The Pomp Podcast - Halsey Minor, Co-Founder of Salesforce: The Rise of Distributed Computing

Episode Date: January 14, 2019

Halsey Minor is one of the biggest internet and tech pioneers of our day. In 1993 he co-founded CNET, which would eventually be sold to CBS for 1.8 billion dollars. In 1999 he helped Marc Benioff co-found Salesforce. Today, Halsey is working on a bunch of projects, including Videocoin, and in this conversation, Anthony Pompliano and Halsey cover everything from distributed computing, crypto currencies, and blockchain technology. ----- Join the Off the Chain newsletter. Pomp's daily email analyzes the crypto market for institutional investors. Simply, it’s the best crypto newsletter delivered to your inbox every morning. No frills. No bullsh*t. Just everything you need to know in a 3-minute read. https://offthechain.substack.com/ ----- BlockFi BlockFi allows you to keep your crypto, put it up as collateral, and receive a USD loan funded directly to your bank account. They do loans ranging from $2,000 to $10,000,000, and they're perfect for helping you reach your financial goals of all sizes. Visit BlockFi.com/Pomp to learn more about putting your crypto to work without having to sell it. ----- If you enjoyed this conversation, share it with your colleagues & friends, rate, review, and subscribe. This podcast is presented by BlockWorks Group. For exclusive content and events that provide insights into the crypto and blockchain space, visit them at: https://www.blockworksgroup.io

What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to Season 2 of Off The Chain, simply the best podcast in crypto. Let's kick this thing off. Halsey Miner is one of the biggest internet and tech pioneers of our day. In 1993, he co-founded CNET, which would eventually be sold to CBS for $1.8 billion. And then in 1999, he helped Mark Benioff co-found Salesforce. Today, Halsey is working on a bunch of projects, including Livecoin. And in this conversation, we cover everything from distributed computing, cryptocurrencies, and blockchain technology. I hope you enjoy it nearly as much as I did. Before we get started, I want to talk about one of our sponsors, BlockFi. These guys are doing

really interesting work in crypto lending. What they allow you to do is keep your crypto, put it up as collateral, and receive a US dollar loan funded directly to your bank account. They do loans ranging from $2,000 to $10 million, and they're perfect for helping you reach your financial goals of all sizes. You should visit BlockFi.com slash Pomp. Again, that's BlockFi.com slash Pomp. Again, one more time, type it in, BlockFi.com slash Pomp, if you'd like to learn more about putting your crypto to work without having to sell it. Definitely do it. Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of

Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion expressed by Pomp as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only. Welcome, guys. I have Halsey here. You have an epic career in technology and are doing some pretty interesting things today. So I appreciate you joining us. Yeah, glad to be here. For sure. All right. So let's just start from the beginning. Maybe let's go through your background and then we can get to early days of the internet. Yeah. Well, I was definitely part of the early days of the internet. I started CNET Networks in 1993

because no web publishing software was available. I had to build my own web publishing software, which became the industry standard. It became a company called Vignette, which ended up being an $11 billion company. CNET made a billion and a half dollars on spinning that out. And when I left in February of 2000, CNET was a NASDAQ 100 company.

um which i built from scratch obviously um we had about a 500 million dollar uh run rate and the company that i spun out of vignette became like i said they became about 11 billion dollar company and we also started a search engine internally which nbc bought and became nbci I left in February of 2000 because Salesforce launched in January of 2000. So I basically left a NASDAQ 100 company that I had built to go spend the next four and a half years to helping build Salesforce. And for the first two and a half years, Mark Benioff, who's now very well known, didn't actually run the company. It was this guy named John Dillon who did a wonderful job. So in 1999, I quit $19.5 million, which I don't know what that would be in today's money, in Salesforce.

So I was, you know, I think more than half the money came from me. And I was the second largest shareholder, I think. When I left CNET, I owned about 15%, which was actually more than I owned at CNET at the time. um and uh uh mark owned about about twice what what uh what i owned so so you know i spent four and a half years uh helping to build the company it was an idea that seems so obvious now uh it was obvious to me uh because it was clear that uh cloud-based computing was you know in our case with salesforce it was one-tenth the cost one-tenth the complexity you know endless innovation as you sort of you know updated and and mark came to me because you know seeing it at the time was one of

the top 10 websites in the world in traffic and then i'd started this this enterprise software company so i had to kind of a perfect blend of these two um so anyway i spent uh spent four and a half years uh helping to build the company uh actually rang the bell uh with mark and the new york stock exchange and then i got off the board um and started to do other things which was uh starting what's now called it's called google voice it was called grand central and i started a company called open dns uh which has about three or four percent of global dns it was bought by cisco pardon me three or four years ago for i think 640 650 million dollars and a couple of others for smarter smaller companies that were acquisitions they didn't

go public or anything and then uh and then i got interested in this industry in uh 2012 and i launched a company called uphold which is uh one of the few companies uh certainly at the time that had access to uk eu um and u.s banking for buying crypto just like just like uh just like uh Coinbase. And that was really about solving the most difficult problem at the time, and still somewhat today, which is how to get money from the banking system into to be able to buy crypto. Very difficult problem. They certainly didn't make it easy. They really don't still make it easy. So I started that. They've been around. They've done very well. I'm a large shareholder there, but I don't run it. And I spent the last three years building a

excuse me um the our video platform that includes a video cloud and the cloud takes in this huge amount of video from a vr camera and then it sends it to you know it does fancy stuff called encoding and and it sends it to uh to youtube and it sends it to facebook and it sends it to uh uh tent the galaxy gear and you know oculus and so so we have to ingest all this video then we have to send it out to all these platforms the person i hired to run my cloud actually built intel's video streaming cloud which was a competitor to aws and was a competitor to uh to google and i don't know their exact logic but i think they they didn't want to compete with with their uh two big buyers of their product google and amazon so they ended up selling that to

facebook and that's how facebook got into video was they effectively bought this uh they bought this uh cloud-based video utility uh from uh from um from intel and so you know my history is you know uh building platforms you know around kind of a known use case so so i ended up building the number one um platform for doing web publishing and i did it because i understood that that's what i had to do to actually do web publishing at cnet so so i literally had to build the platform underneath me and uh you know it was a little different at salesforce but basically what we did is we took a CRM app that was growing very quickly, and we enlarged it and made it a cloud-based platform for building any kind of business-related, cloud-related software. So the ecosystem around

Salesforce now is I think they had 185,000 people at their most recent event, which is called dreamforce so given the the experience we have in crypto and in video and the fact that we've built this you know probably the most sophisticated video app in the world we've basically done the same thing which is to say we've got an app uh why don't we build the infrastructure uh underneath our app in a different kind of way which is really to distribute servers all over the world as opposed to using the ones that are only in google or amazon's data center and we'll use a business model that's now becoming prevalent, which is using underutilized resources to dramatically lower cost.

