VC Legend Bill Tai: The "New Era" of Valuations

VC Legend Bill Tai: The

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RAOUL PAL: Bill, it's brilliant to get you back.  You're one of my favorite people in the world to   talk through big stuff with. I think the interview  that we had about a year ago, I think, was one of   my favorites of all time in the history of Real  Vision. No pressure on you this time, then.  BILL TAI: Thank you, Raoul.  I'm delighted to be here,   and the timing of our last talk was fantastic. RAOUL PAL: It was. Listen, what I'm trying to   do is I'm trying to think through this  hypothesis that I've got. I know you're  

exactly the right person to think through this  with is, I'm looking ahead and I'm looking at   the amounts of disruptive technology that's  not in ideation phase, but in rollout phase,   whether it's autonomous vehicles, whether  it's EVs, whether it's distributed computing,   whether it's cryptocurrencies, and digital  assets, whether it's genetic engineering,   or genetic vaccines, there are so many things  that are all in acceleration or exponential phase.  I'm just getting a feeling that  we're about to go through a period   of change almost unparalleled in human history.  I don't know is that's a very big way to start   a conversation, and we'll talk about valuations  and markets and all this stuff, but what do you   think? Because you've been on the ground and  looking at this for a lot longer than I have?  BILL TAI: I totally agree with you. I think we're  seeing a bifurcation of the economy. You've talked   a little bit about platform companies, which has  been a phrase inside the tech world for a long,   long time. I'm going to mix a couple of things  here. One is what makes for an exponential  

valuation relative to the old stuff, and what  are the business models that hyperfuel that?   Obviously, we're in this tech cycle, or not  just tech cycle, we are in a market cycle that   the world hasn't seen before ever with interest  rates where they are, PE multiples where they are.  Those multiples are going to richly reward  things that have high growth, and they   will also richly reward things that have high  growth in big markets. From a tech perspective,   I think what's happened is that we've moved  from smaller disruption, very disruptive still,   but smaller disruption into like small hardware  markets into massive, rapidly scaling disruption   in consumer markets. If you think about what  tech was like when I started in the 1980s,   it was a world of reshaping the  path of electrons in vacuum tubes,   so silicon, and yeah, there were some good sized  markets there but the rate of change was slow,   because it was physical production of things. Then it moved to a little bit more hardware  

devices, software, and then it was all B2B. It was  all the technology being sold to technologists.   Now, when there's a technology change, it can hit  a billion consumers in a matter of months, that   wasn't possible before. You have this combination  of market effects rewarding things that grow,   you have markets that are exponentially bigger  than they were 20 years ago. Then you have rates   of growth that are like 100 times faster than  they used to be. It's all adding up to what   you're talking about, and you mentioned platforms. I think there's a total change in the type of   company that exists today. I remember when  I was in the silicon business, I'd marvel  

at companies like Microsoft, because their market  cap per employee was 10 times what ours was in the   silicon companies. I'd be like, why is that?  Of course, they had the margin structures they had, but why did they have those  margin structures? Part of it was   monopoly positioning and all  that, but part of it was also   if you think about the architecture of  a company that is "a platform", ---- NICHOLAS CORREA: Sorry for  interrupting your video,   but I have a very important message to share.   At Real Vision, we pride ourselves on providing  the very best in-depth, expert analysis available   to help you understand the complex world of  finance, business, and the global economy. So if   you like what you see on the Real Vision YouTube  channel, that's just the tip of the iceberg. You  

should come to and see how we're  not leaving any stone unturned. From publishing   more in-depth videos, live discussions, written  reports, and our latest feature, The Exchange,   where you get a chance to engage with experts,  fellow subscribers, and learn from everyone's   experience, which can't be wrapped in a video.  It's an experience which you live and learn from.   So if you go to the link in the description or go  to, it costs you just $1 to get a  

month's access to this incredible content. I don't  think it's something you can afford to be without. BILL TAI:   why did they have those margin structures? Part  of it was monopoly positioning and all that,   but part of it was also if you think about the  architecture of a company that is "a platform",   the market cap per employee doesn't count  all of the people making a living and adding   economic activity to that platform  company that are not on the payroll.  For every person in the world of Adobe,  every person in the world of Microsoft,   there's 25 to 100 people using their tools  making a living contributing to that ecosystem,   and it's moved the boundaries around where  the contribution happens have now expanded.   Now, you've got this whole world where there's  zillions of people in open source adding value   every day that accrues to certain companies  and those companies have very few employees   per economic activity. RAOUL PAL: That  

is almost the definition of Metcalfe's law. It's  the number of users and the value that the users   add to the network that makes these things so  incredibly valuable. We've gone from an age of   producing a product and selling it to a market  to creating a platform that allows everybody to   either create economic benefits or other benefits  on it, and that creates those network effects   that are exponential, which is truly different. BILL TAI: Absolutely, because it's moved from   capturing product activity to rich economic  activity. I think we're moving from an   era of, as I said, moving electrons, it's  searing the flow of things to make devices,   faster, cheaper, smaller, with the element  of deflation. Technology was, still is,   but very, very much was totally just deflationary.  When you had the cost structure you had of vacuum  

tubes inside of computers, and TVs and  radios and things like that, the size,   the power burned, the expense of building  and maintaining those machines was enormous.  When you could put it on a little piece of  sand the size of your fingernail in the form of   silicon, the prices went down astronomically, so  there was always this fight because the companies   using the new technology, their revenue was  disappearing per unit but the volumes expanded   greatly. There was growth, but it wasn't the  growth we see today. When you move from electrons   or steering electrons to steering bits, then you  started to move information and the information   age, in the internet age "information age", things  got the lower friction, so productivity went up.   The rate of deflation was still there but limited  to certain industries like telecommunications.  The other stuff, the asset utilization of physical  things got higher because the information was   more relevant to what businesses were doing.  Then we've moved again, from moving electrons,   moving information in the form of bits.  Now, we're basically moving assets.  

