Transcription
But in inventing, there's a dose that is not efficient, and it does require time to get ideas, to learn.
Yes.
To dream.
Yes.
On the other hand, you need to be efficient once you start building that.
That's right.
And iterate.
These are different things for different times. So, sometimes when you know where you're going, yes, you should be very efficient.
So how to put it in harmony, and not balancing? And I know you don't like to balance.
Right? And so, how can you put in harmony the dream side and the built side?
And by the way, just to fill that out a little, I don't like the word balance because it implies a trade-off. Like I've often had people ask me, "How do you deal with work-life balance?" And I'll say, "I like work-life harmony because if you're happy at home, you'll be better at work. If you're better at work, you'll be better at home." These things go together. They're not a strict trade-off. And it's true, I think, for exploration but also determined execution. You just need to do both, and they actually do feed each other. It's the things that come out of the execution that give you new data and new ideas about what the next step should be in your exploration. So the two things don't work against each other; they work together.
And how would you advise young founders, in practical terms, to be able to be in harmony with both?
The touchstone, the thing you always go back to, is those customer needs. So that's the only way that I could advise any founder or entrepreneur is to deeply understand what are the big ideas that their customers want. And you can't—you should ask them, ask your customers, but it's not sufficient. You also have to invent on their behalf because the biggest breakthroughs, the most important ideas, customers don't know to ask for. They don't know to ask for those things. That's why you have to dream. You have to use your intuition, your gut, and your heart.
All of the data that gets used in business is essential. If you're in business and you're not looking at your data, trust me, your competitors are going to beat you. But if you're only looking at your data, you also will not win, or at least not win big, because the most important decisions that every person makes when they're building something new is made with intuition. You cannot prove it, but you have an instinct and a hunch, and then you'll pay attention. If that turns out to be wrong, it won't be a big deal. You'll correct.
I'd like to go back in the future. 25 years ago, I was studying here in Chang, not very far away, in the engineering school. It was the miracle of the internet and mobile phones together. I was actually doing a startup called Chia Web, which was a portal. There were many portals. Portals were also being financed by vendors who were selling you technologies and financing that technology. And e-commerce was going to be everywhere. Penetration rates seemed incredible. The speed at which that was going to happen was imminent, and it was exciting and incredible. And Amazon existed, and it was already a public company then. And then it just blew up. Everything blew, and you had the internet bubble. Today, we have similarities with AI, and we have this incredible sense of optimism and excitement, and everything is going to be there now. How do you feel about this moment, and what can your instinct, taking us back 25 years ago, help us detect? Because my instinct is one of caution.
Mhm. Well, okay. So, to take you back in time, in the year 2000, when the internet bubble burst, Amazon stock, in a very short period of time, went from $113 a share to $6 a share. And by the way, it's split many times since then. I don't know, 20 for one, or maybe even more. I don't have the number. But so these prices have nothing to do with today's stock prices. But to go from $113 to $6 in a short period of time was very concerning. And shareholders were upset, employees were nervous. We had all of our employee base, their parents were all calling our employees and saying, "Are you okay?" You know, this was the environment of great nervousness.
But I looked at the numbers in the business, and every month, as the stock price went from $113 to $6, the number of customers went up every month. Our gross profits went up every month. Our operating expense, we were still in a loss position, but our losses as a percentage of sales went down every month. Every single business metric—new customers, customer repeat purchases, everything that we were monitoring through that entire period kept getting better. And so that's one observation about bubbles in general: the fundamentals can be disconnected, the fundamentals of the business. And of course, as entrepreneurs, you're focused on the fundamentals of the business. The stock price is an output, an ultimate output that you actually have very little control over. Benjamin Graham, the great investor, is famous for saying, "In the short term, the stock market is a voting machine. In the long term, it's a weighing machine." And so, as founders and entrepreneurs and business people, our job is to build a heavy company. We want to build a company that, when it is weighed, it is a very heavy company. We do not want to focus on the stock price. And so that is, you know, that will be misleading because it can be disconnected from the fundamentals. And when bubbles happen, so that's one thing that happens.
The second thing that happens when people get very excited, as they are today about artificial intelligence, for example, is every experiment gets funded. Every company gets funded, the good ideas and the bad ideas. And investors have a hard time, in the middle of this excitement, distinguishing between the good ideas and the bad ideas. And so that's also probably happening today. But it doesn't mean that anything that's happening isn't real. Like, AI is real, and it is going to change every industry. In fact, it's a very unusual technology in that regard, in that it's a horizontal enabling layer. Today, we talk about AI-first companies like OpenAI, Anthropic, Mistral, and so on and so on and so on. There are so many startup companies that are kind of AI companies of various kinds, and that's normal for this phase. But that is not the biggest impact that AI is going to have. The biggest impact that AI is going to have is it is going to affect every company in the world. It is going to make their quality go up and their productivity go up. I mean, by every company, I literally mean every company: every manufacturing company, every hotel, every, you know, consumer products company, etc., etc., etc. And so that is hard to fathom, but it's real. There is no doubt. We don't know how long it will take exactly. We don't know how quickly that transition will occur, and it'll probably occur at different rates in different industries, but that is very real.
Now, what the stock market does, which is when we think of bubbles, we think of valuations and market caps and things like this, and how many billions of dollars are being invested in these six people at a $20 billion valuation, even though they just started yesterday. Right? That's very unusual behavior. Investors don't usually give a team of six people a couple of billion dollars with no product. It's rare, and that's happening today. But the great thing about industrial bubbles, this is a kind of industrial bubble as opposed to financial bubbles. And I'll tell you what I mean by that. If you go back, like the '90s had a biotech bubble, and there were a bunch of pharma startup companies that were designing drugs and using new techniques, and the world got very excited. The investment world got very excited. As a group, they all lost money, but we did get a couple of life-saving drugs. A bubble like a banking bubble, a crisis in the banking system, that's just bad. That's like 2008. And so those bubbles, society wants to avoid. The ones that are industrial are not nearly as bad. They could even be good because when the dust settles and you see who are the winners, society benefits from those inventions. They still get those life-saving drugs. And that's what's going to happen here, too. This is real. The benefits to society from AI are going to be gigantic.
And if we go back 25 years ago, when the internet was in that bubblicious moment, no one would have predicted a lot of the industrial benefits at that industrial level and the huge investments that were put in infrastructure.
That's a perfect example. All of that fiber optic cable that got laid, and by the way, the companies who laid all that cable went out of business. They literally went bankrupt. But the fiber optic cable was still there, and we got to use it.
And the telco companies who owned the customers and who had a very strong moat.
Yes.
Ended up not being the companies that emerged.
That's right.
And a lot of the infrastructure that was laid for e-commerce ended up actually working.
Yes.