know, like with AI, I don't know what we have to teach them. Pretty sure whatever we're doing is not the right thing. I'm 100 % sure that like, ⁓ maybe just, ⁓ getting them to be curious and independent and explore. Like, I don't know anymore. Like,
Michael Eisenberg (59:21)
What do I to do?
What
system can be able to do this?
Eli Ben-Sasson (59:40)
Well, what's good about the Israeli system is that because it's so like, ⁓ dysfunctional is that kids actually hang around a lot with other kids, you know, and I think that's a big problem. Let's say with the U S system that I saw where it's so structured and that, like, so, so to me, my high school experience, I don't remember studying almost anything, you know, before the matriculation exams, sort of cram for it. And, ⁓ my son is actually right now through that phase, but you don't really study anything. You sort of.
hang out with, ⁓ with the guys. And think that's actually great. Yeah.
Michael Eisenberg (1:00:13)
You know, break some things, kick some balls.
Eli Ben-Sasson (1:00:15)
Yeah, and I think it explains the then the academic and entrepreneurial excellence of Israel like the fact that actually the school system did not manage to break the kids into like here's like your place in society and you should like abide by the rules a couple
Michael Eisenberg (1:00:30)
questions. What was the first token you bought?
Eli Ben-Sasson (1:00:34)
When
it was Bitcoin and the story was that I was, ⁓ I just gave a talk and I was hanging out with, Greg Maxwell and Bram Cohen and a bunch, ⁓ that's the inventor of BitTorrent and a bunch of others.
And I said, we were having some beer at a pub and I said, Oh, I don't have any Bitcoin. So someone said, really, man, you know, I walk the earth just with Bitcoin and can you break $20 and I'll install a Jack's wallet and give you like $20 worth of Bitcoin. So I said, sure, I'll do that. So we did this at the pub. I had $20 worth of Bitcoin, but I didn't write down the passphrase or anything. And I was thinking I have a $300 worth smartphone.
With a $20 worth of Bitcoin, don't need to like, the bigger thing is the...
Michael Eisenberg (1:01:25)
⁓
Eli Ben-Sasson (1:01:27)
is the phone. Years passed by, those $20 probably flew up to be whatever, don't know, like $1,000 or more. And I was somewhere in China on the way back to Hong Kong and my smartphone was stolen. And at that time, probably the smartphone was worth $50 and the Bitcoin was worth, let's say $1,000. And I said, oh man, I should have written down the past phrase. So that was the first.
crypto that I had. ⁓
Michael Eisenberg (1:01:57)
percentage of Bitcoin do you think is just lost to the world? Michael Saylor said he's gonna burn his password to his Bitcoin and take, I forget what the number is, a large number of Bitcoin off the blockchain. The US government's confiscated some Bitcoin. There's a bunch of wallets lost. So there's not 21 million of these things.
Eli Ben-Sasson (1:02:13)
I would say right the first four years half of the supply came in. Yeah, I would guess that like Between a quarter and half of that so between I'd say between 12 and a half percent and 25 percent is lost just because people Right lost the keys for that stuff Yeah
Michael Eisenberg (1:02:30)
It's a massive number for
something that people wanna build the future on. That's 12 1 1 2 to 25 % inflation of the value of the existing Bitcoin based on that assumption.
Eli Ben-Sasson (1:02:42)
I had a master's student who now actually works at Starkware and he came in and we tried to solve this thing called decentralized macroeconomics, which I still don't know how to solve. But we ended up working on what do you do with lost coins? Because if you think about it, theoretically, suppose you have 21 million coins. As T goes to infinity, all coins will be lost, right? Because there'll be some catastrophe that the keys are lost over time. So now...
So we had some protocol that offers how to replenish and sort of give you some time window in order for people to claim stuff and then you mint and distribute new coins.
Michael Eisenberg (1:03:21)
about
strategic Bitcoin reserves.
Eli Ben-Sasson (1:03:25)
I don't think they make sense actually. Why? No, because like, uh, why? Like I could see, I don't know why. Like, uh, I don't know why you need this. Does Israel have a strategic gold reserve?
Michael Eisenberg (1:03:27)
Israel should not build one then.
does not as best I can tell, but many countries do. At least in
Eli Ben-Sasson (1:03:42)
don't know
why. If you need gold for the soldering, I could see that.
Michael Eisenberg (1:03:49)
hedge.
You know, what happens the is holding dollars and the dollar, ⁓ you know, gets printed or
Eli Ben-Sasson (1:03:53)
It's not my show.
Yeah, so maybe, maybe, but then I don't have a strong view on it. No, no, I don't think. Yeah. But certainly for the U S government who basically gets right now to, to, not just that, but also to print it is the right. is the fiat currency of the world and you have the ability to print as much of it as you want. So I don't see the rationale in having a strategic reserve, which by the way, the
Michael Eisenberg (1:04:10)
Confiscate it.
Eli Ben-Sasson (1:04:24)
don't really have they just took the confiscated Bitcoin which anyways they had and they called it the strategic reserve which
Michael Eisenberg (1:04:31)
Okay, tell me something about you I can't find out on Google.
Eli Ben-Sasson (1:04:36)
and then I'm willing to share here. So I enjoy windsurfing. I don't know if that's commonly known, but I don't think it's very interesting. I like to read a lot of books. Interesting. Well, I'll get into trouble. So, well, I sat in military prison once for doing what?
Michael Eisenberg (1:04:40)
Did you talk about like integrity? Maybe some of the.
interesting.
Eli Ben-Sasson (1:05:04)
for being ⁓ young and taking responsibility for things I shouldn't have taken responsibility for.
Michael Eisenberg (1:05:09)
That's a feature, not a bug, I think.
Eli Ben-Sasson (1:05:12)
Well, was a bug back in the day. long were you in prison Just a week. Just a week. But it's a cool, you know, icebreaker. My kids love it, right? Because it's like, it sounds like, you know, Dad sat in jail. He's a criminal. He's like a real guy.
Michael Eisenberg (1:05:13)
military
jail.
Satoshi.
Eli Ben-Sasson (1:05:28)
I have no idea. don't know. I know that I do not know. It's interesting that like with all the investigative reporters out there, like no one, it's such a great thing to try and track down.
Michael Eisenberg (1:05:30)
desk.
It is a thing.
Who's somebody in this industry that you want to say something nice about that doesn't get enough recognition?
Eli Ben-Sasson (1:05:49)
So it's a bunch of people, these are like the Bitcoin core developers. There's a lot of them, like Andrew Polster is one, Ethan Helman, Jeremy Rubin. There's a bunch of them. They are really ⁓ working on the most important stuff for the most, you know, virtuous reasons. And people talk about Bitcoin to talk about.
Michael Saylor or Donald Trump or like the associate like, but the real heroes are, yeah, the Andrew poll straws and the core devs, Peter Wheely and, ⁓ all of those guys who are like, ⁓ Really upholding the, ⁓ the protocol.
Michael Eisenberg (1:06:31)
If you weren't doing this, what would you be doing?
Eli Ben-Sasson (1:06:34)
simplest thing is to say I would be continuing with my academic.
Michael Eisenberg (1:06:38)
which I really, really loved.
Eli Ben-Sasson (1:06:40)
The question is like, if I ever leave this kind of stuff, do I go back to academic stuff? I'm not sure I'm capable or like I can contribute that much. So what comes next? I don't know. Yellow pad.
Michael Eisenberg (1:06:57)
computer.
Eli Ben-Sasson (1:06:59)
Depending for what? Like for thinking, definitely yellow pad. And when I think with a yellow pad, the only thing I do is doodle. I have these weird shapes that I don't understand and I fill them in. That's how I think. Or I just write random words in English script. That's how I think about math and generally. But then for writing stuff, of course, never with a yellow pad, always with a computer.
Michael Eisenberg (1:07:24)
This is my last question, promise. How much do you use AI right now to do your work?
Eli Ben-Sasson (1:07:30)
Not a lot. Not a lot. Not a lot. They use it mostly as a replacement for Google more and more. ⁓ plan me a trip in Thailand or, know,
Michael Eisenberg (1:07:40)
You like to hunt? Surf there?
Eli Ben-Sasson (1:07:42)
It's okay.
No, I did not have the chance.
Michael Eisenberg (1:07:46)
What's
your favorite vacation destination? Ah, now you're talking. A lot of Palins. They got a ton of snow this week. see Don't tell me. didn't this Ellie, thanks so much for coming on our Festival. Thank you, that was great. If you enjoyed this episode with Ellie and all our other episodes, please rate us five stars on Spotify, Apple Podcasts, subscribe to our YouTube channel, all those great things, and share this episode widely in the blockchain and crypto community.
Eli Ben-Sasson (1:07:49)
I love skiing most.
You know what? Now we're talking.
Michael Eisenberg (1:08:16)
Thank you. Thank you.
Katie Stanton (00:00)
I used to joke to people that my experience working in government was like trying to run a marathon with sandbags attached to my leg, with everybody booing.
Michael Eisenberg (00:08)
You're a mom of three young kids. You're living in San Francisco. Why did you take the job to commute across the country to go do this?
Katie Stanton (00:14)
It was an honor. It was just the right president, the right opportunity, the right time.
I saw Secret Service, who was looking at me like, what's happening? I'm like, help.
I might not ever be let into China again. The challenge of Twitter is that it's kind of a mirror to humanity. People do a lot of good and people also do a lot of bad. That's what's so interesting about venture, right? There's something new all the time. It's constantly refreshing.
My God, how cool would it be to even work at a company called Yahoo! That just sounded fun.
I think that there's a little bit of a perception that the only way you can serve your country is joining the military. There's so many ways to serve.
Michael Eisenberg (00:50)
Welcome back to the Invested podcast. I am thrilled to have Katie Stanton with me. In fact, I was just telling Katie before we came on that tons of people said, “You need to have Katie Stanton on the podcast. You need to have Katie Stanton on the podcast.” And then by stroke of God, karma, wherever you call it, I'm in Los Angeles at a conference and who's standing next to me in the kind of vestibule outside the conference? Katie. So welcome on Katie.
Katie Stanton (01:15)
I'm so honored to be here. Thank you so much.
Michael Eisenberg (01:17)
It's great to have you. I'm going to ask you to do your own background, but I'm going to do a quick run of it, if it's okay. Katie is a former White House director, served in President Barack Obama's White House as director of citizen participation and a special advisor in the Office of Innovation. Former Vice President of global media at Twitter, co-founder of Hashtag Angels and Moxxie Ventures, which we'll dig into some, a bunch, coming up. And like me, began her career as a banker, although I wasn't at JP Morgan, you were, you served on the supervisory board of Vivendi and on the board of directors of Time Inc. What did I miss, Katie?
Katie Stanton (01:58)
I’m also on the board of Yahoo, which I really love and I'm super proud of.
Michael Eisenberg (02:01)
Right now, with Jim Lanzone and Aryeh Bourkoff, and that whole crew.
Katie Stanton (02:05)
Lanzone is the best. I mean, what a dream team. And it's so fun to have this front row seat to see this incredible iconic brand, the first job I ever loved. So I'm really excited to see it have this whole new chapter.
Michael Eisenberg (02:18)
We agree on that. I think I've known Jim almost three decades now. And actually the first guest ever on this podcast was Aryeh Bourkoff, who was also on the board of…What else do you want to tell us about yourself before we dig in?
Katie Stanton (02:26)
Aryeh is amazing.
I'm a proud mom. have three kids and three bonus kids. So I don't have as many kids under management as you. So I'm at six, you're at eight. But a lot of birds in the nest, and it keeps life really fun and entertaining and loving.
Michael Eisenberg (02:49)
Wait, are they all still in the nest?
Katie Stanton (02:51)
No, we have two graduates, two in college, one in high school, and one in middle school. Busy life.
Michael Eisenberg (02:57)
It's a busy life.
Busy life. As our kids have started moving out and getting married, I actually miss having them in the house.
Katie Stanton (03:06)
I find I miss having my tidy ones in the house. The messy ones, it's fun to visit them.
Michael Eisenberg (03:12)
I probably shouldn't say this on the podcast, but when one of our children left the house, my wife told our future in-law child, “Please take her, and the mess–it's now your problem.” So, yeah. What we always start with here is kind of, what is the core personal value that drives you? What's your core personal value?
Katie Stanton (03:22)
I think my core personal value is service. And I think life is just better serving others. It's the greatest sense of joy. And that can be in your profession. It can be in your personal life. It's in your family life. In a way, as a parent, you're in service to your children. And it's building a better world than you were given. And for me, that brings a lot of joy in work, a lot of venture.
We are in the services business. We are serving our founders, but we're also serving our LPs. And it's important for us to remember that, that every decision–and this job is so many decisions that you're making all day long. How do you spend your time? Who do you spend your time with? Who do you spend that capital with? Who do you spend that social capital with in order to build these deals and networks and go to market, all these different things. And so much of it is a services business and making things better for those that you care for.
Michael Eisenberg (04:33)
Where did you get this value from, that your life should be about service to others?
Katie Stanton (04:38)
I think my grandparents, and part of that was that they beat us both–they had 16 children. The Irish Catholic family in Western Pennsylvania, and they had 16 children. And as busy as they were and as little means as they had, they were always giving to others. And I just saw that and how, yeah, they didn't have much, but there was always room enough for everyone.
Now at night when you went to bed, you couldn't leave your bed to go to the bathroom or anything because someone else would steal your bed, because there were never enough beds. But it was just always filled with so much joy, and laughter, and love. And so that was a big takeaway that I had from my grandparents.
Michael Eisenberg (05:19)
My grandmother used to always say, she passed away a couple of years ago, “God save me from a quiet house.”
Katie Stanton (05:25)
Yeah, quiet houses are boring.
Michael Eisenberg (05:27)
They are. And so, did you grow up like a lot of grandkids going to your Irish Catholic grandparents house?
Katie Stanton (05:33)
I did and the flip side, my dad's side was Jewish, and a much smaller family. And so I had like this view into both worlds, and both were beautiful in their own way. I got all the attention at my dad's house with a much smaller family, but I was just filled with so much activity and love on my mom's side. You kind of play the cards you're dealt in life, right? And you try to see the best and what is given to you, and also see what could be better, and what are the things that you have at your disposal that you can make differently, and hopefully better for those around you, and you pay that forward.
Michael Eisenberg (06:12)
Do you think that your grandparents' religious beliefs, the Irish Catholic religious belief, it obviously led to 16 kids in some way, shape or form. Do you think that was also kind of critical for the focus on service, and what you ultimately inherited from those values framework?
Katie Stanton (06:34)
I think so. My grandmother went to Mass every day since she was eight, which is crazy to me. And that even with all these children, she would find a way to go to Mass. And it was very important to her to have this sort of structure, and have this faith, and also to serve that community, that she would volunteer and do other things. Like, how she did she have time for this? I can barely get my laundry done. So faith was very important to both of them, but particularly to my grandmother.
And on my father's side, faith was very important to them in a very different way. But I think it was that in service to something bigger than themselves, that life is filled with all these to-dos, getting your laundry done, getting your kids fed, getting your work accomplished. But there's got to be more. And there's more to life. And there's this bigger universe outside of what we do day to day. And so it's in service to that greater good and you know, not to get too woo-woo, but in that beyond. And so I think that's really important. And I think that allows us to get grounded, that when we have a tough day or when we have a great day, just know that some of these things are in our control. Some of these things aren't. And you know, playing the long game for that greater good and that greater destiny.
Michael Eisenberg (07:55)
I'm just putting it together now that you went from the private sector into government. Was that kind of background and values inherent, through religious service to the greater good, part of that decision?
Katie Stanton (08:09)
A little bit. And so I originally grew up thinking I wanted to do something in service. I had dreams of working at USAID or the Red Cross or Save the Children, all these different nonprofits. And I went to graduate school for international affairs and public affairs. And most of the students there had similar ambitions. I was in New York City, at Columbia, at SIPA. And part of that was I spent some time working in Kenya and I worked for a nonprofit. I worked on the Hill and did some work there for the Foreign Relations Committee. And I realized actually in service that I didn't have any skills. And especially in Kenya, we would go and visit some of the communities. And I was there thinking I was going to talk about an economic development project, and an environmental studies assessment. And the farmers in Kenya were like, my bananas aren't growing. How come? I have no idea. I'm from Peekskill, New York.
And then they’re like, “The elephants are trampling on our fences. What do we do about it?” No idea. And I realized I was just so ill equipped. I had no business being there. And it really, you know, put me on this new path to realize I need skills. I have this passion, but I have no skills to achieve this passion, and to do the service that I want to do.
So that's why I went into banking. And I realized that so much of these great ideas, like I really needed to understand the financial markets. So nonprofits are largely dependent on donors, either from government grants, from high net worth families, whatever, but you needed to understand where that money came from and then how to manage those different projects. This was my entry into banking. So I went into banking for three years, and that was great skill building, but there was no service to it really. Like I just wasn't very fulfilled.
So it was a little bit of a zigzag, which is life, right? Most of us zig and zag several times in our careers. And that was my very long answer, sorry, but long answer.
Michael Eisenberg (10:12)
I'm struck by the fact that you thought that a job at JP Morgan could help you with elephants trampling over the fences and the crops.
Katie Stanton (10:20)
Playing the long game, I really thought, like, okay, maybe if I do this for a couple of years, then I can go into nonprofit. But a funny thing happened while I was there, in that I was working on this training floor. It was pretty soulless and miserable, but I was learning a lot and I had worked with some great, great people. And as I'm on the training floor, I remember I had a couple of my Bloomberg terminals in front of me.
And the internet was just starting to take off. It was in the late 90s. And I remember I just had this aha moment. I started to go on Yahoo and I thought, my God, how cool would it be to A, find stocks on something called, on Yahoo, that sounds fun. And two, to even work at a company called Yahoo, that just sounded fun. And then I realized like, this is a moment in time–and you could just see the excitement, you could feel the excitement of the internet–and I found a friend of a friend of a friend who worked at Yahoo, pitched them on why they should hire someone like me from the financial services industry to help build Yahoo Finance. And they were like, OK, come on out.
So that was my move out to California. And really, I think that was the path that set me on the path where I am today, just loving new trends, loving technology, and loving how technology can provide a very important service to people.
Michael Eisenberg (11:41)
I think Yahoo is the parallel for the unripe bananas in Kenya at the time. Who was the person at Yahoo who ultimately kind of gave the offer for Yahoo Finance?
Katie Stanton (11:52)
His name is Mike Riley, who was an early product manager there, brilliant guy. And the team around us, Mike Bennett, Tim Brady, Jerry Yang, Tim Coogle–it was so exciting to go to Yahoo! and to California, frankly, for many reasons. It was new, it was refreshing, it was so much of a meritocracy.
I grew up in upstate New York–I think you're originally from New York as well, right–and New York is magical and amazing, but it's relatively structured. It's like, well, where did you go to school? What family are you from? Which church, which synagogue, da-da-da, do you go to? And you get kind of stuck in a bit of a box in DC as well. So where do you work as a lens to, are you Democrat or are you Republican? And then people box you in. I felt in California, people couldn't care less where I came from. They cared what I set out to do.
And I just thought that that was so refreshing and interesting. And there was so much exuberance about what Yahoo! could build at that time. Of course, there were so many roller coasters up and down, but it was a really special moment. Also, I might have also been very excited about having free bagels and free coffee. I thought, my God, can you believe it? They gave me those free bagels on Tuesdays.
Michael Eisenberg (13:14)
That was the beginning of my career, in tech and VC also. And I still remember like those early internet conferences in like ‘96 and ‘97 and Jerry was there, and Fila was there, and TK would turn up, and Mark Andreessen, before anyone knew who he really was at the time it was, it was early. It was exciting. And Silicon Valley was abuzz. Feels a little bit like it does right now, with AI.
Katie Stanton (13:40)
Absolutely.
Michael Eisenberg (13:44)
I want to come back to Yahoo! and AI and the buzzy-ness right now soon. But I want to go back to the kind of service pieces. I actually pinged Dick Costallo, who actually had a super interesting question. There's all these people transitioning right now from the private sector to the public sector. In fact, a friend of mine who's one of the people who's gone into the new administration told me they're getting high-end real estate in Washington has become super expensive. There isn't a lot of them. There are a lot of people with private sector wealth coming to Washington. What is the best kind of advice you would give to people who are now transitioning into the public sector, or people thinking about transitioning to the public sector from the private sector, and particularly tech and Wall Street where you were?
Katie Stanton (14:31)
First, I think it's awesome. I think more people should serve their country. And I think that there's a little bit of a perception that the only way you can serve your country is joining the military. There's so many ways to serve. And it could be serving at local, state, or federal government. And we should make it easier for people to serve. So I applaud everyone who has left their very lucrative and comfortable jobs in private sector to take a very hard job in the public sector where you're not paid very well, everything is hard.
I used to joke to people that, you know, my experience working in government was like trying to run a marathon with sandbags attached to my leg with everybody booing, and everyone's mad. So it is hard. And so I respect that. And I appreciate people willing to do this. So my advice would be to be as transparent as possible.
I actually wrote, I think it was on LinkedIn or Twitter, maybe both, a post about this and tagged David Sacks. So I've never met him and I think he's a smart guy. We disagree on probably a lot, but I'm really glad to see him doing public service. And some of the best things that you can do is, if you are a leader, to be transparent about what is it that you are trying to achieve, how you're going to achieve it.
Take the feedback along the way, because you will get some things wrong. But I think as long as you are transparent, and honest and accountable, you will be successful and have an easier time.
Michael Eisenberg (16:08)
What was the hardest part about it, you know, coming out of the private sector and going to Washington, other than kind of being in the spotlight, and questioned and booed?
Katie Stanton (16:17)
For me personally, at the time, my kids were really young and I was commuting from San Francisco to DC, which was horrible. But I think on the professional side, I think it was trying to do the best job that you can within the constraints of the environment. So for example, I thought it'd be so easy at the time, this is gonna sound like kindergarten, but at the time it was, and this is in 2009 after President Obama got elected.
So I joined in January 2009. And we're like, okay, let's go fast. Let's get the White House really going on Twitter, and LinkedIn, and YouTube and every platform imaginable. Let's open up the government. We created data.gov, and tried to get every data set available, all the APIs available, ready for anybody to program on it. And a private company could have done this in maybe, you know, like a couple hours, a week.
But it took us a while, because you have the Presidential Records Act. What do you do with every like, and retweet, and share? Like, that's a presidential correspondence, technically. You're like, well, we can't passably, like, we don't need to save all that stuff. But if you read the letter of the law, there's an argument that maybe you should. And so, you know, just trying to be respectful to the law while also trying to maintain the goals of the government. And I remember, you know, President Obama, I think his first memorandum, was on creating the most open and transparent government. And so trying to do that within the constraints of the law was really hard. So, you know, trying to move–I left Google for the government, you know, it was just night and day in terms of how quickly you could move. But at the same time, it was an honor of a lifetime to be able to serve and have that front row seat to history.
Michael Eisenberg (18:09)
I've got to ask a few questions. All right, you're a mom of three young kids. You're living in San Francisco. Your kids are in school in San Francisco. Why did you take the job to commute across the country to go do this?
Katie Stanton (18:21)
It was an honor. That, oh my gosh, I could have this opportunity to serve this president who I had so much respect for. And I felt that I finally had some skills that I could deliver. Hopefully the president was not gonna ask me about bananas and elephants, but you know, I figured we would be okay there. But it was the right time in my career, this great opportunity to serve.
And I also knew at the time it was short lived, that I didn't want a career in government. It was going to likely be a two year opportunity. I only needed a commute for a few months with my kids, and then we all moved to DC. And so that was okay, but it was just the right president, the right opportunity, the right time. It was funny though, because in terms of transparency, I had Google stock, and I'd worked at Google for a number of years, and I sold it all.
Because that's what the administration told us to do. Especially if I were to work in technology, I couldn't own any technology stocks. I couldn't even put them in a blind trust. I just had to sell them. Probably the most economically stupid thing I've ever done, but I did it. And I kept thinking, okay, well, there'll be another time. I look at some of my friends who have stayed at Google or didn't sell their stock and, you know, they have a different life than I do, but it's okay. No regrets.
Michael Eisenberg (19:49)
Wow. How did you meet the president? Like, why did he offer you the job?
Katie Stanton (19:55)
Yeah, I had volunteered on the campaign. And so I had only met him a few times. And mind you, I wasn't the most senior person, so I wasn't in there day to day. But I had met him during the campaign. And during the transition, I knew a number of people who were helping on the transition. Some had worked in technology as well, and they had nominated me to work in the administration. So I was very fortunate to have known a lot of people closer to the president than me, And then had this incredible opportunity.
And I'll share to you this one story, and it's a very small story, but I think it's these behind-the-scenes moments that really reveal people's true character, not what you see in front of the podium. And that was, I was staffing the president on his first interview with the team from AllAfrica, which is obviously an African-based media organization. And it was the first interview with an African American president, and there was a lot of excitement for this.
But from the president's side, I mean, this was like the smallest thing he had that he's working on, you know, the economy and health care and a war with whomever and all these other things. But there was time in his calendar for, I think it was a seven minute interview. So every single detail of the president's life is carefully curated, and debated, and negotiated and so forth. And I was on the hook for staffing him for the seven minutes. So I was prepared, AllAfrica was prepared, the president was prepared. I was in the West Wing as we're getting the room ready. And maybe halfway through this interview, there's this big boom, and Secret Service runs in, everybody's in a quick panic, and one of the light bulbs had exploded. And the poor, there were only three people from All Africa and they're in a panic, you know, they're sweating profusely. Time is money, and they're not going to get any extra time. And I was just like, God, like not on my watch. This is terrible. And I asked, “Do you have a backup?” He's like, “Of course.” And so, you know, he's quickly trying to fix everything. And President Obama was cool as a cucumber. And he said, “Don't worry, take your time. It's fine.” And just that grace to this reporter, knowing that this is probably the most important thing to happen in this reporter's career to date.
I just thought that was so magnanimous, and so important, and just something that I've always remembered in terms of importance of true character, and empathy, and compassion, especially when you're in a position of power like that.
Michael Eisenberg (22:33)
Now, I just want to take a second to note that when you described how you got to Yahoo!, a friend of a friend of a friend, and you described how you got to Obama’s White House, I volunteered, wasn't that senior, but I knew the person was on the transition team, et cetera. I often point out to people that early in your career, the most important thing to do is network and meet as many people as possible. And even if it's the loose connections that end up kind of getting you to where you need to be. Is that something you've experienced even more than I'm describing in your career?
Katie Stanton (23:02)
100%. I think about this all the time now as a parent, I talk to my kids about this. It's sort of the importance of compounding, right? And it's compounding, normally we think of finance and compounding your net worth and investing, but it's in people too. And you building that network, that network does compound. Where you went to college matters. Where you went to grad school matters. Where you pick those early jobs matters. And if you're fortunate enough to be at the right place at the right time, that, wow, you could just hit the mother load. And so I felt very lucky that at Google, at Yahoo! for sure, but Google was sort of like, you know, the lottery of network.
And I was fortunate enough to be in this class with Elad Gil, Susan Wojcicki. Sundar Pichai, Marissa Mayer, Brett Taylor, all these incredibly smart, talented people who were still early in their careers. And now I just feel so fortunate to know them. And so I do think network is important. It's something that is important to me to this day with Moxxie and doing venture. That network really matters.
Michael Eisenberg (24:23)
How did you get to Google?
Katie Stanton (24:26)
It was funny, because when I was at Yahoo!, I loved Yahoo!. It was the best job I had ever had. And I thought, well, what could possibly be better than Yahoo!? And I had just had twins. And so I had three kids under two, which is not really recommended. That was a lot. And I was on maternity leave. And then I thought, well, this is really hard. Maybe I'll stay home a little longer. I stayed home a little longer and realized, no, this is really hard. I need to go back to work. That's easier.
And I thought about going back to Yahoo!, but I could see Google’s slope and how fast it was growing. And that was another, I think, just like hustle of, who do I know at Google? And it was a friend of a friend who was a recruiter who had helped me get my first interview. And I think I had 14 interviews. I was breastfeeding one, maybe both of my twins at the time in a closet, trying to do this interview and hoping to God that they couldn't hear that sound of choo choo choo choo choo. And you know, I got this job and it was awesome. There is another level of vibrancy at Google. The same kind of optimism, but another level of speed and focus that I was really excited to be at. So I was at Google for six years. The other fun fact I didn't think about at the time, but now I realize–all of my managers at Google were women, amazing women. So Susan Wojcicki, Marissa Meyer, Sikunder Singh, Joan Braddai, Megan Smith. I might be forgetting one, but I think that's it. Five amazing women at Google who were all extraordinary in their own regard.
Michael Eisenberg (26:12)
And Megan also ended up at the White House.
Katie Stanton (26:14)
She did. And it was funny, because at the time I got the job, I was working for Megan and we were doing a few layoffs at Google. And I remember Eric Schmidt telling us, do whatever you can to save your top talent, but we're going to have to get rid of people who aren't great, and not performing, blah, blah, blah. And maybe a week later, I get the tap to join the White House and I tell Megan and I was like, “Should I take this job?” And she's like, “You should totally take this job.” And then I realized like, “Wait a second, am I not top talent? Are you guys trying to get rid of me? Is this a plot twist or something?” And she's like, “No, no, no, you should really go.”
So it was great. And, I remember too, talking with Eric as I left, and he had given some really good advice, and he's been active in both administrations and you know, talking to many political candidates, but he gave me good advice, which I think about even to this day is that, just get some quick hits, like get in there early. Like it is going to be really hard to get a home run in the White House, but if you can just get to base a couple of times and just get like a couple of hits in there, like that'll be successful in moving the agenda forward. And that's what we did.
Michael Eisenberg (27:26)
I've got to ask you, you told the All Africa story, which is a crazy story for the people filming, but what's the craziest story about your time in the Obama White House that I need to know?
Katie Stanton (27:34)
Maybe crazier was when I staffed the president on his first town hall in China. And I was so excited, and so honored that I got to do this. Just, again, having this front row seat to how things get done. We were in a hotel for maybe two to three weeks prior to the event, where every detail from how he was going to drive from the airport to which location would be host to this town hall, to the attendees. Every little detail was heavily negotiated. And I had to work with a local government, and we all had our opinions. And again, every little detail. And I lost on almost all negotiations with my Chinese counterparts, because they're very powerful. They were the host. But we had a few tricks up our sleeves.
And so the major trick–again, this is so minor, but it was very important to me at the time, was that when the president enters the building, the presidential seal of the United States is placed on his podium. And so that was something we needed to do. But my counterparts didn't want that. They wanted–I think it was at the Shanghai Science and Technology Museum–they wanted that seal to be on the podium. And we had fought about this all week long, and they were like, “No, this is what we're going to do.” I was like, okay, I think it's a law and a regulation that this seal has to appear and it can't not happen under my watch. I just can't let that happen. And so as the meteor, they were coming in, and we're all getting ready for it. And I knew the president was in the building. I had my earpiece, I'm like, Renegade has entered the building. And very quickly I ran up and switched it, so the presidential seal of the United States of America could be there.
And I remember seeing my counterpart, the other side, like, “No!” And so he came running across, and had the other seal and tried to switch it. In a flash, I saw Secret Service who was looking at me like, what's happening? I'm like, “Help!” And they told the guy like, “Sir, stand down, stand down!” And so they came running out. The press is coming in, like, wondering what is happening. And it was too late, and I won. And so I might not ever be let into China again.
Michael Eisenberg (30:01)
I can’t believe you were let out of China after that.
Katie Stanton (30:03)
Lucky, very good question because I was so nervous about it. He was so mad. I got to ride in the presidential motorcade, and got straight on my flight.
Michael Eisenberg (30:15)
Okay, so you know, Dick Costolo asked me to ask you that question. I think that's a pretty good answer. That'll qualify even for improv Dick.
Katie Stanton (30:22)
I don't think he even knows this, so he’ll appreciate this.
Michael Eisenberg (30:26)
Tell us about the transition to Twitter.
Katie Stanton (30:28)
Yes. So, well, it was funny because not only–here's my double whammy–not only did I leave all my Google stock on the table, I had talked to Ev about joining Twitter in 2008, which would have been very early. And then I was like, “No, I am an economic genius, and I'm going to sell all my Google stock, and I'm not going to join Twitter in 2008. I'm going to go work for the federal government for $82,000 a year.” So, I had gone–again, no regrets–but after my two years of serving, which was amazing, I really miss California. My family misses California. And I miss working in tech. And I called Ev back, and Dick, who had joined since, and said, “By any chance do you have a role for me?” And they're like, “Yes. Would you like to help build Twitter around the world, Twitter International?” Like, oh my God, dream job.
Michael Eisenberg:
Just not in China.
Katie Stanton:
Just not in China. So yeah, they were like, “Deal.” And so we moved back to California, and I joined Twitter in August of 2010, which was amazing.
Michael Eisenberg (31:33)
By the way, we should tell listeners–we don't have to take up a collection for Katie. She's going to be okay. Even though she sold the Google stock and worked for $82,000 and missed Twitter in 2008, Katie will be okay. Don't worry.
I want to actually start on today's Twitter. So you were there in Twitter, I guess it's now 15 or so years ago. And I'd love to hear what you think about how Elon has taken Twitter. I imagine if you don't agree with Sacks, you probably don't agree with Elon much on politics either. What do you think about the direction he's taking it in and what Elon's done with Twitter?
Katie Stanton (32:04)
You know, it's funny, because I think directionally, a lot of us agree on things. You know, can Twitter be more efficient? Yes. Can the federal government be more efficient? Yes, of course. I think it's the how where we tend to disagree. I do think Twitter, where it's gotten better, has been the use of AI. I think Grok is great. And I think all these different platforms are really helpful, really useful, really valuable. Where it has not been great is that, at least my feed is very far right wing suddenly. Like these are a lot of voices, and I feel like it's not there to inform me, it's there to sort of irritate me. And that's a bummer. And a lot of the people that maybe I had mutual follows with, they've left–well, not maybe, certainly they've left. Maybe they're on Threads or a Bluesky, or other things, but I still feel very loyal to Twitter. I want to stay on Twitter. I love Twitter. I think it's a great platform. I think it's important to have a place where people can debate and disagree.
Where it has fallen short–I feel like there's more hate. There's more anger. There's more misinformation. Things like, you know, we took trust and safety very seriously while I was at Twitter, even pieces of verifying the person is who they say they are. Whereas now, there's no trust and safety team, or it's very, very small. And the verification practice is basically like, “Hey, if you got 10 bucks a month or whatever it is a month, you're verified.” And that can cause misinformation because people think like, oh, this must be true. And that causes danger, that causes sadness, this causes all kinds of strife. And if we have enough strife in the world. It would be great if we had more opportunities to bring people together that just have really thoughtful conversations.
Michael Eisenberg (33:58)
Are you on Threads too?
Katie Stanton (34:01)
I am, but I'm not active. I tried for a while, but to be honest, I felt like it was actually the opposite. It's all left wing, and that doesn't help either. Like it can't be these silos getting angry together, angry at each other. So if you can let me know if there's a platform of reasonable people in the middle and normalcy in the middle, I think that's the place to be.
Michael Eisenberg (34:33)
Ironically, I was, I guess you could say, joking with somebody a couple of weeks ago. Who would have imagined that church and synagogue has become the place where you can have people with differing opinions together? I mean, politics has become kind of this religious schism, much more so than religion has become.
Katie Stanton (34:54)
I agree, and I think the key to that is that it's local. That when you're local and you're in this community that you share, you realize you're in this together. And it's easier to be mad at somebody far away that you don't know. Or when you're in a car and someone cuts you off and you can give them the finger or whatever. Because you might not see them again. But it's these community groups and religious groups at the local level that I think have the opportunity to really heal us.
Michael Eisenberg (35:28)
I think sports too, for what it's worth.
Katie Stanton:
Sports too, yes.
Michael Eisenberg:
I was just talking with a senior politician who I think made a super interesting observation. He said that musicians and actors are forms of people who have big platforms–they tend to become international or national–whereas sports tends to be regional and local. So sports brings people together more, whereas actors and musicians can become more divisive. And maybe not an accident, by the way, that you see so many sports figures are religious baseball players going around after they hit a home run, and looking up on high, and basketball players praying before the game. I think it's interesting. Sports, and church, and synagogue feels like a good place to get out of the schism.
Katie Stanton (36:10)
Yeah, I love that. I think that's right.
Michael Eisenberg (36:13)
So I need to ask you, because you came out of the Obama White House and you just said what you said about what's now X and used to be Twitter. And I was talking with a bunch of people about this podcast, at least two of them, including Chamath Palapathis, said I should ask you the question also. But, it was in my head before. What's your thinking about what was called “The Twitter Files” at the time? You called it trust and safety. Other people would call it suppression of free speech, or information, or the white information, for example, about vaccines and other things. What are your thoughts about that period?
Katie Stanton (36:54)
So I never even read the Twitter files, so I have no idea what was actually in them, but I can speak firsthand that the people that led the Trust and Safety Organization at Twitter had the utmost integrity that I'd ever seen. They were very careful, very thoughtful about how do we protect our users and how do we also honor the rules of the road and the laws that exist. And the challenge of Twitter is that it's kind of a mirror to humanity, that people do a lot of good, and people also do a lot of bad. And a lot of that can just go Rome really fast and like a virus, and infect a lot of people. And, you know, the general counsel led the trust and safety team and I think did a very good job of balancing and things that we couldn't have predicted when Twitter was born. I'm sure Ev and Jack didn't think like, “Well, what should we do if somebody beheads somebody and lets that video go on this platform?” Ev's first thing was like, “What kind of ice cream should I eat?” You know, it started with something very hopeful, and very positive and fun.
And again, there's bad in the world, and that will seep through on these platforms. And so I really respect and admire and don't envy the work that that team had to do in response to when bad things happen. And we try really quickly to get in advance of that and at least create some kind of structure and policy so the folks on the front line when they would see things, and the algorithm could flag things that they knew what the right thing to do was. And what I worry now is that with all that burned down, just, for a while-and I'm not on Twitter nearly as much as I used to be–but I'll see porn, I'll see all kinds of stuff. I never used to see that.
And because there was better protections for a more positive customer experience, it's disappointing to see it kind of fall apart. And again, I think I'm an optimist. I'm hopeful that there's going to be space for a more positive, safe platform for reasonable people to share their experiences and improve humanity.
Michael Eisenberg (39:12)
I know less about Twitter, Exis, Trust and Safety. The place I've spent more time is TikTok. And there's been a significant amount of NCRI, the Network Contagion Research Institute, remember that guy named Joel Fiegelstein, I think, on TikTok. And I've done my own research on it also. I would argue that TikTok, where a lot of Trust and Safety, for example, was in Ireland and other places, even if people kind of, quote unquote, did their jobs, they brought their own political biases to their work. Do you think that was true at X or Twitter at the time you were there?
Katie Stanton (39:48)
There's probably some. I didn't observe it, but I do think what the team did was at least try to remove as much biases as possible by putting in policy and saying, “Okay, when the following happens, here's our policy of how we respond,” that gave very little room for someone to be like, “Well, I don't like that. So I'm gonna get rid of it.” Like, I don't think that there was room for those biases to really take place. Maybe some of those biases could inform some of these decisions, but–and I wasn't on that team. I was just kind of aware of that team and we would have some meetings together for sure. But I know that team had the utmost integrity and really carefully debated it. And when I was on the executive team, towards the end of my time at Twitter, you know, these issues would flare up and they were heavily debated by everybody on that team, from Jack to Anthony and Adam, myself.
And it was always a very intellectually honest experience of always trying to protect our users, and also protect our shareholders, and building a business that we could be really proud of.
Michael Eisenberg (41:00)
So you're the board of Time, advisor to Vivendi, you were at Twitter, you were at Yahoo!. You have a fair amount of both, call it new and old media experience. I think the question that comes out of what you just said right now is, what's the job of a media company in the modern era?
I'll open with a story. I was the opening act for, I won't mention his name, for a very, very, very senior executive at a very well-known media company in somebody's home. I guess it's right after Trump was elected the first time. And a young woman, who was, by the way, a graduate student at Columbia, stands up and asked this very, very senior media executive, “I understand you gave Trump more media time than you gave Hillary Clinton, by a long shot. Why'd you do that?”
And the very senior media executive in this very closed room said, “Hey, he sold a lot of ads. And we had a lot more viewers. It's what people wanted to see, for good and for bad, and I'm in business.” And, you know, this young woman was incredibly disappointed, and was, think, horrified on some level. And I watched this dynamic play out in the room, and it's caused me to reflect over the last eight or so years–what is the actual job of a media company today? Make money? Be unfettered access to the reflection of humanity, like you described it, or to provide a filter? And I'll broaden the argument a bit so that I can give you a broad space to go into. But it feels like ad-based models optimize for audience, and subscription-based models optimize for niche audience.
Like the New York Times is after a very specific audience, because it increases subscriptions. And so, kind of inevitably, the model you choose almost reflects what you think your media company is supposed to be doing, but there's like eight or nine different kinds of these models. And with that, I'm just going to let you riff on what you think a modern media company needs to be, they should be today, and where the pitfalls are going forward.
Katie Stanton (43:13)
Yeah, great question. I mean, I think, and actually I should share too, Vivendi is so amazing. It was started by Napoleon. So talk about history. It started as a water company. And here's this century-plus old company now in the media business. And it kind of ebbed and flowed, but to these newer media companies today, TikTok and Insta and New York Times and the Onion.
So, you know, in a nutshell, these media companies are here to entertain us. They're here to maybe inform us, but really it is to gather our attention in some form or the other. And part of the reason why if it bleeds, it leads is that it strikes and stirs something in front of us that we stay engaged. And even better, if we click on something to get more or even better, if we're so enraged, we share it with somebody. And so it is in that attention business. And the more attention you have and the more engaging it is, again, the more likely you're going to click and share, do these things, they're going to make you, as a media company, make money. And so there is this incentive in a way to kind of hug the edges, which hasn't been great.
You know, we live in the most divided world we ever have. And so I think it's a struggle that a lot of media companies have to be in that business. And subscriptions are hard, right? And especially if you have people now in an economy that is a little bit shaky, like, if I could cut some corners, what should we cut? Like, oh, we can get rid of maybe the Washington Post for now, and we can get all this free content on the web. So there's such a hustle for that attention, which is hard. And I think the most successful ones out there have been the ones that have built trust with their customers and have that trust and engagement, which has resulted in traffic and which will then turn into money. And that's sustaining. But it's a weird, weird time for media right now.
Michael Eisenberg (45:33)
What is your go-to media?
Katie Stanton (45:37)
I'm all over the place. I still am on Twitter as more of a reader. And then I fact check it all between, I'll go to Fox, I'll go to New York Times, I'll go to The Information mostly for, I kind of stay in my own lane a little bit in terms of venture. I respect Jessica Lessin. I think she's built a really important business and media company there.
Michael Eisenberg (46:03)
She was a podcast guest here.
Katie Stanton (46:05)
Oh, really? Oh, she's the best.
Michael Eisenberg:
Yeah. She's so good. And Sam, too, was previously a guest.
Katie Stanton:
Oh, Wow. I'm in great company. I'm so really honored now. And I look for those voices of people I trust, maybe a little bit less than the institutions. You know, I'll hear what Chamath has to say. I'm like, I don't know if I agree with that, but sometimes he's right.
Like, why did he say that? Like, that's interesting. Let me double click on that. And, you know, this is why Grok is so good. Why ChatGPT is so good. ‘Cause you'd like, well, someone just Tweeted that. Is that correct? And then you'll get sort of this, I don't know, more informed and maybe more neutral answer, which I think is actually quite healthy.
Michael Eisenberg (46:52)
So it sounds like you don't trust any media outlet anymore. But 20 years ago you did.
Katie Stanton (46:59)
Yeah, I trust them less. I love the New York Times. I have been reading the New York Times since I was in high school. And it was just part of our family daily habit. But there are some times I'm like, oh, that sounds, that's a little bit extreme. And I think this is a common thing, right? I think most Americans, and maybe this is a global thing, that there's a lot of mistrust for institutions, for media companies, for government, for maybe religion, for the institutions that we've grown up with, and maybe assumed too much of them. So I think maybe that's the silver lining that we've lost some trust, but it has made us work harder to seek truth and to fact check ourselves and not be so lazy and assume that what we heard is factual, and come up with our own decisions and opinions on things.
Michael Eisenberg (47:53)
Given where we are in the trends of technology, is trust and trust in the media, and maybe coming together ever coming back? Or are we just kind of destined for echo chambers and lack of trust going forward?
Katie Stanton (48:04)
I'm not super optimistic here, because the other thing I see trend-wise happening is that, similar to if you're on Instagram or TikTok or even X now, it is so hyper-personalized to you, right? And so it'll see all the things–like, I need to get White Lotus out of my feed. The series is over, stop showing me stuff.
But I worry that news is in that direction too, that, you know, when I grew up, we had three channels of news stations, and then you have more and more, but now there are so many, not only news organizations, but also so many ways for that to slice and dice to every single individual. So everyone in your local community can hear different things about the same subject that's going to make us all crazy. So I really, really worry about that, that that sort of splintering is really going to tear us a bit more apart as opposed to bring us together.
Michael Eisenberg (49:07)
Will the United States be around as all 50 states in one piece in 50 years?
Katie Stanton (49:14)
Yes.
Michael Eisenberg (49:17)
All right. Let’s move on, after that.
Katie Stanton (49:21)
I'll take France. I don't know why we're talking to Greenland. Let's take France. If we’re going to take a country…
Michael Eisenberg (49:26)
I was just saying we'll get into 51 states, but at least you get the good food.
Katie Stanton (49:30)
Yeah, exactly.
Michael Eisenberg (49:32)
I'm not sure you want to buy France and its budget, fiscal and immigration problems, but maybe.
Katie Stanton (49:39)
We'll send Elon there, he'll fix it.
Michael Eisenberg (49:41)
Hahaha!
Katie Stanton (49:44)
I know he wants to go to Mars, but how about France?
Michael Eisenberg (49:47)
Yeah, yeah.
Katie Stanton (49:49)
I see you should strike that, because now the French will not let me in the country.
Michael Eisenberg (49:54)
So you're an operator all this time, then you go to be an investor. And there's all this discussion, and we'll come to Moxxie in a second, ever since I've been in this business. And by the way, I should say, I have zero operating experience. I can't operate my way out of a paper bag. But there's always discussion about, you know, we need operators to be investors, and people like Peter Fenton, who have only ever been investors their whole life and certainly very successful. Where do you come out on that?
Is the operating side of you–I think was Dick, by the way, who prompted me to ask you this question also–is your operating–by the way, he was an operator an investor too, so it's not a loaded question at all from Mr. Costolo, but is it important to be an operator in order to be an investor? Or can you be, like, an incompetent operator like me?
Katie Stanton (50:43)
I highly doubt you're an incompetent. I think there are a lot of paths to being a great investor, right? Like you can grow up in the venture channel, you can grow up as maybe a banker, you can grow up as an operator. I am biased, and I do think that operating experience does lend itself really well to providing a really helpful founder experience, because you know how to build, you know how to get to zero to one, you know how to get to one to 10 and hopefully to 100.
And I have at least firsthand seen many really strong operators lend their experiences and adding value. And I know it's kind of a meme on Twitter, and acts of like, “You let me know how I can be helpful,” but it is true. So for example, my business partner, Alex Redder, he has, to me, always been the smartest person in the room that never acted like it. That he could take really complex engineering projects and simplify them down. And we worked together at Google where he was a computational advertising engineer, and then at Twitter where he ended up leading all of engineering to being the president of Kitty Hawk, the electric flying car company. And so those collective experiences, I think, lend himself really well to being a great sorcerer of talent and a great supporter of talent.
So, for example, as we're talking to engineers and founders as they're building, I might as a non-engineer be like, “That sounds really interesting.” And then I'll be like, “Yeah, that can't work and here's why,” or, “That could work, but here's what has to happen.” And like, that's really interesting. So we'll come at problems differently. And I think that helps us make better decisions. And then things like, there are very challenging problems, especially that happen at Seed. And it's typically hiring your first sets of engineers. And so having people like Alex that could be on that interview panel that can help you go through like, here's why this person could be great.
It could be firing your first engineer, and talking the team through it and how you'll get over it. We've collectively hired and fired lots of people in our careers, but sometimes founders haven't done it at all. Other things that happen at Seed that I think operators can really help with is basically, how do you get to product-market fit? How do you build a great product? How do you figure out your go-to-market motion? How do you hire your first salesperson and transition from founder-led sales to your head of sales? Do you need an SDR? What is an SDR? How do you write your first blog post? How do you get your first announcement in TechCrunch or the New York Times? Uh-oh, there's regulation. What do you do? How do you respond to this? Things that I think a lot of operators may have seen throughout their careers can add that immediate value to founders. And as you know, so much of building companies, like you have to make so many decisions very, very quickly. It's not like you can–you're not gonna hire a consultant to figure that out for you. Like you have to decide these things on the spot. So if you have a cap table that comes with superpowers across the spectrum, I think you are much better set up for success.
Michael Eisenberg (53:52)
Why did you start Moxxie? Like what was missing in the world in the investing ecosystem? And you said, “Okay, Katie, next gig, I'm starting Moxxie.”
Katie Stanton (54:00)
Well, a little bit of that. I was fortunate enough at Twitter to become a scout. And I had no idea what a scout was, by the way. I was lucky enough that Bijan Sabet–has he been on your podcast?
Michael Eisenberg (54:11)
No he hasn't, great guy.
Katie Stanton (54:26)
He's the best. He was on the board of Twitter, super nice guy, and had asked me if I wanted to be a scout. And I like, “Well, what's a scout?” He said, “Well, many VCs have these scouts and you invest in companies. Your name is on the cap table, and if it goes up, you get some of the proceeds, and if it goes down, don't worry about it.” Like, sign me up, great deal. And then the other thing that happened is that a number of other women at Twitter, we're all friends, we're all working in different departments at Twitter. We collected together to say like, “Let's share deal flow and help each other succeed in venture.” And we call ourselves Hashtag Angels. And so those two things combined gave me both the opportunity and the confidence, frankly, to be able to go out and start to invest more actively. And I ended up investing in roughly 40 companies and realized, I love this. This is so interesting. How do I do this full time? And to be honest, my first thought was, I should join a big firm because I still need to learn. It's an apprentice business. There's still so much to learn. And I started to talk to a couple of my friends in venture, including Bijan and Chris Sacca–has Chris been on your podcast?
Michael Eisenberg:
No, another one!
Katie Stanton:
He should be. He's great. Both of them gave me the same feedback, like, can I curse here? Or you could beep it out. But they both were like, “Where the fuck is your courage?” And I was like, “What do you mean?” And they're like, “You know how to do this, just go out and do it.” And I thought about it for a while because I was like–this sounds so dumb, but I really had no idea where venture capital came from. I knew VCs had money, but I didn't know where they got it from. And so it just took a little bit of work, obviously. But, and I realized, you know what, I do think I can do this. And where is my courage? Hence the word Moxxie, added the double X for the female chromosome. And I also believe that operators like me could add value, and I wanted to lean into that.
And so, fast forwarded building Moxxie. I started it solo. I did a terrible job convincing anyone to join me for fund one. But I talked to, you know, I talked to Alex actually, and he couldn't do it for fund one because he was building these electric flying cars. And he was like, “Listen, I'm a computer scientist and a pilot. I have to do this. These are basically flying computers. But when it's over, I'll join you.” And that's what he did. So he joined for fund two.
And we really leaned into this operating background. So we hired two more investors, both our former founders, both our engineers. One's a hardware engineer, one's a software engineer. They're both fantastic. And that brings us to where Moxxie is today.
Michael Eisenberg (56:57)
What's the hardest thing or the biggest blind spot, because you've got four operators and no investors, and nobody with experience in venture capital?
Katie Stanton (57:06)
It is hard, but fortunately, one of the things, and you probably see this too, and you've been at this a lot longer than me, so I could use your advice–but I think that there are a lot of people who have been in this industry for a while that are so collaborative and helpful. So for example, when I get stuck on, I've never seen this before, I've never seen this recap before, or I haven't seen warrants before, some of these kooky things that happen in venture land, they're both a set of LPs that we have and we're very intentional about bringing on the best LPs. So like Michael Kim at Cendana is one of my first calls when I see weird stuff, or Jaclyn Hester at Foundry. They're amazing. Also other more experienced VCs, so Jeff Clavier at Encore, he has seen everything. Great guy. He is an LP at Moxie too. So I'll send him notes and Jeff being Jeff in very French, he'll just tell me, like, “This is wrong. You shouldn't do it this way. Here's what you should do.” Like, okay, thank you.
I also want to give Jeff a shout out, because when I started Moxxie, and again, I had no idea where money came from, I was kind of surprised. Like there were some people in the community that couldn't have been more helpful. Some people that weren't, and are like, all right, whatever. And then some people who came out of the blue that were helpful. But Jeff Clavier stands out, because I remember he invited me over and he literally sat me down, opened up his spreadsheet of LPs and was like, “Here are people that you should talk to. Let me do intros.”
Mark Suster from UpFront, same thing. I was like, oh my gosh, that's so, like, menschy, and so beautiful and so kind. I'm going to do the same thing one day and pay that forward. So that kind of a community, both on the LP side and the co-investor side, providing a lot of mentorship and filling in those blind spots. And there are plenty of blind spots. That's what's so interesting about venture, right? There's something new all the time. It's constantly refreshing, and learning new things.
Michael Eisenberg (59:05)
So you got this courage, you got this Moxxie–okay, what was the scariest moment though? Or the one you said, “Okay, maybe this is not for me.”
Katie Stanton (59:11)
I think the scariest moment was just like, you know, am I going to be good at it? It's, am I going to first be good at fundraising? Can I raise this initial set of capital? And then the new fear of like, okay, am I going to be good at getting the ownership that I'm setting out to do? Because it's very different getting five to 10% ownership than writing a 25K angel check.
Michael Eisenberg (59:39)
Have you stuck to the 5-10%?
Katie Stanton (59:42)
Yes, so I've succeeded. Because, and this is a struggle where you're like, “Oh, I love this founder. I am going to be sick to my stomach with FOMO if we're not in this deal. I just want to be in the best deals, and I'm going to make an exception, and here's why.” So we've made a few of these exceptions. Time will tell if we got that right.
Michael Eisenberg:
How many is a few?
Katie Stanton:
Less than five, out of 55 or so over time. So one was recent. It's a woman that I worked with at a former company, and she's just one of those like high octane, high slope, blank-check founder, whatever she does, I want to be in. And it was such a competitive round, and she made room for us because of our relationship. It's like, I care, but I don't care, because I just have such conviction in her, and it turns out she's building something really meaningful. I can't announce it here, but I will announce another time.
Michael Eisenberg (1:00:50)
You can announce it. You can announce it, it's okay.
Katie Stanton (1:00:52)
Actually, I will share. Her name is Fatima Sabar, and she's building Bluenote, which is AI for life sciences. So it's helping the scientific community leverage all these tools to be able to get their products and services out to market faster. So it's very early stage, but man, is she an incredible operator and founder and human being. So I'm rooting for you, Fatima. Maybe now she'll feel bad about not giving us the full ownership.
Michael Eisenberg (1:01:17)
Okay. There's always time to kind of load you up. It's interesting. I actually wanted to ask you about this, because you worked at Color also, another kind of moment in your career, Color Genomics, Color Health, I can't remember what it's called.
Katie Stanton (1:01:40)
Both are right. It started as Color Genomics, and I think now it's technically Color Health.
Michael Eisenberg (1:01:46)
Both right. Okay. Yeah, so I reached out to Elad, who was one of the greats also. He asked how your experience of Color shaped your views on digital health and the role AI will play in it going forward. And I actually want to expand that question, with your permission, once you mentioned Fatima. There feels like there's an opportunity, especially the operators, and you've hired some kind of deep technical partners at Moxxie at this intersection of AI.
Katie Stanton (1:01:50)
The best.
Michael Eisenberg (1:02:15)
What I like to call the physical sciences, but biochemistry and physics and how they intersect with the world of health is interesting, particularly from a regulatory perspective. I've had my own follies, let's just call it with the FDA and AI for health. How do you think about investing in this area, AI-ing it, and then thinking about the regulatory challenges?
Katie Stanton (1:02:40)
Yeah, first, Elad is the GOAT, and Elad is another sort of blank check founder. Whatever Elad wants to build, just do it. I remember him telling me about Bitcoin and I was like, sounds kind of stupid and should have done it right away. But it took me a while. So Elad is the GOAT, and I think will go down as one of the best investors of all time. He just sees things first, and early and he's right. And he sees around the curves. So I think there's so much opportunity in healthcare at large. It's a huge part of our economy. We all want to live longer and better, and current services are pretty terrible. And so much of it is moving from a real sick care model. So most of the time you don't go to the doctor unless you're sick and need to be treated. And how do we move to a real like healthcare model that we are more preventative, and we do things to protect ourselves in advance. And I think Color was a step in that direction, which is, it let us understand our predisposition to cancer. Obviously it affects so many of us, and using our genetics as an information source of what is our predisposition to at least breast and ovarian cancer. And what I learned there is that the science is there.
The appetite is challenging. I think consumers are still a little bit skittish about wanting to know some of these things, and also a little bit concerned about, or like who pays for these products. But I think Othman and a lot have done a great job about building, overcoming some of those challenges and actually not doing this direct to consumer, but working at the population health level and helping these healthcare systems leverage many, many tools informed by genomics, but also family health history, all sets of longitudinal data to help inform and help communities better prepare for their health, and be more informed of their health and active about their healthcare.
So now as an investor, fast forward to today, I am obsessed with AI applications and healthcare. I think there are so many interesting ways for us to stay healthy. In fact, I have one Israeli based company, MD Algorithms, which is AI for dermatology. And it's a father-son team. Oded is the CEO, and he is a computer scientist, and his father is a dermatologist and they're building a really great business.
We have another company called Vistapath, which is AI for pathology. How can you use AI to better review a lot of the samples and understand, get to better, faster, more accurate results in labs? And we have another company called Farrow's Health, which, and not to be pumping our companies here, but I think they're good illustrations of, you know, where AI and healthcare can be really interesting. So, Farrow's Health is using AI to automate hospital safety information.
Right now what happens in healthcare systems is that this is a manual process. You have nurses, and clinician data abstractors who are going through, and you're taking this data and making sure that the hospital is complying. Like this is a no-brainer thing for AI to take care of. So I'm really bullish on the opportunities. I think the direct-to-consumer model is challenging, but I think the model working directly with healthcare systems and payers to help automate and speed up and reduce the costs can help enable more of us to stay healthy.
Michael Eisenberg (1:06:32)
Pairs has been a tough model, and it's also hard to know with the FDA whether it can get its head around these things. How do you think about those two?
Katie Stanton (1:06:40)
Yeah, I think it's an interesting time for government. Understatement of the year. But Dr. Bhattacharya, who's coming in, coming from Stanford, growing up in Silicon Valley, I think that there's a lot of opportunity perhaps for him to help both in a transparent way–like if we're going to loosen up some regulations that have been impeding growth and development, that may not be a bad thing–but I think as long as he does that in the most transparent and open process, that could be good. I think as we're reducing some of the numbers of employees that we have in government, I don't totally buy in the process of it, given that there are–I really worry about how we're going to provide a consistent and hopefully better service to Americans.
Maybe these are tools that AI can help with. I don't know. So trying to stay positive there, that maybe this is an opportunity that we can build and serve Americans better with some of these tools at a better cost, a fairer cost, and again, improve outcomes.
Michael Eisenberg (1:07:55)
I once joked that the right algorithm for government efficiency is the number of bureaucrats squared. The more bureaucrats you add, the less government efficiency you have, and it's exponential.
Katie Stanton (1:08:09)
Can I actually, I just want to start on that point if that's okay. I had a very similar opinion before going into government, like, ugh, I'm coming from Google, we're efficient, we know how to get things done, and there's so much bloat and unnecessary stuff in government. And I went into government and some of that was true. But the part that I didn't recognize, and this is something that I think when I posted to David Sachs and others about this, that there are so many wonderful–and in fact, the majority of civil servants who could have chosen a much more lucrative profession and they chose to serve this country, and they're doing a great job. And we should celebrate that, and we should make their jobs easier. We should applaud them. We should not boo them. You know, we should make their jobs easier. I just want to make sure more people recognize that, and celebrate that, and not kind of assume that government's all wasteful and bureaucratic and terrible.
Michael Eisenberg (1:09:08)
Yeah, no, we agree on that. There's great people who go in. I just think it's inevitable in large systems, and particularly ones where it takes a long time to bring technology into that they get kind of gummed up.
So I feel like you're kind of impassioned, supportive of Fatima and, you know, describing very effectively five healthcare companies. So you invested in Clubhouse too. What happened?
Katie Stanton (1:09:28)
I did. I don't know, I'm sad. Yeah, this was a great bet on awesome founders. I think Paul and Rohan are amazing founders, serial entrepreneurs, had been in the audio space for a while. I think they caught lightning in a bottle and it grew really fast and it was such a pleasure to see. And what I loved about it is that it was real time, it was authentic, it was a whole new way to communicate.
The timing was perfect because it was still COVID. We're all trapped in our houses, we're miserable, we're trying to connect. And I remember these moments where it'd be like two in the morning, and I was up and anxious, and I'd go on Clubhouse and I would see this guy, Shane Mack, who was an entrepreneur in Nashville. And then Shane and I would start talking, and a couple of other people going there. Shane Mack to this day is now a very dear friend of mine that we met on Clubhouse.
So it had a lot of that magic and that serendipity. And you could hear Oprah joined at one point. And you could hear the voices and the authenticity of all these people that you recognized and admired. And then I think we went back to work and we got busy. And Clubhouse wasn't able to maintain, I think, a lot of that excitement. So the company is still up and running. And I am hopeful that they're going to emerge out of this as a great case study of persistence and resilience, and come out with a new platform, but it's not exactly as it was in the beginning.
Michael Eisenberg (1:11:08)
I learned that you worked, and we're going to slowly come to the end here, that you worked early on in life on a kibbutz. Is that true?
Katie Stanton (1:11:14)
I did. How did you know that?
Michael Eisenberg (1:11:17)
We have a crack research team Katie.
Katie Stanton (1:11:19)
Wow. Kibbutz Gadot.
Michael Eisenberg (1:11:21)
Kibbutz Gadot! And can I ask what year that was?
Katie Stanton (1:11:24)
That was in the fall of 1990.
Michael Eisenberg (1:11:30)
I was also in Israel then as a student!
You were?
Michael Eisenberg:
I was.
Katie Stanton:
Oh my God, where were you?
In a place called Yeshiva Har Etzion, just south of Jerusalem
Katie Stanton (1:11:40)
Amazing. Yeah, I loved it. I studied abroad in Jerusalem. I don't know if your research team knew that, but I was in Jerusalem as well. It was a program with Hebrew University, and then they had some professors from Beer Zeit, and we lived in the Old City in Jerusalem. And then part of that program was we worked in a refugee camp in the West Bank in Ramallah, and then we spent a lot of time, I spent a lot of time in the north of Israel at Gadot. So I picked avocados and grapefruits, and then worked on a toy factory.
Michael Eisenberg (1:12:15)
And what was the experience like, and what did you take from it?
Katie Stanton (1:12:20)
I loved it. I loved it so much. I loved, it sounds weird maybe, but just the physical work. Like you could see your accomplishments during the day. It was hard work. I loved the community aspect of just, and you're at camp, right? Like you're doing work and then you're having meals together. And you know, and for me personally, because going back maybe to the beginning, where one half of me came from this huge Irish Catholic family, and the other half of me came from this very small Jewish family. And my father's father died when he was 12, and his grandparents, like he's just lost his entire history. Like, I have no idea that side of his family. And I was always just, I missed that. I wanted to understand that side of my family, and the Jewish faith. And a lot of my friends growing up were Jewish, and you know, I went to everyone's bar mitzvahs and all that stuff, but, and seders, but I don't know, I just wanted to feel it myself. So going to Israel was really important to me personally. And I think the kibbutz experience too just helped me feel that community on that day-to-day basis and really brought it to life.
Michael Eisenberg (1:13:35)
I want to touch something a little personal if I can. Another person whispered to me, you got engaged a few days ago or something like that. Is that true?
Katie Stanton (1:13:42)
Yeah. Wow, you're on it. That's right.
Michael Eisenberg (1:14:05)
We're doing our best. And I also understand your husband passed away a few years ago and that both of your parents have passed away as well. Is that correct? I sense you're a sensitive person in a positive sense. On the other side, you kind of heard it when you were talking about Color as well, that you've learned, I guess, some lessons about the fragility of life.
And I'd love to hear if that has in any way changed your priorities, how you think about things and messages. You want to tell other people about this?
Katie Stanton (1:14:19)
Yeah, 100%. I mean, I think if you're touched by death early and often, you just have a different perspective of things, and you see that fragility of life, and sitting with your loved ones at their death beds or being surprised by their death and that shock, and I've had multiple versions of that, you just realize you don't take anything with you. The accumulation of stuff is in service of what? And in those last days, we never know when those last days will be–what are we proud of? You know, what have we done? What have we given? What have we built? What have we shared? Like, what have we grown? You want to make sure that when that day comes, hopefully it's very, very far, that I'll be filled with that gratitude and that comfort that, you know, I did as much as I could, and I was loved by many, and I gave that love. I gave more than I got. And that's what really matters. Leaving that legacy, that is something that you can be proud of, and not take anything for granted. That's why now I'm obsessive about my Oura ring, and going hiking every day and doing these things and being proactive about our physical, and mental and our spiritual health.
Michael Eisenberg (1:15:46)
So guess mazal tov is in order, and congratulations on the engagement. And I guess that's what you referred to when you said three bonus kids before. that right? Amazing. I want to ask you a hard question. You can feel free not to answer it. You are incredibly buoyant, I'd say optimistic, filled with life.
Katie Stanton (1:15:55)
Yeah, that's right.
Michael Eisenberg (1:16:15)
Where do you think it is, both about your upbringing, your sense of service that has brought you to this attitude given what you've gone through?
Katie Stanton (1:16:24)
It just goes back to maybe my grandparents, and family, and just having so much with nothing. We never went on family vacations. We went to Erie, Pennsylvania, and I thought that was amazing. The only time we went shopping was in the Mill Creek Mall in Pennsylvania because they didn't have sales tax, and that's what my parents could afford. And I was so excited to go to Lake Erie because there was so much water. And I think it's just...that gratitude and appreciation for not that much, but who you're with, and just feeling all that love from my greater family at that time. So I think that's fortune, that's luck, and just trying to capture that lightning and magic wherever it may be and paying that forward.
And now I feel so lucky with my kids and it's...I'm heartbroken for the loss that they've had to suffer, losing their father, who was such a great dad, and having to see that. That's the worst part of parenting that is not in the parenting book. But seeing their resilience and their joie de vivre and like, how they don't take anything for granted and they're going to do this, you know, whatever they do in service and honor of their father and his memory, like, you know, I ache that that's which is gonna inform a lot, but I have gratitude that they've learned so much from him and will use that lesson carefully and purposefully.
Michael Eisenberg (1:18:00)
Thank you, Katie. I think I can't think of a better place to end our conversation right there. And if you come back for another visit to Jerusalem, you don't have to stay in a hostel. You can come stay with us in the Old City, and bring the kids for a Shabbat dinner. We'd love to host you here. And to anyone listening, you can learn more about Katie on X. She has a great handle at K-A-T-I-E-S. And had I known Katie then, maybe I could have gotten a better handle than the one I have right now.
And thanks everyone for tuning in. Please rate us five stars in all the places. Spotify, Apple Podcasts, YouTube, and subscribe to our YouTube channel. Katie, I can't thank you enough. This was just an incredible conversation, a meaningful one for me too. So thank you so much.
Katie Stanton (1:18:41)
I'm so honored. Thank you so much for having me.
Michael Eisenberg (00:00)
What was it like being the first female partner of Benchmark?
Sarah Tavel (00:02)
I've been the first at almost every place I've been to.
Benchmark is a firm that our aspiration is to partner with the most ambitious founders of our generation, as the first board member.
Being a founder is another level. I'm married to one. It's like a relentless job. Relentless.
The revenue ramp we see on businesses right now, I've never seen anything like this. You have to have a level of paranoia in this space. You are constantly evolving your strategy so that you are able to escape competition.
I always joke that you trade stress for anxiety when you go from operating to...
Michael Eisenberg (00:41)
That’s a good one. Become an investor, and trade stress for anxiety. Good one.
Sarah Tavel (00:44)
The VCs who are starting right now don't realize how good they've got it.
Michael Eisenberg (00:52)
I'm so excited to welcome to Invested Sarah Tavel. Welcome Sarah.
Sarah Tavel (00:56)
Good to see you.
Michael Eisenberg (00:58)
Good to see you. We had breakfast in San Francisco a few weeks ago. Now we're doing this virtual.
Sarah Tavel (01:02)
Yes.
Michael Eisenberg (01:04)
Sarah, for those who don't know, is a General Partner at Benchmark, which I guess I could call my alma mater at this point, and joined Benchmark as its first female partner. For those who don't know, Benchmark is an equal partnership firm. Sarah was before that at Greylock and at Bessemer, and between Bessemer and Greylock, did a stint as an operator at Pinterest. So she has been at very successful places since the beginning of her career. I wanted to remind myself, Sarah, how do we know each other?
Sarah Tavel (01:33)
You know, I would say, impressively, you reached out to me maybe when I was at Pinterest, or Greylock. I can't remember.
Michael Eisenberg (01:42)
I think so.
Sarah Tavel (01:43)
And then I remember we went for a walk at the boat basin. So it must've been when I was at Greylock, we went for a walk there.
Michael Eisenberg (01:51)
You're younger than I am, that's no secret to anybody. And an up and coming venture capitalist, and it came across the radar, and have been impressed ever since. What we're trying to cover here is A, how values create value, so we'll just start with a really cheesy question, which is, what's your core value?
Sarah Tavel (02:10)
You know, I was thinking, like, when I think about my core values, I have to confess they come a lot from my dad. And my dad's, you know, as these values kind of get passed down, or inspired, came down from his uncle, which was this guy, Kivie Kaplan, who–my family, my dad's side of the family, they were kind of Lithuanian Jews that came to America with nothing, of course. And Kivie Kaplan was this guy who took over the family business, which was a tannery. Became very ambitious, smart, hardworking, became successful enough.
He was able to be a philanthropist. Ended up becoming president of the NAACP, which was just a pretty incredible thing. So my dad's middle name comes from Kivie. And I think my dad growing up in Dorchester, outside of Boston, was inspired by Kivie's success. And that kind of idea of the resilience, the ambition, that sense of justice that you have, and the gratitude that you also have for your position, or whatever privilege that you have–so I saw that with my dad. And my middle name actually comes from Kivie's wife, Emily.
And so I think that I feel very strongly those values. The ambition, the hard work, the resilience, but also the sense of justice. I studied Kant in college, and just this idea, you know, the Rawlsian veil of ignorance, just the kind of ethics that you learn from Kant. And then of course being grateful always for what you are, where you are and kind of having some perspective on that. So that's what I think about.
Michael Eisenberg (04:14)
We share a bunch of things in common, We both grew up in New York. I also studied Kant in college and half my family is also Lithuanian Jews who moved to the United States in the early 1900s.
Sarah Tavel (04:25)
I didn't know that connection. That's great.
Michael Eisenberg (04:27)
There you go. I want to dig into the time you spent at Greylock and Bessemer, and now at Benchmark. And I'm sure you've been asked this question a hundred times, but walk me through the differences between the firms and what, if anything, is similar? In my own experience, every venture firm has a culture.
Sarah Tavel (04:47)
Well, you know, so I was just unbelievably lucky to start at Bessemer. Because you know, Bessemer is a firm, it's probably the oldest venture capital firm in the United States. I think it's more than a hundred years old, and very East Coast in its origin story, the Carnegie Steel family.
And what they did so successfully–you know, we talk about generational transfer in venture capital generally; Bessemer has without question the greatest track record of doing that. Like somehow, they have managed generation of investor after generation of investor to kind of continue to grow.
And one of the things that I was so lucky for was that, it was kind of two things, which was like one, there was like an ethos at Bessemer of finding and identifying talent early, and providing a pathway in the venture firm to go from the lowest rung of the ladder, which is where I started at Bessemer–I was an analyst cold calling companies–to becoming one of the general partners. And so Bessemer developed then like kind of, there was almost this belief that there was a little bit up and out, up or out I should say, but that the firm could scale horizontally so long as
there was enough of that young kind of hungry, ambitious group of people that would work their way up the ladder. And they developed a number of systems in place to make sure that the firm could scale horizontally. So I was very lucky for that ethos. And then of course, as I've talked about many times now at this point, was unbelievably lucky to be hired by one of the partners there, Jeremy Levine, who really mentored me and taught me everything I know. And I would say, actually, a third thing about Bessemer that's very important–it t very much was an investor's way of thinking about investing.
On the Bessemer website, bvp.com, they list some of the memos that we've written over the years for different companies. Like one of the things that you'll see is a scenario analysis at the end of the memo. And it's this idea that actually when you make an investment, you know, we all think, ‘this could be big,’ but there's when you invest–and there's a great book by Annie Duke, Thinking in Bets–it's a probabilistic decision at that point in time. Like you don't actually know, there's no set path for the company. The outcomes are probabilistic.
So Bessemer had very much a way of thinking about this that's almost the way that a growth investor might think about making an investment. What's the downside risk? What's the percentage probability of that downside, all the way to the percentage probability of a very large outcome. I just think of it like very much an investor mindset, very analytical approach to investing that any investor, I think, is lucky to have as a foundation for how they do this business.
Michael Eisenberg (08:19)
And when you contrast that, let's skip Greylock for a second, because I think what you said about the rigor and the downside, Bill Gurley was at Benchmark, famous for saying, “You can only lose one time your money, but there's infinite upside.” My own experience of Benchmark was, it was much more of an upside mentality than a downside mentality. And I'd be curious for your thoughts on contrasting Benchmark and Bessemer.
Sarah Tavel (08:43)
Well, no, you're absolutely right. And I'll say that it was part of the reason why I chose, when I was making the decision to leave Pinterest and go back to investing–as much as I loved Bessemer, part of me felt like I really wanted to learn more of that Silicon Valley ethos on what can go really, really right with the company. Sometimes, you know, I think Bessemer has evolved a lot from when I was there, but I always felt like there was a little bit of a, making sure you really understand the downside protection, what's the downside risk. And then there was almost a humbleness on, you felt crazy to say that a company could become a billion-dollar company. Like that wasn't the culture. And so I made a transition to Greylock, which was a firm that very much had that slogan. Even though there was some East Coast legacy to the firm, it very much had that Silicon Valley, what's the big opportunity that you swing for? And then the transition to Benchmark, as you said, and that articulation that Bill always would remind us, which is that, yeah, you can only lose one times your money. And the hardest, most important thing to really think about when you're investing is what could go right? If this really goes right, what are the things that happen, and what does that company look like as a public company even? And then you work your way backwards from there.
Michael Eisenberg (10:15)
It's interesting what you said, that Silicon Valley mentality of Benchmark. Benchmark obviously got started in Silicon Valley. Greylock started in Boston. Earlier in my career, I asked Henry McCance, founding partner of Greylock, for like five minutes of his time to give me a piece of advice. One of the things he said to me was, and this is in 1995, he said, “Make sure you can make $100 million on an investment. Any investment you make.” Which to my mind was like, mind blowing. How much are we investing here? A million dollars, a million and half, make $100 million. And now we talk about a billion dollars.
I wonder if the kind of Boston legacy at Greylock influences its current behavior, and kind of being founded in Silicon Valley, which the Benchmark was versus, for example, New York for Bessemer, and Boston for Greylock actually makes a massive cultural difference.
Sarah Tavel (11:00)
I think there is. I kind of felt when I was at Greylock, it was a point of transition there. It felt to me like it was still finding itself, like that kind of mixture of the Boston elements still being there. There's also, you could say, there's a different mindset that happens for more infrastructure, B2B-oriented companies versus consumer.
Like you have to have a very high willingness on the consumer side to lose money, because the consumer opportunities are way harder to–the competition for those consumer companies, anything that's growing with some kind of engaged user base, like there's very much this art that comes into play of analyzing whether the company can become the next Pinterest, the next Discord, the next Instagram, whatever it is.
And as you know, there's a ton of companies that never go the distance. And by the way, most of those companies have zero resell value. There's no acquisition. Whereas for a SaaS business or a developer-oriented business, there's a much higher probability of some success, and a much lower probability of the type of outcome that really ends up being the billion-dollar return for the firm. And so you always, even within a Silicon Valley firm itself, you do also have those two cultures at play.
Michael Eisenberg (12:34)
Yeah, of course we're sitting here talking on the day that Wiz got sold for $32 billion.
Sarah Tavel (12:38)
Yes, I know. Remarkable.
Michael Eisenberg (12:41)
You know, kind of a king of an infrastructure. It's the largest, I didn't know this. It is the largest venture backed M&A ever.
Sarah Tavel (12:48)
It's remarkable. No, I didn't know that.
Michael Eisenberg (12:51)
I kind of sat here wondering this morning, I'm saying–Gili Rannan wrote the first check there. I think it turns out like $4 million, I think became $1.3 billion. How do you do a scenario analysis? What did it look like on day one?
Sarah Tavel (13:04)
Yeah, well, you know, you joke, but like when I look at–again, I really recommend people go to the Bessemer website where they have the memos. And I remember, I always joke about Shopify's memo. Because I remember when Alex Farrar brought Shopify into the group, and I can't remember exactly now what the just-go-nuts, best-case scenario was for Shopify, but I would bet you it's less than $500 million in that Series A memo.
And it's just one of those things that, you know, we're very lucky that the history of, this kind of software eating the world, like these markets, and I feel this a lot very strongly with what's happening in AI, is that the market opportunity for these companies, it used to be just US, then it became global, and now with AI, is going not just after software spend, but actually human capital spend, that these markets just keep getting bigger. And so one of the biggest mistakes, and this is back to the Bill Gurley way of thinking, is that we can make the fatal error when we're making a decision of underestimating what the total opportunity size is going to be over time.
Michael Eisenberg (14:24)
It’s interesting you say that. Today I was thinking about two things. I was thinking about Checkpoint, when they first got started ,and became this monster company. People assessed the firewall market for internetworking at the time was like $10 million. And it just grew. And you know, you made the Uber investment at Benchmark. You know, a professor for NYU said the taxi market was $150 million. You know, no one ever imagined you could replace taxis. What do you think causes underestimation of these market sizes? Where does it come from?
Sarah Tavel (14:53)
Well, I think the biggest thing is that, it is just like when you are rooted so much in the way the market works now. So let me give you an example. We're investors. There's two companies that I think are great illustrative of this. One is DeepL. So DeepL is an AI investment that we made a Benchmark before AI was the hot thing. And DeepL is AI translation. And if you were to look at the market of human translators, you know, you would think, ‘that's not a great market.’ Like how big is the global business? Like you could call GDP for translators. It's not very big. But when you make it, when you take away all the friction of hiring a translator, you know, giving them access to–first of all, you had to find them, negotiate the contract, then give them the content that they have to translate, get them to translate it, then figure out some way to ingest that into your own system or use it. There's just so much friction, and there's a lot of costs. Now, if you reduce that all to an API, then all of a sudden, all of the universe of content that you actually want translated blows up. It's just like a huge, huge thing.
HeyGen is another example in our portfolio where, it's a company that makes AI avatars. And this is another thing where no human, if you have a website and you have a product you want to tell customers about, or some learning and development content to help your customers or your employees, the probability that you're going to think it's worth it for you to hire an actor, to set up a studio, and then do all of like, figure out the script, work on like talking how many times I'm gonna have to do it again. I would block off three days, I get the post editing, all that stuff. It's so much work. And then all of a sudden AI lets you just write a script, take a 30 second video, and then you have it and you can edit it whenever you want?
Again, it completely takes a market that's underestimated and blows it open. And I would say that's what happened to Uber. I think the history of these large companies that get created are usually taking something, some market that's so held back by all the friction and cost of that market, and completely makes a 10X better and cheaper that blows it open. And again, not to keep bridging to AI, I don't intend to, but I think that's part of the promise right now.
Michael Eisenberg (17:42)
So now we have Moore's Law, is that the power of computer costs doubles every 18 months or whatever is in Jevon's paradox, is, as the costs come down, the market grows in dollar terms. And now we have Tavel’s law, for every step of friction you reduce, the market grows 10X.
Sarah Tavel (17:50)
Yes. Exactly. I like it. I'll take it.
Michael Eisenberg (18:05)
There you go. We're going to put that right in the headline to the podcast. Tavel’s Law. For every step of friction you take ou,t a market grows by an order of magnitude.
Sarah Tavel (18:12)
I will sign my name to that.
Michael Eisenberg (18:15)
All right, so I want to dig down on that for a half a second. Because there's at least a notion that part of the friction was in what I would call pixels, which is the UI. How good and how easy is the UI? We spent a ton of time with Scott Belsky. I actually had a Tweet today about embedding designers in every move of an R&D product and that'll make a company. And that's what makes a company. I think it was him. And so one part of this is the UI/UX.
But another part of it, as you mentioned, is just reducing coordination friction. You know, we started Aleph, á la Benchmark, we said, you know, the more people we have, the more friction we have in the business. So you want to keep the number of people low. What are the different steps of friction in a given product that you think early teams need to focus on in order to specifically to increase market size?
Sarah Tavel (19:09)
I always just think of it as time to value. Well, there's actually two things really, when I think about it now, which is that there's, first of all, time to value. But there's a mental mindset that has to change. So let's go back to HeyGen. It’s almost like you're inspiring in someone a realization that they could do something that they didn't otherwise think to do, because all that overhead, like the mental cognitive load, the effort of doing something is just completely removed. And all of a sudden your creativity explodes.
I'll give another example. You know, what's happening in the AI image generation–it used to be, in order for me to have an image or a logo or whatever it is, I would have to hire a designer. But now I can do it myself. I can type a prompt, iterate, get better and better at it, and then have this time to value completely compressed in a way that just once somebody, I feel like it's one of these things where you're putting a boulder down a mountain.
You start one thing, and then your creativity and curiosity just explodes, and you realize that there's so many more things that you can do. And I think that great companies are able to really inspire that and package it in a way where someone can immediately activate. They can immediately be successful. And once they're successful in that very initial thing, there is a depth that they can go down that, as they get better and better, they're able to become a better power user of these tools. And so I would imagine, I don't actually know exactly what the story is for DeepL, but usually what happens is that you have a little project that you're working on–it's like a hair on fire problem–you need a painkiller, you go after it, you find it, and it's so easy that it inspires you to kind of expand, expand, and having a product that then supports that expansion is a very powerful place to be.
Michael Eisenberg (21:38)
Listening to you, it almost sounded like a gamer's mentality, right? Which is, I kind of get in, I get hooked, and I keep going to levels. And I up-level and up-level, and I get more capabilities and you know, then I become the OG of the game.
Sarah Tavel (21:51)
Yeah, it’s definitely something like that.
Michael Eisenberg (21:53)
How much did your time at Pinterest, which is what we kind of skipped over, when you left being an investor to be an operator for a bit, influence how you think about these companies, and what works in product and what kind of companies can unlock these markets?
Sarah Tavel (22:08)
Yeah, it certainly trained me and trained my way of thinking. Your poor listeners who have read it in my work know that I like to write a lot about frameworks and what it takes to build enduring products, enduring systems, whether that's kind of social products, marketplaces, or anything else. And I think that was one of those things that when you're in it, you just don't realize the dots that are happening in your brain. And then it was when I left, and then I started to write and synthesize that you connect, I connected all those dots. And I do really think that it affects my way. What I always tell founders that I work with, or that I'm spending time with, is that I'm just very oriented in not achieving the short term success, achieving the short term numbers, but what are the decisions we make today that set the company up to be in a position to scale with velocity four quarters from now?
And I think that's a little bit–like, when I was at Pinterest, like there were bad quarters, there were good quarters, there were moments when I thought the company was going to implode. There were several moments of that. And you just realize like, how not making the right hire, not making the right hire early enough, focusing on the wrong metrics, not having the team aligned well, not, you know, there's all these things that the pain of those decisions compound. And so it's the same thing with making great decisions today as much as possible, orienting towards, you know-I hate vanity metrics.
Like I have a joke that I can see a vanity metric from a mile away, because I experienced it myself at Pinterest when we had MAUs as our metric versus Weekly Active Pinners as our metric, just like, how different the product roadmap is, the company orientation. And so, of course– I think I'm pretty good at not extrapolating too much from my one real job of being at Pinterest, but it definitely influenced how I see the world.
Michael Eisenberg (24:31)
How did you know you should be an investor and not an operator?
Sarah Tavel (24:35)
Well, that was definitely a part of the reason why I went to Pinterest. That I love the company. You know, I was lucky to invest in the company for the Series A when it was four people. And then I was doing whatever I could to help the company be successful. And I just had this moment of realizing that if I didn’t throw my hat into the ring to join the company, I would always regret it. Cause I was so excited about the founder, so excited about the product and so excited about the culture. And I just, in a way, I always thought I would be leading a team. I was one of those people that was captain of the rugby team or whatever thing I was part of. And so I wanted to experience myself in that context. And then as the company got larger, when I joined, it was just a couple of 20 or so people. And then when I left, as I was beginning to think about leaving, we were 650 people.
I just started to feel like what I really missed–the company was so big, I was responsible for a bunch of teams on the product side–that I really missed, the true seeking, the partnership, the strategic thinking that happens when you're closely partnered with the founders. And Ben and Evan were walking around stressed all the time. I was walking around stressed all the time, and it just wasn't the same thing. And so I started to think about it, and just realized that that partnership with a founder, especially in the early days, was what I really loved doing, what I really missed doing. And it was a very difficult decision, to be honest. Like, I anguished over the decision to leave Pinterest because I loved it so much, but I realized that what I really wanted to do was that partnership with founders.
Michael Eisenberg (26:24)
You miss being the operator when you sit around the board table and you say, “I'm just coaching here. I'm not really making the decisions. I'm asking hard questions, but really they should do this–and maybe I'd like to get back in that seat,” or not really?
Sarah Tavel (26:36)
I always joke that you trade stress for anxiety when you go from operating to....
Michael Eisenberg (26:46)
That’s a good one. Become an investor, trade stress for anxiety. Good one.
Sarah Tavel (26:50)
You know what I mean? It's like, when you're operating, you feel the stress of the execution, of, am I going to be able to get this done on time? But you have a lot of, is this the right thing to do? Like, should I be thinking about something else? How do I get all these people aligned? But there's a much higher degree of control, and you feel there's something very concrete about everything you do when you're operating. Like at the end of the week, you feel like, okay, I made progress on this, check. Okay, this one's done, check. You have these concrete goals that you kind of, you aim towards, you make progress towards. And when you invest, I always say it's like going from building a house brick by brick to gardening. You do all this work, you don't know what's gonna work, you’re looking at this barren ground waiting for something to sprout when you're, especially in the beginning, when you're trying to kind of source opportunities. And then of course, you invest, and at the end of the day, you try to provide good counsel to a founder and you could have–I certainly ruminate on like, how do I help this founder see things the way I see it? Like what's the way to influence? But at the end of the day, like, you know, it's the founder who has full accountability for the outcome of the company. And that can be hard sometimes, especially when there are moments where I think, we should go this way and the founder wants to go that way. But ultimately, that is their decision. And it is an adjustment for sure. But I don't miss it. Like, you know, operating is really hard. Being a founder is...is another level. Like I'm married to one. And so I've seen it firsthand and it is a very, very hard job. It's never over. It's a relentless job. Relentless.
Michael Eisenberg (28:59)
So you sit around a table like I do. I always say I'm unencumbered by any operating experience in my life. But you sit around a table and my partner, Eden, was an operator and a founder. And you sit around a table that has some people who've been lifelong investors, and some people who've been operators, at least at some point along the journey. Any difference in investment outlook and insight and approach between people who've been an operator at some point in their career and those who have not?
Sarah Tavel (29:28)
It's so hard to generalize, you know, look at my partnership. Like I have Peter Fenton, lifelong venture capitalist, Chetan, pretty much lifelong venture capitalist, Eric and Victor, experience on the operating side. I'm kind of the hybrid middle. What I've seen outside of, and I think we all show up differently as board members, and we all certainly have different strengths and weaknesses and lean on different facets of our personalities or experience sets. I'll say like, there are two places where I see, there is a common ground in terms of the failure state on both sides.
The person who is an operator, the failure state for that person is thinking that they can do it themselves. it biases their investment decision-making process. And then once they've partnered with a founder, it biases how they partner with that founder. They think that they could do it themselves. They get too micromanage-y. That's certainly a big, no-good way.
On the lifelong investor, I think there's an arrogance that can be very difficult in a lack of perspective, you know, where the feedback isn't grounded. Maybe even too grounded in analysis of a public company, versus what really makes sense for an early stage company that has to be ruthless on prioritization, that has to be ruthless on a lot of the decision making around the people that they hire, and maybe not really understanding that as well.
Michael Eisenberg (31:32)
That's interesting. Makes me wonder whether you have to get off public boards as a venture capitalist just to reorient about size for your new investments.
Sarah Tavel (31:40)
Well, certainly the time allocation is the big thing for us that we think about, which is that public boards, as you know, take a lot of time, and not the most productive means, often, versus the early stage work, where you recruit one person for a company at the early stages and it has a real big impact on the trajectory of the business. And so, Benchmark is a firm that, our aspiration is to partner with the most ambitious founders of our generation as the first board member. And we have no leverage in our system. There's no platform team. There's no marketing team or PR team. And so every hour that you dedicate to a governance committee in a public company is an hour you can't dedicate to meeting that next founder or supporting the ones that you're already partnered with. And that opportunity cost is very high.
Michael Eisenberg (32:43)
And so what would be a reason to stay on a public board?
Sarah Tavel (32:45)
I think certainly the relationship with the founder. And there's some things–we're big students of public companies at Benchmark, because we think that by studying the public company, what it looks like at scale, you can kind of have a feedback loop for the decisions you make at the very early stages, and how that ends up compounding to become a public company. So Eric Vishria, my partner, as an example, he's led the first round of Confluent. It was his first investment at Benchmark, and now it's a business doing a billion dollars of revenue. He's still on the board. And I think for him, a lot of it, of course, is just dedication and commitment to Jay and the rest of the team there, but it's also just seeing even more the wisdom that you get that you can then partner with the founder who has a 500-million revenue business, or a 200-million revenue business, or a 50 million, or before that–those points are so difficult and having a little bit more perspective on it from a company of that scale still helps inform the early partnership that we do.
Michael Eisenberg (33:57)
Before I move on to AI, where I really want to dig into, what was it like being the first female partner of Benchmark, the E-boys firm?
Sarah Tavel (34:08)
I've been the first at almost every place I've been to. When I joined Bessemer, I remember Jeremy telling me, “You know you're gonna be the first woman we hire since, I think it was 10 or 20 years.” The firm was like 25 people, and I was the only woman. That was hard. When I joined, just because I was so young, that was actually a big transition.
But then when I was at Pinterest, I was responsible for the most technical product surface area. So what ended up happening is I was almost always the person in the room with a bunch of engineers, almost always all men. When I joined Greylock, I was the first woman GP. When I joined Benchmark, I was the first woman GP. So I think you do it and, you know, it's a shame that that's true.
But if anything, I actually felt like Benchmark was just an incredible breath of fresh air. The thing that most hit me when I joined Benchmark was the equal partnership. You don't realize that you exist in a hierarchy your entire career until you join a place like Benchmark where all of a sudden–I remember my first board meeting, my first Monday partnership meeting, I believe Bill brought a company in to present to the group.
And here I was, first partnership meeting with Bill Gurley and the rest of the incredible crew of Benchmark. And this guy's a lion of venture capitalists–it was a little bit during some of the Uber stuff, but he was unquestionably one of the best investors of our generation, you know, and not just that. And he came to the group with humility about a company that he wasn't sure what to do. And when I spoke and gave feedback, it was as an equal. And that culture, that organizational ethos, is so strong. People from the outside think it's a compensation thing. It's not. There's something very intrinsic to the group. And I think maybe I'm even more sensitive to that as a woman. And so it felt very special and different.
Michael Eisenberg (36:30)
Yeah, I too believe that it’s a culture that runs deep. It's not the economics at all. You have to have respect for your partners, and like them, and take their feedback as an equal. Only if you feel comfortable do you solicit their feedback. And if you're new, you get a seat at the table like everybody else. And that provides fresh perspectives that everyone should take into account. It's super powerful. I agree with you.
Okay. I want to look at AI. So you've a ton about AI, and you have some framework.
Sarah Tavel (37:04)
What’s AI again? What does that stand for?
Michael Eisenberg (37:29)
That’s exactly my question! And every investor you talk to today is saying, “Okay, show me your AI deals.” And so what I want to ask you, Sarah, is, what is this? There was AI for a while. Then there was the LLM moment, as I'm fond of saying. And now we just feel like, okay, everything's an AI company. And so for Sarah, what is it?
Sarah Tavel (37:31)
I mean, everything should be an AI company. I mean, look, the way I said to one of my companies is, and I think I may have Tweeted this, is that, I read a blog post about this, where we talk about markets as these like large bodies of water, with a certain size. But I actually think what's more important is that you're riding a current. Like, how fast is the current going? Because if you ride a trend, and this is sometimes people ask the “why now,”--if you ride a trend, then–I experienced this with Chainalysis, which was my first investment at Benchmark. The crypto market was growing so quickly. It was a strong current that you could practically throw a board onto the water and you would move really quickly. When you find a market like that, you can make so many more mistakes, and you still move forward. Then at the same time, I’ve had, and I experienced this with some of my investments that had a headwind that happened after COVID, when COVID hit. And when you have the headwind or the water stagnant, you could say, then you have to build like in a really great boat, and really great team, and paddle really hard to make any progress, right? So you'd much rather have that fast current.
So right now there are like two rivers you could take. One river is the river and there might be some current from a trend, but you still have to, with your ingenuity, with creativity, a lot of hard work, you're moving your boat forward. And then there's another current where billions and billions of dollars, and the smartest people that we have are inventing new technology that's like an engine that you've put into the water that's just pushing it forward. And you better take advantage of that engine. That current is there for you. I've never seen anything like it. The revenue ramp we see on businesses right now is faster.
I started at Bessemer in 2006. I've never seen anything like this. SaaS was incredible. Mobile was incredible. But this just feels very different. And so you either are using this technology in some way, LLMs, to automate work, to provide a value proposition that just, relative–often to the cost of a human doing the work–is so much cheaper that the economic equation for a business to adopt your technology is just so easy. Or you're using it yourself in your team with your engineering productivity, with the rest of your team to find ways to take advantage of the technology.
And by the way, not to ramble on too long here, but I think one of my companies, I was talking to the CTO, I'm writing a blog post about this, and he had such a great point, which was that all of us non-technical people have a learned helplessness, that we don't know how to code, to do SQL queries ourselves. And he had this moment of realization with–this was around, I think GPT 3.5 or so–that, wow, right now, all of a sudden, every single person in my company can do their own SQL queries. And how do you get people out of the learned helplessness of feeling like they have to ask an engineer to do something for any task, or ask an engineer for, or some technical person for the analysis, and actually going to a place where every single person can solve their own problems, even if it means building their own software. We are so far from the full expression and impact of that in 99.9% of companies, that I think, if the technology froze today, there's still so much impact that we're gonna see that it's just incredibly exciting.
Michael Eisenberg (42:02)
So what's an AI company? Something that just leverages LLM to reduce costs and reduce work?
Sarah Tavel (42:08)
That’s the probably the easiest–I mean, look, there's AI companies that support, you know–that's the type of company I focus on. I'll put it that way.
Michael Eisenberg (42:21)
Why are they growing so quickly? What changed?
Sarah Tavel (42:25)
Well, there's a few things. One is just the economic value proposition. We haven't seen anything like it, maybe since virtualization. It's such a clear economic–all the software as a service, so much of the, and again, I've focused on like application layer up. That has always been this kind of squishier, “I'm going to improve the productivity of your existing employees.” And how much more? 10%, 20 %? It was always this little squishy kind of thing to really justify. There's a little bit of a leap of courage that the $50,000 SaaS bill that you're going to pay is worth it for the productivity improvement and effectiveness that you get from your team.
Now with AI, it is not even close how compelling the value proposition is, how clear it is. And so that's number one.
Number two, I'd say, is that these AI teams work their butts off. I think part of what we see with our portfolio is that everybody knows that right now there are a number of opportunities that are going to create generational companies. And if you have the typical, I wouldn’t say nine to five because what startup is nine to five–but if you are used to a cadence that's kind of more, you know, what I would say is like the pre-AI ethos and culture. And, you know, we went through this whole generation of entitlement where people, you know, don't want to work too hard, don't want to come to the office all these days. But like, you know, 11X, which I'm on the board of, you know, that founder Hassan. He is so intense, McCor, Brendan, the same thing. These guys, it's not an in the office three days a week, this is in the office six days a week type culture where people are driving hard, because they know that there are 10 other companies, if not more, focused on the same opportunity. And the ones that are going to win, of course, the right strategy and then executing harder than anybody else.
Michael Eisenberg (44:52)
I want to reflect back on the two points, reflect back to you what I think I heard, which is point one is, I have a worker, whatever company I am, and I think the SaaS can make them 10 or 20% more productive. And I go to try to justify what's the value of that 10 or 20% productivity increase. If I have an LLM, what I've actually done is replace the worker, and certainly a lot of the time of the worker. And that's a more tangible cost that any buyer or CFO or software can kind of put their finger on and say, “Hey, this is a no-brainer. I'm actually taking out labor and not just improving the productivity of labor.” Is that the point?
Sarah Tavel (45:29)
Correct, yes.
Michael Eisenberg (45:31)
We'll come back to that one in a second, because I want to talk about the pricing of that, which I know you've written about. But the second point, which is, I'm just working harder and faster, which is that cycles are accelerating because AI accelerates all of us. I literally wrote, by the way, and I know nothing, your point about coding in SQL, I don't know any of that. And I don't know anything about, more or less anything, but there was a gathering that I was supposed to speak at today of all of the council heads of the Gaza envelope, about places and they're trying to figure out what to do with this 17 billion shekels investment, about $5 billion there, to do that. And so I said to them like a month and a half ago, you know, someone should write a tender. It's now six weeks later and nobody did. So I took an hour and a half, and bounced a tender between Grok and ChatGPT, the research module, $200. And I think I did the work of five lawyers, three architects and 25 Knesset members.
And I have three copies of three different potential tenders for it in an hour and a half. You go, whoa! That's pretty stunning. So that's kind of speed, and hard work, as you said. But you gotta ask yourself, if there's 10 other people over here doing it, what kind of moat do I have on this business? Speed’s not enough when everything is accelerating that quickly. Or is it?
Sarah Tavel (46:56)
It's absolutely the right question, which is, you know, the thing I think about is like–I meet founders all the time, and they talk about all the things that they had to build in order to create this, you know, user experience that works. And the reality is, is that two years from now, another company is going to be able to come in, and they won't have to have done all that complicated work, because the technology is so much better that the floor keeps rising on any company's ability to build new software. And so you have to have a very strong point of view over time of what's the enduring competitive advantage. We are a firm that is very vulnerable to network effects.
Michael Eisenberg (47:52)
Vulnerable in the popular sense–meaning….
Sarah Tavel (47:54)
Yeah, when we see a network effect that's real, it's difficult to resist. Those are, without question, where the largest outcomes tend to come from. And so you have to have a level of paranoia in this space that you are constantly evolving your strategy so that you are able to escape competition, which is absolutely a question that I think about. At the same time, something that Bill said once when we were discussing this is that, and this is before my era, but even in the web 1.0 world, there were X number of web server companies or whatever it was, and they were all successful outcomes. Not all, but there was a large number of them that were successful outcomes, and maybe web servers.
Michael Eisenberg (48:53)
And we've forgotten about the ones that failed.
Sarah Tavel (48:56)
Yeah, but we have lived in an era now where it's just been one. For any sector, there's kind of the winner. And it may be, and we don't count on this without question, but just to play devil's advocate here, it may be that this is also a time when you can have multiple winners in a given vertical or sector.
Michael Eisenberg (49:21)
So what is actually a moat, then, that would cause somebody to be a lasting company versus, someone else just got access to, know, chatGPT 5.0, 7.0 or Grok 4.0 and they'll run me over? They're also working hard.
Sarah Tavel (49:35)
You know, in 80% of the ways it hasn't changed, right? Like you are–an obsession over the customer. Network effects, some kind of competitive advantage. We're big believers in open source. Some kind of accruing artifact that a user creates that then becomes an unfair advantage for distribution. Some, you know, multiple skews for a product so that when you do have a new customer, you're able to not just have the revenue from one SKU, but for many SKUs that create additional–some is greater than the parts. This is the same, I think about 11X as an example, that then let you have an accruing advantage with your going to market engine. I mean, none of these things are different. The 20% that is different is just that the ability of new competitors to come into the market over time is going to go up and up and up. And so you have, and you have of course, many well-funded competitors today. Look at what you see happening in the coding world–that you have to be on top of your game and very adaptable in order to really emerge here as the winner.
Michael Eisenberg (51:00)
It feels like there's, and you've talked about some of these companies, translation is less obvious, but certainly in the coding world, that was a very obvious use case for a lot of these companies. And therefore, an obvious that 10 of them would get funded. What's kind of the most wild out there idea or AI idea that you have or run into, or you'd love to see someone start a company?
Sarah Tavel (51:25)
Well, I'll tell you what I would love to see someone start a company in. And I don't know if it's a good idea or not, but this is my call for startups, which is–I don't know about you, but I have found that ChatGPT, Claude, you know, GROK, all these products are so incredible. And yet there is an art to using them well. And there are some people who have written prompts, custom instructions, that make the product way more valuable than a normal person. I think that there's something about the command line, the kind of text input of ChatGPT or any of these LLMs that for most people, you and I have incentive and high motivation to figure these out.
But most people–and there's obviously in education, it's a huge, huge use case–but most people have no idea how valuable and powerful this technology can be for themselves. And OpenAI has, in ChatGPT, they have custom GPTs where let's say you are really, really good and there's many of these people, at writing kind of custom instructions, giving documents to make the GPT work exactly how you want it. But I feel it is like scratching the surface of what's possible. And so what I would love is, and I think it's a massive opportunity, is for someone to create a UGC community with these prompts, with these custom GPTs, with whatever the backend is, it doesn't really matter. But imagine I could follow you for your analysis on, you know, updates on whatever news in Israel, investing in Israeli founders. Like whatever knowledge you've wanted to impart, you could put custom instructions. I think about like these health nuts.
There's so many quantified health nuts, and I'll find custom instructions on Reddit for how to analyze blood tests or how to do whatever. Imagine you could follow one of these people in a community and see all the custom instructions, prompts that they've created to do these types of things. And all of a sudden, you go from like, that blank sheet of paper to having someone who has already done the hard work, whom I can follow, who gets like status seeking work, the satisfaction of that status seeking work, from being really good at these prompts. I would love that. I would love that. And I hope someone builds that, because I think ChatCPT, as powerful as it is, is still a power user tool. And I think there's going to be some kind of democratization that happens that could be horizontal. It doesn't have to be someone else packaging it up for a user.
Michael Eisenberg (54:37)
I've actually seen someone build that for a deceased rabbi.
Sarah Tavel (54:40)
Wow. I believe that. Yes, I believe so, but so that's a great example. It's too atomized right now. Someone will create, I believe someone will create some kind of community here.
Michael Eisenberg (54:54)
What should somebody starting like a B2B company not do right now? Right? You've been playing this application layer for a while. You've done this in AI. Like, what are the no-nos?
Sarah Tavel (55:04)
The two no-nos that come to mind, one is Sam Altman in a podcast, I think it was with Harry Stebbings said, “If your startup assumes that LLMs are gonna stand still right now, we're gonna bulldoze you.” And I think the biggest mistake that I see people make is either, they're building something that isn't a beneficiary of the kind of continued and astounding march forward with the power of these large language models. And so if you're kind of, it's back to my streams. Like if you're building something, and you're not benefiting as the engines that are propelling that current forward are getting stronger and stronger, that's a big mistake.
And also, if you are building something and then it's like a bridge, because you're assuming that the LLMs or whatever the labs are doing isn't going to progress forward, and you're going to outrun them, that feels like a very treacherous game to play.
Michael Eisenberg (56:24)
You know, I heard Sam on the same podcast, and it made me wonder if this is like deja vu again from the late 90s when I got started, which was, don't do anything that's anywhere near where Microsoft is, because they're going to bulldoze you. That turned out to be bad advice early in my venture career. “Hey, don't invest your–Microsoft's going there.” And then something happened, you know, it was antitrust, Microsoft lost his footing, there was Steve Ballmer, I don't know. And Microsoft became easy to compete against. If you invested in the “don't compete against Microsoft,” or you actually were ready when they kind of lost their footing. And I keep wondering whether in that motion and moment again with some of these large language models. Any thoughts on that?
Sarah Tavel (57:06)
I mean, let's take Copilot versus Cursor, versus Windsor, versus Devon, Factory, all these companies. I think Microsoft is executing, and we're seeing it. Their pricing power–they can do things that aren't fair, that are advantaged by their balance sheet and their distribution.
We're investors in Cursor. We think the team is unbelievable, and that they are really as good as they get. And yet they have very fierce competition. And when we made the investment, we asked ourselves, could Microsoft compete? And, you know, we underestimated them. And I wouldn't have changed the decision, because it really was a decision on the team and the clarity of their thinking on what a developer needs and what the opportunity is. But it is intense competition like we've never seen before. And it's the same thing with all the foundation model companies, of course. What I think about, again, I focus on the application layer and then consumer, is we are, this level of competition is the biggest gift to all of us that we could ask for. Think about how cheap it is for us to access this technology. It is unreal. I was coding up an application over the weekend, and I remember I was reading–
Michael Eisenberg (58:52)
I love how you said that so nonchalantly. “I was just coding up an application over the weekend.”
Sarah Tavel (58:56)
Well, I should say I was texting up an application over the weekend. That could be one of my other lines. I was just, you know, I remember there was a moment where I had to buy more credits. And I was just like, “Oh my God, you know, another $40 or whatever to buy more credits.” And then I was just like, my God. Like this used to be hiring an engineer, thousands of dollars, so much time, and all of a sudden I could work on something for a few hours over the weekend to build an application I really want, and it cost me $150 to build it. We are in such a time of abundance, and it is because, in large part because the billions and billions of dollars going into these companies, all trying to race ahead of the other models, get to super intelligence first.
You think about the cost of training, the cost of inference, we're all getting products that should be way more expensive at these crazy low price points, and it's amazing.
Michael Eisenberg (1:00:09)
It should be said though, as a guy who lived through the internet boom and bust and boom again, that sometimes a lot of this is subsidized by venture capital dollars over time.
Sarah Tavel (1:00:18)
There's no question that's what's happening. No, it is known. It is known. I mean, if you like, of course there's the variable inference costs and that for many of the labs is gross margin profitable, but then there's the advertising, the costs of the model training. And that's where the numbers don't look as pretty for these firms, but should over time be okay. At least that's the belief.
Michael Eisenberg (1:00:43)
It should be said that at least the revenues are growing, you know, super fast in these places, which was less true in the internet area. Early internet. That was more of like a circulation of dollars for guys and people in the router companies and whatnot. I want to ask you two questions. The first is, if there's a public company out there that you think is in this current that is non-obvious, like not the mag seven or the Microsoft–
Sarah Tavel (1:01:11)
Shopify.
Michael Eisenberg (1:01:12)
Shopify. Why is Shopify in the AI current? What is it behind it?
Sarah Tavel (1:01:16)
You know, I Tweeted, I was like, if I could have a portfolio of public companies where the CEO has gone AI native, that would be a very, very good portfolio to own. And when I asked myself which CEOs have gone AI native, Toby is AI native. I mean, the guy has his own GPU cluster at his home.
And I just think when you have a founder, a CEO who understands the impact that this technology can have at an organizational level and then is able to effectively push that, I call it the “Oh fuck moment,” down into the rest of the organization, I think you just are able to achieve outcomes for the company that no one can anticipate. And so that would be my pick.
Michael Eisenberg (1:02:15)
I love that answer, by the way. What is the most under explored business model using AI right now? You've written a lot about the business model.
Sarah Tavel (1:02:23)
Advertising.
Michael Eisenberg:
Oooh, now talk to me!
Sarah Tavel:
Look, and I can't take the credit for this discussion. It's a conversation we have at our partnership. I think Peter was the one who kind of first raised it. But if you think about consumer companies and the ones just generally having a business model that is aligned with capturing the most surplus from the customers that use you the most–So gaming is famous for this. Like gaming knows games. Developers know how to have a monetization model that benefits from the whales, that is able to extract the most rent from the whales. And so you're going to have a large percentage of your users who are barely profitable when you look at them from a user acquisition perspective. But then the whales make up for that. It's hard to know who the whales are going to be.
So you have marketing spend that acquires them all. And then you really cultivate and monetize the whales. Google does this very well, right? Their monetization model natively understands that not every query is the same value economically. Therefore, not every user has the same value. And so there's going to be some sponsored results that are monetized way better than other sponsored results.
And then you look at ChatGPT. The monetization model feels like such a missed opportunity for the company. Because you have a monetization model that treats coders and education people and people using it for recipes the same way. But if you could have a monetization model that when someone's using you to think about travel, or make an engineering decision, or whatever it is that you're able to monetize those people differently, and then therefore able to remove the kind of subscription barrier and just have a free product for everyone, I think you can build a very large business, one that we underestimate right now.
Michael Eisenberg (1:04:42)
Love that answer. I have a play in the space. I hope it actually works out.
Sarah Tavel (1:04:46)
Well now you're tempting me.
Michael Eisenberg:
We'll see if it does. A couple of quick questions for you. You built a brand as a VC. What is your brand in your view?
Sarah Tavel:
I think people know me for my writing. And what I just hear is kind of, thoughtful, or that they recognize that I'm very focused on building enduring value as opposed to getting lost in the short-term hype.
Michael Eisenberg (1:05:21)
How important is it to build a brand as a VC today? Beyond the firm brand, called Benchmark in this case.
Sarah Tavel (1:05:26)
I think it's very important. Ultimately because a founder is partnering with a person. So much of finding companies is often the founder reading something or having heard something you said in a podcast and wanting to make sure that they talk to you. I think there's a very positive selection bias with the founders that are most ambitious and most want to build the best company, being very intentional in their fundraising processes to not just rely on the inbound VCs reaching out to them, but actually being proactive in finding the VCs that they want to speak to. And that is a very positive selection bias. And I think having a brand helps you get to that one, that group.
Michael Eisenberg (1:06:23)
What’s challenging or different about Gen 3 of the firm? We talked before about succession at the venture firms.
Sarah Tavel (1:06:30)
The VCs who are starting right now don't realize how lucky, how good they've got it. It is just an incredible time to be starting in this business, an incredible time. I think the last, since 2018 has been a very strange roller coaster where the macro has been very strange, the dynamics in the industry have been very strange.
And so that kind of manifests a little bit. But, overall, I think right now we have just an incredible group that has different strengths. You know, we have Peter, Eric, me, Chetan and Victor. And I think it's a great great balance across the team. So I think it's going to be fun.
Michael Eisenberg (1:07:26)
Philippe Botteri told me to ask you, why did you play rugby in university?
Sarah Tavel (1:07:30)
You want to know the real answer? I had been a competitive swimmer when I was in high school, and then I got to college and I wanted to do a new sport, but I didn't want to do a sport where–I grew up in Manhattan, like my soccer team, we practiced in a gym. We didn't have an outdoor, when we had games, it was on a water recycling facility that stunk.
So I didn't want to play soccer. I wanted to do a new sport where I thought everybody was getting started for the first time. And so I went to a rugby meetup and an ultimate frisbee meetup, and the rugby party was so much more fun–that I joined rugby. Any rugby team will tell you that their drinking team has a rugby problem. And there's a lot of songs and singing, and it's just a very fun, unique culture.
Michael Eisenberg (1:08:33)
You've called yourself before a San Francisco transplant because you, like me, grew up in Manhattan. Well, what does that even mean?
Sarah Tavel (1:08:39)
I think I'm just always going to be a New Yorker. You know, I try…
Michael Eisenberg (1:08:43)
I've lived here 31 years, in Israel. Every time I go back to Manhattan, it still feels like home, which is pretty remarkable.
Sarah Tavel (1:08:48)
Yes. Like I am without question the fastest walker on the sidewalk. I drive like a New York City taxi driver. I curse like, you know, a foul mouthed New Yorker. I just, I can't help it. I am a New Yorker, and just get out of my way when you're on the sidewalk because I will run you over.
Michael Eisenberg (1:09:10)
Will you move back?
Sarah Tavel (1:09:12)
Probably eventually.
Michael Eisenberg (1:09:14)
What's changed for you since October 7th?
Sarah Tavel (1:09:17)
Wow, you really like to end on a bang. You know, the truth is, my family, we've always had a history, like my mom's side, Sephardic Jews, that Spanish Inquisition, they were nomadic, were in Turkey, spoke Ladino, came to Argentina. My dad's family, you know, pogroms, leaving Lithuania. Like I always had a very strong connection to being Jewish, but I kind of took it for granted and I took Israel for granted.
And when October 7th happened and then October 8th, and just seeing the reaction, I realized I couldn't take either for granted anymore, and that it was, you know, I think I heard someone say that they were “born again Zionist,” but that really resonates. And so, you know, I just realized for my kids even, that I was doing a really bad job of connecting them to what it means to be Jewish and to our family history, which was so important to me growing up. And I think there's so many incredible parts about Judaism that I'm so proud of. And yet again, I took it for granted. Like I remember being at Harvard and people talked about antisemitism. I didn't feel any of it. I was just oblivious.
Not to say there was any there. I don't know. I was just completely oblivious. And now you see everything a lot more clearly. And so it's been actually a wonderful silver lining for me, if you could say that, which was doubling down on that and making sure that my kids really, really are connected to it as well.
Michael Eisenberg (1:11:07)
Okay, you forced me to ask you another question, which is, are there any unique challenges to being a mother and a venture capitalist at the same time?
Sarah Tavel (1:11:14)
I am in a marriage where we really are 50-50 on the parents. Actually, I might be 40-60 to be honest. She might say 30-70, I don't know. So yeah, for me, as for any parent, the opportunity cost of your time goes up when you have kids. And it used to be that the weekends were this incredible time for me to read, and to think, and to write. And now I do that time between like 4.30 and 6 a.m. And so you have to change your schedule. And the opportunity costs, again, it's so much more expensive to say yes to a dinner, or to say yes to a conference, or to say yes to a trip. But that's the same for all parents. And so I encourage everybody to do it.
Michael Eisenberg (1:12:16)
I was hoping you would say that. Last question: who's someone in our space that you'd like to say something nice or kind about, who you think deserves more attention?
Sarah Tavel (1:12:26)
I don't say nice things about anybody. You know, when I joined Bessemer, as I mentioned to you, I was the first woman that they'd hired in a long time. And then, I like to say I broke the seal, because after I joined, the next two analysts they hired were women. Then over the last, gosh, 15 years since I left Bessemer, they have just continued to hire, and mentor, and promote incredible women at Bessemer. And in an industry, just because you asked about being a mom, I guess it primed my brain to think about this–in an industry where it has been hard for a long time for women to get in, you know, there's all types of subconscious biases that make it harder for a woman to do this job than a man, just like homophily by itself.
There's like so many subconscious things where it's easier to refer a deal to somebody who looks like you. It's easier to think about, if you're gonna recruit somebody, you're the head of engineering, your brain naturally sorts to candidates that are people like you. It's a natural subconscious bias we all have. And when an industry is dominated by a particular type of person, then it is structurally more difficult for other people to make progress there. And I think it's made incredible progress. And I think there's just incredible women investors now. Like I could give you a list of 10 women who have just crushed it. Actually, you know who I'll shout out? Laela Sturdy at CapitalG. She is now running the show there. She's just absolutely crushed it.
No one knows about her. She is so under the radar. And you look at her portfolio, and she is one of the greats. And no one knows about her. And so I think there's a long list, but Bessemer, I give a shout out for having been an early pioneer here, on grooming this kind of new generation of female partners.
Michael Eisenberg (1:14:53)
Sarah, thank you so much. That was a fantastic answer.
Sarah Tavel:
Great to see you.
Michael Eisenberg:
Thanks for coming on. And if you are enjoying the podcast, please rate us five stars on Spotify, Apple Podcasts, or wherever else you listen to podcasts and subscribe to the YouTube channel. You'll enjoy this, and other conversations here. Thanks, Sarah.
Sarah Tavel (1:14:56)
Thank you, good to see you.
Michael Eisenberg (00:00)
Why did he take you as an investor if you were such a rookie?
Omri Casspi (00:02)
In the beginning, he didn't really want to meet me. He was like, “Casspi from basketball? Like come on, what are you talking about? You know, what do you know about cloud security posture management? What do you know about data backup? How can you help me? Why would I take money from you when I have this other option?” It's a very competitive landscape. You have to be 10x more intense about things, and to provide value and to prove your worth. So it's an ongoing thing.
You can't come to a game and play against LeBron James and expect just to show up and perform at the highest level. He's gonna crush you!
Michael Eisenberg (00:28)
You're at 23% capacity? Watch out world!
Omri Casspi (00:30)
One of the Jewish kids came over and said, “Omri, because of you I'm proud to say I'm Jewish at school.” I was like, “What?” Dude, like, I never thought about this. I didn't start playing basketball because of this.
I always thought I loved the game of basketball, but today I think I love the work and the competition of things. I see the same thing in venture. Like, I love the work around things, of pushing yourself to the limit and climbing the mountain in many ways, rather than the game itself.
Michael Eisenberg (00:53)
Welcome to our next episode of Invested. I'm thrilled to be here with my friend, Omri Casspi. Good morning Omri.
Omri Casspi (01:02)
Thank you. Good morning.
Michael Eisenberg:
We’ll get into a whole bunch of things afterwards, but actually, on my way driving in, I saw that you tweeted Deni Avdija's move and poster dunk.
Omri Casspi:
First one.
Michael Eisenberg:
That's his first one?
Omri Casspi:
That's what he says. First poster dunk. I’m counting on it.
Michael Eisenberg:
First dunk. And I read the Tweet, and I knew we coming to have this conversation today. I said, you must feel like the father of all these players in the NBA, these Israeli players in the NBA.
Omri Casspi (01:34)
Totally. I love Deni, and I was fortunate to play with him when I came back to Israel, so kind of nurture him a little bit, in a sense. He was 17, 18 at the time. And obviously we had big dreams for him. Every morning I wake up in the morning, want to read the box score, and I want to see how many points he scored.
Michael Eisenberg (01:50)
That's amazing. Now, like, so you were the first Israeli NBA player in the NBA, and we always spend most of our time talking about venture capital in the NBA. And now there's Deni, and there's this guy Danny Wolf who's now playing for Michigan,
Omri Casspi:
He’s coming up, yep.
Michael Eisenberg:
And Ben Saraf, who's probably coming in the draft also. How does that make you feel? You;re like, the trailblazer.
Omri Casspi (02:10)
Yeah, interestingly enough, I think, you know, kind of looking back at things, you know, I think opening a market was a big thing for me. Obviously representing my country, and being the first one to get drafted in the first round and play for 10 years. And if I have any, even a small percentage of, you know, kind of people's dreams and players' dreams to play in the league–I think it's the biggest accomplishment of my life, in that sense. So having Deni there, and I think it all kind of relates to venture, also, in that sense where, if you look at some of the bigger companies coming out of Israel in the last couple of years, folks are now dreaming of building generational companies. So in that regard, from a sports perspective, we had Gal Mekel, and Deni, and Ben Sarraf, and I'm meeting kids at 15, 14 years old now saying, “Hey, I want to be in the NBA.”
You know, when I was playing, I remember everybody was trying to put these different boxes upon me. Like, you know, “How about you just make it to the first league and you'll be an Israeli basketball player? You know, like, what are you even thinking about? Like, Euro League? Come on, you're crazy.” And now I'm seeing kids–and I love it. I think the fact that they're dreaming about it, and they're setting high expectations, and goals for themselves–I think, you know, we're going to have more players to go out and play in this league.
Michael Eisenberg (03:27)
That is exactly where I wanted to head, so thank you for making my job really easy today. When we did the first presentation for Aleph in 2013, one of the things we wrote there is, “You could build generational companies in Israel now, $10 billion companies,” which wasn't dreamt of before that. Why? Because the first ones that happened, there was Checkpoint, there was then Wix, and a couple of others. There was a small number, but it was just having these icons. You say, “If he can do it, and he can do it, then I can do it.”
And I think what you just said about playing in the NBA is the same thing. “If Omri can do it, well then Deni can do it, Ben can do it, and Danny can.”
Why do you think that iconography, or the fact that somebody has done it first, is so unlocking for other people?
Omri Casspi (04:19)
I think it's in a couple of different layers. I'm thinking about it a lot, you know, in that regard. If we make the resemblance to tech, you know, it creates this dynamic where investors now also, you know, if you take Wiz for example, “Oh, they've done it. they scaled really fast.” And so we've seen this playbook before, similar teams, big markets.
Like, okay, so we can essentially kind of have the same argument for this new company. And then the founders are like, “I've seen Asaf doing it. So why has he done it this way?” And so we can learn from the mistakes that they've made, and take some of the good things that they've done and essentially capitalize on it. So one of my companies has raised more money in a shorter period of time than Wiz.
Michael Eisenberg:
Which company?
Omri Casspi:
It's a company called Eon. So essentially they go in after data backup. And it's a similar story from a team construct. They sold businesses before. They'd been in Amazon. They managed data backup and storage for Amazon globally. And now they're going again.
They’re like, “We're gonna build this massive data backup and storage platform. And there's many other things we can build along the ways of that.” And so investors have more confidence in, “Oh, this has been done before, so we can make a compelling argument to invest in this company.” So I think if we–
Michael Eisenberg:
And pay a higher price.
Omri Casspi:
And pay a higher price. And essentially, you always buy the future. We're capitalist and so–it never really adds up. The valuation of a company, especially from a financial standpoint, it doesn't really add up. It's like, at the end of the day, you always buy the future of it, right? And to a certain point, at some point you do get, you gotta meet the market, and essentially you wanna be publicly traded, and then you gotta make the compelling argument to what the value of the company is, right?
But in the early stage of things, you always buy the hype. So it's also the same thing. Folks, I think, saw me and like, we have somebody there, and it's time for us to dream about these things and we can practice and–one of the things that I tried to do when I was playing is always come back to the summer, and bring my coaches here, and have them train some of the younger guys and share a little bit of my experience.
And I think one thing that I'm really happy about is, I want Deni to be a lot better than me. And I'll tell you a story. A couple of weeks ago I went to Ichilov Hospital to visit soldiers.
Michael Eisenberg
That’s the local hospital in Tel Aviv.
Omri Casspi:
So I've done that a lot since the beginning of the war, since October 7th. I try to go almost every Monday.
And I saw this beautiful family with a baby, and they just came out of the hospital and they said, “Omri, I want our son to be as good as a basketball player as you were.” And I said, “I want him to be much better than me.” And I was thinking about it in that sense and I was like, wow, so now we have Deni. So I really want him to be much better than me. So like, I really believe that. I think the fact that Deni’s there now, and doing what he does, and I think he's gonna inspire the next generation of basketball players.
Michael Eisenberg (07:13)
I wanna unpack this for a second, because I think there's a lot of depth in this for entrepreneurs, basketball players, but in everything you do, that requires both aspiration and excellence. And so, I often wonder for myself whether the fact that I saw somebody doing something, what caused me to do it? Is it, oh, I now believe it's possible so I can aspire for that? Is it that there is a playbook now, so there's a group of people around who have experience at this and can tell me what to do, and give me feedback along the way?
Or, which I think part of a point you're making about investors, there's now a supporting cast around that enables an ecosystem to develop that almost expects and demands this of the person. Which do you think it is mostly?
Omri Casspi (08:02)
I think it's a little bit of all these different cases. I think for me, I don't know, even now in venture, I feel like a little bit, somewhat of a trailblazer in that sense. I'm the first basketball player to really start a venture firm from scratch, and–
Michael Eisenberg (08:19)
There were football players, by the way, way back. Ronnie Lott and Joe Montana. I remember those guys. Champion Ventures it was called.
Omri Casspi (08:22)
Right, in America. So from that perspective, for me, I always wanted to trail my own way, in many ways. But I think that the fact that there are expectations now in the market, and folks have been there, have done it, and there's an ecosystem from all these companies coming out, founders are coming out, and executives are coming out–and it's also, I call it modern-day Zionism in many ways. I'm sure we're going to talk about it.
But essentially, the fact that we have generations of companies out of Israel these days, with hundreds and thousands of employees, and just the fact around that, from the businesses around that and the supporting cast around that, and all that sort of stuff, it just really helps the country and the future of our country.
Michael Eisenberg (09:02)
One of the things that I think is hard about the venture business, as someone's been doing this 30 years, is that it's on some level manic-depressive, right? It's like there are ups and downs, and ups, and downs. The founders, not the venture guys, the founders actually have to push through. You find that any of your sports experience is helpful in that regard? Do the founders ask you about that?
Omri Casspi (09:25)
Absolutely, in many, many different levels. I think founders are–it's just like playing a game and, you know, Deni had an amazing game last night. And guess what? Tomorrow he's going to have a morning ritual practice, and there's younger guys coming and trying to take his spot. That's just the nature of the most competitive basketball league in the world, right? And there's folks on the bench, and even though they're very happy for the success of Deni, and the success of the team, they want to get their own minutes, and so on and so forth, right?
So, you always got to be on edge, in that sense, of always proving yourself. So, for example, like one of our companies raised a round. So obviously it's a milestone that you should celebrate, and you should celebrate small wins. But we wake up the next morning and, you know, you have to prove yourself. There's a new cap table, there's more investors, they're pushing you.
So, I try to behave this way too, because–if I can work, and execute, and deliver to my founders in the same tenacity and kind of obsession that they're doing to their companies, I think I'm going to be able to prove myself as an investor. I think one of the biggest struggles that I had early on, and I think it's an ongoing thing, is you come from sports, and it's great, and there's a lot of respect for sports, obviously, especially here in Israel, basketball and so on and so forth.
But at end of the day, it's like, you know, “Omri–there's a really established venture capital ecosystem, and there's great investors. Like, what do you really know about this? What do you know about cloud security, posture management? What do you know about data backup? How can you help me? Why would I take money from you when I have this other option?” It's a very competitive landscape. So you have to be 10X more intense about things, and to provide value, and to prove your worth. So it's an ongoing thing.
Michael Eisenberg (11:17)
One of the things I've always appreciated about you, and I think it comes out in this last sentence, but I want to dig into it, is–I think you have an unburning desire for excellence, which doesn't ever stop. We can perform better on the basketball court. We can learn more about this venture industry. We can drive our founders better, but I can drive myself, in your case, yourself harder. We can do it for the country. And it's a relentless pursuit of excellence. Where does it come from?
Omri Casspi (11:47)
I don't know. It's a really good question. I really don't know. It's not about the money and it's not about fame. It’s also like, when you give it your all, I'm totally fine with the results. I was asked many times, do you miss basketball?
Which is a great question, right? Obviously I played for 16 years, I played 10 years in the NBA, 16-year professional career. I was the captain of the national team, the captain of the Maccabi team for many years. And my answer is no. And I was fortunate to be able to walk away from the game without looking back. And the reason was that when I was 16–obviously trust me, I wasn't that smart at the time. I didn't know why I was thinking, but I promised myself, listen, you're gonna play this game, hopefully gonna be a professional. I don't know where it's gonna take me, but the day you walk off the court, and you walk away from the game, you're gonna be totally satisfied with everything that you've done. You give it your all. You worked your hardest, you woke up early in the morning to lift, and to shoot, and to train, and you're gonna do meditations, and you're gonna do psychology and everything else. So you're gonna walk away from the game comfortable knowing you give it your all. So three and a half, four years ago now, I retired from the game and I haven't looked back.
So when I look at venture, I want to do the same thing. I actually talked to my team, and I expect that from everybody on the team saying, “Listen, in 20, 30 years, we're going to have a generational shift, and I'm going to walk away from venture. Hopefully, right? I'm going to make it for 20, 30 years and I'm going to be successful. We're going to be successful together and so on. But at some point, I want to be comfortable knowing that I gave it my all. So the next 20, 30 years, I'm going to give it my all.
Michael Eisenberg (13:32)
That's like, that's a great pep speech to the team, but there's something that burns deep inside. I don't know, I'm trying to access it right now, and try to figure out where does it come from in your childhood, where you were raised, how you were raised.
Omri Casspi (13:44)
I don't know, I think it's a good question. I think it's a pursuit to be the best that you can be. I think God put us on this planet to do something, and to do good for our community, for our families. I wanna be the best husband I can be. And I always tell my wife, I think the best friends that I will tell my wife–”If I can be better in any way, if you see something annoying, like I wanna work on myself, I wanna be better.”
So it's like, it's an ongoing thing on everything. It's on our deck, and it's on our website. I want it to be beautiful. And I want it to be the nicest it can be. It’s on everything that we do. It's like, I wanna make sure that every company, like, when we work with our founders, we're so customer obsessed in that sense, of our founders’ obsession. We're like, I wanna know that we're by far the most helpful for our founders. We have to build an identity. So it's an ongoing thing. It's sometimes hard, you know, because you really push yourself, always, to the limit, but I want to be the best, and I think if we do that, the best I can be in our world and if we do that, there's many other great things we can do to help our country and to help our different things. That's kind of like what drives me.
Michael Eisenberg (14:51)
One of the first times we met, you were still playing ball. I remember you told me something, which was that you were buying real estate. I think it was in Ohio, if I remember correctly. And I said, “What are you doing? Why are buying real estate in Ohio?” You said to me two things at the time. One is, “It's a chance to learn about business.” The second thing is, “I know I'm not going to be playing this game forever.” There's something else in you which is like, I prepare for the future for the long term. Then when you first said you were going to get into venture, I go, that makes sense, actually, because you're a future-thinking person, despite the fact that very few people have made–very, very, very few people, if any–have made that transition. What caused you to invest in real estate in Ohio while you were still playing ball?
Omri Casspi (15:37)
I wanted, know, it's like, life after basketball is like, essentially like you prepare for a game, you know, in many ways. You can't come to a game and play against LeBron James, and expect just to show up and perform at the highest level, right? Because if you don't do the work, if you don't lift weights, if you don't shoot, if you don't wake up in the morning, and you stretch, and you massage, and you eat properly, and you prepare for a game, he's gonna crush you. He's gonna crush you most times anyway, even if you do all these things, right? But at the same time, if you do all these different things–so if like, you box out to a rebound, one thing coach always says, is, “Don't look at the ball, you know, go out and do the early work. Box out, put your body in the position, and then go get the rebound.” And then you can put yourself in position to get the rebound. It's the same way for retirement. And it's even more drastic in basketball players and professional athletes, and many, many, many athletes, you know, retiring. They really find it hard to find themselves in life after basketball, right? So you have to do the work early.
And one thing I tried to do at the time is to meet folks like yourself, and folks in real estate, and ask questions, and to pick their brain about different things, and strategies, and ask dumb questions. And while you're playing–I had a unique position, being the first basketball player from Israel, so folks were really nice, and I was fortunate to meet them even after basketball. But while you're playing, folks wanna meet you. They wanna spend time with you.
I think the NBA have started this, through the player association at the time, this Rookies Transition Program. And one thing that they, essentially do, it was like, bring 50 rookies every year to this camp out of New York, and they teach you about the league, and media, and so on and so forth. So one thing that they told us was like, “You guys are gonna make a lot of money in the NBA. There's guys sitting courtside that make much more money than you. They're billionaires and multibillionaires, right? You play for the Warriors, you see Elon Musk, you see Mark Zuckerberg, right? Folks that are worth $200 billion. So try to get interactions with them, ask them questions, meet them for coffee. Doesn't mean you have to do that every day, five days a week, but even if you take an hour a month, that you can just pick somebody else and prepare for life after basketball, it can go a long way.”
So one thing that I wanted to do, was like, listen, real estate is somewhat, if you don't over leverage, and you buy in good ocean-view properties, and you can buy in great locations, it's a very solid investment that they can perform well for yourself, and going to create this consistent income of capital. When you retire, you're able to kind of decide with no pressure what you want to do in life. So at that time, I think it was the right decision. I was fortunate to have a really amazing partner, and we did it together, and we still do to many, to many extents. And that was kind of the thesis at the time.
Michael Eisenberg (18:26)
I know, but so few people do it. Why'd you do it?
Omri Casspi (18:31)
I was always very intrigued by the business world. And I've seen many examples, especially in America where folks retired from the game and they, you know, I think could have made better decisions in that sense, of building their future in life after basketball. So I wanted to build for myself and my family, and in a solid conservative investment where, we can essentially, you know, take a year off, my wife and I and the kids, to decide what we want to do and not to have any pressure to make decisions.
Michael Eisenberg (19:00)
You weren’t even married at the time you start buying the real estate, if I remember correctly.
Omri Casspi (19:03)
But you know, I was thinking ahead.
Michael Eisenberg (19:07)
That's a recurring theme that I'm trying to get at. Like, where does it come from? I've had the fortune of meeting a lot of athletes. I think I've met, there's clearly more, but I've met two who stand out. You and Shane Battier, right?
Omri Casspi (19:20)
Shane is great.
Michael Eisenberg (19:34)
Of all the athletes, two stand out as being what I would call incredible students of the game and the world around it, and the business world around it, and understanding the power of team, this kind of incredible forward thinking, striving for excellence at the same time. I'm sure there are others. Where does it come from?
Omri Casspi:
If I don't climb the mountain, I'm falling back.
Michael Eisenberg:
Interesting.
Omri Casspi:
I can't sleep at night. Even now, I feel like I'm at 20, 30% capacity, and I'm not climbing the mountain.
Michael Eisenberg (20:00)
You’re at 20-30% capacity? Watch out world.
Omri Casspi (20:13)
That's what I least think, you know? But it drives me crazy. Like over the weekend, I was talking to my wife about this. Like, listen, I'm at 20% capacity, 30%. I don't move. And this drives me crazy in many ways. So I don't want to do anything crazy, or I don't want anything extreme. And I want to be very conservative in how I build things. But at the same time, I feel like right now–you can't be stale on a mountain. Like, you're either climbing up, or you're climbing down. Right now I feel like we're somewhat climbing, but not in the pace that I want to climb. So this thing just burns my stomach, where I'm thinking about these things.
Michael Eisenberg (20:39)
Quick question before I move on to Sheva and Swish. So you played for the Kings, the Rockets, and the Warriors. Was there a team you wanted to play for, that you didn't play for?
Omri Casspi (20:49)
I was the biggest Michael Jordan fan at the time, you know, when I was growing up. Michael was the idol, you know, the perfection of a basketball player. I think his peak was the best peak of any basketball player or athlete of all time. I think LeBron maybe had the longest, best, longest career in many ways, doing what he's been doing for 20 something years. But the peak was Michael's. So the Bulls were always my kind of favorite team growing up, you know, at that time.
One thing that you learn when you become a professional basketball player is that, you know, you play for the Kings and the Warriors–so obviously I love the teams that I played for, you know, and I love the people there. Many people have changed over the years also, but at the same time, like I have affinity and love for the fans and teams that I played for.
Michael Eisenberg (21:40)
The Warriors, the team you were on, we should say, won the NBA championship.
Omri Casspi (21:42)
Yeah, I think it was the peak of my career in many ways. Also, one thing that you learn the hard way is that you can essentially be in March 5th or something, and play amazing for the Warriors, and then two weeks later you get hurt. And then it's an unfortunate situation. We don't play for the playoffs, you know, and it's like, you come to the locker room and you see Steve and, you know, Steph, and Draymond, and KD and, you know, four or five, maybe six hall-of-famers in your locker room, right? So you play with the best players of all time, and you want to be there for the battles of the playoffs. And it's unfortunate. I almost broke my foot.
Michael Eisenberg (22:20)
That's actually the perfect segue, because one of my great frustrations of my venture career is, you have a lot of founders that get very, very, very, very far–and then something happens. Market turns–crash. A competitor comes out. You played that incredible season, and then you get injured and don’t get to play in the playoffs. How do you deal with that mentally, and how do you help founders deal with those frustrations mentally?
Omri Casspi (22:45)
It's easier said than done in many ways. I think being an athlete, and being an NBA player is a close comparison to being a founder. I think the only caveat to that would be probably you just play in the eyes of the public for all these different years, right? It's like if you get hurt and you got hired for the Warriors. I mean, you go back to Israel and it's like, literally every step of the way, every step in the morning, you go out for coffee, people are like, “Hey, it sucks,” or, “You should have done this.” So it's maybe like a publicly traded CEO, you know. Folks are always at the edge of things.
I remember sitting outside of Oracle Arena at the time in Oakland. At the time we played in Oakland, before they moved to downtown San Francisco. And my wife was at home, my daughter was about, I don't know, six months at the time. And I just came out of a meeting with Steve, and Steve was really genuine in his—
Michael Eisenberg:
Steve is Steve Kerr, the coach.
Omri Casspi:
Steve Kerr, of course, the coach. So Steve Kerr was really genuine in the conversation. He was like, “Omri, I think you played really well this year for us.” And I knew this was coming, because I wasn't able to play in the playoffs.
It was two months–at the time it was April 1st I think, and the assessment was that I'm gonna be out for two and a half months. So essentially I'm gonna miss the whole playoff. Steve was really genuine in the sense of like, “Omri I think you played really well for us. But you know, Steph is hurt, and we’re gonna face Oklahoma City in a couple weeks. And we don't have a point guard, and we must have a point guard, obviously, right? So we're gonna need to replace you with a point guard.” Then I remember walking to my car and you know, midnight after the game, nobody was there and it cracks you, you know? I was crying. I never shared that story. And I was like, wow, you know, it's like, you look back at Oracle and it was like, this is the dream of every basketball player. You play for the best team, maybe of all time, and you're weeks away from the playoffs, and you want to be there. But then I was trying to talk some rationale and things, and I was like, you did everything right. You prepared for the game correctly. You did your work.
You never cut corners. You went to sleep before the game at the right time. You ate properly. You did everything you can. So sometimes, you just have to live with the results and it's part of it. So if it wasn't the case, I would probably have regrets. But I really gave it my all, and you just have to live with the consequences. It's like, you're shooting a three in the end of the game, and it's like, obviously you want to score all of them, or do it in game. But if you put in the work, I'm very comfortable living with the results.
Michael Eisenberg (25:32)
I think there's an interesting parallel here to venture capital and to these startups, that I want to put a fine point on. Which is, most of these don't work out. Just like most people don't make the NBA championship or the playoffs, a tiny percentage of them work out. And sometimes you can put in all the work as an entrepreneur, and think you're doing everything right. And maybe you are. But the gods of the market can petition. Technology changes. Everything moves so quickly, particularly today, that you could end up with a zero in the venture business, even though you think you're on your way.
I mean, in my career, I've seen things that have been marked up to hundreds of millions of dollars and ended up as a zero. By the way, I've seen some things that were marked to zero and ended up as billions of dollars. The journey matters. The journey matters. We can't control the outcomes all the time.
Okay, tell us about the venture fund. First of all, tell us about the name of the venture fund.
Omri Casspi (26:31)
So Swish–we started as Sheva. Sheva means a lot to me. The seventh day of creation…
Michael Eisenberg (26:37)
Just to be very clear, sheva, in Hebrew, means seven in Israel.
Omri Casspi:
Seven means the seventh day of creation. And I wanted to start something new. My daughter Sarai was born July 7th, ‘17. I live on the street, number seven, on the seventh floor, unit 27. And then my second daughter was born, also, Esti, in July. I played for seven NBA teams, by the way, too. My number is always seven. So seven really goes a long way with me.
So this is kind of the thesis for Fund One. But at the same time, we wanted something more American. Obviously, we're based here, and we do the work, and we love our country, but we're very much America-facing, and we wanted to do that. I'm still very early in the process. I feel like we're somewhat leading in the second quarter in the game, but I've been to many games, and I lost in the second quarter, right? But in finance, you want to be [more] up than down, obviously, but I love what we do.
I love venture. I've been through somewhat of an up, and I'm sure there's downs, and it's never, not even an even-keel–there's always ups and downs and things not going your way, and so on and so forth. The fact that we're able to interact with amazing founders and to be assistants to them, and advise them in things, and to pick their brains about the stuff. These are the most intellectual, the smartest intellectuals that I've been around, and they see the future, and they want to conquer the world. It's an amazing job and I'm very fortunate to do that.
Michael Eisenberg (28:13)
How big was Sheva?
Omri Casspi:
Sheva was $36 million.
Michael Eisenberg:
How big is Swish?
Omri Casspi:
Swish is $60 million more. So in total we're managing almost $200 million, so $180 million.
Michael Eisenberg:
$180 million under management. Walk us through a couple of portfolio companies that you say–I know we love all our children, I do this all the time. But give us two or three. Give people an idea of what you're investing in.
Omri Casspi (28:38)
You know, the last three years since we started, is that everything is on steroids, in many ways. You have to understand what you like, which type of companies you like, what type of industries make sense, what type of industries the public market likes, you know, and so what type of founders you like, and to ask questions, and to build an identity in the ecosystem. Am I a contrarian, or am I going after established markets? Who am I?
So I think one thing that I challenge with, and I think here's an argument to me where you have to, especially coming from sports and my background, it's not like I grew up in the finance world and I worked at the Blackstones of the world, and I got into venture–and so I had to prove myself. And also essentially build a confidence and trust between my LPs and mine, and our founders and what we do. So I wanted to take a little bit more of a conservative route.
I mean, as conservative as you can be in venture, obviously–as you know, it's not very conservative, but in many ways go after more established markets wit repeat entrepreneurs and folks that have been there, have done it, and now they want to build a massive company. So some of our leading companies, my second company that I invested with is a company called Upwind. First and foremost, we're investing in people and founders. And I was fortunate to meet Amiram and his team when I was playing for the Warriors at the time, almost 10 years ago now, when they were running Spot.io, when they sold Spot.io for almost half a billion dollars.
So the whole team came together and they're like, “We want to conquer the world this time. We built a business, we sold it for almost half a billion dollars, now we want to build a generational company out of Israel.” So this was really my second investment where I was like, wow, this is what I like. I like working with folks that want to conquer the world, and I was fortunate to invest alongside great co-investors like CyberStars, with Gili and Greylock at the time.
I remember in the beginning, I'm weeks into this thing or months into this thing, and Amiram is talking to Gili and Gili's on the board. And literally after every call that he had with Gili, he had 20 minute debrief with me. And I was like, “Amiram, tell me everything. What did he say? What works? What doesn't? Why is he doing this?” I'm gonna be believing in this first principle thinking of like, really understanding everything from the base. And I was able to challenge every perspective that I had on everything, because I knew nothing, right? So I was like, why? How come? Who's doing what? Why is he doing this? How come he's doing this consistently? I wanna be a consistent investor. I wanna score 20 points, nine out of 10 times. I don't wanna score 20 points and then six points. Why is he doing this? How can he do this consistently? What do you look for? What do you need? How can I help? So all these different questions really helped to shape who I am as an investor. So Upwind is one, now it's almost a billion dollar business.
Michael Eisenberg (31:24)
But I need to ask you a question before we go on to the second one, which is, Amiram–who I don't know–why did he take you as an investor if you were such a rookie?
Omri Casspi (31:36)
Yeah. I don’t know. He saw something different, I think. It wasn't obvious at all.
Michael Eisenberg (31:46)
But he could’ve chosen anyone as an investor.
Omri Casspi:
Totally, yeah. I think at the time he had eight term sheets.
Michael Eisenberg:
Eight term sheets, okay. But he chose you.
Omri Casspi (32:04)
I think Amiram at the time bought into an athlete mentality, and winning mentality where he knew at the time that I'm gonna do everything I can to help his company and myself win. It wasn't obvious at all. And actually, the following company, they were somewhat in disbelief. They were like, “Why take your money, really? I mean, Amiram knows you for a few years, but we don't. And so why take your money?” And it was a very fair argument. I never looked at it and like, it's disrespectful, and how come they talked to me like this? I'm Omri Casspi, how’s this, that, and the third? Never. And I was like, that's an argument which is something that I need to address, and I want to address it properly.
And I need Amiram to say, “Omri was 10x, everyone else on the cap table, from the helping, he helped me.” There's other things that I can't do at the time especially, that Gili can, but, “Omri's going to be with me in America, and we're going to trial and error on different things, and we're going to do events together. We're going to introductions, to CISOs,” and so on and forth. And one thing led to another–this company, obviously, Eon is one of our leading companies….
Michael Eisenberg:
That's Ofir Erlich's company.
Omri Casspi (33:33)
Ofir Erlich, yeah. Data backup storage. I remember listening to the pitch for the first time. I met Ofir way before he started the company. So I wanted to do my legwork early and build an identity and relationship with him. Ofir was very vocal in the ecosystem. He's an active angel investor. So we started to build this relationship. And when the seed came around, Eon had, I don't know, 20 term sheets, everybody was like–it's a massive market. These guys know it better than anyone else in the world.
And there are some things that I should have done better, maybe at the seed, to really properly get into it. And we've done the A, which is also not very typical to what we do. We usually do the seeds. But they're going after cloud-native data backup and storage. It's kind of like, next generation of Rubric, Cohesity. So we've done a lot of work on the market. One thing that we like to do is do a lot of work on the market, and essentially, hopefully, invest in the best team to conquer this thing.
But Ofir really bought into the story. He already had some proofs in the market. But one thing that I always say is like, it doesn't matter. You're always good as the next game, in many ways. Ofir, you know, Deni scored 20 points last night or whatever. You gotta do it again, and you gotta do it again. So Eon, now it’s a unicorn. It's the fastest unicorn in Israeli history. Going after a massive market. Still ways to go. We're gonna work really hard. But I'm obviously very bullish and excited.
Michael Eisenberg (34:32)
So I asked Alon Arvatz, who you know, of course, he's been on the podcast. I said to him, “What's something you want me to ask Omri?” And he said, “Ask him what he needs to overcome in particular to get founders to take his money.” What are the big objections to taking your money?
Omri Casspi (34:41)
So Alon Arvatz sold Insights, and then they started PointFive. I remember meeting him for the first time. I love him, very dearly. We've been together for almost two years now. I’ve been his investor and been on his cap table. I’m on his board. But Alon was somewhat...in the beginning, he didn't really want to meet me. Amiram introduced me to him. And Amiram was like my founder, I crushed it for him, but he was like–”Casspi, from basketball? Like, come on, dude. Like, what are you talking about, you know? Really? What does he know about cost optimization? We have other options. We sold the business before.” So he was, and I remember I was like, “Alon, like, just put me in, coach. Like, I'm ready to rock and roll. Just put me in, you know? Like, I'm ready to take the battle.” And I didn't get the ownership I wanted at the time.
But like, it doesn't matter. I'm just going to continue to build, and continue with the reputation. And if you prove this for these founders, especially like guys like Alon and his team, you know, they sense success and they sense weaknesses, and these guys are good. So if I prove it with these guys, I'm going to be able to kind of build the next thing. So I think at this point, we're just going to have to continue to prove that we can do it consistently.
Michael Eisenberg (36:13)
I'm fascinated a little bit by the last five or seven minutes of this conversation, because one of the questions I was going to ask you coming into this was, how's it possible we haven't invested together? But I think I now understand, by the way.
Omri Casspi (36:25)
Tell me why, why, why not?
Michael Eisenberg
Which is–personally, the fund does, but I don't do cyber investing or infrastructure investing. What you described as conservative markets–I'm not sure it is, certainly where Israel's really been traditionally good at–I've kind of gone the other way. I'm a super contrarian, and I've gone the other way. And so there's a gulf between us. So we're gonna have to close that gulf so we can invest together. We'll talk about that. But you then also said that it's like, I want to score 20 points a night consistently, and every night. And it made me wonder. There's like a story about you, going back to basketball. But I think it's relevant for this. There's like some night, I think you scored 36 points. It was a career high, like trading threes with Steph Curry.
Omri Casspi (37:12)
Yeah, I don't remember that game.
Michael Eisenberg (37:13)
You don't remember that game. But in my own investing style, give me one of those 36-point nights! Not that I'll ever hit three-pointers, but give me one of those 36-point nights, and if I don't do it consistently, it's fine. I'm a 50% zeros guy.
Omri Casspi
Wow.
Michael Eisenberg
50% zeros guy! But if it hits, I want to–Lemonade hit. Now, you may have both. You may be scoring 20 points a night, and having Ofir Ehrlich do the fastest unicorn ever. You may be the OG, right?
Omri Casspi (37:45)
Obviously I've read a lot of Peter Thiel's books, big fan, and venture at the end of the day is a game of outliers. My biggest position these days is at Eon, obviously the company's really scaling. I think where I wanna be as an investor is that, if I look at my portfolio and I'm gonna be fine with having some misses, I'm gonna have some things that are early or struggling. I'm gonna have some really good hits, and some big winners. And if I can–essentially, obviously it's easier said than done, and you have to prove it consistently. But if you invest in the best founders and you put yourself in positions in these big markets, I think you essentially can build a portfolio construction where if you have one big hit out of 10 zeros, it also means that you might, maybe you got lucky in many ways for what I'm trying to do.
So I really want to have a couple of really good hits, a couple of amazing hits, some misses, which is fine, it's part of the game.
Michael Eisenberg (38:51)
Ofir told me to ask you, why do Israeli startups fail? What's your insight?
Omri Casspi (38:56)
So, Ofir and I debated this a lot.
Michael Eisenberg:
I guess that’s why he told me to ask you the question. Which means you have two different perspectives, which is excellent.
Omri Casspi:
I think this whole discussion was kind of going back to the same kind of first-principles thinking–the argument in venture is that, you know, the first million dollars in ARR and the first revenue has to be founder-led. And this has been true for venture for many, many years. So in many ways though, I invested at Eon, for example, and one of the co-founders is the CRO. So he's a founder. It's not the CEO, but he's a founder, and he's an amazing, amazing, amazing guy. I love him, and I spend a lot of time with him. I spend more time with him than Ofir.
And Ofir showed a little bit of a different scale, and different interactions with customers from the very early days of the company where he wasn't as, I wouldn't say as involved, but essentially he has distrust with his CRO. They've been together at CloudEndure, and they've been there for many, many years, is that, the company has really scaled, really fast, without the founders really grilling the first million-dollar ARR. So that always got me thinking. I was like, well, hold on. There's something weird here. Like, you guys raised 200 million in a short period of time.
And the sales team is now 15 people, we have a CRO from day one. And if you look historically, you have many of the Israeli startups, especially on an infrastructure level of things, and cybersecurity and so on–how many companies have failed from a technology perspective, rather than essentially, you know, their revenue and so on? So it was like, okay, if you build a DSPM platform–not disrespecting DSPM or any other platform–but like, Israelis most times, they're able to figure out the technology.
Michael Eisenberg (40:44)
We agree.
Omri Casspi (40:46)
So the technology aspect of things is somewhat, I wouldn't say commodity, you know, but if you look at a construct of a team also, it's most of time a CEO, there's a VP R&D, and a CTO. These are usually the constructs.
Michael Eisenberg (41:01)
And they have no clue who the salespeople are.
Omri Casspi (41:04)
So, hold on, so then I was like, okay, so, but you're telling me that the first 20 people in a company, it's always kind of same rough numbers, 19 of them are on the engineering side, and there's one person, with no help, that he needs to go out and get the first million ARR. He’s never sold in America, doesn't know the culture, doesn't know–a CISO can say, “Oh, I really like this product, but, you know, just change this.” That means he's not buying this thing for two years, right? But he doesn't know that, he hasn't been there. And nobody really helps them.
So this got me thinking, I was like, hold on. Something needed to change a little bit, in many ways, in that regard. I was leveraging Ofir’s experience as an entrepreneur, and as a leader, and a thought leader of like, really to be able to maybe change the notion in many ways, where like, you have to be ultra focused. So then, how many companies have closed because they weren't able to get that million dollar ARR? One to five, and five to 15, or whatever, right?
And many of the companies failed! That's where they fail. They aren't building to identify the ICP. They're not building a repeatable motion, in many ways. So we have to put thought to this where we need to help our founders. We want these guys to succeed, obviously. We have to help our founders to establish an identity, and a sales motion, and identify an ICP really early in the life of a company. And I think companies are not failing technologically-wise, and they need more help on the sales side. And I think in cybersecurity in many ways, many of the local funds have somewhat, I wouldn't say cheated the program, but in many ways they’ve established these different CISO networks, and so on and so forth, to really help the founders from the very early days of the company to get that, you know, ARR.
Michael Eisenberg (42:43)
Gili Raanan from Cyberstarts has perfected this to an art.
Omri Casspi (42:48)
Right, and you see that with many of them. It's like, so what do they really do in that regard, right? So they're able to introduce their founders to customers in America and help them bridge the gap to the A. And I think many founders need to understand that they're gonna fail most of the time. They're gonna fail in sales motion, and they need more help. They need to find a VP sales early. It doesn't mean they don't need to be in the cycle. It doesn't need to talk to customers, and so on and so forth, but they need somebody in America.
Michael Eisenberg (43:14)
Ofir also told me to ask you who's the favorite venture fund, or partner out of a venture fund that you like to work with.
Omri Casspi (43:23)
I love all my co-investors. He’s putting me…
Michael Eisenberg (43:28)
Good news, I'm out of the running here because we haven't worked together.
Omri Casspi (43:30)
We haven’t invested together, by the way, it's time for us to do something.
Michael Eisenberg:
It's time.
Omri Casspi:
There's a lot of great investors. I love working with many of them. The way I looked at it at the time, it's just like basketball in many ways. It was like, you knew for some reason, now we'll go back to basketball.
Michael Eisenberg (43:48)
Because you guys have been media-trained by the NBA. You're going to handle this question perfectly.
Omri Casspi (43:52)
So when you play, it's like, there's this amazing player out of Washington. You have to go see him, da-da-da. So like, okay, great. It's like, at some point, I'm going to get on the court. I'm going to compete. I want to feel them. I want to sense. I want them to prove it, in many ways. So it's kind of similar to investors in many ways. It's just great reputations and brands and different things. And folks are great. Let's invest together. Let's see what you bring to the table. And a lot of folks...you know, Gili, and folks at Sequoia, and Sean, and Greylock, and Index, and Excel, and some of the investors that I've been fortunate to invest with, and come in and they prove their worth, you know, they really do.
Michael Eisenberg (44:30)
I won't get a name out of you.
Omri Casspi (44:32)
The best?
Michael Eisenberg:
For Ofir.
Omri Casspi:
I need to think, because Ofir doesn't just ask questions for the sake of the question. He wants me to find a specific person on his cap table that I love. I mean, listen, I love Sean Maguire. And I think he's been an amazing friend of the State of Israel. And he's done so much work. We were fortunate to bring Elon to Israel together.
Michael Eisenberg (44:53)
We'll talk about that in a second.
Omri Casspi (45:01)
I love Gili. I'm a fan. You know, these two really are the first ones that come to mind.
Michael Eisenberg (45:02)
Our mutual friend and your former agent, Stephen Newman, who's a great guy–
Omri Casspi:
I love him.
Michael Eisenberg:
He asked how did it feel to be embraced by the communities, which I assume he means the Jewish communities, in the U.S. He said–which I'm aware of–that when you got to the U.S., you began a spiritual journey, also. Tell us about that.
Omri Casspi (45:07)
Yeah, I moved in as a 21-year-old, right after the army. It was very important for my family and I to serve in the army. My father was in Yamam, my brother was in the army, my mom was in the army–
Michael Eisenberg (45:38)
Yamam is the anti-terror unit in the military.
Omri Casspi (45:58)
Of course. And it was very important for me. So I moved in as a 21-year-old and I war it across my chest. I'm from Israel, I'm Jewish, I'm proud of it. I think the proudest moment I had was, I think it was like 2014, 2015, I was in Boston. I did the summer camp, you know, in summer in Boston. They're beautiful. And I went to the camp and had a bunch of, not just Jewish kids at the time, it was some sort of a mix. And one of the Jewish kids came over and said, “Omri, because of you, I'm proud to say I'm Jewish at school.” I was like, “What?” Dude, like, I never thought about this. You know, I didn't start playing basketball because of this. And I was so fortunate that the game, it's taken me in so many different ways. And so I really war it across my chest.
And I think one thing that bothered me at the time was in Sacramento in 2009, I went to Yom Kippur Shul. And as an Israeli, you feel Jewish, you know. In Israel, everybody here is Jewish, you know, it's like, it's not a big deal. And I went with our head of strength conditioning coach to Shul, and he knew all the prayers. I knew none of them.
I don't think I've ever been in Yom Kippur Shul, never. Probably been once maybe, but I didn't know any of the prayers. Like, dude, this is not okay that, you know, my good friend Daniel Shapiro, who now is the head of strength conditioning for the Clippers, knows all these different prayers and I know nothing, you know. So I wanted to feel part of the prayer with my Jewish community in Sacramento. They've been wonderful. Every city I went through, and every city I played for, the Jewish community really embraced me.
So at some point I wanted to start wrapping tefillin, and, you know, then my wife came about and it was amazing. We had this amazing journey together of just living a Jewish life in America.
Michael Eisenberg (47:36)
Did you have to go to America to do this spiritual journey? Like it wouldn't happen in Israel, maybe?
Omri Casspi (47:40)
I don't think–it's a good question. I don't think it would have been natural here for some reason. It's just weird. But it kind of, I went out of Israel to become more Israeli in many ways also.
Michael Eisenberg:
Explain?
Omri Casspi:
Being in America, you understand the value and the magnitude of our country, and our people, and our history, and our culture. And in many ways, I felt like at some point I'm losing my, I'm losing Omri, in many ways of living in America.
It's very easy to dissimulate in America, and to live a different lifestyle in many ways. And I became the biggest Zionist, and I was proud to represent my country, was proud to talk to Jewish communities, was proud to be part of this revolution of Zionism 2.0. And if our grandparents came here in 1940s and 50s and built this country from scratch, and they had to build the first cities, and so on and so forth, now we're able to the scale nation and build a generation of companies out of here, and employ thousands of people, and do a lot of stuff in charity and many other things. It's an amazing journey in many ways.
Michael Eisenberg (48:49)
How are you gonna raise your children differently than you were raised, given what you've been through?
Omri Casspi (48:56)
Wow. I think my parents have done an amazing job raising us. All three of us.
Michael Eisenberg:
Yeah. We agree on that. You have siblings, right? You have two siblings?
I have an older brother and a younger sister. And I think we always were raised to love our country, willing to die for our country. Family is something that is very important and part of our identity. I think where things change a little bit is now that, you know, I grew up in a middle-class family. My father was in army. My mom was a school teacher. Suddenly you have more means and things that your kids have that you didn't have, maybe, in many ways. But it's also true that we live in different times.
So I think, if you can teach them to be as modest as possible, and to cherish everything that they have, and to work on their manners, and to do all these different things, you can create amazing kids and children. And we have an amazing generation, I think. We've seen that since the beginning of the war. It's like, listen, we bash a lot of our younger generations, and look at what they've done since the beginning of the war. These guys are heroes, you know, and I think it's our responsibility now to address this, and build the next generation of kids.
Michael Eisenberg (50:07)
I’ve written before that people thought this was the Instagram generation. It turns out it's the insta-hero generation. What’s changed in you since October 7th?
Omri Casspi (50:12)
A lot. You know, some of these things. You could argue, like, these kids are not as tough as we were, you know, they have Instagram and TikTok, and they spend all this time and look at them. I'm very proud. And a lot of times I saw this, like, an interesting quote where one of the soldiers that got hurt in the first day of October 7th was saying, “I'm a hero,” right? And it's like, “I'm a soldier, I'm a wounded soldier, I'm a hero.” He was like, “Many of my friends have continued to fight since.” These guys are also freaking heroes, man. Like, these guys have been doing it for 400 days, 500 days, almost two years now, a year and a half, right? But, you know, they might not get the same recognition as somebody who got hurt, you know, but he was actually saying, listen, these guys are the real heroes. They continue to battle. They continue to deal with mental things, and get hurt, and see many of their friends fall, you know, fall and get wounded in the battle, right?
I'm out since October 7th, since October 8th, right? So all these guys. It's part of, you know, look at this amazing people that we have here, right? They fight. I remember the first few, I was going to Ichilov Hospital, which is a local hospital in Tel Aviv, every Monday for the first six months of the war. Literally, in the beginning it was like every day. And then after like two, three weeks in or a month in, my wife was like, “Omri, you're taking too much.” It was like, “You're just going every day, and you're crying, you're sobbing with the families,” and then it was soldiers and in the beginning it was mostly families, and so on. So I started going every Monday.
But you go in and talk to this 26-year-old, 28-years-old, the father with two kids who's one of those guys, you just want to kiss them and hug them. And it was like, these guys are amazing. These guys are amazing, dude. Like I didn't think we were this amazing. Suddenly you get exposed to this strength of the fact that we had 350,000 people that joined the army in the beginning of war. It's like, people from all over Australia and U.S., all these people were like, “Oh, we're going to show that we're coming, even though we didn't have an existential threat. We're gonna come, and we're gonna show the world we're here if something happens.” That goes a long way, dude. This really touched me, and the strength of our people, and I love our country.
Everybody at Swish, everything we do, every investor, we're long Israel, big time.
Michael Eisenberg (52:26)
For good reason. We had that meeting together, that we were both at, with Elon Musk and the Prime Minister. You were involved in bringing Elon to Israel. What was the spark for that?
Omri Casspi (52:37)
At the beginning of the war, there was like this talk around Elon, about whether he is a Zionist, he loves Israel, he loves Jews, he doesn't love Jews. There's no way we can afford losing the modern day Einstein of our lifetime. This guy is like nothing else. Everything he's doing, running eight companies at the same time. Talking about generational companies–this is the generation of the generationals at the same time.
Like, there's no way, especially now that he's the owner and runs the biggest, most influential tech platform in the world, you know, on an ongoing basis. So I texted Sean, I was like, “Sean, let's bring him to Israel.” And I didn't know Sean at the time.
Michael Eisenberg:
You didn't know Sean?
Omri Casspi:
No, we had this group chat that we were in together. And I was like, “Sean, let's bring him to Israel.” I was like, “How can we do it? We'll get him an efficient invite, but let's bring him here.” So this was the start of the conversation and we talked to the chief of staff and everybody came and he was here for 12 hours and...
I think it made a big impact on him, and the fact that he was able to go to the kibbutzim around Gaza and see it firsthand. It was a very rainy day, so we weren't able to really walk the kibbutzim as much as we wanted to. But the fact that he was there, and then went out to the Knesset and met with the Prime Minister, and Benny Gantz, and the president, and other elected officials made a big lasting impact on him.
And there's many things that he's involved with behind the scenes, of helping and establishing and assessing and everything else to the state of country. The fact that he was at the New York Times event, the following day, I think it was, that he showed the dog tag of the hostages. I texted my wife, like, “That's it, I can retire.”
Michael Eisenberg (54:19)
Forget basketball, forget the venture career now. Listen, I'm very thankful for that visit, because I wrote this long post in Hebrew defending him, because Haaretz came after him, that he doesn't like Jews, etcetera. He Tweeted in Hebrew, a verse from Proverbs, from Mishlei. The Hebrew Tweet heard around the world, thanks to Elon. Did you ever feel anti-Semitism in the NBA?
Omri Casspi (54:45)
To an extent, but in many ways, 95, 99% of every interaction I had in America was amazing. I had one incident,I think it was like the Jewish New Year at the time, it was in Israel and something in Sacramento, someone wrote a swastika on my mural around town. We had like these different murals on town of the players, somebody swastika-ed it. But I cannot say there was–listen, the community in Sacramento was so lovely, so amazing, that this one incident had no impact whatsoever on me, or anything that I've done with the community.
Michael Eisenberg (55:27)
I want go back to, not the Elon visit, per se, but this notion of iconography, which is that more and more today, because of the power of social media platforms and how fast things happen, one is, everything's done in public at this point. Even the startup, Ofir Erlich and Eon, everyone knows it's the fastest-growing, and what happened with Wiz and the $23 billion and Elon coming to Israel.
And Deni’s–you know, everything happens in the public eye. You're someone who's lived in the public eye. How do you think that changes the way people behave? Founders behave, politicians behave? You spend a lot of time with politicians too. They like you.
Omri Casspi (56:05)
I think for me, personally, I think it made me for the better, in many ways. Because you start thinking about every little thing you do, from a very young age. And I've made mistakes, and I've said things that I probably shouldn't, and so on. But you start thinking about different perspectives that might–everything can essentially, people can translate it in different ways. So you want to be very precise at what you do. It can affect many people from different perspectives of the aisle. So for myself, it made me for the better.
Michael Eisenberg:
Why'd you start a podcast?
Omri Casspi:
You know, good question.
Michael Eisenberg:
What's the podcast called again?
Omri Casspi:
It’s the Omri Casspi podcast.
Michael Eisenberg:
The Omri Casspi podcast. Catchy name.
Omri Casspi:
I was living in America, and it was a very common thing. A lot of players have done it, you know, and in Israel it was like, nobody's really done it at the time. So I wanted to have a different perspective on my podcast, and I started it when–it was during COVID. So everybody was at home, and I was like, I'm gonna just record this thing and put it out there. And I was fortunate it became somewhat popular, and we won, I think, the number one podcast, in 2020, 2021, ‘22. So I loved it, and at the same time, when I retired, I wanted to take a total shift and focused my 100% into venture and I was like, there's nothing that can distract me from what I'm trying to do and what I want to do. And I really put my head down to work. I still feel like that in many ways, that I still want to continue to put my head down, and continue to work, and only lift it when I start getting results, and real results, in many ways. But it's just the mentality that I have now. So I just enjoy my quiet and being away from the public.
Michael Eisenberg (57:59)
DPI, not TVPI, right? Do you go to basketball games?
Omri Casspi (58:02)
I don't, I haven't been to a Maccabi game since I retired. Almost four years now.
Michael Eisenberg:
Do your kids like sports?
Omri Casspi:
My daughters, you know, they're young.
Michael Eisenberg:
You have three daughters, right?
Omri Casspi:
So I have two girls and a boy. Michael is three. He looks like a seven year old, for some reason.
Michael Eisenberg:
Good name, man. I appreciate that, thank you.
Omri Casspi:
I love it. So he's three looking like five, maybe. So Sarai is seven, Esther is five and Michael is three. You know, Michael is kicking things and throwing things and he's, you know–
Michael Eisenberg (58:36)
Even my less athletic kids kick things and throw things, by the way.
Omri Casspi (58:39)
He creates havoc at home. Very different than my girls. My girls are starting to get into it. They play tennis a little bit. They dance. They're cheerleading. They have all these different things and programs after school. So I'm giving them their time. Being a professional athlete is very, very hard. Very hard. I wouldn't necessarily push them to go that route in many ways, but if they decide, I'm totally going to be their support.
Michael Eisenberg (59:03)
I was at a wedding last night and talking to a well-known rabbi at the thing, and you know, children of–it's a complicated thing. Especially someone, as we talked about at the beginning of the conversation, is so focused on excellence, as you are. How do you think about that in terms of parenting your kids?
Omri Casspi (59:19)
You know, my wife and I talk about it a lot. So you have to examine your child, and to see who he is and what he likes, and they're very different. So there's this thing in Hebrew, being horim le’tiferet. And tiferet means a combination of being strict in many ways–which is gvura–and chesed, which is being very grateful and not grateful, think it's very-
Michael Eisenberg (59:42)
Parents, tiferet, it kind of means glory, but it doesn't really mean–it's a combination of strength, or reserved strength, which is gvura, and kindness, which is chesed.
Omri Casspi (59:52)
Which is kindness, exactly. So I think as a parent, you always have to find this fine line between being strict, and you want to have these values, and to push them for success and so on, but also give them their freedom. You have to use–what I like about it also is like, you have to use your brain. If you’re always just strict, it's easy, right? You’re always just strict. It's easy to, not necessarily easy, but like, you're just going on one speed. And if you’re always just not strict, or being kind to your kids, it's also easier, because you're going on one speed.
But if you decide at some point, you know, this is a line, and I'm not allowing nobody to cross, and I want to be more strict there. And sometimes I want to be more kind with them in many different other areas, especially kids these days who want to be a little bit more kind in many things. But I want to hold them to a very high standard. And I think kids want to be pushed in many ways. Like, I want to push them for excellence, but in the end, I don't want to put pressure on them in many ways.
So like, I told my daughter the first day she went to school a year and a half ago. She went to first grade. I was like, “Sarai, I don't care about the results. You're gonna go to class, you're gonna have a math exam. I don't care about it. Like, I wanna know that you've done everything you can, and you prepared your homework, and you studied through the test. Whenever it comes in the test, I'm gonna be totally fine with the results. You might be the smartest kid, you might struggle. I'm totally fine with the results. But as long as you know that I know that you did the work.” And I think they appreciate that. A lot of times they keep trying to put more focus on the result. Like I want you to succeed, you have to succeed. But you know.
Michael Eisenberg (1:01:16)
You can't always control the outcome. like we were talking about before, not in venture, not in basketball.
Omri Casspi (1:01:20)
Totally. Not in school. But I'm gonna be totally fine if I see you coming in from school, doing your homework, preparing for everything, doing everything the right way. You know, we're gonna live with the results. So it gives the kid even more freedom of thought, of like, okay, I don't, you know.
Michael Eisenberg (1:01:34)
A few finishing questions. What's something I can't find out about you on Google?
Omri Casspi (1:01:38)
I've been in the public eye for 25 years.
Michael Eisenberg (1:01:44)
You don’t even have one gray hair to show for it. How is that possible?
Omri Casspi (1:02:08)
I don't know. But I think we touched many, many things. I think nailing down on somebody who thinks that what makes me tick, and what makes me g, is something that I really never, ever thought about as much. I always thought I loved the game of basketball, but today I think I love the work, and, you know, the competition of things more than I love the game of basketball. And I love the game of basketball very dearly. But I see the same thing in venture. Like I love the work around things, of pushing yourself to the limit and climbing the mountain in many ways, rather than the game itself.
Michael Eisenberg (1:02:25)
Who is somebody in this space or elsewhere that you want to say something kind about, that you think they deserve recognition?
Omri Casspi (1:02:30)
I think my founders, to be honest. Many of them took a gamble on me in the early days. Some of them had more proof in the pudding to show for. I'll tell you an example, like, you walk into the Warriors locker room, you know, think of Steve; you have Steph Curry on one end of the spectrum, and then you have Draymond Green on the other. Both of them are hall-of-famers, first ballot. No debate, Draymond is probably the smartest player I've ever played around. He has this x-ray vision of everything, and he just can translate different things on the basketball court like no other. First ballot, hall-of-famer. The best defender I've played around.
KD is somewhere in the middle. He's a little bit of a heart like Draymond, but he's also, we have to talk to him in a certain way. So when I look at my founders like, you can't talk to Steph the way you talk to Draymond. Draymond, you have to go right at his chest. Like, “Draymond, you're not playing great. You need to play better.” Steph, you do that to him, he might take a step back and he might not respond the same way. So like, the same way I look at my founders, like, okay, so I have Amiram on one end of the spectrum. Amiram is a heart. Amiram is a pusher. He's gonna drive everything through everything. Ofir’s in a different part of the spectrum. He's more of a general, right? He's running a show. He's an amazing presenter. He's ultra, I mean–obviously both of them are intellectually smart at the highest level, right? But you have these different things. So there's things that I can pick Ofir’s brain around, and things I can pick Amiram’s brain around. And they all, I feel like they want to give back to me, and they're willing to, and Alon in the middle of all this. Alon is a generalist, like he's running like a general. So I'm fortunate to invest in these guys, and they spread the word for me, and they give me credit for things, many times I’m not deserving of. And they helped me shape myself as an investor in many ways.
Michael Eisenberg (1:04:34)
I think this is an important point, by the way. People are different in general. Partnerships of people, how you communicate with them, and people with extremely high capacity, and high aspiration, and high performance are extremely complicated people that need to be dealt with differently. That's very similar, I guess, on some level, between sports. What do I have to do to get Omri Casspi to invest alongside me?
Omri Casspi (1:04:56)
You just have to show me something, Michael. You have your own thing, and people–I need to put a camera outside of Aleph and see who's coming in to start calling. “Michael, I see, I want to invest with you, so give us some room to invest with you.” But obviously I've been a fan from afar, and I'm fortunate to call you a friend as well. I was able to pick your brain before I started venture, and during my basketball career, and doing many things, and in politics, and Elon, everything you've been doing for Israel.
Michael Eisenberg (1:05:25)
That's very kind of you, but I wanna invest alongside of you now! So I'm gonna have to fight into your deals. We have different tastes, I don't know. Thanks Omri, appreciate it.
If you enjoyed the podcast with Omri Casspi, please rate us five stars on Spotify or Apple Podcasts. Subscribe to the YouTube channel, do all those things you're supposed to do to spread the good word.
Thanks Omri.
Omri Casspi (1:05:29)
Thank you very much.
Michael Eisenberg (00:01.998)
I am thrilled to be here with my old friend, I think is a fair way to say it, and semi-colleague, because we've been around this tech industry for a long time, Amir Shevat. Amir, how are you?
Amir Shevat (00:13.369)
Thank you for having me. Yeah, I’m excited to be here.
Michael Eisenberg (00:16.344)
So this is gonna be an interesting episode of Invested. Amir and I know each other a long time. We've both been around the tech world for a while, but on very, very different paths in many ways. And so I was trying to remember, Amir, how did we first meet? Do you know?
Amir Shevat (00:32.259)
I think it's when I joined Google and I wanted to, I basically came to Google to try to work with developers, and I met you trying to figure out what's in it for investors in this ecosystem. Me and Eyal Miller, we were trying to map what it's in it for investors, what's in it for startups, what's in it for Israel. And you gave us a lot of insights about how to build a better program for Google for Startups.
Michael Eisenberg (01:00.514)
Oh! I didn’t even remember that. But anyway, take us back to the beginning of your career. Give us your whole background in a nutshell, and then we'll start digging in.
Amir Shevat (01:08.855)
Awesome. So I'm an engineer by trade. So I learned to code when I was a kid. Started with C++, and Logo, and all of that good stuff, and then moved to Java. Started at Microsoft, worked in a couple of startups before that. Then went to Microsoft, worked with developers on SharePoint and .NET. Then joined Google, worked on a startup program for Google, started in Israel–started as what my manager called “A bad idea, but you should start as part of your 20% if you really like startups.” And then turned into a global program for what's called Launchpad around the world, which was pretty interesting.
Then I moved to the U.S. 12 years ago to run the global program for startups, and then joined another startup myself called Slack. This was two weeks before they actually launched their platform, and grew that platform from 50 developers to 250,000 weekly active developers. Slack then IPO'd and got acquired by Salesforce.
Then I joined Twitch. Twitch was a YC company that was acquired by AWS by Amazon for a billion dollars. And I was the head of the API for Twitch. So my job was to integrate between Twitch and the game developers.
Then created my own startup, and that was acquired by Jack Dorsey by Twitter. And so Jack brought me to open up the API for Twitter, and then Elon came and closed everything. And that was it.
Michael Eisenberg (02:55.534)
So, okay, this is the perfect introduction to exactly where I wanted to head. So a 20% project at Google to help Google work with developers out of Israel turns into Google Launchpad, which is working with developers all over the world, that turns into a career path in which, in company after company, now we should start with Microsoft before that, from Twitch to Twitter, Slack, et cetera, turns into like being–I don't want to say head of DevRel, developer relations, but in many cases, yes, and certainly building developer communities globally. So when people ask me about Amir Shevat, what I say is “Amir is the king of developers–relations.” You're like the grand pool ball.
Amir Shevat (03:37.311)
Thank you. Yes–not king of developers, maybe some experience in developer relations.
Michael Eisenberg (03:43.682)
All right, so what I'd like to dig into already very quickly is, what was different at the various companies you had, Google, Microsoft, Slack, Twitter, et cetera, in the role you had and in how you interacted with developers, and what you learned about developers, and what you learned about each of those organizations.
Amir Shevat (04:05.881)
So Microsoft was very, very good at working with developers. They understood the monetization that developers are seeking. So for every dollar that we were making on SharePoint, for example, developers working on SharePoint were making $9. So we understood that if you want to be successful, you need to build the right incentives and the right motivations for developers to build on top of your platform.
Michael Eisenberg (04:32.994)
Ben Thompson says that that's the definition of what a platform is, right? If your developers, if people who build on you make more than you do, it means you're a platform. Keep going, sorry.
Amir Shevat (04:41.657)
That was exactly it. So there was very, very strong motivation for other people to promote SharePoint, because SharePoint was their bread and butter. So I think that was a very interesting insight for Microsoft. What Microsoft didn't do well was understand open source at the time. Because I remember I was walking with a Linux shirt one day, and somebody told me that that was a career-limiting shirt.
And you know what? Today it's not the case. Today everybody's talking open source at Microsoft. But at the time, Microsoft did not figure out how to work with the open source community. It felt competitive with the open source community. And I think that was a mistake at the time. They could have done a much better job at working with developers and understanding developer motivation.
The last thing I'll say about Microsoft is that they thought that money solves everything. I'll give you an example. We were working on Windows Mobile, and we were paying developers to build apps for Windows Mobile. And that was a mistake, because us paying developers to do something that is not useful for them and not useful for the user wasn't effective, because Windows Mobile was not effective, and developers built it just because we paid them money, not because they could get a lot of users or a lot of monetization capabilities.
So I think the understanding that you need to build an amazing product first and then build a developer community is something that a lot of people need to understand when they come into this business.
Michael Eisenberg (06:19.638)
And is that because developers are not, pardon the term, coin-operated? It's not what gets them going is the money and they'll build, it's kind of an incentive misalignment?
Amir Shevat (06:28.739)
Exactly. So I think the key is that you need to have a product that people love. When I worked at Slack, Slack was a product that developers really, really loved. So I could have done a good job. I could have done a less good job, and the outcome would probably be developers loving and using Slack and its APIs. So I can't take a lot of credit for the amazing growth that happened. I probably did an okay job, but the fact that we had a very strong, amazing product at its core really drove developer love. So developers really care about working on something that they appreciate.
Michael Eisenberg (07:06.766)
What makes an amazing product for developers?
Amir Shevat (07:09.943)
I think the first thing is that it needs to be a good product for humans. So developers are a subset of humans. So if the product is cool and fun, like Slack was at the time, then developers feel like they're joining a revolution. The same thing for Android. Android was open source and fun, and Google was a great logo at the time. So developers joined our community because they loved the feeling of being a part of belonging to something that they really cared about.
Same thing with Twitch. Twitch was super awesome because we run our developer community in TwitchCon, and you can see our favorite Twitch streamers together with working on the APIs with them. So fun and belonging is very important. Then there's like, what they really care about when they do their job, which is amazing documentation, very clear onboarding–so what I call “five minutes to hello world” - I want, from the minute I land on the developer site until I feel successful, I want to be able to be successful within five minutes. Very, very important rule in all my engagement with developers. Get them excited and successful and activated within five minutes, because if not, they'll move to the next application. And you can see that with OpenAI and Claude, and all the rest of the solutions, they do that very well.
Michael Eisenberg (08:35.374)
I'm pretty struck by what you're saying because at least probably numbers-wise, Microsoft's got the largest developer community on the planet. Yet when I listen to you, I hear it's not because they love Microsoft, but because it's just a big developer ecosystem. But Twitch and Slack, these were beloved products. I'd ask, is that a fair characterization? And given what you said, how is it possible that nobody's undermined Microsoft's developer community?
Amir Shevat (09:01.711)
So I think Microsoft has changed. They had a lot of developer-negative sentiment, and I think they did a good job in changing that. I think Visual Studio is an amazing developer tool that developers really love. I think Azure is now much easier to use. When I worked on Azure, it was like 12% uptime. So developers would install something on Azure, it would not work 80% of the time.
So now, I think they've nailed down the experience, they nailed down the open-sourceness of themselves, they nailed down an ecosystem of game developers which build on top of Windows. So I think there's a lot of renewed love for that platform. And I think you'd see the same thing with Amazon. Amazon started as a book company, like developers couldn't care less, I guess. And then they started releasing things that developers really cared about, which is, I don't want to care about servers. I just want to run things, and I want multiple services that are cloud-based. And the same thing, developers came and used it. But a mistake that I see is saying, hey, I'm going to have a developer community, and my product is not really good. Because it's like, you need to have a good product and then a developer community, not a developer community that creates a good product. That doesn't work that way.
Michael Eisenberg (10:27.406)
Is that predictable or is that like, you know, the famous judge says, you know, “On profanity or pornography, you know it when I see it.”
Amir Shevat (10:34.593)
I think you know it when you see it. I think you start, so developer community, I call it “herding cats,” because they come, and then you manage their community. It's not the other way around. You can tell them about an amazing thing, but usually, if the product is not good, they just don't care. So I've seen a lot of like, Hacker News launches, and Product Hunt launches that developers come and say, “Hey, we'll check it out.” And then the usage curve crashes. Why? Because the product is not that interesting for developers. So they'll be very open to new things, I think more than usual customers, but they'll really tell you what they think and vote with their usage patterns.
Michael Eisenberg (11:20.216)
So you've been at Microsoft, and Google, and Twitch, and Twitter, and Slack. What's the one DevRel job you wish you had had that you didn't have?
Amir Shevat (11:29.521)
That's a good question. I think Apple would be one of those.
Michael Eisenberg (11:32.662)
Apple, interesting.
Amir Shevat (11:58.447)
Because I think it's one of the biggest platforms in the world that drove a lot of monetization. I would try to change Apple's view of developers to be more open. The other one is what's happening now with OpenAI and Claude. If I was 10 years younger, I would just run
one of these platforms, because I think that's the next big amazing thing.
Michael Eisenberg (12:03.512)
Dude, you got another 10 years in you, what are you talking about?
Amir Shevat (12:06.223)
Yeah, but I want to invest in startups, and work with startups–
Michael Eisenberg (12:09.102)
We're coming to that soon.
Amir Shevat
Yeah I want to invest in startups, and maybe have my own startup. I wouldn't want to do DevRel for another big company.
Michael Eisenberg (12:18.402)
At the five or so companies you worked at, which was the best experience?
Amir Shevat (12:23.183)
The best experience was, I think, two times. One of them is opening Israel Startup Program, because it was so unique and so amazing. And we had so many amazing partners, including you guys, that actually came–you saw the entire community come and celebrate innovation. That was amazing. And then taking it globally.
Michael Eisenberg (12:43.15)
That was at Google.
Amir Shevat (12:49.421)
That was at Google. Yeah, Google Campus. And the second one was definitely Slack. Slack I joined as DevRel number one. We didn't know anything about whether we're going to be successful or not. I took a 50% pay cut, and I joined a small startup. I had to go to San Francisco every day, and it blew up. If I had hair before I started, I wouldn't have hair at the end. It was so amazing to see, to be on that rocketship.
Michael Eisenberg (13:11.694)
And why'd you take the job? Like, it was so early–what'd you see?
Amir Shevat (13:17.527)
I saw a company whose product I really loved, which every person that I talked to had a feeling of excitement about. There's a notion of minimum viable product. I really liked the notion of ‘minimum lovable product.’ Because it generates a feeling that is really important. And I think Slack had that from the early stage, and just joining that was like everybody I worked with was happy, and was motivated, and was working together with zero politics. And I think that was the number one thing that drove me to that.
Michael Eisenberg (13:52.942)
How do you measure a minimum lovable product? How do you know it's gotten there?
Amir Shevat (13:58.127)
I think by retention. Minimum viable product–you look at growth, you don't look at behavior in the product. And I think retention and engagement are the two things that are the indicators for love.
Michael Eisenberg (14:12.886)
Interesting. So I need to ask you the obvious question now, which I'm sure you've been asked a hundred times at this point, which is like, AI is changing developers and changing software development pretty rapidly. The post saying, “Hey, I got Devin, I don't need juniors anymore.” So I'd love to hear two things from you. One is, how is DevRel going to change in the era of AI?
And number two is, start to talk me through the future for developers right now.
Amir Shevat (14:50.105)
So the right answer is, I'm much better at predicting the past than the future. I'm very good at predicting the past.
Michael Eisenberg (14:57.42)
That's not an option on this podcast.
Amir Shevat (15:18.939)
Okay, awesome. I think engineering will change. I think top engineering, the core, very hard things to build are still gonna be something that human engineers are gonna build. I think that will take another few years, between five and 10, for AI to be able to do hard engineering tasks. Things like, I want to scale to infinite, or I want something that is completely new that hasn't been done before. I think that's the place where engineers are going to shine. The second place where engineers are going to shine is reviewing and managing AI engineers.
I think we're going to see synthetic humans. Like AI is gonna collaborate with humans in the same way humans collaborate with other humans. And we're gonna have junior engineers that are AI, and senior engineers that are humans. That is for the hard things. For the not-hard things, I think we're gonna move from engineers to product managers, to people who can easily describe software.
And I think we're going to move from coding to specing. I think we're going to write the specs. We're going to write the specifications and move to, more on the authoring stage than actually the implementation stage. We're going to say, “Hey, I want to build a CRM. I want to have this type of login. I want to have this type of user management. I want to have these entities. And AI will implement those specs.”
Michael Eisenberg (16:45.144)
What's the skill set you think you need or need to learn to be that product manager of AI engineers to spec it out?
Amir Shevat (16:53.101)
You need to be very clearly articulated about the process and behavior of software, about user needs, about the way things look and behave, and to be able to iterate your experience about, like, you look at something–what needs to change? What exactly, what exact experiences do you want to create? And I think AI will be very bad at doing that. And I think humans will be very good at doing that.
I think humans are pretty okay in understanding what they need and what other people need. And I think AI has pretty much failed until now in doing that.
Michael Eisenberg (17:36.78)
What should someone study to get to that kind of role where they kind of spec out and manage AI engineers? They have to learn computer science to know how software is built? They need to learn design? Like what do they need to do?
Amir Shevat (17:47.789)
I think design and business and software engineering in the next few years is still gonna be, probably a good idea. But the answer is like, the rapid change makes it so hard for junior people to enter the markets right now. Like I look at a lot of my friends who have kids who are now finishing college and a lot of them are really struggling to find junior roles, because most of the junior roles have been replaced or displaced already. In software for sure.
Michael Eisenberg (18:19.948)
So the question I keep asking that no one has given me an answer to, but maybe since you are the king of developers you can answer it. How do you get senior engineers if they can't be junior engineers? Like how do you ever get there?
Amir Shevat (18:36.417)
I don't know.
Michael Eisenberg (18:38.934)
If you don't know then nobody knows!
Amir Shevat (19:06.221)
I can tell you that I have a friend who goes to Miami every couple of years to find COBOL engineers, because a lot of the banks are still using a very, very old–there's no new COBOL engineers, or very few new COBOL engineers. So that guy goes and hires people from like, in their sixties, to go back to banks and solve bugs and problems.
So we as humanity have a problem with knowledge gaps. It's just like, I don't know how to start a fire right now if I didn't have any lighter. I don't know how to create electricity again. I think as humanity, we create these gaps in our abilities. I don't know how to hunt, right? People used to say, “Hey, you have to hunt in order to have a living.” We don't know how to hunt anymore, but we still progress. So I think it’s going to be moving from engineering, from being a senior engineer to being a senior product manager. And I think you can be a senior project manager without being a senior engineer. And I think for the next few years, you still need to have junior engineers. You still need to have senior engineers. So we're going to have this class, but it's going to be much, much smaller. I think the amount of engineers that any company will need will be a lot smaller, which has a lot of consequences on SaaS, by the way, because all the seat-based models are getting broken by that.
Michael Eisenberg (20:07.118)
Yeah, I did a presentation in an annual meeting a few years ago called Peak SaaS. To be fair, I did not call the AI piece of it. I used the other piece of it, which was just a trivial business model. And if MBAs could pull the model forward, there's no alpha in the game anymore. But I think that's another, yet another reason–I think people will just roll their own software, you know, build their own stacks internally. I don't need any of these horizontal SaaS companies and I can kind of have a product manager and some AI engineers and maybe one senior engineer, and pull off 90 plus percent of what paying for Salesforce or somebody like that.
Amir Shevat (20:44.297)
There’s a bet in the Silicon Valley about the single CEO human building the first unicorn. So like, when will we have a single person, a single human managing an army of AIs, creating value at the level of a unicorn? And I think we're about five years from that. Probably five years.
Michael Eisenberg (21:00.566)
And so what's your bet?
Amir Shevat:
Five years.
Michael Eisenberg:
Five years. My guess, by the way, is that in algorithmic trading, you could probably be done faster than that. But I'm not sure that creates a whole lot of value. It may create a whole lot of money, not a lot of value. So I want to go back to what I normally open with right now, because this relates to this developer conversation. What's your core value?
Amir Shevat (21:11.151)
My core happiness, maybe core value ties into that, is to enable other people to be successful. I think that is like a core thing that drove my career, helping other people to be successful.
Michael Eisenberg (21:40.28)
So we're co-invested in a company called daily.dev, which is a developer community where developers can stay up to date. And when you think about developers being replaced by AI, how do you think about the future of daily.dev in this regard?
Amir Shevat (22:02.991)
I think developers as people who create software is still gonna be there. I think it's just gonna be different types of developers. They're gonna be more the types that describe software than the type that code software. So they're gonna be much more effective. So it could be that you're gonna have, daily.dev is gonna have fewer but more senior software engineers. And I think the budget, the overall budget for software creation is just going to grow, because right now a lot of the pains that you have in enterprise, the answer to like, “Hey, we can't do that,” is, shrug, “We don't have resources to do it.”
And I think that's going to change. It's going to be, “Hey, we need to really do that. Let's make Joe the mini CEO of that application, and we'll do that type of prediction. For example, like look at all our sales, and do a different type of prediction. So I think that the need and usage of software is just going to grow. You're just going to have less people working at the boring parts. like building all the Windows applications, and making sure that all the UI looks okay, that's probably going to be AI. But defining the software itself, I think it's going to be human for a long time.
Michael Eisenberg (23:19.308)
And there will be more of those people in your view?
Amir Shevat (23:21.155)
Yes, more people who define software.
Michael Eisenberg:
So this is like, this is close to Jevon’s paradox, right? The cost of it's going down, it becomes more ubiquitous and ends up being a lot more of it. The market ends up growing for these things. But so, I guess you're not in the camp that believes that there’s going to be massive layoffs from AI. Although you did mention before that your friends’ kids are not getting jobs.
Amir Shevat (23:46.361)
So I think there is gonna be displacement of jobs. So I think some jobs, like, you know, when I was a kid and I called the U.S., I went through an operator. That was a human that connected the calls. Before that, my parents used an actual operator, right? You called someone and like you say, “Hey, I want to talk to Joe.” And there was a person who connected that operator. That role completely vanished with the automatic call centers.
But if you look at the studies, they show that like 10 years later, the amount of unemployment, and that was like, three million people worked at that job. That was like a percent of the U.S. population. And the employment 10 years later was not impacted by that. So I think what you will see is new jobs, different jobs. It could be that a person who does, maybe, front end engineering is not going to be a role, but a full stack person that thinks about the entire application flow is definitely going to be more of that.
Michael Eisenberg (24:49.646)
Can you think of an example where, like, so you said your core value, and Nimrod kind of told me to ask you at least a version of this question, not exactly this question–Nimrod Kramer, the CEO of daily.dev, where your value is making other people successful has come into conflict, perhaps with what you do? And so I imagine that there's some sort of AI company that you're invested in or worked with that puts somebody out of a job or some innovation or some other case where that value conflicted.
Amir Shevat (25:20.559)
So it conflicted every Google I.O. Google I.O. is a big event. And every time you release a new set of things, you create an opportunity for 10 startups and kill another 10 startups. So I remember one of my painful experiences as a developer, an Israeli developer coming to me and said, “Hey, you just built a thing that kills my entire startup.” When you build a platform, sometimes you do things that actually–and I see that now a lot with AI, like OpenAI is releasing a feature that 10 startups pitched me that they're going to build that feature. And now it's a commodity built by the incumbent, right? So every time a big platform makes a change, it can potentially kill a lot of innovation, but create room for a lot of innovation. And working with that, like if you move from like the big picture to the small picture, to the human being being impacted by that, then it really hurts. I take it very personally when I have this founder that tells me, “Hey, I need to think about a new thing because my startup has just been demolished by what you've built.” And it hurts.
Michael Eisenberg (26:31.05)
And how do you deal with it?
Amir Shevat (26:33.763)
How do you deal with it? You go back home. And my wife is amazing.
Michael Eisenberg (26:39.884)
I've met her, she is, I agree.
Amir Shevat
And I talk through this. Yeah, she's in my much better half. And you then help another 10 developers be successful. And you realize that like net-net, you could do things that are positive and negative, but if net-net at the end of the day, you help more than you destroy, then you probably do a good job.
Michael Eisenberg (27:01.038)
Before I move on to your seed investing, I do want to ask two questions. You were at Twitch, post-October 7th, there's been a lot of controversy at Twitch.
How would you want to talk about that?
Amir Shevat (27:16.815)
So think Twitch, it's a failure of moderation. I don't think Twitch is intentionally doing this. I think Twitch is just not doing the right job in moderating, and having a core strength of meeting their terms and conditions where they are. I think there's a lot of hate happening on Twitch. And I think that if you read the terms and conditions, you cannot do that.
So like at the core, they're saying the right things, but they're not doing the right things. So I think very strict moderation in that case would have probably solved that. And they were walking a thin line, because there's two audiences really trying to push them in different directions. And it's hard for a corporate to play the judge–although we're seeing that now happening in the U.S. a lot–but doing proper moderation through your terms and conditions is probably the right move at the time.
Michael Eisenberg (28:18.125)
And so why are they so bad at moderation?
Amir Shevat (28:22.063)
First of all, moderation is a hard, hard problem. A lot of people have different types of understanding of what toxicity means, what free speech means. You see that as a struggle across all social networks. I think Twitch has a unique problem where by traits, gamers are more toxic than other players. The age range is usually 15 to 35 male, which tends to be more aggressive by nature. So I think the problem in Twitch is even more like that. And I think they just, it's a hard problem and they didn't figure it out. I think Bluesky is figuring it out better, because they think about the problem differently. But Twitch just used the same means to deal with a much bigger problem, and that didn't scale.
Michael Eisenberg (29:18.766)
Did they call you for advice?
Amir Shevat (29:20.985)
Twitch?
Michael Eisenberg
Yeah.
Amir Shevat:
No, they didn't call me for advice. I think Amazon is not very, does not call previous workers. That's not the way they run things. They also think that they might be doing a good job. At the end of the day, a lot of people are judged by KPIs that are not connected to toxicity. They look at engagement, they look at retention, they look at how many people are talking about the platform. And sometimes bad news is a good thing.
Michael Eisenberg (29:52.078)
And what would you have told them to do if they did call you?
Amir Shevat (29:55.847)
To make a stance. To say, “Hey, this is what we do.” It's either, “We're going to allow everything and live with it, or we're going to be very, very strict with our terms and service. And we're a gaming platform and just a gaming platform. Don't get politics in.” And then to stick with what you say. And what they did is, they zigzagged a little bit and that creates that–you lose trust, because when you say one thing and you do another thing, I start to not trust you anymore.
Michael Eisenberg (30:27.15)
It doesn't look like they lost users over it.
Amir Shevat (30:30.295)
I don't think they lost a lot of users for it.
Michael Eisenberg (30:31.81)
Yeah, so they paid no price.
Amir Shevat (30:34.543)
That is a major problem, because the incentives are tied into retention and engagement, and they probably didn't move the needle on that.
Michael Eisenberg (30:45.208)
Yeah, so speaking of people with other approaches, you got fired by Elon Musk overnight at Twitter.
Amir Shevat (30:52.654)
Yes.
Michael Eisenberg:
What happened?
Amir Shevat:
Elon did not think that the Twitter API was meriting investments. That is the reason. I think he wanted to do cuts. He did cuts across the board. And he didn't think that the API was worthwhile. I tried to talk to his team about the Everything Store, and about the ability of Twitter to be like a platform for developers. But it didn’t resonate, and I think that's okay. That's a decision that you could make. I think it's the wrong decision. I think if you look at extremely successful platforms, you need an open API, and that's why I invested in Bluesky and other companies like that. But if you don't think that API and developers are a part of your story, then that's okay.
Michael Eisenberg (31:50.488)
Judging, I guess, by your social media posts, you're not exactly into Elon. Is that fair?
Amir Shevat (31:55.927)
I think he cares about being out there more than he cares about the merit of things. I think he cuts things without thinking deeply about them. And I think he likes to be in the limelight with a lot of ego. And I don't like any of those traits. I think changes are necessary. I think minimal government is probably better than a very extravagant government. But if you cut things without thinking about it, at least at the government level, people die. And that is, for me, dangerous. putting more thoughts into this would probably be better. So if you own a company like Twitter, you can cut as many people as you like. You can look at it and you say, “Hey, I don't care about API. I don't care about moderation. Take 90% of those people out.”
That's okay, because you own the company. You don't own the U.S. So like cutting things without thinking deeply about the implications, I think, is a mistake. And I think you need to be more on the caution side. Even if it's a stupid, stupid thing, go through a process of reviewing it, thinking about it, and then cutting it. And what we're seeing now is more of like a show, “Hey, look at all these stupid people, look at all the things that I'm shining,” and I don't like that.
Michael Eisenberg (33:26.062)
It sounds like you were against the Twitter API cut. That seems to have worked, because Twitter's like at all time highs right now, as best as I can tell. And so, at least in my own head, he keeps seeming to win, even if it's an unorthodox style, to say the least.
Amir Shevat (33:42.607)
So the question is, what does it mean to win? So I don't know if you noticed, but there's a lot more antisemitism on Twitter. And when we had the API, we had a lot more studies from Israeli universities about using the API to study antisemitism, to map the people who are driving antisemitism. And antisemitism is just an example. You have other groups that are negative. But a lot of research was done using the API to try to fight these toxicities. So you might win because you're burning something, but I don't know if it's sustainable for the long run.
Michael Eisenberg (34:24.462)
Interesting. You think there's more antisemitism growing on Twitter than on the other social media platforms since October 7th?
Amir Shevat (34:30.635)
No, but I think there's more antisemitism growing on Twitter since Elon joined. That is my experience. I think that it's more unchecked, because there's no public scrutiny. And I think the public scrutiny was done through the API.
Michael Eisenberg (34:36.545)
Interesting. I guess he would argue that it's done now through Community Notes.
Amir Shevat (34:51.407)
I'm an avid member of Community Notes. I think Community Notes is an amazing product, but think how much more powerful it would be if it had an API. If you could do Community Notes automatically, if you could do Community Notes by running AI to see if something is okay or not. There's an area where you can double down on things using developers and APIs, which I think is not being used right now.
Michael Eisenberg (35:20.718)
Interesting. One of your founders, Guy Podjarny, told me to ask you why you went public with your critique of Elon.
Amir Shevat (35:26.573)
Why I went public….I think it was important for me to tell my team that it's okay to go against the bully. It comes back to my core of empowering people to be successful. And when I talked to my team, it felt that they were afraid of Elon. And I think being, regardless of what your opinion is, being afraid of somebody with power is wrong. And I think that if you, as a leader, your job doesn't end when you get fired. I think as a leader, you continue to care about your people after you leave. And I think that was my motivation to show my people that you could do this.
Michael Eisenberg (36:12.814)
So you made a career switch, after being the king of developers for all those years, to become a seed investor. Like, why?
Amir Shevat (36:21.007)
Turning to the dark side, I call it.
Michael Eisenberg (36:23.308)
Hey, easy buddy.
Amir Shevat
Why? So a friend of mine called Dror Berman, from Innovation Endeavors told me–
Michael Eisenberg (36:35.95)
Eric Schmidt.
Amir Shevat (36:47.861)
Yeah, Eric Schmidt is one of the LPs. He told me, “Hey, if you want to really deeply understand the other side, try to do it.”
And I started doing angel investments. And I did about 32 angel investments personally. And I found out a lot of things from the other side. I found out that like, founders really find it valuable when you help them at certain stages, very early stages. I can't help a startup at the later stage probably. Like if you're growing from 10 million to a hundred million, and you need someone to re-innovate your sales, I'm not the right person. But if you're thinking about core principles of your product in the early stage, I can probably do a lot of value. And if it's developer tools or developer platform, I can probably double down on that value. And then I said, like, “Why am I doing it with my own money at a small scale? Why not do it on a larger scale?”
And then I partnered with two amazing friends, and we created Darkmode, which is my fund. And we raised funds, and now we work with developers and startups, and it delights me. I meet nine startups every day. I deep dive into 12 out of those every month, and I invest in one. That's my funnel.
Michael Eisenberg (38:05.966)
Amazing. Of the 32 initial angel investments, how many were zeroes, how many were okay, and how many were winners?
Amir Shevat (38:14.447)
I would say about–and it's like five years, so it's still early–about five to 10% were zeroed. About 20% were growing, are growing what's called markup. I got more money than I invested in. About 20-25%, and the rest are on that trajectory.
On paper, it looks really good. Can I stop for a beef on our profession for one sec, if I may?
Michael Eisenberg (38:54.158)
Please!
Amir Shevat (39:12.479)
I think when you do product, it's really easy to know if you suck or not. You release something, and you immediately, people tell you, or usage tells you or growth tells you. Reality slaps you in the face really hard. When you're an investor, it really is a slower, much slower learning process.
So I invested in 32, maybe now 12 are doing really, really well, but they are doing well for their stage, right? And the ones that are doing okay, like if you look at Monday, it's an amazing company, but it struggled for a very long time, and then it went up. And so there's no learning in our profession, or not fast learning.
So it takes a very long while to understand that you're either a very good investor or a very bad investor. And there's so many attributes, there's so much stochasticity, like randomness of the data, that it's really hard to know if you're good at your job or not.
Michael Eisenberg (39:56.8)
You have to fake it till you fake it.
Amir Shevat (39:58.519)
Yeah, exactly. So on paper, it looks like my angel portfolio is phenomenal. But on the actual data, I hope I am a good investor. I hope I'm a better partner to my startups and that I choose good people, mentsches, to work with. That is my thing.
Michael Eisenberg (40:19.374)
Is there any theme in the ones you ultimately decide to invest in? That's like a crazy funnel. 90, you see 180 investments a month, 180 pitches a month, and doing one. So what's the theme?
Amir Shevat (40:34.947)
Yeah, it's more like 90 if you look at weekends, but yeah, the theme is a team that is amazing. Like a team that could really execute, a team that has done this before, or a team that has worked together well. So like, first is the people. I think the people, their ability to hire great people, is very important. Their ability to think about problems differently, their ability to introspect is very important. So that's the first thing. The second thing is TAM, and can I help them? So like, is this a big enough of a domain?
And do I care deeply about it? And can I help them in that regard? They could be doing an amazing thing in a domain that I don't understand at all. And I would tell them, “Hey, listen, you probably need another investor that knows this thing out.” And the last thing is the technology is like, is there an ability for this technology to have a really strong moat that other people could not easily replicate? That's the three things that I'm looking at.
Michael Eisenberg (41:41.816)
So your friend, investee, co-investor, Micha Breakstone said I should ask you, “If I asked 100 entrepreneurs that you've mentored what they learned from you, what do think the most common answer would be?”
Amir Shevat (41:55.979)
That's a good question. I tell a lot of people, don't work with jerks. Like I think relationships are important. So I think working with good people leads to good outcomes. So I think they would say that even if I didn't invest, I honestly tried to help them. And I think that returns a lot. And I think you talked about it a lot in like aspects of Judaism–an aspect of tech in general is like, helping other people, and it returns. So a lot of the times I help a founder and they connect me, and I didn't even invest in them, and they connect me to a company that I did invest in. So I'm deeply, I deeply believe in helping others. And I think companies helping each other even without the investor is even better. So, they would probably say that I at least try to help.
Michael Eisenberg (42:53.49)
But that's kind of like, “Hey, I want you to let me into your round, Mr. Hot Entrepreneur, because I'm going to try to help.” You must provide more value than that. So if you had to pinpoint the value you'd provide, what would it be?
Amir Shevat (43:05.711)
The value I provide? It’s that I've been in their shoes, and I've figured out hard things, and I work with them on these hard things before I invest. So I think, every meeting, even if it's a complete waste of time from an investment point of view, I really try to figure out one thing with a founder to try to solve one hard thing. And if you do that consistently, then they pull you into the investments. For example, with Guy, I really worked with Guy Podjarney and Micha on trying to solve hard things for them before I even talked about investment. And usually what happens is that they pull you into the investment, which is pretty amazing.
Michael Eisenberg (44:06.862)
So I want to read something, if I can, from May Piamenta, who is one of your investees.
Amir Shevat (44:11.871)
Oh wow, now you're gonna embarrass me. My god.
Michael Eisenberg (44:36.962)
When she was on my podcast on the previous episode of Invested, she said the following. It was a huge shout out, Amir. It was actually when I decided I should interview for the podcast.
“So Amir is one of those people that you just really want to be around, and you know he'll be so unbiased and supportive no matter what. And Amir, throughout the pivot, [her company pivoted], every conversation I had with him, and I was freaking out, and I was like, ‘Amir, how am going to do it?’
And he told me, ‘May, everything will be just fine, and I'm here for you.’ And Amir, you know, he's been leading amazing product teams. He's been around and working in Twitter and Slack and his record is incredible, but he's such an amazing person, and he always has time to help other founders, even if he's an investor or not. So yeah, I'd pick Amir.”
How come you didn't tell May in the middle of the pivot, “Yeah, listen,” in the middle of the pivot, “Hang it up. You know, it's not working. Let's do something new.” Instead, you told her, “Stick with it.”
Amir Shevat (45:07.001)
So first all, May is an amazing, amazing, amazing founder. She's like, so powerful and so much energy, and so much drive. And your interview with her was phenomenal. I really enjoyed listening to it. So I always like to work with people that I would work for. And she's definitely one of those people. I would work for her in a heartbeat. And that's one another aspect of the people. Would I work for this person is one of the questions that I ask myself.
Michael Eisenberg (45:36.598)
You know, Jamie Dimon, I quoted this in one of my books, the CEO of JP Morgan. I heard him say, he said to me, I was in a meeting with him, he had just gotten back from interviewing a bunch of people in different cities at JP Morgan, and he said the core question he asked himself was, “Would I want my daughter to work for them?” It's a great one.
Amir Shevat (45:52.227)
I love that. I'll phrase it in my words, which is like, if you have imposter syndrome all the time, that's a good signal. Because you work with so many people, and you say like, why are they working with me? Like they're so amazing. I really want to work with them. That's the signal that you're in the right place. Having a continuous imposter syndrome is a very good signal.
With May, I asked myself, what would I want an investor to actually tell me? Because I've been there, where May was, with a pivot. And an investor telling me to shut down would have been the worst thing that I would want to hear. And I think May has so much potential, and now she's killing it. Now it's amazing. Even if it wasn't amazing, telling her to try and be the person that she could really be, and build the things that she could really build, I would be...sinning all types of sins if I wouldn't tell her that.
Michael Eisenberg (46:54.19)
No, no, but sometimes the right advice is, hey, this dog doesn't hunt. You should shut it down, try something new. You're a great person, try something new. How'd you know that she should stay at it?
Amir Shevat (47:03.001)
Because I think Ron Gura told me that, like, how many runs do you still have in you? He asked me that when I told him that I was struggling. And he said, like,”Do you have another run or two in your soul? Can you do another try or two?” And it really made me think about how many runs do I have with me on this idea. With May, she was struggling, but it was clear she had another 10 runs in her. She could go and go at it. Sometimes you see a founder, and they're struggling, and they don't have any runs in them. They're like, tired. They don't like their founders. They don't like their teams. They're really, it's going to be really hard for them. So you need to see how many runs you still have in the founders that you're working on. And with May, it was like, it looked unlimited. She had so much energy to still solve that problem. And I think that was the right call.
Michael Eisenberg (48:01.646)
By the way, for those who have only tuned into the podcast, the Invested podcast recently, there's an episode with Ron Gura, which I think is probably the third or fourth episode of Invested, that I highly recommend you listen to. He's a special entrepreneur, and a special human being. It's worth going back to listen to that.
So you invest in Israeli founders and U.S. founders, and I'd love to hear from you what you think are the core differences between American founders and Israeli founders.
Amir Shevat (48:30.745)
I think Israeli founders really excel at technology, and product, and zero to one. American founders in general are very good at product and business and scale. And I think it's becoming blurry. And I think Israeli startups are becoming a lot better at distribution, and scale, and B2C and definitely American startups are being much, much stronger with even core technologies.
But at the end of the day, it's like, where is your superpower? Superpower for Israeli entrepreneurs is still chutzpah. To think about a problem in a very, very different way that is shocking to everyone else, but actually works. And for American companies, it’s like, how can I take an idea that is okay and really, through go to market and business development in this unfair market?
Michael Eisenberg (49:35.576)
Now you're in Austin right now, right? And you lived in Silicon Valley, right? And you lived in Israel, right?
Amir Shevat (49:37.517)
Yes, I love Austin. Yes. I lived in Israel and I lived in New Zealand as well.
Michael Eisenberg (49:44.738)
And New Zealand. And how would you compare the tech ecosystems between Austin, Silicon Valley, and Israel? Leave New Zealand out.
Amir Shevat (49:52.585)
Yeah, there's not a lot of startups in New Zealand. Silicon Valley is an amazing place for innovation. Everywhere you go, you see people having a startup. There's a lot of availability of money and connection and opportunity. The pay-it-forward is really strong there. And I felt everybody was nice, but...coming into the Silicon Valley to work and to achieve something, and then to rotate. You see a lot of building strong relationships, at least with the people who are coming just for startups is hard because you build relationships and then they move on. They go back somewhere else, or they continue. So I love Silicon Valley, but it felt a little hard when every summer half of the friends left.
I think Israel is an amazing innovation hub. I think Israeli entrepreneurs really, really help each other. They really work hard. I think the problem is that a lot of them think that the next step is leaving to the U.S., and a lot of them do that. And so you see startups succeeding and then moving. And I think that is changing slowly.
And I think it’s a good change, but you still see a lot of founders moving to the U.S. once they reach some level of success. I think the core thing with Austin is that you come here primarily to live. Like, you come here, you have a house, you're gonna stay here for a very long time. So the community is more based on people who are in your area that could help you, and you see much less churn in here.
And also Texans are much closer in spirit to Israelis than Californians. Like people say what they mean, they say it straight into your face, and they don't take bullshit. So Texans are much, much closer. Like my neighbors here are much closer to my Israeli neighbors than California.
Michael Eisenberg (52:15.33)
How big is the Israeli community now in Austin?
Amir Shevat (52:18.511)
I would say it's about 5,000 people at least.
Michael Eisenberg (52:24.014)
5,000 people, so like 1,000 families?
Amir Shevat (52:26.659)
At least a thousand families. So one of the things that I really brag about is that I lead the Austin Foodies community. So there's a Facebook group of Israelis mapping good food around Austin. And we have about 1200 people in that group. Only Israelis, only mapping restaurants.
Michael Eisenberg (52:50.99)
And what are they looking for, hummus?
Amir Shevat (52:56.207)
Good hummus, good barbecue, good everything. Asian food here is amazing. We just had Michelin come through town and give a few restaurants Michelin stars. So everything is becoming more expensive. But we have a great community that is focused not just on tech but also on food, on industry, on a lot of other things which I really like.
Michael Eisenberg (53:21.56)
Has October 7th, has the war changed anything for you?
Amir Shevat (53:25.099)
It changed everything. It brought in scars from the army. So I had an active army service. I wasn't in Gaza, I was in the West Bank, and a lot of the things that happened there came back. So on a personal level, it was really hard. Seeing my friends at my age go and serve in the army was really hard.
I had a friend who had coffee with his son in Gaza, and just thinking about his wife, and what she thought of like having her son and her husband serve in the army together–that breaks my heart. It also changed my thinking about–I'm leaning towards a liberal, and seeing what the crazy in the liberal side we're talking about really changed my point of view from being a liberal to be a centrist. I think that the center in the U.S. is saying on both sides, both the right and the left, are pretty crazy. So I think it changed my point of view in many, many, many ways.
Michael Eisenberg (54:43.278)
And I guess almost a decade ago I tried to get you to come back to Israel. What are the odds of my getting you to come back to Israel now?
Amir Shevat (54:50.351)
So the word back, I think, is hard. I want to live sometimes in Israel, but I want to live around the world. I want to….my kids, my oldest is now finishing his university in Boulder, in Colorado, and my youngest wants to go to Europe. I think we're going to be in Israel, but I think it's going to be somewhere like living around the world. So living in Israel, and in Texas, and in many other places.
Michael Eisenberg (55:20.782)
Tell me this: I understand that you wrote a fantasy book, is that true?
Amir Shevat (55:25.581)
That is true. So I wrote two books that are technical, with O'Reilly and like very technical, somewhat boring. This is for my soul. I wrote a trilogy about magic coming back into the world. So the theory is that we had magic in the past. And now how do us, as humans, treat the world when there's other alpha species? When you come in, and you have to talk to an elf, and the elf could use magic to get what they want, right? How are we as humans gonna deal with other alpha species?
And I think we're gonna act very badly. And somebody said it's a reflection of us working with AI. And it could be, I didn't think about that at the time, but I think as humanity we'll need to deal with working with other species that are not our own, that could be as intelligent and as powerful as us. And the trilogy is about that.
Michael Eisenberg (56:29.55)
Do you believe in extraterrestrial life?
Amir Shevat (56:32.175)
I think there's an absolute possibility. 100% there's extraterrestrial life. The question is, have we seen them? Have they visited? I'm not sure. But if you look at the amount of stars out there, the chances that there is no extraterrestrial life is almost zero.
Michael Eisenberg (56:49.376)
Almost zero. And so when people reflect on your book they think about extraterrestrial life, AI, and what do you think about?
Amir Shevat (56:58.477)
I actually think about magic. I think about like, how are we going to deal with the fact that you go hunting, and you run into a unicorn? And you can’t shoot a unicorn! If you do shoot a unicorn, they will come after you, and you're not going to win that war. So I think that we need to have some sort of humbleness, which we're lacking as humanity and dealing with powerful things. And I think we're seeing that with humanity right now with like dealing with death, dealing with getting older, there's still things that we don't control. And I think we're not dealing with that with grace. I think we're struggling in that area. And I tried to deal with that in my book.
Michael Eisenberg (57:38.2)
I find it interesting just as a religious person. I think that's what religion deals with in large measure, right? It gives you the humility because there's God and brings you down. And how you deal with death, getting older, and life is very religious in those ways. And you took it to an area of magic.
Amir Shevat (57:56.355)
I think that religion solves that problem really, really well, because you always have someone above you. And I think people with less religious faith or ambiguity there really deal with the struggle of like, what do I do? Assuming that I'm the top honcho, I don't know how to deal with it. And I deal with it really poorly usually.
Michael Eisenberg (58:19.552)
Interesting. Last question, which I like to close with. Who's someone in our space that you would like to say something kind about and you think should be getting more attention?
Amir Shevat (58:54.255)
I think all the entrepreneurs that are struggling and getting all the no's from us... okay.
Michael Eisenberg (59:00.458)
Come on, give me a name. That's like a generic answer. That's like a media training answer.
Amir Shevat (59:06.389)
I've been media-trained.
Michael Eisenberg (59:08.086)
I know, I can tell.
Amir Shevat (59:11.631)
So if I had to give a shoutout–can I have two? Probably May Piamenta is one of my shoutouts. I think she's a freaking amazing entrepreneur that works extremely hard despite all consequences to do something really really good for humanity, and working with her makes you want to be better yourself. So that's one person.
I think Micha Brickstone is another one. I think you have somebody who's a really successful entrepreneur who is a true mensch, who takes people–like every time you meet Micha, he makes you feel that you are better. And I love people who have zero thoughts about themselves and 100% thoughts about others. And I think that's like, I love his selflessness.
Michael Eisenberg (01:00:10.166)
I'm gonna ask you one more question and then we'll wrap up, which is, what's a strongly held opinion that you've changed in the last year?
Amir Shevat (01:00:24.429)
I think my political views have changed in the last year. I think I became a lot more, I used to be much more radical, and maybe it's age. But I think I've used to be a lot more radical, and I find myself being a lot more centered. Like I think that the fact that us as humanity have two sides and we're always battling each other, it's actually not a good thing. I don't know how to solve that, but I think the edges are controlling the center, and I think that's wrong, and I think that's becoming more and more of a problem. And I want to think more about how to change that. I used to be one of the sides, and I don't want to be a side anymore. I want to be working together with people.
Michael Eisenberg (01:01:10.03)
By the way, that's what my recent book is about, is how the polls have taken over politics and democracy in many places, and economic policy and affirmative action and many other things have caused that, in my opinion.
But Amir, thank you for taking the time to do Invested with us. And for those of you listening, if you enjoyed what you heard from Amir and the other podcast guests, please rate us five stars on Spotify, Apple Podcasts, wherever you listen to your podcasts. Please subscribe to our channel on YouTube. You'll really enjoy the shorts and the videos there, and Amir's dog in the background. He'll only appear on the video part of the podcast, and not if you listen to us on audio. Amir Shevat, thank you for sharing your wisdom with us.
Amir Shevat (01:01:51.247)
Thank you for having me. That was a great conversation.
Dan Davidi: [00:00:00]
We've figured out a way to make rocket fuel cheaper and better.
What we cracked was the ability not to engineer biology or modern biology to be better. It's to go back in time to before biology existed, and play evolution again, but this time with a dollar sign on the forehead.
Biology is everything, right? It's what we wear, it's what we eat, it's the fuel for our cars, it's our environment. The ability to think about it in synthetic terms is intriguing.
Michael Eisenberg:
You could have started Ohr without me, and I couldn't have started Ohr without you. There's no chance that I could understand synthetic biology.
Dan Davidi:
I'm sure you couldn't.
I think I do what I do because I care.
When I think about investing my time and my brain into how to use biology, how to solve problems so that my kids will have a better world to live in.
If somebody pitched you an idea that was very science, like the early stages of SpaceX–
Michael Eisenberg [00:00:45]:
You mean like Ohr?
Dan Davidi:
Like Ohr.
Michael Eisenberg [00:00:47]:
But I did it.
Dan Davidi:
Why?
Michael Eisenberg:
Don't make me regret it, okay?
Dan Davidi [00:00:49]:
No, do you still trust this?
Michael Eisenberg:
I do.
Dan Davidi
Why?
Michael Eisenberg:
Welcome back to another episode of Invested. I am thrilled to be here with Dan Davidi, Dr. Dan Davidi.
Dan Davidi: [00:01:00]
My mom would be proud.
Michael Eisenberg:
Your mom would be proud. But you're not a medical doctor. What kind of doctor are you?
Dan Davidi:
I take care of bacteria. I'm a biologist by training. I'm a mathematician as well. So I have a PhD in biotechnology.
Michael Eisenberg:
From the Weizmann Institute. Dan Davidi by background–why don't you give everybody your entire background?
Dan Davidi:
Oh that's going to be short. So as you said, I'm a PhD by training. I graduated from Tel Aviv University in mathematics and biology, then I moved to the Weizmann Institute, where I majored in synthetic biology.
This is in general something we’re probably going to be talking about, so I'm going to leave that open. 2019, I moved to Harvard as a postdoctoral researcher in the medical school over there, and then went on and became a faculty member to start a synthetic biology center inside Harvard Medical School. And from there moved to Amazon, Amazon Grand Challenge. This is the GoogleX version of Amazon where they do crazy projects. And then was blessed to join you here at Aleph as an entrepreneur in residence, spent about a year, and now a founder and CEO of Ohr.
Michael Eisenberg [00:02:11]:
Do you want to tell the story of how you ended up as an entrepreneur in residence at Aleph or should I?
Dan Davidi:
I could try.
Michael Eisenberg:
All right, go ahead.
Dan Davidi:
So one day I get a phone call. I'm sitting on the beach in Del Mar, California, enjoying the weather, working in my corporate job, thinking I have the best job in the world. And then Susan, your assistant on the other line. She says, “Michael Eisenberg wants to talk to you.”
“Who's Michael Eisenberg?” “He's the most important investor in the world.”
Michael Eisenberg:
There’s no way she said that.
Dan Davidi:
She said, “He has a Wiki page.” If someone has a Wiki page, I should listen. So I listened, I hear her carefully. She says, “He's going to call you.” And then I talked to you. I think you asked me one question: what would be my job description if I wrote it myself? I was like, that's an interesting challenge. We spent about 30 minutes talking on the phone. I sent you a two-pager the next day. And then I get another phone call inviting me to come to a kosher restaurant in New York the next weekend.
Dan Davidi:
I was like, okay, I'm gonna jump on a plane and come meet you. I think it was a Wednesday, or a Thursday or something.
Michael Eisenberg:
Wednesday.
Dan Davidi [00:03:22]:
That was two years ago, just over two years ago. Three hours later, we said nothing about science or synthetic biology, but we decided we wanted to work together.
Michael Eisenberg:
It was only three hours? I thought it was longer than that.
Dan Davidi:
It felt longer.
Michael Eisenberg:
Yeah, included a walk home in the cold.
Dan Davidi:
Yes, correct.
Michael Eisenberg:
Walk back to the hotel at least in the cold, yeah.
Dan Davidi:
Yeah, no, it was really, time flew by and it was a conversation about everything. I think for the first time, for me, really talking to an investor, but I realized investors are also people, and you were a special one. And that was fun. That was very engaging. And I think the fun fact was that two weeks later, I came see you in Israel, and your partners at Aleph, and never came back. So that was really the–
Michael Eisenberg:
And then your wife and two kids and the dog joined.
Dan Davidi:
So actually they joined me on the first visit. We left the dog in San Diego. And I only flew back about three weeks later to bring the dog, which was the hardest thing I've ever done.
Michael Eisenberg:
Harder than your PhD?
Dan Davidi:
Yes. Bringing a dog from America to Israel is hard. That was during COVID and dogs were not allowed on planes, and that was, yeah.
Michael Eisenberg:
What was the dog’s adjustments issues?
Dan Davidi [00:04:34]:
First of all, he has issues. Let me tell you, he moved with us from Maine. So he was born in Maine, and then moved to San Diego. So that was quite a change. And then moving to Israel was quite of a shock for him. He loves it because we live in a village and we have chickens, so he's like, walking the neighborhood all day long. But otherwise he really is attached. He's a golden doodle. I think it's a 70 pound golden doodle. Your listeners are American, right? So I'm going to use pounds. He's a big guy. And he just loves it.
Michael Eisenberg:
Who adjusted better, your kids or the dog?
Dan Davidi:
I think the kids actually. The kids have moved four schools in five years.
Michael Eisenberg:
Oh, wow.
Dan Davidi:
And they are…yeah.
Michael Eisenberg [00:05:20]:
Important question for you before I get into synthetic biology. Harvard or Weizmann?
Dan Davidi:
100 percent Weitzman, no doubt.
Michael Eisenberg:
Why?
Dan Davidi:
Harvard is just like a fancy name. I don't want to insult anyone, but I remember [00:05:00] getting to Harvard the first time and I stood near the sign, ‘Harvard Medical School.’ And I was like, so proud stepping into the building. I come inside and I see one of the old labs like in Tel Aviv University, reminded me of exactly the same place, with the same smell. I think what's unique about Harvard is not the inside, and working at Harvard is actually not such a fun experience.
What's unique about Harvard is the concentration of talent, not the average talent level. I think at Weizmann, the average talent level is much, much higher than Harvard. The density is much higher at Boston in general, and specifically at Harvard.
Michael Eisenberg:
Because there's just a lot more people, there's a lot more disciplines..?
Dan Davidi:
It's the Mecca, it's the Mecca of research, right? So everybody goes there. The density of hospitals per capita, per square meter, is just insanely high. You have all the money in the world to do research, and that's very powerful.
Michael Eisenberg:
It's interesting you say that you have all the money in the world to do research. Weizmann has less money, I would guess, although it's not a poor institution. I've been thinking about that a lot given the DeepSeek moment. Now, I don't buy the DeepSeek was trained with six million dollars, there's billions of dollars of chips behind that. But I think it was more constrained than Meta or openAI in terms of compute, and Weizmann is a world class scientific institution. Do you ever think about this issue in academia of places with more resources versus less resources to whether more innovative science comes out of one place or the other?
Dan Davidi [00:07:04]:
I think actually, to your point, that innovation is not dependent on capital. It's the ability to really, and in the world we live in, it's data that we need to generate and that costs money. And specifically in biology, where I come from, generating data is expensive. I think it's an unfair advantage that a place with a lot of capital has. I think the Israeli ingenuity in a way has overcome this. And I think Weizmann, again, is one of the top ranked institutions across the world in terms of IP per capita, in terms of publications per capita.
So it doesn't show as necessarily a limitation in innovation, but it shows as a limitation in the ability to first take stuff to the next level. So after you've discovered something, how do you actually, call it, monetize it or how do you capitalize on it? And the second thing would be really the ability to attract more resources into it and more people. And that requires money.
Michael Eisenberg:
If you had to explain what's the magic of the Weizmann Institute, what's the magic?
Dan Davidi:
I think it's the connectivity. First of all–
Michael Eisenberg:
What does that mean?
Dan Davidi [00:08:09]:
So during my PhD, I had a supervisor, my professor, Ron Milo, but I published 17 papers with six different professors, right? So that's unique, that's unusual. And I had sometimes 15 authors on the same paper. So the ability to really network and connect is built into the systems. Some departments more than others. So I'm not saying this is necessarily generic to the Weizmann Institute, but…And the systems biology department, when I was part of it–that was something very special that I remember.
Another thing is that it's a closed environment, unlike many of the schools in the U.S., right? So you have a fence actually, and there's a guard, which is like the Israeli school. It's a very different experience, because everything is almost like a bubble.
Dan Davidi:
And the Weizmann Institute looks like a nature reserve. It's one of the nicest places to visit. I heard once that they actually spent about 20 percent of the revenues on gardening, which is insane, but it does the job. I guess. It's a beautiful place.
Michael Eisenberg [00:09:10]:
Listen, you need beauty to encourage creativity, I guess.
Dan Davidi:
Or the other way around.
Michael Eisenberg:
To calm the neurotic scientists down? How does that work?
So–I want to talk for a second about synthetic biology. My fascination with synthetic biology, which by the way, to this moment I don't really understand anything about, but it started with a conversation with Professor Joe Jacobson of MIT, who, about five and a half, six years ago, who now is also the other grandfather of some of my grandchildren, because his daughter is married to my son.
He came and said, I think it was five and a half, six years ago, “Israel needs something like the Broad Institute. Synthetic biology is coming. Israel needs to get to the forefront of this,” and all you need to do is wind me up and say something like that. I go in, I started to meet people and get involved in this, and think about it, and lose some money in it. And finally I came to the conclusion that I need to find someone who really knew what he was talking about in synthetic biology, and hence we looked for an EIR who could do it. And our former intern, Ron Miasnik, who I think ultimately put us in touch even before Susan called you–before that love at first sight dinner with the call you got from Susan–was instrumental in doing this. And Ron spent time researching.
So before we get into–can you just tell me what synthetic biology is? Because six years later, I'm not sure I understand what it is.
Dan Davidi [00:10:34]:
Yeah, so I've spent 18 years maybe on this, and I'm not sure I understand either. I think you're part of a group of people who have found, and me included, synthetic biology to be an interesting term, because biology is everything, right?
It's what we wear. It's what we eat. It's the fuel for our cars. It's our environment. It's the nature. It's our pet. It's like everything. It's our health, our mental health. Everything is biology. The ability to think about it in synthetic terms is intriguing. It's like, what can we do with biology that is synthetic, that is new? How can we think about biology as an engineering discipline?
I think this is where synthetic biology has emerged. It actually started back in the 20s, 2000s, right, when biofuel was a thing, and people have engineered other organisms to create oil for gas to replace crude oil. Synthetic biology was hit hard over the years, and has made people lose a lot of money, like trillions of dollars, because of overpromises. And I think that's part of the magic, but also the danger in synthetic biology, of if we can engineer biology, we can engineer everything. If we can shift from thinking about biology as zoologists–we look at nature, we try to understand it, we try mathematical models to understand it.
Now we can implement tools like CRISPR, we can implement tools like robotics, we can use AI, of course, to engineer biology, to do new things. That's amazing. But you also have to remember that biology is a living organism, and it has its own way of making decisions, its own way of evolving. And that's been a challenge for the synthetic biology community over the years. And this is why it's unclear exactly what synthetic biology is, what can we do with it, how do we leverage that for the benefit of society? Are there also unintended consequences and the dangers of synthetic biology?
I think that was a very long answer of something you didn't ask. But that's like, my take of the mystery around what synthetic biology really is, and why I also find it hard to understand sometimes.
Michael Eisenberg:
If you had to explain it to a 15 year old in one sentence, what would that one sentence be? Synthetic biology is…?
Dan Davidi:
The ability to engineer biology to do new functions.
Michael Eisenberg:
Like COVID?
Dan Davidi:
So COVID is an example, but we can also engineer bacteria to eat plastic, or we can engineer drugs to respond to stimuli, to treat cancer at specific locations in the body.
Michael Eisenberg [00:12:56]:
Do you ever wonder if this is playing God?
Dan Davidi:
No, I don't. I think the reason is because it depends on the perspective. If you want to say God created the tools that we are playing with, I think you can apply that to almost everything, right? Not just biology, but we do have the ability to play with the genetic code.
Which again is very intriguing, but if you think about it, we also have the ability to take two elements, mix them together and create concrete. That's another playing God exercise if you will, right? So this is just like the sandbox we have and the tools that we have.
Michael Eisenberg [00:13:30]:
Now that I've asked the God question, so now tell me, what are your personal core values?
Dan Davidi:
That's a tough one, because I, unlike synthetic biology, maybe I don't have a one-liner. I think I do what I do because I care. When I think about investing my time, and my brain, and my thinking into how to use biology, how to solve problems so that my kids will have a better world to live in, I'm actually very concerned about what's waiting for them in many levels, political environmental, health-related, society-related. I think I'm just taking my part in this.
Michael Eisenberg:
So you're engineering like cell level biology because the biology of politicians is too hard to engineer?
Dan Davidi:
It's a waste of time.
Michael Eisenberg [00:14:25]:
Okay. So you came back here.--I should probably ask you before I come to the next question, what were your impressions of me? Who's this guy who landed on me out of nowhere on the beach in Del Mar. Then take me to dinner at a kosher restaurant and say, “Hey, why don't you come back to Israel?” You went home, you told your wife, “I met a lunatic?” What did you do?
Dan Davidi [00:14:44]: To be honest, I told my wife, “I met our landing pad. I met the person who can take us back to Israel.” As an Israeli living in the U.S. you constantly are abroad, right? As an immigrant, you constantly, as far as I've experienced it, you constantly look for excuses to come back to Israel, but it's just like sometimes too hard because schools are better, because the weather's better, because there's no stress, and there's no push from Ynet and everything is just easier, right? And you have a bigger SUV, and a nicer house, and it's a slippery slope that we were not willing to be part of this game, and we were looking for an excuse to come back to Israel. And I don't want to call you an excuse. But you were our life rope, I guess? Would that be the term? You were our landing pad. Like you provided the opportunity.
Michael Eisenberg [00:15:32]:
You’re saying, any landing pad is good enough even for a guy who’s just an excuse. It's okay. All right. So you came back and then you went through a year of EIR-ship at Aleph. What was that like for you? So here comes a guy–just to be very clear, okay, Harvard Medical School, Amazon Moonshot Factory, whatever they call it over there, right? Amazon, a big corporate life in San Diego with a big budget or whatever it was. And come back to Aleph, and sit in a little office down the hall from us. What was that like that year?
Dan Davidi:
So it was definitely an interesting experience, because one of the first things I was told by your partner, Eden, was that EIR is the worst job in the world. I was like, okay, that's going to be fun.
Michael Eisenberg:
He managed your expectations properly.
Dan Davidi:
Absolutely. That was the worst experience ever. No, but I think I was stepping into this really in two levels. One was an opportunity to really come back to Israel. And I think the ability to be an EIR was keeping me very broad. I kept seeing stuff all the time, which I really enjoy, especially as a curious person, and as someone who has been always looking for interesting stuff to explore.
I think I was exploring, if you want, a new game, with new rules, and a new territory that I wasn't familiar with. And you and I have spent many hours together working, especially in the first six months where I was basically joining you almost everywhere. And I've learned how you do what you do, which is not easy–not to learn, not to copy. I was really fortunate to be part of it, but it was also exhausting. I couldn't introduce myself anymore. Like I couldn't say, I couldn't say who I was anymore. So many people, so many faces. That was an overwhelming experience. Very powerful, very overwhelming.
Michael Eisenberg:
How many ideas did you have throughout the year that you thought you wanted to start a company on?
Dan Davidi:
I think what I discovered being on, call it, the VC side, where you keep hearing interesting ideas coming from excellent people, is that as much as I was curious coming up with my own ideas and starting a company, that was not my objective. I wasn't the typical EIR coming to a fund to start a company. I could have done that probably better, and with less efforts in the Bay area or in Boston. I came to Aleph to open my mind. And I think what I've realized is that what I really enjoyed doing was not listening to people pitching their ideas, but connecting ideas of different people.
Michael Eisenberg:
Interesting.
Dan Davidi [00:18:09]:
And that, I think it was when I started a company, was when I realized I don't have that power as a venture capitalist, right? So as a venture capitalist, you choose your cards. You invest in this, or you invest in that. You don't have the privilege of dividing and conquering, and taking pieces of each–or say, “You and you guys, you should work together to build something bigger.”
Michael Eisenberg:
So after a year you start, Ohr - OHR–what is Ohr?
Dan Davidi:
So literally it's ‘light.’
Michael Eisenberg:
Right, the word Ohr means light, taken from the first chapter of Genesis–in Hebrew, “Vayomer Elohim yehi or, vayehi or,” “And God said, let there be Or, or light. And then there was light.”
Dan Davidi [00:18:56]:
Yes, and I think that's exactly what it is. Like when I started Ohr, and I have a hard time saying, “I started,” even though I'm a single founder, but I feel like we have founded it together. You even came up with the name. So we started, Ohr, if I may–
Michael Eisenberg:
The only difference is, you could have started Ohr without me, and I couldn't start Ohr without you. You'd find another name, but there's no chance that I could, one, get a PhD, but two, understand synthetic biology.
Dan Davidi:
Fair enough.
Michael Eisenberg:
Yeah.
Dan Davidi [00:19:40]:
I’m sure you couldn't. So Ohr, I think, is a collection of everything I've hoped for. When I told you about the two pager a few minutes ago of what would be my dream job, it was about really discovering critical technologies that could position Israel as a leader and find the talent and the capital to build them. And Ohr as an example of that, and I consider it the way to execute on this two pager. It's basically a way to synthesize chemicals in a new way using biology, but not just like chemicals, right? Chemical sounds boring, even gray. Thinking of chemicals that are of strategic interest. And I think beyond the technology, one thing I've learned over being an EIR at Aleph for about a year, is that technology is cool, but it's not enough. What you need is like a sophisticated go-to-market and how to build a venture business is very different than how to build a business.
I sometimes struggle with this still, because there's something very, I don't want to say silly, but something very weird about venture businesses. There's a lot of growth involved, and there's a lot of storytelling involved. I've learned how to do this, I think, pretty well. I mean, you've decided to invest, and I think Ohr is a way of making chemicals a venture business, if you want.
Michael Eisenberg: Okay. So there's been a lot of, you said, using synthetic biology to make chemicals. Can you be more specific? Cause there’s been a lot of bio manufacturing businesses.
Dan Davidi:
Ohr actually focuses on strategic chemicals, as I said, and the first focus is rocket fuel. We've identified rocket fuel as a very interesting chemical because, first, it's a very interesting market, it's a very rapidly growing market that has shifted from government-owned rocket launches to space, to private companies like SpaceX taking over the market and moving from launching rockets once a year to twice a week.
So the demand for rocket fuel has gone up, and we've figured out a way to make rocket fuel cheaper and better than how you make it from crude oil. We realized that rocket fuel needs to be very clean to keep the rocket engine happy. So the real pain point of the rocket industry is the ability to reuse the engine. And when we use biology–something biology does very well, it's very selective and very specific, so we can actually fashion exactly the composition of the fuel, and because we start from simple elements and not crude, gooey, dark, crude oil, we can start from a clean feedstock, use a very selective biological process, and end up with a very clean product. And rocket fuel is a very good example of how a clean product has a benefit.
Michael Eisenberg:
We can call it ‘kosher rocket fuel.’ It makes the engine happy.
Dan Davidi:
Yeah, but you can't fly on Saturdays. I think more than it's kosher, it's a creationary chemical.
Michael Eisenberg:
What does that mean, creationary?
Dan Davidi [00:22:45]
We don't distill it from oil. We don't take something out there, and extract it, and refine it.
Michael Eisenberg:
There are no refineries here.
Dan Davidi:
Exactly. We create it from scratch. We actually build it from the very basic elements that build fuels or chemicals in generals, which are the atoms. And we focus on carbon atoms, which are basically the backbone of organic material, including fuel.
A skeptical venture investor would say, “Okay, I've heard about bio manufacturing and self manufacturing or a million things for the last, I don't know how many years. Here's another one.” How would you answer that?
Dan Davidi:
That was Google in the 1999 period.
Michael Eisenberg:
Well-played. There have been 11 search engines, here's another one. Whoops, it's Google.
Dan Davidi:
Yeah. No I hear them.
Michael Eisenberg [00:23:30]:
I want to thank you for allowing me to invest in Google before it was Google. I didn't think of that, but…
Dan Davidi:
I think you're right. I've even heard worse things, like PTSD. Like some investors tell me they're really tired of hearing that same pitch over again. It's true. I think what we have is, we have a reversed-engineered solution.
And if I can take a few more seconds to explain what it means–I think in most cases, when you talk about bio-manufacturing or producing stuff sustainably you think of, here's an interesting technology, I can make stuff from it, what can I make? Here, everything was reversed engineered to say, okay, rocket fuel is an actual product. You can build a solution for, can you use any technology out there? And biology has turned out to be the best technology to do that. Not just a technology you can use, or a technology you've been using and applying a product for. I think this is what's unique about Ohr. It's not just rocket fuel, by the way. We do make other things, and we have different areas of focus.
Michael Eisenberg:
Other critical chemicals.
Dan Davidi:
Other critical chemicals. We actually see ourselves as a B2G company for the most part. We see ourselves as trying to create chemicals that would benefit governments, obviously on the good side of the planet, which is an interesting dilemma. Sometimes when you produce critical chemicals, because you understand where they can end up, where the technology can end up–it's true for any critical technology like AI, other things that can have unintended consequences–but yeah, we want to be on the good side.
Michael Eisenberg [00:25:01]:
So I think it's obvious that biology creates chemicals, right? Photosynthesis is a biological reaction.
Dan Davidi:
Everything has started from a biological process.
Michael Eisenberg:
Right. So why didn't anyone else do this before?
Dan Davidi:
I think people for many years have, or still are, trying to engineer biology or make synthetic biology by taking modern biology and engineering it to be better, or more specific, or targeted towards one way or another.
We've talked about synthetic biology and the ability to engineer it, and thinking about the building blocks that we have, cells, enzymes, genes, and engineer them. I think what Ohr does, and hence the name, it goes back in time to before biology existed. And I think what we cracked was the ability not to engineer biology or modern biology to be better, it's to go back in time to before biology existed, and play evolution again, but this time with a dollar sign on the forehead.
So how can we direct evolution from the very early beginning of origin of life and use modern biology to use primordial chemistry to develop modern products? And that, I think, has been a way for us to overcome the complexity and costs associated with bio-manufacturing, which is ultimately very high.
Michael Eisenberg [00:26:17]:
I find it interesting that you can say you play evolution, so to speak. It's on some level what you're doing is anti-Darwinism. It's more, again, God-like. You go back to primordial, the primordial soup, the primordial chemistry, and try to create a bang, so to speak, by creating light or energy, as the case may be. I've gone, by the way, to reinterpreting the first chapter of Genesis, the word ‘or,’ from light to energy, because of you, by the way, or hoshech, which is commonly referred to as darkness, as the absence of energy. But isn't this like, anti Darwinist?
Dan Davidi:
It's an interesting framing. I think it's really the best of both worlds in a way. So we don't just say evolution happens and we are happy about it. Because evolution is to some extent a stochastic process, right? You accumulate diversity, and then based on the condition, diversity is being selected for a beneficial trait. What we can do is we can eliminate that. We can go back in time and ask, okay, no matter what happened throughout evolution, what are the important junctions that evolution has created for us? Can we walk a different route?
So we're using evolution, but not in an evolutionary mindset, right? We're taking a very engineering-like approach in an evolutionary landscape. So we're not ignoring Darwin or doing like an anti-Darwin move, it's more of a reverse Darwinism in a way, where we go back and revisit junctions, and we can allow ourselves the freedom of jumping between one place to another, which is something evolution typically doesn't do. It has a very small step, baby step way of moving across the landscape.
Michael Eisenberg [00:27:57]:
Can you give us an example of how you engineer the route of evolution?
Dan Davidi:
Yes, so at Ohr, we build carbon chains. Carbon chains are the building block of everything organic. And we don't do them the way nature does them, like iteratively one carbon at a time, with a lot of complexity. We actually choose what is the carbon chain we want, and we can go straight to that carbon chain, and produce it in a way that would only lead to that particular molecule.
Michael Eisenberg:
That's like backcasting. You decide, hey, this is where I got to get to, and then you reverse engineer it back to where it needs to go and build it forward?
Dan Davidi:
Yes. And if you do it the right way, you don't have to distill it or to refine it, going back to the refining concept. And we just get that particular molecule and nothing else.
Michael Eisenberg:
So one of our recent guests on Invested was Sender Cohen was someone you've gotten to know also, my friend since high school who is setting up, among other things, Nevo Labs here in Israel, which is meant to be like a fund for a Bell-Lab-style innovation center for where world-class scientists like Dan Davidi could come to Israel and be a part of.
You said you went to Harvard Medical School. You did say Weizmann was better than Harvard Medical School. And then you went to the Amazon, whatever it's called, Moonshot Factory out there and in California and came back to Israel. If you were pitching a world-class scientist now at Harvard or MIT or the Amazon Moonshot Lab or the lab in, Jen Duna's lab in Berkeley or whatever it is, or at Stanford–what's the pitch for why you should come do it in Israel? Like why be like Dan?
Dan Davidi [00:29:37]:
Okay. So I think you're mixing two things, because there's the Bell Lab, or the Nevo lab, which I think is a very interesting idea. I actually have some counter arguments of why this is actually not the best place to allocate capital, and we can bring Sender in maybe to the next episode.
I think that the challenge and the limitation here in Israel is not necessarily a place to do good research. Weizmann is better than Harvard, right? We said that from the beginning, and we should let U.S. taxpayer money train our people, right? People go to Harvard, they go to Stanford, they go to those best places and they learn how to do things.
This has been since the birth of Israel as a state. People have gone out, have learned, and have come back to build in Israel. I don't think building in Israel and keeping Israel as a closed system with everything in it will actually benefit a small country like us. I think it's good that people go out and come back.
I think what's missing is not a place to do research. It’s the talent to take that research and IP to the next level and scale it.
Michael Eisenberg:
Explain more?
Dan Davidi:
I think, again, the limitation is almost like the high tech industry where you've seen very early stage companies in the eighties and nineties starting in Israel and then immediately going to the Valley, right?
And people were flipping coins to see which founder would move to the Valley. I think we're seeing that exact thing now in deep tech, and biotech, and synthetic biology and you name it, right? There isn't the talent and the capability to scale these companies here. And what is missing is not IP.
What is missing is the know how. You need to send people not to work in academia, but in BASF, and in Lanzatec, and in Pfizer, and in Moderna and in the places where you scale biotech, and then come back to Israel and do that from here. And we're seeing this in the high tech industry now, with companies headquartered in Israel and growing in Israel as Israeli companies.
Michael Eisenberg:
So let's make sure I understand. So the problem here, or the challenge, or the opportunity, either way you look at it, is somebody who graduates the Weizmann Institute, or Tel Aviv University with a degree in the hard sciences who then goes to Harvard, MIT, or someplace like that then they, if they want to keep doing research, they can do it there, and then come back for an academic position here over time.
That's kind of interesting. What's really interesting is if they want to go out and do a company, and then they should do a stint at some commercial entity in the U.S., and then come back here.
Dan Davidi:
Yes.
Michael Eisenberg:
And your view, therefore, is that Israel is a better place to commercialize, provided that there is a set of people here who know how to help commercialize these companies, much like happened in the beginning in the 2000s in the high tech industry here. That's the basic case?
Dan Davidi:
That's the basic case. I think you can, on top of it, add the ability–so I would argue that bringing an Israeli back to Israel is less important than bringing an experienced biotech leader to Israel, even if he's not Israeli, even better. So I would argue that someone like that would probably worth 10 Israelis coming back.
Michael Eisenberg:
An entrepreneur?
Dan Davidi:
An entrepreneur, or a technical leader. Yeah.
Michael Eisenberg [00:32:45]:
What is a technical leader, as opposed to one of these guys who goes to MIT after their PhD at Weizmann?
Dan Davidi [00:32:48]:
It's someone who has done technology in the real world, where the academic paper is not the outcome, but the product is. And I think we see it very often where people come out of academia, and there's a very significant disconnect between technology in an academic environment and technology in the real world.
Michael Eisenberg:
So you don't think there's as much value in doing the research here, like for argument's sake, if you had a billion dollars, Dan Davidi had a billion dollars. I said to you–
Dan Davidi [00:33:14]:
Is this an offer?
Michael Eisenberg:
No, because I don't have the money to give you. I give you a couple of million dollars to start a company. That's it. That's it. And an office, and good coffee.
Dan Davidi:
Mediocre.
Michael Eisenberg:
Yeah, but–okay, now we're in a feud. The coffee here is first class!
Dan Davidi:
It's first class. On the partners’ floor.
Michael Eisenberg:
Tell everybody that's not true, that everyone gets the same coffee.
Dan Davidi:
No, the coffee at Aleph is top notch.
Michael Eisenberg:
You know why?
Dan Davidi: Because you choose it.
Michael Eisenberg:
And it's biologically engineered. Jesus.
Dan Davidi:
You're regretting this, right?
Michael Eisenberg:
Listen, you know too much, sitting here all this time.
Dan Davidi:
Oh, I see. You chose to invite me.
Michael Eisenberg:
So if you had a billion dollars–back to that, which now your chances of getting have gone down after your insulting our coffee.
Dan Davidi [00:34:01]:
They were zero to begin with, so it’s fine.
Michael Eisenberg:
Yeah. Ohr is going to be a big outcome. So Ohr is successful. You have a billion dollars, and you say, “Okay, I can sponsor a hundred Israelis at Harvard University to study, or I can set up a new wing of the Weizmann Institute of Tel Aviv University. A hundred scientists here.” What are you doing?
Dan Davidi:
Neither, because the hundred Israelis will go to Harvard anyways, and they will come back to Israel anyways if they had the opportunity. I would take those billion dollars, I would take those hundred Israelis going out to Harvard, and I would find them positions in the best biotech companies in the world, and then pay for them to come back and build companies in Israel.
Michael Eisenberg:
Got it. You're all focused on the commercialization. The research is less important.
Dan Davidi:
That's what we miss. That's what we're missing here.
Michael Eisenberg:
Is that, does that come from a view, which I think is true factually, which is historically much innovation in science came out of academia, but more and more it's coming out of the commercial, right? If you look at what's going on in AI, it's almost 100 percent at this point coming out of a place like Google and Meta, et cetera. And your view is the same thing is going to happen in deep tech and the hard sciences?
Dan Davidi:
I think it's happening, and COVID has actually started this. You know, I grew up in academia, very loyal community. You never go out. If you do, you never come back. And I'm fortunate to actually leave academia. It was the hardest decision I've ever made, leaving from Harvard to Amazon, even though everybody told me I should definitely take the job. I actually refused first and I told Amazon no. It took a few weeks until they basically kept increasing the offer, which I couldn't resist anymore.
Michael Eisenberg:
Not a bad negotiation for an academic.
Dan Davidi:
Thank you. Anyways, I think–what was the question?
Michael Eisenberg:
What was the question? The question was…you were talking about, people should go to work at these biotech companies, and then if they have a billion dollars come back here. And I said to you, is that because more and more IP is coming out of commercial companies rather than academia–and AI came out of more commercial companies like Meta, and Google, and OpenAI, and is that the same thing going to happen in deep tech?
Dan Davidi:
Yes. Yeah, I was telling you I was loyal to academia, and then I left academia and I think academia needs to look in the mirror and ask itself, where is it heading? I think in many ways, innovation used to be in academia, and everything else was like, low-level research. When COVID hit, Moderna came out of Flagship, which was not an academic institution.
And we've started seeing a lot of capital going into private sector, investing in biotech. And we've started seeing top researchers like Aviv Regev and other, probably the best researcher in the world–she's Israeli, she headed the Broad Institute, and now she works at Genentech. And we've started seeing a wave of the best researchers in the world leaving academia and moving to industry, because research is now happening in industry and not in academia. And it's not obviously black and white, and there's always gray, but I think academia is downhill and top research is now happening outside academia.
Michael Eisenberg [00:37:15]:
Do you think about whether, for example, what Elon Musk is working on and the U.S. government, which is going to take more budgets away from academia–it's not that Harvard's going to go out of business, they got a lot of money in the endowment–is that going to impact research and academia, and accelerate people going into industry in your view?
By the way, Musk is another great example. I'm thinking about deep tech, right? Anduril and SpaceX and Tesla has advanced battery technologies, space technologies, rocket technologies, military technologies, far more than academia has and government has over the last five to 10 years.
Dan Davidi:
It's not entirely true, because there was a lot of government money involved, right? I think it’s somewhere in between, between, okay, here's like very important research we need to do. And we have the breath to do it, which is not very typical for the private sector. Venture money is not typically invested in science. But it was a lot of science involved in Tesla and SpaceX and all these things. And Elon had the breath because of, to some extent, government money. I think we're starting to see what's called focused research organizations where people invest the money in outside of academia, nonprofit organizations.
I think what Elon has done, he was able to build a business model around that and make it a for-profit business, which drives innovation forward. So yes, I think we would see more and more of those hybrid models of outside academia for/nonprofit. OpenAI is another example, right? It started as a nonprofit, ended up being basically a for-profit organization.
Michael Eisenberg:
We'll find out.
Dan Davidi:
Yeah, we'll see. But at the end of the day, it's outside academia, innovation happens, and we're seeing this in biotech as well.
Michael Eisenberg:
So when you think about Israel, you don't want to make it the Boston of the Middle East, because academia exists in Boston. What you really want to make it is the commercial hub of science for the world. Is that your vision?
Dan Davidi [00:39:02]:
Yes, I want to make it the Silicon Valley of biotech.
Michael Eisenberg:
Silicon Valley of biotech, okay, but there is a Silicon Valley of biotech though–Genentech.
Dan Davidi:
They exist here, but they don't have the fast turnaround and innovation that we have.
Michael Eisenberg:
So outline for me, like, where is Israel's position in this world of future science? Be specific.
Dan Davidi:
I think really, it's in untrivial connectivity between fields.
Michael Eisenberg:
Go ahead.
Dan Davidi:
So you will see Genentech in the U.S. easy, right? It's a business of innovation and scale and everything. But I think Israeli ingenuity is in the ability to connect non-trivial dots together, and bring, very cliche, but multidisciplinary teams to work together and speak the same language, the language of “Get shit done.” And this is something very Israeli that I've experienced. Moving from Israel to the U.S. and now back, and also working with a U.S. team, our U.S. employees are much, much better at working very systematically, and getting from A to B. But what happens in Israel is ending up at C, unexpectedly. And this is, I think, where Israeli innovation is very powerful.
Michael Eisenberg [00:40:23]:
So let's talk about future areas of science for a second. If I was finding the next Dan Davidi EIR, where should I be looking, and what area should I look at?
Dan Davidi:
I thought you've realized that was a mistake.
Michael Eisenberg:
That's why I gotta get the next one. I'm trying to do better next time.
Dan Davidi:
It's–I don't have a good answer, because I think I grew up in a very kind of a non-orthodox way, right? I had a very weird trajectory. I started as an academic, but I also had some episodes where I went to be a teacher, and then moved to become an entrepreneur, moved to Harvard.
Like I did many transitions over the last years and I don't think it's very typical. I would probably try to find someone who has done a similar transition from top-level academia to the industry.
Michael Eisenberg:
Yeah, but I'm asking a more specific question. So I got a bug about synthetic biology. I found you. What's the–I need to get a bug about the next three areas. What are they? It's not synthetic biology? It's more synthetic biology?
Dan Davidi:
Nah, it's a waste of money. It's, I think energy is, going back to Ohr, I think this is the most important currency of our generation.
Michael Eisenberg:
Yeah. And what's another area?
Dan Davidi [00:41:40]:
I'm a fan of the material world, right? I think technology is not important anymore in the digital space. Not important is a bold statement, right? But I think AI will be an enabler, but where the monetization will really be is leveraging AI in the physical space.
Michael Eisenberg:
And that's an interesting comment. So you think the digital space is going to be tough to monetize?
Dan Davidi:
Yeah, it's going to be a commodity.
Michael Eisenberg:
Everything in the digital space is going to be a commodity?
Dan Davidi:
Most of it, so it's going to be very hard to find interesting asymmetric opportunities.
Michael Eisenberg:
Because?
Dan Davidi:
Because competition will just be too fast.
Michael Eisenberg:
Who are you competing against? More digital entities? I got a hundred bots, and a hundred coders and junior coders, and eventually over time, everything gets reduced to zero, including the application layer, not just the foundation model layer.
Dan Davidi:
Yes, but a drug is still a drug.
Michael Eisenberg:
And energy is still energy.
Dan Davidi:
And energy is still energy.
Although maybe that's what you're paying for in the digital world going forward, which is some sort of added value on top of the cost of energy.
Dan Davidi:
So it's the hardware that can optimize that and not the…right?
Michael Eisenberg:
Okay, so you're a fan of the physical world and energy is one area. Any specific areas of energy?
Dan Davidi:
I don't know. I think that's really something that as a scientist, I want to give you an educated answer. I think you've made a mistake once of focusing on synthetic biology. I wouldn't want you to do another mistake. I think there's definitely a lot of things happening in fusion energy, but that sounds very remote. If you think about energy storage, that's a big one.
Michael Eisenberg:
I feel like everyone's circling around that though. And Elon Musk got a play there with his Tesla walls and his batteries, etc.
Dan Davidi:
Correct. But it's one way to look at the problem. Another thing would probably be, the right word to say would be quantum. Everybody's into quantum, but again. It sounds to me like, and especially coming early stage, as you typically do, there are binary answers there, right? It's not, this is a very good team. This looks like a very good entrepreneur. I'm going to invest in them because it's going to be okay. And they're going to figure it out with some money and good operation. I think it comes down to feasibility.
Michael Eisenberg:
How was science made different by AI?
Dan Davidi:
So there are trivial things, like it accelerates the pace at which we model things, right? Protein folding is a very good example where–actually another innovation coming outside of academia where Google decided to get into the play and developed AlphaFold, and that has changed the industry.
The counter argument would be that as much as AlphaFold is great and helps everyone design new proteins as drug targets, or as, the ability to, whether cure a disease or use it for other purposes–we have not seen the ability to just engineer proteins out the gate, right? We still need the experimental phases. We still need clinical trials. We still need all the stuff that is involved in the messy biological part. So I think AI has advanced the time it takes for a cycle, and allow us to narrow down the search space dramatically, but it doesn't solve the problem of the slow and painful scientific hypothesis testing.
Michael Eisenberg:
How much do you think it's sped up biology, synthetic biology? Is there a way to capture that in a percentage?
Dan Davidi: [00:45:06]
It has shifted the balance and the capital allocation more than it has accelerated it, I think. Because you could have brute force problems that you can now do, more intelligently approach them, right? So that lowers the barrier to enter for smaller companies. But still, and I think this is actually a very good example–many of the companies, let's say, using AI to engineer better drugs are facing challenges when they need to scale, because clinical trials will still cost them hundreds of millions of dollars, whether or not they have AI.
And the only players that can do that are the big pharma companies, which have originally brute forced the problem.
Michael Eisenberg:
Is that a regulation problem or a scientific problem?
Dan Davidi [00:45:50]:
It's both, but I don't think it's regulation so much because it's really a cultural problem. You don't want to try a drug that hasn't been tested and hasn't been proven safe.
Michael Eisenberg:
How do you think about, I was thinking about this the other day, and I don't have a good answer for it–so a lot of what Pfizer did was based on Israeli data. They were able to turn it quickly. We both were at a presentation given by Professor Oded Rechavi of Tel Aviv University. And he was talking about why we use worms in analyzing neuroscience, because these worms regenerate themselves very quickly. So you get through a lot of life cycles very quickly, much faster than you can with a human being, which takes tens and tens of years, et cetera.
And it got me thinking about all the things I want to speed up so that we can get answers to. And then it took me to think about, oh, wait a minute the COVID vaccine was sped up by the access to the data on Israelis, particularly side effects. But also at least in theory, I think the reduction of fatalities and heavily sick people here, based on the data. And it occurs to me based on what you're saying right now that we actually aren't sure, or not necessarily can trust data as a way to speed up drug and vaccine delivery. You need to go through the actual human life cycles.
Dan Davidi
I think there's no way to get robust enough data, and you always have to play a game of risk management, right? And the more robust and rigorous you can be in acquiring data, and do it multiple times in multiple scenarios by eliminating confounding factors you can make the right decisions. I think basing your decisions on one set of data that could have been corrupted, that could have been misunderstood, can be dangerous.
Michael Eisenberg:
I mean, it was gen pop data here, right? It was population data. Israel has a very advanced medical system and a very advanced digital record keeping system.
Dan Davidi:
No, I'm not saying that the data is corrupted I'm saying that it's very specific and you can see also that
Michael Eisenberg:
To Israel, you're saying? Or in general?
Dan Davidi:
Potentially, yes. It can be very specific and it could have been acquired in a very particular way that might not be applicable to other…
Michael Eisenberg [00:48:07]:
You think it was probably–in retrospect now, you weren't in the seat then. And those people who were in the seat then had to make hard decisions, obviously. In retrospect, was it smart of Israel to use its data to get vaccines early? Or is it better to actually wait on these things because you have more information?
Dan Davidi:
Again, it's a hard decision that doesn't happen in a vacuum, right? You've seen, everybody has seen what happened in Italy. Everybody had seen whatever in other places.
Michael Eisenberg:
It's an impossible decision. It's all retrospective.
Dan Davidi:
It would be unfair of me to say that they've made the wrong decision. I probably would have made the same decision myself.
Michael Eisenberg [00:48:43]:
How should one think about using data to accelerate these actual life sciences, physical processes, or should we not? And we need to let biology take its course and actually not try to accelerate it?
Dan Davidi:
So biology is going to take its course one way or another, right? It's going to just, biology is everything. We have ways to collect data, and I think the biggest caveat is standardization. How do we collect data in a way that would be translatable from one place to another? The different models or different entities would be able to use it and come out with the same conclusions or at least have the same input if being measured in one place versus another.
Now it's definitely not the case. A lot of these models are garbage in, garbage out. I think people are tempted to think that it's not garbage out, and this is where the risk comes from.
Michael Eisenberg:
And so AI is not going to help that because it's garbage in garbage out? And so we shouldn't assume that in a lot of these hard decisions AI is actually going to help us as it relates to physical sciences and biology?
Dan Davidi:
I think AI can help us understand how to design an experiment, but it's not going to be able to generate the data without–I mean, maybe there's going to be a robotic system, right? But I'm not–maybe there are going to be robotic systems to get data. I mean, not maybe. There are going to be robotic systems to get data. But I think you still need the data and in biological systems where chaos is genetically encoded data can be hard to acquire.
Michael Eisenberg:
How have you used AI at Ohr?
Dan Davidi: So we design proteins, we design enzymes to catalyze specific reactions. And we've used AI to engineer these enzymes and to predict how they would behave. Definitely helped us in engineering enzymes, and it has shortened time from ideation to experiment. But we still need to do the experiments. We still need to get the chemicals.
Michael Eisenberg:
While you were in EIR at all, you experimented with a bunch of things, including trying to cure cancer with fava beans. Why did some of these things fail?
Dan Davidi:
It's always, and you and I have been talking about this a lot. It's not just the technology. It's like finding the right people, the right partners, and being at the right time. And I think for some of them, I wasn't mature enough in my thinking, in my readiness to jump ship. Being an entrepreneur is hard. It's a roller coaster, and I wasn't ready to do this, and I couldn't find the right partners to do this.
To some extent, this is why I'm the only founder at Ohr. I was having a hard time finding a partner, and I think it's your fault. And I'm not just saying this to upset you. I think the reason we've been so close–
Michael Eisenberg:
You can't upset me, but go ahead.
Dan Davidi:
I can try. I know too much Michael.
So the reason I was having a hard time finding a partner is because I was surrounded by all this good, right?
Michael Eisenberg [00:51:50]:
Coffee.
Dan Davidi:
Coffee, yes. I talk to you a lot. I'm surrounded by your partners, and I get the support from Aleph's platform. And it was just hard for me to justify having a partner.
Michael Eisenberg:
So was it valuable to be an EIR at Aleph? Like you'd recommend to someone else?
Dan Davidi:
I wouldn't, because I want to keep my office. I think being an EIR is a very confusing role. I think any, typically an EIR wants to start the company, and the only thing they need to be is focused. I think being in EIR is a very distracting role, because you see everything all the time. And this is why Eden told me this was the worst job in the world, because you're supposed to focus on your company, but you keep being pulled out to do other stuff.
Michael Eisenberg:
So he was right.
Dan Davidi:
He was right, but somehow, here's another example of where logic doesn't work. He was right, but I feel like it was a very successful journey. I think Ron Gura would agree and I think Eran Shir would agree.
Michael Eisenberg [00:52:50]:
So the producers want me to ask you how I've harmed you during this process, or maybe outside of this process.
Dan Davidi:
I think we don't have enough time for that. How have you harmed me? I think that there's, I’m sometimes very cynical about the venture world. I think investors, you included, cannot really understand, and shouldn't really focus and spend their time understanding what we're doing. I'm trying to stay grounded working with you. You're up in the sky and you are a visionary person.
