{"url": "https://www.youtube.com/watch?v=e2qCRyI9a6o", "page_url": "https://www.youtube.com/watch?v=e2qCRyI9a6o", "title": "Sam Altman: Bloomberg West (Full Show 9/23)", "show_or_channel": "Bloomberg Originals", "date": "2015-09-24", "duration_s": 1356, "type": "tv", "speakers": ["Sam Altman", "Emily Chang"], "confidence": "medium", "notes": "Bloomberg West full show", "people": ["sam-altman"], "id": "2015-09-24_bloomberg-originals-sam-altman-bloomberg-west-full-show-9", "audio_duration_s": 1355.8131875, "worker": "jc-w05", "transcribe_s": 16.1, "model": "large-v3", "segments": [{"start": 1.26, "end": 43.79, "text": "Chinese President Xi Jinping met with U.S. business leaders today, saying the U.S.-China relationship has, quote, enormous potential. This is the same day we learned the fingerprint records of millions more U.S. federal workers were stolen, and experts are blaming the Chinese government. How is President Obama to approach Friday's summit? I'm Emily Chang, and this is Bloomberg West. Coming up, Uber goes after Chinese commuters with Uber Commute, marking the first time Uber releases a global product."}, {"start": 43.79, "end": 63.76, "text": "Outside the United States. Just how badly does Uber meet China? Plus, speaking of global growth, Instagram is leaving Twitter in the dust as it officially hits 400 million monthly active users, most coming from outside the United States. This trumps Twitter's 316 million. What's next for Instagram?"}, {"start": 63.98, "end": 77.17, "text": "And you're not going to want to miss my interview with Sam Altman, Y Combinator president. I caught up with him today at TechCrunch Disrupt. He gets into some dangerous tactics being used by uniforms. That's ahead on Bloomberg West."}, {"start": 77.94, "end": 104.3, "text": "First to our lead, the guest of honor on the West Coast today, Chinese President Xi Jinping. He made the rounds among the business elite in Seattle amid serious tensions between the U.S. and China on the economy and cybersecurity. But out of the ceremony and show today came at least one major winner, and that is Boeing. Bloomberg's Rami Innocencio is on the ground at Boeing's Everett facility and joins us now with details. So, Rami, what can you tell us?"}, {"start": 105.42, "end": 133.33, "text": "Hey there, Emily. Good to speak with you. Right now, I am at Boeing's biggest plane manufacturing center in the world. This is about half an hour north of Seattle. And, you know, it's interesting that looking just right behind me, every single 747 that comes out in the world comes out right through those hangars. As for the deal between the U.S. and China and for Boeing, basically Beijing has green-lighted the purchase of 300 planes from Boeing that are going to go over to the United States."}, {"start": 133.33, "end": 155.6, "text": "Going to go over to China, and the total worth for all of them, $38 billion. Not only that, Beijing has also green-lighted a new 737 finishing center for planes in the country. This is the first time that Boeing is going to have a center in the country. Airbus already has one over in Tianjin, but this is a big coup for Boeing. Emily?"}, {"start": 155.6, "end": 176.46, "text": "So, Rami, cybersecurity is still the elephant in the room. You know, we learned today that, you know, this Office of Personnel Management hack, 5.6 million fingerprint records stolen, and experts are saying it's not just Chinese hackers that did this, it's the Chinese government that is behind this. I mean, what did President Xi have to say today about cybersecurity?"}, {"start": 177.68, "end": 203.28, "text": "You know, flatly and hands down, President Xi Jinping has said that China does not hack. But with that said, other sources say that at least China-backed entities are hacking companies, not just in the U.S., but also around the world. Of course, in the past year, we do know that, for example, the Office of Personnel Management over in D.C. has been hacked and has compromised about $20 million."}, {"start": 203.28, "end": 228.38, "text": "Former and current federal workers. United Airlines has also been hacked, as well as Anthem Healthcare. So this is a very big issue. People are talking about it. Xi Jinping is addressing it. But looking ahead to what's happening over in D.C., we're going to have to see if the words actually translate into action. Also, we do have a Pew Research study that's come out that says that cybersecurity and cyber espionage..."