Odd Lots - Chamath Palihapitiya Says A Reckoning Is Coming For Big Tech

Episode Date: June 18, 2020

Chamath Palihapitiya is the CEO of Social Capital, the Chairman of Virgin Galactic and a partial owner of the Golden State Warriors basketball team. He’s also been an outspoken critic of the way the crisis and economic recovery have been handled. In April, he famously railed against the airline bailouts in a CNBC clip that went viral. On today’s podcast, he talks to us about how he would have handled the bailout differently, and why he sees a reckoning coming for powerful tech companies in the near future.See omnystudio.com/listener for privacy information.

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Saturdays and Sundays starting at 7 a.m. Eastern. Make us part of your weekend routine on Bloomberg Television, radio, and wherever you get your podcasts. Oh, and welcome to another episode of the Odd Lots podcast. I'm Joe Wisenthal. And I'm Tracy Allaway. So Tracy, I don't know, you're just waking up in Hong Kong, but we had a little bit of market volatility today. Do you see that? You know what? I woke up to an alert on my phone something. It's never good. Have you ever noticed whenever you get those alerts on your phone, it's never anything good.

It's always something bad. But yes, something about stocks falling. There's never been a good push alone. No. That's safe to say. But it is June 11th. We just had this market volatility. Nonetheless, even with the volatility, there is this sense that people have. And maybe it'll change by the time people are listening to this episode, that they sort of, the most intense periods of the crisis.

At least, you know, it's not as intense as it was back in early April or late March. Yeah, absolutely. I think that's true. And certainly earlier this week, we did get another. alert, which was, so I guess sometimes you do get good alerts, but the alert was the SMP 500 regains all its losses for the year and basically went back to the highs that it was seeing before the coronavirus. So we do have a sense, and I think a lot of people will attribute it to either the Federal Reserve or some of the fiscal stimulus measures by the government that these

have combined to at least save the stock market, if not the real economy. Right. It's still very TBD on all that. One of the things, and you and I have talked about this, Tracy, is that in the middle of a crisis, one of the things that makes crises interesting is new ideas can emerge. And so often when things are growing, people don't want to rock the boat. But in the middle, the acute phase of a crisis, it always feels as though there's openings for sort of new ideas, new approaches, and a sort of wide-ranging discussion about what the future should look like. Yeah, I think that's right. It's funny how there's nothing like losing money to make everyone reevaluate their capitalist model. But yes, there does seem to be an opportunity in crisis for people to start thinking about deep-seated issues in their respective markets or the way the economy works or even the political system, which is something that we're sort of seeing now. Yeah, that's exactly right. So today we're going to be talking to a guest who actually got a lot of attention. He He had this interview went totally viral. I think it was back in early April. It had to do with

bailouts and he was very opposed to bailouts. But it was a sort of good example of how in the most intense periods, there is this sort of yearning for people to offer different ideas than this sort of standard approach where we just sort of try to put everything back together again. Yeah. And can I just say that this interview was so viral that even I in Hong Kong without access to US cable TV saw clips of it. Exactly right. So today we're going to be talking to Chimoth Pali Hopatia. He's the founder and CEO of Social Capital. He's the chairman of Virgin Galactic. I think he owns a stake in the NBA team, the Golden State Warriors. I think there's our second time now. We've talked to someone who owns part of NBA team having talked to Mark Cuban. As you mentioned back in April, he did this interview on CNBC talking about the airline bailouts. It's been very critical of share buybacks, bailouts that in his his view prop up the rich while failing to protect everyday people. Things are a little bit less severe right now than they were back then. But nonetheless, I think there's still a lot of space

to be talking about these ideas. So without further ado, Chimov, thank you very much for joining us. Thanks, guys. Thanks for having me on. So let's go back. I mean, I remember that interview, it absolutely blew up all over social media. What was your main message? Like, what was the thrust of what you saw, we were doing wrong, both in terms of an economy and in terms of a political approach to addressing the crisis that, in your view, is misguided? Well, I mean, I think that we've probably known for a long time that the tools that we give politicians to help society function properly have never been duller. They typically have a lot of unintended consequences. And so my commentary was more of a frustration in realizing that this thing was going to meaningfully exacerbate what

