Chamath Palihapitiya Compilation

Chamath Palihapitiya is a Sri Lankan-born Canadian-American venture capitalist, engineer, and the founder and CEO of Social Capital.

For more about him- https://cutt.ly/Rjel9Zq

A compilation of sorts. Might be a bit different from other compilations that you’re used to. But my aim here was to provide more snippets and summaries. Highly encourage you to read the source material for a more well-rounded view of his thoughts though.

Keep in mind this is a work in progress and continually updated as I find new snippets, summaries, and links.

On Social Capital (His venture fund)

We are not building a venture fund – at least that’s now what I want to build – and I don’t really have any attachment to the role of CEO, but I do think I set the vision of a place, culture, and values of where we work.

If you ask me what we are today: we are in this primordial stage where we look like a venture firm. We take a lot of capital – ours and other people’s – and invest it in businesses. But I think what we are really doing is building this tool kit with interesting companies spanning a bunch of industries I think are important for us, and for the world.
What I would like for us to evolve into is something that looks more like Berkshire Hathaway and the Peace Corp, with this idea that you make exorbitant amounts of profit by making really smart bets on things that are important. You allocate those resources against the most important issues of the day.
I think the single most interesting business opportunity in the world is to find a way to create equity out of inequity. I think we are underestimating is the amount of pent up frustration that exists in the bulk of the population, where you don’t have as much equity as you thought. I think that boils over in unpredictable ways. I want to spend the next 30 or 40 years on that problem.
Source: Startup Grind’s VC Corner Article

On His Upbringing

So, my parents craved money, meaning they needed it because my dad was unemployed for long stretches of time. My mom was the sole breadwinner. She was a housekeeper, then she was a nurse’s aide. And I would just see how she grinded. We didn’t have a car for a long time. She takes the bus, we all take the bus. When I got my first job, it was at Burger King. I’d take the money, and I had to give it to my parents, and we would buy bus passes.
And I remember telling some of my friends, I went to a very good high school, kind of like the rich high school. Not the high school I should’ve gone to. I was able to go to this different high school. And I would tell them, like, I would be so ashamed that I worked at Burger King. They would sometimes come by, and I would just be like fuck… And then at some point, it was like this release moment where I was, like this is my life. I can’t do anything about it. This is what it is right now. And I kind of had a sense that I could figure some stuff out later, but I didn’t really know. And so I just accepted it.
And then the minute I accepted it, I wasn’t ashamed anymore. And then, when I wasn’t ashamed I could start to actually be inside my head, like, what really matters? So then what happened was there was these massive racial riots in Los Angeles. And not as if the fucking American government did anything about it. But the Canadian government was like, shit, let’s get all these black and brown kids jobs, because we don’t want the Rodney King riots in Toronto, and Ottawa, and parts of Ontario.
And so I was able to take all of my dad’s rejection letters, call every single one. And one of them gave me a job. And I worked at the well-known telecommunication start-up in Ottawa.
Source: The Singju Post’s Transcript of the Money as an Instrument of Change

On the future of Venture in Silicon Valley

I think there is a huge rude awakening that’s going to exist in the venture landscape, and it goes along the following lines. Most of the practitioners, exactly as you said, I think are dated both in their philosophy, their framework and their capability, right? These are people that grew up in a different time where the social signaling of where they went to school mattered enough where they could get these prestigious, “prestigious,” jobs. The problem is that it’s not a prestigious job, it’s a critical job, and so the people who get prestige versus the people that get criticality are very different kinds of people.
The rude awakening is going to be the following, which is that when you look across the venture landscape you have a bunch of people who are, frankly, ill-suited to do what they’re doing, and so as a result they feed off historical bias, they kinda focus on the things that they know the best, which will result ultimately in a bunch of marginal investments.
Source: Vox’s Transcript from Recode Decode

