Esther Dyson talks with EconTalk host Russ Roberts about the market for attention and how technology has changed, how much we pay attention to others, and vice versa. Along the way Dyson reminisces about Steve Jobs, the nature of the start-up and venture capital world, and the future of space travel.
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| 0:33 | Intro. [Recording date: January 3, 2013.] Russ: My guest is Esther Dyson, author, investor, and my favorite title in a long time, Internet Court Jesther. Welcome. Our topic for today, to start with, is an essay you wrote recently on what is called the Attention Economy, the idea that a lot of us spend time on the internet in very noncommercial ways. But I'm sure we are going to get into other issues as well. But let's start there. What do you mean by 'the Attention Economy'? Guest: Well, first, and somewhat ironically, I need to make sure to point your attention at Michael Goldhaber who originally--I'm not sure who originally coined the term or the concept but he was definitely there early. And he wrote a piece--[?] on it--I think 15 or 20 years ago. But it's this notion that one definition of economics is the study of scarcity, and attention is extremely scarce, so what are the economics of attention? And is it fungible? Is one person's attention worth the same as another person's? Obviously not. How do you quantify attention? How do you share it? All these kinds of things. And increasingly in our modern world attention is one of the few things that can't be duplicated or mass produced, though it can certainly be mass collected, if you like--that's what movie stars do. So, just thinking about how people seek attention or are gratified by it. Businesses think of attention as somehow something somehow connected to an intention to buy your product. But it's certainly [?] attention--people don't go online necessarily to buy your products. They go online not just to give attention but to get attention. A lot of people, that's what they do all day: they post hoping to attract attention of their friends, their fans, their ex-boyfriends, the public at large, whatever. And you can't trade that attention for anything thing. You can deflect it, you can use it, but in the end attention has an intrinsic value to people. Not to computers. But people like being paid attention to. And sometimes that's perverted, because they are not loved. Sometimes that's excessive. But like a number of other elements will drive--it's something that most people inherently find pleasure in. And it drives a lot of other things. It drives other activities. It's connected with sex and reproduction but it's virtual. So it's very interesting and very complicated. And it's something work paying attention to. Russ: So, what are the implications of that for economics, the way economists usually practice it, at least? I think one of the--you talk about how people are getting on the internet not to buy anything. I think that alarms some people. Not me. Guest: Yeah. Oh, my God, they are spending all this time. And how can we monetize it? So the first thing is to recognize it, to understand that people intrinsically enjoy doing things that may not generate revenue. It's sort of like the same alarming thing as people enjoying themselves walking through woods. There's no entrance fee. Russ: Doesn't add to GDP. Guest: Yeah. It doesn't contribute to the measured economy. And as more and more, as we become if you like more and more productive, are people going to back to spending more time doing things that are economically not countable? That are intrinsically valuable to them? Russ: That strikes me as a lovely thought. You write in the essay, "In fact, the question is whether we will start doing more and more intellectual work for free or for barter, becoming more like our ancestors. Instead of producing food or housing for ourselves or for barter, we will be producing content and amusement for one another, without engaging in explicit (taxable) financial exchange. Yes, there is a so-called gift economy, but there is also an attention market that may not be fungible or priced--a distributed, many-to-many economy that harks back to the old days." And by the 'old days' you mean the more primitive society, non-commercial, non-market society-- Guest: Yes. The pre-market society. You had a goat, you would trade your goat for winter clothes or something, but it was a non-priced economy. Now we have a world where you change the price in China and things adjust everywhere. I mean, we have trade barriers and so forth, but price propagates. And this is an economy where things don't propagate. It's between you and the other person. And of course there's also the movie start part of it, but the direct face-to-face of it where you don't need a price. You just exchange attention. Sometimes you don't exchange it. Sometimes I pay attention to you but you don't pay attention to me. Russ: Correct. |
