- Everyone wants to be rich and famous right away,
but that's like wanting to have
lots of money without wealth.
And as you know, that's not the way to do it.
Instant lottery winners go from rich to poor
within the course of years, sometimes, months.
Happens all the time.
Fast money is like fast fame.
If you didn't earn it, it won't last.
Here's famous actor, Christopher Lee,
giving his most important advice to future actors,
and I think it applies to a lot more than just acting.
- 'Cause that's what they want,
to be rich and famous, immediately,
which is terribly sad and extremely dangerous.
The most dangerous thing that a young actor
or actress can do is to believe their own publicity.
Because shelf life, 10 years?
If you're a star, 20, or 22, or 3 or 4?
If you haven't got it.
If you've got it, you've got the right instincts,
the right imagination, the right powers of invention,
if you have something behind you,
some sort of foundations of experience and versatility,
that's fine, you will go on, you will last.
- Today, we're talking about fundamentals
so you don't have to be a flash in the pan.
Yeah, it starts right here with your mindset
when you're starting out.
What's the difference between "The Matrix"
and the real real?
We're going to get real today, let's get into it.
It was French philosopher, Jean Baudrillard,
whose ideas inspired the movie, "The Matrix".
- The matrix is everywhere.
It is all around us.
Even now in this very room.
You can see it when you look out your window
or when you turn on your television.
You can feel it when you go to work.
When you go to church, when you pay your taxes,
it is the world that has been pulled over your eyes
to blind you from the truth.
- What Morpheus is pointing out is a key idea
Baudrillard first proposed,
that our world is covered in representational signs.
Our modern society is made of images
that represent someone or something,
what he calls, "simulacrum".
And this simulacrum is more and more disconnected
from the truth, reality, the real real.
Baudrillard says, "Postmodernity is said to be
"a culture of fragmentary sensations,
"eclectic nostalgia, disposable, simulacra,
"and promiscuous superficiality
"in which the traditionally valued qualities of depth,
"coherence, meaning, originality
"and authenticity are evacuated or dissolved
"amid the random swirl of empty signals."
And this is more true than ever as we move forward
into a world of social media, of hierarchy,
of the rat race, of the continual,
a never-ending Squid Game that is professional careerism.
Do as you're told, get the brass ring,
conform, conform, conform.
So, this sign value is actually running everything
and we're feeling more and more dehumanized.
This is what philosophers call "reification",
where human beings become dominated by things
and become thing-like themselves.
And the result is that real life begins to disappear.
In startup land and in our professional lives,
it comes out in a bunch of ways.
What school you went to matters a lot,
what your resume says about you matters a lot.
It's more important to look like you're doing work
than actually doing the work.
When all of society is looking for the same thing,
wealth, power, status, control,
it starts to funnel smart people down very specific paths
in their careers, investment banker,
management consultant, manager, director, VP.
And yes, this feels, in particular, very new to me,
maybe in the last 10 years,
now, startup founder is one of those power positions.
This was not how it was before.
That's not how it was for Woz
when he started Apple Computer.
- [Stephen] So, I was not designing a computer
with any idea we'd ever start a company,
ever have a product ever be successful.
It was just to go down to the club and show off
and to own and use.
- At one point,
the act of starting companies was a fringe act
done by people who never started
with the idea to start a business.
But, now, that's actually becoming a commodity,
something, again, with signal value.
Yes, prestige, the pure age of startups just might be over.
And a sad byproduct of signal value
and the mainstream adoption of startups is that
now all that gross stuff outside has penetrated
what was once the inner world of nerds.
Yep, it's the moment when tech went tech bro.
Yeah, there's still tech, but increasingly,
who gets the billion dollar round is who gets to IPO.
And if the beauty contest chose the wrong startup,
the whole space gets tanked.
It is the age of the Keynesian beauty contest now.
The Keynesian beauty contest is what we call it
if that, which is revered is merely based on
what other people say instead of a more fundamental measure.
People vote based on how they think other people will vote.
The result is herd behavior.
That what should really happen if people voted rationally,
that just doesn't happen at all.
Keynes thought about this
when he was reading a newspaper in the 1930s,
when he saw a popular newspaper game.
Newspapers at the time would publish photos of
hundreds of beautiful women,
ask people to mail in their opinions on
who were the most beautiful.
Readers who picked the most selected women
would win a prize.
Keynes wrote,
"It is not the case of choosing those faces which,
"to the best of one's judgment, are really the prettiest,
"nor even those which average opinions
"genuinely thinks the prettiest.
"We have reached the third degree
"where we devote our intelligences to participating
"what average opinion expects the average opinion to be."
This happens everywhere and it's happening in startups, too.
