Patrick Lee, co-founder of Rotten Tomatoes, was interviewed by Joanne Z. Tan on the "Interviews of Notables and Influencers" podcast, video and blog series, where Patrick talked about these topics:

The Metaverse of NFT and Web3 is decentralizing education model into "learn to earn", and a new Creator Economy is coming.

Patrick Lee also shared his insights about the recent Theranos Elizabeth Holmes trial, "fake it till you make it", the Silicon Valley culture, How education will be decentralized NFT, Web3, Metaverse, decentralization, blockchain, the future of gaming, movie making and entertainment industry intersecting with AI, AR, VR, and virtual technology,...

The new "learn to earn" education model where the "play to earn" gaming model can be evolved into "learn to earn" for students: "...they're actually earning a token or NFTs that can actually be converted into money. And ideally, you could get the rich people in the world to be paying the poor people to learn."

A LOT of insights! Thank you Patrick Lee!

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Joanne Tan 0:00
Welcome, Patrick Lee, former co founder of Rotten Tomatoes, a serial entrepreneur, and someone with great advice and insights about Silicon Valley about startups. So I have a lot of questions for you today. Thank you so much. I am Joanne Tan, CEO branding expert at 10 Plus Brand, a digital marketing, content creation leader in the digital marketing industry.

So the first question for you, in light of Elizabeth Holmes, the Theranos trial, what do you think about the Silicon Valley culture? Because it's pretty prevailing what she did: fake it till you make it, with unrealistic financial projections. What do you think of this whole saga?

Patrick Lee 0:58
I think it's, you know, it's, it is true that entrepreneurs generally are going to be pretty aggressive, they're going to paint a great picture. For me, when I look at, you know, pitches as an investor, I don't really worry so much about the projections in the future, I look at performance in the past a lot more, because pretty much everyone is going to try to have a slide that shows like a hockey stick, like, and you know, and that something that is like, big enough, that will be interesting to investors, but not necessarily series so big that they'll think it's, it's, you know, unbelievable, and everyone has that slide. And I basically ignore it, because it looks the same for every single deck.

As far as Elizabeth Holmes, I mean, they were, they were straight up lying. So I, I think that's a bit different. And I believe that there could have been a version where they were like, "This is our vision of what we want to do in the future. But this is where we are now. And, you know, every year we're going to try to make things, you know, a bit smaller, like the machines a bit smaller, do the tests a bit faster, use a little bit less blood", you know, something like that, and put in goals and milestones that are, would have been achievable, you know, with technology and other things over time. But where they said they were relative to where they actually were, I mean, that was the straight lie? And I think, have they shown the big vision, but had more realistic steps to get there over time, I think they still would have raised a lot of money. And they would have been, you know, telling the truth, rather than what they actually did.

Joanne Tan 3:01
Yeah. You know, you can dream, whatever the future vision. But if she was not realistic and not honest with her past and the present with the numbers, then that's a different issue. Fake it till you make it, what do you think of that?

Patrick Lee 3:24
When I think about that, I think it's less about faking, and more about trying to find something that people want, as quickly as possible. So at least to me, I think about things like maybe the technology isn't there yet. But you know, you know, for example, we were going to have this website to sell cars, I think they did this in like the 90s. And they didn't have the cars, they didn't build the whole inventory system, they didn't hold inventory, any of that stuff. They just put up a website to sell cars and see if people would actually buy a car online without actually having to go and drive it and all that kind of stuff.

And then when people actually bought the car, they just actually bought the car and have it shipped over and took a loss. But in that situation, I mean, you could say like, the system itself was fake, but people could still buy cars from there. But what was more important was they could see, did someone actually willing to buy a car online, in the 90s without actually having to test drive it? And I think that to me makes a lot of sense. Plenty of folks are doing that, where the technology is not fully built out, but it's more about experimenting and testing demand.

I'm not one for faking numbers, all that kind of stuff. And like I said, I don't believe in a lot of protections, and so I tend to look much more at what they've done, either themselves what they've accomplished in their previous companies or jobs or education, and where they are with the company, how much progress have they made, even with little to no funding, that kind of stuff.

Joanne Tan 5:18
And last thing about her trial, her attorney said it in the beginning and the closing, that she basically sank with the ship, she did not sell any of her stocks. Well, that doesn't seem to matter to the jury. They indicted her on the accounts of defrauding investors, if there's sufficient evidence showing that she had an intention to defraud investors, whether she went down the ship without selling her shares, is not relevant. What do you think of that?

Patrick Lee 5:57
I haven't followed the case super closely or anything, but I think had she'd been trying to sell her shares, it would have probably been more obvious what she was doing. I think basically, what may have started as a very small lie just kept compounding and compounding, compounding till it was a huge lie. And at that point, I would imagine that she can't do anything to get out, she has to just keep trying to keep pushing it to the point where it got very, very bad. I don't I don't think that matters.

Joanne Tan 6:36
Right. It's other people's money, and a lot of them. And, yes, so at the end of the day, she had to be held accountable for that. Okay, so the Silicon Valley culture, if you can summarize what Silicon Valley culture is, how would you summarize it?

Patrick Lee 6:57
I actually take a more positive view, I think, in most cases, you know, people are just trying to make the world a better place. And I'm in Silicon Valley, a lot of these folks, you know, come in with a dream, and they actually can change things in a massive, massive way. And a lot of times very, very quickly, they can create, you know, products that can touch, literally, billions of users touch the entire world to change the entire world. In years, maybe a decade or two.

Joanne Tan 7:31
Rotten Tomatoes - when you sold it, it was right after the stock market crash was a bad time to really make any profits for a lot of startups. So for you to be able to pull it through and eventually sold it was quite an accomplishment. But right now, looking at how successful Rotten Tomatoes has become, if you had the choice, would you rather wait until it becomes a beast it has become? Do you regret selling it at a low price? back then?

Patrick Lee 8:10
I mean, it's really hard to time the market, and to know exactly when to sell, I think I didn't do a good job as far as having enough of a network of folks who could be there to help give advice about these issues about when to sell, how to sell etc. I think had I had a better network like I do now. I would have probably been able to approach that better in terms of timing and stuff. Yeah, you know, had we waited even another year or two, it probably would have made a major difference.

But we are all just very happy that the company is still around, is still doing well. They are still growing. I would say overall, being able to have that freedom to have traveled around the world to do other startups to do other things has been good, had we kept running the company all the way until now. You know that that would have been a very, very long time. And I don't I don't think that would be the worst thing. But I also really did enjoy kind of the freedom to travel to do other things as well.

Joanne Tan 9:29
So what are you doing right now?

Patrick Lee 9:32
So right now I actually started an investment syndicate that kind of formed out of the tech founder group that I was running. And basically I have partnered with three friends from the group. So there's myself. There's Holly Liu. She was the co founder of Kabam, the mobile gaming startup. There's Kun Gao. He was the co founder and founding CEO of Crunchyroll, the anime streaming service and Kevin Lin. He was a co founder of Twitch, and basically the four of us have created investments syndicate to invest at the intersection of technology and entertainment. And we started back in March of last year.

And since then we've invested into 28 companies, we raised over 25 million for those companies, across 350 investors. And these are just very value add, and strategic investors. And so at the intersection of technology, entertainment, we provide like a ton of value to founders. And that's basically what I've been doing. We've been super busy reviewing new deals every day, and really trying to find really interesting and special companies at that intersection.

Joanne Tan 10:46
Can you be a little bit more specific? Exactly what kind of technology and how they intersect with entertainment? And what is the future of the movie industry? Or whatever the entertainment industry you met?

Patrick Lee 11:02
Yeah, so for us, I mean, we're thinking of companies, you know, like, Rotten Tomatoes and Kabam and Crunchyroll and Twitch streaming video. Sometimes content in media, gaming and eSports. Web3, crypto, NFTs, blockchain, gaming, creator economy, Metaverse, VR AR, there's a lot of these areas that we think are very interesting. And we have a I would say fairly wide definition of entertainment. Like, obviously, movies, music, games, sports is clearly entertainment. But I think for us, you know, things like education, fashion, a couple other categories of food are like kind of borderline on the entertainment side for us. And so we would actually still look in those spaces as well.

Joanne Tan 11:56
Okay. So I would like you to explain to the general public about NFT, Web3 Metaverse, because these things are sort of a novel concept for most Americans, and most Americans still don't even know what NFT is. I had a conversation with you prior to this. I was fascinated about what you said, of the ownership, almost like creating your own economy with NFT in the future of arts and entertainment. I had a question after our conversation: What is the difference between so called crowd-funding and NFT ownership? Which is a kind of funding or fundraising, it's selling the ownership of what could be the ownership of anything, is that right?

Patrick Lee 13:05
That's a that's a lot of questions. I'll try to unpack it. Um, I mean, I wouldn't say I'm like an expert on Web3, crypto, and NFTs, all that kind of stuff. Like To be honest, I was actually quite against or negative on on the blockchain, I didn't hadn't seen a very good use case at the time. And I was feeling like, pretty much everyone who's in it is just there to get rich quick. For me, personally, my views changed. Back when I read an article about Axie Infinity, which is a blockchain game, written in the, in the newsletter, not boring. And in that article, they basically were saying that with Axie Infinity, the players were actually able to make money from playing the game. And you had, you know, players in the Philippines, in Latin America, in Vietnam, who are making multiple times their living wage, playing that game, versus what they were doing before. And so you had like grandma's grandparents in the Philippines playing it. And I thought that was extremely interesting, because it changed a lot of the economics of gaming that we're used to.

You know, when you look at web mobile gaming, free to play, or a lot of times they call it "pay-to-win" where the more you pay, the stronger you'll be, and you'll be able to, you know, be higher up on a leaderboard or something like that. When you pay all that money, you know, 100% of it goes to the mobile gaming company, you don't own any of that. And they, the mobile game company is going to go and take, you know, 50% or more of that, to spend on marketing to try to get more players and they're going to try to extract as much value out of their players as possible. And usually what they look for is really hardcore players are going to spend a lot of money, they call them whales.

With blockchain gaming, you know, when you look at something like Axie Infinity, it totally changes it and flips everything around, basically, almost all the value goes back to the players, they might extract a 10% on the transaction fees. But basically the other 90% is going back to players. And what's happening is, yeah, you're still gonna have hardcore players who's gonna spend a lot of money in it. But one, I mean, these whales are actually investing, they're actually, when they spend money in the game, they're actually, you know, buying NFTs and other things, or tokens and which are increasing in value. But when all that money also that they're spending and buying these things, is also being generated, a lot of times and earned, by these players in all these other countries who are "grinding" the game, to get these NFTs get these tokens that they can sell, and they can make money.

So this 90% of that money that's coming from the whales is basically going back to these other players. And I think that is something that's super interesting that, you know, I've never seen before up to this point. And, and that's something that I think is applicable across, you know, a lot of areas within Web3, or within NFTs. NFTs, I mean, people should look it up. But it basically means like non fungible token versus a fungible token. And it means it's basically something that's unique, the NFT. And so like, even if you both hold an NFT in the same collection, they're basically different, they're unique, even if they like, look the same, they're still different, like, I would have my copy, and you would have your copy of it. And, and one thing that can happen, that gets people I think, excited is is this idea of ownership.

You know, one example I had given you earlier, is if you look at, like the creator economy, right, the creators on YouTube and Twitch and other places, you know, the first way that they've always monetized, you know, the 1.0 way of monetizing was through brands and sponsorships. They would, you know, make money from the ads that ran on their YouTube videos or other places, they would have sponsored posts, or they would have sponsors pay them to do product placement inside of the video. Version two, the money was coming from users. So version two look like things like Patreon, Twitch donations, Cameo fans, Substack. Yeah, right. So it was coming from the users who are paying generally like subscriptions, or donations, or tipping or other things like that.

What Web3 and NFTs potentially can do is, you know, version three of creator monetization, which, you know, let's take Patreon, for example, instead of every month, you're paying, you're paying some money to the creator, because you want to support them, and in exchange you get content. It could be every month, you're buying an NFT,

Joanne Tan 18:28
As a supporter.

Patrick Lee 18:29
Yeah, for that month. And by holding the NFT, you get access to the content for that month. But what that also could be is the creator could then do things that give value to folks who are holding NFTs. They could say, hey, anyone who's holding three or more NFTs, can get additional access or content, maybe can hop on a Zoom call with the creator, you know, it could be, hey, everyone who is holding an NFT from the past year, all 12 months, maybe they'll do a meet-and-greet one time, like a live meet-and-greet, for example. And so there can be certain things that can make these NFTs potentially more valuable.

And so when people are buying these NFTs every month to support their creator, it could be the same amount of money that they're putting into like Patreon, they still get access to the content. But potentially those tokens could actually increase in value, you know, and they might be able to resell it to other folks down the road. Maybe they can even buy more than one each month, you know, so that they could sell the extras or something like that. And so it changes things in interesting way where now they're actually like, in a way investing in the creator, if they were supporting a creator really early on, and then the creator blew up. Well, you know what, those really early NFTs are probably going to be worth a whole lot more. Because there weren't as many supporters supporting this creator maybe in the beginning.This creator is selling like 100 a month, and maybe when they really blew up, they're selling like 10,000 a month? Well, if you're one of those people holding one of those early ones, and there's only like 100 of them out there, you know, it's probably gonna be worth more. And so that's something that's really changes things for, for the users for who are supporting these creators or playing these games or things like that, that I think is very different.

And for me, personally, I think it's more about that and the technology. I mean, you even look at the difference between, you know, the 1.0s and the 2.0s is in terms of monetization, both of those things, whether it's coming from the brands, or it's coming from the user's technology wise, it wasn't that much difference in my mind. But it's more about the way of thinking and about the whole thing about like, who is your customer? Is it the brands? Or is it the users? And then the difference between 2 and 3 is that the users are just paying and supporting you, or are they actually like investing in you. So that's kind of how I think about Web3 and NFTs and all that kind of stuff. And why I think it's very interesting.

Joanne Tan 21:09
Okay, so NFT right now is pretty much limited to art, whatever pieces of art people would like to own. Do you perceive it can expand beyond the realm of collectibles, art, and music, and video, and paintings, objects of art? So do you think it can expand into, like, the commercial, and just basically anything?

Patrick Lee 21:40
I mean, I think it already has expanded way beyond those things. I mean, when you have NFTs that are the early versions, or like profile pictures, but then the next wave has been utility. So you'll see ones that have been working games or by holding this NFT, you get access to this community, or you can have this NFT that works in this game, but you can still resell it outside of the game. Or, you know, it can give you access to a "skin" that you can take from this game, but you could actually bring it into this other virtual land or game or other things. You're also seeing, potentially, where people can take either NFTs or traditional, like fungible tokens for like real estate for fractionalized ownership.

Joanne Tan 22:34
Real estate property?

Patrick Lee 22:35
Yeah, it's like, we could buy a property and we could split it up and 100 people could own it. You know, there's a lot of things like that. I mean, people were trying to put together a DAO to buy the Constitution. Like I even was trying to support that, because I thought it was kind of cool, you know, and they almost got it. I mean, they were down to the last two bidders. And so yeah, it's gone already gone way beyond just art.

Joanne Tan 22:57
Now, what's the relationship between NFT and crypto currency?

Patrick Lee 23:03
Cryptocurrency, again, I'm not like the expert on this. But I think when people think of cryptocurrency, they're thinking of, like, fungible tokens where basically like one bitcoin is the same as any other Bitcoin, or like $1 is the same as any other dollar. But with NFTs, they're non fungible, they're unique. So if I hold this NFT and you hold an NFT, even if they're like the, they look the same, they're actually different copies of it. And so it's sort of like if we each if if you had a CD and I had the same you know, album in CD form, they're they're actually separate things.

Joanne Tan 24:02
There are people who are diehard cynicists of cryptocurrency, of Bitcoin, I just say Bitcoin, they call Bitcoin the Dutch tulip. They know it's in their mind, it's going to be vanished. They don't see any intrinsic value. Okay so, from their mindset, if their cynicism about Bitcoin is at level 1 to 10, at 5, okay, is NFT in their mind, going to be seven, six above the Bitcoin? If they doubt Bitcoin, as Dutch tulips, are they going to doubt NFT as something like Dutch tulips times five or something? You know what I mean? Because they think the value you're creating is all in your mind!

Patrick Lee 25:07
Are you done with question?

Joanne Tan 25:09
Yeah, so that's a question. Because my audience have very enthusiastic endorsers and owners of NFT, and Bitcoins. And there are very severe doubt, Doubting Thomases, and those who, you know, categorize them as all Dutch tulips, speculatives?

Patrick Lee 25:35
Yeah, I mean, again, I'm not an expert on this, I'm relatively new to kind of believing at least some parts of it. And there are other folks out there who are probably much more able to kind of talk about the value of things. But I would say, if you look at almost any technology, you have doubters, what I would say is, there have been people who have doubted, like, you know, every technology, you go back, you'll see, you can find very smart folks who, who doubted personal computers, you can see a lot of people who doubted the internet. And when things crashed hard, in the beginning of 2000, lots of folks were like I told you, so see, well, guess what, like, look what's happened with both of those things. They're huge.

I can't guarantee that this can happen in this situation. But anytime you're gonna have doubters, and even when it crashes, and I do think there will probably be a crash, or two or multiple crashes, they're gonna come out and say: "see?", but a lot of it is, if it works, you know, how big could this be? And if this is essentially like the next internet, in terms of how big it could be, then the people who did believe in it, who came in early, are going to be the next, you know, Facebook, and Google and Microsoft and Apple and those kinds of companies. That's what happened every time. Microsoft and Apple came out of personal computers, Google, and Facebook came out of an Amazon, now the internet, you know, huge companies came out of mobile, huge companies are going to come out of like, AI.

Joanne Tan 27:32
Right, that's true.

Patrick Lee 27:33
Huge companies, I mean, have already come out of like blockchain and Web3, and will continue to come out. And if this actually ends up where people, you know, the positive people think, then these companies may be, you know, really like the next giant companies, you know, controlling technology in the future.

Joanne Tan 28:00
Okay.

Patrick Lee 28:01
I think for people who are negative, it's great. Let them be negative, to be honest, but you don't really take any risk if you're negative, and if you're right, you're right, but it doesn't, doesn't get you anywhere. If you're right, when it's when you're positive about something and you're willing to take that risk in that bet. And if you're right, then then you can see a huge payoff.

Joanne Tan 28:25
Right. So NFT depends on cryptocurrencies for trading, right? I mean, just to mint an NFT, you need to be owning Aetherium. And then you however you do with the exchange from your wallet, and you got to pay the gas fee and whatever. In China, remember, the government just outlawed all cryptocurrencies, just like that. Now, once you pull the rug from under your feet, well, that's, that's the end of NFT. That's the end of crypto. That's the end of everything. So I don't think the American government will ever do that. Is there any truth to the speculative nature to NFT and, and its foundation? That's cryptocurrency? Can you call it this is 100% genie out of a bottle? It's not going to go back? Or is there any chance that it is speculative?

Patrick Lee 29:41
Um, again, I really do think if you want to be asking so many questions around blockchain and NFTs and Web3, you're really talking to the wrong person.

Joanne Tan 29:52
No, you should be putting on so much better...

Patrick Lee 29:54
Than that is, you know, like, I did Rotten Tomatoes. You know, generally people ask me about movies and things like that. So that would be my first comment. But I would say, you know, with China with these other things, I mean, I think it's already out, it's decentralized, you know, I don't think it can be necessarily put back. And, again, when the internet was getting big, you had all these companies in the late 90s, who were going IPO, that were, you know, pretty crappy companies. And again, when it crashed, everyone's like, hey, there's, these are all scams, these are just companies with no revenue, etc. Right. And you're seeing a lot of that now, with crypto, you're seeing a lot of scammers. A lot of hackers like a crazy amount.

But it doesn't mean that there isn't some good being made out of it. Like one thing that happened in 2000, with the internet, when it crashed, all those books got out of there. You know, there wasn't money to be easy money to be made anymore. They got rid of all the bad actors, and the ones that are actually quality companies at the time, like Amazon, for example, survived and, and thrived.

Joanne Tan 31:13
Right.

Patrick Lee 31:13
And I think the same thing is gonna happen, I do think there'll be a crash or multiple crashes. And it will probably flush out a lot of the bad players, they will hopefully make people smarter, when they're investing into companies in Web3, or buying NFTs are things to be smarter about what they're putting money into, and not just throwing money anywhere speculating. So I think those things are still going to happen.

Joanne Tan 31:38
Right? I have an easier question for you. Okay. I wish I could say NFT utilizes the blockchain technology, but is not crypto dependent. But it is crypto dependent. So this survival and thriving of NFT does depend on the survival and thriving of cryptocurrency. Okay, so those go hand in hand. Now, I do want to, I would like you to answer some questions about the future of movie and entertainment in the context of metaverse. That's AI, AR and VR. You are investing in the future of technology and entertainment. So could you spare some insights, some vision about the future of entertainment with technology?

Patrick Lee 32:41
Yeah, I mean, I think if you're talking as far as Metaverse in the best case scenario, you know, people have already envisioned it. On screen, you know, you look at things like Ready Player One, or the even better case scenario of like, the Matrix. And that's kind of like the ultimate version of of like a metaverse. But I would say, on a practical level, I have a very loose definition of Metaverse, which to me is, you know, almost anything, kind of digital, remote virtual, in some ways. With all of us these days, we're not actually meeting physically in person. We're doing things over Zoom. We're interacting on social media on Instagram, and all these messaging apps on Facebook, on you, you know, watching each other on YouTube, on Twitch. And so I think already people are essentially in sort of like, the beta version of the metaverse. They're playing games together. Many, many of the most popular games these days are synchronous multiplayer games, you're playing with actual other human players. And so Metaverse is just something that potentially can tie it together even more closely.

You know, when you think about things like crypto and NFTs, the fact that maybe you will be able to have your character or your skins or some item in one game or one virtual world that you can pull to another place, you know, that you may have be able to have a persistent identity that you can kind of carry between different places. And so I think a lot more stuff will continue to move online. It's already crazy. Like I barely buy anything in person, especially after COVID like almost everything is online through Amazon or delivered. Even my groceries are delivered, you know, and I think, again, this stuff is all moving that direction to me. Metaverse doesn't have to be VR, AR you know, I think your phone like any thing with an internet connection, you know, is basically already kind of plugged into the Internet which is to me is like almost like a form of metaverse.

As far as entertainment and stuff goes, I think, one, you're going to see a lot more AI playing a bigger and bigger part moving forward, whether it's, you know, NPCs, non player characters in games, I think potentially, there could be versions where games and movies are going to potentially get closer and closer together, where maybe you might be able to, you know, even now you can, in VR, you can kind of watch short movies through the perspective of the main character, and potentially with AI, and other stuff. And as game technologies improve, you might be able to even be the main character in a movie, to actually be able to influence the movie in some way. And I think that kind of stuff will be incredibly interesting. You know, it's probably still a bit far off, but I can definitely see that in the future.

Joanne Tan 35:56
Sounds very interesting. Now. That's what you are going to continue to do for the next 10 years, 20 years? I mean, what's your vision of your, I mean, you're still very young. And I can see that you will be always in technology, innovation, and entertainment. So can you can you share with us what your envision your, your goal, your career, your life is going to be?

Patrick Lee 36:30
I mean, I think right now, with the transition of doing startups, I had done six startups over 23 years, and, you know, to be honest, got kind of burned out on that. Now, with this investment Syndicate, I'm investing into, like the future investing into the next wave of companies at the intersection of tech and entertainment. And I believe this is the likely direction, I will continue to go, you know, supporting these companies, through advice through connections through funding. And, and kind of helping to mentor them and shepherd them towards towards the future, I think that's the likely path.

For me. Another area I believe, very strongly in that I think is incredibly important is around education. And, and that's an area I also want to try and support. And I believe, you know, again, if we could somehow scale education to the point where, you know, everyone on the planet could get a high quality college level education, you know, for free, or even get paid to do so. Like, what the world would be a completely completely different place, if that were to happen. Right. And I believe that almost every problem that we have on the planet is due to a lack of education. Because lack of education is a lack of opportunities, lack of understanding, and these other things. And so that's an area also that I believe very strongly in and want to try to figure out a way to support.

Joanne Tan 37:57
Do you see NFT Web3, Metaverse will contribute to that goal of advancing education globally?

Patrick Lee 38:09
Yeah, absolutely. I in two ways, one Metaverse, I think, ultimately, education is not going to be the traditional one teacher 30 students in a classroom kind of model. I think that doesn't scale well to the whole world. I do think it'll be something closer to Metaverse, or even now you see with internet, I mean, just between Wikipedia and YouTube alone, how much knowledge is there, you can look up almost anything already. And that's two sites.

And if you take the top 100 sites in terms of content, and you look at things like Coursera, Masterclass, and other stuff, it's like, off the charts in terms of how much info there is, a lot of it's like organizing it, using AI to customize that for each individual student, each person and you don't have to stop learning, when you're a child, you can still learn as an adult, there's still a lot of things that a lot of people don't know. Right? And NFT's and Web3, I think also play a part, you look at things like Axie Infinity, their model is play to earn. And you have again, like these grandparents in the Philippines who are grinding a game that they probably don't care anything about so they can make a living.

You know, what if you had learn-to-earn, where instead of grinding a game, they're learning they're studying. And, and by grinding, in that studying by basically doing that, those lessons and stuff, they're actually earning a token or NFTs that can actually be converted into money. And ideally, you could get the rich people in the world to be paying the poor people to learn. Like, wouldn't that fix a lot of things? These are things that potentially could be done through NFTs, through Web3, through Metaverse.

Joanne Tan 40:00
It has far reaching profound impact in revolutionising the education, the traditional way of education, and equalisation, you know, there's going to be more equality, because once you really promote education, that's the stepping stone to equality. And also charity, and how do you do charity? And you can intertwine that with gaming because education can be through gaming's, you know, to some extent instead of just this top down traditional, you know, spoon feeding manner. So this is fascinating. There's no end to this.

So I agree with you, as a matter of fact, okay, that the genie is out of the bottle, those countries, they shut down to new technology, eventually they're going to be really behind. Okay, and crypto, digital currency, freedom, trust, and whatever the new wave of economy built on this, because after all, NFT is built on this blockchain crypto, you know, this technology is going to profoundly change our world for the better. On a pessimistic note, - okay, I always have to balance it, what are the dangers you envision with this technology?

Patrick Lee 41:33
I mean, I would say the biggest danger right now is it's just in terms of scams, in terms of hackers, things like that. I mean, it's pretty much a weekly basis, you hear about some, some service getting hacked, or, or people getting scammed and losing, you know, hundreds of 1000s millions of dollars, 10s of millions of dollars. And I think that is definitely something that's going to be happening a lot. And so people have to be really careful again, when they're investing or buying into cryptocurrencies or tokens, you have to make sure their stuff is properly protected. It's even clicking a link can be dangerous, you had scams beforehand where people were doing it through phone and then through email scams, this is just the next iteration of it. I think in short term, that's probably I think the biggest concerns.