| 6:40 | Russ: So, when you mention the movie star part of it. So, you are talking about the fact that there are large groups of people who spend large amounts of time reading about, looking at, watching stars. Guest: Paying attention to other people, yeah. That of course is very much fostered by the new media. But so is the--I pay attention to the 30 people I went to school with and some of them pay attention back to me or to the others. So some of it's semi-symmetrical and some of it's very asymmetrical. And some of it--it's like the movie star doesn't return my attention, that's not a big problem; but when my husband doesn't or my girlfriend, that asymmetry becomes a problem. Russ: Yeah. That's an old problem, though. What's interesting about today, I think, is the scope to pay attention to people and things and phenomena that I couldn't have imagined 20 years ago. Guest: Right. And so one question: Nutrition, food, is an elemental human need. And then there's sugar, a kind of food that satisfies some of the nutritional needs but actually creates a metabolic disorder. Is there a sugar equivalent--is there bad attention? I pay attention to the movie star who doesn't pay attention to me; it gives me some of the same satisfaction but it actually destroys my attention metabolism. Russ: Well, I think you got an interesting point a minute ago when you talked about a fundamental human drive. And, keeping in mind that this is a G-rated program, let's talk about some of the fundamental parts of this phenomenon that are really primal. Right? As you say: people paying attention to you, feeling loved. Feeling important. Being delighted. These are the things that I think are the fundamental goods that people are consuming on the internet--I love Amazon, don't get me wrong--but besides the fact that I can find a really good price for a good and find out who likes it and what's popular about it, the ability to use the internet for these deeper human drives, I think is what's interesting. Guest: Right. To get real attention rather than to get fake or sugar attention. Like you go on and you post something and you get Likes from people you don't know. Is that good or bad? And good for what? It's definitely different; and like everything else, it can be pathological or it can be really satisfying. Russ: Or the flip side of that is the troll who ways grotesque and cruel things on a webpage on somebody's blog; and it's surprising sometimes how painful that is. Just a stranger. We shouldn't really get excited when a bunch of strangers like us, and we probably shouldn't get excited when a bunch of strangers have nasty things to say about us, but I don't think we can help it. Much. Guest: You wonder: Who is that person? Russ: Anonymity is an interesting part of this. We changed the commenting system at my blog with Don Boudreaux, which is CafeHayek, and the comments got, I think, less interesting but more civil. We made people use their real names--basically, via Facebook. There's obviously ways to get around it. Here at EconTalk, the comments, you have to use a real email address; we actually monitor them and throw out crude and obnoxious ones. Guest: Good. Russ: Yeah, it's good. But it's interesting that we want to. And that when we are anonymous we feel comfortable saying things that we wouldn't otherwise; and that it makes a difference when it's public. Guest: Yes. We're so primed to pay attention to stuff. Russ: Now, one of the implications of this, to me, which I think is often forgotten, is: What a strange time in human affairs. You talk about how it harkens back to some primitive times. And what you are talking about is the fact that there isn't a market price necessarily for attention. There's not arbitrage, people buying low and selling high. Or at least there doesn't seem to be in the attention economy. Guest: Yeah. I mean, there is, but it's like you can't put it in a bottle and say that attention is an activity or an action rather than a thing. And so, other than saying I'll give you $20 if you pay attention to me tomorrow--it's a possible transaction, and so is: I'll take you out to dinner tonight, so that you'll pay attention to me tomorrow. It's not very transferable. It's not all these things, whatever. Russ: No. It's clearly a different thing. Although I used to say--I still say it but I'm not sure I should say it--that when we become more productive we create the most precious thing we can have, which is time. Because we are able to spend less time feeding ourselves and more time searching the internet-- Guest: Getting attention-- Russ: Or being delighted. Paying attention is the other side--there are two sides of it. Getting attention and paying attention, meaning watching something glorious or beautiful, or hearing something. Guest: Or something horrible. Or worrying about something stupid. Russ: Yeah. That too. Guest: People don't always get pleasure from paying attention. Russ: Though what I was going to say is: I like to say that being productive creates the most precious resource because it's the scarcest, which is time. And people have said: Well, there's nothing particularly scarce about time. But there is in a fundamental sense in that we live a fixed amount of time; we don't know how long that is; and how we spend our time in many ways is the most important decision we make. And I think our wealth has allowed us to spend our time in these both transcendent and not-so-transcendent ways on the internet. Guest: Right. Russ: But it suggests we are a very wealthy society. So, you are harking back to a time when we were very poor, and specialization wasn't possible. Now specialization is so ubiquitous we can take some of the time that is created by it and spend it on Flickr. |