On how the world works

Look, here’s the thing, there’s about 150 people that run the world. Anybody who wants to go into politics, they’re all fucking puppets, okay? There are 150, and they’re all men that run the world, period, full stop. They control most of the important assets, they control the money flows. And these are not the tech entrepreneurs. Now they are going to get rolled over over the next five to ten years by the people that are really underneath pulling the strings.
And when you get behind the curtain and see how that world works, what you realize is, it is unfairly set up for them and their progeny. Now, I’m not going to say that that’s something that we can rip apart. But first order of business is, I want to break through and be at that table. That’s the first order of business. And the way that I do that is by proving that I can do what they do as well as they do it and then do it better than how they do it.
Because at the end of the day, they are commercial fucking animals, okay? And they’ll open the door out of curiosity and they’ll let me stay because I add value. And then once I’m there, I can open the door for other people who can try to do the same thing. So my entire goal now is that, is to be in a position to aggregate enough of the capital of the world, to then reallocate it against my worldview. And I’m not saying my worldview is the best or right, but it is mine.
And at the end of the day, there are 150 other fucking guys with their worldview and they don’t give a shit what you think about their fucking worldview. That’s the truth. And so, why not me? Why not? Why not one of you? Why not?
And so in my life now I’m just kind of like, why not? Why the fuck not?
Source: The Singju Post’s Transcript of the Money as an Instrument of Change

On Bailouts

On Main Street today, people are getting wiped out. Right now, rich CEOs are not, boards that have horrible governance are not. People are.

What we’ve done is disproportionately prop up poor-performing CEOs and boards, and you have to wash these people out.
Just to be clear on who we are talking about. We’re talking about a hedge fund that serves a bunch of billionaire family offices, who cares? They don’t get the summer in the Hamptons? These are the people that purport to be the most sophisticated investors in the world.
Source: Chamath’s appearance on CNBC

On Twitter

Its biggest problem right now is the decay in human capital that’s happening within that organization. There are just too many other interesting good companies that one can go work at if you are a very credible, talented contributor at Twitter, and the problem is in the absence of them completely kind of figuring out their true northern star metric, the next version of product market fit, it’s a thing that just kinda stagnates and decays. So product engineering talent, and eventually that seeps into the quality of the business.

Is it fixable? Absolutely. Would it be a fun thing to do? Absolutely. Would it be valuable for the world? Absolutely. Could you make a lot of money? Absolutely. But I think it requires day-to-day full-time leadership and a vision, and it’s probably best in my opinion it comes from the outside in, at this point.
Source: Vox’s Transcript from Recode Decode

On Facebook and Google

Unstoppable. I think the thing that Facebook and Google will both have to contend with is regulatory headwinds, specifically starting in Europe.
Facebook and Google more than anything else now are a psychological map of humanity. Your behaviors, your patterns, what you do, what you say, where you go, and to have that amount of knowledge that can be learned on concentrated in two for-profit companies can be in the eyes of governments extremely scary. And so at scale this becomes a huge issue as people realize the actual scope and scale of their ability to predict your behavior. So I’ll just leave it at that.
But I’ve thought really deeply about this issue, and that is the government. It’s government intervention for both of those two businesses, starting in Europe.
The thing with Facebook and Google ultimately is that Facebook is basically about consumption and advertising, and Google is about intent in advertising. Those two are bounded markets that are in the mid hundreds of billions. Big markets, okay.
Source: Vox’s Transcript from Recode Decode

On dropping out to start a Startup?

my whole thing is for every person that drops out, which is fine and good, there is so much value in working at a company. I worked at AOL. I worked at Facebook before I started my startup, and I felt way more prepared. I was a 36-year-old founder/CEO. I’m glad I waited till I was 36. I had so much more knowledge because I learned from the side gig. I learned from people that were better than me. I also learned from people that were not as good as me about all the things that I shouldn’t be doing.
We need to divorce ourselves from this romanticized narrative… like fallacy that we’ve created that is this two dudes, 22 years old, dropped out of school, coded some schmatzy thing. That’s not what success is about necessarily. There are some great examples of that where they’re creating real value, but there’s all of these other things. There’s 40-year-olds. There’s 50-year-olds. There’s 35-year-olds. There’s men and women. There’s people doing all kinds of things that are not easy, and we have to find a way of telling the world that this also exists, and this stuff is worthwhile because I suspect that the long-term solution for us being less tone-deaf and for us to actually be a constructive part of the solution is to celebrate with these people.
Source: Semil Shah’s Transcript from Post Seed 2016

On Investing as a team or as an individual?