Joanne Tan 42:26
Yes, yes. And blockchain hopefully will come to the rescue, for lack of a better word. Because blockchain is traceable, you know, it's transparent. So, but that's another... last question. So, last question about this area. Okay. So, to summarize, what does Patrick Lees' brand stand for?

Patrick Lee 42:52
Um, I, I like to think about myself as someone who's quite open to connecting with people try to be supportive, to help mentor and give advice around business or life or other things, and to try to just, you know, help everyone move in, like a positive direction.

Joanne Tan 43:14
Okay. So can I summarize it within less than five words? "Always for the better".

Patrick Lee 43:24
Sure, yeah. That sounds that sounds good.

Joanne Tan 43:27
It's your you believe the world will be better. So you do it always for the better. You're not settled at current status quo. You always want to do it for the better. Okay, thank you. That's my parting gift to you. Thank you so much. My great pleasure having you.

Patrick Lee 43:42
Yeah, thanks so much for having me. Joanne. Really nice doing this interview with you. Thank you.

Joanne Tan 43:48
Okay. Thanks, talk to you later, Bye!

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Commercial & residential real estate market in California 2022 – how remote working, housing shortages, governmental policies change investment considerations, building locations, and the Silicon Valley. – where, what, why.

At the end of this interview, Joanne Z. Tan, Branding Expert at 10 Plus Brand, Inc. summarized what the Republic Urban Properties’ brand stands for, based on its president Micael Van Every’s stories: “Build landmarks. Define neighborhoods”, during the interviewing on Oct. 5, 2021, for the series of Interview of the Notables and Influencers.

Joanne Tan 0:00
I have here, Michael Van Every, my honored guest, welcome! for 15 years Michael Van Every has been the president of Republic Urban Properties (RUB, for short,) one of the largest commercial California real estate developers in Silicon Valley, which is also the Bay Area flagship of the Republic Family of Companies known for developing institutional quality real estate throughout the United States.

Michael works with federal, state and local governments on the creation and development of smart growth projects, such as master planned communities near transportation hubs, urban mixed use projects near major employment centers, and innovative public private partnerships. He has 25 years of representing major institutional and private real estate developers in the greater San Francisco Bay Area. Michael has led complicated projects from land acquisition to completion.

Under his leadership RUP has gained national attention for its transit oriented development at key transit stations. Working as the premier public private partner with many transit authorities across California, Mike has been involved with the planning, financing, construction and delivery of 1238 multifamily units and 145,000 square feet of mixed use commercial space, 380 hotel rooms, 151,000 square feet of office and 120,000 square feet of retail in various stages of development at 1.5 billion in value.

A third generation San Jose native, Michael is an active member of the Silicon Valley leadership group.

Very shortly about myself: I am the president and CEO of 10 plus brand Inc. It’s a full service brand building, content creation and digital marketing agency. We are an award winning agency in the San Francisco Bay Area.

Okay, first question, Mike:

Tell us about yourself, your personal stories, your family, why do you do what you do? How did you journey end up here? And where is it going?

Michael Van Every 3:06
Well, thank you, Joanne. And thank you for having me on this wonderful podcast. I appreciate it. So as you mentioned in my bio, I’m a third generation San Jose resident. My family is deeply rooted in the South Bay, specifically San Jose. And they were immigrants from Italy on my mom’s side, which various still a very prominent kind of immigration here in the South Bay. And with that, they were grocery clerks. They were a grocery store owners, they were bakers. And they arrived here in the early 1900’s on my mom’s side, and owned small businesses very similar to many great immigrant groups in this wonderful country we live in.

My father’s family came from, really from the east in Nebraska, they were actually back residents of the United States back in its early infancy in the revolutionary days and migrated westward as expansion and opportunity happened here in California. My dad’s side, our iron workers and house Movers. And so the combination of those two families from my mom and dad side had deep influence into my life, whether it’s working in or owning a grocery store, and you know, that kind of blue collar route that really drove me to respect how hard people work, but also, as a younger man seek educational opportunities. And it just so happened that the real estate industry combines all of those facets. It combines a blue collar workforce, with a white collar direction, understanding how much money and time it takes to build things.

As far as where I’m at, I love my job as the managing partner here of Republic Urban Properties, and where we’re going is a continued investment in the South Bay in the greater Bay Area. My family’s rooted here, we’re actually moving our corporate headquarters from downtown San Jose, where we’re currently filming this podcast into the willow Glen business district, where we’ll construct 15,000 foot building, $11 million, 8000 square feet for our offices, and then a 6000 square foot rooftop restaurant, which I’m very proud of. So where we’re going as another 10-15 years at least with Republic, depending on our pipeline, and we’re excited to continue to move through this stage of the California real estate industry.

Joanne Tan 5:39

What is the most important thing that you value?

Michael Van Every 5:44
You know, I value integrity. And I think to be a respected real estate professional, a marketing professional, in the world of social media, where there’s a lot of misinformation, I think the real estate industry has always provided an opportunity that if you have integrity, and you develop what you promise and you deliver that to the community, to the financial markets, that gives you the integrity that people desire, and also helps shape your brand.

Joanne Tan 6:20

What are your biggest accomplishments, and the biggest learning lessons/ failures?

Michael Van Every 6:29
What my most recent accomplishment that I’m very proud of, and that is, we accomplished in 2019 is the gateway at Millbrae station project, which is 400 units of housing 150,000 feet of office, 165 key Marriott Residence Inn with mixed use of about 44,000 square feet of retail, roughly about a half billion dollars of construction costs. But one stabilized probably $2 billion worth of valuations. It started in 2013. And it kicked off construction in 2019. Very long journey and a public private partnership. But very satisfying, because our partners, they are Bay Area Rapid Transit – BART, and as well as the city of Millbrae. And I think that’s something that we as a company are excited about that. It’s been a long endeavor, but it’s very fruitful as it finishes and opens here in 2022.

My failures, I would say that, I try to minimize those. But nevertheless, in real estate, you’re always going to have hopefully many successes, a few failures. And you know, that probably would go with some of our retail investment. Especially we have a large project, which we love the location off of the 580 and El charro in Livermore called Republic Square. It’s a wonderful, wonderful location, but because of the times, retail, specifically, restaurants are very difficult to lease. So I’m not going to call it a failure, but it’s been a challenge. And so, you know, but again, that’s the boom bust nature of real estate.

Joanne Tan 8:18

COVID: how is it affecting commercial and residential real estate development, – office buildings, retails, hotels, apartments, housing projects, public transit, mixed use projects, etc? How do you view the new remote work impacting new commercial office development?

Michael Van Every 8:41
Yes, and that’s an excellent question. Joanne. You know, remote work is a real catch 22 for the commercial real estate industry. It is a hindrance, for office. It is a hindrance for retail, especially new retail development. I mentioned Livermore, and it’s a hindrance for hotel. And so I think when we look back 10 years from now, all of us will probably say that we overreacted to the pandemic. In other words, limiting small business, limits retail, – it by nature shuts down hundreds of thousands of square feet. It has …the remote work has affected how companies now view their office buildings.

Well, office buildings typically are located in downtown cores. Downtown cores are served by transit, transit now is severely impacted, you know, through the pandemic. Now some would argue that’s a good thing. We have less traffic.

However, we’ve invested billions upon billions of dollars of public money into very rapid transit, into the valley transportation system. And into our freeways and infrastructure. And with the idea that commercial real estate, specifically office and retail would locate in these downtown cores. And that would be joined by new transit development, apartments, hotels and other things to support convention centers, to support small business.

And so the pandemic has absolutely taken a massive chunk out of the commercial real estate industry. Now, will it come back to full strength? I don’t think it ever will, especially for retail. I do think that there will be a rethinking of corporate campuses, moving forward that hybrid work systems will be more of the norm in the future. It remains to be seen what the demand for commercial real estate will be in the office, retail, and hotel asset classes. But clearly COVID has had a severe effect.

Joanne Tan 10:53

When you say downtown “corridors”? it’s “corridors”, right?

Michael Van Every 10:59
Downtown core. C O R E. For example, downtown San Jose, the core would be around the convention center, the Fairmont Hotel, you would look at Union Square in San Francisco, or, of course, the business district there on California Street in San Francisco, have been severely affected by COVID.

Joanne Tan 11:25
Yeah. Lots gonna change now,

Will the future development of office space, have habitation space associated with it?

Michael Van Every 11:45
Sure. Um, I think mixed use of all types. office with hotel has been has been done in major cities like San Francisco, Los Angeles, office and apartments have had, you know, mixed use components as as well. I would say yes, but I’d also say that the cost side of those are very difficult to accomplish. And typically, you see those in high rise developments. And I think that high rise developments in the near term are a little cloudy, with construction costs, and of course, who is going to be your office tenant?

I do think apartments as standalone will continue.

To further illustrate your question: We will see potentially the conversion of office in the habitat into residential units. I do see that as a possibility. Because there are some large cities like New York, for example, there’s a number of projects being considered as you know, trying to transitioning from an office to a residential property. And look, that might be a good strategy to tackle affordable housing. If you have an existing structure and there is public money available, it might be the solution to house people at a cheaper cost than the millions and millions of dollars, that it takes hundreds of millions to build affordable housing.

Joanne Tan 13:13
Yes, always a silver lining, given whatever the change is, you know, the pandemic induced or not, because affordable housing has always been a really big problem for all major cities in the United States.

Okay, number six:

Wildfires, climate change, California’s water shortage, how are these three things impacting both commercial and residential real estate development?

Michael Van Every 13:40
So natural disasters and the ones you mentioned specifically have a material effect on commodity pricing and labor and in specifically the wildfires have been, you know, devastating from a quality of life, you know, day to day, but it also a real effect when it when it affects properties and structures. When we saw the destruction that past wildfires have done in places like Sonoma County and other places like that, it’s drove up commodity pricing like wood. And of course, labor that goes with some of that commodity pricing is greatly affected the ability to have as affordable pricing as you can.

So you couple the natural disasters with the manmade disasters of the pandemic, it kind of creates a perfect storm for new construction. And at a recent conference hosted by Marcus and Millichap, it’s evident that to to build a new podium project, a wood frame, say four stories over a podium structure, we can’t achieve the financing metrics to make a bank or an equity investor attracted into that deal. So these natural disasters just again, contribute to the already manmade issues that we’ve created. And it’s tough in especially in California, Florida, and there’s other places that might be affected by hurricanes or tornadoes or flooding, it’s a serious issue, and it all ties back to the cost of construction.

Joanne Tan 15:26
So the labor is in shortage, the materials are priced higher than before, and the supply chain is broken, and that makes the price goes even further. So it’s getting more and more costly to build commercial or residential, yet the demand for at least the residential housing is increasing, because more people are working remotely, so they want a comfortable place, an affordable place to live. Now, so that makes the real estate, – I mean, it’s going to be always more in demand, less in supply.

Michael Van Every 16:04
True.

Joanne Tan 16:04
But places like Paradise or Lake Tahoe where the wildfires burned, you know, so many acres, and houses are all burned, do you think people will go back in the same place and build again? Just to be burned? Again? I mean, are people choosing less hazardous places to build both residential and commercial buildings?

Michael Van Every 16:34
I don’t think it’s the choice. I think given the choice of the consumer, they’ll choose to go back to those locations. The question becomes that of how do you serve that consumer, for example, Pacific Gas and Electric, which, sadly, it has been the reason for some of these fires, and again, I think pg&e is, is doing the best job they can reasonably to stay on top of these natural disasters. But nevertheless, the question should be asked: Do we want to extend services in remote locations to serve the demand of housing, and that may be is not for me to answer, that’s probably for our governors, and our Board of Supervisors, and our city council’s. But also, it’s not just the services of power, that, can, …is there water supply also in those locations that can also serve these residents? It is an issue. And then of course, the last part of that is the cost. And in some cases, insurance agencies will not fund or provide insurance, especially fire in these hazardous zones.

So I do believe that, again, this gets back to why we’ve had the strategy of building in our downtown cores, and that we want to live in nodes and, and villages that allow for us to get out of the automobile, where power is abundant. And solar energy can be provided in a mass kind of situation. So I do think that building remote will become a less and less strategy to house people. But again, given the consumer, anyone would say I’d love to live in Lake Tahoe, if I could afford it.

Joanne Tan 18:22
Okay, so number seven:

Silicon Valley is full of world’s largest monopolies such as Google, Facebook, you know, Google has been buying land in the valley pretty aggressively. How has that impacted your business?

Michael Van Every 18:39
Excellent question. It has driven land costs are extraordinarily high. If you go back to the Trump administration, when he took the presidency, and the Republicans took control of Congress, you know, about six years ago, there was repatriation of a lot of offshore money by the high tech companies. And we’re talking billions and billions of dollars that would have otherwise went into an Irish bank offshore to be protected from you know, capital gains taxes. And what happened was when that the deal occurred, and people, companies like Facebook, Google, Apple and others have been investing in the United States into properties, especially in the Bay Area in California, New York’s a great example and Hudson Yards.

And what has happened is that they’ve come in, and they’ve created a lot of speculation with them in the case of San Jose, where you could buy land for, you know, maybe $40 a foot in the Midtown area of San Jose, now sells for $150 – $200 a foot in a matter of years. So the speculative nature that high tech and their investment or commercial property is created, it’s not unusual, I mean that’s something that you want to see investment and valuation created by these investments by tech.

But what it has done, is it has, you know, depending on what side of the aisle you’re on, politically speaking, there is an issue of equity. And then there’s an issue of who’s going to move into these locations. And that’s been a central debate in cities like San Jose as Google as planned their campus. But in the case of San Jose, and in the case of the Google investment, they have created a relatively good plan to address equity issues, and to address the new development that will come in to benefit the entire city, and most importantly, the economy in general in San Jose, but it has, – the investment by high tech, has absolutely affected almost every aspect of real estate development in the major metropolitan areas.

Joanne Tan 20:59

What messages do you have for Silicon Valley giants like Google, Apple, Facebook, Cisco, Oracle, related to the current COVID remote working situations, and related to all their other monopolistic powers in the more-than-COVID-return-to-work issues?

Michael Van Every 21:21
Get back to work! Get your employees back to work! We’re running that in the high 70s, have vaccinated people and mandate vaccinations and try to restore faith in the fact that, you know, we will never… COVID will always be here in one shape or form. But that we now have ways to deal with COVID. The first way is to get vaccinated. And I think that as you’re seeing across the country, mandates will likely be here to stay. And to your point, if you’re a monopoly, and in this case, some of these companies could be monopolies, I wouldn’t go that far, but then you should mandate people to get back to work.

I don’t believe this remote work is a sustainable business plan, despite the employee, you know, acknowledgement or influence that this is a better way for them to work. I do not believe that at all. And I think that ultimately there will be wrought with challenges of production. I also think that it could be a… as people work more from home, it will allow Silicon Valley to make deeper cuts, potentially. if there are layoffs, I fear for those people that think that working from home is the panacea for the long term because there’s not enough… innovation is done when you are working with other people.

And it’s not working over a virtual platform, which you and I are doing, I think this platform for a podcast or a video cast or you know, a meeting where you’re, you know, you’re not, you’re spending time, instead of traveling on a plane, you’re going to spend time having this conversation, and obviously there’s a value there for travel travel dollars.

But from a day in and day out perspective, I just don’t understand why we’re not looking to get people back in their offices, that also will provide more jobs and support services. You know, people forget that a lot of these large campuses have janitors. They have, you know, cooks and employees that support the large companies like Facebook and Apple. And those people right now are trying to… they don’t know if they’re going to have jobs, which means we could lose them out of the region forever. And we already have a problem finding people to do all sorts of jobs that are not high tech, you know, $200,000 a year. So it creates more digital divide and more social equity issues. And yet Silicon Valley is promoting a virtual workplace.

So I’ve always had a problem with Silicon Valley also in that, with the very few exceptions, they’re not very generous individually. You do not see large parks or, you know, new theaters built after billionaires as they did in the turn of the century, when you had the Rockefeller and the print spurs and the others that built monuments to cities, to people in these cities, to foster arts and education. A lot does happen and I’m probably generalizing it. But I’d like to see some of these high net worth folks that make zillions in the stock market, turn around and say, You know what, I’m going to help this school district. I’m going to build This Art Center, I’m going to fix this community issue here. It’s very spread out, and it’s very self interested based upon their tax situation.

So my message is Silicon Valley is stopped being so cheap, and invest in your communities.

Joanne Tan 25:16
Excellent point. And internally, it’s good for them. Because culture building, team building, – you need to have in-person contact. And that’s how we met, you know, we met at the Silicon Valley Chamber of Commerce event, it was in person, and then we chatted, and we followed up, – I cannot imagine meeting you solely virtually, and I’d be interested in what you’re doing.

And you’re absolutely right, those monopolies, they have responsibilities to the communities, they have responsibilities to the economy, okay, it’s not just them, you know, just whatever it is best for their bottom line, their bottom line is linked, is related to the prosperity, to the vibrancy of the community, there is a whole community of supportive services.

So they need to really have a sense of urgency, they need to play the leadership role, not just the bottom line, okay. And in the long term, the bottom line will be negatively affected if they keep this kind of a remote working model. Because people are social animals, they need interaction, they need, … innovation is a contact sport, you got to be in the contact of others to stimulate growth and have innovative ideas.

Okay, so, that’s in their monopoly power, they’d better put it to the best use, post pandemic as well. Okay. Number nine:

With your deep roots in Silicon Valley for generations, what, in your experience, makes or breaks your deals in the valley?

Michael Van Every 27:08
I think the integrity that I mentioned prior, and the ability to demonstrate a record of success, has to be the baseline for any good real estate developer. And we’ve got some really good ones here in the South Bay, as we do in the Bay Area. And so it’s a very fierce competition to get those prize properties. And so for someone like myself and Republic, I think that one of our advantages is because I am a third generation San Jose, and that I’m very comfortable with the politics and the neighborhood, you know, matters, that you have to work through, those are just part of my job.

And that we work very hard in the community. We, you know, you mentioned philanthropy, in our last conversation, Republic Urban Properties is in the top 50 of philanthropic organizations in the entire Bay Area. And we’re ahead of companies like it, believe it or not Clorox, which is a multi billion dollar company. And so we use that philanthropy platform, to make sure that we promote and practice what we preach, and that we value education and children, that we want solutions to house people of all types, that we want to make sure that community based organizations are successful, and that we’re partnered with them in the right way that has nothing to do with profit.

And I think that separates Republic Urban Properties from other people, where you can say, well, hey, you did great on that project, you made millions of dollars, congratulations, all the investors made a bunch of money. The question is, what do we do with that money? And where did it go? Did it go back to an organization outside of the Bay Area, or even outside of the country? And the answer’s no, those those dollars continue to stay local, and they continue to recirculate not just for profit reasons, but also for nonprofit reasons that really go to my core values as a Catholic and as a Jesuit, that we need to teach children, but we need to teach people how to be generous, not just with their money, but with their time, and of course with other people. So I think that would separate Republic a little bit, obviously, I’d like to think so. Again, that’s not something that we we try to promote, we try to make you understand by what we’re doing, and so we hope people will follow our lead.

Joanne Tan 29:40
You just answered my last question: What does your brand stand for? That was an excellent answer. Okay. So I’m quoting you,

You said: “The government is 100% responsible for the housing shortage.” Please explain why.

Michael Van Every 29:57
Well, it’s like anything else. It’s regulated 100%. So in other words, I can’t,…there are some cities like Houston, that you can build anything you want, really whenever you want. But that’s not the case in California. And we’re governed by local jurisdictions, the state of California has helped us a little bit by accelerating state bills, which put requirements on local government to prove more housing. But make no mistake, in a lot of cases, even when you get a government approval, like a city council approval for an apartment complex, that could be sued. And that could end up in the court system. And you could lose the entire project.

But yes, real estate development, and the demand for housing is 120% impacted, I’ll add another 20% to the 100, by local government, and it is why California real estate has consistently under approved new housing units. I mean, realistically, the state of California should do 200,000- 300,000 housing units a year, we typically do a little over 100,000. And depending on the economy, it could be less than that. And so that, … and yet we have 40 million people living here, with many more that come in, through migration, you know, internationally. and then, of course, nationally, in addition to illegal immigration, that happens in droves as well.

So all of those contributing factors, and then you’re relying upon a local city council to approve things? And then how long it takes to get that approval? So yeah, it’s in some regards, like the pandemic, it’s a self inflicted gunshot wound that we consistently shoot ourselves with, and put ourselves behind in the production of housing. I think people are working hard more than ever, our governor, our legislator, we have amazing housing advocates, I don’t want to make it as an anti government platform. But the numbers do equal the lack of supply of housing, and that is a result of government.

Joanne Tan 32:08
Yes. Now we have a message for the California legislators, they need to be really tackling this issue of over regulation, and streamline the permit approval process, and make it the state issue rather than just local municipalities’ issue. A lot of talk, they are keenly aware of the housing shortage, you know, it’s just get it done, you know, get it done!

Alright. So, number 11:

Will increase in warehouses due to the so called Amazon effect permanently continue, while the decrease in brick and mortar retail services last beyond the pandemic?

Michael Van Every 32:56
So anecdotally, I got tired of shopping online the other day, and I decided I’d go with my beautiful wife, Jennifer, and we went to Santana Row and to Westgate shopping there, Valley fair, had a great time, I really miss being out and shopping at a storefront location, and enjoyed that experience immensely. And yet, and that made me to your question, it is becoming a an endangered kind of commercial asset that is the brick and mortar, you know, small business retail, it’s very difficult. And most of those places that I shop that we’re all, you know, larger, you know, well funded, in some cases, international brands.

And so, if there’s no incentive to open up a hobby shop, a toy store, in some cases, even a grocery store now, you know, understanding that Amazon really fulfills, you know, an electronic, you know, good or service and not so much a service, but any kind of goods that you’re looking to purchase can be done within a second and a click. And so I don’t think you’re ever going to win that struggle against Amazon.

I think what we need to do is, we need to continue to work with Amazon and these others, the Walmart’s and others, and really, like they do with housing, mandate that they provide a certain amount of a small business with their locations. For example, Amazon is now starting to put more storefront operations in some of their industrial warehouses, for example, the boxes that you receive, they’re now looking to encourage you to return those there. And then they’ll have some storefront shopping opportunities, where you might say, Hey, you know, I need to pick up this or that, and Amazon provides that location. And maybe Amazon allows a small minority owned business to actually lease that space and run that operation for them.

I think if we start to get that kind of cooperation from these larger big box, instead of just consuming and swallowing up the small businesses as an example, my family used to own 10 grocery stores in the greater San Jose metropolitan area, as the larger Safeways and others began to expand in the superstores, and then Walmart came into the area, my family’s grocery stores could no longer compete. And they were slightly mismanaged in their own right through second generations. But nevertheless, that didn’t help the macro strategy of the Amazons and Safeways and others and Walmart’s have moved in.

So I think that there’s got to be… a government should look to potentially regulate some of this. But it’s difficult because in the free market system, and when every city is chasing sales tax dollars to fund their general funds, which repairs potholes, which funds, the police and fire, when you have local government chasing sales tax dollars, they don’t really care, they just want more sales tax dollars. So the idea of an Amazon having a warehouse there, and sales that might come out of that warehouse, potentially, that’s fine with them, that the government, maybe the local government, so it’s a real conundrum.

And I’m not sure that local government has the expertise to really govern and create better opportunities for this, it might have to come out of the state someday. But for now, it’s a losing war. If you’re a small business, you’re lucky to be around and you’re probably not going to be around for the long term.

Joanne Tan 36:43
Is that same reason for the dying of malls, shopping malls? Same reason?

Michael Van Every 36:50
Yes.

Joanne Tan 36:50
Because …what’s inside a shopping mall are all these mama papa, brick and mortar stores! Wow.

Michael Van Every 36:59
Yeah.

Joanne Tan 36:59
Okay. 12:

What are the challenges for realizing internal return on investment, (ROI) for real estate investors?

Michael Van Every 37:11
Yeah, great question. It’s all about cost right now. Joanne, it’s … we want to achieve on a commercial apartment, new development, 250 units as an example, over a podium project, save up two or three stories, you know that that projects probably going to cost $150 million on average, okay, you want to get a return on cost of about five and a half percent, 5 – 5% return on costs, which means your internal rate of return should be around 20 – 25%. And that’s difficult to do right now, because we can only charge so much rent, with, you know, construction costs continually rising, and that’s where we’re at right now we’re at a standstill for new construction. I mean, you’re seeing some construction here or there, a lot of that was probably done in 2019. Some of that’s affordable housing.

But as far as starting new apartment projects now in like San Jose, San Francisco, Oakland, Walnut Creek, the major cores, with the cost of construction, it’s virtually impossible. And we’re all sitting around now asking ourselves, when is this going to change? Well, we know this, we know that we can’t push rents that much further, understanding that we have the highest rents in the nation, in some cases, the world. And so we keep looking to the fact that maybe we’ll get a better deal on construction costs. Yeah, we have inflation. We have supply chain issues. We have labor, you know, rate issues. So for now, we’re again in that perfect storm of rents being capped, construction costs still rising, and we’re not able to move to that next level.

And that’s… what’s that doing now is it’s causing companies like myself to look outside of the of the nine county Bay Area and maybe in more built-for-rent opportunities in places like Fairfield, or Sacramento, when I mean by built for rent is townhomes for rent, single family homes for rent. That seems to be where the industry is moving for the time being. But again, as someone like myself would much rather be building in my hometown, a mixed use project that I could deliver. And yet I’m not able to do that right now. And candidly, here we are in 2021, q4, I do not see a pathway to do that in 2022.

Joanne Tan 39:42
That is profoundly impacting the future of Silicon Valley. Because, well, a couple of years ago, there was already a lot of exodus from Silicon Valley. Very good companies moving out of state to Utah, to Texas, you know, Nebraska. Well, I don’t see any reversal of that trend based on what you just described.

Imagine yourself as someone with money to invest in real estate, what would you invest in right now, industrial properties such as warehouses, residential townhouses or duplexes triplexes, quadplexes, or single family homes for rent, land only?…

Michael Van Every 40:34
Wow, um, if I were to invest personally, I would look for, you know, opportunities in built for rent in some of these off market locations that I mentioned, Fairfield, Hollister, Salinas, Vacaville, the Sacramento area, even Manteca, in places like that. But I would look in areas that are supported by a very good infrastructure. I still like the train stations, and there are train stations. And the Capitol corridor, for example, is a good line that a lot of people can take Sacramento in the Bay Area. I do like those built for rent opportunities.