Who gets funded and who gets blessed, not just by investors,
but the workforce too, it's become exactly like this,
a Keynesian beauty contest.
This kind of thing seems to be opaque
to most people outside of tech.
But if you're a founder,
you know that your startup lives or dies,
not just by whether you have money,
but by whether you can hire talented people.
And, now, in an age of the $150 million post-money valuation
for a series A,
which is more than 2X or 3X higher than it was
even a year ago, the competition is fiercer than ever.
This effect compounds, the winners get more capital,
which lets them hire better people,
which then lets them build a better product,
and the cycle continues.
So, the tricky thing now is, as a result,
it's more important to look the part of
the prettiest startup than it has ever been
in the history of building startups.
But looking like the best startup
and being the best startup are clearly two different things.
Case in point.
- This is what happens when you work to change things.
And, first, they think you're crazy, then they fight you.
And then, all of a sudden, you change the world.
- Theranos happened because
looking like a successful biotech company was more important
to that CEO than actually creating a blood test that worked.
And the signal value of Stanford professors
and luminaries, like Mattis or Kissinger on her board,
that took the place of real diligence and real thinking.
Another case in point,
here's the failing district attorney of San Francisco,
Chesa Boudin.
- And all of us did what we could,
took action to intervene and to prevent the criminal conduct
that show tragically cost two lives on New Year's Eve.
- Listen to what he said.
"All of us did what we could and took action."
Yet, did you spot the lie? He didn't take action.
Two people died because he didn't take action.
When he failed to charge a repeat criminal
in an escalating pattern of crime.
A politician, and ideologue, no less,
just has to say the right things these days.
The outcomes are mattering less and less.
What's happening in a society today
with this kind of double think?
Clearly, image is becoming more important
to some sociopaths than the actual outcomes.
Nowhere is this more true than the world of venture capital.
Yes, my world, my business.
This scene in "Silicon Valley" actually does happen.
- No, no, no, no, no, no, no, no revenue,
I'll call you back.
What? Why would you go after revenue?
- Because, to make money?
- No, if you show revenue,
people will ask how much and it will never be enough.
The company that was the 100X, or the 1,000X,
becomes the 2X dog.
But if you have no revenue, you can say you're pre-revenue,
you're a potential pure play.
It's not about how much you earn,
it's about what you're worth.
And who's worth the most?
Companies that lose money.
- VCs and founders both fall into this trap.
The VC in this scene says
looking like a successful company is far more important
than doing the things to actually be successful.
Fake it till you make it.
But, here's the thing.
Faking it might get you far,
but it doesn't bring you all the way.
Warren Buffet says,
"Markets evaluate companies by popularity,
"but in the longterm, they evaluate them by weighing them."
What is the true worth of this company,
and, how much money is the business generating?
This is the weighing machine
and it won't weigh a thing that is full of hot air.
That's what Elizabeth Holmes found out.
- Over the years, she ran into setbacks
with this vision of a blood testing device
she was trying to pursue.
And instead of admitting those setbacks and, you know,
admitting to her investors where she was with the progress,
she lied and the lies got bigger and bigger,
and eventually, the lies got so big, relative to reality,
that it became a pretty massive fraud.
- Businesses end up having to be real
and profitable eventually.
There are serious limits to being fake
and clearly, it is the VC's job to find the fakes
and avoid them, trust me, we try.
And the reason why?
We only make money when we find the real.
In a world where everyone is trying to fake it,
you have to realize that signal value of
looking like a good startup,
without the fundamentals of being a good one,
now that has close to zero value.
Well, that was big.
Overall, all that glitters is not gold.
And that lines up with what Baudrillard is saying too,
that the glitter is getting in the way of
truly identifying the gold.
So, that's the answer.
Build for weight, build fundamentals,
build the real, and show it.
In a world where all the things are showy,
flashy, signal value, real recognizes real.
And that's the true path to wealth
in a world awash with noise.
So, now you have the secret knowledge,
you're free now from having to merely look successful,
it's a flash in the pan, that is too short term,
zoom out and pursue that which is fundamental.
Baudrillard said, "Once you are liberated,
"you're forced to ask who you are."
Humans, we are creative creatures.
Let's get back to creating.
Thanks for watching all the way to the end.
Hey, if this is your first time watching this channel,
thank you for being here.
I'm a venture capitalist who started as a software engineer
and as a designer.
I grew up sometimes food insecure,
the child of Chinese immigrants in the SF Bay area.
And just being here gave me tech.
And tech is what's given me everything I have today.
And that's why I'm here to try to help people
get to the next stage,
wherever they are in their careers,
at the beginning, at the middle,
or just about to start a new reinvention.
Technology is remaking all of society
through engineering and code,
what line of code will you write?
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I appreciate you all so much.
I'll see you next week.