Michael Eisenberg:
That's a nice way of saying, I have no understanding of what it is that you're actually working on .I didn't do well in high school chemistry either.
Dan Davidi:
But you know chemistry today, right? The other day you told me, “Oh, I read a piece about whatever, right? Kerosene.”
Michael Eisenberg:
No, no, no. I actually talked to ChatGPT about it, and said explain it to me like I was a 16 year old again. Okay. So please explain it to me like I'm a 16 year old, and I ask it questions while driving.
Dan Davidi:
So you've been using AI.
Michael Eisenberg:
Yeah. Yeah. So I could have a high school education, so I can talk to you.
Dan Davidi:
I don't think you've harmed me. I think it was really a fascinating journey.
Michael Eisenberg:
So, assuming I was a high school student again, and the truth is I took AP Biology in high school so I would never have to see science again. That was my goal. My wife and kids know that. And I did well in AP Biology, for what it's worth. Not so well in chemistry.
But if you were making a pitch to high school Michael, or to any high school kid out there as to why they should go study science instead of computer science. What's the pitch?
Dan Davidi:
The pitch is that science is really the ability to look into something, hypothesize and go test it. And it's driven by curiosity, whereas computer science is driven by execution. And that can be replaced tomorrow, or even yesterday by AI. I would actually recommend going to study history or philosophy or science.
Michael Eisenberg:
I'm also a fan of studying philosophy. Why philosophy?
Dan Davidi:
It makes you think. It makes you be critical. It makes you look at the world and ask questions, and spend time thinking about things that are not trivial to answer even with AI.
Michael Eisenberg:
I think that's another reason also to study Talmud, for what it's worth.
Dan Davidi [00:55:08]:
You keep bringing this back, Michael. I'm not going to study Talmud.
Michael Eisenberg:
I mean, listen, you know. Critical thinking.
Dan Davidi:
A kosher restaurant was enough for me.
Michael Eisenberg:
So what are you having your kids study?
Dan Davidi:
They go to a Waldorf school, so you know.
Michael Eisenberg:
They're enjoying life in nature?
Dan Davidi:
Yes, no, but seriously, I think the same methodology would hold. I would want them to be critical thinkers. I would want them to not necessarily be an engineer or a computer scientist. I would want them to be critical thinkers.
Michael Eisenberg:
Should we be investing in science and not technology more?
Dan Davidi:
I think we should find mechanisms which are not venture capital to bridge the gap between science and technology.
Michael Eisenberg:
Interesting.
Dan Davidi:
Yes and I think academia is not the right place to do that.
Michael Eisenberg:
And you think venture capital is not the right place for it either?
Dan Davidi:
It doesn't have the patience.
Michael Eisenberg:
Interesting. Even though you see things like SpaceX, and…
Dan Davidi:
You would not have invested in SpaceX, I think.
Michael Eisenberg:
Be fair. I'd invest in anything that Elon Musk does. We'll just say that.
Dan Davidi:
Yeah, okay. No, but seriously….
Michael Eisenberg:
I have invested in something Elon Musk has done, but…
Dan Davidi:
Be frank, right? If somebody pitched you an idea that was very science, like the early stages of SpaceX, would you–
Michael Eisenberg:
You mean like Ohr?
Dan Davidi:
Yeah, like Ohr.
Michael Eisenberg:
But I did it.
Dan Davidi:
Why?
Michael Eisenberg:
Because of the founder.
Dan Davidi:
Okay, because you invest in people. And you trusted me, for no good reason.
Michael Eisenberg:
Don't make me regret it.
Dan Davidi:
Okay. No, do you still trust this?
Michael Eisenberg:
I do.
Why?
Michael Eisenberg:
I don't know.
Okay.
Michael Eisenberg:
Kosher dinner?
Dan Davidi:
Kosher dinner!
Michael Eisenberg [00:56:46]:
You came to kosher dinner.
Dan Davidi:
Oh, but we also did something else, right? We kept bringing on experts that could validate my crazy ideas.
Michael Eisenberg:
And many of them didn't, by the way, we should say.
Dan Davidi:
Many of them didn't. And this is where it became interesting.
Michael Eisenberg:
Yeah, exactly. What's a Kavra?
Dan Davidi:
You go way back. Kavra is actually an ornamental fish business, an ornamental fish farm that I started back when I was between my master's degree and my PhD, that used ornamental fish farming as a way to teach high school kids genetics. I did that in a boarding school of Naamat, in Kanot.
Michael Eisenberg:
Where's Kanot?
Dan Davidi:
Kanot is near Ashdod.
Michael Eisenberg:
I know where it is, but–
Dan Davidi:
Okay, Kanot is near Ashdod, and this is a Naamat boarding school for kids.
That now has an ornamental fish farm, because you created it to teach genetics?
Dan Davidi:
Yes.
Michael Eisenberg:
Okay, what's the coolest genetic thing that happened in the ornamental fish farm?
Dan Davidi [00:57:42]:
So ornamental fish are beautiful to see, and the genetics, again, is very quick. So within a few generations, you can create a guppy with like, a purple tail, right? And you can see this very quickly, and kids love it, and they can track the properties. So it’s almost like being able to witness evolution in a high school.
Michael Eisenberg:
How fast from two guppies can you get to a guppy with a purple tail?
Dan Davidi:
Literally a couple months.
Michael Eisenberg:
Wow. That's because my kids killed a guppy so quickly?
Dan Davidi:
The generation time is very fast, and the number of offspring, or babies per fish, is very high.
Michael Eisenberg:
And is the purple tail a mutation? Or is it inbreeding?
Dan Davidi:
It's eventually a mutation, right? Everything is.
Michael Eisenberg:
But one that happens is reasonably predictable.
Dan Davidi:
Yes.
Michael Eisenberg:
Interesting. Okay. And out of my general questions–so what can I find out about you on Google?
Dan Davidi:
That I was the champion of Israel in equestrian show jumping.
Michael Eisenberg:
Is that true?
Dan Davidi:
That's true.
Michael Eisenberg:
I had no idea. All this time over dinner and you never mentioned that one.
Dan Davidi:
We had too much to cover.
Michael Eisenberg [00:58:49]:
Yeah. Okay. What strongly held opinion of yours has changed in the last year?
Dan Davidi:
In the last year? That we have no other choice but to build here.
Michael Eisenberg:
In Israel.
Dan Davidi:
Yes.
Michael Eisenberg:
Thanks, Dan. This was fun.
Dan Davidi:
Same here.
Michael Eisenberg:
If you enjoyed listening to Dan and me or the other podcasts, please rate us five stars on Spotify, Apple Podcasts, wherever you listen to podcasts. Please subscribe to our YouTube channel, which is the Aleph and Invested YouTube channel. And if you have suggestions for guests, please keep them coming.
If you'd like to learn more about Dan Davidi, please follow him on LinkedIn. That's D A N D A V I D I, and the company is Ohr, OHR. Thanks for tuning in. Thank you, Dan.
Dan Davidi:
Thank you, [00:54:00] Michael.
[00:00:00] Noam Bardin:
CEOs that come to Google usually fail. And they fail because they try to find where do they fit into the master plan. There is no master plan.
Don't even try to understand the logic of why a corporation does something. It's beyond your scope of understanding. Their only competition is really yourself.
Community has to be the DNA of the company. It has to be ingrained in day one of the company, and everyone in the company needs to be part of it.
That was our big trauma. They stole our model with a better product.
When you're making 600 million dollars a year, why rock the boat? And I think what Google is seeing right now is the outcome of not rocking the boat.
You know people today go to Google and they go, “Oh, I'm a Googler.”
You're not a Googler. You work at a corporation. We all say, “It's all about the people. You have to hire great people.”
And our country, we gave to a bunch of losers.
I left Google and all kinds of people were asking me why I left, whatever. I thought, let's put my thoughts down on paper. And literally the world exploded the next day.
[00:00:48] Michael Eisenberg:
Welcome back to another episode of Invested. I am thrilled to have Noam Bardin with us. Welcome Noam.
Noam Bardin:
Thank you.
Michael Eisenberg:
Noam, most of you will know as the former CEO of Waze, but you'll find out after an hour of listening, mostly to him and less so to me, that he's a much richer person than just Waze. Now, the most interesting thing though, I think, is that you're like one of the few people in the world responsible for a product that is in the hands of like, billions of people.
[00:01:19] Noam Bardin:
Yes, that's a responsibility you get with a product like that, and the conspiracy theories you get. So people have all kinds of ideas about what Waze does to route people to different places and things like that.
Michael Eisenberg:
Okay, tell me what's the best conspiracy theory.
Noam Bardin:
The best was that we route people according to advertisers to pass their location. I thought that was really a great idea. I should have thought of it myself, but definitely a conspiracy theory.
[00:01:40] Michael Eisenberg:
That's a conspiracy theory? What's another conspiracy theory?
Noam Bardin:
That we route people to Route 6 in Israel or to paid tolls, to collect the toll on the highways, and so we prefer those versus service streets.
[00:01:53] Michael Eisenberg:
You know, both those conspiracy theories are about money. The best conspiracy theories aren't about money. Is there one that's not about money?
Noam Bardin:
No, no, I mean not really.
Michael Eisenberg:
Money is the best conspiracy there is.
Noam Bardin:
Money drives everything, yeah.
Michael Eisenberg:
Alright, so for those who don't know Noam, Noam is the Co-Founder and CEO of Waze, the revolutionary navigation app with the funny cartoonish, icons. We'll come back to that in a second. He's a former VP of Product Management at Google, after Google acquired Waze.
He was the founder of Post News, which we're going to talk about in a second. Before we get there, Noam, tell me: What is your core value?
[00:02:33] Noam Bardin:
So I believe in transparency at the core. I believe that as long as you really are transparent, transparency means actually saying, with a risk of something wrong happening, being transparent and telling the truth, great things happen.
As soon as you start sugarcoating things, as soon as you start telling people what they want to hear, et cetera, you're down a very dangerous path.
[00:02:52] Michael Eisenberg:
Alright, so tell us the story of how you got to Waze.
[00:02:55] Noam Bardin:
So Before Waze, I was running a company called Intercast Networks. We were doing HD content delivery. One of the biggest mistakes in my life was going to that company.
And of course you learn the most from mistakes, right? And so I learned a tremendous amount from there, but the person who ran engineering for me was a very good friend of one of the founders of Waze. And so we kind of heard each other's stories as we were going along. They were going to raise money.
They didn't raise money. We were going to raise money, et cetera. And one of the decisions on their A round was, they were going to bring on a new CEO. And so through that, through this kind of indirect relationship, I got to know the founders, we got to know each other, et cetera. And we kind of reached a point that we wanted to do this together, before we went to talk to the investors.
I think that was one of the unique things about us, you know, usually bringing on an external CEO, I joined Waze about a year into the company founding. And when it was launched in Israel under the Waze brand, it worked. And usually this doesn't work, right? Bringing on an external CEO is like the biggest no no you could have.
So a lot of people call me up to ask how to do it. I say, “Don't do it.” It doesn't work, right, statistically. But in our case, I think what was really unique is spending about three months together, the founders. And I remember Amir basically saying, “Look, I want you to feel like a founder, and we want to feel that you're a founder.”
And we could talk a lot about what the founder mentality is. And only then we went to talk to the investors. So I was always part of the founding team, and never part of the investing team.
[00:04:23] Michael Eisenberg:
Why did you join a company that all it had done was help people find their way through illegal routes and fields in Israel?
Noam Bardin:
So it's funny, when–
Michael Eisenberg:
Most people don't remember this, but there was like a big thing around Waze in the early days where It knew the routes that people were actually taking and not the roads paved by the government.
[00:04:41] Noam Bardin:
Right. There are a lot of funny stories about that. So it's funny, when we ended up shutting down Intercast, and it was obviously a very traumatic experience for me on many different levels.
And I told myself, I am now going to go for the smallest component, like the classic Israeli startup. I'm doing a feature basically, and I'm going to sell it for 60 million to someone. Enough of this world changing stuff, enough of these big grand visions, none of that. And then Waze came along.
And I really fell in love with the concept. And the concept to me about Waze that is really the community, the fact that, you know, the reason Waze could happen is because we built a map with volunteers, with a community of people and using GPS chips, which are beginning to be prevalent, and do some smart analytics.
But the concept that we're going to go after this duopoly of Navtech and Tele Atlas, two companies that were valued at eight and a half billion dollars and four and a half billion dollars.
Michael Eisenberg:
That nobody today even knows exists for the most part, by the way.
Noam Bardin:
So that's why, when we started, the whole world map–there were two maps of the world.
There was Navteq and Tele Atlas. Navteq got bought by Nokia and Tele Atlas got bought by TomTom. And that was the duopoly. And so any kind of navigation product, the most expensive component was the licensing of the map. You could have bought a PND, a GPS device, you know, more expensive than the hardware, the marketing, the distribution, whatever it was, was the license to the map.
Michael Eisenberg:
Scarce asset.
Noam Bardin:
Being a monopoly is a good business. And so we basically came along and said, “We're going to do the same thing with a community, with volunteers.” And, you know, open source had already started, but it was kind of new, crowdsourcing was kind of new. But this idea that a bunch of crazy people are going to go up against these conglomerates with 4,000 employees that drove every road in the world, every two years, with these super sophisticated trucks, was just so exciting.
And being able to build something in that different way opened up all these opportunities, where the biggest one was offering navigation for free. And that was our big marketing angle about why going direct to consumer, because obviously free is a very powerful engine. And we forget that at the time, this is 2009, navigation was a paid product. Navigation on mobile would cost you $10 a month, and we gave it away for free.
And so all that together was such an exciting opportunity that I just couldn't say no to it.
[00:06:58] Michael Eisenberg:
Did you ever read Chris Anderson's seminal piece–there's only two business models, basically free and not free? I mean, alongside, I think it's a Jim Barksdale's great line is, “There's only two kinds of business models, bundling and unbundling.”
I think Chris Anderson really nailed it. There's either free or not free. And free was disruptive, but it relied like on a bunch of crazy Israelis driving routes and reporting things and, you know, telling us, “Hey, this, this is here, and there's an accident.”
[00:07:27] Noam Bardin:
So one of the first things we were working on was going global when I joined. But the more interesting thing is that free, that was the core of our marketing, our distribution model and the core of everything we're doing got shattered a year in, roughly, when Google came out with Navigator at the time and gave it away for free. And that was our big trauma.
It was like, every company goes through some traumas, some don't survive them, but that was our biggest trauma. And we made terrible mistakes because of it. But the point was they stole our model with a better product at the time. And that was really kind of–free is great when you're the only one free.
Michael Eisenberg:
What mistakes did you make because of Google?
Noam Bardin:
So it was funny. Just to set the stage, we're talking about the end of 2009. We had just launched in the U.S. Things were going great, like 150 downloads a day or something like that. The way things really grow, not the way you read about them later on.
And we had this board meeting, and we're in Israel, and I'm about to relocate to the Valley and we're about to, everything comes together. We have almost a term sheet from one of the top VCs in the Bay that I’d just come back with, and I'm talking about it. And they had done due diligence around Google, and came back and told us that Google is not building a map.
No one is. That was the consensus, that was too expensive a thing. And while we're in the board meeting, someone sees on Twitter that Google just launched the navigator, and obviously the whole board meeting got derailed and everyone starts downloading it. And it was a great product, and so much ahead of where we were, and we just panicked.
And so I decided not to relocate to the Bay. Obviously the VC that was giving us a term sheet didn't return our calls anymore. And we decided to actually move to look at Latin America, instead of the U.S., because we assumed that Google was going to go through the classic model, they would open it up for free, open up APIs, go, you know, UK, France, Germany, kind of following the advertising models the way they usually do.
And so we said, “If we go through Latin America, we could actually have a foothold somewhere.” And that was it. Terrible mistake, probably lost a year of moving in the U.S. And it all stemmed from the fact that none of us had ever worked in these companies. And so, you know, when we look at them from the outside, like most people do, it's these unbelievably efficient master companies you could never compete with, et cetera, et cetera.
And I always say to founders I talk to now, “Don't even try to understand the logic of why a corporation does something, because it's beyond your scope of understanding.” You think about products, distribution, et cetera. They think about promotion, the other VP, I'm going to get him,
I need headcount for this. I'm going to buy that. Like just, things that you can't imagine. It's not your scope. Your only competition is really yourself. Being able to distribute, build, get your product out there, get your customers happy. That's your competition. That's hard enough to compete with.
Don't worry about anyone else.
[00:10:18] Michael Eisenberg:
The great moral of that story is, don't let your board members use their phones or Twitter during a board meeting.
Noam Bardin:
That's in general a good idea. Yeah.
Michael Eisenberg:
Board members have big ADD, especially when they're venture capitalists.
[00:10:31] Noam Bardin:
They have a lot of big things.
Michael Eisenberg:
You want to share some of this?
Noam Bardin:
I mean ego. I don't mean what you were thinking.
[00:10:38] Michael Eisenberg:
Present company included or excluded?
Noam Bardin:
We've never worked together, I don't know.
Michael Eisenberg:
Okay, okay. Phew! But back to Google. When I got started in my career, you know, Google was called Microsoft. And everyone said, “Don't invest in things that compete with Microsoft.”
And I said, “Yes, invest in things.” Just because I was stupid, I had never worked at Microsoft or anything like that. I actually never worked in a real company in my life. Yeah, I still haven’t. And, like, I think this notion of competition in general feels overrated. What do you think about it?
[00:11:14] Noam Bardin:
So, I think that startups think there's competition, but the competition doesn't think they are competition, right?
It's kind of one way. You think you matter as a startup. You think that you matter, and people are doing this because of you, whatever. You don't matter. Nobody knows anything about you. You don't exist for the world, right? By the time you actually become competition, it's a different ball game. You know, you're in a different place.
I’m talking specifically about early stage, right? So, you're basically–nobody cares about it. And that's a superpower. The fact that nobody cares about you means you're not constrained by anything. You can do whatever you want when you start. Think about competition. You start putting constraints on yourself. You start basically thinking, negotiating with yourself, “Oh, they're going to do this. I'm going to do that.” But they don't care about you.
They want to get promoted by that job. And that, you know, he actually wants to acquire a company so you can get the headcount for it for a different project. Like again, but you're thinking that it's all about you. And so to me, that's the most important thing is really, you want to look at other products to understand what they're doing, but you shouldn't think of them as competition.
It's hard enough to do your own work. Don't worry about someone else's work.
[00:12:11] Michael Eisenberg:
I hate to fast forward now, and I'll come back to previous stages, but I feel like I need to ask you. So when you got to Google, were you able to stay focused, or were you worried about that promotion?
[00:12:24] Noam Bardin:
So it's funny. No one thought I would last in Google more than a few weeks.
Michael Eisenberg:
Count on me too, by the way. I thought the same thing.
Noam Bardin:
I did myself as well. I gave myself three months. I said three months, I'm going to get fired. And I actually stayed seven years. And I had a pretty successful career at Google at the time. I was a very controversial figure there, big surprise.
But I remember one thing after we got acquired. Dave, the corp dev person who had done the transaction, sits me down and says, “Listen, CEOs that come to Google usually fail. And they fail because they try to find, where do they fit into the master plan? There is no master plan. You go ahead and do what you think is right. And don't try to figure out how you fit in, and everything will work out.”
I took that very seriously. And so we continued to build our plan as we had before, as if Google was not there. Now, when Google acquired us, we started talking to Google, so we had about 10 million active users, monthly active users.
When I left there were 150 million, and today there are about 200 million. And so that kind of change within a corporation is kind of unthinkable in terms of that kind of scaling, especially since we got no support from Google. We got a lot of money from Google. We had no support. We had assumed we were getting all this traffic, and distribution, and integration, whatever.
And the beginning, I banged my head against the wall trying to do that. And then you realize, it's not there. You're on your own. And we continued just to do our plan and execute on it. We were kept very independent. And that's one thing I fought very strongly for. And so we continued to have our own engineering, and marketing, and sales, everything integrated as one team.
So we kept the spirit alive in that sense. By the way, one of the biggest risk factors in the acquisition was whether the community would continue to work with us after the acquisition. It's one thing to be part of, “We're going to go destroy these big conglomerates.” It’s something else when we are the conglomerate, you know, come help us.
And again, I think it goes back to the fact that we kept the company separate. It was the same people that they knew, we kept coming to the meetups the same way, you know, Ehud would talk to them the same way. So it's like, there's something about that that we managed to do. Then obviously over time things change, but they change slowly and they allow us to get a certain scale.
Had we tried to integrate into something, it wouldn't have happened. First of all, we wouldn't know where to integrate, but Waze would not have become what it is today.
[00:14:30] Michael Eisenberg:
I want to go back to that community thing. So community based business models have become a thing over the last bunch of years, I think particularly as, you know, SEO gets tougher.
Search engine marketing gets more expensive. Community is back, right? Notion is built on community. We have a company called RiseUp that's built on community, and there's, you know, numerous others. What are the best tips you would give to entrepreneurs about building community-based models and keeping the community engaged?
[00:15:00] Noam Bardin:
So first, one thing we see a lot is large companies trying to add a community. And that is the worst possible thing to happen. Community has to be the DNA of the company. It has to be ingrained in day one of the company and everyone in the company needs to be part of it. So at Waze, for example, every employee that joined Waze had two tasks.
One, to come to Israel, and they came to Israel for at least a week to work here. Even if their business had nothing to do with–they were in Brazil, that had nothing to do with it–everyone had to come at least spend one week in Israel. And the second was they had to go to a meetup. A meetup with the community.
And when you see an engineer who wasn't even thinking about it, go to a community meetup and talk to the people using the product, and get excited about what's going on there–it just changes their whole outlook. And those two things were very, very important in keeping that culture and that DNA. But it meant that I went to the meetups, and everyone else did. There wasn't any of this, ‘I'm the CEO. I will send people to…’ You have to. That's the example you're setting, right?
Where the CEO goes is what is where the company understands what is important to the company, but also to the people in the community. The fact that they could text me directly and ask me a question. And when they complained about something, I would respond to it.
It doesn't mean this is my full time job, but that's the DNA. And of course, as the leader of the organization, what you do is what everyone's going to understand. And when I went every quarter, I went to a meetup, and obviously with larger meetups that we all went to, et cetera, it set the message.
It's very risky to run a community at the same time. We had community members who had permission to delete the 101 highway. Now, the reason they worked with us is ‘cause they had that permission.
Michael Eisenberg:
I just wanted to delete the traffic on the 101 highway. Forget about the highway.
Noam Bardin:We always talked about a premium feature that would route everyone else a different way, so you would go, you know, that way.
[00:16:45] Michael Eisenberg:
Now that's a good conspiracy theory.
[00:16:46] Noam Bardin:
I know. I know. Ideas, ideas.
[00:16:47] Michael Eisenberg:
There's a lot of people in Silicon Valley who would pay nine figures for that feature
[00:16:56] Noam Bardin:
Here there aren't enough options, but in LA, you could actually do something very interesting, because there's so many different options.
Michael Eisenberg:
Oh, tell us, what could you do in LA?
Noam Bardin:
Of course we would never do it.
Michael Eisenberg:
But what could you do in LA?
Noam Bardin:
No, I'm saying you have more options, with the road grid. So you could create routes, individual and since our density is so high there, but anyway. Obviously we're never going to do it and never happened. Of course, now it's just a conspiracy theory, wouldn't happen. I'll send you the link later.
[00:17:23] Michael Eisenberg:
You know, if there happens to be, like, “weather,” right here on this one kilometer, one mile section, you know.
Noam Bardin:
Things happen. What can you do?
Michael Eisenberg:
The weathermaker machine.
[00:17:32] Noam Bardin:
Anyways, I think the community, the essence is, it has to be the DNA of the company.
It's a magical thing. It's not a scientific thing. It's art. It's not science. Obviously you can measure it in different ways, but it really is about individual people. It's not about roles.
Michael Eisenberg:
What is the magic? Tell me what happened in a community meetup.
Noam Bardin:
So the way this community is built is that basically anyone who uses the app gains permissions. That if you create a road for the first time, you gained permission to edit that road.
Michael Eisenberg:
You are the king of the road.
Noam Bardin:
You’re the king of that road. And let's say I named the road after my girlfriend. And then there's an area manager who has a polygon, where they have higher rights, and they look at it and say, “This is not your girlfriend's road. This is the 101 highway in San Francisco.”
So they would change it. Now they have a higher rank than you, so you can't undo what they did. So it ratchets up. They have a state manager above them who will look at all the big roads and be able to edit that, and then there's a country manager, and then we have global champs.
The global champs are the ones that actually interface with the Waze. And there's a team at Waze that interfaces with them. So you have this hierarchy of people and it goes across a variety of things. It goes across countries, languages, roles. There are people that specialize in beta-testing products, people that specialize in our routing engine.
There are all different types of roles that people take. And that's a lot of what makes Waze feel so local. You know, you go to Ecuador, people will think it's an Ecuadorian company. How could they know about that intersection somewhere? It's because someone in Ecuador, who's Ecuadorian, who lives there, knew that it happened and named it the right name that everybody uses, not what's written on the maps, you know?
So that local component, you can't get away with anything but a community.
Michael Eisenberg:
So what happened at those meetups though?
Noam Bardin:
So at the meetups, usually it would be the global champs. There'd be regional meetups, which–so the regional meetups, when I left, were managed locally on their own. So the top people who would work together online all the time in the forums would actually get together somewhere. We’d need some swag and, you know, and help support it.
Michael Eisenberg:
Did you pay for the flights?
Noam Bardin:
When they would do their own thing, no. When we would do it–every two years we have a global champ meetup in Israel, and we fly in all the global champs around the world, and obviously we would pay for everything. It’s a fancy event. But the local meetups really are where we bring our senior engineers management, you know, and just random people from the company as well to meet with them.
We go over product roadmaps, what's coming out. We get their feedback, which is very vocal, very aggressive. And I remember when we were starting out, we had this community person blow up at us. He says, “I took a day off work claiming I'm sick, so I could work on this thing, and your server was so slow, I couldn't do anything.”
And on the one hand, you could get mad about why is our server so slow, but to me it was, “I took a sick day. pretending to be sick so you could work on the intersection that you wanted to build!” And that's the magic of the community. So these meetups really become the physical connection where you build these relationships forward between them, because they've met each other virtually, they meet physically between us. But it also is the message that you matter.
We care enough to fly to the middle of nowhere to meet you, because you matter. And I remember that at the time, I'm not sure how it is now, but the number one person in all of the community lived in kind of a flyover state, what we'd call in the U.S., and during the day would stock inventory at Walmart.
But at night, he'd come home, he'd open his shirt, have a big S, and he was the bigshot. Engineers all over the world would be asking his opinion. He would make decisions on everything. This person had not only meaning, but had power over it. Today, 200 million people are driving on the software that he sees as his. And that's really the essence of a community.
Michael Eisenberg:
They are his.
Noam Bardin:
They are. They are.
Michael Eisenberg:
He's the ultimate editor.
Noam Bardin:
It really is. And it creates that–that's the magic that I call the community. It's, you've got to come together. You've got to, the community can [00:21:20] sense when you're fake, right? In general, people can, right? If you start lying on a consumer app, you're dead in the water.
People immediately can spot a fake. Everyone's looking for authenticity, and authenticity is very hard to fake. But it's very easy when you actually are authentic. And so that was the important thing. And also depends on the type of people you hire, the culture in the company–everything has to go around this authenticity and transparency that they're expecting.
And, you know, if you can keep that up, people will go with you anywhere. And we were always shocked how far you could go with the community. There's like, I have never reached a point of something that community can't do. Like, just as an extreme thing, we had one of our engineers came up with this idea of building beacons so that you could have underground routing in tunnels, you know, the big dig in Boston, et cetera.
And he built this product, and we had some companies build it, and basically community members meet with the local road authority in the middle of the night, with their white hats and the yellow shirts. And they go and they stick these beacons up on the highway, stop the traffic, and they stick them on the ceiling, and they configure it and with his laptop, and he's configuring it– it's a volunteer.
When there's a set of flooding anywhere in the world, we have a team that's dedicated to crisis, and suddenly the community members will interface with local and state police, FEMA, et cetera, open up highways, close highways, mark where there's flooding, where is there fuel, where is there food–all these things happen organically, together, right?
We have to provide the platform for it, but at the end of the day, this is people helping their own community.
[00:22:50] Michael Eisenberg:
I want to come back to this, but in the early days of Waze, there was a question: Could you scale it without paying the people?
[00:23:01] Noam Bardin:
First of all, you should never pay community members. If you're paying community members, you're lying to yourself.
It's not community. And the problem is if you pay anything, then immediately the person begins calculating, okay, so I got $10, but I've worked three hours. So I'm making $3.3 an hour. That's a discussion that doesn't happen in community. In community, the discussion is, you know, I'm done, I need more things to do.
Why don't you build this feature so I can now configure these things to make the service better? That's a community discussion. And so we had a few very important rules. One is that we don't hire from the community. So the community is not a path to go to for employment at Waze. And second is, we don't pay for the community.
You do it, you come because you want to be part of the community. People always ask, “Why do people do this? Why do they spend hours doing this?” I always ask the other way. I flip that question to, “Well, what's the alternative?” You know, most people come home, they sit in front of the TV, turn off their brain, and just, or today on their phone, right, they go to a social network and waste five hours on TikTok, right? That's what they do.
Here are people that actually have meaning. They're impacting the lives of millions of people around them, they're making them better. They're interfacing with people all over the world they would never have met.
They're building skills. Like, volunteering is kind of the essence of humans. Humans are community animals, right? That's how we started. So all these, you know, cities are a new thing for us. All this being alone is a new thing. And so it's actually the natural state, and you see the people that get into this really find a meaning that I think is much more powerful than watching some TikToks.
[00:24:29] Michael Eisenberg:
You know, cartography was always an expert field. And it was a solo field, by the way, for the most part. So and so was an explorer and would go out there, and be a cartographer and do it. And then obviously Navtech was obviously a similar thing. Here comes these amateurs–not just for the amateurs, they've got this cartoonish interface, for such a serious thing called cartography. I'll tell you, by the way, for myself, the first time I saw Waze and I saw one of those bubbly things, I said, “Should I rely on this?” Like, it must be giving you pause that UX, that UI, you know.
[00:25:07] Noam Bardin:
So it's interesting. Every company is a unique company and has its own thing. We had two camps in the company. One camp was the people who came from the traditional cellular business. And these were the people that were, we called them the BlackBerry people, who thought we should build for BlackBerry. They wanted the UI to be like an F15 cockpit with lots of dials and knobs. They wanted, a simple thing, to have search be, “Choose country, then city, then road,” right?
And so that was kind of one group. And the other group were the social group. They were the iPhone people. iPhone was relatively new. They were thinking about social features in the community. They wanted the UI to be friendly and fun. And the search bar is a one bar that you type in, and we have to figure it out.
Huge battles between these groups. Everything was a yelling match, and obviously Israelis are very polite, so everything's, you know, very quiet and civilized. Crazy tension, but–
Michael Eisenberg:
Passionate community.
Noam Bardin:
Passionate, yeah, passionate is the word for crazy yelling at each other. But, that tension is what built the product.
You know, our nemesis was Foursquare. Like at the time we were starting, Foursquare was starting, and they were the cool kids. They were on the front page, the man of the year, person of the year at times, you know, all the cool kids were using them. And obviously our engineers, like every good engineer is like, “I could build this in the weekend. What is this thing?”
While we're struggling away with these hard problems. And we actually reached a point where we're thinking of just taking our social features and removing the navigation feature. Just being the social gaming company. And what we did that they didn't is, we managed to take all that cool, fun stuff that we did and turn it into actual value. To the point that today, most people don't know there's a community behind Waze, right?
And that's really the success. The fact that, you know, you start something cool to get over the hump, it created value to the point that my mother will use it, and again, she doesn't really care about everything behind it. And that's what Foursquare didn't do. They stayed at the cool, couldn't make that leap. And obviously, you know, we ended up differently.
[00:27:09] Michael Eisenberg:
But the cartoonish interface, like that was thoughtful? That was just–
Noam Bardin:
That was very thoughtful.
Michael Eisenberg:
Like, we started this way, so we continued that way?
[00:27:15] Noam Bardin:
No, no. So what are the, the, the. I mean, I actually put it a little bit as a gender thing. Most product people, historically have been men, especially in the navigation space.
And so that F15 pilot kind of cockpit view of the world really drives them. Yael Elish that ran a product at Waze and comes from the social side, whatever, looked at it very differently. And she looked at how to make it fun.
Now the word fun is a very difficult word to have in navigation and other things. But you know, when you look at Google maps, that's not a fun product. That's a utility. It works great. You can use it or not use it. But you don't love it or hate it. You don't have an emotional connection to it. You don't say “It screwed me over,” or, you know, “It's wonderful. I love it.” But that's what you get with Waze.
And that cartoonish interface was part of that kind of viewer. I remember when I was thinking about joining Waze for the first time, I showed my wife the application, we're driving and she looked at all those Wazers and said, “Wow, that's so cute. I don't feel alone.” Now, as a man, I never thought about that, but I mean, actually, for her driving at night alone, it’s, kind of, a little bit of scary experience.
So there's something about that friendliness that Yael created, that approachableness, but also that not taking yourself too seriously. Our products sucked in the beginning, like we would not get you where you going until we tell you to jump off the bridge onto the highway, you know, things like that. And so not taking yourself too seriously is part of what the UI was on there.
That became our brand in many ways.
[00:28:45] Michael Eisenberg:
So just to wrap up this phase, I want to ask a question. So ultimately think about it, Waze gets sold to Google. There's a bidding war. It's been told in other places, you don't listen to this podcast, for what happened with Facebook, what happened with Google, uh, et cetera.
It gets sold to Google who has a competing map product. And like you said, it's like the Dobbs and Niles version, the more serious version.
Noam Bardin:
The grown up version.
Michael Eisenberg:
The grown up version of Waze. Waze grows to a couple hundred plus million users. At the same time Google Maps is probably more successful in the number of users.
[00:29:19] Noam Bardin:
Well, it depends on the metric you're using.
Michael Eisenberg:
Go ahead.
Noam Bardin:
Because Google Maps does a lot of things. It does walking and transit. All these different things. When you look specifically at driving–
Michael Eisenberg:
This is where I wanted to get to, good.
Noam Bardin:
Which is ours. The company started out with kind of generic metrics, and as they grow, they begin learning more about their business to reach a point of actually having the metric that really describes their business.
And to us, the understanding was it's what we call driven kilometers. It's the amount of total kilometers in a day, week, month that everyone on Waze drove. And that correlates to how much data we're collecting. It correlates in the advertising world to revenue. It correlates to actual usage. It really is the ubermetric for us.
So when you look at that, and you compared it to Google Maps, at the time on iOS, we did more than them. And on Android, where they're pre-installed, they did more than us, but not dramatically more. So when it comes to driving, we're more or less head to head in terms of the amount of kilometers people drive every month with each product.
[00:30:13] Michael Eisenberg:
But my assumption was, though, that it was even more than that. It wasn't just driven kilometers, but Waze is basically your commuting app, at least in the early days. Like, this is how you get home, this is how you get to work. And Google was kind of more kind of, I gotta go to some new place, I gotta figure it out.
Is that correct?
[00:30:27] Noam Bardin:
So this was the philosophical kind of thesis behind Waze, right? When we started out, the iPhone was just coming in. Mobile internet was still very expensive. Most phones did not have GPS in them. I mean, it was a different world. You had to jailbreak your iPhone to install Waze in the beginning.
Michael Eisenberg:
I did that.
Noam Bardin:
And so our thesis was that, once internet becomes unlimited and free, and everyone has a UI, you know, on their phone and whatever, people will use navigation every day when they drive. It's not going to be a product for when I go to Paris, I don't know where I am. I want to find a place.
It's going to be this situational awareness of what's around me, every day. And when you think about the way people use Waze, it's that. People will say, “I can't get into my car and drive anywhere. I'm driving to the supermarket. I have to use Waze,” right?
Michael Eisenberg:
That's my wife, by the way, not me. Go ahead.
Noam Bardin:
Well, she's right and you're wrong. But that was the goal.
Michael Eisenberg:
Not only about that, but most things probably.
Noam Bardin:
But that was the goal. The goal really was to create a product that you would use every day. And that's why being fun was part of it. Because it's not just about the efficiency. ‘Cause most of the time, we don't have anything to tell you beyond your instincts.
Your instincts are right. Most of the time, right? That's why they're instincts. But that one time when something changed is where we're going to earn our keep. But we have, you have to keep the app on every time. And so all these kind of fun components that we add in really had to do with that, with that everyday driving.
And we used to call it everyday driving versus search, in that sense. We very much looked at Google as search in the real world, and ourselves as that kind of everyday application that you use to drive.
Michael Eisenberg:
Do you regret having sold Waze?
Noam Bardin:
So regret's a big word. A billion, or 150 million acquisition. It was the biggest thing, definitely in Israel.
It was the biggest app sale at the time. But when we kind of realized we're going towards an acquisition, Amir, Ehud and I sat down and kind of talked about what we want. And we had kind of different opinions. A lot of it's my fault, but you know, they were sitting in Israel, dealing with the servers crashing, can't hire enough engineers, this person wants a raise, you know. I was sitting in Silicon Valley being the cool kid on stage everywhere.
Everybody wants to talk to you, you know, et cetera. And so there was a mismatch there and, you know, they basically were in the position of, we're kind of tired. If we have an opportunity, let's take it.
And I was in the position of, let's go on. And so we decided, let's build a model, right? How can we deal with this? And basically what we said was, we were planning to raise a round at 750 million at the time, which was again, at the time, a tremendous amount of money. We wanted to raise 750. And we said, if we get an offer below 750, we're not going to take it. We're gonna raise the money and continue. We agreed. So if we get an offer above a billion, we're going to take it. And obviously the term unicorn hadn't been invented yet. It was a little bit after our acquisition.
Those were the good old days when the term hadn't been invented yet.
Michael Eisenberg:
And when a billion was a lot of money.
Michael Eisenberg:
Also a billion was not like it is today. Today everything's a billion. We said above a billion we'll sell, because it's a billion dollars. You know, that was the mythical thing, right? The mythical company was a billion dollar company. And if it's in the middle between 750 or a billion, it really depends who the acquirer is, because we're gonna have to go work there.
And just to understand how the world has changed, at the time we thought that if Facebook offered, we would take 750. And if Microsoft offered, we'd have to see at least a billion. Cause, and how the world has changed since then. So that was kind of the model that we went into this. We also agreed that if we waited two years, we could double the offer.
So that was the assumption. And the guys still wanted to sell. They said, “Frankly, whether we sell it for a billion or for 2 billion, it doesn't really matter for our standard of living and for the exit, et cetera.” But another two years of the stress, whatever, we didn't want that. And so that's how we went into this.
And obviously it worked very well. Personally, I regret it enough that I actually tried to resell Waze out of Google. And I actually brought a five billion offer to Sundar, and he basically said, “Five billion is not going to move the needle for me.” And that's when I realized that, okay, this is it. We're staying at Google for now.
And this is again is a different view you have on these corporations. You know, you view the world differently. That's one of the things I'm really happy about the time I spent at Google. But I got to sit at the table, when a company of Google's scale was making some really big decisions and just see the way it thinks.
And it is just completely different than a startup. Startups can't imagine the constraints. And that's why I keep going back to, don't try to think about what they would do. You're not going to be able to ever figure it out.
[00:34:56] Michael Eisenberg:
Ehud Levy told me to ask me to ask you about the challenges of integrating with the founding team.
I want to ask you a different question, which is, you mentioned on the exit, this kind of a dichotomy between the founders that were in Israel and you who were in Silicon Valley. Is there anything you could have done differently at the entry point to this founding team that would have impacted the discussion at the end point?
[00:35:21] Noam Bardin:
Well, I think the discussion at the end point was different. It was, what I could have done differently is convince the guys to come to the Bay more often, not just for work meetings, but to actually go to understand how successful we were. Understand what was going on, the extent of the excitement of it.
Look at the end of the day, if Waze had been founded in Silicon Valley–it probably would have happened for a lot of different reasons–but at the same time, you know, a lot of things would have happened differently, and the guys would have seen what was happening there. And we probably wouldn't have sold at that point. And that's one of the challenges that we have with Israel.
[00:35:57] Michael Eisenberg:
Well, I'll argue that, I wonder where the community could have gotten started there. It took some really crazy people early on for some of the stuff.
[00:36:04] Noam Bardin:
I was going to say, it wouldn't have started, it wouldn't have been able to. The funny thing is two years before we were founded or a year before we founded, there was a company called Dash, and they were trying to do exactly the same thing we were doing, but they had to build hardware because there was no iPhone, right? And, you know, they burned 70 million dollars and shut down. That year and the cutting of the iPhone, right? These kind of pivotal moments when things change, really what matters.
If we had started Waze three years later, it wouldn't matter. Wouldn't have happened. Two years.
[00:36:30] Michael Eisenberg:
Proliferation of GPS, the advent of the touchscreen, the ability to kind of take this thing and put it up in your car against the thing.
[00:36:38] Noam Bardin:
And have it early enough that Apple Maps wasn't out yet. Google was just getting started, you know, so timing is such an important component. I think it's often overlooked when you think about startups, but the most important thing is that point where everything changes. Today, it's AI, you know, it was cloud. It was like these moments where everything can, everything that we knew in the past isn't relevant.
Michael Eisenberg:
You have to be ready. You have to be there before it changes.
Noam Bardin:
Now, obviously you don't–you have to at the change, because if you come too early from the change, you're dead as well. So there's so many constraints that go in there. And so it's very hard to actually, if you try to time the market, it's never going to work.
There's those moments–and I remember coming out of a meeting with Navtech’s CEO, and literally I was laughed out of the room. “Really? You guys, it's a bunch of volunteers, are going to compete with us? With 4,000 people and 2,000 trucks,” and whatever it is.
Now I'm a kind of vindictive person, I have to admit. And so one of the things I really loved is finally when Navtech got sold to Microsoft, or I think it was Microsoft, or it was for less than, I think it was 900 million. And so, you know, that kind of made that laughter sound better.
[00:37:46] Michael Eisenberg:
That was so good. Right? You'd love that. What did you do to celebrate Navtech's acquisition?
[00:37:51] Noam Bardin:
But that's the innovator's dilemma, right? When you're the incumbent, you cannot see the world differently. This is the world you see. And that's why startups, at those moments, can make these dramatic changes. Today with AI, anyone in a large company can't imagine what's going to happen to them, right?
They just can't. But 10 years from now, they're going to be gone.
[00:38:16] Michael Eisenberg:
What present did you buy yourself because of Navtech's lower valuation?
[00:38:16] Noam Bardin:
That's enough for me. I don't need presents. That was the present.
[00:38:19] Michael Eisenberg:
That was enough. So I want to, for a second, also just kind of highlight something you said about two minutes ago, because I want to come back to it.
I'll put it in my own words. You said that Israelis, because they grew up in a small country, can't imagine how big something can be.
[00:38:38] Noam Bardin:
I think it's one of our challenges. When you meet a Chinese entrepreneur or an American entrepreneur, the smallest unit of measurement they can think of is a hundred million.
It doesn't matter. You're measuring dollars, servers, people, it's whatever it is, right? They think in a different scale. When you come from a company like Finland, a country like Finland or Israel, or in a small Lithuania, you know, these small countries, you think in thousands and tens of thousands. And it's, at the same time, you can only think export.
Because you have no market, right? So there are pros and cons. You think global from day one, but you think small. And this is one of the challenges small countries have, is really building that kind of belief that you can do this at the scale. While an American was born into this idea that, of course you can do it.
Google is the minimum, right? You start a startup and it becomes a, you know, a two trillion company. That's how it works, you know? And so we don't have an example of that in Israel, the two trillion dollar or one trillion or, you know, a hundred billion dollar companies that were started. We will, but we don't have them yet. And so it's hard to imagine that kind of thing.
[00:39:32] Michael Eisenberg:
Yeah, I grew up in New York City. So I found that when I moved here, everything felt smaller. And at the same time, one of the first times I took my kids kind of walking around Manhattan, they’d look at me and say, “This building is just so big!” And I think there is a difference between the smallness that you describe and how that influences this where the glass ceiling is above, and how you break through it, versus someone who goes up in a significantly larger country, which we're going to come back to in a second.
But in order to get there–so you left Google, and you penned a flame, a letter. What's the right way to describe it? Tell everyone what you did, what the letter said, basically.
[00:40:10] Noam Bardin:
So I left Google, and all kinds of people were asking me why I left, whatever. And I thought, let's put my thoughts down on paper. And I never had any idea what was going to happen.
If I had, I would have ended it differently. I would have thought about what I'm saying, whatever, but I just wrote what I thought, and published it, and literally the world exploded the next day.
Michael Eisenberg:
Because what did the letter say?
Noam Bardin:
So basically I was commenting about the culture at Google and the mismatch of culture with a startup. And a lot of people read it the wrong way, but the way I looked at it–I naively felt that I wanted to make an impact on Google coming in. You know, we startup people think we can do everything, and we can change everything. And I thought I was going to make this big impact on Google.
And I went out and basically fought some windmills around that, and realized at the end that it really is kind of the nature of the beast. It's not something that's fixable. That's what it is. That's your nature. A corporation has a certain nature to it. And, you know, today when, just a side note, a lot of entrepreneurs talk to me, they've just sold their company to the corporation and then they read my note, and they're like, wow, this is really something.
And what I tell them is, “What you need to do is to get out as fast as possible. What you're doing is actually damaging your team. When you're trying to fight to keep it separate, trying to preserve your values and your culture. You've sold your company. It's not yours. Now you've got to–the faster you come to terms with that, the better it's going to be for your team, for the acquiring company, et cetera.”
I fought very, very hard to keep Waze independent. I also tried very hard to change things at Google, and losing on all those battles.
Michael Eisenberg:
What was your description of the culture of Google?
Noam Bardin:
It's complicated. I think Google is an extreme case of a corporation, because it has literally unlimited amounts of money coming from a very small team in the company, a small percentage–
Michael Eisenberg:
The ads business.
Noam Bardin:
The ads business, search ads, that's where the money comes in at the end of the day, and everyone else can live this imaginary life that they matter. And frankly, they don't, from a financial perspective.
Michael Eisenberg:
The greatest business model of all time funds all of these great ventures.
Noam Bardin:
Of course, they would argue they're not a monopoly, and they're not dumping, and all these kinds of arguments. Bottom line is, we all know what's going on, right? They have this great monopoly, best monopoly ever, creating tremendous profits. They're using that to build all kinds of stuff, giving away for free, that nobody else can compete with.
The problem, from a culture perspective–what happens is that people begin believing in what they're saying. So this idea of OKRs, right? I make up some goals, which are not connected to sales, because there's no money.
So there's no real external impetus. And I believe that until money transfers hands, nothing happened. So at that point, we're all just talking and loving each other, right? And then when you try to sell something is when you discover what your product's really worth, right? And so you can make up these OKRs and obviously hit 80 percent of them because you made them up, right?
And feel really good about yourself doing it. And at the same time, it creates this culture of exceptionalism–without being exceptional. And it's kind of a lie that everybody lives in. Now at Google, another example is that the currency is promotion. Everyone's focused on promotion, and so it means that if you're an engineer, and to get promoted, you need to show technical complexity–you're going to take the simplest task and turn it into a machine learning model, make it as complex as you can, so you can get promoted.
There really is no connection, or maybe a better way to put it is the connection to the product. The magic about a startup is that everyone's aligned.
The investors, the employees, the founders, the customers, the partners–the product does well, everyone does well. And that's why Waze is the name of Waze, and the name of the product, right? And Google was like that, right? Google was a search engine, and it was also the name of the company. But when you become a corporation, the alignment becomes to the corporation, not to the product.
So I work at Google and on Google Maps, and then I can work on Drive, and I can work on hardware. I can go work in Waymo. So my alignment is to Google, not to the product. And that creates this kind of mismatch, suddenly, of incentives, and of alignments. I wanna do what's right for Google now, what's right for my Google career–not what's right for the product or for the users.
Because two years now, I'm gonna be working on something else. And that's a superpower on one hand for startups, and also a weakness in startups, right? That they're, you know, they're so focused on the product in many ways that a lot of scaling functions don't happen.
Corporations become corporations for a reason. And I think the skillset of being good at a corporation is not transferable to a startup, and the other way around. These are different animals. And as soon as you understand that and realize you've sold your company, and it's not yours anymore, and it's not going to continue to operate the same way, the sooner it's done, the better it's going to be for everyone.
[00:45:00] Michael Eisenberg:
So if you opened a new company today, would you have OKRs and KPIs? Or do you think this kind of methodology from Google has taken over the world in an unjustifiable way?
[00:45:09] Noam Bardin:
So I think what's happened is, as always, the buzzwords take over. And people forget what the buzzwords are there. You have to have clear understanding of what your strategy is, your vision is, what your mission is, what your strategy is, where your tactics are.
You have to have a clear way to measure this. Some things need to change very rapidly, like your tactics. Some things need to never change, like your vision. So call it whatever you want, right? The problem is if you're just following the methodology and you're not understanding really what's behind the numbers, and the numbers don't really matter–like when we started out Waze, our big metric was downloads. You know, those were the days of downloads. It was very hard to measure anything else at the time on mobile. So we measured downloads. After a while, we realized that downloads don't really represent anything that's happening because we're churning through users.
And so driven kilometers slowly became the metric. And once we had the right metric, everything made sense, right? And suddenly we could track these things. But if you're just building these OKRs because you need to, it's like, a lot of entrepreneurs build their strategy for the board. It's, yeah, we need to show the board a strategy, so let's build a strategy deck.
And I used to be like that as well.
[00:46:08] Michael Eisenberg:
You didn’t realize what knuckleheads these board members are, and investors are, and say, it’s not even worth it.
[00:46:15] Noam Bardin:
Well, it’s worth it because it's a force and function to create it. So it's not completely worthless. I mean, some of my best friends are board members. But the point is that strategy is a tool for you, the leader.
And if you understand that and begin using that, it's a superpower. It's a tool for saying no, right? Your goal is to say no to 95 percent of the great ideas your great team comes up with. And if you don't have a model for how you're saying no, then it's just emotional. It's because, you know, you like the person, you don't like the person, whatever it is.
Strategy is a huge component of things that I've learned, but it doesn't matter what you call it, you call it OKRs, whatever it is, right? What matters is that it really is what you're managing the company for and with.
Michael Eisenberg:
What's an OKR for a board member or a venture guy?
Noam Bardin:
What would their OKR be?
Michael Eisenberg:
Yeah.
Noam Bardin:
The first would be, do no damage.
Michael Eisenberg:
Okay. Right. What's the KPI for that?
Noam Bardin:
The KPI is not having any damage.
[00:47:06] Michael Eisenberg:
Minimizing the amount of hours, minimizing the number of minutes spoken at a board meeting by an investor, yeah?
[00:47:10] Noam Bardin:
It's very interesting. Obviously, some investors, board members are amazing. And like, John Malloy was on my board. Really just changed my life in many ways, and me as a manager–
Michael Eisenberg:
John Malloy?
Noam Bardin:
John Malloy from Bluerun.
[00:47:22] Michael Eisenberg:
Bluerun Ventures, by the way, was a venture arm of Nokia originally. It said Nokia ended up buying one of these companies and turning it into here. And then here's what it is.
[00:47:31] Noam Bardin:
He spun out and he ended up funding Waze, which actually destroyed, it was part of the destruction of Navtech.
[00:47:36] Michael Eisenberg:
So Navtech went, by the way, to Microsoft, to Nokia. I think if I remember correctly, and then it became here, and–
[00:47:44] Noam Bardin:
But the thing that he brought to the table was the fact he was one of the early investors in PayPal, and so he saw what it really was building a billion dollar company, you know, in reality, not reading about it on TechCrunch.
Now the reality is it's messy, and nobody knows what they're doing, and people are fighting with each other. You know, humans are terrible things, right? We put a lot of humans together.
Michael Eisenberg:
I think most of them are good, I just want to say that.
Noam Bardin:
Well, I think most of them are terrible.
Michael Eisenberg:
All right.
Noam Bardin:
They say a pessimist is an optimist with experience. But the point is, everything's a mess. You're always sure the other company–
Michael Eisenberg:
That we agree. Everything's a mess.
Noam Bardin:
You're always sure the other company is the super efficient company that's running well. It's an amazing business model and just, you're the only one that's a mess. Everyone's a mess. You just don't know them, right?
Michael Eisenberg:
Every family's got stuff.
Noam Bardin:
But having seen it from the inside meant that he could appreciate what I was going through and give me feedback that made sense to what was happening. And to me, that's the biggest value you get from an investor, right? It's what in that partnership, what types of deals have they seen?
What in terms of success? Failures, everyone's seen a lot of, that's no problem. But have they seen the success, the reality of success? And the reality is not what people remember, right? What you remember afterwards is obviously what a great, you know, super person I was. You don't remember the terrible things you did along the way and the mistakes and the luck and all that.
But if you were there as an investor, obviously as an employer, as a founder, et cetera, you just see the world differently. And to me, that's the biggest value, the biggest OKR I would want from an investor is that they've seen success before. And so their instincts matter.
[00:49:21] Michael Eisenberg:
OK, so, you joined Waze basically as a co-founder.
[00:49:28] Noam Bardin:
I mean, technically I wasn't a co-founder because I came a year later.
[00:49:29] Michael Eisenberg:
I met them before you joined. I said, “You need someone who can run this business.” And then you came and it was too late. By the way, they called you a co-founder, which I think was critical.
[00:49:37] Noam Bardin:
Yeah, I know. When I did due diligence on the company, I went to talk to investors that did not invest, right? That was like the most important thing. And consistently I heard similar things, right? Nobody can change a CEO along the way, blah, blah, blah. But to me, that was the most important thing to understand–that everyone really liked the team, the product, everything that was going on, and I was going to be the make it or break it kind of a thing. And it worked well. Huge risk, by the way. Odds of it working are very low.
[00:50:04] Michael Eisenberg:
You go to 200 million kilometers grown, 200 million users, whatever the number is, a large number. You're at Google for seven years. You write a flame on the way out the door and all hell breaks loose. I encourage anyone listening to this to go read–
Noam Bardin:
It's on my LinkedIn, if you're looking for it.
Michael Eisenberg:
That's exactly what I want to get to. And Noam decides to embrace this, I guess, maelstrom. Well, why'd you embrace it?
Noam Bardin:
In what sense?
Michael Eisenberg:
Like you just, you stood up and it was like, “All hell is breaking loose.”
[00:50:35] Noam Bardin:
So I'll tell the story. I believe strongly that everybody knows what's going on in the company. That doesn't mean that's what they say, right? There's all these stories that people tell themselves. But at the bottom, especially. Like you can tell the company that we're doing great, but the engineer that sits on the database actually looks at what's going on there, knows that it's not going great.
And so that's how kind of corporate culture begins to get destroyed, when you start telling a story. So fast forward, Larry asked me to give a presentation at the next VP meeting–I was just promoted to VP–and about what I think about Google's mobile product.
This is 2014. And their products were not great. And I was like, okay, I've survived here already six months. Now's the time to get fired. Right? Okay. This is–now it's going to happen. And I got up in front of all the VPs of Google, about 160 then or 180, and basically gave a 20 minute presentation about how shitty the products were.
And as you can already understand, as I'm describing it is exactly how I presented it. I explained why, obviously the mobile, each product has to do one thing really well, can't do multiple things. Like there was logic to what I was saying. I wasn't just shitting on things. But basically it was shitty.
I ended it expecting to be fired. And 160 VPs got up and clapped. Because it was the first time someone said what everybody knew, right? And to me, that is really what kind of where corporate culture comes together. If you're saying on stage something that's different from what people are seeing in the database, you've destroyed the culture, right?
And so being the person saying that, it was an important thing to me. And that's why embracing it when I came out–that everything I said in the doc, I said multiple times internally before. You know, the easiest thing to do is come to an organization and shit on it. ‘Cause as we said before, every organization is screwed up.
And so after, as I went and I kind of built what would became the cross-platform growth team, being growth as a discipline and imparting, I did a bunch of stuff to try and change the problems that I saw, not just to complain about them. And that's where I really saw the inner workings of the company.
Cause that originally, you know, Waze was a separate thing, their thing. I got into the nuts and bolts of the big product units at Google. And that's where I kind of gave up and handed the team over to someone else. But the point is, I said all that internally, I said multiple times to everyone from Sundar and Ruth and Urs and everyone, and you know.
There's no need to do anything when there's money coming in piles and piles. When you're making 600 million a year, why rock the boat, right? And I think what Google is seeing right now is the outcome of not rocking the boat and what OpenAI is doing to them right now, my gut is it's going to get much worse, much faster.
Because don't forget that advertising contracts are 30 day contracts. Things can change overnight. And so I do think that this is the product of ignoring the real problems for the last 10 years. And by the way, when I wrote that note, you know, I would say 70 percent of people at Google applauded me, but especially the early stage people. The people that were there actually building the company.
People today go to Google and are like, “Oh, I'm a Googler.” You're not Googler. You work at a corporation. Googler was someone who worked 24 hours a day in the beginning, building a search engine to compete with Yahoo that nobody thought possible, or built an email client that like–there were these pivotal moments of people, small numbers of people, these amazing things.
Today, you're one of the few hundred thousand people, you know, optimizing some clicks. Let's not get ahead of ourselves, right? But those people that were there, they're the ones who reached out to me who are still at Google or left Goole or whatever, who said “You nailed it. You know, someone had to say it, I'm glad that you said it.” And that again, goes back to that–eerybody knows what happens. You might not talk about it, but everybody knows.
[00:54:18] Michael Eisenberg:
My friend Bill Gurley, my partner at Benchmark has, I think, been focused on this topic that you're focused on right now for a while also, which is–can openAI upend Google and upend the greatest business model ever, but because they've kind of lost their way and search can get replaced by this open AI or the chatbot interface, which is foundationally different.
What do you think? Where do you land on that?
[00:54:40] Noam Bardin:
So first of all, I use Perplexity or chatGPT maybe 80 percent more than I use Google today. And the only reason I use Google more is because they're built into the Safari browser on my phone. As soon as–we can talk about that monopoly–but as soon as Perplexity goes in there, it's done for me. I have yet to run into a query that they can't answer better than Google.
[00:55:00] Michael Eisenberg:
The other benefit, by the way, of Perplexity over ChatGPT?
Noam Bardin:
Depends for what.
Michael Eisenberg:
Is it's much shorter. You can actually get a short answer.
Noam Bardin:
A short answer, but also the links are right there. Cause a lot of times you're looking for something, right? I mean, the problem–
Michael Eisenberg:
This morning, by the way, I got the sources from ChatGPT. They've started doing that.
[00:55:16] Noam Bardin:
Yeah, they've started doing that. So it doesn't matter what you use there. It's a fundamentally different thing. Yeah. The basic difference is the business model. Now, because they don't have this hundred or 200 billion business on it, they can afford to charge.
And if they make 5 billion off it, it's a great business. And that's a classic innovators dilemma. But all of this was obvious 10 years ago. And the fact that Google does not, it has a peacetime team that's used to being ahead just because of the monopoly that keeps running things, you know, and we suddenly get a competitive–I would never have guessed this is what's going to bring down Google. Especially because Google invented machine learning and what we call AI today, whatever, that was invented by Google. I remember Sundar getting up on the stage, that must've been 2015 or something, saying, “We are now,” or 2016, “We are now an AI first company.” The mobile-first company was the buzzword. “Now we're going to be an AI first company.”
What does that mean? If anyone had actually said, “Okay, that's a great tagline. What does it mean? What do we want to do? How are we going to leverage AI? Not just the backend feature for our product, but what does it mean for the consumer?” They would be open AI today. But of course they couldn't take that risk. That was their business model. To me, it's exciting to see this happening. In general, I think it's the most–
[00:56:30] Michael Eisenberg:
Transformational.
[00:56:32] Noam Bardin:
Transformational. Crazy. And people that have been around technology, it doesn't really work, right? We pretend it does. And for a long time, we pretend, this is just shocking and the pace that it's moving.
Michael Eisenberg:
Shocking.
I think if you're building a startup today and you're not part of the AI revolution, it doesn't mean that you're building an AI product, right? But that the AI is fundamental to what you're doing–you're missing out, because all the rules have been broken. Now, very few companies have actually integrated. So we're not seeing the output of AI yet. What we're seeing is the potential. And so now's the time to reimagine things, and go ahead and build them and destroy businesses that have been around for 200 years, because the whole world's changing, being reordered. No one knows what's going to happen. So your opinion is just as good as anyone else's.
[00:57:11] Michael Eisenberg:
Funny story from this morning. I was in synagogue this morning. They took out two Torahs and took out the wrong order. And it's not a hard question in Jewish law what to do with this, but some guy standing there whipped out his phone and said to ChatGPT, “What's the ruling if you take out the first Torah on Hanukkah, and Rosh Chodesh, in the wrong order, what you do?
And there it was, right there.
[00:57:34] Noam Bardin:
By the way, I've heard about that. I was in miluim with a bunch of religious people, and they were saying that that's become your Gemara buddy. It’s just so much better, you know, and just amazing what it’s doing.
[00:57:46] Michael Eisenberg:
It really is amazing.
So in five years, is Google worth more money than it is today? Or less money?
[00:57:52] Noam Bardin:
Obviously more.
[00:57:52] Michael Eisenberg:
Obviously more.
[00:57:53] Noam Bardin:
Yeah. But that doesn't mean that they're going to be a leader anymore.
Michael Eisenberg:
Got it.
Noam Bardin:
Because of the inertia. IBM is still around and AOL is still around. Yeah.
[00:58:01] Michael Eisenberg:
But IBM, you know, is kind of vast. The market cap is vast, but we think Google is gonna be worth more on the whole.
[00:58:06] Noam Bardin:
Yeah. Because businesses don't disappear overnight. Advertise knowledge to go somewhere, whatever, but will most people use Google for most of their searches? I think that's going to change dramatically.
[00:58:17] Michael Eisenberg:
And the monopoly broke, by the way, not because the regulator got involved, but because new technology, and you mentioned Safari is a monopoly, et cetera. And I want to move to a different monopoly and take a really hard pivot right now.
I think it's valuable. So you leave Google, you send the flame, it's now on your LinkedIn I think you are–what's the right way to say this–WYSIWYG, what you see is what you get. There's a Yiddish expression, vus is zafin lung is zafin sung, what's on the lung is on the tongue. You say what you think and you think what you say, and you're a straight shooter, I think.
And there, you leave, you, that's why I think,
[00:58:54] Noam Bardin: I agree with you, for better or for worse.
[00:58:56] Michael Eisenberg:
You think we don't add so much value, but I think you're a straight shooter. Took you a second there. And there you are, you left Google, you're in New York for the most part, I think living in New York, correct?
And October 7th happens, and you're in New York.
[00:59:15] Noam Bardin:
So I moved to the States–first of all, my whole life, my businesses have been split between Israel and the States.
Michael Eisenberg:
And you were born where?
Noam Bardin:
I was born in the U.S. but my parents moved to Israel when I was six months old. So it was traumatic. I had to say goodbye to all my friends and everything, but basically I grew up in Israel. So if I speak Hebrew, I'll be short tempered, obnoxious, like every other Israeli. But I can have this American accent because of it.
[00:59:36] Michael Eisenberg:
This is a very warm society, I don't know why you say that. I’m being serious.
[00:59:38] Noam Bardin:
That's what you say if you grew up with us. I won't forget that. Dana Eisner was the first kind of American we hired, and she's amazing. She ran the U.S. for us and she was pivotal for the company's success. But she comes to Israel for her first time as the new kind of VP of America. And we have a meeting with the team, and it very quickly devolves into yelling and area. And we split the Hebrew, of course, and people yelling, throwing things at each other, whatever.
And she's shocked. She just can't believe what's going on. And she turns to me, “I don't understand, what are the arguments, what are the positions?” And I was like, “Oh no, they're actually agreeing with each other,” right? And that's the thing, we forget how aggressive our culture is, and there's a lot of good about it.
Michael Eisenberg:
Passionate.
Noam Bardin:
Passionate, sorry.
[01:00:20] Michael Eisenberg:
Emotional. I have this line when I recruit American executives to Israeli companies, I have this line where I say–which I believe to be true by the way also–which is, in America, if somebody's yelling at you at work, you need to be really worried. In Israel if they're not yelling at you, you need to be worried.
[01:00:38] Noam Bardin:
It’s good. So I've been looking for a while, and I've been very frustrated with Israel in a lot of different ways. I know when the judicial reform came out and my friends were kind of shocked, I was not shocked at all. It was obvious if you look at what's going on in the world. By the way, everything happening in Israel is happening all over the world.
Different intensity, slightly different language, but basically it's the same, right? We're at the end of the liberal democratic order. I believe social media networks are the fuel for this destruction, moving away from facts and logic, moving to my opinion matters more than your facts.
You know, the whole kind of world that we're in. And I just didn't see a future liberal, a democratic future for Israel. And to me, to live in an ethnocentric religious state is not something I want to do. And then a bunch of other stories I told myself. And the 7th–I went to sleep on the 6th, and there's some missiles flying, you know, we have the missiles all the time, it's no big deal.
I woke up on the 7th in the morning, I opened my phone, and I see the videos, and I was like–
[01:01:39] Michael Eisenberg:
The 7th in the morning in New York, which is like 1 o'clock or 2 o'clock in the afternoon in Israel on October 7th.
[01:01:43] Noam Bardin:
And I was like, okay, this is not business as usual. And I get on the first flight, I actually managed to get on the last United flight, I kind of got on the last El Al flight, and got to Israel. And I landed on the 8th and called up a buddy of mine, Yair Golan, who today runs the Democratic Party, but we went to school together. And he was a hero on the 7th. He went on his own to save all these people down there. He was the S’gan Ramatcall.
Michael Eisenberg:
Second in command to the Joint Chiefs of Staff.
Noam Bardin:
Exactly. And I tell him, “Okay, I'm here. What do we do?” He says, “Come on. I'm going from north to south tomorrow.” So six in the morning, he gives me some uniform. I put on the uniform, pretend to be a soldier. And we drive to the south. And we went through everything. We saw the Nova, we saw Sderot, we went to the kibbutzim, we met with the people on the side, and just the bodies were everywhere, and there was something about the biblical level of barbarity that was going on there, that to me was this wake up call on many different levels.
I mean, suddenly all this, everything we're doing in tech on the kind of practical level of what matters just seemed like, insignificant. And, you know, suddenly being Jewish was back in style or not, or antisemitism was back in style, however you want to call it. Seeing it, just seeing the cars and everything, it just suddenly flipped in me.
And at that point I kind of decided I'm coming back to Israel. I went to the army, did a bunch of stuff, but the point was that I believe that the only change happens is through massive shocks. Google did not need to change search. They will not change it, because there was no shock. OpenAI now is their shock, and they'll do something.
Same thing with Israel. I believe that this is the shock that's going to kind of change our society. It seems bleak and impossible now where it is, but when you zoom out a little bit, next election I believe will be completely different here. I don't believe the pessimists and seeing what these, what Israelis did in the first three months of the war, I was involved in some of the stuff, but just this bunch of random people basically building a complete civil society,civil service, running the country by independent volunteers, putting together these AI systems to track the hostages in like a few days, collaborating–that's something that doesn't exist anywhere.
It's something unique about this country, this ability to do things. So I believe that once we, if we start dealing with our real problems, we can blow through them. The problem is we're dealing with imaginary problems. We make up problems that we can deal with, but if we actually focus on the real problems, it can happen.
And I think if this shock–I believe the shock will change things. If it doesn't change things, at the same time, okay, so then we really know that this is it. But I'm very optimistic.
[01:04:38] Michael Eisenberg:
I actually am too. I referred to this as the re-founding of the state. I wasn’t around in ‘48. I guess you weren't either.
Noam Bardin:
Thank you. Would have been worse if you had said you were, right?
Michael Eisenberg:
You know, I mentioned in my city, we have a guy, we celebrated his 96th birthday this weekend, you know, at 6:30 a.m. with some schnapps, or shots of whiskey, at 6:30 in the morning. He is 96. Just think–it’s 2024, he has a certificate from David Ben Gurion for his service during the War of Independence that he's taken out and shown us.
It's like–there are still people around who remember, though it's not us. Anyway, this is a re-founding moment.
Noam Bardin:
As my kids say, I'm not old, I'm vintage. I’m like, is the point the vintage or the point of old?
Michael Eisenberg:
It's a re-founding moment of the state right now. And I've observed, like you have, there's this podcast with me and Eldan Yaniv about two and a half years ago, I wrote an article for Hashiloach, maybe 2016. But what Israel is going for in this era of declining liberal democracy is the most resilient and vital civilian population on the planet. It's an era, and this is really what I want to hit on as a technology CEO, where government simply cannot keep up with people. Like what you described is, you know, the civilians worked on WhatsApps, and dash cams and AI and the government's working on, you know, on fax machines and Windows 95 right now.
And so you've seen this like at Google, what you call the corporation versus the startup. Israel, which is the startup nation, which is named after its startups, is actually the wrong way to think about it. The right way to think about it is the millions and millions of civilians in this country who are very, very capable people act like a startup all the time, whereas the government is like this ossified corporation.
How does that conflict happen or get resolved? Or what happens here?
[01:06:23] Noam Bardin:
So you know, we were talking about scale-up nation lately, right, and say, yeah, we're actually going to build large companies here. I think we kind of ahead of ourselves in terms of where reality was, but we're definitely moving in that direction. And we have more and more people in Israel who have worked in large corporations, understand the pros and cons and the structure, but the government is still built like Israel thought a corporation was 30 years ago, right?
It's still built in the oldest possible way of thinking of a corporation. And all that has to be replaced. Now, incrementally, it's very difficult to do these things. You need to blow them up, right? Things need to be disrupted. And I think what we're seeing now is a disruption of the current government structure, and I'm involved in several groups that are trying to rethink, assuming a government comes in and wants to deal with the real problems–what is the right government structure?
And there's so many things that when you actually get into the details, you realize how quickly this could happen. There are people here with such energy, whatever, if you only just point them in the right direction or allow them to do their thing, we can, this country will be, I mean, Singapore will look like Gaza compared to us.
I mean, it really is. There's no reason that won't happen.
Hopefully not like Gaza.
Okay. We'll stay out of that one. But definitely what could happen here is not proportional to any other country in the world. And that's the thing. We keep thinking, we would be next to America. How would it be. America needs to be looking at us as to how to, what a modern society should be.
But our biggest enemy is ourselves as well. And just like think about corporations, they're in it. Especially large corporations are basically monopolies. They don't have competition. I mean, the regulator is the only competitor, but their competition is themselves. Their ability to actually make the hard decisions that they know are important for the long run, but might actually impact the stock price in the short term, right?
That takes leadership. And that, that's what we're lacking here. I think the whole world is lacking leadership in that. But you see also in corporations, you see what Satya did versus Balmer, right? That really is leadership. It's to come and say, you know what? We're not going to build a phone. We're never going to build a phone.
It's too late. Let's put Word on the iPhone. We're not going to continue to sell operating systems. We're going to sell cloud services, and we're going to take a hit in the short term, but in the long–like it seems obvious now. And at the time it also wasn't rocket science, same thing here.
It's not about rocket science, it's about making the right decisions, even if they're painful, that we all know we need to make. And what I find exciting about this period of time is most of Israel's problems were obvious 30, 40 years ago.
Michael Eisenberg:
100%, right?
Noam Bardin:
But we had excuses, right? Let's always, nobody wants to make the hard decisions, so let's not make them, right?
We're now hitting the wall where we have no choice but to make the decisions. We saw that from a military perspective, we see that with the ultra-orthodox, both military side and the economic side, right? We see that in so many areas where we have to make this decision we didn't want to make.
And I think there is a coalition of parties right now who are willing to put aside some of their animosity of each other and work together.
[01:09:20] Michael Eisenberg:
Satya had a board. In politics there are voters, at least in democracies, not a board. My friend Eugene Kandel likes to say that the KPI for a member of Knesset or a member of parliament is to get reelected just to get more votes.
[01:09:38] Noam Bardin:
Well, it's actually no. It's to be a friend of the number one person who's getting reelected. That's the way it is in Israel right now. In Israel right now, most of the, of the parliament in general, nobody votes for them. You vote for a party. Right. So all you know is the number one person in the party.
Everyone else are freeloaders basically.
[01:09:50] Michael Eisenberg:
And so therefore, you know, the KPI basically is how you kiss up to the party leader. So what boldness comes from that though? Like it's not like controversial, Satya had a board. He could be bold because he didn't have to kiss up to anyone. He didn't make a turnaround.
That's not the case with most politicians.
[01:10:05] Noam Bardin:
I would argue that most people don't really have a board, right? Most boards are just rubber stamps that put together by the CEO to make sure they're rubber stamps, which is a problem in general about corporate governance, but when you think about politics, I personally believe very strongly in authenticity.
And I think just like people can smell bullshit everywhere, you know, they smell bullshit in politics as well. And the lack of leadership that we have is really a platform for leadership to emerge and it's a global problem by the way, globally, our generation, it's our fault, right? You and I, capable people, went to make money to have interesting challenges, work with interesting people, eat sushi, you know, have a, wear jeans to work, whatever it is.
Michael Eisenberg:
Hey, I ate sushi before I went into high tech, before it was in.
Noam Bardin:
But I say, we went to do all these things and we left the government to people we would never hire for our companies. We basically said, take the keys to the country, go do whatever you want. Now we all say, it's all about the people, you have to hire great people, great people.
And our country, we gave to a bunch of losers.
[01:11:05] Michael Eisenberg:
I mean, come on. There were some intelligent people that went into politics. There were some entrepreneurs that went into politics but didn’t make it.
[01:11:14] Noam Bardin:
I mean, we think on the whole, right? You think on the whole, we do not have the best of Israel or the best of America, or the best of Brazil running the country.
[01:11:20] Michael Eisenberg:
The best of America is turning up now, I'll argue, in a big way. There's a lot of very serious appointees being appointed. .
[01:11:26] Noam Bardin:
And there are also a lot of clowns.
[01:11:28] Michael Eisenberg:
You know, life is like that.
[01:11:30] Noam Bardin:
So I have to say, overall, we have yet to see the new wave of leadership come out. And I think that the world is reaching that point where we swing different directions. I believe we're looking for authenticity and for people that can actually deliver, but more than that, people that are just transparent and not political in the negative sense.
[01:11:50] Michael Eisenberg:
I'm so glad you said that. So you've been super authentic and super transparent, I'd argue, I mean, many things. What would you do to increase transparency without, so to speak, putting the strategic elements of the country at danger? I think this is a key thing. Our transparency is really important to getting accountability and politics have become less accountable, not more accountable.
What would you do?
[01:12:16] Noam Bardin:
So I don't have a simple answer. It's, I don't think anyone has, we don't have an example in the world today of a well functioning Western liberal democracy.
Michael Eisenberg:
New York City. It was under Michael Bloomberg I’d argue. He was super transparent.
[01:12:28] Noam Bardin:
And again, it's not. It's not a country. We have a fundamental problem right now as humans, as society, right, as civilization, that we're going back to superstitions, back to opinions, back to monopolies, moving away from competition and rationality and science. Everything that the kind of enlightenment started, we're now going back to the dark ages in many ways in our thinking, right?
Religion is back in with politics, right? The source, I would claim, of most of the problems of the world has been when religion and politics were together. Religion should be at home, it shouldn't be in your government. But we're going back to that all over the world, and that's a dog whistle for people everywhere.
So, it's a fundamental problem, right? We need to emerge, we need to go back to the basics. Basics of, you know, science, logic, civil rights, individual rights, getting the government out of your life. You know, all these kinds of things, which we've forgotten. Now, we're gonna remember it the hard way.
[01:13:20] Michael Eisenberg:
You know, liberal democracy is only around for a small amount of history. Maybe it doesn't make it.
[01:13:24] Noam Bardin:
And that's the big question. The big question is, you know, basically the world we know since the Second World War is an imaginary world. As you said, for the last 10,000 years of civilization, the last 80 years have been this anomaly. Where we kind of said, you know, let's not just kill each other.
Let's try and solve things a different way. But the question, are we going back to the mean? And basically back to this barbaric, realpolitik world of power. Or are we changing and moving in a different direction? Or will we change and continue to evolve in the right direction? It's not clear where it's going.
Michael Eisenberg:
Will you go into politics?
Noam Bardin:
So, definitely not politics. I was thinking of going into the public sector. For a variety of reasons, it doesn't look like it's going to happen in the near term. And so actually thinking of maybe going over to the dark side,
Michael Eisenberg:
Becoming a useless board member?
Noam Bardin:
Exactly, exactly. Beginning to think about that. I mean, Israel, the high tech sector is 40 percent of our exports, 20 percent of our GDP. There is no other–Israel is basically a startup factory with a military, right? That's basically what we are. Everything else is a rounding error. And I believe that our kind of startup, or the change we need to do is we need to scale up our startups.
So we're talking about, I was talking with someone who is in the public sector, but how do you measure the sector? And they were talking very much about the exits of the company, the amount of money raised, et cetera. I said, “No, we need to measure by the revenue. These companies are making, if these companies can build products that in spite of everything around the world, people buy them from us, that is our strongest geopolitical force.”
Now, you know, we like to think of ourselves as part of the Western world and all this kind of shared values, whatever. Shared values are gone, right? We're moving to a realpolitik world. The Middle East is gone. Oil is basically over, right? I mean, we've got, we're in the tail of oil, right? And so frankly, America is out of the Middle East.
And we can all say the nice words, bottom line, America is a corporation, doesn't need the oil anymore. It's gone somewhere else. So how do we stay relevant to the Western world? And I believe that the only way we can do that is we need to have a technological base in Israel that other countries need, not want, not think it's important, not because the Holocaust–because they need our technology.
That's our natural resource, right? And they need it. And to do that, we need to think larger, not just selling the companies, actually building and selling products that are unique, that the world's dependent on. And I think that's the change to me, when I think about the next 10 years in Israel.
That's the change that will bring us back to being a leader in the Western world. And as I said, to building the country to where it needs to be. But at the same time, without that, we don't really have an alternative business to run.
[01:15:59] Michael Eisenberg:
Before I get to a few rapid fire questions, I have one last question.
You said that if Israel lost 50,000 engineers, it would be over. I want to ask that on two sides. Every country around the world, Portugal, Canada, United States, are trying to get Israeli talent. Some of them are being pretty effective.
Noam Bardin:
It's working.
Michael Eisenberg:
So what would you do to recruit talent to Israel? And what do we need to do to make sure we don't lose 50,000 engineers?
[01:16:28] Noam Bardin: So first of all, I've had this discussion with a lot of people and I've actually revised the number to about 10,000. That's kind of what people have kind of pushed me on. Look, there's, you know, there's kind of the product issue and there's the marketing issue. The product issue is we need to change the government and people need to feel valued, right?
We have the most productive people in the world being told that they're traitors, that we don’t need them here, et cetera, while they are doing, you know, 200 days of reserve duty a year and while they're running their companies and while they're trying–so that, I think, that to me is kind of the core product problem that the product needs to be better for people to want to stay on the marketing side.
I think there are a few things. One, I think we need to have H1B type visas. We need to bring in more resources and I think we need to provide incentives for companies to bring back people from abroad. I think companies will know how to bring the people much better than kind of government process or government organization.
Let's provide tax incentives, whatever it is for companies to do that. By the way, I think the only way we rebuild the north is by providing H1B visas north of Haifa. Overnight, every tech company will build a center there. They'll bring all our offshore employees that are in the Ukraine and in Poland, whatever.
We'll bring them there and literally overnight, we're going to have, North is going to be the most productive part of Israel.
Michael Eisenberg:
Interesting.
Noam Bardin:
So many things we can do if we try to deal with our real problems and not with just getting into soundbites.
[01:17:50] Michael Eisenberg:
All right. Rapid fire questions.
Noam Bardin:
Go for it.
Michael Eisenberg:
You talked about the challenge to Western liberal democracy all over the world. Does the welfare state make it or does it collapse?
[01:18:01] Noam Bardin:
Well, the welfare state has to evolve. We have no choice. The risks on the individual are getting higher and higher and higher. I like the model that in, in kind of Northern European countries where the company is not responsible for the individual, the country is.
So the company can fire people quickly, can hire people quickly, can be competitive, but the country takes responsibility for its citizens.
Michael Eisenberg:
I'll take the other side. I think the welfare state's in big trouble.
Noam Bardin:
I get it. The current model of, we're just going to pay out, whatever, we're not going to do anything.
That's obviously, but I'll tell you what scares me even more. Throughout history, the elites have needed the common people to work in the fields, work at the factories, fight their wars. With automation and AI, we're moving to a first time in human history where the elites are not going to need the common people because they're going to have robots to do all this.
What does that do to our world when you can not, you don't need to provide something to them? Talking about the welfare state, I mean, there's potential for much worse things.
[01:18:57] Michael Eisenberg:
I think that's a fair comment. What is a KPI for a board member's ego? What is the KPI?
Noam Bardin:
Well, the KPI is how big is the ego?
Michael Eisenberg:
Like what's the indicator of how big the ego is?
[01:19:08] Noam Bardin:
I think the amount of time talking in a board meeting versus listening in a board meeting is a great, simple KPI to track.
[01:19:18] Michael Eisenberg:
Who's someone in our space or orbit you'd like to say something nice about, and highlight?
[01:19:25] Noam Bardin:
Something that they're doing? It's not an individual person. I would say when you meet with more or less anyone in the tech space in Israel, I'm constantly blown away by what we take for granted.
In terms of the minimum, everyone just assumes they have to volunteer and things. They have to go to the army, they've got to help each other out. It's like, there's that kind of a basic assumption, which really is, to me, the essence of Israel. And I think that's undervalued internally because we all kind of think that way.
That's not the way the world works. It's very unique to us. It's very unique to Silicon Valley. These are two places where you can literally call up anyone and say, “I want to have a meeting,” and there's a good chance that they'll actually meet with you without you being, you know, Steve Jobs.
[01:20:06] Michael Eisenberg:
No disrespect to Silicon Valley, but I think what’s true in tech and Silicon Valley is true in every part of life in this country.
Noam Bardin:
That's a good way of putting it. Yeah.
Michael Eisenberg:
Tell me something I can't find out about you on Google.
[01:20:17] Noam Bardin:
I hate eggplants. Eggplants are the worst.
Michael Eisenberg:
Hey! We share that.
Noam Bardin:
Oh, and it's crazy that the Middle East people think it's a good thing. They're also wrong. It burns my tongue. It's just terrible. It's like, if you have to give food a different flavor to make it work, then go to a different flavor–go to a different food. So like, I stay in restaurants, I say I'm allergic to eggplant, just to make sure.
[01:20:37] Michael Eisenberg:
Same. It burns my tongue, to be fair.
[01:20:41] Noam Bardin:
Well, I just don't like it, but yeah. Okay.
Michael Eisenberg:
What strongly held opinion did you change in the last year or 15 months?
[01:20:47] Noam Bardin:
I think that Israel can change. I assumed going back that Israel was too far gone.
And unfortunately I think it's going to take, it will take or is taking a trauma like we've gone through on the 7th to actually change things. And unfortunately that's the whole world. I believe Ukraine is going to be the most powerful country in Europe 20 years from now.
They're going to have the best economy. It's the war creator, a national sense of identity. They've digitized their whole government to create the startup sector in the military. They've done everything that they would never have done without the war, which is going to have dividends for it.
Unfortunately, I think it's the same thing with us, same thing with Google. OpenAI is either going to kill them or make them super strong. There's nothing in the middle. It's not going to be okay. And, um, and the, the, the need for a trauma to make change is also what I, what I'm optimistic about. We've already paid for the trauma.
Now let's make the change.
[01:21:38] Michael Eisenberg:
I think those are good words to end on. I do find it fascinating that we can mention Ukraine, Israel, and Google in the same sentence. I think it says something about these big companies like Meta and Google and Microsoft. These are States at the end of the day. So Noam, thank you for doing this.
Thank you for the straight talk. Thank you for the directness. And if you're listening to Invested, please rate us five stars on Spotify, Apple Podcasts. Join our community on YouTube. You can put comments in there. Any feedback for Noam and me, please write it there. And you can learn more about Noam by following him on LinkedIn.
That is N O A M B A R D I N. Again, thanks Noam, really appreciate it. See you next time on Invested.
Noam Bardin:
Thank you very much for having me.
Sender Cohen:
I’m not a really great investor. What I’m very good at is figuring out a trend or an area to be in and finding the right people to do that.
A bubble can be a great thing if controlled properly.
Israel is very good at 30-year out research, winning a Nobel Prize. Israel has not been great about what's needed 5 to 15 years out.
We all say, you know, democracy is the best system out there. Sometimes it's not. Sometimes, a long-term plan controlled by one person has a greater outcome. It's just reality.
What's happening technology wise in Riyadh is incredible.
At Harvard, you hear about the jubilation of October 7th, but I come to Saudi Arabia and I hear about the tragedy of October 7th.
Michael Eisenberg:
Why is there nothing about you on social media?
Sender Cohen:
I pay a service to make sure there's nothing about me on social media, or Google, or anything, so I was happy to hear that it was hard to find stuff.
It’s like we're sitting here, we're like Statler and Waldorf–has anyone watched the Muppet show? We’re like sitting here, and making fun of everybody and everything.
[00:00:53] Michael Eisenberg:
Welcome back to Invested. This is going to be a very fun episode of Invested for at least three reasons. Number one, I have a froggy in my throat, and I’m a little hoarse. Number two, I'm here with Sender Cohen. We know each other since we're teenagers, which is a long time. And although he has lapped me a few times professionally, he used to work for me at one point, maybe we'll get into that.
And lastly, we started off kibbitzing off camera about Houthi branding, the Houthi’s Christmas branding, and maybe we'll get to dig into that too and find the clip–because I think we were recording when you were talking about the Houthi branding–and bring it back.
Sender Cohen:
Were we? Oh dear, okay.
Michael Eisenberg:
And this is also Sender's first podcast, so join me in giving him a round of applause for agreeing to do his first podcast. Welcome Sender.
[00:01:43] Sender Cohen:
Thank you. Excited to be here.
Michael Eisenberg:
Okay. So for the audience who doesn't know Sender as long as I do, Sender Cohen is currently the Managing Partner of KH2 Capital and the chairman of Nevo Labs. All that we'll get into. He is also the chairman of Fulbright Israel for the last–eight months?
Sender Cohen:
18 months.
Michael Eisenberg:
Last 18 months. He's the previous Chief Investment Officer of the Schusterman family. Before that, he was the director of research and head of external allocations at Soros. And before that, he worked at Duquesne with the famous Stan Druckenmiller, one of the greatest investors of all time, if not the greatest investor of all time.
He's a trustee of the Harlem Children's Zone, a trustee emeritus of Yeshiva University–at our age, you can be an emeritus already, that's quite amazing–and was a founding trustee of the Birthright Israel Foundation. Did I miss anything?
Sender Cohen:
I think you know more about me than I do, so that's good.
Michael Eisenberg:
So before that, Sender was also the news editor of the college newspaper when I was the editor in chief.
Sender Cohen:
And then he promoted me to Editor in Chief when he left.
Michael Eisenberg:
That is exactly right. No, you earned the right to be the Editor in Chief of The Commentator.
Sender Cohen:
I earned the right, yeah.
Michael Eisenberg:
So, just for the audience who doesn't know you, I have to say, how did we first meet? Make sure you talk into the microphone.
Sender Cohen:
We first met, I came to New York from Cincinnati, Ohio. I was born and grew up in Cincinnati. I came to New York to go to Yeshiva. My brother had gone to Skokie, which had a bit of a–
Michael Eisenberg:
Which is in Chicago.
Sender Cohen:
Which is in Chicago, yes. And my parents thought Skokie was a little bit, “nutty” might be the word. It had a certain reputation as a free-for-all yeshiva, so they figured they would send me to another yeshiva's dorm, not realizing they were sending me to what can be best described as a Lord of the Flies scenario at the MTA dormitory.
But when you live in Cincinnati, and it's pre-social media, and pre-iPhones and pre-everything else, that's what happens. So I had a very lovely time in MTA. I met Michael, I met his cousin, I spent much time going to various people's homes, just ‘cause I didn't have much family in New York, other than a sister.
It was great. It was a great experience. Most of my friends come from those high school days like Michael. So it was all worth it, even though I had a C-minus average in high school ‘cause I missed three finals and got three Fs, ‘cause I went to a Billy Joel concert instead of taking those three finals.
Michael Eisenberg:
All right. So, we always start with the question of like, what is your core personal value?
Sender Cohen:
Core personal value? Just being a good person, I guess that.
Michael Eisenberg:
Are you succeeding at that?
Sender Cohen:
I don't know.
Michael Eisenberg:
I think you are.
Sender Cohen:
I think we’ll find out. There's a great quote at the end of–has anyone here read Middlemarch?
Michael Eisenberg:
I have not.
Sender Cohen:
The last page of Middlemarch has, and I'm not going to remember it to say the phrase, but I love George Eliot, in large part because she wrote Daniel Duranda, which helped create British Zionism or helped, you know, create more enthusiasm for Zionism. But the last page of Middlemarch is a beautiful quote about unmarked graves of people who just make the world a little bit of a better place.
Michael Eisenberg:
That's very nice.
Sender Cohen:
And it's a great end sentence, if anyone's bored and wants to read it.
Michael Eisenberg:
So Middlemarch is the end of your life, and Lord of the Flies is the beginning of your life.
Sender Cohen:
Yeah, that's a good way to phrase it. Yeah.
Michael Eisenberg:
I want to start with the question that was raised. What did you learn most from Stan Druckenmiller?
Sender Cohen:
What did I learn most from Stan Druckenmiller? I'd say most importantly to be a good person. He's a very good person. He's very shy. He’s not good in front of a room, but he doesn't take credit for many of the things he's accomplished in life, both philanthropically and investing wise.
But he's just, as an investor, he's very good at quickly pivoting when he's made a mistake.
Michael Eisenberg:
Meaning cutting his losses.
Sender Cohen:
He cuts his losses very quickly. People watch him on TV, and they think he's always bearish, and they think he's like, “Oh, he said this. So therefore I'm short.” And the funny part is thinking he's always bearish and listening to what he says, and trying to do based on what he said in an interview the week prior on TV, is–the man never has had a down year.
And I think he's been investing for 37, 38 years. He's never lost money in a year. So clearly he's not always bearish, because the market's up 95 percent of the time or whatever it is, but also he's very quick to adjust, which is phenomenally hard for a person to do, to take a loss and move on.
And he's exquisitely good at that.
Michael Eisenberg:
And when we had dinner with Stan here in Tel Aviv–
Sender Cohen:
Which was a lot of fun–Michael hosted a dinner for Stan on his first trip to Israel, which was a very magical trip.
Michael Eisenberg:
I was blown away by the number of questions he asked over dinner. An accomplished person. And I felt like he was constantly questioning his assumptions.
And then later I heard him say that he gets up in the morning and has a call like at 5:30 in the morning, of like, “Okay, what's changed today?” I thought–is that something you picked up from him? Is that something that's actually real?
Sender Cohen:
It's real. I wish I'd picked that up from him. He's very inquisitive.
He's constantly looking for new data points, and he's also very good at distilling things down. You know, it's like having a great teacher who knows how to make something very simple. And what I always loved about him is, a macro concept is very simple. You know exactly how he's thinking of what he's doing by talking to him.
And clearly the machinations in his brain are incredibly complex. You know, all my years at Soros, there were always people who would come in with this macro theory, or that macro theory, or wanting us to invest in this macro trade, or that macro trade. The way I'd evaluate things in the first stage was, when people were complicated, was–Stan says something to me and I understand it right away. These guys are talking, and it's taking me a half hour and I still don't understand what they're saying–they're clearly not better than he is, ‘cause they're not. And they're so complicated. Like, it was a great first filter to move on, and it was always right to move on. But he's just very simple in how he approached these things.
But again, it's not a simple brain. It's a simple articulation of a concept.
Michael Eisenberg:
And a move and a trend.
Sender Cohen:
Yeah.
Michael Eisenberg:
I saw him right after the Milei thing. Said, “Okay, I got to buy some stock in Argentina, just to get some skin in the game. I'm going to start and then get going.” It was like, simple. The guy's going to come figure something out here.
Sender Cohen:
Yeah.
Michael Eisenberg:
What's something that you've managed to distill down to something simple?
Sender Cohen:
Well, these simple questions should get a very simple, quick answer. Just trend following. I think the one thing that I've gotten from him is the ability, well, not as well as he does by any way, shape or form is this–I'm very good at looking at patterns. My kids always find it inexplicable that I'm very bad at math, which I am–but I'm very good at looking at numbers and figuring out patterns in a trend or a graph or a model, et cetera, et cetera.
[00:07:55] Michael Eisenberg:
So what's something that you can distill down now for us into a simple thought? Start with an investment.
Sender Cohen:
Start with an investment? Just looking at this country, a simple thought is–one of the reasons that I've been coming back and forth is the simple thought of, why Dubai and not Tel Aviv? Looking at what's happening in this country and why more is not happening here in alternative asset management.
[00:09:14] Michael Eisenberg:
Which we're going to dig into a lot in a second, but I want to build our way there. So you also worked for George Soros.
Sender Cohen:
That's a good segue, right?
[00:09:22] Michael Eisenberg:
It was good. It was good. You spent years at George Soros.
Sender Cohen:
Yep.
Michael Eisenberg:
What's the big thing you took away from him?
Sender Cohen:
The great similarity that George and Stan have is, they're both able to distill things down to a very simple concept. The big difference between George and Stan, I think it was actually Scott Bessent who said this, to paraphrase him–
[00:09:43] Michael Eisenberg:
Now nominated to be the–
Sender Cohen:
Treasury Secretary–and I think you heard Scott at the last, we're about to host something together; at the last one, Scott and Stan started off the day for us, which was a lot of fun.
Scott once said that George can get into the mess. The market's a mess, and he knows to get out, right? And most people don't know how to get out of that mess. Stan never even gets in the mess in the first place. I daresay even on this podcast and I don't know, you know, on the public–Stan is a better investor than George.
He just has a skill that I think is unique and second to none, but that's like comparing, you know, as I say that he's better than George, and I very much think he is a much better investor than George, certainly at size. He's shown an ability that few have shown.
If I knew sports, I'd compare it to when you realize the great nations–
Michael Eisenberg:
LeBron James and Michael Jordan?
Sender Cohen:
There you go. LeBron James and Michael Jordan.
Michael Eisenberg:
Each person will decide whether George is LeBron James or Michael Jordan, or whether Stan is LeBron James or Michael Jordan.
Sender Cohen:
Yeah. I like that. But yeah, Stan is a very unique talent.
Michael Eisenberg:
I sense also their politics are pretty different.
Sender Cohen:
They are quite different. They are quite different. But despite the difference in their politics, one thing that I always think about, especially in today's fractured times, is the way that they're both focused on helping people.
George comes from the far left. Stan, he's not by any stretch far right. I think he's classified, classifies himself as an independent. But he just stepped down as chairman of Blue Meridian, which is one of the most amazing organizations in helping underprivileged people in America that exists today. I mean, it's an absolute powerhouse. You look at the list of multi-cent of billionaires, whatever the term is these days, that are involved in this incredible–that was all Stan's doing, pulling them all together.
Michael Eisenberg:
Amazing. And how would you describe your investing style, having been both at Soros and with Stan?
Sender Cohen:
My investing style is a bit different. I'm not a really great investor, and I say that with complete sincerity. It's true. What I'm very good at is figuring out a trend or an area to be in, and finding the right people to do that. That's what I'm good at. I'm not good at underwriting a specific security; I am good at underwriting a person, and I'm good at underwriting a theme or a trend and putting that person together with the theme or the trend.
Michael Eisenberg:
Okay. So one trend that we'll come back to is Israel–why Dubai and not Tel Aviv. What's another trend?
Sender Cohen:
Right now?
Michael Eisenberg:
Yeah.
Sender Cohen:
There are very few trends that are super interesting to me right now, just because of–there are a lot of scary and concerning ones.
Michael Eisenberg:
Keep going. What’s scary and concerning?
Sender Cohen:
There are also some hopefully pretty optimistic ones, which we can get to. But right now what interests me from an investing standpoint is the next wave, because, you know, from our youth doing this–I started a firm called Hambrecht and Quist–you were at Marttila & Kiley, right?
Michael Eisenberg:
Well, that was a consulting firm back–you know, when you were having your first job at Montgomery Securities.
Sender Cohen:
Montgomery Securities, that was after, yeah. I'm trying to get back to our old CVs. All these tech waves always have a second wave that rises from the ashes of the first wave. And the second wave is always, I mean, historically has always been better than the first.
Maybe this time will be different. But there are certain waves right now that are interesting to me because, as they smash upon the rocks, the second wave will be pretty interesting–those are in areas of like quantum computing, and certain areas of physical substrates for semiconductors, et cetera, that are needed for this next wave of technologies, both software and hardware, but those are the areas that are of great interest to me.
Michael Eisenberg:
Right, you were also a comms and semis analyst way back in Hambrecht and Quist.
Sender Cohen:
I was. Yeah.
Michael Eisenberg:
Why is that important, if you have been a comms and semis analyst?
Sender Cohen:
Because the physical layer is something that A. is so important for everything that occurs, and B. has been so under-invested in right now.
And I think that is the great opportunity set. The investing mindset–it’s like we're sitting here, we're like Statler and Waldorf–has anyone watched the Muppet show? We’re like sitting here and making fun of everybody and everything. They're my two favorite characters on the Muppet show. But investment cycles have shortened so dramatically since we started, right?
The average life of a venture fund and the average life of an investment was much longer. People had a lot more patience, you know, especially in those days when I started out. I think my great claim to fame was I wrote the first Wall Street research report on cable modems. But there were a lot of things happening at the time that took a long time to bake.
And you fast forward to today after that first wave of the internet happened. Everything's, you know, software eats the world or ate the world or whatever the heck the quote was from Mark Andreessen. But the problem is everyone's so focused on the software layer that everything has gotten to a much shorter timeframe.
People expect something. A. The capital investment required to bring a company to profitability is much lower. B. The time expected before that happens is much shorter. So there's less patience among investors and among entrepreneurs, certainly among investors, which I think drives the limit of entrepreneurial patience.
So there's a massive under investment in the technological underpinnings of everything that we do. And you've seen a very negative consequence of that happening, because countries where there's–I'm a capitalist at heart, but–countries where there's top-down control have done a much better job of investing for the long term in these areas, than the U.S. has. Not the areas that make them more competitive on the global landscape in terms of economic growth. And by this, obviously, I mean China versus the U.S. and overall economic growth, but the physical underpinnings of what we need day-to-day, in technology land, which is why we've been so worried about fabs, and all kinds of other physical infrastructure, and why we're so worried about what Huawei is doing versus what's happening with companies in the West.
But I think we have a lack of patience, and the lack of patience has led to a certain degree of malinvestment.
Michael Eisenberg:
Even like today, if you look at Jensen at NVIDIA, right? He's sped up the clock on semiconductor releases to a year.
Sender Cohen:
Yeah.
Michael Eisenberg:
I mean, it's insane. And, you know, that's a moat on his business, but these businesses, even the hardware businesses are getting faster today.
Sender Cohen:
But the ability to create the next generation of hardware to compete with what he's doing still takes a long time. And the problem is very few are investing in that long duration cycle to compete with him at the next stage. So as great as he's done, you look at each decade, which companies are top 10 market cap versus the prior decade, maybe NVIDIA will still be there.
It's usually 80 or 90 percent fallout. So I hope he does. It's great for the U.S., it's great for Israel, it's great for the West. But somebody's in a little corner somewhere and has patience, hopefully, and is building something to be the dominant player in the next decade. But the problem is fewer and fewer. I think, I mean, you're more of an expert in this than I am, but there's definitely that lack of patience in terms of long term R&D.
Michael Eisenberg:
I think there's also a lot of supply chain lock in. If you look at TSMC, you know, the U.S. thought that they'd build it in Arizona. Turns out it's much harder than anyone thinks, when the Taiwanese don't want to share their expertise that much, and then the other part of it is there's actually a supply chain around it in Taiwan that helps you iterate there a lot faster than you can in the U.S. This is hard to do actually.
Sender Cohen:
Which is why I'm excited about some of the things that you've been looking at, like using synthetic biology to take control of some of the processes for next generation lithography.
I mean, that's exactly what's needed when you think far out and say, “Okay, here's how the supply chain works today, and here's what's going on. And I, Michael, have this really interesting guy who's worth looking at,”–for those who do use the internet and social media, ‘cause I was just made fun of cause I don't–who's just an incredible entrepreneur, who is thinking about the way to do this with proteins, right, to just take over the current processes for lithography.
That would be incredible if it works, and I hope it works, but think what will happen to all of these current generation companies, ASML, et cetera, if he succeeds–and somebody will succeed, and hopefully it'll be him–but that's exactly what I'm talking about. People like him are rare, and the patience to invest in a person like him is rare.
Kudos to Aleph for doing that, but that's very unusual.
[00:18:31] Michael Eisenberg:
Thank you. What would it take to get long-term capital to think about investing in this? And in kind of creating these next-gen infrastructure? Your career started when–people don't know, but the Hambrecht and Quist times in the mid to late nineties was all about–you went to Oppenheimer, if I remember correctly.
[00:18:49] Sender Cohen:
Right. Which is how I got into Israel, because Oppenheimer was all focused here. I just saw Aaron Stone in New York two weeks ago. It turns out our daughters are going to go to college at the same place in two years, which is fun.
[00:18:59] Michael Eisenberg:
To close the loop, Aaron Stone and I grew up together on the west side of Manhattan, so I know him forever, and Sender knows him also, even though we were at rival high schools. Sender knows him also from his career, and because the cousin he mentioned earlier also grew up with me together. This is like a small group of people. And then Aaron had a great career at Apollo.
[00:19:17] Sender Cohen:
A great career, and his father was like the lawyer who opened up Israel at Wallagotcha(?) And I remember my first business trip to Israel was right when I moved to Oppenheimer, and I come to Israel, and Mr. Stone's on my flight. So A. I am not in the back and tower area, you know, seat 47 C. I'm like, this is what the front of the plane looks like. And B., I'm with Mr. Stone. So it's very exciting.
Michael Eisenberg:
You know, if we're having fun stories. So the first IPO I did, who was the attorney? Mr. Stone, who I grew up with. But everyone's calling each other by their first name. It was a little awkward for me to call him David.
But nonetheless, we go around this U-shaped table at the org meeting, which used to be in person. I think it's all virtual now.
Sender Cohen:
Yeah, mine was a Rad Group org meeting. That's why I came to Israel.
Michael Eisenberg:
Okay. Mine I believe was the RADCOM IPO. And I'm the last guy at the edge of the U on the table, because I'm operating the presentation on PowerPoint, and I introduced myself as Michael Eisenberg, and Mr. Stone, or David Stone says, “And I was at his bris!” One of those moments where, if I turned red generally–I probably would have been then.
But back to semiconductors in the late nineties, the mid to late nineties. So this was a time where you had, first HDSL–this cable modem stuff– and then telecom, ADSL. These were companies that don't exist anymore. Paragain, Eastside Telecom here, and others.
Sender Cohen:
Yeah, a lot of Israeli companies. Orkit, Tarion, Com21, Libit, for cable modems, which Texas Instrument bought. I mean, the underpinnings of so much of what we have today and what we take for granted today, for telecom and for broader communications come from Israel. It's absolutely amazing.
Michael Eisenberg:
And that was like a golden era where there actually were these longer lead time hardware plays. And by the way, even today, I don't think NVIDIA becomes what it becomes if it's not for Mellanox and Eyal Waldman. Also a company that kind of pitter-pattered along for a long time. It struggled to get going for a long time, and then it hit a moment.
Almost–I think it was probably seven or eight years as a public company.
Sender Cohen:
Yeah, when people realize this is the golden key needed to unlock the speed.
[00:21:25] Michael Eisenberg:
Right, InfiniBand, the Mellanox standard that everyone kind of laughed at early on. What was the standard? What does it take to get investors to go back to that underpinnings?
And by the way, it's material science.
Sender Cohen:
Material science.
Michael Eisenberg:
I remember there were companies here working on chips with gallium arsenide back in the 90s when I started. It's networking, data. I mean, you see how it pays off. I mean, NVIDIA is a 30-year project, right? Mellanox is a 25-year project, but that's how you gain dominance over time and build an industry. What does it take to get people to come back?
Sender Cohen:
Yeah, it's like old wave division multiplexing companies, you know, back to the days of Chromatis and a number of other companies in that sector, but the ability to more finely parse wavelengths that you're sending over a fiber optic cable, and multiplex and demultiplex those wavelengths, and then translate them from optical to electric are technologies that A. started in the nineties, and B. started with many Israeli companies.
It takes a patience and understanding that, you know, it's kind of your comment about Mellanox. It's an understanding that certain basic research building blocks have to be built, and you don't know when they'll become applied.
And your Mellanox comment reminds me of the Hemingway quote, which I'm sure I'm going to phrase wrongly, but “How did I go bankrupt? Slowly, than fast.” Certain things sit there and they're not necessarily, you don't realize how critical they'll be as a building block, but it's important to invest in them.
You know that they have a great value. You don't know exactly how that will apply, and you don't know when that will apply, but there's something as a national asset is something that a country that has an economic policy, or a technology policy, those being the same thing, that's focused on the longterm, has to invest in, because you don't know when that bankruptcy that's going slowly will go fast, but in the opposite way–that that building block that exists will be so critical, a component of what's needed for the next generation of growth.
[00:23:27] Michael Eisenberg:
One of the things I was thinking about, as we were talking about all those companies that have kind of come and gone, but their products and infrastructure persist, is maybe actually what's needed is a bubble, right? Many of those companies went public in the internet, or what's actually the telecom bubble of the late nineties. Pets.com became the poster child, but there was all these companies you mentioned, plus a host of others that got bought by Cisco for gobs of money. but all that laid the infrastructure that we're benefiting from today.
[00:23:56] Sender Cohen:
A bubble can actually be a great thing if controlled properly. And what I mean by that–and I think there's a George Soros quote of, there's always a bubble forming somewhere, in terms of investments–but obviously a bubble is bad for an economy when the bubble blows up and what it does. But you need to create enough of a critical mass in a given industry or sector, which includes failed companies, where scientists, or entrepreneurs, or engineers go off and start new companies.
So, what could be irrational for the individual is very rational for the whole, for the policy of a country or for a large organization that's testing different things and seeing what things do or don't work. But, you go back to your point, right? The Telecom Act finally passes in ‘96 after a few years of failed attempts.
Michael Eisenberg:
Tell everyone what the Telecom Act is.
[00:24:48] Sender Cohen:
The Telecom Act is what deregulated the telecom networks in the United States. And we were, you know, two years or so out of school and better be lucky than smart. We just, we caught the wave, because Michael and I had started working, and we were looking at this area and, you know, kind of figuring stuff out–and then boom, the starting gun gets triggered, and just the amount of investment pouring into the sector just went up exponentially.
And on the one hand, you had a bubble burst, and the bubble bursting in 2000 led to a three year downturn. downturn in the S&P–I think one of only three times in history that's happened–but out of that came, what is what we all look at today in the internet. And these companies that were formed in that first telecom bubble, all the engineers from them, either the companies in and of themselves grew, but oftentimes the engineers went off and started new companies.
So they said it might've been bad individually for the company, or perhaps for the venture fund that created that company, but the venture funds that actually understood what they're doing and stayed around ended up being great venture funds, and the investors that stayed around ended up being the great investors, and et cetera, et cetera, et cetera.
But that created enough of a critical mass of people and knowledge from the failed and the successful companies that a lot of really interesting stuff happened.
It's funny, you had Adam on a few weeks ago?
Michael Eisenberg:
Yeah, Adam Fisher.
[00:26:20]
Sender Cohen:
Who is indeed incredible. There are three great investors in Israel, in my mind. Michael, Adam. I know who the third one is. Michael knows who I'm thinking about. I'm not going to say who it is just so that anyone else doesn't think I'm thinking about them, but I'm hopefully going to see him this week for a little Chanukkah party. But Adam had said to me in terms of an initiative I'm working on with Adam and Michael, and, another friend of ours, Scott Tobin, that–there you have it–that perhaps we should think broader and do more in these sectors, because you need that critical mass that's out there. If you don't have the critical mass of people out there, even if some of the companies will fail, we're not going to create the critical mass, again, needed to create the next wave of growth.
Michael Eisenberg:
Short term bubbles can be painful. Long term though, they lay infrastructure. And I think the same is true about AI and compute right now.
[00:27:19] Sender Cohen:
A hundred percent. I agree with that.
Michael Eisenberg:
This is likely a bubble of sorts, although, you know, NVIDIA is not trading at the crazy multiple that Cisco was back in 2000. I think Cisco is trading at a price to earnings multiple of like 120.
[00:27:30] Sender Cohen:
It's amazing. And NVIDIA also–
[00:27:31] Michael Eisenberg:
NVIDIA’s like at 30.
[27:32] Sender Cohen:
They report earnings and like, the multiple contracts, because they have such explosive earnings growth. It's been amazing to watch. And I don't think there are any companies, I mean, Cisco at the height was at I remember there were price targets, there was an analyst in 2000 who had a price target in Cisco, which was the equivalent of nine percent of nominal United States GDP. It seemed a little bit out of whack. It never got there. And I don't think anyone has that, quite that euphoric or bubbly perspective.
Michael Eisenberg:
I remember when Henry Blodgett said that Amazon was going to be $1,000 a share, and he was laughed at, basically fired because of that. He was right.
Sender Cohen:
He was right.
Michael Eisenberg:
Unlike in the case of the Cisco analysis who thought there'd be nine percent of GDP. Blodgett was right, but the bubble burst on him, and he was tarred and feathered, but he was 100 percent right. I think by the way, one of the differences is consumer-facing stuff can actually scale pretty infinitely, whereas infrastructure at some point runs up against price erosion in a meaningful way, and changing technologies and need for speed in that case, and other things.
Sender Cohen:
Yeah. Cisco had a lot of constraints that Amazon didn't have, for sure.
[00:28:43] Michael Eisenberg:
Yeah. So we talked about this basic technology and technology policy. Can you tell everyone about Nevo Labs, what you're working on?
[28:51] Sender Cohen:
I'm working on, you're working on–
Michael Eisenberg:
We're all trying to make it work.
[00:28:55] Sender Cohen:
We're working on it together. Because of our experience in the nineties, we wanted to kind of, I wouldn't say reset the clock, but kind of reset the stage and say, “Okay, what is it that is needed to help make Israel great in the next generation of technologies?
How do we create an environment in Israel that is like a Bell Labs, where we can get these scientists in Israel with the right tools, the right systems, the right resources, that they can sit and have the luxury of time and colleagues in different fields to develop that which is needed for Israel's next generation of growth?”
Michael Eisenberg:
Not just Israel's next generation of growth, the region’s–
Sender Cohen:
The region, the world. I think, and I don't live here, so maybe I'm going to mischaracterize something, but I think, in my view, looking from the outside, Israel is very good at what's needed for the next one or two years. Because of the military, right? Very good at near term cyber stuff. Israel is very good at 30 year out research, winning a Nobel Prize. Israel has not been great about what's needed five to 15 years out, that middle stage.
So, we all go on about how many Nobel Prizes and Fields Medals and this and that Israelis have won, which is incredibly important. Heck, I could never even win a Fulbright, that's why I was happy I was named chair by Tom because, you know, now I can, like, tell my mom I'm associated with Fulbright.
Michael Eisenberg:
And your mom was an academic, right?
Sender Cohen:
My dad's a professor. So he would have been very happy to see my association. But Israel has not been good at that middle stage. Again, to quote Adam Fisher, who's working on this with us–Israel is very good at the D, but not that great at the R.
I mean, if you look at the R numbers, the research numbers out of Israel, a lot of the research funding here, the foreign share of funding for research in Israel is frighteningly high. It's, I think, seven or eight times that of other OECD countries, which is very scary, especially in times like this.
B, you just don't have these big commercial labs or other sorts of labs with technology transfer that you have in the United States. There was actually an article in Harvard Magazine–Harvard used to be a good word, until a few weeks ago, a few months ago. There was an article last week in Harvard Magazine. I think it's the only article I've ever read in Harvard Magazine. But a few people sent it to me. It came out last Monday or Tuesday,about why commercial labs are taking people from academic labs. And it was a much more articulate version of what I'm trying to say, and I urge everyone to read it who finds this topic interesting.
But it walked through why people are leaving Harvard, and MIT and–pick your other school that we like these days or don't like anymore–but why they're going to commercial labs. And it quoted, it focused on four scientists that left Harvard and went to these different labs, and why they're so much better: A, less bureaucracy, B, the ability to be more flexible in how they research things, the incentives are set up better.
I mean, just goes through all of–like I said, it's the best articulation I've seen of why this trend is happening, why this trend is going to continue. Interesting that Harvard Magazine itself had this. It walks through why this should happen–not in Israel, but why we have to make this happen in Israel.
And the good news is this model exists, right? In the United States, there are multiple of these labs that have been tremendously successful. This article actually focuses on a really cool, innovative new one, called Arena Labs in Boston. And one of the four scientists interviewed is one of the founders of that with an incredible family named Pagliuca that doesn't come up in the piece, but they're the ones who were behind the scenes helping put it all together.
[00:32:46] Michael Eisenberg:
He was the CEO of Bain Capital.
[00:32:48] Sender Cohen: Yeah.
Michael Eisenberg:
And I think the CEO of The Celtics, right?
[00:32:51] Sender Cohen:
One of the owners of the Celtics, yeah. But they've done something amazing with this. Arena is a great model for this, but Israel's never had this. And the idea is to bring this–there’s nothing new under the sun here.
There's nothing we're inventing here. We're just saying, “Here are the best practices that have worked in the United States very successfully, either as part of a commercial labs attached to a large corporation, AT&T, or a lab that is in private hands, that is addressing the shortcomings of the academy and complementing them, to be sure. It's not to replace them. To help create a “safe space,” to use the term du jour–
[00:33:32] Michael Eisenberg:
An unsafe space, actually, because you can experiment, blow a lot of things up–
Sender Cohen:
And develop really great things that are needed for the future. So how do we take that model, move it to Israel, and use that model to say, “Here are scientists that are focused on the lower layers of the OSI stack. Maybe some of the higher layers too, but the lower layers that are
underinvested in, and make sure that we're thinking about those layers for the longterm future of the country and the world.”
Michael Eisenberg:
So one of the challenges with Bell Labs over time, I think it causes it to lose a lot of its luster was actually economics, right? They don't seem to have done a great job of creating a business model that works. So how much money does it take to set up Nevo Labs to start?
[00:34:10] Sender Cohen:
How much does it take?
Michael Eisenberg:
Yeah, capital.
[00:34:11] Sender Cohen:
It depends how ambitious we want to be in terms of
Michael Eisenberg:
Throw out the number.
Sender Cohen:
The best thing to do is start it with around $800 million. So we can start with four sectors, which are the critical sectors for us.
Michael Eisenberg:
Which of those sectors is it going to be? Unless you don't want to say.
[00:34:27] Sender Cohen:
The only reason I hesitate is because some of the sectors we're still debating, sectors three and four, but we know we're going to do synthetic biology. We know that we're going to do some stuff in the quantum space.
And we know we're going to do some stuff in AI. AI is obviously an overused term. It reminds me of stake.com. Remember the company in Herzli Pitouach, stake.com? Which was a great sign of the bubble then, but in terms of some next-generation underlying technologies needed for AI, but we're still trying to figure out what the fourth one will be. But it takes a great deal of money to do it right and have the patience. It's the duration of capital. And that's a critical thing to address here also.
And I'm going to go on a tangent to come back to why it's critical to how we set up Nevo, but hedge funds–I'm going to make fun of hedge funds a little bit. A lot of hedge funds, a lot of long, short funds are not all that great at creating strong returns, but they solve for other issues. They solve for the expectations of their investors. They solve for vol characteristics that investors want. They solve for leverage characteristics that their investors want, but, you know, oftentimes there was a great Steve Ballmer interview recently where he talked about how he's just in ETFs and in Microsoft stock. You saw that, right?
[00:35:50] Michael Eisenberg:
And the Clippers.
[00:35:52] Sender Cohen:
And the Clippers. Yeah. I mean, which was not as good an investment as the Microsoft stock, but still a lot of fun. You have to solve for the expectations of your investors and the duration that you have, but just being, simply long the markets–unless your name is Stan Druckenmiller, who can consistently outperform the market (the few that are touched by God, as I sacrilegiously like to call them), then it's better to just be passive and then do things in the private sector, things like Aleph does, where it's talent and access rather than the chance of the public markets. But people invest based on the expectations of their investors. Investors want to make sure you have an up month every month, or an up quarter because you're reporting, then you have to invest that way. If you're investing for yourself and you're not looking for 10 years, you can just be long ETFs and you'll do great.
So it depends what the expectations are, but it's the same thing with basic research. You have to create a pool of capital that's longer duration, like funds used to be, where the investors have an expectation that this will take a longer term to get to fruition. You'll end up in a great return place because investors that did this in the old days ended up in a very good place, but you have to have a lot of patience with that capital.
And let me go back to AT&T and Bell Labs, and what happened there. Bell Labs was a very interesting story, because Bell Labs was fortunate in that it was attached to a very large monopoly. So, and I might not have the full history, but oftentimes the DOJ, maybe not oftentimes, the DOJ would come and want to break up AT&T, because it was a monopoly.
And I think part of what Bell Labs, you know, their offering to the regulatory gods was, this is pre Lena Kahn crazy, they were still crazy, not as crazy as she is, or was, I guess she's gone now, thankfully–
[00:37:48] Michael Eisenberg:
I hope she's gonna be gone. She's a real threat to capitalism.
[00:37:51] Sender Cohen:
Disaster.
Michael Eisenberg:
So part of the offering to the regulatory gods–
[00:37:04] Sender Cohen:
It was, we're gonna give the IP away for free, right? That'll be the public service. We're not gonna license the IP that comes out of Bell Labs. So the Bell Labs business model in terms of what the IP did for the world was not, okay, we licensed it out, because it was better to have these highly tariffed phone calls on the other side that were minting money.
You know, you'd call New York city, New Jersey, and it was a long distance call. You had these highly tariffed phone calls that were minting money, so better to give away that IP for free that was being generated by the profits from AT&T that were being pushed into Bell Labs.
Commercial labs these days don't have that monopoly attached to them. Some have excess profits from companies attached to them. I think of Google, although those also get tied up when times are tough. The commercial labs that have done best in times like these are the independent commercial labs that have an investing mindset. They're not philanthropy, which is critically important.
There has to be accountability and discipline. You want to have long term capital. And you want to have the freedom to do what you want. And you know, you want to make sure it's multidisciplinary, but at the same time, you want to make sure it's not philanthropic. There has to be a goal.
But capital that’s set up properly that way, in these commercial apps has done extraordinarily well. It's made a lot of money, had a great impact.
[00:39:14] Michael Eisenberg:
So what’s the return that investors are going to get? What's the IRR?
Sender Cohen:
The IRR of these have been very good. If you look at the commercial labs that have come into being in the United States, they've been highly profitable. They've had pretty strong returns that definitely justify the duration of the capital. When I invest, I always think for every year of lockup, there should be a hundred year, a hundred basis points of excess return over the given benchmark. And the best commercial labs in the United States have certainly met or exceeded that hurdle, I think for good reason, because that basic stuff becomes applied really fast overnight and has a lot of value, you know, and what I'm saying also reminds me of another great quote about Bell Labs, that it was an ivory tower. In other words, people could do whatever they wanted with a factory downstairs, right?
So you want to create that ivory tower so scientists can do what they want and explore, but they have to know there's a factory downstairs, and it has to have an output so that it can justify the ivory tower up top. And universities usually are one of one of the two things and other institutions are the other of the two things–the harmony is bringing those together where there's a capitalist accountability, but also with the freedom, read, duration of capital and enough capital, that very good scientists who have an applied mindset are working towards some sort of a goal.
[00:40:33] Michael Eisenberg:
So if there's a scientist sitting right now, Israeli, Jewish or otherwise, who’s sitting right now at MIT, at Harvard, at the University of Toronto, in, I don't know, Washington University, in Stanford, in Berkeley, in École de Polytechnique in France–make the pitch why they're coming into Nevo Labs.
[00:41:07] Sender Cohen:
The pitch is simple. First of all, focus on the issue of why they wouldn't come back. And we spend a lot of time meeting with different scientists, but also talking to a lot of people at Bell Labs and at these commercial labs that exist today.
And by the way, the most fun has been speaking to people who used to work at Bell Labs, just fun stories, but also just the magic that happened there. But the problem right now is, you're going to go to the United States for your postdoc nine out of 10 times, I think, because that's where the opportunity is.
And that's where a great scientist is that can mentor you, et cetera, et cetera. You finish your postdoc, you live in Boston. There's not much opportunity to come back to Israel and make what you can make in the United States and have the freedom to make in the United States, because it's a smaller country.
It doesn't have as much infrastructure for this, but also in the fields that you're in–there's none of that. Go back to that mid-duration research for five to 15 years, if that's what you're interested in. So you're making X as a postdoc in Boston, and then you're offered X plus Y to go to some commercial lab or some corporate in Boston–again, read the Harvard Magazine article last week, it does a good job of talking about some of this–and in Israel, that opportunity simply doesn't exist today. So even if you want to come back, it's hard to come back. You're in Boston, you're going to move to Tel Aviv, which has the same cost of living or higher, probably higher.
And you just, you don't have that career opportunity that you have in Boston. So you're going to end up staying. And that's a problem because once you stay, you know, you put down roots and you stay for longer and hopefully you come back at some point, but the opportunity set doesn't exist here to bring them back.
And that's exactly what we're trying to address.
[00:42:38] Michael Eisenberg:
Why would it be better than being there though?
Sender Cohen:
Why will it be better? I wouldn't say that it will be better from a scientific standpoint right away, but it can definitely be the same. And if it can be the same, and they can live where they want to live and not live where they're going to live because that's where the opportunity is, that I think is equal.
Longer term, I think it will be better because you can create these, to use a corny term, these clusters, these centers of excellence in Israel where they can really be leading the charge in certain areas as Israel has done today in different areas, that will be at the forefront of these technology developments.
Michael Eisenberg:
If I'm an American scientist, Jewish or otherwise, at Berkeley–what's the pitch?
Sender Cohen:
The pitch is, once we have this lab center set up here and you've seen what we've done–we, Israel, I shouldn't say “we,” I'm not Israeli, I'm with Canadian citizenship too–you could be at the forefront of starting the next big wave in Israel, like Israel did in cyber and did in these areas in the 90s that we were part of.
And Israel's in danger of not being at the head of these areas, but Israel could easily be a leader in these areas today. I'm not very good at elevator pitches. Can you tell? We'll leave that to Michael.
Michael Eisenberg:
You know, by the way, you may need to take out Israeli citizenship, because if Trump has his way, your Canadian citizenship will just be American citizenship.
Sender Cohen:
I mean, I have always looked as Canada as the 51st state and Israel as the 52nd, sorry guys, but like, you know,
Michael Eisenberg:
So Ruchama Rusakaminoff said I should ask you–
Sender Cohen:
She's great.
Michael Eisenberg:
She's great. We agree. She's on the board of Fulbright with you, I think, right?
Sender Cohen:
Yes.
[00:44:13]Michael Eisenberg:
And so she said, “You made a non-trivial personal decision to start Nevo and some of the other stuff you're working on and leave the Schusterman family office to go do this. Why'd you do that?”
[00:44:25] Sender Cohen:
Why'd I do it? One of your colleagues here talked about how, after two months working in America after October 7th, felt the need to quit and come here. I wanted to do something, maybe it's because I'm 52–he's much younger than I am–but I wanted to do something a little bit focused and actually do something impactful. I'm not an impact investor. I don't think I'll ever be an impact investor.
Michael Eisenberg:
God forbid, that’s a terrible thing to be.
Sender Cohen:
I am a capitalist through and through. There's a funny plaque on my desk at home that I think my mother in law made, ‘cause my kids call me “worker man.” Nobody can tell what I do.You know, I move money around. I make money. There's nothing substantial.
[00:45:07] Michael Eisenberg:
My mother-in-law also doesn't know what I do. I don't know. It's weird.
Sender Cohen:
One day, one day we'll figure it out, you know.
[00:45:12] Michael Eisenberg:
Two guys who went to MTA, and they can't figure it out.
Exactly. When you get three F's in finals, you know.
I wanted to do something here that actually had a real impact, and there's a gaping hole. And sitting with Scott, and Michael, and Adam, and brainstorming about what needs to be done, somebody threw out the phrase, “a private sovereign wealth fund,” which is an oxymoron, but this country needs a private sovereign wealth fund. Somebody threw out the phrase–somebody being one of those three people, could have been Michael sitting right here–but a private sector subsidy to the private sector.
There are certain things that need to happen here with no comments about government, here or in the United States. I think there's the Ronald Reagan quote, “What are the nine scariest words in the English language?” And I'll probably use more than nine words.”I’m from the government, and I'm here to help,” or something like that.
Like, it's important for the private sector to step in and make a difference, and fill those holes that desperately need to be filled. And the optimistic side says, unfortunately, war has obviously, catastrophic, unfortunate consequences, but wars also lead to great economic booms that can be great for the country, and make sure the country is well-positioned for that economic boom in the right sectors that make sure it is what it is today in the future, compounded by the fact that it has more enemies in the world now, unfortunately.
So we need to offset that. This all came together in my head and said, “Okay, here's, you know, I’m hopefully young enough that there's a great investing chapter ahead. I have great friends in Israel, like these three guys. Let's build something great here where we can have that impact.
And I'm the one sitting in America. So I'm like, I'm gonna quit my job to do it. They're already doing something great, ‘cause they're sitting here investing here, but I want it to just be focused on this country.
[00:47:04] Michael Eisenberg:
So on that topic, I asked Stan Druckenmiller what I should ask you. You know what he said?
Sender Cohen:
What did he say?
Michael Eisenberg:
Please explain why you are uniquely positioned to thrive doing venture capital or all this tech stuff in Israel.
[00:47:16] Sender Cohen:
Goodwill. I think I have, hopefully, a lot of relationships where I can tie things together in the U.S. and in Israel, because of friends–I made some unfriends also, but friends that I made in the U.S. technology and investing industry, and friends I made in the Israeli technology and investing industry, and friends I made in the Gulf investing technology industries that hopefully we can pull together to create something unique.
Michael Eisenberg:
So I'm glad you mentioned the Gulf because that was going to be my next point. You have a lot of relationships in the GCC countries writ large.
[00:47:52] Sender Cohen:
By the way, for my 30th birthday, Stan gave me two presents, which was–one was very, heartfelt, which was a Tanakh from Cologne, Germany from 1709, which was a beautiful, beautiful, thoughtful present. And the second was a belt from a golf club that doesn't have many of us as members, and that was funny.
It was the fact that you saw in the same box, his great sense of humor, and also, a very thoughtful gift.
Michael Eisenberg:
A Hebrew Bible and a belt or something you can't open or go to. Alright. Perfect.
The Saudis are about to normalize with Israel, I don't think that's a great secret.
Sender Cohen:
Hopefully.
Michael Eisenberg:
Well, I mean, they were before October 7th, and now hopefully they'll come back. You know, Trump's in office. Jared Kushner is back.
Sender Cohen:
I've been to Saudi Arabia a few times. It is incredible. It's incredible to see, it's incredible to meet the entrepreneurs there. I spoke at a convening–a friend there who's a venture capitalist, who's a phenomenal venture capitalist, invited me to speak at a convening he had.
I wore a jacket. I spoke publicly to a room, but it was–
[00:49:03] Michael Eisenberg:
For those who don't know you, the fact that Sender’s sitting in this seat now is in itself remarkable. It's his first podcast. A round of applause.
Sender Cohen:
Thank you. It's like my wife said, I come from the Middle East and that's where I speak in front of a room since I never do it in America.
What's happening technology wise in Riyadh is incredible. I mean, you just see the green shoots, they said, when the great financial crisis was ending. You see these green shoots of a great technology wave. The demographics are strong. The deregulatory push is strong.
The spirit of investment and entrepreneurship is strong, so a lot of great things happening there.
Michael Eisenberg:
And I just came back from Abu Dhabi, where there's a sign that says “Capital of capital,” but at the same time, it's not just about money or the sovereign wealth funds there. There is an incredible focus on the AI and you see it from the top down, apropos some of the comments you made about China earlier. It's top down with some real entrepreneurship underneath, and a strategic understanding of the unique place in the world as it relates to AI in real strategy, you know, to your point about Israel earlier. What's the two to 15 year strategy?
Where, if you think about Nevo Labs and, when you said before also, why can't Tel Aviv be the next Dubai? How does the region fit into your plans for what you're planning, both at Nevo Labs and what you're calling KH2 Capital?
[00:50:29] Sender Cohen:
The region fits in because there's a lot of interest, I think, and I think you've seen the same thing in regional collaboration because it's good for the region, it's good for the world–it's good for the countries, it's good for the region, it's good for the world.
The sectors that are of great import to Israel are also of great import to these other countries in the region. They're equally, if not more, I wouldn't say more importantly to, incredibly important to the United States of America. That its allies are strong in these areas. But there's a great interest in collaborating in these sectors, I think, from what I've seen and heard. And I think the sectors that we're focused on are sectors where you're going to see a lot of great intellectual capital.
You are seeing great intellectual capital in countries in the region, but also interest from a policy, either top down in these countries or bottom up among the people, to make sure they're focused on the next waves of these technologies, both for independence, security, independence, trade peace. I mean, a whole bunch of good reasons.
[00:51:35] Michael Eisenberg:
What's the most interesting thing you've heard as you talk about Nevo or KH2 in the Gulf countries that would surprise people listening?
Sender Cohen:
The deep interest in the scientific exchange, and understanding technology together, and working on technology together.
Michael Eisenberg:
For what end?
[00:51:55] Sender Cohen:
I think there's always misconceptions out there. I'm full of misconceptions in my head, but the entrepreneurial, and the engineering, and scientific classes, let's call them, have a great interest, from what I've seen, in both sides, in both parts of this region collaborating on these next generation technologies, because again, it's beneficial to all the countries in the region.
[00:52:20] Michael Eisenberg:
You said, why not Tel Aviv? Why should it be Dubai? What did you specifically refer to there?
Sender Cohen:
Oh, that I was referring to something else that we've been talking about for a while, which is, it's nuts that Tel Aviv has such an underdeveloped alternative asset management sector. Israel has done a great job in the venture industry, phenomenal job, but given the number of our tribe members in the hedge fund industry, and in my industry in New York and in London, the fact that this industry barely exists in Tel Aviv is kind of nuts.
[00:53:00] Michael Eisenberg:
What do you think that is?
[00:53:02] Sender Cohen:
Government. Full stop, end of story. The country just hasn't made it a priority. They just haven't made it a focus, which is perplexing. I'm not sure why that is. It doesn't require much in the way of tax changes. It requires certain policy frameworks be put in place to encourage the immigration of people that are in this sector. Somebody said to me, somebody who's not Jewish, who's a very senior executive at one of the banks in New York, said to me that, Dubai, with apologies to our friends in Dubai, is a short-term rental; Tel Aviv is a long term purchase.
Meaning somebody would move to Dubai to work at a hedge fund because it's a tax-free zone. It's fun. It's this or that–but then they're going to leave, because they have children, their children get older. They want them to go to school. They want them back home.
People who are going to move to Tel Aviv to do this would move to Tel Aviv because they want to live here. You know, it's interesting, you think about, financial service in Israel or alternative asset management in Israel. Nevo is trying to solve for the problem of scientists not being able to come here, not being able to come here if they're American because the opportunity doesn't exist to do what they can do in America, or leaving and not being able to come back, because the opportunity doesn't exist for them to come back post their postdoc.
KHD was dealing with something different. A lot of Americans, and British, and French would happily move here. It's a build it, if they will come, going back to movies from–we're talking about Dumb and Dumber and Jackass, some of my favorite movies from my youth. Field of Dreams? This is generally a Field of Dreams scenario.
If you build it, they will come. If the financial services sector in Israel was hedge-fund friendly, the way the Gulf, Dubai has done a brilliant job of setting up that infrastructure. There are so many people that would move here, from portfolio managers to analysts to securities lawyers that the opportunity just doesn't exist.
But if the ecosystem, to use a word I try and avoid, exists here, they would happily move here, especially post October 7th, and go back to me quitting what I was doing because I wanted to focus on Israel. I keep saying all things being equal post October 7th, a lot of why things would not have happened–the hedge fund industry beforehand made sense, now they make more sense to happen in Israel. People want to live here. More people want to move here because of what happened. And then, can you look at what's happening in Dubai? It's not hard to do.
[00:55:33] Michael Eisenberg:
So what does the government need to do here? I tried with crypto here, and we're making some progress, but it's like a nightmare to be honest.
The government can't get their act together. In the meantime, all the Israeli crypto entrepreneurs are going to Dubai. And so what does the government need to do here to–and I'm going to be ambitious. Right now, tech is like 50 percent of exports and 35 percent of tax revenues. And it was 12 percent of the population.
Israel needs a second industry. What would it take to make alternative assets, financial services, fund management, et cetera, the second large industry of Israel, especially with all this talent?
Sender Cohen:
So first, your point is entirely about–Israel needs a second large industry, and the great thing about this is you can create a large industry, a high income industry that percolates and creates jobs, has a great multiplier effect to the economy, by simply moving talent over that wants to be in this country, which is great. The other thing that's very interesting about this industry, which we'll start getting to your answer is, it's all accretive to the tax base. It doesn't exist here. So bring people in from all of these countries that are high earners.
It's all accretive dollars. It's not a tax cut for somebody that's existing. I'm not even talking about taxes. You have incremental taxpayers that are coming to the country. Israel needs a clear framework. I'm not a regulatory expert, nor do I have the sheets in front of me, but having a clear framework that meets the standards, because it's important.
I keep saying all things being equal, pre and post October 7th–it's important that the industry here meets all the standards of excellence, of compliance, of talent that exists in the United States. So the talent, that's easy. The talent will move here. That's a build it and they will come. The rest is making sure that the regulators and the policy makers understand what the framework is that mirrors what the United States has done, and I think the Gulf has done a very good job of, mirroring what's happening in other parts of the world, so that standard of excellence and from a regulatory center standpoint exists, and tax and the other policies. But making sure that those frameworks exist, so that institutional investors from around the world are happy to invest in Israel.
I think right now, there's 22 billion or so hedge fund assets in Israel. And I think the average hedge fund is around 73 million, which, by the way, in and of itself is an interesting number because typically in the U.S. a hedge fund doesn't really start to grow until they hit a hundred, right? And others can come in. So the average hedge fund doesn't even hit that threshold. And I think 80 percent or so of the capital in Israeli hedge funds is from Israeli domestic institutions. I think 70 percent of which, I might be mixing those two numbers, the 70 and 80, from private domestic individuals.
So you just, you don't have foreign capital here in this industry. So you don't have incremental dollars creating more of a tax base, right? And this isn't to invest in Israeli securities. This isn't to invest globally, but in funds that are domiciled in Israel. But all they need to do–all they need to do, but it's really not that much–is create a very clear framework from a regulatory standpoint and a tax standpoint, so that the manager knows in coming here who they can hire, how it's going to work, how they can bring in a foreign investor that won't get trapped by some Byzantine policy, so that they feel comfortable investing in an Israeli domiciled hedge fund.
And then the rest will take care of itself. That’s it.
[00:58:59] Michael Eisenberg:
Do you have a punch list of what needs to change in the regulatory environment?
Sender Cohen:
We do.
Michael Eisenberg:
Can you send that? We'll put it in the show notes.
Sender Cohen:
Yeah. I think we could.
[00:59:03] Michael Eisenberg:
Maybe we'll translate it into Hebrew so that the Finance Minister can read it.
Sender Cohen:
They’re not a crazy ask, and frankly, it's not even an ask for us, it's an ask for the industry. Because the country, you know, this is something that we think that Israel could really use, as you say, another industry besides tech.
Michael Eisenberg:
Do you wonder whether Dubai's going to be able to do it? Because it's not a democracy, but here in a democracy, it's just hard to do?
Sender Cohen:
Absolutely.
Michael Eisenberg:
We all say it was the U.S, because the New York Stock Exchange and the NASDAQ and stuff.
[00:59:37] Sender Cohen:
Yeah, we all say, you know, democracy is the best system out there. Sometimes it's not. Sometimes, you know, a long-term plan controlled by one person has a greater outcome. It's just reality, objectively speaking. So absolutely. And they have, thankfully, very enlightened rulers there who understand things and are great for their people, great for the economy and they know how to execute.
And we here, we being, I guess, you guys, have a government that's a little complicated.
Michael Eisenberg:
We've never noticed that.
[01:00:03] Sender Cohen:
By the way, the other great thing about this industry that I'd also note, relative to venture is–when venture started, when was Yozma, ‘96, ‘97?
Michael Eisenberg:
‘91-’92.
Sender Cohen:
So when the Yozma program happened, when you think about it, it took seven or eight years until you really created tax revenue out of this industry. The great thing about the hedge fund industry is there's tax receipts every year, assuming people make money.
Michael Eisenberg:
You'd think given the deficit we've built up, given the war right now, that somebody should be focusing on this. I have a post coming today on Twitter about how they're going after what they call “jailed” or “trapped” profits, and what they call personal wallet companies.
It's like these tax deferral mechanisms. You create a company to do it. So they think they get 10 billion shekels out of taxing, you know, these trapped earnings. And I read through all the documents of the finance ministry, and all documents written by the Bank of Israel, and not one of them mentions growth. Economic growth.
Sender Cohen:
Amazing.
Michael Eisenberg:
Not one of them mentions growing the total tax base. It's all, how do we get access to the current tax base that hasn't been spit out yet? And it's like, come on!
[01:01:06] Sender Cohen:
Can you imagine? I mean, I keep coming back to you build it, they will come. I mean, you know all the people I'm talking about. People will move here. They're phenomenal money managers. You know, the one thing–you talk about tax and in Dubai, it's tax free for a certain number of years or certain zones. We have a very different perspective. We want people to be taxpayers here. We don't want something to be tax free. The whole idea is for people to come here and contribute to the economy.
And it's not just by hiring more people here. It's that the people are moving here and paying taxes.
Michael Eisenberg:
And so, in order to do that, you're, you're gonna set up a framework to help people get feeder money to get started setting up here, but we gotta solve the regulatory problem.
[01:00:48] Sender Cohen:
But the framework also requires somebody to move here and become a taxpayer here.
Because if you're not becoming a taxpayer here, we're not helping the country. And helping the country, you know, there is a tzioni give here. And the tzioni give is, you're moving here and you're not commuting to Spain. Like, we want to be taxpayers here. We want them to be taxpayers here. We want to help the country.
[01:01:58] Michael Eisenberg:
You’re gonna be an Israeli domiciled fund and resident. You will give feeder money to these funds to set up. And that will increase the tax base. We want to solve the regulatory issues first, in order to make it a friendly environment.
Michael Eisenberg:
So I asked Alisa Mall who runs the Dell Family Office, or part of the Dell Family Office–
Sender Cohen:
I believe the whole thing, the whole Dell family office. She's great too. You spoke to good people. So that's good.
Michael Eisenberg:
And she said I need to ask you about a sliding doors moment, which is like, had you taken a slightly different path in life, you would have ended up in a very different place.
[01:02:32] Sender Cohen:
Well, I wanted to be a history professor when I was in school. And when I first went to Hampton Quist, I thought, okay, I'll work for two years. I think I had like 1400 bucks of Bar Mitzvah money at the time. And I came out of college, and I lived with Yehuda Stark, Zivi Mendelsohn, and Benji Hain.
Michael Eisenberg:
All the guys you went to high school with.
Sender Cohen:
All the guys I went to high school with, all live in Ra’anana now. Hopefully I'll see at least one of them this week. I've been very bad at pre-planning, but I just texted one of them about Motzei Shabbat. So let's see what happens. But, Benji lived on a sectional sofa he found on the street, but I wanted to be a history professor.
I wanted to be, actually a professor of the history of English common laws, very broad field. I'm sure there would have been a lot of readers for my books, had I ever published any. But I decided to try out Wall Street for a few years, and I got hooked. It was fun. And part of why it was fun is, I ended up in the sector that was just growing and fun. Optics, and semis, and all that stuff.
Michael Eisenberg:
Why is there nothing about you on social media, or Google or like anything else?
[01:03:35] Sender Cohen:
I pay a service to make sure there's nothing about me on social media or Google or anything. So I was happy to hear that it was hard to find stuff.
[01:03:44] Michael Eisenberg:
Is that right? You pay someone for that?
Sender Cohen:
Although now is this going to be like, I guess this will be out on something.
Michael Eisenberg:
Is that right that you pay some people?
Sender Cohen:
My kids keep saying, “It's the internet. You know, like you should understand how that works.” I have a service that makes sure, you know, it helps keep your picture off, and bios and stuff like that. But I think because of Fulbright, my bio is now on the world wide web.
Michael Eisenberg:
Wait, so they're gonna like, they're gonna take down our podcast? Can you please tell them not to take down our podcast? I mean, please.
[01:04:09] Sender Cohen:
It’s a good service. So that's why I'm not….
Michael Eisenberg:
Why don't you wanna be there?
Sender Cohen:
Why? I don't know. I should get over that.
Michael Eisenberg:
You’re better in person?
[01:04:19] Sender Cohen:
I'm better in person.
Michael Eisenberg:
People should wanna meet you, not just read you?
[01:04:29] Sender Cohen:
Yeah, there you go. I don't know.
Michael Eisenberg:
Talia doesn't want you–Talia's his wife. You don't want her to be like, “Why aren’t you on social media?”
[01:04:29] Sender Cohen:
Nah, I just, when stuff's out on the internet, it's always out on the internet.
[01:04:32] Michael Eisenberg:
That is true. Is there like a strongly held opinion that you've had in the past that's changed over the last year?
Sender Cohen:
Yeah. My opinions of many people have changed, just seeing how different people have reacted to what has happened here. People, you know, I know a lot of us in the States have seen this, some people who've been, shall we say, stepping up, to use another term I hate, allies, you know, let's go through all the woke terms I hate, but people who have been very–certain things were troubling me about different worlds that I inhabit in the U.S., and a dear friend of mine in December of last year said, “Sender, let's go out for lunch. I want you to just like spew, you know, what's made you unhappy about hearing about different people's reactions.” And I did, and he was a great friend about it.
He's been a great friend about it all along. But I've been sorely disappointed how some people have reacted to what happened here. And I've at the same time been, incredibly….impressed? Impressed is the wrong word, because that's not a, but incredibly appreciative of the way others have reacted to events that have affected this country, your country, but also the Jewish people as a whole, so.
Michael Eisenberg:
I find it interesting, by the way, we talked about the Gulf before, and you've been to Saudi.
Sender Cohen:
At least a few times.
Michael Eisenberg:
At least a few times since October 7th, and it sounds like you're not disappointed with anyone there.
Sender Cohen:
No.
Michael Eisenberg:
Which is, I think, interesting for people to hear. I haven't been disappointed by the Emiratis. And I think the world is realigning in a pretty meaningful way right now. It’s kind of the Wookiees over here….
[01:06:07] Sender Cohen:
It is definitely realigning. And I came back from my trip, I'll be careful about what I say here, but we met with some pretty important people when we were there, because of who I was with, not because of me–I was like the, you know, the ugly duckling in the back of the line–but there was one meeting with somebody pretty important, where someone referred to the tragedy of October 7th. And I said to the person who brought me to this meeting after the meeting, that at Harvard, you hear about the jubilation of October 7th, but I come to Saudi Arabia and I hear the comment, the tragedy of October 7th.
They understand. They are rightly critical of a lot of stuff going here, but I think we're all rightly critical of a lot of stuff that's going on here. On the WhatsApp planning group I had for the trip with my assistant–I call it the Aseret Yimei Tshuva trip, cause I went during Aseret Yimei Tshuva–
Michael Eisenberg:
The 10 Days of Repentance.
Sender Cohen:
Yeah. Sorry, the 10 Days of Repentance. But the trip was a pick-me-up. I went to Saudi Arabia for a pick-me-up. Like it felt really good as a proudly Zionist American Jew to be in Saudi Arabia, to see the moral courage of people there, to see the entrepreneurship of people there, to see the respect they have for people here as people.
I'm not talking government policy here or anything like that, but just, it really felt good. I came home very happy from the trip.
[01:07:42] Michael Eisenberg:
They want me to finish up, but I have to ask you a few more questions. You mentioned Harvard. You've got a kid on an Ivy League campus.
[01:07:49] Sender Cohen:
I do.
[01:07:51] Michael Eisenberg:
At Brown University. How do you think about that?
[01:07:55] Sender Cohen:
Two things. The president there has been exceptional. That kid is here now, and he's very happy to be here. He's, I think, visiting a friend right now.
Michael Eisenberg:
And a good kid.
Sender Cohen:
Really great, great kid, that I'm very proud of. That campus has been very good. The president there has been phenomenal. I'd say there are two Ivy League campuses where the presidents have been great, Dartmouth and Brown. The rest, you know.
[01:08:19] Michael Eisenberg:
Some were fired.
[01:08:22] Sender Cohen:
Yeah. The rest should be fired. But Brown and Dartmouth have been great. But it's been a good experience for him, and, you know, last year he was here. He was at Malei Gilboa.
[01:08:34] Michael Eisenberg:
Which is like a hilltop near the Jordan Valley.
Sender Cohen:
When everyone talks about the periphery in Israel, I say periphery, like, nothing's periphery. Then the first time I went to visit Roni in Malei Gilboa, I was like, “Wow, this really is the periphery.” It's such a pain to get to.
I went up to take him for dinner in September of last year because I’m here so much, and it took like three hours to get there.
[01:08:55] Michael Eisenberg:
It’s good. That way when they're isolated there, they can just study and they do what they're supposed to be, rather than coming to Tel Aviv.
Sender Cohen:
Yeah. But, no, it's been a good experience for him also to see some of the attitudes out there. But on the whole, it's been a relatively sane campus.
Michael Eisenberg:
You mentioned before about the top-down approach of China and Abu Dhabi as being effective.
We talked about Lina Khan. We talked about that the Israeli government needs to get its act together on regulation. One of the things that struck me is, the Trump administration that's coming together right now has put people we both know into real positions of power, out of the business community, the tech community.
Sender Cohen:
Really great people.
[01:09:39] Michael Eisenberg:
Really great people. But this is a new model. I don't recall in my 53 years around, and 35 or so years following politics, a collection of this many successful business and technology people taking roles in government. You know, the flip side of it may be, they may get there and just be totally lost in the bureaucracy and not know how to, you know, be a plumber, an engineer of these bureaucracies, but I wonder what you think about this.
Sender Cohen:
No, it's great to see. I don't know what my politics are anymore, to be honest. I'm so confused. I think a lot of people are confused, given events in America, Israel, and the world.
But focusing on individuals, these are phenomenal, phenomenal people that you and I are friends with that are going there, and I wish them great success. It's great for America. It's great for Israel, but I think some of them will figure it out.
I hope they'll figure it out. If any people can figure it out, I think it's the people that you are referring to, ‘cause they are just so talented and they've been talented at doing many different things, which is, I think, what you need. But it's really encouraging to see them.
[01:09:57] Michael Eisenberg:
You’ve got Frank Bisignano of Pfizer running social security, Scott Besant now gonna run treasury–
[01:10:15] Sender Cohen:
Yeah. Great, great people. Scott's phenomenal. Having Scott there is just a great thing for the United States.
Michael Eisenberg:
Yeah. It's super encouraging.
Sender Cohen:
He was an incredible candidate. I'm very happy he got it, and he will be a phenomenal Secretary of the Treasury. I'm very happy for him.
Michael Eisenberg:
Alright, and the last thing I have to ask you, even though they told me I should ask it first, but I decided not to.
[01:10:23] Sender Cohen:
I've dodged a few questions, so let's–
[01:10:24] Michael Eisenberg:
Were you nervous sitting in this seat?
[01:10:26] Sender Cohen:
Well, I don't see a hundred people. You know, when my kids have their bar and bat mitzvahs, well, let's go back to like when they're born. The deal I had with my wife is, you speak at the Simchat Bat or the Brit Milah, and then you do the final choice of names so I don't have to speak in front of the room.
[01:10:42] Michael Eisenberg:
You know who told me I had to ask you that? He said you’re a great guy but said you’re probably going to feel nervous. Tom Nides.
[01:10:47] Sender Cohen:
Tom Nides. That's funny. Yeah. He made me speak at some embassy convening here, which is why my wife says I only speak publicly in the Middle East, never in New York.
[01:10:58] Michael Eisenberg:
Sender, thank you very much. Thank you for two things. First, doing your first podcast and two, leaving out the embarrassing stories about me.
[01:11:06] Sender Cohen:
We'll do those next, in the outtakes. Thanks very much.
[01:11:10] Michael Eisenberg:
If you enjoyed this podcast, please rate us five stars on Spotify, Apple Podcasts, Stitcher, wherever you listen to podcasts, and please share the episode. There are just incredible insights from Sender here. Because this is his first episode, we need to make it the most popular episode of Invested ever. Thanks.
Katherine Boyle (00:00):
My career took off when I became a mother. I wasn’t living as fully as I could when I was just living for myself.
I think your family history matters. Your religion matters, your culture matters, the story that you come from matters.
The purchase of Twitter is one of the most important political, but also one of the most important technology acts probably in the history, not only of the 21st century but in the history of the internet.
The minute where you strip yourself of all meaning, you just get filled with these platitudes. I do think that is why you saw sort of this progressive religion take off and wokeism, where people had no meaning anymore so they just adopted whatever the current thing was.
Land a man on the moon or take a man to Mars–you create a family, you’ve done something that has a legacy that is the ultimate thing to build.
If what you are looking for as an investor is truth and where the world is headed, I feel like I’ve had a better barometer in Florida than I did in Silicon Valley.
Our limited partners–like no one wants to think that this is how you’re making decisions about investments, right? It sounds, like, a little bit woo-woo, right?
Michael Eisenberg (00:54)
Welcome back to another episode of Invested. I’m here with Katherine Boyle. The truth is I have been waiting to do this for a very, very long time. I think you'll find out that despite our different genders and despite our different religions, we share a ton in common, and it's going to make this a super interesting conversation. Welcome Katherine.
Katherine Boyle (01:13)
It's so great to be here. Thanks so much for having me, Michael.
Michael Eisenberg (01:15)
Katherine, rather than me describing who you are, you want to give us your brief background?
Katherine Boyle (01:20)
Yeah! So I love that you start with the sort of self-description. And I know we're going to get into this, but everyone always starts with where they worked or what they do for a living. I'm an investor at Andreessen Horowitz, but I always like to start with the family. And I know family is something that matters deeply to you, too. So I always say my story actually starts with my father's story.
I always get the question of, “Well, how did you learn how to invest?” I changed careers much later in life and became an investor. And I always say it started because my father was a Jesuit priest, or in the Jesuits for 10 years. And right before he was ordained, he decided to leave the Jesuits–for a very, very long story, this was in the late 40s, early 50s, because he wanted to become a physician. And at the time, Jesuits could become physicians. And I always say, my story actually begins there.
Because if my father hadn't had the courage to leave after 10 years and change his entire life, I would not be sitting here. So I'm very grateful to my father for deciding that he was going to go a different path in his mid-30s. And it is the reason I am here today.
Michael Eisenberg (02:24)
That's an amazing story. And today you are a partner at Andreessen Horowitz, and part of the American Dynamism practice there. Do you want to tell us how that got started quickly?
Katherine Boyle (02:30)
Absolutely, yes. The origin for that is, I had spent 10 years in Washington before moving out to Silicon Valley. And I always say I had lived around the world. And the worst culture shock I ever felt was moving to Silicon Valley from Washington. Because while Washington–innovation is aerospace, defense, national security, the things that touch all American citizens–in Silicon Valley when I moved in 2014, those were sort of categories no one was investing in. It was all social apps. It was all the digital world. There was no sort of commonality between Washington and what Silicon Valley was doing at the time.
And so, I kind of came out with this sort of Washington sensibility of, are these categories that tech can invest in? Like, can we bring software into the Department of Defense? Can we invest in new ways in production aerospace? And starting investing in those categories in 2021, I joined Andreessen Horowitz with the view that we are going to be much more focused on these categories coming into the 2020s.
COVID hit, it was still the height of COVID. People were really focused on the fact that we didn't have enough PPE. There was a homeschooling movement happening in the U.S. because schools were closed. And so there was sort of this view that the companies that are focused on the national interests were going to be much more important. And of course, we announced the practice in January, 2022. Three weeks later, Russia invaded Ukraine, and I think the world completely changed in terms of how founders, particularly in Silicon Valley, view their role of building technology.
So the impetus for the American Dynamism practice is really recognizing that we need to start building in the physical world. We need to be working with governments and allied governments. And we really need to focus on these categories of innovation that touch all American citizens and our allies.
Michael Eisenberg (4:20):
Three hours ago, boom, a video of Mark Zuckerberg appears, like it was teed up for this podcast–in which number one, Zuck seemed to admit that the U.S. government was interfering and censoring content on Meta, Facebook, Instagram, et cetera. Kind of point one.
Point two, he said, “Well, censorship is bad. And so I'm going to the Elon Musk model of Twitter, of Community Notes.” And it was like a jaw drop moment. I'm a fan of the Community Notes model. I wrote about that about a year ago. But to hear Zuck say it was like, stunning. And the third thing he said, which I thought was super interesting, was that foreign countries, particularly Europe and China, get this all wrong, and their content moderation teams are a mess. And actually the fourth thing he said, another one was, “We got to get the hell out of California and move our content moderation teams to Texas.” And I want to dig into each one of these, but I just first want to get your thoughts and reaction to this.
Katherine Boyle (05:29):
So I think it's extraordinary. And I think the extraordinary one actually comes at the very end, where he does say, “We are going to push back on foreign governments. We're going to push back on governments that say that they want to censor us.” You know, Facebook has sort of been in the center of that, not only in the U.S., but around the world in terms of harmful content and sort of trying to appease many different regimes to operate.
And I think the sort of broad takeaway is, elections have consequences. I think if people ever doubted that their vote matters–this is why your vote matters. Your vote matters because if the election had gone the other way, I don't know that Mark Zuckerberg would have come out and made that statement. I don't know that he would have heard that.
Michael Eisenberg:
You think he wouldn't have.
Katherine Boyle:
Yeah, I think it would have said something about the sentiment of the country. It also would have said something about the sort of political actors. And he actually names in that statement, he says, it has been very difficult to work with the Biden administration on these things, because they have a more pro-censorious view. So I think in some ways, Americans should look at that and say, “Okay, my vote does matter.” But I also think that it shows the impact of, again, the purchase of Twitter is one of the most important political, but also one of the most important technology acts probably in the history of not only the 21st century, but in the history of the internet. It completely broke the cycle of censorship.
And had Elon not done that, I think the world would be a very different place. Again, where I keep on saying I feel like if we were having this conversation two years ago talking about moving to Florida and escaping would have been much more of the moment, because we did have this sort of massive pendulum swing back of people saying they're sick of it.
And I think that is what Mark Zuckerberg is responding to. I think it is courageous of him. Courage is contagious. But I also think it just would not have happened had Elon not done the same thing. And that to me says we need to speak out more. We need to be louder. We need to be talking more about these things. We need to be less afraid, and kind of speaking in euphemisms about why freedom of speech is so important.
Michael Eisenberg:
So I need to ask you, you said it was courageous of him, but in the same sentence you said, I don't think he would have done it had the administration not changed and he didn't do it before today. Do you think he's actually courageous, or do you think he kind of sees the way the winds are blowing?
Katherine Boyle:
I mean, I think it is important. I think he's reading the room. But I also think it does take a person who understands that there's going to be a lot of backlash, especially on the foreign government aspect. Like, I'm sure there's going to be business ramifications for what he says. There's going to be countries that don't agree with what he's saying. So I do think it takes a level of courage to do it. But again, it's like we are all indebted to Elon buying Twitter and recognizing the importance of opening that platform up, given what had happened in 2020.
Michael Eisenberg:
Let me pause on two things for you. I'll do them one at a time just to get your reaction. Over the last five days, Elon has exposed Keir Starmer, the Prime Minister of the UK, and put him on his heels, because of the grooming or the rape scandal in the UK. That's a woke-ish Labour government that's gone away. The AFD is ascending in Germany, by the way, and Elon is interviewing the leader of that party this Friday. Very clearly, Austria is moving in a similar direction. So perhaps the cost of Zuckerberg taking on Europe is actually lower because of the last five days, and Elon's activities than it would have been before that.
Katherine Boyle:
Yeah, no, it's definitely lower than–yeah, I mean, the world has shifted so much since the election. And really, I think there's a couple key moments where the world completely shifted, right? It's Elon buying Twitter, and then we talk about these mimetic cascades, or these preference cascades that happen in society when people follow someone because they see one person speaking out, and then they feel comfortable speaking out.
And that certainly happened. I remember where I was sitting when the president was shot in July. And that moment of Elon saying, “I'm supporting the president,” and the number of people in Silicon Valley who had not spoken publicly about their preference, or their view of the election coming out and saying, “I'm supporting President Trump,” or saying–basically, it was a free moment, that preference cascade, where people felt like they could no longer remain silent.
And I think you're just going to see more and more of that. To think that was only around six months ago. So we are sort of coming out of this, I would say, long period, very long period where people have not practiced speaking what they believe. They still tiptoe around issues because they're not sure who's friend, who's foe. They don't want to lose their job.
It's actually very recent when you look at it from a historical context of people being able to do this. So I think it matters that Mark Zuckerberg is doing it, because I think the rest of the CEOs who will look at him, maybe they look at Elon and they say, “Well, Elon can do it because he's the richest man in the world, but I can't do it.” They look at Mark doing it and now they're like, “Okay, now I can do it.”
Michael Eisenberg:
Okay, he's the sixth richest man in the world.
Katherine Boyle:
Yeah, but he's a lot more cautious, right? Like he's always been more cautious.
Michael Eisenberg:
Yeah, he is.
Katherine Boyle:
So there's something about that where I do think that the more people that can speak, can be loud, can actually say what's going on and can push back. It gives courage to the people who are sort of in the middle, who are just going about their business. And maybe it gives courage to people who are not even in tech. Maybe it gives courage to the people who work in banking or in finance or in other industries, where it's, okay, this is now a totally normal thing to say. So I think we're just seeing the beginning of sort of the unraveling of the censoriousness that we've seen for really what has been over a decade.
Michael Eisenberg (11:46)
So, you went from Washington to Silicon Valley, but you don't live in Silicon Valley anymore. You live in Florida. And you're prosecuting this practice neither from Silicon Valley nor from like south of Los Angeles with a lot of the space stuff, and new manufacturing stuff is nor from Washington. Why Florida? Maybe now you're near Mar-a-Lago, but...
Katherine Boyle:
Yes. It's a great question, although it's looking a little bit more prescient now than it was in 2021. But why Florida? I think it is such a big question. I always say the greatest political act that I have ever participated in in my life was leaving Silicon Valley and moving to Florida the minute that Mayor Suarez Tweeted out, “How can I help?” When it was the height of COVID lockdowns, you know, there was sort of this, can we build Silicon Valley somewhere else? The mayor responded. I saw that Tweet. I was already in Florida, actually. What's really interesting about that story was, I was expecting my first son. Gavin Newsom had put a very large lockdown curfew on cities across California and said, you know, like, after a certain time, you can't leave your house. And I'm like, how am I going to get to the hospital?
So it was a temporary move for us. I moved in with my mother and said, “Okay, we'll move back to San Francisco when things get normal again.” Of course, that's never happened. So we serendipitously are here, still, in Florida. But in some ways, I think there's been a lot of talk about politics in Silicon Valley. But political action matters just as much as political talk. And I think moving to a place where you are surrounded by people that have your values, where you are focused on, I'd say, the things that matter most to you and your family.
I'm much more in line with the values of Florida than I am with the values of San Francisco. And so our family decided we are going to put down roots in Florida. We're surrounded by people here who share, kind of, what we think matters most in life. And I think more and more people should do that. And the exciting thing about where technology is headed is that it is going to be, you know, I think we're at the beginning of a 20, 30-year trend where people are actually going to be able to make those moves. And you look at the migration patterns that are happening in Texas and Florida and states in the sunbelt in the U.S.
It's extraordinary the number of people who are saying, “I want to be around people who are like me, who share my values,” and they're moving to states that otherwise didn't have that migration five years ago.
Michael Eisenberg:
The topic of this podcast is how values create value. This is how we started, and how your values create an investment strategy. Could you be more specific about what those values are that you found in Florida or South Florida that you did not find in Silicon Valley?
Katherine Boyle:
Yeah, no, it's a great question. I'd say the first thing that I've noticed when I moved to Florida was how proud people are to be American, how excited people are to be in this country. So you see it in Miami. There's American flags on every Uber. People are enthusiastic. The city of Miami actually celebrates an anti-communism day, where they talk about the evils of communism.
And part of the reason for that is the migration. Like there's a massive Cuban population that understands just how detrimental and the tyranny that exists under, you know, under a communist regime in Cuba. But I also think it is sort of this Floridian spirit, which I didn't understand. I grew up in Northern Florida, and I don't think I understood this until I came back. But it really is sort of a frontier-like spirit where it's, everyone is doing these weird things. People are not necessarily, you know, just focused on their jobs.
People are building families. They want to experiment in different ways. In some ways it has sort of the, what California was in the 50s–sort of this newness, this freshness, I'm coming here for a better life. Everyone who is in Florida–Florida is a very young state in terms of the migration that's happened in the 20th century–people who are here, they're coming here because they want opportunity.
And I do feel like there is sort of this opportunity spirit that exists in Miami, but also in greater Florida, where people have moved here for different reasons. So for some people, we meet a lot of young families who moved here because they want more space. They didn't like where they were living before. They didn't like the values that were being preached to them in public schools or in many private schools in New York City, for example. And so they moved their families down here because they didn't agree with sort of the dogma that was happening in whatever community they were in before.
But you see just a ton of different reasons why people have moved here, whether it's economic opportunity, whether it's escaping communism, whether it's escaping dogmatic practices in schools, whatever it is, they're here for opportunity, because they care about their family. And that is something that has just always been sort of top of mind for me in how people live their life, at least where I am. That's why I think we love it here so much.
Michael Eisenberg:
And I think you're alluding to, when you speak about people moving their kids out of the private schools in New York, for example, the kind of progressive woke culture that's taken over a lot of those places. Is that a fair statement?
Katherine Boyle:
I do think we've seen a movement away from that woke-ism that's very public from both our companies, our political leaders, we just had an election. In some ways, we are seeing the tides turn on that. But I do think that the past four years, why I moved, why many of my neighbors moved, was this tyrannical view that you have to abide by the dogma of progressivism versus the dogmas that you might believe in because of a religious practice or because of a family tradition. So I think that is something that I think unites a lot of Floridians is just the freedom that we feel living here.
Michael Eisenberg (17:16)
You know, when I was a kid, the only people who moved down to South Florida were older Jewish couples seeking warm weather. So when I saw people leave New York to go to Florida, it was because they were 65, retired, and probably moving on to play golf and stay out of the cold in New York. And I think Miro Suarez of Miami, a mutual friend of both of ours, an incredible American, an incredible person–when he reached out, there was an initial tidal wave, but it feels like a lot of people have actually gone back to San Francisco since then. Is that an incorrect impression?
Katherine Boyle (17:49)
So I think some have. It's interesting. I think the Florida migration, at least the way I was seeing it, was more people from New York. Because New York is a day trip. Washington, DC is a day trip from South Florida. So I think there were a lot of people who moved from New York City, and they've stayed. Because you can fly up in a day if you need to. Why would you move back? I do think it is a different culture, and it is a culture shock coming from California, where, you know, San Francisco is the tech universe for the world. And so if you are investing in AI, if you are investing in companies that are being built in San Francisco, it makes sense to be in San Francisco. I certainly, you know, I think there was a lot of talk in 2021 of was Miami going to be the new tech hub? I don't think that's why Florida is an interesting experiment. I actually think Florida is an interesting political experiment. And that matters just as much for the future of this country as does having new economic zones.
I do think that Florida and Texas in particular are the political petri dishes for the country and for federalism. But if you're investing in AI, you know, you need to be in San Francisco if you're focused on companies that are in San Francisco. But for categories that are outside of AI in particular, we're investing in American Dynamism and a lot of companies that are being built in the physical world. And there isn't really a nexus of where those companies are being built. We have companies in Texas and Southern California–Southern California is becoming sort of that hub, but Washington, D.C., Atlanta, I mean, there's companies all over the country that are being built in American Dynamism, and that's also why it's super exciting that the innovation isn't just being kind of hoarded in a couple states or cities.
Michael Eisenberg:
You mentioned a couple of times in passing this notion of family, and it sounds like you didn't find what I would call family values in the Bay Area, and that kind of caused your move to Florida. What specifically troubled you in San Francisco and caused you to move here? That's kind of question one.
And question two, we're doing this on Riverside here. You've said in the past that Zoom is good for raising a family. And so I'd love to have that discussion, because like I'm in the anti-Zoom camp, but I'm in the pro-family camp. So I'd love to have the discussion.
Katherine Boyle:
Yeah. So the thing about San Francisco and, you know, I've thought about this a lot and I think it's a very deep conversation that isn't just, you know, something we can put into a soundbite. I think San Francisco has a very particular religion, and it's transhumanism. Both digital transhumanism and biological transhumanism. But it's this view that we are kind of liberated from the body, from the self. We are individuals.
And if you look at sort of all of the theory that's happening around artificial intelligence now, I actually think that it's going to be a much more prominent thesis or prominent view of what kind of people subscribe to in Silicon Valley. But I don't know that transhumanism is compatible with a lot of traditional religions, and frankly, with the family, right? Like I think the family as an institution is the most important institution as it stands in contrast to the state.
And if you are building a family, it is a political act that actually is not aligned with the state in many ways. It is the only institution that can fight against the state. And I think that tech is going to find itself in this very interesting kind of with this question of like, where do we see ourselves? Are we aligning more with the family? Or as we get more into social media in particular too, are we aligning more with the state? Because tech was aligning with the state. Big tech was very much aligning with the state for the last four years, until Silicon Valley or until Elon Musk bought Twitter, and renamed it X, and we had this sort of deluge of free thought and free speech where the big tech wasn't necessarily aligning with the state.
And I just, I think the sort of oppressive nature of what was happening in Silicon Valley where there was this kind of almost religious fervor around certain dogmas that don't align with the views of traditional religions, whether it's Judaism or whether it's Christianity. Like there was a lot of, I would say, dogma that it was like, “You believe this,” and that is very different than what I believed and espoused. And what I liked about Florida is that Florida is actually a very diverse, free place. No one is going to tell you what to believe, but you are allowed to practice your religious religion. You're allowed to be, you build the kind of family that you want, in a way that I think California was just, it was moving in a direction, particularly during COVID, where that was almost impossible to do.
They were shuttering churches across the country, but of course, Florida famously was the first state to open back up. And I think that in some ways, that was the canary in the coal mine for a lot of people, that where you live physically actually matters. And it matters, it's going to impact your family in ways that we can only imagine in the future.
Michael Eisenberg (22:50)
You mentioned transhumanism. I've remarked to many people that I find that Yuval Noah Harari and some of his books like the priest of, I wouldn't call it transhumanism until you did, but what I would call the non-corporeal elements of society. It's all a story. Your biology doesn't matter. Your family doesn't matter. It's all just kind of made up. Do you agree with that statement?
Katherine Boyle:
The statement about him or that those things don't matter? So I'll trust you on that aspect of it, yes. I think there's a lot of modern philosophers who preach that. And I very much disagree. I mean, part of the reason why we started this conversation where we did is because I think your family history matters, your religion matters, your culture matters, the story that you come from matters.
Of course, the American experiment is that none of that is going to stop you from achieving what you can. This is one of the kind of, I'd say, wonderful paradoxes about America, is your history and family and culture matters, but you can achieve anything. And that, think, is part of American dynamism and part of the American experiment. But to pretend as though where we came from or what American culture is or what our religion is or what our family history is doesn't matter–that is a very modern, dangerous thing.
And I always make fun of people who say ‘dangerous’ and ‘harms,’ but I think it's dangerous. Because the minute that you allow, the minute where you strip yourself of all meaning, you just get filled with these platitudes. And of course, I do think that is why you saw this progressive religion take off and wokeism, where people had no meaning anymore, and so they just adopted whatever the current thing was.
And they didn't understand where they came from or what they should–they didn't even understand what they should be doing with their lives. And so that was something that I think we've kind of turned the page on in a really dramatic way, which, you know, I think very few people saw coming November, 2022 with the purchase of X and sort of free speech being opened up, I think the world has shifted dramatically.
Michael Eisenberg:
Before we dig into free speech, I want to ask you two more things. One is, we're on the era of AI right now. And obviously that's kind of another distancing–it's kind of the wrong word, but maybe a separation between man and machine that's getting a little tighter or closer together. The separation is being blurred.
Given what you said about family, where we came from–obviously the computers didn't come from anywhere–where do you see, if we play this movie forward 10, 20 years, the delta between man and machine, man and robot?
Katherine Boyle:
Yeah, I mean, it seems to be happening faster than we could have ever anticipated. I spend most of my time investing in the physical world. And so the kind of view of what is autonomy and what is AI, particularly in the Department of Defense. I always say in the U.S., the first agency that used the term artificial intelligence was actually inside the DOD. It was the Joint AI Center, in 2018.
And so it's something that, like, at least in my investing life, I've been thinking about for a while in terms of how these systems interact with the physical world, and sort of the good things about that, right? Like I think if we move away from wars of mass and putting bodies in harm's way, and we put machines in harm's way, everyone would agree that that is a much better way to live than to put human lives in harm's way.
But when we think about it from the consumer aspect, as you said, where this view of what is the difference between man and machine, and how do those sort of entities come together? I think it will be very important that people understand that there is a difference between their digital and their physical life. And I really haven't thought through it deeply, until you asked this question, but I think part of the reason why I love living in a place that is not dominated by the AI conversation or by technology is that I have very clean breaks between what is my physical life and my family life, and what is the life that I live on the internet. And I've talked about this a little bit in terms of why I think this is good for mothers in particular. When you kind of have to leave the workforce or when you take maternity leave, how do you stay in conversation with all the people that you're used to talking to? How do you stay up to date on what's happening in the world while also nursing a baby to health? How do you do those things?
And what's interesting is, you have these very clean breaks between the physical world, as in the home, and the virtual world is something I can participate in with no one even really recognizing what's happening in the home. And so I do think having those sort of clean breaks of my home life is different than the virtual life–that might actually be the way that we kind of maneuver through this, what does it mean to be man and what does it mean to be machine?
That our work lives and sort of our digital lives are very much intertwined with this AI world, but that our home lives are sort of, I don't want to say protected from it, but they don't engage with it in the same way. And maybe that will be the reason why people become so much more desperate to have families, is because the family is the only sort of organic physical thing that they can build.
Michael Eisenberg (28:26)
Interesting.
Katherine Boyle:
And the virtual world is going to be flooded with all this ephemera that is very different than what they can build in their tangible life.
Michael Eisenberg (28:36)
I've talked about with our mutual friend, Rabbi Dr. Ari Lamm, that the pinnacle of human creation is actually a child. When you give life to another human being, it's the most godlike act that there is in the world. And I think that's the ultimate differentiator probably between man and machine, which you think expressed very beautifully in talking about family that way. But it leads me to the question, do you have an Alexa in the house?
Katherine Boyle (29:02):
We don't, no.
Michael Eisenberg:
You don't.
Katherine Boyle (29:06):
Maybe that's a good point. Maybe the house has already completely been bombarded with all of these AI tools. We keep sort of a, we're not like total analog, but we don't have those things in the house yet. No robots, you know?
Michael Eisenberg:
Wait, do you want the large folding robot though?
Katherine Boyle:
No. no. No, no. I've seen every version. It's so funny. In investing, I've seen so many versions of the laundry folding robot. It's like every roboticist's first task is like, “How do I get someone to fold my laundry?” Of course, it's some young man who's in college or in grad school, like, “What's the biggest problem I have in the home? I hate folding laundry.”
To me, that's probably one of the simpler problems to deal with in the family. It's very easy to do.
Michael Eisenberg:
Wait, wait, do you have a Roomba? Do you have the laundry, what’s it called, the Roomba, the one that vacuums the floor?
Katherine Boyle:
No.
Michael Eisenberg:
Not the lawnmower either?
Katherine Boyle (30:08)
No, no, no robots.
Michael Eisenberg:
And you don’t want any of them?
Katherine Boyle:
There's probably more interesting problems to fix, but I understand why everyone starts there, right? It's like, everyone hates doing the dishes. Everyone hates folding the laundry, but, you know, every time I've seen those pitches, I'm like, are consumers really going to be–is that really the thing that consumers are going to dole out money to bring a robot to their home to do? I don't know. Maybe?
Michael Eisenberg:
Alright, how old are your children?
Katherine Boyle (30:37)
Four and two.
Michael Eisenberg (30:38)
Alright, so they're a little young. Are they gonna do chores?
Katherine Boyle (30:42)
So yes, so that is a very good question. We are already trying to teach them–of course, they’re boys–trying to teach them to clean up their toys, let alone other things has been difficult. But we’ve just now introduced the piggybank. So you get a nickel–
Michael Eisenberg (30:59)
You get a Bitcoin?
Katherine Boyle:
Well no, a nickel–we are a little old school. You get a nickel if you clean up your toys or if you do something in the backyard. And that nickel is still exciting to our oldest. We'll see when he realizes what it's actually worth if he's doing chores. But right now just having the nickel is a big deal. But yes, I think chores are very, very important. And yeah, you're right. If you have eight children as you do, you probably don't need the Roomba, right?
Michael Eisenberg
Has your son seen the latest print of the CPI? I mean, that nickel's not going very far.
Katherine Boyle:
Yeah, it's definitely not going very far. He hasn't figured it out yet. We're definitely taking advantage of free labor.
Michael Eisenberg (31:41)
Yeah, just wait till get to the Tooth Fairy. I can tell you through eight kids, you know, there's been a lot of inflation with the Tooth Fairy has had to give them. They obviously don't know who it is, but….
Katherine Boyle (31:50):
Yes, yes, what they expect is going to be much higher.
Michael Eisenberg:
Yeah. So you wrote, like, I think you Tweeted this. I have the quote, “This is one very selfish reason why if you aspire to greatness, you should also build a family. If you're surrounded by family, when the mob comes for you, this thing of your enemies and critics will be far less overwhelming.” I, by the way, completely agree with this comment. But I was struck by it because it feels like you wrote this in response to something and I was wondering what that was.
Katherine Boyle (32:23):
Oh gosh, yeah, I'm trying to think if there was any sort of actual event. It's more that I think, you can live your life expecting that at some point the mob will come for you. And the mob can be, in the case of these very famous, you know, like, we just saw the comeback story of a lifetime and Donald Trump being elected president again.
If you had asked me a year ago, would he be elected? I think people looked and saw like, no, there's a likely chance he's going to jail, right? And look at where the world is today. And I think the Elon Musk story is a perfect example of this too, right? Where it's like the highs and lows of where he has been throughout his career. He constantly has critics on his back, just trying to destroy what he has built.
And I think the only way to inure yourself from sort of the story of life, which is that if you ever achieve anything great, if you ever do anything wonderful, if you ever send a rocket into space and re-land it, there are going to be people just completely picking away at you. And the only way to inoculate yourself from that constant criticism or the constant people trying to tear you down is to have a rooted family that is going to outlast you. I think my sort of critics, or my sort of little nitpicks or whatever, those are not nearly anything like the ones I just described. Having a family that you have, in some ways it's like you have total control over how you raise your children. Yes, your children are independent beings, but you can create a safety net around your kids. You can create a world around your kids.
I always say, my kids have no idea anything exists outside of fire engines, and cars, and rockets. Their entire world is what my husband and I have created for them. And it's beautiful. And there's something about contrasting that with the dangers of the world that we live in, the outside world, where I think, to me, that is the root of happiness, the root of safety, the root of beauty is in that family.
And one of the things that, looking at Elon and these sort of great men theory of history, one of the things that I've just been hearing a lot more in Silicon Valley is just how many heroes we have, and what heroism is. But being a father or a mother is the heroic act. It is the thing that, even if you don't land a man on the moon or take a man to Mars, if you create a family who've done something, that has a legacy that is beautiful, and is the ultimate thing to build, is the ultimate institution to build. And I sometimes think Silicon Valley doesn't recognize this, but the rest of the world does. And so, yeah, that's probably where it was coming from, which is just the highs and lows of a job, or the highs and lows of building a company, or the highs and lows of building an institution can take you in a lot of directions. But if you've built a family, you're at least rooted in something that's going to outlast you.
Michael Eisenberg:
So first of all, I totally agree with you. In my books, I've talked about this, this is like the most selfless act that can be, right? Which is, you have kids, you have a family, you give all your time, you actually learn to tolerate people because all your kids are different over time. And by the way, eventually they go out of the cocoon that we all try to create for them and develop independence. But I think the interesting thing is, you're a religious person. I think that's not a secret to anybody. I am as well. But if you look at the world, the family has come apart, and childbirth has come apart. I know Elon's been all over this. I've written about this extensively. Certainly 10, 20 years ago, almost none of the European leaders had any children. Angela Merkel had no children.
Macron has no children. At the time, the Prime Minister of the UK and blanking on her name now–Liz Tross–had no children. Many world leaders had no children. And demographics are falling off a cliff. We have a natalism problem in the world. I think clearly, the Hebrew Bible, and the New and the Old Testament are all pro-natal and obviously pro-family. The family is at the core of it. It's actually not the state, and not the politics. The king in the Hebrew Bible has his wings clipped, to start. It's the family that's the center of it.
But as secularism and certainly wokeism has ascended, I think the family has taken a back seat. And so why do you think that your kids, my kids, our grandkids will have an optimistic future, given that a large part of the world has kind of abandoned the family or decided not to invest it and have children?
Katherine Boyle:
Yeah, no, I think we have to–this is probably the biggest critical issue that we have to fix, is family formation, but also, as you said, like the natalism problem is the biggest problem. The fact that people are not having children. And part of the reason for that that I don't think I recognized until I had children, is because having children is a civilizing force on society.
Michael Eisenberg:
Agreed.
Katherine Boyle:
And I always point out the fact that when we take our kids out into the world, when we go to the mall or we go to a restaurant or whatever, there's something about everyone wanting to protect, that should exist like this. Where everyone wants to protect, or people watch their language–there's little things that people do that are far more civilized if there are children around.
But less and less children means that fewer people know how to do those things. Fewer people have empathy for what it means to have children. One of the reasons we love, as you said, South Florida is filled with old people. It's filled with grandparents. And so they are very kind. They understand what children act like in a restaurant. Or they understand that you're trying to teach your children, and they're sort of just a kind–there’s just an understanding that we are doing something for civilization by having children. But in cities or in places where there aren't very many children, people really don't like having children around. Or they don't understand that sometimes it takes a little bit longer to do something because there's a child that's engaging in that activity. And so as there are fewer and fewer children in society, I would say society becomes much colder.
Katherine Boyle:
And that sort of coldness of society is manifesting itself in ways that I think are very much linked to this family issue. We talk about the loneliness issue, and how lonely young men are or how lonely people are that they don't even leave their houses, like that this is actually a public health crisis in America, that there is so much loneliness and that it's killing people–that is because there are not enough children. And that is because people have decided not to have families. And that is because the family has been destroyed as sort of the institution that would take care of that person who doesn't have a family, or take care of the weakest link in their family.
And so to me, this is the biggest crisis, is that the family as an institution exists to do what the state cannot. It exists to give unconditional love, empathy, to take care of the weakest link in the flock. That is not something the state was ever set up to do. And as the family is destroyed or as it becomes far, far weaker, that's why you have these public health crises that didn't exist in the 50s or the 60s, or didn't exist in such a strong form, because they were dealt with and handled by the family, by the mother, by the father, by the people who cared the most about the people who were experiencing them. And so if we don't figure out a way to protect, not only just child rearing, to have more children for a variety of economic reasons, but if we don't figure out a way to have stronger families to take care of those people, it's just going to be a crisis, a crisis for the West.
Michael Eisenberg:
I think you'll find this somewhere between humorous and sad, but because I was an investor in WeWork, I get pitched a lot of community ideas. And there was something that came through about four or five months ago from Texas, actually. And he was in Israel.
He said, you know, male loneliness is a real problem in Texas and in other places. I imagine it's less in Texas than in many places, but whatever. And he said, “And I want to create an online app for men only, and then, you know, men's clubs for this.” And I said, “I got a better idea. Why don't they go to church and synagogue? And, you know, it's coed. It'll solve a lot of loneliness problems.”
I saw somewhere you said, I think maybe Sal Churi, another mutual friend of ours, suggested I ask you this, which is somewhere I think I saw you say, “It's good to be bored in church.” Tell me about being bored in church.
Katherine Boyle:
Yeah, yes. This is very interesting because I actually think this is a more common theme. I actually think Jews and Catholics have this in common, where the practice of going to church is actually just as important as the belief. And when I said before, the most important political act that I've had is actually moving to Florida. It's not something I believe, but it's something that I have done. I actually think for Catholics, the practice of going to church matters.
And so even if you're not paying attention, or you're bored, or you don't necessarily feel like going that day, the fact that you are going to church and that you are engaging in a practice is actually part of the meditation, is part of the prayer. And one of the things that I think I hear a lot of young parents say is, “My children are way too young to go to church. I don't get anything out of church if I take them to church, all I'm doing, and it is embarrassing to watch this in the back of church. We sit in the very back of church with two boys who can sit, they can sit still for 90 seconds, and we feed them constantly, we're giving them lollipops, we're doing all these things to just keep them quiet. I have a purse full of little matchbox cars, and they get a different car every two minutes.” I mean, it is, it is hilarious, but then also, like, every week people are like, “That family's here,” right?
But we're one of the only young families in this church. There's probably three or four families that come at the same mass that we do. And it's like, even though I don't get to pay attention the way that I would love to, or I'm not sitting there in solemn prayer, or really getting the spiritual experience, the fact that I am bringing my children to church, and that every week they are going to learn something new–maybe it's that my four-year-old will actually kneel down for 10 seconds this time, right? But they are actually learning and engaging in something, knowing that we are a family that goes to church is like, it is important.
And it is the practice of that that matters. And there's a huge debate among, I would say even among Catholics, definitely in Protestant churches, about whether you should force your children to sit through something boring. And I think the boredom is part of it.
It's like, sometimes we do things that are boring. Sometimes you have to be quiet if you're in a place of worship. Like learning that as early as possible is actually a very good thing for their development.
Michael Eisenberg:
And to that I'll say amen.
Katherine Boyle:
Yeah, I do agree with that, but I do think it is a heated debate among young families, whether they should engage in that.
Michael Eisenberg:
Listen, my poor father used to take us to synagogue on Saturdays, and walking down past the statue of Teddy Roosevelt outside the Museum of Natural History in New York, and that statue is no longer there, unfortunately. I hope they return it soon. My poor dad has to watch us run up the stairs in front of the Museum of Natural History. All he wanted to do was get to synagogue, but he had to kind of be patient with us till we got there. And then we sat patiently for two and a half hours and even had to listen to the rabbi.
Katherine Boyle:
Which is incredible, two and a half hours. 90 seconds is sort of our...
Michael Eisenberg:
But you don't bring devices for entertainment. It's only lollipops, not devices, right?
Katherine Boyle:
No, no, no. And that I actually think, there are so few places in the modern, I would say, yeah, modern physical world where if your children are acting up, you're not going to bring out a device. And this is like, a lot of people who don't have kids say, “I would never introduce screens to my child.”
It's like, well, just wait until you're at an airport. And you have the world looking at you like, why can't you get this kid not to scream? You're going to bring out the Cocomelon. You're just going to do it, because no one can withstand that kind of pressure. But inside of a house of worship, you're not going to bring it out. Your children are going to have to learn to pay attention. And it's the same reason, at a similar Tweet stream, I talked about why I think piano lessons are so important.
And I do think pianos are going the same way as learning a language, right? Like, we're not going to need to know language, to your point, because AI is going to be everywhere. And you're not going to need to learn any language, because you can just translate it through your phone. And so we're not going to have, in 20, 30 years, we're not going to have the same sort of study of multiple languages that we have today. But it is important to learn those things, because focusing, and paying attention, and not having devices around and learning to memorize, learning to look at notes–these things are really good for our brains.
And I think you're going to tell a huge difference between the kids who had those sort of practices from an early age, and the ones who've been completely, I would say, forced to only interact with screens. And that there's going to be a kind of a difference in how these children are raised.
Michael Eisenberg (46:05)
Just yesterday I downloaded Duolingo to start teaching myself Arabic.
Katherine Boyle:
Oh wow. That is impressive.
Michael Eisenberg (46:14)
Well, I'll let you know afterwards whether you should be impressed or not. Let me ask another Machiavellian question. So I think it's this Friday, the Supreme Court is about to decide on the TikTok ban that's due, I think on the 19th, which is the day before the inauguration. President Trump has said, “Perhaps reconsider this and give me a chance for a political solution.” Maybe the other reason that Zuck came out so hard against the China thing right now is he actually wants TikTok out of the market. He says, “Hey, I'm going to open up, be like Elon. You know, we keep that TikTok thing out, leaves my social media game here.” It's like, you know– I'd argue it's 4D chess, but Mark is a very smart guy.
Katherine Boyle: (46:44.258)
Yeah, no, no, he very well could be. I certainly think he's always, as you said, he's looking around the bend for opportunity. But I also think that it is a clear sign that for normal people–I like to bucket myself inside the “normal” camp, right? I'm not Mark Zuckerberg. It just means that I can be louder.
Michael Eisenberg (47:04.865)
You've been loud already, come on.
Katherine Boyle: (47:12.962)
Well, I could actually, I could be even louder that I have been. And I think that's exciting. It's just gonna inspire more people to actually speak what they believe, and to not back down if they're told, “Hey, you can't say that,” or it's going to have widespread ramifications, and I don't think it's going away. I don't think it's just that.
Michael Eisenberg (47:29.604)
Are you in the ban TikTok camp, or the let TikTok keep operating camp?
Katherine Boyle (47:35.214)
I think TikTok is a weapon of the communist regime. I think 100 percent it should be banned. It should be, if it is removed from the CCP, I think the president very much likes to find really unique diplomatic solutions. He likes to make deals, right? But I think there is no denying that it is a weapon of the CCP. It has been a very powerful weapon.
If you take any other form of technology, if you said, like, should Russia be allowed to own television stations inside of the US during the Cold War? People would say, “Absolutely not.” Like that's absurd. Why would we allow a propaganda machine into our country to poison the minds of our young people, to poison the minds of our countrymen? To me, it is very clear what it exists as. And so there has to be a solution, whether that solution is an outright ban or whether it's changing ownership to a U.S. entity. I care less about the specifics of it, but I think it is obvious that it is owned and operated as a weapon of the CCP.
Michael Eisenberg (48:44.148)
So I want to ask a question that's kind of related to that, which is, I think it's reasonable to say, and I'm with you by the way, I think it's the giant PSYOP operation. And that has, by the way, helped advance the woke undermining of patriotism in the United States. And obviously shine China's positive light on China. I was fortunate to speak, actually, by the way, right near where you are in Palm Beach, and in West Palm Beach, for the Manhattan Institute. And I followed Vivek Ramaswani right after he had published his book, Woke, Inc.
And reading his book and thinking has caused me to ask the following question of myself. So, we're all concerned about DEI and wokeism penetrating corporate America, and corporations in general. What's to prevent the other side of that, so to speak, which is, if you're doing American dynamism, obviously you're putting your values first. And the U.S. government, so to speak, has a seat at the table–not in a shareholder way, but kind of, hey, you sell to the government, they set a lot of the rules. You're a person of belief, like myself. What's to stop the same thing happening, I don't want to say on the other side, but from a different angle? Where these kind of corrosive values perhaps, maybe it's government domineering behavior, maybe it’s government values, or maybe it's just religious values that end up influencing the corporation too much?
Katherine Boyle (50:23.022)
Repeat the question?
Michael Eisenberg (50:29.652)
Call it the inverse of Woke inc. Yeah, yeah. The shoe’s on the other foot, so to speak, right? Which is, Woke inc. was a big problem, and Vivek correctly outlined that. But, you know, I assume I have values, and you have values, and the government has values. Maybe American dynamism is a value that other people find offensive in some way, or undermining. How would you respond to that?
Katherine Boyle (50:52.056)
Well, I don't think you have to work for a company where you don't share the values of that company. I've left organizations, and companies where I didn't share their values, or where I felt that my values would be better served in a different entity. And I think that's something where, I think the myth that we've been fed for way too long is that your religious, your purpose, all of those things in life are separate from work. And I actually think this is a little bit different than what a lot of my friends in Silicon Valley think, where it's like, the way we combat wokeism is to leave our values at the door, and to come in and to just work on the mission at hand.
Michael Eisenberg (51:30.846)
That's like Brian Armstrong of Coinbase, right? Yeah.
Katherine Boyle (51:44.878)
I think there's some good in that. Yeah. And I think the Coinbase memo was very much right in its time. It is very important, I think, for a lot of companies, that is the right way to run a company, which is, leave all of your stuff at the door, come in and just do the work.
But I also think for people who feel very deeply about their values, and their responsibility to society, like for people who work on American dynamism, you can't really leave yourself at the door. You want to work for a company that actually espouses the beliefs that you have, that you feel proud going into work every day. And I think for people who have strong values in that way, they need to find a place where the mission that they are working on in their life, their calling in their life, matches the things that they believe.
Not everyone has that. I think there's a lot of people who are just like, the thing that matters most to them is their hobbies, or their family, or whatever it is. And they don't really necessarily want to take it to work. And that's fine too. So we need all of it. But I don't think that I could just go to work and leave myself at the door, not talk about who I am, what I believe, and then just go invest in startups. That's not who I am.
It might be who other people are, but it's not who I am. And so I think we need both. And the most important thing for me was, throughout my career has been finding institutions and organizations that match my beliefs that I can believe in 100 percent. Because investing in particular, we haven't really gotten to this, is about belief. It is belief. It is the manifestation of belief, which is very different than reason.
Michael Eisenberg (53:02.548)
We're getting there soon.
Katherine Boyle (53:12.832)
It is belief in things that don't exist yet. And if you don't allow yourself to be moved by that belief, you can't really do the job. So I try to match the things that I invest in with the things that I truly believe, because I don't think I could do the job otherwise.
Michael Eisenberg (53:31.656)
And what is your core value, your core belief?
Katherine Boyle (53:35.351)
I mean, the things that I'd say, if I had to write out the things that drive me every day, it is AMDG, like for the greater glory of God, and then American Dynamism, which is like God and country. I joked, like before American dynamism existed, someone asked me, like, “Well, what do you invest in?” And I had just made an investment in a company called Hallow, which is a prayer app, that, when I first invested in that company, I think people thought it was kind of hysterical. Like a Catholic prayer app? Like that's going to be a Silicon Valley backed company?
But I sort of joked after that, I was like, gosh, well, I've invested in Anduril, and I've invested in Hallow. Like maybe my actual investment thesis is God in country, which has not been a terrible investment thesis or thesis for life, for millennia. You know, like a lot of people live their life by that.
But for some reason, Silicon Valley–God and country didn't really resonate as an investment thesis. But I do think American dynamism is sort of the manifestation of that. It's what matters most to American citizens or American citizens. It’s companies that support the national interests and the interests of our allies. is the things that people care the most about, the American dream and investing in categories where, you know, if we can bring the cost down of the American dream, if we can invest in things that truly support defense, that support the things that government cares about as well, people are going to be able to pursue that dynamism however they view it.
Michael Eisenberg (55:04.394)
I've seen you say before that belief trumps data in the past. So the first part I want to ask you about that, is, what about the Anduril founders in particular caused you to believe in them? Because there was a big leap of faith in Anduril. And then the second thing I want to ask you is, some people would argue that when you have this belief system–and by the way, I'm kind of the same way. I don't know anything about technology, candidly, but I believe in people with unique ideas and big aspirations, call them God and country also–when does that kind of turn into deluding ourselves that something is real or possible when it isn't?
Katherine Boyle (55:48.386)
Yeah. Well, I think there's a lot of delusion in investing. You become very humbled very quickly in investing, too, which I also think is part of the wonderful things we get to experience in our job. But to go back to the belief versus data, I'm coming up on 10 years of investing, which it's flown by, but it also feels like, wow, it's like the world has changed a lot in 10 years. And maybe five years ago, I was on a podcast, and I sort of borrowed from the ancients and said that investing is a combination of reason versus revelation.
Michael Eisenberg (56:24.606)
I love that.
Katherine Boyle (56:43.926)
And I said, it's sort of this unique combination. And when you use reason and when you use revelation are very different things, but they need to come together. And I think maybe four or five years ago when I said that, I probably felt like I used reason and revelation equally. And when I look back now 10 years later, I think revelation is so much more important than reason when it comes to early stage investing.
And what I mean by that is, if you sit down and you're like, “I'm going to do diligence,” and to go to your question on Anduril–”I'm going to do diligence. And I'm going to sit down. I'm going to make my little diligence box. And I'm going to call all these people who know the founders of Anduril. I'm going to call everyone at Facebook who knows Palmer Lucky. And I'm going to do all these comps based on Raytheon and Lockheed Martin. I'm going to do the standard Harvard Business School diligence packet.” You will never invest in Anduril.
Like, you would never invest in that company at the earliest of stages. Like, an X on everyone, right? Like, Palmer will talk about it publicly. He had just been fired from Facebook. You know, the worst market you could have ever invested in is defense, in 2017. Donald Trump had just come in as president. No one wanted to touch anything related to defense and national security because of what was happening at the border. You know, it was the worst possible investment, based on that HBS standard diligence reason packet.
But in terms of the revelation packet, which again, there's the reason box, if you think it's just like a little box. But everything outside of that box is revelation. It's what the universe, or God–I mean, if you're not a religious person, you'd say the universe. I'm a religious person–it's what God is trying to tell you. It is all these little signs that you are getting about where the world is headed.
In the context of the Anduril investment, it was like someone on the outside was just pounding me on the head with like, wake up. The world is changing. We need a new defense prime. We need people who are serious about their motivations in the world. And this is the team that's going to do it.
Michael Eisenberg (58:28.586)
The Messiah is like a guy in a Hawaiian shirt and shorts, right?
Katherine Boyle (58:32.962)
But it was obvious. It was so obvious. It's like, you have some of the best technologists in the world going after one of the most important problems. No one believes they can do it.
Michael Eisenberg (58:42.762)
It wasn't obvious. I don't believe that. It was not obvious.
Katherine Boyle (58:32.962)
But it was from a revelation perspective. I had complete certainty.
Michael Eisenberg (58:50.826)
What were some of the signs though? Like tell us, is it a gut? Is it revelation? Or there are some signs you go, “Okay, now I understand that's what it was.” Even if you didn't fully understand it.
Katherine Boyle (59:00.014)
But I think that is revelation.
Michael Eisenberg
I like that.
Katherine Boyle:
Maybe I'll use, as we learn more about what intelligence is, it’s like, an LLM takes in so much information. And you don't really know what's relevant until you get the prompt. And that's kind how our minds are too, right? We take in so much data every day. Another reason why we'll get to the sort of, do you work in person or work from home? I work from home for most of the time.
But I'm constantly taking in data, whether it's talking to people. I'm constantly taking in all of this data, and I control the inflow of data into my brain. But it's like, when the prompt is, should I invest in this company, it doesn't make sense to narrow it to the point where I'm just looking at this sort of HBS diligence reason packet. It's like, what are all of these things that exist outside of the prompt that are influencing how I make decisions?
Now, our limited partners, no one wants to think that's how you're making decisions about investments, right? Like, it sounds a little bit woo-woo, right? But it's actually like your sort of model for how the world works. You'll have these sort of moments where you're talking to someone and, you know, it's like every great investment that I have made, it hasn't come from sitting down and doing a spreadsheet in the Stanford Business School or HBS sort of way of doing things, it's come from someone says something that just triggers something where you can't stop thinking about it.
And then it's like, you see another thing where you're like, “Wow, that is an incredible piece of data or information,” and it leads you to conviction. But that's not reason. You can reason it out sort of retroactively. That's something that's being revealed to you, because you are open and listening to whatever the universe, or God, or the people around you are trying to tell you. And I think if you think of any movements that have happened recently, the people who were mocking Elon in November of 2022 for buying Twitter, he saw something, and had conviction in what was going to happen only a few years later that now has become obvious to everyone. But something had been revealed to him that gave him conviction that this needed to happen. And I do think that that is like, just being open to the data that is around you. I actually think it's never been easier to be open to the data that's around you, because the algorithms on our phone actually help us. As long as we tune them correctly, as long as we are following the right people and listening to the right conversations and really understanding where the world is headed, you can be a lot more thoughtful about where the world is going.
Michael Eisenberg (01:01:38.644)
What was it about Hallow?
Katherine Boyle (01:01:41.464)
So Hallow is an amazing story, actually. So I sort of begrudgingly agreed to go to Stanford Business School and judge a pitch competition. Sometimes you go to these things where you're like, “I'm just going to do this because someone asked me to do it.” I wasn't expecting to see a company that could actually be a generational company at a business school that day. But I think it was 2018 or maybe 2019. And I was judging this pitch competition of business school students. And everything was like, whatever the hot thing was happening that day, was like crypto, or consumer economy, or influencer economy or whatever the hypey trends were. And Alex Jones, who's the founder of Hallow, he was a business school student at the time, stands up and he says, “I am building a Catholic meditation app for myself that I use every day, and it is going to change the way that people pray.” And I just sort of like the hair stood up on my head. It was just sort of like, “Whoa, like here's a person.”
And I think people laughed. I think it was one of those things where it was so out of the norm at an elite business school that someone would come up and say this, that I think there was sort of like murmurs in the crowd. Like, that's so weird, right? And I still remember the seriousness with which he said it. He looked straight at me and said it. And I just said, “Okay, I have to see what this is.” I ran up to him after the pitch competition.
And I said, “I need to learn more about this work.” I downloaded it. I used it. I said, “I need to invest in this.” The funny story is I was actually too late. He had already gone out and pitched many seed firms and everything. I think I brought him in the next day to my firm. And he pitched, but it was too late. The round was already full. And I was upset about that. But I stayed in touch with him for a year. And the funny thing is when I was going out on maternity leave, and I said, “If you decide to raise, please call me. Please call me. I cannot manage to, I don't want to lose working with you twice.” And so I think my son was three weeks old, and he said, “I hate calling you while you're on maternity leave, but we're being preempted, and I need to know whether you want to invest.” And within two days, we had invested. And so it was an extraordinary story and outcome and everything.
But he's just, what was so obvious to me about what he was doing was usually when people are building in the faith category, they are not great technologists. They are not just like–they don't have the ambition to build something of scale. And he was the first person that I met where I was like, this person is of extraordinary intellect. He's going to run it as a business, not as like a do-gooder, like creating this thing that's nice to have. He wants to create scale. And the fact that he's hired the team that he has, the fact that it's grown the way that it has is something that he could only do himself. It was just a founder-mission fit. And of course, a lot of people hadn't tried, or hadn't tried to raise venture capital to do this, because they figured, “Okay, who in Silicon Valley is going to bet on a Catholic meditation app?” And it turns out, actually, a lot of people have bet on a Catholic meditation app. A billion people subscribe to this religion. It's a massive market.
And there is sort of a reason component to why you would think that this would be a big company. But in terms of why I got so excited, I know this is a great founder. And he's just done an extraordinary job with the company.
Michael Eisenberg (01:05:04.638)
Yeah, the Catholic TAM is a lot bigger than the Jewish TAM. That's for sure.
Katherine Boyle: (01:05:07.746)
That is true, it is really true for scale.
Michael Eisenberg
So that begs the question–there you were sitting in Stanford, Alex got up, and your hair stood on end, and now you work from home behind Zoom. Like, how do you invest like that? I can't, by the way, I just hands up. I'm an old guy. I can't do this on Zoom. I need to meet the people and have my hair stand on end.
Katherine Boyle (01:05:35.062)
So I will say, I meet founders in the process of–I think you can organize your time a lot better when certain days are in person and certain days are on Zoom. So I'm not a 100 percent, you can do this job completely behind a camera. I do think you need to meet people. I do think you need to work with people in person. It's more that I actually think there's something about, it's actually not about the technology. It's more about being separated from the herd, that I actually think has been really valuable for me.
So when I lived in Silicon Valley, I used to get invited to dinners constantly. And I still do. But you get invited to dinners, you're constantly at breakfast. And you're constantly around what the hive mind is thinking. And I actually think it becomes this sort of circuitous, are we gaslighting each other? Are these real things? Are we really around what's happening in the real world? And there was something that I think has actually been very beneficial of leaving Silicon Valley and moving to a place that is so orthogonal to the tech world, which is, you know, Florida is just completely outside of that world, where I think that if what you were looking for as an investor is truth and where the world is headed, I feel like I've had a better barometer in Florida than I did in Silicon Valley.
Michael Eisenberg (01:06:54.505)
Interesting.
Katherine Boyle:
Like, and part of it is, I do think the Silicon Valley sort of ecosystem and early what's happening there is on the phone now. It is on X. You can curate it. So I feel like, in some ways, my digital life, if I were just talking to people in group chats and on X, no one knows where I am. It doesn't really matter where you are. Your location is on the internet. And I spend a lot of time on the internet. I am constantly plugged in. So I feel like I have that sort of part of my life covered.
But there's something about being in the real world outside of what that tech ecosystem is, where I feel like the balance of that, the physical world and the virtual world being so separate, actually gives me a better understanding of what's happening in the present and where the future is headed. And maybe that balance will someday get off. I think I have to protect that balance really well. But there's something about when I look at my investing career, I don't fall as quickly for trends. I don't fall as quickly for, this is going to happen. There's something about being, again, in the family, rooted in reality, rooted in where the world is today for the vast majority of people, but also having access to the future on this phone that has been the right balance for me. And it might not be the right balance for everyone. I'm sure for founders, I think it's very hard for founders to do that.
I think it's different for investors. I think it's very hard for founders to build virtually unless they have a very strict philosophy of why they're doing that. But there's something about that being those parallel paths that has helped me sort of answer questions when it comes to investing.
Michael Eisenberg (01:08:45.204)
Do you think that being both Catholic and in Florida makes you more of a contrarian?
Katherine Boyle (01:08:51.34)
Yes, but it's interesting. The contrarian thing, being contrarian for contrarian's sake has become very in vogue in a way that it wasn't 10 years ago. When I started out, that was not a good thing. And now it's like, everyone wants to be a contrarian. Everyone wants to be a difficult person. Again, we've done a 180 in terms of what profiles and how people act are celebrated in Silicon Valley.
There's something about being sort of like, living my life more authentically to who I am, which is as a Catholic, but also like I am surrounded by family. I am in a place where I feel surrounded by people who share my values. That probably allows me to flourish in a way where I wasn't necessarily flourishing in the way that I wanted to when I was living in San Francisco not doing that, or doing that in a more covert way or feeling like those values, like I couldn't live in a completely flourishing way. Maybe there's something to that where it's like if you are living as authentically as you possibly can, and you have sort of the community around you that allows you to thrive, then you're going to be more successful at your job. You're going to be more successful. I always think for a lot of people–it stuns new mothers when I say this–you're going to be more successful in your job when you're a mom.
Michael Eisenberg (01:10:11.594)
100%.
Katherine Boyle: (01:10:12.994)
Because you're going to be more confident. You're going to be surrounded by people who love you. You're going to live your life more authentically. You're going to be the best version of yourself. And people are going to recognize that. And people are going to respond to you differently. And I certainly saw that. I think my career took off when I became a mother, in a way that I wasn't living as fully as I could when I was just living for myself.
Michael Eisenberg (01:10:34.184)
I've heard about this in my books, you know, being a parent teaches you tolerance, being a parent teaches you executive function, being a parent gives you more support from your family and being married, obviously. And I'm a huge fan. I need to take this around somewhere actually, because of what you said. I was talking to Sal about this. I'm not going to ask you this question, but now I'm going to ask you this question. Sal Churi.
So when I think about what's going on in Google, which is in Silicon Valley and kind of the opposite of what I would call God in country. They protested people working on behalf of the Department of Defense, employees at Google. In my own existence, which is in Israel, investing in Israel, the whole tech ecosystem comes out of working for defense, essentially. It comes out of the military. And I wonder how you think about that over the next 10 years, whether that changes in Silicon Valley–one, does the election of Trump change that in any way, and change your approach to how you approach that?
And whether there's just two Americas, the one that kind of doesn't want to do this stuff and the one that has an American flag in the background that talks about God and country?
Katherine Boyle: (01:11:41.794)
Yeah, so I probably would have said that a few years ago. I actually think there's something that shifted where the best engineers and our top, like our best and brightest engineering minds actually do want to work on the hardest problems. Again, I don't want to say everything is because of Elon. But I think it's between SpaceX, Palantir, the companies that have been around doing this for a very long time, they are just very, very good at curating talent. Like the best.
The most talented manufacturers come out of SpaceX. Some of the most talented engineers come out of Palantir. And there's something about when I look at our portfolio of new companies that are scaling, a lot of them come from those companies. A lot of them come from SpaceX. A lot of them come from Palantir, increasingly Anduril. And what's interesting that's a new thing that we've seen, as you said, in Israel, a lot of people already work in defense. We've actually backed a ton of veterans, which I think would surprise people. We've backed a lot of founder CEOs who have served their country.
They go work at one of these companies. They understand sort of the pace of startup life, but they also understand how to speak to the customer. And they have the trust of the customer because they've served. Where I think we're going to see more of that. Where I think it's not going to be uncommon for people to serve their country, whether it's in the SEALs, whether it's in the Army, the Navy, then go work at a Palantir, Anduril, one of these scaled companies where they see what a great organization looks like, they see what great scale looks like, and then they build their own company.
We're seeing more and more of that. So I'm very excited about that, because I do think it kind of bridges, as you said, if there are two Americas, if there's the America where people go and serve in their country, and then the America where people go immediately and work in tech, I think that's kind of coming closer and closer together. I also think you mentioned the election of President Trump.
I actually think the election of JD Vance matters just as much, because that is someone who served their country as a Marine, who understands what Silicon Valley is because he worked in Silicon Valley. He worked as a venture capitalist, and he's sort of bridging those worlds in his career, where he's served his country proudly, and then he also understands how the economics of the capital of America, America's risk capital work. He understands how that works in a way that a lot of people in Washington just do not understand. And I think that will lead to more and more people in DC understanding how these worlds come together.
Michael Eisenberg (01:14:10.058)
I met JD, now Vice President-elect Vance, for the first time at Jacob Helberg's Hill and Valley Conference, where I'm like, the only Israeli there generally.
Katherine Boyle: (01:14:16.91)
Oh great. Wonderful.
Michael Eisenberg:
This is a bunch of years ago. But what do you think about this inside Google thing where people say, no, we're not going to work with the country, we don't work with the Department of Defense?
Katherine Boyle: (01:14:28.59)
Well, the height was 2017 when the Google employees stormed out because of Project Maven. And that was the impetus for Anduril, too. It was the tipping point of, the greatest companies in America aren't going to work with the DoD. We have to build them. It's funny how Google has reversed course on some of these things. Certainly in our world, Google's tried to say, “Oh, actually, no, we very much want to work with the DoD.” There has been sort of a movement away from what happened.
I mean, it's been almost eight years now. So there is sort of a, to your earlier point, like some of the CEOs that were more focused on censorship or going in line with those views, a lot of them have reversed course. And so in some ways I'm big tent about it. The more people that want to work on this, the better. And if people realize that there was an error in their ways 10 years ago and they want to come work on defense, i feel like forgiveness is probably a good thing, and let people work on it.
Michael Eisenberg (01:15:30.667)
Forgiveness is a religious trait.
Katherine Boyle: (01:15:39.246)
Yes! But I do think that, yes, absolutely, it's important. There's no forgiveness in wokeness, but there is forgiveness in most other world religions. And so I would say like that's actually a good thing, and let's let Google work on some of these projects if they now see that there's value in it, and they see the importance of it.
Michael Eisenberg (01:15:48.042)
I've often joked that religion and repentance is anti-cancel culture. One more long question before I get to a rapid fire round. So people don't know probably, but you started your career at the Washington Post and in media. I actually just published my podcast with Jessica Lessin, and now you're on the board of The Free Press, and we share that in common too. I'm not on the board, I'm, for full disclosure, one of the investors in The Free Press, and a big fan of Bari Weiss.
What's the future of media? Is it X? Is it The Free Press? Is it professional newsrooms or We the Media? I was talking to my friend, Stefan Thompson of Visegrad just this morning who said that he thinks Jessica Lessin is right. You need real newsrooms. It can't all be We the Media. Where do you come out on this?
Katherine Boyle: (01:16:38.328)
So I look at media as no different than how I would assess any other founder, or any other tech company, which is that the founders that have the strongest points of view are the ones who are going to win. And the reason I'll brag on Bari and The Free Press. I remember where I was sitting when Bari Weiss, I was actually, it was during COVID, I think it was July of 2020, when she wrote her letter resigning from the New York Times.
It was epic. I remember reading it and being like, actually, the first thing I did was I texted Chris Best at Substack. And I said, “You have to get Bari.” He's like, “I know. We have to get Bari.” But at the time, I was trying to court him for investment, I wasn't an investor. But it was one of these things where it was just like, someone with that clarity of purpose, and view, and worldview, just such clarity, those are the sorts of people in the newsrooms of tomorrow.
And very singular in that regard. She is just extraordinary to the point where, you know, it's like the fact that I even remember that moment says something about her words, her understanding of where the world is headed. And it was very clear to me even then that she was going to build an extraordinary newsroom, it wasn't just going to be a Bari Weiss, you know, newsletter or a Here Are My Thoughts, like that she actually is capable of leading an extraordinary new institution. And we are the beneficiaries that she wants to create an institution, that she wants to create something that is not just her, that is an enduring newsroom. And so in some ways, it's like the future of media is that.
A lot of people in media do not have that. Part of the reason I left media, I saw–now it's 15 years ago–there was such little understanding of where the world was headed, of how technology was impacting the business model. I mean, in some ways, it felt like ancient history now, when I was at the Washington Post, but it was the first industry that was being completely disrupted by technology. Really, all the business models were completely destroyed in the early 2000s by what Google was doing. And the people who understood it could get ahead of it, but a lot of people didn't. It was like, no, no, no. This is how the news has always been done. It's always going to be done this way.
And I think there's always a lot of talk on the business model. But the thing that people like Bari, and the thing that will actually decide what newsrooms thrive in this new environment is, do you have moral clarity? Do you understand what your newsroom actually stands for? And there's a lot of people who want to innovate on the model, but they don't talk about that. And what all great founders do is they know what their thesis is. They know that they're building for, in some cases, a limited TAM, right? They're building for a certain customer.
And then that customer can grow over time, but they have a very unique perspective of who they are writing for, who they are building for. And that's what Bari has done so well with The Free Press. It's just extraordinary to watch. I don't want to pat myself on the back too much for knowing that that was going to happen when I read the letter. But it's like, again, revelation. It's obvious. It was obvious in that moment, like here is someone who's going to build something enduring. And it's just incredible what she's been able to do.
Michael Eisenberg (01:19:49.94)
So you've talked a lot about Elon, and now we talked about Bari, and you talked about Elon buying Twitter as a seminal moment. I've wondered whether when history is written, I'm pretty certain it'll be Elon buying Twitter, but I often think about Bari as being the person who broke open the Overton window even before Elon did, certainly chronologically. What do you think, Bari or Elon?
And then she did the Twitter files, by the way, which is super interesting. Yeah.
Katherine Boyle: (01:20:08.056)
I think Bari, because she was immersed inside–what was so important about what Bari did was she was an insider. And she had an incredible job. She was in some ways, there were people who didn't like her inside the New York Times. But she also had incredible bylines. And she had incredible power. She had incredible power inside that institution.
And she said, “I cannot work at an organization that is silencing me, or that is not allowing these voices to be here. I see what is happening. I see sort of the censorialness of this organization, and I am not going to let it happen. I am leaving.” And I think in some ways, being that public about what was happening inside the institution, relinquishing your power as someone who had never founded a company, who didn't know if her audience was going to follow her, right? Like she's far more famous and successful now than she was when she was at the New York Times, and probably didn't think that would happen. So it's like to say, “I do not believe in what is happening inside this institution, and I am leaving,” again, that is like a powerful, powerful thing to do that inspires other people to do it. And so I think it is like the ultimate act of courage to say, “I am leaving, I am giving up my power because I do not agree with the direction that something is going in, even knowing that I might not be able to build something as large or as important as The New York Times.”
I agree with you. I think it was one of these seminal moments, especially for people who follow media, because it was someone inside the building who was critiquing it. It wasn't someone outside that couldn't make it in there, who wasn't successful. I mean, she'd already been covered in Vanity Fair as the new It Media person, right? It wasn't like she wasn't someone who people took seriously. She was someone who was serious, who was leaving because she didn't believe in the direction it was going in. And that was a very powerful thing for her to do.
Michael Eisenberg (01:22:05.884)
I agree completely. So Bari Weiss or Elon Musk?
Katherine Boyle: (01:22:08.974)
I think they were different things. I think for people inside of media, what Bari did, like just, it opened up the gates for people to say–and again, like, you know, this is when Substack was there saying, “Hey, we will take anyone who–” basically Substack was also that thesis too, where it was like, “Hey, like the person who is not welcome inside of an organization can write for us, and can write for their audience.”
But then I think what Elon did, as Elon opened up the institutional–he exposed censorship at the institutional level, and made it possible for everyday people to speak on that platform. And I think X has had an extraordinary impact. X is the reason why the election went the way that it did. X is the reason why we were able to have this conversation the way we're having it now. We couldn't have not had that way.
Michael Eisenberg (01:23:03.078)
And it’s the reason that I think the the grooming or rape scandal in the UK was exposed and Elon deserves a huge amount of credit for that. Although I think people are upset around Europe that he's quote unquote interfering in politics. Although I don't agree with that. I think billionaires have interfered in politics all around the world for a long time. He just gets exposed for it.
Katherine Boyle: (01:23:18.796)
I think people are ashamed. Yeah, I agree with you. I think people are ashamed, and the reason they are upset is because he is publicly shaming them over something they should be ashamed.
Michael Eisenberg (01:23:27.082)
I completely agree. Okay, next rapid fire question. Community Notes or human editors?
Katherine Boyle: (01:23:33.132)
Community Notes! And this is a great day to be having the question, right? Like it is so much fun. I actually think it is really fun to be on X now, and to see how the community is policing itself. And some of the Community Notes are just hilarious, right? Like human editors aren't allowed to be funny. They're like the least fun people in society. But the Community Notes are oftentimes hilarious. And so I'll always bet on the thing that's gonna be funnier.
Michael Eisenberg (01:23:58.698)
So will The Free Press introduce Community Notes? I mean, you're on the board.
Katherine Boyle: (01:24:01.644)
You know, so what I love–I always read the comments in The Free Press. They're so smart and people are so astute and care a lot about that community. And so I think that the comment section of all of the articles is valuable. Like you should read the article. I used to say as a reporter, I would never read the comments because they were just so hateful. But everything I've written for The Free Press, I take the comments very seriously and there's a lot of things I've learned from them.
Michael Eisenberg (01:24:27.722)
Okay, what is the most surprising technological innovation of 2024 to you? Is it SpaceX toothpicks, the Anduril operating system, or the beepers and pagers that blew up in Lebanon?
Katherine Boyle: (01:24:45.826)
Gosh. So the beepers and the pagers is definitely the most surprising. That was definitely the biggest surprise. That is a shocking, incredible story of innovation. And an incredible story of government innovation too. What's interesting about the options you gave me is that the first two you mentioned, those are private companies that in some ways, I'm never surprised that Anduril is capable of doing incredible things. I'm never really surprised.
Did I think that SpaceX wasn't going to be able to maneuver the chopsticks in the way that they did? In some ways, I'm not surprised. But you asked “surprising.” And I think they’re just hands down. But also surprising that a government is capable of that. That's part of the most extraordinary thing is that a government is capable of that kind of innovation, of that kind of secrecy, that kind of execution. It's just, it's extraordinary.
Michael Eisenberg (01:25:47.594)
And what's the most meaningful innovation you think of the last year?
Katherine Boyle: (01:25:51.726)
The last year–to go back to our transhumanism point, I actually, I'll change your question a little bit, but I think 2023 is when you had ChatGPT and Ozempic come on the main stage. And that's transhumanism of the digital world, and transhumanism of the physical world. And to me, what's really, really interesting about those two innovations is that at least most Americans are much more comfortable with the transhumanism of the physical kind. Like, no one looks at Ozempic and says, “That's a bad thing that you can lose 25 pounds with a shot,” or however much weight you need to lose with a shot.
But people are much more skeptical of AI. At least, I think young people, maybe there's a little bit of a difference. But the average person is a little bit more fearful of the digital transhumanism than the physical transhumanism.
And so I think it'll be interesting to see which one of those innovations has the bigger impact. I would argue the digital transhumanism is, and we've only began to scratch the surface of where artificial intelligence is going in our daily life. But it is interesting that those two radical changes have happened at the same time and the same year, and really have extraordinary scale as two companies.
Michael Eisenberg (01:27:04.874)
I'll make a comment that I probably shouldn't make, but I think that Ozempic is interesting in that as a religious person, it takes away the need to control myself, because I don't need to control myself for a long, long, long time, and then I get a shot and woof, it kind of goes away. And I worry about that in general, things that erase things that the human body, and brain, and psyche has gotten used to.
Katherine Boyle: (01:27:25.696)
Yeah, well, I think the most interesting part about Ozempic that is probably under-discussed is it affects all sorts of risk taking. It's impulse control across not just eating, but there's reports about vice consumption or alcohol consumption, but also appetite for risk. And so if you have an entire community of people, whether it's Hollywood or whether it's Silicon Valley, and they're all doing Ozempic, does that change the appetite for risk? So much of what we do is assessing risk. So I think there'll be more sort of meditations and studies on that aspect of it in the future.
Michael Eisenberg (01:27:58.194)
Is it a fair due diligence question to ask somebody, do you take Ozempic?
Katherine Boyle (01:28:01.598)
Well, I think maybe it should be. If we find out that it really does affect someone's appetite for risk or affect someone's appetite for certain impulses, it's probably something we should know. And there shouldn't be as much shame about it, too. I mean, I think in some ways people should be very honest about the ways that they're controlling their bodies. If we're using artificial intelligence for certain types of reports or writing, we should be honest about that as well, too.
Michael Eisenberg (01:30:00.596)
I want to thank Katherine for doing this. This was superb. For those of you still listening, this is going to be the longest podcast I ever did, because it is incredibly interesting to talk to Katherine. So much, both in common and so many interesting pieces of tidbits of information and insight. And if you want to learn more about Katherine, you can follow her on X, and that is @KTmBoyle, KTM-Boyle.
Katherine, thank you so much for doing this. And if you're still listening, please rate us five stars on Spotify, Apple Podcasts, wherever you listen to us, and on YouTube, and join our community on YouTube. Katherine, thank you so much for joining us on Invested. I really, really appreciate it and enjoyed it immensely.
Katherine Boyle: (01:30:47.658)
Wonderful to be here. Thank you so much again for having me.
[00:00:00] Sam Lessin:
The fact that the United States allows TikTok inside of our country is one of the greatest unforced national security issues in, like, the history of the world.
[00:00:08] Jacob Helberg:
TikTok has to divest within a certain window or it will face a ban in the U.S. It almost doesn't matter who's president.
[00:00:16] Jon Pelson:
It weakens America, it weakens unity. That weakens us as a country.
[00:00:18] Stefan Tompson:
It's a very dangerous tool. It's been destroying attention spans, it context-switches you, you're unable to focus. It's sexualized young girls.
[00:00:27] Barak Herscowitz:
TikTok employees supporting not the released hostages, but the released terrorists. And I thought this was crazy.
[00:00:34] Izhar Shay:
This is like giving weapons to your enemies. Somebody walking with a rifle in the street, and you didn't put a regulation against it just because you don't know exactly how a rifle works.
[00:00:43] Bradley Tusk:
Why would we give the Chinese government the ability to manipulate our kids’ minds by something they all have in their pocket already? And that's exactly what's happening! And we did nothing about it.
[00:00:50] Michael Eisenberg:
Today, we are launching a special episode of Invested. It's the culmination of a number of other interviews that we've done throughout the last two years on the topic of China, and specifically, on the topic of TikTok, which is incredibly relevant in the coming days and weeks, and incredibly important for the future of the West and the future of our children who are being mass-influenced by the Communist Party of China's propaganda.
[00:01:20] See TikTok, and its 170 million users in the United States, and its billions of users worldwide, perhaps is the largest PSYOP operation ever conducted globally. NCRI, Network Contagion Research Institute, affiliated with Rutgers University, has published incontrovertible evidence showing how China and the Communist Party manipulates the Tiktok algorithm to influence what our children think about China, to influence who they are and what they are, and it rewires young people's brains based on the TikTok algorithm. This is not an issue of free speech. This is an issue of a foreign influence operation on the entire West, on Israel, on the United States. on Europe, and many other places around the world.
Then I'm asking you, please comment below this post–tell us, do you think TikTok needs to be banned? But as for me, and as you'll hear from our guests, here is exactly why TikTok needs to be banned.
Michael Eisenberg:
Do you worry about the state influencing these mass media platforms in that case and the people who control them to influence public opinion?
Like that's my view of TikTok for what it's worth, right? Which is the state influences. That's TikTok. I'm talking about democracies for a second now, which is like, Twitter, Facebook, et cetera, do you worry about government influence there at all?
[00:02:35] Sam Lessin:
So here's what I basically say. I mean, just, sorry, you and I are both very aligned on TikTok.
Like the fact that the United States allows TikTok inside of our country is one of the greatest unforced national security issues in, like, the history of the world. Like when we rewrite the history of the world in a hundred years or a thousand years, this will be gawked at. Right? As in, like, how could you possibly screw that up? Is what I would say.
Michael Eisenberg:
I agree.
[00:02:57] Michael Eisenberg:
I'll argue that perhaps the most significant thing you've done over the last five years was help to shepherd the TikTok divestment bill through Congress. I think it's a stunning piece of public service for our children, our grandchildren, the United States and the West.
But the question I want to ask you – having stated that – is, do you think it's actually going to be effective? Will it get implemented is probably question one. And question two is, okay, if it's not TikTok, it'll be the next one.
[00:03:29] Jacob Helberg:
I was hugely supportive of this legislation and was over the moon when it passed.
Michael Eisenberg:
You weren’t just supportive. You did incredible groundwork and you've been a thought leader on the topic, and I really admire you for it.
[00:03:43] Jacob Helberg:
Yeah, I was really involved in conversations on Capitol Hill. I approached it like a political campaign, and so I talked to everyone. Republicans, Democrats, it didn't matter what stripes they were from. If they were interested in talking about the issue, I talked to them. I spent a lot of time on Capitol Hill, talked with literally in the hundreds of elected officials in Congress.
So it was incredibly rewarding when this passed, but also it really renewed my faith in our system because there was so much skepticism about whether this bill would pass. People said: It's too late. TikTok is too popular. Congress will never take the political risk of passing something that’s a restriction on an app that's used by 170 million Americans.
And ultimately, the national security arguments won the day–primarily because members of Congress had a foundational question about whether TikTok was controlled by the Chinese Communist Party, and TikTok never satisfactorily answered that question. And it was really because of the substance, and it didn't matter how much money TikTok spent on lobbying.
And so to answer your question about whether I think it's actually going to go through or not–the bill is passed. It's law. What it says is TikTok has to divest within a certain window, or it will face a ban in the U.S. And that's the law. And so it almost doesn't matter who's president. The law is the law, and TikTok is mentioned by name in the law. So it can't try to claim that it's somehow out of scope. And so, they have a finite window now to operate in good faith and pursue an orderly divestiture.
And ultimately, Americans will know very soon if the Chinese government is in it for the money or if they're in it for the influence. If they're in it for the money, they will take the money and allow a divestiture to take place. If they're in it for the influence, they'll choose a ban.
[00:05:49] Michael Eisenberg:
Let's talk about TikTok for a second. So a number of countries want to ban TikTok. Our mutual friend Jacob Helberg has been really pushing for this in the United States. So should America ban TikTok?
[00:05:58] Jon Pelson:
Absolutely. TikTok has two insidious things that it can do. One of them is, it changes who you are. And that's absolute.
Michael Eisenberg:
100%.
Jon Pelson:
You can't argue that. It pushes content to you deliberately and with an agenda, and restricts content from you deliberately and with an agenda. So it is changing what you know, and who you are and how you spend your time. You can't argue that.
[00:06:20] Michael Eisenberg:
By the way, what do you think are the most pernicious, or sociological things that they're pushing on American teens today?
[00:06:29] Jon Pelson:
I think part of what they're doing is pushing such foolish idiocy. Now look, all the old crotchety adults say, “The kids today, it's such idiotic things they’re doing. Back in my day, we used to be doing the frug, and–”
Michael Eisenberg:
And hula-hoop, in the previous generation!
Jon Pelson:
And the hula-hoop. You go back to the thirties, we were doing the 23 skidoo, whatever. So, you know, that's back when things were normal. Now they're weird. So I don't want to play that game here.
But the constant, constant flow of addictive vacuousness, whereas, you know, when I was a kid, you had to wait till Saturday morning cartoons to turn off your brain completely. And now you can keep it in that idling mode, all the time. And I'm sure every generation would have, if they had the same technology available.
Michael Eisenberg:
Do you think they're fomenting some of the social maladies of the United States through TikTok?
Jon Pelson:
I think someone should be fired if they're not. Someone in the Chinese politburo, if they're not using that tool to push people into the streets, when sometimes we’re saying, “What are we here for again?” “I don't know, there’s this bad thing that's going on here. Let's all go out there and turn out for it.” That has to be tapped right now by China, because it weakens America, it weakens unity, whether it's racial or class or any other divisiveness in America, that weakens us as a country.
Michael Eisenberg:
Would you ban TikTok in the West?
[00:07:47] Stefan Tompson:
Yes, I would. And I say this as someone who does use it. Visegrad is on TikTok. We have hundreds of thousands of followers there, generated hundreds of millions of views. And we've done objectively good work there that I'm proud of. Work that has been educational, that has been quality, that has been using good vocab—I mean, even raising the level. Just raising the level of just providing content that is well spoken, well presented, that has some merit. That in and of itself in this absolute ocean of trash, of vulgarity, of swear words, of crassness, of sexualization. Just vulgarity.
That in and of itself was a good thing. But I would. I think it's a tool. I think it's a very dangerous tool. Because it is so addictive. Because it's been destroying attention spans. It context-switches you. You're unable to focus. It sexualized young girls in a very meaningful way, as in–these girls, I think there's a process they go through where they post videos to TikTok, they get some views, and then they realize that slightly more sexual content, more sexualized content, will give them even more views, so there's a dopamine hit, and the algorithm rewards them immediately.
And suddenly you have incredibly vulgar stuff. And the same with the crassness. You do something stupid, and crass, and silly–I don't know, there was a trend of people crawling around shopping malls as if they were a sort of caterpillar. It was bizarre. It was stupid, and it wasn't funny. And it was a public nuisance, but it was generating millions of views. So suddenly you had idiots crawling around shopping malls across Europe. And then you had, obviously, the letter to Bin Laden. How is it possible that in the span of two, three days, Osama Bin Laden is rehabilitated in the mind of Gen Z?
In two, three days! That level of influence on young people that is manipulated–the algorithm is obviously manipulated. And then you see obviously the Chinese version, the Douyin version of TikTok, which is promoting an entirely different algorithm. Every seventh video is a video that is from the CCP.
It's an extraordinary fact that actually, they are making sure that their young people, even though there is the context switch and there's the dopamine rush of every new video you watch. And you always think the next one is going to be–just another one. Right? And they're promoting educational content that they're–
Michael Eisenberg:
They’re sitting at the poker table or the blackjack table. Just one more hand, I'm going to win.
Stefan Tompson:
Just one more hand, I’m going to win. It's exactly that. And it really is. It's a beautifully designed tool.
Michael Eisenberg:
Yeah, it really is.
[00:10:33] Barak Herscowitz:
So we were all in Israel, we were obviously very emotional about this night. You know Michael, I never, never cry. Last time I cried was when my grandmother passed away. It was years ago. That night I cried, I was up basically, I cried for hours, and then someone told me to check something up on the internal system of the TikTok employees. It's called Lark, and I realized that there is an internal group called Palestinian Support.
And I joined it, and I saw that there are TikTok employees supporting not the released hostages, but the released terrorists. Some of them exploded cars, some of them stabbed people on the streets in Jerusalem. And they were celebrating their release, and were so happy and emotional about the release of those Hamas terrorists and other terrorists.
And then I started scrolling back through this group. And I saw that these employees also promote BDS, and supported the Houthis, and they celebrated when the Houthis attacked a lot with missiles, they celebrated and they were happy about it. And this was all on the internal company platform.
So I started to, you know, say, “Who are these employees?” And, you know, I'm going to be very cautious here because my lawyers, they always told me to be cautious. So not a hundred percent of them, but 99.5 percent of them were in Trust and Safety teams, meaning they were in charge of the censorship of TikTok.
They decided what content goes on and what kind doesn't go on. And these are the people who celebrate Hamas, and the Houthis, and BDS. And I thought this was crazy. This was crazy. And I wrote an internal memo to the company, and my initial claim was that there is a bias in policy and bias in content moderation.
And then I added this, screenshots and information about those internal groups, and that Trust and Safety employees who support terrorists and support BDS. And I also mentioned it’s a very hostile environment towards Jews on other TikTok sites. This is something that I haven't personally experienced because I work here in Israel. There aren't any anti-Semites here in Israel, I hope so.
But in other offices, there were many incidents. There were Jewish employees who reported that they came to work after October 7th and no one spoke to them, including their bosses. They were completely ignored by everyone, as non-existent. Or, other employees who received very disturbing anti-Semitic remarks.
I'll give you one example, and I'll try to do it without too many details.
One of them said that they had a team day. And they had some games and, you know, group games. And then one of them, she experienced very harsh remarks about Jews, and money, and being in control of the world, etcetera. And then she reported it to HR and the Ethics office. And she said–it's not something that I experienced, but this is something I saw on Lark, on an open Lark group–she claims that no one ever talked to her, and no one ever dealt with her reports.
[00:14:17] Michael Eisenberg:
How do you think about TikTok, and would it ever occur to you as a minister, which you were, to ban TikTok for that reason?
[00:14:25] Izhar Shay:
So TikTok is a specific example, because it is actually governed by Chinese forces. There's always the assumption that something may be there that is not just biased, but also controlled by some central forces. You know, I hate the word regulation. I hate the notion of regulating the free world, and definitely free press, and the freedom of expressing yourself and so on.
But the worldwide regulation is almost like, I don't know, centuries behind what happened with technology. So the leaders of parliaments around the world have to put their heads and have to first of all understand the potential of these new technologies because this is like giving weapons to your enemies in a country without limiting them, because you do not understand the ramifications.
Somebody walking with a rifle in the street, and you didn't put a regulation against it just because you don't know exactly how a rifle works. Once you know that this rifle has bullets that can kill people, you put regulations as to who is allowed to buy that rifle and forget about freedom of choice and the freedom of movement and so on.
Even if you're allowed to own a rifle, speaking in U.S. terms, you are not allowed to walk the streets of New York and to shoot people.
So you have to put regulations on social media that will prevent the same kind of damages. And we know today that using social networks - this is not about TikTok, you have all kinds of possible ramifications also on fake profiles, and the spread of traveling news and other types of media pieces on Telegram and other social networks. So the regulators have to understand the dangers and have to respond accordingly.
By the way, we know today that Israel was attacked many times over the last few years on social networks, on Facebook, on Telegram, on Twitter, obviously on TikTok as well, by very specific enemies, using all kinds of targeted psychological weapons in order to affect the society here. So this is not just a theoretical situation. The regulators have to respond, have to understand and do this rather quickly.
[00:16:34]
Michael Eisenberg:
Speaking of social media, what do you think should be done with TikTok?
Bradley Tusk:
Ban it. I mean, not even a question. I was for banning TikTok long before October 7th. And there was a poll today in The New York Times that showed Trump beating Biden among young people, and I directly attribute that to TikTok.
TikTok has been so blatantly pro-Hamas, pro-Palestinian, anti-semitic, anti-Israeli, that it has wildly changed perceptions in a completely misguided way among American youth, and that has changed the political dynamic here meaningfully. And you know, it's funny, a couple years ago when Trump started talking about it, and he was right at the time, but he never follows through on anything. It was, you know, everyone was like–why would we give the Chinese government the ability to manipulate our kids’ minds by something they all have in their pocket already? And that's exactly what's happening. And we did nothing about it. And we're doing nothing about it.
And this again, gets back to sort of the mobile voting thing, which is, we're so polarized that we can't function any longer. You know, forget about appropriating more aid to Israel, which Washington's now having to do through executive powers because they can't get Congress to act in any way. Even stuff that's happening here domestically that's destroying our own kids’ minds. And whether that's how social media has driven teen suicide up by 200%, or the influence of TikTok right now–we can't do anything about it, because we're too divided.
And I think that either one, we come back together. And that happens through technology and through mobile voting, or two, to your point, I just think that it's much sooner than 2050–states start seceding, right. And there could be a world where you say, you know what, we can't get anything done in the U.S., the current system is completely broken. A national divorce makes sense. Let's have something more like the EU.” That may be the way to go.
[00:18:19] Michael Eisenberg:
All of my guests think that TikTok should be banned. But I want to hear what you have to say. Do you think TikTok should be banned? Please comment below. Thank you so much for listening to this episode on this very critical topic. If you liked the episode and liked the podcast and want more like this, please rate us five stars on Spotify, Apple podcasts or YouTube. Comment on our YouTube posts so that we can keep delivering you this super important content.
[00:00:00] Jessica Lessin:
Media organizations have to not screw up. You have to earn it with every article, you have to earn it with every headline.
What worries me the most is when I see journalists who I think are more crusaders than reporters.
[00:00:11] Michael Eisenberg:
Why do you think that's selling your soul to the devil?
[00:00:12] Jessica Lessin:
We've seen what happens when quality news organizations take a quick buck from a tech company without thinking about how it is helping them build a sustainable business that serves their end user.
To build a news brand in this decade, you have to also build a community of people who really value your product and the experience that they get out of it. We don't get to launch a product and then tweak it and scale it. We have to launch our product every hour. We have to keep publishing.
[00:00:41] Michael Eisenberg:
What were you wrong about when you started The Information?
[00:00:43] Jessica Lessin:
Oh my God. So many things.
[00:00:48] Michael Eisenberg:
I am super excited to have Jessica Lessin on with me. This is the first time we've interviewed, or had on the podcast, the spouse, or someone even related to another podcast guest that we’ve had.
[00:00:58] Jessica Lessin:
Woohoo! We're the first couple. Love it.
[00:01:01] Michael Eisenberg:
There you go. I know Jessica for a long time. Actually, how did we meet? I don't even remember anymore.
[00:01:06] Jessica Lessin:
It may have been when I came to Israel more than a decade ago. And I know we came to Aleph, but I knew of you at least before then. But I think maybe that was the first time we met.
[00:01:19] Michael Eisenberg:
Yeah, I didn’t remember. So for those who don't know Jessica Lessin, she is the founder and CEO of The Information, which is probably, at this point, the most well-read, insightful news and analysis operation about Silicon Valley. It has a surprising readership that I hope we're going to get into. I keep running into people all over industrial America who read The Information.
Jessica Lessin:
Awesome.
Michael Eisenberg:
Part of what I wanted to get to–but why don't you tell everybody about your background, and I'll highlight what you're too bashful to say.
[00:01:52] Jessica Lessin:
Awesome. Well, I actually think you're catching me on our 11th anniversary. So 11 years ago, I was a reporter at the Wall Street Journal, covering Silicon Valley, and I was really concerned.
I was concerned that we weren't building a sustainable business model for quality journalism, that publications were very focused on traffic, and advertising, and trying to beat Google in the ad game instead of building meaningful relationships with our audience and making money from delivering something that was worth paying for.
[00:02:30] And I was also worried about how tech was covered. I actually edited the first article I think that was ever written about Facebook when I was at the Harvard Crimson. So I really saw the emergence of this whole category of company and business from very, very early on. And I saw at the time–this is more than 10 years ago–a lot of coverage that was chalking it up to, “Oh, what's the hype out there in Silicon Valley?” Or, “How much is this founder worth?”
And there was really, I thought, a lack of realizing that tech was transforming everything. Every industry was about to change, and a business leader needed to be following that as much as they needed to be following the stock market. And so I started The Information to do that, to build a subscription publication and community that was doing impactful work about journalism on tech companies, both scoops, and features, and data, and really to be that authority that I felt we needed to have–and to do it with a very simple, straightforward business model, 400 bucks a year, and to see where it took us.
And now, you know, we have an active, engaged audience of more than 700,000 global business leaders, and it's going pretty well.
But there are a lot of headwinds for news as well, which I'm sure we'll talk about.
[00:03:55] Michael Eisenberg:
Yeah. And before I dig into your subscription base, I want to point out to everyone that you were a reporter at the Wall Street Journal, I believe it was like for eight years, or something like that. Is that right?
Jessica Lessin:
That's right.
Michael Eisenberg:
And so you came out of traditional media, and before that came out what I would have called traditional media also, which is the Harvard Crimson. I myself was an editor of a college newspaper, and we always looked at the Harvard Crimson–
[00:04:16] Jessica Lessin:
Best job. Best job.
[00:04:19] Michael Eisenberg:
The Harvard Crimson and now, you know, Harvard–but we won't get into that right now, Harvard.
But I'm most interested in the following. There was no Substack. There were none of these people at the time really trashing mainstream media, which is what's gone on now.
Jessica Lessin:
Yeah.
Michael Eisenberg:
And you talked about the prompt that you thought the coverage was shallow. But yet you kind of, I think you're the first actually, to kind of go out and leave mainstream media, and say, “Okay, I'm going to do this, with a subscription model, and create an audience for myself.”
Beyond the shallowness of the journalism, what was it about that moment, again, the pre-Substack, the pre-easy-to-charge moment, that caused you to do it?
[00:04:58] Jessica Lessin:
Well, something had to change, Michael. And, you know, I had covered startups for so long that I kind of understood you don't just build great things by thinking you've built lightning in a bottle, or you kind of can through doing things incrementally better, build a great different company. And I think that was an insight I had that was different. Like, the outside world thought you became a startup cause you woke up one morning and you dreamt up, you name it.
But I had seen all these companies, you know, Instagram was a little bit better at photo sharing, right? Dropbox was a little bit better at file sharing, and so on. And so, my calculus was like, I can do more of these stories that take people behind the scenes that are about important issues. You know, my last beat at the journal was Apple, and I saw that if I wrote about some dynamic inside Tim Cook's new management team, post Steve Jobs, the readership for that was vast. People around the world across industries were trying to understand that.
So I knew there would be this huge market if we just did things a little bit better. And at the time, I also remember going to an iPhone launch for the journal, and my boss wanting me to live blog what color Phil Schiller's shirt was, because that was the traffic-grabbing approach of media at the time.
And I'm just going like, “I got to go talk to Phil Schiller and build my relationship with him. I don't need to be live blogging the color of his shirt.” And so I did feel like it was an urgent moment that if we, as a news industry, facing this onslaught of disruption from technology, we're going down the same road of trying to play the traffic game, we'd be in deep trouble.
And, at the same time, I'd see these same technologies and tools that could be so empowering for media companies that we could use to segment and personalize for our audiences, and embrace that. And I just thought it was more urgent than, I think–a couple of years later, the industry also sort of began to believe it was urgent.
I mean, when we launched with a premium subscription, many people who are close friends of mine, you know, would–I remember Business Insider publishing, “Oh, we'll just summarize every Information article, so you don't have to pay a dime.” You know, they have copied our subscription–
Michael Eisenberg:
And now they’re charging.
[00:07:30] Jessica Lessin:
The Verge has done the same. And, you know, at the time we were one of a number of tech sites, you might remember AllThingsD, Pando Daily, there was a whole cohort and–those brands don't exist anymore. And so, and they had different models, but there's also been a sea change in the business, which I think has been very healthy overall, but it was kind of isolating back then. Kind of isolating.
[00:07:54] Michael Eisenberg:
You actually led me to the question I wanted to ask after this first question, which is–what causes an august institution like the Wall Street Journal, known for its quality journalism, to become a click baiter over time, and to kind of get in this traffic run rather than delivering a quality product?
[00:08:10] Jessica Lessin:
I've been thinking a lot about this now, because I'm worried we're doing it again around AI a little bit. Because your question really gets to the heart, I think, of what is the time frame of building out your organization? And what are your real aims, and objectives, and that real alignment? And I think in media, it's been a challenged industry.
A lot of publications had one eye on the door, as many startups do, and have been trying to kind of ride the tide to an exit of some sort. And if you think that the tide is X or the tide is Y, you chase those games. And, I think it honestly comes down to a short-sightedness or a more long-term point of view. And obviously, if public companies versus private companies probably have that dynamic as well a little bit.
But, ultimately what I spend a lot of time thinking about is, how do I make the right choices for The Information for the next 10 years or 20 years? And in media that's very different than the right choices over the next 5 months or 12 months.
[00:09:31] Michael Eisenberg:
But, like, the Journal's been around for, like, forever, okay?
Like, what caused them to do this? Now, I was at an event once with somebody very senior from CNN right after Trump was elected. And a young woman who was a graduate student at Columbia University got up and asked this executive at CNN and said, “What are you doing to give Trump more air time than–” at the time, “Hillary Clinton?”
And he said, “Sold ads, we got a lot more viewers, and we need Trump.” She was furious at the time, and without getting into the politics of it, the question one could ask themself is, is it that people put business model ahead of good journalism? Is it that they got caught up in the zeitgeist?
It wasn't an answer like, this is what the news was. It was “Hey, you know, sold ads.”
[00:10:25] Jessica Lessin:
Yeah. I think even the largest legacy institutions have been facing tremendous business pressure. I mean, look at the Washington Post right now, right, losing millions and millions of dollars a year.
And so that business pressure has been real across the industry. And so, yes, even the most legacy of companies are making, I think, wrong short-term business decisions. And I think you can look at some of the deals they're striking with the large language models and say the same thing is happening.
But also, our model is really difficult, doing journalism, or in other models that, that are aligned with this are–they're very difficult. And that isn't to pat ourselves on the backs of being geniuses, but I think you've got a lot of entrepreneur listeners to this–you know, sometimes doing the right, aligned thing over the long term is just really difficult.
And it doesn't grow exponentially. We've grown 20 to 30 percent a year for 11 years, and that's an awesome business, but it doesn't look like a business you would invest in. It doesn't look like a venture-backed kind of business. But it's an awesome and profitable business.
And so I think also that alignment–and I see this a lot with startup site investment and advice around news–you have to be really clear about what success looks like and not get caught up in the zeitgeist of what's happening over at Open.AI or whatever's in the headline, because that's not what success looks like in our industry.
And I think people really got caught up in that as it related to the tech startup ethos.
[00:12:17] Michael Eisenberg:
This is an important point for entrepreneurs listening: not every business is a venture-backed business, nor should it be.
[00:12:23] Jessica Lessin:
Absolutely. I haven't raised any investment, and a lot of people look at that and say, “Why not?
Like, “Why did you grow so slowly? Why didn't you put more gas on the fire?” But this was what's right for us. We always had the resources to back the ideas we had conviction in, and we also had to hold ourselves to the bar that over the course of a year or two, those ideas would bear fruit.
[00:12:50] Michael Eisenberg:
I want to ask what I think is a question that you led me to about AI. A little bit you're saying, and I won't put words in your mouth, that for a few extra bucks, the news organizations are selling their soul to the AI devil by giving away information, their content, to the AI models. I was told, I think this is true, that in the early days of the AI models, they got a lot of their news from Al Jazeera, and that's where a lot of the results look like they do. Now more are coming in. Why do you think that's selling your soul to the devil?
[00:13:21] Jessica Lessin:
I do think that, and you're not putting words in my mouth. And I say it in such strong terms because we've seen this play before.
We've seen what happens when quality news organizations take a quick buck from a tech company, to hit that quarter's revenue without thinking about how it is helping them build a sustainable business that serves their end user. And look, AI is tremendous.
Twice a day I'm using AI, or more than that, for research, for summarizing transcripts, for cutting podcast clips, like, you name it. But the idea that there is a consumer product here that we know benefits news organizations to be a part of, that has a revenue stream you can model, I mean, we are just so far away from that.
It's crazy to me. And we saw this when publishers rushed to give Google free versions of content because Google News was gonna change their business, and every publisher I know has walked back some type of that arrangement and restructured it, and so on. And you add to that this uncertainty–there's just so much uncertainty. And so I have been very concerned to see, you know, major deals.
I mean, I think the only publisher candidly that hasn't struck them of size–we obviously haven’t–but the New York times has taken a very courageous and different approach of challenging Open.AI and Microsoft in court over this ,and letting the courts kind of figure out what makes sense around copyright going forward.
So yeah, I think we saw a bunch of these deals, and I got a lot of angry feedback from people I respect in sharing my opinions, because they were just saying, “It's money, we should take it.” But I also find the point of view that it's not going to require much distraction or doing things differently, that's not how it works.
You always end up bending to your partner who's going to make or break your quarter. And I think tech companies and news companies should have long ago figured out we're in very different businesses, and there are areas for partnership, but we actually don't need each other in that way, and it's important we kind of fulfill our own destiny.
So, we'll see.
[00:15:55] Michael Eisenberg:
If I play the model forward, okay, so everybody other than the New York Times kind of capitulates, gives their content to the LMLs, or a couple of niche publications like The Information. So all these news companies collapse, so they all have to be bailed out by billionaire tech entrepreneurs like Jeff Bezos.
[00:16:18] Jessica Lessin:
Perhaps, perhaps, but who wants to sell it? So, you know, I think that's an even shorter-term solution.
[00:16:24] Michael Eisenberg:
So you're all going out of business. Like Elon's right. Elon Musk is right–X becomes the primary news source, because that's where individuals create news and all these other people, maybe, except the New York Times, go out of business.
Is that where we're headed?
[00:16:38] Jessica Lessin:
No. And Elon Musk is not right. We should just be on the record about that. But I think you do see a lot more news publications go under. I think it's largely in that, it's not the Wall Street Journal and the New York Times, probably not the Washington Post, but I have to put on that asterisk there.
[00:17:02] Michael Eisenberg:
I'm not gonna lie, given their coverage over the last 12 months, I may not be sad to see them go.
[00:17:07] Jessica Lessin:
I think they'll figure it out, but they have a lot of figuring out to do, maybe is how we should phrase it. But, no, the big guys will exist, but we'll continue to see–the collapse across the industry has been seismic.
It's quite interesting. And I live and work in Silicon Valley where you're right, sort of, the animus towards the press is at an all-time high, in large part led by the cult of Elon and others. But what's so amazing to me is that these same people can't stop talking about the news. They can't stop talking about what, in a given day, professional journalists are writing and breaking.
They just riff on it, and opine on it, and attack it, and so forth. But still, the surfacing of original and new facts, is still, I think, a wonderful business with the right models. And I think it's something that is still sort of the bedrock of our information society, and that a lot of the opining, and talking heads, and so forth, is sort of built on top.
So I think for the institutions that can have sustainable models for doing that, they'll be in great shape and actually see very strong growth. Yes, we'll continue to see other information economies like X, and the new ones that will emerge. And I think readers will have to decide for themselves–and this is concerning, because many of them won't–how trustworthy what they read is or isn't.
But I think there will be enough institutions that are injecting good facts into the system. And those institutions are just going to have to work really hard to continue to do that, and to continue to earn people's trust, which I agree with you, they haven't done a great job of in the past few years.
[00:18:54] Michael Eisenberg:
Well, I'll speak for myself. I was a religious reader of the New York Times as a kid, and then the Wall Street Journal later. What you call facts, I haven't seen in a lot of parts of the mainstream media. And the other thing I find kind of really interesting is how often TV news in particular, but also written news uses X as a source, and as a prompt for what's news today. And it's almost like the opposite of the way it used to be, right, which is, you don't opine on something that was on TV on X, now it's TV opining on what was on X.
[00:19:25] Jessica Lessin:
I occasionally see my husband's Tweets splashed across CNBC, and I crack up. And I have a lot of respect for CNBC. But, no, look, there's obviously tremendous challenges inside these newsrooms ,and part of it is–I think in this political climate, it's particularly hard to chart what you feel is an independent course, because everyone you talk to is, I mean, it is just so loaded. And that isn't an excuse, I think. You know, I was being critical of the New York Times for some of their headlines around Trump's victory recently. They were using words like ‘strongman.’ And again, you could have your own opinion and think that's totally justified, but it sets a tone as a news organization that I think is really problematic.
I don't know if we can put that genie in the bottle. And I think from my point of view, building new organizations that try to have different values and different independence. I mean, I think we have a strong and growing advertising business that I'm excited about, but our core is also just individual readers around the world thinking we're worth $400 a year.
And to me, that really keeps us honest, in a way that's very different if there were one, or two, or three companies or people who we really had to keep satisfied. And so I think those business models matter a lot too.
[00:21:11] Michael Eisenberg:
Well, speaking of that, and I think this is a really important point–the claim that has been made is the following. Once you move away from advertising to subscription, you need to get a harder core readership that is willing to pay whatever it is, two, three, $400 a year. The claim is that, for example, if you're the New York Times, you actually want to call Trump a strongman because that panders to someone who'll give you a few subscription dollars.
And in fact, it's subscriptions, particularly at the higher rates they're at now, that cause these news outlets to be more ideological, let's just call it that, and therefore panders. I'm curious what you think about business models that create better journalism versus worse journalism.
[00:21:53] Jessica Lessin:
And that's real. So we talk a lot at The Information about the right kind of subscriber. And by that I mean, we just mean someone who gets value from our journalism, not someone who subscribes because they happen to agree with an opinion piece or happen to disagree.
And I actually think if you look at what happened to the Washington Post, it demonstrates this. Losing almost 300,000 subscribers over a decision to not endorse a presidential candidate, to me, really said–those subscribers came in, because they felt they had an ideological alignment that then they all of a sudden felt they didn't have.
And The Post had an explicit campaign when Trump was first elected, “Democracy dies in darkness,” and they courted people based on their political beliefs, not based on how important it was to know what had just happened inside the Oval Office based on an anecdote they reported, or something like that.
And so I think that's very important. And you can make the strategy–and many publications do– and so they get these sort of ‘Trump bumps’ or these Trump troughs, I guess, you know, based on that sort of, “Hey, I agree,” or “That validates me” kind of journalism, and I think that that is a very dangerous game to play. We're playing the game of, how many people need to know what AWS is going to announce next for their AI strategy, or how many people need to get inside the TSMC NVIDIA relationship, and what it means for the future of semiconductors. It's not to say politics doesn't play a role, but it's very different. And so I think it's the business model, but it's also the type of customer and what their value proposition is that's really, really important.
And so I do think that kind of broadly distributed subscription base is the healthiest way to build a quality news company.
[00:23:56] Michael Eisenberg:
I'm actually going to come back to that. I have one more question before we transition to what I want to hit on also, which is your subscription base. But I think it's interesting, before you get there, like another person I think of similar to you is like Bari Weiss, right?
So you looked around the Wall Street Journal and said, “This is becoming clickbaity. I'm going to do some serious journalism.” And Bari Weiss, you know, took a look at the New York Times and said, “This has become an ideological cesspool,” and left to start her own subscription news business, an opinion business and column business.
Compare and contrast what you went through leaving the journal and what you think Bari went through leaving the Times.
I think you're both successful.
[00:24:37] Jessica Lessin:
I remember taking a walk with Bari, probably, I don't know if it was a few months after or a few weeks, around San Francisco.
And I actually, for people who know her, was just struck by how hard working–like even on that walk, she was like doing business and texting people. And I'm like, “I'm taking a walk with you! I'm giving you my advice.” What she and Nellie are building at The Free Press is so impressive, and I think they identified an opportunity.
You know, I think The Free Press has a lot more really insightful columns, and opinions and analysis, whereas we focus a lot more on breaking news, and obviously business journalism. But I think at the core, Bari has built a great community–and that's an overused word in some ways, but it's also the right word to use. And to build a news brand in this decade, you have to also build a community–and perhaps this is true of other brands, but I know news–of people who really value your product and the experience that they get out of it.
And I think brands like The Free Press with their events, and debates, things we've also had great success with, are really capturing that. There are so many others too. I'm an investor in Semaphore, a great publication that is heavy on events and community, and many others as well.
I think there is great opportunity in this moment–I'm perhaps a bit contrarian–if you have a quality and differentiated news or media product, if you get the alignment right, and you got the investing sec right, and you work your ass off, I think you can build not just a great business, but something that's really important in this moment. And there are good examples of that, and we should probably talk more about them in the context of the troubled landscape.
[00:26:35] Michael Eisenberg:
This is exactly what I wanted to get to. So I've been around this industry long enough to remember Red Herring–
Jessica Lessin:
Oh, my goodness, yes.
Michael Eisenberg:
Fast Company, PandoDaily, as you said, Sarah, right, AllThingsD, which was kind of a conference first and then a media site later, you know, rode Walt Mossberg's and Kara Swisher's brand for a while. They had great conferences, I used to go every year.
Jessica Lessin:
Yeah, me too.
Michael Eisenberg:
And now like, all of those people are more or less gone. Gone. Didn't make it. And here's Jessica, and The Information, 10 years running, which continues to grow, started with the kind of subscription business just for news, which was bold by the way, right? How do people get exposed to a product that they got to pay for? This trial that was bold. Now you've moved into conferences, and community, and there goes Bari Weiss, who I think follows the playbook roughly, which is, “You're going to pay for my content, and I'm going to do conferences and community.”
And it strikes me that maybe there's a new model here, which is the old kind of WSJ, New York Times, whatever it was, which was, “Hey, I'm going to send you a newspaper. I'm going to just sell you news.” Just give it away to the model you described, which is, community, content, conversation. And I'm just trying to put my finger on what's different about this moment. Because there was seeds of it in AllThingsD, and seeds of it in the Red Herring too, they used to have conferences too.
[00:28:13] Jessica Lessin: Yeah.
[00:28:14] Michael Eisenberg:
But you made it, and they stopped making it. I mean, I think All Things D did great for a long period of time.
[00:28:20] Jessica Lessin:
Yeah, a fantastic franchise and obviously, has morphed in a lot of ways. So I think one of the big differences between that era–well, actually, I don't know. Maybe I'll play this out a little bit. But I think a lot of people today talk about vertical media, and the idea that the newspaper has been unbundled.
You don't need to read it cover to cover to get your news. You can get that in real time over the internet. And so, I think that one of the things that's where I think we're going, is I think we are going in publications that are deep, deep authorities in specific areas and then build communities around that.
Because I think readers want to go deep, and have the best and the most insightful information from the people who are in the know. When the election rolls around and political cycle's big, I go to Politico, I go to Punchbowl News, which is focused on Congress, even, within the world of Washington.
And I think the mistake a lot of people make is they see those businesses as narrow. And take Politico. Politico had a billion dollar exit. Politico is the most successful media startup since Bloomberg Media. Maybe that's true, I don't know. Sounds right. I'm going with it. But certainly a huge success story, a wonderful business, a real authority, global, so on and so forth.
Back in the day when Jim and Mike founded it, it was seen as very narrow. But it turns out that that sometimes these focus areas are actually massive. And so that's where I think we're going. And I think that's one difference. Because 10, 20 years ago, there might not have been as big an audience for some of these verticals, or you couldn't find all those people globally who were in your demo.
But now, if we have a big story–what's going on inside Google as it's trying to fight OpenAI with Gemini, that's just a global story with a global audience. So I think we are moving to more of that fragmented model, but everything's a pendulum and you bundle and you unbundle, right?
Look at what we're seeing in streaming now. It turns out I've just re-aggregated all my one-off, unbundled subscriptions, and Amazon, and YouTube TV, right, of my Comcast world or whatever it is. So, I think there will be room for consolidation. It's companies like us that might do some of the consolidating too, and I think that will look very different.
[00:31:09] Michael Eisenberg:
I'm paying much more for news than I ever did before right now. I'm subscribed to so many things. It's a little bit ridiculous.
[00:31:15] Jessica Lessin:
Yeah, and you'll winnow that out, and people will be forced to compete for that. But yeah, it is a very different time, but I think, and maybe it's too hard for the consumer in some ways.
So that should present an opportunity, I think.
[00:31:33] Michael Eisenberg:
Well, I think you put your finger on something important, which is tech has become mainstream. And like I said before, I've heard from a lot of people that they subscribe to The Information who surprised me, like in Red Herring days. There was no outside of this clique of Silicon Valley that subscribed to the Red Herring, a couple of guys in Israel.
You know, when Jason Kalkanis, before he was famous for the All In pod, was at Silicon Alley Insider, the August publication way back, there were a hundred people in New York. I'm not trying to be–
[00:32:05] Jessica Lessin:
No, it was very different, yeah.
[00:32:05] Michael Eisenberg:
It was a very, very, very niche thing and nobody, you know, cared that much.
But today tech is totally mainstream. We witnessed the All In pod, and witnessed The Information. And I'm curious, have you had to kind of talk about tech differently, report tech differently, or is it just everyone's interested because this is what is shaping the global economy now?
[00:32:25] Jessica Lessin:
So I've been struck by how, and again, we have a broad business readership.
So I mean, our readership actually largely maps to a Wall Street Journal or a Financial Times. I mean, about half work in technology, about a third work in finance, and then the rest is sort of broadly distributed around other industries. So we do see readers who are product managers that, you know, name the company.
And I think, so in some ways, our point of view is, I guess we've ultimately still stayed pretty focused on that core that wants to go deep, and we're not necessarily going just for that tech-savvy consumer, per se. But I think those areas are bleeding into each other pretty quickly. And I'm constantly surprised that people who I'll run into and they'll be like, “Oh, your story on like Inference and what's going to happen with the chip market, because we're moving fromTraining to Inference.”
It’s crazy. I'm like, why is that relevant to you? But people are deeply interested in things that would have seemed a year or two ago as too niche or narrow. I mean, talk about data center, architecture and energy, the number of businesses that have a real stake in that transformation from retail and real estate, it is massive.
And so that's sort of where we play. We do have a three-year-old weekend section that's really fun, talks a lot about tech and culture and lifestyle, and gadgets, and things that may be interested, appeal more broadly to people interested in how tech's shaping culture. So yeah, we, I think, explicitly tried to stay focused on what we're uniquely good at and have been very pleased how that segment is growing pretty quickly too.
[00:34:27] Michael Eisenberg:
Do you have to hire–let me back up with the question. Like I can find on Twitter an expert on data center energy consumption and someone who is crazy about the topic and goes really deep. My experience with traditional journalists was they never went that deep as you could find on Twitter.
My experience with The Information is, people go that deep. Have you had to hire a different kind of person, you know, than maybe traditional journalism did, to work for The Information? And how do you think that kind of projects onto the future of where journalism goes?
[00:34:57] Jessica Lessin:
So yes, but not necessarily that they have to be total subject matter experts, but they have to be really, really deeply curious, and intelligent, and kind of interested in understanding the weeds.
And so, journalists are never going to get to the level of the person building the data center, and you maybe don't want them to. Because you want them to be able to synthesize multiple points of view, but they have to get in their head wonky enough that they love learning from those people and kind of being the student.
When our team talks about our travel budget, like, I mean, we probably go to CES or–but we go to the wonkiest conferences. I'm like, why is so and so in Hawaii? And it turns out, you know, there's this kind of, it's actually a lot of data center conferences lately–but there's very, very wonky.
So, yeah, you don't have to know it all, but you have to really, really want to learn and understand. And it's hard. I think a lot of people get into journalism for a different reason, but to have a big impact, you have to really get in the weeds to earn the trust and expertise to build those sourcing relationships.
So that's what we look for. We did just hire a new venture capital reporter who has been a venture capitalist though. She worked at Emerson Collective, and it's been really fun already to see her story ideas. She's not as afraid to go after some of the wonkier concepts, you know, SPV structure, you know, stuff like that.
And I think having that confidence and knowledge will just allow her to go deeper. And then we'll have to explain that to readers who aren't immersed in it, but it's been fun to watch her get started.
[00:36:52] Michael Eisenberg:
Now I'm nervous. Let me ask you a different question. Are you mainstream media, or are you new media or are you–what are you?
[00:37:03] Jessica Lessin:
You know,I'm not sure. I don't think we're mainstream. New is fine. I was struck, about a year ago, the New York Times did a feature on the new class of news startups. And I saw the headline. I'm like, “So weird they didn't call.” And then I saw that we were the legacy in that. So basically they were talking about the newer, newer class, and we were lumped in with the Politicos and the others that had been the prior wave of whatever.
And I just thought that was so funny, because in my mind we're very much a startup, because our opportunity is just massive, so that's my point of view. But I don't know that the readers think that much about that question. To your point, they think about, do I trust what I'm reading?
So I obey in the trust stream media, or whatever that should be called.
[00:38:01] Michael Eisenberg:
Sam told me to ask you–I was going to ask you anyway, to be honest–and you kind of alluded to this before in your comment about the cult of Elon–citizen journalism, the kind of “We, the Media,”-- for those who don't know, by the way, Dan Gilmore, another legend of Silicon Valley reporting, he used to write, like no one remembers these things anymore, for the San Jose Mercury News, which is like the only way you can cover Silicon Valley once upon a time.
He wrote a book called We the Media back in like 2000, 25 years ago. And I just want your take on citizen journalism and We the Media.
[00:38:39] Jessica Lessin:
You know, I am all for citizen publishing, citizen reporting, citizen sharing, citizen publishing, maybe. Citizen journalism to me–journalism as we practice it is very, very different.
You know, we have 80 people who are–not gonna be professionally trained, right, but whose job it is, is very specific, is to learn and verify information and to publish it, and to have that sort of be trusted–and also to really work together as a newsroom to be able to cover really meaningful big things.
[00:39:24] Michael Eisenberg:
So why does it matter?
[00:39:26] Jessica Lessin:
Why does it matter? Oh my goodness. Well, it matters because how do we make decisions? How does anyone make any decision in the world? They need trusted facts and information.