If you think about what's happening today,  where we're sucking assets into those bits,   and lowering the friction of transferring  those, so it's not as deflationary. Back to   your exponential theme, we were finding ourselves  in deflating the industries we were going into,   now we're just exponentially  increasing the rate of transaction   and the size doesn't change. The size  of the asset, the cost of moving it   deflates, but the asset value itself does not. RAOUL PAL: Digital currencies and the digital  

asset universe is clearly one of the-- maybe  even the epicenter of all of this change, because   this is the digital transfer ownership,  custody and everything of value. You've   talked about this before, but you always got  your eye on this space. How are you seeing this evolve now? Since we spoke, we've got the  rise of NFTs, the massive rise of defi,   I think we've got community tokenization to  come. There's a huge amount coming in this   space, how are you thinking through it all? BILL TAI: Again, the timing of our last call   was fantastic, because I think it was  summer of last year, and in a very,   very brief moment in there, I mentioned  that there was a little wave of NFTs coming,   and really around Dapper Labs. It so happened  that four years ago, I was one of the main angels   at Dapper Labs, and they had launched this  product, CryptoKitties. Back to the journey  

of digital assets, when I first got exposed to  Bitcoin around 2010, it was profound, because   to me, that was an extension of distributed  computing that you had mentioned previously.  I had spent my life basically watching this wave  from mainframes to minis to workstations to PCs,   and ultimately, smartphones, where the smartphone  in your hand today is 20 times more powerful than   the personal computer you might have used in the  early 1990s. The ability of all that processing   to move to the edge to be in everyone's  hand in everyone's pocket was just amazing,   because it enabled the transfer of a lot of  things. Without that, if you had to carry a PC,  

a real PC in your pocket, we wouldn't have the  world we had today. You had to lay that framework.  Then as the compute elements moved  from centralized to decentralized,   towards the end of the 1990s, you started to  see the first breakthrough totally disruptive   peer-to-peer implementations in things that like  Napster or like Kazaa, the music kinds of things   that then got applied to video. You could  see it, applications distributed to the edge   and the reconstruction of the compute model  from big machines inside buildings to millions   of blade servers that were like a conductor in  a symphony, allocating things to change the way   data was handled, the way data was stored. Hadoop came out, it's like there's so many   different things that were just a different model  where you could have the power of many, many, many   small elements working on stuff. When Bitcoin came  out, the paper was called peer-to-peer currency,   because you had now the smart distributed  computing elements in your pocket and you   could have little nodes running and maintaining  a distributed database, so that you could prove,   like proof of work, you could prove out in an  internet-like way where you couldn't destroy   the network, just like the internet can't go  down if you dropped a bomb in some of the nodes.  The processing that supports that currency or  exchange value was distributed, can't destroy it,   everyone can participate. That foundation is what  you're talking about. Now, you had the ability  

to encapsulate fundamental value, virtualized  value into a node that anyone could transfer at   any time, borderless, and you're right, it's like  totally revolutionized asset transfer because if   you think about what is currency, there's a bunch  of definitions for it, but it's used to barter.   Now, you represent the value in a  third system, which is that paper bill   that represents the value of these items. As we've moved forward to digital currency,   the friction of that has gone down. If you think  about Bitcoin, okay, so now wrapping it all the  

way back to that discussion about Dapper, NFTS.  When peer-to-peer came out and the network had   these fungible bitcoins, one way to look at what  is a unique Bitcoin is that it's an NFT. It's   swappable for another NFT Bitcoin, but they're all  uniquely identified assets. As I rode that wave   of early cryptocurrency stuff, when my friends at  Dapper got going on CryptoKitties, I was floored. I was like this, while it's a little  weird, cats and the internet always are   a good combination. It's a little weird. It's  a little playful, but it represents something  

foundational. I was all in and I funded that  one as an angel. Sure enough, CryptoKitties   took off as a low friction use case and that  wave has progressed now. Now, CryptoKitties   was so successful that it broke the Ethereum  blockchain. Ethereum couldn't really handle it.  They learned everything they could about why  Ethereum couldn't handle it, they made a list   of all the things that were chokepoints,  and they created their own blockchain,   which is the Flow blockchain and launched that  last year, or maybe a little bit before that,   and then tried to launch a couple things to test  it. That resulted in NBA Top Shot. Talking about   exponential, I have never seen a marketplace  grow that fast from nil, 60 days later,   zero to 5 billion run rate. It was a $14 million  a day of GMV transactions on that one marketplace. 

RAOUL PAL: This completely unleashes a new layer  of value that didn't exist. Because there was no   value in this before because there was no way  realizing the value. That's the groundbreaking   thing here is what you're doing is releasing  value that was locked and unknowable before.  BILL TAI: Yeah, and this is what  economies are about. How do you   unlock value, and if you can unleash value, just  allow economic empowerment for value creation,   that's the key to stable society and economies. If  people are busy making stuff and unlocking value,   however they're going to do it, they're happy.  If they're idle and unemployed, they're unhappy. 

I think this has got a lot of the brain power  that might have been idle in the old structure   economy that we had, it could have been like  fomenting revolutions around the world but now,   they're productive and they're applying  their energy to unlocking value   and everybody that's under a certain age  and very fun and tech is having a blast   and it's a good world in that area right now. RAOUL PAL: The other thing that I've been looking   at is I think that logical conclusion, and maybe  arguably one of the biggest use cases of this all   is I think that things are going to coalesce  around communities and value is going to   coalesce around communities, whether it's a brand,  whether it's an individual, whatever it may be,   even a charity. And that in this world where you  can now tokenize and create a shared incentive   system amongst the nodes, i.e., your customers,  and the value driver, and then get everybody's   drive value within that, you create a new layer-- How I'm thinking of it is you create a new layer   above equity, which is a whole new extra layer  of value that doesn't exist that you can create   within communities. That's for sports stars to  musicians to great brands. I think this is a  