I don’t think investing is a team sport
The fundamental underwriting decisions of great investors over long periods of time are very lonely individual decisions,” he explains. “It’s about a kind of pattern recognition that very few people have. I don’t know if I have it. But in order to find out, I need to isolate myself and do it myself.
Source: Institutional Investors article – The Unusual Ambitions of Chamath Palihapitiya

On three technologies to watch

The first is sensor networks. The second is actually this push towards automated transportation. And the third is around a very specific application of big data.
So for the first example, what we’re seeing now is sensors everywhere. And before, sensors were when people thought, “Oh, is that an RFID1 chip?” No. It’s your phone, which has like 19 different things that it could be measuring at any given time. It’s clothing that you’re wearing, it’s a Nike FuelBand, a Fitbit, whatever.
But the point is, the number of physical sensors are just exploding in scale. They’re in the roads, they’re in the air, they’re on your body, they’re in the phone, what have you.
And as that happens, what we’re going to see are extremely explicit ways of improving one’s quality of life, one’s economic output, in really tangible and simple ways.
These sensor networks will drive tremendous value and efficiency for people. And I think we’re not yet ready to really understand the totality of that impact, but it’s going to touch every facet of our lives. So that’s one area that I’m extremely excited by.
The second is really what Google is pioneering in the autonomous-vehicle space. It is probably the one thing that I’ve seen that could fundamentally have the high-order-bit effect on GDP.
You can completely re-envision cities, transportation models, and commerce with all these autonomous vehicles, with the ability to ship goods. So you can imagine a fleet of small electric cars that deliver all mail. A fleet of drones that drops off parcels from Amazon, Walmart, and Target, right to your doorstep. A fleet of trucks that doesn’t cause traffic and congestion. An entire fleet of city vehicles paid for and bought by a state or by a city that provides public transportation in a predictable way. All these things have massive impacts to commerce and the mobility of individuals. And I think it’s not well understood.
And then the last idea is that big data is kind of like this stupid buzz word—like “growth hacking,” frankly—where you’re really talking about just creating more noise and not enough signals.
But in the specific case of genetics, I think we’re making an extremely important shift, which is shifting the burden away from biologists to computer scientists. Because when you sequence an entire genome, what you’re really doing is spitting out a 4 GB to 5 GB flat file of codes, which can be interpreted, where you can build machine learning—supervised or not—to intuit things, to make connections, to find correlations, to hopefully find causality. And across a broad population of people, you have the ability to use computer science to solve some of the most intricate problems of biology and life.
Source: Managing disruptive technology: A conversation with investor Chamath Palihapitiya Transcript by McKinsey

SPAC’s VS VC funds?

SPACs are short bursts of effort from a fundraising perspective, while VC fundraising requires more hand-holding and thus time and focus.
As a head of a VC fund, you are no longer an investor; you become the head of investor relations. This is not a job I either liked or wanted to do.
I still have a couple of billion that I’m managing on behalf of others (the VC fund). But there’s a $4 billion balance sheet that’s mine. I don’t have to answer to anybody.
Source: Institutional Investors article – The Unusual Ambitions of Chamath Palihapitiya

On Companies Staying Private Versus Going Public

I don’t understand why public is a bad thing. I think it’s the most rationalizing thing in the word. Because you cannot hide behind bravado and nonsense. You are forced to show that you have articulated a strategy, and a gameplan, and a set of metrics, and narrative, and you have to explain that to people who may not necessarily care emotionally. That’s not a bad thing. That is like an act of discipline. So as an example, you look at a company like Amazon, they barely generated a dollar of profit, but Bezos has created a envelop of trust in the public markets, which are extremely fickle, which are extremely judgmental, we claim them to be extremely short-sighted. Yet they’ve taken a 20-year multi-decade bet on this guy.
So I think that line of reasoning is just wad. It’s an excuse that prevents you from being held accountable in ways that make you fundamentally uncomfortable, cause you’re afraid of what it means to build a real business. Build a real business. Be around for decades. You have a compact with employees, financial source of capital, and you have an opportunity to have market leverage, if you’re good, give you a currency that you can use, so that you can get to N of 1. So why wouldn’t you do it?!
The people that don’t do it, is the people that can’t do it. And the people that can’t do it, will, say all this stuff about waiting, waiting, cause the markets don’t understand.. is just a false trade off, it’s just an immature understanding of your own business. And what it tells me, is that you don’t know your business. Jeff Bezos knows his business. Indisputable. He never grew it 100%. But he grew it 20% per year for 15 straight years. Bang, bang, bang, etc… That guy knows his business.
Source: Transcript from Semil Shah @Chamath At StrictlyVC’s Insider Series

