a16z Podcast - a16z Podcast: Wall Street's Most Hated Man -- A Conversation With Overstock.com's Patrick Byrne

Starting point is 00:00:00 The content here is for informational purposes only, should not be taken as legal business, tax, or investment advice, or be used to evaluate any investment or security and is not directed at any investors or potential investors in any A16Z fund. For more details, please see A16Z.com slash disclosures. Welcome to the A16Z podcast. I'm Michael Copeland. Mention Patrick Byrne, the founder and CEO of Overstock.com, and you'll elicit a strong opinion. In 2004, one hedge fund manager labeled Byrne the most hated man on Wall Street, a label he wears proudly. Byrne started Overstock.com in 1999, and the online retailer has been through a lot of change in the intervening years. At the outset, Byrne didn't want Overstock to be a technology company trying to get retail right.

Starting point is 00:00:50 He wanted to be a retail company that was amplified by technology. Looking back, Byrne says, he had the emphasis wrong. It should have been on technology. Bern has been focused on the technology side of things ever since, pushing overstock.com further into the cloud, as well as becoming the first major online merchant to accept Bitcoin. Burn joins this segment of the A16Z podcast to discuss the state of online retail, value investing in tech, and why Bitcoin and the crypto revolution is bigger than the Internet. Welcome, Patrick.

Starting point is 00:01:25 Thank you, Michael. Good to be here. We had a chance to talk a little bit earlier, and you were talking about. talking about the origins of overstock and how at the time you viewed this marketplace that you wanted to get to as a sort of flea market, but that in those days as you were building it, and even though you were building it on the internet, you didn't view yourself as a technology company. Right. Well, we, that's absolutely correct. In the, in 99, there was a lot of craziness going on and crazy thinking about the internet. A lot of people getting involved. A lot of people getting

Starting point is 00:01:59 involved doing, I'd been a normal businessman. I'd run a couple old meat space, as I call it, there's cyberspace and meat space. I'd run a couple meat space companies. And so there was some crazy thinking, it seemed to me, about the internet. And then, so when we started, I just, I didn't want to take part in any of that. And so we were really about revenue and expense control and trying to cover our expenses and generating positive cash flow and profits and such. And 99, that was actually considered crazy. Yeah, that was heretical. What?

Starting point is 00:02:35 Profits, no. What do you? I mean, I literally people, I got, well, I got, I was up here on Sand Hill Road. I was turned down by 85 venture capitalists at the height of the dot-com boom when folks were dropping out of Stanford Business School around one paragraph business plan raising $100 million. Here I had run some companies. I thought I'd had this great, but I went up and down Sand Hill Road, met with 85 venture capitalists, and 85 VCs turned me down.

Starting point is 00:03:05 I mean, I'm sure they didn't Hall have the same answer for why they said no, but what was the gist of why you got rejected? I think I seemed old-fashioned to them. They would say things like, well, what, okay, if we put it in $10 million, what are you going to do with it? And I said, well, we're going to build it this out as inexpensively as possible. and just, you know, what our business people used to talk, and the VCs would say, no, no, no, if we do this, it's all about, you know, it's all a land grab. Everything's a land grab.

Starting point is 00:03:33 So it's just about, you know, getting as most sales as you can or getting it. And it was nothing about sort of running a disciplined income statement and balance sheet. And so that's why we never saw eye and I. So if you weren't a technology company back then, even though you were building this thing on the Internet, and I want you to describe kind of what that business was. was and how the sort of if it was a marketplace who the what the sides were but then you've also in recent years had this transition to becoming a technology company so i want you to take us through

Starting point is 00:04:03 the original thinking and then why that has shifted okay well the original thinking was we had to get the retail part right we didn't want to be a technology company trying to do retail but not know we wanted to get the retail part right and then amplify it with technology so i used to say tell folks in our company look we're a lemonade stand that has a computer in it let's not think of ourselves as a tech company let's get the lemonade right and once that's right then we'll work uh so that's where we got started and and uh and then once we had that that that's and i probably if i had to do over again i was probably wrong or at least my emphasis was on the wrong syllable i should have been more focused on the technology to be to begin with how did that change and how did