}, {"start": 228.38, "end": 248.11, "text": "is one of the top three issues for Americans looking overseas to China. Emily? So, Rami, what can you tell us about any progress that was made at this meeting between President Xi and the U.S. business leaders who were there, specifically the tech leaders who were there? Tim Cook, Ginni Rometty."}, {"start": 249.62, "end": 278.24, "text": "Yeah, you know, it's good that you bring them up. You know, it was actually a closed-door meeting, so we don't exactly know what came out of that. But we did actually see Tim Cook and Ginni Rometty leaving, and we got some really good footage there. But in terms of what actually happened behind those closed doors, that will be for those 30 executives, both from the U.S. and China, totaling $3 trillion worth of market value for them all to digest and to talk amongst themselves. Emily?"}, {"start": 278.24, "end": 305.36, "text": "All right. Bloomberg's Rami Innocencio in Seattle at Boeing. Thank you so much, Rami, for your reporting today. I do want to talk a little bit more about this visit and what President Xi had to say. Oh, Malik of True Ventures is with me. And, you know, as Rami said, we don't know exactly what went on behind closed doors. We got some pictures and it appeared to be quite a formal setting. We don't know how much back and forth actually happened. But how productive do you imagine something like this actually is?"}, {"start": 305.36, "end": 327.98, "text": "I don't know. I mean, not being there in the room, so I can't really speak to it, but I don't think anything much would come out of this meeting. You know, the issues between U.S. and China on a technology standpoint is there's a lot of talk around, you know, industrial espionage in technology, which is where the focus is. The other issue is around..."}, {"start": 327.98, "end": 344.96, "text": "Cloud services and the US cloud services have certain limitations. They have difficulty in trying to offer services in China. I think Google obviously has made it very clear that it has some issues around China. I think there is a lot more."}, {"start": 344.96, "end": 371.12, "text": "Thank you very much."}, {"start": 371.12, "end": 393.01, "text": "As we understand it, he did speak about the importance of U.S. tech companies to China, specifically companies like Apple, but it is certainly ironic given that Facebook is blocked in China, Twitter is blocked in China, Google had to leave mainland China. But I wonder, ahead of this meeting with President Obama, what is President Obama to do when the Chinese president is saying publicly, we don't hack, yet privately U.S. officials are saying..."}, {"start": 393.01, "end": 411.57, "text": "Well, yes, absolutely, you do. I mean, you know, it's the age-old saying, politicians say one thing and do another thing. So I think we have to kind of confront this issue. I think we still think of war as something of an old-school industrial war, whereas, you know, the front is..."}, {"start": 411.57, "end": 432.82, "text": "All digital, all cyber. I mean, this is about... We're in the middle of a cyber war right now. And the citizens are getting impacted on an everyday basis. And so, you know, the Chinese president denying that nothing is happening, I don't have to believe it, and neither does the president, right? We need to take strong action around it. All right. Omalek of True Ventures, you're sticking with me throughout the show."}, {"start": 433.04, "end": 456.54, "text": "Now, all you Apple enthusiasts are probably counting down to Friday when pre-ordered iPhone 6s and 6s pluses will be delivered. Yet the big Apple will have to wait. Apple, the company, is warning some New Yorkers that they should expect delivery delays. Just blame it on the Pope. Yes, Pope Francis arrives in New York City this Thursday and Friday after meeting with the president."}, {"start": 456.54, "end": 480.82, "text": "President Obama in Washington. Apple has sent an email to customers and affected zip codes saying there will be traffic restrictions in New York City on Friday. They'll make it up to New Yorkers with a Saturday delivery. UPS has a service warning up on its website too. Warning of delivery issues that will follow the Pope throughout his stay here in the United States from Washington to New York to Philadelphia. It's okay. You can wait. It's because of the Pope."}, {"start": 481.1, "end": 532.99, "text": "Up next, my interview with Y Combinator's president and Reddit board member, Sam Altman. We discuss tech valuations, unicorns, burn rates, and Ellen Pau. Plus, the startup that's helped investors get their gadgets off the ground is no more. Details on the rise and fall of Torpy, next. Welcome back. I'm Emily Chang. Earlier today, I sat down with Y Combinator president, Sam Altman, at the TechCrunch Disrupt Conference. Sam recently tweeted, I'm generally much more scared of unit economics."