0:01

You're listening to Fox Sports.

0:04

Welcome in the latest episode of Wins and Losses.

0:07

I'm excited to be under way here

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because I think we have got a fantastic guest

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that is going to take us through

0:13

a lot of really interesting things about

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the rise of the Internet, the rise

0:17

of business based on the

0:20

Internet, and also big tech

0:22

in general. And he is David

0:24

Sacks. He has got an incredible

0:26

history. I don't actually know where

0:29

you're from or where you grew up.

0:32

He's a partner at Craft Invests in all

0:34

different sorts of tech companies and

0:36

beyond out there. But where

0:39

did you grow up? David? Like? What was your background?

0:41

And thanks for coming on with us. Yeah, great

0:43

to be here. Clay Um, I was born in

0:46

kipt, Africa, and my parents

0:48

immigrated the United States fast five years old. We

0:50

actually moved to Memphis, Tennessee,

0:52

and that's where I basically grew up until I left for

0:54

college. All Right, I had no idea. So

0:56

Memphis, Tennessee. How much of

0:58

a culture shock can you member? I can't imagine.

1:01

The conveyor belt between South Africa and

1:03

Memphis, Tennessee is very common. How

1:05

did that end up? Your location in the United

1:07

States? Yeah. You know, it's

1:09

interesting. My dad's a doctor and they

1:11

wanted to immigrate from South Africa.

1:13

They didn't agree with the political situation

1:16

there back in the nineteen seventies,

1:18

and uh, he got a job

1:20

at the University of Tennessee Medical Center

1:22

practicing and teaching, and

1:25

so that's we end up moving too. Yeah, it was

1:27

a pretty big culture shock. Are

1:29

you a sports fan? Did growing up

1:31

in Memphis in any way sort of an

1:33

embed itself in you as a college

1:35

football college basketball fan or

1:37

you sort of not that interested in sports as a kid

1:40

growing up? Well, there are only

1:42

two real sports in Memphis at

1:44

that time. There was Memphis State Tigers

1:46

basketball. That was huge. Um,

1:49

everyone looked forward to that. I remember one

1:51

year we went to the Final four with

1:53

I think Keith Lee was sort of the start player then.

1:56

And the other sport,

1:59

if you want to call it out in Memphis was wrestling.

2:02

Every money was wrestling at the miss South

2:04

Coliseum and those are really the only two big

2:07

sports in Memphis at that time. Obviously

2:10

it changed, but did you go to

2:12

those old school wrestling matches? You

2:15

know, my parents would never let me go, unfortunately,

2:17

but I remember, you know, Jerry the King Lawler

2:19

was time and I would watch

2:21

that stuff on TV. And you know, as a fan

2:24

now, as a kid growing up in Nashville, the Nashville

2:27

Memphis rivalry was very real.

2:29

Did you feel it in Memphis when you were growing up?

2:31

Were you aware that as a Memphian you were

2:33

feuding constantly with Nashvillians

2:36

a little bit? You know, our high school football team

2:38

would eventually, you know what, sometimes going to the state finals

2:41

and play against teams from Nashville. So yeah,

2:43

there was a little bit. Where did you go away to college

2:45

from Memphis? I went

2:48

to Stanford as an undergrad, all

2:50

right, So how much of a culture shock

2:52

was that? All right? So you you come

2:55

from South Africa, you then end

2:57

up in Memphis and you make the trip out

2:59

to Palo Alto. Stanford was a lot

3:01

different place then, certainly than

3:03

it is now, but that wasn't

3:05

a very common route. How did you

3:08

pick Stanford? Is the place you wanted to go to? Yeah?

3:11

It's interesting. I mean Stanford, I mean, to be

3:13

honest, this is the best school and that I got into, and

3:15

I had a great reputea and

3:18

um, it seemed like a great place to go to school.

3:20

The campus is sort of really idyllic,

3:22

like you said, being in Palo Alto, fantastic

3:26

weather. Uh, it seemed like this an amazing

3:28

place. And yeah, it was a pretty big

3:31

culture shock because the campus was very liberal.

3:33

In Memphis is uh

3:35

or Tennessee in general sort of a little bit more conservative.

3:38

So there was a difference there. But um,

3:41

but the you know, the important thing about going to

3:43

Stanford in the early nineties for me was

3:46

that it got me into the whole tech scene when

3:48

I graduated, and that that

3:50

end up being very important for my career. By

3:52

the way, I wanted to go to Stanford Law School. They didn't

3:55

let me in. I had never been to California

3:57

until I was in college, like twenty one

3:59

or twenty two, and the first time I went

4:01

to the Stanford campus, it really

4:03

is heaven on Earth. I mean it is an incredible,

4:06

uh incredible place. So

4:09

so you graduate from Stanford, and

4:12

do you remember the first time you ever got on the Internet? By the

4:14

way, good

4:16

question. Um, I don't

4:19

remember that. I guess you know, it

4:21

must have been in the mid nineties. People are starting to use

4:23

Yahoo. Um,

4:25

maybe I was in law school, you know. After Stanford, I

4:28

went to law school at the University of Chicago,

4:31

and it must have been around that

4:33

time. And you know, I thought I

4:35

had missed the whole internet thing because I

4:38

had friends at Stanford who graduated, which

4:41

that was the year that Netscape went

4:43

public, and it kind of ushered in the commercial

4:47

and there were a bunch of you know, really interesting

4:50

companies getting started around then. There was

4:52

you know, eBay and Amazon and Yahoo, and

4:54

if you went to graduate from

4:56

Stanford you would get easily

4:59

pulled into all that. But because I graduated

5:01

ninety four, I kind of felt like I

5:03

missed it, and I actually ended up in law

5:05

school. And it wasn't until

5:09

when an old friend of mine from

5:11

Stanford called me up and told

5:14

me about a startup he was founding,

5:16

uh called Confinity but

5:18

eventually got renamed PayPal, and

5:21

that was Peter Teel, and so

5:23

Peter kind of pulled me back to paol

5:25

Alto in um

5:28

so Stanford. It actually ended up being

5:30

very important, but it took five years

5:32

from me to come back and do internet stuff.

5:34

How did you like law school? Law

5:38

school was great. I mean your Chicago was a very serious

5:40

place and um you

5:43

know, it was rigorous and

5:45

a lot of great teachers and I

5:47

enjoyed it, you know, but by after three

5:49

years of it, I felt like I was ready to do something

5:51

else. It wasn't a desire of

5:53

mine to do law, but

5:56

inell actually I thought it was really interesting, and

5:59

you know, I enjoyed experience. Did you ever

6:01

practice at all as as a part of a big firm?

6:03

Did you do anything legal related? I

6:05

also obviously went to law school at Vanderbilt,

6:08

as as most listeners will know, and

6:10

I kind of had the sense early on that law was

6:12

not for me. It sounds like you kind of did as well.

6:14

But did you go into any sort of big firm

6:16

lifestyle or any actual practice

6:19

of law after you graduated? You

6:21

know, I spent a summer at a at a big law

6:23

firm, and that kind of reinforced

6:25

the decision for me that I

6:28

wanted to do. You know. Part of it was

6:30

always that I was interested in business,

6:32

but I always felt like I wanted to be the decision

6:35

maker, you know, and not not

6:37

sort of the person carrying out the instructions.

6:39

And you know, lawyers are ultimately

6:42

advisors to the principle, uh

6:44

and you know many of them do,

6:46

you know, fantastic work. But I always

6:49

felt like I wanted to be on the other side of the table and

6:51

and do something more directly in

6:53

business. Would you advise, because

6:55

I get asked this question all the time, would

6:57

you advise kids who think, hey,

7:00

I don't necessarily want to be a lawyer

7:02

to go to law school. If we got a one

7:04

year old who's listening right now and they're going

7:06

to college, is it a move that

7:08

you would make again? Would you advise your

7:10

own kids or kids who ask you for advice

7:13

whether it go to law school or not. No,

7:16

I would tell him not to because I think the only

7:18

reason to law school these days is if

7:20

you really enjoy the law and want to be a lawyer.

7:22

You know, maybe you want to practice law, or you

7:24

want to be a clerk for a judge, or you

7:26

know, maybe become a judge or an elected

7:29

official or something like that. I think the

7:31

reason to go to law school today is because you're really just

7:33

in the law now. Back when I

7:36

did it and you did it, there are a lot of people

7:38

who did it because I

7:41

think there weren't as many options

7:43

or it wasn't as clear what you should do. There

7:46

are a lot more people back in those days. We're talking

7:48

you know years ago who

7:51

went to law school knowing they'll go into business.

7:53

And I just think that today there's so

7:55

many more options. If you want to do that,

7:58

you can just do it directly, you know,

8:00

spending three years of law school and

8:02

all the expense of that. Uh,

8:04

there's just much more direct ways of getting into

8:07

business now. You know, in the mid

8:09

nineties, even though I

8:11

had some entree entrepreneurial

8:13

instincts and desire to do

8:15

something in business, I really had no idea how

8:18

to do it. It wasn't clear, like

8:20

how do you start a company? And

8:22

so as a result, you kind of end up going

8:24

to law school as the next step.