Starting point is 00:04:51 your thinking change around that? I mean, was it as the company grew or as you saw others around you really leveraged technology, whether that's Amazon or Google or somebody else? It was as the company grew, and probably as I grew, but as the company grew and we kept, you know, our first year was a million eight, then it was about 30 million, then 75 million, then 115, 500, and the very simple systems we had put in place to begin with, just it was kind of everything was at risk of breaking at the seams. In fact, we used to have to, it was turn off parts of our, parts of our company, our financial system and such, just because our computer, our entire company, was running on an HP N-class box, sort of a $300,000 box about the size of this little table

Starting point is 00:05:43 in front of us. And that was okay when we were, you know, 10,000. $20, $30 million, but you turn around a few years later and you're $500 million running on this one box. It became like Star Trek, you know, Scotty, divert all power to the shields. We had to divert all, just a hand-off. I'm giving her all she's got. Right. Just to keep it, you know, in the Christmas season with all the traffic, we would have to

Starting point is 00:06:08 turn off the financial system. We would even have to turn off reporting. We'd have to turn off departments. There was a point we had to actually turn off products on our site just so we had enough power to support the Christmas wave. And then finally around 0405, we said this is silly and we raised $120 million and we went out and built big enterprise class systems over the next few years. And has that, I want to get back to the changes in your business, but the changes in technology. So when you say big enterprise systems, did you do things in-house? And are you now going

Starting point is 00:06:39 through this process of sort of taking it out of the house and putting it into the cloud? No, we did not do the things in-house, and there was no cloud back there. We became a great third-party integrator, and that's how we say, well, we did data warehouses and such with Teradata, but what we didn't have the, we actually didn't have the skill sets back in 2005-06. We had 13 developers. We were a $5, $600 million company with 13 developers, and we were, you know, I was fighting people who were saying we should take it down to seven to save a few pennies. And I was like, no,

Starting point is 00:07:17 we should be taking it up to 100, 200. So we integrated with a lot of third parties. And I think that we became known among third parties as the biggest of the e-tailors who would do these external integrations to handle things dealing with, say, recommendation, a recommendation system. And so it became something of a feather in people's cap to get us, because if they could get us to integrate, then they could get 100 other customers. And so we became quite good at doing third-party integrations, and that's the way we leveraged having a very small IT department. But in retrospect, I say this is a cautionary tale, because if I had to do over again, I would go back and have, and hit the throttle on getting good technologies in several years earlier than we did. In fact,

Starting point is 00:08:04 probably from the beginning. How are you viewing then as a company of your size, this shift that we see, you know, at a pretty large scale to the cloud or how are you guys looking or embracing or staying away? Well, we've not made as much of a transition to the cloud as we should have, but it's, and I'm a huge fan of the cloud. We do have parts in the cloud. We think we're at the size where we, you know, a lot of our technologists say, well, we're, we have the scale that it's no, it wouldn't save us any money to do things in the cloud. I'm not completely, convinced of that because if all your comparison is, well, if we did it in the cloud versus if we buy these boxes, what it costs, that's one thing. But you really got to remember

Starting point is 00:08:50 that unless you're doing things in the cloud, you've got, you know, it isn't just that you have to buy the boxes. You have to have the people who run the boxes and dust the boxes and plug them in and off. And those people need secretaries and you need toilet paper and there's light and heat and electricity. There's all these other costs that multiply. And I'm a big fan. And it's really only been in the last three or four years that we've made a push into the cloud.

Starting point is 00:09:17 So parts as much of we can, I want us to push as much up into the cloud as we can. There's some natural resistance within our tech group. But I'm always pushing. Because, again, it's just the nature of things that people, when they analyze the cost, they're missing all the overhead costs associated with. It's not just about the boxes. It's about all the toilet paper and the dusting and all that kind of stuff. You mentioned that there's some resistance to pushing maybe other parts of your business into the cloud.