So that's the history in five minutes or less. Well, and there's a bunch of really interesting stories along the way, right? Because there's a lot of people that come on and we talk about technology, and very few people have the historical context of how a lot of this technology got built, what business models i've worked haven't worked um how to monetize those companies along the way um one of the most interesting stories i think uh with you is back in i think it was 93 94 uh you bought a ton of uh urls things like mac.com search.com etc tell us that story yeah pardon me um yeah so you know uh you know early on people uh didn't understand that you

know, the internet was going to be very big and the domain name for valuable. And so I think for less than $15,000 and 94, 95, uh, and I won't get them all, but we bought, um, search.com news.com tv.com radio.com community.com chat.com mac.com java.com, um, uh, shopping.com. Um, uh, there are more all of the same uh download.com share it um so so you know we i mean we honestly we didn't pay more than fifteen thousand dollars for for any of these and you know what part of my strategy for growing uh the company was news.com became our news site download.com became our download site shareware was another one and you know part of the reason that it seemed like got so big and like I said, we were, I think when I left, we had more traffic than Amazon, um, was we had

services like download.com where you could come and search for and, uh, and find software. And I think we had 10 million people a day who actually did that, uh, all the way back to 2000. Um, so, you know, this was a very scarce resources. People didn't sort of appreciate, um, at the time. And I had a, it's interesting. I had the guy, uh, who, who bought these for me, was my assistant, who was actually employee number three, who actually went on and was actually with the company longer than I was and ended up ultimately becoming the ambassador to Great Britain, a guy named Matthew Barton, and he was just out of college,

so he was the perfect guy to go plead forward to all of these people who had these key domains we wanted and obviously didn't want to overpay for, if at all possible. And at one point, you got approached to sell Mac.com to Steve Jobs, right? And it's just a crazy story. Yeah.

Yeah, it was. Yeah, so I got a phone call. So my assistant came in and said, you have a phone call from Steve Jobs. I said, okay. So I got on the phone, and it was classic Steve Jobs. He goes, you know, got this incredible new service that we're building, really breakthrough kind of thing, kind of painting the picture of this big new innovation at Apple. And, you know, so I said, well, what can I do for you?

He said, well, you have the name Mac.com. And I had no idea which way this is going to go. I mean, obviously, it could have been, and my lawyers will be calling you, which is not the way it went, thankfully. And he said, you know, we're interested in getting it from you. So I said, well, how about this? You guys don't advertise on CNET. why don't we um set up an advertising uh meeting and we talk to you about advertising on our network and we try to figure something out so we set up a meeting with with steve and it was just

with steve he didn't have anybody else in the room and my head of sales had a very carefully prepared presentation that he went down and he started going through with steve and steve got through the second slide i think of 15 and he was gonna have none of it he didn't want anyone spoon feeding him anything so he just started rapid fire questions coming in and my head of sales actually melted down the spot i mean just totally utterly melted down and uh and so anyway this this presentation became a very interactive affair and the net of it was i effectively you know gave him the url but they had to buy 150 000 worth of advertising on on cnet and um And anyway, so that's what happened. And, you know, the thing is, is, you know, we were selling banner ads at the time. And so, you know, as you can imagine, you know, banner ads aren't the best way for Apple and Steve Jobs' mind to market, right?

I mean, he likes TV and poster. So, you know, from there on out, you know, anytime I ran into him, he would, he would, he would remind me that he thought his advertising sucked and it didn't work on, on the platform. It didn't end up with Apple as an advertiser, but at least we got a shot of trying to bring them into the platform. They're pure brand. And as we know, things like Google, where they're transactional, we know those honestly were best when it comes to advertising. Today, we know that. For sure. Let me ask this question, because I think, you know, as you had these interactions with what are now, you know, tech luminaries, and obviously you've built a number of very large companies yourself, all in and around the computing space and, you know, kind of personal PC, etc. What was the general market temperature or feeling as these companies were being built? I'm assuming most of them weren't just consensus driven, right? Everyone thought that Salesforce was going to work or anything like that. No, nobody thought. I mean, no VCs would invest in the company. Really? So explain this more. Yeah. Well, I mean, when I say, you know, most of the money in Salesforce was me and Larry Ellison. And Larry Ellison did it because he wanted to spy on the company.

And I did it because, you know, I was trying to buy CRM software and it was going to take two years and $5 million and take forever to do it. So here is the, so literally everyone in Silicon Valley said no to Mark. everyone you you named the big firm and they all said no so so what they didn't believe was that there would come a time where companies would put their most critical information their customer data in a website that's how everybody thought of the internet it's a website right it's for publishing um and you know even the the uh uh the software that you know i spun out it's called story server and the company's called vignette so it's kind of like this is you know this is people how how newspapers put their information online this is not how companies put their data

and and you know uh yeah i mean i mean it's interesting i went and i was a customer of merrill lynch and i went and i met with cto in like 2002 and i knew they had a huge like 100 million dollar siebel software project and when i met with him i said hey look you know you're probably going to say you can't do this but um but you know that while you're spending all that money and if you just adopted you know a cloud-based application um you know you get up get going faster and it'd be cheaper and more innovation all this stuff and he said he said well you're right it will never happen and from a regulatory standpoint we don't even think we ever could put any of this data out in the in the cloud so so you know now it seems you know now

there's such trust in the internet that these things seem you know like why would anybody not do that but in 2000 we weren't there and and the problem was is that what happened with every uh we ended up having two groups of customers we had little teeny companies who couldn't afford any software like i mean they didn't have an option so we were we were the only option um as it turns out the other end of it was giant companies who had salespeople all around the world and they couldn't possibly put uh you know heavy duty oracle whatever software in 50 different locations and try to connect it um but there was just a general um belief in the valley and it was unshakable that um you know that that the security people i mean you have to remember