| 14:10 | Russ: Well, let's talk about data, which is something you've also written about a lot. Which we've touched on implicitly in this conversation. One of the things you've talked about is something called the 'quantified community'--our ability to monitor ourselves, our health and body, our activities. What's that about and where is it going? Why is it important? Guest: Well, it starts with the quantified self--or perhaps it starts even before that with the quantified car, for example, the notion that you monitor something and its vital signs. Interestingly--a little anecdote--there's this website called RealAge.com acquired some years ago by Hearst. It was founded by a guy who before that ran Jiffy Lube, the car maintenance service. Anyway, the idea of the quantified self is you measure how many steps you take, perhaps what and how much you eat, how much you sleep. The more the merrier, obviously. And not only do you monitor it, you respond to that. So, with more or less effort, simply by paying attention, and perhaps with some game dynamics, by quantifying your behavior, you change it. If you don't know what you are doing, it's much harder to change it or to notice that it needs changing. And then there's the idea of the quantified community, which is very similar. Well, let's see what is the graduation rate of our high school. How many potholes do we have? Where do the most accidents occur? Maybe we should put street signs there. Or: what kind of garbage are we producing? Do we need recycling? Anything that a community does or produces again can be quantified and then sometimes people would say: Oh, yeah, this isn't so good; we should change it. And how do we change it? It's mostly quantification and good leads to self-knowledge and self-improvement. The challenge is that you can't measure everything. And particularly you can't measure long-term things. So that you might, if you quantified yourself, you might now pay enough attention to long-term infrastructure problems. Or if you don't think about this properly, you might quantify the return on education--which is very low in the short term--and not spend enough on education. Or on preventive health. So the challenge is to pay attention to this but not to ignore the fact that some things take a long time to have an impact. Russ: Yeah, I'm a little bit of a--it's funny, I have a little bit of schizophrenia about this issue. Right? Guest: Because? Russ: Well, we have a lot of people on this program who talk about the virtues of measurement and data. I'm thinking about Ian Ayres, the book Super Crunchers--we're on the cusp of a great revolution. And then on the other hand I have people like Jim Manzi and Nassim Taleb who say we fool ourselves into thinking we understand things that we don't really understand. And I'm in both camps. I think people often misunderstand this program: it may mean that my skepticism about data means that I'm against data. I think the art of being a grownup and being a thinking person is to understand when data is useful and when it's not. Guest: Well, to understand how it could be improved. You need to know enough to understand the imperfection. Russ: Correct. A little learning is a dangerous thing. And I think--the issue for me is, I don't think our brains are very well-designed for thinking about or well-evolved, depending on your preference about language, for thinking about uncertainty and probability, complexity. And so, as you point out, something that looks good in the short run but turns out to be toxic in the long run, or vice versa--and we often want to know: Which is it? Is it good for me or bad for me? I once had an MBA student--I was criticizing something about Swedish public policy or Swedish subsidies to the car market, I think that's what it was. And the student said: Well, wait a minute. In my other class we were told Volvo is a great company. The student wanted to know: Is it a great company or not? So when the question on the exam comes, which box do I check? But life is, alas, a little richer than that. Guest: More complicated. Russ: So, one aspect of this we touched on earlier, this attention aspect: Why do we care so much about people paying attention to us? Why is it--and our ability now to quantify that is a little bit frightening. You can look at your book's Amazon rank. You can see how many people follow you on Twitter, how many people subscribe to EconTalk. Guest: Or more interestingly you can look at your phone records and see whom you call and who calls you. And how fast are they calling you back, and which person in the company forgets to cc you all the time. It's amazing what you can find if you look for it. And yeah, you have to wonder. The purpose of getting attention is clear. I guess if you didn't deeply desire attention you wouldn't work hard to get it. So that's ultimately why we like attention. Russ: Yeah. It's something deep inside us. But combining these last two issues: How healthy is it to pay attention to that all the time? Guest: Yeah. Well, it's just like you eat food, but you can eat too much food. And you can crave too much attention. And, as I mentioned, you can also get bogus attention that may be not real. And your creating gets worse. So it's like all these things. It can turn into something that's vestigial and over-stimulated. |
| 20:45 | Russ: Well, let me take an example from this program. So, something on the order of 20,000 plus people download a podcast in its first week. And a popular one will get, lets say, 50,000-100,000 downloads over the course of its first year. And there's a long tail. Every podcast we've ever done for this program, all 350 plus of them. People listen to all of them. I think every podcast gets at least one download. Which is kind of cool. I don't get those numbers often. I get them occasionally from Liberty Fund, which is the sponsor of the program. But I'd really like to get them every day. Which is not good! I like knowing. I like to watch it climb. And those of you out there listening--for all I know you just download them and don't listen. So I imagine that you are listening, and I look at other monitors of attention. I look at the emails I receive at mail@econtalk.org, and I'm really glad to get those. Guest: Which you read. Russ: Right. I see how many people follow me on Twitter. But is it really a good idea? If I didn't know at all how many people are listening, I think it would be very depressing. But do I really want to know quite so much? Guest: Yes. Good question. Russ: What do you think? Guest: Well, sometimes I look at my Flickr stats and sometimes I'm too busy. It's like