8:27

Uh. But but but today

8:29

I wouldn't encourage it. Okay,

8:31

So you mentioned you leave law school

8:34

and go back to work for a company that would

8:36

become PayPal. I imagine

8:38

a lot of people are somewhat familiar

8:40

with PayPal. I've read a lot of the corporate

8:42

history of PayPal because I find

8:44

it to be pretty fascinating. What how

8:47

would you describe it for people out there?

8:49

You go in at nine, what

8:51

is the experience? Like? Who were you working

8:53

with? I think you mentioned Peter Teal uh

8:56

and what did you guys end up

8:58

achieving. Yeah.

9:00

I mean, it was a really incredible group of people

9:02

who today are kind of known as

9:05

the Papal Mafia. That you

9:07

know, people like Peter Til and

9:09

Elon Musk and Max

9:11

Levchin and Reed Hoffman,

9:14

and the list goes on and on. Chad Hurley

9:17

and Steve chen who founded YouTube Rule

9:20

off Photos our CFO who went on to become

9:22

the head of Sequoia, was a famous venture

9:24

capital firm. So a lot of

9:26

really incredible people were part of that founding

9:29

team. And um

9:32

and you know today Papals a hundred billion

9:34

dollar, you know, publicly listed company,

9:37

so it's, you know, twenty years later, it's a very important

9:39

company still today. But it was really

9:41

a pretty incredible group of people. When I joined

9:44

in, it was about six months before

9:46

the dot com crash, and Papal

9:49

was primarily built. Although it was founded

9:52

the year before the dot com crash, it

9:54

was primarily built after and in

9:56

the wake of the dot com crash,

9:58

And it was a very tough environ ronament lots,

10:01

you know, all these other startups are going out of

10:03

business all around us, and somehow we

10:05

managed to persevere and

10:07

create you know, a successful outcome,

10:10

and by early two thousand

10:12

two. We were the first company, first

10:15

tech company tai Po since

10:18

the dot com crash. Uh And like

10:20

I said, today, it's, you know, a hundred billion dollar publicly

10:22

traded company. Okay, So what

10:24

do you attribute um there being

10:27

such an unbelievable amount of talent?

10:29

The so called PayPal mafia. You ran through

10:32

a lot of those guys who not only were successful

10:34

in building PayPal into a company

10:36

that could go public in two thousand two and

10:39

survived the dot com implosion when everything

10:41

else crashes, what attracted

10:43

that amount of talent to that

10:45

particular company at that point in time.

10:49

It's interesting. I think the most important thing

10:51

to realize is that although these

10:53

people and these names are sort of celebrated

10:55

today, they were kind of nobody's back then.

10:58

And you know, we were all pretty young at

11:00

the start of our careers. You know, when PayPal

11:02

I p owed in two thousand two, the I

11:05

was the average age on the S one,

11:07

which is the sort of corporate finaling documents, and I

11:09

was twenty nine years old, So you

11:12

know, we weren't even thirty years old yet. This

11:14

this executive team, this founding team,

11:16

and one of the ways that we all came

11:19

together is through friendship networks.

11:21

You know, Peter Teal recruited his friends

11:23

who had worked at sorry

11:25

who had gone to school with him at Stanford. That

11:27

was the case with me. Max

11:30

Levchin, who was the CTO, he recruited

11:32

fellow engineers that he had gone to school with

11:35

that you have I And that was pretty

11:37

much how the team was

11:39

collected and came together. Is we

11:41

recruited our friends, and the main reason

11:44

for that is nobody else would would work for us. Joining

11:46

a startup in the early two thousand's

11:49

was considered a very risky thing

11:51

to do, and it was really hard

11:53

to convince people to join this fledgling

11:55

company. So how did you meet

11:57

Peter Tell at Stanford? Do you remember the first time

11:59

you guys met? What drew you together? Yeah?

12:02

So I met Peter at at Stanford.

12:05

I was undergrad. He was actually in law school at that time

12:07

because he's a few there

12:09

had founded the Stanford Review, which

12:11

was the conservative, you know

12:13

slash libertarian student newspaper

12:16

on campus. And I ended up becoming

12:19

a writer and then the editor in chief

12:21

of the Stanford Review. And

12:23

um, so we you know, sort

12:25

of bonded initially over politics

12:28

and our take on what was happening

12:30

on campus. And then, as

12:33

you know, after that back in we

12:36

ended up writing a book together about

12:38

what was happening at Stanford, and

12:40

that was sort of the beginning of a friendship

12:43

that you know, Persevers took to this

12:45

day. What's your favorite

12:47

thing that you guys published as a part of the Stanford

12:49

Review? Was there an article you wrote? Was there an article

12:51

somebody else wrote while you were an editor. Do you recall

12:54

something where you thought, man, we really nailed

12:56

it here and maybe had an impact that we weren't

12:58

anticipating being able to us. Well,

13:02

you know, back in the this is going back to

13:04

the late eighties early nineties, there was

13:06

this huge debate at Stanford over

13:09

the cannon the reading list, and there

13:11

was a big protest on campus that became very

13:13

famous where the protesters started

13:16

chanting, hey, hey, ho ho, Western

13:18

culture has got to go, and there

13:20

was this sense that there

13:22

was this protest movement to

13:25

overturn and throw out

13:27

what they called the dead white males of the

13:29

curriculum. And they

13:32

succeeded. I mean, they really ended up

13:34

kind of purging the cannon of these classic works

13:37

and replacing it with something very different,

13:39

and that was really the beginning of

13:42

this sort of cultural revolution on

13:44

campus that kind of persists

13:47

until today. And I think

13:49

a lot of the political changes that you've

13:51

seen in our society over

13:53

the last you know, thirty

13:55

years, or really downstream of

13:58

the changes that happened on campus,

14:01

because what happens the last thirty years

14:03

is that they've been successfully

14:06

graduating waves of

14:08

um of students who've

14:11

been in doctrine into the cityology, and those

14:13

students have gone on to populate

14:15

many of the institutions in our in

14:17

our culture. And so if you think

14:19

about you know, whether it's will capitalism

14:22

or you know, any of these other

14:24

institutions that are kind of pushing this idea

14:26

of wokens today that all started

14:29

on campus in the late eighties

14:31

early nineties. We called it political correctness back

14:33

then, but it was the same idea. Two

14:36

thousand two, PayPal goes public, Uh,

14:39

stock took off. I remember I went

14:41

back and look before we talked, because I was like, man, I

14:43

think that stock was still because people, what, you're

14:46

right, the dot com implosion had happened, but you

14:48

guys had built back up to a really

14:50

impressive spot. Was there

14:53

something that you bought or something

14:55

you were excited to buy. Do you remember a purchase

14:57

after I'm assuming you had some

15:00

decent wealth, probably for the first time in your life,

15:02

certainly on that level. Yeah.

15:05

You know, Um, Peter and I both did the

15:07

very cliche thing which I now cringe

15:09

a little bit at doing, which is buying

15:11

a Ferrari. Um. Yeah,

15:15

you know what kind of Ferrari did you get?

15:17

Like and and and and this is before like

15:19

it was kind of probably commonplace for a lot of

15:21

these Silicon Valley companies to be going public,

15:24

Like did you just go into a dealership in Silicon

15:26

Valley? Yeah, pretty much,

15:29

I think I got I got a three

15:31

five five Spider. It was like one of those you

15:33

know, it was like a black convertible. It was a really

15:35

cool car. Um. But

15:37

you know, it's like I felt like it was like driving an

15:39

egg, you know it was. It was so

15:42

delicate. I felt like, you know, I was going to mess

15:44

it up every time I drove it, and uh,

15:47

you know, eventually eventually got rid

15:49

of it. But what was the girl reaction

15:51

to you having a Ferrari? Like was that

15:53

something that was impressive? Did you always hear about rich guys

15:56

driving fancy cars, and sometimes you got poor guys

15:58

who drive fancy cars to try to look like rich

16:00

guys. Net positive or net

16:02

negative return on value in terms

16:04

of impressions on women when you have a Ferrari.

16:08

Yeah, you know, I don't think it really helped me that

16:10

much. UM. So I don't

16:12

Yeah, I don't think it helped me that much. Um.

16:15

But you know, you know, I was only thirty

16:17

years old at that time, so it was

16:20

a kind that that you do when you're young,

16:22

and um, yeah, you know, I guess

16:24

I enjoyed it for a couple of years and then, uh,

16:26

you know, I ended up ended up selling it. I actually

16:29

got instead, uh one

16:31

of the first test loos that Elon made,

16:34

um, and that that was an interesting car. Hey,

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17:18

So I don't even know anything about that. When did

17:20

that? Was that like an early model Tesla?