salesforce is outsourcing like they're taking people who are doing something today which is CRM software, and they're shipping it off to another company. And the security people, and I used to joke, I'd say, you know, the only way that, you know, Salesforce will get into the enterprise is the head of sales has been waiting two years for a software, which was common. And he would accidentally run over the head of security in the parking lot. And that's kind of what, you know, that's kind of the way it felt. And, you know, so, and, you know, we actually avoided big companies because they would say things to us like okay we'll use you but you have to build the entire data center inside of our data center like what how is that different

from what you're doing today right um so we said no to a lot of big companies because they wanted to wanted to break our uh to break our our uh our model so so it was just uh you know i you know i was in a unique position i i created an enterprise software company you know i understood how to build webs you know websites and i was actually when mark came to me i was actually a customer like i was already looking at buying the software and i'm like this is crazy it's gonna take me two years all this money and it probably won't even work at the end of it so so i was in a very good position to, you know, to sort of recognize why this would work. And, you know, I would generally say that sometimes it's important to look at things at a very high level, right? I think this

is true of blockchain. And say to yourself, you know, ultimately, are the characteristics of what are being sold so good that people will all ultimately have to, um, uh, acknowledge and accept the model. Like, is it that much better than just, you don't know how you don't know when you don't know why, but it is the value is so great that, you know, it will have to be accepted at, at some point. And Salesforce fits fit into that category perfectly. it's so interesting because a lot of what you're talking about is um directly correlated to the crypto industry where most people either don't understand the trends they don't believe it's going to happen right but within the crypto community there's incredibly high conviction

around decentralization computing etc do you see that parallel as well or is that is that an inaccurate uh statement look i see a lot of parallels i mean when uh when when cnet started the number one uh business plan most successful business plan on the internet was porn hands down that was that was first people do transactions um and you know if you wanted to paint an ugly picture of the internet which many people wanted to do that's what they would uh That's what they would present. And, you know, people have the base to figure out the internet like the beginning of 1998. So it took a while before, you know, a lot of very smart people sort of even recognized its utility.

You know, that period from 93 to 2000 was not similar to what's happened recently with The dramatic run up in price, followed by the dramatic fall in price. CNET actually went from around $67 when I ran it for share, down to 63 cents in three years, where it traded below cash. And then it came back and was ultimately bought by CBS for $17 a share. so so you know there was um a huge amount inflow of capital into the internet and i think it was something like nine trillion dollars ended up being lost in the in the contraction and i used to always say to people um who talked about the fact that this this went on and how bad it was and how much money was lost and i said well think about this way if the bubble had not happened in

the United States, if it had happened someplace else, all of the big world-dominant companies would be in another country. Amazon would be there. eBay would be there. Google would be there. You could write down the list. You have to actually sort of cover all the bases to make sure that you actually enable the really big companies, right? And so people weren't crazy in the in the internet bubble they were right something major was happening right a lot of these things were ahead of their times um a lot of them were being run by by people didn't have any experience running anything that was a huge problem capital was too easy to get so um you know so so a lot of things got funded that wouldn't have people spent a little more time analyzing

them but fundamentally what happened uh was was was beneficial to the united states uh that it happened here so we've obviously gone through you know a very similar sort of trajectory up and down and if you believed in the internet you know um you know in 2001 2002 uh you know 2003 you know you could have bought a lot of companies that became extraordinarily valuable for not a lot of money at all um there was huge opportunities to buy amazon for you know pennies you know on the on the dollar fractions of pennies on the on the dollar so so so you know the only thing is sometimes when these things go up really quickly they tend to overshoot um on the way down but for me it's all about is what's happening does it bring fundamental benefits that are undeniably

useful and if they are then you know you just you find the best uh you find the best people you know in the industry and you get behind them and you know you don't look at it um you know day to day i mean after we went after we went um you know public salesforce microsoft would announce that they were going to compete and stock would go down sap would announce they're going to be the stock would go down and we all knew none of those guys were going to be able to compete with us but you know why did you investors were afraid because it was a completely different business model excuse me excuse me um you know it's like um everything that we did was different right so so they they would have to make software for lots of different kinds of computers with lots of

different kinds of databases you know we just made software for one kind of computer one kind of database uh we did it in the cloud you know rather than software having to be updated every two years we made it better every quarter you know i say to people you know what's the what's the last time somebody showed up and their oracle software just got better never that was the website happens websites all the time so so you know there was you know in a certain inevitability um to the the very concept of of uh cloud in my mind just because as i said the the benefits were just you know when you when you when you scrape off all of the you know uh all of the um well you you see through all the fog that's always created when there's something new you know in there was

something to me that was just undeniable um in in its uh in its utility for sure let's move to talk about um computing right because i think that the computing today obviously looks very different than it used to um and one of the things that really has fascinated me is we've historically lived in this cpu heavy world right most of the computing capacity uh and the needs have been CPUs. Obviously, people build those CPU facilities, but it's shifting. The computing needs are becoming more complex. And so, things like video, AI, self-driving cars, machine learning, DNA sequencing, all of that's going to require GPU-based computing power. What's your perspective on the difference between the CPU-GPU evolution or move to the GPU side?

Well, you know, we're sort of heavily vested in GPU computing. So what we do at LivePlanet is we not only have a cloud, but we also have the best, most capable VR camera that connects to our cloud, that connects to all of the clients. So, you know, it's an entire chain of plug-and-play services that makes it much easier for people to have higher quality and much less complex. We use a huge amount of GPU processing in that. And so, you know, what's happened on the Internet is now 80% video. and so video processing is is typically um you know often very gpu intensive now now there's a process called encoding and whether it's a gpu or cpu it has the power to essentially compress and decompress video and that that's how video gets gets uh basically gets gets distributed but i

I think if you look at Moore's law, I think it would have slowed down, except for the fact that GPU has sort of picked up and made up for the deficit in CPU computing. So on the Internet, you've got 80% of the Internet is video. It's growing 25% compound annual, right? So we're not in the world that Google and Facebook and all these other guys started out, which is really text and graphics. And we're moving to a completely different kind of internet that's fully video. And even within video, you have your GPU story, you have things like VR that are going to become monstrous in terms of, I mean, in every capacity, in data, etc. But it actually takes video and using a GPU, it transforms video into something entirely new called reality, right? So video is at this really weird inflection point. So in the world today, you know, what really is sort of driving technology is, you know, growing bandwidth and GPU computing. It has to do with video. It has to do with self-driving cars. It has to do with AI in the world.