}, {"start": 532.99, "end": 557.63, "text": "Then burn rates. I asked him to explain. A burn rate is not bad by itself. Companies losing tons of money before they make tons of money. This happened at Facebook. This happened at Google. They never lost tons. That's okay. What I worry about is companies that are losing tons of money and have no plan to ever make lots of money. That's the problem. And so these super low margin businesses that operate as if they were a high margin business."}, {"start": 557.63, "end": 586.11, "text": "That, I think, is a real problem, and many people aren't thinking about how these businesses will eventually make money. So if you have the operating culture of a Facebook, but you have the margins of an Amazon, that's a problem. So what are you telling your startups? Have a plan to eventually make lots of money. This one thing alone is like a light bulb for some people. They're like, oh yeah, I actually do need to generate. Someday all businesses are valued as multiple earnings. Sometimes that takes 20 years. Eventually it happens."}, {"start": 586.11, "end": 607.36, "text": "And so just like talking to our founders about it's okay to lose a lot of money up front. You can invest in growth as long as the fundamentals of the business support it. But you do have to have a plan someday to make lots and lots of cash flow. Now, it's interesting. I recently had a conversation with Bill Gurley, who expressed a lot of concern about the unit economics of on-demand companies like Postmates, Instacart, Ship."}, {"start": 607.36, "end": 633.17, "text": "Do you share those concerns about those kinds of companies? Why are so many investors getting into on-demand startups? Well, yes, I do. Bill is on the board of Uber. I think he's a wonderful guy. Uber has probably burned more capital in the last five years than any other startup ever. So I don't think even Uber is immune to this. Look, I think Uber is going to be a giant $100 billion-plus company, but I think Uber also will have to sort out the..."}, {"start": 633.17, "end": 649.14, "text": "You know, I think it's sort of, it's just."}, {"start": 649.14, "end": 674.05, "text": "I'll disagree with the premise that Reddit needs to make a comeback. The company has more than 200 million unique users. It's growing really fast. And it hasn't even done the easy wins. One of the counterintuitive things I learned about investing is that you should prefer an unoptimized startup to a really optimized one. If a startup is growing incredibly well like Reddit is and has lots of broken things, like no great mobile strategy, you can fix those easily."}, {"start": 674.05, "end": 702.66, "text": "Guaranteed, and then it will be even better. If it's already fully optimized, there aren't the same number of easy wins. Ellen Powell came in as interim CEO of Reddit. She spent a few months there, and then she moved on. She's decided now to not appeal the Kleiner Perkins situation. What's your reaction to that, as you've been watching from afar? I don't want to comment on her specific decision to appeal or not. I will say that I really enjoyed working with her, and I think that she..."}, {"start": 702.66, "end": 731.95, "text": "She really brought the issue of women in tech to the forefront of public interest in a way that was really important. And I'm very thankful for what she did at Reddit. Did you guys learn anything from that? Or are you doing anything differently at YC because of these issues that have been raised about diversity in the industry? Well, everyone talks about diversity in tech. I think the best thing you can do is not talk about it, but just act on it. One quarter of the partners at our firm, we have a flat, equal partnership, are women."}, {"start": 731.95, "end": 748.72, "text": "And we're funding, you know, we fund women that apply at exactly, you know, plus minus a rounding error of we fund them at the rate they apply. So I think those are the things that we can do that really help. But I also don't think diversity in tech is just about it."}, {"start": 748.72, "end": 772.35, "text": "It goes in a lot of different directions and we try to be thoughtful about that. It's the right thing to do. I also think it'll be the best thing for our returns. Do you think funding at the rate they apply is enough? Well, it's very hard to do more than that. I think what we can do is continue to encourage more women to apply. We hold the Female Founders Conference every year. The women in our partnership go off and meet with women and talk to them about startups."