[00:39:35] Michael Eisenberg:
I'll crowdsource it. Get it Community Noted.
[00:39:39] Jessica Lessin:
Well, for some things that can work actually. So I think for some things, like, did this rocket just go off or, you know, that could work.
But what about what really went on at OpenAI, with the firing of Sam Altman and what that means for the future development of AI, and every company that interacts with it, and every shareholder that puts a buck in it, right? I think there are just huge swarms of topics and areas that no citizen journalist is going to get at because they don't have the ability to, or the interest to, or the incentive to, and I think that's really important.
And I think this is what's missed in the Elon Community Notes model, or the idea that X replaces newspapers. X could still be very important. It will not tell you the things no one wants you to know.
And that's what journalism can do. Or, it doesn't have to be scandalous per se, but the things that require the kind of sourcing that isn't publicly available, and I think it's hugely important, because if we go into a world where our source of truth is other people's opinions, and also very powerful people with the biggest megaphones on the planet swarming those channels, that's deeply, deeply problematic. Because again, every citizen needs information to make decisions.
And so I do think professional journalism, the resources that a newsroom can bring are very, very important. Are they flawed? Yes, and to your point, we've seen that in the major news organizations, but there are just simply facts that would not be revealed. And there is just so much that would not be known.
I mean, I think we have a reputation as a publication of being very tough, and some people would maybe say antagonistic in some ways, but what that really boils down to is, we're actually not–they also say that and then they say, “Well, you call us the most times and you give us the most information about what you're writing.”
So we're very cordial, but you can't ignore the fact there are things that people don't want reported because they don't have an incentive to, but there might be a very strong public incentive for those things to be out there. And I think ultimately that is what journalism is at its best, and I don't think community-noting 12 different views or 1200 different views is going to get you to the same answer there.
I think it's actually quite different.
[00:42:27] Michael Eisenberg:
You alluded before, I just want to point it out, to the Sam Altman, like what happened behind the scenes there. It should be said that the place to go to for what happened there was The Information by 100 miles.
[00:42:38] Jessica Lessin:
I had a little bit of PTSD, because we just had the Thanksgiving after last year where we were all reporting in closets when our family were. But I think that, and thank you for saying that, Michael–the team did an amazing job–but I reference that too, because I think it was a moment where, in tech, we have so many really wonderful and knowledgeable Substackers who have great newsletters, who cover so many interesting things that happen, and they analyze a lot of the industry. And I think those kind of went silent when there was a big news event, because it underscored that the places–and there were others, like Bloomberg–that could really peel back the curtain weren't, you know, one or two highly intelligent writers, but really teams that were triangulating and using relationships built over decades across companies and industries that were able to really help readers understand what was going on in a moment.
And I think it was an incredibly validating time for the importance of a newsroom. It's one I'm close to, but there's so many of those, and I think as an industry, we have to do a better job kind of articulating–I mean, I think readers recognize it, but, yeah, what is it that happens in those moments that wouldn't have happened? And you could have at the same time, right, on X, all sorts of opinions about it, and employees sharing this point of view or that point of view, but none of those people had the full story.
And what a newsroom can do at its best is get everyone closer to the full story. And that's important.
[00:44:23] Michael Eisenberg:
You said a pile of times since we started that trust has been eroded in a lot of these media organizations. We just talked about the power of a newsroom. A little bit it doesn't matter because, I guess, because of the erosion of trust.
I'll ask you two questions: what does media need to do to earn back trust–and please be very specific–and number two, what happens in a post-trust world of media and newsroom?
[00:44:53] Jessica Lessin:
I know.
Michael Eisenberg:
I think we're there.
Jessica Lessin:
I know. We're there. We're there. I have to embrace that. A good friend of mine, like, recently was like, “Get your head out of the sand. We're there.” So, media organizations have to not screw up. You, you just have to earn it. You have to earn it with every article. You have to earn it with every headline. You have to–
[00:45:18] Michael Eisenberg:
We're not doing it. So, like, it's like, there's an institutional problem here, so what do they need to do?
[00:45:23] Jessica Lessin:
Well, I think you need to make sure you have the right talent, and you have to make sure you have total alignment on the journalists and editors you're hiring; do they fit your mission, and a real sense of what that mission is.
[00:45:38] Michael Eisenberg:
And where did they get hiring wrong and you got it right?
[00:45:41] Jessica Lessin:
I actually think the New York Times has been upfront about some of the mistakes they made in hiring around COVID.
And I have to remember, I think Joe Kahn may have mentioned this in a Semaphore interview, but I read it somewhere, and I think he said, “We got caught up in hiring a lot of people who were here for like ideological reasons.”
[00:46:04] Michael Eisenberg:
Yeah, I've been on record saying I think he's there for ideological reasons too, just to be clear.
[00:46:10] Jessica Lessin:
Got it. Yeah. I mean, COVID was hella disrupting, and weird, and disorienting in so many ways. And we all made decisions. But there is that, which is wonderful, it must be harnessed–that, like, crusading aspect of being a journalist. Like, I think that is so core and awesome for the profession, but when channeled towards a particular ideological position versus, you know, holding power to account or something, I think that can be problematic.
So I think the industry, which again, has been financially troubled, so not exactly the most attractive for a lot of talent, I think they swung too far there. So I think you have to hire the right people. You have to have the right incentives. I mean, we are highly analytical, and obviously very subscription focused, but we do not comp our reporters based on the number of subscriptions they drive, and others do.
And I don't do that because it's distortionary in a lot of ways. And it also doesn't necessarily always reflect the quality of their work or effort. But you have to make–
[00:47:24] Michael Eisenberg:
I had no idea that people get comped for the subscriptions that they drive. That's pretty stunning.
[00:47:29] Jessica Lessin:
Yeah, they do. And so it's, you know, it's all of those things, right?
I mean, how do you, your question is sort of, how do you build a trusted institution? And so, I think it's more like a million little things than putting a banner out inside and saying, “Trust us!” I also think we have to make sure we're trusted from a distribution point of view, like reaching a lot of people, right, so we have to stay aggressive, and how we disseminate our news, and grow our audiences and just, you know, be there.
And then there's a movement inside of news to say, we have to talk about what we do more, more of the craft, and help people understand that. I don't know how much people care to be honest, but I have made a concerted effort, when people push back against our stories, to actually publicly explain why we're standing by the story and maybe even reveal more information about the reporting process so that people understand, really, what went into it.
You know, we've had some stories that have gone inside, NVIDIA's rise, but also real troubles that they've had scaling some of the most recent technology that they've pushed back on. And I've gone public talking about the four different people we talked to, and, you know, just really helping people understand that.
Does that move the needle, big picture? I don't know. But it's important and we'll keep doing it.
[00:49:08] Michael Eisenberg:
And you might be wrong even from four people. It's impossible to know.
[00:49:14] Jessica Lessin:
No, we totally could. Of course, but I think people just understanding, right?
And also they never, these companies never say it's wrong. It's their corporate speak, or whatever. And so I think I'm hacking that as well. And then, of course,when next quarter on the earnings call they confirm your story, which happened twice, I think it's important to also point that out.
[00:49:36] Michael Eisenberg:
To remind them on X, of course, or any information–
[00:49:39] Jessica Lessin:
Yes, everywhere, actually, broadly, broadly.
[00:49:42] Michael Eisenberg:
Is there any event that's happened that has eroded your trust in media?
[00:49:46] Jessica Lessin:
Yeah. I mean, I see what everyone else sees, and I'm also perturbed. I think that the coverage from around Trump, you know, I mean, you could pick apart it, it's so many aspects of it, and obviously, the war in the Middle East too, which you've been much closer to. But I mean, I see a lot of headlines that give me a pit in my stomach or that seem off, or make me wonder sort of what's going on. I think it's a constant process. The thing about news, and not to be defensive for the industry, but the big organizations publish thousands and thousands of pieces a week, I mean, I don't know, but a shit ton of journalism.
And I think, do they get it wrong a lot of the time? Yes, but they also get a lot right. That isn't excusing what's wrong, but I'm kind of a believer in, you're gonna get some stuff wrong, fix it right away, and then do better next time–as opposed to thinking that the bar is getting at 100 percent every time.
But what worries me the most is when I see journalists who I think are more crusaders than reporters. That’s what nags at me, in part because I know that if they focused on being great journalists, they could also have a tremendous impact on the things they care about.
And so I think they're almost shooting themselves in the foot by leading with the crusader. And that does worry me, because that's a big part of the eroding trust.
[00:51:34] Michael Eisenberg:
I'll say, I think more people are going to journalism to be crusaders now than to be reporters or investigative reporters.
I see a lot of that. Let me ask you a different question. I want to switch channels for a second. I'd like you to tell us about the accelerator at The Information.
[00:51:51] Jessica Lessin:
Yeah, sure. So a couple of years ago, we started an accelerator to help new news companies that want to get off the ground.
And it was simply, we had a new model, and people would be interested in learning more. And I thought it was really painful to learn some of the lessons we learned that were very simple. Like make sure you capture that email address so you can remarket to the person down the line. Like the blocking and tackling of the business.
And so, we brought in a couple classes of entrepreneurs who have gone on to build really interesting news businesses, among them on the Anklor, which is a news publication out in Hollywood under Richard Rushfield, Impact Alpha is another that covers the clean energy economy. and many others.
And we went from sort of having discrete classes year after year to now just sort of being in constant conversation with interesting businesses. We just invested in Dynamo, which is a new video company from Nick Carlson, the former editor of Insider, and just try to be as helpful as we can.
So I'm an operator, not an investor. I've learned this. My other two, you don't know where you– I kind of feel it's actually pretty black and white. I'd rather climb the hill than look around the corner, but, I've learned a lot from these businesses, and we're happy to be as helpful as we can be both tactically and sometimes with resources.
So it's fun. I've learned a lot.
[00:53:32] Michael Eisenberg:
What's next for The Information?
[00:53:34] Jessica Lessin:
Man, I mean, this tech news cycle does not stop. We now have a presidential best friend of chief, you know, coming from Silicon Valley with Elon Musk. And I think we're at some fascinating moments in AI. So, you know, we think a lot. I'm always trying to expand our coverage in our core. How can we go even deeper? We're about to launch our second AI newsletter with a different bent on AI and going even deeper, even wonkier. Probably, I don't know if I should say that–
[00:54:04] Michael Eisenberg:
Say more Jessica.
[00:54:05] Jessica Lessin:
It's very good. It'll be very relevant to businesses. and it's coming in January. I think that's enough.
Michael Eisenberg:
You should tease it out, come on Jessica.
Jessica Lessin:
You're a good reporter. It'll be great. I love the team that's working hard on it.
[00:54:18] Michael Eisenberg:
Is it like how AI disrupts like classical businesses? And what do you need to do to AI your business?
[00:54:23] Jessica Lessin:
Those will be questions answered by reading it. Yes, those will be some.
But it'll be, you know, we have a daily newsletter, AI Agenda already that covers AI broadly. And this will be a little more–
[00:54:34] Michael Eisenberg:
What's the title of the new newsletter?
[00:54:35] Jessica Lessin:
So good, so good. Maybe even work in progress, but, so we're going to go deeper–energy, data centers, power. We have a franchise called The Electric, which years ago, if you would ask me, would we have a battery publication and cover, you know, manganese, I would have said, what are you talking about?
I mean, it's one of our biggest growth areas.
[00:54:57] Michael Eisenberg:
Wow. Batteries!
[00:54:59] Jessica Lessin:
Batteries.
[00:55:02] Michael Eisenberg:
You know when I got into the venture business, it was said the road to VC hell is paved with batteries.
[00:55:04] Jessica Lessin:
Yeah. Well, that's true. But a lot of good stories along the way. So, but also, everything's been disrupted by tech.
We've had a ton of interesting coverage around the sort of struggles of fintech companies as related to the traditional banking system, and the challenges of fintechs and finding banks to partner with as the regulators have come a calling. And I think that's–
[00:55:35] Michael Eisenberg:
Well, that'll be interesting with the change of the administration.
Jessica Lessin:
Exactly.
Michael Eisenberg:
Because I argue a huge amount of that came out of the den of Elizabeth Warren.
[00:55:40] Jessica Lessin:
Exactly, it did, but I don't think it's just going to be smooth sailing because of the changes there. So broadly, in finance ,and continuing to do more there, we've been growing a finance team out of New York and we'll continue to do that.
And Asia is also a big area of focus. You know, I feel a little bit contrarian and that many of my peers have pulled out of China, Hong Kong, obviously, but we're actually growing our team in Hong Kong. They've been doing incredible work, and we're looking to grow our business in Asia. So a lot cooking, a lot cooking.
[00:56:20] Michael Eisenberg:
Alright, what's the hardest thing you do? The hardest thing you do?
[00:56:23] Jessica Lessin:
Lead.
[00:56:25] Michael Eisenberg:
Lead. Okay. Sam didn't say it was being married to him. He didn't say that, but he told me to ask that question. So do you admire Rupert Murdoch?
[00:56:35] Jessica Lessin:
I wonder if that was a Sam question.
[00:56:38] Michael Eisenberg:
It is.
[00:56:39] Jessica Lessin:
So yes and no. So yeah, as a media mogul empire builder, yes. I don't share his politics, but I do think we need to be better building the next generation of legacy media institutions. And he's done that. And he clearly loves the news. And I think that's cool to watch. And I hope I love it as much at his age.
[00:57:08] Michael Eisenberg:
What were you wrong about when you started The Information?
[00:57:11] Jessica Lessin:
Oh my God. So many things. There were little things that probably aren't that interesting to people, but I never wanted to launch an app.
I thought it'd be so stupid. No one's going to download another app. As soon as we did, engagement went through the roof. So, you know, a lot of those tactical things. I also was wrong, I made a lot of early hiring decisions based on pattern mapping to myself. Like, you know, there were people we hired who I was struggling to manage, and I realized it was because like, they like to write in a quiet room and I like to write in a loud room.
So, like, little things that it was a big leap in my management curve, when I kind of recognized that, you know, not everyone was like me. I know that sounds very silly, but I was sort of pattern-matching to myself for a bit. And then when I stopped doing that, we really started to take off on the talent front.
[00:58:14] Michael Eisenberg:
What do you want to tell Harvard-Crimson-Jessica?
[00:58:17] Jessica Lessin:
Oh my God. Keep going. Keep going.
[00:58:21] Michael Eisenberg:
It gets better.
[00:58:22] Jessica Lessin:
Keep going. Yeah, I mean, it's just such a fun and exciting job, but it's also, I mean, there are always those people who never call you back or that story that you don't get or that moment that the industry looks like it's collapsing.
And I think, I remember talking to Marni Barron a couple of years ago, the legendary editor of the Boston Globe and Washington Post, and he said to me, “Jessica, journalism has been in constant disruption since it began,” or, I think he said, since the course of his career. And so I think that's really important.
There are a lot of things to kind of give you pause about. This profession, or this career, it's very difficult to–we don't get to launch a product and then tweak it and scale it. We have to launch our product every hour. We have to keep publishing. The second we stop publishing, we haven't earned that trust.
And so there is a relentlessness to it. So I would say keep going.
[00:59:26] Michael Eisenberg:
I normally ask this question at the beginning. I wanted to ask it at the end today. What is your core value?
[00:59:32] Jessica Lessin:
I only get one, huh? I mean if you, I really do think, I'm going to make it two parts. I think hard work and alignment are things I think about a lot.
I think that continuing to try, and go, and move, and stay in the game is something I think about a lot. And I've been fortunate to watch so many young CEOs become great CEOs, and I think they really have that in common. They stick around, and they don't give up, and I think that's really clear. But I also think the alignment, making sure that that's going towards something that's your goal, and that, and there's that consistent alignment that you're rowing hard, but you're always rowing in the right direction, whether that's an objective you have with your family, or an objective you have for your business, or an objective you have with your relationship, I think a lot about those things. Because the world is hard, and life is hard, and you're juggling a lot of things, and just being on the same page and being intentional about that, is really important to me.
[01:00:55] Michael Eisenberg:
Have your values ever come into conflict with your work as a journalist?
[01:00:59] Jessica Lessin:
You know, this is going to surprise people–they really haven't. Because, and I get this question all the time, because when you've been in the industry long enough, you know a lot of people and those people often get mad at you with your journalism, right?
Or you can face a situation where you've learned something important and unflattering about someone you like, right? But because to me, they're separate worlds, right? I know what my goal is with The Information. I know the values that I'm also more comfortable communicating to people in those situations about those values and articulating why, despite them screaming my ear off, you know, we're kind of proceeding.
So it's not that you always feel great about it, but it's pretty clear cut. And I think I've really learned that good communication can get you through a lot of potential tensions.
[01:02:01] Michael Eisenberg:
All right, last two. So, who is someone that you'd like to give a shout out to say something kind about, that you think deserves, or should get more attention than they're getting?
[01:02:13] Jessica Lessin:
These are great questions. Who deserves more attention?
[01:02:18] Michael Eisenberg:
If it doesn't work for me in VC, I'll come to you for a job.
[01:02:21] Jessica Lessin:
Yeah, I mean, you're crushing it. Well, I want to think about folks in my field, but then you talk about other people and then I got so mad. Who deserves bigger shout outs? You know, because I gave them a shout out, I have to take every opportunity to praise the New York Times for suing OpenAI.
I really do. Because I think in that moment, they made clear that they are in this for the long term, and I think the courage every other news organization taking the half a million dollar check, which, by the way, is half in OpenAI credits, not even cash you can do anything with, I aspire to continue to have those courage and the decisions that I make for our organization.
So I think it's really, really important.
[01:03:21] Michael Eisenberg:
What is a strongly held opinion that you've changed over the last year?
[01:03:27] Jessica Lessin:
I used to think if you left The Information, you could [01:03:30] never return. I know that sounds like, I realize now as a founder how naive that sounds because if you have the opportunity–
Michael Eisenberg:
You're either on my team or you're not!
Jessica Lessin:
Yeah, I did. I really did. And the reason I felt it was because I would think, when you're a tiny team and someone key leaves, the burden placed on the rest of the team is signable.
And so to me, it was like, okay, you can move on. But now, you're adding to what everyone else is going to have to work harder, recruit your replacement, blah, blah, blah, blah, blah. And you can make that choice, but I'm going to somehow protect the team by saying “fare you well.” I think we've now, we probably have four or five boomerangs of the information.
Michael Eisenberg:
Oh wow.
Jessica Lessin:
And I couldn't feel more deeply that if you were an awesome figure and an awesome contributor, you know, that the door is open. And if there's a role that makes sense, I feel that very deeply. It's not the most significant example, but it really hits home because of how stridently I believed it, and how far I've come to the other side.
[01:04:46] Michael Eisenberg:
You know, I can’t not ask you this question, Israel is such a big tech hub–when are you putting someone on the ground here? When are you going to come here?
[01:04:53] Jessica Lessin:
No, I know. It's a great question. Yeah. I'd love to come back soon. I actually, we may have an exciting family thing that pulls us out there before too long.
It is a great question and we absolutely will. And I think I've made the choice–I have felt that being too broad internationally would spread us thin, and that when I go into a place, I want us to be excellent and really stand out. And so we've tended to trying to go into markets where we can have five or six people and really kind of dominate.
So we should talk more offline about how we might do that over there.
[01:05:29] Michael Eisenberg: We'll do that. Maybe I'll put my hand up for the job. I don't know.
[01:05:31] Jessica Lessin:
I mean, at least a columnist with these questions.
[01:05:35] Michael Eisenberg:
Well, thank you, Jessica, for joining me on Invested, and you can learn more about Jessica on X. She's not part of the cult of Elon, but you can still find her on X.
Jessica Lessin:
You can find me!
Michael Eisenberg:
J E S S I C A L E S S I N on X, and I highly encourage everyone to subscribe to The Information. It's a great publication if you're in, or not in, our industry. So thank you so much for taking the time, Jessica.
[01:05:58] Jessica Lessin:
Thank you so much, Michael. It's great to chat.
[01:06:00] Michael Eisenberg:
Great to see you.
[00:00:00] May Piamenta:
He told me, “You have three weeks to present your company's idea to all commanders of the unit.” And I was like, “Okay, I'm going to do it.”
It is my biggest, biggest pride. It’s been such a crazy ride.
[00:00:12] Michael Eisenberg:
We're going to get into that in a second. When you started the company, you were still in the military,
[00:00:16] May Piamenta:
Correct.
[00:00:16] Michael Eisenberg:
How did that happen?
[00:00:17] May Piamenta:
The nonprofit market in general is really unfair. We need to figure out how we're getting all of these organizations out of survival mode.
I was caught with a computer, and they wanted to send me to jail. I cried for six weeks. I had no idea what I'm gonna do.
The toughest thing about layoffs, it's not the layoff itself. It's keeping a team after.
If you ask me what is my biggest achievement from the pivot, it's the fact they have the same team.
Wow, October 7th. It's probably the toughest question you asked.
[00:00:47] Michael Eisenberg:
I am super excited about today's podcast. I am here with May Piamenta, someone who I admire. She doesn't even know why I admire her so much, but she's heard it before, partially. And I'm thrilled to have you on the Invested podcast, because I actually can't think of any young person who more embodies what we talk about on this podcast than you. And so welcome, May.
[00:01:11] May Piamenta:
Thanks so much Michael. I’m super excited.
[00:01:14] Michael Eisenberg:
I think you're also the youngest guest we ever had on the podcast–without giving away your age or asking you yet how old you are. How old are you?
[00:01:20] May Piamenta:
24.
[00:01:21] Michael Eisenberg:
May is 24. Tell us who May Piamenta is today.
[00:01:24] May Piamenta:
So, hi everyone, my name is May, I'm the co-founder and CEO of Vee.com. I'm a board member of a few non-profit organizations, and I'm based here in Tel Aviv.
[00:01:36] Michael Eisenberg:
And now you're going to be blown away. May, tell us about yourself, but I insist that you start, like, from the womb, like where you grew up, everywhere.
[00:01:43] May Piamenta:
Okay, so firstly it's not hard. It's not, I'm not much of a tough benchmark to be the youngest one, you know, on the podcast. So I'm May, I'm 24. I grew up in Dimona.
[00:01:55] Michael Eisenberg:
Okay. Anyone listening to the podcast that knows where Dimona is?
The silence says that nobody knows. So tell everyone where Dimona is.
[00:02:02] May Piamenta:
So Dimona is a small town in Southern Israel, but it's pretty big. Probably the best city in the world. I love Dimona. I think it contains like 40,000 people. I grew up in Dimona. I'm the oldest sister out of three siblings. Amazing, amazing parents.
[00:02:22] Michael Eisenberg:
Yeah. Like Dimona is, you get down to Beer Sheba in the desert more or less.
May Piamenta:
Right.
Michael Eisenberg:
And you make a left turn, kind of, and go east.
[00:02:28] May Piamenta:
Correct.
[00:02:28] Michael Eisenberg:
And then you see desert around, the middle of the desert, and there's more desert, and then there's Dimona.
[00:02:34] May Piamenta:
Correct.
[00:02:34] Michael Eisenberg:
Of 40,000 people.
[00:02:36] May Piamenta:
Yeah.
[00:02:36] Michael Eisenberg:
And that's where May grew up. It's not a high tech hotbed. Would you agree?
May Piamenta:
Oh, no. It's not a high tech hotbed.
[00:02:41] May Piamenta:
But Yossi Benayoun went out of Dimona.
[00:02:43] Michael Eisenberg:
Yossi Benayoun, who is? Famous music star?
[00:02:47] May Piamenta:
No, football.
[00:02:48] Michael Eisenberg:
Oh, football player. Sorry. That's another Benayoun. You see, I don't know anything about pop culture, which is going to make this conversation interesting.
[00:02:53] May Piamenta:
That's Amir Benayoun. Amir.
[00:02:54] Michael Eisenberg:
Amir Benayoun. Sorry. Okay, and so you get to the middle of Dimona. And there's like nothing there.
One of the last times I was in Dimona, there's something called “Shchunat Hanitzachon,” which is Victory Square. It looks like it's a victory from, you know, the Soviet era.
[00:03:07] May Piamenta:
Oh yeah.
[00:03:08] Michael Eisenberg:
There's like, big blocks. Your mom grew up there. And just to paint this picture for everybody, it's a full square block, actually two full square blocks, with Soviet-style, square buildings with a big courtyard in the middle, which is just concrete, basically, right?
[00:03:22] May Piamenta:
Looks the same, looks exactly the same.
[00:03:25] Michael Eisenberg:
Okay. And you grew up there, not a hightech hotbed. And now tell us about your high school days, and what you started there.
[00:03:31] May Piamenta:
So I think it actually goes even before that. When I was eight, my best friend, Amit, passed away from cancer. She was the most important part of my life. When she had her leukemia, she couldn't take any medicine or do anything without May. She needed me next to her and we were super close. We were living, you know, one next to each other, since we were born. And when she passed away, it was like all of a sudden–she had no severe changes in her condition–and after she passed away, I just knew I'm gonna do something about it, but I didn't know what.
I was super young. I was eight. When I turned 13, I read a book, I think it was called The Fault in Our Stars, or something like this. And she spoke in the book about how tough it was to have no hair, and how it was super tough for her socially. And that was the first time I thought about how it was for Amit.
I think it was a week after I read the book, I saw an article in Dimona’s local newspaper–not any fancy newspaper–where they invited girls and young women to come and donate their hair. So I went and said, “Okay, I'm going to go and I'll see, like, how hard can it be?” And I went.
The issue was, I didn't have enough hair to donate, so I said, “I'm gonna do this long braid, and I'm just gonna shave the rest.” And I said, “Okay,” and I left the room with no hair. And that was the first time I was so proud of myself, because I said, “Wow, this is how Amit felt.” And I felt like I knew what she went through, and I knew she's proud of me, but as a little girl, it was super tough socially. I felt like what she said in the book.
[00:05:37] Michael Eisenberg:
And just to be clear, you shaved your hair to donate it to cancer patients, so they could have hair.
[00:05:42] May Piamenta:
Correct. Time passed and I had to switch and move to a different school, specifically because kids were evil, and I had to switch to a different school.
[00:05:53] Michael Eisenberg:
You were being bullied for shaving your head and giving your hair to cancer patients.
[00:05:58] May Piamenta:
Yeah, you know, back then it was such a disaster for me. I didn't know what to do, and the only option I saw was I needed to leave this school. But now, I really don't care why they did it. And it's like, to me, it just built my character even more.
When I do good things, I need to be proud of it no matter what. And I'll tell you a story. The inspiration for me, my inspiration–I had two role models in my life. One is my mom. She's the kindest person on earth. By the way, she now hosted all the evacuees from Otef Aza in her hotel in the Dead Sea for a year.
And she became one of the kibbutz, like she became a kibbutz member. They wanted her to come move to the new kibbutz with them. She's amazing.
[00:06:48] Michael Eisenberg:
These are the Gaza refugees, the people who had to leave their homes after October 7th. Many of them were relocated, quote unquote, or evacuated to the Dead Sea area, where there are a bunch of hotels. And her mom runs a hotel there and took them all in.
[00:06:59] May Piamenta:
Yeah. Her name is Chagit. My other role model is my grandfather. He passed away exactly a year ago, a month after October 7th. And my grandfather, his name was Joshua–he was the world for me, and he was the deputy mayor in Dimona. And he was doing only tzedakah.
Michael Eisenberg:
Only charity.
[00:07:25] May Piamenta:
Only charity. All the time.
[00:07:26] Michael Eisenberg:
If you're the deputy mayor in Dimona, I should say, everybody knows who you are. I've actually been down there, met the mayor, Benny Bitton, and everybody, he's like Superman of Dimona, so to speak. Everyone knows who he is. And May's grandfather was his deputy.
[00:07:38] May Piamenta:
Yeah. And Mayor Cohen's deputy, the one before Benny, he was only doing charity. I remember him taking me at 4 a.m. to go and fix this random women's problem she has in her house, and we need to do it now, and we're going, all of us, because she needs help right now, and it doesn't matter what's the time.
And I will connect to the story of the hair. I came back, and I was so, it was too much for me, and I said, “If I need to stay in this school, I need to have hair.” So I ordered, on eBay, a wig. It was a blonde wig. I have no idea why I did blonde, really. And I think it was like a day or two days after, I couldn't find the wig, and I had to go to school.
I was like, “Sabah, where's the wig?” We lived together after my grandma passed away, also from cancer, we moved to live with my grandfather. It was like, where is the wig? And he's like, “You're not wearing this. I threw it away. You're beautiful with or without the wig.” And he gave me the power to say, I just need to be proud of the good things I do. And everyone else, they just will never understand.
[00:08:51] Michael Eisenberg:
Wow. And so you switched schools then? Because people, they bullied you about your hair and your grandfather gave you energy, and you went to the next school.
[00:09:01] May Piamenta:
Yes.
[00:09:01] Michael Eisenberg:
And then what happened?
[00:09:02] May Piamenta:
That was the best thing that could have happened to me. And when I landed in the new school, I had no friends, and I sat next to this amazing, amazing girl that ended up being my best friend in school. Her name was Ziv. She also knew Amit, so that was closure for me. And she said, “You have to come with me. We have a robotics team, and there are interviews today.”
And I was like, robotics? Like, this is my first day, this is what you're telling me? No, no, no, no robotics for me. And I came. Long story short, I joined the robotics team of the school. This robotics team is part of a huge competition of an amazing organization called FIRST, an American nonprofit organization that runs robotic competitions all around the world. I joined when I was 13, ended up leading the team with Ziv, and the rest of the team to be semi-world champions in my last year, representing Israel, representing Dimona, and yeah.
And now I've been mentoring the team, up until now.
[00:10:09] Michael Eisenberg:
And where did you go to as part of this team?
[00:10:11] May Piamenta:
Detroit, Houston, Texas.
[00:10:14] Michael Eisenberg:
Which was like?
[00:10:15] May Piamenta:
A whole complete new world to me. And also English, Michael. English. It was so, you know, unique to know English where I grew up. Like to me, when I go in Dimona right now, people are like, who here's the American?
But it really was such an amazing pedestal for me, from where I started to what I became. And I had a mentor in the team called Etty. She's the woman who made me who I am.
[00:10:48] Michael Eisenberg:
Tell us more about Etty.
[00:10:50] May Piamenta:
Wow, so Etty, she is a superhero. She's a biology teacher, who ended up taking ownership of this team, started it, mentored it up until today.
She is the woman that just believes in kids that nobody else believes in, and she gives us so much strength, and she really changed my life. She's probably the only person that you'll ask me to talk about, and I have no words to describe Etty.
[00:11:29] Michael Eisenberg:
I just find it fascinating how we meet people through our life, particularly kind of unique teachers after a bunch of bad educational experiences, and that kind of one person who's there can literally shift you.
For me, and people have heard this before, there was a rabbi named Rabbi Michael Hecht, he's not very well right now, who was a person like that for me in the 11th grade. And you know, people don't run into somebody like that. It's a pity.
And then you finished high school in Dimona, you go to the military where you do–well from Dimona, keep going.
[00:12:02] May Piamenta:
Yes. Actually before we go to the service, I think a big part of me and a big part of my journey was actually Pineapple, my first business.
[00:12:13] Michael Eisenberg:
I was going to come to that afterwards, but you can go to it now. Go ahead.
[00:12:16] May Piamenta:
Oh no. So we can definitely go to the army, but Pineapple also was a huge part of me.
[00:12:22] Michael Eisenberg:
How old were you when you started Pineapple?
[00:12:23] May Piamenta:
14.
[00:12:23] Michael Eisenberg:
Okay. I thought you were 16, but I'm glad to hear it's 14. Go ahead.
[00:12:26] May Piamenta:
Yeah. Okay. I actually sold Pineapple just a month before I turned 17.
[00:12:31] Michael Eisenberg:
So tell everyone what Pineapple was.
[00:12:33] May Piamenta:
So, Pineapple was an e-commerce shop for swimwear and beach equipment.
[00:12:41] Michael Eisenberg:
For those who don't know, Dimona is nowhere near the beach. Right?
[00:12:44] May Piamenta:
Yeah, no.
[00:12:46] Michael Eisenberg:
There are sand dunes around, but there's no beach yet.
[00:12:48] May Piamenta:
No beach, no beach. So it was just a regular day in the mall, in this small Dimona mall, that everybody knows because everyone stops there as they drive to Eilat.
[00:12:59] Michael Eisenberg:
Yeah.
[00:13:00] May Piamenta:
And I remember when I went to the mall with my friends, and one of them wanted to get swimwear and she said, “There's no way that's the only option. It's so expensive.” And back then we had someone from the Bedouins community, and in Southern Israel, really close to Dimona, that his wife, he was working with my dad, his name was Munir and his wife was a sew-er.
[00:13:30] Michael Eisenberg:
A seamstress.
[00:13:30] May Piamenta:
Yes. And when I met Munir and she came, she used to come to us once in a while, and I asked her, “Look, Shafira, is there a chance you can make, like, five swimsuits, like pairs of swimsuits that I can give my friends for like 50 shekels?” And she said, “Yalla, okay, let's do it.”
So we did five and then we did 10, and then we did 20, and then we did 50, and it exploded in the school, and then exploded in the city. And I said, “Okay, I need to build a website, and let's start.” And I used Wix. I remember going on Zooms with Nir Zohar.
[00:14:10] Michael Eisenberg:
The president of Wix.
[00:14:11] May Piamenta:
But like 10 years ago.
[00:14:12] Michael Eisenberg:
Yeah. When he was still sitting like on a porch on Hashmonaim street in Tel Aviv, before Wix was a something.
[00:14:18] May Piamenta:
Yean, giving me a demo of Wix. I was one of the first businesses to use their payment systems and it was amazing. And this is how I built Pineapple. My uncles did deliveries for me all across Israel.
And when I turned, I think it was 16 and a half, I wanted to really focus on robotics. And I was like, okay, I need to finish school properly. I wanted to reach a good unit in my army service, and I said, “Okay, I'm gonna give up a Pineapple,” and I sold it to an amazing designer. As she now she's part of TwentyFour Seven.
I don't think Pineapple works since 2021, but it was such a beautiful first business.
[00:15:01] Michael Eisenberg:
Why did you call it Pineapple?
[00:15:03] May Piamenta:
That was the first thing I saw in the logo maker. Honestly, I'm really not a name person. People ask me, “Why did you call Vee, Vee?” And I'm like, “I really don't remember.”
[00:15:14] Michael Eisenberg:
And now, what'd you do in the army then?
[00:15:17] May Piamenta:
So I served in an amazing unit. I served combat. I know, I don't look combat.
[00:15:27] Michael Eisenberg:
You can't see, but this is not like, but you can see May’s face, but she doesn't exactly look like your prototypical combat soldier.
[00:15:34] May Piamenta:
Yeah.
[00:15:36] Michael Eisenberg:
Maybe with the shaved head you would have, but–
[00:15:39] May Piamenta:
So actually my family, it's all about Israel. My dad is also a Nechei Tzahal.
[00:15:48] Michael Eisenberg:
A wounded veteran.
[00:15:50] May Piamenta:
Yes. So he was injured during his training. He was shot in the leg, and he still has severe injuries since then. So to me it was a no-brainer that I'm doing combat. I was pretty excited. It was clear that I'm choosing the hard way, and I'm doing something meaningful.
And I served in a unit that is called “electronic warfare.” I cannot really elaborate a lot about my service, because it's really super classified, but I served for two years, eight months. I really wanted to even do more, but I decided to make more impact outside of the military.
[00:16:29] Michael Eisenberg:
Okay, now I'm going to pause for a second and ask the question I normally ask at the beginning, but I think it would be impossible for people to understand any answer you would give to this question without hearing your background, which is, if I asked you to tell me what is your core value, what is it?
[00:16:41] May Piamenta:
The thing that comes up first is discipline. Just to be a good person. Everything we do to do with the people in mind and make sure we do things with honesty, transparency, be “benadam.” Before everything else, to be a good person.
[00:17:02] Michael Eisenberg:
Be a good person. What drives you every day? Like sitting here,people don't understand how much energy you have.
[00:17:07] May Piamenta:
Yeah.
[00:17:07] Michael Eisenberg:
Although it is infectious.
[00:17:09] May Piamenta:
I know it sounds such a cliché, but to really create the change I want to see in the world. Not just expect it to happen, but really create the change and make sure that less families will need to deal with what Amit's family has to deal with, so kids will not have to go through what I went through. And just really create the world I would want myself and my kids and their kids to live in.
[00:17:45] Michael Eisenberg:
So, your current company is called Vee. Why don't you tell us for a second about Vee?
[00:17:50] May Piamenta:
Yes, wow. Vee is one of the things that I really, really love. My biggest, biggest pride. Vee, we’re changing the world by enabling nonprofit teams and nonprofit founders to grow their teams efficiently without hiring people.
So we're solving nonprofits’, basically their biggest problem, which is hiring and increasing capacity, by giving them AI agents that can hire, just by subscribing to specific, different products and tools–from grant writing, social media management, bookkeeping, admin work, everything they need and they would love and dream of hiring, but they can't. So they take our agents instead. They actually have names and faces and, with Vee, it's been such a crazy, crazy ride.
[00:18:46] Michael Eisenberg:
We're going to get into that in a second. Thank you. But when did you start Vee?
[00:18:50] May Piamenta:
Four and a half years ago, May 2020.
[00:18:52] Michael Eisenberg:
So you were 19 and a half when you started Vee?
[00:18:54] May Piamenta:
I was actually 20 exactly. I was born in May 2000.
[00:18:58] Michael Eisenberg:
Okay. What's your birthday? [00:19:00]
[00:19:00] May Piamenta:
May 16th. I'm Taurus.
[00:19:01] Michael Eisenberg:
Two days before me.
[00:19:03] May Piamenta:
You're also a Taurus.
[00:19:04] Michael Eisenberg:
I don't know any of these things. But I know that I'm born on May 18th. I know my birth date. Like I said, you know, I don't know soccer players. Or music. Or astrology. Not my thing.
If my math is correct, and you joined the army at 18, and you served two years and eight months, when you started the company, you were still in the military?
[00:19:26] May Piamenta:
Correct.
[00:19:26] Michael Eisenberg:
How did that happen?
[00:19:28] May Piamenta:
That's a long and super funny story.
[00:19:31] Michael Eisenberg:
Okay, we have time, go ahead.
[00:19:33] May Piamenta:
So I wanted to start Vee years before. When I was in FIRST–when I was in the competitions, I ended up joining FIRST, the organization that runs the competition. One of the founders of the organization, his name was Woody Flowers. He passed away in 2019. He was 94. He was an amazing man. So he wanted me to join the org, and I was really clueless.
I was the first and only girl to join from Israel. It was difficult. The entire team is based in Houston. And when I joined the organization, I was like, what a mess. And they are a huge organization. They run 150 million in donations every year, and programs. And what was interesting about FIRST is the organization is really large, but they are the fiscal organization, like the mom organization of over 600 smaller orgs.
[00:20:29] Michael Eisenberg:
Like the one in Dimona.
[00:20:32] May Piamenta:
Yeah. To me, what was really interesting is to see the differences and pain points of how a large organization that runs like a huge enterprise–everything is like clear CRMs, just like a tech company–but the 600 organizations was a huge mess. They have no manpower. No way. They were all in survival mode.
And I was like, wow, we need to figure out how we're getting all of these organizations out of survival mode. Because the nonprofit market in general is really unfair. You have the large organizations who get all the money, have huge operations, and the small ones are just trying to compete and be right-sized to compete against the big ones. And it's so tough for them.
So I said, “Okay, let's see what we can do.” And of course I served, and my military service was really tough. I served eight months in Mount Hermon.
[00:21:28] Michael Eisenberg:
Mount Hermon is like the northern post mountain in Israel.
[00:21:32] May Piamenta:
It's very cold up there.
[00:21:33] Michael Eisenberg:
It's very cold up there, and even snows there. It's actually Israel's only, you know, ski run. I wouldn't even call it a ski resort. It's Israel's only ski run, with two little chairlifts and an army base. And it's cold. People don't realize that about Israel, but it's like four or five different climates in this tiny little country.
[00:21:48] May Piamenta:
Yep.
[00:21:48] Michael Eisenberg:
Yep. Okay.
[00:21:50] May Piamenta:
I started the company when I was in the Hermon. And I had this amazing commander, and he said, “May, you cannot bring a computer here. You cannot, it's an intelligent base. You cannot bring a computer.” And when people tell me I cannot do something, I do it. So I brought the computer, and then he said, “May, if you want to continue doing this, you need to work outside of the base. You cannot go in with a computer.” That was the first thing he told me.
The second thing was, “If you're going to continue doing this, I will have to discharge you from Mount Hermon and move you to the center of Israel.” And I was like, yay, I really want to get the hell out of here! So I kept on working on the company.
So I brought the computer again and again, and he ended up moving me to a different role. So I ended up moving to the center, to Tzrifin, a different base. The problem was, Tzrifin was the base where the manager of the base, and the manager of the unit is based. So I came with a computer again.
And he was like, “What are you doing? Why do I have a civil computer here?” I was like, “What? I have an approval!” “Approval from who?” And then I was caught with a computer, and they wanted to send me to jail. They were like, “You cannot come with this. This is a felony. You're going to jail. I cried for six weeks.”
I was shitting in my pants. I had no idea what I'm going to do. The last thing I want to do is go to jail, and I'm such a nerd. Like, no one can send me to jail. I'm going to freak out. So I went to the unit's manager, the unit's commander, and I came to him, and I was like, “Yaniv, I'm sorry. I'm never going to come with a computer again.” He was like, “No. Sit down. Tell me the vision for your company.” He's a father of four girls based in Kiryat Gat, not far from Dimona.
[00:23:49] Michael Eisenberg:
Not far from Dimona.
[00:23:49] May Piamenta:
And he believed in me. You spoke about people we're meeting.
[00:23:54] Michael Eisenberg:
Yeah.
[00:23:54] May Piamenta:
You know, it's all people at the end of the day. And he told me, “You have three weeks to present your company's idea to all commanders of the unit, all officers of the unit. They all need to give me a recommendation letter to let you come with a computer.” And I was like, “Okay, I'm going to do it!” And the toughest thing you can do, and the best practice you can do before doing an investor pitch, is try to convince an army officer who has no idea what you want to do to sign this paper.
So I went and I got 36 signatures in three weeks. I drove to the Hermon, I drove to Be'er Sheva, I drove everywhere, but I got the signatures and everybody knew what I'm doing at the end. Like, at a certain point, it was like, “Okay, just tell me what I need to do to stop.” And I came back to him like, “Yaniv, Magad, you know, Commander, here are all the signatures.”
He was like, “I already got the approval, I just wanted to see if you're gonna do it.”
[00:24:55] Michael Eisenberg:
That's actually an only-in-Israel story, and only in the Israeli army story, I think every other army in the world, you would have been out and probably in jail.
[00:25:00] May Piamenta:
Oh yeah. Yeah. So that was how we did it. And I started gathering my co-founders and the first team, the initial team when I was still in the army.
I used to drive to Sarona–
Michael Eisenberg:
Center of Tel Aviv.
May Piamenta:
The center of Tel Aviv. And, you know, you were talking to me about, did I travel and did I go to the States before? I'd never been to Tel Aviv. And I used to drive from the base to Sarona, from the Hermon to Sarona, change and then meet investors, go back to my uniform–and I had an M16–and then I had to go back to Dimona.
So that was my routine for probably three months. At a certain point, I said, okay, I need to stop driving so much, because it wastes all my entire day. So I posted a Facebook post, at a group “Hey, I'm a soldier from Dimona, I'm building a company, I'm serving in the center and once a week I go to Mount Hermon. Can anyone adopt me?” And I was adopted by a family in Nes Tziona. I lived in their basement for six months.
And thanks to them, Vee was established basically.
[00:26:21] Michael Eisenberg:
What a story. Here's another one. We have Etti, we have Yaniv the commander, and now we have the family in Nes Tziona.
[00:26:26] May Piamenta:
Family David.
[00:26:28] Michael Eisenberg:
Family David in Nes Tziona. Incredible. Okay. Now, for those who don't know, many Israelis who go through the military take a trip, a tour. They go to South America, the Far East, wherever, sometimes America, after the army. You didn't do that.
[00:26:43] May Piamenta:
I did an investor around.
[00:26:44] Michael Eisenberg:
You did an investor tour. Yeah.
Why did you give up on the tour?
[00:26:50] May Piamenta:
It wasn't an option for me.
[00:26:52] Michael Eisenberg:
Not an option. Why?
[00:26:53] May Piamenta:
No, because I knew my mission was to build Vee.
[00:26:55] Michael Eisenberg:
Your mission was to build Vee.
May Piamenta:
Yeah.
Michael Eisenberg:
You're going to build Vee.
[00:26:57] May Piamenta:
Yeah.
[00:26:58] Michael Eisenberg:
And it's going to be successful. Okay. Now, I asked one of your investors, Amir Shafat, and Daniel Bernard, both of whom I know, and I said to them, “Give me a question to ask May,” and here we get into the kind of rollercoaster.
And so they said, and I met you early on in your journey, and so you've been around the space of nonprofits since the beginning of the company–but you took the AI thing and pivoted, but you didn't just have to pivot, you had a bunch of disagreements along the way, and you had to lay off a lot of people. Can we talk about that?
[00:27:40] May Piamenta:
Of course.
[00:27:41] Michael Eisenberg:
Go for it.
[00:27:42] May Piamenta:
So when we started Vee, we started with, as you mentioned, you know, a completely different path. We started with a different service and we wanted to–
[00:27:52] Michael Eisenberg:
All for nonprofits, it should be said, and for raising money for nonprofits and helping them scale up.
That's always been the mission.
[00:27:56] May Piamenta:
Yeah.
[00:27:57] Michael Eisenberg: Yeah.
[00:27:57] May Piamenta:
And you know, when we pivoted, we had runway and we could pivot. We had enough time to complete the pivot successfully, which we eventually did, but we did it because we did layoffs. And the only term and condition I gave to myself and my board members is, I'm not changing the mission, and I'm not changing my core management team.
If I'm going to do this, let's close the company. Because that will be a different company, with a different mission, with a different core team. So we started with a completely different service. It was a manual service, marketplace, super hard to scale, in person. We wanted to give nonprofits and solve the same problem basically, manpower, with actual manpower, and not AI.
And after a year and a half in the market, we saw how difficult it was for us to scale it. We had over 13,000 nonprofit organizations on our marketplace and over 600 employers.
[00:29:07] Michael Eisenberg:
And if I remember correctly, what the marketplace did was, companies that wanted to engage with nonprofits either for CSR or for other things, they could kind of connect through the marketplace to nonprofits, and they would run activities for the people. Some of it during COVID even happened online, and some happened in person.
[00:29:25] May Piamenta:
Correct. So, and I think something that happened to us was, because we started during COVID, all of the skilled-based volunteering opportunities and everything was virtual. So it scaled so quickly. But then–
[00:29:38] Michael Eisenberg:
Then COVID ended and to scale, you have to actually move human beings around somewhere. People wanted to see other people.
[00:29:43] May Piamenta:
Yeah. And then you have to cover insurance.
[00:29:46] Michael Eisenberg:
Right.
[00:29:46] May Piamenta:
And then you had, we had other problems that we didn't expect. And to me it was very clear.
We started getting emails and requests from customers. “Hey, we need to cut off the contract by 75%.” It's like, what happened? Like you're using, you're engaged. They're like, “Yeah, but we're laying off our staff.” We started getting emails from huge companies in the Valley, asking to cut the contracts.
It was like another one, and another one, and another one. And we were the first thing to cut. We weren't a must have. And we knew it from day one. And then we said, “Okay, so all the HR budgets are being cut off.” And the problem we had is, we're not an employee CRM that even if they lay off people, they still need to keep it.
We were user based, so if they laid off 75 percent of the staff, even if they really love us, they still need to cut 75 percent of the contract. So the model didn't work, and it wasn't scalable, so we said, “Okay, we need to pivot.” Easier said than done. And I know it sounds bad, but you know, honesty is everything to me.
It wasn't a choice, Michael. It was very clear this is what we need to do. This choice and this decision had various things that were very difficult in it. Like laying off my co-founder and my uncle, Gili, the best person on earth. My first co-founder.
[00:31:21] Michael Eisenberg:
How did that conversation go?
[00:31:23] May Piamenta:
Amazingly. I know it sounds so weird and people are like, “Yeah, she's lying.”
But I sat with Gili and it's like, “Gili, we need to break up.” And he's like, “May, if you did this conversation, you'd be able to do any conversation in life, and you need to be the Prime Minister of Israel.” And I said, “Don't exaggerate. I need to lay off 45 other people today.” And I remember this, it was Rosh Hashanah, you know, the Jewish holiday, the Jewish New Year.
And I called Jacob, our first investor from Horizon Capital. I said, “Jacob, we need to talk. I think we need to lay off everyone.” He’s like, “Ma? Like, what?” I was like, “Yeah, I think we need to lay off everyone. I know it sounds impulsive, but I see the data and I feel my gut. We need to lay off everyone.” He’s like, “Everyone, everyone?”
It was like, everyone, everyone. We were 56 employees, back then, and we turned out to be six, everyone. So we did it in two batches. So it's not going to be too impulsive and we will still have, you know, a chance to keep the business. We had quite a significant ARR back then. So we said, okay, let's start with just cutting off growth.
So we cut off growth first. And then we said, “Okay. Now after we cut off the growth, we still see the numbers start continuing to where we said, “We see the iceberg and we're facing the iceberg.” And this is where I said, “Okay, now we're going to lay off everyone.| And then he said, “Okay, May who are you talking about?”
And then I sat with Amir and he helped me to gather a list. And he gave me really good advice. He told me, “May, imagine tomorrow morning. Everybody in the company are giving you a resignation letter. Who are you keeping?”
[00:33:19] Michael Eisenberg:
It's the famous Netflix idea.
[00:33:21] May Piamenta:
Yeah.
[00:33:21] Michael Eisenberg:
Yeah.
[00:33:22] May Piamenta:
So I kept six people. So five people and myself. And I have to say the toughest decision was to keep myself.
[00:33:31] Michael Eisenberg:
Tell me more.
[00:33:32] May Piamenta:
Because you failed. Like, I felt like I failed. I failed. I could expect it. I could foresee the change. I could know that COVID will end. I couldn't expect the market, you know, to change that drastically.
You and I are very similar in, we look forward, and when we look on how we're changing things and we're not sticking to the past and to our mistakes. And that day it was, I needed to think if I'm able to lead this. And the only thing who gave me my confidence back was the team, and the board, and investors. Picking the right investors in the beginning is everything.
[00:34:24] Michael Eisenberg:
And did you make the right decision not to fire yourself?
[00:34:28] May Piamenta:
I'm not sure I can tell this about myself. Ask my team.
[00:34:34] Michael Eisenberg:
I should, by the way, appreciate you're saying about a dinosaur like me, 30 years older than you, that you think I still look forward and try to make the change.
I just want to say I appreciate that. That's not obvious. If you can tell my kids that I'd appreciate it even more. And so like, I guess the idea for the pivot is not that complicated. It's core to the mission that you started with, and you just decided to replace people with technology.
[00:34:56] May Piamenta:
I wish it was that easy.
[00:34:58] Michael Eisenberg:
Oh, good. Now, so now tell me why it wasn't.
[00:35:00] May Piamenta:
So when we wanted to pivot, I think the best thing we did is, we questioned everything. We questioned everything. We questioned the market. We questioned the team. We questioned the model, which–we questioned everything.
And when we did so, we could really see everything objectively and say, “Okay, now let's pick the right path that when we have enough time–” we had a year and a half of runway to pivot, you know–”And do it the right way, and do the right market research, and connect well with the market.” But the first thing we did was actually taking down the product. That we did before, and it took us six months, five months from October when we did the layoffs, to March, when we took down the product. And up until March, we were rolling around thinking of other ideas, thinking of other things to do. And when we took down the product, a magical thing happened.
We took down the marketplace and I started to get emails from the nonprofits that were on the marketplace–”May, what are you doing? You're the only people we had. Can we meet?” Michael, end of February, I spoke with Jacob and I told him, “I don't know what we're doing. We tried six different ideas. I don’t know.”
And whoever says you just need to be strong, and you don't–like, it's BS. Sorry for the word.
[00:36:35] Michael Eisenberg:
It's okay.
[00:36:36] May Piamenta:
Yeah, I was super depressed. I wanted everything to work out, and the toughest thing about layoffs, it's not the layoff itself. It’s keeping a team after, and making sure that they will not leave, that they will stick, that they will continue, they will have the energy to rebuild everything.
And if you ask me what is my biggest achievement from the pivot, it’s not the six figure ARR we have now. It’s the fact we have the same team, and the investors continue on investing in the company.
[00:37:08] Michael Eisenberg:
How many people do you have now at the company?
[00:37:09] May Piamenta:
Thirty-five.
[00:37:10] Michael Eisenberg:
Thirty-five. And how big is the growth now? What's the annual growth?
[00:37:15] May Piamenta:
What, rate?
Michael Eisenberg:
Yeah.
May Piamenta:
We did 10X this year.
[00:37:18] Michael Eisenberg:
10X. And next year?
[00:37:20] May Piamenta:
5X.
[00:37:21] Michael Eisenberg:
5X. You see it coming?
[00:37:22] May Piamenta:
Yeah. Now it's a numbers game.
[00:37:25] Michael Eisenberg:
Yeah, but it raises the question, like, is non-profit a good market segment? Like, is anyone going to pay you actually for AI agents in the non-profit world? Like, they get their money from donors and like, there's no money there.
[00:37:34] May Piamenta:
So that was my biggest question, and also in the original model, which is, the previous product, we didn't monetize them.
[00:37:41] Michael Eisenberg:
Right. You monetize the companies. And I remember you telling me early on, don't monetize the nonprofits, monetize the companies, but you are monetizing the nonprofits.
[00:37:48] May Piamenta:
And it just actually shows how doubtful I was from charging them. But today they pay us, every single one pays us five to six figure contracts.
[00:37:58] Michael Eisenberg:
Wow. And how much is it saving them?
[00:38:03] May Piamenta:
Much more.
[00:38:04] Michael Eisenberg:
Much more.
[00:38:05] May Piamenta:
So, you know, we actually started working with Nevo, with Abby.
[00:38:10] Michael Eisenberg:
Nevo is a nonprofit that I started and chair to help new immigrants to Israel, people who make what's called Aliyah, to integrate and get ahead in the tech ecosystem here.
So Abby, who May is referencing, runs it. Go ahead.
[00:38:22] May Piamenta:
Abby is amazing. So I feel, you know, when we started, we wanted to really see how we're doing something that will be a must have, money they already spend or is not coming in with something else that they now need to get used to or be educated on. Money they already spend, and this is how we also prioritize our agents.
We prioritize our agents based on the things that they pay for, quite a lot and they want to save, but they're not going to save by paying a Fiverr or something else, but actually dramatically save and drastically save with working with us.
And this is how we ended up going to the payment world and the grant-making world and all the things that actually, the revenue streams in and out are very clear. And eventually when you look at the market, yes, you have a bunch of small, super small mom-and-pop organizations that you and I can talk about, and they're probably not going to be a stable customer.
They're more of like B2C, so we're not working there. You have the big ones that have a huge team first, and this is where the game will be more of like co-pilot, assistants, and this is where they're going to probably go to the Canvas of the world, and we'll have to be very, very good in what they do in order for them to pick us over others.
And then you have 350,000 mid-market ones that are not here, not there. There are three to five people on the team. They don't have enough money to hire, but they're not too small. In this market segment, you have almost 8 billion in potential annual revenue.
[00:40:03] Michael Eisenberg:
What's your favorite agent?
[00:40:05] May Piamenta:
I cannot pick. It's like picking between my kids.
[00:40:07] Michael Eisenberg:
You don't have kids, so you can pick an agent.
[00:40:09] May Piamenta:
I have a dog.
[00:40:10] Michael Eisenberg:
That doesn't count.
[00:40:12] May Piamenta:
I really love Maggie and Grant. Today our core revenue comes from Grant.
[00:40:17] Michael Eisenberg:
Grant, he writes grants?
[00:40:19] May Piamenta:
He writes grants. He takes down—
[00:40:20] Michael Eisenberg:
Grant, the grant writer?
[00:40:21] May Piamenta:
Yes.
[00:40:22] Michael Eisenberg:
Okay.
[00:40:22] May Piamenta:
Yeah, now we have Penny, the bookkeeper, because it's Penny. It's really smart. We have Donna, donors. She's also, you know, a redhead, so, we had to, because of Suits.
[00:40:35] Michael Eisenberg:
Because of Suits?
[00:40:36] May Piamenta:
Suits! The TV show, Michael. Donna!
[00:40:39] Michael Eisenberg:
I told you, I don't know musicians, and I don't know soccer teams, and I–
[00:40:42] May Piamenta:
You have homework from today.
[00:40:43] Michael Eisenberg:
I don't have a TV.
[00:40:45] May Piamenta:
Okay. That's a completely different conversation.
[00:40:48] Michael Eisenberg:
You have a dog and a TV, I have eight kids, you know?
[00:40:51] May Piamenta:
Okay. Yeah, that's fair. That's fair. Okay.
[00:40:56] Michael Eisenberg:
So, Noam Mendelsohn.
[00:40:58] May Piamenta:
Noam.
[00:40:58] Michael Eisenberg:
Yeah. Your VP of Revenue and Growth. You must be doing a good job. And he asked a really interesting question and I had the CEO of Wolt, Lior sat in this seat a few months ago, and I should have asked her this question, but I didn't.
So he wanted to know how has the industry evolved for a female CEO and founder, over the last five years, like from when you were 19 and a CEO?
[00:41:25] May Piamenta:
Hmm. You know, I think I'm the opposite of what other women will say in the industry.
[00:41:31] Michael Eisenberg:
Go ahead.
[00:41:34] May Piamenta:
Maybe it's just me, I don't know, but I saw many women talking on stages and saying, “Yeah, we're a minority, we need to work harder.”
I don't think so. Everyone needs to work hard. Like, I feel like I'm like a street cat. I don't know if I can say that in English.
Michael Eisenberg:
You can. Alley cat.
May Piamenta:
Yeah. I feel like to me, the world is, if the door is closed, I need to find another way to get in. Yes, there are differences, there were differences when I started, there are differences because, in the industry in general, it doesn't matter if I'm a CEO or VP sales or VP R&D, there are less women. My management team is four women, three men. And I insisted on it. But I feel like to me, the thing that has changed is, there is more awareness, I feel that people are intentionally prioritizing hiring women.
I think the awareness on salary expectations is super important. When I interview women, and they come to me, and they expect something ridiculously, ridiculously low, lower than what I think they should get. I tell them like, “You're worth like 5,000 shekels more. Why are you asking for 20,000?”
But to me, I feel like I'm the opposite. Maybe it's a bit controversial, but I feel like everyone needs to work hard.
[00:43:10] Michael Eisenberg:
Why do you think you're different in that way?
[00:43:13] May Piamenta:
Because I felt like every time I was interviewed in a panel around this question, everyone was really apologizing. And like “Yeah, we're women, and it's harder for us”–it's harder for everyone.
I feel like men CEOs, they don't work any less harder than me. But yeah, they probably, their network is better, because they went to 8200, and they know a bunch of people. But maybe if I would go to 8200, I would have the same network. I don't know.
8200, the intelligence unit. But, so to me, it's, I'm a woman. It's part of my facts, good and bad. I don't think that anyone either invested in me or chose to work for me because I'm a woman. And if so, I'm happy. I think I would probably love to work under an amazing CEO I admire. It doesn't matter if it's men or women.
[00:44:09] Michael Eisenberg:
What about being young? Did anyone ever, maybe it’s the wrong term, discriminate against you or kind of go–
[00:44:15] May Piamenta:
Yeah. Age does matter. And I understand why.
[00:44:22] Michael Eisenberg:
Go ahead.
[00:44:23] May Piamenta:
Experience is important. I don't blame them. Experience is super important. When you hire, when I hire, I look for experience. People who know what–
[00:44:32] Michael Eisenberg:
What’s more important, ambition or experience?
[00:44:33] May Piamenta:
Ambition. I also hire by talent.
[00:44:36] Michael Eisenberg:
You hire by talent, not experience.
May Piamenta:
Yeah.
Michael Eisenberg:
So why do you think it's okay that they said–
May Piamenta:
I don't think it's okay.
Michael Eisenberg:
Okay.
[00:44:41] May Piamenta:
I don't think it's okay. I'm not blaming them. I feel like I understand why age can seem like, you know, “Oh, she's young. She doesn't have experience. Now I need to put 12 million, 14 million, 20 million dollars on her. Like, how can I make sure she'll do a good job?”
[00:45:00] Michael Eisenberg:
Yeah.
[00:45:00] May Piamenta:
Fair. But I feel like it's, again, it's what you make, and what you do with it. For example, to me, it was very clear that I lack experience in one, two, three, and those are the strengths I'm coming to the company with. And I need to surround myself with highly experienced individuals that will be, and I need to be the less, like– I don't want to be the smartest person in the room.
[00:45:31] Michael Eisenberg:
What's the hardest thing you've done as a young founder CEO?
[00:45:35] May Piamenta:
The breakup from Gili.
[00:45:36] Michael Eisenberg:
The breakup from Gili. Would it have mattered if you were older?
[00:45:40] May Piamenta:
No.
[00:45:40] Michael Eisenberg:
Probably not.
[00:45:41] May Piamenta:
Probably not.
[00:45:42] Michael Eisenberg:
So, October 7th happened.
May Piamenta:
Oh.
Michael Eisenberg:
That was one way to say it. You became very vocal afterwards.
[00:45:52] May Piamenta:
Correct.
[00:45:53] Michael Eisenberg:
What changed in you?
[00:45:57] May Piamenta:
Wow. October 7th. I think that that's probably the toughest question you asked, because–so I have a family member that is held hostage. His name is Segev Kalfon. He was kidnapped from the party, from the Nova festival. We have no idea what's going on with him ever since, nothing. If before October 7th, I was managing an Israeli company, now I'm proud of managing an Israeli company.
So I have a bunch of friends who are like, we have to flip. We need to say we're a global company with an Israeli site. No. I didn't spend eight months in Mount Hermon to hide the fact that I'm an Israeli. We're an Israeli company, so we raised the last round, last financing round by TLV Partners, this April. It was the toughest thing, Michael. I met you during the round.
[00:47:16] Michael Eisenberg:
Sitting outside.
[00:47:17] May Piamenta:
Yes. And their reactions were so weird, and people either told me that, “Hey, you need to just flip the company and change the Israeli primary company to be the subsidiary,” and some people were less vocal and just said, “Yeah, we're not interested.” And I ended up discovering this was the fact, which again, it's their business, but to me, professionally, this is what changed. Personally–I'm worried, Michael.
I'm worried. This is my house. This is where I want my kids to grow up. I'm worried, I'm worried, and I have to tell you, I'm not worried about Hamas. I'm not worried about any terror organization. I'm not worried about them. We're going to have good leadership. We're going to have good external relations.
We're going to be okay. I'm worried about what's going on inside Israel.
[00:48:16] Michael Eisenberg:
Are you going to fix that?
[00:48:18] May Piamenta:
I hope so. I feel like it's much, much tougher than building a good company.
[00:48:22] Michael Eisenberg:
Well, I think you can be a part of the fix.
[00:48:27] May Piamenta:
I hope so.
[00:48:27] Michael Eisenberg:
Yeah.
[00:48:28] May Piamenta:
I really hope so. Michael, what was changed in you?
[00:48:32] Michael Eisenberg:
From October 7th? I'm determined that you shouldn't be worried. That we can fix this place completely.
And there will be another generation of leadership from your generation. And I think like many people who were worried about the next generation, I think we've discovered that the 20 to 40 year olds in this country are not only okay, they're incredible. And so the future therefore is going to be very bright, and I'm just trying to dedicate my time to making sure they get a shot to make this place better.
I'm actually very optimistic, and every day that goes by I become more and more optimistic. I see just more and more incredible people like you, and others, who are getting after this. I think the second thing that changed in me is–you made the point that you're not worried about the enemies, Hamas or anything like that.
I think October 7th is a reminder that people without imaginations who deal in the real world, like ironically, I think building a tech company is harder than being a politician. There is like real competition, a real world and real technology, and things change. And we need people who are not career politicians, and people who live inside these big bureaucracies for the whole life aren't challenged on a day-to-day basis to make decisions.
Cause the world is much more uncertain than they’d have you believe. And they spend a lot of time doing risk management instead of engaging in uncertainty. And venture capital and the startup world is a lot about uncertainty, or more about uncertainty than it is about risk management. And I think that we just need more people who’ve dealt with uncertainty in there.
You wrote a post a while back about having anxiety. Why'd you do that?
[00:50:22] May Piamenta:
I didn't know anxiety exists. And I quote my best friend that is here next to me all the time is my imposter.
Michael Eisenberg:
Imposter syndrome
May Piamenta:
I have imposter syndrome. Yeah. And I feel like, to me, when I was going to the bathroom in our office, and I had to breathe multiple times before I was pitching to the team, and I'm pitching since I'm 12, like, been going to huge competitions, speak in front of 3,000 people, and then I cannot breathe, and I'm sweating, and I don't know what's going on.
And then I started hearing the words, “Hey, May, you're just, you're just anxious. It's fine. Drink some water. Sit. Take a few breaths. And you'll be okay.” And after understanding that it's okay and anxiety just happens, I wanted to talk about it. I wanted to normalize it. I wanted other people to know that, you know, even people that you would imagine are doing extraordinary things, you know, at the end of the day, I'm scared, and I'm anxious, and I thought it would help others.
[00:51:44] Michael Eisenberg:
And did it? You think?
[00:51:46] May Piamenta:
I think that's the post, you know–and I've been out there since the beginning–that's the post that I got super personal reactions from other founders, you know, 20, 25 years older than me and ones that just started who said, “Thank you for this one.” Because they actually spoke with me, like, “May, how are you coping with this?” It's like, I have Cipralex in my bag, and I have an extra shirt in my bag all the time. So if I'm sweaty, if I have a panic attack before anything important, have my makeup in my bag, I just know it's with me.
[00:52:27] Michael Eisenberg:
Okay. Who do you want to say something kind about? These are my new finishing questions. You're the first one to get it. Who's someone in our space that you'd like to say something kind about, and you think should be getting more attention and it isn't?
[00:52:41] May Piamenta:
Wow. That's such a good question. In our industry….So I know it sounds weird because you mentioned him, but Amir.
[00:52:51] Michael Eisenberg:
Amir Shevat. Yeah. He's a terrific guy.
[00:52:54] May Piamenta:
Amir. Amir is one of those people that you just really want to be around and you know, he will be so unbiased and supportive no matter what. And Amir, throughout the pivot, every conversation I had with him and I was freaking out, and I was like, “Amir, how am I gonna do it?”
And he told me “May, everything will be just fine, and I'm here for you.” And Amir, you know, he's been leading amazing product teams and he's been around, and working in Twitter, and Slack, and his record is incredible, but he's such an amazing person and he always has time to help other founders, even if he's an investor or not. So yeah, I'd pick Amir.
[00:53:45] Michael Eisenberg:
My last question for you, what is the strongly held opinion that you've changed in the last year?
[00:53:51] May Piamenta:
Wow. Hmm, a strongly held opinion I changed probably would be…can it be like a decision I thought I would make and changed?
[00:54:06] Michael Eisenberg:
An open question. Go ahead, May.
[00:54:08] May Piamenta:
I thought I will leave Israel for many years, like relocate outside of Israel for many years. And I don't think I'm going to do it.
[00:54:18] Michael Eisenberg:
Amazing. If you're listening to this podcast, by the way, I think you'll agree with me that May is quite an inspiration. I've been waiting for a while to do this conversation with you, wanted to get it done after you had not only pivoted–I mean, forget that, but you started to gain some momentum on the new business.
I think everyone who's listening will join me in wishing you, not only good luck, but much success and fortune in changing the world, which is what you're doing, using AI in particular, for an incredibly good purpose. And your journey since you're a little kid is, I think, quite remarkable.
So thank you for taking the time to join. And if you wanna learn more about May Piamenta, you have to check her out on LinkedIn. M-A-Y-P-I-A.M-E-N-T-A. And if you've enjoyed this episode, please rate us five stars on, I don't know, Apple Podcasts, and Spotify, and YouTube and subscribe to our YouTube channel and do all those wonderful things. And follow May's journey and what's going on at Vee, where you can meet the future of AI for good, really.
So thank you, May.
[00:55:26] May Piamenta:
Thank you so much, Michael.
[00:00:00] Adam Fisher: That move from Flash to HTML, they literally said to one million users, “Fuck you, because we're not going to support you anymore.”
I told myself, “Adam, you've reached that point in life and in your career where if you can't exercise your freedom to speak your mind and to deal with some pushback, then what's it all for?”
[00:00:16] Michael Eisenberg:
Does it hurt you to lose money when you lose?
[00:00:18] Adam Fisher:
It's less about losing money, and much more about extinguishing that dream. And also feeling a little bit of empathy for the entrepreneur who put their real heart into it.
[00:00:27] Michael Eisenberg:
Do you still enjoy going to board meetings? Do you find them useful?
[00:00:31] Adam Fisher:
No.
It took me a long time to have confidence. I have a lot of self doubt of what I'm doing at any given moment in time. It took me many many exits to feel like okay, I think I've got this done now.
[00:00:46] Michael Eisenberg:
Welcome back to Invested. I'm actually thrilled to have Adam Fisher with me. I'm telling Adam a story he doesn't even know yet, but Adam is a partner at Bessemer, and I'll have him introduce himself in a second. But when I set out to set up Aleph, I asked an LP, who became our anchor LP, who should I consider for a partner?
And there were two names on the list. One is Eden Shochat, who is my current partner, and the other is Adam Fisher. And so, we didn't partner up on the fund, but we'll partner up on the podcast, and I'm really looking forward to it. So thanks for coming.
[00:01:15] Adam Fisher:
Thanks for having me.
[00:01:16] Michael Eisenberg:
Adam, tell everyone about you.
[00:01:18] Adam Fisher:
About me?
I typically start with the fact that I was born in South Africa, which surprises people because I don't have a South African accent. I left at the age of four with my parents, who took me to the United States. And so I grew up in the U.S. for formative years, and then moved to Israel immediately after completing university.
I'm a venture capitalist, a partner at Bessemer Venture Partners, and I've been in venture capital for the last 26 years.
[00:01:44] Michael Eisenberg:
Where'd you grow up in the United States?
[00:01:45] Adam Fisher:
Initially in Cleveland, Ohio, and then in San Antonio, Texas.
[00:01:49] Michael Eisenberg:
How did your family get to San Antonio, Texas?
[00:01:52] Adam Fisher:
Well that was family. We were following family at that point. And in Cleveland–my father's a physician, went to the Cleveland Clinic to finish his, or to do his residency, and then joined up with family who had moved to San Antonio. I think a lot of South Africans moved to Southern California and South Texas, Houston, San Antonio. It was a similar standard of living.
[00:02:14] Michael Eisenberg:
Really? And why'd you move to Israel after college?
[00:02:17] Adam Fisher:
Good old fashioned Zionism.
[00:02:19] Michael Eisenberg:
I answer the same way, so I get it.
[00:02:22] Adam Fisher:
Right, I think as a South African Jew in particular, Zionism was very, very strong in the community throughout the generations. And so I grew up hearing a lot about Israel. My father had actually moved here as a child with his parents and his family in the early 1960s.
It didn't work out for them. At the time the country was actually experiencing a deep, deep recession 1963, ‘64. So they moved back. But if I go every generation back, there's somebody else who actually moved here and didn't make it. My great-grandfather moved here from Poland. My grandmother was born here.
I can go further back, even to 1898, a direct ancestor of mine left South Africa and moved to the Holy land. I have a document actually that was sent from his shul, from the synagogue, wishing him well. And I love that date, 1898, ‘cause actually a hundred years later I made Aliyah in 1998.
Michael Eisenberg:
Wow.
Adam Fisher:
And so I'm the first generation, I think, to succeed since that great ancestor, and I lost trace of him. I think he lived and died here, but I don't know what happened.
Michael Eisenberg:
How old was he when he came?
Adam Fisher:
He was an adult. He left his children in South Africa.
[00:03:42] Michael Eisenberg:
Wow, he left his children behind in South Africa and moved to the Holy Land, to Jerusalem?
[00:03:47] Adam Fisher:
I don't know. Like you're asking me–it's too long ago to dig that far back. You're talking about five, six generations back.
[00:03:54] Michael Eisenberg:
You were an investor in MyHeritage, right? Which is–you couldn't find them on MyHeritage?
[00:03:59] Adam Fisher:
No, no, no, there's a lot there's still a lot that you can't find. MyHeritage is a place primarily for for documenting what is known, and then finding research to back it up. But it's actually quite difficult in particular with Jewish communities around that time. So I have a lot that's documented, but not that.
[00:04:18] Michael Eisenberg:
What is his name? Like if someone's listening to this podcast and they hear his name, maybe there's somebody out there who says, “Oh I know who that guy was!”
[00:04:24] Adam Fisher:
It was Moshe, or Morris, or Moses Magid.
[00:04:28] Michael Eisenberg:
I always start off by asking what are your core values. So what are your core values?
[00:04:34] Adam Fisher:
As an investor, or as a person?
Michael Eisenberg:
It's an open question.
Adam Fisher:
That's a core value question. I believe in being genuine. I think it's really important. Some people call that transparency.
Some people call it ‘honesty,’ but it comes through for me in what I call ‘intellectual honesty.’ I think that's kind of a core value of mine. Intellectual honesty is different from honesty, because it's about truth with yourself. You know honesty is when I'm talking to you. Of course I also believe in honesty, but intellectual honesty is something different.
It's a truth within yourself. It's actually accepting yourself, understanding yourself, and that helps me a lot in everything else–how I interact with people, how I make decisions.
[00:05:23] Michael Eisenberg:
I think I once heard from you in a conversation–and we can cut if you don't want me to talk about it–that you are an introvert. Can you define what that means?
[00:05:32] Adam Fisher:
Yeah, there's no reason to cut that. There's no shame. An introvert is somebody who actually gets more satisfaction in spending time with, let's just call it fewer people, or even on his own. It could be reading, it could be exercising, and gets a lot more out of that than being surrounded by many people. And an extrovert, in contrast, needs other people to feel alive, to feel active.
[00:06:04] Michael Eisenberg:
When I think about most of the venture capitalists I know, I find most of them to be extroverts. It's not that there aren't people who are introverts.
[00:06:12] Adam Fisher:
Well it's because you're going to conferences. You're going to meet other extrovert venture capitalists.
[00:06:14] Michael Eisenberg:
My partner Peter Fenton at Benchmark never went to a conference. I'd say he was closer to an introvert, but he felt like an extrovert. It certainly seemed that way around the table.
[00:06:22] Adam Fisher:
Look, it's ultimately, it's a spectrum right? It's not binary. And I think most venture capitalists need to have the ability to turn themselves into extroverts. Sometimes it requires a beer or two, but we're all capable of it. If not, were not going to succeed.
You know, anybody who gets on stage needs to have some ability to take on an extrovert persona. But I would also say the opposite. I think those who are extroverts also need to be able to spend time with themselves, to think carefully about what they need to do when they're making an investment, when they need to engage an entrepreneur or somebody else in a tough conversation–that's time with yourself. It's not teamwork. It's you. And then it's you in one person. That's much more of any kind of one-on-one type environment. That's where introverts are.
[00:07:10] Michael Eisenberg:
Can I assume you don't go to conferences?
[00:07:12] Adam Fisher:
What's that?
[00:07:15] Michael Eisenberg:
So how do you–like, this is a networking business. Like how do you meet people if you don't get out and go to conferences and you want to be with yourself?
Like how does that work? You know a lot of people. A lot of people know you.
[00:07:26] Adam Fisher:
Right. Well, I think at any point in your career you need to decide what you need to focus on. I personally don't feel like I'm at that point in my career where I want to continuously expand my network. There's value in that, don't get me wrong, but it always comes at the expense of something else. Perhaps just considering, thinking, writing thoughts down–again, engaging with entrepreneurs I back, or with my colleagues. There are other ways of reaching out to people, and it's usually in one-on-one or smaller settings, smaller gatherings.
[00:07:56] Michael Eisenberg:
Did you ever go to conferences? Yes you did.
[00:07:58] Adam Fisher:
I just never understood those people that would collect the lanyards as a prize for themselves. And when I do go to conferences–and I do occasionally go to conferences–I'm usually last one to arrive, first one to leave.
I come for speaking engagements of course, but less just to deal with chit chat. That's one other thing about introverts. They don't really like talking about the weather, and sports, and chit chat. It's like, they want to get to business.
[00:08:23] Michael Eisenberg:
Eden says that in our partnership, I'm responsible for all the small talk.
[00:08:27] Adam Fisher:
There's a place for that. There's absolutely a place for that. I think it's a great icebreaker. It's also an important skill in our world. And ultimately I think you will probably also connect more closely, perhaps, with entrepreneurs who are like you in that sense, who are also extroverts. In my sense, I feel like I connect more with people who are slightly more introverted.
[00:08:51] Michael Eisenberg:
On your LinkedIn bio it says that you write more poetry than code. For me that's easy. The last line of code I wrote, I think, it was either in seventh or eighth grade. What was the last line of code that you wrote?
[00:09:02] Adam Fisher:
Yeah, that was just mostly just to emphasize the fact that I don't have a technology background.
[00:09:07] Michael Eisenberg:
I'm going to talk about that in a second.
[00:09:08] Adam Fisher:
I've never really written code, except for trying to figure out how to build a website back in the late nineties with some HTML.
[00:09:15] Michael Eisenberg:
But did you write poetry?
[00:09:16] Adam Fisher:
I do. I do write poetry. These days I mostly write poetry for my children. Essentially every birthday since I think the age of five, since my eldest turned five, I've written a poem for their birthday. And that's how the birthday celebration begins. And every year–
[00:09:34] Michael Eisenberg:
Do the kids find this celebratory to read a poem? I just want to be–
[00:09:37] Adam Fisher:
Absolutely.
[00:09:38] Michael Eisenberg:
They don't want a present, they want a poem?
[00:09:39] Adam Fisher:
No, like, they get presents too. But the poem, like at this point, my problem is I've done it every year, that they expect nothing less. And let me tell you something–trying to find something new to talk about, about your child and their last year, every year, with different language and different rhymes, is an incredible challenge, and somehow I'm able to pull it off.
So I love it actually. When I'm finished.
[00:10:06] Michael Eisenberg:
This is a skill. So how long are each of these poems?
[00:10:08] Adam Fisher:
I mean each one is like a 10 font, one page. I try to get it onto one page so I can read it. No, it's a good 15 stanzas probably.
[00:10:21] Michael Eisenberg:
Wow. And how long before the birthday do you start writing?
[00:10:26] Adam Fisher:
I try to cram it. This is, I don't always recommend cramming for other things, but something like a poem, where there's–perfection is a dangerous thing to obtain–you've got to rely on time. And so I generally start 24 to 36 hours before.
[00:10:44] Michael Eisenberg:
And do you collect anecdotes and tidbits throughout the year?
[00:10:47] Adam Fisher:
Not throughout the year. No, maybe in the few days prior.
[00:10:52] Michael Eisenberg:
But do you remember the whole year? How much of the year does the poem capture?
[00:10:56] Adam Fisher:
It tries to capture all the memorable moments and the changes in their lives.
[00:11:02] Michael Eisenberg:
And how many kids do you have?
Adam Fisher:
2.
Michael Eisenberg:
And you write both of them a poem?
[00:11:04] Adam Fisher:
On birthdays, yeah. On each one of their birthdays.
[00:11:09] Michael Eisenberg:
Does your wife get a poem?
[00:11:10] Adam Fisher: She occasionally gets a poem, but it's just too much.
[00:11:15] Michael Eisenberg:
All right. Now speaking of writing–since October 7th, you've turned up on Twitter. Is that fair to say?
[00:11:22] Adam Fisher:
Yes.
[00:11:24] Michael Eisenberg:
Your presence is going, you've written what I consider to be epic threads, for example, on Ireland and other places.
What caused you to kind of come out onto Twitter–which is an extrovert kind of thing, I guess–and start to be so vocal? And by the way I think so incisive too.
[00:11:41] Adam Fisher:
Well I mean, I love that platform. It's actually perfect for introverts that aren't afraid of expressing their opinion. And introverts are not closed off from the world.
They just–again they just don't get activated by those media interactions. It allows me to express my thoughts and opinions with those that are interested in hearing it. I woke up like everybody else on the morning of October 7th, to, you know, to air raid sirens, and realized very quickly that this is highly unusual.
If it's not a mistake, it's not the way I would expect an attack to start–meaning in the central region of Israel. And so I immediately actually got onto Twitter, X, to figure out what is really going on. And I did searches, the kind of searches you probably, in retrospect, kind of don't want to do to figure out what are they saying out there.
And I immediately encountered some of the worst images, the very first images that were out there, that were being grabbed from Telegram channels and put onto text. And I realized this is actually massive. And so within, I think, by about 7:30, I made it clear to my followers that this is actually the beginning of a war.
We might not know it yet, but it's the beginning of a war. And I realized that at that point in time I wanted to just express myself–of both how serious this is for the moment, but also from a historical perspective. And from that point I also began to realize that what's happening, the response, meaning those who are anti-Israel, was also incredible.
It was immediately what looked to me as support for the elimination of Israel, support for terrorist organizations. And I realized there was going to be two kinds of wars taking place here. The real war, and the information war, and that is modern warfare. It's an asymmetry that we think we're familiar with, but we're not.
And in some ways, like citizens are also soldiers, from the asymmetric war of trying to get information out there. My goal was not to convince anybody who hated Israel to suddenly love Israel. It's impossible to do. But rather to equip those who their instincts are with Israel to have the information they may not otherwise have, who aren't as well-read or well-informed, and to help give them the kind of ammunition, so to speak, to both explain to themselves why they support Israel and if necessary, also to tell others.
[00:14:21] Michael Eisenberg:
I asked Ariel Sterman, who is your partner at Bessemer, what should I ask you? One of the things he said was, “Has there been any pushback, number one, or number two, how does it feel to share your point of view out there?” You're in a partnership, it's a big partnership, you're in an international partnership, which I'm not in–has it had any impact internally, externally, from a fund basis? And did you have any hesitancy to get your views out there because of your position in the firm?
[00:14:55] Adam Fisher:
No. So the quick answer is no. Absolutely not. My partners are fully behind me and Israel, no hesitation whatsoever. You asked me before about what made me come out. I didn't mention it before, but my first coming out politically was actually in December of 22’, against the so-called judicial reform here. And it was at that time that I told myself, you know Adam, you've reached that point in life and in your career where if you can't exercise your freedom to speak your mind and to deal with some pushback, then what's it all for?
And so the same thing here. I realized that there may be some price to pay and my partners may get some pressure. But I think that's a price I'm willing to pay, because again, if we as venture capitalists, independently successful, can't do it, well, then, who can? And so that's what I've done.
I know it's also inspired others, which was not my intention, but that's also the reason I continue to do so.
[00:16:01] Michael Eisenberg:
Give me some people that's inspired.
[00:16:03] Adam Fisher:
Well, people who have told me that they were inspired by it. They've told me that–a lot of people are in a position, unfortunately, where they don't feel comfortable speaking out.
They're in companies where even if they're the CEO or the main investor, they feel like it's just not worth it, because the blowback will be so hard, it will have been counterproductive. And so again, we have to then speak out also on their behalf, and compensate for that relative silence, which is unfortunate, but I also completely understand it.
[00:16:37] Michael Eisenberg:
Does it bother you at all when–I've I looked at some of the comments on a bunch of your X posts, and some are pretty nasty. Actually, many are very nasty.
[00:16:47] Adam Fisher:
Well, you didn't see nearly as much as I have. I mean, it is unreal.
[00:16:53] Michael Eisenberg:
I'm certain that that's true. And how do you think about that? Like first of all, does it get to you at all?
[00:16:55] Adam Fisher:
No. Well no. The real crazies, like the total neo Nazis, it's–I laugh. I think when I did that one post on Spain, in particular, that was the most bizarre.
[00:17:13] Michael Eisenberg:
Anyone who’s listening, you need to go scroll Adam's timeline to read the posts both on Spain and Ireland. They're excellent. Yeah.
[00:17:17] Adam Fisher:
Yeah so the Spanish one was interesting, because I was pressing Google Translate on all these, they're all posts in Spanish. It was just fascinating that like they would be so well-versed in antisemitism 500 years later. But they knew everything, and it just lives on.
And so it yeah I mean does it affect me? Only in the sense that I knew this was always there that latent antisemitism. And in some ways I'm glad it's out. That's the truth.
[00:17:51] Michael Eisenberg:
Does this have anything to do with like when you think–I know it's hard to kind of do a retrospective–you said earlier that it was Zionism that caused you to move to Israel. Did you think that antisemitism was latent, either through your college experience or any other experiences growing up that caused you to think, “Hey, I'm going to go to Israel, won't be antsemitic.”
[00:18:09] Adam Fisher:
Yes. I mean the answer is yes.
[00:18:11] Michael Eisenberg:
Where'd you go to college?
[00:18:12] Adam Fisher:
Georgetown.
[00:18:14] Michael Eisenberg:
Georgetown. And you felt it there?
[00:18:15] Adam Fisher:
I did. I mean I encountered it for the first time truly at university. It's a Jesuit university, which is Catholic. Now they themselves are actually very welcoming, and also connected to Israel. But Georgetown, there's a very large Arab studies program which, for years, was funded by problematic sources. They once even took money from Libya when it was still under Gaddafi.
They actually were forced to give it back. But that just gives you a sense of who was running the show there, again, at this program. And so I encountered a lot of, you can call it anti-zionism, but it was very clear. It came from a much deeper place, and from a, I wouldn't say religious angle, but it wasn't simply about the modern state of Israel
[00:19:12] Michael Eisenberg:
When I interviewed Sam Lessin who tried to get on the Harvard Board of Overseers recently and has been trying to figure out how to take Harvard back from the forces that have taken over Harvard, and the antisemitism there and other things. I asked him if he thought it was redeemable, and whether college campuses were. He said he wasn't sure, basically, but that it was an important fight to fight.
Do you think these college campuses that have taken money over all these years from somewhat nefarious sources are redeemable at this point? I didn't have it. I went to Yeshiva University.
[00:19:47] Adam Fisher:
Right. I think so. By the way, I don't think the source of the funding is the problem, because you could easily–it could very well be that many of these universities have most of their money actually from much more liberal-minded or even Jewish sources.
So I don't think it's a source of the money that's a problem. I think it's something rotten in academia, something rotten about the tenure system which was not supposed to work that way. It was supposed to allow people to have their own opinions, and to do their own work and research without interference from administration or from donors.
But in this case, it led to a certain level of groupthink, where tenured professors would be in the selection communities that would essentially grant tenure or not, just positions, to like-minded people. Over the last 20 years, there are many more opportunities for intelligent, well-spoken people who want to do things, right, in the private sector, even in private research organizations, in government.
Those who stuck to academia, they're of a certain typecast and made from a certain cloth, and I think what you're what you're seeing is that come out, and–typically, not just the United States, but across the world, it's the extreme left.
[00:21:05] Michael Eisenberg:
There's no tenure at Bessemer, right?
[00:21:07] Adam Fisher:
No
[00:21:07] Michael Eisenberg:
There's no tenure at Aleph either. And it makes me wonder–candidly, I keep wondering about systems where the meritocracy goes out the window at some point ,whether then the goal becomes, “Hey I got to get to this point. And then like I don't need to earn our merit anymore. I can just be there.”
I once thought that about founding partners at venture firms who had an unlimited tenure. Do you think that there's room for a more market based system in universities, or this tenure thing is important? I mean the thinking of tenure where a person should be able to express their own view–you said before, “My success enables me to express my own view.” What's the best way to kind of get to some real pursuit of the truth, or ability for people to speak out and be free?
[00:21:55] Adam Fisher:
Well I think people in universities feel they feel free to speak out. Again, I just think the faculty has now just been–it doesn't represent the broad spectrum of views in the country.
[00:22:09] Michael Eisenberg:
It's been captured.
[00:22:10] Adam Fisher:
Yeah. It's been captured. And of course they also teach students in a certain way. I just remember myself being in university, and now, I was well-read, and I understood how to make sense of what the professors were saying, if I felt that they had clearly had an anti-Israel agenda.
And I took it in stride. I found it fascinating. I just didn't think about it as a form of propaganda. Look, you can make the same argument about somebody who's very right wing and teaching at a university. I think there's room for a diversity of views. The problem is that lack of diversity. I don't know if there's a market way to go about it, but I do think that there should be some balance in the types of people who are educating the next generation.
[00:22:55] Michael Eisenberg:
I want to make a sharp turn. So I'm speaking to somebody who, on some level, has a similar background to me, right? Which is, we both grew up in the States, both went to college in the States, we both moved to Israel right after college, and we're both in venture capital for more than two and a half decades. That's a pretty parallel path. You've done very well. You've been very impactful. We've even invested in a couple of companies together.
Do you think there's something about that path, like growing up in a bigger economy, in a bigger country, and then applying the skill in a smaller country, that gives you a different perspective, maybe a unique angle on investing, that’s made you a better investor?
[00:23:36] Adam Fisher:
Well we're both immigrants–
Michael Eisenberg:
Yes.
[00:23:36] Adam Fisher:
And I think immigrants and entrepreneurs have something in common. You know, it's not a coincidence that a lot of entrepreneurs in the U.S. are immigrants. I think there's something about being an outsider that makes you a better observer of the world and a better innovator, better positioned to innovate. And I think both of us coming here, there's some aspect of being entrepreneurial in that sense, taking some risk I think obviously we're going back to the U.S. Our companies are focused on the U.S. market. That's a huge advantage, not just language and culture but also being able to travel back and forth.
It's an advantage to our Israeli peers.
[00:24:13] Michael Eisenberg:
You mean culturally to be able to travel back and forth, basically. It's not just a passport issue.
[00:24:17] Adam Fisher:
No, it's not a passport issue. It feels like our home. We’re advising our companies, and they see us as locals there, even though we're locals here. I would say that we both did it also without much of a career before.
Michael Eisenberg:
Right.
Adam Fisher:
And that was unusual at the time. And so we had to kind of forge our way at a time when the industry was very very young. It didn't really know what it didn't know. Those who were experienced had two to three more years experience than we did.
[00:24:51] Michael Eisenberg:
And a decade and a half plus of age.
[00:24:53] Adam Fisher: At least. And you know, I always believe that your past certainly informs your present. In good ways and bad ways. A lot of the people who were the first kind of crop of VCs, they were former execs, not so much at startups but rather at larger companies.
And that doesn't necessarily lend itself to working with entrepreneurs. So we started with a clean slate, and that allowed us both to decide who to emulate. We met a lot of American venture capitalists. We learned their kind of, the secrets of the trade, so to speak. These days it's all public and on blog posts and Twitter.
But back in the day it took effort to figure out exactly how it was supposed to work.
[00:25:32] Michael Eisenberg:
And what do you think is the core trait that turns you into a very successful venture capitalist?
[00:25:37] Adam Fisher: In my case, it's accepting the uncertainty of business, but also of life and figuring out the right mental framework that's going to allow you to move forward.
That's going to allow you to embrace that uncertainty. There's a lot of risk in starting a business. There's a lot of risk in funding a business. And I think the ability to find the way forward, find some the justification to move forward, is what propels us. And I say it that way because our business also requires –we have to be dreamers, but we also have to be skeptics, right?
Otherwise we'll invest in everything, and we'll lose the fund very very quickly. So the default is skepticism. It's like, this is not going to work. This guy doesn't know what he's doing. At the same time, we have to have a framework for moving forward, for seeing an opportunity and seizing it.
[00:26:29] Michael Eisenberg:
It’s interesting that you say that, by the way, because I agree that the framework is both what you call dreamer, I would call optimism–I often refer to it as if this goes right and this goes right and this goes right and that goes right then we have a big outcome. and skepticism. I have the same framework but I tilt the other way which is my default is optimism and dreaming. And then I poke holes from the skepticism and
[00:26:51] Adam Fisher:
I think that works. Clearly it’s worked for you.
[00:26:53] Michael Eisenberg:
It’s fine. It’s interesting. Well yeah, you know, Eden often kind of, and now Tomer kind of look at things and say, “But like, where's the data?” And I’m like, “I think it can work!”
[00:27:05] Adam Fisher:
So I'm a bit more like you in that sense of also not relying so much on data. I think those who come with an engineering background, they look for data as a source of truth.
And I think data is a bit of an illusion. It can be an illusion. It's a fact, but it's not truth. It's something about the past. It doesn't tell you about the future. And I've seen this over and over, even at the early stages. It can be a company with evidence, but if you dig, you can, in a certain way, present those facts–good numbers–to tell whatever story you wanted to tell.
And you have to be very aware of that. So I prefer to be skeptical first, and then try and figure out how to justify it, and sometimes it's with the numbers, and other times it's despite the numbers.
[00:27:54] Michael Eisenberg:
Do you think venture capital is a skill?
[00:27:56] Adam Fisher:
It's not a one skill. It's a skill set. There are a lot of skills involved in venture capital, especially our type of active, early stage investing where you truly partner with entrepreneurs. You're on the board, you're often, if not the first investor, you're also in our case the largest investor. It's a lot of skills and working with entrepreneurs, working with co-investors, understanding markets, being able to make quick decisions but also having patience. So it's an incredible set of skills and a lot of balancing work.
[00:28:29] Michael Eisenberg:
Does it hurt you to lose money when you lose?
[00:28:32] Adam Fisher:
It's less about losing money, I'll be honest, and much more about extinguishing that dream of you know–you really wanted to see that product be successful or have an impact. That’s much more painful to me than having lost money, and also feeling a little bit of empathy for the entrepreneur who obviously lost much more, who put their real heart into it.
[00:28:57] Michael Eisenberg:
I told myself–I don't know if it's true–that if it doesn't work out, it's best that the entrepreneur figure this out quickly, even though they had a dream, because their time and kind of cycles are far more important than both the capital and the idea itself. If they're going to be–a good entrepreneur can kind of reinvent himself and find something else to do.
I'm not sure that's always true what I just said now, right? Which is, there's some people that are just married to an idea, and it's like their life passion and life project. I just met someone like that earlier today. I don't think that the idea has a lot of merit, but I think the person does.
[00:29:26] Adam Fisher:
Look, there's something to be said about perseverance. It's also an incredible trait. And sometimes it's absolutely necessary for success. There are stories of startups and entrepreneurs that, had they not continued at it despite what everybody said– there's no way it would have been a success. And there are others where I agree with you. Like my message to the entrepreneur is, look, this is not going anywhere, but you're full of ideas and you're going to create another company, and it's going to be massively successful. You're not going to remember this company.
[00:29:55] Michael Eisenberg:
I've often thought of you as a contrarian. Like, you were running around semiconductors when nobody else was for a long time. I want to talk about another view that you've held for a very long time, in fact you had a recent X post about it–on Bitcoin, right?
So Bitcoin took a big drop, and you posted, I think alongside a chart of gold which is going up and to the right and said, “You see?” It’s about gold. Bitcoin's made a U turn, and by the time the podcast comes out it can make another U turn again. It's highly volatile, but it's obviously come back. Where is your anti-Bitcoin sentiment from?
[00:30:28] Adam Fisher:
Well, it started with anti-crypto. I didn't like the grift. I didn't like the speculation. I didn't like the claims that it was decentralized, that it was a store of value, that it was like a currency. Because in each case, you could–or that it was anonymous, because in each case, you can ask a different person in crypto, and they would tell you, “Well actually, it's not anonymous, because we can track it,” and they'd say, “Well it's not, it's decentralized,” but actually to get on in the first place, it's centralized. Or there are whales, you know, somebody owns incredible amounts and can swing [00:31:00] markets.
My comment on the gold thing was against the store of value. It's not supposed to act like that if it's like gold. Obviously it can go back up. I actually think Bitcoin will continue to go up. I think it's the one asset that has the most potential. It was much more against the other types of crypto at the time the speculation really got to me.
And those advocating for it were almost always self-interested. Actually they're always self interested. And that bothered me in particular, because it was tied up with what I felt is not just personal interest, but a certain kind of ideology, of supplanting the current system. And I know as venture capitalists, our role is to figure out what couldn't go right
Always ask that question. And it's somebody else's problem to think of what can go wrong. But I think at some point, we also have to ask ourselves what can go wrong. And in this case I saw both. I could see what can go right. But what could go right is also what could go wrong. Meaning if it indeed would supplant the current system where there's no longer an interest rate set by the government because everybody's trading in these virtual currencies, or the stock market was irrelevant, that is not a world I wanted to live in. And so that's how I reached that conclusion that it's not for me.
[00:32:15] Michael Eisenberg:
Why not? Why don't you want to live in that world?
[00:32:17] Adam Fisher:
It's a world that was essentially seeded and capitalized by those that already had capital or took not fair risk early on buying up an asset, using advertisements to run it up.
And now they own a certain percentage of some type of a coin. And that being an asset, I just don't think that's a fair system. It's just, it's another feudal type of system where the early ones all of a sudden have power over others. And again it's a currency, it's a finite currency. It's not a stock.
[00:32:56] Michael Eisenberg:
But isn’t that true in everything? Like, so there were the early oil barons, and the early railroad barons, and then there was De Beers, and diamonds, and there's, you know, Rio Tinto and mining, and you’ve got all these people who discovered something, found something–by the way, the Emiratis and the Saudis, you know, by luck of geography, you know they ended up on top of a large part of the world's oil reserves. And the Qataris, the tiny Qataris who are causing a lot of mess in the world right now, landed on a giant gas reserve that they share with the Iranians.
And so inevitably there are people either by luck of geography or dint of geography, by dint of innovation, by dint of just good luck or whatever, it is–turn up at the beginning of an asset or an innovation cycle, and own a lot of it.
[00:33:43] Adam Fisher:
Yeah. I mean I don't agree with those analogies. I mean, oil was not in one place.
Nobody thought they had cornered the oil market earlier. They didn't create the oil market. Oil also had another purpose beyond just an appreciating asset. It was only worth something because it actually was needed.
[00:34:01] Michael Eisenberg:
I mean, we found more use for oil over time, which increased its demand and made it much more valuable.
And it takes time to dig oil wells. There ends up always being a lag, at least in the early parts of the market between demand.
[00:34:15] Adam Fisher:
No I'm all for free markets, but–
[00:34:16] Michael Eisenberg:
Even Bitcoin, right. If you're in Venezuela today or Argentina, and you want to get your money out, which is, you know these are oppressive regimes in Venezuela, and they were inflationary regimes in Argentina until Milei turned up. It was a way to get your money out. That's a valuable use case.
[00:34:34] Adam Fisher:
It is. I just don't think that Bitcoin was bid up because people wanted to help Venezuelan refugees.
[00:34:40] Michael Eisenberg:
That's fair. In the same way probably oil wasn't created, it wasn't found initially so it could run automobiles.
[00:34:47] Adam Fisher:
No, it wasn't automobiles, but you know, yeah. They found a purpose for it.
[00:34:55] Michael Eisenberg:
And diamonds, like think about diamonds. What's the value of a diamond? It's like, we created a system called carats, and we created a perfect color, and whatever it is. It's a narrative. We're out of diamonds. Like you can make them in labs today and they're the same.
[00:35:09] Adam Fisher:
They are, but they're not valued the same as real diamonds.
[00:35:12] Michael Eisenberg:
Right. But why? Because it's a story. Because I want a natural diamond. It's just a story. You know, I hate to quote Yuval Noah Harari on this, because I'm not a big fan, but you know, there was a story around a lot of these things. Why is a Nike sneaker worth more than the same identical sneaker that's sold at Costco? Because of the story around their brand.
[00:35:27] Adam Fisher:
Yeah, that's fine. I just don't think it is. If diamonds were the way in which we interacted going forward, we transacted, that would be a problem.
[00:35:37] Michael Eisenberg:
It was for a long time. Like people would sew their diamonds into their underwear and use them to trade.
[00:35:43] Adam Fisher:
Yeah I think crypto will continue to exist. I fear a world in which crypto dominates our society. It's not so much that it exists at all. I'm not one that advocates for banning it. But it was reaching a crescendo, where to me it just seemed dangerous. People were plowing all of their savings into these virtual coins and NFTs and there's a lot of very unhappy people around the world who bought into this.
[00:36:10] Michael Eisenberg:
Because it's in the news now just so you know. And it's not in the same category as crypto is controversial. But I feel like I want to ask you–have you followed this Pablo Durov story?
[00:36:20] Adam Fisher:
A little. Yeah.
[00:36:20] Michael Eisenberg:
Yeah. Guy who's invested going into France. I don't know any of the specifics of the case. I want to ask you a more meta question, which is–you've got people today, like Pavel, and Mark Zuckerberg, and Elon Musk, and I'm not comparing them or anything. I just find there's individuals in the world today with a lot of power to influence.
Because they have platforms that are used by billions of people. How do you think about the interaction between states on the one hand–and it's just come out, for example, this morning –Mark Zuckerberg penned a letter to Congress basically saying “Hey, I was influenced by the Biden administration to take down posts about COVID,” undermining government's policy and to cover up the Hunter Biden laptop thing.
How do you think about this balance right now, or this complex issue right now, between these kind of mega CEOs and founders and platforms versus states?
[00:37:16] Adam Fisher:
I worry about state interference. I do. I worry about anything labeled as misinformation. That is a slippery slope, to government or bureaucratic control. That's something we should be very wary of. At the same time, you know, in the case of Telegram for instance, they are much more lax in what they allow on their platform or how they proactively stop things. And as you know, that's the preferred channel for terrorist groups, for drug traffickers, for pedophile rings and for good reason.
It's fully encrypted. It's not domiciled in any country. And you can reach anybody. That is problematic. I don't know what the answer is. I don't know whether I support or I'm against his arrest. I haven't seen the arrest warrant. I don't think any of us know exactly what's going on.
But the idea that they have zero responsibility is also problematic to a certain extent. I don't know where I would put it down. It's a dilemma that I think is going to characterize our society for decades to come. I'm just not an absolutist in either way.
I'm probably more scared about government control than complete decentralization, and so called anarchy. At the same time, I can understand governments who are aware of something or have access to information where there's a missing link and they know it's there using all means to get it.
We know that conversations are tracked by the NSA. We know that. And we're probably safer as a society. Now at the same time, that also kind of scares me right? It freaks me out. As Snowden pointed out, it's a balancing act. I guess I would trust that in an open system, a non-concentrated governmental system that it works, there'll be situations which the government overreaches, but there'll be pushback. And I think that's inevitable and probably healthy.
[00:39:27] Michael Eisenberg:
As someone who had to, on some level, watch the Hamas videos after October 7th–something I'll never probably fully recover from–they came in over Telegram. And initially I said to myself and then some of them were reposted on Twitter in the early days, until they got you know, kind of banned.
I vacillated myself between this notion of, “Oh my God, people need to see what happened. It's good.” The Telegram existed for them to get this out–because it's not what Hamas had in mind, but the world needed to see this too. But oh my God, that's terrible, that there was a way to broadcast this horror and the suffering of people.
And I wonder how you think about that. Like this notion of open, because we got to see it and open gives people a chance to terrorize people and oppress them.
[00:40:18] Adam Fisher:
Yeah, well they put on Telegram what they wanted to put on Telegram. So a lot of the footage that we've seen was not put on their telegram. It was captured by CCTV, and GoPros that never made it back to Gaza for obvious reasons. And so at that point, yes, I'm in favor of sharing it, because I think it shows the sheer horror of these atrocities, which are just unfathomable. So I'm in favor of that. Am I in favor of Hamas having a right to distribute content?
I think that serves their interest. That is how they recruit. That's how they fundraise. That's how they show their success. I think if they hadn't shown it, it would have been seen as a failed operation. I mean they planned to take over, you know, for weeks they planned to go deeper into Israel.
That would have been seen as a failure. So Telegram essentially helped them with propaganda, showing it as a success.
[00:41:20] Michael Eisenberg:
So again, making a hard right turn–you were an early investor in Wix, which I was fortunate to join you in, very early investor in Fiverr, became household names, these two, around the world.
What are your core lessons? And particularly from these two, because they become really branded household names. What about these two spoke to you? Like I mentioned before, I've always admired the fact that you have this interest in semiconductors, even though you don't have a technological background. I wish I could understand enough to go invest there. But these two names are like, you know, they're brands right now. And so what attracted you to them? What do you think you did to propel them? And why are they important?
[00:42:06] Adam Fisher:
So they're quite different, even though they were both very early stage.
I was the first venture investor. In the case of Wix, I saw two things that I really had not seen before in Israeli companies. The first was this marketing angle that they had. They were doing things that I'd never seen before, well in advance release of the product of how to create–everything from buying their URL, a three letter URL back in 2007–but also various sites that were kind of building their SEO, and just already thinking about paid acquisition, which is something that again, it was not very familiar with. That was fresh. And that to me felt like somebody who was really thinking far ahead.
The second thing I saw, and this actually helped, that I'm not technological, is the whole proposition that it shouldn't be that to create content on the web, you need to be a developer, or that you had to learn a specific kind of software. That didn't make sense to me. And I've always been one to say that if it can be made for non developers, or non technical people, then that is what will succeed. Because most people will always be non-developers.
So that's where I signed it. It was admittedly a small investment. It was a two million dollar initial investment, with an option for another million.
[00:43:28] Michael Eisenberg:
Back then you could still do those kinds of deals.
[00:43:29] Adam Fisher:
I had to overcome a lot of doubt. My partners really didn't like it. Because again, there was no traction. I don't mind saying this. The company did not present well at the time.
[00:43:44] Michael Eisenberg:
So I have a similar story, by the way, when they came to see me–it was right at this point, and older listeners will appreciate this, when Flash was about to become obsolete, and Wix was originally built on Flash, and they walked in and started telling me “Don't worry about it. Our current platform is going away, but there's a thing called HTML5 that we'll just reconstruct everything.” And you're going, “They didn't really just say that in the presentation right? That the whole thing is going obviously, but don't worry, it's going to be okay.” And I actually admired the honesty on it but it was a tough kind of–
[00:44:17] Adam Fisher:
Oh they were always very transparent, right? I mean, there are a lot of things I learned from Wix over the years. I mean they were a magnet for talent. Whenever they saw somebody who was talented, they would find a way to find a position for them. It just didn't matter what the titles were. It was a company that didn't care about titles. They just wanted talent.
And so they became a magnet for all types–former founders, new ideas. I mean, Monday was spun out of Wix and all the different products. The second thing was being afraid to throw away what you've done. I mean that that moved from Flash to HTML5. They literally said to 1 million users, “Fuck you, because we're not going to support you anymore.”
Now, they didn't use that language of course, but they said, “Listen, we care about the next 10 million users, not the first million. They have nowhere else to go anyway. They'll figure out a way. We'll make it easy for them to transition.” And I realized that it was actually, it was a bold move, but it actually makes sense.
Michael Eisenberg:
Fiverr?
Adam Fisher:
Fiverr had traction. When I met them at the time, we were measuring websites on Alexa. You remember what Alexa was?
Michael Eisenberg:
I do.
Adam Fisher:
Alexa was a was a way of measuring website traffic.
[00:45:29] Michael Eisenberg:
Before you talked to it, you actually installed the little Alexa toolbar.
[00:45:32] Adam Fisher:
Right. It was a toolbar that measured website traffic, that actually, Amazon bought and then reused the name. But there was a website that just went through the roof overnight. And I met the founder Micha, and saw what they were doing. And I was just astounded that there could be a market for what was at the time five dollar services, which you immediately think about–what is somebody willing to do for five dollars?
And it was silly at first, it really was. A lot of it was silly, but there were some real things. And I was compelled by just the continuous traction, the momentum that I could see the volume of transactions and the diversity of transactions, and sellers, and buyers told me this is probably going to go for a while.
[00:46:22] Michael Eisenberg:
I had to get over the fact that it was like five bucks only, and it was in the name Fiverr can only be five bucks. I thought it was one of the risks. Not everything is going to be five bucks, for God's sake. There's some things that are worth more and worth less.
[00:46:33] Adam Fisher:
So you value it appropriately, and–look in our business, you know, there's lots of risks.
The question is, can you get comfortable with the risks? Can you eliminate them over time? That was potential cap on the company's potential, but we knew that there was probably a way to move up over time. And sure enough, pretty much, you know every quarter, if not every year, the average transaction value kept going up.
I don't remember what it is today. I think it's like close to 300 or so, and of course, that's the average. So it just shows you even in the name, even if their original mission was five dollars, like that that doesn't need not pin you down.
[00:47:14] Michael Eisenberg:
Hand on your heart–how many times did you look at the name Fiverr, F I V E R R, and say, “Oh my God, what are we gonna do with those two ‘r’s?”
[00:47:20] Adam Fisher:
No, I wasn't bothered by it at all. No, no. No, there are far worse names. I'm sorry.
[00:47:27] Michael Eisenberg:
All right. Give them to me. Which are the far worst names?
[00:47:30] Adam Fisher:
I have a whole blog on bad names. Look, there are a lot of bad names that are typically, they're words that sound like something to an Israeli ear.
Michael Eisenberg:
Give me some of them.
Adam Fisher:
No I'm not going to go into–I don't want to accuse anybody. Look, the first name of Monday was Dapulse.
Michael Eisenberg:
Dapulse, right.
Okay, and with a D, “Da Pulse,” as if that's what it sounds like to non-Israelis. And every time I would meet the founder I'd say, “Have you changed the name yet?” And then he did.
[00:48:04] Michael Eisenberg:
All right. I'm not going to get you to give me the other ones, huh?
[00:48:06] Adam Fisher:
No, not now.
Michael Eisenberg:
You're too well media-trained.
I need to pick the best ones. I don't have them on the top of my head.
[00:48:13] Michael Eisenberg:
So like Amit Karp, your partner, said I should ask you–you bet on teams and ideas very early. He says, “Where do you get the confidence from to kind of just bet like that?”
To bet on a team? Yeah. Just a team and an idea. Yeah. Yeah.
[00:48:25] Adam Fisher:
Yeah, when you've been doing this for so long, you know it fails. It's like it's the inversion technique when you figure out all the ways in which a startup or an entrepreneur is going to fail. And if you don't see any of those signs, there's a good chance that this person or this team can be successful.
I look for certain positive traits also in entrepreneurs. Well I focus primarily on the CEO, I look for communication skills. I look for transparency with me. We're going to become partners essentially, we're not just investors of course, at that stage. They need to be able to have to communicate what they're doing in such a way that they can recruit top people, fundraise, sell the product.
That's a lot harder than it seems. I look for somebody at the same time who's sophisticated, who I think can as much as they're transparent and a good communicator, can play a game of poker if they need to. And then, of course, I look for a very compelling product, or sometimes it's just a market direction where I feel like it's not contrarian.
We're actually here kind of I can see I think the trend is in their favor over time. where it will actually be easier to fundraise with time as opposed to kind of going with a headwind. So I also look for entrepreneurs that I think can handle adversity, that realize that the journey they're on is going to be filled with a lot of bumps and surprises.
Sometimes there's something in their past that suggests they'll be able to handle it.
[00:49:58] Michael Eisenberg:
Can you give examples?
[00:49:59] Adam Fisher:
Look, sometimes it's really tough things in a personal life. Including, you know, deaths in the family disease. Sometimes it's massive setbacks in their previous venture–it was shut down, didn't work.
That tells me something about their character. You know, it's important. Entrepreneur startups are not easy. If they're easy in the beginning, they're not going to be easy in the end, and vice versa. And you need that. I looked to get past that initial risk phase from a funding perspective as well, which is not trivial, you know that series A–can they get far enough? Is the domain, is the entrepreneur compelling enough that additional funding will be straightforward and de risk it? Do I see the future? Do I really know where it's going? I don't.
[00:50:49] Michael Eisenberg:
You've been doing this a long time, like I have. And I forgot the right words to ask this question. So like, you've been to thousands of board meetings at this point. Do you still enjoy going to board meetings? Do you find them useful? Do you want to be there?
[00:51:05] Adam Fisher:
No. You know, as an early stage investor, I'm typically quite tight with the team, the CEO. We have regular conversations. And typically I know what's going on ahead of the board. In fact I don't like to have any surprises at the board, not negative or positive. The board is an opportunity to have a discussion, to hear other perspectives that you perhaps hadn't thought of or hadn't come up in the conversation you have had with the CEO. But oftentimes it's just going through numbers. It's just updates, and it's not a very productive use of our time.
[00:51:42] Michael Eisenberg:
Do you prefer in person board meetings or Zoom board meetings?
[00:51:46] Adam Fisher:
In person.
[00:51:46] Michael Eisenberg:
Which means you can't do something else at the same time, because you're in person.
Adam Fisher:
Correct.
Michael Eisenberg:
But you like it better because you think you can get value from other people in the room?
[00:51:53] Adam Fisher:
I think I'm able to concentrate a lot more in person. There's something about looking at a screen and having things pop up at you,and having ideas. You know, whenever I'm sitting doing something, I have ideas popping into my head, and the urge to look something up on my phone. It's not good. I'm not proud of it. But luckily my–enough interaction in between the boards means that I actually know exactly what's going on.
[00:52:25] Michael Eisenberg:
Yeah. I noticed something interesting. I found the same thing. And so I now take Zoom board meetings without the video because I actually find it's–maybe this is like, habit, because I'm old. I have telephonic board meetings. You remember the Polycom board meetings before this, Polycom video, and I find it easier to concentrate when I'm just on audio than when I'm on video too.
[00:52:44] Adam Fisher:
I completely agree. I don't use a Polycom, but I put my AirPods on and I just walk in circles. All conversations are much more effective that way.
[00:52:55] Michael Eisenberg:
I do too. I often leave my house. If it's an evening then I'll go walk, because I find it much better.
[00:53:01] Adam Fisher:
I find also that it actually helps with my memory. The discussion as well.
[00:53:05] Michael Eisenberg:
Same. I find the same thing. But people want to do Zoom board meetings! So what do you do about that? Because no one wants to travel!
[00:53:11] Adam Fisher:
Board meetings used to be all in person. So I don’t think it’s horrible. But my problem with Zoom meetings is that people want to do Zoom meetings, instead of a phone call. Phone calls, it doesn't exist anymore.
[00:53:26] Michael Eisenberg:
You and I can talk by phone, because the two of us seem to be the only two guys who wanna talk by phone.
[00:53:28] Adam Fisher:
No, you can do phone calls only if you're in the car. That's the only legitimate excuse these days for doing a phone call rather than a Zoom.
[00:53:36] Michael Eisenberg:
I have this new shtick where you know, where they want a Zoom call. So I get on the Zoom and I go “Now that we've said hello, I'm turning off the camera so that I can concentrate.”
And there’s this puzzled look on the other side of the Zoom, like what does he mean? And I say “It's okay. I'm old.”
[00:53:54] Adam Fisher:
You're ahead of me on that. Maybe I'll take that.
Michael Eisenberg:
Why do people want to keep doing Zoom board meetings? Do you invest over zoom?
Adam Fisher:
No.
Michael Eisenberg:
[00:54:00] Right. Did you invest over zoom during COVID?
Adam Fisher:
Once.
[00:54:03] Michael Eisenberg:
And?
Adam Fisher:
I regret it.
Okay. How fast did you regret it?
[00:54:10] Adam Fisher:
It takes time to realize you've made a mistake. I'm not sure that's the reason, but I felt very uncomfortable investing in teams over Zoom. I also missed many opportunities. So I don't want to blame Zoom. I found it very hard to establish a rapport with the team at that period of time. And by the way, it wasn't just that it was on Zoom. It was the pace of activity, if you remember.
[00:54:31] Michael Eisenberg:
Oh yeah.
[00:54:32] Adam Fisher:
That was when there was an accelerant applied to all venture deals, to the point where you have to decide within days of meeting a company over Zoom whether you're going to invest. And for those of us who like to truly partner with entrepreneurs in the beginning, that was an impossible thing. To me, it was truly speed dating for marriage.
Michael Eisenberg:
Did you think of retiring at that point?
Adam Fisher:
Retiring? No, because you know it was like a gold rush. It felt like, cause we had portfolios, and all of a sudden everything was doing really well, and there were exits. It was fantastic in that sense. And no, not ever retiring. No
[00:55:07] Michael Eisenberg:
I thought I was finished, to be honest. I thought, I can't keep up with this. It's all these people speed dating over Zoom, and you know, I can't figure this out. And I figured that this was going to be what the future might look like. And I was done.
[00:55:21] Adam Fisher:
The other problem I had is that I met all these companies, and you know, six months, 12 months later, I had no recollection that I'd met them.
Michael Eisenberg:
100%.
Adam Fisher:
There's something about meeting somebody on Zoom with that same San Francisco background, or whatever background they're using. And I mean, it was impossible. And the odd thing is that, I meet them in my office, I remember exactly what chair they sat in, which side, who else came to the meeting–not so much what they were wearing, but–
exactly that the dynamic. You just lose that all in Zoom.
[00:55:53] Michael Eisenberg:
I interviewed a board member on Zoom yesterday, which I also don't like, for what it's worth, for one of my companies. And I was completely distracted, had to stay on Zoom for this one. I was completely distracted by the fact that the logo of the company that the person works for was in the background. And it was like one of these virtual backgrounds. Every time the person moved their head and a big head of hair it was like, you know, eating into the logo. Right.
I don’t think I have A.D.D. but it was like, I couldn't concentrate. There's that background.
[00:56:24] Adam Fisher:
And before–not everybody was using those backgrounds, but I once had a situation where I had a reporter once say, from a publication that was interviewing me–there was no background. She was in her home. And in the middle of the interview walks in this young man with a towel wrapped around his waist. And of course she can't see him, but I can see him. And I'm in an interview, in an answer.
And at a certain point she realized that her son had walked in and you know. So. Yeah. I prefer face to face. Or phone calls.
[00:56:59] Michael Eisenberg:
My daughter was joking that a podcast interview I did last night over video would've gone much better had I let my grandson in the room ,and he could have jumped on my lap. She thought that would've added a lot of, some interest to the conversation. Otherwise it was boring, things that happen on zoom.
Michael Eisenberg:
So–I have a partner. His name is Tomer. He used to work for you.
Adam Fisher:
Great guy.
Great guy. But you must have a favorite Tomer story.
[00:57:27] Adam Fisher:
You've caught me here. I don't have a great Tomer story. Tomer was always just so composed and together, and mature, and wise beyond his years. You know, I don't have any good, like, silly or embarrassing stories.
[00:57:47] Michael Eisenberg:
He didn't walk in a towel on a Zoom or anything like that.
[00:57:50] Adam Fisher:
No never, I don't have a story like that. No he was just–
[00:57:54] Michael Eisenberg:
So I want to try something here. So like, there's an entrepreneur walks in and says, “I've only got room for one of the two of you.” So after you explain to them–really we should do the deal together, you and I. How would you compete against me and say don't take the Aleph money, come take the Bessemer money?
What's the Adam Fisher pitch? Why do you want Adam Fisher's money? You get a chance to do this live, like, tons of entrepreneurs are going to hear you.
[00:58:14] Adam Fisher:
Why take our money? Oh, look, honestly–I want what's best for the entrepreneur. I think we offer, we have very different personalities you and I, different approaches.
[00:58:27] Michael Eisenberg:
I think Matan Bar would agree with that. Matan Bar the CEO of Melio.
[00:58:32] Adam Fisher:
He took us both. I feel like it's self-selecting. So my view is that if you're more comfortable with Michael, go with Michael. We can invest in the next round. I think you know if you want to go with Michael, go with Michael. if you feel more comfortable with me, you know, go with me.
I don't like to put down others. I try to, you know, bring us up. And if that doesn't connect with them well, then it's probably not the best match anyway.
[00:59:02] Michael Eisenberg:
Why should someone take one of our money instead of, say, a foreign investor that comes into Israel?
[00:59:08] Adam Fisher:
Oh, that's easier.
[00:59:09] Michael Eisenberg:
All right, good.
[00:59:09] Adam Fisher:
In the early years, you need somebody local. You need somebody who can meet you face-to-face, who can really spend time with you. Aside from the help we provide, whether it's recruiting or understanding the market, or the idiosyncrasies of compensation in Israel, or you know, working with lawyers, there's something about being present physically, and in your time zone in those first 18, 24 months, that is priceless.
And as we know, as much as foreign VCs foreigners come to Israel quite often, much more often than they did in the past–they're not here more than once a quarter. And if they are, they have a very busy schedule and they're not going to spend half a day with you.
[00:59:56] Michael Eisenberg:
Amit told me also to ask you, what do you think is the biggest misconception foreign investors have about this market?
[01:00:01] Adam Fisher:
The biggest misconception probably is that all the great entrepreneurs come from a certain technology unit.
[01:00:07] Michael Eisenberg:
I agree with that.
That's a great point. Yeah.
[01:00:10] Adam Fisher:
And the second one would be that everybody speaks English.
[01:00:16] Michael Eisenberg:
Well my second one is different. I think from the outside this looks like an endlessly deep market. And it's still a country of like less than 10 million people. And it's not endlessly deep.
[01:00:27] Adam Fisher:
And they see a very high percentage. They don't realize how efficient the market is in terms of surfacing opportunities. That's frustrating to a certain extent, because it means they can come here for a week and actually meet a lot of the interesting companies that are fundraising at a particular point in time. They figured that out. It's great for the market. I'm not against it. I agree. But yeah, they do tend to focus on a certain typecast of entrepreneur.
We've seen it with Shmona Mataim [8200] and in the cyber sectors. And I think when you veer beyond what has already been proven in Israel, they're much more skeptical, even cynical. You asked me about Wix–like Wix was really an impossible thing to get approved when it would have been in other funds, because there were really no consumer success stories out of Israel, except for ICQ which was never a business.
And there's one thing I've seen over the last two and a half decades–you have as well–it's that there is no domain that entrepreneurs can't eventually conquer. And we've seen it, you know there were doubts about consumer. There were then doubts about mobile, and cloud infrastructure, but truly building a cloud–you know Wix is one of the first companies to build a scalable service payments. Fintech, you know, insuretech in your case with Lemonade. And so that's what attracts me about the Israeli market, the breadth of domains, and the ones that have still not yet proven themselves.
But for me I view that as an opportunity, not as a reason to be skeptical or cynical.
[01:02:07] Michael Eisenberg:
What was your first success? First investment success?
[01:02:11] Adam Fisher:
Like as an exit, or…?
[01:02:13] Michael Eisenberg:
Yeah, which company was the first–put you on the map?
[01:02:19] Adam Fisher:
It wasn't a map.
Michael Eisenberg:
Fair enough.
Adam Fisher:
But it was a company called Dune Networks.
[01:02:25] Michael Eisenberg:
Is that what gave you confidence that you can do this?
[01:02:28] Adam Fisher:
No, it took me a long time to have confidence. You know there are people who have confidence and that makes them successful, and there are others that need to be successful before they have confidence. So I'm the latter. I have a lot of self doubt of what I'm doing at any given moment in time.
It took me many, many exits just to feel like, okay. And so I don't know if it was my 10th exit or what exit it was that made me feel like I figured it out. But you know Dune was a success story because I had sourced it, negotiated it. I mean, I was 25 at the time, and road it to an exit, and it became actually one of Broadcom's most successful acquisitions ever.
[01:03:11] Michael Eisenberg:
What was the multiple on capital you returned from that?
[01:03:12] Adam Fisher:
It wasn't big.
[01:03:13] Michael Eisenberg:
It wasn't big. That's the interesting thing. But you remember it really well.
[01:03:16] Adam Fisher:
I remember because we persevered. It took nine years, but we felt the success along the way.
[01:03:24] Michael Eisenberg:
I think it's a critical point that people often miss, right? Which, it's not always the multiple on capital early in your career. It's a sense that I can get through these tough times. You know, the ups and the downs of these businesses, ‘cause there are roller coasters.
[01:03:38] Adam Fisher:
That's right. I mean I think early on, I realized that in our business, it's much easier to lose money and it's very hard to, at least at this stage, to see those home runs. You can't see that. We're not nearly imaginative. You probably also don't have the patience to think that far ahead. We're talking about a decade ahead. But what you can do is eliminate the risks and avoid losing money. And I decided to go on, I wouldn't call it low multiple opportunities, but things where I felt like I know how to get to a three X.
And that doesn't sound like great justification for an investment, but my view is that once you're there you can figure out if there's another three X in it, and then all of a sudden you're at a nine or 10X right? And so that's been my approach. So when I invested in Wix, I didn't anticipate whatever five or 10 billion company. My best outcome was 500 million. Actually I was hoping even for a hundred million, because when you invest at such a low price–it was seven and a half pre I think–
Michael Eisenberg:
Oh, the good old days. That's all you needed.
Adam Fisher:
Yeah. You know I always say, if you get points on the board then you can also lose some at another place but you have to figure out how to manage that risk.
And I don't know. You tell me. My feeling is that you're willing to take more risk. You see opportunity where I see perhaps too much risk. And that's why I feel like we haven't cooperated as much as we might have.
[01:05:04] Michael Eisenberg:
Just the way I think about it is, I'm really good at losing money.
And I'm okay with all those zeros, and I think one or two or whatever it is will turn out great. And so I don't mind writing them off. I feel bad for the entrepreneurs, but I also think they should get their time back. And that's kind of what I was referencing earlier. So yeah I don't know if it's more risk tolerance as much as it's, I don't mind the crazy part of this, so I don't mind the really really way out there entrepreneurs. I'm looking for very small propensity to have an outcome. But if the outcome is there, it's very large.
[01:05:40] Adam Fisher:
I respect that. And I love that. It's necessary. I mean I've done it on occasion. I do think that Wix and Fiverr were those crazy opportunities that you could not explain logically. I need to do more of them.
[01:05:53] Michael Eisenberg:
So Ronni Zehavi said I should ask you this question. I think it's a really great one. He's founder of HiBob, by the way, he insisted on saying, “Send regards.” He said, “What is your recommendation to private companies when it comes to the geopolitical tensions that exist now?”
And to say it in a different way, he said, “What comes first, company or country?” And I don't think, by the way they're dichotomous, I want us to say that up front.
[01:06:18] Adam Fisher: Yeah I don't, I mean, I'm trying to think of a situation in which I'm favoring my company over the country. Maybe it's from a perception standpoint.
You know, I think the country will be fine. The country's not gonna go bankrupt because of a bad rap. I think a company can, if maybe that's what he was getting at. I’ve been of the opinion that we perhaps took the Israel “Startup Nation” story a little bit too far, and it's unnecessary.
[01:06:50] Michael Eisenberg:
I agree with that.
[01:06:51] Adam Fisher:
I don't think we need to market Israel's high tech. It's doing fine without it. I can't think of another country that markets its business community the same way. We don’t think of most products we buy as Swiss or Swedish or Dutch. It's just not that important. And I think we need to get used to not always referring to our companies as Israeli companies.
I don't think the venture ecosystem needs to pound its chest the way it has. We've reached the stage of success where, just look at the results. You want to make money? You know, you're welcome to invest. I just don't think we need to market ourselves the same way we have over the last decade.
[01:07:30] Michael Eisenberg:
Yeah. So I think the startup nation moniker is problematic. I do think there's a certain amount of national pride in you know America and Israel. I don't like the startup nation thing. I think it was great for a period. I don't think it's great for now. But as kind of this leader in innovation, I think is super valuable.
[01:07:45] Adam Fisher: It is. But again I think great companies are funded. I don't think there's any problem with good companies continuing to get funded, or being dismissed by customers as not being serious. There was a time, and you remember this, when businesses in the U.S. especially in Europe, they wouldn't buy from a company outside of their home territory, let alone Israel.
That sounded, to them, very sketchy. It's just not an issue anymore. The world is far more interconnected. There's much more acceptance of not even asking where the salesperson is calling from, where that website is actually domiciled. It's just not interesting anymore. And so I just don't think it's important.
So maybe to Ronni's question, like I'm fine with our companies kind of not raising the Israeli flag and just considering themselves international companies.
[01:08:40] Michael Eisenberg:
Last two questions, since we deal a lot with values on this podcast. It’s been, I open with that question. So you're on the board of Beit Issi Shapiro, and I'm interested in what drew you to that cause?
What motivates you to be there? And you should tell us about it also, because it does important work.
[01:08:59] Adam Fisher: I’m actually no long on the board. I was on the board I think for seven years. I'm still active there in other ways. Beit Issi Shapiro is, they do a lot of things, but they essentially focus on children with disabilities–from the most severe disabilities to light ones, very young children, kind of the preschool kind of years.
And they’re the first of its kind in Israel and had a huge impact on the disabled community in Israel in particular children, how the government treats them, the rights they deserve. And they've actually exported a lot of their ideas, and thoughts, and training to other countries around the world, both in the Middle East but also in Europe and in Asia.
And so they've had an enormous impact. I got involved because my youngest son went there at age six months, which for us was a godsend. He was born with a very severe, very rare neurological disease that made him essentially unable to do pretty much anything. No cognitive function, I can't even say very limited. And they took him with open arms. And you know this is where I thank myself for choosing to live in Israel. I know some places like that exist in the U.S., but the kind of personal warmth we received was just incredible. The rights he received as an Israeli citizen despite the fact that he couldn't communicate in any form.
And so you know, my family said we're gonna we're gonna be involved and truly give back. And so that's what we do.
[01:10:50] Michael Eisenberg:
Amazing. You know I first ran into them–you mentioned the consumer industry before–so Nahum Sharfman of blessed memory who was an early father was really high tech. He was a national semiconductor.
And then he started this company that became shopping.com that I was invested in, in the late nineties and in the early two thousands, was very involved there. But then it dropped off my radar, until kind of doing the research for this episode. So you know, thank you for the work. It's an incredible place.
[01:11:25] Adam Fisher:
It's an amazing institution. You know, it's just it's also a sign of–it itself was an entrepreneurial venture in the name of of Issie Shapiro, but it also shows like, what Israel is capable of even beyond high tech.
[01:11:44] Michael Eisenberg: People don't realize by the way, but they're in the non profit sector in Israel, you have this in the four-year study center in Jerusalem you have Beit Issie Shapiro, you have it in Yad Sarah, which distributes free medical equipment across the country.
It saves the country by the way billions and billions of dollars in medical costs. And Zichron Menachem in Jerusalem for cancer patients. The nonprofit sector particularly around health services populations is actually an area of IP export that is underappreciated in this country. And to your point, you know it's all over the world, whether it's Middle East or Southeast Asia or Europe–people are not even aware of what incredible work is done here and now.
[01:12:25] Adam Fisher:
There's incredible innovation. I think the only thing that has been lacking, that I think has changed, is just Israeli citizens approach to supporting and helping nonprofits financially, not just with their time.
[01:12:38] Michael Eisenberg:
Yeah I agree with that. Last question for you from Tomer Tagrin of Yotpo, and I'm going to quote it. He says, “How do you manage to deal with your level of success and stay so grounded and humble?” He thinks that one of the most unique things about you is that nothing goes to your head. How do you pull that off?
[01:12:59] Adam Fisher:
It helps to have self doubt to begin with. Yeah I mean, failure is just around the corner all the time, or other types of challenges. As successful as you've been, you've also had a lot of privilege, and privilege may come from the family you were born into or the country you were born in or whatever the opportunities you were given. It also comes from not having had to deal with horrible things. After October 7th, I think you realize what people deal with, so I've just always been very conscious of how lucky I am–whether it's in business or in life–and not let it get in my head.
A lot of what we do feels like it was scripted, or we knew exactly how it was going to end up. We didn't, right? I mean it's a lot out of our control, not only just the macro but even the micro. We're dealing with individuals who things happen to them as well that are unforeseen, and you have no control over that.
And so you have to accept that. When you accept that, I think you realize how much luck is involved in success. Because in my opinio,n luck is just the absence of bad luck. When you understand that, you realize look, don't let it get to your head. Be grateful. Move on to the next one.
[01:14:31] Michael Eisenberg:
Thank you for doing this Adam. I appreciate it. For those of you who want to learn more about Adam, check him out on X, and I highly recommend you check him out on X @AdamRFisher. That's @ A D A M R F I S H E R. And if you like the podcast, rate us five stars on Apple Podcasts, Spotify, Youtube–subscribe wherever you can find us. I really appreciate you doing this Adam. This was a lot of fun.
[01:14:54] Adam Fisher:
Awesome. Thank you Michael.
[00:00:00] Michael Eisenberg:
Welcome back to another episode of Invested, where we explore the intersection of values that create value. I'm thrilled to have with me my friend Roland Fryer. I didn't know Roland actually four or five years ago. But since then, we actually became fast friends. I would often refer to him to others as a true brother.
We don't look alike. We don't come from the same background at all, but he can literally be my brother at heart. And, actually, why don't we start with that Roland? Where did we meet? You want to tell everyone about it?
Roland Fryer:
Yeah, we met in Tel Aviv, on a rooftop. I came and had coffee with you because I heard you on a panel the day before, and you were talking about the limits of impact investing.
And you know, this is not really my style, but I waited for the long line to dissipate after people wanted to chat with you. And I came up and I said, “I think you got this investing thing wrong, this impact investing thing wrong.” And you were like, “Oh, really?” And you were nice enough to ignore my ignorance, and invite me for coffee the next day.
And as you said, we really hit it off, and then we had a long and wide-ranging discussion of impact investing, how to make actual progress using capitalism, and we've been friends ever since.
[00:01:24] Michael Eisenberg:
Yeah, so for those who don't know, Roland is a Professor of Economics at Harvard University.
At age 30, he became the second youngest professor and the youngest African American ever to be awarded tenure at Harvard. He's an early-stage investor and Founder of Equal Opportunity Ventures. He was awarded a MacArthur Genius Fellowship and the John Bates Clark Medal given by the American Economic Association to the best American economist under age 40.
I think Roland is over 40 now, and he's still the most interesting and insightful American economist out there. He's also a senior fellow at the Manhattan Institute, and I can say an all-around great guy with an interesting story. And actually, I want to start with a story, Roland, which I know, but I think everyone needs to hear it because I think it tells a lot about who you are.
Can you tell us the story of how you persuaded your wife to go out with you? Your now wife.
[00:02:16] Roland Fryer:
That is not the story people typically want to hear, but I'm happy to tell you that one. We had a fellowship together. She's three years younger than me. After graduate school, I went to the Harvard Society of Fellows, which is Harvard within Harvard.
That's the most obnoxious thing you've ever heard of. But at that point, it was a good thing to have on one's resume. So I did it, and I was in my third year of the fellowship and really ready to leave. And in walks this wonderful, smart, beautiful woman, her first year of her fellowship. And she was so popular amongst the other fellows that I didn't get a chance to talk to her until April, you know, I met her in September across the room.
And so we were sitting in line for the restroom at one of the dinners. And I asked her what she did. She says, “Well, I'm a cancer researcher.” I said, “Huh, did you know, are you familiar with the work that shows that smoking actually reduces the chances that you'll get cancer?”
And she said, “That's the dumbest thing I've ever heard. It's just impossible.” I said, “Well, if I'm able to prove to you that smoking actually reduces cancer, how about we go out and have dinner?” And she said, “Sure, it'll never happen.” So the next day, early in the morning, I sent her a report that indeed showed that smoking reduced cancer.
And she says, “You know, this is from the tobacco lobby, right?” And I said, “We didn't talk about the quality of the evidence.” So she, with sympathy, agreed to have dinner with me anyway. And we went out one night and moved in together that night. And that was 18 years ago.
[00:03:58] Michael Eisenberg:
Unbelievable story. Thankfully, the quality of your regular research is much better than the quality of the American Tobacco Institute’s research. What made you think of that? ‘Cause I think this is actually instructive about who you are as a person. Like, you know, it was a bold comment to somebody who kind of knew and said, “Go on a date with me.”
And you use guile, for lack of a better term, and research to persuade her to go on a date with you. So like, what, how'd you think of that?
[00:04:31] Roland Fryer:
Well, I was teaching, or, I had taught an applied microeconomics course with a heavy dose of econometrics in it. And one of the examples I gave for a particular statistical methodology, and how it could go wrong, was this paper by the tobacco lobby.
So I knew it was deeply flawed. But you know, if you do enough of this stuff, Michael, you have a bunch of cocktail humor and random facts. And so it just so happened that this one came in handy. And as you said, we've been married for a while now, have two wonderful daughters.
So it was a good use of fast statistics.
[00:05:13] Michael Eisenberg:
Jeff Bezos is fond of saying that if the anecdotes contradict the data, check the data. You're probably looking at the wrong data, he says. Do you agree with that?
[00:05:30] Roland Fryer:
I don't disagree with that, but I'm constantly checking the data, right? So that wouldn't be the only thing I would check the data for. But after you check the data, if you think that it's comprehensive and robust, cleaned, then I wouldn't worry about the anecdotes at all. You know my view, the plural form of the word anecdote is not data. But, we have to be humble about what data can tell us sometimes and the quality of it.
And so oftentimes I will use that more qualitative approach, anecdotes, you know, things I see with my own eyes, to help me understand, and for lack of better words, feature engineer. So there's data, and then there's data. There are ways of constructing variables that will help guide one's intuition.
So I think anecdotes are really important for hypothesis testing. They're not helpful for hypothesis proving or hypothesis dismissing. And so there is a nugget of truth in that. But at the end of the day, the data wins out, but less, let's put it through the wringer. Let's be thoughtful about it and be careful, and anecdotes can help guide that discussion.
[00:06:56] Michael Eisenberg:
Let me tell you the reason I asked you the question. I have an observation about Roland that goes back to a story about you that maybe I'll let you tell, which is that sometime, I think in 2016, you published a working paper and your colleague said to you, “Don't publish it.”
You want to tell the story? Because I want to make my observation afterwards about something I think is super unique about you.
[00:07:22] Roland Fryer:
It's an interesting example. So I didn't know you were going there, but–in that case, we got the anecdotes wrong, right? Or we didn't see all the anecdotes. We didn't see all the anecdotes, right? And so in what you're referring to is in 2016, like the rest of America, and maybe much of the world, we were looking on and watching American cities be engulfed by riots. We had seen videos that were deeply disturbing. Deeply. You mentioned values–that, what we saw, cannot be a part of–what we saw was not a part of American values.
And I want to be clear. I went into this research thinking that I was going to be another instrument for those people who were out there protesting, but protesting is not my thing. In economics, we talk a lot about comparative advantage, right? And that protesting is not my comparative advantage, but data nerd-dom is.
And so I thought, this is going to be the easiest thing I've ever done in my career, right? Because up until that point, I had studied incentives for kids and other things that were not so popular amongst a lot of people. And I thought, here's my shot to do something that people might actually like.
And it'll be the truth. That'll be great. We'll get a twofer here. And so I thought I was going to download some data on the police, show that they were really biased, inject that into a time in American history, what was important, to add data analysis to the emotions, and lo and behold, that was going to be helpful and maybe even help the country heal a little bit. That's arrogant, but that's what I thought at the time.
I actually started looking at the data, and we collected millions and millions of data points. And–
Michael Eisenberg:
Data specifically on what?
Roland Fryer:
Sure. On police use of force. We collected data on uses of force that ranged from just putting your hands on someone during a traffic stop, to hitting them with a baton, to a fatal shooting and everything in between.
One data set, Michael was so sensitive, not sensitive–sorry about that–but one data set was so detailed that it documented when the police raised their voice at a civilian. Those types of uses of force. Okay. So when we actually looked at the analysis, what we found was that on lower level uses of force, the hands, and pushing people up against the car, there are large racial differences that cannot be explained.
And in fact, when we put them through a formal bias test, there is bias in the lower level uses of force. But that's not what people were protesting about. People were protesting about the lethal forms and lethal uses of force. And on those, we collected data from 10, 15 cities around the country. And for that, we found absolutely no racial difference whatsoever.
And that is a case, as you described, where we had seen a handful of videos that were really disturbing. And it was really discombobulated for a lot of people to see those videos, and then to read this analysis saying that there was no bias in police shootings. How could they not? I see it with my own eyes.
And the reason I say those anecdotes were misleading is because you know, I don't know the percentages off the top of my head, but roughly 50 percent of police shootings in America are of white suspects. And we hadn't really never seen many, if any, videos of whites in those types of situations. And so I thought, so that's a situation where anecdotes truly are that. They are not representative of what's actually going on in the data.
And so when we looked at the data, that's what we found. And you know, it caused a bit of an uproar, to say it mildly. But that's a case in which, not only did anecdotes go a different way than I expected, but my own personal views and personal experience was exactly opposite of what the data showed. My arrogance of them in the beginning, of thinking, “Oh, this is a situation where I'm going to put out some research that people actually like,” was the exact opposite.
[00:11:53] Michael Eisenberg:
But I would take a step deeper. How did you collect the data? How did you verify it?
[00:12:00] Roland Fryer:
Sure. A few ways. We collected multiple data sets. Some of them were public records that you could FOIA from police departments. So at that point I had what I called a FOIA machine in my lab. I had people just writing FOIA, which is Freedom of Information Act requests to police departments, to get data that they had to share with the public.
And then there were relationships that I just went out and talked to police departments, and told them what I was doing, and asked them for their data, and did ride-alongs, and tried to understand their perspective as well. And so we had partnerships with large urban police departments like Houston, Texas, where we get really, really detailed data that, you know, folks like, The Guardian or other, you know, Vice or other news outlets did not have access to.
And that's important because of all these things. Like other things, context matters. And so it's not enough to just look at summary statistics and say, this group is more likely than that group to be involved in officer-involved shooting. What you're actually trying to estimate is, at the time of an officer-involved shooting, holding everything else constant except race is the probability that that police officer pulls the trigger any different?
That requires a lot of data. Okay. And at that time, no one had that type of details in these types of data sets. And so that was the real problem, innovation, as it were, for this analysis.
[00:13:37] Michael Eisenberg:
So I want to pick out two words you use, because I think this is my thesis on Roland, and I want you to tell me if I'm incorrect.
So you talked about that the anecdotes are out there, like what I would call on social media. And, one of the things that I've observed is it used to be that maybe eight people were killed a day in New York City out of, you know, eight million people, which is a tiny fraction–nobody knew about it. But today if eight people are killed in New York city, eight million people know about it because it's all over social media.
So the social-media driven anecdotes, as it were, kind of take over the narrative of what's real. The two words you use, I think, that are critical, are ‘ride along.’ Which is, the thing that really struck me after some of our conversations, was you actually did the legwork.
You went out to police departments. You didn't just rely on the FOIA, the Freedom of Information Act, and download the data. You did the ride-alongs to collect the anecdotes that framed the data, and collected essentially more data in an interpersonal way. And in the kind of way I would frame Roland Fryer–I have gotten to know you over a bunch of years–is there's data Roland Fryer, and then there's hard work, and legwork, and personal anecdote Roland Fryer, where you actually go see it yourself, which contextualizes your insights, and I think makes them controversial. Because very few people actually go out and do the legwork, and instead kind of use the data to get us the anecdotes.
Is that a fair characterization?
[00:14:52] Roland Fryer:
I think it is. The latter part, the legwork, is what I really pride myself on. Anyone can download data. And so, whether it be school reform, where we went out and actually rolled up our sleeves and tried to take on schools, or the police, where we, where I embedded myself in police departments for, you know, days at a time.
But I want to be crystal clear. It's because I am–it is hypothesis generation, right, that I want to understand from the police perspective, what they believe they're maximizing, what they believe they're doing. And then you take that information, you go back to the data, and you form a set of statistical hypotheses that can actually be tested.
That's the key. And so for me, this is an unrelenting hunt for what the data had to say about a particular social issue. And my views don't matter. Michael's views don't matter–except to form hypotheses that can be statistically tested, right? And for me, and I've had this view since I got into the Harvard faculty, whatever, 25, 26-years-old, is, I'm willing to put everything on the table, and I don't understand people who are not.
What are you afraid of? I’m really just trying to understand where the truth lies, with a capital T. Now, some will be seen as impossible. Fine, we can have that philosophical debate later. Happy to have it. But I don't really see any other way, because my life experiences are different than yours or different from someone else's.
And so I don't like situations where the best argument wins. I like situations where the clearest and most compelling data, and the most rigorous analysis guides our beliefs.
Michael Eisenberg:
Where does that come from? Where does your–
Roland Fryer:
I think it comes from my grandmother. I don't know if I've ever shared this with you. My grandmother, you know, Southern parenting in the U.S. isn't known for its innovation. But my grandmother had a rule, and her rule was, ‘If you just tell me the truth, you'll never get in trouble.’ So that was my guiding principle. And, so I told her the truth, even when I really, even when I was embarrassed to do so, and she always lived up to it.
You know, you know, kind of spankings and all that kind of stuff for Southern kids–and I got my share of them, but never from my grandmother (and she was known for that with her kids). But she made a pact with me, ‘If you tell the truth, you'll never be in trouble.’ And that's been my view scientifically.
And I wish she were still with us, because I could tell her that not a lot of people have her beliefs, because sometimes when I tell the truth, I get in a lot of trouble.
18:52 Michael Eisenberg:
Why do people, and maybe this is unfair, but especially in academia–because you took a lot of heat for some of your stances–have such a hard time with the truth?
Roland Fryer:
I don't know. We can hypothesize, but I don't pretend to understand them, and I'm not sure I want to, I don't want to do the mental exercise it would require to try to understand what's that all about? I have asked before, and the kinds of things I've been told as well, people know what the truth is.
And so if the data comes in the opposite direction, the data must be bad. It gets back to your anecdote versus check the data comment. And I’m not as quite as dumb as I look. I understand data has problems and it's not always clean, and one has to think about those things. But that's something we can, oftentimes we can try to measure.
And so we can try to put bounds on what the data tells us, but to just ignore it, I don't understand. And you know, look, we're both capitalists. We also understand that people have a vested interest, it's oftentimes in a particular narrative or a particular story. So I think all of those reasons are behind why people, they're not ignoring the truth. It's just inconvenient for them.
[00:19:37] Michael Eisenberg:
Do you have a view on data and truth in the era of AI right now? Like how do you pursue truth in the era of AI and defakes, and…?
[00:19:52] Roland Fryer:
Well, it’s both good and bad. AI is going to supercharge those who want to do research in the right way. And oftentimes resources go to the people who do the most popular research that makes everyone feel good, who hold the purse strings.
But the cost of doing research has gone way down. The research I just described to you in 2016, that took a lot of capital. I mean, we had eight full time RAs running around. There's not a lot of faculty who have eight full time RA budgets, for eight full time RAs, right? In fact, the provost at Harvard at the time, I met with him right after I had done that paper.
And he said, “Well, I saw on a footnote that you had eight full-time RAs do the analysis, but then you were so surprised by the results that you hired another eight to have them redo the analysis.” I said, “Yes.” You know, I thought he was complimenting me. I said, “`Wow, yes, I actually did. I'm glad you saw that footnote and see how rigorous I am.”
And he says, “Yeah, that's one approach. But the other view of this is you have too many resources.” But now with AI, there's a lot more you can do. One individual faculty member can use the tools of these foundational models to write code a lot faster and produce research a lot quicker. So that's the good side. But the bad side is what you mentioned, which is the deep fakes. How do you know the data is real? And that's the thing we're going to have to figure out.
How do you actually understand and check the quality of data in the age of AI? How do we know it's actually real? What's the real source of truth? Is there going to be something to compare it to, so that we understand this data set’s not representative versus not–?
Those are the things that are on the frontier that we have to think about. But I'm hoping that the net result of this is yes, deep fakes are a problem, but that it will be positive on society because, you know, just like startups lowered the–and the foundational tools that came with the startup ecosystem, lowered the cost of people to start businesses–this is lowering the cost of people to do actual research and insights. And so hopefully the truth gets out there, net, in a larger way.
[00:22:29] Michael Eisenberg:
You mentioned earlier, and I think you've made a big point of this when Bari Weiss interviewed you down at the University of Austin, which I'll come back to later, that you choose data and research or you're a data nerd, over protesting.
We've had a lot of protests on college campuses, over the last, you know, nine months or so. Do you think data causes more change than protesting, especially–a lot of people seem to want to pay attention to data when it doesn't fit their narratives?
[00:23:04] Roland Fryer:
I think in the long run it does. Perhaps that's me being optimistic.
[00:23:09] Michael Eisenberg: God bless the optimists, man.
[00:23:09] Roland Fryer:
I have no choice. You can't do this work if you're not. I think in the long run it does. You've heard the quote that, you know, the arc of history is long, but it bends towards truth.
And I really do believe that. And so, I've proven that, you've proven, we're in this for the long, for the long game. And so, I have people now referring to work I did 20 years ago. And so, I believe you put it out there, and yes, in the moment, it may not be politically feasible for people to implement things because of protests or other current political realities.
But in the end, I do believe that as the base of knowledge changes, that it becomes harder and harder to ignore it. Not always. Your viewers are going to say, “Oh, here's five examples.” I got it. But, that is my fundamental core belief about lots of social issues, whether it's healthcare, education, etc.
You know, there is oftentimes moments where the political reality and the undergirded data come together. And in those moments we can do something special and make real progress.
[00:24:41] Michael Eisenberg:
So, how long have you been teaching at Harvard?
[00:24:45] Roland Fryer:
21 years? Something like that. I showed up on campus in 2003.
Michael Eisenberg:
Do you see a difference in the students today?
Roland Fryer:
Yes. For sure. Big differences. Big differences.
Michael Eisenberg:
I'd love to hear what they are.
Roland Fryer:
You know, here's a shining example. I think the students are really, really credentialed now, relative to 2003 or 2004. Yes, of course, they always had good resumes, but they are phenomenal when they come in. The downside of that is that they take less risk.
And so I don't meet a lot of students who have failed at anything. And I believe risk-taking and failing provides certain character traits that are good for the long run. And I think that that is one of the big differences I've seen over the last 20 years is that the amount of failure, risk taking, wearing failure on your sleeve like a badge of honor just doesn't happen that much anymore. You know, my oldest daughter competed in the math Olympiad last year, and she didn't do that well and she was embarrassed to tell me, I think.
Because I didn't really know she was competing. Neither did her mom, it's not just me being out of it. At any rate, at some point it came up over dinner. “Dad, I competed in the Math Olympiad.” “Okay, how'd you do?” “Not that great. You know, I did okay, but I didn't crush it.” I said, “Eleanor, did you fail at the Math Olympiad?”
She looked down, she said, “Well, I guess you could kind of put it that way.” And I leapt up from the table and I said, “Yes!” And I got on my phone, and I had a huge chocolate cake delivered to the house as quickly as I could get it. And we celebrated and we had a dance party.
And I think she was thinking, what is wrong with this family? And I said, “Failure is good! This is great! That means you're stretching yourself. That means you're pushing past your limits. I mean, you're learning about yourself.” And that is the thing that I have seen less and less of over the years. I find it sad because I fail 20 times a day, and that's just the way I've orchestrated my life. I'm always trying to push further than probably I'm supposed to.
[00:27:24] Michael Eisenberg:
You came from a rougher background than just failing the Math Olympiad, I think though, right?
[00:27:30] Roland Fryer:
Yeah, I didn't know what the Math Olympiad was until my daughter was in it
That's fair to say
[00:27:38] Michael Eisenberg:
Did anyone celebrate your failures when you were a kid?
[00:27:41] Roland Fryer:
No one celebrated the failures or the wins. You know, there was just not a lot of celebrating going on. You know, we–so the short answer is no. And it's interesting because depending on the type of failure, when I was a kid, it could be really catastrophic.
[00:28:04] Michael Eisenberg:
Yeah, for those who don't know, in, I think in Freakonomics they wrote that you were a “full-fledged gangster by your teens.” And then you became a footballer.
Roland Fryer:
Yeah, that's not true.
Michael Eisenberg:
Oh, that's not true?
[00:28:14] Roland Fryer:
Yeah, I'm not, I'm not a full fledged gangster, I mean, I don't want to scare my Harvard colleagues over here, I've already got enough troubles.
[00:28:21] Michael Eisenberg:
Yeah. Well, listen, you were an athletic star, right, playing football and basketball at the U of T?
[00:28:28] Roland Fryer:
Yeah, I was an athlete from five years old, loved that. That I excelled at, and I enjoyed it.
Michael Eisenberg:
And you flipped burgers also, right?
Roland Fryer:
Oh yeah, a lot of burgers. I flipped burgers.
I had every job you could imagine, Michael. I mean, my first job at age 12 was stripping furniture. You know, I would sand it down and get it ready to be reupholstered. I think I got paid $2 an hour, which was half of minimum wage at the time. That's probably generous, ‘cause he didn't really pay me some days. But I did that. That was at 12, and then once I got to be 14, I believe, I forged my birth certificate so I could work at McDonald's.
I had to wait till then because, on my birth certificate, the doctor signs, you know, whenever 1977, June 4th. And I needed to take the cursive four over. So it's a whole thing, but I did that, and I worked at McDonald's, and Pizza Hut. The worst job I ever had was waiter at a buffet. Oh, what a bad job, right?
Because you make half of minimum wage, because you’re wait staff, but no one tips you because it's a buffet. So I worked at the Golden Corral, man. That's a bad job. I've had every odd job you can imagine. But you know, it was because I wanted, I used to joke with people that I had real customer service needs. I was not convinced that being poor was a cool idea, and I wanted more.
Michael Eisenberg:
Is Eleanor going to flip burgers?
Roland Fryer:
I hope so. You know, I hope so. One of the big questions I have personally is, how do you get kids to have grit and resilience? And an internal locus of control when they don't go through a lot of friction in life?
And maybe that's too personal for a podcast, but it is something I think about a lot. So I find myself just randomly telling my kids “No,” just to see what happens. Should I just test them?
Michael Eisenberg:
And then buy the chocolate cake for failure.
Roland Fryer:
And then buy chocolate cakes for failure. Exactly. But yeah, I hope they do. I think you learn a lot of things in those jobs, right?
[00:30:56] Michael Eisenberg:
I agree. I sliced fish and cheese, and did deliveries for years. I came home smelly.
Roland Fryer:
Exactly.
Michael Eisenberg:
My mom would say, “Go to the fumigation room over there. Go get yourself cleaned up.” And, yeah, I totally get that. I wanna go back to Harvard for a second.
Roland Fryer:
Sure.
Michael Eisenberg:
So a lot of things have changed at Harvard in the last nine months, including Claudine Gay's resignation, after her appearance in Congress and things kind of went sideways.
And then you wrote an opinion piece in the Wall Street Journal titled, “Anti-Israel Protests and the Signaling Problem,” about college administrators bending to antisemitic and anti-Israel protests, through their signaling. What caused you to write that piece?
[00:31:43] Roland Fryer:
A couple of reasons. One, as you know, I have many friends in Israel, and I was watching what was happening. And I believe deeply, deeply in my bones about fairness. When I was a kid, I couldn't even watch a movie where the person who was doing the right things didn't come out on top.
Like it would bring me to tears as a boy. Like, I mean, it's just in my bones, man. And I felt like, rather than operating from a system of core values–here is what I believe, and I'm willing to lose whatever it takes for these core values–that college campuses, their approach would look more like this [signals with hands].
And I think that is deeply against what liberal education is all about. And so, it wasn't just what happened nine months ago that caused me to write that. It was over the last five or six years, I believe there have been opportunities to teach at institutions of higher education, and we have squandered many of those opportunities.
There've been a lot of big issues going on in the world. And rather than somehow sitting people down and having a communal discussion about these–whether or not they're consistent with our values–we have oftentimes, not all the time, but oftentimes, tried to figure out what the students wanted to hear, or that would be popular, and said those things.
And I just, I don't believe in it.
[00:33:58] Michael Eisenberg:
Why do you think that's happened in higher ed?
[00:34:04] Roland Fryer:
I don’t know. You know, this might be a real surprise to you, but I don't sit around with university administrators and hang out. I don't know what they believe they're maximizing. And so I don't know the answer to that. But it is an observation of mine, that, you know, if you take for example what happened here, as I understand it, with Ron Sullivan on our campus, I think that's a prime example where, you know, Ron is a defense attorney. He's a professor in law school. Ron had defended double murderers, because Ron believes, and many of us believe, that everyone has the right to a defense.
And then he became part of the defense team for Weinstein. And I'm not saying anything about–let's be very clear here. I shouldn't even have to say that, but I'm saying it anyway, it drives me nuts that I even have to say it–but he was on that defense team, and he was subject to some level of sanctions here at Harvard for that.
Now that, in my opinion, it was an opportunity to teach, to say, “Maybe we find this person's actions absolutely disgusting, but he is entitled to a defense. And so what is our, what do we believe about that? And how do we think about that? And how do you navigate that?” And to bring different faith communities together, to talk about how different faith communities might think about that. I don't know, maybe that starts to sound a little bit like leadership, but there's something there that I believe was a real teaching moment, rather than say, “I'm on the good team. They're on the bad team. Let's polarize.” There was a real moment, and there's been other moments like that, and the one after October 7th was another moment like that, where I just believe it was an opportunity for universities–and I'm not picking on Harvard or Yale or anybody else, I'm just saying universities generally, I don't know many who got this right–to really step up. And to teach. I believe, and this is just my belief, I believe students are here for more than just math and physics. And I don't believe they're here for political indoctrination.
I believe they're here to learn how to think about complicated issues. And some of that is math and physics. And some of that is all sorts of other types of social issues. And I think we're really good at teaching math and physics, but I think on these things that are things like, is there bias in policing in America?
Somehow our rigor that we put into the math and physics all goes away, and we figure out what's comfortable to say. And I think that is a real lost opportunity.
[00:37:27] Michael Eisenberg:
So, to ask you a bit of a controversial question–is there a role for these institutions of higher education going forward?
Roland Fryer:
Of course.
Michael Eisenberg:
That's valuable? Why?
Roland Fryer:
Of course.
Michael Eisenberg:
Why? If we can't educate kids in the hard issues of our time and see all sides of it–by the way, I should point out, just a side point on Sullivan, the Talmud says that if somebody is brought in a capital case before the court, and the court unanimously decides that he is guilty, he's innocent, and he must be released. Because if nobody can provide a defense for the person, it's obviously that this is like a cabal or it's–no one's thought this through properly.
Roland Fryer:
That’s interesting.
Michael Eisenberg:
And so he must be released, because nobody's defended him on the court. So unanimous opinions in capital cases under Jewish law, if he's unanimously convicted, he's actually released–which is similar to what you're talking about.
So why is there a role for higher education? Why should these institutions even exist at this point? If you can't do the kind of teaching moments you're talking about.
[00:38:29] Roland Fryer:
Because I think they create, I still believe they create value for many, and I believe there are really phenomenal professors on these campuses.
And I believe there are really hungry students on these campuses. And I believe there is a lot of good work going on. I am highlighting specific instances over the last five years where I believe universities didn't live up to their potential. But I think it's an extreme overreaction to say they have no value.
You know, they are the reason that you and I are talking today.
Michael Eisenberg:
No. The reason is Sender Cohen. He brought you to Israel, and we got a chance to meet. Let’s be very clear.
[00:39:19] Roland Fryer:
Yes. And the way that happened is, I showed up on one of these campuses and an economics professor said, I think, “You might actually be a pretty good economist. You might have a knack for this stuff. Everyone else in class looks confused, and you look delighted.”
Michael Eisenberg:
That professor, by the way, is Steven Pinker of Freakonomics, right?
Roland Fryer:
That is not true. But I think that it is, I mean, you get what I'm saying. I think if you look at the level of discovery going on and many of our science labs, I could go on and on, or, you know, my wife, what she's doing in cancer research and her colleagues is just mind-blowing. So no, let's not throw the baby out with the bathwater here, but let's fix it. Let's not go extreme, but let's fix it. And let's figure out–this is the harder problem than just throwing it away, Michael–let's figure out, how do you give faculty the incentives to be truth tellers? That's a much harder problem than just throwing it out.
[00:40:21] Michael Eisenberg:
What would you do to give faculty the incentives to be truth tellers? You're an incentives guy.
[00:40:31] Roland Fryer:
Oh, I am. I've thought a lot about this, but I don't have any great answers, because the problem is, you need a set of universities to do it. Not one individual university can really solve the problem.
Michael Eisenberg:
Game theory problem.
Roland Fryer:
Yeah, exactly. Because even if Harvard says that or Yale, and I just don't quite get tenure here on my merit, not because I said something controversial and the other set of universities haven't adopted that principle, then I'm going to fall.
So then it's still a really risky bet. If it's a risky bet, I don't take the bet in the first place. And so I think we need a collective culture change of focusing on the quality of the research, where quality is not defined by whether I like the answer.
[00:41:23] Michael Eisenberg:
Okay, listeners, Professor Roland Fryer is soliciting proposals for how we create incentives to change higher education such that people pursue truth and bravery in the face of, let’s call it common wisdom of what the students want.
We’ll get your email at the end, Roland, so that anyone can send you their proposals. And I'm sure it'll be flooded by several.
[00:41:46] Roland Fryer:
I love it. And here's the thing though. We don't want to prompt just knee jerk, you know, shocking things just because we think–that's fun too, but what we're actually looking for is the earnest search for truth. And those are different. But if anyone has any proposals to figure that out, please do. I mean, I think it is one of the most fundamental problems in higher ed right now.
[00:42:11] Michael Eisenberg:
So before I take a sharp turn to talk about an entirely different topic, I want to tackle two more quick issues. So you wrote a piece in the Wall Street Journal about DEI, which I would characterize as ‘don't throw the baby out with bathwater,’ which is that there were important things in DEI, even though it failed as a policy, basically, and we need to go out and find the talent wherever there is, because talent and intellect is pretty evenly distributed. Recently MIT released its enrollment statistics for the new years after the Supreme Court ruling that didn't allow using DEI criteria and there was a dramatic decrease in acceptance or enrollment of black students.
I just want to get your reaction to that, hear how you think about it.
[00:42:55] Roland Fryer:
Completely predictable, and I want to be clear that I don't think DEI as a policy failed. I think DEI as a term failed. I don't know what the policy is, because everyone interprets it differently. It's a term, and I'm sure there'll be another term.
There was a term before DEI. And all I'm asking for, I think DEI 3.0 or maybe 4.0, depends on your perspective, is to actually–you ready for this, Michael? This is going to–you asked for controversy. This is real controversial. Are you ready for this? What if it were just based on meritocracy?
Michael Eisenberg:
What if? Tell us. I’m in.
Roland Fryer:
Because if there's bias in the world, which I believe there is some, and you move from that to meritocracy, you get both more diversity and–not or–productivity. This is not trying to argue for the business case of diversity, which we can have a whole different conversation about.
This is saying, how objectionable is it to put the right people in the right jobs, doing the right things? That's all I'm asking for. That's what I was asking for in that piece. And so what do I believe about MIT's numbers or anybody else's numbers going down in the advent of affirmative action? I mean, duh.
We all knew that was going to happen, right? Like you could look at the conditional distribution of the SAT scores before the Supreme Court decision, and you could have predicted this. I think it'll be interesting to see if they really line up with what we thought the predictions were, but yes, of course, it was going to go way down.
Of course, what I have written about is, why don't we take a more proactive approach to solving the problem? Why wait until they apply and then say, “Oops, I don't think I have enough applications. Hmm.” Why not say, “Look, let's set up academies. The Ivy leagues can do this. Why don't we set up academies around the country and take students who otherwise wouldn't be in that grade of a high school, whose potential is being suppressed, right? That's not consistent with meritocracy either. And why doesn't Harvard, and MIT, and Yale and all these places, run academies, or fund the running of academies that can get people up to their standard, and then admit based on meritocratic admissions?
See, I fundamentally believe that if you start in sixth grade or ninth grade, and you give people–independent of the color of skin–true opportunities to, to get to their God-given potential, that those dramatic drops that you just described won't actually be there. And my view is that people who are against this don't think that minorities can actually do it, which is the real insulting thing.
I find it insulting that you think you have to wait and have a lower bar. Why not give opportunities earlier? Developmental opportunities and let people show you the talent that they really have?
[00:46:10] Michael Eisenberg:
I'm going to come back to that in a second. I do want to say something and then ask another question. I actually want to come back to that.
The thing I want to tell you is that the 8200 unit in the Israeli military, which is kind of the cyber unit and the technology unit in the Israeli military, which is, think of it as the Harvard or MIT for getting into the high tech system here, set up a program called ‘Magshimim,’ which means ‘self-actualization’, which goes into high schools around the country in the social periphery of the country, disadvantaged neighborhoods, and sets up programs for thousands of young people with a lot of potential and not a lot of access, to then track them to the 8200 units. It's been incredibly successful. I have a program like that myself called The Startupists here in Israel. And I think for whatever reason, because it's the military, they're able to do it in a more effective way than perhaps higher education is in the United States.
And here also, I should say, maybe because of that, you know, the main universities here have Programs all over the country are called “Children Love Science,” and it goes down into the ninth grade already and kind of pulls kids up to go do that. I find it fascinating. I'm sure it exists in some way in the U.S., but kind of the elite institutions for whatever reason don't go out to the neighborhoods and the communities to effectuate this. I find that difference fascinating. I'm not sure what causes it.
[00:47:31] Roland Fryer:
Yeah. I don't either. I think that, you know, they would say they go out there recruiting, but I'm not talking about recruiting.
I'm talking about developing. Right. And so for me. I believe that is part of the answer, that we create these academies and it makes sense for them to do it. Right? Look, I'm an economist. I understand public good like nobody's business. I get that, you know, Google shouldn't go take on computer science education, because they'll spend a bunch of money, and then the computer scientists might go to Apple. And so it's not a public good. That's a public good problem. But if the Ivies together took this on, then the marginal students that are helped by this, they're much more likely to choose the Ivy Leagues than someplace else, right?
Because there's much more of a clear hierarchy in the higher ed system than there is in corporate America. And so I don't understand why they don't take it on. They really don't. And so that's what I believe is a policy to help the MITs and the Harvards of the world not have dismal numbers when it comes to race.
You don't just sit back and put a little bit more effort into recruiting. You actually say, you actually believe–it goes back to our core values that we talked about before–that talent is distributed uniformly, but opportunity is not. And so if you're not getting what you're supposed to, that's a market failure.
Why don't you and the other Ivies team together and go try to solve that market.
[00:49:12] Michael Eisenberg:
Before we make the hard turn, I want to make to talk about investing. I want to ask you actually one question. I know you have a young Israeli guy, Nim, who we both know well, who works for you sometimes. And you're on Harvard campus.
Is it safe for Jews and Israelis to be on the Harvard campus these days? And will this year be safe for them, you think?
[00:49:29] Roland Fryer:
I believe they are, but are there cases where incidents happen. I believe so. As you know, I have spent some time trying to understand and help heal what's going on on campus here with our Jewish students.
I think some of the videos that we've seen of people being harassed are awful. I think many of the reports of how the students feel, I have the same reaction to. But, you know, do I believe they're safe? I do. I think that, you know, years ago, I think some black students felt the same about the campus here, and I had the same comments there. I believe that in general, yes, they're safe, but could the university do more, likely? And are there anecdotes of things that are happening that shouldn't happen? Absolutely. So, yeah, I'm hoping this year is going to be a lot better. But the proof will be in the pudding.
[00:50:40] Michael Eisenberg:
So I want to make a hard turn, and say, okay, here's a successful academic. He's won every prize. He's ruffled a lot of feathers through research, and produced what I think is absolutely groundbreaking approaches to research also, which is using your own eyes alongside the data. As trivial as that sounds, it turns out most people don't do it.
And all of a sudden you wake up one day and go, “Okay, I'm going to be a venture capitalist.” What the hell? Like, why are you doing that?
[00:51:10] Roland Fryer:
That's not quite how it happened. I used to have coffee with a guy named Bill Hellman for 29 minutes at Crema Cafe here in Harvard Square. And Bill was, and is, fascinated to me.
And so he was helping fund some of my research, and me being the arrogant academic, I rarely ever asked him what he did. I had no idea what, and he doesn't talk about himself, which is not true for typical venture capitalists. So I didn't really know what this guy did. And I, and I didn't, and I didn't understand finance that well.
I just, you know, but we'd have coffee all the time. And, and so I, the typical coffee would be, you know, 15 or 20 minutes of me saying, “Here's what I'm seeing in the world. Students are doing this. Schools are doing that. Police departments are doing this.” And it would be nine minutes of Bill saying, “You know, I met this guy who says that he can rent out people's sofas after The London Olympics. What do you think about renting people's sofas?”
And I would, you know, I was the worst venture capitalist. I would tell him quickly what I thought. “That's a terrible idea. In my neighborhood, no one rents a sofa. Who's going to rent a sofa?” I could go on and on. “What do you think about 120 characters?” “Oh,” I said, “That's the silliest idea I've ever heard.”
And so we had this incredible friendship, but then over time he started to tell me about companies that both solve things, you know, diseases like cystic fibrosis and had, you know, multi-billion dollar market caps. And so after that 2016 paper that you described earlier, I got really, really frustrated with the impact that academics can have, because that, by some measures, was a real academic home run that it had broken some download records, and it had a big profile in the New York Times.
And President Obama at the time, after the paper was released seven days later, I got a confidential email saying, “He needs you at the White House.” And so I went to the White House for five hours and met with him. And you know what? We got nothing done. Nothing. Not one of the 18,000 or whatever it is police departments changed anything as far as that. Zero, nothing.
Complete failure. No one bought me a chocolate cake either. You owe me a chocolate cake.
Michael Eisenberg:
President Obama owes you a chocolate cake! Good luck!
Roland Fryer:
For all those tax increases, more than chocolate cake. And so I was lamenting this fact with Bill. So it was one of these things where you go, I don't know if you do this–I went, and we were chatting, and I just laid it out on him. “Man, this is ridiculous.” And then he was telling me more and more examples over that conversation about how markets had, he believed, helped solve real problems. And I said, “Why aren't we trying that approach for poverty?” And another thing happened that really spurred me to this–my wife had this idea, which I don't even think I'm supposed to tell you, but she had this idea about early-stage cancer diagnostics. And when she published her paper in Nature, Google Ventures and other people called her up and said, “Oh, that's a great paper. I think we can make a company out of that.”
Now, granted, my wife's ideas are a lot better than mine, but no one's ever called me and said, “Wow, that's a really cool thing you did there. I bet we could build a company off of that.” Not one, zilch, zero, another failure, another chocolate cake. And Bill and I thought, maybe there is a market here to take real social science research, which I had been doing for, you know, 18 years at that, or 20 years at that point, whatever. And instead of having the product that comes out of research be adopted by the government, my hopes and dreams, or not-for-profits, maybe there's a for-profit market-based solution to help scale these ideas that social science has said that will really increase mobility. And so that's what Equal Opportunity Ventures is all about. You know me, I don't believe in impact investing. I don't, any time there is anything called a double bottom line or triple–every time I don't believe in the bottom lines, they become more–triple, quadruple bottom lines.
So after this conversation, there might be a quintuple. I just don't believe in it. I think that everything that–we decided to start a little fund, to see if we could invest in people and ideas, where the impact was embedded in the core product, so that all they had to do was maximize revenue, single bottom line. And that’s what we’ve been doing.
[00:56:18] Michael Eisenberg:
I think when we first met, you heard me say together with Jeff Swartz, “Market caps close social gaps.”
[00:56:29] Roland Fryer:
I love that, yes. I've been telling people that's my phrase since then.
[00:56:31] Michael Eisenberg:
Good. Listen, in venture capital, there's no plagiarism. That's only in the highest levels of Harvard.
I want to actually talk about two of your companies, because I think they're super fascinating. One goes back to what we talked about before about DEI. So, you've been talking about using AI to actually enable meritocracy in HR. Can you talk about that for a second? Because I think this is actually–it’s not an earth-shattering idea, but it's a mind-blowing implementation.
[00:57:19] Roland Fryer:
So, after the summer of 2020 with George Floyd, I got really, there's something about the corporate statements that came out, that they lacked authenticity in such a deep way. We care about that group. We care about this group. I mean, Expensify even told me who to vote for at some point.
And I just thought, this is bananas. And I called up, probably the best student I've ever had here at Harvard, and I said to her, “Why aren't they using the theoremsI taught you in your graduate course? You can solve these issues. There's a way to analyze talent and to build the algorithms to ensure that the people you hire and promote are most likely to be the most qualified. And maybe that's a true DEI strategy, that it's all about meritocracy.”
And she laughed at me and she says, “No one reads econ journals.” And I said, “Really?” It was news to me.
Michael Eisenberg:
Not even Google?
Roland Fryer:
Exactly. Not even Google. And so I said, “Well, why don't we substantiate those insights into actual software?”
And so that's what we've done, and we've had a phenomenal time doing it. And so we work with large enterprises, police departments, you know, restaurants and franchises to supercharge meritocracy in their hiring. And so one of the things that we can do is we can go in and run a series of proprietary tests based on my research, and the research of others, that can tell them all the ways in which they are not on their talent frontier, meaning they don't always put the right person in the right job.
And some of that will have to do with race and gender. And some of that will have to do with, you know, the allure of British accents. You just don't know. And so we can do that, and then we can say, “Hey, here is a hotspot over here where I really do believe putting AI, or ML, as part of a hiring check can really be helpful.”
So let me give you a concrete example. Food and beverage companies struggle a lot with attrition. Okay. So I talked to someone that’s from a large coffee chain last week, who said, “We've got 50 percent year over year attrition in our stores. And if we could get that to 35%, that's a game changer for our business.”
Okay. And so one of the things I've noticed is that A. there is a big disconnect between what corporate wants to do in terms of hiring and what the store managers actually do. And so to have fun, I applied to one of these places, you know, and didn't even get an interview. Couldn't get an interview.
I've applied to multiple fast food places, can't get one. I'm serious. I can't get an interview. And the reason that I've interviewed a bunch of store managers and the store managers–if you come into the store, in person, at the right time, and you can work on Thursdays and they need someone on Thursdays, you're in luck. Or they'll take referrals from the current employees. But doing what we do in corporate, which is having people apply, having that go to an applicant tracking system, having a systematic way to narrow that down to a slate and do structured interviews and then make choices doesn't always happen at the store level.
And so we built technology to do that first pass for them, that we're chatting with a big restaurant chain who literally only interviews three percent of the people, so we can use AI to interview the other 97 percent and not to make any decisions, but to then surface people that we believe are highly qualified.
So here's a really simple idea. Why don't you double down using data on the people who have the characteristics and traits of employees who have actually worked out in the past? And you know, sell short on the characteristics and traits that have not. And so what we can do and what we do with our clients is say, “Look, whenever someone applies, they go through our algorithms. We can give you an expected tenure and an expected performance based on historical data.”
[01:01:51] Michael Eisenberg:
And there is historical data.
[01:01:52] Roland Fryer:
Absolutely. And all those models are built specifically for the actual enterprise, because different characteristics and traits will work at Starbucks versus Pizza Hut versus McDonald's, okay, because of their different corporate cultures.
And so we're building all of that. And that, in my opinion, is a way to get DEI through meritocracy, because in our algorithms, race and gender, they don't come in. Okay. And so this is really about whether or not the things that you present at the time of application are correlated with performance.
And so that's what we've been doing. And it's been a blast, because we can actually work to ensure people are at their talent frontier. And I really believe that's a game-changer for folks.
[01:02:46] Michael Eisenberg:
One question I have for you on that is, one of the things that I've noticed about myself is when I meet people first on Zoom, or when I met them first on Zoom in the pandemic, we had a relationship kind of, and then I met them in real life and they were the much taller, much shorter, much–it felt like I was meeting a different person for the first time.
By the way, it just happened to me a week ago here. Someone I met during the pandemic, I ran into, he says, “You don't recognize me?” And I go, “I have no idea who you are.” And he told me his name, and I'm looking at him and it's like, “No, no, it can't be.” By the way, I talked to this guy five, seven times on zoom. Not like once.
And so I wonder if you select people using the data, then they turn up and shop for an in-person interview where, it can almost be shocking to somebody, Hey, this is the guy, this is the woman–it doesn't compute.
[01:03:38] Roland Fryer:
Could be, but you know, it will help you shortlist them, right?
That's why I say that the computers aren't, aren't choosing. But I believe in the data-driven method more than I believe that we should take the random person who comes by on Thursday who can work on Friday. And so, is it perfect? Of course not, but it is the best predictive thing that we have about who's actually going to be effective.
And so look, all those people that wouldn't actually get an interview in the first place get an opportunity. And so this is a way to increase opportunity, increase meritocracy. And by doing that, I believe, you know, whether it's hospitality or food and bev, or traditional enterprises, will fundamentally change their bottom line. Because I don't care what business you're in–you're in the people business. That's one thing I've learned, in early stage, venture ideas are one thing. Ideas are king as an academic, because you don't ever have to scale them. But in the venture business, ideas are important. Don't get me wrong. But they are people, businesses, all of them are people businesses.
And you know this better than anyone I've ever met. One of the key characteristics you're looking for. We've talked about this over dinner is can this person build a real team around this idea, because if it's them and their idea alone, and I don't think they can attract true talent, it's not going to scale.
And so all of these business, yeah, all these businesses are people businesses, and we're trying to help folks get the right people for them. Not, not, you know, hiring needs–HR analytics and hiring is stuck in the 1980s, if I'm being generous. It needs a fundamental re-envisioning, and that's what we're trying to do.
[01:05:29] Michael Eisenberg:
I also want to ask you about Forage, because you started Equal Opportunity Ventures–I think not only, but one of your kind of life pursuits is ending poverty, and certainly in 2024, the digital divide is a big part of that–and I think there's a kind of super unique insight with Forage that I want everyone to hear.
[01:05:47] Roland Fryer:
Yeah, we are, I think what they're doing at Forage is, is phenomenal. So our big deal is increasing social mobility. And at some point, maybe we can talk about how we actually measure that, because I'm dead serious about it. And so–
[01:06:05] Michael Eisenberg:
You’re gonna tell us right now when you tell us about Forage. That's exactly where I'm headed.
[01:06:05] Roland Fryer:
So Forage is a way to use, it's a third-party processing platform that allows people to use, we call them food stamps, but government assistance for food at online grocers, and they're even have point of sale now, through other partnerships, but this is really, really important.
When I was a kid, we were on food stamps, and it was, frankly, embarrassing to use. I mean, you probably don't remember that, or maybe you know it, I don't know. Food stamps back then were like, literally like monopoly, right? They were like huge bills. They didn't look like dollars. And so you'd show up to the grocery store, and you'd buy things, and you'd give them your big, huge dollar bills from the government.
And then they would always come over the loudspeaker and say, “Food stamps on aisle four.” And everyone looks and–its very different now. So the CEO of Forage used to be Head of Payments at Instacart and he, during the pandemic, they turned on the ability and he had some debates internally, whether or not there was a real market in term in grocery delivery for people who were on government assistance, and he was adamant that yes, there was. And that turned out to be really, really successful for them.
And he then left to go do that for everybody. And there are, you know, 200,000 online grocers, and there's a 75-page application and only six people at the USDA to approve those applications. And so this allows people to have this third-party processing and enables them to take food stamps as a form of payment.
And it's really, really, I'm so proud of them. I mean, they have big deals with big grocers and the idea is, now there should be no food deserts. Because Uber Eats and DoorDash and all these people deliver most everywhere in the U.S., certainly the urban centers, and any place it's urban and so, he has built software that allows people to go anywhere, to all these online grocers that sell groceries or what have you, and to use their government benefits in a way that has dignity, and is effective and allows them to get high-quality food, and what they need from anywhere. It also obviously pushes down on prices, because, you're not beholden to just the local grocery store. Now there's a big market for you to be able to find your groceries.
[01:08:55] Michael Eisenberg:
And it gives you digital connectivity, which I think is just, you know, ensures it, which is critical. I want you to take a minute and just tell us about the measuring of this social mobility here.
I think it's critical for people to hear. And then I'm gonna ask you one last question.
[01:09:11] Roland Fryer:
Sure. Yeah. We created this thing called the Social Money Multiplier. And so everybody's familiar with the classic money multiplier. You give me a dollar as an LP, and I give you back $5, I hope, .
[01:09:20] Michael Eisenberg: Hey, Roland's LPs, please listen in.
Here he is, just saying he's giving you back $5 before the social money multiplier.
[01:09:21] Roland Fryer:
And I'm sure Michael's giving his 10. Okay. So let's put us both on the spot. The social money multiplier is for every dollar invested, how much an expected income do we give back to society? And so that is a calculation that we take when we look at an investment, something like–let's take education.
Cause that's an easy one. Invest in education. And I know that for every standard deviation increase in test scores, that results in roughly 12 to 14 percent increase in income. So all I need to do is have them, if I understand this product and understand the impact it's actually having on test scores, then I can relate that to income.
Now, this measure we do for everything we invest in pre-investment. I want to understand what data we need on our side, not beholding the entrepreneur–there's no such thing as a double bottom line, I need them focused–but what data we need to ensure that we can actually estimate this. And so I am trying for five times money on the social side as well.
And so that's going to error me on things like finding people jobs. Companies like that. Because there's a very direct relationship between finding you jobs and getting you income. It's going to bias me against vegan restaurants as a way to increase social mobility. I like vegetables too.
But you buy your kids chocolate cake. But okay.
Yeah, that's a vegetable, isn’t it? According to my children it is.
But seriously, there's so many steps between a particular vegan meal and income, right? People can say, “Okay, healthy, you stay at work,” but there's a lot of steps. And so each one of those steps, it gets diluted.
And so that's how we calculate it. And so something like Forage, we look at what happens when the power of a dollar for food actually increases, and how that affects your economic mobility. And so that's what we did before that investment. We looked, it turns out that the government formulas are very close, whether you live in New York City or Tulsa, whereas the cost of a tomato in New York City versus Tulsa are very different.
So you can use that real value of the government assistance, the differences between the two, and relate that to mobility. And that's what we did, and we saw that there was a real steep increase. The higher the value of the food stamp, the higher the chance of social mobility. So we do those things for every investment.
And there have been investments that we thought would be really, really interesting, but we just couldn't get our heads around how it was going to actually impact social mobility. I remember one of our really young associates came in and said, “Oh, I got this scooter company that's amazing.” I said, “Scooters?” And he was like, “Isn't that literally mobility?” I was like, “That's
the wrong kind of mobility.”
So we are very, very serious about this. And this is, I prefer this relative–of course, terms like ‘wealth creation’ are really, really important. But that doesn't scale in the same way, right?
And so a lot of people are out there looking at, okay, well how many of this group or that group do they, do the companies I invest in hire? Or what percent of executives do they have of the people of a certain group if I invest in them? I don't like those measures. I also don't, we don't pay attention to the race and gender of the founder.
Yes, I think something like 70 percent of our founders are people of color or what have you. But that’s because they're solving problems that are familiar to those neighborhoods. And we believe founder-market fit is really important. So it just so happens that that's true, but we're not solely focused on that, right?
Like if you're putting a cat on the internet, it's a cat on the internet. I don't care what, who, what group you're from. That's still a cat on the internet, right? We're interested in people who are solving big social problems using technology, in ways that can scale fast.
[01:13:37] Michael Eisenberg:
Perfect segue to my second to last question, which is–so we talked about HR, we talked about access to food and keeping inflation down for those people and connecting them, and our mutual Abby who you're invested in, who's taken on housing, which is, I think another investment of yours. So three amazing areas, but what is the single biggest problem you want to solve through this market mechanism?
You must have an aspiration for the biggest problem you want to solve….
And I stumped Roland Fryer. Wow!
[01:14:14] Roland Fryer:
Wow. The single, man, it’s the single part, right? Like I can give you two or three, but I think that if I had to choose one, it'd be jobs. Workforce development.
[01:14:31] Michael Eisenberg:
But you’re doing that! What other plays would you make in jobs? Or is there a new area you haven't invested in?
[01:14:35] Roland Fryer:
I think there are many areas that are around alternative training to get people into really good paying jobs. And I'm not talking about–we've seen things where people come in and say, “Well, in five hours, you can become a pilot.” No, you can't. I believe there's real training. Our investment in Stepful is an example of that.
Michael Eisenberg:
Amazing company.
Roland Fryer:
Right? Getting people from Starbucks, and making them medical assistants or phlebotomists. That's a phenomenal company, but that's just in one narrow area. There's got to be a lot of those. Whether it's teaching people to do heat pumps or teaching people to do windmill techs, or whatever it is.
So I like things like that, where I'm very interested in companies like that. And you told me to mention one, I did that. Look, education is great. It's hard to have scalable, big returns on education, but the impact's really large. So we look for education things that oftentimes don't sell to schools.
So what Kaipod is doing is fascinating to me.
[01:15:40] Michael Eisenberg:
It's K A I P O D. It's super interesting. Check it out.
[01:15:43] Roland Fryer:
Absolutely. So, a few years ago, they had six kids and a pilot. And now, you know, I just talked to the CEO yesterday. He's got more than 50 schools and nearly a thousand kids, right?
Michael Eisenberg:
Amazing. He's incredible.
Roland Fryer:
Fundamental, what he's doing. And I think the other one is healthcare. I think health is really really important. And I think this is a place where academics have actually, they've gotten a lot of it wrong. They're focused on the wrong things here, and I think it's really about access to high-quality care and how we can use technology to ensure more people can have access.
I don't think that if you and I go to the same hospital and the same doctor, we don't have that different outcomes. The problem is, we go to very different hospitals and different doctors, so the question is, how do we solve it?
[01:16:25] Michael Eisenberg:
Okay, last question for you. Because we met in Israel, I feel like I need to ask you this question.
What has changed in you or your worldview after your trip to Israel?
[01:16:39] Roland Fryer:
Oh, man. That's a great one. I think the power of understanding the power of collective grit and resilience of people. I’ve had, as you know, several trips to Israel since we met, and it has altered my views of thinking through race relations in America, watching, you know, what has been built in Israel and what's possible.
And after my first trip, I think I may have told you this, Michael, after my first trip to Israel, after our coffee on your, rooftop, as soon as I landed in America, I called my best friend from seventh grade and I said to him, he says, “I haven't heard from you. What have you been doing?”
I said, “Man, I just landed from Tel Aviv.” He says, “Oh my God, how was it?” And I said to him, “Maybe black people should have taken Texas. Maybe, oh maybe, we should have had land of our own and built from there, and done a similar experiment.” I say that half-joking, but you get the idea.
I think it's really hard to have any type of empathy or understanding sitting over here and watching CNN, or listening to social media. You gotta, like anything, whether it's the police or education or healthcare, you know my style, you got to get over there, and shake people's hands, and hug them and get to understand their stories, before you can really, truly understand, and then get some data.
And so that's what's changed for me, is perspective, and an understanding, a deeper understanding–and not always in the ways you might predict–but a deeper understanding of how complicated the issues are in the Middle East. And you know, one of my top five moments of the last four or five years is being in, I think it was the West Bank with you, where we were talking to the folks who were investing in kind of Palestinian and Israeli companies to do joint ventures–I thought that was fascinating.
And so a lot of work that's being done over there–not just Startup Nation, but some of the collaborative work that I saw across different cultures and trying to use capital markets to help with that–I found extraordinarily inspiring, and I don't think people know enough of. So I think a lot of those things that just changed my perspective.
[01:19:25] Michael Eisenberg:
Roland, thank you for coming on the Invested podcast. You know how much I admire you and your work, and this was a real treat for me, a true treat to kind of do this semi live, people hear it. I really want to encourage anyone listening, you should, you should actually read Roland's research.
It's something I did after I met him. I encourage you to read everything he writes, whether it's in the New York Times or the Wall Street Journal, or online. You can find him on LinkedIn, Roland Fryer, R O L A N D F R Y E R. You're just an extraordinary person. And I feel completely enriched over the last five years to have considered you a friend. I hope you consider me the same.
[01:20:02] Roland Fryer:
Oh, of course, I do Michael and you're being way too kind. You're a legendary guy, and I really appreciate you bringing me on.
Michael Eisenberg:
All right. Thanks for coming Roland.
Roland Fryer:
See you Michael.
Harry Stebbings
Michael, you've got to be on tick tock, I love you! Like, come on!
Michael Eisenberg
My whole team here is pointing at me and laughing at me. Going “Go, Harry, go go!
Harry Stebbings
Seriously, we got 44 million plays a month.
Michael Eisenberg
I know. But, do you know it's like the Chinese?
Harry Stebbings
Do you know what? If the Chinese are listening to my podcast, good for them!
Michael Eisenberg
I’m afraid that they're taking your DNA.
Harry Stebbings
I mean, honestly, I love it. People are like “Oh, they're gonna steal your TikTok searches.” And I'm like, “My TikTok searches are protein recipes and bicep curls. I mean, good luck, Beijing. Honestly. So, I just- Yeah, it’s hilarious.
Michael Eisenberg
I hear ya. All right, should we get going?
Harry Stebbings
Let’s do it, brother.
Michael Eisenberg
All right. Well, I am going to- I am super duper, duper excited to put the man and the podcast on the other side of this mic. My friend, who is half my age, but for whom I have a tremendous amount of respect, Harry Stebbings. The man who was a teenage phenom, and now an investor. And- but, before we start, I just want to ask you something we ask all our guests coming on, which is: what is your core value?
Harry Stebbings
That’s a very, very good question. It's one that I might steal for my podcast. I think my core value is actually one that my dearest friend Shaq told me. And, Shaq told me that everyone is facing a battle that you know nothing about, be kind. And, I always think about that every day, whether it's to the barista in the coffee shop, or whether it's the CEO that you work with. And, I hold that one very, very near and dear to me. And, so I'd say that's my closest.
Michael Eisenberg
Be kind. I love it. And, I love Shaq. As you know, I feel bad now that I gave him a hard time, many years ago, smoking a cigarette outside of the conference.
Harry Stebbings
He gives me a hard time for smoking too, so don’t worry.
Michael Eisenberg
Good. So, it is my utmost honor and pleasure to introduce Harry Stebbings, a man who needs no introduction. He's the founder of 20VC, one of the largest media assets in venture capital and startups. He also manages the fund 20VC, which has a couple of 100+ million dollars, 400 million dollars in assets, under management. The 20VC podcast reaches 700,000 subscribers, has over 120 million downloads, to date. Harry started this podcast without a single contact in venture capital, just with a lot of chutzpah. You know chutzpah is, right Harry? You live chutzpah.
Harry Stebbings
I live chutzpah.
Michael Eisenberg
He’s got a lot of chutzpah. He’s got 2750+ episodes. Over 1,000,000- 1.3 million plays per show. Guests have included, my former partner and friend, Bill Gurley, Howard Marks of Oaktree, founders of Spotify, PayPal, LinkedIn, Revolut, Checkout, yours truly, and many more, including recently, the Prime Minister of the United Kingdom, Rishi Sunak, in his residence, no less. How was their podcast studio, Harry?
Harry Stebbings
You know what? It was actually very lovely. It was quite a palatial run that we did it in, and we had a portrait of Maggie Thatcher hanging over us. It was a wonderful session.
Michael Eisenberg
I see that you're on a first-name basis with “Maggie” Thatcher.
Harry Stebbings
Of course.
Michael Eisenberg
Okay. At 22 years old, Harry was the youngest to make the list of the Forbes Finance 30 Under 30 in Europe. And, prior to 20VC, Harry was a partner at Stride.VC, a firm he co-founded in 2018, right after his bar mitzvah. Harry then went on to launch his venture capital fund, 20VC, in May 2020. He's raised a couple of funds, $33 million- no, more funds than that. And, most recently, launched the sales fund made up of sales executives. We’re gonna talk more about that soon. So, Harry, welcome to the show. Sorry for the mumbled and blundered introduction. But, nobody needs an introduction to you. So, I want to talk about how I first, kind of, got to know you and got inspired by you. It was the middle of Corona, I think it was. And, I read about your mom. And so, first of all, tell me about your “mum”, as you call her, “mom” in my American English. And, how that was, kind of, a motivating factor in your life.
Harry Stebbings 4:35
It's funny, I think everyone needs “why” to be driven to do anything, really. And, I think one of the worst things is, that we're told you have to do it for yourself. It's complete bullshit. You don't have to do it for yourself. You can do it, totally, for someone else. There is the “post-baby effect” that you see in entrepreneurs. Entrepreneurs are actually scientifically designed or programmed to be more successful, post babies. It's been proven. There is an internal “why” and for much of my career, you know, the “why” has been my mother. You know, she inspired me so much growing up. I always say she's the light in every room, which sounds quite corny, and it is. But, she's amazing! You know, she got to MS when I was very young, 13, goes through an immense amount of pain and struggle. And, she remains the best mother in the world. And, always there for me and always the rock in my family. And, I think it, bluntly, just gives you this awareness of how truly great people can be. And, how she's never given up, and never will give up. And, always has a smile on her face. And so, I learn, every day, from her. And, she drives me to be better, to do more, and to never give up on myself.
Michael Eisenberg
So, before I ask you, when do you get the baby? So that you can, kind of, get to the next leg of entrepreneurship. Yeah, how does your mum tie into starting the podcast?
Harry Stebbings
I mean, honestly, I was 18 years old, and I was at home. And, you know, I was in love with venture capital. I fell in love with venture when I was 13. I saw Peter Thiel invest in Facebook with Clarium Capital in The Social Network, which is a scene that everyone else has completely forgotten. But to me, it changed my life forever. And then, you'll know these writers, but I went home and I read Brad Feld, Roger Ehrenburg, David Hornick. And, I was just captivated by the early writers in venture. And, I fell in love with it. I had Howard Marks under the kind of, you know, duvet at boarding school. No wonder I had no friends. But- also saying Howard Marks under my duvet sounds a little bit wrong, Howard, if you’re listening, I'm sorry. But, to my point, I loved it. And, you know, we'll talk about burnout later, and why I think it's complete crap. But, when I was 18, I have this love of venture so much. So, I walked to school every day. And, on my walk to school, all I ever heard was Peter Thiel and Marc Andreessen on podcasts. And, I knew there was this slew of amazing, amazing VCs. And, I thought, “Why doesn't anyone interview them?”. And actually, I believed- the best companies, Michael, I think, personally, are built on insight developments. A way of seeing the world that is different to how others see it. And, I believe that venture would be personalized, that people would choose the partner more than the firm or as much as the firm. And, we deserve transparency in the system. And, I believed in the rise of media and content as the core vehicle for this personalization. And so, really, for me, it was this case of, “Okay, if these are my two contrarian beliefs at the time in 2015, what medium is perfect for me?”. And, sorry, you can just stop me at any time, but like, everyone comes to me and says, “You know what, I want to start a podcast”. And I'm like, “Why? You suck at talking”. And they go, “Well, it's what it's about now, everyone's doing a podcast, right?”. And you're like, “I repeat, you suck at talking.” You have to choose the medium that is right for you. And so, for me, I just love talking. I gain the energy from speaking with you now. I love learning about people's stories. That's why I did podcasting. And actually, most people maybe shouldn't do it. They should do short-form videos, tweets, some long-form writing, but you got to choose the medium that's right for you. And then, to another point of an investing lesson that I've learned, honestly, Michael, I was really lucky. Venture, in 2015, was so not cool! But, it was just becoming cool. And, podcasting in 2015 was so not in, but it was just coming in. I was at two very, very early waves that were about to explode, which goes to one of the most important investing lessons, which is market timing. It doesn't matter where you are in a field. If it's not hot, or it's not on the app, or it's not big enough, it's not going to work.
Michael Eisenberg
But it's hard to time markets.
Harry Stebbings
It's really hard to time markets, which is why I don't, generally, like to play the market timing game, because I'm not smart enough. I want to do something that I know has demand. I want to do, you know, international payments. Great. We know this is a business, but I don't want to do something which is inherently-
Michael Eisenberg
But, take back to your mom, like, so, at 13, you became interested in venture capital. At 15 you said “Oh, this is cool”, and you start listening to Marc Andreessen and Peter Thiel. And then you start this podcast.
Harry Stebbings
Yeah.
Michael Eisenberg
But why? Still, why? Not just because you'd like to talk. Or, was it just because you like to talk?
Harry Stebbings
No, it was because I wanted a job in venture. I wanted a job in venture, and I didn't go to university. Well, I went for a month, but then I dropped out. I hated it.
Michael Eisenberg
Did you go to high school when you were there? Or were you just listening to Marc Andreessen?
Harry Stebbings
No. I mean, I went to high school, and that's when I actually started the podcast, in high school. And then, when I went to university, I was earning about three grand a month, so 36 grand a year, about $50,000 a year.
Michael Eisenberg
From the podcast?
Harry Stebbings
Yeah. And, I was like, okay, like this is enough money to live on my own in London, that would be a sustainable source of income for me to be okay. And so, after a month I left. I think one of the biggest crimes, actually, is university. University should be banned, should be made illegal, unless you are doing anything like doctorates or, you know, vet studies or legal studies
Michael Eisenberg
Is there a Stebbings Fellowship, like there's a Thiel Fellowship?
Harry Stebbings
There will be. The fact that we imprison children from 18 to 21. Encourage them to get blind drunk, every day. And then, really just like captivate their minds with bullshit academics that you won't need when you grow up, in their most productive years, is literally criminal. I will give children- mind you, I've already said this to my family and my girlfriend, I will give my children 50 grand to go start a business, fail, learn, try, you'll do it for two, three years, and you'll come out and get a job and go “I learned these four things when I started a failed business”.
Michael Eisenberg
So children won't only be an entrepreneurial bug for you, it's already for them. You've got them out of the cradle and into business.
Harry Stebbings 11:02
Listen, they should be starting before 18. One of the earlier- you know, I ask this of all founders that I meet, which is like, tell me about how you first made money. Great, great entrepreneurs always have a story, you know this, they always have a story of “Oh, I was 12 and I was selling something on eBay. I was doing comic books and I was selling them at school”. Something. And, it's completely- everyone's like, “Oh, you know, it's only for the 1%”. And, you can say that bullshit, socioeconomically uncorrelated. And you can verify, 99% of the best have those early signs.
Michael Eisenberg
I worked at a cheese and fish store, for what it's worth. I guess if your talent was talking, mine was tolerating bad smells.
Harry Stebbings
I mean, there we go, this is a sign of true excellence.
Michael Eisenberg
So you're good at talking, you started a podcast, and you wanted a job in venture capital, and your mom was the shining light in your life that caused you to do this. And, you were bored sleeping with Howard Marks in high school. That's the summary of your career until age 18.
Harry Stebbings
Pretty much, Ray Dalio was busy. Yeah.
Michael Eisenberg
Okay, so, I want to dive right into a bunch of questions we got from people. So, in preparation for this episode, I did what you do, right? Twitter, work your magic. And, I put our short video on social media asking people what I should ask you when we put you on the other side of the mic. You retweeted it and wrote “I do not ever do interviews. but when Mike asked, I had to say yes. What do you want to hear me discuss? Preference for personal life, drinking, happiness, depression, media? But AMA, go. You said you were super happy before we came on air. You said you stopped drinking. Why were you drinking in the first place?
Harry Stebbings
I mean, the UK has a very normal, like, abnormal, I think, relationship to drinking. Where it's like, kind of, just so ingrained in our society from a very early age. And you know, I have a problem with drinking, Michael, if I'm honest. I find that not enough people actually say it. They'll bullshit and say, “Oh, it was health, it was calories”. And, the only way we're going to get a generation of people to accept it and actually say it's okay, and that's fine, and you can change and be better, is by having people speak up and say it. And, this man had a problem with drinking. I was drinking too much. And, I was drinking every day. And, you know, especially in our jobs, you drink every night, because you have dinners, drinks of entrepreneur events, VC events, and it just became a really negative habit in my life. And actually, it was just beginning to be a really bad influence in my life. And so, I stopped drinking. And, it was probably the single most meaningful thing that's ever happened to my life.
Michael Eisenberg
How’d you stop?
Harry Stebbings
Oh, I can stop doing anything. I am probably the most strong-willed person in the world. Which is not an arrogance. It is to the point of like, bad. Like, I will run when I'm injured, I will lift weights when I shouldn't lift weights, like, nothing will stop me, to the point when it's sometimes unwise. But, when I say I'm going to do something, I'm not going to do something, nothing will stop me. And so, for me, it was just a very simple, “I stopped drinking”. I use an app called I Am Sober. You press start. And then, you see the time that you're sober. Trust me, there is nothing like looking at that, with now whatever it is, 300 days, when you think that you want to drink, which I never do. But, if you ever do, when you see that, and you have to restart, that sucks. Also, the biggest problem that people have with habits, Michael, is they always think about the reward, not the action, okay? And so, they always think, “Oh, I'm gonna feel great when I have that drink”. And actually, it's not about that. It's about, like, the after-effect. And so, there's the action, and then there's the after-effects. And they go “Great. I want the action, I want the alcohol, I want the Espresso Martini”. The after-effect is 200-400 calories and a hangover. No one thinks about that. It's the same with good things. Like, every morning, I will never miss my alarm. Everyone thinks about the action, “Oh, I can sleep in”. But, the after-effect is: and I'm 20 minutes late for work. Think about the after-effect, not the action. And, they will change pretty much everything about the way that you do, often, very negative things. And so-
Michael Eisenberg
As you’re talking about that I'm thinking about zero interest rates. And, the hangover from that. So, how did you develop this kind of indomitable determination to, kind of, be able to do anything? Where'd that come from?
Harry Stebbings
I was very fat when I was younger. And I think we also-
Michael Eisenberg
I would never guess that!
Harry Stebbings
And, we're too nice. Like, we're far too, and I'm probably gonna get canceled for this show, but, we're too nice. Everyone's like, “Oh, you can't say fat. You should have to say round, or well, well-sized”. No, I was fat. I ate KFC family buckets, and I was fast. It's okay. But, I was very fat. And I lost a huge amount of weight, very quickly. And, bluntly, it showed me that if I put my mind to it, I could achieve it, I could do anything. And, I think we all like to tell ourselves that, actually, it's okay. And, no one knows what they're doing. And like, we all look for the comfort. That's not okay. Like, you should be uncomfortable. Today, I like, seek discomfort. I just finished a run, which is probably why I'm sweating. And, it was a really uncomfortable run. It was really hot in London, but only through going through that discomfort do I sit with you now, and I'm absolutely fucking pumped.
Michael Eisenberg
Oh, it's not just because of me it’s because of your run?
Harry Stebbings
It’s not just because of you, sadly. Ray Dalio has given me a tickle under the table. But, like you've got to go through that. And so, that's where, honestly, I think the seed of it was, where I saw that. I lost- I went from 125 kilos to 75 kilos, in five months.
Michael Eisenberg
Wow.
Harry Stebbings
Yeah, it's 50 kilos in five months. Everyone's gonna be like, “Oh, it's so bad for you to do that, It's so bad for you to do that”. You know what I say to all those people on Twitter? I don't care about you. Literally.
Michael Eisenberg
Harry, I just want you to know, this is a totally safe space for political incorrectness. It's all good. We're the same on this. But, that leads me to a question, by the way, which is, so here comes this 18-year-old kid, he launches a podcast. It's the most popular thing in venture capital and entrepreneurial journalism, if that's the right word, or media, for today. The mainstream media is, kind of, not exactly having a romance with tech and venture capital, these days. How do you think about what you're doing, versus where mainstream media is at today, particularly in regards to tech?
Harry Stebbings
I mean, I, honestly, I think journalism sucks. If we're totally honest, Michael. We started this conversation, well, we all read it, they didn't really know what they're talking about. They write, kind of, bombastic articles that are there for clickbait. They're not very well researched, on the whole. Some are, there's always nuance. 3% are, and they're great. You know, but the majority is not. They have a business. Business models drive incentives, you have to understand the incentive mechanism. And, they will take a snippet, put it as the headline, because it drives clicks. And, they will ignore most of the good things you say, because it doesn't drive clicks. And, that is their business model. And so, I think most of, honestly, the quality of journalism today sucks. I think most of the journalists want to be VCs. I think they’re all overworked, they are all overworked, which I feel really bad about. Like, they don't have time to do a lot of the research, which is really tough on them, because a lot of them are good writers. A lot of them are given stories they don't want to write about. Let's not get on to PR firms, because they are terrible, and 99% are useless. I'm really making friends here.
Michael Eisenberg
It’s good. It’s good clickbait for this podcast.
Harry Stebbings
Thank you so much. There you go. Welcome to modern media.
Michael Eisenberg
But, you know, you said that they're overworked, the journalists. You work pretty hard yourself. I mean, you and I have had dinner in London, it's pretty late at night, and you will go back to work after that, sometimes.
Harry Stebbings
Sometimes! Sometimes. Every time! People need to know the work that goes in. Because, like, you don't get there without the brutal, grinding work. I get so many McKinsey grads, people, saying to me, I'm going to start the 19 Minute VC, the 18 Minute VC. And, I'm just like, good luck. Let me help you. Like, I really wish you well, because you will have to give eight years of your life, your health, everything, to this, to make it what it is, in a market that's harder than I did it in.
Michael Eisenberg
But, one of our mutual friends is an investor- I'm not sure if she's an investor with you, Kathryn Mayne said, “Is Harry going to burn out?”.
Harry Stebbings
Oh, I love Kathryn. So period, love Kathryn. But, the topic of burnout is just absolutely, for me. And, again, a lot of people take everything as like “Oh, he’s-” this is for me. So, for anyone who's upset or emotional about me saying this, it's just for me. But, burnout, for me, is when I'm doing something I don't love, and it's crushing my soul. Which was when I had a job, which was, admittedly, many years ago. But, I love what I do. Like, Michael, this is my job. I'm about to interview an amazing, amazing founder, later today.
Michael Eisenberg
Who's that?
Harry Stebbings
One of the founders of Plaid. And like, that's awesome. That's my job, too. I have a board meeting later today with an amazing company. Am I gonna burn out? Oh, Christ, I've got, you know, an iced coffee brought to me by an EA in a beautiful office. My grandfather shovels gravel on a golf course for $12 an hour. Okay. And, we talk about burnout? I think this is like a luxury, in my space, for me to be talking about burnout. I love what I do. I work with amazing people. And, I'm more energized than ever. So for me, I don't worry about burnout. I think it's a real thing. And it happens to people. But I think if you really love what you do, it's hard to do burn out.
Michael Eisenberg
So, our mutual friend, Shaq, said I should ask you, what did you learn from the markets in 2021, 22, and 23. So, I know a lot of people got excited. And, you know, this is like my third or fourth cycle. And, I saw a lot of people in 98, 99 be super energized. And then again, you know, in 05, 06. And then, you know, through the teens, and they were super energized. And, they were working really hard. And, you know, everything was great. And, everyone was a genius, which is, by the way, the totality of your career, so far. What have the new learnings been like, for you, has it impacted your energy at all? And, I'll ask the follow-up question afterward.
Harry Stebbings
Good. So yeah, there's been a huge amount of learning. It- has it impacted my energy? Not at all. Let's go through the lessons. Now, again, I find people on- I do what you're doing now, often, and people don't- The best interviews are made up of art and science, okay? The art is where you talk about the story, it resonates with people, you bring people in. And then, the science is what you learned. The thematic, the tactical. And so, let's let's do this, let's do the science and the art of what I learned. Number one, I learned that a company is more than a piece of paper with numbers on it. And, what do I mean by that? I made an investment in Pakistan, Airlift, quite well-documented, very poorly documented in terms of, like, the amount of money that I put into it, and, kind of, my name and attribution to it. But again, we will leave journalism to journalism. And so, I made an investment in airlift in Pakistan, the numbers look great, everything looked great. The caps were fine, the LTVs were great, the unit economics and the business, on paper, was very attractive. Now, in the real world, it was in a country with political risk, with currency risk, with weather risk. And, I didn't factor in the very many negative externalities that can really damage a business. And, actually, the idea that a great founder can make any business happen is complete rubbish. You cannot have a great founder in a market which can get crushed by corruption, politics, weather. No matter how good you are, as a founder, those things can crush you. And so, I just learned that, bluntly, you have to really be quite holistic in how you understand and evaluate businesses. And, I said this to my girlfriend today. You know, she said, “How do you know what founders to invest in?”. And I say, “Ah, you're Australian. So let me help you here. You need a great surfer. But that's not enough. You need, also, a really great beach with fantastic waves. But, that's still not enough. If you go in the middle of the night, you're not going to do much surfing. So, you need the right beach, the right surfer, and the right time of day for that beach, to really go surfing.” And, I think this was a real articulation of that, because I don't think I quite looked at it holistically, and I was too focused on singular strengths within the business.
Michael Eisenberg
Did you meet the founder in person?
Harry Stebbings
Yeah, I did. Yeah.
Michael Eisenberg
Did you go to Pakistan?
Harry Stebbings
No, he came here. But, I stand by where you're going, 100%, on that. I think the return of in-person is crucial, people hate me for this too. I think really, you need to meet the founders in person, as well, you gain so much from that tangibility-wise. And so, I totally get where you're going with that. I think another one, honestly, is like portfolio management, liquidity-wise, you know, there were positions that I should have sold. And, I didn't. And, I think we were trained, bluntly, and I’m not blaming the younger generation of investors, we were trained to hold onto your winnings, this is what the best told us. And, we listened. And, we did. And, bluntly, there are three or four where I should have been much more proactive in selling. And, I should have been much more strategic about that. And I wasn't.
Michael Eisenberg
You know, by the way, “hold on to your winnings” is a good strategy, if you actually know which the long-term winners are. The problem is that there's a survivorship bias to it. And so, you actually don't know, most people don't know, in the moment, that it was going to be a winner. I think about 2001, I lived through that.
Harry Stebbings
But, this is fundamentally why I don't like reserves. Reserves, I think, are actually financially irresponsible, in a lot of cases. And you're gonna go “Whoa, oh, Harry, you’re going for this one”.
Michael Eisenberg
I want to clarify for people listening, what reserves are is, venture capitalists invest some money upfront, and they keep money to invest in the company as it matures, or gets into trouble, or whatever happens.
Harry Stebbings
Yeah, absolutely. And so, why do I think that it is often unwise? Because most often, reserve allocation is aligned to trajectory and to speed of growth within companies. Oh, X company has hit an inflection point, Y company’s got adoption, we want to put more money, we want to put more money in. Consistently, across the board in venture, if people were to have done that, they would have put their money in, kind of, the fastest growers, which, most often, if you look at the data, it's not the sustainable growers. If you looked at my portfolio, that would definitely be the case. And, it would have been financially unwise, which I'm thrilled that I had no reserve strategy. Actually, when you look at most portfolios, the best-performing companies, often, as the kind of, mid-performers in the early days, the ones that took a little bit of time and then found something, the ones that just went straight out the gate, often hit snags, actually, later on, and the trajectory tails off. And so, for me, I personally feel that it's too difficult to know which of your companies, within the first 18 months, you should really concentrate capital into. And so I do take that approach.
Michael Eisenberg
So, it's now 2023, and the market’s down and liquidity has dried up and growth capital has disappeared, in many cases, not fully. But, it's gone. And so, I'm sure when you got started in this business as a venture capitalist, you just assumed that the later rounds were there. Now they're not. What has that taught you?
Harry Stebbings
What, that later rounds aren't there?
Michael Eisenberg
Yeah. Or maybe, has it taught you anything about investment pace?
Harry Stebbings
Um, no. I'm 40% deployed. Two years into my fund cycle. Will be a three to three and a half year deployment-pace,
Michael Eisenberg
Amazing.
Harry Stebbings
All of my LPs are going “Harry, we expected you to be the fastest.”
Michael Eisenberg
Well done.
Harry Stebbings
Thank you. And so, no. I've always been a big fan of temporal diversification, which, for people listening, is, essentially, that there are benefits to investing, kind of, overtime across cycles, because you'll get kind of a blended exposure over time, really. And so, I've always very much believed in that. And so, I was always very wary of that. And, you know, the other thing that's honestly true, Michael, I don't live the same life as a lot of other VCs. I’m not predicated on fees. Like, this is the other thing that we don't talk about in this industry, which is that a lot of funds are predicated on fees. And, funds are a business, as well. I have a business of media, which makes me more money than funds. I'm not here to raise funds fast and stack fees. That is not my game. Also, you want to talk about finding happiness. You know what? When I was 21, and super honest, I have no idea why I'm so honest with you, Michael, you're bringing out my honesty. But, I sat on my balcony when I was 21. And, I looked at my bank and I had a million pounds in there. And, I used to watch I'm a Celebrity- Who Wants to be a Millionaire. And, that was like happiness, when you're a millionaire. And, I had never been as unhappy. I had no friends. I was drinking a lot. I was quite unhealthy. I didn't actually have that much of a great relationship with my family. And, my mother, sure, but not my brother or anyone else. And, I was less happy than ever. And, I think this is the biggest problem with people is like, they don't actually know themselves. And, it's like, you know what makes me happy, Michael? My Sunday walks with my mom, spending time with my family, going to a spin class, things that cost $20-$30, at max. And actually, that’s what makes me happy. I think people don't know who they are. And, I think they don't know what they want, what they actually want. And, when you actually know those two things, it just changes a lot about how you think about life, for me.
Michael Eisenberg
What turned it around there at 21? So, there you are, drinking there, you were not happy. But, you know, your podcast was succeeding, and your financials. What turned it around?
Harry Stebbings
Nothing. I continued drinking. I continued making more money. And, I didn't realize. It took a long time, actually.
Michael Eisenberg
So, when did you?
Harry Stebbings
When did I realize that it wasn't okay? I think on the drinking, there were bad times. You know, there are times when you wake up and you just feel like absolute shit. And, when that happens time and time again, it's the most crazy thing. You know, you will feel like crap, time and time and again, and you'll get up and do it again. It makes no sense. And so, I think, you know, honestly, I turned 25. And, I believe that everyone is capable of really achieving greatness. I think most people, like, want to tell themselves that mediocrity is fine if we're honest. But, I think everyone's capable of achieving greatness. And, I thought, if I'm 50, and every year I lose 20% of my productivity because of alcohol. 20%. It's not actually a huge amount, but it's very significant, actually, stacked. Over 25 years, compounded, that's the difference between good, and really, really great. And, I am terrified of thinking, at the end of my career, I could have been so much more. And, I'm not more because of alcohol, because of the nights out. Seriously? And, actually, I really want to be a good father and a good parent. And, you know, I'm not going to be that, and I'm not going to be fresh to play with them in the park. Because I had a night out before, at a dinner? Is that really who I am? That doesn't sound like someone I want to be. And also, reliable. You know, someone- I asked someone recently, what do you want on your tombstone? And, they said, “I'd like reliable”. And, I thought, oh, fuck, that's boring. And, they said no. Being reliable is probably one of the greatest compliments you can be.
Michael Eisenberg
What do you want on your tombstone?
Harry Stebbings
What do I want on my tombstone? Knackered.
Michael Eisenberg
Rest in real peace.
Harry Stebbings
I think honestly, like, content. Like if you were content-
Michael Eisenberg
We’ll never be content.
Harry Stebbings
No, but if I'm dead, then hopefully, I will be. But also, you should never be content.
Michael Eisenberg
Right.
Harry Stebbings
You should be appreciative of what you have. I'm very appreciative of what I have. I love it on Sundays, knowing that I've got a week ahead of me, that I love doing what I'm doing. But, I'm never content.
Michael Eisenberg
Did that million pounds in your bank account, when you're 21 on your porch, change you in any way?
Harry Stebbings
No. Like, this is the other thing, Michael like-
Michael Eisenberg
What’d you do with the money?
Harry Stebbings
Keep it, I don’t want- I don't wear watches. I don't- I legally can't drive. I have zero interest in fashion. I don't like furniture. I don't like cars. I like venture capital and startups. So, which is why I find it so funny that people who focus on the money, don't make the money. There's inputs and outputs. Money, for me, is the output. And, the input is doing the work that I love.
Michael Eisenberg
By the way, there's a lot easier ways to make money than to be a startup entrepreneur or a venture capitalist, for that money, for smart and ambitious people. It requires a certain amount of- for founders in particular, a certain amount of, kind of, you know, craziness, a crazy gene in there, that you got to get after this and beyond it and, so-
Harry Stebbings
This is the worst way to make money, for sure, in terms of like, if you want to wait very, very long times. But also, it’s important to say, I did about 125 shows before we made a dollar on 20VC. Two years of shows.
Michael Eisenberg
How'd you pay for it?
Harry Stebbings
I mean, it was $50. It was dirt cheap. Like, you know, I had a laptop from school, which, you know, 15-year-olds have. I had a bedroom. And, I used, you know, all the free tools on the internet. This is the beautiful thing about the internet when you think about it. A kid from London cold emails Guy Kawasaki, and gets him to come on a podcast that doesn't exist! And, that makes, now, millions of pounds from like $5.
Michael Eisenberg
Was Guy your first guest?
Harry Stebbings
Yeah.
Michael Eisenberg
That's amazing. I love Guy. I haven't seen him in a bunch of years. So he, you know, he was a legend. Yeah, you know, in the late 90s, early 2000s.
Harry Stebbings
Yeah. And so, but, I think it's important to know that, like, you know, it takes time. This is the biggest reason why people fail with content. Which is, bluntly, they give up too soon. There’s many reasons why they fail. They give up too soon. You just- it's a game of who can survive the longest. Jason Calacanis taught me that early, actually, to be fair, credit to him. He taught me it's just a game of who can survive the longest, just keep going.
Michael Eisenberg
Jason’s amazing. I just ran into Jason in Abu Dhabi. And, we were reminiscing about his time at Silicon Alley Reporter, which nobody remembers anymore. So, you know, the media outlet, Silicon Alley Reporter, is not around, but Jason Calacanis is killing it on All In, his podcast.
Harry Stebbings
Yeah. And, it's just about surviving the longest. I don't think that people make terrible mistakes on content. They try and go so broad. I have so many people that are reading stories of entrepreneurship. And, it's like, when you inject yourself in the market timing of a cycle, changes a lot about the content types that you do. Like, we are coming in at a much more mature stage of content than five to eight years ago. So, you have to be incredibly specific. You want to do Israel or Jerusalem-based SAAS founders. That is your starting point. And, you want to own that tiny market. And then, you want to do Jerusalem and Tel Aviv-based SAAS founders. And then, you want to do the region of SAAS founders. But, a really important lesson that I always think to, you have to earn the right to do the next thing. And, I think too many people don't think about, kind of, step functions of expansion. But, you have to find product-market fit with that first 100 users. I think it's very much the same with founders today. Like, just find the first 100 users. And, you know, I cold-DMed on Twitter, like every single person who followed me, up until 40,000 followers.
Michael Eisenberg
Wow. Yeah. That's amazing. So, I'm gonna just go back to Shaq's question for a second, to switch. If you could turn the clock back to, you know, the fall of 2021. Which is, by the way, when Gurley and I came on your podcast in November and talked about the impending downturn. Other than, kind of, selling some secondary in your portfolio at the top of the market, what else would you have done differently?
Harry Stebbings
I wouldn’t have sold the secondary one. I would have been much more- I wouldn't have done Pakistan, I wouldn't have done emerging markets. You're not smarter than the market. Again, I'm gonna get hate for this. Emerging markets are really hard. They're really, really hard. And, everyone's like “Oh the growth of Pakistan, the growth of North Africa”. Where's the liquidity coming from, Michael? It's gonna go on the NASDAQ, is it? I don't think so. I don't think so. Everyone points to New Bank. New Bank is a phenomenal company. David Velez is exceptional, exceptional. Like, once in a generation founder. But they're very, very rare. Very rare. And so, I'm just like, I would have been much more cognizant of that. I don't think there's more on the market, bluntly. Like, did we pay too high a price? Yes, we all did. Do I kind of blame any of us for that?
Michael Eisenberg
You gotta play the game on the field as Gurley says, right?
Harry Stebbings
Yeah, I blame the growth investors for doing 1200X ARR for some of my companies, but also let's not throw shade. When they were doing it, I was welcoming them. And so, I think it's easy to throw stones in those cases. I think it's quite humorous, that like, I will never not be more active on portfolio management than in the future, having learned what I've learned. I will absolutely take the lessons from Pakistan and from Airlift. What I find entertaining is the fact that there's a generation of investors who went through 08, who went through the.com, and still fell for this.
Michael Eisenberg
Yeah, I don't know what you mean by fell for this. What does it mean to fall for it?
Harry Stebbings
Who succumbed to 1200X ARR prices. Who succumbed to 12-month deployment cycles. Who succumbed to crazy emerging markets investing at the same price as US investing. When they’ve seen it before.
Michael Eisenberg
So, just a side question before I get onto the main question I wanted to ask you about this. So, London or the UK. Is that an emerging market for venture? Or, is it a well-established ecosystem?
Harry Stebbings
I mean, what, for venture?
Michael Eisenberg
You're laughing nervously, Harry.
Harry Stebbings
I'm laughing because I'm thinking of London as an emerging market. If this is an emerging market, wow. No, London is not an emerging market. London is an amazing, amazing place to build a business. We- I think we have, actually, very poor levels of venture, by the way. I think there are very, very few seed funds, series A funds, or growth funds, that are any good. So, fuck it, should we just burn the bridges of venture in Europe? Like, the great seed funds in Europe, Point Nine, number one. Visionaries, number two. They're rising and they’re the competitor to Point Nine. Okay.
Michael Eisenberg
And, what about you?
Harry Stebbings
Listen, I will always promote others and people can make their own mind up.
Michael Eisenberg
By the way, is early stage the best place for you to invest? Katherine Mayne asked me this question. Or, should you be, kind of, a later-stage investor?
Harry Stebbings
I don't categorize myself as an early-stage or late-stage or SAAS investor. My job is to- and I don't know how you feel about how you categorize yourself, but like, my job is to make great investments in category-defining founders and make a huge amount of money for my investors. Yeah, it's that simple. And so, I don't like to box myself into- what does early stage mean, is series A and B early stage? If you're a post-IPO, then perhaps series D is early stage. So, I'm just like, my job is to partner with the best founders in the world and make them pick me. I don't even think I'm an investor, Michael. I think I'm a founder. My job is to create products that the best founders in the world want to take.
Michael Eisenberg
Expand on that.
Harry Stebbings
Money Sales is a great example. Yeah. And so, the media is another great example of that. We have an incredible data team and data product. That is another example of that. We, by far, could do the best fund of funds in the world. We have 30,000 references on 3,000 GPs from 10 founders, each, that they sit on a board with. We have 2,800 track records. By far the most comprehensive data on this generation of venture investors. I’m creating products because I need to win the best founders. And, my customers are just founders. It's that simple. And so, I don't really like the whole, like, “Oh, are you an earlier growth, where do you sit in the stack?”. My job is to build products for my customers, and my customers are founders, and that's it.
Michael Eisenberg
When we started all of it, Eden and I, so, he said, “Hey, I just want to make sure we're really an equal partnership”. I said, “What's that?”. He says, “I want to spend a lot of money on a data platform”. And this is, by the way, 2012 or 13. And I said, “What's that?”. And he says, “Well, I've got this spreadsheet of angel investors and of references and of founders and of connections. And I want to instrument the whole thing and hire developers and product managers into Aleph, what do you think about that?”. I said, “Well, it's an equal partnership, you get to make that decision.” We have this system now, called Amplify, which has millions and millions and millions of connections. By the way, we do the same thing. We have automated reference checking on engineers and marketing people and investors. And, by the way, I get a list of “Hey, so and so wants to get in touch with this investor”, email automatically teed up, because it's already, kind of, been preprocessed by our system. And, kind of, we know what they're looking for, what they're not looking for. And we've- it's a massive network. And, it's like, you know, it’s a killer competitive advantage. And, by the way, as the old guy, you know, I'm responsible for none of it. It's my partner Eden that is, but I look at young people like you, and Eden is older than you, and say, “Wow, what made you certain that that was worth the investment?”.
Harry Stebbings
Oh, I wasn't.
Michael Eisenberg
That's a great answer.
Harry Stebbings
This is the other thing, we always backtrack and we say “I knew this”. I didn't know this, I didn't know most of the shit! I will probably sound really arrogant in this show, most of this stuff you figure out along the way. And, I think that's the number one thing that I find so funny with a lot of early-stage investors, when they're like, “Oh, I don't find the defensibility”. It's like no, no one has any defensibility on day one, it’s built over time with process, with reference, with customers, team members, with portfolios. And so, for me, it was basically a data acquisition interest, that then turns into a data product, that then turns into a platform, and strength compounds over time. You get stronger by doing the reps and by going back to the gym. And, that’s what I saw here, which is like, it just compounds over time, and it gets better and better and better. And, the show is actually an amazing data acquisition strategy. I think, when I heard you talk about the data platform there, that the thing that I actually think when I heard that was, something that Hunter Walk and Sacha Patel told me, which is, partnerships are often most successful when both of you are rich already. And, I don't mean to talk about your personal wells, but, you're not resting on the fees to pay rent. Which actually makes the decisions that you make a lot higher quality and purer, because you make them in isolation, without personal need coming into it. It’s for the best of the firm. And, I thought that was a really interesting lesson that Hunter and Sasha took from their building of Homebrew. And, it made me think of that when I heard you say about the investment in the data team, which, naturally, takes away from your fees.
Michael Eisenberg
Tell me something. Like, how did you get up the gumption to reach out to Guy Kawasaki? And, who were the other, early, you know, I guess, guests on your podcast or show or kitchen, or bedroom-
Harry Stebbings
I think this is like, you know, the other funny thing, which is like, you know, people say this to me a lot, which is like, “Oh my gosh, weren't you nervous?”. No. I was really nervous to speak to friends my own age, like at a disco. Terrifying. I still find it terrifying. Like, I was the one in the corner. I don't know how to dance, Michael. I don't know what to do. I'm deaf in one ear. It's just awkward. But, speaking to a CEO of a massive business? No, it's not very nerve-wracking because we share a passion. Because I love what you do. And I'm really interested to hear your answer.
Michael Eisenberg
But how about speaking to the Prime Minister of the UK?
Harry Stebbings
No, it wasn't- I didn't mean it- no, I'm really passionate about the UK and about European tech. Why would I be nervous?
Michael Eisenberg
Bill Ackman?
Harry Stebbings
No. Like, I didn't get nervous. I mean, I was nervous when Howard Marks told me-
Michael Eisenberg
He was my next question, Howard Marks.
Harry Stebbings
Howard Marks told me, “Well that’s a stupid question”. Suddenly, I was struck with a little bit of nerve. And, Bill came in and saved the day and was like, “Okay, well, I mean, let's just calm down, Howard”. Which was very kind of Bill. But like, no, I didn't get nervous here. Because, I think, honestly, I do the work. I really do the work. We prep, intensely, before each show. So we're ready when we step on the field, one. And then, two, I'm passionate to listen, I want to learn. Every show that we do- by the way, I only release 70% of shows we do, 30% don't go out. So-
Michael Eisenberg 48:52
How pissed are those people?
Harry Stebbings
Not too pissed. And they're not pissed because we have a full-time TED coach on staff. Like, former TED speaker coach, on staff, who analyzes the transcripts. And then, we'll say, “Michael, in your intro, it wasn't as cohesive as it could be. If you did one, two, and three, you could tie it together a lot more succinctly”. And, they'll coach you on your speaking style. And so, we try and give quite a lot back, as a thank you. And actually, if it's not a good representation of you, then it's not the best version of yourself in the world and present yourself. But like, I need to learn three to five things, per show, still today, for it to go out. And so, you know, this is the other thing, like, you know, Gustav Soderstrom, at Spotify, the CPO of Spotify, says one of the best quotes. And, he says “Details are not details, details are the product”. And, I am passionate about delivering the best product, every single time. And, if it's not, like, the best product, it's not going out. Just like product designers don't ship not-good product. I'm not going to ship a mediocre podcast.
Michael Eisenberg
You know, I didn't ask your founders what they think of you before the show. And, none of them seemed to DM me, unlike many other people who did. If I asked your founders what they think of you, as an investor or a board member, what would they tell me? What would be the feedback?
Harry Stebbings
I think that's a-connected if we're honest. I think I don't believe venture investors are generally very well-positioned to help founders. Like, I just don't. I think the best people to help founders are people in the trenches, who are operating, in real-time, and are facing those problems, right now. If you are hiring a Developer Relations Lead, it is not right to speak to your ambassador about it, honestly. It is probably right to speak to the best technical recruiter at Slack, at MongoDB, who is having that exact challenge. Who will help you write that job description? Who will help you get that diverse candidate pipeline? Like, that is where real value lies.
Michael Eisenberg
Is there gonna be a $5 million developer relations venture capital fund from 20VC, soon?
Harry Stebbings
You know, it might be a little bit niche. But, you never rule it out, Michael. But, like, it is not, like, the venture investor who will be able to deliver that value. And, people also forget the decay in operating experience. People are like “Oh, well, X was an operator”. He was an operator or she was an operator, in 2012. This was, kind of, at the birth of cloud, in the very early days of cloud. This was pre-COVID, when work-from-home, hybrid, and millennials, weren't a nightmare. The world has changed so much, the rate of decay on operating experiences has never been greater. Actually, you need people in the trenches, who can deliver that value. So, my job is to be the best switchboard in the world, to deliver real value to my entrepreneurs, and to the founders that we work with. Why did we do 20 product, 20 growth, 20 sales? Because, now, we have 100, of the best operators in the world, on WhatsApp, ready to go, who we have great relationships with, we've delivered value to them, already.
Michael Eisenberg
So, take 20VC’s money, because you'll have access to the greatest network in the world. So, it's not just money. It's money and access. That's what you're offering? Anything else?
Harry Stebbings
I would say more. It’s money, and access, in real-time, to the best people. Like, a lot of people like access- access, and knowledge. And, what I mean by that is, like, there's access, which is, I want to speak to X and they're able to connect you. We’re a little bit, I think, more intelligent than that, which is like, “Hey, this is my problem, help me solve it”. And then, knowing the exact right person, at the exact right company, at the right time, and then being able to connect them within a day. That, I think, is very, very powerful and unique, especially from Europe to the US. More in the US, you have firms that do that. And then, I think, also content. Yeah, every company's question today is, “How do I scale customer acquisition in an economically efficient way?”. Every firm is becoming a media and a content firm, as well. And, knowing how to do it, it takes years, and years, and years.
Michael Eisenberg
You know, on that front, does it bother you that so many people out there in the media- But, I guess I'm asking you a psychological question, almost. I think this came from Shaq, too, by the way. Does it bother you that people, kind of, still consider you this, like, teenage podcaster? Does it bother you?
Harry Stebbings
Yeah, I love it. Keep thinking I'm a podcaster.
Michael Eisenberg
Why? Another why, besides mum?
Harry Stebbings
Michael, I was a fat kid at school who was always told that they'd be the one, you know, that’s single forever and without friends. And, I was told that I was, like, the B student, not the A student. I was told that, whatever, whatever, whatever. And, you know what? I spent my life being underestimated. Being underestimated is one of the best superpowers in the world. Keep on thinking I'm a podcaster. And, I'll keep on writing $75 million Series B checks and leaving the round for triple dot, like we did. And so, you know what? It's okay. I don't mind, and this takes time, I think I did a lot before. Shaq taught me so much about it, actually. You know, I remember once I wasn't on the list for, like, I don't know, some TechCrunch list. And, I wrote some snarky response to a tweet. And Shaq was like, “Seriously? Seriously? You know what? Different game, Harry, different game. You have to change your game. What you did, now, to get here isn't what's gonna get you to the next level”. I don't mind what people think. I know what I'm doing. I'm operating against my plan. The plan is going exceptionally well and better than plan. And so, if people think I'm a podcaster, and they don't see it coming. Fantastic.
Michael Eisenberg
Do you make all the investing decisions?
Harry Stebbings
I have a precede partner, Keiran, who I work with on precede, but across the firm, yes.
Michael Eisenberg
How do you stay humble?
Harry Stebbings
I have a mother that kicks the shit out of me.
Michael Eisenberg
It’s not your girlfriend. It's your mother.
Harry Stebbings
Yeah, no, girlfriend doesn't, it’s mother that does. Um, honestly. What is success, Michael? Like I'm not successful, okay?
Michael Eisenberg
I know but wait, hold on, hold on, hold on. How many emails do you get a week from people who want to go on your podcast?
Harry Stebbings
200
Michael Eisenberg
200. How many people come over and say “I want to be, or I can be, maybe, the next Harry Stebbings, and at 26 I'll have the most popular VC podcast, my own venture fund solo GP.”? Lots, right?
Harry Stebbings
But is that a success? This is something that I just think more and more about, which is like, you know, someone very close to me, earns $30-40 grand a year, you know, which is absolutely fine, but it's much less an average salary in the UK. And, every day, they go and hang out with some friends at the end of the day, and then they go back to their wife, and on the weekends, they play sports with their friends. And, they go to the cinema, and they seem very happy. And, I just think that we wrongly categorize success as a number in HSBC. And, it's just not that. And, actually, in many ways, that person is much more successful than me. You know, me with psoriasis, you know, alcoholism, and heart palpitations sitting at my desk at 1 am, cranking.
Michael Eisenberg
Is success and happiness the same thing?
Harry Stebbings
It’s a good question. Can you be unsuccessful and happy? Yes, you can.
Michael Eisenberg
So, they're not the same. So, how do you define success?
Harry Stebbings
I think, for me, it's nuanced. Like, for some people- and this is the other thing that's terrible is like, you know, we tell people that you shouldn't do it for money. If you do it for money, and that's your “why”, I think that's fine. And, for some people, success is the money. For me, it's not. It's loving what I do and never feeling imprisoned, or feeling free. You know, technically, now, I can do, you know, you control your day, I control my day. Now, really, we do and we don't, it's a little bit constrained. But, technically, we don't have a boss to do that. That, for me, is a huge luxury and success, in many ways. For other people it's not. So, I think it's really dependent on the person. But I think, you know, yeah, I think it's very dependent on the person. But, I think you can be successful and you know, unhappy as well.
Michael Eisenberg
How do you know if you're gonna be a successful venture capitalist? Or, if you are a successful venture capitalist? I mean, you've been through a massive bull market run, there's been a downturn now. Like, how do you know if you're good at this, even?
Harry Stebbings
I don't think you do. I don't think it takes 10 years to know if you're good at this. Everyone's like, “Oh, it's 10 years''. That's not true. You can look at it and be- it's not follow on funding, that will be a skewed metric. Let's take a look at how many companies, within your portfolio, doing sustainably 10 million in ARR or above, within a certain amount of time frame. Let’s look at the quality of revenue, the quality of margins, the quality of customers within portfolio companies. You can quickly tell, within a three to five-year period, whether you have decent enough access and picking to be a good investor. When you think about ventures today, Michael, and it’s so funny that I'm telling you, someone that I respect the shit out of, as a venture investor, and learn from daily. So, this is ironic for me, but for people listening, you know, there's three pillars, to me, of successful venture investing. There's sourcing, finding the best companies and founders in the wild. There's selecting, which is picking those best founders. And, then there's helping, which is ensuring they have all they can to be as successful as possible. I create products for those three. How do you know whether you're successful? I think, honestly, you take what I said before, and you can tell early signs within those first three to five years. But, cash is king. And, as a lot- of the reason I don't do podcasts, and I've probably sounded very arrogant in this podcast, but the reason I never do podcasts is because I have not returned cash. And, there's a lot of young people today who like to chat a lot of shit. And, actually, their LPs are still waiting for dollars back. And, you know what? I'm just very wary of that. Which is why I do this with you. But, generally, I think we should do more work and less talk,
Michael Eisenberg
That's super authentic. Noah Tradonsky asked, who haven't you interviewed that you really want to interview?
Harry Stebbings
I mean, I was talking about this with my very dear friend the other day. There's a couple of people I would love to interview. I mean, my number one is like Bernard Arnault. Bernard Arnault is like my all-time hero. He will never do it, so we can just safely move on from that one. One. Two, I would love, love, love to have Peter Thiel on the show. This is, you know, the man who inspired my first love of venture. Before, it's been challenging, because he had involvement in politics. And so, we shall try again. And, we- I will email people 50 times, I'm on my 52nd email to Sasha at Windows- or, not Windows-
Michael Eisenberg
Microsoft.
Harry Stebbings
And, I will keep going. Persistence is everything, everything.
Michael Eisenberg
Well, you can just turn up at his door with your podcast equipment in Redmond. That'd be cool.
Harry Stebbings
I'm tempted to. You know, you could also create, you know, this is the other thing, which is like, people view a piece of content in isolation, which is so silly. So, we record this podcast today. This podcast is not a podcast, this podcast is a YouTube video. This is a series of YouTube shorts. This is 20 Instagram reels. This is our, you know, TikToks, we've spoken before, about at least 15 TikToks going here. We've got at least five Twitter threads going through this. We've got a Medium blog post. Every piece of content is 10 other pieces of content. I think it's something we've done very well at, from the beginning. And so, it's your question. Yeah, we should do that on Sasha and then we should document it. And, the story of getting Sasha on 20VC, the travel, the standing outside the Microsoft Office, the TikToks of our team ready and waiting with lights. That is how you tell a story. You have to engage people. And so-
Michael Eisenberg
I would love to be a fly on the wall at Redmond, for that one.
Harry Stebbings
Yeah, but this is my problem, also, Michael. Which is, like, we've lost creativity. We've lost so much creativity. I want the batshit crazy ideas of “Shall we paint our office black with 20VC logos all over it?”. Seriously! We have to-
Michael Eisenberg
So how about this? When you get to Tel Aviv, you and I are doing walking podcast on the beach of Tel Aviv, interviewing random founders. When you come here in the fall.
Harry Stebbings
Love it. But well, let's go further. What more can we like- I always ask myself-
Michael Eisenberg
In the water? What do you want?
Harry Stebbings
Maybe. Ray Dalio, just being our bit cameraman.
Michael Eisenberg
Wailing Wall?
Harry Stebbings
But like, everyone always goes like,” Oh, what a stupid thing to ask”. But, it's a very good one to push your mental thinking, which is, if Mr. Beast were running Aleph today, what would he do differently? Just ask yourself that. And yet, why-
Michael Eisenberg
We literally have an off-site on that, next week.
Harry Stebbings
Yeah. And, it will make you think, you know, he would probably give $10,000 to 10 entrepreneurs, and then film them for the next week, and see which ones go the furthest. Actually, $100,000 for a venture firm is nothing. It could be the first preeminent steps in how to do customer discovery, how to do product testing. It could be an amazing series.
Michael Eisenberg
So if in 2014-15 1415, like, the podcast was the next big thing in media, what's it in 2023?
Harry Stebbings
The rate of copycats in content has never been greater. You know, we started, very prominently, with the kind of, TikTok-style interview clips. They've been taken, totally, by everyone. And, ours are still massive and very, very successful. But, they've been commoditized. So, the commoditization of content type and style is very rapid today. What's the next? I think is, maybe, worrying me, creative extremes. Which is, like, bluntly, Mr. Beast style. Give away an island. How do we, you know, blow up a building in, you know, I don't know, whatever, whatever, whatever, whatever. Like, some crazy thing that he's going to do in the middle of a desert. Whatever crazy thing Mr. Beast does. I think creative extremes is very, very much where we're probably gonna go. It's pretty capital-intensive, so I don't know how that will play out. I think a lot of people look at the All In podcast and say, “Ah, are we going to go to the kind of, panel-style discussions?”. No. All In podcast is actually fantastic for the chemistry that they have together. It doesn't really work if you don't have that chemistry. And, by the way, Jason is an incredible moderator. Yeah. And I don't think he gets enough credit for that.
Michael Eisenberg
And, a great dinner guest, by the way, he's very fun.
Harry Stebbings
Sadly, I haven't had dinner with him yet. But so, I think, honestly, kind of, creative extremes. And then specialization. Really, really focused. Like, you know, consumer retail in Tel Aviv, will be podcasted. And so, I think you'll get hyper, hyper-focused, and then creative extremes.
Michael Eisenberg
By the way, that question was asked by Oren Charnoff. The next question is, what, from Yael, and a couple of others. What's the problem you most want to fix in the world?
Harry Stebbings
Multiple Sclerosis.
Michael Eisenberg
Because of your mom.
Harry Stebbings
Yeah. Mom's got MS. I'm also very frustrated, in many ways. You know, we were always told for years that diet didn't impact her MS. Well, she used to have about eight relapses a year when she was drinking, and then my mother actually stopped drinking. And, she's had one relapse in 18 months. Eight in 12 months to one in 18 months. The correlation there is the only thing that changes is drinking. So, I find that very, very frustrating. And, I think there's mis incentives within healthcare. Healthcare is completely free. Like, the whole world, Michael, is broken now, I think, very, very significantly. Not more than ever, because it's been, we've been through tough times. Yeah. But, it's significantly challenged across healthcare, across education, across climate. And, I think, this is why, it's never been a more exciting time to be a venture investor.
Michael Eisenberg
Will you invest in healthcare?
Harry Stebbings
Do I invest in health care? Absolutely. Yeah. I do. But also, you know, this is the funny thing. My first ever deal was in healthcare. Okay? And, it was an okay deal. Like, okay. But, not great by any means. The hardest thing as a venture master, and you'll agree with me on this one, I'm sure, is mental plasticity. Is making sure that, on the next healthcare deal, you come with a fresh mind, untarnished by the fact that, yes, you might have just lost money on a healthcare deal. But, the next one could be great. I really believe that, especially in early stage, you know, optimists make money. And, cynics are right. And, you really have to keep a fresh Canvas for every opportunity. And so, yeah, I think that would be very much front and center for me. I'm very passionate about MS. I'm also very passionate about male eating disorders.
Michael Eisenberg
Male eating disorders? What's a male eating disorder?
Harry Stebbings
Well, like bulimia that young men suffer from, or like, anorexia that young men suffer from.
Michael Eisenberg
I thought that was a female thing to be perfectly honest, I'm glad you've made me aware.
Harry Stebbings
So no men, sadly, get eating disorders too, but bluntly, they don't get any, or much attention, at all. It's massively on the rise. The kind of, glorification or idealization of these Instagram trainers causes men to just be bulimic, anorexic. It's a terrible, terrible pandemic, eating disorders, right now. Eating disorders is one of the most undiscussed and worrying themes, I think, in Western society today.
Michael Eisenberg
Tell me, how do you relax? Do you relax?
Harry Stebbings
I mean, I run to relax, I find that very relaxing. I listen to David Goggins when I run, and he tells me that I'm pathetic. Oh, my God, David Goggins, and he has his line “Who's going to carry the boats?”. And, every time, I will send the video to my brother of myself running, and I will literally be screaming, “Who's going to carry the boats”. And, the kind of takeaway from that, is you are the one who's going to carry the boats, you’ve got to take responsibility. And, you've got to be strong enough, when called upon, to carry the boats. It's like, you know, he says, training is building calluses on your mind. You have to be ready for the day when you are called.
Michael Eisenberg
Interesting.
Harry Stebbings
And, that changes a lot about how I think.
Michael Eisenberg
Do you take vacation?
Harry Stebbings
I'm taking my first vacation ever, with my girlfriend and an LP of mine, one of my biggest LPs, to their, kind of, holiday home. And I'm doing that in July. Otherwise, no, I don't.
Michael Eisenberg
Is that in Europe?
Harry Stebbings
It's in Europe, it's in France. The answer on like holidays is like, I think holidays are for people who know who they are in many ways. I have been so wrapped up in 20VC, for the last eight years, when you remove yourself from work, and you've only done what for your whole adult life, and never went traveling, never even went to university, really. I am 20VC. I know we should separate identities, there's zero separation. But, when you do then go on holiday, you have this real question of “Whoa, who am I?”. And, there's a very uncomfortable moment of staring into the abyss and realizing that actually, you don’t know.
Michael Eisenberg
Can you find out in France?
Harry Stebbings
You might find out in France. I think the honest truth is, I actually know now. Which has been a recent revelation, over the last year or so, giving up drinking. You know, finding someone special. Knowing that it's not money, I thought it was money, often. It's not. I love the park and an espresso, it’s five bucks. And so, I have a lot more grounding on that now, but I didn't before. And so, yes, I will take this vacation. But, it will be my first.
Michael Eisenberg
And, are you going to really turn off?
Harry Stebbings
It's only for a week. And, no, I will not turn off. But, I've also naturally done quite a lot of studies into the time it takes to turn off on a vacation. And, scientific studies suggest that it takes about 13 to 14 days before you will properly turn off. And so, I'm actually, then, rationalizing this or saying, “Well, if it takes 13 to 14 days, I scientifically should not turn off at all”.
Michael Eisenberg
You know what you need, by the way? You need the Sabbath, when we turn off, entirely, for one day a week. No phones, no connectivity. It'd be helpful.
Harry Stebbings
Do you know, actually, I've always looked at the Sabbath as this incredible time of purity? I love family. I'm a real family man. I love family dinners. There's nothing that makes me happier. And, I think it's one of the most wonderful occasions of purity and love that I would wish we had. But, we don't have it. And, it's very hard to instill in a non-Jewish home, I think, in terms of the discipline you have around the timing of people being there. And so, I would love it. But sadly, it's quite difficult to implement.
Michael Eisenberg
Do you- kind of, this exploration that you're on for “who's Harry”. How does that tie into settling down, having a family? You mentioned earlier, you didn't want to drink so that you would be awake to take your kids to the park in the morning. It sounds like that's starting to be part of the “Who is Harry” more than 20VC. There's, you know, Harry, the family man, both your current family and maybe future family.
Harry Stebbings
Yeah, I mean, I definitely think about that. I think, you know, if I'm being very direct and honest, I think the only way you truly grow up is by having children. And, that's not throwing shade at people who don't have children. And, it's not being disrespectful. But, I think having children forces you to realize that, actually, you are not the most important person in the world. When you're married, you can still go to the gym whenever you want, actually. You can still go and hang out with your friends, they will be fine on their own. When you are a parent, you cannot, they will fall off the chair, they will not be okay. You have to devote yourself to someone else, entirely. I think that's one of the most magical experiences that you can have. Now, don't get me wrong, they shit on you a lot. They throw up on you a lot.
Michael Eisenberg
Those are the least of the issues, trust me.
Harry Stebbings
There’s a whole lot of stuff that happens, I am not naive about that. And so, I think there's that. But I do think, you know, bluntly, whatever day you have ahead of you going into your child's carriage, and picking them up and hugging them, would be a very, very wonderful feeling. And so, yeah, I think about it a lot. I would like to be a young father. I think being a young parent is a wonderful thing. And, I do think about that. And, you know, I always say, people say to me, “What's the vision with 20VC? What's the vision?”. I say it's very simple. I want to be a 75-year-old grandfather with my grandchildren running around my armchair. And, I want to say, “Hey, let's look at you know, Wix, or let's look at X Company Y Company. And, you know, our family was a tiny part of that journey. And, I remember meeting Michael, when he was starting in, you know, one room in Tel Aviv”, and your grandchildren go, “Wow, that's amazing”.
Michael Eisenberg
Oh, Harry, I’ve got bad news for you, by the way.
Harry Stebbings
What?
Michael Eisenberg
My kids don't read any of my books, and I've written a bunch of them. And, they don't listen to any of my podcasts. Maybe one child listens to my podcast. And, maybe one or two are interested in my investments. And, I have grandchildren already. And I'm not sure they have any interest in what Papa is recording or talking about. So, you know, my prayer for you is that it works out for you the way you're hoping, but, even if it doesn't, there's a lot of wonderfulness in having children and grandchildren at a young age.
Harry Stebbings
Do you know what? I think I might be being rather hopeful here. I'm hoping I might just play it in the kitchen, enough. My brother will sometimes put on Sonoff, just like, “Welcome to 20VC”. And so, yes, maybe I am being hopeful, but I think that's very important. But, I also, like, yeah, I think that more and more now actually.
Michael Eisenberg
All right. I'm going to turn the rapid fire on you, quickly, to wrap up. If you were going to write a book, what would it be about?
Harry Stebbings
Mental discipline.
Michael Eisenberg
I like that.
Harry Stebbings
Most people are not mentally disciplined. They like to be told that it's okay that you didn't win. With children today, they’re told it’s, you get a participation medal. No, you didn't win, you should do it again.
Michael Eisenberg
There's a lot of softness out there that I don't think has done us well, as humanity. And everything's okay.
Harry Stebbings
It's not okay to, like, not win if you wanted to win. Like, that's the point. And so, I think like, I'm actually like- everyone says to me, “Oh, how do you do the work? How do you not burn out? How do you fast? How do you run 30 miles?”. Because I'm never going to ring the bell!
Michael Eisenberg
Yeah, I think, by the way, the best venture capitalists have a lot of self-motivation and self-discipline to, kind of, stay on things, and stay with things. A stick-to-it-iveness that you don't find all over the place for what it’s worth.
Harry Stebbings
Peter Fenton told me, very early on, that the best investors in the world have two things. They are hyper-curious, and they're hyper-competitive. And, the minute you lose one of them-
Michael Eisenberg
Time to get out. Yeah. So, what makes you, kind of, vulnerable and human?
Harry Stebbings
Did I not come across as vulnerable and human?
Michael Eisenberg
But, what causes that? What causes you, at any given time, to be vulnerable and human?
Harry Stebbings
I think it's, actually, a real luxury to have the ability to be vulnerable. And, what I mean by that is, I mean, you can sit here and pine on this show about being vulnerable about, you know, the problems that we have, and we face. It's very difficult if you haven't, to some extent, been a little bit successful, already. And so, firstly, I appreciate that it's a luxury that comes with a little bit of success. And, what causes me to do it? A real desire for more. For more people to do it, more people to say, you know what? I had this problem, and I learned this. And, it changed me in this way. It's not weak. I'm not weaker, because I had an alcohol problem. I'm stronger. Like, can't come in the ring with me, now.
Michael Eisenberg
Which brings me to, like, the last question, which is asked by Daniel Eck, the CEO of Spotify. Which is, what's the most significant hurdle you've had to overcome, so far? And, what did you learn about yourself in the process?
Harry Stebbings
Daniel always asks a very good question, huh? I mean, there are many, by the way. I think one of the lessons when I look at all of my hurdles, is that, in life, you are faced with continuous hurdles. And, there are two types of people. Ones that say, this was really, really hard. And, you know, it's okay. And, not many people come back from this, or not many people get over this. And then, there’s the other people that say, this is not going to be me, no way. If you actually just look at mine, you know, I was bulimia when I was 16,17, which is quite a serious eating disorder. And then, I went to a different school. Never really had friends throughout the schooling period. And then, I went to a different school, because I also didn't do very well at that old school, like I failed in my exams. They're not like B's, like failed. This is the other thing, everyone knows that they're entrepreneurs, and you put “whiz kid” in it. Yeah, you look at it now, every story is crafted by great, you know, publications and marketers, and the Colossians with books in the background of every video conference they do. It's a beautiful craft. And so, when I look back, bluntly, the lesson that I have is, you will continuously be faced with failure and shit. And, you have a choice of do you accept it? Or do you decide that only you decide the next steps? And, only you can tell yourself that you're not good enough. Every step of the way, Michael, I was told that I wasn't good enough. Every step. There's no way you can be a VC. You're a kid. You're a podcaster. Now, they’re desperate to come on the show, every week. Point being, only you tell yourself you're not good enough. And, even then, I think people underestimate themselves.
Michael Eisenberg
Was there a turning point that you developed that self-confidence? You said, “I'm gonna beat this”.
Harry Stebbings
Yeah.
Michael Eisenberg
When you learned that about yourself. What was it?
Harry Stebbings
Well, you want the honest, honest truth, naming names? I got down to the final two, or whatever it was, of associated an analyst position at Excel in London, when I was 18. And, the partnership, kind of, was split. Half decided that I was great, and half decided that I was too young and I wasn't ready. I remember getting a call, on a Friday afternoon, I was in the middle of London, and I was ready, you know. And, this is, like, a career-defining call sitting, on the bench by the Tower of London, outside of Pret, with my lunch. And I'm like, “I'm ready for the news”. And then they're like, “You are too young”. And you're like, in that moment, your dreams are crushed. And, it's like the Steve Martin quote, which is, like, “Be so good, they can't ignore you”. And, the truth is, they were probably right, I was too young. And, by the way, I would have stopped doing the show and joined as an analyst and an associate. It would not have been the right thing. In hindsight, I'm very grateful. But, in the time, it taught me that nothing felt as bad as that moment, when I was told “absolutely not” to my dream, by someone who I really respected. And, I will build such a big business, that you will regret it.
Michael Eisenberg
Where did you find that? That, “I'm gonna to make you regret this, that I'm good enough, I can do this”. Where do you find that? That I can lose the weight. I'm going to be in venture capital, and I'm going to build a media. But, where did you find that?
Harry Stebbings
I think that anyone can do anything if they work hard enough. I really do. There are some physical constraints. Sadly, you know, I'm not going to be in the NBA. I'm not tall enough. You know, some people don't have the bone density for being a great swimmer. Sure. But, generally, I am not- I think more and more people need to understand that they are capable of so much more. And, actually, with hours, and with strategy and craft, you can do more than you think. And, I just always believed that.
Michael Eisenberg
I'm a deep believer in that too. And, I think, you know, one of the things you've led the way on Harry, candidly, is exactly this. Is to empower millions and millions of people to believe that they can touch this thing called “entrepreneurship” called “venture capital”. And, in a world where entrepreneurs are so critical, and, in a world where it's gonna get harder to earn, kind of, a white-collar income, your empowerment of other people candidly, is inspiring.
Harry Stebbings
Michael, you know, you touched on 20 Sales. This is eight incredible women, who are the best, best go-to-market experts in the world. They are freaking amazing. I want them on every cap table. And, to be very clear, I have no carry in their funds. They are the GPs, they have all the carry. So, just to be clear on that. But they are exceptional people. And, they deserve a fund with great LPs. And, they deserve the chance to also invest. I am so proud that they let me help them in that way. And, I look at my mother, and, you know, bluntly, my mother wasn't afforded chances that she should have got, and if I can be a tiny vehicle of change in some of those cases, fuck, I'm gonna take it.
Michael Eisenberg
You know, that's amazing inspiration. You know, my own Genesis story is that I had an interaction with a rabbi, when I was 19 years old, who told me that if I moved to Israel and enabled 10,000 other people to earn an honest and decent living, it would be an incredible Mitzvah, you know, religious commandment and life mission. And so, everything you say really resonates. I just want to tell you, personally, and I should also make a full disclosure, I'm a tiny LP in Harry’s fund. But, you're just an inspiration for a lot of people. So, thank you for being you and being so raw, and so vulnerable. And, so present with us here, and just keep up the amazing work, Harry.
Harry Stebbings
If people don't know, that you've been an amazing advisor to me in the tough times. I call you when times are tough, and I really appreciate our friendship. And so, thank you for always being there for me and I've been uncomfortable but also loved having the tables turned.
Michael Eisenberg
Well, I appreciate you doing it Harry. Thanks so much, and, you know, see you in Tel Aviv or London, soon.
Harry Stebbings
I will see you soon.
Michael Eisenberg: [00:00:00] You could have done anything. You could have gotten into the family business. You could have invested in these startups that you met in Silicon Valley. You had easy access to them. Someone probably would have hired you as an executive at some point. Why did you choose to do what you're doing? Give us the why.
Yasmin Lukatz:
It goes back to what makes you happy. Being impactful, helping my community, creating this community - this is actually what makes me happy. So it's pretty selfish. I want to be happy.
Michael Eisenberg:
Welcome to Yasmin Lukatz. How are you Yasmin?
Yasmin Lukatz:
Thank you, Michael. Thank you for having me.
Michael Eisenberg:
Okay, before we even get started, I normally ask you to introduce yourself quickly and tell us your core value.
Yasmin Lukatz:
Wow. I think integrity is one of them. I think it's very important for me when I choose people I want to work with. Authenticity too. And that's very important. Yeah. And I love the State of Israel. I think that's becoming–when we, when I think of values, I think about general things, but I think the love for this place is becoming stronger and is part of my core values.
Michael Eisenberg:
Wow. I actually want to dig into that a bunch in this conversation, but maybe I'm just going to jump right to it.
So for our audience who doesn't know who you are, Yasmin Lukatz has lived between Israel and Silicon Valley over the last 20 years, I have that about right?
Yasmin Lukatz:
18 years, and I came back two years ago.
Michael Eisenberg:
And she came back to Israel two years ago. She was the Founder and Executive Director of ICON, which is the Israel Collaboration Network.
She is the Founder and President of Code for Israel, and non-tech people may know her from the Israeli version of Shark Tank–
Yasmin Lukatz:
And Dancing with the Stars!
Michael Eisenberg:
I was going to say, and Dancing with the Stars. So she is multi-talented, an investor, runs multiple not-for-profit networking activities. Everybody in Silicon Valley knows Yasmin.
We'll come to that soon.
Yasmin Lukatz:
My daughter is doing a reality show now. She's doing Peking Express, and now I'm starting to be known as “Shira's mother,” and I love that.
Michael Eisenberg:
That's amazing. I don't know what the reality show, Peking Express is.
Yasmin Lukatz:
Yes. It's like The Amazing Race.
Michael Eisenberg:
I don't even know what that is.
Yasmin Lukatz:
You just, they don't get–it's long. They don't get–and they have their racing, they do different things, and they don't have any money. In a foreign country.
Michael Eisenberg:
Oh, which country is she going to?
Yasmin Lukatz:
I think they start in Cambodia and they're gonna end in Thailand, I'm not sure.
Michael Eisenberg:
Oh wow, so she's asked to steal people's money on the way as part of the reality show?
Yasmin Lukatz:
She's gotta stay in people's houses, she's gotta ask for food, she's gotta do tasks and compete with the other couples.
Michael Eisenberg:
I'm gonna ask you, how do you feel as a mother? That your daughter is going to run around in Cambodia to wherever–
Yasmin Lukatz:
So she’s already done that and she came back home safely.
Michael Eisenberg:
Okay.
Yasmin Lukatz:
I think as parents–I'm so biased. I'm her biggest fan. Whatever she does, I'm going to be happy about. I don't know, you know that too. I think, if I were to introduce myself, I always start, I'm saying “I'm a mother of four.”
Michael Eisenberg:
Yeah.
Yasmin Lukatz:
I think that my kids are my biggest challenge and biggest achievement, most challenging and most rewarding thing of my life. So I'm very proud and I'm excited to be Shira's mother, to be known as Shira's mother now.
Michael Eisenberg:
Why do you think she chose a reality show where she has to run around skimping on a dollar a day or less?
Yasmin Lukatz:
I think you have to watch the show or you have to invite her, so she is, there's a–she talks about it.
Michael Eisenberg:
Okay. Since you mentioned you came back to Israel two years ago, I'll actually start at the end. Did anything change in you on October 7th or post October 7th?
Yasmin Lukatz:
I think things that were always there got, like, this extra sense of urgency. So when we spoke before, I told you, I heard in my early 40s Professor Jennifer Acker from Stanford talk about her research on happiness, and what is happiness.
And she spoke about how when you're a baby, you're happy when your diaper is dry and you have, you've been fed and held. And in your 20s, speaking of my daughter, it's the adrenaline and the rush that makes you happy. And in your 40s, it's community and impact. That's really, that's research.
And when I heard her speak, I was like, “Now I get it.” Now I know why I do ICON later, on doing Code {for Israel}, why I enjoy connecting people and creating opportunities for other people so much–combined it with my love for Israel, I enjoy and I want to do it here.
Michael Eisenberg:
So you started ICON in Silicon Valley. Tell everyone what ICON is.
Yasmin Lukatz:
So ICON is a not-for-profit. Our mission is to connect between the Israeli and the Silicon Valley tech ecosystems. We're a community of Israeli tech entrepreneurs, U.S.-based venture capital investors, and corporate executives in the U.S. in companies that could be acquired, a partner, or a customer of a startup.
And through a series of programs, we create opportunities for community members to do things together. We just bring the right people in the room, bring the right content, we develop the specialty, put some fairy dust on top, and then they make the magic happen. We just create the opportunity for the magic to happen.
Michael Eisenberg:
Did you take equity for that in ICON?
Yasmin Lukatz:
We–so ICON is a non-profit. We actually belong to everyone, and it's very interesting because it's a non-profit with a business model. But all the profits actually that we make go to fund the non-profit activity.
Michael Eisenberg:
And what's the business model?
Yasmin Lukatz:
We charge for sponsorships. We have some philanthropic dollars that are coming in, but most of the revenues are from sponsorships and from a small fund we created that invests in some of the companies, and all of the profits from the general partner profits go back to the non-profit.
Michael Eisenberg:
And have you had any exits?
Yasmin Lukatz:
We had one exit–so we just started. In 2019 we had one exit so far.
Michael Eisenberg:
Which was that?
Yasmin Lukatz:
Which was at the Dia, I don't know if you know them, they sold to Philips.
Michael Eisenberg:
Terrific.
Yasmin Lukatz:
Yes.
Michael Eisenberg:
So you're like Y Combinator, but without Paul Graham taking your equity?
Yasmin Lukatz:
This is–
Michael Eisenberg:
But for Israeli companies too.
Yasmin Lukatz:
That's just one of our programs.
Michael Eisenberg:
And what are some of the other programs?
Yasmin Lukatz:
So that's SV101. That's, yes, we're like, we don't take their equity. We have a program focusing on women in tech in the U.S. We have a program, a few programs around specific verticals. One in cybersecurity. Now we're starting one in fintech. We do a series of dinners between investors and founders, and so on. Tons of opportunities.
Michael Eisenberg:
And why was this needed? You started what, now, 12 years, 10 years ago?
Yasmin Lukatz:
10 years ago. We’re celebrating our–open for ideas on how to celebrate our 10th birthday.
Michael Eisenberg:
I don't know if you remember this, by the way, but you could do like a “best of” show. I interviewed Sam Altman on your stage at the third conference.
Yasmin Lukatz:
Yeah. We need to bring him back.
Michael Eisenberg:
Yeah, before Sam was like a thing, I interviewed him once, I think it was just at Y Combinator–
Yasmin Lukatz:
He was a thing!
Michael Eisenberg:
He was always a thing. Yeah. He wasn't asking for a trillion dollars for training AI models–but I think I interviewed him, I think I asked him a question of what was more dangerous, nuclear weapons or Donald Trump, at the time, because he was really in the anti-Trump camp. And I can't remember what his answer was.
Yasmin Lukatz:
I'm gonna dig in.
Michael Eisenberg:
Yeah, let's see if we can find it. That's my recollection. Yeah. Why did you start ICON?
Yasmin Lukatz:
I think we started, we wanted–so many times people ask me, did you have the vision on what ICON is going to be when you started it?
And the answer is no. And I think that's comforting for many people that start something and don't have a vision. It doesn't mean you should, you can't do it. What we did do is that we were attuned to opportunities. And if an opportunity came, we took that and if somebody closed the door, we came in through the window.
So we were very entrepreneurial, in the way we developed this nonprofit. But it wasn't like this is my vision on what we're going to be in 10 years. And this is how we got to it. We started actually by trying to solve the problem of Israelis in Silicon Valley, not involved enough in community life, with the Jewish community. That was the problem we were trying to solve. And we thought, okay, let's do something at the JCC, and then Israelis in Silicon Valley do tech, and we'll do something, a conference about tech. And then they're going to come and they're going to see the JCC and they will want to be part of this.