I mean, the CPU brought the world a long way, created the whole PC revolution. But the world now really belongs to the GPU. And that's, of course, why NVIDIA has done so well over the last two or three years. for sure and why do you think the you know obviously uh google's got their tpu and starting to offer gpus um but why do you think they haven't uh kind of really double or triple down on building that out faster do you think it's lack of demand like large demand do you think that it just takes time to build the technology you know where are we in that life cycle of those large incumbents so are you talking their specific chips that compete with nvidia for instance so well i think there's a couple of different pieces right so there is

the the kind of the hardware that needs to compete here and then also what i would the consumer offerings right so just like amazon aws right yes they are ramping up the gpu offering and and google's got their stuff too um but but it just feels like we haven't yet hit kind of the turning point where um there's a ton of demand but i don't know if that's actually what's holding us back or if it's something more technological or what your take there is No, I mean, I mean, look, I mean, if you look at AI, right, I mean, AI is, is, I mean, going to play an extraordinary role in everything we do. But, you know, I mean, in that particular area, there just aren't a lot of engineers. I mean, if, if, you know, it would go five times faster if there were five times more engineers in the world. So, so some of these aren't even technology deficits. So they're just engineering deficits. Um, so, so there's no doubt that most modern computing is really centered around, around the, uh, around the GPU. It's a different kind of, it's a different kind of computing though. And it takes a different set of skills, right? Because GPUs, a lot of it is, you know, multi, uh, you know, uh, multi-threading. So Intel will send you eight chips on a chip. Intel will send you 5,600 chips on a chip. So it's a different actual model for computation.

And as a result, we have a world of CPU developers, and we have really a deficit of GPU developers. But if you look at self-driving cars and all these things, they're so GPU heavy. Um, so I just, um, um, you know, I, I think over the next, I mean, I don't know how long it can be forever, but certainly over the next 10 years, you know, all of the heat around new applications and sort of breakthroughs and computing are all going to center around, um, the GPU or, you know, it's variants, for instance, the drive AI they're, they're, they're either GPUs are very GPU like, uh, in the way they, in the way they function. So, yeah, I mean, I think the transition is happening. And I think, I mean, honestly, I think one of the biggest things slowing it down is really lack of a talent pool. I mean, if you want to go out as a company and you want to hire AI guys inside of your company, I mean, they're going to go work for an AI company. So, massive lack of skills around GPU-based computing in general.

as this gets ramped up right what is the needs of let's say those ai companies do you think that there's going to be concerns around um outsourcing or using kind of cloud options versus um actually keeping the computing power internally no i mean i mean let's kind of bring this let's kind of bring this back to the to the block to the blockchain because i think it's it's an interesting glenn to look at this so to me the blockchain is a new architecture for computing and you know we've gone what happens is we we go from centralized decentralized back to centralized decentralized in the entire history so we started out with mainframes and then they were broken up by servers that people put you know client server computing which they put you know inside their

company and all these servers you know you know number of servers the company had for all their apps you know like crm exploded and that became too too complicated so we went back to the cloud we started using companies like uh like salesforce and so now we're seeing this decentralization and you know for me um you know people talk about decentralization in a lot of different ways um you know some people refer some people talk about it as kind of a moral imperative right for them it's it's the the way that it should work and you know that that may or may not be true it really depends on the app on the application some things are better centralized and i don't think we're ever in a world where everything is decentralized um but if you look

at it as a new kind of computing architecture what it allows you to do is tap resources where they are in the entire world right and so we have ideas you know today that are in our heads from airbnb and uber who are completely look completely different from marriott i mean like they're in totally different businesses even though from a consumer they're kind of like the same the same thing right so so if the blockchain allows for easy decentralization of processes which it does, that opens up an entirely new avenue for doing computation. And that's why, you know, you've got, you know, AI is an example. And so, you know, there will be data centers that are run that have AI.

But there will also be resources that are all around the world that people tap into. Let me give you one reason for why the decentralization may actually win out over the data center. 5G is designed to do two things that are very specific. The first is to deliver significantly more bandwidth, you know, one gigabit kind of thing to people. The other thing is very low latency. so so if you're you know um i think microsoft announced they're creating an xbox in the cloud so how do you do that well you have to have very low latency so when people talk about 5g they don't just say it's faster than than 4g they say it also has lower latency so what you're doing

then is you're you're pushing the applications to the edge it's the only way that you can do this right so so if people really are going to have their ar you know goggles and vr um you know watch watch their video it's going to run from a from a data center that's very local right i mean i'm not making this up this is the future of 5g anytime you see people talk about it this is what they talk about low latency so so the whole centralized data center model for all kinds of computing doesn't work around 5g you know it it it it's not it's it's contemplated to pushing all the computing to the edge so so while you know companies like ours uh you know around video can claim that we are much lower cost than amazon or google uh for providing the same services

ultimately we fit the new computing model which is an edge-based an edge-based model and so i think it's the ability for the blockchain to enable this edge-based model in an ecosystem of people who can get paid for, you know, for dynamically showing up on the edge and making resources available. It is underappreciated how much of a new computing model that the blockchain represents today. I mean, I started thinking about his money and, you know, how do people buy Bitcoin or whatever, but it took me a couple of years to finally realize this is a fundamental change in the way a lot of computing will actually take place, particularly as it lines up with 5G. All right, before we continue with this conversation, I want to mention our sponsor

again, BlockFi. Remember, they do crypto lending. So you posted your crypto as collateral, they give you a US dollar loan, and you can use the US dollars to do whatever you want. You should visit blockfi.com slash pomp and then tweet at me that you went. If you tweet at me after you went to blockfi.com slash pomp maybe i'll throw you a like a smiley face or the fire emoji the fire emoji is the best remember go to blockfi.com slash pomp and i'll see you on twitter one of the questions that i've had right so you guys are doing like video compression stuff um and really i think taking a nuanced view maybe before we get into it uh why don't you describe a little bit about how you're how the technology actually works at video coin and then we can kind of

jump into um you know some of my questions yeah so i mean it it's it's the same thing as um you know airbnb and um um and marriott we the customers we look the same but but but we're very different in what we do so so you know most people who know amazon know amazon web services is their you know only business that makes money and it makes a ton of money and they use that money to compete with media companies and retailers. And I think they'd recently announced that they were bidding on five, I'm sorry, 10 sports networks from Disney.