}, {"start": 772.35, "end": 799.82, "text": "So I think we can increase that number, but it would be very hard for us to fund at a higher rate than they apply. So we were talking about the environment earlier. How do you see this playing out? The environment that we're in? You know, stuff feels expensive to me. It has felt expensive to me for a long time. Maybe it gets more expensive. Maybe it crashes. I don't know. But I believe that the great companies, the companies that really matter to our returns and to sort of..."}, {"start": 799.95, "end": 820.61, "text": "What do you mean by that?"}, {"start": 820.61, "end": 845.04, "text": "So I was talking to Mark Benioff about this and he said, I think people are just more obsessed with being unicorns and having a billion dollar valuation than they are about focusing on their customers. Absolutely. I think, you know, I looked through the list of companies that have an over a billion dollar valuation recently and more than half, I think, were valued between like a billion and 1.5 billion and something like a quarter were valued exactly at a billion. So people are clearly obsessed with getting to this like mark."}, {"start": 845.04, "end": 869.04, "text": "And they're willing to like put all sorts of weird structure on their terms to get there. And yeah, I think like if you were looking at the financial data, like you would say something is amiss. You'd say there's some fraud going on or something if you were just looking at the numbers because they don't fit the distribution you'd expect. There's this huge desire to get right to a billion or just over. I don't care about it. Like that's not."}, {"start": 869.1, "end": 892.37, "text": "I think it's dumb, but it's like that's not going to make a company great or not. Is it going to come back to bite them? I do think if you should have been worth $800 million and you raised it a billion, that's not going to matter. If you should have been worth $200 million and raised it a billion and don't execute perfectly, yes, that will come back to bite you. So what's your advice for these guys raising? Well, we always tell people don't over-optimize on valuation and don't..."}, {"start": 892.37, "end": 922.08, "text": "Except messy terms. You can get any valuation you want with sufficiently crazy terms, but that will come back to buy you, you know, like 95% of the time. Sam Altman, president of the startup accelerator Y Combinator. Oh, Malik, back with me from Truevent. He really seems to have been hitting his groove now that he's been doing this for a year and a half. He's not shy about saying what he thinks. What's your take on his remarks? It's great. I mean, I'm glad he's a little bit more plain spoken than others, but he doesn't get into the specifics."}, {"start": 922.08, "end": 949.63, "text": "Name the companies which he thinks are not doing okay. If he knows, he should talk about it. I think Bill got into specifics of some companies. I talked to people around those companies, Postmates, for example, and I learned a lot about those companies. Hang on. Bill Gurley, I interviewed him last week where he expressed some concerns about on-demand startups, saying that he didn't think that the economics might work."}, {"start": 949.63, "end": 978.7, "text": "Made a comparison to Webvan, which he said, look, everybody loved Webvan, but it just economically wasn't possible. So you said you've been talking to Postmates. I did, and I talked to Postmates, people who are close to Postmates and people who are close to Instant Card. And, you know, there is some gray area in whether they make it or they don't. So I don't think I'm, you know, equipped enough to make a judgment call. But if Sam thinks there are some companies which are at risk, he should."}, {"start": 978.7, "end": 999.84, "text": "You know, call them up. I mean, why not, right? He's pretty plain spoken otherwise. Why not just not invest in them? Yeah, and mostly the other thing which I say, you know, he says that startups should not optimize for valuation. Actually, that starts at point zero, like at seed level, at series A level, that education."}, {"start": 999.84, "end": 1029.17, "text": "Thank you so much for joining us."}, {"start": 1029.17, "end": 1055.79, "text": "The company plans to sell its assets including the Wink smart home business for $15 million."}, {"start": 1055.79, "end": 1078.02, "text": "According to CB Insights, at least 34 startups have failed this year. Bloomberg West will be right back. And it is time now for the Daily Byte, one number that tells a whole lot. And today's number is 400."