17:22

I mean he's like kind of almost making

17:25

out of the back of the studio

17:27

somewhere. Yeah, I mean the

17:29

first version of the Tesla was

17:32

called the Roadster and it

17:34

was the first car that Ellen made,

17:36

and it was more of a sports car

17:39

and it it

17:41

was in the body of they

17:44

used like the body of

17:46

I think it was like an old I want to say,

17:48

Fiat or something like that. It was a really

17:51

small car. It was a two seater and

17:55

didn't have a lot of features. It didn't

17:57

even have power steering. It was pretty hard

17:59

to draw, I've to be honest, but

18:02

elon. But it was very quick. It had

18:04

that speed from the electric

18:07

batteries. Basically, you know, the torque

18:09

was there was no gear shifting, and

18:11

the torque felt, you know, almost unlimited,

18:14

and so it was a very fast car. But it

18:16

was small and kind of hard to drive, but it

18:19

got test off the ground. What Ellen did

18:21

is I think he sold maybe thousand

18:24

of those cars, um

18:26

and you know, the idea was, we're, you know,

18:28

we're going to sell a sports car because

18:30

he could charge a lot of money for them, and then

18:33

on the heels of that he would make a mass market

18:35

car. And that's what he did is

18:37

you know, I think he stopped production of the

18:39

Roaster after maybe a thousand they sold about

18:41

thousand of them, and then use that money build

18:44

the Tesla Model Less, which was their

18:46

first real mainstream

18:49

car, and that was a really fantastic

18:51

car that was easily

18:53

the best car I'd driven till that time.

18:56

And you know, since then they've

18:58

gone on to the Model three and not a lie

19:00

and Tesla has become the most

19:02

valuable car company in the world. Tesla

19:05

is an interesting story, and I think,

19:08

and I'm curious if you were the same way. One of the things

19:10

that fascinates me about a lot of the guys

19:12

who made money at PayPal is many

19:15

people make tens of millions of dollars

19:17

and they throw up the peace sign and they

19:19

say, Okay, I've got money to be able

19:21

to basically do whatever I want for the rest

19:23

of my life, But I'm not interested in

19:25

pushing all that money back into the center of

19:28

the table and make bigger bets

19:30

going forward. It seems like a lot of

19:32

the PayPal guys and maybe it's the psychology

19:35

of the company in general, the risk taking culture.

19:37

I'm curious how you would analyze it. Almost

19:39

looked at the money that you guys made at PayPal

19:42

as table stakes that allowed you

19:44

to up your wagers on things that

19:46

were even more important to you. Did

19:49

you have a conscious decision about making

19:51

that kind of choice, because certainly

19:53

you've gone on to other companies, and

19:56

it's easy for somebody who has a success

19:58

on the level of payper how to

20:00

say, Hey, you know, I've made my money. I can have a

20:02

really comfortable life. You guys,

20:05

it seems like a lot of you said, Okay, I've got the

20:07

table stakes to do what I really wanted to do.

20:09

Conscious decision, unconscious? Am I analyzing

20:12

the larger culture in your mind correctly?

20:16

Yeah? I think that's right. I mean, nobody

20:18

felt out of that original

20:20

PayPal crew. Nobody felt like, oh, let's

20:22

just retired now. They all went

20:25

on to do, you know, greater things,

20:27

And I think that's why the paper Mafia's

20:29

kind of remembered today is not just for PayPal,

20:32

but what they all did afterwards. Um,

20:34

you know Ellen famously that really

20:37

his entire fortune on Tesla and

20:39

SpaceX. He was, you know, a

20:41

few weeks away from going bankrupt and

20:43

you know, ended up just back in two thousand

20:46

eight in the financial crisis and put

20:49

his last dime into Tesla and SpaceX

20:51

to save those companies and then ultimately succeeded.

20:55

And that's why he's the

20:57

world's riches man today, or one of them, is because

21:00

he really double

21:02

triple down and kind of risked every

21:04

penny he had on those ventures.

21:07

But everybody else in the group really went on to do

21:09

really impressive things as well. I mean, Peter

21:12

went on to become of VC. He wrote the first

21:15

check as an angel investor

21:17

into Facebook. I think it's a five mins houseand dollar

21:19

check, and then that turned into billions.

21:21

And then he was the founding investor at Volunteer,

21:24

which is now a successful public company, and you

21:26

know, also founded Founders Funds, a

21:28

VC firm has done very well. Mass

21:31

Love Tune is the CTO of PayPal, founded

21:34

a firm which is now publicly traded

21:37

company, went publishing the last year that's

21:39

worth you know, billions, um,

21:41

and so on down the line. I mean everyone went on

21:43

to do different things. I

21:46

after PayPal, created another internet company

21:48

called Yammer, which was an

21:50

enterprise software company. It

21:53

was one of the first enterprise software

21:55

companies to use viral tactics that I had

21:57

learned at PayPal. So yeah, we all

21:59

went on to do different things.

22:01

And I think it's partly a function the

22:03

fact that we were all very young and

22:06

still had a lot of ambition, and nobody

22:08

felt like they had hit some number

22:11

or something where they were just going to retire.

22:15

Is it difficult to when you have a big,

22:17

big hit like you guys did with PayPal?

22:20

Is it difficult to decide what

22:22

the next step you're going to take

22:25

is in any way because you're almost

22:27

over analyzing it and trying

22:30

to equal or have that same kind of

22:32

success you mentioned Yammer. How many things

22:34

did you look at in a significant way from

22:36

a business opportunity perspective before

22:38

you made the leap there? And what

22:40

was it that made you make that choice?

22:44

Yes? So for me, I mean I think you raised a good point,

22:46

which is, you know, once you've had

22:49

a success, you know, is there a danger of

22:51

kind of over analyzing the next thing and being

22:53

reticent to have a failure,

22:55

you know, because now you've had a success and it

22:58

could be the opposite to right where you expect everything.

23:00

I mean, it's just you're going to be uh

23:03

analyzed in some way based

23:05

on your prior success. And I'm just kind of

23:07

fascinated by how you make the decision to take

23:09

the next opportunity. Yes,

23:12

So for me, it's it's always about

23:14

the product. And what happens is I get

23:16

a product idea and I start, you know, turning

23:18

it over my head and start developing the idea,

23:20

and I get kind of obsessed with it. And so

23:23

it's my passion for the product that drives everything

23:26

else, and I don't

23:28

worry so much about what the

23:30

business outcome is going to be. I just try to design

23:32

the best product and try to figure

23:35

out how to get it into as many fuel as hands as possible,

23:37

solve the distribution problem,

23:39

and and kind

23:41

of let that drive it and then let the shift fall

23:44

where they may in terms of the actual financial outcome.

23:46

I think it's not healthy to

23:48

be thinking so much about,

23:51

you know, how much money you're going to make, because

23:54

that's not something that's going to fuel you on a

23:56

daily basis when, especially when times

23:58

get tough, you really want to have

24:00

passion for the idea and the mission of the

24:03

company and the product,

24:05

and that's the thing that's going to motivate you on a daily

24:07

basis. So you sell uh

24:10

yammer for over a billion dollars

24:12

basically four years after its founding.

24:15

Microsoft buys it. And

24:18

then I'm kind of fascinated by

24:20

your move into venture capital. But

24:22

before we talk about that, are

24:24

you noticing along the line you get

24:27

to Silicon Valley in ninety nine, you're

24:29

right there at the heartbeat of this culture.

24:32

Zuckerberg is gonna move Facebook out there,

24:35

uh, and it continues to grow and

24:37

become an incredible incubator of

24:39

so many different ideas. Is the culture

24:42

substantially evolving as you see

24:44

it? Do you like the evolution that

24:46

you're seeing in Silicon Valley? Do you dislike

24:48

it? Well, the

24:50

culture Silicon Valley is always a really

24:52

important contributor to the sasum

24:55

of all the companies that were there historically.

24:58

And so you know, I really sell when

25:01

when I moved back to Silicon Valley

25:03

back to PayPal,

25:05

it really felt like the center of the universe.

25:08

You would drive along the one on one freeway

25:10

and you would see all these office buildings, these shiny,

25:13

gleaming new office buildings that had just been

25:16

constructed in the last couple of years, and they all

25:19

had the logos of companies that

25:22

didn't exist a few years before. And

25:24

it really felt like something magical was

25:26

happening where you could build these

25:28

incredible companies so quickly, and

25:31

there was nowhere else in the world you could really do that.

25:33

There was, you know, there was nowhere

25:36

else where you could find the money to do it,

25:38

where you get vcs to write you these checks

25:41

so quickly, you know, without spending

25:43

months thinking about it. They could do it in days or

25:45

weeks, and you could find the talent that

25:47

you needed to build these companies. So it

25:49

was really a magical place. And

25:52

what happened between say two

25:54

thousand and

25:57

over that twenty year period is that looking just

26:00

kind of getting it got bigger and bigger. If

26:03

you go back to the ninety nineties,

26:05

it was sort of clustered around Palo Alto,

26:08

but you know, it got it kept

26:10

growing to the point where it included San

26:12

Francisco and the East

26:15

Bay, and then it went south to San Jose, and

26:18

so Silicon Valley really became Silicon

26:20

Bay, and it kept getting bigger and bigger, and

26:22

it created this sort of bounty of riches

26:25

for the city of San Francisco, even though

26:27

the city itself had really

26:29

done nothing to encourage Silicon

26:32

Valley, and in fact, I had a lot of policies

26:34

and politicians who were hostile to

26:36

the tech industry. It you know,

26:38

made San Francisco

26:41

this beneficiary of these incredible

26:44

riches. And we can talk more about that.