So if you, you know, if Amazon Prime isn't enough to, video isn't enough to convince you that they want to be a player here, then that should. So, you know, so we have advisors like Pano Bassett, who's the CTO of 20th Century Fox. these guys are paying amazon huge amounts of money because um you know cord cutting is just

accelerating and and it takes um you know sending a broadcast signal out to people is you know one cost for everybody um now with cord cutters every time somebody connects you have you know you have an additional cost and they haven't figured out how to actually get any more um any more um uh revenue out of that um so so i mean really what we're doing in one regard is really simple we have a today we have uh google as a data center we write all of our software that runs on their hardware that they provide the software is ours and we're simply taking that model and saying instead of it running just in one data center let's let it run in any data center where they can perform the kinds of things that we want so it's encoding the data which is compressing it

it's storing it and streaming it the big advantage that we have over just about really any any other kind of project is that whether it's a gpu or cpu or it's your iphone or samsung galaxy whatever it is every computer has what's called a chip has what's called an encoder and your encoder is either for compressing your video or decompressing it um so so unlike miners who have to buy specialized hardware every computer sitting in a data center today has an encoder all of them in in 95 of the cases they're sitting in a data center and the encoder is completely unused uh because they're doing all kinds of other stuff i mean they're only you know only in like an amazon data center or google data center or some others are they actually using this encoder um but you

You know, and I'm using an encoder right now to compress my video. They're using an encoder, you know, on your end to decompress it. And it's actually essential to video. It turns out in our domain, there are 20% of all servers around the globe that are called zombies. They are totally unused. The problem was identified in 2015, and between 2015 and 2017, it actually got worse. So there's been massive overbuilding in data centers. And so that creates an opportunity to start with just to lower the cost.

And so, you know, I used to tell people, you know, with Salesforce, I said, you know, you're going to buy us because we're cheaper, but you're going to keep us because we're going to be way more innovative. And because this is essentially an open source project on an open source network with a development community, you don't have a lot of innovation around Amazon Web Services. You don't have a lot of innovation around Google's cloud. And as a result, there's been very little innovation around video. I mean, YouTube came a long time ago and video is totally controlled by these big companies. And they've had no real reason to do any real innovation because they've got it right now. They've got it where they want it. they know how to monetize it etc so so i i think by by taking this out of um i don't want to say

monopolistic hands but i mean the people who truly control you know everything that's about really the internet creating a new architecture and uh driving an ecosystem of of developers i think you're going to start to see just like i mean our app um you know effectively today runs on the video coin network the the vr app in the same way that at salesforce we started a crm application and then we created an entire uh platform underneath it that allowed you to build any application right just seen that you know i built web publishing but i had to build a platform underneath it in that case i spun it out in salesforce you know didn't make sense to spin our platform out it was part of this the crm so so we built the most sophisticated video processing

app already and you know we want to be able to broaden the appeal of that and we want to be able to uh dramatically reduce our cost so so part of this you know part of this came from the um the company's called live planet that does vr and the idea is you have streaming vr all over the world you can pop into a museum or you know play or whatever it is um you know just by putting on the goggles to run our camera 24 hours a day seven days a week to all platforms cost 26 000 in you know mostly encoding costs so you know even for our core model to work we need to drive the cost down dramatically we we know also that you know companies like fox that have tons of video that they have archived,

they would love to be able to push that into the cloud and create new products around it. Like, what's the history of the soccer team? What's the history of this football team? What's the history of this player? They have all this content, but it's locked away. If you reduce the cost, they can push it up into the cloud and they can start striping it and creating new products.

And so I guess the big thing here is, As the cost of computing goes down, and it actually makes more money for those using it, really the innovation, I guess, is happening not only... It's happening in multiple layers. You've got the energy sources. People are actually finding cheaper energy to use. Then you've got people building better software, better hardware, more efficient, etc. And then you actually have, I would argue, even better business models. And this is where things like incentives, the token economics, etc. come in to not only use dedicated hardware in the cloud, but really to use that unused or zombie computing power, etc. How have you thought about... Let's go top-down. How have you thought about the incentives given... A couple of people are trying edge computing or decentralized computing to do this. What do you think kind of we end up as the right model? Yeah, I mean, so the way that we work is pretty straightforward.

And, you know, in our model, we don't really see people turning on their home computer and, you know, we see data centers really being the ones to do this. And we know that they're out there and we know they have unused capacity. um so um sorry i just um i'm sorry uh i i forgot your question one more time around the um the use of incentives and the token economics etc how you think that'll play out Yeah, sorry. Yeah, so our software does three things. It runs on servers, and it determines whether the server can actually do the tasks that we want it to do. So there's got to be a proof that it's actually capable. the second thing it does is it measures what it is that server does and the third thing it does is it transfers value to that participant so they can be compensated for it um i think that is uh i think that is the model um you know the hard thing that everyone's kind of struggling with here

is you know you've got a constantly changing environment around regulations and and when i say that i mostly mean the united states not not that this is not happening around the world but it does scare me because you know the united states has actually done things right before. So when the internet got started, the U.S. could have required every website to pay taxes. Now, for you to understand the problem, there are, at least there were when the internet was young, there were 9,600 tax jurisdictions. So there's a state, there can be a local, there could be a hotel tax, you know, it's all taxed. If the government had required Amazon and others to calculate the appropriate tax, you couldn't have operated.