was already a very, very skewed economy and that the people that needed the help wouldn't get it and that you would see the emergence of a lot of perverse incentives that wouldn't really fix the system properly. Just to know that now we're going to deal with a tale many years long of the activity of Treasury and the Fed over just, you know, what was basically four to six weeks of a drunk and binge will play out in ways that'll have just a lot of unintended consequences, I think. So I'm going to declare an interest here, which is that my dad is a former pilot, and he was a pilot for Southwest Airlines for a long time. And I remember distinctly in the early 2000s after the 9-11 attacks when a bunch of his competitor airlines were getting bailed out. He used to get really

annoyed and say, why are his taxes going to pay his competitors? Of course, fast forward to now. he's retired, but he still takes a big interest in Southwest. And of course, Southwest Airlines is one of the airlines getting a bailout. But what do you say to people who will argue that this is a short-term cash flow problem? And just because people have in order to stay inside for the foreseeable future, revenues are drying up, that shouldn't mean that companies that are essentially viable should go out of business. Yeah, I agree with that. I just think that, the incentives that the government creates to make sure that those things don't happen can be very different from them just giving a handout. And the reason is because that the handcuffs that we put on companies when we give them these handouts are very brittle. And so what happens in the case of airlines specifically is that, you know, we made them sign a pledge that essentially said that

they wouldn't lay anybody off until I think September 30th. And I think what you're going to see is a wave of layoffs. And I think American has already announced that it's going to happen, essentially October 1st. And so in no event did any of this capital do anything other than just dilute the actual problem at hand and confuse us all into thinking what the problem was, because you create a problem where you've inflated the money supply, you've created more debt, all of that debt, it gets spread across every single American citizen and none of us are necessarily better off for it. So I think the better question to ask is actually, what could we have done to actually help Southwest Airlines or American Airlines or United or Delta and the panoply of other companies that

needed help to bridge the time between the coronavirus and a normal resumption of business. And I think you would have come up with a whole bunch of different answers than the ones that we came up with, which is essentially was, here's a check. Please at least don't do anything until near the election so that we can at least look, you know, semi-competent. Well, what does that look like to you? So we've kind of as a if you look at the Federal Reserve and the Treasury combined, we've sort of taken a dual-track approach, which is provide a lot of liquidity loans to small businesses, loans that could potentially turn into grants to keep the corporate infrastructure alive. And then for the layoffs that have

happened, the sort of expanded unemployment insurance so that households can maintain their income and buying power during the acute phase of the health crisis. And the idea in theory is that as the health crisis fades, the businesses were kept alive with access to sort of cheap financing. Households were able to keep their buying power, keep their homes, keep paying their rent, keep putting food on the table during this period, and then ideally go back to their old jobs and we sort of do that bridge from the past to the future. So what is the ideal, what would the idea of approach been to you? So, you know, for you and your listeners, how I would imagine this is a two-dimensional grid, and the X-axis is something that says short-term and long-term,

and the Y-axis is bottoms-up, top-down. Look, for the last 40 to 50 years, we've always believed that, you know, a top-down reallocation of wealth was the only way, trickle-down economics that was really, you know, started by Reagan, and frankly hasn't changed very much since, in any presidency thereafter, to be completely honest. And we've never believed that bottoms-up actually works. What I would have advocated for was a lot more short-term bottoms-up help. And I think what that looks like is guaranteeing wages for basically a lot of individual people that would have been put out of work and making sure that they have complete financial security to, at a minimum, pay their ongoing repeat bills and at a maximum to actually be able to

pull forward some amount of spending that they would otherwise not do. And the reason is because we are not a country that relies on government spending to drive the economy. Although now, after these last four or five weeks, the government is responsible for probably 55% of GDP, which is a little crazy. So in the short term, I would have done something that was a lot more bottoms up. Some people would call it UBI. I don't think we need to label it, but I do think that money in the hands of consumers would have been a much smarter strategy. And then over the long term, I do think that top-down really works. And long-term change top-down is all about incentives and tax policy.