26:46

But then what happened, I think during

26:48

COVID, and this is really new, this is the

26:50

last couple of years, is that because

26:53

of COVID, and you know, that started

26:55

this whole era of remote work and

26:57

distributed work. People started doing

26:59

their jobs from home and then they realized that they could

27:01

do these jobs from anywhere. And so this whole

27:03

tech industry of the last couple of years has decentralized

27:06

a lot, and you started to see

27:08

the rise of tech hubs

27:10

in places like Austin and Miami.

27:14

Um, you know, New York City has gotten

27:16

strong. L A and Seattle were already

27:18

somewhat strong. But you're seeing now

27:21

tech emerge everywhere

27:24

and it's not just Silicon Valley anymore.

27:26

And I'd say maybe fifty of the companies

27:28

we invest in today are still in Silicon

27:31

Valley or the Bay Area, but the other

27:33

fift are increasingly in

27:35

a distributed number of locations.

27:38

And I think it's really good for the country actually,

27:40

that this wealth and prosperity that's being

27:42

created by the new economy is not

27:45

just going to be in the Bay Area, but that's going to be all

27:47

over the United States. Yeah, I'll give

27:49

you By the way, we're talking to David sachs Uh, this

27:51

is wins and Losses. I'm Clay Travis. I'll

27:53

give you an example of that, David. I spent a lot of

27:55

time going out to l a UM

27:57

obviously because Fox was based there for Fox

28:00

Sports, and spent months and

28:02

months out there, and I would go around and look

28:04

at everybody's houses in l a and

28:06

then I, you know, you see how much they cost. And

28:09

then I'd come back to the Nashville area and

28:12

I would be like, you know, my house that

28:14

that we initially bought here, uh,

28:17

would cost millions and millions of dollars

28:19

in l a and it was a fraction

28:21

of that in Nashville, right. Um, And

28:23

what I've seen with COVID is it accelerated

28:26

things to such an extent that now there's

28:28

not as big of a difference.

28:30

You know, a lot of people are cashing out in California,

28:33

in New York, in the Chicago area and

28:35

moving to where I live in the Nashville

28:37

area. And the prices have skyrocketed

28:40

in Nashville. And I think that's because

28:43

the top ten percent of income earners,

28:45

to your point, have realized that

28:47

they can basically live anywhere in the United

28:49

States and do their same job, and

28:51

absent COVID, many of them

28:53

would not have risk that, right. You would never

28:56

have said, oh, okay, I'm gonna go ahead

28:58

and relocate and do my job that I had been

29:00

doing in California, in Nashville or in Austin

29:02

or a place like that. And uh.

29:05

And certainly people who are running hedge funds in

29:07

New York are finally saying, screw it, I'm

29:09

not gonna pay you know, fifteen percent state income

29:11

tax and I can go to Florida pay nothing, being better

29:14

weather, get a bigger place. But it

29:16

seems like in many of these areas

29:18

that lack of similarity

29:21

in housing prices has vanished, right, Um,

29:23

And I think it's reflective of what you're saying, which

29:25

is people with high level talent and frankly high

29:27

level incomes being more evenly distributed

29:30

across the country than they might have been in

29:32

the earth in the late nineties and the early two thousand's

29:35

for sure. Yeah, I think

29:37

I think that's right, and I think it's all been enabled

29:39

by this cultural shift that we don't all

29:41

have to meet in person almost

29:43

all of my meetings these days or by zoom.

29:46

Yeah, you know, the factors that I invest in,

29:49

they are fine with meeting by zoom

29:51

and in fact, they like it better. It

29:53

saves everyone, you know, a bunch of drive time

29:56

and I can be wherever I am and

29:59

um, and they can be in a different city.

30:01

So everything kind of moved to zoom in in the

30:03

VC industry. I'm not sure

30:05

that's totally true. If you're if you're trying to build

30:07

a company, I think there is some value in having

30:10

people under the same roof working together, but certainly

30:13

for a VC everything's moved to zoom

30:15

And so if that's the

30:17

case, if if you're somebody who who's

30:19

kind of a knowledge work and do your job remotely

30:22

from anywhere. Now you're kind of freed up

30:24

to live anywhere you want. You don't have to just live

30:26

in the in the in your sort of industry

30:28

town and um and

30:30

so yeah, there's been a lot more decentralization.

30:33

I mean, it used to be that if you wanted

30:35

to do tech in a serious way, you have to go

30:37

to the Bay Area. If you wanted to do entertainment

30:40

in a serious way, you have to go to l A

30:43

or finance was in New York, um,

30:45

and so on down the line. But now people

30:47

are liberated. And so I think cities

30:50

are starting to realize that they're competing

30:52

for knowledge workers. Um,

30:55

you know, not just companies anymore. You know, cities

30:57

used to compete to get the company

30:59

headquarters is to move to their city. Now

31:01

they're kind of competing for individual knowledge workers

31:03

to make that decision. And the

31:05

low tax states or no tax states

31:08

like Florida and Texas um are

31:10

just seeing you know, there are incredible

31:12

beneficiaries of that. And if you look at

31:14

the migration stats across the United

31:17

States, all the states that are growing

31:19

right now are basically the

31:21

zero tax or low tax states

31:23

and the states that are seeing the biggest outflows,

31:26

or California, New York and the other states

31:28

that have very high taxes. So it's

31:31

it's a it's a really big change. We're

31:33

talking to David Sachs. All right, so you

31:35

now do venture capital. I'm not

31:38

an expert at venture campit capital at all. I

31:40

know just enough to be good enough at content that

31:42

I can build a business and be able to sell it,

31:44

but I wouldn't be great at spreadsheets or anything

31:46

like that. Um, what percentage

31:49

of companies that you look at do

31:51

you end up investing in? Uh,

31:54

by the time they go through their fundraising

31:56

rounds, Like what kind of hit rate would have fund

31:59

like yours have? In terms of

32:01

the personage of companies that you're investing in, I

32:04

mean, if you probably one in a thousands.

32:08

But yeah, but I mean obviously that's not

32:10

me. I can't take a thousand meetings

32:12

without doing crazy. So we have a we

32:15

have a team, you know, close to forty

32:17

people now and between all

32:19

of them, they look at thousands

32:22

of companies every year for us

32:24

to make you know, um,

32:26

one to two dozen investments at various

32:29

stages. So it might be a little better hit

32:31

rate than that. It might be more like one

32:34

something like that. But that doesn't mean

32:36

that every company we go deep on, right.

32:38

It might mean that we take a meeting, or

32:41

it might just be that they send us their information.

32:44

But our top of funnel, when we measure it

32:46

is is thousands of companies. Um,

32:49

what is your biggest hit? What is the

32:51

company that you invested in as a venture capital

32:54

investor? And it has been an absolute home run

32:58

well before. So I started Craft in

33:00

two thousand seventeen, about five years ago to

33:02

institute size and professionalize what I was

33:04

doing. But I've been investing, you know, pretty

33:06

much since you know, after

33:09

we sold PayPal in two thousand two. Probably

33:12

the biggest hit to day would be

33:14

investing in Facebook back in She's

33:18

Camember exactly what year it was, and it was like two five

33:20

or two thousand and six that you know, what kind of valuation

33:22

would Facebook have had at the time that you invested. Well,

33:25

I invested in a in the growth round,

33:28

So I wasn't as early as Peter Peter invested

33:31

like at a five million dollar valuation. I think by

33:33

the time I invested, it was sort of at a

33:35

at a five million million dollar valuation or something

33:37

like that UM and then

33:39

it went public at fifty fifty

33:41

billion dollar valuation. Today it's about five billion.

33:45

You know, there were some other ones too. I mean I invested in

33:48

UM, Valanteer, invest in

33:50

Airbnb, slack Um,

33:54

SpaceX you know Elon's company, which

33:56

has done phenomenally. Would you invest in Tesla?

34:00

You know, I don't know how I missed that,

34:02

but I bought one of the original tests by the non

34:05

investment company, and that was did you look at the

34:07

Tesla? I'm just kind of curious. Did you look

34:09

at any of the VC money when they raised

34:11

and say, hey, I'm consciously not going

34:13

to make that choice, Like, yeah, I'm just kind of curious.

34:15

You liked the car uh and obviously your

34:17

friends with Elen. I'm just sure curious

34:19

how you didn't end up in there. Well

34:22

I didn't. I didn't look at it. I wasn't a professional

34:25

VC or anything, so I didn't look at it. You know,

34:27

he never presented it to me. He certainly

34:29

could have called him up and said hey, could I invest? I

34:31

actually did that with SpaceX UM. I

34:33

emailed him and said, you know, hey, can I invest? Me?

34:35

Said sure, so I invested personally,

34:38

and then we invested as a VC later. Um.