The Health Of The SF Bay Area Tech Startup Ecosystem

There’s way too much money, in the system, ultimately still chasing few really great companies. The problem with that is that you have a bunch of imposter companies that get funded for a lot longer than traditional cycles.
So if you had 1/10 the capital, the mortality rates would be higher, faster, the curves are sharp, and instead what happens is the decay is longer, and in the long decay, what essentially happens is that you are feeding capital to companies that should really not exist anymore, and those companies then use that capital to take up space. They use that capital to hire other employees, and all these other people spend a lot more time wasting their time. And that’s problematic, and if you don’t get that churn, then the few that have the ability to really get to escape velocity, are forced to figure out for themselves, how to get that sooner?
So what do they do? They start to pay people more, they start to spend more on these things that think will attract all these people, and that has this negative byproduct, which is everything goes up, the cost of everything starts to rise, and you have this really vicious cycle where at some point then that N + first young engineer, can’t afford to come here in the first place because he can’t even afford a 1 bedroom out of 5 bedrooms because it’s $2000, and all of a sudden a first-year engineer is making $170K, and it’s like this violent vicious cycle that helps nobody.
Source: Transcript from Semil Shah @Chamath At StrictlyVC’s Insider Series

On Value Investing and Value Investors

Those guys are morons
Today, when money has no value, because we’ve essentially printed all the money in the world and we’ll continue to print it over and over, you have to find value in other parts of the balance sheet, so you have to go to things like brand or intangibles.
And this is where their mathematical models break, and then their brains explode.
Source: Institutional Investors article – The Unusual Ambitions of Chamath Palihapitiya

On what drives him crazy

We have not done a good job of divorcing ourselves from the bullshit in Silicon Valley, and there’s all layers of bullshit. You know, like we talked about some earlier, like, “Oh, I just came up with this thing, it was divine intervention.” That’s a crock of horseshit. “Oh, I knew this entrepreneur from Day One.” That’s a crock of horseshit. “Oh, I knew this thing would work and that thing would fail.” That’s a crock of horseshit.
So there’s just layers and, “Oh, I found this thing,” so there’s layers and layers of this stuff. And the problem that it creates, I think, is that it just doesn’t make it a fun place to be after a while. Because everybody in dealing with it, they all are like, “Wait a minute, you’re bullshitting, you’re bullshitting, you’re bullshitting.” They all become incrementally more mercenary, and then when that happens, because you have to put up a shield, right, you’re less sympathetic, you’re less connected to the people around you, and then you just, it’s just not great.
So to me, what is driving me crazy is that. I would like for this to be like what it was, and now I sound like some nostalgia, okay, I’m back to the 70-year-old.
Source: Vox’s Transcript from Recode Decode

On failing fast and doing the hard thing

I think that that fail fast approach works in consumer Internet businesses, but I don’t think it works for anything that really matters. Basically. Consumer Internet businesses are about exploiting psychology, and that is one where you want to fail fast because you know people aren’t predictable and so we want to psychologically figure out how to manipulate you as fast as possible and then give you back that dopamine hit. We did that brilliantly at Facebook, Instagram has done it, WhatsApp has done it, Snapchat has done it, Twitter has done it. So there are great examples. WeChat is doing it.
There are great examples of failing fast is the right path to exploiting psychology of mass populations of people. But it is not how you solve diabetes. It is not how you use precision medicine to cure cancer. It is not how you educate broad swaths of the world’s population. It’s just not. It’s taking a point of view and being methodical. It’s hard, no it’s hard.
I think that that fail fast approach works in consumer Internet businesses, but I don’t think it works for anything that really matters. Basically. Consumer Internet businesses are about exploiting psychology, and that is one where you want to fail fast because you know people aren’t predictable and so we want to psychologically figure out how to manipulate you as fast as possible and then give you back that dopamine hit. We did that brilliantly at Facebook, Instagram has done it, WhatsApp has done it, Snapchat has done it, Twitter has done it. So there are great examples. WeChat is doing it.
There are great examples of failing fast is the right path to exploiting psychology of mass populations of people. But it is not how you solve diabetes. It is not how you use precision medicine to cure cancer. It is not how you educate broad swaths of the world’s population. It’s just not. It’s taking a point of view and being methodical. It’s hard.
Source: The Singju Post’s Transcript of the Money as an Instrument of Change

Resources

Video

Articles, Letters etc

Keep in mind all these opinions and statements were made at a point in time. Chamath may have changed his feelings or opinions on certain topics, so maybe don’t take every word as gospel but take it on board for thought. Just my opinion

-VINAY DWARAKINATH

Valuenomics Research