And I think the right thing to have done there would actually be to make it much more profitable and credible for companies to spend on things like R&D to not fritter away the cash profits they have today via buybacks, you know, all these idiotic, basically, activities, which is the toolkit of the dumb CEO. And if you actually force some intelligent long-term planning and thinking at the board level and at the CEO level and tie compensation to things that are truly long-term versus EPS, you would change those incentives as well. So if I was the government, I would have spent trillions of dollars on giving money to individual

citizens and that I would have spent several trillion dollars of tax incentives that told companies, hey, listen, I'll give you a short-term loan, but in return, you must sign up for the following idea. You must spend at least 15 or 20% of your profits on R&D. You must actually save 15 to 20% in a rainy day account for the future. You must guarantee the pensions. There are all these things that you could have done. None of those things were done. You know, two thirds of the S&P 500 do not have an R&D budget. How is that possible? I definitely want to talk about the idea of the idiot CEO manufacturing short-term EPS growth. But just before we do, when it comes to government policy, it did feel like there was a sense that in the worst of the crisis, people were trying to act relatively fast.

And when people like that are trying to act relatively fast within a very defined political system, they tend to reach for things that already exist or they reach for fiscal tools that they've used before. How would you encourage politicians specifically to think, you know, slightly more creatively when they face this sort of time-sensitive crisis and start thinking about, new ways of tackling the idea or tackling the problem? Well, the things that we did were actually completely novel and new. UBI wasn't a concept that existed until, you know, we decided to give $1,200 to every American. You know, we had no concept that the Fed would be empowered to basically use a bunch of cash, lever it up, and enter the capital markets and buy debt of all kinds of maturities,

to be able to pick off, you know, debt that's actually, you know, degraded in quality and creditworthiness to buy ETFs. These were all new things that none of us had ever seen before. So I think that they clearly invented things. I just wish they would have invented smarter things. You can get the news whenever you want it with Bloomberg News Now. I'm Amy Morris. And I'm Karen Moscow here to tell you about our new on-demand news report delivered

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the latest stories and developments. Get the reporting and the context from Bloomberg's 3,000 journalists and analysts we're all over the world. Listen to the latest from Bloomberg News Now on Apple, Spotify, or anywhere you listen. When I, after I saw your interview, a railing against the bailout, I tweeted something kind of cynical, but I also kind of wonder what the deal is. So you're the chairman of Virgin Galactic. The ticker is SPCE, which kind of sounds like space, except that. you've said in the past that the sort of at least medium term likely business model is something

that competes not actually going into space, but, you know, terrestrial travel that could be like a much better version of business class, much faster, potentially more economical than traditional business class. Do you feel that you have a incentive or that you, the company which your chairman, is a competitor of these companies that you were calling out against their bailout? You know, we have a lot of work to do before we build a hypersonic airplane. And just to give you a sense of it, a hypersonic airplane is something that flies at 90,000 to 110,000, 120,000 feet. The spaceship that we have today flies up to 320, 350,000 feet. So we're in the business of spaceships and we will be for a very long time. It's just that when you're in space, the physics are

such that flying from here to Beijing is not nearly as troublesome as when you're flying at 30,000 feet. And so obviously long term, you know, we can enable a different form of travel that's not possible by basically going so high into the atmosphere that a lot of the practical difficulties of traditional planes are not the problems that we would face. But I really do firmly believe we're in the business of spaceship. It's just that those spaceships can be used for a whole host of different applications, including point-to-point. What you call that, I guess we can get semantic and call it an airplane if you want. So you are kind of in, I mean, in theory, in terms of like a revenue model, they would be your competitive. Maybe by 2030. Okay. Just on one more cynical note,

but you're talking about government policy, sorry, sorry to throw this all at you at the beginning, but you're talking about government policy and central bank policy distorting economies and potentially distorting markets. A lot of people would say that venture capital has benefited enormously from the kind of central bank liquidity that we've seen in recent years and that because of it, you've had a lot of money that can continuously fund a lot of loss-making tech enterprise. How do you respond to that? Yeah, you're right. I mean, there's no point putting lipstick on a pig. Like, let's be honest about what's happened. You know, starting. in 2008 and 2009, we printed an enormous amount of money. The United States government stepped