Starting point is 00:09:47 Where does that resistance come from, do you think? Is it sort of territoriality or is it just we're afraid of what we don't know? Well, it was territoriality. There's been a real turnover in leadership in our tech department in the last few years, and the new leadership is embracing the cloud. But the old leadership was quite resistant. to it. And I think it was by nature, territoriality. People in any organization start measuring themselves by how many people they have and what their budgets are and things like

Starting point is 00:10:16 that. And I should make clear that starting around 07, we got good enough that we could we didn't need as much of the third party anymore. We got good by four or five years ago at our own recommendations. So we started doing that and our own internal search and all kinds of functions. So we started displacing a lot of the third parties. But it really ultimately, it was two or three years ago, I had to remove some people who were quite obstructionist to moving into the cloud. And the new leadership has been much more receptive. You guys are not the only company who's going through that. What would you tell other CEOs and leaders of companies who are kind of in this same technological jam, as it were, as they want to move forward? Well, I would tell a story that my

Starting point is 00:11:04 great mentor who will I suppose we'll get to told me I was working from 16 17 years ago and we were talking about inventory control and he said you know Patrick and the the financial people don't really understand the cost of owning inventory at the time this was inventory some apparel I was in the apparel business and he said you know when your CFO and stuff looked at it and they They talk about cost of capital and involved in inventory. They, in general, they underestimate what the real costs are of having a warehouse full of slow-moving inventory. The real cost is not just the stuff that's sitting on the shelf. It's the cost of the personnel who are there cleaning it and counting it and dusting it.

Starting point is 00:11:54 And the cost of heating and lighting the warehouse and all these other costs build up without inventory cost. and if you just look at the cost of having the trousers on the shelf, you're not really seeing the full cost. And I'd say it's the same is absolutely true about IT, that if the people doing the comparison are just looking at, well, what's the cost of having this box versus putting it having something in the cloud, they're missing the real cost of having.

Starting point is 00:12:20 It's all the staff and everything associated with that, that gets missed in a conventional analysis. Overstock.com is one of the original e-commerce companies, and I just wonder how your business has changed. I mean, one thing is back when you guys launched, there wasn't really any competition, or maybe there was, and maybe that competition was on the ground, but not on the internet. But how has your business changed since 99, and where does it head next? Well, it's changed. We started with 100 products that you would find in the flea market industry. Hotkeys and Drek, as what would be known in the retail trade, just DREC, just, you know, epilady, which was one of my bad buys, just really cheap-o stuff.

Starting point is 00:13:08 And we got going with it. And then one of the things that happened was we were turned down when I, we were turned down by 85 venture capitalists. About six months later, we were sputtering along trying to get the business model working, dealing with these little products. And there's wonderful thing happened called the dot-com collapse. And as all these companies went out of business, we found that the supply chain that we had built to deal with overstocks and canceled orders worked really well on bankruptcies, too. And we went in and liquidated 19 companies that had been funded by the same fellows who turned us down. I promise, Michael, I'm much too mature to take any satisfaction from that. I'm sure, yeah.

Starting point is 00:13:55 You're just smiling like a Cheshire cat right now. Maybe this is the wrong place to be telling that story, but I have huge respect for your firm. I really do. It's such a premier firm. Well, we weren't around then to turn you down. You weren't around. You can see whatever you like. That was 10 years before you guys even came into existence.

Starting point is 00:14:11 So all of a sudden you have this new supply coming in from dot bust companies. Right. And did that change your kind of mix of inventory and then also kind of your view on how to grow this business? It changed the mix of inventory, which triggered another change, that people, suppliers, stopped seeing us as the folks who were selling low-end direct. And because we got, say, meadora, which was a meadora.com was a jewelry company that just about a mile from here that went under. And we got a, I don't know, seven, ten million dollars worth of their diamonds and watches and all this stuff for a few million dollars. and we started selling that. And then other higher-end companies went under.