the odd little chocolate. The great thing about most of these stats is that they never go down. They may grow slowly or not at all, but they don't get subtracted on a slow week. Which is why they are so gratifying. Russ: Yeah. Well, that's 'cause I'm doing such a good job. But I think it could be because more and more people are getting on the internet, don't you think? Guest: Sure. Take your stupid podcast back. I'm un-downloading it. Russ: You can lose subscribers. And people stop following you on Twitter. But there are an enormous number who, like you say, they follow you once and now they still follow you on paper, but they don't follow you. Guest: Right. Yeah. And at some point people's attention is finite. They can sort of be doing 2 or 3 things at once. But again, this is back to real economics. This is an issue where at some point, people have only so much actually money. And of course they can earn more. But if people--advertising loses its power as people need to spread their income across more and more things. So they may pay more attention to your particular products, but they don't actually have more money to spend. And so if you show them more ads, they are just less responsive to each individual ad, for example. Which is another thing. It's not about to happen yet. But it's something--it's a long term issue. We don't actually create more commerce. We create some more commerce than [?] and we create a lot of useless stuff like people buy like people buying stuff they don't need, but at least they are tangibly buying stuff. As people start to buy virtual goods, well, there's an inexhaustible supply. But there's not an inexhaustible supply of their time to be spent using these virtual goods. So, there's some kind of diminishing returns. But it's pretty far off. Russ: Yeah. Well, I see that on my iPad. When I first got it I kept downloading all these incredibly cool apps. And I still think they are incredibly cool. But my actual use of the device has narrowed extraordinarily to a handful of things. And I have to be really bored to go see what is to admire about the apps I bought in the early days. Guest: Right. Or you have to be really bored to go and delete them. Which is work. Russ: Yeah. It's not a big deal. As long as the space is there. I was thinking more about the attention, the quality of attention and the constraints of it, to do two or three things at once. I look at the human side of it when I travel now. And everybody is paying attention to their phone. They are looking down at their smartphone. They are not engaging with the other people--which is fine, because most people don't chitchat with strangers on the Metro or on airplane flights. But people are immersed in their toy. And what they are not paying attention to besides the people around them, is, I suspect, the person inside them. Introspection seems to have taken a dive in the smartphone age. What do you think? Guest: Yes. I mean I'm not sure how much introspection was happening necessarily. It might have been just random daydreaming-- Russ: Yeah. Staring off into the distance. One of my favorite activities. Guest: Yeah. And sometimes that's productive, sometimes it isn't, and sometimes it's--but yeah, there's a lot less time just for thinking. I swim an hour a day, and I think. And I love it. Because the rest of the day, yes, I'm paying attention to something external, whether it's my computer or my email or my reading or talking or listening or watching. But while I'm swimming, I'm thinking. And I love it. Russ: You don't listen to books on tape while you are swimming? Guest: Nope. And I don't want to. I do listen to audio books while I am walking to my pool. Which I like doing, because I always feel that is wasted time. But while I am swimming, I like just thinking about what I did or what I am going to do or what I am going to say in a talk or should I really go to this thing in Texas or not. It's when I'm swimming that I think of new ideas and also when I cancel over-commitments. Russ: Yeah. Are you a good swimmer? Guest: Yes. But I don't count laps. That's the whole point. I do actually think, and I measure time. I swim, to be precise, for 50 minutes. But I'm not counting laps or paying attention other than I try to swim 200 yards in 4 minutes every day, in addition to the 50 minutes in general. But most of the time I'm just idly thinking. Russ: I'm asking because I try to either ride a stationary bike or the elliptical machine. And I find it kind of painful. And so I find I listen to books on tape; I listen to classes, lectures. But if you said to me I have to go do that for 50 minutes without any--with just thinking--I can walk for 50 minutes but I can't do the elliptical for 50 minutes. I'm curious if the swimming time is fun. Or pleasant. Or decent. Guest: Yes. It's pleasant. I mean, usually by the end of the 50 minutes I'm ready to get out. But I'm not out of breath at the end. I'm not exhausted. It's really a great time. And it's perfect. It's not--it's work, so I don't feel bad about not reading while I'm doing it; but it's not hard work, so I can concentrate on what I'm thinking about. Or what I don't like about[?] Circle-[?] because then you have to concentrate about who is around you. Just thinking is actually really great. Russ: Yeah. I think it's getting to be a lost art, though. I worry about it a little bit. My kids and how much time they want to spend on the internet. I don't let them spend quite as much as they'd like. Not even close. But the ratio of stimulus to introspection seems to have grown a great deal. Guest: Yeah. Or self-stimulus, perhaps. Enigma. The term might have lost its original meaning but the notion that you can just amuse yourself is becoming lost. Which is sad. Russ: Yep. Although I don't know if it's lost. We've just fallen a little bit out of the habit. |