It's just too much complexity. The overhead of calculating, you know, all the taxes and all these different jurisdictions would have overwhelmed the development process. So as it turned out, that actually went on for 17 years. And at the end of it, what the government said was, state by state, you can decide whether you're going to collect tax. And, you know, when this was going on, states and localities were complaining to the federal government, we're losing all this money. The issue that I ran up against was the phone companies went to, there's a law that says if you provide phone service, you have to guarantee that the phone is always on, even if the electricity doesn't go out. So they went after Skype and what's now Google Voice and

Others said, oh, they can't provide that because they're running on top of our network or they're running on top of the person's internet. So they can't guarantee always on. And the FCC took a look at it and said, you know what, I'm going to exempt them from those rules because they don't control the hardware. So they can't be expected to perform the same thing. So they gave them an exemption. so so the big question now is are the the regulators willing to be thoughtful enough to create the right set of of um uh exemptions that can allow you know some of these business models to kind of logically play out and you know i you know i was just writing to somebody

You know, this morning, it's just like this is the first time, you know, where this has become, the government has become such a big part of my path to innovation, right? I mean, and, you know, it's difficult, and I think it has definitely slowed the pace with which this industry has been able to move. And I think we're still kind of caught in a place where nobody, I don't even think the SEC really know, you know, what are the rules of the game? And so, you know, at some point we need enlightened government. And by the way, we've had it before, right? I mean, I gave you those examples that were actually kind of enlightened. i mean i think we all know now i forgot what bank it was that had like 200 billion dollars of um of money laundering to win through one bank for the entire industry and you know sarbanes-doxley

and all these regulations are being taken off the banks you know now now they're focusing on crypto I mean, we're a gnat, right? And this is a gnat. And, but we're a spark of innovation. And so, you know, I just hope that, you know, the SEC is not using this as kind of a way of saying, well, you know, we're killing a bunch of regulation over here, but God, we're going to go regulate these guys, you know, over here. uh we're trying to do new new stuff and it kind of feels like that you know it kind of feels like we have been uh given the overall size and scale of what we do which is so small um we have been um uh sort of over watched now i'm not telling the sec that they shouldn't do their job and i'm not saying they shouldn't go and find obvious fraud and and um but i i think there should be you know there should be a direct interaction with leaders in the industry coming in helping to guide them in their policy i mean you know i mean in the united states we've you know we're

terrified of china we're terrified of what they're going to create you know and and here we are on the cusp of a major innovation and to my to my knowledge there's no body that's been established help advise the government to not screw this up and um you know it's an it's unfortunate well if somebody did create that organization what do you think the uh one key things they should uh should focus on and what do you think um the types of people that would be involved in that organization like if you if you were to kind of you know create the dream team is it people from different disciplines is it all technologists how do you see that coming together well i mean i think they're enlightened people in inside and outside of the industry right and and i think you

know i i think it would be um sort of the industry to try to come up with the people who sort of best uh represent i mean there are there are brilliant academics who understand this they're brilliant entrepreneurs brilliant brilliant investors um you know who understand this and and i mean it all comes down to basically what does tokenization mean like what what is okay You know, tokenization is an entirely new kind of thing. I mean, it is and it's not, right? I mean, you know, when I was running CNET, we tokenized our equity and we traded on the NASDAQ. So these ideas around tokenization, yes, they already exist in some form. there's a great um there's a great analogy that somebody gave me and they said you know when there's a quantitative change leads to a qualitative change so for instance when uh when a ibm computer gets shrunk down so it fits on your desk it becomes a pc and a totally

different thing i mean you take your pc and you shrink it down to the size of the phone it becomes a completely new thing again and i would argue the same thing is going on right now that you know tokenization of stocks, which is very hard to do. I mean, you know, going through the whole process of, you know, going public or whatever, that's being shrunk down to something that can be done very quickly and very easily, technically. And so it's going to require qualitative differences in the way it's addressed. And so to my mind, there's nobody who's addressing this issue of tokenization in all of its forms, you know, in all of its forms, right? I mean, from the standpoint of a video coin, I mean, we have to be a utility. We're competing with Amazon Web Services that is

a utility. We're laying across the internet a new video utility, right? I mean, it's patently obvious, right? And so, you know, I see very little thought going into, you know, what are the forms of tokenization? What are the benefits of tokenization? What are the technologies behind tokenization? And how might we differently treat them in order to capture the innovation that's happening and i i said this to people in like 2013 2014 i said you know when in the 1970s you know i was 10 12 whatever i remember when the um the deregulation of the airlines happened because all of a sudden um tickets on the airline went from being unaffordable to uh southwest west cheap right and i mean it blew the industry up because you know they were all used to having

the governments at their prices and yet these new companies came in and you know anybody could now fly you know basically on an airplane at the same time they also deregulated um wall street commissions so people went out and got brokers and charles schwab was born right as an old new way of of you know buying and selling stocks that didn't cost so much money and it became a you know and It revolutionized both of those industries. Both of those things were driven by the government. The government decided to deregulate, and it had a profound impact on how the economy works. It had a profound impact on equity ownership.

It had a profound impact on people's ability to get around. What I tell people is Bitcoin came along, but there's no government mandate for change. Like the change arrived, but it wasn't because the government said, hey, guys, let's go find a better way to do this. here's bitcoin and all this other stuff so so we've got a problem which is it's the the new way of there's a new way of doing things that's better but it's not because the government ushered it into being it it has to usher itself into being inside of the government and you know i don't know uh i know the opposite of the comptroller currency is now looking to issue new banking licenses for innovative companies. But I know from 2008 to 2015, at least no new banking licenses

were issued in the United States. So if you think about it, we had this catastrophe, this financial catastrophe, and we didn't invite more competition. We did the exact opposite. We actually made it harder for small banks to operate. So that's the four corners of what we're up against. Yeah, no, and it makes complete sense. I guess my question to you would be, so I'm a believer, right, in the sense of I agree that a lot of this stuff is going to happen. And I think that we're well on our way and kind of all of the right tech trends, technology, regulation, etc. are all kind of coming together at the right time. In your eyes, though, let's say we get five, 10 years out and this failed, what would be the number one likely cause that it would fail? Oh, it's clearly regulation. You think it is regulation? It's unequivocally regulation. And yeah.