into financial markets and basically told investors, listen, I'm going to take the things that you have and give you U.S. dollars in return. Those investors in turn took those U.S. dollars and said, well, I can do three things with it. One is nothing. Two is I can buy bonds or three is I can buy stocks. And what has happened is we've had the most incredible bull market that we've ever seen. Along with that, what that gives investors is an enormous amount of confidence because they will conflate luck and skill. They think that they were geniuses in picking stocks. And what we don't really take into account is we have this huge behemoth behind us, you know, giving us a massive tailwind. In that, what happened was a bunch of, you know,

investors decided that they needed more illiquid exposure to get even better returns. And so they pumped enormous amounts of money in private equity. Now, what did those private equity companies do? They went back and issued more debt, bought companies, fired people, pillaged balance sheets. They also then decided that venture looked interesting. And they tripled and quadrupled the amount of money that's gone into venture. What do venture capitalists do? They respond to those market dynamics and they raise larger and larger funds, doing dumber and dumber things so that they can get the money while the getting is good. I mean, this problem of people very quickly reverting to lowest common denominator behavior in search for money is tried and tested and true and has been true for hundreds

of years. And, you know, I don't think venture capitalists are any more virtuous than anybody else. And so that's absolutely what they did. But if you trace it all back, how did it start? It started with the United States government deciding to print trillions of dollars. Now, ask yourself what happens in 2025 when you look back at 2020 and realize that, you know, we printed eight, nine, 10 trillion when it's all said and done, almost 50% of a year's worth of GDP. So whatever's happened in the last 10 years, I suspect in the absence of some cataclysmic market realization, we are going to go to heights that you didn't think were possible for me. Well, let's talk about right now.

So obviously you have a lot of different purchases via which you see the economy. Early June, most people would say, okay, things are not as dire looking as they were in early April. But from your various businesses and your various roles, including sports and so forth, what's your assessment of the economy and its trajectory? and do you feel like we're on a path, regardless of the incentives that policies created, towards something resembling the pre-crisis economy? Or are we still a long way from that in your view?

So the first thing to remember is that typically the way markets behave in the face of a recession can be sort of seen over about six quarters. I'm just going to make the math simple, six quarters. And in the first two to three quarters, the markets trade down. And they trade down because people are trying to figure out when the bottom is. And, you know, the economy is contracting, and then it's contracting a little bit more, and then it contracts yet a little bit more. But it's that last quarter where we have been taught as normal traditional market participants in the middle of a recession to buy. And that's the term.

And then you get the next two or three quarters of massive ripping equity prices, and then the economy returns to normal. And then you get back to judging companies based on normalized earnings. If you had said a priori this event, how would people react to a recession? that's what they would have said. They would have said, okay, we are in for two to three quarters of a drawdown, and then the markets will turn and rip back over two to three quarters. Instead, what we did was shut down the economy and we took it to zero. So from a very basic level, it actually couldn't get any worse than the first quarter. And, you know, when then you again supercharge it with all the money that the Fed gave us, this is why we've had such an indiscriminate rally going into early June. Now, all of that said,

my large and more broader market framework still applies, which is that there are typically three phases of a market. And the way that I think about it is that first, you reflect the worst, and everybody assumes the worst, and you have to basically manage to the absolute worst-case scenario. But that's all psychological. And in all of that, what happens is people realize that they overreacted, as they always do. And then what happens is you start phase two, which is you price the news. And what that means is you become a little bit more sober, you become a little bit more thoughtful, you take a little bit more time, and you try to really understand what's happening and try to really weigh the balance of things that are happening and be a little bit more judicious

in your decision league. And then you enter the third phase, which is then you harvest profits. And you can be harvesting profits for a year, for 10 years. You know, you could wait till the last month of the 10th year, but the point is that then you're really in a position where markets are trending higher and you can safely be a holder and a net seller and make money. I think where we are is we're in the middle of phase one and two. We reflected the worst in March, and what we're still trying to find is our version of the truth. And so we're testing theories in the marketplace right now. We're pricing the news trying to see how people react. So we just spent the last six weeks pricing the news, which is that there's a V-shaped recovery and everything is going to be great.