I do think that industrial has, especially existing industrial, if you can find a core location, like San Jose, for example, or, you know, even parts of Santa Clara would be another great example, and you find a 50,000 – 100,000 foot warehouse, there will always be the need for those uses inside the core. And those are excellent long term investments for families that maybe are looking to do a 1031 exchange, maybe into that product. I also would say that there are some great shopping center locations, that while retail, you know, is still a little down, there are some great existing locations and services that you’ll consistently need from now to the end of time anchored by grocery stores, and then the ancillary uses that would go with the grocery store anchor, I do think those are good, you know, infill opportunities.

Last but not least, I am a believer still in apartment projects and of all types. And making sure that you’re working with the right developer, like a Republic, that maybe like, for example, we have a friends and family program. And we do preferred interest versus ownership, which is more risky. So if you look for, like preferred interest into real estate projects, there are still 7 – 12% returns that you can achieve on your money on a yearly compounded basis that are out there.

But you know, real estate is still the best investment, I have a 1030, I have a I have a 401k, I have some stock portfolio, but I look at it and say, Oh, God, I guess this works. And I guess the stock market’s going to do its thing. Whereas with real estate, I can own it, I can control it, I can live it. And it’s just fun. And frankly, it’s still the best return on investment, once you find the right property.

Joanne Tan 43:22
Yes. So you almost answered all of my next questions, just see if there’s anything to add, okay:

Where would you advise commercial real estate investors to invest? If all things being equal, Silicon Valley? or elsewhere? And why?

Michael Van Every 43:38
Silicon Valley is a great long term investment. You just can’t go into commercial real estate thinking that you’re going to get your money back, you know, right away. So anyone that wants to be in commercial real estate better understand this. It takes a while. And so I always marvel at some of the people that want to get into our industry and how did you get where you’re at? And how do I make, how do I get there and make that kind of money? Well, guess what? Any investment that you do with me is a five year business plan. And it might be longer depending on the tax ramifications of the investors and so you know, I think if you’re committed to a long term investment, if you like where jobs and great weather is, then Silicon Valley is where you should be, but you better bring your wallet, and your dad’s wallet, and everybody else with you because it’s not going to be inexpensive and that’s unfortunate because you know, we would like to get more people in to this great region, but it tends to be the high net worth people that invest in Silicon Valley.

I will say this, you know, there’s been a lot of these opportunities zones that have come up. I’m not a huge believer in some of that opportunity zones investment, so be careful. Might be a way to dodge your tax capital gain issue. But that’s, if you’re if you’re going just to dodge your capital gains, great, that’s wonderful, just never expect that money back because that’s the thing about commercial real estate: unless you’re in control of it and you are the person that are making, calling the shots, there’s no guarantee you’ll ever get that money back. Read the fine print!

Joanne Tan 45:17
Yes, always!

Is AI, Smart Cities, smart project, and sustainability technology changing the way the buildings are built?

And I have two folds to this question: when people build residential single family homes, they expect to be able to use Alexa or Siri to voice control everything; and the other aspect is with the technology lowering your cost for building because right now you are in a big hole of this labor shortage, the supply chain broken, and also the materials are getting more expensive…

Michael Van Every 46:06
Certainly technology, whether you want to classify it as artificial intelligence or you know, we’re seeing that now with prefab technology. So anything that’s built off site, trucks shipped, railed in, unloaded and then man constructs… and I don’t know if that will change too much on the back end, which means you know, the carpenter and the you know, the electrician, I don’t see a lot of new AI technology or machine technology that will replace that skilled labor, at least in the real estate construction industry.

What I do see how are on the front end, and I mentioned the prefab and for example, at the gateway at Millbrae station, we’re putting together a system called light gauge framing system called prescient, it’s constructed, it’s actually a software so we work with the software designers to essentially fit together the framing aspects of light gauge metal construction, as the frame and all of that is, you know, manufactured in a warehouse in Colorado, and it’s all put together and it’s been shipped by truck or trucked from Colorado over the Rockies, over the Sierras, here to the Bay Area. And then it’s put together on site using a QR code that stands, and that event basically comes together like an erector set like you would put together an erector set as child, and that all has been from the innovation of prefab technology.

So like I said, I think on the front end, we’re continuing to see some great innovation with AI software and lots of great innovation you’re also seeing that with pre fab where things are being built, like now full bathrooms now, are being built off site, truck ship, railed over, craned in, and assembled on site by man labor; on the back end I’m not seeing much innovation beyond just good skill people; on the front end certainly we will continue to see more innovation.

Joanne Tan 48:25
Right, innovation is always going to solve whatever the crises and issues.

Okay, so I’m curious about what do you know or what you think about “the One” in LA, you’ve heard of “the One“?

Michael Van Every 48:39
No!

Joanne Tan 48:40
Oh, it’s the most expensive residential house ever built, hundreds of millions of dollars and now nobody wants to buy it, nobody; I mean it’s over the top excess, and well, never mind, it was talked about on…

Michael Van Every 49:00
Tell Elon Musk to buy it.

Joanne Tan 49:06
He sold his houses, he doesn’t want to own any earthly belongings. So let’s move to the next one:

How do you think the Biden administration’s infrastructure spending can help with real estate development?

Michael Van Every 49:27
Well, you know you mentioned the question earlier about helping out through natural disasters, and I think bottom line is this: let’s create more reservoirs and let’s create more supply for human beings. And water chiefly comes up as the number one thing here in California. As far as what else will happen with that spending plan, I am, look I’m a centrist and so I don’t have a lot of patience for the left that I don’t have a lot of patience for the right, I’m right down the middle. And so in some cases, I’m misrepresented by both of them.

I don’t like all of these spending plans as much, because one of the problems that we have is we were spending a lot. And we’re not necessarily telling us who’s going to repay that spending. And so what happens with those spending plans is they become a platform for other issues. And that’s unfortunately, what’s happening with this spending plan.

By its definition, it could be an amazing thing in that, if that money got to the water district to build a new reservoir, if that money got to transit system, you know, agency to do expand transit ridership, or a local government to help out on its fair share of building new roadways and other infrastructure, – if it works like that, then I’ll be extremely happy. But as of yet, it seems to continue to change. It confuses me. And I’m pretty sophisticated. And so my hope is that we just land on something that will benefit anything, a better water supply in California.

Joanne Tan 51:09
Right? You didn’t mention the word “cheap” water?

Michael Van Every 51:15
water supplies? Yeah. So we saw a supply of water, that’s not going to cost, you know, ratepayers double of what they’re paying today. And so we need, you know, sustainable water supplies that are is affordable, for its consumers.

Joanne Tan 51:32

What can the federal government do to ease the labor shortage?

Michael Van Every 51:39
Well, we can fix immigration or define immigration, we are a nation that relies on immigration to service our great industries. And you don’t have to go any farther than Japan to see an immigration problem and their economy has been stagnant for a generation now. And so you know, we are a nation of immigrants. And we have to embrace that. And we have to have compassionate towards that, we have to have pragmatism. So we can have a highly skilled workforce of all levels, not just at the highest professor level, but also the people that are going to staff our assembly lines, that are going to pick our produce, and that are going to basically work in our industries, because we don’t have high enough birth rates in the United States of America, we need to have more children. So any of you that are 25 and 35, have children. Because if we have children or work hard, in a productive way, to challenge your elected leaders, to make sure that we have a good immigration policy, I’m not talking about letting everybody run the borders and run in. I’m talking about, you know, doing what we do here, and making sure that America still has a great immigration policy for everyone to have a fair share to come here. But the work here, not to get a handout.

Joanne Tan 53:02
Yes, yes, absolutely. I agree with that.

What do you want the state and local governments to do? Now an after the pandemic for the real estate market? And the economy?

Michael Van Every 53:14
Great question. Locally, get out of the way. And let us build things and stop, you know, there’s a crane fee, a crane! CRANE. Crane fee in the city, actually proposing a crane fee!

Joanne Tan 53:30
For what? For using a crane?!

Michael Van Every 53:33
In San Jose! And I’m losing my mind because we’re trying to say, wait a minute; and they want to do that because the airport, they want to create more user fees for the airport. It’s insane. It’s insane! So on the local level, stop it. Stop the madness, okay, get out!

Also, on a local level, stop creating more mandates that are going to create things that are going to be more expensive. For example, the “reach code” is a another, Berkeley, San Jose, San Francisco, it’s, in other words, no more natural gas for houses, only electric, all electric, because in theory, that will eliminate greenhouse gas emissions that are emitted by natural gas. That’s absurd. That’s absurd. That’s creating more cost to housing. So all you’re doing is exacerbating more costs and forcing more people not to be able to own or rent. Craziness! Local governments: Stop it. Get out of the way.

State Government, I think, at least in my lifetime, this is unbelievable, you’ve got incredible leaders like Senator Scott Wiener, David Chiu, and Gavin Newsom, and others who continually lead the charge to make local government stop. So they can continue to build housing because they see the statewide impact it’s creating on the economy! So continue what you’re doing state government, because you’re doing a better job than you’ve ever done before.

Joanne Tan 55:09
Absolutely! Yes. Now last question: what does your brand stand for? I asked this as a branding expert I build brands and personal brands so first your business brand:

What does your business brand stand for? And then if any difference as a personal brand, then you know elaborate on that.

Michael Van Every 55:29
Well the personal brand would be about being from the South Bay and creating product in the South Bay that makes you recognize Republic Urban Properties. So in other words, you build that transit station, you recreated that corner that has a nice restaurant in it now, so someone that does mixed use well, and understands mixed use and not afraid of it, and can create something that is a benefit from a lifestyle perspective, but also from a tax perspective. So you know, again, our trademark is “we build landmarks” and I think that’s a little corny, or old and cliche, but I think it remains true if you translate it back to our brand, which is building mixed use and building it well and reshaping a neighborhood.

Joanne Tan 56:29
Okay, so you know what I really miss, and I hate to see them disappearing, are these mama papa, local colors, local tastes, local elements of that really adds to the diversity of a culture of a city. When you go to Europe, they still have those old stores, some of them more than 100 years old. And here we see are all these franchise chains, Taco Bell, and even Barnes and Noble that where I took my little boys, (now they’re all grown ups) you know, for just go to the local Barnes and Noble – now that’s completely vanished. It’ll be a very sad way of living that you only have Amazon, and Walmart, and Safeway and it’s just like… what do you think? What do you think?

Michael Van Every 57:27
Yeah, now, I couldn’t agree with you more and that’s why we as property owners need to foster mom and pop in small business, for example Republic will spend a lot of dollars on tenant improvements to make sure that mom and pop can spend it’s money maybe on the other startup operation ventures, and so all you can do is create spaces and opportunities for small business and hope that you’ve got the right location for them to grow and foster their businesses.

Joanne Tan 58:00
Right. And they will grow much better if they build the brand first. We help them and serve their growth.

Well, thank you so much. Exactly one hour. Appreciate it very much. I will have this made into a podcast, video, and a transcript, edited, slightly edited, so we will get it out, you get it out. I get it out. And hopefully, the Silicon Valley monopolies and state and local governments will hear your message loud and clear. Thank you so much.

Michael Van Every 58:36
Thank you, Joanne. I appreciate it. Thank you for the opportunity, you are wonderful.

Joanne Tan 58:41
Thank you. Bye.

Transcribed by https://otter.ai

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“The Tim Draper brand stands for…five words: ‘Freedom and trust for humanity’.“– Joanne Z. Tan.

“I actually don’t think that we’re going to have fiat currency in 20 or 30 years. I think it’s all going to be Bitcoin and crypto.” – Tim Draper.

Bitcoin is immune to inflation, hacks & power outages. It’s borderless, open, trustworthy & even good for IRS, but bitcoin regulation should be light-handed by SEC.  -Tim Draper 2nd interview with Joanne Tan.

Joanne Tan 0:00

happy to see you again Tim. Tens of thousands of people all over the world enjoyed our first interview recorded on May 30th this year. Personally, I bought my first Bitcoin afterwards, even though it was less than 5% of my total investment portfolio, and I’m not easily persuaded by the way, and I never gamble.

Tim Draper 0:23

No, this isn’t gambling. This is investing. Yes, exactly. Buying a currency of the future.

Joanne Tan 0:32

Yes. Nonetheless, these interviews are not for me to personally promote or demote crypto and Bitcoin, but for getting quality information and insights to the general public. I have 20 questions today to be answered within an hour.

Tim Draper 0:47

Let’s go through them quickly.

Joanne Tan 0:47

Yeah, if you talk too long on one of the subject matters, I will have to intervene. Sorry about that. Thank you for this interview. I need to briefly introduce you. Tim Draper is a billionaire investor in technology startups, very successfully, and an early adopter of Bitcoin with 19 million worth of Bitcoin purchase in 2014.

I’m Joanne Tan, the founder and CEO of 10 Plus brand. We establish and market business brands for technology companies, funded startups, b2b services. We also build personal and professional brands for leaders, influencers and professionals.

Okay, question number one: crypto and Bitcoin fluctuated wildly in the last four months after our first interview, there is not a dull moment. As of today, September 23, 2021, Bloomberg News reported that the crypto market is starting to knock on the doors of big bond funds and institutional investors for loans against their virtual assets. Fidelity Investments said it would allow institutional customers to pledge Bitcoin as collateral against cash loans. Well, news like this drives up Bitcoin. Many issues keep driving down bitcoins’ value.

Other than China’s cracking down in their authoritarian way, do you see any systemic flaws in the cryptos trading mechanism that have caused the wild roller coasting?

The examples like yesterday’s 90% drop of Bitcoin on Pyth was caused by computer botching basic math, the day before, the blackout at Salona. And the use of robot traders in high frequency crypto trading, etc. What are your thoughts about these systemic flaws, or phenomena, or growing pain?

Tim Draper 2:50

Yeah, well, the market is the market, if the market believes that Bitcoin is worth a million dollars a Bitcoin, then it will be worth a million dollars a Bitcoin; if the market believes it’s worth 30,000 Bitcoin, it’ll be worth 30,000. So the market actually eventually speaks, there will be little fits and starts and we’re always talking about what’s the value of Bitcoin in dollars. But over time, one bitcoin is always going to be worth one bitcoin, because there are only 21 million of them. And it’s the dollars that are very volatile against Bitcoin as they slowly disappear from our use. Eventually, I don’t think anybody’s going to want to hold on to any currency that’s tied to a government, I think they’d much rather tie or use their currencies that are crypto driven. So I think that this volatility that you’re seeing is people realizing that the marketplace is changing. And a lot of them are saying, oh, boy, this is a real thing. I’ve got to have some of this for my portfolio, or I’ve got to, I gotta use this for my trading system, or I’ve got to lend against it or borrow against it. And then there are the other people who are like, trying to cling to the past. The Chinese government, for instance, is trying to cling to the past and say, “No, I want to control everybody and control everything, and I’m not going to let them use this Bitcoin.” So he puts his people at a disadvantage by limiting their use of Bitcoin or their ability to…

Joanne Tan 4:47

I have another question about it, later, Tim. Question number two:

 It seems that Bitcoin holders are primarily in two large camps. The first one: highly educated, intelligent and sophisticated investors and usually they’re financially secure…

Tim Draper 5:07

I think that’s the whole camp.

Joanne Tan 5:09

Oh no, the second:

Herd mentality blind followers, some of whom are gamblers. Is that another contributing factor for crypto and bitcoins’ extreme volatility, since there are far more blind followers than seasoned investors? And if so, what can be done about it?

Tim Draper 5:32

You know, I believe people are smart, look, we’ve all made it, you and I, and all the other people on the earth have made it through millions of years of evolution. We’re smart, we know how to survive. We are all the people on the earth, they all know how to survive, some of them survive by leading, some surviving by following, some survive by taking risks, some survive by not taking risks. We are all survivors. So I always feel like giving the individual their choice. If they feel like hey, I’ve got some money, I want to put it into bitcoin, because I think it’s the future. I think they should be able to do it. Put it into bitcoin, because somebody else tells them to put it into bitcoin. Fine, they did it, it’s their own choice.

Tim Draper 6:22

And I think there’s something wrong with people doing this, which is they make a choice like that for themselves based on a bunch of information. And then if it doesn’t go well, then they blame other people. But if it goes, Well, they take full credit for it. I don’t know what’s wrong with us all that this way, but that is sort of a human nature thing. We want to point to somebody else if something’s going wrong, take responsibility for your action. If you buy something, and it doesn’t work out, hey, that’s on you.

Tim Draper 7:01

But I look at Bitcoin in this way. I look at Bitcoin as trust and freedom. Trust and freedom are the most important parts of any society. If a society has great trust, they’re trustworthy, they’re trusting, that society will grow at an extraordinary rate. If they’re free, it will grow at an extraordinary rate. If they’re government controlled, it will not grow at any rate, that maybe even regress. If they are untrusting and untrustworthy, that will also shrink the economy. So Bitcoin to me represents trust and freedom. That’s why I wear a tie. World, Look, it is important to be trustworthy and free. And keep it that way.

Joanne Tan 7:57

You just answered my last question about what your brand stands for. But let me focus: it’s about volatility. Because there are people who come in and exit emotionally so that compounds the volatility of this wild swing, okay.

Tim Draper 8:18

If you make decisions emotionally, some of those are the best decisions you’ll ever make. And some will be bad decisions. And that’s your responsibility.

Joanne Tan 8:28

Okay. I agree.

Tim Draper 8:30

Look, you have made it through human evolution for millions and millions of years. I trust you to make the right decision for you.

Joanne Tan 8:38

Yes, it’s personal sovereignty. A robust economy must be based on INDIVIDUAL sovereignty and freedom. Okay, number three,

Tim Draper 8:46

Bitcoin is free, and open, and transparent, and all those good things. And it’s trustworthy. Yes. And so you put those things together, and that is really good for society.

Joanne Tan 9:01

Good. Number three,

Is the lack of circulation or inadequate circulation and liquidity another reason for its volatility?

Tim Draper 9:13

Well, volatility, a lot of it is when people read certain things in the paper, they talk to somebody or somebody else. They react, and if that reaction includes buying or selling or trading in some commodity of any kind and it’s going to move. So what’s interesting about the news today is that if somebody tweets something out, it can have a ripple effect all the way around the world. People are learning it at different times. But as soon as they learn it, they say, Oh, I have to put that into my thinking when I’m investing or buying a currency, or whatever it is I’m doing, I have to put that into my thinking. But I have a very slightly different approach to investing, which is, I have a long term view. So these little changes, big changes, whatever, these changes in the dollar against Bitcoin, are in my mind very temporary, because I actually don’t think that we’re going to have fiat currency in 20 or 30 years. I think it’s all going to be Bitcoin and crypto. I don’t see a reason for governments to have currency other than trying to control people.

Joanne Tan 10:41

Okay, let’s get to the details to prove your proposition. Oh, by the way, I’ll quote that as a headline for pushing this out. Number four:

What caused the malfunction of El Salvador’s launch of Bitcoin?

Tim Draper 10:56

Oh, that’s just getting the system in place. I think software, it takes time for software and it needs to kind of go through iterations before people are up and ready. But El Salvador has discovered that open node works perfectly. And so people can and retailers can accept Bitcoin, use open node. Open node’s been tried and true. It’s been used for many, many years now. But it’s a little like when Obama had the health care software, and then it just broke. Well, sure, I mean, software is gonna break at the beginning, but then people will fix it, fix it, fix it, and eventually, it’ll work beautifully. And I’d say El Salvador made a brilliant move. They suddenly were globally recognized on the map. They are, if I’m an entrepreneur, and I’m thinking, where do I want to go? I go to a place that is forward-thinking, I go to El Salvador, or Panama, or any of these other countries that are making Bitcoin a national currency, Japan…

Joanne Tan 12:10

Okay, you’re single minded focused on Bitcoin,- whoever adopts Bitcoin the fastest. And now here’s my question:

Do you think El Salvador’s bold move has something to do with that their currency traditionally was pegged to the US dollar anyway?

Tim Draper 12:29

Great. Well, you know, I had a discussion with the president of Argentina. And I made this bet with him. I told him about Bitcoin and then two years later, I met him again. And I told him again about Bitcoin and Bitcoin had dropped from 10,000 to 4000 during that time, and I said, and during that time, also, the Argentinian pesos dropped from 75 cents to 25 cents. “So I’ll make you a bet.” This was President Macri. I said that I’ll bet that if the Argentinian peso outperforms Bitcoin over the next year, that I will double my investment in Argentina, and he said, okay; and I said, but if Bitcoin outperforms the Argentinian peso, then you have to make Bitcoin a national currency. And, he hesitated because of the IMF, because they have these debts with the IMF, and creating a new currency could throw off the system that is controlled by, you know, the IMF. But what he didn’t realize was, if he had put some portion of his National Treasury into bitcoin, he could have paid off the entire IMF debt! He didn’t, I mean, instead, he got thrown out of, he got voted out of office, and the new person in there is a socialist and the currency has gone from 25 cents down way below a penny. So it’s a disaster. But if he had done it, he would have been able to pay off his entire country’s debt! And, he would have attracted all the great entrepreneurs from all over the world because Argentina, let’s face it, is one of the most beautiful places in the world.

Joanne Tan 14:30

Yes, wow. hindsight is always 2020. But now move on to the next question…

Tim Draper 14:36

I’m sorry, but I would call that foresight. I gave him a chance.

Joanne Tan 14:42

It takes a lot of guts to go in, and audacity, and clarity of vision to take that move for the country. Okay, so number five:

Ray Dalio recently said the value of Bitcoin is “imbued” rather than “intrinsic”. He says Gold’s value is intrinsic, and the imbued value of Bitcoin, he cited, was at least based on the impressive fact that it has never been hacked. He didn’t mention that Bitcoin has a limited edition capped at 21 million coins. What do you think of his characterization?

Tim Draper 15:24

It’s semantics. But look, Ray Dalio, a brilliant man. He’s just gotten into bitcoin and crypto. He hasn’t had what I had. I’d have from 2012 to now almost 10 years of time to like, understand and build my understanding of Bitcoin. He is brand new. So he is just starting out. But boy, he’s a brilliant man, he’ll catch up very quickly. And it’s just semantics, that’s just putting a definition on something that is amorphous. So I would just say, hey, Bitcoin is a store of value, it’s a currency, it’s a new way of operating businesses, it’s a new way for retailers to, to use another form of currency. It’s just better, it’s better, that we should all be using. It keeps perfect records.

 Tim Draper 16:31

So like, if you’re in an untrustworthy industry, let’s say you’re in the movie business. It’s not a trustworthy industry, people don’t get paid what they think they’re supposed to be paid, there are all sorts of problems with it. You embed Bitcoin into that industry, and suddenly everybody’s paid exactly what they’re supposed to be paid in a bitcoin wallet. And it keeps perfect records on the blockchain, and it’s all built into a smart contract. Why would you use anything else? And then, you know, of course, why would you use anything else anyway? Because eventually, once I can get my groceries, my clothes, my shelter, by paying in Bitcoin, there’s no reason for me to hold dollars.

Joanne Tan 17:20

So if his criteria for categorizing something as intrinsic, rather than imbued, is based on physical attributes that you can physically touch, and feel, and hold gold, but you cannot do that with a digital currency, then…

Tim Draper 17:37

well, that’s also imbued. I mean, who decided that was intrinsic? It’s just something physical that he can think about? Hey, electrons are physical.

Joanne Tan 17:48

Right.

Tim Draper 17:51

we use, we use paper. I mean, that’s not exactly that’s got to be imbued too, it’s not. So that’s why I’m saying it’s semantics. He’s just sort of defined it in some way. And he doesn’t think of electrons as physical, but they are.

Joanne Tan 18:09

Right and the convenience,…

Tim Draper 18:11

and it’s all about trust and yes, convenience and

Joanne Tan 18:14

speed of transactions,

Joanne Tan 18:19

Yeah, that intrinsically is associated with digital currency, you know, the speed and the convenience. Okay, so number six:

Has the definition of money changed in any way with the birth and growth of Bitcoin? Does Bitcoin ownership vs gold ownership give Bitcoin owners more responsibility, participation, and other new elements of ownership?

Tim Draper 18:47

Well, if you define responsibility as ownership, which it kind of is, when you own something you kind of are responsible for it to be put to good use, then yeah, I think that’s right. Has it changed? Yeah! Changed in this way, just the way when you went to gold, to the promise of gold, to the promise of silver, to the promise of the full faith and credit of the government, each of those created more liquidity in the market. With more liquidity in the market, the people of the world or of that marketplace become wealthier, because if you and I do a deal, we’re both better off and you multiply that by the 8 billion people on the planet. We want more deals to happen. Well, Bitcoin is pretty frictionless. You can do a deal in Bitcoin in five seconds. If I have to send you money I have to go to my bank. I have to wire it. It’s a very complicated process or I’d write a physical check and mail it to,… if I need to send fiat money. If I want to send electronic money, it moves very quickly. So yes, we are moving into a period where we are all going to be much better off because there’s going to be less friction, the banking system today, the governments today create a lot of friction to us doing commerce with each other. Yes. But if you’re operating in cryptocurrency, it moves very quickly. And we don’t have to wait for the bank to go through their whole process, because that process is all done very quickly in software, on the blockchains.

Joanne Tan 20:47

So every individual has more, sort of, theoretically, ownership over their own money.

Tim Draper 20:57

Oh absolutely! If I’m holding my money in a ledger, like this, if I’m holding money in a ledger, I have this feeling like, Oh, it’s right here, I have my money. But if I’m holding it in a remote bank account in some place, to get that money out is hard. If I have $20,000 in a bank account, I want to pull it all out. I can’t do that very easily. I can take out $9,999 without too much trouble. But I can’t get more than $10,000 out of that bank, at any one time. It creates huge friction for people who are moving large amounts of money.

Joanne Tan 21:49

Okay, I have my next question is pretty macro:

Ayn Rand brand of libertarian capitalism, in my opinion, was based on the dated view that the world’s resources are almost limitless, that’s back in the 20s and 30s, an utopian and idealized understanding of limitless potential of capitalism, back defined then as “capitalism”. Now living with the reality of global warming and the realization that, first, resources are limited, and second, the window of opportunities is rapidly closing to reverse climate change…

Tim Draper 22:26

so you’ve got so many things wrong in that question. One at a time. No. Okay, well, here’s what you have wrong. You are looking at it with a Marxist philosophy.

Joanne Tan 22:37

No, I am not looking at it with a Marxist philosophy. I am absolutely against Marxism. I know you’re a libertarian, but let me finish…

Tim Draper 22:48

I’m not ready to build any kind of political party. … I’m not any of those political parties. Karl Marx, “We’re gonna run out of food, there isn’t enough food and the population is growing faster than the food supply.” He was so wrong. And why was he wrong? He was wrong because of capitalism. He was wrong because people innovate in food supply. They got better at it, it’s entrepreneurs did interesting things on how to grow more food per acre.