Starting point is 00:14:58 We started liquidating. Well, that greatly improved the quality of stuff on our site. So they said on Wall Street, liquidity begets liquidity. As we had that stuff, more suppliers with really good, you know, Cartier watches and people like that started coming to us. And we started liquidating their stuff and SACOM and stuff. So it all fed itself. Once we started having some really good high-end products,

Starting point is 00:15:21 a lot of other people with good high-end products came to us, and we crawled out of dealing with the DREC and turned into dealing with really higher-end products. And then another thing that developed was we had one supplier. At the time, we were buying all this stuff and bringing it into Salt Lake and selling it, but we had one supplier who was selling vacuum cleaners or something, and every week we were buying a truckload of vacuum cleaners,

Starting point is 00:15:47 and we finally said, let's say he was in Chicago, which I think where he was, And we finally said, you know, instead of buying these and moving them down to Utah and then to our warehouse and then selling them, why don't we just open a little hole in the back of our database? You can upload every week, but how many you have, and then you can ship them right out of Chicago. And thus began our partner program. We were the first to the market with it. Amazon followed a couple of years later. And now 90% of our business, we never actually touch.

Starting point is 00:16:17 We've got all these suppliers all over the country. So we're a platform for that. Yeah. Interesting. So you mentioned Amazon and I wanted to get to that. How do you compete or do you guys sort of run in parallel and, you know, how has your business changed because of them getting bigger and bigger and bigger? Well, they were always 30 times our size. They've kind of stayed around the same relative proportion here in the U.S. we've gotten much more upscale and we're more what's called inline now where it really isn't all bankruptcies and stuff but there's a lot in many ways we're like amazon except i like to say about 10% cheaper on average and with better customer service as several industry groups have certified but and we have two million products they have i don't have any tens of millions

Starting point is 00:17:10 but so you compete on price do you also then compete on you know differentiated stuff that you sell like You can't get what I can buy on overstock on Amazon? Some of that is to some degree, yes, we're having products that aren't showing up anywhere else in the supply chain or there's model, some difference in models. But more and more, we are, or less and less, we are a true overstock closeout business and more and more a general inline retailer whose products are salted with, you know, closeouts and bankruptcy and really good buys. Right. E-commerce and much of retail is a really small margin business. And, you know, the pressure on retailers is squeezing their margins even more. So how do you either maintain margin or have such scale that you can make a business sing with the margins that you can get?

Starting point is 00:18:04 Well, it is a tight margin business. We operate at basically a 1% net margin. About free cash flow is more like 3% or 4%. And the The truth is those margins, it's awful tight to break into e-tale. Now, the rise of cloud means that people don't have to make the huge upfront capital expenditures that we did. But the way you compete is it's all about supply chain. You know, marketing is sexy and people come out of business school and they want to talk marketing.

Starting point is 00:18:42 They want to talk strategy. But Klausovitz said amateurs talk strategy, professionals talk logistics. And that was about war, but the same thing is true. It's really a lot of people take for granted and how that it's easy to do some of this logistics. It's actually really hard. And finding places to just shave nickels and dimes all day long and have a set of continuous improvement processes. that's really, I think, been our secret sauce is logistics. And it would be really tough to break in from scratch into that, into, for example, our corner of the market.

Starting point is 00:19:25 Because it's just so you need some scale, but it's also a matter of getting, you know, getting things ironed. It's just, it's unbelievable. We keep looking around and still seeing dollar bills we can pick up off the ground, places we can. we can just keep squeezing costs out of our supply chain. In a way, you can look at the business as it's a race, who can do that faster? And as you can do that faster and pass the savings onto the consumer, that's your moat. So it seems that I can sort of find anything anywhere, and at times it's overwhelming, right? So, you know, I have my phone or my laptop, and there's somebody in the world who has what I want in a sort of long-tail sense.