34:40

You know, I don't know why I didn't occurred to me. I just I guess

34:43

I just thought that the idea of

34:45

a new car company was so

34:47

far outside the realm of

34:50

what I thought I knew about investing,

34:53

you know, because all the other investment selves

34:55

making were software investments or

34:57

tech investment. And I

35:00

guess what i'd realize is that was basically

35:02

creating an iPad on wheels, and

35:05

I should have just seen it as a car company. I should have

35:07

really seen it as like a fundamental tech

35:09

innovation. And so I

35:11

guess we has to have the innovation, the imagination

35:14

to see what a radical innovation it would

35:16

be. And I'm curious. So

35:18

those are a lot of hits, obviously, Tesla,

35:21

maybe not a not a hit. What's the

35:23

worst decision you've made in terms of not

35:26

investing or investing in your like? So

35:28

I'll give you an example, small level. I

35:30

don't even know if you know this. I decided that

35:33

I would get into the pants business early

35:36

on when I launched out Kick, and the idea

35:38

I think was the right one, which was I

35:41

don't want to be uh reliant

35:43

upon advertising dollars to

35:45

monetize my business. I would rather

35:48

my content business. I would rather own

35:50

businesses that I could advertise

35:52

against instead of having to go out hat

35:54

in hand always selling ad dollars,

35:57

right, and so find things that over

36:00

lap with, uh, the audience that I'm

36:02

already reaching from a content perspective, things

36:04

that they would want to buy. And you know,

36:06

at some point when you're staring trying to tell the difference

36:08

between you know, one pantone color

36:11

and another one, like the difference between auburn

36:13

orange and Tennessee orange for somebody frankly

36:15

who maybe a little bit color blind

36:17

and also certainly is not is

36:19

not fashion savvy, uh, you know, and

36:22

and shipping them in and tie dying and

36:24

the sizing and pants are really actually

36:26

a complicated business. So I lost like fifty

36:28

thou dollars pretty fast in pants,

36:31

and I was like, this is such a stupid idea. You know, you see

36:33

athletes who go broke, and you know, if they did a documentary

36:36

on me, wo'd be like Clay Travis decided

36:38

going to the pants business. He lost money. Was

36:40

there anything you got into on a

36:42

bad perspective or you were like, this is just

36:44

such a stupid business that I ended up getting involved

36:46

in and or something that you looked

36:48

at, looked at heavily, then passed

36:50

on and it ended up being wildly successful.

36:54

Yeah, I mean there's definitely things that I've invested

36:56

in that haven't worked. I mean, this is

36:58

this is absolutely a bad average game. And nobody

37:01

that's you know, a thousand what's

37:03

a good what's a good batting average? In the VC business?

37:05

Like, what are you shooting for? I know, your returns

37:07

overall, but what kind of

37:10

hit rate should you have if you're doing a good

37:12

job in VC investing, Well,

37:15

it's probably like baseball and if you're batting three something,

37:17

you're like Hall of Fame r um.

37:21

Yeah, I mean really, although it's not just

37:23

um, I mean, you'll appreciate this. It's not just

37:25

batting average. It's also slugging. Slugging because

37:28

you can hit you can hit like a thousand

37:30

home runs on one swing, right, as opposed

37:32

to just being able to maximize, you know, one run.

37:35

You can get a thousand runs on a swing exactly.

37:38

And and that's and that's really what

37:41

that's one of the biggest um

37:44

things about the VC business that's kind of

37:46

nonintuitive to people is that it's

37:48

not about how many losers that you

37:50

have. It's about the magnitude of your winners.

37:53

And sometimes, you know, you can be

37:55

wrong about everything, but that one

37:57

decision you were right about ends

37:59

up with turning you know, ten times your

38:01

funds. So, um, that tends

38:04

to be that if you look at kind of the great VC

38:06

funds, it's not about

38:08

how often they were right, it's about the magnitude

38:10

of their winners. And UM,

38:13

so yeah, but I mean I think we've had a pretty good

38:16

batting average. You know, I've been in about

38:18

twenty five unicorn companies.

38:21

Um. You know, we defined unicorns companies

38:23

that end up being worth

38:25

a billion dollars or more. And

38:28

um, you know that the most recent one

38:31

for us was was crypto. Um

38:33

we you know, we made some crypto investments back

38:36

in two thousand, seventeen, two eight, and

38:39

they returned our first fund. So

38:41

you know that was sort of like a forty or fifty

38:43

x investment in five years

38:46

based on making you know, based on investing in crypto.

38:49

I think you also invested

38:51

in a movie, right, Um, thank

38:54

you for smoking am I right about this? How did that happen?

38:57

Uh? And and have you gotten involved

38:59

in other creative endeavors, which

39:01

are certainly different than trying to

39:03

analyze software companies or tech related

39:05

funds. Yeah. Yeah, I guess

39:07

that you're If you're looking for me to identify

39:09

a bad investment, I'd say anything

39:11

in the movie industry. Now. Actually, we didn't lose

39:14

money on Thinking for Smoking. We actually did

39:16

fine. It ended up being one of the big hits

39:19

of I think two thousand five, two thousand six.

39:22

Um, this is an independent movie. I financed

39:24

it along with a few friends. Peter

39:27

and e la On all contributed

39:29

and they were executive producers. This was a

39:31

script I found that was written by Jason

39:33

Weightman, who ended up directing the movie,

39:36

based on a book by Christopher Buckley.

39:38

And um, I just thought it

39:40

was a fantastic So, yeah, this is

39:42

this is amazing to me, Like, so, how do you find

39:44

a script? Right? Like? So, uh,

39:47

you are thinking, after you've made some

39:49

money in PayPal, hey, I like movie. Certainly

39:51

at Stanford you've talked about the culture of political

39:53

correctness and whatnot. Were you thinking,

39:56

hey, maybe I'll get involved in the entertainment industry

39:58

in some way. Yeah,

40:00

I mean it was just sort of an unfuneral venture

40:02

for me where I decided to create a movie

40:04

production company and it was like a startup,

40:07

you know, We're like, let's let's see, let's

40:09

understand what it takes to make a movie. Let's try and make

40:11

a better one. And we went out

40:13

looking at projects and we probably looked

40:16

at a thousand scripts, and I

40:18

thought that Jason had written the best one

40:20

I had seen, and someone

40:22

had given it to me as a writing sample for him actually,

40:25

and the question I asked was, wait, why is the writing sample?

40:27

Why why don't we just make this? And the reason

40:30

why is because the lights

40:32

have been fragmented. Warner Brothers

40:35

owned the book and

40:37

Jason script was actually owned by Milk Gibson's

40:39

company Icon, And anyway, we spent

40:42

something like two years trying to unravel the right

40:44

situation and acquire all the rights, and

40:46

we finally did that. Then we could make it

40:48

as an intendent movie, and we did that, and we took

40:51

it to the Frounto Film Festival

40:53

and Sun Dance and ended

40:55

up being a pretty big hit um

40:58

in terms, you know, as a hit creatively want a lot of awards,

41:00

and it did something like the box

41:03

office on an eight million

41:05

dollar budget, and you know, it's one of these kind

41:07

of cult movies that's and

41:11

it launched Jason Reitman's career. He's ended

41:13

up becoming a very very big director

41:16

in Hollywood. The you know, my

41:18

takeaway from it though, is in terms of business

41:21

is that you know, we did a little better, but

41:23

not much than just get our money back.

41:25

And so it made a lot of money, but it mainly

41:27

made money for Fox, uh,

41:30

you know, the Fox Searchlight movie studio.

41:33

And that kind of taught me a lot about the

41:35

movie business, which is is controlled

41:37

by gatekeepers. There's a handful

41:39

of studios and they really make

41:41

all the money. And you know,

41:43

we as this sort of entrepreneur, as the

41:45

producer who took all the risk, this

41:48

is not really a reward for

41:50

that risk, and um, you know,

41:53

very it's very different than the

41:55

internet business, where you're

41:57

taking you're taking a similar kind of risk, very

41:59

hard execute you know, a huge chance

42:02

of failure, but at least when you hit

42:04

it, there's a giant reward there.

42:06

And so that was a big lesson for me.

42:09

And on the heels of things for smoking, that's what I

42:11

actually created yammer is. I

42:14

was like, well, look I'm gonna do something super risky.

42:16

At least I want to be in a position to

42:18

get rewarded for it if it works. Fox

42:21

Sports Radio has the best sports talk

42:23

lineup in the nation. Catch all of

42:25

our shows at Fox sports Radio dot

42:27

com and within the I Heart Radio

42:29

app. Search f s R to listen

42:31

live. So let's talk big

42:34

picture. Now, you've been in Silicon Valley

42:36

for a long time. And by the way, that's fascinating. Do you think you'll ever

42:38

fund any other movies? Maybe because you're

42:40

just so committed to the idea that it's

42:42

getting out there, um, as opposed

42:44

to the you know, remunerative return

42:47

that you might be able to recoup.

42:50

Yes, And I think that's the way you have to look at it. I actually

42:52

have another movie that's um in the can,

42:54

so to speak. Um. It's called dolly Land.

42:57

It's a movie about the painter salvad

42:59

Or Dolly Ben Kingsley, you know,

43:01

the multi Academy Award winner

43:03

plays Dolly. It's directed

43:05

by a great director named Mary Here and it's actually

43:08

done. We made it as an independent movie over

43:11

the past year and we're taking

43:13

it too film festivals later this year. And

43:16

I think we've been accepted to Toronto

43:19

Film Festival, and there's a couple others we're looking at.

43:21

So it's exciting. I mean, we're gonna

43:23

take to the Film Festival and try to sell

43:25

it and see what happens. Um,

43:28

you know, I hope it makes money. But

43:31

you know, I've I've gotten used to the idea that,

43:33

you know, it's very, very hard to make money in the movie business.