}, {"start": 1078.02, "end": 1108.02, "text": "400 million. That's how many monthly users Instagram says it now has. A lot more than Twitter's 316 million. Instagram says most of the recent user growth comes from Europe and Asia. And that is music to the ears of the guys over at Facebook, which owns Instagram, of course. Facebook bought the photo-sharing app for a billion dollars in 2012. According to Forbes and the research-firming marketer, Instagram's ad revenue will reach $1.5 billion in 2016, $2.8 billion in 2017."}, {"start": 1108.78, "end": 1137.47, "text": "Now, when it comes to global cities, Uber has a new favorite. The company has chosen Chengdu, China, with a metro population of 14 million, to test out a new service called Uber Commute. It's the first time Uber is rolling out a global product outside the U.S. and follows the big teaming up of U.S. rival Lyft and the Chinese market leader, Didi Kuwaiti. Joining me now to discuss the competition, Gabe Klein, a Lyft investor and special venture partner with Fontanelis, and still with me here, Omalek of True Ventures."}, {"start": 1137.47, "end": 1163.09, "text": "I lived in China, I went to Chengdu, and I can imagine this is a service that Chinese consumers would be excited about. Anything that, you know, helps pay the bills, essentially. But testing a new service like this in China, in a second-tier city in China, what do you make of this? It's smart. Like, you know, if they fail there, nobody knows, nobody notices, right? I think they have to try China and India as growth markets. That's where..."}, {"start": 1163.09, "end": 1179.86, "text": "The future is for Uber and services like Uber. So Gabe, as a Lyft investor, Lyft now partnered with Didi Kuai Di. First of all, how widespread is Didi Kuai Di in China? Is it in the second and third tier cities? And do they have a commuting carpooling service like this?"}, {"start": 1181.14, "end": 1196.59, "text": "Yeah, so they're in 80% of the market, or they have 80% of the market compared to Uber having 20%. And they are in, oh, I think like 60 plus cities in China. So they are very, very big."}, {"start": 1196.59, "end": 1221.66, "text": "Now, there are some questions about how the Chinese government is going to regulate."}, {"start": 1221.66, "end": 1241.42, "text": "Ride-sharing companies that they might require drivers and cars to be commercially licensed, for example. The reason I had you on is because you recently did a round-the-world tour. You used Uber in a lot of different countries and had some observations about how well it's actually working abroad in places where they're technically launched, but realistically not that far."}, {"start": 1241.42, "end": 1271.33, "text": "So I love the whole experience that one app, you know, never have to bother with, you know, telling people where I'm going. So that was great. I think the thing Uber works in places where there is abundance of drivers. It does not work where it doesn't have enough drivers. So for instance, in Tokyo,"}, {"start": 1271.33, "end": 1297.58, "text": "They didn't have that many drivers, so the wait times were way longer than you and I are used to in San Francisco. Sweden, again, Stockholm was, again, the wait time was somewhere between 7 to 12 minutes. But the prices were a little lower than what I paid in San Francisco because I tallied up my bills. So you start to see that the effect is based on the number of people."}, {"start": 1297.58, "end": 1320.0, "text": "The more people there are, the faster prices go down. That's the thing they're good at. Okay, so quickly, Gabe, you know, you were part of the Department of Transportation in Chicago, in D.C. Obviously, these regulations abroad, they're all different. But can Uber, can Lyft triumph over these kinds of regulation? Yeah, I mean, the thing is China is a completely..."}, {"start": 1320.0, "end": 1343.57, "text": "Different animal. And what you see going on over there is subsidy rules. And so whoever is subsidizing the most in their app is gaining more drivers, and then the drivers can serve more customers. So I think it is a different animal. I like the fact that Lyft is partnering over there versus entering the market. That doesn't mean Uber shouldn't, but I just think it's a safe strategy."}, {"start": 1344.21, "end": 1353.74, "text": "Gabe, we'll have to leave it there. Gabe Klein of Fontanales, O'Malick of True Ventures. Thank you both. Tomorrow, I'm going to be interviewing the CEO of Oculus. Do not miss it. That's it for today."}]}