gamechanger, and people don't realize it yet. BILL TAI: Yeah, I totally agree with you.   I'm going to go back to some foundational thought  about communities and value exchange, and then   abstract to some things that have happened today  that are actually already examples of that,   but where the friction is getting lowered to  greatly expand the markets. If you think about   what is a currency, it's something that people  agree has a certain value, and are willing to exchange with each other because they trust  each other or trust the backer of that piece of   paper in the 1900s version of what is currency. I've used this example before, but like when you   think about when people got off the Mayflower  and stepped on the forest land of North America,   and they drew borders around things on a  hand drawn map and said, this is Connecticut,   this is New York, this is Virginia, because the  people that rode on that boat with them were   their friends, and might have been of the same  religion, they trusted them. Every single state  

had its own currency, they all define their  own currency. It's whatever your tribe is,   whatever your group of believers is, you can have  a value exchange, and it's basically community   driven value exchange, that's one base layer. What's happening now is that behavior,   which went away briefly for the US dollar, for  the Gold Standard for about 27 years, and then   the petrodollar that we've been in for another 40  or so. Now, that's getting replaced by electrons,   instead of hydrocarbon because productivity  has moved from oil, burning oil, to what you do   with your electrons. I've said this before, too,  which is, if I had to give you the choice of give   up your phone, or give up your oil burning, the  thing that's important to you is electrons today,   so there's a foundational change in what  creates productivity. Currency is both  

community exchange, and it's stored  productivity in the World War II era.  After World War II, nations that generated  surplus needed to hoard oil, but they don't   want to move oil around so they hoarded the dollar  that represented the purchase power of oil. Now,   these tokens represent electricity. These tokens  are basically economic alignment of interest   across communities of interest, which goes to  your point about brands. For tens of years,  

we've had loyalty points. What is a United  Airlines smile? What is a Starbucks point?   They're all interchangeable for products that  you think you will use, so it's a reserve   currency in a way for things that you might use. That is a precursor to the to what you just said,   which is what's an ICO? It's a community of  interests of believes that that token representing   something is valuable, because somebody else in  their community will take it. One of the companies  

I funded is a company called TAP Network. They  run the loyalty program for Uber Eats and Warner   Music. They're making those tokens interchangeable  into other things. Now, there's marketplaces where   communities of interest can intersect and  there's liquidity. Anytime you have liquidity   in a marketplace, you unlock value, period. RAOUL PAL: A couple of questions on that.   What's also happening is this change to this new  system, the electron system, let's call it that,   is happening at a pace of which we've never seen  before. It's currently growing at 113% a year as  

an overall number of users, which is almost double  that that the internet grew over an equivalent   period of time. This is unbelievable. We're about  to throw in Diem into the middle of this with 3.5   billion nodes on a network and they will have  their own community value proposition which is   Diem and that will be interchangeable with others. The pace that this is going to transform   all business model, I think people are  still arguing, should I buy Bitcoin or not?   I think they're missing the picture, which is this  is a complete transformation of all value system. BILL TAI: Well, and yeah, because it  introduces liquidity. When I started   thinking about the transition from Bitcoin  to blockchain. My first exposure was, wow,   peer-to-peer currency, that's really cool. Then it  was like, what can you do with it? What can you do  

with the underlying technology? Then I started  to think, wow, this is like, TCP/IP for assets.   When you could use to have a fax, I'd write  something on a paper, stick it in a machine,   digitize it, send it over an analog phone line at  a very expensive rate through a monopoly telco,   and then come out on the other side.  Now, you could just put it on a screen,   type your words, drop it into a transport  layer through internet, the email internet,   boom, it pops over there in just nanoseconds. The lowering of friction unlock value. I thought,  

wow, like if this is a TCP/IP for assets, what  can you do, and I got my head around that and   I threw my first blockchain summit on Necker  Island, like six years ago. I got Michael Casey,   who wrote Age of Cryptocurrency. He was at the  time, the global finance reporter for The Wall   Street Journal. I asked him if he can throw this  thing with me, and I wanted to get this economist   to join named Hernando DeSoto. I don't know if  you've ever read the book, Mystery of Capital,  

but it's a foundational piece that defines what  is the fundamental building block of capitalism,   and why do things work in capitalist societies  in the West, but not in other places?  His thesis was, in his world, it all went  down to clarity of land title as an asset.   Because if you were a squatter, you didn't  have anything. If you had a clear line drawn   around a piece of land you owned, you could take  that to the bank and mortgage it and get capital   and start a store. Then you had this network  effect where you're leveraging that and taking the   money and going and turning it into something. I  said, Hernando, I want to take mystery of capital   and turn it into a software program. I want to  basically automate your brain and turn it into   a software stack, where people could load  assets onto it. Then they could be used  

in smart contracts can be done, and I  want to do this on a single blockchain.  He said, what's blockchain? I explained it  to him. So, back to the unlocking of value,   I explained it to him in this way, because  he had told me that he had bought a rug.   I said, well, Hernando, think of this, it's  like there's eBay, there's MercadoLibre,   where you bought your rug, because he's in  Peru. I said, before that rug was listed,   it had zero value. It was sitting in someone's  garage. It wasn't worth anything. But as soon   as they exposed it to a network, they took a  picture of it, they listed it, they described it,   other people, communities of interest interested  in rugs could see it. Suddenly, it had value,  

and you bought it for a few $1,000. There  was $2,000 of value creation out of nothing,   because it was connected to a network. As you think about what does Dapper Labs   represent, with its flow architecture,  that is a very easy way to have "NFTs"   meaning the digital certification of an  asset, whether it's physical or digital,   then they can list something that is valuable to  somebody, but nobody knew about it before. Bam,   $14 million a day of transactions of little  video moments just from the NBA. That's just   the NBA. I don't know what other leagues they will  onboard at some point, but you can imagine every  

single league in the world has contacted them. So, if-- I don't know, I'll make it up because   I can't tell what they're working on, but  let's imagine that UFC has contacted them   or the biggest Soccer League in Europe or MLB,  or what have you, if they're all the same size   as the NBA, does it go from 5 billion run  rate to 100 billion run rate? I don't know.   The level of value creation and economic  activity, you can't count it. It's so big. RAOUL PAL: Have you also been following things  like Chiliz, which is Socios, which is the   platform where all of the European football clubs,  soccer clubs have been going on and creating   community tokens and giving people rights within  their community to vote for, let's say, the kit   that year. They have some community rights. That's  been fascinating, which I think is also coming and  