43:35

It's not why I do it. I do it because

43:37

I love movies and I like the subject matter,

43:39

and um, it's a passion project for

43:41

everyone who's involved. So so yeah,

43:44

I you know, I'm still sort

43:46

of interest in the movie business and do it.

43:48

But it's you obvious see it as a hobby or you're

43:50

going to be disappointed. I think our

43:52

actors harder to manage than other

43:54

employees. It's

43:57

case by case. Um, most

43:59

of them are very professional and are a

44:01

delight to work with, and then you have

44:04

a handful who are known as difficult. But

44:06

to be honest, UM, the ones who are difficult,

44:09

they don't last that long. I mean there's

44:11

a kind of old uh saying

44:13

in Hollywood is a life's too short list. And

44:15

if you're an actor, you really don't want to get

44:17

on the lots too short lists? Are

44:20

you? We're talking to

44:22

David David Sacks about wins

44:24

and losses in his career across a variety

44:27

of fields. All right, let's talk um,

44:29

big picture here on tech. One

44:32

reason I'm so excited to talk to you and I appreciate

44:34

all the time you've given us, is for

44:36

what I do, UM, and I testified in

44:38

Congress about this, uh, in front of the House

44:40

Judiciary Subcommittee. I

44:43

can see the power of Facebook

44:45

for what they can do. I can see

44:47

the power of Twitter just for the content

44:50

that we created OutKick. You know, I can go

44:52

in and look at the charts and

44:54

tell you basically, hey, the algorithm

44:57

is favoring us today or this month. Hey,

44:59

they decided they don't like what we're writing,

45:02

and they are writing us off of the

45:04

algorithm page UM.

45:07

And it seems, based on my experience,

45:09

that the bias always runs against

45:11

us whenever we write something favorable.

45:14

I'll give you an example. When we had

45:16

Donald Trump on for the first time on my sports

45:18

talk radio show. We wrote a bunch of articles

45:20

about it at OutKick. Our traffic basically

45:23

vanished on social media literally

45:25

within a day. Or two of all of those

45:28

articles, and it was Trump primarily talking about

45:30

sports going up on OutKick.

45:32

It was clear that we have been flagged in some way.

45:35

Certainly the same thing has happened when we wrote about masks

45:37

or we wrote about covid um.

45:39

From a business perspective, not from a

45:41

political perspective. Does that

45:44

make sense that they

45:46

would be behaving, these big tech companies,

45:48

and I'm talking about OutKick specifically in

45:50

a way that clearly is discriminatory

45:53

in terms of the distribution of articles

45:56

from sites like mine. Does that make sense

45:58

to you from a not from a you know what's better

46:00

for the country perspective? Does

46:02

it make sense from a business perspective? No,

46:05

I don't think so. I mean, I think they're

46:07

doing it because for ideological

46:10

reasons. And um,

46:12

now what I think what happens

46:14

is they start with a business rationale

46:17

that seems to make sense. So for example,

46:20

they will let's say you're a social media site,

46:22

and uh, you start

46:25

with the content moderation department, because there's

46:27

a certain kinds of content that just shouldn't beyond

46:29

there. I mean, people threatening violence or

46:32

you know, harassing other users,

46:34

or using profanity

46:36

or obscenity, and they don't want that to be part

46:39

of their social networks. So they create a content moderation

46:41

team to basically take down that stuff,

46:43

and you know, no one really

46:45

has a problem with that. But then the problem is that

46:48

the people actually doing the content moderation

46:50

have an ideological bias

46:53

and they start indulging that bias. And

46:55

the fact the matter is that if you're in Silicon

46:57

Valley, you know, the for failing

47:00

orthodoxy is everyone kind of drinks

47:02

from the same monocultural sound.

47:05

They all have the same political views. This stuff

47:07

has been pulled many times and

47:09

you can sit and so half

47:12

the time ton't even realize what they're doing when

47:14

they indulge in in this bias.

47:17

But yeah, the bias absolutely creeps in and

47:19

then it starts to become official policy. Um.

47:22

I think something similar has happened that at Google,

47:25

where you know, you've got the search

47:27

algorithm, and the search

47:29

algorithm might produce some results that seem

47:31

offensive to people, so they

47:33

introduce, you know, what they call human interventions.

47:37

But then as soon as you allow humans

47:39

the process, they carry with them their

47:41

preconceived biases and

47:43

they start indulging those biases, and the problem

47:46

is that none of us have any

47:48

transparency into those decisions.

47:51

And I think we have a right

47:53

to know when we're being down

47:55

ranked or the algorithms

47:58

sort of supporting our content we

48:00

should ever right, or or we've been kicked off

48:02

one of these networks. There's no explanation

48:05

that comes with us, and I think we should

48:07

have due process rights to at least

48:09

know why, to know when and

48:12

why we've been down

48:14

ranked or downvoad or something like that. And

48:17

is that the idea behind the idea of

48:19

an open algorithm marketplace

48:22

effectively so that we

48:24

could go in and I'm just using out kick as an example,

48:26

which is owned by Fox now. But

48:29

when you're down ranked, if you are a

48:31

business that is reliant on advertising,

48:34

that can take money directly out of your pocket,

48:36

and the lesson that they are instructing to business

48:38

owners is you play games

48:41

and share content that we want to be shared

48:43

or else. Right, there's an implicit threat

48:45

from a business perspective that is hanging over

48:48

the algorithmic problems that can arise.

48:51

What's a solution? Not necessarily again

48:53

from a political perspective, but you

48:56

just kind of kind of walked through us if

48:58

you were just trying to be as open and trans parent

49:00

as possible. Is it a public

49:02

algorithm so that everybody could see

49:04

what results are occurring? Well,

49:06

this is what Elon has suggested with respect

49:08

to Twitter, as he says that he wants to open source the

49:11

algorithm. And so the idea is,

49:13

yeah, you would be able to see how the algorithm works,

49:16

and if there's a human intervention, you would

49:18

know that. And so that does

49:20

give you, well, first of all, it gives

49:22

you an assurance that

49:24

they're not putting their thumb on the scale

49:27

and discriminating against certain

49:30

people because of their their viewpoints.

49:33

But also it would give you some due process

49:35

to know that when there's an intervention against

49:37

you, at least know what's happened. Um.

49:39

So that that's that's why Elan has been pushing

49:41

that idea of of open sourcing

49:43

the algorithm. Um. I think it's

49:45

a great idea. I mean, we need more transparency

49:49

around the decision these big tech companies are making

49:51

because frankly, they have enormous power.

49:53

I mean, by and large, they are monopolies

49:56

and they controlled the public square. The public

49:58

square has been privatized. Um.

50:00

You know when the founders at the trainers in the Constitution

50:03

started the country, the town

50:05

square was a place you would go to it

50:07

like the courthouse steps, and you pull out of soapbox

50:10

and could talk and people gather around to listen.

50:12

That's what the town square meant today. The

50:14

town square. All these giants social networks. I

50:16

mean, that is where people assemble, that

50:18

is where political speech occurs. And

50:21

yet there are no limitations on their

50:23

ability to you

50:25

know, to d platform you or discriminate against

50:27

you. And they don't even they're not even obligated to

50:30

provide any transparency around that. And

50:32

so I think we need more to process

50:35

on these big monopolistic companies

50:38

when they restrict our speech. I'll

50:41

give you an example. By the way, Google News obviously

50:44

drives a lot of traffic. Um No,

50:46

people out there may not realize it, but Google News

50:48

is wildly influential. When

50:51

Fox bought out Kick, they went back

50:53

through all these social media relationships

50:55

and I've been saying for a long time, yeah, we're registered

50:57

with Google News, but never our store.

51:00

He's come up even stories where we might

51:02

break news other people right

51:04

will show up on the Google News alerts. We won't.

51:07

Fox did a deep dive and they said, oh, you've

51:09

been mischaracterized, and you hadn't been showing up

51:11

in Google news for years. It's

51:13

amazing how often the mischaracterization

51:16

seems to only run one way, right,

51:18

like uh, and and so

51:20

I'm incredibly skeptical that at some point

51:22

someone at Google wasn't it was

51:25

you know, unhappy, and they just decided,

51:27

Hey, I'm gonna move the OutKick algorithm

51:30

you know, feeder or whatever over into

51:32

this little box where it will kind of disappear. Um.

51:35

And if you're a independent business,

51:37

you don't have the resources or the relationships

51:40

to even get things like that rectified.

51:43

And uh. And that's why I think the idea

51:45

that Ellen is trying to put in place

51:47

could be so potentially influential,

51:50

which is just, hey, we're gonna have

51:52

content neutral policies and people will

51:54

have optics on things. And and David, I don't know if

51:56

you paid attention to it. I'm sure you did. But

51:59

you know, the day that Ellen announces that he's reached

52:01

acquisition terms, suddenly

52:04

my Twitter feed comes alive and I'm adding

52:06

tens of thousands of followers at a rapid

52:08

rate. It's hard for me to believe

52:10

that in some way Twitter is not trying

52:13

to bury the evidence of what they've been doing.