Then, you know, George Floyd happened and it's unlocked a level of discomfort in, again, the real world. We've had a spike in coronavirus cases in the last two to three weeks, and I think now the market is going to price a different kind of news, which is that this is going to be tumultuous and that it's not going to be a clean recovery and that there's a lot more uncertainty to come. And I think that over the next probably two to three weeks, we're going to play around with that model of how the market should work to see if that works. In general, my perspective is that, unfortunately for us, the amount of money that the Fed has printed mutes and masks any of these things. And so the tendency will be for the markets to trend higher going into the fall into the election. Just zooming out from markets, in one of your investor newsletters, you were talking about how you were viewing a sort of parallel with what's happening now and a moment in time from U.S. history, which was the Gilded Age.

Can you walk us through that parallel? Because I think it's really interesting. You know, the Gilded Age in basically, this is the late 1800s, turn of the 1900s. What we saw was a handful of industry. really represent all the success in the world, specifically the railroads, and a handful of industrialists that were personified with both greed and villainy in many ways for being at the center of those industries. And it's not dissimilar to how tech is viewed or has been viewed going into this pandemic. But what really happened was, you know, there was there was pushback against immigrants, there was push back against women's rights, there was push back against labor organization. But eventually what happened was there was a pushback against trust busting.

There was a movement for labor rights, for women's rights, for immigrants, for high schools, organized high schools didn't exist until the late 1800s, etc. All of this is to say that, you know, we sort of had a short-term bottoming in the pure form of capitalism that had preceded it. And we layered capitalism with a lot more social consciousness. And I believe that we're in that progression right now. And I think that in the next four years, it really, irrespective of which whoever holds the presidency between 2020 and 2024 is the bottoming of the top-down, trickle-down economic process, you know, largely defined by a gerontocracy who will eventually recede into the, you know,

annals of history and will be replaced by young progressives on both the right and the left. And so by 2024 and beyond through 2030, I think we're going to see a rise in progressive ideals and a rise in social consciousness, a more responsible approach that looks at every human inside of the United States as roughly equal and asks ourselves what we have to do. A lot more trust busting of big companies, higher taxes for companies. All of those things I think are in the, are sort of like, you know, what I expect to happen over the next five to ten years. Let's talk about that further, particularly from the perspective of the tech world.

You're at Facebook for a long time. Facebook is in many ways at the center of a lot of these tensions because so much information flows through Facebook. There's tension with inside Facebook, different views on how it should regulate itself. regulate speech or how much it should just be a completely open platform. There's also, you mentioned trust busting. I know there's a lot of people who want Facebook to be broken up, but give us your take on Facebook's role right now and how it should, first of all, how internally, how management should be, in your view, addressing some of these thorny issues about what it should

allow on his platform. And then also, perhaps your view on what, from a policy standpoint, the rest of society, politicians, and I trust experts, how it should go about regulating Facebook. Let me answer it in the context of all of big tech. So Google, Facebook, Apple, Amazon, Microsoft. My answer is that these guys should try to continue to build the most value for consumers and try to give as much of that away as cheaply or as freely as possible because it is the only path to maintain consumer loyalty. The tech sector has largely been responsible for a decade of deflation. They have taught consumers not to spend money because you get great things for free,

and tomorrow you'll get even more great things for free. That's an inherently deflationary set of behaviors and dynamics that largely the tech industry has created. The other reality, though, is that governments, I think, have two very practical issues. The first is that big tech threatens their ability to govern. And the second is that big tech is collectively more economically viable than most governments. And so what you see now, for example, if you look in Australia, is a much more aggressive taxation and policy regime.

In Europe, a much more aggressive taxation and policy regime. We've heard that the 50 AGs plus the federal DOJ who seemingly couldn't agree on anything has agreed to try to trust bus Google. In France, they tried to tax Amazon or they're going to tax the dollars that they make there through Amazon Prime. So this is the beginning of this trend. Local, state, and federal governments all around the world are the poorest they've ever been. And these five or six companies are the richest they've ever been. And so it sets them on a collision course that's pretty obvious. And what I think the markets are doing right now is trying to fight the obvious.