And then as I started working on this event, I first understood how connected this community is. Second, I understood that Israeli tech is a pretty hot commodity, because everyone, even if you're not Jewish and you're not Israeli, you want to know what's going on in tech. It's not enough to just know what's going on in the U.S.
You want to know what's going on in Israel. Everybody wanted to know what's going on and be part of that. And I realize there's so much goodwill that's been created and poured into this conference that we should do something with it.
And the first thing we did is change the name of the event from a conference to a launch event.
No idea what I'm launching. Honestly, no idea what I'm launching. And then slowly, step-by-step we added one thing, we added another thing. Something didn't work. We decided not to do that and move forward. So that has been ICON. I love, I love that I'm in the intersection of tech and innovation and at the same time community work and impact–specifically when it all ties back to Israel.
And I love, also, the fact that we have this business model that supports a non-profit. I think I hope many non-profits get that.
Michael Eisenberg:
We're going to talk more about this kind of circle and the no-profit activity, but–if you had to compare and contrast the Israeli tech ecosystem with the Silicon Valley tech ecosystem, what would you point to?
Yasmin Lukatz:
As an ecosystem? I think one thing's obvious. If you want to sell only here, you're not venture worthy. The market here is not big enough versus in the U.S. you can sell to the local market and it's going to be amazing. It's going to be an amazing success. So startups here always are with an eye for fundraising or for customers in the U.S. And that's pretty obvious.
Having said that, we're a little bit in a disadvantage because you do business with people. And growing up here, I'm not sure you understand all the cultural subtleties, and you don't know someone. My kids went to school and all the parents of the kids in the preschool were like CEO of this company and that company, and we just socially knew each other.
And I'm thinking like here I can probably get to people cause I know them from the army, I know them from, from the kids’ activities. I know them because they went to school with me. And then if I'm an entrepreneur and I'm coming to the U.S., I don't have this breadth and depth of connections.
So that's another difference.
Michael Eisenberg:
What are the core differences between Israeli entrepreneurs and Silicon Valley entrepreneurs?
Yasmin Lukatz:
I think, I don't work with Silicon Valley entrepreneurs.
Michael Eisenberg:
But you know a lot. You met a lot through ICON.
Yasmin Lukatz:
Yeah. I think when, when you say that you expect me to talk about the stereotype or the chutzpah.
Michael Eisenberg:
No. I have no expectations. And I know you always have different answers. So I ask you.
Yasmin Lukatz:
I think the Israeli entrepreneurs are awesome. I think they do the work and they learn about the differences, and they understand you just, things that worked here are not necessarily going to work there.
And they want to know, maybe even the difference on how you dress to a meeting, on what's okay and what's not okay to ask. They work on their accent. If there's like a word, I remember one of our, one of the founders that spoke on stage and when he introduced the team, he wanted to say, “We're just a bunch of hackers.”
It's based on their military hacking experience. That's what, it's a cool sentence to add. But with this very deep Israeli accent, it came out as I don't know if I can say it on the podcast–”We're just a bunch of fuckers.” That's what it came out as really. So they're very, I think they're very much aware of all those differences.
I love working with Israeli entrepreneurs. I think someone in the U.S. said, someone told me, “I like them because I'm being stabbed in the front and not in the back.” What do you think about it? Do you?
Michael Eisenberg:
What are some of the other feedback you've gotten on Israeli entrepreneurs?
Yasmin Lukatz:
There's the joke that, when an entrepreneur comes out of a meeting and he said, they suggested they thought it's interesting,
If you hear, “I thought it's interesting,” it doesn't mean that I'm interested. We're never gonna– “let's do lunch,” that does not mean we want to do lunch together. If I open my calendar, it says, “let's do lunch, I can do next Thursday”–then I want to do lunch with you. But let's do lunch one day, it's just bye.
So those are cultural differences. That's like, I came out of a board meeting and the board said, “I should be looking at so and so,” and I thought about it and I don't think I should do that. That was not a recommendation! That was something you should do.
Michael Eisenberg:
Do you see a difference in aspiration between the Silicon Valley founders and the Israeli founders?
Yasmin Lukatz:
I don't work enough with the Silicon Valley founders to say that, but I gotta say the Israeli entrepreneurs are awesome. They have big dreams. They used to say that everybody wants to build a company until they can sell it. But now I also see entrepreneurs, they dream of creating a large, a huge company and going public.
No, I think the Israeli entrepreneurs are inspiring, aspiring, full of fire, and ready to rule the world. Maybe I shouldn't say “ready to rule the world.” It's so, like, fueling antisemitic stuff.
Michael Eisenberg:
Yeah.
Yasmin Lukatz:
Yeah. We're ready to succeed and spread the amazing things we create here and help everyone.
Michael Eisenberg:
I know you for a decade plus. I've never heard you hide what you think, even once, which is good. Just to follow up on that, so it's been, like, a complex year for Israeli tech. It started with the judicial reform here, and now the war. Have you seen any changes in your Silicon Valley network as it relates to your–less investing–we've raised tons of money for our portfolio since the war started. Almost a couple hundred million dollars at this point.
Yasmin Lukatz:
So I think venture capital is a business and part of your business model is that you have to make a set amount of investments per year.
Michael Eisenberg:
No, I never do that. Only if I find good opportunity.
Yasmin Lukatz:
So you can go on and not invest like for three years?
Michael Eisenberg:
Ah, three years my LPs might get antsy.
Yasmin Lukatz:
Okay. But it is based on the assumption that you are going to consistently invest. Maybe it's not three and three, but you have to keep on looking for opportunities.
Michael Eisenberg:
Yeah.
Yasmin Lukatz:
I think, what I do see, I see actually investors that are more eager, that see what's going on and understand that it's more challenging now for Israeli entrepreneurs and get them–send me anyone, let me see anyone. I do see that. I haven't seen anyone who's said, I don't want to invest in Israel now. But I think we have to also acknowledge that this is part of not just a crisis in Israel, there's a slowdown in tech that's been going on for a while, all over the world.
Michael Eisenberg:
Yeah, I agree with that.
Yasmin Lukatz:
Many times I was asked, are we being penalized because of the judicial reform? And it was really hard to tell, are things happening because of the judicial reform or are they happening because of, they're happening anyway all over the world.
Michael Eisenberg:
Yeah. I completely agree with that. I've said that to the Treasury Ministry over and over again. I've written it publicly. I think it's very difficult to tease out the causes of the downturn. And by the way, my sniff test is, a lot of it has to do with the investment in base AI models in Silicon Valley that didn't exist here, or basically anywhere besides Silicon Valley and France, as best I could tell. And maybe Abu Dhabi.
I want to dig into something else. So you kept coming back to ICON, and the nonprofit, and community, and purpose. What is Code for Israel?
Yasmin Lukatz:
Code for Israel is another nonprofit we created three years ago. And the thought there was that we have amazing talent in the tech community and they want to do things for the community.
And we end up sending them, distributing food for the needy, or painting a preschool, which are great things, but wouldn't we be getting so much more of their time if we let them do what they do best, which is write code? At the same time, we have many nonprofits in our world, in Israel, that target core issues in the Israeli society.
And it's, I don't know if you say in English, “the shoemakers going bare feet?” What's the English equivalent?
Michael Eisenberg:
The cobbler's kids have no shoes.
Yasmin Lukatz:
That's the one. The shoemaker. Yeah. And we create amazing technology that touches so many people around the world. And yet our own nonprofits are not as tech advanced as they could have been.
So what Code for Israel does is that creates those collaborations. We bring volunteers from the tech world and they either implement or develop specific tech. That helps those nonprofits do the work in a more efficient and productive way.
Michael Eisenberg:
Give us an example of a project.
Yasmin Lukatz:
So one of them that's very relevant recently, there's the “Tnuah l’mavak b’antishemiut bareshet” {התנועה למאבק באנטישמיות ברשת}
Michael Eisenberg:
Yeah, which is the movement to combat antisemitism online.
Yasmin Lukatz:
Yeah. I don't know what's the specifics of their name in English, but–so before we help them, they have volunteers that scan YouTube, Facebook, any of those. When they find an antisemitic expression, they file a form and they request that it will be removed. We created a tool for them in which they can do it automatically and now they doubled their tempo by 10.
Michael Eisenberg:
Wow.
Yasmin Lukatz:
So instead of 7 expressions an hour, they can tackle 70 an hour.
Michael Eisenberg:
Wow.
Yasmin Lukatz:
Yeah.
Michael Eisenberg:
Give us another example.
Yasmin Lukatz:
For example, HaShomer HaChadash. HaShomer HaChadash, which I know you know pretty well.
Michael Eisenberg:
Full disclosure, I chair that organization, but go ahead.
Yasmin Lukatz:
I love that organization. I love Yoel. I love what you guys do. It's like the true great Zionism. Really “hachalutz.”
Michael Eisenberg:
Pioneering.
Yasmin Lukatz:
Yes, really pioneering in this field. And you tackle many issues, but the one that we got–so what we like to do is work with the non-profit and ask them for the problem, not the solution. What is the problem that you have?
And the problem that you all introduced is that we're trying to help the farmers when there's a theft, agricultural theft, but the volunteers don't get to the right place at the right time fast enough. What we did is developed our sensors–so we didn't develop sensors, so we took various sensors and changed them so that they're, they can tell if it's a, if it's a cow that walks or a car, because we want to know when a car walks in.
The next stage would be that it can read the number of the car and say if this is the car of the former or another car. And they don't need to be–they're weather-resistant and you don't need to change batteries often. And they're just placed in strategic locations on the field, and the volunteers get notified and just get to the right place at the right time.
Michael Eisenberg:
And on the cows.
Yasmin Lukatz:
And the cows. I love the cows. So another one was, I call it, “GPS for cows.” So basically, when we came to talk with the farmers about this thing that we created for them, to prevent the cars from coming in, we understood that there's another problem with the cows.
Now, I actually did not know that cows go out to the field and come back six months later. I thought they go, they eat, they come back. Lik, I don't know, you go out, you come back, you go out, you come back. So I was, maybe I'm naive and I'm not a farmer. But they don't come back as often. And what happens is that people, bad people come and they take the cow somewhere else.
Or they just slaughter the cow in the field, chop it to pieces, put it in the car and drive away. And the farmer knows about it just six months later, when they come to count the cows. So what we did is we created this GPS for cows, and like a little cute belt that goes around the cow's neck, and if the cows is out of the designated area being walked away, or the cow stops breathing, again, the volunteers get a notification.
Michael Eisenberg:
So, you get totally animated talking about Code for Israel. You got totally animated talking about ICON.
Yasmin Lukatz:
I've been there. We checked it. I saw it. We checked it on the cow. We like, we got one of the volunteers to hold it and run away, and we saw how, you can see it on the screen. It was pretty yeah, it was fun.
Michael Eisenberg:
You could have done anything. You could have gone into a family business. You could have invested in these startups that you met in Silicon Valley. You had easy access to them. Someone probably would have hired you as an executive at some point. Why did you choose to do what you're doing? Give us the why.
Yasmin Lukatz:
So one, I do invest in startups. I don't make it my core business like you do. But I do, if I meet someone that's exceptional or extraordinary in my mind, I dig a little deeper and I do invest. I did have some good examples, some good investments.
Michael Eisenberg:
Tell us about your portfolio.
Yasmin Lukatz:
I invested in Navan, TripActions, early on when he had a 10 million valuation. I invested in Salt Security, which I'm sure–but I don't want to do that full time. I don't want to do that full time. I really enjoy, it goes back to what makes you happy. Being impactful, helping my community, creating this community, this is actually what makes me happy.
So it's pretty selfish. I want to be happy. I do community work because it makes me happy.
Michael Eisenberg:
There must have been pull to go into a family business. There must have been.
Yasmin Lukatz:
So I spent four years working with my stepfather after I graduated from Stanford Business School. I enjoyed it, but I enjoy this, I enjoy this more.
Michael Eisenberg:
No disrespect to your stepfather, but you're making a lot of impact doing what you're doing.
Yasmin Lukatz:
And he did too.
Michael Eisenberg:
He did too. Yeah. When you get out of bed every morning you say to yourself, “Today I'm changing X.” What's the first thing that comes to your mind?
Yasmin Lukatz:
Today I'm changing X. It's not like an every morning thing that I wake up–
Michael Eisenberg:
I think you do.
Yasmin Lukatz:
I gotta say I have, I had this really interesting talk. So my 10, my youngest son is 10, and 10-year-olds, they'll do anything before bedtime to postpone bedtime.
Michael Eisenberg:
Never noticed that one.
Yasmin Lukatz:
Never. So he saw that I like talking to him and he like, dives into, in depth, really like, deep conversations. And two weeks ago, we had this conversation when he said, “Between the war, COVID and moving to Israel, my childhood is pretty much fucked up.”
I was like, “Really?” He said, “Yes, there are things that need to change here.” I was like, “Okay. What needs to change here?” He said, “Really?” I said, “Yeah. What needs to change in Israel?” And he had 10 things he wants to change. I was actually shocked that I think the top four were about the environment.
Then he said, “I want more green, I want this, I want less pollution, I want the weather.” And then it was personal safety, especially with the war going on. And then it was the education system. Because he goes to school. This is his life. But if you would have asked me, I don't know if it's a different generation or there are things that bother me more than the environment in Israel right now.
So if it's education, then I think that, there's great things. We are, we're a child of the, I don't know, a few–did you go to school here?
Michael Eisenberg:
No.
Yasmin Lukatz:
I'm a child of the Israeli education system. And I'm pretty, pretty happy with myself.
Michael Eisenberg:
You did well.
Yasmin Lukatz:
I did okay. I did okay.
Michael Eisenberg:
I often say that the informal education system here is better than the formal education system here. The formal education system here used to be better, but the informal education system around the youth movements, around just what you pick up from friends on the street and the army in particular, is just,
Yasmin Lukatz:
And mechinot also, right?
Michael Eisenberg:
And the mechinot also, which is these army preparatory programs that are incredibly valuable, and they create resilience in kids that are–people in Silicon Valley will excuse me, are less created in high school in Silicon Valley.
Yasmin Lukatz:
I think that, what happens here, just going to the army, seeing your friends in danger–it creates resilience. Going to the shelter when there's an alarm, it creates resilience.
There's no, we don't really, we don't really have a choice.
Michael Eisenberg:
Uncertainty is empowering.
Yasmin Lukatz:
Yes. And it helps you deal with uncertainty that there's always going to be in life.
Michael Eisenberg:
Are you good at dealing with uncertainty?
Yasmin Lukatz:
Yeah.
Michael Eisenberg:
Where does that come from? Yeah.
Yasmin Lukatz:
I'm good with pressure. I actually thrive in stressful situations.
Michael Eisenberg:
Yeah. How do you do that?
Yasmin Lukatz:
I don't know. How do I do that? I, when we did Dancing with the Stars, when I did Dancing with the Stars, my partner is, he was the complete opposite of me. He said, “No, let's relax.” I was like, “No that's, I need the pressure.” He says, “You don't need to be pressured.” I was like, “I need to be pressured.”
I do better when I'm pressured. I don't know why. Is this a therapy session?
Michael Eisenberg:
Do your kids like that you get under pressure like that?
Yasmin Lukatz:
No, I'm not stressed by it.
Michael Eisenberg:
You're not at all, right?
Yasmin Lukatz:
I'm not stressed by it, but I–
Michael Eisenberg:
You use it to motivate you.
Yasmin Lukatz:
Yeah.
Michael Eisenberg:
You use it to focus.
Yasmin Lukatz:
Yeah, I like that there are many things that–
Michael Eisenberg:
I also like that for what it's worth. I think it's an interesting phenomenon, people who know how to channel pressure and stress versus those that get to–
Yasmin Lukatz:
To motivation.
Michael Eisenberg:
Yeah, to motivation, versus those that get stopped by it.
Yasmin Lukatz:
It doesn't stop me. It fuels me.
Michael Eisenberg:
Yeah, Dan Loeb of Third Point once sent me a book, which I didn't read, embarrassingly, about, I think a woman psychologist, who says that stress can actually be the biggest performance enhancer, much more than, caffeine or steroids or anything else that people take, if you know how to channel it properly.
Yasmin Lukatz:
Yeah, and if you also, if you enjoy it. You don't want to be stressed and be miserable. And I enjoy it. If we go back to your first question that kind of led us to this, and–there are many things that I think could be better. And we need to do, we need to take care of all of them.
Michael Eisenberg:
So you said earlier you’re passionate about Israel. You spent all this time in the U.S. Tell us about how you think about your identity. Are you Israeli, Jewish, American?
Yasmin Lukatz:
I'm all of the above.
Michael Eisenberg:
Can't be all of the above.
Yasmin Lukatz:
Why not?
Michael Eisenberg:
Alright, tell us how. I'm Israeli, I'm Jewish, and I'm American.
Michael Eisenberg:
And where, how does that fit into your identity?
Yasmin Lukatz:
Ah, how does that fit into my identity? I feel, I feel that I belong in both places. Could have been that, could have been that you don't belong in both places, which is bad. So actually, I think, I don't know, I just, you feel–what do you feel? Are you more Jewish than Israeli? Are you more American than Israeli?
Michael Eisenberg:
No, I'm more Israeli at this point, I think, than most, but I'm culturally, probably, because of my upbringing–if you ask my kids, they would tell you that I am American. In my own head, living here 30 years, I have become more Israeli, but I understand American cultural norms. I think the values that I've adopted are more Israeli.
Yasmin Lukatz:
So I think if I had to choose if I'm more Israeli or more American, I'm 100 percent more Israeli. Not 100 percent Israeli, but there are some–after spending 18 years there and doing business there, lots of me is American. I really value the relationship between Israel and the U.S. If there's one thing that, we spoke about things that disturb, that bother us and need to be changed, I think we should do a lot more to work on this relationship and not just take it for granted.
Michael Eisenberg:
Agreed.
Yasmin Lukatz:
And yeah. I'm both Israeli and Jewish.
Michael Eisenberg:
So you and I actually were side by side in a column, I don't remember how long it was before the war.
Yasmin Lukatz:
Yeah.
About the future of this relationship, the U.S. Israeli relationship, and antisemitism in particular. A lot's changed since October 7th. How do you think about the problem of antisemitism right now?
Yasmin Lukatz:
I was so naive. I feel I was naive. I felt there is antisemitism, but I didn't think it's so spread and broad. I thought it's like crazy people that are like the edges of society that feel that. And I'm shocked to see how prevalent it is.
And it made me think about all the people that I've done business with and I met. What happens when they go home and they talk to their spouse? So they say, “Oh, the Jew came over today. And she said so…” and um, it's really bothering. I think in universities, it's worse than anywhere else.
Michael Eisenberg:
Would you send one of your kids to an American university today? They may not ask you, but–
Yasmin Lukatz:
One, I want them here. I want them close to me. I want my kids close to me. I'll support my kids in whatever they do, but it's a very challenge–it's tough and it's challenging. I also don't think that not going to U.S. universities is the solution.
Michael Eisenberg:
I agree with that.
Yasmin Lukatz:
We have to be, it's like when something goes wrong, running away is not going to solve it. We have to be there. And I'll, if my kids were in an American school now, I would encourage them to step up, and to speak, and to be an activist, and do things to explain to their friends what is going on.
Michael Eisenberg:
Specifically, what would you tell them to do?
Yasmin Lukatz:
I've been, we created the community in, around Stanford created this like, initiative, “Blue and White Tent” in Stanford, where you can come and people can ask questions and share knowledge. And there are talks, and I sat there, and came along–some people came and said, “Oh, great job, keep on doing this.”
And I said, “Why won't you come and sit with us? Come and take a shift, and answer questions, and talk to the students.” And one 19-year-old told me it's a social suicide. That made me really sad. That's a kid that I've known, he was, he's a friend of one of my kids, and I've known him since preschool.
And he said, “It's a social suicide,” and it's sad that this is the way it is. Yeah.
Michael Eisenberg:
So do you worry in that case today more about antisemitism or assimilation?
Yasmin Lukatz:
Antisemitism.
Michael Eisenberg:
Antisemitism.
Adi Tatarko, I asked her, what should I ask you? And she said the first thing I should ask you is, “Did October 7th change your perspective?”
So it sounds like on the issue of antisemitism, it changed your perspective massively.
Yasmin Lukatz:
Yeah.
Michael Eisenberg:
Okay.
Yasmin Lukatz:
I also changed, I think, another change is that I don't know if it's perspective or real change. I think that the North America Jewish community understood that even if they disagree with us, we're in the same bad situation and we're together.
So I think in one way, it did create an opportunity with the relationship with the Jewish communities in North America, understanding that this is both our problems.
Michael Eisenberg:
Adi asked me to follow up and ask you, with all the social impact initiatives that you have, do you have other desires to influence from within?
I think she means from within the political system–or do you want to nibble around from, I don't mean to say ‘nibble,’ you want to have the continued impact from outside the system doing the nonprofit work. You're like a real bridge in many ways.
Yasmin Lukatz:
I think that what I care about is creating a positive impact and change in Israel. What is the best way for me to do it? Is it from within or from the outside? I'm still not sure, but I'm exploring every option.
Michael Eisenberg:
That's a very political answer. You might be ready for this.
Yasmin Lukatz:
I don't know. What would you think? What do you think? Where could you bring the most impact? If you really want to create change and make this a better place to be, what could I or could you make the most impact?
Michael Eisenberg:
Like you, I'm a big believer in civilian movements. I think the operating system for the world has changed. The government operating system is still the Pony Express and maybe Windows ‘95. And our operating system is WhatsApp and the iPhone and AI right now.
And so ironically, I think we're in this tension moment here between the speed of the civic operating system and the slow speed of the government operating system, and I think civilian initiatives can outrun the government now.
Yasmin Lukatz:
But maybe the solution is we go and we fix that.
Michael Eisenberg:
Could be. My own view is the government needs to slim down and become an orchestrator rather than a manager, and should orchestrate civilian movements. You mentioned before the Shomer HaChadash. We're doing a much better job than the government of helping farmers, not just with protection, but, many of the farm workers ran away after October 7th, and Shomer HaChadash ships 25, 30,000 volunteers a month to go help the farmers pick their crops, plant their crops, etc.
It's something the government has not gotten organized about, and I'd like to see civilian movements scale up and to change the interface between civilian movements and government. I think that's true here. I think it's true in the U.S. as well. I think part of what’s going on in the U.S. is a need–the federal government's trying to grab more power, and the States are saying no, they understand the power needs to be distributed more.
But I think I'm, I side with the states very significantly in this way. I think Thomas Jefferson would have said the same thing, and the Founding Fathers would have said the same thing.
And so I'm, I'm a States rights guy, because I just think they get elected by the local people and that's a better outcome for the most part.
Yasmin Lukatz:
I think that one thing that I did learn after that strengthened this point after October 7th, that I realized the importance of not just the civil movement, the business people for the country–I noticed that, that we have a council, not a council, a console in San Francisco. They've been there just for five years the most. They can't have the depth of the connections that business people or community leaders have within a community. So kinda, they came to us. “Make ab introduction for me in YouTube, make an introduction for me in TikTok, make an introduction for me there.”
And many people, many good people, obviously everybody did whatever they can to bring the business people here. And you saw the visits here and that, people that kept on coming and others back behind us, and behind the scenes meetings with business people there. Yeah I agree with you that the government, it's, we do have to fix things and make it more efficient, but still the–you can't have the breadth of the entire business community of that, so you need to work together.
Michael Eisenberg:
So you're part of the business community and nonprofit community. What's a message you want to say here to Silicon Valley CEOs and entrepreneurs?
Yasmin Lukatz:
This is a good place. Israel is a great country with–this is, could really be heaven. So I would say just help us go beyond the slogans.
Really see what the people are and see the fact that we're strong doesn't mean that we are the occupier or the oppressor. And the situation has to change. There's so much hate for nothing in the U.S. It has to change.
Michael Eisenberg:
And what would you tell an investor right now?
Yasmin Lukatz:
This is the time, so it's really funny, but even from a pure business perspective, when do you want to invest? Do you want to invest when everybody's a unicorn? No, you want to invest when the missiles hit Tel Aviv. Valuations, just from a pure business perspective, this is–and it's funny because many investors feel differently, I guess many want to invest more when they keep on reading about this unicorn and that unicorn. This is not a good time to invest.
It's a good time to invest when the valuations are low. The technology will keep on growing. I think there's a lot of actual technological innovation that will come out of the situation. A lot of things that will start being developed in the military and then will trickle into the tech society.
So there are plenty of opportunities ahead.
Michael Eisenberg:
We agree. We think there's been science fiction created over the last five or six months and In the military, and we're seeing incredible deal flow right now. I'll tell you a funny story. When I first got started in my career, I went to see a well known British stockbroker named Edward Cohn as part of my kind of tour to find 10 people who would give me 10 minutes of advice.
So I go to see Edward Cohn, who was living in Jerusalem at the time. He just passed away, unfortunately, a couple months ago. And I said to him, “Edward, what's the one piece of advice you would give me?” And he said, “Buy low, sell high.” I said, “Edward, come on, man.” And he looks at me and says, “Well, if it's so easy, why does everyone do the opposite?”
And I sat there and said, “Wow, there's real wisdom in that.” Everybody wants the unicorn. Everyone wants to follow the herd. Few people are able to get up the gumption to invest when the missiles are falling on Tel Aviv. And it was like a moment for me. I was 24, 25. It was like a moment.
Buy low, sell high. It's not what you thought it was. It's not just a bumper sticker or a slogan. It's hard. It's really hard. It's against human psychology.
Why did you do Shark Tank? Is that even real?
Yasmin Lukatz:
Of course it's real. We invest our own money. So when we say “yes” in the show, that means that we're gonna start a due diligence process, and if the due diligence process is successful then there's gonna be a deal.
I think the average in the U.S. is that about half the deals happen and half the deals don't. I don't know here in Israel.
Michael Eisenberg:
How many did you do?
Yasmin Lukatz:
Probably half. About half of the deals.
Michael Eisenberg:
Did any of them work out?
Yasmin Lukatz:
Annabella, the breastfeeding pump, actually we just launched in the U.S.
So they developed a new, actually patent even. Think about the breast pumps, it's always been about the vacuum.
Michael Eisenberg:
Yeah.
Yasmin Lukatz:
And they developed a mechanism–we always tell entrepreneurs, “What is your problem? Did you experience the problem?” So his wife came to him,and Masha came to Senya and she said, “I don't like the pumps. Can you do something about it? I just don't like them.”
And they work the mechanism that imitates the movement of a tongue of a baby. And turns out in research that it produces double the amount of milk at the same time, or a same amount half the time. So that's a pretty strong claim being proved in research.
Six months ago, we started selling it here in Israel. And now we did a soft launch in the U.S. just starting, just on our website to make sure we can do that. So that's been pretty awesome.
So I went to Shark Tank, I went to Shark Tank to see that, can I take all the knowledge, that everything that I saw in Silicon Valley and pass it, not to the people that come to the show, but to the people that stay at home and watch the show?
Michael Eisenberg:
What was the feedback like from the kind of people who stay at home and watch the show? Did you get hate mail, fan mail, feedback?
Yasmin Lukatz:
I mostly get–what I wanted is to people to open the drawer, take their dream, look at it, like air it and say, “Okay, I have a few tools now, and I know what investors think, and I know what I need to do, and maybe I'm going to look at it differently in my idea, and maybe I can try, and I fail or I'm not going to fail, I don't know, but I'll give it a try.”
And I got many people to tell me they've done that. I get mostly women that approach me in the street. I don't know if the men are afraid to approach or women are more inspired by what I have to say because I'm a woman. But they come and say, “I have this idea, and I'm going to now start looking at it and figure out how to do that.”
Michael Eisenberg:
Michael Eisenberg:
Interesting.
Yasmin Lukatz:
Yeah.
Michael Eisenberg:
And so why did you do Dancing with the Stars?
Yasmin Lukatz:
It's a dream. I don't know. I'm a little sparkle pony inside.
Michael Eisenberg:
Were you a dancer as a kid?
Yasmin Lukatz:
I wanted to be a ballet dancer, but I think I stopped when I was 11. I think, put the glitter aside and the dresses and the learning and you think–I think for me it was stepping out of my comfort zone in a very big step, in a cha step, and trying to see how I deal with that.
I actually like it for life. I like trying things that are not comfortable and seeing how it feels. And then if it feels good, like your comfort zone's bigger. I used to be afraid of talking in public, and then I tried and I spoke with 20 people and then I spoke with 100 people. And then I remember the first time I was in the IAC conference, and I went on stage in front of 4,000 people and I was like–but I've done it.
Michael Eisenberg:
And this is, by the way, an incredibly important point, which is that you forced yourself out of your comfort zone in many different ways in order to get comfortable with it. And eventually you got comfortable with it and your impact and range expanded.
Yasmin Lukatz:
Yes. And I recommend, think about, don't think, don't go over the top, don't do something crazy. But think about something small, like a small step outside of your comfort zone. And then see how it feels and either you can always walk back.
Michael Eisenberg:
See, you're the psychologist in this conversation.
Yasmin Lukatz:
What is, what is your step out of your comfort zone, Michael?
Michael Eisenberg:
I'm doing this, right?
Yasmin Lukatz:
This is outside your comfort zone?
Michael Eisenberg:
I don't know. No, I've spoken publicly since I was like, my grandparents were like honored at some dinner when I was, I don't remember, 10 or 11 and I spoke, so I've spoken publicly for a long time.
What's out of my comfort zone? That's a good question, I have to go think about that right now.
Yasmin Lukatz:
I wish you to find something out of your comfort zone and try it.
Michael Eisenberg:
I'm definitely not going to do cha dancing on television. What do your kids think about you being on television?
Yasmin Lukatz:
They like it.
Michael Eisenberg:
They do.
Yasmin Lukatz:
They like it. Actually, my daughter forced me to go on Shark Tank when I wasn't sure if I wanted to go or not. She said, “Oh, you have to do it.”
Michael Eisenberg:
Were they critical? ‘Mom, you got this wrong.’
Yasmin Lukatz:
No, they're pretty supportive. No.
Michael Eisenberg:
Yeah? Was your mom–my mom gives me feedback, my mom is like a speaking coach.
Yasmin Lukatz:
Yeah?
Michael Eisenberg:
And she gives me feedback on every TV interview I do like, watch your legs, watch your hands stand up. It's a–your mom give you feedback?
Yasmin Lukatz:
Not on the content.
Michael Eisenberg:
She's not a blushing violet, your mom. I know her.
Yasmin Lukatz:
Not, never, she's always, but she's a mom. She's always like a supporter. And she came, actually, to one of the Dancing with the Stars shows.
She came to visit me on the Shark Tank set, and I loved it. It was like having your, even though I'm 50, it was like having your mom come and see you at the chug, at the after-school activity.
Michael Eisenberg:
Like when you were a ballerina when you were 11.
Yasmin Lukatz:
Exactly. I don't know if she came when I was 11, but she came to Dancing with the Stars. If she has comments, it's–”Put your hair in the front. Smile more. Why aren't you smiling? This is a good lipstick.” But she's–
Michael Eisenberg:
Fashion comments.
Yasmin Lukatz:
She's a big, she's a big fan. Yeah, it's, if I want criticism, no, it's not–
Michael Eisenberg:
That's not it, huh?
Yasmin Lukatz:
Yeah.
Michael Eisenberg:
Two last questions for you.What makes you human and vulnerable?
Yasmin Lukatz:
I think someone asked me once, there was like a big conference. “Are you excited?” I was like, “No.” “Are you excited?” “No.” “Are you excited?” “No.” And I think I get excited from the small things, that they work. I get excited from a flower, and see all the way from something the kids do from the small things.
What makes me human? I–why would you suspect I'm not?
Michael Eisenberg:
I know you are. But like, what are those things that kind of bring out your vulnerability? Your more ‘sappy’ side.
Yasmin Lukatz:
Sappy. What is sappy? What does that mean?
Michael Eisenberg:
Oh my gosh. Sappy is like emotional, sentimental.
Yasmin Lukatz:
Okay. I'm a hopeless romantic. This is one. I am a hopeless romantic I'm founding a cult for hopeless romantics. Not really but, but I do.
Michael Eisenberg:
That sounds interesting.
Yasmin Lukatz:
We have one convert that–actually never mind. Um, I'm a true believer in yeah, in love and a hopeless romantic, and I think things will eventually work out if there's big love.
I think–babies, for some reason, my team thinks it's weird. I'm crazy about babies, about other people's babies and babies–
Michael Eisenberg:
I like babies, too. I'm a big fan.
Yasmin Lukatz:
You're a grandpa!
Michael Eisenberg:
It's true.
Yasmin Lukatz:
Yeah, you get that. I have some time to go until I'm a grandpa.
Michael Eisenberg:
We can give your kids some encouragement. You'll never be a grandpa, but you can be a grandma if you want.
Yasmin Lukatz:
I have a few years to go. Yeah. My Shira's 23, almost 20, and I can wait a few more years.
Michael Eisenberg:
I was a father at 22.
Yasmin Lukatz:
No. No, it's not gonna happen.
Michael Eisenberg:
All right.
Yasmin Lukatz:
A few more years.
Michael Eisenberg:
We can go talk to her when she's finished her trek in Cambodia. How do you want to be remembered at the end of your life?
Yasmin Lukatz:
Interesting. So when I was in Stanford Business School, in one of our classes, we were tasked with writing a eulogy for ourselves.
Michael Eisenberg:
Wow.
Yasmin Lukatz:
Yeah.
Michael Eisenberg:
That's a heavy assignment.
Yasmin Lukatz:
It's actually interesting. Because how do you, it is exactly what you're asking. How do you want to be remembered? How do you want to be remembered?
I guess it depends–by whom? I want to be remembered by someone who touched, who touched people. I want to be remembered by my kids as someone who was impactful in their life, that allowed them to be the great people that they are. I want to be remembered as someone who did something great for this country.
I want to be remembered by the entrepreneurs I worked with, someone who facilitated their professional growth and investments or whatever. Um, how do you wanna be remembered? I'm not going anywhere!
Michael Eisenberg:
I'm not suggesting you are!
Yasmin Lukatz:
Yeah.
Michael Eisenberg:
This is 70 years from now. We say, ‘Until 120.’
Yasmin Lukatz:
I don't know. I wrote in my eulogy, the one that I wrote, actually it was a pretty awesome. The professor at the end analyzed it in the class level, so she said, “We have five people that will end up being U.S. presidents sitting among us. But the most interesting thing is that four of you married Natalie Portman.”
I wrote, I think one of the things that I wrote is that I got to work, that I worked with my daughter. At the time when I wrote this, she was four, and I didn't have the younger ones. There was just one that was a baby. But at that time it seemed like something that was combining, kind of, our worlds.
Michael Eisenberg:
A mother-daughter business.
Yasmin Lukatz:
Yeah.
Michael Eisenberg:
Interesting.
Yasmin Lukatz:
We're very different now in our career paths. She's very artistic, and she's going a different way than I have–not in values, but in what she chooses to do. I want to spend a lot of time with my kids.
Michael Eisenberg:
Amazing.
Yasmin Lukatz:
Yeah.
Michael Eisenberg:
Yasmin, thank you for coming.
Yasmin Lukatz:
Thank you for having me, Michael.
Michael Eisenberg:
This was fun.
Yasmin Lukatz:
It was.
Yonatan Adiri:
You know, in many times throughout the journey, I always asked myself: Am I still the right guy to run the company?
Michael Eisenberg:
Welcome to part two of Invested with Yonatan Adiri, the former CEO of Healthy.io and its founder. Today, we're going to talk about Yonatan's decision to step down from Healthy.io. We think it's a super interesting and meaningful episode, a must-listen for any entrepreneur and investor. So join me as I talk again to Yonatan Adiri.
So let me summarize this for a second, which is, you went through four extinction events. You're serving a million patients that you're preventing from ever having to get to dialysis. You saw AI coming before just about anybody else did, and built it into the phone and into the cloud. There's PersuasionOS, which is AI driven and now generative AI driven.
Our persuasiveness for healthcare, ColorAI, which is AI for analyzing all these machine vision, these incredible samples of dipsticks and urine sticks that you’ve done. And this company was born out of your mother's injury in China, and you're a decade in, and, so you just stepped down as a CEO?
Like, why?
Yonatan Adiri:
I think–maybe two fundamental points about the journey. First and foremost, as I've shared openly, for me, public service was always, and specifically in Israel, right–for me, for my wife, for my community–was always priority number one. I think that, in many times throughout the journey, I also have my own, I would say, motivation from that perspective.
And I always ask myself, as companies and our company morphed, right? And you've seen companies outlast a decade and becoming generational capacity companies–they morph. Because reality changes and you’ve got to morph. So in every morphing, at least four, I asked myself a question: Am I still the right guy to run the company?
When we survived the first extinction, am I the right guy? And I think where Healthy.io is right now, the vision is very clear. The technology engines are very clear. The management team is phenomenal, globally and in Israel. Our ultimate test right now is, how do we extend sales in the U.S. over the next 24 months? Can we unlock some of those big contracts that we've won? Can we unlock collaborating with the government, the NCQA and others, and push through 1 million to 10 million patients, right?
When we do that, healthcare is gonna–it's forever changed because of Healthy. Digital healthcare is forever changed because of Healthy.
But I think the space of what can be done at home depends on how well we do our next nine million tests. Now, when I ask myself, am I the right person at this point in time to drive nine million patients in the U.S–which is the target market, ultimately, you want to IPO, you want to raise more capital and build that 2030 platform–somewhere in ‘23, my answer was, I'm not sure.
For the first time in over a decade of the company, but almost 12 years of journey for me–and I think we can share with the audience, we've had conversations about that and you've given me a lot of food for thought into how to run through that process myself, and get to the conclusion, get to the answer.
So that was the process that kicked off. I also had a severe injury that, roughly, about a year ago, that also got me to think in a more profound way about that, right? There's a saying in our, by the Jewish sages, I don’t know how to translate it into English that well–
It's,
Michael Eisenberg:
You do the Hebrew, I’ll do the English.
Yonatan Adiri:
“Lo alecha hamlacha ligmor, v’lo ata ben horin levatel mimena.”
Michael Eisenberg:
“You're not required to finish all the work, but at the same time, you don't have the privilege or the ability to walk away from it.”
Yonatan Adiri:
Exactly. So that kind of was very strong with me. So when I decided to transition somewhere in, call it July, and we were looking for the right person to take the CEO role, it was clear that the goal–look, I'm not the best sales guy in the world. This is about sales. This is about scale. And it needs to be, in my view, at this, at the next morphing of the company, an American CEO. Now that doesn't mean that the work is done. It doesn't mean that I'm, that it's not incumbent on me to be there to see it through.
And therefore I'm, I took the role of President, I'm doing the work on public affairs. But there's also a question of another quote from our sages which is, if you want to, I don't– “Al tomar l’kshe’epaneh eshaneh, shama lo tipaneh.”
Michael Eisenberg:
“Don't say that when I free my time up, I will study, because you may not free any time up.”
Yonatan Adiri:
Exactly. So the idea of going back to public service and going back to serving the community at large here in Israel, there's always going to be a good, quote unquote, excuse out of the Healthy journey to say, “Oh, I'll do it next year when we IPO. I'll do it next year when we cross the 5 million people. I'll do it next year.”
It's a never ending thing. And for me, that calling is very profound.
Michael Eisenberg:
But what made you figure out that you're not–like founders morph also. So what made you figure out that you're not the right guy? Suddenly when it comes to this big commercialization push in the U.S., what's, what was the moment or the trigger?
Yonatan Adiri:
Yeah, I think you gotta, you really have to be very honest with yourself, right?
Michael Eisenberg:
Most people aren't though, isn't that true? Something must have caused, it must be a something.
Yonatan Adiri:
Look, again, honestly, for me, we've, we didn't manage to crack it for a certain period of time.
Tried different approaches. And really, honestly, for me, at some point, you gotta look at the empirical data and say, “This is a task for someone who's done this four or five times.” And in many ways–by the way, the task we have in front of us over the next 24 months is a task that has been done before in a way, right? Like it has a method and there's ways to go from 1 million to 10 million. Whereas the tasks we've had before, there was no textbook. There was no epistemology. There wasn't, “Oh, you do this to create the medical selfie.” Medical selfie 101, right? Sales of 1 million to 10 million post FDA, there are textbooks for that.
And I genuinely believed at that point, so come July, August that, for me to morph into that would be, just not a good use of shareholder value, not driving shareholder value the right, within the right time, in the right velocity. And so that was the driver for my decision in a way.
Michael Eisenberg:
So you met like a lot of candidates, a bunch of candidates for the CEO job along the way. And you said to them, “Hey, I'm going to step down.” Number one, did they actually believe you?
Yonatan Adiri:
No.
Michael Eisenberg:
No, most of them didn't believe you.
Yonatan Adiri:
Yeah.
Michael Eisenberg:
And they, because they thought you'd get in the way, you wouldn't give up the job.
Yonatan Adiri:
Yeah.
Michael Eisenberg:
And how did you persuade them that you were serious, that you're actually going to do this?
Yonatan Adiri:
I sent them to you. No, but honestly, I think that, conversation one, a lot of people didn't believe. But when you–the four or five finalists that went through a few hours of a journey with me in terms of how decisions are made, and then met Oz, who's our COO and CFO, and met Ron, who's in many ways my Co-founder that came in one year later, and the credit for the execution on the ColorAI and the Persuasion is all his in that sense, right?
And they saw people who really gave them the sense that I'm very credible, and when I say something, that's what I do, and they've been through quite a long period of time with me. And that's something we're very proud of, by the way, as a company. We are a core team of about 60 people that have been doing this for almost nine years together.
Michael Eisenberg:
Yeah. Nobody left. The loyalty is incredible.
Yonatan Adiri:
Yeah. And so when some of those candidates expanded, spoke to Naomi, spoke to Oz, spoke to Ron, they were like, “Oh. He means it,” right? “He's a serious guy.” And also the type of management strategy we built was always 90-10, right? I have had a philosophy of always managing the vacuum, right? So in the beginning I did everything. I dipped sticks, I went to the lab, whatever. At a certain point–
Michael Eisenberg:
I remember, by the way, you showing me very proudly this little bizarro robot, in that office on Rothschild Boulevard. It was like a box.
Yonatan Adiri:
Yeah. on Rothschild.
Michael Eisenberg
It looked like it was out of a, I don't know, like a, like a–with a million lightbulbs in it that were going off in different ways.
Yonatan Adiri:
We called it, we called it “The Automator.” And jokes aside, like we, how do you generate–ultimately, again, let's geek for a sec on the tech, right? This is very advanced optics. You need to recreate color from a sensor that you don't own, in a lighting condition that you have no idea. Because every person, literally a million tests, a million lighting, a million spectrums, right?
Michael Eisenberg:
Let's just say the lighting in the bathroom stall in the public park is not the same as the lighting in the bathroom stall in my house, or anywhere else.
Yonatan Adiri:
And, where people test, it's the privacy of their own home.
Some folks have a blue wall, some folks have a yellow wall. Like, it affects how you–that's why it's very hard to compete with us. So we had to generate enough data to even start developing the algorithms. And we were like, what are we going to do? Are we going to just go and take pictures in certain places?
So The Automator was born and actually carried out its role. Long story short, I did marketing in the early days. I did a lot of things in the early days. But as those fields got kinda, I would say, there was less haze and more clarity? We brought in the best people to do that and I moved on.
Come 2019, right? We had the best product person in the world doing this. We had the best CFO in the world doing this. We had the best marketing person in the world. So I was kind of, I don't know if you remember, I used to tell, little did I know that I ended up in a way predicting something–I used to tell the board, if I get injured in a car accident, the company would not feel that for six months out. That's how I want to design my management. I need to be busy with things six months onwards. Company needs to run impeccably. And it has the best management team to run impeccably for six months out, at any given moment.
Michael Eisenberg:
I know. I sat there when you handed the reins over to Jeff Martin, and we'll come to Jeff in a second. And the question I asked myself, but I reserved it for right now is, like, how did you really feel? This was your fifth child.
Yonatan Adiri:
Yeah. No, but listen. I think we are at a point right now in the world where we are witnessing what happens when folks at the top hold on to the reins for too long. Across the globe, across industries.
I think it's ultimately a healthy thing to do. I'm a very emotional person when it comes to my family, my kids, Israel and values, but when it comes to the entrepreneurial track, I'm very kind of, purpose-driven, and very honest and very diligent in the sense–Billie Jean King has this beautiful quote that says “Pressure is privilege.” I always knew that on the journey. And we've been through some hard times, with the FDA delays and stuff like that. I, for me, that pressure was always a privilege, because I knew we're building a company to serve people. There are, I came to the company from public service where I saw really, world-changing hard stuff.
The sausage factory that is Global Statescraf, it gives you perspective. So for me, yes, in many ways, it is a baby. It is, but I–for instance, I never spoke of Healthy.io as a family. Never. And I also told that to our team. This is a place where we have a, we sign a contract every day of trust. That you want to come here and you want to be part of what we're trying to do in the world. And when you'll just, when you'll decide to leave, it's totally fine. And when we'll decide to part ways with you, because of merit, because of change of direction, whatever, we both know that there's a bigger goal here, and we're trying to get there. To serve people, to get to a million patients, 10 million and whatnot.
And I'm not going to give you some fake language on, on family and then fire–I don't fire my kids, right? From that perspective, pressure is privilege. The company is a company. It has a purpose, it has shareholders. And for over a decade I felt genuinely that I'm the right person to drive that value. And so in many ways when I handed the keys over to Jeff, I just knew it's the right thing to do.
Michael Eisenberg:
You know when I started my career, it was very common that you brought in the professional CEO to replace the founder. And then there became this thing about “founder friendly.” Where everyone wanted to be the most founder friendly, and there's some truth to it. Michael Dell created an incredible company, and Bill Gates created an incredible company.
They forgot about the vast majority of companies that were actually created by the CEOs that were brought in. But, this mythical kind of founder thing–and you speak about this now almost transactionally. And, it's not my baby, it's not my company. And that is not a, doesn't fit the narrative or the zeitgeist around the mythical founder figure.
Yonatan Adiri:
I think everything is a system. Everything. Like things come together, right? If you're, if it's all about you, you're a mythical founder and you built the company that way, then it's not resilient enough, right? If it's about you, you don't go through four extinction events and have your management team intact and tackle it and get to a million patients.
You just don't, it doesn't happen.
Michael Eisenberg:
Maybe if you're a great leader, you can, right?
Yonatan Adiri:
So I think greatness in that space, right? So I'll give you an example. When Facebook IPOed. And the whole notion of eternal founder control in the public market was legitimized. I looked at it and said, that's wrong.
He can be an amazing leader. And I have, obviously, it's an incredible company, but from my perspective, I wouldn't even want to have that. If I can't convince my board–again, it's a private company,not as a public company–of a certain idea. And I bring it to a vote and it's voted against and I don't have a super voting share–I should think through why that happened, right? If qualified, smart people on my board, I don't know, 8 out of 10, think completely different than what I think–
Michael Eisenberg:
But maybe we're not so smart though. We don't see the same things, like I couldn't have invented Healthy.io.
Yonatan Adiri:
So I'll convince, I gotta be able to convince you. Again, I'm not a publicist, this is not open to the Carl Icahns of the world, right?
Michael Eisenberg:
Yeah.
Yonatan Adiri:
There's a genuine, in the private market still, there's a, should be a genuine kind of shareholder, kind of driving together. So for me, I never wanted this to be about me, right? That's not something I ever had in mind.
Michael Eisenberg:
Is that unique to your personality or would you give the same advice to every other founder?
Yonatan Adiri:
I think, look, one of the things I learned from running clinical trials time and time again is that, for some things, N equals 1. I really, I think it's like, the mental strength you need to go through a journey of a decade in building a company makes it so, renders this decision to be very personal. Some folks, and there's no right or wrong, right? Some folks need that. And by the way, some folks also get energized by that. That's–them being at the top in a pyramid structure energizes them? Kudos! Great. If that's what gives you–but for me, that, that's not what gave me the force to withstand the crazy upheavals of FDA grade digital health on a pioneering track.
Michael Eisenberg:
But do you worry the company will lose some energy because you're gone?
Yonatan Adiri:
I don't think so. I think we, again, I think the company needs different types of energies right now. Yes, it would lose some energies that I brought forward, but the kind of energies it needs right now, Jeff delivers way better than I could ever.
Michael Eisenberg:
So tell us why, Jeff.
Yonatan Adiri:
As you said, I met many many candidates, and I think one of the most critical pieces, and–the finalists were all great salespeople, established, right? You get to the last part where the finalists are very close to each other from that perspective.
There's one thing that Jeff kindled in me and listened carefully in those conversations and gave me that trust–and by the way, it's now been a couple of months, and I have to say he's doing like 10x than I thought, like from that perspective, specifically, he gave me this feeling that from a cultural perspective, right?
He's going to be an amazing fit.
Michael Eisenberg:
So you hired for culture, not capability?
Yonatan Adiri:
No. So I'm saying I hired for capability until we got to four finalists. And all things being equal on capability, right–one of the four was, Jeff stood, was towering over the rest in the sense that, I'll say it in a way that, it's a cross-cultural, honestly, like Israel, U.S., he was the most Israeli in terms of his ability to communicate to me grit, forward-looking, I'm going to get this done and if it doesn't work this way, I'll do it that way. And if it doesn't work this way, I'll do it that way. And for me, that is a critical piece. I'm just non-romantic.
Michael Eisenberg:
Like he turned up here for the handoff in the middle of the war. I agree.
Yonatan Adiri:
Exactly. Exactly. So for me I'm very, I don't have any romanticism about entrepreneurship. It's hard. It's hard. It's, and especially when you're pushing against a medical convention with a regulator on top, it is very hard. And you meet people along the way that are not open minded, that have been hit by Theranos. They have legitimate rights.
Michael Eisenberg:
Would you tell people not to do a healthcare company if they came to you for advice?
Yonatan Adiri:
I think it's a broad–now where we're headed, it's a broad gamut of healthcare companies. For instance, bio bioinformatics, definitely.
Michael Eisenberg:
Definitely yes?
Yonatan Adiri:
Definitely. Yes. Yeah, I think it's a field that’s sort of starting to behave more like software. It's very hard to differentiate. You got to have, it's almost, you got to have a molecule quality to your AI, right? And by the way, there hasn't still been a big success in that space. I think now the CRISPR companies are coming and it's going to be different. But bioinformatics for sure. Go for it. But I think, yes, there is, you gotta go for it. Just know that it's going to be a journey that involves so many different stakeholders that you're going to have to convince, and many times they are, they have conflicting–
Michael Eisenberg:
And can we actually get like the innovation we need given the regulatory structure?
Yonatan Adiri:
No. No, we can't. No. Look, we're pasturing in many fields of the world. We're pasturing sick and hungry, holy cows. You know what I mean? Like in regulation, everybody knows it's, there's so many holy cows. Don't do this. Don't do that. We all know that system doesn't work. We're still pasturing them, right?
And I was hoping–
Michael Eisenberg:
We're putting them out to pasture.
Yonatan Adiri:
Sloooowly. Yeah, but listen, there needs to be a slaughterhouse, not a pasture for that kind of stuff. We need to reinvent these things. And I was hoping, and just to give you a sense, COVID was a great example of slaughtering those holy cows. To allow for mRNA in billions of people with I don't know, five, 6,000 people, clinical trial, is unheard of. Like that was not anywhere near the dogma that the FDA would consider come, circa early 2020.
And still a year later, it happened, right? Look, it's been, what is it now, 3 billion injections, 4 billion, 4 billion. Mortality rate hasn't changed. We're not seeing it. Imagine how many people are dying right now because of those holy cows that are sick, and we’re not willing to touch them and say, okay, in the era of CRISPR, we don't need that, right?
Michael Eisenberg:
You know, I think back to the conversation you said about Shimon Peres. I feel like Shimon Peres, if he was chairman of the FDA today, would have not missed the opportunity to make a foundational change in how we speed up innovation.
Yonatan Adiri:
I agree, but I have also a lot of respect for them in terms of, they're liable and they're accountable. It’s the structure around them that also–again going back to Shimon Peres in ‘85–there's one way of saying we need FDA reform. That's glib. That's not the story. Yeah, because if you hold the FDA accountable and you're telling them, reform–it's very hard for them because they're the ones on the hook, right?
But if you're telling them, “I'm gonna change the entire incentive structure, me as a country, the CFR the Federal Code of Regulation around health care. I'm gonna go to Congress. I'm gonna change that, so you're not on the hook solely.” And you're going to build a different kind of multi stakeholder process around that, which by the way is starting to happen.
Michael Eisenberg:
Slowly.
Yonatan Adiri:
Then you're going to get the FDA being willing to have more appetite. But it's unfair to say, I'm going to reform. That's my kind of thinking right now. We're trying to reform stuff, but we're expecting foundational changes. That doesn't come from reform. It comes from a foundational change.
You can't keep the FDA with all the liability and then ask them to be radically different in terms of how they review drugs. You've been with me since the early days of this journey through a lot of crises, a lot of good parts also, and have mentored me and have been a person that I looked up to in many tough decisions.
When I stepped down, you asked me about how I felt about it. Like, how did that feel to you? You've seen companies transition. You've seen that, that growth episode.
Michael Eisenberg:
The first thing–one of the ways I try to measure myself is if I have had a good experience with somebody, and they're not all good experiences along the way, do we stay friends afterwards?
And so more important than anything is, I think–you'll tell me later–that we've developed a friendship and a professional relationship that goes beyond the company. I hope to keep working together for many years.
Number two, as I said before, I don't think stepping down is a bad thing.
In fact, I think we've gotten too, quote unquote, “founder friendly,” that you follow the founder blindly till the end of time. And I think finding a way for founders to be self reflective like you've been, and to make the right decision for the shareholders in the company, is really important.
This is not Kumbaya. The rules of capitalism say that the company belongs to the shareholders.
Yonatan Adiri:
100%.
Michael Eisenberg:
And the founder and the CEO serves at the discretion of the Board of Directors. Now, you made it easy for us. We didn't fire you. We didn’t need to fire you. You decided to initiate the process, you know, in consultation with us and the rest of the board. And I think that's admirable, right?
I think it's, you deliver an important lesson, which is, if a founder feels like there should be somebody else telling the job and doing the job, and someone else could do a better job. There's nothing wrong with saying, let me go get someone else. There is, there's greatness in that moment of self recognition and doing it, and it's often better for the financial well being of the founder too to have somebody else to take this forward.
So how did I feel? I was challenged, because it's always challenging. Change is challenging. And you've worked alongside somebody who you have built trust with. Over that time, I hope we’ve built trust.
So it's challenging, and at the same time, I think it's inspirational. And candidly, I'll share with you, I think it was the right thing for the company, and for you personally. I'm glad we're here.
Yonatan, for the peanut gallery over here that stands in the background that the viewers can't see–they'd like you to offer me criticism on my role as a board of, as a board member and an investor.
Yonatan Adiri:
Look, I think what probably is different and Healthy than other portfolio companies–I'm venturing, I don't know if it's true–when you made the decision, and the partnership made the decision, to invest in an FDA grade-seeking company, I think you knew you're going on a journey in which in some areas you won't be able to go to the founder and say, “I've seen this before. This is what we should do.”
So, would I’ve wanted to have somebody on the board that had more conviction and had, built companies and sold them or IPO them in the healthcare space? For me, the fact that–
Michael Eisenberg:
So you've correctly pointed out that I knew absolutely nothing about this business that I invested into, or the regulatory journey.
Yonatan Adiri:
And that, and you can argue both ways about that. And for me, the knowledge that I can come to you and you'd be unencumbered, right? Because you haven't been there before, but your pattern recognition of seeing similar situations that kind of ring a bell–and, go back to what I told you about my parents, this was very much like how I was brought up, right?
I'll think about it with you, I'll highlight from–but it's your decision. That's how I would think about it, but I totally respect any decision here, so long as it's well thought out and presented and we bring it to the board. That process we went through, I think, hundreds of times through that process, when I would come and you'd say, “Well, I haven't seen this before.” You had that humility to say, “I haven't seen,” but you gave me, like, ways to think about it. And then you said, “You know what, and go think about it. And if it's a well thought out answer, let's move on.” And, were there some mistakes I've made that you could have probably prevented and I probably venture, you’s say, “I'm going to let him make that mistake.”
Michael Eisenberg:
And I probably couldn't have prevented it.
Yonatan Adiri:
And no, but like in, in a guarded way, right? Created a space where I can make certain types of mistakes that would teach us and get us to become better management. around DTC back in the days, and UTI and so on. I grew a lot through that and, it's a disadvantage to invest in a company that goes through the FDA when you haven't had that experience before.
But it's also a great advantage, because the curiosity and the kind of pattern recognition capacity gets you there. That's an honest, you know to the peanut gallery.
Michael Eisenberg:
I kind of, thank you for telling our LPs that they have a partner that they've invested in, that invests in things he has no idea about.
I appreciate that. So as we come to the end here, I want to ask a couple of questions. I heard you give a talk in Basel, Switzerland.
Yonatan Adiri:
Yeah.
Michael Eisenberg:
I think it was entitled Continuous Disruption. The Era of Continuous Disruption.
Yonatan Adiri:
Yeah.
Michael Eisenberg:
Can you summarize for us in a minute or two what that is?
Yonatan Adiri:
So yeah. In essence, when I came back from NASA, one of the things I realized is this exponential growth of tech with a declining price, like a deflationary tech, is not going anywhere.
This is the new norm. And when we were looking for what that does and what asymmetries it creates, we realized it's a nonstop thing. I came to the President, he was a naming guy. He needed a name for it. So I showed him, it's, I buy it, how do we call it? And I had to go all the way down to Trotsky. He's the one who called it like the ‘permanent revolution,’ the era of permanent revolution.
Peres, by the way, called it an ‘era of permanent genesis,’ which is better, right? This is what we're seeing in Gaza, this is what we're seeing in Russia, this is what we're seeing with Iran. It's never been easier to leverage technology to create a change, a radical change in the world, for better and worse.
So that's how I think about where we are right now. It's precarious. We are in a very dangerous point in history. If we have the moral authority, and if we have the morals right, we're gonna get CRISPR, get rid of cancer, we're gonna have bioinformatics introduce new drugs, radical life extension–we're seeing that with GLP now with Novo Nordisk–or we can end up, going back to the Middle Ages, the type of violence, dirty bombs.
It's a Promethean, almost a Promethean period, and what do we do with that? That's where the era of permanent revolution takes us.
Michael Eisenberg:
And when you think about this era of permanent revolution–and you've done a decade now in entrepreneurship and before that in public service–what does the next decade for Yonatan Adiri look like?
Yonatan Adiri:
Government for an era of permanent revolution, right? I think civilians, specifically in democracies, are underserved by those–it's the same pasture of holy cows that are sick, right? And nobody's willing to touch them, the way the late ‘70s saw a radical change in how government delivers on its promise.
That's where we're headed, and that's where I'm going to dedicate my time over the next few decades.
Michael Eisenberg:
Is that in politics? Is that in the bureaucracy? Is that in–
Yonatan Adiri:
It's, I think, look, these are the first few weeks that I'm opening my head to that, but I think first and foremost understanding the kind of, establishing the slaughterhouse for the, for those holy cows is critical.
Like understanding–
Michael Eisenberg:
You're going to focus, there's going to be a lot of dead cows. We should just be aware of that.
Yonatan Adiri:
Exactly. No, I think, and you've written about this extensively, right? You can't expect to get change that is radical without radical action. And radical action has a price.
When 15,000 people from the public service of Israel lost their jobs in 1985, that was radical. That was painful, right? You can't get there without that. And we need the kind of leadership that would be able to tell that to the public in all truth and all honesty. Now, when it comes to Israel, I'm super bullish and super optimistic.
We are a 550 billion dollar economy. In, in less than 35 years. We were at 410 percent inflation. Now we are at 65 percent debt to GDP ratio.
Michael Eisenberg:
One of the best in the West.
Yonatan Adiri:
We have 150 billion of net cash reserves, right? The best, one of the best tech scenes in the world. Capital around some of the best academia in, in also the most important fields in quantum computing and so on and so forth.
There has never been a point in Jewish history, I think in the last 2,500 years, where a Jewish leader would stand and have all this at his disposal, or her disposal, to pave the way for a century of growth and prosperity. So I think we are at the point that, again, like ‘85, if we take this crisis, and we allocate the political capital to the holy cows, as opposed to adjusting and reforming and thinking we're just going to plow through, we're going to be missing a historical magnitude of an opportunity.
Michael Eisenberg:
And if you go do this, and we, after 120 years, we say, how should we remember Yonatan Adiri at the end of his life. What should we say?
Yonatan Adiri:
Look, I think in all honesty, I would want to be at a point where I'm at least a footnote in the history of the process that got us to that point. I think we're gonna, by the end of the decade, we're gonna have to look radically different.
Michael Eisenberg:
The opportunity is enormous.
Yonatan Adiri:
It is. It is aligned with, we are very much aligned with where the world is going. An Indo-Saudi-Israeli axis, right? From a geopolitical–you take Herzl right now. We're all kind of gloom and doom right now, right?
Michael Eisenberg:
Not me. It’s a bit hard, but no.
Yonatan Adiri:
If you take Herzl, you tell him, and you put him in the Prime Minister's office, right?
And tell him, “Hey,” that you have peace with, you have the Abrahamic Accords, you're on the verge of normalization with Saudi Arabia. Peace with Egypt, half a trillion dollar economy, run the country–I can't believe that! For 125 years, that's what you guys were able to create! Right?
Whereas when you think about him in 1897, fighting against 2000 almost years of like non-sovereign Jew thinking, right? Like almost like an immune system to sovereignty that we've built over 2000 years. Almost a million people running away from Russia after pogroms, and not going to Israel saying, becoming sovereign? Nah, I'll just go to wherever, right, somewhere in the West.
And again, you've written about this extensively. Your book on Purim was transformational for me and how I understand Judaism. And how actually, when we're at the golden era, that's when we need to open our eyes, right? And that was, like, think of him. Nobody wanted to come to Basel.
Literally, the people who came to Basel were not the leadership of the Jewish people. And who came to Israel? Who believed in the idea of sovereign Jews? And you read about, when you read Ben Gurion, ‘20s, ‘30s, ‘40s, adversity, existential threats, like he was a, we were on the verge of extinction.
So if you tell them you have a half a trillion dollar economy, you're 10 million people, you're competitive globally, you have a very strong army, you're–
Michael Eisenberg:
Fast demographic growth.
Yonatan Adiri:
The opportunity is amazing, but we need to go back to the fundamental layer, right? There are some holy cows we cannot accept anymore.
And these are tough. There, there are tough decisions to make. They're gonna be painful. You said recently something that, that I'm trying to wrap my head around. And I'm paraphrasing, I don't remember it's, but Jews haven't had power politics for so long. 'Cause we weren't in, in power, right?
So this idea of having unity as the litmus test is wrong, right? We need to have unity of vision. We need to know where we're going, but it's okay to have an argument and it's okay to have some painful decisions that are going to be painful for certain types of people. I would say so long as we have a, the Israeli New Deal and everybody kind of chips in, then I think it's worthwhile.
Michael Eisenberg:
Thank you for joining me, Yonatan. Thank you.
You can learn more about Yonatan Adiri on X, formerly Twitter at Y O N A T A N A D I R I. He actually had a fascinating tweet earlier today about Germany. There's a story on Bloomberg today that German manufacturing is collapsing, talking about a country that needs to make a leap into the 21st century–Germany is one of them. And we wish them luck. And if you enjoyed this podcast, please rate us five stars on Spotify, Apple podcast, or wherever else you listen. Yonatan, thank you. Thank you.
Oren Etzioni:
There was a famous fake image of former President Trump, supposedly on the Epstein plane surrounded by underage girls. And it was meant to be quite a damning picture.
And the famous actor Mark Ruffalo forwarded it to a million followers on Twitter, because he was like, “Oh yeah, that's just the kind of thing Trump would do.” It turned out to be embarrassing for him when it came out that this image was fake. So I really hope, and I really believe that both sides of the aisle, whatever your political views are, you don't want to be duped.
You don't want this election to be decided based on fake. You want it to be decided in an orderly fashion.
Michael Eisenberg:
Welcome, everybody, back to another episode of Invested. I am thrilled to have Oren Etzioni on with me. In the run up to the show, I just reminded him that I once kind of obnoxiously came up to him at a conference in Scottsdale, Arizona, and introduced myself, to this legend in my eyes, Oren Etzioni.
And I'm just thrilled to have him here. Oren, rather than me listing your achievements, which I may do anyway as the episode goes on, can we ask you to tell us about yourself?
[00:00:29] Oren Etzioni:
It's a pleasure. You know, talking about myself is one of my favorite topics. I was born in the United States.
My mother moved back to Israel with myself and my older brother, when I was a year old. I grew up in Israel. Then my mother ended up in Australia with her husband. And I came back to the U.S. when I was about 13, 14. And since then I've been here as an academic. I became a professor of computer science at University of Washington, but also founded, or co-founded several startups, up to now where this year, I've co-founded a startup that's a non profit called TrueMedia.org that fights political deepfakes. So that's the TLDR.
[00:01:21] Michael Eisenberg:
And we're going to talk a bunch about TrueMedia, but I also want to point out that you were the founding CEO for the Allen Institute for Artificial intelligence, a highly relevant topic.
You've been a venture partner at Madrona Ventures for, I think, two decades. Madrona Ventures, of course, one of the first venture capital funds in the Seattle area, going back to, I believe, the late 90s, if my memory serves me correctly.
Oren Etzioni:
Yes, I've been around that long.
Michael Eisenberg:
And you've received just about every accolade out there.
The Robert Englemore Memorial Award, Distinguished Paper Award from the IJCAI, the AAAI, Fellow National Young Investigator Award in 1993, and two Test of Time Awards from the ACL and IUI, and I could go on. And so I just want to thank you for taking the time to do this. The thing we start with on the show always is, I ask guests, what is your core value?
Like the most important thing in your values hierarchy.
[00:02:25] Oren Etzioni:
I'll give you two different ones right there. There are more, I guess. First of all, I would say that family and personal things, health, always comes first. People who neglect that for other things, again, there can be good reasons, but that's never been my experience.
Professionally, I would say that life is too short to work on a project you're not incredibly excited about. And so, there are so many technical problems, so many fascinating business puzzles, and we have so little time. So I prefer to choose things that I think are really worthwhile, whether it's helping consumers shop better, which has been the topic of some of my startups, or fighting political deep fakes, which I'm doing now. It's always been the case that I get up in the morning and I'm just really excited to get going because it isn't like, “I have to do this, you know, boring stuff, but it's going to be very lucrative.”
It's much more like, I love what I'm doing and hey, it may be lucrative and maybe not, but this is just so amazing.
[00:03:39] Michael Eisenberg:
You know, I often tell the story to my kids–I had a rabbi in the ninth grade. He and I didn't get along that well, but he had one line that I've taken with me for my entire life.
He said, “There's no better expression in the English language than ‘killing time,’ because once it's passed, it's dead forever. And that had a huge impact on me. Huge impact. And so, I want to actually dig right into TrueMedia. So, we're recording this about 40 days before the U.S. election. The election that's had more money spent on it in the shortest period of time probably of any election before.
It's really the first election since we're in what I would call the full-blown AI era. Or maybe, we haven't even gotten to the full-blown AI era yet, but certainly we have enough really deep fakes. I've joked to a few people that sometimes reality is funnier than the deep fakes, given some of the politicians around the world these days, but nonetheless, deep fakes are a problem.
And so what I'd like to do is just have you kind of slowly unpack this for us. Tell us about what you perceive as the big drawbacks of these AI deepfakes. I want to fashion the problem, or describe the problem first.
[00:04:56] Oren Etzioni:
So I love how you started this, because it is actually a little bit more subtle than people think.
Very little, right? We're so polarized nowadays. Very little is going to take a diehard Democrat and make them a Trump supporter, make a diehard Bibi supporter, and turn them against him, et cetera, et cetera. So what happens though is the disinformation operations, whether they're state sponsored or whether they're what I sometimes call ‘disinformation cyberterrorism,’ they attempt to undercut trust–to gnaw at the edges, to foment divisions, to create fear, uncertainty, and doubt, and just to get people to a place where they can no longer feel like they know what's real and what's true and who's who.
And that is a lot easier to do by just showing people a bunch of stuff where after a while you're like, well, gosh, I'm not sure what's real and what's fake, and where you have people showing real things and other people saying, “Oh, you know, that's not real. That’s AI.” So it's, I think the biggest effect is undermining our confidence that we know what's real and who we can trust.
[00:06:22] Michael Eisenberg:
Why is it so easy? Or is it easy–to undermine people's confidence in what is real? Like you said, on the one hand, people are, “I'm a diehard Trump. I'm a diehard Harris. I'm a diehard Republican. I'm a diehard Democrat. I'm a diehard Bibi guy. I'm a diehard anti-Bibi guy.” So if that's the case, why is it so easy to undermine people's trust in what's real?
[00:06:40] Oren Etzioni:
Two key facts or factors. The first one is social media. So it used to be that we would get most of our information from a trusted news source, you know, Walter Cronkite on CBS with his reassuring voice. I'm probably dating myself here. A bunch of folks are like, “Who's this Walter Cronkite guy?” But we all had trusted, high-quality news sources.
Now, many people, particularly young people, are getting their news from social media, from TikTok, and there are surveys that demonstrate this. The thing about social media is very different kind of editorial decisions, if you like, right? Algorithms are driving them. They're click-driven. Often more extreme content is more clicked on, and you just don't have the same level of quality control.
So that's one piece of it. If your source is social media, you have truth and lies side by side. Maybe you see them in subsequent videos. The second thing is, we are visual animals. When we see something in an image or a video, it's visceral in a number of ways. We tend to react to it. So now the combination of generative AI, which allows people to create credible videos and images that are fake or that are highly manipulated, coupled with the social media stream, is really an Achilles heel for democracy and for our ability to decide what's fact-based and what's not.
[00:08:18] Michael Eisenberg:
I want to ask a hard question before we kind of continue down the deepfake area. So, I do remember Walter Cronkite from when I was a little kid, and when I grew up there was Dan Rather and Peter Jennings in the United States, and others. And I remember the first time I was written about in a newspaper, mainstream media, and it was false. And then I said to myself, “Wait a minute. If this is what they write about, and it's under the masthead that people trust, well how much of the other things I read here are trustworthy?”
And just recently, for example, a report's come out about the BBC that I would say deeply undermines, or should undermine anybody's faith in what the BBC puts out there.
So did we actually, was Walter Cronkite, or Dan Rather, or Bill Jennings, Peter Jennings, that was his name, Peter Jennings, actually tell us the truth? Or were there editorial decisions that are not too different from algorithms, but we just didn't know any better?
[00:09:23] Oren Etzioni:
Wonderful, wonderful question. And of course you're right, and we see this so much, particularly in reporting also in the United States about the Middle East and about Israel.
The framing, the slant of the story, it's not even–and on truth. But if you report, say, what's happening in Gaza without giving it any context, right, it's just an interview of a person who is suffering horrifically, right? In Gaza, their family and so on, then obviously that has a slant to it.
And that does originate from a particular editorial decision. There's no notion of, well, who's responsible for this? Is this Hamas using people as human shields? What led to this? It's just kind of this human interest story that sounds horrible. And this is repeated again and again on both sides, right?
The New York Times, NPR, BBC is maybe some of the worst offenders. And then on the other side, you know, the Wall Street Journal and others, and of course, Fox News do that as well.
So that is as old as time, right? Probably the snake in the garden of Eden did not practice full disclosure when he was sharing supposedly factual information with Eve.
That said, we're still in a different place. When I show you visually something that just didn't happen–for example, the smiles on the secret service agents who were surrounding Trump during the assassination attempt, or images of Iranian planes bombing Tel Aviv, right? Which never happened. Or a leaked audio in Slovakia, of a candidate in their quiet period 40 days before the elections. So I think the thing that's different is there's always been subtle pulls and pushes in various directions. There aren't these smoking guns or bombs, to use these metaphors, that show up, that you see without any interpretation and that are just factually non-existent. They're completely faked. So there is really a big difference.
[00:11:42] Michael Eisenberg:
So, okay, so you believe that the deepfakes created mostly anonymously, not under anybody's imprimatur or brand, are more pernicious than what you would call framing, or slanting, or verbiage, or even some images that put on a mask that are produced by mainstream media?
That's a fair assessment? Because, you believe–I'm just trying to regurgitate what I think you said–because you believe that the images, and the videos, and their ability to proliferate on social media–and I would add, maybe this you did not say–can be socially confirmed by people like me, and by my circle of friends–makes us more pernicious and undermining people's understanding of what is true and what is false, what is fake and what is real?
[00:12:31] Oren Etzioni:
Yes. Let me just give two quick examples though, to drive this point home. So one that's not even social media, but during the November primary, there was a fake audio of President Biden, sounded just like him and it was robo-called–that's how it was shared–with tens of thousands of voters in the New Hampshire primary, and it told them to stay home.
So this is election interference, again, not via social media, not visual, in this case audio, but a very specific and very credible attempt by an individual to influence the election. Second example, which was via social media, there was a picture of the Pentagon being bombed, not at 9/11 a long time ago, but in the last, I think it was 2021, in the last few years, that resulted in a glitch in the markets. This video that looked like the Pentagon was being bombed was shared widely, just like you said.
And traders, right, are always trying to get the edge on each other, traded the market down very sharply until they realized this was fake. So again, two specific illustrations where in real time, something going viral or spread in one way or another can cause a very specific and targeted harm.
[00:13:53] Michael Eisenberg:
I'm glad you mentioned that point about the market. I was going to head there. Maybe we'll get back there. I wonder, the deep fakes like the Biden robocalling fit into one category, which is what I would call permanent damage because, you know, a moment passed that you can't get back, which is an election day–versus things like the markets, which recover from these things, because actually our truth system on the outside, whether it's Community Notes on Twitter or hey, we can kind of figure this out, actually works reasonably well.
Michael Eisenberg:
Do you think about, in the framing of the problem, these kind of temporal moments that pass, versus things that we have a timeline to fix, or do you think it doesn't matter?
[00:14:31] Oren Etzioni:
You're absolutely right. If we delve into this, we can find a very interesting taxonomy, some things that have lasting damage, some things that are temporary attempts to manipulate the market, or manipulate the voters, and some things that are more kind of like erosion, right?
So again, another concrete example just to help us bring this conversation down to earth–there was a parody video of Vice President Harris that Elon Musk shared with 191 million followers on Twitter, but without saying it's a parody. It was a deep fake video. Now, most of the people who saw it, and it was viewed tens of millions of times, might have known that it was fake, but did it affect them subconsciously?
Did it kind of contribute to their confirmation bias? So that's yet another thing. It's not so much a concrete, tangible instance, but part of a flood of an attempt to brand or rebrand candidates or countries in what they do. And of course, I think Israel has been a victim of this, because beyond the slants that you see, say in BBC and beyond the genuine horrific images that arise., there's also fake ones that are viewed again millions and millions of times, and they just contribute to a particular narrative, which I think is highly flawed.
[00:16:08] Michael Eisenberg:
Before we dig into the TrueMedia solution, I actually want to ask you a personal question. When you view content online, is your default assumption that it's fake or real?
[00:16:18] Oren Etzioni:
When I view content, and I think this is a very important point for everybody to internalize, because again, we have a free tool at TrueMedia.org people can use, but a lot of people won't. And so what I do when I look at something is first, I monitor my reaction. And the more outraged I am, the more emotional reaction I have, the more I actually slow down and say, “Okay, how do I persuade myself that this is bona fide?”
So that's the first thing, is monitor–
[00:16:49] Michael Eisenberg:
You are a true student of Daniel Kahaneman. Well done. The late great Daniel Kahaneman.
[00:16:52] Oren Etzioni:
Yes, he was actually a friend of my parents at Hebrew U back in the day, but that's another story for another time. And then the second thing I ask myself is, do I know the source?
Not the purported source, like it'll say CNN on it or something, but do I actually know who shared this? And only then do I start to think about, do I believe it? And so on. So I am very careful with things that are very powerful.
[00:17:29] Michael Eisenberg:
Tell us about TrueMedia, what it does, what you're trying to accomplish, whether you think you can be successful, given that this cat is way out of the bag.
[00:17:39] Oren Etzioni:
I came to this problem in 2023. I was actually in a small meeting with President Biden and a number of members of his staff, Governor Newsom from California, some AI folks, and we all brought in some of our moonshot projects. and some of our concerns. And I'm actually a big AI optimist.
I think there's a lot of great things we can do with AI and, you know, we can talk about that. But in this context, I came away actually quite afraid, because Tristan Harris, who's a luminary warning us about the effects of social media, was outlining some of the potential risks and scenarios around deepfakes.
And I was thinking, I can just imagine a situation where, 48 hours before the election, or even on election day itself, you see a video of one candidate or another being rushed to the hospital. You see the talking heads get on TV and saying, “It doesn't look good.” You see reports of an active shooter at a polling station.
You see some things that can have lasting damage, because before they're debunked, they change people's voting behavior. And of course once the election is over, the election is over. And so I said, “Well, let me dig into the tools that are available to the general public, and to election officers, and to the mainstream press media organizations, to rapidly debunk this. And I quickly learned that these tools are not out there.
There are three-letter agencies as we call them, or major corporations like Microsoft that have their own tools, but they're not widely available. And so I launched into the problem of. building a deepfake detector that is available to the public. Fast forward to now, as we're getting close to the election, just a very short while ago, last week, we announced public availability of our tool on TrueMedia.org.
Anybody can go upload a social media URL. If you have an account, you can upload a video or an image. And you can assess whether it's fake or not. The social media URL, by the way, I should explain, what we do is if you upload something from Instagram, Facebook, TikTok, etc., we will find the video or image at that URL, and we will analyze it, And provide you in real time, within a minute or so, our assessment of whether it's real or fake.
So, I got into it to help solve a problem, particularly in 2024, and particularly in the run up to this, one of the most consequential elections in history.
[00:20:26] Michael Eisenberg:
Do you think consumers are using it, or is it journalists using it to figure out what to do? Or political operatives?
[00:20:32] Oren Etzioni:
It's been very interesting. Most of our users fall into two categories.
They're media organizations, fact checkers. For example, during the Indian election, we were able to debunk some fakes in India. And we have what I would describe as a somewhat haphazard assortment of concerned citizens. Some people are like, “Ah, I'm [00:21:00] not going to worry about it. Yeah, I've got better things to do.”
And other people, and I couldn't tell you who's who, are extremely worried about it and get very involved in uploading media and checking it, highlighting things that they think are potentially fake. So we have both of these. We have had people from political parties and operations using the site, but fewer. They’re more kind of, boots on the ground, get the voters out. They're aware of the issue, but I think it's not their most pressing issue, frankly.
[00:21:36] Michael Eisenberg:
How many links or objects are you getting in a day?
[00:21:38] Oren Etzioni:
It really varies, but I would say it's in the thousands over a week, averaging, so growing very quickly.
Some of it also comes from places like Telegram or WhatsApp that's not open to the public. Some of it is very fanciful. It's not all political, you know. There's dating scams. There's all kinds of stuff that we see. And the data that comes in helps us to tune our algorithms and get better and better at this detection problem. I want to make one more point though, that's really important. Cause you're talking about the efficacy of this and the impact. When I started, I was very concerned about the number of items being uploaded. My concern has shifted to the number of eyeballs that see it, right?
So one video, right, shared by Elon Musk or one fake image of Taylor Swift shared by President Trump, former President Trump, can have a huge impact, more so than 10,000 videos that are only seen by a small number of people. So I realized that when you look at the number of eyeballs that they say, the number of people who view this on a weekly basis, it's in the millions every single week.
[00:23:11] Michael Eisenberg:
Well, that's impactful. Do you have a favorite object that TrueMedia has caught, or a most egregious story? Take your pick.
[00:23:21] Oren Etzioni:
If you go to our website, you see what we call notable deep fakes, and you see all the way from a video claiming that Ronaldo is Pro-Palestinian, which is a fake video, to the example of the Secret Service folks surrounding Trump after he was shot and smiling, which was an image manipulated, right, they were grimacing, but it was changed to them smiling.
And I would also say that we contributed to a takedown operation where another organization called NewsGuard used our tools to identify sites, bots that were sharing a substantial amount of disinformation in Europe. So these are some of the things that come to mind, and there are a variety, from an actual seemingly state-sponsored disinformation operation to just something that's meant to promote conspiracy theories and create a distrust.
[00:24:31] Michael Eisenberg:
Oren Zamir, your colleague at TrueMedia said, I should ask you: Why did you make TrueMedia a nonprofit? And by the way, this ties back to something we talked about before we got on air, which is the importance of business models to kind of sustain a lot of this innovation. So I’d love to hear why you made it a nonprofit.
[00:24:50] Oren Etzioni:
First and foremost, it was extremely important to me to serve a public mission. Having done some startups, again, I feel fortunate that I'm comfortable. “Eizehu ashir hasameach b’helko.” The person who has enough, has enough. So I'm not–
[00:25:14] Michael Eisenberg:
The person who has enough is rich.
[00:25:17] Oren Etzioni:
Thank you. Thank you for the better translation. So I'm rich, not because I have so much money, but because I have enough. Exactly right. So being that, I was focused on the public mission, and it was clear to me that the lowest friction is when you do something that's high integrity and that's free.
People don't have to fulfill purchase orders and so on. As we've worked with major media organizations and social networks, we've learned that they do want enterprise-grade packages. So I think that there is the potential. And of course there are companies like GetClarity in Israel, RealityDefender and Hive in the U.S. There are different organizations that are venture-backed and building very interesting businesses. And so I definitely don't discount the commercial potential. However, our mission is different, and was different. And it was to urgently–because a year sounds like a long time, but in the world of technology, it's very fast–to get this tool in people's hands before the upcoming election.
So that was our focus. And I was fortunate to have Garrett Camp, who was the Co-Founder of Uber, to back us out of his philanthropic organization, camp.org. So I had the benefit of not having to score business deals and achieve revenue numbers, and just focus on getting the tool out.
[00:26:57] Michael Eisenberg:
Given how polarized things are–and I have no idea what Garrett Camp's politics are. I don't know him– do you wonder or worry that somebody perceives TrueMedia as partisan because of whatever the donors’ political views are? Is it on some level of business cleaner than that?
[00:27:15] Oren Etzioni:
I do worry that people will perceive TrueMedia as partisan.
And that's one reason at the top of our website, it says in big bold letters, “Nonprofit, nonpartisan, free.” Nevertheless, we know that, like so many things in the United States and elsewhere, disinformation research has been vilified by groups in Congress, has been politicized.
And I think that's unfortunate. So we see, and let me give a quick example–we see examples of disinformation that's meant to impugn the people on the right. There was a famous fake image of former President Trump, supposedly on the Epstein plane surrounded by underage girls. And it was meant to be quite a damning picture.
And the famous actor Mark Ruffalo forwarded it to a million followers on Twitter, because he was like, “Oh yeah, that's just the kind of thing Trump would do.” It turned out to be embarrassing for him when it came out that this image was fake. So I really hope, and I really believe that both sides of the aisle, whatever your political views are, you don't want to be duped.
You don't want this election to be decided based on fake. You want it to be decided in an orderly fashion. The people who really benefit from undermining trust in the election process in this way are the people who are anti trust. Democracy. And so I worry about it, but I can assure you that we are firmly nonpartisan and the tool doesn't discriminate.
You upload something that's fake or that's been manipulated. It doesn't check the politics. It checks the statistical signature of what's there and gives you an automated assessment that is nonpolitical. It's technical. It says, ‘Was this manipulated? Was this synthesized by AI?’ And for that reason, actually, we shy away from things like the truth or even from statements like facts.
Like, is this a fact about the budget deficit? Or even articles, right, because text is so malleable. We really formulate a technical assessment. Was AI used to create this image, video, or audio?
[00:29:42] Michael Eisenberg:
Before switching gears to really a deep dive on AI, I have to ask you an, I don't know, maybe it's an impolitic question.
But you grew up part of your life in Israel, and you reference either pro-Bibi or anti Bibi; you spent most of your life in the United States, and you keep talking about both sides of the aisle, and how people are so rooted in what they believe. Is there any way forward to get people to actually focus on issues, to be more malleable in their thinking, to have actual policy and conversations about the future at this time of such rapid change?
Or do you think we're just on a path to devolution, which is democratic countries, and it's happening in many of them right now, will just over time devolve into more atomic units? Whether it's the United States coming apart into some number of states or regions; Israel coming apart in some way, and other democratic countries.
Is that just the course of history we’re on? Because obviously, by the way, if you look at the last 20 years, there are more countries in the world now than there were 20 years ago. There's been devolution, right? It happened in Bosnia, it happened in Czech Republic. We're in kind of a phase like that, it feels like.
[00:30:56] Oren Etzioni:
I'm not a political scientist, but since you asked, I'll share with you my relatively uninformed view. I would say that certainly we're on a trajectory where a number of things, and certainly polarization and conflict seem to be getting worse. Are getting worse. I think by most measures, I do want to highlight that these are nonlinear processes, right?
So sometimes things have to get worse before they get better. I would be very hesitant to extrapolate linearly. That's a mistake often. And so it remains to be seen how we respond. There are attempts to rein in the influence of social media. companies, social networks, to hold them more accountable.
I think it remains to be seen what will happen in the medium term. That's what I would say, but yeah, in the short term, I'm extremely worried about what we see everywhere. I just saw a video from somebody on Twitter. He said, “I'm going to keep posting the video of the mayhem on January 6th, right, in our nation's capital, at the Senate–a mob storming the Capitol building–to remind us that this can't happen again.” And whatever my political views are, and whoever wins, we cannot afford to devolve into civil war. And of course, neither can Israel. So, without taking a side or other, I think it's safe to say that we should all be opposed to civil war, and we have to uphold democracy.
[00:32:55] Michael Eisenberg:
So switching gears now to a deeper dive on AI. So you have been studying AI for decades. I think I remember at your speech that I heard you gave, you talked about agents way back then, and now they're back to being called chatbots or agents, you know, they have different names. The first time, by the way, I read about agents, was in the second half of the 90s, in a paper written by a Researcher at Hebrew University named Jeff Rosenschein, who you may or may not know–the first time I read about it, he had a company called Agent Soft, in like 1997. What I’d really love to hear is, you know, you have this incredible perspective, decades-long perspective–what about your perspective on AI has changed?
How do you frame AI today? Like, AI's been around for a while. The moment we've had recently is the LLM moment, not the AI moment. And I think that's kind of muddled out there in pop culture. So I wonder how it's changed, how we got here, and where you think at a deep level where we're headed? I know it's a big question.
[00:34:01] Oren Etzioni:
Sure. How much time do you have? But let me touch on it, and then we can dig deeper where you like. First Rosenschein is an old friend and colleague. I would say that my most wonderful tour of Jerusalem was actually given to me by Jeff. There's nobody like somebody who, he just took me to all these nooks and crannies and beautiful spots and neighborhoods.
Just amazing. He's terrific. And we were working on different technical approaches to agents, back in the nineties. The reason that I stopped working on that problem is because I realized that even if we build these powerful agents, our motto back in the day was, “You tell the agent what, and it figures out how.” You give it a high-level goal, and it figures out how to accomplish the goal, which of course would be tremendously powerful. We don't have to delve into all the little details. The software can do it on our behalf, right? And that's the idea of an agent, whether it's a travel agent or another kind of agent, it does things on your behalf.
I realized that to do that well, we need to have a language to speak to the agents. And we delved into research on how we would communicate with our agent to avoid the kind of behavior that’s actually destructive, where you tell the agent, “Hey, reduce the disk utilization on my computer by 20%, the disk is getting full.” And it says, “Yes, sir.” And it comes back and says, “Okay, I've deleted your important proposals and datasets. And by the way, there was a bunch of backups of these, but those took a lot of space. So I deleted those too. Didn't I do a great job?” It's like, “No, no, I didn't mean you….”
Right? But it's too late. So we really need to think about that. Fast forward to today, where as you aptly said, we're having an LLM moment. One huge thing that's changed, and it's really quite miraculous actually, particularly to those of us who've been in the field for decades, you can now actually talk to your programs.
And again, one has to be very careful using anthropomorphic words, but in a very real sense, it does understand you. It comes up with responses that are very helpful and informative. It has plenty of problems. And now actually one of the hottest trends around LLMs is to turn them from chatbots, from things you converse with, to systems that can actually take actions on your behalf, and can formulate multi-step plans, which you need to do even for something as simple as, “Hey, you know, plan for me, or book for me a short family vacation,” or what have you.
And so agents are back. And one of the biggest changes is now we can communicate with them, in a language that to a certain extent, both sides, the agent and you can understand, and thankfully that language is natural language, English or Hebrew, what have you, because that's the language that we're most conversant in.
[00:37:14] Michael Eisenberg:
And so going back to what changed about your perspective, so you look now at the LLM revolution, it's accelerating at a very rapid pace. You had concerns about agents doing things that might be deleterious or destructive because they didn't get it. And now we've got kind of, what I would say, I would say the opposite problem, the opposite challenge, which is, these things are getting really good and really fast.
By the way, I'm publishing a new book in a week, it's coming out, it's gone to the printer. A buddy of mine called me last night and said, “Hey, I got this online publishing thing. Do you want to translate into English and Spanish?” Because I wrote it in Hebrew. And I said, “Yes.” This morning I got a 270 page file that I started reading through and like, my jaw dropped. It was 95 percent of the way there, includes biblical verses, footnotes, the whole nine yards. It was really 95 percent. You know, I've paid tens of thousands of dollars for translation. So I'm really interested like in, okay, Oren Etzion says, “I used to be sanguine about this. I'm worried about this. I used to be worried about this. I'm not anymore. I used to think this was the limit. It's not, you know, the ceiling is a lot higher than I thought.” I know it's a big question.
[00:38:35] Oren Etzioni:
Well, let me first say that, one really needs to answer it in a more granular fashion. So I always believed since I got into the field, in, gosh in the 80s, right? I like to say I got into big data, which is another name for all this body of technologies when it was just little data, it's definitely grown a lot. The concern was always this existential concern, right?
Will it take over humanity? And the question was always can you actually build? human level intelligence AGIs, is sometimes called artificial general intelligence all these things I always believed that, yes, we would be able to build it. The question would be, how long would it take? , what shape would it take? Et cetera.
And so I would say that a lot of what's changed is the underlying technology and the timelines. But the fundamental questions have not changed. And my fundamental beliefs have not changed. So the belief is, yes, we can build highly intelligent software and so on. And on the question of whether it's a threat to humanity, I believe that AI is a tool, not a being, and I like to highlight that intelligence is not the same as autonomy, right?
You can have a very powerful technology. In fact, we do with with ChatGPT and so on, but it just sits there until you give it the next query and so on and and we can have even self driving cars, which are now looking a lot closer with some of the experiments and and the success that Waymo has had in San Francisco and other other cities, right?
They're just available to the public. Well, you have a self-driving car, but you decide where you want to go. It's not like you get into the car and you said “Hey, I'd like to go to an ice cream place,” and it says, “No,” or “You really should go to the gym, I'm taking you to the gym.”
That's not how it works, right.
[00:40:38] Michael Eisenberg:
In Israel, that’s what the taxi drivers tell you.
[00:40:39] Oren Etzioni:
Well, right. The taxi drivers, the humans have autonomy. So I just think it's extremely important. And again, this issue gets more complex, but my one line summary, if people take away from our conversation about AI is, AI is a tool, and the choice is ours as a society, as individuals, we get to decide how it's used.
And there's a very important conversation to be had. How does it affect privacy? How does it affect jobs? How does it affect democracy? But it's not some being that is asserting dominance over us. That's going to tell us what to do. And so we have to fight it. We need to have a broad societal conversation to decide how we as a society use AI.
[00:41:29] Michael Eisenberg:
What is the most interesting, and I would call, “out there” opportunity, that you can think of right now, where you say AI is going to catapult us in ways that nobody even can think about or imagine right now?
[00:41:43] Oren Etzioni:
I really like to think about AI as a way to solve humanity's thorniest problems. It's a very general technology. It's an enabling technology. So you pick the problem. The next pandemic, doctor overwork and physician error in hospitals. Accidents on our highways, right? In the United States, there's 40,000 highway deaths each year and more than a million injuries. Each problem like this where many lives are lost, AI could really help. And there are concrete projects on the way to do that, right?
The much more rapid design of vaccines–Moderna is famous for having used AI. There's going to be a next pandemic, whether it's a natural or something that escapes from a lab–who's going to help us solve that? Climate change? We need carbon sequestration, right? We need to get carbon out of the atmosphere. So we have a huge set of very difficult problems. And in each of these cases, we can build AI systems that would help us solve these problems better and faster.
[00:42:56] Michael Eisenberg:
And when you think about the near or long term risks, bBe specific, not general. What worries you?
[00:43:06] Oren Etzioni:
I'm obviously worried about the impact on democracy, very much in the short term, but also longer term as institutions erode. There's impact on the legal system, right? There's rules of evidence. And we need to figure out if this video or a photograph being submitted into evidence has been manipulated, and so on.
So there's, I would say, AI-based forgery. I wrote an article for the Harvard Business Review in 2019, which is eons ago, right, in AI time, entitled “AI-Based Forgery.” I think AI based forgery is a problem that we need to think about very, very carefully. I think the impact on jobs is perhaps overstated.
They do improve efficiency, but you know, the famous [00:44:00] line, “You're not going to be replaced by AI. You're going to be replaced by another person who knows how to use AI if you don't.” So I think that there will be impact on jobs, but I think it can be managed effectively to increase productivity.
Those are some of the key things. And my focus, what I would love to work on next is actually AI as assistive intelligence. We're all getting older, right? There's this kind of gray boom. And people as they get older tend to develop disabilities. I'm particularly thinking about difficulty in seeing, right? But there's difficulty in hearing, difficulty in moving. Each of those things, AI, particularly based on LLMs, can help. For the first time, we can have software that can help to see on your behalf. in a general environment, right?That would be a tremendous help to those of us who over time start to develop difficulties in seeing.
And so we can talk about that. Overall, I see huge potential benefits of AI that are very concrete in assisting, in saving lives on the highways, in the hospital.
[00:45:22] Michael Eisenberg:
We actually have an investment in a company called OneStep that is using AI to help people rehab, particularly older people from both knee replacement and hip replacement, and other injuries in the legs.
And it's stunning what you can do on one mobile phone with no other devices, just using the computation on the phone, and in the cloud of AI, to help people walk better again. It's actually stunning.
[00:45:44] Oren Etzioni:
More power to you. The mission, you mentioned the Allen Institute of AI, which I created and ran for the late Paul Allen from inception to, you know, 250 people and all that.
Our mission was AI for the common good. And that wasn't just you know, lip service. We were pursuing AI to help humanity. So kudos on that investment.
[00:46:10] Michael Eisenberg:
So, the Allen Institute has a branch in Israel. What are you working on there?
[00:46:17] Oren Etzioni:
So as a nonprofit, we're an open book, and we publish, so people who are interested can go and look.
Our focus there is on natural language, and specifically natural language in service of science and medicine. Again, let me give you a very concrete example of a project. A lot of people end up having to need chemotherapy. We all know somebody in our family or friend group, etc. More than one person, right, who's had to have chemotherapy.
Chemotherapy is remarkably primitive, because it's a cocktail of a relatively small number of medications and medications whose effect has been studied. The doctors are very hesitant to have more complex mixtures, because it's costly and slow to understand their effects. Well, A.I. scouring the medical literature and analyzing it, using natural language to figure out what's going on.
Potential effects and side effects and to spur the development of more sophisticated chemotherapy is the kind of thing that can be done using the tools developed at AI to Israel. It's led by, you have Goldberg on the academic side, Ron Yachini, who actually, you might know from venture capital world on the business side, and they are doing just phenomenal things in natural language to help science.
[00:47:49] Michael Eisenberg:
You know, I find, I actually got this tip from a friend of mine, Daniel Schreiber, the CEO of Lemonade, I don't know how long ago, which is before you go to any doctor or check with any medical professional or anyone else, you should query a bunch of AIs, and I found it incredibly helpful.
It's remarkable what you can kind of scope out. You have to be careful not to be a hypochondriac by nature, although I'll argue, by the way, that the hypochondria that someone could develop from Google searches is far worse than the hypochondria you develop from an AI by exchange. But to your point, I think it’s been absolutely remarkable.
I want to switch gears for another second on AI. I had a meeting actually today where a senior researcher in this field said to me, “You know, I think the world of junior programmers is coming to an end. And instead, you're going to have people whose jobs are to manage coding bots, and that's actually going to be a job. And not an easy one, and a well paying one, a remunerative one.”
You were the first student, I understand, to major in computer science at Harvard University. Is that correct, by the way?
[00:48:56] Oren Etzioni:
Yes, again, this was a paper-based system and Harry Lewis was the first person who signed my paper form, and he looked up and said, “Hey, you're the first,” because Harvard had a major in Applied Math and so on.
So, yes, I was the first person to what's called, concentrate to major in computer science.
[00:49:20] Michael Eisenberg:
Okay. What is question one is what is the comp sci degree of 2025? That's the first question. And then the second question or second part of that is, what all these people who study coding and are kind of juniors trying to break in gonna do?
How do they ever become seniors if, you know, the bots are coming for them?
[00:49:40] Oren Etzioni:
I don't think that the bots are coming for them. One of my favorite sayings that applies very much to AI is, ‘Never mistake a clear view for a short distance.’ And so what that means in this context is, yes, we can see on the horizon tremendous capabilities, including programmers, AI programmers–but even a junior programmer right now is a lot more sophisticated than any coding bot.
And I'll explain why in a second. And so again, what they need to do is, first of all, they need to understand the basic capabilities. Just because we have calculators doesn't mean that we don't learn to multiply and even do long division. I can't tell you the last time I did long division, because I do use a calculator, but it's very reassuring to still be able to do these things myself.
But the most important point is that these tools will accelerate their productivity, will solve some of the thorniest problems, but it is still the case that mapping from a high level need, right, “Okay, I need you to build a package that does this, that, and the other thing,” to specific code that's tested, that's robust, that doesn't contain hidden bugs, and most importantly, does actually what the person wanted–is still very much a human skill. Because what people ask for is often ambiguous and incomplete. I say, “Build me a website,” even something as simple as that, “build a website for my company.” Okay. Well, should it have videos in it? What content should be authenticated?
What should be available to the public? Is it aimed at professionals or consumers? My statement is often very vague. There's a process we have to elicit what I really mean, what are the requirements to build it? And then, what should it look like on mobile? Are you aiming at an international audience?
So it should be a very light site that loads very quickly. Or are you aiming at people sitting in their office in San Francisco, where it can be a very heavy site with very cool virtual reality, and videos and so on. There's just, it's an illusion, and I'm giving these intuitive examples, but with any programming tasks, there are many questions and clarifications you need to do and many decisions that a human needs to make.
It's not just spitting out, spewing out the number of a number of bits that the compiler is able to compile. So, a useful tool. Not a replacement even for the most junior of programmers.
[00:52:36] Michael Eisenberg:
And what's the compsci degree for 2025?
[00:52:38] Oren Etzioni:
I'm not sure I understand your question. Are you saying, if I'm getting my degree–
[00:52:48] Michael Eisenberg:
You were ahead of your time, we can argue. I don’t want to argue. You were definitely ahead of your time, with your comp-sci degree, many decades ago. You were ahead of your time in AI. If somebody wanted to be ahead of their time at the forefront of what's going to be the future,
What's the compensating degree? Or by the way, is it a degree at all?
[00:53:11] Oren Etzioni:
Got it. Got it. So first of all, I would definitely say that studying computer science, AI and data science in 2025 is extremely forward-looking, right? We're still on an exponential, maybe not Moore's law, but other exponentials.
And so it's just an arena that's exploding. Another one that I would consider is biology, because biology is generating tremendous data. There's tremendous opportunities there, both to save lives, but to create new molecules, new drugs, and so on, and so on. So I would be studying those things. I think brain computer interfaces is something that we really haven't had in the past, but over the next 25 years and, Elon Musk, but others are delving into. It's extremely, extremely valuable on this question of, do you have to have a degree or can you kind of you Peter Thiel and some others have advocated, just drop out of school, I'll give you a hundred thousand dollars, do a startup?
I think for most people, having the degree is still extremely valuable. Remember that early in your career, always, but especially early in your career, you want to maximize learning, right? So the question becomes, how could I learn the most and the fastest, and not just learn details that are going to be obsolete? And maybe even in two years, but learn fundamental concepts, and fundamental constructs of critical thinking, of being able to express myself, and so on.
And I I do think–and again, maybe I'm biased because I've been a professor for so many years–but I think that a high quality, B.A., B.S., a high-quality degree program, it's still extremely valuable.
And the worry about jumping into a startup is that you become knowledgeable on a very, very narrow swath of skills and ideas. And then when that startup is over, where do you find yourself? What's the long term play? If you're not, if you're Peter Thiel yeah, it doesn't matter. But most of us aren't.
There's what's called the long tail. So for 99.9 percent of the population, which includes you and me, and everybody who's not Mark Zuckerberg or Bill Gates, who dropped out of college to become billionaires–and by the way, they’re autodidacts. They learned a tremendous amount without the degree program. But the degree program is a huge, huge help.
[00:56:04] Michael Eisenberg:
You mentioned students, and teaching, and being a professor. So I pinged Eric Horvitz, who's been your colleague since the 80s, a fellow AI researcher, Chief Scientific Officer at Microsoft. I said to him, “What do I have to ask you?” He said, “First of all, I should tell you that Oren is a fabulous human being and a mensch. But I should ask you to start with, how do you care and mentor your students?” And I thought that was just a great question. Because I think it talks about how we don't just transmit knowledge, but we transmit values and critical thinking skills to a next generation of people. So I'd love to hear, what is your secret? He was raving about it.
[00:56:42] Oren Etzioni:
Well, first of all, thank you for the kind words, and thank him. He's a mensch, and for years in my talk, I would be quoting him about how doing AI is actually a moral obligation, because we can save lives using AI, as I was saying earlier, right? The opposite of the kind of view that AI is a very negative force for our world.
[00:57:11] Michael Eisenberg:
I want to interrupt you there. I love that comment. I want to restate it and pin you on it. We have a moral obligation to engage in AI. It can save lives, make people's lives better, improve people's health, etc. I think that's an incredible framing. I want to understand though, at a deeper level, because it implies then also that people who are trying to stunt AI, or slow it down or regulate it are taking an immoral stance.
[00:57:47] Oren Etzioni:
I think that the moral obligation is to engage with it, not to try and shut it down. So I do think that I wouldn't go so far as to call them immoral, but I think the people who want to shut it down are making a mistake. They can be well intentioned, but they're making a mistake. I think the people who want to promote responsible development of it, right? The balance–because look, it's a power tool. Another metaphor for AI. It's a power tool. And so with power tools, you need to do it in the right way.
So those who want to promote responsible use of AI are very reasonable. And then we can get into the detail of how do you do that without losing the good.
I think the people who are, I do think are immoral are, or at least–immoral is maybe not the right word, but damaging–are the scare mongers, the fear mongers, the AI alarmists who just are screaming, “The sky is falling. AI is going to take over humanity.” And they have a far-fetched, speculative argument, you know, that AI will take over humanity and keep us as pets.
And they use that to slow down very concrete developments, like in AI, and medicine and elsewhere. So yes, I do have some concerns about the most extreme groups, fighting against AI as an existential risk.
[00:59:22] Michael Eisenberg:
I've written about and talked about it–I view utilizing AI also and improving it as a religious obligation as well, that comes from, if people are created in God's image, we have a responsibility to use whatever powers we have to make their lives better and to take responsibility for other people. And because there will be, perhaps, a gap between people onboarding to the AI world and those not onboarding, it behooves those of us who have access and interaction with AI, to engage in it. Interestingly, there's kind of the doomers on the one hand, and then I would call it, there's a lot of Luddites–that's a bad term–I think it's uninitiated more than anything else, on the other hand. What do you think is the responsibility to kind of get the 99 percent of humanity that may have heard of ChatGPT, but it's not really engaged with it on, and what can be done about that?
[01:00:18] Oren Etzioni:
Wow. First of all, I do want to say that I'm not religious in the observant sense, but a lot of my values are very much anchored in Judaism. So for me, as I was mentioning, the most exciting opportunity in AI is to save human life and the sanctity of human life. “Mi shematzil nefesh achat k’ilu hitzil olam um’lo’o.” “You save a single life, it's as if you save the whole world.” Very core Jewish value.
So a lot of my thinking does come from the notion that we really have these opportunities to save lives in these different ways. I actually think that the biggest service, in the perspective of history, of ChatGPT has been to raise awareness of AI. So many of us have been watching deep learning and associated technologies gain capability over time. And some people almost discounted ChatGPT as, “Yeah, this is just a scaling up of what we already know. This is not a new thing.”
The sense in which it was a new thing is the wake up call to hundreds of millions of people, literally, about the power of AI. So AlphaGo, right, was that for many people, because they thought, you know, AI could never play go, and ChatGPT was for many other people who could suddenly interact with it and see how powerful it is.
So I think now we're actually on to the next phase. It's less about making people aware that AI exists, and instead making them understand what it is, what it isn't, and what are the questions that as a society, we ought to be debating around AI policies around things like universal basic income, and around things like what are the appropriate regulations and strictures for AI.
And those are very complex policy topics, and policy is so thorny. It makes me glad that I'm a technical person slash business person. I don't really have to get into the nitty gritty of how do we formulate successful policies. I know how not to do it. I would not do it the way that the EU has done it. I think that's been very faulty, although I like to say that the road to regulatory hell is paved with the good intentions of the European Union. So they have good intentions. They've made huge mistakes, and I hope we can do better elsewhere.
[01:03:06] Michael Eisenberg:
But how would you onboard, you know, 300 million Americans, nine and a half million Israelis, and I don't know, a few hundred million Europeans who are not engaged yet in a real way with this AI world?
What would you do educationally, culturally, to kind of give people from this bounty to help better their lives and save lives?
[01:03:27] Oren Etzioni:
I would do two things. In the extracurricular realm, there are wonderful organizations like Code.org that have taught people outside of school how to write code, and then, now how to engage with AI systems and they just help to raise AI literacy. So I would say we should have a campaign that people understand–whether they're technical or not–they need to improve their AI literacy, and that it's easy to do, right. If you have not spent at least 10 hours cumulatively playing with ChatGPT or the equivalent, you're doing something wrong, whether you're a medical assistant, or a home worker, or a kid.
And of course, most kids have. So I would say that's that piece. The second piece is in school, because formal schooling is still where a lot of us get more of our knowledge, we have to up level the skills of the teachers, right? They need to become conversant in AI, and we do need a crash program to make sure that the schools, the teachers in elementary school, in high school, everywhere understand how to teach AI so that they can do it instead of shying away from it.
[01:04:54] Michael Eisenberg:
We're getting close to the end of our conversation, and our time is getting up. I'd like to talk to you for 2 hours, but I need to do 3 short questions before that. I want to give you the opportunity to answer the question I cut you off in the middle of, which is, how do you mentor and coach your students? Eric Horvitz’s question.
[01:05:12] Oren Etzioni:
Again, he's so wonderful to pose it like that. I go back to, again, the Chazal saying, “Eizehu chacham halomed mikol adam.” “The wise one learns from everyone.” And so first and foremost, I look at people I work with as people. I don't see them as pawns on the chessboard or means to advance my career.
I'm thankful that I've had a good career, but it's always been based on taking a collaborative approach, always based on, what can I learn from you? And again, another Jewish saying is, you know, “I've learned a lot from my teachers, and even more from my colleagues, but most of all from my students.”
So when I'm working with a person, I think of them as a person. And I think, what can I learn from you? What can I teach you? And how can we have a wonderful relationship? And with that mindset, I think we're poised to work together to have a great relationship.
Michael Eisenberg:
Amazing.
Oren Etzioni:
it doesn't always work, but again when it doesn't, you know, we can part as friends. But when it does, it's really wonderful.
And so I'm very proud of my students. You mentioned Oren Zamir. He was my PhD colleagues like Eric, who I've worked with on papers and other projects over the years. And just, AI to Israel, where, which I started and am so admiring of, and it does so much. And this is, some of your listeners will be like, of course, you're saying it's about people.
But to us technical people, this is a revelation. Think about the people! Think about the relationships, something all too easily missed by computer scientists.
[01:07:04] Michael Eisenberg:
Speaking of relationships, Eric mentioned, and I hope I'm not crossing a line here, that you had a very close relationship with your father.
And he sounds like he was a very special man. If you feel comfortable, I'd love to hear more about your father, your family, and how it's influenced you, your motivations and passions. You mentioned at the beginning, that's your core value. So I'd love to hear more about that. And then I'll get to my rapid fires.
[01:07:25] Oren Etzioni:
Sure. Well, I'm very fortunate to have had a close relationship with both my parents. My mom who still is in Tel Aviv, and my dad who passed away in the last year. And so, it's natural for Eric to mention him. I think they both shaped my thinking on various topics, and so on. Let me just pick one of the many topics where, even though my dad was a sociologist and a political scientist, I do have that connection. My dad always highlighted that professors have a special obligation to to be what he called ‘public intellectuals,’ not just to be in the ivory tower and writing our obscure papers and getting together in our societies and so on, but also engage with the public and his way of doing that was fighting against the war in Vietnam, fighting for Israel, which has not always been popular in academic circles, but basically using the fact that he had tenure and he had a kind of public perch to argue for what he believed was right for me.
I'm also a public intellectual arguing for what's right in my own way, promoting values. But also thinking about how AI comes out of the ivory tower, comes out of the technical paper into applications that we use, whether it's to save lives or to make shopping more streamlined.
A lot of my startups were helping consumers save money or make better shopping decisions right there. There are many different ways, but I always felt the ivory tower is a launching point, not an end state where you're locked up in the tower, like, you know, whatever it is, Sleeping Beauty before she escaped.
[01:09:25] Michael Eisenberg:
Thank you for sharing that. Three rapid fire questions for you. You mentioned earlier UBI in this era–you pro or against?
[01:09:34] Oren Etzioni:
I am very strongly pro what you might call UBS, universal basic services. Our society is rich enough that people should have a roof over their head. People should have access to adequate medical care.
I am very opposed to just sending people checks that they can use to avoid work, that they can use for drugs or alcohol or just gambling, and so on. So I think, yes to UBS, no to UBI.
[01:10:07] Michael Eisenberg:
Good nuanced answer. I want to ask you how we get housing for people when we look at China blowing up buildings right now, but we'll leave that for another conversation.
Second, you mentioned earlier in the conversation and I quote it, you used the word anthropomorphic, and talking about AI, that we need to be careful about that. So I'm curious. Two quick things. Do you say please and thank you to your chatbot?
[01:10:28] Oren Etzioni:
Never. And I think that's actually very important. We need to, as they become more and more lifelike, we need to distinguish between AI programs and people. It makes no sense to do that, but I do that advisedly, because I'm not talking to human beings. So I try very hard to say please and thank you to every human being. And I try very hard not to do that to machines.
[01:10:57] Michael Eisenberg:
So no tips for the chatbots either then, right?
[01:11:00] Oren Etzioni:
No tips for the chatbots. Just do your job.
[01:11:06] Michael Eisenberg:
Alright. I got one last question for you. So you may or may not know this, but I gave a quite impassioned speech in the Knesset about what I would call amateur hour in the Israeli government on AI policy and AI investment. What would it take for me to get you to come spend some time here and help Israel get on its feet from an AI perspective and come help us lead a charge?
[01:11:27] Oren Etzioni:
So I am part actually of an advisory board led by Yoav Shoham.
[01:11:33] Michael Eisenberg:
Yoav Shoham, I'm aware, yeah. He was just on the podcast, by the way.
[01:11:36] Oren Etzioni:
Oh, wow. Yeah, wonderful. Yeah, he's very thoughtful on these topics. So I would love to help. I really wish, sincerely, if we can get to a more peaceful state, right, where the flights are flowing again, the hostages are back again. I don't claim to know how to do that. A lot of people do. But when we get to that state, you won't be able to stop it. Right? Anybody who just says AI, I'll rush in there and offer my help pro bono. I love Israel. Of course, there’s huge potential for AI in Israel, and I would love to help.
[01:12:19] Michael Eisenberg:
I'm signing you up and hosting you for Shabbat dinner. You know, I promised that was the last question, but I got one more. Do you think at all about the energy challenges around AI, or do you think they're overblown?
[01:12:28] Oren Etzioni:
They are not overblown. So again, an important paper we wrote a few years ago was entitled “Green AI.”
People can look it up. It was the lead story in the communications of the ACM, arguing that we have paths to reducing the energy usage of AI. At the time, again, people pooh poohed it. They said, “Ah, no, the data centers is where it's at, the cloud.” AI is not using a lot of energy. That's the funny thing about exponentials, right?
A few iterations of the exponential, and now nobody's poo pooing green AI. So I think it's important. And I encourage people to look at the paper, because we outlined some important paths forward.
[01:13:07] Michael Eisenberg:
I just want to say thank you to you, because as the master of the chatbots, we don't thank the chatbots, but this has been a super interesting conversation.
Hope the listeners enjoy it. And for our listeners, you can find Oren Etzioni on X, otherwise known as Twitter, @Etzioni. That's E-T-Z-I-O-N-I, and also on LinkedIn as well. Oren, I cannot thank you enough. Have a Shana Tova and really thank you for doing this.
[01:13:33] Oren Etzioni:
Michael, thank you. Really wonderful to talk to you. Shana tova u’mevorechet.
Michael Eisenberg: [00:00:00]
The story of Healthy.io actually starts with your mom.
Yonatan Adiri:
That's true.
Michael Eisenberg:
How and why did Healthy.io get started?
Yonatan Adiri:
My parents were at the point where my dad was kind of already figuring out how to close shop, and they were in China. We get a call, actually my oldest brother, which again, it's a hierarchical family–my oldest brother, he gets the call from my dad, that's how things are done–my mom fell, she was pretty badly injured, lost consciousness for quite some time. They're now hospitalized, he feels everything is fine. They want to fly them out to Hong Kong in a couple of days. And they think she broke a couple of ribs, but he kind of feels that's not the case. So, having worked with Peres, we always had trauma doctors with us.
So I had on my speed dial some of the best trauma doctors in Israel. When my brother told us the story, I said, “Put Dad on the line immediately, I want to hear from Dad.” And he said he has CT scans. Luckily, by the way, they bought an iPhone 4, their first smartphone, before leaving. So I said, do you have your iPhone 4 with you?
“Yes.” “Just take pictures of CT scans and send it by email.” And I send it out to a couple of those trauma doctors, who are like, “Oh yeah, that's very clear. She has, you know, a punctured lung. And so she can't fly for the next few days, definitely on a medical flight, because when they take off, her lungs can collapse. Like she could literally die.”
I was like, “No, she's flying. She’s supposed to fly the next day, like on a commercial flight to Hong Kong.” They’re like, “No way. She's not flying.” Hang up the phone. Obviously, we take care of it and whatnot. And suddenly, I'm like, wow. Is it possible that between the smartphone camera, the CT scan, knowing some people who are kind of–by fluke, right?
So if you kind of remove one of these things from the equation–no camera on the phone, no phone, no bandwidth–she may have died, right? Like, this could have been, like, a horrible outcome. And that got me thinking, and I started kind of plotting. You saw that deck. This was later called, by the economists when they wrote about us, ‘the people who dreamt and created the medical selfie,’ right?
So, you know, in a way, that was kind of the vision.
Michael Eisenberg:
Your mom invented the medical selfie.
Yonatan Adiri:
My mom invented the medical selfie, for sure.
Michael Eisenberg:
Today, I'm really excited. I'm here with Yonatan Adiri, who's the founder and CEO of Healthy.io and most importantly, he's married to Maureen. We here at Aleph are investors in Healthy.io. And I would love for you, Yonatan, just to give your brief, one second background on who you are, and then I'll dig in some more.
Yonatan Adiri:
So I think you started off with the most important thing. So I'm married to Maureen. It's been now, 15 years. And she made “aliya” from Switzerland. We have four kids, so a father of four.
I'm also the youngest of four. But in my case, it's only boys, the youngest of four boys. Born and raised here in Israel, grew up outside of Tel Aviv, and then joined a school in a certain program that allowed for us to take our undergrad while we were in high school. So I never graduated high school, left that piece behind me, had a very unique military service for about five years.
And then–
Michael Eisenberg:
What did you do in the military?
Yonatan Adiri:
So this was a very interesting period–I grew up in the late 90s, you know, those were the Oslo years, delegations of Palestinians, the disengagement from Lebanon, where two of my older brother's friends died when we were there for 18 years.
So we were thinking we were the peace generation, and then we ended up with five years of a very difficult period, suicide bombings and so on. So I joined the army in the end of 2000, and was given a very unique task of being the Chief Negotiator for the army and the Red Cross. This was a period where three angles–like, international law was being rewritten around, kind of, modern warfare.
Israel was deploying so much tech into trying to figure out what to do with suicide bombers. And so this was like, watching life on speed, right? And the third was that the entire diplomatic space around what can and cannot be done was also affected by 9/11. And so five years, really, at the forefront of those three fields.
I then spent a couple of years in the US on research of this specific topic, and then was very fortunate to come back and this was, you know, for me, the pinnacle of my career in the public service, was to serve as a CTO or the diplomatic advisor to the President of Israel.
Michael Eisenberg:
Who was that?
Yonatan Adiri:
Shimon Peres.
Michael Eisenberg:
Shimon Peres.
Yonatan Adiri:
Which is true. You're right. I mean, it's not just a president. It was a privilege to work with a person–I had some White House counterparts who said, “This is like, you're like working with William Jefferson,” which is true, right? Like it was a very, it was a true privilege.
He was 86, I was 26 when I joined. So 60 years between us, but I can say, you know, and things pertain to sort of, you know, our conversations about tech and where it's going. The guy was 86 years old, never opened a computer in the modern era, right? Facebook, Twitter. But in ‘09, his vision of where the second decade of the 21st century is going to go in terms of exponential growth of tech, what it's going to do to politics, what it's going to do to society, to our conscience, I mean, even in hindsight was so accurate, in ways that many other leaders who we've met worldwide, who were more, I would say, tech savvy, lost touch with the arc of what tech is going to do to the world.
Michael Eisenberg:
How do you explain that?
Yonatan Adiri:
Well, I think he was always, and he kind of, his history is the same way. And for me, the most fascinating decision-making process he went through, the defining episode in his life was not Oslo, was not the nuclear facility, all those things you read about in books.
And I spent many hours with him on what he did in ‘85, where the country was at 410% inflation 6 weeks ahead of a default on its debt. And he redefined–he's one of, for me, the kind of, most impressive heads of state of the 21st, or the 20th century, that is, in terms of the ability to see a crisis coming, and using it to redefine the core, kind of, values of how the state is built. People think it was an economic restructuring. It was far more profound. And so, in everything he did, he managed to kind of see the noise. And, you know, there's a lot of technical things you got to fix. But he always was looking for the Archimedean point, right?
What is the one or two things I can do? Knowing that political capital is very scarce, right? So if you have political capital, don't spend it on, like a 20 percent reform incremental–just go and hit, kind of, the nail on the head. And he had the same vision with regards to tech, I think also, when you're a curious person, the way that he was naturally, and you'd lived through the 50s, you know, what happened in aviation and then what happened in space, you kind of, and you co-founded the State of Israel, you're like, you know, everything is possible.
So there was no limitation to his imagination.
Michael Eisenberg:
What was more profound about the reform in 1985? For those who don't know, Yonatan mentioned that there was 400 plus percent inflation in Israel. You literally walked in with a stack of bills to go buy milk and it wasn't enough. And, in addition to that, it's a year after a big bank fraud crisis here.
It was called the North American Bank in Israel and a bunch of unstable governments as well. So what was more profound about the change from a systemic level?
Yonatan Adiri:
So I think what he identified as an opportunity to go back to the basic level and rewrite, like, the force of the magnitude of the crisis was so profound that he did not want to waste the political capital on, and I think what he identified, and, you know, we've had many hours of conversations around that, was a transformative process. It was worldwide. Remember, this is a couple of years after Thatcher in the UK, kind of–”Well, we've had 30 years post World War II. This isn't working. We're not a British empire.
We're not going to make small reforms because they're not going to do, we're going to go to the core,” right? Same with Reagan, Volcker, end of the ‘70s, same with Deng Xiaoping in China. So, Peres was inspired by that. He saw the imminent collapse of the Soviet Union. This is 1985, right? And the peace with Egypt that happened a few years earlier kind of got him to the recognition that the operating system, if you will, of Israel, 1947 throughout 79, 80, it's just not working anymore. The paradigm, you know, we're at the tail end, the 1985 crisis was not an economic crisis, it was a crisis of an old paradigm, a couple of numbers and figures, right? The Israeli economy was–75 percent of the GDP was publicly owned in 1985, right?
Michael Eisenberg:
Yeah, publicly owned, government owned companies, the public sector.
Yonatan Adiri:
Yeah, the public sector basically, right, owned 75 percent of the economy right? As we said, 410 percent inflation ended up kind of as a result of that.
Michael Eisenberg:
Just to say, state the obvious is that, part of the reason is that all the government wages were linked and all these individuals linked. So they had unionized–you tripped one person's salary, and you tripped the whole system's salary up to the top.
Yonatan Adiri:
My father had a truck electricity garage for 50 years. He was one of the, he was one of the quarter of the population who was entrepreneurial, and kind of a self made man. He immigrated here from Iran in the early 50s. And it was very peculiar to him, in hindsight, when I had conversations with him, he–you know, ‘Soleil Boneh,’ one of the biggest construction companies in Israel, was publicly owned.
So every employee at Soleil Boneh–
Michael Eisenberg:
Publicly owned does not mean IPO, like, public markets owned. It was owned by the government.
Yonatan Adiri:
Owned by the state. State owned, I should say. Right, state owned. State owned. And so, drivers of trucks would come in for like, you know, months and months. And he would be like, “Oh, the prices went up,” and they wouldn't care. And at some point he's like, “My supply chain is going up, I'm trying to figure all this out,” right. And you know, he didn't have more than basic education. You didn't go to university, didn't have that privilege, how to figure out, you know, PnL, and how do I plan and so on?
And he's talking to people and they're like, “I don't care. My, you know, my salary is linked to the CPI, right? So I don't really care.” And by the way, a couple of his really good friends, one of them committed suicide because his business collapsed because he just couldn't handle, you know, the changes in supply chain and so on and so forth.
So a really tough period. And I think going back to sort of where Peres goes, he kind of understands there are fundamental areas that really shifted from the last paradigm definition in the late forties. And I think he kind of assigns three fundamental working assumptions for Israel, which kind of worked really well until, call it a decade ago, right?
We are kind of at the tail end of that. One, he identified this again, the imminent collapse of the Soviet Union as sort of, we won, we bet on the right horse, our relationship with the US with sort of the West–because remember Ben Gurion founded this country in a sort of schizophrenia, right–like, we're semi Soviet, socialist, we have a great relationship, you know, with that part of the world. And we're liberal, western democracy, so on and so forth. And he kind of tried to, also diplomatically, live in that space. Peres identified that that has to stop. And that was one.
The second piece was a complete, I would say, liberalization of the economy and the fact that he was considering the fact that we had peace with Egypt–and by the way, if you kind of think in hindsight, it made a lot of sense, at least was the only army that kind of had the magnitude to threaten Israel–no existential threat, right? So a lot of decisions coming out, like, he fired 15,000 state employees in one week. That's the depth and breadth of that reform.
And the third was what we can learn from the peace with Egypt is that, you know, land for peace works. So let's try to exercise this formula with, you know, the West Bank and in Gaza. So I think, you know, what he put in place in ‘85, yes, it was an economic reform, dollarization, for sure. But he actually used it as an opportunity to spend the political capital on the fundamental operating system and put in place a paradigm, for the first time since ‘47, which I think really served Israel incredibly well for 35 years–we're now at the tail end of that.
Michael Eisenberg:
Right. We'll come back to that in a second. I just want to ask you one last question. What's the one thing you took away from your time with Shimon Peres?
Yonatan Adiri:
You know, he just, you know–when I thought I dreamed, I had a radical dream, it wasn't radical enough.
Michael Eisenberg:
He always dreamed bigger. Yeah, that’s the name of his book, by the way, “No Dream is Too Small.”
Yonatan Adiri:
Right, No Dream is Too Small. Yeah. Like, I think, like, for me, the main learning from, from Peres was radical changes, they do happen. And not only that they happen, you can make them happen.
And, you know, he was such a, in his age, sort of after that illustrious career, Nobel prize, whatever–he was a very subtle man to work with, very easy to work with. We had a great trust. And he was–so you could kind of see this, this famous Shimon Peres, 60s, 70s, 80s, like, you know, grit things that made him who you, who he was as a brand, right?
But in conversations, when you would go in hindsight, you would, you would really realize like some of those processes–it's not only that he had an imagination, he literally made it happen. And part of the reason why he was such a hated politician is, when you go down to that level of the working assumptions of the system and you try to instill a new paradigm, it's painful, right?
Thatcher was hated for many years, Reagan was hated for many years, and Peres was hated for many, many years. Because he went down into that fundamental level of, what is it that we're trying to get done here. And when you're touching that level, people dislike you.
Michael Eisenberg:
Some would also, I guess, argue that the land for peace paradigm in particular, you know, it, it affected a lot of people in this country. But we'll come back to that maybe afterwards.
Tell me about your parents.
Yonatan Adiri:
The best in the world. You know I'm very fortunate to have had parents who kind of, first of all, connected very well, intimately, in 50 plus years. And they still love each other, you know, kind of very dearly. And there was something very old school about the way they built their relationship and what they modeled for us, which was a sense of like, division of labor and parity at the same time, right?
It was very clear who does what for us as kids. It was very clear, sort of who has, you know–my dad, you know, would wake up at 6:15, at 6:30 he made his sandwiches for work, at like 6:42 he would go out. I remember I used to joke with him when I would join him to go to the garage, he would, you know–this was before Waze–he would know, like, where traffic would hit, and he would kind of tag himself, so that he would change the radio. These were like old dials. He would change the radio from music, like GalGalatz, to Reshet Bet, to like talk radio at 7 a.m. sharp, and that would be like seven minutes before he opens the garage gate. Like, it was amazing.
He was a very kind of meticulous, routine, hard worker. He had a lot, like, you know, now he's almost 80 and we have a lot of, kind of, adult conversations. I realize how hard it was for him. The burden he took on himself to get out of the immigration camp, which is where he came from, coming from Tehran, one of the biggest cities in the world during that time, in the Middle East for sure.
Yonatan Adiri:
What year did he immigrate to Israel?
‘51.
Michael Eisenberg:
‘51?
Yonatan Adiri:
Yeah. This is the Shah and Mosaddegh, you know, the big, you know, and 4,000 year history. And he ends up in a tent, you know, kind of town, shanty town in a way, right, near Ramat Hasharon for seven years. And he leaves, he leaves when he's about 14, 15, understanding, “No one's going to help me. Like I gotta, I gotta do something to pave a better future for my kids.”
So that burden of being a breadwinner was very, I mean, for us as kids, we didn't feel it. Now in hindsight, I kind of understand that he's, you know, it was, it was hard for him. And, you know, we learned work ethics from him.
We learned, you know, I'll tell you a funny story. I went with him to the garage many, many months when I was, call it, eight, nine years old until 13, 14. And he would never let me do anything beyond running errands. I remember one summer he gave me a task. This is 4 p.m. The garage is about to close. These are big trucks, so there's a lot of, there are a lot of oil spills, right? At the end of every day, you need to clean. It's a safety thing. There's like shreds of paper or wood that you have to put on it so it absorbs it and whatnot. So he tells me, “Go and do it.” I'm, I think I'm 13. I'm so excited. My dad told me I can do something in the garage.
I go, and I kind of pick it up, and he screams at me from the second floor where he was kind of having tea. “That's not how it's done!” And he comes down, and like, this was, you know, the most mundane simple thing, at least looking at it from the outside. And he tells me, “No, there's a way to do it. Look how you're doing it. Da da da da.”
So for him, everything was a profession for him. Everything is, there's a way, a proper way to do things. So I think for me, that was kind of tacit learning. He’s not a man of many words.
My mom was just infinite love. Kindergarten teacher. She always kind of gave us this feeling that whatever we do is great.
Just let's just be good people, and I trust you that whatever you'll choose to do, you'll do great. Just like no pressure, do whatever you want. She makes fun of me, like when I was about five–and again, in hindsight, now having four kids, I have so much admiration for the way they did it, right? This was truly scarcity, and they built themselves up from nothing. I was kind of–she was asked by my kindergarten teacher to have me kind of diagnosed or whatever, right? And there was a young kids curiosity camp kind of thing happening in Tel Aviv University now. For her, at 4 p.m. right, with three other kids, and my dad coming from work at like 6:30, which he had to kind of be at home for–to drive with me, drop me off there, wait for an hour, and then come back, was quite a big thing to do that once a week. So we're going, and it was like an amazing quality time.
And then, Chol Hamoed Pesach. And I tell her, “Mom, next week, there's no class.” I'm five years old. She says, “Of course there is.” I'm saying, “Mom, there isn't.” No internet, like whatever. So she takes me there, drops me off. By the way, my kids are there also. And now it's like, it looks very small to me, but as a kid, I remember it being huge. This is like 1988 we didn't, we had like, public phones, pay phones, but we had ‘asimone,’ like a specific–
Michael Eisenberg:
The token.
Yonatan Adiri:
The token! So I had that token here in my shoelace–
Michael Eisenberg:
For those listening, in America, if you put, like a dime or a quarter, that's how you operate the pay phone. In Israel, it was asimone. It was a little, kind of silvery piece that had a hole in it, like you put them on shoestrings to kind of hold them on. So what Yonatan is describing that he would keep it on his own in his shoelace.
Yonatan Adiri:
Yeah. So that was my mom's, didn't own smartphones–that was my mom's kind of, if something happens, you know, we had to memorize my dad's garage number because it was always, there was always someone there answering. It was an easy number, 550 5040. Like I still remember it. And, you know, we had a drill. And so I said, “Mom, there is no class today.” She's like, I'll see you in an hour.” And she drives out, right?
You know, sure enough, I go in, there is nobody. Chol HaMoed Pesach, like literally nobody. So I walk around looking for someone to kind of help me, you know, call my dad.
Like, in hindsight, I'm like, I'm totally cool. Like, I'm walking around, and I find someone, she's a very nice woman, I kind of take my shoelace off, and yeah. She gets into the payphone, she calls, I'm too, I’m not even tall enough, right? She says, “Hi, I have your son here, da da da,” and I'm totally cool. I answer my dad, and my dad's, like, impatient, in the garage, like, what's going on?
So I'm like, “Abba?” “Yes.” And I burst into tears, “I don't know where I am, you have to let me know.” And I think, well, like, within less than 10 minutes he was there, and my mom says that from that point on, I would not–I would sort of guide my own path. And I have to say to her credit, you know, when people look at it, my kind of journey from the outside, it looks like an overachiever kind of thing, pushing, whatever. My parents always kind of, “Oh, that's what you think you should do? Great. So do it. You want to go to this university thing? Sure.” Even at some points, they tried to discourage me from doing those kinds of things. Just, you know, kind of just do the, do things the regular way, right?
Michael Eisenberg:
My mom used to say that at Friday night dinner, that she prayed she would have mediocre children.
You probably heard this from my mom, because the line between excellent or genius and crazy is really, really thin.
Yonatan Adiri:
My dad, you know, when we joined the army, all of us got the same story from him, like, cause he was in the Yom Kippur War, and he had like dreadful stories. And it was like, you know, when you go to the army, like never volunteer, don't be at the beginning of the line and not like, like–this mediocre, like excellent people in the army get killed.
That was kind of, and it was for many years, it was kind of his thing. Like just, you know, play it safe. Right. I came out of this like, camp. ‘I, you know, Mom and I are taking care of the education opportunity for you. Get a job. A steady job.’ And this is important because I never thought of myself as a person that would go outside of public service.
I always thought of myself as kind of having to serve, right? Having a job and having to serve. Ideals. And when my mom was 60, it was like 15 years ago, we sat together and it was like, we were joking because all of us found out that he told all of us the same thing. We never talked about that. And, and we asked our mom, like, “how is it that that was, what dad would verbalize, right? But we all felt that we have to do things in a certain way.” And she said, “You know, what you'll find out as parents,” and she was spot on, “Kids don't listen to you.”
Michael Eisenberg:
Yeah.
Yonatan Adiri:
“They observe you and what you do, by example, that's what they pick up, right?”
Michael Eisenberg:
Or they rebel against what you tell them.
Yonatan Adiri:
Exactly. Yeah. Which is part of that problem. But, you know, so I mean, having known your mom also, like she personifies not a mediocre person, right? So she can wish for–
Michael Eisenberg:
No, my mom is not a mediocre person.
Yonatan Adiri:
That's what I'm saying. So she can wish for–but what she personifies is something different. And that's what kids kind of follow, and I have to say, sort of as an officer in the army, and then as a, as a founder, you lead a lot of people, and you try to kind of get them to cross a chasm, to cross, to close an imagination gap.
You work with heads of state, or with investors, or with regulators. This notion of nothing comes easy, you know, just to be very diligent and, you got to personify what you believe. Otherwise, you can't fake people's people in large numbers see that.
Michael Eisenberg:
Like, like you said, especially with those very difficult investors, that's–so, the story of Healthy.io actually starts with your mom.
Yonatan Adiri:
That's true.
Michael Eisenberg:
So how and why did Healthy.io get started?
Yonatan Adiri:
Well, I think, you know, the real genesis of me even believing I can start a company happens a year into my service for President Peres. There is an experimental teaching experience hosted at NASA Ames in Mountain View called Singularity University, where a group from MIT dedicates about a hundred days over the summer to teach people–this was 2009–that the second decade of the 21st century is going to see Moore's Law all over, right? And after a year of building this idea of tech, diplomacy, whatever, the president asked me to apply to this thing. He’s like, “I think you should go because we can then kind of understand things in a different way and try to build a better diplomatic, technological kind of vision.”
So obviously, you know, I go there. And I'm blown away, right? Like this idea that comes natural to you as an investor and a man who'd seen a lot of that. The notion of switching from a linear to an exponential mindset was very foreign to me. Profoundly, right? I understood it, like, graphically, but…and in our dorm room, we started a company called Getaround.com. Which was, you know, kind of the pioneer of peer-to-peer car sharing.
So while I have no claim to fame in executing on the company, but I was really there when we built the idea and was on, you know, the, the kind of founding team, and then I came back to serve the president and I'd met Maureen, which I still, you know, I knew I wanted to marry her.
So I think for me, it was very clear, I'm not staying there. I'm coming back. The privilege of serving under Peres was just too big. And knowing that I want to marry Maureen, who made Aliyah, she's not going to want to go to Silicon Valley. Like this is where we're going to build our family. That was, for me, a mindset shift that maybe I, maybe there is a possibility that, you know, I'm not a doctor, I'm not an engineer, I don't write code, you know–I come from the kind of policy space–that I could really change the world. Because if exponential tech is a reality, and the law of accelerated returns, right, like it's going to be cheaper to get things done in a global magnitude, then, like, can I really build a company? Can I really not just be the advisor to or in public service? Can I really get it done?
So the seeds were planted at Getaround and at NASA. Fast forward, you know, three years later, I decided I'm leaving public service. I decided the decade ahead, since I am committed to, you know, the ongoing beta, which is Israel, right?
I asked myself a question: “How do I serve my country best?” You know, into the third, you know, fourth decade of my life. Do I kind of take the turn and become a young member of parliament? Which kind of, I had an interesting couple of opportunities to do that. And kind of, you know, designate myself as a forever political kind of whiz.
Michael Eisenberg:
Hack.
Yonatan Adiri:
Hack. Yeah.
Michael Eisenberg:
Maybe you'll be a whiz. I think you could have been a hack.
Yonatan Adiri:
For sure. Okay. Or do I really take the turn where I can fail and try to go bottom up and build a company? And there's a reason why I ended up in healthcare, which is in hindsight, you know, quite a tough one.
Because it was very close to public service in a way, right? Like the good we made in the world at Healthy. The million people, that's our benchmark from a couple weeks ago. The million people that used our AI to diagnose early that their kidneys are not working. That's a public good in a way, right?
Like that's a dent in the universe that is meaningful to me. And that sort of served the purpose. And I made a decision, like, sure I can fail. And this may end up, you know, within a couple of years. And, you know, then I'll have to try and pick up the pieces and figure out where I'm headed. But if I really want to serve our–if I really believe genuinely that if, if people want to serve the country, they got to do stuff, they got to fail. They got to put themselves in a place outside of the political sphere, so they can learn business, job creation, technology, the things that really are going to define the 21st century, and they need to do it bottom up.
Michael Eisenberg:
Now tell me about your mom. How'd your mom start to help you start the company?
Yonatan Adiri:
So I decided to leave, and decided to do that, and was kind of ideating, was looking into things. I guess my parents were at the point where my dad was kind of already figuring out how to close shop. And they were traveling a month every year. And they were in China. Luckily, by the way, they bought an iPhone 4, their first smartphone before, before leaving. And we get a call–actually my oldest brother, which, again, it's a hierarchical family. My oldest brother, he gets a call from my dad. That's how things are done. He gets a call, my mom fell. She was pretty badly injured, lost consciousness for quite some time.
They're now hospitalized. He feels everything is fine. They want to fly them out to Hong Kong in a couple of days. And they think she broke a couple of ribs, but he kind of feels that's not the case. So, having worked with Peres, we always had trauma doctors with us. It was, again, ‘86, ‘87, ‘88, ‘89. So I had on my speed dial some of the best trauma doctors in Israel.
And I asked my dad–actually, not true. When my brother told us the story, I said, “Put Dad on the line immediately. I want to hear from Dad.” And he said he has CT scans. So I said, “Do you have your iPhone 4 with you?” “Yes.” “Just take pictures of CT scans and send it by email.” And the joke in the family was that my dad responded, “What is ML? What is this ML I need to do??” Because he was totally outside of, you know, figured out how to send, you know, Gmail, Whatever, he sends it out. And I sent it out to a couple of those trauma doctors, and they were like, “Oh, yeah, that's very clear. She has, you know, punctured lung. And there's some pretty serious stuff going on there. They didn't do the right process, and so she can't fly for the next few days, definitely on a medical flight. Because when they take off, her lungs can collapse. Like she could literally die on the plane.” I was like, “No, she's flying, supposed to fly the next day, like on a commercial flight to Hong Kong.”
They’re like, “No way, she's not flying. And one of you guys better fly out to China, spend a few days with her, so that then, you know, we can fly her directly to Israel on a medical flight.” So, we hang up the phone, obviously we take care of it and whatnot, and suddenly I'm like, wow. Is it possible that between the smartphone camera, the CT scan, knowing some people who are kind of–by fluke, right?
So if you kind of remove one of these things from the equation, no camera on the phone, no phone. No bandwidth. She may have died, right? Like, this could have been, like, a horrible outcome. And that got me thinking, and I started kind of plotting. You saw that deck. I started plotting different areas of exponential behavior around smartphones. And I ended up with about six of them.
So one was obviously camera quality. It was clearly exponential. Knee of the curve was somewhere around 2015. It was very clear. This is 2012, 2013. Bandwidth? I mean, you just look at Netflix and you understand this dynamic is going to drive massive explosion of bandwidth, and by the way, we would pay 30 cents a text message in 2012, right?
2016, it's like infinite bandwidth for zero, basically. Battery quality on the phone, bandwidth’s on the cloud. Like how do we get, you know, storage on the cloud, computation on the cloud, computation on the phone. They all kind of look the same, and they all converged around, if you kind of plot them well, around 2016.
I was like, blown away, like what we just did in 2013, was a small–with an iPhone 4, you can do exponentially more. Again, going back to Peres, I'm like, dream big. We can go to the FDA. This is not some wellness thing we can do here. We can deploy AI on the phone.
Michael Eisenberg:
Did you call it AI then?
Yonatan Adiri:
No, I actually called it, basically, computer vision.
Michael Eisenberg:
Right.
Yonatan Adiri:
That was like the thought, right? State-of-the-art computer vision that would run on the phone, on the computation, on the phone, and would deliver on near zero cost bandwidth, images to the cloud and, you know, kind of decipher for medical grade, clinical grade. This was later called by the economists when they wrote about us, “The people who dreamt and created the medical selfie,” right?
So, you know, in a way, that was kind of the vision.
Michael Eisenberg:
Your mom invented the medical selfie!
Yonatan Adiri:
My mom invented the medical selfie, for sure. No, but like, and you know, it's been a treacherous road, right? First of all, to raise capital was a nightmare because, you know, this was a very odd vision, right?
This is 2013. A lot of the kind of gaming apps are out there, very nice, you know, risk reward equations for investors. And here's this guy coming, saying, “I'm going to–” You know, there's a risk of creating apps. That's a certain risk. “I'm going to create a medical app without hardware. And I'm going to get you through the FDA.”
And so nobody believed in that. And so, we went to like gaming and app funds, and people heard the name FDA and were like, “No way.” And then we went to folks dealing with healthcare and they said, “You're not going to get computer vision.” Like, it was hard for them to imagine what I saw happening in 2016, this convergence.
Nobody believed in that, right? Nobody believed that that would–you can get to clinical grade, no hardware by then.
Michael Eisenberg:
It's not that there's no hardware, it's more that it's commodity hardware that was getting better on its own because, because of the cell phone, because of Netflix, because there was this kind of–
Yonatan Adiri:
When I say no hardware, I mean the consumer or the patient does not have to buy or add anything to their phone, right?
And actually it's a great–you're making a great point. Because at the time in the Valley, not in Israel, it was kind of the emergence of digital healthcare, and there were three kinds of verticals. One was wearables and it made a lot of sense, right? Price of hardware was cheaper, you can create great optics, chips, and so on.
But, again, one of the things I learned from Peres, and again, we've had infinite conversations about that. When you draw an argument, draw it all the way to the end, right? If your argument is, I can do for 50 million what somebody did for half a billion five years ago, then draw it all the way to the end.
It means that five years from now, somebody would do it for half a million. So how does that look like? And what do you got to do when, when these guys have, you know, Instagram has an incentive to make cameras better and better and better and better. So who's going to do that better than Apple or Google or, you know, or Samsung?
So you're effectively saying, “I'm going to compete with these guys.” And you know, now we're north of a decade later, a million patients, north of 50,000 cases of dialysis averted in all the markets that we operate, because what we do is we allow people to test at their speed of life, right? Part of the crisis of healthcare.
Last year, north of three trillion dollars spent in the U.S. Bigger than the GDP of India. It's the third GDP in the world, basically, healthcare spending in the U.S. bigger than the entire consumption of oil globally.
Michael Eisenberg:
How many people need dialysis every year in the United States??
Yonatan Adiri:
It depends. Now it’s about 750,000 people.
Michael Eisenberg:
New people who need dialysis every year.
Ongoing, right? Ongoing dialysis. Ongoing and growth. This is 135 billion, no 160 billion this year, 135 billion was last year, 160 billion cost to the American taxpayer every year because dialysis ends up–
Michael Eisenberg:
And it's fully avertable, right? With early diagnosis. So to the extent that the smartphone is ubiquitous and it can get into people's hands and you can make it a critical medical device, anybody can pee in a cup.
Yonatan Adiri:
Take a picture. Yep. That medical selfie.
And beyond that, the drugs are generic. So not only that we have a solution, it's super cost effective. And so this 150, 60 billion could easily be 30 to 35 billion. And so that kind of, when you look back, it now is a clinical reality, but so many things had to happen for that to eventually happen.
You've been obviously on that journey.
Michael Eisenberg:
Seven rungs of hell.
Yeah. And you know, first of all, I would say four, we've survived, you know, four waves of extinction in the industry, right? The 2016 extinction period one, which is to kind of summarize, Google primarily promising the birth of an AI, by then already AI, with a white robe that would rid us of cancer.
Google Health and this or that, the other. By the way, it's now almost a decade later, nothing to show for it, and they closed that division, right? And the wellness and hardware, all of that died in 2016. That was wave of extinction–the first wave of extinction. The second, and this is credit to Aleph and to you, right, because you became a partner before, during, and after the Theranos criminal case. For people outside of healthcare, urine testing on the phone sounds a lot like blood testing at home, right? So they kind of draw the parallel and nobody wanted to talk to us.
Michael Eisenberg:
Yeah, Elizabeth Holmes cast a pall over the entire market.
Yonatan Adiri:
And I would say even today, even today, there's still a part of that. “Oh, here's another crazy hack, liar, whatnot,” right? And now we know it's criminal and, you know, that court case has been adjudicated. So the second wave of extinction, which was, you know, decimation in many parts of the industry.
And then came COVID, and that was, in the beginning, kind of cleared out a lot of certain types of companies, but ushered in another era for companies that were kind of like us already established, and had a unique type of service that works, and allows people to test remote and not get to, you know.
Michael Eisenberg:
And all those companies, except for Healthy.io basically pivoted to go off for COVID testing and that then disappeared.
Yonatan Adiri:
And then that paved the way for the fourth extinction, which was the flawed IPO markets in healthcare. We've seen, there's a company I admire, and it's a shout out to these guys, Q Diagnostics, they call it Nespresso of medical testing. IPOs in the end of ‘21, three and a half billion dollar IPO, Goldman Sachs sponsored, like, you know, kind of–and everybody has their eyes on that and say, “Hey, finally, digital healthcare, right?” And you look at Livongo and–within six months, they were worth a fraction. And today they're worth, depending on the day, south of 50 million. A three and a half billion dollar–so call it mid ‘21, investors don't want to like, they saw already a wave of like, how do we make money of this in large scale and that, you know, kind of–so four of those waves of extinction in which, you know, many stakeholders, the regulators, the reimbursement agencies, the governments, the insurers. They all reset every three years.
Michael Eisenberg:
Do you see Healthy.io being able to get rid of dialysis altogether?
Yonatan Adiri:
Yeah.
Michael Eisenberg:
You do?
Yonatan Adiri:
So beyond that, I think Healthy.io's 2030 vision, if everything works well, every medical process that's done with a clinician's eyes, nurse, or a doctor will happen on the phone. These cameras are going to get–I would say even not cameras, optical sensors–there's a good opportunity that somewhere in 2027 you have a hyperspectral, near hyperspectral capacity on your phone. You can do dental stuff. Like, there's so much you can do, that's done now with optics in the office or with clinicians’ eyes.
Michael Eisenberg:
I should say that Healthy.io already does that with wound care, right? Provide nurses–same single smartphone, different software. Correct. or even the same backend software, the different application, to diagnose people's diabetic wounds.
I mean, make them heal faster.
Yonatan Adiri:
Correct. Yeah. Again, Michael, to simplify, and again, you've been such a champion for us. So when my imagination was capped, even though I thought I was imagining big enough, for instance, the acquisition of Inui, right?
We acquired a competitor from Silicon Valley, very uncommon for a company kind of our age at that time. The reason we did that is ultimately–the way to think about Healthy.io is that it has two fundamental engines of technology, right? Heavily patented and very strong. One is what we call color AI–the ability to identify color in clinical grade through the FDA. And by the way, we're so far not only the first, but so far also the only one to get the FDA to clear AI to operate on any phone, including future phones for the purpose of urine testing, and also wound analysis. So that is a hard battle we won through Israeli talent.
Part of the reason of founding it here is the computer vision talent here is second to none. Really, unbelievable.
The other part, which was born throughout the services–we realized at some point that the kit may be great and the smartphone and the ubiquity, but, and we can get to people's homes through color AI and regulatory approvals–but then how do I convince a person to get tested? Some people are afraid to find out. So they would leave the kit, although they can test whatever they want with their smartphone. Other folks, and this has happened to us in some markets, are afraid that their premium will go up. If they do have protein in urine and they enter this kind of preventive care model, right?
And they would rather know later and save two to three hundred dollars a year between now and whenever the late discovery happens, right? So, kind of nudging people in healthcare is a very unique, I would say, art. And thanks to big data and thanks to what we were able to create back in the day, now, you know, more and more generative AI–identifying when's the right time to nudge you, with what language, and with, you know. Is it kind of risk-driven language, is it, you know, hopeful, is it comfort, convenience, and so on? That's Persuasion OS.
So between Color AI and Persuasion OS, you now have two engines that, whatever optically can be done by the phone, Healthy.io was the best platform in the world to do that.
Michael Eisenberg:
So let me summarize this for a second, which is you went through four extinction events.
You're serving a million patients that you're preventing from ever having to get to dialysis.
You saw AI coming before just about anybody else did and built it into the phone and into the cloud. There's Persuasion OS, which is AI driven, and now generative AI driven, our persuasiveness for healthcare–Color AI, which is AI for, for analyzing all these machine vision, these incredible samples of dipsticks and urine sticks that you've done–and this company was born out of your mother's injury in China, and you're a decade in. And so you just step down as a CEO? Like, why?
********
We covered so much ground that we decided to split this episode into two parts. In the next episode, we are going to cover his decision to step down as the CEO of Healthy.io.
Yonatan Adiri:
I asked myself a question, am I still the right guy to run the company?
Michael Eisenberg:
You met like a lot of candidates, a bunch of candidates for the CEO job along the way. You said to them, “Hey, I'm gonna step down.” Did they actually believe you?”
Yonatan Adiri:
No. You really have to be very honest with yourself, right? When I stepped down, you know, you asked me about how I felt about it. Like, how did that feel to you?
Michael Eisenberg:
How did I feel? I was challenged, because it's always challenging. Change is challenging.
Stay tuned for part two, which will be coming out in the next few weeks. We think his lessons of stepping down as CEO are critically important to any entrepreneur.
Izhar Shay
Each of these people had a name. We are going to have a startup for each of those names.
Michael
Today we're running another special episode of Invested, in light of the atrocities that occurred in Israel on October 7th, and the incredible response of Israeli society since. I'm here with Izhar Shay, who is an entrepreneur. He was a minister in Israel's government, the Minister of Science and Technology and Innovation. He is a venture capitalist like I am.
Izhar, thank you for joining us on Invested in light of what's going on right now in the country, specifically your family. And before we start, I just want to extend our condolences and tell you how sorry we are for your loss of your son, Yaron, a real hero who died not only defending the country but saving countless lives, which we'll get into soon. So first, could you introduce yourself? And then I'd love to hear more about Yaron.
Izhar Shay
Thank you, Michael, for having me here. I think that what you are doing is important in terms of delivering not only the news and the updates, but also the insights as to what is going on in Israel and how the innovation ecosystem is coping with this kind of significant challenge. And it is coping. It is important to say that. So as you said, I'm a venture capitalist. I was the Minister of Science and Technology for the Israeli government.
And in the context of our discussion today, I was, for 21 years, the very proud father of Yaron Oree Shay, our youngest son. Yaron has three siblings - my daughter, who is 33-years-old, Shir; my son, Lior, at 30-years-old, and Ophir, who is 26. Yaron was our youngest. He was a soldier within a special unit of the Nahal Brigade.
They were stationed at the border for a few weeks before October 7th. Their mission at the border between the Gaza Strip and Israel was actually to keep the peace between the two sides of the fence, to let people go about their agricultural business and other businesses on both sides of the fence. On October 7th, they were there from the first launch of rockets and missiles against Israel.
Their unit responded as they should have, because this was their mission - when peace turns into war, when the ceasefire is broken by the other side, what the IDF is supposed to do is to respond and to protect the civilians. This is what Yaron's unit did on the southern side of the Gaza Strip border. They were stationed in an area called Kerem Shalom.
Ironically enough, Kerem Shalom means ‘the peace vineyards’. This is the name of the kibbutz and also the name of the army base, which is adjacent to that kibbutz. This is what Yaron's unit was assigned to in terms of their responsibility. And they responded immediately. They were attacked in that area by hundreds of highly trained, very well equipped Hamas terrorists, whose mission was to move into the kibbutz and the torture and murder of innocent civilians, babies, young women, families, whomever they would be able to get hold of, as they did in many other places in that region. But in this case, the unit stood against them and was able to maintain both lines in the army base and in the kibbutz. The end result is significant tolls for the unit itself.
The commander of the unit was killed in action. His deputy commander was also killed, a number of other officers and soldiers, including our son, Yaron, when they were facing, basically, a higher number of terrorists, but they maintained the line. No one was affected on the side of the civilians in the kibbutz, and none of the military women who were in charge of the radars and the various electronic equipment, the devices that are in the base, none of them was hurt, which is quite an accomplishment, as opposed to the sad results in other areas.
Michael
The soldiers in your son’s brigade, in the Nahal Brigade there, were able to defend against these rapists and terrorists coming in. In other areas where they broke through, they raped many women, including women soldiers, some of which have been taken into captivity.
There's now 240 kidnapped Israelis, Americans and Thais who have been taken into the Gaza Strip by the Hamas Jihadi terrorists. And the fact that your son and his brigade was able to stop the infiltration there, despite the horrific loss of life in your son's brigade, has saved countless more women, children, and others from a fate that befell others. That bravery is remarkable and it's just important to point out both the bravery and the tragedy that was averted because of it.
Izhar Shay
Thank you for noting that out. The mission those savages had was to rape, and behead, and kill young babies and torture families in front of their relatives just to make sure that everybody suffers and then get rid of them by killing them in all kinds of savage ways. So yeah, this was a mission. The mission was not accomplished in that region. The toll was significant in terms of the military toll, but this is what the IDF is supposed to do. The IDF stands for Israel Defense Forces. And this is exactly what they did. They defended the civilians, they defended the State of Israel. And on that side of the border, the border was maintained.
Yaron himself was part of a team of three, that was actually the commanding post of the unit. He was just sent to the commander of the unit at that time and another soldier, and the three of them stood in heroic ways against dozens and dozens of terrorists - again, very well equipped and highly trained. They responded. They were able to maintain the line. Actually, there's an interesting communications recording of the Hamas terrorists, where the commander of the area of Hamas kind of shouts at his people -why do they not enter the kibbutz? And they tell him that there is a jeep that they cannot get rid of; there is some kind of response that they are unable to overcome. And this is exactly the jeep, or the unit that Yaron was part of. Eventually after fighting hard against dozens and dozens of terrorists, the three people were wounded. One of them was severely wounded. This is the driver.
The other one was severely wounded, who is Yaron. And the third one was wounded, but still was able to maintain consciousness, and this is the commander of the unit. And by some very heroic efforts of another officer, they were able to retrieve them back to an area where they could be treated first and then lifted by a helicopter back to a hospital. And this is where Yaron was pronounced dead. And the other soldier, by the way, is recovering now, doing relatively well, and we are very happy for him. He will survive, and he will be able to continue on with his life.
Michael
Now, when I came to visit you for a condolence call in the Shiva, you were starting to piece together what happened on that morning. One of the things that I heard when I was there was despite the massive numbers of Hamas terrorists, it seems that your son and his crew took out a significant number of them. How much detail do you have now of what happened on that morning?
Izhar Shay
You know, Michael, it's a very good question, because we are gathering details on the go. Because most of the soldiers who survived that day and can still be considered as in condition to fight are in the Gaza Strip now, fighting against terrorists. So what we have is what we were able to gather from wounded soldiers. Each of them has their own perspective, or their own very narrow angle as to what happened in their part of the section, which is totally fine, because we are piecing together those pieces.
And we spoke, actually, with Yaron’s commander, direct commander, who was hospitalized for three weeks. And by the way, he's now back in Gaza. He's a real hero. This guy really saved - you know, with his own soul and body - probably hundreds of people just by commanding that unit, by standing still, killing, himself, as many people as he could, as many terrorists as he could, while responding personally to his personal situation, but also by continuing to command the unit itself.
Interestingly enough, sometime at the afternoon, the unit was able to kind of tranquilize the situation a little bit, so that they could bring in a chopper of a special Air Force unit called 669. This helicopter is assigned to take wounded people, wounded soldiers to the hospital. This officer
took the wounded people with him, took some soldiers in order to bring them on to the helicopter.
And then on the helicopter, you have a doctor who kind of does the arbitrage and decides who goes on and who goes off. And then he looked at this officer and said, “You must go on this helicopter. You're wounded in a dangerous way.” And the officer looks at him and says, “There's no way I'm going up the helicopter.” He turned back and stayed on the ground while the helicopter had to immediately take off, because of the shooting around them.
So this guy was indeed the commander of Yaron. He was also a very good friend of Yaron. He took his death in very personal ways. But he's a real hero. And after three weeks in hospital and treatments and so on, he's back in Gaza. He's, from Friday, with his soldiers fighting arm to arm, shoulder to shoulder with them.
Michael
Wow, that's incredible, and inspiring. I'd like you to just take a couple minutes and tell us about Yaron.
Izhar Shay
Sure. So, Yaron was our youngest. He was 21 years at his falling in Kerem Shalom. Interesting to note, Yaron was an American citizen. He was born in the USA, and was brought up as a young Jewish American kid until the age of five, which is when we decided to relocate back to Israel. He also attended the American -
Michael
In New Jersey, right?
Izhar Shay
Jersey, yes. He was born in Ridgewood, New Jersey and grew up in Fairlawn. And then when we relocated back to Israel, he actually attended the American high school program here in Israel. So his education is half Israeli and half American by training. And he was, I should say, a proud Israeli American citizen. He obviously fought for the Israeli army, the IDF.
But I believe that we should all understand that he also fought for the American values of freedom, and the American basic norms of culture, of the Western world. And he died defending those basic values, which are, I think, shared by both Americans and Israelis. This is important to note as a kid and as a young adult.
Well, first of all, not the most important feature, but still he was very handsome. He had his bright blue eyes, and very, he was very good looking. We always used to say that he is the better version of all of us. He looked much better than I do. He was way more sophisticated than his siblings. They told him. So, you know, this is not something that we are now saying after he's passing away. This is something that he was told while he was still here with us. He was crowned, like, the king of the house, for all kinds of reasons.
He was very modest, so he never took this in the wrong way. He was shy and modest, but still a very charismatic leader. He was a leader in the Tzofim, in the Scouts, where he spent a good number of years. Then he volunteered in a gap year between high school and joining the IDF. He volunteered with kids from economically challenged families in the south of Tel Aviv. Did this for a year.
And then he volunteered to the best he could in the Israeli army. He was very proud to have joined a special unit within the Nahal Brigade. This is a unit where you have to work very hard for about 13 months, until you earn the title of a combat soldier in that unit. So you work, you sweat, you freeze in the cold, in the rain, you walk many, many long nights, and you do all kinds of crazy stuff until you are qualified to fight for the defense of the Israeli citizens, to join this special unit. He was actually eventually qualified in February of this year, 2023. He was awarded an excellence award for having been an outstanding soldier. Sadly enough, the officer who gave him that title in a special ceremony also died on the same day fighting against terrorists.
But we still have that title in our house. Both their names indicate, in some symbolic way, the connection between them. And I should also add to that - Yaron was a musician. He liked to play the piano. He did it for about 11 years. He was very talented in music, liked to sing. He had an excellence sense of humor and was an avid sports fan in terms of just understanding sport, liking very much or being a fan of a local team here, Hapoel Tel Aviv. But also, he was a fan of American sports, NBA and NFL. You could not find him unprepared. If he watched an NFL game, he would tell you the names of the quarterbacks, the names of the running back, anybody who is there on the field and the coaches and everything. He understood games in a very professional way.
Michael
Yeah, I think I remember that at the Shiva when I came to visit you, there was a story that stuck with me about, like, a little pact he was supposed to have with his sister who was left to babysit him. Can I ask you to share that story, or is it too personal?
Izhar Shay
Yeah, no, no, I'm happy to. We were, you know, we actually opened a Facebook group called Noni's Stories. It's in Hebrew, ‘Sippore Noni,’ the stories about Noni. So in that group, we actually encouraged friends, family, anybody who had any kind of dealings with him, to upload their stories. The only condition was they had to be verified, true stories. So we asked nobody to say that he was an excellent math student, because he was not. Actually the teachers were in love with him and he was an excellent math practitioner, but he never liked to do that much of homework or anything. He was just a bright guy.
So anyway, there are all kinds of very interesting, funny stories. There are many telling stories as well about his leadership, about his friendship, his support of other people. But this story that you're referring to is kind of funny.
So at a certain point in high school, we - Hila and myself, my wife and myself, Yaron's mother - we traveled to the US for a week for one of my business trips. And we left Yaron at home. He's a high schooler, and his sister is probably 20 plus years old. She's after her army duty. She's responsible. She's the responsible adult for that week, and what we asked her to do is to make sure that he prepares for this big exam that he has to attend. And her duty is to keep him focused and on track. And at a certain point, she comes to him during that week and says, “Yaron, I have a new boyfriend and here's the deal. Rotem is coming to our house, we are going to watch a movie together. You are not to tell anything to our parents, because I don't want to report anything until I find out that this is serious enough, worthwhile to report. So the deal is I'm going to tell them that you're keeping track of your preparation for the exam. You are not going to tell them anything. That's the deal.” He says, “okay, Shir,” that's her name, “I'm going to keep this deal going.” The next thing she hears - she is by the way, I should say, Rotem did qualify. He's today her husband and the father of our granddaughter.
So apparently it was an important week. But next thing she hears, she sits with Rotem in our living room. They watch a movie, and she hears Yaron calling her mom, my wife, Hila. And we hear this on the other side. So Yaron calls Hila and says, "'Mom, how are you?' And she says, "'How are you doing? What about the exam that you're having tomorrow?” He says, "'Well, I wanted to do my preparations, but Shir brought in a new guy, and they're shouting and doing all kinds of noises. I just can't prepare properly, so I'm not doing my homework.” And then that was what called the deal off. He had the total leverage of negotiations from that point. And this was his way of doing business.
Michael
That's a great story. So, little known fact is that you had a startup company called Business Layers, where the firm I was at at the time, Israel Seed Partners, was the investor, and I even sat around your board table. I don't think I was the official board member, but I was at a lot of board meetings in New Jersey and in Israel. And you've been not just a startup entrepreneur and not just a venture capitalist, but a Minister of Science, Technology, and Innovation.
And I think it's fair to say, and when I came to the Shiva, you saw it everywhere - the whole high tech community has an incredible fondness for you and for your family. And everyone was there. And then you did something which just lit up. You said, “For every person who was killed on October 7th, and in the massacre and the wounds that ensued, we need to set up a startup. A new innovative startup.”
And the post went absolutely viral. And I still hear people - we’re 36 or seven days past that, and people are still talking about Izhar Shay's inspiration to set up a startup. And even I've seen, by the way, startups be named or adopt fallen soldiers. So tell us about the inspiration for that. Tell us what you're looking to accomplish, and how you think it's going 37 days in or so.
Izhar Shay
So thank you for bringing this up. This is important for me and I think that also for Israel. So first of all, this is now past the phase of being just a vision. We have put together a steering committee. We have what we think is a good name. The name of this project, so to speak, is Next October. And Next October kind of indicates that we are looking forward, and we're looking forward to a better future.
And next October will definitely look much better than this past October, but it also records the timeline of the next 12 months. And what we want to accomplish is, we want to make sure that our response to this sheer evil - you can’t call this otherwise - we faced the most evil, atrocious set of activities that a person could think of. Our response to that is by creating, by innovating, by bringing good to the world, as a response to everything that those savages wanted to bring upon us. And first of all, thinking about the economic aspect of this, we are set to establish a startup for any person who lost their life during this atrocious attack on the state of Israel. And we are today counting, lamentably, about 1,400 people.
About 300+ of them are soldiers, but most of them are civilians. Hundreds of kids and babies, hundreds of young ladies, elderly, just civilians. People who were attacked in their homes while celebrating a holy celebration, a holy day in Israel, the last day of Sukkot and a Saturday. They coincided on the same day. These people were attacked and atrociously murdered around their homes.
And what we want to respond to that is, each of these people had a name. We are going to have a startup for each of those names. The startups will have their own names as any startup should, but they will also carry the responsibility to memorize and to make sure that the world knows about the person who lost his or her life during that tragic day. Those startups are going to be filtered, screened, selected and funded as any other startup does here in Israel, which means that we are not giving concessions in terms of the quality of the concept that this startup has to go on.
Michael
This is not a charity. This is, this is a business. Yeah.
Izhar Shay
Thank you for mentioning that. What I said, and I keep saying is, I'm not looking for donations, I'm encouraging investments. And when you consider an investment in an Israeli company, you know,you do your professional judgment, but the statistics, the historic statistics - and you'll notice as I do, Michael, are that you are likely to make good returns if you invest in smart ways.
For example, if you invest in Aleph as a VC - and you didn't tell me to say that, so I feel free to use Aleph as an example - you're putting your money in the hands of professionals, they will make the selection for you. Those startups have to qualify.
But we have to encourage people to go back to innovation and to put together startups. And this is why this initiative is important in terms of putting the word out, making sure that Israeli entrepreneurs know that the infrastructure is there to support their putting together a few startups. In an average year in Israel, we have about 400 to 500 new companies. So we are not talking, you know, a change in orders of magnitude.
What we are targeting is 1400 startups. So we need to put some more effort. We need to put some more money, but the cost is not that prohibitive. And the idea is that when we have those 1400 startups around, first of all, we kind of regenerate the Israeli economy. We put some more people to work in job opportunities. We create new small companies that within two or three years will grow, and provide opportunities for tens and then hundreds of people to work within those companies. But as important as that is, we are bringing innovation to the world. As people probably know who are watching us, an Israeli startup sells their product to the world. They promote their services to the global markets. And so for each of these startups, there is a global market, and the end result is 1400 innovative products or services that will cater to the global community and will be the right response to evil.
We are bringing innovation to agriculture, to energy needs, to financial sectors - everywhere there is a need for innovation. And this is the response that the world really needs for what evil has tried to do here. And I'm very happy to see that this is taking off. So we've put together a steering committee. We have started to talk to investors. We are not going to replace investors and the people who have been doing the job so far. We are going to encourage many more international investors and the international foundation - some of them on a G2G basis, some of them on a business basis, just to come in and invest. And pretty much, as you saw the trend in impact investments over the last decade, people invest first of all to make money, but they also invest for a good purpose.
There is no better preference than this one. We are promoting a better world as a response to the worst of the worst of concepts that savages may have had about us.
Michael
I think one of the other things is - if the families of the people who have been killed, this is a lively way to build a connection between them and obviously entrepreneurs, and number two, so that their strength can show up also in the strength of the Israeli economy and the Israeli DNA.
My kids told me - I found out about this because one of my kids called me and said, “Did you see what your friend Izhar Shay said?”
And I said, “No,” I hadn't. And then he told me, and I said, “Oh, that is actually exactly Izhar. It fits him like a, fits him like a glove,” and so true to who you are. But that caused me to ask a question I ask on all the podcasts, which is, what's, you know, if you have to kind of define what your core value is and what drives you, what is it?
Izhar Shay
You mean me personally?
Michael
Yeah, I think I know by the way, but I'm gonna ask you anyway.
Izhar Shay
You know, my wife always says that if you talk about more than three values, they are not core values. So I'm going to be very careful here. I think that on a personal level, the value of humanity and love for people, however and whomever they are. I think this is one of the guidelines that I was brought up on, that guides me and also hopefully guides my kids through our education. But then along with that, we are very proud Jewish Zionists.
Zionists, you know - my parents came to Israel from Argentina about 70 years ago to establish a kibbutz in the Negev, by the way, which was very severely affected by the savages and some of our best friends in that kibbutz have suffered very tragic, significant losses. But they came to a kibbutz, and I was brought up to give back to community, to do whatever I can in order to protect this nation, this country, which is what my parents came for when they did Aliyah to Israel, which may resonate with you, Michael.
You also made your own choice about coming to Israel a number of years ago. So Zionism and being a very proud Jewish Israeli is another core value of, you know, of what we try to do at home. And I think that the combination of those values, along, by the way with the general values of freedom and liberalism, and just living as a free person in a free world, those are the guiding lines in our home. I guess that education worked, to the extent that each of our kids try to do their best at high school, and giving back to community in the gap here between high school and the military service, and then doing their best at the military service as well.
Michael
I've always thought that the core value that animates you is service and empowering others to be better. That's what I've always thought about you. And...
Izhar Shay
You are way better in definitions than I am, so I take this one as a...
Michael
No, listen, I don't know that I know you as well as you know yourself or that your wife knows you, but I've always admired that about you. I want to ask you, you're the former minister, and you're a venture capitalist. Where do you think Israeli high tech goes from here?
Izhar Shay
It's a good question. We entered this crisis in a crisis mode already because of the economical global issues that we were facing over the last 12 months. And then on top of that, we had some internal issues here in Israel. So we kind of went into this war while already having on our back a challenge that had to be addressed. We are now in a state of war, but my instinct, and also experience, indicate to me that recovery is imminent, and we’ll be likely intensive and quick in terms of our way to achieve new heights and to get back to normality within the Israeli high tech.
The gating point is actually the end of the conflict, based on 75 years of conflicts in Israel. You know, within a few months from now, we are going to talk about past events and we are going to face the opportunities that we always faced when those conflicts were over. Actually, the good news are, that in this case, it looks like our government is damn serious about solving for once and for all, the southern part of the conflict and hopefully also the northern part of the conflict.
So in terms of the international trust in the Israeli economy and the geopolitical situation in this region, I am personally optimistic here. Within six to nine months, we are going to look at a different situation, which means that we are going to have the trust of the international investors community. People are going to be able to go back to work. And then we have to resume normality. It will take us a couple of years to resume the pace that we had during 2021. It was a record year in terms of investments in Israel. There is no reason why we should not get back to 25 to 30 billion dollars on an annual basis of investments in the Israeli high tech.
And when that happens, you know, you probably know this as I do, Michael, the ideas that you see around here, the innovation and the spirit of entrepreneurship have never gone anywhere. They are here. They are here to stay. And so we're going to see many new innovative ideas. We are going to see many new startup companies growing through all the faces, early stage, two guys in a garage, all the way to big companies of thousands of people, doing great things for Israeli high tech and for the global innovation.
Michael
We also see, I don't know if you see this as well, we see and hear of people coming back to Israel now and people moving. There's a mass move, as best I can tell, back to Israel. And I guess the violence at American, the anti-Semitism at American universities and in graduate programs is probably gonna accelerate this. Do you see this as well?
Izhar Shay
Oh yeah, absolutely. I just had a, by coincidence, a meeting yesterday with a guy who spent his last 25 years in Philadelphia and just moved back, and he's here to stay. And I hear the same from other people that I know of in Silicon Valley and other places. You know, this is also a nice, interesting response to what these savages were trying to do to us. I mean, they try to eliminate our existence here. The opposite happened. They are going to be eliminated and we are going to increase our presence here. We are going to bring back many people who decided to stay elsewhere.
It is totally fine for Israelis to live in California or in Europe or elsewhere, but many people have decided to come back to Israel, which is a nice reflection of what I've just mentioned. People feel that they belong here. People feel that this is the home that has to protect the Jewish people.
There is no other home for us, regardless of where people want to spend their lives. Israelis who live in New York know that Israel is a safe place for them no matter whatever happens, and the same for any other Jewish people or Israelis around the world. And I guess this is reflected by people moving back to Israel now.
Michael
Just a, like, a segue from that for a second. So the thing that's really struck me over the last four or five days is how a lot of the protests that supposedly are pro-Palestinian have turned anti-American and anti-British around the world. We just saw two days ago protesters in New York ripping down Americans flags on Veterans Day, trying to break into Grand Central Station in the UK, defacing statues - you were a government minister. You've also lived in the US. Your kids, as you said, are US citizens. When you look at this, and you kind of elevate from out of the personal and even the national piece of it, how do you think of this moment in history now?
Izhar Shay
So, you know, this is a very good question. And I think that the Western world society and its leaders, they really have to take a very serious consideration into what is going on right now and make significant decisions as to where they want the nations, their nations to go over the next century. You know, if they just, you know, let these waves, these very bad negative waves pass along and continue to grow, this is going to be the elimination of the worst in world culture and societies as we know them today.
Extremism will not stop here at the Gaza border. The fundamentalist belief of eliminating anybody who is not Muslim or is not an extreme Muslim person does not stop at killing Jews and beheading babies and young ladies at the border between Gaza and Israel.
This will go anywhere where the Western society is willing to bend their heads and to let this extremism take over, because of all kinds of politically correct beliefs or other considerations which are totally wrong and irrelevant. I think that what we are seeing today is the proof of the naivete of many Western European leaders over the last couple of decades and also in the US, if I may say.
I have a very high level of admiration for the USA, to America and to the American values. But the fact that anti-Semitism is growing so fast and expresses itself in campuses where young people actually are coming about, and then we leave those campuses to actually become what America is supposed to be over the next decades. This is a very troublesome situation for the people who created this great nation, and the people who still care about the values of democracy and freedom and human rights.
You are letting, by letting those anti-Semitic acts and demonstrations go on, and while you are being kind of either supportive or neutral towards pro-Hamas demonstrations, you are supporting atrocities, you are supporting acts and crimes against humanity and you are
naive or ignoring the fact, not the assumption, the fact that this culture will go after you because it is not limited to Jew hatred. It is not limited to anti-Semitism. It is boundless, and it will go anywhere where people are weak enough to allow these cultures to grow. And history indicates that they will not stop there. So what we saw in Europe and in the United States is very troublesome. It's not an Israel issue, it's a global issue, and it's actually a very significant moment in history.
I still hope, and I'm relatively optimistic, that the Western world leaders, including the US leaders, will recover, will make the right decisions and some of them will have to be tough choices. But if they don't do this, we are talking about a totally different world less than 100 years from now, maybe even 50 years from now.
Michael
I think 10 years from now, for what it's worth. On that point, I want to ask you a policy question actually. So most 18 to 24-year-olds get their news from TikTok. And very clearly, a lot of these 18 to 24-year-olds have been radicalized and somehow either through obliviousness or some sort of insidious behavior, have become radicalized with pro-Hamas and pro-violent Hihad sentiments.
How do you think about TikTok, and would it ever occur to you as a minister, which you were, to ban TikTok for that reason?
Izhar Shay
So TikTok is a specific example, because it is actually governed by Chinese forces. There's always the assumption that something may be there that is not just biased, but also controlled by some central forces. But I will answer you in general, in a more generalistic fashion, Michael.
I hate the word regulation. I hate the notion of regulating the free world and definitely free press, and the freedom of expressing yourself and so on. But the world is, the worldwide regulation is almost like centuries behind what happened with technology. And somehow we have to match the abilities of technology as it is practiced today, by evil people, by savages, by people who are using these technologies on purpose in order to promote agendas that are anti-Semitic by nature, that are racist by nature and are criminal by other natures.
So the leaders of parliaments around the world have to put their heads and have to first of all understand the potential of these new technologies because this is like giving weapons to your enemies in a country without limiting them, because you do not understand the ramifications.
Somebody walking with a rifle in the street, and you didn't put a regulation against it just because you don't know exactly how a rifle works. Once you know that this rifle has bullets that can kill people, you put regulations as to who is allowed to buy that rifle and forget about freedom of choice and the freedom of movement and so on.
Even if you're allowed to own a rifle, speaking in US terms, you are not allowed to walk the streets of New York and to shoot people.
So you have to put regulations on social media that will prevent the same kind of damages. And we know today that using social networks - this is not about TikTok, you have all kinds of possible ramifications also on fake profiles, and the spread of traveling news and other types of media pieces on Telegram and other social networks. So the regulators have to understand the dangers and have to respond accordingly.
You know, this is a moving target. Most of the world regulators and I was, for one, part of the Israeli parliament, you know, most of the people don't even know what you and I have just talked about. Just to understand the dangers, the potential ramifications of your enemy using social networks. By the way, we know today that Israel was attacked many times over the last few years on social networks, on Facebook, on Telegram, on Twitter, obviously on TikTok as well, by very specific...
Michael
Yeah.
Izhar Shay
enemies, using all kinds of targeted psychological weapons in order to affect the society here. So this is not just a theoretical situation. The regulators have to respond, have to understand and do this rather quickly.
Michael
So I want to ask you just two more questions, maybe a third. Did you watch the videos of the atrocities committed? Did you bring yourself to watch them?
Izhar Shay
No, I read the descriptions of those videos, but I will not look at them.
Michael
And when you think about those videos of the atrocities, and the savage behavior, and the way that the savages used videos in social media and Telegram to do this, what's your takeaway about whether that stuff should be out in the open or should be controlled?
I see, on some level, I see both sides of it. One is that the truth needs to be known about the savages. And on the other hand, I have watched them, you know, it's damaging to the soul and damaging to the families of people who have survived. I'm just, I'm interested in your perspective.
Izhar Shay
Yeah, so first of all, I think that - let me tell you a quick story about this, because it's interesting. So, you know, Yaron, our Yaron, our fallen son, had his smartphone on him during this fight. And the smartphone was not with him when he was brought into hospital. It was actually recovered in the battlefield a few days later. So we actually got hold of his cell phone not before the Israeli Shabak, the Israeli security arm of the government…
Michael
CIA.
Izhar Shay
The Israeli CIA, they actually cleared those phones, because it became a known fact that one of the doctrines the Hamas savages used is to recover those cell phones, to record atrocities on the cell phones and then to leave them back in the field so that when a family of a fallen soldier gets their cell phone, they first get to see the atrocities of the cell phone of the fallen soldier.
This was part of the psychological warfare doctrine that these savages went after. It actually happened within the first few days. So we are lucky enough not to have fallen in the same trap, just to show you the level of sophistication. And people have to understand that these atrocities were taped and documented on purpose. This is the ISIS philosophy of infiltrating fear and terror on the world. So, you know, the ISIS demonstrations of beheading dozens of people did have its effect on many people around the world.
This is exactly what these murderous savages were trying to do over here. I believe that, first of all, at least the transcripts should be distributed worldwide. I mean, what I thought to myself is they should put the same videos without the video, just description. Now we are seeing the torturing of a young lady. Now we are seeing the shooting of an innocent civilian. Now you are missing - just, you know, black screen that describes what you have missed over there, maybe showing some noises or whatnot.
And I think that also this should be limited, you know. The fact - and I read all kinds of articles, just the fact of these descriptions being spread out is very negatively affecting, you know, young souls, young kids and so on, and adults as well.
But after considering all these damages, the news has to be spread around. People have to understand what is the kind of evil we are talking about here. And I think that part of this ignorance infiltrates the hypocrisy of “equality” of war, as between what happened to us and what happened to them. Part of this discussion that you're seeing over the TV networks, say the BBC and others, part of this is just sheer hypocrisy. And part of this is just ignorance. People don't, I guess, people can't even envision that human beings can act in such a way.
So we have to educate the world. We have to make sure that the world understands that these people tried to document themselves doing the most terrible acts a person can even imagine, because of being proud of doing this, because of being happy of doing this, or because of whatever. We have to document it, to spread this around the world, but we have to do this in some, I guess, civilized, so to speak, ways.
That's the only way for people to conceive and understand these news.
Michael
Two last questions for you. One is, the first one is, what's the one thing you wanna leave investors with? Investors listen to this podcast. What's the one thing you wanna tell investors today as they think about today, tomorrow, and the next October, and the next October after that, and the next October after that?
Izhar Shay
Be patient with us for the next few weeks, maybe few months, but when this is over, the Israeli innovation is back in center stage around the world. You're going to invest here because you're going to make money and good returns, but you're also going to add another good reason. You're fighting sheer evil. You're fighting the people who went after you, not after Israel. They went after the civilized Western world and had we not stopped them here, you would have faced them in Paris, London, or God forbid, New York.
Invest in Israel because this is the right thing to do.
Michael
And the last question for you is, it's my perception at least, that Israeli innovation has actually accelerated during this conflict. There's just incredible stuff going on in the technology units, in the military, in startups, and the civic response to what's going on, which has been incredible. The most remarkable thing. In the last episode, I talked to Ami Daniel about what he did in the early days after October 7th. So now I'm talking to Izhar Shay, who's been a successful entrepreneur, successful venture capitalist.
If you were going to start another startup today, also to memorialize the fallen, what would that startup be that would create just a much better world and incredible returns? What would you do?
Izhar Shay
You know, I have so many ideas. Actually, some of them use, or make use of AI in order to provide for better services, media and so on. I'm actually toying with an idea, as we speak, of using AI to analyze news and to spread them around in much more efficient and personalized ways. I saw yet another proof of the fact that people consume news, but they need to consume them in different ways than we used to, maybe even five years ago.
So there are new opportunities today, new ways to use AI in order to consume media, to distribute media, to understand, to personalize it and so on. And what I've just said is probably the basis of 10, 20 new startups. And I have other ideas as well. I think that what's interesting to note, Michael, thank you for raising this point. Many people came to me because of this Next October project, and expose all kind of new fresh ideas. 99% of those ideas have nothing to do with war, conflict, military zones, whatever. They just have excellent, fresh, bright ideas. Maybe they got the inspiration from the situation, but the implementation is not about war or military. It's about making for a better world.
Michael
Thank you, Itzhar for joining us. Our condolences again on Noni. He, he served like you did, and fell defending all of us. So thank you for that service.
For those of you who want to learn more about Izhar, you can find him on LinkedIn at Izhar Shay, which is I-Z-H-A-R-S-H-A-Y. If you enjoyed the podcast, please rate us five stars. But I also want to encourage one other thing.
Use Google Translate and go into the Sipore Noni or the stories about Noni on Facebook. I just sat at the condolence call and listened to stories. I have not been to the Facebook page, but I'm going to go now and encourage everybody else to do that. And if you're listening and thinking of starting a startup, no matter where you are in the world, pick up the names of the families of one of the 1400 fallen people and memorialize them and support them through this incredible effort and initiative of Izhar.
So thank you Izhar, and we wish you only happiness and health to you and your whole family going forward and many more grandchildren.
Izhar Shay
Thank you very much, Michael. Thank you for having me. And yes, let's work together for a better world. Thank you very much.
Michael
Deal.
[00:00:00] Michael Eisenberg:
For a professor of AI and especially the way we kind of consider what you refer to as statistical models or LLMs today, I find you much more creative brain side than mathematical brain side.
Yoav Shoham:
Oh, it's a total accident. I'm a computer scientist. I agree.
Michael Eisenberg:
Welcome to our latest episode of Invested. I am thrilled to have with me Yoav Shalom, or doctor
Yoav Shoam, who was a professor at Stanford for many years and is now the CEO and founder of AI21, a foundation model company based here in Israel. But instead of me introducing you, Yoav, why don't you introduce yourself?
[00:00:36] Yoav Shoham:
Well, first I can confirm–I am old. I was at Stanford for more years than I'm willing to admit.
[00:00:41] But I need to correct one thing. I'm co-founder and co-CEO of AI21 Labs.
Michael Eisenberg:
Okay.
Yoav Shoham:
Otherwise, perfect.
Michael Eisenberg:
That's all you have to say? Give us more of your background.
Yoav Shoham:
Ah, what can I say? Born in Israel, grew up in Haifa. Did computer science by mistake, just because my parents thought I should study something, so I studied that. Didn't really care. Discovered AI. Started reading on the internet, and–no, there was no internet. But went to the libraries and read, went to do a PhD in the States. Came back to Israel for an abbreviated post-doc. But then already had the job at Stanford waiting for me in 1987. Yes, I'm that old.
[00:01:23] Michael Eisenberg:
Now, everybody who listens to podcasts today is talking about AI, but when you say, “I discovered AI,” this is not in the current moment of LLMs, right? You discovered it a long time ago.
[00:01:36] Yoav Shoham:
That's right. It's interesting. Today's young folks, brilliant young folks, really think of AI as almost synonymous with, if not LLMs, at least deep learning, more broadly construed, and certainly, you know, within machine learning, even more broadly construed, but AI has a longer history, and it's a broader umbrella. And a lot of the limitations of LLMs right now, if you really want to overcome them, you need to have this broader perspective.
Michael Eisenberg:
[00:02:08] Ah, this is exactly where I wanted to go in about 15 minutes, but we're going to go there right now. So, tell us about your discovery, what you discovered about AI way back–it's now 40 years ago.
[00:02:18] Yoav Shoham:
I was drawn to AI just because of the intellectual curiosity. It just seemed like an opportunity to think not so much about, not only about computers, but also about people and the relation between them, and what does it mean for a machine and for me to be intelligent.
So, that's the reason I was drawn to it. It's an opportunity to do philosophy and psychology while getting a computer science salary. And that really is still my interest. But then at the time, machine learning was always there, but the emphasis back–so people don't realize that AI had another AI moment in the ‘80s. So in the ‘80s it was a similar phenomenon where you went to a conference, standing room only, even the VCs couldn't throw money fast enough at AI.
That was the ‘80s. And then in the 90s, we had what we call the “AI Winter,” where you weren't allowed to admit you were doing AI. And then in 2000, suddenly, is the beginning of the new wave. But the technology was very, or the emphasis in technology was very different. Back in the ‘80s, it was all about the symbolic system, how to represent knowledge explicitly and draw inferences in a very deliberate way.
[00:03:36] And machine learning was there as an intellectual activity, but didn't play an important role. And now, of course, it's the mirror image. We do statistics. This is what we do. At scales we couldn't imagine. Enabled, not so much because of algorithmic advantages–that also–but mostly the insane abundance of data and compute.
[00:03:57] And it's amazing what it does. But we kind of left money on the table when we pivoted away from, you know, reasoning to statistics.
Michael Eisenberg:
Explain. This is a critical point to explain.
Yoav Shoham:
Maybe the best way to explain–look at today's LLMs, large language models. And it's amazing what they do. And among other things, they do arithmetic, which is in some sense mind-boggling. You know, we didn't expect when we trained models that they'd be able to do arithmetic. And they do it. You give it two digit numbers to add up, and they'll do it just fine. You'll give it six digit numbers to multiply, and you'll get garbage.
And that's because God did not put neural nets on Earth to do arithmetic. We know how to do this. HP told us how to do it in 1970 with a calculator. So, not everything starts and ends with a language model. That's an example of reasoning, an area in which we've optimized how to do inferences in a symbolic way.
[00:05:04] And so that's an example of reasoning. But the list goes on and on. And so the trick is, and this is, by the way, why we started the company–LLMs weren't a thing when we started seven years ago. But that deep learning was necessary but not sufficient. And you need to bring reasoning back into the picture.
Michael Eisenberg:
And I want to specifically focus on your comment, we left money on the table, by kind of abandoning reasoning for a decade and then kind of getting to this big data moment, which we'll come back to in a second, and then to LLMs. What does it mean we left money on the table?
[00:05:41] Yoav Shoham:
It means that we could do certain things well then.
[00:05:45] Types of reasoning, it's not just arithmetic–you didn't need AI for that–but it's actually temporal reasoning. I give you a bunch of information about events that took place, and I ask you questions about certain events and what was the temporal relation between them. A whole area within AI called “temporal reasoning,” and their algorithm for doing that.
The language model today can't do it. I actually recently published a paper with a colleague of mine called “Understanding.” What does it mean to understand something? And we give that as an example. So that's an example of something we could do in the ‘80s we can't do with LLMs, and that's the money we left on the table.
[00:06:20] Michael Eisenberg:
Just yesterday, I was working with a colleague and we asked it, post the Biden debate debacle, to write a column as Thomas Friedman would write it about a certain topic. And we fed it the parameters of the article we wanted, or the opinion piece we wanted it to write, in Thomas Friedman's style.
And it produced a remarkable copy of Thomas Friedman's work on this new topic. And then we asked–it was ChatGPT–we asked ChatGPT “Tell us how you got to this structure,” and it was able to tell us how it got to the structure, like, by dissecting it. And then we said, “Okay, point to other Thomas Friedman pieces where this structure exists,” and it was able to do that.
[00:07:10] I think this is something, for example, that these LLMs are perfect at, which is structured reasoning. But temporal reasoning is very complex for these things, because it doesn't understand the concept of time right now.
[00:07:25] Yoav Shoham:
For example. Yeah. By the way, I wonder whether what it produced for Tom was the same as what he actually wrote recently about the–
[00:07:33] Michael Eisenberg:
It was on a slightly different topic. And I don't know if it was updated for that post. Basically, tried to have Friedman write a piece about the lame duck part of Biden's presidency, what he should do.
Yoav Shoham:
I see.
Michael Eisenberg:
As opposed to whether he should withdraw from the race or not. It was actually an incredible piece.
Yoav Shoham:
Yes.
Michael Eisenberg:
But what it showed me, by the way, was that Tom Friedman actually has a structure to how he writes that's incredibly consistent and predictable.
[00:08:03] Yoav Shoham:
That's interesting. So, listen, first of all, language models are amazing. They really are, and they surprise us all the time. And they do exhibit certain things that you almost have to say there's reasoning and understanding there. And then they don't. And understanding when they do and when they don't is a crapshoot, which also raises the question of, well, what does it mean for them to really understand the subject matter they're involved with?
[00:08:38] And they're amazing at pattern detection. Patterns, by definition, compress information, which is a mode of understanding–by projecting a high dimension to a small or lower dimension, it means somehow you've extracted an essence of some sort. And they do it by their [00:09:00] construction. But the essence that they hone in on, and how much of that is relevant and sound, and how much they are not able to extract is really a crap shoot.
I have a colleague who published an, I thought, a very insightful piece on the distinction between being able to produce expert output and being able to understand the output. And how people and machines, or at least people and LLMs, are different in this regard.
Michael Eisenberg:
Explain.
Yoav Shoham:
That people, for me to produce something that looks like Thomas Friedman's piece, would really force me to somehow understand something in a way that I could communicate to you, that I would be able to communicate, to articulate to myself. And then I'd be able to–it's hard for me to speak Friedman-esque without having that structure in mind.
And I wouldn't do it very well. I wouldn't do it as well as the language model, whereas language models, I just said, do it amazingly well. Whether they really understand it in a way, it's unclear. And by the way, the mere fact that you promise to say, “explain it to me,” and they give you a cogent sounding explanation, doesn't mean they really understand it.
The same example I gave earlier about temporal reasoning, so in this same paper, I prompted–and this is not a knock on GPT because it's true for RLNs also, but, I prompted, at the time it was GP3. 5 to give me a temporal reasoning answer, and it gave me a very confident wrong answer and an explanation behind the answer. And then I asked it, “Well, are you sure it’s that?? And I gave it a hint, and it said, “oh, I'm sorry, the right answer is such and such.” It gave me the explanation. Again, a totally wrong answer. So, explanations could be only a veneer, and not display a real understanding.
[00:11:07] Michael Eisenberg:
So on that point, like if I'm a user, and this happened to me by the way in the early days of ChatGPT, where I asked it a question about something I thought was a historic event, with Nachmanides.
Yoav Shoham:
Yes?
Michael Eisenberg:
And I remembered in my own head reading about it and it gave me a date, and by the way, it gave me three sources in Jewish texts for the things, and I went to look at the Jewish texts, and they're not there. After it gave me the actual text from it, and they weren't there, and I began to become confused as to how I was able to make up this thing that I remembered from 30 years ago, and somehow it knew it. And so I posted it to Twitter, and a classmate of mine from college said that we saw a movie about Nachmadidies in which this scene appeared.
Yoav Shoham:
That's great.
Michael Eisenberg:
And it must have somehow, I guess, Chapter 50, found the script or something like that in one of its indexing or training sessions, and then brought it back, and somehow invented the sources. And like, so the question I asked myself is given this, and it's very convincing–I'd even written something on the basis of it–like, how am I as the human supposed to know what to trust and not trust?
[00:12:19] Yoav Shoham:
I think that's the key question. I mean, one of my less charitable colleagues called this authoritative bullshit.
Michael Eisenberg:
I know some people like that too, by the way.
Yoav Shoham:
And only some of them are in office.
So I think this is interesting. It's interesting not only for intellectual reasons, but also for pragmatic reasons. You know, it's this age of, I don't like the term ‘fake truth,’ but you know, post truth. And I think one of the biggest issues for us as a modern society, you know, hoping to maintain a liberal democracy, we're eroding the information layer underlying their society and, to the extent that we're relying more and more on automated tools to produce and display information, that you should have known, how are we to know, is critical.
First of all, I don't have the right answer. When I grow up, it's something I want to deal with really. But in a limited way, it's something we've put an emphasis in our own–so you know, we, it’s not a main focus, but we have a very successful application called WordTune that helps you write and read.
[00:13:39] And what we try to do, when we suggest things you might put into the text that are contextually relevant, we give you the sources. And so, at least you can inspect and say, “Do I trust this? Do I trust that?” It's a key issue. And some of the chatbots now do that, introduce pointers. But it's an issue how to trust the information you get.
[00:14:06] Michael Eisenberg:
And what would you teach kids today in order to help them kind of contend with this era?
[00:14:14] Yoav Shoham:
Again, yeah, I don't know the answer, but I think it's gotta be a Socratic approach. It's just teaching people critical thinking, whether from a person or a machine.
Michael Eisenberg:
How do you do that?
Yoav Shoham:
How do you do this with your kids?
Michael Eisenberg:
So I actually got asked in an article I was interviewed on AI over the weekend, it was published over the weekend. And they said, “What should kids study today?” And I said three things, but I left out the fourth, which I'll come to in a second. The three I said were, I think, math and coding are good because they teach you how to think in structured formats, and philosophy was going to be critical, because I think there's going to be an endless amount of both ethical issues, and you need to learn to question everything.
And so I thought philosophy. But the fourth thing I should have added was actually Talmud.Because I think it teaches you how to think using a Socratic method that's very valid, very critically, and to try to get at truths and multi-layered truths that you kind of get at, and I think in my own life, the thing that serves me best for critical thinking is actually Talmud study.
[00:15:30] Yoav Shoham:
I can't boast that background and knowledge, but I recognize what you say. I think we agree on this, that the challenge is to not make everything relativistic and conditional, and a matter of perspective. At the end of the day, one plus one is two, and October 7th happened, and these are things we can't relativize away.
Having said that, not, you know, we do need to question all facts, even these facts. And it goes back to–so what is the basis for accepting something? It's interesting, I'm falling back on this latest kind of weekend hobby I had, this paper I finished writing after years of trying to do it with a colleague, by the way,Kevin Layton Brown. And we asked the question, “what does it mean to really understand?” So here's the thing, that's actually–it's a theoretical paper, but it's actually, I think, relevant to our conversation.
First of all, when we discuss the subject matter, we've got to have some level of competence. We can't really speak with any authority on whether it's math or Talmud, or world politics, without displaying some kind of general competence. Call it a passing grade in this domain. But it won't be perfect, and there's certain things we will say, I don't know, and that's fine.
But we can't be ridiculous. If I say something that is patently wrong, and I cling to it in the face of evidence, then there's something fundamentally wrong. And when you think about how to achieve that, the issue of explanation becomes very, very central. I'll try to explain what I mean by that.
When I ask you, okay, so why do you believe something? Why is something the case? So Feinman has this very fun, you can find it on YouTube, somebody asks, “Why do magnets attract?” And it goes through this long, “Well, it depends at what kind of answer you want, because of this, but why this…” And as he goes to a deeper explanation, so explanations are a funny thing, but at the end of the day, explanation is an appeal to a source of authority that's unquestioned. Why does one plus one equal two? Well, here's the addition table. We accept this as truth. Why did October 7th happen? Well, here's all the evidence. Here's something that we saw live on TV.
And you can close your eyes and ignore, but then we just don't have a common base for conversation. Sometimes it's more involved. I mean, sometimes you need a more complicated procedure to explain, but somehow you need to fall back on something that both the explainer and the person who's judging agree is a common basis.
[00:18:45] I think this is something we need to establish. These are, and by the way, this goes back to Talmud, right, because there are principles of reasoning that are enshrined there. So whether it's these exact principles or others, we need to agree on [00:19:00] them, whether Talmud or Wittgenstein or something in between, I'm not sure.
[00:19:03] Michael Eisenberg:
I find it fascinating that you go to Wittgenstein in deconstructionism because that had a huge impact on my thinking in college.
Yoav Shoham:
How so?
Michael Eisenberg:
Because I think there's a lot reflected in language, which is what he was interested in. Apropos LLMs, by the way, that also help tell us about culture.
[00:19:23] And I think if you're trying to understand whether people are having the same conversation or different conversations, understanding the cultural backgrounds that they come from, and the words they use, and the types of parables and homilies that they use is valuable for that. Why did you mention him?
[00:19:41] Yoav Shoham:
I went through a period. I went through a phase.
Michael Eisenberg:
At what?
Yoav Shoham:
I don’t remember, I think it was early college days, or not early college, my graduate studies, where I had the luxury of just reading a whole bunch of philosophers and psychologists and, and one of them was Wittgenstein. And,of course, the very structured way it went about things. was very closely related to the development of logic at the time, logic and AI, were intimately sort of intertwined. My thesis was about logic of time and causation. And so, somehow….
[00:20:17] Michael Eisenberg:
We're gonna cover that more. So Jack Clark who is your fellow chair of the AI Steering Committee–by the way, what is the AI Steering Committee at Stanford? That you chair, right?
Yoav Shoham:
Well, let's speak about what the AI Index is.
Michael Eisenberg:
You're the founding chair of the AI Steering Committee, right?
Yoav Shoham:
Right, so there's something called the AI Index. Maybe take a step back. There was a project also anchored at Stanford called the AI 100, which is a 100 year study on AI. Which my friend and colleague, Eric Horvitz from Microsoft, started. And I was asked to join its inaugural, sort of, committee. The vision there [00:21:00] was to do periodic, every five years or so, a big study on AI with an expert. Which they do and it's great.
[00:21:07] But my feeling then was that the rate of change in AI, this is even before the latest craziness–going back, yeah, maybe ten years ago–that the rate of change is too rapid to only do things, so let's do like, something that's ongoing, kind of like an index that we update real time. And so that was the vision, and I started sort of an offshoot from that, and it became an independent thing, and it puts out these annual reports.
It does other things, but the main thing it does is puts out these annual reports that are amazing. And I get to say this because I actually no longer chair it. I'm on the committee, but I no longer chair it. And my colleagues there did an amazing job, and they, there are like, yea-thick tomes, pages–the idea was not to be an apologist for AI, nor an alarmist, just inform the conversation.
[00:22:05] Lots of data, and so that's what the project is. And like I said, I no longer chair the committee, although I'm still on it until they kick me off.
[00:22:15] Michael Eisenberg:
And so, Jack Clark said–he's your fellow chair on the Steering Committee–at a panel discussion with you in Beijing in 2017, you said that you thought AGI, or artificial general intelligence, which is on par with human intelligence, was hundreds of years away. Jack specifically mentioned that you said 500 years away. Do you still think that?
[00:22:39] Yoav Shoham:
First of all, I don't want to be held to a quote that is attributed to me. I want to see the source, because it's actually–
Michael Eisenberg:
Jack, isn't he the source?
Yoav Shoham:
Well, I'm willing to believe that Jack said this. I need further evidence that I actually said what he said I said. It's a little unlike me to say, because as soon as you mentioned AGI, Artificial General Intelligence, my first reaction is, I hate that term, because I don't think it means anything. Well, that's a strong statement.
[00:23:14] I think it's so loose and ill defined that machines have always been better than people at certain things. They'll continue to be better at more and more things. At what point does it become AGI? I don't think that's well-defined. So I think machines are amazing. I think that I do believe that where we are in the evolution of artificial intelligence is not nearly as far as some people think. And in Beijing, I actually remember that slide, to describe where we are in AI–and already then there was a lot of excitement about AI–I had an image o a cartoon I reconstructed from my childhood of, you see a kid looking at the stars through a telescope, but standing on a stool to get closer.
I think it's not a bad metaphor for where we are in AI right now. The stool we're standing on right now, LLMs and stuff, it's amazing. But I think there’s a big gap between true intelligence understanding and where we're at today.
[00:24:23] Michael Eisenberg:
The, kind of, meme is, we need to be concerned about AGI, in fact, this whole, which I imagine is not fully true, this kind of whole thing that happened at OpenAI because somebody saw something that reminded them of AGI–and I kind of find these things a bit fantastical. That was a worry. What worries you about AI?
[00:24:48] Yoav Shoham:
Let me start by what doesn't worry me. What doesn't worry me is that tomorrow machines will wake up, thank me for my services to the evolution of the species and send me off and replace me as a species. I don't think that'll happen.
[00:25:13] Michael Eisenberg:
Hallelujah.
Yoav Shoham:
I don't know, you look at some of the people, you're not sure, but….
Michael Eisenberg:
You're thinking about artificial intelligence for politics right now. I see what's going through your head.
[00:25:25] Yoav Shoham:
You know me too well. But I think there's real issues as it is with any technological, I wanted to say, revolution, of inclusiveness, which segments of society will benefit, will reap the benefits, of inclusiveness, of how to spread globally among different parts of the globe. There's issues, I think issues of the impact on both employment, and training, and education is real. Now, I actually believe that every technological advance, including this one, always produces more jobs than it eliminates.
But it does eliminate some jobs, so the transition can be painful to people.
Michael Eisenberg:
I'm with you on this. I agree.
Yoav Shoham:
And it certainly calls for a change in the nature of the jobs. I mean, an example would be, say, writing. So copy editing is essentially a non-job anymore. Editing, in the sense of a magazine editor or a book editor, exists, but now the editor has many more tools and some aspects of it can be automated.
And so I think the nature of the job there changes a little bit. So I think that's an issue. The magnitude on the workforce, I think, I don't know. There are many studies. I know you know them well, but I remember the McKinsey estimate of, what is it, like a couple of years, three, four years ago–I can't give a better estimate, but I don't know that the basis for the numbers listed there–at some people, at some point people predicted that two million truck drives will lose their jobs. I don’t see that happening any time soon.
[00:27:20] Michael Eisenberg:
I actually think it's more likely–because that stuff has got regulation–I think the more likely thing I keep referring to is BPO, or business process outsourcing, in India. You know, it's just endless amount of forms, and form analysis, and it could be for insurance, or 401ks or, you know, benefits or a million things that get done by a million Indians or Filipinos, and they don't see the customer. And so, over time, which is probably getting faster, those jobs get replaced in a similar way to copy editors getting replaced, and maybe people who write marketing copy kind of more broadly. Anything where there's a form I think is where you start.
[00:28:03] Yoav Shoham:
I think actually, you're right. I think these are better examples. Every process automation, you know, like RPA, but on steroids, I think is ripe for disruption here and it's happening. Yeah.
[00:28:16] Michael Eisenberg:
And those jobs are considered not blue collar jobs, they’re considered like, on the border of white collar jobs right now.
Yoav Shoham:
I agree.
Michael Eisenberg:
Yeah. So tell us about AI21 Labs, which you co-founded and are co-CEO of.
[00:28:29] Yoav Shoham:
So, we started really in 2018. I think formally end of 2017, if I remember correctly. And when I say ‘we,’ it's me and two other people. It's Ori Goshen, who's half my age, twice my brains. And Amnon Shashua, who's just twice my brains.
And the reason we started the company is odd. We didn't start it to solve a problem in the world. We started it because of where we saw the arc of AI. It's very much what you spoke about before. We believed that deep learning was necessary, but not sufficient. We needed to put reasoning back into AI, and so let's figure this out.
Michael Eisenberg:
And?
[00:29:08] Yoav Shoham:
Working on it?
Michael Eisenberg:
Yeah. And what is the best example? So, if for argument's sake, I have ChatGPT or Mistral, which for lack of a better term–
Yoav Shoham:
Never heard of them, but keep going.
Michael Eisenberg:
Or Claude, which is, you know, kind of these chatbots with a big LLM in the background. And, Claude is doing some other fancier work right now. Where does AI21 sit in that landscape?
[00:29:37] Yoav Shoham:
So, I think it's good to look at the evolution of the recent evolution of LLM lands. And in the beginning, there was a very simple temperature zero, kind of use of LLMs. You have an LLM, you give it a prompt, you get a completion, a single completion, and you're happy.
When GPT3 came out, we developed our first model called Jurassic 1. And at the time it was slightly bigger, slightly better than GPT3. And at the time, they were the only game in town. And that was the first stage. But since then, things have evolved. First of all, it's not always linearly kind of dependent, but roughly– first of all, we realize these are stochastic systems.
[00:30:35]
So even if you just call it an LLM, there's something probabilistic going on. And you want to maybe sample it several times from the distribution and do something with the sample, for example, in WordTune, the application we built on top of it, we wanted to give you–you write something, and you're given suggestions of what else you might write.
And the idea here wasn't to kind of do a word smithing or word play, a synonym or something, but to give you something that was more semantically, perhaps, relevant. You could say, and this actually happened, you could say, “It was nice meeting you last night,” or write it. And the system would suggest “it was love at first sight,” which is not obviously a paraphrase, but I think actually what you might have wanted to say. And so, to do that, you wanted the language model to generate diverse–language models weren't optimized for that. And so that's the next step of kind of tweaking the inference that you get for diversity, and checking the results.
This takes you in the direction of where we are today, of doing AI systems. But in between the various tools, for example–this is going to 2022, I think it was–We spoke about tools, which was, to us, I think, an obvious thing. I mean, you don't want to do arithmetic, we said, with the language model–let’s call a calculator.
[00:32:02]
You don't have access to an employee database? Call the database. You want to do web services–these are all tools. And so, but this is a little oil and water. And so how do you get the language model technology, which is continuous kind of backpropagation with these discrete operations. And so we published something called the Miracle System, MRKL; it stood for something, doesn't matter right now.
[00:32:26] Michael Eisenberg:
Another politician, Angela Merkel.
[00:32:27] Yoav Shoham:
Yeah, not that. Although I have nothing but good things to say about her. And by now I think that standard that’s generally accepted is that you need to use tools. You need to reflect on the address. That's also for–and we're slowly moving towards what a lot of people like to call agents, which is another term, I dislike, even though I coined the term ‘agent-oriented programming’ back in 1991, I want to say.
Michael Eisenberg:
Wow.
Yoav Shoham:
In fact, here's a curious fact. Last week, I got an email from the AI Association that this paper won the Test of Time Award, and I got some award for that. But that's more of a historical anecdote than anything else.
[00:33:20] Michael Eisenberg:
I'm curious to hear what the trophy looks like for that award, given that it's an agent.
Yoav Shoham:
[00:33:24] Me too. Me too. We'll find out. I'll you know. I haven't gotten it yet. So people speak about agents, and I think people are touching different parts of that elephant, but it's very much an evolution of these ideas of using tools, and doing self reflection, and this very vague notion–planning. It's kind of Kahneman's thinking fast, thinking slow. You know, right now it's very transactional. You call an LLM, in fact, you call an LLM, you're the initiator, and the language model “thinks,” quote unquote, for between a fraction of a second to fractions of a minute, and gives you back the completion of the answer.
But you're going to see systems where the execution could take longer, in fact, could take weeks and months. And, in fact, the system may initiate things.
Michael Eisenberg:
Give me an example.
Yoav Shoham:
You want to task your research agent to do internet search on an ongoing basis, subject to your guidelines of what you're interested in. And it'll go and do internet search, and maybe you have an urgent need that you tell it, “Oh, I need an answer like in an hour, I’m preparing a presentation.” And maybe you say that, “I need you to fact check things. So I want you to go deeper and chase links.”
Or maybe it doesn't require that. And maybe you have more or less compute for this. So it's a complicated kind of, new kind of operating system, kind of that's required to manage all of these things.
[00:35:08] Michael Eisenberg:
What do you mean before specifically when you said ‘AI system?’
[00:35:13] Yoav Shoham:
So ‘AI agents’ are maybe the catchy phrase for what is the behavior you'd like from these things. To make it happen, you need a system. And I'll give you an example. In fact, when you're using the chatbots that you like to use, you're using, it's more than a single call to an LLM–there's some pre-processing that goes on, there's some checking after, there's already something above it. And you'll see more and more of that, where the LLMs are a very important tool, but they're a tool.
[00:35:53] So what you have now is a whole system where there's various things that take place. LLMs are called more than once, and more than one LLM. They’re bespoke software that's written to take care of certain things. There's tools that we mentioned and some of that, all that needs to be orchestrated to produce the solution to the problem you posed. That's an AI system.
[00:36:16] Michael Eisenberg:
When you look around and you talked about, quote, the chatbots or the agents right now, and the need to build systems, and you look around and you see the amount of money being raised by OpenAI, Mistral, AI21–it's raised a lot of money, but nowhere close to these numbers, right, as OpenAI has?
[00:36:36] Yoav Shoham:
It's close to Mistral, not close to OpenAI, yeah.
[00:36:37] Michael Eisenberg:
Does the ability to get a big return, a venture-scale return on that make sense to you? Where does it come from?
[00:36:47] Yoav Shoham:
Well, that's more of an AI question for you.
[00:36:47] Michael Eisenberg:
But you raised the money, you got to return, right?
[00:36:49] Yoav Shoham:
Well I, we hope to. I'll tell you why we need it. Whether it's a good investment for our–I hope it is. We need it for two reasons. The main reason is compute. These language models, as you know, are expensive to train. There's no question of how many of these do you need. And we can speak about that. But, it's expensive to train.
And that's already, by the way, it doesn't have to be hundreds of millions or billions to train them.
It can be a mere dozens of millions. Which adds up, you know, a dozen million here and there, it adds up. But that's the main source. The other is talent. We're fortunate to have really good talent, and you know, that, that costs money. And so, you know, so I'd have to say, we've raised a little over 300 million right now and we're happy with that, and we'll probably raise more because, to train the next models, we'll need to fund that.
Michael Eisenberg:
[00:37:54] Is model training a moat? Or is it not really a moat?
Yoav Shoham:
It's a really important question. First of all, it is, in various aspects. It's a moat for young startups because it's expensive, and they don't have money. For rich companies, it's no longer a scarce commodity, the talent to build a good language model. It is scarce to build an excellent language model. And it's an important distinction.
[00:38:32] Michael Eisenberg:
And that's a talent question more than a data question or a compute question, right?
[00:38:38] Yoav Shoham:
Well, you need all of the above, but one moat is the talent. You know, information diffuses.
Michael Eisenberg:
And computing costs comes down generally.
Yoav Shoham:
Yeah, let's see what, how these curves intersect–because it's not just the amount of data, it's also the length of training.
Michael Eisenberg:
Yep.
Yoav Shoham:
But right. And the other thing is that not all language models are created equal, not just in quality, but also in the type of stuff they need to do. Just for example–one reason, by the way, we have more manageable expenses is that we're not chasing the full multimodal language model.
We're looking at the enterprise, and we ask, so what is the data in the enterprise? 80 percent of the data is text. And what's not text tends to be charts and graphs, but it's not donkeys on the moon. So that hasn't been part of what we've been chasing. And so our models are really good at that, even if you don't have a crowd pleasing sort of, you know, a multimodal model.
But even more specific, you have a model that goes to certain things, certain tasks. So I think we're going to see multiple models. And having access to a very strong general purpose model is an edge.
[00:40:09] Michael Eisenberg:
You're, then, the believer in what I would call the large language models rather than the small language models, and the more circumscribed ones–the ones that kind of focus on a given niche. Like you could see an accounting model, if I'm not mistaken.
Yoav Shoham:
No, no, no, totally. The reason I'm hesitating is because we sort of pioneered the topic of–so Gartner just have a new category called ‘task specific language models.’
Michael Eisenberg:
Oh, now the space has arrived. There's now a Gartner model. It's a task-specific language model.
Michael Eisenberg:
And I think they do credit us with coining the term. So we're a big believer in that. But one of the reasons I hesitated is because in order to create a really good model, whether it's a certain domain, or a certain task, or what have you, you really want to have a very strong basis from which to drive this model, which is, by the way, tends to be smaller, and better at the task. So it’s not either-or, it's and.
[00:41:02] Michael Eisenberg:
You look at like, for example, what happened to Mustafa Suleyman's company, right? It was kind of, you know, sold for the body parts to Microsoft's expensive body parts for that. And you look around and there's been, I don't know how many companies that have raised hundreds of millions of dollars at this point, if not billions. You know, the character, I just raised a pile of money, and, how many of these do you think actually make it?
[00:41:24] Yoav Shoham:
I thought you were going to mention Adept, if you've seen, you know, a similar story to, Inflection. I think they're companies who made a bet on a specific application. And that's a–wow, I don't have the English term for this.
[00:41:48] Michael Eisenberg:
You either get a purple heart, a badge of honor–either get a badge of honor or you'll hang your head in disgrace.
[00:41:56] Yoav Shoham:
Something like that.
[00:41:56] Michael Eisenberg:
Yeah, it rhymes in Hebrew, but it doesn't work in English so well.
Yoav Shoham:
Yeah. One of the few cases where Hebrew is pithier than English.
[00:42:04] So yeah, I mean, creating a—Right. So I think as you bet on a specific application, it become more tenuous. We, by the way, we realized, for example, that writing assistants are going to become very generally available both by many companies and by the big players.
And so we always believed that WordTune was–because we didn't have the enterprise market ready then–so it was a very good way for us to understand how does application building on top of language development actually work, one, maybe the only one of the few companies would have, you know, our toes in both areas. And it's doing very well in terms of, you know, R and everything. But If we had bet the future of our company on that, we wouldn't be doing as well as we're doing. And so, I think that's part of what you see is, companies who are creating foundational technologies being, I don't want to say agnostic, but not narrowing their success to a particular application.
[00:43:19] Companies are putting all their eggs in this one basket.
Michael Eisenberg:
Do you worry about Google, Microsoft, the big players kind of crushing you?
Yoav Shoham:
Well, I worry about a lot of things, including that, all the time. I'm a worrier. Listen, I have nothing but huge respect for those companies, and certainly if I were in the business of just doing writing assistants, I'd be even more worried.
But Google, by the way, we have a very close partnership with Google and with AWS. We now also publish, we publicize with Azure also. And so, this is not a winner-take-all world that we live in. But we do want to make sure that where we emphasize, where we do concentrate, is we have reason to believe we'll win.
Either because focus–at the end of the day, at Google, mighty Google, there's a team of 50 people, which is already a large team, focusing on the problem. So we have, you know, 100 people. So we can, if we concentrate, we don't have a problem of scale. And the other thing is, and this is not, not a knock on any company, but big companies, it's hard for them to move fast.
And I remember my previous company, which we sold to Google, by the way, it was very successful on both sides, called Timeful.
[00:44:50]
Michael Eisenberg:
We'll come back to that in a second.
[00:44:52] Yoav Shoham:
But, you know, we had this, our calendar, it was a calendar and to-do list combined, and mighty Google, we’d gotten wind of the new calendar that's coming out called Timely.
Mighty Google coming out with a Timely, when we're coming out with Timeful, it's scary. But the truth is, we're able to do much more and much faster than they did. And so, I think that could serve us well also.
[00:45:16] Michael Eisenberg:
If you had a million dollars to invest in any AI company other than AI21, where would you put it?
Yoav Shoham:
I'd ask you to invest in Aleph, so you can invest it for me.
Michael Eisenberg:
That was almost political, that answer.
Yoav Shoham:
One day I want to be able to–no, the truth is, but this is a side comment–when I returned to Israel eight years ago, I thought I wanted to become an investor and I joined one of the investment clubs by colleagues you and I know well.
And I realized that number one, I didn't really care, I didn't come to any meeting, it didn't move me, it didn't get my juices [flowing]. Plus, it's a profession. And I didn't have the energy to learn the profession.
[00:45:55] Michael Eisenberg:
Fair enough. Well avoided. You also have the seat as basically the Chairman of the Policy Forum, for AI here in Israel.
[00:46:06] Yoav Shoham:
Again, if you allow me to slightly correct the title, Israel has a national AI program as does any country in the world. And it's an interesting way it's constructed. And they wanted to have a scientific advisory committee. So they asked me to kind of put it together and share it. So that's what I do.
[00:46:26] Michael Eisenberg:
What is the core policy recommendations you'd make on a national level? What countries, in particular smaller countries, should do about AI right now?
[00:46:38] Yoav Shoham:
First of all, invest money. We could speak in a moment about where the money should go.
[00:46:44] Michael Eisenberg:
See, I got you to be an investor. Just like that. It took me a second.
[00:46:47] Yoav Shoham:
There you go. But the problem is you can't compete in investments, let's say, with Saudi Arabia or UAE. And so, you got to invest smart. You got to invest in compute, and make it available to both academia and the startup ecosystem. And you really want to invest in the development of human capital.
We in Israel, as you know, we have very strong academia, but on a good day, if you count the number of people who do core AI among professors, you won't get to a hundred people. We need more than that.
[00:47:27] Michael Eisenberg:
Well, we have a lot of people who are Israelis in America or UK or France doing this.
[00:47:36] Yoav Shoham:
We do. And one opportunity is to make the environment here very inviting for them to come to Israel, either on a permanent basis or a partial basis.
Michael Eisenberg:
[00:47:47] How would you make it attractive?
Yoav Shoham:
Well, the real answer is the country as a whole. To be an attractive area, regardless of AI. But maybe that's above my pay grade. With regards to AI, I think, you want to provide–the basic table stakes is compute and salary, and we do have a built in limitation in Israel because of the way Israeli academia is constructed, so it's a little hard to pay professors something competitive, but I think there's ways around it. And to put in front of them huge challenges: intellectual, technological challenges.
Michael Eisenberg:
Give me an example.
Yoav Shoham:
I'd rather not, but the reason is that in this national program, I suggested that in addition to all the good stuff that's happening, let's declare some moonshots, which A, would excite people to get involved, and B, if successful, would really catapult us to an even higher kind of standing we have in AI currently. And what those moonshots are is something I think in discussions, I'd rather not enter that discussion.
[00:49:16] Michael Eisenberg:
Got it. How would you say the government is doing here on investing in compute and attracting the talent right now?
[00:49:21] Yoav Shoham:
I think that there are really good people who are trying to do the right thing. There's a lot of willingness to invest, and it's moving, maybe not as fast as we can, but for example, now on compute, I think finally–and I take no credit for that–but there'll be a call, an RFP for providers to provide not tens of thousands of GPUs, but at least a small number of thousands of GPUs for the community. I think that's a really good start. I think the Ministry of Education has agreed to put money to increase stipends to postdocs and afterward, and I think we need to do more of that.
[00:50:04] Michael Eisenberg:
I want to go back to your time at Timeful, one second, that you sold to Google.
Yoav Shoham:
Going back in Timeful.
Michael Eisenberg:
So Jacob Bank, we asked him to see what he wanted to ask you. So he was your Co-Founder at Timeful. And he said I should ask you: what is your other office?
[00:50:23] Yoav Shoham:
So it so happens I'm speaking to Jacob in two hours. I don't speak to him that often. But I'm speaking to him in two hours. Hi Jacob. Jacob’s amazing. My other office was always where, it'll sound terrible, but where I like to smoke a cigar. That's my other office. So, back in the Timeful days, we were–
Michael Eisenberg:
Should I ask you where you like to smoke a cigar?
[00:50:51] Yoav Shoham:
Where?
[00:50:51] Michael Eisenberg:
Yeah. Like, where was that physical other office?
Yoav Shoham:
Oh, at Timeful in the parking lot.
Michael Eisenberg:
The parking lot. Okay.
[00:50:56] Yoav Shoham:
Yeah. I actually had a folding chair in my car. I'd go open the trunk.
[00:51:02] Michael Eisenberg:
Beach chair in the parking lot, kind of?
[00:51:03] Yoav Shoham:
Yeah exactly.
[00:51:03] Michael Eisenberg:
That's great. So everyone could go by and watch you smoking outside, because you can't smoke inside. What would you do when it’s cold out?
Yoav Shoham:
Bay Area? California?
Michael Eisenberg:
Oh, I guess you're right. You couldn't do this in Boston. And what are some big decisions you made? In your other office, on the beach chair in the parking lot, smoking a cigar.
[00:51:21] Yoav Shoham:
Funny. So we needed a name. So we had a temporary name for the company, and you'll enjoy it. It was called CafeBotz. Or in Hebrew, “kafe botz.”
[00:51:37] Michael Eisenberg:
So it means black coffee, or like, you know, dirty, muddy coffee.
[00:51:40] Yoav Shoham:
Yeah, and so I had the URL, but we needed a real name.
[00:51:47] And so we had this agency, this branding agency that we worked with, and I really liked the people. Really smart and nice. And we went to their offices, and they took out magazines and took turns and we gave them scissors, and we cut out phrases, you know, I felt like I was in kindergarten.
[00:52:09] And then we ended up with a short list that nobody was really happy with, but we said we'd go with one of these. And I went to the parking lot and came up with Timeful, and we called the company Timeful.
[00:52:20] Michael Eisenberg:
Amazing what smoking a cigar can do in a beach chair.
Yoav Shoham:
Amazing, isn't it?
Michael Eisenberg:
If you'd just done it on the beach, it would have been even more perfect.
[00:52:27] Yoav Shoham:
Yeah, especially in Israel. Yeah.
Michael Eisenberg:
Do you go to the beach here?
Yoav Shoham:
I do, yeah.
Michael Eisenberg:
You're a big beach guy?
Yoav Shoham:
I don't have as much time as I'd like, but I love jogging on the beach. I like, you know, stand up paddling.
Michael Eisenberg:
Do you bring a cigar?
Yoav Shoham:
I'm not sure I'm willing to admit it.
[00:52:46] Michael Eisenberg:
Okay. Next time you host office hours there, I just want to get an invite, that's it. It's all I'm asking. You know, I'll bring a glass of wine, you'll bring the cigar, we’ll be good.
[00:52:53] Yoav Shoham:
I'm a little self conscious here because I know there's an image of cigar smoking and a certain privileged class. I actually liked that before I–
Michael Eisenberg:
Found out that politicians do it?
Yoav Shoham:
There you go. And, or, you know, smoke filled rooms and–it's funny. I had a meeting with investment backers the other day, and I was on Zoom and I was on my porch. I said, “It's the first time I'm meeting investment backers and I'm the one smoking a cigar.”
[00:53:23] Michael Eisenberg:
I love that. So, Jacob also said that you recruit teams in kind of an interesting, serendipitous way. What is he talking about?
Yoav Shoham:
Boy, I mean…
Michael Eisenberg:
He says you're hiring kind of non-traditionally.
Yoav Shoham:
To be honest, I'm not sure. I'm going to have to ask Jacob. I will say that I usually, so I think I get people, and I like people who are smart and who are nice. I don't know if that goes to what Jacob was speaking about.
[00:53:56] Michael Eisenberg:
He says it's not exactly an organized process, right? You find them, and recruit them, and persuade them.
[00:54:04] Yoav Shoham:
Well, I have to say, we haven't worked much in my previous company nor in AI21 with recruiters and so on. A lot of it is kind of word of mouth and people who know people. Yeah, again, I don't know what Jacob had in mind, but I think if there's something you're excited about, it's easy to bring people to join you on the journey.
[00:54:25] Michael Eisenberg:
For a professor of AI, and especially the way we kind of consider what you refer to as statistical models or LLMs today, I find you much more creative brain side than mathematical brain side.
Yoav Shoham:
[00:54:35] Oh, it's a total accident that I'm a computer scientist. I agree.
Michael Eisenberg:
It's an accident that you're a computer scientist.
[00:54:39] Yoav Shoham:
Oh, I wanted to be an architect, but I was traveling abroad, by the way, apropos, on a wine tour in France. And my parents really made it clear that I should study something. But for architecture, I had to go back to Israel and take a drawing exam.
And also, I didn't want to do that, but I said, “I can't draw.” So I said, “Sign me up for something that my”–I had high matriculation grades–”so sign me up for something that I can get into.” They signed me up for computer science.
[00:55:07] Michael Eisenberg:
Amazing. Speaking of your serendipitous career as a computer scientist, you still went on to be a professor at Stanford for 29 years, and I wonder, you know, you've now moved back to Israel, and you look at what's going on in college campuses in America and on Stanford's campus, and what do you think about that? How do you think about it? Because, you know, your time there was different, very clearly. Things have rotted or gotten a different way. How do you relate to this?
[00:55:37] Yoav Shoham:
I mean, how do you relate to it? It's so raw and unsettling. And, even though I haven't been at Stanford for–I go back, I'm in touch with my colleagues–by the way, there are not a small number of Israelis there also. And Stanford is not an extreme case, but even there it was so unsettling that I felt compelled to reach out to the president, and initially to multiple people and say that, you know, this is not a time for moral, sort of, hedging. It's time to show moral leadership and this, I remember saying, this was on October, writing to my colleagues and to the president saying, “This is what happened. If you can stomach it, go on Telegram and look at what happened. But it's just, you won't sleep afterwards. But it happened. Now, what's going to happen is going to be horrible for both sides. And I'm not going to get into what I think should happen, but it's going to be horrible. But don't forget this moment, because this is what started it.”
And I still feel that way. And I feel like, see all these social undercurrents that I don't feel an expert on, but these identity politics and the oppressor-oppressed, and somehow, you know, everything getting projected onto this very ignorant, simplistic viewpoint. Even by well-meaning, good kids, I think there's a moral obligation for the leadership of universities to risk being unpopular. And say what's right.
[00:57:25] Michael Eisenberg:
Do you think they exercise that moral obligation?
Yoav Shoham:
I do not.
Michael Eisenberg:
You do not?
Yoav Shoham:
I do not.
Michael Eisenberg:
And why do you think that? Why do you think they can't exercise it?
[00:57:33] Yoav Shoham:
First of all, I think they have a very hard job. I think they have multiple constituents that they need to serve. Students are an important constituent. Parents of students are important constituents. Faculty are. I would have to say donors are. And it's hard to balance all of that. So I understand why it's not easy for them. Having said all of that, I don't think any of that excuse is not doing the right thing. And, I would have to say, I think it's cowardice.
[00:58:12] Michael Eisenberg:
You mentioned the word ‘balance,’ you have to balance all of that, and given your perspective both on AI and philosophy, I find myself wondering whether this, kind of, obsession with balance has cost the world its moral position, has cost the world its leaders. We have no leaders because everyone's trying to find balance.
And in real life, there's no balance. I've said this in many cases, there's no balance. And certainly when there are moral issues, there's just no balance. And in order to be a leader, you need to strike out of balance. By the way, if you want to be a leader in AI, you know, the weights, how you weigh it, the weights and measures matters a lot, right?
[00:58:51] Yoav Shoham:
You never win by being average. I totally agree with that. The opposite danger is being simplistic and gravitating toward the extreme position that will never win, and in fact, usually is morally wrong. And so, I think you need to have a clear moral compass and act according to it.
I agree. It's not a matter of just calculating the vector of all these influences and going the, you know, the lowest friction and direction. I absolutely agree with that. By the way, you know this better than me, in business you'd never win if that's what you did.
[00:59:33] Michael Eisenberg:
No, if you don't bet in size, you don't matter. And, you got to make hard choices. And I feel we let people get away with easy choices today, or with not taking a stand. And that's why we have no leaders. It's not an accident at this moment in time, after 20, 30 years of balance, we have no leaders.
[00:59:54] Yoav Shoham:
You think that's true across the world or in certain liberal democracies?
[00:59:57] Michael Eisenberg:
I think it's true mostly in liberal democracies right now. Too many constituents, including social media, and people who aren't afraid to be criticized in public, because the price is high. But all leaders pay prices.
[01:00:15] Yoav Shoham:
I agree. Now, I have the luxury of not being a politician, not having to run for office, which is a hard thing.
Michael Eisenberg:
[01:00:22] But neither do college presidents have to run for office.
Yoav Shoham:
They do.
Michael Eisenberg:
They kind of do.
Yoav Shoham:
They do. I mean, they have to–but you’re right, I mean, they have a small number of people they need to convince.
[01:00:31] Michael Eisenberg:
To speak outside of your comfort zone, meaning not in your immediate pocket, you know, Claudine Gay, for her lack of moral standing, will finish her career, life in disgrace.
[01:00:46] Yoav Shoham:
I'm sorry, I didn't understand what you said. No, I actually didn't hear the question.
[01:00:46] Michael Eisenberg:
Oh I said, Stanford, you were at for a while, but you know, you can see people who didn't express or exert leadership around them, like Claudine Gay from Harvard ended up finishing their careers and their lives in disgrace.
[01:01:00] So there's actually prices to pay for not being a leader. That's clearly true.
[01:01:05] Yoav Shoham:
I think also the question is, can you kind of look yourself in the mirror regardless of how well it served your career?
[01:01:16] Michael Eisenberg:
Yeah. I think a lot of people tell themselves a lot of stories.
Yoav Shoham:
For a while.
Michael Eisenberg:
Maybe. Yeah. I agree with that. I totally agree with that. So, to wrap up on the conversation, Dan Ariely has said about you that you're a “combination computer science philosopher.”
Yoav Shoham:
I'll take that. I like that.
Michael Eisenberg:
What does it mean though?
[01:01:36] Yoav Shoham:
Ask him! Why are you asking me? I like to ask the big questions, which doesn't always serve me well.
I mean, for example, to become very successful academically, the standard practice is just to write a lot of papers, each of which may not be–just get to the minimal published amount sort of thing. And I've never liked that. I've always asked, I like to ask the big questions, which sometimes don't admit very satisfying or good answers. But maybe that's what makes me a philosophical computer scientist.
Michael Eisenberg:
What's the biggest question you're asking right now?
Yoav Shoham:
The biggest question I've asked and partially answered is, what does it mean to understand?
Michael Eisenberg:
Tell us.
Yoav Shoham:
It goes back a little bit to what we discussed before. And so a couple of things. First of all, if you think about people, but it's true also for machines, you never say, “Oh, the person or the system understands.”
They understand something. They understand the subject matter, they understand, you know, mathematics, they understand philosophy. So that's number one is, what is it that you do or don't understand? And second is, how would you exhibit your understanding? And again, I'm sorry if it's a little redundant for what I said before, but you gotta be somewhat proficient.
If I can't answer any question in mathematics, I don't understand mathematics. I don't need to be able to answer every question. It's okay even if I explicitly say, “I don't know the answer,” but I can't–and there's certain things I can't be ridiculous about. I can be ridiculous by giving a wrong answer, or by not knowing.
Sometimes it's ridiculous. I don't know how much 1 plus 1 is. No matter how good I am at other additions–I don't understand addition. So, those are some telltale signs of understanding. You might ask, is there a deeper sense of understanding? That is, this is just the way you exhibit it, but internally–and people, there's a lot of discussion about in AI and philosophy, and I actually believe that the answer is no. This is very much a Turing kind of like–it's not just a test, it's actually the essence of understanding, being able to answer a question.
[01:04:09] But then we have intuition to somehow–when we understand things, there's some deeper principle that is being displayed. It's not just, you know, there's a famous story about one of the mathematicians, I think it was Gauss, but I'm not sure, who was given as a young kid, some arithmetic series, and asked what the sum was, and he immediately gave the answer.
And they said, “Oh, you know the formula?” I said, “No, I just summed it.” And so, but of course, you know, the way most of us mortals do is we know something more general, the general principle. And that somehow intimates a right to understanding and then, how does that fit into the picture? And I think this is where explanations come in–why do teachers at school ask, you know, explain your answer?
Why do they say that? It's because if you're able to explain the answer, the teacher can infer that you could have answered many other similar questions that the teacher didn't ask. This is a way of probing you for the deeper thing. So essentially, an explanation is worth a thousand answers. And so I think that's sort of the main elements of understanding general proficiency, avoiding ridiculousness and explanations.
Michael Eisenberg:
[01:05:26] And what makes you human? Or what makes us human?
Yoav Shoham:
I wish I knew. So we all have this intuition, that we’re - vayechasrenu me’at mehamechona -
That we’re somehow different from machines.
Michael Eisenberg:
“A little less than machine.” That is a paraphrase from a verse in Psalms, which says that you made the man slightly less than God.
Yoav Shoham:
Right.
Michael Eisenberg:
So Yoav reinterpreted it or rephrased it as you make it a little less than a machine.
[01:05:55] Yoav Shoham:
So I don't know who's less than what, but at least we're different. We all have this intuition that we're more than a glorified toaster. And I used to have this course at Stanford for freshman seminar, for young kids before they got corrupted–the title was, “Can Computers Think? Can They Feel?”
[01:06:17] And I'd start the course by–it's a long answer to your question, but bear with me–so I’d start the course with these six questions. Let's see if I can reconstruct them. Can the machine think? Can they understand? Can they be creative? Can they feel? Can they have free will? And can they be conscious?
And I’d ask them to think about machines in general. You know, not just the current laptops. And first, I'd force a vote at the beginning of the course. And, you know, you've got to vote, you can't hedge depending what you mean, yes or no. And then we speak about AI and machine learning, all of that, and at the end they would vote again.
And I noticed two things. First of all, clearly at the end, people were both less sure of their answers and more charitable with competitors. All of the “Oh, of course they can't,” that went away. There also seemed to be a difference between men and women here, but this is not statistically significant so I'm not willing to–but by and large, it seems like women thought there was a difference and guys couldn't tell the difference. But that requires more research.
Michael Eisenberg:
[01:07:20] It speaks volumes. Yeah.
Yoav Shoham:
But I gave a TED Talk about this, and I spoke specifically about free will. And I looked a little into it, and it's fascinating, because obviously we have this feeling that it's somehow innate and one of the archaic characteristics of humans being responsible for our actions and so on, moral people, and you see–what have people written about it?
So Isaac Moshe Wiesinger in his Nobel Prize speech said, “We have to believe in free will, we have no choice.” And this philosopher, Ray Smullyan, who passed away, he's kind of a funny guy. I remember hearing him talk. He looks like Dumbledore, but he actually is a magician also. He's an amazing guy, and he has this parable, in a short story he wrote, about a mortal requesting from God to be absolved for this burden called free will. And through a series of Socratic questions, God kind of gets across the message, not that it's a bad request, it's an incoherent request. And then you have Rabbi Akiva, HaKol Rashu Tzafui V'Rashut Netonai–everything is foreseeable and free will is granted.
What does that mean? I find it fascinating. This is an example of what makes us human. I think we don't know the answer, and asking where the machines can have these qualities is just a new lens, not to understand only machines but to understand ourselves.
[01:09:08] Michael Eisenberg:
And so, to finish up, what is your core human value?
Yoav Shoham:
I’m not sure if it’s my core, but I'm really curious. Just curious.
Michael Eisenberg:
Just curious. What makes you most curious? What are you most curious about?
Yoav Shoham:
What does it mean to be human?
Michael Eisenberg:
Well done. Thank you, Yoav, for joining us on Invested.
Yoav Shoham:
Thanks for having me.
Michael Eisenberg:
And if you enjoyed this podcast, please rate us five stars on Spotify, Apple Podcasts, wherever else you listen to podcasts. If you want to learn more about Yoav Shoham, you can follow him on X @Y S H O H A M, Yoav Shoam. Thanks, Yoav. Appreciate it.
Yoav Shoham:
Thank you.
[00:00:00] Sam Lessin:
I think the happiest and proudest moments I've had in my careers have been those places where someone walks in, and everyone's written them off, and you're like, “But you might be right, or people are missing the point, or people are missing why you're great even though everyone thinks you're not right.”
And when you get to enable those people and then you're fucking right, and you see those people become super successful–I don't know. Like, I really take pride in that in a lot of ways.
[00:00:26] Michael Eisenberg:
Well, welcome everybody. I am absolutely thrilled to have my old friend Sam Lessin join me on the Invested podcast. Sam, good morning.
[00:00:34] Sam Lessin:
Hey, great to see you, Michael. It's been too long, but excited to be on the podcast.
[00:00:38] Michael Eisenberg:
It'd be better to do this in person rather than virtually, but I haven't gotten to California in a while. And I guess you haven't been in Israel in a while.
[00:00:43] Sam Lessin:
You know, I'm trying–I have a trip on the books to Israel for I believe October, and we'll see if I can make it happen or not, but I really want to get over there. It's been too long for me.
[00:00:53] Michael Eisenberg:
Shabbat dinner at the Eisenbergs when you come. So let us know.
Sam Lessin:
Deal. I'm in.
Michael Eisenberg:
All right. So I don't really want to introduce you, I want you to introduce yourself. But for our listeners, Sam is a GP at Slow Ventures. He was a co-founder of two companies, Fin and Drop.io, acquired by Meta. He was the former Vice President of Product Management at Facebook, and he writes for The Information and then takes a screenshot and posts it up on Twitter, which is where I find it most of the time.
But Sam, tell everybody who you are. That's kind of the professional side fo the things.
[00:01:20] Sam Lessin:
I mean, I think you just did. I started my career very briefly in consulting at Bain and Company a million years ago. I said, “What's the opposite of this?” after two years. Faxed in incorporation documents.
Started a company in Brooklyn. Facebook acquired it. Spent a bunch of great years, you know, reporting to Mark, working at Facebook through the IPO, which was a total ride and super fun and super, I don't know, I felt great about,. And then I said, “Look, I really liked the early stage stuff. I don't like the big company stuff.” And so we started a venture platform, Slow, which has gone great. We can talk about investments there. We're on our fifth fund cycle in that. And then, yeah look, I love building, and I love tinkering. And so I started a company after that with Andrew Kortina, who was the co-founder of Venmo.
I was Venmo’s first investor personally. And so, you know, he and I really wanted to work together, and we started some stuff, mucked around. I don't know. I generally try to have fun.
[00:02:14] Michael Eisenberg:
Not bad. But I don't even know how we first met. How do we know each other?
[00:02:19] Sam Lessin:
Was it, was it Aryeh? It might've been Aryeh.
[00:02:22] Michael Eisenberg:
Might’ve been.
[00:02:23] Sam Lessin:
Or it might have been Eden, because–I'm not 100 percent sure, but it's been sufficiently long that we'd have to go trace it through email.
[00:02:31] Michael Eisenberg:
Yeah. Aryeh, for those that don't know, is Aryeh Bourkoff, the CEO of Liontree, who was the first guest on Invested, by the way.
Sam Lessin:
Oh, wow.
Michael Eisenberg:
And he had maybe one of the most all-time controversial comments on this podcast. When I asked him what's something he thinks that nobody else thinks, he said, “I'm not sure democracy is the best form. Some dictatorships are actually good for people.”
[00:02:52] Sam Lessin:
I'll challenge that. That's not truly an original opinion. It's just a tough one to verbalize in 2024. [00:03:00] Throughout history, that's been said before.
[00:03:04] Michael Eisenberg:
Okay. Fair enough. So what we'd like to dig into to start with is just to ask you, what are your core personal values? And you already said that, you know, having fun and tinkering drives you, but what are the core values that–what drives you day in and day out?
[00:03:16] Sam Lessin:
Look, that's a really interesting question, and not one I frequently get asked. The first thing that comes to mind is family. I deeply care about my immediate family. I grew up with a lot of great cousins. And I think just putting family first and certainly kids first within the family is just something I really believe in, investing in. You know, the next generation–I was just biking with my kids right before starting this podcast before they went to school.
And that really is probably the thing that I care the most about and is most important. Beyond that, you know, it's interesting. In terms of values, I think a lot about what I can personally try to uniquely bring to the world. I think that's an important thing. Everyone comes with different perspectives and from a different place, and I really think that thinking about not just how to make a buck, but what can you give that's different? What can you give uniquely? And I think part of that is recognizing how incredibly large the world is. The world's so big and there's so many people doing so many different things.
And thinking about that, not just what must be or what should be, but where you can make a difference, really matters. And I guess the last thing that comes to mind is, again, which maybe goes hand in hand and maybe doesn't–and I don't have practiced answers to this, Michael, because I don't usually get asked about my values is–look, I have a lot of respect and an appreciation for the broad diversity of humanity.
You run into new people who are just themselves in their own quirky way, and pursuing their own thing. And I have a real love and appreciation for that. So I think helping people, learning who they really are, helping people be the best at what it is that they do, and helping them just get confident in expressing themselves in whatever way–it’s this thing I get really excited about because it's just, humans are so infinitely creative, and playful, and interesting when you let them be, right? When you don't put them in a box.
[00:05:05] Michael Eisenberg:
What do you think it is that you're actually uniquely suited to deliver on, or do better in this world than anybody else?
[00:05:13] Sam Lessin:
It's a great question. And look, I'm 41, and I've had kind of a really fun, interesting, I think impactful career so far in a lot of ways. But it's a question I'm asking myself right now, which is, how do I want to spend the next 10 years? Like, what do I want to do in a highly productive era of my life? And where do I think I'm really uniquely suited?
And I think in some ways, we're all intersections of these weird Venn diagrams of experiences, right? I wouldn't say I'm smarter than anyone else, although I don't know, I'm confident to say I'm pretty smart. I do think that I've had a heck of a unique set of experiences, based on where I was born and the things I was exposed to, and the things I got to see, and the lessons I got to learn throughout my life. And so for me, look, there's a reason I left Meta when I left, a decade plus ago, which is–I really didn't want to be a manager.
I was like, this doesn't feel different. I did it for a little bit. I figured out what it was. It was demystified to me. And I was like, I need to go do something that's going to be more authentic to myself, but what am I best at? I think what I'm best at is finding people, and finding ideas that other people have written off and saying, “But what if they're right?” and then every once in a while being right about that.
I'm the type of guy who in my venture practice, we go very early. I mostly lose money, right? I mostly light money on fire. Every once in a while though, I'm right. And when I'm right, I'm really right. And you know, that works for everyone. And you know, if you think about that, what does that really end up meaning you do?
Well, it means that you have to be willing to entertain crazy people. You have to be willing to entertain crazy ideas, and take them seriously, and listen to them. You have to be willing to kind of show up every day and actually talk about a lot of ideas, and a lot of people that are actually silly or stupid, right?
I think that's actually one thing that people miss about venture capital in terms of what you’re uniquely suited for, is, you sit down–especially if you're in the early stage–you hear a lot of bad ideas. And you have to be willing to show up every single day and hear another bad idea on the way to the good idea.
And it takes a lot of patience. It takes a lot of appreciation for people, and their ideas, and their hard work. It should take a lot of respect, right? Because again, these are people, whether or not they're right, they're pouring their lives and souls into this weird thing they believe that's different than everyone else.
And I don't know. I will say that on a bad day, it's really frustrating, right? ‘Cause on a bad day, you say, “Oh, my friends who do late stage VC, or work in these other industries, or are senior managers at big companies, their ratio of good ideas to bad ideas they hear is a lot higher.” They have to deal with a lot less crazy, right?
But then every once in a while, and I think the happiest and proudest moments I've had in my careers so far, maybe what I'm uniquely suited for has been those places where someone walks in, and everyone's written them off, right, or a lot of people have written them off because otherwise you wouldn't be talking to them, and you're like, “But you might be right, or people are missing the point, or people are missing why you're great, even though everyone thinks you're not right.”
And when you get to enable those people, and then you're fucking right, and you see those people become super successful. I don't know, I really take pride in that in a lot of ways.
[00:08:27] Michael Eisenberg:
How do you deal with the losses or the zeros?
[00:08:31] Sam Lessin:
You know, you talk about what you’re uniquely suited for–I actually think this is something I don't know that I started out in my career uniquely suited for, but I've gotten extremely comfortable losing money, right?
And I think that that's actually something that is in some ways–I don't think anyone wakes up on day one and they're like, “This is great. I feel awesome about dropping a million bucks and watching it just get incinerated,” right? Or whatever it ends up being. But I do actually think it's a learned and practiced skill in a lot of ways.
And so it's fine. I actually talk to entrepreneurs–right now is actually an interesting period because, as you well know, we've been through this cycle in the last few years where VC was so hot, right? And startups were so hot that everything kept getting funded. So all these things that you would seed early on, and you'd kind of be like, “why aren't these companies dead yet?” Right? Like, I know which the good ones are. And there's a bunch of others like, “wow, I'm glad they're kind of bumping along. They're still figuring it out. Someone will fund them to keep doing their experiment, but they won't die.” And what I've actually liked in the last, even few weeks is, I've gotten so many calls from entrepreneurs being like, “It's time to throw in the towel. This isn't working. I'm going to go do this corporate job. I'm going to change direction. You know, we're done in a lot of ways.” And the thing you hear for a lot of first time entrepreneurs is that they're really apologetic about it. And I was like, guys, it's just money to me. It's your life in time.
Like, do not worry about me. Now, you know, if you can do right by me and make me some money back while you're doing the right thing by yourself, great. That's honorable and I appreciate it, but do not optimize for me. Like I'm fine. And then that is my game, is, if you think about early stage, what we do is you mostly lose money, but you get so ridiculously overpaid when you're right that that's the entire equation. That's literally the business model. So I'm quite okay with it. I try not to lose enormous amounts of money, but losing small amounts of money repeatedly, I'm all about.
[00:10:27] Michael Eisenberg:
I'm interested to hear what you think about this. I've made the argument actually, made it to the military here over a bunch of years that the world actually looks much more like an early-stage venture capital investment than a hedge fund. Meaning, this is not a risk management business, it's actually, if you want to kind of change the vector of society, or in a different way, make sure that you're prepared for what's going to go on in the world, it actually looks more like a venture capital investment.
There's kind of a lot of middling failures along the way, there's a lot of failures, but if you get one of them right, it works. By the way, I'll argue that tragically, the Hamas attack on Israel was another one of those venture capital investments. They kind of played at this and, you know, MVP so to speak, and killed a lot of people.
Tragically, it's obviously not the same as losing money. But the world looks like this actually, and if you have a risk management model where you're kind of trying to minimize risk all the time, you miss out on big events, whether they're political, military, economic, technological. But if you have a venture capital mindset you can catch these.
Do you disagree with that?
[00:11:32] Sam Lessin:
Look, the reality is, as the world gets faster, and faster, and faster, and technology gives us more and more leverage, and you have these incredible platforms where if something works, you can scale it up ridiculously super quickly, which didn't used to be the case.
There used to be a lot of friction in the system, right? But that is certainly the way the digital world works. And so much of the physical world now follows the digital world for better and worse. That–I do think there's some truth to that, which is, you know, it's almost like if you're at a roulette wheel that it used to be 100:1 winnings, now is 10,000:1.
And what you're willing to experiment with rationally, like what the rational balance point is between 0000 and 100,000 versus 0000 and 10 is very, very different. And so I think the reality is yes you know, I think the world has moved in this direction, for what it's worth. It's not all good. Like I think it is. But you know, the fact that people realize this, right, does push the bounds of experimentation in ways which are pretty extreme. And again, as a business model, as trying to find the next thing that's going to be really important or change the world again, I'm all for it.
I actually think expanding the bounds of human experimentation is good, but we are managing a planet with billions of humans and real life consequences. and bad things. And again, I think it's, if nothing else, I'd say where we live is an increasingly chaotic time because of how that works.
It's rational, and it has its places. I think it's amazing, right? Like I think it pushes the balance in all sorts of great directions, but it's certainly not all good.
[00:13:10] Michael Eisenberg:
I made the comment at a conference probably five or six months ago in Abu Dhabi. I won't say everything I said, ‘cause it was Chatham house rules, but you know, this notion of AI increases chaos or entropy in the world because all of a sudden, if there's a small number of chaotic actors on a relative basis to the rest of the world, most of the world just wants to get along with life. But they're now empowered with superpowers, and you've actually increased the rate of chaos or the level of chaos in the world pretty dramatically, by endowing it with superpowers. Part of the point I made was, you can correlate between the increase in compute power and the increase of chaos in the world. How do you think about that?
[00:13:47] Sam Lessin:
I think that's basically like, look, there's two ways to look at it, right? One is exactly what you said. Which is yes, like more leverage equals more chaos, and also more opportunity, right? Like there's amazing things that can go great, but things can also go badly very quickly. The other way I'd almost go at it, imagine you know, the reality is, I do also broadly believe that markets are efficient.
Like the reason I like seed investing and what we do is, I think it's, in a lot of ways, the least efficient market in the world, right? Which means the last thing I'd want in life is to be known as just a market participant. Like that's always like, if you talk about like, what is the most upsetting concept is it, well, to say, “I lived my life as a market participant.”
God, what could be more boring? Right? You want to be the person who said “capital is my tool, I'm looking for places to deploy it.” That's the highest leverage where no one else is. And it's good for me. And it's good for capitalism. And it's good for the whole, you know, I have a really positive story about it.
But so, if you think about AI and all these things, and you believe in relatively efficient markets, it's almost like having like two, you know, AI can be adversarial, right? There's a balance point to it. So you think what you really get is a system where there's more and more pressure pushing against each other, right?
Like all the systems, the entire world, the white hot centers, everything's pushing and trying to keep itself in balance. The problem is, this thing slips a little bit, you have so much energy in the system, it goes flying off in a crazy direction, right, in a lot of ways. So that's kind of almost the model I would have in my head for what this looks like.
[00:15:16] Michael Eisenberg:
I want to get back to AI, but before that, I want to actually ask you a question. I'm realizing now that you basically left Facebook and became a venture capitalist roughly around the time that you had your first child. Is that right?
[00:15:27] Sam Lessin:
Let's think. Not quite. So, I left Facebook In 2014, and our first child, I think, was 2017.
I should know that. 2017. So, relatively. I had just gotten married though, and we were certainly on the course of starting a family, and kind of to figure out what the next stage was, is what I'd say. And I definitely did my 20s in that part of my career, in an all-encompassing, all in, let's build Facebook mode.
[00:15:53] Michael Eisenberg:
Do you find that having a family has changed your ability in any way, as an investor? Does it make you more understanding of crazy, more understanding of uncertainty? Or zero impact, you think? You’re just Sam.
[00:16:06] Sam Lessin:
You know, here's what I basically say. The big impact I have, I think, with kids is they're, I remember when I worked at Facebook, when I did my first startup, even at Bain and company–I worked way too hard at Bain, by the way for what I was getting paid and the relative impact, but I learned a lot– basically, if you think about it, if you had a problem, you could spend almost infinite time on it, right? Like you just, he number of times I slept in the office at Bain and then at Facebook was off the charts, right? And you basically could just work your way through any problem. You could just boil the ocean. You had the energy to do it.
You had the time to do it. Now it's funny. It's like the number of hours I have to dedicate to work is so far down, right? Compared to what it used to be, because I used to work all the time, and now there's a whole bunch of reasons I would never operate that way. It's not just literally the raw hours, it's just the energy. It's like, if you are up all night working, you're a wreck the next day, right? You just can't do it. You can't do the thing. You know, when you don't have kids, you can blow your brains out for a month, right? Getting something done or a project done, and then you can just rest and sleep for two days, and come back.
And you just can't do that when you have kids. So. It definitely changes how you have to approach things. I think I'm far more efficient now than I was before. I know where the value is. If you've ever read my screenshot essays or some of the stuff I work on, I am like the king of believing in 80-20, right?
People will send me notes all the time being like, “There's a typo on the third line.” I'm like, “I don't care.” It proves it's human, right? Like it's just totally irrelevant. So I think it changes how you can work. But essentially, I don't think it's changed my mentality as much as it's changed my approach.
And then I guess there are a few things you're probably not supposed to say on podcasts. Like, here's the reality. You know, backing parents of young kids in startups–very complicated conversation about whether that's a good idea or not, right? Because there are things, you know, there are places that if it's going to require the brutal work schedule, da, da, da, you're going to rip their marriages apart. You're going to rip their families apart in a lot of ways. And for some people, it's incredibly motivating, right? They're like, I have to put food on the table. This has to work. It's a healthy dynamic. But in some ways, it's a very, very unhealthy dynamic. So I don't know, you can go in a lot of directions with that.
[00:18:19] Michael Eisenberg:
By the way, for what it's worth, I'll tell you that in our portfolio, at least–and maybe things are different in Israel–a significantly high percentage of our best performing companies are founders who've had children during the startup run. Or are parents of young children. I don't know what to make of it, but it's definitely factual.
[00:18:39] Sam Lessin:
I believe that. Well, how about this? Let's just try, let's bullshit in the spirit of ‘we're probably wrong but we'll try on some right things.’ So Israel is a way better social network and support system than the United States, right? Like, in a whole bunch of ways.
The community is smaller, it's more integrated. I think that probably actually changes the dynamic somewhat, right? You know, you screw up in the U.S., there are more consequences.
[00:19:00] Michael Eisenberg:
The unheralded hero of startups in Israel is the grandma.
[00:19:05] Sam Lessin:
Yeah, a hundred percent. I mean,
[00:19:08] Michael Eisenberg:
Who lives nearby in Israel.
[00:19:09] Sam Lessin:
Totally, there's that whole dynamic. I mean, obviously because of the army and the culture and kind of things like that, I assume that exactly when people are starting families versus their service, and startups, is all a little bit different. So different societies stack differently, but it is interesting. I'll give you an example.
I'm actually a big believer in providing social services, although I'm really pretty Libertarian in a lot of ways. But I'll tell you the reason why is because I actually think that if you have a strong social safety net, if you have a lot of the groundwork laid, you get more innovation, you get more people who can afford risk, right? And I think that's a good thing.
[00:19:46] Michael Eisenberg:
Yeah, I agree with that. So I want to make a couple of sharp turns here before I get to AI.
Sam Lessin:
Sure.
Michael Eisenberg:
You just posted an excerpt of your thoughts on X about Pavel Durov from Telegram. You asked, “Is it possible that Telegram was an elaborate ruse by the Russians the whole time that he's a double agent?
Yes, it's possible. And in our era, where a single person or a tiny number of people can use technological leverage to touch untold people–” that's what I was referring to earlier about the AI–”and impact massively important and scaled things nearly alone, more than 0 percent of tail risks is, as many people like to remind us…a lot of risk.”
And so what do you think about Pavel? He's like a hero of free speech?
[00:20:27] Sam Lessin:
I don't know. I don't know him personally. I know a lot of people who know him. And again, I agree with a lot of the things he said and a lot of the story around him. I also know a lot of people who think he's pretty nuts in various ways. And the basic point there that I would just push on is, I just don't think we can trust individuals in that way in this point in history. That's why I'm a big believer in crypto. If you think about where we've done the best, what are the places I've actually literally made the DPI that has driven our fund and a lot of things? It was coming down to having a better viewpoint on where the value was in crypto, and how to approach that as a small fund over the last 10 years. We seeded Solana, which was a 1200+X return to our LPs in three and a half years.
Like we seeded a lot of great stuff. I was personally a seed investor in Ripple, and early in Bitcoin. And for me, it all comes down to this whole thing, which is the faster you go, the more the formal rules matter. And I think that's one of the key things.
Michael Eisenberg:
Explain that?
Sam Lessin:
In the end of the day, there's two forms of trust, right? There's social trust and then there's formal trust, is what I'd say, like mathematical proofs. And historically the world's obviously built on both. There's a lot of places where social trust–what it means to have retribution, identity, reputation, the stuff I actually spent a lot of time at Facebook on–critical to how our society functions. And then you have literal mathematical formal verifications and their value, and things like that. And, you know, it opens from an open-source perspective. And look, again, leverage and everything is going up. You've never seen more super empowered individuals than you have with an Elon Musk or things like that before in history, right?
And I mean, they've been close maybe, but not to the same degree. And so as power goes up everywhere, if there is a one percent chance that Pavel was working for the Russians the whole time, that's an enormous risk, right? And maybe we should care a lot more about encryption, and decentralization, and things like that in a world where that's true. You have to think about what you really can't screw up.
[00:22:37] Michael Eisenberg:
So you make the point that there's trust, right, which is social, and then there's trust which is mathematical. There's a third area, which is regulation, which is not the same thing really. And then the power of state, which is what happened here. State power overwhelmed, call it individual power. If a state is kind of a license to use force, they used it and incarcerated the guy. And so, where does the line get crossed where you say, okay, this slightly-greater-than-zero-percent risk, a state should take action and jail the individual?
[00:23:15] Sam Lessin:
Well, look, the answer is, I think it's a long conversation. I don't know the details of the situation. I think it's good that the state has a monopoly on the use of force. I don't think we want people running around like private armies anytime soon. And look, I'll be honest, in my career, I've generally been, I grew up in the era where everyone was internet utopian, right?
We were going to stitch the world together, all the rules of the internet were the same. They were basically mathematical rules, although the dirty secret was they were always enforced by a social human layer on top of that, but we really tried to make it as formal as possible, and we were all going to talk to each other openly. That actually worked quite well for a long time, because I think the states did not understand the internet, right? They didn't read enough science fiction. And so they kind of like, let it be for a long time to develop. This is about the same, very similar pattern to crypto from the early days, right, which is, it was a toy. And because it was a toy, no one paid attention to it, as often the sideshow, and it got to develop on its own for a long period of time before anyone paid attention.
Obviously, states and communities now pay attention. They realize how important the force is, et cetera, and they say, “Hey, what is our say here? What is the democratic part? How do different communities want to regulate speech differently?” Things like that. The thing historically has been, I would argue, that the states have really been A. behind the ball in terms of how they understand and think about and act on these things, and then B. kind of random in how they apply their force, if that makes sense. And this is because technology moves so much faster than it is.
They're not designed to regulate or come up with rules at this pace. This is because the leaders have historically had no idea what they were talking about.
[00:24:57] Michael Eisenberg:
And not just historically. Currently.
[00:24:58] Sam Lessin:
I would actually argue there's, I don't want to name names because I couldn't, but my sense is, is that the people in government–I'll give you one name, like Pete Buttigieg–I think he actually basically understands the internet. There is a generation–but the problem is just because individuals in the government understand it doesn't mean the systems overall do, or they make good rules. And so you look at AI regulation, this whole tip of the spear thing, what a mess, what a mess.
And on one hand, I don't grudge the states for screwing it up or saying a bunch of asinine things in terms of how they're approaching it. Because they literally just don't, as an organ, have the capacity to process this stuff or deal with it. The problem is, honestly, that when you start watching what happens with some of regulation and how it's applied, is when actually powerful individuals, companies, things like that, start manipulating the states for their own ends.
And that's the thing I worry the most about, is not the states, which are kind of bumbling a little bit. They have some ideas that matter, but they don't really know how to enact them. What it really is, it's almost like you have trust in people. You have trust in math, and then you have this like 10,000 pound gorilla wandering around smashing things, and kind of doing the bidding of other actors in the system without knowing what they're doing.
[00:26:12] Michael Eisenberg:
Do you worry, certainly when the Twitter files came out, do you worry about the state influencing these mass media platforms, in that case? And the people who control them to influence public opinion? That's my view of TikTok for what it's worth, right? Which is the state influence. That's TikTok. I'm talking about democracies for a second now, which is like Twitter, Facebook, et cetera. Do you worry about government influence there at all?
[00:26:33] Sam Lessin:
So here's what I basically say. I mean, just, sorry, you and I are both very aligned on TikTok. Like the fact that the United States allows TikTok inside of our country is one of the greatest, unforced national security issues in the history of the world. Like, when we rewrite the history of the world in a hundred years or a thousand years, you know, this will be, like, gawked at, right? Like, how could you possibly screw that up, right? Is what I would say.
Michael Eisenberg:
I agree.
Sam Lessin:
That is different because it is literally, there are state representatives on the board. And it's very clear how the power structure works there. Here's the thing. I've spent too long on the inside of these large platforms to not believe that there's A. a lot of pressure around.
And we talked about the plates or like, you know, when there's so much pressure in one place, what happens? This is what's happened with speech broadly. If you think about it, fundamentally, speech is distributed. It used to be, you’d sit in a bar with someone. There was no actor in the middle.
There was nothing to influence. Now, as these platforms have gotten bigger, and bigger and bigger, all of human speech is concentrated on fewer and fewer comments and fewer spaces. And you know what? It's super easy to stick a hook in there. And instead of, the old joke goes about even in Russia, they just say, “In the USSR, people always had free speech. They just might not have free freedom after speech.”
It's obviously a little bit of a joke. The idea that you can now centrally monitor the way you can, and centrally control is terrifying in a lot of ways. So then, what are you back to? You're back to trusting either algorithms or humans, right?
If you trust the algorithms, or you're trusting kind of the transparency was–that's one thing, you can mathematically trust, you know, from a crypto perspective. Or you are trusting whoever is leading these things, and their organizations, the human side of it. Look, I do trust Facebook.
I think it's super complicated. I argued incredibly aggressively for certain policies that never came to bear in terms of how speech was treated internally, but it's a delicate balance and a hard game. And I know you have serious people who are trying to do the right thing, but yeah, I mean, that's the real question. It's kind of a crazy world where we're being asked to trust individuals and human organizations at this scale.
[00:28:44] Michael Eisenberg:
Do you worry that like, Zuck, or Elon, I mean, Elon's not just Twitter, right? He's got a rocket company, and a telecompany. I've argued that he's a state in a guy, right? He's got an energy company. And Zuck controls a large percentage of human media on the planet, human conversation on the planet that, you know. And WhatsApp is encrypted end to end. Do you worry that these guys walk into a France and get picked up and arrested?
[00:29:10] Sam Lessin:
Yes, I do worry about that. I think that is a problem for them and for the world in a lot of ways. Which again, you go back to the whole state that has the monopoly on the use of force. And that's not, I don't want that to change anytime soon, by the way, and it's not going to change anytime soon, but yes, I think that when you have powerful actors at that scale and tensions around those, those are real concerns, I think for them and for kind of where the world plays out.
And then the question is like, are they strong enough to stand up to that? Are they able–let's pretend Elon can never leave the United States again, right? You know, i is the U.S. strong enough to protect him? And then, how do you think about that playing out long term, I think is a really weird science fiction, but true narrative for sure.
[00:29:55] Michael Eisenberg:
I'm pretty sure he can come to Israel, as could Zuck.
[00:29:58] Sam Lessin: I agree. I agree.
[00:30:00] Michael Eisenberg:
I don’t say that facetiously, I say that seriously. I think this question of the rights–rights is the wrong word–what do you do with powerful people in a world that has become fundamentally borderless digitally? And that moves a lot of people physically. You can do what the UK did, which is shut down on, you know, “I'm sorry, you can't Tweet about this. You'd be arrested.” You can arrest the guys, you know, Zuck, and Elon and Pavel. And I'm not saying they're the same, by the way. I mean, I don't know Pavel from a hole in the wall.
[00:30:30] Sam Lessin:
I'll say it explicitly, they're definitely not. But thematically, I agree. I mean, like, look. I’ll give you a few things. One is, the real answer is you have to throw away the keys.
Michael Eisenberg:
Explain.
Sam Lessin:
Well, again, even take encryption. If you believe in free speech, no one in the world is going to be powerful enough to believe in free speech, and then encrypt and leave themselves an out or a backdoor, right?
It's just not how the world works. And this is I think, probably the Telegram mistake, free speech, asterisks is not actually end-to-end encrypted. That's not a value. You can't maintain that, right? Like, you have to have a system that formally says that basically you can say, you can say, “Hey, shoot, Pavel.
It doesn't matter.” Like there's nothing you can do, right? This, I think, is the kind of mentality you have to–so this is the thing I think is very difficult about compromise, and where we are as a society is that we are moving in a direction where a lot of compromises that used to work, the messy middle, you could get away with it. You could be like, “Okay, well, the speed limit is 60 miles an hour, but if it's an emergency, you go 70.” Here's the problem. You're in a self-driving car. It's formal. It can't go more than 60, right? Like you actually have to encode those rules. And those rules are human rules are squishy in the middle, in a lot of this stuff.