Joanne Tan 23:27

I like the word “innovative”. The word “capitalism” is innovating. I believe in capitalism that is innovating. So..

Tim Draper 23:36

And then you talk about limited supply of resources … global warming, that’s going to be solved by entrepreneurs. It’s not going to be solved by some government. In fact, you go to the governments of like North Korea or Russia,…you go those countries, they are big polluters. … the cleanest countries are usually the capitalist countries…

Joanne Tan 24:16

We were big polluters before the early age of industrial revolution. We have a government

Tim Draper 24:22

and then they came up with the catalytic converter that wasn’t the government, that was an entrepreneur…

Joanne Tan 24:29

But the government did play a role: EPA was non-existent before. Okay, the government did play a role, you cannot deny that. … I want you to entertain other ways of thinking and don’t label me Marxist or capitalist, I’m neither. I’m not labelable.

Tim Draper 24:48

I didn’t. I just said that Karl Marx was the one who said we have limited resources and everybody’s going to starve if we keep…

Joanne Tan 24:56

No. There is no limit to human innovation. There is no limit to human progressive ways of, like redefining money and redefining capitalism, in an innovative way. But here, denying the government has any role to play in the global warming crisis…

Tim Draper 25:14

no, no government should be involved when there are people who are hurting other people in some way or another. So absolutely, there is a time. But I also believe that governments should have to compete with each other for those people, that they have to provide good enough service. Yeah. So that those people can want to stay in that government. So we got an opportunity now to have more virtual governments. Those governments have to compete with each other for us.

Joanne Tan 25:52

Yes, I present all points of view. I know what you said. But that doesn’t stop me for presenting other points of view, because I’m here representing the general public, the left, and right, and in the middle. Okay. So based on the fact that the national governments do have a role to play, in addition to private actions of entrepreneurs, to combat global warming and climate change, so the questions are:

Could Bitcoin undermine the national government’s control of central banking in economic policies? Next question. In China, a couple of months ago, a great flood happened in a large city, there was no power, no internet, people were so used to digital payment, they found themselves needing paper cash for everything. What do you think of its implication to bitcoins’ use and circulation, when there is no power?

Tim Draper 26:44

Well, what’s great about Bitcoin is that the power could go out, you still have your Bitcoin, as long as the power comes back on, you can use it. So during some period of time, where there’s a blackout, there are a lot of things that don’t work during the blackout, your lights don’t work, your computer doesn’t work, a lot of things don’t work. …so you have to kind of go back and, you know, like candles and, and pay with IOU or whatever. But I’ll tell you that power out around a bank is much more disastrous than a power out when there’s Bitcoin. Because the power out in a bank could be shutting down contracts in between when they haven’t been done. But in Bitcoin, that blockchain is replicated all over the world. And it is kept honest all over the world. So if one place goes down, another place can represent the trade. But if a bank loses its energy, that can be really disastrous. The vault can open up, you know, so many things can happen, whereas with Bitcoin now, you still have your Bitcoin, but it can be used somewhere else. So yeah, absolutely Bitcoins is better in power out.

Joanne Tan 28:12

Question number 10:

Assuming that you do not prefer to live in a country without government, without borders, what is the right place for Bitcoin to fit in? coexist with Fiat?

Tim Draper 28:28

No, I actually think long term, our governments will not really have borders. I think our governments need to trade. I think China and the US made such a mistake by creating a trade war, that they are hurting themselves. Every time you put a trade war together, you hurt your country, you hurt your people, your own people, you think you’re damaging the other guy. No, you are hurting your own people. And whenever there’s any kind of barrier, trade barrier, tariff, tax, whatever, yes, you are hurting your own people.

Joanne Tan 29:04

And Americans got hurt more.

Tim Draper 29:06

You ought to be trading with each other. Yeah. And that borders should be as open as possible. … I think these guys are the last breath of the dying lion. It’s the big roar before they’re gone.

Joanne Tan 29:22

I think you’re way ahead of the time. I think the national government is going to be around for many years,

Tim Draper 29:29

It moves pretty quickly. You know, now around the world, you get a new product, a new meme of some sort, it moves around the world pretty quickly. Once, what happens when El Salvador triples their GDP because of what they’ve done? It’s going to ripple throughout the world. They’re gonna go, Oh my gosh! And then what happens when, you know, people are trying to keep people in Mexico from coming over the border? But what happens when it’s nicer to live in parts of Mexico than it is to live in the US? That border doesn’t mean anything. I think I think those things are happening. Because, look, I can start a business anywhere. And if I want to hire somebody, why would I ever hire anybody from California, California has all these regulations, I wouldn’t have all these regulations that forced me to do things for my employees that I don’t necessarily want to do. And, and so I can, I can go hire, if I could have two people in California operating my business and I can have 4500 people from Pakistan. And eventually that means that Pakistan is going to rise and they’re going to have a better economy and all those things. And then the borders between the US and Pakistan will mean very little. The quality of life will be similar. And I think once you have that you’re going to have a very free and open world. And then what’s your currency going to be? I’m not going to use Pakistani rubles or whatever they are, to transact business. I’m gonna use Bitcoin.

Joanne Tan 31:18

Okay, so, you said in the last interview with me that China’s government issued digital wallet is a threat to Bitcoin if their digital wallet is accepted outside China

Tim Draper 31:30

never said it was a threat to Bitcoin. I think I said it was a big mistake. So in fact, I used Aurora coin, the Icelandic as an example, where it’s only accepted in Iceland, it was the stupidest thing ever. All the things like currency that’s accepted all around the world, and now you’re going to create a currency that’s only accepted in Iceland.

Joanne Tan 31:56

Conversely,

If Aurora coin or China’s digital wallet are accepted outside of their own country, in the world, do you think that is a threat to Bitcoin?

Tim Draper 32:08

No, because it’s still tied to political force, so China would just print more renminbi if they wanted to, and for the people holding those digital renminbi the digital Won, that money will decrease in value over time through inflation, whereas Bitcoin won’t.

Joanne Tan 32:32

Okay, that’s digital Yuan, Won is Korean. Okay. So,

Do you think technology has borders?

Tim Draper 32:40

Yeah, well, it shouldn’t. But I mean, it does as long as government’s get in the away. But no, no, technology, we can use it anywhere. You know, the Koreans should even be richer than the South Koreans, North Koreans are stuck in the Marxist world. And I feel for them, those poor people in our country, we need them to be a part of the world economy. But the South Koreans have been so advanced in their technological thinking, they built incredible technology, but because until recently, they didn’t speak a lot of English. English is the money language. It was hard for them to do business. But boy their technology was so good. And I mean they had broadband before anybody they had. They had video phones before. They had so many things that these massively multiplayer games, they were way ahead on. Mostly because it’s a free country, and it’s a democracy, and it says it’s open in the free market.

Joanne Tan 33:49

Tim Draper’s utopian world is borderless: technology has no border, the currency has no border, and people freely live…

Tim Draper 33:59

live on the world!

Joanne Tan 34:00

yes, sure. …The reality is…

Tim Draper 34:04

and ownership, the title for ownership is in the blockchain, because then we are going to know who owns what. We don’t have any sort of crazy military fights…what good is that?

Joanne Tan 34:22

So the reality today, the reality today is…

Tim Draper 34:26

whenever I hear that, I think, I’m not sure your reality is my reality…

Joanne Tan 34:31

Bitcoin is based on the value of Fiat.  So if the value of bitcoin is priced and based on the value of Fiat, what makes Bitcoin immune to inflation of the US dollars?

Tim Draper 34:45

because there are only 21 million, of course they’re immune. There are only 21 million. US dollars, – they’re printing 3.4 billion right now. … they’ve printed 6 trillion. They got to keep printing, of course. And when they print money, the money you’ve got is worth less. So let’s say you’re trying…

Joanne Tan 35:09

I totally know that. Yes, my readers, my very smart audience also know that. So let’s move on to the next question.

Is crypto a threat to the US government’s national security?

Tim Draper 35:21

No. Not at all …because I think security is tied to all the branches. I think security is tied to peace. It’s not tied to bigger weapons. It’s tied to peace. It’s not tied to controlling people either. … that’s insecurity. It’s the government officials who are insecure, who are the ones who are saying, No, we have to control everybody, we have to tell everybody what they have to do. The secure government, people are saying, Yeah, let’s innovate, let’s come up with new things. See what you can do, and then it’s a safer world, because you’re not creating a bunch of, you know, but you’re not creating threats to other people that are in other that just happened to live in other places.

Joanne Tan 36:18

Right. So the next question is a little long that has three parts, So hear me out, okay.

Regulatory scrutiny is being ratcheted up by the SEC. And the chair of SEC said that he believes it’s better to be proactive on digital currencies than to react following a crisis. So Michael Hsu, the Acting Chief of the Office of the Comptroller of the Currency, he said that on Tuesday, that cryptocurrencies and decentralized finance maybe evolving into threats to the financial system in much the same way certain derivatives brought near collapse more than a decade ago in 2008. So three questions: number one,

Tim Draper 37:10

Okay, I get there are two there, there’s Gary Gensler. And then there’s the talk about derivatives. No, it is not a threat, like the derivatives are a threat because it is the derivatives were a system that was actually driven by government regulation, that forced banks to lend to people that they will lend on houses to people who they knew were bad credit risk, they were forced to do that by the government through a bill that went through. Okay, good. And then it crashed, because of course it was going to crash because they were not going to pay because they were bad credit risk. And we were sitting there going, Oh, god, what do we do? Do you support the banks, or do you let the banks fail? Or do you …what do you do? Well, we were put in that situation, because the government put a restriction on banks, a forced restriction on banks, that they knew was not economically viable, but it pushed the ball down the tube…

Tim Draper 38:21

If the government over regulates these cryptocurrencies, it could have a similar bad effect. Yes, it could have only if they over regulate, and I’m not sure. Gary Gensler is a great guy. And he does it… He’s a really bright guy. I’ve been on a panel with him, and he is terrific. But I don’t know if regulation should anticipate every new innovation, I think they should let innovations run for a while to see what might go wrong.  And then get in there and say, Well, maybe we need to do something about this. Maybe we don’t. Because when you regulate what you’re doing is you’re putting regulation on, well, in the case of the SEC, that’s 300 million people. That’s so many people. And if it works for one person, that doesn’t mean it works for the other 299,000,299.

Joanne Tan 38:25

Okay. So here, follow your thought if it is true that it was the government over regulation that created the derivatives, the mortgage subprime and then the financial system collapse. Well, it was a government, the political power, you know, started with Henry Paulson, and they had no choice but to rescue the lending institution, the big, too big to fall bankers. I mean, the Government does have a role in that systemic crisis moment. And you could argue the other way that they shouldn’t; they just let everybody fail and then repeat, you know 1929…

Tim Draper 40:12

It’s that you put one bandaid on, then you have to put another bandaid on, you created a discontinuity in the marketplace. It collapsed the way you would, I mean, I could have predicted that, and then they had to do something about it. And they knew that the government in their hearts knew that the government was at fault, and they looked and they said, Yeah, it really wasn’t the bankers’ fault. The bankers just did what we told them to do. And we together got us into that problem

Joanne Tan 40:49

we have to bail them out

Tim Draper 40:50

I think they were making reparations, now the press didn’t write it up that way, but I think the government was sort of going okay, okay, we know we forced you into this thing. now we’ve got a problem we got to solve it, and they did, but I in general, sure, the government is great if they come in and do something to get to rally people…

Joanne Tan 40:54

right. Okay, I have to start to interrupt you, Sorry to interrupt you, but I have to relate to the crypto market okay. Because you see on the horizon SEC and the controller office are coming to regulate, so hear me out with three questions:

Does it mean that Bitcoin and other crypto currencies are more likely to be treated by the government as a security rather than currency? In the last interview, you said that Bitcoin is more like a currency, have you changed your mind? Second…

Tim Draper 41:53

No, I’ve already… I know I laid it out: the SEC just defined Bitcoin and Ethereum as currencies, the other ones they have yet to define. They are generally trying to get them all to be securities, I mean, if you’re in something called the Security and Exchange Commission, everything you see is a security or an exchange. So you know, if you’re a doctor that does only cancer of the ear lobe, everything you see is going to be cancerous ear lobe. I think they’re they’re focused on that, they’ve got to keep in mind though, that you got to balance, you’ve got to encourage innovation, if you are really trying to in some way protect the buyer of these currencies, and i think that you know, to date they’ve done an adequate job. But I think down there I would have been a little lighter touch, but I’m a little concerned about them picking out the biggest one and trying to pick on them. I think they’re trying to set an example but I think that may be the wrong way for the SEC to operate. I think they should look for absolute fraud and go ahead and pick those off. But if it’s not fraud, I’d let it rip.

Joanne Tan 43:22

So let’s hope that it’s light handed regulation, Okay, now about tax:

Do you reserve tax payment for all your Bitcoin capital gains since 2014, if and when you sell some portion of it or just use some portion of it for purchasing goods and services?

Tim Draper 43:42

Yeah, of course. Okay. I know very well, that if I sell Bitcoin, which I don’t plan to do, or if I use it for any purpose, I now have to pay a capital gain on that Bitcoin. I mean, that’s the law. Here’s what’s really interesting in taxes. Let’s say, I raise a fund completely in Bitcoin. I invest it completely in Bitcoin, all my employees and suppliers. I mean, all those companies pay their employees and suppliers in Bitcoin. And we have a closed system there that where the money comes in, it’s on a smart contract when money goes back out, it goes down a certain waterfall, and it’s all built into a smart contract on the blockchain. You can put a tax system into that, you can build a tax system into that entire system, and then you don’t have to go around and break people’s kneecaps to get them to pay their taxes. You can just come right out of the trade that’s being done with Bitcoin. And, and I don’t get why the IRS people haven’t recognized that. This is a bit opportunity for them to get tax revenue, to move all of commerce to Bitcoin so that they no longer have to go out and find who’s cheating, who’s not, who’s whatever.

Joanne Tan 45:13

We will send this link to the IRS okay. Hopefully they’re going to have some innovative kind of awakening moment. Now number 16:

On the one hand taxes and regulations on Bitcoin will legitimize it, and graduate it from the Wild West jungle, okay. But on the other hand, do you think being taxed and regulated will make Bitcoin lose some of its incorruptibility, transferability and uninflatability?

Tim Draper 45:48

Well, it’s not going to lose its uninflatability, there are only 21 million Bitcoins. I’ve said that four times already, it’s not going to inflate. So that part, no. But is it going to lose its, … well, if it gets over regulated in one country, it’s going to pop up in another country that’s freer. And when that happens, all the innovators are going to go to that country. So people in government regulate at their own peril, and not only their own peril but their country’s peril. If I start telling everybody in the world that they have to wear a Bitcoin tie, you got to where Bitcoin tie, that’s it, you have to, this is what you have to do. And everybody then just does what with a Bitcoin tie … strangle people that I might, you know, chafe on other people. People have different desires, they’re gonna want different fashions, they’re gonna want different things, and for me to be a politician, or somebody who’s trying to tell other people what to do, I’d better be really sure that everyone will benefit from my decision. And that is not the case with all these regulations. And certainly certainly not the case with President Xi and him telling every single parent exactly how they’re supposed to raise their kid. And you think that the President of the United States knows better how to raise my kids than I do? No way.

Joanne Tan 47:34

Today, the Chinese government dares to call themselves a democracy citing Abraham Lincoln. It was like, what a laughingstock. Anyway, we have six minutes to finish the next four questions.

What do you foresee as the worst possible scenario to Bitcoin, other than the solar flare that wipes out all digital records and civilization based on electric power on earth? What is the worst that can happen?

Tim Draper 48:02

By the way, solar flare wouldn’t be a problem. All electricity goes down, not a problem. People have their Bitcoin backed up if they have their Bitcoin on Ledger’s, they backed it up with a handwritten. So yeah, not a problem. What would or could go wrong? Well, lots of things. But it’s, I think, generally, you know, people try to muzzle technology, they try to stop technology, technology wins, It always wins. Because the consumer in the marketplace, the consumers are always right, the consumer knows what’s good. And the consumer knows that, hey, this is just better currency. So why would I use this other currency? So why, you know, why do I use fiat currency when…

Joanne Tan 48:53

do you see the government, the national governments could be the worst that can…

Tim Draper 48:58

No, because they have to compete with each other for us. So if one national government says like China did – shuts it down, then other national governments say, Hey, bring it here. So what was kind of cool was, China said, Bitcoin mining is illegal, well, all the Bitcoin mining came to other places, the US and Iceland… where energy was cheap. So it’s one of these things where they are pushed down in one place, and it pops up somewhere else…

Joanne Tan 49:33

so let me ask, what do you foresee as the best

Tim Draper 49:36

look, progress could be slowed down by government regulation, and that would be bad. But eventually it’s gonna come. You know, it’s like…

Joanne Tan 49:46

Genie is out of the bottle.

So what do you foresee as the best possible outcome of Bitcoin? How many decades or years will it take to get there?

Tim Draper 49:55

I think I’m an optimist But I actually think that the future is even more optimistic than I am. But I’m optimistic that I believe that the first thing that will happen is all the retailers start accepting Bitcoin. So they don’t have to pay the banks 2.5 – 4% every time they swipe a credit card. And then we start looking and saying, Well wait, why would we hold on to this other currency because I can get my food, clothing and shelter with Bitcoin. And then people start innovating, realizing that they have the security of knowing that those innovations create stored value. And that stored value is not going to be taken away from them through inflation, or government controls or whatever, so they will build value, and they’ll be able to hold that value. And I think that that will create incredible innovation in all the young people that who are trying to get started in the world, they’re going to come out and they’re going to go, I’m going to start some cool because, hey, if I make this money, I keep it. And it can’t be taken away from me. And that’s, that is a big deal.

Joanne Tan 51:19

Yes. So number 19:

What do you think about the corporate monopolies such as Google, Facebook, Apple, Microsoft, Amazon, and the social media platform becoming more powerful than the government in certain areas?

Tim Draper 51:36

I kind of like that they’re becoming powerful. I like that. Think about this. If you’re a startup, and you’re looking and you’re saying, how great Could this be, you know, used to be that you could get to be a billion dollar business. Now, you could be a trillion dollar business. That’s amazing. People should aspire to be that great.

Joanne Tan 51:57

But do you think monopolies…

Tim Draper 51:58

For that part I don’t mind. The part that we have to watch out for is if there’s any restraint of trade. So if we’re getting bad service at a high cost, and we have to from that supplier, that’s trouble. But if as long as there’s a place for an entrepreneur to come in, and innovate and compete with that, and provide better service at a lower cost, hey, let entrepreneurs become huge successes. They’re great models for all the young people in the world. You know, God, I mean, what young person who’s starting a new business doesn’t want to feel like, Hey, I can make this as big as Apple, or Facebook.

Joanne Tan 52:45

So as long as they’re not anti-competitive.

Tim Draper 52:48

Right. And you know, what’s happened in China? They’ve taken away like, Jack Ma got his wings clipped, and all those young people are looking and going, Oh, so that guy built that great business, so they’re saying, Why would I do that? Yeah, there’s a lot of sacrifice to get to where he is, and he worked very hard to get to where he is…

Joanne Tan 53:14

It is a power and control thing, because the Chinese system is very much of a Leninist system, the party is paramount. The party’s control is paramount. They used…

Tim Draper 53:26

by the way, it was a free market for all, the way through Deng Xiaoping.

Joanne Tan 53:31

That’s because Deng Xiaoping had no other way of surviving. The country was going to collapse. So they used entrepreneurs…

Tim Draper 53:39

because why? Because they were Leninist, Marxist.

Joanne Tan 53:43

Yes. They are still, they’re still Leninist

Tim Draper 53:46

And now they’re going back.

Joanne Tan 53:48

They’re going backwards. Yes. Going back,

Tim Draper 53:51

I know they are going back, how people can’t? …North and South Korea is such a practice…

Joanne Tan 53:56

We know that. Okay, Tim, let me ask the next question, Okay. Last question: As a brand builder, the cornerstone of the entire practice of brand building is empowering individuality, be it in the form of a large corporate brand, or an individual’s personal brand. Bitcoin is one of the decentralized way of expressing and exchanging value, decentralized, okay? At least in theory, it gives everyone more control over their own money and the protection from inflationary risk of losing value of their hard earned money. So individual sovereignty, liberty and self government, they were the values of our own country, they were the cornerstone of the United States, okay. And the foundation for democracy is the freedom of individuals and a truly free market economy. Okay. So I asked everyone in my interview this question,

What does the “Tim Draper brand” stand for? What do you want to be remembered as your legacy long after you exit from this planet?

Tim Draper 55:03

great, you know it is true that brand is so important and in how you present yourself, how you treat your employees, how you treat your suppliers, all so important. Your customers, how well do you treat your customers. And I’ve always had that in my mind, I met a really good brand guy way back when and, and he just explained that to me. And I said, Yeah, it’s not just your logo, it’s not just your, in this case, an NFT, it’s not just your NFT.

Joanne Tan 55:35

DNA.

Tim Draper 55:36

It’s everything. And, and so you saw me I had a mission, which was to spread venture capital and entrepreneurship around the world. I did that. And, and then the world changed a little when Bitcoin came. And I realized that now my mission is freedom and trust around the world, led by Bitcoin. And so I wear my Bitcoin tie every day. I dress up every day, I tried to I, I encourage entrepreneurs from all over the world to come to me, I’m an I’m a natural magnet, I tell them what my email address is tim@draper.vc, we have “meet the Draper’s“, we have a show that’s dedicated to entrepreneurs, allowing people from anywhere to come onto the show, and get crowdfunded. The viewers can, can invest, we have Draper University, for people who are kind of, you know, trying to figure it out at the early part of their career to come and get trained to become entrepreneurs. And so all of this is a natural magnet for entrepreneurs to come into our fold or ecosystem, and then potentially get funded and grow and become great. And so my whole brand is built around that. And venture capital is very much a trust business. You, you, when you write a check, you’re sending your trust to someone. And in my experience, almost every time the entrepreneur lives up to that trust, and even more, yes, and if you’re in a society, where the government’s telling everybody what to do, and they’re saying, oh, what are you doing what, and they’re looking at you that way, you will also live up to their distrust. So as a human, if somebody trusts me to do something good, I’m going to do everything I can to do that good thing. And if somebody is very skeptical, a call about me and looking at me sideways, and oh, you’re doing something wrong, I know you’re doing something wrong, I might end up doing something wrong because of that. So I think trust in a society is so important. And the idea of a government telling everybody how to manage their children? Nuts! is spreading distrust throughout that country. And that country was awesome. It was so much fun. …the economy was taking off, there was a free market. There were entrepreneurs everywhere, there was tons of venture capital, the the buildings were going up that the high tech, the place looked fantastic and that now it’s going to deteriorate, people are going to not trust each other, they’re gonna be watching each other and say, Hey, wait, I saw him he was doing something wrong, you know, that kind of attitude. That’s the beginning of the end of a society. And that’s what they got in North Korea. That’s what they got in Russia. And now that’s what you got in China.

Joanne Tan 58:53

You know, my expertise is to summarize the brand essence with no more than five words. So may I summarize what you just said? So the Tim Draper brand stands for freedom and trust for humanity. Five words: “Freedom and trust for humanity”. Okay, so now I’d love to have you back again to him maybe next year to talk about your amazing accomplishments, but we will continue with entrepreneurship, which is another passion of mine. You’re helping the entrepreneurs.

Tim Draper 59:20

Okay. Great questions.

Joanne Tan 59:21

Thank you so much. Okay. Take care.

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Check out Part 2 of the interview: “Tim Draper talks Bitcoin, Crypto Currency, Inflation, IRS Tax Revenue, SEC Regulations, Ray Dalio, etc.

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Crypto Currency – the Revolution of Freedom and Trust

The following is a summarized and edited version of Tim Draper’s answers to some of the questions.

Tim Draper on Crypto currency, Bitcoin, Blockchain Elon Musk, Women, China, etc., on the first exclusive interview by Joanne Z. Tan, Founder and CEO of 10 Plus Brand, Inc. on May 27, 2021, for the Podcast series “Interviews of Notables & Influencers”. Out of 60 questions, Tim only had time to answer 34. But Tim said that if there are enough shares by the audience on social media, he will answer the remaining 24 questions. PLEASE SHARE. Thank you!

(Question from Joanne Tan:)

Are you still predicting that Bitcoin will be worth $250,000 USD in 2022-2023? What is your basis for such a prediction?

(Answer from Tim Draper:)

“I predicted … in 2014, I said in three years, Bitcoin will hit $10,000. And …Bitcoin was at $180. …And it did, in fact, almost three years to the day.

“This time in 2018, I predicted that in 2022, Bitcoin would hit 250,000, at the end of 2022, or early 2023. And, and I did that, based on that I kind of had in my head that Bitcoin was going to go through that natural progression is going to go up will hype thing, it got up to $17,000, came way down to $3,000. And then, and then quietly, slowly, but surely, and with some volatility, it will continue to rise way, way past where the top of that hype was. And the reasoning is that the hype was on the imaginations of the people in 2013. And their imaginations have gone way beyond where they were there. And it was in their imagination, but then the reason that the hype goes away is that people go “Hey, but you know, I can’t use this to buy my groceries yet.” And so what has to happen is engineers have to go do all that work to make it easy for people to go buy their groceries with Bitcoin, once they have, and that’s usually like a four year period, then it becomes a use … something that everyone can now use. And so once everybody’s using it, then I was saying that a 4 or 5% market share by 2022, 2023 is probably not even optimistic. I think it might actually be a lot higher. …It’s a combination of my gut, all of the analysis I’ve done on all the industries I’ve ever looked at throughout my life. And that’s how I came up with that number.”

“Oh, of course, there is always going to be competition. But it was pretty clear to me, at that point by 2018 that Bitcoin was going to be the Amazon and the rest of the currencies were going to be the other e-commerce sites…”

“You know, my feeling about pessimists. The pessimists of the world. There. They bring a lot of good points up but they do not accomplish anything. The optimists of the world are the ones who accomplish things.”

(Did Stanford prefer Tim Draper’s donation in US dollars, or Bitcoin?)

“I know that I bought a house and the people knew who I was and they said they wanted Bitcoin instead of dollars. And I was… thinking of donating some money to Stanford. And they wanted my Bitcoin, they didn’t want…dollars, but they’d rather take Bitcoin.”

What is preventing crypto currency from being used and circulated more widely?

“Well, it’s the women. One out of 14 bitcoin wallets is held by a woman. And women control 80% of retail spending. So… once the retailer realizes that they can save money, by accepting Bitcoin, and …can spread some of that savings to the women who spend the money, … then the women will all make sure they have bitcoin wallets….So it’s just a matter of every new technology grows at a certain rate that it spreads around the world. And, Bitcoin is similar in that way.”