So if you look at, for example, the weighted S&P 500 market cap versus the unwated, what that means is every company is worth the same versus every company is worth, what their market cap is worth. the weighted market cap has completely dispersed from the unwaited, which is to say that, you know, the big five tech companies have completely ripped and the rest of, you know, the 495 other companies in the S&P 500 have been kind of sitting on their hands. And the reason why that lollygagging is happening in the capital markets is that market participants don't want to believe that it's true, that the future profitability and long-term profit capture of these business. will stay intact. The practical reality is that when you look at what's happening just by reading

the news, you can see that there's not much recourse for these companies over time once the government decides that they're going to get their pound of flesh. So it's pretty obvious from my perspective. I don't think that it's the consensus view. But if you had to basically trade that news, what I would tell you is that you're over time, especially as we rally, you'll see more dispersion of these five companies relative to the rest. And that's when you want to get short because that's when the spread will collapse at some point when enough of these lawsuits basically, you know, trigger a realization that a bunch of these things will get broken up and taxed and overtaxed. And it's just going to be an ugly position, I think, for big tech overtime.

So you're talking about obviously inequality in society, but also inequality in company. between the big ones like the fangstocks and some of the others. And you think eventually a lot of that is sort of going to get worked on or worked out in a similar way to what we saw, I guess, during the progressive era after the Gilded Age. Is that sort of the thesis? In some ways, yeah, I mean, I don't think it's going to look exactly the same. Like I said, I think that, you know, at that time, these were all domestic companies with domestic motives and there were fewer actors to really manage. This time around, you're talking about

global companies with, you know, global balance sheets and hundreds of regulators, you know, up and down the value chain at the federal, state, and local level all around the world, that will want their pound of flesh. So it's just inevitable. I'm June Grosso, inviting you to join me for the Bloomberg Law podcast. Every weekday, we help you make sense of the legal stories that shape the nation and the world. Listen for complete analysis of the biggest court cases, the latest actions from Congress and regulators, and the legal moves driving the markets, from corporate law to constitutional law and from state courts to the Supreme Court. At Bloomberg Law, we go beyond the day's headlines. We speak with

top attorneys, judges, scholars, and policy experts to break down what the rulings really mean. We do this every weekday, then bring you the best conversations in our daily podcast. Search for Bloomberg Law on YouTube, Apple, Spotify, or anywhere else you listen. On the East Coast, listen as you start your day. And on the West Coast, catch up in the evening. That's the Bloomberg Law podcast with me, June Grosso. Subscribe today wherever you get your podcast. From the internal side, how do you think Mark Zuckerberg or some of these CEOs who are trying to wrestle this very strange role in which they're sort of de facto,

governments unto themselves who have to set norms and their own lines of what they think is appropriate speech. How should they go about adjudicating these questions? Because of course, there are a lot of people inside Facebook that would love to see. It depends on the lens in which you want to view it. But if you're running a big tech company, you have two options. Option one is to hold on for dear life and basically, you know, wait until they come knocking. Or option two would be to do it yourself so that you can control the outcome better. For example, if you take Amazon as an example, you could make a case that Amazon could spin out AWS into its own entity right now and have some kind of an agreement that they define between them and Amazon retail versus having it

done to them by the DOJ. You know, you could make a claim that, you know, you could spin out Skype from Microsoft or that, you know, Gmail and the Google Ads business and YouTube should all be three separate entities, each individually traded, where, you know, the agreements and the bilateral sharing or trilateral sharing agreements of data are defined by them themselves, or you can just wait and have it done to you. In the absence of anything else, I think it makes all the sense in the world to wait. It's not necessarily what is the moral answer, and it's not necessarily what the companies or employees may want you to do, but it's absolutely the thing that maximizes market cap in the short term, because that also maximizes your influence in the short term, which then probably gives you a

sensation that maybe you can change the outcome. If all this were to happen, if you saw some of the big tech giants start to get broken up or rained in a little bit, how harmful is that for their business models? I guess I'm asking how much of their business model is predicated on having basically a monopoly over certain sets of data. Yeah, I mean, I think that you probably see a whole host of other competitors. Look, you know, the thing to keep in mind is that the technology ecosystem typically has swung, you know, as a pendulum between these two poles. Pole number one is, you know, a few companies highly integrated.

And then the other, the other spectrum, the other end of the spectrum, is a highly, highly fragmented ecosystem of many small. players. And we've done this twice already on the internet. I think in general, a smaller set of five or six large tech companies just means that there will be, you know, hundreds of smaller businesses that sort of more cooperate nicely together and, you know, have very clean interfaces and very clean data sharing rules. And, you know, there's a little bit more transparency and how you're, you know, how individual consumers are being tracked. And there's, you know, there's, there's better interoperability that becomes very important when you have a fragmented ecosystem.