And so I actually think that's where we're going is like, if you're one of these people or in general, we have to have this really hard conversation. We have to rehash a lot of historical compromises. For a technological world where it is more determinist, you do actually have to have a hard line.
That's why I say, if you're Pavel, you have to throw away the keys. I'd also say like, the other way to look at this is the science fiction story angle. I don't know if you've ever read Snow Crash? It's a great book. I actually, when I was at Facebook, one of the things I instituted, I ran a lot of the PM on recruiting and onboarding for many years.
And I made everyone read what I call ‘the canon,’ and do a book club when they joined Facebook. This is well before Oculus or whatever. One of the books they had, every single new PM at Facebook had to read and then debate was Snow Crash. And in Snow Crash one of the characters, the way he does it is he has a nuclear weapon hooked up to his heart.
So if he got killed, there'd be a nuclear explosion. So that's what Pavel could do if he's not going to fully end-to-end encrypt.
[00:32:44] Michael Eisenberg:
By the way, I think we've actually hit the core of this conversation. I'm so happy we're here, which is what you're really articulating is that this new digital world, which operates in bits and bytes, needs a much more formal digital framework in order to manage it. And a lot of things that make us human don't make it in that world on some level, because it gets cut much harder, right? When you think about smart contracts and crypto, which is something we'll get into in a second, those are automatic, those are like automaton contracts. And there's none of this, “Oh, I'm really sorry. It's not exactly what I meant.” Or there's kind of, pleading my case is not okay, because it's not going to work. And when you have people of this scale, it's really hard to craft these smart contracts, because the power is so immense and constraining it could actually constrain freedom. You could constrain creativity. Like, this is tricky.
[00:33:41] Sam Lessin:
I'm liking this. I like that we're here too, because this is a really fun, and hard, and interesting topic. Think about it this way. There's two types of technology we now have. There's what we've had for the last 20, 30 years that I've been working on, which is effectively highly deterministic systems, right?
You know, one plus one equals two, full stop. And you can make it more and more aggressively deterministic, where everything can be monitored and kind of, there can be rules that are formal yes or no's on everything. Again, to your point, that's actually not how the real world has historically worked, but it is very powerful and scalable. So we've been trying to shove a lot of the world towards that formula. I will say, in the last two years, though, there's something else that's happened, right, which I think is a whole other thing, which is the AI thing, which is effectively non-deterministic computing.
And so our options really are, if the world has to go faster and faster and faster, faster than humans can process, certainly faster than democracies can process, you basically have to make this decision, or I have to choose between, is this a formal verification–where like the speed limit now is not sort of 60 miles an hour, it is 60 miles an hour exactly–and if you're wrong, you're wrong, right? Or do you hand it over to AIs, which is another whole thing which I'm very skeptical of, but some people are really into, where you say, “Eh, we can't exactly say it's 60, we'll feed it all into the AI and whatever the AI says is, is correct.”
But those are kind of your options.
[00:35:08] Michael Eisenberg:
I think there's a third option for what it's worth, and I wrote about this like a year ago, which is the Community Notes model, which basically says the following. There's this speed, there's this mass media that builds up, but I'm going to throw this other force called human beings at this problem at scale, and try to get to a truth that is faster than the corrections that mainstream or mass media make.
It is less deterministic than the algorithms of, call it Facebook or whoever, and this brings kind of a human element to it. I think the tricky part is it can't cover a hundred percent of what's out there.
[00:35:42] Sam Lessin:
I will say, here's what's interesting. This is what I spent all of my time at Facebook on a decade ago.
And so when I started at Facebook, I ran profiles. I ran a lot of the kind of product teams outside of newsfeed and messaging, which were always separate. But I started something called the Identity Product Group, and the whole point was this. The whole point was, anything written on the internet, who the fuck knows, right?
It's like, the whole point is, how do you connect the real world in a trusted way to the digital world? And what does that start with? That has to start with encoding properly identity, and true reputation. Cause the problem with Community Notes is you still don't really know who's writing them, who to trust. Is it a bot? It's a war of attrition, where there's always going to be such an incentive to–what you need to get back to is, these are real humans, which by the way, was the fundamental Facebook innovation. You go back to 2004 and the whole point was no one trusted anything on the Internet. Facebook hijacked FAS.harvard.edu to prove to all the Harvard kids that they were talking to real Harvard kids. They forced a real-name policy in photos. And all of a sudden you had the first trusted local digital community at Harvard that made sense and worked.
And so the history of the company was about that, which is how do you take a physical world trust, move it online, and then create this like place where there is real reputation. There is, if you say the wrong thing, it has real world consequences for your operations in flesh space.
Like all of the systems of human trust that work physically, we could transport online and use it at scale, right? So I love the theme and the direction. It turns out that as beautiful a dream as it is, and there are places that can work a little bit, it is unbelievably hard to do at scale.
And the number of technical and practical problems you get into when you say, “Okay, can we trace these humans all the way down? Are these real people? How do you extend trust? What is the value of social capital versus financial capital?” All these types of things get really hard. So I agree with you intellectually, but it's funny, is if you picked one problem area that I absolutely adore and through my career, I'm also incredibly burned out on, it is this.
[00:37:59] Michael Eisenberg:
I made the argument a bunch of years ago that ultimately we'd need to actually come into smaller groups of people to identify, to kind of coagulate around trust. Meaning at some point people will have default–and I'm this way by the way already, anything I see online is default, not true–anythingI see it in the media, default not true, period. I trust Sam, and so if I see you–go ahead.
[00:38:22] Sam Lessin:
I agree that's exactly what's happening, Michael, but I'm actually really sad about this.
Sure.
Let me tell you, like, here's a historical arc. It used to be, in like the medieval era, that's exactly how like you had your tiny little community.
You hired your friends’ kids. You worked with the ten noblemen you knew, because if they fucked you, you'd fuck them back, right? And like, their daughter was married to your son and whatever else. It was like this highly stratified, small system of trust in local loops. And what happened over the last 150 years, 200 years has been beautiful, which is capitalism–which says all dollars are the same. I don't care who the hell you are. A dollar is a dollar is a dollar. You want to buy this thing, you can buy this thing. That's a beautiful open system. And then interestingly, recorded media. So it used to be you, someone says things–like, who do you trust? I don't know if it's right or not. Like you trust the Church, maybe, right? The church was the broker of reality, right? Like noblemen were, you know, Joe Schmoe Peasant had no ability to influence, but now Joe Schmoe Peasant had a camera. He had a microphone, right? And all of a sudden, you know, this whole ‘truth can come from anywhere’–well, it's kind of true because it was sufficiently hard to fake recorded media that whoever had it had it, right? And all of a sudden reporting and truth could be much more open. The problem with AI and where we're going is, I think you're exactly right, which is trust is re-collapsing into local networks, everything is default untrustworthy, and I think it really actually screws with a lot of what I love so much about the last 200 years, which has been how open our system has been. We're going to get very closed again. Yeah, look, there are opportunities for this. My wife runs a publication called The Information that she founded, has grown up. It’s not as big as the Wall Street Journal, but it is big. And in its community, it's trusted, right? But here's the thing. If you look at the history of–you go from large media to high-priced private newsletters, this has happened before. This actually happened right after the printing press, which is the news got really scummy.
And no one trusted it. So anyone who actually had a stake in reality, the noblemen, whatever, they all started subscribing to these super high-priced Italian newsletters which were supposed to tell them what was actually going on in different courts around the world, not what the scummy popular opinion was. So, these things go in waves, but we're in a dangerous part of that cycle.
[00:40:52] Michael Eisenberg:
Do you ever wonder, you know, you mentioned that the church was a proxy, or an arbiter or a convener of trust communities. I've often said that, and I'm not the only one who's made this argument, that Capitalism in the United States was built on the Protestant covenant.
And I'd offer the synagogue covenant as well.
Yeah.
Michael Eisenberg:
So, do you wonder whether we need to get back to an era where there's religious convening in order to broker trust? I'll also mention, by the way, one of the things I noticed about Israel, and this year–from my accent, you can tell I wasn't born here–is that the army is a broker of trust.
Army units where people sweat together and hang together. Lack of military service in the United States has meant that that's a much smaller community. So you think that these things come back like service and church and synagogue in a way that enables trust?
[00:41:39] Sam Lessin:
So something has to come back, is what I basically say.
And I do think people need organizations and common nodes, is what I would basically say. And now the problem is obviously, just like we talked about with individuals going rogue, you can talk about like rogue Popes, is the fact that everyone agrees with the church on a certain topic doesn't mean it's right, but it does mean at least everyone's swimming in the same direction, if that makes sense.
Michael Eisenberg:
Right.
Sam Lessin:
And you do over-concentrate power sometimes in too few and scary hands, but yeah, I mean, look, I kind of was hoping that this would come out of COVID. I was kind of hoping that the world and the United States would have this moment, where COVID fucked up things so royally that out of the ashes of that, like some sort of new trust would emerge where we'd all kind of get behind something in a way that was coordinated and helpful, and positive and whatever that could be.
But here's the funny part. My kind of take on what happened in the U.S. with COVID is, especially in whatever year we are in, you know, the end of August, 2024, where the economy looks okay in the U.S. is what I would say–at least that's the popular narrative–is we kind of got through it too easily. You know, we printed too much money. People hung out at home with Zoom. And again, that's not to discount the millions of people that died. And again, I want to obviously do all the things so I don't get canceled on this. But I think like, when–
Michael Eisenberg:
Getting canceled is okay, it's fine. You'll get through it, you're fine, yeah.
Sam Lessin:
It's fine. I've been there so many times, I'm fine with it too. But basically what I'm saying is, you don't want to have to have a world war to get everyone on the same page. Like, that's really, really expensive and terrible. But the question is how do you, in a world of abundance, in a world where we can kind of print our way out of stuff, in a world of current American hegemony where we have whatever it is, I do think a lot about what are those moments that can re-bond the United States.
You know, candidly, when you get into it, you're in Israel–how much does 10/7 re-galvanize society in Israel? And I don't know the answer to that. Like, has that been a moment?
[00:43:43] Michael Eisenberg:
A lot in my opinion. I mean, there's still kind of the political discourse that is extremely divisive, but I think on the popular level, what you'll see coming out of this is a recombination of society into a different vector.
Sam Lessin:
Yeah.
Michael Eisenberg:
And unfortunately, I think it actually takes wars, for what it's worth. I think it's an interesting question, you know, World War II, for example, had a lot of draftees. I don't know if the same thing is true in the United States today.
But I want to pivot one second, exactly on this topic, to your investments in crypto.
Years ago, I had a back and forth on Twitter with Marc Andreessen. He said that crypto conveyed trust and I said, “No, it's a replacement for trustless societies.” Is that why you like crypto so much? ‘Cause you think trust is gone and now we have to go to mathematical proofs because there's no trust?
And while you're answering that question, thinking about it, I'd love to hear why you did Solana at the time, which is obviously this killer investment–you referenced 1200 percent return.
[00:44:41] Sam Lessin:
1200 times return. It's more than a percent.
[00:44:43] Michael Eisenberg:
1200 times, sorry. I hope you wrote a very big check.
[00:44:44] Sam Lessin:
It's never big enough, but big enough, big enough. And it's actually more than that, but it was, it was good. Look what I saw, so my interest in crypto, I'll be honest, it's actually funny. I have framed the first time anyone ever asked me about Bitcoin–someone sent me an email, a person I know reasonably well, but not incredibly well.
He said, “Hey Sam, have you looked at Bitcoin? What do you think about it?” I was working at Facebook at the time. And I wrote back this incredibly dismissive email. And this isn't like 2000, this was early, maybe 2010, 11. But I remember at the time, Bitcoin was trading around like less than a penny.
And I basically, my dismissive one-line email back was, “It's super interesting. It seems like the price has already run up too much.”
But I will tell you my path into it is a few fold, which is, not that many months later, a few things happened. One is, you know, I had seeded Venmo from zero. I was Venmo's only investor. And I'm really proud of that. Not because it was the biggest financial return in the world, but because Kortina and Iqram, the founders, I was willing to bet on them when–I mean, they're wonderful people, but even they would say they're weird.
And it took someone to see the brilliance. And I'd like to pat myself on the back. The second is their approach to how do you think about the financial graph, and things like that, was just very different and avant garde, and people didn't want to invest in it. So I was willing to write that check.
So I was always very interested in how do you move money. And money is a form of communication more than anything else. And so sitting at Facebook, spending more time on this, you know, looking at what was going on–you just saw all of a sudden, this was like a self-replicating system that was decentralized, that was fundamentally a communication system. Money is a form of communication. Now this is going to grow just like a communication network. And it was growing like a communication network. And so I was able to make a reasonably sized–Bitcoin, you know, sending Western Union money to Bitstamp, right.
Which was the only way to buy crypto at the time and things like that, the whole nine yards. And then it's kind of seeded Ripple and a bunch of other stuff. But yeah, I mean, for me, the idea that you can have global free communication between anyone in the world instantly, for free, and the idea that you can have global free movement of money between anyone in the world instantly for free in theory is just, they're the same story, right?
And if you see what happens, you know, with community, with communication, how that changes commerce and how people interact and the relationships that exist–to me, money is just another version of that, right? You know, setting aside everything else. And so that was very, very appealing to me and very interesting from an early stage.
Now, the interesting thing with–you asked about Solana in particular, and again, I'm proud of that. It was also a massive, massive return for our fund. The reason it was such a good return is, at the time, it was extremely uncool. Like the reason Solana was such a good return was that at the time there was, people were very excited about Ethereum.
That was kind of the story of Silicon Valley, and smart contracting, and this is it and dah, dah, dah, dah, dah. And then there were a few high-flying projects like Dfinity or whatever, which I mean, candidly, the A16Zs, the big boys of the world were backing, right? It said, okay, we have the right tech, we have the right pedigree of people doing the right thing, and we funded that up the wazoo. And the reality is the reason Solana was such a spectacular return versus an okay return is because on a relative basis, no one would give them money, right? They were weirder people, right? They weren't part of the Silicon Valley mainstream the same way.
And they had a really, really compelling vision of what the future of effectively a smart contracting platform could be, or how it could work, or what would really work that ran contrary to a few things that people were very dogmatic about right in Silicon Valley, right?
You know, then we can get into that if it's pretty technical, but the upshot is, I hilariously talk about relationships and trusting people. The way I ended up doing that investment was twofold. One is I had an anti-Ethereum thesis at the time, right? Which, I had invested in Ethereum like everyone else.
But I didn't think it was the be all and end all. It was not Bitcoin 2.0, right? There's a bunch of things that were different about it versus being the only possible outcome. And second, Raj, one of the two co-founders, I had known him through three startups before it was Solana, right?
This goes back to relationships, and people, and trusting people over the long period of time. So when he came to me and said, “We're doing this, it's on the thesis you believe in.” And I'm like, “Raj, you know, I've watched you through three companies. I'll back you on this one.” It was the right intersection at the right time.
But yeah, I think it does. And that, again, I'm proud of it partially because it was a good thesis, and I was right, and whatever else, but also, we talked in the very beginning about getting excited about finding those voices and those people that are counted out a little bit, or haven't had their big success or didn't work at Facebook, right?
But they're the right voices, and I think that was a really great intersection for me on those two things.
[00:49:50] Michael Eisenberg:
I sense some snark about the Silicon Valley elite, or you know, the A16Z club or….
[00:49:56] Sam Lessin: Well,yeah, I mean, like, look, as with all things, yes, I would say that I–there are asset managers and there are investors. And investors try to make returns, and asset managers are the ones that figured out that actually venture capital is an okay business. It's not a great business. What's a really great business is asset gathering. There are people who are trying to find the next thing or the next people or whatever to invest in. And there are people who are trying to move gross dollars and make a market, right? And I don't like the asset managers. I think they distort the markets. I think that it's a very cynical way to make money, because you basically, you're not trying to find anything.
You're trying to pay slightly more on a promise, and then convince a bunch of LPs to give you more capital. So yeah, I'd say again, as individuals, as individual deals, they're all people. Behind all the institutions are people, and there are people that make good decisions and bad decisions.
And there are people that have, it's more complicated. But when you think about institutional incentives and like where the world has gone, I am pretty bummed at what Silicon Valley has largely become in the last few years. And I think it's a discredit to technology. I think it's a discredit to innovation.
And, yeah, those guys do kind of annoy me, is what I would basically say.
[00:51:17] Michael Eisenberg:
What do you mean you're bummed about what Silicon Valley has become?
[00:51:21] Sam Lessin:
Well, let's take this AI thing. I'm very, very anti-investing in AI companies. Now, I want to be clear that I think companies like Meta are going to make an untold fortune on AI.
It's an incredible technology for specific applications. And there are clear ways to make money. AI as a technology is good. LLMs are cool. Like they can do cool stuff. They can help you build cool product features. You know, the reality is, the narrative in Silicon Valley the last several years that I've been pushing on is, because people are trying to deploy so much money, because there's this incredible incentive to tell everyone that everything is the be all end all, AGI, you know, multi-trillion dollar, everything is different this time, right? There's this narrative that there needs to be this next wave, and it's not intellectually honest. What it is, is people who read science fiction and are great storytellers building a market.
So they can deploy an enormous amount of money irrationally. And I just, I think it's disingenuous. I think that in some ways, this is my big thing with Elon, by the way–I find Elon to be such a complicated character. I'm a SpaceX shareholder for years. I think it's incredible. Some of the stuff he's done is amazing.
Every time he gets on stage and says things that I know he's too smart to actually believe. It drives me nuts because I think it's intellectually dishonest. And I actually think that's my current snark around the A16Zs of the world, the mega funds. It really comes down to that, which is, it's one of those things where they've gotten so big and they’re such good storytellers that I worry the people in leadership positions, the people who are actually driving these things, have kind of lost their souls and are talking a book, and a PR game, versus a real game of innovation.
[00:53:15] Michael Eisenberg:
But don't you think about AI in particular, you made the point about Facebook, right? So it is a pretty transformational technology, and certainly it's an application of efficiency in many areas, and its ability to scale things up with smaller numbers of people. I see that every day.
[00:53:32] Sam Lessin:
Sure. But that's just normal. That’s just more technology. I mean, the Facebook ad, again, the Facebook ad auction is going to become unfucking-believably efficient. It already has. It's going to keep–the ability to turn the crank on that with AI is off the charts.
The ability to turn the crank on–have you ever actually tinkered yourself and tried to run Facebook ads? Building copy, copy variant testing, all that stuff. It's like, you couldn't come up with a better technological step for making more money as an ads platform. You know, that's different than this AGI bullshit, right?
That's different than the NVIDIA is worth X trillion dollars, is my basic view.
[00:54:12] Michael Eisenberg:
What is my view of NVIDIA being worth X trillion dollars, which I don't have a perspective on, though, is, I'm old enough to remember Wintel, the Wintel monopoly.
[00:54:20] Sam Lessin:
Yeah.
[00:54:21] Michael Eisenberg:
Windows and Intel. I think NVIDIA is Wintel in one place, right? It's got the software overlay Cuda, and it's got the chip manufacturer, at least for now. But I think there will be other competitors as you know, there was over time to Intel, but I'm certain to think like, iconoclast Sam is at work here and you wanna attack the establishment.
I don't say this in a negative way. Because you have a vastly different perspective, maybe coming from outside the Valley Network originally, New Yorker, went to Harvard. But I think there's, I'm trying to find the words for it, which is, you set up a smallish fund, Slow, you called it Slow–which is not fast, even though the world is speeding up–that obviously creates friction in the brand name. A16Z, which has become this brand, has raised large amounts of capital. You've done well for yourself. And so you sit kind of on the outside of it, (by the way, while your wife is the ultimate kind of insider whisperer in The Information) and say, “No, this has gone off the rails.” Do you relish that position?
[00:55:20] Sam Lessin:
Absolutely. So I'd say a few things. One is, let's be honest. I make my money on being an outsider-insider, right? And by the way, my bet structure, if you think about it–even if I wanted to be an AI investor, which, if you didn't get the drift, I don't–there's no money to be made in it for me, right?
Because anything good gets bid to infinity, and anything that's bid at infinity for a seed investor, if you're only deploying a few million dollars is like, it's just not worth it. Like the math doesn't pencil out right ever. And so it's incredibly self serving for me to say, to shit all over this stuff, is what I would basically say. And I'm transparent about that.
But I would say on the flip side, here's the thing. It's also, you know, the outsider-insider thing is like, you always do the best when you're kind of between ecosystems. You never want to be fully in an ecosystem. You want to be a translation layer, right?
That's where all the values created in the money is, when you understand multiple domains or sit between them. And look, I like shitting all over the big VC funds, but I also get a lot of value from the fact they always take my phone calls.
[00:56:32] Michael Eisenberg:
You know, your partner Will told me to ask you, is there anything that would get you to be a seed investor in an AI company?
[00:56:41] Sam Lessin:
Yeah, I would seed an AI company with–and I actually have done this–people that I feel like I know better than the rest of the world, and the world is discounting for stupid reasons.
And if the price was right. And if I had a compelling narrative story about why this time it's different. So I think it goes back to, you get to do this, I get to do this. It's the coolest job in the world. People spend years figuring shit out about the world. And then what do they do?
They come and they tell you their crazy ideas that people haven't heard yet, or like that are different. And you're like, why, you know, why you, why this, tell me something about this industry you've never heard of, and why, and then you get to learn professionally, and place bets where–here's the best part, Michael, is I love the freedom of being allowed to lose money. Right?
If you're A16Z partner 1005, and you're trying to write a hundred million dollar check, you better not fucking lose the money, right? Whereas I get to write checks all day long with very little oversight, to weird shit.
And when you're wrong, it's fine, because people only remember when you're right anyway.
[00:57:56] Michael Eisenberg:
I once heard that from Bob Kegel like 22 or three years ago. “People remember your winners. They forget your losers.” And that actually had an incredible impact on my career risk appetite.
[00:58:06] Sam Lessin:
That's true, unless you really fuck up, right? So the key is to not invest in FTX. The key is to not fuck up morally in a way, or to like drop the ball very, very, very publicly. But the nice part about being a seed investor, I mean, I'll give you an example. At Slow, we probably run about a 1 percent fraud rate. About 1 percent of the things we've invested in turn out to be fraudulent, and it's really funny–we get letters, for instance, as a firm every once in a while, from State Correctional Facility 3827 saying, you know, “Your prisoner, blah, blah, blah,” and it's because every once in a while we've screwed up and invested in something that's like straight up fraudulent, and the person's ended up in jail.
Right? And like, that's not okay if you're moving huge amounts of money, or if the person murdered someone. But if you're trying to find the edge, right, and the next thing, you're going to screw it up every once in a while.
[00:59:01] Michael Eisenberg:
So you're saying, it turns out that the line between crazy and criminal, or crazy and fraudulent, is actually pretty thin.
[00:59:07] Sam Lessin:
Well, I'm saying that I as an evaluator of crazy and honest versus crazy and fraudulent, am not perfect.
[00:59:14] Michael Eisenberg:
Okay. I like that framing. Speaking, by the way, of being like the iconoclast of the outsider. So you made this bid to kind of get on the Harvard Board of Overseers, your alma mater.
Sam Lessin:
Yeah.
Michael Eisenberg:
Why'd you do that?
You know, I mean, I was in favor, by the way, I would have voted for you. But Harvard didn't accept me.
[00:59:33] Sam Lessin:
So, look, Harvard had a tough year, if you hadn't, if you hadn't heard. What was interesting was I loved Harvard. I thought it was incredible. So many of my friends, my colleague, my wife, I met at Harvard.
Like I think it's an incredible institution. And for years, I had been the one in my friend group, everyone was saying, “Harvard's off the rails. Harvard has these problems. It's not the school you went to.” And I'd always been the apologist. I'm like, “Nah, you guys are overstating it. It's fine. There are some problems. There are always some problems in institutions of that scale.” And then after 10/7 it became, I was like, “Oh my God, I'm wrong. Harvard is off the rails.”And it's easy to just walk away at that point, but I said, “No, this institution really matters to me. I think it's important in the world. It's not just a personal thing. It sets the tone for a lot of higher ed in the U.S. We should see what the situation is and how to put it right.”
So I put this bid in last minute, you know, I got more votes than anyone as a write-in candidate for Overseer. I almost got 1 percent of all alums to vote me. I still didn't get on the ballot because you know, by 30 votes we can debate at a later date, not a big deal.
But what's interesting, Michael, is I pivoted that and we built the 1636 forum. We now have 20,000 plus alums subscribing. You know, most of the senior administrators at Harvard and members of the corporation all subscribe to our newsletter. We're helping people organize donations strategically.
Like we've kind of pivoted it into this really interesting outside alumni advocacy group. I've gotten more and more effective about, what are the real problems and how do you push it forward? So, you know, this goes back to tinkering. I'm a huge believer in tinkering, and I think one of the nice parts about being a venture capitalist is, in some ways, I always joke that it's kind of like being a tenured professor of capitalism. Which is like,
Michael Eisenberg:
I don't want to be a tenured professor!
Sam Lessin:
Well, of capitalism. And what I mean by that is, unlike if you're operating a company, you have like shit to do every day, like you can't cancel meetings. Like, you have people to manage and things like that. And the nice part of being a VC is, if you're like, I have a thesis I want to go learn about, or I want to try something, you can kind of reorganize your time to go try that. And you learn a lot doing it.
And so I'm constantly building software projects. I'm working on things. And this was the thing I was like, I'm going to try to push on this. What have I done? I've learned a lot. I think we're making a difference at Harvard. I think we have a direction to make more impact, but by the way, it's also a great lesson in 2024 advocacy, digital technology, and the pieces that go into that. What needs to be built? I actually am going to release a project called Standard Aptitude, which I built from a lot of the insights I learned about what's actually going on on college campuses for interviewing and hiring. So to me, it's kind of, you muck around in the world, and you wander into interesting corners and you learn things, and those inform lots of interesting directions in terms of what to invest in and what to build and how the world works.
Michael Eisenberg:
So is Harvard redeemable?
Sam Lessin:
I'm actually an optimist. So here's what I'd say. I'd say that it's not just like we talked about the formal one zero versus, you know, others, and it's not a binary yes-no. Can Harvard be the perfect institution of–no, and it never was, by the way, either. Like, there's gonna be a bunch of departments that are messed up, and weird policies in places, and things funding you know, endowed chairs that make no sense. Like it's going to be mucky. Can Harvard do good in the world again?
Can it be a beacon of truth and academic excellence and free speech? I actually believe it can. There's not a silver bullet. There's a lot of things that need to change to get there, but I do believe it's possible. And I think it's important. We talked about trusted brands before–I would argue that it's not the church in the U.S. It might not be the army. I would actually argue that the Ivy League played somewhat of that role for a segment of America in an important way, in leadership positions for a very long time. Which is, everyone knew each other, you kind of had all taken the same classes. There was a baseline of trust and consistency that really mattered. Not, again, for all American society, but the reality is for a lot of smart, very driven people that were in a lot of different pockets. And I think that's important, I don't want to give up on that. I think that's important.
[01:03:46] Michael Eisenberg:
Is there anything that would cause you to give up on Harvard?
[01:03:50] Sam Lessin:
yes, I mean, look, for me, the question is–it's a bummer, but it's always a question not of, is something possibly redeemable, but effectively thrust to wait, which is, you only have so many hours in the day and days in your lifetime, right? And where is your time best spent? You know, Harvard, if you had the wrong president and the wrong head of the corporation, and they wanted to go down a path that’s not focused on academic excellence, and they really made strides towards that. They, you know, were not interested in academic free speech, et cetera. And they really took a bunch of steps–my basic view is like, it's just pushing a boulder uphill, and that's the best way to ruin your life and waste your time, right? This is the thing you learn from startups. You want to be running, if not downhill, at least on a flat surface with a downhill on the horizon, is what I basically say. The second you look at a mountain and it's straight uphill, it's doable–it's possible to redeem it–but it's just not how I'd spend my time.
[01:04:52] Michael Eisenberg:
The academic year starts in a couple of days. You think we'll see more or less antisemitism on campus over the next year?
[01:04:58] Sam Lessin:
Great question. Well, I actually have about a hundred-page slide deck on, it was called ‘back to school,’ about what I've learned about the situation at Harvard and higher ed, and what the key leverage points are, that I'll be publishing hopefully in the next day or two, getting it out there. It won't be perfect.
Michael Eisenberg:
I will include that in the show notes.
Sam Lessin:
There will be typos, but I think it will have some good points in it. Here's the interesting thing. My default is it's going to be bad. If you think about it. Like none of the fundamental problems have shifted. You know, last year there was a lot of quote unquote enforcement of policy that kind of went awry, and ended up amounting to nothing. There's a lot of reasons to be skeptical.
I've actually talked to several current students, you know, people who worked at The Crimson, people who actually have much more on the ground, informed opinions, and they're actually optimistic. What they say is, “look, we talked about how a lot comes down to people. A lot of the key instigators are gone. They've graduated, right? They've moved on.” They've said that, you know, the reality is that while the enforcement was fairly weak at most of the schools like Harvard, one, a lot of the students were shocked there was any at all, and they all want to graduate and get jobs.
And then beyond that you know, the schools have really, they're prepared now in a much better way than they were. The last stuff, quote unquote, caught them off guard. We'll see. And then the last thing is, there's a whole thing about the graduate schools, some of which are pretty cray cray, and kind of their relationship on campus and things like that.
So, it's interesting. I was default expecting, even a month ago I would have said I think it's gonna be pretty bad. But, I've heard some hopeful things from students in the last several weeks of talking to them.
[01:06:32] Michael Eisenberg:
Given what you said, do you think it was correct that they let these kids off from the disciplinary action, ultimately letting them graduate?
[01:06:38] Sam Lessin:
No, I don't.
[01:06:39] Michael Eisenberg:
That's bad moral hazard, I would guess, right?
[01:06:40] Sam Lessin:
Well just to tie it together, we talked earlier about this whole formal versus informal systems, and enforcement. If you have a policy of one plus one equals two written down, and you do not enforce it, it is no longer a policy, right?
And so this comes out to like what we're talking before, which is like, how do you manage humans? How do you manage systems in highly dynamic, complicated situations? And one of the most important things–you have kids, I have kids. If you don't set a rule, you can negotiate.
If the rule is set, you have to follow through on the rule. It's like whether you want to or not. Now, I will say that this goes back to the whole media, what you trust and don't trust, always more complicated than it looks. It would be great if Harvard had a single policy with these things. It doesn't. Each school has its own policy. The policies conflict. People look at one school's policy and they get confused about the policy. So I'm not letting them off the hook. They screwed up, and they should have enforced their policies. But I'd also say it's not quite so black and white as people make it out to be.
[01:07:42] Michael Eisenberg:
I want to finish up with a couple of reasonably quick questions, although one of them I think will be harder. So, Arielle Zuckerberg told me I should ask you that, she said, “First of all, you have off the charts charisma and infinity hot takes,” and what she said I should ask you: what motivates you to keep going?
I think I know the answer to this question, but I don't know if they're your words. What motivates you to keep going?
[01:08:01] Sam Lessin:
Well I'll tell you the flippant answer I always give is, I love it when people think I'm wrong, but I'm right. And then I can later say, “Ha ha, I told you so.” So I'm mostly in it for the fuck you, I'm right.
And that's kind of what I care the most about, is if I can get to every year or two, get to point to and say, “I told you I was right, and you didn't believe me, and fuck you.” That's just a great feeling. And I would argue that capital is a great way to express that. It's like one of the most pure systems for that.
So, I mean, that's one thing. Look, I will say I really, I think about our portfolio and the things I'm most proud of, and it really, really all comes down to people. It's individual entrepreneurs who you were able to enable, and they remember it. And they're like, “You didn't do this, by the way. This is my thing.” And any venture capitalist who thinks they did something is kidding themselves. But like you opened a door and that made all the difference. And that feeling really, I absolutely love, especially when people are being constant. I mean, part of my anti-establishment thing is like, the kid who went to Stanford and Y Combinator and has 87 term sheets from every single fucking person on earth, like, fuck that kid. It's like, they'll either be fine or they won't be fine, right? But it's not like they weren't enabled. Like, I think the key is like, can you give someone a shot?
And then when those shots happen, and convert. and make a difference, that just feels awesome.
[01:09:32] Michael Eisenberg:
That line reminds me of my good friend Roland Fryer, professor of economics at Harvard, who I love dearly. So both Kevin and Will told me to ask you a question. I would have asked it anyway, by the way, because I knew your dad, who was an incredible person. And he was pretty legendary. And what I'd love to know is, how did your dad impact you, impact your career path and kind of some of the most important lessons you took from him?
[01:09:55] Sam Lessin:
Oh my God.
[01:09:56] Michael Eisenberg:
I know you were pretty close with him.
[01:09:57] Sam Lessin:
I was so many ways.
I mean, the sad, sad slash nice thing for my dad is, my dad had a lot of sickness in his life, and knew he was going to die young. And so I think that, you know, he died at 56, and I think he made a point of writing a lot, but also just spending a lot of time and really teaching me.
I felt like I was under his tutelage for years through the internet, you know, 1.0 ,and his career and things like that. I miss him a lot. There's so many lessons. I mean, he wrote a book, ‘Lessin’s Lessons,’ which is actually quite fabulous about his life lessons across the boards. I don't know.
I think that he really was a joyful guy who appreciated life, and appreciated quirky people, in a really deep and personal way, is I think one of the things I took away. I think I took away dreaming from him. And you know, and kind of seeing the big picture and a lot of amazing things.
The guy also loved, you know, The Post, and newspapers of world events and all sorts of stuff. So it's hard to distill, but I took a lot from him for sure.
[01:11:01] Michael Eisenberg:
Amazing. One last question. For the listeners who don't know, Sam is an incredible skier. An incredible skier. I'd love to know.
[01:11:08] Sam Lessin:
I got that from him. He made me ski a lot growing up. But yeah, go for it.
[01:11:12] Michael Eisenberg: I only saw him in the boardroom. That was, I guess, tougher than skiing with him. But he was an incredible board member. What are some of the lessons you take from skiing to your business life?
[01:11:24] Sam Lessin:
That's an interesting question.
I do love skiing. I ski a lot. I grew up skiing. And at this point, we do some pretty wild things. Here's what I basically say. I think one of the interesting–one of the things I think I've figured out over time is, people think that I'm, I think a risk-seeking person, right, in a lot of ways.
I certainly sound like one on TV. I actually think that by default I'm actually not. And so, I'll give you an example. The first time I went helicopter skiing. Fucking scary, right? Like, you're landing on top of the mountain, sometimes on a knife edge, there's like blades flying around, there's all this crazy stuff.
And your heart rate goes up and it's like, and it's scary. And now, again, you still need to respect the environment. You need to respect the machines. You need to respect safety. There's a lot that you need to be prepared for, but there's this thing of understanding calculated risk, right?
Understanding what actually feels unsafe versus actually is unsafe, because there's a difference there. And where that line is of your personal ability and what you can take out. There's just a lot of lessons of being around those types of things that now all of a sudden, you know, I can go around and have a blast.
And like my heart rate isn't necessarily going up. I'm not trying, it's not like–you're not at an 11, right? In a lot of ways. And so I think the difference between perception and reality of risk, I think, is like a really important thing from skiing. But I think it's something you practice.
I'll give you another example which is relevant, which is like last year I got my pilot's license. And here's the thing, I am not one of those people who got on an airplane for the first time and was like, “This feels awesome, I love flying airplanes.” I got on an airplane for the first time to fly it, and then especially to land it–landing's the hard part. I was fucking terrified. I actually, I have a Garmin watch, and I was getting an abnormal heart rate, as you're trying to figure this stuff out. And then by the time you get your license–again, I'm not the world's greatest pilot, I don't have 10,000 hours, but I can fly alone and I have a license– and you no longer have the abnormal heart rate.
And so I think the biggest thing, and I think a lot of life, but it's certainly startups, is just understanding, one, perceived and actual risk, which you certainly get in more extreme skiing. And then two, that learning to manage your emotions and your reaction to stress is a practiced thing, it's not an innate thing. I think are kind of really key lessons, and I think they apply to entrepreneurship a lot.
[01:13:48] Michael Eisenberg:
I love that. I wanted to ask you as a last question, what is one thing you think about the world and its future, or technology in its future, that you think nobody else asks or thinks? I think it's a perfect last question after your last response.
[01:14:03] Sam Lessin:
Oh, man. What is one thing that no one, no one's enormous, eight billion people, I'm sure someone thinks almost everything.
[01:14:10] Michael Eisenberg:
The unique Sam view.
[01:14:13] Sam Lessin:
So I'll tell you the thing that I'm not sure this is fully unique, but I've certainly been on for a while, and I'm really excited about that in terms of unique view is, I am really excited about entrepreneurship in America, but I think the model of Mark Zuckerberg's and Elon Musk's and, you know, Jeff Bezos's is in the rear view.
So let me explain what I mean by that, which is, you know, Americans love to be entrepreneurs. They love to build, so do Israelis, right? There's a freedom, the creation, the uniqueness. There's so many things that people love about it. But for 20 years, I would argue the narrative of what an entrepreneur is, has been captured by the Forbes headlines, the Zuckerbergs of the world or whatever.
And so you've had thousands of kids pouring out of universities and saying, “I want to be an entrepreneur. And what that means is I'm going to Silicon Valley, and I want to be the next trillionaire.” And I actually think that the big thematic thing that I'm very much after and I see happening is, I think that everyone's just as bullish about entrepreneurship–that era of chasing that is over. And the reason is that there was this moment in history with the birth of the internet. I don't think AI is it, although everyone wants it to be another echo boom of it, where you really could change the world and build platforms that had never been seen before on Terra Nova at that type of scale.
And I just think what we found is that there's like 10 of them. They're mostly done. And if you're going to spend your life pursuing something, pursuing that, and then almost certainly failing–sucks, right? Whereas what doesn't suck, and where there's enormous opportunities, is in the towns of America, having relevance in small businesses. All these things which are not going to make you into a 100 billionaire, but can provide incredible lives for you, incredible meaning in a community and purpose in all sorts of places.
And so I guess it's not a tight answer, but I'd say the thing I believe is that entrepreneurship is alive and well. But the narrative of what entrepreneurship is, is moving away from Silicon Valley and trying to be the next kajillionaire, to instead being really important and meaningful in your community, whether that's a community online of creators, whether that's a town, like it's really shifting pretty dramatically and pretty quickly.
[01:16:36] Michael Eisenberg:
Sam Lessin, thank you so much. This was an incredible conversation. It went in places I didn't expect it to go. So thanks for playing along.
Sam Lessin:
It was fun.
Michael Eisenberg:
It was fun! You can learn more about Sam on X. And that's @Lessin. That's spelled L E S S I N. And if you enjoyed this podcast, please rate us as five stars on Spotify, Apple Podcasts, or wherever else you listen.
And Sam has a podcast, also called More or Less, with Dave Morin and Jessica Lessin.
Sam Lessin:
And Brit Morin.
Michael Eisenberg:
Is that correct?
Sam Lessin:
It's the two couples. It's the More-ins, get it? The More-ins.
Michael Eisenberg:
Oh, I got it. I love it.
Sam Lessin:
And the less-ins. And the Morins think everything is great, and the Lessins think everything sucks. That's kind of the shtick.
[01:17:15] Michael Eisenberg:
And I highly encourage you to listen to Sam and Jessica's and Dave and Brit's podcast. Sam, thanks for joining.
Sam Lessin:
Thanks for having me, Michael.
Michael (00:01.438)
All right, well.
Today we're running a special episode of Invested, in light of the massacre that happened on October 7th in the south of Israel, and the incredible response of Israeli civic society since then. I really want to thank everyone for joining and listening to this episode. And I have with me today Ami Daniel. Ami Daniel is the CEO and founder, co-founder of Windward, a company that Aleph is invested in. And we'll talk more about Windward soon, but we want to start by talking about October 7th, which we’ll come to in a second–Shabbat, or Saturday morning, October 7th. But before we get to that, Ami, tell me, how is your family doing? How is Adi, your wife, and your kids doing?
Ami Daniel (00:49.099)
First of all, thank you for having me, Michael. It's great to be here. I think it's super important to talk about what happened, but also what can we do about it. My wife is okay, my kids are okay. I gotta say, they're a bit afraid now. I think what happened, I think is the actual definition of terror. My kids sometimes wake up at night or walking in the streets and say, “Daddy, can you make sure people don't kidnap us?” So I think it's way beyond just an alarm or two. It's instilling that fear, I think, in kids and citizens, which are afraid of exactly that.
Michael (01:23.126)
Yeah. So October 7th, for those who don't remember, was a Shabbat or a Sabbath morning, Saturday morning, here in Israel. And it was also the holiday of Simchat Torah, which literally means the ‘happiness with the Torah,’ with the Bible. And take us through your morning. Like, you got up at 6:15, it was on that morning?
Ami Daniel (01:47.275)
6:32 I think.
Michael (01:52.583)
6:32 you got up on that morning. And just walk us through what happened.
Ami Daniel (01:55.239)
Yeah, so we wake up from an alarm at 6:32 a.m. We run down to the shelter. We have a shelter.
Michael (01:59.815)
An alarm is a siren, a siren, not an alarm clock, a siren. Yeah.
Ami Daniel
Yeah, sorry. A siren. We wake up from a siren. No alarm clock, actually said that. And we run down to the shelter in our house. We close the door of the shelter. And then we come out 10 minutes afterwards, and my wife tells me, “Ami, this is like the Yom Kippur War.”
Ami Daniel (02:25.627)
Immediately, and I was looking at her and saying, “Why are you saying that? We had sirens before.” She says, “Listen, I can feel it. This is like the Yom Kippur War, okay we need to do something.” I gotta say, it took me 25 minutes to sit on that, because Yom Kippur was 50 years ago - by the way, exactly 50 years that day, I believe, Michae, so I think it's actually quite symbolic but also quite purposeful on their, on their behalf.
25 minutes afterwards, I sit on it, and I said, “Okay listen, we need to do something. What can we do?” And then it's 7.30 a.m. on Shabbat. Obviously everybody should be asleep, right? It's Simchat Torah. And I pick up my phone, which is, by the way, usually closed, and it's usually, I turn it off and put it in a closet. It's my digital Shabbat. Because it helps me clear my mind. Usually. Not at war. And then.
And I open the news and I see the videos of the trucks, Toyota trucks in Sderot, which is a city down south, with a lot of terrorists on them and RPGs. And I grabbed my head and I said, “Listen, this looks like a movie,” right? Toyotas with terrorists in Sderot. I think it's, I've never seen anything like it.
Michael (03:42.594)
It's important to point out that you're actually not in the south of Israel. You're probably 20 kilometers, 15 kilometers northeast of Tel Aviv.
Ami Daniel (03:51.127)
Yeah, like I live northeast of Tel Aviv. I just sit in the TV, I see it in the computer. I go up to my study where I am right now and I say, “Listen, we gotta do something.” And then I just start calling people, basically. I call you Michael, but it's Shabbat, so it took me a few hours to get ahold of you. I call some other people, and my brother-in-law is very active in Brothers and Sisters in Arms, which is a new civic movement which was built in the last 10 months.
So I called him up and said, “Listen, did you see what happened down south? We need, we got to help them.” His name is Tamir. And he says, “Listen, let me check that and come back to you.” He's checking with them. They didn't really know what to do. He calls me back, says, “Listen, I can't do anything to help.” So I said, I say, “Okay, so I'll do it alone. No problem.” And I started messaging in a lot of WhatsApp groups. ‘Does anybody need help?’ And I did this instinctively without any plan, obviously.
And then people started coming back to me. And the first guy actually is Erez Shachar, which you know very well.
Michael (04:56.575)
Yup, he’s a venture capitalist.
Ami Daniel
He's a venture capitalist from Qumra Capital, who we, together, went to meet some people, some internal Israeli things in the last 10 months. And he calls me back and says, “Ami, my lawyer is right now in a car, with a gun, going down south, trying to rescue his daughter.”
Ami Daniel (05:17.195)
And I was like, “Excuse me, can you please repeat that for me?” He says, “Yes, my lawyer is in the car with a gun, trying to rescue his daughter, but can you call him and help?” I called this guy. I've never met him. I don't know who the guy is. I said, “Listen, hey, what's your name?” He says, “Yaron,” I say “Can I help?” He says, “Yes, my daughter was in the party. It was a big party called Nova -”
Michael (05:37.794)
The Nova Peace Festival.
Ami Daniel (05:46.815)
The peace festival. It's about 1500 or 1300 young people celebrating peace. A few kilometers from the Gaza Strip, I think four or five kilometers. And she says, “Listen, she got away from that. They were massacred there. And she's hiding right now in some open area. I'll give you her number.” And then I WhatsApp her. And I said, “Yuli, your dad told me to help. How can I help?” And she writes me back, like in a second. “Listen, my boyfriend and his friend, they tried to save us and they got shot. We're surrounded with bodies. We're just outside in this open area, and we need help, can you help me? Here's my location.” She sends me her WhatsApp location.
And my instinct to respond to her was, “I'm on it, don't worry, we'll fix it.” Why did I say that? I have no idea, because I had no backing to say that, obviously. But I just say, “On it,” you know, “I'll get you out of there.” I turn to my wife and say, “Listen, what do you think we should do?” She says, “Listen, do you remember the guy who, when we were in London a couple of years ago, he studied with us? He's a general in the army. How about you call him?” Okay. I was his mentor, Michael. I think you put me together with him to mentor him in some internal course for the army a few months ago. So I know him, I know his wife, I know his son, right? I call him and I say “Moran, listen, I have these people, they're just outside, we need to help them. What can I do?” He says, listen, I'm on vacation in London, I can't help. But here's the phone number of the Operations Officer down south. Call him, tell him I told you, I told him to help you.” I said, “Okay, please message him.”
I called the guy and I said, “Listen, you don't know me, my name is Ami, but I have people right now locked in with terrorists around them. Give me somebody to work with.” And then from that sentence onwards, for the next whatever, three days or so, but specifically that Saturday, I made maybe 50 calls, maybe 100 calls to this guy.
And I got, and this guy gives me, now, a guy who is around the lady’s, the young lady’s location to get her out. So in one hand, I’m on WhatsApp with her, and she's telling me - it was five or six hours with her, right, it's not a minute, this starts at eight AM, it finishes at one, two PM - and she says, “Listen, they're outside, there are terrorists outside, they're trying to kill us, they're shooting people,” and so forth. And he got me together with these forces on the ground and we managed to get her out.
Ami Daniel (08:12.207)
And then we did it again. And again. And then in Be’eri, and then - Be’eri was a big city down south, I think the biggest one, right? So about 1,400 residents, really close to the fence. And Be’eri was really a massacre over there. So suddenly these people started phoning to me. And my brother-in-law calls me and says, “Listen, you know what? I'll help. I don't care.” And he starts sending these messages in Brothers and Sisters in Arms WhatsApp groups, which is, again, hundreds of thousands of people around the country.
And I do the same, in the Entrepreneurs WhatsApp group, in the whatever, Tech Leaders for Democracy WhatsApp group. And people start spreading the word. So people started coming back to him, and coming back to me, and coming back to some friends, and coming back to my wife, and then suddenly, I'm overflowing with hundreds of people right now under fire. And they're telling me, “Listen, here's my location. Nobody's helping me. Can you please get the army here?”
Michael (09:10.578)
All on WhatsApp, all being coordinated with both the people who are under attack and the army on WhatsApp.
Ami Daniel (09:15.911)
It's all on WhatsApp, and I think Saturday I focused on Be’eri, because this is, I think, one of the hardest areas and I'm just one person. My wife and kids are at home, right? So I focus on Be’eri, and I get to the first forces that break into Be’eri, and I end up with a guy, with the commander who's called Daniel Luria, who's right now coming from the fence around. So the terrorists were at the gate, the barbarians were at the gate, actually, maybe, shooting everybody coming in. So he goes around the fence, and this guy just, you know, they just gave me his number. And I said, “Listen, I got your number. Can you go down south to Be’eri?” And he says, “I'm on my way. Give me 15 minutes.” And nobody else is telling him what to do. Right? He's like a colonel in the army. He has 25 or 30 people with him.
Michael (10:11.29)
We should also say at this point that some week plus later, you discovered that Luria, this guy, actually got in his car from the northern border of Israel, from Betzet, and went south to save - loaded, put on his uniform, put his gun on, and went all the way south to do that. And then two and a half or three hours later, which first of all tells you how small a country Israel is, is now at the fence in the southwest of Israel in Be’eri, talking to you on the phone. And you're kind of...
Ami Daniel (10:22.09)
Yes.
Michael (10:39.426)
directing him to get people. But you only discovered this, that he came from the north, like a week plus later.
Ami Daniel (10:44.567)
I didn't know. He just sends me a WhatsApp message. ‘I'm on my way, 15 minutes.’ And then when he comes in, I started working with him. Now, it's important to understand that these cities don’t south don't have street names. So as opposed to New York City, where it's just like, you know, “I'm on sixth and 25th,” or whatever, you can't really... Like, if you don't live there, there is no name. And this is quite difficult to...
Michael (11:07.094)
Right. All towns and villages with little roads.
Ami Daniel (11:10.203)
Yeah, it's like little roads and the houses, people know the houses according to the family name and the number. But if you go to Google Maps, it doesn't appear there. So I think it's a big issue, because I end up working with three or four different ground forces in Be’eri - every one of them in a different area of Be’eri - for like 14 or 15 hours, and they don't know the place. And they have no maps. And really they don't know, really, that each other are working there. And I'm getting these locations from people. And I think at that time, I think what's crazy is there are terrorists in the houses. It's not that this is done and the army is like - there's three to five terrorists in every house. Oftentimes, and I've spoken to many, many families that I’ve helped, they're in their shelter locked. The dad is pushing the door handle so people don't open it.
The terrorists are setting the house on fire because they can't open it, because the dad is like this for 14 hours, and the door is becoming hot. And the terrorists are either putting it on fire or not putting it on fire, and waiting outside the door, ambushing the forces coming in. So at that time, what I end up telling the forces is not just, “There are people in this house,” - because they don't know where the people are, because many of them were kidnapped - but also where the terrorists are. To the extent that right now, “Listen,” they send me WhatsApp pictures from the ground, and send me a live location, and I send them back maps with drawings that I do on my iPhone of where the terrorists are.
And I try to just have them understand in which windows are the terrorists, and where did they miss them. And a few families were - we had one family, the Mor family, where the dad has ALS and he just, he's in a wheelchair. So we had to tell the two kids to jump through the bathroom window, while the forces go in and blow up the door. And we knew there were two terrorists hiding from them, one in the stairs and one in the second floor. And it's very surreal, because I'm just a CEO of a tech company, right? I don't usually work with ground forces to tell them where the terrorists are. So that was Saturday, and I think Saturday finished, I think, at 2.30 a.m., there were dozens of families like that. And it really...
Michael (13:29.29)
Yeah, you know, I just….Sorry, go ahead.
Ami Daniel (13:33.157)
I thought it was over Saturday evening, but apparently it wasn't.
Michael (13:37.066)
Yeah. So just to kind of cover off on something that's incredible - so you and I were at a bris, a circumcision, a brit-milah, for the son of someone who used to work for us at, at Aleph. I actually officiated at their wedding as you know, and their family is also from Be’eri. And we were both - so this child was born in the same hospital that the grandmother who was wounded in the evacuation of the people from Be’eri was, where she was being treated. The baby was born a few floors underneath her. And then the grandmother passed away just hours before the circumcision and the Brit Mila. And we were both there at this bris, at this circumcision.
And I got to see actually, her family here, her husband's family from Be’eri, come over to you. They thought that you were in the South, in Be’eri, when you were directing them out of the room. By the way, this is, you know, one degree of separation in Israel where, you know, Avigail, who is the mother of the child - you and I were on the phone, and these people who you helped save now turn up at the bris on the day that the grandmother unfortunately perishes from this awful massacre.
Ami Daniel (15:00.671)
Yes.
Michael (15:06.526)
And they didn't realize that you were in the center of the country doing this by WhatsApp. They thought you were directing ground forces in Be’eri. What did you feel when you, kind of, met these people?
Ami Daniel (15:15.987)
Yeah, first of all, they're the first people I actually meet. I got many phone calls afterwards, and pictures, and stuff like that, but they're the first people I actually meet. So Avigail's husband actually reached out to me sometime on Saturday I think. He says - or I reached out to him, I think, I got his phone number from somebody - he says, “I know your family is down in Be’eri, how can I help?” And he had actually all of his family down in Be’eri,, I think, about 10 people. And they worked with three different forces to get him out, and actually her husband was very resourceful because, it's because of them.
Michael (15:37.623)
Yeah.
Ami Daniel (15:44.819)
He was really, he sent me maps, and he worked with me for like seven, eight hours. So kudos to him because that's really, I think - I don't think people thought of it as the meaning of family, but that's some of the meaning of family. You don't give up on your family, right? So what I felt is - they hugged, the wife hugged me and she said, “Listen, is it because of you that we're alive? You saved us. They would not have found us.” And I think, you know, I'm not sure I thought of being in that situation, but I think it makes you just grateful for the opportunity you had to help. Because we talk about investing with an impact, and improving the world and technology, but we maybe forgot the Maslow pyramid, right? First thing: stay alive. Then you can eat, then you can have WiFi and all that good stuff, right, and what we can't do without. But I think that's really out of this world. We spent a lot of time together, and...
Michael (16:30.527)
Yeah.
Ami Daniel (16:42.407)
and I think it was really amazing to see people that you managed to get out of there. And by the way, many of them wrote me, like, “Thank you Soldier Ami for getting me out.” Why they called me ‘Soldier Ami’, I don’t - because they told me, “You spoke to us like the commander of Delta Force. You told us what to do.” And by the way, I think, equally, the mental support is equally important. I had a family in Kfar Aza with four kids, and then the wife, it was really tough. Because she's with four kids, for 30 hours. 30 hours in a closed, like, small room. They're out of air. They don't have water, they don't have food. 30 hours, four young kids. She's telling me, “Ami, I need to go out. The kids are thirsty, you know? They need food.” And I tell her, don't go out, okay? I'm with you.” She tells me, “We're all gonna die.” I told her, “Listen, you can tell me that. Don't tell the kids that, okay? You have me. We'll be together, and we'll figure it out together.”
And it's always the darkest before sunrise. So I think equally is just getting the army there and so forth, but equally is just being with these people that they don't break. I think it's super important.
Michael (17:50.858)
Yeah. And what I want to do here today is also, then, take a step back.
Michael (18:03.658)
You were in the Israeli Navy, I don't know how many years ago it is now, 18, 20 years ago, and your ship was hit by Hezbollah, another Iranian proxy. You want to tell us about that?
Ami Daniel (18:18.039)
Yeah, July 14th, 2006, 8.42 p.m. As you can notice, there are a few dates I remember very well. Dates and times. I'm a Naval Officer, a lieutenant, just off Lebanon, on a corvette called ‘Ines Hanit,’ which means ‘spear’ in Hebrew. We're doing a naval blockade, and the ship gets hit by a Hezbollah missile, C802. Actually, it's a very special story because it's the only time - it was Friday evening - it was the only time we did the Kabbalat Shabbat at sea, like a big one. So, clearly they planned to fire the missile Friday evening, but we were very lucky, because of the Kabbalat Shabbat, dinner was postponed, obviously.
So, that means that when the missile hit, there were only three or four people at the back of the vessel. Most of us were in the, it's called the ‘officer's mess,’ doing the blessing on the challah bread for Shabbat.
Michael (19:18.045)
That’s the blessing on the bread for Shabbat.
Ami Daniel (19:19.847)
Yeah, and that saved a lot of people. And then the missile hit. We were obviously surprised. It's a very big missile, 8.5 meters, 120 kilograms of explosives. Four people died. 12 were wounded. It took eight and a half hours to take out the fire. We were towed away from Lebanon. I was a tactical officer on board, so I was in the Command Information Center all along, talking to everybody and doing whatever I need to do.
But to some extent, actually, Saturday, October 7th, I responded that way because I responded instinctively because of that event. Because I felt under fire on Saturday, October 7th. Again. So I responded exactly like I was trained, which is, ‘go manage, just go figure it out. Get everybody together,’ because that wasn't what I used to do in the Navy. And I think it really changed me, that experience, obviously.
Michael (20:15.506)
Yeah, I want to, by the way, there's a famous biblical expression where the vintner of Pharaoh says, “My sin I recall today.” So Ami, who's been to my house with his wife and kids and other people for Shabbat - so the siren went off in Jerusalem two hours after it went off in Tel Aviv. The first missiles were fired by Hamas to Jerusalem two hours later. So only at like 8:20, 8:30 in the morning did we know something was up. And I have a son who's in the army, and his phone started ringing, “Get ready to come.” And my second, another son, who's in reserve duty, turned on his phone - because we don't keep our phones on Shabbat - and they said, “You gotta come to the army.” And after another 10 minutes I said, “I better turn on my phone. Something's going on.” I turned it on and there’s a message from Ami that says, “Call me as soon as you can.” And I hesitated.
I'm saying, “It’s Shabbat. I never talk on the phone. I never turn on my phone. Why is Ami looking for me? He's one of my CEOs, like, what's going on?” And then I said ‘No, he knows that I wouldn't do that.’ So I pick up the phone and call you. I said, “What's up?” You said, “What took you so long? I wouldn't call you for a Shabbat. I know you keep Shabbat. There's an emergency. We got to go find people down south who can rescue people.” And we start connecting, and I'll never forgive myself for that hesitation. And so I want to thank you for having the right instincts and I've learned from it. That 10 or 15 minute hesitation until I actually called you, staring at my phone, like what the hell is going on, I won't forgive myself for, and, uh, so thank you for being…
Ami Daniel (21:52.272)
It could have been 10 hours, you know, 10-15 minutes is not that bad.
Michael (21:55.382)
Yeah, it could have been 10 hours. And then we started getting a hold - and I think what's interesting about that part of the story is, you called the Brothers and Sisters in Arms, and I called my buddy Erez Eshel and Yoel Zilberman, who both went down there immediately as soon as they heard, on Shabbat morning, one from the Golan Heights and the other one from Kfar Adumim, and a bunch of other people - we started connecting people - Erez grabbed an ambulance and took a pregnant woman that you found - which was incredible. And just, the human stories - that baby was born, by the way, a couple of days later - the human stories are just incredible. And I think your instincts proved to be beyond critical at this point in time.
But I want to transition and let you tell me about your day job, because I think it's important for the next phase of the story. What is your day job as CEO of Windward? Why did you start the company? And what do you do? And then I want to come back to, kind of, how all of that comes together on the events of October 7th.
Ami Daniel (23:05.323)
Sure. So Windward is a shipping AI company. What we do is, we observe and track the world's ships, and cargos, and ports, and companies, and help figure out risk in world trade. We work with about 200 customers, from ExxonMobil and BP and Shell, to Glencore. So very big traders in oil companies. We have about two thirds of our revenue from governments and regulators.
So the US government is our biggest customer worldwide, more than 15 agencies across DHS and DoD and everything you can think of. And same in Europe, obviously in Israel and other places. And we also work with supply chain companies, the biggest freight forwarders in the world, to then track and predict supply chain structures.
So it's a software company, traded in the London Stock Exchange, about 170 employees, growing very nicely. And I think my day job, what I do is, I work with our customers to understand, look, two years, three years, four years in the future with them, and then work back from there to learn what do they need to get more profitable or safe or secure, and co-build these technologies with them on a day-by-day basis. And actually, during this war in the last few weeks, we've rolled out a couple of new products that I think will make a big difference because of the situation.
That's it.
Michael (24:33.45)
A couple of new products for maritime, just to be very clear about this, that because of the war situation and the kind of pressure cooker that this puts you under and the way it's affecting global supply chains and shipping companies, new product ideas around AI and other things that you've been working on, have now kind of, okay, there's a real customer need here and we can roll this out. You've already rolled out and sold some of that in a short period of time.
Ami Daniel (24:36.071)
Yeah. Yeah, listen, I think basically, when you roll out a new product, everybody knows the hardest thing is what's called creating a product-market fit. So this is basically a startup under fire, right? In such a pressure cooker right now, it is much easier to get a ton of feedback and fast. Because there's lives on the line, it's not just dollars on the line. And when there's lives on the line, everybody operates in a different level of urgency. So I think you can sit back and say, “I'm shocked, what's happening in the world,” you know. “Oh my God, it's very tough.”
But as a leader of the company, I think, A. You need to make sure your people hold up. And I think it's not easy, because it's very emotional. It's very deep to many people. At the same time, we lean into our business and we make this a business opportunity, I think. Never miss out on a good crisis.
Michael (25:47.274)
Yeah, this is kind of the famous Ben Horowitz, ‘Wartime CEO’. I think it's fair to say you're a Wartime CEO right now. What's some of the hardest things that you've had to deal with at the company level as a Wartime CEO now?
Ami Daniel (26:03.011)
I think there's a lot of uncertainty, because the drafting of the employees in the company isn't -
Michael
Reserve duty.
Yeah, reserve drafting, isn't in one day, and their spouses - so the people you have in your manpower for the next six months is a moving target. You know it's not that, you know, listen, I pay, I spend X, I have Y people, here's the production I can get, what do I do with it - it's constantly moving about. So I think it's formalizing a more fluid way of management with your management team that understands what's important, focusing on the most, and the top priority right now, and doing that first. And I think, many years ago, I met Marc Benioff, chairman and CEO of Salesforce, and he did an exercise with me. He says, “What's your top priority? What's the top 10 priorities? What's the top 5? What's the top 3? What's top 2? What's the top priority?” It's actually hard to do that. So getting inspired by that exercise with Mark.
That's exactly what we're doing. And we're doing this, kind of, every two or three days. Because on the one hand, your manpower changes. On the other hand, your customer needs are changing because there are new needs around the world, the war. And at the same time, there might be technological breakthroughs you can do to bridge the two apart. So I think it's not easy having that in your head, but actually having people focused on execution because the world, the non-Israeli world, doesn't really care, in the businesses of the way. We need to keep delivering the results on a quarter by quarter basis. There are no excuses here.
Michael (27:35.506)
One of the things I keep hearing from our CEOs, which I just find inspiring, is, “This is Israel. We deliver.” And everybody is absolutely committed, war reservists or whatnot, to deliver for customers. And I think that's a key part of the country's resilience, the entrepreneurial resilience that's here. And it's become a rallying cry. We're Israel, we're Israelis, we deliver, and we're gonna keep delivering. And to the point you made, there's more innovation coming out of this than I think people understand. At your company you mentioned it, but let's go back also to the days after October 7th.
So you and I are talking, and I think you said, “We can't keep doing this on WhatsApp. This needs to be productized. This needs to become something.” We talked about it and said, “Okay, let's gather up a bunch of great Israeli engineers and product people and get at it.” And so, why don't you tell the story of what happened right afterwards?
Ami Daniel (28:37.151)
Sure, first of all, I thought it's only Saturday. And then Sunday morning I wake up, I see it's not ending, and there's still more people. My wife tells me, “What are you going to do? I said, “We gotta help them.” So I call up my VPs - my VP product, Amir, and my CFO, Ofer, and my VP business services, Ariel - I tell them, can you just show up? They just show up, like 15 minutes afterwards. And then I write in an entrepreneur group, I said, “Can people come help?” And suddenly by 10 a.m., there are 15 or 20 people in our house. And I end up like, people reach out to me and then I give them, “you talk to this part of the army, you talk to that.” And then we understand, my wife tells me, I mean, “This is too much. We can't keep on doing this on WhatsApp. Let's build a product.” I said, “Well, good idea, sorry.” I was like heads down. I called Eden, your partner in ALeph, and I said, “Can you come and help?” 15 minutes afterwards, he's in the doorstep. And we start working with Eden and figure out how we can make this a product. Now I think, you mentioned no degrees of separation - I actually think the layer of founders, CEOs, COOs in Israel of growth companies is extremely tight. I can mention Nir Zohar from Wix who is amazing - obviously you invested in the early days of Wix - I think you introduced me to Nir, and Micha Kaufman, co-founder and CEO of Fiverr is amazing. Eynat Gez from Papaya, and Guy Bloch from Bringg, like I mentioned, and Gigi Levy who is a big investor in this country. But the investors and top founder CEOs are very tight. So I reach out to them and say, “Listen, guys, we need help. Can you help?” And suddenly, I think we have a team of, by Monday morning, 15 or 20 people productizing an idea that says, if Israel is attacked and the fight is on our ground, not on the enemy's ground, and people message you on WhatsApp, how do you collapse the time at scale to help them? And do that in hundreds or thousands of cases?
So we think of a concept called ‘Kvar Baim’, which in Hebrew is, ‘we'll be right there.’ It's, by the way, intentionally in Hebrew, so everybody feels comfortable in this country, because Hebrew is, you know, obviously our mother-tongue. And we start working on it. And so by Monday evening, there are about 20 people working on this product. By Tuesday morning, it's on the website of the biggest news website called ynet.co.il in Israel, for people to reach out and get help.
And I think by now, it is a fully-fledged product that people can reach out and get help, whether it's for evacuation, or whether it's for more things under fire. And it's fully integrated with monday.com and other products, API products, but it's a fully integrated product for rescuing people under fire.
Michael (31:34.734)
And not just that, also to provide intelligence and location-based intelligence information to the forces. And it's been integrated also into institutional civic society, without saying more than that, at all levels. And so, this product that came about in 48 hours, which Eden, my partner, now thinks it’s actually, maybe a company that can be built around it for civic response globally, is - what's that?
Ami Daniel (32:00.767)
Yeah. Thank you.
Yeah, I agree with him. I called him up a few days ago to tell him that. Yeah, this is a global need. And it's again, the hardest thing is to get the product-market fit.
Michael (32:12.126)
Yeah, I think it's also fair to say that a bunch of the companies that worked on this, whether it was Bringg or Monday, et cetera, found new products and new product market fits, and new markets coming out of all this innovation. And so like, let's, let's roll this movie forward a year or two or three now. Where are some of the areas of innovation that you think will have come out of this awful, atrocious massacre, and the crucible that it created for Israeli tech?
Ami Daniel (32:48.875)
First of all, I think it's global tech, not just Israeli tech. I think the need, basically you see a rallying of the West, I would say, around Israel. You could see the Prime Minister of the UK and Germany and France, and President Biden here. So I think it's important to say, I don't think by now it's an Israeli thing. I think it's a global thing. I think it's important. There was Israeli tech developed based on this, but to a global customer base. I think it's a very important thing because you need a market, right? I think there are the obvious suspects - video analytics, to me, is an obvious suspect. Suddenly I think it's the first case ever in history that I know of that you're just open source, like that amount of open-source videos and just identifying who's been kidnapped, you know, who's been murdered. It's just, just hard. And these, the videos are from phones and you know, whatnot. So I think that's one.
I think civic response is another one. We've been working with one of the other Aleph companies and their logistics platform, so I think there are a lot of civic-response use cases for them. Which actually, by the way, they also tweaked the product in the last three weeks. Half of their company’s working on building that product and tweaking it. So I think there’s clearly civic response. I think there are different elements of intelligence, I heard, that they are building. I'm sure there's cyber intelligence, and I think there's location-based intelligence.
Because I think as a country, we were completely caught by surprise. And I think the country was actually in a bit of a shock for the first two or three days. But since the last weeks, I think people have been rallying up, and really every bit of technology and talent is trying to be directed at that.
Michael (34:25.782)
Yeah. I think by the way, some investors in the US, guys like Matt Ocko and Josh Wolfe, who have been investing in - and Trae Stephens at Founders Fund - who have been investing in defense tech over the last years, have probably, some of their companies have gotten tested in the crucible here as well. And that probably moves a bunch of those companies forward as well. Israel became, on some level, a beta sight, or a real use case for some of those technologies.
Ami Daniel (35:03.931)
All of them, if I may, I think these guys are all great guys. Most of the investment in defense tech and stuff like that went to US companies, because US companies, the assumption is that their market is the biggest, so they get to the product-market fit the fastest. So actually, I think this is an interesting turning point, actually, to bring that attention to Israeli companies who are innovating under fire for the Western world. And I would not underestimate that, because one of the things that we haven't seen in Israel is the big defense tech investment in companies like - we’ve seen Saildrone, obviously Palantir, is of course, Anduril. There are a bunch more.
Michael (35:40.942)
So I think, there's a fascinating question in my mind here, which is, if you are an Israeli founder post-October 7th, post the day of the Simchat Torah massacre, are you gonna go build something different that maybe you wouldn’t have built had you started your company a year ago?
Ami Daniel (36:07.947)
It's a good question. I think the answer is yes.
Michael (36:11.892)
Yeah, I think so too.
Ami Daniel (36:13.519)
I think the answer is yes, and I think maybe I would also build it differently... I think if you take a step back, I think we in Israel, we have a responsibility to make the world not give up on us from a business perspective. Because equally people can say, “You know, there's a lot of investment opportunities. This place has a lot of uncertainty. There's war. There's political unrest, you know, we don't have to deal with these guys. Let's wait for a year or two for it to settle down.”
So I think it's really on us to go back to, we deliver, and to show resilience, and our capability to build companies at a global scale, and make sure that on the business level, this has made us stronger and better.
Michael (36:57.33)
Yeah, I think you hit the key word, which is resilience. Civic society has shown incredible resilience here. The military has shown resilience here, after the initial failure. And I think there is a esprit de corps, which has turned up in a broad swath of Israeli society that wants to be resilient technologically, business-wise, and embrace life. And I think the other thing, I think this is part of what you're saying is, the technologies we build, in addition, to being incredible businesses should embrace life. And should embrace making humanity a better place. It's not just ‘not give up on us.’ This is where you're going to want to be if you want to find resilient founders and find people who want to build technologies that build big businesses and embrace life.
Ami Daniel (37:47.591)
Yeah. And if you, by the way, if you take Israel out of the equation for a second and look at the last three years. We had two years of COVID. Then we had, it's my - this is my CEO day job, right - two years of COVID. And then you had the war in Ukraine. You have interest rates go up and capital dry up. So there's a lot of things that require, actually, resilience and resourcefulness and the ability to gather a team and, you know, navigate on the go. And actually, if you look at our business - and she's been growing very nicely - we had a long-term thesis, and I'd like to quote Peter Thiel here that says, "To build a big company, you need to be right for a long time on something everybody else thinks you're wrong about."
And I think as a founder, CEO, to run a business, like, in these times, it's hard and you need to be resourceful. I know a lot of companies in the freight tech industry, supply chain industry, I can mention Convoy was valued at $3.8 billion a year and a half ago. They went bankrupt a couple of weeks ago. There's a company called SLE, which raised $80 million, I think, from Goldman Sachs, $240 million, filed for Chapter 7 and so on.
I can give you a lot of other examples. And my view is I'm sure they're all amazing businesses that had great technology and a great market, but then things changed. There was a recession, then the demand went down, the interest rates went up, and probably, I think in hindsight, somebody didn't respond well enough to keep them afloat and successful. So I think if you choose founders, that's what you should think about.
Michael (39:27.822)
You know, in the 1900s, a century ago, when historians talked about the 1920s, they called them the ‘Roaring 20s.’ I have been floating in my head and tell other people the idea that when we look back on the 20s of the 21st century, it's going to be called the ‘Chaotic 20s.’ Chaos reigns, and in chaos, you need resilient people. And we're not out of the chaos yet, obviously, you know, the war between Russia and Ukraine is still ongoing, who knows what happens in China and Taiwan. The maps are being redrawn. I think most people thought that in the 21st Century, maps wouldn't be redrawn. I've never thought that, for what it's worth, and even written about that in my books. But the world is changing in front of our eyes, and many of the isms of the last 20 or 30 years have peaked and are now behind us. And so I guess just in finishing, the one thing I wanna ask you is - you know, just like you said, you came out somewhat different from the event of your missile hitting your ship. There's no way to come out of this event, if you're a bystander, and certainly not after what you went through. There's no way to come out of it the same person. So if you reflected on it for a second - and obviously your answer may be different in a year - so we won't hold you to it (or two), what has changed about you since three weeks ago or four weeks ago?
Ami Daniel (40:56.489)
Um, well it's a good question. First of all, I think…I'm not sure I'll be calm anymore. Because I think, it kind of undermines your basic security about the world. As a dad, as a head of a family, you need to be...I don't think I ever expected to be on it at this level. And by the way, you could see a lot of anti-Semitism around the world right now. If you were on a plane landing in Dagestan, wherever that was in Russia, and from Israel, I'm not sure it's a good outcome for you right now.
It didn't feel well, for sure.
Michael (41:32.362)
Or campuses in America.
Ami Daniel (41:58.691)
Or campuses. I think Cornell University, I saw them telling their Jewish students, “Please don't go to the place where you can get kosher food,” which I think is crazy to say and do. And I've seen Stanford University and Cambridge University and Oxford University's professors write not very nice things, I think. So I think, first of all, I thought that part of the world was done, I have to say. I'm not sure it's done. So I think that's one thing.
I think the second thing is - and you know, I might go write an article about that - I thought about the public sector as being separate. Although I have public sector customers, I thought of them as ‘customers’. And I think we need to think about a new model for civic involvement.
I'm not sure we can stay outside and say anymore, “Well, we're running a business, good luck with that. We'll just pay our taxes and move on”. I'm not sure that works anymore. Because the other side, in this case Hamas, but it could equally be Hezbollah - they work asymmetry, in the asymmetrical warfare. So, and the problem with these big civic systems is they're very slow, because they're very big. They need bureaucracy.
So perhaps the answer that we need to get to as a society is, how do we combine the best of both worlds? The width and depth of execution of a big system with the agility of people like us who can drop everything and think of stuff. Maybe last but not least, actually in this event in the last three weeks, I ended up, you know, the people who were with us - and it shows the importance of the bonds - were obviously my wife and kids did this with me, my brother-in-law, ex-employees of our company - a lady called Yonit Hoffman - just saw me do that and, she used to be an employee data scientist, just picked up eight ex-employees of Windward, threw them on the problem, created a forum, and created hundreds of people to come to her. So I think it shows you the bond between people doesn't start and stop at, if you work for me, I work for you. But it's this organic bond we build together to figure things out.
I think it's a more human view of the lack of communities that we now have, because these people are lonely. So maybe we shouldn't be lonely, because we build these virtual communities with us that at a time of need, they come together. I don't know if that makes sense.
Michael (44:14.634)
Yeah, I actually think that it's the physical bond, that you know somebody, you really know them, not just online, that has enabled a lot of the coming together and resilience to solve this problem and the mutual support. And I agree by the way with everything that you said. Ami was referencing an article he and I wrote for one of the Hebrew language papers here, entitled ‘Pioneering 2.0,’ which basically says that the operating system of civic society is, you know, AI, iPhone, Android, whereas the operating system of public service is, at best, Windows 95 and maybe the Pony Express today. And that needs to be solved. And we need to upgrade it and that requires more civic responsibility.
I'll tell you an interesting story I heard last night. I was in the Finance Ministry very late last night. The first responders to the South who took care of the gruesome, gruesome sites of the people who had been massacred there is an organization called Zaka, which is a civic organization. And these, you know, almost a hundred people who picked up beheaded babies and other things need some mental health treatment, obviously. And the Finance Ministry and minister wanted to deliver them five million shekels for treatments like this. Three weeks later, after he issued the order, it still wasn't done, because it was winding its way through the bureaucracy. And that's just not okay, not during wartime or anything. Kudos to the heads of the Finance Ministry that were trying to do that. Shame on us as civilians that we haven't updated the operating system.
I want to close with, actually, something deeply personal. So number one, some of the unsung heroes of what's going on here are grandparents right now who have filled in with kids, as many husbands and some wives have gone off to reserve duty. Throughout this discussion, you've mentioned your wife, Adi, who is a leader in her own right. And, you know, said right at the beginning, had the instincts, said this is the Yom Kippur War, and kind of kept pushing you to go, and you were in this, kind of, thing together - she's calling, you're calling and everybody's calling her, you know, doing the work and helping you pull the whole thing together. Tell me, how you think about - there was always a joke, “behind every successful guy, there's a surprised mother-in-law and a very smart wife.” I feel like through these last three weeks - I speak for myself -the partnership with my wife has become ever-stronger. Talk to me about the importance of Adi, both in the company and in the last few weeks.
Ami Daniel (47:22.163)
Oh, okay.
Michael (47:24.95)
If you feel uncomfortable, you don't have to answer it.
Ami Daniel (47:22.163)
No no, I feel very comfortable. I think it's the better of my life. I think in my view...we're building everything together. I think building a family is a long-term partnership. Building a business is a long-term partnership. Also, everything we built here in the house was part of that partnership. When people walked in, I was on the phone with the army, and they said, “Hey, what's up?” And I said, “She runs everything here.” So she basically ran everything here. I was just on the phone with the army. Starting Sunday morning. And I think you have to have a level of trust between you and unspoken understanding of what's important, and the ability to believe in each other, and follow each other and support each other. But also, I would even say in this case, walk in that journey together. Because usually people talk about spouses in terms of supporting. I think that actually does not do justice. Because supporting means somebody's in the backseat. I don't think of it as a backseat or front seat. I think of it as two front seats.
And I think that's the way I think about our business. And that's, in my view, that's her role for me and the company. She's, for me, a partner in figuring out what to do and how to manage stuff, and stuff like that. And I learn from her, and hopefully that's mutual. But also same in this event and many other events, same with raising a family. It comes back to the world. The world is hectic. My view is, we're not at it alone. We're at it together. And I think love, to paraphrase, is the answer. If bad people are saying, you know, life starts at death, I think life starts at birth. And it's about love. It's about building a family, it's about building a business, it's about building community, it's about saving lives, it's about doing good things.
And I think if you live a positive life with a positive life partner, you end up happier, more successful, more secure. But actually that's what life is about. It's better just to go through that journey with a partner that grows together with you, but I gotta say, can equally challenge you in everything. And that's, I think, part of - I have a good friend who told me many years ago, that I married a female version of me. I disagree with that, I think she's much better than me. But I think marrying at that level, I think is the best decision I've made in my life.
Michael (49:58.254)
Thank you for that. I feel the same way about my partnership with my wife. Unfortunately, we haven't had much time, actually, to sit and talk over the last three weeks. I assume we've got to the same thing. There's a lot of, like you said, unspoken words, and division of labor, and each one driving cars from the front seat right now. But thank you for that. Ami, thank you for your service to our people and to the world. Thank you for keeping the company delivering and running. Our investors thank you, your investors thank you, and I think the world thanks you for that. And looking forward to doing this again. And I'll probably see you later today, because it feels like we've seen each other a whole lot over the last three weeks.
Ami Daniel (50:44.425)
Thank you for having me.
Michael Eisenberg:
You had an encounter with former President George W. Bush.
Matan Bar:
Yes.
Michael Eisenberg:
Describe the scene, because it relates directly to this.
Matan Bar:
We had a quick conversation, and then, you know, I said, “Hello, Mr. President.” And he said, “Oh, you have a weird accent.” That's what George W. Bush told me. And he said, “Where are you from?”
I said, “I'm from Israel.” He said, “Oh, Israel, great ally.” I'm like, “Thank you for your support, Mr. President.” So I was like an ambassador for a second. He was actually talking with a few entrepreneurs. There were like, I think five or six of us, and he didn't have too much patience to hear, you know, their fancy technologies.
And so I heard that he didn't have too much patience. So when he asked me, “Hey, so what does Melio do?” So instead of talking with him about our payments infrastructure, which I'm very proud of, I told him, “Mr. President, we keep small business in business.” And then he said, “Oh! Small business? They’re the backbone of America!”
Michael Eisenberg:
I'm super excited to welcome Matan Bar, the CEO and co-founder of Melio, to the Invested podcast. I know Matan for a fairly long while and Melio actually started when we were commuting about two blocks by foot, one to each other, when he was at the PayPal offices and I was at the Aleph office on 32 Rothschild.
And I said to myself for many, many months on end - “I gotta be in business with Matan Bar when he finally does his company.” So Matan, welcome.
Michael Eisenberg:
Thank you. Thank you for having me.
Michael Eisenberg:
Give us your brief background.
Matan Bar:
The brief background is, I'm originally from Haifa. I moved to Tel Aviv at 21, went to Tel Aviv University, studied computer science.
And then, in my last semester, started my first company, which I'm sure you remember. That's how we got to know each other.
Michael Eisenberg:
What was it called?
Matan Bar:
The Gifts Project. We weren't great at choosing names back then for companies. But the company name was The Gifts Project, and I started it together with Ron Gura, which was also here–and I watched the episode I think a few weeks ago, a few months ago.
Michael Eisenberg:
Ron Gura is the founder and CEO of Empathy.
Matan Bar:
Yes, today. And back then, when we were 24, we were co-founders together of a company, again, called The Gifts Project, together with Erez Dickman and Maya Gura.
Michael Eisenberg:
By the way, just to say, Erez Dickman is the VP R&D of Lemonade, also an Aleph company. So it's all in the family.
Matan Bar:
Yes, that's true. Yeah, so Erez, the CTO and co-founder back then, Ron, the CEO and co-founder, and I was the Chief Product Officer. And we were very good friends and are very good friends today,
Michael Eisenberg:
All from Haifa.
Matan Bar:
All from Haifa. I know Ron since the age of eight. Erez I met during computer science studies in Tel Aviv University. He was the smartest person in the class, always got better grades than me. And that's why I wanted him to work with me, as you can imagine. And then, in our last semester, we started The Gift Project together. Long story short, we sold it to eBay Inc. eBay and PayPal back then were the same company.
So we sold it after three years. I was 26 when we sold the company. Ron was 27 because he's–like we sold the company in September, and my birthday was like a few days after the acquisition date. His birthday was a few days before. So I would say anyways, 26 years old. And then, we were with PayPal and eBay for six years. As opposed to many entrepreneurs that hate corporate, I loved every second of it. I know that it's not cool to say when you're an entrepreneur, but I love PayPal. I love eBay. It's the first time I learned how to manage, how to work in a global team, like, happy to talk more about that, but I've been there for six years, and then, for six years, I started Melio, which–that's how we met again–and, actually, we met before I even knew what Melio is going to be and what we're going to work on, but that's, like, a good story. We'll come back to that.
Michael Eisenberg:
Yeah. We'll come back to that, but what did The Gifts Project do?
Matan Bar:
So the Gifts Project was a group payments platform. So we, friends, buy items together online. So if you're organizing a group gift, and each friend wants to chip in $20 to buy the gift together, we enable the product that can help you do that online.
Or if you wanted to go to an event together with friends, instead of one person buying the tickets for the entire group, you could invite your friends, and each person would chip in and buy their own ticket. Now it sounds like, very trivial, but at the time, combining Facebook APIs and Facebook technology with e-commerce was a big deal.
Like, combining social and e-commerce was considered to be very innovative, and it was. And so enabling a group purchase experience in 2009 was pretty cool. So that's what we did.
Michael Eisenberg:
It's amazing how when we look back at these things, it seems so trivial, but at the time these things are hard. Our perspective on them completely changes.
So you started The Gifts Project right after the great financial crisis of 2008. Why did you think you could raise money as a 24-year-old and 25-year-old and make anything successful at all?
Matan Bar: Yeah, so I think–we had no idea what we were doing. That's the real answer. And we were, I think Ron came to me at the last semester of my university and told me, “Hey, I want to do something together.” And I love Ron, and I said, “Yeah, why not? But we need someone smart that knows what they're doing.” So then I called Erez, the smartest person in the class. And he got, like, these crazy offers from Google. Like, I don't remember, like, he had a lot of demand.
But I told him, like, it will be fun, like, we'll work together, and, there was no market validation, product-market-fit validation, there was no ‘what is the size of the market that we're pursuing,’ none of that. It was three people that liked each other, and knew how to build stuff. So we went ahead and built something, but it was being young and stupid. But really, like, there was just–we'll go after it. Even in terms of raising money, the first money that we raised was from Yossi Vardi.
And it was probably one of the weirdest meetings that I've ever experienced, because, you know, we went to meet Yossi, the meeting was 15 minutes, and we prepared a nice demo, and, you know, we prepared a nice prototype to show Yossi what we were working on. And he didn't care about what we've prepared at all. For 10 minutes, he asked us questions about where do we volunteer.
At the time, Erez and I were actually volunteering in Bialik-Rogozin, the school for the foreign worker kids. And we taught programming, so we volunteered in different places. And he asked us, like, a lot of personal questions, and the meeting was over. And then he sent us an email the day after saying, ‘Ideas change, people don't. And so I will invest in you.’ Because he did a lot of reference calls. He actually checked if we actually volunteer. He said, “Okay, you're good people–I invest in people.” And he invested $100,000. Which is, at the time, a significant investment that could actually pay for an office and salaries.
And that's how we started.
Michael Eisenberg:
First of all, do you agree with his assessment that ideas change but people don't?
Matan Bar:
I think that, as an overall statement, it's a correct statement. Like I think people, behavior can change, but you know, values, I would say, rarely change. And so, like any good marriage, you can marry a person with a completely different set of values, but you'd have a very difficult life, so I wouldn't recommend it. I actually, I recommend that you get married, or partner with someone with shared values.
And the fact that we all grew up in Haifa, you know, we were all like, relatively self-aware, we're relatively–we don't think too highly of ourselves. I think that helped us get along together.
So the values are common. I do think behaviors change over time and people evolve, no doubt. And in terms of ideas, I think ideas change. It's not like you're pivoting from being a fintech company to a healthcare company, but within your journey, an idea gets so many turns and twists, that yeah, ideas evolve and change a lot.
So overall, yes, I think that's a true statement.
Michael Eisenberg:
So the bottom line is if you want to raise angel money, go volunteer.
Matan Bar:
In our case, it's actually true.
Michael Eisenberg:
This is what we keep saying. Values lead to value.
Matan Bar:
Absolutely.
Michael Eisenberg:
Do you agree with that?
Matan Bar:
It's a fact. Like for us, it was, it's just a fact. Like if we didn't contribute to the community, if we weren’t people that care about their surroundings, and where they live, and making where they live better than, yeah, I think it would have been harder.
Michael Eisenberg:
So when a 21 or 22-year-old student comes to you and says, “What's the best thing I can do for my career?” What do you tell them?
Matan Bar:
Wow. That's a tough one.
Michael Eisenberg:
You don’t tell them to volunteer, it doesn't sound like.
Matan Bar:
I think, you know, after thinking about it for like five seconds, probably the best advice is always do something. People that do something–good things happen. If you use your time watching Netflix, like, you won't see any interesting evolutions in your life.
If you keep doing stuff, building stuff, impacting stuff, just do something, I think good things will happen. So, I guess maybe that's my conclusion.
Michael Eisenberg:
You talked about shared values and you talked about not thinking too highly of yourself, but what are your core values?
Matan Bar:
My core values–I think it's the first time that anyone asked me this.
Michael Eisenberg:
It’s not a trick question.
Matan Bar:
My core values are, I would say, I think if I can answer like a few of our best politicians and, you know, take your question, but answer what I want to answer regardless of the question–or take it slightly differently–I would say my identity is, I'm a proud Israeli. And so as a proud Israeli, I have like 50 percent more motivation–before October 7th, of course, after October 7th–50 percent more motivation than most of my entrepreneur friends around the world, because I want Israel to be successful.
And I think it's not unique to me or anything like that. I think most entrepreneurs in Israel that I know have that extra motivation to make Israel successful. So, as a result, I think our values, or my values are, when I succeed from a business perspective, it's because, of course, I want to succeed. I want my family to succeed. I want to impact customers. All that is always true. But I also want Israel to succeed. And especially during this time, it gets an additional meaning. So I think my value set is very much common with many Israelis, and it's mixed within the business life.
Michael Eisenberg:
Interestingly, I was at this conference called Hill and Valley in Washington, I guess it's now a month ago, put on by my friend Jacob Helberg, who's also a podcast guest here. And one of my big takeaways is that in America, patriotism is coming back into vogue in the tech industry. Like for a while, there was this kind of almost anti-Americanism in Silicon Valley, which I never experienced in Israel. This has always been kind of, ‘we're in this for a cause greater than ourselves’ and particularly the success of the economy in Israel.
But I think this is actually catching on in the United States now as well.
Matan Bar:
I think it's the best thing that will happen to them. I think, you know, every time, I remember as a kid when I watched an American football game, I was always amazed by the fact that, you know, there's a band, and the anthem, and combat planes fly over the stadium.
And I remember asking my parents, “What the hell is the connection between playing football and flying combat planes above the stadium?” Like, how did they connect the two? And, I got that this place after World War II, people wanted to encourage patriotism, and that was a great way to connect sports and loving your country.
And that's why you have combat planes flying over stadiums when you play sports.
Michael Eisenberg:
Isn't that obvious?
Matan Bar:
Yeah, but you can ask yourself, why the hell are there combat planes? And I think, I wish, by the way, Israel sports had more of that, because I think it's very moving and it connects you to the country.
But in business, it definitely exists in Israel. Like tech, and being a Zionist, being a patriotic person, it connects really well. The equivalent of how American sports and patriotism connects, to my opinion.
If I can ask you one question, which I'm sure is top of mind for many in Israel–I think, you know, Israeli entrepreneurs are, you know, what's the slogan? ‘Israeli tech continues to deliver’ or, ‘Israeli tech delivers?’ And, I'm actually very curious just, you know, from all your portfolio companies and just having your perspective in general, on what are the biggest reasons to continue and be optimistic about Israel and the tech ecosystem during these days?
Because many, I think, need to hear this, including myself.
Michael Eisenberg:
I don't think you need to hear it. I think you do a fine job of it. High-level comment: leadership on a global basis is very challenged right now. And more and more, by the way, entrepreneurs and companies are becoming leaders at a global scale, if you just look at Elon Musk as an example, but there are others.
And so I think one of the things Israel has going for it is, as leadership kind of crumbles around the world, the civic leadership in this country is second to none globally. You know, when I was younger, I read Democracy in America by Alexa de Tocqueville, in which he describes the incredible community leadership provided by regular citizens and the importance of the church and community.
And in Israel, that's, the army, and community, and religion. But you saw what happened after October 7th is that the civic population took over here, and the startup nation part of this, which is the entrepreneurial spirit of the tech ecosystem, I think is stronger than ever because you realize you have to rise to this occasion.
And I think what you're going to see is Israel at the forefront of a global move of responsibility where civilians and civic society take more responsibility over what's going on in countries. And we have that infrastructure better than anyone. We're also seeing incredible innovation over the last three or four months walking in the doors here. Just stunning.
And so I think the next bunch of years, I've said this publicly, is gonna be rough for the world. Not just here. I think it's plausible that Israel is–we're not first in, first out because Ukraine was first in–but second in, first out maybe, SIFO, to use an accounting term or non-accounting accounting term, I just think we're seeing people starting incredible companies.
I think there's going to be very positive immigration inflows into Israel. We already see it.
Matan Bar:
Great.
Michael Eisenberg:
I need to ask you a question. What does the name Melio mean?
Matan Bar:
So Melio is–I would say we picked the name based on your guidance and Adam Fisher's guidance. You told us we shouldn't pick a name that is like a name of a feature, because that would limit us. Like this company will exist for a long, long time, so you can't pick, like, Pay Simple, you know, that's terrible.
Michael Eisenberg:
Or the Gifts Project.
Matan Bar:
Yeah, and then our history with picking names was not one to be proud of.
Michael Eisenberg:
That's why Adam and I felt we needed to intervene early on just to make sure you didn't, you know, bring us ‘The Payments Project.’
Matan Bar:
Yes, yes. That was yet another point where you added value.
Michael Eisenberg:
Investors adding value. That’s what we do.
Matan Bar:
Yeah, yeah, that's definitely yet another example. So we wanted something that is, you know, broad, not limiting. I love the word Meliorism. Meliorism is not a very common word, so it's okay if no one knows it, but Meliorism is the belief that the world can become better through human effort.
So it's a very pragmatic approach. If an optimist thinks that no matter what happens, everything will be great, and a pessimist thinks that no matter what happens, everything will be terrible, then a meliorist thinks that things will be better, but through action, through human effort.
That's a very pragmatic approach that I relate to. And so meliorism, or to meliorate, is to make better. And so Melio is just a short of that word. And, it also sounds just simple and very consumer oriented, as opposed to our competitors. Our competitors’ names are AvidXchange, or Bill.com.
It's like, just by the name of it, you know that the product can't be great. So we wanted to pick something that is more on the consumer side, like Venmo.
Michael Eisenberg:
Did you know the word meliorism before you started Melio?
Matan Bar:
No, I don't think so. I think it was from research.
Michael Eisenberg:
So you loved the name once you decided to research, to find something to name the company.
Matan Bar:
Yeah, yeah, I think it's through, I don't remember what research it was, but we encountered this name and we loved it as an approach for us, for the company. And so that was also a good name for us. But we don't expect anyone to understand the meaning behind it.
It's just, it's short and sweet and memorable.
Michael Eisenberg:
So it’s like how you can make the world better by paying your bills–but it's not, that's Bill.com. It's really about how you can make the world better by?
Matan Bar:
Keeping small business in business.
Michael Eisenberg:
Keeping small business in business. So what does Melio do?
Matan Bar:
So Melio keeps small business in business. That is what we do every day. And more specifically, Melio is a B2B payments platform. So we enable, today, more than 150,000 small businesses that pay with us every month to manage their finances, and their financial relationships. And when I say financial relationships, it's all your suppliers–so if you're a restaurant, you have many suppliers. The vegetable supplier, the coffee bean supplier, the fish supplier. These are very important relationships for your business. If you're late to pay, if you forget to pay, if you don't get the right inventory and you pay the wrong amount, there's so many things that can go wrong every day.
And even a small restaurant, they pay hundreds of thousands of dollars out every month. Like, so you think about a small business, you think they're paying, I don’t know, $2,000? No, these are like massive volumes, even for small businesses. So we help manage these financial relationships, whether it's your vendors, whether it's your customers that you send an invoice to, whether it's your accountants and bookkeepers, whether it's your bank, like all these different interfaces, Melio helps manage and, at the end, helps you manage your finances better so that your business can continue and thrive.
Michael Eisenberg:
Why'd you choose this area of small business?
Matan Bar:
There are two reasons. One is, it sounds simplistic, but money is important to people. And when you make money better, your impact is genuine and real. So I always–when I was at PayPal, I was always shocked by the fact that when we shorten the time to send the payment by a day, you know, when a U.S. citizen needs to send money to someone in Mexico, it usually takes four days.
If you shorten it by a day, you change people's lives, because the money arrives sooner, they can pay their bills on time. Or if you make something slightly cheaper, or faster, or if you help with cash flow, deferring a payment, or receiving money faster by day, everything related to money movement and money management, making it more transparent, accessible, faster, cheaper, is changing people's lives. And I always had a very cynical approach to many companies’ mission statements that, you know, were always like, very big, but they weren't genuine.
When we talk about our own mission statement, ‘keeping small business in business,’ I believe it's a million percent. Because we help businesses with their financials. We help them with money. And money, for many people around the world, is I would say in the top three, top two concerns that they have. Health is obviously number one, always. Money is a close second and third.
So helping with money is making a real impact, period.
The second reason is that it has a great business model. And so when you help with money, like you don't need to invent a business model. The business model for financial services is very clear. You know, there are things with the financial ecosystem that will not change for the next 10 years. Businesses will always want to pay as late as possible. Vendors will always want to get paid as fast as possible. You know, that's not going to change, not with generative AI, not with any AI. Like people want to pay late and get paid fast. And so–
Michael Eisenberg:
AI does not know how to generate money yet.
Matan Bar:
Yeah, exactly. And you know, there are truths that are just so fundamental. In money management and financial services that, you know, when you build the business, you're thinking, okay, I have a business model now that will be relevant 50 years from now. And I am a hundred percent confident in that. Maybe we'll enable it through different ways, that's probably going to happen, but the business model is going to remain the same. So these are the two reasons: big impact, and a very clear and sustainable business model.
Michael Eisenberg:
You had an encounter with former president George W. Bush.
Matan Bar:
Yes.
Michael Eisenberg:
Describe the scene, because it relates directly to this.
Matan Bar:
Well the first few seconds didn't start well, because I put my arm around him and his bodyguard really did not appreciate my Israeli gesture of–yeah, you're not best buddies with the president. So put your hand down.
Michael Eisenberg:
Were you trying to take a selfie?
Matan Bar:
No, no, we did. Eventually we did. But I probably should have saved the whole hugs to the later part of our conversation, not start with it.
Michael Eisenberg:
You just walked up to him or you were standing on line?
Matan Bar:
Like, yeah, no, it was at an event in the U.S. like, I think, around two years ago. And then we had a quick conversation, and then, you know, I said, “Hello, Mr. President.” And he said, “Oh, you have a weird accent.” That's what George W. Bush told me. And he said, “Where are you from?”
I said, “I'm from Israel.” And he said, “Oh, Israel, great ally.” I'm like, “Thank you for your support, Mr. President.” I was like an ambassador for a second. And then he asked me, he was actually talking with a few entrepreneurs that were like, I think five or six of us, and he didn't have too much patience to hear, you know, their fancy technologies.
And so I heard that he didn't have too much patience. So when he asked me, “Hey, so what does Melio do?” So instead of talking with him about our payments infrastructure, which I'm very proud of, I told him, “Mr. President, we keep small business in business.” And then he said, “Oh, small business? They're the backbone of America!”
And then he sat with me for five minutes, which is four minutes and 50 seconds more than he sat with any other entrepreneur in the room, because, you know, like many other investors, partners, customers, employees–when you talk about your impact, it's just a lot more interesting and relatable than starting to describe all the infrastructure beneath.
So he loved the fact that we help small businesses, and he appreciated it. He knew quite a lot about the financial service ecosystem. In general he was extremely impressive and intelligent and sharp, which I know this is like out of our conversation, but it taught me a lesson. The image people have in the press–because he was always described as the Texas cowboy. He indicates this about himself. And then you meet the person, and he's a painter, and he likes to paint, and he's super intelligent. He's super charismatic and you know, the Texas cowboy and him are two different people, and he knows this. He's very self aware. So, you know, he taught me not to read the paper.
Yet another example not to believe everything you read in the paper.
Michael Eisenberg:
And in the five minutes that you spoke to him about it, what did you tell him and convey to him and learn from him about small business?
Matan Bar:
So I think as the president of the United States, small businesses are dear to his heart and to America's heart.
And there's a good reason for it. Because until, you know, today, 99 percent of businesses in America are small businesses. And communities thrive from local businesses, because when you're a local business, then you pay taxes locally and like, it all comes back to the community. And the president shared the importance of empowering these small businesses to compete with large corporations.
And it's true for every restaurant or cafe or wine store, like in every industry. You have the enterprise, you have the main competitor. And so empowering small businesses, giving them tools, that I would say were only available for the large corporations until recently, is extremely important as it can level the playing field, and help small businesses compete and stay in business.
So that's something that he appreciated. And he kept telling me, providing more tools that only Microsoft can, you know, enable or own, like give the restaurant the tools that Google has. And, and I think that's what we're doing and working very hard to do.
Michael Eisenberg:
What I find fascinating about the conversation is that you walk into board meetings as an investor, and everyone wants to show you their conversion metrics, you know, their marketing efficiency, and yet here storytelling, keeping small business in business, not just attracts a big crowd and kind of galvanizes the company, but gets the attention of the former president of the United States.
Matan Bar:
Yeah.
Michael Eisenberg:
How do you think about this balance between, call it performance marketing, or measured marketing, versus storytelling?
Matan Bar:
I think storytelling is the guidance and the framework for the performance and everything else.
Like if you don't have your narrative straight, then it will be hard to be consistent and effective with any performance strategy that you might have. How can you? You need to have a narrative. How am I going to win this market? Like, tell a story to yourself so that you believe in that story, and then guide the team to follow that story and execute it. But, I will say, we didn't have a good, clear crisp story until we met you. So actually, I can ask you–because we came to you with, “we're an accounts payable automation solution company.” Not as inspiring as “Keep small business and business.” I remember you called us to your house and you're like, “We need to get out of the office. Accounts payable automation solutions is not an inspiring story. That's not how you get attention from the US President.”
If I would tell George Bush we're an accounts payable automation solution software company, I'm sure he would like, you know, move on.
Michael Eisenberg:
You would spend 10 seconds with him.
Matan Bar:
Yeah, he would move on, because it's hard to actually, I would say, define your place in the world. And so I remember we spent a lot of time together. I'm actually curious to hear your perspective in terms of how you looked at us, and you were like, “What are they talking about? Like, what is an accounts payable solution? They're doing something completely else.” Like, I've never asked you that, but maybe now is a good opportunity to ask you that as well.
Michael Eisenberg:
Part of it is that, when I went to college, I actually wanted to get a business degree in undergrad or at least a business minor, but they wouldn't accept me because I refused to take the prerequisite of accounting. So I think part of it might be, I just didn't understand what accounts payable was. So I needed something simpler for myself.
I'm a believer that the storytelling drives everything, and being able to explain what is the actual user value in an easy way is critical. And so, when I did ask you to come to my house and I think that's where the line came from, right? ‘Keeping small business in business’ came out of that meeting in the yard?
Matan Bar:
Yeah that was the moment where you came up with it, we tweaked it together and then, it stayed for five years.
Michael Eisenberg:
Hopefully for 50.
Matan Bar:
Yeah, yeah. Until now.
Michael Eisenberg:
‘Keeping small business in business.’ And, I just think that, you know, if you think about The Gift Project to Melio, just like it. A name can be descriptive or it can be kind of amorphous, but aspirationally you can tell a story around it. So business also needs a story. We are storytelling animals, as the book title is. People relate to stories.
And I think it's critical to tell stories. It's not done enough by entrepreneurs and particularly, it's really hard for us. We have a hard time with it.
Matan Bar:
Yeah, I think the U. S. president meeting was, you know, one thing, but I can give another very important, pivotal example for our company where storytelling got us into what was our biggest partnership back then, which is Intuit.
Michael Eisenberg:
Tell us.
Matan Bar:
So, I met with the founder of Intuit. Intuit is a company that is worth around 180 billion. They own the most common ubiquitous accounting software in the U.S. Every small business in America uses a software called QuickBooks by Intuit. And so we thought that we can integrate into this accounting software and that way, have a lot of distribution to millions of small businesses in America.
So we went to a meeting and this accounting software already used our competitor, Bill.com And I went and met the founder of Intuit and then the executive Vice President that leads QuickBooks. We were 15 people and we didn't really have a fully working product yet. And this is a company that serves 5 million small businesses.
And I came there with really not nothing to lose. And I remember I shared our story about how we're not an accounts payable automation company. Like, we don't automate workflows. We keep small business in business, and we do it by maximizing their cashflow and minimizing their busy work. And I started telling the story about how we keep small business in business, because keeping small business in business, it's not just the building the workflow, it's also helping with cashflow.
It's also building these relationships with–it's a lot of things. This story basically drew a different type of vision and roadmap, and one that the guy at Intuit and QuickBooks, when he heard it, he said, “I want you to replace our existing solution.” And the existing solution is a public company, 18 years old, a lot more experience.
They had a product. Let's start with that. We didn't. And he loved the way we talk about cashflow. By the way, he's, today, the CEO of PayPal. And he's the guy that gave us a shot. And he gave us a shot because, you know, he liked us, but he loved the way we thought about the problem.
So again, talking about storytelling–storytelling, I think many people think, “Oh, it's like the nice taglines. You tell a story for marketing.” No, a good narrative is one that can help you consistently deliver the right features, enables you to get the right type of partners. It does a lot. It's the strategy, in very simple words.
Michael Eisenberg:
And it pulls the company forward, I think, and lets you kind of think bigger almost than accounts payable solutions.
Matan Bar:
Definitely. And if we would have described our solution differently, they would just say, “Oh, this is like another Bill.com. So let's move forward.” But he really liked how we thought about the problem and he trusted us to build the solution.
And I think until today, this is probably their most successful, fastest growth initiative that they've launched. And that opened the door for many other partnerships that we're doing today.
Michael Eisenberg:
We'll come back to some of the other partnerships in a second, but I actually want to go from like this high level storytelling to the early days of the business, where we didn't exactly have a working product, but we had a working, back room, right? You hired a bookkeeper.
Matan Bar:
Yeah.
Michael Eisenberg:
In New York. You want to tell everyone about this, about how you humanated before you automated?
Matan Bar:
Yeah. So we started a company that is supposed to help with the small business financials.
And we didn't know anything about small business financials. So how do you solve that gap? You start asking, you do interviews, right? Like, so you go and talk with small businesses and you ask them, “Hey, how do you do your financials?” And you ask such basic questions because you don't know anything about how they do bookkeeping and accounting, how they manage their vendors.
So how sophisticated can your questions be? You can ask, look, how do you pay your vendors, you know, that's like the type of questions, you don't get deep. You can't. You don't understand anything. So, what we've done in simple words is instead of asking about their workflow, we became part of their workflow.
And we started a bookkeeping firm, with one person that basically acted as their bookkeeper. And we did everything manually. So if they had to pay their vendors, Dafna was one of our first employees, today is our VP customer experience.
Michael Eisenberg:
She was the bookkeeper.
Matan Bar:
She was the bookkeeper, and she basically onboarded 10 businesses. It wasn't easy. Like we, we went to like a hundred or more to try and onboard them. And basically we managed everything through WhatsApp. So they would send us an invoice image over WhatsApp, tell us when to pay and how to pay. Dafna would then lick stamps, stuff envelopes with paper checks and mail it on their behalf to their vendors.
And then she asked for the login details of their accounting software and bank account. Again, the ones that agreed, 10 out of, I think more than a hundred, but 10 agreed. And so, she would log in to their accounting software, update all the details manually, send an emoji back over WhatsApp to the customer, like we had like a juice place in New Jersey that I remember really well, Juice Organic, it was called, it is called.
Michael Eisenberg:
Because they’re still in business.
Matan Bar:
Yeah, they're still in business.
Michael Eisenberg:
Keeping small businesses in business.
Yeah, yeah. And, and so we got heart emojis. You know, we always joke that we are the only invoices company that gets heart emojis, you know, from its customers. It, it just taught us so many small details. And it's not just a nice story.
Like, this is a real story. So, you know, always, I think, you know, entrepreneurs choose to tell things in a really, you know, nice way. In retrospect, they make it even nicer. No! This was a shortcut to build a great product because we knew so many nuances about the workflow. So WhatsApp, the WhatsApp bookkeeper initiative before, and the reason we did it, there was no product. There were no engineers. So we had to launch something fast again. We did something so that we could get closer to the market, and it worked well.
Michael Eisenberg:
And so then you scale up, you do this partnership with Intuit. And then, most recently you've done a huge partnership with Fiserv. Fiserv, for those who don't know, is basically the digital infrastructure for most banks in the United States, for a description of what Fiserv is.
Matan Bar:
Yeah, I would say the way that the CEO of Fiserv describes it, he asks, “How many people use a Fiserv product a year in the U.S.? What's the percentage?” A hundred percent. A hundred percent of the U.S. citizens are using Fiserv products every year. That's how massive their scale and reach.
Michael Eisenberg:
Apropos the previous part of our conversation, Frank, the CEO of Fiserv, I would say he's a big patriot. Is that a fair statement to say?
Matan Bar:
Absolutely.
Michael Eisenberg:
And so, Melio gets selected over bill.com, to be Fiserv's partner.
Matan Bar:
Yes.
Michael Eisenberg:
How does that happen? This little company that was licking stamps and sending checks. By the way, we should tell people that the original idea for Melio, the company was called, if I remember correctly, Paper, P A Y P E R.
Matan Bar:
Yes.
Michael Eisenberg:
Like the Gifts Project, kind of.
Matan Bar:
Yeah, same level.
Michael Eisenberg:
P A Y P E R, Paper, like, you pay per check, and it's a paper check, and, we would lick stamps and mail your checks for you to pay your accounts, so it also could send money. Some ACH, you know, digital wire transfers, and maybe you could play it by credit card, as well when we, when we could set that up, but that's kind of the humble beginnings of the company.
Matan Bar:
Yes.
Michael Eisenberg:
But with big aspirations, and now partnered with Fiserv to serve 100 percent of U. S. citizens. How does that work?
Matan Bar:
Yeah. I think our goal is to serve every small business in America and–
Michael Eisenberg:
So why not just market to them? Why Fiserv?
Matan Bar:
Yeah. So I think–you talked about how the story sets the, you know, the execution and the roadmap, and everything else. We have a very strong story inside Melio, which is that banks are here to stay. And there might be like a few neobanks, you know,, in fintech you have all these, like startups that are starting a new bank. We believe in them. A few of them will be successful, but they will not replace the financial institutions in America. Bank of America, Wells Fargo, Citibank, U.S. Bank, Citizen Bank, Chase. Of course, they are here to stay. And, you know, that's an important story. That's the story that we tell ourselves.
And we also tell ourselves that banks are very successful selling financial services to small businesses and consumers. And we tell ourselves that it will continue to be that way for the next 50 years, because consumers and small businesses trust the bank.
Do you know that Chase keeps opening branches in America? You're thinking, okay, generative AI, right? Generative AI. How is it possible that banks are still opening branches in America? Because people want to see their money. You go to your doctor when you don't feel well. You go to your bank when you need help with your money.
It's as simple as that, and so, because we believe that banks are here to stay, and that consumers and small businesses trust the bank, not just with holding their money, trust the bank in terms of getting advice, getting a loan, and helping my business thrive, the bank in America has a central part in the community.
You go to the bank, you know the people in the bank, in the branch. Especially when you're a small business, you get a loan because the person in the bank knows you, and he knows you're a family, and he knows that you're a good person. That's how real small business works in America. And so, with all that fancy introduction that I just gave, we believe that banks are the best way to enable money movement products.
They've succeeded with Zelle in the past in the consumer space, where Zelle today, the P2P app is bigger than Venmo, Square Cash, and PayPal together. And we are doing the Zelle for B2B with banks. It's not our only channel, but it's, I would say, the channel we believe in, I would say, more than many other channels.
And so what we will do is embed our product, our accounts payable solution, our accounts receivable solution into a thousand banks in America over the next three years.
Michael Eisenberg:
Wow.
Matan Bar:
And that's only made possible through a partnership with Fiserv, because Fiserv is already providing this software to thousands of banks in America.
And the reason that they picked us and not a competitor, is twofold. One is, and apologies for the, maybe trivial statement, but it's all about the people. We,
Michael Eisenberg:
Just like Yossi Vardi told you all those years ago.
Matan Bar:
Yeah, that's true. We admire the CEO of Fiserv and we, from a personal perspective, and we really get along with his executive team.
So that's the basics. We're going to have a partnership for hopefully many, many, many, many years. And these guys are here to stay. So. Personal relationship number one, number two, number three, number four, number five–that's personal relationship. Number six is, we actually have a very good product that is better than our competitors. And so, we can do, like, in a very, like, cold way, if there's a comparison table between us and our competitors, we have capabilities that are very important to Fiserv that our competitors just didn't have. I won't get, you know, into all the details now, but
Michael Eisenberg:
Yeah, our listeners aren't that interested, and if they are, they can go to your website.
Matan Bar:
Yeah, yeah, exactly.
Michael Eisenberg:
Www.meliopayments. com, yeah. Yes,
Michael Eisenberg:
I assume you have a comparison of features on the site somewhere.
Matan Bar:
We have it. I need to check with our marketing team that it's updated, actually. Now that's what I thought as you were directing the audience to go to melio.com. By the time this is live, then it will be updated.
Michael Eisenberg:
That's okay. Nobody cares, because the story is to keep small business in business. Who cares about the features?
Matan Bar:
Exactly. No, but there are real strategic advantages. Like we've built an incredible technology. I'm obviously biased, being the CEO of the company, but we've built an infrastructure that is like no one other in the U.S. today.
I'm sure it's, you know, our competitors will catch up. But today we have a superior technology and that was a big part of it.
Michael Eisenberg:
So, I remember getting a call from you and hearing your children in the background. I think you were in Greece on vacation. And you said, “Frank called. And, I think I need to go to New Jersey.”
Or something like that.
Yeah. And you left your family on vacation. Yeah. Is that hard?
Matan Bar:
No, not at all.
Michael Eisenberg:
Your wife is going to listen, I’m just saying.
Michael Eisenberg: I can't just tell you, yeah,
Matan Bar:
No, no, no, not at all. You asked if it was hard for me, you didn’t ask if it was hard for her. But no, no, it wasn't hard for any of us.
First, like, you know, when, when Frank calls, you go. That's one thing. The second thing is, I think that it's true for many entrepreneurs. Like we have a very intense life. There's a very smart thing that one of my favorite investors is saying, like, don't look for, balance.
There are tradeoffs, which is you, think I learned it from you, and I use it a lot. Like, there's no balance. Like, you say it much better than I'm sure I will. And the pursuit of balance is very frustrating. So why would you? And, I don't want a balanced life. I want an interesting life.
And so, an interesting life is when you go to a vacation in Greece and you're being called because you need to do something for work. Is that like, isn't that the most interesting life? Like, I love it. And, I think that if you choose to be an entrepreneur, you need to love these things because I just embrace it and I love every second of it.
And I have a very supportive family. And my wife is on a full time job, and I support her, and I watch the kids when she has something important at work. There's, like, it happens both ways. My job is more demanding, obviously, but, because, you know, being a founder is just a completely different level of hecticness, but, yeah, that's just something that I love about my job, and I wish it would just continue to have, to have all these stories.
Michael Eisenberg:
Is it hard to take a vacation?
Matan Bar:
Also no. I'm very good, like,I'm never trying to separate work and life. Life, for me, is full of work and rewards an fulfillment, and, I love my family. It's the number one priority, but it works together, and you just sleep less.
You sleep less. Like, I'm more tired probably than other people that, you know, with no family or no company to run. But, you know, that's the meaning of life. So, no, again, no complaints.
Michael Eisenberg:
I hear you. So, Melio’s kind of grown explosively since day one. It's kind of been up and to the right, but over time, you know, for efficiency sake, you've had to lay off some people. How did you deal with that?
Matan Bar:
I would say that there's, it's like asking, you know, why do companies do a reorganization at one point and then do another one 12 months after, and another one six months after? I always thought that when a company is doing a reorg every six months or 12 months, they probably got the reorg wrong, they made a mistake and now they're fixing it.
After I started Melio, I realized it's not the case. Different times require different structures of teams, and different types of people sometimes. And so our job at Melio, we're a sports team, so we need to have the best formation and the right type of people for every stage of the company.
Luckily, there are such incredibly talented people at Melio that can fit every stage. But sometimes it's not the case, or sometimes it's not the person, it's the structure. Sometimes you need more managers and more layers, sometimes you need less managers and less layers. And so the job, not just my job, the job of managing Melio well, means that you need to make sure that you have the ideal structure, and the ideal management team and the ideal engineering team for every phase of the company. And different times require different structures and different people sometimes. So from a cold business perspective, that's the healthy thing to do. And you know, when you're a soccer team, when you go after, you know, you have a game, you don't always play the same formation and same squad. You change. it's not like 80 percent change, but it's 20 percent change of formation, 20 percent. So, you know, it's the same thing, like the equivalence or how similar sports and running a business is, it's so similar.
It's just, you know, I always tell my team, like if us and Bill.com or another competitor would be on a basketball field, like one versus the other, you would see how much better you are. But it's not that, it doesn't work that way. It's not on a court. It’s more abstract. It's like everybody has their own office.
It's not on one court playing against each other, but you're much better. And so you just don't see it because it's not in a stadium. So I think layoffs are always awful, because it's personal. And anyone that said it's not personal, they're lying. It's personal. It's people. I wish that I didn't have to do it.
But the reason that we've done it in the past was because of strategic changes to the company. One time it was like, we just stopped pursuing a certain initiative, and there was a team that was working on this initiative. So we felt bad, and we offered them jobs in initiatives that we did continue.
So some actually continue with the company, but you know, so it's just strategic shifts that require structure changes, different people. But it’s, you know, the 10%, the 15%, you don't change your entire company every six months.
Michael Eisenberg:
Obviously you played competitive sports, right?
Matan Bar:
Yeah, I played in various, like when I was a kid, but yes, soccer, soccer.
Michael Eisenberg:
Did that teach you something about this?
Matan Bar:
Yes. It taught me a ton of things.
Michael Eisenberg:
Give us the top three. What position did you play by the way?
Matan Bar:
Left wing. I have different lessons. I don't know if it's too interesting, but I I always thought–it's a random one, but I always thought that the worst thing that can happen to your team is have a bad player.
Like, someone that doesn't know how to play. It's not the worst thing, I learned. The worst thing that can happen to your team is have a bad player that thinks he's good. That ruins the game. Like, that I learned from soccer. Like, I can manage, you know, playing with bad players. Playing with someone that is terrible and thinks he's awesome?
That you just cannot. Like, you just, you lose. Ah, so that's, you know, one example.
Michael Eisenberg:
I thought you were going to say someone who's not a team–they could be a good player, but they're not a team player.
Matan Bar:
Yeah, that's, you know, that's a good one, but it's just that, when you go to school, like you play with different types of players. And we go to play in these leagues, and you have some bad players, but the ones that are bad and think that they are like the best, they just ruin it for everyone.
Michael Eisenberg:
Everybody needs self awareness.
Matan Bar:
Yeah, that's maybe one lesson. Yeah. It's true for business as well, by the way.
Michael Eisenberg:
You said that at the beginning that you and Ron and Erez are all very self aware.
Matan Bar:
Yes, that is true. That’s connecting everything.
Michael Eisenberg:
Melio was actually started by three co-founders, there was you, Ilan, and Ziv. Ziv Paz. Somewhere along the way, I can't remember how long ago it was, maybe a year or two ago, Ziv left. Tell us that story.
Matan Bar:
Yeah, so, so, we started, Ilan, Ziv, and I. and, the, I was at PayPal and, Ziv, came to my office at PayPal and, really like convinced me to leave, PayPal and, and start a company together.
Michael Eisenberg:
I thought I did that! That wasn't me?
Matan Bar:
That was him. No, you just told us what we need to do. it wasn't like to start, no, it was actually the credit belongs to Ziv. Yes, we had no idea what we wanted to do. And then we came to you with all these, I would say ideas, that your feedback was, it's too small. It's not interesting. Like, you know, in, in your own unique style, you were very direct with us, not leaving too much room for doubt and so we, this was a process that we did with you. But in terms of leaving, no, I think, Ziv came and then, Ilan, I got connected to Ilan through Yuval Samet, the CEO of RiseUp and then we got along really well, Ilan and I and Ziv, and we started working together.
And then after a few years, the company did really well, and Ziv decided that he wants to pursue an initiative by himself. Like, we're friends since the age of 15. We're still very good friends.
Michael Eisenberg:
Another Haifa guy.
Matan Bar:
He's from Atlit actually, but it's just south of Haifa.
Michael Eisenberg:
Yeah, yeah. Just south of Haifa.
Matan Bar:
He also served in the army in Atlit. We always joked about him that he wants to be “Kalav”, like close to home, but it's actually the shayetet that he went to, and–
Michael Eisenberg:
The Navy SEALs.
Matan Bar:
Yeah, the Navy SEALs, which happened to be close to his home, but that wasn't the reason he chose it.
And then he decided to pursue an initiative, and he wanted to lead it from scratch. And, you know, we respected it and we're still in great touch. And Ilan and I are together leading the company, together with the new president of the company, relatively new–it's been two years, more than two years, Tomer Barel–which, both Ilan and I feel like we won the lottery every day, that he is, or he agreed to join our team.
Michael Eisenberg:
So, was separating from Ziv difficult?
Matan Bar:
On a personal level, it's a big change for the company, no doubt, but it all came from, I think, good things for him, for the company. So I think we all felt like it's the right thing to do at the right time. So, it wasn't like, you know, a clash or so it was just the right thing to do at the right timing.
And I think both Ziv and the company evolved in a way where it was just, you know, the right thing to do. So that made things simpler from a personal level. I would recommend like, you don't need to continue working with colleagues because they're your friends, they can be your friends outside of work, like it's not–so, no, I think from a personal level, it was a big change, but because it was good for Ziv and the company, I think, yeah, I think that we made a decision together. And it was a pretty simple decision for Ziv. So I think it made it simple for all of us.
Michael Eisenberg:
It was reported in the press that Bill.com almost acquired Melio. Wanna talk about that?
Matan Bar:
Yeah. So the way that I also talk with my team about this is that Melio luckily is receiving a lot of interest from enterprise companies. The reason is, we work and partner with many of them.
So we partner with Fiserv, which you mentioned, Intuit, Shopify, Capital One Bank, like we partner with a lot of very large corporations. It's only natural that some of these partners would want to tell Melio, “Hey, we want you to work only on our stuff. And we want to own you.” And we get a lot of incoming interest, like all the time. And, at the moment, Melio's only path is pursuing an independent path, and that's what we're working towards.
And we don't, I think people sometimes think, like, what's your goal, to ring the bell when you go public or get acquired and get a lot of money? It doesn't work that way for most entrepreneurs that I know, it definitely doesn't work that way for me and Ilan. Like, you don't focus on that type of reward. You focus on winning, you focus on being successful. Sometimes I need to go and check the cap table to know how much of the company I even own, because I couldn't care less, I want to be successful, and you know, money follows. It's not like I'm a charity. I definitely want to, you know–
Michael Eisenberg:
As your investors, we appreciate that.
Matan Bar:
Yeah, no, of course. No, we want a good return for all shareholders. But the way it works is that you need to be successful first.
Michael Eisenberg:
The way to be successful is to keep small business in business.
Matan Bar:
Exactly. And then money follows and, and so, I think our only motivation is to continue and build and be successful, and serve more small businesses and build great products.
Michael Eisenberg:
You have no regrets that these acquisitions didn't happen?
Matan Bar:
No, not at all. Like, this is all like unsolicited. This was all incoming. Like, Melio has never, and will never pursue, looking to get sold. Like, we're happy. We're doing well. We just want to continue, and we are being thoughtful about incoming interests as, because these are our partners, these are people that we work with.
Michael Eisenberg:
You mentioned the cap table. Melio grows up at kind of the tail end of the, let's just call it, the ZERP era, right? The zero interest rate era. And valuations in 2020, 2021 just go up and you raise a super high round that probably in retrospect, given the reset of the stock market, looks, looks like a high price. How do you think about that? Have you raised that price and you know, the market's resetting, etc.?
Matan Bar:
Yeah. So I think, and I'm not sure who are the people that are watching this, but the way valuations work–there are two numbers usually, for companies at our phase. One is revenue. How much revenue does the company generate? That is something that we can affect. If we're doing well, we generate more revenue. If we're doing not well, we're generating less revenue. The other number is a multiplier, which is a number that we do not control. This number, sometimes it's 50, sometimes it's five, sometimes it's two.
We don't control this number. Public investors, I don't know, whoever the multiplier committee, I don't know how that works. No, but it's like, you know, the market determines this number. I cannot determine this number. I apologize, I cannot. So, my job is to increase revenue. Now, whatever the multiplier that the multiplier committee sets, valuation–I just need to make sure that we increase our revenue.
So, you know, at that time, like we had a lot less revenue than we have today. We grew, you know, 170 percent one year and then 270 percent the following year. So, you know, we did our job with the number that we control and hopefully we'll continue to do that.
But the multiplier has decreased significantly because of interest rates, because of all that. So I think the next time that our valuation will be set is when we fundraise, or when we do an IPO, or when we, you know, M&A, you know, that's the next time that we'll discover it. But raising for 4 billion, which had a very high multiplier, I would do it over and over and over and over again.
Like, of course I would. Like, this is, you know, raising 270 million for a good valuation is something that is good for the company. It's good for the shareholders. I don't care if the multiplier then decreases, but our revenue continues to go up. I don't, I'm not apologizing.
Michael Eisenberg:
You want to take less dilution.
Matan Bar:
Yeah, that's less dilution. That's a good thing for the company. So as the CEO of the company, I did the right thing for the company. And I would do it over and over and over again. If multipliers then change, then the Multiplier Committee is the one to blame, not Melio.
Michael Eisenberg:
I used to think that private company valuations was just a two person market, basically, what the buyer's willing to pay and what the seller's willing to accept.
And now I understand there's a third player, which is the Multiplier Fairy. What pixie dust they sprinkle. No, but that's–don't you worry a little bit, like, if your price is here and then people say, oh, “Melio did a down round,” or, oh, you know, you go public at a lower price, or –I’m not worried about you going public at a lower price, to be candid–but you go public and the narrative changes, and people say it's not a successful company anymore because the price is down.
Matan Bar:
I just think that if we continue to have years of 170 percent, 200 percent revenue year over year, everything will be just fine. And that's what I focus on, because that's what I can control.
The rest I can't. And I'm not worried about it at all. When we do an all-hands in the company, we don't talk about multipliers. We definitely talk about revenues and we definitely talk about gross profit, and people see that the graph is up and to the right. And they need to be concerned when it's going down. They need to be concerned when we're not generating more revenue.
That's when they need to be concerned, but they don't need to be concerned when multipliers change. They have nothing to do about it.
Michael Eisenberg:
I wanna ask two detailed questions before we wrap up. And then finish with one. So how are you using AI at Melio? And is AI making Melio more efficient, or what are you doing with it?
Matan Bar:
We're definitely using AI across multiple technologies and products that we enable. I've been dealing with AI since before it was cool, and before it was called AI. It was called when I was in the army, it was called data mining and profiling. And, you know, we build different models. So machine learning, obviously, is part of everything we do, whether it's our risk models and the way that we take image information and convert it into data that can serve the accounting software and, you know, there's so many things with generative AI. A lot of the technology that we use today, we just need to throw away and replace them with Generative AI because it's doing a superior job by far.
So, you know, I'll give a simple example. OCR. Like, you know, reading a bill, a PDF for image and converting it into text. The OCR companies are dead. There's no need for an OCR technology.
Michael Eisenberg:
Name names.
Matan Bar:
Yeah, no, I don't know. No, but there are companies, you know, that sell you OCR services.
Like, they're actually doing pretty well. You know, their space is, unfortunately for them, completely commoditized. Everybody can now do it with a simple call to an open AI API or whatever. And the generative AI will not read the text from the image. It will understand exactly what the page says.
So if the image has a mistake, it will fix the mistake on the paper. So, you know, it's obviously we all know that.
Michael Eisenberg:
You wouldn't want it to hallucinate a bill though, and move it from like a hundred thousand to a million dollars, right?
Matan Bar:
Yeah, exactly. No, so the determinism of these models, I think there are–you need to build layers between the generative AI model and your software so that it doesn't do crazy stuff and be more determinist, like in terms of the results. So yeah, there's, there's work, but it's easy. That’s one simple example.
Michael Eisenberg:
But how does it make you much more efficient? Or what are some of the bigger plans you have for the generation of AI the LLMs, et cetera?
Matan Bar:
So in our space, we serve bookkeepers and accountants. And bookkeepers and accountants, in America, like you have many, sole props that are basically, you know, one person managing 20 clients. They would have loved to manage 100 clients if they could.
With generative AI, we can empower the individual to work as if they own a team. Because at the end of the day, what is generative AI? It's like asking yourself a question, what if I had another thousand very intelligent people working for me?
What would I tell them to do? And so now a person that is doing bookkeeping from their house, they have a new tool that can help them manage a business as if they have a team of a hundred. And so they'll be able to make more money, generate more revenue. We're now launching our new accountants product very soon, and we'll be able to help these accounting firms and bookkeeping firms generate more revenue by making them a lot more efficient with different generative AI and just AI modules so that they can do more with very limited time.
Michael Eisenberg:
Who loses from that? Is it like junior audit people who just came out of college?
Matan Bar:
I think that in respect to the small business space in America, there are between 600,000 to a million new small businesses created every year in America. Of course, there are many small businesses that are also shut down, but the market is so big that this efficiency is required and will just enable more businesses that couldn’t afford using a bookkeeper. Because with these technologies, at the end of the day, these small businesses will be able to take services cheaper, that they couldn't afford before because they're just more efficient and enabled in a more efficient way. It should increase margins on both sides of that.
Matan Bar:
Yeah. Everybody are, you know, AI. I don't think you can have a conversation in tech where ten seconds pass and you don't mention generative AI. Are you already seeing companies utilizing this technology in Israel, at scale? Because I hear there are, there is criticism that Israel is not where it needs to be in terms of the investment in generative AI, in terms of the number of companies.
Is it true? And are you seeing, like, good examples already?
Michael Eisenberg:
So a few things. Two days ago, I sent a company that is a kind of data play around cleantech to a few investors. Two of them wrote me back, “but this is not AI, and not to be cliche, but we're doing AI all the time. Right now, we're looking only at AI.”
That's not our view. I mean, the last investment I made was in synthetic biology and synthetic chemistry. Yes, it uses AI to kind of design some of the enzymes, but I think there's other areas other than gen AI that are interesting. In fact, when we invested in Winward in 2000, I think in ‘13, 2013, that was AI for Maritime. In 2015, Lemonade was an AI-based insurance company or, you know, this kind of new era of LLMs has upped the level of efficiency. And I think actually companies in our portfolio and not only, have got incredible efficiencies out of this. Lemonade announced that it was able to shrink its workforce, particular customer support while serving many more customers because of gen AI.
Adyen and PayPal and others have implemented gen AI, and this is true across Israel and the United States, anywhere where there's AI on, certainly on the application level. I think where Israel is behind is on the foundation model. I think that's a feature though and not a bug. I think there's going to be an enormous washout.
I'm in the Gavin Baker of Atreides camp, which is that LLMs are the fastest depreciating asset in history. I think there's going to be a massive washout there. We're not at the foundation layer, but at the applied layer, I think, Israel is excelling. I think our portfolio is excelling, and I think you're going to see a fast uptake of this in many areas that are going to make companies much more efficient than they ever have been.
Michael Eisenberg:
When Melio first started, you made a very conscious effort to hire as many women as men at the beginning of it, and it was reflected in the leadership team, as well. Why?
Matan Bar:
I would say organically, because, you know, Ziv, Ilan and I, we have more men friends than women friends, just in terms of our personal life, that we brought our friends and then, without noticing, we were like eight dudes in an office. And that felt awful. And it felt also that, that if we continue and do like, you know, a few more, then no woman would want to join this frat house, or I don't know what it is. So we said, okay, we need to stop now.
And it's not like we, you know, we just said, we need to create equality of opportunity so that hopefully we'll get equality of outcome. So there wasn't any prioritization by, you know, we hired the best people, period–but we opened up our recruiting beyond our friends from high school that I played soccer with.
Like, you know, so there was more equality of opportunity. And not surprisingly, when we started recruiting in many areas, other than our personal soccer groups, then, yeah, what happened is that we very quickly became like 50-50 in terms of women-men, and not like, you know, the trick of you know, HR women–R&D is like 50, across R&D, across product, across many of our departments.
And yeah, most of my leadership were, and today I think still, we have a lot of women across our VP level. So yeah, it just happened because we created more equality of opportunity and recruited in various sources, not just in our own organic ones.
Michael Eisenberg:
So for the last question, as your venture capitalist and board member, I'd like to ask you how I've hurt you.
Matan Bar:
Hurt me? No, I don't think you've ever–
Michael Eisenberg:
Want to make suggestions for improvement?
Matan Bar:
No, seriously, I don't think you've ever hurt me, or even close.
Michael Eisenberg:
This is going to be uninteresting for our listeners unless you come up with something.
Matan Bar:
There’s always–you didn’t hurt me, but–but–I think it took time for us to adjust your style. Because you say things as they are, and you couldn't, you know, care less if it's comfortable hearing it or not. But it's always driven from the right place, and the success of the company and our success. And so initially when you hear these words, it's like, it's hard. And then, we worked together for quite some time.
So I'm used to it. And when I have a board meeting, I text you, “hey, how was the board meeting?” And you text me back, “you really want to know?” And I'm like, then I'm not sure. And then you say, “No, it was uninteresting. It wasn't good, and this, this, and that.” So, you know, and I don't get offended by it, even not by a bit.
But it takes time to get used to this style. But we know each other and I'm used to it.
Michael Eisenberg:
All right. Thank you for providing the warning to all the other entrepreneurs out there. I appreciate that.
Matan Bar:
No, these are real stories. It happened more than once. If you already are getting into it. It happened more than once.
Michael Eisenberg:
Matan, thank you for coming on Invested. If you want to learn more about Matan Bar, you can follow him on Twitter @matanbar, M A T A N B A R, and also Melio, which is @MelioPayments, M E L I O P A Y M E N T S, and Melio will make you happy and keep your business in business, as the name suggests.
Thank you, Matan. Thank you.
Michael Eisenberg:
All right. Welcome everybody. Thank you to everyone for coming. This is actually quite an audience of entrepreneurs, CEOs, people who've been involved in important places in Israel and the war efforts. So we're thrilled that you came out for Mark. I'd like to thank Mark for agreeing to do this. He has a very busy schedule while here in Israel and has been jetsetting around the world.
But most importantly, his son got married over the weekend. So please join us in wishing him a Mazal Tov. {Applause}. Thank you.
Marc's just been an incredible friend to me, and to Israel, and to the Jewish people, and a real leader. And we'll, we'll delve into some of that. And I actually want to start in a place that goes back a bunch of years, because there's a lot of younger and successful people here. A bunch of years ago, you got involved in something that was originally called YRF and then called DARCA.
You want to tell people about it?
Marc Rowan:
Sure. So 38 years ago, standing on the Israel-Lebanon border with the head of Northern Command, I said, “What are you worried about?” And I expected him to be looking out and talking about the threats. And he said, “I'm worried about divisions in Israeli society.” And, ultimately, we traced that back to education, periphery versus central.
And so 38 years ago, we began an education effort to get the 50 percent of the kids who don't pass the Bagrut at a level to go to university, to pass the Bagrut. And we started with business principles–use other people's money, measure everything, double down on what works, and so on and so on.
Fast forward 38 years to charitable takeovers, which not many people have done. We now run 47 schools in Israel. We have 27,000 kids in school. We have 3,000 teachers. Our kids are passing the Bagrut with fours and fives in the 90 percent range. And these are Moroccan, Ethiopian, Yemeni, Bedouin, Druze, Israeli Arabs, even Haredim, and our first Haredim school. It's never the kids.
We go into Netivot, the kids are passing the Bagrut at 16%. And you say to the principal, “How could you have a 16 percent Bagrut rate?” He goes, “What do you expect from poor religious Moroccan kids?” And we said, “We expect a new principal.” And two years later, this school is 88%. It's just crazy. And these, by the way, Union teachers, state curriculum, some religious, some secular, all parts of the school system here.
It's just not that hard. And so, the goal is nothing short of changing the face of Israeli education, because if we can show that it works everywhere with every population, what parent does not want their kid to get a better education? And it's happening. So if we come into a town and we start attracting students, the other schools start losing population.
We train their principals, we train their teachers. We just want to change the system.
Michael Eisenberg:
And where do you find the principals from, like–?
Marc Rowan:
Everywhere. I mean, you know, so the head of it is the former principal from Bleech High School. And he just one day woke up and said, “Why am I teaching the children of rich kids?”
He literally just said that, and he's just used his network, and then we've developed a methodology for training. What we've figured out is that people who go into education are not there for the money. They're there to do good. They become jaded by the system over time. So if you make the place work, they get energized.
And so people leave successful jobs, successful positions, leave the Ministry of Education and come to work with us because they see what we do works.
Michael Eisenberg:
What was the main opposition? I mean, this is, it's a behemoth, the Ministry of Education in this country.
Marc Rowan:
It's breaking the status quo. What was happening here is the outsourcing had become a business that the supposedly philanthropic entities were taking 15 or 16 percent of revenue to cover their overhead and building big buildings and infrastructures. We went the other way. We said we charge nothing and we pay our own overhead. And we went and we, with Naftali Bennett's help, got transparency to the process.
Once there was transparency to the process, it liberalized. But it is a business by the way. So we run this thing like a business. The principal who started out as an educator is now like the single best marketer. Like if you had him as a VC pitch, he would in the elevator sell you on what he needs to do.
He measures, he is–the team is completely awesome and they speak like venture capitalists.
Michael Eisenberg:
In the public service, that's not a common way to run this. People don't think of running this like a business. Why did you insist on that? And how is it working in this kind of friction with the public institutions?
Marc Rowan:
There's not, there's not really friction with public institutions. At this point, we're a cooperative part of the system. People know if we're gonna bid on it, bid on a school, that they will lose it unless they adjust. And so we're forcing the market to adjust. And that's what's happened, and running like a business just means we're scaling inexpensively.
We are, in dollar terms, we're 500 per kid per year. It's nothing in the scheme of things. And it just allows us to be really efficient and to make sure we can do 27,000 kids every year.
Michael Eisenberg:
Can you fire teachers?
Marc Rowan:
We cannot fire teachers, but we don't have to fire teachers. We can fire the principal. We can fire, we can hire and fire leadership.
But if you are the mayor of a town in the periphery–first, 50 percent of our mayors are in jail, or under indictment. They generally do not know how to organize their municipality. They can't organize a school, and so part of what we do is we just come in and we organize. We actually control the budget, we schedule, we plan, and we tell these kids that they're not going to be mechanics, we tell them they're going to be physicists, and we just remove the low expectation.
Michael Eisenberg:
What would you tell some of the young budding entrepreneurs and hopefully would-be philanthropists in the room about what they should focus on and when they should get started?
Marc Rowan:
Early. I mean, this is now year 38 for me.
Michael Eisenberg:
Which is amazing because he's only like 50.
Marc Rowan:
It's getting bigger and bigger. because people have now seen it work over a long period of time.
And we started out as a hundred percent U.S. funded. We are now majority Israeli funded, Israeli entrepreneurs, and Israeli entrepreneurs are really skeptical. So Danna Azrieli merged her philanthropy into the organization. We took over, essentially a failing philanthropy from Rashi and put them all together and have gotten synergies, all the things we talk about in mergers that we never get.
Michael Eisenberg:
And how involved are you in DARCA?
Marc Rowan:
So initially very involved. I mean, we, we tried and failed numerous strategies, more than Amir has, actually. We, everything we could fail at, we failed at, and we just kept innovating and kept innovating, and we just kept coming at the problem. And over time we saw success and then we doubled down on the things that worked. And the models become great over time.
Michael Eisenberg:
Why do you think so few young people start out when they're, like, early in their business career doing philanthropy at the young age that you did and what did you see that others didn't?
Marc Rowan:
So, I think, look, even for us, so we're, the whole group of us that founded the philanthropy are now, I hate to–60s.
And so we've had to recruit the next generation. So, we decided that we would focus on 30-year-olds. And 30 to us was, you had achieved enough success in your career that you were willing to think about something other than yourself, but you were not yet attached to something and you were starting to search for purpose.
And so, I've taken 300 30-year-olds to Israel, where I'm their tour guide for–and they come at my expense. And now, if you come to an event for YRF or DARCA, it's, 50 percent 30-year-olds and 50 percent 60-year-olds. It's actually quite a funny mix of people and the whole mentorship. And to be honest, you want to do something with friends.
So scale, make this work with friends. We started this, we were all in our early 20s and mid-20s. This was the best Jewish dating service in New York City. It was absolutely far and away the best. The number of matches we have and dates we have out of this is just off the charts. Because it has to be fun to sustain it over time.
You have to want to work with people you like working with. And you have to believe in the cause.
Michael Eisenberg:
Where does your commitment to Israel come from?
Marc Rowan:
You know, it's a funny thing because I didn't, I'm not grown up religious. I never came to Israel as a child, and in my mid-twenties I started in this education project and just, it's been like a building and overwhelming commitment over the years that this is just a unique and special place.And, you know, we are, as they say, the chosen people. Sometimes chosen too often.
Michael Eisenberg:
But if you kind of reach deep back, you got involved in your twenties, it was an Israeli school initiative. Like, why did that happen? You could have chosen something in New York.
Marc Rowan:
So I, we were all in our mid-twenties. We had all exceeded anything we thought we were going to achieve in our lifetimes, financially. And we were all there as a result of education, and we were all Jewish.
Your co-founders of Apollo you mean.
The co-founders of this philanthropy, all of whom worked at Drexel Burnham. This is pre-Apollo. Pre Apollo.
Michael Eisenberg:
So pre-Apollo. That's quite amazing. Tell us, like, from your perspective now, in your 60s–
Marc Rowan:
Early 60s, Michael. Watch that.
Michael Eisenberg: And for those who don't know, Mark has just taken over as chairman of the UJA, which is the Jewish Federation of New York. In your own words, I'd love to hear from you what you think is the importance of the Jewish state.
Marc Rowan:
Look, I tell you, I say we learn the importance every day. I'm going to start with UJA and how I got there.So just to give you context, UJA Federation was formed to help Jews resettle, the Jews of Europe resettle in New York. Last I looked, there's not a lot of Jews resettling in New York.
Michael Eisenberg:
Yeah.
Marc Rowan:
And so these places, these big entities, give you a sense, UJA in New York in a normal year raises 225 million. 225 million.
This year we'll raise 425 million. It is the largest collective Jewish philanthropy in the world. And has unique political power and unique ability to have a collective. And so, you know, you ask, like, you know, what's the importance of the Jewish state? We find it every day. It's our refuge. It's our refuge.
Michael Eisenberg:
So, where did 10/7 find you, October 7th, where, where were you?
Marc Rowan:
I was probably in Abu Dhabi.
Michael Eisenberg: You were probably in Abu Dhabi.
Marc Rowan:
Abu Dhabi, Michael knows this, but Abu Dhabi and the Emirates are by far the largest investors in Apollo
Michael Eisenberg:
We're going to come back to that in a second, but, so they found you in Abu Dhabi. And what was your initial reaction? And how did it kind of grab you?
Marc Rowan:
I was embarrassed, actually, to think that a failure of this scale could happen, and particularly in the South, where the people already feel neglected.
I mean, we're in Netivot, where Ofakim, Yerucham, and I spend a decent amount of time there, and, you know, clearly the population feels that the government has not cared about them for a long time. And as a proud supporter of the state of Israel, as someone who looks to the IDF and to what Israel does, the notion that a group of amateurs could cause damage of the scale was embarrassing and then tragic, and then, you know, every crisis then presents opportunity. Which is okay. Now there's an opportunity to, you know, change the equation, and the equation is always, at the end of the day, at least in recent memory, wrong.
Michael Eisenberg:
And do you think there's enough being done to change that equation? Both here and in the U.S.?
Marc Rowan:
Look, I, the answer is no. I've been incredibly frustrated, but what I see is a just war. And, I mean, just line it up this way, the notion that the world was on Israel's side, that two aircraft carriers were in the med, that basically Israel had carte blanche to come in and do this, and 180 days later, we have kind of lost the narrative, is just insane.
And I think, you know, I'm, I've been, the world does not quibble with the justice of the war, but we live in a political world. Like I can just speak in US terms. We have an election coming up. That election will be in part decided on Israel and to the extent the population believes that Israel is committing genocide.
That's not a great thing for the president, and that pushes the president to be tough on Israel, which actually undermines Israel's leverage with hostage negotiations. It undermines its leverage with Hezbollah. It undermines its potential discussions with Saudi. It undermines its access to military and other things, and potentially can unravel what was a great thing.
And so I am often frustrated here watching, I'll say it differently. In the U.S. we get to play politics because we're in the middle of a political season. And we have two big oceans, so we have a big military and we don't have people on our borders. But the notion that you can both prosecute a war and play politics just seems very frustrating.
It must be frustrating to all of you.
Michael Eisenberg:
When you say ‘play politics,’ you mean domestic politics, just to be clear.
Marc Rowan:
Domestic politics.
Michael Eisenberg:
Yeah, just to be clear. 10/7 or October 7th also kind of reverberated in the Jewish community in America, particularly in college campuses. For those of you who didn't see it because you were under a rock, there was a congressional hearing led by Elise Stefanik and others, where she grilled the presidents of University of Pennsylvania, Harvard and MIT.
Mark is Chairman of the Board of Advisors at the University of Pennsylvania.
Marc Rowan:
Wharton School.
Michael Eisenberg:
Wharton School, and was super involved, I would say, behind the scenes and in the front of the scenes at some point.
There's, for those of you who haven't seen it, there's an incredible interview with him on CNBC, a series of letters that he wrote to have the President of Penn removed.
Marc Rowan:
Yes, and the Chairman.
Michael Eisenberg:
And the Chairman. Do you want to tell people, one, what got you animated, and two, kind of how you went about this? This is a, this is a hard battle. Like, Claudine Gay is still at Harvard. She's no longer the president, but she's still there. And the president of MIT is still there, but you were successful first at Penn.
Marc Rowan:
So this started in the summer, and we had at Penn a conference that has gone on for a long time, which was a Palestinian literature festival called Palestine Writes.
And this year the festival was hijacked and essentially outsourced to a known anti-Semite and Hamas sympathizer named Susan Abulhawa. And this is ahead of the conference, and so I wrote to and called the President of UPenn, and said to her, “I'm a free speech absolutist. I don't think you should prevent these people from speaking, I actually think people can say whatever they want, but your professors are sponsoring it, your students are being forced to go, your buildings are hosting it, your university's paying for it, and your logo is on it. It seems to me like you're imprimatur. I think you need to remove your imprimatur from this conference. Because you're not, this is not a question of free speech, this is a question of favored speech.”
And I gave her a number of examples where a law professor named Amy Wax had said things like, “Minority students don't do as well in my class on tests as non-minority students.” That's seen–and that she's under discipline, it's been a huge scandal at UPenn and other things.
And through a series of letters back and forth, ultimately, she concluded that she didn't agree with me. She actually said to me, “Well, 30 professors disagree with you.” And so with Hope Tates’ help and the help of a small group alumni, we animated the alumni, and we ultimately had nearly 8,000 alumni step forward and say they were not going to fund the University of Pennsylvania until both the Chairman and the President were removed.
And it became viral. Jon Huntsman, the ambassador Jon Huntsman was in Japan minding his own business. In the middle of the night, the President and I get a joint email where Jon Huntsman says, “I'm embarrassed that my name is associated with the university and I will not, my family will not fund this anymore while you're here.”
And what we were seeing was in part support for people fighting antisemitism, but I really want to couch what's happening in the U.S. It's not anti Semitism. It is anti-Americanism. We are in the middle of a takeover of our elite academic institutions by a dominant narrative that you can call post-colonial education.
Oppressed versus oppressor, powerful or powerless, and the narrative goes as follows. If you're the oppressed, by any means possible, it does not, facts don't matter. It just matters in outcomes. And so Israel is seen as powerful. Israel is seen as colonizing. And therefore it does not matter whether the facts support or don't support Israel.
And if you've had 20 years of this on university campuses, it does not surprise me that the population on university campuses in particular that generate our next generation of leaders has grown up this way. And what's happened is, you have this dominant narrative on the campuses and that dominant narrative affects students, because most students who come to college want to learn and have a good time.
They don't arrive to be political activists, but when the cool kids are all out protesting, they're out protesting from the river to the sea. And then you ask them, “What river and what sea?” and “Who lives between the river and the sea, and how do they get there?” No one knows anything, but they're still out there protesting.
And we can laugh at that, and I do laugh at that, but I do think this is what we're fighting. And some people combine this with DEI, which I think has been an accelerant to this. But anytime we choose people based a favored class characteristic, and not treat you as an individual–who decided which class is favored and not favored?
And that's really what we have on these college campuses. And what I tried to do, by being public, was actually just give people the courage to step forward and take this on. And that's what's happening. You're seeing it at Harvard. Larry Summers was fired because he had a bit of a faculty revolt.
So presidents of universities learned to fear faculty. Now that Liz Magill and Claudine are out, presidents of universities now fear alumni and faculty.
Michael Eisenberg:
So I spoke at Harvard on Monday night to Jewish student leaders, and after the talk that I gave, which was primarily about courage of standing up against the zeitgeist, primarily about courage, about not letting, so to speak, the winds of history and the zeitgeist of whatever's in the university overwhelm them and be able to stand up.
One of the student leaders said, “Can I ask a question?” I said, “Yes.” And he says, “Do you have any practical advice on how to develop courage?” And I was kind of stunned and I like, looked around at the table, you know–I've had four kids fighting in Gaza, and everyone else here has as well. And I looked around the table, and I said, “Is this an important question?”
And everyone said, “Yes.”
Marc Rowan:
Oh, it's not just the students, it's the faculty. I mean, I have, I have chairmen of departments, tenure professors who call me, or you know, I see them on the street and they hug me, “Thank you.” And I'm like, “Well, where have you been?” |Well, you know, I don't want to lose my research dollars. I don't want to lose this.”
People are fearful. And I think the only, I don't know that we can give people the tools to have courage. I think all we can do is set the example, and begin to put this in reverse. And so when I speak, and I've done this a bunch now, I go through how we got here, and I said, “Actually, telling the truth feels great. All of you should try it sometime.” And then I go through, I said, I, and Hope's heard this before, I'm in Dallas, Texas, or Houston, Texas, a month or two ago, and I get off the elevator, and some guy is like, you know, nose to nose, I mean, he looks at me, he says, “Are you Mark Rowan?”
And I'm thinking to myself, 50–50. We live in a crazy world.
And I say “Yes,” and literally he just hugs me. “Thank you.” And that's been, if I look at my emails and texts, I have 4,000 emails and texts, which basically just say ‘thank you.’ The amount of outpouring of support from employees.
And so what I've been doing is literally just telling people like, there are no repercussions to telling the truth, because you actually are being looked at as having a moral position. And the more people who we can get to show examples of leadership and model leadership is the best chance, I think, we have of showing these people how to have courage. Cause I don't think we can get, there's no magic pill for them.
Michael Eisenberg:
Why is it so hard to have courage? Like faculty members, you mentioned, these are well-educated people, many business people.
Marc Rowan:
This, this is the same thing we have, like this, this relates to investing too. Like this is everything that we do. There's something that goes on for so long, for a long time, and you, you have fear of missing out, FOMO.
And we've had this net dominant narrative on these campuses. And if you really dissect it, it is not trustees or alumni versus faculty. There's actually three parties at the table. There's faculty. There's trustees, alumni, and then there's administration. If you actually analyze what's happened on college campuses–administrators, administration has actually taken the faculty freedom away.
It is not the trustees. The trustees are the countervailing force. Because if you look at Penn as a microcosm–and I'll get to your question on courage–if you're a professor at Wharton, you want to get back to academic excellence and merit. If you are a professor in the engineering school, academic excellence and merit.
If you're in the medical school, academic excellence and merit. That is a majority of the professors at the entirety of the University of Pennsylvania. And then in the social sciences, not so much. Okay. But I don't think everyone has to share the same view, but the notion that they're fighting City Hall because the narrative is so dominant that it squelched conservative voices or merit-oriented voices to the point where they're just non-existent and so there's no camaraderie through self-selection–and so an outside force, trustees, I believe, need to come in and help re-center some of these institutions. But also there's been no price to pay for being an antisemite, for instance.
These kids who are marching, they don't think about it, because there's been no price to pay. But if you come to Apollo, I would not hire you if you were anti-black. I wouldn't hire you if you were anti-gay. I wouldn't hire you if you were anti-anything. Why would I hire an anti-semite? Why should we hire in finance, in insurance, in consulting, in banking, or law, any of these kids?
I think one of the things we should do is make sure there's a cost for being an antisemite. I think we should call out the 20 worst universities, the 20 worst civic organizations, the 20 worst philanthropic institutions. We should make it embarrassing to serve as a director on these boards and trustees.
Because being an antisemite has been costless. One side, positive side effect of 10/7, the Jewish community in the U.S. is off the sidelines. They are engaged. And now they just need to be directed.
Michael Eisenberg:
And to exact a price.
Marc Rowan:
And I think that will be part of it. You know, it's not just about retribution.
Michael Eisenberg:
Yeah.
Marc Rowan:
I think there has to be a bunch of positives in education and other, other things.
Michael Eisenberg:
Do you think it's safe for kids on college campuses, Jewish kids on college campuses now?
Marc Rowan: I do believe it is safe, but I think there are places that are more safe than others. I mean, we're, I think we're going to watch a rotation of schools in terms of what we think is great.
I mean, if I look just at the competition amongst business schools, I think UChicago is doing the best job of any business school today. They are ascendant everywhere. They are winning in terms of PhDs. They're winning in terms of new professorships and otherwise. And as much as I want–and I believe Wharton can be dominant–until Wharton finds its direction and actually picks a path, I don't think it's going to change the trajectory of the school. Because if you get in a negative fundraising loop, the Dean loses power, professors don't–see their research not getting funded, you start getting the best appointments, the best kids can go anywhere, and I think we're gonna see real upticks in Vanderbilt, Brandeis, Duke, UF, UT. There are a lot of good places to go to school. You don't have to go to eight schools.
Michael Eisenberg:
How about Tel Aviv University or Hebrew University, we get an uptick there?
Marc Rowan:
Maybe. Maybe, we'll see.
Michael Eisenberg:
You said before that the future leadership of America comes out of these institutions. You think about 20 years of indoctrination and a lot of these things are fear-based. How does that bode, if you think these are people who fill administration jobs or congressional jobs, how does that bode both for the US-Israel relationship and for the position of Jews in America?
Marc Rowan:
Look, I think it's not a positive. I think if you, I’ll start this way. The majority of the country is sensible on every issue. When polled, the majority of the country is supportive of Israel's position, supportive of Israel, going into Rafah and wiping out Hamas, supportive of appropriate limits on abortion, supportive of almost every controversial issue that has plagued, you know, U.S. political life.
The consensus–we just don't have a consensus political system. You have your own problems. We have our own problems. We have a primary system. In the primary system, most Democrat, the most, most seats for Congress are determined in the primary. They're not determined in the general election. And therefore, the only risk you have if you're a Democrat in a Democratic district is that another Democrat runs against you.
And so you're, you run in fear of the progressive left. And if you're in a Republican district, the only fear you have is that a very right wing Republican runs against you. And so I don't view these issues as issues of substance. I literally do not. And why do Republicans support Israel? Well, the Republican primaries, in part, are determined by evangelicals, and evangelicals are very supportive of Israel.
Therefore, Republicans are more apt to support Israel, in addition to all the good and practical reasons that many of them do, as a valued partner in other things. And on the Democratic side, you have these issues in reverse. But you have such a splintering and polarization of politics that these views can be very damaging to Israel.
And I think there is a sophisticated appreciation on the part of some in the Israeli administration of how these issues play. I mean, I've heard advisors to the current prime minister articulate roughly what I've said. On the other hand, the pressure of domestic politics here sometimes leads to policies and practices which are very popular here electorally, but are incredibly damaging strategically to the country.
Michael Eisenberg:
And if you were to give one piece of advice to the Israeli government and the American government on trying to break the tensions here, what would it be?
Marc Rowan:
I think it's now, the onus right now is on the Israeli government to take steps to not tell Biden no at every turn. I mean, appreciate the position that he is in, which is a political position, and do that which is necessary to garner support for what needs to be done.
Michael Eisenberg:
Which is take out Hamas and finish the job.
Marc Rowan:
Yes.
Michael Eisenberg:
I want to take a sharp turn, to–
Marc Rowan:
As sharp as possible.
Michael Eisenberg:
Okay. So once in a prior conversation that we had, I think we were walking at 57th Street, you said to me that “I've been doing this for, business for like 30 plus years, but I only made money in some small number of them.”
I think it was nine you said, but I don't remember. But it's worked out fine.
Marc Rowan:
It's worked out fine.
Michael Eisenberg:
So what should somebody take away about the investing business from that comment?
Marc Rowan:
So I don't, I want to, I don't want to be too literal, but I'll break it down. So the business, what I said applied specifically to private equity, which has a lot of similarities to venture capital in company selection and, and I–
Michael Eisenberg:
We make money in fewer years, just to be clear.
Marc Rowan:
Okay. But if you think about the private equity business, you make 10 decisions a year. Maximum. Everything else is ceremony. And how is money made? Well, over a long period of time in private equity, it appears that the secret to success is buying a good company at a low price and then selling it at a higher price.
Okay, so when do the sophisticated investors spend most of our money? Given that we know low price is important, we spend most of our time buying companies when prices are high, because that's when financing is available, that's when people feel great, that's when people have confidence. And we do this cycle after cycle.
And then when things get bad, everyone's overpaid, everyone's on defense. The ability to be a counter-cyclical thinker in this business, I think, is very hard, and it requires, you know, just a commitment throughout the institution to a style of investing that can be unpopular.
Michael Eisenberg:
And how do you train counter-cyclical thinking and being unpopular? A little bit comes back to the courage thing as well, right?
Marc Rowan:
It's, you know, so I look at what we try to do at Apollo and there are, you know, four or five things, but making sure we are a safe place for counter-cyclical thinking, for contrarian thought, is great. And part of that is a healthy tolerance of intellectual insubordination, which is different than outright insubordination.
But–
Michael Eisenberg:
What is intellectual insubordination?
Marc Rowan:
That means you can take on any, if you're a young professional in the firm and we're discussing an investment, you can take on anyone over the investment on facts, and have it out. And it is not only tolerated, it's expected. You can have deal teams disagree with each other.
As long as the facts are on the table, we make investments as a partnership, and we win and we lose. But let's face it, we–how do we know who is a good investor over the last 10 years, exclude the last two?
Michael Eisenberg:
I think it's very difficult.
Marc Rowan:
I think track record is useless.
Michael Eisenberg:
Yeah, so do I.
Marc Rowan:
Like, look at the U. S. We printed 8 trillion from 2008 until 2020. When we print 8 trillion, what, what happens? Everything goes up and to the right. And everything did go up and to the right, good stuff and bad stuff. Okay. Like, if I picked out some names, which I'm not going to since we're recording this, and I asked you three years ago if they were good investors, everybody would be like, “Oh yeah, they're amazing.”
And now if I ask, you know, three years later, “No, they were just lucky.”
Michael Eisenberg:
Many of them are out of jobs.
Marc Rowan:
Yes. Many of them are out of jobs. So I, I do think that that is an element of being an investor, which by the way, is different than running the business that I run today. The business that I run today is–the ability to be a good investor is paramount, but the ability to identify big societal shifts, trends, and get yourself in front of these trends is much more important than that.
So we had, we gathered the whole partnership in Abu Dhabi in January, all 201 Apollo partners. First, the fact that 70% of them had never been to Abu Dhabi and they're our largest investor is itself an issue. But we, we've now, we've now rectified that, and I put up a slide that showed that in 2008 we were 40 billion of AUM.
And in 2023 we were 650 billion. So we grew 14 times. And then I said, “We outgrew Apple. We outgrew Microsoft. We outgrew everyone.” Second slide. Were we lucky or smart? We were lucky. How could you possibly plan on growing a business 14 times?
Michael Eisenberg:
In a financial management business, yeah.
Marc Rowan:
And right. We were just, we positioned ourselves in front of really big trends, and we were therefore taken along with those big trends.
So what happened? You had a financial crisis in 2008. Financial institutions were on their back foot. They were weak. We stepped in when they, when they couldn't do things. The world was pushing banks to do less. As banks did less, we did more. Interest rates went to zero, everyone needed returns, we provided,--they were willing to look different places for returns, we provided returns.
So it changed the shape of our business. The business today is 500 billion of credit, and 150 billion of equity. And so–
Michael Eisenberg:
Just for context, how much is JP Morgan providing credit on an annual basis?
Marc Rowan:
They would be, you know, three trillion.
Michael Eisenberg:
Three trillion. So you're at one sixth, that's not bad.
Marc Rowan:
But the point being is that in the context of our, like, it sounds big in this room, but in the context of the market that we serve, it's just not that big. The big bank CEOs don't wake up every day wondering what the mighty Apollo is doing. And I do think that that is, in your business, it's about identifying the trends specifically around, is it AI?
Is it power? Is it other things? In our business, it's what's going to happen next. So we look at the world, and banks are still being asked to do less. Basel III Endgame, everything else, that's going to be a big trend. The Western world is getting older. We're short retirement income. The provision of retirement income on a guaranteed basis is going to be a big business.
Then I look at things that have happened in the stock market. Does the U.S. have a stock market? Do we have price discovery?
Michael Eisenberg:
No.
Marc Rowan:
I don't know that we do.
Michael Eisenberg:
Especially not for small cap companies, for what it's worth.
Marc Rowan:
So 80 percent of trading is S&P 500, 10 companies are 35 percent of the S&P. Those 10 companies traded astronomical P/Es.
The whole market is basically levered to NVIDIA and Apple. And I'm not sure we do. And so in a world– I think the public markets have become mostly beta, and the reason I know that is, I look at all active management of debt and equity. It's failed to beat the market 90 percent of the time for 20 years.
I don't think we're going to have as much active management going forward. I think that we're watching in the next 10 years, the demise of active management. I think it becomes more passive and more boutique, of which we are boutique.
And I also think we're rethinking the whole notion of public and private. We grew up, and I grew up thinking that private was risky and public was safe. And when I started it was. Private was three products: Venture capital, hedge funds, private equity. And public were diversified portfolios of stocks and bonds. Now, private goes from double A to levered equity. It is both risky and safe and public.
We used to have 8,000 public companies. We now have 4,000 public companies–
Michael Eisenberg:
And shrinking.
Marc Rowan:
–going down, and we have massive concentration. And so shouldn't we, first, should we recognize that public is both risky and safe? And second, shouldn't we expect more private, given that half the market is now private?
Michael Eisenberg:
Well, maybe what's the other side of that argument, which is if you want to kind of be counter to the trend, there needs to be a market that develops for smaller cap companies and for active management. You don't think that happens?
Marc Rowan:
I don't, I don't know.
Michael Eisenberg:
That's bad news for the whole room here, just so we're clear.
Marc Rowan:
I think it's going the other way. I think the question is one of exit. I think the private market, I think gets–wins at the expense of the public market.
Michael Eisenberg:
Because of regulation? Like, why does it happen? Because the big pools of capital are just passive and algorithmic?
Marc Rowan:
Because big pools of capital are passive and algorithmic.
Now, the negative for our business, and it's your business and my business, is I think IPOs are going to be the minority exit for all businesses, and I think we're going to have to be really careful about how we invest to make sure that what we're doing is incubating for public companies to buy.
Michael Eisenberg:
You talked about getting ahead of trends. One of the big shifts in the market since interest rates went up is all of a sudden a focus on cash flow and profitability. In the room are people who are growth-minded rather than cash-flow minded. Every startup is growth-minded. If you were advising the room, what would you tell them, how would you tell them to think about that problem?
And you have one of your entrepreneurs in the room too.
Marc Rowan:
That's exactly what I tell them, which is get to cash flow. We have to recognize that the money we will raise will be limited by the willingness of private capital to finance success. So get out and show success, and then you'll get the next round of capital.
We just had this conversation over a drink here. Which is, okay, you're showing success, you're going to get the next round of capital. And I do think that that's really important today as opposed to, we're adding customers, we're scaling, but there's a big hole. Big holes cannot be filled.
Michael Eisenberg:
How do you think about AI? You have this giant portfolio of companies, right? How do you think about the emergence of AI in these big companies? Some of which are industrial, some of which are hospitality, some of which are insurance.
Marc Rowan:
So for us, you know, again, I won't hold us out as experts in technology, but what I, we see primarily right now is a massive cost lever, and I'll give you the first use case for us.
So we run a very large call center for our insurance operation. Every call center everywhere in the world has 30 percent turnover. If they're good.
Michael Eisenberg:
30 percent turnover butts in seats.
Marc Rowan:
Annually. That means everyone in the call center knows nothing, because they haven't been there. And therefore, you're not displacing a knowledgeable individual.
And so, we will initially start with an AI co-pilot, with a person, because we're in a regulated business. And we will, over time, replace our call centers with AI. Okay. We are now, for all our simple legal documents, they asked on the first draft of everything, which is a massive cost reduction. It's not yet at a decision making point in our business.
I think it will be.
Michael Eisenberg:
What did you do to get Apollo ready for this?
Marc Rowan:
It's primarily been putting the team on the field and giving them the opportunity to be wrong. So I'll come back to, like, management, management style. So the business is, it's a business. It can be really hard or can be really simple. What's really simple?
What do we, what do we offer clients? What do you offer clients? You offer them judgment. That's all you offer them. And I think judgment comes over a long period of time seeing what you do and don't do. Therefore once you are at Apollo, I want you to spend your whole career at Apollo. Otherwise I lose your judgment.
So the North Star of how we run the business is to make Apollo the single best place to be a partner in financial services. Okay. Second, in private equity or venture capital, you make 10 decisions a year, and you can therefore have every senior person around the table and make those 10 decisions.
When the business gets to scale, if you try to make that, the line outside your office gets really long and the quality of your decision making goes down and the frustration level goes up. So you have to go the other way. You have to tell people where you're going. You have to tell them what they can do to get there.
You have to give them the do's and don'ts of what your corporate code is, and then you have to make it safe to fail. Because if I'm right two thirds of the time–that's a lot–that means I'm wrong every third decision. But I just fail and fix it quickly. And I tell people, you don't get fired for making a bad decision, you get fired for making no decision.
Or you get fired for bringing not all the information to the table to confirm some bias that you have.
Michael Eisenberg:
How do you deal with people's confirmation biases?
Marc Rowan:
You just over time, like this, this is, it is remarkable. I live with a quote behind me from Teddy Roosevelt, which is how you see, how you see the world once you've made up your mind.
Every piece of data you just shape to fit your, you know, predetermined conclusion.
Michael Eisenberg:
That's like, that's like closing the circle with October 7th in many ways, right?
Marc Rowan:
Right, and so here, you know, look, what we try and do is just to make sure we're always challenging. We're always being contrary. I grew up, when I was coming up in the business, if I wanted to do something, the senior team never wanted to do it.
They just were contrary for the sake of it. And it forced better decisions.
Michael Eisenberg:
Did you become defensive?
Marc Rowan:
No, that's, that's the side of it, which is you just, you knew that you had to kind of get through a gauntlet. And you were just ready for it intellectually. And you know, you, you tried not to be locked in, but as you know, it's really hard.
Michael Eisenberg:
You've both invested personally in Israeli technology companies for most part. And Apollo, I believe bought Playtika, bought Playtika at some point. What's the difference in your view between the Israeli companies you've invested in, worked with, and the American ones?
Marc Rowan:
First, it's so much more efficient.
Michael Eisenberg:
It's so much more like hands on, get dirty, get it done. Rawr! Like night and day. Night and day. And therefore?
Marc Rowan:
And therefore, like getting from startup to proof of concept to showing customers is, is actually, I think easier here. Getting it to scale is easier there.
Michael Eisenberg:
Is there a bug in the Israeli genetic pool that you can't get to scale? Is there like, a heavenly decree–you the chosen people can't scale? I mean, there's very few of us, it's true.
Marc Rowan:
I might, I have, I have cultural observations where people are willing to sell for short dollars. That's one. That's, that's one. The second is you grow up in a market where you are, unless you are international, when you're a few, you grow up thinking small, because it's a small market as opposed to in the U.S. where you grow up thinking, you know, you have a big market to go test and, and do in.
I also think the scale of capital that's available in the U.S. to allow you to start some of these things is just, has been bigger, but itself is self-correcting.
Michael Eisenberg:
You know, I've often thought the second point you made is correct, which is when you grow up in a smaller country, your notion of what scale is, is just smaller. How would you correct for that?
Marc Rowan:
Well, I don't think you, it's not going to correct for it any other way. I do–look, I think the entrepreneur system here is incredible, but because of the late start as a result of military service and other things, and particularly people who, at re the best part of their career, they've served more than their required three years or anything else–by the time they have financial success, they're older and they want to cash in on their financial success. And I find a real bias to ring the cash register early for that first win here.
Michael Eisenberg:
And how would you solve for that?
Marc Rowan:
I think that there is not a great solution. I'll tell you what, at Playtika, I'll tell you what we did.
We just started paying out a percentage of profits. And like, before we exited and other things, we just wanted the entrepreneurs to relax. Like, yes, Robert, buy a car. Yes, Robert, buy a house, you know, and so it made them more willing to swing. We were swinging the bat, and we saw something that, and we didn't want them to kind of lose confidence as a result of their personal financial situation.
Cause sometimes, you know, the notion that the investor wants the entrepreneur to be all in is great–up until the entrepreneur is all in and becomes risk averse.
Michael Eisenberg:
Yeah.
Marc Rowan:
And that's, we try to, you know, find the balance between the two. I'm going to say it's, look, things have changed here.Whatever, whatever, however attractive Israel was pre-October seventh, it is less attractive now. And that just has to be a recognition, but it's also an opportunity. And so I, and I'm just going to go off piece for a second, touring Europe and speaking to regulators for the last few days in financial services.
And everywhere I went in Europe, they were talking about, am I seeing the UK really reforming to reach out for business to try to build? And I said, “No, not a single sign of it.” Brexit, you know, they, they never got themselves behind what Brexit opportunity was. They never became the Singapore of Europe.
They went the other way. They had all the costs of breakage, and then they emulated the system that they were breaking from, if not the same, worse. And so I look at a break–October 7th is Israel's own break. Okay, how do you take stock of what is really good here and is really strong and how do you make it more attractive?
How do you actually go to the four or five industries that dominate here and say, what are the impediments to success? And how do we use this opportunity–because it is going to be an opportunity–when the dust settles, how do we use this opportunity to change the landscape and actually do it?
And as I've talked to you and others in the group, the shocking lack of thought of how long-term economic policy is done is, is just shocking.
Michael Eisenberg:
What would be your top two pieces of advice to get after that?
Marc Rowan:
Look, I think we live in a global world. I mean, you look at the–I'd go industry by industry, and I'd go, you have oil and gas, you have defense, you have technology, you have tourism, and you–it does not have to be tech.
You know, I jokingly said to both you and Eyal before, I said, “Okay, show me where the hotel school is in Israel.” Everyone's like, “Huh? Hotel school?” I was like, “Exactly.” This is the, this is the typical stepping stone for blue collar to white collar employment. And it doesn't exist here. And yet, everywhere I go, there's being, there's hotels being built.
Last I looked, people actually serve people in hotels.
Michael Eisenberg:
Yeah.
Marc Rowan:
And we're not, we're not training them. We don't do it.
Michael Eisenberg:
The robots are coming.
Marc Rowan:
But these are just like–go industry by industry, and what are the four or five things that are the biggest impediment to life?
Michael Eisenberg:
That's a good segue to my last two questions, and then I'll take a couple of audience questions. You mentioned before the GCC and Abu Dhabi and going there, and that's where you were. Where we're sitting right now, what do you think is the opportunity and challenge for this region? Saudi, Emirates, Israel, maybe India and others right now. And how would you prosecute it?
Marc Rowan:
I think it's to make it livable. I mean, so I'll give you my observation. So, I've been going to Abu Dhabi and to the Emirates for a really long time. And the first generation of expats who were there were people who failed in Western companies. This was the only place you could get a job.
This generation of expats are everyone who's the best of the best.
Michael Eisenberg:
First class people, yeah.
Marc Rowan:
People, despite the climate, despite being a form of government that is not, you know, how most of us have grown up, Abu Dhabi, Dubai have become really attractive places to live. And they have gotten the dividend of talent, and reinforcement, and local investment, and the ability to take knowledge, industries and to have people invest–because they've always had plenty of money. And now they have money, and a livable place, and they're reaping the benefits from that.
I think Saudi is going to reap the benefits from that too, as–like I, five years ago, if I had to go to Saudi, I would literally be dreading the trip. Now I feel almost like going to Abu Dhabi. Like if I look, women are out and about everywhere in Saudi society, 50 percent of my professional contacts in Saudi are female.
200,000 Saudis a year moving back to Saudi, mostly educated women whose parents had sent them abroad. The energy level of young Saudis, young, even for me, is just off the charts. Is it as embedded in Saudi as it is in Abu Dhabi? Absolutely not. But the resorts, the tolerance, the openness, the acceptance of Jews, of Israel, and other things amongst educated people, this is an unbelievable dividend. And the Emirates is three and a half million people?
Michael Eisenberg:
Yeah.
Marc Rowan:
It's 30 million people. Like Riyadh alone is going to, it's going from 9 million to 13 million people. It is hopeful to go there and it is becoming livable.
Michael Eisenberg:
And, where are we 10 years from now in this relationship? This is all a question of, you know, how Israel gets itself–I mean, in some ways you have a common enemy and a common opportunity. I mean, this is a, you know, why do people want to make peace with Israel? You can come up with a list of reasons, which is, you know, technology, defense, standing up to common enemies, relationship with the U.S. Okay, those are things that, you know, Israel has to continue to invest in defense, continue to invest in technology. Relationship with the U.S. I think you will still have a common enemy.
Michael Eisenberg:
One last question for you. You mentioned earlier that you think getting people guaranteed retirement income is going to be a big deal. Do you think that the social welfare state is kind of dead?
Marc Rowan:
No, I think that that's what people want.
I think that's Europe. I mean, I do think, and the remark was made to me, is Britain had the opportunity to be Singapore, except the people decided they wanted to be a social welfare state. So, I think it is starting to fray around the edges. Because the requirement–I mean, think about the challenge Europe faces of defense, of investment in their economies, of energy transition, climate, oh, and an aging population and providing for the social welfare state.
Michael Eisenberg:
With no kids.
Marc Rowan:
Yeah. With no kids. I mean, they've had, and they have not done a great job assimilating immigrants into their society. They've basically not assimilated them into their society. And so I think there are challenges around the world. But I don't, I think that the need for guaranteed retirement income is not primarily it from governments.
I think governments are just going to do less.
Michael Eisenberg:
Right. They'll shrink. The social welfare state will shrink, but we'll need other solutions.
Marc Rowan:
Look, this is, it is possible. I mean, go to the, where, who has done the best job anywhere in the world? Australia. Australia just did a simple thing. They did something called superannuation, which is nothing more than putting professional managers who are fiduciaries over people's savings, and allowing them access to 30 percent private markets over a long period of time with compounding.
And in the U.S., just to tell you, Israel's not alone in not addressing this. In fact, Israel is closer to the Australian system than we are. So, what's the largest pool of capital in the world? 401K in the U.S. 13 trillion dollars. What's it invested in?
Michael Eisenberg:
The index, maybe.
Marc Rowan:
Daily liquid stock index funds for 50 years. Why? No one knows. 50 years ago, we decided this was what they should own, and we haven't changed yet. So, if we had invested social security in anything other than government bonds, we'd be talking about surpluses.
Michael Eisenberg:
Questions from the audience? Liza?
Marc Rowan:
I can't believe people raised their hands, actually. Oh my God.
Michael Eisenberg:
Yeah, I'm surprised Yael raised her hand. Yael runs AI for Walmart and Walmart Israel, among other things that she does that we won't talk about.
Yael Visel (guest):
Most innovative startup-ish company in the world, I would say, right now.
Marc Rowan:
Always harder to innovate in a big company. Yeah.
Yael Visel (guest):
Yeah. Yeah. First of all, thanks for coming here and sharing your insights with us and coming to Israel. I want to go back–
Marc Rowan:
This is not a hardship, by the way. I have to be honest.
Yael (guest):
I'm glad to hear.
Marc Rowan:
I'm staying down the block. It's all good. Yeah.
Yael Visel (guest):
Getting back to campuses. So when you look at the young Jewish generation, where are they on the, you know, spectrum of supporting Israel? Or protesting, or feeling that they are not necessarily supporting, you know, the actions, and what Israel is doing and what–
Marc Rowan:
Massive resurgence of support for being Jewish and for Israel. And I think there's always the fringe, but after October 7th, there's, people are just off the sidelines. And
Yael Visel (guest):
And do they feel closer to Israel? Because–
Marc Rowan:
I don't know, what do you think? I'm looking at Hope. She spends most of the time with the kids.
Hope Taitz (guest):
No, they're getting, as Micah said, they're getting more courage.
They're getting more, as we get them out–they, they want to come, by the way, they want to, they haven't been able to come during the academic year. We're trying to get the College Campuses united, loud, together, but the support is really there in every way, shape, or form. And anybody who wants to connect on this subject, we are, we want them here, and we want, and we want you guys to know how supported you are.
Michael Eisenberg:
Other questions? Idan?
Idan Tendler (guest):
You mentioned, you talked about the colleges, but actually I want to hear your thoughts about the relationship between Israel and the Jewish community in the U.S. post October 7th.
Marc Rowan:
You know, it's an interesting thing. So pre October 7th, everyone had their own, you know, things.
I mean, most of the U.S. is Reform or Conservative, and it's divided that way. And I would think the support for Israel, while always there, is the Orthodox are more supportive, the Reform are less supportive. They don't feel as welcome. I think post October 7th, that conversation is completely and totally on the sidelines.
I mean, I wanna say, I'll say it in the nicest possible way. Reform Jewry, of which I was a member of–I would listen to the rabbis and the rabbinate for the whole movement, and they basically had bought into the whole, you know, social justice, DEI narrative. And after October 7th, the LGBT community didn't come out, the women's community didn't come out, the black community didn't come out, the Hispanic community, the immigrant community, everyone they supported kind of deserted them.
This was a massive wake up call. Some of them got the joke, and some of them didn't, but everyone is being forced to rethink their position. So, there's obviously a lot of dispute, just as there is here, with respect to leadership and the style of leadership. But I think that support for Israel amongst the Jewish community has gone up.
I mean, I look at it just in numbers. You know, look at fundraising at UJA. People have come off, people who never gave to UJA just want to help.
Idan Tendler (guest):
And do you think we will see a change regarding to the politics in Israel? More involvement, more pressure?
Marc Rowan:
How do you, you know, we, we're all helpless, except for you guys. You guys are not helpless, but I find it so, it's actually a really funny thing, like in the U.S., I actually think we can affect change in U.S. politics, and yet I come here and you guys are so resigned to, oh, the system. It's so crazy. I mean, the notion that there's not going to be substantive change after what's happened here, I can't, I just can't believe.
Michael Eisenberg:
There will be. Go ahead.
Yuval Golan (guest):
Thanks for being here. It's very insightful. And I wanted to ask a question because we're discussing a lot of aspects of education. So most of us, I guess, grew up reading books and being critical. The biggest issue that I see today is how to deal with the next generation and how to deal with all the amounts of data, that many of that is fake, and how to teach them to criticize and ask the right questions to draw the right conclusions before they go to those protests or other events that happen, either against us as Jews or others? And how do we deal with the next generation of education and teach them?
Marc Rowan:
I don't, I'm going to say I don't have an answer for you. I think it's a real problem. And I think it's a problem for us. I no longer know what's true. I don't think The New York Times is true, I don't think the Wall Street Journal is true, I don't know where news is true. You have to get news from every source you possibly can, and by the end of the day, decide for yourself what's true. But at least we grow up thinking about that critical reasoning. This next generation gets their news in snippets, and we can rail against that, which I think we should over a long term.
But in the short term, the notion that we, this generation, technological group of geniuses in this country, that we've ceded social media and we've lost the terms. We're not seen as indigenous. We're colonists. For the way we, the way the army operates, and versus the rest of the world, the notion that there's genocide and the notion that this is an apartheid state.
I mean, we've actually ceded those three words, and we've ceded the social media battle. And I just, I don't see the resources of this state, which should be awesome, applied in that context. I really don't. I mean, there's obviously lots of need for that today. And every effort I've seen here has been kind of nascent and not well thought out.
Michael Eisenberg:
I’ll finish with this last question, then we have to wrap up. No, I'm going to ask it and be done. The interviewer’s prerogative.
So there's a bunch of people in the room who have been in reserves since October 7th, and some in uniform here. From looking from the outside in, what's the one thing you'd like to tell them or empower the people who have been in Gaza or in reserve duty, and from your job as chairman of UJA, the work you've done there?
Marc Rowan:
Look, this is unbelievable. I mean, how many places in the world are there where people actually fight for something they believe in? I forget who said it to me yesterday. If I'm, if you said it to me yesterday, I don't want to steal what you've said, but you know, if you're a Belgian, are you fighting for Belgium?
Probably not. This is like an amazing place, where people want to preserve what they have. And it's, it's doubted and appreciated. I mean, there's very few places in the world where you have a citizen army.
Michael Eisenberg:
Yeah.
Marc Rowan:
It's really impressive.
Mark. Thank you for doing this. Thank you for coming.
Joe Lonsdale:
Are wealthy people in the world able to say what they believe? Yes, they actually can, but most of them are cowards, because our society has become a lot wimpier in the last 50, 60 years.
So I think we have a lot of losers out there. I think that culture just, it's a very beta culture where you don't fight. You're very afraid, you don't stand up for anything. You just try to go along to get along. There's lots of very positive things about feminine energy, but it's a very feminine culture for men, which is very unhealthy.
And I think that I was surrounded by cowards. Yeah, so it's kind of horrible. I mean, I love the fact that Elon speaks out. I'm speaking out. We're trying to model what masculine behavior is supposed to look like. And all the left says, “Oh, it’s toxic masculinity.” It's not toxic to speak out and have opinions and be strong.
That's actually what men are supposed to do. If you're not doing it, you're not being a man.
Michael Eisenberg:
Welcome back to the invested podcast. I am thrilled today to have Joe Lonsdale. Welcome, Joe.
Joe Lonsdale:
Thank you, Michael.
Michael Eisenberg:
Joe and I have known each other for many years. Joe is a partner at 8VC, co-founder of Palantir Technologies, which actually reported earnings yesterday, I believe, and they were excellent. We'll talk some more about Palantir. And he’s the co-founder of OpenGov, but rather than me introducing you, Joe, what do you want people to know about you?
[00:00:27] Joe Lonsdale:
Well, Michael, it's good to be on. I'm a proud American and I'm Jewish. I'm a big fan of Israel. We're worried for you guys over there right now, but proud of the country. You know, I guess I've started six unicorns now. I'm a founder of the University of Austin, a new university here. And I have a big policy group called Cicero. So we're doing our best to build new companies and fight for the values of Western civilization.
[00:00:51] Michael Eisenberg:
First of all, I find all the work you do super inspiring, that you’re trying to start a new university in the current climate. And you're even ahead of the hearings on Capitol Hill. What inspired you to start the University of Austin?
[00:01:02] Joe Lonsdale:
You know, I've been talking about it as something that's needed for over a decade. Peter Thiel is a mentor. He was also exploring this idea, had similar ideas about 10 or 15 years ago. And I think he came to the conclusion back then that it was virtually impossible to start a new top university. There's such a strong cartel and so many barriers to entry. And it became more clear, I think about four or five years ago, that things had gone much further downhill.
There was a lot more rot at the core of our great American universities. And so, as sad as that is, that also creates an opening to build new ones and show how better things can work. And, you know, I have to give a lot of credit–my co-founders are Bari Weiss, the creator of The Free Press, and Nial Ferguson, who's one of the world's kind of great academics, great historians alive today.
[00:01:46] And, you know, both of them were also just pushing. I think I met Bari because we were telling both of our friends how much we had to rebuild the core institutions of the West, and both of them were saying, “The moment is now, we have to do this.” And I was in the middle of building so many companies already and running my policy group and having my young kids.
[00:02:03] And so I was like, “Oh, I don't really have time for this, but you guys are right. We have to do it now.” ‘Cause I'd talked to them about the idea before as well. So we pushed it ahead. And of course the timing, it seems to be, obviously was very strong. Obviously a couple of years later, you saw October 7th, and you saw what happened with the reaction of the totally broken universities here. So I think a lot of our people started to realize how broken they were.
[00:02:24] Michael Eisenberg:
And what differentiates University of Austin?
[00:02:28] Joe Lonsdale:
University of Austin is about saving Western civilization. It's about the pursuit of truth. I think most universities are concerned about not having kids be offended as some of their highest value. I think our highest value is actually pursuit of truth, regardless of who's offended. And it doesn't mean you offend people on purpose. I think intellectual humility is important when you seek the truth. A lot of times right now at a university, you assume you know all the answers, you assume that whatever worldview, progressive worldview is exactly right, and you preach. And I think the idea is rather than that, let's study the different perspective, let's deeply understand the dialectics that exist, and then let's debate, and let's argue. And you know, just having a place that's actually open to that, having a place where no one gets shut down, having a really strict constitution about who's even allowed to be shut down to protect people for speaking up is more like how universities worked 100, 200 years ago in the West. It’s not how they work nowadays.
Michael Eisenberg:
[00:03:21] What did you do to protect people's ability to speak up? What specifically did you do?
Joe Lonsdale:
Well, specifically, Neil Ferguson, who obviously studied lots of these things, understands how the world evolved the last few hundred years, wrote the constitution for our university. And actually, specifically what happens at these other universities is the boards will get kind of bullied and intimidated into going along with censoring or disciplining someone. You say someone broke some shibboleth, you know, okay, now they have to be taken out and shot, basicaly.
[00:03:49] You're not allowed to do that. We have a constitution. We have a process. So even if they say something very, very offensive that I, for my business, I'm horrified by because it's going to be, you know, make me look really bad, not make me be able to work anymore–too bad. I'm not allowed to now fire them for that. That doesn't break the constitution if they're making an argument. So I think having protections in place is really important.
And frankly, personnel is policy, starting with people–I mean, Michael, 5,000 professors applied when we started this thing. 5,000 professors. People have no idea the extent to which even people on the moderate left are hounded and attacked and just like demonized inside these places that they don't stick exactly to the script of the far left right now.
[00:04:27] So you have people who are all sorts of moderates that like to speak out and think for themselves, and you base the university based on that, and you’re not ever going to punish someone or demonize them or sideline them for speaking out. And that's a really powerful start.
[00:04:41] Michael Eisenberg:
So to be a bit provocative for a second, does Ibram Kendi have a place in the University of Austin?
[00:04:48] Joe Lonsdale:
You know, Ibram Kendi, if he had an attitude not to cancel people—his viewpoints themselves are not canceled. But Ibram Kendi is explicitly a liberal. He's explicitly somebody who is trying to cancel people. So I don't think that attitude–it's not left or right, it's illiberal versus liberal.
[00:05:07] And this is an enlightenment principle. If you are specifically trying to shut people down, if you're explicitly trying to discriminate against people, like that's not what we're going to do at our school. So those illiberal values would not be a fit, in my view.
[00:05:19] Michael Eisenberg:
Do you think America today is actually what you would call a liberal society?
[00:05:21] Joe Lonsdale:
Some parts of it are, some parts of it aren't. If we didn't have our constitution, we might've fallen another way. I think that a big part of the left in America has become a liberal. I think a big part of the left does what they can to cancel people, to punish people for going out of bounds.
And I think if we didn't have explicitly a court system that was based in the constitution, I think a lot of people might have succeeded in making us no longer a liberal society. I think that's what you're seeing right now in Britain with these riots and the threats that cracked down on them by Keir Starmer.
[00:05:55] He's like, “We’re going to punish you. Anyone online who's encouraging this, who's encouraging, this point of view is going to be punished.” And you see people literally have already gone home to home with the police to punish people for views and for jokes they don't like. And, you know, I think there's a strain on the left in the West right now that's very illiberal.
And thank goodness America has a sound constitution, has sound courts that are all standing up for it. And we’ve got to keep that.
[00:06:19] Michael Eisenberg:
I find your distinction between countries with constitutions and constitutions without them fascinating. So I'll be extreme about it for a second. We're protected with freedoms by a document.
[00:06:32] Joe Lonsdale:
It's a process though, right? So I think systems emerge from processes. And I think anyone with an IQ as high as yours understands how important systems are for the whole, how the whole world works. These things evolve, and they respond, and they have forces that go back and forth. And so having a process that guarantees certain inalienable rights is actually extremely important.
[00:06:52] I think our founders–you see behind me, there's a lot of primary sources of a lot of our founders. You can see a lot of old books back there behind me. And I grew up studying the enlightenment and studying the founding of America. And, as much as there's a lot of new things that are completely different in terms of what's going on in the technology world that you and I work in, I think human nature is not so fundamentally different than 300 years ago. And I think there's some really, really important breakthroughs these guys made in understanding the philosophy to have the base of society, a system tied to inalienable rights.
And if you don't have those rights that come from God or that come from a source outside of the government, it's very dangerous where things iterate towards.
[00:07:29] Michael Eisenberg:
Yeah, you know, one of the things that's fascinated me over much of my life is the Hebraic principles that underlie and serve as kind of the rubric for the constitution, and the Federalist Papers and many other things. Behind me are biblical and Talmudic books. So that's a couple of thousand plus years old.
[00:07:47] Joe Lonsdale:
You got me by a couple of thousand years. My wife and I do study Talmud as well. But I am very focused these days on the principles of government from our founders, and frankly from people like Cicero as well, because there's a lot of wisdom from there. There's two different strains. I think I do like the Judeo Christian principle to leave unto Caesar what is Caesar's.
I think you have to have different strains of faith vs. politics hopefully.
[00:08:09] Michael Eisenberg: Yeah, I tend to agree with that. But tell me how you think, for example, you're a co-founder of Palantir, an AI company. Where do you think that AI software kind of perhaps, amplifies or threatens these basic freedoms and ability to speak up?
[00:08:28] Joe Lonsdale:
Yeah, no, that's–gosh, we've been arguing about this for a couple of decades. You know, Palantir, it's funny enough, it is an AI company now, and it's an AI company for a good reason. We started off as a company, a data infrastructure company that was organizing data ontologies and workflows and ontologies in ways that really kind of productized a lot of services–worked around understanding the data, understanding how it was used. And it turns out that a lot of hard work Palantir did over 15 years actually ended up setting it up perfectly, it turns out, for being harnessed for AI. So it actually was explicitly not AI company when we started it, because you know, every government agency wanted to build a ‘find terrorist’ button.
And so it turns out you couldn't build a ‘find terrorist,’ button, but you could like, help people to organize it, for humans to be able to use it. And, you know, at this point, you still can't build the ‘find terrorist’ magic button, but the AI could do a hell of a lot more than it could before. It's obviously getting quite strong.
And, you know, and so there's this view that I think Peter Thiel–I can't speak for him today, but I guess the old view would be that, like, crypto was like a pro-libertarian thing, and it was like kind of getting around government's control of money and other things, and then AI was like a pro-authoritarian thing.
It's like a very simple, high level kind of model of that, where AI made the government stronger and smarter and could see what everything was going on, and it's kind of a scary thing. You know, I think there's definitely some truth to that. It definitely, AI definitely does let you have a bigger, more intrusive authoritarian government.
It's also obviously something that makes businesses much more productive, and it creates massive amounts of wealth in the world. So, you know, and I guess the question is, are there ways you can use AI for liberty? And I do think that the ability for very small groups or even one person theoretically in the future to build big companies and to create great things using AI, like does give a lot more autonomy to individuals.
It does make it so you don't probably need as much an overbearing government. Like you actually make government a lot smaller, for example, with AI, because you can outsource like so many things it does. You don't need a million bureaucrats anymore if you have AI. So in some ways there could be ways in which AI enables liberty, but it is a very scary tool for authoritarians right now. I think that I think Peter's intuition is correct there.
[00:10:46] Michael Eisenberg:
I made the argument at a conference in Abu Dhabi that I spoke at, I don't know, six months ago or so, that AI, because it's so powerful, like it can empower individuals to build their own companies, it can also empower mediocre hackers to become great hackers; it can empower people who don't know how to develop bio weapons to develop bio weapons, and by the way, at the same time, to the point you're making, the current framing of AI is like in service to the Chinese Communist Party, the CCP.
So it's also kind of an authoritarian thing. And one man's view is more compute power increases entropy in the world because of both of those things. And I wonder how you react to that and think about how we leverage this for more freedom and, call it, less chaos and less authoritarian government.
[00:11:38] Joe Lonsdale:
Well AI ultimately creates a lot more wealth. Let's just say for the sake of this discussion, you probably see this in your portfolio companies. I see it in mine. There's ways in which it's working. It's increasing productivity. It's making services work better. It's going to create a lot more wealth.
So in a world that you fast forward, hopefully, if we don't all, you know, kill each other with these potential wars coming up right now, and hopefully we find peace–like I'm terrified of the Red-Black Alliance, we call it, that took over Iran, and that it's taking over other parts of our world right now as we speak–but to take the war stuff aside, if AI makes the world a lot wealthier place in 20 years, I think that actually does create more freedom. It's not the default that happens automatically, but you've seen as the world gets wealthier, people tend to want a voice and people tend to want some sort of freedom.
And basically people tend to be enabled to get that as well. So if you think of our society, if everyone's like a multimillionaire, you probably have all these space hotels. You probably have colonies on Mars. You probably have all sorts of new cities you could build under the ocean because you have the wealth and the ability to do so.
And I think with all this room and with all this wealth, it creates a kind of a new birth of freedom, in the sense that there's new cities, there's new countries, there's new innovation in government. There's all these new ways of doing things. So I think the more humans can experiment with government, the more we can experiment with ways of living, the more we can learn and see what works, the better chance we have to kind of escape authoritarian grasps on ourselves, escape this kind of top down, you know, censorship, et cetera.
So it's definitely dangerous, but this wealth probably could be a very good thing for us overall.
[00:13:19] Michael Eisenberg:
You equate wealth with freedom.
[00:13:22] Joe Lonsdale:
Not perfectly, but I think it enables it on the whole.
[00:13:27] Michael Eisenberg:
Do you think the wealthy people today are free to speak their mind right now? Because I was talking actually to a guy who's an agent who I know since I grew up. I didn't know he was an agent until about a month ago. And he told me his job over the last decade was getting people who were canceled, and getting them back on their feet. And these are all very wealthy people who went into a cocoon despite their wealth because they felt unfree to speak their mind. So is it really true that wealth enables freedom and people to say what's on their mind? Or is it only unique people like Joe Lonsdale who speak their mind?
[00:14:02] Joe Lonsdale:
It's definitely not true that wealth perfectly enables freedom for sure. I think we've seen this with China. China has become a lot wealthier and it's not free. And I think this is why the principles of the founding of our country are so important. You do have to have these principles. You do have to understand human nature. You have to fight for checks on power. Now the point I was making is much more that in a world where there's an immense amount of wealth, it's very likely you conduct experiments in governments, in new cities, that you couldn't afford otherwise–that actually could lead to a lot of examples of freedom.
So I think overall, I'm optimistic that what that wealth can enable is us to experiment and to be able to prove freedom. Now the question you're getting at–are wealthy people in the world able to say what they believe? I actually think this is like one of the more interesting questions of our time in the sense that, yes, they actually can. But most of them are cowards, because our society has become a lot wimpier in the last 50, 60 years.
[00:14:54] So I think we have a lot of losers out there who are kind of like, basically, you know, as kids, like even when I was a kid, I guess it was somewhat rare–like you'd get in fistfights with other boys and you become friends afterwards. By the way, this is what happens when you get in fistfights with other boys.
[00:15:09] And it's actually a healthy thing. This is how little boys are supposed to work. And I think that culture just, it's a very beta culture where you don't fight. You're very afraid, you don't stand up for anything. You just try to go along to get along. There's lots of very positive things about feminine energy, but it's a very feminine culture for men, which is very unhealthy.
[00:15:31] And I think I was surrounded by cowards. Yeah. So it's kind of horrible. I mean, I love the fact that Elon speaks out. I'm speaking out. We're trying to model what masculine behavior is supposed to look like. And all the left says, “Oh, it’s toxic masculinity.” It's not toxic to speak out and have opinions and be strong.
[00:15:44] That's actually what men are supposed to do. If you're not doing it, you're not being a man.
[00:15:48] Michael Eisenberg:
And why do you think it happened? Why do people become reticent?
[00:15:51] Joe Lonsdale:
I think our culture went in a direction of very anti-masculine. It's very anti-bold.
Michael Eisenberg:
Why?
[00:16:00] Joe Lonsdale:
I think our universities were taken over by that energy. I think the culture's always swung different ways. I think you could say it was too toxic masculine a hundred, 150 years ago. You know, it's really funny if you read about the duels and the founding of our country where people are just like shooting each other for no reason–and it's like, guys, this is ridiculous. Like that's toxic masculine energy, when you're randomly having Aaron Burr shoot one of our founders and kill him for no good reason. So I think cultures swing in different directions. And our culture, I think we identified properly that women were being treated really unfairly.
[00:16:35] And that became a cause that rightly was taken up, not just by suffragettes, but by a lot of people in our society, to try to bring equality for women. And I think the pendulums swing, and it’s swung so far that it basically took away a lot of the masculine energy that makes our society healthy.
[00:16:50] Michael Eisenberg:
You've spoken in the past about the need for heroes, and clearly if I look behind you, you probably think that Madison, and Hamilton, and Jefferson are heroes, quite obviously. I imagine you can probably identify a lot with Alexander Hamilton based on the last–
[00:17:06] Joe Lonsdale:
He’s a little more a statist than I am, to be honest, but he's a very important man.
[00:17:10] Michael Eisenberg:
We'll come to that soon, on being a statist. Who should be the heroes today? I actually interviewed Cooperman recently, you know, who I think is just a hero of American capitalism for sure. Now, but who are the people you consider heroes? That people should be looking up to and that movies should be made about, because that's how we define heroes today.
[00:17:30] Joe Lonsdale:
Listen, I mean, Ken Langone, who I just interviewed, is a hero of mine.
[00:17:34] Michael Eisenberg:
Ken Langone, I said Cooper, you're right.
[00:17:36] Joe Lonsdale:
I think Ronald Reagan is definitely a hero of mine. The way he stood up and was bold, and went against things and was strong. I mean, it's trite, but I think Elon Musk is doing something that's really saving Western civilization, and of course that means there's people who are gonna be really angry at him about it, but to actually take X out of the control of the kind of government censorship complex, and out of the complex of everyone's thinking the same way, and to let it be free is such an important thing. And to build everything he's built, I think it's just amazing. I think there's lots of builders who are heroes in some sense, but I think builders who also get involved and are also bold in what they believe in. And listen, there's a lot of political leaders. I think no one's perfect, right? I understand a lot of arguments against Netanyahu, mistakes he made, all these types of things, but I mean, some of what he's done is also very impressive–to be that bold and be fighting for his people that hard, and to care that much over such a long time. It's a very hard thing to do. It doesn't mean that he's like a perfect guy, or that he's not wrong about things.
[00:18:36] So I think just strong people who fight for their countries and who stand up for what they believe in, and who are bold and who are talented. I mean, those are the people we should celebrate.
[00:18:46] Michael Eisenberg:
I sense, you know, I grew up in New York, moved to Israel. What I grew up on is what I would call ‘American exceptionalism.’
[00:18:54] This notion that America is an idea. It's not just a place, it's an idea. It's not just a place that gathers people–talented or less talented people–it's an idea that you can come to America and be exceptional. America is an exceptional country, ergo America's values are better than the world's values. I feel, for what it's worth, that in the notion of Abrahamic values, you have the same thing.
[00:19:16] There's Abraham chosen by God, so to speak. And, you know, the question I would ask you is, do you think that this idea of American exceptionalism has been eroded? And if so, how do you restore it? And is it even important today?
[00:19:30] Joe Lonsdale:
American values come from really three sources, right? So America is obviously a people we have to fight for, but it is also exceptional thanks to its founding principles.
[00:19:38] It's both. I think J.D. Vance makes a very important point that we have to be fighting for the people as well and not just the values. But the values I think to me come from three different traditions. They come from the classical tradition of virtue, right? And the four classical virtues, which is obviously courage, and wisdom, and temperance, and justice, which are all extremely important.
And there's a lot of tradition that comes from the Greco-Roman background that is just kind of core to who we are. My institute’s name is Cicero, an institute out of a lot of the principles that drove the Renaissance when they re-emerged. And then you have of course the Judeo Christian principles, which are extremely important, which you're talking about with the books behind you, and the Talmudic wisdom and the wisdom that really comes from our religion. And you obviously have the three virtues of faith, but then you also have all sorts of other wisdom that's critical that we learn from the Jewish and Christian traditions.
And without those, we don't have the West. And then you have, in a lot of ways, but a lot of people don't realize today–I think a lot of people are brought up in school today thinking science and religion are opposites. And obviously there's ways in which they don't always align, but I think it's very clear if you look at it, that Christianity did a lot of things to pave the way for the enlightenment. And it was only possible thanks to the Judeo Christian tradition. And then you have the enlightenment, you have enlightenment values and the enlightenment values that led, through John Locke, and through Adam Smith, and David Hume and all the rest of the Burkean values, to understanding of what it took, basically, to have a functional government with checked power, with the natural rights of man.
And those are absolutely critical, and that really was an amazing philosophical height that our civilization was able to reach, thanks to the combination, in the late 18th century, of these three different traditions, really expressed in an extraordinary way. And yes, with the heroes that stood up and founded it and fought for it. And there's just so much wisdom there that enabled America, and enabled, obviously, a lot of the West at the same time, that I think we're not taught today, that we're not as thankful for as we should be.
[00:21:39] And if we lose some of that, then we regress. And I think if you see a lot of politicians today, a lot of views today, a lot of things we fight over–they don't pay any heed to a lot of that wisdom. And yes, we regressed, and things are broken, and things are messy.
And it’s very easy for them to claim the world's very different today than it was back then. Of course the world's different, but human nature is not different. And the insights and the importance of checked power, and the importance of liberty, and the importance of all these things, and all the history that we've kind of built up to that point is critical. So it is very frustrating to me that we don't have some of those yet.
It’s definitely regressed in the sense that we're not teaching it in our schools. Like Thomas Jefferson, the number one reason he wanted the mass public to be educated is to understand the danger of despotism, and the core principles of our country, and we're not teaching it. So that is a problem.
[00:22:23] Michael Eisenberg:
You know, I asked Balaji, our mutual friend, what I should ask you on the podcast, and he said to ask a couple of questions. Number one: Why'd you invest in OpenGov, and why is OpenGov so important? I think it relates to this. And then I'll get to the second question, which I think also relates.
[00:22:43] Joe Lonsdale:
So OpenGov–I was a founder of OpenGov, founder and chairman. And the reason we created it is that we'd had a nonprofit, one of my early nonprofits. I'm always trying to start these things to fix problems. And I was living in California. It must've been, gosh, like 17 years ago now. And California kept raising taxes, and they had so many government employees.
[00:23:04] And I'm like, where is this money going? And what's happening? And we kind of mapped it all out with a nonprofit. We put all these states, different states’ budgets online for the first time in California, and we did regressions, right, and compared it. And you would see that California was actually pretty reasonable in some areas.
[00:23:18] And then in some areas they're spending like 50 percent more than you'd expect in that department, just based on the regression. And regressions are pretty accurate in these things, ‘cause you can see the size of the state. There's a number of factors, right. They usually predict spend. And it's really accurate for most states.
[00:23:30] And you're like, whoa, California is way off on a few areas. And each of these areas have really strong government unions, it turned out, special interests. And so this is really funny because I had these Stanford students doing the work, and they just published it under their own names. And these Stanford students got raked over the coals in the press, because these unions were not happy to be attacked.
[00:23:47] But it was fun because we got a ton of attention, and all these cities started writing to our nonprofit and being like, “Oh, this is great.” The city managers, “Can you do this for us too? We'd love to see what you think of our spending.” You know, that's cool. Send us your data. And they'd be like, “Oh, how do we send the data? Our IT services guy says it'll be a 50,000 or a hundred thousand dollar fee to get you all this data.”
And we're like, what is going on here? That's kind of ridiculous. And it turned out, most of them didn't even know how to compare themselves to the city next door. Like they just didn't, they couldn't get access to the data. They're running off of these literally black and green screens, or black and white screens. And this is now only 15 years ago, 2009. Okay, and the cloud is just starting. Like, wait a second, this is a mess.
So we realized that this nonprofit was not going to be able to change the world by itself, but that if we kind of basically hired some really strong engineers, built a tech-driven culture, a sales-driven culture, we might be able to go to thousands of cities and state agencies and actually fix them and see what's going on, that'll run their processes.
[00:24:41] And we learned a hell of a lot about GovTech. I don't need to go into all of it now, but, you know, it ended up being that we sold a company for 1.8 billion this year called OpenGov. You know, it helps thousands of governments, and it made a pretty big difference in the space. And so, you know, it turned out that the building part was actually what really helped. Building as a company was much more effective.
[00:25:00] Michael Eisenberg:
You know, what makes me chuckle is I actually was one of the first donors to the same project in Israel, Open Budget and Open Knesset. And it kind of, because we didn't make the transition to a–
Joe Lonsdale:
It dies off, it's just a non profit, right? It can't keep going.
Michael Eisenberg:
Totally. And Israel probably couldn't support a commercial company at the scale that you could support in the United States. No one would buy it for 1.8 billion shekels, even, forget about 1.8 billion dollars.
[00:25:24] Joe Lonsdale:
You know what's amazing? I met the guy, Nandan, who runs, oh gosh, it's the big, The Emphasis, I think it's called in India. And he did the same thing because he has extra Emphasis engineers and nothing to do, because they have so many of them there.
And in India it’s still a nonprofit, but the government's paying for it. But they did it there too. So I guess each of us in our own way have built these things for our countries. We probably should have combined forces at some point, it would have been more efficient–
[00:25:45] Michael Eisenberg:
But I'm fascinated by the way you tell the story, which is the same story as Palantir, which is just–organize the data. And I think, you know, one of the advantages, I keep saying this about one of our companies, Lemonade, versus the other insurance companies is getting AI right. Getting analysis right. It has a lot to do with getting your data organized, and so many of these legacy institutions can't get their data organized.
[00:26:04] Joe Lonsdale:
Yeah. We talked about it in the course of dynamic ontologies, where you're mapping out, cause you'll have, I mean, the CIA and FBI are actually each hundreds of different departments and each had different schemas. And so you're mapping it out and tying it to each other, but you're not just mapping the data, you're mapping the workflows as well, which I think is a really important point–which is, you have all this data and now you have to understand what are the workflows, and how is the data used. And if you can map out both the data to talk to each other, and the workflows, and you understand it, then all of a sudden there's like all these cool things you do with it. That's my framing.
[00:26:31] Michael Eisenberg:
So going back to Balaji's question, he says, “Joe's a pragmatic, libertarian-ish conservative, similar values to me and you,” he says, “free speech, free markets, but also strong on defense. He's more of a ‘minarchist’” - I'm not even sure what that means–“or a good government conservative rather than an anarchist.”
[00:26:51] Joe Lonsdale:
I think a minarchist might mean a minimum-sized government. Is that what he's going for?
[00:26:54] Michael Eisenberg:
I don't know. So, you audited the government with OpenGov, that was oppositional, but then it became a product for governments to use, and therefore it's cooperative. So, I think what Balaji is trying to figure out, and this may be the comment you make about a minarchist, which is a minimal government guy, is where do you stand in this political philosophy question of are you libertarian, are you small government conservative–a minarchist as he calls it–or somewhere else?
[00:27:22] Joe Lonsdale:
You know, I think a government's job is to serve the people. And so I'm not opposed within the set of, you know, there are principles and there's ethics around what government can and can't do. But within those constraints, it needs to fight really hard for whatever's best overall for its population.
[00:27:39] And I think that's where the conservative movement's going. And I think there's nothing that's necessarily wrong about that as long as it's constrained to the proper principles. That said, if you go back to like, we're talking about this in the sense of the American founding, a sense of those things, like, yeah, the government should be as small as possible, but then also as competent as possible. Because if it's going to be doing things in our society, and by the way, it's doing a lot more in our society than it ever was going to in the past.
And if it's doing that, and it's incompetent, that's bad for everyone. And this is what drives me crazy, Michael, is that, you know, even the commies back in the fifties and sixties, they wanted government to be smart. I was hanging out with Clarence Jones the other day. He's 93 and he was like the smartest lawyer. He's an African American, smartest lawyer on Martin Luther King Junior's team. He was Martin Luther King Junior's right hand. And he and I do not align on politics, although he's also annoyed at the modern woke stuff, but we don't align. He was basically a communist sympathizer, you know, in the fifties and sixties, but an amazing man, a leader of the civil rights movement.
[00:28:39] But he's all about Black excellence. He's all about excellence in general. He wants things to be smart and competent. And we desperately need that in our government these days. Like what is the big gap in the U.S.? There's about nine million workers paid for by D.C. It's actually about nine million. Three million or so are paid directly as bureaucrats in D.C. About 4.2 are paid for with contractors, and then another kind of 1.8, give or take, are paid for by D.C. that exists at the state level. So it's nine million workers, and it used to be government workers. Did you know what the Pendleton Act was? Have you heard about this in 1883?
Michael Eisenberg:
No.
[00:29:18] Joe Lonsdale:
So basically governments tend to expand a lot in war, right? In wars or crises. So Civil War, Abraham Lincoln created all sorts of new departments. If you track it out for all government, all of a sudden it starts growing a lot bigger. And it becomes this mess where everyone's just appointing their friends and then getting their friends rich to get elected, and everyone on both sides is like, okay, this is intolerable. We gotta fix this. It's like a bunch of cronies who are unqualified just running around D.C. throwing around money. And so in 1883, you pass the Pendleton Act, and we say, listen, to get to be in charge of any of these things in government or even to like work there, you have to pass a test.
[00:29:46] And the test is harder to be in charge, but it's harder to work there, too. And this test iterates over the years. But up until the late 1970s, there's these pretty hard tests. And there's different exams. And, you know, actually it's funny that even in the 1970s, Americans are just disgusted, because after World War II, government also grew a lot bigger.
[00:30:02] And like, okay, we have to reform it again. It's a total mess. Tons of paperwork everywhere. Jimmy Carter actually gets the nomination, because he in Georgia took hundreds of departments down to only 22. So even he has some track record of doing this. And unfortunately, because the government units have become so strong, they put poison pills into all his legislation and he really can't reform it in the late seventies.
[00:30:21] So even he was trying to reform it. And then to make matters worse, the leftist activist courts in the late seventies, they say, “You know what? These tests are letting more white people in than black people, because more black people scores are lower. So we're going to get rid of them. These tests have quote unquote “disparate impact.’” And so this is basically what we call proto DEI, you know, DEI today, you have a proto pharma DEI starting about 45 years ago. And the Reagan administration settles it, knowing they'll lose the courts in ‘81, and the tests are gone. So these tests we had for 98 years, like when we went to the moon, we were doing all these things.
[00:30:51] We used to have somewhat competent people in the government. I'm not saying the government's great, but at least it was smart people. Now they're hiring millions more people and none of them are passing tests. And this, by the way, is not against like the Hispanic and black people that didn't do as well.
[00:31:04] This is also against the white people who couldn't pass the test. There's tons of white people working for government today that never would have been there, but we're not testing them anymore. And so you basically have this just viciously incompetent government that's getting worse and worse.
And what do you do, Michael, if you're not accountable, by the way? You can't fire these people anymore, either. That's the other thing I didn't say. You're not accountable. You're not competent. Well, you're going to spend all of your time virtue signaling, because that's the only other thing you could do.
You're not being held to any kind of account for profit or anything. So of course they're just like woke as hell, and it's a total mess. And so I mean, I don't know exactly what principles that is. I guess that's on the right, but I hope smart people on the left would agree with me.
[00:31:41] Like we don't want a giant, incompetent, unaccountable government. That's just retarded.
[00:31:46] Michael Eisenberg:
I have a lot of sympathy for that perspective, as I’ll get into a second. David Fisher, the former Chief Revenue Officer at Facebook and at Google, told my daughter over a Shabbat dinner, when she asked him for some advice, he said, “Just be competent. 98 percent of the people aren't, especially when they don't have to be.”
Joe Lonsdale:
Especially when they don’t have to be, right? It's like, it's terrible.
Michael Eisenberg:
So, you know, I'll challenge kind of a notion that I think you referred to, or maybe amplify it. I've been making the argument in Israel because, you know, we have the same people who are soldiers, and reserves, and the same people kind of contributing to the economy, where a lot of Western countries have gone sideways, the United States included, is it’s focused on the periphery–that's part of the DEI thing–and it ceased to invest in the excellence and the growth and the competence of the core of its society, irrespective of obviously gender, skin color, like nobody cares. We just want the people who are true to the ideals of the country and those who want to be competent and be in service, you know, to speak about the virtues that you talked about earlier.
[00:32:51] But instead of what we've got is, we've gone to the fringes, so much so to use the obvious Olympic parallel right now, or the swimming parallel–we have men beating up on women who spent, you know, 200 years trying to get equal rights for 50 percent of the population. So we've got these fringes that are really impacting the core, because they've been amplified. And that feels like we've come off the rails, and government should be investing in the core of the population, not the fringes. Do you agree with that?
[00:33:16] Joe Lonsdale:
Yeah. I mean, but why are they focused on the fringes? Right? I think you're right. But why are they? It's a couple of different things, but I think it's because they don't want an environment of accountability. They don't want an environment of competence and of merit. And if you don't have that, you have to focus on something else instead, right? And it turns out you can't, organizations really can't have multiple gods.
[00:33:38] It doesn't work that way. If you're going to be telematic about it, it's not possible to practically have multiple. You end up with kind of a focus or not. And so people pretend, “Oh yeah, we're going to have merit, but we're also going to do this, we're also going to do that.”
And then you end up prioritizing something else that just breaks the core, and it's, I mean, some people say the Marxists are doing it on purpose, where like Marxists want things to be broken in order to kind of have society be transformed radically, because you have to first break it before you can transform it. So there probably are some of them that are doing it for that purpose.
But I think it's also just this thing where like the system can't work if certain people are trying to do all these things at once.
[00:34:20] Michael Eisenberg:
So you left San Francisco where you were living and moved to Austin. Why'd you leave? Did it have anything to do with this?
[00:34:31] Joe Lonsdale:
Yeah, it's probably tied to the quote unquote, ‘woke mind virus’ a little bit. It’s a lot of practical things in my life, right? I wrote a piece in the Wall Street Journal about it when I did it. It's like all the people we work with who aren't rich have to commute an hour and a half if they want to come to our house, you know, our office in San Francisco has gotten way too expensive for everyone who's not wealthy.
[00:34:51] The schools are taken over by crazy people. They're yelling at kids about gender at the private schools nearby. And you have kids pretending to be cats, scratching people. I mean, the whole thing is just, it's insane. Or you can't even believe it. You know, I hired a lot of people, I build a lot of companies.
So I've built obviously three big defense companies. I built big things in finance and healthcare, and we're doing a lot of other stuff. And when we want to hire people, their spouses will basically resent me, because when we hire them to the Bay area, even if they're making a few hundred thousand dollars, they're still like barely getting along there, you know, it’s so expensive. And so it's not a fun place to bring people.
So we were actually hiring, we hired over a thousand people already in Austin. It's one of the cities where we were scaling our companies even before I moved here. And so this was a great place.
[00:35:31] We love to build and we love to expand our companies too. And, you know, I'll be honest, like it's not like the number one reason, but my wife was seeing all this money we're making, and it's like, “Joe, we both agree, Sacramento is filled with kind of like really crazy evil people who are using their money on special interests and horrible things. It's not ethical to feed this beast, right?” And so I think she's right. But there's a lot of different reasons. But, you know, at the end of the day, Michael, I want to live in a place where I'm proud of it and I'm fighting for it. And I'm contributing to it.
[00:36:02] I'm able to talk to the governor here. I'm able to fight for the values I care about. I'm able to admire what my state's doing. And that's really important to me.
[00:36:10] Michael Eisenberg:
Why would somebody less influential than Joe Lonsdale want to start his company in Austin versus San Francisco?
[00:36:16] Joe Lonsdale:
I think there's a few different reasons. One, if you're raising a family, you don't want your kids to be like weird communist. They try to take them away from you if you stop them from transing them. I think that's like a big deal, if I'm going to be extreme about it. Two is like, you're unethically feeding money to something that's against your values and people who are horrible.
[00:36:35] Three is like, it is more dangerous in San Francisco. The quality of life is lower. So what's going on there? There's like random people rampaging malls and stealing things in front of you and shutting down stores. I think it's a mess. And I think Austin has lots of great talent.
[00:36:50] It has a lot of top entrepreneurs here. It's people like Elon Musk, and myself, and dozens of others who've built big companies, Michael Dell, Joe Lamont, just amazing people, amazing new things being fought for society here. And just to be part of like a dynamic, healthy ecosystem, as opposed to be part of something that's, that's broken and decaying is an exciting thing.
[00:37:11] Michael Eisenberg:
I feel the same way about Israel. I get excited every day to come build the country. And I think it's a place for builders and a place for people who are optimistic. You need to be with Iran threatening drones and rockets. But I feel the same way. You know, you mentioned your family and a place to raise kids.
[00:37:25] So Drew Otting, who is your partner, and we both know, he had a great question to ask you. He said, “you just had your fifth child, Mazel Tov.”
Joe Lonsdale:
Thank you.
Michael Eisenberg:
And he said, “You added a son to your tribe of four daughters.”
Joe Lonsdale:
That's right.
Michael Eisenberg:
But you grew up with only brothers. I did not know that about you.
[00:37:44] Joe Lonsdale:
I'm one of three boys. I'm the oldest. So it's very interesting having daughters.
[00:37:47] Michael Eisenberg:
So how does having all these women around you changed your outlook on the world, on business, and other things?
[00:37:55] Joe Lonsdale:
Well, my daughters are amazing. I'm very lucky. I definitely feel I understand women at least a little bit better now than I did before, because I didn't understand them at all before. I can see how men and women definitely come from totally different perspectives, and a lot of different problems, and how important is like–some of these little human and emotional touches are just so important to little girls, in a way that I think a little boy would not even notice if you looked at him or not.
When you came into the room with the little girl, it's like, that's like her whole thing. Like, is Daddy paying attention to me? And she's gonna get her confidence from some of these things. It's just interesting ,male and female brains are clearly totally different. So it's very useful to understand that in terms of interacting with the rest of the world, and listen–I think both feminine and masculine energy are just critical to have a healthy world. And if you have too little or too much or they're the wrong parts, then it makes society unhealthy. So I think we need a healthy feminine and a healthy masculine and both sides need to be fighting for the other side.
[00:38:58] And so I think I understand a little bit better, hopefully, how to contribute towards that and how to understand the beautiful feminine energy of lots of little girls.
[00:39:05] Michael Eisenberg:
Has it impacted your investing at all?
[00:39:09] Joe Lonsdale:
You know, I've worked with some brilliant women. I still do. And we've had amazing female CEOs in the past who have been very successful. And it made me understand certain things a little bit better, to make myself like better able to interact with people or something like that, thanks to having lots of girls around me, but I'm not sure it's changed the core investing frameworks or anything.
[00:39:34] Michael Eisenberg:
So you're building a university, you started this organization Cicero, and you're still investing out of 8VC and creating companies. What are some of the areas that you've invested in, call it in the last 12 months? And has anything changed about your investment strategy over the last 12 months?
[00:39:50] Joe Lonsdale:
Well, you know, we've been doing a little more defense than usual. That's my background. So doubling down on both Chaos, and Saronic, and another round of Epirus now. Those are three companies in defense that are very important. I could talk about that if you're interested.
Michael Eisenberg:
Yeah, do so.
Joe Lonsdale:
So the framework, of course, is that Palantir was the first new defense prime in a long time, followed by SpaceX, followed by Anduril, which we backed in the first couple rounds.
[00:40:13] Anduril, everyone I think knows who's in this world, is started by three of my former colleagues from Palantir, with Palmer Luckey and doing extremely well. Just raised 1.5 billion at 14 billion post, and have all sorts of different types of leadership, things that are breaking through and helping the U.S. military and allies, and delivering things on time ahead of budget, etc.
And so those three companies just kind of blew the world away and like, have changed the perspective of the generals and admirals to say, “Wait a second, these new companies are just so much better than anything that primes are doing in a bunch of areas, like we need to work with newer companies.”
[00:40:44] And so even today, unfortunately, you're still spending like 30 times more on the old companies than anything new. I think it's like about a percent on new companies, about 30 percent on the primes for the whole defense budget. But you are seeing now suddenly a [00:41:00] lot of generals are almost like, “Wait a second. What else is the top new company we can work with?”
And so there's a whole new generation of maybe like, five, six, seven, eight new top companies under these three that are coming up really fast. One of them we started right after Anduril was called Epirus. It's the top HPM in the world.
[00:41:17] So I think Israel has the best lasers in the world right now. It's shooting down drones. I was with the defense minister last year, was very proud of how much money he saved for every laser shot, which I thought was very funny. It's just stereotypical my mother, who's Jewish, would always talk about saving money, but it's just true.
It's amazing how you save like a million dollars with a laser. And we have something related to that, which is that we have a high-power microwave, EMP blast that has a very long range, take out swarms of drones, fries electronics. We figured out how to use AI chips to amplify things and, you know, advanced electronic warfare we've been developing in the U.S., like modified by the new AI stuff, can, is just by far the best. And we can put it on stuff, and turn things off from far away. So that's a really important company changing the landscape of battle.
There's actually like a Moore's law for the power of the GaN emitters. And I think we're gonna be able to turn stuff off from tens and tens of miles away, pretty soon, dozens of miles away, which actually really changes warfare. So that's very interesting. Another one that just raised a big round that we've been talking a lot about is Saronic.
Saronic is teaching the U.S. Navy how to use AI, and we're going to be producing hundreds and then thousands of small weaponized vessels. It turns out that, you know, if China could build 200 times more ships than us, we have to have a response that's not just like–we're not gonna be able to build enough big ships, but it turns out that lots of different types of different small ships that coordinate in intelligent ways actually is a much better way to fight.
[00:42:38] It's much harder to take these out at scale. It's much cheaper to build a better fighting force this way. So we're completely transforming and augmenting the Navy with that. And some, some of the leading animals have been great. So that's going really fast. It's going to totally change things there.
[00:42:51] Hopefully partner with our allies as well. And then finally, just as another mention is Chaos. There's a lot of the best guys I've worked with. Some really big breakthroughs on radar could detect things with as much–there's giant sat damn devices right now, take up the size of a whole large room.
[00:43:04] And we could do things that are, you know, basically like a foot across. Thanks to how these chips can now sync, right, on like sub picosecond timescales to detect, you know, things in radar that previously you would have had a giant machine where you have a tiny thing with antennas and it's much cheaper.
[00:43:19] So I think there's all sorts of new technologies like that, that got to transform how our radar works, which is an area that we spend, you know, tens of hundreds of billions on a year. So really cool breakthroughs across the board with applying modern technologies. And, you know, we'll be working with the primes still in some ways, but we're also gonna be replacing a lot of their systems as well, which is very important.
[00:43:38] Michael Eisenberg:
What's the role, if you think about the big primes right now, General Dynamic or Lockheed Martin or whoever it is, in 20 years?
Joe Lonsdale:
You know, I think that they do a great job. They're partnering with the new upcoming technologies. They still have a lot of advantages and lobbying. They have a lot of advantages integrating, if one of them were to become more friendly to new technologies and to be more open that, okay, we're not going to be the best in the world, necessarily, at software.
[00:44:03] For me, Lockheed still can't admit it's not as good as Palantir software, just even though it's obvious. It's just, it's not able to fundamentally. It's like a flawed thing. We know people on the board there that are just kind of like at their wits end with their company. Cause they're like, obviously we're not as good.
[00:44:14] We have to just let Palantir on this part. And the people on the side just don't understand software. They're not from that world. They come up in a generation where Lockheed was ahead in that. And it's just not even close anymore. And so they're very confused about it, and they're going to have a lot of trouble until they can basically say, “Okay, there's some things that we're the best at, around doing these games in DC, around putting these things together.”
[00:44:37] Maybe there's one or two areas where they do sell the best technology, and they combine those with the new things and be a top integrator. I really hope one of like Lockheed or Raytheon, or Northrop or others start to realize it's not about trying to monopolize things anymore.
[00:44:52] It's about working with the new guys. And they're making some outreach. There's some things that are positive there, but it's still just like a very broken culture, and these big old companies are frankly very much like the government themselves. We just talked about government incompetence and you see a lot of that same broken culture in these big primes.
[00:45:07] And so hopefully a few, well, one of them fails. That'd be great. ‘Cause then the other ones would probably wake up, you know, so we'll see what happens.
[00:45:14] Michael Eisenberg:
It feels to me also that we have a couple of primes in Israel, right? We have Rafael and Elbit over here. It feels like they're all very long in the tooth, and there hasn't been the disruption in primes that you've had, for example, in Silicon Valley, and in other places, and where people were forced to compete. And so, for example, the U.S. government, the Israeli government is spending way too much money with these people, and it's taking way too long to deliver in a world where, we're in a kinetic world right now that's actually moving really quickly, and we're at a competitive disadvantage compared to what these people have been working on, whether it's China working on more ships, or Iran working on more drones–everything needs to get faster.
How would you close this loop faster? Go ahead.
[00:45:53] Joe Lonsdale:
China and Iran of course have their problems, so we definitely need to see them as serious competitors. But fortunately, they also have lots of similar corruption and competition and messes. But no, I think the thing Israel and U.S. should be doing more is, we should have open competitions, whether it's internally or whether it's with our allies as well, and then let the people who win the competitions get the contracts, you know?
[00:46:11] So that's how Epirus kind of finally broke in. There's this thing in the desert where they have hardened drones coming at you from far away. And companies like L3 and Raytheon and Northrop had gotten billions of dollars of contracts, and they had their systems, and we were allowed to set up a system next to them and they kind of mocked us and made fun of us.
[00:46:25] Like, who are you guys? You're not part of this thing. And you haven't spent billions of dollars on it. I think we’d spent $30 million at that point. And for the same size, same power, we shot something down nine and a half times farther away than any of those guys. It's like, it's not even two X, it's like nine and a half X, right? It's like, it's a big freaking deal. And so we finally got to break in. But we need more contests like that, because otherwise the big guys just always win, because they’re always going to lobby more and be friends with the people already.
[00:46:51] Michael Eisenberg:
How do you shorten the cycles and get more context like that? Cause everything's got to get faster. That's very clear.
[00:46:56] Joe Lonsdale:
A hundred percent. That's what, procurement has to set targets, has to talk to companies, has to bring people in. And you know, I think DIU is doing a really good job of this. There's a guy named Doug Beck who's from Starbucks and Apple, and just like really good innovative guy who'd been in the Naval Reserves, and he's gone in now and he runs the Defense Innovation Unit and it's interesting–the prime lobbyists try to cut the funding massively to the DIU and the Senate a couple years ago because they saw this coming.
[00:47:21] And as a kind of an example of the fact that we're no longer the little kids we were 15 years ago when we were trying to build these goddamn companies is, I went and talked to Senator Cornyn in Texas. We introduced Doug to a bunch of other senators that he knew, that people trusted him, and others helped as well, obviously.
[00:47:38] And we protected it and we kept the funding for innovation. And so, you know, we're fighting back now. Like you saw Andreessen Horwitz–I've been fighting in D.C. for 20 years. We know everyone, we have people on the ground–we have to, it's our job. We have to protect ourselves.
[00:47:50] And Andreessen Horowitz for the first time in their American Dynamism thesis just put, I think, $75 million into fighting, with, you know, lobbying for the new as opposed to the legacy guys. This is wonderful for our country. They're a competitor of mine, but thank goodness there's more people like them who are also investing in companies I'm building.
They're big investors in Saronic, and they're on the hill fighting to make sure we have a fair chance of competition. We have these faster cycles you’re saying, so, you know, as these new guys break in and grow, we're hiring more people around us, and we're scaling. And listen, there's some things where we are going to work with, with Lockheed and Raytheon and Northrop, because there are some things where our interests are aligned to be functional, but there's a lot of things where we're going to outcompete them and they can't stop us anymore.
[00:48:27] Michael Eisenberg:
What's your best advice for a defense or a government procurement organization as to how to hasten cycles, how to make things go faster? Because making them go faster is what changes the pace and the clock, and gets everything rolling there.
[00:48:39] Joe Lonsdale:
You need competition and accountability.
Michael Eisenberg:
Be specific.
Joe Lonsdale:
So if you really want to do this right, the government should not be a monopsony. There should not be only one buyer. You should have two buyers, you should have three buyers, and you should make them compete.
[00:48:51] And then you should replace the buyer that's doing worse and is spending more for less output. Like, this is one of the key things we go back to, like, how America works. Why does a free society work? It's an open competition of ideas. It's not that the Soviet guy on top decides what business is going to be best, and that business is going to run–people tend to think the world works through like these ESG frameworks where you score everything, and you have bureaucracy deciding about what–no, no, no, it's not how it works at all.
[00:49:19] It's all bottom up. Like if you want the government to be more efficient, ironically, it's not one thing. It should be multiple things competing. And we do that a little bit with different departments, but even within the Navy, even within the army, you should have two or three buyers, and you should be testing and trying and competing. And we have enough money to do it.
[00:49:35] And the problem is, they're desperately afraid of accountability, Michael. These people in government do not want anyone to be fired. They don't want anyone to be held accountable. They don't want anyone, not even to be fired, but they don't want anyone to be shown to have done worse than someone else.
[00:49:46] Like they love it when there's no way to measure who's worse or who's better. And that's terrible. That's it.
[00:49:52] Michael Eisenberg:
But isn’t part of the problem–like we don't give them margin for error, right? As soon as a politician or a bureaucrat makes a mistake, the press is all over them, it's blown out of proportion. So, you know, in our own startup companies, we have people make mistakes. We hold them accountable. And they have to improve.
[00:50:06] Joe Lonsdale:
I’ve made so many mistakes. I've started six unicorns, you know, and I've made a lot of other mistakes. I've built something with Lady Gaga that blew up. I've done all sorts of things that haven't worked as well. That's the whole point, is you have to be out there on the field, trying and iterating and learning and doing your best.
[00:50:19] And you're right. We need frameworks where bureaucrats could try things without getting fired. But we need accountability, and we need competition. And those are the basic frameworks that work in society. And right now, instead, our government, our DOD looks a lot more like a Soviet apparatus that was designed in the 1960s. You know, in the 1960s, you read the economic textbooks–they all assume the Soviet Union was going to pass the U.S. in the next 20 years. Like this was a time that, everyone's very status, very top down. And that's the MacArthur design. That's the design of our DOD, is a top down framework, and we need to fix it.
[00:50:51] Michael Eisenberg:
I highly recommend the book by my friend Dima Adamski on the culture of innovation and the Russian American and Israeli militaries. It's pretty interesting. It's a dense and heavy read, but I recommend it. What else are you investing in besides defense? Big defense thesis–what are the other areas that you're saying, okay, this is where we're headed?
[00:51:07] Joe Lonsdale:
Yeah, sure. We've built companies and done a lot in infrastructure for bio, which is very, very fun. I think there's all sorts of breakthroughs that are hopefully going to make us all live a lot longer if we don't kill each other. This is one of the reasons defense is so important, to stop wars. Healthcare in America is a disaster. It's about 20 percent of our GDP. The market's not functioning in all sorts of ways. We have a lot of stuff we're doing there to try to re-put in markets, re-put in frameworks of, you know, better services, aligning things.
[00:51:32] Like for example, I'll give you one investment we have, it kind of teaches how this stuff works. So Medicare and Medicaid are kind of a mess in America. These are the ways the government takes care of people. If you look at Medicaid, it's kind of like people who are much older in states, but also people who are poor, or homeless, or on drugs or whatever.
[00:51:48] And it turns out the 5 percent of people on Medicaid who are worst off–these are people very often with chronic disease, very often mentally ill, homeless, drugs, et cetera–that 5 percent of Medicaid is about 45 percent of the costs. So we're talking about like this 5 percent of people in Medicaid nationwide, that are like $800, $900 billion dollars a year.
[00:52:06] Massive cost center for the U.S. And of course you want to take care of these people. They're in a horrible place in life. I think it's very ethical to take care of them. But the question is like, what's the framework to take care of them correctly? And so one of our companies is now in multiple states.
[00:52:19] And what we did is we say–”Listen, these people who are terribly off,” to go to the state and say–and the state has a payer they're partnering with, we say, “You're going to spend 43,000 say on average on each of these people in the state for the next year, next three years, per year. Give them to us, pay us $35,000 and we'll have better outcomes.
[00:52:39] We'll make sure we go to each one of them and do all these different things, treat them better, and we'll take them off your hands. And it turns out that we can hire people. Basically you have a doctor on top of the team, you have a few nurses on the doctor's team, and each nurse has like 10 people who are trained, who are not as expensive, and you go and you actually interact with these people, you help them get their medications, help them get their services, help them with whatever they need.
[00:53:01] They can go to the gym if it's a freezing cold night and they're homeless, rather than the emergency room, help them find a motel. We'll cover the motel cost, because otherwise we're paying for the $2000 emergency room, whatever it is. And it turns out we can have these people have better outcomes and cut the costs so that we're actually making money, even though we're saving the state tons of money.
[00:53:17] So we're effectively saving the government, you know, tens of billions of dollars, and practically helping these people. So there's things like that, that just realign incentives that we need a lot more of that right now in our healthcare system.
[00:53:27] Michael Eisenberg:
That sounds like competence arbitrage.
[00:53:28] Joe Lonsdale:
It is, right? It's like realigning incentives. It's just amazing how much stuff, Michael, is broken in the world where you just need to have competent people come in and iterate. And like, I didn't start this one. I'm a proud early investor with Sebastian who runs our healthcare team, but there's so many things like that in healthcare where there's confidence arbitrage.
[00:53:46] It's like, go handle certain patients better. And then finally, let me give you our biggest theme right now, our biggest theme, which maybe others are doing too, is what we call AI services. So our fund–like me as an investor, we were kind of known originally for all the SaaS stuff we did.
[00:54:04] ‘Cause I started, after Palantir, Adapar and OpenGov, and backed early like Blend, and all these other things that are big SaaS companies. A lot of public SaaS companies, a lot of our huge private SaaS companies. And that was really a way from 2009 to about 2021, ‘22. And our view of this is, you want to back really top talent doing things that are newly possible.
[00:54:25] And when we were backing these SaaS companies, most of the time their competition was something not just from pre-cloud or pre internet. So you're basically, you can say, “Joe, oh, you're so smart. You got all these things to work from like 2013, 14, 15.” And it really though, it's like, not that smart. It's like really smart tech guys who are kind of beating up on legacy companies that obviously need to be replaced. And so we just did this like dozens and dozens of times. And that was great. And fast forward to 2024, that playbook is probably not going to work right now. Cause if you show me a SaaS company, good chance you're competing against a post-cloud company.
[00:54:56] ‘Cause the spaces have all been taken up. We've done all of them. They're all there. And so, okay, what do you do now? And this AI thing is really interesting because in a way, what AI is doing, if you want to look at this in a kind of like obnoxious, like capitalist kind of way is, it's opening up other parts of the economy that are pre-internet that we can beat up on again. Or fix, if you want to be positive, right?
Michael Eisenberg:
I agree.
Joe Lonsdale:
So, yeah. So we have all these companies that are, you know, 40, 50, 60, 70 years old doing certain types of services, logistics billing, and healthcare billing, you know, insurance TPA, back office work, like trust estate management, whatever the hell it is that’s been around since 1970 or 80 or 50. And, and we're able to say, “Wait a second, we could do this better at a fraction of the cost.” And so there's two ways. One is just to do it better, and grow organically. And two is to start doing it better, growing organically, and then start buying the old ones, because the old ones are just boring companies that are trading at maybe eight times cashflow.
[00:55:50] And suddenly you could triple the cashflow after you buy it. And so we're doing this at scale now in a bunch of areas. So just like we have this big SaaS wave, and we now have this big AI services wave. And this is like, this is really my day job, is there's doing that at scale and lots of different ways, and figuring it out, and I'm trying to publish some pieces on it.
[00:56:06] It's really interesting how the Palantir ontology stuff works out here. Cause you really have to map out the services and workflows and the percent profits and which areas you can go after. So I'm pretty obsessed with this. I'm, if I'm lucky, I'll be able to do it, you know, a couple dozen times well over the next five years. So I think it's a big theme.
[00:56:21] Michael Eisenberg:
Owning the customer is critical in these things. What I've pointed out to a bunch of these guys doing this is that you've got–anyone can get the AI. Not everyone can map the processes and map the data, but the key differentiator is going to be who owns the customer. And that's why buying the company is so interesting.
[00:56:34] Joe Lonsdale:
A hundred percent. And there are places where we've surprised ourselves with organic growth because we're so much better at it than the old guys that we haven't had to buy it, but in general, I think the organic side is underestimated. And it's like four and a half trillion dollars of wages and services in the U.S. And our estimates is about a third of that's addressable. So, I mean, this is just a giant wave for the next decade. And people are going to be like, “Oh, you're going to replace jobs.” I mean, if we are successful at this, the productivity boom to the world, especially to the U.S, it's just so massive.
[00:57:05] The U.S. will be a much wealthier country if this works over the next decade. And I think it will. So, I mean, this could actually get us out of our debt problems, which is really funny because I think it's like, if you look at our debt deficit problem, it is a black pill. I mean, it's a mess getting out of that for the world. This actually could solve it. So it's such a positive thing. So we're gonna do our best on it.
[00:57:24] Michael Eisenberg:
I asked Jamie Dimon recently whether he thought America was bankrupt. He said, “No, we have, like 14 trillion of actual assets against the debt. So I don't think we're bankrupt, but boy, are we headed to some insolvency, potentially.”
[00:57:36] Joe Lonsdale:
We gotta stop spending money like drunken sailors, Michael! It's embarrassing. There's like tens of thousands of NGOs that are corrupt, sucking at the teat, and we're just throwing money around the world and throwing money at like random nonsense. It just, the more you look at the budget, the more it's infuriating. So yeah, we gotta turn this down.
[00:57:52] Michael Eisenberg: So last couple of questions. So in a recent interview on CNBC, you said that there's growing frustration among the tech industry about the government and politics holding back innovation. How is politics holding back innovation? And do you think, you know, I think you've been an open supporter of former president Trump–do you think he can change that actually?
[00:58:13] Joe Lonsdale:
You know, we’re in an interesting time, obviously. And I don't think either presidential candidate is perfect. I am supporting the right, and supporting Donald Trump versus Biden, and now versus Kamala. I think she's actually worse. Part of the reason we started supporting him is ‘cause we're so afraid of her, seeing what she did to California and what that brand of politics did to California.
But you know, in general, a lot of people in tech were pretty apolitical for a long time. I think when you're building on the internet, and you're building in these like cyber worlds, you kind of could just like abstract away government. And government, you know, it's there, but it's not really in your business.
It doesn't really understand what you're doing. It's not bothering you. It's mostly cheering you on, and even in some cases giving you subsidies. So it's like basically the tech world was like, “Yeah, government's fine. It's great.” They're all moderate Democrats. Let's just be nice to everyone and treat people fairly.
[00:59:02] And I guess that's fair. I mean, I think it's very reasonable for them to have been that way. And then what's happening is that suddenly the parts of tech that are possible, that are helping grow productivity, they're fixing things, they’re interacting with the real world a lot more now–we're doing things in finance, we're doing things in the Feds, we're doing things to fix healthcare–in every one of these areas, you start to run up against the SEC, the FTC, you know, the DOJ, the healthcare regulators are like–wait a second, this is like, all these people who are pretty dumb are putting in stupid rules that are stopping me from fixing these things, and it's like, obviously pretty corrupt.
[00:59:41] And it's incompetent, and you're like, this doesn't make any sense. And a lot of these people are running based on not liking me because somehow they're demonizing me for my success now, and I'm trying to use this to fix things. So all these people are like, “What's going on here? Like, we're smart people getting other smart people to solve problems in these areas.
[00:59:58] And the government's making it impossible. And the regulators are making it impossible. And they're doing it in unfair and weaponized ways.” Like, okay, this is obviously wrong. And it started when they really came after Elon in ways that were obviously weaponized. And it's not like this was all of a sudden new. Like the last five or six years, but one of my friends, I'm not going to say who, he helped start PayPal, you can guess one of the many names–which has a big fintech company, and the fintech company is drawing fast, and they give loans, and they have to deal with Elizabeth Warren CFPB. And he's terrified to say anything bad about them, because he says they basically just, you know, they’re like the mafia. They're going to come and they're going to attack me.
[01:00:36] And obviously their rules are stupid. Obviously the rules make no sense. Like any loan you give has to have disparate impact, based on the fact that Hispanics, and Asians, and white and black people are not the same. So you're going to have disparate impact, but it’s illegal to have disparate impact. But it's impossible not to mathematically.
[01:00:52] So these people are just like retarded. And so you start having things like this, where you're dealing with just retarded government who break things. And it's like, what do you do? And like a lot of them, their answer is just “shut up and don't say anything, because they're going to come after you.”
[01:01:03] But when you hear this enough times and you have dozens of examples of these broken things, you finally start getting people to say, “Wait a second, this is a problem. We can't have these people holding back our country.”
[01:01:13] Michael Eisenberg:
What do you think about Europe in this context? I was just on Harry Stebbings's podcast. I told him if I was an entrepreneur, I would never start a company in Europe these days. I think that EU regulators are just too tight. Everything you need to do today, because it involves AI, because it involves disrupting services, is just going to disrupt them.
[01:01:29] Joe Lonsdale:
You’re just going to be stopped by them. You're going to be demonized by them. You're going to be hated by them. You can virtual signal for long enough, but they're going to come after you. No, Paypal was almost killed by regulators. If Paypal was killed by regulators, Eliot Spitzer came within days of killing Paypal before it was bought by eBay.
[01:01:43] He was really close. He tried really hard. Like that would have killed SpaceX and Tesla. I wouldn't have been able to do Palantir, because Thiel wouldn't have had the money to back us early on. Like this whole giant entrepreneurial ecosystem that emerged out of these companies would not exist in the U.S. if the regulators had been a little bit stronger.
[01:01:58] Like people don't realize how freaking dangerous these things are in Europe. Just have like a little bit stronger, a little bit stupider, a little bit more broken regulators and boom, there go like hundreds of companies that would have existed in Europe that don't now, because they were just able to kill off some of these things that they weren't really not able to kill off in the U.S. This is like, this is a serious thing for civilization.
[01:02:18] Michael Eisenberg:
I think it's absolutely critical and people don’t understand this, so I want to repeat it, which is–what you just said was one guy, Elliot Spitzer, who turned out to be very corrupt in many different ways. He didn't just almost kill PayPal, by the way, and hurt Wall Street at the time, but because entrepreneurship is an ecosystem that pays it forward, he would have killed off SpaceX, which has put America back in space leadership and defense leadership. He would have killed off Palantir, which has put America in the lead in data for defense or AI for defense and running government companies, and could have killed off all the nine other defense companies, because this whole chain of events would have never happened. I think that's a very profound point.
[01:02:55] Joe Lonsdale:
Palantir literally blocked over a dozen major attacks that would have happened, both in [01:03:00] America, but also in Israel. So, I mean, this guy would have led to the deaths of a huge number of more people. It would have led to a lot more horrible war.
[01:03:06] And it's not just Palantir, it's all these companies.
[01:03:10] Michael Eisenberg:
And we don't see these people. Like he could have killed it, but he's gone, you know, no one would have known that he would have killed these companies because no one would have known that all those deaths were on his hands. But that is what happened.
[01:03:18] Joe Lonsdale:
This, Michael, is like a difference in politics today. Like if you want to say how politics work today, there are people who are system-level thinkers. Who care about systems and have IQs that are high enough to understand systems, to understand the point we just made. If you do this thing, it leads to this bad outcome.
[01:03:36] It destroys all these things. It destroys all those things in society. And there's people who do not understand systems. And so I think in terms of people, and emotions, and all they think of is like, “Oh, Donald Trump was recorded saying this. I don't like him. I don't like him. So I'm against him.” So you have like these retarded people who are just purely about people and emotions, and you have systems, and like, we need more system-level thinkers, otherwise we're in trouble. So we got to do our best.
[01:03:59] Michael Eisenberg:
What do you think happens to the tax rate if Harris is elected? And how does that impact?
[01:04:06] Joe Lonsdale:
No, it's fair. Listen, I obviously think lower tax is better. But I mean, I would be fine to pay way higher taxes myself just to have a competent, functioning society. I wanna be clear about that. Like, I am not voting for lower taxes here.
Michael Eisenberg:
That’s not my question.
Joe Lonsdale:
I like lower taxes, and they're better. But like I would literally pay a 90% tax rate. I'm fucking rich Michael. I would pay a 90% tax rate if we could keep our society competent, if we could stop having illegals swarm into our country, if we can fire unaccountable bureaucrats, if we can put systems into place to make our government competent, if we could stop having regulators harass, and destroy, and impugn builders–like I will pay whatever taxes that takes.
[01:04:45] I'll pay 90 percent of my fortune. Because we need our country to be functional for my kids and grandkids and everyone else to live in a functional society. I think that's the important point here. Like, but this is not about saving some dollars on taxes. Like this is about saving our civilization.
[01:05:00] Michael Eisenberg:
Your podcast is called American Optimist. Why are you still an optimist?
[01:05:05] Joe Lonsdale:
Because there's a lot of amazing things going on in the world that are going to make people live longer. There's good answers to all of our problems, and there's men and women stepping up who are strong and bold, who are going to fight with the principles that helped create our country and our civilization, and we're going to win.
[01:05:19] It's just going to be, it's a tough fight.
[01:05:22] Michael Eisenberg:
Drew insisted I ask you as an almost final question, like–what's the closest to woke view you hold?
[01:05:31] Joe Lonsdale:
Oh, this is one of the Peter Thiel things where you have to like–that's very funny. What's the closest to a woke view I hold? The closest to a woke view I hold is probably that I have a ton of people I work with who are gay and lesbian who are awesome, and I think people are naturally that way, and that we shouldn't attack them for it, and they should be allowed to get married, and should be treated kindly.
[01:05:50] And I actually even think that although most of the trans thing is like a socially-viral phenomenon, and most of these people are not trans, there actually are people who are trans and actually are people who are naturally that way. And there probably shouldn't be men in women's sports, and they probably shouldn't be trying to like trans my kids, but it doesn't mean that I don't think they should be given dignity for being God's children and being fellow human beings.
[01:06:11] And so as much as I don't like that this is an obsession of our society, I don't think we should be demonizing everyone who's trans, just the same way I respect the gays and lesbians I work with as well. So, you know, I don't know if that's woke, but that’s my take on it.
Michael Eisenberg:
What makes you vulnerable?
Joe Lonsdale:
[01:06:27] What makes me vulnerable? My daughters.
[01:06:28] Michael Eisenberg: There you go. All right. And with that, I want to let you get back to your very, very busy day. They want me to ask you about your hobbies, but I don't sense you have time for many hobbies to become world class in, given everything you're doing.
[01:06:40] Joe Lonsdale:
I was a chess champion as a kid and we still play some games every once in a while, but we’re keeping busy.
[01:06:44] Michael Eisenberg: Do you play with your daughters?
[01:06:46] Joe Lonsdale:
I do a little bit, though I walked into the room the other day and the pieces were getting married. So, you know, we’re still working on the competition.
[01:06:54] Michael Eisenberg:
Barbie chess is next.
Joe Lonsdale:
It’s what we’re seeing.
Michael Eisenberg:
Joe Lonsdale, thank you for taking the time to do this. I really appreciate it. And keep up your work on behalf of freedom and society. You can learn more about Joe on X, formerly Twitter, @ JT Lonsdale. That's spelled @J T L O N S D A L E. And if you enjoyed this podcast, please rate us five stars on Spotify or Apple Podcasts and subscribe to our YouTube feed as well.
[01:07:18] Joe Lonsdale:
Thanks, Michael. Good to see you.
[01:07:19] Michael Eisenberg:
Good to see you.
Michael Eisenberg:
You're serving 2 million people, and people love you.
Lior Eshkol:
You know, actually, Wolt is a Finnish company.
Michael Eisenberg:
I know.
Lior Eshkol:
So our presence in Israel is very strong.
Michael Eisenberg:
But what's special about you? I know, but this is the biggest market for Wolt. And you're an icon, and you're a verb. There’s something about Lior, and I’m going to put you on the spot–I know it’s uncomfortable to talk about yourself–that you’ve figured something out. And that’s what I want to know.
I am so excited to have Lior Eshkol with me. She is the CEO of Wolt in Israel. And before I jump into your background, why don't you tell us what is your core value, and introduce yourself?
Lior Eshkol:
Sure. Thank you, Michael, for having me. It's really exciting. We're looking forward to the conversation. So I think one of my core values is, and I thought about it before listening to the other podcasts, was kind of treating people, or being the type of person that other people would want to learn from.
So be the type of person that years after, your grandchildren, or your children would say, “This is the type of person I want to learn from.”
Michael Eisenberg:
Amazing. And how do you measure that, by the way?
Lior Eshkol:
You know, I think it's something you measure in retrospect, but I think I see it today with my employees and colleagues.
I want to behave in a way that they want to come to me and learn, and also I want to work with people that actually share similar values that I can learn from.
Michael Eisenberg:
You know, Jamie Dimon once said that he only wants to hire people that he would send his kids to work for. I think that's a similar thing, but do people bring you their children to mentor them or grandchildren?
Lior Eshkol:
Actually, a little bit, yes. I have some people I mentor that are very young, but let's see in retrospect what will happen with them.
Michael Eisenberg:
That's important. Lior is the General Manager of Wolt Israel, and we're going to spend a lot of time on Wolt. She was also the head, former Product Director at Healthy.io, which is one of our portfolio companies.
And before that, she was former Head of Global Commercial Products at WeWork where I was also an investor. And I actually want to start with WeWork. So I've often made the, I don't know if it's a joke, but the comment about WeWork that WeWork is exporting Israeli culture, in a way. Adam obviously grew up in a kibbutz, and the first time I went to WeWork with the glass walls and everyone peeking in on each other and not a lot of personal space, it sort of felt like Israel, even though it was in New York.
And, if for years we kind of exported drip irrigation, and firewalls, and software, all of a sudden, Israeli culture became exported. Part of it's WeWork. There's some restaurants, for example, Miznon, the famous Israeli chef, Eyal Shani, starting to become hot, even outside of Israel.
Now, Wolt is not an Israeli company–
Lior Eshkol:
Right.
Michael Eisenberg:
But Tel Aviv is the world's biggest market?
Lior Eshkol:
That is true.
Michael Eisenberg:
How? Why? Why? This is a small country still.
Lior Eshkol:
It is a small country. So I think it's really interesting you talk about Israeli culture, and it has different aspects. I feel like one of the aspects that's talked quite frequently as well is the innovation, right, and the entrepreneurship.
It's usually talked about in the tech world, right, as tech innovation, sometimes coming from the army or intelligent corps, but we also have other types of innovation and entrepreneurship culture in Israel, which we see in the operational front as well. So I think that one of the reasons that Wolt is successful in Israel–that combination of really entrepreneurial spirit that comes from our employees, from our partners, from our restaurant partners–they're very, very, very innovative and react really quickly to the market–and a very engaged team that knows how to work together, collaborate, and just go and think that things are possible even when they might seem impossible.
And I think that culture of entrepreneurship and that feeling of something is possible–it's something that is really, again, often talked about in tech, but it's actually true in the operational world.
And I think that's some of Wolt's magic, really that team that believes things are possible, works together, and also the partners and the other kind of partners that we have that have their own vision of innovation.
Michael Eisenberg:
So let's drill down for a second. Is it easier to recruit restaurateurs to join Wolt in Israel than it is in other countries?
Lior Eshkol:
I don't know exactly if it's easier. I'm sure it's a little bit different. Obviously, you know, Wolt has proven itself to restaurant venues over time. But I'll be honest with you, every time we recruit a restaurant or retail, which I'm sure we'll get to after, is something that we commit ourselves to saying we do the best thing for this partner to succeed.
That's kind of how our model works.
Michael Eisenberg:
That's your job. That's your side of it. I'm more interested in the Israeli entrepreneurial spirit, which is, you suggested that restaurateurs here are also more entrepreneurial, and they're willing to give Wolt a chance, more so than in other countries maybe? Or no?
Lior Eshkol:
I think that, for example, you know that Wolt was acquired by DoorDash a few years ago in June, 2022. And we had Tony the CEO of DoorDash coming here. And we brought him to one of the restaurants that's actually very close to here. So maybe you know what I'm talking about, that during COVID–it starts with Café–
Michael Eisenberg:
What’s the restaurant’s name?
Lior Eshkol:
It starts with ‘Cafe…’
Michael Eisenberg:
Okay. Yeah.
Lior Eshkol:
Café Noir, that created their own delivery area set next to the restaurant, because they saw an opportunity and they created dishes that are powerful for delivery, that are right for delivery. And they really have everything to make sure the deliveries are most efficient.
And this is something that happened a year after COVID, not two years or three. And that's something that's very unique to the Israeli culture. Let's do it. It's possible. Let's work efficiently. Let's do it together. And let's do it quickly. And I think he was so impressed to see the amount of orders coming in from that specific venue at a single hour, because that owner was very innovative and understood the potential, and then really created that area specifically for deliveries.
Michael Eisenberg:
There's another element which we were joking about before we went on air here, which is, it seems to me that every soldier that’s come out of Gaza or every teenager, in order to make a few shekels, wants to be a Wolt driver–which by the way is most often on a tustus, or like a little–
Lior Eshkol:
Yeah, a scooter–
Michael Eisenberg:
A little moped or a scooter, or a bicycle sometimes. But why did this become so popular as a place of employment, or …?
Lior Eshkol:
It is quite popular. We do have a waiting list to become a Wolt courier, exactly as you said. And I think it became powerful because, you know, in general in the world, the gig economy is growing and people want to have more ways to make a living in a flexible way.
This is something that has evolved over time, and maybe that soldier or a student or something like that, that want to prioritize their own time. They don't want to work from nine to five. They want to have an opportunity to work when they want to work, create additional income. And at the same time, be their own manager, be their own boss.
And I think that's something that's really powerful, that Wolt really delivers on.
Michael Eisenberg:
When you compare Wolters or these drivers in Israel to other places, is there more demand to be a driver here than other places on a regular basis?
Lior Eshkol:
You know markets are very different, so it's a little hard to compare exactly.
Michael Eisenberg:
No, no politically correct answers. Like a direct answer. Like Israeli, come on.
Lior Eshkol:
I would say there is a big waiting list in Israel.
Michael Eisenberg:
Why is that?
Lior Eshkol:
Again, I think because–
Michael Eisenberg:
Is the gig economy more popular here?
Lior Eshkol:
I think it's a combination of the gig economy being more popular, the frequency of ordering in Israel and kind of like, you know, Wolt in general, being something that's very strong in Israel, we–
Michael Eisenberg:
I'm coming back to that in a second, yeah.
Lior Eshkol:
Yeah, absolutely. Because I think it's that the frequency of the ordering is quite high, because we first of all have the restaurant business; second, we also introduced our retail business. So we're able to offer to those soldiers, students, et cetera, work across different hours of the day, and they really seize an opportunity.
I would say if you open your app as a Wolt courier, it's very likely you'll receive a task within seconds. And then you can–
Michael Eisenberg:
Within seconds.
Lior Eshkol:
Yes, absolutely.
Michael Eisenberg:
Wow.
Lior Eshkol:
Yeah.
Michael Eisenberg:
And how many of the Wolt drivers are full time versus gig or part time?
Lior Eshkol:
All of our Wolt partners–we have, by the way, 20k Wolt partners–
Michael Eisenberg:
20,000 Wolt partners, which I should read as a courier or a driver, and a nice word is called a partner.
Lior Eshkol:
Yeah, absolutely. And that's, by the way, across all of Israel. So from the north all the way to Eilat in the south. They are all part timers. They all decide on their own way. And I think what's interesting, think of an average Wolt career–there is no average Wolt career.
They take their way into how they use the platform. So even think of a student, right? Maybe during the academic year, they can be part time, but during summer, it's a great opportunity to be full time. So we see a lot of that flexibility. So I think the answer is there are no full timers and part-timers.
So I think the answer is there are no full timers and part timers. There's a lot of like fluidity in how people use the passport.
Michael Eisenberg:
What's the median income of a Wolter?
Lior Eshkol:
Like 70 shekels an hour.
Michael Eisenberg:
That's 70 shekels an hour.
Lior Eshkol: Yeah.
Michael Eisenberg:
Minimum wage in Israel, in my memory, is 25 shekels an hour?
Lior Eshkol:
It's a lot higher now, almost 30.
Michael Eisenberg:
Almost 30 shekels an hour. So it's more than double the minimum wage to be a Wolter.
Lior Eshkol:
It is.
Michael Eisenberg:
And what's the risk to getting into a bicycle or car accident with the crazy Israeli drivers?
Lior Eshkol:
I think, you know, safety is obviously the number one concern that we have.
Michael Eisenberg:
What are the total number of missions or deliveries they do here?
Lior Eshkol:
We do a few millions of orders a month.
Michael Eisenberg:
A month.
Lior Eshkol:
Let's put it this way, yeah.
Michael Eisenberg:
So how do you think about accidents at the company?
Lior Eshkol:
You know, I think, as I told you, safety is our number one concern, and honestly, every life is so important that we take all of these things very, very, very seriously, and we don't really look at the numbers, but every person is very important on their own.
Michael Eisenberg:
So I have an admission to make to you, which is, I think I've ordered from Wolt three times in my entire life.
Lior Eshkol:
Really? You're very unique.
Michael Eisenberg:
But hold on. I will also say that Wolt is a verb in this country. Like if you Google something, people Wolt it. Or ‘volt’ it as they say here, right?
And I think Uber was a verb in the U.S. Unfortunately our transportation minister didn't let Uber into this country. How did Wolt become a verb in Israel?
Lior Eshkol:
I think that, let's start with–the Israel consumer was very open to adoption of new things, of new technology. People are very tech-savvy in Israel and people are very–also food here is really good.
So for those listening, the food in Israel is really amazing. And I think that combination of the warm climate and the entrepreneurship spirit really started off Wolt as a great, you know, success in the market, along with a very strong team that launched it here in the country, and a very strong product.
And then over time, we work to really continue on identifying those product-market fit opportunities, to continue on seeing what the consumers need and actually find answers to it in the app. So the idea is like, we always look for the most product-market fit being, for example, our entry from restaurant into retail, specifically within retail to pharma and supermarkets, et cetera.
And then over time, Wolt became just like the thing you do. It's the answer to everything. I think that that's one side of it. The second side of it, you know, in delivery businesses, many things can go wrong, right? We have, as you asked before, millions of orders a month. So many things can go wrong.
Every order is very specific. It's both a combination of a tech thing that's happening and also a physical thing that's happening at the same time. Think you're ordering from your phone, and then someone in the restaurant actually prepares the food, a courier comes and picks it up and brings it to you.
That's so many interactions. And what we really do in Wolt is we find those opportunities to optimize and improve those interactions, because we understand that the customer needs to choose us every day. And I think with that mindset, and very entrepreneurship team that continue on looking for the product-market fit, gradually, you know, Wolt became this verb.
Michael Eisenberg:
Do you think it has anything to do with the traffic? Like, I don't want to leave my house cause there's like a ton of traffic, and so I'll Wolt it.
Lior Eshkol:
Yeah, absolutely. That's one of those things. I think it's like the dense environment, the urban environment. And I think what's actually really interesting for us, you know, we started expanding outside of Tel Aviv a few years ago, and now we're almost nationwide. And we see it being successful also in other areas.
So I think it's kind of like, people find their way of using it in different areas. But I think for sure the density plays a part here.
Michael Eisenberg:
So what percentage of the millions of deliveries a month is Tel Aviv still?
Lior Eshkol:
Tel Aviv is actually now less than half of our work in Israel.
Michael Eisenberg:
That's unbelievable, because every second person in Tel Aviv is a Wolt driver.
Lior Eshkol:
That's true. But I think what's interesting is that we saw, again, that product-market fit, not only in Israel, in Tel Aviv.
Michael Eisenberg:
Yeah.
Lior Eshkol:
So it's now in kibbutzim across Israel.
You can go to a kibbutz. We actually have, you know, a grocery shop in a kibbutz on the Wolt app, which is really exciting.
Michael Eisenberg:
And who drives it? Some kid on a bicycle?
Lior Eshkol:
Some kibbutz kid, you know–soldier, student, whatever you said, in different areas. They also want to make a flexible living.
Michael Eisenberg:
How do they deal with the hills in Jerusalem, these drivers?
Lior Eshkol:
They're tough ones, you know.
Michael Eisenberg:
Yeah, yeah.
Lior Eshkol:
But they're, again, from Jerusalem. They know the area.
Michael Eisenberg:
Okay. I want to talk about you for a second now, which is, how did you become the GM of Wolt Israel? Like, we did your LinkedIn thing. I think you were 34 when you became the GM. Is that right?
Lior Eshkol:
That's true. Yeah.
Michael Eisenberg:
Okay. So how did you become the GM of Wolt Israel?
Lior Eshkol:
It's actually an interesting question, and the right answer is I just applied. They had a LinkedIn posting and I applied to that position. I was, I knew their investors, and I submitted my resume for the investors as well, which brought me for the initial interview.
But then I interviewed for the job. I had, you know, a first interview at HR, then a couple of professional interviews, and assignments, tasks, and here I am.
Michael Eisenberg:
And how many employees were at Wolt when you joined?
Lior Eshkol:
I think like 150, more or less.
Michael Eisenberg:
And how many drivers or partners?
Lior Eshkol:
4,000, more or less.
Michael Eisenberg:
And now?
Lior Eshkol:
We are more than 1,000 employees in Israel. We have the Tel Aviv HQ, and then we also have offices in Jerusalem and Haifa. And we have approximately 20K couriers a month, active a month.
Michael Eisenberg:
That's a lot of growth over a few years. And you joined right at the beginning of COVID, in the middle of COVID?
Lior Eshkol:
I joined October 2020, which, it was in Israel, kind of like the second wave of COVID when actually everything started closing up and it was closed for a few months afterwards.
Michael Eisenberg:
And Wolt took off during that time, big time. Why do you think–this is something that baffles me, to be honest. I keep thinking about this in a broader global context. So COVID happened. If you look at e-commerce, it shot up during that time. But retail’s made a comeback in a pretty meaningful way, and my sense is that the growth of, not sense–the growth of e-commerce has slowed.
My sense was restaurants have made a comeback also. But in Israel, even though restaurants have made a comeback, it doesn't feel like Wolt has slowed for a second. It feels like it continues to grow ever much faster. What's happening here?
Lior Eshkol:
To be honest, we actually grew more after COVID than during COVID.
Michael Eisenberg:
Why? Explain that to me.
Lior Eshkol:
I think, first of all, that consumer habit is something that's stuck, both from the consumer, but I talked earlier today also on the entrepreneurship of restaurants and retail venues, et cetera, that knew to adapt their operations to accommodate both for delivery and for the restaurants themselves.
So many of those venues made that adaptation. I think again, it's chasing that product-market fit all the time. And if you think during COVID, our main business was the restaurant. Currently one out of four orders, and even more, is actually for retail, from supermarkets, from pharm. Yeah. Which is something that we continue on looking for.
Michael Eisenberg:
Pharm, you don’t mean like, farms, you mean pharma. You mean like Superpharm, which is our local CVS, or Duane Reade or drugstore.
Lior Eshkol:
Yeah, but actually, people can order today, you know, over the counter medicine for Wolt.
Michael Eisenberg:
Right.
Lior Eshkol:
So imagine that you're sick, you're at home, and you have the cold, you don't want to go out.