(About Elon Musk’s statement that Bitcoin uses more energy:)

“Think of all the bankers going to work, all the people who are going back and forth to their bank branch, think of all the energy that’s consumed in banking, people have done the research, and our banks use so much more energy than Bitcoin ever will. And it turns out the amount of Bitcoin, the amount of energy that is used for Bitcoin mining continues to run down over time. And by 2040, it’ll be almost nothing. And because, well, energy use per switch does not comply to Moore’s Law, so it doesn’t doubled every 18 months. But it does drop over time, we used to use five volts per switch, and then it was three volts per switch, and then it was 1.8 volts, 1.3 volts, point nine,… keeps going down. And the amount of energy used per switch will continue down. So the energy argument is not a strong argument.

And in the amount of energy, Bitcoin is the most secure of all the currencies of all the crypto or fiat currencies. …Bitcoin blockchains have never been hacked. So I think it’s worth spending a little energy to get that kind of security.”

“It is sustainable, …most of the stored value in Bitcoin is going to be slow to move and… it’s going to use a lot of energy. But when Bitcoin is used as a currency, it’s going to be used… the way Opennode uses it, they move it off chain, it’s very efficient, it moves very quickly and very efficiently. And then when it moves back on chain, it takes energy. So there is no difference between the amount of energy that Bitcoin is going to be using as a currency and any of the other cryptocurrency but there’s a big difference between what the little Bitcoin uses and the huge amount that banks use. So yeah, I mean, people should look deeply into Opennode. And if you’re a retailer, there’s no reason you shouldn’t be accepting Bitcoin through Opennode. And it’s sustainable. It uses very little energy.”

(About how businesses can now transact with Bitcoin using Cryptio: )

“People were worried about the speed at which you could transact a Bitcoin transaction. But it turns out that now with Opennode, they’re faster than the visa network. So you can if you’re a small business, you can accept Bitcoin now and you can do all your accounting for Bitcoin now with Cryptio… you now have the ability to operate … entire business in Bitcoin…”

In general, we’re much happier to accept Bitcoin and then fiat. I think most retailers will start feeling that way too. And, I think that they’re gonna say, Well wait, when people swipe their credit card, 2.5 to 4% of my business goes to the banks. Well, what if I use Bitcoin? Well, it’s a lot less than 2.5 to 4%, … nothing goes to the bank…. He can double their profit margin, if they accept Bitcoin, so I think people are gonna start using it.

…Bitcoin would be as interesting just as a store of value…, if you ran Lucas Film, and you realize that… you had to spend $8 for every check, you send out to the assistant, to the assistant to the lighting director. And instead, you could just drop Bitcoin into a wallet, automatically. Every time somebody orders the movie. You’ve got a much better vehicle for spreading currency. Sending money overseas is so much easier with Bitcoin than it is with Fiat. …it will be used as a currency.”

(About DogeCoin’s unlimited supply:)

“I think that it’s very important for cryptocurrency to have a known limit to how much is printed, and there is a known limit of 21 million bitcoins. If a currency is in any way centralized, if any one person or one group of people can go ahead and print any number of this currency, then the value of that currency drops. And the whole point of trust in the currency disappears. So the one of the great reasons that you want to move to cryptocurrency, from fiat currency, is that cryptocurrency is not tied to any political force, it’s not tied to any one individual who decides to print a whole bunch of currency of one type or another. It is a fixed number. Now, if you were to create a perfect currency, it might be a little bit more like Tezos, where the voter, the owners of the currency can vote as to whether you inflate the currency, whether you add more to the currency. But if you have, if you have a centralized control of any kind, any currency, you’re not getting that benefit,… ”

(On inflation and crypto currencies:)

“If we are relying on governments to figure out the right model for inflation, to print just the right amount of money, so that it doesn’t go through an inflation, death spiral, or whatever, it’s a very difficult thing to do, because there’s a lot of politics involved….So people’s dollars aren’t going to be worth as much, people’s Bitcoin will be worth more… it just hurries the need for people to have a stable currency that they can trust and build.”

(What do you think of the Altcoins, Meme coins, “Shitcoins”:)

“I’d say Bitcoin is a good store of value. Crypto – it depends on which currency… some currencies are centralized and some are decentralized. Some have inflation attached to them and some do not. I would be very particular on which currencies I would look at as potential stores of value, but Bitcoin is one.”

“I’d be looking to the alt coins…where there are really good engineers working on that token, and that the token has a real purpose, not just a Bitcoin copy, but a real purpose and a real technology that’s going to take humanity forward into a new direction.”

“… we’ve seen since I bought all that Bitcoin and I was in the first two ICOs after the Dow Tezos and Bancorp. I got mobbed with people all wanting my money to start a new token. And it was all a bunch of copycats, and, you know, get rich quick schemes and whatever. I pushed them all away. And I I waited for those, those very select few that had real engineers, real passion behind them, and are focused on those and a real reason to be yes, good.”

(Is Bitcoin the “Digital Gold”?)

“…gold is such an old vehicle as the currency, no one uses gold as a currency. You know, people trying to buy their cup of coffee with gold, it’s ridiculous. Gold is something people retreat to when they’re trying to retreat to the past. And, there is value to gold, but it’s a good use for jewelry. It’s good use in some computers. So there is some value to gold, but it isn’t in being a currency. And so I think if you are thinking in terms of a store of value, the way people used to store value was in gold, then they stored value in the promise of gold like a gold certificate, then they stored value with the promise of the full faith and credit of the government. And now you can store value on a blockchain. And it’s I think we’ve taken a technological leap forward by allowing people to store value with Bitcoin.”

(Is Crypto a currency, an asset, a security, or any of or all of the above depending on what utility value is imbued into a particular crypto?)

“I think that the IRS got it right. But it’s a currency. And it’s an asset. But it’s more a currency. I think it should be treated as a currency…”

(Will the US government crush crypto currency?)

“The US government knows, they have figured out that they benefited in a huge way from letting the internet go, and not regulating it, not taxing it, letting it go. They won big. The same things happening now. US government, there’s plenty of like, pushing, pulling, and the Fed is, you know, concern, whatever, but and the US government might do their own crypto, I think it’d be a mistake, but they might do their own cryptocurrency. But they know that they want the innovation in their country. They know that the golden goose is the entrepreneur. Entrepreneur in the Silicon Valley is driving huge value to the rest of the country, they don’t want to do anything to harm that entrepreneur. They want to make sure that entrepreneur, that 28 year old who wants to start this business and make something interesting happen, they want that person in their country.

…“…so I believe in light touch regulation, and that has been the cornerstone of America for many, many, many decades. Right. And that has helped America grow and grow and grow and become a great, great country.”

(About blockchain for keeping records, music and art, NFT, and the future services professions:)

“the blockchain keeps perfect records. And so …Bitcoin will be an honest currency. And as people’s names are attached to their wallets, they will be even more honest. And so I suspect that honesty and trust will grow the currency, and people will feel better and better because of it.

Now, one other thing that’s kind of interesting about that blockchain is that it keeps perfect records. And as you said, it can identify who all the owners were before. Well, that’s maybe interesting with currency. But it’s really interesting with art, or with music or with anything, or with fancy purses, or whatever. People really want to know where that came from. And sometimes with food, people want to know which farm that food came from. And the blockchain allows for that. And so that technology is going to be used first for Bitcoin. And then for all these other new services, that are tied to any data that should, that needs to stay permanent. So your medical records or your diploma, or your nursing license, or your ID, or driver’s license, whatever, those things are all going to be very permanent. And so the blocks are your collection, collection of, you know, people’s. All those things are going to be in the form of an NFT, a non fungible token. And that’s a really interesting use of the blockchain. So I’m excited about that use of the blockchain.

The other use of the blockchain I really love is what this company Cryptio is doing, tying the accounting to the blockchain. And so we could run all of our businesses without auditing, accounting, or bookkeeping. And, you know, or all the lawyers that are attached to all of that, we can actually have it all perfectly kept, perfect records on the blockchain, and all the reports and the taxes and everything can all be put out there. And we can all be better off the frame of data around accounting, the accounting profession or the legal profession, does slow down the economy, and we could speed it up a lot by tying our accounting to the blockchain.”

(Are smart contracts indispensable or merely supplemental to crypto currency? Do you agree that smart contracts add value to crypto currency?)

“ I think smart contracts are critical for the long term success of any contracts in general, are critical for long term success of any currency. smart contracts are going to be so much better and so much easier to use than the complicated where we’re putting contracts into words. Words are a lot harder to understand than software is.”

“it’s going to be instrumental and is going to be so exciting…. I can’t wait … to have my entrepreneurs pay their employees and suppliers all in Bitcoin, all on smart contracts. And then when any of my entrepreneurs sell their business, have all that Bitcoin, go back to my investors, according to the distribution waterfall that we’ve set up. And if we can do that, the whole system, and then taxes paid, the whole thing can be one walled garden of Bitcoin.

And… there’s no dispute, there’s no argument that, hey, you know, this word meant this and this word meant this, …it’s all built into the software, and all the contracts are all fixed, dollar fixed, and Bitcoin comp contracts, all the way down, all the way.

So I’m very excited for when we can use smart contracts for all capital business, but it can be in all of finance, it can be in bidding, it can be in real estate, it can be used in all different forms, real estate,… you could have a smart contract, and we have a company called property that is working toward making it so that all title is kept on the blockchain. And all real estate is done on a smart contract. And eventually, you’ll be able to buy and sell pieces of real estate on a smart contract, and that will be a thing of beauty.”

(From an average Joe investor’s perspective, is the best crypto coin yet to come, since technology is evolving, and more smart contracts are being created for more apps, and more sustainable ways of mining coins will be adopted?)

“It could be but if I’m a retailer today, the first token I accept is Bitcoin. But it could be that other tokens come up and rise for one reason or another, that kind of thing makes for a great environment when there is competition…”

(About if Chinese “Digital Yuan” is a threat to crypto currency:)

“It’s only going to be accepted in China. And I think that it’s got to be global. It’s got to be open. It’s got to be. So they’re gonna blow it too…”

(As one of the earliest investors in digital currency, after paying $19 MM for Bitcoin in 2014, how would you describe Bitcoin’s growth journey so far? Would you say that in 2014 Bitcoin was an “infant”? And now in 2021, a “teenager”? If so, as a 6th grader or a 10th grader?)

“I think it’s still an infant. But we were very excited to be able to buy that. That Bitcoin way back when, and people ask me, Well, are you going to sell your Bitcoin? When are you going to sell your Bitcoin? And I say, into what? Why would I take the currency of the future and convert it to a currency of the past, it would be like taking euros and trading them for drachma or French francs, or for taking the dollar and converting it to Confederate dollars, it makes no sense. Because we have a new currency that is the basis for a new platform to bring the world economy to another level. And to make us all of them are global and unless tribal is tied to one geographic area or another…”

“…a lot of people got out of poverty by buying crypto. And they took a chance and they bought some crypto.”

(What are the “black swans” of crypto currency? Who are the biggest winners & losers of crypto currency?)

“I think Black Swans come all the time. It’s very exciting. They’re coming faster and more furiously because more and more people are free. And more and more people are in countries where they can work in a free market. Superbad where it seems we are losing China as a free market, but most of the rest of the countries are free. And as more and more people become free, more innovation happens and more black swans and I think that the countries that are accepting of new ideas and new technologies and Bitcoin and blockchain and smart contracts and artificial intelligence, all that, the ones who are more accepting and less regulatory are going to be huge winners over the next 40 years. And the ones that put down all of these rules and laws and make it so their country, their people can’t do anything, that those countries are going to be the big failures of the next 40 years.

“I think humanity is the big winner. I think command and control governments are the big loser, because they’ve been operating like monopolies for a long time. And all of a sudden, they have to think, how do I attract people? How do I attract businesses? How do I attract money to my country? How do I attract citizens, and brain power? How do I attract entrepreneurs? That’s the thinking that has to go on, in, you know, the government’s mind. And, if they’re not thinking that way, they’re thinking, I’m going to control everything. And it’s me, me, me, me. And I want my power and whatever. You know, the best governments are not the ones who say I want power. Best governments are the ones who say, I want my people to thrive. And, the ones who were just saying I have to be in control of everything, telling everybody what to do. Those countries are going to be the ones that are the poorest in 40 years, the richest countries are going to be the ones that are free and trusted and do things for the people.

(About how Crypto currency, AI, blockchain will change the world:)

“This is a really critical time in human history. It’s really an exciting time in human history. And so because I think we’re going from tribal to global, but there’s gonna be a lot of wild tumultuous waves along the way. But one bitcoin is still worth one bitcoin. It’s all these other currencies that are very volatile as they slowly disappear from us.”

“…everybody’s job, they all will have to continually reinvent, to see what our job becomes. The media had to reinvent their businesses because of the internet, the movie business, they reinvented their business because of the internet. Now we have Bitcoin, the blockchain, smart contracts, artificial intelligence surveillance, a whole bunch of the biggest industries in the world are going to go through a major transformation because of those things, but all those people, sure we’re all going to lose our jobs. We’re all going to have to reinvent, we’re going to have to find better ways to operate, more productive things to do.”

““And that’s why I love Bitcoin. It’s freedom. And it’s trust. It’s open, it’s transparent, it’s global. It’s decentralized. So it isn’t tied to any geographic borders. It’s moving humanity from being tribal to being global. It’s moving humanity from being tied to geographic borders, to an open globe, where we can all run free with it, within the world. It is a fabulous vehicle for governments, for people, for businesses, for all of us to operate with.”

“…every industry goes through this period where it gets hyped up, and then it comes down. And then over a long period of time, it goes even bigger than the hype, it just keeps going and going and going. And during that time, the also-rans fall out of business. And that has been the way every industry has been developed throughout time. There were thousands of thousands of dot coms e-tailers where they were in the hype, and then disappeared, eventually and everybody sort of consolidated on Amazon. They think the same kind of thing is happening, will happen around Bitcoin.”

“I don’t think crypto is dependent on fiat in any way. But people need fiat right now to buy their groceries. When they don’t need fiat anymore to buy their groceries, they’re not going to use it.”

Here are the 34 questions Joanne Z. Tan asked Tim and he answered:

As one of the earliest investors in digital currency, after paying $19 MM for Bitcoin in 2014, how would you describe Bitcoin’s growth journey so far? Would you say that in 2014 Bitcoin was an “infant”? And now in 2021, a “teenager”? If so, as a 6th grader or a 10th grader?

How “mature” is Bitcoin and crypto currency? How many years before Bitcoin and crypto currency as a whole reach “maturity”? How long will it take for crypto assets (currency and block chain) to permeate the small business markets?

Elon Musk bought more than one billion worth of Bitcoins for Tesla in February 2021, then he voiced the issue about unsustainable use of energy for mining Bitcoin, which is more than all other types of crypto currency coins (I don’t want to compare carbon footprints of Bitcoin’s with Fiat’s and traditional banking institutions’, to keep it “orange to orange”.) Would you agree that Bitcoin is indeed a lot more energy consuming than Ether, Dogecoin, and all other altcoins and meme coins out there?

About Elon Musk’s support for Dogecoin: Unlike Bitcoin that has limited quantity, Dogecoin has no limit thus lacking the “scarcity” element as one of the intrinsic values. Do you think scarcity, albeit man-made, is important to crypto?

Is volatility, as shown in the last few weeks of crypto’s roller coastering ride, an inherent trait of crypto currency?

Is there a correlation between stock market volatility and crypto currencies’ volatility?

In addition to the element of scarcity, what are other intrinsic values associated with crypto currency? Is traceability, (thanks to blockchain technology) that enables transparency of the source and all prior ownership, another unique value proposition that crypto has that fiat does not?

Now adding to scarcity and traceability, smart contracts can be added to crypto tokens such as Ether and the new kid on the block, ICT (Internet Computer Token) for various apps, would that be an indispensable or merely supplemental character for crypto currency?

Do you think smart contracts make crypto tokens more valuable?

As a tree-hugging environmentalist and an extremely concerned advocate for sustainability, I do agree with Elon Musk, and I would like to see adding the 4th element to crypto’s unique value proposition: sustainability. What do you think?

How would you describe crypto?

• Is it a currency?

• Is it a commodity?

• Is it a type of security?

• Is it all of the above, depending what utility is imbued into each particular crypto?

Do you believe Bitcoin is the “digital gold”? If yes, will it rival and even surpass gold?

About inflation. Technological innovation is usually a force to counter inflation. What is your assessment of the likelihood of PROLONGED inflation in the US in the next couple of years or even beyond? And Globally too?

Is crypto a safe haven for protecting cash from devaluation caused by inflation? If yes, why, if no, why?

I can see the value of using dollar-backed crypto in countries where inflation is out of control, like in Venezuela – folks can bypass the banks and get their money stabilized by crypto. But for Americans, what is the use of having dollar-backed crypto?

If traceability, transparency is one of the cornerstones for crypto’s intrinsic value, privacy is at odds with transparency. But some tokens are offering privacy protection, what do you think of that?

What do you think of the many varieties of crypto coins, Meme coins, even “shit coins” out there?

Peter Thiel was quoted saying in January 2021 that “Crypto is a secret financial weapon of the Chinese government”, then he was in the news issuing his own token and even creating his own exchange, – will you be issuing a Draper Coin and even having your own exchange too?

Is it a reasonable prediction that after the crypto market as a whole will flush out all the “junk” coins and unsophisticated speculators, perhaps half a dozen “finalists” coins will be left on the crypto market? Will that lead to some level of stabilization?

From an average Joe investor’s perspective, is the best crypto coin yet to come, since technology is evolving, and more smart contracts are being created for more apps, and more sustainable ways of mining coins will be adopted?

In addition to all 4 “cornerstones” for crypto I talked about above, do you believe that crypto must be in circulation, must be used in transactions, in order to become viable and competitive with fiat and other traditional currencies?

If yes, what is preventing crypto from being used and circulated more widely?

Would you agree that even without sufficient circulation, crypto is still a store of value, like land or diamond?

You predicted that Bitcoin would reach $220,000 – $250,000 in 2023, what is your basis for such prediction?

You said that you will eat a raw egg if Bitcoin does not reach $250,000 in 2023, – I’m willing to eat a sour lemon on my show (without the peel) if it does, – can we make a deal? Do you dare to eat a raw egg on my show, for the fun of it?

The irrevocability of crypto transactions seems like a double edged sword. To err is human, everyone makes typos and mistakes, and if someone types in an amount with two more zeros than the actual amount, mistakenly sending $10,000 when only $100 is intended, there is no way to reverse that mistake. Do you foresee any remedies?

Any other “black swan” for crypto, in your opinion?

Who will be the biggest winners of crypto? Early investors?

Who will be the biggest losers?

Do you believe that crypto has the potential to replace traditional currencies including fiat, as an independent currency?

Traditional currencies and fiat have existed without crypto, do you think crypto can exist without fiat?

What kind of relationship crypto now has with fiat?

• Interdependent?

• Co-dependent?

• Symbiosis (you scratch my back and I scratch yours)?

Do you think the US government will allow crypto to co-exist with fiat?

Do you think the government needs to regulate crypto, as the SEC regulates securities?

© Joanne Z. Tan. All rights reserved.

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Great advice & cutting edge information by Steve Hoffman of Founder Space, Silicon Valley Investor to startup entrepreneurs & leaders.

This is a little long, but it’s extremely valuable to entrepreneurs AND any business leaders, who want to be in the know for cutting edge information, so you can lead ahead.

Startup Entrepreneurs: Why do more than 90% of startups fail?

(Joanne Tan:)
welcome. I have Steve Hoffman, “Captain Hoff”, a celebrity in Silicon Valley.

So, Steve, known as “Captain Hoff” is the CEO of Founder Space, one of the world’s leading incubators and accelerators. He’s also a serial entrepreneur, an angel investor, limited partner at August Capital, and author of “Make Elephants Fly”, an award winning book on radical innovation, and “The Five Forces”, an extraordinary journey into the minds and ideas of the people and the technology poised to reshape our world. Recently, Mr. Hoffman completed his new book, “Surviving a Startup”, to be published by HarperCollins. Tim Draper, the multi billionaire startup investor said this about the book: “Read this book before you launch your startup. It could save you much emotional turmoil.”

This book answers the question why over 90% of startups fail, and what is needed to succeed? “Surviving a Startup” is full of sage advice, rich stories, cutting edge information. And it’s comprehensive both on a macro and micro levels. It’s not only a sort of “Bible” or a mini encyclopedia for startup founders, in my opinion, but for business leaders of all types in this digital age. I find it really fun to read.

Here’s a generous gift to anyone in my audience: For limited time, Mr. Hoffman will give away access to his full online startup program. For everyone who purchases a book, please visit his website, www.founderspace.com/promo.

Okay, Captain “Hoff”. My questions, we have lots of questions. Okay.

(Steve Hoffman:)
Well, I want to thank you for all the kind words that’s so nice of you.

(Joanne Tan:)
Oh, sure. My pleasure. First question is, during the initial ideation stage, you wisely advised about failing fast, like a serial baby killer. Try to prove everything that may go wrong with the idea (that the baby is the idea,) okay? And after trashing it, and you may cry, but it won’t feel a thing. Only when you have exhausted all possible ways to shatter your vision, should you start to believe in it. That is just wow. Awesome. So my question is, do you see many founders spend too much time fixated about an idea? and not letting go? If yes, how do they get out of that?

(Steve Hoffman:)
So the answers, absolutely. So I’ve been a startup founder, I founded three venture funded startups and two bootstrap startups. And I understand what it’s like to fall in love with your idea.

You know, when you give birth to an idea, it’s like giving birth to a baby, you can’t help but love it, because it’s yours. And your baby always looks the most beautiful, no matter what anybody else thinks. So this creates a problem, a dilemma for entrepreneurs, you really, in order to take the leap into entrepreneurship, you have to be the type of person who can believe in their ideas. If you can’t believe in your ideas, you can’t be an entrepreneur. But the other side of that coin, is that if you believe too much in your ideas, and don’t look at what’s really going on around you in the real world, you will risk failing.

And this is one of the biggest reasons I’ve seen entrepreneurs fail. I work with entrepreneurs all the time, hundreds of entrepreneurs, and all of them love their ideas, but the really good ones, train themselves. They’re disciplined enough to actually put their love aside and say, is this idea worth pursuing? And question and doubt it? And if the evidence shows that the idea will not take them all the way to their dream of building a great company, they kill it at the earliest possible moment. That’s why I say a serial baby killer. Kill it. You have to kill your ideas.

To move forward, now, it may not be the whole idea, it may be like a piece of your idea. But you have to continually do this. And really, if you want to succeed, it’s not how passionately you feel about your idea that will not make you succeed. It’s how it’s actually how quickly and effectively you’re able to understand the implications of your idea, test those out in the real world, get real feedback, and then understand what that feedback means. Should you move forward? Or should you abandon it? Or should you change it, and then take your next step, the startup entrepreneurs who go through that process over and over and over very quickly, are the ones who usually wind up succeeding, because it’s a matter if you just Usually, I mean, 99, out of 100 times, the first idea you have is wrong. And it’s not, it may not be entirely wrong, but there are pieces of it that you don’t understand.

And this is because it’s only an idea, you haven’t taken it into the world, yet, you haven’t given birth to it, you haven’t seen what it actually can do in the real world. So until you get that information, if you don’t know, you really know very little. And the more information you get, which is your journey, your journey is to fall in love not with your idea, but with the direction you’re headed, the process of gathering information, analyzing information, and making really intelligent decisions based on that,

(Joanne Tan:)
Right. So you also said in your book, that a great forum for entrepreneurs to test their ideas is to present to and pitch to different groups and get feedback, okay, that also exposes them to the risk that their ideas are exposed to the world and may be “stolen” by others. How do you reconcile this?

(Steve Hoffman:)
It’s always a risk to take an idea that’s inside your head and put it out into the real world. Will people copy it? Can they copy it? Absolutely. I mean, all of us copy ideas. And in fact, the idea you had, it’s probably coming from a lot of different places, right? It’s, you’re, you’re probably not the first one to think of it, it’s probably not as original as you want to believe. There are almost surely other people around the world, the world’s a big place with billions of people working on similar ideas. What determines whether you succeed or not, is not having the idea. It’s actually where you go with the idea, the idea is literally just a starting point of a long journey.

So what I tell people is, if you keep the idea to yourself, if you don’t show it to people, if you don’t put it out there and start to get feedback, then you don’t really understand your idea. Because you haven’t gotten rid of it. building a business is not building a business in your head, that’s a fantasy. building a business is building a business in the real world, which means you have to figure out how to put your idea safely into the real world where it can grow.

And you can get all you can see the interactions between what you thought would happen, and what really happens, right? So it’s like you have a baby, right? You don’t want to keep your baby locked in a closet, right? It’s never gonna grow up, it’s never going to learn anything, you’re never going to see what type of baby you could have had leaving it locked in the closet, you have to put that baby into the real world, you want to put it into a safe place. So when I say present your idea to the world, I mean, exactly that you really need to figure out what’s the best place you can put your baby to get. So it can learn and grow as fast as possible, but doesn’t get you know, squashed, killed, eaten by a lion, you know.

So you walk up to a conference filled with competitors, and explain all your ideas to them. That’s not what I’m talking about. getting feedback is actually targeting the people who can really help you write, who can really help you, trusted advisors, potential customers, yes, some of them may, in fact, wind up stealing your idea. But it’s the risk of your idea dying, because it’s undernourished, you haven’t put it out into the real world and it doesn’t grow up healthy, is much greater than the risk of somebody else killing your idea or stealing your idea. So I always say, your friend is information. Your goal is to find information. Your goal isn’t to keep things to yourself.

And I want to give a great example of this to all of you out there. You know, we all know what VR is right? Virtual reality. Well, VR started out as an idea, a lot of people had this idea. It wasn’t just Palmer Luckey, the one who started Oculus, he got all the things right by putting it out there. But actually, that idea was gestating around the world, in research laboratories, universities, people have made VR devices. Palmer Luckey, really wasn’t a scientist, he wasn’t like, at the forefront of the technology, he was actually using technology developed by USC and other sources that they had developed. But he was the first one to take that idea, visualize it, put it out there on Kickstarter for the real world to see, and then start it moving. And he got moving so fast that his company sold for billions of dollars before he even launched a product.

Now all the other people out there, there may have been many smart people, brilliant people in the field, who knew a lot more than he did about this idea. But because they kept it in their labs, they didn’t take it into the real world their babies never grew up with. So they never made that step. And he was willing to take the risk, go out there, articulate this idea in a very clear way, you know, he did a video of what VR could be. And he created this sensation around that idea, and was able to be the one who brought Oculus, which is now part of Facebook, to market. So you need to follow that path rather than the other path.