And look, I mean, you know, the problem is large, right? Because one of, you know, what's the greatest benefit of Bitcoin? Well, it's the first currency you can send all the way around the world to anybody instantaneously. it it's it's lack of of you know it's it it's ubiquity you know whether you think it is a currency or a gold or whatever it is it's the first credit use case where you can just send this stuff anywhere in the world right and and and if if half the world um you know didn't accept it uh or people couldn't somehow get it it would have its utility you know what people like me You know, there's a building that we're building these global utilities. Right.

So so the problem is not just the United States. The problem is kind of everywhere. Unfortunately, a lot of people look to the United States for guidance. But I think that if I think there's no doubt that regulations currently and lack of either engagement and or understanding the technology sufficient to be able to come up with an enlightened, you know, enlightened ways of creating sandboxes around which people can operate. And people can learn. It is the globalness of what we're building that is so powerful. But it is the global, you know, every jurisdiction has some rule that touches some facet of this business. And, you know, that's, you know, that's, that's, that's been a problem. And I think it will continue to be a problem. But I will say this, though. When I put $19.5 million in Salesforce in 1999, I believed that there was an inevitability to this. Big companies weren't going to use it. I mean, there it just there was an inevitability because it was just a fundamentally different way of operating for companies. I mean, one of the great things that we did at Salesforce is we took companies who aren't innovative and by adopting our platform, they became innovative.

That's a really big deal. That's a that's a really big deal. So. So I do believe that there is an inevitability behind this. I don't I can't tell you the timeline because I don't think a lot of it has to do with how quickly, you know, regulators pick the U.S. want to become enlightened. I think that's probably the number one. But I would say I don't believe that there will come a time where it doesn't happen because I think that the evidence will continue to mount that there is a fundamental nature of this technology that makes it powerful enough that it has to ultimately be adopted. interesting yeah i mean look it's i always joke about um you know this idea of decentralization and people are you know oh it's not going to happen or we don't need that etc and i laugh and i say well airbnb is simply a decentralized hotel and uber is just a decentralized taxi company exactly right and when you start to think of it that way really what you're talking about

it's just building a decentralized data center yeah it's yeah i mean it's the same it's an architecture for doing business and so when people talk about as an architecture doing business you know i i you know i'm totally on board with them there are other instances where people talk about decentralization and it doesn't actually make things better it just becomes some sort of moral imperative, uh, as opposed to being way of making the world work better. Right. And so, and so I think people can go overboard and try to decentralize some things, which, uh, which for a variety of reasons may be better off being, uh, centralized, but in the world that I'm living in through the examples that you're giving, um, both the things that have already happened

and things that can happen the ability to decentralize is going to lead to a whole nother enormous set of new companies that are been enabled by a new business model around decentralization just like the internet enabled centralization as it's ironic but you know you know i had people from all over the world coming to cnet for everything computing And of course, Salesforce is, I don't know, $110, $120 billion company for everybody comes to them, you know, for centralized CRM and other applications. So the blockchain that allows for decentralized business models as an architecture, and that's where I think its real power lies. particularly when you can combine two things on a blockchain. You can combine money and you can combine the information.

And part of the reason that I think businesses have struggled is they've had a hard time using the blockchain for money because it's volatile. And I think we're going to see more and more. So when I launched Uphold, we had Bitcoin and 15 tokenized, fiat currencies. And so I think we need a broader concept of tokenization that exists beyond just cryptocurrencies. And that includes, obviously, fiat as well. And what's your take on the crypto industry in general, right? Do you feel like we are

kind of early, mid-90s and kind of we got a long way to go and there'll be this big bubble you know a couple years out do you feel like the 2017 bull market into 18's bust is kind of that 1999 type you know hype cycle you know you've lived through this stuff so kind of how do you look at that in comparison to the internet bubble and the infrastructure being laid and all that innovation yeah i mean i mean it's very interesting i mean i think about this a lot obviously i haven't been through uh you know that cycle um what what happened in in the late 90s excuse me what happened in the late 90s was the uh the the whole movement was co-opted uh in fact taken over by the u.s banking system in other words it led to enormous numbers of ipos i mean i use morgan

Stanley and Goldman Sachs. And Morgan Stanley took me public. I think Morgan Stanley took Salesforce public. So they participated in the IPO, their trading desk traded our stock, and their customers were customers of my companies and other internet companies. So this wasn't kind of a fringe thing. I mean, this was right in the heart of what was going on. I mean, the number of times I was on CNBC was ridiculous, you know, compared for the size of the business that I had. I mean, it was ridiculous. I mean, GE couldn't find a way to get on, you know, CNBC at the time. so it was like front and center in um and and and the banks and all these other guys they were making a fortune off of this a fortune off it and that's how you got to nine trillion dollars of

value and that that's nine trillion and two thousand dollars right so because the banks haven't been able to make any money off of this um and i don't just mean commercial banks i mean wall street in general right if they had all been able to co-op this and make money off it this would be a hundred times bigger, maybe a thousand times bigger. I mean, it would be absolutely enormous. So the good news is though, is the rise and the fall, you know, it's really affected a very narrow group of technologists, you know, primarily. Nobody could call their broker and go buy any of these. It's real work to go buy a cryptocurrency. You gotta do a lot of work. It's not easy. You know, despite the fact that I've always been trying to make it easy, it's, you

You've got to know a Bitcoin address. You've got to know security. And in ways, you don't have to know about that with the stock. Let's call your broker in your account. You don't have to do anything. You don't have to worry about anything. So this bubble is really a mini bubble. It's a very small, well-contained kind of bubble.

And for the people who are in it, it feels huge. right and and and obviously you know for anybody who's had 10 times as much money as they have today you know it feels profoundly large but the reality is it's very very very small and so i don't think overall that the broader world feels like they've been um uh they've been hurt by what's going on i think if anything they feel like you know if it comes back They won't have missed out and they'll get an opportunity around the next the next time. So so the lack of acceptance by kind of the mainstream financial system contained the size of this in a way that that never happened in in in the 90s. So, you know, you don't have, you know, cab drivers running around having lost half their money.