Starting point is 00:20:07 But then there's these points of aggregation like overstock. and what is the value of curation and have we kind of overcorrected to one place where like the world is infinite and now we need to go back to some more focused view of things that's exactly where the world is and we realized about six or seven years ago some of the real value we could bring would be in the curation we went from seven years ago we had about 50,000 products we moved up to a million and but we're they're hand-selected we have buyers we're much more like a department store we have buyers who are talking we don't allow anyone to just come up and put anything they want on our site we're we're designing categories when we get into you know bridle gowns

Starting point is 00:20:51 we've got a specialist in bridle gowns who's who's and talking to the suppliers and choosing the right things a lot of analytics drive that so on the border between curation and non-curation is your recommendation system because you recommend if recommendation system if it's good, it means you can offer more products and people don't feel like they're lost in a bizarre because your system is driving them to things they're interested in. So the recommendation algorithms spans some of that distance. But at the end of the day, if you want to go and be shopping among tens of millions of products and anything, there's other sites for that like eBay or Amazon.

Starting point is 00:21:34 In our departments, we have real buyers just like you would have at Nordstrom, who have a vision of who our customer is and they want to, you know, what they want to be getting and what kind of a department they want to have. And so that's something that's different with Overstock versus the other big e-tailers. I want to get to you as the most hated man on Wall Street. First off, who said that and why? Well, the fellow who said it is himself not such a bad guy, so I don't want to use his name, but he's a well-known kind of a gray beard of the hedge fund industry.

Starting point is 00:22:07 and well-respected guy and himself not tanged up in anything untoward. But this is what happened. We went public in 02. And when you're a public company CEO, you're out there swimming in the mix. You're out there with hedge funds and prime brokers and regulators and bankers and all. And between 2002 and 04, I became convinced there was a whole bunch of no good knicks on Wall Street. And in 2004, I came out very publicly, just started saying it. explaining. And in 05, I did a press conference, 500 people online, and I explained Wall

Starting point is 00:22:43 Street's full of a bunch of criminals. This is who they are by name. This is what they're doing, how they're doing it. By the way, no one's ever going to sue me because they can't take discovery. That's how sure I am of what I'm saying. And among my claims was the SEC is what economists call a captured regulator. Society sets up regulators to protect us from certain industries, but it's a standard feature of regulations, since the first regulator, the Interstate Commerce Commission, that they become captured. They become towelboys for the industry they're supposed to be regulating. And so I started talking about that.

Starting point is 00:23:21 And the East Coast Press was running photos, you know, Photoshop pictures of me with UFOs coming out in my head. This is some conspiracy theory that they, what, Wall Street's in bed with the SEC and the SEO? This doesn't make it. This is a crazy conspiracy theory. like, well, I think anyone who's awake who hasn't been living under Iraq gets that, I think our SEC is better today than it was Frank under Chris Cox and that it was in the last decade.

Starting point is 00:23:47 And they're more sparky, I'm more open-minded. So, but anyway, in January 2007, this well-known hedge fund guy asked me to come see him. And we had known each other at a distance for 10 years. And he sat me down and he said, first thing he said was, Patrick, I want you to know, you're the single most hated man I've ever known in my life used to be kind of a golden boy on Wall Street but now you could kill people

Starting point is 00:24:14 and we wouldn't hate you like we hate you in this town so to which I say please carve that on my tombstone that in January here lies in January 2007 the most hated man on Wall Street so when the system kind of dropped to its knees a year or two after that

Starting point is 00:24:32 do you do you feel vindicated do you oh yeah yeah the wall street journal wrote a story at the end of oh eight saying okay there were five guys who figured this out and you know nassim talib and and patrick burn right bloomberg actually did us a emmy nominated documentary in 2007 half hour show about me saying there's this basically there's this crazy guy you've been hearing out about in utah and he sounds crazy but if you look at you look at you're at his data, there's actually seems to be something, too, what he's saying. And they were really the most progressive of any of the East Coast media. And then after, after 08, yes, the, the, there's no, no, no, yeah, there were a bunch of vindication stories and associated press and other things