(Joanne Tan:)
Right. And if people are cautious about their revolutionary ideas, they can always use an NDA and go to a targeted limited audience that, you know, advisors and entrepreneurs and people like you who they trust, to get some feedback, if they don’t want to just flash it to the entire world.

(Steve Hoffman:)
You know, so I would say if you’re presenting your idea to a big corporation, like Microsoft or something or somebody like that, if you can, get them to sign an NDA; if you’re presenting your idea to like a venture capitalists like me, we usually will not sign an NDA. And the reason is not because we want to steal your idea. But because we don’t want to get sued, we see too many ideas from too many startups. And there are too many similarities out there, you may think your ideas totally original, but they’re probably some other startup working on something that has some overlap with that, probably not exactly the same. And we may wind up funding that company over your company. So most VCs I know will not sign NDA as most advisors, maybe you know, they might sign it.

If you go out to potential customers, you know, my gut feeling is don’t waste your time with NDAs, they’re usually not worth the paper they’re printed on, you know, what kills your idea usually is not somebody stealing it. It’s you fumbling the execution of your idea, not learning how to put all the right pieces together, not moving fast enough, not gaining money and momentum. That’s what kills your idea, not somebody copying it. So worry less about the copying, and more about your own execution.

(Joanne Tan:)
That is such a good segway to the next question. I’m completely with you that ideas are just the starting point. The entrepreneurs need to focus on bringing in the best talents who are all in. So my question is, if “all in” means that they may have to ”starve” along with a startup without pay, but only the promise of equity, and they’d better not hold a daytime job, and be the founders amplifiers not diminishers, and the talents have to be the best of the best, and have a do-or-die mentality, work for mission over money and give up their six figure jobs and work for equity and be willing to go down with the ship, – How long can this realistically last during the bootstrap stage before getting any investment? Is it too much to ask?

“This is a mistake a lot of founders make, because they, a lot of them are technical, they’re engineers, they’re really good at building products. But they aren’t necessarily good at branding, or marketing, or even customer acquisition.”

(Steve Hoffman:)
So it can last a very, very short time or an extremely painfully long time. Now, you know, there is no limit as long as you have the will. And the means to keep surviving and funding your own company. You can go on forever in the bootstrap mode, even though you might not be making much progress at all. That’s not the goal, but that I’ve seen it happen. I’ve seen people work on these bootstrap startups for a decade, and they go nowhere.

And then I’ve seen people work on them for a month and they boom, like going at hyper speed. So the point is, I usually say, as a rule of thumb, before you dive into a startup, you should be able to survive without a job in cover all the expenses of the startup for a year, at least six months at the minimum of three, six months, because it’s going to take you at a minimum six months, on average, to raise money. And a lot of times it goes out a full year. So because you think, Oh, I can do this much faster. And then you have problems. And you know, and if things don’t gel, and it and like I said, you know, you could literally have your idea and start bootstrapping it and get funded a week later, that can happen, especially if you know some wealthy people, and you have, you know, something that appeals to them.

But realistically, you know, if you can say, look, I, me, and my team can go for a year on this idea, and iterate on it and change it and test this and test that until we figure it out. That’s a, that’s a good, you’re in a good position to take the leap into doing a startup.

(Joanne Tan:)
Okay, so my next question is, I also see your point of generously giving equity to co-founders at the early stage and other key members. But how much is too much?

(Steve Hoffman:)
To give away the equity? This is a really personal question. And a difficult question and a question I get asked a lot by startup founders, they asked me, you know, how much should I realistically give to them? Well, I will tell you, nine out of 10 times, they are giving too little. So most people think about it, they will err on the side of keeping more for themselves, you know, that’s our nature. And, you know, it’s an actual, if you started the company, if you put in time and money before you bring in other people, you feel like you are owed more than them, because you have taken a bigger risk. And it was you who started this whole thing. So a lot of people will not give enough to their co founders to really make them a part of the core team.

And I will tell you, in the end, when all is said and done, if your company is successful, I guarantee if you if it’s your company, you will wind up with a lot of money, you know, how much money do you realistically need, you know, if that’s, you know, is it 100 million or 200, 300, 500 million, you know, whatever you want, but the hard part is getting the right people onto the team. So I say, figure out… First of all, don’t give less equity, and go for less capable people. Because this is a mistake a lot of people make, they’re like, Oh, this person will work for free, or this person will work for like very little percentage of my company point 01 percent, you know, just give them a few shares, that’s worth it, it’s not worth it, it’s better to give away more of your company, and get on great people.

So I usually say, if you are the founder, and if you started this company, like you’re the founder and CEO, and you started it on your own, and you’ve been going a few months already, before you bring people on, you should have more shares than the other participants. But you don’t have to have disproportionately more. So you may have 20% more shares than them, 30% 50%, you may have doubled them. But you start to get over that. And it really becomes lopsided in the fact that they’re probably if you really want them to take a big risk, if they are really super talented, as talented as you are but in a different area. You know, how much are they worth, they’re worth as much as you write, maybe you put in a few months, maybe you put in a few dollars, but there’s a long road ahead of you. You are just at the very beginning, you may think, oh, I’ve put three months or five months into this company already. You may think that’s a lot. But it’s not, you know, this is a long journey.

Now you can make sure that those shares, you get them vest over time. So you don’t give it to them all at once. You do a four year vesting schedule. So basically, they get some shares every month, that vest, and if they quit, they only are left with what they earned. Yeah. And you can put a cliff on that, a cliff means there’s a certain date by which if they if the relationship doesn’t work out, they don’t get any shares. So if they don’t stick around six months, nine months or a year, whatever you decide, they don’t get any shares. But if they stick around, then they get that full six months or nine months worth of shares at that point, because you really know they’re a good fit with the company and they’re going all the way.

(Joanne Tan:)
Okay, good. So, your book, stated that the number one reason for a startup to fail, accounting for 42%, is no product-market-fit. And you caution against inventing your own market. Okay. But Steve Jobs famously said this, “the market does not know what it wants. We tell the market what they want.” What do you think of that?

(Steve Hoffman:)
So, here’s what I think what Steve Jobs was saying was slightly different, although it sounds the same. So when we say a product-market-fit, we mean your products fly off the shelf, people love them. And every one of Steve Jobs’, his products had a perfect, not everyone, I should say, the Lisa, the Newton, there were ones that didn’t have a product market fit, but never went anywhere. But you look at the iPod, iPod, the iPhone, you know, the Mac, they had product market fit, when people saw them, they went crazy over them. What Steve Jobs was saying there was at the beginning stage, when you have an idea, just an idea, right? You really don’t know what you want to do. You can’t go to your customers and say, What should I build, you know, should I go build this or that you can’t be you’re not going to be able to envision the future. They can’t tell you what it will be like his customers, what you know, the average person, wouldn’t be able to conceptualize the iPhone, that was Steve Jobs’, his job ticket and his team’s job was to conceptualize the iPhone, you know, when I say average person, they’re like, I can’t tell you what I want you to build, right? That’s they’re not good at that. That’s what he meant by not asking the market, don’t go to your customers and ask them what you should build, you need to build it. But then you need to make sure that it’s what they want. So the product market fit is once you build it, you make sure it aligns with their wants and needs. So what you can do, what you can ask the customers is what do you need? Like, what do you need, you know, Henry Ford had this the same, which was similar to Steve Jobs.

You know, if I would have asked my customers what they wanted, they would have said faster horses, because all they knew were horses, they didn’t know, you know that cars weren’t a product that people could afford and buy, they weren’t readily available, they are still experimental. So I would say give me a faster horse. But what they’re really saying is I want to get from point A to point B faster, faster, more conveniently, you know, with, you know, let you know, I don’t have to take all the trouble you have with horses, which we don’t have to deal with anymore. But that’s what they were telling Henry Ford. So he wouldn’t ask them what’d be their product, if he should make a car, he would ask them what they need and what they want, what they want us to get around faster and more conveniently. And then he has to come up with the idea of a car, this car could solve their need, then he has to test the market, like bring the early ones to market and see if people really react the way he thinks they’re going to react. If they do it’s called a product market fit.

(Joanne Tan:)
Yes, Yes, I remember. Right at the time when iPhone first surfaced, I was out of my paper printed calendar space to calendar everything in a day. Because however large is a calendar, there’s only a finite space. And I was like this, this cannot go anywhere because I changed sometimes the appointments, and then what I do? use whiteout. And then boom, iPhone, it solves all these problems. And also video, camera.

It’s just the genius is in detecting the need and matching that need with innovative products.

(Steve Hoffman:)
Steve Jobs was not just brilliant at that, he was brilliant at also really recognizing a products earlier and executing on how to bring them to market and make them better. Because before the iPhone, there were a number of products. I remember using a Palm Pilot. So for those of you in the early days, it was basically you know, a personal digital assistant that you would use. And then they came up with the palm Treo, which would combine that with a phone and that was essentially the iPhone. It was the iPhone before iPhone. So Steve Jobs saw these products. He was immersed in this area he saw when he used those other products. He was like, wow, these things are amazing. You know, this is where the markets headed. So it wasn’t that he came up with all these ideas on his own right. He saw that people he wanted to use, some people around him, all the techies were using them. And then he figured out how to take this mass market and to the next level and make it simpler.

(Joanne Tan:)
and scalable?

(Steve Hoffman:)
Yes. And so Steve, the brilliance of Steve Jobs was, you know, you don’t come up with all the great ideas. You know, most of the great ideas are already out there. It’s what you do with them and where you take them that matters. And he, Steve Jobs was just really good at spotting those ideas. Like when he went to Xerox PARC, he didn’t invent the whole UI for the Mac out of thin air, right? That came out of Xerox PARC, it was all there in the experimental stage, but they didn’t know what to do with it. They were like geeks in the lab. Right. And Steve Jobs saw that and he actually knew how to take that and productize it, that became the Macintosh.

(Joanne Tan:)
Take the idea and productize it. That’s the key.

(Steve Hoffman:)
Yes, yeah. So he took the idea, productized that, but there was always a demand there. Before he went, there was always a product market fit for these products. So there were customers out there who really, really, really wanted those products. And you see Steve Jobs wasn’t perfect. Like he had many things that didn’t work, The Next, you know, the Next computer, you know, was supposed to be this huge, incredible hit that would replace the Macintosh. Well, it never really took off, right? There wasn’t the demand out there. Even though it was an incredible product. There wasn’t the demand for what he was building at the time. He was building it in the way he was building.

(Joanne Tan:)
Right. Okay, so next question is, I’m impressed by your insights about the importance of brand building and marketing. Okay, that’s music to my ears. And you listed that the number two and number three reasons for startup failures are 14% fail because of bad marketing 13% failed from ignoring their customers.

From your experience, what percentage of series A funded startups have the vision and the budget to hire outside brand building experts to establish a brand, brand market, and brand marketing strategies for the right customers from early on?

If these startups are not doing the right thing early on, which is to build the brand systemically, what can be done to bring the founders to the right path?

As you know, a brand is a lot more lucrative and powerful than a mere product or a book of business. You can compare Apple with Microsoft, Apple is a brand and Microsoft is forever a machine. And Apple can command such a higher price because it has faithful followers. Okay. So the question is, if most of the startup founders are either short sighted or they are busy putting out fires in other areas, and they don’t have the vision and the budget, to build a brand early on, what can bring them to the right track?

(Steve Hoffman:)
So this is a mistake a lot of founders make, because they, a lot of them are technical, they’re engineers, they’re really good at building products. But they aren’t necessarily good at branding, or marketing, or even customer acquisition, or any of the other things that you need, ultimately, to be successful. So to go back to Steve Jobs, he was brilliant in multiple areas. That’s what made him so amazing, right? And you look at people like Elon Musk today, you know, they’re brilliant in multiple areas, right? They’re not confined to one that makes them and Bill Gates, even he was still a really good business person, right? But he was also a technical geek, who likes to understand the ins and outs and code and do all that stuff.

So with startup founders, you know, when they get their Series A funding, this is what I like to tell them. So prior to series A is when you are bootstrapping it, when you are Angel funded, when you get your seed funding, which you know, somewhere in between, you know, series A and Angel, those are all times when you’re really working on the product market fit, you’re trying to create the best product possible and find the customers that really need it.

Most VCs today step in once you’ve found the product market fit, meaning they aren’t giving you the money to just develop technology at that point. They are giving you the money to scale your business and scaling your business is all about branding and customer acquisition. Right. So in essence, branding is your message and branding enables you to focus and have a strategy for acquiring customers and embracing them right so that they become yours forever. They become real devotees. So you need to understand that you are in a transition point.

As an entrepreneur, upon the Series A funding, you are going from a primarily r&d oriented company, – you know, that is exploring the market and trying to figure everything out,- to a company that is about growth, and growing and reaching out, engaging with your customers at a very deep level. And you ultimately, just like you have an r&d budget, you need to have a budget for brand and marketing.

And you need to also have the expertise on board to actually implement that, because you may be incredible at what you do, and there are certain products that you can just grow virally. They’re designed that way, right? They don’t need a lot of marketing to work. But marketing, put it this way, marketing takes even good product that’s growing, and will just make it if you do it right, with a good brand, and everything will grow much faster, right. So even if you have a viral product that’s out there, you can supercharge that product by focusing on getting the right expertise, those people who are brilliant at it onto your team, either as permanent members, or as consultants to help you to the next step.

(Joanne Tan:)
Yes, I totally agree with that. Okay, so startup founders must be superb sellers from day one, selling their ideas to co-founders, teams, selling to investors, selling to prospects and customers. Yet few have mastered the art, science, and craft of telling inspiring stories that convinced people. From my own experience of mentoring founders to tell their stories in pitch decks and executive summaries, I found that they may be brilliant engineers, or even financially savvy, but often cannot communicate effectively to their target audience. What do you suggest they should do to overcome this deficiency?

(Steve Hoffman:)
What I suggest is, people have their strengths. So most of us are good at certain things, certain types of thinking. So some of us are very good at complex ideas and getting very technical and very deep into subjects. Others are good at taking something very complex, simplifying it, and listening and understanding how to present it to others so that they can relate to it and understand it.

As an entrepreneur, you need to look at your team, right? This is your job as the CEO to look at your team and say, do we have this expertise on our team? If not, how can we bring this DNA into our company? You know, are there people out there, I always say if you’re not the best at something in the world, but you want to build the best company in the world, you need to find the people who are the best at the best at those things, and bring them in.

This is why I tell entrepreneurs, you know, when you’re starting a company, your job is not to worry about fundraising at the beginning, it’s not to worry about your idea at the beginning, because your idea, like I said is probably not right, you’re gonna have to work through this. What you need to worry about is the people, you need to get the right combination of people on your team. And if you can do that, you will iterate on this and everything will come together. Yes.

So most people, most entrepreneurs spend far too little time on figuring out who they need on their team, and then going after those people and incentivizing them to join their team early. And they spend too much time focused on ideas and products, which are very important. But the best idea in the world without the best team, you’ll just fumble the ball, you will fail to implement that, somebody else will implement it better. So you could start with the best idea. But if you don’t, if you don’t implement it, well, somebody else is just going to pass you up. And as you know, it’s kind of a winner take all market out there.

You know, if you’re one of Zoom’s many competitors, that, you know, fumbled the ball didn’t quite get it, right. We’re not using your product. All of us are using Zoom right now. So we’re all using Zoom, and all those other products out there, and they were pretty good. But maybe you know, they didn’t quite get there. They’re going away. They’re dying. You don’t want to be one of them.

(Joanne Tan:)
Yes, totally. I absolutely agree. It seems that angel investors nowadays expect startups to show traction, revenue and profitability, at a level almost like Series A. Angels are no longer the traditionally defined early stage investors who take more risks. What do you think? If you agree with me,Is it getting harder and harder for bootstrapping startups to survive before they get angels to open their wallets?

(Steve Hoffman:)
So it depends on the angels. So there are still traditional angels out there who come in very early. Take a huge risk on a team with just an idea. They are really necessary for startups to succeed. Like you said, without them, it’s very hard on your own money. A lot of times, especially, you know, if your idea isn’t something you can just do super cheaply, and you have enough to survive, it’s really hard to get to the next step. So a lot of the angels are called super angels now, meaning they’re, they’ll put in more money, a lot more money, they won’t put in like 10,000 or 50,000. They’ll put in like some of them a million dollars, one person or even more.

But they often want to wait, because they have found the same way that venture capitalists have found that the hardest part is finding that product market fit and the right team. And that usually takes time, right? It doesn’t happen instantly. Like you wake up one morning, a flash of brilliance and everything works, you know, it just doesn’t happen. It takes time. So they think, well, let’s wait. And when I find the right company, that’s everything is jelling, you know, meaning they have traction, I’ll just put in my money. And then it’s a sure bet, nothing’s a sure bet in this world. But it’s a much surer bet than placing a lot of bets on very early stage startups.

However, that leaves you with the problem, you still need the money. Now, what I will tell entrepreneurs is that it’s always been hard to raise that first money. Always, it might feel harder now, it was never easy, right? As if there was no time in history. In fact, honestly, now, it’s easier than it ever was before. It’s not harder. So it’s still not easy. But it’s not hard. It feels harder, because there’s a lot more money coming into later stage companies. But there was always a saying that there’s never enough money for these early stage companies, never. They’re always struggling.

But because there’s so many successes now in the tech sector, you know, and later on that there’s still more people actually angel-investing than there ever were before, way more people. But there’s a lot more companies too, there’s a lot more competition for that money. So you’re getting a lot of competition, a lot more angel investors at the early stage, meaning it’s still hard. But if you have the right idea, and you can put together the right team, and you can get that early evidence, the money’s there.

(Joanne Tan:)
In your book, you said that startups need “ either a big win, or the creditors and the investors will gobble everything up.” Could you explain it?

(Steve Hoffman:)
So investors typically want to protect their investment. So if your company goes nowhere, they want their money back, right. So they put in terms into the agreements you make, like what are called liquidation preferences and other terms, so that any money that comes in, if you sell your company for, you know, a fire sale or a low price they get first, they get first dibs on that money that’s like “we put the money in, we want to get that money back”. And they do this by having two shares of stock, common stock and preferred stock. Now, the preferred stock has special rights to that early money. So that means that, I’ve known a lot of entrepreneurs who’ve worked for years on their startup, they end up selling for maybe $50 million, which sounds like oh, my God, but they have raised 10X, or even hundreds of millions of dollars. So that 50 million doesn’t go into their pocket, you know, that that 50 million goes back to their investors before they get a penny. And none of the common stock gets money. So that’s the reason if you’re going to sell, if you’re going to raise a lot of money, which startups tend to do, now you have to sell for multiples of the amount you raised. So you have to. So you need a big hit, you need a big hit to get over that threshold, to start to see money flowing into your pocket. When you get over that threshold, what we call liquidation preferences, then the money, all the stock converts into the common stock, so everybody starts being treated equally, but only once you get over that threshold.

(Joanne Tan:)
I see. Monopolies like Google, Apple, Facebook, Amazon, Microsoft, they have all the money to buy Oh, crushed startups in infancy. It seems that more and more startups end up bought by the few big players only to make these monopolies even bigger. What does it take for entrepreneurs to beat monopolies at their own game?

(Steve Hoffman:)
So what the fact is, you can never beat a monopoly at its own game without certain ingredients. So a monopoly has all the advantages, right? So they have the customers out there, they have the marketing, they have the brand, they have the distribution, they have the technology, they have everything right?

There are only two ways to beat an existing player in the market, you know, and they don’t even have to be a monopoly, they could be any, even, you know, just a company that’s doing well in the marketplace, how do you beat them?

So the only two ways are, one, you have to have an idea that isn’t a little better, you know, a product that isn’t a little better than them. But that is exponentially better, so much better that all their customers like I’ve been using this for years, I feel comfortable with it, you know, we have it integrated into our workflow. But I am going to switch to this new product, because this new product is SO much better that I have to switch. So it’s not incremental innovation, you need, you need exponential exponential innovation. And this is what we call radical innovation. And that’s my first book I wrote, “Make Elephants Fly”. The process of radical innovation is about how entrepreneurs make these leaps to products that are so much better, that they can actually start to steal market share away from existing players.

And then the other way is, if it can’t be so much better than it has to be different, literally, you can’t play in the same ballpark they’re playing in, right, because they’re a monopoly there. So you have to have a product that is in the market that is new, right, that they haven’t touched yet. And so if it’s not exponentially better, or very, very different, not a little different, but like it solves a fundamentally different problem than them. Those are the two ways to beat the big monopolies.

(Joanne Tan:)
You know, that’s how branding works. As a branding expert, when I build a brand or business brand, I seek to differentiate it from all your peers and competitors. Or you are way better and focused on doing certain things, with your products and services. It’s the same thing.

(Steve Hoffman:)
People need to know you are the best person in doing one thing, you are SO much better than everyone else, they will all come to you for this one thing they really need, or you just do something they don’t do, so they are gonna come to you, because there aren’t a lot of people doing it, and you are the right one.

(Joanne Tan:)
It seems that for a startup to survive and thrive, not only all stars must be in alignment – team of talents, right product/services, investment, the right business model that can be scaled up fast, brand building and marketing, … and most of all, the founder must be made of rubber rather than steel, to keep bouncing back. Among all the attributes such as resilience, certain craziness, risk taking, business savviness, ability to gather the best team and let them buy in the founder’s vision, ability to know what the market needs are and come up with the GREAT solution that can be “blitzscaled”… which is the single most important attribute for a successful entrepreneur? Is entrepreneurship an innate gift? Or a lifestyle? Or both? How much is nature and how much is nurture?

(Steve Hoffman:)
I always say startup entrepreneurship is both. There are certain people who are just gifted with being an entrepreneur. In their genes they have the hustle, the drive, the creativity, all the right elements, to be a natural entrepreneur. It’s sort of like a sports team. If you want to get on a sports team, you get on a major league, you have to have a certain physical build, you can’t change that. There are some people I believe who were never born to be entrepreneurs. They maybe people who don’t like risk, who get extremely stressed out about uncertainty, people who have a really hard time communicating with other people, managing other people, they shouldn’t be an entrepreneur, let other people do that and figure out what they are really good at, if they want to be really really successful.

But even if you have all the right pieces, like the right genetic pieces, genetic jackpot, even if you have those, if you are not open to learning, you aren’t ready to put in the time and energy to really make it a focus, you still will not succeed. I know a lot of people who aren’t given the right pieces, but they are given enough of the right pieces, and they work on themselves, and they improve themselves, and they fill in the things, you don’t necessarily have to be born with something, to be able to learn it.

One personal example, I used to be extremely shy, people don’t believe me when I say that, I used to be an incredibly awful public speaker, but I worked on it and trained myself, and now I think I am above average in actually being able to public speak, my shyness went away, but literally all the way through college I was terrible, only in college I made concerted efforts to change myself and it didn’t happen overnight. It’s a lot of work.

Yes, you can learn to become a great entrepreneur. It’s a struggle. You have to put in a lot of work, and be really committed to doing it. I have seen entrepreneurs who are not naturally that good, but they are smart enough. You have to have this base level in certain areas, if you don’t have that, it’s really hard. But in you is that base level, then you can take yourself much much further. I have seen this with athletes too, they might not be born as the fastest runners, the strongest person on the team, but they trained like crazy, some of them become better than those actually gifted, because they didn’t really have to put in the hard work, have to figure it all out themselves.

So I tell entrepreneurs, if you have that drive, you can probably go a lot further than you think you can, if you put in the effort.

(Joanne Tan:)
Do you believe that technology has borders? What part does nationalism play in technological innovation? Do you think America is falling behind comparing with China’s national policies and direct governmental investment to stimulate technology advancement? What do you think of the competition between US and China?

(Steve Hoffman:)
… China within 30 years, … we can learn from China too instead of blaming….

(Joanne Tan:)
I ask all my guests for the “Interview of the Notables and Influencers” this question: What does your brand stand for?

(Steve Hoffman:)

I want to create a space for the founders to learn and grow. That’s what my brand means.

(Joanne Tan:)

Lastly, allow me to circle back to my own passion for brand-building, by quoting your insightful words: ”It must either be exponentially better than their competition, or else it must be radically different.” Brand is for GREAT companies and GREAT founders, so I’d like those top 5% VISIONARY founders to know that

10 Plus Brand Inc. is a full service branding and marketing agency, we decode brand DNA and product-market fit, and make it stand for something, create brand structure, strategies and stories, and amplify with AI-enabled inbound marketing and content marketing. We design look and feel, emotional undertone… AND we thrive at VIDEO PRODUCTION – to give a brand its heart, soul and the mind that enables great user experience and make products and services emotionally attachable and delightable, with visual, audio, sensory and verbal beauty.

Thank you for tuning in. See you next time.

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© Joanne Tan, 10 Plus Brand, Inc. All rights reserved.

March 5, 2021

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#10PlusInterviews #InterviewsofNotablesandInfluencers

Kevin Surace on how to invest in technlogy (pain points, market timing, convenience), climate change, the future of US, his personal brand.

Based on the interviewee Kevin Surace’s self-description, Joanne Z. Tan, branding and brand marketing expert, described Kevin’s personal brand as: “A Renaissance Man with Purpose”.

Joanne Z. Tan 0:00
I am honored to have very talented Kevin Surace from Silicon Valley today for the “Interviews of Notables and Influencers”. Kevin is a Silicon Valley innovator, serial entrepreneur, CEO, TV personality, and an “edutainer”, educator plus entertainer, all combined. Kevin has been featured by Business Week Time, Fortune, Forbes, CNN, ABC, MSNBC, Fox News, and has keynoted hundreds of events. from Inc 5000, to Ted, to the US Congress. He was Inc Magazine’s Entrepreneur of the Year in 2009, a CNBC top Innovator of the decade, World Economic Forum tech pioneer, chair of Silicon Valley Forum, featured for five years on tech TV Silicon Spin.

Joanne Z. Tan 0:57
While he has a technical background with 93 worldwide patents, (and we’re going to ask you whether those are all under your name or co-owned,) Mr. Surace has pioneered work in the first cellular data smartphones, the first plastic multi chip semiconductor packages, the first human like AI virtual assistant, soundproof drywall, high R-value windows, AI driven building management technology, AI driven quality assurance, automation, and window retrofits of the Empire State Building and the New York Stock Exchange, for saving energy.

Joanne Z. Tan 1:40
Kevin is also an accomplished music director, conductor, Broadway show musical producer, and the percussionist. He is actively developing high quality digital theater, virtual musical entertainment using green screen studios and advanced digital designs. (And I’ll ask about that later.) Kevin is currently CTO of Appvance.ai, which has developed groundbreaking AI based autonomous software testing in a SaaS platform. He is also involved with companies addressing AI and robotics, and automation, QA, security, IoT, and sustainability and sleep tech.