what Rally has been doing in the background as  well, I think, has been interesting. I think   they're still in early phase. Are you following  that kind of stuff as well, because that's like an   extension of NFTs, but it's like community rights? BILL TAI: It is, because I think what's happening   now is that we're in this-- I don't know if it's  the first inning or the second inning, but it's   somewhere in that range, maybe not even the first  inning, because not everybody uses NFTs but the   unlocking of value and the exposure-- it's funny,  the eBay CEO the other day was on CNBC talking   about they're going to get into NFTs. That's like  Ground Zero, it's like what assets can you expose   in a more efficient network based on blockchain. Then once you have that,   you can because it's digital, assign all kinds of  properties, and all kinds of community incentives,   and governance structures around the items that  are there. Some of that was already previously   expressed, and some of the ICOs that happened  in 2017-2018, where tokens you would buy would   have certain characteristics, but now you're  able to assign characteristics to assets.  

If you think about the savings of labor ahead  in some of the old world businesses, like   when people are talking about land title and title  insurance and things like that and getting rid of   that for years, but that is like getting rid  of the fax machine for email or getting rid of   Swift and two or three days of waiting for your  wired money to transfer through cryptocurrency.  I think there's going to be great efficiencies,  both great efficiencies introduced into the system   for a community action, and also great  functionality on top that produces   other kinds of value that couldn't exist before. RAOUL PAL: Here's a question. The other thing that   I see within this is that move towards the  metaverse, which is a way where we all live   in a more immersive digital experience,  whatever, however you want to define it,   gaming has done that, how are you thinking  through the metaverse idea as well?  BILL TAI: I literally was corresponding  with Philip Rosedale yesterday, and Philip,   if you know him, he was the creator of Second  Life, and it was really through that interaction   that I really got exposed to digital currencies.  Think back to that era, he launched that world  

in around 2000-2001 and people didn't have  anything to do. I became Alan Greenspan Gollum,   and he introduced the Linden Dollar,  and there was a vibrant economy by 2006.  People like the avatar Anshe Chung were  showing up on the cover of Businessweek   because he was doing digital work for other  citizens of Second Life that wanted to dress a   little better or have a little digital house  and they would pay her in Linden Dollars,   and there were exchanges where you could take  the Linden Dollars and sell them for US dollars.   I learned a while ago that one of those exchanges,  IGX, run by this young kid, Brock Pierce.   All of these things like intersected and  set the stage for me learning about Bitcoin, and now we're in this world where the  metaverse is coming back, not even   coming back, it's taking a real world form. In that time, it was very labor intensive to   create a character that represented you and then  you'd walk around and try to find something to do.  

Now in some ways, if you think  about what's happening today,   there's a couple vectors approaching this  still in like a Gen Zero, Gen One way, but   one of the next big marketplaces that Dapper is  launching is with Genies. You can read about it,   there's a press release on it. There, you create a  digital avatar, and those can be NFTs, and you can   transact and create an economy around your digital  representation that's a little bit of a 2D model.  On the other end of that, we are virtualizing  people now through the internet. Think about this   moment of productivity we're having on Zoom. What  would it have taken to do this interview without   Zoom, or without things like Zoom? The cost of  time sunk to get on a plane to fly somewhere,   to meet in a studio, to do something and record  it, it's astronomical compared to this. Zoom in  

a way is like a digital marketplace that allows  people to virtualize themselves and transact.  I think all these forms are going to merge at some  point because now there are metaverses where you   can enter and represent yourself not just with a  2D avatar like a Genie, but with a more full blown   3D construct and that the interface to that is  still a little heavy. 3D glasses in some cases   or other things like that, but it's going to get  better and better and lower friction over time.  RAOUL PAL: On a number of levels, it's captured my  imagination is somebody sent me something. It was  

the family office of one of the guys who started  Nintendo. Their website is a 3D little metaverse.   I saw that and I was like, oh, my God,  that's amazing. Then somebody said, no,   just have a look at, let's say, Cryptovoxels.  What they gave me which changed my entire   perspective on it all was as opposed to having  a web link, it was basically a coordinate,   like, I could drop a coordinate for you of my  house, if you're trying to find it. It was a   coordinate and I was in somebody's art gallery,  with music playing, videos on the wall. I'm like,  

oh, my God, websites aren't going to exist. BILL TAI: Yeah, it's the virtualization of   everything. Let me talk about two levels of  that. One early example of virtualization of   an asset that everybody in the finance markets  will understand is a futures contract. If you  

think about a pork belly in the old, old, old  days, where a farmer is trying to sell his   load of stuff on the truck, the physical movement  of that item, that transacting of that item was   pretty heavy, and then to try to protect himself  from commodity price swings, forward contracts,   futures contracts would start to evolve  where he could sell them before he delivered.  What ended up happening was that piece of paper  representing the physical item could trade   on the CBOT. For every time that physical  pork belly moved, the paper contract might   move 18 to 200 times in the 1980s. In a way, you  expanded GDP by 18 to 200 times by virtualizing  

the asset to a piece of paper. Now what's  happening is you're moving from paper assets   to digital assets that are more directed in where  they reach because you've got these subcommunities   of interest that are voracious about their  consumption, like the NBA moments on Top Shot. That early futures contract is representative of  what's happened today, where every asset in the   world can be virtualized. Its digital certificate  representing that asset is trading. The NBA Top   Shot, where does that video clip sit? It can be  anywhere the digital certificate moves around,   you're seeing now the physical assets starting to  get onboard. Imagine like Cherry auctions, like   a pair of shoes from a certain  basketball player from a certain game,   or a wonderful piece of art, that could  sit in a room with a webcam on it.  