Michael Eisenberg:
Yeah.
Lior Eshkol:
Within, you know, 15 minutes, you can have the medicine delivered to your home.
Michael Eisenberg:
And then the Wolt driver gets sick when he turns up at your door. Because he catches you. But at least the people in the store don't.
Lior Eshkol:
Yeah, absolutely.
Michael Eisenberg:
You mentioned when I sat down with you, I said to you, I said to you like, well, drivers are ubiquitous and wherever you turn up, when I came down, you were already in our office.
You want to tell everyone how you got in here?
Lior Eshkol:
So I got in, I, you know, rang the bell and no one answered. And then a Wolt courier came in, picked up the phone, and called the person that had the delivery, and they walked them in. So I came with a Wolt delivery here. It's a funny but true story.
Michael Eisenberg:
Not, not, not in the little Wolt container though.
Lior Eshkol:
No, no.
Michael Eisenberg:
So, what has the rest of the world learned from the Israeli market that have become best practices that you could take the Wolt elsewhere?
Lior Eshkol:
I think, at the end when you ask like what, why Wolt is a success and what people can take, again, it's that entrepreneurship and innovation spirit.
Michael Eisenberg:
I know, but you can't make, you can't make Swedes or Danes, more entrepreneurial, like Café Noir is a super entrepreneurial guy, I mean he takes up more of the sidewalk down the block than anyone I know. You can't do that in normal countries, like they actually limit how far you can expand your sidewalk seating, right? Or you're just going to set up a place for deliveries. So like, what can they learn? What do they learn from you like in Wolt in, wherever it is in Europe or DoorDash around the world now?
Lior Eshkol:
So I think they learn not only from the venues, but the team in Wolt, they're kind of like, you know, entrepreneurship spirit and yes, can do attitude, and how to just make things happen and not wait for everything to be perfect, but kind of like launch; see how it goes; get data; learn. We use a lot of data. We talked a little bit before about this combination of tech and physical product. Think of how many inputs go into the system that we can optimize for. And that way of working is something that, you know, is used Wolt-wide. We also need to learn a lot from them as well.
But I think that, you know, entrepreneurship spirit and within the team.
Michael Eisenberg:
How do you teach that?
Lior Eshkol:
We had a lot of visitors in Israel. You know, Mickey the CEO was here a few times.Tony, as I said before, was here a few times. And it's something that we have many team conversations. We're a very collaborative company.
Michael Eisenberg:
Do you have a specific example of things that were taken from Israel and put in the rest of the world?
Lior Eshkol:
OTC, for example, that we talked about before. So over the counter medicine. We actually discovered the need for it by looking at search. So we actually look at what people search on the app. And then we saw that, you know, drugs like medications was the number one searched thing that we didn't have a solution for.
So we worked with a product team to figure out a solution to productize it, and now it's being used in other places as well, and that's great. It's really kind of an entrepreneurship spirit and collaborative approach that's afterwards used in different places.
Michael Eisenberg:
And it's been implemented elsewhere?
Lior Eshkol:
Yeah, yeah. Absolutely.
Michael Eisenberg:
Okay, give me another example.
Lior Eshkol:
Other examples, I think, in general, kind of like how we grew with retail is a great story.
Michael Eisenberg:
Tell me.
Lior Eshkol:
We started, you know, quite early with a supermarket business, I would say in 2021, with a strong design partner that we have, that afterwards really helped to design the product work as well, as well as our operations best practices that are being used elsewhere as well.
Michael Eisenberg:
You're a product manager by experience or training. Now you're a general manager. What is unique about being a product manager as applied to a general manager role that you think is super important for other people to know?
Lior Eshkol:
I think a product manager, honestly, I would say is a great, great job in which you learn how to really think of the consumer and kind of like design solutions for them. And honestly, as a GM, you do that thing as well, but maybe using slightly different tools. As a product manager, you really think of kind of like, what is the need of a customer, and then how do I solve for it in the best possible way, while maximizing customer experience?
And you do similar things as a GM. You think of, where do I need to expand the market? What are additional product-market fits? I would say that as a GM, there's also a lot of work on the team aspect, which is really, really, really important. Product managers tend to be more of individual contributors. But that consumer mindset and growth mindset is something that both roles have in common.
Michael Eisenberg:
How'd you learn to manage people?
Lior Eshkol:
So you asked me before I got to Wolt, I can admit it now that before Wolt, I didn't manage more than 10 people. And now I'm definitely managing a different level of people.
Michael Eisenberg:
That's amazing.
Lior Eshkol:
I think that first of all, I learn and I ask a lot of questions. So I really made sure from the beginning I was involved, because I joined a company that was already here.
I'm not a founder, right? So I joined a team that was already a successful team with great results in Israel. But the goal was to move from, let's call it like a startup lens to a scale up phase. And what I did is, I really asked a lot of questions and really, like, learned from the team because they knew best.
And I think that over time that they saw that my asking questions and really trying to understand what's happening, made my managing them much easier because they knew I really tried to understand where they're coming from. And that's being, you know, in the field type of work is something that I think for me, I discovered, is really strong in management.
Michael Eisenberg:
Do you have siblings?
Lior Eshkol:
I do. I have two sisters.
Michael Eisenberg: You're the oldest?
Lior Eshkol:
I am.
Michael Eisenberg:
Okay. Okay. I could have guessed. Why did Wolt open in Tel Aviv to begin with? I know it was before your time.
Lior Eshkol:
It was before my time. It was 2018. It was actually a great story about, you know, Imri, who was the former GM before me.
They had a type of business that was closed, and they had a very strong team that was looking for something to do. And they kind of shopped around for things that team can do. And then, you know, they shopped through Wolt and that became a success. I think at the same time, there were also–
Michael Eisenberg:
So they pitched Wolt on opening up Wolt Tel Aviv?
Lior Eshkol:
Yeah, they have. At the same time, there are also investors from Israel that started investing in Wolt.
Michael Eisenberg:
Right. 83 North, right?
Lior Eshkol:
Yeah, absolutely.
Michael Eisenberg:
Interesting. Okay. What is the business model for Wolt? And is it the same globally?
Lior Eshkol:
It is the same globally.
Michael Eisenberg:
Okay. So what's the business model?
Lior Eshkol:
How Wolt makes a living?
Michael Eisenberg:
Yeah.
Lior Eshkol:
So Wolt is, as you know, a platform that connects consumers, merchants and couriers. The way that we as a company make a living is through that connectivity. So we charge from users consumer fees and from restaurants, the venues, the commissions.
And then we, obviously, these are our main kind of revenue drivers. And our cost drivers are obviously the courier cost, the support cost, et cetera. That's kind of like our basic P&L, how it works.
Michael Eisenberg:
Has the war influenced the cost structure of Wolt here?
Lior Eshkol:
I think the war unfortunately influenced a lot, but it was also very interesting to see how the team here reacted to it.
Because think that, within a day, so many things unfortunately changed. We're also, by the way, a very young company. So the average age in Wolt is 26.
Wow.
I think now it's 27, people grew up. But it's a very young company, which if you think of the people, a lot of them, unfortunately, were actually at the party or went to reserves. And we as a company needed to–
Michael Eisenberg:
How many of your employees did you have at the party? At the Nova party?
Lior Eshkol:
We had a few. We had a few. Luckily, all of them came back, but it's something that's, you know, not taken lightly.
Michael Eisenberg:
Wow. Wow. Not taken lightly at all. And what percentage of employees were called up to reserve duty?
Lior Eshkol:
15, almost 20 percent at a certain point, but I would say an average 15 percent.
Michael Eisenberg:
And what percentage of drivers were called up, do you think?
Lior Eshkol:
We actually called all the drivers.
Michael Eisenberg:
You called all the drivers?
Lior Eshkol:
Yeah.
Michael Eisenberg:
20,000. How many were called up to reserve duty?
Lior Eshkol:
You know, I think it's like the general ratio in the population.
Michael Eisenberg:
Fifteen percent, twenty percent?
Lior Eshkol:
A little bit less, but something like that. But I think when, you know, when the war started happening, there are a few things we were thinking of. First of all, we knew as a company, the importance of Wolt in Israel as an infrastructure. We need to find a way to stay open, and it means totally refactoring our business.
Figuring out how we do deliveries differently, different hours, different ways of working. And then at the same time–
Michael Eisenberg:
Why? Explain why you had to figure out different hours.
Lior Eshkol:
Because so many things had changed. So think of what happened to us. We talked about how many people were in reserves. It happened to venues as well, happened to couriers as well, as you asked.
So we needed to understand how to refactor and change our processes, and quickly adapt to the new situation. Now, when you think of what we talked about before, thousands and thousands of orders a day, you know, tens of thousands of orders a day, that means you really need to make sure how everything is extremely efficient, still solving for customers, partners, and couriers, and creating a sense of stability in that type of a situation.
We reduced opening hours, we, you know, we changed a lot of things.
Michael Eisenberg:
Reduced opening hours at the restaurants, not at Wolt.
Lior Eshkol:
Yeah, at the restaurants. And I think that that was our own aspect, except totally refactoring the business, figure out new ways of working.
Our sales team moved to doing customer success, you know, support, cause that was what was needed at the time. My leadership team was so inspiring and really, really, really did everything with our team. And it was amazing to see how people actually, the resilience of the team was uncanny. Our head of the retail department, Israel Avrahami, for example, took his team and they started picking up in the grocery stores because the grocery stores didn't have people picking.
And a lot of people needed food delivered to their house. So our team was actually there at the front. Same, by the way, with our operations team. Eliya Yosefyan, who was in charge of more than 20K, you know, couriers a month, really worked with his team in the field to support couriers and–
Michael Eisenberg:
What does that mean?
Lior Eshkol:
Giving out equipment–
Michael Eisenberg:
So your head of couriers went out to the field to give out equipment, which is…?
Lior Eshkol:
The bags, you know, the equipment, the gear, all of that. And he also called couriers. Everyone did what needed to happen, and I think that's–you asked before about some of the success, you really see it in crises, how the team really rallies and the resilience of the team, I think is extremely inspiring.
We made sure as a company, you know, we talked about the young force, the safety of our employees was number one for us, but also their connection to what's happening. So we made sure they had stability in the office.
We made sure to communicate with the employees all the time, and I'll say again, I was so, so impressed by the resilience of everyone.
Michael Eisenberg:
I'm actually now thinking, right in the first couple of months of the war, there were sirens in Tel Aviv nonstop. That's 50 percent of your business. I'm trying to think about the Wolt courier partner riding around Tel Aviv and a siren sounds that he's got somebody's food on the back of–what does he do?
Lior Eshkol:
First of all, he knows, because we communicated very clearly from day one, that their safety is the number one priority. So he knows that if there's a siren, they stop, they follow the instructions needed, and if the food would get there and it's going to be cold, that's our responsibility. And I think that's, in general, the approach we took.
It's our responsibility. We compensate the customer for this. We compensate the venues. It's not about them, you know, taking care of their safety, but I think it was, also for couriers, interesting because unfortunately the war is not something that ended in a week.
Michael Eisenberg:
Yeah.
Lior Eshkol:
And they need to continue on making a living.
We all know, by the way, that making a living is more than actually the money. It's the sense of purpose, it's the sense of doing something. I think we all remember the first day of the war, how chaotic everything was and that, you know, sense of stability and something that still is working is something that's meaningful for everyone on a human level.
Michael Eisenberg:
Did the number of orders go up or down in the first month?
Lior Eshkol:
It fluctuated. Obviously the first week, you know, decreased because again, many venues weren't really open and many couriers, but over time, I think like a month and a half after it already came back, more or less to what it was, the mix obviously changed.
Michael Eisenberg:
You got more what? Medications?
Lior Eshkol:
Supermarkets, for example.
Michael Eisenberg:
Supermarket, okay.
Lior Eshkol:
People wanted to get food delivered to the home and have that opportunity. And again, it was the team that's always reacting to see what we can add to the app, kind of like, you know, according to searches, according to different things.
Michael Eisenberg:
And what are the things that were added post the war starting?
Lior Eshkol:
Safety equipment, you know, generators, as I'm sure you remember that.
Michael Eisenberg:
They delivered generators on scooters?
Lior Eshkol:
No, we have cars in different areas, but that was, that was looked for. Transistors, you know, radios.
Michael Eisenberg:
Transistor radios. Yeah.
Lior Eshkol: Yeah. And I think then–
Michael Eisenberg:
Starlink?
Lior Eshkol:
I think in general, you asked a little about the magic of Israel and you see it in the team, and you see it in the general public, is how people really, you know, adapt and find solutions. And I think for me, more than find solutions, work together to figure out a problem.
Michael Eisenberg:
Have you documented all the various kind of ups and downs and changes you went through at Wolt? I think it's fascinating. Have you, have you written it up?
Lior Eshkol:
Not yet.
Michael Eisenberg:
Okay, we'll give you a transcript of the podcast and you can do that.
Lior Eshkol:
I feel like you have.
Michael Eisenberg:
I actually think you should write it up. It's a lesson in resilience for the rest of the world. Because stuff happens and I kind of wonder, I'm sitting here thinking two things. One is, I wonder, is there Wolt in the Ukraine?
Lior Eshkol:
No, there is no Wolt in the Ukraine.
Michael Eisenberg:
I wonder if, like, in Ukraine, the reaction was the same to what it was in Israel, or if there's something kind of unique about the culture here that, by the way, I'm looking for a generator and someone to bring it to me on a scooter, and also, you know, the kind of resilience.
And the second thing I'm sitting here wondering, and you probably have an answer to this question, is, like, did anyone call you and say, “I need another order of food, it's cold because there was a siren?”
Lior Eshkol:
I think that's also a sense of normality, right?
Michael Eisenberg:
So the answer is yes!
Lior Eshkol:
The answer is yes. But I think it's also a sense of normality and I think, you know, we talked about supermarkets and transistor radios, but at the end of the day, having ice cream delivered to your house after a very stressful day is also important.
And I think people figure out that need as well. And I think in general, so you know what Wolt is in Israel it's part of normality. It's part of life.
Michael Eisenberg:
Yeah. I'm going to talk about that in a second.
Lior Eshkol:
So when Wolt stops, it's like, you know, an infrastructure stop. It's like the electricity stops or it's not something you don't, won't even consider happening.
Michael Eisenberg:
That's a really first world problem. Ice cream not coming your way.
Lior Eshkol:
Absolutely.
Michael Eisenberg:
I'm just thinking about this. “Hey, kid, siren, go into the safe room. Let's order ice cream.” Is that what happened?
Lior Eshkol:
No, it's not. Not from the mamad {safe room}. Let's put it this way. But think of how many people are part of the Wolt ecosystem, right?
So we talked about the thousand employees we have. Then we talked about 20,000 couriers. And then we have 8,000 venues, each one of them employing numerous employees. We're talking about, you know, 30, 40, 50,000 people that are being touched, you know, within hours of Wolt's activity. So it's more than ice cream.
Michael Eisenberg:
So Dor Gabizon, who's Head of Retail Business Development, says that you have become a part of national culture. And it is actually a cultural icon, those blue boxes and that Wolt–it's a cultural icon. It really is here, particularly in Tel Aviv. But I live in Jerusalem, it's there too now.
Did you do anything to make that happen or is it just a, like one of those cases where there's just a, you know, the hand fits the glove, Israelis like their food delivered and like the Wolters and there's a lot of excitable Wolter partners?
Lior Eshkol:
First of all, I think Dor, by the way, is an example of a true entrepreneur.
He started the retail business in Israel. So in the early days when there was no product support and he really did everything, you know, by himself, he's also one of their earliest employees. What we did to do that is, again, constantly thinking on how we continue adapting for the neediest customers and really, really, really, really work harder on fundamentals.
Make sure we continue on delivering it at excellent quality, time and time again, learn from what we do. And over time, you know, that delivers, and obviously it also helps that the bags are outside, and they're very nicely blue-colored, which helps the visibility.
Michael Eisenberg:
Maybe it's because you're blue and white! I just thought about that right now. Like the colors of the flag.
Lior Eshkol:
I'll write it in my book afterwards.
Michael Eisenberg:
Yeah. You really should write, I'm not kidding, you really should write a book. How do you think, like, what is Wolt? Is it like a marketplace? Is it a logistics system? Is it just there? Like, what is it? How do you define what it is?
Lior Eshkol:
Well, it's a platform that, you know–
Michael Eisenberg:
Yeah, platform is so bland though.
Lior Eshkol:
I think the thing is, it's a marketplace that can become whatever that consumers want it to be. And that's exactly the example you see here. It started from restaurants, and now one of our orders is not from a restaurant.
And then we're only talking about–Wolt has been in Israel in only five years,
Michael Eisenberg:
Right? It's remarkable.
Lior Eshkol:
Yeah. So I think Wolt really is what it will become. It's, you asked how many full time couriers we have. And the answer is, it fluctuates. So a marketplace platform really enables the people participating to make with it whatever they want.
And as you know, the Israel people are very resilient that way and very entrepreneurial.
Michael Eisenberg:
And they come up with all sorts of things that they need.
Lior Eshkol:
Yeah, that's true. That's true. Also, by the way, just to remind us, we do have a great product that enabled all of that. We have a very, very strong consumer fronted product.
And also you asked before, a very supportive global team, by the way.
Michael Eisenberg:
I find it fascinating that there's actually almost no competition here for Wolt. I mean, there's like the Yango or the Y Delivery, whatever they call that. I've never used that, but I have used Wolt three times. But you know, my kids won't order from a restaurant if there's no Wolt.
Lior Eshkol:
Really?
Michael Eisenberg:
Yeah. They won't. They find it a pain in the neck.
Lior Eshkol:
Yeah.
Michael Eisenberg:
Why? Like, why is that?
Lior Eshkol:
I think you can ask other people.
Michael Eisenberg:
I’m asking you, though.
Lior Eshkol:
Why is there no other–
Michael Eisenberg:
Yeah, why is there no competition?
Lior Eshkol:
First of all, it's not really true. When Wolt entered Israel, TenBis was a very, very strong household name in Israel.
Michael Eisenberg:
There was competition, but there's not anymore.
Lior Eshkol:
They’re still a big company, but I think it's more than that. If you think of the competition to Wolt, Wolt created a new type of behavior. You said before yourself that people came back to restaurants and they also, you know, order from restaurants. So that's a completely new behavior.
Michael Eisenberg:
Right. How did you do that?
Lior Eshkol:
It's this constant, you know, adapting to consumer need, constantly focusing on the fundamentals, our operations.
Michael Eisenberg:
You didn’t do anything special, you just kept doing your job all day, like working on the fundamentals and focusing? There must be something you did that was special. A secret sauce that you want to share.
Lior Eshkol:
Honestly? If you want to, and I'll tell you now what the secret sauce is. We have a saying at Wolt, is doing common things uncommonly well. In a repeat way. And I think at the end of the day, you know, when we tell the story of Wolt, it's not a story about this phenomenal, you know, app, although we have an amazing product.
It's not a story of an amazing marketing campaign. You know, it's not a case study in that, although we have a great marketing team. It's this ongoing pursuit of making sure you focus on the fundamentals, making sure which are for us, supply, delivery times, you know, customer support, all of that, to really provide for your consumers.
Because think of our business model. People need to choose us every day. Every day, a consumer needs to go into the app and actually order. And by the way, same as the venue. They have an app in their store, and they need to swipe it to go online every day. That's a choice they're making, and the couriers as well.
Michael Eisenberg:
My friend David Fisher, who was the Head of Revenue at ad sales at Google, and the Head of Revenue at Facebook, now is an investor at O1 Advisors, said he once got advice earlier in his career to just be competent. And he thought it was like insulting initially, and then thought about it. And so for, well, it turns out that 98 percent of the people are just not competent.
And so therefore, being competent is a significant strategic advantage. And that seems to be, in a nutshell, what you're saying.
Lior Eshkol:
I think so.
Michael Eisenberg:
Just being competent in a really good way.
Lior Eshkol:
And a very good and engaged team.
Michael Eisenberg:
Globally, and I'm going to macro for a second. And there is an ongoing, I was at Benchmark when we made the Uber investment.
And since the gig economy started, there has been a global debate on how to classify the drivers, the workers in America, they call them, are they 1099s, or not. We have, like, a lawsuit against Wolt in Israel over this very same topic. This is a topic that every government, country, company like Wolt is dealing with.
What is their status now in Israel? Are they freelancers or employees?
Lior Eshkol:
They’re freelancers.
Michael Eisenberg: They're freelancers. And, do you think that's the appropriate definition of what they are?
Lior Eshkol:
I think exactly as you said, employment laws are changing and everyone is trying to figure it out. What is this exactly, this thing? I think that we know, we said before, that the needs of people is changing in the workplace.
People don't necessarily want to go from nine to five, and that's okay. But we as a society need to find solutions to that and not, and not always go back to the past. So, I think that's a lot of the issue with employment laws, they're, at least in Israel, based on decades before.
They haven't adapted to the needs of people today. And so that binary choice maybe is not the right way to look at these things. And that's what the other countries and everyone is trying to figure out.
Michael Eisenberg:
Okay. So, if you were writing the law, what should it say, the new labor law?
Lior Eshkol:
My next book. I think that–
Michael Eisenberg:
I'm giving you the opportunity to write a law.
Lior Eshkol:
Yeah. I appreciate it. I’ll ask my lawyers a little bit for their opinion.
Michael Eisenberg:
No, no, no, no.
Lior Eshkol:
They'll make it so long.
Michael Eisenberg:
Look, no lawyers. This is just an open conversation, me and you, in front of thousands and thousands, if not tens of thousands of people.
And you have a chance now to define what the labor law should be for the next two decades.
Lior Eshkol:
I think we need to find a sustainable solution that allows for flexibility, which is a great need of people in the modern workplace, and also enable a sense of security, so that flexibility and security is something that needs to be dealt with.
Michael Eisenberg:
Okay, but be specific. That's–everyone's trying to get it there. Okay. So now let's be specific. What should it say?
Lior Eshkol:
I can't tell you if something exactly the law would say, but I think it's definitely something that everyone's trying to figure out. We are learning from other-
Michael Eisenberg:
No, no, but you must have a point of view on this.
Like, what are the core tenets?
Lior Eshkol:
My point of view is that–
Michael Eisenberg:
We can lead on this. So, theory. Because we're a small country and because you're such an incredibly dominant and capable player here in Israel, and you have exported this excellence outside, I actually believe that we have a chance in Israel to establish what the future of employment law should look like.
And I think what you've done for 20,000 couriers and 1,000 employees is nothing short of incredible. People want to work for Wolt, so you've done something right.
Lior Eshkol:
Yeah.
Michael Eisenberg:
And so now, I want to package this up and say, hey, just like we invented drip irrigation, right? Just like we invented the kibbutz in an office space with glass doors, now we're going to invent employment law for the 21st century, employment law by Lior.
So what should it look like? This is like an opportunity.
Lior Eshkol:
Yeah, I know, absolutely.
Michael Eisenberg:
You're the secretary of labor for the entire world.
Lior Eshkol:
New world. I think it's a good question. Unfortunately, I don't have a good enough answer. I think it's something that supports flexibility but also addresses the need for a certain type of like, you know, support system.
Michael Eisenberg:
So in Israel everyone has health insurance. So providing health insurance is not an issue here, because we have mandated health insurance by the government. So that's okay, one problem that we don't have to deal with that America, for example, does have to deal with. Flexible hours, we want them to have. Should there be a different tax code?
Lior Eshkol:
I don't know enough. Unfortunately, that's not my occupation. You're asking me what's the difference between a product manager and–
Michael Eisenberg:
Should there be severance pay? No, because then it's not freelance work and they're not working full time either.
Lior Eshkol:
But I think you're exactly, your answer is old, right?
Michael Eisenberg:
Okay.
Lior Eshkol:
It shouldn't be because that's how things are.
Michael Eisenberg:
Right, I agree.
Lior Eshkol:
I think it's about opening the book, right? It's like, totally thinking–
Michael Eisenberg:
Do people need pensions from being freelancers?
Lior Eshkol:
I think pensions are definitely something that people need, but let’s not take a Wolt courier, let's take a plumber, for example. Do they not need pensions?
Michael Eisenberg:
So we have a mandated pension system in Israel, kind of.
Lior Eshkol:
That's true for the couriers as well, by the way.
Michael Eisenberg:
Right, I know.
Lior Eshkol:
Yeah.
Michael Eisenberg:
So is the idea that if the government provides kind of a mandate, they don't provide the pension, a mandate that everyone has to have a pension, everyone gets health insurance, et cetera, you can solve most of the problems? So like, what are they, what are they angry at you about?
Lior Eshkol:
I think you need to, again, open up the book because you're talking, I would say logically, and the law is really based on hourly wage and things like that. All of it needs to happen. Maybe someone wants to work for 20 minutes. Is that not okay?
Michael Eisenberg:
Yeah. No. So, okay. So, here's another thing. We need to not have hourly minimum wages, but minutely minimum wages.
Lior Eshkol:
I think it's a good conversation, but unfortunately I'm not sure we'll solve it now.
Michael Eisenberg:
You don't want to have it, huh?
Lior Eshkol:
No, I think it's a complicated question, but I think the real answer is the fact you need to completely change the way you think about it, and accept that flexibility is something that's desired in the workforce as much as other rights that people have.
Michael Eisenberg:
Do you think that the politicians don't want to solve the problem because they benefit from kind of unionization and the way they vote for people, kind of this whole full time thing?
Lior Eshkol:
I think it's a complicated problem to solve. There is a reason that no country has solved it. You talk about the U.S. that has totally different laws. We talk about Europe, which we're a part of. No one has figured it out yet, because it's a complicated problem. That's certainly due to incentives–everything is changing, right? And it's true for every industry. There's tech and progress coming in, and then the law or regulation follows sometimes a couple of decades after.
It happens in other industries as well. I'm sure it's going to happen in our industry as well.
Michael Eisenberg:
What happens when autonomous little robotic delivery things come? Do you use any of those yet?
Lior Eshkol:
We don't use those.
Michael Eisenberg: Right. I don't think that would do well in Israel for what it's worth. But, but let's say they come. Have you thought about how you would use those?
Lior Eshkol:
This is not something we're actively working on.
Michael Eisenberg:
You're not actively working on it.
Lior Eshkol:
Solve one problem at a time.
Michael Eisenberg:
I remember when Travis Kalanick said that maybe there'd be autonomous driving and the drivers would kind of be put aside and cause a giant ruckus.
Lior Eshkol:
Yeah. By the way, autonomous vehicles are a great example of something that the technology is there, but the regulation, ways of working, is not necessarily there. These things happen, tend to happen in multiple industries.
Michael Eisenberg:
Have you seen, there's a fair amount of drone work going on in Israel right now. Have you seen deliveries by drones here now?
Lior Eshkol:
Not yet. And by the way, when people talk about delivery by drones, they usually talk about less dense environments.
Michael Eisenberg:
Yeah, open areas.
Lior Eshkol:
Which is not really the situation we have here in Israel.
Michael Eisenberg:
Okay. I have a funny question for you. You run a business with millions of deliveries a month. You are serving how many customers in Israel right now, total?
Lior Eshkol:
More than two million.
Michael Eisenberg:
More than 2 million customers in Israel, which is a stunning number. Is there any other business in this country that serves more than two million people?
Lior Eshkol:
I guess so. I guess like the big e-commerce market,
Michael Eisenberg:
Like who?
Lior Eshkol:
For example, the government.
Michael Eisenberg:
The government?
Lior Eshkol:
Yeah.
Michael Eisenberg:
Yeah, I agree with that.
So, I think it's fair to say that Israel writ large is not well known for customer service, yet I think you have probably built the most popular brand in this country. Do you get a lot of complaints about customer service?
Lior Eshkol:
We get complaints about customer service, but it's also part of the model. Like the people reaching out for us is, we talked before about what our model is.
We need people to choose us every day. And we also understand in delivery things can go wrong. I'm not preparing the food, you know, I'm not carrying it. Which means that fundamentally we know this will happen. So we solve it by a very strong customer success and customer support team. Which, by the way, I do a lot of customer support.
Michael Eisenberg:
You answer calls?
Lior Eshkol:
I answer, it's like text, not calls.
Michael Eisenberg:
You don't have AI agents doing this already?
Lior Eshkol:
No, not yet.
Michael Eisenberg:
Zero?
Lior Eshkol:
We do have an entry point that orients the conversations, so the chats and solves kind of like very easy problems.
Michael Eisenberg:
How many people are actually sitting behind and responding?
Lior Eshkol:
In Israel, more than 700. Obviously in shifts.
Michael Eisenberg:
For two million people?
Lior Eshkol:
Yeah. Sounds efficient?
Michael Eisenberg:
It sounds very efficient. And no AI?
Lior Eshkol:
We have, again, a bot in the beginning that orients the chats according to the specific theme.
Michael Eisenberg:
How many chats can people respond to an hour?
Lior Eshkol:
It depends on the level of depth, like the chat, the type of issue that arises. A delivery being late is an easy problem. Someone taking your delivery might be a more complicated problem. It happens sometimes.
Michael Eisenberg:
What percentage of deliveries are taken by somebody?
Lior Eshkol:
Not very high. Not very high.
Michael Eisenberg:
Who takes them?
But going back to–
Lior Eshkol:
Michael Eisenberg:
No wait, who takes them?
Lior Eshkol:
Who takes them? I don't think that someone takes them. I think people sometimes get mixed up. Addresses are very similar, like, you know, someone just left an order here when I came in. Maybe someone else took it by mistake.
Michael Eisenberg:
I mean, the fact that I didn't order, it didn't dawn on them, maybe I should return it?
Lior Eshkol:
Maybe they ordered something else.
Michael Eisenberg:
Wow. Okay.
Lior Eshkol:
Yeah. But I think at the end, customer support, that's by the way, something that's very interesting because you're right. It wasn't a big thing in Israel. And the thing is, the Israeli consumer deserves good support, and they wanted that good support.
And it's something that we as a company–
Michael Eisenberg:
But nobody ever provided it.
Lior Eshkol:
But we as a company knew we have to, because the customer experience, and that work on making sure that people choose us every day, that's our DNA. That's our culture at the end.
Michael Eisenberg:
You said that you get behind the customer support chat every once in a while. When I checked with my team here, there's a feeling that somehow Wolt always knows the right answer. It's like, it's like bear hugging you. In a positive sense, and knows exactly what you're looking for. How do you create that?
Lior Eshkol:
You know, it's a combination of, obviously, first of all, tech. We have a lot of data to actually, we know exactly when someone picked up the order, what happened to the order.
We have all those touch points across the journey, with a team that all of our team are the customers. If you go to our team, you see all of them are what you consider to be the typical Wolt customers. They know what type of service they want to have, and that's the type of service they provide onwards.
And because they have the right data to do that, they can really openly be themselves and like the unique Wolt tone of voice which is very friendly, very social. The blue heart is often used in the Wolt support, that really is Wolt. So the customer support people are a little bit the spirit behind Wolt and I'm happy that customers can see it.
They also, by the way, apologize when they make a mistake because mistakes happen, but they try to fix it moving forward.
Michael Eisenberg:
How do you recruit for people who know to use the blue heart?
Lior Eshkol:
It's part of our training process.
Michael Eisenberg:
How do you find these people who are empathetic enough so that the customers feel comfortable? Like, they're being hugged and supported.
Lior Eshkol:
I think that, first of all, we, people from the company invite people that they know and they think will share a similar culture. A lot of our people come from that. We know the type of profiles that are kind of like people from certain backgrounds that might fit that.
We also train them and we give them that ability. And we also provide them with a lot of information and our data is very good, so they can really make the right decisions and they know that.
Michael Eisenberg:
Okay, now tell me, I'm going to put you on the spot, because I was waiting for this moment.
What is special about you that figured that out? Because I'm looking for another consumer brand in this country that's figured it out, and I can't find one. I've thought all the last two days getting ready for this. Is there another consumer brand in this country that people love as much as Wolt, and think that the customer support and customer experience is excellent? You're serving 2 million people, and people love you!
Lior Eshkol:
You know, I'll tell you differently. I'm not sure there's enough really strong consumer companies in Israel.
Michael Eisenberg:
I agree.
Lior Eshkol:
We'd love to see more, by the way. As I said before, Wolt is a Finnish company.
Michael Eisenberg:
I know.
Lior Eshkol:
So our presence in Israel is very strong.
Michael Eisenberg:
I know, but this is the biggest market for Wolt. And you're an icon.
Lior Eshkol:
Yeah.
Michael Eisenberg:
And you're a verb.
Lior Eshkol:
So first of all, again, it's part of the Wolt global DNA.
Michael Eisenberg:
I know. What about you?
Lior Eshkol:
It's the customer obsession.
Michael Eisenberg:
I know. What about you?
Lior Eshkol:
What about us as a team?
Michael Eisenberg:
No, you personally, Lior.
Lior Eshkol:
Me personally as Lior, and us as a team, know that people need to choose us every day for this to happen.
Michael Eisenberg:
I know. You keep saying that. No, but there's something that you figured out that comes from somewhere deep, where you've led this team of people to, like I said, become a cultural icon and that's what I want to get at.
Like you came from Healthy.io, I know that company. Great company, great customer experience, not 2 million people yet.
Lior Eshkol:
Yeah.
Michael Eisenberg:
You came from WeWork, there's a lot of people at WeWork. There's something about Lior, and I'm going to put you on the spot, I know it's uncomfortable to talk about yourself, that you figured something out in a country which doesn't have consumer brands.
You grew up here. It wasn’t like you were exposed to Swedish customer support that you figured out that matters. And that's what I want to know.
Lior Eshkol:
I think that part of the figure out what matters is, as we said, that Wolt’s global culture, and you know, as we said, it's something that happened also before I came. It was very strong. What I think we did as a team that's very good is how we scaled it. So how do we move on from only Tel Aviv and restaurants to from, again, from the startup phase to the scale up phase? And that results in a very, very, very strong team.
Michael Eisenberg:
What's that playbook?
Lior Eshkol:
The playbook is one, create a very strong leadership team that their strength is in their ability to work together.
Michael Eisenberg:
Okay. Everyone says that, but keep going. I'm not going to let you off this easy. I promise.
Lior Eshkol:
Everyone says that, absolutely. But I think in an operational business, you know, there's, the business we run is a combination of tech and operations. That means that so many different things need to happen. And you need to be able to work in a culture that people really have to collaborate. Like they have to, have to, have to collaborate. You know, people talk about that “I choose my team according to the airport test, the person I want to spend some time with in the airport.” I don't think that's how we build a team.
We build a team figuring out people who are best in their field, but also good at working together. So that at the end, we talked about the war, for example, and some of the fundamental changes we did is, we changed something really meaningful in the operations. We decided on that day that the first day of the war. And a week after I had a team meeting and I asked them, “Do you guys remember who came up with that idea?” No one did. Really, no one did because it's, you have to constantly work together. So I think that's recipe number one, have a very strong committed team. And at the end, that culture will make itself so they will create a meaningful team that know how to work together and collaborate.
Two, focus on the fundamentals because at the end, at least in a business like ours, we get judged every day. That means we need to learn every day. We optimize. I'll be honest with you, we have deliveries that are late. We have deliveries that someone else takes, unclear why, but we take that as a learning opportunity all the time.
And that's like a little bit part of our DNA. And also it doesn't hurt to have a great, you know, tech environment in Israel, entrepreneurship spirit, and that's it.
Michael Eisenberg:
You still haven't told me what makes Lior unique that you've cracked this. This is a country of a little less than 10 million people. You serve 20 percent of the people in this country.
It's remarkable. And people still love you. You serve more people than vote for the most popular politician in this country. Low bar, but, um.
Lior Eshkol:
What do you think makes us special?
Michael Eisenberg:
Since I only use it three times in my life, I don't know. It's clearly super convenient for people. I actually like to go out and see people. Sitting at home and ordering food candidly to me feels like a waste. I'll make myself food. So I'm the wrong guy to ask the question, which is why I'm asking you.
There's clearly something about what you're doing that has created this, but I haven't been able to get it out of you yet. Other than, you hire great people, you have an open environment where they can challenge things and they're selfless.
All of which are very important. Jim Collins would give you an A plus on good to great. But what about you?
Lior Eshkol:
I think what about me is that I, you know, I came from a family that grew up here. Like all of my family is originally from Israel. My grandparents are Holocaust survivors, established a kibbutz in Israel.
My other grandparents came from South Africa as true Zionists to Israel. And all of them came to Israel with the belief of, they can do something great, and worked very hard to do it. Each one of them with their own environment. So, my parents are very similar. My dad is, you know, a matkalist. I was an officer.
Michael Eisenberg:
That's a special forces guy. Yeah.
Lior Eshkol:
I was also an officer in the intelligence corps for four years. I think I came up with a very loving, very loving family that really believes in working hard, figuring out the right ways to do things. In my education, starting with the army, I really learned the importance of gathering different information, analyzing it and making rapid decisions.
That's something that I practiced every day since I was 18. And it's something that really became a part of me. And by the way, part of many Israelis here in Israel, I think, it's part of the culture, culture of ownership. In my case, a culture of data searching, analysis, assessment, and then decision making.
These are things you need to do all the time. And these are the type of things I brought with me to Wolt and across my journey. First of all, that really hard work and the details to get the big picture, right, and also a little bit of like a daring, right? Like believing that it's possible.
The same as my grandparents believe this country can be a thing, I believe very much in my team. I feel like you can see it. You can come to the office, you'll see how really strong and collaborative the team is, and that belief of kind of like things are possible. That's learning, that kind of like going to the details, is some of the things I brought across my career.
Michael Eisenberg:
First of all, thank you, that was, I think, a great answer. Rapid decision sounds interesting. What percentage of decisions do you get wrong and then have to fix?
Lior Eshkol:
Oh, I'm sure a lot.
Michael Eisenberg:
How many you think?
Lior Eshkol:
Think of how many decisions an operational company makes every day.
Michael Eisenberg:
Yeah.
Lior Eshkol: Most of those decisions, the good thing, are two way doors, right? That's what Bezos says, right?
Michael Eisenberg:
Exactly, the classic Amazon. Keep going.
Lior Eshkol:
Yeah, the classic Amazon example of–let's say I make a specific, even on a certain holiday in Israel, I make a certain decision. Great. Next holiday, if I did it wrong, we have many holidays here, I can fix it.
That's the thing is like, if after every decision you make, be it a positive one or a negative, you reflect afterwards and then improve your operations moving forward. That's what really makes sure that those decisions, the ones you get wrong, are also okay, cause they're learning opportunities.
Michael Eisenberg:
A few quick questions to wrap up. What's the most expensive item ever delivered by Wolt?
Lior Eshkol:
We deliver iPhones, so I would say that's one of them.
Michael Eisenberg:
That's the most expensive item?
Lior Eshkol:
That's one of the most expensive.
Michael Eisenberg:
How many iPhones are ordered a week in Israel?
Lior Eshkol:
Not as many as people order pizza. Let's put it this way.
Michael Eisenberg:
But how many?
Lior Eshkol:
I don't know. It changes. Let's wait for the next version of the–
Michael Eisenberg:
Tens, hundreds, thousands?
Lior Eshkol:
Tens to hundreds.
Michael Eisenberg:
A week.
Lior Eshkol:
No, not a week. A month.
Michael Eisenberg:
A month.
Lior Eshkol:
But I would say even, like, it varies. I feel people buy less now. They're looking for the next innovation from Apple. It's going to come with AI, and–
Michael Eisenberg:
That's actually really interesting.
So, based on, like, fluctuations in deliveries, you can tell when a product is on its course.
Lior Eshkol:
And I think you asked me before, that's exactly why we continue on looking for that target market fit. Exactly. We look at searches. We look at needs. And that fixes a lot of the things that people don't need as much.
Michael Eisenberg:
Yeah. Give me some other things like the iPhone or Apple devices where people you think have like slowed down their buying and waiting for the next thing.
Lior Eshkol:
Most of our business is not on things people wait for a year. It's in things that people want quite quickly, being food delivery, grocery delivery, pharma.
Michael Eisenberg:
What about generators? Are people still ordering generators?
Lior Eshkol:
Not as much. No, so generators are gone. Transistors, no, also not as much.
Michael Eisenberg:
Anything else?
Lior Eshkol:
Bolts? Bolts, people order.
Michael Eisenberg:
Bullets.
Lior Eshkol: Bolts. Oh, bolts. Light bolts.
Michael Eisenberg:
Light bulbs are important. What are other things that have kind of gone up and gone down?
Lior Eshkol:
I think many things go up and down. Sometimes you look at a Thursday, and the next Thursday is not the same. Why? It might've been sunnier. People might have felt better with the situation in Israel. So many things change all the time. The need as a platform is to be able to adapt and adjust.
Michael Eisenberg:
I'd love to get some AI in your backend and try to assess people's moods by looking at what they bought. Do you deliver alcohol?
Lior Eshkol: We do deliver alcohol.
Michael Eisenberg:
Okay. This is interesting. What is the day of the week that people order the most alcohol?
Lior Eshkol:
What would you assume?
Michael Eisenberg:
I would assume it's Thursday.
Lior Eshkol:
You are correct.
Michael Eisenberg: Okay. I was wondering if it was–
Lior Eshkol:
You don’t need AI. You are the AI for alcohol deliveries.
Michael Eisenberg:
I was wondering if it might be Friday for Kiddush, but it's probably Thursday. I would say, because it’s the weekend here.
Lior Eshkol:
Yeah.
Michael Eisenberg:
Okay, Thursday.
Lior Eshkol: Purim, for example, is a big alcohol day. Because that's, you know, a reason to celebrate. So that's part of the holiday.
Michael Eisenberg:
Is it mostly wine or hard alcohol?
Lior Eshkol:
I would say it's a combination of all types of alcohol.
Michael Eisenberg:
What's most popular, beer, hard alcohol, or wine?
Lior Eshkol:
Maybe in numbers, beer, people drink more beer. Wine is quite popular in Israel. But I think it just reflects that general, you know, atmosphere in Israel.
Michael Eisenberg:
What was ordered most on the recent Independence Day holiday? What was like something that spiked up?
Lior Eshkol:
Meat is often ordered.
Michael Eisenberg:
People buy from the butcher.
Lior Eshkol:
Yeah. Yeah.
Michael Eisenberg:
Right on the day of.
Lior Eshkol:
But I think that's exactly it. Think of, we just talked about two recent holidays, how the platform enables people to order whatever they want.
Michael Eisenberg: Yeah.
Lior Eshkol:
I'll tell here that I'm a vegetarian. I don't order meat, but we also have different, Beyond Meat on Wolt and that became, you know, big as well. So it's the ability to really adapt yourself and find whatever you want and, and when we see those vegan trends and vegetarian trends and we enable them as well.
Michael Eisenberg:
So Tel Aviv is known as a vegan capital of the world. When you compare vegan ordering in Tel Aviv to Jerusalem, what's the ratio?
Lior Eshkol:
I assume more people order in Tel Aviv, the same as, you know, I lived in New York for a couple of years. That very common there as well. So I think that's something that all, you know, big cities have in common.
Michael Eisenberg:
Well, I'm not sure it's all big cities. I don't think Dallas, Texas has a big vegan population as Tel Aviv, for example, or…
Lior Eshkol:
You're right. Maybe it's like–
Michael Eisenberg:
Or Greenwich Village in New York.
Lior Eshkol:
–an East coast and west coast thing.
Michael Eisenberg:
There's definitely an east coast thing. That is actually really interesting. Did people order matzah for Passover on Wolt?
Lior Eshkol:
People did order matzah and also I think krepelach,
Michael Eisenberg:
Kneidolach.
Lior Eshkol:
Yeah.
Michael Eisenberg:
Did it arrive whole or was it broken?
Lior Eshkol:
Maybe try it yourself next time and we'll see.
Michael Eisenberg:
You are almost non-existent on social media. Why?
Lior Eshkol:
You know, I’m not very–let's call it like, an open person. I'm not an extrovert in nature, as you can see. I love the things I do and I love working with my team. I don't feel the need to be out there. But on the opposite side, I do spend a lot of time observing. I'm an observer in nature. I, in the office, you talked about the glass walls, which we have as well.
It's a great opportunity to always look at people really in the eye, and see what they're doing. And for me, I find that it serves me quite well to really kind of, look and try to understand what people are actually experiencing and then address that. And it's less my nature to be more outwards facing.
Michael Eisenberg:
You're a social media voyeur. You don't think it would be helpful to kind of share some of what you've learned and your wisdom on social media?
Lior Eshkol:
It might, it might be. I spend a lot of time in universities with young people. And I have a very young work force that I'm working with. I really make sure that we, you know, it's our achievement together. So it's like something that, that we all share in common. It's kind of like we're all on the same journey together. It's something I think they feel. And you know, I think that obviously I hope over time people will experience that and move on.
And that's why it's really important for me to spend a lot of time with young people, mainly in university.
Michael Eisenberg:
Is social media posting a waste of time?
Lior Eshkol:
I don’t think so. For some people, I'm sure it's very, very, very valuable.
Michael Eisenberg:
You think you're more efficient and more able to make decisions because you're less on social media?
Lior Eshkol:
I don't think so. I think that for me it works, but it also makes sure it's–for other people, you know, something else might work. For me, being who I am works. We talked a little bit about like my family and kind of who we are a little bit. My partner is very similar as well.
We're not, you know, extremely outward facing people. But you asked a little bit before, I think that kind of like going back to the value. he and my family are people that I really look up to. And that's kind of like where I'm spending most of my energy and focus on. Really kind of like doing the work, being with people that I care about.
Michael Eisenberg:
I kind of think you're like this hidden cultural icon in this country. Like everyone knows who you are by the blue bags and whatever those things are, coolers that everyone's driving around with. But no one really knows who you are.
Lior Eshkol:
But I'm part of something. Like I know I'm leading it, but I'm a part of something.
I think that this, and the blue box, would never have happened if there wasn't Imri Galai and this amazing team that built Wolt to where it is. If we didn't have an amazing global company and a great product that keeps on developing, if I didn't have an amazing team that even on October 7th, knew how to refactor the business and make quick decisions, and it's all of this together.
All of this together is what actually makes this work and keeps on improving over time. And I think that's why it's a little bit less about me. I was very privileged in other companies I worked with to learn from different mentors.
I spent some time in P&G, which is a great school. I got great mentors there, like Phil Gutmann and Steven Einstein. And I hope to be the same for my team. And I also learned from them. So, in a way, it's very much like a team effort that continues enhancing.
Michael Eisenberg:
Last three questions. What do you do when you're not working?
Lior Eshkol:
I do yoga. I love yoga. I spend some time with my family and friends. Tel Aviv is a great city to be outside.
Michael Eisenberg:
Best.
Lior Eshkol:
Yeah, it's a great city.
Michael Eisenberg:
That's it? Family and friends, yoga?
Lior Eshkol:
Yoga, go to the ocean, to the sea.
Michael Eisenberg:
Yeah?
Lior Eshkol:
Yeah.
Michael Eisenberg:
Are you competitive in any way? Sports?
Lior Eshkol:
I'm competitive on the small things. Like, yeah, I can be very competitive on small things, but not necessarily a bigger thing.
Michael Eisenberg:
Gimme an example of a small thing.
Lior Eshkol:
You know, I can argue with my family on who was right about something that happened a few months ago. I can see people here empathizing, but I'm not so–I'm competitive with the small things, like who would get there faster type of thing.
Michael Eisenberg:
What can the world learn from you and Wolt, Israel? Like, what can we export from both your experience and success here? It's hard for people to imagine, it's stunning, everywhere you go in this country, there's Wolt at this point. Everyone knows it. It's a verb. Like, you're the least well known cultural icon in the country.
Lior Eshkol:
I think they can learn resilience. I think it's something that, unfortunately, we need to practice quite a lot.
But you know, this is an extreme situation, but it happens every day. We look for a product market fit every day and continue on building towards it. I think they can look at people really doing the work in the details, like really making sure that one thing leads to another, because at the end it's a business that's really won every day with every delivery, and that is part of what we do as a team.
Michael Eisenberg:
Is that different from Amazon?
Lior Eshkol:
I think it's similar to Amazon that way actually.
Michael Eisenberg:
So what's unique that they can learn from Wolt Israel?
Lior Eshkol:
From Wolt Israel?
Michael Eisenberg:
Yeah.
Lior Eshkol:
I think the resilience, and having a very strong team. It's something that I would definitely encourage many people to have as well.
Michael Eisenberg:
Is patriotism a value at Wolt Israel?
Lior Eshkol:
I think people take great pride in–and I saw it especially during the war–at the ability to continue serving so many people. We talked about the number of customers, couriers, and venues, and this is something that's really inspiring, and I think that's one of–I would actually love to see again more consumer companies like Israel making an impact.
We are great successes in many things in Israel, but consumer companies and companies that are built in Israel for Israelis are not necessarily something we have enough here.
Michael Eisenberg:
The book we described today that you're going to write, what's the title going to be?
Lior Eshkol:
What do you think the title should be? I think you came up with the idea.
Michael Eisenberg:
The Hidden Icon?
Lior Eshkol:
Can I be honest with you?
Michael Eisenberg:
Yeah.
Lior Eshkol:
I think it's a little early for that book.
Michael Eisenberg: I agree.
Lior Eshkol: I think I'm in a journey and we're on a journey and the headline for that journey would be determined in the future. And honestly, I'm looking for more stops in the journey.
Michael Eisenberg:
I love that. Lior, thank you for joining me.
Lior Eshkol:
Thank you for having me.
Michael Eisenberg: You can find Lior Eshkol on LinkedIn, but she's barely around. L I O R E S H K O L. That's just because I do that on every show. You're just better off following the Wolters around in order to understand what a great job she's doing.
Thank you for joining us.
Lior Eshkol:
Thank you for having me. I really enjoyed it.
Michael Eisenberg:
We're back for another episode of invested. And today I'm thrilled to have my friend, Jacob Helberg, with us. Welcome, Jacob.
Jacob Helberg:
Mike, thanks for having me.
Michael Eisenberg:
Jacob and I know each other for a bunch of years. We've also, let's say, been around the block a few times on a bunch of interesting issues, some of which we'll delve into today where Jacob has been a true leader.But before I start asking you questions, you want to tell our listeners who Jacob Helberg is?
Jacob Helberg:
Yeah. So I serve on a bipartisan commission in Congress called the U.S. China Economic and Security Review Commission, which advises both Chambers of Congress – so the House of Representatives and the Senate – on laws related to the U.S.-China relationship in all areas. That includes political affairs, military affairs, economic affairs, technology affairs, diplomatic affairs. And it was created in the wake of China's accession to the WTO in the early 2000s because Congress wanted a mechanism to stay informed on whether China was complying with its WTO commitments.
For a long time, it was a bit somewhat of an arcane institution and has really catapulted to the forefront of the China debate as Washington struggles with figuring out the best way to recalibrate America's trading and political relationship with China.
In a private sector capacity, I also serve as an advisor to Palantir CEO, Alex Karp, where I help provide support with public policy strategy and help inform the company's positioning relative to the changing geopolitical landscape. The company was founded in the early 2000s when a pervasive feature of international politics was the war on terror. Obviously, today, we live in a world dominated by great power rivalry, and so I tend to focus a great deal of my time on those issues.
I also wrote a book called The Wires of War: Technology and the Global Struggle for Power, which came out a couple years ago now, and which basically made the case that the United States and China were in a two-front technology gray war: the software front and the hardware front.
In a completely private capacity, I also help run a private annual gathering called the Hill and Valley Forum, which brings together technology executives and lawmakers.
Michael Eisenberg:
Yeah. And, if I could add: you're also a senior adjunct fellow at the Center for National New American Security. You're also a senior advisor at the Center for Geopolitics and Technology at Stanford University. You're married to another good friend of mine, Keith Roboy, and you live in Florida, but you weren't born in the United States, is that correct?
Jacob Helberg:
I was born in Paris, France, actually.
Michael Eisenberg:
And this is kind of where I want to start, which is, you grew up part of your life in Europe and outside the United States. What did that kind of time growing up outside the United States teach you about America and teach you about –sorry for the word – patriotism?
Jacob Helberg:
It's funny because, in a way, growing up abroad gave me some distance and perspective and see looking at America from the outside. I grew up in France and came of age right around the Iraq war when Europe was in the grips of a huge wave of anti-American sentiment. You know, at the time I wasn't particularly, I had no political allegiances either to the Democrat or the Republican Party, but I felt strongly that America was a force for good in the world, so I often found myself embroiled in debates at school defending the Bush administration. Even if I didn't particularly identify at the time as a Republican, it quickly made me realize, it created a strong personal incentive for me to read up on a lot of international political issues because people would always ask me about them.
By virtue of being Jewish and being American, the first question I would get was often: what do you think of the Iraq war, or, what do you think of the Israeli-Palestinian issue? And that's sort of the origin story of how I developed a passion for these issues.
My grandparents were Holocaust survivors, which formed an indelible part of my worldview and natural skepticism of authoritarian governments. I think authoritarianism comes in different flavors, but authoritarian regimes always share a certain set of traits and features in common. And I think, unfortunately, that theory is proving true today, especially in places like China. And so, those are sort of the formative set of experiences that ultimately led me to where I am today.
Michael Eisenberg:
I want to double click on a few things. So, you said growing up outside of the U.S. informed your view that America is a force for good. Other than not being authoritarian, right – France is not authoritarian – what about that experience led you to the notion that America is a force for good?
Jacob Helberg:
I think when you grow up in the United States, it's easy to idealize other countries and other places. For example, in the U.S., we've often heard political figures like Bernie Sanders hold up countries in Scandinavia as an example and a model that the U.S. should follow. When you grow up abroad and you have a little bit more proximity to how other parts of the world are run and some of the issues that other parts of the world face, you realize how unique and exceptional America is.
That's not to say that other countries don't have their own benefits and strengths, but I've just always found that as a gay Jewish man, and as the grandson of Holocaust survivors, I've always been incredibly touched and moved by the idea of America, which really is inherently meritocratic. It doesn't care, it doesn't matter where you're from or what your last name is. What matters is who, what you're made of.
To a lot of people in the U.S., certain countries in Europe are beacons of health care services and equity and, to a lot of people who live in Europe, there are pervasive social and economic mobility issues. It's really hard to get ahead. Youth unemployment is in many parts of Europe at 25%. By the way, that's reflected in the fact that a lot of young, ambitious people have to emigrate abroad, including to places like the United States. Others immigrate to places like Tel Aviv.
So I guess I grew up with a much less rose-tinted lens view of the world because, as much as I loved and appreciated Europe for a lot of its qualities, it made me appreciate just this boundless sense of opportunity that people had in the U.S. Not to say that it's easier or that it doesn't have any flaws. You know, America is always in the midst of trying to improve itself. But the idea that through hard work and through personal grit, people can really get ahead in this country. And I've always thought that to be incredibly inspiring.
Michael Eisenberg:
You mentioned twice now that your grandparents were Holocaust survivors. How does that impact you in both your outlook and kind of your day-to-day life?
Jacob Helberg:
Well, there's an old saying that history doesn't repeat itself, but it often rhymes. And when you look at authoritarian regimes and when you look at how we got to the Holocaust in the 40s, and how there was a bit of a boiling frog effect and how so much of the “intelligentsia” at the time said it would never be possible. It would never happen. And then consensus shifted from it would never happen to justifying why it was happening or simply not talking about it. And when you look at how there's so much groupthink in our current elite circles, combined with the fact that we have revisionist, revanchist, authoritarian regimes in different parts of the world who are absolutely committed to reversing the outcome of the Cold War, including in places like China and Tehran, and who've made it their common cause to band together to achieve those objectives, and who have a proven track record of being willing and ready to employ similar methods as some of the darkest chapters of the 40s, it really gives me a great deal of concern that a lot of the mantras that the world embraced that it would never happen again after World War Two, are actually easier said than done. And that we really need to be a lot less naive, and start to, we really have to grapple with some hard realities. And that Beijing is currently run by an authoritarian who has a lust for power, who cares about himself, his cronies and his country in that order, and is willing to enslave an entire population in Xinjiang in an open air prison. Estimates range between three and nine million people in those concentration camps.
That's before you start to count Tibetans and ethnic Chinese political dissidents. He's also made it an irrevocable part of his legacy to try to reunify Taiwan. So China is a competitor the likes of which the U.S. has never faced, both just in terms of its technological capabilities as well as its population, the size of its economy.
We really need to… America can win this contest, but it's absolutely imperative that we not be complacent.
Michael Eisenberg:
I want to come back to China in a second, particularly your last sentence, which is “America can win this contest,” because I want to limb the contours of the contest also, and what it means. It's what I spent a lot of the time doing, but I just want to ask you two quick questions.
On the last episode, I had Mark Rowan here. Mark Rowan said, “America doesn't have an anti-Semitism problem; it's an anti-Americanism problem. To which the byproduct on some level is also anti-Semitism.” You agree with that?
Jacob Helberg:
I think there is this bizarre ideology that some people have referred to as wokeism, which I think is an apt name, that has really evolved into a 360 set of belief systems that includes a revision, the revisioning, of Western history through the most negative lens possible with a focus on racism, sexism and oppression that divides the world into oppressors and oppressed, that aims to erase any hallmark of concepts that is deemed to be unjust according to that ideology: from everything from statues to public squares. And that is fundamentally aimed at replacing the current set of elites in our country, that were based on principles of meritocracy, with a new elite that is based on a set of narrow definitions of identity, the definitions of which are constantly shapeshifting.
And so I think there's something incredibly toxic about this ideology. It's unmeritocratic. It bends and deforms the English language to subvert concepts like justice or equity or fairness. It's the most Orwellian thing where if you've read Animal Farm, you know there's passages in Animal Farm where you kind of see this play of the English language where they say, all animals are equals, but some animals are more equal than others, or war is peace and peace is war.And you kind of see similar things where these slogans are used to justify things that are actually completely at odds with the plain English understanding of the word. And so, yeah, I mean, I do agree with Mark Rowan. I think anti-Semitism is part and parcel of a broader anti-Western ideology that's incredibly toxic.
Michael Eisenberg:
So before I get into China, I have one more question for you harkening back to something you said probably five minutes ago about Europe. And you kind of said that they may have better health care or they may have health care as a value and a few other values, but ultimately the meritocracy and the ability to kind of get ahead and make something of yourself is what makes America so special.
Part of the issue in America, as we know, is that a lot of the entitlements, which you kind of include in what you referenced in Europe is coming close to bankrupting America. And so I want to ask you a controversial question. As someone who grew up in Europe, moved to the U.S., as an astute observer of economic policy, do you think the social welfare state has run its course? Is it bankrupt and dead?
Jacob Helberg:
I've always been a believer in the idea that people should be given a hand up. I think there is a world – this is where I may not be quite as conservative as some of my Republican peers – but I do think, as someone who was raised by a single mom, who taught herself how to program at the age of 47, she benefited enormously, she was a stay-at-home mom for about 10 years when my sister and I were growing up. And part of what happened was when she reentered the workforce, she worked in the news industry, in the magazine industry. She was the editor-in-chief of a magazine in Paris in the 90s. Fast forward to the early 2000s, the industry had totally changed. So her way of reentering the workforce productively was to teach herself how to program. And she never asked for a handout or a permanent safety net, but her ability to have access to courses that allowed her to teach herself skills in order to reenter the workforce, was actually kind of key.It was only four or five months, and it totally changed her life and our lives in terms of her ability to self-sustain herself financially for the next 20 years.
And so I do think that there is a world where the government could be a facilitator and give people a hand up, but I really think there's a fine line between giving people a hand up that allows them to pull themselves up by their bootstraps and get out of hard times, and start creating handouts that actually disincentivize work and create a lot of perverse incentives.
One of the things that I've seen in France is – under the guise of compassion – the government has leaned so heavily in this massive welfare state that it's actually created an enormous amount of perverse incentives. And I'll just give you a few examples.
First, France has had effectively its own equivalent of UBI for several decades. So if you're 18 years of age and you're unemployed, you can claim that. It's roughly 1000 dollars, 1100 dollars from the government, which doesn't sound like a lot in the U.S., but in France the cost of living is much lower, so it actually goes quite a long way. And that's before you add different kinds of child care benefits and all that.
What that does is a lot of young people who are 18, 19, 20, will claim those benefits and then work undeclared without paying taxes. They never really, there isn't that hard forcing function to actually go and work legitimately. And it creates really big problems, both from a tax revenue collection standpoint, but also just from a social integration standpoint.
I grew up in, relatively, I was lucky in some ways, to have graduated without a student loan debt, but I really didn't have that many resources after graduating college and working was actually an incredibly formative experience. Figuring out, going through the process of figuring out what are the skills that the job market requires and wants, you know? It's not just about me wanting to study Latin American art history, but the world has needs and figuring out where you fit in those needs. So I think work is incredibly important.
The last thing I'll say is I do think our modern day culture – and this kind of traces back a little bit to this new woke ideology that I'm very concerned about – I think has created this and social media has made this worse: there is this myth among younger people that has emerged today that I've certainly seen emerge as a pattern: that if you work really hard, you're supposed to make it. And there's something deeply unfair if you don't make it right away, if you work really hard. I get that, but I think a fundamental difference with the ethos that I grew up with, is that working really hard is table stakes. That doesn't mean you make it. You have to be better than your peers, because it's a relative game, not an absolute game. There is no guarantee in life that you're going to be successful. And so you have to work really hard for a while and there's nothing– And the reality and the truth that our culture doesn't tell young people is that being successful is actually really hard. And so I think there is a bit of a lie in the notion that if you just look at inputs, you are supposed to get a guaranteed set of outputs. The reality is the individual responsibility and agency is actually critical. And people have to think about: what are my strengths relative to others? Life is going to be full of highs and lows, and all of these things are normal. They're a part of life, and they're a part of people's journeys.
Michael Eisenberg:
And just to follow that up, at a macro level, do you think the social welfare state with the UBI in France can survive kind of the upending of the demographic pyramid: the lack of birth rate among the French or other Europeans and the high-end provision of social services? Or does it kind of collapse?
Jacob Helberg:
Well, I think by every objective metric, the French economy has been in decline for two decades now. When I grew up in France, Europe's GDP was roughly, was actually a little bit bigger than America's, and today it has totally collapsed as a relative share of global GDP and as a relative share of U.S. GDP. And so when we think about collapse, there has been this unbroken years of retreat from Europe's role in the world that I think has actually kind of proven that entire model wrong. I would say even that was actually even a core basis for my decision to switch to becoming a Republican because I just really felt like the Democratic Party in the U.S. was embracing a set of values and politics that was more and more reminiscent of the French left, which I believe has been the primary author of French decline.
Michael Eisenberg:
Really interesting.
Jacob Helberg:
Probably harsh to say, but that's the truth.
Michael Eisenberg:
That's actually a good segue. I really want to dig in on China now, but just to tee it up:you wrote Wires of War. By the way, I had John Pelson on who wrote Wireless Wars. On some level, you're two birds with the same feather. But I want to talk about the book for a second before we really dig in on the kind of contest we talked about before.
So you had a front row seat to – for lack of a better term – Chinese PsyOps and Chinese actual ops in the digital sphere – what you call the gray war – when you were at Google. I'd love for you to tell everybody about what your role was at Google, what you saw that kind of lit up your neurons on this topic, and then caused you to write the book.
Jacob Helberg:
I'll start with what my role at Google was. I led news policy at Google. There are two types of policy functions at large tech companies. There is what's called product policy and public policy. Public policy is essentially akin to government affairs. It's the state department for a tech company. How do you manage the company's relationships with external stakeholders?
Product policy is kind of like Congress for the company. So the company obviously enforces laws that governments require statutorily, but because a lot of the Internet is relatively unregulated, companies then also develop a set of voluntary self-imposed product policies to decide how they handle certain types of content information issues that come across. Everything from spam to violent extremism to misinformation and the like.
I focused a great deal of my time on the new issue of foreign interference, which some people over the years have kind of defined as everything encapsulating misinformation. During my tenure at Google, I had a much narrower definition of foreign interference, and I focused on the cases where foreign governments misrepresent themselves as domestic news agencies, basically. So it was a very narrow definition that really focused on the conduct of a given news site. I oversaw news policy for all of Google's products except YouTube. So that includes Google Search; that includes the Android feed; that includes Google News, et cetera. One of the interesting things that I saw took place in 2016, 2017 was there was clearly this new trend – that was actually very new in Silicon Valley at the time – which was foreign governments increasingly using commercial civilian products that were deemed completely benign as tools to advance their geopolitical interest. They were doing this in ways that were extremely novel at the time. So much so that most executives initially thought that I was crazy when I was trying to explain this to them. I came to this conclusion through a lot of forensics work that I did with different teams at Google to identify exactly what are the locations of different assets and so forth, to actually really get to the bottom of what the facts were.
The other interesting observation is it quickly became so Russia was the first mover. They really piloted and seed funded, if I should say, this whole news foreign interference space. China and Iran were rapid followers. And China, I would argue, is by now by far the biggest player.
But the interesting thing is Chinese, Russian and Iranian news sources all parroted each other, so they all reinforced their own messaging and talking points, especially when they're targeting Western audiences. And it's always about discrediting institutions and Western politicians, whoever they may be, whether it's Trump, Biden, whatever. Trying to turn allies against each other, so they're trying to turn the U.S. against Europeans, Europeans against the U.S., the U. S. against Israel, vice versa.
Lastly, the other big takeaway and insight that I realized was that this was actually part of a broader strategy and a broader feature of international politics where these authoritarian governments were increasingly using commercial technologies writ large, both software and hardware – except that in hardware, the main player is China because hardware is very expensive – to wage political warfare. And the reason that this pattern had emerged and the reason they were doing this is because there was a paradox between the usability of a given weapon and the degree of destructiveness of a weapon. Just to kind of give you a little bit of a simple example: if you take nuclear weapons, they're highly, highly destructive, which also makes them not that usable in day-to-day political warfare between different countries. It's attributable; it's highly destructive. If you wage political warfare in the gray zone, beneath the conventional threshold of war, the degree of destructiveness is lower, but it's also highly usable because you can deploy it every day without triggering substantial repercussions upon yourself.
Michael Eisenberg:
It also compounds.
Jacob Helberg:
It compounds, exactly. And that was this paradox that kind of created a new landscape. Where gray zone warfare had really become a pervasive feature of international politics, which was very new. Ultimately that was one of the reasons that I decided to write my book.
Michael Eisenberg:
So, you write this book which is really at the heart of information warfare. Pelston's book is really on the hardware side of this, particularly around Huawei. How did that both shape your views and actions? You leave Google not long, I mean, you write the book after leaving Google basically, and this has a major impact – as best I can tell from our conversations and from watching you – on your view of U.
S.-China economic relations and geopolitical relations. And so you start to work at this and you get in front of Congress and you get in front of companies on this topic.
Where are we going with this? We're in a great power rivalry right now. There isn't a new status quo, that's for sure. We're in a very uncertain time. The PsyOps operations continue. Your book woke up America, but it didn't deter China, or Russia, or Iran, in that matter. And so we're in this kind of heightened state of economic and security tension between everyone.
So first of all, where are we? And second of all, where are we going in the next 12 to 24 months on this and over the longer term? Right, the open internet's not going away.
Jacob Helberg:
So the internet is changing its shape. China effectively ended the global internet when it erected its great firewall, which basically divided the world into two internets. And now you're kind of seeing this fragmentation continue because part of what China did is that it erased the dividing line between its public and its private sector, which meant its internet companies are now directly subservient to the Chinese state. Which means that democracies need to determine if it makes sense to allow Chinese companies in their market, which kind of prompted a lot of national security concerns around TikTok and Huawei and ZTE. And so there is a little bit of a bifurcation–
Michael Eisenberg:
Let me just challenge that for half a second. So the ZTE, Huawei, TikTok thing – which we'll come back to – is almost an easy dividing line, but there is an asymmetric war here, which is that China's internet is closed to U.S. influence, whereas the U.S. or European internet entities are still wide open for the Chinese to play, and especially – the way you describe in your book – using the local actors. So we're not in the same, we haven't solved the problem, so to speak.
Jacob Helberg:
Yeah. And that's one of the reasons I've been an advocate of legislative action against companies like TikTok, a proponent of banning Huawei and ZTE. For all those reasons. So we're not where we should be, in my view. I would push for much more aggressive action against these companies. And I don't believe that free speech is a legitimate reason to stall legislative action. We've taken lots of restrictions on commerce on grounds of national security when national security is at stake.
But in terms of your question about where we're going and where we're headed with this: when I wrote the book, I said that the U.S. and China were in the middle of a gray war and that it was untenable for Silicon Valley to remain neutral and be Switzerland, which was fundamentally where much of Silicon Valley was at the time.
Today I think we've entered a new phase. I think we are in an incredibly accelerating technological arms race with China, that is moving on every front from biotechnology to hypersonics to quantum to artificial intelligence, material sciences, space exploration. The narrower the gap gets between us and China, the less stable the world gets. Ultimately, if you believe in basic deterrence theory, if we want peace, the best policy is to stay ahead and widen that gap as much as possible.
I really worry that we are taking the right steps, but we are also slow. Ultimately, one of our biggest Achilles heel right now isindustrial. We are awakening to the fact that our hollowed-out industrial base, it creates a massive problem for our country that has repercussions on almost every sector of our economy. My hope is the U. S. government starts to consider pretty drastic steps to reboot the industrial base quickly because, ultimately, the hourglass is running out. I believe that the narrower the technological gap gets, the higher the risk of war, and, China's not that far behind anymore.
I really worry that if the Chinese government starts to feel like it's gaining an edge over us, it's going to feel really emboldened to roll the dice and try to attempt a move of force in the Pacific, which could really throw the world into an incredibly deep crisis..
Michael Eisenberg:
“In the Pacific”– you mean Taiwan or you mean–
Jacob Helberg:
Taiwan.
Michael Eisenberg:
Philippines, or you mean… Taiwan.
Jacob Helberg:
Well, Taiwan is the war that everyone is expecting, which naturally makes me a little bit skeptical that maybe they're going to try something different. But, I think whether it's in Taiwan or whether they try to prompt some sort of unexpected other regional conflict, I just think that they're going to try. If they feel emboldened, if they think they can win, they're going to try to make a move in some capacity. And they might actually try to incite one or two additional regional conflicts in other parts of the world to further drain the West's resources, attention, before trying to make a move in the Pacific.
But I think they're really playing three-dimensional chess. And I think unless we come to grips with the fact that these regional conflicts are already a global challenge– I mean, Tehran carried out the October 7th attacks, Hamas carried out the October 7th attacks under the direct direction, assistance and so forth of Tehran, which itself was completely subsidized and sponsored by the Chinese Communist Party's 50 billion dollars a year oil purchases. Some of the equipment included Chinese-made drones. Hamas obviously built thousands of kilometers of tunnels under Gaza, allegedly many of which were with the help of China's engineering corps.
So it's really hard to isolate these problems in a vacuum. And so I think unless we get a little bit more realistic about that, we're just not going to have an effective long-term strategy. We're going to play whack-a-mole and fight the symptoms and not address the ultimate root cause.
Michael Eisenberg:
So you made the comment earlier that we're in an all-out technological arms race and it behooves – my word, not yours – Silicon Valley to be on the side of the Patriots here.
Before I come to your conference, which I want to talk about, I want to ask: how do you win a technological arms race? And for what it's worth, it feels to me, at least in the current U.S. administration's view of all this, is these are a series of skirmishes and you need to win each one by a little bit to kind of keep the Chinese at bay. And then ultimately there's not a winning strategy here because of what you described, which is this is a kind of technological arms race that is not a kinetic war.
Jacob Helberg:
Yeah, that's exactly right. My basic view is winning this technological arms race is going to take three big steps. On the one hand, we need to build our capabilities as rapidly as possible. Second, we need to stop China from stealing our stuff. China is estimated to be stealing half a trillion dollars in intellectual property from the U.S. every single year. The commander of Cybercom referred to it as the biggest transfer of wealth in human history. We, our companies, spend years and almost a trillion dollars a year in research and development. It's just going to be really hard for us to win if everything we develop, they take by the back door. We need to figure out a way.
Michael Eisenberg:
But how do you stop that? We're not playing by the same rules. How do you stop it?
Jacob Helberg:
We have to figure out a way to stop it. And that could include increasing, enhancing FBI programs to identify Chinese spies in Silicon Valley, of which there are many. Obviously it has to include some sort of border policy where it's hard to stop spies from coming in if 13 million people just walk in through the front door.
Michael Eisenberg:
Terrorists, too.
Jacob Helberg:
Terrorists, 23,000 Chinese nationals, several thousand Iranians. It's a bit of a free-for-all right now. But we really have to figure out some way to stop it.
And then the third is we need to make ourselves less technologically dependent on them. It's just not tenable for us to win this if we are entirely, if our supply chains are entirely reliant on the Chinese. We have to decouple technologically from China.
Michael Eisenberg:
So I'm appointing you the new advanced technology czar on the war on China. And you've got to kind of work geopolitically on exactly the things you described. Right now, what are the three things you do, either in technology policy or geopolitically, to make that happen?
Jacob Helberg:
Well, first of all, working with the countries, so, when you look at artificial intelligence, I'd say the first thing is I would favor tariffs on Chinese hardware writ large. I think that actually helps reshuffle the macroeconomic table. That creates an incentive for companies to move their stuff out of China.
One of the challenges that, frankly, our economy faces, is we are so dependent on China for manufacturing that a lot of companies that make drones, that make a lot of other types of hardware, don't even know if some of their vendors, they might have vendors in Mexico who themselves use vendors in China for different discrete parts. And so we don't even totally know the full extent of what is sourced and made in China.
And so it's not realistic for us to ban individual Chinese manufacturers, but what you can do is create a macroeconomic environment where you basically tell corporate America: you can keep buying stuff from China; it's just that Chinese-made things are going to now cost a lot more money. And that way you're basically telling the private sector: if you want to make stuff in China, it's going to cost you more. And you can figure out what makes sense for your business, if you want to make it in Vietnam or in India or in other places. The private sector is actually really good at making decisions, making rational decisions that make sense for themselves. And so if you just change the incentives, that will really go a long way.
So I'm a big believer in instating steep tariffs on all Chinese hardware, across the board: made by Chinese companies and geographically made in China. And you have to do both because the Chinese are very good at creating offshoots in places like Mexico.
The second is I would further tighten what I call in my book “cyber sanctions against Chinese software companies.” It's for all the reasons that I favored a divestiture ban of TikTok. If you do that, you help address the IP leakage issue, you help address China's infiltration, from a propaganda and surveillance system, into our society. And so I'd be in favor of tightening the screws on Chinese software companies.
Third is, I'm also deeply in favor of removing regulations that impede the U.S. government taking in privately developed technologies. I think we have some of the very best private technologies in the world. Where we tend to consistently fall behind is our capacity to convert those technologies into hard power. So we need to have a zero-based approach to regulations and defense, in my view, and just really rethink the incentives and the culture at the DoD that impedes the modernization of defense.
In the past, and during the rearmament period of World War II, we saw the creation of an industry board that helped supervise, bring in some of the most iconic figures of the private sector to help coordinate the mobilization effort and to increase production towards the war effort. We need to have a major plan and strategy to have a manufacturing surge in this country and in an allied space.
Obviously, not everything is going to be made in America, and that's okay. We need the most essential things to be made here. And then we need things that are important, but non-essential, to be made in some sort of allied space. So figuring out a strategy to do that, and we have to do it in concert with our very best innovators.
And I'll just illustrate this with one example. SpaceX reduced the cost of a launch by 100x. You know, we spend more on defense than everyone else in the world, which a lot of people gloat about, and yet we're short on everything. We're short on munitions. We're short on artillery shells. We're short on ships. At some point you have to stop measuring the inputs and you have to start to look at how China spends less money than us, but they have more ships. They have more missiles.
And so we have to be able to start bringing the costs down and accelerating timelines. The only way to do that is if you modernize the way that things are made. And you have to do that with tech. Tech is the essence of doing more with less. So I'm a big believer in bringing some of our very best technology founders to bear on this issue. As you know, as a technology investor, the bread and butter of tech investing is, often, you make a bet on a founder. The founder identifies a big picture problem. As an investor, you're going to make a bet on this person: does this person have what it takes? You don't always have the detailed plans and roadmap, ever figure it out from day one, but you make an assessment based on whether this person is going to actually produce and deliver. I think we need to have a little bit more of a founder-driven culture and ethos in the government to solve some of these problems.
Michael Eisenberg:
Before I move on to the Hill and Valley Conference, which is directly related to what you said now, I just want to tee it up with trying to get what the stakes are here. You used the word ‘contest’ earlier. And so, to kind of really sharpen the question, tell us what you think the doomsday scenario is if we kind of look forward the next five to 10 years, both in terms of China winning, and the economic and national security impacts of China winning the contest, as you call it.
Jacob Helberg:
Well, the doomsday scenario is you have a world that's run by China, which looks drastically different than the world that you and I grew up in.
Michael Eisenberg:
How does it look different? Be specific.
Jacob Helberg:
Well, America will no longer be able to borrow the way that it has. And that has drastic implications for our day-to-day way of life. That's obviously number one.
Number two is the very way that we express ourselves starts to be completely turned on its head where all of a sudden Chinese censorship rules and privacy rules basically become the de facto norm and standard for the world. So that includes, you know, you could go online and send a text or post something online and all of a sudden your posts get scrubbed or get flagged by Chinese authorities.
The head of Interpol, who lives in Europe, got kidnapped by Chinese authorities. You could have, if China runs the world, you could imagine a world where you do something that is unsavory to the Chinese Communist Party, you take a trip to Bora Bora and never come back, because you get kidnapped by Chinese authorities. I mean, that's really the dark world that we're facing down and that we're trying to prevent.
It means a world where China controls global shipping routes and sea lanes and if your government has a politician that the Chinese government doesn't like, it could cut off the flows of goods to coerce your government into compliance.
So it's a drastically different world. China has a foreign policy doctrine concept called the tributary system. The basic U.S. concept of world order is based on a horizontal concept of sovereign states, which engage with one another on a relatively equal footing. The Chinese system has a vertical tributary conception of the global system, which has China at the top of a hierarchy and countries paying tribute to the Middle Kingdom. What that means is, if China succeeds in reshaping the world order to its image, much of the world will be subservient to the whims and wishes of the Chinese Communist Party. And so it would be a very dark world for all of us to live in. It would be reminiscent of the thirties and forties, except even more so, even worse, because this authoritarian regime would have technological capabilities that Hitler and Stalin could have only dreamed of.
So, ultimately, if there's anything our countries should stand for, it's the very basic foundational ideas and values that we all agree on.
Michael Eisenberg:
Who should be the natural allies? Which state should be the natural allies for the United States in this battle?
Jacob Helberg:
So I think we often in the foreign policy community have a little bit of a puritanical approach to this, where we only want to partner with countries that have perfectly clean hands or are democracies.
Those democracies are obviously natural allies, but in reality, I also think we need to work with countries who are strategic and may not be perfect. And that's just the reality of the world we live in. That's kind of how we won the Cold War. I mean, we had partners that weren't perfect and that weren't angels, but we need to, I'm actually a proponent of having a more realpolitik approach that includes partnering with countries who have their own problems and who aren't necessarily totally democratic, but if they're willing to play ball with America and help advance our interests, then there could be partnerships to be forged.
Michael Eisenberg:
Such as?
Jacob Helberg:
Well, for example, Saudi Arabia was an ally to the U.S. for a long time. Still is. If we move away from Saudi Arabia, that could create a vacuum that China could fit that China would be all too happy to fill.
Michael Eisenberg:
We need that oil in order to kind of keep the dollar as the core currency. It's not backed by gold. It needs to be backed by petro. By oil.
Jacob Helberg:
Yeah, exactly. I mean, there are some real benefits in terms of checking Iran's influence in the region, for so many different core interests of American foreign policy. Saudi Arabia is not perfect. And obviously, they have a terrible human rights record. Still, there are a lot of interests that we want to advance that will be set back significantly if we start to hold them to an ultra-puritanical standard, that is simply completely out of step with where that region is as a whole.
Michael Eisenberg:
By the way, I think they would argue that they understand the Muslim Brotherhood way better than the West does. And so their human rights record is actually good because what they did was take on the Muslim Brotherhood in large measure and they're making progress. And you see this from a lot of Emirati and Saudi bloggers and officials these days, including the foreign minister of the UAE, saying: I warned you about the Muslim Brotherhood. The approaches that maybe work with – take your pick – criminals in New York, don't work with the Muslim Brotherhood. They say this is more humane for humanity than anything else. You don't realize who you're dealing with.
Jacob Helberg:
My theory of politics is you need to forge coalitions. You win when you build a coalition and that politics is a game of addition, not subtraction. Picking fights with everyone is not a realistic strategy. You have to prioritize what fights you want to pick and win. Ultimately, I think that was the successful strategy we took during the Cold War. And I think how we're going to win this contest again.
Michael Eisenberg:
I had the fine fortune of attending the conference you now put on annually in Washington, D.C. It was a week and a half ago, I guess, called the Hill and Valley Forum, which brings together tech people and investors from Silicon valley, and I guess little old me from Israel, and political leaders in the U.S. and every year it gets a bigger turnout, which I think is both a tribute to you and an indication that the message that you tried to convey a few years ago is actually getting through: that this needs to be a partnership and that patriotism in the tech sector is important.
I'd like you to walk me through three things and I'll be quiet for a while while I listen to you.
Describe, and kind of concisely, why it's important for these policymakers and the tech people to come together.
The second thing is: how is AI redefining warfare, and why is this kind of critical for national security, the AI race?
And then last, I'd just love to hear your general takeaways from the conference and then I'll chime in with two of my own.
Jacob Helberg:
So, I think it's important– in our system, unlike in China, we don't have civil-military fusion. In my book, I even joked that we have civil-military confusion because at the time when I wrote my book, the relationship between Silicon Valley and Capitol Hill was, in large part, still very much dominated by a great degree of distrust and, frankly, discontent.
In the book, I explained that one of the reasons was there was a massive cultural gap. A lot of people in Washington view the world through the lens of having a legal background. The average age in the Senate is that senators are in their early sixties. In Silicon Valley, people have a background in engineering for the most part and are in their early thirties. So there is a generational gap, a gap in terms professional training and life experiences, and that led to a very different culture.
But both communities are fundamentally in the business of building the future. Innovators use the laws of nature and science and lawmakers use the laws of man to build the future.
And so I viewed it as a critical national security issue to do whatever I could to help improve that relationship in some way, because we rely on voluntary collaboration between the private sector and the public sector in order to bring private innovations into our public sector. And so I started the Hill and Valley Forum.
In the U.S., the private industry spends almost a trillion dollars a year in research and development, which completely dwarfs public sector spending. That, I think, is kind of the marquee figure that really encapsulates why we really need those private innovations to convert into hard power.
Right now there's been so much talk about artificial intelligence and how it's transforming nearly every industry. It's a buzzword that's been thrown around that I think a lot of people in Washington are still kind of wrapping their minds around what does it mean for defense and national security specifically.
To a certain extent, we're still learning what it means exactly. But one of the things that we're seeing play out in Israel and Ukraine and in other places is that it is actually drastically compressing the windows that generals and military commanders have to respond to things because now with AI, decisions that used to take days and weeks to make, based on the collection of information and intelligence, are now taking minutes and seconds because information is flowing back to central headquarters really fast. It gets processed and swift through billions of data points. It is accelerating the tempo of war in a way that is quite unprecedented.
Also, war always used to be characterized by a fog of war effect. When you're in a conflict, there are information asymmetries and communication disconnects that create a fog of war. One of the things that we're seeing with AI is that it's actually dissipating that fog of war where now you have more and more visibility into the terrain in a way that you didn't necessarily have a few years ago.
Michael Eisenberg:
The only people still in the fog of war is the United Nations who somehow can't get the numbers right of casualties because they're in the fog of war, these guys. They’re actually supporting the terrorists, but whatever.
Jacob Helberg:
Yeah, exactly. They probably get their data from UNRWA. It's a little hard to get accurate data when your staff is directly working with Hamas.
Michael Eisenberg:
Yeah. Or is Hamas.
Jacob Helberg:
Yeah, exactly.
Michael Eisenberg:
Yeah.
Jacob Helberg:
The last thing is, it's also decreasing the human costs of war. We're seeing the adoption of more and more, autonomous systems and effectively robots, whether it's air-based drones or sea-based drones.
We're now seeing this race in the development of humanoids. China's Unitree just announced the release of a 16,000 dollar humanoid robot, which is obviously incredibly cheap. That robot can run at 11 miles per hour; it could swing a bat; it can pull a trigger. It's totally dual use. You can use it in a warehouse, but if it can outrun a human and if it could pull the trigger of a gun, it could also be used on a battlefield. And when you include more robots into warfare, it means you're going to have less civilian casualties, which also means that the decision to launch a conflict is actually going to be different. Part of what used to be a deterrent to waris having your domestic population see a lot of body bags come back from the front and absorbing the human cost of war. And if that human cost goes down, it really changes the incentives that generals and politicians have when they decide whether or not to launch a conflict.
Michael Eisenberg:
By the way, I'll take the other side of that. I think that it appears to have less human casualties, but over time it'll have more. If you think about the kind of 300 missile and UAV attack by Iran on Israel. They were all intercepted, yes, but that just encourages them to send 5,000 next time.
Jacob Helberg:
Yeah.
Michael Eisenberg:
And so, kind of, as you iterate through this, it may have a much, much larger toll.
I’d like to, I even want to, give you my two pieces of feedback, or big takeaways from Hill and Valley.
Jacob Helberg:
That's a great point.
Michael Eisenberg:
So I'll give you my two takeaways from the conference that you ran and then I'll ask you a few more questions. Number one is that the number one issue facing democracies and kind of getting the technology you're talking about converted to hard power is procurement. And we'd have a larger discussion on speed of procurement and ability to procure from startups and from innovative companies. Palantir's obviously made some inroads here, Andrew is making some inroads here, but foundationally this is still way too hard and way too slow, way too bureaucratic, in order to keep up with countries like China. And so there needs to be a big focus on procurement speed and process.
And the second one is you need a second conference. This one is really good because it's really America-focused. I think on a half-yearly mark, you need to bring together some of the people in the Hill and Valley Conference, and then we should pick seven, eight countries – my own list would include India, UAE, Saudi Arabia, France, Germany, UK, US, and pick one or two more – where you bring technologists and policy makers from there together in this kind of international group. Because I think this is – to the point you made earlier – this is a bifurcated world right now and I think we can kind of accelerate a lot of this technology arms race through cooperation to really understand the issues that frontier nations are having, especially as you described earlier, which is China can start another conflagration somewhere else in the world to kind of tire the West. So we need to bring both private and public together. If you decide to do that conference, count me in; I'd love to do another jaunt on that.
I think the work you're doing on this is so critical. It was an incredible day, by the way, Started at noon, I could have stayed 24 hours easily. I'm not sure the politicians could have sat that long, but it was a super valuable event. So thank you for leading on that.
At the conference,you interviewed Alex Karp, and you are an advisor to the CEO of Palantir, which is Alex Karp. Alex has kind of aggressively and steadfastly supported Israel since October 7th. He's been an unabashed patriot in the United States. I first want to understand: how did Alex – and I think I know the answer – but how did Alex make the call to do this and stand up? He's been an incredible voice of moral clarity.
The second thing is: there was an article in Fortune suggesting that some employees left Palantir because of the support of Israel. And so I wanted to know if there's been any significant impact on the business because of that.
Jacob Helberg:
I would defer to my colleagues on the impact or lack thereof on the business, but with respect to Alex and the incredible moral clarity that he's demonstrated post-October 7th one of the things that's really important to remember is Palantir's very origin story started after 9/11 and to help the U.S. and the West prosecute the war on terror and the emergence of terrorism.
So, from its earliest days, Palantir was actually predicated on the idea of taking a side, which is a very different premise than where much of Silicon Valley had been for the last 20 years, which was, fundamentally: we want to be Switzerland.We want to be neutral. We don't want to get involved in geopolitics. We want to have good relations with everyone. Palantir was always on:we're on the side of the West. We believe there are such things as good and evil in the world, and we want to be the closest to the good as possible. Acknowledging the U.S. isn't perfect, but when we do have excesses, we talk about them openly and in a free press and so forth, and we're ultimately a force for good in the world. I think that Alex's commitment to Israel really stems from that philosophy.
Michael Eisenberg:
And earlier you talked about the importance of kind of fusing Silicon Valley and the Hill. There've been a small number of noisy employees at many of these tech companies to the point you made, made them try to be Switzerland and not involve the geopolitics. How many people is this really at companies that have kind of taken over woke? You know, you see some of these AI biases that have come out recently, and you also obviously see the noisy protesters. Do you think this is a big cohort of people, and how do you think the CEOs in Silicon Valley have handled these noisy cohorts? It's not just about October 7th, it's about selling to the U.S. government as well.
Jacob Helberg:
So I think the interesting thing is, I think there is a little bit of a difference between– a lot of executives in Silicon Valley are actually very politically in the center more often than not. It's the rank-and-file employees who skew very woke. And one of the challenges that we're seeing both at large tech companies in the Valley, but also at places like elite universities, is that DEI has been institutionalized in these places through programs and offices and all kinds of feedback loops and mechanisms. It's made it really hard to just undo. You have to basically dismantle this DEI infrastructure that keeps enforcing this ideology at all these places. I think unless you address that, it's going to be really hard to reverse this ultra-woke culture.
Michael Eisenberg:
Do you think that there's any hand of Russian PsyOPs or China in any of this kind of institutionalization of DEI?
Jacob Helberg:
Well, if you look at a critical technology like AI, I think one of the interesting things that Gemini proved – obviously in a way that was much to the chagrin of Sundar – is there is an inverse correlation– So if you believe we're in an AI race, you want the U.S. to have the best AI possible. What Gemini proved is that there is a perfect inverse correlation between how woke an AI is and how useful it is. I mean, if you type, “I want a historically accurate image of a 15th century British prince” and you get some sort of Native American person, it's just not useful. It's not accurate. It might conform to the various DEI algorithms that are built into the source code, but it's just not going to be useful.
And so, ultimately, if your goal is to slow down American AI development, I'm sure the Russians and the Chinese are all too happy to let these DEI efforts indoctrinate young people with anti-American ideas, with AI algorithms that are absolutely not useful at all. It serves their bidding for sure.
Michael Eisenberg:
But do you think they had a hand in it? Or do you think they have a hand in it in the universities?
Jacob Helberg:
It's hard. So at big tech companies, I do think big tech has a spy problem and has ducked its head in the sand and been too unwilling to actually stamp out spies in their midst.
I really do think that's a real issue.
Ultimately, I think the establishment of these various DEI offices and programs, the buck stops with the executives and they should go ahead and undo them. They bear responsibility for the sustaining of these offices.
At universities, I think it's a bit different because I think the reality is the sources of funding that universities get from foreign sources remains highly opaque. When you look at campus protests and you see that the material that all of these students have: they have matching tents. They have incredibly fancy banners and thousands of them. Pamphlets, leaflets… I mean, all these things take money. And so there is a real question as to where do they get the funding to orchestrate all of these different protests with the various resources that they bring to bear. And universities aren't forthcoming about the foreign sources of funding that they get.
I had a meeting with a university president whom I won't name, but who came to my house to pitch funding for his university. And I started asking him about the university's relationship with China. And he said – this was not long after the spy balloon incident – he said the spy balloon incident really caused a little bit of a kerfuffle between the U.S. and China, but don't worry, things will get back on track very soon. We're going to get all the funding we need from China very soon.
I just looked at him thinking, what planet does this guy live on? I mean, the fact that he didn't even know, have enough self awareness to realize that I was asking this question because I was concerned about Chinese sources of funding, not because I was trying to encourage them to take CCP money – I think it just speaks for how much these administrative university officials live in such an echo chamber.
In a way, it's funny, because in the government, there's such a high level of paranoia around conflicts of interest. If you're in the government and you have had any past life in the private sector, people are paranoid about what your ties are, what your financial interests are. When you're in academia, you could be taking tons of checks from all kinds of foreign sources and people never ask questions, which I think is the craziest thing. There's such a dichotomy, but you're an academic, so it's totally fine.
Michael Eisenberg:
If you control the minds and the indoctrination, you actually don't ever need to fire a shot.
Jacob Helberg:
Yeah, right. Yeah, exactly.
Michael Eisenberg:
I'll argue that perhaps the most significant thing you've done over the last five years was help to shepherd the TikTok divestment bill through Congress. I think it's a stunning piece of public service for our children, our grandchildren, the United States and the West.
But the question I want to ask you – having stated that – is, do you think it's actually going to be effective? Will it get implemented is probably question one. And question two is, okay, if it's not TikTok, it'll be the next one. You know, back to our conversation about the open internet in the West.
Jacob Helberg:
I was hugely supportive of this legislation and was over the moon when it passed.
Michael Eisenberg:
You weren’t just supportive. You did incredible groundwork and you've been a thought leader on the topic and I really admire you for it.
Jacob Helberg:
Yeah, I was really involved in conversations on Capitol Hill. I approached it like a political campaign and so I talked to everyone. Republicans, Democrats, it didn't matter what stripes they were from. If they were interested in talking about the issue, I talked to them. I spent a lot of time on Capitol Hill and talked with literally in the hundreds of elected officials in Congress.
So it was incredibly rewarding when this passed, but also it really renewed my faith in our system because there was so much skepticism about whether this bill would pass. People said: It's too late. TikTok is too popular. Congress will never take the political risk of passing something that’s a restriction on an app that's used by 170 million Americans.
And ultimately, the national security arguments won the day. Primarily because members of Congress had a foundational question about whether TikTok was controlled by the Chinese Communist Party, and TikTok never satisfactorily answered that question. And it was really because of the substance, and it didn't matter how much money TikTok spent on lobbying.
So to answer your question about whether I think it's actually going to go through or not: the bill is passed; it's law. What it says is TikTok has to divest within a certain window or it will face a ban in the U.S. And that's the law. And so it almost doesn't matter who's president. The law is the law and TikTok is mentioned by name in the law. So it can't try to claim that it's somehow out of scope. They have a finite window now to operate in good faith and pursue an orderly divestiture.
Ultimately, Americans will know very soon if the Chinese government is in it for the money or if they're in it for the influence. If they're in it for the money, they will take the money and allow a divestiture to take place. If they're in it for the influence, they'll choose a ban.
Michael Eisenberg:
What do you think will happen?
Jacob Helberg:
Well, it seems as though the Chinese government has already signaled that they won't allow the export of Tiktok’s core algorithm, which, you know: selling TikTok without the algorithm is kind of like selling a car without an engine.
Some American buyers have floated the idea of doing something creative around buying the brand and the platform without the algorithm and rebuilding the algorithm. Honestly, I actually think that will be much easier said than done because the reality is TikTok's algorithm – whatever it is that they did – is incredibly potent. So much so that it's just more potent than Instagram and its American counterparts.
If it was easy to rebuild the algorithm, Instagram would have already done it. And so I'm a little bit skeptical about how easy or feasible it will be to rebuild an algorithm that'll be the same. It doesn't mean we can– you know, we can have TikTok, an American platform with a different algorithm, but I think where the rubber will meet the road is if the Chinese government allows the sale of the brand and the platform without the algorithm. American buyers will want to buy that at a much cheaper price, because most of the value comes from the algorithm.And so TikTok might end up getting banned if the Chinese and the Americans don't agree on price, basically. If the Chinese ask for this 200 billion dollar or whatever it is crazy price tag for a platform without the source code, I'd be shocked if Americans bought that, basically.
Michael Eisenberg:
Three rapid-fire questions to finish. I was struck as you were talking this entire time – and I'll back up by saying that my wife's grandparents were Holocaust survivors like your grandparents and my wife's grandfather would say he was paranoid till the day he died – and I wonder whether a lot of your early awareness of the Chinese threat comes from some sort of deep-seated paranoia that came from your grandparents who are holocaust survivors.
Jacob Helberg:
Yeah, that's potentially–
Michael Eisenberg:
I don't say paranoia in a negative way, by the way. I say it in a positive way. You have kind of heightened sensitivity to it.
Jacob Helberg:
You know, I guess you could say it's paranoia. I would kind of view it as a lesson learned in the sense that there was always this idea that it could happen again. And so, yeah, I guess it definitely was part of that.
Michael Eisenberg:
Yeah, I think that's a super valuable lesson to kind of listen to instincts and family history that we take along with us. Because, like you said at the beginning, history does rhyme, and I think your tentacles were way attuned. Ironically, I wonder if anybody else sitting in the same seat in Google who didn't have that past would have picked up on these things. I'm not sure.
Jacob Helberg:
Honestly, it was when I first joined Google, I wrote an article about China and the various national security risks related to China that I never published because at the time my viewpoints were so fringe and out of the norm that I was concerned it could completely derail my joining Google. And today it's like those viewpoints are consensus and plain vanilla.
Michael Eisenberg:
I think, by the way, there's a big lesson in that. I was back and forth with Joe Lonsdale on this as well. You know, there's a lot of people have been sounding the horn about woke and lack of meritocracy for a while. They sounded like fringe or racist or whatever it is for a while, but this has become mainstream. So, curious to hear that.
The second kind of quick question is: I know Sam Altman officiated at your wedding or something like that. And like the only thing that seemed kind of in my head is: did he use AI to write his speech?
Jacob Helberg:
I think his speech was very heartfelt and written by himself.
Michael Eisenberg:
You say AI is not heartfelt then, right?
Jacob Helberg:
You know, it just doesn't quite have the beating heart that a human has.
Michael Eisenberg:
I tried to prompt Keith Roboy to give me a question to ask you, but he didn't respond. So what's the question he would have asked?
Jacob Helberg:
That's a tough one, actually. A question that he would have asked on this podcast?
Michael Eisenberg:
That he would have told me to ask you.
Jacob Helberg:
I think he would probably ask a tongue-in-Keith–
Michael Eisenberg:
Tongue-in-Keith!
Jacob Helberg:
–tongue-in-cheek question.
Probably about how, when he and I first met, I was a Clinton Democrat and now supporting President Trump and his re-election. So I think he – and he obviously is a lifelong Republican – told me for a long time that I would come around. At the time I said that was crazy. On that issue, like on so many other issues, he ended up being prescient, ahead of his time and totally right.
Michael Eisenberg:
He would have told me then to ask you: how could you have been a Democrat? Or he would have told me to ask you: what did it take to convince you?
Jacob Helberg:
Yeah, he would have said something along the lines of: what took you so long?
Michael Eisenberg:
Then the last question I'll ask you, it came from Jordan Hirsch, and I think it's a very apt question, given our conversation. I should point out, by the way, that Jordan also pushed me to ask you about your upbringing in Europe and how that's affected your outlook. Jordan said to ask you: what motivates you and gives you optimism?
And I want to kind of broaden the frame of the question, which is, you deal with what I would call dark things all the time, right? A lot of what got the TikTok thing going was the October 7th massacre, but not only, it's been going on for a while, but that kind of brought a lot of hashtags into quick view. And you’ve spent the last six or seven years of your life dealing with pretty nefarious people. And when you describe the doomsday scenario of what could happen with China, it's pretty dark and bleak.
And I know you. You're an optimistic guy, generally. So what is it that gives you this optimism and motivates you every day?
Jacob Helberg:
So part of what gives me an enormous source of optimism is a deep-seated belief that we're on the right side of history and we have all the ingredients to win. When you look at autocrats like Xi Jinping in Beijing, they surround themselves with rows of soldiers and military brigades and military weaponry, and yet they are terrified of an ounce of free thought and words. And I think that really highlights the Achilles heel of their entire system. They are terrified of the truth, and, ultimately, I think that really serves as a constant reminder that we are on the right side of this.
Michael Eisenberg:
That is a fantastic way to finish this conversation.
Jacob Helberg, thank you for joining me on Invested and I want to leave everybody here– I highly recommend you follow Jacob, by the way. He's on X at Jacob Helberg, which is J-AC-O-B-H-E-L-B-E-R-G. Highly recommend you follow him on X.
Thank you for joining me today and, really, from the bottom of my heart, thank you for our friendship and thank you for the leadership role you've taken, particularly the last seven years, on these issues that are absolutely critical for our people, our planet and people of the West.So thank you.
Jacob Helberg:
Thank you so much for having me and thank you for our friendship, Michael.
Michael Eisenberg:
Great to see you.
Michael Eisenberg
The theme that kind of keeps coming up is, let's do business - and that will solve a lot of problems. Do you really believe that?
Eyal Waldman
So I think business can be a bridge, in many ways, to show that we can work together. Once you have the same incentive - to make money - it's a simple incentive, to make money. And if you can collaborate from both sides - let's say from the Saudis and Israelis, for the Palestinians and Israelis to make money together - then we can now start and expand this to cultural things. Let's do a concert. You know, when we started working with the Palestinians, there was a lot of fear between the sides. The Palestinians were afraid of the Israelis, the Israelis were afraid of the Palestinians. They started working together. There was positive friction, about the kids, about jokes, about sports, about those things. When this positive friction happened, it took the fear level down.
Michael Eisenberg
Eyal Waldman, it is great to have you here, for the 10th and final episode of this season of Invested. Thank you for coming.
Eyal Waldman
Thank you very much for inviting me, and it's great to be the last.
Michael Eisenberg
Can I ask you - one of the things we ask our guests to introduce themselves with is, tell us your core value.
Eyal Waldman
My core value?
Michael Eisenberg
Yeah.
Eyal Waldman
Making a difference.
Michael Eisenberg
Making a difference. So with that, I'll tell everyone that Eyal Waldman is the Chairman now of Waldo Holdings. He served as Co-founder, President, CEO, and Member of the Board of Directors of Mellanox technologies from 1999 until 2020 - 21 years - when the company was then acquired by NVIDIA, now a very famous company, for about $7 billion, which was probably the best acquisition of their lives. Is that fair?
Eyal Waldman
Yeah, it's very fair.
Michael Eisenberg
Yeah. Eyal co-founded and served as Vice President of Engineering of Galileo Technology, a semiconductor company. I don't know if Eyal knows this, but I was involved in raising some of the first money for Galileo, from Weiss, Peck & Greer, then a venture capital fund in the '90s. The company that is Galileo went public in 1997, and was acquired by Marvell Technology Group in January 2001, for $2.7 billion. Eyal has been a Member of the Board of Directors of several private companies and public companies. Currently, he is a board member of Check Point Software Technologies, as well as Pliops. Eyal, it's such a pleasure to have you on the show with us. And so, let's get started. Thank you very much.
Eyal Waldman
I'm a previous board member of Check Point.
Michael Eisenberg
Oh, previous.
Eyal Waldman
Yes.
Michael Eisenberg
Now emeritus.
Eyal Waldman
Yes.
Michael Eisenberg
So I actually don't know the answer to this question, but I was going to ask - how do we know each other? I don't remember actually.
Eyal Waldman
I think we met [at] a number of opportunities. They were both social and professional, I think, on some investments. And then you had Oona working for you.
Michael Eisenberg
That's right.
Eyal Waldman
Oona was a friend from San Francisco that relocated here. So it was both connections.
Michael Eisenberg
Amazing. Oona was our first Head of Marketing and Comms at Aleph. And what are you doing now with your time?
Eyal Waldman
It's divided to two things. First is the family estate. So it's our family office, where we invest in a very diversified set of tools and vehicles around the world. And the second one is activities about the country or geopolitical things, trying to make Israel a better place to live in.
Michael Eisenberg
So you IPO'd way back, I think it was in 2007.
Eyal Waldman
We had two IPOs. In Galileo, it was '97. And Mellanox, 2007.
Michael Eisenberg
Then you sold the business to NVIDIA 13 years later, or so. And then you left NVIDIA, six months after that. What made you leave?
Eyal Waldman
You know, I decided that I want to make sure that the transition, or the integration, goes as smooth as it can, and then said, "Okay, I've been 21 years, the CEO of this company," and I felt like it's about time to retire. Didn't want to be number two. So I said, "Okay, Jensen, here's the team, we have great accomplishments of what we'd said we're going to deliver," and decided, let's go into something else.
Michael Eisenberg
Was it hard for you to leave?
Eyal Waldman
You know, I was already prepared for this for more than a year and a half, because between [when] we signed the deal until it was closed, it was a year and a half. So I was kind of ready for that. Yeah, emotionally, it's always hard to do such a big change. But I think I was prepared for it.
Michael Eisenberg
Tell us about Mellanox. What was Mellanox? And why was it so important to NVIDIA, and also, hence, to the artificial intelligence moment we're going through right now?
Eyal Waldman
You know, not just the AI world. I mean, Mellanox is important to nearly everything you do today. If you think of where we started, we started focusing on the new standard of interconnect of servers, servers to server, servers to storage. And there were about nine companies running with us, parallel to us, to try and build this standard. I think we were the best, and we kind of killed everybody that was trying to do it, whether it was Intel, IBM, more startups and so on. So what we did is the best, most efficient interconnect. And if you look today, first at the high-performance computing market, I think there's more than 66% (maybe even more than 70% today), of the supercomputers today are built with the Mellanox interconnect.
Michael Eisenberg
Wow.
Eyal Waldman
And that enables you to do research, to do defense in all the DOD, DOE labs -
Michael Eisenberg
DOD: Department of Defense, DOE: Department of Energy, Lawrence Livermore Labs -
Eyal Waldman
Los Alamos, Sandia Labs -
Michael Eisenberg
Energy prediction, weather prediction, war simulations, and a million other things.
Eyal Waldman
And more things that we don't talk about. And we were also part of the agencies. So we've enabled people to do things they could not do before in the supercomputer world. Then we've seen that the same guys' need - that they're trying to build the hyperscale applications, whether it's Facebook, Instagram, Microsoft, Apple, Google, and so on - need the same infrastructure, a supercomputer infrastructure for their applications. So we started focusing both on supercomputers, but then high-performance computing, but then also on hyperscale data centers. So we started winning them one by one. And also not just in the US, also in China, Alibaba, Baidu, Tencent, JD.com, ByteDance. Nearly all of them, or most of them, the vast majority, are using us. So we've been able to build the most efficient data centers now. And after that came artificial intelligence, machine learning, all that. So once you've been very good at supercomputing, high-performance computing, we took this to data center, hyperscale, hyper applications that wanted to serve billions, or hundreds of millions of users, and then to AI, machine learning, and so on. So what we enabled is really to utilize the compute and the storage power, that's for the benefit of many applications, many things that people can now do much better.
Michael Eisenberg
At high performance and high speeds.
Eyal Waldman
Yeah, I mean, it's to do with compute, with storage. So to build the fastest supercomputers, the scalability, and accessibility, and, you know, computation, has to do with how fast you move data, and shortest latency. That is a very good correlative to the performance you get. So we've been able to get to the lowest latency with the highest bandwidth. And on the way, we're doing, now, manipulation of the data. So we're processing data, the DPU, the BlueField - which now is getting more and more in the NVIDIA platforms - it's not just moving the data, we're also processing the data while we move it through the wires.
Michael Eisenberg
And why didn't NVIDIA buy the company?
Eyal Waldman
Well, I think it's, there's amazing synergy. I mean, from -
Michael Eisenberg
I know why, but I just want to explain to the listeners.
Eyal Waldman
So from earlier days, we actually worked with NVIDIA. NVIDIA has built graphic processing units. Then, people found that the floating-point performance of a GPU is very much useful for supercomputing. For calculating of, you know, mathematical or science calculations, physics and so on, you can use the floating-point processor much better than a regular CPU. So we started seeing GPUs and high-performance computing in the supercomputing arena. What now you have is a very fast processor. You need to provide a lot of data very fast and with low latency to that processor, and we opened this bottleneck, so that you can really utilize the processing power of the GPU. Without us, imagine you have a very big engine, but the pipe feeding it is very small. So your bottleneck is in the pipe. What we've done is matched the performance of the GPU to the pipe that's feeding it, the data we can bring in and out, and that's why there's great synergy between NVIDIA and Mellanox from day one.
Michael Eisenberg
So before we started talking, you mentioned something I didn't know, which was that you've been powering OpenAI, or ChatGPT, from day one. Can you talk some more about that?
Eyal Waldman
You know, OpenAI came, and they wanted to do very fast machine learning infrastructure. And we told them the best thing is to use InfiniBand. And its most advanced -
Michael Eisenberg
InfiniBand is the standard on which Mellanox leads.
Eyal Waldman
Today, there's mainly two interconnects. It's Ethernet, or InfiniBand. And we're seeing today, the vast majority of AI platforms have been using InfiniBand. And InfiniBand is growing very fast, they grew very fast to billions of dollars every year. So we told them, "Look, if you want to do AI, the best interconnect for you is InfiniBand." And we started working for them. Obviously in the initial stages, there's always things and bugs you need to fix in order to make it work. But we told [them], "This is the only way, the best way, you can really get performance," and OpenAI were smart enough to continue using InfiniBand and were successful - I think part of it because of utilizing InfiniBand.
Michael Eisenberg
So the whole, kind of, AI revolution that's blown up in the public consciousness in the last six months started six years ago, with OpenAI, ChatGPT, Sam Altman, and Eyal Waldman's company in Israel, Mellanox?
Eyal Waldman
I think without us, it would have been very difficult, if not impossible, to get to the same results utilizing the infrastructure, to get such results of intelligence. So the more data you can move around, the fastest you can move data, the more intelligent the machine is.
Michael Eisenberg
Although I think this is, not to get too geeky for a second, but this is an important thing that people, many people don't understand. A lot of the limitation on the progress of AI is hardware related, and not software related, right. And here comes Mellanox, I mean, they've been around for a while, and unlocks a hardware problem that enables the data to move much faster, higher scale, and be processed, and that unlocks AI.
Eyal Waldman
Yes. It enables AI to actually achieve much better results. It has to do with the amount of data you can look at in a period of time. So if you can look at more data, you become smarter. It's a very simple equation. So what we enable is the machines to become smarter, to make better decisions, to build better, better and faster neural networks or bigger neural networks. And this is why you become more intelligent.
Michael Eisenberg
What do you think is, by the way, the next hardware barrier for the progression of artificial intelligence?
Eyal Waldman
You know, today NVIDIA is doing, or Mellanox is doing 800 gigabits per second, almost a terabit per second on one cable.
Michael Eisenberg
Wow.
Eyal Waldman
I think this is going to grow. I think the computation of data with the amounts of data, the storage, the manipulation of data [is] on the way, and this is also something that NVIDIA is doing with Mellanox DPU. So we are already working to unlock the next data-processing platforms of the future with, I think, over one terabit per second and more offload engines. So instead of the GPU doing all of the work, we're going to do some, or the CPU, we're going to do some of the work in the data processing, in the DPU, in the BlueField, so that there's more data processing being done on the way, and the platforms can get smarter and faster, and better and better.
Michael Eisenberg
If my memory serves me correctly, when Mellanox got started, there was a big question about InfiniBand technology, in general. I think if, if my memory serves correctly, it was right after the whole WiFi/WiMax issue in the wireless wars, where people said stay on 82.11 to make it work, and the same thing at the time - was InfiniBand this just, kind of esoteric standard, that wasn't going to make it even though a few people were working on it? And, you know, maybe it'd be something else like, like Ethernet? Is my memory correct about that?
Eyal Waldman
I don't know about the WiFi/WiMax. But InfiniBand was definitely a standard that a lot of people did not adopt. A lot of people were shy to use it. And they said it's like a temporal thing until Ethernet that catches up. And everybody was waiting for Ethernet to catch up and get close to InfiniBand. What we've done, actually, we took our InfiniBand engines and put them on Layer 2 Ethernet. So we've made Ethernet closer to InfiniBand. But we've shown that still InfiniBand has a superior performance, it's better utilization, for high-performance computing, for machine learning, for hyperscale data centers and so on.
Michael Eisenberg
But what made you so certain - I'm more saying, like, the personal part - like, people doubted that this was -
Eyal Waldman
Not only people doubted. I think a lot of people buried Mellanox and said, "You have no future."
Michael Eisenberg
Yes.
Eyal Waldman
It happened when Microsoft and Brocade stopped using InfiniBand. And IBM then stopped, and all announced that InfiniBand is dead, and they're not doing [it]. What we've seen is, actually, the results. And I think it's because they were not using the interconnect in the right way, or not using the right vendor for InfiniBand. So what we've seen is continuous traction, and we've doubled our revenues from when we started seeing revenues in 2001. For the first five or six years, we more than doubled our revenues every year. We've seen the traction with everybody. And we didn't have even one customer say, "No, we're not going to use you in the future." But, "Give us more bandwidth, give us lower latency, give us better performance." Everybody needed performance. Everybody needed to move data. So we understood and we've seen things that other people from the outside don't see, because it's not in production yet. And we kept on performing. We kept on executing, designing, architecting the next generations, and we understood it's going to catch. And it really caught. And today I think most of the data centers that are really big and that really want to use data, they use InfiniBand, not Ethernet.
Michael Eisenberg
Was it hard when people gave you up for dead?
Eyal Waldman
It's always hard, you know, you need to believe your own reality. So our investors, our customers, sometimes even our vendors were doubting our success. And you're there alone. And a lot of companies just fall on the sidelines, trying to do InfiniBand. So it's always tough, and you need to make the decision whether you're going back to Ethernet, you're staying with InfiniBand, you're staying in leadership. You're doing exactly what - not what everybody's telling you, actually against what everybody's advising you. And if you make the right decisions, and it works, then you're very successful.
Michael Eisenberg
Was it lonely?
Eyal Waldman
It was very lonely.
Michael Eisenberg
Did you have any self doubt at the time?
Eyal Waldman
You always have self doubt. You must question yourself all the time. I have a big painting in my house, that's by Marik Lechner, that's very colorful. But what it says - it says "you are alone." And it's very, very - and I bought this because that's how you feel as a CEO, you lead the company and you feel very much alone. But you need to make the decisions that you believe in. You need to be very consistent and very persistent in what you want to do. And even when people tell you you're going in the wrong direction, or you're doing things that won't work, if you see different signs or different behavior, you should try and continue. And you don't need to go where everybody's going. You can sometimes go the other way and be more successful.
Michael Eisenberg
So apropos that, going the way that everyone's going or not the way people are going - so as AI has exploded into many people's lives (and I like to say if you wanted to make AI investments, you needed to make them five and seven years ago. Today, it's all priced in and too late, now you're in the culture wars) - so what do you think about the future of AI that other people don't think, right now?
Eyal Waldman
I think AI is going to improve our world in so many ways that people don't think today. For example, imagine that you look at a courthouse and you look at the judge, and you understand what aggravates him, what he likes, what he doesn't like, what to say, which words. And our computer can analyze this. And a computer can also analyze the meanings and etc. So imagine now, the legal system looks at all of the cases this judge has done, and has the video of everything in his court. The computer will be a much better lawyer representing you in that court, in that judge, than any other lawyer coming into this judge-court - into the court of the judge - for the third or fourth time. So this is just one simple example, where a machine-learning, legal adviser, lawyer, whatever you want to call it, can perform better than anything else. And it's the same about everything. It's the same about psychologists, it's the same about advisors. You know, a top CEO of one of the largest, or the largest hospitals here, told me they've done a query of images between an AI machine and very, very, you know, superior doctors or managers of departments and so on. And in about more than 50%, there was the same answer and they were right. The next 40 or 45, I don't remember the right number, 40 to 45%, the computer was right, and the doctors were wrong.
Michael Eisenberg
Wow.
Eyal Waldman
So in reading the images, of, you know, health machines - whether it's MRI, whether it's X-rays, whether it's whatever, ultrasounds and so on - the computer, the machine learning has done better decisions than real life doctors. It doesn't mean you need to replace each other. But it definitely helps to have a machine next to you, telling you, suggesting you what's the right analysis of prognosis, and move forward. So in a lot of our future lives, we'll see AI machines helping us make the right decisions, helping us be better, improve and be more successful.
Michael Eisenberg
What worries you about AI, anything? Or is it all going to be much better?
Eyal Waldman
First it's going to be much better. But second, if AI falls into the wrong hands, it could be harmful. I'm not afraid about AI getting out of control by itself. But if it falls to the wrong - so, you usually trust the computer. So if you ask for the best recipe, you will do what the computer tells you without thinking twice. You know, one of my friends put - he uses Waze. It's actually a she. So she uses Waze. And she put in the wrong address. And it took, instead of South Israel took her to the North Israel. She didn't even realize she's going 75 kilometres out of the path she was supposed to go. I give her a call, "Where are you?" She says, "I'm here." I said, "What are you talking about? This is not...." She trusted the computer so much, she didn't even check. So if you get a recipe, a recipe from a computer, you trust the computer. You say, "Okay, I'm going to do what I imagined," and the recipe, or the computer falls in the wrong hands. It can tell you what to do, whether it's driving, whether it's doing other stuff. So that's kind of where the dangers with AI is. Our trust and our belief that it's harmful, when it goes into people that can do different things with it. That's where you can utilize AI are use a device for the wrong doing.
Michael Eisenberg
That just reminded me of a funny story. My son was a teenager - he's now in his late 20's - and we're driving, and it was the early days of Waze and I put it on. He said, "Turn that off." I said, "Why is that?" He says, "You're gonna have no brain left." He said, "No one will know anywhere to go. If they get lost, they won't know how to navigate, if we've outsourced our brains to Waze." Do you think like we're in a global war for AI supremacy now? Is that like a thing? Like Israel, for example, needs to have tons of NVIDIA GPUs and chips and supercomputers and big clouds, because if we don't have our own to train, AI models, we're going to be in trouble. We need to have these PhDs who are great in AI, because otherwise we'll fall behind?
Eyal Waldman
You mean about intelligence and stuff like this? Or defense?
Michael Eisenberg
And the economy.
Eyal Waldman
So on the commercial side, yes, for sure. I mean, the people that will utilize better AI machines will perform better. It's a simple equation. And you need more compute power, you need more capabilities, you need better utilization, and so on. So you need this in every geopolitical thing. So on the commercial side, for sure. Companies that will use more AI will be better, will win more of the markets. In terms of states, it's the same thing. And you're seeing AI being used in many units here. If you look at Iron Dome, it's a great example.
Michael Eisenberg
Iron Dome is the missile system that intercepts missiles coming in.
Eyal Waldman
I mean we're so protected. I think 95% of the missiles shot into Israel are being intercepted by Iron Dome.
Michael Eisenberg
And the AI behind it.
Eyal Waldman
Yeah. And it's all based on AI. And now we also have a "hetz", arrow.
Michael Eisenberg
The arrow missile, yeah.
Eyal Waldman
The arrow program, and now we're developing the laser thing. So all those things are based on AI. Humans cannot have as fast response as a computer can, in terms of understanding what's going on, where the missile is gonna go. So everything is based on AI. And that's why we're so protected against what's going on around us.
Michael Eisenberg
So you've been at AI really, since the beginning. And how do you think the roles of humans will change over the coming years, decades, as AI becomes an inevitability in our lives?
Eyal Waldman
I think our jobs will be better, safer, and we'll be able to do more things we like. For example, we will not need to drive. If you look at the car of the future - and you know, now it's public, we've been working with Apple on their cars, when it was still confidential - but if you look at a car, a car is going to be a different platform. Today, it's a vehicle moving you from place to place. In the future, a car will be an entertainment, education, whatever you want, platform that you can utilize while it transfers you. I mean, talk about drones in the future. While those things, whether it's an autonomous drone or autonomous car, will transfer you from wherever you want - I'm not talking about beams yet - from wherever you want to wherever you want to get to. And at the same time, you can utilize the time to do whatever you want. If you want, you know today's students do their homeworks much easier with ChatGPT, actually. The ChatGPT writes the papers for them. So doing the homework, understanding what's going on, reading articles, summarizing books, and so on - it's so much easier because you have a machine helping you do this. So imagine this in everything, in medicine and driving. So first, we'll be much safer, will be much healthier. Imagine you'll have robotic cops instead of humans. So there'll be much more efficient, there'll be 24/7, they will never be tired, they will never do mistakes, and -
Michael Eisenberg
I should short Dunkin' Donuts stock, then, right? Cops won't stop to buy Dunkin' Donuts I guess, if they're robots.
Eyal Waldman
Yeah, I think so. They'll use something else, they'll use way more energy and stuff like this. But no Dunkin' Donuts.
Michael Eisenberg
So you said, when we started, that your core value is making a difference. Is there like a way to embed that value in AI? Right, because AI is not going to be values mutual at the end of the day, because the training set that you train it on is what's going to teach it what to do.
Eyal Waldman
The database is very important. The database needs to be accurate, needs to be true, and need to be neutral.
Michael Eisenberg
How's it going to be neutral? I mean, there's no such thing as neutrality, really, I mean -
Eyal Waldman
With data there is.
Michael Eisenberg
You sure?
Eyal Waldman
With data? Yeah. If you look at data only from one location, one place, then you may be shifted one way or another. But if you look at data around the world or on the web, it should be balanced using big numbers. Big numbers talk. I mean, if you look, even here, if you look only at Channel 14, you'll see a different data set and you'll believe different things and different theories and so on. But if you look at Channel 11, or other channels, or private channels than it being built, you'll see different things. So if you look at both of them, you'll have a more balanced -
Michael Eisenberg
But you'll need to then have 100% set of humanity's data, and any partial set of humanity's data will die.
Eyal Waldman
I don't say 100%. You never get to 100%. But big enough? Yes. Large enough? Yes. So data is very important. So when we talked about reaching conclusions or making the right decisions also by machine, it's all based on data, based on your experience. It's the same if your experience is screwed up, you will not make the right decisions, right. So in machines, it's the same correlation. But I think with machines, it's much easier. Because for you to look at all the data, it's very hard, completely impossible. For a machine, it's much easier, especially when you feed the data very fast.
Michael Eisenberg
So you've created two multibillion dollar companies. It's been very successful on a business side. You said your personal value is to make a difference. How do you embed your personal value of making a difference into your business?
Eyal Waldman
So, you know, it could be funny, but my main ambition was to build a very healthy company. It wasn't to make money. So it wasn't financial, it was to build a healthy company where we work, and we change the world, and we make things bigger, faster, better, with a group of people that we all enjoy from. And that's it. So our integrity was second to none. We were transparent, both inwards and outwards. We build a very strict - I know when we, when I've done the negotiation of selling in a company where, like, multiple entities involved, I never sent one thing that was not accurate 100%. So we've really built a company, I don't want to say second to none, but really a state-of-the-art in terms of taking care of the employees, building the right teams, building the right incentives, the right motivations, the right projects. Very aggressive in our goals and achievements. That's why we've been able to overdo everybody and take the market for us. So we definitely made a difference for all of the people that have worked and touched them in lots and many ways.
Michael Eisenberg
You talk about being kind of the best, bigger, faster, better. But at the same time, at Mellanox, you decided to, for lack of a better term, upskill people, right? You hired people in Ramallah, Palestinians in Ramallah. You hired Palestinians in Rawabi, if I remember correctly. Why did you do that?
Eyal Waldman
I'm actually very proud also to do this in Gaza. So we had employees in Gaza. First, I think, on the business side, it makes a lot of sense. If you have employees that cost you a third, or even less of what the same engineer costs you in Israel, it makes sense to hire more cost-effective human resources than in Israel. And they're very good. So on the business side, it makes a lot of sense. Same as people going out to, or did, to Ukraine, to Russia, to China, to India. It's getting more cost-effective resources. The second thing on the geopolitical situation, I think, it's about time we do peace, and we help build the Palestinian country that can be independent and have its own resources. So what I've done is open one in Ramallah, that moved to Rawabi. We had other people, also in Nablus, and Hevron. And then, it was very important to me to open in Gaza. And it's a very interesting story, because we went through four wars or operations, while we were working with the same people. So we had one, the Second Lebanon War, in the north, and we had three operations in Gaza. Now even more. So we found ourselves in the same day working with each other and killing each other. And I have no problem with that. I had 22% of my company inside Gaza, in reserve duties fighting during this, and the same time talking to our employees there, taking care that they can continue and strive and so on. And, you know, people were very disturbed, you're paying tax to the Hamas. And I said, "Yes, we're paying tax to the Hamas, because in China, we're paying tax to the Chinese, in the US, in every place, we're paying tax to whoever rules that area. And the people that work for us, they need to pay tax to the Hamas." I have no problem with that either. I think it's about time we stop killing each other. We've done this for 75 years. If you look around us, in the past 60 years, 77 very violent conflicts have been resolved. And whether they were killing, burning, raping, destroying each other completely - whether you look at Kosovo, Serbia, if you look at South Africa, if you look at Falkland, if you look at Northern Ireland, and so on - awful things were done. Now there's peace. And there's one place where we keep killing each other for 75 years, which is completely unbelievable, crazy. And I think if you have two smart people, and you only need two, you don't need more than that, talk to each other, understand and come to an agreement, which I think is very doable. I mean, they actually have a very well-defined peace agreement that I think is acceptable or will be acceptable by everybody. And I think it's a shame we're not getting there. So part of the reasons of doing these employments in the Palestinian territories, and in Gaza, was important to try and resolve some of the geopolitical position, and I'm very proud we were the only Israeli company to also employ in Gaza and grow. We gave them a lot of equity. So when we sold the company, they made like five, six million dollars.
Michael Eisenberg
Wow.
Eyal Waldman
And the employees there, it's a lot of money for them.
Michael Eisenberg
It's a lot of money anywhere.
Eyal Waldman
Ah, not for one person. One person there, we had, like, 100 something. But for them, you know, even doing like 50 or $150,000, and it's not taxable in the Palestinian [Authority] because they don't have to tax equity yet.
Michael Eisenberg
Get your options in the Palestinian Authority, right? It's more tax-efficient.
Eyal Waldman
Yeah.
Michael Eisenberg
Did you ever - you mentioned the conflict, like, you know, there's a battle going on, you're paying to people and trying to keep them online. But did you ever think that your personal values of what you just discussed right now, could come into conflict with the business values in some way? Like, this was just an example. Maybe there were more talented engineers in Pakistan or in Bangladesh, that would also be cheaper and not necessarily in Rawabi or Gaza?
Eyal Waldman
If they're comparable, I would go for the Palestinian side, because they're closer. They're the same time zone. They speak the same language. I can bring them to Ranaana, right, and it's much easier.
Michael Eisenberg
Ranaana is a town in Israel, where Mellanox is headquartered.
Eyal Waldman
No, no, we're headquartered in Yokne'am.
Michael Eisenberg
Yokne'am, sorry.
Eyal Waldman
Ranaana is, we acquired Voltaire and the headquarters of Voltaire was in Ranaana, and we left, we had a design center in Ranaana. But our headquarters are in Yokne'am. If there's a better business reason to use the Pakistanians, we probably use the Pakistanians. But I'm sure we would have found a way to also use the Palestinians, maybe in a lower number of resources. But I think it's also very important, even for the geopolitical reason, to use them.
Michael Eisenberg
Was it hard? You acquired a couple of companies along the way, right?
Eyal Waldman
We acquired 11 companies.
Michael Eisenberg
11 companies.
Eyal Waldman
Two of them were public. We paid, I think, about $1.7 billion in cash for acquisitions. And we invested in about, I think, 12 or so companies, about $90 million.
Michael Eisenberg
Was it difficult, like, you started the conversation by stating the values of Mellanox in your own personal values, and the transparency and the accuracy. Inevitably, when you acquire a company, you acquire a different culture. Was that difficult in any way?
Eyal Waldman
Yeah, it's very difficult. So first, we acquired 11 companies. All of them were very successful. Measuring success by being accretive, in a not-too-long time - in less than three quarters. So all of them became a accretive except for one, which we had to shut down - Kotura in LA. So 10 out of 11 were very successful. It's very hard to integrate two companies. We have to put a lot of energy, a lot of work to make them feel at home, to make them become Mellanox employees very, very fast. And we put a lot of resources, human resources, HR, and engineering, and management, in order to make this integration - post-merger integration - as fast as we could. So yeah, it's not easy.
Michael Eisenberg
And how'd you handle it? Did you have to fire a lot of people who were bad culture fits?
Eyal Waldman
Not a lot. Yeah, but we had to fire people. And it's very hard to do. And you - well, not everybody - but I think most people are always too late to fire people they need to fire.
Michael Eisenberg
For both performance and culture.
Eyal Waldman
Yeah. You always, at least I do, I always try to think, okay, let's do it later, or maybe we can change, or stuff like this. And it always takes you longer to fire the people you need to fire.
Michael Eisenberg
How do you fix that?
Eyal Waldman
You fire earlier. Or fire faster.
Michael Eisenberg
Easier to say, harder to do, right?
Eyal Waldman
No, when you become more experienced? I'll tell you a short story. You know, I had a board member, I won't mention his name. And he was really considered a son of a bitch. And he did everything very fast, very cruel. Only was looking at the business. And I always said, "I don't ever want to be like him, I'm always going to stay the same guy, nice." And when time comes and you grow and the company's growing, and it's thousands of people, and you're talking about billions of dollars, you don't have time. And you need to do what's the right thing for the company, not for the people. I mean, it's for 98% of the employees, it's the right thing, but there's some people that are gonna get hurt. And when you understand that this is your job, and no one else will do it, you need to do some things that, before that, you said would be very hard for you to do. And you do them. Because otherwise you're not doing your job, and you're lacking off. And so yeah, you learn to become a person that needs to make tough decisions that you don't like. But you got to do them for the better of the company, better for the most, the vast majority of the employees and better for their shareholders, for everybody. So you make those decisions.
Michael Eisenberg
Is there any decision that you think back now, now that you're retired and past the Mellanox days and go, those hurt my values, or -
Eyal Waldman
No, I never, I never compromised my values, never.
Michael Eisenberg
Never? Something that really nags at you, or you said, I could have done that better?
Eyal Waldman
Look, you know, you make a decision every day, multiple times a day, to go right or left. You go there, but you succeed. The company's successful. So you don't know if you would have gone the other direction, would it have been better? So if you ask me, I don't know, if you made a mistake - I'm sure we made mistakes. But I see the bottom-line results in two companies, taking, you know - started two companies from zero, to two companies public in NASDAQ and hundreds of million, then sold two companies for billions of dollars.
Michael Eisenberg
And many thousands of employees -
Eyal Waldman
And many thousands - they became very rich, and also shareholders that became very rich. I think the the fortune diversification, or the wealth distribution in Mellanox, was very, very good. We gave shares to secretaries, to students, to everybody. And I think the wealth distribution was very good. I'm very proud. So yeah, if you ask us now whether we made mistakes, yeah, we made mistakes. Whether I can tell you today that we've done mistakes, and I can point them out, you know, I don't think you know. It's interesting that when you're in that position, as a CEO, I've made a lot of decisions that 100% of my people have told me to do something else. Not just my employees, but also board members, bankers, lawyers, and so on. And when you make those decisions, you know that either you're taking the company down to the ground - and there were a number of board members like this - or if you're successful, everybody is going to be happy, everybody is going to be successful. So -
Michael Eisenberg
And then they forget that they were opposed to what you want.
Eyal Waldman
No, they don't forget. They don't forget, they realize. And then the danger is, they come to rely more on you and and your decisions. So the danger is, they don't want to make their own decisions. But they say, "Okay, Eyal, resolve this thing for us and the whole company." So I never let them put all of the problems on my desk or on my door. I make them make their own decisions. But yeah, you'll make a lot of decisions by yourself, which is against what everybody, really everybody tells you. And they don't forget it.
Michael Eisenberg
Do you think a hired CEO could have made those hard decisions against everyone's advice, or only a founder CEO could make them?
Eyal Waldman
I think depends on the person. It depends on the person.
Michael Eisenberg
So I want to switch gears for a second. You went to Saudi Arabia last year?
Eyal Waldman
Yeah.
Michael Eisenberg
You visited and entered on a non-Israeli passport, I think was reported somewhere.
Eyal Waldman
Yeah.
Michael Eisenberg
So it means you have another passport?
Eyal Waldman
Yeah.
Michael Eisenberg
You were in the US for a while, I think also right? Did you live in the US? And California?
Eyal Waldman
Yeah, four years.
Michael Eisenberg
Yeah, for four years, yeah.
Eyal Waldman
I actually spent, in the US, about 21 years.
Michael Eisenberg
21 years.
Eyal Waldman
For like, yeah. 21 years,
Michael Eisenberg
Why did you go to Saudi Arabia?
Eyal Waldman
First, I think we need to get - I was, by the way, in the Emirates before we had relations with the Emirates. And we sold to Saudi Arabia, to Aramco for many years. Mellanox. Yeah. So we found many ways to do business with countries and entities we don't have a formal relationship with. I think it's very important. And we can really help bring a lot of things to the Saudis, whether it's technology, whether it's, you know, methodologies, whether it's things that they can utilize for them. And I've been to Bahrain where we met the Crown Prince. And he asked for specific things that we could help them in, in a number of directions. So I think we can do the same thing in Saudi, in a much broader scale. So it's very important. And we had many meetings with multiple people, both from the government - private entities and public entities - where we had initial meetings of how we can work together and do things together. So it's very interesting. I was very proud to do that.
Michael Eisenberg
What do you think the opportunities are?
Eyal Waldman
Opportunities are amazing, you know, it's huge opportunities. Imagine that, an hour and a half flight - you know now they're building Neom. South of Aqaba.
Michael Eisenberg
That's the new city, new Saudi city -
Eyal Waldman
The most advanced city in the world. It's going to be a well of technology, and so on. So you know, we can do a lot of things there. And we can help make it better, we can help make it faster, we can do a lot of the things. More secure.
Michael Eisenberg
And it's like an hour from Israel by car.
Eyal Waldman
From the south.
Michael Eisenberg
From the south, from Eilat.
Eyal Waldman
Not from here. But it's an hour flight from here.
Michael Eisenberg
Yep.
Eyal Waldman
So yeah, I mean, we can really help, we can really be part of this geopolitical - to bring this whole area to be the best place to live in the world. And if we have peace with Egypt and Jordan - and Syria is now in shatters and Lebanon is also in its own crisis - but if we create peace, not just in our neighboring countries, but we've done this now with the Emirates, Bahrain, Moroccans, if we do it in Saudi, and then go,even, to other countries on the other side of the Gulf, I think we are in a much better position. And we can take leadership, not in a political situation, but in the technology and some of the business stuff and really gain for everybody. So I think again, it's, you know, we're trying to bypass the Palestinian problem and do this without solving this. But I think the number two today - nine months ago, it was number one - issue that we need to resolve is the Palestinian problem.
Michael Eisenberg
Do you think that with the Saudis, and the Emiratis, these are shared-values conversations? Or is it just, kind of, realpolitik and economic opportunity? What did you discover when you were there?
Eyal Waldman
So values are different in every country. And we should not try to impose or enforce our values on other cultures. When you do business in China, and you know, 30% of our business came from China -
Michael Eisenberg
Wow.
Eyal Waldman
When you do - yeah, we sell more than $450 million in China. When you do business in China, you do it in a completely different manner than you do it in Europe, than you do it in the US, than you do in different countries. And if you do it also in the Arab world, you do it in a different manner. So you don't want to enforce culture on different countries. You want to learn to work with them. You want to learn to do business in the way that they're used to doing business. That's why we always hired local people to do our business in different territories, which is also very important. We didn't send Israelis to different territories. We actually hired local managers, local business guys to do this and work for us. So yeah, I mean, there's a lot of things we can do together. And I don't think we should view ourselves as leaders, you know, that we always have this, 'we're better than everybody else.' We're not, no, we're completely not. And when you come and look at everybody at the same level, and say, "We want to work together." It's not like, "We want to come in to help you." We want to work together, want to succeed together. We want to really build and help you be successful. And we'll help you be successful. It's a completely different approach, whereby we help us by helping them. And you know, it's a mutual thing. It's a symbiotic thing, instead of trying to teach or think we can do better, or lead, or whatever. So we don't want to lead. We want to work, we want to make money together, we want to succeed together. And we want to adopt your culture in terms of doing business in your country. And we hope you respect our culture and how we do business. So all this needs to work together, and we can do this around the world.
Michael Eisenberg
What do you think then - you mentioned you sold $450 million to China. What do you think, then, about the US decision to ban selling certain amounts of technology, certain kinds of technology to China?
Eyal Waldman
Yeah, you know, I think if you look over a decade ago, the world became smaller, and became more homogeneous. And you could do business everywhere - in Russia, and China, obviously the Ukraine, and stuff like this. Today, it's much more going localized. The globe, the world is getting diversified, not getting closer. And it's a big problem. I think there are some things that President Trump has done right - and I'm not completely for President Trump - in terms of protecting the US from China, in some aspects. But I think sometimes they've gone overboard. And this economic war between two giants is always a risk. Today, there's only one power in the world, which is the US. There's no one else. Russia has gone. And I think if you look down and you open the hood in China, you will find China not as powerful as people think it is. But still, you need to respect. You need to work with them as if they are a power. You need to, because they are a big economic market for everybody. And they are powerful. At the same times, if the US tries to crush China, I think in the long term, it will be harmful for the US and for everybody. And China will develop its own technology, its own ways. And this is not a good - I think collaborating, working together, is always much better than fighting and working against each other.
Michael Eisenberg
So if the US came in and said "Mellanox, stop selling in China," that would -
Eyal Waldman
They did.
Michael Eisenberg
They did, okay.
Eyal Waldman
They did sometimes, to different - not only in China, also in other territories. They came and told us, you cannot sell to this and this - and some of it was public. And the Chinese asked us, "Why are you obeying the US government? You're not a US entity, you're an Israeli entity." And we always played with this, the same way that we had a very simple answer, you know. More than 50% of revenues come from the US, and a lot of it from the US government. So the last thing we want is to kill our revenues and commit suicide, by not obeying what they asked us to do. They cannot rule us, but they asked us not to do those things. So we collaborate with this. So we were in difficult situations in China, and in other places, and we worked with the US on this. In the US, it's funny - we didn't get FOCI approval. But at the same time, all of the agencies have used this technology, because without us, they would not be able to do what they could, with the technology that we have.
Michael Eisenberg
A theme that kind of keeps coming up is, let's do business, and that will solve a lot of problems. Do you really believe that?
Eyal Waldman
Yeah.
Michael Eisenberg
I mean, you mentioned the issues, for example, that resolved around the world - Northern Ireland, Falklands, a million other places. But that wasn't business-driven, that was courageous political leadership on some levels. So why is it do you think they kind of -
Eyal Waldman
That was more theological religion, in Northern Ireland.
Michael Eisenberg
Northern Ireland is theological and religions, yes.
Eyal Waldman
Here, we also have something like that, which is completely not smart. Look, eventually, you need to understand and think what's important for you. If it's more important to you to have a certain stone, than your children living together and not being killed by each other, and not, you know - there's an operation now in Jenin, we had one soldier wounded this morning. And I don't know if you have the experience, I had experience going into Jenin, into Nablus, into Sh'chem, into the Casbah, and it's scary to do those things. So I think, it's not that we will not stay powerful. We always need to stay powerful and keep our forces. But it's stupid to keep continuing killing each other. So I think business can be a bridge, in many ways, to show that we can work together. Once you have the same incentive to make money - it's a simple incentive, to make money. And if you can collaborate from both sides, let's say from the Saudis and Israelis, for the Palestinians and Israelis to make money together, then we can now start and expand this to cultural things. Let's do a concert. Let's bring in Coldplay. I just saw Coldplay -
Michael Eisenberg
In Milan!
Eyal Waldman
Yeah.
Michael Eisenberg
I don't even know who Coldplay is, but my partner went.
Eyal Waldman
So it was great. My girlfriend, it was her dream, so I said, "Okay, let's go," and we jumped there. Anyways, let's bring Coldplay and play for the Palestinians and Israelis, let's do it together. So you can start doing business, and then do cultural things, and then start liking each other. You know, when we started working with the Palestinians, there was a lot of fear between the sides. The Palestinians were afraid of the Israelis, the Israelis were afraid of the Palestinians. They started working together, [and] there was positive friction - about the kids, about jokes, about sports, about those things. When this positive friction happened, it took the fear level down. I don't know if you see Star Wars, but fear is the source -
Michael Eisenberg
Of the dark side.
Eyal Waldman
Right. It's, fear leads to anger, anger leads to hate, hate leads -
Michael Eisenberg
To the dark side.
Eyal Waldman
No, to destruction. So it all starts with fear. So if we take the fear levels down, if we take the fear level down between both sides, and we actually learn to work together and start to believe each other - and this can start with business relationship - we can do much better.
Michael Eisenberg
You said your core value is to make a difference. How would you say you're making a difference today? And what's the difference you're most proud of throughout your last 30 years of work?
Eyal Waldman
So I don't talk about everything I do. That doesn't really matter for now. And maybe it'll be successful or not. I don't know. But I'm very proud about both Galileo and Mellanox. Both have contributed to the world, definitely to Israel, to thousands of people around the world and we've done great things. Today it's part of Marvell and part of NVIDIA. And in other things - I do a lot of philanthropic things. Now I'm focusing on trying to make this country more "sanibel," or better, in many ways. I think we're now in a big mess, which we need to get out of. And the second thing, which I think is important, the Palestinian issue that we have.
Michael Eisenberg
You've mentioned before in other interviews that you think Israelis are uniquely not afraid, and I think a lot of what you described earlier, the decision-making at Mellanox shows a certain lack of fear gene.
Eyal Waldman
I wouldn't say that we are afraid. But we know how to overcome and not let fear drive us to do the wrong things.
Michael Eisenberg
So kind of, not afraid of failure on some level, right?
Eyal Waldman
Actually afraid of failure. So you know, I've asked - I didn't even ask, people came and told me - one of my board members said, "You know why you will never fail?" And I said, "no, why?" He said, "You're so afraid to fail, you will do everything. You will cover yourself 360 to make sure you don't fail."
Michael Eisenberg
Interesting.
Eyal Waldman
So fear of failure is the best thing that can make you be successful.
Michael Eisenberg
Why are Israelis like this?
Eyal Waldman
Well, you learn this in the army. You cannot fail. And what they teach you in officers' course is, you always - first, things will always go wrong. So you need to be prepared for everything. You need to have Plan B, C, and D. And when you're in the army, it's not about money. It's about [the] lives of your friends, lives of the people that you lead, and you're scared. So imagine you're 21 years old, and you're leading 30 people into darkness, into certain places. That's not an easy thing. So you learn to calculate differently, to think differently. You cannot be afraid, because you need to do what you need to do. And it's also about building the right team. And doing everything for the team, you know, when you're under fire, getting up and doing what you need to do, most people will not get up.
Michael Eisenberg
Right.
Eyal Waldman
You need to trust your friends, and so on, that they're able to get up. So it's that kind of attitude that they teach you in the different stages in the army that you work by and take it into the rest of your career.,
Michael Eisenberg
It's a good thing, then, that everybody does the army. One of things I've observed in the US is, my grandfather was a military man in the US. He served in the US Navy. I think the people's army draft is a good thing for creating national culture. Do you agree?
Eyal Waldman
Yeah, I think it's a good thing. I think it actually changes you completely. I see kids from 18 go from kids to being men. And you see how you go from being an individual to being a team. And I see how you create the capabilities of making the right decisions, of being serious. You cannot make jokes anymore. It's, you need to have responsibility, you cannot be irresponsible. And you see people that have completely been irresponsible before the army, become the best leaders in the army. And I think it's very good for a lot of things. I also think, you know, some of the communities here in Israel, we need to go start serving more in different things. But yeah, I think it's very important.
Michael Eisenberg
What motivates you now? You sold two companies; what motivates you now, every morning when you get out of bed?
Eyal Waldman
I do so many things, you know, I'm amazed at how busy I am. I don't even understand why I'm so busy.
Michael Eisenberg
And what's the motivation for that?
Eyal Waldman
I don't know. It's like, you gotta get up and do what you want to do.
Michael Eisenberg
It burns in you, though. You're still very active.
Eyal Waldman
Yeah, I really don't understand why. Yeah.
Michael Eisenberg
You don't understand why?
Eyal Waldman
No. I mean, I understand the philanthropic side, but on the other side, I don't understand. Like, sometimes I find myself, "Why am I doing all these things? I can be on the beach," and stuff like this. And I find myself very busy. Including this interview, by the way.
Michael Eisenberg
Would you be bored? You'd be bored on the beach!
Eyal Waldman
I'd be able to do an hour and a half being on the beach, instead of sitting here, you know, working together with you.
Michael Eisenberg
Ooo! Yeah, fair enough.
Eyal Waldman
So why am I doing this?
Michael Eisenberg
What?
Eyal Waldman
I don't know.
Michael Eisenberg
I hope you'll enjoy it more than being on the beach.
Eyal Waldman
I don't know. I enjoy more on the beach.
Michael Eisenberg
You see what kind of response you get to the interview, versus....
Eyal Waldman
That's like an hour being on the beach and an hour being with you? Trust me, on the beach is better. There's no offense. But it's not just here, you know, it like, happens to me a number of times. And then I find myself busy. You see, it's like, things like this.
Michael Eisenberg
What makes you human and vulnerable?
Eyal Waldman
I think everybody's vulnerable.
Michael Eisenberg
What about you specifically?
Eyal Waldman
I'm also vulnerable.
Michael Eisenberg
What makes you vulnerable, or human?
Eyal Waldman
You know, everybody wants to be loved. Everybody's sensitive. Everybody, you know, we're all the same people. It's not like we're different. So if you're a big leader, that doesn't mean you're not vulnerable. You cannot show that. You cannot show that you're afraid while you're afraid. So you can have your own feelings, but you cannot expose them when you're a leader. So that's something.
Michael Eisenberg
Is there something that makes you emotional?
Eyal Waldman
A lot of things.
Michael Eisenberg
A lot of things. You want to share, or not really?
Eyal Waldman
No.
Michael Eisenberg
You're going to the beach, okay. In 100 years, they'll write the biography of Eyal Waldman - what's the title gonna be?
Eyal Waldman
I don't know.
Michael Eisenberg
You don't know.
Eyal Waldman
A lot of people asked me to write the biography, and to do like a movie or documentary, and stuff like this. You know, until now I didn't do it. For many, I don't know why, but I didn't do it. Mainly for time. I didn't want to be more busy and I said, "Better be on the beach than write the biography." Serious, I'm not joking. I'm still in that same position. But when I think it's important; I'm doing this because I think it's important that people hear, maybe, and be more successful in the future. But, so, I don't know what - they want to do this about the Palestinian episode in my life? They want to do it about the technology? About building this Mellanox? So I don't know what they'll write.
Michael Eisenberg
One last question: When you look at ChatGPT and OpenAI today - knowing you were there at the beginning, on the infrastructure level - and it's now blowing up into people's consciousness, how does it make you feel?
Eyal Waldman
It makes feel good. But we've done this, we've seen this in a number of companies, not just ChatGPT and OpenAI. I mean, if you look at JD.com, if you look at ByteDance, at TikTok, we've been in the very early stages, when there was a group of a small amount of people. So we've done this in many groups that have grown to be amazing companies in the past. So it's not just ChatGPT that everyone's talking about today.
Michael Eisenberg
You know, one of the lessons I take from what you said right now is that there's a lot of things we don't see, that are behind the scenes in the experiences we have every day - whether it's people using these great internet services, or ChatGPT, or whatever it is that we don't see - that are so important. And so many thousands of people and stories toil away on in the background, and they're really human stories behind them. And not just that, there's real hardware behind them that people just don't see or talk about. But without them, none of this works.
Eyal Waldman
By the way, I think more than 80% of the time you touch your phone, you go on Mellanox on the other side. So all of the social media, whether it's Facebook, Instagram, TikTok, Twitter, all them use Mellanox. Whether it's all of the, you know, most of the media - so 80% of the time you touch your phone, and maybe now even more, you go through Mellanox on the other side. So we're very proud of that, and now we're taking more percentage of the markets. Yeah, we've done a big change.
Michael Eisenberg
Intel said - Intel Inside - you've never done Mellanox inside, or -
Eyal Waldman
No, you know -
Michael Eisenberg
Mellanox in your mobile.
Eyal Waldman
There's a big difference. We're not selling to consumers.
Michael Eisenberg
Yeah, fair.
Eyal Waldman
So we don't need to do advertising. We're selling to engineers. So we're selling engineering to engineers. So it's a much easier sell. It's more a technology sale. When you start needing to advertise Intel Inside, it means you're starting selling to consumers. And internally, we didn't need to do that.
Michael Eisenberg
I think the title of this episode should probably have been the story behind everything you do, which is Mellanox. But we may need to call the episode, I Would Have Preferred to be on the Beach, Rather Than be With You.
Eyal Waldman
Yeah. I agree.
Michael Eisenberg
Well, thank you, everybody, for listening. This is actually the 10th and final episode of this season of Invested. We'd be happy for your feedback to the existing episodes and suggestions for guests for the next season of Invested. And if you enjoyed this podcast, please rate us five stars on Spotify, Apple Podcasts, Stitcher - wherever else you listen to it. And if you're listening to us on the beach, don't forget to make the extra press of the button for five stars. You can learn more about Eyal Waldman on LinkedIn and Twitter. On Twitter he's is @EYALWAL. Eyal, thanks for coming.
Eyal Waldman
Thank you very much.
Michael Eisenberg
That's a wrap on Season One of invested. We hope you've enjoyed the podcast. Please remember to rate us five stars on Spotify, Apple Podcasts, Stitcher or everywhere else you listen to your podcasts. Also, we're looking for suggestions for our next season of Invested. So please email us to invested@aleph.vc. And, we'd love your feedback on the current season of Invested, and you can send to that email address or just write it to us on LinkedIn or Twitter. We'd love to hear from you.
Michael Eisenberg:
I normally, at the end of the podcast, ask people how they want to be remembered. But I want to actually ask you how you want Danielle to be remembered.
Voiceover:
This episode of Invested is dedicated to the memory of Danielle Waldman and Noam Shay, who were murdered on October 7th.
Michael Eisenberg:
Sometime seven, eight months ago, I sat down and interviewed Eyal Waldman, who's here with me again for this podcast. A lot has changed in your life and in the world since October 7th, and I'm happy that you were willing to come back again for another conversation. But I actually want to start this conversation in a place I didn't think I was gonna start it.
Literally ten minutes ago as I was walking down the block to come in here, I got a WhatsApp from a friend of mine, who said, “Good news, it looks like Eyal is going to get the Israel Prize after all.” Literally ten minutes ago as I walked down the block. Do you even know this?
Eyal Waldman:
I know that there's going to be an Israel Prize ceremony on Independence Day. I haven't yet received an official notice that I have received the prize.
Michael Eisenberg:
Okay. So for those listening, there has been a little bit of a drama around Eyal. For those who don't know, if they listened to the last episode, Eyal is the founder of Mellanox, a company that was sold to Nvidia–and is really at the heart, the beating heart of NVIDIA's rise in AI. There's the GPUs, and then there's the interconnects, which are developed by Mellanox and Eyal. And once every few years, I don't remember how many, it's instituted by Prime Minister Bennett, they now give an Israel Prize, which is the highest prize in the country for entrepreneurship.
Eyal Waldman:
No, it was not initiated by Bennett.
Michael Eisenberg:
No?
Eyal Waldman:
It's 71 years old.
Michael Eisenberg:
No, not the Israel Prize, the one in entrepreneurship.
Eyal Waldman:
Oh, I don't know. Okay, maybe.
Michael Eisenberg:
Yeah, the one in entrepreneurship. And the Israel Prize is the most prestigious prize in Israel. And seemingly, maybe you know more than I do–t was going to be awarded to Eyal. I can't think of anyone more deserving, candidly, than you, to receive the prize.
And then there was a political upheaval about it–you want to describe it? You had a passionate appearance in the Knesset. Would you prefer not to talk about it?
Eyal Waldman:
I think it's, I think what's the most important thing is that we're getting back to normal, and the way it should work is working. And I think it's a small accomplishment in getting the right way Israel should be managed right. And I think the professional committees are the ones that should decide who's getting the prizes and who's not, and not anyone else.
Michael Eisenberg:
The–I appreciate you saying that, by the way.
Eyal Waldman:
I appreciate it too.
Michael Eisenberg:
I think your career as an entrepreneur in this particular moment right now–I'm not talking about the moment in Israel, I mean the moment of artificial intelligence–is quite striking.
Last time we were here we talked about the origins of Galileo, and then the opening of Mellanox and the transaction with NVIDIA. One of the other things I found striking is that Jensen, the CEO of NVIDIA, has, I would say, been incredibly supportive of both the Mellanox team and Israel. Very outspoken about it and what's gone on here since October 7th.
Has that surprised you in any way or…?
Eyal Waldman:
No, I think Jensen has his heart in the right place. And I think he realizes the contribution and the importance of Israel. I think he was a supporter of Israel even before that. Jensen is also supporting us employing the Palestinian employees, and I think would have liked us to increase the number of Palestinian employees.
So I think it's the right thing to do. Mellanox today contributes more than 13 billion dollars to the revenues of NVIDIA, so it's a significant part. And they were growing, so I think the synergy between Mellanox and NVIDIA has obviously gone very well. As a result, NVIDIA is worth more than 2.2 trillion dollars, became the third largest in terms of market cap in the world. So I think it's a great acquisition, a great synergy, and a great merger of the two companies and technologies.
Michael Eisenberg:
How important is the Mellanox team that's still here, obviously–and grown–
Eyal Waldman:
It's growing very fast, yes.
Michael Eisenberg:
It's growing very fast–not just to NVIDIA, but to the future of AI?
Eyal Waldman:
Look, AI, it's a simple thing. It's all based on data. The faster you can read data, and the more data you can read in a period of time, the more intelligent you become. The more concise your decisions are, the more correct your decisions are, the more data you look at per second.
What we do is we bring more data, faster than anyone else, with the lowest latency so that the GPU, the main processor, can analyze more data per second, and that's why we are, NVIDIA can build the most intelligent supercomputers or computers in the world. So it's very important, the architecture.
You have the CPU, you have the interconnect, and you have the memory. So NVIDIA is taking care of the GPU, now of the CPU of the brain. NVIDIA, through Mellanox, is now also taking care of the interconnect and now the memory. something that needs to be improved as well.
Michael Eisenberg:
And when you think about the future of Israel's position in the world of AI, what do you think comes out of Mellanox and NVIDIA over the coming decade?
Like you rolled out of Galileo, and then did Mellanox, I mean - Galileo was one of the first chip companies in the ‘90s - how do you think Mellanox plays a role in that? Mellanox and NVIDIA.
Eyal Waldman:
Yeah, I think, I think Mellanox plays a significant role in artificial intelligence around the world. We build the infrastructure to enable everything on top of us to run faster and be more efficient, and be able to do more things that before could not have been achieved, could not have been done.
And it's very significant for all of humankind. I think the things we can find, things we can do with supercomputers, with artificial intelligence, and with such supercomputers for science and for everything else, is very significant.
Michael Eisenberg:
If you were advising–
Eyal Waldman:
I think we'll live healthier lives, more secure life, much better lives than every year that goes on. And we have more AI applications running next to us.
Michael Eisenberg:
I want to come back to that more secure thing in a second. But if you were advising the Israeli government, or Israeli entrepreneurs, whoever you think is important, and what we need to do right now in the world of AI, what would it be?
Eyal Waldman:
It has like, multiple facets. The number one is, deal with AI itself. So the first, the building blocks, the hardware, the infrastructure, whether it's electronic, photonics, the basic stuff that builds the infrastructure. Then the silicon, then the architecture, then the middleware, then the building blocks of LNM and stuff like this.
So basically the building blocks of AI is very important.
On top of that, the utilization of AI into different markets, into different applications like fintech, like Agritech, like foodtech–everything you can think of, legal stuff, healthcare–everything can use AI. So I think first we need to be involved in the infrastructure, in the basic building blocks of AI.
On top of that also the middleware that provides engines to everybody on top of that, and then the applications themselves. And we should play in all three or four categories in Israel. that need to be built up.
Michael Eisenberg:
And what should we do practically in order to play in those categories in Israel?
Eyal Waldman:
I think we are playing already in those categories. We have the infrastructure with NVIDIA, Mellanox, and I think there are more companies trying to do that. We have middleware companies like AI21 or 21AI. We have more companies being built up. There's more research in Weizmann Institute, in Tel Aviv University, in the Technion, in Be'er Sheva, in other places–Bar Ilan–that are very successful with AI. And we're seeing a lot of companies, I've invested in multi companies in fintech, agritech, foodtech and many other places that they're doing a lot of augmented reality that's very interesting, that all of them has to do with AI.
Michael Eisenberg:
Would you encourage the government to do anything?
Eyal Waldman:
I think the government should, number one, make sure our education is enhanced, and we have the number one education related to AI. There's talks about building now an AI institute and there should be some budget there. I think we should attract talent from outside of Israel to come here for sabbaticals, to come here for their postdocs to do and bring the best minds to Israel for short periods of time, like two, three years that will leave their students here with a lot of knowledge, a lot of capability, and will continue their way with AI research in Israel.
So education is number one in the universities, and different issues and so on. On top of that, I think the government can direct some of the funds that are intended to encourage startups or venture capital to invest in AI. But other than that, I think the government should just stay aside, make sure the infrastructure for education is there. There is funds for startups, and then let the economy do itself.
Michael Eisenberg:
What about compute and energy right? Compute’s a bottleneck right now, we need more and more of it, and it's gonna be a needed national resource, and energy to power this compute is gonna be needed.
Eyal Waldman:
Let's leave it for a second, power aside. But I think yes. Israel has not had an entry in the top 500 since I think the 1980s, which is a lack, significant lack of capability in Israel.
Michael Eisenberg:
The top 500 what?
Eyal Waldman:
Supercomputers.
Michael Eisenberg:
Supercomputers, right.
Eyal Waldman:
Supercomputers in the world. I think we need to be in the top 250 at least. I've talked about this with the government multiple times. I hope now we're going to do this. I think that capability, or the, when you have such a supercomputer, it is very significant and we need to do something about this. After that, it will bring a lot of capabilities. If, for example, if you look at Google and Facebook, they were funded when students had access to a lot of compute power, right?
And once students have access or smart people have access to compute power, they can think of many ideas that do not exist today. If they have something to play with, many startups, which may grow to companies like Google and Facebook, may be created, and I think this will happen when we have this big supercomputer here.
Michael Eisenberg:
Should the government subsidize compute for entrepreneurs and people to make sure we have enough of it? Should it buy NVIDIA boards?
Eyal Waldman:
I don't think the government should do that, no. What I do think the government should initiate–we should take the model from Ulich or Cambridge or Virginia Tech. So what we should do is the government should like, buy and build the first supercomputer.
That's one. Once you have it up and running, you charge for utilizing it. So anyone that wants to use it for research, or for industry, pays a fee to use the supercomputer. The next supercomputer within three years, or let's say maybe the first generation is two years, can be built and bought from the revenues, from the income you get from the first supercomputer. And so on.
So every three years you need to calculate what's the money you need to create or build the next supercomputers. When you build the next generation, you still leave the generation minus one working for students, for academia, and so on. And you have income from the first supercomputer and it can actually sustain itself if you manage it correctly.
And this has been done in other places in the world. We should learn, copy, exact–we don't need to invent the wheel–and just build supercomputers that then will fund the next generation. So I think the government should not subsidize, but should bring the first supercomputers to Israel and then have it fund the next generations.
Michael Eisenberg:
Like infrastructure, like you build a road or a train, you should build the first supercomputer?
Eyal Waldman:
And it's even more important because it will enable us to build better infrastructure, much smarter, much better in the future.
Michael Eisenberg:
You mentioned that you think the world will be more secure. And in the last podcast, you mentioned that we'll have, kind of, better psychologists or medium psychologists become good psychologists.
It's true also that mediocre hackers become better hackers, with AI and compute power. At least in my own thinking, nuclear weapons were controlled by countries that are at least reasonably rational actors, but there's tens of thousands, hundreds of thousands of agents of chaos and very irrational people out in the world.
With their access to this AI and this compute power, and some mediocre hacking skills, they could wreak a lot of chaos. Might the world not be going to a place that's less secure?
Eyal Waldman:
Well, you need to be ahead of them, right? If you keep ahead of them and you do things right, then it'll be okay. There's always a race of arms between the criminals and the governments, or the police. And I hope we'll maintain–that the government, the police will be ahead of the criminals. This is the nature of man. I think we can regulate. We should be able to be ahead in things we do. And so I think we can do, but for example, you know, driving will be safer, right?
The autonomous driving. You'll be having drones that will take you from place to place. So now if you come from Jerusalem, instead of taking you 35 minutes, it'll take you 20 minutes.
Michael Eisenberg:
35 minutes? I wish it could be 35 minutes. You know what the traffic's like?
Eyal Waldman:
Okay, so let's say it takes an hour and a half, you'll be here within 35 minutes.
Michael Eisenberg:
Yeah.
Eyal Waldman:
And not only that, you'll be secure and you'll be able to work and do whatever you want while this thing brings you from one roof to another roof. Your medical, your health care will be much better because your clothes will tell you if there's something wrong, same as the Apple Watch today. But your shirt will decide what temperature you need to be in, the food you eat will tell you exactly what you need to eat and not eat.
You'll be much healthier, much safer, crime will be harder and harder to be executed, be done. The police will have much more control, much more power and intelligence of what's going on, so I think it's a good thing. If data is managed by the wrong people, and they put the wrong data for the computer, that's another issue, but we need to make sure that this is things that don't happen.
Michael Eisenberg:
One of my takeaways, at least, is that on October 7th, here, was that there was a lot of reliance on technology. Which I'm not sure is correct, by the way, but that's one of my takeaways. One of the takeaways has been, there's been too much reliance on technology and sensors, etcetera. Did you agree with that?
Eyal Waldman:
October 7 was a complete failure of so many things. It's also relying on technology, but also relying on humanoids that did not execute correctly. It's a concept that should not have been in existence. It's acceptance of things–coming close to the fence. Both, by the way, not just in Gaza, but also in Hezbollah. In the north border, I've been there and I've seen two Hezbollah tourists taking pictures of us right on the fence, and the army didn't do nothing.
Michael Eisenberg
I had the same experience.
Eyal Waldman:
And so I think we had assumptions that were completely wrong. We had concepts that were relying on a decoy that Hamas has made. And unfortunately we believed it.
And we've made a huge mistake, also on the operational side. The fact that we had only less than two platoons, or maybe even one and a half platoons of tanks in Gaza–while both, our extreme right government have put some 25 brigades to protect the settlers, which is completely, unbelievable wrong, because of the settlers doing wrong things in the West Bank–led to what happened.
So there's so many things going wrong. And on October six, between the night, between October six and seven, there are multiple phone calls to discuss. And I think the people that have made, and went to sleep or didn't do what they need to do, has a lot of responsibility of what went wrong. So I think everyone from the division commander of Gaza, and maybe two more division commanders from that level, up to the Prime Minister, all have responsibility, all have blood on their hands, and they need to resign.
Michael Eisenberg:
Just to go–before you carry on about October, just go back to the point about the digital technology. So they had indications from digital technology in the night of October 6th.
Eyal Waldman:
They had more than that.
Michael Eisenberg:
Yes. Yeah. A lot of–
Eyal Waldman:
They knew that hundreds of SIM, Israeli SIM were turned on.
Michael Eisenberg:
Yeah.
Eyal Waldman:
Turned on, have been lit up in Gaza. They knew that Sinwar is going down South. They had four more critical assets of indications that night, and they ignored them. And they said it could be a drill, it happened in the past and stuff like this, which is not true.
So we had at least five or six very strong indications that things are going to happen and the people at the top have ignored them, and that's why about 1,200–now with the soldiers I'd say about 1,700 people–paid with their lives. Were murdered, draped, burned, killed. And that's a big responsibility.
Michael Eisenberg:
Before we drill down there, what does it teach you? What do you take away about human thinking in this era of kind of–there's all these digital signals and intelligence signals, but the human thinking didn't kind of get there?
Eyal Waldman:
I think I've always, when I managed Mellanox–when there's doubt, there's no doubt.
Michael Eisenberg:
Explain?
Eyal Waldman:
When there's doubt, there's no doubt, right? If I have a doubt that something might go wrong and the expense of it going wrong is very expensive, I prevent it from going wrong. So I put a lot of effort in front of something wrong happening, to make sure that it doesn't happen. So for example, if I know this house is leaking and it might break down, I will go and close the water. I don't have a question. If there's a doubt, there's no doubt.
So if there's a doubt that things are going to happen, if you're a responsible person, and you know there's a book by Andy Grove, “Only the Paranoid Survive.” If you're paranoid enough, you will survive. If you're not paranoid enough, and you have too much confidence, and you think that two tanks, two platoons of tanks and a brigade of infantry can block 4,000 terrorists, that's where you end up at.
Michael Eisenberg:
I think it's hubris, not human cognition or not human perception. It was just hubris.
Eyal Waldman:
I don't know the difference between those things.
Michael Eisenberg:
Interesting.
Eyal Waldman:
Yeah. So I think it's definitely human mistakes. It's human responsibility. Decisions are made at the top, and they have the responsibility. And by the way, there are multiple people at lower levels that brought up the issue of what's going on.
And people ignored what they were saying. We had the plans. We knew of what they were planning to do. They actually said it multiple times on TV, and we chose to ignore it. The leaders chose to ignore it.
Michael Eisenberg:
In your own company, again, before we go down October 7th, you get something like from lower levels–it doesn't elevate up or people at the top don't pay attention–
Eyal Waldman:
It does.
Michael Eisenberg:
Why does it elevate up at your company, and you think it didn't elevate up here?
Eyal Waldman:
It did elevate, but they chose to ignore it.
Michael Eisenberg:
And why do you think? You were CEO, you said if there's doubt, there's no doubt, but here there was doubt.
Eyal Waldman:
No, they didn't do nothing.
Michael Eisenberg:
Why? What's, I'm trying to get into the thing. I know it's hard to analyze it.
Eyal Waldman:
I think they had the wrong concept. I think they were living in vain. I think they were thinking we’re too strong. I think they didn't appreciate the strength of the enemy. I think they thought it's unthinkable that we will be defeated, that we will be raped, that we will be humiliated.
So they made all the possible mistakes.
Michael Eisenberg:
No, kind of, appreciation for the competitive nature of the world and uncertainty unfolding and people always wanting to kill you.
Eyal Waldman:
That's given.
Michael Eisenberg:
No, I get it. That's what you're saying, that they didn't have that.
Eyal Waldman:
You learn, when you're a CEO, you learn to live in uncertainty. I met today a CEO, and he asked me–so you learn to live in uncertainty. It's part of your life. It's part of where you are. Always things can go wrong. Your competitors can come with something. Your vendors can come with something. Something can go–imagine you're a provider to the New York stock exchange, or to Google and Facebook, and a 10 millisecond of system going down costs them more than a hundred million dollars.
Michael Eisenberg:
Yeah.
Eyal Waldman:
Even, and with Alibaba at 11/11, at Singles’ Day, milliseconds can cost billions of dollars.
Michael Eisenberg:
Yeah.
Eyal Waldman:
So you have a lot of responsibility and you always live in uncertainty. Your job is to build enough shock absorbers, to build enough margins, to make sure that you don't miss. Nothing that can go wrong.
And this is, I think, one of the things why Mellanox was successful. We were paranoid, completely scared of everything that we had to do. We didn't even trust ourselves in many cases, and we've always put more margin of what we thought can go wrong. And eventually we delivered correctly. And this is something that's not been done here.
Michael Eisenberg:
For those who have been under a rock for the last six months, Eyal lost his dear daughter, Danielle, on October 7th.
Can you tell us about October 7th for you? You weren't in the country to start, right?
Eyal Waldman:
Yeah. Yeah, I was in Indonesia. I was on vacation. It was a holiday.
Michael Eisenberg:
And you heard?
Eyal Waldman:
I heard that she's not responding, that she's missing.
So I took the plane back. Took me about 20-something hours to get back. They enabled us to land. Not with the plane I came, I had to bring another plane. They didn’t land foreign planes to come and land here. I got here, and three hours later I went down south. I found the car. It's full of bullets, blood.
The body's already been taken. When we were going there, there's still engagements with terrorists Monday morning. We were very close, or part of one of them. So yeah, it wasn't a good day.
Michael Eisenberg:
And–you reached out to her, you heard, you knew she was at the party there?
Eyal Waldman:
I didn't know, her mom knew.
Michael Eisenberg:
Her mom knew she was at the party?
Eyal Waldman:
Yeah.
Michael Eisenberg:
And they called and told you she's missing?
Eyal Waldman:
And Guy and Sharon told me that she's not answering her phone.
Michael Eisenberg:
And you landed and you went down armed, I assume, I would hope. And her body had been taken already?
Eyal Waldman:
Yes.
Michael Eisenberg:
It was subsequently reclaimed? Or no?
Eyal Waldman:
It was taken by Zaka.
Michael Eisenberg:
It was taken by Zaka. And I'll tell you when I came to visit you at the Shiva, it was one of hardest hugs I've had in a long time. And, in my life, you're there–can you tell us about Danielle, your daughter?
Eyal Waldman:
She's an amazing person.
Michael Eisenberg:
What was her, what was her fiance's name again?
Eyal Waldman:
Noam.
Michael Eisenberg:
Noam.
Eyal Waldman:
And, no he wasn't her fiance. He gave her like, a promise ring.
Michael Eisenberg:
A promise ring.
Eyal Waldman:
Yeah.
Michael Eisenberg:
Tell us about those–I actually want to ask an important question. You mentioned earlier that Jensen pushed you to hire more Palestinians. You always inspired me. I think you were always a man of peace, and a man of incredible optimism. You hired so many Palestinians, in both the West Bank and in Gaza. Am I correct?
Eyal Waldman:
Yeah, we had about 25, 30 employees in Gaza.
Michael Eisenberg:
25, 30 employees in Gaza.
Eyal Waldman:
And about 175 in the West Bank.
Michael Eisenberg:
And do you think any differently about that today? Has anything changed in your outlook/
Eyal Waldman:
I divide it into two things.
First, the short term and long term. So for the long term, the answer is probably not. And when we can talk about that. For the short term, I think what we need to do now is eliminate Hamas and Islamic Jihad. And this is, let’s not compromised about this. I think there's two units being built to take care of that.
It may take us a few years, but we'll do this. Anyone that was associated with Hamas, anyone that passed the fence and participated in what was going on in October 7th will be eliminated. And that's number one.
Number two, I think in Gaza, we need to bring an international coalition led by the Arab League, led by Egypt and the U.S. and Europe be involved, and they should come and have two mandates on Gaza Strip. One, there's no artillery and rockets in Gaza. Anything that exists goes and being buried in Sinai. And second is education. Maybe they should bring the Emiratis’ education into Gaza.
Michael Eisenberg:
Deradicalization? Deradicalization, to un-radicalize the education.
Eyal Waldman:
I think they should have western education that talks about music, about science, about, paintings, and love, and stuff like this, instead of hate and destruction. And then they should build like a local government from the six, seven strong families in Gaza to be the technocrat.
A government for an intermediate period of time. Anyone, IDF should retreat from Gaza within three months to our borders. And then anyone who gets close to the fence will be shot. No questions. About 800 meters. So they should be shot, like we did in the past. And then they should be the ones deciding who will build the next government, who will rule Gaza.
I don't think we should try and dictate who's the next government in Gaza, and I'll soon talk about also the West Bank. I hope they'll be the same. But we should have the veto. We can say who cannot participate in the elections, who cannot be the entity to rule Gaza. So we can say Hamas cannot, Islamic Jihad not.
We don't say who will, but we say who cannot. That's the only veto we have. And I hope that within time, when they change their leadership, the Palestinian leadership, and we change the leadership here in Israel, we'll be able to create a peaceful agreement, a two-state solution that will yield the right synergy between the two people, the Palestinians and Israel.
I think until now, the Palestinians did not want to have peace. I think both the economic and the political leadership enjoyed a lot the current situation by getting a lot of money from corruption. And that is why they kept it this way. We always came with suggestions of what the peace agreement should look like.
And I've done multiple things with the Palestinians. I employed Palestinians. I donated $360,000 for a Palestinian hospital in Gaza. I've done a peace initiative that took about 12 months. But then Abu Mazen stopped it. I think we now need to make them want to have peace.
Michael Eisenberg:
How do you make someone want to have peace?
Eyal Waldman:
Have them suffer. So we need to have them want to have peace. They should understand if they don't want to have peace, it's going to be miserable for them.
Michael Eisenberg:
Peace comes from defeat at the end of the day, right?
Eyal Waldman:
No no.
Michael Eisenberg:
That's what happened in Egypt.
Eyal Waldman:
No no. By the way, they think they won, which–I think also Hamas now think they won. So don't misunderstand. We want them to–they've done a lot of things. They've achieved a lot in October 7th.
Michael Eisenberg:
Unquestionably.
Eyal Waldman:
So we should not step on their pride. You do agreements with respect, you do agreements with trust, and you do agreements that are win-win or lose-lose, whatever you want to call that.
But in a similar situation, one of my board members told me that if both sides come out of the agreement and both of them think they left something on the table, it's a good thing.
Michael Eisenberg:
Yeah.
Eyal Waldman:
So we need to do that, but we need to make sure they want to have peace. And this is something that has changed, and we need to push for that in a very big way.
I'm happy that now also in the West Bank–what happened in Gaza, we all know, but in the West Bank, I think we arrested more than 3,600 terrorists. We've killed hundreds of them. We've gone to places that we haven't been in the last 20 years, like An-Najah University, Birzeit and more places.
We're going everywhere we want. And we'll continue doing this until we get whoever we want. And in the north, we need to get Hezbollah up to the Litani, 40 kilometers from the border. I think now they're about between 5 and 10, or 8 and 10 kilometers north to the border. I don't think we're going to have a full engagement in the north.
But, once we achieve this, and we replace the regime on both sides, we should strive and make them strive for peace. Once they understand it's better for them to have peace with us, and we also do this, I think it's the right ground to have the right negotiations, to build a very significant coexistence of the Palestinian people, the Palestinian state with the Israeli state.
Michael Eisenberg:
I find it striking how optimistic you are about it given your personal loss, and how–
Eyal Waldman:
I think there's only one way to converge. I don't think any people can rule or be responsible on other people. It's never worked. And this is not something we should strive for. So we should do what's best for the Israeli people.
And what's best for the Israeli people is to have a two-state solution. I don't think there's any other solution that is, will hold water for a long time.
Michael Eisenberg:
How do you–maybe I”ll ask the question this way, do you still employ the people in Gaza and the West Bank?
Eyal Waldman:
No, Gaza, October 7th, disconnected. People in the West Bank, yes. NVIDIA still employs them very much.
Did you hear from any of them after what happened to you?
Eyal Waldman:
Not from the people in Gaza.
Michael Eisenberg:
Not from the people in Gaza, yes from the people in the West Bank?
Eyal Waldman:
Yeah, I heard from one or two.
Michael Eisenberg:
From one or two. Did that surprise you in any way, or…?
Eyal Waldman:
No.
Michael Eisenberg:
No. Disappoint you?
Eyal Waldman:
No.
Michael Eisenberg:
No. Because?
Eyal Waldman:
You have expectations, you're disappointed. You don't have expectations, you're not disappointed.
Michael Eisenberg:
And what do you think is the plan for NVIDIA for further employment in Gaza in the West? Well, Gaza it’s impossible to tell anything right now, but….
Eyal Waldman:
I hope eventually we'll be able to open another design center in Gaza. Look, I think the economy on the Palestinian side is important to us. I think we should help them develop the Gaza gas field.
Michael Eisenberg:
Called Gaza Marine.
Eyal Waldman:
Gaza Marine–
Michael Eisenberg:
Yeah.
Eyal Waldman:
–field. I think we should help them have technology design centers. I think we should help them in multiple things. I don't think today we should bring Palestinian employees into Israel as a result of whatever in October 7th, but we definitely need to build a synergy.
And I think there's great synergy between the Palestinian economy and capabilities, and the Israeli economy and capabilities. And we should benefit Israel and the Palestinians should benefit from this. So yes, I think we should do this.
Michael Eisenberg:
Has anything deeply changed in your outlook since October 7th?
Eyal Waldman:
The time frame. It's interesting. It could be that we're closer to peace now than we were before. If you look at what happened in ‘73 there was a big crisis, and the number one enemy for Israel was Egypt. It was the number one enemy. And my father fought, he was a second in command of our brigade of tanks. I was second in command of brigade of infantry.
Michael Eisenberg:
You were in Golani, right?
Eyal Waldman:
Yeah, but that's reserve duty. I'm not normally in Golani, but in reserve duty. So in ‘73, Egypt was our number one enemy. And in 77, no one believed it would happen. But one guy, one guy, the Egyptians did not support him. No one from Egypt. The Israelis did not trust him.
And Sadat came and says, “I want to talk to the Knesset, to the Israeli parliament.” And Begin that did not trust Sadat said, “You're invited to come and talk.” And this one guy, Sadat, has made peace between Egypt and Israel. And I think it's amazing that from crisis in ‘73, our number one enemy in ‘77 made peace.
I hope the same things will happen now. So I hope now that after ‘23, that there's been so much suffering, so much destruction, that in ‘27 we'll be able to have peace. So we'll, we first need to replace the leadership on both sides, and then either we go and speak to the Mukataa, or they come and speak in the Knesset, or together, and there's one guy or two guys required to make peace.
Michael Eisenberg:
I lost a cousin on October 7th and thereafter. You lost your daughter October 7th. There's such a trauma in this country right now. It was real trauma around everybody, it's such a small country. Everybody knows somebody or is related to somebody who was murdered or raped or were wounded, because we've had a lot of, we don't even talk about them really. We have a lot of wounded soldiers.
Eyal Waldman:
Both visible and un-visible ones.
Michael Eisenberg:
A hundred percent. I'm sure my son-in-law wouldn't mind–he was wounded in 2014, and he suffered from PTSD, and he's written a song about it. And I talked about it very–he actually fought with the army to go back into Gaza now. And he's fought, he's actually in reserve duty as we speak.
This is a country that's kind of emerging from trauma. I think there was similar trauma after the Yom Kippur War in 1973, although it's hard to compare time periods. What are some of the changes you think go on in Israeli society in kind of response to this trauma over the coming years?
Eyal Waldman:
First, I think we're very resilient and very robust. I think we'll come out of this stronger, and hopefully also better. I think, the number one thing that I'm very disappointed is in the current government, and extreme right parties that are doing wrong things in the government, in the budgets, and being very sectorial in all the decisions they make. By the way, the Israel Prize is one example of that.
So we need to change the government as soon as possible. I think once we do this, and we have a logical government–and by the way, everybody outside of Israel is saying the same thing–if you look at the U.S. and Biden, and Europe, and many other places, saying the same things. Sometimes it's, you look, you see us better from the outside than we see from the inside.
So I think we're resilient. I think we're very strong. We'll get, we will get the hostages back.
Michael Eisenberg:
You think we will?
Eyal Waldman:
We will get the hostages back. I don't know how long it's going to take, but I hope in the next, uh, worst case, I'd like to say less than 30 days. Let's give 45, 90 days.
We'll get the hostages back. I hope we'll be able to eliminate Hamas in multiple ways. And then we need to start rebuilding. And this rebuilding will be prosperous for both sides.
Michael Eisenberg:
Other than the government level, at the civilian level, what changes should we look to implement here?
Eyal Waldman:
Look, I think we have an amazing people.
Michael Eisenberg:
So do I.
Eyal Waldman:
I think the religious people, the extreme orthodox religious, they should take responsibility. I think they should be part of the military service, or, you know, some sherut le’umi–
Michael Eisenberg:
National Service.
Eyal Waldman:
National Service. So I think–and also we should look at the Arabs as part of Israel, and I'm very proud to say that this time the Arabs reacted correctly.
Michael Eisenberg:
Yeah. I think you're right about that.
Eyal Waldman:
The Israeli Arabs.
Michael Eisenberg:
Yeah. Agreed.
They have completely, don't want to be associated with the Palestinians. They want to be Israelis. They have been murdered. They've been raped. They've been kidnapped, the Muslims, to Gaza and by the Hamas, same as our Jews, because they’re Israelis. So I'm proud of that. So we need to change some of our sectorial understanding, and then on the extreme right parties that are part of the government today, and also things they're doing in the West Bank.
You're seeing more and more countries boycott either settlements completely, and individuals. And I think it's the right thing to do, to make sure that we act as we should and not abuse Palestinians or do wrong things in the West Bank or anywhere, anything else.
Michael Eisenberg:
Do you think– let me ask a question this way: And if the ultra-Orthodox aren't willing to go to the military, and aren’t willing to go out to work, then what?
Eyal Waldman:
I think we should–it really depends if you think it should be gradually, or it should be done quicker, but eventually they should be part of this.
Michael Eisenberg:
I'm a gradualist in general. I think very few things happen quickly that happened well. But I do think there are breaking points in history. I think we're at a breaking point in history right now.
Eyal Waldman:
I heard yesterday a rabbi that's saying he is preferring to die than serving in the army.
Michael Eisenberg:
I saw the same thing.
Eyal Waldman:
I heard a rabbi that said that if they need to go to the army, they'll just leave the country. When you hear rabbis say things like this, you don't understand where it's coming from. And this rabbi is getting the salary from me.
Michael Eisenberg:
No, he’s not, that one’s not. ???
Eyal Waldman:
Yes he is. He is getting, I'm paying his salary, and he's saying, if he needs to, if he, if they need to go to the army, they will–so first of all, I'll buy them the ticket. And second, I don't think it's the right statement.
Michael Eisenberg:
I know, I Tweeted at him, “is this a promise or a threat?”
Eyal Waldman:
And you know, the interesting thing, they say they respect the Israelis that are protecting them, and they're praying that the Israelis protecting them will be winning, will be successful. So if you're praying, why don't you go in and fight?
And, in the Torah, it actually encourages you to go and fight for Israel.
Michael Eisenberg:
Yeah. I don't need to be persuaded, I had four kids in Gaza
Eyal Waldman:
Yeah, no, I understand.
Michael Eisenberg:
But I agree with that. So I think we should, but this,
Michael Eisenberg: I, I don't like to get into the right-left politics thing, but–
Eyal Waldman:
This is not right or left.
Michael Eisenberg:
Does the left wing bear any responsibility?
Eyal Waldman:
This is, this is not right or left. Everybody bears responsibility. Everybody. The left, we've been–
Michael Eisenberg:
it's a generational thing almost. There's a whole generation of people that need to be pushed–
Eyal Waldman:
I don't blame just the right. I blame everybody. We completely screwed up. I think it started with the previous chief of staff, or maybe one and a half, but I think with the previous–so it's a concept that we have been taking for the past, let's say, five years. That is, that put us in where we are today.
Michael Eisenberg:
You met with President Biden, right? And Secretary of State Blinken?
Eyal Waldman:
Yes. Yeah, a number of times.
Michael Eisenberg:
What were your takeaways from those meetings?
Eyal Waldman:
I think they're amazing. I think President Biden said four amazing things, and is very much supporting and protecting Israel, and he will be there for us forever. And he's the one saying also we need to change the government.
So first he said, “You don't have to be a Jew to be a Zionist,” which is a very important statement. The second thing he said, then, during weekend dinners in his house, his dad always talked about the Holocaust and said, “We've never been for the Jews during the Holocaust.” And he said, “We will be here for you now, and we're standing next to you.”
The third thing he said, “You need to be within the envelope of the international rules of war law.” I think we need to be within the envelope of the rules of the laws of war. You need to be within the envelope of the international rule of law. And which I think we are doing.
Michael Eisenberg:
I'm certain we're doing it.
Eyal Waldman:
Yeah, I think we are trying to have as less collateral damage as we can, and we're doing everything we can. Yeah, I agree with that. And the last thing he said, “You should always think of the day after.” What is your goal? What are your targets? And I think there we're missing. I don't think our government.
is managing the day after in the right way. We should have a plan. We should have a time schedule. It's not something that we should just leave for, whatever happens. So he said those four things. It was very strong. He meant what he said. He's executing what he said. When they brought the two aircraft carriers and a number of submarines here, it was not to help us fight Hamas.
It was not to help us fight the Hezbollah, or the West Bank. It was to prevent a third world war with the farther states, or countries, like Iran, Iraq, Yemen, and other countries. And when this “Don't” speech, the big “Don't” speech was made, he exactly targeted those people, those ears.
Michael Eisenberg:
If you think about what's going on, you mentioned Yemen right now–this will be my last question on this topic, I want to go back to tech–how do you think about this kind of regional array? Where Yemen is being sponsored by Iran and Iran's not paying a price right now at all?
Eyal Waldman:
We did attack in Iran, or someone claims we attacked in Iran. People claim that we did attack in Iran.
Michael Eisenberg:
Right. The Americans haven't made them pay a price, right? They've just fired on the Houthis.
Eyal Waldman:
Again, I don't know who's done some operations, but there were some blowups in Iran recently. I think after this operation, which is a defense operation–what we're now in is not an offensive operation, this is a defense operation we're doing–after this defense operation is over, I think we should work very hard to get normalization with Saudi, which will lead to normalization with many Muslim countries around the world.
So I think we should very fast move to create normalization with Saudi. And I think we should create normalization, the right balance between the red countries and the red country, the red countries and the blue countries, where the blue countries–any country that's gray, Ukraine was a gray and it's kind of exploded. I think India–
Michael Eisenberg:
What do you mean by gray?
Eyal Waldman:
Gray, it's not identified with the west or with the east. I'll give you an example. Now Saudi was completely blue. I think in the past few years it went slightly red. I think now it's in between, and it may become to be blue again. I hope it will become to be blue again. So we need to make sure that the blue countries win the final game, the end game. And I think it's possible with the superior, superiority that the United States has.
Michael Eisenberg:
How do you think the tech industry has been impacted since October 7th?
Eyal Waldman:
So I think the tech industry was somewhat impacted. I think we've used a lot of tech in this war, a lot of AI and stuff like this. And more than two of my companies, the companies I invested in, have participated and helped in multiple things with AI. I think the high tech is very resilient, very robust, even though we had about in NVIDIA, about 700 employees in reserve duties–still NVIDIA executed and other companies have also executed.
Michael Eisenberg:
Flawlessly.
Eyal Waldman:
Hard, but yeah, still continue to execute. And I see also other companies do that. So we're resilient where we understand what we need to do and we're doing this. So I think we'll come out of this.
Michael Eisenberg:
Okay, you're optimistic about the future. I think.
Eyal Waldman:
Yeah, I think I'm always optimistic.
Michael Eisenberg:
I normally, at the end of the podcast, ask people how they want to be remembered, but I want to actually ask you how you want Danielle to be remembered.
Eyal Waldman:
As she was. She was like–she's an amazing person.
Michael Eisenberg:
You want to give some more details about her? I've read just about everything I think you've written on Facebook.
Eyal Waldman:
You know, she loved to dance, she loved people, she loved dogs, she loved horses, she did wake surf, she did snowboard, scuba-dive, everything. She liked people very much.
Yesterday I was talking in front of Americans. And one American woman, girl, came to me and said, “I went to the gym with Danielle and I only speak English. And always when Danielle was there, she made sure that everybody around me speaks English to me. And also her boyfriend, Noam.” She said, “She took such good care. She was so sensitive to me, trying to help, even in the gym.” She didn't even know her, but she helped. So that's Danielle.
Michael Eisenberg:
Always there for people. How old was she?
Eyal Waldman:
24.
Michael Eisenberg:
24. As we say, yehi zichra baruch. [Of blessed memory.]
Eyal Waldman:
Todah. [Thank you.]
Michael Eisenberg:
And there shall only be happiness going forward. Anything you want to ask me? Before we wind up?
Eyal Waldman:
You know, I think you can have a critical role In trying to bridge between a lot of religious communities and non-religious people.
And I think it's very important to bring both sides to the right understanding of what the future should hold. I'm disappointed, and I've tried to do this as well, to try and talk to Haredim. And I've seen yesterday another try like this, and I don't think it's working. And I think you can have a big role in bringing some of those things.
So I don't know if you're doing anything about this.
Michael Eisenberg:
I promise you I am. Even a fair amount. It's, but I think it's not trivial. I've spent a lot of time on it even before October 7th. And I think it's not trivial. I am optimistic about it, even very, but I think it goes through economics. And probably not for the military to start with.
And I think it, it's going to require some very hard political decisions that I'm not sure we found the people who have the courage to make it.
Eyal Waldman:
Yeah. I think we need to build the right coalition to do this, but this is something that's very significant. And I don't know how you see the high tech getting out of this October 7 operation.
Michael Eisenberg:
Like you, I think there is a lot of resilience, and I think there's been incredible G Wiz technology developed since October 7th. And I think companies, because they've had to get more efficient during this time, are actually fitter now than they were beforehand. And I think this has been just a terrible unimaginable tragedy and trauma on a national level.
But through it, and through the resilience, we've gotten fitter, both as a tech industry and maybe as a people. I think we've discovered something else, and this is–you flew back from Indonesia because of your personal thing, and you went down south, and you weren't afraid. We've discovered that our kids are incredible.
Eyal Waldman:
Yeah.
Michael Eisenberg:
I have kids the same age as your kids, and we've discovered that the most incredible generation of kids around the world lives in this country, and they stood up and went to fight. And stood up for what mattered. They discovered, tragically, what they're willing to die for. And if you know what you're willing to die for, you know what you're willing to live for.
And previous generations here have had to show that. And I think they've shown that. And it's–tragedy, nothing makes a tragedy fully better. But sometimes the body, when it goes into shock or gets hit, it comes back more resilient. I'm just, I'm blown away by this younger generation of kids, just blown away.
Eyal Waldman:
Do you see any tech transition out of Israel?
Michael Eisenberg:
I see there were people who were leaving before October 7th because of the judicial reform. Not a big number, or a small number. And I think those people have kind of gone ahead. Ironically I ran into a bunch of people who were caught out of the country on October 7th and never came back. I don't think the numbers are large.
Eyal Waldman:
No, but I'm saying after October 7th, do you see a transition or…?
Michael Eisenberg:
No. I don't.
Eyal Waldman:
There are some, and we should be very watching, because if you look at the, what's happening here, I'd say there's about, 15,000 or what, that are leading.
Michael Eisenberg:
That matter.
Eyal Waldman:
That matter, right. And if some of them start leaving the country because of the government, or because, if the same government is elected again. I think we'll be in a bigger trouble.
Michael Eisenberg:
I think that could be a challenge, I agree with that. I think we need to work hard to make sure that the government is up to the sacrifice made by this young generation and the people who have gone in there.
Eyal, I want to thank you for coming on a second time. I think listeners will find this fascinating, both on the personal side, and on the business, and technology and AI side. We obviously share in your sorrow of the murder of your daughter. Choking up even talking about it. And I wish you only happiness. Thank you.
Eyal Waldman:
Thank you. And thank you for inviting me again.
Michael Eisenberg:
Yeah. Thank you for coming.
Eyal Waldman:
Thank you.
None.
Michael Eisenberg 0:00
It is my absolute pleasure and honor to welcome Aryeh Bourkoff as our first ever guest on Aleph's invested podcast. Aryeh is a great friend and the founder, chairman and CEO of LionTree, and independent investment and merchant bank, advising and investing in transformational CEOs and the companies they lead. Aryeh founded LionTree in 2012, during a time of unprecedented disruption across media and technology. He's known for his work advising on some of the largest transactions in the space, including the recent spin off of Warner Media from AT&T to create Warner Brothers Discovery, and the sale of MGM to Amazon. LionTree is deeply immersed in sectors shaping the world around us from gaming and sports to AI, software and Web3. And while they're based in New York, they have a growing presence here in Israel and the region. Importantly, values sit at the core of what LionTree does. And it's been a pleasure getting to know Aryeh over the last 25 years and LionTree over the last decade, and their unique perspective on where the future is headed, and how businesses can build and capture value in an evolving market. Aryeh is a graduate of the University of California at San Diego. He resides in New York City with his family. Aryeh, we're so happy to have you on the show with us. Let's get started. It's a true honor to meet a man who personifies values that create value.
Aryeh Bourkoff 1:30
Have you done one of these before? Have you ever done a podcast?
Michael Eisenberg 1:35
I've never been the interviewer. I've been the interviewee many times. Have you done one?
Aryeh Bourkoff 1:40
Yes, I've done over 100.
Michael Eisenberg 1:42
I know. Okay, Aryeh. This is so fun.
Aryeh Bourkoff 1:46
I haven't really been a subject of too many. This is my first one with a close friend and a first one in Israel.
Michael Eisenberg 1:56
There you go. There's a first for everything. All right. So, welcome, Aryeh, thanks for joining us here at Aleph in Tel Aviv. Actually, I want to start on something deeply personal. For those who don't know, LionTree is an amalgam of two names, “lion” and “tree.” “Lion,” of course, is the English of “Aryeh,” your first name, which is a Hebrew word, and “tree” comes from your wife's name, “Ilana.” I think in our world, it's pretty bold to name a firm, after you and your wife, even in symbolic terms or hidden meanings, so to speak. Why did you choose to name the firm LionTree?
Aryeh Bourkoff 2:34
Well, why is that bold?
Michael Eisenberg 2:36
Why is it bold? I think it's bold, because there's something family about it, and maybe even less business about it.
Aryeh Bourkoff 2:42
Well, I guess I would say it was important to me to have a company name, that for most people that are not as insightful as you and your listeners, would not be identified with me or my wife, but would belong to everybody else: employees, partners, and entrepreneurs and whoever we do business with business with today and well into the future, that they would be able to call the firm their own. That was the most important thing for me. And so that's why I did not want to have a name publicly associated with myself, for everyone to, to be able to understand, you know, out in the open. At the same time, I knew it would take blood, sweat, tears, sleepless nights to build it. And I want it to have it be deeply personal to me and my family in a very inner being way that the journey has to be to make it worthwhile, and it will take everything out of me. And them, shared sacrifice, and the kids too right, and, and it's only fair that they would be identified with it. And it's almost better that they're identified with it in a sort of private way. So you have this, like everything in life, dual meaning. So for everyone else, LionTree is theirs. And it has many definitions. It has the strength of the lion and the forward ferociousness of moving something forward that has to be entrepreneurial, and the fragility of nature and the tenderness of what you have to build.
Michael Eisenberg 4:38
And I'd say the deep roots of the tree.
Aryeh Bourkoff 4:39
The deep roots of the tree, you have to go in to go up and which is a real theme for us and for everybody in my view right now. But for me personally, it's always about the attachment to me and the family and what it takes in the sacrifice.
Michael Eisenberg 4:53
One of the reasons I ask the question is you know, I've been to your conference Media Slopes, which is you know, I don't miss, it's my favorite conference of the year, no offense meant to anybody else. But I've said this before, it actually almost feels like your Bar Mitzvah sometimes when I'm there, because it really feels like family's invited. And it's all these high powered CEOs and executives from around the industry and around the world. But everyone feels like one kind of LionTree family. How do you explain that? Like, am I the only one who feels that way, by the way?
Aryeh Bourkoff 5:23
No, I feel it's a community. It's even hard to call you and everyone else clients, you know, which is the nomenclature of a bank. Or even entrepreneurs, because obviously, you are an entrepreneur or client. And so as sort of the other people that are in attendance, but it's really a community. And it's the reason why LionTree exists. And we have no reason to exist, no one said, out of the blue and called me saying “by the way, I really think that, you know, the world needs another bank or the world needs LionTree, the world needs you to create something,” no one called me and said that, although a few people did encourage me, and everyone knows who they are. But the group of people that come together really make up the company, it's the inside and the outside and inside outside journey, and you never lose sight of the pillars of it. And so it's not solely the people inside, even though they're very important. It's really also the people outside that feel they're invested in the journey. And with each other. That's the most important thing that the community of people is not just through me, it's really with each other. And the minute that you create a forum for them to do business with each other, then you break down borders in a very comfortable way. And it's a different sort of platform of leadership, in my view, that's very important for this moment, that has an elasticity to it beyond just the product of mergers, acquisitions, raising capital, taking companies public, but also could be a platform for purpose, other things that we don't foresee yet, filling the gaps in our society where there are needs, emphasizing certain geographies that are important, that you see trend lines, and to do that, and to be a good adviser of this platform for this community, you have to be learning with them, and for them, ahead of time in some cases, which is a responsibility and frankly, the prerequisite for being a good advisor. Your advice gets very stale, if you're not learning.
Michael Eisenberg 7:30
So one of the things, you know, maybe the core ethos of this podcast, and what we're talking about is, is how values create value. One of the core values, I think you and I share, we think about a lot, is trust. You talk about the conference, or LionTree as a community, I mentioned the word family, certainly for communities to thrive, there needs to be trust. And for families to stay together, there needs to be trust. I'm always struck by how there's Chatham House rules, basically, at the LionTree conference, but they're never, you'd never stand up and say, Hey, this is Chatham House rules, you can't leak anything, but nothing leaks from there. There's like implicit trust in the room. Where does that come from? And do you think that's actually important for creating economic value for you, and for others out of it?
Aryeh Bourkoff 8:20
It's interesting, because people, I'm sure you've had this experience, and your listeners, when someone tells you something in a conversation, and it's a very close relationship, or a close friendship, but they feel the need to say, by the way, this is between me and you. And I will say to them, well, you're the one choosing to tell me, like I didn't ask you to tell me anything, but like, but then you could say, of course, it's between me and you can trust that. But if you have to say that, you know, you're obviously, they’re either saying it because they feel like they have to, or they don't really fully trust you or something like that. But I'm always saying like, by the way, like, we don’t have to have a conversation, you feel the need to get off your chest, you know, then you're taking the risk that this is a trusted conversation. So there's a certain amount of intent. There's a term called tensegrity - tension, integrity, tensegrity. Interesting. It's a structure, if you look it up, that has no pillars that holds up this structure. It's almost like when your kids went to school yard, and had a structure that you can climb up, that had the tension of the structure hold it together had perfect integrity of the structure. That's the room. So everyone has the right amount of integrity and tension holding it together, where there is no need for any artificial pillars, that you have to sort of like use as a crutch, because there's perfect tension and integrity in the room. And when you create that, you don't have to say, Oh, this is between me and you or no posting to social media accounts because if I say that to everybody, then it's like almost like I imply that I'm worried about it, or that the room was not created properly. And it's supposed to be created properly. Everyone is in the right community and doing the right thing. So therefore, I don't have to say those things.
Michael Eisenberg 10:09
So quite obviously, one of your core values is trust. And having people around you that you trust and that trust you and trust each other, what else would you say are your kind of core personal values, because LionTree is created in your image at the end of the day. You're the founder, you're the CEO, you're the leader, you have a great team. I know many of them. But what are your core values on a personal level? Before we get to the business?
Aryeh Bourkoff 10:39
I said to, I think, my kids on this vacation, if you had to put one word on a billboard, for everyone to see, that you want to transmit to society, what would it be? And, like one word only, and it's a great exercise, I played with them sometimes. And your team asked me while you were freshening up in preparation, or doing makeup or something for the podcast, what my value is, so it was
Michael Eisenberg 11:10
Some of us are not good looking to do, you know, we need help
Aryeh Bourkoff 11:15
What my core value is, I said the same word that I would put on the billboard, which is empathy, which is another way of saying, seeing people where they are. And,
Michael Eisenberg 11:24
By the way, you know, we have a company that we're invested in called empathy.com.
Aryeh Bourkoff 11:28
I know, Ron is a great CEO, a great founder, you've introduced me to him. And I think it's a great company. And, but empathy is a great concept, because in order to see people where they are, you have to be very secure in who you are. And, and most people focus on like, what your game plan is all the time. But what really matters is how it lands to the other person. And to do that without losing sight of yourself is I think is really, really important. That's a very big value for me. But you have to do it in a sense that you can also make sure you're taking care of yourself. And that balance is really, really critical. So I think, you know, love of self and empathy for others, and that balance and getting it right is a blessing and a burden, a challenge and a gift. And I think the whole company is built off that.
Michael Eisenberg 12:26
What are some of the words that your kids put on the billboard?
Aryeh Bourkoff 12:31
I think they put like, like, charity, they put words like confidence, they put words like practice, you know, depending on their age. –But Dad, don't tell me to study for a test.– Yeah, exactly. Exactly.
Michael Eisenberg 12:52
So speaking of like community, you were involved with the Bored Apes Yacht Club, and some of the music videos around that and these digital communities are starting to proliferate. Why do you want to be involved with something like the Board Apes Yacht Club? What do you see the future of that kind of community as? And then, what do you think are both the opportunities and the pitfalls in these kinds of digital communities?
Aryeh Bourkoff 13:21
Yeah, well, I mean, I think one is I, I believe in insurgency. And curiosity, which could be another word, by the way, for a billboard. I think that we, I spend a lot of time with the established companies, most of my time, I frankly, could spend all my time with them at this point in my career, and that's most of my community. But I don't want to be stubborn, or have tunnel vision around just the establishment. I want to really understand what's around the corner, which speaks to knowing people like you and understanding new companies – Are you calling me an insurgent? – Oh, yeah. Yeah. You're, you're always with, you're always with the curious and the new. But hopefully getting to the new establishments as well, you know, and, but so I would like to know what's around the corner and what could take off. Within that you're gonna pick up some findings that make it all the way and some things that are just kind of flashes in the pan. And I guess that's your whole world in venture at the end of the day. But for me, it's also how those can relate to the large companies and what they may be interested in and how they connect the dots not just from an investing perspective, but a business development perspective and a R&D perspective. And then reforming new media companies, which is in a constant state of innovation and transformation. Probably one of the most innovative sectors all the time. It's transforming itself, music, media, other forms of entertainment. One of America's best exports, I would say. So the Bored Apes to me represents animation. Think about Pixar and Disney. And you know, we all grew up with like, the Bambi’s of the world, but you know, new ones like that. Come on. Yeah, exactly. But also the way to have digital identity, you know, how do you create a new identity for yourself? That's not the physical or an avatar? And then how do you use that identity to then form a new music label, a new movie studio, a new community of IP, that's not encumbered by the old IP. So if you bring a Justin Bieber together, and Justin Bieber puts a song out, it's going to the music label. But if you put Justin Bieber on his ape with a new song, that ape has an unencumbered level of an IP.
Michael Eisenberg 15:43
Is that okay? I mean, like, it's still Justin Bieber
Aryeh Bourkoff 15:45
Well, depends on the event that's up for grabs, right? So like, can you create a new level of communities and labels and music and media companies and art companies and fashion companies and commerce enterprises with a simulation, than just the kind of age old infrastructures that we're living in today? So restart,
Michael Eisenberg 16:06
I mean, I need to think about this, like there's real Justin Bieber and fake Justin Bieber, there's like, is that the same person? Is it some sort of digital twin? Or is it like a different person?
Aryeh Bourkoff 16:17
Of course, you can't go see the Justin Bieber gorilla in concert, necessarily, right now? Now, you wouldn't pay the same amount for that. Right?
Michael Eisenberg 16:25
I wouldn't pay to see it either way.
Aryeh Bourkoff 16:28
Your kid, your kids, your kids, you may not want to be screaming and looking at Justin Bieber for pictures if it's a gorilla, you know? No, but I think there's a chance to create these new communities and, and new media models and gaming and sort of like immersive experiences that go to the 4 billion gamers of the world.
Michael Eisenberg 16:51
But how immersive is it? Like, you know, even if Justin Bieber is on stage, or Madonna is on stage, and I'm dating myself, or somebody younger is on stage. I'm still in a concert environment with a lot of other people. There's intimacy there, there's real community, in this kind of digital form of Bored Apes, there's not real intimacy or community. Like, why would I want to be there?
Aryeh Bourkoff 17:12
No, I think you need both. I mean, there's, there's, there's Coachella and things like the middle beast, and in Saudi where you go, and you watch concerts, and it's fantastic. And you go to a basketball game, and, and there's immersed, there's physical experiences, which are irreplaceable. But then you always are doing social virtual experiences, whether it's on, you know, Tik Tok, or you're doing things that are more, you know, virtual in nature, even Dungeons and Dragons when you grew up and other games you want to play that are more fantasy. You know, I think people look at both. And I think I think the Apes, and I think these Metaverse areas are just another form of escape. But I think it doesn't replace the physical. I think you do both.
Michael Eisenberg 17:55
When we think about all the digital places people who have escaped to today, do you think we lose some of our humanity in these digital places?
Aryeh Bourkoff 18:05
Yes, for sure. I am a face to face person. – I know. – Like, I mean, frankly, I did more traveling during COVID, than before COVID. Just because I saw it as a competitive advantage. And then I trusted myself to create safe spaces more than someone else dictated them for me. And, and I thought there was more like intimate experiences that you could create, if no one else is doing it. And so it's a differentiation, but I like the face to face better. And it just sparks creativity and, and conversations and there's environments around you. But I also like, you know, virtual experiences that are like, you know, listening to music with your headphones, and, and having some alone time and stuff like that. I wouldn't get lost in the Ready Player One for days on end, you know, kind of Metaverse like, experiences for me or, don’t want my kids to be in games forever, or living in alternate universes, right. But I do really appreciate that gaming can be married with education as a learning tool, or Simply, for example, educational tools to learn how to sing or play piano – Full disclosure, Simply is an Aleph company. Appreciate the plug. Download in now. – Yeah, these are virtual ways to, to learn and to engage in education that you may not be able to do physically all the time.
Michael Eisenberg 19:43
Do you worry about a global decline in creativity, the more time people spend in kind of the virtual space?
Aryeh Bourkoff 19:51
No, actually, because I think that we've had a renaissance of creativity over the last few years. I mean, look at streaming, and content creation, I think we've had a glut of creativity, frankly, and I think COVID has reduced our creativity, in a lot of ways, I don't think you had as much, you know, particularly great, you know, songwriting or, you know, creations or art going on through the pandemic, that you would have thought, although if you think back to 1919, or what I've heard about the influenza, a year after influenza was over, Carnival started – interesting. – That's what came out. So if we're about on track for that, then right now is a spark of creativity. And he made it come out of it,
Michael Eisenberg 20:36
Full disclosure, I hate zoom, I really, really hate zoom, I didn't make investments over zoom during the, during the pandemic, I'm kind of a face to face guy.
Aryeh Bourkoff 20:45
I hate Zoom too. Zoom has a utility for maybe capital markets and other things that you may not want to be doing in person anyway. And zoom could be a good replacement for that. But zoom also has had a captive audience for over three years, and not a lot of new product innovation. – Yeah. Right. – So think about that for a second, you've been on Zoom, and you're not you're having the same experience, which is like a kind of a, a communications tool, right? You're not, it's not really a rich experience,
Michael Eisenberg 21:13
I even find it, by the way, less rich than the telephone. Because it feels like people are distracted a lot. It's almost a dehumanizing experience in that it puts the screen between you. Whereas the phone goes into your ear, and therefore like music, it's a more experiential experience. Whereas this visual kind of oddness on the screen, I find terribly distracting and dehumanizing.
Aryeh Bourkoff 21:37
Yeah, so someone sent me a text today saying, can we get together in the new year? You know, will you be in Los Angeles anytime soon? Or if not, let's do a zoom. And I said, I won't be in Los Angeles anytime in January. And Zooms are so 2022. Come find me in New York, or somewhere else I'll be traveling.
Michael Eisenberg 22:03
So this person wants to have a conversation with you, you mentioned capital markets people, Zoom is good for, because they actually never really want to be in the room in the first place, probably doing all these meetings. Your business, in particular, has been built on relationships. And so as you think about transactions versus relationships, try to delineate for me, what makes somebody a master of relationships, versus somebody who's really great at transactions or firm is really great at relationships versus a firm that's really great at transactions.
Aryeh Bourkoff 22:42
Great, great question. I think people do what they want to do in life, and with who they want to do it. I believe that, you know, relationships first have to be earned. And a transaction also has to be earned. So one doesn't necessarily lead to the other, they have to really go together. So if you have a relationship, it doesn't mean that you're necessarily going to be called for a transaction, if you don't have experience doing transactions with that person or with that company. So I always say that, like, we want to have enough relationships and the creativity, around coming up with ideas for those relationships, as if that bar is so high, that you want to come through for your friends, not that you feel like it's entitled, that they're gonna call you and say, ‘Hey, we thought of something, and we're calling you’ because there's a certain amount of competition in this business, that you want to see that relationship be, you know, sort of, you know, justified by your own sort of performance all the time. And at the same time, you want to be treated fairly, right. So like, I think, when you're doing a transaction with a relationship that you have, then you're also going to want to come through for them and, and perform on the execution of that transaction much better than just sort of like calling it in. So I think everything goes back to quality and care, and the community and coming through for the people that you're working with, in a way that's very, that's very high standard. But I don't think that we're going to do every transaction with the people that we that we work with, I think they're going to do the deals with the people that they should be doing deals with, and that we're going to have to work very hard to earn our keep every single day and that goes back to creativity and coming up with the best ideas. But that's informed by the fact that we should know each other really well. We should know their goals and objectives. And that takes a long time to get. So if we know what the objectives of those CEOs are or the investors are, then we should have a head start in knowing what the transaction should look like and should have a better and trusted, dynamic and trying to get them done for them.
Michael Eisenberg 25:03
David Zaslav, the CEO of Discovery, I know said about you that you really get people, you get that it's not a transaction, you kind of get the creativity around it. I assume that was in the context of the Warner media deal. But I think there's something else, which I want to dig into, which is, how do you think about the difference between how you build a firm for the long term versus how you build a firm for transactions of the short term? And are they radically different in the way you choose to build a firm?
Aryeh Bourkoff 25:34
Yeah, so I always say, well, first of all, I have to say that a transaction in and of itself, transactions and of themselves are important, – yeah, they pay the bills, they pay the bankers, – they pay the bills, and, you know, you have you have to be commercial, about doing business, and you have to also know how to get things over the finish line, everyone in these businesses, you know, are do have constituents and do you have shareholders and stakeholders that they're counting on, – in your case, your family, you better get it right – or employees or like, you know, the or the future in the future constituents of the company, but I'm saying the CEOs have shareholders, and if they're entrusting us to do transactions with them, then we have to make sure that we come through for them, but we don't want to, we want to be an additive dynamic to that. So I think transactions are important. You just want to have a lot of shots on goal for it. My point is, you don’t want to make decisions for the here and now at the expense of tomorrow, if you look at any company that you invest in, and you determine the valuation of the company, and you look at the discounted cash flow model, that company 80 to 90% of the valuations in the terminal year, which is determined by the Perpetuity Growth Rate, discounted back – 100%, – right. So that means you have to figure out what that business looks like in the nth year, at the end of the day. So if you're making decisions based on what the business looks like, at the end of the day, just kind of back that has the highest amount of opportunity in that nth year. That's how I think about LionTree. What's the best opportunity I have for the company at the end of the day? And if I defer towards that moment, if I'm afforded the opportunity to defer, which goes back to liquidity and paying the bills and having the right people in place, then I'll have a better outcome to play long.
Michael Eisenberg 27:21
It's really hard to do that, most people can't think that way at the end of the day, I mean, quarterly bonuses, annual bonuses, I mean, most people don't think that way, how do you you kind of keep yourself on that road to think that way?
Aryeh Bourkoff 27:35
Well, on one on one level,, it's the mindset of an equity holder, right? Just to be, you know, more financial about it, it's, if you're building enterprise value, and you're, you're incentivized by the growth of the value of the enterprise, and you own the equity enterprise. That is how you should be thinking about it, right? Because you're incentivized to go long term to give the equity value, right? If you're incentivized to maximize cash, then you may not be thinking that way. But I kind of think that cash tomorrow may have more opportunities that you don't see than cash today, – what do you mean by that, – being that it goes back to go back to the Tree of Prosperity, and, and your Divrei Torah, and everything else, so like Yose. So if you have seven years of plenty, followed by seven years of famine, and you were smart enough to know how to save up during the seven years of plenty, and you had a differentiated edge during those seven years of famine, and you knew how to create systems and frameworks to sustain, I read the last one, right, but you got to sustain, then you may have a competitive edge in markets and periods of time where that cash is more valuable in the future for opportunities that you don't see today. And there's some optionality around that. Right. And I like that. Because when you build businesses, at the beginning stages, you have to, you have to sprint very fast, to make sure that you have a successful startup, maybe even scale up. But what you're really trying to get to is an opportunity to walk briskly and have a very efficient, long term enterprise that has sustainable value. That's really what you're trying to get to.
Michael Eisenberg 29:21
One of my takeaways from what you said is you're actually pretty excited about the years of famine we have upon us right now in this down market. Is that fair?
Aryeh Bourkoff 29:27
Sure. I'd like to I like the more challenging moments,
Michael Eisenberg 29:31
because it brings out creativity, makes people more raw,
Aryeh Bourkoff 29:32
it makes you understand what your competitive advantages are, it leans on your community – shows what real value is – shows that real value is and values are and values are right. Scarcity and scarcity is a much bigger and better catalyst for decision making, then I think abundance.
Michael Eisenberg 29:52
I totally agree with that. What do you think that is?
Aryeh Bourkoff 29:57
Because you have to make choices. You have to prioritize.
Michael Eisenberg 30:01
There's a rabbi who I always admired. His name was Nachum Rabinovitch. He said, hard decisions are not between good and bad options and good and good options there between the lesser of bad options. And scarcity brings that out, I have to make the choices of lesser bad options and it forces creativity. So if I can invent maybe a third option.
Aryeh Bourkoff 30:17
That's right, the hard thing is the shift. The hard thing is when the scarcity starts to move through abundance, or the abundance of scarcity, it's the Delta. I think it's like when people started the pandemic. And it's as if they said to me or said to you, by the way, Michael, is your email not working? And you said, no, no, no, my email is not working either. Like, the whole broadband system is down, no one's email is working. And all of a sudden, you say, Oh, that's great. I could relax. I could go home, spend time with a family, not check my email. It's great. And then about a year later, you came to me and said, your email, it’s still not working, right? I'm like, no, no, it's been working for weeks. Now. You go, oh, no, that delta, that shift that you missed, is the scary part.
Michael Eisenberg 31:06
Did you find that by the way, there is a side point but like during the pandemic, you found out kind of what people's true character was, on some level, because of the scarcity, because of the distance. And even now in this down market, I feel like truly resilient people are standing up, people who are true to their values are standing up versus you know, what [George] Akerlof might call the animal spirits that are coming out?
Aryeh Bourkoff 31:30
Yeah, I mean, I like I mean, it goes back to humility, right? Like, I think humility creates power. Not the other way around. And I think that, I think if if a scarce period of time or a challenge period of time, helps, you know, highlight that humility or helps the sheen come off, then you see people's character, but I think it's just helpful to get to what ultimately, I think is a great business value, which is self awareness.
Michael Eisenberg 32:02
How do you do that? So, you’re doing billion dollar transactions, or multi billion dollar transactions, you're in the CEO’s office and boardrooms of Fortune 100 companies? You're running around the world talking to capital providers, which we'll come to in a second. How do you stay self aware and humble in that environment?
Aryeh Bourkoff 32:21
Oh, because you're wrong most of the time, right? I mean, what you get from being in the public markets, which I used to do covering stocks, and I think most people have P&L’s every single day. And that keeps a certain amount of truth, and self awareness front center right. But you shouldn't need a P&L to be self aware, right. I get it actually, in the middle of the night, I, I'm always thinking I'm always in my head. And I always sort of emerge at three in the morning to like a level of subconscious and spend an hour, not really awake, not really sleeping. But if I actually tracked down the Fitbit and everything, my sleep patterns, and it's true three or four in the morning, I'm self correcting. – Oh, yeah. – And
Michael Eisenberg 33:10
I'm just not sleeping well, but no,
Aryeh Bourkoff 33:12
No, I sleep very well until three in the morning then I get up for an hour and self correct, but not really up. And then I go back to sleep for an hour. And then I'm a different person in the morning. And there's it's about self correction, self growth, working things through, being truthful with yourself and then getting up, you have to be you have to be self aware to do that. It's about the tree going in to go up. And it's but but that's fine. If you live and operate a business alone, but you're operating a business with others, you kind of are counting on everyone else to do the same thing. And if people have a, ego is basically, you know, a sort of inflation above self awareness and insecurity is sort of a discount below self awareness. I consider ego and insecurity sort of like mirroring sides of each other with self awareness being the par value.
Michael Eisenberg 34:02
That's an interesting line. Okay.
Aryeh Bourkoff 34:05
That's how I think about it.
Michael Eisenberg 34:07
Where’s self confidence in that, by the way?
Aryeh Bourkoff 34:10
I think there's nothing wrong with self confidence, as long as it's balanced with humility. – Yeah. You need a certain amount of self confidence to get out of bed and enter your job every single day. But has to be backed up by results, right. Yeah.
Michael Eisenberg 34:24
So you're spending. Speaking of long term and long term thinkers, long term relationships. You've been spending a lot of time over the last bunch of years in this region, broadly, developing relationships. When you look at this world going forward. There's obviously been the Abraham Accords, which have connected the United Arab Emirates, Morocco, Israel, Sudan, and maybe who knows, maybe Saudi Arabia in the near future. When you think about the future of the world and your merchant banking business, a decade from now, how does this region play into it in a way it hasn't in the past? Or does it for that matter?
Aryeh Bourkoff 35:08
I love this topic because, you know, you go through life and you wonder how many things actually change in the world. And we and I think everyone that lives in Israel and everyone that studies Israel and is pro-Israel is a student of history and is very focused on geopolitics to some extent, right. And so you're aware of what happens around you. And some things are always fluid, that’s true to some extent here. But very rarely do you see like a cementing of a structural shift as much as you'd have in the last few years, which is not just about alliances that you've talked about, but also a de-emphasis of ideology, and sort of an emphasis of business as a currency, which also goes to generational changes, that the newer generation, maybe younger than us, they have just decided, you know, just to get on with it. And, and travel and focus on the gaming and the metaverse and the business transactions and the tourism. And, and, and doing things in the right way, and maybe investing. And obviously that could go to an extreme as well, by the way it can, it can’t just be a business. culture matters a lot. And history matters a lot. Where we're doing matters a lot. But I think it's really encouraging. that sort of the Arabian Peninsula and the Gulf States and beyond the ones you mentioned. I mean, you could put Oman and Bahrain and others in there too, and Israel have so much in common culturally. And in some ways were younger than Israel, and the way they've been built and, and opportunities to do business together in capital, in capital markets, in appreciation of the uniqueness of Israel's technology, industry and making something out of nothing vis a vie like, you know, water and scarcity and cyber and all the best industries that we have here in Israel,
Michael Eisenberg 37:07
Yeah, scarcity turns out to be a great natural resource for Israel.
Aryeh Bourkoff 37:11
But those countries have cared about things that Israel hasn't cared about, like architecture, in some ways. And, you know, and traffic, the grid, if you drive through, you know, Dubai and Abu Dhabi, like there's no traffic, you know, they figured that out, you know, so, you know, we
Michael Eisenberg 37:28
We haven't, these roads were built for horses and carriages, and then they tried to put cars on him, it doesn't work that well.
Aryeh Bourkoff 37:35
Yeah, so I think there's some learnings there. But I like the fact that there's a lot of opportunity. Now I don't want to be sort of utopian around about it. Because in this part of the world, things could change on a dime. And, it's sort of like, you know, rough neighborhoods, right, but better to protect yourself around rough neighborhoods with friends than alone, and Israel has been alone for too long. So it's nice to have friends and, and frankly, Egypt and Jordan have been friends for a long time. And hopefully these friendships now are the beginning of a very long term relationship. But
Michael Eisenberg 38:09
It's your view, I think that in what you said right now, that business actually is almost a better carrier of that relationship than politics is.
Aryeh Bourkoff 38:18
Look, countries operate in their borders, businesses operate cross-border, especially multinationals.
Michael Eisenberg 38:23
Yes in the last 100 years, that's the case, or actually, since the British, the British East Asia tea company, but certainly today.
Aryeh Bourkoff 38:31
So businesses operate cross-border and multinationals then are represented by CEOs and board members, that also have to have multi-jurisdiction perspective and investors that come from many different areas and appreciate a multi-jurisdiction and geopolitical perspective that has to obviously subjugate ideology. And put first and foremost returns and purpose and what the objectives of the businesses are, versus what the border stands for. And those businesses are very complex to manage. on an international level, you know, you think about those businesses that come out of the US, like the Microsoft's of the world, the Apples, the Amazons, the Googles, are the Disney's of the world. Some of us haven't even really effectively gotten into the Gulf or Israel, like Disney, or like Warner Discovery. But there's a lot more to still grow and to do. And I think that like that opens up a lot of new investors and new business partnerships and commercial opportunities that will, I think, draw attention to this region that will benefit Israel in process that will bring a lot more companies beyond tech like other industries that the supermarket umbrellas of tech, maybe were just too generic, and now we'll get into the different parts of the the industrial economy. So retail, commerce, luxury, media, healthcare, financial technology, defense, security, you know, energy, water
Michael Eisenberg 40:06
Nine and a half million Israeli is not a big market. 250 million people in a region at this point is a big market.
Aryeh Bourkoff 40:11
Yeah. Yeah, but 9 million Israelis and 10 million people in the Emirates, not all Emiratis obviously. But, a lot to do together.
Michael Eisenberg 40:20
How would you react to the following comment? Business and multinational business is fundamentally built on trust. Politics on some level is bloodsport, and, you know, it's kind of coalitioning overcomes lack of trust on some level. And so business becomes a better carrier of that trust over time maybe than politics?
Aryeh Bourkoff 40:43
Well, I'm not sure about that. I mean, I think business has metrics. Politics doesn't have metrics.
Michael Eisenberg 40:50
Well getting elected, in places where people get elected at least. Which is maybe the wrong KPI.
Aryeh Bourkoff 40:53
Yeah, I think the business metrics, or I'd say milestones are really, really important to verify. Yeah. But I think relationships are important in both cases. – Interesting. – And, and I think, you know, the violation of those relationships, or the violation of those milestones, obviously can be catastrophic. But I mean, at the end, at the end of the day is personal, everything is personal at the end, especially in this part of the world. I think relationships are really, really important to foster. And I think those are, that's how things ultimately get done.
Michael Eisenberg 41:26
So if I asked you, okay, you just described to me a vision for the region, what's the business project, or projects you'd like most to come to fruition in this region? What would it be, without giving away state secrets or business secrets?
Aryeh Bourkoff 41:44
I would like to have, I would like to see a mutual appreciation of competitive advantages come to play in the region. – Is that a business? – Yeah, for sure. That's a quilt, I'd say. Israel has some clear competitive advantages, you know, let's just say it's tech, but there are obviously other ones, you know, culturally, tourism and so on. I mean, I'm sure a lot more Israelis are traveling to the Gulf states than the Gulf state constituents are coming to Israel right now that has to get rebalanced, that goes to media and narratives and making it really fun to go visit Israel.
Michael Eisenberg 42:21
Well, it also goes to the fact that Israelis have like an itch to travel the second any part of the world opens up, it's like, oh, let me out of this
Aryeh Bourkoff 42:27
Shpilkes. I think a balance of tourism would be good. And that I think
Michael Eisenberg 42:35
That’s not a big idea. You’re so creative, it must be better than the beach in Tel Aviv.
Aryeh Bourkoff 42:38
The big idea, I think, is a real capital markets hub in the region. – I love that. – So like, you don't think if you're a US company of listing in Tel Aviv, or Abu Dhabi, or Qatar or Saudi right now, but you could, if everyone got together in a regional exchange, just like you used to think about listing and LSE or Luxembourg. So I think it's a very interesting part of the world, timezone wise as an alternative to the US or China, to list in this part of the world. The New London, the new Europe, to season companies here, with a really interesting emphasis, which is based on growth and tech and you know, long term capital associated with it. This is a great place to foster new capital markets activity with longer term oriented capital.
Michael Eisenberg 43:34
I think that's an amazing idea. I’d be an investor in it, I would love that. Related to that, so the media loves to kind of talk about the evil villain of the day or the bad leaders of the day, Sam Bankman-Fried, and what's her name Elizabeth Holmes at Theranos and take your pick. You work with a lot of leaders, you've actually called out that we need more trust and empathy and reliability of business leadership. Who is the most inspirational or trusted leader that you've worked with over your career?
Aryeh Bourkoff 44:15
Well, you.
Michael Eisenberg 44:19
Cut it out, flattery will get you nowhere over here.
Aryeh Bourkoff 44:23
I try to accumulate relationships based on loyalty, curiosity, I have as much room in my set of relationships for the loyal as well as the new and the curious. Like they're equally important to me. The only way you get ejected is based on lack of integrity or betrayal of the trust effectively, right. But there's a lot of people that are, you know, hopefully fit into the characteristics of value and values that we're talking about. And the mentorship comes from people like the John Malone’s of the world that I've talked about before, but not holistically. Like I wouldn't consider him to be like, we're not like, we're not the same, you know, like, I'm, I'm sort of like a protege are the greatest hits, I try to be a lot of people that have come before me in different areas, whether it's the media industry or the junk bond industry or the digital disruptors, or investors I've learned from, and so I get to pick from all of them and sort of like a quilt and get the best of
Michael Eisenberg 45:23
so what is one of the core values that do create value then, what's on that quilt, the core values. Forget the people, what are the core values?
Aryeh Bourkoff 45:31
Never lower your bar of excellence. Don't subject yourself to mediocrity. Like, I hate to do the best you can comment, you know, like, well, then you get up in the morning. So now what. It's the curiosity point. It's trying to get the best out of others as well. It's putting maximum care into what you're doing, it’s thinking about the long term versus just the short term. It's trying to always ask the next question. You know, I think about like, if you watch like a great tennis match, and you're watching like great tennis, and you think you've just seen a championship shot, and then someone like Nadal gets the next one. You're like, I thought it was over. Unbelievable. Unbelievable. I always ask like, when the conversation seems like it's coming to an end, I ask the next question. And that's where all the magic sits, you know, and so like that inquisitive nature is really, really important, I've learned and you pick up a lot of learnings there.
Michael Eisenberg 46:36
How does empathy, the word you used before, show up in your kind of everyday activity?
Aryeh Bourkoff 46:42
Listening.
Michael Eisenberg 46:44
You're a good listener,
Aryeh Bourkoff 46:45
I appreciate that. Well, here, I feel like I'm doing most of the talking.
Michael Eisenberg 46:48
I like it better that way. So I’ve known you're 25 years or so. You were once a cable analyst. Now you're running this very successful, I think inspiring, candidly, merchant bank. What motivates you still today, to get out of bed every morning?
Aryeh Bourkoff 47:11
What's in my mind? What's in my head? – What does that mean? – It's a vision. I mean, it's a vision. It's a vision of what the platform of LionTree could be for others, and for the people that work at LionTree, today and into the future. And we're not even halfway optimized to what I see it could be in the future. And that's a geographic comment. That's not just simple expansion, but like really playing into where the world's going and how centralized organizations play with companies, and investing in those gaps. But also what the platform can create in terms of cultural innovations and new businesses together working with the partners that we have. And it's sort of like the best is yet to come through the different periods and the community sort of demands that we keep playing. And, and, and we're all partners together in this. And I feel like, we're nowhere close to where we could be. It's exhausting. It's exhausting, but you constantly have new ideas and chessboard moving and one move begets another. And so I feel like, I feel like the vision is still like pulsating. And I want to keep playing
Michael Eisenberg 48:25
You used the term where the world is going. Well, where do you think the world is going?
Aryeh Bourkoff 48:29
Well, we talked about it, I think that the cultural areas of sports and gaming and media entertainment, are being used as a currency, just like investing was a currency and business is a currency, to break down borders, and create new hubs. And those hubs are here.
Michael Eisenberg 48:50
Interesting. There you go. So there must be a problem, given that you're thinking about where the world is going in the world that you would most like to fix? What is it?
Aryeh Bourkoff 48:59
Well, I mean, I think, well, we talk about redistribution of wealth a lot in the US, or maybe here also, redistribution of energy, water food could be really interesting in a scarce moment. Yeah, I agree with that. That's the probably the best use of sovereigns, you know, where you're really supplying
Michael Eisenberg 49:20
Is it really redistribution or new generation?
Aryeh Bourkoff 49:24
More efficiencies and redistribution. Because I think, you know, you have to get to countries like Africa or continents like Africa, sorry. And other areas, I think the other thing that's interesting is population trends. China's population is on the downward trajectory, and the only area where population is really truly growing is Africa, and the Middle East, and the Middle East,
Michael Eisenberg 49:49
Israel in particular, but there are other places too
Aryeh Bourkoff 49:51
Okay, so I think it'd be interesting to see like how the world's going to redistribute some of these central resource such as population, demographics shift, frankly, it even changes like voting patterns like in the US, like, post the pandemic, a lot of people have moved around the country, you know, people used to know which state voted red, blue, purple. Like I think a lot of those things will shift in next few elections.
Michael Eisenberg 50:17
Pollsters may have to earn their keep finally, you know that question of global growth when demography is slowing down in everywhere but the Middle East and Africa, do you think like we're in a period of declining growth because of that, economic growth? Yes, yes. How does that reshuffle the deck?
Aryeh Bourkoff 50:38
We're in a period of declining growth with higher costs of capital, both together. And the question is like, where the next cycle of growth truly comes from? And then how you value enterprises when metrics are in decline. So, think about the valuation of that enterprise over the long term. And assigning a perpetuity growth, stress, growth rate,
Michael Eisenberg 51:14
right, when more people are dying than being born?
Aryeh Bourkoff 51:18
Correct. And from a business perspective, you know, when the near term metrics are in the negative, how do you know what positive number to assign to the last year – that's a great comment – if it should be positive. And if it's not positive, then you should then shift your attention to the short term versus long term, and get what you can get today, which is transactional. And so then forget everything I said, right? And then just go get it for the here and now, because there is no tomorrow. And then your value system is going to shift completely, or it's going to really test who can have a purposeful values-oriented life, in moments of scarcity.
Michael Eisenberg 52:06
When they're scared about the long term? Or pessimistic about the long term,
Aryeh Bourkoff 52:10
Which is totally fair. At the end of the day, I mean, if you don't have excess discretionary income, and you have to worry about paying the bills, is it really fair to ask them to focus on things like ESG? And climate change? And, all these world problems? Is it really fair to ask them for that when they have to put food on the table for their kids and pay the energy bills and water and everything like that.
Michael Eisenberg 52:37
As you know about me, I think that ESG is a bag of nonsense. First of all, because it has terrible metrics, no metrics really. And it's just like virtue signal, where people express their values at somebody else's expense. Right. To your point, people can't pay their bills, but we should go do something for ESG. So I think, that kind of stuff, again, if you want to be a values based person, and a values based investor that creates values or values based business creates values, express your values and grow the pie. Don't do it at someone else's expense.
Aryeh Bourkoff 53:11
But let's get but let's double click on that for a second. So like, it's really hard for a public company to squeeze 10% of growth out of an existing enterprise every single year – 100% – It is really hard. For a growth company or venture company, maybe it seems easier. But if you're a public company, and you're established, and you need to grow 10% to get an outperformance level your stock price, that is not an easy thing to do. And it will be increasingly difficult for the next few years. – Agreed. – So then how do you deliver? How do you find that growth? – Tell us? – Well, it goes to what's what's structurally an area of growth in the economy versus what's cyclical downturn in in hopes of for future recoveries.
Michael Eisenberg 54:07
Does it also have to do with the incentive structures – maybe – What would you change in the incentive structures to make it work?
Aryeh Bourkoff 54:14
I don't think it's the incentive structures right now. I think we're in an economic slowdown with higher cost of capital. And I think we're in a redistribution of supply chains, which increases the fundamental cost structures for companies. And then I think you have too many companies that have to reconsolidate to create economies of scale, and give themselves a better advantage on the ability to generate profits and growth without having as much competition as they have today. So I think a reconsolidation of industries will be very, very important, but structural areas of growth right now, security, cyber, scarcity-driven industries like water and energy, like we talked about, food. Those are structural areas of growth. I think commerce is still an area of growth, you know, gaming, sports, consumption patterns like that. But but for major companies, I think you have to give yourself an advantage by growing down, creating cost efficiencies, and, and really focusing on profitability, sometimes much more than even scale
Michael Eisenberg 55:18
For our listeners, Aryeh’s annual letter was called “Growing Down,” which is just a great title for a letter and based on the tree growing its deep roots, but also based on Ethics of our Fathers, the great Jewish text, which offer some great clues into how to do that. Go back to your point about a shrinking global population, which impacts growth. So you're a father of four. I'm a father of eight. There's a lot of people out there not having kids. And even if they're having this below the repopulation rate of 2.1. Why do you think people aren't having kids today?
Aryeh Bourkoff 55:52
You have double the amount of kids that I have. Incredible. Well, I don't know why people aren't having kids these days. It's a good question.
Michael Eisenberg 56:06
You grew up, I think your parents were academics. – Yeah. – You didn't come from money, you've built this amazing business yourself, like me look back and say, How did I do it? How did you do it?
Aryeh Bourkoff 56:17
Step by step. I mean, I view it as a very methodical career build so far. I mean, started with the decision just to be a specialist versus a generalist. Meaning, a generalist approach, which is nothing, there's nothing wrong with it, which is like, let's say, like a bank training, or learning how to be educated in corporate finance, for example, I sort of defer that to later, I want to understand an industry early on, and stick with it. And I knew the longevity of that industry knowledge would accrue to my benefit over time. And this is again, playing the arc of life. And, and that curve. And so I was assigned, you know, Media Communications Technology early, day one effectively. And so I knew that learning the people, the content, the fundamentals, the capital structures around those companies, the people, the pattern recognition would, would give me an advantage over time, and I would keep learning around it. So that specialist dynamic, and that confidence that I had over time that I knew that industry, would allow me to take risk in other areas. So the more confidence I felt in one place, the more risk I could take in other places. – I love that – which is like learning effectively. Put yourself at risk someplace, but then starting over, per se, and that was products, so I started in high yield bonds, then I went to equities, then I went to banking, but all in the same industry segment. And then that allowed me to contribute while I was sort of leaning on people, until I rebalanced.
Michael Eisenberg 57:52
I love that. So you're like a media expert, a telecom expert. I'm on Twitter, you're not as best as I know. Instagram is your social media of choice. I think. That’s my expression. Why?
Aryeh Bourkoff 58:04
Instagram is a unique journey for me, that I get to travel and do business with these relationships in these great places that are culturally significant, in these industries, whether it's art, fashion, music, in his great cities around the world, and, and they're beautiful pictorials, so I tried to express that journey rather than them being lost. And I pinch myself that I'm on this journey, and I don't want them to be, it's my own sort of journal.
Michael Eisenberg 58:39
You think pictures make it more human than maybe the text of Twitter,
Aryeh Bourkoff 58:43
for sure. For sure. And also like the problem with Twitter, in my mind, is it I don't think I've ever had, by the way on Instagram a negative comment in the comments section – It’s hard to say anything negative about you Aryeh – I'm not on Twitter, the problem with Twitter is like the comments are as significant as the initial expression. So meaning that like if you express something on Twitter, the comments have, they don’t have a smaller typeface, right? It's the exact same relevance as the initial expression.
Michael Eisenberg 59:17
It's really human like that, we're all equal.
Aryeh Bourkoff 59:19
Well, I don't think you're all equal if you're the one expressing the initial conversation and it's I think that it's supposed to be a comment based on the initial expression. But I think for the picture, to me, it's like this is a thing. And if you want to comment on it, great, but then you have to go search for the comments.
Michael Eisenberg 59:34
What makes you human, or vulnerable?
Aryeh Bourkoff 59:38
Oh, I mean, the mirroring of the mirroring effect you have on others, and they have on me every single day. I mean, you know, my entire life is in relationship to others. And you affect people in an inspirational way, and as a leader, but also as a partner and a facilitator of people's businesses, and then they affect you in, in the way that you feel a part of that, or not. And sometimes you can be very disappointed by people, all the time. It's very hard to deal with that.
Michael Eisenberg 1:00:18
Is there something that makes you cry?
Aryeh Bourkoff 1:00:20
Nostalgia of family. I don't, I don't get nostalgic about business, because I try to, I try to look forward versus backwards. But when you look at the passage of time of kids. And family, or grandparents, when people come before you, you know, I was on a plane the other day, actually, you know, when you’re on a plane, it’s a very peaceful experience in the sky. It's actually from Proverbs, the eagle in the sky concept is a very peaceful perspective of life, right? Because you’re higher up, everything seems smaller, all the problems down below seem smaller. But when you're in the sky, and the lights are lower, and you look at people, you get to be very introspective. And so I saw I was on the plane, and my mother was on the plane, and my daughter was on the plane. And they were both sleeping. And I have a hard time sleeping. So I was like, and I saw I looked at each of them. And, and it took me backwards and forwards in my life. And that was a very, I wouldn't say I cried. But there was like, maybe there was a tear. There was a nostalgic moment.
Michael Eisenberg 1:01:32
So the two questions I asked at the end of this podcast are how do you want to be remembered at the end of your life?
Aryeh Bourkoff 1:01:43
As original.
Michael Eisenberg 1:01:45
You're on a good path for that. And in 100 years, somebody's gonna write the biography of Aryeh Bourkoff. What should the title be?
Aryeh Bourkoff 1:01:56
I know the title already. – Go ahead. – The shy and lazy life of Aryeh Bourkoff. – Okay. That wasn’t what I expected. – My ultimate objective is to be shy and lazy.
Michael Eisenberg 1:02:12
Yeah. But that's not the biography of a Aryeh Bourkoff. Your kids are going to write that.
Aryeh Bourkoff 1:02:14
No, that means I will have accomplished everything that I want to have accomplished. And then I'll have no guilt about being lazy and shy and sitting around opening a beer watching a football game and say, I've done everything I want to do. I can ignore everything in my head that says I have to do anything else because I've accomplished everything I want to accomplish. That will be the biography. – Are you really shy? No. – There's a there's a French expression that means better alone than in bad company. Right? It's different from being shy.
Michael Eisenberg 1:02:50
The life of an introvert
Aryeh Bourkoff 1:02:55
It’s is a big misnomer about me.
Michael Eisenberg 1:02:57
Okay, so now we have a bonus question. Those are the two questions we ask every guest. But for everyone listening today is our Aryeh’s 50th birthday. And we're recording this on Aryeh’s 50th birthday and an Ethics of the Fathers – ‘Pirkei Avot’ in Hebrew, which Aryeh quotes in his annual letter, because he's 50. It says, at age 50, you have now reached the age where you give advice. So first of all, what's your resolution for the next year, the grand Rebbe of Lubavitch said make a resolution for the next year. And if you're gonna give one piece of advice at age 50, what would it be?
Aryeh Bourkoff 1:03:34
To have an eagle in the sky perspective all the time. You know, not to get dragged into minutia. It's really important. I think from a business perspective, I call that like a holding company perspective. You know, try to build businesses out of the gaps. Try to like have a bird's eye view and not to get dragged into the minutiae. There's a great book called ‘The Alchemist.’ Great book. Yeah. And I haven't read yet, but I've heard from you. Yes. And and the wisest of the wise, wise men said the secret is to, and this was recommended to me, this book by a good friend, secret, the secret is to walk around the castle and to look at the most beautiful things – metaphor for life – while not dropping the oil on the spoon that you're holding in your hand and do both at the same time. That's the secret to happiness. So to have that perspective, look at those beautiful things and keep all the details in hand at the same time.
Michael Eisenberg 1:04:34
What's the piece of advice you want to give? You’re 50, now you can give advice.
Aryeh Bourkoff 1:04:41
Yeah, exactly. Everything before now has been a practice round. The piece of advice I have is, really look inward. Like don't ignore the things in your mind that you must do eventually, like now is the moment to clean house – and build deep roots, right, – build deep roots because ultimately, you have to figure out what your edge is right now. And it's okay if you don't have one. It's totally cool to just like, cleanse it right now, and then restart again. But if you have it, then just focus the spear on that edge and build from there. And that's where all the security is. But if you don't have it, start again and that's totally fine. But if you have that edge, start from there and plant the seed again from right there.
Michael Eisenberg 1:05:40
That's amazing. Thank you for joining me as the inaugural guest on our podcast and please join me,
Aryeh Bourkoff 1:06:03
So special. Celebrating my birthday in Israel with you. Amazing, happy birthday. Thank you.
Michael Eisenberg 1:06:09
You can find LionTree at LionTree.com and on Instagram you can find a number of accounts @aryehbourkoff and also at @LionTree_LLC, and @KindredPodcast. Hey listeners, please give us five stars on whatever podcast platform you listen to us on, whether it's Spotify, or Apple or Stitcher, wherever you listen, give us five stars.
Stefan Tompson
This is the front line. And it's Israelis dying right now, and this war will keep advancing. I mean, we are fighting this allied unholy alliance of China, Russia, Iran, North Korea, Hamas, and other affiliated terrorist organizations. And they hate the Jews, but they don't love Christians of the West.
They hate us as well.
Michael Eisenberg
I think that's fair.
Stefan Tompson
And I think that's to a certain extent that, that hasn't been - obviously you are in, I love the fact that Israelis refer to this part of the world as their neighborhood. I mean, Europe is a different neighborhood. We don't exactly, we're not surrounded by Egypt, Syria, Jordan, and Lebanon.
But nonetheless, obviously, this region of the world hates you first and they hate us second. After the Saturday people come the Sunday people, as the saying goes.
Michael Eisenberg:
Stefan Thompson, welcome to the podcast. Welcome to Invested. It's great to have you here.
Stefan Thompson
Thank you very much, Michael. Appreciate it.
Michael Eisenberg
Before we get started, tell everybody about who [00:01:00] you are.
Stefan Tompson: I'm Stefan Thompson. I'm a Polish South African, but born in London, educated in French schools. I run a PR company in Poland and I'm the founder of Visegrad24, which is one of Europe's biggest social media news aggregators.
And I'm here in Israel on the ground filming. We just filmed an interview with you, Michael, which I'm very excited to release. And yeah that's roughly it.
Michael Eisenberg
And so, for a guy who grew up in South Africa, is Polish, went to French schools, and grew up in England, why exactly did you come to Israel to do media on what's going on here with the war?
Stefan Tompson
There is, I get asked this a lot by Israelis. There's an assumption, there's a suspicion, almost, of people who are non-Jewish, who are supportive of Israel and of the Jewish people. There's an intrinsic suspicion. Why are you doing this?
I'm not suspicious of you for it.
This is not altruistic.
There is a, there's a very definite self interest here. I understand that Israel is part of the West. My fight, my struggle, my battle for Western civilization and our values [00:02:00] is also being fought here. This is an outpost of Western civilization. It's also the birthplace, of course, of Western civilization.
Without Judaism, there is no Christianity. Without the birth, death and resurrection of Jesus Christ here on the ground in Israel, there is no Christendom. Without Christendom, there is no West. This is an incredibly important place to the West, and I am very baffled, upset, confused and shocked that so few people understand that this is not, this is not a fight for just Israel. This is not a fight for the Jewish people. This is a fight for all of us.
And try to dig out for me, what are like your core values, the core things that motivate you? Because you've set up quite the media empire in social media. But it feels to me like this is not just media for the sake of doing media, there's something deep down that drives you.
Absolutely. I mean, we started , the reason I started was, the messaging that was coming out of Central and Eastern Europe where I moved back to, I moved back three, four [00:03:00] generations after my great grandfather was stuck in London. He was the ambassador to London before the war and then couldn't go back because of communism.
I came back three generations later to Poland because I felt a deep connection to the country and I was raised as a Pole. So there was a lack of representation of the media that was coming out that was representing Poland in a very negative light, and I wanted to address that, and I wanted to address the stories of Central and Eastern Europe and how it's being portrayed.
There was a hegemony of left-wing journalists who had access to Le Monde, to The Guardian, to the New York Times. They were writing these very negative stories about these countries. And I wanted to address that. That was the birthplace, really, of Visegrad and how it came about.
And there was an understanding that there is a, we have tools that allow us to bypass that traditional media. And to really get the stories of everyday people. Without having that big entourage of what traditional media is or the barriers of it. But the aim, it's become much bigger than that. It's become a platform in which I have been able to, I wouldn't want to overstate what I've achieved and done, but we have generated at this point in the last three months, it's over three and a half billion impressions on X alone. Over the course of the full scale Russian invasion of Ukraine, it's several billion impressions as well.
We've been essentially fighting back against Russian, Iranian, Chinese disinformation that is attacking the West. We have been promoting center right and conservative values. So an appreciation of what Western civilization is, a respect for our past, a respect for our history, a respect for our religions as well, which I think has disappeared to a great extent and a respect for the values that have built the West into what it is. And the West at its core is the, it's a pinnacle of human achievement. We have the wealthiest societies in the history of the world, the most equal societies in the history of the world. We have the ability to generate wealth, to generate capital, to pursue happiness.
We have uncountable freedoms, and we have social mobility. This is an extraordinary time to be alive. And those things are all under fundamental attack, under threat. And unlike Israelis and the Jewish diaspora who understands the fragility of life, there is a great understanding of the fragility of order in Israel. The Israelis, even the left wing ones that I have spoken with, they have a deep understanding that all, everything that has been achieved, everything that has been built can collapse and it can go very fast. That knowledge that is so ingrained for many reasons in the Jewish people has disappeared in the West and that is what I'm, that is what I'm attempting to - this is a humongous task, I'm not saying, I'm a very small drop in a very large ocean.
Michael Eisenberg
I have faith in you.
Stefan Tompson
Thank you, Michael, I appreciate it.
Michael Eisenberg:
Let me back up for a second.
Stefan Tompson
Yeah, sure.
Michael Eisenberg:
I'm sitting here listening to you and wondering whether the fact that, so to speak, you were in the Polish diaspora during the time of communism or your grandfather was, that gives you the appreciation for how fragile this is, now that Poland's kind of made a comeback from communism and is now a growing economy of Western values.
Yeah.
Michael Eisenberg:
Is that why you feel so fragile? Is that–
Stefan Tompson:
Definitely, and I'll say something that will make me both unpopular in Israel and both unpopular in Poland. We're very alike. I do believe that there would be no Poland without Jews and without the Jewish example.
When we, when Poland disappeared, there were three partitions in the 18th century and Poland didn't exist for 123 years. How do you maintain an identity without a state? This is obviously a question that the Jews have dealt with much, much longer than the Poles, and the Polish intelligentsia, the Polish elite during the 19th century, during those 123 years until the return and the recreation of the Polish state, based a lot of their thought and a lot of the organic work in maintaining the nation alive and Polish identity alive - whilst there were very severe attempts at Russification and Germanization of the Polish people throughout that 19th century - were based on the Jewish example. We are very alike and obviously our histories have been, the history of the Polish state is very deeply intertwined with the history of a thousand years of Polish Jewish history.
So there is, I think, A, I think we, the Polish people have learned a lot from the Jews. The Jews brought a huge amount of things to Poland. And I do also think that yes, there is, the Poles as a people have been threatened and it's been 250 years of tragedy for our people in the sense of no state, World War I, there's 4 million Poles killed fighting on all fronts because they were simply conscripted into the armies of the occupying empires of Poland.
Then we have 20 brief years of building a state, 1918 to 1939, the tragedy of World War II, Intelligentsia Aktion, A-B Aktion, where the Germans hunted down our elites and massacred them, not to the same extent as the Jewish people, of course but three million Polish Catholics were killed in six years.
The Polish state was decimated. And they really came for the doctors, the lawyers, the accountants, the priests, the aristocracy, the landowners, the professors, the schoolteachers. These people were systematically wiped out. And then we have, obviously, the Soviet invasion that happened simultaneously with the Nazis.
They come in on the 17th of September, 1939. And they come in with lists as well. And they murdered two of my grandfather's brothers who were killed in the death pits of Katyn and Starobelsk, where 22,000 Polish intellectuals and officers were murdered. And then we have 45 years of being under Moscow's boot, implemented by the Red Army.
The Red Army is in Poland until 1993, until December 1993. No ability to create wealth. A system of repression, no freedoms, censorship, being cut off from the world, and essentially state-mandated poverty. So this is the Polish experience of the last 250 years. Again, I'm not, you know, you went through the Holocaust, we didn't go through that, but as you can see, it's 250 years of being threatened as a people.
And I think that that certainly has formulated a deep patriotism in many Poles, a great respect for religion, because the Catholic Church was an important player in keeping the Polish identity alive and of Polish resistance, and of Polish, of Polish fight back against especially communism. But that threat has obviously disappeared. Even though, and this is something that I worry about, I live in Poland. I can see the very rapid change happening, where we have had 30 years, 29 years of uninterrupted economic growth at an average rate of 4.3 percent of GDP per annum between, all the way up to COVID–COVID was the first year that we had a slight recession–but there was uninterrupted economic growth, rapid explosion of wealth, a creation of a middle class, a creation of a wealthy upper middle class, the skyline of Warsaw is changing.
And as these comforts have come in, so has a shift away from religion, and so has a shift away from this sort of patriotism, and love, and respect of the past and tradition. And it's very interesting to see in Tel Aviv, which is such a liberal city. Well, many of the people, and we have spoken to many people, we've done a lot of street interviews, so I've spoken to, I'd say 150 people on the streets, just sort of everyday people in Tel Aviv, and many of them probably left-leaning, all of them with a deep understanding that you, even if you're not religious, you have to have a deep respect for your culture, your heritage, where you've come from. And a very interesting remark that I have about the Israelis, they will use the Bible, you will hear the Bible referenced every day.
Michael Eisenberg:
Yes.
Stefan Tompson:
I mean, it is just, it's normal.
Michael Eisenberg:
Part of the Hebrew language. Yeah, it's part of the Hebrew language.
Stefan Tompson:
It really is. Yeah. Sorry, because I sort of rambled on. My apologies.
Michael Eisenberg:
One of the things that strikes me when you're talking, you know, my family, my personal family was in America before the Holocaust. My wife's family, not - one of the things that I've found striking about the whole current situation and the war, just as it turns of history, is Israel's best friends in the world right now are the United States, obviously, but Germany, Austria, Poland, Greece, you know, that whole kind of region, even Hungary to some extent, which I don't think anyone would have imagined 85 years ago.
It's a stunning turn of history right now. And I'm not exactly sure what to make of it, but it's, but I find it fascinating. And I think a lot of what you're saying is true, which is, there's a set of values that maybe had to do with the intertwined Jewish diaspora, maybe it has to do with other traumas, maybe it has to do with common enemies, I don't exactly know right now. But the world changes and alliances change in that way. It's been heartening on some, you know, some level.
Stefan Tompson:
I do think that one of my worries is that a lot of the framing of Israelis, of this conflict, and the reason perhaps that there hasn't been as much support as there should be, is that Israelis are very often speaking about this in terms, of this conflict in terms of anti-semitism, in terms of attack on just Israel, whereas it's so much broader, that actually there are–this is, I think, what Israel really needs to do, is to inform the Western world that it is an intrinsic part of the Western world, it's an outpost of the Western world, and it's the battle line.
This is the front line. And it's Israelis dying right now. And this war will keep advancing. I mean, we are fighting this allied unholy alliance of China, Russia, Iran, North Korea, Hamas, and other affiliated terrorist organizations. And they hate the Jews. But they don't love Christians of the West.
They hate us as well.
Michael Eisenberg:
I think that's fair.
And I think that's to a certain extent that, that hasn't been, obviously you are in, I love the fact that Israelis refer to this part of the world as their neighborhood. I've heard that term so often. I don't know if it's a, is there a Hebrew word for neighborhood, Michael?
Is that where...?
“Shchuna.”
Michael Eisenberg: “Shchuna.” But that has, by the way, in slang, some negative connotations too, but-
Stefan Tompson:
Yeah. Yeah, we're in a different neighborhood, of course. I mean, Europe is a different neighborhood. We don't exactly, we're not surrounded by Egypt, Syria, Jordan and Lebanon. But nonetheless, obviously this region of the world hates you first and they hate us second.
After the Saturday people come the Sunday people, as the saying goes.
Michael Eisenberg:
I want to take you back to Ukraine. So you start, the war starts, Russia attacks Ukraine. Where does that find you, Stefan? And where does, and what happens from there?
Stefan Tompson:
We had a platform at that point. We'd been building up Visegrad slowly but surely, presenting our perspective, countering this very left-leaning narrative that was coming out of Central and Eastern Europe and presenting things the way that we saw them.
And the full scale invasion of Ukraine, Russia has been an existential threat to my region of the world.
For hundreds of years.
Stefan Tompson:
For a thousand years.
Michael Eisenberg:
Yeah, for a thousand years.
Stefan Tompson:
So we really understand that threat. You know, we went through Russian occupation. We went through wars with Russia.
My family was murdered by the Russians, by the NKVD in Katyn and Starobelsk, as I mentioned. There is a, I have a profound understanding that this is a civilizational threat. This is a great threat. And we intrinsically knew, we just, the people working on Visegrad, it was me, my brother, and our friend Adam–we knew that we had a platform, and we didn't hesitate. The moment the invasion happened, we were on it. Writing about it, fighting Russian disinformation actively. And that was the spurt, the growth spurt that took us to where we are roughly now. And obviously it made sense. Ukraine is our direct neighbor.
So, we immediately got involved in countering disinformation, helping all the initiatives that we could of bringing Ukrainian refugees. So there were, we were connecting drivers from Warsaw, driving to the border to pick up refugees and put them up in their homes. The Poles opened up their homes.
It was incredible. And we had millions of refugees and not a single refugee camp. And that, I know it sounds like a slogan, but it really was the case. That, that magic is slightly gone. It's been almost two years now to the day. And it, obviously the situation is different but, Ukrainians were afforded all the same rights as Poles, all the same benefits as Poles.
The workplace was opened up for them. And they set, they went to work immediately. It was an incredible time. And, there was obviously, out of this great tragedy of the Russian aggression, there's a huge amount of good that came out of it, really. Now it was a beautiful thing to witness, it was an extraordinary thing to witness.
And I think it was the true essence of Christianity, of Poles–and bear in mind that we have a very difficult history with the Ukrainian people. There was a, in 1943, there was a terrible genocide that happened. About 250,000 Poles–ome estimates go as far high as 400,000–were murdered in Volhynia and Eastern Galicia.
And it was a very brutal genocide that, that was perpetrated by UPA, by Roman Shukhevych and Stefan Bandera, people who are still glorified to this day in Ukraine. And that was, and it's an open wound that, that discussion is still ongoing. The Ukrainians reference UPA because UPA also fought the Soviets very actively.
So it's a complicated history. There was that unfortunate event in the parliament of Canada where Yaroslav Hunka, who's being hunted by the Simon Wiesenthal Center, was applauded by the Canadian parliament. Because he was a Ukrainian who fought against the Soviets, but he happened to fight in a German unit.
So there was an awkward situation with that -
Michael Eisenberg:
There's a lot of awkwardness in Canada, in Canadian government these days.
Stefan Tompson:
Correct.
Michael Eisenberg:
Is that fair?
Stefan Tompson:
Yeah. But all in all, the incredible essence of it was, that was to me the essence of Christendom, the essence of Christian spirit and values, to help your neighbor in need, to open your home up, to give shelter, to feed the homeless, to house the homeless, and to give clothes to those without clothes.
I mean, there's that saying in the Bible.
Michael Eisenberg:
In Isaiah.
Stefan Tompson:
Yeah. There we are.
Michael Eisenberg:
Why is, what you call Western religion or Christianity so important to you, and why do you think it's so important to Poland?
Stefan Tompson:
I'm a religious man. I grew up with in a very religious mother. She's a practicing Catholic. She instilled things that I assumed were completely natural to everyone. It was quite a discovery to discover that suddenly, that actually not everyone goes to church every Sunday. I mean, you know as a child, you don't think about it, right. I assume as a religious Jew you probably had the same discovery.
Michael Eisenberg:
Oh, I grew up in Manhattan. So it was all different. But yes.
Stefan Tompson:
I mean, I grew up in a very secular London. I went to the French Lise, which is broadly speaking, most people were not Catholics in any way, shape or form. But it was a very important part of growing up. It was, it's what's formed a lot of my conservative beliefs have been formed by it. Yeah. And I do also think that it is a, there's this–Feliks Koneczny, who is a Polish thinker and philosopher, described the West or what he called Latin civilization as built on three hills: the Acropol, the Capitol and Golgotha.
So, Greek philosophy, Roman law and Christianity. And I think it's a good definition of what the West is, though I think it ought to be expanded to Judeo Christian. There is no Christendom without Judaism. There is no Christianity without Jesus. We've asked around, we've walked around the streets of Tel Aviv and Jerusalem and asked people, you know, there's two questions we do.
Well, who's the most famous Israeli? They'll say Gal Gadot, or they'll say Bibi, or Golda Meir. And they'll say, who's the most famous Jew? And so, amusingly, the answer is obviously, I mean, the most famous Jew ever was presumably Jesus Christ. People say Moses. They'll say Einstein. They'll say a few other things, but, and then suddenly it'll click. Oh, Jesus. But obviously, right there is, I mean, my belief is that my God was a Jewish man. And I think–
Michael Eisenberg:
By the way, that's become unpopular in social media. And all the kind of misinformation on social media.
Stefan Tompson:
No he’s a Palestinian. Yeah, who is Jesus? He's become controversial. He's a socialist refugee, Palestinian. No, he wasn't. Look, the reason Christendom is so important to the West is that the, it has inspired our architecture, art, our culture and ultimately, it has led the liberal values of the West today, that the liberal in the classical sense of the word have been formed by centuries of Christendom, that there is what we have today is an accumulated wealth that it didn't come overnight. Well, it didn't all happen in the 20th century. It took two millennia to achieve it.
And it took that torch. I mean, when Rome falls, and Rome is sacked, and there's what is referred to as the ‘Dark Ages’ that aren't as dark as people like to refer to them as, but there is that torch of Western civilization of Christian belief, of Roman law, of Greek philosophy, is carried through in what is referred to often as the “Benedict Option,” where in these small towns and villages, small communities kept that light awake.
And this is, I mean, there's this saying that, that says, you know, that “the tradition is not the worship of ashes. It is keeping the flame alive.” And I think there is no West without, without Christianity. I think that without at least a respect for it and an understanding, I see something that, that I don't know if you've seen this across the West, there are churches that are obviously empty.
No one goes to them because of the secularization of society, and they're being turned into cafes, and libraries, and even nightclubs in some cases. That is, that to me is a very powerful image as to what, that there is a lack of appreciation for the sacred and the profane. And that there is a sort of profanity to turning a church into a library.
I mean, a library might be better than a nightclub or a cafe for sure, but nonetheless, there is a sort of perverse transformation in that. And I do wonder, and actually it's a question for you, do you think that if there was a synagogue here in Tel Aviv or in Jerusalem that wasn't being used, is that something that would be possible, conceivable here?
Michael Eisenberg:
I don't know, they seem to all been taken over by small groups of people here in Tel Aviv. There are a bunch of empty synagogues in Tel Aviv, and now you find the kind of–
Stefan Tompson:
Small squats. Anarchist squats.
Michael Eisenberg:
Well, no, I don't know, religious squats have taken over this area.
Stefan Tompson:
Religious squats, that's a very different story.
Michael Eisenberg:
But you know, I've written this piece called, for Fortune, called ‘Covenantal Capitalism,’ and I actually just wrote a longer piece on the topic for this weekend. And one of the things I argue is that capitalism actually can't exist without the underpinnings of community and taking care of the other.
Stefan Tompson
Absolutely.
Michael Eisenberg:
That has been such a part of the Judeo-Christian ethic because it creates a covenant between me and you, that I want to empower you. And that Adam Smith's capitalism actually, people have forgotten, grows on this Christian covenant that exists in Scotland and the UK, instead of Protestant in that case.
And that's been part of the explosion of prosperity once it put capitalism on top of this structure. And it's not a statist infrastructure. It's actually a religious communal infrastructure that enabled capitalism to grow, and innovation in my view.
Stefan Tompson:
A hundred percent agree. There's one of the sins that calls for the vengeance of the heavens, is not paying your employee. And I think it extends to not paying your employee fairly.
Michael Eisenberg:
It's in the Hebrew Bible, too. Twice.
Stefan Tompson:
The fact that, the fact–and this is the brokenness of capitalism. I think there's genuine critiques of capitalism–and there's people on the left that criticize it, I think, in a very eloquent and interesting way.
What we're seeing now in the West, we have, you know, sort of, employees working for Amazon working in the U.S. and they have to have two jobs. They can't afford to have children. There is a brokenness to the system because there isn't the capitalism detached from the safeguards of religion.
There is an intrinsic safeguard to Judaism and to Christianity that keeps capitalism from becoming this, in essence, a sort of monster that eats away at its own, at its own.
Michael Eisenberg:
Yeah. One of the fascinating stories from the war here is about a guy named Harel Friedman, who has a jewelry store in Dizengoff Boulevard here in Tel Aviv.
He went off to reserve duty for 90 days and basically couldn't make ends meet, etc. He announces that he's going to have a liquidation sale on his jewelry store and on Dizengoff. It gets to two journalists, and they publish it. And all of Israel's turned up to buy this guy's stuff at a fair price and he's staying open because of that.
I think that's part of like, you know, the communal infrastructure that exists here, that communal capitalism.
Stefan Tompson:
That atomization in the West has occurred, I think, to a much greater degree than it has here. Much greater degree.
Michael Eisenberg:
I agree with that. That's what my piece is about.
Stefan Tompson:
Launching this weekend!
Michael Eisenberg:
Yeah. I'll send it to you. I want to switch gears for a second.
Stefan Tompson:
Sure, of course.
Michael Eisenberg:
And go to, it's actually, ironically, it's like connected–like Elon Musk was yesterday in Auschwitz, in Poland, and we've been talking about Poland–and he had this comment about his aspirations and what he's doing, but the interesting thing to me is you mentioned that you've really exploded on X–
Stefan Tompson:
Sure.
Michael Eisenberg:
–in Visegrad, and there's been a fair amount of criticism of Musk. Which I actually defended. It's probably the most viral Tweet ever in Hebrew because Musk, Elon retweeted my Tweet where I said, better an open air of ideas there than controlled media that has an agenda.
It's not that people on social media don't have agendas. They do, but there's enough ideas out there that the open market of ideas, and with Community Notes, that can kind of hold people accountable. This is a better architecture for the future of news. I'm interested in what you think about that.
Stefan Tompson:
I agree with you. I think that you cannot have freedom of expression and freedom of speech without uncomfortable speech. I do also think there is an intrinsic day to, to defend that the mainstream's idea, that attempts to curtail what Elon Musk is trying to do. That there is an issue with the open-air marketplace of ideas that it can be abused by bad actors, and we are under constant threat from a machine that is very powerful, very well organized and very well-funded, of bots, of disinformation accounts, of influencers who are bought and paid for by Iran, China, Russia, but also the Qataris.
So there is, we looked at this with the NCRI. There was this study that Visegrad helped and worked on, which showed that for every one pro-Israeli hashtag be it, ‘bring them home’ or ‘free the hostages’ or ‘stand with Israel.’ There were 57 posts on–this was on TikTok–57 posts with pro-Palestinian or pro Hamas hashtags. Obviously there's 2 billion, almost 2 billion Muslims. So there is a certain organicness to that. But there is no doubt, there is no doubt that there is a machine that is creating content, that is creating influencers, that is funding influencers, that is mass posting. We've seen this with Ukraine, where Russian disinformation–very powerful tool–that has infiltrated mainstream media to a certain extent, that had built its architecture around Russia today.