I mean, there were horrible stories I heard all the time about people, what happened after the, you know, after the stock bubble. So, you know, I think this is, I think we're really, really early. I think this is kind of like an early lesson for a lot of people, which, you know, the next time it kind of gets going, hopefully people will kind of keep in mind. Um, but I, I don't think this is kind of a wipe out scenario where for the next three years, you know, um, you know, nobody's going to want to, uh, engage in crypto. I think if anything, you know, it will, you know, whenever it kind of bottoms out here, um, you know, I think people can get back to, to trying again to do useful things, uh, with more knowledge about what can and cannot work in whether it's regulation

all the way through to, to, through technology, to, to business models. So I think this, this is a minor crisis, you know, compared to what happened with with the internet in 2000. Very interesting. All right. I could talk to you for hours. This is super, super fascinating stuff. And you just have a really unique perspective. So I appreciate all the time. Before we wrap up though,

I've got a couple of quick fire questions for you. The first being, what do you think the most important company in crypto is other than Europe? Well, I think the most, I don't know whether I would hold it, but I think the most interesting thing to happen over the last two to three years is Tether. Why is that? Because it begins the

tokenization of fiat. And in order to be able to take all of this and push it into mainstream corporate America, we're going to need tokenization of the money that's used by, you know, the 98% of the world is not in the crypto economy. I think it's, you know, I mean, it's led to like 200 other stable coins coming out. So clearly, this has sort of led to, you know, a bunch of thinking about, but I think, you know, this is an idea I had when I launched a poll with 15 different tokenized forms of fiat. And I think, you know, we're now getting out of the tokenization of sort of nothing into the tokenization of real things and that's uh the the world of real things is very big got it um okay what uh what's the one regulation that you would either change or

improve if you could wave a magic wand um i would make the um the whole utility model crystal clear because what you and i have talked about are a lot of utility-based ideas um and there could be an explosion of real um alternate models around decentralization if the sec could just make it clear um you know um or could listen to to these businesses and come up with a framework that um that that makes these business models um much easier and so the people you know they know if they do the right things um you know they don't have to worry about um you know uh the sec coming after them um just that would be a huge first step got it and then um what's the most important book you've ever read well it was interesting i read a book called snow crash

in 1993 and um as i was starting cnet and this it's um it's really the it's the first well-known book to talk about uh virtual reality and it not only had virtual reality as virtual currencies in and it has you know in many many different ways over the course of my career uh including right where i am right now snow crash neil stevenson i think he's actually uh i think he was actually hired by um by magic leet um and so it's uh i mean anyone who hasn't read it they should read it it's like many of the ideas to kind of define the world today were right there at snow crash in 1994 that's yeah it's funny um when you join uh join facebook the um at least in the product side uh they give you i think it's one or two books home is a snow crash so is that right i didn't

know that i didn't know that yeah well because it's i mean that makes sense because right there they're building uh you know they're they're they're building a digital community and they did pay two billion for um for oculus so they they obviously they're driving towards uh that world which i think will happen and you know i think vr and and social when they come together i think it's going to be a pretty found set of innovations actually for sure um all right so i usually ask one non-crypto question um and uh we just got to admit that aliens exist right so let's just say that they do uh one thing i'm really interested in is what are the odds that there is a more advanced civilization somewhere out there and they're aware of us but we don't know about

them um i wouldn't be surprised i wouldn't i mean i would uh you know would i would i give if i had to give thumbs up or thumbs down i'd give thumbs up i i think the odds are i think i mean look if anybody is you know had a million year running head start on us i mean everything is possible so in the 13.7476 billion years since the universe started is it possible somebody made it in their million years above us i i would i mean look we're we're getting to the point pretty soon where we can tell what the uh uh what the um uh what the atmosphere is like around these exoplanets so yeah i would thumbs up all right and then uh i usually end with uh with you asking me one question what uh what one question do you have for me when do you think the market's going

to turn around the timing's the hardest part always right um i think here's what i'll say so so it's hard to pinpoint like you know an exact date or anything like that but i do believe we still don't have the psychological kind of shock and awe that we're going to need um and i actually don't think the shock and awe is like a one moment in time i think that it comes out of the portal people basically give up and they're just like look we were wrong and they go home they leave they forget about it um and so that means that we gotta kind of go sideways for a while right maybe if you go down a little bit more or whatever but if we just go sideways for a while people lose interest they go on to other things they feel like um there's no way to you know build um you

know valuable products or make money or whatever it is uh and i do think that the halvings around Bitcoin specifically are kind of great catalyst. And so I think the next one scheduled in May, 2020. So I don't know if it takes that long, but, but I do think that those, those moments, you know, historically have had, you know, kind of a good impact and wouldn't be surprised if it happens again. Yeah. I mean, I'll, I'll give you a kind of a quick story. I, I was having dinner in 2002 with Terry Semel, who was,

he ran Warner Brothers and then he went and was, and was the CEO of Yahoo. And we were talking about the fact that internet advertising crashed. And he was saying that he couldn't even get meetings with people in the advertising industry that he'd known for decades. I got a phone call from, from business week, which at the time was a very big business publication.

It's now owned by, it's now owned by, by Bloomberg and they never built a website. They didn't participate at all in the whole internet, you know, media sort of website revolution. And they knew I wasn't doing CNET anymore. You know, I was doing stuff with Salesforce. So they knew I would be sort of an impartial kind of person to talk to about media. So the reporter called me up, giddy, because, you know, they had done nothing in terms of building their own presence.

and he said to me exactly like this now that we know that internet advertising doesn't work what does this mean for the industry for companies like cnet and i said well it's not a problem necessarily for cnet the internet is going to consume more and more people's time so if they go into this thing and they can't be reached by marketers it is going to wreak havoc in the marketing world because they can't have everybody disappear in media consumption and be able to market their products so somebody's going to have to come up with a solution in order for all this to work the irony was is that is that um i mean we had the pay-per-click model at cnet and it was so profitable that's kind of why we were an asset in our company but you know around this time google

was rising, you know, and at the moment that everybody had decided this was never going to work, never, never, never, uh, Terry Simmel couldn't get people calling back. It was at that moment, uh, taking shape. So I, I think your, your point may be accurate from my point of view. I love it. Well, we, we, uh, we agree on many things, my friend. Um, I really appreciate the time you took to do this. It is super enlightening to me and hopefully people at home enjoyed it. So we'll have to do it again. Thanks. Thanks for having me on. All right. You reached the end of the podcast. Congratulations. I appreciate you listening all the way to the end. You deserve a trophy. But before I hand out the virtual trophies,

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