The ownership certificate that's authenticated  by the warehouse that owns it can now float,   and that piece can move around at the  same velocity that a futures contract did.  If you look at events, like your event, the  Crypto Event you threw, people are everywhere,   the event is virtualized. Burning Man, which is a  physical event historically every year, last year,   they were forced to try something new. I did do  some things to show them some new technologies   that could make future experiences fun. Imagine  a map of the playa instead of actually having to   go to the playa and where the art installations  would be in a physical world. Instead, there's   that geo drop pin that you described, and you move  your cursor, click on that and bam, you drop into   the artist's studio, wherever he is building that  art with a bunch of webcams that you can control. 

You can move around in the room, you can  change the focus, you can change the direction,   and you could visit every art studio in the world  from every cool artists that's building something   for Burning Man before it gets there. Then the  spatial audio that's available today, and Philip   Rosedale and I were demoing spatial audio, because  that was part of his next generation world of High   Fidelity, you could basically-- RAOUL PAL: What is spatial audio?  BILL TAI: Oh, it's 3D audio. The feeling that on  the playa, like if you imagine a map of the playa,   and then your representation and I are standing  on that map, talking to each other chatting,   and we're actually talking through our  microphones, and we can hear each other because   you can hear who's near you, louder than other  people. We're having a conversation just like   it'd be in real life. An art car drives by on the  left hand side, you will hear and feel that audio.  RAOUL PAL: As opposed to this 2D. If  somebody would come onto the Zoom call,  

they're the equivalence of us because it's 2D. BILL TAI: Exactly, yeah.  RAOUL PAL: Wow. Okay, that's fascinating. BILL TAI: Very basic technology that someday   may get embedded into all kinds of things.  It's audio and video and your avatar.  

He had developed that for High Fidelity so that  when you entered the new world of High Fidelity,   as your avatar's standing, and you have  headphones on, and someone spoke on that side,   if you close your eyes, you knew where that  avatar was relative to you. All of these things,   that's just one component of many things  happening in the world of metaverses. RAOUL PAL: I assume that we're going to earning a  living in the metaverse and that democratizes the   ability to earn certain types of living because  you can be in Ethiopia, or you can be in Seoul,   and you can have equivalent access to generating  certain types of income. Do you think people are   going to earn an income in the metaverse? BILL TAI: Oh, you know what? They already   have been. People did earn income in Second  Life. Again, that was early, early behavior,   but as we move forward, it's going  to be profound in about 10 years,   or maybe less. When you look at the generation  of kids on Roblox today, that's one example. If   you've ever been on Roblox, you basically have a  platform where you as a user of Roblox can also be   a contributor to the economy, and they don't call  it an economy, but you can create your own world. 

Roblox is basically a whole bunch of  worlds that all these kids have created,   and they invite other kids to come in, and  they're open, many of them, so anyone could   come in. It's a series of worlds on this platform  and people basically make money. Some of them,   there's a price of admission. You've got people  all over the world that are getting trained to   basically live in virtual economies at  the age of 10 or younger in some cases.  I think there's an expectation coming from  this next generation that they don't ever   have to go to a physical office, they  don't ever have to work for a company.  

The tools to create their own worlds, their own  economies are on the screen of their computer   today. We didn't have that growing up. It's quite  profound. We used to have to go and make things   and show up at a company or do food service or  whatever it was, sell clothes at somebody else's   place but now, all the tools to create your  own job, your own workplace, your own economy,   in your own world, are right in front of you. RAOUL PAL: Creating your world is another thing   I've been thinking through, is platforms, as  we know them won't exist in the same 2D world.   Because you and I can create, I can create my  Raoul's finance room and I can have a Bloomberg   thing, I can have video, I can have podcast  playing, I can have a stack of PDFs on my   virtual desk, I can have my prices, I can have  everything with one click that exists everywhere   I wanted to do. That gets rid of even the notion  of needing Windows. It's a whole weird thing  

that we can have whole different setups of our  lives in this virtual world that actually makes   us more productive, puts everything together. BILL TAI: Well, and you have your own audience,   which is your own community, and you can have your  own currency. You could literally issue your own   Raoul coin, or whatever it is, whether it's a  loyalty program, or it's the way you subscribe   to additional content, so you're going to see a  fragmentation of the economy into all these little   buckets that add up to one large, productive  economy, because all of the currencies of each   of these will be interchangeable and exchangeable  in other places where there's connection points   where you have a member of your community,  that's a member of a different community,   and they want to change points but it's the  rate of growth of economic activity, it could   totally inflect in the next 10 years. RAOUL PAL: That's been my hypothesis,   just looking at this part, I'm thinking that  this could be a trend rate of growth change. Yes,   we've got offsets of aging populations, a bunch  of other slowdowns, debt- based economies but   this feels huge and interestingly enough,  I've got a call after you with Mark Cuban. Mark reached out and said, I've seen your stuff  on all of this and I said, I think this is new   GDP. This is discovering the Americas. It's brand  new GDP, and he said, I'm not sure it's new GDP,  

isn't it taking from the pie of existing GDP? I  don't think that's the case. What do you think,   because I need to speak to him after  I speak to you? I want to tell him.  BILL TAI: I think it's totally new GDP  being created that is not yet accounted for.  RAOUL PAL: The pie gets bigger  because it was non-released value. 