52:15

So when neutral engineers

52:18

come back and start to look at the algorithms

52:20

they have in place, there's not

52:22

necessarily the same evidence that there would

52:24

have been if somebody like Elon weren't acquiring

52:26

the company. It's gonna

52:28

be really interesting to see what happens

52:30

if Elon is able to close this deal. I guess

52:32

they're still still up in the air with us going to happen,

52:35

but it'll be really interesting to see what comes

52:37

out after he acquires the company

52:40

because we just don't have any visibility

52:42

into how they moderate

52:44

content or upfold

52:46

or down rank content, how the algorithm

52:49

works with them. Again, the manual trending

52:51

topics is wildly influential, and

52:53

I think that's a total cesspool. By

52:55

the way, for somebody who does what I do. Uh,

52:57

they decide what trends, they decide

52:59

how they are going to characterize what trends in

53:01

a positive or negative fashion. Um,

53:04

it's just such a rigged game.

53:07

And do you think that one? See

53:09

my theory is one unrigged game,

53:11

right. So if Elon is able to acquire h

53:14

Test, sorry, acquire Twitter, what

53:17

I think would happen is if there

53:19

are wildly divergent results

53:21

that suddenly start to happen at Twitter, and

53:23

we can see a discrepancy between what's going on

53:25

on Twitter and what's going on on Facebook and what's

53:28

going on on Instagram and all these different social media

53:30

outlets, then it puts

53:32

a lot of pressure on these other companies

53:34

to also be honest and transparent

53:37

about what they're doing. Is there a

53:39

logic to that, based on your knowledge

53:41

of how tech companies work, that that could

53:43

occur, that that influence could become substantial.

53:47

I think so, because Ellen, I mean,

53:49

this is what's so important about what Elon is doing

53:51

is that he's drawing a line in the sand here

53:53

and he's opposing censorship, and he's also

53:56

setting an example for all these other companies.

53:58

One of the things about the censorship

54:00

that's taken place that's so discouraging

54:03

is the way that it all seems to be done in

54:06

unison. So when Trump was sent

54:08

off Twitter back in January,

54:10

they all did it. Every site did it within

54:12

days of that decision. So they

54:14

all seem to be acting in concert, in

54:17

lockstep. I've called it a speech cartel.

54:19

If they were getting together for the purpose of fixing

54:21

prices, let's say advertising prices, everybody

54:24

would be up in arms saying that's illegal. But if

54:26

they get together for the purpose of fixing

54:29

speech and what you can't say or what

54:31

you can't which, by the way, is so much more dangerous

54:33

than from a from a democracy perspective

54:36

than fixing advertising costs. Absolutely.

54:39

I mean, look at the employees of these companies

54:41

have enormous power over our

54:43

public discourse and public debate. They were

54:45

never elected to have that power.

54:48

And back twenty years ago when I was doing

54:50

Internet stuff, we never believe

54:52

when we were creating these platforms, we never believed

54:55

it was our job to put our thumb

54:57

on the scale and prefer certain views

54:59

over others. We just thought it was our job

55:01

to let the users communicate with each other. And

55:04

somehow that mission changed,

55:06

And now the employees these companies have gone

55:09

from being umpires to basically

55:11

being participants, to being partisans

55:14

in the marketplace of ideas. And

55:17

I think what you hear from Elan is

55:20

listen, I'm a moderate. I'm going to restore

55:22

the balance. I'm gonna let the users

55:24

communicate the way that they want to. I'm

55:26

gonna be nonpartisan. I'm going to

55:28

be a fair referee, and

55:31

that's what's so powerful about what he's doing, and

55:34

hope it will set an example for these

55:36

other companies you mentioned

55:38

dolly Land, which I'll be interested to

55:40

see as well as a passion project. It's

55:42

not necessarily being done to make money. One

55:45

of the arguments that I've made for a while. And

55:47

maybe Ellen is doing this, I'm curious if you

55:49

think he's doing it is in

55:53

the passion project being brought to bear.

55:55

In the world of larger media, I

55:57

think, to a large extent me

56:00

media in the United States is broken. And what

56:02

I mean by that is you've got the CNNs,

56:04

the msnbc S, the New York Times, the Washington

56:06

Post, and their narrative

56:08

bias to me is so clear,

56:11

and you have one alternative, which is basically

56:13

Rupert Murdoch and Fox. In fact, if

56:16

Rupert Murdoch didn't exist, there

56:19

would be almost no It's crazy

56:21

to think about, but there would be almost

56:23

no full fruition of

56:26

media outlets in the country.

56:28

Right. It's basically one man and his family

56:30

who said, Hey, we're gonna create Fox News, and we're

56:32

gonna buy the Wall Street Journal and we'll run the New

56:35

York Post and now they bought out kick and

56:37

they have these different assets that are

56:39

trying to fight back a battle, not necessarily,

56:41

in my opinion, on a right wing basis, but

56:43

just for the seventy of the country that

56:46

isn't gone insane. It feels

56:48

like to some extent there is an opportunity

56:50

for passion projects and media which

56:52

may not return a lot of money, but do

56:55

have massive influence. Do you think

56:57

that's what Ellen is doing with Twitter?

56:59

Is it his passion project? Is it a version

57:01

of dolly Land for him? Or do you think

57:03

he's looking at it as a big money maker. I

57:06

think, first and foremost, like you said, it's a passion

57:08

project. I think that this is about the principle

57:10

of free speech for him. When he says that he's

57:12

going to restore Twitter to being an

57:15

open town square, that really is

57:17

his main motivation. And it always

57:19

starts with the mission for him. I think he's got enough

57:22

money, you wouldn't just be doing this as a business

57:24

deal. Now. The history

57:26

of Elon's ventures is that

57:28

he starts with the mission and

57:31

you know, the passion project, as you say, but over

57:33

time he figures out how to make them a great business

57:35

certainly that's the case with Tesla. The

57:38

passion project there was to move the world to sustainable

57:40

energy. So but in the process of doing

57:42

that, he's created the world's best car with

57:44

SpaceX. He wants to get people of the Mars.

57:47

I mean, that really is the mission. But in

57:49

the process of doing that, he's figured out, you know,

57:51

Starlink and how to make

57:53

that a great business. Um so I

57:55

think he will figure out how

57:57

to make Twitter into a great business. But I have no

58:00

doubt that it's all about the passion rim politics.

58:04

Obviously, you're involved in donating money.

58:06

What's the best thing that national

58:08

politics could do in your mind

58:11

to advance American business interests?

58:14

How much like the Biden administration to

58:16

me is just a disaster in all respects. But

58:19

a lot of politicians, it seems to me the best

58:21

outcome would just be don't do anything. Unfortunately,

58:24

because of where we are, what

58:26

can and should America be doing

58:29

to advance entrepreneurial and

58:31

capitalistic interests so that

58:33

we maintain uh leadership

58:36

in risk taking around the world. Well,

58:40

the the entrepreneurial energy in

58:42

America is strong. I mean,

58:44

this is historically our great advantage.

58:47

It's our d n a right our cultural DNA exactly.

58:51

I mean Americans are willing to take

58:53

risks, are not afraid of failure. If they

58:55

do fail, they kind of dust

58:57

themselves off and try again. There's

59:00

the huge stigma in our culture

59:02

the way there is in Europe. If you fail and

59:04

you got vcs people

59:07

like us who are willing to write a check and

59:09

if it's a zero, so be it. We're not going to come

59:12

break your kneecaps or even be too upset about

59:14

it. You just don't have that

59:16

mentality in other parts of the world.

59:18

So that's what's strong there. And

59:20

I think what you need from government is

59:22

to create a stable environment

59:25

with sound money and low taxes

59:27

and reasonable spending levels

59:30

just to not break the golden goose. And

59:32

you know the prominent washing right now is they're

59:34

really threatened to break the golden goose. I

59:36

mean inflations out of control as

59:38

a result of this hyper spending um

59:41

and the money printing. I mean, you had the FED

59:44

and if you were running so sorry to cut off

59:46

that, you're exactly right on this. If you're a business guy,

59:48

you have to make a profit in order to that's

59:51

how capitalism works. If you were

59:53

running the government, and you

59:55

saw the books that the government is putting out

59:58

on a yearly basis. I

1:00:00

mean, obviously the business would

1:00:02

go bankrupt with the books that the government

1:00:05

is putting out right now, how

1:00:07

long can this continue? You know, modern modern monetary

1:00:09

theory, the idea was, Hey, we can print as much money

1:00:12

as we want, there's no consequences. We're seeing consequences.

1:00:15

We've got a thirty trillion dollar national

1:00:17

debt now and we basically added

1:00:19

twenty trillion dollars in the last you

1:00:21

know, ten twelve years. When

1:00:24

you look from a business perspective at the nation's

1:00:26

books, where are we

1:00:28

in and how troubled would you be? Purely

1:00:31

from a business perspective on that,

1:00:34

I think it's terrifying. We owe something like

1:00:36

a GDP now,

1:00:38

I mean we basically, oh more

1:00:40

than the entire amount of the output

1:00:42

of our economy in our national debt,

1:00:45

and what do we get all of that debt um?

1:00:47

So it's it's really pretty scary. And I agree with you

1:00:49

about m m T. I mean, that's

1:00:52

the latest group of so called experts

1:00:54

that I think are gonna be massively discredited.