| 29:47 | Russ: Do you think the internet is changing our brains? Are you one of those? Guest: Yeah. I mean, I think it's making us think more short term. I think it's less narrative, less structure, less--the biggest issue is when you hear that Abraham Lincoln, for example, used to regularly give speeches for several hours. No one would sit still for that any more. And people don't even like reading books. They like to see videos. There's less construction. Russ: I don't know. Guest: There's lots less coherence. I think, yeah, the internet is definitely abetting that. Russ: I don't know if that's true. It might be true. It's hard to know. That's a good data question, right? If you look at Hollywood movies that are successful, they are still--I just saw Les Mis (Les Miserables) it's 2 hours and 40 minutes long; nobody left; I don't think anybody left. And it's a narrative. It's a long narrative. It's not a set of-- Guest: If you look at the relative amount of time spent on short and useless videos its incredible. Russ: It's true-- Guest: People used to play cards, which is singularly useless as well. Russ: Yeah. No. It builds strategic thinking. I'm sure we could find some justification for it. And actually, mindless videos are hard to define. They inspire sometimes. But sometimes they just-- Guest: You know, cat videos, people stuck in elevators--I'm sorry. Russ: That's shocking, I agree. It's hard for people to understand how those phenomena are so successful. |
| 31:39 | Russ: Well, let's shift gears. Let's talk about investment. Investing. Which is something you do and do a lot of. Talk about entrepreneurs. Talk about the people who are successful in starting companies and having them grow. Guest: Yeah. The first thing is: Being successful and starting a company is easy. Being successful in growing it, scaling it, making it sustainable when you leave--that's hard. And that's what creates real value. It's not--personally I think there's way too much veneration right now of the hero-entrepreneur, and not enough of the expanding team, the middle management, which has become all of the swear-word that middle managers make people productive. They build teams, they motivate people, they--it's middle management ideally that takes the successes of one small team and enables other teams to emulate that. That's an idealized version of middle management, but in a good company that scales, yes you do indeed have middle management and it does useful things. So the challenge is: How do you scale this thing once you start it? Russ: We do have a lot of romance for the visionary. Steve Jobs. Guest: The single guy who dropped out of Harvard. Yeah. But what about all the people he hires that then make the team and build the stuff and find the customers and run the business? I like to take the analogy, if you know the story of the stone soup, where the conman goes to the village with his magic stone. He says: I have a magic stone; it will make a magic soup that will cure you of any disease and let you live forever. But of course all I brought was the stone. The pot is too heavy. If you could just find me a pot please, and maybe some vegetables from yesterday, and an old hambone. So, he gathers the villagers. They bring all the stuff. At the end of the day he has a magic soup that they partake of. And this is your archetypal conman. And also your entrepreneur. Somebody who makes something out of nothing, but with the help of a lot of people. Also like Tom Sawyer. But what we want is not one guy and one soup. Russ: Yeah. Guest: What we want is for somebody to turn that soup into ideally production so that you have a restaurant, and then you have a restaurant chain. And you do that on a mass scale that creates genuine leverage, return on investment. And it's that magical--it's not a jump, it's a long, hard, slaught, but that movement from the one-stone soup to the restaurant chain that does it every day regularly and pleases customers and provides value, that's where the magic is. Russ: My wife makes a magic soup every night for 6 people. Which is great. Guest: But it's not leveraged. Russ: If you can delight 6 million, it's better. And that's real magic. Guest: Economically and commercially better. Russ: Yeah. But I think of it just on the human side. It's not so much the jobs it creates. It's the value it creates in letting people not have to make their own soup. And do something else. Guest: It's an institution or an infrastructure that makes people productive. Which is one person making soup is not very leveraged. Thousands of people making soup--so, whatever you are taking [?] food, they can produce it more cheaply than one person at home. So it's this ability to make people productive at scale. And it's interesting that the internet of course, it overcomes some economies of scale. One person doesn't need a secretary or an accountant; they can do all this stuff online. But the magic of a really productive economy, especially a manufacturing economy, is indeed created when you have lots of people leveraged by institutional infrastructure, whether it's business processes or manufacturing facilities or marketing visibility, and each of those people is far more productive in the company than they would be as individuals. And the bad thing of course is when the company gets so big that it makes those people less productive, because you have hundreds of people just chasing around after one another without any impact on the product that is created. |