BILL TAI: Yes, and the government doesn't  know what it is. How do you measure the GDP   of Roblox? It doesn't show up in any statistic.  I don't know the number of hours that are being   consumed on Roblox, but it's a lot. RAOUL PAL: Yeah, when you get to a   place like Epic Games, this is now monstrous. BILL TAI: It is, and the value of Roblox being   exchanged or whatever, how do you account stuff  like that? I don't know that the cryptocurrency   volumes and stats yet are in the GDP numbers that  show up. Maybe they're accounted, I don't know,   but there's so many things now that are  not measured in dollars. They're trying,  

the government's trying to come back and account  for all that stuff, because you want to tax it   and that's fair, because we all want to  contribute to the greater good of the world   but a lot of the stuff, or the mechanism  to account for it doesn't really exist.  What's a Farmville credit? I don't know  how many people were playing Farmville,   but the movement of the little  Farmville tokens, does that get counted?   I don't know. I guess this goes to the question of  what is the definition of economic activity? Is it   just a dollar-based purchase of something from  the categories that the government statistics show   or is it a kid doing something  on Roblox for another kid?   I don't know if it should be counted,  but they're not being counted.  I think this is why, partially why, going back  to your thing, we're seeing this bifurcation   of the economy where there's platform companies,  platform companies, by definition, are their own   economies. What is the Apple economy? It's a lot  of people that they work in that world of Apple,  

it's like its own country. It's profound,  because you've got these economies forming   around brands now that are live virtual countries. RAOUL PAL: Yeah, I completely live in the Apple   world. Completely. Everything I do now is driven  by that, because it's so interconnected. It   creates all the connection points  for me that it creates massive value.   That's without it being a traditional platform  like Facebook, it's not a network. What it is,  

is a platform that creates endless added value. We've talked about the digital asset world and   how game changing this is, what else you  looking at? You were early saying Zoom,   which arguably is part of that same digitization  of the world. What other exponential trends   are you identifying that you think are happening  over the next 10 years? Because that's what you're   good at, you spot these things early. Some you  don't get right, but some you get spectacularly  

right. What are you looking at now that you  think, okay, this is all about to go exponential? BILL TAI: Well, and this word exponential matters,  because in the layer of the funding stack that I   exist, I am looking for massively asymmetric  risk if it works, because here I am, a seed   angel investor, working with young and some middle  aged entrepreneurs too that are basically starting   interesting projects where I'm counting on that  if it works, it's going to change everything,   because it redefines an economic layer. In that  bucket, I think one of the areas that is totally,   totally due for a remake is healthcare, just the  general inefficiency of the healthcare system. 

I have a little project, I took the main data  scientists out of a little bit of a notorious   company called Cambridge Analytica, and  they were really good at what they did   in order to understand patterns of data and steer  things so they could get engagement and reaction   and I teamed up with them to help create a  company called Dyad basically is   applying their data science skills to transforming  the efficiency of healthcare operations from a   data perspective. I think, on our last call, we  talked about the power of data science and how   old companies that didn't use data science,  perfect example is retail, JC Penney, Sears, they   didn't know what they had. Their inventory is  floating, that gets written off every year. 

Amazon and Walmart are basically data science  clouds with products at the end where they know   where everything is, they're living knowledge  were clouds of products, that when there's a   shortage in one area and too much in another,  the thing moves. The working capital model is   transformational compared to the old one. The  old ones went bankrupt, and Walmart and Amazon   didn't and they've just grown. That same effect  is going to be applied to every type of business   where there's things moving around, whether  it's healthcare records or bills or whatever,   because whoever has it is going to  live and who doesn't is going to die. 

It's interesting now that these companies are  very aware. There's a public company called Change   Healthcare. It's a 7 billion market cap company.  It's interesting to see the partnering that's   going on because all of the bigger companies  now are starved of innovative young people,   because everyone wants to go in a startup. They're  having to partner with the young people, because   the best ones can't be hired. Change Healthcare,  for example, through a startup competition, where   they invited hundreds and hundreds of companies  picked the top 50, reduce it to a top 12 and   picked one winner that was given access to their  data, to their data lakes for healthcare plans. It  

happened to be my company Dyad, but anyways. Now, you're going to combine a rich dataset   with data science techniques, and a platform that  can unlock a ton of value. In the same way we were   describing about unlocking value before. I think  we're just at the fringe of something that might   happen five to six years from now where there's  a total change in the efficiency of that area.   Another area that I think is going to  have to change and will be massive when   it happens is power, electricity generation  and consumption and the way it's handled.  If you think about what happened when the telco  industry deregulated, used to have these like   fixed landlines, lots of money invested in  that infrastructure. Then once you could  

cut up the information flowing on those telephone  lines into little chunks that had identifiers on   them, headers, footers, so that you could know  where multiplex a lot of things onto a line,   have them come in and break out, then you had  ISPs in the internet. Any kid in the garage   could buy a router, stick it on the  phone line, and become his own phone company selling data services to the  whole neighborhood. You went from one   phone company to tens of thousands  of phone companies in a few months.  In that era, there was a company in the 1990s,  called Portal Software. They were the billing   system that every ISP would buy the software so I  could charge you if you're down the street for the   amount of bandwidth you're using. That company  went from nothing to $10 billion in market cap  

in no time. I funded a company that does  something like that called Power Ledger.   They're out of Perth, Australia. If you think  about what's happening with power, we're finally   at the point now where if you look at the cost  curves on the cost of energy production by burning   long chain hydrocarbons, carbon molecules,  and coal or whatever else, versus solar,   or versus wind, we're at this transition point  now where anybody can put a solar panel on the   roof and be a producer. That's like that ISP. We're entering a world now where you're going   to have tens and tens of thousands of little  power companies and you just need a regulatory   change like we did in the Telecom Act of 1996  at least in America, other places don't have   those things. There's going to be places where  peer-to-peer energy production and consumption   just blows up like crazy, and everybody is an  economically productive unit. If this happens in   Africa, look out, it's going to be very, very big. RAOUL PAL: Also, if you say, rightly say  

that we're moving into an electron world,  then the more you free up the electrons,   the more you free up the economy. BILL TAI: You do. Imagine a world where if you   think about what the oil economy was, it was very  concentrated in a few places, and only those who   had control by armies, or regulation, or physical  owning the land, they had economic productivity.   The CapEx was pretty heavy, it was hard to get  into the business. Now, it's like peer-to-peer,   anybody can be a producer at some scale. In  large population sets where you didn't have   a lot of the legacy stuff, you're going  to have a transformation in the same way. 