1:00:56

Uh. They claimed for years that we can print

1:00:59

as much money as we want and spend as much you want,

1:01:01

because I guess we were the world's reserve currency. That

1:01:03

be no price to pay for that. And

1:01:05

it's true that interest rates stayed low for

1:01:07

a long time, but now they've rocked it up,

1:01:10

and inflation has rocketed it up, and

1:01:12

you're seeing it. Ordinary Americans feel a lot poorer

1:01:14

because their wages is not kept up with inflation.

1:01:17

And we've had a stock market crash because now the

1:01:19

stock market is starting to price in, you

1:01:21

know, much higher interest rates that are gonna

1:01:23

be necessary to tame the inflation. So

1:01:26

it was just very irresponsible. Um.

1:01:28

I mean, it's the fun at a law that

1:01:30

you cannot spend more than you

1:01:32

make, not for very long and

1:01:35

um yeah, we just need fiscal sanity to

1:01:37

return to Washington. You mentioned

1:01:40

experts, uh, And I appreciate your time, and

1:01:42

I know how busy you are. To me,

1:01:44

one of the great lessons of the past several

1:01:46

years has been how wrong

1:01:49

experts can be. The experts who told

1:01:51

this modern monetary theory there were going to be

1:01:53

no consequences, certainly the experts

1:01:56

surrounding so much of COVID. Uh.

1:01:58

One of the reasons why I love capitalism

1:02:00

is you really do have to put your money where your mouth

1:02:02

is, and you have to place bets

1:02:05

based on things like logic,

1:02:07

based on numbers. Um,

1:02:09

where are we in the field of so

1:02:12

called experts right now? Were you

1:02:14

someone who believed I think probably

1:02:16

the answer is no. On conventional wisdom

1:02:18

in the first place, which is a business

1:02:21

opportunity is really about recognizing

1:02:23

that the conventional wisdom is wrong oftentimes,

1:02:25

or else everybody would be doing what you're doing isn't

1:02:29

isn't what you do basically the exact

1:02:31

opposite of what experts do. Yes,

1:02:34

because if you listen to the experts with respect

1:02:36

to any business opportunity, they will

1:02:38

always tell you us a bad idea that because yes,

1:02:41

they are fully ingrained in the old

1:02:43

way of doing things and they they don't

1:02:45

have the imagination to see that things

1:02:47

could be done in a completely different way. I mean,

1:02:49

look, we would never have found it PayPal if

1:02:51

we had listened to all those payment experts

1:02:54

back in and

1:02:56

in fact, part of the reason we created PayPal

1:02:58

is because we didn't know that much about payments. We weren't

1:03:01

beholden to the old way of doing things.

1:03:03

So you're listening to experts is

1:03:05

something that really runs against the

1:03:07

grain of an entrepreneur. And

1:03:10

this whole idea of listening to authority

1:03:13

because those people in power

1:03:16

have some sort of credentials, and that

1:03:18

you should automatically listen to

1:03:20

them and not consult your own faculties,

1:03:22

your own common sense. That's an

1:03:24

idea that I think is gonna be offensive to any

1:03:27

entrepreneur. And I think we've seen that

1:03:29

now with politics over the last couple of years.

1:03:31

I mean, everything the experts told us

1:03:33

about COVID, for example, was just completely

1:03:36

wrong. And I mean we're told

1:03:38

so many things and then they also not not to

1:03:40

be right. So you know, having

1:03:43

a healthy distrust of experts is

1:03:45

a good idea in business or politics. I think

1:03:48

it's also the case that

1:03:50

everything that they told us and allowed

1:03:52

us to discuss on social media very

1:03:55

often ended up being wrong. And when

1:03:57

I kind of diagnose it, I'm curious what

1:03:59

you think about this As we come to a close here.

1:04:01

We've been talking with David Sachs. A lot

1:04:03

of this comes down to risk analysis. Many

1:04:06

people are really really bad at

1:04:08

analyzing risk, both financial and

1:04:11

personal. And it seems

1:04:13

to me that you talked about the American

1:04:15

DNA, and I agree with you is based

1:04:17

on taking risk. I mean, you don't get on a

1:04:19

ship and decided to come to a new land and

1:04:21

then get in a covered wagon and go all the

1:04:24

way to the west coast because

1:04:26

you have a high if you don't have a high

1:04:28

risk tolerance. Right, it seems

1:04:30

like our national risk tolerance in

1:04:33

a social media era is

1:04:35

being totally destroyed to

1:04:37

the point where you saw all the time in

1:04:39

the early days of COVID, well, if it saves just

1:04:41

one life, well, if it saves just one life, we would

1:04:43

have never committed airplanes. We certainly

1:04:45

wouldn't have emitted cars. Um.

1:04:48

How much of this is just a failure to understand

1:04:50

basic risk in both personal business

1:04:53

and life. Yeah,

1:04:55

I mean I think I think you you saw this during

1:04:57

COVID as there was a total suspension

1:04:59

of cost benefit analysis in

1:05:02

favor of this sort of zero COVID

1:05:04

thinking this idea that we can completely stamp

1:05:06

out COVID, which was just not possible,

1:05:09

very clearly not possible, And

1:05:12

there was a total refusal to

1:05:15

to to apply cost benefits on any of these

1:05:17

lockdowns. I mean, we I

1:05:20

think it's very clear now that that whole policy

1:05:22

of lockdowns it cratered the economy

1:05:24

was devastating the economy, but it didn't

1:05:26

do anything to stop COVID. And

1:05:28

no one about the or the kids

1:05:31

in school with the mass, you know,

1:05:33

and and the remote learning. I mean, we lost

1:05:35

an entire year of schooling

1:05:38

for so many kids in this country, and

1:05:40

no one really thought to apply cost benefit to

1:05:42

that, you know, negligibile

1:05:45

benefit if any, and the costs I think

1:05:47

we're gonna be feeling for a generation. So

1:05:49

yeah, we need to bring back benefit costs. I think we have to

1:05:51

bring back as assumption of risk. You know that

1:05:54

there's a tradition this country that

1:05:56

you're allowed to do risky things.

1:05:59

Uh, you know, if you're willing to assume the risk.

1:06:02

And and we saw this workout

1:06:04

I think very well in Florida, where they

1:06:07

basically got on with their lives so much more quickly the

1:06:10

country, Um, because they allowed people

1:06:12

to make their own choices. And if you wanted

1:06:14

to go out to a restaurant and risk

1:06:16

get in COVID, that was your choice. Um.

1:06:19

So we've got to bring back these basic ideas.

1:06:22

And I think, you know, I don't know if it's just

1:06:24

that the media culture doesn't really get it but

1:06:27

but you're allowed to do whiskey things in this country. You know, if

1:06:29

it doesn't work out for you, that's your choice, such

1:06:32

as buying our ferrari. Alright, last question

1:06:34

for you, uh uh,

1:06:37

what advice would you give. There's a lot of people who are

1:06:39

young that listen to these podcasts, this Wins

1:06:42

and Losses podcast because they're trying to

1:06:44

build their own culture,

1:06:46

their own idea, their own worldview.

1:06:49

For someone who wants to get into business

1:06:52

today, let's say that they are out there and

1:06:54

they're sixteen years old listening to this right now,

1:06:56

what do you wish you had known when you were sixteen?

1:06:58

What would you be telling young people they need

1:07:00

to be doing today to

1:07:03

prepare themselves to make the kinds

1:07:05

of decisions that you had the opportunity to make in

1:07:07

your twenties, thirties and forties. I

1:07:09

mean, the main thing I would have done differently

1:07:12

was just get into business faster. Like

1:07:14

we talked about, I kind of I took some time

1:07:17

and went to law school, and UM,

1:07:19

I just didn't know how to get into it. And I think

1:07:21

that what's great about UM

1:07:24

entrepreneurialism today is there's so many

1:07:26

opportunities. There's incubators. Now

1:07:29

there's young startups you can join.

1:07:31

I just would have gotten into it a lot sooner, and

1:07:34

so I still think going to college is

1:07:36

probably a good thing to do. I wouldn't

1:07:38

necessarily encourage anyone to drop out, although

1:07:40

certainly a lot of great entrepreneurs have had

1:07:43

success dropping out, like Zuckerberg, like

1:07:45

Bill Gates, so on. But but

1:07:47

I would say just get into it as quickly as possible.

1:07:49

What you really want to do is

1:07:52

go work at a startup

1:07:54

where you can really learn, where there's some great

1:07:57

founders, and it almost doesn't

1:07:59

matter what's the job is that you get.

1:08:01

The important thing is who you're

1:08:03

associated with. And you know, I learned

1:08:05

so much working with people like Peter

1:08:08

Till and Elon Musk at my

1:08:10

first startup at PayPal, and that enabled me

1:08:12

to go on and then found my own companies

1:08:15

and become an investor. So you

1:08:17

really want to just work with the smartest

1:08:19

people you can possibly find and

1:08:22

do that as quickly as possible. Outstanding

1:08:24

stuff, David Sachs. This has been a phenomenal

1:08:27

discussion wins and Losses with Clay Travis. I

1:08:29

hope everybody enjoyed it. Thank you guys, there's

1:08:31

now forty seven of these, I believe, so

1:08:33

if you enjoyed this one, check out the other forty six. Thank

1:08:35

you, thank you, quite appreciate

1:08:37

it.