Joanne Z. Tan 2:26
As a branding expert, I’m Joanne Tan, CEO of 10 Plus Brand Inc., a full service brand building, content creation, digital marketing, SEO company. We are recognized as one of the top digital marketing agencies in the San Francisco Bay Area. So I can’t help Branding Kevin, as of now, as “A Renaissance Man in a Renaissance Age”.

Joanne Z. Tan 2:51
Okay, first question.

Tell me about your personal story, your journey about why, what, how you get to be where you are today, Kevin?

Kevin Surace 3:04
Well, thank you for that amazing intro. Joanne, sadly, you used up the entire hour. So No, I’m kidding. So Well, that’s a great question. Look, I was born in upstate New York, m dad worked for GE. I was around electronics, the whole, you know, my entire while I grew up, and I went to Rochester Institute of Technology, with a double-e degree and came to Silicon Valley. And I came to Silicon Valley because it is absolutely the land of great opportunity and technology, there is no better place in the world to develop technology than Silicon Valley. And I quickly found myself I started the semiconductor industry, but quickly found myself doing a startup at age 29 or so. And, and that was a smart cellular data phone called AirCommunicator.And that was back in the early 90s. So we were very early, there was no internet yet you had to talk to BBS (Bulletin Board System) if you remember what those are, and AOL and Compuserve and things like that. But and then I got the bug for that. I got the bug for starting companies and inventing things. Can I say more than that?

Kevin Surace 4:16

I know, you mentioned all the patents. I have tried to wake up every morning, … not every morning, but many mornings and say, there is a pain point. There’s a serious pain point that humanity is facing. How could technology address that? And I don’t care. And you can see across my patents, there’s building materials, which we can talk about, which is really fun. There’s sleep technologies, body technology, there’s obviously SaaS and software, there’s hardware. So I don’t look at any of those as a barrier. I say there’s a problem. I can see the problem. People face this problem. How can we solve it, and I think great companies and great inventions start with a pain point. They don’t start with a solution.

Kevin Surace 4:59
I know Joanne, in your business, you see this all the time, companies bring you in, you go: this is a great solution, I don’t know what it solves?  No problem, but it’s a wonderful solution. And that’s the bane of a lot of startups. They have a great solution looking for a problem.

Joanne Z. Tan 5:14
Yes, right. I totally agree with that. Okay. Are you the holder of all these 97 patents? Or are you co-owning…

Kevin Surace 5:22
93. So most patents, as you know, even if you start a company, technically belong to the company, when you’re done. Like you invented it, your name is the lead inventor, you might bring others on, but you give those to the company, you have to give those to the company. That’s part of your intellectual property agreement when you join a company, right? Even if it’s a company you founded, ultimately bringing investors and you know, the company takes ownership of those patents. So then you know, the vast majority of them are owned by companies or were sold, like all of the patents on voice user interface design and technology, which was the predecessor to Siri, if you go back into the late 90s. These were done in General Magic. I built the team that did that, I was the lead inventor on virtually all of these patents. They ultimately got sold and Nathan Myhrvold and Nathan, and intellectual ventures licensed them to Apple and Google and Microsoft and everybody else who’s in the voice user interface business or the artificial intelligent business… not artificial intelligence, artificial helper, will say right, like a Siri.

Joanne Z. Tan 6:23
OK, still very impressive. Okay.

Among all the things you have done, what are your most important and most proud of?

Kevin Surace 6:36
I’m most proud of marrying my lovely wife, Erica. Everyone should be proud when they have a great partner in life in all aspects of their life. Look, I am very proud of some of the music productions and that I’ve been involved in on a national level, writing and conducting one show called “2AM at the Sands“, another one is “Broadway and More”. So I love that, very proud of the art side of what we do.

Kevin Surace 7:08
I’m also, from a technology standpoint, which probably more people are interested in, of all of the software and hardware technologies I developed I’m probably most proud of some of the building technology things that I got to work on including the invention of soundproof drywall and, high R-value windows, high r-value windows. We retrofitted the Empire State Building, did it in just about five months, reused all the glass in the building, took it out, cleaned it all on the fifth floor, built a factory, put it all back up and increase the resistance to heat flow or increase the insulation from R two to R eight. So a 400% increase. Those windows pay back in under three years. And they’re still on the Empire State Building today. So that’s it. I mean, you have to be proud it’s the Empire State Building.

Kevin Surace 7:57
I think obviously you can be proud of all the work for, you know, that predated Siri because nobody had done that kind of work before our system was called Portico, the the female’s name was Mary, was actually her name in real life by the way, and she’s absolutely fantastic person to work with. So it was her voice that you would hear we had millions of people on that system so I’m proud of that. And then lastly I’d say I’ll pick one more is soundproof drywall because that was really a pain point. It started with recording studios but it turned out multifamily homes and hotels and all of that when you can hear the people in the room next to you is not only a problem, people sue if they bought that condo and they can hear the people next to them, so we invented a drywall that was virtually soundproof and people said it couldn’t be done. But it can be done and it’s become you know, just a billion dollar seller now over many many years, and so over the last 20 years or so, and so I’m… every hotel that you go into, that’s new uses soundproof drywall, every condo, anything has been built in the last 10-15 years uses soundproof drywall.

Joanne Z. Tan 9:09
Wonderful. Failure is the mother of success.

What are the most profound “failures” that you have learned from, that you’d like to share with the world?

Kevin Surace 9:21
Great job, well, look, as much as I’m proud of soundproof drywall, windows and all that was all done at a company called Serious Materials, but Serious Materials was writing its S-1, had its bankers, and was ready to go public in 2010, 2011, in that era, and then that materials and clean tech space sort of blew up on Wall Street and all the banks got rid of all their clean tech people, all their sustainable people at that moment in time. Right. This is 10 years ago. And so we had this amazing public offering that was going to be a billion dollar plus, you know, market cap on day One. And all of a sudden, we had no outlet for a public offering, we would have to eventually raise some money or whatever. And we ended up selling the company to actually five different companies, we split the company up and sold it. But and while it got sold for decent money, it was nowhere near what it could have gone public for and today had that been a public company with the revenue that all those divisions that got split up are doing, it probably over $10 billion.

Kevin Surace 9:24
So we came this close, and it shows you certainly in Silicon Valley, but in others, everything has to go right, for sale to happen, for an acquisition to happen, for a public offering to happen. You know, we didn’t have SPACs then. That with a SPAC, you could get away with not everything’s right, you still take it out. But with a real IPO, you know, the market had to be primed, and the market had to be ready, and there had to be no negative situations in the rest of the market. And bankers had to be in place. And you just there’s sort of everything. And IPO windows open, and then they just shut. And when they shut for an industry they could shut for years. And when it shuts for years, and you were ready to go public, it just destroys all your plans. Right? And we were nearing profitability very successful company had 500 employees, six plants. So you know, very proud we got to that point. But had we gotten to that point, just one month sooner, we would have been successful. But we failed in that outcome for our investors, and we fail for our investors, we failed for our employees. I was the CEO, falls on my back. I missed that timing. And we should have, we should have been there just a little sooner. So while the products continue to be a, you know, a multibillion dollar success, we didn’t have the success we we could have had.

Joanne Z. Tan 11:41
Okay, well, thank you for that candidness, the sharing the lessons, because actually those learning lessons are going to be helping a lot of entrepreneurs.

So you invest in startups, any unicorns? And what made you spot them as the unicorns before they become successful?

Kevin Surace 12:00
Yeah. Well, the the biggest unicorn, most recent unicorn that I invested in, I invested in about 10 years ago, at 40 cents a share in their seed round, was the very first set of investors for small seed round. And then it went public. And it’s hanging around $230 or $240 today up from 40 cents, that was Coinbase. And so Coinbase was an excellent investment. And we got very, very lucky. So why did I invest in Coinbase? Well, here’s the answer. I could not tell 10 years ago, whether Bitcoin or any other coin or any other cryptocurrency would necessarily be successful, or how to pick the ones that would be successful. But I didn’t know there had to be an exchange to exchange them, you had to get dollars out of them at some point. And so it was a little bit like investing in the California Gold Rush, don’t invest in the gold miners, invest in the pick and shovel companies, because they’re selling everyone. Coinbase had a sell to everybody. Everybody had to use Coinbase, for the longest time was the only place you could trade. And so that was sort of obvious that you could put money to work there. And if there was any play at all, it would pay off, right? If it turns out there was a play, it did pay off. Now there were many many cryptocurrencies that have gone absolutely nowhere, maybe the majority of them, and there are a few as you know, Joanne, because I know you love this field, there’s a few of them have gone through the roof, and may go up another 10x 20x 50x. Because it’s a supply and demand situation. We know how that works. Yes. So it’s a fascinating field. So to me, it was literally stepping back and saying there is a pain point. There are people, you know, mining Bitcoin at the time, with no way to turn it into anything. And here’s an exchange as the only one at the time, two guys in, you know, startup out of Y Combinator and I go well, that’ll probably work. Because someone’s got to exchange it. It’s a pretty good idea, right? So there’s a real pain point.

Kevin Surace 13:59
You know, look for real pain points that are huge. Look for the right market timing. Bill Gross famously did an analysis of at the time about 180 companies he invested in, in Southern California, and to look at what was the most successful, who had the best outcomes, turns out surprisingly, it wasn’t about the team. It wasn’t about their educational background. It wasn’t about their experience. It wasn’t about the money they raised. It wasn’t about the technology, it really came down to one thing every time: market timing, they happen to get that pain point right at that moment in time. They had maybe first mover advantage or just when the product was working good enough, that’s when the market expanded whatever, Facebook would be a good example of that, right? Coinbase is a great example of that. Market timing is everything. Almost no amount of money can beat market timing, and you’ll never be able to raise enough money.

Kevin Surace 14:53
So we see, you see, and I see, incredibly talented people in Silicon Valley outside of Silicon Valley, building amazing companies only to see the company fold and you go, but that guy or that gal, or those people are so smart. I don’t understand it. They are smart. It doesn’t say that they’re not smart as the market timing wasn’t right. And by the way, it might be right a year later, and they just couldn’t hang on long enough, right? We don’t know. And I see that companies go under, and then a year later, the space is on fire. Okay, we saw this in the food delivery space. So you know, food delivery was sort of, okay, about 10 years ago, and then it just went through this nuclear winter and nobody wanted it. And all the startups were shut ghost kitchens, were shuttered, everything. COVID came, and now anyone who’s in that business is all of a sudden worth $50 billion, right? Well, 20 companies went under, and they wish they had just, …if they had saved their money and lasted the market timing, eventually got there.

Joanne Z. Tan 15:51
Yes, yes. Now, here’s the question, the right product, at the right time, with the right amount of money that you have, you know, to make the dream come true, so how much is the luck? – Well, that’s all the luck!

Kevin Surace 16:06
Well, that you could say all luck. I mean, obviously. Well, I’ll give you a Bill Gross’s point was, he had several teams that he would not rank as his best team at all. They were not the smartest, the most aggressive, they didn’t hire the best people. And they still had a huge success because of market timing. So again, market timing sort of trumped everything, you could have a pretty lackluster product. But at that moment in time, there’s a need for it. So you know, an example would be grocery delivery in the middle of COVID. If you had stock, you had customers, if you had stock you had customers, and if by chance you had started your company a week before COVID and you had a warehouse and you had toilet paper you could sell all you had, right, market timing killed it, crushed it.

Kevin Surace 16:52
This, look, this is true for Peloton. Peloton, by chance, market timing was right; Zoom, market time was right. Zoom was doing fine. But they were you know, there with Blue Jeans and a bunch of other people, right? A lot of people in that space competing against the big guys. And the market timing just happened to be right. And they had ease of use on their site. Everyone in… their grandmother, literally the grandmother can run a zoom, that I can use it, I can push the button that comes up. Right. And then Microsoft had to get into the game. And Google’s late to the game. I mean, I don’t know, – does anyone use Google Meets? I don’t know. Does anyone even use Blue Jeans anymore? Blue Jeans was a huge network. No. I mean..

Joanne Z. Tan 17:29
Everyone uses Zoom, Yeah. So market timing. Now, that leads to another question: most of the CEOs, the entrepreneurs, startup owners, they value too much their ideas and their technology,

Kevin Surace 17:45
Yes, they do.

Joanne Z. Tan 17:46
They fail to really use, to use the mindset of marketing, branding, and establish your product-market fit, and decipher the signals of the market before everybody else, you know. So that part actually, is the marketing part.

Kevin Surace 18:06
Sure.

Joanne Z. Tan 18:07
And they don’t even bother having a CMO until they’re like in B round, you know, or even later. So that’s a problem. They’re not visionary enough.

Kevin Surace 18:19
It is. But here’s the reason I think that’s always been, by the way, and smart companies know that they need a branding, and differentiation, and messaging, and those all have to be tested. But the problem is, most tech startups anyway, are started by tech people. Yeah, engineers that are marketeers, and engineers by nature. Someone’s going to probably write to me and yell at me. But I’ve certainly been this “engineers by nature”, invent their thing, get their thing working, and they think it is the best thing in the world. I don’t care if it’s a plastic box, it is the best plastic box in the world, right? It is the best SAS software in the world. It is the best crypto thing, it is the best that is … So they’ve convinced themselves. Now that level of ego is actually partially important because it keeps you going every morning, you sort of need that belief, – we believe we’re doing the right thing.

Kevin Surace 19:10
But smart people have written about this for a long time: actually step back and say, I of course think it’s the best, that’s by nature. But I now have to do testing, and I’ve got to circle that around, and get that feedback loop very, very tight. So I’ve got to get out there test the product, test messages, and within days come back around, and say that feedback is not working. And you know, some people use focus groups, now we do a lot online, we do surveys, we push stuff online, we get free freemium offers whatever it is, right. You have got to get that client, that customer feedback. You got to see what messages sell, which don’t sell, which one’s converting, which don’t convert, I’m telling you your job, you know, – you do this for people. And then you have to listen to it. And you… I want to make that feedback loop days, not weeks and months, – days! I mean, make it very, very, very quick. So that you iterate on your product.

Kevin Surace 20:01
Now what a lot of, what I see a lot of people do, is they’ll hire you, you come, you put, – I am going to make it up – five different ads out there, you get all this feedback, you’ve come back around, you show them what people want. It turns out, they want some different features, as it turns out, then, and they go and the the entrepreneur goes, Oh, they’re wrong. Well, that’s a view. That’s one view. Let me give you another view: that feedback is invaluable. And those who listened to it, your clients, your customers can’t design your product, but they can tell you their pain points.

Kevin Surace 20:33
So there’s no customer who designed Steve Jobs’ iPhone or Apple’s iPhone, right? Nobody does. But Steve could watch people and say, This is actually a pain point. They actually need their email, they don’t know they need their email when they’re standing out there. But they do. And they and they need texts, and they need messaging. And actually, they need to, today with the web, they need to surf the web. You know, so he could see these were pain points that people couldn’t exactly articulate, but they were real pain points, they couldn’t design your product for you. So don’t look for your customer to design the product, but look for your customer to tell you their pain points. And then when they use your product, say this is what’s working for me. And this is what I don’t understand. And you know, customers say real quickly, they say, I don’t understand, you go, Oh, well, that customer is stupid. Okay, that’s also a view, but that’s your customer, and they were going to buy from you, and they won’t buy from you if we call them stupid. So if that’s who you’re selling to, you got to fix the product.

Joanne Z. Tan 21:28
Those entrepreneurs, startup owners, the CEOs, they need the “outside their own forest” perspective, because they’re so deep into their products, which are like their babies, okay, they don’t have an objective point of view. So they need people outside of their vision, peripheral vision, to tell them what is wrong with this product-market fit, you know, why is it not better, what are the pain points, so they need people like us, okay. Anyway, next question.

Kevin Surace 22:04
Yeah, hire Joanne! I mean, you need a separate set of eyes. Don’t forget, Tiger Woods has a coach. And you go, the coach can’t play nearly as good as Tiger Woods. – He doesn’t have to, he’s got a set of eyes, and he can see what’s going on to improve what Tiger Woods is doing. Okay, if Tiger Woods can have a coach for that, you can have someone who looks at the product-market fit, who talks to potential customers, who gets feedback, who looks at different ads, and different messages, and finds out how customers are back, and come back to you with a third party view that you can’t see yourself. And frankly, you don’t even want to see because you believe so much in what you’re doing. But you NEED to see, because that’s how you’ll be successful.

Joanne Z. Tan 22:45
That’s right. Even the best surgeon cannot operate on himself. Okay.

Kevin Surace 22:50
Yes, he can once, but very badly.

Joanne Z. Tan 22:55
Yeah, we all have our blind spots. We need others to help us.  Number Five Question:

AI – What do you think about the prospect that AI may become the master of humanity?

Kevin Surace 23:08
Yeah, not in our lifetime. I think, you know, I always split AI into what Hollywood does and what really happens, what Hollywood does is Ex Macina, and it takes over everything and blows up the world and whatever. But actually, that’s, we’re nowhere near that. Where we are today is very, very, very succinct vertical solutions. Speech recognition is a great example that is improved dramatically. Image recognition, – these sorts of things, learning from huge databases, building out a neural net, and then applying that to future data. We are very good at that. Now we’re getting extremely good at it. So for instance, today, you know, we can teach an AI to recognize a cat out of millions of images by training it on millions or billions of cat images, right, and saying: cat, cat, cat, cat cat, okay, great. However, now if you throw a chair at the AI and never trained it on a chair, it can just say it’s not a cat, but it actually doesn’t know what it is, has no clue because we haven’t trained it on it. That’s the limit of our technology. More than that, you could show it some hair from a cat, and it wouldn’t know what that is because it didn’t train on hair. It could hear meow, and it would go I don’t know what that is because I wasn’t trained on the sounds of a cat. Does that make sense? And it can’t tie these different realms together yet, although we’re starting to work on that. That’s where we actually are in actual AI. It’s very, very limited solving specific problems.

Kevin Surace 24:40
When you look at AI in a driverless vehicle, you’re trying to solve many, many, many different problems with many different, we’ll say, AI engines, or many different neural nets. And probably some traditional AI as well. You know, across dozens of computers or GPU systems, that’s what you’re doing. You’re solving these things, the way a human would. You’re listening to sounds you’re looking ahead, you might be getting LIDAR data, etc, etc. And so you’re trying to solve problems the way humans do, but very limited. So forget this idea that there’s going to be a robot like me that they can have this kind of, you know, rapid fire conversation and then go over and push the nuclear button – Not gonna happen. Not in our lifetime, when, …and there’s just no sense of this. It’s so far away.

Joanne Z. Tan 25:27

Do you think AI will ever acquire the human critical thinking and the creative skills?

Kevin Surace 25:35
Well, here’s the problem. So scientists today don’t understand exactly how humans can jump from one domain to another and think outside the box by leveraging their knowledge of one domain and putting it in another domain, right. That’s a very unique skill, although it’s not just unique to humans. There are probably other animals and things that can do that. But we can do that, you know, sort of innately, we see something coming towards us. And we can pretty well figure out even if we’ve never seen it before, if it’s dangerous to us or not, even though we’ve never seen that thing before, right? Doesn’t matter. We go: Hmm, I’ve never seen a lion coming towards me. But a lion is a bad thing. Now AI doesn’t do that, at all! If it wasn’t trained to recognize a lion, it would say, well, there’s something coming towards me. I don’t know what I do. I it’s not something I’ve seen before. So we could program it to say if you don’t know what it is, run. But it actually doesn’t know what it is. Right? So you have all these problems. So there’s that.

Kevin Surace 26:38
And also what scientists don’t know, we don’t understand is: how do we actually have sensing, and feeling, and true emotions, right?  How are we sentient, truly sentient, we are aware of ourselves, we’re aware that we live and die, we’re aware of our finite existence, we’re aware of things that are dangerous to us, could harm us. I mean, and we have feelings, we have compassion, we have empathy. Now, back in the 90s, when we built Portico and Mary, we programmed Mary to sound like she had empathy, just like Siri does. So people would say, “Mary, I would like to marry you, you’re so sexy,”or whatever it is. And she’d say, “Oh, thank you.” And we’d have, you know, a dozen different replies to make her sound like she was empathetic to what they were saying. However, she wasn’t actually empathetic, it was just a sub routine. It’s a randomized saying, well randomized and waited. And you know, you said, well, I already use that, so I’m going to use a different one until you’ve cycled through them. And then you do it again. And you randomize it. So that’s how we fake empathy.

Kevin Surace 27:41
But how do we actually have empathy? I have no clue. And nobody does. We don’t know why we have it. But why do we actually care? really care? I mean, physically care about another human who’s, let’s say bleeding in the street, – we actually care. We don’t even know who they are. But they’re human. If we, by the way, a cat bleeding in the street, we would feel the same way. You know, at some level, we’d say “I have to help this poor animal, I’ve got to get it to a vet, I’ve got it,” whatever. Why do we have, Why do we even have empathy? And how do you form that? I can program it and fake it. How do you… So that’s why we are so far away. I think to think outside the box, you probably have to have empathy, you have to have feelings. You have to, you have to, have been raised in an environment where you were taking in literally terabytes of information every few seconds, the equivalent to terabytes of information, right? It’s fascinating.

Joanne Z. Tan 28:34
You know, I think it will be the saddest day for humanity, that AI will become the master of our life, and humanity loses what they are created to be. So AI should be always a tool serving humanity, not the other way.

Kevin Surace 28:58
Oh, well, let’s flip it the other way around. Yeah, I agree with you. But let’s flip it the other way around just for a counterpoint. It could be that humans are the scourge of the earth, we are destroying a planet. We don’t actually care about this beautiful planet, that the heavens or whoever, is given to us.

Joanne Z. Tan 29:16
But you cannot expect AI to save the Planet. It has to be…

Kevin Surace 29:19
Maybe we can, maybe AI comes along realizes that we’re actually a virus, a bacteria, a fungus on this planet, eradicates us and then fixes the planet, and designs its own co2 absorbing mechanisms to reestablish the planet’s balance.

Joanne Z. Tan 29:37
If that’s the case, that’s my point. That’s the end of humanity.

Kevin Surace 29:41
And maybe it should be. That’s my point.

Joanne Z. Tan 29:44
We can write a sci fi about this,

Kevin Surace 29:46
maybe it should be, maybe we are actually a fungus that must be eliminated.

Joanne Z. Tan 29:50
That leads to my next question, okay, –

This pandemic is only the beginning. There will be more. What do you think the world should do to be more prepared? What are your predictions about the future after this pandemic?

Kevin Surace 30:06
Well, surprisingly COVID, being a Coronavirus, was, you know, a generally well understood virus type, and actually not that dangerous. I know that’s a terrible thing to say with millions of people dead. But compared to what could come out, which could be some kind of airborne fungus that we have never seen before, or potentially a bacteria or some virus that is way outside of the realm of this thing. You know, the overall fatality rate of this thing, well being in this, call at 1-3% range, you know, it wasn’t 90 or 100%, it wasn’t Ebola. Now, you know, fortunately, Ebola doesn’t seem to travel through the air. But how would an Ebola that travel through the air and could travel hundreds of miles and infect everyone on Earth in a month, and everyone dies, 100% fatality rate, that would be bad, that would be severely bad. So we were… this was a warning. I mean, I hate to say this is a warning sign. Now what’s the good news? The good news is that the US government had funded mRNA research for a decade. And that allowed us to actually have a vaccine, literally, within a week or so of the virus. DNA being released, right, so the virus being sequenced, it was sequenced, and we had a vaccine ready to go in a week. Now it had to go through three phases of trials, which in the future, we might shorten, because we now know how mRNA vaccines work. So maybe there’s a chance to say, in emergency, that’s three weeks, it’s not a year, but they actually had a working vaccine in a week, we could have made billions of those and gotten them out, almost nobody would have died, right? But we weren’t ready to do that. Because mRNA is new. So this is a huge step forward to humanity. Remember, in 1918, Spanish Flu, we had no vaccines, there was no hope of vaccine. It just had to peter its way out over two years, and eventually it did and died. And it actually turned into H1N1, which we have today, circulates around and we generally don’t die from it.

Kevin Surace 32:19
Um, one thing about, the last thing I’ll say about viruses is, often if they’re given enough time, they continue to mutate and they eventually mutate into a form that generally doesn’t kill its host. Now, why is that? Well, because the longer the host survives, and spreads it, the more of it there is, right. So if you think about that, it makes no sense for a virus to quickly kill its host, because then it can’t get around. And so just Darwin itself would say you need a host to keep walking around for months and giving it to everybody so that it spreads more, does that make sense. And so H1N1 became not generally lethal. Even though the Spanish Flu… it slowly mutated into something that today we just call the flu, doesn’t really kill very many people, one in 1000, it’s not good, but it’s fine. We live with that. So I think we’re more prepared than we’ve ever been. I think that we’ve got to have agencies, which are hard, you know, it’s hard to do, agencies that are willing to say, in an emergency, we are going to come up with a protocol that approves an mRNA based vaccine, now that we have experience with it in, you know, I’m going to give you a number, in four weeks. And you create a protocol that does that. And, you know, whatever the deal is, and maybe it’s six weeks, but we can’t wait a year, we’re gonna have to really condense that, because an awful lot of people died.

Kevin Surace 33:41
The second thing is, and I’ll just mention this, because it’s sort of a techie program. It is absolutely beyond my understanding how we can have apparently smart people, Southwest Airlines pilots right now, health care workers, saying they refuse to take the vaccine. They’re happy taking horse dewormer in the form of ivermectin, but they won’t get a vaccine. This is scary for humanity. Okay, this is a failure of the education system. It really is. You talked about critical thinking earlier. Clearly critical thinking went out the window, and you were not taught to think critically, instead, you’re watching whatever rolls by on Facebook and you’re believing them that the vaccine is full of nanoprobes or something. No, it’s not full of nanoprobes. And no, it doesn’t change your DNA. And please, that’s not how the science works. Learn how the science works, or trust the scientists, trust the scientists who developed it and gave it to themselves and their family first. Now they’re not martyrs. They did that because they believe in it, right, So you got to believe in other humans… those can’t believe in anything, you believe everyone’s a martyr, and they’re not, anyway.

Joanne Z. Tan 34:56
No matter how advanced a country’s general education level, there will be people who are going to be anti-vax. There will be people who refuse to do this. Now that leads to a bigger question: If you rely on science only, on vaccine only, without the political mandate, the virus will just keep mutating.

Kevin Surace 35:20
Sure.

Joanne Z. Tan 35:21
Now, you compare the statistics of China’s fatality and infection rate and with United States. Of course, they use the draconian measure, which I don’t particularly care about. But they were controlling it far better than any country on this planet. Okay. Now, there is no answer to that question. Let’s move on to the next one.