| 36:55 | Russ: I think one of lessons I learned from Walter Isaacson's biography of Steve Jobs--which, by the way, I'd love to have him on the program; he wasn't available. Guest: You mean Steve or Walter? Russ: Either. They both would have been good. Unfortunately only one of them is possible. Given the current technology. But one of the things that I think is amazing about that book, and I think the Apple and Steve Jobs's story is Jobs's ability to motivate people. And make them more productive. To get the most out of their skills. Which was at times a very inhuman and unpleasant world. Not everyone was comfortable in it, obviously. Guest: Yeah. I had my run-ins with Steve. Russ: Tell me. Guest: When he was good, he was very, very good. Oh, he could be nasty and unpleasant. Russ: It comes through pretty clearly in the book. But people still wanted to be around him. Most people. Guest: Yeh. Because he could be so stunningly, just charming. Beautiful. Charismatic. Whatever. Russ: Yeah. Again, that's pretty clear. But that skill--to create a team and motivate it--he's not a technical genius. Guest: Would you like a story about Steve? Russ: Sure. Guest: So, it's not that pertinent. Russ: I don't care. Guest: So, I had my conference, for years. And Steve came and spoke at it one year, in the early 1980s. Russ: What kind of conference? Guest: PC Forum. And then he had to leave, because he had to be on Larry King, as I recall. So, Steve, even then--this was when it was Bill and Steve and Frank Givens[?], from software publishing who no one remembers any more, but they were the big three. Russ: 'Bill' is Bill Gates. Guest: Pardon? Russ: Who is Bill? Just checking. Guest: So, Steve--people liked him, but they also competed fiercely with him and thought he was doing unfair things and the usual stuff. But a bunch of us gathered the next night in somebody's hotel room to watch Steve on Larry King. And suddenly, instead of being one of us and the guy we loved to hate and so forth, he was speaking for us to the population of America. And it was quite magical. We all kind of felt it. Even though it was Steve--we all kind of: Tell them about us. There was nobody in the world, then or now, who could represent the magic of this industry as well as Steve could. So it was quite magical. The other was some years later he was going to come on a panel. The night before--and it was still before cell phones. So he called and said he couldn't make it. So, I called him back, on a pay phone, and he explained that his dad was very, very sick, he was dying, whatever; and I said: No problem, I understand. It's your dad. Of course you can't come. Just do what you need to do. And he said: I'll make it up to you, Esther. Next year I'll come and I'll speak twice. Russ: Did he? Guest: No. But interesting guy. Great. One of the most wonderful things I ever saw was the Bill and Steve panel at All Things D, which would have been probably 4 years ago now? Where they were quite friendly and reminisced and smiled at each other and Bill actually said he envied Steve's sense of design, and Steve--as I recall, they were kind of trying to get him to say that envied Bill's business acumen, but he couldn't quite get it out. Russ: Yeah, probably not. Guest: But it was an absolutely magical session. Russ: Well, that's pretty cool. Guest: But back to [?]. I apologize. Russ: That's all right. That's interesting. So, your point though is that a lot of times we romanticize the lone visionary, I think of as a gunslinger, cleans up the town, or cleans up the industry or changes, transforms it. But the people doing the blocking and tackle are often unromanticized but they are very important. And obviously an entrepreneur who can create that infrastructure, that hierarchy--hierarchy is the wrong word--but the network within a company that allows it to grow and thrive is underappreciated. Guest: Yeah. Call it the organism. Russ: Yeah. Who can help the organism thrive. Do we know anything about what those people are like who can do that? How do you find them? Or are you just lucky? Guest: Yeah. In theory you find them. In practice you get lucky. It's people who have the ability to listen, people who are sensitive and flexible, people who are able to make and admit mistakes. And of course there are always counterexamples who are perfectly horrible to deal with yet somehow build something anyway. I'm an angel investor, so I invest my time as well. I like investing in things where I like the people. And if I had infinite amounts of money then I'd have to spend it on all kinds of things that I didn't particularly like. If you have a limited amount you can be picky. So I invest in things where I like the person. Usually. I've made mistakes there, and especially where I like the idea or the purpose. So I don't do [?] sharing for rich white guys. Right now I'm doing mostly health stuff. |
| 43:28 | Russ: Now, you've been an early investor in some very successful startups such as Flickr and Delicious. Guest: Actually, I don't know why--Delicious wasn't that successful. It was acquired. People always mention it. I was an investor in Medstory-- Russ: Well, we've heard of it. Guest: I was an investor in [?] it was acquired by Neilson. Currently I'm an investor, I was on the Board of Evernotes; I'm an investor in Square. There's more to it than those two. But anyway, keep going. Sorry. Russ: Delicious is mentioned in your bios because people have heard of it. Some of those turned out to be extraordinary companies. I'm a huge Evernote fan, by the way. Or are in the process of becoming extraordinary companies. In the early stages, when you saw them on the drawing board or in those first days, did you have the feeling they were going to be something spectacular? And were there another ten where you've had the same feeling that didn't? What have you learned from that experience of watching those companies? Guest: The reality is no. You get lucky sometimes and unlucky other times. Flickr