Starting point is 00:25:21 like that. And then so that, to me, in my mind, that whole fight was over. Your company has been one of the early adopters of, of all kinds of technology, but in particular payment technology. So PayPal for merchants to use. And in 2014, early, right, 2014, you guys shifted to Bitcoin. So let's talk about Bitcoin and why that move and what that's meant for your company. Well, okay. It happened. I somewhat stumbled across it, although I was reading about Bitcoin in probably by 2012 or 2011, as a curiosity. I was reading it. And then I will never forget, December 19th, 2013, a reporter interviewing me said out of the blue,

Starting point is 00:26:12 you're going to take Bitcoin anytime soon and I, operating on the Dilbert principle of nothing's too hard when you don't have to do it yourself, I said, yeah, sometime in the next year in 2014, sometime we'll take it. Well, I said that as an offhand comment figuring, well, you know, sometime a year later, if we had some free cycles in our development team, we'd throw the project at them. That little mention zipped around the world. I started getting, you know, there were things from South Korea and Thailand and stuff. There were articles about this.

Starting point is 00:26:44 And I realized, wow, this is no longer some little cult. There really are people paying attention. And I called one of your companies, Coinbase, who was super responsive. I called them on December 31st of 2013. And on January 2nd, they flew a team out to help us with an integration. And we were integrated. They stuck some people. In room, we put a few dozen developers.

Starting point is 00:27:16 And not even, no, it was even that much, maybe a dozen. And basically slid pizzas under the door for a week. And on around January 10th, so not much more than a week later, we brought live at Coinbase as our processor. And were the first, I knew by then that there was some real value in being sort of the first major merchant to cross that. What value is that or would that be? Well, there was first, I knew that there was a value in being the first that you, just the publicity value, the global publicity. Also, there was, it makes such sense that this, so at the time it was maybe a tenth of one percent of sales. And it's, it's grown to be, let's say, a quarter of one percent of sales.

Starting point is 00:27:59 I think it's very early stage. I actually think I'm kind of a gloom and doom guy about the economy and the financial system. So I think when it all cracks, you know, there's going to be the guys back in Washington are going to be able to draw, we're going to be pushing us to adopt the IMF. There will be a global currency. And the powers that B want that global currency to be based on the IMF SDRs, the special drawing rights. I think that that's just the right time for civilization to make the switch and, get off of a kind of currency that any political authority, any political mandarin can whisk

Starting point is 00:28:35 into existence with a pen. So that really goes to my other reason for getting involved with Bitcoin is I'm a pro-freedom guy. I'm a small L. Libertarian is another way to say that. The basic dilemma humans have always faced is when you get into consensual exchange, do you go peer to peer, in which case trust is an issue, or do we have some central institution? I don't need to trust you. I don't know you, but I just, if we each trust this one central institution. So take the issue of land titling. You know, you could come and say, well, here's, I'll sell you my piece of land here and here's a piece of paper. I'll give you. But I don't know if I can trust you that you own this. So, you know, years and years ago, so civilization adopted this method

Starting point is 00:29:22 of, well, let's have a central office that keeps the titles. And then we all go there. And that way the trust issue is solved. What the, what the blockchain does is for the first time in man's history lets us have peer-to-peer exchange, which is trustworthy. You don't need the centralized institution. That's why I think it is, unlike Al Gore, I was not here quite for the beginning of the internet, but I was five years later. And it was, we knew we were doing something as revolutionary as the Gutenberg Bible. But I, so I think the crypto revolution is even bigger. than the internet. It's political implications are so profound because there's all these centralized institutions that people tend to think it's like they came out of a burning bush. It just has to be

Starting point is 00:30:07 this way. You don't need them, including many of the functions of government. So we're going to be disrupting. The crypto revolution is going to disrupt all kinds of political institutions that you really, we just have to wake up and remember they didn't come out of the burning bush. They didn't come on a stone tablet. There were institutions we created to accomplish some end that we can now do for free through the blockchain. Who's using Bitcoin at Overstock? And how are you seeing that, you know, it went from an eighth of a percent to a quarter or whatever it was, small percent to a larger small percent. But who's using it? Well, it's interesting. It's, it's, it's, they tend to be, we can tell from their shopping patterns, they tend to be more