When phone companies were built  in America with landlines,   the embedded infrastructure and the legacy wanting  to keep that going prevented America for a little   while from being a leader in mobile, which sprung  up in Scandinavia and Southeast Asia first,   because they didn't have all those landlines, and  some of those countries are a bunch of islands.   I think as we move into this world going  forward, where the older infrastructure   doesn't really exist, the new stuff that gets  put in is going to grow at a much faster rate   and be much more economically distributed. RAOUL PAL: Because they all follow   Metcalfe's law then, because you're  taking it away from a single node   and creating multiple nodes and networks  that coexist with each other. Of course, the   rate of change goes from linear to exponential. BILL TAI: Yeah, and then think about the software   economy too, the software economy, it has become  a big part of the GDP and it used to be in the   physical economy, people had to make things to  have something physical to sell. Now, there's a   bunch of bits that get downloaded and you pay for  it. Microsoft makes a lot of money doing that.  

That's actually quite astronomical. If you think  about how software development has changed,   and what's going to happen next, you may or  may not know Andy Bechtolsheim, but he was one of the founders of Sun Microsystems, he wrote the  first $100,000 check to Sergey Brin and Larry Page   for Google. He became an executive at Cisco. Andy Bechtolsheim, myself and Eric Yuan,   who founded Zoom, we were among the first  three angels in a company called [?],   which is a fascinating concept. If you think about  the modern economy and software, it used to be   that you'd have to develop as a developer, you'd  have to understand something and write new code,   and you'd have to write a book, you'd write the  first thing, and it was labor intensive and hard.  

Now, software development is no longer writing  books, it's permission plagiarism. It's copy   paste of other people's paragraphs, and  you're swapping variables in and out.  The world of productivity today in the fourth  industrial revolution is really all about   software, the marginal incremental productivity  comes from software. Now, you've got all of these  

bits of code out there in all these repositories  whether it's GitHub or GitLab or Specialty,   Zebra, code bases, whatever these things are,  there's lots of them. No one knows what's in   there. There's some rudimentary cataloging  all that stuff, but it's like walking into   the world's largest warehouse with boxes  of gears and engine parts with no labels. 

Imagine, and but you know that they're there and  you don't have to make the gears, you just have   to piece them together and reassemble. Imagine a  clear categorization of all that stuff where you   can walk in, and where it all is. You just say,  give me that, give me that, give me that give me   that, pop, pop, pop up, done. I think the rate of  increase if the search navigation and discovery   functions are good, it's going to totally change. RAOUL PAL: Because then you put an AI layer on   top, and then it becomes ridiculously powerful. BILL TAI: Yes, we're on the verge of that too.   When I say verge, I think in my last thing, I  said, typically when I think through something,   I have to wait seven years for it to be time. This  is what I funded last year, I think it's going  

to be a while but I think these are the kinds of  things that I think will be massively disruptive.  RAOUL PAL: We've seen some  disruptive technology obviously come.   Why have we had such bad GDP growth? BILL TAI: I think accounted. Well, I think it's a   two things that I mentioned before, a bit of it is  deflationary. It's this constant tension between   lowering the cost of whatever the economic  activity is, because it's become more efficient.   Then the elasticity of the market, when that  unit of whatever it is, is lower priced,   and the adoption rate can go up but then you've  got to get people's behavior to attach to that.  

There's a little bit of a generation gap. I think, above a certain break point,   the user friendliness, or the user familiarity  with compute devices, is just not there.   I think under a certain age, it's like no  friction. I think that will add to the exponential   nature, too, because we're getting to a point that  at some point, everybody is facile and it's like   very natural. You see it in kids today. You take  a kid to a bank to deposit a check, they're like,   why do you go there? What is that building? Why  don't you just use your phone and take a picture? Well, they sent me a check, but you can  still take a picture deposit it, can't you?   Well, yeah. Then why do you go to the  ATM? Well, I'm used to it. It's like the  

bank branches are like museums to them, they  have no idea why you'd actually walk in. Museums   are very valuable, by the way, I love museums  too, but I'm meaning that they're like historic   icons that they don't know what they're for. RAOUL PAL: I guess one of the things also is if   you're replacing old with new, even though the new  is much more productive, it comes at lower prices.   Even for volume adjusted, you're still destroying  an industry next to it. It's a replacement factor   for the time being. As you said, there is also I  think the offsetting of the Baby Boomer generation  

that's so large that they're non-adopters  of a lot of this. They're marginal adopters,   but once the Baby Boomers come through the  other side of their lifecycle, you end up with,   okay, now, total adoption everywhere. It's like, in the US, there's 76 million   people who are Baby Boomers and yes, that some of  those adopts this. But as they change and they'll  

become-- or don't even need productive assets,  because they're in their retirement years, etc.,   then suddenly, the rate of change can increase.  That feels like, I think the average Baby Boomer   now is 68. You're getting right there at the  point where they're almost all about to come  

out of the labor force, which is going to make  the labor force participation rate numbers look   awful for a period of time now. It's going to be  a bit of a shock to the economy, because none of   these guys are earning a living anymore. They're  depleting income, so that's quite deflationary.  We've now got this massive offset. I was really  fearful of how the hell are they going to get   through. When my father retired, he  immediately dropped his spending by   60%, 70%, because he didn't know how long he was  going to live for. Therefore, he did his bucket of  

money, will it give him 30 years, 20 years and  the fear of running out is the big thing. But   it feels like the offsetting of that  deflationary lack of consumption is going   to be driven now by this massive technology, and  the bringing of all of these young people into a   new way of earning a living. Because, again,  it was like, what's the job mismatch here   now? We're creating new jobs in different worlds. BILL TAI: Yeah, and it's clear also while there's  

that deflationary pile in the Baby Boomer  era, the newer ones, the rate of growth of the   economic elements, when they hit is astronomical,  growth rates today on some things, they would   have never been comprehended 20 years ago. I think  digital technologies, the way I invest in things,   I can't say it's totally cookbook, but what  I'm typically looking for is, how do I find   an emerging use case, and use digital technology  to lower the friction to that use case?   If you can lower the friction, you're  getting more usage. Then you couple that with   making it very replicable, number two,  and then third, make it very scalable.  All of the companies that I find have that  set of characteristics, whether it was Zoom,   or Dapper Labs, or Canva, or what I want to do  with Dyad, or Power Ledger. It's like get that  