And we're seeing the same with the Qataris, and they're doing with Al Jazeera, for example. And it's an incredibly powerful tool, because a lot of what they post is actually good journalism, until you get to that part where they're kind of coming through that back door, and they're saying, and here is some pro-Hamas content that's sort of hidden away in this pile of decent content.
So in that sense that the free marketplace of ideas is under attack because of those bad faith actors. And there needs, then we have to build safeguards against them. Because we're seeing what has happened to Gen Z. The studies in the U.S. showed that 67 percent of Gen Zers, it was actually exactly converse–Boomers were 67 percent pro Israel, and Gen Z was 67 percent pro Palestine.
So you've reached a stage where 67 percent of Gen Zers in the U.S. either are at least openly pro-Palestine, potentially openly pro-Hamas.
Michael Eisenberg:
And by the way, a significant percentage is not patriotic to America. And not patriotic
Stefan Tompson:
Yeah. This is exactly, and this is that link of, if they hate Israel, the odds are they also hate the West and they blame it for every single evil in the world.
So, but absolutely. I think what Musk has done is great, I mean, he's an incredible man. He's an incredible entrepreneur. He, I mean, what he has achieved in one lifetime, you know, millions of people could never achieve in thousands of lifetimes. But it's so many fields. And he has, you know, he's bequeathed a great gift to all of us by doing what he did with X, by ending the shadow-banning process, by own by ending arbitrary takedowns of accounts by reducing cancel culture.
And I think, and I, you know, these accounts like Jackson Hinkle, for example, or Salman Syed, and a few other, sort of, blatantly, I mean, blatant bad actors–
Michael Eisenberg:
Owned actors, probably.
Stefan Tompson:
Owned actors, probably. Most likely. But in fact, having that there, and being able to challenge it, and being able to argue back and fight back and have that debate in the open–I actually think it's objectively a good thing for society, and I think it's a good thing for free speech.
Michael Eisenberg:
I want to tease this open a bit, because I think this is like the heart of a big conversation right now, which is, you said you got started because of Le Monde and The Guardian, etc. which kind of projected a certain image, which we couldn't see what was behind or who was behind–but certainly caused a certain narrative to take hold.
You also got started because of Russian disinformation, which by the way, acts on both mainstream media and social media. We talked about this war with Hamas, in which social media and mainstream media, whether it's Al Jazeera, as the case may be–
Stefan Tompson:
Or the BBC, Sky News. For sure. And social media accounts.
Michael Eisenberg:
And it feels like there isn't a perfect system.
Stefan Tompson:
No.
Michael Eisenberg:
Obviously. And I think that the question comes down to, or part of the question is as we kind of project this forward, and technology gets a lot better, and AI gets a lot better, in creating more and different and fake content, and some real content–what is the better architecture for media and for narratives for you, for Visegrad, for me, for society going forward?
Stefan Tompson:
I think there is a great future for citizen journalism, where the truth is not owned by anyone and everyone is a journalist. There is a great beauty to that, and that gives a great fairness and there's a, there's almost a justice to it that there isn't someone who detains the keys to the truth and says, I have, you know, the ability to create, write up, interpret, and then distribute the end of that is, is a great thing.
And I, I think, and this is very much the project that Visegrad24 is here doing in Israel on the ground. We've gone around, and my team is right now in Sarona market filming; there’s two crews with multiple presenters taking turns asking questions, and giving the mic to the people and saying, you know, and it's a range of questions and we're going to air all these different opinions.
We want different opinions. We don't, I'm not, you know, Visegrad doesn't hold the key to the truth. I don't know what the truth is. I'm trying to get it. And obviously the truth depends on, on, on the–I mean, that's a dangerous statement right there. It's a very postmodernist statement. I was about to say, you know, the truth depends on your perspective.
Michael Eisenberg:
Well, there's a lot of perspectives–
Stefan Tompson:
Sure. There's a lot of perspectives that convince people of what their truth is, because we all have some psychological bias that we view the world. By the way, in the late 90s, a journalist at the time for the San Jose Mercury News named Dan Gilmore wrote a book called “We the Media” about the future of citizen journalism.
I actually think it's taken more than 20 additional years until almost everything he wrote came true. I think we're living in that era right now. But, like, you look at Instagram, you look at TikTok, and you look at X, right, or Twitter, what was formerly called Twitter. And I ask you, what's the best architecture for the future of journalism, and news, and technology?
Which of the three is it?
Stefan Tompson:
I think it's, I think it's all three. I mean, obviously bear in mind that TikTok is a CCCP disinformation tool. CCP, not CCCP.
Michael Eisenberg:
CCCP was the Russian hockey team in the Olympics.
Stefan Tompson:
Correct. Yeah. No, I mean, it is a communist tool.
It is a PSYOP. It is designed to demoralize the West, and it has demoralized the West to a great extent, but it is also a great platform for virality. It is, there are some subjects that have no censorship in the sense of–there's a lot of educational videos that we've done with Visegrad talking about, just European matters that have done very well, that have reached Gen Z, that have reached audiences that we wouldn't reach in other places.
Instagram again, is a place that is, it's an aesthetic space. So it reaches again, a slightly different audience. Videos that perform fairly well. Again, you reach a Gen-Z and millennial audience, so you reach people you wouldn't normally reach. Facebook, you're reaching primarily a slightly older demographic, so Gen X, and you're reaching Boomers as well.
X is the place, it's the cross-section of thought leaders, of journalists, of politicians, X really is where news happens. It truly has become that space. Mainstream media gets its news off of X.
Michael Eisenberg:
Right.
Stefan Tompson:
Because we've reached an interesting point where actually if you have a big enough platform, a social media account that's big enough, you don't need to, if you're a prime minister's office, you don't need to call up the BBC and say, hey, I have something important to say, you just post it to X.
And and the media is gonna have it, you know, any minute they will write up the article. So I think X is the place where, obviously the masses–I, I don't like that word because, you know, people are people–but the, in the colloquial sense of the word, the masses aren't on X.
X is a space of–
Michael Eisenberg:
Opinion leadership.
Stefan Tompson:
Opinion leadership.
Michael Eisenberg:
Yeah, I agree.
Stefan Tompson:
And that does get disseminated further. And Visegrad24 is at a very interesting place where we have several hundred members of various European parliaments who follow us, about 150 ministers from multiple countries, several current prime ministers, I think five sitting prime ministers follow Visegrad right now, and several thousand journalists from across Europe, the US, but also the Middle East now.
Many of them are our detractors, many of them don't like our content and disagree with it, but we have reached an incredible place where we have been able to break multiple stories. A recent one that we did was the balloons that were flown over JFK to disrupt air traffic.
Michael Eisenberg:
Unbelievable work you did there.
Stefan Tompson
Thank you, I appreciate it. And that, but that was, that is the essence of citizen journalism. A worker of the airport messaged us, said, “I want you to break this story, I love your content, I love your work.” An FBI investigation has now been launched into the people who–
Michael Eisenberg:
But why didn’t mainstream media pick that up?
Because they didn't. Even after you published it, it was barely visible in mainstream media.
Stefan Tompson:
It was, I mean, it was a very uncomfortable thing having, I mean, essentially domestic terrorists. This is an act of domestic terrorism.
Michael Eisenberg:
A hundred percent.
Stefan Tompson:
To launch balloons over an airport. I mean, imagine if a plane had crashed because of it and they'd killed people. I mean, I think they'd probably celebrate. They'd think it's some great win for their cause.But it was–no, so the FBI did launch an investigation. And that was, to have that as something under my belt, I am very proud of that. I think it's a great achievement. I think it was a great achievement.
The fact that the man who filmed it trusted us enough with that story and wanted us to break it. And that's happening more and more. There's people who trust us. There's people who understand that we're, I'm not impartial, I am biased, I'm, and I'm biased, because I oppose–I'm pro-Israeli because I oppose Islamist, fundamentalist, terrorist organizations who want to wipe out the Jewish people and then Christians next.
That's not a radical position to hold, it's a sensible one to hold. And people have, we've had some great content being sent to us some, and now we're making great original content, and my hope is that in the coming months and coming years, we will be able to scale this into a more serious news outlet with a bigger team.
And I think that's very likely to happen. I think we've reached a point of momentum, a point of trust, a point where we have a proven audience. We're reaching a billion impressions a month consistently now, for multiple months. And I think that there will be people who believe in us sufficiently to make it happen.
Michael Eisenberg:
What would you do about all the fake that is on X, or Instagram or TikTok? Like, how do we handle that?
Stefan Tompson:
I don't have an answer for you, Michael. That is a question for greater minds than mine. I have no idea how–
Michael Eisenberg:
Do you worry about AI? You worry about AI in that context?
Stefan Tompson:
I, yes, very much so. I, obviously I, my primary line of work was, has been PR for years.
It's been very interesting to watch how fakes are disseminated in political campaigns. Very strategically.
Stefan Tompson:
You worked on a lot of political campaigns.
Michael Eisenberg:
I worked on a lot of political campaigns. I've seen fakes be deployed. It's very interesting to see how they are released and how they manipulate campaigns.
And the thing is they happen faster. They're released faster than they can be counted. I don't know where the answer lies. I don't, it's a threat that is, that’s beyond my comprehension and beyond, I don't have an answer.
Michael Eisenberg:
If you were going to give one piece of advice to Elon Musk on what to do with X, what would it be?
Stefan Tompson:
The bots. More actively, I am struggling with Iranian, Chinese, and Russian bots. If I posted something right now, it could be, we could Tweet ‘hello’ right now. And within one second, we'd have about 25 comments saying free Palestine, some swear words about Visegrad, just automated bots. Doesn't matter how many of them I block, it's always about 25 of them within one second that come. That, that's an irritation, and I think there must be a sensible way to clean that up. Perhaps by making everyone pay, even a dollar a year, whatever it is, but that is definitely an issue.
Michael Eisenberg:
Going back to, kind of, the impact of fake news on political campaigns, so you've been involved in a number of political campaigns.
Stefan Tompson:
A number, yes.
Michael Eisenberg:
I’m not going to ask you if you publish fake information, I'm sure you haven't. What do we do? Like, we're going to have an election in Israel soon. This year is going to be a U.S. election.
Stefan Tompson:
Sure.
Michael Eisenberg:
There's an incredible amount of fake news, usually A.I. For example, you know. You can make President Biden say anything, and it's indistinguishable. It's reached the point where it's almost indistinguishable from the real thing, right? Difficult to watch. Did you watch Javier Milei’s speech at Davos?
Stefan Tompson:
I did.
Michael Eisenberg:
Right? Which was dubbed. I don't speak any Spanish, but it was dubbed. He was sort of lip synced as if he's spoken in English, his own voice, his own accent. It was incredible. It's incredible. And if I didn't know he didn't speak English, or he didn't speak English at all, I wouldn't know
Stefan Tompson:
You'd assume, you would have intuitively assumed, ‘Oh, Javier Melei is making a speech.’
Michael Eisenberg:
And by the way, I bet you I had a better experience than people in Davos, who had to have it simultaneously translated by some talking head behind a booth. Yeah. Like, what do they do about that? You just think about the following circumstance. Somebody deepfakes Jerome Powell, the chair of the Fed, saying, “I'm reducing interest rates, you know, 100 basis points.”
You know, market takes off, somebody makes it. Or, I'm raising interest rates 100 basis points, the market tanks, I got a big short, and I'm off to the races. What do we do about this?
Stefan Tompson:
That happened when, right–
Michael Eisenberg:
With the Bitcoin ETF! That was hacked.
Stefan Tompson:
I was going to mention something else. I was going to mention when Elon Musk introduced verified users, there were a few accounts that these guys, they basically renamed something and they did crash some stock prices.
They Tweeted out, I think one of them was a pharmaceutical company. I can't remember the exact story, but I think they were this–I think it was insulin. I think they said insulin would be free, and it came from an account that was verified. And the price actually did crash.
You're asking, again, an incredibly complex question. I don't have the answer. I think the answer lies probably somewhere in technical ability to, I mean, I don't know, in having–I was almost going to say something ridiculous, like saying, you know, it should all be on the blockchain. The Bitcoin bros will say that, you know, the blockchain will solve absolutely every single problem in humanity.
Michael Eisenberg:
My own framework, for what it's worth, is like, yeah, you have two choices. Like we always trusted the, call it the New York Times, had a brand that was trustworthy. I'm not sure it's true anymore. And so like our trust sensors have kind of got up on the New York Times. And so everything you look at on Instagram, Twitter, Facebook, needs to be looked at with a high level of skepticism.
It's a, is that real? Maybe there’s Community Notes, in the case of Twitter–we got to question that. So everything over time might be perceived to be fake before it's proven real. One of the things I always do when I see something like that is, I don't answer. Like, I don't reply. I'm gonna wait 24 hours to see if something sorts out here because it may not be real.
Stefan Tompson:
But isn't that actually a good thing? To have that assumption at all times. It might be a good thing for society.
Michael Eisenberg:
I think, yes, schools should teach critical thinking about facts, or about history, or about all these things. I'm a big believer in that. We should teach critical thinking. That's one of the things you learn in orthodox Jewish education, is critical thinking on texts.
But it's hard in the 24/7, every microsecond, news cycle to go do that all the time.
Stefan Tompson:
No I agree, and Community Notes actually has been a really interesting tool and interesting solution–but I don't know the extent you could do that on a YouTube video.
Yeah, I don't either. I don't know. The answer again is yeah, so–
Michael Eisenberg:
Is fake news with us to probably stay for the rest of our lives?
Stefan Tompson:
Feels that way. Yeah, I think so. Also, the other thing is that–news ultimately, there's this belief that there is objective news. I don't think that is true. I think everyone has, everyone is biased. And you can take a story, and you can frame that same story in two ways that turn it into a completely different story.
And we're seeing that happening in, in real time, right? We're also seeing real time denial of true events. So October 7th–the evidence is overwhelming, I mean, there is really no, there should be no question about the fact that it happened. There was a massacre. Over a thousand people were killed. Innocent civilians were attacked.
3000 Hamas fighters poured into Israel, committed horrific atrocities, documented them, live streamed most of it, and you're getting in real time–and I'm not even talking about the Arab world, I'm talking about the Western world–where you get people in the West saying, “Oh, it may have been AI, we don't really know what happened.”
It's not even, they're not, it's not even them saying, “Oh this is a response to 70 years of Israeli crimes on the Palestinian people, blah, blah, blah.” No, they're saying, I don't know, it didn't happen. In real time. There's that famous, you know, Eisenhower saying, “please take photographs of evidence. Because in 20 years, there's gonna be people who are gonna say it didn't happen.” It's happening, you know, one month, two months, three months after the event. And the overwhelming evidence.
Michael Eisenberg:
There's this incredible video yesterday of Noa Tishby going around. In Utah, right?
Stefan Tompson:
Yeah, I watched it.
Michael Eisenberg:
And people don't know anything. I sometimes wonder, you know, we have this narrative, it's called the Flynn Effect, that, you know, IQs increase over the last decades. And I'm starting to wonder whether there's been a massive dumbing down of society due to social media, or people have always been this dumb, they just never got on camera?
Stefan Tompson
Have you watched Idiocracy?
Michael Eisenberg:
No, what is that? Idiocracy!
Stefan Tompson
Oh, you gotta watch Idiocracy, Michael. One of the, it's a cult movie. It is an incredible film. It's the exact reverse of what you said.
Michael Eisenberg:
I've never even heard of it.
Stefan Tompson:
The concept of the film is, essentially, all the clever people are too busy being clever to have children.
They're considering it, they're thinking about it, they wonder if they can afford it financially. And all the idiots in the world were just procreating en masse. So the IQ drops dramatically, I mean off a cliff, and there's two people with an IQ, I think, I believe it's a hundred. So they take a soldier and they take a prostitute, and they freeze them and get, keep them in time and they wake up.
And they're the cleverest people in the world. And there's an incredible moment of them discovering this completely dumbed down society that tried to go back home in time. It's a wonderful film and it's, it answers a lot of your questions actually. It's actually–
Michael Eisenberg:
It's distressing. I feel primed to believe fake news.
Stefan Tompson:
I do believe we're reaching a point where IQs have risen, and they've risen for many reasons, including simply diet, for example, and access to food, et cetera, et cetera, et cetera. And average heights have gone up in the West. For example, in the West, there's an incredible statistic in Poland where you have a certain decade where there was malnutrition because of communist mismanagement.
And then there was another decade where the Polish government borrowed a stack of money, and there were bananas in Poland. There's even a famous saying about bananas in Poland because that era was, it was such an important thing as shipping containers arrived with bananas in Poland. You couldn't have–I mean, the incredible fact that, you know, under a communist regime, the fact that bananas have been shipped to a country is a success, tells you everything you need to know about communism. But anyway, there's one decade where Poles are on average shorter than they are in the next decade because of malnutrition, which, and you know, the same thing happened with IQ.
And I mean, I do think that there are, we are reaching a point where cousin marriage, for example in, in Gaza or the West Bank is not exactly a good thing for the gene pool. It has real ramifications and serious consequences. I dunno, I think we might be, I mean, I guess Steven Pinker and others would, Jonathan Haidt would disagree on this, but I do think we're going to reach a period of dropping IQs again.
Michael Eisenberg:
Interesting. By the way, would you ban TikTok in the West?
Stefan Tompson:
Yes, I would. And I say this as someone who does use it. Our Visegrad is on TikTok. We have hundreds of thousands of followers there. Generated hundreds of millions of views. And we've done objectively good work there that I'm proud of. Work that has been educational, that has been quality, that has been using good vocab—I mean, even raising the level. Just raising the level of just providing content that is well spoken, well presented. That has some merit. That in and of itself in this absolute ocean of trash of vulgarity, of swear words, of crassness, of sexualization. Just vulgarity.
That in and of itself was a good thing. But I would. I think it's a tool. I think it's a very dangerous tool. Because it is so addictive. Because of the, it's been destroying attention spans. It context-switches you. You're unable to focus. It sexualized young girls in a very meaningful way. These girls, I think there's a process they go through where they post videos to TikTok, they get some views, and then they realize that slightly more sexual content, more sexualized content, will give them even more views, so there's a dopamine hit, and the algorithm rewards them immediately.
And suddenly you have incredibly vulgar stuff. And the same with the crassness. You do something stupid, and crass, and silly. I don't know. There was a trend of people crawling around shopping malls as if they were a sort of caterpillar. It was bizarre. It was stupid, and it wasn't funny. And it was a public nuisance, but it was generating millions of views. So suddenly you had idiots crawling around shopping malls across Europe. And then you had, obviously, the letter to Bin Laden. How is it possible that in the span of two, three days, Osama Bin Laden is rehabilitated in the mind of Gen Z?
In two, three days, that level of influence on young people, that is manipulated. The algorithm is obviously manipulated. And then you see obviously the Chinese version, the Douyin version of TikTok, which is promoting an entirely different algorithm. Every seventh video is a video that is from the CCP.
It's an extraordinary fact that actually, they are making sure that their young people, even though there is the context switch and there's the dopamine rush of every new video you watch. And you always think the next one is going to be–just another one. Right? And they're promoting educational content that they're–
Michael Eisenberg:
They’re sitting at the poker table or the blackjack table. Just one more hand, I'm going to win.
Stefan Tompson:
It's exactly that. And it really is. They've, it's a beautifully designed tool. Yeah, it really is. A weapon.
Michael Eisenberg:
How would you feel–I'm just going back to fake media for a second.
Stefan Tompson:
Sure.
Michael Eisenberg:
How would you feel if you, kind of, knew that the campaign for President of the United States was influenced by some fake item, or the Prime Minister of Poland was elected because of some massive fake campaign?
I know this kind of harkens back to Russian propaganda, but you don't have to be that sophisticated.
Stefan Tompson:
You don't have to be that sophisticated.
Michael Eisenberg:
You know, it doesn't have to be a giant operation. A simple AI tool, you know, propagates something fake about Biden, and he's not elected, or the Prime Minister of Poland, like–
Stefan Tompson:
I mean, I think over the course of multiple elections that, that has been the case, right?
I mean, there's the famous argument that, goes that those who watched, I believe it was Kennedy was campaigning against Nixon at the time. Was it Nixon in the sixties? And those who listened to it on radio believed that Nixon had won the debate. Those who watched it on TV assumed that Kennedy had won.
Based on the aesthetics and those who are listening is an interesting distinction, right? Where you get, for example, on average, taller candidates perform better in elections than those who are short. On average, you will not find bald heads of state, it's a rarity, since the TV world has become a thing and we've had, you know, photography of everything and video footage of everything–generally speaking, you do not get bald elected heads of state.
It's just, it's an interesting fact, right? I mean, but the bias is massive, where you reach that stage of life that the voter is influenced by the fact whether or not the candidate has hair or not. Or whether he's, or whether he's, you know, six foot one or whether he's five foot eight. It's a massive difference.
And so if that, if just that impacts an election–I think they have, obviously in the past they've been impacted by fake news. Also by the fact that some things get unreported. I mean, an element of fake news is news not getting reported. That's an important part of it, right? That you don't hear something about a candidate, because it's been made to disappear, because the media collectively chooses to ignore it.
Or simply because it doesn't, the story isn't broken.
Michael Eisenberg:
How do you choose what to ignore?
How do I choose what to ignore? Well, the thing is I'm at a place where Visegrad is a relatively small team of five, six, seven, depending on how you count, you know, it's less than 10 people.
Any which way you counted is less than 10. So we're limited in that sense in having to cover specific topics. At the moment, I would say that 50 to 60 percent of what we are posting to social media is related to Israel. And the reason is, we do not have the capacity to focus and to have, you know, people who genuinely know about a topic covering that topic.
The Israeli topic, I believe the team has been focused on this for several months, is well versed in the topic, and we have very good sources on the ground. I mean, we have people we trust, we have people who send us things that we trust, we have an established network of people who are quasi-contributors at this point, really.
But we'd be incapable of, I don't know, if something major happens suddenly, it'd be very difficult to cover both things at once. So we're limited just by the virtue of–and that actually solves the problem. What do I ignore? Well, I ignore, you know, the rest of world news, because we're busy on one topic and we can only meaningfully focus on one at a time.
Michael Eisenberg:
How do you see the rise of antisemitism affecting global politics?
Stefan Tompson:
I think there's a genuine threat in the West because of mass migration, where you're seeing candidates like Jean Luc Mélenchon in France, and the rise of Jean Luc Mélenchon, a far left candidate who is openly antisemitic, and that is going to be replicated across European states.
There is going to be a normalization of antisemitism–we're already seeing it–and one of the reasons is the demographic change of the West is going to lead to that normalization. Because Arab populations, migrant populations, third, second generation, third generation even, will hold views–or not even that, they already hold them, views that are antisemitic.
So I think there will be normalization.
Michael Eisenberg:
Will France exist like we know it today in 50 years?
Stefan Tompson:
France doesn't exist in the way–I've lived in France in the late 90s, early 2000s, as a child, I grew up in France partially. France doesn't exist in that way already.
Michael Eisenberg:
Oh wow. I wasn't expecting that answer. Okay. What's the most important piece of technology for your business in the next five to 10 years?
Stefan Tompson:
X.
Michael Eisenberg:
That already exists. What else?
Stefan Tompson:
Oh something that’s coming up? I think that the tools offered up by AI that will help us edit editing tools, the editing process itself, and you know this, because we, this is going to be edited by someone
Michael Eisenberg:
Yeah, it's time consuming. By the way, our normal editor is in reserve duty for the last hundred days. So it's been really tough. But yes, keep going.
Stefan Tompson:
That, I mean the ability to have–and some of it is already available. I mean, Descript, for example, which will do your subtitles for you fairly accurately, you have to go through it, but it's fairly accurate.
The ability to dub things in different languages. We discussed this briefly. But even the ability to–there's three cameras here, so there's a shot of the two of us, one of you, one of me–even to have that, you know, the editing process of, an editor has to sit usually, and go, here's one cut here, and change from one camera to the other, that, that's already happening as well, where you can almost semi automate that, that's going to save thousands of hours.
Michael Eisenberg:
In a hundred years when they write the biography of Stefan, what's the title going to be?
Stefan Tompson:
Man of the West.
Michael Eisenberg:
Man of the West.
Stefan Tompson:
That's what I hope–something like that.
Michael Eisenberg:
You may need to move to Israel. I got one last question for you. In this era of fake news, if you had to bet on one person to solve it or the one place you'd have to go, is it TikTok, Zuckerberg, or Musk?
Stefan Tompson: 100%--I mean, as a problem to solve?
Michael Eisenberg:
Yeah. Who's going to solve the problem and where would you want to go first?
Stefan Tompson:
Oh, I think it's Musk. I, albeit Zuckerberg has been becoming more conservative, generally more conservative as he's been, as Facebook has become a publisher in the sense of, it is also a platform to publish news.
He's found himself at war with establishment media. It's an interesting shift that he's had. I think Zuckerberg is a very interesting man as well. I think he's an incredible human being. I mean, he's achieved incredible things at an incredibly young age.
Michael Eisenberg:
If you had to be left with one social media platform, would it be–
Stefan Tompson:
X?
Without a doubt. Yeah, without a doubt.
Michael Eisenberg:
All right, Stefan, thank you for coming.
Stefan Tompson:
Michael, thank you.
Michael Eisenberg:
You can learn more about Stefan on X, formerly Twitter, Stefan Thompson, that's S T E F A N T O M P S O N. You can also follow him on YouTube, TikTok, and Facebook. And if you haven't yet checked out Visegrad, that's V I S E G R A D, 24, on Twitter, you should definitely go do that. It's some of the highest quality content out there and they actually break real news. Thank you for coming. Thanks for spending time in Israel. Thank you.
Bradley Tusk
Michael if they gave out an award for podcast honesty, I think we’d win it on that one.
Michael Eisenberg
I am super excited to have my friend Bradley Tusk with us on the Invested podcast. Bradley and I have done a couple of podcasts together in the past. This is his first time on Invested. I hope you're gonna enjoy it. I promise you it will be an interesting conversation. But instead of me introducing you, Bradley, why don't you introduce yourself?
I’ll of course feel free to fill in.
Bradley Tusk
Yeah, sure. So I started my career in politics. I was Mike Bloomberg’s campaign manager when he ran for mayor of New York. I worked for him at City Hall, spent four years as the Deputy Governor of the State of Illinois, ran the state's budget operations, legislation, policy communications; a couple of years in the US Senate as the communications director to Chuck Schumer, who's now the Senate Majority Leader.
I started my first company in 2010, a political consulting firm that runs big campaigns. So imagine you're Walmart, and you're trying to open up stores in four major US cities, and you've got union issues and zoning issues and community issues. We figured all that stuff out, and pivoted to tech kind of by accident. I was sitting in a meeting in early 2011, and a friend of mine called and said, “Hey, there's a guy with a small transportation startup. He's having some regulatory problems. Would you mind talking to him?” I’d become Uber’s first political adviser that day. I get really lucky. And Travis calls back and says, “Listen, I can't afford your fee, would you take equity?” I had no idea what equity meant, but thank God, I said yes.
That was back during the series A–and then spent the better part of the next few years running campaigns all over the US to legalize ride sharing and Uber. That worked, repeated the process with CLEAR, took some equity to help get them into airports. That worked. And then my partner, Jordan Knopf, who you know, who was running Blackstone's internal venture fund at the time, and the question we started asking ourselves is, if you truly understand regulatory risk, and you can do something about it, how much of a better investor would that make you? And we didn't know the answer, but we believed it was material enough to try, and raised our first fund in 2016. Really small fund, 35 million, but put it to work right away. And some things had worked out. So our first investment ever was FanDuel. And we ran all the campaigns to legalize fantasy sports betting. Our second investment was Lemonade, which we did with you. And then we helped them get their insurance licenses all over the US, and so on.
We're now investing out of our third fund, raising our fourth, typically invest in seed and series A. Check size is typically one to 7 million. And then separate from all of that. I teach this stuff at Columbia Business School, I host a podcast called Firewall that you've been on a bunch of times about tackling politics; I stupidly own a bookstore and podcast studio on the Lower East Side of Manhattan. So it's a great way to lose a lot of money. Out of my foundation, we fund and run the campaign on mobile voting to make it possible to vote in elections on your phone, and another one on universal school meals to make sure that every kid in America gets breakfast and lunch at school every day. And I write books. So I wrote a memoir a couple years ago called ‘The Fixer’ and a novel that came out, as you know, a couple of weeks ago, called ‘Obvious in Hindsight,’ and then a third book coming out next year on mobile voting.
Michael Eisenberg
So I actually want to dig into how we met, which was on Lemonade, but not dig into Lemonade specifically. But it was, it was kind of the Bible of venture capital never to invest in regulated industries. It's why, for example, healthcare venture investing struggled for a long time. You never want to touch anything that had any regulation. Your strategy obviously is the opposite. And anyone who's read ‘The Fixer,\ which I have read and enjoyed, and even had my name mentioned in the back of it, would understand that you have a very different perspective on regulated industries. So if I'm making a venture investment, why should I venture into anything that is regulated? And has that changed, by the way, from 15 years ago to today?
Bradley Tusk
Yeah, I think, I think the norms have changed a little bit, partly because I think of all the tech fights. And importantly, now that we've been around for a while, there's at least one fund that does this kind of stuff. But the vast majority of–let's just use the US as an example here–the vast majority of companies are regulated either directly or indirectly. if you touch a consumer in any way, ultimately, you're going to face regulation in some form. And I think where a lot of startups get caught, unaware and get into trouble is, you can have great engineering and you can have great product, you can have great marketing, you can have great everything. But if the other side can use politics and government to put you out of business and restrict your market share and stop your activities and everything else, it doesn't matter that you went to Stanford or that you were at Y Combinator or that, you know, Benchmark or whoever invested in your Series A. Like you're still not going to survive. And you've got to be able to sort of deal with this. And then the other side would be all of these new industries, like whether it's crypto or AI or autonomous vehicles, where there may not be someone that you're disrupting, like we did with taxi for Uber, or insurance for Lemonade, or casinos for FanDuel. But there's no regulatory framework at all, which is actually a problem, right?
I know, everyone thinks that they would love to live in a totally, you know, utopian world of no regulation, or all libertarian. But the reality is for any industry to function, there have to be some set of rules that people comply with. Because otherwise, it's the complete Wild West all the time. And so I think the tech companies are starting to realize that, look, if we're not prepared for– if we’re disrupting someone, and we're not prepared to deal with it, we can face real problems. And if we're entering a white space, and we're not at the table to form regulations, they're still gonna get formed, we're just not gonna like them. And so the whole point of our fund is that, you know, we're effectively the political consultants that do that for you, whether it's, you know, fighting off the entrenched interests, if you're disrupting someone, or building in a new regulatory framework if you're in a new sector. And, you know, we're lucky, I guess, in a way that we're the only venture fund that I know that does this. And so we've got a monopoly in our little niche.
But I think that if, if nothing else, overall, I hear less founders telling me when they pitch me that, you know, some stupid regulators can do whatever they want, once they realize how brilliant that founder is. So the perceptions are changing a little.
Michael Eisenberg
Yeah but maybe it's like a stupid idea to begin with, to invest in or start a company in a regulated industry, like–
Bradley Tusk
Healthcare, energy, education, gaming, transportation, I mean, unless you're doing like, pure enterprise SAS products, it basically is going to be regulated one way or another. And there's just if you said, I'm going to avoid all regulated industries, you're basically limiting yourself to a tiny swath of the economy. You know, one reason why I think our funds has worked out pretty well is, there's tons of deal flow, because the vast majority of businesses one way or another get touched by regulation, get touched by politics, get touched by government. And so yeah, if you said, ‘I only want to limit my investment thesis to 10% of the economy and ignore the other 90%,’ there are people who do that, and there are some really successful pure enterprise software funds. But overall, both in terms of opportunity and also interest, right, because part of it we do to make money, but part of it also is to build companies that have, you know, succeed going forward to have an impact on the world, on society and consumers. You know, those are going to be in regulated industries. And so to me, you would be crazy to avoid it.
By the way, I'd frame your point a little differently, which is if we want to actually help out 90% of the population, we need innovation in regulated industries, and so you might unlock the ability to bring advanced technology and great user experiences to these industries that have been left behind in the Pony Express era. And so, I think it's super important. You know, Lemonade is a case in point.
Why–instead of me telling the story, why don’t you tell the story? I mean, no one had gotten an insurance license in New York for forever before Lemonade.
Bradley Tusk
Yeah, so it was–and this is how we met, obviously–so my partner Jordan met Daniel Schreiber. Daniel was, still is the founder and CEO of Lemonade. And Daniel has said to Jordan, like, “We've been trying to get our insurance license from the New York Department of Financial Services, and our law firm is having a lot of trouble.” And then Jordan came back to the office, and we talked about it. I said, “That's because they're going about this all wrong. This is a political process. And because they're lawyers, they're approaching it from a totally bureaucratic way, and they're missing the point.” And so my thesis was, DFS will grant the license if Andrew Cuomo, who at the time was the governor of New York, tells them to grant the license. And if he doesn't, they're not going to because your average mid-level regulator inside the agency didn't like Lemonade for two reasons. One, it's a whole new model they had to wrap their heads around, and that means a bit more work, more time or effort, and generally, they don't like that.
And the second thing is, you know, there's thing called ‘regulatory capture’ where it's like Stockholm Syndrome for regulated industries, where the regulators become friends with the people they’re regulating, and they start looking out for the interests of those that they're regulating ahead of the interest of the consumers and constituents of the jurisdiction that they work for. And so one, they were trying to protect the incumbents from new competition like Lemonade, and two, they didn't want to have to sort of deal with a whole new model. And eventually what ended up happening was, you know, us calling Governor Cuomo’s office and saying, “Listen, front page of the Wall Street Journal tomorrow is gonna have one of two stories, you know, ‘New, low-cost insurance startup launches in New York offers, you know, cheap insurance for New Yorkers,’ or ‘Because of Andrew Cuomo’s corruption and bureaucracy, hot insurance startup moves to London.’ You guys pick, we're okay with either one. And we had our license 24 hours later. And I will say, when I look back at my career, one of the things that to me is a shining moment was successfully bullying Andrew Cuomo.
Michael Eisenberg
By the way, Mark Suster told me to ask, you said you're invested, you did work together on Bird. It's like, what makes you unafraid, as a venture capitalist of, for lack of a better term, you know, that rough and tumble world of politics and all these regulated industries that you think most VCs shy away from?
Bradley Tusk
Yeah, I think two things. One is keep in mind, you know, we, just like every VC, we don't do 99% of the deals that we see, right. And most of the time, it's because just the company's not going to be successful. But there are times where we like the TAM and the founder and the thesis. And then me and my team will conclude on the platform side, like, you know what, this just isn't gonna work politically. And we're not going to put our money or reputation behind something if we don't think we can get it done.
But overall, I think the difference is, you know, I grew up, like I said, in politics, that was the first half of my career, you know, in campaigns. Like when I was Deputy Governor of Illinois, that’s Chicago politics, like, there's nothing rougher than that, right. I got death threats, I used to have to have my apartment swept by State Police for bugs, you know, I testified in multiple corruption trials.
So once you do–
Michael Eisenberg
Let's just be clear for everyone, not your own corruption charges.
Bradley Tusk
I was a witness thank God, but nonetheless. So I think you just sort of get used to it. And one reason why I think we have this monopoly in our space is, you know, in theory, any venture fund could say, “Okay, I'm gonna hire five people like Bradley and build my own, you know, platform on dealing with regulation.” The problem is this. And Andreessen tried this, and they had really talented people working on it. But ultimately, the person making the investment has to truly understand the regulatory situation and be comfortable taking the risk and taking on the fight. If it's just another data point from some other outside person that they're telling you that it's just like I have people giving me data points, like, yes, I factor them in, I take them into account, sometimes I might take them very seriously. But that's not the DNA of how you're investing. For me the DNA of how I’m investing in every single situation is, you know, can we change the regulatory structure here to allow this company to succeed? And so I think to do what I do well, you probably have to come out of politics, and then pivot into venture to do it. And look, I just got very lucky that because of Uber, I both had, sort of, the credential and just the financial freedom to go ahead and start this thing.
Michael Eisenberg
You know, when you read ‘The Fixer,’ you come away with the feeling that every one of these fights is like a bloody battle with incredibly entrenched interests. And where the campaign and the strategy is is not obvious. It's certainly not cookie cutter to say the least.
Bradley Tusk
Right.
Michael Eisenberg
So how do you decide which of these work for you or you think are going to work versus the one that…?
Bradley Tusk
Yeah. I mean, politics is very much an art, not a science. But like, I think the Uber New York City fight is a good example. That's where Bill DeBlasio, at the time Mayor de Blasio, was super left wing, fancied himself a socialist, hated business, hated tech, refused to do like, go on the High Line, or anything that he thought in any way was sort of, you know, capitalistic, and want to–he was very corrupt too–and one of his biggest donors was a taxi industry. And they wanted to stop competition from Uber. And so he proposed a ban on any new Uber licenses at all, which meant that the company would eventually sort of stagnate and go away in the New York market. And I remember, I was sitting in the, in the Dallas airport coming back from some meeting. And Travis calls me and says, “Did you see what happened?” And I had not. And I took a look at it and called him back. And he said, “What do we do?” And I said, “You know, the problem is, you got the Mayor and the City Council Speaker both on the same side of this thing. That's the whole system. It's really tough to stop that once both of them want to achieve the same thing.” And he's like, “Well, you got to figure it out.” And then I'm on the plane coming back from Dallas, and finally hits me somewhere like over the Ozarks, or whatever that like, you know what, the trick isn't the normal campaign about how like, de Blasio is going to kill jobs and innovation and all the shit that people tech like to say, is to come out and from the left. You, de Blasio, by stopping Uber, are racist, because black people in the city have a long history of having their hand up when the cab goes by, and it just passes them right away. Or our drivers are immigrants from all over the world, who you purport to care about and support. But yet, this is how they're feeding their families and you're trying to take it away from them. And we came at him completely from the left. And that just, they totally didn't know what to do, because it was so outside of the normal playbook. And we did that to the entire city government and put so much pressure on politicians. And one of the things that we did, which then led to the mobile voting work that I do now, that you know about, is, we mobilize our customers politically through the app. So we did this all throughout Ubers’ history. But specifically in this case, we created “Modes” by Uber X Uber Black, de Blasio, and if you clicked on de Blasio, 25 minute wait time, you know, click here to tell your city council member to stop this bill. And like 100,000 people did it in the span of like a week or two. And that was so overwhelming to the politicians who normally just don't ever hear from constituents about much, that the political math went from like, “oh yeah, I'll do it, the taxi guys want it, because they give me a campaign contribution every year,” to like “Shit. I'm not pissing off like 6,000 of my constituents.” And so as a result, you know, they told the speaker, “We're not going to, we don't want this bill,” and they ended up pulling the bill and we won. And that's actually what led to the mobile voting project.
So let me digress for a second here. But in US politics and people assuming Israel sort of, if you wonder, why is it so fucked up in the US this is why. Which is that the only election that typically matters here is the primary, because we have this thing called gerrymandering, which every district is drawn to benefit one party or the other. So typically, the general election is already a fait accompli, whoever won whether they’re Republican, primarily a red state, or the Democratic primary blue state, they're going to win the general election. And so therefore, the whole contest is in the primary. Primary turnout in the US is typically 10 to 15%. Who are they? They're typically the furthest left wing voters or the furthest right wing voters. And so what they're effectively saying to the politicians is, these are people who want moral purity, right? They think that the other party is the devil, they don't want to compromise. They don't want to get things done. They just want to feel righteous about themselves at all times. And so the incentive to politicians is, don't do anything to piss off the base. Because if you do, you'll lose your next election. Like so, for example, there was a Congressman from upstate New York, Republican named Chris Jacobs. Real Trumper, no one's definition of a liberal. But there was a mass shooting at a supermarket in Buffalo, which was right next to his district. 10 people died. And he was very emotional at a press conference, and said, “You know, we ought to think about maybe changing some of the laws to make it harder for people to get assault weapons.” His career ended that day, they literally stripped–this was September, the next election was November– they stripped the line from him, he couldn't even run for reelection, because he dared to say something that challenged the party orthodoxy.
But imagine that if instead of Jacob's primary being 12%, turnout was just 36%, still barely better than a third–if you just look at the polling among Republicans on assault weapons, he would have to be for some sort of assault weapon ban or regulation, because that's where the voters are. So the good news about politicians, at least in the US believing in nothing, is they'll adapt to whatever they need to adapt to, but they're only going to adapt to whatever helps them win the next election. And to be clear, both parties are equally bad. I'm an independent at this point. I hate them both.
But I think the only way you're going to change this constant climate of dysfunction and polarization in US politics, is to radically increase primary turnout. And it doesn't matter, sort of, what the right thing is, most people are not going to not take their kids to school on a Tuesday so they could vote in the State Senate primary. But if they could vote on their phone, all of them wouldn't do it, but more would, and how do I know this, because that's what we did with Uber and with Bird, as you mentioned, and with Eats and with FanDuel, and all these other portfolio companies that we've invested in. And if you change underlying inputs, you'll change the underlying outputs. So we created the mobile voting project in 2017 out of my foundation, thanks to Uber, I've got a foundation–and we funded elections in seven states, 21 jurisdictions, where people either deployed military or people with disabilities, voted in real elections on their phones. It worked, still got a lot of shit from the cybersecurity community. So I decided, you know what, I'm gonna build my own mobile voting technology. So here we are, $10,000,000 and 3 years later, we're going to release it publicly in Q1 of next year. It will be free and open-source, it's owned by my foundation. So it's not a for-profit business in any way.
And I just want to make it possible for more people to vote, because that's the only way that you fix the underlying problems. And by the way, I think absent doing that, I don’t think the US is one country in 25 years.
Michael Eisenberg
Yeah, by the way, I'm on record with a prediction that by 2050, some state will try to secede from the Union. I don't know what you think about that.
Bradley Tusk
I think that's, I think you're being too generous. I think it’ll come much sooner than that.
Michael Eisenberg
Interesting. So, you know, you probably saw Bill Girly’s speech on regulatory capture, and how that was innovation and creates worse outcomes for health. And another thing, you know, Jordan Knopf, your partner, said I should ask you whether or not there's any way actually to minimize or eliminate regulatory capture altogether? Or is it just like a cost of doing business at this point? You got to fight it?
Bradley Tusk
No, I mean, the first thing is if we can change the underlying political structure a little bit–so you know, I mentioned sort of the far left and the far right having disproportionate power because we're the only ones who show up to vote in primaries, but the other group have special interests, right. And the special interests typically are not us. They're the taxi industry, the casino industry, the hotel industry, whatever industry you're trying to disrupt. They give out campaign contributions. They hire tons of lobbyists, and they are able to, especially in low turnout primaries, influence the election in ways that terrifies politicians. And as a result, politicians try to do what they're told to do by the special interests. So the first thing is if you had significantly higher primary turnout, the power of special interests would be diluted significantly. And their ability to create regulatory capture and to screw over innovation would be significantly weakened. So that's number one.
But then number two, and look, this is why my fund exists, is, you know, you can win these fights, right, we win the vast majority of them, but you got to go into it ready for it, you know, you can't just–I think, where maybe I differ a little bit with sort of Bill Gurley, Marc Andreessen, or whatever it is, you know, they feel very strongly that the world should be libertarian, and we should be techno optimists. And there shouldn't be all this regulatory capture. And that's great. And I don't disagree. But just saying, “Here's how the world should be,” like, is useless, right? Either the reality is, you're in there changing it or you're not. And so on a day-to-day basis, that means when you build startups, building the regulatory and political framework to anticipate these fights, prevent them wherever you can take them on and win them. And then in the big picture, trying to change the underlying system itself, through things like mobile voting that can reduce and dilute the power of special interest to screw you over in the first place.
Michael Eisenberg
People underestimate, by the way, I think how much of this is a ground war. You know, it's not just kind of, you get some article in the Wall Street Journal, the New York Times, and you know, make some statements. There's a ground war to win all these regulatory battles. And, like on that front, I want to ask you one last question before I switch topics, which is, if you're going to start a company today, in a regulated industry, what would it be? And what would you target?
Bradley Tusk
Yeah, it's interesting. So you know, one thing I think that we're thinking about a little bit, and I'm gonna pull out a chart here is, you know, we've been thinking like every venture fund is sort of, how do we approach and think about AI. And to us, there are dozens of examples of AI companies that are going to end up being highly regulated. So I'll just read you from my list: healthcare, workflow, agents, drug discovery, diagnosis and imaging, mental health, personalized medicine, clinical trials, public health, FinTech, fraud detection, insurance, HFT, debt collection, management, personal finance, operations, technology, and then we've got multiple other categories, as well.
And so I think for us, it's really thinking about, okay, as things evolve, and as new technology evolves, we are going to run headlong into regulation. And where is it going to be that if startups are not properly prepared to deal with the regulatory implications of their work, they're not going to succeed? And for us, when we can find those companies at seed or Series A, and the founder sees the world the same way we do, and we can kind of get out ahead of this thing, that's when we can build multibillion dollar companies and deliver really good returns for our LPs.
Michael Eisenberg
And how do you think AI lands in the regular–you know, what does the regulation look like? How does this land?
Bradley Tusk
Yeah, I mean, look, so the EU did act on this a couple of weeks ago. And I think that the system they put together was not bad in the sense of, it's so early in AI, that you don't know how to regulate it from a specific like, this symptom, this problem standpoint, because we don't really even know what it is yet, right, other than, like chatGPT and some other tools. So what the EU did that I think makes sense is, they created risk categories. And they said look, for AI companies working in this space, where you can do cognitive behavioral manipulation, or surveillance, or whatever it is, they're gonna be subject to more scrutiny than a company that's doing, you know, menswear, or whatever it is, right. And so we figure out where the risk is. And that's where the regulatory scrutiny applies. And what they're doing is they're doing kind of foundational regulation, so they're really regulating the large language models, moreso than the specific companies that are using the application itself.
I think that's the right structure, at least at this point in the game. But you know, the EU and the US have been very different when it comes to tech regulation. And I think the US in many ways has been very deficient around it. We have yet to even really deal with the basic regulation of social media, right? So Section 230, which exempts all platforms from any liability, still is alive and well. There's no version of GDPR, or of data privacy protection for consumers, internet users in the US; our antitrust laws are still very weak. And so eventually, there will be AI regulation in the US, but we still haven't regulated internet 2.0 yet. And so while there's a lot of politicians talking about AI, because it gets them attention, I think actual regulation here is awhile away.
Michael Eisenberg
By the way, speaking of social media, what do you think should be done with TikTok?
Bradley Tusk
Ban it. I mean, not even a question. I was for banning TikTok long before October 7th. And there was a poll today in The New York Times that showed Trump beating Biden among young people, and I directly attribute that to TikTok. TikTok has been so blatantly pro-Hamas, pro-Palestinian, anti-semitic, anti-Israeli, that it has wildly changed perceptions in a completely misguided way among American youth, and that has changed the political dynamic here meaningfully. And you know, it's funny, a couple years ago when Trump started talking about it, and he was right at the time, but he never follows through on anything. It was, you know, there it was, why would we give the Chinese government the ability to manipulate our kids’ minds by something they all have in their pocket already? And that's exactly what's happening. And we did nothing about it. And we're doing nothing about it. And this again, gets back to sort of the mobile voting thing, which is, we're so polarized that we can't function any longer, right, you know, forget about appropriating more aid to Israel, which Washington's now having to do through executive powers because he can't get Congress to act in any way. Even stuff that's happening here domestically that's destroying our own kids’ minds. And whether that's the, how social media has driven teen suicide up by 200%, or the influence of TikTok right now–we can't do anything about it, because we're too divided. And I think that either one, we come back together. And that happens through technology. And through mobile voting, or to your point, I just think that it's much sooner than 2050 states start seceding, right. And there could be a world where you say, you know what, we can't get anything done in the US, the current system is completely broken. A national divorce makes sense. Let's have something more like the EU. That may be the way to go.
Michael Eisenberg
So since you mentioned, kind of, October 7–and you're a professor at Columbia, how do you kind of experience the current climate of antisemitism on the campus?
Bradley Tusk
Yeah, it's interesting. So I teach at the business school, in fact you've taught my class before. And we're actually on a different campus. So, I mean you're from the Upper West Side. So there's the–have you been to the new campus at Columbia?
Michael Eisenberg
I don't think I have, no.
Bradley Tusk
It's up by like 130th and the West Side Highway. So it's not on the main campus at 116.
It's life sciences. And it's business. So I think the underlying students and philosophy is a little different. So on my campus, I haven't seen anything at all, and keep in mind, business school students are generally going to be older, probably a little more mature, a little wiser, and a little less are taken in by TikTok, or whatever else it is. But look, overall, Columbia or Penn where I went, or Harvard, or MIT or all these schools, I think has handled this atrociously, right.
And let me make maybe a slightly different argument than what you've been hearing or making on this, which is, is there blatant antisemitism across the US across the world? Absolutely. Has war culture, especially on campus, gone amok? Absolutely. But I would argue, if you just take those three university presidents who embarrassed themselves in front of Congress, they're less the progenitors of the culture, and more the product of it.
Michael Eisenberg
100%.
Bradley Tusk
In that, I think that we have for so long now created this ivory tower. And this is true in academia. But it's also true like in certain professions that are totally kind of enclosed, like law firms, or whatever–I saw this when I was in law school, where there's just an absence of common sense, there's an absence of street smarts, like, we put so much emphasis on sort of academic pedigree and status around sort of test scores and things that ultimately don't really matter at all. And we fail to teach people the basic life skills you need on how to succeed. In fact, at Columbia, I'm trying to get them to let me teach a new class called How to Sell ideas. Because what I've noticed is, my students don't really know either how to sell or when to sell. And I think you would agree that the biggest determinant of nonlinear success in business is the ability to generate revenue. Like that's the number one thing by a lot, right, you know, more than anything else, by far. And so like, I think that our schools from K through 12, and then all the way up through universities have gotten so off track in terms of teaching kids what they need to learn, that these three presidents weren't even so much people who were like trying to sort of move everything to the far left. They didn't know the difference. They didn't know better, they'd have the basic common sense to say the word yes. Or at least emphatic in saying, is genocide okay? You know, or will you condemn that? And like so, I think that the atmosphere on campuses across the country has become a real problem. And yes, we should be doing a lot to crack down on antisemitism on campus and everywhere else. And that's actually, we should start with banning TikTok. But I think even more than that, the entire US educational system has gone so awry, that one, as a country, we’re falling further and further behind other countries, from an economic standpoint, and two, as a society, we have people that really just don't know the basics about how to live and how to be human beings.
Michael Eisenberg
Is it salvageable really? I mean, you've got, you know, the institutional rod is pretty deep. And there's this kind of giant anti-colonialist narrative–the New York Times signed up for it, the famous 1619 project. And, you know, the antisemitism I think, is almost a function of two things right. One is this anti-colonialism narrative which paints Israel in some colonialist way, but even separate to that, DEI, and kind of the institutional rot, has made being excellent and being able to sell yourself or be successful, a bad word and you know, favors the oppressed no matter what happened, or the downtrodden–is that solvable even?
Bradley Tusk
Yeah, I mean, I think so. But it's, it's a couple of things right? So the first thing is, ultimately, the reason why this narrative has succeeded so much is because it has political power, not just resonance within academia. And the reason it has political power, again, is because when the vast majority Democratic primary votes are only cast by people who self-identify as socialist or radical left-wingers, they're the ones who ultimately control the narrative policy, and everything else. And so when every Democratic politician is ready to, at the drop of the hat, to accuse anyone on any campus of racism or anything else, then that's what produces this entire sentiment. So that's number one. Number two–we can fix that, I think through mobile voting and technology. Number two, I think that AI is, potentially at least at the K through 12 level, a solution to a lot of this in that right now, you know, a teacher has to and this is true anywhere, you know, basically figure out of the 225 kids I'm teaching, what's the connectivity between them? And what's the lowest common denominator in which I can teach this subject, this concept? And the reality is, everyone learns differently, right? Some people are visual learners, some people are, learn through reading, some through writing, whatever it is. And I think the real potential that AI has in education is to figure out, Michael learns differently than Bradley learns, and develop tutorials and systems and everything that really works best for us individually. And then by doing that, you probably start to weaken the influence of teachers a little bit, and I'd say, at least here in New York City, that would be a good thing, because the radicalism of a lot of our teachers, both at public schools, and even sometimes the private schools that my kids go to, right, is really a problem.
And I think the other thing is, we really overrate at the sort of elite level of society here, the value of education. And yes, I understand that, like a true premise of Judaism and the Jewish culture and people for 5700 years has been education, but education in terms of understanding the world around you. And having a brain is different than whether you went to Yale or Princeton, or you got a 1580 on a test instead of a 1460, or whatever it is. And we so wildly overvalue this, in that we're hiring for the wrong reasons, and we're rewarding, incentivizing the wrong things. Like I have actually fired my last two HBS grads at the fund. They're very smart. But you know what, I'm not curing cancer. We're not doing quantum physics, like every extra IQ point in my fund doesn't really matter. You got to be smart enough. But there's all the other skills that come in, it's hustle, it's street smarts, its integrity, its work ethic, its communication skills, its character. And the truth is, what I found is oftentimes students from really elite schools are backwards on a lot of this, because they're so coddled, and they're told how special they are all the time, that a lot of the shit work that you have to do in any industry to be successful, they don't want to do. And the truth is like, yeah, maybe they're like a few IQ points ahead of someone else. But like, so what? I'm not using those extra IQ points anyway. And so I think we also need a reevaluation in society, the value of a pedigreed education. And I would argue that look, I've got a kid who's a senior in high school right now. So we are literally in the middle of the college process. But I really think whether she goes to a state school somewhere, or to a more prestigious liberal arts school, or wherever else, it really doesn't make a difference.
Michael Eisenberg
And so what are you doing differently though? Your father, your kids are in private schools in New York–what are you doing differently? When you look, kind of, look around and see all this?
Bradley Tusk
Yeah, I mean, a few things. One is my hiring. And this is true of my fund, but this is true with my consulting firm, bookstore, all the different businesses and entities that I run, we don't look at where you went to college.
Michael Eisenberg
Yeah but what are you doing about your kids?
Bradley Tusk
Oh, you know, I'm talking to them a lot. I have to say I was because they go to a you know, liberal, private school in Manhattan. That first conversation we had after they'd been back in school for a few days was sort of, I was terrified going into it, like, oh my God, what are they going to hear? What are they going to tell me? And they were actually great. Now look, my son was Bar Mitzvah only two years ago, my daughter four years ago, so they're not that far off of this yet, either. But I was really happy to see that they weren't just parroting the party line. My kids tell me they don't use TikTok–at the end of the day, you know, they're 17 and 14, I really can't control what they download or not on their phones, right? They can delete it, hand me the phone and then reload it again as soon as I hand it back. So, but it seems to be the case. But it's really being aware. One thing that I did with my son up until now–now he's in high school, and he gotta be too cool for this. But we read the New York Post together every day for five or six years. Every morning. The Post is, you know, the Post has its flaws, but lack of support for Israel is not one of them. And so I think he internalized a lot of that.
Michael Eisenberg
So that's, do you read it from the back to the front or the front to the back? As a kid, I always read it from the back to the front.
Bradley Tusk
Yeah. Well, it depends. If the Mets were–on the rare times where they were winning, we'd go back to front, but the teams that you were rooting for– you're a front runner, you just root for the winners, you know. I root for teams that require real character and sacrifice, like the Mets, and the Knicks–well, you’re a Knicks fan too. And so as a result, typically speaking, the teams that I root for are playing poorly. So yeah, if the Mets are playing well, we'll go back to front. But usually, otherwise, we'll go front to back.
But I think generally just trying to make sure that my kids are really aware of what's happening in the world. And by the way, they should hear different points of view, they don't only have to listen to the point of view that I agree with. I want them to be able to hear lots of different points of view and think through it intelligently, and reach conclusions that make sense to them as individuals, not what they think they're supposed to say to their friends or their school, or on social media or anything else. And so a lot of it is just talking to them about it and trying to expose them to the broader world. And also look, I mean, I spend the vast majority of my time and money–or vast amounts my money and some of my time, you know, investing in the things that I really care about, whether it's mobile voting, or, you know, school meals, or even things like running a super-money-losing bookstore on the Lower East Side, because I care about books.
Michael Eisenberg
Why are you running that bookstore?
Bradley Tusk
Purely because it's fun. It is a terrible business. But just for the listeners, I think your listeners will appreciate this. So it's called P&T Knitwear, where it is a bookstore, podcast, studio, event, space and cafe, on Orchard Street in Manhattan. So for those of you who can think of, like, Katz's Deli, we're right around the corner from that. And the reason it has this funny name is, when my family came here from DP camps in the early 1950s, the one job that an uneducated Jew could get was in the shmata business. And my grandfather and a guy that he knew from the refugee camps came over around the same time, and they opened up a 300 square foot sweater store on Holland Street called P&T Knitwear. And my dad told me, they had like, literally empty boxes on the shelf to look like they had inventory. And they did okay, you know, they didn't, it's not like all of a sudden they became, you know, barons of industry. But you know, they made it out and I was able to sort of, you know, grow up nicely and get a good education and everything else.
And when I signed the lease for this place, I texted my dad and said, “hey, where was that original store?” Because I knew it was around here somewhere, but I didn't know the exact address. He told me, and I was like, holy shit, that's the next block over, remind me of the name. And he wrote back “P&T Knitwear, but you can't name a bookstore, P&T Knitwear.” So the minute he told me I couldn't do it, that was absolutely happening. So. But what's cool about it is, we found a photo of the original P&T Knitwear from the early 1950s. And one of the interior walls of our store is the big blown up photo of the original. And so you know–
Michael Eisenberg
What are you trying to get from it?
Bradley Tusk
I turned 50 a couple months ago, and I wrote this essay about turning 50 that sort of caused me to do a lot of thinking, a lot of reflection. I've spent a lot of time the last few years really studying happiness science. And what I've learned is, happiness basically comes from two things: relationships, and fulfillment. If there are people in your life, who you care about, and they care about you, and you know they're going to be there for you, and you're there for them, and there are things that you do that bring you fulfillment, you are far more likely to be happy than if you're just checking boxes on buying stuff and achieving various status symbols. And look, you do the same things that I do. Like, I think neither–look, both of us live really well. But neither of us live nearly as lavishly as we could, because we take most of the money that we make, and we reinvest it into causes and issues that we care about.
But you know it’s, selfishly, it's not because we're better people. It's because we just get more out of it. Right? Like the reality is, okay, so let's say I didn't have this bookstore. So maybe I'd fly private instead of flying commercial, right? Okay, so how much satisfaction would I get out of that? Is going through TSA annoying? Yeah, a little bit. So I guess I would avoid the aggravation a little bit. But at the end of the day, you know, like, you get used to it pretty fast. And then that's it, right?
Whereas here, I got a dozen people who are making a living because of me, they get the same healthcare people in my fund get. I have a space for the publishing industry and for the community that we let them use all time for free. Our podcast studio is the only free podcast studio in New York anybody can just sign up and use. And so I feel really good about, you know, what we have here, and what we're giving the community in New York City, you know, honoring my family's legacy. And so I just think purely selfishly, I get more out of this than I would buying some extra thing. Right? And you know, it's purely, if you look at everything from an ROI standpoint, the ROI for me of a bookstore is a lot higher than the ROI of a private plane.
Michael Eisenberg
And so what does success look like for the bookstore?
Bradley Tusk
Oh, success would be to lose less money. So look, I think we've built a really good store. There's some–I hadn't heard of it. I'm sure you haven't–shopkeepers.com, which is apparently a prestigious website in that world that ranked us when we opened one of the top new top 10 store openings in the world.
We get great reviews, helped create something called the Gotham Book Prize, we run it out of here, and people really like that. So, you know, in terms of a place that people come to, and enjoy, and come to events almost every night and everything else, I think we've achieved that. I would like to lose a little less money, I knew I was going to lose money. So we're still working on that part. And we'll see if we ever get there. But, you know, I think success would be what we have now, combined with slightly less losses.
Michael Eisenberg
I want to ask you a question. You said that the primaries, you know, lead to this very polarizing effect. And so I want to ask you kind of a two part question on that, which is, is the primaries a good system? That's the first part of the question–it’s a terrible system. You want to go back to the cigar-chomping guys who put the list together?
Bradley Tusk
No, I would just go back to pure open election. So California does this now, where, it’s called top two, where everyone runs in one primary, and then the top two vote-getters–and that could be two Republicans, two Democrats, one of each, whatever it is–are then competing in the general election. It's a much better system, because it produces more moderation. And so I would do something like that.
There's a version called “Final Five” that Alaska is doing that has worked pretty well. Nevada is about to adopt it. So no, I mean, I would and again, you know, sort of the mobile voting is literally the opposite of the cigar-chomping guys from Tammany Hall in the back rooms, it's throwing us open to everyone and saying, “Look, you know, we've all got a phone in our pocket at this point, you know, adult smartphone penetration in the US is above 90%. Let's use it.” And I think that if you have that, by definition, the will of the majority wins out, because if the majority people are voting, then the politicians have to figure out what the majority of people want and what do most people want? They want to get shit done, right. They want schools that work. They want a healthcare system that makes sense. They want to have some protection against climate change. They want jobs, they want to be safe from crime. You know, the vast majority of people in this country want the same things.
So I take immigration as an example. 70%, this country would tell you, we should neither deport everyone here, who's here illegally, nor should we have open borders. The problem is that 70% doesn't vote in primaries. So the 15% of the left who want open borders all the time, they have a lot of influence. The 50% on the right, who say no immigrants ever, they have a lot of influence, even though 70% of the country actually agrees on the issue. Even abortion, two thirds of the country agrees on it.
So the problem isn't finding consensus among the voters. The problem is getting those voters to participate in the electoral process so that politicians actually care what they think.
Michael Eisenberg
So you just recently published a new book, a satiric novel called ‘Obvious in Hindsight.’ Tell us about it.
Bradley Tusk
Yeah. So the book is about a campaign to legalize flying cars in New York, LA and Austin. On one side is the flying car startup, and their vicious political consultants. And the other side is Uber, the Audubon Society, the socialists, the transit unions and the Russian mob. And it's satirical, and it's ridiculous. But I think, you know, now that you've been behind the scenes of enough of these sort of tech-regulatory fights, it's less ridiculous than you think. So what I'm trying to show in the book to the readers is, here's why people in politics in tech, in VC, in media make the decisions they make. Here's how they think about it, here's what matters to them. Because if you can understand that, then you could arguably do something about it. And so yeah, the book’s a little silly, although I will say the EV industry–I don't know if you guys have any investments in that space or not, but we don't either–but it has really made a lot of progress from when I started writing it, which was this fantastical notion of flying cars like the Jetsons or whatever to like, now like they're really you know, they're, it's moving forward. So it's actually pretty, pretty amazing. It's, it's a fun book, and it started off as a TV show. Do you know who Steven Soderbergh is? He’s a movie director?
Michael Eisenberg
Only because you told me who he was once.
Bradley Tusk
Right, Traffic, and Ocean's 11, and Erin Brockovich, and all that stuff. He had read ‘The Fixer,’ and said to me, “Let's make a scripted TV show based on this.” And that's what led to the whole story about the campaign to legalize flying cars. And then he and I worked on it. And our big pitch was to Apple TV and March 10th 2020. Obviously, COVID got in the way, that never happened. He moved on to other stuff. And I still really liked the characters that I created, and the concept. And so it turned into a novel, which came out in November. And the cool thing is now Steve, and I are back at it, and hopefully it’ll turn into a TV show.
Michael Eisenberg
Oh, that'd be fun.
Bradley Tusk
Yeah, I think the odds of a concept going all the way through to a show that we're watching on Netflix, it's about the same as a seed stage company pitching your fund and then actually IPOing. So pretty, pretty low. But you know, I've got one of the you know, best directors in the world, you know, involved in the project. So that may help a little bit.
Michael Eisenberg
So I want to go to a rapid-fire set of questions. And I want to start with what you said about TikTok before. and one of the questions I've been asking myself, and I'd like to ask you is, if there was a war that the United States was involved in today, and there were draft notices issued, like my great-grandfather, my grandfather, sorry, got in 1941. Do you think people would turn up?
Bradley Tusk
I think people would, but I think there will be a lot of pressure online to not do so. And there'd be a lot of resistance, and a lot of violence around it. And here's the thing, you know, a draft is neither inherently moral nor immoral, right? A draft for World War Two, like your grandfather was necessary to literally save the world, right? You know, the world would have been an exponentially worse place had the US not gotten involved in World War Two. Vietnam, you could argue, was a really stupid war, and therefore the draft was immoral. My fear would be that TikTok and social media would just sort of equate draft and war with bad, and the reality is like, no one wants to be at war. But if you're at the point where you're at war and World War Two, we were at war because we were attacked at Pearl Harbor, and we saw the way that Hitler was succeeding, and we had to get involved and Roosevelt knew that, then, you know, it's, it should be based on the the situation, the context that you're in, not the sort of naive, totally, you know, baseless narratives that you see online.
And so, look, one of the failures, we talked earlier, that the US has had in regulating social media is not just things like, you know, leading to huge instances of teenage depression and girls cutting themselves and eating disorders and things like that. But we've lost control of basic society, right. And when you allow the platforms to publish whatever they want, with no ramifications, when you allow TikTok to operate and have the Chinese government play the algorithms, and therefore the minds of our kids, this is exactly what happens. So you know, you're putting in a doomsday scenario, but it's not that crazy, to be honest. And given that we have failed so fundamentally to regulate social media, we have that risk.
Michael Eisenberg
When you see Gen Z protesters–which I started calling Gen H, Generation Hamas–protesters in New York, tearing down American flags and putting up other flags and defacing US historical monuments. What do you feel about that?
Bradley Tusk
It’ll be terrible. And I'll give you two close-to-home examples. One is, you know, there's posters all over New York City, about the people who are kidnapped in Israel, the hostages that Hamas are holding, and people tearing them down, right. And on my block in Soho, I came home on a Friday, and there's a bunch of posters, great. And then about 24 hours later, my son and I were walking down the street, and he had noticed them separately, and most of them were gone. And his reaction, which I thought wasn’t a terrible idea was like, they ought to put razor blades in those, in those posters so that people don't tear them down, which I was kind of proud of him for suggesting. Or my partner, Jordan, who we mentioned, Jordan lives on Astor Place, and he sent me a video that he took out his window of a pro-Palestinian rally. And here's the thing that blew my mind. I guess I was just being naive. But there were people flying around Iranian flags, right? So not even the Palestinian flag. But literally a country that oppresses everyone, you–the same people who are so woke, and so liberal, and so progressive; Iran doesn't allow people to be gay, they don't give women any rights. Like, other than the Mullahs, no one has any rights in Iran, you know, it’s a terrorist dictatorship that tortures people. And here they are flying their fucking flags, because they're so clueless and so manipulated. And so you know, it is hurtful to me, obviously. But to more, it just speaks of, we are facing this breakdown in society where if we can't get our ability to govern back together, this is what we get. And that's why eventually we're not going to be one country.
Michael Eisenberg
How do we restore patriotism, this era of social media? Because that ties the two questions together.
Bradley Tusk
Yeah. I mean, the first thing is, I think you have to significantly limit social media, right? And so right now, take where, you know, Trump, I would argue damaged the fabric of our democracy when he lost the election in 2020, and kept arguing that he won anyway. And one of the things that he and his minions said, was that Dominion, which is a voting machine company, fixed the elections in favor of Biden. And Fox News really peddled this argument. And because of basic rules that we have, Dominion successfully sued Fox and recovered $800 million. And as a result, you know, it's much less likely that any media outlet sort of makes baseless claims that that again. But Twitter and Instagram and Facebook and all these other platforms that repeated the same as that claims were, completely got away scot-free, because they are immune to any liability from any content posted by their users. And so the first thing you’ve got to do is revoke that liability. And say that hey, you know, Meta, if you are posting content, that is, you know, unquestionably untrue or defamatory, or is directed–
Michael Eisenberg
Or anti-American?
Bradley Tusk
You know, anti-Americans is sort of a debatable concept, right? But I think at least if it is, you know, AI-generated content that is clearly false, or, you know, terrorist propaganda, then yeah. I think that, you know, there was a family that sued, I think it was Google and Twitter, because their child did join ISIS based on being recruited online, and American. And they lost in the Supreme Court because of this law, Section 230, which the Court said protected the platforms. But even then it managed to get up to the Supreme Court. So clearly, in a case where you saw terrorist recruiting happening on social media, which happens all the time. If section 230 hadn't been in effect, that wouldn't have been allowed.
Michael Eisenberg
Tell me something, what makes you human?
Bradley Tusk
I am so exceptionally flawed in so many ways, man. You know, the older I get, the more I realize that, you know, being human is not about achieving as much as possible. It's not about having some image of perfection. It's not about checking boxes. It's about trying to find peace and contentment with who you are, right. And part of that means acknowledging and accepting that there are all kinds of things wrong with every single one of us, right? Human beings are incredibly complicated creatures that are still evolving, right, you know, we're still relatively early in the span of humanity compared to other species in lifespan on this planet, or even other planets. And so, you know, we're flawed in so many fundamental ways.
And I think for me, you know, a really radical moment that came–this is a couple of years ago– was sort of just accepting that, right? I made a list one day of all my good qualities, all my bad qualities. And the radical thing that it did for me was that I looked at the bad list, bad qualities list, and I said, “Okay, I'm not going to work out how to mitigate these, I'm not going to worry, I'm not going to hate myself for these things. You know what, they're all fine, because they're human. And none of these are hurting other people. And I'm hurting myself vastly more for hating myself for being insecure, needing affirmation, or validation or conflict or whatever it is, then the actual thing itself.” And so I think by acknowledging that, that frailty and all those flaws, has made me much better able to accept myself, and that has brought a lot more peace and contentment.
Michael Eisenberg
When they write your biography in 100 years, it won't be called ‘The Fixer,’ because that title is taken. What should it be called?
Bradley Tusk
I mean, right now, I kind of think that the work that I do is disrupting stuff, right. You know, whether it's my portfolio companies, disrupting entrenched interest, or I'm trying to disrupt democracy through, sort of, mobile voting, or you know, everything else that I do. And so, at the moment, I would say that if you took the majority of stuff, whether it's in politics, in tech and in venture, philanthropy, ideas, everything else, you know, the goal is to sort of question and disrupt the system and build a better one in its place. And so maybe ‘The Disrupter’ would be the title.
Michael Eisenberg
You know, that causes me to ask you one last question, which is, if you were to look at October 7th, question one would be–do you think it's actually a turning point in the Western world, generally or just for Israel? Or do you think nothing's going to change? And if you had to paint a different vision of the future based on what seems to be going on globally, right, you have the global radical Jihad rearing its ugly head; you have a rise of antisemitism going on globally; you have the college campus fiascos going on and the lack of leadership there; what would, what would be–if you think that there's a big difference, a disruption in the force, so to speak–what would be your vision for the next decade or a better future?
Bradley Tusk
So I'm gonna give you the opposite of the answer that you want I think, because my answer would be totally depressing, which is, yes, all that is true. And yes, this has existed for 5700 years in one form or another, I do believe that antisemitism lurks right below the surface, all the time, everywhere. In fact, when my family came to this country, I grew up, you know, with the view from my father and my grandfather that like, Jews have not been able to stay in anyone else's country safely, forever, right? It doesn't matter how good seen things seem, eventually it goes bad. And one of the reasons why Israel has always mattered to me so much, is it's not just a theory or a concept, like–I think that I or my kids or my grandkids will probably need to live there to be safe at some point. And therefore, like, it has to exist, it has to be sovereign, and it has to be safe in order for that to happen, right. And when you look at how easy it's been for antisemitism to bubble to the surface, both from the far left, far right and everywhere else, you know, it's a combination of people kind of doing things like manipulating TikTok algorithms, but I think also and I'm sure this is not gonna get me in trouble for saying this, but like, Jews have really succeeded throughout society and throughout history and in this country especially.
And I know that you know, there are people on the far left on the far right that have these conspiracies that Jews control the media, or Hollywood or Wall Street, or Washington or whatever it is. But I think fundamentally, what we know about human nature is that people really don't like feeling inadequate compared to others. And when they do, there's one of two options; you can either improve yourself and compete and win, or you can cast aspersions on the others and just blame it on unfairness and whatever else you want instead, and most people pick the lazy route, which is a latter route. And because Jews have disproportionately succeeded in this country and other, obviously, in Israel and other countries around the world, there's a tremendous amount of jealousy and resentment, and it bubbles to the surface, the minute the opportunity is there to do so.
Michael Eisenberg
Bradley, thank you for doing this. Thank you for your candor as always. Thank you for the hard work you're doing to disrupt democracy and make it less polarized. And you can learn more about Bradley Tusk on LinkedIn, @Bradley Tusk, BRADLEY TUSK. And his book, ‘Obvious in Hindsight,’ is available on Amazon, I highly recommend that you read it. And I also highly recommend that you read ‘The Fixer.’ It was an incredible read for me. And I even knew a fair amount about it beforehand. And I really enjoyed it.
Bradley Tusk
Yeah, you were involved in some of it.
Michael Eisenberg
So yeah, it was an incredible read. Bradley, thank you so much. And I have a suggestion for you–if you think about something for the kids for this year that's a little different, you want to give them a rough and tumble of life, and, you know, let them–send them to Israel for a gap year.
Bradley Tusk
Yeah, yeah, you're right. We’ve suggested to my daughter the gap year, and she has been pretty opposed so far, but we'll find–she finds out about one of her schools tonight. So I think we'll have a better sense of where things are going in about 12 hours.
Michael Eisenberg
Awesome. Good luck.
Bradley Tusk
Thank you. See you Michael.
Bradley Tusk
Michael if they gave out an award for podcast honesty, I think we’d win it on that one.
Michael Eisenberg
I am super excited to have my friend Bradley Tusk with us on the Invested podcast. Bradley and I have done a couple of podcasts together in the past. This is his first time on Invested. I hope you're gonna enjoy it. I promise you it will be an interesting conversation. But instead of me introducing you, Bradley, why don't you introduce yourself?
I’ll of course feel free to fill in.
Bradley Tusk
Yeah, sure. So I started my career in politics. I was Mike Bloomberg’s campaign manager when he ran for mayor of New York. I worked for him at City Hall, spent four years as the Deputy Governor of the State of Illinois, ran the state's budget operations, legislation, policy communications; a couple of years in the US Senate as the communications director to Chuck Schumer, who's now the Senate Majority Leader.
I started my first company in 2010, a political consulting firm that runs big campaigns. So imagine you're Walmart, and you're trying to open up stores in four major US cities, and you've got union issues and zoning issues and community issues. We figured all that stuff out, and pivoted to tech kind of by accident. I was sitting in a meeting in early 2011, and a friend of mine called and said, “Hey, there's a guy with a small transportation startup. He's having some regulatory problems. Would you mind talking to him?” I’d become Uber’s first political adviser that day. I get really lucky. And Travis calls back and says, “Listen, I can't afford your fee, would you take equity?” I had no idea what equity meant, but thank God, I said yes.
That was back during the series A–and then spent the better part of the next few years running campaigns all over the US to legalize ride sharing and Uber. That worked, repeated the process with CLEAR, took some equity to help get them into airports. That worked. And then my partner, Jordan Knopf, who you know, who was running Blackstone's internal venture fund at the time, and the question we started asking ourselves is, if you truly understand regulatory risk, and you can do something about it, how much of a better investor would that make you? And we didn't know the answer, but we believed it was material enough to try, and raised our first fund in 2016. Really small fund, 35 million, but put it to work right away. And some things had worked out. So our first investment ever was FanDuel. And we ran all the campaigns to legalize fantasy sports betting. Our second investment was Lemonade, which we did with you. And then we helped them get their insurance licenses all over the US, and so on.
We're now investing out of our third fund, raising our fourth, typically invest in seed and series A. Check size is typically one to 7 million. And then separate from all of that. I teach this stuff at Columbia Business School, I host a podcast called Firewall that you've been on a bunch of times about tackling politics; I stupidly own a bookstore and podcast studio on the Lower East Side of Manhattan. So it's a great way to lose a lot of money. Out of my foundation, we fund and run the campaign on mobile voting to make it possible to vote in elections on your phone, and another one on universal school meals to make sure that every kid in America gets breakfast and lunch at school every day. And I write books. So I wrote a memoir a couple years ago called ‘The Fixer’ and a novel that came out, as you know, a couple of weeks ago, called ‘Obvious in Hindsight,’ and then a third book coming out next year on mobile voting.
Michael Eisenberg
So I actually want to dig into how we met, which was on Lemonade, but not dig into Lemonade specifically. But it was, it was kind of the Bible of venture capital never to invest in regulated industries. It's why, for example, healthcare venture investing struggled for a long time. You never want to touch anything that had any regulation. Your strategy obviously is the opposite. And anyone who's read ‘The Fixer,\ which I have read and enjoyed, and even had my name mentioned in the back of it, would understand that you have a very different perspective on regulated industries. So if I'm making a venture investment, why should I venture into anything that is regulated? And has that changed, by the way, from 15 years ago to today?
Bradley Tusk
Yeah, I think, I think the norms have changed a little bit, partly because I think of all the tech fights. And importantly, now that we've been around for a while, there's at least one fund that does this kind of stuff. But the vast majority of–let's just use the US as an example here–the vast majority of companies are regulated either directly or indirectly. if you touch a consumer in any way, ultimately, you're going to face regulation in some form. And I think where a lot of startups get caught, unaware and get into trouble is, you can have great engineering and you can have great product, you can have great marketing, you can have great everything. But if the other side can use politics and government to put you out of business and restrict your market share and stop your activities and everything else, it doesn't matter that you went to Stanford or that you were at Y Combinator or that, you know, Benchmark or whoever invested in your Series A. Like you're still not going to survive. And you've got to be able to sort of deal with this. And then the other side would be all of these new industries, like whether it's crypto or AI or autonomous vehicles, where there may not be someone that you're disrupting, like we did with taxi for Uber, or insurance for Lemonade, or casinos for FanDuel. But there's no regulatory framework at all, which is actually a problem, right?
I know, everyone thinks that they would love to live in a totally, you know, utopian world of no regulation, or all libertarian. But the reality is for any industry to function, there have to be some set of rules that people comply with. Because otherwise, it's the complete Wild West all the time. And so I think the tech companies are starting to realize that, look, if we're not prepared for– if we’re disrupting someone, and we're not prepared to deal with it, we can face real problems. And if we're entering a white space, and we're not at the table to form regulations, they're still gonna get formed, we're just not gonna like them. And so the whole point of our fund is that, you know, we're effectively the political consultants that do that for you, whether it's, you know, fighting off the entrenched interests, if you're disrupting someone, or building in a new regulatory framework if you're in a new sector. And, you know, we're lucky, I guess, in a way that we're the only venture fund that I know that does this. And so we've got a monopoly in our little niche.
But I think that if, if nothing else, overall, I hear less founders telling me when they pitch me that, you know, some stupid regulators can do whatever they want, once they realize how brilliant that founder is. So the perceptions are changing a little.
Michael Eisenberg
Yeah but maybe it's like a stupid idea to begin with, to invest in or start a company in a regulated industry, like–
Bradley Tusk
Healthcare, energy, education, gaming, transportation, I mean, unless you're doing like, pure enterprise SAS products, it basically is going to be regulated one way or another. And there's just if you said, I'm going to avoid all regulated industries, you're basically limiting yourself to a tiny swath of the economy. You know, one reason why I think our funds has worked out pretty well is, there's tons of deal flow, because the vast majority of businesses one way or another get touched by regulation, get touched by politics, get touched by government. And so yeah, if you said, ‘I only want to limit my investment thesis to 10% of the economy and ignore the other 90%,’ there are people who do that, and there are some really successful pure enterprise software funds. But overall, both in terms of opportunity and also interest, right, because part of it we do to make money, but part of it also is to build companies that have, you know, succeed going forward to have an impact on the world, on society and consumers. You know, those are going to be in regulated industries. And so to me, you would be crazy to avoid it.
By the way, I'd frame your point a little differently, which is if we want to actually help out 90% of the population, we need innovation in regulated industries, and so you might unlock the ability to bring advanced technology and great user experiences to these industries that have been left behind in the Pony Express era. And so, I think it's super important. You know, Lemonade is a case in point.
Why–instead of me telling the story, why don’t you tell the story? I mean, no one had gotten an insurance license in New York for forever before Lemonade.
Bradley Tusk
Yeah, so it was–and this is how we met, obviously–so my partner Jordan met Daniel Schreiber. Daniel was, still is the founder and CEO of Lemonade. And Daniel has said to Jordan, like, “We've been trying to get our insurance license from the New York Department of Financial Services, and our law firm is having a lot of trouble.” And then Jordan came back to the office, and we talked about it. I said, “That's because they're going about this all wrong. This is a political process. And because they're lawyers, they're approaching it from a totally bureaucratic way, and they're missing the point.” And so my thesis was, DFS will grant the license if Andrew Cuomo, who at the time was the governor of New York, tells them to grant the license. And if he doesn't, they're not going to because your average mid-level regulator inside the agency didn't like Lemonade for two reasons. One, it's a whole new model they had to wrap their heads around, and that means a bit more work, more time or effort, and generally, they don't like that.
And the second thing is, you know, there's thing called ‘regulatory capture’ where it's like Stockholm Syndrome for regulated industries, where the regulators become friends with the people they’re regulating, and they start looking out for the interests of those that they're regulating ahead of the interest of the consumers and constituents of the jurisdiction that they work for. And so one, they were trying to protect the incumbents from new competition like Lemonade, and two, they didn't want to have to sort of deal with a whole new model. And eventually what ended up happening was, you know, us calling Governor Cuomo’s office and saying, “Listen, front page of the Wall Street Journal tomorrow is gonna have one of two stories, you know, ‘New, low-cost insurance startup launches in New York offers, you know, cheap insurance for New Yorkers,’ or ‘Because of Andrew Cuomo’s corruption and bureaucracy, hot insurance startup moves to London.’ You guys pick, we're okay with either one. And we had our license 24 hours later. And I will say, when I look back at my career, one of the things that to me is a shining moment was successfully bullying Andrew Cuomo.
Michael Eisenberg
By the way, Mark Suster told me to ask, you said you're invested, you did work together on Bird. It's like, what makes you unafraid, as a venture capitalist of, for lack of a better term, you know, that rough and tumble world of politics and all these regulated industries that you think most VCs shy away from?
Bradley Tusk
Yeah, I think two things. One is keep in mind, you know, we, just like every VC, we don't do 99% of the deals that we see, right. And most of the time, it's because just the company's not going to be successful. But there are times where we like the TAM and the founder and the thesis. And then me and my team will conclude on the platform side, like, you know what, this just isn't gonna work politically. And we're not going to put our money or reputation behind something if we don't think we can get it done.
But overall, I think the difference is, you know, I grew up, like I said, in politics, that was the first half of my career, you know, in campaigns. Like when I was Deputy Governor of Illinois, that’s Chicago politics, like, there's nothing rougher than that, right. I got death threats, I used to have to have my apartment swept by State Police for bugs, you know, I testified in multiple corruption trials.
So once you do–
Michael Eisenberg
Let's just be clear for everyone, not your own corruption charges.
Bradley Tusk
I was a witness thank God, but nonetheless. So I think you just sort of get used to it. And one reason why I think we have this monopoly in our space is, you know, in theory, any venture fund could say, “Okay, I'm gonna hire five people like Bradley and build my own, you know, platform on dealing with regulation.” The problem is this. And Andreessen tried this, and they had really talented people working on it. But ultimately, the person making the investment has to truly understand the regulatory situation and be comfortable taking the risk and taking on the fight. If it's just another data point from some other outside person that they're telling you that it's just like I have people giving me data points, like, yes, I factor them in, I take them into account, sometimes I might take them very seriously. But that's not the DNA of how you're investing. For me the DNA of how I’m investing in every single situation is, you know, can we change the regulatory structure here to allow this company to succeed? And so I think to do what I do well, you probably have to come out of politics, and then pivot into venture to do it. And look, I just got very lucky that because of Uber, I both had, sort of, the credential and just the financial freedom to go ahead and start this thing.
Michael Eisenberg
You know, when you read ‘The Fixer,’ you come away with the feeling that every one of these fights is like a bloody battle with incredibly entrenched interests. And where the campaign and the strategy is is not obvious. It's certainly not cookie cutter to say the least.
Bradley Tusk
Right.
Michael Eisenberg
So how do you decide which of these work for you or you think are going to work versus the one that…?
Bradley Tusk
Yeah. I mean, politics is very much an art, not a science. But like, I think the Uber New York City fight is a good example. That's where Bill DeBlasio, at the time Mayor de Blasio, was super left wing, fancied himself a socialist, hated business, hated tech, refused to do like, go on the High Line, or anything that he thought in any way was sort of, you know, capitalistic, and want to–he was very corrupt too–and one of his biggest donors was a taxi industry. And they wanted to stop competition from Uber. And so he proposed a ban on any new Uber licenses at all, which meant that the company would eventually sort of stagnate and go away in the New York market. And I remember, I was sitting in the, in the Dallas airport coming back from some meeting. And Travis calls me and says, “Did you see what happened?” And I had not. And I took a look at it and called him back. And he said, “What do we do?” And I said, “You know, the problem is, you got the Mayor and the City Council Speaker both on the same side of this thing. That's the whole system. It's really tough to stop that once both of them want to achieve the same thing.” And he's like, “Well, you got to figure it out.” And then I'm on the plane coming back from Dallas, and finally hits me somewhere like over the Ozarks, or whatever that like, you know what, the trick isn't the normal campaign about how like, de Blasio is going to kill jobs and innovation and all the shit that people tech like to say, is to come out and from the left. You, de Blasio, by stopping Uber, are racist, because black people in the city have a long history of having their hand up when the cab goes by, and it just passes them right away. Or our drivers are immigrants from all over the world, who you purport to care about and support. But yet, this is how they're feeding their families and you're trying to take it away from them. And we came at him completely from the left. And that just, they totally didn't know what to do, because it was so outside of the normal playbook. And we did that to the entire city government and put so much pressure on politicians. And one of the things that we did, which then led to the mobile voting work that I do now, that you know about, is, we mobilize our customers politically through the app. So we did this all throughout Ubers’ history. But specifically in this case, we created “Modes” by Uber X Uber Black, de Blasio, and if you clicked on de Blasio, 25 minute wait time, you know, click here to tell your city council member to stop this bill. And like 100,000 people did it in the span of like a week or two. And that was so overwhelming to the politicians who normally just don't ever hear from constituents about much, that the political math went from like, “oh yeah, I'll do it, the taxi guys want it, because they give me a campaign contribution every year,” to like “Shit. I'm not pissing off like 6,000 of my constituents.” And so as a result, you know, they told the speaker, “We're not going to, we don't want this bill,” and they ended up pulling the bill and we won. And that's actually what led to the mobile voting project.
So let me digress for a second here. But in US politics and people assuming Israel sort of, if you wonder, why is it so fucked up in the US this is why. Which is that the only election that typically matters here is the primary, because we have this thing called gerrymandering, which every district is drawn to benefit one party or the other. So typically, the general election is already a fait accompli, whoever won whether they’re Republican, primarily a red state, or the Democratic primary blue state, they're going to win the general election. And so therefore, the whole contest is in the primary. Primary turnout in the US is typically 10 to 15%. Who are they? They're typically the furthest left wing voters or the furthest right wing voters. And so what they're effectively saying to the politicians is, these are people who want moral purity, right? They think that the other party is the devil, they don't want to compromise. They don't want to get things done. They just want to feel righteous about themselves at all times. And so the incentive to politicians is, don't do anything to piss off the base. Because if you do, you'll lose your next election. Like so, for example, there was a Congressman from upstate New York, Republican named Chris Jacobs. Real Trumper, no one's definition of a liberal. But there was a mass shooting at a supermarket in Buffalo, which was right next to his district. 10 people died. And he was very emotional at a press conference, and said, “You know, we ought to think about maybe changing some of the laws to make it harder for people to get assault weapons.” His career ended that day, they literally stripped–this was September, the next election was November– they stripped the line from him, he couldn't even run for reelection, because he dared to say something that challenged the party orthodoxy.
But imagine that if instead of Jacob's primary being 12%, turnout was just 36%, still barely better than a third–if you just look at the polling among Republicans on assault weapons, he would have to be for some sort of assault weapon ban or regulation, because that's where the voters are. So the good news about politicians, at least in the US believing in nothing, is they'll adapt to whatever they need to adapt to, but they're only going to adapt to whatever helps them win the next election. And to be clear, both parties are equally bad. I'm an independent at this point. I hate them both.
But I think the only way you're going to change this constant climate of dysfunction and polarization in US politics, is to radically increase primary turnout. And it doesn't matter, sort of, what the right thing is, most people are not going to not take their kids to school on a Tuesday so they could vote in the State Senate primary. But if they could vote on their phone, all of them wouldn't do it, but more would, and how do I know this, because that's what we did with Uber and with Bird, as you mentioned, and with Eats and with FanDuel, and all these other portfolio companies that we've invested in. And if you change underlying inputs, you'll change the underlying outputs. So we created the mobile voting project in 2017 out of my foundation, thanks to Uber, I've got a foundation–and we funded elections in seven states, 21 jurisdictions, where people either deployed military or people with disabilities, voted in real elections on their phones. It worked, still got a lot of shit from the cybersecurity community. So I decided, you know what, I'm gonna build my own mobile voting technology. So here we are, $10,000,000 and 3 years later, we're going to release it publicly in Q1 of next year. It will be free and open-source, it's owned by my foundation. So it's not a for-profit business in any way.
And I just want to make it possible for more people to vote, because that's the only way that you fix the underlying problems. And by the way, I think absent doing that, I don’t think the US is one country in 25 years.
Michael Eisenberg
Yeah, by the way, I'm on record with a prediction that by 2050, some state will try to secede from the Union. I don't know what you think about that.
Bradley Tusk
I think that's, I think you're being too generous. I think it’ll come much sooner than that.
Michael Eisenberg
Interesting. So, you know, you probably saw Bill Girly’s speech on regulatory capture, and how that was innovation and creates worse outcomes for health. And another thing, you know, Jordan Knopf, your partner, said I should ask you whether or not there's any way actually to minimize or eliminate regulatory capture altogether? Or is it just like a cost of doing business at this point? You got to fight it?
Bradley Tusk
No, I mean, the first thing is if we can change the underlying political structure a little bit–so you know, I mentioned sort of the far left and the far right having disproportionate power because we're the only ones who show up to vote in primaries, but the other group have special interests, right. And the special interests typically are not us. They're the taxi industry, the casino industry, the hotel industry, whatever industry you're trying to disrupt. They give out campaign contributions. They hire tons of lobbyists, and they are able to, especially in low turnout primaries, influence the election in ways that terrifies politicians. And as a result, politicians try to do what they're told to do by the special interests. So the first thing is if you had significantly higher primary turnout, the power of special interests would be diluted significantly. And their ability to create regulatory capture and to screw over innovation would be significantly weakened. So that's number one.
But then number two, and look, this is why my fund exists, is, you know, you can win these fights, right, we win the vast majority of them, but you got to go into it ready for it, you know, you can't just–I think, where maybe I differ a little bit with sort of Bill Gurley, Marc Andreessen, or whatever it is, you know, they feel very strongly that the world should be libertarian, and we should be techno optimists. And there shouldn't be all this regulatory capture. And that's great. And I don't disagree. But just saying, “Here's how the world should be,” like, is useless, right? Either the reality is, you're in there changing it or you're not. And so on a day-to-day basis, that means when you build startups, building the regulatory and political framework to anticipate these fights, prevent them wherever you can take them on and win them. And then in the big picture, trying to change the underlying system itself, through things like mobile voting that can reduce and dilute the power of special interest to screw you over in the first place.
Michael Eisenberg
People underestimate, by the way, I think how much of this is a ground war. You know, it's not just kind of, you get some article in the Wall Street Journal, the New York Times, and you know, make some statements. There's a ground war to win all these regulatory battles. And, like on that front, I want to ask you one last question before I switch topics, which is, if you're going to start a company today, in a regulated industry, what would it be? And what would you target?
Bradley Tusk
Yeah, it's interesting. So you know, one thing I think that we're thinking about a little bit, and I'm gonna pull out a chart here is, you know, we've been thinking like every venture fund is sort of, how do we approach and think about AI. And to us, there are dozens of examples of AI companies that are going to end up being highly regulated. So I'll just read you from my list: healthcare, workflow, agents, drug discovery, diagnosis and imaging, mental health, personalized medicine, clinical trials, public health, FinTech, fraud detection, insurance, HFT, debt collection, management, personal finance, operations, technology, and then we've got multiple other categories, as well.
And so I think for us, it's really thinking about, okay, as things evolve, and as new technology evolves, we are going to run headlong into regulation. And where is it going to be that if startups are not properly prepared to deal with the regulatory implications of their work, they're not going to succeed? And for us, when we can find those companies at seed or Series A, and the founder sees the world the same way we do, and we can kind of get out ahead of this thing, that's when we can build multibillion dollar companies and deliver really good returns for our LPs.
Michael Eisenberg
And how do you think AI lands in the regular–you know, what does the regulation look like? How does this land?
Bradley Tusk
Yeah, I mean, look, so the EU did act on this a couple of weeks ago. And I think that the system they put together was not bad in the sense of, it's so early in AI, that you don't know how to regulate it from a specific like, this symptom, this problem standpoint, because we don't really even know what it is yet, right, other than, like chatGPT and some other tools. So what the EU did that I think makes sense is, they created risk categories. And they said look, for AI companies working in this space, where you can do cognitive behavioral manipulation, or surveillance, or whatever it is, they're gonna be subject to more scrutiny than a company that's doing, you know, menswear, or whatever it is, right. And so we figure out where the risk is. And that's where the regulatory scrutiny applies. And what they're doing is they're doing kind of foundational regulation, so they're really regulating the large language models, moreso than the specific companies that are using the application itself.
I think that's the right structure, at least at this point in the game. But you know, the EU and the US have been very different when it comes to tech regulation. And I think the US in many ways has been very deficient around it. We have yet to even really deal with the basic regulation of social media, right? So Section 230, which exempts all platforms from any liability, still is alive and well. There's no version of GDPR, or of data privacy protection for consumers, internet users in the US; our antitrust laws are still very weak. And so eventually, there will be AI regulation in the US, but we still haven't regulated internet 2.0 yet. And so while there's a lot of politicians talking about AI, because it gets them attention, I think actual regulation here is awhile away.
Michael Eisenberg
By the way, speaking of social media, what do you think should be done with TikTok?
Bradley Tusk
Ban it. I mean, not even a question. I was for banning TikTok long before October 7th. And there was a poll today in The New York Times that showed Trump beating Biden among young people, and I directly attribute that to TikTok. TikTok has been so blatantly pro-Hamas, pro-Palestinian, anti-semitic, anti-Israeli, that it has wildly changed perceptions in a completely misguided way among American youth, and that has changed the political dynamic here meaningfully. And you know, it's funny, a couple years ago when Trump started talking about it, and he was right at the time, but he never follows through on anything. It was, you know, there it was, why would we give the Chinese government the ability to manipulate our kids’ minds by something they all have in their pocket already? And that's exactly what's happening. And we did nothing about it. And we're doing nothing about it. And this again, gets back to sort of the mobile voting thing, which is, we're so polarized that we can't function any longer, right, you know, forget about appropriating more aid to Israel, which Washington's now having to do through executive powers because he can't get Congress to act in any way. Even stuff that's happening here domestically that's destroying our own kids’ minds. And whether that's the, how social media has driven teen suicide up by 200%, or the influence of TikTok right now–we can't do anything about it, because we're too divided. And I think that either one, we come back together. And that happens through technology. And through mobile voting, or to your point, I just think that it's much sooner than 2050 states start seceding, right. And there could be a world where you say, you know what, we can't get anything done in the US, the current system is completely broken. A national divorce makes sense. Let's have something more like the EU. That may be the way to go.
Michael Eisenberg
So since you mentioned, kind of, October 7–and you're a professor at Columbia, how do you kind of experience the current climate of antisemitism on the campus?
Bradley Tusk
Yeah, it's interesting. So I teach at the business school, in fact you've taught my class before. And we're actually on a different campus. So, I mean you're from the Upper West Side. So there's the–have you been to the new campus at Columbia?
Michael Eisenberg
I don't think I have, no.
Bradley Tusk
It's up by like 130th and the West Side Highway. So it's not on the main campus at 116.
It's life sciences. And it's business. So I think the underlying students and philosophy is a little different. So on my campus, I haven't seen anything at all, and keep in mind, business school students are generally going to be older, probably a little more mature, a little wiser, and a little less are taken in by TikTok, or whatever else it is. But look, overall, Columbia or Penn where I went, or Harvard, or MIT or all these schools, I think has handled this atrociously, right.
And let me make maybe a slightly different argument than what you've been hearing or making on this, which is, is there blatant antisemitism across the US across the world? Absolutely. Has war culture, especially on campus, gone amok? Absolutely. But I would argue, if you just take those three university presidents who embarrassed themselves in front of Congress, they're less the progenitors of the culture, and more the product of it.
Michael Eisenberg
100%.
Bradley Tusk
In that, I think that we have for so long now created this ivory tower. And this is true in academia. But it's also true like in certain professions that are totally kind of enclosed, like law firms, or whatever–I saw this when I was in law school, where there's just an absence of common sense, there's an absence of street smarts, like, we put so much emphasis on sort of academic pedigree and status around sort of test scores and things that ultimately don't really matter at all. And we fail to teach people the basic life skills you need on how to succeed. In fact, at Columbia, I'm trying to get them to let me teach a new class called How to Sell ideas. Because what I've noticed is, my students don't really know either how to sell or when to sell. And I think you would agree that the biggest determinant of nonlinear success in business is the ability to generate revenue. Like that's the number one thing by a lot, right, you know, more than anything else, by far. And so like, I think that our schools from K through 12, and then all the way up through universities have gotten so off track in terms of teaching kids what they need to learn, that these three presidents weren't even so much people who were like trying to sort of move everything to the far left. They didn't know the difference. They didn't know better, they'd have the basic common sense to say the word yes. Or at least emphatic in saying, is genocide okay? You know, or will you condemn that? And like so, I think that the atmosphere on campuses across the country has become a real problem. And yes, we should be doing a lot to crack down on antisemitism on campus and everywhere else. And that's actually, we should start with banning TikTok. But I think even more than that, the entire US educational system has gone so awry, that one, as a country, we’re falling further and further behind other countries, from an economic standpoint, and two, as a society, we have people that really just don't know the basics about how to live and how to be human beings.
Michael Eisenberg
Is it salvageable really? I mean, you've got, you know, the institutional rod is pretty deep. And there's this kind of giant anti-colonialist narrative–the New York Times signed up for it, the famous 1619 project. And, you know, the antisemitism I think, is almost a function of two things right. One is this anti-colonialism narrative which paints Israel in some colonialist way, but even separate to that, DEI, and kind of the institutional rot, has made being excellent and being able to sell yourself or be successful, a bad word and you know, favors the oppressed no matter what happened, or the downtrodden–is that solvable even?
Bradley Tusk
Yeah, I mean, I think so. But it's, it's a couple of things right? So the first thing is, ultimately, the reason why this narrative has succeeded so much is because it has political power, not just resonance within academia. And the reason it has political power, again, is because when the vast majority Democratic primary votes are only cast by people who self-identify as socialist or radical left-wingers, they're the ones who ultimately control the narrative policy, and everything else. And so when every Democratic politician is ready to, at the drop of the hat, to accuse anyone on any campus of racism or anything else, then that's what produces this entire sentiment. So that's number one. Number two–we can fix that, I think through mobile voting and technology. Number two, I think that AI is, potentially at least at the K through 12 level, a solution to a lot of this in that right now, you know, a teacher has to and this is true anywhere, you know, basically figure out of the 225 kids I'm teaching, what's the connectivity between them? And what's the lowest common denominator in which I can teach this subject, this concept? And the reality is, everyone learns differently, right? Some people are visual learners, some people are, learn through reading, some through writing, whatever it is. And I think the real potential that AI has in education is to figure out, Michael learns differently than Bradley learns, and develop tutorials and systems and everything that really works best for us individually. And then by doing that, you probably start to weaken the influence of teachers a little bit, and I'd say, at least here in New York City, that would be a good thing, because the radicalism of a lot of our teachers, both at public schools, and even sometimes the private schools that my kids go to, right, is really a problem.
And I think the other thing is, we really overrate at the sort of elite level of society here, the value of education. And yes, I understand that, like a true premise of Judaism and the Jewish culture and people for 5700 years has been education, but education in terms of understanding the world around you. And having a brain is different than whether you went to Yale or Princeton, or you got a 1580 on a test instead of a 1460, or whatever it is. And we so wildly overvalue this, in that we're hiring for the wrong reasons, and we're rewarding, incentivizing the wrong things. Like I have actually fired my last two HBS grads at the fund. They're very smart. But you know what, I'm not curing cancer. We're not doing quantum physics, like every extra IQ point in my fund doesn't really matter. You got to be smart enough. But there's all the other skills that come in, it's hustle, it's street smarts, its integrity, its work ethic, its communication skills, its character. And the truth is, what I found is oftentimes students from really elite schools are backwards on a lot of this, because they're so coddled, and they're told how special they are all the time, that a lot of the shit work that you have to do in any industry to be successful, they don't want to do. And the truth is like, yeah, maybe they're like a few IQ points ahead of someone else. But like, so what? I'm not using those extra IQ points anyway. And so I think we also need a reevaluation in society, the value of a pedigreed education. And I would argue that look, I've got a kid who's a senior in high school right now. So we are literally in the middle of the college process. But I really think whether she goes to a state school somewhere, or to a more prestigious liberal arts school, or wherever else, it really doesn't make a difference.
Michael Eisenberg
And so what are you doing differently though? Your father, your kids are in private schools in New York–what are you doing differently? When you look, kind of, look around and see all this?
Bradley Tusk
Yeah, I mean, a few things. One is my hiring. And this is true of my fund, but this is true with my consulting firm, bookstore, all the different businesses and entities that I run, we don't look at where you went to college.
Michael Eisenberg
Yeah but what are you doing about your kids?
Bradley Tusk
Oh, you know, I'm talking to them a lot. I have to say I was because they go to a you know, liberal, private school in Manhattan. That first conversation we had after they'd been back in school for a few days was sort of, I was terrified going into it, like, oh my God, what are they going to hear? What are they going to tell me? And they were actually great. Now look, my son was Bar Mitzvah only two years ago, my daughter four years ago, so they're not that far off of this yet, either. But I was really happy to see that they weren't just parroting the party line. My kids tell me they don't use TikTok–at the end of the day, you know, they're 17 and 14, I really can't control what they download or not on their phones, right? They can delete it, hand me the phone and then reload it again as soon as I hand it back. So, but it seems to be the case. But it's really being aware. One thing that I did with my son up until now–now he's in high school, and he gotta be too cool for this. But we read the New York Post together every day for five or six years. Every morning. The Post is, you know, the Post has its flaws, but lack of support for Israel is not one of them. And so I think he internalized a lot of that.
Michael Eisenberg
So that's, do you read it from the back to the front or the front to the back? As a kid, I always read it from the back to the front.
Bradley Tusk
Yeah. Well, it depends. If the Mets were–on the rare times where they were winning, we'd go back to front, but the teams that you were rooting for– you're a front runner, you just root for the winners, you know. I root for teams that require real character and sacrifice, like the Mets, and the Knicks–well, you’re a Knicks fan too. And so as a result, typically speaking, the teams that I root for are playing poorly. So yeah, if the Mets are playing well, we'll go back to front. But usually, otherwise, we'll go front to back.
But I think generally just trying to make sure that my kids are really aware of what's happening in the world. And by the way, they should hear different points of view, they don't only have to listen to the point of view that I agree with. I want them to be able to hear lots of different points of view and think through it intelligently, and reach conclusions that make sense to them as individuals, not what they think they're supposed to say to their friends or their school, or on social media or anything else. And so a lot of it is just talking to them about it and trying to expose them to the broader world. And also look, I mean, I spend the vast majority of my time and money–or vast amounts my money and some of my time, you know, investing in the things that I really care about, whether it's mobile voting, or, you know, school meals, or even things like running a super-money-losing bookstore on the Lower East Side, because I care about books.
Michael Eisenberg
Why are you running that bookstore?
Bradley Tusk
Purely because it's fun. It is a terrible business. But just for the listeners, I think your listeners will appreciate this. So it's called P&T Knitwear, where it is a bookstore, podcast, studio, event, space and cafe, on Orchard Street in Manhattan. So for those of you who can think of, like, Katz's Deli, we're right around the corner from that. And the reason it has this funny name is, when my family came here from DP camps in the early 1950s, the one job that an uneducated Jew could get was in the shmata business. And my grandfather and a guy that he knew from the refugee camps came over around the same time, and they opened up a 300 square foot sweater store on Holland Street called P&T Knitwear. And my dad told me, they had like, literally empty boxes on the shelf to look like they had inventory. And they did okay, you know, they didn't, it's not like all of a sudden they became, you know, barons of industry. But you know, they made it out and I was able to sort of, you know, grow up nicely and get a good education and everything else.
And when I signed the lease for this place, I texted my dad and said, “hey, where was that original store?” Because I knew it was around here somewhere, but I didn't know the exact address. He told me, and I was like, holy shit, that's the next block over, remind me of the name. And he wrote back “P&T Knitwear, but you can't name a bookstore, P&T Knitwear.” So the minute he told me I couldn't do it, that was absolutely happening. So. But what's cool about it is, we found a photo of the original P&T Knitwear from the early 1950s. And one of the interior walls of our store is the big blown up photo of the original. And so you know–
Michael Eisenberg
What are you trying to get from it?
Bradley Tusk
I turned 50 a couple months ago, and I wrote this essay about turning 50 that sort of caused me to do a lot of thinking, a lot of reflection. I've spent a lot of time the last few years really studying happiness science. And what I've learned is, happiness basically comes from two things: relationships, and fulfillment. If there are people in your life, who you care about, and they care about you, and you know they're going to be there for you, and you're there for them, and there are things that you do that bring you fulfillment, you are far more likely to be happy than if you're just checking boxes on buying stuff and achieving various status symbols. And look, you do the same things that I do. Like, I think neither–look, both of us live really well. But neither of us live nearly as lavishly as we could, because we take most of the money that we make, and we reinvest it into causes and issues that we care about.
But you know it’s, selfishly, it's not because we're better people. It's because we just get more out of it. Right? Like the reality is, okay, so let's say I didn't have this bookstore. So maybe I'd fly private instead of flying commercial, right? Okay, so how much satisfaction would I get out of that? Is going through TSA annoying? Yeah, a little bit. So I guess I would avoid the aggravation a little bit. But at the end of the day, you know, like, you get used to it pretty fast. And then that's it, right?
Whereas here, I got a dozen people who are making a living because of me, they get the same healthcare people in my fund get. I have a space for the publishing industry and for the community that we let them use all time for free. Our podcast studio is the only free podcast studio in New York anybody can just sign up and use. And so I feel really good about, you know, what we have here, and what we're giving the community in New York City, you know, honoring my family's legacy. And so I just think purely selfishly, I get more out of this than I would buying some extra thing. Right? And you know, it's purely, if you look at everything from an ROI standpoint, the ROI for me of a bookstore is a lot higher than the ROI of a private plane.
Michael Eisenberg
And so what does success look like for the bookstore?
Bradley Tusk
Oh, success would be to lose less money. So look, I think we've built a really good store. There's some–I hadn't heard of it. I'm sure you haven't–shopkeepers.com, which is apparently a prestigious website in that world that ranked us when we opened one of the top new top 10 store openings in the world.
We get great reviews, helped create something called the Gotham Book Prize, we run it out of here, and people really like that. So, you know, in terms of a place that people come to, and enjoy, and come to events almost every night and everything else, I think we've achieved that. I would like to lose a little less money, I knew I was going to lose money. So we're still working on that part. And we'll see if we ever get there. But, you know, I think success would be what we have now, combined with slightly less losses.
Michael Eisenberg
I want to ask you a question. You said that the primaries, you know, lead to this very polarizing effect. And so I want to ask you kind of a two part question on that, which is, is the primaries a good system? That's the first part of the question–it’s a terrible system. You want to go back to the cigar-chomping guys who put the list together?
Bradley Tusk
No, I would just go back to pure open election. So California does this now, where, it’s called top two, where everyone runs in one primary, and then the top two vote-getters–and that could be two Republicans, two Democrats, one of each, whatever it is–are then competing in the general election. It's a much better system, because it produces more moderation. And so I would do something like that.
There's a version called “Final Five” that Alaska is doing that has worked pretty well. Nevada is about to adopt it. So no, I mean, I would and again, you know, sort of the mobile voting is literally the opposite of the cigar-chomping guys from Tammany Hall in the back rooms, it's throwing us open to everyone and saying, “Look, you know, we've all got a phone in our pocket at this point, you know, adult smartphone penetration in the US is above 90%. Let's use it.” And I think that if you have that, by definition, the will of the majority wins out, because if the majority people are voting, then the politicians have to figure out what the majority of people want and what do most people want? They want to get shit done, right. They want schools that work. They want a healthcare system that makes sense. They want to have some protection against climate change. They want jobs, they want to be safe from crime. You know, the vast majority of people in this country want the same things.
So I take immigration as an example. 70%, this country would tell you, we should neither deport everyone here, who's here illegally, nor should we have open borders. The problem is that 70% doesn't vote in primaries. So the 15% of the left who want open borders all the time, they have a lot of influence. The 50% on the right, who say no immigrants ever, they have a lot of influence, even though 70% of the country actually agrees on the issue. Even abortion, two thirds of the country agrees on it.
So the problem isn't finding consensus among the voters. The problem is getting those voters to participate in the electoral process so that politicians actually care what they think.
Michael Eisenberg
So you just recently published a new book, a satiric novel called ‘Obvious in Hindsight.’ Tell us about it.
Bradley Tusk
Yeah. So the book is about a campaign to legalize flying cars in New York, LA and Austin. On one side is the flying car startup, and their vicious political consultants. And the other side is Uber, the Audubon Society, the socialists, the transit unions and the Russian mob. And it's satirical, and it's ridiculous. But I think, you know, now that you've been behind the scenes of enough of these sort of tech-regulatory fights, it's less ridiculous than you think. So what I'm trying to show in the book to the readers is, here's why people in politics in tech, in VC, in media make the decisions they make. Here's how they think about it, here's what matters to them. Because if you can understand that, then you could arguably do something about it. And so yeah, the book’s a little silly, although I will say the EV industry–I don't know if you guys have any investments in that space or not, but we don't either–but it has really made a lot of progress from when I started writing it, which was this fantastical notion of flying cars like the Jetsons or whatever to like, now like they're really you know, they're, it's moving forward. So it's actually pretty, pretty amazing. It's, it's a fun book, and it started off as a TV show. Do you know who Steven Soderbergh is? He’s a movie director?
Michael Eisenberg
Only because you told me who he was once.
Bradley Tusk
Right, Traffic, and Ocean's 11, and Erin Brockovich, and all that stuff. He had read ‘The Fixer,’ and said to me, “Let's make a scripted TV show based on this.” And that's what led to the whole story about the campaign to legalize flying cars. And then he and I worked on it. And our big pitch was to Apple TV and March 10th 2020. Obviously, COVID got in the way, that never happened. He moved on to other stuff. And I still really liked the characters that I created, and the concept. And so it turned into a novel, which came out in November. And the cool thing is now Steve, and I are back at it, and hopefully it’ll turn into a TV show.
Michael Eisenberg
Oh, that'd be fun.
Bradley Tusk
Yeah, I think the odds of a concept going all the way through to a show that we're watching on Netflix, it's about the same as a seed stage company pitching your fund and then actually IPOing. So pretty, pretty low. But you know, I've got one of the you know, best directors in the world, you know, involved in the project. So that may help a little bit.
Michael Eisenberg
So I want to go to a rapid-fire set of questions. And I want to start with what you said about TikTok before. and one of the questions I've been asking myself, and I'd like to ask you is, if there was a war that the United States was involved in today, and there were draft notices issued, like my great-grandfather, my grandfather, sorry, got in 1941. Do you think people would turn up?
Bradley Tusk
I think people would, but I think there will be a lot of pressure online to not do so. And there'd be a lot of resistance, and a lot of violence around it. And here's the thing, you know, a draft is neither inherently moral nor immoral, right? A draft for World War Two, like your grandfather was necessary to literally save the world, right? You know, the world would have been an exponentially worse place had the US not gotten involved in World War Two. Vietnam, you could argue, was a really stupid war, and therefore the draft was immoral. My fear would be that TikTok and social media would just sort of equate draft and war with bad, and the reality is like, no one wants to be at war. But if you're at the point where you're at war and World War Two, we were at war because we were attacked at Pearl Harbor, and we saw the way that Hitler was succeeding, and we had to get involved and Roosevelt knew that, then, you know, it's, it should be based on the the situation, the context that you're in, not the sort of naive, totally, you know, baseless narratives that you see online.
And so, look, one of the failures, we talked earlier, that the US has had in regulating social media is not just things like, you know, leading to huge instances of teenage depression and girls cutting themselves and eating disorders and things like that. But we've lost control of basic society, right. And when you allow the platforms to publish whatever they want, with no ramifications, when you allow TikTok to operate and have the Chinese government play the algorithms, and therefore the minds of our kids, this is exactly what happens. So you know, you're putting in a doomsday scenario, but it's not that crazy, to be honest. And given that we have failed so fundamentally to regulate social media, we have that risk.
Michael Eisenberg
When you see Gen Z protesters–which I started calling Gen H, Generation Hamas–protesters in New York, tearing down American flags and putting up other flags and defacing US historical monuments. What do you feel about that?
Bradley Tusk
It’ll be terrible. And I'll give you two close-to-home examples. One is, you know, there's posters all over New York City, about the people who are kidnapped in Israel, the hostages that Hamas are holding, and people tearing them down, right. And on my block in Soho, I came home on a Friday, and there's a bunch of posters, great. And then about 24 hours later, my son and I were walking down the street, and he had noticed them separately, and most of them were gone. And his reaction, which I thought wasn’t a terrible idea was like, they ought to put razor blades in those, in those posters so that people don't tear them down, which I was kind of proud of him for suggesting. Or my partner, Jordan, who we mentioned, Jordan lives on Astor Place, and he sent me a video that he took out his window of a pro-Palestinian rally. And here's the thing that blew my mind. I guess I was just being naive. But there were people flying around Iranian flags, right? So not even the Palestinian flag. But literally a country that oppresses everyone, you–the same people who are so woke, and so liberal, and so progressive; Iran doesn't allow people to be gay, they don't give women any rights. Like, other than the Mullahs, no one has any rights in Iran, you know, it’s a terrorist dictatorship that tortures people. And here they are flying their fucking flags, because they're so clueless and so manipulated. And so you know, it is hurtful to me, obviously. But to more, it just speaks of, we are facing this breakdown in society where if we can't get our ability to govern back together, this is what we get. And that's why eventually we're not going to be one country.
Michael Eisenberg
How do we restore patriotism, this era of social media? Because that ties the two questions together.
Bradley Tusk
Yeah. I mean, the first thing is, I think you have to significantly limit social media, right? And so right now, take where, you know, Trump, I would argue damaged the fabric of our democracy when he lost the election in 2020, and kept arguing that he won anyway. And one of the things that he and his minions said, was that Dominion, which is a voting machine company, fixed the elections in favor of Biden. And Fox News really peddled this argument. And because of basic rules that we have, Dominion successfully sued Fox and recovered $800 million. And as a result, you know, it's much less likely that any media outlet sort of makes baseless claims that that again. But Twitter and Instagram and Facebook and all these other platforms that repeated the same as that claims were, completely got away scot-free, because they are immune to any liability from any content posted by their users. And so the first thing you’ve got to do is revoke that liability. And say that hey, you know, Meta, if you are posting content, that is, you know, unquestionably untrue or defamatory, or is directed–
Michael Eisenberg
Or anti-American?
Bradley Tusk
You know, anti-Americans is sort of a debatable concept, right? But I think at least if it is, you know, AI-generated content that is clearly false, or, you know, terrorist propaganda, then yeah. I think that, you know, there was a family that sued, I think it was Google and Twitter, because their child did join ISIS based on being recruited online, and American. And they lost in the Supreme Court because of this law, Section 230, which the Court said protected the platforms. But even then it managed to get up to the Supreme Court. So clearly, in a case where you saw terrorist recruiting happening on social media, which happens all the time. If section 230 hadn't been in effect, that wouldn't have been allowed.
Michael Eisenberg
Tell me something, what makes you human?
Bradley Tusk
I am so exceptionally flawed in so many ways, man. You know, the older I get, the more I realize that, you know, being human is not about achieving as much as possible. It's not about having some image of perfection. It's not about checking boxes. It's about trying to find peace and contentment with who you are, right. And part of that means acknowledging and accepting that there are all kinds of things wrong with every single one of us, right? Human beings are incredibly complicated creatures that are still evolving, right, you know, we're still relatively early in the span of humanity compared to other species in lifespan on this planet, or even other planets. And so, you know, we're flawed in so many fundamental ways.
And I think for me, you know, a really radical moment that came–this is a couple of years ago– was sort of just accepting that, right? I made a list one day of all my good qualities, all my bad qualities. And the radical thing that it did for me was that I looked at the bad list, bad qualities list, and I said, “Okay, I'm not going to work out how to mitigate these, I'm not going to worry, I'm not going to hate myself for these things. You know what, they're all fine, because they're human. And none of these are hurting other people. And I'm hurting myself vastly more for hating myself for being insecure, needing affirmation, or validation or conflict or whatever it is, then the actual thing itself.” And so I think by acknowledging that, that frailty and all those flaws, has made me much better able to accept myself, and that has brought a lot more peace and contentment.
Michael Eisenberg
When they write your biography in 100 years, it won't be called ‘The Fixer,’ because that title is taken. What should it be called?
Bradley Tusk
I mean, right now, I kind of think that the work that I do is disrupting stuff, right. You know, whether it's my portfolio companies, disrupting entrenched interest, or I'm trying to disrupt democracy through, sort of, mobile voting, or you know, everything else that I do. And so, at the moment, I would say that if you took the majority of stuff, whether it's in politics, in tech and in venture, philanthropy, ideas, everything else, you know, the goal is to sort of question and disrupt the system and build a better one in its place. And so maybe ‘The Disrupter’ would be the title.
Michael Eisenberg
You know, that causes me to ask you one last question, which is, if you were to look at October 7th, question one would be–do you think it's actually a turning point in the Western world, generally or just for Israel? Or do you think nothing's going to change? And if you had to paint a different vision of the future based on what seems to be going on globally, right, you have the global radical Jihad rearing its ugly head; you have a rise of antisemitism going on globally; you have the college campus fiascos going on and the lack of leadership there; what would, what would be–if you think that there's a big difference, a disruption in the force, so to speak–what would be your vision for the next decade or a better future?
Bradley Tusk
So I'm gonna give you the opposite of the answer that you want I think, because my answer would be totally depressing, which is, yes, all that is true. And yes, this has existed for 5700 years in one form or another, I do believe that antisemitism lurks right below the surface, all the time, everywhere. In fact, when my family came to this country, I grew up, you know, with the view from my father and my grandfather that like, Jews have not been able to stay in anyone else's country safely, forever, right? It doesn't matter how good seen things seem, eventually it goes bad. And one of the reasons why Israel has always mattered to me so much, is it's not just a theory or a concept, like–I think that I or my kids or my grandkids will probably need to live there to be safe at some point. And therefore, like, it has to exist, it has to be sovereign, and it has to be safe in order for that to happen, right. And when you look at how easy it's been for antisemitism to bubble to the surface, both from the far left, far right and everywhere else, you know, it's a combination of people kind of doing things like manipulating TikTok algorithms, but I think also and I'm sure this is not gonna get me in trouble for saying this, but like, Jews have really succeeded throughout society and throughout history and in this country especially.
And I know that you know, there are people on the far left on the far right that have these conspiracies that Jews control the media, or Hollywood or Wall Street, or Washington or whatever it is. But I think fundamentally, what we know about human nature is that people really don't like feeling inadequate compared to others. And when they do, there's one of two options; you can either improve yourself and compete and win, or you can cast aspersions on the others and just blame it on unfairness and whatever else you want instead, and most people pick the lazy route, which is a latter route. And because Jews have disproportionately succeeded in this country and other, obviously, in Israel and other countries around the world, there's a tremendous amount of jealousy and resentment, and it bubbles to the surface, the minute the opportunity is there to do so.
Michael Eisenberg
Bradley, thank you for doing this. Thank you for your candor as always. Thank you for the hard work you're doing to disrupt democracy and make it less polarized. And you can learn more about Bradley Tusk on LinkedIn, @Bradley Tusk, BRADLEY TUSK. And his book, ‘Obvious in Hindsight,’ is available on Amazon, I highly recommend that you read it. And I also highly recommend that you read ‘The Fixer.’ It was an incredible read for me. And I even knew a fair amount about it beforehand. And I really enjoyed it.
Bradley Tusk
Yeah, you were involved in some of it.
Michael Eisenberg
So yeah, it was an incredible read. Bradley, thank you so much. And I have a suggestion for you–if you think about something for the kids for this year that's a little different, you want to give them a rough and tumble of life, and, you know, let them–send them to Israel for a gap year.
Bradley Tusk
Yeah, yeah, you're right. We’ve suggested to my daughter the gap year, and she has been pretty opposed so far, but we'll find–she finds out about one of her schools tonight. So I think we'll have a better sense of where things are going in about 12 hours.
Michael Eisenberg
Awesome. Good luck.
Bradley Tusk
Thank you. See you Michael.
Michael Eisenberg:
Why should somebody come to Ben Lang for money today?
Ben Lang:
I think I’m a builder at heart. I have a lot of empathy for people starting companies, and I think a lot of the things that I’m working on on my own are things that could be pretty helpful, whether it’s finding co-founders, recruiting talent, getting early users, thinking about how to build your community - those are things I spend a lot of time on personally, and I just hope to be a good service provider on my end as an investor.
Michael Eisenberg:
Super excited to welcome to Invested my old friend, Ben Lang. It's hard to call him an old friend because Ben is still super young, but we know each other a long time, which we'll get into soon. Ben, why don't you tell everybody who you are?
Ben Lang:
Sure. I'm Ben. I'm living in Tel Aviv with my wife. I grew up in the US. in the Bay Area, and New York.
I went to Ramaz for high school. I moved here afterwards and was in the military. Been working in tech for a while now. And I’m a proud Zionist, proud Jew.
Michael Eisenberg:
How'd you get yourself into tech?
Ben Lang:
I started when I was in high school selling stuff on eBay. I think my grandfather gave me some of his camera equipment to sell, and I got really into it. I started putting ads on Craigslist and flyers like on the street saying, “Hey, I'll sell your stuff for you.” This was when selling stuff was really difficult still. It wasn't so simple like to, you didn't, you couldn't just put something on Facebook Marketplace.
So I started just helping people with that, and taking a cut, and trying to scale that.
Michael Eisenberg:
And did you do the box shipping too? Did you box it up and take it to the post office?
Ben Lang:
Yeah, oh yeah, for sure. I was doing that in my bedroom. I was selling collectibles and electronics, and taking care of all the shipping.
So I was doing this after school every day in my little bedroom.
Michael Eisenberg:
And did you make money at it?
Ben Lang:
Yeah, it was like, it's probably better than what I could have been, the alternative of–
Michael Eisenberg:
Mowing lawns.
Ben Lang:
Yeah, exactly. Yeah, I did dog walking before that at a certain point. I think this was, like, a little more profitable. It was also more interesting because I, I had to learn how to market myself and get customers.
Michael Eisenberg:
From dog walker to eBay seller. It's quite the career path. All right, but bring everybody up to date on what you're doing now.
Ben Lang:
Yeah, sure. So I spent the past five years working at Notion. Notion is a productivity tool. Companies and individuals use it for project management, notes, tasks.
I joined when it was about 15 people. Pretty small company in the Bay Area. I was working remote most of the time from New York, and then Israel as well. And I had a really incredible time there working on community, marketing.
Michael Eisenberg:
What was your role? I mean, be specific. We'll talk more about that. Just what your role is.
Ben Lang:
We called it Head of Community, but I think it meant a lot of things, because I got to work on all kinds of things over the years. But really a lot of what we, what I thought about in the team that I built there was how we could support our user base to help expand and grow Notion, help people teach Notion, and just help us grow faster.
Michael Eisenberg:
And why'd you leave?
Ben Lang:
Why'd I leave? Mostly because I wanted to spend more time in Israel and it didn't–you know, as the company grew, it was about 600 people, and we didn't really have a presence in Israel and it just made it more and more challenging to manage a team. I had to make a decision at a certain point to prioritize living here.
Michael Eisenberg:
And what are you doing now?
Ben Lang:
Now I’m mostly doing angel investing. I've been doing that for a few years now. I started off helping out a founder with his angel investing. An incredible guy I think we both know named Clark. And I did that for a few years. And then I started investing a bit on my own.
I did that for a few years, and I raised a little micro fund about a year ago. So now I'm mostly investing out of that.
Michael Eisenberg:
Good. Now that we've gotten almost all of your biography, almost–can we tell everyone how we met?
Ben Lang:
Yeah, definitely.
Michael Eisenberg:
So how did we meet, Ben?
Ben Lang:
I think we met–I'm trying to remember what the sequence of events with this Facebook post was.
I think you had posted a challenge about creating a map of Israeli startups. And then I saw that. I think I built it. I think I was in the army at that point. And I thought it was a great idea.
Michael Eisenberg:
I think you were before the army still. Is that possible?
Ben Lang:
Oh, maybe. I don't remember exactly.
Michael Eisenberg:
Yeah.
Ben Lang:
And yeah, I published it, and I think it got some good traction, and then we met up, and I remember you gave me a case of wine.
Michael Eisenberg:
Right, and I remember you were underaged, right? The prize I offered for whoever could build the map, this visual map of Israeli startups, was a case of wine. And I brought the winemaker, the vintner to come, and give it–Yoram Cohen from Tanya Winery.
And he came, and made this presentation. And without being too cheesy, I'm not sure you were shaving yet.
Ben Lang:
It's very possible. I think my dad appreciated the wine more than me. He's French and he knows good wine. I probably had not had a cup of wine in my life at that point.
Michael Eisenberg:
Yeah, but I think that's how we met. It was like one of these random things. And then I discovered at the time that it wasn't just this mapping project–you had some project around hummus.
Ben Lang:
Yeah.
Michael Eisenberg:
So why don't you tell everyone about hummus?
Ben Lang:
Yeah I think at that point I was really into building side projects. That was kind of my hobby.
I, at a certain point I was in the army, which was obviously most of my time. I was in intelligence, but I think like, when I had time off, I was just hacking away at these different side projects. And so I organized a Hackathon. I think it was, I think it was the first one in Israel actually. We called it Innovation Israel.
And the idea was for people to work on projects that could show Israel in a different light. This is really when hackathons were like just getting started. I think it was like 2011. There had not been a lot of hackathons at that point. And so I, a bunch of people worked on incredible projects, and I wanted to work on my own personal project.
So I had just recently come across this thing called Nutella Day, this holiday, and I thought ‘Oh, this is so cool. We should have our own version of this.’ So obviously, hummus is the equivalent of that, so I bought hummusday.com and built a little, simple website. I made up a day, May 13th, and then it just, a month later, it just went viral, like on its own.
I didn't, I honestly just forgot about it, but it just went viral.
Michael Eisenberg:
What do you mean it went viral? Like, how does that happen?
Ben Lang:
It, someone in, I think–someone sent it out in like a vegan newsletter, and then from there it just started to go viral on Twitter, and these different celebrities started sharing it, and then every year since it's just become this real thing. If you search Hummus Day on Google, it looks like a real thing, but it's just a totally arbitrary day with no, nothing behind it.
Michael Eisenberg:
Was there any significance to May 13th?
Ben Lang:
No, nothing.
Michael Eisenberg:
And what is the ritual practice on Hummus Day?
Ben Lang:
People–on the website it says “eat hummus for breakfast, or lunch, or dinner,” or I think all of the above, and share photos, and lots of people do.
The cool thing, I think, over the years has been seeing, like, all these different hummus events happening–festivals–I think multiple years now in Dubai, there's been these massive, like, hummus festivals in Dubai.
Michael Eisenberg:
On May 13th?
Ben Lang:
On May 13th, yeah. And there's all these articles like in GQ and Cosmopolitan on like, how to eat hummus.
And even I think a year or two ago, there was like a tour of the best hummus places in Gaza. And just so much, like it has so much reach now, which is, which has been really cool to see.
Michael Eisenberg:
Was there any significance to May 13th? Is it your birthday?
Ben Lang:
No.
Michael Eisenberg:
Okay. So what's the significance to May 13th?
Ben Lang:
It was just, I think, a month after the Hackathon that I'd organized. I just looked for a random day in my calendar.
Michael Eisenberg:
Is there a Hallmark card?
Ben Lang:
I don't think so.
Michael Eisenberg:
Hummus Day?
Ben Lang:
No, but it's on all those websites National Day, National Calendar Day. There's a ton of these websites that keep track of every single possible holiday. It's on all of them.
Michael Eisenberg:
And, like, when you think back about, okay, this was like a Hackathon project. Kind of a joke. And now it's everywhere. How do you think about that? Do you say, what a weird world we're living in? Do you say, “Wow, I made a dent in the world of hummus.” Do you say, “Wow this is incredible.”
What do you tell yourself? Do you say, “Mom, I'm in GQ?” What do you say?
Ben Lang:
No I honestly, I just, for me, it's just a good reminder, like, that you can make an impact, like, pretty easily. I think it's not, I think a lot of people think it's a lot harder to make an impact and requires years and years of effort, and this was like a two hour project, right?
And I think it, for me, it's just always a good reminder. That's why I always tell people–you, if you do something creative, come up with your own niche, whatever it might be, like you can really, you can really do something impactful.
Michael Eisenberg:
Did you trademark Hummus Day?
Ben Lang:
No, I didn't, but I had a really interesting story with that. I actually got into a pretty big fight with Sabra over it, because they sponsored it for a few years.
Michael Eisenberg:
What do you mean, they sponsored it?
Ben Lang:
They would sponsor it to like, to be like the official sponsor of Hummus Day.
Michael Eisenberg:
On the website.
Ben Lang:
On the website. And they would do these events and in Union Square, all these like crazy hummus festival, like, crazy hummus events.
And after a few years, they asked me if they could buy it. And I kind of felt like they lowballed me. So I said no. And then the year after they came out with National Hummus Day, on the same day. And I had called it International Hummus Day. So then they started releasing all these PR releases saying like, it's National Hummus Day now.
And I'd been calling it International Hummus Day. So we got into a little spat over that. And I think they stopped doing it recently, but it was not, it wasn't a great feeling of them trying to like hijack hummus day from me.
Michael Eisenberg:
And they backed down?
Ben Lang:
Yeah. They backed down recently.
Michael Eisenberg:
Yeah. And what happens when you, like, violate the trademark of Hummus Day? People like, throw tomatoes at you or hummus at you?
Ben Lang:
There isn't quite a trademark. I don't think I can really trademark a food holiday. I also have never really spent enough time looking into it, so if you have any suggestions….
Michael Eisenberg:
And what's next for Hummus Day, International Hummus Day, is it like, what is it..?
Ben Lang:
I spend maybe two hours a year on it, so there's not like too much going into it.
Michael Eisenberg:
It feels like there's an opportunity here though, like you'd imagine the International Hummus Festival on the boardwalk in Tel Aviv or….
Ben Lang:
Yeah, there's, I mean–
Michael Eisenberg:
Or the shuk in Jerusalem?
Ben Lang:
Usually most restaurants like, they'll host events and they'll like, they'll give out promo codes, which is cool. I think it would be really–something I always thought about that would be really cool is like, bringing people together from different backgrounds to eat hummus on Hummus Day and kind of create dialogue for people who you know, who normally probably wouldn't be talking.
Michael Eisenberg:
I think–it's two months from today? I think there's an opportunity here, at this time in the Middle East, and you can get a lot of people together to, you know, what they call ‘wipe hummus’ together, you know with the pita or something like that, or the onion slice.
Ben Lang:
Yeah.
Michael Eisenberg:
If Nathan’s can do the hot dog eating contest, you can do the hummus eating contest. You can just imagine what that looks like.
Ben Lang:
I think it's doable.
Michael Eisenberg:
So you're on it. If you got it in a month in a hackathon, two months from now there should be something else.
Ben Lang:
Yeah, you're right
Michael Eisenberg:
This is the year–this is the year for the big hummus eat off.
Ben Lang:
Yeah.
Michael Eisenberg:
Dubai, Abu Dhabi, Lebanese–from Gaza–we can bring everyone in.
Ben Lang:
I mean, I would love that. I would love that.
Michael Eisenberg:
So what are you doing about it?
Ben Lang:
Okay. Okay. Yeah, you're right. I'm inspired.
Michael Eisenberg:
All right. So from, you know, making like, a hard turn from hummus to Notion–what I really want to dig into, I guess–hummus is one way to build community. But I want you to tell me about the job of being Head of Community at Notion.
I think this is important for a couple reasons. One is buying traffic, or buying ads, or what they call demand generation marketing online, seems to be running its course for a variety of reasons on Google and Facebook. And it feels like there's a lot of interest in community building as a go-to-market strategy.
Take me from the beginning of your time at Notion, on being Head of Community.
Ben Lang:
Yeah, so I, I mean I think that one of the interesting parts of joining Notion was like, I actually joined Notion without really applying, or there being a job description. So I had actually come across Notion on Product Hunt pretty early on, and I tried it out a few times. I thought it was really cool. I think it took four, maybe, four or five times for it to click, and I Tweeted my Notion set up. And a lot of people thought it was pretty neat, and asked me if they could, if I could share more pages for my Notion and so, and people started sharing theirs as well.
Another one of these little side projects, I built a website where people could share how they were using Notion. And this was before Notion had, like, a template gallery for their templates. And I posted that. It was called notionpages.com on Product Hunt. It got a good amount of traction. It started to get 20, 30,000 visits a month.
And I was having so much fun, I started buying more Notion domains. I bought all things Notion.com, NotionForBusiness.com, I started a Facebook group for Notion users, I started helping people onboard to Notion. It was just something I became really passionate about, because I thought I could improve people's lives by helping them get onto Notion.
And that's actually how I met the team. I at some point emailed the founder. I was like, “Hey, what are your plans with the API?” And we just started chatting, and I told him I would–“Do you want to hang out? Like I'll be in San Francisco next week.” I wasn't going to actually be in San Francisco and they're like, “Sure, come by for tea.” And so I booked a trip. And I went there, and I met Camille Ricketts who had just left First Round. She had started First Round Review, their blog, and so I met her on her second day at work, and so we were, we were chatting and I think maybe the next day I started working with her on Notion's template gallery.
And that basically evolved into me joining the company. So there was no like, real interview process or job application process. It really just happened very organically, because I really loved Notion, and it seemed like there were great ways to work together. And so the first two things I worked on were, one, Notion's template gallery, where we started to crowdsource templates that people were building through Notion.
And the second thing was building out an ambassador program, because we–our hypothesis was if there were people like me out there who were crazy enough to spend this much time evangelizing Notion, there must be other people out there who wanted to do similar things. And so I found a few people, someone in Japan, someone in Korea, who were doing similar things, and we started to build out this program to enable and empower people to spread Notion.
Michael Eisenberg:
Give me some more details on the ambassador programs, I think it's super important. And it's just an incredible story, right? Which is, you were doing this and there's someone in Korea doing this, someone in Japan doing this, and you happen to find them. And now they turn into ambassadors. So really dig in on the ambassador program.
Ben Lang:
Yeah our, basically what we thought was, if we could find a few of these people and bring them together and have them inspire each other and also give them the full backing from Notion's team, that we could try to, we could probably make this something that we could keep replicating, and continue to bring on more people like this, and just empower more and more people to become evangelists for Notion.
So it started off with a few people, and I really just spent a lot of my early time at Notion just talking to these people, becoming friends with them, figuring out what could we do to support them.
Michael Eisenberg:
And what were you trying to get them to do?
Ben Lang:
So these people on their own were–some of them had been organizing Notion events, some of them had been writing books about Notion, some of them had started YouTube channels about Notion–a whole bunch of different things, anything basically to do with either talking about Notion, like spreading Notion, or teaching Notion. Those were like the two, kind of, themes that we saw.
And so as these people progressed, we started to see more and more people getting excited about Notion and wanting to do something similar, like in their own language, or in their own country. And so we actually like maybe a month into it, we just put out a form on Notion’s Twitter and asked people like, “Hey, would you want to be an ambassador for Notion?”
And at that point, Notion was starting to get pretty, pretty hot, and I think a couple hundred people applied. So I just went through this forum and just looked for people who seemed to be the most passionate about Notion, some of them from new regions, maybe, where we didn't have ambassadors yet, and we built a program to help enable them and empower them and help them feel special.
Michael Eisenberg:
What were some of the details of the program that made them feel special or empowered?
Ben Lang:
So no one really had access to, like, Notion's team at that point. It was, if you wanted, if you had to, if you wanted, if you had any questions, you would have to reach out through support and so people–so what we did was, we would do like AMAs with our team, with our, with the founders, for example, and people were really excited about that.
Michael Eisenberg:
Which I'm sure was great product feedback also for the founders.
Ben Lang:
Yeah totally. But this was totally new to Notion, like doing something like this.
We would give them early access to new features we were building. We would send them swag, which was something we had never done before. So we were making swag for the first time and people felt really excited to, to be a part of it.
So we were constantly just thinking about ways that we could–
Michael Eisenberg:
You didn't pay them though.
Ben Lang:
No, we never, we didn't pay anyone to do that. Yeah.
Michael Eisenberg:
Yeah, I think that's an important thing that people lose sight of is, that there's people really passionate about products, and everyone’s always like, “Oh, I got to pay them.” “All right. I got to find an influencer and pay them.”
But if you build a good enough product, and you can include people in the community such that they give you feedback, and they feel emboldened, empowered, and part of something that's bigger than the self–they'll actually do a lot of work just out of the passion.
Ben Lang:
Yeah, totally. I'm curious. Have you seen any companies do really well with this?
Michael Eisenberg:
I think RiseUp in our portfolio is doing a really good job of this. They have, I don't know how many ambassadors at this point. But just people who love the product, love being able to finish the month out on the plus side of their bank account rather the minus side of their bank account, and they've become passionate evangelists.
They do media for us. They reach out. I think there's, for some of them, some incentives. Just being a part of something, and being an ambassador for financial health and financial wellness has become a big one.
We have one at our company now, Sequence. It seems to be brewing. Also Wix had something similar with designers when I was on the board there, apropos templates and, and a few other things.
So yeah, I've seen it work before, but I think there's a small number of companies who do this extremely well. Notion obviously is one of them. And so, you created templates at Notion, and then you made it a template gallery as an employee of Notion. Why was that so important?
Ben Lang:
I think it was so important because Notion as a product, it was like a, it gave you a blank slate.
So people would arrive at Notion and ask themselves like, what do I do with this? Notion started providing templates early on, but at a certain point, we realized people using Notion could create an infinite amount of templates that we would never be able to create ourselves. So once we made that connection, we were able to essentially give people prospective Notion users an opportunity to try any type of use case that was interesting to them.
I mean now there's probably tens of thousands, maybe hundreds of thousands of templates out there. At this point also, because it's been a few years now, when you search for, for all kinds of use cases, you'll hit like a Notion template, which is pretty powerful for SEO.
Michael Eisenberg:
And do people get paid for the templates?
Ben Lang:
So early on, no. At a certain point, people actually started charging for templates themselves. And so they would put the template access on a Gumroad page, let's say, and people would have to pay 10 bucks to get access to that link. And then they'd be able to duplicate that.
That became actually, it's like entirely organically, it became a massive thing. There's people now earning hundreds of thousands of dollars a year. I actually just a few weeks ago, I met someone in Singapore who is 22. He started when he was 19, started with no audience, and he started just Tweeting about Notion early on when he was actually in the military in Singapore.
Now he has 300,000 followers on Twitter, 400,000 on TikTok, and 400,000 on Instagram, and he's making probably like $30,000, $40,000 a month just from selling Notion templates. He built an entire audience around it. So this whole ecosystem around it–
Michael Eisenberg:
On the Notion template website though?
Ben Lang:
No, from–
Michael Eisenberg:
Or on Gumroad or something?
Ben Lang:
He distributes it like through himself, like through his platform, through Notion's platform, all kinds of places. But he's built an entire, he's basically rode that wave to build like an incredible business. And he's 22 now.
Michael Eisenberg:
Amazing. Reminds you like of being an eBay seller?
Ben Lang:
Huh?
Michael Eisenberg:
Reminds you of being an eBay seller?
Ben Lang:
I wish I had been selling Notion templates.I think that's much more exciting.
Michael Eisenberg:
Higher margin business than selling collectibles.
Ben Lang:
Yeah.
Michael Eisenberg:
That's incredible. What do you think makes the community stick at Notion? Like, why are people so passionate? Why are they so part of this community? Because it's vibrant.
Ben Lang:
Yeah, I think at the end of the day, like the product is, what makes it possible.
I think part of it is that Notion, you can use Notion for anything. There's just an infinite amount of use cases. So there's always something to talk about. There's always different use cases to talk about, templates to talk about. It's also, it can be a challenging product to use. So people always have questions.
People always want to help other people. So it creates this opportunity to just have a lot of dialogue around Notion. I think for products that are just much more constrained and less use cases, there's just not–you don't really have an opportunity to do that.
So I think Notion was lucky in that the product really enabled that.
Michael Eisenberg:
That kind of flies in the face of, I think, typical product thinking, which makes it as easy to use as possible. Make it as this is–Notion is not easy to use. I'm not a good user of Notion, I'll speak for myself. It's too complicated for me.
Ben Lang:
Yeah.
Michael Eisenberg:
Yeah, and, but yet, because of that kind of blank canvas thing, people have turned up. But what also strikes me is that Excel doesn't have a template community for the most part. There are kind of, things out there, but there's no like business, or business community in the same kind of easy, mix and match way that there is for Notion.
Ben Lang:
Yeah, I think something we would always talk about is like the IKEA effect. You know, when you go to IKEA and you buy the pieces, you have to bring it home and build it yourself. So it's like–
Michael Eisenberg:
I'm not that competent at that either.
Ben Lang:
So some people don't like that. Some people like that. And I think people who do like that, like they actually probably, they like that product on the other hand much more than if they had just bought it pre-made. Because now they like, they actually invested time, they invested effort in learning how to build it. And, maybe Lego is another good example. Lego might be a little easier–
Michael Eisenberg:
For me thank you, yeah.
Ben Lang:
And taking the time to actually build something, it can be rewarding. So if you could like, I think Notion took that and brought that concept into software.
Michael Eisenberg:
And why is it different? Why are Notion and Excel so different in that way? There's no community around Excel really.
Ben Lang:
Yeah, there are like, Excel influencers. I've seen people on TikTok and other places making, who have pretty large audiences doing that. I think–
Michael Eisenberg:
We used to call those people like investment banker trainers.
Ben Lang:
Yeah. Yeah, I think Excel, I guess Excel just doesn't have, I don't know, it's, it also just doesn't have the, the brand, the story, the, it doesn't really have anything that like–right, like who is going to want to create that around like a Microsoft product?
I think it's just kind of missing the–
Michael Eisenberg:
So what's the story? What's the story? Why is Notion different than Microsoft, other than the fact that Microsoft's been around for 50 years? What makes Notion, what is, what's the story?
Ben Lang:
I think beyond the product–Notion's brand, like the playfulness, the aesthetics–I think all of those things come together to create something that people really, it just really resonates. Like when I meet people, either they, they don't get Notion, or they love Notion, right? There's no in between.
Michael Eisenberg:
It's good to have haters, too, because–
Ben Lang:
Yeah, it means you built something that people, people actually care about, or they don't.
I think the people have this emotional connection to Notion. That's what I felt when I started using it also early on. I just felt this emotional connection. I felt like I could visualize my brain. The aesthetics just really worked for me. And I think people are just–excited to like, spend, connect around that, whereas in Excel, you're just, you don't really feel that. It's just boring.
Michael Eisenberg:
What does it mean that you can visualize your brain?
Ben Lang:
So for me my use case in Notion early on was just kind of putting all my notes and thoughts into this Notion database. That's how I used it early on, so I felt like I was able to finally visualize my brain inside of Notion. So I think for–people use it for whatever they want.
It was just, that was the specific use case that got me really excited about it.
Michael Eisenberg:
What would you have used if you didn't have Notion?
Ben Lang:
I had been using Wunderlist before that. They were acquired by Microsoft and shut down. And I think I tried Evernote a few times and it never worked for me.
Michael Eisenberg:
Yeah, for me neither. I tried Evernote also, bought the subscription. Never worked for me.
Ben Lang:
Yeah, so Notion was like the first time, like, a productivity app really really worked well for me.
Michael Eisenberg:
I used Google Docs and Microsoft, and Mac Notes. That's it. That's my–
Ben Lang:
Simple.
Michael Eisenberg:
Yeah.
Ben Lang:
Yeah. I think it's whatever works for you. I know a lot of people that, that, that's what works for them.
Michael Eisenberg:
Should I try Notion again? Should I go back to that? My partner, everyone here uses it. Like, at Aleph, everyone uses it. I'm the Luddite.
Ben Lang:
I don't think you can force yourself to use something if it doesn't work for you.
Michael Eisenberg:
I appreciate that.
Ben Lang:
Yeah, I definitely think if Apple Notes works for you, then just stick with that. It's totally fine.
Michael Eisenberg:
At my age we need to remember things, so I'm trying to figure out what I should, what–
Ben Lang:
How do you use, how do you keep your Apple Notes organized? Do you have any way to do that?
Michael Eisenberg:
No, I'm very disorganized. Have you ever seen my desk? I organize it in my head. I don't use digital tools to organize.
Ben Lang:
That's impressive.
Michael Eisenberg:
You know, until I forget things. But, my brain doesn't work in an organized fashion, I don't think.
Ben Lang:
Yeah.
Michael Eisenberg:
So Notion is not for me because I'm too disorganized.
Ben Lang:
It might be hard. It could, if you, if it, like, clicked for you, it might potentially change your life and you might look back and be like, how did I live this way before, but if it doesn't, you might not be able to force it. So there's definitely a learning curve though.
So if you haven't spent a few hours really trying to learn it, which I know is a lot of time, you might, you just might not get it. It, there's a learning curve.
Michael Eisenberg:
Huh. All right. Not going to happen. I don't know. I don't know. So–a founder comes to you today and says, “I got this cool product. I want to build a community around it.” You say? You ask?
Ben Lang:
What do I ask? I usually like to understand like what people's, what the people using it think about it. What is it doing for people? What is it? Meaning like, I don't like the idea of just creating community for the sake of creating community. I think it's very hard to force it. I think if you do it in an inauthentic way, it's just not–
Michael Eisenberg:
So it needs to bubble up. You need to see signs of it first around the product.
Ben Lang:
Exactly. I think that's the most important thing. So I would rather lean into understanding, you know, from people already using the product - what excites them? Are there any signs? Are there any signals showing that people like, want to actually talk about this? They want to spend their time. They want to teach people. They want to connect around it. Are there like, shared interests and values between the people using the product? That to me is what I would look for. I think it's also, like, totally on a company by company basis. Like there's no–
Michael Eisenberg:
So before you have a product in the wild, you probably can't start thinking about a community strategy. Because you need to see if it bubbles up organically.
Ben Lang:
I think if it's based on a product, I think that's probably what you need to do. Again I think there are ways to just create community around things that aren't necessarily product based. Like I worked with a company a few years back that was pre-product that was selling to IT leaders, and we were just trying to get to as many IT leaders as possible to get their feedback on this upcoming product. And I had the same challenge. There was no product yet. So what are we gonna connect around?
And I just, what I did was I spent a bunch of time talking to different IT leaders asking them like, “Hey, what excites you? Like, where do you spend your time? Where do you connect with other IT leaders?” And something I hit on then was that IT leaders really liked talking about products they were using. They liked the, like, similar to Product Hunt, they liked discovering new things, new tools, they were into that.
So what I did was I hired a contractor and we built a Product Hunt but just for IT people. And we called it IT Kit. And I curated like this initial list of products from these IT leaders I had spoken to, and I added them on the website, and we added like a little upvote function. And through that, because it went viral in a bunch of like IT communities, we were able to capture, like, a couple thousand email addresses from IT people.
And this is, again, this is like pre-product. But at the end of the day, it was the same idea. It was just like talking to these IT leaders and understanding like what, what are these like shared interests, shared values, things that connect them, and building something for them, and providing a service to them.
Michael Eisenberg:
And just to be clear when you say talk to them, you mean actually talk to them, not text message or email.
Ben Lang:
Yeah. No, like just hanging out on Zoom, grabbing coffee. Like that's what I mean.
Michael Eisenberg:
Is hanging out on Zoom the same as grabbing coffee?
Ben Lang:
It's just, it's easier. It's not, it's definitely not, but if you don't, if you don't have a choice–
Michael Eisenberg:
Other than Notion, who are the other great, kind of, community companies that you've seen out there?
Ben Lang:
I think figma is definitely one of the top ones. I've always been super impressed with them. I think they've done an incredible job. Other than them, who else? I need to think about other ones.
Michael Eisenberg:
Interesting. Nothing comes to mind quickly. That's interesting.
Ben Lang:
I'm trying to think of like, really like top, top tier ones. I always look at Figma as like, an incredible example for that. I haven't seen as much in Israel, that's like, kind of at that level. There were definitely, I think, companies doing interesting stuff in the crypto space at a certain point. I think, because I'd always felt very, community-oriented.
Michael Eisenberg:
I find it interesting you mentioned Product Hunt a bunch of times in this conversation. What is it about Product Hunt that works? You like Product Hunt, right?
Ben Lang:
I, yeah, I just, for me, it's just a, that's a community that I feel really connected to, because it's a community for early adopters, and people building stuff, and that's just what–that's partially what I like to do. So it's just this place I end up going to and spend a lot of time.
Michael Eisenberg:
Alright, so you made this kind of transition from being an underage drinker, to a soldier, to a community guy at Notion, and now you're an angel investor full time. Why?
Ben Lang:
Why? I guess I realized over the past few years, like I really enjoyed the early days of building startups.That's–to me was like, it's just the most exciting part. And I felt like a lot of things I had been doing could add value to early stage companies. So I also, at the same time, outside of angel investing, I had been working on some of my own stuff. For a while now, I've been organizing these gatherings for people who are exploring what's next.
This originally started as On Deck, which was this thing that Erik Torenberg in the US was organizing.
Michael Eisenberg:
Founder of Product Hunt, right?
Ben Lang:
I think, I don't know if he was the founder. I think he was like an early employee at the time. So he had been organizing these dinners in San Francisco, and I started doing them in Tel Aviv with a friend, Rafael Uzan, on Achad Ha’am, not too far from here, and it was the same concept, which was bringing people together who were exploring what they wanted to do next. People who were maybe like founders who had sold their companies and weren't sure what they wanted to do, or operators who wanted to start things and weren't sure, or wanted to join their next thing.
So I'd actually been building this out for a while now, and I renamed it to Next Play. So now it's at nextplay.so. And so, what’s been really cool about that is just people–we have this really incredible database that's been growing of people who are like, at this phase of exploring what they want to do next.
And so I think it's just been a really incredible community that has a lot of potential and hopefully can support the companies I'm investing in as well.
Michael Eisenberg:
How hard was it to write your first angel check?
Ben Lang:
How hard was it? I–the way I did it, I guess the way I broke into it was that I was helping out a founder with his angel investing.
And so I guess, I didn't really have to, I didn't have to take the risk early on. I think, when people ask me about breaking into angel investing, I usually tell them I think that's a great route. Like trying to become an apprentice for someone and just, avoid the risk of losing too much money early on. So I did that for a few years, and so he was making the decisions on his end, and I was just observing and learning what he was doing. At a certain point, I started to invest in some of those companies as well. So I think if I had just gone straight into it without doing that, it would have been a lot harder because I really just wouldn't have had any idea what I was doing.
So I found that to be pretty helpful in terms of breaking in.
Michael Eisenberg:
What was your first investment?
Ben Lang:
First investment was–
Michael Eisenberg:
Do you remember your first girlfriend? No, I'm just kidding. What was your first investment?
Ben Lang:
Ben Lang:
Umm…
Michael Eisenberg:
Do you remember your wife's name?
Ben Lang:
It might've been, I'm trying to remember exactly. I remember like some of the–I'm not sure if it was like the first one or after a few, but it was one in Israel called Landa. They were doing fractional real estate investing.
Michael Eisenberg:
Yeah, I remember them.
Ben Lang:
Yeah, so I think that was maybe one of the first ones that I did.
Michael Eisenberg:
Where'd that go?
Ben Lang:
Where'd that go? They're, they've bought, I think, a few hundred buildings now. And they've built this app where you, where they're now taking care of like the rent and the whole rent process. And then you as a, you as like an investor can can buy shares in houses–
Michael Eisenberg:
Yeah.
Ben Lang:
–which is, it's pretty cool. They're pretty cool. I think it's been an interesting environment for them as, like, interest rates have changed.
Michael Eisenberg:
You think?
Ben Lang:
But I think also, what I really liked about them early on was seeing people in their Facebook group were just getting super excited about what they were doing. And there was just a lot of that kind of early, these early signs of excitement or, you know, around having a community.
Michael Eisenberg:
If that would come to you again today, now that you've done this for a few years, would you make the investment?
Ben Lang:
I also really, I was a huge fan of Ishai, the founder.
Michael Eisenberg:
Yeah, I also liked him.
Ben Lang:
Yeah, so I think just based on that I would have done it for sure. Yeah.
Michael Eisenberg:
Yeah. How many investments have you made to date?
Ben Lang:
I've probably made around 50 or 60.
Michael Eisenberg:
50?
Ben Lang:
Yeah.
Michael Eisenberg:
What's the best company in the portfolio?
Ben Lang:
Probably Deel.
Michael Eisenberg:
Were you an angel there way at the beginning?
Ben Lang:
Not at the beginning, but I think two rounds in.
Michael Eisenberg:
Why should somebody come to Ben Lang for money today? How big is your angel fund?
Ben Lang:
Six million.
Michael Eisenberg:
Six million?
Ben Lang:
Pretty small.
Michael Eisenberg: Yeah. First one I was involved in was seven. Yeah.
Ben Lang:
Great.
Michael Eisenberg:
Yeah. Why should someone come to Ben for money today?
Ben Lang:
I think I'm just like a builder at heart and so I, I really kind of, I have a lot of empathy for people who are starting companies. And I think a lot of the things that I'm working on on my own can, are things that can be pretty helpful–whether it's finding co-founders, recruiting talent, getting early users, thinking about how to build your community. Those are just things that I spend a lot of time on personally. And, I just hope to be like a good service provider on my end as an investor.
Michael Eisenberg:
You said you're a builder. I always say that I'm unimpeded by any management experience. I've never really built anything other than a fund. I couldn't start a tech startup if I was the last guy to do it. Is it hard to go from being the builder to being the coach, or advisor, or an investor?
Ben Lang:
Yeah, I think so. I'm still trying to understand what that exactly looks like. For me at least, to see what type, how I feel about that kind of work, I know they're very different. That's partially why I find myself trying to build things on the side that can provide value to the companies I'm investing in and make me a better investor hopefully.
I think I will always have that itch of creating and building. And so I'm trying to merge those two worlds together. I'm not sure exactly what that looks like yet.
Michael Eisenberg:
And what are you building on the side now?
Ben Lang:
I think I mentioned before this thing called Next Play.
Michael Eisenberg:
Yeah.
Ben Lang:
I'm actually taking a lot of what I did at Notion and applying it here. So we have these, I brought these hosts in other cities now who are hosting Next Play gatherings as well. So we're setting them up now in Berlin, and London, and Paris, and in Austin and Boston. And so it's becoming this larger thing where it's, I think–hopefully it can become the place that people go when they're exploring what they want to do, what they want to do next, whether it's joining something, starting something.
So I'm, that's something I'm really excited about, and I think there's just a lot of value to be unlocked from it. And also something people just don't, people don't know really where to go for that today.
Michael Eisenberg:
It's like founder dating on steroids.
Ben Lang:
Yeah, but not just for founders. Even for people who want to become operators.
They want to discover, like, what the next best thing to do is. But it's really hard. So it's a very, it's a very challenging place to be when you're not sure what you want to do, when you're, when you want to leave, when you want to figure out what's next. It's just, it's hard.
Michael Eisenberg:
And you're not at all these dinners. How do you collect the feedback, the information, etc.?
Ben Lang:
Now I'm trying to build out this host network of people who are, they're all, we're all using the same database and and just getting more people to take this model and apply it there.
Michael Eisenberg:
I love that.
Ben Lang:
Yeah.
Michael Eisenberg:
I love that. What is your advantage as a venture capitalist? Distill me the Ben Lang advantage. I don't think, have we done a deal together yet? We haven't, right?
Ben Lang:
I'm not sure.
Michael Eisenberg:
I’m not either.
Ben Lang:
I might have done some when I was originally investing with Clark. There might have been some that he did with you.
Michael Eisenberg:
I can’t remember. I should buy you another case of wine if you bring me an investment.
Ben Lang:
I would love to.
Michael Eisenberg:
Now you can drink it.
Ben Lang:
Yeah.
Michael Eisenberg:
Yeah. You can share a nice dinner with a bottle of wine with your wife now.
Ben Lang:
That sounds great.
Michael Eisenberg:
Okay. Distill for me the Ben Lang advantage. I'll say it differently. You and I are competing on a deal. Why are you going to beat me?
Ben Lang:
So I don't think I'm going to compete with people on deals.
Michael Eisenberg:
No, you're going to compete on deals, and you're going to compete with me.
Ben Lang:
Okay. Well I'm, part of my strategy is I'm doing very small checks, so I'm not trying to, I'm not leading any rounds. I'm the kind of person that just joins in.
Michael Eisenberg:
I get it. Don't, don't be deferential. Just, okay, hit it hard.
Ben Lang:
It is part of my strategy. I, ideally I want to be the kind of person that like does–I don't take up too much room and–
Michael Eisenberg:
You don't want to be competitive?
Ben Lang:
I just don't, at least right now with my setup, I don't think I can be, \cause I'm not going to be leading a round. I can, I'm going to be someone who's adding in an extra 100K to a round.
Michael Eisenberg:
All right. There's 25–there’s a hundred thousand dollars left in a round. You and I are competing. Tell me why you’re going to beat me.
Ben Lang:
Why am I going to beat you? I think I'm, I guess because I'm a small shop, I'm doing this alone–
Michael Eisenberg:
I thought you were going to say because you're younger.
Ben Lang:
So I think I can, given kind of the things I'm working on and the areas I can help out, I'm able to be like super, super proactive.
Michael Eisenberg:
That's generic. I can say all those same words. You gotta be, come on, be specific.
Ben Lang:
I will, I would love to–
Michael Eisenberg:
You want the younger generation to beat you. This is good. You need to tell me why you're going to beat me now.
Ben Lang:
Yeah.
Michael Eisenberg:
Tell the founder–let's make pretend that Ron or Erica over here is a founder, and you got to pitch to them. Give me the last hundred thousand dollars in the deal.
Ben Lang:
Yeah. I would, my hope is that having done this a few times, like having been a part of building companies and really being on the ground, I can bring that type of insight and really help out with that.
Michael Eisenberg:
So one, you're an entrepreneur and I'm not. Keep going.
Ben Lang:
Yeah. Two, I think this network that I'm building, Next Play, I think I'm, I will hopefully be able to recruit early hires and even find co- founders when needed. And I think, I really think it has the potential to be something really huge and an incredible asset.
Michael Eisenberg:
Okay, two, be a part of my network of people called Next Play.
Ben Lang:
Yeah.
Michael Eisenberg:
Eisenberg doesn't have that one. Keep going.
Ben Lang:
Three, I'm just getting started. I'm super hungry.
Michael Eisenberg:
Eisenberg's old, keep going. Yeah?
Ben Lang:
Oh gosh–
Michael Eisenberg:
You lost the deal buddy.
Ben Lang:
Yeah, I lost it? Okay.
Michael Eisenberg:
No, no, keep going. I'm just helping you refine your pitch in real time.
Ben Lang:
Yeah I've never really–that's the thing, I haven't been in a position to compete over–
Michael Eisenberg:
How'd you get into Deel? Like, why did the Bouaziz’s take your money? Because you speak French. You speak French, right? Did I remember that right?
Ben Lang:
Yeah, I speak French. I had been friends with Alex for a long time before. And at some point, I had sent a bunch of customer intros for him. I spent a Shabbat with his family in Caesarea and just, I could have gotten in much earlier, I just wasn't angel investing at that point. So I think it was just like, I was just there to be helpful, or before even trying to invest.
Michael Eisenberg:
You didn't mention any of that in your pitch, which is, I delivered customers before I invested.
Ben Lang:
Yeah.
Michael Eisenberg:
And I'm good at hanging out at the Shabbat table and drinking wine with people, and speaking French. Those are all advantages!
Ben Lang:
I didn't know that goes into the pitch.
Michael Eisenberg:
Certainly getting customers probably goes into the pitch. You delivered early customers. That works. You might’ve beat me if you just, if you delivered that.
Ben Lang:
What is, what is your pitch? I would love to hear.
Michael Eisenberg:
I'm old. No, I mean, I've been doing this for a long time.
Ben Lang:
Yeah.
Michael Eisenberg:
I have reach, at this point. I think I can persuade executives, not just early employees, but executives to join your company. And if you need an investor network for your follow-on rounds, I have enough of a track record and capability to get there. I'd still go with youth maybe, but I'm just–
Ben Lang:
How often does that work?
Michael Eisenberg:
My French is not good.
Ben Lang:
How often do you lose a deal against anyone?
Michael Eisenberg:
I think I most often lose deals I don't see. Which is okay right now. But I don't know. I think you don't know how many deals you actually lose. Because many of them don't ever get to see you. Which will make this conversation fun, because it's like head to head competition. But I'd have you in my deals. I think you'd add some value.
Ben Lang:
Okay.
Michael Eisenberg:
If I could figure out who needed community help in particular, that would be super valuable. But you told me I can't figure that out until the product's launched.
Ben Lang:
Yeah, I think you can, I think ideally there's some hypothesis around that will be like a big part of, a big part of the company's play. It sounds like Sequence doesn't necessarily have that yet, but ideally, that's something, somewhere they want to go. I've spoken to them before.
Michael Eisenberg:
Yeah, I know you have. You like it?
Ben Lang:
Yeah. Yeah, I like it. Yeah.
Michael Eisenberg:
You’re not sure.
Ben Lang:
I wasn't like super excited about it, and I didn't end up investing, but–
Michael Eisenberg:
Alright, we're gonna tell the Sequence guys that now they have extra motivation to be successful.
Ben Lang:
Yeah.
Michael Eisenberg:
Ben was skeptical.
Ben Lang:
Yeah, definitely.
Michael Eisenberg:
And he's not sure he can build a community around this. There's one forming in Discord. A pretty significant one.
Ben Lang:
Yeah, I saw that, yeah.
Michael Eisenberg:
What do you think about Discord as a community, a place to form community, versus forming it organically? Or, Facebook Groups as a place to form community–how do you think about that?
Ben Lang:
I don't really think about the platform too much. I think, I always think if it's happening organically and people are building it on their own, I think that's definitely the most exciting thing to see. So if people, if you have a company, if you have a startup and people have launched a Facebook group or something without you even doing that, like that, like by all means, just put as much you can behind that, I think, instead of forcing people to come somewhere.
Michael Eisenberg:
You mentioned earlier that you were in the army. You mentioned Shabbat. Clearly, you wanted to live in Israel, so you have to make a decision about leaving Notion. This is clearly important too. You've also posted pictures online of yourself in uniform and fill in tefillin, phylacteries. You got any pushback on that? Like you're a pretty public persona at this point, as Head of Community in Notion?
Ben Lang:
I didn't get too much pushback on that. I've definitely blocked people on Twitter, and–
Michael Eisenberg:
Who hasn't at this point?
Ben Lang:
Yeah. It's like a normal, I think it's like a, just a normal thing. I wasn't like, so public about it, I think, before October 7th. I think now I try to, I just, I want people to know where I stand. Yeah.
Michael Eisenberg:
I guess if you get lucky, you get blocked by Paul Graham.
Ben Lang:
Yeah.
Michael Eisenberg:
Have you been blocked by Paul?
Ben Lang:
I've never responded to him. I just, I actually just blocked him instead.
Michael Eisenberg:
Oh.
Ben Lang:
I don't want to see his stuff.
Michael Eisenberg:
Yeah. You could get blocked by Paul Graham. I don't think I've been yet, but maybe after this podcast that will be, I don't know.
Ben Lang:
I just tell people just, I think just block him first, I don't know. Yeah. Maybe that's better.
Michael Eisenberg:
Yeah, I think, between your Next Play, TLV Collective, or whatever it is, you'll have your own community that's just as powerful as YC, and Gary Tan is doing a great job over there.
Ben Lang:
Yeah, he's incredible.
Michael Eisenberg:
Gary Tan is incredible. We definitely agree on that. Yeah. I think he's been ahead of a lot of things and what he's doing in San Francisco is also incredibly inspiring.
Ben Lang: Yeah. Do you think it's going to work?
Michael Eisenberg:
I hope it's going to work. That's actually a good question. So you've been like, in San Francisco and New York and Tel Aviv–what's the best place to build a startup today?
Ben Lang:
What's the best place to build a startup? I think they're, they're very different. I'm obviously biased and I will–if you can live in Israel, in Tel Aviv, wherever, I will obviously say that.
I think if you don't have the opportunity to live in Israel, I would probably still say San Francisco, just 'cause I think the, I still think like the talent network there is pretty unmatched.
Michael Eisenberg:
Agreed.
I think people like to say New York has it, but honestly, it doesn't feel like from the startups that I've met, it doesn't feel like they're able to recruit the same caliber of people.
Michael Eisenberg:
Which is interesting, right? Although, you know when I started this business, there was nothing in New York. It was like a desert. Now, it's hopping.
Yeah.
Michael Eisenberg:
Especially if you're Israeli and you have to, you know, being located–New York is better because you save six hours of travel and three hours of time difference. You find that also?
Ben Lang:
Yeah. For sure. Yeah. For Israelis, for sure. I think, I mean it seemed also like during COVID, a lot of people moved to New York and wanted to stay there from–I'm saying folks from like the Bay area. But I feel like recently now it seems, at least in my circles, a lot of people have actually moved back to San Francisco–
Michael Eisenberg:
Post COVID.
Ben Lang:
Yeah post-COVID, and also it just seems, it still seems like with the whole AI hype, there's just a lot more going on in San Francisco than there is in New York.
Michael Eisenberg:
San Francisco, New York, Tel Aviv–what about your perspective has changed since October 7th?
Ben Lang:
I mean, I think I feel more conviction about living in Israel. I think it's more important than ever.
I'm also passionate about getting people to move to Israel. I actually just a few weeks ago met up with Nevo Network, which I think you started. And I was just so impressed by, like, all these talented people who moved here from all over the world. I'd never met people who moved here from so many of the countries that were represented. So I was super inspired.
Michael Eisenberg:
Mexico, Chile, Argentina.
Ben Lang:
There was someone from New Zealand.
Michael Eisenberg:
New Zealand, yeah.
Ben Lang:
I didn't even know there were Jews in New Zealand.
Michael Eisenberg:
Yeah.
Ben Lang:
Yeah, I would, whatever I can do to help get more talented people to move here, I think it's the most important thing.
Michael Eisenberg:
So make the pitch right now live. If you are listening to this podcast, here's why you should move to Israel to join the tech community or start a company. Ben Lang.
Ben Lang:
There's just, I think the vibrancy in the tech community here is pretty incredible. There's just, there's so much opportunity. I think the salaries are pretty much on par now with a lot of other companies, places in the U.S. And you're not really, there's no downgrade to your lifestyle, and that the talent here is incredible. You can still learn from people in a lot of different ways. I just, I feel like if you have the ability to live here and work in tech, like there's just, there's no reason not to. All the infrastructure here is available here that you'll need.
Michael Eisenberg:
No reason not to is like, here.
Ben Lang:
Yeah.
Michael Eisenberg:
Here's why you should. Go ahead, try again.
Ben Lang:
Why you should. I think being around people who you're able to be open with, people, you don't have to be afraid to share your opinions, being around like-minded people with similar values. Also just incredible talent. Unmatched Israeli tenacity. Having, being able to have an incredible lifestyle here, good weather, good food, being able to be a Jew here openly it's, there's just, I think it's, I think it's the best place in the world to live, and you have everything there's just, there's nothing like it.
Michael Eisenberg:
I teed up a softball question for you to say hummus.
Ben Lang:
I said food.
Michael Eisenberg:
The hummus in San Francisco is not good, no disrespect to Orange Hummus. But it's like, the best hummus! No?
Ben Lang:
That's true, for sure.
Michael Eisenberg:
You can celebrate Hummus Day from its, kind of, origin hub.
Ben Lang:
Look, I think generally speaking, the food here is just so much better. The quality of food here is so much better than in–
Michael Eisenberg:
Are you a foodie?
Ben Lang:
Yeah, for sure.
Michael Eisenberg:
Now, you did Hummus Day, and Mapped in Israel, and Corona Crush. Is that the beer or the virus?
Ben Lang:
That is the Facebook group.
Michael Eisenberg:
Corona Crush.
Ben Lang:
Oh, like what did we name it after?
Michael Eisenberg:
Yeah. What’s it for?
Ben Lang:
Yeah, the virus.
Michael Eisenberg:
And what was it about? Because there’s another reason to move, so keep going.
Ben Lang:
I still want to hear your pitch. Oh, to meet someone.
Michael Eisenberg:
Yeah, exactly. So what is Corona Crush?
Ben Lang:
I want to hear your pitch after that.
Michael Eisenberg:
In a second. But first tell us what Corona Crush is.
Ben Lang:
During COVID, a few friends and I, we started a Facebook group for people to post about their friends that were single Jewish people.
And it, it went pretty viral. It now has about 25,000 people in it, and as far as we know, at least a hundred people have gotten married through it. But we think a lot more than that at this point.
Michael Eisenberg:
Were they social distancing as part of this, or this was how you broke the social distancing without people telling you–?
Ben Lang:
People were dating on zoom at that point. That was the normal thing. You weren't meeting in person, for you know, a few months. This is when there was lockdown.
Michael Eisenberg:
I think though in Israel, people were actually meeting in person.
Ben Lang:
You think? There was like, there were like a few weeks where like, you couldn't leave your house. That was when we started it, because we felt like this is you know, we need to help people, right. And people were looking for entertainment. People were spending a lot more time online. It just, it was, I think it's good timing for that.
Michael Eisenberg:
Speaking of the difference between San Francisco and Israel, do you have any couples in San Francisco from Corona Crush?
Ben Lang:
Unlikely.
Michael Eisenberg:
Because they were social distancing for much longer probably, right? Israel was, I got, I met on Corona Crush online, whatever you're down the block, it's Tel Aviv. Nobody's watching or I don't care if anyone's watching.
Ben Lang:
Yeah. That's–
Michael Eisenberg:
How many of those hundred couples were in Israel?
Ben Lang:
I don't know. I don't know the breakdown, but–
Michael Eisenberg:
Majority you'd say?
Ben Lang:
Probably majority. Yeah.
Michael Eisenberg:
Yeah. Because you need a place where you want to break the rules. So that's my pitch. Ready?
Ben Lang:
Yeah. Let's hear your pitch.
Michael Eisenberg:
That's my pitch. If you want to innovate, you need to be able to break the rules. Israelis are very good at breaking the rules. In fact, nobody's even sure there are any rules in this country. The laws and the rules are kind of suggestions, not enforcement. And with all these new models coming around AI, et cetera, the kinda cross-pollination to build applicable AI in places that no one's thought about before, because there are no rules, is going to be unique to Israel.
And I think this is a unique time in history to be able to disrupt many traditional industries. Using AI here in Israel and to do multidisciplinary science out of Israel that will create foundational innovation because again, nobody believes that any rules exist. We're looking at something now in the bio area. The guy who invented it is not a biologist. He's a software engineer who was at Wix. But he said, “I can do this.” And they said, “You don't know anything about biology.” He says, “Aha, that's a feature, not a bug.” And that's, I think part of, what happens here in the same way people got married during Corona Crush when people were supposedly social distancing. You'll also break through some of the–
Ben Lang:
This is the pitch for founders to move to Israel.
Michael Eisenberg:
Yeah, and you know, why it's a great place to join a tech company. It's exciting, it's different. And I think post October 7th what Israel's proved is that civic responsibility and resilience are the hallmarks of this society.
And I think in the 21st century where we have big leadership problems, political leadership problems, globally, the societies that have the most civilian responsibility and civilian resilience will be winners. And I think Israel is going to be a winner.
Ben Lang:
Yeah.
Michael Eisenberg:
To finish up with a couple of questions, since we got through Corona Crush now. It's amazing, by the way, you've got like the whole thing. You can meet your spouse in Corona Crush. You can then have a hummus wedding. And then you can start a startup and be mapped in Israel.
Ben Lang:
That's my pitch now for why let me in the deal.
Michael Eisenberg:
So I finally gave you your–I mean, come on, man. And so given those three accomplishments already, plus Head of Community at Notion–in 90 years when you're 120, how do you want to be remembered?
Ben Lang:
How do I want to be remembered? I don't think that far ahead. I would love to continue to back incredible founders and just be a great service provider in whatever I can, in whatever ways I can and, really add value. And, hopefully continue to scale that over time. I would love to, to help bring more people to Israel and, make this an incredible place for Jews to live.
Michael Eisenberg:
Alright, at the ripe old age of 30, what is the most valuable lesson that you've learned that you want to impart to the listeners?
Ben Lang:
Most valuable lesson? I think just like, taking a shot. I think I've done that like enough times to realize, a lot of these times it didn't work, but a few of the times it did work. And I think people are like oftentimes just afraid of taking a shot and whatever it might be, if it's like starting something, if it's sending a cold email, just reaching out, like I think really like, that's the difference between people who like, I think do something interesting and people just aren't able to break out, like just being able to take a shot somewhere.
Michael Eisenberg:
I think by the way, that is a great place to end the conversation, because I think that's true about you. You just keep taking shots, and some of them work, and some of them don't. And it's reminiscent of the big song from the play Hamilton. And I think there's a lot of batches, I bet you were 17 or something like that, where you were like hey, I’ll try this, I'll try that, and something sticks, and let me be bold enough and reach out to the guys at Notion because I'm just interested in this.
I think that's great advice to anyone. So Ben, thanks for coming on. If you enjoyed the podcast, please rate us five stars on Spotify, Apple podcasts, or wherever else you listen. And if you want to learn more about Ben Lang, you can find him on LinkedIn, Ben Lang, and on X at B E N L N. Ben, thanks for coming on.
Ben Lang:
Thanks for having me.
Michael Eisenberg:
Next drink is on me.
Ben Lang:
Sounds great.
[00:00:00] Michael Eisenberg: I am thrilled to have Beezer with me. Everybody knows who Beezer is, but her real name is Elizabeth Clarkson. And Beezer is one of the most sought after limited partners for venture funds. She runs Sapphire, which is, for full disclosure, an LP in Aleph. But Beezer, rather than having me introduce you, why don't you introduce yourself to our listeners?
[00:00:23] Beezer Clarkson: Great. Um, how far back should I go? Just my name and I would say start from the womb. Your mother's, that is. My mother's days. So I was born in London. Um, so I actually carry dual citizen, citizenship, British and US because my father was British and my mom is American. So out of the womb, I came out there with two passports, which I think is awesome.
[00:00:42] I do not take enough advantage of. But, um, fast forward to today, I am now with Sapphire Partners. And as Michael said I'm responsible for the LP strategy here along with the rest of our team. And, uh, just really delighted to be here. Thank you so much for having me on.
[00:00:59] Michael Eisenberg: And you've been at [00:01:00] Sapphire more than a decade already. I think it's 12 or 13 years, right?
[00:01:03] Beezer Clarkson: 12 years, which is unbelievable. I think it's the fastest 12 years, which it's crazy when you start adding up the numbers, but yeah.
[00:01:11] Michael Eisenberg: And neither of us have gotten a day older over those 12 years. Neither of us. You're also a member of the National Venture Capital Association. You're an advisor and the investment committee member at Wesleyan University.
[00:01:22] You also co host a podcast called Origins about the LP and VC ecosystem, a key reason, uh, in addition to our friendship that we're happy to have you here on Invested. And you launched something called OpenLP, which is powered by Sapphire Partners. So just tell everyone what OpenLP is about as we get started.
[00:01:40] Beezer Clarkson: Sure. So we started OpenLP, I shouldn't have the exact date, but let's say a decade ago. And, um, I want to make sure the clear that it's a very collective effort. And one of the reasons why we did open LP and I co founded it with Chris Duvos and a handful of other like minded LPs was because there just really seemed to be a thirst for understanding a bit more [00:02:00] about the venture ecosystem and how LPs were thinking we can talk about this or not, about how much transparency there is in venture, but for venture geeks like us, it was just really clear that there was a lot of great conversation with LP with VCs, sorry, doing blogs and tweets and.
[00:02:15] You know, now podcast, but there was a real lack of the LP voice and we wanted to create, uh, a system that will allow LPs to come together and participate and not have it unilateral, but really try to encourage other folks to come on and then help amplify the voices. So in many ways, I consider open LP a mission and a movement, which I know sounds like an odd thing to say in venture.
[00:02:37] Because you can go to our website, you can get our newsletter, but the point is that we created a forum where folks can come in and participate and go find information and really pull in other, other people that want to talk, because a lot of times, my experience is, and I'd be curious to get yours since you run this podcast, people want to participate, they just don't know how.
[00:02:54] And so the idea for OpenLP was how do we create a forum that allows other LPs that wouldn't [00:03:00] necessarily think about engaging to engage. And to share their point of views and what people might come to experience is that there's a whole wide range. And to quote a friend, LPs are like snowflakes, no two are the same.
[00:03:13] And that's not necessarily clear to VCs or entrepreneurs. So we just wanted to do that and we've been supporting it for the last decade. And I just think it's amazing the difference in the ecosystem today that you have LPs on multiple podcasts, you have LPs at conferences. We cannot take credit for all of this.
[00:03:29] I think it's just a really more of a comment of the interest in hearing that perspective.
[00:03:34] Michael Eisenberg: Is it really true now that LPs are like snowflakes or did open LP and kind of this open chatter create some groupthink?
[00:03:45] Beezer Clarkson: Well, there's definitely groupthink and venture writ large, and I do not think LPs are immune.
[00:03:50] Um, but the more I get to know various LPs and the more I talk to them, there really is a difference in how and why people build their portfolios. And Maybe it's not [00:04:00] radically different, right? Some people, if you're going for a financial return, it's financial return, but people's, um, what we might want for a financial return and what somebody else might want actually can be pretty different.
[00:04:10] Some folks do it for the directs. They don't do it for the fund returns. Some people do it for different, um, don't want to use the word impact, but they're trying to get at different business solutions. So, there is a wide range and family offices are pretty radically different from pension funds. Again, they're all investing capital in a venture fund.
[00:04:27] That's not different, but the hows and the whys are, can be pretty different.
[00:04:32] Michael Eisenberg: I actually didn't plan to get into this, but now I'm going to go down the rabbit hole, uh, entirely. So, uh, You know, when I started, uh, in venture capital, people like to call it venture capital career. I don't think this is a career, actually.
[00:04:43] It feels like a roller coaster ride. Um, there was like no one to learn from. So when I got started, I actually sought out people in, in venture. Henry McCance of Greylock was incredibly gracious with this time and Kevin Compton. Uh, of Kleiner Perkins is incredibly gracious with this time [00:05:00] and Bob Cagle of Benchmark and, and, and Bruce Dunleavy who became my partners later, uh, were incredibly gracious, uh, with their time and wisdom.
[00:05:08] And Bill Gurley and I kind of grew up at the same time in this business. So I was very fortunate in that way. Today, it feels like it's not just OpenLP, but like Twitter is like the open venture knowledge market. Uh, others like Thomas Tungans have been writing blog posts and, and many others. There's. Uh, just an incredible amount of, of information out there.
[00:05:29] And when you gather a group together, like open LP and everyone kind of gathers around the campfire, uh, I think what you called the herd mentality has gotten more extreme over time than it was when I entered the venture business. Am I correct?
[00:05:42] Beezer Clarkson: I have experienced the same thing. I. I don't think of it as herd mentality.
[00:05:46] I think of it more of the,
[00:05:47] Michael Eisenberg: Groupthink?
[00:05:49] Beezer Clarkson: The hype, I always say the word hype cycle, but the, the time an idea gets launched and the sort of, uh, jumping on the bandwagon, that timeframe is really shortened because everyone has access to the same information [00:06:00] if you put it out on whatever social media you want to put it out on.
[00:06:03] And that's new because when you and I were growing up in venture, You literally had to have a one on one conversation and maybe the other way of thinking is the information arbitrage was just higher because you just literally wouldn't know what someone was thinking because there was, unless you found them in a room and talked to them, you, I don't know how else you would know.
[00:06:23] And now you can know right away if they put it out there. I would say still though, something that's very present to me, even today, like I always say, I could have read the Starbucks business plan and it wouldn't have made a damn bit of difference. I would never have been able to do Starbucks the way Howard Schultz did.
[00:06:40] And I feel the same way about some of the information that everyone's like, Oh, but you can just read it online. I'm like, well, of course you can, but it's the person who brings it to life that makes all the difference. So. On one hand, I feel like everyone does hop onto these ideas really quickly and that in some ways can be a race to the bottom, but it's still true that how you do it is the meaningful difference.
[00:06:58] Michael Eisenberg: Has venture investing [00:07:00] become more like momentum investing than company building or kind of a differentiated perspective?
[00:07:06] Beezer Clarkson: Um, hmm. There's been a lot of momentum investing and you and I could go down the rabbit hole of is that in of itself being an excellent momentum investor or a long term strategy or is that a point in time ability?
[00:07:18] Hmm. I don't know for the long run if just following a herd is ever going to be the best returns. I mean, we'll have to wait another decade to see for this current batch, but. I don't feel like that was true. Again, there's short term gains, but not long, over the long term. I just don't think you can follow somebody else's path to success.
[00:07:36] Michael Eisenberg: Feels like momentum investing in liquid markets can work because you can kind of get out. But in illiquid markets like venture, it feels tough.
[00:07:43] Beezer Clarkson: Fair enough. Again, I was speaking of privates. That's a great distinction. In publics, I'm not a hedge fund manager. There could be a million ways of managing that.
[00:07:50] Michael Eisenberg: Let's dig in more to this information arbitrage idea. I literally had no plan to go down this rabbit hole, but this is great. So, uh, it used to be, say I had one on one [00:08:00] conversations. There's not just information arbitrage. I had kind of unique deal access, maybe a unique view on a trend. Um, but today you don't.
[00:08:06] So, um, the value of contrarianism today, is it higher or lower?
[00:08:14] Beezer Clarkson: Oh, it's so funny. I debate this in my head all the time because this whole, there's so many like memes and venture that people say and just accept as truths and I love and hate it. I will own that. Um, but one of them is being contrarian and right, which I think if peel back the onion, it means getting in early so you can capture the gains of that, right?
[00:08:32] For just making a sheer financial example out of it. So that has to be true from a numeric standpoint. But I think just coming up with a contrarian standpoint, because you want to be an out, be contrarian, doesn't get you there. So it's, it's not sufficient, you, it actually has to be authentic, I think.
[00:08:50] Michael Eisenberg: So like, um, I'm in the Gavin Baker camp, he of Atreides, uh, where I think these kind of foundation models and AI is the fastest [00:09:00] depreciating asset in human history.
[00:09:02] But there's a lot of venture capital dough that's gone in there and, and we just saw what happened to, uh, Mustafa Suleiman's company. I have no idea, but I think. I think it was reported that Greylock put 250 million in there at like a billion dollar valuation, uh, or something like that. Uh, no critique of Greylock.
[00:09:18] I mean, Reid Hoffman is one of the greatest investors and entrepreneurs of, Of all time. It's just the only place I actually know what I think are the numbers And um, but there's probably been I don't know how many billions of dollars put into these foundation models and everyone's chasing one of them um Uh, and I just I wonder I don't know how many dollars from sapphire as an lp You've got exposed into this foundation model trend, but that feels like everyone's gotta get on the momentum Uh, it's not clear That value accrues, just use an example there.
[00:09:48] And I think, uh, Bill Gurley and Brad Gerstner were talking about this on their podcast also. And so, uh, when you look at that as an LP, what are you saying to yourself? You're looking like 15 funds. We're 25 funds, many of [00:10:00] which you're probably invested in, and you see a lot of money going this trend called foundation models and you watch like meta with its open source over here and Google Gemini, even if they got the woke thing wrong.
[00:10:11] But what do you do?
[00:10:13] Beezer Clarkson: Uh, it's such a great question. Um, I think it goes back to, cause I, my suspicion is this is happening right now in the LLMs. It's going to happen with something else six months from now, three months from now it, you see it happening again and again. Okay. It's how the person comes to the table thinking about why they're doing it, and we spend a lot of time trying to understand with our GPs why they choose what they choose, because it's going to be different tomorrow than it was yesterday.
[00:10:38] So. The specific example is something that ground the conversation around, but it isn't necessarily the answer if that isn't too meta. Um, so, because I think what you're asking is, what does an LP do when someone's all of a sudden starts making investments in an area that you're like, wow, how do we feel about that?
[00:10:55] I mean, we have conversations and try to understand why they're doing it. And if [00:11:00] you're, if you're committed to the fund, you're committed to the fund. And then the trust goes to the GP and says, you know, this, this is a blind pool of capital that there's, there's, it's, it's off to the races. But. When you're making an assessment of the underwriting, it is a lot of trying to understand their views on these different things so that when you do go along for the ride, there's a high level of trust.
[00:11:19] And there's always something people pour money into that's overpriced. I mean, you could look throughout the history, right? It was wireless way back in the day, you now remember this, and semiconductors and things that now seem
[00:11:29] Michael Eisenberg: Fiber optic equipment. Correct.
[00:11:30] Beezer Clarkson: Which now, like, everyone's like, oh, that's so small dollars.
[00:11:33] Relative at the time, it was huge dollars. Uh,
[00:11:36] Michael Eisenberg: totally. And we've had this, I think what's different now is exactly the point you made earlier where it feels like the, the bulge or the, the pendulum in each one of these things is actually larger, uh, at this point. Uh, you know, I lived with a dot com, uh, boom.
[00:11:52] You know, pets that this and pets that the other we make fun of because of the sock commercial, but there were others that everyone's forgotten about, you know, dot com by the dozen and there's fiber [00:12:00] optics, um, both in the equipment side and the, and the, and the fiber optic cables and providers that were laid.
[00:12:06] But it feels like because of what you said earlier, like. the trend is more extreme now that the dollar exposure, if I'm an LP, it's not just about the individual fund decision making. It's like you wake up tomorrow morning and find that one third of the dollars you've invested in, you know, in venture capital portfolios now in LLMs.
[00:12:24] Correct. What do you say? No, no,
[00:12:25] Beezer Clarkson: you are a hundred percent right. I think it's, um, the quantity or the, what's the right word? The quantum of dollars now is so much larger because there's something here about the intersection of human nature. There's something about I think very human level of FOMO that you're like, Oh, this is a massive trend.
[00:12:41] If I'm not on it, what happens? And I think LPs are just as human as GPs. So I think, and maybe entrepreneurs, I, we're all people. So I think that's just true. And then you get this discussion of the exits. And when we saw these very large companies being created, you know, the, the private to publics in 2021, and then the.
[00:12:59] I don't know how many [00:13:00] fabulous ones we have now. Are we at seven? Are we back to five? I'm not sure.
[00:13:04] Michael Eisenberg: You know, the mag seven, the fab four, the, I don't know.
[00:13:08] Beezer Clarkson: No,
[00:13:08] Michael Eisenberg: no. Phenomenal five.
[00:13:10] Beezer Clarkson: I'm terrible. I'm terrible at the quick, like little quick naming things of not my forte. I won't try it, but you do see trillion dollar companies created.
[00:13:17] So it. I think that fees are human psychology, if we have to get on this, what if we miss the one and in that fear, a ton of money can essentially get wasted. I, again, this is my personal belief, there's something in the ability to hold all these conflicting emotions in the, in the, in your mind at one time as you invest, that the powerful comes out of it.
[00:13:38] And you can figure out where you want to be, but you, you have to be able to acknowledge That the human aspect and the fear and the potential at the same time, otherwise it's just not, it's just not authentic. It's not how the world works.
[00:13:50] Michael Eisenberg: So you made an important point now, which is, uh, it's about like the human element and you keep coming back to that, uh, both on the behavioral side, chasing the trend, tracing, you [00:14:00] know, the FOMO, et cetera.
[00:14:01] Um, but also in the, uh, in the ability to identify the one, right? The venture business is a grand slam home run business, not just a home run business. Uh, You need, in your portfolio of whatever fund it is, you need one that's a massive outlier and you don't want to miss it. And what are the Beezer shortcuts or heuristics to finding a someone or a group that can pick a one, an N of one that delivers outside returns?
[00:14:30] Beezer Clarkson: I do talk about people a lot because we're in the business of early stage investing. So we invest in early stage venture funds, emerging and established. Um, and it's about the people. And I'm sure if you ask any early stage investor, you're going to hear this because it's, it, that's just what is there then, right?
[00:14:46] There's sometimes you have companies that you can look at the data points on, but there's not a lot. And when you invest in people half the time, it's just an idea and that's the powerfulness of it. Um, so as an LP, we have certain processes that we put in place and I, I'm about to [00:15:00] say something that sounds contradictory and I, I accept both sides of it, which is, you The only way that we know to repeatedly do something, which is based on something that's so hard to the intangibles of, is to have a repeatable process you can run every single time so that that's the consistency.
[00:15:15] And so we underwrite, and it sounds so banal. We underwrite a series A fund with three X net and a seed to a five X net and in the peeling back of the onion of what needs to be true, you get at the why of the people. And I'm happy to go into as many weeds in that as possible. Yeah, yeah, yeah. Give
[00:15:30] Michael Eisenberg: us that process.
[00:15:31] Um, This is the, for all the listeners, this is the shortcut of how to get Beezer's money. It's because it gives the,
[00:15:36] Beezer Clarkson: I'm happy to share it because this is why I'm like, just, there's no secret. It's just hard. Like, why you? Like, why Michael? Why Aleph? Like, what, who were you as a person that led you to want to do this?
[00:15:47] And then how are you constructing this firm to attract the best entrepreneurs? Because that's really the most important part, right? And it's the GP founder fit. And what is your point of view on the market? What's your point of [00:16:00] view on team? What's your point of view on culture? What kind of checks do you want to write?
[00:16:03] How does that align with how you are and how you go to market? And then there's portfolio construction questions, which sound just basic numbers, but a lot of that does go to how you want to be and what you want to do. Do you want to be a lead investor? Do you want to be a collaborative player? What is your ownership target?
[00:16:20] What size fund are you raising? What is the market that you're investing in? And then with all that, you kind of put it in the soup and you can kind of do some simple math and say, like, there's easy ones. There's no let me just also cheat to the end. There's no one right answer, which I think is part of what makes the world awesome.
[00:16:38] Michael Eisenberg: Right. But at the same time, it's hard to make that decision. It's deeply heuristic. So it's like, you put it in the soup and you say, Oh, this might taste good, but I don't know.
[00:16:46] Beezer Clarkson: Yeah. But let's see, but you, I would say what I've learned over the last, I've been in venture now for in different versions at like 20 years.
[00:16:53] There are a lot of things that are flags on what's going to make it a lot harder. It's not a guaranteed fail, but you're like, Oh, [00:17:00] this is going to raise the challenge of doing this a lot. Yeah. There's no like, okay, we'll start with the simple things. Portfolio construction. A lot of times people simply don't run the math of what needs to be true, given the check size and the ownership and this and that.
[00:17:15] It's not going to guarantee you a wonderful exit, but it certainly, if you need to have 10, I'm making up a little hyperbole, a little hypo, hyper, hypo, hyperbole, hyperbole, sorry, too much caffeine. It's only 9 o'clock,
[00:17:29] Michael Eisenberg: Beezer.
[00:17:31] Beezer Clarkson: Yeah, I've been up for a few hours. All right. If you need 10, 50 billion companies to return your fund because it's large and you're going to have 1 percent at the end of it, it could happen.
[00:17:41] But statistically, you are going to be so far out there on the curve, it's going to be very hard to underwrite that. So one always needs to believe the future is going to be different from the past, but how much are you stretching that? We will look at numbers like that. And then what is the likelihood that you will get into these types of [00:18:00] companies?
[00:18:00] Do you need to own the whole market? Are you saying you're going to invest in every single one of a certain type of company? Again, traditionally, just that's just not historically how it works. Um, how many deals per year can someone really do and keep track of like, they're just some basic sort of tests you can throw, throw against the wall and say, does this feel realistic given what we've seen happen?
[00:18:22] And there are other ones that are a lot more, um, I'd say art versus science. Like what is the area someone's investing in? And does that feel like a big enough space? And there's some things which. Can look misleadingly small and some which just feel small like do you remember the whole AR VR world when there was?
[00:18:40] I can't remember how many funds we saw wanting to invest just in that space that to us I'm gonna say felt too small but if someone was saying I'm looking at data that goes online and is being played at in this area and I can translate that Into a multitude of different areas some of which might be driving AR and VR that to us is an interesting [00:19:00] thesis So it kind of goes back to that resonance, right?
[00:19:03] Michael Eisenberg: What percentage of the funds you invest in hit your underwriting targets? Like, I invest, I know 50 percent of my companies don't, don't make it to anywhere, right? So I have a, I have, I have a bad hit rate. Um,
[00:19:18] Beezer Clarkson: Well, that's venture.
[00:19:20] Michael Eisenberg: So we do
[00:19:20] Beezer Clarkson: expect a loss ratio and that's part of the portfolio construction math.
[00:19:24] Like you, if you don't take that into account, it's very hard to be thoughtful in how you're doing it. So when people say I'm never. And I'll caveat this and say the last, what, help me out here, 2015 to 2020 loss ratios were just not where they historically were. So far. Yeah. So we, and now, now we're seeing it, right?
[00:19:44] Like now it's catching up. And so that to us doesn't freak us out. Like we anticipate there should be a loss ratio and when there's not, everybody's portfolios got very congested. Um, but I would answer your question, uh, it, you know, it takes, I'm going to say this [00:20:00] for all the people that don't, haven't done the math, it takes 10 to 15 years to see full productivity of a fund.
[00:20:05] So we have some that hit the underwriting early because they were able to get exits in the exit land of 2020, 2021. We had some folks who were quite young that because they were small early funds, um, crypto was also very productive. If you got out, I would just throw that out there. Sometimes the getting out is at.
[00:20:25] It's unusually early and people that take advantage of it can be great. Um, I'd say it's on track. It's on track. There's definitely some which have slowed down. But what percentage of
[00:20:34] Michael Eisenberg: your funds don't return capital?
[00:20:36] Beezer Clarkson: At all? Like none? Oh. No.
[00:20:38] Michael Eisenberg: No. Don't return 100 percent of invested capital. Like, don't do 1x.
[00:20:44] Beezer Clarkson: Um, so far of the vintages that should, um, I don't think we have any, I'd have to go back and look at the numbers. I think people, I think, I'm sure there's somebody out there. I'm sure there's, I'm sure there's a couple, none of the, some of them are coming to [00:21:00] mind. I'm sure there's a couple because it's just true.
[00:21:02] Like people have underperforming funds and I, we do the best job that we possibly can, but reality is reality.
[00:21:09] Michael Eisenberg: You mentioned before that the portfolio math doesn't, Work. So in many cases, and then you mentioned if you have a large fund that requires three 50 So large funds, small funds, where do you come out?
[00:21:22] Beezer Clarkson: Well, since we do early stage, we definitely have a preference for what I'd call right sized funds, and then it depends on the strategy. It's a little, it's, I know it's like the worst answer ever is it depends, but if that was
[00:21:32] Michael Eisenberg: so politically correct, large funds are small funds, Beezer. I'm not as nice as Harry when he interviews.
[00:21:37] Beezer Clarkson: Our average, if I had to average out our funds, and again, since we do a number of seed funds, that's going to pull us down because they're sub, maybe the average seed fund now is anywhere between 50 and 125 million, depending on the strategy, but I'd say our typical series A fund is probably between 250 and 450.
[00:21:56] And again, it's a little bit of a, what are they doing? How many [00:22:00] people, how many check writers, all that kind of goes into the mix. Although I would say, and I'm going to own this just in case it's helpful. Okay. Because you and I can get into this. A lot of times you see GPs doing the math of the number of checks per partner, which reality and should absolutely be looked at.
[00:22:15] That is not, however, how companies exit. Nobody acquires a company and says, Oh, but there was five check writers at this firm. Therefore, I must pay you this multiple. They just exit however they exit based on that company. So we look at both sides of that equation because it just isn't the same input, right?
[00:22:32] People do need to have enough air in the room to write the checks they want to write. But that doesn't dictate the size of the companies on the other side.
[00:22:39] Michael Eisenberg: Nor by the way does it dictate who gets the exits in a five person partnership or six person partnership. That tends to be unevenly distributed, I think.
[00:22:46] Beezer Clarkson: Oh, that's interesting. That's probably very true. And ideally, we'd Everyone likes it when everyone has it, but it's not always true. And then I think at least our experience is other people can still play important roles. It's just not necessarily captured in the [00:23:00] numbers from a sheer, I don't know what you want to call it, sourcing board seat attribution level.
[00:23:05] Michael Eisenberg: Do you ask that
[00:23:06] Beezer Clarkson: question? Sure. Mostly because we're interested in. What's very opaque to LPs, and this is why LPs ask a lot of these questions, is what actually happens, like, what happens in the room? Like, when Michael goes into the room, what are the conversations like? It's fascinating. We just want to know because this is all part of the world that we don't get to see, and we don't pretend to have a right or wrong answer on this.
[00:23:28] We literally just don't, don't know and would like to know because all of that is part of what happens. Do
[00:23:33] Michael Eisenberg: GPs tell you the truth?
[00:23:35] Beezer Clarkson: I don't know. You tell me. I hope so. I'm not talking
[00:23:38] Michael Eisenberg: about myself. Of course I tell you the truth, Beezer. I'm just asking about everyone else.
[00:23:42] Beezer Clarkson: I think for the, I would like to believe for the most part, I think people tell their truths.
[00:23:46] If you, I'm sure you had this experience, you can ask six people what happened in a room and you will still get six different versions. And. And we don't take that to mean that someone's lying. We just take that to mean is that's how people experienced it. And [00:24:00] the real, the reality is somewhere in the middle of that, right?
[00:24:03] Because where you, isn't that where you stand is where you sit or whatever that phrase is. It's all going to dictate it. It
[00:24:09] Michael Eisenberg: sounds like postmodernism has hit the venture capital world. There's no truth in the world anymore. Everyone's got their own little perspective.
[00:24:15] Beezer Clarkson: Well, I don't know. This is one of the conversations.
[00:24:18] One of the questions
[00:24:18] Michael Eisenberg: you asked to get to the bottom of whether people are telling you the truth.
[00:24:22] Beezer Clarkson: We just ask a lot of what happened, how did it, you know, what, what did, don't think there's one super secret get to the truth question. I would love it. If you know it, share it. I think we just always ask, like, how did you make this decision?
[00:24:34] What were you considering? What happened? Tell us what the company was doing. You know, a lot of times we'll be curious about how the customers are, what's happening, what's happening for the company as it goes to market. That's a really important part of the puzzle that I don't know if GPs, I don't know if all LPs care about, we like to hear it because it really gets at how the company is doing it's doing and that is also something which you can read about in the paper but a lot of private companies don't share because why should [00:25:00] they?
[00:25:00] But it really speaks to like, how is it going? Is it repeat customers? Is it new customers? How do people engage with the product? As a, as an investor, I love knowing all these things because it just gives you the texture of what's going on.
[00:25:13] Michael Eisenberg: Now, what happened? Like, for example, like you've got a GP of three or five people and you happen to have dinner one night with one of the GPs and lunch the next day with another GPs and you get a conflicting answer.
[00:25:24] What, what do you do with that?
[00:25:26] Beezer Clarkson: Meaning wildly different, like I was never
[00:25:28] Michael Eisenberg: happening at all, but just in case it happens with someone else, what would you do with that? Like a conflicting answer?
[00:25:33] Beezer Clarkson: Well, here's an example I got the other day, which I thought was interesting. There was, um, a GP who was saying how they were trying to win a deal.
[00:25:40] And until they decided they weren't doing it, they were spending a bunch of time with the entrepreneur as one does. And then we got feedback, not was the GP ended up not making the investment. And then the feedback we got for reasons that were totally, you know, there's to choose and we were not. We didn't have an opinion.
[00:25:56] We just noted it down as okay. It didn't fit though, what they were looking for. [00:26:00] The entrepreneur was not happy, not a surprise. They wanted more term sheets. And so their experience was they felt a little bit let on. It's interesting feedback because I get why they might feel that because they wanted a term sheet.
[00:26:14] This was not at all. I've bought it just for the record.
[00:26:17] Michael Eisenberg: We never lose deals. I know what you're
[00:26:18] Beezer Clarkson: talking about. You never lose deals. Um, and this, this time the GP didn't necessarily, I don't know, they didn't issue a term sheet. So I don't know if that counts as lost or not. But the entrepreneur was upset because they thought they were going to get a term sheet and their term.
[00:26:30] They're they're. The thing was they felt let on and I was like, that's their language. I'm not going to say that's not true, but is that, how do you experience that if you decide not to make an investment, but you're going to engage until you do like two different reports and we just observe it and say, okay, the deal didn't happen and here are the two experiences of it.
[00:26:50] Um, accepted as both sides being fair, but just different experiences.
[00:26:54] Michael Eisenberg: But here's an interesting comment on that. If there's brand damage there, right? So Entrepreneur X [00:27:00] is now going around and saying that Fund Y, uh, led me on. Correct. Um. But then. And.
[00:27:07] Beezer Clarkson: Correct. So you, you keep asking and you keep an ear out, but also you should be allowed not to do a deal just because, just cause you said hello to an entrepreneur and dug in and looked at the data doesn't mean you're obliged to invest, right?
[00:27:19] Sure. We feel both sides of it. So I'm just saying is. There is no simple answer. You just have to understand and get as much context as possible and there could be times I suppose when the Stories conflict so much it's hard to know if what the reality is. I'm sure there's an example of that if it could just come to mind, but you do the best that you can with what you got.
[00:27:38] And if you consistently, I suppose, get information that doesn't add up, that in and of itself is a piece of important information. I would say, and this is a little bit of a generalization, but I think it's helpful for folks, LPs do love hearing consistently awesome feedback, but I think You don't want to be blind to it and only assume everything is always positive.
[00:27:57] Like we're all human and things happen. And sometimes [00:28:00] you have to have hard conversations and not everybody likes the hard conversations. And I've known multiple times when people will say, Oh, somebody gave me some hard news and I was upset about it, but I don't know, a year later I realized they were right.
[00:28:11] So sometimes it's also the timing of the tough news,
[00:28:16] Michael Eisenberg: right? Have you ever stopped the relationship with the GP group?
[00:28:20] Beezer Clarkson: Yes.
[00:28:21] Michael Eisenberg: What caused you to do it? Uh,
[00:28:24] Beezer Clarkson: a couple of times we've had funds grow outside of our mandate. So we celebrate this. We don't do a lot of later, larger funds. So if someone is going on and doing, kind of building their business in that method, it's just not what we do.
[00:28:37] It's not our focus at the early stage. So that's, that's definitely happened. Um, sometimes funds have kind of stopped doing their doing. So it's a bit of a mutual, you know, we can talk about succession management. Sometimes it just doesn't work. And then people stop. Um, so we've had that happen in our portfolio.
[00:28:54] Uh, there have been times when the performance has been challenged and [00:29:00] it doesn't look like things are changing. So we have an obligation to our LPs to be good fiduciaries and there, that comes into play. That usually is. an extended long time frame. That's not a one or two fun because it just takes, there's not enough time to see that.
[00:29:14] I would say that's something that probably comes up over a much more of a longer time duration.
[00:29:18] Michael Eisenberg: Interesting. So performance is the least likely reason that you would cut a relationship.
[00:29:22] Beezer Clarkson: It's ironic to say it out loud like that, isn't that? But if you, I know, um, it's interesting. I needed, Uh, I, I think ultimately when the performance is that kind of an indicator, they're usually something that then gets tied to the go forwardness of that GP in general, do you know what I mean?
[00:29:41] Like usually there's a challenge comes out and there's something in succession, there's something where they're morphing their business. And it just changes and it, that usually seems to be similar.
[00:29:50] Michael Eisenberg: All right. Now we're on the question that I actually, actually, before I get there, you said earlier about like exits, uh, getting out.
[00:29:59] How [00:30:00] important is an early win for a venture fund? Like an adventure capitalist period to kind of get their career launched. There's like, there's a meme on Twitter, if that's the right, You know, term, or maybe I don't think he's an urban legend, but a discussion on Twitter that basically if you get an early win in your, in your career, you can kind of you're set, but if you don't, you're going to struggle for a while.
[00:30:24] How true is that?
[00:30:26] Beezer Clarkson: Um, sometimes LPs are just as susceptible to believing something, whether or not it's true. And that is a hundred percent in that camp. I think if there's an early win, it becomes this great proof point that everybody can hang their head on and say, Cause in early stage investing, there's so few data points for so long that kind of are easy to sort of run through a calculator, which again is not the best way of necessarily looking at things, but it's, we're human and people have to sort of show up and go to their investment committee and say, here's why I believe in having data points doesn't hurt.
[00:30:56] And having an early win can be really compelling, not just [00:31:00] because it can be a financial success, but because to your point about brand, it can really be this amazingly powerful flywheel for the brand of a fund. And then, and I do think it's a bit of a trope, which is the, Oh, when you get success, begets success.
[00:31:14] And if you have this early success, you can then leverage it as a GP and entrepreneurs want to work with you. And I can tell you countless narratives where an entrepreneur and an LP will come to me and say, I want to work with so and so because they were an investor in pick your favorite IPO.
[00:31:30] Ironically, sometimes the GP that did that deal is not even with the fund anymore, but it's so associated with the firm, they've captured that brand value. And that's really powerful because. There does seem to be some consistency of performance around funds that can capture that flywheel. And that goes into the, you know, you get to fund for and on, you can see the track record developing.
[00:31:51] And it's not just the LPs who are willing to then continue investing. I think it's the entrepreneurs keep coming back and there is that the best entrepreneurs want to work with the [00:32:00] best investors, want to know they're surrounded by other great entrepreneurs. And so you can really get that momentum going.
[00:32:06] Conversely, I know GPs that have had great success and they don't talk about it and they continue on because they're just not on Twitter and they're not doing that thing. And it's, it's interesting to see that too, right? Like emergence with, with FIVA did amazingly with that company. People talk about box and it's, but you know, for a dollar deployment, if you put whatever they put in like 10 million, some small amount into this company that went public for a much bigger value.
[00:32:32] It was hugely, was hugely, um, financially lucrative for them and their LPs, but everyone talked about the box investment because everybody knew about it. Does it matter? Do you know what I mean? Like, these are interesting open questions.
[00:32:45] Michael Eisenberg: You know, I, I think a lot about my friend, Roger Ehrenberg from IA Ventures, who's like a quiet guy, incredibly successful and wonderful human being.
[00:32:53] Uh, there's many ways to prosecute this business, but if I had to ask you, um, [00:33:00] what's the most Marker of future success, early success, brand of the fund, or hustle? Which of the three would it be?
[00:33:08] Beezer Clarkson: Ooh. So we invest early. So saying early success feels, it's, we invest sometimes before those are those proof points are there.
[00:33:17] So that feels to be, uh, I can't use that as an answer. There is sometimes there's, we look for things in people's life that indicate, I think I struggle to have a great term for this. It's this interesting balance of being able to see the envision a different world given the same data points that other people have, like a point of view that you can really get behind and the hustle to keep going out there and doing it because it is a long road.
[00:33:45] And I think that's where the momentum kind of putters out for folks. I just, if I went back and I triangulated and I said, why did we work with somebody before the success was, you know, you could check the boxes and be like, Oh, great exit or Oh, great TVPI. Right. [00:34:00] There was this ability of them to think differently and I'm really trying to avoid the term first principles because I don't, I think some of these terms don't really get at the real meaning and we use them and people don't, don't understand the nuance of it.
[00:34:14] Every single time someone has a point of view and we're like, Oh, that's really fascinating. And it's the same data points that somebody else has, but they're looking at it with their own set of eyes and coming to it and saying, but I see this possibility and it doesn't necessarily get expressed in one company.
[00:34:29] It has this whole sort of. market to it doesn't have to be one theme or one thesis, but it tells me my takeaway is this is really compelling. I can understand why an entrepreneur is going to choose them because it resonates and you can hear it reflected back from entrepreneurs. And yeah, early success is awesome because then you can fill out the little form and be like, Oh look, Michael invested in these six IPOs.
[00:34:53] He's a great investor. Check, check, check, check, check. But that's like a fund four or five thing. That's not a fund one or two thing. If you're a [00:35:00] spin out, yes. But even then, I would say a lot of people that spin out don't necessarily have, you know, 15 years of experience. It's great if people do, but that's unusual.
[00:35:11] Usually people leave at a slightly more of the, it's still the upside of their growth curve as an investor,
[00:35:18] Michael Eisenberg: right? So is being a venture capitalist a skill set or a personality type?
[00:35:23] Beezer Clarkson: Can it be a mixture of both? Is that cheating? You want me to pick one answer?
[00:35:28] Michael Eisenberg: Oh my god, Beezer.
[00:35:31] Beezer Clarkson: I know. This is the mind. I know.
[00:35:33] It's very busy in here. Is it a
[00:35:35] Michael Eisenberg: skill set or a personality type? Coke or Pepsi? Oh, I never really liked Pepsi.
[00:35:43] Beezer Clarkson: Um, not really a soda person.
[00:35:45] Michael Eisenberg: I never did either, but I haven't drank soda in, I don't know, two and a half decades probably. But, uh,
[00:35:49] Beezer Clarkson: Way back in the day I was a Coke person, but I haven't had a soda in so many, like what, 20 years?
[00:35:54] So I don't know, but grew up in the Diet Coke era. So I'm a victim
[00:35:56] Michael Eisenberg: of that. It's a skill set or personality type. [00:36:00]
[00:36:00] Beezer Clarkson: I don't think you can be successful without a personality. I really believe there's a personality that drives this, but I think you can learn the skill set. I think the skill set is learnable.
[00:36:08] I don't, I think it's harder to learn a personality type, so I'm going to go with personality type.
[00:36:12] Michael Eisenberg: So are you an investor or a psychologist?
[00:36:17] Beezer Clarkson: I know you like this question. I should have prepared a better answer. I think there's a lot of psychology in investing when you deal with people. Right? I think if you're a growth investor or a public's investor, it's, it's, no, probably a whole different ballgame.
[00:36:30] Michael Eisenberg: Am I a psychologist or an investor?
[00:36:33] Beezer Clarkson: I'm not a trained psychologist.
[00:36:35] So is it terrible if I say I might be a bit of bit of that, like 70%, 30%? I'm just asking if
[00:36:41] Michael Eisenberg: you think I'm a psychologist or investor.
[00:36:45] Beezer Clarkson: Oh, I probably is the same. I think you're heavily into the people side. Right? I mean, you tell me, how do you consider yourself?
[00:36:53] Michael Eisenberg: Probably a poorly trained psychologist. You wouldn't want to entrust me with your children.
[00:36:58] Uh, well,
[00:36:59] Beezer Clarkson: you have, you, you [00:37:00] have experience with a lot of children. I don't know. Just ask them, they would tell
[00:37:04] Michael Eisenberg: you, they would tell you my kids, you know, you wouldn't want to use me as their psychologist. Probably. Uh, no, I think I'm like, I'm with you. I think it's a personality type and you obviously need, um, I think the financial skills are learnable.
[00:37:18] Uh, I, I, I, I have joked that I still struggle to read a balance sheet. Um, but, uh, I don't worry, AI
[00:37:27] Beezer Clarkson: is going to solve that for us. It's fine.
[00:37:29] Michael Eisenberg: Hey, I, I, yeah, we'll talk about that and say, but I'm finally getting to the question I wanted to open with, which, uh, by the way is, um, I want you to literally give advice and I see you got Harry Stebbings behind you, a young Harry Stebbings is behind you.
[00:37:47] So, uh, this is perfect. If you are giving a young VC advice. And there is right now this giant generational shift underway in venture capital. I mean, I've turned up at a couple of conferences recently. I know 50 [00:38:00] people introduce themselves to me as venture capitalists. First of all, I feel old, but second, I go, where the hell these people come from?
[00:38:04] And, um, what would you tell them should be their pitch to you as a potential LP, a young person starting out?
[00:38:15] Beezer Clarkson: Yeah. I think the simple answer is the, is the, is a great one, which is why you literally, why are you doing this? Why do you want it? Not just Why do you want to be an investor, but why do you want to invest in this area?
[00:38:28] And why do you think this area is compelling? That's we basically, that's what we want to hear.
[00:38:36] Michael Eisenberg: And if you just see like a young guy like Harry, uh, you say, why can he do this business? So why can he do this business?
[00:38:44] Beezer Clarkson: Oh, so I remember first meeting Harry, he and I got on to prep for a podcast and I think we had a three hour conversation.
[00:38:51] I mean, this was 2016, 17, it was a And I was so struck by his [00:39:00] curiosity and his interest in learning. And he had, he had point of views and theses and whatever you want to call it, but he was really listening for the information saying, I am observing this. What do you think? How does this work? And that curiosity I think is just amazing.
[00:39:16] And it's, it's not that you can't come to the table and have, have a reason for why you think it's true, but I do think at the early stage, if you're not always asking, how does this work and why does it work, you're just going to miss the next trend because it's, it's never known yet, right? I mean, again, I'm, I feel like an idiot saying your business because it's, This is just my observation, but it, it feels like at the early stage, it's all about what's new.
[00:39:37] So if you're not curious about learning about it, how does that, how does it work?
[00:39:42] Michael Eisenberg: So first of all, for full disclosure, I'm also an LP with Harry, uh, for a lot of the same reason. I'll get on to one more reason after, but, um, so is curiosity the core trait for a venture capitalist?
[00:39:55] Beezer Clarkson: I think it's a very compelling one.
[00:39:57] I think ambition is also very important and that can get [00:40:00] expressed in multitudes of ways because Transcribed Whatever gives you your hustle, and maybe it's not ambushed, and maybe it's a different version of wanting to change the world, and this is your method of changing it. But there's something about that that's going to have to get you up and out of bed every day, energize you.
[00:40:14] I have a belief, and I have no data points to support this, and maybe this is a psychologist, but if you're energized and passionate about the work that you do, it'll translate into carrying you through longer. And I wish I could triangulate that and say it's guaranteed to make you a great investor.
[00:40:28] Thanks I can't, but I don't know somebody who has been successful as an investor. Isn't passionate about the work that they do and it can be expressed again like it doesn't mean they have to be like Harry's an extrovert charismatic lights up the room when he walks into a person. I know introverts that are also passionate about what they do and they're much more reserved.
[00:40:50] So one of the things that I adore is this can be physically expressed in a hundred different ways of, you know, thousands, but it's, but it's there. And these folks are just going to be like [00:41:00] relentless, like, no, I believe this is true. And I'm just going to keep going out there and looking for it. Venture is a long game.
[00:41:07] I'm like, it is a marathons of marathons and I don't know how you get through it without that.
[00:41:13] Michael Eisenberg: So you just said core trait one of a venture capitalist curiosity. Core trait two is either ambition or, or passion. In the venture business, you say no a lot more than you say yes. And so is skepticism or pessimism an important trait or is optimism more important?
[00:41:33] Beezer Clarkson: I think the general trope is that early stage investors are optimistic by nature because how do you envision a world that's different when an entrepreneur comes to you if you're not? This is where I fail as a psychologist. I don't know if that's always a hundred percent true. I think being able to see how big it could be does differentiate the early stage investor from the growth stage investor at some level.
[00:41:55] The dialogue is just different when you talk to people. Um, [00:42:00] but I do think having, understanding where the potential potholes in the road can be is an important ability. You have to be able to balance these two, like, I'm sure, and again, I am envisioning what it's like to be in your shoes. You have, at some level, you help guide the entrepreneurs and knowing what's coming down the road is very helpful because you've seen it happen and maybe it's just some things around hiring or team or go to market.
[00:42:23] So you don't want to be a Pollyanna and be like, Oh no, no, it's always going to be fine. That's. Not true, but being able to see what could go right is a very powerful, is a very powerful lens to be able to look through.
[00:42:35] Michael Eisenberg: Entrepreneur friendly, overdone or not?
[00:42:38] Beezer Clarkson: I think of it means being blind in, in how we go to market and how we support each other.
[00:42:43] Maybe. Um, not that when entrepreneurs need a lot of support and encouragement, they're doing the, they're doing a real tough job. I mean, they're really the reason why we're all here just to bring it back and mad respect. We're the
[00:42:55] Michael Eisenberg: stagehands.
[00:42:57] Beezer Clarkson: Totally. I say the LPs are the peanut gallery. We're like [00:43:00] in the back.
[00:43:01] We're like, go team! That's
[00:43:04] Michael Eisenberg: good. That's good. I'm going to come back to that, the peanut gallery. So, um, I asked Mamoun at Kleiner, uh, what I should ask you. And he said, I'd asked Beezer if this is the worst time in 20 years or so to be a first time fund. And if you were a first time fund, how would you increase your chances for raising, uh,
[00:43:25] Beezer Clarkson: He's smart one, Mr.
[00:43:26] Mamoon. He knows a lot of good questions. Um, the numbers say it is definitely one of the low points. If you just look at the number of new funds that have been raised, looking at 2023, it is a small number. And LPs are not leaning in as much as before. So you have a bunch of challenges coming at you. Um, that said, I'm going to die on this hill.
[00:43:50] It is so much better than it was before, even if the numbers don't support it, because the multitudes of ways that you can bring a fund together. Now, like, I'm just going to throw out some of that. Like, the rolling fund [00:44:00] world did not exist. I don't know. 10 years ago. It is a way Like the Angel List
[00:44:03] Michael Eisenberg: Rolling Fund world.
[00:44:04] Just to tell people. Yeah. There's
[00:44:05] Beezer Clarkson: a way to get started. You can use, um, different ways of incorporating so that you can publicly raise on Twitter. Like there are means of getting your message out that just didn't exist before, which doesn't mean to say it's going to be easy, but you have those advantages, whereas before it wasn't.
[00:44:20] There is information to the conversation we had earlier, so you can go out and do your homework. And I tell this to my son all the time, I'm like, the bar is higher, my friend, because you can't say, I don't know, because you can go look it up. And so all of those are great tools in the First Time Fund Tools Kit.
[00:44:36] There are VCs that invest, not just individual VCs, but there are VCs that run mini fund to fund programs. And so there's ways of gathering dollars that just didn't exist before. So even if the traditional LP world is a little skittish right now on emerging managers, there are also still programs of like, we have an emerging manager program that we launch, a new one that we're doing for CalSTRS we launched last year.
[00:44:59] There's folks [00:45:00] like ScreenDoor, there's Zendana, there's Pivotal. There's a whole bunch of folks that didn't exist, I don't know, five years ago, 10 years ago, I could get my math wrong. Um, but Mamou is right that it is a very hard time because LPs, generally speaking, are really dialing into the haves and have nots and concentrating their capital where they have the highest level of conviction, given some of the challenges that have gone on the past couple of years in venture and some of the overfunding and then the exit market.
[00:45:29] There's just a lot of mishegos out there right now in LP land that's still working its way through. Um, and I think also, I'll say this. I think a lot of GPs. Get the full picture of how hard it was to raise when money felt like it was raining down on people And so I do not think it's bad if people decide they just don't want to do it And you know what they try to one or fund two and they're like, you know what this isn't what I thought I don't want to side hustle as a venture capitalist.
[00:45:58] That's always been true. I think it just [00:46:00] looked like it was less true For a couple of years, and we're still appealing, you know, dialing that back and getting back to reality. This to me feels like what it felt like for most of my career and venture. So it doesn't feel wildly different. It just if you came to market in 2018 to 2022, it feels very different.
[00:46:17] It's
[00:46:18] Michael Eisenberg: interesting you say that, by the way, when I saw Ma'moon's note, and he said the last 20 years, so I've been doing this at this point, I guess, 27, 28. It feels to me a lot easier today than it did in the mid 90s. Um, and a lot, a lot, a lot easier than it did in 2001 and 2002, um, when there was incredible carnage in the dot com.
[00:46:40] And I think you're a hundred percent correct that the whole kind of rolling fund phenomenon, uh, the Harry Stebbings phenomenon, which is you could build a media brand before you raise a fund. So you gain notoriety and, you know, he did, he gave himself, you know, 10 MBAs by doing a podcast, actually did himself much better than any MBA.
[00:46:58] Uh, he even got paid [00:47:00] for it. And, uh, you know, and to your point about your son, there's just endless ways to kind of learn the craft for people sharing open source advice on, you know, Uh, on Twitter and you can get access to anybody in the 90s and early 2000s to find my way to Beezer was like impossible, you know, to get a recommendation and people, you know, Horsley Bridge, you know, turning down meetings or, or, uh, you know, Harbor vest and, and the endowments, you know, Yale, I can get in there.
[00:47:28] Tl and so I actually think it's much much easier right now Than it was in the late in the mid 90s and in the early 2000s, but to your point, I think a zurp phenomenon Um is that money was easy But also that venture capital became a known something like in the 90s This was not a known something even in early the only thing they knew about it early 2000s was all the embarrassed venture capitalists And you know the the dot bomb, uh bust but now everyone thinks this is you know, I think it's an asset class Which I don't but by the way, do you think venture capital is an asset [00:48:00] class?
[00:48:00] Beezer Clarkson: Not really. I mean I should say yes but the answer is, it still feels boutique to me in a way and, and delicate, which I'm sure Venture Capitalists just cringe that I said that but it is, it is still very much of a craft and I think an asset class feels like a little bit more of something you can pop into the public markets and everyone can digest in its own way.
[00:48:20] Getting in and out is just much more facile than it really is.
[00:48:24] Michael Eisenberg: Yeah. I agree. So, um, what makes a differentiated LPs? Like, your day job is you meet people like me all the time, um, we try to sell you stuff like us. They sell themself. Um, what makes you a differentiated LP? Like why should I take you? Oh, I did already.
[00:48:40] But why should I take you into my fund?
[00:48:43] Beezer Clarkson: Well, I'd love to hear the answer on your side because you get to choose your LPs and that's a whole other set of math that I think people would be super curious about. Yeah. We try, I think you have to pick why people differentiate you and build a business around it.
[00:48:55] So we have decided to, from a Sapphire side, dedicate ourselves to venture. [00:49:00] And you can be a great LP and invest across multiple asset classes like many of our friends in endowment. So I just say that as we just decided, how could we be special? And we're, we're going to, we're going to love this space.
[00:49:13] Like everyone on the team loves venture. We care about it. We care about it as a non asset asset class. We spend a lot of time thinking about it. We wanna be able to be the person that, if you wanna call, here's what one of my GPS said to me. They're like, I don't wanna have to worry about the 16 different things that are happening in venture land.
[00:49:29] I just want you to worry about it and then I'll call you and you can tell me what you see. And I was like, great. 'cause you know what? You should go worry about the entrepreneurs and all those things like you had enough to do. And we can just own our little portions of the world. Not to Adam Smith it, but a little bit.
[00:49:45] Um, and so we've constructed a team that feels this way. We've constructed a team picking folks for different EQ and IQ reasons, different parts of the LP world so they can bring different abilities to the table. So we have a team of complementary but different skill sets. We've [00:50:00] done that very purposefully.
[00:50:01] Um, we've built our business model of how we go to market, how we share things like open LP, things like origins. We do all of this so we can stay connected and thoughtful and engaged, um, much like your, you know, your example of going to a conference and feeling like, who are all these people? I feel ya.
[00:50:19] And I'm like, Ooh, I got to get out there more because it's my job to know this. And the world is moving very rapidly. And I feel like, It's expanding. Like, our TAM is just getting so big. And I, I should say this because, um, I didn't do this well in my introduction. So we at, at Sapphire Invest in, as I said, early stage emerging and establish U.
[00:50:39] S. Europe and Israel. So we want to be the person that can be, if you want to have this conversation, we want to be able to have the conversation with you about how is venture working and what have we seen and not just what we've seen, but to the extent that we can tap into the, the hive LP mind on your behalf.
[00:50:57] What are folks looking and seeing around in these geographies [00:51:00] and how is it playing out and what are the best practices that we can offer and again, you'll interpret it the way you need to interpret it for your firm because you can't take, I mean you can't take Mamoun's best practices and just stick it on Aleph and have it work.
[00:51:12] It's, it's going to have to be authentic for Aleph, obviously, but Anyway, that's a long winded answer to why do we, how do we do what we do and why do we think it's hopefully relevant. Um, but Who's the best
[00:51:23] Michael Eisenberg: LP? Fund to Funds, Endowment, Family Office, Pension Fund?
[00:51:28] Beezer Clarkson: I, I think they all are great at different times.
[00:51:30] I think it depends on who you are and what you're building towards and what you want around the table. And I know, I do think there's Are you running for office? No, I think if you say, I just, I don't have any, I can tell you, I've walked into the rooms and it's all one kind of LP and I'm like, yeah, there's huge value in that.
[00:51:46] And then I walk into rooms, I think there's, there's a common wisdom that says you should have, I'd be curious, you're very thoughtful in how you go to do your doing, having a range of LPs because sometimes the markets hit people differently. And so [00:52:00] we don't have a denominator effect because we don't have Publix.
[00:52:03] Um, but that doesn't mean to say we don't have other, you know, fund of funds don't have other issues, and we're not a fund of fund. We run very large SMAs for two dedicated LPs. Mm-Hmm. . But, um, that's a mouthful. So I need a simpler way of saying that. And family offices can be wonderful co LPs. So we, we really do like playing amongst a lot of them.
[00:52:22] But I would tell you if you're a first time fund and you are banging on the doors of large endowments, they're not the right LP for you. Probably, statistically speaking, their check isn't the right check. Mm-Hmm. . So part of it. It's, it's, I'm trying not to use the word depend. It's correlated to the kind of fund you want to raise and what you're trying to do.
[00:52:40] And I didn't know Felice said this to me and it's stuck in my head for, I don't know, up 10 years. Your LPs should be part of strategic value of your firm. And this doesn't mean strategery in some sort of weird way, like they should be part of your superpower and every reason that they're there should work for you.
[00:52:56] And that's why I say they can all work, but not all of them all the [00:53:00] time. You just need to know what you're doing and what adds value. So, Michael, you tell me, how do you choose your LPs? And don't use us as an example, so you can talk about other people more freely.
[00:53:09] Michael Eisenberg: To be candid, when we started, all if I'd, uh, spun out from Benchmark as, I think, I think LPs call it spin outs, um, spin outs, yeah.
[00:53:17] So, uh, and the, the obvious place to go, uh, were the Benchmark LPs, and that became kind of the anchor set of LPs, uh, for the fund. And because this is a relationship business. Uh, at the end of the day and relationships matter if you've been around it for a while, you get to know people's demeanor during downtimes and good times and, uh, very critically, what we were interested in was people who were here to stay for a long period of time because, as you said, This business has, uh, highs and lows.
[00:53:48] It's manic depressive on some level. Um, and you want, you want LPs who can kind of raise the valleys and lower the hills, uh, a little bit. And so, uh, the length of relationship was critically [00:54:00] important and the ability to absorb the shocks. I understand the venture capital business. We thought there were a lot of tourists who would come and gone.
[00:54:05] I'd seen a lot of those in 2000 and at other times, I think we see it now. Uh, so that, that was the key for us. And so, Much like you talked about, uh, chemistry, we judged in all the meetings we had, and we raised the fund, as you know, pretty quickly. The key thing for us was chemistry, and would we feel comfortable, uh, sharing uncomfortable details?
[00:54:27] with the LPs, you know, things get tough, you know, and we separated from a partner, as you know, and, uh, those separations can be tough. And I saw it when I was at Benchmark too. And, uh, uh, key is that you can have an open conversation with your LP that feels like a conversation, not a telling, um, and you get feedback and you value their feedback and understand it's a relationship that you build over time.
[00:54:49] Beezer Clarkson: How do you then think about the different kinds of LPs in that mix? It's like the fund to funds, family office, endowments, foundations. So, assuming all non tourists, right, so you can take that [00:55:00] filter off.
[00:55:00] Michael Eisenberg: Yeah. So, we looked for a mix. You kind of referenced this earlier. We think that there are cycles in this business.
[00:55:07] People with what are called denominator effects, which is that their public market portfolio goes down so much that they can't deploy into, into a private equity or venture capital. And so we think. Uh, we think of it like an accordion. So you have people who come into times where they got to shrink and grow.
[00:55:24] That hasn't happened to us yet, but where they shrink and grow. Um, and you want people who can fill those positions in addition to which we also, because of the relationship side of this made a decision before we started. That we would not be taking small checks from lots of people. Um, we could have done that.
[00:55:42] We wanted a small number of deep relationships with, uh, highly trusted relationships, uh, funds and, and others. And I think that's endured to our benefit. Uh, it was something I learned at benchmark. Uh, quite candidly, uh, I think those [00:56:00] guys are absolutely first class. Um, and it feels like a family when we all get together and we can kind of have open conversations and drink a lot of wine together and, and even do some crazy things, you know, at our LP meetings and you'll still love us.
[00:56:13] Beezer Clarkson: Oh, well, yes, I appreciate the thoughtfulness. Great advice for other GPs looking to build their LP world.
[00:56:20] Michael Eisenberg: Thank you. Does mission matter at a venture fund or just returns?
[00:56:26] Beezer Clarkson: I am sure there is somebody out there who's a phenomenal GP who just cares about financial return. But, yeah. Everyone we've bumped into tends to have a bit of a, I want to get out there and change the world mentality, which I would translate into mission.
[00:56:40] I don't know if that's a one to one definition.
[00:56:43] Michael Eisenberg: Do you actually care about, um, the social values of a fund or just return?
[00:56:51] Beezer Clarkson: It's an interesting question. Or change the world.
[00:56:53] Michael Eisenberg: Yeah.
[00:56:53] Beezer Clarkson: Yeah. We have found when we keep our process consistent and [00:57:00] really look into the why we find someone compelling in the entrepreneurs that we end up with. A higher level than the traditional market of diversity and other aspects. So I think it somehow works its way out.
[00:57:15] And I think it's about having a wide aperture and looking at what's compelling and understanding different entrepreneurs and what's compelling in different markets. So I know that's a backwards way of answering your question. Um, this is interesting to me that when
[00:57:28] Michael Eisenberg: I said social values, you took it to diversity right away.
[00:57:30] Beezer Clarkson: Well, because we don't do, there's some folks who are saying if it's like a specific data point, like I'm trying to invest to, like back in the day I worked in a midi art network and we had to do grants. And so we did grants into entities, some of which were investing and they're like, we're out there to make sure more children get fed.
[00:57:47] Or there's more low income housing and so we don't, we invest for financial return. So that is our, our first and number one priority. But my experience is there is still social value. [00:58:00] It, those are not in conflict. And the data points I can pull from this, the most obvious one is one of diversity because we don't go out and pull you.
[00:58:10] How many, you know, how many employees are there now in the firms that you've worked with and how do you know what I mean? Like, we don't pull those stats, but I'm sure there's. and that they're not out there as well. But mostly I was just comparing it to some of the past underwriting I did. And this was back in the early 2000s that were very specific around social goals.
[00:58:27] Michael Eisenberg: Not to knock into walk into like this, this landmine, but do you actually care about what they kindly called D. I., which now seems to be being unwound when you invest in the venture firm? Or do you care about, Track record and returns.
[00:58:46] Beezer Clarkson: Say more.
[00:58:48] Michael Eisenberg: Inevitably, I think, uh, there's been a move in the venture business to, what is at least external or gender diversity, uh, bring more people in.
[00:58:58] That's been a, that's been a [00:59:00] concerted effort in some places. Um, it may or may not have any correlation, uh, to returns. I, I don't know. You have data, I don't have data. And so it might be too early to see whether that returns at this point, but yeah, does that matter or,
[00:59:15] Beezer Clarkson: so here's, here's the lens that we use.
[00:59:17] And as I said, we doubt we've, I don't know, I'm directionally correct. And I'm probably gonna get yelled at by our chief compliance officer for not having all my data, but we probably have a 60, 70 percent rate of diverse GP of diverse check writers as part of our team. GP based.
[00:59:33] Michael Eisenberg: Defined how?
[00:59:35] Beezer Clarkson: Um, pretty broadly women and people of color or self identified of a different of a gender orientation.
[00:59:43] Um, The process that we use, as I said, we were underwriting for financial returns first. But because we use a consistent open aperture of a process for what brings that in and who that resonates with from an entrepreneur is we end up with a much more diverse GP pool. [01:00:00] And I think it's because, how do I say this?
[01:00:04] Obviously the whole world has potential to be an excellent entrepreneur. Like capability and ambition and all that comes in many shapes and forms and bodies. And I think that then kind of gets pulled through and different people have hired different folks into venture capital to go after different areas.
[01:00:19] And if they're going after ones that are financially productive, it all works out. So we, we found that lens to produce a diverse base without saying we're looking for diversity.
[01:00:28] Michael Eisenberg: There's an implicit, there's an implicit assumption there that I'm not sure is correct. And that is just to take a simple, Uh, diverse thing that, uh, a black entrepreneur to want to work with a black venture capitalist and a white entrepreneur want to work with a white venture capitalist that, you know, I have this dear friend who I love, Roland Fryer.
[01:00:45] I think we both think that's not true. I mean, I invest in people who want to work with the best people. That's, that's what we keep finding.
[01:00:51] Beezer Clarkson: I say this every day. I invest in people that don't look like me every single day. And you invest in people that don't look like you every single day. [01:01:00] So that is not the limiting factor.
[01:01:01] And if people think it's the limiting factor, I would just say to them, they are wrong.
[01:01:04] Michael Eisenberg: That's inherent to being an immigrant to this country that I invest in people who don't sound or look like me every day. That's inherent.
[01:01:09] Beezer Clarkson: I mean, I remember first round and this is ages ago. So pre COVID my brain can't compute.
[01:01:14] And they did a, they did a sort of diversity report and they had at the time a, a publicly said, stated an all white male team. And they had a very diverse entrepreneurial, you know, CEOs, um, that they invested in to their point being like, you do not need to look like the people you invest in, go forth and find the best people.
[01:01:33] Yeah. I do think, and there's public, there's numerous public reports that having more diversity of thought, however one, whatever body that comes in, um, in public companies produces better, better results. And so I think everybody is trying to figure out how venture can do that same math. It's just, I don't know how
[01:01:50] Michael Eisenberg: you measure diversity of thought other than having an argument.
[01:01:54] Uh, in a civil, in a civil way, which I'm in favor of. You should hear the Aleph table. It's very, very, [01:02:00] very, uh, um, non consensus.
[01:02:04] Beezer Clarkson: No, I'm with you. I don't, I don't, when you asked me, how do we measure it? There's like the obvious check a box ways people measure diversity because of their external viewpoints.
[01:02:11] And I think that obviously doesn't get at a gazillion of them. Like we have a GP who is an immigrant and comes from another country and would take present like a white male, but it's like millions of different experiences that you could say is not what people have had in Silicon Valley that have grown up in Athens and you're like, anyway, I'm going off on a tangent.
[01:02:29] So diversity of thought.
********[01:02:31] Michael Eisenberg: Which brings me to my, to my own status, which is like, there is a, a history, I think, in the venture business, uh, that as people get older, they get less good at this business. Um, it's a young, young person's game. We used to say it was a young man's game, now I think it's a young person's game.
[01:02:49] Um, like, am I over the hill for this business? Like, ageism, ageism should be a thing in venture capital, right? They should want to get rid of me.
[01:02:58] Beezer Clarkson: I, I, I understand [01:03:00] what you're talking about. We hear it too. Um, I don't know, what do you, my experience is people that are really driven and hustle and love it and use whatever those stupid Twitter terms we're supposed to be using.
[01:03:11] I don't know if age is tied to that. I think there is, there's a different part of what you're asking, which is succession. At what point did people need to move over to make room for their firm? Or do you just keep growing? I'm coming there. But I want
[01:03:21] Michael Eisenberg: you to tell me if I'm over the hill and like, I'm being serious, which is people who are like in their fifties, they, I think, is it true statistically they get less good at this business?
[01:03:32] Beezer Clarkson: I think it's true that as humans, our brain can become less elastic as we get older. This is, again, me being a bad psychologist, but I think it gets harder to be flexible in what we think could be true. And I remember listening to Ron Conway way back, before I was at Sapphire, I was at DFJ and Ron Conway spoke at one of the annual meetings, and I think he's probably said this publicly, but he was like, it's very important to have younger people on the team.
[01:03:55] And Tim Draper said this too, because he's like, you need people that are going to bring in. I don't know. I [01:04:00] think it was how he did Twitch or whatever it was. Someone who's going to bring in this whole other way of thinking because, I don't know, Tim probably wasn't out there gaming online. Maybe he was.
[01:04:07] Maybe he wasn't. So that seems to be an important. technique people use to keep the new ideas coming because as we do get older and I'm, you know, you and I are basically the same age, give or take two months, I would
[01:04:19] Michael Eisenberg: never have said that about you. I was hiding your age. I spoke about myself.
[01:04:23] Beezer Clarkson: You know, one of the things I decided way back when I turned 40 now being over 40 was like, it's important to talk about being a parent.
[01:04:30] It's important to talk about age. Like if we don't, it's Who the hell, like, becomes this weird thing that people don't want to talk about and just make it non weird. Like, put it out there.
[01:04:40] Michael Eisenberg: We've just determined that both of us are psychologists and not investors. So we can have this conversation if you'd like, Beezer.
[01:04:45] I mean, you want a couch?
[01:04:47] Beezer Clarkson: Sure. Um, so yes, I do think there is a tendency as we get older to have you to be more conscious of doing things that keep you connected. If you want to keep doing it. Um, and [01:05:00] I do think that's where you can see, but I do see the, the term is always the elder states person, which I find also sort of a weird stereotype that people have, but they're like, Oh, they get to play the elder states person.
[01:05:11] I was like, Oh, I don't know if I want that role, but I do think there is. I also say the shout out to those of us who have been around for a while, being able to understand the cycles, like this downturn. It's painful, does not freak me out. I'm betting it's not freaking you out because you're like, oh no, seen it.
[01:05:32] Michael Eisenberg: Best time to invest ever.
[01:05:34] Beezer Clarkson: Best time to invest. Here's how we go all in and here's how you do this. And like, and it's, it's just very comforting to be like, oh no, this is fine. This is, this happens. This is like a wave. It comes in, it goes out. We got to play the pendulum. It's all fine. That's much scarier when you're younger. ********
[01:05:49] Michael Eisenberg: Yeah. I think at 21, 21 continued, I would have probably hung it up because I think it would have made the game harder to keep up. With the 24 hour term sheet nonsense. And, [01:06:00] um, you know, I think, I think perspective is hard, uh, to continue in this, like, you know, 24 month race on zoom. You know, we had our annual meeting, you know, I don't think zoom investing was a very good idea.
[01:06:17] I couldn't do it. I used to take people for walks. And you're a farmer, whatever it was, it was like, this was not for me. And um, you know, I, I couldn't keep up with that. Could have hung it up, but you know, thankfully the market turned, I guess.
[01:06:31] Beezer Clarkson: I'm in your camp. I, I, I have to get out and walk around and see where people are investing.
[01:06:35] You know, we started investing on the LP side in 2012 in Israel. I don't know, three visits in one year, cause it was a new. I worked with Israeli GPs while at DFJ, so it was not new as a concept, but I was like, I need to go out and see the world that Michael is going to tell me about. Otherwise, how do I, how do I know?
[01:06:54] How do I appreciate what he's talking about? And Zoom's terrible for that. Like it's [01:07:00] great for the five minute, let me pop up a PowerPoint so we can look at it together. But I don't know. I'm, I'm in your camp. If that makes me an old investor. I'm going to wear my little old investor sign with joy. I don't know.
[01:07:11] Michael Eisenberg: Have you ever told a GP to fire a partner? Have you ever maybe hinted to them that someone may be over the hill?
[01:07:17] Beezer Clarkson: Not because of their age. When asked, we will share with people the references that we have heard or our observation. It usually isn't a surprise when a GP comes to us and says somebody isn't working because The same way you could probably watch LP teams or entrepreneur teams and you're like, there is this energy that feels different and I'm not sure where it's going to go.
[01:07:39] Sometimes the different is very, um, it's very powerful and kind of gets back into the energy and other times you're like, I don't know. This just feels like that might, that might be more of a disconnect. Right. Then just different.
[01:07:52] Michael Eisenberg: Have you, have you heard that I'm over the hill yet? Okay.
[01:07:55] Beezer Clarkson: But if you will, I know, but you know, have you heard that I'm over the hill?
[01:07:59] Michael Eisenberg: [01:08:00] Definitely not. Definitely not. Definitely. Definitely. So, uh, you mentioned you came to Israel to kind of feel it out. Um, you, you know, the Israeli high tech investment environment, uh, probably better than almost anybody. Uh, I know a few others who know it reasonably as well as you do, or, you know, Catherine and other people like that.
[01:08:22] But, um, Have you seen sentiment around Israel change since, and Israeli companies change since October 7th? And how has October 7th made you think any differently about your own investments in Israel?
[01:08:34] Beezer Clarkson: Uh, hasn't changed our investment in OneIota. And I would also say on our platform is a large growth fund.
[01:08:41] Um, and they started investing in Israel in 2014 and made an investment last fall. I'm not sure if it was on October what date, but it was fall 2023. So still doing the doing. Um, I haven't heard, I would say when LPs talk about other geographies, [01:09:00] the dialogue hasn't changed and folks that were predisposed to want to have Israeli exposure still do and folks who have other desires for their exposure still do.
[01:09:11] Candidly, and I don't know if we want to open up this rabbit hole, I think one of the conversations that's more prevalent right now is investing in China. And you're seeing that a lot because of the U. S. government and things like that. That is really the dialogue that I hear. And maybe, maybe you have a different experience on the ground.
[01:09:28] I actually haven't heard a difference.
[01:09:30] Michael Eisenberg: Same, by the way. Yeah. On both notes, I was actually going to ask you, uh, to contrast, if you decide to find fascinating, you know, Israel post October 7th, where I sense, if anything, sentiment has become more positive, um, versus China, in which it feels like sentiment is going more negative and negative.
[01:09:45] Now, I've actually, as you know, never invested a nickel in China and we've never taken a dollar from China, um, because I was afraid of this moment, um, and had wariness, uh, about it. Do you find it fascinating? Uh, or interesting or [01:10:00] just kind of, okay.
[01:10:01] Beezer Clarkson: Oh, no, I find it fascinating. So I was a poli sci econ government history major in, at Westland.
[01:10:08] So all
[01:10:08] Michael Eisenberg: of this
[01:10:10] Beezer Clarkson: is like, Oh God, it's so fascinating.
[01:10:13] Michael Eisenberg: Geopolitics has finally come to our industry.
[01:10:16] Beezer Clarkson: Well and just to add a little personal wrinkle. So when I was at DFJ, I worked on the DFJ network, which was this, uh, I don't know, franchise model, which again is the wrong terminology for it, but DFJ literally joined the GP of venture funds around the world.
[01:10:30] And feel free to consider this bizarre, because I did. I went to China and helped do the R& B funds, and you can, I don't have any language capabilities on any score, certainly not anything like Mandarin or Cantonese I can maybe order in French and in Spanish, and that's it. And I was running around China looking at this in 2009 or 10, and I was like, Oh, over my skis.
[01:10:53] Like, this is not an area that I know I've not, I've no advantage, like I can't digest this. It's way difficult for [01:11:00] me. And I looked then at what's going on in the government politics today, and you're like, these are just hard questions, whereas Israel doesn't present those challenges. Do you know what I mean?
[01:11:10] And the technology is very consistent. I mean, I was going back and looking at some of the exits. I mean, Israel's had just a history of it. And I think it was kind of off the radar. I mean, again, it was on the, on the DFJ radar in the mid 2000. So for me, it's been very present, but there's a consistency of technology and of use and of caring about innovation and of.
[01:11:31] unbelievable grit and hustle. And I know this sounds like the, I'm just saying this to you because we're on this podcast, but it's just, it's just been true and you can look at it and the companies are exciting and interesting. And I got to tell you, I think some people in the United States don't realize how many of the companies are actually Israeli because they exit in the U S market.
[01:11:49] Michael Eisenberg: I agree with that. Um, I want to kind of go to a couple of more rapid fire things right now. Um, an article came out in December. It [01:12:00] said Sapphire ventures on is making a billion commitment. Um, to AI, uh, it says that you've invested 2 billion in AI over the last decade. Um, AI, AI, AI, are you, are you sick of AI or do you think this is like a bubble?
[01:12:21] It's like, here we go. We're old, right? So here we go. 2000 again, 2021 and it's back already.
[01:12:28] Beezer Clarkson: Um, so the good news is because we're old and because I do think there is this, there Um, accelerating speed of the hype cycles, we will not be saying AI is the same way six months from now. It'll be something new.
[01:12:38] So don't worry. Just wait. But yes, we are big believers as investors in software that AI is a critical piece of what's changing the landscape. And so there was obviously a lot of interest in what it means. And a lot of, you know, I had this conversation before, I think, a lot of what it means is actually a, In existing companies, it's not, it's both the new and the existing.
[01:12:59] [01:13:00] To me as an investor, I think that's fascinating. And I think there's very powerful and some really, um, I think some companies aren't going to do as well on adopting AI and it's going to be their downfall, which I know sounds like a very pessimistic thing to say, but you're already sort of seeing it in the, in the separating of how people are adjusting to this new technology.
[01:13:20] And it's more pronounced, I'm going to kick this can back to you. It feels more pronounced to me than mobile. Because eventually, if you didn't have a mobile strategy, yeah, maybe your storefront looked funny and people were annoyed, but whatever. Um, but I think if your major enterprise software or customer service or a lot of these things where we're seeing adoption pick up just to pick on a new area and you're not figuring it out, I think it's going to feel really hard soon.
[01:13:45] Michael Eisenberg: The way I would describe it is we felt that mobile for many legacy businesses was a way to leap ahead, but AI is existential. And uh, you know, at our annual meeting we talked about, we haven't invested at the foundation model or the LLM level, [01:14:00] but. We're very, very deep already since 2013 in, in applied ai applying AI to disrupt certain industries and change the way, uh, the business models of those industries, whether was when we're eliminated, that's our thesis, is that AI is gonna just disrupt so many different industries.
[01:14:20] Um, we won't call it ai, we'll call it new financial services or new insurance, or new maritime, or whatever the case is, or new accounting. Uh, done by AI instead of by, you know, fresh grads who you can't pay enough to, to do the audit.
[01:14:33] Beezer Clarkson: Well, so true. I'm so glad you offer those examples. We, a number of our GPs, yourselves included, when they talk about AI actually have a number of companies that predated this recent sort of whatever we want to call it bubble.
[01:14:46] I don't know, but what's the non negative way of saying everyone's doing all the same thing at the same time right now? Pendulum shift? Pendulum shift. Oh, you are good. You've got a good thesaurus there in your brain. Um, but yes, number, [01:15:00] pardon me, poli
[01:15:00] Michael Eisenberg: sci. Poli sci. Yeah, I write books on the side, but that helps, you know, so I got Google, Google thesaurus, whatever it is.
[01:15:06] Beezer Clarkson: Oh, it's good. I love, I love it. It's great. I love the language. Um, so yes, we, we do think it's existential, as you said, that's a good way of describing it.
[01:15:15] Michael Eisenberg: Okay. Last two questions. I'm going to make them tough. There are still many more men than women in VC. What challenges have you faced as a woman and do you think women venture capitalists face?
[01:15:31] Beezer Clarkson: Um, well, I hope some of these things have just changed in the, in the ecosystem. I think when I've been building my career, it was, slightly more uncommon for women to be doing the traveling and the working, um, versus the child raising. So I think some of the infrastructure, especially in the U S is just been kind of pathetic as far as helping any working parent do it.
[01:15:54] So the gender is not necessarily specific, but the United States is just really behind in the European countries and [01:16:00] Canada have much better ecosystem. So I'm hoping that's changing. So I think being a working parent, not that's obviously not the only thing for women and men to do, but it's definitely been a challenge.
[01:16:09] Um, And trying to figure out how do you do both work and I happen to be a mom so for me that's It's just harder, right, because you have to either live in your family or pay for support or some version, because it's hard to be in two places at once, and my son doesn't want to come to meetings with me, shockingly.
[01:16:26] Michael Eisenberg: So I'll tell you two funny things on that. One is my daughter, when she was in the second grade, they asked kids to bring their parents in to discuss what they do, and this one brought a lawyer, and this one brought, it was a doctor. And they asked my daughter to bring her father and said, why would you want that?
[01:16:38] All he does is sitting long, boring meetings all day. Uh, and you know, she was right. And the other thing I think that's come out during the war in Israel, but I think is true generally is that the most valuable player in this country is the grandmother and the grandparents. And because Israel is such a small country.
[01:16:55] Nobody moves to a different state. So everyone's 45 minutes or 60 minutes away. And so they can [01:17:00] turn up, uh, and do that, which I found interesting compared to the size of the U. S. Yeah. Just being close has value. Yeah. So shout out
[01:17:07] Beezer Clarkson: to my mom. When, um, when my son was little, my husband is a consultant, was traveling a lot.
[01:17:12] And I was traveling literally for every trip that I took those over like two days, she would fly from Boston to stay with my son. I know. Shout out. All those trips to Israel.
[01:17:22] Michael Eisenberg: What is mom's name?
[01:17:24] Beezer Clarkson: Eleanor.
[01:17:25] Michael Eisenberg: Shout out to Eleanor.
[01:17:26] Beezer Clarkson: Yeah.
[01:17:27] Michael Eisenberg: Amazing.
[01:17:27] Beezer Clarkson: Amazing. Amazing. And then my sister. I feel like we should end
[01:17:29] Michael Eisenberg: with that, but I have one more question I want to ask you.
[01:17:31] Oh, go ahead. Shout out to Eleanor. Wow. Shout
[01:17:33] Beezer Clarkson: out.
[01:17:34] Michael Eisenberg: Wow. Shout out to Eleanor. What, what, what makes you human? What makes you vulnerable?
[01:17:41] Beezer Clarkson: Uh, Oh, I think I care really deeply and it doesn't always come off, but I care a lot. Like I was saying people laugh all the time and they're like ever since becoming a mom and my son's 16 So now there's been a while.
[01:17:53] Yeah, like I'll cry at commercials. Like it is like I'm oh, I'm like the don't sit next to me on a plane I'm invariably [01:18:00] always crying at the movie and people are like this is so bizarre because you come into a meeting and you seem so Different but yeah still waters run deep. I yeah, I care a lot I care a lot that this world is a better place and people are happy and We do what we can to leave it, um, you know, whatever we can do a little better off.
[01:18:16] And I, my, my way of doing it is by supporting venture capital, so take that for what it's worth.
[01:18:21] Michael Eisenberg: Did you ever cheer up at an annual meeting of a venture fund?
[01:18:25] Beezer Clarkson: Oh, probably, probably at yours. I mean, if anyone's going to make me cry, it's yours, they're so heartfelt.
[01:18:33] Michael Eisenberg: These are Elizabeth Clarkson. Thank you for joining me on Invested. Uh, if you like this podcast, you can rate it five stars on Spotify. Uh, or wherever you listen to your podcast could be apple podcast and I highly recommend that you follow beezer on twitter She's at b e e b e e z e r 2 3 2. That's at b e e z e r 2 [01:19:00] 3 2 Beezer, what is two three two?
[01:19:03] Beezer Clarkson: I know you're going to ask me this. So way back in the dark days of AOL, when I first got online, um, I was working in New York at a, at a venture fund slash incubator, a first time fund, right? All the, all the firsts. Um, and I had to figure out a Twitter handle and an email, sorry, not Twitter. It was an email, an AOL email, and Beezer was already taken.
[01:19:21] And I was like, what? I know. This was like 2000. And my seatmate was like, well, just stick 232 And I, that was my email, it became my Twitter handle, because Beezer was also taken on Twitter at some point when I got on, I don't even know what it was, so it's, yeah, I know. But what is 232?
[01:19:39] Michael Eisenberg: But like, why 232? Does it add up to something?
[01:19:40] Because she
[01:19:41] Beezer Clarkson: literally typed in 232.
[01:19:44] Michael Eisenberg: So, somebody else chose your lifetime screen name for you.
[01:19:48] Beezer Clarkson: A little bit. Well, she was smart and wonderful and was a really good colleague and mentor at work. And you know what? She was like, here's a simple hack. Add something on, it'll differentiate it and keep going. And then it just, to your point about branding, [01:20:00] once it's there, changing it is just, it just created more noise in the system than it seemed to be worth it.
[01:20:05] Michael Eisenberg: Okay, now I have to ask you one last question. In a hundred years when they write the biography of Beezer, what will it be called?
[01:20:12] Beezer Clarkson: So there's this line in my head, Kurt Vonnegut is one of my favorite authors, and I don't really know if he'd be okay with me using this, but he's got this great line in one of his books that goes, strange travel suggestions are dancing lessons from God.
[01:20:25] And I just, whenever the world kind of throws you a curve ball, like I live in Austin, you're like, never saw that one coming. And it just always reminds me, I'm like, Oh, this is a dancing lesson. It's going to be interesting. Let's see what happens.
[01:20:38] Michael Eisenberg: All right. So the title's not going to be 232. Nope. Nope.
[01:20:40] Beezer Clarkson: Nope. No, I think Beezer killed that.
[01:20:45] Michael Eisenberg: You killed that, alright. Strange Travel Lessons from Beezer. Thank you so much for joining me, this was a lot of fun.
[01:20:51] Beezer Clarkson: Thank you for having me.
[01:20:52] Michael Eisenberg: Look forward to seeing you again soon.
[01:20:54] Beezer Clarkson: Yes.
[00:00:00] Alon Arvatz:
It just drove me crazy, and I went from like the most motivated person to a person that it’s hard for him to get out of bed every morning. So at that point, I said, okay, I have to do something different. I left Rapid7 and went ahead to found PointFive.
Michael Eisenberg:
What did your wife say when you decided to do this?
Alon Arvatz:
“I don't like it, but I support you.”
[00:00:24] Michael Eisenberg:
I am thrilled to welcome to Invested Alon Arvatz. Welcome, Alon.
Alon Arvatz:
Thank you, Michael, for having me.
Michael Eisenberg:
Alon is a serial founder in the world of cyber security. And one of the things we actually haven't delved into on this podcast yet is the world of cyber. And I'm thrilled to have you, because literally, you wrote the book on cyber. Is that fair?
[00:00:43] Alon Arvatz:
Yeah, that's correct.
[00:00:44] Michael Eisenberg:
Okay. So tell us about you Alon. Instead of me introducing you, tell our audience about you.
[00:00:49] Alon Arvatz:
Sure. So first of all, today I'm the CEO and co-founder of PointFive. Actually this new startup, which we announced two weeks ago, is not in cyber security, it's actually in an infrastructure management, cloud infrastructure management.
[00:01:04] But actually most of my background is in cyber security. So I started my cyber security knowledge and experience in 8200, like many other Israelis. Although I had a not-too-traditional path–I actually studied infantry–and after hurting my ear during shooting training, I actually moved to 8200, which is a whole story for itself.
[00:01:26] Michael Eisenberg:
Well, tell us.
[00:01:29] Alon Arvatz:
Okay, I'll try to keep it very short.
[00:01:31] Michael Eisenberg:
Okay.
[00:01:32] Alon Arvatz:
I really wanted to go to infantry, to command the unit. I gave up all my assessment to the intelligence corps. And I said, okay, I want to go to commando. I did, you know, all the tests, all the assessments, and I ended up in Egoz, which is the command unit, back then it was Golani.
[00:01:49] And actually through my training, I forgot to put my earplugs one time, and I started hearing beeping. And then I also was assessed with hearing reduction. And they kicked me out of Egoz, basically. And then I was like, okay, what am I doing now? They sent me to the HR of Egoz, by the way.
Michael Eisenberg:
The commando unit.
Alon Arvatz:
Yeah, yeah, yeah. Of Egoz. And I said, “Okay, I wanna do more. I'm capable of doing more,” and I just started a whole campaign in the IDF to get out of Egoz and get to 8200. So I got a pirate interview with 8200. I convinced the commander of Egoz to sign me off, I convinced like half of the IDF, until I was moved to 8200.
[00:02:32] Michael Eisenberg:
So amazing. Then you became a cyber commando.
Alon Arvatz:
Yeah, exactly.
Michael Eisenberg:
Okay, so you were in 8200 and then you got out of 8200 eventually.
[00:02:37] Alon Arvatz:
And then I got out of it. I did one year of Yeshiva.
Michael Eisenberg:
Talmud study.
Alon Arvatz:
Yes, yes, exactly. And then I decided I wanted to be an entrepreneur, but I had no idea how you become an entrepreneur. There is no degree in university of Entrepreneurship. It doesn't exist. And I had no idea where to start, so I said, “Okay, I'll go to university.” I thought, okay, what can help me as an entrepreneur? I said, okay, law and accounting might be helpful. Big lie. Wasn't helpful whatsoever, wasn’t what I had in mind.
And I also thought to myself, okay, I also have a backup of doing something in the economy ministry, which was also something that I always wanted to do. But as I started my studies, I met a few friends who became my co-founders. The first one was Barak. We founded together my first venture, which was a nonprofit for financial literacy for teenagers.
Michael Eisenberg:
We're going to talk about that soon.
Alon Arvatz:
Yeah. And after that, I also already got experience with schools, and teaching, and building curriculums, et cetera. And then I decided to found with Guy Cyber School, which was a cybersecurity training education for teenagers. We sold that company, and then Guy and I, and Gal who served with me in 8200, founded IntSights, which was my first tech startup, basically.
Michael Eisenberg:
Which was sold…?
Alon Arvatz:
Which was sold to Rapid7 for $350 million.
Michael Eisenberg:
In 2000 and..?
Alon Arvatz:
2021. Yes. It was an amazing journey.
Michael Eisenberg:
During Covid.
Alon Arvatz:
Yes, yes. Amazing journey. We took the company from nothing. It was our first high tech experience. We had no tech experience before that. We took it to over $30 million ARR.
I'm actually a lot more proud of that, rather than the amount we sold the company. And after we sold it, we became part of Rapid7. I wrote the book about the Israeli cybersecurity industry and what makes it so successful. It's called The Battle for Your Computer.
[00:04:35] Michael Eisenberg:
Yeah, we're going to talk a lot about that.
[00:04:35] Alon Arvatz:
For sure. And then PointFive.
[00:04:39] Michael Eisenberg:
How did you know you wanted to be an entrepreneur? Like where did that even come from?
[00:04:43] Alon Arvatz:
That's a very good question, because after I sold IntSights, I started giving lectures and talks about my personal journey. And then I had to ask myself, “Okay, Alon, where does your journey start? Does it start in 8200? And I think it really started when I was like, nine or 10 years old, going to my dad's work. My dad's always been working in the tech industry. He’s been the CFO of multiple tech companies. And I think the time when I went with my dad to his office and was amazed by the atmosphere, by the office, and how it looks like, et cetera, I think that was like my first point in time when I felt, okay, I want to do tech and maybe want to do entrepreneurship.
But besides that, I grew up in Israel. Entrepreneurship is many people's dream. This is what you see in the news. This is what is perceived as successful in our society. So I guess it all accumulated into very strong motivation to become an entrepreneur myself.
[00:05:46] Michael Eisenberg:
You know, now that you said that, you had mentioned kind of two minutes ago that you thought of going maybe into the finance ministry, the economics ministry, to do economic work or policy work. And now in the same breath, you said that part of what's regarded as successful, or let's call it models or people that we model behavior after now, is entrepreneurship.
[00:06:09] And I think that started by the way, roughly in the mid nineties, particularly around the ICQ and Mirabilis moment here, with these four shaggy-haired guys sold their company to AOL for $400 million. And in the earlier part of the State of Israel, people modeled themselves after army generals. Does it ever worry you that the most talented people today end up not in government, and not in the military, and not in places that really matter?
[00:06:33] Because what you said as a kid, I got inspired by these models of success who are entrepreneurs, and that's the kind of thing people model after.
[00:06:42] Alon Arvatz:
Right. And I definitely worry because of that, because the government needs very good people. And the bottom line is that many people go to tech, and many talented people go to tech.
[00:06:54] So it's definitely a concern. I think that the reason I wanted to go to government, or that was something that I said, “Okay, this is something I want to do,” that's because of the social impact that it has. So economy has always been a hobby of mine, since high school I've been reading about economy, like macroeconomics, but the reason I was considering government is because of the social impact I want to do.
[00:07:21] And the education I got from home, in my yeshiva, in my high school, of doing something that will be very beneficial and impactful to the State of Israel. So I think that. But let's put it this way, I don't think that the government will be able to give you the same financial benefits as the tech industry.
Michael Eisenberg:
I know, but so what? But this matters. Like we're in a country, and the world is like in a state of war ,and Israel is in a state of war, and we've got challenges and–I don't say this to be critical, but if you already raised it, which is, you sold a company, and instead of going to government, which you thought was super important and where successful people need to go, you went off and did a second company.
[00:07:57] Alon Arvatz:
That's true. That's true. But I can tell you that my definitely long-term plan is to do something in the public sector.
[00:08:03] Michael Eisenberg:
How long is long term? Because we need people in the public sector.
[00:08:05] Alon Arvatz:
I don't know. Right now I'm really into PointFive. So I'm going to be at PointFive for, you know, as long as it needs me. But my plan is like, I don't know, the next thing or the next-next thing to do is something in the public sector.