Starting point is 00:30:51 technology oriented. They tend to be more mail. We're, were significantly, our customer base is larger female than male. They end up generally spending about the same, but because, you know, women shop more carefully and men come in and plunk down 200 bucks on their first visit and such. So, but anyway, we've generally are more female-oriented site, but with Bitcoin, it's tend to be more, the purchases are more male still. So more male and more technology focused. Although, oddly enough, they're buying things that women, well, I mean, when you get

Starting point is 00:31:32 talking marketing, it sound terribly sexist or whatever, but it's just, there are men buy different things than women buy. The products they're buying are products that women are more prone to buy, like pillows and blankets and such. So I don't know if that means that in the household the woman is using the guy's Bitcoin account or if the Bitcoin guys are buying something, I don't know. But the accounts are skewed towards owned by men. I, you know, so 6,000 years of history and choosing between kind of centralized institutions versus peer-to-peer trust. It doesn't sound to me like from buying pillows and blankets. There's a clue as to if we're going to overturn that. anytime soon, but I guess we'll see. Patrick, you call yourself a value investor, and one, I want to

Starting point is 00:32:23 know where that comes from, and then give us a sense of the technology industry and whether there's value to be had there. There's definitely value to be had. I had a, among, I've had an extraordinary set of tailwinds in life, both the parents that I drew, I won the ovarian lottery. My parents, my family live sort of the Horatio Alger dream. And from when I was born, my dad was a GI Bill grad student and such to the time I was about 20, somewhere in that process when I was about 13, this funny guy from Nebraska started showing up and staying with us. And he was incredibly generous with his time with me. I don't know why, but whatever he would visit, he would send word ahead and schedule two or three hours to sit with me. So we would just sit and talk and he would teach me about things. And I thought

Starting point is 00:33:11 he was kind of a farmer because he would teach me about, you know, if, okay, now, Patrick, if I've got an acre of land that produces 440 bushels of corn a year and this is the cost of the land and interest rate, it would walk me through this stuff. But more importantly, he would teach me about life and character and decision making and such. And he was, I call him rabbi. He was my great rabbi in life. While I was in college, and I saw his name appear in Barrens. For the first time, his name was in the press. He was, wrote this essay that his name's Warren Buffett. Wait, so this is the mentor you mentioned earlier.

Starting point is 00:33:47 Right. And so he was really my great Dutch uncle through life and has been my real. He's my rabbi. So, you know, Silicon Valley is constantly looking at valuation and value. You're a value investor. You were saying there's plenty of value in tech. How do you see that? And how do you see private companies in the marketplace, staying private longer?

Starting point is 00:34:09 And then public companies like your own, how they're valuing. these days? Well, it's, there is absolute value in tech. Somebody actually said this in the first dot-com bubble, something about, you know, an answer to the people who are saying everything's a bubble, it's all overvalued. I remember somebody saying, well, most things are, and some things are going to turn out to be wickedly undervalued. And so if you take a step back and look at this just at a secular level, the stuff

Starting point is 00:34:39 that's being created here in Silicon Valley. is going to change, or is changing human history. It's immensely valuable collectively. You know, 50 years from now, people will be looking back and still, this tech boom isn't over. It's, we're remaking, we're remaking all kinds of institutions, and gosh, you only have to look back 20 years of how differently things used to work. I also think there's going to be quite soon in the next two or three years, a big disruption in our economy.

Starting point is 00:35:08 I think an 08 or worse is going to happen. and with each disruption, people will shift farther into online, and then it ratchets. We just made it through in 08, but nothing's been fixed since then. It's just been more and more Novakane, and eventually I think the financial system faces something bigger than 08. Well, on that sobering note, Patrick, thank you so much. Thank you, Michael.

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a16z Podcast - a16z Podcast: Wall Street's Most Hated Man -- A Conversation With Overstock.com's Patrick Byrne

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