But in general, I think it's better for innovation. It's better for consumer choice. It's just not good for, you know, mark a cap of a few folks. And then the holders of those businesses as well, because then they have to go and, you know, figure out where to reallocate that capital. Jamath, you mentioned a little bit ago the killing of George Floyd and the tensions that we've seen since then you yourself, I've seen on Twitter, been very critical of the police state and how we do law enforcement in this country. I'm curious if you could talk a little bit more about what tech of Silicon Valley can contribute to accelerating change, because I think you hear a lot from tech leaders about

the importance of diversity and more companies have published diversity numbers and things like that. But from your perspective, in terms of putting things into practice that would make a difference both internally and for society, where do you see tech falling short still and what more of substance could be done? Look, this is a very delicate topic. And I don't know exactly know how to address it, to be quite honest. It's something that I've been thinking about. And it's really caused me a lot of anxiety actually the last couple weeks. Because when you see that stuff, both the Amy Cooper video and then the George Floyd incident back. to back, you know, for all of us that are minorities, it triggers, you know, all the many slights and inconsistencies and behavior that we've observed and, you know, have been done to you and have accumulated. And you normalize them because that's what it takes to live a normal life and be a participant in society without sort of seeing, you know, embittered. But I think the real, the real change isn't necessarily for a company, but it's for the majority, you know, ruling class.

and those are, to be honest, white folks. You know, the analogy I made to a friend is, if your child came to you and said, you know, I'm being bullied, is it the child's responsibility or the parent's responsibility to do something? If you had a very close friend and she said to you, you know, I've been sexually assaulted, is it her responsibility to fix it? Or is it our society's responsibility to actually, you know, educate people? people and train folks to be more respectful.

And I think this is sort of what it comes down to, to kind of like point to an industry and say, folks need to do better, I think misses the mark. This is a societal issue that's kind of been left unaddressed for a long time. And I think people feel very sensitive about it on both sides. If you're a person of color, you know, you feel at points shame, anger, resentment. If you're not a person of color, sometimes you feel grief, shame, resentment, fear, a discomfort. And I don't really have a very good answer. I wish I could give you an articulate sense of what needs to happen, except that it is up to the folks who recognize that it's wrong,

but who are not the ones on whom these injustices are put on to do something about it. I can tell you one story, which is that after 9-11, you know, I hated getting on a airplane. And I still do because people look at you like you're going to blow the plane up. I mean, literally. And, you know, knowing me and knowing who I am, you can imagine it's the furthest thing from the truth and on my mind. And it's just a very, very simple example because it doesn't really even come close to the magnitude of what black people deal with in America. But it's just an example.

And I used to have SSS written on my boarding pass. and it was there for years. I could have been flying business class, first class economy, domestically, internationally, one-way return, it didn't matter. And I would always get these guys that were kind of like very, kind of like physically patting me down and, you know, just would delay me for hours, it seemed. And you just feel so helpless and targeted. And what happened was I told a coworker at the time of mine who worked at AOL,

white guy. And what's so sad about this incident was I was not ashamed. I was just, I didn't know what to do. He was so angry. He wrote the same letter that I wrote to United. And then all of a sudden, the SSS was gone from my boarding pass. It's a very simple example. And it's not to take away from the severity of what the real issues are. But my point is in that example, like, you know, people of color sometimes feel helpless and it's the non-people of color that have to do something because you're just more credible at times and you're taken more seriously in a way where it doesn't seem like we're complaining. And I don't feel like I've ever complained in my life, but it makes you feel pretty worthless, you know, you know, you get pulled over by the cops 10 times. I remember,

like, I have a driver now. And I told somebody, they asked me like, why do you have an Asian guy as your driver. And I said, well, if it was another person of color driving me, we would for sure get pulled over in my car. If it was a white person driving me, people would think that maybe I had sort of carjacked this car. And I found through iteration of not getting pulled over that this is the sequence that allows me to do it.