new use case, make it super easy to use, make  it easily repeatable. When it goes repeatable,   make it super scalable so it happens fast.  Because you can set things up for that today,   and in fact, you have to or you won't win, the  rate of growth when they grow is astounding   compared to anything you could have done  20 years ago and the size of markets. I am so happy about that, like when we were making  semiconductor chips, I was at LSI logic, we had   the chipset for the PC Jr., IBM PC Jr. It was IBM  was a lion share of the PC at that time, and a big  

order might have been a million units. You might  have had an assault base of a few million PCs,   trying to sell a graphics card and you'd be, oh,  I might get 20% market share. It might be 200,000   or a million units for the whole year. If you  were a software developer making Lotus 123 like   Mitch Kapor was, huge hit. I'll get 40% of all the  computers out there, I might sell a few 100,000   units for the year, for the year, and you'd  have to sell the software at like $100 a copy. 

That's like a day now. If you get a  good hit product, kablam. The markets   are truly exponentially bigger. The ability  to reach those markets, truly exponentially   easier today. The distribution mechanisms  of everything, like an Apple store, holy,   wow, those didn't exist at that time. I think big  market, high growth rate, high multiple, wherever   that level set is with interest rates and parts of  the economy are going to continue to just explode   up around us even in the face of deflation. RAOUL PAL: I think when you and I last spoke,   the obvious example the home run that you just  had was Zoom. There was a new technology that lets  

everybody to digitally represent themselves  so you and I can chat. It's game changing,   very easy. Then suddenly, the set of circumstances  for the world changed and it gets mass   ridiculous adoption. How fast was the  change of customer acquisition at the--?  BILL TAI: Yeah, that was remarkable. I was  totally blown away. In December, I remember  

the year before COVID really was being recognized  because COVID had existed but people didn't really   know what it was going to be. I think that year  ended with Zoom's infrastructure being set for   about 10 million meetings a day, which was a lot  of meetings given the company's progression over   time. I remember that the next February, things  really started to spike. That month of February,   it jumped to 200 million meetings a day. I was texting with Eric Yuan, I was like,   wow, this is crazy. I was like when I funded you,  I felt like my life changed because I really could   be anywhere and work anywhere, and hang out in  Perth, Australia, and fund companies like Canva,   and I could be here. When I funded Dapper Labs,  I was reminiscing with the guys the other day,  

I was on a ship, getting ready to  leave a port in Geraldton, Australia.   To get to Geraldton, you got to fly from here in  San Francisco area like 20 hours to Singapore,   and then overnight, or take a break, and then  fly another six hours to Perth, then you got   to drive seven hours north to Geraldton. I'm on a ship, about to leave, and Roham who   started Dapper is like, hey, we got a scheduled  call. I'm talking to him off of Zoom on a ship   and we worked out the deal to fund  Dapper Labs. It was all because of Zoom.  

Anyway, my world had become very free  and virtualized and I could spend the   year kiteboarding all over the place and  fund companies anywhere. It was this grand.   I was texting with Eric Yuan, and I said, Eric,  I didn't realize how fun life was going to be.  Now, there's 200 million people following  me and then the next month, it was   300 million meetings a day, in March. I was  like, oh, my God, this is crazy. I was like,  

I've just lost my competitive advantage. RAOUL PAL: What's interesting to me in this is,   so we get to the phase where Zoom explodes  and everyone goes, this is excessively valued.   What is now becoming clear to  people and was clear to you when you and I spoke is the use case that we have now  is only a fraction of what this network could be   used for. Because you've created a giant network.  It's a network built around, happens to be video,   but it's a digital network so what is the future  value of that? That is the value of networks. It's  

not about the single original use case. Amazon was  never about books, and Zoom was never about this.  BILL TAI: No, it's a platform now. We talked about  platforms. It's just so delightful to see what's   happening with the platform. You may or may not  have seen announcements in the past where Zoom   announced that they're developing an app  store and an SDK, software developer kits,   so people can bolt on. Just last month, or a few  weeks ago, they announced a venture fund. They've   been onboarding little groups, because there are a  lot of developers building things on top of Zoom. 

I funded four or five of them, whether it's like, they've changed the name to Class Tech,, they did get that URL, to there's  all kinds of applications being built that are   vertical communities, because part of  community building is communications, and   communication is fundamental the communities.  Once you have communities, you have commerce,   and you have vertical communities around  different topics that are self-generating   economies themselves In a way, zoom is  enabling a set of communities to be built   around the world by communities of interest where  the nodes might be all over the place but now they   can meet easily where they couldn't before. When they announced the app developer fund,  

they put a little web page up where people could  type in an application and what they're building.   Within a few days, there were 200 companies.  I don't know if it's going to be as big as an   Apple App Store. That's like really, really  hard to get to, but everybody uses Zoom.   There are so many communities of interest now  that can empower themselves and create things.   There's little technologies to allow transactions,  like I funded a little thing called Pledgeling.  If you were to hold a little call here and you  wanted to raise money for a cause, you'd click   this plug-in, it would be embedded, and then on  the window of the Zoom bar, it would it would say,   oh, do you want to donate now and then you click  on it, and it sends text message to your phone,   you put in the amount. Then on the sidebar, it  says Raoul Pal just donated X to this charity and  

they power Zoom, they power Clubhouse. RAOUL PAL: Wait, so we all have digital   wallets and that becomes entirely frictionless. BILL TAI: Super easy then, yeah. The unlocking   of all kinds of economic  activity, it's been happening  through digital technology and it is  accelerating. I do agree it's exponential.  RAOUL PAL: As the final summary, I think  Zoom is the great example of people   misunderstanding because they linear think what  the potential future value is of a network.   They get it at first. Oh, yeah, Zoom has taken  off, because a bunch of people were stuck at home.   No, Zoom has created a massive network, which  will now undergo network effects. Therefore,  

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2021-07-18 06:07

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