started out as more of a game. It was called LudiCorp, as in 'ludo,' the Latin for play. And then they started sort of applying game dynamics to photos. And I liked it because I like taking photos. And then we got acquired, perhaps a little early, by Yahoo, which ignored us for many years and is now wonderfully paying attention again. Which is absolutely great. Russ: Yeah, coming back. Guest: The thing people don't realize about Flickr--several orders of magnitude more photos get uploaded to Facebook. Russ: Different kind. Guest: I'm not sure of the statistics, but something like 80% of the Facebook photos have a person's face in them. Something like 80% of the Flickr photos do not. Russ: No. Flickr's for photographers mostly. And Facebook's for people who--want attention. Guest: Yeah. Fair enough. Russ: By the way, like you I look at my Flickr accounts, too, because I can't help myself; and I view it as a measure of my photography ability. Which is stupid. Anyway, it's an amazing company. Guest: For example, I was an investor in ParaGraph, which was Stepan Pachikov's first company. And they did the handwriting recognition for the Newton. I helped Stepan, who I met in Russia--I helped him get in touch with both Bill and Steve. And one day he called me up and said: A lawyer will be in touch with you. Please sign the documents. We are giving you 1% of the company. So, I got an infinite return on that company, and when he came to me with Evernote, of course I agreed to get involved again. But Stepan's a genius. He's not a great manager. And nice product that was sort of floundering. And then we got lucky and found Phil Libin who is the current CEO and suddenly things began to click. Almost every company has a story that is more complicated than: I found the right CEO and we all lived happily ever after. Russ: Or: I had a great idea and we all lived happily ever after. Guest: Yes. I've done a lot of things that I'm very proud of that didn't do well commercially, and I've done other things that did well commercially that I had nothing to do with their success, but they helped me do the other things. So, it's all statistics. It's not that you work harder on the ones that become successful. The people in them work harder, but as an investor you have to be comfortable with getting lucky, because people tend to attribute their successes to their intelligence and hard work and their failures to bad luck. But it's often not that way. Russ: Yeah. No kidding. It's a problem with data. Easy to fool yourself sometimes. In the old days--and this is, say, 25 years ago--I used to be told by investors that of the 10 bets that you'd make, 3 or 4 would just never make it, 3 or 4 would be so-so, and the other 2 or 3 would be the ones that made up for everything. And you wouldn't know which those 2 or 3 would be in advance. Is that still true, do you think? Guest: That's true for Venture Capitalists (VCs). For angels there are more failures but the returns are even bigger because you came in-- Russ: at an early stage. Guest: At an incredibly early stage, yeah. |
| 48:54 | Russ: So, you travel a lot, looking at companies and talking to entrepreneurs. Do you think the United States is unique? And if so, how? Guest: Well, of course it's unique. That doesn't mean everybody in it is unique or you can't do startups elsewhere. But it's a combination of a very failure-tolerant culture, a huge market that is open to new things--sometimes excessively so. Sometimes it's not so bad to stick with something old that works. And an infrastructure that supports this. You can walk down the street and find a Chief Financial Officer (CFO); you can find a landlord who will take equity. Those things are very hard to find in most of the world. But it's the culture in the market that matters as well. And yes, they are unique. I'm seeing startups and startup communities elsewhere around the world, and the more you get culturally specific rather than just technology, the less important the United States is. But it's still a very special place, and that's one of its big strengths. But we are losing some of that magic because of our crummy educational system, and our failure to invest in infrastructure, including broadband as well as education. And health--one reason health care costs so much in the United States is that we're so unhealthy. Much of it is self-inflicted. Russ: One reason we're so unhealthy is we are so wealthy, and we can afford both an extravagant health care system and an extravagant lifestyle. We still live longer every year than we did before. Which is shocking, really, when you think about it. It suggests that longevity is a little more complicated than it seems to be. Within the United States, California has a unique place. Or a unique reputation, at least--supposedly that failure-tolerant culture. I think of Austin, Texas; maybe Boston. I don't know where else. Is California special? Guest: Yes. I mean, it's also special because it's just a really nice place to live. Austin gets too hot in the summer; Boston gets too cold in the winter. California is just pleasant. But it's not the only place. And even though proximity--I'm a big fan of physical proximity and having lunch together--it is easier and easier to do remote working of all kinds. Russ: Has any of that changed in the last 5-10 years? I don't mean California. I mean the United States in general. Do you think the environment for investing and startup companies is different than it was 5, 10 years ago? Guest: Well, I think we've had a bubble around here for the entrepreneur that's beginning to burst. There's too many--and this is beginning to be recognized; I'm not alone in saying: Let's build a scalable companies rather than apps. And I'm very happy with the attention that's being taken to health as well as health care. So these things go in waves and it will sort itself out eventually. The biggest problem is not in the tech sector as much in the overall, we-are-earning-too-much vis-?