[00:08:20]
[00:08:20] Michael Eisenberg:
The next, next, next, next thing seems like a long time for talented people like you.
[00:08:23] Alon Arvatz:
Yeah. First of all, I'm pretty young, right? I still have many years ahead of me.
Michael Eisenberg:
How old are you?
Alon Arvatz:
I'm 36.
[00:08:31] Michael Eisenberg:
That's the perfect time. That's even older than the Founding Fathers of the United States.
[00:08:36] Alon Arvatz: Yeah, yeah, yeah. So relatively young.
[00:08:40] Michael Eisenberg:
So I want to actually first dig into your book. So you sold IntSights, and then you sit down and write a book. Why'd you write the book?
[00:08:52] Alon Arvatz:
Yeah, so first of all, I always had a dream to write a book. I love books.
[00:08:57] Michael Eisenberg:
You had a dream to be an entrepreneur since you're nine, how old were you when you had a dream to write a book?
[00:09:02] Alon Arvatz:
I don't know, but I can tell that since high school, I started reading nonfiction, and there were a few books that really shaped my philosophy, my perception of life, the way I look at the state, the way I look at policy, the way I look at philosophy. And I felt like books, especially nonfiction, by the way, have tons of impact.
[00:09:24] Michael Eisenberg:
Which books are those that had a big impact on you?
[00:09:27] Alon Arvatz:
So the one that I always highlight is Basic Economics by Thomas Sowell, which is an amazing, economist, a conservative economist. And he really like, you know, flipped my entire perception on economy. Like he made me, I would say capitalist in many ways.
[00:09:48] And I was just reading through the book and it was, as I was flipping page after page, I realized that it changes everything that I think about economic policy. And I was like, wow, this person changed my life in a way, the way I look at reality.
[00:10:04] Michael Eisenberg:
Mm hmm.
[00:10:05] Alon Arvatz:
And when I realized the impact that books have, I started reading more books, and at some point I wanted to write a book myself.
[00:10:11] Michael Eisenberg:
Amazing. So tell us about the Battle for The Computer, for Your Computer.
[00:10:15] Alon Arvatz:
So I can tell you that when I sold IntSights and as I was reflecting at my journey, I realized that a lot of my success is actually thanks not only to my personal talent or efforts I put into IntSights, but actually a lot of that was thanks to the ecosystem that was built in Israel.
So the investors that have a lot of experience with building cybersecurity companies and guided me through my personal journey, the entrepreneurs that have done it before me and can give me guidance, and the reputation that was actually built through the years. And when I, as an entrepreneur came and said, “Okay, I'm from Israel.”
So people said, “Oh, you're from Israel. You already get a few points ahead.” So that's a reputation that was built through many years, and I got the benefit of it, right? I could tell you when I started IntSights, which was actually pretty funny–I didn't know if people like Israel or they don't like Israel. So I always try to avoid mentioning that I’m from Israel.
And I also have my yarmulka on my head. So I always try to stand in the Zoom in a way that would, you know, it won't stick out too much. And at some point I realized that actually being from Israel is an advantage.
Michael Eisenberg:
It's a feature.
Alon Arvatz:
It's a feature. Exactly. So when I started my pitch, it always started with “I'm from 8200. I'm from Israel.” That's how I started. Like that was the baseline of the conversation, because the reputation that was built was really helpful. So after I realized that I said, “Okay, there is an amazing ecosystem that was built, right, through the years. I got the benefit, to benefit from this ecosystem.”
[00:11:48] It's time, one, to tell the story to the world, how it happened. And from my perspective, it was also a way to show gratitude to all the entrepreneurs that built this, this industry for me. And I got to ride on their shoulders and build IntSights.
[00:12:06] Michael Eisenberg:
Who are the two most important figures in the book in your mind, the builders of the cyber industry of Israel?
[00:12:14] Alon Arvatz:
Okay, so the first one is easy. That's Gil Shwed. No doubt about that. CEO of Checkpoint, biggest cybersecurity company in Israel. Okay. I think that Nir Zuk deserves a special mention. Palo Alto Networks is not really an Israeli company but it has a very big R&D center in Israel.
It makes a lot of acquisitions here in Israel, so an honorable mention. And from the investor side, it's definitely Gili Raanan. Okay, no doubt about that.
Michael Eisenberg:
He was your investor also, right?
Alon Arvatz:
No, no.
Michael Eisenberg:
No, he was not?
Alon Arvatz:
No.
Michael Eisenberg:
Okay.
Alon Arvatz:
Actually, it's a funny story. So when we founded IntSights, we got a term sheet from Gili, back then Sequoia, and from Glilot, from Kobi and Arik.
And we actually decided to go with Glilot, with Kobi and Arik, and they were amazing partners for us. I don’t know how it would've been with Gili, but they were amazing partners for us, and we were really happy that they were the ones with us and guided us through the process. I have to say though, about the entrepreneur that I felt most related to, is Mickey Boodaei.
Michael Eisenberg:
Mickey Boodaei is one of the founders of Imperva, Imperva with Shlomo Kramer.
Alon Arvatz:
Right, and then Trusteer, and now Transmit Security. I was captured by his humbleness, and actually the book ends with a quote by Mickey. And it's a fascinating quote. Because I asked every entrepreneur I interviewed to the book, “What is the biggest risk or biggest threat to the Israeli cyber security industry?”
And everyone said, “Lack of talent, lack of people that can actually build products.” And Mickey was the only one that gave me a different answer. And he said, “The biggest threat is hubris.” And he was like, “We learned nothing from the Yom Kippur war, where we thought we were so powerful and no one would dare fight us. And until today, because we're so successful, we feel like, ‘Hey, we're Israel, we’ll continue to lead the cyber security industry worldwide.’ And that's not true. If we won't be humble enough to listen to the industry, to listen to our customers, we'll lose our leadership. And it's just amazing how relevant it is to anything that happened to us as a nation in the last year, and since October 7th in specific. Because the history just repeats itself, and it repeats itself with our defense and security interests, and it can repeat itself with our cybersecurity industry.
[00:14:53] Michael Eisenberg:
Would it be fair to say–and I really appreciate Mickey's point–would it be fair to say that conflict is healthy for this industry?
[00:15:01] Alon Arvatz:
Definitely. Definitely.
[00:15:02] Michael Eisenberg:
It's actually imperative for the industry
[00:15:04] Alon Arvatz:
For sure Actually, I write about in the book–the whole reason that Israel became the leader to begin with is because we had challenges that, for example, American entrepreneurs didn't have to face. The fact that we don't have a market here, that the market here is very, very small, and that we had to adapt ourselves to the American market, that was a challenge that allowed us to build very scalable and agile products, products that are very easy to replicate, to sell, even for partners that live on the other side of the ocean.
And that's what allowed us to build amazing products that were also very simple. So a lot of the success of the Israeli cybersecurity industry is thanks to the challenges and the conflict we had in the beginning, and until today.
[00:15:50] Michael Eisenberg:
How important is it that, unlike in every other technology ecosystem where somebody goes to college and then at some point decides to get into cyber, here you get into cyber you're [00:16:00] 18, 19, 20?
[00:16:00] So you've got all these young guys together for five or six years and hacking away, they're probably more daring and less kind of scared when they're 18, 19, 20. So they'll do anything, and maybe the moral sense is less well developed as well. How important is that to the innovation in the Israeli cyber ecosystem?
[00:16:18] Alon Arvatz:
Yeah, yeah, yeah. No, it is very, very important. Actually, the technological unit in the IDF has a huge impact. I always say that, like, if you think of–I went to 8200, okay, I only testify by 8200. 8200 is the place where you wear a military uniform, you have a dining room just right at any place in the army, right? With the trays and so on. The cafeteria. But when you sit down with your friends, you can talk about what startup you will found when you will finish your service, and what is the latest technology that was just announced or published. Like these are, this is the conversation that people are having over lunch in the army.
So that is a crazy ecosystem to encourage people to go on their personal entrepreneurial journey. By the way, I'm curious, like, what is your perspective as an investor? About investing in people that came out straight from the army, versus people that went through college and had some experience in the private sector and just then got to become entrepreneurs.
[00:17:20] Michael Eisenberg:
I think it really depends on the area that they're focused on. I think in cyber you can kind of get away with it coming straight out of the army, and in some parts of data infrastructure you can, but for the most part, having someone a little more developed, particularly here where you need people to understand markets that are not Israel. This is a small country. I think it's important to have people slightly more mature.
What was the feedback on your book or the pushback?
[00:17:48] Alon Arvatz:
So first of all, the feedbacks were great.
[00:17:51] Michael Eisenberg:
I never met an author who didn't say the first answer, “The feedback on my book was great.” And I've written a lot of books, so.
[00:17:56] Alon Arvatz:
Yeah, so I'll try to be more specific.
Michael Eisenberg:
Yeah, okay.
Alon Arvatz:
Okay. I'll try to be more specific. I also got a lot of good feedbacks about the writing. Which was very nice, because it’s the first book I'm writing, like that it's interesting, it's compelling, et cetera. I think the biggest compliment I got was from my wife's grandpa, who said, “This is the first time I understood what this whole high tech is all about.”
[00:18:21] Michael Eisenberg:
Yeah.
[00:18:21] Alon Arvatz:
Right.
[00:18:22] Michael Eisenberg:
I thought you were going to say, “Okay, after the book, I'm finally happy that you married my granddaughter.”
[00:18:29] Alon Arvatz:
He said something pretty similar, and more funny, by the way. He said, “Now I know that you can make a living out of tech.”
[00:18:39] Michael Eisenberg:
I have a similar background story to my wife, that on my 15th anniversary, my wife's grandmother called up and said, “Mikey, happy anniversary. You know, you're not as bad as we thought you were.”
[00:18:53] Alon Arvatz:
Yeah. So similar comment. I can tell you that a lot of people told me, “Alon, the book is missing your personal story.” So, I put a lot of focus on the industry as a whole, and I guess not too much on my personal story. And people told me, “Alon, we want to read this book to also learn about your personal story. And that's very much lacking.”
[00:19:15] Michael Eisenberg:
You know, interesting tidbit, when Jacob Helberg's book came out–and he's been a guest on the podcast before–I called him up and I said, “You know, it's wild to me how much of your personal story you told at the beginning, because I also, in one of my books, was pushed by my editor to tell more of my personal story, and I didn't want to.”
He said, “Hey, you know, the same thing happened to me.” And he said, “It turns out that you come to write a book about a topic, but the editors know that people want to read your personal story first to know who they're connecting with.” Which I found stunning. I got pushed to do the same thing.
[00:19:51] Alon Arvatz:
Right. And also interesting comment, my book is now being translated to Chinese.
Michael Eisenberg:
Uh oh.
Alon Arvatz:
And yeah, it's going to be promoted in the Chinese market.
Michael Eisenberg:
Are there any secrets in there?
[00:20:04] Alon Arvatz:
No, not really. Not really. It also went through a censorship. They also cut, by the way, a lot of it. Like big areas of my book were cut off in censorship.
[00:20:14] Michael Eisenberg:
Oh, in censorship?
[00:20:15] Alon Arvatz:
In censorship.
[00:20:16] Michael Eisenberg:
Okay yes. There's an army censor in Israel that, you know, limits what you can say about things that are secret.
[00:20:21] Alon Arvatz:
Exactly. So a lot of it was cut, so it's clear. But funny story, they told me that I have to write a special introduction to the Chinese market to explain the Israeli culture. Because they said that for the Chinese reader, It would just look like fiction. It will be unreliable. The story is being told there about Israeli entrepreneurs. So you have to explain to them the Israeli culture. Like the fact that Shalev Hulio was standing in line in the coffee shop, and hearing someone talking about what he did in the army, and he was like, “Wait, wait, wait, what are you talking about? Okay, I need you to connect me to a person that has expertise in phone hacking,” that for them would sound unreliable. So you have to do an introduction to explain the culture. That was fascinating.
[00:21:08] Michael Eisenberg:
You also should tell them that people in Israel don't wait in line.
[00:21:11] Alon Arvatz:
Exactly.
[00:21:13] Michael Eisenberg:
Really. So was there any negative backlash to your book?
[00:21:17] Alon Arvatz:
Not really. I think there were a couple of people that felt they weren't mentioned enough or didn't get enough credit, which always happens when you try to cover a certain topic, but beyond that, mainly positive feedback.
[00:21:31] Michael Eisenberg:
So if I had to ask you, where's the Israeli cyber industry going, and tech going, what would you tell me?
[00:21:39] Alon Arvatz:
So I'm personally very optimistic about Israeli cyber security.
Michael Eisenberg:
Still bullish.
Alon Arvatz:
Still very bullish.
[00:21:45] Michael Eisenberg:
Yeah.
[00:21:46] Alon Arvatz:
Yeah. Honestly, I felt very uncomfortable with some of the articles in the Israeli media lately–
[00:21:55] Michael Eisenberg:
Yeah.
[00:21:56] Alon Arvatz:
–about the tech industry, where, like, the reader might get the perception that investors are pulling their money out of Israel.
[00:22:06] Michael Eisenberg:
Yeah. Yesterday, by the way, data came out that showed that all these same journalists who talked about a downturn investment were all wrong. Yesterday, the data came out.
[00:22:16] Michael Eisenberg:
I've been saying that they’re wrong the whole time. There has been no downturn.
[00:22:19] Alon Arvatz:
Listen, I was reading it and I was like, am I crazy? Because I experienced the exact opposite.
[00:22:25] Michael Eisenberg:
Yeah.
[00:22:25] Alon Arvatz:
Am I crazy? And I was like, went around and talked to the top investors in the world that have people here in Israel. Like top 10 investors. And they all told me they did investments since October 7th. Two of them appointed partners in Israel, which means they're doing strategic investment in Israel to be here for the long term.
VCs that never did investments here started doing investments last year. So my experience is exactly the opposite. I think, I'm very optimistic, very bullish. I think we should expand beyond cybersecurity. I think we're too much focused on cybersecurity.
[00:23:02] Michael Eisenberg:
Is it too crowded in cybersecurity now here?
[00:23:06] Alon Arvatz:
I think it is. Yeah. I think it is. Okay.
[00:23:09] Michael Eisenberg:
That's why I don't invest there, by the way.
Alon Arvatz:
Oh, yeah?
Michael Eisenberg:
Yeah. I can't compete in these crowded businesses, where everyone’s looking at them…I’m not capable enough.
[00:23:15] Alon Arvatz:
Yeah I think it's a bit inflated as well.
[00:23:17] Michael Eisenberg:
Me too.
[00:23:18] Alon Arvatz:
And I also think that like for our country, it's very important to go beyond cyber security. That's part of the reason that my new startup is not in cyber security, but in cloud infrastructure management.
[00:23:30] Michael Eisenberg:
Before we go to your new startup, what are the kind of, top two or three cyber companies in Israel that are kind of on your radar now that you say, okay, those are the future Checkpoints, those are the future Wizzes, or whatever it is?
Alon Arvatz:
Wow, you mean like early stage, or…?
Michael Eisenberg:
I'm not gonna, you tell me, the big three. The big three by Alon, go ahead. The guy who wrote the book on Israeli cyber has given us his big three. One.
[00:23:54] Alon Arvatz:
Okay, so I personally really believe in Mickey, and in Transmit Security, and what they're doing.
[00:23:59] Michael Eisenberg:
Whatever Mickey Boodaei does, number one. Next. Number two.
[00:24:04] Alon Arvatz:
Number two, I think that Island is doing something really great.
Michael Eisenberg:
What do they do?
Alon Arvatz:
Okay, they're doing browser security. But what I like about them is that they have a vision to go beyond browser security.
[00:24:16] Michael Eisenberg:
They just raised a pile of money, right?
Alon Arvatz:
[00:24:18] What?
Michael Eisenberg:
They just raised a lot of money.
[00:24:20] Alon Arvatz:
Yes, yes, yes.
Michael Eisenberg:
Who led that round?
[00:24:25] Alon Arvatz:
I don't, no, I don't remember. I don't know.
[00:24:27] Michael Eisenberg:
Hopefully when they edit the podcast, they'll put something on the bottom, some subtitle that says who led the round. Go ahead. Number three is?
[00:24:34] Alon Arvatz:
Yeah. Number three. Wow. That's a good question.
[00:24:37] Michael Eisenberg:
Mickey Boodaei and Island stood out quickly, but number three is tough. Who's number three?
[00:24:40] Alon Arvatz:
Number three is tough. Number three is tough. That's a good question. I don't know. I didn't think about it. I didn't think about it. I'll get back to you maybe by the end of the podcast. I'll get you the number three.
[00:24:54] Michael Eisenberg:
Okay. So tell us about PointFive.
[00:24:57] Alon Arvatz:
Okay. So actually PointFive is the born child of our personal experience at Rapid7. So at Rapid7 we became part of a very big engineering organization of thousands of engineers, and also part of their overall efforts of cloud cost optimization.
And there we really faced all the challenges around actually getting the engineers to take action. Because today engineers aren't really involved in the whole process of optimizing the infrastructure and reducing cloud costs. Today, cloud infrastructure is the number two cost driver for organizations after people, after human capital. And it's a big, big issue to all organizations. So we decided to chase after cloud cost optimization, but actually build a solution for engineers. So instead of going after the finance people or people that have more finance background, go after engineers or FinOps that are leaning more toward tech, that are part of the engineer organization, and actually build a solution that will motivate and give engineers the tools they need to actually drive action.
This is how we started. And actually over time we realized that the infrastructure we built can serve other aspects of cloud infrastructure management for engineers. So actually can facilitate different types of infrastructure management, and DevOps use cases that are not pure cost. So we started building our cost suite, and now we're slowly expanding beyond cost to also help organizations drive action across the general organization to manage anything related to infrastructure.
[00:26:37] Michael Eisenberg:
Do you love this idea?
Very much.
Michael Eisenberg:
You know how I know you love this idea?
Alon Arvatz:
How?
Michael Eisenberg:
Alon Arvatz:
Cause Tamar Yehoshua told me to ask you, why did you leave Rapid7 early before you vested to go do this thing?
[00:26:49] Alon Arvatz:
Exactly. I actually, we had two and a half years of hold back period.
[00:26:56] Michael Eisenberg:
Yeah.
[00:26:57] Alon Arvatz:
And I left after one year, just because I got really excited, we got really excited about the space, about the idea. And I really felt like I have to get back to entrepreneurship.
[00:27:06] Michael Eisenberg:
What, where did that feeling come from? You left real money on the table.
[00:27:09] Alon Arvatz:
I left a lot of money on the table. So first of all, to be honest, I felt like I have like enough money for what I want to do in life. So like getting more money, which is a lot of money, but more money won't change my life. So that was a certain baseline, but just being, you know, part of a big corporate, which everything is so slow, it's a lot of bureaucracy, and you're not making the decisions, really lowered my energy. And people that are not entrepreneurs, like for them, it's very hard to understand. Because I basically, after the acquisitions, continued to do the same thing, work with the same product. I had more or less the same role of leading the product, and product management for the same product. Like more or less the same.
But like the fact that you're not making the decisions. It's not yours. It's so slow. You're dependent on someone in Boston to approve any little thing you want to do–that just drove me crazy, and I went from like the most motivated person, to a person that it’s hard for him to get out of bed every morning.
So at that point, I said, okay, I have to do something different. I left Rapid7 and went ahead to found PointFive.
Michael Eisenberg:
What did your wife say when you decided to do this?
Alon Arvatz:
“I don't like it, but I support you.”
[00:28:36] Michael Eisenberg:
She doesn't like it. Why? Because it's all encompassing to be a founder? Because you left the money on the table?
[00:28:41] Alon Arvatz:
No, no, no, no, no. So my wife, it's not about the money.
[00:28:45] Michael Eisenberg:
That was after her grandfather said that he now knows you can make a living, and then he left it behind.
[00:28:50] Alon Arvatz:
Exactly. No, it just that, you know, life in a corporate, they're a lot more easygoing, and I had more, I wouldn't say time, because I was still working full time. I think it's more attention maybe.
[00:29:04] Michael Eisenberg:
Yeah.
[00:29:05] Alon Arvatz:
Okay. It's very hard to balance entrepreneurship and family. I think I'm making improvement over time in doing the right balance.
[00:29:13] Michael Eisenberg:
Does your wife think you're making improvement over time, or do you think so?
[00:29:16] Alon Arvatz:
I think, like, I don't think she's satisfied with where I'm at, like, she still believes I can do more improvement. But I definitely made improvements since my early entrepreneurship years, where I left her in certain situations. She always liked to tell a story where, on our way–and actually I'm pretty embarrassed about telling this story retrospectively, but as a young entrepreneur, that's what I did, so, yeah–actually, on our way to the hospital, like, when she was feeling like, how do you call it? Like, the pains before giving birth.
Michael Eisenberg:
Contractions.
Alon Arvatz:
Contractions. I asked her if we can go through a certain place. I don't remember if it was like to give a lesson in Cyber School, or to pick up something for Cyber School, okay, on our way to hospital. So then I'm very embarrassed to tell that.
Michael Eisenberg:
For your first child?
Alon Arvatz:
For my first child. Yeah. Yeah. So, but that's what happened. That's the reality.
Michael Eisenberg:
And you stopped?
Alon Arvatz:
No, I didn't.
Michael Eisenberg:
You did ask her.
Alon Arvatz:
I did ask her if it makes sense.
[00:30:26] Michael Eisenberg:
And you're still married.
Alon Arvatz:
I told you, I'm making improvements.
Michael Eisenberg:
And there have been more kids since. I was sitting here thinking, you know, at the beginning of the podcast, you talked about the fact that you had some hearing loss from your time in the army because you put the earplugs in. I'm thinking that that might serve you well.
[00:30:41] Alon Arvatz:
It did. It did. Back then, it felt like the biggest disaster that ever happened, and ever will happen to me. Yeah. That's how it felt.
[00:30:50] Michael Eisenberg:
Yeah. And now it's helped your marriage, because you don't hear when your wife’s yelling at you.
[00:30:53] Alon Arvatz: Exactly. Exactly.
[00:30:57] Michael Eisenberg:
So, David Politis of Better Cloud, he said, I should ask you this. He thinks you're being very deliberate in your approach to building PointFive, and you're more calculated than he has seen in many other places. And he wants to know, ‘where does that come from? Is it because of your previous founding experience? You're trying to do it a different way? Is this just how you operate? Since you're a super deliberate guy.’ That felt so un-Israeli to me, I didn't know how to relate.
[00:31:28] Alon Arvatz:
Wow, that's an interesting insight. I think that I'm a pretty deliberate person.
[00:31:35] Michael Eisenberg:
Yeah.
[00:31:37] Alon Arvatz:
That's how I grew up in many ways. And I would even say that I'm trying to coach myself to be less deliberate.
Michael Eisenberg:
Nice.
Alon Arvatz:
Because I feel that, and that's very interesting, because I feel that if you take my co-founder Guy Nitsan, which I built Cyber School with him, and IntSights, is the exact opposite. He likes to go with his intuition. He makes decisions on the spot, not that calculated in many ways. Amazing entrepreneur, by the way. And I really, after working with him for a while, I should learn the advantage of being more or less deliberate, and working more with your intuitions and making decisions on the spot.
And actually, since then, actually over time, I tried to learn from him as we're working together. And I'm trying to coach myself to be a bit less deliberate. So I can never be a different person. I'll always be this calculated, deliberate person that wants to do things in a very focused way and doing things right.
But I'm actually trying to balance it with fast decision making and going more with my intuitions, when I realized that like doing the calculations won’t get me that far.
[00:32:52] Michael Eisenberg:
So you and I are co invested in Dream, Shalev Hulio's company you mentioned earlier. Him from the line of overhearing the people who hack telephones, as you covered in your book. How is it to be an angel investor in cyber companies and why do you do it?
[00:33:06] Alon Arvatz:
So first of all, just so you know, I stopped investing in startups.
Michael Eisenberg:
You stopped?
Alon Arvatz:
I stopped.
Michael Eisenberg:
Why is that?
Alon Arvatz:
I stopped. So you have to ask yourself why to invest in startups. One reason is to make money. And as I told you in the beginning, I don't feel like I need to make more money. And I wouldn’t definitely want to spend or invest a lot of time in making more money. That's not how I operate. So that's a very basic baseline. The other reason I wanted to do that is to learn, about new technologies, about new trends. Investing really opens your mind to what happens out there.
[00:33:47] But I think that I just realized that before I want to do an investment, maybe because I'm a calculated, deliberate guy, it just takes me a lot of time to do that. Time that now as an entrepreneur, I don't have, so basically at some point I said, “Okay, I don't have the time. I don't really need the money.”
So I just stopped doing it. I feel sorry that I don't support early stage entrepreneurs that maybe need my support, need me to be there to support them. That's the drawback of not doing that. But still, I don't feel like I really have the capacity to do it the way I wanna do it as an investor.
And also to be frank, investing is a profession. It's an expertise. Like, I feel you have to really invest time, and to learn how to do it right, if you actually want to invest. Specifically Shalev, it was very easy. I was told that Shalev is building a company. I said, “I'm in.” And the reason is that after interviewing multiple entrepreneurs here for my book, I just felt like Shalev is one of the best entrepreneurs today in Israel.
Like, he's not the typical entrepreneur. He's not the one that went to 8200. He's not the tech geek. But he's so, I don't know, courageous. There's no fear. If you want to do something, you'll just go ahead and do it. And for me, it's really inspiration from that perspective.
Michael Eisenberg:
Yeah. I agree.
Alon Arvatz:
So when I heard that he's doing something, I knew that I'm going to put my money there because I'm not sure what it is, but it's going to be good.
[00:35:31] Michael Eisenberg:
Yeah. You didn't have to think that much about it.
Alon Arvatz:
Exactly.
Michael Eisenberg:
So I actually want to ask you about Cyber School. So this is really your first entrepreneurial venture. Why did you set up something called Cyber School? Like there is 8200, right, there are other units in the military. What was the purpose of Cyber School? Like why'd you have to get kids in high school before they go to the army?
[00:35:57] Alon Arvatz:
Yeah. So it actually came from, I would say like, my, social impact point of view.
[00:36:10] Michael Eisenberg:
But it was a business, right?
[00:36:11] Alon Arvatz:
It was a business. Yeah. It was a business. So my, actually my first venture was a nonprofit for financial literacy.
Michael Eisenberg:
I'm coming to that in a second. But I want to talk about cyber school specifically.
Alon Arvatz:
But cyber school specifically, first of all, I wanted to build like, like a business. But I felt there is also very big importance in getting kids into cybersecurity. Sometimes kids that don't have this opportunity from home. So getting into these schools, and get people exposed or kids exposed. And I'm talking about kids that not everyone had like me a dad that worked in the high tech industry since he remembers himself. So it was about giving opportunity and actually strengthening Israel.
[00:36:54] Michael Eisenberg:
Yeah, but most people think of doing something like that, like even 8200 has this project called Magshimim, where they go into high schools and train kids. This is a for-profit business. So people had to pay money. Parents paid money to get their kid into Alon Arvatz's Cyber School. It's probably what the kid could get prepared or whatever it is. It's like, you know, for 8200, it's like the Kaplan prep tests in America for the SATs, right? If you can pay and you can afford to do them so you can get ahead and maybe get into a bad Ivy League university or whatever the case is, right, that's, that's gone corrupt. But, like why?
[00:37:27] Alon Arvatz:
I understand. And I think that it's just not a black or white answer.
[00:37:31] Michael Eisenberg:
Yeah.
[00:37:32] Alon Arvatz:
I think it was a mix of, I want to be entrepreneur. I want to build a business, or learn how to build a business, and the social impact. I think what was so great about cyber school, is that it allowed me to mix these two motivations that always coexisted in me. That's why I wanted to be an entrepreneur. I wanted the fallback to work for the government, for example, because that's always two things that I feel like I have to balance, like the social impact and also my dreams and aspirations of building businesses here in Israel.
Michael Eisenberg:
When you're 50, what do you want to be?
Alon Arvatz:
[00:38:05] Ooh. So definitely in the public sector.
[00:38:08] Michael Eisenberg:
Like what do you want to be? What's the job?
[00:38:09] Alon Arvatz:
The Treasury Minister. That's my big dream, probably.
[00:38:17] Michael Eisenberg:
Minister of the Treasury.
[00:38:18] Alon Arvatz:
Yes. So, like I told you, macroeconomics has always been a passion of mine. After I finish to do my time in the private sector, I definitely want to do something in the public sector.
[00:38:29] Michael Eisenberg:
You want to run for office or you hope to get appointed to the treasury sector?
Alon Arvatz:
[00:38:31] I have no idea. I have no idea. I still haven't figured out my journey.
Government needs good people like you.
Alon Arvatz:
It needs good people, for sure, you know, I hope like me.
[00:38:42] Michael Eisenberg:
So like at this intersection of, you know, like public policy and business, and cyber, and kids, and whatever, like, how do you think about–if you had to distill like what your core value is, what is it?
Alon Arvatz:
My core value. That's a very good question.
[00:39:02] Michael Eisenberg:
I get paid extra for asking you questions, just so you know.
[00:39:05] Alon Arvatz:
So first of all, I can tell you that I'm a religious person. So the main thing that drives me is my connection with God. That's the number one. And I feel that the main thing that God expects me is to make this world a better place.
As much of a cliché as it sounds. I feel that's what expects me to be a better person, and to have a positive impact on the world. And I really, really believe that what I do allows me to have the biggest impact on Israel, on the world as a whole. And that's exactly why I do it. And I wake up in the morning every day. Now, again, you asked me what is the core thing? That is the core thing. There are a lot of motivations around that. And I shared with you most of them through our conversation so far, right? But if you take me like to what is like the most basic point, I think that is the basic point.
[00:40:10] Michael Eisenberg:
This leads me to the question about your first non-profit organization, Kanfei Kesef, which means ‘wings of money,’ or maybe ‘money has wings,’ I'm not sure. Like, why did you start that? And what was it about?
[00:40:27] Alon Arvatz:
So it started when I went to university.
Michael Eisenberg:
Right. So you were like, 24, 25?
Alon Arvatz:
No, that was like around, 2011, more or less.
[00:40:46] Michael Eisenberg:
2011. So you were then, 23?
[00:40:49] Alon Arvatz:
Yes.
[00:40:50] Michael Eisenberg:
Right.
[00:40:50] Alon Arvatz:
Yeah. I was yeah, 23. Yeah, exactly. Okay. 24. Yeah, I was 24. And actually when I started learning accounting, I felt like I'm learning things that are really, really basic that everyone should know.
[00:41:06] Michael Eisenberg:
Even though your father was a CFO, you thought they were basic. Exactly, exactly.
[00:41:08] Alon Arvatz:
I didn't, by the way, I didn't get financial education at home.
Michael Eisenberg:
[00:41:12] Interesting.
Alon Arvatz:
Although both of my parents were finance people. Like my mother is an economist, and my dad has always been a CFO. So I've never gotten any financial education. And I was like, how can I finish like 12 years of school, and I have no clue on how to manage money and how to work with money?
[00:41:31] Michael Eisenberg:
The cobbler's children have no shoes.
[00:41:33] Alon Arvatz:
Exactly. And that led me to the understanding that it is really important to teach kids about finance, and about what is money, and how to work with money. I also felt it's a way to bridge gaps, like social gaps between people that have less capabilities, and come from a lower socioeconomic level.
And that led me to say, okay, why don't I go and teach financial literacy in schools? And that's how we started. I always like to say that, like the scariest meeting I always ever had as an entrepreneur was meeting with this teacher in the first school, we pitched our financial literacy course, and trying to convince her to take us to teach in her school.
That was a lot more scary than meeting the investor at IntSights, which we wanted to raise from him like $30 million.
Michael Eisenberg:
Why was that more scary?
Alon Arvatz:
Because it was the first time that I told someone, you need to pay me money for all of the services I provide you. That's it. And it was just scary.
[00:42:47] Michael Eisenberg:
And did they agree?
[00:42:48] Alon Arvatz:
Yes.
Michael Eisenberg:
And do you have any idea where the first students of your financial literacy course are today? Have you kept track of them?
[00:42:58] Alon Arvatz:
Not really, [but I know that one of my first students at Cyber School actually, like three years ago, started working four floors below me. So we were like floor 11, and he started working and suddenly one day he's on floor eight. And one day I see him in the elevator. And I was like, “What's going on?” He's like, “Who are you?” I'm telling him, “I'm Alon. I taught you cybersecurity in your high school.” And I was like, “Oh my God, that's right.” And I was like, “What, what happened with you since we last met?” So he told me, “I got into this intelligence technological unit. And just last week I started working in this tech company on the eighth floor.”
And we're talking since then. His name is Sagi, by the way. And we're in touch since then. I hope that one day he'll come to work with us at PointFive. I'm still trying to convince him.
[00:43:55] Michael Eisenberg:
That's amazing. How many, how many students did you teach about financial literacy?
Alon Arvatz:
[00:44:00] Wow. In the hundreds.
Michael Eisenberg:
In the hundreds. So when I asked you your core value, you said that you think God wants you to make this a better world. How is financial literacy related to that?
[00:44:10] Alon Arvatz:
So I think that it's really, so let's put it this way. If you have a lot of money, you don't need financial literacy. Okay, you can waste money. You don't have to be that considerate. If your capabilities are limited from a financial perspective, it is really, really important to know how to manage your money.
And actually my dad always used to say, “When there is no money, love goes, escapes out of the window.” So that's something that I always heard, like as a child. And I think that again, if your funds are limited, you have to learn how to manage them very carefully. So I think that financial literacy, that's the way for people to on average classes to have a good life, to have a life where they can support their kids, support their families and actually build fulfilling family lives.
Michael Eisenberg:
If you were the Finance Minister of Israel today, the Treasury Minister of Israel today, and I said, “There's 10 million people here. We need to make them all financially literate or all financially stable.” What would you do?
[00:45:32] Alon Arvatz:
I would say that that's the wrong task. I would say that you have to start very early with Education Ministry to make sure that kids know financial literacy since they're 10.
[00:45:46] Michael Eisenberg:
There's a fair amount of studies that suggest that teaching financial literacy doesn't work. I don't know why that's the case, but I'm pretty certain that's the case. And in fact, just kind of running people like, the current approach is we use technology products, like here in Israel use RiseUp and some of these kind of neobanks have stuff to help people kind of engage in being financially responsible, rather than trying to teach financial literacy.
[00:46:13] Alon Arvatz:
So I will tell you what I think. I think that generally teaching anything without support from the parents, without support from home, has very small impact. And I think our task–
[00:46:26] Michael Eisenberg:
Says the guy whose CFO father and economist mother didn't teach him financial literacy.
[00:46:32] Alon Arvatz:
No, but again, I think that's, that's the whole point.If you listen to my story, my story starts as a 10-year-old.
[00:46:38] Michael Eisenberg: Yeah, I get it. I was kidding.
[00:46:40] Alon Arvatz:
Right. And it all started with my parents supporting me. So I feel without the support from the parents, from home, it's very hard to make an impact. But I think that if you make it something that is being taught in school from a very early stage, and at some point you're being tested on that, that will make it something that would become very, very important. And eventually parents, or the next generation will realize how important it is.
[00:47:07] Michael Eisenberg:
You are a product of a combat unit, a commando unit, and then an intelligence unit. You are a successful product of the Israeli entrepreneurship system that you chronicle in your book. If I had to ask you to tell me the difference between Israeli entrepreneurs, and let's just say American entrepreneurs, which you're spending a lot more time with now, what are the core differences?
[00:47:36] Alon Arvatz:
You mean like through the years?
[00:47:38] Michael Eisenberg:
Yeah. You know, what causes them to be different is maybe the better way to ask the question.
[00:47:45] Alon Arvatz:
So like startups today, I just feel like the Israeli industry has really matured in many ways. One, you have second-time founders who are actually motivated by different motivations. So second-time founders typically would lean more towards a quick exit, and more towards big companies that can last for the long term. So I think that is something that makes one difference.
The other one, I think that Israelis over time also learned to do go-to-market. I think traditionally, Israel is a really good tech hub because we have very good engineering expertise here, but like go-to-market's always been something that we outsourced to the U.S. And there's a lot of logic to that, because basically our market is in the U.S. But I do think that over time we'll learn more how to do or manage go-to-market as Israelis, and that will allow Israeli companies to build their headquarters in Israel over time.
And I can tell that my personal dream is actually to come back to Israel one day with PointFive and make sure that our headquarters being built here.
[00:49:05] Michael Eisenberg:
We should tell the listeners that you're now spending time in the U.S. on the East Coast in New Jersey, to set up the headquarters for your new company.
[00:49:13] Alon Arvatz:
Exactly. So for me, it's like more going there to build ourselves and marketing teams. That's the way I look at it for a few years, like as long as it takes. But my plan is that, at some point, I do want to come back here and make sure that we establish the headquarters in Israel.
[00:49:31] Michael Eisenberg:
If you had a choice to send your children for their quote unquote education, to an Ivy League university or the Israeli military, where would you send them?
[00:49:42] Alon Arvatz:
The Israeli military.
[00:49:44] Michael Eisenberg:
Why?
[00:49:46] Alon Arvatz:
Because of the soft skills that you gain in the Israeli military.
[00:49:50] Michael Eisenberg:
Be specific?
[00:49:51] Alon Arvatz:
Okay, so, first of all if you go to infantry, by the way, you get a lot of things. I can tell you personally, as a person that–by the way, I've only been to infantry for six months–but from my sixth months, I gained endurance, I've gained values.
For example, I will always do my obligations before I take advantage of my rights. That's something that's from my military education. And the idea that I can always do better than I think I can do. That's something I learned in infantry, that you cannot get anywhere else. In 8200 for example, the creativity, the tech experience that you get there that is very, very unique, the network, and you actually get some level of confidence there that you can become an entrepreneur in a fairly early stage. Just something in the air. It's something in the reserve duty people that come to work with you, and suddenly you say, “Oh my God, this person is like 25 and you already founded a startup.”
And Nadav Zafir was the 8200th commander when I served, and he was like–
[00:51:09] Michael Eisenberg:
He's the founder of Team8.
[00:51:10] Alon Arvatz:
Yeah, he's the founder of Team8, exactly. He told me like, “You know, when this 8200 soldier sees this reserve duty person come and work with him and like, he's looking at him, okay, he's already an entrepreneur and he's like, okay, if this idiot can open a startup, I can also open a startup, right? It becomes something that's realistic, you know, I can also do it.” And this thing, this is something that you can only get in 8200.
[00:51:36] Michael Eisenberg:
I said, I don't know, a few months into the war, that after I had visited the 8200 unit during the war that it was the greatest hackathon of all time, because everybody, you know, four, five, or six generations of people in the 8200 all come back and brought in mattresses.
[00:51:51] And you had kind of young and old developing incredible stuff, and we'd see incredible innovation as the war continued, and after the war, just out of these people. Do you [00:52:00] agree with that assessment?
[00:52:02] Alon Arvatz:
To some extent, yes, yes.
[00:52:05] Michael Eisenberg:
So that's a soft no?
[00:52:06] Alon Arvatz: No, it's not a soft no. It's not soft. I will tell you what, a lot of people asked me, “Alon, have you been called to reserve duty after October 7th?”
[00:52:18] And I told them, “Honestly, I'm not sure I’m that relevant anymore.” Like, I'm not, I have no idea what systems they use today. By the time they would train me, others can do a lot more. So I actually think that the people that actually finished their service, I would say in the last five years, are a lot more relevant and will have a lot more impact rather than someone that was released like 10, 15 years ago.
[00:52:48] Michael Eisenberg:
There's real cross pollination between the generations that can kind of create, I think, interesting innovation. Or you don't think so?
[00:52:55] Alon Arvatz:
I do think so. I do think so. But when you have an emergency, you really need the people that know the work and get things done very quick, rather than brainstorming, and finding like very innovative solutions. Actually, I hope that they will do it for the long term.
[00:53:14] Michael Eisenberg: Yeah.
[00:53:14] Alon Arvatz:
These brainstorming exercises.
[00:53:16] Michael Eisenberg:
Alon, if you run into somebody who had at least a similar background to you, who comes out of 8200 right now, what advice would you give to him or her to start their entrepreneurial journey?
[00:53:27] Alon Arvatz:
So I have two main tips. One, choose the space you want to become an expert in. This is very important, because you want to develop a cumulative expertise that then you can leverage to your entrepreneurial journey, whether it's cybersecurity or infrastructure, which is most typical in Israel or something else, fintech maybe, whatever it is that you're passionate about.
[00:53:53] And actually number two is go work for a startup. So go see how it happens firsthand. Now, that's funny advice because I didn't do that. I went straight ahead to entrepreneurship, but I have to say, I do feel that I was a bit lucky, honestly, that's my honest feeling. And I think like at least doing one session or one period of time working for a startup, understanding how it happens, understanding the terminology, get connected to entrepreneurs, and learning from them how to build a startup, I think that can be extremely helpful for you when you will build your own startup.
[00:54:32] Michael Eisenberg:
So two last questions. You spoke on Fox right after the war started about how Hamas leveraged crypto for funding the war. Is this still going on, and what's being done to stop it?
[00:54:45] Alon Arvatz:
First of all, I have to give you a compliment about your background research. The best that I've ever seen.
[00:54:53] Michael Eisenberg:
I have the best team out there. Period, full steam.
[00:54:58] Alon Arvatz:
You have the best team out there. So honestly, I'm not up to date with the status today of cryptocurrency and Hamas. I would guess that the answer is yes. Just that crypto is a very easy way to get funds without being, I don't know, scrutinized or without being, you know, subject to different regulations or sanctions. So I would bet they use crypto. I'm not sure to what extent.
Michael Eisenberg:
What would you do to stop it?
Alon Arvatz:
Honestly, the main thing that we should do to stop it is like, on-ground intelligence to identify the accounts they're using, okay, and cooperate with banks and with cryptocurrency wallet management providers like Coinbase, for example, and just shut down their wallets.
[00:55:53] Michael Eisenberg:
Got it. My final question to you goes back to something you said about your parents and maybe your wife's grandfather too. So you have children of your own now.
[00:56:03] Alon Arvatz:
Right. Four of them.
[00:56:05] Michael Eisenberg:
What are you teaching them?
[00:56:07] Alon Arvatz:
Great question. So first of all, I teach them values before anything. Values, Jewish tradition, that's always number one priority. I'm not very successful with that, but I'm doing my best to learn with, you know, each of my kids at least a few times a week–Bible, Tanach. So that's my effort for me, like Jewish tradition is number one.
Number two is tools for life. So tools for life I would say–English, very, very important. All of my kids went to private English lessons since they're three or four, and now that we're in New Jersey, they learn a lot more, obviously.
Two, I think that learning technology is very important, because I think that when they will grow up, one, there will be a lot more technological jobs than non technological jobs. There will be a lot more tech companies than non-tech companies. And even for non tech jobs, technology will be used extensively, whether it's AI or any other technology around computers that they will use.
So our world becomes a lot more technological. So I think that's number two. And number three, it's believing in themselves, something that served me tremendously through the years and aspiring to do great things.
[00:57:39] Michael Eisenberg:
Amazing. Although I noticed you didn't mention financial literacy.
[00:57:42] Alon Arvatz:
That's true. That's true.
[00:57:45] Michael Eisenberg:
Alon, thank you so much for joining us on Invested, and I encourage everybody to buy the book and read it, The Battle for Your Computer. Alon Arvatz is the author, it's the story of Israeli cybersecurity, and if you want to learn more about Alon, check him out on LinkedIn at Alon Arvatz, that's A L O N A R V A T Z. Thanks Alon.
[00:58:06] Alon Arvatz:
Thank you very much, Michael.
Michael Eisenberg:
Good to have you.
[00:00:00] Ami Daniel: But I have people right now locked in
[00:00:02] Izhar Shay: with terrorists around them. We faced the most evil atrocious set of activities that a person could think of. This
[00:00:09] Stefan Tompson: is not a fight for just Israel. This is not a fight for the Jewish people.
[00:00:15] Marc Rowan: I think one of the things we should do is make sure there's a cost for being an anti Semite.
[00:00:19] Sam Lessin: And then after 10 7 it became, I was like, Oh my God, I'm wrong, right? Harvard is off the rails.
[00:00:23] Michael Eisenberg: I'll tell you when I came to visit you at the Shiva, it was one of the hardest hugs I've had in a long time. Can you tell us about Danielle, your daughter? She's an amazing person.
It's now been one year since all of our lives changed on October 7th, 2023. A Shabbat and holiday morning that, to paraphrase others before me, It was a day that will live not just in infamy, but in deep pain for the people of Israel, for the state of Israel, for the families of those who lost loved ones. A year later, we might forget that on that day, women were raped, [00:01:00] children were burned alive in ovens, families were destroyed.
There are still 101 hostages held captive by Hamas terrorists in Gaza. We've lost tens of hostages who were murdered by that brutal regime inside of Gaza, held in dungeons, suffering in untellable conditions under the ground of Gaza. And I think back also, over the last 20 years, as the world has poured millions and billions of dollars, tens of billions of dollars into Gaza, as UN agencies operated in Gaza, concrete was delivered to these people, pipes for water, and what were they used for?
For missiles. for building dungeons to hold the hostages and sex slaves. That's what happened in Gaza. That's what Hamas prepared 20 years for. That's what UNRWA supervised. Would you believe that we'd be sitting here on October 7th, 2024, knowing both at the same time that members, [00:02:00] teachers in UNRWA were terrorists and butchers.
And at the same time, that same agency asks for their immunity. Think of the countless of lives that were destroyed on that day. This has been intensely personal. You've heard me say before that I've had numerous sons serving on the front. We lost two cousins. Everybody has friends who have lost children due to the brutality of Hamas, due to the brutality of terror organizations that the world decided to countenance for way too long.
That's what the last year has been like in Israel. One year in, you may have forgotten those original images. If you didn't see the 47 minute film prepared by The IDF and the prime minister's office, a large part of which I did see. You may not still hear the screams of the people. You may not be able to see the head being chopped off by a whole wielding terrorist of Hamas.
The glee with which they shot up homes, babies and tore [00:03:00] families apart one from the other. There have been heroic moments since then. The saving of Noah Argamani was a moment of heroism. But Noah should never have been taken on that motorcycle. She should never have had to spend time in Gaza. That's a trauma she and many others will carry with them.
And I think it's also important to come back to the sexual violence that happened on that day. The rape of women that we thought had been banished from our lives for already hundreds of years as a tool of war. Something that no modern person should have to think about. But it returned. Sheryl Sandberg documented this in her film.
The screams of the women, the screams of silence who were raped multiple times by Hamas barbarians. We cannot forget this. The one year anniversary must remind us all of the horrors that happened on that day. The day that the most depraved people on this planet were jubilant. The day that not only did terror [00:04:00] rear its ugly head, but struck fear in the eyes of many.
Not only a day in which terrorists destroyed families, but a day in which people on college campuses rejoiced. And a day later when the Hezbollah terrorists launched missiles on Israel, this was a coordinated attack at the heart of humanity, at the heart of Western civilization and attack into the hearts of civilized people.
Throughout this year in Israel, we've recorded people affected by and who were effective on October 7th. We've heard a lot of very human stories. Stories of tragedy and stories of resilience. And it's those stories we want to bring to you today. But not before we remember that there's still almost 150, 000 Israelis displaced from their homes by Hamas terrorists in the south and Hezbollah terrorists in the north.
There have been hundreds of soldiers killed. As I mentioned, two of my cousins were killed as well in battle, but these kids are heroes. They [00:05:00] are unique Israeli heroes. As I've written before, this is the defining generation, the generation whose brains were not turned to mishmash by TikTok, the generation that was not confused by Instagram.
They didn't just flick forward. They turned the page on history by turning up and being counted. One year after the horrific October 7th, we'll take stock on the pain. We'll look at some of the really touching heartfelt and heart rending moments that we've experienced in our own podcast here. We will also salute this young generation, this very resilient population of the state of Israel that has showed the way for the West.
Forward that has showed the world that you can stand up for freedom. You can stand up for morality. You can stand up and be counted. You will see how they turned up in spades since October 7th, the people behind that innovation who [00:06:00] lost loved ones and the people who came to save people they didn't even know.
We want to recount some of these inspiring stories and some of the lessons for the entire Western civilization and the civilization of civilized people. I think the other lesson you can take on October 7th, 2024 is the following evil can be defeated. We fight depravity with optimism and we fight those who ravaged us with resilience, innovation, optimism and resilience will win the day.
Israel will come out on top and ultimately with enough moral clarity, the West can win this fight against evil. So please come along with the journey back in time for one year and forward to a much better future. Ami Daniel is the CEO and founder, co founder of WinWord. We want to start by
[00:06:54] Ami Daniel: talking about October 7th.
I live northeast of Tel Aviv. I just sit in the TV. I sit at the [00:07:00] computer. I go out to my study where I'm right now and I say, say, listen, we got to do something. And then I just start calling people, basically. I call you Michael, but it's Shabbat, so it took me a few hours to get ahold of you. I call some other people and my, my brother in law is very active in brothers and sisters in arms.
Which is a new civic movement, which was built in the last 10 months. So I called him up and said, listen, did you see what happened down south? We need, we, we gotta help them. His name is Tamir and he says, listen, let me, let me check back. I'm back to you. He's checking with them. They didn't really know what to do.
He calls me back, says, listen, I can't do anything tomorrow. So I said, I say, okay, so I'll do it alone. No problem. And I started messaging in a lot of WhatsApp groups. Does anybody need help? Does anybody need help? I did this instinctively without any plan. And then people start coming, start coming back to me.
And the first guy actually is, it is Shaka, which you know very well. Venture capitalist is a venture capitalist from cool. [00:08:00] What capital? Yeah, we, we, we together went to meet some people some material Israeli things last 10 months. And he calls me back and says, I mean, my lawyer. It's right now with a car with a gun going down the South trying to rescue his daughter.
And I was like, excuse me, can you please repeat that for me? He says, yes, my lawyer is in the car with a gun trying to rescue his daughter, but can you call him and help? I called this guy. I've never met him. I don't know who the guy is. He said, listen, they all, Hey, what's your name? He says, yeah. Can I help?
He says, yes. My daughter was in the party. It was a big party called Nova, the Nova Peace Festival, Nova Peace Festival. It's about 1, 500 or 1, 300 young people celebrating peace a few kilometers from the Gaza Strip, four or five kilometers. And she says, it says, listen, she got away from that.
They were massacred there and she's hiding right now in, in some open area. I'll give you her number. And then I WhatsApp her and I [00:09:00] said, Yoni, your dad told me to help. How can I help? And she, and she writes me back like in a second, listen, my boyfriend and his friend, they tried to save us and they got shot.
We're surrounded with bodies. We're just outside in this open area and we need help. Can you help me? Here's my location. She sent me a WhatsApp location and my instinct to respond to her was I'm on it. Don't worry. We'll fix it. Why did they say that? I have no idea because I had no background to say that obviously, but I just say on it You know, I'll get you out of there.
I turned to my wife and says listen, what do you think you should do? She says listen, do you remember the guy who were in London a couple years ago who started with us? He's a he's a He's a general in the army. How would you call it? Okay. I was his mentor Michael I think you put him together with him to mentor him And in some internal course, me a few months ago.
So I know him, I know his wife, I know his [00:10:00] son. Right. I called him and said, well, why listen, I have these people there. They're just outside. We need to help them. What can I do? He said, listen, I'm on vacation lately. I can't help, but he used a phone number. Of the operations officer of Delta South. Call him, tell him, I told you, I told them to help you.
Said, okay, but please rest your, I called the diner and said, listen, you don't know me. My name is Ami, but I have people right now locked in with terrorists around them. Give me somebody to work with. And then from that sentence, all the words for the next three days or so, but specifically that Saturday, I made maybe 50 calls, maybe a hundred calls at this guy.
And I got, and this guy gives me now a guide who is around the ladies, the young ladies location to get her out. So the one I had a, well, what's what, what's up with her. And she's telling me it was five or six hours with her and what's right. It's not, it's not a minute. This starts 8 00 AM. It finishes one, 2 PM.
It's And she says, listen, they're outside, they're terrorists outside, they're trying to kill us, they're shooting people, and so [00:11:00] forth. And he got me together with these forces on the ground, and we managed to get her out. And then we did it again, and again, and then in Béry, and then Béry was a big city down south, I think the biggest one, right?
It's about 1, 400 residents, really close to the fence. And, and Barry was really a massacre over there. So suddenly these people started swallowing to me and my brother in law calls me and says, listen, do you know what I'll help, I don't care. And he started sending these messages in brothers and sisters in arms WhatsApp, which is again, hundreds of thousands of people around the country.
And I do the same in the entrepreneurs WhatsApp group in the whatever tech leaders for democracy, WhatsApp group. And people start spreading the word, so people started coming back to him and coming back to me and coming back to some friends coming back to my wife. And then suddenly I'm overflown with hundreds of people right now under fire and they're telling me, listen, here's my location.
Nobody's helping me. Can you please get the army here [00:12:00] all on WhatsApp, all being coordinated with both the people who were under attack and the army on WhatsApp, all of WhatsApp. And I think in Saturday. I focus on Bairi because this is, I think, one of the, the hardest areas and I just, I'm just one, one person, my wife, kids are at home.
Right. So, so, I focus on Bairi and I, and I get to the region of first forces that break into Bairi and, and I end up with a guy with the commander is calling the Dalleluria, who's right now coming from the fence around. So the terrorists were in the epic gate, the barbarians actually, maybe shooting everybody coming in.
So he goes around the fence. And this guy just, you know, he just gave me his number and I said, listen, I, I got your number. Can you go down to South Tiberii? And he says, I'm on my way. Give me 15 minutes. And nobody else is telling him what to do, right? He's like a coordinator in the army. He has 25 or 30 people with him.
We should, we should also say at this point that some
[00:12:59] Michael Eisenberg: [00:13:00] week plus later, you discovered that Luria, this guy actually got in his car from the Northern border of Israel from Betzet. It went south to save, it loaded, put on his uniform, put his gun on and went all the way south to do that and then two and a half or three hours later, which first of all tells you how small a country Israel is.
He's now at the fence in the southwest of Israel in Beirut, talking to you on the phone. And you're kind of directing him to get people, but you only discovered this, that he came from the north like a week plus later.
[00:13:29] Ami Daniel: Yeah, I, I, I didn't know. He just sends me a WhatsApp message. I'm on my way in 15 minutes.
And then when he comes in, I started working with him. Now, it's important to say that these, these cities downtown don't have streets names. Yeah. So opposed to New York City, where you say, you know, I'm on the 6th and 25th or whatever, Yeah. Yeah. Yeah. You can't really, like, if you don't live there, there's no name, right?
This is called Little Towns and Villages with Little Roads. Yeah. It's like Little Roads and the houses, people know the houses according to the family name [00:14:00] and the number. But if you Google, go to Google maps, it doesn't appear there. So, so I think it's a big issue because I end up working with three or four different ground forces of Béry, every one of them in a different area of Béry for like 14 or 15 hours, and they don't know the place and they have no maps.
And really they don't know really that each other are working there and, and I'm, I'm, I'm getting these locations from people. And I think at that time, I think it's what's crazy is there are terrorists in the houses. It's not that this is done and the army is like, you know, there's three to five terrorists in every house.
Oftentimes, and I've spoken to many, many families and I help them, they're in their shelter lock. The, the dad is pushing the door handle so people don't open it. The terrorists are setting the house on fire because they can't open it because the dad is like this for the hours and the door is becoming hot and a terrorist either putting [00:15:00] it on fire or not putting it on fire and waiting outside the door, ambushing the, the forces coming in.
So at that time, what I end up telling the forces is not just. There are people in this house because they don't know where they are, but where they are because many have been kidnapped and also where the terrorists are to the extent that right now, let's say they send me WhatsApp pictures from the ground and send me live location and I send them back maps with drawings that I do on my iPhone of where the terrorists are and, and I try to help them understand where, in which windows are the terrorists and where did they miss them.
And a few felonies where we had one felony, the mall felony where. The dad has ALS and he just, he's, he's, he's, he's in a wheelchair. So we had to tell the two kids to jump through the bathroom window while the forces go in and blow up the door. And we knew there are two terrorists hiding for them, one in the stairs and one in the second floor.
And it's very surreal because I'm just like, I'm just a [00:16:00] CEO of a tech company. Right. I don't usually, I don't usually work with ground forces to tell them where the terrorists are. So that was saturday and I think saturday finished I think 2 30 a. m There are dozens of challenges like that I I thought it was over saturday evening But apparently it wasn't so the siren went off in jerusalem two hours after it went off in tel aviv The first
[00:16:18] Michael Eisenberg: missiles were fired by hamas to jerusalem two hours later.
So only at like 8 20 8 30 in the morning Did we know something was up and I have a son who's in the army and his phone started ringing get ready to come and my second, another son who's in reserve duty turned on his phone and because we don't keep our phones on on Shabbat and and they said you come to the army and after another 10 minutes I said I better turn my phone something's going on.
I turn it on. There's a message from Ami It says call me as soon as you can. And hesitated. I'm saying, it's Shabbat, I never talk on the phone, I never turn on my phone. Why is Ami looking for me? You know, he's one of my CEOs. What's going on? And then I said, now he knows that I wouldn't do this, he wouldn't do it, so I pick up the phone and call [00:17:00] you.
I said, what's up? And he said, what took you so long? I don't, I wouldn't call you if it was Shabbat. I know you keep Shabbat, there's an emergency. We gotta go find people down south that can rescue people, and we start connecting, and I'll never forgive myself for that hesitation. And so, I want to thank you for having the right instincts, and I've learned from it.
That ten or fifteen minute hesitation until I actually called you while staring at my phone, like, what the hell is going on? I won't forgive myself for it. And so thank you for being here. We're gonna get
[00:17:26] Ami Daniel: out. We're gonna get out. You know, ten, fifteen minutes is not that bad.
[00:17:30] Michael Eisenberg: What you just heard from Ami is the story of Israeli instincts and Israeli resilience in the 21st century is democracies are crumbling and leadership is hard to find.
The societies that are going to be successful are those that show civilian resilience, where civilians actually take control and take responsibility. Ami is a shining example of that. It was not only his instincts, but his activity, his persistence, his insistence to go the distance over [00:18:00] 48 hours to save people.
that saved tens of people's lives. That's what I want you to take away. We have an incredibly resilient, innovative society that knows how to take responsibility, not just in the face of tragedy, but also when opportunity knocks and people need to be called on to stand up. Ami didn't stop there. It wasn't just the first 24 or 48 hours.
He and a series of of Israeli entrepreneurs, resilient Israeli entrepreneurs, people who take responsibility, decided to develop something called acquired by him, which means we're on our way. We'll get there. This was a civilian build of technology that was then integrated into the military, into the police to enable them to be better first responders to trouble.
That might arise going forward. The story is incredible. Please listen with me. First
[00:18:49] Ami Daniel: of all, I thought it said they ended suddenly warning. I wake up, I see it's not ending. And you know, there's two more people. My wife tells me, what do? I said, I helped him. So I call up [00:19:00] my, my, my PPS I could be part of a meal at my CFO offer and my people just show up.
They just show up like 15 minutes afterwards. And then I. Right. Did a entrepreneur group. I said, kids, people come help. And suddenly by 10 AM, there are 50 or 20 people at our house. And I end up like people reach out to me and then I give them, you talk, please part of the army, you talk that. And then we understand my wife tells me, I'll be, this is too much that you, you, we can't keep on doing this on WhatsApp.
Let's build a product. I said, well, you know, good idea. Sorry. I was like, hence I was hence doubt. I called Ed and your partner and out of it. And I said, and can you come and help 50 minutes afterwards is in the doorstep. And, and we start working with that and, and, and, and figure out how can we make this a product?
Well, I think you mentioned low degrees of separation. I actually think the layer of founders, CEOs, COOs in Israel of growth companies is extremely tight. Yeah. I can mention Mir Zohar from Wix, who is amazing. [00:20:00] Obviously you, you, you invested in the early days of Wix. I think you introduced me to Mir and Mir Kaufman who founded CO5R is amazing.
And I had a guest from Papaya and Guy Bloch from Brain that I can mention. And Geeky Levin is a big investor in this country. But the investors and top focus teams are very tight. So I reached out to them and I said, listen, guys, we need help. Can you help? And suddenly I think we have a team of by Monday morning.
15 or 20 people productizing an idea that says, if Israel is attacked and the fight is on our ground, not on the enemy's ground, if people message you on WhatsApp, how do you collapse the time at scale to help them and do that in hundreds or thousands of cases? So we think of a concept called Kvalbaim, which in Hebrew is, we'll be right there.
It's a, by the way, intentionally in Hebrew. So everybody feels comfortable in this, in this country. It's the Hebrews are, you know, obviously have a lot of talent. And we start working on it. [00:21:00] And so by Monday evening, there are about 20 people working on this product. By Tuesday morning, it's on the website of the biggest news website called Binetz.
co. il. In Israel for people to reach out and get help. And I think by now it is, it is a fully fledged product. The people can, can reach out and get help, whether it's for evacuation or whether it's for more things under fire. And it's fully integrated with Muddy. com and, and the other products API products, but it's a fully integrated product for rescue people under
[00:21:36] Matan Bar: fire.
I am a proud Israeli. And so as a proud Israeli, I have like. 50 percent more motivation before October 7th, of course after October 7th, because I want Israel to be successful.
[00:21:48] Michael Eisenberg: When I talked about Ami Daniel I talked about the resilience of Israeli society, of Israeli entrepreneurs, the take charge attitude, this idea that I'm going to make something good, [00:22:00] meaningful out of this.
I'm not certain there's a better example of this than my dear friend, Izhar Shai. I backed Izhar Shai's first startup 20 something years ago. I was fortunate enough to sit on his board. His son Yaron was killed on October 7th by Hamas terrorists. He was killed because he stood up. He was killed because he defended the kibbutz that he was stationed at.
He was killed because he was a man of valor. He was killed because he is a uniquely Israeli and global hero. Right now, please listen with me as Yisrael talks about his son Yaron.
[00:22:35] Izhar Shay: I'm a venture capitalist. I was the Minister of Science and Technology for the Israeli government. And in the context of our discussion today, I was for 21 years the very proud father of Yaron Ori Shai, our youngest son.
Yaron has three siblings. My daughter, who is a 33 years old, Shir. My son, Yor, at 30 years old. And 26. Aaron was [00:23:00] our youngest. He was a soldier within a special unit of the Nahal Brigade. And they were stationed at the border for a few weeks before October 7th. Their mission at the border between the Gaza Strip and Israel was actually to keep the peace.
Between the two sides of the fence to let people go about their agricultural, agricultural business and other businesses in both sides of the fence. On October 7th, they were there as from the first launch of rockets and missiles against Israel. Their unit responded. As they should have because this is what their mission when peace turns into war when the you know the the ceasefire is broken by the other side What the IDF is supposed to do is to to respond and to protect the civilians.
This is what y'all's Unit did on the southern side of the Gaza Strip border. They were [00:24:00] stationed in an area called Kerem Shalom ironically enough Kerem Shalom is the peace vineyards this is the name of the kibbutz and also the name of the army base, which is adjacent to that kibbutz This is what Yoram's unit was assigned to in terms of their responsibility, and they resorted immediately.
They were attacked in that area by hundreds of highly trained, very well equipped Hamas terrorists whose mission was to move into the kibbutz and torture and murder innocent civilians, babies, young women, families, whomever they would be able to, to get hold of, as they did. In many other places in that region.
But in this case, the unit stood against them and was able to maintain both lives in the army base and in the kibbutz. The end result is significant tolls for the unit itself. The commander of the unit was killed in action. His his deputy commander was also killed a number of other officers and soldiers, including our [00:25:00] son Yaron when they were facing basically a a higher number of of terrorists, but they maintained the line, not nobody was was affected on the side of the civilians in the kibbutz and none of.
The military women who were in charge of the radars and the various electronic equipment, the devices that are in the base, none of them was hurt, which is quite an accomplishment as opposed to the shot results in other areas.
[00:25:30] Michael Eisenberg: The soldiers in, in Yaron's brigade and the Naha brigade there were able to defend against these rapists and terrorists coming in.
In other areas where they broke through, they, they raped many women, including women soldiers, some of which have been taken into captivity. There's now 240 kidnapped Israelis, Americans, and ties who have been taken in to the Gaza Strip by, by the Hamas jihadi terrorists. And, and the fact that your son and his brigade was able to stop the [00:26:00] infiltration there despite the, the horrific loss of life in your son's brigade.
Has saved countless more women, children and others from from a fate that befell others. And that bravery is, is remarkable and it's just important to point out both the bravery and the tragedy that was, that was averted because, yeah,
[00:26:17] Izhar Shay: thank you for noting the doubt that the mission of those savages had was to, to rape and behead.
And kill young babies and torture families in front of their, you know, relatives just to make sure that everybody suffers and then get rid of them by killing them in all kinds of savage, savage ways. So, yeah, this was a mission. The mission was not accomplished in that region. The toll was significant in terms of the military toll, but this is what the IDF is supposed to do.
The IDF stands for Israeli Defense Forces. And this is exactly what they did. They defended the civilians, they defended the state of Israel, and on that side of the border, the border was maintained Yaron himself was part of a team of three that was actually the commanding [00:27:00] post of the unit. He was just sent to to the commander of the unit at that time and another soldier.
And the three of them stood in heroic ways against dozens and dozens of terrorists. Again, very well equipped and highly trained. They responded, they were able to maintain the line. Actually, there's an interesting communications recording of the Hamas terrorists were the commanding you know, the commander of the area of Hamas kind of shouts at his at his people, why do they not enter the kibbutz?
And they tell him that there is a jeep. That they cannot get rid of their there is some some kind of a response that they are unable to To overcome and this is exactly the the jeep that or the the unit that you're almost part of eventually After fighting hard against dozens and dozens of terrorists.
The three people were wounded One of them was severely wounded. This is the driver The other one was severely [00:28:00] wounded, who is Yaron, and the the third one was wounded, but still was able to, to maintain consciousness, and this is the head commander of the unit. And by some very heroic efforts of another officer, they were able to retrieve them back to, to an area where they could be treated first, and then lifted by a helicopter back to a hospital.
And this is where Yaron was pronounced dead. And the other soldier, by the way, He's recovering now, doing relatively well, and we are very happy for him. He will survive, and he will be able to continue on with his life.
[00:28:34] Michael Eisenberg: I'd like you to just take a couple minutes and tell us about, about Yaron.
[00:28:38] Izhar Shay: So, yeah, Yaron was our youngest. He was 21 years at his father in law, Kerem Shalom. Interesting to note, Yaron was an American citizen. He was born in the USA, was brought up as a young Jewish American kid until the age of five, which is when we decided to To relocate back to Israel. He also attended the American.
Oh, New Jersey, right? New [00:29:00] Jersey. Yes. He was born in Ridgewood, New Jersey. He grew up in Solon. And then when we relocated back to Israel, he actually attended the American high school program here in Israel. So, his education is half Israeli and half American by training. And he was I should say a proud Israeli American citizen.
He obviously fought for the Israeli army, the IDF, but I believe that we should all understand that he also fought for the American values of freedom on the, the, the American you know, basic norms of of culture of the Western world. And he died defending those basic values which are, I think shared by both Americas and Israelis, which is important to note as a kid and as a young adult.
Well, first of all, you know, not the most important feature, but still, he was very handsome. He had his bright blue eyes and very, he was very good looking. We always used to say that he's the better version of all of us. He looked [00:30:00] much better than I do. He was way more sophisticated than his siblings, they told him.
So, you know, this is not something that we are now saying after he's passing away. This is something that he was told why he was still He with us he was crowned like the the king of the house for all kinds of reasons He was very modest. So it never took this you know in the wrong way he was shy and modest but still a very charismatic leader he was a a leader in the Zofim, in the Scouts, where he spent a good number of years.
Then he volunteered in a gap year between high school and joining the, the IDF. He volunteered with the kids from economically challenged families in the south of Tel Aviv. Did this for a year. And then he volunteered to the best he could in the Israeli army. He was very proud to have joined a special unit within the Nakhat Brigade.
This is a unit where you have to work very hard for about 13 months until you earn the title of a combat soldier in that unit. So [00:31:00] you work, you sweat, you, you freeze in the cold, in the rain, you. You walk many, many long nights and you do all kinds of crazy stuff until you are qualified to fight for the defense of the Israeli citizens to join this special unit.
He was actually eventually qualified in February of this year, 2023. He was awarded an excellence award for having been an outstanding soldier. Sadly enough, the officer who gave him that title in a special ceremony also died in the same on the same day fighting against terrorists. But you know, we still have that the title in our house.
Both their names indicate some symbolic, in some symbolic way, the connection between them.
[00:31:45] Michael Eisenberg: It's harsh how you lost a son your own. decided that if the path of terrorists is nihilism and terrorism, our path will be light and building. That's what we do. We build when they destroy. And [00:32:00] so his answer to the murder of his son by these terrorists was an initiative called next October.
Next October is incredible. Is her determined that there would be One startup created in memory of each of the people killed on that day. We would build something that would employ people that would inspire life, inspire innovation as a tikuna fix for what happened on October 7th. But this incredible initiative already has 500 partners, including Amazon, Google, Meta, many banks, venture capitalists.
There are already 300 startups and 200 mentors. That have joined his heart is next October initiative. I think you'll agree with me as his heart describes the initiative that this is among the most perfect answers to terrorists and the list. We will build and we will not only rise again, but build it back.
A whole lot bigger and better than before.
[00:32:56] Izhar Shay: This is now past the, the face of being just [00:33:00] a vision. We have put together a steering committee. We have what we think is a good name. The name of this project, so to speak, is next October. And next October kind of indicates that we are looking forward and we're looking forward to a better future.
And next October, we definitely look much better than this past October. But it also. Record the timeline of the next 12 months and what we want to accomplish is we want to make sure that our response to this sheer evil You can't call this. Otherwise we faced The most evil atrocious set of activities that a person could think of Our response to that is by creating, by innovating, by bringing good to the world as a response to everything that those savages wanted to bring upon us.
[00:33:50] Michael Eisenberg: What about your perspective has changed since October 7th?
[00:33:52] Ben Lang: I mean, I think I feel more conviction about living in Israel. I think it's, you know, more, more important than ever.
[00:33:58] Michael Eisenberg: What has been [00:34:00] inspiring, but to be candid, not surprising, has been the reaction of global investors to October 7th. I already wrote, I believe it was in November, that I thought that the resilience that Israelis showed and the innovation that would turn up in this war would lead to a wave of investment.
We at Aleph invested a lot since October 7th. It started on November 7th on the Gaza border when we signed an investment in Dream together with Shalev Julio. Shalev was in reserve duty. You can see in the picture in the Wall Street Journal that covered the investment, the M16 slugging across his shoulder.
As we stood there. With one of the people saved on October 7th from one of the kibbutzim. She was there with us and we signed this large investment in the future of Israeli artificial intelligence in the future of our economy. We've made many investments since October 7th at Aleph. This is our most active period in a bunch of years, but we're not alone.
Since October 7th, Greylock has opened an office in Israel. Sequoia has opened an office in Israel. [00:35:00] Axel Partners has opened an office in Israel. Global investors are all over the place. Missiles from the north. Missiles from Gaza. Terrorists cannot deter global investors because what they've seen since October 7th is a society that loves life and loves innovation that has taken this lemons and made lemonade out of them that has found ways to develop new technologies in the heat of battle.
In fact, we now have truly battle hardened CEOs. We now have incredible technology tested under battle conditions that is ready to take on the civilian market. Investor attitudes have not changed since October 7th. You want the numbers? 7. 8 billion dollars in private funding in 577 rounds of funding since October 7th.
How has October 7th made you think any differently about your own investments in Israel? It
[00:35:52] Beezer Clarkson: hasn't changed our investment in One Iota and I would also say on our platform is a large growth fund. For[00:36:00]
[00:36:01] Michael Eisenberg: I have known Eyal Waldman for many years, since he was an engineer at Galileo in the 90s. Eyal lost his daughter Danielle and her boyfriend on October 7th. They were at the Nova party, just dancing. Eyal was a tireless seeker of peace and coexistence. He employed many people in Gaza prior to October 7th.
I interviewed Eyal for a podcast. Before October 7th, you can go back and look at that episode. The clip you're about to see is when I interviewed him after October 7th, after his daughter was murdered by terrorists.
[00:36:38] Eyal Waldman: For those who have been under a rock for the last six months Eyal lost his dear daughter, Danielle,
[00:36:44] Michael Eisenberg: on on October 7th.
Can you tell us about October 7th for you? You weren't in the country to start, right?
[00:36:50] Eyal Waldman: Yeah. Yeah, I was in Indonesia. I was on vacation. It was a holiday. And you heard? I heard that she's not responding, that she's missing. [00:37:00] So I took the plane back. It took me about 20 something hours to get back. They enabled us to land.
Not with the plane that came. I had to bring another plane. And they didn't land foreign planes to come and land here. I got here and three hours later I went down south, I found the car, it's full of bullets, blood the body's already been taken. When we were going there, there's still engagements with terrorists Monday morning.
We were very close, we were part of one of them. So yeah, it wasn't, it wasn't a good day. And, you reached out to her, you heard, you knew she was at the party there? I didn't know, her mom knew. Her mom knew she was at the party. Yeah. And they called and told you she's missing. Yeah. And the guy in Sharon told me that she's not answering her phone.
And you landed and you went down, armed I assume, I hope, and her body had been taken already? Yes. But was subsequently reclaimed, or no? Taken by Zaka. By Zaka. by Zaka. And I'll tell you when I came to visit you at the Shiva, it [00:38:00] was
[00:38:00] Michael Eisenberg: one of the hardest hugs I've had. In a long time and, you know, in my life, you're there.
Can you tell us about Danielle, your daughter? She's an amazing person. What was her, what was her fiancé's
[00:38:12] Eyal Waldman: name again? Noam. Noam. And, No, he, he wasn't her fiancé. He gave her, like, a promise ring. A promise ring. Yeah. How you want Danielle to be remembered?
And she was, she was like she's an amazing person.
You want to give some more details about her? I, I've read just about everything I think you've written on Facebook and You know, she loved to dance, she loved people, she loved dogs, she loved horses. She did wake surf, she did snowboard, scuba dive, everything. She was like very much peoples. You know, yesterday I was talking in front of Americans and one American woman, girl, came to me and said, You know, I went to the gym with Danielle and I only speak [00:39:00] English.
And always when Danielle was there, she made sure that everybody around me speaks English to me. And also our boyfriend, Noam, she said she, she took such good care. She was so sensitive to me, trying to help even in the gym. She didn't even know her, but she helped. So that's Danielle. Always there for people.
How old is she? Twenty four. Twenty four. Twenty four. As we say, he's a Khram Baruch, and there shall only be happiness and Simchot going forward. I lost a cousin on October 7th, and thereafter you lost your daughter October 7th. There's such a trauma in this country right now. There's real trauma around everybody.
It's such a small country. Everybody knows somebody or is related to somebody who, who was murdered or raped or or wounded because we've had a lot of, we don't even talk about them really. We have a lot of wounded soldiers. Both
[00:39:47] Michael Eisenberg: visible and invisible ones. 100%. You know, I actually want to ask an important question.
You mentioned earlier that Jensen pushed you to hire more Palestinians. You always inspired me because I think you were a man of peace and a man of incredible optimism. [00:40:00] You hired so many Palestinians in
[00:40:01] Eyal Waldman: both the West Bank and in Gaza. Am I correct? Yeah. We had about 25, 30 employees in Gaza. 25, 30 employees in Gaza.
And about 175 in the West Bank. And do you
[00:40:12] Michael Eisenberg: think any differently about that today? Has anything changed in your outlook?
[00:40:16] Eyal Waldman: For, I, I divided two things. First the short term and long term. So for the long term, the answer is probably not. And when we do, we can talk about that. For the short term, I think what we need to do now.
is eliminate Hamas and Islamic Jihad. And this is not compromised about this. I think there's two units been built to take care of that. It may take us a few years, but we'll do this. Anyone that was associated with Hamas, anyone that passed the fence and participated in what was going on in October 7 will be eliminated.
And that's number one. Number two, I think in Gaza, we need to bring an international coalition led by the Arab League, led by Egypt and the U. S. and Europe be involved, and they should come and have two mandates [00:41:00] on Gaza Strip. One, there's no artillery and rockets. In Gaza, anything that exists goes and being buried in Sinai.
And second is education. Maybe they should bring the Emiratis education into Gaza. De radicalization. De radicalization, to un radicalize the education. You know, yeah, I think they should have, you know, Western education. That talks about music, about science, about, you know, paintings and love and stuff like this instead of hate and destruction.
And I hope that within time, when they change their leadership in the Palestinian leadership and we change the leadership here in Israel we'll be able to create peaceful agreement, a two state solution that will yield the right synergy between the two people, the Palestinian and Israel.
I think, until now, the Palestinians did not want to have peace. I think both the economic and the political leadership enjoyed a lot the current situation by getting a lot of money from corruption, and that is why they kept it this [00:42:00] way. We always came with suggestions of what the peace agreement should look like, and I've done multiple things with the I employed Palestinians.
I donated 360, 000 for a Palestinian hospital in Gaza. I've done a peace initiative that took about about 12 months. But then Abu Mazen stopped it. I think we now need to make them want to have peace. How do you make someone want to have peace? Have them suffer. So we need to have them want to have peace.
They should understand if they don't want to have peace, it's going to be miserable for them. Peace comes from defeat at the end of the day, right? No, no, no. That's what happened in Egypt. No, no. No, no. By the way, they think they won. Which, so, so, I think also Hamas now think they won. So don't misunderstand, we want them to, they've done a lot of things, they've achieved a lot in October 7th.
Unquestionably. So, we should not step on their pride. You do agreements with respect, you do agreements [00:43:00] with trust, and you do agreements are win win or lose lose, whatever you want to call that. But in a similar situation, you know, one of my board members taught me that, If both sides come out of the agreement and both of them think they left something on the table, it's a good thing.
But, once we achieve this, and we replace the legitimate both sides, we should strive and make them strive for peace. Once they understand it's better for them to have peace with us, and we also do this, I think it's the right ground to have the right negotiations. To build a very significant coexistence of the Palestinian people, the Palestinian state with the Israeli state.
I find it striking how optimistic you are about it given your personal loss and how, I think there's only one way to converge. I don't think Any people can rule or be responsible on other people. It's never worked. And this is not something we should strive for. [00:44:00] So we should do what's best for the Israeli people.
And what's best for the Israeli people is to have a two state solution. I don't think there's any other solution that is you know, will hold water for a long time. Has anything deeply changed in your outlook since October 7th? The time frame. You know, it's interesting. It could be that we're closer to peace now than we were before.
If you look at what happened in 73 there was a big crisis and the number one enemy for Israel was Egypt. Egypt was our number one enemy. And my father fought. He was the second in command of our brigade of tanks. I was second in command of our brigade of infantry. But you were, you were in Golani, right?
Yeah. Yeah. But that's reserve duty. I'm not, not into my Golani. I'm in reserve duty. So in 73, Egypt was our number one enemy. And in 77, no one believed it would happen. But one guy, one guy, the Egyptians did not support him. No one from Egypt. The Israelis did [00:45:00] not trust him. And Sadat came and says, I want to talk to the Knesset, to the Israeli parliament and begging that did not trust.
So that said that you're invited to come and talk. And this one guy said that has made peace between Egypt and Israel. And I think it's amazing that from crisis in 73, our number one enemy. One
[00:45:22] Michael Eisenberg: of the things about this war is I have met incredible people from all over the world who speak with moral clarity, who understand this moment that we are in in history.
I met Stefan Thompson in Shukmachane Yehuda, the market in Jerusalem, a couple of months after October 7th. The person I met was a fierce media warrior for moral clarity. and for the future of the West. He understood we're in a civilizational battle right now between the forces of evil, of nihilism, of terrorism and Western values of science, of innovation, of morality, of life loving religion.
[00:46:00] Stefan has been a light, a light in so many of our lives. He dedicated his Visegrad 24 media channel to voices of hope, of resilience, and of moral clarity. He exposed many of the lies. Being told on college campuses, he exposed the venomous professors preaching for the destruction of Israel in the West and Western values.
He showed how so many institutions were captured. Stefan, my new friend, stood up when many in the media cowered. When many in the mainstream media, many well known names, couldn't find the moral clarity to even call Hamas terrorists, to explain that Hezbollah were terrorists, to call out the depravity of the rape, Stefan stood up and he dedicated his platform to the pursuit of truth.
And the pursuit of Western values. We all owe him a debt of gratitude. And I consider him a new friend and one I hope to keep for many years. For a guy who grew up in [00:47:00] South Africa is Polish, went to French schools and grew up in England. Why exactly did you come to Israel to do media on what's going on here with the war?
[00:47:10] Stefan Tompson: There, there is I get asked this a lot by Israelis. There's an assumption, there's a suspicion, almost, of people who are non Jewish who are supportive of Israel and of the Jewish people. There's an intrinsic suspicion. Why are you doing this? I'm not suspicious of you for it. This is not altruistic.
There is a, there's a very definite self interest here. I understand that Israel is part of the West. My fight, my struggle, my my, my battle for Western civilization and our values is also, is, is also being fought here. This is an outpost of Western civilization. It's also the birthplace of course, of Western civilization.
Without Judaism, there is no Christianity, without the birth death and resurrection of Jesus Christ here on the ground in Israel, there is no Christendom, there is no West. This is an incredibly important place to the West, and I am very baffled, upset, [00:48:00] confused, and, and shocked that so few people understand that this is not this is not a fight for just Israel, this is not a fight for the Jewish people.
This is a fight for all of us. One of my worries is that a lot of the framing of of Israelis of this, this conflict and the reason perhaps that there hasn't been as much support as there, as there should be is that Israelis are very often speaking about this in terms of, this conflict in terms of, of anti Semitism, in terms of attack on just Israel, whereas it's so much broader that, that actually there are, this is I think what Israel really needs to do is, is to, is to inform the Western world about it.
That, that it is an intrinsic part of the Western world, it's an outpost of the Western world, and it's the battle line. This is, this is the front line. And it's Israelis dying right now. And this war will, will keep advancing. I mean, we are fighting this, this allied unholy alliance of China, Russia, Iran, North [00:49:00] Korea, Hamas, and other affiliated terrorist organizations.
And they hate, they, they hate the Jews, but they don't love Christians of the West. They hate us as well. I think that's fair. And I think that's, that's, To a certain extent that, that hasn't been, obviously you are in, I love the fact that Israelis refer to this part of the world as their neighborhood.
I've heard that term so often. I don't know if it's a, is there a Hebrew word for neighborhood, Michael? Is that where? Shkhoona. Shkhoona. But that has, by the way, in
[00:49:29] Michael Eisenberg: slang, some
[00:49:29] Stefan Tompson: negative connotations too,
[00:49:30] Michael Eisenberg: but
[00:49:31] Stefan Tompson: yeah. Yeah, we're in a different neighborhood, of course. I mean, Europe is a different neighborhood.
We don't exactly We're not surrounded by Egypt, Syria, Jordan, and Lebanon. But but nonetheless, obviously, this region of the world hates you first, and they hate us second. After the Saturday people come the Sunday people, as the saying goes. We're also seeing real time denial of, of true events, so October 7th.
The evidence is overwhelming, I mean, there is really no, there should be no question about [00:50:00] the fact that it happened. There was a massacre, over a thousand people were killed innocent civilians were attacked, 3, 000 Hamas fighters poured into Israel, committed horrific atrocities, documented them, live streamed most of it.
And, and you're getting in real time, and, and I'm not, I'm not even talking about the Arab world, I'm talking about the Western world, where you, you, you get people in the West saying, oh, it may have been AI, we don't really know what happened. It's not even, they're not, it's not even them saying, oh this is a response to 70, 70 years of Israeli crimes on the Palestinian people, blah, blah, blah.
No, they're saying, I don't know, it didn't happen. And this isn't, there's that, that, that famous, you know, Eisenhower saying, please take photographs of, of evidence because in 20 years, there's going to be people who are going to say it didn't happen. And it's happening, you know, one month, two months, three months after the, the event.
[00:50:56] Eyal Waldman: At the end of the day, one plus one is two. [00:51:00] I
[00:51:01] Michael Eisenberg: want you to pay attention to what Stefan just said. His moral clarity about what the values are that we need to stand up for. How forceful we need to be in this very confusing time. A time when TikTok is showering you with not just vacuous thoughts, but dangerous thoughts.
Anti patriotic thoughts. Thoughts that the West, the US, is somehow immoral or morally inferior. Pay attention to what he said, because part of what is going on in this moment right now in history is people are just confused. Mainstream media has totally lost the plot. But thankfully today we have people from Elon Musk to Stefan Thompson, to Anthony Goldblum, to God sad who have stood up and insisted that we speak the truth.
We find the truth. We community note the truth and we find a path to show. What everybody feels inside where the truth lies [00:52:00] is not how mainstream media reports.
[00:52:03] Izhar Shay: Many
[00:52:03] Michael Eisenberg: people were surprised by the quote unquote outbreak of anti Semitism on college campuses. It goes much deeper than that. These protesters on college campuses didn't just make the campuses unsafe for Jews.
They identified with terrorists. They beg the hooties. to launch another missile, to disrupt global trade. They wanted Hamas to rape more women and behead more children. Where does that come from? Well, we got a clue in the hearings in Congress, where university professors stood up and said, anti Semitism depends on the context.
Identifying with Hamas depends on the context. Anti Semitism has actually been percolating on college campuses from apartheid weeks to literary festivals, and it just erupted in unison October 8th. Way before Israel responded to anything, the tent camps were out. The supporters of terror were out on Harvard, Penn, [00:53:00] Princeton, and other Ivy League campuses.
This was well coordinated. It was a moment they were waiting for, and Mark Rowan identified it. And decided to stand up and do something about it. And for that, Mark is a hero of the post October 7th world. He didn't cower. He didn't hide in Apollo, his firm. He stood up and was counted with incredible moral clarity, incredible vision, and incredible determination.
He led the change on college campuses. When the president of Penn was removed, the place where he served on the board of trustees, it sent a notice to all college presidents, you're on notice. Get your house in order, and if you didn't, you were going to be gone. And then Claudine Gay fell, and then President Shufik of Colombia was also forced to leave.
We owe that to Mark Rowan and the many others who fought alongside him.
[00:53:54] Marc Rowan: There's been no price to pay for being an anti Semite, for instance. [00:54:00] These kids who are marching, they don't think about it because there's been no price to pay, but if you come to Apollo, I would not hire you if you were anti black.
I wouldn't hire if you were anti gay, I wouldn't hire if you, you were if you were anti anything. Why would I hire an anti Semite? Why should we hire in finance and insurance and consulting and banking or law, any of these kids? I think one of the things we should do is make sure there's a cost for being an anti Semite.
I think we should call out the 20 worst universities, the 20 worst civic organizations, the 20 worst philanthropic institutions. We should make it embarrassing to serve as a director on these boards and trustees because being an anti Semite has been costless. One side, positive side effect of 10 7, the Jewish community in the U.
S. is off the sidelines. They are engaged and now they just need to be directed and to exact the price. And I think that will be part of it. You know, it's not just about retribution. I think there has to be a bunch of positives and education and other, other [00:55:00] things. People fighting anti Semitism, but I really want to couch what's happening in the U.
S. It's not anti Semitism. It is anti Americanism. We are in the middle of a takeover of our elite academic institutions by a dominant narrative that you can call post colonial education, oppressed versus oppressor, powerful or powerless. And the narrative goes as follows. If you're the oppressed, by any means possible.
It does not, facts don't matter. It just matters in outcomes. And so Israel is seen as powerful. Israel is seen as colonizing. And therefore it does not matter whether the facts support or don't support Israel. And if you've had 20 years of this on university campuses, it does not surprise me that the population on university campuses in particular that generate our next generation of leaders has grown up this way.
And what's happened is you have this dominant narrative on the campuses and that dominant narrative [00:56:00] affects students because most students who come to college want to learn and have a good time. They don't arrive to be political activists. But when the cool kids are all out protesting, they're out protesting from the river to the sea, and then you ask them what river and what sea and who lives between the river and the sea and how do they get there?
No one knows anything, but they're still out there protesting. And we can laugh at that, and I do laugh at that, but I do think this is what we're fighting. And some, some people combine this with DE& I, which I think has been an accelerant to this. But anytime we choose people based on the, a favored class characteristic and not treat you as an individual, who decided which class is favored and not favored?
And that's really what we have on these college campuses. And what I try and do by being public, It was actually just give people the courage to step forward and take this on. And that's what's happening. You're seeing it at Harvard, Larry Summers was fired [00:57:00] because he had a bit of a faculty revolt. So presidents of universities learned to fear faculty.
Now that Liz McGill and Claude Dean are out, presidents of universities now fear alumni and faculty.
[00:57:14] Barak Herscowitz: There were Jewish employees reported that they came to work after October, October 7th and no one spoke to them, including their bosses. They were completely ignored by everyone as non existent.
[00:57:28] Michael Eisenberg: So clearly, This fight by Iran, Hezbollah, Hamas, and others in the Axis of Evil is an assault on the free world, an assault on the principles that we hold dear.
Capitalism, freedom, free speech, freedom of religion. And not only that, it's an assault on excellence, on meritocracy, on the things that America was founded on, that Israel was founded on, that the Jewish people hold near and dear. And so, in this moment of refounding, as we reach the first anniversary, October 7th, We are forced to ask ourselves what kind of society we want, [00:58:00] one based on meritocracy or one based on ideological purity of those in the ivory tower of academia.
We're forced to ask a question. Do we want a society that thrives on meritocracy? Or one that thrives on victimhood. My dear friend of many years, Sam Lesson, came on the podcast to talk about everything from what's going on in Silicon Valley to contrarian ideas. One of the most heartfelt segments was what happened at Harvard, his alma mater.
I should also point out that my aunt, who I loved very much, was a senior professor at Harvard and administrator of the Radcliffe Institute for many years. Both Sam and I believe my aunt would as well are horrified by what's gone on at Harvard. It's come off the rails. As Sam details in the segment you're about to watch.
I think in general, in the moment we're in, the value of a college degree, and an Ivy League degree in particular, is in question for the first time in a couple of hundred years. Who will hire people brought up and [00:59:00] educated in these places of ideological purity and victimhood? I think this segment with Sam caused me to question whether these places are redeemable.
I tend to like to be optimistic. I am not sure I am. Good people. are leaving these institutions. And the question I want to ask right now of parents of conscience and many Jewish parents, why would you send your kids to these institutions? I asked this question one month after October 7th, 2023 in public on Twitter.
But I ask it again now with more vim and vigor. Send your kids to the University of Austin. Send your kids to Tulane. Send your kids to college in Israel. They can get an open education, an innovative education, and when you send them here, they'll also build resilience. They'll build grit. They'll understand from their surroundings, from the defining generation that surrounds them, what it means to be gritty.
How you build resilience and optimism to build a better future. You made this bid to kind of get on the Harvard board of overseers, [01:00:00] your alma mater. Yeah, why'd you do that? You know, I was in favor, by the way, I would have voted for you.
[01:00:06] Sam Lessin: No, no, I look at
[01:00:08] Michael Eisenberg: me
[01:00:09] Sam Lessin: So so well if Harvard had a tough year if you hadn't if you hadn't heard maybe you realize and What was interesting was I loved Harvard.
I thought it was incredible. So many of my friends, my colleague, my wife, I met at Harvard. Like I think it's an incredible institution. And for years I had been the one in my friend group, everything Harvard's off the rails. Harvard has these problems. It's not the school you went to. And I had always been the apologist.
I'm like, nah, you guys are overstating it. It's fine. There are some problems. There are always some problems in institutions at that scale. And then after 10. 7, it became, I was like, Oh my God, I'm wrong, right? Harvard is off the rails, right? And it's Harvard
[01:00:45] Michael Eisenberg: redeemable.
[01:00:46] Sam Lessin: I'm actually an optimist. I, so here's what I'd say.
I'd say that it's not just like we were talking about the formal one zero versus, you know, others. And it's not a binary. Yes. No. Right. Can Harvard be [01:01:00] the perfect institution of the, no, it never was. He, by the way, either. Right. Like there's going to be a bunch of departments that are messed up and weird policies in places.
And things funding you know, chaired endowed chairs that make no sense. Like it's going to be mucky. Can Harvard do good in the world again? Right. Can it be a beacon of truth and academic excellence and free speech? I actually believe it can. There's not a silver bullet. There's a lot of things that's a change to get there, but.
I do believe it's possible.
[01:01:28] Michael Eisenberg: The academic year starts in a couple of days. You think we'll see more or less antisemitism on campus over the next year?
[01:01:34] Sam Lessin: Great question. Well, I actually, I have about a hundred page slide deck on, it was called back to school about kind of what I've learned about the situation in Harvard and higher ed and kind of what the key leverage points are that I'll be publishing hopefully in the next day or two of getting it out there.
It won't be perfect. We'll include that in the show notes. There, there will be typos, but it'll be, I think it'll have some good points in it. Here's the interesting thing. I, my default is it's going to be bad, right? If you think about it, like none [01:02:00] of the fundamental problems have shifted. You know, there's a lot like last year, there was a lot of quote unquote enforcement of, you know, policy that kind of went awry and ended up bouncing to nothing.
There's a lot of reasons to be skeptical. I've actually talked to several current students, you know, people who worked at the Crimson, people who actually have much more on the ground in foreign opinions. And they're actually optimistic, right? What they say is Look, we talked about how a lot comes down to people.
A lot of the key instigators are gone, right? They've graduated, right? They've moved on. They've said that, you know, the reality is, is that while the enforcement was fairly weak at most of the schools like Harvard, one, a lot of the students were shocked there was any at all, and they all want to graduate and get jobs.
And then beyond that you know, the schools have really, they're prepared now in a much better way than they were, you know, the last stuff, quote unquote, caught them off guard. We'll see. And then the last thing is like, there's a whole thing of the graduate schools, some of which are pretty cray cray and kind of their relationship on campus and things like that.
So it's interesting. I'm D, I was [01:03:00] default expecting, you know, even if a month ago I would have said, I think it's going to be pretty bad, but I've heard some hopeful things from students in the last several weeks of talking to them. Most of the
[01:03:10] Michael Eisenberg: world has moved on since October 7th. It's understandable.
What's out of sight is, is out of mind. Headlines have moved on. The U. S. presidential election is heated up. October 7th, 2023 still looms large in the lives of many people here, and it's still going on. Hezbollah has been attacking since October 8th, firing thousands and thousands and thousands of missiles.
on the state of Israel with nary a peep from the global community and certainly not from the United Nations. But that's been the life. Over a hundred thousand people are still not at home. This is the life that's still going on in Israel and you need to be aware of it and we need to talk about it. You need to understand it.
Over the last couple of weeks, I believe there's a sense that the tide is turning. The pager or beeper attack that we don't know who did, but wounded thousands of Hezbollah terrorists. And killed some was a moment of [01:04:00] deterrence. It was a moment that said we might've been surprised in October 7th, but we're not going to be surprised again.
We will surprise you. The taking care of business in the North with targeted attacks on terrorist infrastructure has exposed the Hezbollah and their Iranian overlords have hidden missiles, large missiles in people's homes. Can you imagine the next door to the baby crib of your child? There's a room with a missile.
Well, that happened in Gaza. Under the aegis of Hamas and that happened with even larger missiles in Lebanon under the aegis of Hezbollah and Iran. But now we're turning the tide and what I want you to pay attention to is we got knocked on our backsides on October 7th and the cost has been unbearable both in human life, in sacrifice of time, in strained marriages, in children that can't let go of their fathers when they walk out the door again and again to go to reserve duty.
The initiative taken in the north is a sign, but it's only the [01:05:00] sign that makes the newspapers. The defense tech ecosystem that has grown up here since October 7th is not just a sign, it's a build. It's optimism. The innovations in material sciences. In chemistry and biotech that have happened here since October 7th are stunning.
The advances in AI made in Israel since October 7th, whose results you'll see over the coming years will cause your jaw to drop. The resilient population of Israel has stood up and I think you're going to see something else. People want to raise their families in a place, not that you know why you're willing to die for it.
But a place that you know why you're willing to live for it. And what Israelis have shown over the last 11 months is we know what we're willing to live for. We know how to live for it. And so investors are turning up and entrepreneurs are coming out of reserve duty, ready for bear and building back bigger and better businesses.
And in a more innovative way, there are more entrepreneurs, wilder [01:06:00] ideas, bigger ideas that are coming your way. And as he's harsh, I said, we keep the memory of all those who were murdered, who perished, who sacrificed on our behalf, front and center. As we build, as we innovate, as we display our optimism, that the world will get better.
And I'll add one other thing. It's not just in Israel that you see struggles of leadership today across democratic countries. There's struggles of leadership. Across democratic countries, the welfare state is crumbling. Across democratic countries, there's a generation of confused kids, confused by TikTok, and not sure what they're living for.
Israel will be the beacon of light for civilian resilience. for how civilians take not just control, but responsibility for a society. When leadership is confused, it will be a beacon of leadership for a defining generation that will inspire your youth. They will learn from our Children, from our younger generation, for those that stood up to fight and those that came back to build, they will be that beacon of [01:07:00] light that leads the West to the next 80 years of growth.
prosperity and security. It should be a much better year going forward in a better decade on the backs of those who have shown up to build back bigger and better. God bless and Shana
[01:07:14] Marc Rowan: Tova.
Barak Herscowitz:
Back then I was really afraid that TikTok would hunt me down and sue me.
Michael Eisenberg:
Did you get any threats?
Barak Herscowitz:
From TikTok?
Michael Eisenberg:
Yeah?
Barak Herscowitz:
Um…
Michael Eisenberg:
When we started this podcast, Invested, I wanted to explore how people's values influence their economic decisions. I met Barak Herscowitz–although I'd heard his name before–I met him after he began to Tweet about what he was learning about TikTok, and what was going on there, and how content moderation, and what was getting out on TikTok, was influencing the discourse in the West. How it was so pro-Hamas, and pro-Houthi, and everything else.
And then Barak basically put his job on the line because of his values. He put his job on the line and called out nefarious behavior at TikTok and in their policies, at great personal risk–financial risk and personal risk. And I thought it was very important that his story be told in this context of that trade off between professional success, financial gain, professional opportunity, and the values that he holds dear. And in the war since October 7th, if one thing has become clear, that if we don't put our values first, the West, Israel, and other places, we’re going to end up in a bad place.
I think Barak is a great example of what it is to put your values first, how we can tell that story to the West and what we can do in order to promote these values globally.
I'm super excited to have Barak Herscowitz with me out here today for the next episode of invested. Welcome, Barak.
Barak Herscowitz:
Thanks for inviting me.
Michael Eisenberg:
Barak Herscowitz is a former government and public sector vertical leader at TikTok Israel, and a former advisor to former Prime Minister Naftali Bennett.
Welcome, Barak.
Barak Herscowitz:
Hi.
Michael Eisenberg:
Tell us your core value.
Barak Herscowitz:
I am a huge advocate for liberty, personal liberties. And you know, I never thought about core values or liberty until I spent a few years in the United States. And then I went to Cuba for a trip, and it was such an interesting experience.
And somehow, I found a cab driver who took me around, me and a few other friends. He took us on a trip around the island in Cuba, and then he mentioned that he wants to send his daughter to the United States, and he teaches her English and he wants her to be ready to go to the United States.
I don't know if it's still the case, but back then they would send kids on, you know, it's like pirate boats, basically. It was very dangerous. Many people would die on the way, or would get caught, or whatever. And we asked him, “Why would you want to send her on such a dangerous trip to the United States? I mean, things look fine here. Things are okay.”
And he said that for him, his daughter is like a very precious little bird. And a little bird in a cage can never fully enjoy life, what life has to offer, and he wants her to be in the States even though it's obviously what he sees as America is an unrealistic image. But he wanted her to have all the opportunities to fail, or to succeed. That changed me very much, and I think my core value is freedom.
Michael Eisenberg:
What does liberty or freedom mean to you? Define it.
Barak Herscowitz:
I heard something interesting on the Bari Weiss podcast recently. And she said that freedom is the right to say, when you see something that is incorrect; when you see the lie triumphs over the truth, for example, freedom is to be able to say “Not in my name. You can do whatever you want–not in my name. I wouldn't take part in this thing that I don't agree with.” So freedom is the ability to navigate your life in the way that you feel that is right, I guess.
Michael Eisenberg:
What if your personal freedom interferes with somebody else's freedom, or some other group's freedom? How do we deal with that?
Barak Herscowitz:
It's always hard. There are smarter people than me throughout history that discuss those questions and maybe have some answers. Generally speaking, people need to think, what if they were on the other side? And it might be easier for them to decide then.
Michael Eisenberg:
You know, that's like the famous statement of Hillel the Elder, one of the great Jewish sages, right? What you hate, don't do unto other people.
Barak Herscowitz:
It's true.
Michael Eisenberg:
What would anger you, don't do unto other people. I still think like in modern society, we've come to a point where people, so to speak, very individual freedoms or taste buds or whatever it is, can often threaten a larger collective of people. And for myself, I find myself struggling with this notion of what has become individual freedom, which is not like you talked about the guy from Cuba, which is, “Hey I want my my daughter to be able to get out of the cage and experience,” but it's using–for example, what's going on in America right now.
You know, people disrupting college graduations, a small group of people disrupting college graduations, which is the kind of the biggest day of many people's lives, when they're graduating college. And so they're expressing their individual freedom, but it's at the expense of many others. Or the encampments on college campuses today, which is my individual freedom, so to speak, to keep other people out.
Barak Herscowitz:
I think it's a very easy case, because colleges, universities are supposed to be the place where you listen to different opinions, different facts, different theses, right? And then you decide what's right for you. You spark a process of thinking, and then you decide what you take from each professor, or each colleague, or each friend.
And, when one group or one individual denies you from access to the discourse, to knowledge, to being on campus physically, I think it's a very easy case.
Michael Eisenberg:
Why? But if they're exercising their individual freedom–first, they don't want to hear other opinions, and they want to make sure that you can't get access to those quote unquote dangerous opinions. So why is that not exercising…?
Barak Herscowitz:
You can speak up and say whatever you want. You can speak up, you can express whatever fringe idea that you have. But if you actively prevent people from going to–you know, what happened in Columbia is that Jewish students and Jewish professors were instructed to stay at home. This is crazy! So once you prevent people from being a part of this discussion and access to knowledge, I think, yeah, it's a very simple case.How do you think we can change the tide there with the young Americans and their perspective?
Michael Eisenberg:
I don't think it's just about young Americans, for what it's worth. I think it's a general malaise of the West where, we've lost the confidence as multiculturalism kind of set in, and universities were taken over by a lot of these DEI departments. And we began to identify people, not by what they think, but by some external characteristic. We began to lose the confidence that the values of the West are better.
They lead to more innovation, they lead to more freedom. They lead to more prosperity for humankind. And they actually galvanize people to do amazing things. And I think the first thing we have to get back is the optimism about the future of western values. I think that's something we should teach, and we should insist on that. This system is actually a better system for prosperity, and human flourishing, and that freedom is a cardinal right of people.
Iran is not a free society today. Russia is not a free society. China is not a free society. Gaza is certainly not a free society. People live under the threat of death and violence all the time. It's like, we were talking about before, this notion of human rights. Going to quote “queers for Palestine” where they wouldn't last one day in Gaza
Barak Herscowitz:
It’s the most ridiculous thing.
Michael Eisenberg:
But it's emblematic. It shouldn't be taken as a joke, because it's emblematic of deep confusion. And I think every few decades, these kind of, some of these Marxist notions show up in the West. But it's important to just state very clearly that we think this system is better. They're free to live with their system if they'd like to in China.
That should not penetrate the Western system. I think the other thing is kids. I think the decline of what's gone on in Western society has to do with the decline in demographics, and the decline in childbirth. And I think people are more optimistic about the future when they have kids. One of the amazing things about Israel is how many children there are here.
And that makes us more optimistic, it causes us to invest in the future. And it forces us to teach our values, because we have to teach them to our children. And I think, by the way, that's an incredible insight of the Torah, which spends a lot of time saying, “Teach it to your kids,” even in the Shema prayer, right?
It's, “teach it to your kids.” And I think that reinforces our own certainty that these values that you opened with, by the way, which is liberty and freedom, are so foundational. And it's the foundation of the U.S. Constitution. It comes to the foundation of the Bible. It comes to the beginning of Western, civilization in Greece. And I think we have to insist on those topics and that we need to be unabashedly, unabashedly outspoken about them, and tell our kids that they're better.
This will be a good segue to a topic I want to spend a lot of time on, which is TikTok and your incredible bravery and freedom that you expressed there.
Before we get there–what was it like working for the Prime Minister, Prime Minister Bennett?
Barak Herscowitz:
It was great. So I started as his campaign manager, when he ran for office. which was very hectic and very interesting. And then I joined the Prime Minister's office, and I was sort of like the spokesperson of the government for COVID.
Every message that the government had wanted to deliver to the public was under my supervision. I thought it was a great experience. And, especially with Naftali Bennett, he's done something very interesting that not many people know, that I thought was very unique and very different than other politicians, and maybe it's something that he learned in high tech.
He would start every morning with a meeting with all of the relevant ministers. They needed to report on their tasks. They would report their failures and then him as Prime Minister–the general approach that he had is, “It's okay to fail, just share it with us in order for everyone else to be able to help you to succeed.” This is something very different than what we usually see in politics. So people weren't afraid to say, “I didn't succeed in this and that,” and then everyone else would really think how they can step in and help them
Michael Eisenberg:
It’s like a stand up meeting at a startup company. I was fortunate to be the investor in one his startups, and so I sat around his board table, et cetera. He is a good manager of people. I'm glad to hear that the acceptance of failure and let's just fix it all together has kind of extended from his time is at Sayota to his time as Prime Minister.
Barak Herscowitz:
Yeah. And I think people in the beginning were shocked. I think he taught many people how to manage with failures, how to manage with struggles and how to be candid and open about it.
Michael Eisenberg:
Would you like him to be Prime Minister again?
Barak Herscowitz:
I think he'll be better than most other candidates and hopefully, I don't know.
Michael Eisenberg:
Is that a low bar? It's like a low bar to get over.
Barak Herscowitz:
I think the bar is not very high. And I think we need to, we need to give some chance to new blood to come into the system and maybe see things differently.
Michael Eisenberg:
And so you worked for the Prime Minister Naftali Bennet, and you think there should be new blood in politics.
You were in politics, but then you got out of politics and went to TikTok. What made you make the jump from the political side of being in politics to TikTok, and kind of representing, let’s call it, corporate interest vis-a-vis the government?
Barak Herscowitz:
On a personal level, I wanted some time in the business sector, And I wanted to experience the business sector as well. But on a deeper level, when I was in the government, we were always trying to find new ways to approach new audiences with messaging about COVID.
For example, I’ll give you an interesting example, with the Haredim,
Michael Eisenberg:
The ultra-Orthodox.
Barak Herscowitz:
Yeah. So they don't watch TV. Basically most of them, they had a lack of trust in the government and we tried to find new ways to approach them. So, I don't know if our audience knows what happens in ultra-Orthodox neighborhoods–you post posters, basically.
Michael Eisenberg:
What are called in Yiddish, “Pashkevilim”.
Barak Herscowitz:
Right, Pashkevilim,
Michael Eisenberg:
These giant, generally white–but not always–posters with big black letters on them. They’re very informative.
Barak Herscowitz:
Very informative, yes. Yeah. So we tried these Pashkevilim campaigns on billboards in Haredi, in ultra-Orthodox neighborhoods.
This is how we try to approach these audiences. So we tried different ways. And one of the things we tried was TikTok. It was a brand new–
Michael Eisenberg:
That's not what the ultra Orthodox community uses.
Barak Herscowitz:
No, no, these are–yeah, but you know, you would be surprised to know how many ultra Orthodox communities have two cell phones, some of them, so you would be surprised.
Michael Eisenberg:
You’re telling me. There's the kosher phone in the right pocket and the smartphone in the left pocket. Yeah. I know it well.
Barak Herscowitz:
Some of them are on TikTok. But yeah, we use TikTok to approach mostly younger audiences and also the Arab audience that heavily uses TikTok, to be honest.
We learned it on the go. And I saw the huge impact that TikTok had. It was a very powerful tool for us as a government. And I basically, I pitched my position to TikTok. I told them that I personally saw firsthand the impact that TikTok has, how the government can use it, and I can bring in the rest of the ministries to operate on TikTok. And the idea was, back then, it was seen by many, maybe still as a silly app for dancing cats and kids you know, stuff like that. And I told them that if we will bring onboard the government, the banks will come, the healthcare providers, the food industry, everyone will follow, because it will give the platform some sort of credibility.
So that was my pitch basically. And I joined TikTok two weeks after I pitched it. I just joined the company.
Michael Eisenberg:
And what was the job exactly?
Barak Herscowitz:
So my job was called a “Government and Public Sector Vertical Lead.” I was in charge of basically onboarding the government. I was in charge of making them open TikTok accounts, advertise on TikTok, be active on TikTok.
Michael Eisenberg:
How long were you at TikTok for?
Barak Herscowitz:
A bit more than two years.
Michael Eisenberg:
A bit more than two years.
Barak Herscowitz:
Yeah.
Michael Eisenberg:
And you onboarded the Israeli government to TikTok and many other good businesses. When did you resign from TikTok?
Barak Herscowitz:
I resigned in January, of this year, 2024, yeah, mid January.
Michael Eisenberg:
Three months after October 7th or so. What caused you to resign from TikTok?
Barak Herscowitz:
First, I must say that generally speaking, my two years there were great, were very positive and a great experience. And there are amazing people working in the Israeli office. So it was a good experience. And then October 7th broke, and we were, that day, that Saturday, we were all obviously as Israelis, we were all in shock and hid from rockets in shelters.
So that was a very harsh day. But as a TikTok employee, there was something else. Because we saw that morning that TikTok and other platforms as well are being used by Hamas. So I don't know if many people know, but Hamas, they broadcasted on live their atrocities, which was crazy.
And they mobilized some of their supporters to cross the border, to come into Israel, using those social media platforms. The Israeli team was very fast to ring all the bells, wake up. Remember very early in the morning Saturday. No one works in the European offices or in America, but we rang all the bells, and we made sure that everyone wakes up and gets into action.
And Hamas-related accounts were blocked immediately that same day, so I was very proud of TikTok. Very proud of my workplace. But then right after that day, after things started to change and to shift–and it started with the government being blocked.
Michael Eisenberg:
The Israeli government.
Barak Herscowitz:
The Israeli government.
Michael Eisenberg:
Your client.
Barak Herscowitz:
So it was my client, and they were completely blocked from advertising on TikTok, right on October, I think eighth. The reasons why they used ‘beyachad nenatzeach’ - “together we will win” slogans on their videos, and it was considered political by TikTok to use it. I thought that this decision, this policy decision wasn't fair. And I asked the Policy teams why, and then they would say that anything related to any conflict, any political conflict or any war, we try to get out of the platform, and especially in paid ads.
So I communicated this to the government and, you know, the government didn't have much to do. And then later on, I think the following week, all of the videos for the hostage families that tried to raise awareness abroad to the hostage crisis, they were banned as well. And I was sent to talk with the hostage family forum and, you know, communicate this to them, that we don't allow any campaigns that are related to any war or any conflict.
So it's not against you. It's not against Israel. It's not against the hostages. And I felt very comfortable communicating it, because I had an unwritten agreement in my head with TikTok that I communicate those messages, those policies to my clients, as long as it's being fairly and equally implemented on everyone. Makes sense, right?
Michael Eisenberg:
Yes, sometimes.
Barak Herscowitz:
Sometimes. But then I saw that this wasn't the case. Then I saw that there were very heavily funded campaigns for Palestinians by, pro Palestinian groups or organizations, that showed very disturbing images of kids in the rubble in Gaza, testifying how much they're hungry and they're being bombarded all the time by the IDF.
This ran on the platform smoothly. And then I asked the company, “How come?” I mean, I wasn't even against it. I said, “But if this is allowed, then campaigns for hostages obviously should be allowed.”
And I never got any real response. They would always say, “Yeah, we're going to check it. But for now, this is the policy.” And they didn't change it. So I felt to me, what I saw is a bias against Israel and antisemitic bias. And then later on, there was something also very interesting, a campaign by Birthright–
Michael Eisenberg:
Birthright’s the organization that helps Jewish kids, and young adults come to Israel for–it's basically a free trip–it’s an educational trip given by philanthropists.
Barak Herscowitz:
So they tried to promote a program for volunteering in Israel, mostly in agriculture, because many of the foreign workers just escaped the country.
Michael Eisenberg:
Yeah, there were a lot of Thailandese killed and then taken hostage, for example, and Thailandese are the farm workers, some of the farm workers in Israel. And they were taken hostage or killed on October 7th. Some of them just left.
Barak Herscowitz:
Right. And so, Taglit, Birthright tried to recruit volunteers to the programs here in Israel. And this was also banned by TikTok, because of two reasons. One is that many of them had the saying, “Am Yisrael Chai” on their shirts. “The people of Israel live.” Am Yisrael Chai.
It's obviously not a political phrase. And the other–that the landing page that it led to said “In these hard times, we stand with the people of Israel.” And I saw other videos promoted on Tiktok that say, “In these hard times, we stand with the people of Palestine,” or “We will continue to send with the people of Palestine.”
So I asked the company, “How come? Why are things that are allowed for Palestinian videos aren't allowed for Jews or for Israelis?” And obviously, for me, it was a very strong bias. And it wasn't only in the paid ads section, it was also in organic content we would receive, because Israel is such a small country and it's built on, there's a word that I don't know if it exists in English–”combina.” Basically, that everyone thinks that they can use someone–
Michael Eisenberg:
They can fool the system.
Barak Herscowitz:
Yeah. Fool the system.
Michael Eisenberg:
Make a deal to fool the system.
Barak Herscowitz:
If you know someone, you can fool the system. It’s a small country. So Israeli content creators, pro-Israeli content creators who had problems with TikTok–they would, they knew people at TikTok Israel in their offices. So they would call us all the time and tell us that they had problems.
Many of them were blocked on October 7th. And many of them, which I think is worse–they weren't blocked, but they were shadow-banned. Meaning they never received any notification that there is any problem with their content–but all of a sudden, they saw a huge drop in their reach, especially outside of israel.
Meaning, the Israeli point of view couldn't reach audiences outside of Israel. And we know for a fact that there was a tsunami of anti-Israeli and antisemitic content on TikTok abroad. So something felt very fishy to me. Something felt like there is a very strong bias against Israel, both in the policies and in the way those policies are being implemented.
And content moderation, I did write about it to company officials and I opened, you know, you work in high tech, you know how it works in big companies, you need to open a ticket and then make sure this ticket is being taken care of. And then you follow up in the system and it's very easy for those things to take forever.
But I did it all in the traditional way, okay? With those tickets and everything, but nothing changed. And then the first night, around the first night of the hostage deal, when Israel released terrorists in order to get hostages back–
Michael Eisenberg:
A few women and some old people back.
Barak Herscowitz:
Yeah, the first time was only women and young girls, including, I think, Abigail Idan.
So we were all in Israel, we were obviously very emotional about this night.
You know Michael, I never, never cry. Last time I cried was when my grandmother passed away. It was years ago. That night I cried, I was up basically, I cried for hours, and then someone told me to check something up on the internal system of the TikTok employees. It's called Lark, and I realized that there is an internal group called Palestinian Support.
And I joined it, and I saw that there are TikTok employees supporting not the released hostages, but the released terrorists. Some of them exploded cars, some of them stabbed people on the streets in Jerusalem. And they were celebrating their release, and were so happy and emotional about the release of those Hamas terrorists and other terrorists.
And then I started scrolling back through this group. And I saw that these employees also promote BDS, and supported the Houthis, and they celebrated when the Houthis attacked a lot with missiles, they celebrated and they were happy about it. And this was all on the internal company platform.
So I started to, you know, say, “Who are these employees?” And, you know, I'm going to be very cautious here because my lawyers, they always told me to be cautious. So not a hundred percent of them, but 99.5 percent of them were in Trust and Safety teams, meaning they were in charge of the censorship of TikTok.
They decided what content goes on and what kind doesn't go on. And these are the people who celebrate Hamas, and the Houthis, and BDS. And I thought this was crazy. This was crazy. And I wrote an internal memo to the company, and my initial claim was that there is a bias in policy and bias in content moderation.
And then I added this, screenshots and information about those internal groups, and that Trust and Safety employees who support terrorists and support BDS. And I also mentioned it’s a very hostile environment towards Jews on other TikTok sites. This is something that I haven't personally experienced because I work here in Israel. There aren't any anti Semites here in Israel, I hope so.
Barak Herscowitz:
But in other offices, there were many, there were many incidents.
Michael Eisenberg:
I heard about Spain and Ireland were places that, you know.
Barak Herscowitz:
In Ireland, things are crazy, but also in London, and in France, and other places, there were Jewish employees reported that they came to work after October 7th and no one spoke to them, including their bosses.
They were completely ignored by everyone, as non-existent. Or, other employees who received very disturbing anti-Semitic remarks.
Michael Eisenberg:
Such as?
Barak Herscowitz:
I don't want to get anyone in trouble, but, I'll give you one example, and I'll try to do it without too many details.
One of them said that they had a team day. And they had some games and, you know, group games. And then one of them, she experienced very harsh remarks about Jews, and money, and being in control of the world, etcetera. And then she reported it to HR and the Ethics office. And she said–it's not something that I experienced, but this is something I saw on Lark, on an open Lark group–she claims that no one ever talked to her, and no one ever dealt with her reports.
So I added these harsh feelings of Jewish employees to the internal memorandum that I wrote. And it was a very elaborated and detailed, long memo. And I sent it to the management of the company. And I was a bit, I don't know how to call it. It's chutzpah, Jewish chutzpah, whatever.
But, I sent it to all of the C levels who report directly to the CEO and ethics office, GR, HR, PR teams in America and in Israel, and in Europe, and to my manager and all of that. All of the managers, up to the CEO–
Michael Eisenberg:
Up to China.
Barak Herscowitz:
The CEO of TikTok is not in China. He's in Singapore.
Michael Eisenberg:
Mm-hmm.
Barak Herscowitz:
TikTok is owned by a Chinese company, but TikTok as a company, it splits between Singapore and the United States, London.
The reaction was crazy. The first reaction, I mean, I assumed, maybe I was naive, I thought that if I raised red flags to the company about employees who support terrorists, and they are in charge of the content moderation, and this content moderation is being infamous on all of the traditional media–is anti-Israeli and antisemitic–I assumed or hoped that they would say, “You know, these are hard accusations, Barak, and we're going to take it very, very seriously, and deal with it, and change it, and fix the problem.” No. The first reaction was, by some managers, wrote me, “Who else have seen this? Who else have you consulted with?”
Michael Eisenberg:
Who else have seen your letter?
Barak Herscowitz:
Yeah, who else have seen this letter? “Did you send it to anyone who's not mentioned in the letter?” They were panicked about it. And then later on, they sent a Jewish employee very, very senior. He approached me and he said,
“You know, I'm Jewish, too. I understand that we have a problem here in TikTok, and I feel very much like you. And this antisemitic wave in the world is very dangerous. Let's go over your memo together. Let's read it together and think together, how can we fix it? I can help.” Because he said that he can help, because he’s senior in the company, and I thought it was a very great offer.
And we scheduled a meeting, and then halfway through the meeting, I realized that I'm basically under investigation. It's not really a meeting of “Let's fix things together.” It's more of, at this point, the memo was,they transferred it to other, you know, other people, other employees.
So at this point, I think tens of people were exposed to the letter, 20, 30, 40. I don't know exactly how many–other groups, et cetera. And of course the CEO as well. And, he told me in this meeting that parts of this memo leaked to Fox News. At this point, I was very scared about it because I, you know, I plan to stay in TikTok for many years, and I was in a senior position there.
It was a great job to be honest.
Yes.
But so I was afraid that they would think that I was the one who leaked it, but, they–it was very clear to me that they thought it leaked from somewhere in Europe for some reason. And then they would, he asked me if I have any friends in Europe, and the other European offices, who are my friends there, who do I talk to on a regular basis from European offices?
And I told him, I think you’re wasting your time in the wrong place. I think the real problem is with employees who actively support the Houthis. Whoever, who supports the Houthis? That's crazy!
Michael Eisenberg:
You’ve got these people on college campuses begging them to bomb another ship.
Barak Herscowitz:
Yeah, now there's a chant.
Michael Eisenberg:
Or stop pharmaceutical supplies to Europe. And to raise the cost of all products around the world and increase inflation. And support a terror organization that has done nothing for the West or anything else other than kill people.
Barak Herscowitz:
Well, they were removed from the terror organization list.
Michael Eisenberg:
But they're back now.
Barak Herscowitz:
Oh, they're back. Okay. But I think it's interesting you mentioned the campuses, because I think that there's a connection between what people see on TikTok and later on, they chant on campus.
Michael Eisenberg:
No question. Just look at the Bin Laden letter, for example.
Barak Herscowitz:
TikTok generally speaking was very fast, very quick, you might say that it was quick in removing it, removing the trend. It took them two days. It's a very crucial two days to be honest, but you know, in such a big company, you can say that two days is fast enough to remove such a trend. But I think they only removed it because it was, it gained so much media coverage.
Michael Eisenberg:
And because by that point, tens of millions of people had already seen it or heard it or whatever. It was like–
Barak Herscowitz:
But what if it weren't covered by New York Times?
Michael Eisenberg:
They would let it go on there forever.
Barak Herscowitz: Maybe, you know, Jackson Hinkle. Have you heard the name? So Jackson Jackson Hinkle, if some of our listeners don't know, he's anti-Israel, but also anti-America and anti Ukraine and anti-everything basically.
Michael Eisenberg:
Well, he's not anti-Russia.
Barak Herscowitz:
He's not anti-Russian.
Michael Eisenberg:
He is not anti-communism.
Barak Herscowitz:
Right, exactly. But he's anti-everything Western, and anti-everything that makes sense. And I wrote another, a separate internal memorandum before that to the company about his content on TikTok. He was banned from most other platforms.
And he doesn't have a verified TikTok account, but his content is booming on TikTok. And I sent them links to videos with hundreds of thousands of views with very crazy accusations of the IDF bombing. You know, he says that the October 7th never happened, and it's the IDF bombed Israeli citizens.
These videos, I checked a few days ago, these videos are still on TikTok. Bin Laden gained some media coverage by traditional media and that's why it was removed, but what other content is still on the platform?
So that's basically my story. And then in January, after a few more trials, I tried to ask them if anything is being done with my letter, if they're going to change anything. The answers that they gave me were ridiculous.
They sent someone from Ethics office to talk to me, and she said, “We take it very very seriously, and we will take some actions as a company, but we will never be able to tell you what these actions are exactly.” So I told her, “I'm not expecting for you to tell me if a specific person with their name was fired,” because obviously it breaches their confidentiality, “But I do expect to understand if you change anything in the policy. How do you recruit trust and safety teams? How do you oversee their work? Is anything being done with employees who support terrorists on the internal platform?” They said that they will remove those messages on the internal platform that support the Houthis and Hamas.
And I told them, “The fact that it's on the platform is not a problem. The fact that these people are the censors of TikTok, this is a problem. This is a real problem.”
Michael Eisenberg:
Did they remove the messages?
Barak Herscowitz:
They removed some of them, but you know, one thing that happened later on after I left is that they removed the Jews and the Israelis from those groups supporting Palestine, so they won't be able to screenshot and complain, and open other tickets in complaining about it.
Michael Eisenberg:
Wow.
Barak Herscowitz:
Yeah, that's what they removed.
Michael Eisenberg:
How do you think Trust and Safety people were hired?
Barak Herscowitz:
I don't know. And it's a big question, and they never answered it. I'm pretty sure that they didn't look actively for people who are antisemitic.
Michael Eisenberg:
Okay. Yeah.
Barak Herscowitz:
And I'm sure, I hope, and I assume that the CEO of TikTok and the C level-managers that directly report to him are not antisemitic, and not specifically against Israel. Maybe most of them,
Michael Eisenberg:
Or pro-terrorists for that matter.
Barak Herscowitz:
Or pro-terrorist. Maybe. But I thought that after they saw that there is a problem in their company, and they chose not to act upon it, it becomes a policy.
Michael Eisenberg:
I agree with that. So you resign in January. You finally decided–the fight you've been fighting and fighting. You're not making progress. You resign.
Barak Herscowitz:
Yeah.
Michael Eisenberg:
In the background, and you and I know each other partially through this, right? I had done some research and other groups of people had done some research showing a lot of nefarious things that were going on on TikTok.
And at some point, Congress, in the United States, decides to do something about this. And there you are sitting at home. And I can't remember who the member of Congress was right now, who quotes a letter that you wrote or a Tweet that you wrote.
Barak Herscowitz:
It was Senator Lindsey Graham.
Michael Eisenberg:
Senator Lindsey Graham.
Barak Herscowitz:
He basically grilled the CEO of TikTok in a Senate hearing for my resignation.
Michael Eisenberg:
And you resigned in this very public letter that you posted on Twitter.
Barak Herscowitz:
Not exactly. I resigned. It was very interesting, because my Tweet was very vague. It was, “In these hard times when our existence as Jews is being under attack, people's priorities change. I quit TikTok. Am Yisrael Chai.” That was what I wrote. But then the media immediately connected it with my internal memorandum that had leaked way before. So it was clear to people–the reason I left was very clear by then.
Michael Eisenberg:
Yeah. And so you stated very openly then, but I mean, I'll just say it, because–you said it was vague, but it was at least clear to me, that you decided to put your values ahead of your employment. Is that fair?
Barak Herscowitz:
Yeah.
Michael Eisenberg:
Okay. And you said at these times, meaning these are clarifying times. My values in the defense of my people standing for what's right, is more important than my earning this great living that I'm earning. Is that fair?
Barak Herscowitz:
Fair.
Michael Eisenberg:
Fair. Okay. And Senator Lindsey Graham then, in a congressional hearing with Mr. Chu, who’s the CEO of TikTok in the U.S., then quotes a quote from your letter and you're sitting, I don't know where?
Barak Herscowitz:
I haven't watched it. I didn't watch it back in real time.
Michael Eisenberg:
Yeah.
Barak Herscowitz:
Someone tagged me on Twitter and I was shocked, to be honest. I was shocked. Because when I quit, when I posted on Twitter, I received numerous requests, from Congress, people and senators, to talk to them. And I refused, because back then, I was really afraid that TikTok would hunt me, would hunt me down and sue me.
Michael Eisenberg:
Did you get any threats?
Barak Herscowitz:
From TikTok?
Yeah.
Barak Herscowitz:
No, not really.
Michael Eisenberg:
From people around, anybody else threatening you?
Barak Herscowitz:
No, first I received over a hundred messages from TikTok employees supporting me, not only from Israel, but from other places as well. And they were very supportive until this day. I want to be cautious here, but I hear that some TikTok officials are trying to talk bad against me in some places, but I never received any threats.
Michael Eisenberg:
Take it as a compliment. And so Senator Graham quotes you in a Senate hearing, your phone begins to blow up from people saying, “Hey, Senator Graham did this,” and then you subsequently wrote a bunch of pieces and did a couple of press interviews. What were you trying to get out about TikTok?
Barak Herscowitz:
You know, the first thing I wanted people to understand is, I saw a very, very clear and very radical bias against Israel and on the platform. And other people posted quantitative researches about those things. I never studied this thing.
Michael Eisenberg:
Just to state them very openly. So, for example, free Palestine versus pro-Israel was some, I forget, it was 50 to one or 60 to one. I can't remember the exact number. Or more than that to one. Anything having to do with the Uyghurs or free Tibet or whatever, it is not present on TikTok, but is present on Instagram.
Various anti-Semitic lines, or pro-Hamas lines are like multiple hundreds to one, over what you find on Instagram or other social media platforms. And plus, there was also research to show that all sorts of content that got started in Malaysia and Indonesia, then jumped to the United States as part of the TikTok algorithm. Go ahead.
Barak Herscowitz:
Basically, what they claim is that TikTok doesn't behave as a real social media platform. It behaves as a tool for propaganda.
Michael Eisenberg:
And then just to be clear about the U.S. Law Section 230, which is supposed to say, okay, I'm not responsible if I'm a social media platform like Facebook or Instagram or TikTok, I'm not responsible for the content that's posted by users–but their algorithms are promoting certain content, which is changing public opinion, and they're still claiming section 230 protection.
Barak Herscowitz:
You know today, and this was part of my pitch when I talk to clients, TikTok is not a silly app. TikTok is a place where many Americans, many Europeans, and in Israel as well, go to consume their news, and it's very influential. So basically what I wanted to–
Michael Eisenberg:
But do you think this was like intentional by TikTok, Chinese, to kind of change and control the minds of young Americans or young Westerners?
Barak Herscowitz:
I don't have any evidence for this, but it makes sense. And then, as I said, once you realize that there is a very strong bias, and once you realize that you have employees in very sensitive positions, who actively influence the way things are portrayed in the media, on the platform, and you don't deal with it, I think it becomes a policy.
And so either it was a policy or became a policy, but it is a policy. And what I wanted the world to know–because I did give interviews about it to the New York times and others, the Telegraph–that today it’s Israel, but tomorrow it can be anything. It can be any other subject. It can be any other interest that malicious or other entities have. The minds of young people in Western civilization, in Western countries, in European countries, in America, are being, manipulated. And I think that the free world is in a war that he doesn't even understand, that it loses, you know–maybe Israel is going to win over in Gaza with tanks and with missiles.
Maybe, I don't know, but one war that we already lost is the war on the narrative, is the war on public perception. In the West within allied countries. And I think TikTok is being a tool for this war. And, we need to wake up and we need to understand this.
Michael Eisenberg:
So I assume you agree with the law passed in the United States that TikTok should be divested to US ownership.
Barak Herscowitz:
Generally speaking, the answer is yes. You know, this is an internal American issue, but more important than this specific law, I think that after the study that you mentioned that showed that TikTok is not behaving naturally on some issues, Tiktok decided to block its data that allowed those studies.
Michael Eisenberg:
Yeah, when, you know, Jeff Morris Jr. or Anthony Goldbloom started, you know, working on this data, it started to get some traction and then TikTok blocked it because–
Barak Herscowitz:
Crazy.
Michael Eisenberg:
Why be transparent? When you're trying to be nefarious.
Barak Herscowitz:
So I think the first thing that we need to demand from TikTok, especially from TikTok, because it's owned by some entities that we're not quite sure how they behave, is for full transparency on everything.
Not the algorithm itself. But we need to understand what people in America see. Where is it coming from? Where are those videos being pushed from? In what volume is each hashtag is being promoted? These are things that we need to understand and we need to know.
Michael Eisenberg:
So I want to come back to what you said a minute ago.
We're in three distinct wars right now. One is a kinetic wa–tanks, battlefield, wherever it is, the Houthis, missiles. The second is a narrative war. And the third is a values war on some level, right? It was kind of what Marxist/Leninist/Communist values against free world, Western values. And then this war of narratives.
These are asymmetric wars right now, right? Because TikTok, for example, doesn't play by the same rules that Instagram plays by. And the Chinese won't play by the same rules the Americans play by. Neither in narratives, nor in values. And TikTok is like an education or mind control mechanism. Once you control the mind, you don't need to run on the battlefield, so to speak. How do you win a war like this? You like, had the inside seat. You were in the Prime Minister's office. You then went to the TikTok side. How do you win this war?
Barak Herscowitz:
First, I think we need to understand that we need to win this war. I posted something on X today about it. And people said, you know, “This is a war we can't really win. When you see photos from Gaza of babies in the rubble, we can't win this war.”
I say we can, we must win this war. We don't have any choice. We need to win this war. Eventually not us as Israel, specifically us as, but as the democratic countries, the democratic world, we don't have much of a choice.
In the defense, first, we need much more clear and vigorous and yes, smart regulation on social media and on campuses as well, because we know that money is being transferred to universities from some countries that are not very friendly to the notion of democracy.
Michael Eisenberg:
So what would be the most effective way to win this war on the narratives and the values in social media?
Barak Herscowitz:
I think that we need to first realize what is our story. Okay, what is our true story that we want to convey out? Because the other side, they have very good stories to tell, okay? They have stories of small, weak entities, like in Gaza, the Palestinian people, for example, is very weak, is very small. It's against big America, and the huge amount of power that Israel has, and its colonialism.
This is a story they tell. Okay, it's a story that is compelling people by the story. It's a very good story. We need to tell a whole different story and which i think is true–
Michael Eisenberg:
Tell it to me. What’s that story?
Barak Herscowitz:
If we talk about Israel specifically, the story is that we are a small nation, inside a very hostile, very strong world around us, very wealthy entities that are anti-democratic values, anti-LGBT, and women’s rights, etc. inside a very hostile, very strong world around us, etc. And they try to extinct this tiny island of democratic sanity in this place. I think we need to reverse it. Israel and America, and democracy is currently under attack from malicious powers that want to harm personal freedoms.
I think that many people in those campuses don't even understand that they're being manipulated, and people don't like to be manipulated. And to understand that they're being lied to, with complete lies.
Michael Eisenberg:
How would you wake them up?
Barak Herscowitz:
It's a long battle, but we need to fight it. First, speaking their own language in what interests them, what they care about, what I care about as well, by the way, because I'm a gay liberal, a person who lives in Tel Aviv, enjoying the good life of Tel Aviv. Hey, I care about LGBT rights. I care about personal liberties. I care about democracy. We need to speak in this language to address these issues and these concerns, and show them that Hamas and its allies are not on the good side. And not on their side.
Michael Eisenberg:
Yes, that's for sure. Hamas, Iran or China. Who's most dangerous for Israel?
Barak Herscowitz:
I don't know. I think that Iran is more obsessed with Israel specifically. So it's more scary. I don't think that China specifically has an obsession towards Israel. I think we need to be very cautious about this coalition that is being formed with them and with Russia.
Michael Eisenberg:
Yeah, Russian, of course. I asked Prime Minister Naftali Bennett, former Prime Minister Naftali Bennett, what question I should ask you. And he said, ask him, “What are the biggest mistakes you've made?”
Barak Herscowitz:
Me?
Michael Eisenberg:
That's classic Prime Minister Bennett, by the way. I remember this from when he was a CEO.
Barak Herscowitz:
Hmm.
Michael Eisenberg:
What are the biggest mistakes you've made?
Barak Herscowitz:
I've done too many. So, where to start?
Michael Eisenberg:
He’d insist on a specific one.
Barak Herscowitz:
I'll give you two. Two good ones. Okay. One is, for many years, I worked with politicians like Naftali Bennett and others. I felt like in some places I knew the right answer, but I didn't insist on it because I was, I felt that I'm not big enough around them and I don't have–
Michael Eisenberg:
The gravitas, or the presence or the confidence–
Barak Herscowitz:
Yeah, gravitas. And eventually I think I should have been more confident about what I feel and what my gut's telling me.
The second thing, which I think is more interesting around TikTok and this world is that, I think I was too hesitant before I left TikTok. And, even though some would say that I had the guts to leave TikTok and interview about it, I should have done it earlier. I should have done it bigger because, when I left TikTok and when I was ready to speak about the bias, I think the world already moved on from being on the side of Israel. And I think, timing is everything in life, and probably in a better timing, I think it would have drawn much more attention and make more impact.
Michael Eisenberg:
Wow. Wow. I think, by the way, there's a general lesson that–I've admired you for standing up for your values and taking hard decisions. But I think that self-reflection point that I could have done it earlier, maybe change the tide is, you know, is remarkable.
When Elon Musk was here in Israel and people were talking to him about curbing some of the anti-semitism on X, he made the point, and I then echoed it in a Tweet–I wrote it in Hebrew–which ended up I think becoming the most read Hebrew Tweet ever, because Elon retweeted it with a verse from Proverbs, verse from from Mishlei–and his approach on X is what I would call radical free speech. They ban almost nobody there, but the algorithm is also not tipped like TikTok’s was to kind of suppress pro-Israel and promote pro-Hamas or promote pro-China.
How do you think about the X view of free speech, given what you said to me earlier about what kind of spreads on these platforms? I argue that in the land of social media, the X model is the best one. But how do you think about it kind of objectively?
Barak Herscowitz:
I first, I tend more towards the X model because I'm very enthusiastic about free speech.
I think it's crucial for democratic societies, but two things. One, it has to be on both sides. Okay. Unlike on TikTok, what I saw on TikTok is that they did censor some things, but only for one side.
Michael Eisenberg:
Agreed.
Barak Herscowitz:
So as long as it's fair, it's one major thing. And the other thing is that on X, there are still some things that I would remove.
Michael Eisenberg:
Jackson Hinkle?
Not Jackson Hinkle, because Jackson Hinkle, he can lie. And then Musk added these community notes that he can–
Michael Eisenberg:
I think that's a great architecture, for it's worth. What they did to Raisi when he died, you know, and the BBC called him like, you know, someone like, “people can think of him as a decent guy.” My God, right. And the Community Notes flamed BBC. God bless Community Notes.
Barak Herscowitz:
I think it's brilliant. But some things are much more hateful and some things are much more violent.
Michael Eisenberg:
Yeah.
Barak Herscowitz:
And when it comes to things that spark violence, I think, there should be some moderation. So if there is China on the one hand with a very strict censorship, and Elon Musk on the other hand, it's somewhere–I lean towards Elon Musk, but I think he can be, it can be at 10 percent less.
Michael Eisenberg:
Where do you trust the news more, BBC or X?
Barak Herscowitz:
X is not X. Because X is people on X, right?
Michael Eisenberg:
Right.
Barak Herscowitz:
I don't trust the BBC because I know what they report.
Michael Eisenberg:
Right.
Barak Herscowitz:
But I think we need to learn, and teach our children other people to consume from various sources. If you consume from various sources, and you know that this one leans towards one side and the other one leans towards the other side, then you can have a more broad picture of the world.
It's healthy. Never rely only on BBC or never rely only on Jackson Hinkle, and never rely on the other side as well.
Michael Eisenberg:
What do you do when you're not working in your free time, and now you're unemployed?
Barak Herscowitz:
For some reason, I'm much more occupied than before. I don't know why, but I–
Michael Eisenberg:
We like to say that at some of these big companies, there's like silent unemployment, but I don't think that was the case with you.
Barak Herscowitz:
First, I like to write. I like to express myself. And recently I'm working on a new project. I want to take the last part of our conversation about the West losing a fight it doesn't even know it fights, and bring it to more audiences. And I'm working on a new lecture.
Michael Eisenberg:
Good for you.
Barak Herscowitz:
And I want to make it a hobby and a mission.
Michael Eisenberg:
I want to ask you one last question because I think the last five months have been instructive. And I know you've been through ups and downs, and people attacked you. And, you know, there was time to be concerned. And there was an incredible time of being brave. And you've been very, kind of, I would say, raw and open during this time. What makes you vulnerable?
Barak Herscowitz:
To be honest, not much nowadays. I think when you're very confident in what you do, then you're less vulnerable. One thing that I can tell you, I visited Kfar Aza, one of the villages that were destroyed by Hamas on the raid. Since then, every time I hear about those stories from October 7th, it harms my ability to move in this day.
And, to be honest, this experience with TikTok, it made me so much stronger and more confident, because it's the first time that I actually paid a price for something that I truly believe in.
And I paid a heavy price, I must say, a very heavy price.
Michael Eisenberg:
I know you did.
Barak Herscowitz:
And I lost some friendships. I had a great salary, everything. But doing this action, taking this action. When you know you're going to pay the prices, and it scares you to death. And you don't know if they're going to sue you, in America, and it's scary, but you do it anyway–I think it's strengthened me. It's strengthened me dramatically.
Michael Eisenberg:
Amazing. You can learn more and read more about Barak on X, formerly Twitter, @Barakher that's spelled B A R A K H E R. Barak, thank you. That was great.
Barak Herscowitz:
Thank you.
Antonio Garcia-Martinez
A lot of that hippie, flower-child culture did bleed into the tech scene.
San Francisco used to be a pretty normie, you know, middle-class, working class, you know, Irish and Italian Catholic town, you know, postwar boom, standard stuff. And in the 60s, the summer of love, the druggie culture, the Beats, Allen Ginsberg, all that that now forms part of the essence of nostalgia, came in the 60s and just never went away, right. And some of that led to an, I would say, potentially overly permissive drug culture where people, you know, they think about meth and fentanyl and these absolutely destructive drugs in the same way that you think about pot or something. And they're not obviously not the same, right.
But on the other hand, they do allow all sorts of weird trippy experimentation. Like this guy named Stewart Brand who had this Whole Earth Catalog, which was this very hacker-ethos thing, where you go live off grid and hack your stuff together. Steve Jobs claimed he was very influenced by it. And so a lot of that, a lot of that hippie, flower-child culture did bleed into the tech scene. And you see even today, right. And again, I would say, again, SF is a very permissive society in which traditional roles and traditional marriage, a lot of traditional things are just kind of suspended. And everyone lives in this sort of, almost, Peter Pan adolescent life, which again, is kind of abnormal and strange, in many ways, but I think is very fruitful when it comes to technology, right?
Like, a lot of the things we do on phones now - I remember, I'm old enough to remember 10 years ago was still odd, right? Like, I heard the first Uber pitch and it seemed like a bad idea. It's like why would you do that? Mind you, this is before drivers, you know, it was a black car service. Right? Like it was a very small service. Or Airbnb? It's like, who the hell is gonna let a stranger into their house? This is, dumb, right. Or even Facebook's ad system. When I joined, it didn't work very well. Like Facebook's ad monetization model was actually kind of poor. Right? And so all these things got fixed and became normalized, but it's, at one point they were radical and strange. And there's only one place in the world that would even let you, you know, entertain the notion that things would work that way. Right. And San Francisco had that culture.
Michael Eisenberg
This episode of Invested with Antonio Garcia-Martinez was recorded in the summer, before the massacre of October 7th, and the war that has since ensued in Gaza. This war obviously, irrevocably changed our lives. And therefore, we’ve held off on releasing this episode.
This episode was recorded at the height of the protests in Israel around the judicial reform, and relates to some of the topics of that time. But it’s a super interesting episode. We tackle why Antonio converted to Judaism, the tech scene in San Francisco, and the tension that exists between government and the high tech sector. We think there’s a huge amount of interesting content in this episode, and think you’ll enjoy it, it harkens back to a different time, but we’re now ready to release it after a time period that has literally changed our lives. So, please listen in to my conversation with Antonio Garcia-Martinez, author of “Chaos Monkeys”, founder of Spindl, all around incredible guy.
Welcome back to Invested. I am thrilled to have Antonio Garcia Martinez with me. He just landed in Israel not long ago. And it's a pleasure to have you with us. Rather than have me read off your bio and introduce you, would you introduce yourself?
Antonio Garcia Martinez
Oh, God, where to begin? I've lived a few lives. Let's see, I dropped out of a PhD program in physics at Berkeley, went to Wall Street, did Wall Street as a pricing quant at Goldman for a while, realized that I didn't like Wall Street, went back to the West Coast, worked in tech, did a Y Combinator startup, sold that startup, was early at Facebook on the ads team, built some of their ad tech, later on was an advisor at Twitter, worked in attribution company called Branch Metrics, and then wrote a book called Chaos Monkey. It's sort of a memoir of my time inside tech. Then I came back into tech, and right now I'm CEO and Founder of a crypto company called Spindl.
Michael Eisenberg
Spindl without an 'e'.
Antonio Garcia Martinez
Without an 'e'. I cheaped out, I didn't want to buy it with 'e,' it was too expensive. And so I got Spindl dot XYZ instead.
Michael Eisenberg
It feels like that could be a Wheel of Fortune word at some point, you know, but you're not going to find the vowels. So the thing we always open with is kind of, what is your core personal value?
Antonio Garcia Martinez 1:34
Oh God. Wow, that's a real stumper. And this is a -
Michael Eisenberg 1:36
Right out of the gate, we try hard.
Antonio Garcia Martinez 1:37
This is Tyler Cowen-levels of podcast difficulty here.
Michael Eisenberg 1:42
Have you done Tyler?
Antonio Garcia Martinez 1:43
No, no, sadly, no, that's probably the one big podcast I haven't done, which is like the one I actually want to do, but haven't done yet.
Michael Eisenberg 1:51
Tyler if you're listening, please invite Antonio.
Antonio Garcia Martinez 1:55
Personal value, man. I suppose it's somewhat contextual, whether we're talking a business or a personal context, I guess.
Michael Eisenberg 2:04
You can give us both.
Antonio Garcia Martinez 2:07
I mean, look, I've just outsourced my morality to the Torah, I don't know at this point. I'll just read out something from Exodus or something. Yeah, I don't know. You know, I think courage, intelligence. I can tell you the things that pissed me off, the anti-values.
Michael Eisenberg 2:23
Go ahead.
Antonio Garcia Martinez 2:24
Yeah, gross incompetence pisses me off. Hypocrisy pisses me off. I don't know, being pretentious pisses me off.
Michael Eisenberg 2:34
Boy, if pretentiousness, gross incompetence, I guess a lack of courage or fecklessness pisses you off - these days and ages you must be pretty pissed off.
Antonio Garcia Martinez 2:46
I know, I know a little bit. I try to stay off Twitter.
Michael Eisenberg 2:52
And politics?
Antonio Garcia Martinez 2:53
And politics.
Michael Eisenberg 2:54
So I read "Chaos Monkeys" before I knew you, when it first came out, actually, because I know a lot of the players -
Antonio Garcia Martinez 3:01
Right.
Michael Eisenberg 3:01
- in the book. It was courageous to write that book, I think is fair to say.
Antonio Garcia Martinez 3:07
I think so. I was definitely a little worried. Actually, it's funny. I wrote it in Europe, because I'm officially a Spanish citizen. And I thought, man, I'm gonna get cancelled for writing this book. Because no one's ever written, like, a tell-all memoir. Not that it was anti-tech necessarily. It was just like, this is actually what it is. And so yeah, I thought I was gonna piss off a lot of people. You know, it was not long ago, and when, I guess, six, seven years ago, but it was kind of unusual to be that open about what you did at a large company back then. Now everyone just Tweets anything.
Michael Eisenberg 3:32
Yeah.
Antonio Garcia Martinez 3:32
But back then, it was kind of a little weird.
Michael Eisenberg 3:33
It was groundbreaking -
Yeah.
- I would say, and no one knew what canceling, I think, was, seven years ago, still early in cancel culture.
Antonio Garcia Martinez 3:40
Right, it didn't even exist. I wouldn't have used that word then.
Michael Eisenberg 3:42
Right.
Antonio Garcia Martinez 3:43
Yeah.
Michael Eisenberg 3:43
But you were worried about it?
Antonio Garcia Martinez 3:45
Again, I think it was - again, it's not anti-Facebook, to be clear. And in fact, in retrospect, it comes off as maybe pro-Facebook, or certainly appreciative of certain parts of the company's culture. But you know, it was just an honest, 'this is what it's like to sit in a meeting with, you know, Zuck, or Sheryl Sandberg, this is how big companies work, this is how the real startup ecosystem works.' So yeah, I mean, it pissed off some people moderately.
Michael Eisenberg 4:07
Why did you do it?
Antonio Garcia Martinez 4:09
I mean, a couple of reasons. One, you know, as I detail in the book, there was, you know, there's all sorts of internal political machinations in my, you know, mid-level career inside Facebook. And then two, I thought, you know, that the internet, like I'm old enough to be that bridge - I think we're both the same age roughly - to be that bridge generation that remembers the analog world before the internet. Before, you know, you didn't have the world's knowledge of the world's people in your pocket, in a phone. And I thought 100 years from now, people will look back and say, "What was it like when humans basically virtualized human life into this sort of digital domain?" And they're going to ask and see what, you know - there's going to be like half a dozen books that people still read then - let's make a bid to be one of those books and give, like, an honest insider take of what happens when you intermediate all of human social life through a phone.
Michael Eisenberg 4:50
Yeah, but there were other ways, clearly, to tell that story, right? You could almost have written an Isaac Asimov kind of sci-fi. Or you could have just written a fiction book about that. And you could even have written it more anonymously. But this was like, in the weeds. Just for what it's worth, by the way, I mentioned to my son, who reads a lot, that I was seeing you. He says, "You know, you never let me read 'Chaos Monkeys.'" So I said, "Well, I think now he's 18, he's old enough to read Chaos Monkeys, right?" It was, it was a rated R version of Silicon Valley.
Antonio Garcia Martinez 5:22
It was a little salty.
Michael Eisenberg 5:23
You didn't have to write it that way. But you did.
Antonio Garcia Martinez 5:26
Yeah. I mean, not to externalize blame, but to externalize blame - my editor did push me to make it a little saltier than I kind of wanted, because obviously, it's a personal tale. Like it's the human story that makes people read it. And so, and then the narrative voice, like, you know, I love authors like Tom Wolfe, Hunter S. Thompson, these sort of, edgy-gonzo-journalism, you know, make the writer part of the story type thing. So it's not this dry reported nonfiction narrative. It's very much this spicy take of, this kind of out-of-control person that I sort of was, I guess, part of the time, I wouldn't say it's 100%. It's not really 100% me. But yeah, it was a little spicy. But I think the personal was important. I had two kids in there, you know, the personal was important. But, yeah.
Michael Eisenberg 5:29
When people read the book, what should be their core takeaway?
Well it depends who they are, right? If they're getting into tech, I think, people in tech who've read it have said, "You know, I think it correctly represents what that world is like." If you work in the ads and marketing world, which is a key part of Web 2, right, it's how the consumer internet gets paid for. They see the ad industry in there, right? So a lot of the book, you know, sure, there's a lot of personal spiciness in there. But at its core, it explains how does Google make, you know, whatever, hundreds of billions of dollars a year? How does targeting actually work inside Facebook, right? What data is actually valuable? How does the media business actually work? Those are actually some of the core themes in the book.
What I found interesting about the book as a tech insider, and, by the way, as a guy who did what they called "ad tech," up until the early 2010's. And then I wrote a piece saying, "Good Jewish Mothers, or Good Israeli Mothers Don't Let Their Great Engineering Sons Go be Ad-Tech Engineers." You know, what I found really interesting about the book was at massive scale - like Facebook - the decision making, I would say, is even different than it is at smaller scale. Just some of the companies that I was on - why do you think that is? Why does scale impact, kinda, even the ethical decision making, I'd argue in these cases, of ad tech?
Antonio Garcia Martinez 7:29
I mean, I would almost use like a physics analogy. And like, you know, when you solve a physics problem, there's a notion of a heat bath, right, this thing that has so much energy in it, and you couple your system to that, and that other thing just doesn't change, right? Because it's like the universe or the galaxy or whatever, right? That, you know, if you're a small startup, you have to think of the system as you being a small part of it. And your ability to influence that macrosystem is basically zero. You're a reactive, you're a reactive entity. When you're Facebook, you are the universe, right? You are the heat bath. And just in the same way that if you change the temperature, to cite a bizarre analogy, of the earth two degrees, it would have these massive, you know, macro consequences. If you change the direction of the Facebook ship, now mixing metaphors, even a few degrees left to right, suddenly, everything shifts.
So like, one of the one of the things I detail in the book, but part of what I did at Facebook, was the first time Facebook actually joined outside data and used outside data to target ads and try to monetize the user, you know, was me, right. I pitched - the story opens with me pitching Zuck - with a bunch of people, of course - saying, "Hey, we should do this weird thing where you retarget people inside Facebook, and it's never been done, and you don't quite understand what it is. And we don't really understand how we're gonna build it, but let's do it." Right?
That - again, me as like a mid-level product manager, like I wasn't even that senior at Facebook or anything, right? But - and then he said, "Okay, great, go do it. Here's three engineers, go build a programmatic ad exchange." That completely roiled the entire ecosystem, right? I had literally every ads company show up with their entire, you know, senior management staff and walk me through the roadmap and basically say anything I want, even though again, I was just like some little lieutenant in Zuck's empire. And that's the thing, right, and suddenly, we opened up this master amount of inventory - Google had to take notice, right? There's a certain excitement to being inside a large company like Facebook, you can have, if you're in that in-between when it is a giant, but it's not so big, that you're just one of a cast of tens of thousands. And when I joined, I was employee 2000 or something at Facebook; there was maybe 20-some odd PMs, maybe 4- or 500 engineers, it was big, but it wasn't that big, right? You could still have real impact on the company's direction, even though you're a relatively mid-level person. And that small-times Facebook size is huge by you know, outside size. So that's one way that the thinking is different.
Facebook kind of creates its own reality. And it's good to think that way, in the sense that you should try to create your own reality, because Facebook creates the frame for its own products. On the other hand, that also means that you can live in kind of Facebook lala land a little bit, and not understand that the outside world - there is an outside world -and that often its rules are very different, which - not anymore, but I think initially did plague Facebook's attempts on monetization.
Michael Eisenberg 9:55
Do you think, like, ethics and morals and values got a seat at those tables?
Antonio Garcia Martinez 10:03
In Facebook broadly? Yeah, I think so. I mean, there's definitely a Facebook set of values, right. And there was all these posters that, there used to be this thing called the Facebook Analog Research Laboratory, which like a lot of things that Facebook at the time, was a sort of permissionless bottoms-up thing. It was basically a silk screening factory where you could print stuff, it was a print shop inside Facebook, that just, some of the designers just started. And they'd print these posters, that they'd put on the wall that would embody Facebook values. And some of them have now, I guess, [become] kind of famous, or at least infamous, like "Move fast and break things," which is no longer a company value. You know, "What would you do if you weren't afraid?" "Every day feels like a week," - it's very, sort of, gung-ho sort of values. But you know, the company really did live them, actually, in a way. In fact, I've actually reproduced some of those posters, and I have them hanging in Spindl's office. I have some of them, my favorite ones that go, yeah, we want to definitely channel the the early Facebook.
Michael Eisenberg 10:47
But those are like ethos, like you said, you outsourced your values to the Torah, right? Were there any kind of timeless principles in there that you think that said - man, because there's an outside world, we need some timeless principles to be able to anchor what we're doing?
Antonio Garcia Martinez 10:47
I don't know. No, I don't think so. I mean, I think Keith Rabois - I think it was Keith Rabois' comment - that "every successful startup is a cult"? It's probably true. And that's just the reality of it. And the cult of Facebook had those posters and other values as their values. I don't think there was a lot of - there were definitely no 10 commandments, the "eternal truths," that they were following along. No, not really. Which doesn't mean they were unethical to be clear, or amoral. I just, I don't think that there was some outside moral reference standard that was being followed.
Michael Eisenberg 11:29
You're spending more time now in Silicon Valley. And you're kind of back; has anything changed since the time you wrote this book?
Antonio Garcia Martinez 11:34
Oh, yeah. Well, I mean, physically, a lot of things have changed.
Michael Eisenberg 11:36
Well, yeah.
Antonio Garcia Martinez 11:37
Yeah. I mean, the COVID hit San Francisco in particular pretty hard. The city just emptied out, right, and it still hasn't recovered, to be honest.
Michael Eisenberg 11:44
Yeah. I was just there. Yeah.
Antonio Garcia Martinez 11:47
A lot of things have gone wrong, with both, like, law and order, local politics. You know, SF, I keep reminding people, or I have to remind - you know, there's a lot of young people in the startups now, that's like, working with people half my age. I call them the "Zoomers," because they're part of the Zoomer generation, it's fascinating. It's like, you realize, like 10 years ago in San Francisco, this was the center of the universe. Not only was it where all of like, the consumer internet that you know - Facebook, Airbnb, Twitter - like our office is on South Park, literally a stone's throw away from where Twitter was invented in one of the offices there, right. This is where it was all happening, not just technically, but also socially. Like San Francisco was as hopping and booming, as, you know, Soho in New York is now, or Tel Aviv or whatever. Like, it was - you felt like you were in the center of something grand, and big things were afoot, right. And, you know, I think other parts of the Bay Area are fine. But Silicon Valley is not just San Francisco, obviously, it stretches all the way to Menlo Park. It's a big stretch of land, right. I think Menlo Park and Palo Alto are probably doing fine. But San Francisco actually got pretty hard hit.
And I think you're seeing a bounce back with AI. People are kind of moving back. I don't know, the way I reconcile myself to San Francisco - because a lot of it frustrates me and I've wanted to move, but I have a kid there and stuff - you just have to think of it, it's America's petri dish in which, you know, it's a fertile medium, the surrounding nature is beautiful. And just wait, they'll sprinkle weird bacteria, and you'll see random stuff will grow out of this thing. And either it's, you know, absolutely destructive urban policies of a very radical, sort of, brand of politics, or it's autonomous vehicles. Like literally you have - so Cruise has gone to, like, main production. I have the app on my phone, there are cars without drivers just zipping around San Francisco, you see them all the time.
And I think one of the most representative images of San Francisco in my head is that - this is not like hyperbolic or a joke, you see this all the time - you'll see, like, an autonomous vehicle with no driver weaving its way around, like, a homeless person. And it's like, man, this is such a dystopia. And that's kind of what SF is, like, this is a glimpse at a, sort of -
Michael Eisenberg 13:43
Our future?
Antonio Garcia Martinez 13:44
- a certain sci-fi, you know, book-movie version of that future. Yes.
Michael Eisenberg 13:49
Well, has anything changed in the ethos of Silicon Valley since you wrote that? I mean, let me, maybe inappropriately, make a couple of observations about the book. There was a large wind-at-all-costs attitude that I think you are talking about at Facebook. At the same time, there is a high value placed on money, despite kind of, let's call it, highfalutin ideals - money talks, people walked - and people recounted, it's kind of how score is kept, I guess, on some level.
I don't know. I don't know that I'd accept that characterization.
But that was one of my takeaways from the book. And then there's this kind of whole, both political and social atmosphere on the outside, that is a little unmoored, for lack of a better term. Has anything changed over the last decade?
Antonio Garcia Martinez 14:42
Yeah, I think the whole quote unquote, "tech backlash" that I'm putting in air quotes because I think it was mostly manufactured - but at some point if you manufacture media things, they become realities - the whole -
Michael Eisenberg 14:53
Manufactured by politicians, you mean?
Antonio Garcia Martinez 14:54
Or journalists, or media in general. The whole 2016 Trump election, right and then the whole anti-Facebook crusade with various trumped up, frankly, stories like the Cambridge Analytica scandal -
Michael Eisenberg 15:04
No pun intended, or pun intended?
Antonio Garcia Martinez 15:06
What do you mean?
Michael Eisenberg 15:07
Trumped up?
Antonio Garcia Martinez 15:07
Oh yeah, no pun definitely intended - Cambridge Analytica story, I think changed the view of tech, right? Like, I think at some point in there, in the last gaffes of real tech journalism, I think Recode - Kara Swisher's thing or someone - actually published, like, a negative sentiment study of coverage of tech over time, and you saw a dip negative and in November of 2015. And what happened in November 2015? The Trump election happened. And you know, Facebook was credited with getting Trump elected, and suddenly tech was no longer exciting. People will forget that the tech journalists used to be kind of, like, not exactly cheerleaders, but at least an appreciative audience that would kind of go to the same parties and hang out with the builders, and it would kind of be this -
Michael Eisenberg 15:45
Kara Swisher too, I mean, she put Jobs on stage, Julia Gates, and it was this emotional thing. I was at that conference, I was in the room when that happened. And she was certainly a cheerleader along the way. She's obviously turned negative. And she -
Antonio Garcia Martinez 15:55
Well, she and everybody else has turned negative. And so I think, yeah, the there's been a real animus against tech. And I think that's necessarily, I think, if you're, if you're an insider, that necessarily pushes you one of two ways. One, if you're like a normie tech person who, let's face it - not everyone is like a ketamine-doing, Burning-Man going, you know, scooter-riding radical technologist guy, some of them are just like, with a guy who's a director at Google, and he just has a job, like, it's pretty normie. That probably sours you on it, maybe, a little bit and makes you feel slightly embarrassed. And maybe you don't sit there and talk about your Google Drive on Thanksgiving.
And then there's another half. And it's funny, Nadia did a great piece on this in Tablet recently, actually - speaking of Jewish organizations - to have a magazine about the tech Civil War. You've got people like Peter Thiel, Elon Musk, Marc Andreessen, who, in some sense, I think, become more pro-tech, right, and more rejectionist towards the sort of mainstream (I would count myself among them, by the way) of people who kind of reject - I just don't even talk to conventional journalists anymore. I don't care about them. I have no idea what's going on New York Times tech section. Nor do I care, nor do I think it's politically important. And so I just reject it. I think some of us just retrench into more pro-techness and more accelerationism. Even though, you know, I have reservations about tech that I expressed in the book and stuff.
Michael Eisenberg 17:09
Yeah.
Antonio Garcia Martinez 17:09
I'm not 100% pro-tech. But I definitely reject the reflexive anti-tech sort of vibe.
Michael Eisenberg 17:17
Let's dig for a second, though - and now that you brought it up - into progressive politics and autonomous vehicles, right?
Antonio Garcia Martinez 17:21
Yeah.
Michael Eisenberg 17:22
It's like, on one hand, kind of, I think there's a notion out there that extreme liberalism, let's call it, or progressiveness, enables creativity.
Antonio Garcia Martinez 17:22
Yeah.
Michael Eisenberg 17:39
But very, very clearly - and the data is very clear on this - the more progressive the mayors in the city, the more the cities deteriorate.
Antonio Garcia Martinez 17:45
Yeah.
Michael Eisenberg 17:47
But like you said, autonomous vehicles are scooting around.
Antonio Garcia Martinez 17:49
Yeah.
Michael Eisenberg 17:49
San Francisco has a lot of young people, and AI growing up there - how do you reconcile that? And what happens?
Antonio Garcia Martinez 17:56
Yeah, I mean, progressivism, it's like, it's like the gas pedal on a car. And conservatism is like the brake pedal, right? And if you have nothing but one, the car just spins out of control. And if you have no brakes, I mean, how do you reconcile it? I think if you just take the historical perspective, there's this great book called "The Season of the Witch," that's about the history of San Francisco in the 60s and 70s. And the short version of what happened is, San Francisco used to be a pretty normie, you know, middle-class, working class, you know, Irish and Italian Catholic town, you know, postwar boom, standard stuff. And in the 60s, the summer of love, the druggie culture, the Beats, Allen Ginsberg, all that that now forms part of the essence of nostalgia, came in the 60s and just never went away, right. And some of that led to an, I would say, potentially overly permissive drug culture where people, you know, they think about meth and fentanyl and these absolutely destructive drugs in the same way that you think about pot or something. And they're not obviously not the same, right.
But on the other hand, they do allow all sorts of weird trippy experimentation. Like this guy named Stewart Brand who had this Whole Earth Catalog, which was this very hacker-ethos thing, where you go live off grid and hack your stuff together. Steve Jobs claimed he was very influenced by it. And so a lot of that, a lot of that hippie, flower-child culture did bleed into the tech scene. And you see even today, right. And again, I would say, again, SF is a very permissive society in which traditional roles and traditional marriage, a lot of traditional things are just kind of suspended. And everyone lives in this sort of, almost, Peter Pan adolescent life, which again, is kind of abnormal and strange, in many ways, but I think is very fruitful when it comes to technology, right?
Like, a lot of the things we do on phones now - I remember, I'm old enough to remember 10 years ago was still odd, right? Like, I heard the first Uber pitch and it seemed like a bad idea. It's like why would you do that? Mind you, this is before drivers, you know, it was a black car service. Right? Like it was a very small service. Or Airbnb? It's like, who the hell is gonna let a stranger into their house? This is, dumb, right. Or even Facebook's ad system. When I joined, it didn't work very well. Like Facebook's ad monetization model was actually kind of poor. Right? And so all these things got fixed and became normalized, but it's, at one point they were radical and strange. And there's only one place in the world that would even let you, you know, entertain the notion that things would work that way. Right. And San Francisco had that culture.
Michael Eisenberg 20:06
And New York seems to kind of have it now also.
Antonio Garcia Martinez 20:09
Yeah, it seems that way.
Michael Eisenberg 20:10
Why do you think that is?
Antonio Garcia Martinez 20:12
Yeah, I wish I knew New York better. But it's funny. The first blog post that I had go viral at AdGrock, which is my YC company, was basically something dumping on New York as a tech hub, because I had been there as a Wall Street guy, right. And I moved back to San Francisco. And the contrast was striking to me. Mind you, this was like 2008, or nine. Or sorry, no, 2010 or 11. And so the New York tech scene hadn't quite taken off yet. Like, basically, they had Foursquare and like nothing else, right. I think it has taken off.
I do think it's funny; people ask me about, like, is Miami going to be a tech hub? Because I was raised in Miami. I think that sort of builder culture, like, is it a place where nerds rule? Put it that way, right. Like in San Francisco, you have an AI meetup, and some space is taken over by 200 tech nerds talking about like, large language models. That's a completely normal thing that happens literally almost every day of the week, like that's the way the world works. Not to say that there isn't serious tech being built in New York, but there's just a lot of other things going on. Right. And I think people just aren't quite nerdy enough. They dress too well. I don't know. They're too fancy. They know which fork to use at dinner. It's like, it's kind of different. Right? While that form of tech awkwardness is welcome in San Francisco. The other thing, of course, is that San Francisco has like almost nothing else going on. There's no other serious industry alive in San Francisco, right. So tech can sort of take it over in a way that tech is never going to take over in Miami, or much less in New York.
Michael Eisenberg 21:25
And what happens when the city actually grows worst apart. I mean, I grew up in New York in the 70s, in the early 80s, it wasn't a fun place, right? New York - it was a great place to grow up, but it wasn't safe and, you know, homeless people were all over the place, and people getting killed and Central Park slashers, and Bernie Goetz that people have forgotten about. Like -
Antonio Garcia Martinez 21:44
I remember, yeah.
Michael Eisenberg 21:45
San Francisco is kind of like that now, right?
Antonio Garcia Martinez 21:47
It is. I mean, I don't think there's any Giuliani on the horizon to fix it. Yeah, I mean, look, there's been some signs of life, right? They recalled Chessa -
Michael Eisenberg 21:59
Moody -
Antonio Garcia Martinez 21:59
- Boudin or Buddhan, however they pronounce his name, who's literally the son of communist cop killers. And, you know, he, you know, he didn't believe in prosecuting criminals, apparently.
Michael Eisenberg 22:10
Yeah.
Antonio Garcia Martinez 22:12
And then the school board were recalled. The school board basically closed the one high-quality public school that, you know, a lot of SF youth used to have social mobility and get an elite education despite not coming from money, which I think we all say is a good thing. They basically closed it down and made it not be a meritocratic school. So a lot of, they did a lot of things that people disliked. And so they got recalled, but I don't know. It's strange. On the one hand, right, SF has been the scene of the biggest legal wealth creation, possibly in the past 40-50 years, if not human history. And yet, you look at the city, and it's terrible, right? And it just doesn't look like that. And -
Michael Eisenberg 22:47
Is that a societal problem? Is it a city management problem? Is it the way the world's gonna look going forward?
Antonio Garcia Martinez 22:52
No, well, SF has been corrupt for a long time, but it has the second largest city budget in the United States after New York, and yet, it's a city of, what, 800,000 people or something, for seven miles on seven miles? It's not very big at all. It has an enormous budget, it's not a money problem. And yet, somehow it all gets siphoned away and nothing gets fixed.
I have to say, I think tech deserves a little bit of the blame, right? I think, for various cultural reasons that I've speculated on in other podcasts, it's not quite clear to me, but I think tech doesn't, doesn't feel that sense of civic investment of, you know, taking over the town in a good way, right? Like, you go to the Met in New York. And there's the whole list of little logos, with every investment bank, every hedge fund, every, you know, every aggressive hedge fund person has his name on a hospital, or museum, or school or something. And you go to the SF MOMA, and Google isn't sponsoring the exhibit, are they, or anything else.
Michael Eisenberg 23:41
Why do you think that is? That's actually an interesting observation. What's the civic involvement of tech companies and entrepreneurs?
Antonio Garcia Martinez 23:46
I think they just don't feel they're part of the of the civic fabric. They just don't.
Michael Eisenberg 23:50
They did buy the basketball team, the Warriors.
Antonio Garcia Martinez 23:53
Well, Jamoff did.
Michael Eisenberg 23:53
Well, Jamoff's a tiny guy, but Joe Lacob brought it.
Antonio Garcia Martinez 23:57
Yeah, and there are some philanthropy, right? There's the Benioff hospitals. It used to be the Zuckerberg hospital, but they took his name off of it, I think.
Michael Eisenberg 24:03
I didn't realize that they canceled the hospital too.
Antonio Garcia Martinez 24:05
Yeah, he donated, I forget, what is it, $200 million? But during the whole post-Trump 2016 thing -
Michael Eisenberg 24:10
Yeah.
Antonio Garcia Martinez 24:10
- they canceled Zuck, so I think they took his name off the hospital.
Michael Eisenberg 24:14
Welcome to the club, right. So one of the things I think about is like, the context of Tel Aviv, which I think by the way, the entrepreneurs in the tech companies have actually taken a lot of responsibility in Tel Aviv, and now I'm wondering, as you say that, why that's the case here. By the way, this is an incredibly well-run city -
Antonio Garcia Martinez 24:32
Right.
Michael Eisenberg 24:32
- Tel Aviv, incredibly, well-run, with a budget surplus, too. And I'm just, I'm wondering, like, you got all the, kind of, tech thing here -
Because there's a social fabric, right? In California, it's always been kind of a gold rush tow, right. At 1849, they discovered - for those who aren't familiar with the history - they discovered gold and it was one of the first cities develop because you could get there by ship, even before there was a railroad. And it's always been the town of people showing up and trying to make money, and the land of schemes, and new beginnings, and all the rest of it, but also a disconnectedness. Like you go to San Francisco, you make your bag, and you kind of get out or you move to Marin County or you move to the peninsula, or you just leave and you move to LA or Park City, Utah or in ski, or whatever, right? I don't know. I mean, in Tel Aviv, from what I can tell, I mean, obviously, there's Zionism, right? People are creating the startup nation, they believe deeply in it. And like, you know, when I show up, people, there's always so - they love it when somebody shows up from Silicon Valley and comes to Tel Aviv. And I've had all these lunch invites in my time here, and right, it's just a very different feeling. I guess there's a feeling of ownership, right?
Yeah, one of the things I've been saying actually, is that the big difference between Israel and all these kind of places where the politicians, the leadership, is falling away is that the civic society is actually much stronger here than it is, I think, in most places. Talking about Zoomers, that's a new one. I drive this thesis to someone that one day is gonna write a PhD thesis on people who made investments over Zoom during COVID; it ain't gonna look very pretty. But tell me about Zoomers.
Antonio Garcia Martinez 25:49
Yeah so Zoomers - I think I'm using the right term, or Generation Z - I mean Zoomers are like the opposite of Boomers, right, in the sense of, it's the youngest generation, which I think now is like teenagers to 25. I don't know, I mean, you can look it up and see if I'm quoting the wrong age. But it's like the youngest employees.
In theory, I don't actually believe in this generational astrology, to be clear, but I do think that there are differences among, broadly speaking, generations. So I don't know. They're always giving me new drugs, which is great. So there's this drink called Celsius, which has all sorts of weird serotonin precursor chemicals and caffeine which totally makes it trip. Some of them are nicotine; nicotine is a new drug now in Silicon Valley. People intentionally take nicotine. It gives them focus. Yeah, I know. I've gotten pro-nicotine lectures from more than one person, I know it sounds weird. But the nicotine gum they use for people trying to get off smoking? They just take it as like a performance-enhancing drug. I'm not joking.
Michael Eisenberg 26:41
Okay.
Antonio Garcia Martinez 26:42
Not to even mention, they've legalized all these drugs in California. Like ketamine is now legal. Elon Tweets about taking ketamine all the time.
Michael Eisenberg 26:47
I don't know what ketamine is.
Antonio Garcia Martinez 26:49
Oh, it's, I kid you not, like a horse tranquilizer. And it's - yeah, and it's obviously used as a recreational drug. But it's actually gotten therapeutic approvals. You can actually get prescribed ketamine in California now. I know, I know. It's weird.
Michael Eisenberg 27:02
Oh my God. Well, I'm not worried about Musk being homeless, but the rest of the homeless people on fentanyl, I'm very worried about.
Antonio Garcia Martinez 27:06
Yeah, I don't think it's nearly as addictive as that. But there's literally a ketamine startup called Mindbloom. Not to plug it, I have no connection to it.
Michael Eisenberg 27:13
Yeah.
Antonio Garcia Martinez 27:14
But it exists -
Michael Eisenberg 27:15
We wouldn't plug drugs on this podcast. I'm way too conservative with this, mostly, for that. When you said before, you know like, this whole line of drugs - like pot is like this, like, all of those are the same for me. On the other side. But it's okay, keep going.
Antonio Garcia Martinez 27:26
No, but yeah, the cornucopia here is vast. They legalized mushrooms recently in San Francisco. You can actually buy chocolate with mushrooms on the street, legally, with - by the way, organic, fancy chocolate as the chocolate on the streets of San Francisco. They even have a loyalty card. I will confess to having bought one of these mushroom bars. You get a little loyalty card like you get in the sandwich shop, when they click off the little numbers. You get one of those. I'm serious.
Michael Eisenberg 27:49
This is what Zoomers are doing?
Antonio Garcia Martinez 27:52
Yeah, this is what, well, I don't know about Zoomers, but this is what San Francisco is doing.
Michael Eisenberg 27:57
How did you handle the backlash to "Chaos Monkeys?"
Antonio Garcia Martinez 28:00
Oh, well, I mean, when it came out, I mean, there wasn't much backlash.
Michael Eisenberg 28:03
But it came later, we'll come to that in a second.
Antonio Garcia Martinez 28:05
Yeah, well, okay. No, I mean, the reaction was super positive. It was a month on the bestseller list. It was a book of the year, or the summer or whatever, by NPR, at the Atlantic, Wired. It was super positive when it came out. I mean, you know, it was considered a spicy book. But it was still a very positive reception when it came out.
Michael Eisenberg 28:21
And so later, kind of, you had this thing, this little couple-month stint at Apple, that they canceled you because of a silly thing in the book. Should I quote it, or not even bother?
Antonio Garcia Martinez 28:34
I'd rather not.
Michael Eisenberg 28:35
So what - how'd you feel when that whole thing happened?
Antonio Garcia Martinez 28:40
Oh, I don't know. I mean, you know, I just, I might sound a little bit too blase. But, you know, I've been in the media spotlight before. It wasn't that shocking an experience, I'd have to say. I think to people who, you know, like the joke on Twitter is like, the guy who, like, everyone makes fun of on Twitter - like your goal is to not be that guy, right? So if ever the spotlight of Twitter is cast on you, and you're like, you know, somebody who isn't used to that sort of thing, right, I think it could be, like, a shocking, dramatic encounter. I don't know. For me, it wasn't that big of a deal.
Michael Eisenberg 29:12
Are you gonna write another book, by the way?
Antonio Garcia Martinez 29:14
It's tempting. I mean, we'll see where this Web3 thing goes.
Michael Eisenberg 29:18
That'll be the topic?
Antonio Garcia Martinez 29:18
I mean, potentially. I mean, someone needs to write a book about it, assumint it, like, takes off and becomes a new internet. So it's not like - there's no fixed plans, to be clear. People ask me this question all the time. There are no plans right now.
Michael Eisenberg 29:27
It could be called the "Chaos Phoenix," I guess.
Antonio Garcia Martinez 29:31
Yeah, I have to think about the title of it, yeah.
Michael Eisenberg 29:33
Okay. So you've been canceled, kind of, from that experience, and you've spoken about this "woke culture,| and wrote that, I'll quote those, it's "optimized-for-virality version of Christianity." Can you explain that?
Antonio Garcia Martinez 29:44
Oh, yeah, yeah. Well, the whole wokeness thing - I mean, this is not an original coinage by any standard, I mean, Matt Iglesias, Andrew Sullivan, lots of people have compared or Noah Smith, more recently, have traced the origins of what we now call, vaguely, "wokeness" - which is admittedly a vague term, but you need a name for it - to sort of, crusading Protestant Christianity, right. If you look at the the original social justice movements, they were originally all religious in origin. That was true for abolition, the women's rights movement, civil rights movement in the 60s. And again, truthfully it's not necessarily a bad thing, right? A lot of these social justice movements were motivated and organized through churches. And so I think, you know, one of the things I definitely think is true: religion is conserved, religion never goes away. It just, it finds new and potentially worse forms of expressing itself. And so religion never goes away. It's, our puratively secular society has all sorts of religious dogma that it adheres to. And I think these days, in the tizzy of COVID, I think, yeah, sort of, at least in the US, which of course, is still a very Protestant nation - they went crazy for this wokeness business. Yeah.
Michael Eisenberg 30:49
And so, you know, you've kind of spoken out against this. And obviously, your book, "Chaos Monkeys," you know, was a tell-all, to use your terms, and you said, at the beginning, that one of your core values is courage, and brave. Where does it come from, to kind of be able to cut against the grain like this, and be able to be so contrarian? We've got this line at Aleph, we just say that "different is better than better." We try to be different, but you've really been out there and contrarian and brave. Where does that come from?
Antonio Garcia Martinez 31:18
I mean, I'd like to claim that it was some sort of virtue, but I think, you know, disagreeableness is actually - I forget, whatever that framework is for human psychology. There is disagreeableness, and then whatever the opposite is. It's probably telling that I don't even know what the word is. But there's like neuroticism versus this, conscientiousness versus the other thing. So there's various axes, you can rate human personality on. One of those is disagreeableness. I suspect it's either genetic or psychological in origin, right. Some people are just more contrarian. I mean, I don't know, just being raised with certain values, I guess? Yeah. I mean, not wanting to be loved is another thing, right? I think most people want to be liked publicly. Right? And so they're not willing to take that stand? Because they, I don't know. I don't really feel that urge. I don't feel the need to be loved.
Michael Eisenberg 31:57
Because? What's more important?
Antonio Garcia Martinez 31:59
Truth maybe? Aesthetics, beauty? A well-written, engaging piece of literary nonfiction, right? Things like that.
Michael Eisenberg 32:07
Why'd you start writing, by the way?
Antonio Garcia Martinez 32:09
Oh, it's funny. You know, it's funny, everyone thinks it's shocking, in a way. I guess I've lived so many lives that it's weird when people see the transitions. My first actual paycheck in the United States was in writing. I was a city desk intern at the Miami Herald, which is the paper in Miami, and the Sun Sentinal, which is the paper in Fort Lauderdale, which is a city north of Miami. And so I was raised in Miami - my mother was a librarian, so the house was full of books, and it was a very bookish culture, I was reading since way before school - and I always knew that writing would be part of, I'd written op-eds and stuff. I've done creative writing workshops, though I've never taken them really seriously. I had pieces go viral. So my first YC startup, frankly, the most successful product was the blog. We would be number one on Hacker News, these things that would go viral back when, you know, it was rare for things to go viral on Twitter, a novel, that I'd have things go viral. It's funny, it was in that, that somebody working at the agency that became my literary agency discovered the blog post and sent me an email. But I discovered it only later, it was in my spam filter, actually. But anyhow, that's how I originally met my literary agent. Years later, when the startup had wrapped up, I decided to actually spend serious time on and write the book. But I don't know it was always waiting in the wings, I always knew that there'd be a writing component to my life.
Michael Eisenberg 33:13
Is writing important for everyone, do you think?
Antonio Garcia Martinez 33:14
Um, I don't - I think it helps people distill their thoughts clearly. I think it's hard to become a good writer. I think it's, you can probably train to become an adequate writer. Yeah, I don't know. I mean, my girlfriend claims that I wake up mumbling phrases, and like, there's constantly language flowing through my brain in a weird way, that is probably true for most writers.
Michael Eisenberg 33:34
Is writing gonna be as important in this era of AI?
Antonio Garcia Martinez 33:36
Oh, yeah. Moreso. I think, I mean, AI removes the middling and the mediocre, right. But if anything, I think the people on Substack, who can actually manage to swing, you know, 20,000 subscribers, who pay him five bucks a month, will do even better in the sense that, like, if you automate away the sort of middling human component, the premium human component becomes even more valuable, in a way, not less. And so I think for a subset of writers it will actually do very well.
Michael Eisenberg 34:00
By the way, why did you start writing for Tablet, of all places?
Antonio Garcia Martinez 34:03
Well, the whole Jewish thing, the you know.
Michael Eisenberg 34:06
That's my segue.
Antonio Garcia Martinez 34:09
Yeah, so the whole Jewish thing - so I converted to Judaism a few months ago, to Conservative or 'Mesorati,' as you would call it here. Yeah, so I have three Jewish kids, the two mothers to my kids are all Jewish. And the third, second mother and third kid, you know, I wanted the kid to go to shul and have a religious upbringing for a bunch of reasons, because I was starting to doubt whether secular liberalism really was the way forward, and she's like, "Well, the kid goes to shul - you have to take her." I'm like, okay. So I sort of called her on the bet. And COVID came, so it became kind of a COVID project to do all the study required for this. It was like getting a master's degree, basically. And of course, being Conservative, some of it could be done over Zoom, right. So like, they'll actually livestream Shabbat services and stuff, which obviously, Orthodox wouldn't do. So that's part of, kind of, why it happened. But yeah, and then the Tablet thing, I guess, I don't know how I met Alana, I can't remember. Alana is the editor.
Michael Eisenberg 35:00
Alana Newhouse. Yeah.
Antonio Garcia Martinez 35:03
And Tablet, for those who aren't familiar, is, I mean, I would say probably one of the premier ,if not the premier sort of Jewish publications, in the United States. I mean, there are other ones of course, Mosaic and a few other ones. But yeah, and I think it takes - I'm not even sure Alana's denomination - but it, you know, it's definitely not reform. But I think it's very, sort of, ecumenical and the people who write - it's not all Jewish writers, for starters. But you know, I think it's definitely a little heterodox or dissident, I guess you would say. It doesn't line up with the usual
Michael Eisenberg 35:29
And not only Jewish topics, obviously.
Antonio Garcia Martinez 35:31
And not only Jewish topics, either.
Yeah.
But it is Jewish.
I mean, brokenness, and yeah.
But it is legitimately Jewish, right. You're not a Jewish organization unless you have the date in the Hebrew calendar, and then you have a PDF version for Shabbat that can be printed out, right. That defines you as a real Jew, so it definitely has that. But yeah, it's not just Jewish topics, actually.
Michael Eisenberg 35:47
So you mentioned before that, kind of, religion seems to get conserved. It doesn't go away.
Antonio Garcia Martinez 35:51
Yeah.
Michael Eisenberg 35:51
And you also said before that wokeness, per se, was kind of a religious ethos run amok -
Antonio Garcia Martinez 35:58
Yeah.
Michael Eisenberg 35:59
- on some level, and yet, you converted to Judaism?
Antonio Garcia Martinez 36:02
Yeah.
Michael Eisenberg 36:02
What was it about Judaism -
Yeah -
- that attracted you, other than the mother of your children saying, "Hey, they need a babysitter in synagogue"?
Antonio Garcia Martinez 36:13
Right. I mean, there's a couple reasons, right. The one thing is - the pro is the attractive aspect of Judaism. And then, so I wrote this piece called "Why Judaism?" that should have been in Tablet but ended up not being. I still regret it. It was in my Substack, called The Pull Request. Actually, sorry, they republished it with a second piece. Sorry, now I remember. So you can find it on Tablet. And then I wrote a second piece - somewhat cheekily titled, "The Moses Option," about, also, why I converted, also in Tablet magazine. And so you know, one thing is just secular liberalism, you know, the sort of, it's not even just necessarily wokeness, it's just, it's the blah, globalist, whatever left of center, Western political default, right, is a little empty, and there's sort of a God-shaped hole in the middle of it, right, that's not being filled by much of anything at this stage. And so it's sort of a rejection of that.
Also, Judaism, obviously is beautiful for a bunch of reasons, right, I get into in the piece. I think that my first piece coincided with Simchat Torah, actually. And so, you know, the joy of this very textual society that conserves its text that is the tree of life, so to speak, like, title of your book. And, yeah, it appealed to me in a deep way, obviously, very scholarly, bookish religion. You know, in orthopraxy, religion about the practice, less about the faith, right? Plus, it's not a personal relationship with God, or Jesus or whatever. A lot of aspects of it were, were interesting. And I think Judaism is very adapted to modernity, in many ways, right? Like -
Michael Eisenberg 37:37
Explain?
Antonio Garcia Martinez 37:39
Well, I mean, you know, there's this whole, I don't how much you listen to Balaji, right. But like the whole notion of the network state?
Michael Eisenberg 37:44
Yes.
Antonio Garcia Martinez 37:44
The notion that there's this, you know, Federation of loosely associated, you know, kind of elite cities where everyone does their thing, right. Like, the Jews were the original network state, obviously, the diaspora was the network state, right, that the rest of world is only catching up now.
Michael Eisenberg 37:58
Now like Balaji, there's like an Indian network state as well.
Antonio Garcia Martinez 38:01
Yeah.
Michael Eisenberg 38:01
Silicon Valley in India itself.
Antonio Garcia Martinez 38:02
Yeah. And so like the notion of a very abstract, cosmopolitan, decentralized state is nothing new to Judaism, obviously, that was Judaism for 2000 years. So in that sense, I think it's very suited to modernity. I think the other thing is that, I don't know, this is a more theological question. But you know, Christianity, I was raised Catholic, right? So I first read the Torah although I wouldn't have called it that then, the Old Testament, in translation in a Jesuit school, which had like a scholarly annotated edition, and I just found the, you know, the Old Testament and the Tanakh a lot more interesting than New Testament for a bunch of reasons. And even then, obviously, I mean, Christians acknowledge this as well, there's a huge contrast between the God of the Old Testament in there, the Torah and the Tanakh, and the Gospels. There's a huge difference, in fact, to the point that many Christians call it a New Covenant, right? Like the old contract is null and void, we have a new contract, because clearly, the counterparties are very different. It's a very different God. And so yeah, I think something about - I just started seeing the world in a more Jewish way. It seemed as if my personal Bible ended at, you know, with Chronicles at the end of the Tanakh, and that's it. It didn't begin with, I can't even remember anymore, Matthew, or Luke, whoever the first Gospel is. So yeah, I sort of ripped out the Gospels from my personal Bible. And I don't know if we want to go into the details of what I find objectionable about Christianity or not, but I don't know, I can.
Michael Eisenberg 38:02
Sure, I mean, if you want to.
Antonio Garcia Martinez 38:49
I mean, yeah, Christianity is interesting, right? I've often joked that Christianity is Judaism with product-market fit and a growth team, right. That's basically it, right. They basically managed to popularize, you know, it's like Mac OS 10 versus Linux, right. Linux is unusable and never became a desktop, but you had a very, you put a nicer UI on it and suddenly it becomes a Mac, and everyone uses it right?
And so that's kind of what Christianity did with Judaism, right, which is basically this unauthorized religious offshoot. And it takes a lot of Jewish ideas, and in many ways over-expresses them, in many ways, the Messianism and all that. But then it has new ideas that don't have a lot of precedents in Judaism. So for example, the victim as divinity, right? It's very strange when you walk into a Christian church, and here is this tortured criminal on an instrument of torture, just hanging there dying a gory death. That is, that is the vision of divinity, right? Again, as a Christian, you're so used to it or even the West, you're so used to it. It's strange, right? Most religions don't have that as a symbol, right. And the unique thing that Christianity did was elevate, was reverse the moral order, right. Traditional religions - not Judaism, but just broadly - worship the beautiful, the strong, the wealthy, the powerful, right, they worship the superlative. And Christianity has in some sense, inverted that and said that, actually, no, the sick, the ill, the ugly, that that is where divinity lies. It's in victimhood in some sense that we, and we uplift that into divinity. And I think that sounds very noble in a way. But it can also go off the rails in a big way, right, which I think is a lot of what you're seeing now.
And in fact, some of Christianity's biggest fans, Rene Girard, who, you know, Peter Thiel is a big reader of him, I think, Girard was a genius in a way - the way that he understood the myth of Christianity and what it did for a lot of these pagan religions, and even in his own book actually, he describes that yeah, Christianity has created a level of victim worship unprecedented in human history, right. And I don't know, I think I just, I reject that worldview. And I think the other thing is, Christian and Jewish notions of justice, I think are very different. And, to me, I mean, you're seeing a lot of it now, right, like in a lot of the traditionalist right, and a lot of it exists only online to be honest, of reverting to paganism, or like rejecting the Christian message. It's like, it's as if the Christian world goes between two poles - the weird, overweening victim worship of Christianity, and then the bizarre pagan revolt against that. And I don't know, there's a middle road, which is sort of Judaism.
Michael Eisenberg 41:39
And what do you think is the role of religion in the future democratic states? David Brooks had this piece I forget the title of - I think it was in the Atlantic - about the, kind of, overly liberal order, you know, that's after, of course, he wrote about the, no need for the nuclear family. And, you know, he's kind of talked about how liberalism quote unquote, with the small 'l', I guess, has gone over the line, and it's devolving society and become devoid of religion.
Antonio Garcia Martinez 42:09
Yeah.
Michael Eisenberg 42:09
By the way, he made the opposite conversion than you did. He went from Judaism to Christianity.
Antonio Garcia Martinez 42:13
I know.
Michael Eisenberg 42:15
What is the role of religion in this kind of increasingly secular world? By the way, it's a question I get asked a lot when I give speeches.
Antonio Garcia Martinez 42:20
Again, I think religion is just there. It doesn't exist as such. I think one of the reasons for religious education - I'm glad I was sort of raised Catholic with the Jesuits who took a very scholarly approach to it - is that you can you can recognize religious thinking, right, when you see it, and it doesn't always come wearing literally, you know, priests robe or a kipa. It's religious thinking, right. I think it was William James who said, in "The Varieties of Religious Experience," that at its core, religion is the thought that there's some moral order to which human society should converge, right, that there's some unseen abstract order, which of course, is, if you take a totally materialist, physicalist view of the world, is insane, like, why would there be, right? Like, I believe in science as much as the next guy. I think to me, they just, they're just orthogonal spheres of life -
Michael Eisenberg 43:02
Yeah.
Antonio Garcia Martinez 43:02
- science and religion. But it is irrational. Why, I mean, even the secularists. Why - what is human rights? Show me human rights in a microscope. Doesn't exist, right? It's a human construct. And to the extent that you revere it, and that you inject it into your society, and you claim that this is the good to which we should all be converging, you're talking like someone who believes in religion, right? This is an abstraction that doesn't really exist. And so I don't know, I think what David Brooks is saying is that at the end of day, he, you know, he likes formal religion, right. So I think that's what he's objecting to, that there aren't structured forms of religious thought. And that, if anything, that's the bulwark against unstructured and kind of random and potentially bad forms of religious thought.
Michael Eisenberg 43:37
Right. He also seems to say that a society devoid of religion will inevitably spiral downward. This seems to be his latest argument. Do you agree with that?
Antonio Garcia Martinez 43:47
I think a society needs some metaphysical language to talk about the world, right? If you don't, just asking the question, what is good in life? Right? How should I live as a person in this society? To what, to what ends should society be striving? To what ends should we sacrifice for, either when it comes to human life, or money, or anything else? If you can't ask those questions about yourself and come up with some sort of answer, you're not going to function as a society.
Michael Eisenberg 44:11
Let me ask it of you. What is good in life? What would you sacrifice for?
Antonio Garcia Martinez 44:14
Well, again, I think it depends a lot on the context. I mean, I don't know depends on the context. I mean, I think one of Israel's strengths is that Zionism answers that question, right. The Israeli, the Jewish state is a good -
Michael Eisenberg 44:27
Yeah.
Antonio Garcia Martinez 44:27
- thing to which we should all be upholding, although clearly people disagree about, as to how to build it. I was at the protest yesterday. And obviously, there's a lot of disagreement about how to build that. But at some sense, the the end state is kind of in mind. I'm not sure that in the US, for example, most Americans would have a clear answer as to what is the good that we're trying to build?
Michael Eisenberg 44:44
What's yours?
Antonio Garcia Martinez 44:45
Me personally?
Michael Eisenberg 44:46
Yeah.
Antonio Garcia Martinez 44:47
Well, I mean, I don't know. At a personal level, who cares, right? But I don't know. At the societal level, again - Israel to me is interesting, because it was, like the US, founded as, like, a startup - it was an inventive nation in a way, right. And -
Michael Eisenberg 44:59
I call them both call "covenantal nations."
Antonio Garcia Martinez 45:00
Right, exactly, they're both convenantal nations.
Michael Eisenberg 45:02
Yeah.
Antonio Garcia Martinez 45:04
Although in the US, again, what - I don't know that most people will even accept the document anymore, or even accept what the details of the convenant are. So yeah, no, I mean, the US is obviously a reboot - in many ways, a securalized form of Judaism, right. Here you have, it's a sacred document handed down by prophetic founders and interpreted by this rabbinical court. You're right. It's the most kind of Jewish thing ever, right. And that's why, that's why politics seem like religion in the United States, because they become almost theological disputes.
Michael Eisenberg 45:26
Yeah.
Antonio Garcia Martinez 45:27
And something like, you know, abortion or gun control assumes the proportions of like Sunnis versus Shiites, or like, literally a religious splinter group, right.
Michael Eisenberg 45:38
You mentioned before that Judaism is the original network state.
Antonio Garcia Martinez 45:42
Yeah.
Michael Eisenberg 45:43
But when you converted, you were asked, "Will you support all those who seek to re-establish and revitalize our Jewish homeland -
Yeah.
- by making the State of Israel part of your life and the life of your family," and you said, "I do."
Antonio Garcia Martinez 45:52
Yeah.
Michael Eisenberg 45:52
Isn't that the anti-network state?
Antonio Garcia Martinez 45:54
Yes, yes, yes. So the question you're asking, just for context, that was literally the questions in the Beit Din that the Rabbis asked me, which is part of the standard Conservative script I think. My Rabbi just plucked it out of a book. And it's funny, the editor who edited it at Tablet, who I think is Orthodo, was shocked that they would still even ask that in this day and age in the United States, given that Zionism these days is somewhat more controversial in the United States. But you know, I agree with you. But yeah, of course, but you know, that's the - I mean, come on, that's, that's the struggle between diaspora Judaism and Israeli culture, right. It's like - and you've seen this forever, right? I was just reading back a book by, I forget who it was, either Michael Goodman or somebody, and just about, you know, when Zionism or, no, I think it was Walter Russell Mead's book about The Arc o of a Covenant about Israel and the United States, before Israel was founded. Zionism was not popular in the United States. On the contrary, there was, it was very anti-popular. New York Times, Sulzberger, to not support Israel at all -
Michael Eisenberg 46:48
Right, and by the way, in Europe, also, even with many Orthodox Jews, most of Orthodox Jews, it wasn't popular. Yeah.
Antonio Garcia Martinez 46:53
Right. Because in the US case, they felt, well our new homeland is the United States = like that we're submitted citizens here. There was still anti-semitism, but not nearly as much as Europe. This is our home; Israel doesn't speak for us. And in fact, I remember, I was reading too much Israeli books and media as it is. But during the Eichmann thing, when the Mossad nabbed Eichmann and dragged him back, many Jews in America actually objected. They're like, what, how, who appointed Israel as the great avenger of the Jewish people? And why are they doing this? And obviously, at the time it was actually judicial and whatever. Yeah, there's a real tension there between - I mean, look, we're gonna see it next week; it's Tisha B'av, and we're gonna go to the Kotel, and we're gonna see the Temple Mount, and we're gonna lament the destruction of the temple and "Oh, can't we go back to Jerusalem?? And yet, there's gonna be an Israeli policeman standing there in the Temple Mount, what are you talking about? The Jews control Temple Mount now, what are we lamenting, right. In some sense that is - is the diaspora over? Or is it not? Who really speaks for Judaism? Is it the rabbis on the Upper West Side? Or is the people right here in Israel? I don't know. It's -
Michael Eisenberg 47:53
I grew up on the Upper West Side, I have a very clear answer to that question.
Antonio Garcia Martinez 47:56
But what is the answer? Let's turn it around -
Michael Eisenberg 47:59
Actually, I'm not sure it's the Rabbis at all. How's that? I think it's the people.
Antonio Garcia Martinez 48:02
Okay.
Michael Eisenberg 48:03
By the way, I don't know, just a side point - did you ever read the book "The Great Partnership" by Rabbi Lord Jonathan Sacks, where he talks about, kind of, the marriage or partnership of science and religion? I guess you wouldn't subscribe to that necessarily. You think they're orthogonal?
Antonio Garcia Martinez 48:16
I just think they address different questions. It's just, I'm literally as pro-science and math as the next guy, possibly more. I just think there's a metaphysical plane, you're not going to get the answers to "What is a good life?" or -
Michael Eisenberg 48:29
Biology doesn't answer all our questions.
Antonio Garcia Martinez 48:30
It doesn't at all, yeah. And the problem is that somebody who thinks that actually becomes frankly, dumb about metaphysics, or morality, or philosophy. Because if there's nothing in your epistemology, and how you discern truth is only an empirical exercise, then you have to warp reality to make the fundamental metaphysical argument that you're making. Right?
Michael Eisenberg 48:49
And by the way, since science is evolving, right, there's a thesis and you have to prove it out, etc. right, it's kind of consistently evolving, there's nothing that's a truth quote, unquote.
Antonio Garcia Martinez 48:58
I mean, science is like an intellectual dialectic. It's not like a book with the answers. And so yeah, I think they're just very different. Science is not, you know - was it Carl Sagan who wrote that book, you know, "The Demon-Haunted World," right, that in some sense, the God of the Gaps, you know, religion exists in the gaps that science has. And I'm like, I think those gaps will always exist, right? It's not - if we had a more powerful microscope or a higher energy, you know, particle collider then religion shrinks, like, no, no, it won't actually.
Michael Eisenberg 49:25
Yeah, actually, it gets bigger.
Antonio Garcia Martinez 49:27
Yeah. If anything, it might get bigger. Yeah.
Michael Eisenberg 49:29
So talk to me about Spindl. Let's shift gears entirely. Tell us what Spindl is and why you decided to take your talents, to use a Lebron James line, from the world of Web2 to the world of Web3.
Antonio Garcia Martinez 49:40
Yeah, some people might be asking like, "What the hell is Web3?" So this is this whole world of the blockchain, which if you talk to a normie they think of - if they know about blockchain, they think about it in the context of cryptocurrencies -
I love that you use the word "normie" like this, you know -
It's like the non-tech people, the civilians, civilians, civilians. Yeah, so this is all happening on this thing called the blockchain, which is a very different way of building Information Technology, right. And what's different about it is that something like the blockchain, it's not just about Bitcoin, it's not just about value transfer (although that can be part of it), it's the fact that it's the, one of the main blockchains is called Ethereum. And it's known as the Ethereum Virtual Machine. What that means is, you have a network of world machines that do the computation of the network. And that code, and that data lives on this thing called the blockchain, which is basically just a chain of state that all these computers keep in memory. And you write a thing called a Smart Contract, which is literally a piece of logical code similar to computer code that runs in other places, except it's running on this global computer on the blockchain. And that, smart contracts makes claims about the world, such that - Mike Eisenberg owes me 1000 ETH, right. Or, I went to a decentralized exchange, and bought a thing that represents the value of Google shares - something called a 'synthetic,' that you mimic an equity on chain or something, right? And that is a claim in the world that the network of computers will say, "Yes, this is truth." And if I sell it for 1000 ETH, which is a large sum of money, actually, then I get that in my wallet - there's this thing called a 'wallet,' which is my representation on this chain.
So that is the world of blockchain, right. And you can do lots of stuff with it. And it goes way beyond Bitcoin, which again, is just like sending money. It's like, no, this is this is literally a contract about the world. I'm saying a thing, right? What can you do with that? Well, you can run financial exchanges, you can run things like banks, things that look like banks, or things that look like exchanges. You can also do things like NFT's - digital ownership, right? Like I own this beautiful painting, and the rights to it, literally, I own - the digital rights to this thing exist on chain, and I can sell it or buy it, which sounds very strange, but it's really not that different than the disembodied form of the fine art world.
Michael Eisenberg 51:42
I have a certificate of ownership, except this time, it's proven digitally.
Antonio Garcia Martinez 51:46
Right, right, exactly. And you can also build things like games, right? So I have games, virtual goods are a big part of many games, and you trade things inside a World of Warcraft, or as the case may be, and that exists on chain. And I can actually own that in a way that I can sell it to you outside of the scope of the game, right? Even if the game shuts down or whatever. And so that's what Web3 is, right? There's a notion - Chris Dixon, who's a partner at a16Z has a book coming out, and it's called "Read, Write, Own." And that's how he traces the history of the web.
So Web1 was read. You publish a thing, that's like the basic internet, I go to a site, I read it. Then there's write. That's Web2, it's Twitter, it's Facebook. Like, I'm a little guy, but I, you know, I've got my following, and I publish my thing, and people follow me. Then there's own, which is, I actually own digital assets. The way I see it is, if you imagine a world, if you imagine an economy, meaning banking, equity, financial instruments, NFTs, ownership - if you're to reengineer that for a fully online virtualized economy, one that didn't start with, you know, fax machines and checking, all the rest of it, what would it look like? It would look like crypto looks now, right. We need a programmable way to assert things about the world in a decentralized way and exchange value. And that's what the blockchain world does. Anyhow, long story short, that's this whole Web3 thing. And the idea there is that you can build a consumer web on top of that. So I can build a game in which I own the gun or the sheath or the helmet or whatever. And that's actually mine, and I can sell it, or I can rent to somebody else. There could be a whole, you could lease your NFTs and make revenue on your NFTs; there's a whole banking sector around in-game virtual goods that all just sprouts up around the blockchain, right. And it's a different way of building the internet.
So I got kind of crypto pilled, I had lots of friends in crypto. And you know, what have I done for 10 plus years, ad systems, data, human attention, turning all that into money, and measuring it. You know, measurement on the internet is super important. One of the early promises of internet advertising is that you can actually see who saw every ad, and then eventually converted - religious pun intended, I think, from the marketers perspective - and actually bought the thing or did the thing, and you can actually tie all that together. And that whole world is called 'attribution,' and it feeds a lot of what happens on the advertising in the media side.
So I started talking to crypto companies, I got some intro to gaming companies, and nobody knows what's going on. They literally have no clue. Where are users coming from? I have no idea. Well, how are they monetizing inside your experience? No idea. We can't even calculate our revenue. How long are they sticking around? Are you retaining users? These are all very basic growth metrics that everybody in Web2 knows - we have no idea. How much did it cost to acquire them? I don't know. But we did this thing called a token drop, where we basically give money away to get people to use the product. And it costs us this much, but we have no idea if it was actually effective or not. And it drove me crazy. I just, I could not understand how this world could be run in such a dumb way.
And so I set out to fix it. How do you, how do you build and measure things? Like how do you know if you click on a thing, and then you go to that protocol, and you spend money inside their product two weeks later - how do you tie it all together and know that yeah, actually, this Twitter influencer tweeted a thing and that's what actually drove this user, so therefore, you know, we should pay that influencer something.
Like, we basically built the technology that does that. And it sounds kind of boring, but it's very important plumbing. And it's the foundation for any sort of real media ecosystem that will ever get built in blockchain.
Michael Eisenberg 54:51
Every media ecosystem has attribution and measurement. And this is attribution and measurement for blockchain or crypto as the case may be. I remember back in the '80s - you said we're both about the same age - in the old dot com days, it was the same thing. And basically, venture capital money covered up for sloppiness in this business, in the late '90s in the dot com, and call it in the 1920-21 era of crypto. Now you get to the other side of it, and somebody actually needs to measure this. And it ain't gonna be Nielsen, and it's not going to be DoubleClick or Google Ad - it needs a whole new system for it. By the way, if you had to explain blockchain to my mother-in-law, what's the one-sentence description of blockchain?
Oh, man. It'd be hard to explain to a grandmother.
My mother-in-law, if she's listening, is very intelligent. But still.
Antonio Garcia Martinez 55:42
Yeah, I mean, the one metaphor people often use is that it's a global ledger. People understand a ledger, like a system of accounts. It's a system of accounts that everyone can read and write to, for a fee, for a network fee. And that's the basis for how various entities collaborate, I guess. I would use a ledger analogy.
Michael Eisenberg 56:00
It's kind of - the hard part about blockchain is that it's part collaboration, part proof of ownership, and then it's also composable. Right? So you can kind of constantly change it, yet it's immutable at the ownership level. And -
Antonio Garcia Martinez 56:14
Yeah, well, that composable thing is worth lingering on for a second. So that's one of the, that one's a little harder to explain.
Michael Eisenberg 56:19
Right.
Antonio Garcia Martinez 56:20
Yeah. What composability means is that I can put one of these pieces of code called a smart contract that does a thing, right, it's literally a set of function calls that do a thing. And if I'm willing to pay what are called the 'gas fees,' the fees -
Michael Eisenberg 56:32
On Ethereum it's called 'gas' and on other networks it's called something else, yeah.
Antonio Garcia Martinez 56:35
Basically if I pay the fees that get the nodes to do the thing, I can then write to the chain or read to the - well, it's easy to read, cheap to read, but hard to write. I can do things on chain. The cool thing is that it's composable, in the sense that, it's like Legos. I can build something on that smart contract. So for example, in the decentralized finance world, there's a lot of, again, protocols that are kind of wonky, low-level things that let you buy this derivative or whatever - I can create, with no permit - like, again, 'permissionlessness' is another term of art in this world - I can take those smart contracts, and build a user-facing product that actually trades on those protocols without even talking to the company, right? I can, as long as I'm willing to actually pay the gas fees - and those will, of course, get passed on to the user - I can build a better UI on whatever that underlying protocol is. And they're actually fine with it, like fine, you want to build on us? Go ahead and do it.
As part of what we do, we have a reward system, so if you come in and do a thing, we will pay the person who drove the action. That's part of the product that we offer. People can take that smart contract and build on it if they wanted to, if they wanted to build the publisher network that drove traffic to our smart contracts, in theory they could, right. And so that's kind of part of the magic of the blockchain.
Michael Eisenberg 57:40
I try sometimes to describe to people in what's called decentralized finance, or defi - try creating your own derivatives, financial product, on top of Goldman Sachs's, you know, mainframe or service system. You can't do it.
Antonio Garcia Martinez 57:53
You can't do it, right.
Michael Eisenberg 57:54
And so gas, or ether, is just a different way to pay for the infrastructure -
Antonio Garcia Martinez 58:00
Right.
Michael Eisenberg 58:00
-and you don't have to be Goldman Sachs in order to do it, anybody can do it. And so it's democratized the ability to get access to those great compute systems, and to be able to just kind of, one layer on top of the other, build on other people's work, also, to go do that.
I want to ask you another question about Spindl. Like, why'd you go back and start a company?
Antonio Garcia Martinez 58:24
Well, I mean, somebody was gonna get rich doing this, might as well be me. I mean, I don't know. That's the reality of it. I mean, it's just like, it's so obvious that this needs to exis. Like there's no question that, in five years, there will be attribution on Web3, and it will be a billion dollar business. Still open question whether it's gonna be Spindl or not, but there's no question - assuming Web3 takes off, and maybe it all goes away and this was like the biggest, you know, failure in tech history, but I don't think so.
Michael Eisenberg 58:47
Are you in the office or remote?
Antonio Garcia Martinez 58:49
Kind of half and half. I don't believe in full remote, to be honest.
Michael Eisenberg 58:51
Yeah.
Antonio Garcia Martinez 58:52
I believe in working in person. So about half the team is remote. But, you know, we have a live-work crash-pad thing with bedrooms and stuff, so often the remote people come in on a regular - in fact, next week, it's gonna happen they're gonna come back in.
Michael Eisenberg 59:01
So you transitioned from, you know, Facebook social media attribution now to Web3 - you think we're gonna, we're at the end of the era of social media?
Antonio Garcia Martinez 59:10
Well, I mean, look, what's going on with Threads, right. So Facebook started with the biggest social network in history, launched Threads, which is like, kind of an okay product. It peaked at whatever, 70 to 100 million active accounts, and now it's crashing, right, like it's dying. No, I think there is not like large Web3 social media yet. But I think some - look, humans are never going to stop talking about and to each other. That's never going to end. That will never end. And I think Facebook itself, Facebook.com is getting a little old. I think WhatsApp is hard to beat. I mean, I was at these marches in Jerusalem yesterday, I was with one of the organizers. It all got spun up in like a few days on WhatsApp. So there was literally no planning except WhatsApp. It was incredible. It was this huge mass of people, it was nuts. So I think WhatsApp is gonna be hard to beat. I don't know. I think something on block - in something in Web3, some decentralized version of social media will definitely take off, I think.
Michael Eisenberg 59:59
Long-term: Twitter or Facebook, who wins?
Antonio Garcia Martinez 1:00:01
Define winning.
Michael Eisenberg 1:00:03
Who's the bigger company?
Antonio Garcia Martinez 1:00:04
Oh, Facebook without any question.
Michael Eisenberg 1:00:05
Facebook.
Antonio Garcia Martinez 1:00:06
But the most influential company?
Michael Eisenberg 1:00:07
Yeah.
Antonio Garcia Martinez 1:00:09
I think it already is Twitter.
Michael Eisenberg 1:00:10
And you think it has staying power, too?
Antonio Garcia Martinez 1:00:13
Yeah.
Michael Eisenberg 1:00:14
Yeah. What does the Web3 version of social media look like, by the way?
Antonio Garcia Martinez 1:00:19
There's a couple of examples. So I'm a tiny investor in a company called Farcaster, which is an A16z-backed company. They're basically Twitter on the blockchain. Just, I guess, the simplest way to explain it. It's a microblogging service, if you can still use that term, and it exists on the blockchain. It's an open protocol, you can build a viewer on top of it. There's another one called Lens, which is a similar concept. There is some social media out there. But you know, the adoption has not been great. I mean, it's solid adoption, to be clear,
Michael Eisenberg 1:00:46
Yeah.
Antonio Garcia Martinez 1:00:47
It's not Twitter-scale yet. I don't know. I suspect when Web3 consumer really takes off in a big way, we're talking 10 million plus users, it'll probably look a lot like Web2. It'll just have fascinating functionality that you couldn't generate in Web2, and -
Michael Eisenberg 1:01:02
And maybe differentiate ownership, right?
Antonio Garcia Martinez 1:01:04
Oh, yeah, sure, probably. But it'll do magical things that you couldn't engineer in Web2, and yet just work naturally, and it'll actually be super appealing to consumers.
Michael Eisenberg 1:01:13
The question I have to ask you, as someone who writes and somebody who opines on religion, and somebody you know, who is part of the Lincoln Project, right? So politics, so you're -
Antonio Garcia Martinez 1:01:23
Lincoln Network -
Michael Eisenberg 1:01:23
Lincoln Network, sorry -
Antonio Garcia Martinez 1:01:25
Which, by the way, and they rebranded, actually, they're no longer even called Lincoln Network.
Okay.
But yeah, it's, for explanation, it's a DC policy org that's like, about technology and stuff.
Michael Eisenberg 1:01:33
And somebody who's kind of, what I would call, long tech, short mainstream media, and kinda full into the acceleration. So we're in this moment of, kind of, clash between tech and DC, or tech and politics, right. AI is one topic of it. Crypto was a big topic, although -
Antonio Garcia Martinez 1:01:33
A little of it.
Michael Eisenberg 1:01:49
Well, the FTC took a beating, I think, recently, appropriately so, in my opinion. And, you know, and the SEC is also kind of teetering on this topic. Where, where does this go? Like, you know, Silicon Valley is like the whipping boy of many people in Washington,, on the one hand, on the other hand, it's now by the way, by market cap, the most important industry on the planet. How does this work itself out over time? And what happens over the next year or two?
Antonio Garcia Martinez 1:02:21
Yeah, I mean, a lot of this is inevitable, right? I think technology is inherently destabilizing, destabilizing. I think crypto particularly so, right, like decentralization is literally a value in crypto, like DC is bad, right? Isn't that what we're saying? I think this has always been the case. I think tech is really bad at making a case for itself. Like I was part of this, like DC, like sort of lobbying, think-tank thing. But like, a running joke in DC - I'm a little bit in that world, and I'm still in a couple groups with DC people - is that the tech lobby groups are terrible. Like literally, Google and Facebook, some of the smartest, most well-funded people in the world, are less effective than some, like, no-name healthcare company in Pennsylvania you've never heard of, who has got their boy in the House and gets whatever bills they want passed, and do not get pushback, and get treated like royalty, right? And like, why can't tech do that? I don't know. I think tech is bad at selling itself to non-tech people, I think, is part of the problem. And then part of it is just a huge target. Right? Like you said, the top whatever, four or five, by market cap, companies are tech companies.
Michael Eisenberg 1:03:18
But believe this. Cambridge Analytica changed the face of politics in America and Facebook did too.
Antonio Garcia Martinez 1:03:23
By perception alone. But yes.
Michael Eisenberg 1:03:24
No, come on. Every new change in media changes the way politics is done, right. America started with pamphlets, ended up, you know -
Antonio Garcia Martinez 1:03:24
Oh, political advertising, you mean. Yeah, of course.
Michael Eisenberg 1:03:33
Right. That's changed. And those are powerful places to be. And by the way, controlling the narratives on Twitter, which is what every news, mainstream media anchor starts with in the morning -
Antonio Garcia Martinez 1:03:42
Yeah -
Michael Eisenberg 1:03:42
- is, what did so-and-so say on Twitter, right, on Twitter, is a big deal. And these are privately owned companies by, you know, tech titans right now. And, you know, we've got autonomous vehicles, which is going to need regulation, and you've got crypto, which is decentralized and threatens decentralized financial systems. I mean, we're headed for an even larger clash over time. And -
Antonio Garcia Martinez 1:04:02
Yeah, yeah.
Michael Eisenberg 1:04:02
You know, by the way, technology used to destabilize religion. Now, it's destabilizing politics faster than its stabilizing religion, as best I can tell.
Antonio Garcia Martinez 1:04:08
Yeah.
Michael Eisenberg 1:04:09
In fact, I'd say there's something of a religious revival, now, around technology, but politics and DC is threatened. So are we just going to be in, like, these wars between DC and tech for the next year?
Antonio Garcia Martinez 1:04:20
Yeah, yeah. But we just need to accelerate.
Michael Eisenberg 1:04:22
And they're gonna get worse.
Antonio Garcia Martinez 1:04:24
Yeah, probably. But yeah, it's fine. Just move faster. And then they're just slow to react, and by the time they catch up -
Michael Eisenberg 1:04:30
Will that impair democracy, though, for example?
Antonio Garcia Martinez 1:04:32
Nah, I don't think so.
Michael Eisenberg 1:04:33
You don't think so?
Antonio Garcia Martinez 1:04:34
It would improve it, if anything.
Michael Eisenberg 1:04:35
By the way, is democracy the best system for governance in this accelerated age?
Antonio Garcia Martinez 1:04:38
Ah, hard to say. I think it depends, obviously, depends on local context. Not every country is a democracy, right? You know, I don't think every country can be a democracy.
Michael Eisenberg 1:04:47
Would you move to a different country if it's not a democracy? To accelerate tech?
Antonio Garcia Martinez 1:04:52
Probably - no, no, no, I would not make the China trade, no.
Michael Eisenberg 1:04:56
Not just China. There are other countries that aren't democracies, or less democratic, right?
Antonio Garcia Martinez 1:05:00
Yeah, no, no, I think - so, you know, democracy has come to mean a lot of things in the West, right. And often what it really means is sort of secular liberal universalism is what it's come to mean.
Michael Eisenberg 1:05:13
Yeah.
Antonio Garcia Martinez 1:05:13
Right. You can have all sorts of democracies that are not necessarily the most liberal state in the world.
Michael Eisenberg 1:05:20
Yeah. But democracy, I think, at a basic level - Natan Sharansky, who's the great refusenik, right, hero of mine, said that it's the ability to stand up in the central square and say whatever you want.
Antonio Garcia Martinez 1:05:32
Yeah. Yeah, of course.
Michael Eisenberg 1:05:33
It's a reasonable definition, right?
Antonio Garcia Martinez 1:05:35
Sure. Yeah. Yeah. I agree. Yeah.
Michael Eisenberg 1:05:38
So you wouldn't leave that behind for anything? For acceleration.
Antonio Garcia Martinez 1:05:40
No, no, no - well, to be clear what we're talking about - well, but even they're, you're conflating a little bit. What he means is human rights, the right to actually, the right to free speech.
Michael Eisenberg 1:05:47
Freedom.
Antonio Garcia Martinez 1:05:48
Right.
Michael Eisenberg 1:05:49
Samuelson famously said that, "free markets create free societies." I think it's the opposite, by the way. So free societies enable free markets. Where do you come out on that?
Antonio Garcia Martinez 1:05:57
Oh, it's probably a little conjoined.
Michael Eisenberg 1:05:58
Conjoined, alright.
Antonio Garcia Martinez 1:05:59
Yeah. But yeah, the democracy thing is kind of interesting. I mean, well anyhow, it's too much local politics. I won't, I won't say the thing that comes to mind.
Michael Eisenberg 1:06:06
Come on, say it!
Antonio Garcia Martinez 1:06:07
Well, it's funny. I was at this demonstration in Jerusalem yesterday, and these are the pro-democracy protesters, but they're actually protesting a democratic process, the breaking of a parliamentary vote. I don't understand, if you're pro democracy, this is democracy. Is it only democracy when you win? I mean, if anything, it's an anti-democratic measure, having a Supreme Court would nullify parliamentary measures, right?
Michael Eisenberg 1:06:23
Yeah.
Antonio Garcia Martinez 1:06:23
But it's strange. They don't really mean pro-democracy in the sense of voting. They mean pro-democracy in the set, of a set of values that they think, that they're using the banner of democracy to sort of flog their own beliefs. But it's, it's - you know, I remember there was a headline somewhere in there I saw that "Pro-Democracy Protesters are Dragged Out of the Knesset." It's like, do you not see the irony? The pro-democracy protesters interrupting literally the democratic process, right. And so, but of course, they don't literally take it to mean democracy. They take it to mean a set of values, that they think that they're sort of fighting for, and maybe they are. But yeah, anyhow, democracy can mean a lot of things.
Michael Eisenberg 1:06:53
A lot of things.
Antonio Garcia Martinez 1:06:53
Yeah.
Michael Eisenberg 1:06:54
What motivates you to get out of bed every morning? We've come to the rapid-fire questions.
Antonio Garcia Martinez 1:06:57
Oh, probably the nine o'clock stand up, which is gonna happen in half an hour that I have to go to.
Michael Eisenberg 1:07:03
What makes you human and vulnerable?
Antonio Garcia Martinez 1:07:04
Oh, human and vulnerable. I mean, the same thing that makes everybody human - flawed, flawed reasoning, being overly emotional, being stuck in some rut of psychology. I mean, that's the human condition.
Michael Eisenberg 1:07:17
So you probably won't write your own biography or autobiography, would you?
Antonio Garcia Martinez 1:07:21
Ah, no, no, I always joke I'm not really a narcissist. I just play one on the internet. I'm not nearly self-absorbed enough to actually do it. I mean, I mean, Chaos Monkeys is arguably what, I guess, kind of an autobiography? But it was really more of a - the focus wasn't really on me, the person. It was on, like, everything else going around me.
Michael Eisenberg 1:07:34
And it's a timepiece.
Antonio Garcia Martinez 1:07:35
Right, right. Exactly. It's using me as a mirror to a reality but it wasn't really about like - my individual story didn't matter that much. It was, I was emblematic of a time and a period and a thing going on. So, would I write another one of those, maybe, about crypto? I mean, who knows? Potentially, but -
Michael Eisenberg 1:07:49
I'm an author also. But if I wrote your biography, what should it be titled?
Oh, God, I, you know, I don't know - "Mistakes Were Made."
Mistakes Were Made. Well, this was great. Thank you, Antonio, for doing this. You can learn more about Antonio Garcia Martinez on Twitter. He is @antoniogm. His book "Chaos Monkeys: Obscene Fortune and Random Failure in Silicon Valley" is available on Amazon and wherever books are sold. And if you enjoyed this podcast, please rate us five stars on Spotify, and Apple podcasts, and wherever else you listen. And not just that, please tag Tyler Cowen and tell him that Antonio wants to go on his podcast.
Antonio Garcia Martinez 1:08:26
Yes! Absolutely do that.
Michael Eisenberg 1:08:28
Thank you Antonio.
Antonio Garcia Martinez 1:08:29
Thanks Michael.
Michael
I've been trying to summarize for myself in one sentence, what a global investor or you think today about Israeli founders?
Alex Konrad
Scrappy, efficient, well-networked, highly technical.
Michael
All right, Alex Konrad, I am putting you on the other side of the proverbial microphone today. Why don't you introduce yourself instead of me introducing you?
Alex Konrad
Absolutely. Great to be here. I'm Alex Konrad, a senior editor at Forbes. I've been at Forbes for 11 years, which is insane. And I cover venture capital startups and high-growth technology companies.
Michael
Amazing. By the way, I don't remember. How do we know each other?
Alex Konrad
We met, I believe, when I wrote the first magazine story about WeWork almost 10 years ago, when it was a plucky New York City startup with an Israeli founder.
Michael
Wow, that's kind of full circle a decade later, right now.
Alex Konrad
Yeah, yeah. 2014, when we wrote the story, they were still getting inquiries from seed investors trying to get into the first round. They were already valued at $1.5 billion. You guys were in there and it was a really exciting, you know, local startup. And that was my focus at the time, New York City startups.
Michael
Those were the days, $1.5 billion startups. It feels like a long time ago right now. So, Alex is also the editor of the Midas list, the 30 under 30 for VCs and other things, and a variety of other lists that have made Forbes so famous and Alex so well known in the venture capital world. But I actually wanna start somewhere else. Some time ago, I can't remember exactly when it was, you told me a story about your grandfather coming to Haifa.
Do I remember that right? We were kind of going to do research on him. So what was that story about?
Alex Konrad
My great grandfather was, I want to write a book about him someday. My great grandfather lives an incredible life. He grew up in Minnesota, volunteered for World War I, fought for Canada before the war had started for the US. He stayed in Europe in the 20s. He was a researcher, an academic. He met Freud, he met Ataturk, volunteered to drive an ambulance.
And he was a professor and 40 at the start of World War II and took the field test for the OSS, the precursor of the CIA, with some of his peers. Unlike them, he did so well on the test that they sent him into the field, and he ended up leading the Allied resistance, the fighters on the island of Crete in the Mediterranean.
And his resupply port, when he needed a break, he needed new supplies, was Haifa. And what makes that more poignant is that we didn't find out until after his death that he was actually Jewish and the son of Ukrainian immigrants, born Moses Silberman. So my middle name is actually Royce, but Morton Royce was a name he assumed so that he could have more opportunities, go to the Ivy League when it was still limiting Jewish students.
And he actually had lived this entire, kind of, second life, but can only imagine what he was thinking, leading the resistance fighters, going back to Haifa, all with this Jewish identity that he was not able to talk about. Pretty crazy.
Michael
What an incredible story. I didn't realize that you were also named for him and the name that he took. I didn't realize that part of the story. That's incredible. You know, the other thing, by the way, you mentioned full circle - we talked about full circle in relation to WeWork - on some level, what you described right now about your great grandfather and the inability to get in as someone Jewish into the Ivy Leagues and having to change his name, that's a little full circle right now also with the anti-Semitism going on campuses. I'm curious what you think about that, especially given the family heritage and history.
Alex Konrad
Yeah, I mean, obviously I can only speak for myself. I can't speak for my company or for a lot of people. I think as a Harvard graduate, a lot of my peers are feeling a lot of concern for anti-Semitism rising in the US. It feels like something that our grandparents definitely fought against and to see it coming back in any forms is super disturbing.
And I think, for me as a journalist as well, I'm always trying to get all the perspectives. And this is a really scary time where I feel like I have friends I love from all sorts of backgrounds, from Muslim backgrounds or Palestinian backgrounds as well who are hurting, and it feels like there is not a lot of constructive dialogue, or at least empathy, from my perspective.
And so, we just had Thanksgiving here in the US and you know, it was one of those things where I almost felt like maybe I should just keep my mouth shut, because this is not a time to kind of have those really empathetic conversations. So what I've seen at universities feels tone deaf, and not constructive, and really disturbing and sad to me.
Michael
Why do you think it's kind of started to happen again at this moment? I mean, I live abroad now, although I have cousins at Columbia and NYU and places like that. How did we get to this moment that this is now erupted again on college campuses?
Alex Konrad
Yeah, I studied archaeology and history, so I kind of think more in the past than maybe, like, current trends, so I could only speculate. But I think social media is a major contributing factor to people having quick reactions to things, wanting to participate in the discourse at the moment, feeling like maybe it's, everyone wants to weigh in on everything, everyone wants to participate, and maybe they're not fully educated on the subject.
So I think you can have well-meaning or earnest young people finding themselves in positions that they will regret or they would repudiate later on. And I think, honestly, it's not just, and the anti-Semitic side really does resonate with me personally, but it's not just one group of people here. I think I've seen a lack of empathy elsewhere too on other subjects, completely different from this.
It just feels like we're not in a moment of a lot of open minds. We just saw an athlete here in the US delete his social media accounts because he couldn't play in a football game, because he's trying to be healthy, and Fantasy Football people came after him with death threats until he deleted his social media. That is not a normal situation.
Michael
Yeah, that's kind of what I'm trying to get at. Like, you're a journalist who investigates trends, mostly technology, which we’ll come to soon. But it's like, the point you made about the athlete, the lack of, of empathy, I think is, is a good word, that has exploded. This feels like a moment in time, where, you know, a lot of forces, maybe it's pent up frustration from the pandemic, maybe it's social media as you describe, but you see it also at arguing some of the mainstream media too. So it's not just social media, the impact of social media on mainstream media. How do you think we got to this moment and how would you say we get out of it, particularly in these combustible areas?
Alex Konrad
Well, one thing is, if people are upset about the media coverage that they see, and I know there's been a lot of intense feelings there, obviously the media is a really heterogeneous situation. And so when people complain to me about the New York Times, I'm like, great, you know, the New York Times isn't promoting my work or really going out of its way to help Alex. So I don't know how you expect me.
Michael
Yeah, go down the block.
Alex Konrad
Yeah. I don't know how you expect me to put in a word at the New York Times. They wouldn't even let me inside the lobby.
But that said, one thing I would say is that the attention that gets rewarded in social media, whether it's a creator payout on X, or it's people paying for a subscription in media, it often is rewarding that salacious, clickbaity stuff. And it's not that a journalist gets out of bed in the morning and says, “Hey, I want to create clickbait.”
But they do want to keep a job, right? And they do want to get a promotion or a raise. You know, they're just like anybody else. And so, if that's what is getting rewarded financially, it's very hard for the media outlet to say, “No, we want to make less money. We don't want to give our, you know, we don't want to create a product that our customer wants. So let's create a product that our customer should want.” That's really tough. And so I would encourage people to reward good journalism, invest in it, support it, and kind of give the positive reinforcement there too - not just the negative of, “oh, I'm canceling my subscription to whatever paper.”
Michael
So I mean, one of the things you hit on now is that incentives matter. And so I just asked the obvious question on that, like should journalism or media be not for profit because of that?
Alex Konrad
I mean, great question. I think that some journalism should be non-for-profit. I would love to see a non-for-profit backstop with accountability, where quality is all that matters. I think that would be great. And I would love to see more media be that way. It could just be nostalgia, but I think back to, kind of, the BBC of decades ago, or NPR, where we didn't have to really worry about trusting them. You could just kind of, at least growing up in New York City for me in the 90s, my family just could trust NPR. And I think that would be great to bring back.
I do think that capitalistic media will always be a thing. And I would love to see it make more money than it does, because it's not always a great investment today. But that said, I do think that foundation-based, nonprofit-based journalism is very important. And I'd love to see a lot more of it than we do right now, which is not very much.
Michael
The BBC has certainly lost the plot, I think is fair to say. I don't listen to NPR as much as I used to, so I don't know what's going on there. It's hard to stomach what I think has gone on at the BBC. It feels like they've lost the plot. I can tell you, in Israel, by the way, we have a semi-government-appointed or owned broadcasting station, which is free from any government's influence on editorial decisions, but it's not for profit. The product, as my kids often remind me - by the way, one of the heads of Facebook told me it's the best media product out there, it’s one of the best in the world, from a media product perspective, but -
Alex Konrad
Which, what's the name of the publication? Just for ignorant Americans?
Michael
It's called KAN 11, K-A-N 11.
Alex Konrad
Okay.
Michael
And the content is incredible. And they've really kind of diffused it out to the producers in the field to make credible. By the way, the producer of this podcast used to work there, Sofi. And that having been said, it's a challenge, because how do you, kind of, criticize the government without them feeling that you're going after them? And the government pays the bills. And so it's, it's complicated.
I don't think there's, there's one great answer. We'll probably muddle our way through it, but that actually brings me to a slightly different point that I want to come talk about: Forbes. So one of the great - what’s the right way to say this - one of the great intrigues about Forbes is the Midas list that you publish every year. And I have heard from people that there's actually lobbying efforts on the part of venture guys to get themselves on the list.
And I often wonder about the incentives in the list, not for Forbes, but like, you know, it's a wonderful thing, but does it matter that much that I should lobby Alex Konrad about it? Tell us about some of the politics behind the scene that goes on the Forbes Midas list, which, for full disclosure, I've been on, but I've never lobbied Alex.
Alex Konrad
Yeah, Michael does well on the Midas list without lobbyings. There you go. He's my example. So I think the first thing I would say is that with any list, and this is especially true at Forbes, but it's true across the board - there is gonna be a survivor bias where people see someone make one of these lists and they try to reverse engineer how they made it. And so maybe they did send me an email, but that doesn't mean that the email actually affected their chances of making the list.
And so I think one thing that I've seen with the 30 under 30 list, where I've done our VC list for a long time, or with the Midas list, or with the Cloud 100 list that I also helped co-create for cloud companies - people who don't make these lists are always like, oh, I wasn't connected enough. I wasn't kissing up to Alex enough. There was no baksheesh. And it's like, that is not really what's going on here.
What's going on here is that, you know, if someone emails me and says, ‘Hey, Alex, you know, can you do me a solid with the Midas list?’ Like, I'm going to be polite. That's my job. You know, I'm kind of in a services game the same way that the BBC is. And so I'm going to say, ‘Oh, thank you so much for the note. You know, we are going to give you a long look,’ or something like that. But they're going to get the exact same look that anybody else is. And in fact, when people are pinging me a lot or kind of, like, harassing me to make a list, it's a negative signal. Like I'm not stupid. You know, I know that someone who had their entire Stanford graduate school class ping me about 30 Under 30 is probably trying too hard. So that's one point I want to make clear.
Michael
Yeah, but the Midas list is very quantitative, at least in theory it’s quantitative. And there's other parts to it. Like if I asked you, of the hundred people who make the Midas list in the international or the US one every year, how many of them actually reach out to you, you know, to try to -
Alex Konrad
Not many, not many.
Michael
How many people who don't make the list reach out and lobby?
Alex Konrad
Way more. We get hundreds of submissions for the international list of 100, and the best people often don't submit. But one nice thing about the Midas list is we've run it for over 20 years now at Forbes. And then I co-created the Europe and Israel list a few years ago, about five years ago now. And what you get is you get institutional data. So even if a firm doesn't submit in a certain year, we might have their past data or we have what their co-investors gave for a company. So, we were talking about WeWork–when that was a driver of the list, when it was still a really big company, one WeWork investor might not want to submit, but other investors did submit. And so if we know that they invested in the Series A or some early stage alongside the other investors, we know, roughly speaking, what kind of gains they're looking at.
And so the nice thing about getting, sort of, a critical mass of data, and one thing that's made the Midas list so hard for others to copycat is that you get that kind of critical mass of data that, that gives you really a lot more clarity at that zoomed out view into what's real and what's not. And because let's face it, sometimes investors misremembered to be generous when they invested in a company or what their role was in a company once it's successful.
Michael
I was in a meeting yesterday with people who are, with someone who's an expert in history. And he told me a story last night about a bullet that had gone through somebody's neck and came out, and it ticked the eyelid, and somehow pinned it against the wall from the outside. I know it sounds gory or whatever.
And when they interviewed people afterwards, I think he said 32 people said they were the ones who removed the eyelid from the wall and put it in a matchbox. There could only be one.
Alex Konrad
Yeah, witnesses are known to be spotty, right? And so especially when it's a VC talking up their own book.
Michael
Alex, what are you saying about VCs?
Alex Konrad
I'm saying that they gotta build a brand, Michael. They're told to build their brand.
Michael
There you go.
So let's talk about that for a second, which is, you cover individuals and cover firms. Is the individual brand more important or is the firm brand more important for a venture capitalist?
Alex Konrad
I think it really depends on the stage of their career and the fund. So, this morning I actually just published an investigation into a new firm that is kind of a crossover fund, and has at least $10 billion in assets, and they are ghosts. Like, the investors don't have photos on LinkedIn, their website has nothing on it. They did not want to participate in the article we wrote about them. It's called Newlands, and it's an investment fund bankrolled by Jan Koum, the WhatsApp billionaire.
And so sometimes you get these ghosts and they just want the results to speak for themselves.
I would say that for most investors today, especially earlier stage and earlier stage career investors, it can be a limiting factor or make things harder to have no brand. In this world where people are increasingly online, you want more people to know you and to find you.
And if you're only relying on those personal referrals or networks, that can be tough. Like obviously we both know Gili at Cyberstarts in Israel, and like, Gili will always find security startups, you know, and make them drive up from Tel Aviv. And he can do that. But if you were the 25-year-old Gilly, you would probably want to be on social media.
Michael
Yeah, or on the 30 Under 30 list or on the Midas list, right? And you see, this is actually, I wonder if you've done the work on this. Is there any correlation between people who have been on the 30 Under 30 list and later performance in venture capital?
Alex Konrad
I haven't done that correlation, but I can tell you that a lot of the Under 30 VCs at least have gone on to be extremely successful. Some have left the industry, like Sam Altman or Shivon Zillis, and are big names in the tech world now outside of it. Others are leading their VC firms. So there's actually, like, a very good hit rate of those investors actually working out.
I think the most interesting correlation that we actually saw is a PR firm last Midas list, called Milltown, did an analysis of social media usage of the main international Midas list, and found that most Midas list investors never post to Twitter/X–never post to social media. And I think the question is, were they successful before those things took off? Or is it a flex that when you get successful enough, you don't need to do this stuff? Like people would think you're crazy that you're a Midas Lister and running a podcast.
Michael
I think that was a barb.
Alex Konrad
It was a compliment, that you are in that cadre of investors and actually out there talking to people like me. I think a lot of investors might see that as–what was the Chamath thing–”below their line?” So I'd be below the line of a lot of folks.
Michael
Yeah. No, no, you're a friend more than anything. And I don't have people who are below my line anywhere on the planet. Although I did feel a little below the line–I met Elon today, Musk, in Israel. Boy is that guy incredibly smart, and talented, and–
Alex Konrad
What's the scoop? Is he recruiting for his AI company? Why is he seeing you?
Michael
You can ask him.
Alex Konrad
All right.
Michael
But just an incredible experience, to be honest. So I want to pivot for a second, because we actually scheduled this long before this, what’s going on in Israel broke out. But you wrote three super interesting stories about what's going on here. I actually want to start with, I think the last one you wrote, on civilian efforts, technology efforts in Israel to supply nonprofits. Why don't I let you tell the story quickly that you covered. Um, and then I actually want to ask you a question about it.
Alex Konrad
Yeah, absolutely. So we were interested in how the tech community in Israel and also abroad responded really fast to what was happening after the attacks. And one of the things that was interesting to us was how technology was going to be used. So I've written in the past about really successful Israeli tech companies, like Monday.com.
And talking to a bunch of founders and others in the industry, you know, I was hearing about Monday.com being used a ton to organize volunteer efforts. But then, you know, when you, when you start talking to people, you hear more.
And so, a founder told me that they were volunteering with Hatzala, and doing, using this kind of Uber-like app to be a first responder. And I thought, wow, that is so interesting. I had no idea that this giant network of first responders in Israel and they have satellite offices, you know, in places like here in New York too is using this very sophisticated, location-based app to send people to an emergency as fast as possible, including on October 7th.
So that was fascinating to me. And then as you talk to more people, you hear more stories. And it almost became a question of, what can we include? And so I also found it interesting, this startup called Guesty that is for multi-tenant homes or vacation properties, like on the beach,
that are going to get listed on a Vrbo or Airbnb, etc. And so they opened up their platform for people who had unused properties, to make them available to people who had been displaced by the attacks.
And I thought that was just really interesting. And so we kind of tried to round up some of these examples into this article that looked at, sort of, how the technology tools were being used.
But the reality is, I also just, as you know, heard about dozens of WhatsApp groups and much more sort of ad-hoc efforts that were also sort of technology and also really inspiring.
Michael
So the question that brings me to is the following. What you described is what I would call ‘civic resilience,’ and particularly in a tech-centric country like Israel with a high density of technology talent, this ability, one, to organize quickly, but two, to bring advanced solutions to solve real-world problems where, candidly I think it's fair to say the government left a vacuum.
And, question - you know, you're starting to see companies like Anduril, right, which is a startup company - not anymore, but a startup company using Silicon Valley or startup methodologies to attack something that was, no pun intended, that was previously the purview of governments, and big prime contractors, and semi-governmental agencies.
And the thing that's been occupying my headspace since I've been at ground zero of this civic organizing effort, but I'm just in the outsider's perspective, is–I'm wondering if this is a watershed moment from your perspective in, call it tech, Silicon Valley, Tel Aviv tech, where civilians begin to step in the shoes of government, bring 21st century to solutions to what has been, I'd like to call it, you know, a previous century's operating system, which is the government. And now we can kind of use orchestration of civilian efforts, you know, to solve real societal problems.
Does it feel to you like a moment like that? How would you think about this on a broader scale in the US?
Alex Konrad
So I think Israel is unique on some levels, because–your audience will probably know this better than me–but I was in Tel Aviv in June. Sorry, I was shadowing the CEO of Wiz, which is the only reason, for everyone, that I did not go say ‘hi’ to Michael in person. But it was really interesting to hear, kind of, how a lot of the tech leaders of that moment were using these tech tools to help mobilize the community to sort of protest or influence the government around the judicial reforms that a lot of tech leaders were not fans of, to put it mildly.
And then you see the same rails, the same kind of WhatsApp groups or other organizing groups being deployed immediately for volunteer efforts after the terrorist attacks. And it's really interesting to see, like, what happens to those rails after this, is one way to think about it.
Does it go back to protests? Does it go back to other civic engagement? I hope so. I hope that the muscle that the community in Israel has flexed is used for good, whatever that would be. I think in the US, we don't have quite the same density of people, of organization. So you're gonna see more ad-hoc efforts, but I do think companies like Anduril are starting to be more and more respected and key to our infrastructure from a government and defense standpoint.
I think SpaceX has to be the leading example there though. I mean, SpaceX is literally putting our government astronauts into space. Starlink is mapping a lot of our, you know, critical satellite infrastructure today. SpaceX is, if it's not a government agency, it is now codependent in interesting ways with the US government. And I think that's totally, you know, totally good for innovation.
Michael
It's the most important company for US supremacy, I think is, you know, is clearly SpaceX in my view. And, you know, just to leap forward. But again, you know, the question I'm trying to get at is, is this a harbinger? Is it only in–call it defense technology in case of, you know, SpaceX–so is transportation, by the way, electrification, you know, under Elon Musk. What you see in Israel is what I would call this kind of–can we create a new operating system for the country?
I've called this already going back two years ago, the government needs to move from management to orchestration, right? For managing all these things, you know, to orchestrate. Like FEMA in the U.S., right, the emergency management agencies–not exactly working terribly well. And it makes me wonder, given what's going on here, whether civilian efforts properly funded and orchestrated by the government and kind of led by, quote unquote, Silicon Valley or Tel Aviv, is maybe a new trend and maybe a new trend to invest in.
Michael
But I'm living it. You're the outsider and you wrote about it. So I'm more interested in your perspective.
Alex Konrad
I think Israel can be maybe the proving ground for larger populations there. Because I think, again, smaller country where tech is very clearly the driver of GDP growth. And I think maybe it's not as controversial as maybe Silicon Valley can be with some politicians in the US on both sides of the aisle.
I think in the US it's going to be three steps forward, two steps back, where you see kind of more co-dependence on these tech tools. But in terms of, like, an operating system replacing the US government? The US government has lots of arcane and bizarre and sometimes mind-numbing pieces in place that would resist a software update.
Michael
You know, one of the jokes I've been making, or it's pretty serious actually, is you know, since they called up all these reservists to 8,200 and, you know, I've been there, there's like mattresses all around. This is like the, you know, the biggest and most impressive hackathon I think ever created. You have all these brilliant guys who've turned up at 8,200 with mattresses sleeping there for six weeks. The amount of ideas and innovation that will come out of there over the next couple of years is mind-boggling.
And there's this, because of the failure of October 7th, I think the mindset over here has shifted to people wanting to apply their innovation and technology skills to public service. You've got to solve these problems. And I think it's fascinating.
Alex Konrad
That's amazing. That's awesome because so many of those smart 8,200 and 81 grads, we see them creating cybersecurity companies that are, I think, good for the world usually, not always, but usually, but maybe incrementally better than what came before because it's like the safe, smart thing to do or they join a company. Obviously, I've written a cover story about Wiz this year and I've talked to a bunch of these folks.
And some of them even go into, like, ad-tech, right? Which is not exactly world-inspiring. And so if maybe those ad-tech entrepreneurs and some of those security folks are getting into civic tech and other areas, I think that's only good for the world.
Michael
I wonder if you’d make the Midas List investing in that stuff.
Alex Konrad
You know, I wrote about a new fund manager here in New York who has a fund just focused on things like disinformation, user privacy, you know, people having real ownership of their digital assets, some of this edge stuff. It's a brand new fund, so she's many years from making the Midas List, but I'd love to see more funds like that and more investment theses that are taking a different approach than, ‘hey, see if Gili and anyone else who's in on the 8200 alumni network can cut me into the next security deal.’
Michael
I love Gili, but what's the name of the person who's running the fund and the fund name?
Alex Konrad
Oh, I'm talking about Gili Raanan from Cyber Starts with…
Michael
No, no, I know. I mean, the New York fund. The New York fund focused on–
Alex Konrad
Oh, Zoe Weinberg, ex/ante. I just wrote about it. It's a 30 million plus first-time fund. She's an impressive woman here in Brooklyn.
Michael
Good for her. Good for her.
So I want to switch gears for a second to another piece you just wrote, about, about Gazen tech. So, you know, full disclosure, I have a company, we employ a hundred people in, Ramallah, or so, maybe, yeah, close to a hundred people in Ramallah. So, and I’ve been involved with, I hosted the Gaza Sky Geeks at my office some number of years ago and, and a bunch of other initiatives.
I'd love to hear, like, firsthand, what you heard when you interviewed the Gazan tech people.
Alex Konrad
Yeah, so this was something that was important to us to think about and cover too, because when I went to Israel with Forbes about a year or so before COVID, we did a hackathon in Jerusalem at the JVP offices or in their yard, and it was Israeli founders, but it was also Palestinian founders. They were from the West Bank, not from Gaza, but founders from a very different background.
And to see these entrepreneurs rubbing shoulders and joking around, they had some of the similar technical problems, that felt very hopeful to me. And it was a real kind of heartwarming feeling, even if it was just for a moment. And so it was obviously something that we thought about as we were talking to all these Israeli entrepreneurs, was also like, hey, what about those founders who had kind of talked about economic progress and sort of technology as a way to maybe lift up their own people in places like Ramallah?
And so we tried to talk to folks, and it was definitely somber. It was a tough conversation for very different reasons. I think some of these folks were just trying to say to me, ‘hey Alex,’ and my colleague Sarah Emerson, they were saying, ‘it's hard to think about the future of my startup when I'm not going to have stable internet access, when my employees who are in Gaza can't get back to me in Ramallah, I can't reach them by phone, I have no idea if they're alive or dead, and that could be weeks.’
And I think it was just a very visceral sense where their startups like, weren't going to have internet access, let alone worry about people getting called up or something like that. And that is, it's very hard to compare these situations. I don't think it's fair to compare them. And I think Israeli startups have just shown incredible resilience. I just think separately also, it was something we wanted to look at was these founders in the West Bank, especially, which is where most of the tech innovation is such as it is because I do think they were seen as a bastion of hope, as a sense of innovation.
And let's be real, if you went through Gaza Sky Geeks, if you learned how to code, if you were trying to get a remote job with Google or something, you're probably the kind of person who it would be easier for someone like you to talk to than a random other person. These are people who wanted to engage in the global economy, and believed in the power of entrepreneurship. And that's something that I do think is international.
Michael
Yeah. And I think it's fair to say that it's very tough for them under Hamas as well, people who want to be part of the global economy. And let's just say those aren't 21st century methods of Hamas. You know, one of the previous guests that I had on the podcast, I guess like three guests ago, was Eyal Waldman, who, as you know, was founder and CEO of Mellanox, which was sold to NVIDIA, and his daughter was killed in the October 7th massacre. He was perhaps the largest employer of technology talent, Palestinian technology talent, both in Gaza and in the West Bank. He's always a hopeful person, an incredible leader. But that's a tough element right now, I think.
Alex Konrad
And Michael, one other thing that just makes me think of is, you know, I do think that Palestinian tech founders were largely scared to talk to us, because they didn't really see a way that it would help them or improve their lives, because they could face backlash from international community or they could face backlash from Hamas, and people in their own backyard who don't like that they are talking to Americans, don't like that they are trying to use technology in this way.
And for them, it was sort of like, what is the upside in sticking my neck out and talking to you and facing repercussions? And that is a very tough thing as a journalist to hear. Because there isn't really a good answer for that, right? Like, why should you risk your life to talk to me? It's just a Forbes story. I'm just trying to shine a light, but you have to protect yourself.
Michael
That's a tough thing for anybody to hear, I think, not just a journalist.
You know, I'll throw an idea back at you, when Hamas hopefully is gone, it would be great to have a Forbes hackathon, similar to the one you did, or you were at at JVP, where we can get the SkyGeeks from Gaza and people from Israel and other places, maybe from international countries, the Gulf, etc. together, in a big hackathon to solve problems for humanity. I think that'd be a big thing Forbes can do. You can write a full 100 list of all the people who participate in that.
Alex Konrad
It would make me extremely happy to come back and do something like that. So, let's hope that that is something that you and I can give an update to the audience about down the road.
Michael
So tell me something else. The third story you wrote was about Israeli resilience. And maybe because I'm a little biased, so I may be biased, but it almost felt when you wrote the story that you were amazed that these people were continuing to deliver with so many people called up. And then I almost felt, I don't know what the right word is, that you were a little split on some of these smaller companies that were struggling to make it–inspired by the fact that they saw a higher calling to serve the country, but, you know, kind of wistful to sad that the companies would likely not make it because they couldn't focus on fundraising.
And I have two questions in that regard. One is, is that an accurate reflection of how you think about the story, kind of amazement on the ability to continue to deliver some of the companies, and then this kind of dichotomy on the younger companies? And then the second question I would ask you is, you cover the global tech world, and companies are going out of business everywhere, smaller companies right now. And I kind of wonder in your own head, how much you attribute to what's going on here, geopolitically, locally, and how much you say is, oh no, that's just the general, we've hit the end of 2023 going to 2024, money’s starting to run out, and this is happening everywhere.
Alex Konrad
Yeah, it's a really good question that takes, like, a deeper look into the story than I think many readers did. So kudos to you. I would say that the biggest thing that we were really trying to reinforce with the size point was that realistically larger companies could absorb people leaving more easily. If you're Monday.com or you're a cybersecurity unicorn, and some of your folks got called up by 8,200, that was something you could plan for. You have great investors like Aleph and others, who are already lined up to help you get through it. If you're a three-person startup and your CTO gets called up by 8,200, you maybe don't have that support system in place.
And even if you could have someone step in to try to help out, and we wrote about these volunteer efforts, like there was a signup group that I believe still exists where people could say, hey, I wanna chip in and help a startup that had people get called up on a volunteer basis. And that's great, but I think we both know that sometimes with a small business or a three-person startup, training someone up or having someone step in who doesn't have the context is as much work as just doing it yourself. And losing, you know, your technical co-founder as a tiny startup is just going to be pretty disruptive. And I think that was something we wanted to just make really clear was that people were pretty open-eyed, understanding the consequences of doing this.
And we were pretty blown away by just how matter-of-fact they were about it, how eager they were to still get called up, you know, people flying back from the US or trying to organize donations on their way at the airport to get back, because this was just something they had to do. I don't think there is the same sense of civic duty in the US in any industry, but including among entrepreneurs, you know, where I think entrepreneurs would be like, no, you know, I got to protect my startup. Were those startups struggling anyway? Maybe.
It is true that startups are failing all over and that is natural and it is just part of the game. And it's a tough time in general for startups globally to fundraise if they don't have revenue or some clear metrics. I don't think that was really like the point of the story though. I think that is just a backdrop and sort of context here that I think makes it either more poignant or you can be cynical and say, hey, best way to wind down a startup is to just go volunteer and then come back and start something new with those three people at 8200 that you slept next to as you were saying. Like I have a better idea.
Michael
It's funny, you may be right about that. I actually came up with a different perspective, which is, I think, not covered, but hinted to in your story, which is, it made me wonder whether this resilience will mean that the failure rate of Israeli tech companies is going to be lower than everywhere else in the world in the bad funding environment, because the kind of grittiness needed to kind of get through this will enable some people to survive on fumes in a way that few others would in a normal place.
Alex Konrad
So I think that's possible, but I also think that, again, speaking as a New Yorker who's just visited, I think my sense of the founders in the Tel Aviv and wider Israeli startup ecosystem is also that people are just very pragmatic and practical. And so I think that could they be cockroaches that you can't kill and just kind of persevere?
Michael
Ouch.
Alex Konrad
Well, no, I know that's a term that is often a good thing in startups, at least here in the US. Startups say they want to be a cockroach because, to explain to anyone who doesn't get that, means it's impossible to kill you. You know, you can step on, you flush, you whatever, you survive, and I think in a lean funding environment.
Michael
I grew up in Manhattan, I know what it means, but I'm not sure most people would.
Alex Konrad
Yeah. Fair enough. Well, it's, there's even a company now, a unicorn here in the US called Cockroach Labs for the same idea. So I want to make clear that that is not meant in any pejorative way.
But the point was that these companies could survive even in a leaner situation. But I think that the founders might be practical enough that they would pivot fast or go to something else if they see a bigger opportunity, much like the Wiz founders did in the profile I wrote about them, rather than just kind of get caught in the messy middle for five years. Because I do think that a founder's biggest asset is their time.
And spending five years on an idea that's not going to be very big is not always the best way you could use your time.
Michael
Do you think, you know, you cover investors globally, venture, do you think this war has changed investor attitudes on Israel in any meaningful way, to any direction?
Alex Konrad
I think investors who were interested in investing in Israel are as interested and more interested in investing. And I think investors who were not looking to invest in Israel, it's probably because the sectors, you know, they're not security minded or enterprise SaaS. And I think, you know, traditionally, most of the global venture investments have been kind of more on the B2B side with a couple, you know, big consumer exceptions.
I think that what you were talking about with civic technology, maybe new areas, I think it would be great to see global investors be looking to Israel for more types of companies. But I think if you were already kind of having Israel on your radar, you double down and you like, want to invest more than ever. I'm curious if that's your sense too.
Michael
It is. It is. One of the things I've been trying to figure out for myself, and I'm interested in what you think is, I've been trying to summarize for myself in one sentence, what a global investor or you think today about Israeli founders? Like, how would you summarize what differentiates them in one sentence?
Alex Konrad
Scrappy, efficient, well-networked, highly technical.
Michael
Interesting. The word that keeps coming to my head, but I can't put it into use properly, is focused and resilient. Those are the two words that keep coming to me. But I feel like I need a better sentence and I haven't been able to come up with it yet. But let me change gears entirely for a second.
So you Tweeted–I can't remember whether it was yesterday or the day before–by the way, we have to keep saying ‘Tweeted’ because you can't say you ‘Xed’ it. That doesn't make any sense. But like, you're finally picking your head up.
Alex Konrad
Yeah, you should have mentioned that to Elon, Michael. You had your shot today. I can't believe you didn't ask him about that.
Michael
Yeah. So you Tweeted that, you know, it's finally the first day you're not writing about OpenAI and what went on there. What's your take? Like what happened?
Alex Konrad
Mm-hmm. What's my take? The trillion dollar question, right? I think that the narrative that we've seen to start to emerge where there was a technological breakthrough in model training that freaked some people out and excited other people, that does seem credible to me. It is what my sources were kind of signaling. At first people saw the shock announcement and they were like, for a board to fire a CEO so abruptly, the CEO must have done something really bad. And it went to–people immediately thought, is it financial misconduct, or personal misconduct, or something like that?
But that always seems shocking to me and surprising. Also that kind of investigation would usually involve the person. And I was at an AI conference two days before he got fired in San Francisco, and he stopped by the speaker dinner, and I had a nice little chat with Sam. And he did not look like someone who was about to be fired. And so, I was just like, wow, that doesn't seem like the right narrative. And so this technology angle feels credible, but it's also, also incredible because it's like, really, this is really why you would fire Sam Altman and immolate your own board and cause all this craziness, over a model improvement? At the least, I think the board of directors of OpenAI just did a masterclass in bad communications.
Michael
I hear that. It's, speaking of bad communications, it’s a good segue. Like you're a journalist, you're at a media company, you guys run conferences. And over the last six or seven weeks, Paddy Cosgrave self-immolated also, apropos self-immolation. You know, he's resigned. Web Summit was a disaster and imploded, you know, he had been co-opted so to speak, already, by the Qataris for the next one. You know, how do you think about that self-immolation?
How do you explain, kind of, ruining your media franchise that way?
Alex Konrad
Yeah, well, I haven't studied that so much specifically in terms of how Web Summit went or anything. And so I don't want to necessarily speak out of turn there, but I think what, having just gone to the event in past years pre-COVID and seeing what was happening with Paddy's initial Tweets, I think this is a moment where there is the intent of your words, and then there's the public perception that you should realistically expect. So there are things that you might say in a certain context and have them spark legitimate debate or conversation. But then there's also the read-the-room factor, where in a certain room, you should not say that. And in a certain time, it is inappropriate to say that.
And I think what happened here was a real refusal to read the room and a really major consequence that affected a ton of other people–employees of the conference business, contractors, people who were going to speak, and it was going to be good for their company.
And so I was just like, what a waste, what a horrible shame that the room was not read here in a way that's gonna have this, like, very negative consequence. You know, I wasn't gonna attend the conference either way–
Michael
Me neither.
Alex Konrad
But it was just really sad for me to see like, why is this, it just, you know, I don't know if own goal is a term there, but you know, it felt like an own goal.
Michael
I come back a lot of it to what you said at the beginning of the conversation. And maybe I would phrase it that lack of empathy, maybe, has real costs to people. And that's part of reading the room and, you know, being empathetic as to understanding the room. And turns out that it has real costs. And, so I want to finish with two quick questions if I can, which is, how do you decide what to cover?
Like, everybody wants to talk to you. They either want to pitch on why they should be on the Midas List or the 30 under the 30 list, or please cover my company–they know you've got a big audience. How do you decide what to cover?
Alex Konrad
Well, part of it is that I always feel short on time, and I have to really defend my time. And so I kind of every morning think from an impact standpoint, am I spending this day well? Is this the highest impact way I could spend my day? And unfortunately, a lot of the time I don't give myself a great grade there. I'm like, I could be doing better. Maybe I should not have agreed to this meeting, or maybe this article is not the highest impact one I could have.
But I at least try to be writing things that I think are going to drive conversation and have meaningful impact and contribute to a healthier tech ecosystem. Because I do think shining a light as a reporter, being annoying sometimes to people, but fair–I do think overall it's good for the ecosystem. And so if I'm writing a story that is not, it isn't fun, the technology isn't interesting to me and I don't think it's high impact, that's where I'm like, what am I doing here?
More often than not, you know, there's at least one of those components that gets me really interested. Like this morning's article about this secret new fund, I'm like, hey, if there's a $10 billion fund out there and nobody knows who it is and it’s starting to invest in startups, I think founders should know who these guys are. And so I can be the person to kind of pull back the curtain a little bit and be like, here's who they are. So the next time they pitch you or something, you know that this is Jan Kuom's money, or, you know, that this is a new $10 billion fund in Texas.
That's a unique situation, of course, but similarly, I might say, oh, this technology is really important and that's what's going to focus my story. And I need to check off at least one of those boxes, ideally all of them. Does that make sense?
Michael
It does. So, the next question, the last question I want to ask you is the following. All right. Maybe it's a high-bridge question. You were very public on your own Twitter/X or whatever it was. You got engaged and it was posted there. You got married, and I'm interested in how has married life changed you as a journalist and someone covering tech. And then the followup to that is, you know, single journalist, now married, covering this. You talked a lot about your great-grandfather at the beginning of the conversation and what an extraordinary person you think he was. And I want to ask you when you're a great grandfather, how do you want to be remembered?
Alex Konrad
These are some deep, deep questions. Well, I would say
Michael
It's afternoon for me! It's early in the morning for you.
Alex Konrad
Yeah, I'm like, man, I needed more than one coffee. First off, my wife's VC firm, they haven't given me any juicy stories. So married life hasn't helped my career in terms of inside tips, despite now being married to a consumer investor. So that's–
Michael
Wait, is she lobbying you to get on the Midas List or the 30 under 30? Just to be clear. She has an unfair advantage.
Alex Konrad
She's 30, she's not gonna bug me, thank God. Maybe the Midas list in 10 years, no. But I think married life has grounded me in the sense of, it does help you just remember that life is more than just quick job wins or getting caught in the rat race, and that we are really a partnership who are playing a long game here and trying to not just build our careers, but kind of build a family together.
And I think that marriage has just been great in kind of giving me that sanity check or kind of deep breath because I'm the kind of person who is type A crazed. Like I had to delete the chess app off my phone because I would just play for hours trying to get my rating up on that kind of competitive person. And so to have that grounding has been really important for me. And then in terms of, you know, how I'd want to be remembered–it's hard, you know, Michael, I think when I was younger, when I was in college, and I was big in history–and I still care about history–but I really studied a lot of these kind of great leaders. And I thought, oh, life is all about having the biggest possible impact in very noticeable ways, you know, whether it's, you're a head of state, or you had a massive new invention, or you created a new economic theory.
You know, the key in life–like winners will be remembered forever for doing something really big. And I do think that as I'm, you know, I'm about to turn 35, I'm married now. I am thinking about kind of the, the next phase of my life and career. I want to be driving conversation and leaving the ecosystem here in a better place than I started. I want people to enjoy my stories, but I am starting to kind of accept that maybe I won't be remembered 30 years from now, maybe it will just be my great-grandson who remembers me, and no book I write will stand the test of time or something, and that's okay.
And so I've definitely started to think about impact in a much more local, personal way and less that kind of be a great man of history. I'm curious to your thoughts there, because you are one of the leaders in your field and you have a huge family. So how has your thought changed there over time?
Michael
Aren't I doing the questioning on this podcast?
Alex Konrad
Oh come on, I can't give you that answer and not get a little bit back. That was way too good a question.
Michael
I think of the world as a relay race, that we need to leave this earth a better place for our children, grandchildren and great-grandchildren. And one of the things that changes you, when I became a grandfather, I thought it at maybe 60% when I was a dad (I still am a dad). But when you become a grandfather, it becomes even more so, more prominent is, how do we leave this world a better world for our generations that follow us? And that has, that occupies my mind.
And it's, how do you leave a family like that? How do you leave a country like that? And how do you leave a world that is better for that? And grandparenthood has made that far more prominent in my thought and in my behavior. My kids would probably tell you, not too much of my demeanor. But I think that's, I think the big one.
I think we're in a tricky decade. I just finished writing something, or almost finished writing something, that kind of looks at the world from 2008 till 2030, which I think is a, yeah, it's like a 22-year period of real dissonance. We had the great financial crisis, then ZIRP, which created this–COVID, Russia, Ukraine, you know, Israel, Hamas, radical Jihad rearing its ugly head around the world, China, US in the middle. I mean, it's, we got a lot going on. And so, you know, how do we leave this a better world for our children and grandchildren and great-grandchildren, you know, matters. And I'm actually eager because when you write the book about your great-grandfather did maybe, think about the question, about how did he leave the world a better place for you and then how you can do it for your great grandchildren.
Alex Konrad
Yeah, and you know, I've thought a lot about that too, because my grandmother is 90 now, his daughter, and I want so badly to be able to show some progress to her so that even if the book isn't ready in a time that she can appreciate it, she can see how much it means to me. But it also got me thinking about her impact and her effect on our family too. I'm so proud of my sister and my cousins, her grandkids.
And even though my great-grandfather met all these famous people in history, you know, and lived this crazy life. He did it for his daughter, my grandmother, and she had a massive impact in her own way as a nurse practitioner and as a volunteer, and doing a lot of other stuff. So, you know, he would be the one who rubbed shoulders with the famous people in history, but, you know, this is also for my grandmother too. And I think that reflection has been really healthy for me.
Michael
By the way, I can go–hold on.
So these over here in the corner of my office is a box. On Saturday night, I went to pick up–my grandmother passed away this year at 99, and they finally cleaned out all of her affects, including 10 cartons of old pictures. I have their wedding album in the box over here. But this, apropos technology, these are DVDs. You can see this one, it says on it, 1960s old films. They had old negative films, real, real films that I guess my grandmother had digitized onto DVDs.
I actually, I have four boxes of the old films and we're now going to digitize them and get to look at them and see what was there. And you can kind of come, you know, reach back and reach forward. And one of the things about the world, the technology world, digital world is you can reach back and reach forward. And, you know, I'm excited to see what's on these over here.
Alex Konrad
Amazing. Well, you're gonna have to share it in a blog post or something so I can learn a little bit from it too. And I promise to share my story with you as well.
Michael
Deal. Feel free to send a picture of your great grandfather. So Alex Konrad, thank you for joining us. You can learn more about Alex on Twitter or X, @Alexkonrad. That's spelled A-L-E-X-K-O-N-R-A-D. And please, please don't bug him about the next Midas List or Tweet at him with that, or DM him. But Alex, thank you for coming and chatting, and just super appreciate you and your thoughtfulness and how you think about things globally. And you've been a good friend, so thank you.
Alex Konrad
Thank you for nine years of great conversation and a really thoughtful chat today. Thanks, Michael.
Michael
Yeah, thanks Alex.
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