Kevin Surace 35:48
There is a little bit of an answer. Hang on, because there is no question while I deplore communism, there’s no question that in certain circumstances that actually works better than a democracy. In the case of a virus, it works great because you just say if you leave your house, will kill you. And you go, Okay, well, I know I’m exaggerating a bit but you get the point right? A country that says if you leave your house, will kill you clearly can squash your virus in a week, there’s nowhere for it to go. There’s no human to see. So when you can have those kind of mandates in certain circumstances that works, like I said, deplore communism and all its forms, on the other hand, we should acknowledge that there’s times that kind of draconian method actually save lives, they actually save lives, no question; and a few other countries who did something incredibly similar, you know, New Zealand, which is a democracy but clearly clamped down, Australia clamped down, we had some countries that do that.

Kevin Surace 36:45
Here, we value our freedom so much, which is great. We all value that. But there are times that, you know, people have to wear a mask and have to get vaccinated and have to not get together with family. I mean, look at this huge breakout in Hawaii, you know, at the end of August and into early September. Basically, the residents of Hawaii, who live there full time, just want to get together with their family, they were just done with COVID. And I understand that, but by getting together with their family, they had an entire families they had an entirely huge spike, huge spike that was 5,6,7 times higher filled, all the restaurants have filled all the hospitals, excuse me, didn’t fill the restaurant. And and to the extent the governor had to say that, please, visitors don’t come. Now the visitors were not the ones that were having COVID because they don’t get together with anyone. They don’t know anyone else there. Right? It was the larger families that got together. And there was nothing that Governor could say that would stop them. They just said we don’t care. We’re getting together. We’re celebrating our family. And if we all get it, we get it. So I, you know, humans are humans, that we’re going to lock them up?

Joanne Z. Tan 37:55
Well, democracy and freedom is based on personal, individual accountability and responsibility. But if you don’t have that personal responsibility and accountability, it breeds ignorance. And it hurts the entire society.

Kevin Surace 38:13
Sure, absolutely.

Joanne Z. Tan 38:14
So this is a philosophical question. Let’s move on to the next one:

Describe in detail your vision of the world with AI, social media, digital currency, two years from now, five years from now, 10 years from now, 20 years from now.

Kevin Surace 38:31
AI is augmented intelligence. And the first thing it’s doing is, there’s no question, it’s allowing companies to be more concise and more predictive with the data that they have. It is then slowly with RPA, which is a techno robotic process automation, with technology that sort of replaces things like customer service and other things that are repetitive, it is going after those lower end jobs first. So AI can replace some, you know, first level customer support. And it is, it can replace things like you know, insurance, people who have to, you know, look at the information when you’ve gotten in a car crash, things like that, right. These claims processors, things that are highly repetitive, it’s actually quite good at that.

Kevin Surace 39:26
So over the next five to 10 years, those are the jobs that are at risk. On the other hand, society will get more productive. And most of those jobs in the US, those kinds of jobs were sent overseas anyway, and by the way, that’s true with manufacturing, so we’re going to see those jobs coming back but being taken over by software or hardware robotics, if that makes sense. Right. So because look, why do we make things in China? Well, companies for the last 20 years went to China because you could get labor cheaply, period, full stop. Nothing wrong with that. And China got very good at making things for us. As automation, and robotics, and AI, and AI image detection, all of those things get better and better and cheaper and cheaper, well, you can make it right here cuz I don’t need any labor. Why would I pay any labor? Why would I pay even $2 an hour in China, when I can pay $0 here, just the machine, it’ll run 24/7.

Kevin Surace 40:21
So we’re seeing this on-shoring of lots of things, customer support, I sent it to India 15 years ago, I sent it there because of cost, not for any other reason. Now I can have a technology do it. And the AI is getting very good at doing it. So I’ll just bring it back here. It starts with chatbots. And then it starts with true interaction. And then eventually it starts with literally it looks like a human and, and we’re very close to that. So those jobs are going to be taken but mostly being taken from offshore. So that’s not good for them. But it’s probably fine for us.

Kevin Surace 40:54
Second thing is, don’t realize we have 10 plus million jobs open in this country, the United States, and no one to fill him. Even though there’s 8 million people out of work, they don’t seem to want to fill those jobs. Most industries are facing a huge labor shortage over the next 10 to 20 years, simply because of the macro economic conditions of people with lower birth rates finally getting through high school. And so high school graduations are continuing to go down. College graduations continue to go down just because there’s less people going in, not because they’re not graduating, they’re just less people in the system. And they’re going down at a pretty rapid rate. And yet we have a need for more workers to produce more. And so this is diverging, right? We’ve got a problem. We got worker base going down, needs more. So we have to get more productive. So AI is going to help us be more productive. This is all wonderful. And yes, over the next 10 to 15 years, we might finally have a real kitchen helper that’s a robot, that’s AI, that does cook for us. I’m waiting for that, it’s technically almost practical and possible today, just a little pricey. But but I think we will actually get there I want you know, I want a robot in the kitchen that cooks and cleans. We don’t want to do the dishes. I don’t want a dishwasher. I want a dish washer, right?

Joanne Z. Tan 42:07
I wanted sooner than 10 years.

Kevin Surace 42:09
Yes, we all do. But in the next decade, I think they’ll become affordable. We could build one today for a million dollars, but we can’t build one for $10,000. That’s the problem, right? So we got to get it to where it’s priced reasonably. And you probably won’t buy it. Most of these kinds of robotic systems that use a lot of AI but also are physically robotic. We’re going to lease, we’re going to pay by the hour, or pay by the month, and you know, it might be $1,000 a month or $2,000 a month to have one of these things in your kitchen. And you’ll decide is this a good thing? Oh, and they might be able to clean the house and you know, do other tasks and fold laundry. These are good things. these are, see those are pain points. Right? We know those are pain points. We know nobody actually wants to fold your laundry ever. Nobody ever said I love folding laundry. Nobody ever said I love ironing. Nobody loves those tasks. So you can see some of these tasks getting taken on by relatively dumb systems were smart enough to do that task. Right?

Joanne Z. Tan 43:05
Next question. Okay. So I’m an opera fan. All right. This season I’m really delighted to watch the New York Met opera live performance in a Century 14 movie theater near my home. The surround sound effects, large screen, reclining chair, even warmed up, and social distancing, too. – I really don’t feel like taking the BART to San Francisco Opera House, which I did for 25. I’m afraid the San Francisco box office will suffer a decline in ticket sales. So will many cities’ opera houses in the world since the Met is streamed to around 27 countries, more or less, in many local cinemas there. So:

Do you agree that technology in this case is helping with monopolies (The Met), at a loss for the local cities’ opera houses, or musicals’ performances?

Kevin Surace 44:04
Yeah, well, obviously, I’m involved in a lot of this streaming stuff, including working on a project with Stephen Schwartz actually to stream something very large to theaters later next year. So here’s what I would say. While COVID accelerated this sort of digital access to amazing performances, it was going to happen anyway, what was keeping it from happening was frankly, unions, and agreements, and how the money gets split, and all of these other things. It was not a technology problem, right. We could we’ve been streaming to theaters for five, or six, or seven years. We could certainly streamed even 4k to your home for the last four or five years. And certainly 1080 for five years before that. So you say what’s been keeping… It wasn’t a technology problem. It was all These other things. Well COVID made everybody figure out how to work. And so the unions had to figure out like, you know, AFM, right, musicians union had to figure out how do I actually work in a streaming world. Because if I don’t do this, my musicians aren’t working. Like I have to find a way to do this. Right. So everybody started looking at how they could create contracts and agreements that would work for everybody involved. And not just rely on a live audience. And that, when you look at that, that expands the audience and the opportunity, it expands the opportunity for people.

Kevin Surace 44:06
There’s a project I’m working on, called PEN performances, PEN, Private Entertainment Network performances, private, what’s a private Entertainment Network – private entertainment, is where you can get on the system. And you can pick from potentially hundreds of entertainers, and they will provide a private performance to your household all digital, two way, just to you, just to you, private, just to you. Now that’s absolutely fascinating. It’s because we’ve never had a way to do that. Even though we technically could have done it. COVID sort of pushed us to say, this is actually an expansion for the artists so that artists now can perform worldwide without leaving their home.

Joanne Z. Tan 46:17
But here’s…there are some other issues. Number one…,

Kevin Surace 46:22
someone wins, someone loses. I hear that.

Joanne Z. Tan 46:25
Oh, yes. If I have a choice of watching the same opera, my choice is between the Met and San Francisco Opera House, I look at the cast and most likely I’ll go with the Met because they just have more resources, okay, bigger stars. My time is limited. I choose the best. Okay. Now, if you do a live event, just for you, a private show, – are you kidding me? You don’t have that interaction with the audience. You don’t… you can’t read the facial expressions…

Kevin Surace 46:59
Actually, it’s full two way interactive, two way interactive with that audience, with your home.

Joanne Z. Tan 47:04
Virtually,…

Kevin Surace 47:05
virtually. Oh, two way. Yeah.

Joanne Z. Tan 47:07
So follow up my question:

So isn’t this consistent with the entire human societies trend right now toward monopolies such as Google, Amazon, Apple, Microsoft, as well as in the political climate of autocracy, (China) or whatever you call it, versus democracy?

Kevin Surace 47:28
Well, when there are winners, there are losers. And what I mean by that is, if you just look at the amount of dollars spent on opera, every year, you’re going to spend X amount of dollars, right? You weren’t going to increase your expenditures, you’re just going to spend those dollars in different ways. And since there’s more ways to spend them, that means you took it away from someone else. So if you go to San Francisco, one or two times less, they didn’t get your money. Now, let me say this, that there is something absolutely grand about live performance in being there. As you know, there’s nothing like being at the opera, or being in a Broadway show, and being in the audience. There’s, there’s nothing, nothing at home, nothing in the theater replaces that. Now, here’s how I look at it for Broadway, not everyone can go to New York City, like you can’t go to the Met every week, because you don’t live in New York City. So this is bringing the Met to you, which is fantastic. It is sad that you’re it’s taking some money from San Francisco, because you’ve chosen to limit your time and expenses and everything else. But you otherwise could not have gone to the Met. But if you are in New York City, if you’re in New York City, and you could just go to the Met, you would probably go to the Met because it’s live! And … that is a way better experience in the theater. But that’s not available to you, taking the plane trip, going there, seeing the two hour production, getting back on a plane, and coming back is not available to you every week.

Joanne Z. Tan 48:49
I hope you’re right, so with this live streaming by the best opera houses in the world, really true that they will not threaten the other cities’ local opera houses, then it’s the same analogy with Amazon, all those mama Papa retail stores are still going to thrive, – which is NOT the case!

Kevin Surace 49:12
Not the case. As I said, you’re taking money out of someone else’s pocket – you’re going to the theater took time and money from your going to San Francisco, and that was a choice you made. Even though a lot

Joanne Z. Tan 49:24
The choices made by so many people

Kevin Surace 49:26
I get that. That’s right.

Kevin Surace 49:27
They chose Amazon over the local retailers, and the local retailers all go bankrupt

Kevin Surace 49:31
That is absolutely the case. Well, look, here’s one thing we know from Apple, and Steve Jobs said it is true: Convenience trumps all. Convenience trumps all. And we learned this with the iPod when it first came out, the music player. When that came out, the quality wasn’t that good and it couldn’t hold that many songs. But it held enough to be more convenient than any other method of music playing I had. It wasn’t the highest quality, and the ear things that they had weren’t tech-y, but it was so convenient to have a few 1000 songs in my pocket, that convenience trumped everything else, trumped quality, okay, the convenience of you being able to go to the theater tonight at eight o’clock, and for two hours, close to your home, watch that opera and leave and watch it from New York, the convenience that trumps everything else. And the convenience of Amazon, the convenience, not the price, and not anything else, the convenience of I can order it this morning, and have it here this afternoon for a lot of items, we’re having here tomorrow, that convenience, save me time to go to the store, figure out if they even have the item, – I can push a button right now order it, it’ll be here this afternoon. I’m done. That is wickedly convenient. I don’t know if I got the best price. And frankly, I just don’t have time to care. It’s just like push the button, something will show up. That problem is solved, right? I could have gone to Home Depot and got that light ball, but I can order them on Amazon and they show up for $5.

Joanne Z. Tan 50:57
So speaking of innovation, if those local retailers, if the brick and mortar opera houses or just consumer stores want to survive, they cannot compete on convenience, they must compete on experience.

Kevin Surace 51:13
Sure, absolutely

Joanne Z. Tan 51:14
Customer experience, so they have to go there to experience that, you know, which cannot be offered by just a box dropped at my door. You know,

Kevin Surace 51:24
that’s right. That’s right. And there are certain products that offer that kind of experience. Certain kinds of clothing is generally all for that experience. Although Amazon’s getting better, and they’re better with returns. Now, groceries used to offer that experience. But now people have learned you can just order groceries, whether you order them locally, or whatever, whatever. So I would say what we’ve learned from COVID is that humans are willing to generally live without that experience. It wasn’t that important in most cases,

Joanne Z. Tan 51:52
as of now; but I think there are people who … more and more people are getting tired of this locked up.

Kevin Surace 52:00
No question. No question. But when you teach people a new trick, like order groceries online, and they show up at your doorstep two hours later, you’ve taught them a trick that they don’t unlearn. They don’t unlearn. And they used to say, well, the experience of growing a grocery store, but then they learn because they had to, to order groceries and then they go, Well, sometimes I’ll still do that. I might not do it all the time. But it’s actually pretty darn convenient. We taught people new tricks. And we taught people the experience was good. But I could live without it for a while.

Joanne Z. Tan 52:30
Okay, yeah. So next:

Climate change: How do you address it? To what extent our traditional ways of thinking, governing, investing, living… must change, and change fast?

Kevin Surace 52:42
Yeah, well, this is a terrible topic. So look, the The real issue is that we needed to address climate change around 1985, before any of us knew the term climate change. And it’s in a runaway situation at this point. And as much as we have now, you know, signed back on the Paris Climate Accord and the other accords and everything else, the truth is, when you look at every country who signed up for all those accords now multiple times, Kiato, Paris, others, nobody’s met any of their targets, virtually no countries come even close. And part of the reason is that it’s easy for a government to sign up and say we’re going to reduce our carbon emissions by 30% in five years, but how do they get industry to actually do that?

Kevin Surace 52:47
How do you actually force an industry to do that, and in some industry, they have no alternative like they must use natural gas to burn something that generates, you know, methane, co2, etc, etc. So this is actually a fundamentally huge problem. Look, we heat and cool our homes, all of our buildings all all up are about including making of the buildings, if you look worldwide, about 52% of overall carbon emissions, buildings, we don’t think about it, because the carbon emission is happening at some power plant, you know, 100 miles from here, right? But I heat and cool the house and somewhere someone’s burning coal, or natural gas, maybe nuclear, possibly, solar, there’s much more of that now. But solar is a few percent of our overall energy usage. After years of, it’s cheaper and it’s better and but you have to have the space and you know, it’s all we can just go down the line, right?

Kevin Surace 54:19
So we’re moving in the right direction, but we’re not moving fast enough. We’ve never moved fast enough. And it’s not just about us. China is still building coal plants, we’ve stopped in the US and you know, they practically have to they don’t have natural gas resources. In some of those areas, they just don’t have the solar resources. They’re building coal plants, still building coal plants, coal plants, – turn them all off! Well, you can’t. And a coal plant last 50 or more years, so I don’t see a way out of this when no country has met any of their goals. Now that’s the negative and me and the positive would say but look at wind and solar, and how cheap they become and solar and in many cases

Joanne Z. Tan 54:58
Nuclear power! We really need to think about using nuclear power.

Kevin Surace 55:02
Oh, absolutely. I’m a big supporter of nuclear. Absolutely. The fact that we’re turning off our, you know, nuclear power plant in California is ridiculous. This is one place where it’s very interesting, you know, you see the environmental, the environmentalists who said, Get rid of nuclear power, it’s dangerous. It’s not, but fine. And it turns out that by shutting down and not building nuclear power plants over the last 30 years, we permanently harmed the Earth, permanently harmed the Earth by thinking that that was more dangerous than building coal plants and generating co2, which is what we did. We built coal and natural gas because we couldn’t build nuclear. So for 30 or 40 years now,…

Joanne Z. Tan 55:44
That loops back to my prior question, lingering question, is about this political process has permanently, I’m quoting you, harmed our Mother Earth, this political process has delayed even the BART for 20 plus years, while everyone else is building bullet train! I interviewed a commercial real estate developer last time, okay. And he said, the housing shortage in California is 120% responsible on the government part, the government created the housing shortage because of the process. So now I’m looking at this democracy that I came to this country, because, back in 1980s, I believed in this the beacon on the hill, the American democracy, and now I’m looking back, it’s like, COVID: – failed; Well, environment: well, you know, the race against climate change, I don’t think we’re, as you said,… which is slow…

Kevin Surace 56:46
Actually no country is doing well in the race against climate change. That’s the problem.

Joanne Z. Tan 56:51
Okay. Next question. That is:

The sorry state of US politics: Do you think the two party system is collapsing into its own dead end? There are other democratic political structures, the parliamentary systems, and I wrote something about the rank choice voting based on Harvard professors model, which is used already by New York’s mayoral election, and other state’s governor’s election. So what do you think?

Kevin Surace 57:20
Yeah, rank choice could work. Look, I think that, what people have to understand the two party system, which has been around for some time, is a very interesting system. Because it creates a situation early on in the election cycle, during the primaries that in the end pushes the furthest left and furthest right candidate to be on top, and that dog doesn’t… that’s that is a problem. That’s a real problem, because actually, most Americans are generally centrists. And so you can’t get a centrist candidate. And you can’t get one through the primary system.

Kevin Surace 58:01
The second thing is, is that Americans think that their vote actually counts. And in, say, a presidential election, it doesn’t exactly count directly, as we know, there is all these systems in between. But in fact, even within a state, it’s just a recommendation for the representatives of the electoral college that the state is going to send, and technically in some states are talking about this, they’re saying that they might send whoever they want, that is the legislature can look at how the people voted yet send representatives in the electoral college to which they wish. Now that isn’t technically illegal, perhaps because of the will of the people in this case is representative, and it’s just a suggestion to the party, who they want and who they should send, by the way, even a party could say, they could, for example, in the next election, maybe everybody goes for Kamala – I’m making it up, – and Biden still on the ticket, let’s just make that up. And the party could say that’s interesting, but we’re putting up Biden, thank you America for voting, we’re putting up Biden. Because the parties themselves, you all you did was vote for a party, the party can do what they want. Now, they’re not supposed to, they shouldn’t, but you’re not actually voting for the candidate you think, so this whole system is messy.

Kevin Surace 59:28
And it got put in place to be able to really fund two candidates, one on the right, and one on the left, and fund it wholeheartedly. So we really have to rethink the funding, rethink where the money comes from, rethink how companies can come in with millions of dollars to fund candidates. Get it back to grassroots, maybe nobody can give more than $1,000 and there are no PACs, get rid of PACs. I mean you have to undo the whole system.

Kevin Surace 59:58
Well, the only one who can undo the system is Congress and Congress loves PAC money. They love money, what’s not to love? So the whole system is built in a way that in this case, the normal check and balance doesn’t work, right, because the judicial side, can’t undo the fact that Congress likes these PACs and likes money. And you know, they, a congress person has to go out every two years, you know, they’re running again, right, they’re running again. And this is a problem. So they’re always running. And to run, they always have to raise money. So you know, you get the emails, please give $1 please get $5. And I am going, you just got elected, but they’ve got to start the cycle again. Because that’s their job. They’re only in … And for career politicians is the only job they’ve ever known. They don’t know what else to do. So all they do is raise money all the time. And I don’t know how that gets fixed…,

Joanne Z. Tan 1:00:55
As long as politics and public positions are dependent on money, this democracy is… to say the least, flawed…

Kevin Surace 1:01:10
All societies eventually blow up, and have on Earth, you know, Greek, Romans, just, you know, go through it,

Joanne Z. Tan 1:01:19
I certainly hope that the “we the people” will contribute to the survival and the sustainable future of our democracy.

Kevin Surace 1:01:29
Well, who’s “we the people”? You know, some portion of “we the people” tried to bring down the entire government on January 6, that’s not you the people, or me the people, but it is we the people, some of the people, by the way, some of those people continue to think in the back of their mind, or even in front of their mind that the election was stolen. There was zero data on that, sorry, it’s been tested in every state. But there are conspiracy theories, and there are conspiracy theorists and they’re not going to let go of their conspiracy. They’re the same people that won’t take a vaccine.

Joanne Z. Tan 1:02:00
So I see all these problems, the warning signs, those people I would say that education, our education system failed, because they do not know how to critically think, and education system failed, to make them think this is a conspiracy and the anti-vax and all this Qanon. So what do you think the future of America?

Kevin Surace 1:02:29
I think that the educational system has absolutely failed some of the people in this country, you know, and look, I think another thing I mean, I think, to be controversial, right, but you look at, you know, the shaman who broke into Pelosi’s office and all of that, and more than the headdress, you know, when you listen to him talk, you’re not hearing the highest IQ person, right? I mean, and so, you know, other terrible things might have happened in his life. We don’t know who the parents were, we don’t know, the education that he went through if he even graduated from high school. You know, everything went wrong with people like that. And of course, they think everything went wrong with us, that we came through a collegiate system, a university system that warped our minds, and made us all lefties or something like that, right. So they’re, they think war is crazy, as we think they are crazy.

Kevin Surace 1:03:23
And because of the rapid feedback loop of Facebook and social media today, we’re no longer in a place where we can have a conversation, like you and I really don’t want to have a conversation with Mr. Shaman. He’s a nutcase. Right? On the other hand, he doesn’t actually want to converse with us. But if we don’t sit down and have a conversation between humans that say, look, let’s start with this. We’re both Americans. Okay, great. And we’re all Americans. And we want a wonderful country. Okay, great. So we got to find some places where we share some common ground, what… let’s start to talk about what a wonderful country is, its opportunity for you to have a job, you know, some of these people hadn’t worked in years. That’s another problem, right? They hadn’t worked, they lost hope. Look at the people in the Middle East, they get attracted to these radical groups, there are people who have no other hope, they have no hope of a job, no hope of an education. And the only hope they have is to go take up arms and get a gun with this crazy group, and commit suicide somewhere and go to whatever place they’re going to in the afterlife, right. And a lot of that is true with these Qanon folk. These are people who haven’t worked in a long time. They were just looking for someone to follow. They got involved in a group that was online like this, and all of a sudden, they made like friends, and they had, they had an enemy. The common enemy, you know, was the government that was trying to put in place someone that wasn’t fairly elected. So in their mind, they were doing what was right even though it’s warped, and they could no longer see or hear the facts. They lost the ability to critically think that the number of people who would have had to in, you know, six or eight states, who would have had to bet in on changing this election stuff, the number of people and nobody ready, you know, it’s impossible. It’s just too many people would have had to keep that secret.

Joanne Z. Tan 1:05:21
No, that’s the biggest threat to our democracy. Okay. And to American future.

Kevin Surace 1:05:29
It’s not AI. It’s not AI,

Joanne Z. Tan 1:05:31
not AI

Kevin Surace 1:05:31
It’s the Shaman and Qanons.

Joanne Z. Tan 1:05:33
Yes, the ignorance of the massly not educated.

Kevin Surace 1:05:39
ignoramus. Oh, yes.

Joanne Z. Tan 1:05:41
Now, last question.

What does the “Kevin Surace Brand” stand for? What do you want the world to remember you after you kick the bucket?

Kevin Surace 1:05:52
Well, well, first of all, I hope I’m here remembering instead, why I didn’t kick the bucket and why the world is doing what it’s doing. So let’s turn that around. It’s a little bit like, the doctor saying, Wh at do you want me to remember me by when you die? And it’s like, well, actually, I want to see you dead first, right? So I would say this, though, truly, look, I think all you can do is try to have integrity in your life, that’s all you can do is try to have integrity. Don’t steal from people, don’t steal their ideas. Don’t treat them badly. If you hear from someone that you haven’t heard of from, I don’t know, since high school since kindergarten, doesn’t matter, treat them with respect. Treat them with dignity, if they want something from you try to give it to them, give them the time of day, give them the time that they need, give them the respect as another human. There are too many people in this life, that kind of throw their friends away at different sections of their life, they get to this point, they go, I don’t have time for that group of friends, you know, where I grew up that, and I get that, but you know what, just respect other people, just respect and have integrity in your business. Don’t lie, don’t cheat, don’t steal, just have integrity, you know, in trying to, try to have a sense of purpose every day.

Kevin Surace 1:07:16
Try to have a sense of purpose every day. And when people have a sense of purpose, you know, what happens, they’re not Shaman, they’re not QAnon, because they get up every day, and they have a sense of purpose, my sense of purpose is, you know, I’m going to help move things forward, or I’ve got this job to do, or I’ve got to take care of my family, or we’ve got to love my wife, we got to love my kids, whatever it is, right? That sense of purpose, have a sense of purpose, you have a sense of purpose everyday for the companies that you work with, you go, Okay, I’ve got to collect this information, I got to do this, and I got to work on this branding, and then I got to get to the company, I got to change the way, maybe some of the direction that companies so that they can be successful. And you will be successful in return.

Kevin Surace 1:07:52
So integrity, integrity, integrity. And in this valley in Silicon Valley, I can say, you know, when we’ve got Elizabeth Holmes on trial for Theranos, and we’ve got the, you know, this media company that just fell apart, and I can just go down the line, you have a lot of people with getting a lot of money, and literally lying about the business that they’re doing. And this has gone on, isn’t the first time, I’ve seen this for 20, 30 years. But don’t do that. Just build an honest business. And if you can’t, give the money back, I’m sorry, I don’t know how to do it. I don’t know what I’m doing. Here’s your money back. These are people’s money. They earned it. They worked hard for it. Their retirement funds. That’s what’s actually funding these companies. So high integrity, please, when you start your company, high integrity,

Joanne Z. Tan 1:08:39
Integrity, and purpose. Well, thank you. great pleasure talking to you. I can go on, and on, but we have we already exceeded our time by 10 minutes…

Kevin Surace 1:08:49
We’re already three hours and 42 minutes. So it’s…

Joanne Z. Tan 1:08:50
Haha! So, “a Renaissance man” still holds? “A Renaissance man in the Renaissance age”, – my branding of you.

Kevin Surace 1:09:00
Excellent! I’ll take, I’ll take that brand, because that’s a 10 plus brand!

Joanne Z. Tan 1:09:06
Hahaha! Thank you so much! I love it. Okay, so you do take care and have a good day.

Kevin Surace 1:09:12
Thanks, Joanne. Thanks so much.

Joanne Z. Tan 1:09:14
Okay. All right. Bye.

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