-vis the rest of the world. And so the rest of the world is becoming more productive but they are still only earning a quarter or a third of what we do and attention may not be fungible but earnings are. We are beginning to realize: Oh, yeah, we are competing with people in India and China who are earning much less doing the same things. And more and more intellectual labor is fungible in a way that building bridges is not. Russ: Well, it's good for them. And eventually that will be good for us. Guest: It's great for them. And it's going to be good for us in the long term, but we need to adjust to it and not think that we have a God-given right to earn 4 times as much as people doing the same work elsewhere in the world. Russ: Yeah. Well, reality will set in. I don't know how much attention we have to pay to it. It forces you to concentrate your mind. I don't know how we are going to deal with it, but that's okay. You don't have to figure it out. It usually just happens. |
| 54:24 | Russ: Now you mentioned before we started the interview that you were an economics major. How does economics play a role in your life? Guest: In everything. It is, in essence, quantitative thinking: valuing things, exploring alternatives, understanding opportunity costs. Just a way of thinking rationally about the world as opposed to just about physics. I very rarely went to class. I did at least understand. So, I was a nice, young, liberal person and I wanted to change the world; but I had some suspicion that in order to do that I had to understand how it works. And I would say economics really gives you that-- Russ: Yeah. It's a reality check-- Guest: in the ideal it does. I knew nothing about business, which is separate from economics. Russ: I agree with that. And certainly, you can sleep through class or not go to class so long as you listen to EconTalk. My theory is that if you listen to EconTalk long enough--it doesn't have to be very long--you'll learn a lot of economics relative to what you'd learn, at least in the wrong classes. Guest: And you'll start thinking more clearly. Russ: I hope so. That's the goal. Guest: It's just understanding investment, return, surplus value, tradability, barter--all these things that somehow they don't seem to really understand in Congress, unfortunately. Russ: A lot of lawyers, not so many economists there. |
| 56:11 | Russ: I want to close by asking about your interest in space travel. I've read that you are trained as a cosmonaut. I'd like to know what that means and I'd like your thoughts on what is holding back personal space travel these days. Do you think it will become a reality within your lifetime? Guest: Yes, I plan for it to become a reality not just in my lifetime but in my life. I trained as a cosmonaut, which means I spent 6 months in Star City outside of Moscow. I was a backup to Charles Simonyi, who actually went. And so I learned basically how to fix up the space station. It's much less about piloting and much more about space plumbing than you might imagine. And of course I learned about just physiological--how to, what keeps us alive and how to run the machines that keep us alive, and so forth. As to what's holding it back: right now it's a question of time and energy; and yes, if anybody listening to this who is a billionaire wants to fund some more of these [?], that would be helpful. It's kind of like the internet--now that the private sector is getting involved there is a lot of commercial energy being unleashed, a little more risk tolerance. The National Aeronautics and Space Administration (NASA) has a lot of problems that are not self-inflicted. They are inflicted by Congress, which keeps giving it some budget, telling it what to do, then changing its mind, reallocating the budget the next year. So it's a very difficult environment. And of course it's very risk averse, because if something bad happens they get criticized and it's a huge disaster. And yes, we want to save human lives. But people die on Mt. Everest all the time. If the government were running Mt. Everest nobody would ever go up. Russ: Yeah. They'd shut it down. Guest: So, it's changing dramatically in this decade. And its very exciting. I'm involved. I'm an investor in XCOR Aerospace as well as a customer and investor in Space Adventures, which did my space training. I'm involved with Golden Spike, which is planning to send two humans to the moon within the decade and then do that, kind of in line with what I said earlier, that entrepreneurs not do it once but build a company that can do it regularly. And it's going to be exciting; and then it's going to be routine. Which is even more exciting. Russ: Well, right now--obviously there's a mix of technology and other things that hold it back. But if I said to you: Why aren't there going to be two humans on the moon in the next 5 years? Why is it going to take 10? Or the next year? What's missing? Guest: Well, because we didn't start 5 or 6 years ago. It takes time to build these things. The technology is fundamentally there. We need to build some components--the particular moon lander and so forth. This is a big project. Russ: It's rocket science. Guest: It's like building a subway system. Golden Spike is starting now and we hope to be done by 2019. It's a multi-year project and the issue is when you start. And again, if anybody wants to help by sending us a couple of billion to Golden Spike[?], email me courtesy of EconTalk and I will get back to you promptly. Russ: I bet you will. |
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