And I did that. The reason I did that was because I was so ashamed of getting pulled over so often. These are all these little things. These are the things that accumulate rust in a person's mind. And it's hard to overcome that stuff, and it's hard to explain it to guys like you because I'm sure you'll never understand what that means. You know, when I talk to my black friends, it's not a if it's a when was the first time that a policeman pulled a gun on you.

Can you imagine? I can't imagine that. So, you know, what I just told you was a one on the scale. What they're dealing with is a thousand on the scale. And so I think it's up to you guys to solve that problem. It's not a tech industry problem. This is not an industry-defining thing. This is a racial problem.

I think that is a great spot to leave it there. And really appreciate you joining us. Appreciate your perspective. Appreciate your outspokenness. I enjoy following you on Twitter. And Chama, thank you very much for joining. Thank you very much. Thanks.

Take care yourselves. So I really like that conversation. I mean, often, you know, what would first catalyze the discussion or wanting to have him on was the whole question about bailouts. And I'm often pretty cynical about some of the, oh, let's let it go. No bailouts for the rich discussion because I often get the impression that it's sort of this desire among people with money to buy assets on the cheap or implicitly.

But I really don't think that is, that's his angle anyway. No, you definitely don't get that sense. it is really interesting to see a venture capitalist be so thoughtful on a number of these topics. So he's talking about inequality in society as well as between companies like the Big Fang Stocks and others and also trying to decide, trying to think about trying to parse ways to fix a lot of societal and economic issues. You don't see that very often. I feel like you see a lot of like you see a lot of venture capitalists who like to talk about making the world a better place. but not necessarily in these terms and with as much sincerity.

No, exactly right. And often there is this view that it's sort of like, I don't know, it's a sort of quasi-libertarian, sort of like leave us alone and let us build, right? Let us build this thing. And I think it's interesting that he is specifically talking about the need for or the likelihood of more aggressive taxation. There is this incredible. constant, right, raining tech in from a sort of like very substantive way taking the money.

And it's going to, in his view, I mean, people have been predicting it for a while. Maybe it won't. Maybe it will happen. But the tension that he sets up, especially state and local governments that are already sort of stretched on cash and it's going to be much worse due to this crisis, this idea that this tension is coming or this inevitable clash is coming, I found to be pretty complete. call it. Yeah. And I can kind of see it going either way because, of course, in a crisis like we were discussing, sometimes people want to preserve whatever the industries are that are actually making money. And tech, as we've seen, has still been doing reasonably well because it's insulated from the coronavirus quarantine measures and the stocks have been doing really great. But on the other

And because of the social discord that's been sparked by everything that we've seen in the past month or so, you could also see a lot of the public anger eventually alighting on big tech. So again, it's going to be really interesting to see which way it goes. Yeah. And I think like that's like, you know, we've been doing a number of episodes that are kind of about this question of like, do we return to normal or do the events of 2020? are they so profound that they meaningfully reshape policy? And we've talked about it with trade policy. We've talked about fiscal policy. But I think this sort of question of whether we really, as a society, go after huge power centers is another really big aspect of that question. Yeah, absolutely.

You know, it will be fun. In 10 years or so, if we listen to a bunch of old all-thoughts episodes from 2020 and just see how. a lot of these issues eventually got resolved. That'd be fascinating. We have to get Laura, the producer, to schedule those now in 2030 so we could do the 10 years look back. Laura, please make us a time capsule of all thoughts episodes and bury it somewhere in the Bloomberg office so that we can find it in 2030, dig it up, and listen to everything. Of course. Not a problem at all. Thank you. All right, should we leave it there?

Yeah, let's do that. This has been another episode of the All Thoughts podcast. I'm Tracy Allaway. You can follow me on Twitter at Tracy Allaway. And I'm Joe Wisenthall. You can follow me on Twitter at The stalwart. You should follow our guest, Chimoth Polyhapatia, on Twitter at Chimoth. Follow our producer on Twitter, Laura Carlson at Laura M. Carlson.

Follow the Bloomberg head of podcast, Francesca Levy, at Francesca Today. And check out all of our podcasts at Bloomberg. under the handle at podcasts. Thanks for listening. A lot of short daily news podcasts focus on just one story. But right now, you probably need more. On Up First from NPR, we bring you three of the world's top headlines every day in under 15 minutes. Because no one's story can capture all that's happening in this big, crazy world of ours on any given morning.

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